ARCHIVED - Transcript, Hearing 10 September 2014

Volume 3, 10 September 2014

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

SUBJECT:

Let's Talk TV: A Conversation with Canadians

HELD AT:

Outaouais Room
Conference Centre
140 Promenade du Portage
Gatineau, Quebec
10 September 2014

Transcription

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

Transcription

Let's Talk TV: A Conversation with Canadians

BEFORE:

ALSO PRESENT:

HELD AT:

Outaouais Room
Conference Centre
140 Promenade du Portage
Gatineau, Quebec
10 September 2014

- iv -

TABLE OF CONTENTS

PAGE / PARA

PRESENTATION BY:

- v -

UNDERTAKINGS

PAGE / PARA

Gatineau, Quebec

--- Upon resuming on Wednesday, September 10, 2014 at 0900

3700   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

3701   Madame la Secrétaire.

3702   LA SECRÉTAIRE : Merci.

3703   We will now start with the presentation by GroupM Canada.

3704   Please introduce yourself and you have 5 minutes for your presentation. Thank you.

PRESENTATION

3705   MR. GARVIE: Good morning. My name is Stuart Garvie, I'm the Chief Commercial Officer of GroupM Canada.

3706   GroupM represents 25 percent of media planning and buying in Canada. We work with and on behalf of both Canadian-based companies and the Canadian businesses of global companies.

3707   As outlined in our letter, we believe that the proposals put forward will have serious negative impact on the media and marketing industries in Canada, leading to significant job losses.

3708   Advertising and video content have always been symbiotic. Good content provides vehicles for advertising by delivering valuable audiences and in return advertising provides funding for that content. We are extremely concerned about the ability of Canadian companies to continue to source, produce and distribute the great content we advertise in and around should these proposals be accepted.

3709   Canadian broadcasters buy and simulcast high quality U.S. shows and simulcast them with the U.S. networks to provide Canadian audiences the best content on their own channels with relevant local advertising. This income fuels Canadian broadcaster production of Canadian content.

3710   If simultaneous substitution is removed, it will no longer be financially viable for Canadian broadcasters to purchase and show highly demanded and viewed U.S. shows and events.

3711   The simultaneous substitution proposal therefore removes these high-value vehicles for Canadian advertisers and the subsequent income for the curators of the content, the Canadian broadcasters. This has an immediate knock-on effect of increasing the price of advertising as the supply of available impressions is reduced.

3712   This means that advertising becomes less effective for Canadian advertisers who are relying on Canadian broadcasters to provide large Canadian audiences to promote their products and drive their businesses. Rising costs put pressure on bottom line delivery, leading to a reduction in budgets and increasing prices for the consumer and starting an ever-decreasing circle. Decreasing budgets put further pressure on all aspects of the marketing and media industry: broadcasters, media agencies, marketing departments. This contraction will result in fewer jobs in Canada.

3713   As I'm sure has been mentioned in this hearing already and will be again, loss of revenues at Canadian broadcasters will have a devastating effect on programming budgets and the Canadian production industry.

3714   Canadian audiences will migrate to U.S. networks to access these hit shows. If the majority of Canadian impacts are now delivered via U.S. networks, a number of things will happen.

3715   1. Canadian-only businesses will be disadvantaged versus their U.S.-based rivals who already have large budgets in the U.S., affording them advantageous prices on those U.S. networks.

3716   2. Canadian companies are effectively excluded from advertising in event programming.

3717   3. U.S. or global-based companies may decide to buy only U.S. networks and reach Canadians as an intended bonus.

3718   4. The need for Canadian-only messaging will be reduced for these clients, putting pressure on Canadian creative agencies and Canadian marketing departments.

3719   5. There will be a reduction in regulatory control of messaging as more messages will be served to Canadians from the U.S.

3720   6. More buying of U.S. networks means less need for media agency staff in Canada. Offices in the U.S. would buy these impressions as part of U.S. campaigns.

3721   7. As agency and marketing jobs leave for the U.S. there will be less need for other sales operations to service these agencies even in media outside of broadcast.

3722   The proposed changes to cable packages and better access for U.S. networks will only add to the issues above. Cable packages are designed so that premium, most desired channels are effectively subsidized by the wholesale and advertising income from smaller channels in the same packages. If each channel has to stand on its own, then the result is less channels and less variety.

3723   Fewer channels again deliver less Canadian impressions, driving up the cost for advertisers. Those impressions again are most likely to be lost to the U.S. networks.

3724   So in summary, we are opposed to these proposals because they will lead to:

3725   - Canadian business being disadvantaged versus U.S. competition;

3726   - Canadian business being disadvantaged by a reduction in effectiveness and opportunities for advertising; and

3727   - job losses across the whole marketing and media industries.

3728   Thank you.

3729   THE CHAIRPERSON: Thank you very much, Mr. Garvie. Commissioner Simpson will have some questions for you.

3730   COMMISSIONER SIMPSON: Good morning, Mr. Garvie.

3731   MR. GARVIE: Good morning.

3732   COMMISSIONER SIMPSON: I'd like to start with the statement you made in both your written submission and this morning where you said:

"We believe that the proposals put forward will have serious negative impact on the media and marketing industries."

3733   Are you talking about all proposals that are being contemplated or some, and if some, which?

3734   MR. GARVIE: I am mostly talking about simultaneous substitution and cable pick-and-pay.

3735   COMMISSIONER SIMPSON: Okay.

3736   Simsub has been argued back and forth for many, many years and I was wondering if you could share your experiences with the Commission this morning as to whether the consumer frustration with simsub parallels your frustration in that if you are inserting spots into Canadian-substituted programming that there seems to be great inconsistency at times because of changes and change-ups in U.S. scheduling and also the issue of prime properties like live events which sometimes go into extra innings and switching isn't always acknowledging the extra time that's required.

3737   How much of an issue is the inconsistency of U.S. scheduling changes and the difficulty with live programming substitution?

3738   MR. GARVIE: For us and advertisers, I don't think it is a huge issue. I think it's a small, very small but necessary evil. I'm not sure that, from what I've seen, the level of consumer dissatisfaction is as great if you compare it to the size of audience and simultaneous substitution allows us to deliver those large audiences. If we didn't have it, those audiences would be small and probably broadcast from somewhere else.

3739   COMMISSIONER SIMPSON: I'm not going to spend a lot of time on simsub because your position is quite clear. What I'd like to try and delve into while we have you here is some of the other areas that would shed some light on potential consequences of what we're talking about.

3740   You know, advertising has always been traditionally bought on a rating point or a cost-per-thousand basis and I'm curious, being that you're one of the biggest players in the world, if not the biggest --

3741   MR. GARVIE: The biggest.

3742   COMMISSIONER SIMPSON: -- yeah -- how on a program-to-program basis, if your New York outfit is purchasing a program that let's say is "Good Wife" and you're buying on a cost per rating point or a cost-per-thousand basis in the U.S. in terms of the delivery expectation and the rate you pay, how does that compare when you're doing an insertion into a simsubbed version of that show in Canada? Are the CPMs dramatically different?

3743   MR. GARVIE: They'll be different for sure. Do I know how -- the CPM in "Good Wife" in the U.S.? No. They'll be different because they're completely different markets right now and they're sold in a completely different way. It's a completely different supply and demand metrics and --

3744   COMMISSIONER SIMPSON: Yeah. Well, see, what I'm trying to get at is we know that there is an economy-of-scale issue and by just dividing everything by 10 to equivocate the Canadian versus the U.S. market is simple math but it doesn't always work. What I'm trying to understand is the economy-of-scale issue and whether or not buying Canadian programming or, yeah, putting a spot into a simsubbed program in Canada is disproportionately higher, because it gives us a little bit of a clue as to whether the programming issues are the same in terms of what the program cost.

3745   MR. GARVIE: I don't think they'll be proportionately different to other parts of a schedule. It's usually fairly standard around the world that primetime shows have a premium and daytime shows are at a discount.

3746   COMMISSIONER SIMPSON: Yeah. With respect to your dissertation on the potential of migrating to U.S. networks, what is your opinion to one of the theories as it was put forward about an all-Canadian basic and perhaps putting the U.S. channels on a discretionary tier? Would that not actually help your industry because it reduces fragmentation?

3747   MR. GARVIE: If the access to the U.S. networks was reduced, that would help. However, we all live 100 miles from the border and we pick it up by aerial. So on a cable package, yes, it might help but people are getting it free-to-air through an aerial. I think it's very difficult to stop that.

3748   COMMISSIONER SIMPSON: I'm sorry?

3749   MR. GARVIE: I think it's very difficult to stop that access, free-to-air from Buffalo, Seattle, wherever.

3750   COMMISSIONER SIMPSON: Yeah.

3751   Going back in the time machine, in my experiences in the late eighties there was a huge disruptive change in the ad agency industry. We saw revenues in agencies collapse and it was largely because of the fragmentation that was happening with television. It went from a 50-channel offering to a 500-channel offering and it had huge impacts on reach, which is part of the formula that you guys rely on so much, that reach and frequency equation.

3752   And I'm curious, in the potentially 5000-channel universe that we're looking at with digital, is this one of the reasons why you're trying to stop -- cause us to protect the industry as it exists because 500 channels is better than 5000?

3753   MR. GARVIE: Absolutely not, no. I mean we have an enormous amount to spend on additional channels. Do I think that the reach on television is substitutional in digital? Absolutely not. Digital does a completely different thing.

3754   There was a study recently in the U.S. that said and that showed from Nielsen that 96 percent of online video is viewed by 17 percent of the population, and those people weren't light TV viewers, they were medium TV viewers. So the notion that digital is going to add reach is not true.

3755   COMMISSIONER SIMPSON: Yeah. It adds cumulative reach but not necessarily targeted reach?

3756   MR. GARVIE: Yeah. It adds frequency.

3757   COMMISSIONER SIMPSON: Yeah.

3758   We're hearing all kinds of scenarios but it seems like the digital revolution is coming, if it's not already here, and agencies have been grappling with placement methodologies and measurement methodologies. How are you adapting as an industry to the prospect of on-demand and non-linear programming? Is there a universal strategy or --

3759   MR. GARVIE: Well, I think we're all developing as different agency groups in our own approaches to every new thing and we're working very hard at it. The fact remains that it's still a small part of our business and a small part of our advertisers' business.

3760   So while it's coming, I'm not sure it's coming as quickly as everyone thinks and we have to develop plans to be ready for it and how it fits into the original traditional channels. We're trying to be platform agnostic rather than --

3761   THE CHAIRPERSON: I don't want to interrupt. Could you not be behind the table, please? Thank you.

3762   UNIDENTIFIED SPEAKER: Sorry.

3763   THE CHAIRPERSON: Sorry to interrupt. Please go ahead.

3764   MR. GARVIE: I had kind of finished.

3765   COMMISSIONER SIMPSON: That's a no-no.

3766   Understanding the symbiosis that goes on between conventional media and the agency or the advertising industry, how are the networks and the rep houses working with agencies to -- I'm thinking about value added here and I'm thinking about migration of content beyond the first window into the digital realm, you know, being planted on the server after it's run on its first syndication schedule and your ability to follow on with how that content is being moved around, because, you know, the networks are obviously trying to monetize as much as possible.

3767   So how are you working with them and what are they -- what's the relationship?

3768   MR. GARVIE: We are testing with all the networks into their digital offerings. We're doing a test with Shaw right now on their on demand. We're doing a test with Bell right now on their on demand. We're working with Rogers on their data platform to help us try and connect audiences across channels. We're working very hard with all of them and I think all of them are working hard to work out what is the future of content for where consumers want it to be.

3769   COMMISSIONER SIMPSON: Yeah. So, on the issue of where the consumer is, they're not always, you know, sitting in the living room anymore and I go back to that analogy earlier, that experience that I referenced about the eighties where it had been the industry's experience that fragmentation due to the number of offerings that were available on cable were getting to the point where it was, you know, playing havoc with the efficiency of a buy -- you know, you couldn't buy deep anymore, you couldn't buy six out of 10 stations in a market, you could only afford three and it was having reach and frequency difficulties -- and what advertisers seemed to be doing in those days was experimenting, and experimenting successfully, with taking spend and putting it closer to the decision point and that often meant going into the point of sale and particularly packaged goods.

3770   Now that content is movable, and it's movable to the extent that it's out of the living room and into the car and potentially into the store, again, I'd like a little more meat on the bones in terms of what you're doing to try and help clients do that. Because beer companies are not spending so much on-the-air anymore but spending at point of sale and point of trial and --

3771   MR. GARVIE: I'm not sure that's massively driven by media and it's more driven by the ferocious retail environment. Having worked at a big CPG company, I can tell you that the trade relationships are much more difficult than the media relationships. So a lot of that money moves in because of their relationships with the trade rather than because of proper media planning.

3772   There was an IPSOS study done earlier this year that actually 93 percent of screen time is still in the home and 73 percent -- no matter what screen, 73 percent is still done in the family room. So we, again -- and CPGs tend to have higher television budgets because they need broad reach to reach people, be top of mind, and TV is still the only medium that delivers that.

3773   So yes, while we're working with them to get down to the decision path and where we reach consumers and affect their past purchase, TV still remains the most effective broad-reach medium.

3774   COMMISSIONER SIMPSON: Yeah. Well, there's no doubt and it's also easier to plan and buy a campaign in mass media. Retail is hard work and --

3775   MR. GARVIE: Yeah. And also mostly controlled by the retailers, that environment.

3776   COMMISSIONER SIMPSON: Yeah. Yeah, exactly. But on that point though, when I was on your website, you know, hopscotching from region to region around the world, an awful lot of your organizations from a regional standpoint were saying that they were touting e-commerce as a growth area for their business and I was just wondering if you could define e-commerce from the GroupM definition standpoint.

3777   MR. GARVIE: Define the amorphous base of e-commerce?

3778   COMMISSIONER SIMPSON: Yeah.

3779   MR. GARVIE: Yeah. I mean, again, we're working with a loss of consumers who have reached the market that don't involve retail.

3780   COMMISSIONER SIMPSON: Yeah.

3781   MR. GARVIE: I'm trying to help them pick up consumers and lead them all the way down to the endpoint, and the endpoint of that funnel is e-commerce. So can we help them build that engine at the back end to help actually move product outside the retail environment?

3782   COMMISSIONER SIMPSON: Okay. Thanks. Just a couple more questions.

3783   Being a big outfit, you have an opportunity to work with big networks. Are you hearing any dialogue -- I'm thinking here about the Canadian market both from a television industry standpoint and from an agency standpoint. Are you hearing any backchannel conversations about networks and program producers moving more towards North American rights as a model versus Canadian rights?

3784   MR. GARVIE: No.

3785   COMMISSIONER SIMPSON: Okay. Taking advantage of you being here, this is on a subset.

3786   Children's advertising has been -- child-directed advertising has gone through a lot of constraints and it appears that one of the unintended but very negative consequences is that it's driven children's programming off of mainstream television.

3787   And I would like your views as to how clients -- you have some package of kids' clients, I think, that fit into this category -- how you're dealing with that. It's gone to specialty but do you feel that children's advertising needs to be reviewed with the idea of lightening the load regulatorily?

3788   MR. GARVIE: With the idea of...? Sorry.

3789   COMMISSIONER SIMPSON: With the idea of lightening the regulatory requirements, trying to encourage spend back into mainstream.

3790   MR. GARVIE: Yeah. I think if you have responsible advertisers -- and which we're lucky that we have a number of CPGs that are and are voluntary members of various schemes. We have very strict rules on the composition of programs that we'll place their advertising in or not. And I think if you have responsible advertisers who sign up voluntarily to that sort of stuff, it's much better than hard regulation.

3791   COMMISSIONER SIMPSON: Last question. Advertising always adapts to conditions in the market and are you finding that your industry is developing closer relationships with the program producers rather than the aggregators of programming? You know, I'm thinking of the old days of sponsored shows and product placement and so on.

3792   MR. GARVIE: As an organization we do because we are fully behind the creation of great content. So we work with the Canadian broadcasters to help them make content. So we have production relationships.

3793   Do we think that that will usurp what we need from broadcasters? No. It's a sort of partnership program. There are lots of places where advertisers are thinking of making their own content now and syndicating that and we can facilitate that, but again, the scale of that is small.

3794   COMMISSIONER SIMPSON: Again, at the risk of contradicting myself, this will be my last question.

3795   There was an academic yesterday morning, Miss Berkowitz, who had a very interesting view to Canadian content program creation and she was saying that the industry and all participants should be focused more on creating hits rather than just creating content, and obviously, you know, you want to -- everyone wants to be part of a hit whether it's as an advertiser or as a program producer.

3796   Did you get a chance to hear any of her submission yesterday?

3797   MR. GARVIE: I didn't, no. But I mean, I think -- I've heard that lots of times from lots of different people, you know, in different markets around the world. I think if she could tell the people behind me from all different broadcasters how they could make a hit, they will be doing it. You know, it's television, hits aren't necessarily formulaic and, you know, there's going to be some hits and misses, right?

3798   And yes, I believe that people should be trying to create the best television show they possibly can, but whether that resonates with the consumers -- if we all knew how to do it, it would be very easy.

3799   COMMISSIONER SIMPSON: But do you see -- giving the appeal you are making here, which is to ask us to ensure -- I don't want to use the word "protect" -- but ensure the status quo both for the benefit of the industry and the advertising agency industry and not see jobs migrate, do you see your industry having a bit of a role in trying to help the industry that you buy ads from to build hits or are you just satisfied to --

3800   MR. GARVIE: No. Absolutely and I think that we all as advertisers, we need strong broadcast partners because they deliver our broad audiences and if they are allowed to make the revenue to develop the content, then hits will come like "Rookie Blue," which is now shown on ABC in the U.S., that was developed here. That is, I imagine, termed a hit.

3801   COMMISSIONER SIMPSON: Those are my questions, sir.

3802   THE CHAIRPERSON: Thank you.

3803   Mr. Vice Chairman.

3804   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

3805   Mr. Garvie, thank you so much for being here this morning. Would you agree that the CPM for a Canadian show is lower than the CPM for an American show? In other words, is an eyeball for "The Good Wife" worth more than an eyeball for "Saving Hope" in Canada?

3806   MR. GARVIE: That completely depends.

3807   COMMISSIONER PENTEFOUNTAS: On?

3808   MR. GARVIE: On who's buying it, what audience. It's difficult to compare CPMs across markets and if it's a cost per thousand, I imagine that, you know, that's a -- it's not a cost per rating. A cost per rating in the States is going to be much bigger than a cost per rating here.

3809   COMMISSIONER PENTEFOUNTAS: No. In Canada, is the same eyeball watching an American show worth more than that eyeball watching a Canadian show?

3810   MR. GARVIE: Not necessarily.

3811   COMMISSIONER PENTEFOUNTAS: Not necessarily. Okay.

3812   In terms of the use of data -- and sample data as opposed to census data -- do you think that something can be done in Canada to help us better understand data and better monetize that data?

3813   MR. GARVIE: Absolutely.

3814   COMMISSIONER PENTEFOUNTAS: Can you speak to us on that issue?

3815   MR. GARVIE: I think that the Canadian broadcast industry should be better measured. I think one of the issues they've had with digital coming into Canada is digital is measured and there's data coming from every single source.

3816   We currently have eight markets, I think it's eight markets, with PPM, 27 markets with diaries, and that's, frankly, not good enough for us to plan and buy effectively.

3817   COMMISSIONER PENTEFOUNTAS: That would certainly help -- a better measurement system would help curtail the migration of revenues from the traditional TV platform to the digital world.

3818   MR. GARVIE: I think it would give us a much better view of exactly what was happening.

3819   What I'm confused about is we have as many as 10.5 million sets of boxes across Canada. So, we have the data. I'm not sure why it's not unified and made public.

3820   COMMISSIONER PENTEFOUNTAS: Made public, yes.

3821   I'm trying to remember the term that my colleague used but, in terms of background noise and back-door hearings, has anything come to you -- and I don't know if you're free to speak on the issue or if even you want to -- that vertically-integrated entities are using that data, as we speak, internally?

3822   MR. GARVIE: I'm sure they were looking at it. How much they're using, I don't know.

3823   COMMISSIONER PENTEFOUNTAS: It's there, it's available, it's easily accessible, and one would think --

3824   MR. GARVIE: Well, I assume for them, yes.

3825   COMMISSIONER PENTEFOUNTAS: We've also heard a lot about sort of the uptake in our TV ads.

3826   Is that something that can be used in Canada to help drive revenue?

3827   MR. GARVIE: I'm not sure it drives revenue. I think it makes advertising more efficient. I'm not sure it drives revenue for content creators.

3828   COMMISSIONER PENTEFOUNTAS: In terms of real-time bidding and broadcasters, wouldn't it drive revenue for them to have access to this kind of model? It certainly is driving revenue on the digital front and the CPMs of RTB are certainly growing exponentially year over year.

3829   Are we using that model and if not, why not?

3830   MR. GARVIE: I think there's always a place for programmatic buying of media and buying audiences, rather than environment. But there's always, also, going to be the buying of environment and the buying of -- and television has always been audience buying. You know. We buy audiences on television. We don't buy, necessarily, one or two shows. We buy packages of shows. Effectively, we're doing the same as RTB.

3831   I'm not sure why the broadcasters would ever put their content up to be auctioned.

3832   COMMISSIONER PENTEFOUNTAS: To get rid of excess inventory?

3833   MR. GARVIE: You'd have to ask these guys behind me how much excess inventory they actually have.

3834   COMMISSIONER PENTEFOUNTAS: Okay. Thank you so much.

3835   THE CHAIRPERSON: Thank you very much, Mr. Garvie. Those are our questions.

3836   Madame la Secrétaire.

3837   LA SECRÉTAIRE : Merci.

3838   I would now ask Bell Canada to come to the presentation table.

3839   While the group from Bell is finding their seats, I'll take a few seconds to acknowledge the group from Carleton University that is following our hearings. They're in the room. I think they've been following it online, as well.

3840   So, welcome. I think you may be just as many as the panel from Bell, it looks like.

--- Laughter

3841   THE CHAIRPERSON: It makes you wonder who's running the company, today.

--- Pause

3842   THE CHAIRPERSON: When you're ready.

PRESENTATION

3843   MR. BIBIC: Good morning, Mr. Chairman.

3844   Let me introduce our panel. While it is large, we are here representing French and English broadcasting, distribution in French- and English-language markets, local TV production and, of course, our experts.

3845   I'm Mirko Bibic, EVP and chief and regulatory officer, BCE and Bell Canada.

3846   With me on our panel today are, to my right: Wade Oosterman, president of Bell Mobility and residential services and chief brand office.

3847   To his right: Geoff Wright, VP, content and business planning for Bell TV.

3848   To my left: from Bell Media, Kevin Crull, president; Kevin Goldstein, VP of legal and regulatory affairs; Tracey Pearce, SVP of specialty and pay services; Wendy Freeman, president of CTV news; et Gerry Frappier, président et directeur general de RDS.

3849   Derrière moi, à ma gauche, également de Bell Média : Corrie Coe, SVP Independent Production; Mario Clément, VP, Contenu; Dany Meloul, chef adjointe du service juridique; et Mike Elgie, VP and GM of CTV Atlantic.

3850   Finally, behind me, to my right are the three experts whose reports were included in our filing. We have Dr. Jeffrey Eisenach, Stephen Armstrong and Ken Goldstein.

3851   Panellist Commissioners, this hearing challenges us to examine whether today's broadcasting rules have a place in a modern system.

3852   What's at stake is the very successful system we have developed and which delivers incredible value to consumers today. Television viewing costs Canadians just 24 cents per hour and offers a wide array of services with more packaging flexibility than is offered in the United States.

3853   While important and provocative questions are being asked in this hearing, one or two missteps can place this success at risk, ultimately, to the detriment of all Canadians.

3854   Nor will this success be sustainable if we forget that what's really relevant to consumers is watching content, not just watching TV. That means regulation should not favour one type of broadcaster or distribution platform over another. And it certainly cannot continue to provide structural advantages to foreign players without, in the long term, dramatically undermining the cultural objectives of the Broadcasting Act.

3855   Our team has crafted a proposal that addresses all of the issues put forward by the Commission, keeping in mind desired outcomes rather than just rules and balancing the risk to the overall system against the benefits of flexibility for individual consumers.

3856   Many of these outcomes have already been set out by the Commission and the government: choice and flexibility in selecting services; access to a variety of popular and niche programming; creating compelling and diverse Canadian content; fostering local reflection; and protection of Canadian jobs.

3857   Our road map -- notre feuille de route, Monsieur le Président -- puts those outcomes front and centre.

3858   Notre feuille de route a cinq volets :

3859   1. Choix et souplesse pour les consommateurs.

3860   2. Accent réglementaire sur la programmation canadienne à haut budget.

3861   3. Assurer la viabilité de la télévision locale.

3862   4. Promotion de notre contenu.

3863   5. La distribution sur toutes les plateformes.

3864   That's the five points of our road map. To summarize, I'm going to cover each aspect.

3865   First: choice and flexibility for consumers.

3866   Under our proposal, consumers could select any service not included in basic on a pick-and-pay basis, exactly as they have said they want.

3867   This can be achieved with two minimally-intrusive regulatory rules.

3868   At retail, BDUs must make every service available on a stand-alone basis if it is not included in basic.

3869   At wholesale, programmers, domestic or foreign, must not restrict BDUs from offering stand-alone, pick-pack, or other flexible retail packaging, and must not demand any packaging, penetration, or pay-on commitments.

3870   BDUs would remain free to construct basic and any other packages in order to deliver compelling value. There is no evidence of dissatisfaction with existing basic packages, but, of course, BDUs should be free to offer skinny basic or any other packages.

3871   Beyond the two rules we proposed, more intrusive unbundling regulation would actually limit competitive differentiation and, without a change to the regulation of wholesale negotiations between large players, puts at risk the ability of the system to create the quality and variety of programming available to Canadians.

3872   Second point: a regulatory focus on the creation of big-budget, high-quality Canadian programming.

3873   To grow in popularity, Canadian programming must match the production values of the best that Hollywood can offer, and this requires a shift in focus. That shift leads to a virtuous cycle, driving audience attention and subscriptions; therefore, funding more content.

3874   We have seen this time and again with shows like "Dexter", and then "Homeland", on Showtime, or, more modestly, "Orphan Black", and then "Bitten on Space" and "L'appart du 5e" sur VRAK.

3875   Third: long-term sustainability for local television.

3876   We know that viewers cherish their local news and local content and rate local TV as the most important; in particular, local news.

3877   A third of all viewing in the system is to private conventional TV -- and our CTV stations alone reach 80 percent of English Canadians every week. This remains the principal entry point into the system for viewers. Yet, today, it is unsustainable.

3878   We need to not only maintain simultaneous substitution, but should convert to a local specialty model and improve the protection of the Canadian rights market.

3879   Fourth: promoting our great Canadian content to the maximum extent possible.

3880   We do a lot already, but we need to continue to focus on promotion to attract viewers.

3881   This is another reason to have strong local television stations, as they are the key promotional platform Canadian content, in particular, due to the power and audience delivery of simultaneous substitution.

3882   Fifth: make our great content available over all platforms.

3883   This is key to meeting foreign OTTs head-on. It consumes us every single day at Bell Media, Bell TV, and Bell Mobility.

3884   We have endorsed many of the Commission's proposals, from pick-and-pay, to the elimination of genre protection, to a system for handling complaints, and we have not shied away from proposing significant changes to the status quo supported by fact-based evidence.

3885   We, too, seek a flourishing industry, from production to broadcast to distribution, that makes Canadians proud. The key question: how to get there from both a business and a regulatory policy perspective?

3886   Wade...?

3887   MR. OOSTERMAN: Thank you.

3888   We are operating in the most intensely competitive period in the history of the BDU market in Canada: cable, IPTV, two national DTH providers, and domestic and foreign OTTs. Every day we try to attract customers to Bell Fibe and Satellite TV and our competitors do the same for their services.

3889   As an aside, I might add we do that through a number of elements, including crucially packaging, and packaging requires a careful balancing of content and cost to generate what each of us believes will be the best value proposition for consumers.

3890   If the Commission mandates skinny basic and pick-and-pay and build-your-own-packages, packaging differentiation will disappear and a crucial element of competition -- certainly how we will compete -- will be lost. And, of course, pick-and-pay practically eliminates the need for predefined build-your-own-packages, giving ultimate flexibility.

3891   Now, to be clear, as Mirko said, we are not opposed to skinny basic or any other packaging, we just do not support mandating it for all BDUs, for the reasons stated, and also because we saw in that in online forums and interventions what consumers really wanted was more flexibility when adding channels above basic, which our pick-and-pay proposal obviously provides.

3892   We did not see a clear desire for fewer channels to be included in basic. In fact, the empirical research shows the same thing. Our Hill & Knowlton survey found that just 13 per cent of Canadians support skinny basic as contemplated.

3893   We do, however, support the Commission's view that the U.S. 4+1 should not be included in basic as allowing them to be included undermines the cultural objectives of the system.

3894   Thank you.

3895   Kevin.

3896   M. CRULL : Merci, Wade, et bonjour tout le monde.

3897   As part of this all-encompassing conversation about the system's future, a frank discussion of local television is essential.

3898   Local TV stations are crucially important, but the business model has been broken for some time and now it's time to act. We have to decide: do we want sustainable local television, in markets both large and small across Canada, giving it a pride of place in the homes of Canadian viewers? If we do, our local specialty proposal is a sound way to achieve that goal.

3899   As I'll explain in a moment, merely shutting down transmitters would actually make a dire situation even worse.

3900   Now Bell Media proudly operates local TV stations in 30 communities across Canada. These stations are the primary way that citizens engage with each other via their broadcasting system. In the Commission's research, 81 per cent of Canadians cite local news as important to them, more than any other category of programming.

3901   Now I'll ask Wendy Freeman to take you through some of the important work her team and these stations perform.

3902   Wendy.

3903   MS FREEMAN: Thank you, Kevin.

3904   Our local stations serve a vital democratic and community function. The production of news -- reporters and cameras on the ground in our communities -- still depends crucially on local television stations.

3905   In Edmonton, our CTV newsroom recently interviewed virtually every candidate for mayor and council during the last municipal election. We posted all of the full interviews online. On the night of the election, which brought in Edmonton's first new mayor in nine years, CTV journalists ensured that viewers could hear from each elected council member.

3906   In Saskatoon this spring, CTV local news teams provided live coverage of the disappearance of 15-year old Austin Carter, contributing to his rescue when a local resident recognized him from media reports.

3907   In Moncton this past summer, our local teams provided extended live coverage of the RCMP-targeted shootings, keeping the community and the rest of country up-to-date on developments and safety advisories. Our team was later commended by the mayor and the local RCMP detachment.

3908   This is news coverage that only local television stations can produce. Our 30 local TV stations provide what CNN, Fox News, Al Jazeera, and the BBC never will: real stories, from Montreal to Barrie to Terrace, and real coverage of local issues, local politics, and local events.

3909   Local TV stations are also active community partners. Our northern Ontario stations operate the longest-running telethon in Canada that will raise nearly half a million dollars this year.

3910   Twice a year our Saskatchewan stations take their show on the road to 10 rural communities across the province, telling their stories and supporting community events.

3911   Our London station is a founding partner of the Pledge To End Bullying. In fact, in total, we aired 187,000 free community-enriching public service announcements last year alone.

3912   Kevin.

3913   MR. CRULL: Notwithstanding what you just heard from Wendy, the existing business model for these services is simply unsustainable. Despite investing about $2 billion each year, without the LPIF conventional TV as a whole, as an industry, would have only been marginally profitable in one out of the last five years. Our 30 local TV stations at CTV and CTV2 together employ 2,060 Canadians and last year we actually had costs of operating these channels of $721 million against the ability to generate revenue of only $709 million, producing a loss of $12 million.

3914   Unfortunately, the Commission's proposals in isolation would make this situation worse rather than better. See, operating transmitters comprises less than 1 per cent of our local TV operating costs and the savings from shutting down transmitters would be more than offset by lost revenues from ad revenue from those over-the-air viewers and also copyright payments under the distant signal retransmission regime.

3915   All of this is before the impact of the Commission's proposals on simultaneous substitution, either of which would be immediately devastating for local TV.

3916   The evidence that we filed on the record shows the value of simultaneous substitution to be in excess of $450 million annually, and live events account for a significant percentage of that: up to $40 million every year for CTV alone.

3917   Simulcast programming is essential because it provides large lead-in audiences and our conventional stations themselves generate $85 million in annual promotional value for our Canadian programming. In fact just this past weekend, it was simulcast that allowed Canadian networks who were broadcasting the annual Stand Up to Cancer event to ensure that all funds raised from Canadian viewers remained in Canada.

3918   Eliminating simultaneous substitution is just clearly not a risk worth taking when, by our analysis, there's fewer than 500 complaints out of more than half-a-billion hours of simulcast viewing annually. The vast majority of interveners, including all major stakeholders, and more than 90 per cent of the individual consumers who addressed this issue, have supported maintaining simultaneous substitution.

3919   Our local specialty model that we've proposed would finally bring stability to these local stations that are so valued. We appreciate the concerns for those who receive these signals over the air, but without this support local television could disappear entirely for all Canadians.

3920   Now I'd like to turn to the funding of our great Canadian programming.

3921   Over the years we've experimented extensively in order to create and find hits. Yes, that is our motivation: creating and finding hits amongst the inevitable failures and to maintain access for consumers to a wide range of quality contents. Shows like Motive, Mix 4, Véro Inc., Saving Hope, Inner Space, 19-2, and Coldwater Cowboys demonstrate the incredible creative talent that we have here in Canada.

3922   As an industry and as policymakers, we just can't ignore the economic model of creating and distributing content, nor can we let rhetoric or inapplicable analogies dictate a policy that fundamentally tries to defy gravity.

3923   Because of high fixed costs for both BDUs and programmers, bundling has always been foundational to the economics of the television business and to delivering the best value to viewers. You see, bundling is what allows not just the biggest hits, but also a wide variety of creative and edgy content to be available to Canadians.

3924   It is not just a relic of old TV. OTT services like Netflix and Amazon Prime, they're very bundled. Digital radio services, like Rdio and Pandora, and digital magazine services, like NextIssue, these all bundle content in order to deliver the best consumer value.

3925   Now, to be perfectly clear, we do accept the directive to unbundle; however, we acknowledge that we're gambling on our ability to re-invent an industry's foundational economics and still generate sufficient revenue to sustain quality, variety and investment, and also, at the same time, to improve our global creative competitiveness. In my opinion this is a tall task that has significant downside risk for every stakeholder.

3926   Under the existing distribution model, where rates are fixed, even a modest 10-point drop in penetration of specialty services, say from 80 per cent to 70 per cent, will lower revenue by 15 per cent, but will cut profitability by nearly half.

3927   When Rogers unbundled in London during their trial, the penetration of Bell Media services fell not 10 points, but an average of 57 points, with those consumers who chose to pick the trial offerings. In that scenario, the sustainability of even strong brands, like TSN, RDS, Discovery, Space, VRAK, Canal Vie, and Canal D, is at risk.

3928   We're not asking Canadians to guarantee our success. In fact, it's just the opposite. What we're proposing is an unbundled world, where each of our services, from TSN to Bravo to Book TV, they will thrive or fail based on the consumer value that they deliver. All we're asking for is the freedom to work creatively with our distribution partners to find a model that supports the production and discovery of a great variety of quality content for Canadians.

3929   M. CLÉMENT : On ne surprendra personne en disant que le marché de langue française est unique à maints égards. L'offre dans ce marché est beaucoup plus souple depuis plusieurs années. Le star-système y est bien développé et il soutient la production d'un contenu d'ici de grande qualité. Jusqu'à maintenant, les services OTT ont eu un impact moindre qu'ailleurs au Canada. Les services de langue française sont déjà beaucoup moins nombreux et ils se distinguent. En outre, le marché québécois est dominé par une importante EDR intégrée verticalement.

3930   Nonobstant ces différences, le document de discussion du Conseil met de l'avant les mêmes propositions pour les marchés de langues anglaise et française. La vision de la programmation de Bell Média au Québec est en effet semblable à celle du reste du Canada : maximum de souplesse pour les consommateurs, succès canadiens à gros budget et de grande qualité, maximum de promotion et distribution sur plusieurs plateformes. Toutefois, nous estimons que des approches distinctes sont nécessaires pour assurer la mise en oeuvre de cette vision sans compromettre le succès que nous avons connu jusqu'à présent, comme le stipule l'article 3 de la Loi sur la radiodiffusion.

3931   M. FRAPPIER : Nous devons maintenir l'exclusivité des genres et les droits d'accès à la distribution. Puisque le marché offre déjà un choix accru de forfaits au Québec, le maintien des mesures de protection de l'exclusivité des genres et des droits d'accès à la distribution pour les services de langue française de catégorie A ne nuirait pas à davantage de dissociation des forfaits, mais leur élimination pourrait considérablement porter atteinte à la diversité. Les mesures de protection de l'exclusivité des genres et les droits d'accès à la distribution demeurent essentiels pour un système de télévision spécialisée diversifié et prospère au Québec.

3932   Nous avons proposé une hausse des dépenses en émissions canadiennes pour les services de langue française en raison du succès de la programmation de langue française d'ici, de l'impact moindre des services OTT et de notre proposition visant à maintenir l'exclusivité des genres. Puisque nous sommes d'accord avec le Conseil que le nouveau cadre réglementaire doit être tourné vers l'avenir, cet engagement comprend une plus grande souplesse des horaires pour les services de langue française, afin qu'ils soient bien positionnés pour s'adapter.

3933   MR. BIBIC: Our regulatory framework has always reflected a bargain that balances privileges against important public service obligations. We understand that many of the privileges will be pared back and we are not resisting these changes, nor are we seeking the elimination of all of our obligations.

3934   Our proposal creates an environment that balances the inevitable trade-offs between personal choice, costs, and the variety of content available to Canadians, while giving all stakeholders the flexibility they need to find creative solutions to new challenges.

3935   Thank you, Commissioners.

3936   THE CHAIRPERSON: Thank you very much.

3937   Commissioner Molnar will start the questioning.

3938   Thanks.

3939   COMMISSIONER MOLNAR: Good morning, everyone.

3940   So to whom should I direct my questions?

3941   MR. BIBIC: You can direct them to me and I'll pass them along to the most appropriate person.

3942   COMMISSIONER MOLNAR: Okay.

3943   Well, thank you. I'm sure will not be surprised to know we have many questions for you, and so I'll try to be efficient in asking. I'm going to ask, just because you have so many people, that perhaps we try and be efficient in responding, too.

3944   Before I get into my questions, I just want to ensure I'm understanding what you meant or intended on page 10 of your opening remarks here, where you ended and said:

"All we are asking for is the freedom to work creatively with our distribution partners to find a model that supports the production and discovery of a great variety of quality content...."

3945   MR. BIBIC: I think there's two aspects to that. Kevin will answer primarily, but I want to lead off.

3946   One aspect is the ability for BDUs to develop their own creative packaging beyond basic and ultimate stand-alone for every single channel that's not in basic. That's one aspect of it.

3947   Otherwise, Kevin will answer.

3948   MR. CRULL: Thank you, Madam Molnar.

3949   Well, as the panel, I think, is aware, many of you, that unbundling and packaging flexibility has actually been a topic of discussion in the industry for some time, certainly since about the day that I arrived in this role four years ago. So we've worked as Bell Media and we've worked with distribution partners and we've had many dialogues with the Commission about: how do we enable greater packaging flexibility, greater choice for consumers, but how do we also recognize the benefits that our system has delivered, in terms of a wide variety of creative content, some of it niche, serving audiences that are maybe 10 per cent or 20 per cent of Canadians, but are important nonetheless, and who value that content, and how do we fund the experimentation of the creative process that inevitably it takes to find hits?

3950   That paragraph says that we're trying to do something with this unbundling endeavour that no other market has done. You know, we have actually come to the point that we embrace this, but we really want -- we want to move along prudently so that the system can generate the revenue necessary still -- in this unbundled-packaging-choice world, it can generate the revenue necessary to support creative services.

3951   Now, it's really important --

3952   COMMISSIONER MOLNAR: So just --

3953   MR. CRULL: M'hmm?

3954   COMMISSIONER MOLNAR: -- just to be clear, when you are saying "All we are asking for," are you asking...

3955   MR. CRULL: So our --

3956   COMMISSIONER MOLNAR: ...we, the Commission, for something?

3957   MR. CRULL: Yes. Our proposal suggests that, for the largest distributors in the country, those that have over 500,000 subscribers, that we have commercial negotiations, in a free market --

3958   COMMISSIONER MOLNAR: Okay.

3959   MR. CRULL: -- sense, without the dispute resolution process that exists today.

3960   COMMISSIONER MOLNAR: Okay, thank you. And we talk about that further.

3961   MR. CRULL: Okay.

3962   COMMISSIONER MOLNAR: I just wanted to ensure I understood what you were speaking of here.

3963   MR. CRULL: Right.

3964   COMMISSIONER MOLNAR: So you were speaking of freedom from some of the restrictions in the VI code.

3965   MR. CRULL: Correct.

3966   COMMISSIONER MOLNAR: Okay, thanks.

3967   MR. CRULL: I'm so sorry, no, the VI code --

3968   COMMISSIONER MOLNAR: No.

3969   MR. CRULL: -- we absolutely support. It's really dispute resolution, as we will, I'm sure, get into in great detail. We want to be able to have a dialogue with our distributors that meets their needs, meets consumer needs, but also supports our needs. We're afraid that the current dispute resolution process doesn't create balanced outcomes in that way.

3970   MR. BIBIC: Ms Molnar, if I could just add -- it's more for the benefit of my panel -- it's actually not -- I mean we've labelled it the VI code, but it's actually the code of conduct for commercial arrangements and interactions. It actually applies to all stakeholders in the industry, not just VI players.

3971   I just don't -- it came out of the vertical integration movement four years ago, but just the label is...

3972   COMMISSIONER MOLNAR: Okay, I'll --

3973   MR. BIBIC: It's a misnomer now.

3974   COMMISSIONER MOLNAR: -- I will be careful. And I will also call it the code of conduct, even though we all know what we're talking about.

3975   I want to start just talking a little bit about multiplatform. You've said that it is what consumes you every single day. Obviously, a lot of this hearing is about the future, and what's going on, not just within the traditional system, but on alternative platforms, and providing Canadian citizens with access over any time, anywhere, and all of that.

3976   So could you just begin. Just tell us briefly of what are your current initiatives to move traditional content onto alternative platforms?

3977   MR. CRULL: Yes, I'd be happy to.

3978   We've invested significantly in the procurement of content rights, both through the terms of trade, with our Canadian partners, and also through our foreign-acquired programs. We work very hard to digitize and make available in creative ways everything that we create in our news and our other in-house-produced shows.

3979   We deliver that to consumers. We have a very strong belief, and, in fact, a commitment that the only way we're going to be able to thrive in this world is to add value to the existing subscriber relationships that we have.

3980   I believe that Mr. Garvie, before us, talked about the overwhelming majority of viewing. Even though we are all very excited about multi-screen viewing and about watching outside the home, and things of that sort, the overwhelming majority of the 28 hours that Canadians consume of television is still on the big screen, in their living room. In fact, 93 per cent of it is still watched live.

3981   So we're using that foundation and that platform to enhance the viewing experience by making all of that available on any screen -- so you can watch it live on a smartphone, on a tablet, in the home, out of the home -- or to make our programs available on demand, but always -- always -- connected to that primary relationship and the primary business model that we have today, which is, really, supporting our local communities and producing great Canadian content.

3982   MR. OOSTERMAN: If I could add to that, I think Bell Mobility has been a significant leader in putting content on mobile devices. In our television distribution side, we've developed storefronts to allow VOD, and the like. Our app investments, I think our remote control app is actually the highest rated video app in both iTunes and android stores. So we do a lot.

3983   COMMISSIONER MOLNAR: Thank you.

3984   You said that all of your multiplatform strategy is centred around your subscriber relationship, so when you say that you are a programmer, and your relationship is with a BDU, and you are a BDU, what subscriber relationship are you speaking of? Are you speaking of your relationship where you are the BDU and you're providing this content to your customers or are you speaking of it as the programmer?

3985   MR. CRULL: Yeah, I'm speaking of it as the linear ecosystem, so I'm speaking of my relationship with all viewers in Canada that are served from, you know, TELUS and Shaw, to Cogeco and Vidéotron and MTS, and also that are served by Bell. So I'm speaking of that ecosystem.

3986   If I may, this has arisen in the last two days, I think, as an important topic because the question has been asked: why don't you just -- you have the freedom to go OTT, why don't you just do that? Why don't you just take advantage of that environment and compete in that way?

3987   I think an important part of that message is: that's not our business model and we can't meet our objectives or our passions of producing local content and supporting Canadian programming in that way.

3988   It's often lost. More than 50 per cent of what we air is produced by -- right here -- Canadians, and more than 50 per cent of what is watched by our viewers is produced, and an OTT model is incapable of supporting our business and those objectives.

3989   COMMISSIONER MOLNAR: Okay. Well, that was going to be a question, and so I will ask it now.

3990   Obviously, everybody was very interested when Show Me was announced and who the partners were and who the partners weren't. Anything you can share? Are you telling us that you don't have an interest in an OTT model? We are not going to see a Bell OTT?

3991   MR. CRULL: We absolutely have an interest in providing consumers with much more long tail content, with more on demand content, with elegant navigation interfaces that IP can deliver, which allow discoverability through search and recommendations, absolutely.

3992   I mentioned our GO products when I was talking about the extension of our linear channels. We have an HBO GO, a TMN GO, a TSN GO, a CTV GO, a Bravo GO. These are all the multiplatform extensions of our channels.

3993   We did announce last week our partnership with HBO, which I think teased a little bit about what our thinking is, and I would expect that we will have a channel, if you will, that will have a lot of fantastic long tail content, which will be available on demand on any platform, and that we will distribute through our distribution partners to complement the existing ecosystem.

3994   COMMISSIONER MOLNAR: Would you expect that you are going to continue to offer all of those as separate, essentially, channels, instead of, you know, one place set up, and it opens up all the content that you are controlling?

3995   MR. CRULL: If I understand -- stop me if I don't understand the question --

3996   COMMISSIONER MOLNAR: You are saying that you have HBO GO and TMN GO and --

3997   MR. CRULL: Yes. You sound like our CEO.

--- Laughter

3998   MR. CRULL: The consumer experience of replicating the program guide -- it's funny, we all complain sometimes about the program guide, with numbered channels on our cable system, and how difficult it is to navigate.

3999   Similarly, we have a world now that we are trying to sort out. On my tablet, I have all of these apps. If I want to discover and find content, which app do I go to?

4000   Just consolidating them all to one app, we believe, makes it too cumbersome. So I don't think we have solved that user interface elegance across all of these offerings just yet.

4001   COMMISSIONER MOLNAR: Right. I guess one of the issues at this point is, when you are linking it to subscribers, a subscriber may have TSN and not have HBO. So you are still tying it to their basic cable subscription today. Correct?

4002   MR. CRULL: Our intention is, absolutely, to add value. We believe that the value proposition that we deliver to consumers is best recognized whenever we enhance that basic subscription.

4003   COMMISSIONER MOLNAR: So would you ever see a time when those services would be available to somebody who may have cut the cord from traditional --

4004   MR. CRULL: That is not our strategy.

4005   COMMISSIONER MOLNAR: No.

4006   MR. CRULL: I firmly believe -- and you can ask the Netflix executives, with great respect to the business they have built -- I firmly believe that we cannot serve our local communities --

4007   I mean, it is hard enough today to serve our local communities -- you have heard our implorings of the broken business model -- in an OTT world, and we could not generate the volume, the variety and the quality of programming that we do today in an OTT world.

4008   Really, OTT was -- the foundation of it was the procurement of long tail content kind of sitting on the shelf that, frankly, somewhat to my surprise, found great appeal and great audiences with a lot of older shows, and that foundation has now enabled the production of some made-for-OTT shows.

4009   But, in fairness, at Bell Media right now, we have 76 scripted projects in development, all the time, in that 76 range.

4010   I think the leading global player, with massive scale in OTT, may have produced five or six shows. We can't do what we do that way.

4011   MR. BIBIC: Just to put a fine point on it, our strategy -- what is our comparative advantage? It's not the scale that these global players have. Our comparative advantage is what Kevin just said, it's our distinctly Canadian broadcasting ecosystem, which is going to produce desirable Canadian content that is reflective of Canadians.

4012   Our proposal, the five points that I laid out, is designed to say: Okay, let's make sure that that continues to be successful. Let's recalibrate some of the obligations and privileges, so that we can look forward, and be successful going forward, and then we will continue to generate Canadian content, we will promote it, attract subscriptions, and -- critical to your question -- make that content available on all platforms, not just on the old linear TV set.

4013   That is the strategy, and the reason for it -- how it ties into the debates that we heard yesterday, and the public policy questions today in this hearing.

4014   COMMISSIONER MOLNAR: It is a different strategy than what we heard yesterday, certainly.

4015   MR. BIBIC: In some parts, by the end of it, I thought, in the discussion between the Vice Chairman and ---

4016   COMMISSIONER MOLNAR: I am just talking about the OTT strategy, not your overall approach.

4017   MR. BIBIC: Yes. But, to be fair, some parts of what I heard at the end of Vidéotron's or Québecor's testimony, there were some similar elements to it that I heard, which was about, you know, there is an ecosystem here that we need to continue to nurture and meet the foreign OTTs head-on.

4018   I mean, my words, but that's kind of what I heard by the end of the conversation between the Vice Chairman and the panel from Québecor.

4019   But not altogether the same strategy, I would agree.

4020   COMMISSIONER MOLNAR: I believe I understand, but I am going to ask this one more time, so that I am not assuming that I understand something.

4021   Under a regulatory framework where there would be a skinny basic, and consumers would have the option, then, to pick and choose, and maybe retain their access to some of the important channels, like the CTVs and so on, which make up that skinny basic, they would have no access through alternative platforms to any of the content that you control, unless they subscribe to that cable channel.

4022   Is that correct?

4023   MR. CRULL: I think, generally speaking, yes. If you want TSN GO and you want to have TSN available on a tablet, out of the home, on a Smartphone, and you want on demand --

4024   COMMISSIONER MOLNAR: You better subscribe.

4025   MR. CRULL: -- then subscribe to TSN, and then you get it in all places, all the time.

4026   COMMISSIONER MOLNAR: Bundling it another way?

4027   MR. OOSTERMAN: No, but that's no different than if I want to watch Netflix. I actually have to sign up to watch Netflix.

4028   If I want to watch TSN, I have to sign up to watch TSN.

4029   I think that part of the complexity is the trade-offs between what elements of the system do we want to nurture and protect, and what elements of the system do we want to throw under the bus.

4030   COMMISSIONER MOLNAR: Just to be clear, I, at least, am not here to challenge your strategy, I just want to understand it.

4031   Before we leave this subject, you spoke of CTV GO, and I have tried a couple of times to get onto that app, and I have not been successful.

4032   Is it available throughout Canada?

4033   MR. CRULL: Now you sound like my CEO again.

4034   It is, indeed. It is carried by Shaw. It was just picked up by our partners at TELUS. It is carried by Bell.

4035   You do have to be a basic subscriber of one of the partners that is carrying CTV GO, and that is the same business model, I believe, that TVA has and that Global has.

4036   Global has many partners carrying Global GO.

4037   So, if you are a subscriber of one of those BDUs, then you log in and --

4038   COMMISSIONER MOLNAR: I am not, because I live in Saskatchewan and those BDUs don't operate there.

4039   MR. CRULL: Of course, we are working with all of the partners --

4040   COMMISSIONER MOLNAR: Seeking to monetize the rights of the multiplatform use.

4041   MR. CRULL: Yes.

4042   MR. OOSTERMAN: I am happy to provide service to you in Saskatchewan through our satellite service, for what it's worth.

--- Laughter

4043   COMMISSIONER MOLNAR: I think it wouldn't be appropriate if the only way to get CTV GO in Saskatchewan was to have to subscribe to a Bell BDU service, for what it's worth.

4044   MR. CRULL: Nor do I.

4045   Ms Molnar, subscribing to GO services is an incremental fee. I pay incremental rights to acquire that content. It is a very small -- in terms of specialty channels that already have a fee, it is very small. In terms of CTV GO, it is very, very small.

4046   But it is a business model that is firmly established, and that is rational, and it is a business model that is not at all preventing distribution.

4047   COMMISSIONER MOLNAR: It is not preventing distribution, but it is not distributed by either of the players. Okay.

4048   They will also be here, so we will be able to ask them if there has been anything that has prohibited them from offering those services.

4049   MR. BIBIC: I think what has not been highlighted is that the CTV GO offering is being made available to all BDUs in the country. It is not that there has been a conscious decision to say: In Saskatchewan, we are going to reserve CTV GO only for Bell satellite TV.

4050   You have heard that Shaw has it, and other BDUs have it.

4051   COMMISSIONER MOLNAR: Okay. So it comes at a cost, and that would be another small way of monetizing the CTV content?

4052   MR. CRULL: Yes, very small.

4053   When I mentioned our revenue that we generated, which was $12 million below our costs, that included some revenue from CTV GO.

4054   So it's nickels in the grand scheme of trying to do that.

4055   And I may be being pedantic, but I am sure that you will hear people say: Why isn't it free. Why can't they give it free.

4056   It just isn't a business model, especially when it comes at cost, and I am already losing money on the business.

4057   And giving away TSN GO or HBO GO without a subscription, so that it is free, again, that is not sustainable.

4058   In fact, not only is it not sustainable, it is just not -- there is nothing sensible about that.

4059   COMMISSIONER MOLNAR: Do you negotiate all of your multiplatform rights, or are you actually doing it on a channel-by-channel basis?

4060   MR. CRULL: It is more program-by-program, because the production partners that we have, that produce for space, we have many different production partners, and we have many different studio suppliers.

4061   So it's program-by-program.

4062   COMMISSIONER MOLNAR: So you may have a BDU that will offer its customers TSN GO, and not CTV GO, because they felt the values weren't the same?

4063   MR. CRULL: That is their choice, absolutely. It is up to them.

4064   As a matter of fact, I think, to the comment of bundling, we allow them to choose whether they take TSN GO or not.

4065   They may not find -- in fact, it has been widely reported that customer adoption of TV Everywhere, of these GO products, has been slow on the uptake, for a variety of executional challenges, like the navigation you mentioned, like authentication.

4066   So there are some BDUs that just think it is still a little bit too early for me to spend money on TV Everywhere. I am going to let the marketplace evolve a little bit before I do that.

4067   COMMISSIONER MOLNAR: On the mobile platforms, is it the same business arrangement that you have there, everything is available to all wireless service providers, and it is negotiated on a program-by-program basis?

4068   MR. CRULL: Yes, and I think I --

4069   The answer is yes. It is channel-by-channel when I sell the content. It is program-by-program when I buy it.

4070   So I apologize if that was confusing, but the answer is yes, our content is available to all wireless providers.

4071   As a matter of fact, Rogers has our content on their platform, Bell has our content, and Vidéotron has their content on our wireless platform.

4072   Alternatively, as a customer of CTV GO, say you are with TELUS and you have CTV GO, now you can access it on any wireless platform.

4073   So that is related to your television subscription, and then any wireless carrier over that, you can access it.

4074   MR. BIBIC: I would like to add something here. Let's separate the two businesses. Bell Media, as a programmer, offers its content to all wireless providers on a channel-by-channel basis, so that the wireless providers can then serve their subscribers. That's one aspect of it.

4075   Bell Mobility, as a provider of mobile content to its subscribers, doesn't only offer Bell Media content to Bell Mobility subscribers, we actually offer about a hundred channels or so -- it might be a bit less -- and there is a lot of independent content on there, or programming owned by non-independents but not us, Global products, et cetera.

4076   COMMISSIONER MOLNAR: Is that the same for Bell Fibe?

4077   MR. BIBIC: Bell Fibe is not the mobile platform, but --

4078   COMMISSIONER MOLNAR: Yes, I know, but the same thing, that you have online alternate platforms --

4079   MR. BIBIC: It's the same, yes.

4080   COMMISSIONER MOLNAR: -- and there is a whole range of different content on there?

4081   MR. BIBIC: Correct.

4082   MR. OOSTERMAN: We see the same behaviour in consumers that all of you have commented on. People want to watch what they want to watch, on the screen that is convenient at that time, and the programming that they are interested in.

4083   That program comes from all sources, so we strive to make our subscribers have access to all of that content. We negotiate with Bell Media, we negotiate with Rogers, we negotiate with Vidéotron for all of those rights, and they, in turn, go upstream and try to get those rights from the content owners.

4084   And when we get it all worked out, everything is available to everybody, on every screen.

4085   COMMISSIONER MOLNAR: I want to move on to the area of choice and flexibility. Your position is quite clear that you want to be able to create your own basic, design your own basic, and after that pick and pay.

4086   Could you tell me what is your basic today? Because we were hearing some rumours that it may have changed overnight, or something like that.

4087   MR. BIBIC: We have a basic package that differs between the French-language market and the English-language market, and it's slightly different between Satellite and Fibe, which is kind of part of the issue from yesterday's discussion.

4088   Then, if you are offering -- let's take Bell Satellite Basic. If you are offering, which we obviously are, CTV -- it's a local channel, it's on Basic -- does that count as one channel or does that count as eight channels, because we are offering CTV affiliates from across the country?

4089   The same thing with Global, et cetera.

4090   So, are we counting the SD and the HD feed, or just one?

4091   You can easily multiply all of these channels, just from variance and the distant signals, and then there are the U.S. Four Plus 1s, the east and the west feed. Then you add them all up and you can say that Bell is lathering on basic with 100 channels, but you really have to pare that down to, yes, you get a CTV affiliate, yes, you get the U.S. Four Plus 1s, and other discretionary services that are of high value and demanded by most Canadian households. YTV, for example.

4092   So it's very hard to be very, very precise on the numbers. We can give it a shot, if that's what you are looking for.

4093   COMMISSIONER MOLNAR: I think we want to get a sense. Are you still with the Good, Better, Best?

4094   MR. BIBIC: Yes.

4095   COMMISSIONER MOLNAR: So nothing has changed in the English-language market.

4096   MR. BIBIC: Correct.

4097   COMMISSIONER MOLNAR: And you use that over Fibe and your Bell Satellite service?

4098   MR. BIBIC: Correct.

4099   MR. OOSTERMAN: But nothing changed overnight. I am confused by that comment.

4100   COMMISSIONER MOLNAR: I am, too. I heard that there might have been a change in packaging.

4101   MR. OOSTERMAN: No, that's not true.

4102   COMMISSIONER MOLNAR: Okay. So your view of being able to create a strong basic package, would you see that as Good?

4103   Is that what you are talking about? Is that the kind of package you are suggesting would be Basic going into a new framework, where you get to design Basic?

4104   MR. BIBIC: That is the model today. Of course, in the model that we envision, we would continue to have the flexibility to design our own basic packages, and we would design those as a function of the competitive marketplace, primarily what consumers are asking of us. We would have that flexibility.

4105   Today, it is what you have called, and what we call, and brand and label, Good. The composition could change in the future though.

4106   COMMISSIONER MOLNAR: So you want full flexibility to create a basic package of whatever size and of whatever price you believe the market will bear.

4107   MR. BIBIC: I will let Wade answer, I just want to punctuate it by saying, however, that, of course, Basic would also contain -- in our proposal, Basic would always contain the local stations, the 9(1)(h) stations, provincial educational channels, CPAC and those channels.

4108   COMMISSIONER MOLNAR: Yes, of course.

4109   MR. BIBIC: And, the one other caveat is, in our proposal, there would be a rule that the U.S. Four Plus 1 channels would be out of Basic and available only discretionary.

4110   MR. OOSTERMAN: I am just going to reiterate my opening remark comment, which is that packaging is an enormously important basis of competition. So anything that lowers that basis of competition, we don't think is appropriate.

4111   There seems to be no correlation purely based on the number of channels that somebody includes in Basic and their success in the market or lack thereof.

4112   An example would be Eastlink, in the Maritimes, which has an entry-level plan starting at $35. Aliant has an entry-level plan starting at $56. Aliant seems to be doing better in that market than Eastlink.

4113   So it is the totality of the value proposition that you bring to the consumer that we are trying to protect. So anything that limits that basis of competition, we don't think is good for consumers.

4114   COMMISSIONER MOLNAR: You said in your opening remarks that there is no evidence of dissatisfaction with existing basic packages. Would that include no evidence of dissatisfaction with price?

4115   And let me -- you know, that's kind of an unfair question, because I am looking at a survey result that was conducted by the Commission, where 36 percent of customers were satisfied with the price.

4116   MR. BIBIC: Which question?

4117   Is this the Harris/Decima survey?

4118   COMMISSIONER MOLNAR: That's right.

4119   MR. BIBIC: Which question was it?

4120   COMMISSIONER MOLNAR: Just looking at that, they had relative satisfaction with their customer service and relationship with their service provider, but satisfaction kind of falls off the table when you start talking price, and I think that, in large part, some of this is about: do consumers perceive value to what they are receiving, and is there a way that they can control that, control their price more.

4121   MR. OOSTERMAN: Correct.

4122   COMMISSIONER MOLNAR: Under your proposal, you retain full control over the entry-level to the cable system.

4123   MR. OOSTERMAN: Correct, because that is subject to competitive forces.

4124   First, our research shows that overwhelmingly -- so "no evidence" is perhaps too strong a term, but overwhelmingly the evidence is that what consumers really want is an ability to add in smaller increments to their basic starter package.

4125   And the basic starter package, as we just articulated, between Aliant and Eastlink, one is $20 more than the other, and yet it is winning in the market.

4126   So I think you are absolutely correct in saying that it is about value, not about price.

4127   MR. BIBIC: And under our proposal --

4128   COMMISSIONER MOLNAR: Could I just ask, under the Working Document proposal, which says that you can continue to offer packages as -- you know, you could offer the equivalent of your Basic -- of your Good package today as an alternative, the Working Document doesn't mandate that you can offer nothing but a skinnied-down basic service.

4129   MR. BIBIC: That's understood.

4130   MR. OOSTERMAN: We appreciate that, yes.

4131   COMMISSIONER MOLNAR: Do you believe that the majority of customers would stay with your packaging, assuming that you are giving them good value?

4132   MR. OOSTERMAN: I think that when we lose an ability, which we do if elements are mandated, to compete on all elements, and it gets taken down -- I am making this up -- from 10 elements to 9, it is a less competitive environment.

4133   So we favour maximum flexibility, because we either win or lose based on the wisdom of our decisions, and the value proposition that what we bring to the market represents.

4134   What our proposal tries to do is to say: We want to give ultimate flexibility to consumers beyond the basic package.

4135   I don't know what --

4136   COMMISSIONER MOLNAR: Right. All I am asking is, the Working Document does not preclude you from offering that package to your consumers, and if they value it at the price you are offering it, they could continue to take it.

4137   What the Working Document suggests is, in addition to that, there would be a basic service, and there were two options put forward -- I'm sure you understand them well, one being a price-capped model, the other being a very skinnied down, kind of mandatory Canadian channels as an entry if consumers wanted. And there are some. We don't know how many, but there are some who want to control their price and control, you know, who would see that as a value.

4138   MR. BIBIC: So I would like to ask to ask Dr. Eisenach to jump in and help us here but you're asking us about the working document and the skinny basic proposal and my answer --

4139   COMMISSIONER MOLNAR: And I am asking can yours coexist? Are you comfortable because you want -- you want the ability to do a big basic which I don't think the working document would preclude you from doing.

4140   MR. BIBIC: No, I understand that Commissioner Molnar, but here's what I was trying to answer, is I don't think you can -- we can just answer on the narrow question of skinny basic because the working document says this:

4141   Every BDU will have the same skinny basic package in a particular market. Every -- so that's on this end. On this end, every single BDU will offer every channel not in basic, which is basically every channel on a standalone basis. Every BDU will have to offer build-your-own packages.

4142   So the level of -- yes, we would be able to offer our current good package under the Commission's proposal; understood.

4143   But now we're just competing to fill in the white spaces and everyone is basically going to have to offer standalone, the same skinny basic, the same build-your-own off the functionality and that's the competitive differentiation that we lose.

4144   The second point is the Commission's skinny basic proposal which is something that we haven't discussed yet, does affect the cost structure. And we filed evidence, the actual numbers of Bell TV both satellite and Fibe, the Quebec market, the rest of Canada on how much of the cost structure is reflected by the other channels that we have in good today that won't be permitted in skinny basic.

4145   Because at the end of the day, if a customer takes skinny basic or good, it costs the same amount of money for that technician to sit in the truck, drive to the customer's home, spend the six hours, the one hour, the however long it takes to connect the customer. The set-top box costs exactly the same whether you take five channels or 300 channels. So these are the elements that don't change as a function of what you as a customer decide to pick.

4146   I don't know if --

4147   DR. EISENACH: Well, I think you have captured that very well, and I just have an additional, a couple of thoughts that come out of the research that's been done on this and the basic economics of bundling in this ecosystem.

4148   What you have once you begin to see people dropping off into a skinny basic package is people who are not -- it's equivalent to an adverse selection problem in an insurance market.

4149   So there are all of these benefits of giving people access to additional programming which is essentially free. Once we produce the program and hook them up to the grid, delivering them additional -- an additional channel into their home does not cost society a penny. That's a free good. So we give them an opportunity to experience something they don't otherwise experience. If they experience it even a little bit they're watching advertising that contributes to the ecosystem.

4150   In a system with extremely high fixed costs and very low variable costs that incremental margin is enough to begin tipping the system over into a spiral in which that incremental revenue is no longer there and all of a sudden the ability to produce the programming, to produce the ecosystem that creates the overall value proposition begins to deteriorate and you see a downward spiral.

4151   Just as you see a downward spiral in an insurance market where you allow the sickest people, for example, you know, to not pay their way, you begin to see -- or people who have a high probability of auto accidents not to pay their weight, all of a sudden you begin to see the inability of the overall market to support the service.

4152   So the benefit of keeping everybody in and offering them a product which in this case is free to offer, is really extremely high to the overall ecosystem.

4153   COMMISSIONER MOLNAR: It might be free to offer but it is not free to the BDUs and therefore it's not free to the consumer. And that's the problem, right?

4154   DR. EISENACH: Well, yes, it's not free to --

4155   COMMISSIONER MOLNAR: I think if they wanted to provide it free to offer, I'm not sure that anybody at this table would suggest that we preclude free services from being offered on basic.

4156   DR. EISENACH: Well, as I understand the proposal this is a mandate to the BDUs to do something that they're not doing today, so I may misunderstand it. But currently BDUs have the option of offering a skinny basic and would continue to have that option. You know, I think the issue here is not -- I think there's a lot of research, and I reference this in my report.

4157   Choice is -- and the Commission certainly has said this in its various documents in this report in this matter -- choice is exploding in the market for video. Consumers have choices today they have never had before. And that's going to continue happening.

4158   So the question here is not whether or not we're moving in the direction of more consumer choice. The question really is should we mandate something which the market is not generating today?

4159   MR. BIBIC: Commissioner Molnar, just in response to that, I think that the notion of free may -- perhaps it is conceptual, but I think it's really important to actually look at the real facts and figures.

4160   Appendix 3 of our submission shows the proportion of our operating costs represented by the non-mandated channels in our basic package. The numbers are confidential but you could see from that if you just take all else as being equal, and factor in no puts and takes and you just take those channels out and assume that the BDU will therefore save that programming cost, we're not going from $26 in Quebec or $36 in Ontario to $5 in terms of being able to offer a skinny basic package.

4161   And I use $5 as an extreme number because it was a number, I think, that I heard yesterday. That's because we still have network costs, call center costs, products, programming, support, sales, marketing, set-top box, et cetera.

4162   And that's the notion that Dr. Eisenach is trying to convey. You can have 86 channels for, let's say, $40. I'll make up the number because I don't want to betray confidential information. Or you can have 10 channels for $33.

4163   COMMISSIONER MOLNAR: I think we understand that. There is a high -- well, not just a fixed cost. There's an ongoing operating cost associated with the network that exists separate from the cost of the programming.

4164   I've seen your numbers. I have to say I was a bit surprised by your non-mandated basic channel cost, given what I had saw was in good. But it's confidential and we don't have to talk about that.

4165   But let's move forward on the premise that consumers will be provided more choice as a consequence. There will be regulatory change that will enable consumers to access a skinny basic service of some type.

4166   If we move forward as -- just to discuss it here with you folks, if that is made available the working document provides a couple of different options as to how that paired-down service, that sort of affordable entry point or most affordable entry point, if you will -- I understand that there is relatively little incremental costs to adding what you would perceive to be more value through more channels, but a paired-down entry point.

4167   The working document provides two proposals as to how that could be done, an all Canadian skinny or some kind of price cap. If there was to be that type of entry point mandated, what would be the best for the system? What is the best option?

4168   MR. OOSTERMAN: That is a little bit like Sophie's choice in reverse, not what you would like better but who do you dislike least.

4169   You know, and I think ultimately it's what is it that we're trying to achieve? And if it's to reduce the cost for a very few and the risk that is that the substantial majority pays more --

4170   COMMISSIONER MOLNAR: Without harming the service of the majority.

4171   MR. OOSTERMAN: Yeah, so forced to make a choice between those two, I think a Canadian channel skinny basic would be better for the system than the alternative.

4172   COMMISSIONER MOLNAR: Okay.

4173   MR. OOSTERMAN: But it would be bad, nonetheless.

4174   MR. BIBIC: Option A, right?

4175   MR. OOSTERMAN: Option A.

4176   MR. BIBIC: Yes.

4177   COMMISSIONER MOLNAR: And would you agree that if you provide an alternative that consumers value, the impact of that would be minimized?

4178   MR. OOSTERMAN: Well, to the extent that any viewers --

4179   COMMISSIONER MOLNAR: Because if they value -- if they value your design more than the skinny basic --

4180   MR. OOSTERMAN: Sure.

4181   COMMISSIONER MOLNAR: -- the majority will go to your design.

4182   MR. OOSTERMAN: Sure, but --

4183   COMMISSIONER MOLNAR: To minimize the impact.

4184   MR. OOSTERMAN: I understand that, the point that is being made.

4185   However, I want to reference back to Kevin's comments about if penetration of something drops even 10 percent, so let's say only 10 percent of people take that mandated skinny basic, the impact on the ecosystem financially is massive. Those costs ultimately have to be borne by the 90 percent of people who chose a different value proposition. They would pay more for the same that they're getting today.

4186   So it's what is it we're trying to achieve? That's the question.

4187   And if we're providing in our proposal the real issue that consumers are asking about, which is if I take an entry level plan I don't want to be forced that 20 channels at a time or 100 channels at a time, I just want to be able to add one thing, our proposal accommodates that. Just, I think it works.

4188   MR. BIBIC: And back to the costs. One thing, this is not conjecture. This is what would happen.

4189   If we have a skinny basic package and 10 people only take it and everyone else stays on good, then you see the Appendix 3 numbers. What it costs us for non-mandated channels in good will go up because now we're not delivering those channels that are currently in good to the entirety of our subscriber base. So we're delivering them to the entirety of our subscriber base minus 10. So now we pay a different rate to the programmer and, therefore, our costs to acquire the very same content will go up. It may go up by a little. It may go up by a lot.

4190   Again, taking all else as being equal and assuming, just assuming that we pass on those extra costs to the subscriber base, the good customers today will see, will pay more for the very same channels that they are receiving today. And it's not conjecture. We can absorb the costs, I suppose but that's what will happen.

4191   COMMISSIONER MOLNAR: Yeah. You probably heard. We had a discussion with the Competition Bureau as to whether or not that would be the outcome and they weren't clear that would be the outcome and nobody seems to be clear that would be the outcome.

4192   MR. BIBIC: It's clear that it will be the outcome because --

4193   COMMISSIONER MOLNAR: Well --

4194   MR. BIBIC: What's clear is that the cost structure will go up. It's clear. BDUs -- sorry -- programming services charge a rate if you deliver the product to everyone. And there is a different rate if you deliver it to fewer than everyone. The structures are different in that we're moving towards and proposing penetration-based rate cards.

4195   But, clearly, it's a function of volume. And the costs will go up. That's for sure.

4196   COMMISSIONER MOLNAR: Have you --

4197   MR. BIBIC: Now, you can pass them on. Then the consumer will pay more too.

4198   COMMISSIONER MOLNAR: Right.

4199   MR. BIBIC: So I don't know why it's such a mystery to the Competition Bureau. They've certainly seen these affiliation agreements.

4200   MS MELOUL: Commissioner Molnar, if I can add a point regarding the Quebec market because, as you know, we have vast experience in unbundled and choice. We have been at it for several years already.

4201   When Videotron launched its experimentation -- I'll call it that. Now it's obviously well entrenched -- there was no mandated obligations for a basic package or any other form of package.

4202   And as we heard Madam Brouliette say yesterday, they did experiment and they went down to a very skinny basic and they found that while perhaps the price might have been acceptable, it was not satisfactory to the customer. There was just not sufficient choice. They found out that their sweet spot is with a plus five. So it was a non-mandated basic and they found a solution where now 25 percent of their base, I believe she said, take that.

4203   So what we're saying in this proposal is that those who think that skinny basic is the way to go, well, that's fine. They can do it, but it's just to give us the opportunity to experiment and offer other options than rather than have just the mandated option.

4204   COMMISSIONER MOLNAR: Thank you.

4205   DR. EISENACH: Commissioner Molnar, very briefly, I summarize the research in my study which the Competition Bureau didn't do. I've read the transcript of the Competition Bureau's testimony yesterday on the report. They don't refer to a single economic study. There is some hand waving about general results but it's simply incorrect. And if they wanted to support their views they should support them.

4206   I go through it in my study and in detail discuss the specific studies that have been done. The average in terms of the impact on penetration between 29 percent and 61 percent reduction in penetration, reduction in viewership. And I think this is a very important metric of between -2 and -21 percent. When you implement a la carte, people watch less television. That means they are getting less value.

4207   So the empirical study is the economic studies that have been done and are not in any way ambiguous on these counts. What the studies do agree is that some minority of consumers with very limited preferences for channels would likely benefit.

4208   So it's not that there wouldn't be no beneficiaries. But you are talking a transfer and the net of the transfer is a loss and the loss is not just for the consumers who prefer larger packages. It's for the entire ecosystem and everything that supports it. It shrinks. And that's what we're talking about doing here.

4209   MR. BIBIC: I don't want to try your patience. We tried to answer the question ultimately and the more we talk about skinny basic, I think the less we -- the more likely it is that we move away from the principle that we do really do support way more flexibility for consumers. Every channel can be purchased on an individual basis.

4210   And what that means, it means a different way to address the costs or the cost to the consumer issue. Now, the consumer would have beyond basic, totally unfettered ability to manage overall spend and choose the channels they most desire. And that's -- I just don't want that to get lost as we have a discussion around skinny basic for several minutes.

4211   COMMISSIONER MOLNAR: M'hmm. Yeah, and I don't want it to get lost either. I mean, I think there is a desire.

4212   There is a preliminary view put out by the Commission that some type of skinny basic, however, it might be designed, is desirable. I just wanted to know from your perspective. I understand you don't like it best. It's not there for the masses. It's there to address the needs of some who might want an entry point, an affordable point whatever that might be.

4213   To the extent that the proposal also said you could retain your own packaging and if you have value in that, I mean you did -- the studies you did, I don't believe, looked at a situation where you would continue to offer the bundled packages that supposedly the market most desires today and add in the unbundling as an option.

4214   DR. EISENACH: The studies that have been done, the studies that -- our reviewer studies that assume that you have both the option to continue offering packages but also required to offer a la carte. So they do --

4215   COMMISSIONER MOLNAR: Oh, they do?

4216   DR. EISENACH: -- they do allow that possibility, yes.

4217   COMMISSIONER MOLNAR: Okay. Sorry, I forgot.

4218   MR. BIBIC: Commissioner Molnar, would you -- may I jump in on this packaging point?

4219   COMMISSIONER MOLNAR: Yes.

4220   MR. BIBIC: Now, we've talked about basic and now I want to make an impassioned defence for our position that the Commission need not mandate build-your-own packaging. And here's how -- the way I look at it.

4221   Let's assume that the Commission decides that they will move towards a form of skinny basic. Then that is addressed. We all agree, I think, and certainly this panel agrees with the notion of channels available on an individual basis. So that side of the spectrum is covered. We have the ability, as you've acknowledged, as BDUs to develop our own tiers and packages and theme packs as we wish. That's good.

4222   Now, why in that scheme of things do we need build-your-own packaging and, yet, more mandated regulation of sameness? And this will be the way I try to convince you. In Quebec that marketplace on its own developed pick-a-pack. I look at the Notice of Consultation, paragraph 35 and it says if the objectives can be achieved without regulation through the evolution of the marketplace, then regulatory intervention is not warranted.

4223   If the Commission adopts what we described in our opening statement as a minimally intrusive rule, programmers give the BDUs the flexibility to offer channels on a standalone basis and any other way they want. The one thing that we've heard as an irritant in the English-language market about BDUs not having the flexibility to build pick-a-packs, that irritant will be completely removed.

4224   And if the experience in Quebec is any indication, the marketplace will deliver pick-a-packs. Maybe one won't. Another one will have pick five. Maybe another one has pick 15. But that will get sorted out through the competitive market forces.

4225   So if you've addressed skinny basic and you've addressed standalone on this side, and we've removed the one irritant, the marketplace will solve it. And it's not conjecture again. You have a real life experiment in the Quebec market.

4226   COMMISSIONER MOLNAR: Okay, thank you. I think that is well understood.

4227   Before we leave this whole issue of flexibility, pick-a-pack and so on, I just wanted to have -- talk to you a bit about sports. We haven't talked about sports services in this proceeding yet. I mean, they are often -- they are often the channels that we hear of as, you know, causing some of this. So sports is going to save one year of television but sports is also the thing that 50 percent of the people don't really want to pay for and it's kind of expensive.

4228   So how do you see sports services being offered in this new world?

4229   MR. CRULL: So our proposal has TSN offered in a pick-a-pack/pick-and-pay basis as just like every other service, so not treated any differently.

4230   COMMISSIONER MOLNAR: Okay. Okay, very good.

4231   MR. BIBIC: Commissioner Molnar, there is --

4232   COMMISSIONER MOLNAR: And the prices, I assume you anticipate that the price for different services will be different within the pick-and-pack world.

4233   MR. CRULL: So let's look at the examples that we have.

4234   The spectrum of pricing for flexibility goes from what we said in our opening statement of 24 cents an hour in today's generally cable value-bundled packaging to when you buy today something a la carte from the system. Like TMN, it's $20. And so there is no bundling, no packaging with the Movie Network or with Movie Central. And that's $20. Sportsnet World is a pick-and-pay soccer sport service. I think that that's about $20.

4235   And then you keep moving up the spectrum and the industry has developed pricing for the ultimate flexibility which is buying a TV show at a time. And that's $2.99 to $3.49 for a show on iTunes. And if a viewer were to satisfy their 28 hours of viewing a week in a household that way it would be $800 a month for the ultimate in packaging flexibility.

4236   And so I guess just to answer your question, yes, sports will be higher priced than Discovery and Discovery will be higher priced than Bravo which will be higher priced than BookTV.

4237   COMMISSIONER MOLNAR: Can I ask one more question before we leave this? You used the example of TMN and TSN where, like TMN, that's the Movie Network, right?

4238   MR. CRULL: Movie Network.

4239   COMMISSIONER MOLNAR: And so HBO is bundled with it?

4240   MR. CRULL: Part of that, correct.

4241   COMMISSIONER MOLNAR: You would see unbundling those?

4242   MR. CRULL: TMN and the Movie Network, all of that content is part of the Movie Network. So the Movie Network comes with movies, with HBO programs, with Showtime programs, with other programs that we purchased from other suppliers and with half Canadian content. That's all part of the channel called the Movie Network.

4243   COMMISSIONER MOLNAR: But the Movie Network is not a channel. I mean, on my television HBO is one channel and the Movie Network, you know, movies are somewhere else.

4244   MR. CRULL: It's a multiplex of four channels. It is one subscription.

4245   COMMISSIONER MOLNAR: If you are a customer you're not going to understand that.

4246   MR. CRULL: Why not?

4247   COMMISSIONER MOLNAR: I don't even know what multiplex is and I'm working here, you know.

4248   MR. CRULL: When you sign up for the Movie Network you get the great value of multiple movie channels, you get HBO Canada and you get a lot of other series.

4249   COMMISSIONER MOLNAR: Could I get HBO without the movies?

4250   MR. CRULL: You cannot.

4251   COMMISSIONER MOLNAR: Never will be? Never ever?

4252   MR. CRULL: Can you buy movies from Netflix without TV shows? Can you buy old TV shows and not original productions? Can you buy just kids programming and not adult programming?

4253   With the Movie Network it is sold with HBO and it has generated, you know, a significant success in the marketplace at a $20 price point for that programming. If you would like HBO television shows, just HBO shows, you can actually go to iTunes and you can buy Game of Thrones at $3.49 an episode.

4254   COMMISSIONER MOLNAR: So just to be clear, in the situation of the Movie Network where it is, you said, a bundle offered today to customers is --

4255   MR. CRULL: It's a channel.

4256   MR. GOLDSTEIN: Just to be clear, Commissioner Molnar, it all operates under one licence.

4257   COMMISSIONER MOLNAR: Yeah. No, I get that.

4258   MR. GOLDSTEIN: There is multiple channels under the licence and the rationale behind that in the early years and continues today is there is a -- the Movie Network offers a wide range of programming available to customers. And there's only so many hours of the day that you can fill that schedule.

4259   So for example, if you're Movie Network and you want three movies available in a night they are going to be on three different channels. They might be on -- those same movies might be moved around to different channels the next day.

4260   COMMISSIONER MOLNAR: Could I just ask just to clarify for me what's confusing me, because I do understand you know what I see on the TV screen, are you somehow tied not through the licence provided by the Commission but through the rates or your arrangements with the content providers, or is there something that requires you to bundle the movies with HBO? Or is that just CRTC licensing that's caused that to occur?

4261   MR. CRULL: I have never seen it. I have just never seen it as a bundle. It's a channel that has movies and has series. It's like AMC. AMC has movies and series. If you only want to get The Walking Dead off of AMC or A&E and not watch the movies, you know, you don't do that. It's part of the channel.

4262   MS MELOUL: Madam Commissioner, again, as you know that service was an Astral service that Bell acquired a year ago. As Mr. Goldstein said, it is one licence. It's a multiplex licence and it is bundled together.

4263   MR. BIBIC: Commissioner Molnar, I would like to go back to the reference to sports.

4264   COMMISSIONER MOLNAR: Yes.

4265   MR. BIBIC: Some have raised sports --

4266   COMMISSIONER MOLNAR: How about TSN too? Or TSN, yeah, that's what I was going to ask next. Is that going to be bundled with TSN?

4267   MR. BIBIC: Well, I'm not going there.

4268   COMMISSIONER MOLNAR: Oh.

4269   MR. BIBIC: Where I was going to go is --

--- Laughter

4270   MR. BIBIC: -- we'll answer that next.

4271   Some have raised sports as an issue affecting costs, et cetera. From the Bell perspective what's a bigger issue is the contractual demands of very popular U.S. services. So you have U.S. services. You know the ones, the CNN, A&E, AMC. We're in negotiations with them.

4272   There is one who is asking for -- the contract ended. We're negotiating for a new term. They want a 300 percent increase in the total payments to them. A huge increase in the per subscriber wholesale rate.

4273   They are demanding that our penetration go from 50 percent to 75 percent. They know they can't be on the basic package but they are asking for us to pay for every single one of our subscribers. So actual penetration needs to go from 50 to 75 and we have to pay on 100 percent.

4274   Now, why did I make what seemed like a drive-by comment at the beginning of our appearance where I said it's not a VI code; it's a code of commercial interaction? I think it's critical to address the issues you're trying to get to with sports that the Commission fix that issue.

4275   And if a U.S. service, a linear service is to be distributed by BDUs in Canada, they need to be subject to that same code of commercial interaction. I think that's where the Commission is going.

4276   In Item 2 of the working document, all discretionary services must be available on a pick-and-pay basis and there is another. VI code would be expanded to prohibit certain provisions that impede a BDU's ability to offer a pick-and-pay. I think that's very important. And it's getting to the same kind of issue I think you're trying to explore with sports.

4277   COMMISSIONER MOLNAR: Okay. Thanks.

4278   I am going to move on to the issue of simultaneous --

4279   THE CHAIRPERSON: Commissioner Molnar, if you -- if you're moving on to another subject matter maybe we could take a break now?

4280   COMMISSIONER MOLNAR: For sure.

4281   THE CHAIRPERSON: Is that okay?

4282   COMMISSIONER MOLNAR: Yeah.

4283   THE CHAIRPERSON: And before Mr. Crull starts advocating for a skinny Netflix as well.

--- Laughter

4284   THE CHAIRPERSON: So why don't we take a break till about five past -- five past 11:00? That's about 15 minutes.

4285   Okay, thank you.

--- Upon recessing at 1052

--- Upon resuming at 1106

4286   THE CHAIRPERSON: À l'ordre, s'il vous plaît.

4287   Commissioner Molnar...?

4288   COMMISSIONER MOLNAR: Thanks.

4289   I mentioned I wanted to move on to the issue of sim sub.

4290   I know that you have provided some information in your remarks, this morning, about the value of sim sub. For live event, alone, you measured that at 40 million.

4291   MR. CRULL: That's correct.

4292   COMMISSIONER MOLNAR: How did you measure that?

4293   MR. CRULL: We looked at the commercial programming in live events and added up the revenue associated with that.

4294   COMMISSIONER MOLNAR: Over all your channels or --

4295   MR. CRULL: Just CTV. We're talking about conventional, so just CTV.

4296   Look, live event programming you heard from Mr. Garvie earlier today, and we've talked frequently as an industry, part of the acceleration of sports rights, and that is live event programming if PVR-proof.

4297   Advertisers love both the access to audiences that they get in real time from live events and they also love live events tend to be brands that evoke the kind of emotion that consumer package goods brands want to be associated with. Whether it's the Oscars, the Emmys, the Super Bowl, these are the kind of places that brands like to have their image presented. And so, live events are higher CPMs and they do punch above their weight and they are critical, critical -- the Super Bowl is a great example of how throughout the Super Bowl, in fact, 60 percent of the promotions that we run during the Super Bowl are Canadian programs. We use that platform to promote our Canadian programs and then we always launch a Canadian show right after the Super Bowl. These are essential to our business.

4298   COMMISSIONER MOLNAR: When you measured that 40 million, you said, on CTV, was it your assumption that if you could not simultaneous -- use sim sub that you would not acquire the rights and continue to operate on the Canadian platforms?

4299   MR. CRULL: Yes, that was our assumption.

4300   COMMISSIONER MOLNAR: So, in your view, if there's no sim sub, you would not be looking to acquire the rights to the Super Bowl?

4301   MR. CRULL: In my view, if I broadcast the Super Bowl and it was also broadcast on NBC, I would have very few viewers.

4302   COMMISSIONER MOLNAR: Okay. One of the arguments that has been made for eliminating sim sub is that it would provide you more flexibility in being able to schedule your time and program your channels.

4303   Can you speak to that issue?

4304   MR. CRULL: Well, I can, absolutely.

4305   I would like to preface into that just by underscoring the vital importance of what we do with our local programming and with our Canadian programming and scheduling is one of the aspects. But scheduling flexibility is a small benefit compared to the lead-in audiences and the promotional audience you get from sim sub.

4306   So, putting "Motive" at 9 p.m. every Thursday night and not moving it, in my view, losing simulcast audiences for lead-in and wrapround and losing simulcast promotion for "Motive" is like 50 steps backwards and keeping it in the same time slot is two steps forward.

4307   So, do I like scheduling flexibility? Yes.

4308   Now, would I still leave "Motive" at 9 p.m. Thursday night all the time? No. Because as long as the American channels are still here, I still have to consider what the American channels are doing and counter-program against what they're doing.

4309   So, it's very, very possible that they'll make a scheduling change and I'll still have to move my Canadian show because we factor that in all the time, the audiences that it's up against, even when we're not scheduling.

4310   COMMISSIONER MOLNAR: I think that -- I wrote these numbers down here -- you had measured the direct impact over the system as about 250 million and an additional indirect impact of another 175 million or so.

4311   If the U.S. channels were not available on basic, would that change that number significantly?

4312   MR. CRULL: No.

4313   COMMISSIONER MOLNAR: No?

4314   MR. CRULL: No.

4315   I appreciate the Commission's consideration for trying to minimize the impact of the U.S. 4 plus 1s, but in my view, it's really -- we can't incrementalize ourselves down from 100 percent to 95 percent to 90 percent and have any measurable impact on their presence in the market.

4316   Let me start at the other end.

4317   If the U.S. 4 plus 1s were not in Canada, then there's no need for sim sub. That absolutely goes away. And then true scheduling flexibility does come in because I'm not counter-programming against the behemoths. I'm actually controlling the schedule.

4318   By the way, if that happened, I believe that some have stated for the record -- and I appreciate the acknowledgement -- all of the popular American programming that consumers enjoy right now would be here because 197 out of the top 200 shows -- and that's getting pretty tiny, 200 of the top programs -- 197 of them are aired on City, Global, or CTV.

4319   COMMISSIONER MOLNAR: So, just to be clear -- because you have the programming side and you have the distribution side, and we have heard other distributers, BDUs, saying that retaining U.S. 4 plus 1 is important because it's important to their customers -- you don't have that same position, from a distributor's perspective?

4320   MR. CRULL: Before I hand it to Wade, it's my strong belief that when that question is asked those answering it believe they'll lose the U.S. programs. I don't. It would be my assertion that they wouldn't understand, well, wait a minute, the content is still here, it's just the channel.

4321   I don't believe that high proportion of people who said how much they love the U.S. channels really love Buffalo or Seattle news. I think they love the U.S. programs and they get confused by, ah, I don't want to lose that.

4322   But, Wade...?

4323   MR. OOSTERMAN: I can only agree with what Mr. Crull just said. All the U.S. programs, 197 out of the top 200, are available on Canadian channels.

4324   MR. BIBIC: Commissioner Molnar, I --

4325   COMMISSIONER MOLNAR: I'm not disputing that it's there. I'm just suggesting that consumers have indicated that they see value in receiving those.

4326   And there's other BDUs who will be coming forward who are saying that the U.S. channels are important to their customers.

4327   MR. OOSTERMAN: The U.S. programs absolutely are.

4328   MR. BIBIC: Commissioner Molnar, I --

4329   COMMISSIONER MOLNAR: You would not be concerned from your BDU side to strip all U.S. conventional off the Canadian system?

4330   MR. OOSTERMAN: No, and no logical --

4331   COMMISSIONER MOLNAR: It wouldn't hurt your customers --

4332   MR. OOSTERMAN: No logical conclusion can get you there. One hundred and ninety-seven out of the top 200 programs are available.

4333   MR. BIBIC: Commissioner Molnar, I approach it from a different perspective. Same result, different kind of thinking than my colleagues is the shows would still be there.

4334   We actually haven't proposed, in our document, that they be stripped out, in fact, blacked out, in fact, or not available in Canada. In fact, they should, if you want to protect the true integrity of the rights market.

4335   That's not what we propose. We said take them out of basic, however basic is formulated, put them in a discretionary tier. That's how far we've gone.

4336   The way I approach the question is -- like your questioning, I actually see the sim sub issue and the U.S. 4 plus 1 issue, their availability, generally how they're packaged, as going hand-in-glove -- and the way I approach the issue is, okay, we're here in a very, very important hearing to talk about the future of Canadian broadcasting and one of the central tenets of our platform is, or proposal is, conventional TV is at the heart of this.

4337   So, I get really worried about the sim sub discussion. I really do. I get to worry about all the others, but this one really perplexes me because we're -- here's what we know. Most Canadians accept sim sub. That's what "Choicebook" said: 63 percent in "Choicebook" said sim sub is fine. We read every single individual intervention. Of the ones that talked about sim sub, 121 were for sim sub; 16 against. And we know that out of 458 complaints to the CRTC, 90 were about the Super Bowl.

4338   So, I get worried here because we know what the financial impact of sim sub is. It's at risk. And we need to convince you not to eliminate sim sub, in whole or in part.

4339   If we convince you of that and we get the decision, I suppose we'll be happy, some of us will pat ourselves on the back and say, man, we were convincing, and all we will have convinced the Commission to do is maintain the status quo; where we really want to have a discussion about how to sustain local TV in the years ahead, because status quo won't do it.

4340   Now, that's how I segue into the U.S. 4 plus 1s.

4341   We have a moderate proposal. We're not trying to take U.S. 4 plus 1 channels away from Canadians. They would remain on the system. Bell TV would offer them. They just wouldn't be invasive.

4342   We're trying to come up with a moderate proposal that does, that supports local TV, that gives viewers access to the direct 4 plus 1 channels -- or the content that they'll get in any case, as Wade said. That's what we're trying to kind of piece together.

4343   And the sim sub discussion is worrisome because we want to put Canadian conventional television -- we want that content to have pride of place on our programming grids, not the U.S. channels, having the same pride of -- right now -- same pride of place.

4344   They're on basic. Why?

4345   MR. CRULL: I think I'd also add to Mr. Bibic. He mentioned the numbers, that of the 458 complaints, 90 were about the Super Bowl, and so, the 90 were clearly people saying, hey, I'm not seeing the American commercials I want to see. The others were about the administration.

4346   Commissioner Simpson was asking, I think earlier, about the administration, the technical execution of sim sub, and I think, as an industry, we would say, you know what, we should take it on to get better at that. We should always endeavour for zero errors in the execution. So, of those 458, 370 of them were about the execution: hey, I missed the last three minutes of the golf tournament because you switched over.

4347   So, we would propose an industry working group to continually improve that execution.

4348   As for the Super Bowl, you know, CTV has been proud to air the Super Bowl for the last several years. We try very hard to get the U.S. advertisers to bring up their creative commercials that they spend a lot of time and effort on and to air that in Canada -- and, in fact, about 20 percent of the commercial space is the same commercial.

4349   Secondly, we're creating -- we did a contest this year to incent Canadian advertisers to step up their creative game and produce unique special spots for the Super Bowl -- and, in fact, we're giving away a free 30-second ad in the Super Bowl to the winner of that.

4350   So, we'd like to create the same kind of environment.

4351   If we did not have sim sub in this, all of these Canadian brands -- Mr. Garvie talked about it this morning -- they would lose access to those audiences, and I know that's a massive concern to our consumer industry, which is the biggest driver of Canada's GDP. Tim Hortons. Cara Foods. I mean just last week at the Emmy Awards, Cara Foods, CIBC, Maple Leaf Foods, Shoppers Drug Mart, and Tim Hortons were our biggest advertisers in that program.

4352   So, this is really important to many of us.

4353   And as Mr. Bibic says, we'd like not to talk about how much should we hurt conventional TV. We'd like to talk about how much can we help it.

4354   COMMISSIONER MOLNAR: Fair enough.

4355   I want to move on to conventional.

4356   But before I do, you said you would propose a working group to fix the administrative and technical issues related to sim sub, which would reduce complaints. I mean, yes, they are not going to get the U.S. Super Bowl ads, but you're going to create some compelling Canadian advertising.

4357   If sim sub was to be retained, how would you see this working group coming together and what would be the incentive for other BDUs -- because it's a BDU group, right? -- to maintain your programming?

4358   MR. CRULL: Oh, I think they all would very willingly work together to -- you know, say the error rate today --

4359   COMMISSIONER MOLNAR: Would you take that on --

4360   MR. CRULL: -- .001. I think they would all willingly co-operate to try and make that error rate better.

4361   I also think this working group could discuss, hey, how do we talk to our consumers about simulcast complaints. So, when we get a consumer call into our call centre, we absolutely should not point the finger back to the Commission. We should have a very clear description about the Canadian rights market, about the value of the Canadian television system, and that Canadian ads for Canadian viewers is part of that.

4362   So, I think the working group would work on consistency and how we explain it, as well.

4363   COMMISSIONER MOLNAR: M'hmm. Once again, if sim sub was retained and the Commission did not want to receive complaints about it, this working group -- I mean sim sub has been here forever and those technical issues have existed forever. They haven't been corrected. You would take it upon yourself to lead a working group that would fix this?

4364   MR. CRULL: Yes, we would.

4365   COMMISSIONER MOLNAR: And provide some reports and prove that there's actually a reduction in the number of problems and measurable number of complaints?

4366   MR. CRULL: Yes.

4367   COMMISSIONER MOLNAR: Okay. Thanks.

4368   Let's move on to local programming.

4369   You mentioned, and we are also aware, that local news is considered important by a very large majority of the respondents who've participated in here.

4370   I want to make sure that we cover this well, so I want to give you an opportunity to just talk more about your proposal for local specialty and some specifics, as you kind of go through what you've proposed.

4371   Tell us how you would see consumers who don't, today, have a cable subscription be able to continue to receive access to the local news and information that Canadians value. Those sorts of things.

4372   How would you see that going on?

4373   MR. CRULL: We came at this -- and I appreciate Commissioner Molnar initially saying the importance. I'd like to give some statistics about the viewing so that we can all ground ourselves that the challenges facing local television is not a lack of interest or popularity among viewers.

4374   In your Harris/Decima report, you saw them say how valued it was.

4375   When we look at the actual viewing, I'm very proud of Wendy and team's work that CTV local news, our evening news, across markets in Canada. The viewing is actually up 11 percent in the last five years. There's 11 percent more Canadians watching their local news than five years, and I think we should celebrate and applaud that.

4376   But that's not generating the revenue to pay for the content.

4377   In your monitoring report that was released last week, in fact, it also showed that it's not just me that's enjoying growth in local news, but the local news category over the last four seasons went from 32 million hours of viewing to 38 million hours of viewing. And so, I think we're satisfying -- and, in fact, we often cheer for some of these high-profile edgy shows like "The Walking Dead" and "Breaking Bad".

4378   CTV's National News at 11 p.m. is 60 per cent bigger than the Walking Dead in Canada. Just Toronto's local news is 30 per cent bigger than Breaking Bad.

4379   So I appreciate you letting me do that as a foundation of our pride in the product and the importance in the product, but the economics of an advertising-only revenue stream can no longer pay for the cost.

4380   My predecessor was cutting costs pretty aggressively before I arrived, and in the four years that I've been here, Ms Freeman and her teams and I have spent a lot of time together attacking costs. I think we're out of cost ideas that don't really damage, dramatically damage, the delivery of the product.

4381   So we, like all others in this space, need a second revenue stream to fund the continuation of local programming.

4382   We looked at: how do we generate a second revenue stream? No doubt there are alternatives. We felt like the most elegant alternative was to have an environment where we negotiate with our distribution partners.

4383   Because of it being still a mandatory carriage channel, they would retain all of the dispute resolution and final offer arbitration processes that exist today. We would not be, obviously, able to withhold the signal, so standstills all remain in place, but we would negotiate for a subscriber fee. To enable that we needed to say, Take down the over-the-air transmitters.

4384   So we didn't want to take down the over-the-air transmitters in isolation because we think that's a good idea. We just upgraded them to digital, you know, we -- it's -- but to enable in our current environment this negotiation, that was the package proposal.

4385   MR. BIBIC: And, Commissioner, to your very direct question, or one of them, which was: How do you envision -- I think there were some complaints that I couldn't be heard. I don't if -- does the mike work -- okay -- in the back?

4386   So to address -- well, your question was: How do we deal with or how do we handle the issue of those who are receiving these channels over the air, and how would they continue to receive them under our proposal? It's a very difficult one to answer. It really has to kind of -- the real answer is: the choice, ultimately, is going to end up being: Are we going to have local TV at all? In which case, we all, as a society, lose access to conventional TV. That's going to be the ultimate trade-off in the long run.

4387   And then if you look at just the -- you know, you've asked several questions about the Commission's working document. If you look at the totality of the proposals that pertain to local TV in the working document, you have -- you know, Kevin mentioned the loss of $12 million for CTV alone. If all the proposals in working document were to be adopted, let's just say, the simsub loss could be somewhere from $40 to $100 million, depending on how far it goes.

4388   With the shutting down of the transmitters, we would lose retransmission payments for the distant signals. That's $8 million.

4389   The Commission proposal suggests increasing CPE over time. I can't quantify that because it would depend on the revenues and what the percentages are. We'd have smaller OTA viewership, of course, if we shut down the transmitters, and that's revenue.

4390   So what would we gain in return? We'd shut down the transmitters and wouldn't have to operate those costs, and that's a savings of less than $7 million.

4391   So if the Commission were to take the package as a whole and adopt it, conventional TV wouldn't be in a position -- our conventional TV wouldn't be in a position of a $12-million loss, it would be significantly worse. In that environment forget the long-term sustainability, it's probably more kind of short- to medium-term, and then it becomes the ultimate trade-off, yes.

4392   I mean you asked before. Skinny basic would be designed to address a particular segment of the customer base on the affordability scale, and the trade-off may be, or will be, in our view, that everyone else will pay more. This is the same -- this is the trade-off in reverse: some may have to lose that over-the-air access so that the rest of the consumers, and all of them who really do value local TV, continues to get it.

4393   COMMISSIONER MOLNAR: So you mentioned that some would pay more under what's been proposed by the Commission, and all would pay more under what's been proposed here. Would you agree?

4394   MR. BIBIC: When you say "the Commission" --

4395   COMMISSIONER MOLNAR: In proposing -- huh? Well, you said that by adopting skinny basic some would pay more.

4396   MR. BIBIC: Correct -- well, I gave the example of the good package would have to be repriced if we didn't absorb the increased cost. That would --

4397   COMMISSIONER MOLNAR: Right.

4398   MR. BIBIC: That's a trade-off there.

4399   COMMISSIONER MOLNAR: That's a trade-off. And here --

4400   MR. BIBIC: Right, and the trade-off here is --

4401   COMMISSIONER MOLNAR: -- here the trade-off is some Canadians, those that rely on over-the-air television, will have no access to local news.

4402   MR. BIBIC: Over-the-air -- well, they'll have no access over the air-the-air --

4403   COMMISSIONER MOLNAR: Assuming they don't subscribe to a cable channel --

4404   MR. BIBIC: Right, or the skinny basic package --

4405   COMMISSIONER MOLNAR: -- a cable service --

4406   MR. BIBIC: -- that you may adopt.

4407   COMMISSIONER MOLNAR: -- they will have no access, and the rest of the customers will pay -- potentially, you will charge BDUs, who may pass those costs on to their customers, for the local specialty --

4408   MR. BIBIC: Okay, so there's --

4409   COMMISSIONER MOLNAR: -- channel.

4410   MR. BIBIC: -- there's a scale of trade-offs. The ultimate trade-off is: if conventional TV disappears, then none of us --

4411   COMMISSIONER MOLNAR: M'hmm.

4412   MR. BIBIC: -- none of us have access to it, and that's a price.

4413   COMMISSIONER MOLNAR: M'hmm.

4414   MR. BIBIC: Another trade-off is our proposal gets adopted, there's a negotiation of a wholesale fee for local specialty between the conventional TV stations, and the BDUs, they remain in business, they're sustainable. Hell, maybe they -- I apologize for that.

--- Laughter

4415   MR. BIBIC: Maybe they flourish, I should have said. Maybe they flourish, but they're still available on basic, under our local specialty model. And under -- if the Commission were to adopt the entirety of its unbundling proposal, people would have an ability to manage their spend better. Maybe it's skinny basic only and one or two channels, or no -- or just skinny basic, but there'd be more flexibility there to manage overall spend, if we're not talking about the ultimate trade-off, which is these things no longer being in -- operating in the long term.

4416   MR. CRULL: I apologize for piling on, so I just want to make sure -- the point Mirko made, I think, should be clear. The consumer -- first from the consumer standpoint -- we're giving them -- through this process there is no doubt we are giving them many more tools to manage their spend.

4417   So, yes, a local specialty model does pass along a new cost to the BDU, who may choose to pass it along to the consumer, but those consumers now have many new tools. I think we've heard pretty vociferous indication of some form of a skinny basic, and through a pick-and-pay world consumers are going to have a lot of options to manage their overall spend, so despite that additional new cost, on channels they value the most.

4418   COMMISSIONER MOLNAR: Okay.

4419   MR. CRULL: Now, secondly, I want to say to the side of the broadcaster, I think that this Commission, in all of your tenures, and before you, have wrestled with this topic now for maybe close to a decade. I think we have comforted ourselves as an industry that the financial woes of local television are offset by the strength in specialty programming and, with consolidation and whatnot, that the owners of the local TV stations that serve the most Canadians generally own the speciality channels, and, taken as a whole, we find that there's some sustainability. I think that has been a bit of the thinking.

4420   There's no doubt, even if our proposal on pick-and-pay and free market wholesale negotiation with the big BDUs, even if that is adopted, I envision, of my 29 channels, that 7 or 8 or 9 of them that make money today are going to go away and the remaining channels are going to have compressed profitability in that environment, even with the fullness of our proposals.

4421   So if we're introducing through that modernization of our system something that's going to reduce the financial contribution of specialty channels, then we can no longer rely on that old belief that, Hey, this part of -- this leg of the stool's broken, but this one's still strong. If we're going to bring one down, let's bring the other one up, and that's what our local specialty does.

4422   COMMISSIONER MOLNAR: Okay. Well, I appreciate you providing that information, because, you know, you're absolutely right, this has been struggled with for many years. You folks were considered to be the solution: vertically integrated so you could monetize -- you could use your scale, you could create good Canadian content, you could monetize over all your platforms.

4423   Conventional is the beachhead. You noted yourself that it is. Suggesting it's going to go away is a bit surprising to me, you know, given you only made the purchase a few years ago knowing the environment you were moving into. I mean, clearly, there's value there, and there's a value to BCE.

4424   You know, looking at individually is perhaps not the way to look at content that's monetized over a number of platforms.

4425   MR. CRULL: No question. There's no question that we look at the ancillary benefits of our conventional programs to all of Bell Media and to all of BCE. In the fullness of that view, the financials right now don't warrant sustainability.

4426   I would say we bought ourselves four years with vertical integration. The team -- the cost benefits -- remember our discussion about fixed costs. Operating media businesses are about 85 per cent fixed costs. Vertical integration has helped us to reduce the 15 per cent. We've taken out about $100 million of overhead in our acquisitions and the vertical integration, and that has allowed us to weather this storm for four years. But it's not sufficient going forward. We are losing money today.

4427   MR. BIBIC: Commissioner Molnar, when we acquired CTV, CTV was endorsing a different model. You know the acronyms.

--- Off microphone

4428   MR. BIBIC: No, no, CTV was endorsing value -- or pushing for value for signal, and we all know where that went. When BCE acquired CTV, BCE continued to endorse that model.

4429   This is a different model, but I just want to go back in time to the point of your question. When BCE acquired CTV, there was no contemplation in our minds that simsub, and that significant revenue associated with it, would be at risk, as an example. When we bought CTV, there wasn't LPIF. Lots has changed since 2011.

4430   MR. CRULL: And there was -- in fact, when we bought CTV, there was a Commission decision to enable fee-for-carriage. That ultimately got struck down, but when we bought CTV that was absolutely in the plans.

4431   COMMISSIONER MOLNAR: Let me go back to your proposal.

4432   So your proposal is a local specialty, which is, in effect, conventional without over-the-air. I mean it's not local specialty. You're not proposing to increase the amount of local programming made available. Correct?

4433   MR. CRULL: No, we're not.

4434   COMMISSIONER MOLNAR: Right. So you're proposing to maintain your conventional without over-the-air at a subscription fee --

4435   MR. CRULL: Yes.

4436   COMMISSIONER MOLNAR: -- just to be clear?

4437   MR. CRULL: Yes.

4438   COMMISSIONER MOLNAR: So let's talk about a scenario where the Commission would not endorse customers having to pay for something that's been free to them for its history, which is traditional conventional television.

4439   I assume that you folks -- I'm sure you folks do lots of scenarios, lots of contingency planning. You came in with one proposal, but I expect you've looked at a number of different scenarios. So what is your backup if there is no subscription fee? What's the best alternative?

4440   MR. CRULL: Well, Commissioner Molnar, we don't have an alternative, and it would be -- it would be unwise, and probably unproductive, for me to speculate on, you know, grand pronouncements of shutting it down and this and that, so I -- I will tell you that over the years we've looked at many things of trying to improve the cost side of the business, because the revenue side of the business has run out of steam.

4441   I mentioned that, you know, we've reduced newsroom staffs, we've automated our newsrooms tremendously, we've lowered our foreign programming spend significantly, very significantly, so I think you see that line coming down aggressively.

4442   We operate local television stations in 30 communities, large and small, across the country. We've looked at: Is 30 the right number? Should it be 20? Should it be 25? Should it be 15 or 16? Unfortunately, I would not want -- it would terrible to abandon any of these communities, but if I thought it would make local TV sustainable, I would. Abandoning 10 of those communities doesn't alter the economic situation.

4443   So, Ms Molnar, what's going to happen? I don't have a plan B, but I believe this with all of my heart, it's not going to be good for Canadians or for Bell.

4444   COMMISSIONER MOLNAR: Let's talk about an interim solution at least and maybe if there's other things that can be done within a regulated framework to help to support local television.

4445   One of the things that's been tossed around is providing a CPE credit, you know, like 125 per cent, or something like that, so that you would get greater credit for local -- expenditures on local towards your regulatory obligations.

4446   Do you have any comments on an approach such as that? I mean it's not -- I understand it's not revenue, but are there approaches such as that that might help facilitate maintaining this service?

4447   MR. CRULL: I don't think so, Commissioner Molnar, because -- you know, I don't think -- you don't hear us today saying the solution is to lower our obligations or to change our obligations. We actually believe that our differentiation in the market is exactly that CPE. It's the quality of both the news production that we do, the in-house variety programming of things like The Social, Marilyn Denis, eTalk.

4448   So we actually want to maintain the work that we're doing there.

4449   COMMISSIONER MOLNAR: M'hmm.

4450   MR. CRULL: We don't want to cut that, and I don't think that that would be -- cutting that and getting a credit wouldn't be a solution to the problem.

4451   COMMISSIONER MOLNAR: Okay. So no solutions. All your eggs in one basket on this one.

4452   MR. CRULL: I'm afraid it's time to act, as I said in my opening statement.

4453   COMMISSIONER MOLNAR: How many years are available, in your view, for conventional?

4454   MR. CRULL: If we've lost money --

4455   COMMISSIONER MOLNAR: I mean all revenues not gone.

4456   MR. CRULL: -- in four out of the last five years, I think our management has been extremely patient.

4457   COMMISSIONER MOLNAR: Okay.

4458   I'm going to move on to the issue of Canadian programming, beginning with your proposal for big budget productions.

4459   It's not clear to me, and maybe you could just help me understand, what is it that's prohibiting today the creation of big budget productions under the existing funding mechanisms?

4460   MR. CRULL: I'd like to pass this to my colleagues, Tracey Pearce and Corrie Coe.

4461   MS PEARCE: I'll start, and then I'll pass it back to Corrie.

4462   Our proposal with respect to the Big Budget Fund is really about our focus on quality over quantity. I think you'll see that theme running through a number of proposals. I'll speak directly to your question, but if I can lay a little bit of groundwork.

4463   We have found in the English --

4464   COMMISSIONER MOLNAR: I don't mean to be rude, but make a little bit of groundwork, because we're taking a lot of time --

4465   MS PEARCE: I will.

4466   COMMISSIONER MOLNAR: -- and we still have many issues.

4467   MS PEARCE: I will.

4468   COMMISSIONER MOLNAR: We haven't even begun to speak of affiliation agreements.

4469   MS PEARCE: I will. I promise I will.

4470   We found in the English system that in order to produce the kind of Canadian content that viewers expect, budgets have been escalating rapidly. So where there used to be a standard of around a million dollars an episode, it's now two times or more that in the English market. As we've heard in response to a number of questions, at the same time we're finding that our resources are being spread evermore thinly.

4471   So in response to your question, Commissioner, it's not that we can't or don't spend that on productions now, it's rather that it's increasingly challenging to close the financing gap on these productions, and so we thought it would be useful to come forward with an mechanism that would help specifically to fund those productions.

4472   COMMISSIONER MOLNAR: And to be clear, your mechanism is pulling the money out of the community channels and giving it to big budget Canadian drama.

4473   MS PEARCE: For the BDUs that have a community channel, yes. For the BDUs that do not have a community channel, it's a redirection of some of those funds.

4474   Our position is that we're in a situation where we need to make some choices. We're coming forward and saying that we think one of the choices we should consider is funding big budget Canadian programming. Because it resonates with viewers, it has a better chance of success internationally, and it drives the viewership and subscriptions that we're going to need to have in a riskier pick-and-pay environment.

4475   MR. GOLDSTEIN: And just to clarify for the record, we haven't -- we're not pulling all the money out of the community channels. It's one quarter of existing community channel funding, so --

4476   COMMISSIONER MOLNAR: Right, but the money you want for big budget would come out of community. Even though we know that consumers, citizens, view local news and local information as important, we would pull it out of the local and move it into big budget Canadian production?

4477   MR. GOLDSTEIN: Well, we wouldn't pull it out of local. When consumers say that local news and local programming is important, they're largely referring to local private conventional television, not the community channel. If you actually look at audience out of the community channel, it's somewhat small. So it's not pulling it out of local.

4478   In many ways, because those big budget productions often end up on conventional television, you're actually, potentially, helping conventional television by moving that over. Not in the way that saves it, but it --

4479   COMMISSIONER MOLNAR: It's not going to save it, though?

4480   MR. GOLDSTEIN: Not going to save it.

4481   COMMISSIONER MOLNAR: Okay.

4482   Okay, moving on to the issue of exhibition, first of all, I guess, I'd like to understand a little bit the whole issue of recycling of programming. You have, you said, read all of the record of this proceeding. I think you've then probably saw what I saw: that there's a lot of people who just think that there's a lot of recycling.

4483   I mean how many times can you watch Big Bang? How many places do you need to watch Big Bang? And Amazing Race is a great show, but when I googled -- or when I went into the guide to find out where, I had 25 options, so...

4484   So tell me about recycling. What is it doing? What is the reason that recycling occurs? Is it for business reasons or filling the schedule, or what is it?

4485   MR. CRULL: Well, certainly it's our goal to have original programming in every hour that we can, absolutely. When you googled or your searched Amazing Race and you find -- we often -- gosh, our system creates a bit of a disservice for ourselves because of the perception that distant signals creates.

4486   You know, I know when I look at my Bell TV guide and I see 1,500 channels, I don't actually have 1,500 discrete channels, but I have distant variants of so many things and that.

4487   COMMISSIONER MOLNAR: M'hmm.

4488   MR. CRULL: So I think for sure that you saw many distant variants of the program.

4489   But we do repeat. Amazing Race is a show that doesn't repeat well, but our dramas we do absolutely repeat.

4490   It's for a couple of reasons. One is because we do have to fill a 24-hour schedule, and so -- you know, there are low-viewership times that airing original programming isn't economical, and so we do air repeats.

4491   Monetizing a program: you know, we will see an original airing of a drama is sort of 80 per cent of the value that we can create, but we create 20 per cent of the value of Saving Hope and Motive and Flashpoints and whatnot through the longer tail of repeating.

4492   Now, more frequently, we're creating that value through on demand, and one of our proposals is to have the monetization of BDU on demand platforms. So we don't have to repeat it in the linear schedule, but we can air it on demand and have commercial insertions in that.

4493   But there is no question that we strive to have more original programming. I will tell you as budgets get constrained -- and part of the -- Dr. Eisenach talks about the extensive studies on unbundling, and part of the reason that you get a big of a death spiral when we see that is because, as revenue comes down, then budgets constrained and channels run more repeats and run less programming, and then fewer people pick the channel, and then, you know, you get into a cycle that.

4494   So it's our goal to have as much original programming as possible.

4495   MS PEARCE: Can I just add that on the Canadian side I think the fact of the matter is that there are some conditions of licence on some of our specialty channels that force us into a position of repeating Canadian programming more than we would choose to do, from a business perspective, and that's why we're coming forward and seeking a harmonization, first and foremost, of the Canadian exhibition requirement.

4496   So Mr. Crull is absolutely right: there are business reasons to repeat programs, but there are also regulatory imperatives that are seeing us repeat Canadian programs more than we would otherwise.

4497   COMMISSIONER MOLNAR: Maybe just as a follow-up to that, so that we can go on with the questions, would you undertake to provide us the specific COLs that are forcing you to recycle programming?

4498   MS PEARCE: Yes.

Undertaking

4499   COMMISSIONER MOLNAR: Thank you.

4500   You saw that the Working Document proposes to eliminate exhibition requirements in the daytime. What are your thoughts on that? Is that useful?

4501   MR. CRULL: Kevin, could I ask you to answer that?

4502   MR. GOLDSTEIN: Maybe I will start and then I will ask Tracey to add.

4503   I am not really certain that eliminating that during the daytime and keeping the same requirements in the evening period really changes the economics of the business.

4504   I think it would vary -- with specialities, it is going to vary from specialty to speciality, because their audiences are all over the map in terms of when people watch and when they don't, depending on the genre.

4505   But from our proposal, generally, if you kind of take a step back, there is so much competition for audiences at all times, and the number of channels has escalated, and simply putting something in a particular time slot does not guarantee its success.

4506   We are incented to put our programs in time slots and schedule them in a way -- and I think that Kevin and Tracey highlighted this earlier -- in a way that is going to drive the most audience to that program.

4507   But simply saying "You have to put this much in", and putting it out there, does not guarantee that people will watch the show. In fact, in today's environment, with so many different options and so many different ways in which people can consume content, it is even less likely that they are going to go and find it that way.

4508   COMMISSIONER MOLNAR: So the short answer is, it is not really that valuable to you.

4509   MR. GOLDSTEIN: In and of itself, no.

4510   COMMISSIONER MOLNAR: If it were eliminating exhibition requirements across the schedule, would that be of value, or is it the same argument, people are watching programs and looking not so much at the time?

4511   MR. GOLDSTEIN: I think we would have to understand what the overall framework looked like, because there is a CPE side of the equation and there is an exhibition side of the equation.

4512   So if we are eliminating exhibition requirements and doubling the CPE obligations, I don't think that is helpful in any way. I think that we need to look at the overall regulatory framework that applies to these services.

4513   We are entering into a situation where we are removing a lot of the privileges and rights that channels had in the system, and we are trying to figure out a way to preserve what we have, in terms of obligations, and I think that we need to understand what one side of the ledger looks like before we can fully comment on what the other side of the ledger looks like.

4514   Our proposal tries to balance it all. We know within the framework of what we have proposed that this is the regulatory environment from a packaging perspective, and a choice perspective, that we are recommending, and this is what we are saying needs to be done to the obligations to make it all balanced and work going forward.

4515   COMMISSIONER MOLNAR: The Working Document is a comprehensive framework. It's not your framework, but it's a comprehensive framework, and it says that CPE would increase over time, CPE levels.

4516   I know there are no boundaries to what those levels are, but I don't think the Working Document said that CPE would double.

4517   Unfortunately, we are not in a situation here where we set CPE and then can come back to you and ask, "Would it be helpful to eliminate exhibition," because it is all here now.

4518   So your short answer is, eliminating exhibition, even through your prime time hours, is not of significant value.

4519   MR. GOLDSTEIN: I think I will toss it to Tracey in a second, but I think that eliminating exhibition in our prime time hours probably is of some value.

4520   I think the concern we have in the Working Document relating to the CPE proposal is that the regulatory environment is actually quite simple, especially for specialty right now. Certain services, essentially the big ones, that have all of the obligations, have carriage rights, and they have genre protection. Until recently and, really, for the most part, they have had packaging guarantees and widespread penetration.

4521   The proposals being put on the table, whether it's the Commission's proposals in the Working Document or the proposals we have put forward today, and in our submission, will eliminate all of those rights.

4522   The only two obligations, really, that exist for specialty services on the other side are exhibition and CPE.

4523   And, essentially, in the Working Document, what is being proposed is the ultimate inflexibility. Ultimate inflexibility -- a small adjustment to exhibition, largely at the times when people aren't watching, and increasing the obligation to spend.

4524   For us, that balance seems out of whack.

4525   From our perspective, if you are going to remove all of the privileges, you have to recalibrate the obligations. What we have proposed is something that is a small recalibration.

4526   Yesterday we heard Québecor, essentially, start off by saying: We should throw it all out.

4527   We haven't done that. We have tried to make what we thought were the minimal amount of changes necessary to create a balanced framework.

4528   COMMISSIONER MOLNAR: I'm sorry, remind me what is it that you are proposing as the small recalibration?

4529   MR. GOLDSTEIN: What we have proposed is maintaining exhibition requirements over the broadcast day. In the case of specialty services that don't have access rights, we have essentially modelled it after the Category B example, which would be non-genre protected, non-access-right services, which would be 35 percent.

4530   We have also recommended a standardized CPE of 25 percent, where the current standard CPE range is in the 30 percent range.

4531   Now, in the Quebec market -- and I will toss this to Ms Meloul in a second -- we have taken a very different approach that recognizes the characteristics of that market.

4532   COMMISSIONER MOLNAR: So your view is, essentially, under the framework with the flexibility and pick-and-pay that has been proposed, there should not be an expectation that CPE levels would increase, there should be an expectation that CPE levels would decline, because the profitability of the services will decline?

4533   MR. GOLDSTEIN: I think we would say that they should be reduced and then standardized. I don't think we were thinking that they would decline over time, I think our hope is that we are going to have successful businesses and we will be able to contribute to the system.

4534   COMMISSIONER MOLNAR: So the amount may grow --

4535   MR. GOLDSTEIN: The amount may grow. It's a percentage --

4536   COMMISSIONER MOLNAR: -- but the CPE level needs to be standardized at something less than exists today?

4537   MR. GOLDSTEIN: Yes.

4538   COMMISSIONER MOLNAR: For the Cat A's.

4539   MR. GOLDSTEIN: Because the rules that were introduced, and the levels that were introduced today, were introduced in a completely different regulatory and business environment.

4540   COMMISSIONER MOLNAR: You have said it, but I will just confirm: exhibition is just -- it is not significant enough, this way or that, to make a difference.

4541   MR. GOLDSTEIN: Tracey, do you want to comment on that?

4542   MS PEARCE: Yes. I think that, from a programming perspective, the more flexibility we can get to create a schedule that resonates with viewers, the better, and that would be more flexibility, and that would be valuable.

4543   But, I think, first, our approach was: Let's get the specialty channel exhibition requirements standardized, and then, hand-in-hand, we are looking for a reduction in the CPE to enhance flexibility, again, as we enter pick-and-pay, recognizing that we may need to be spending more money on marketing and communications and drawing people's attention to our channels.

4544   So reducing exhibition requirements is valuable. It is one piece of an overall puzzle.

4545   MR. GOLDSTEIN: I'm sorry, I know we are trying to move forward here, but I think it is really important that Dany speak to what we have proposed in the French market, because I think it reinforces the overall approach that we took to looking at these issues.

4546   MS MELOUL: Very briefly, in the French market, due to the size of the market and the fact that there is one BDU that is dominant in the market, and therefore has control of distribution and access, we are asking you to maintain genre protection for the moment, until such time as one BDU has 40 percent of the market.

4547   In exchange for that, we are increasing our spending. We are proposing to go from the 32 that we currently have to 35 percent.

4548   To go to your other question about increasing it over the life of the licence, we told you in our introduction today that increasing spending to create better content comes with a lot of risk. We may hit homeruns and we may not.

4549   So while we are readjusting the system and trying to build this new model, our proposal is that we keep the actual spend for the life of the licence and revisit it at licence renewals, from time to time, as opposed to having it increase, because it would be just another element of risk that we would be tossing into the equation.

4550   THE CHAIRPERSON: If I may, Commissioner Molnar; your answer seems to focus a lot on specialties. What if the question was about OTAs?

4551   I seem to recall, Mr. Goldstein, that you were at the CAB at the time, during the last TV review, and the CAB had advocated deregulating the day part in over-the-air.

4552   MR. GOLDSTEIN: I was at the CAB 14 years ago.

4553   Oh, you mean in 1999.

4554   THE CHAIRPERSON: Yes, for the policy hearings.

4555   MR. GOLDSTEIN: I can't comment on what the CAB advocated back in 1999.

4556   THE CHAIRPERSON: But could you answer the question, then?

4557   You are all answering in terms of specialties. They are not shut down yet -- over-the-air -- so maybe you could give an answer with respect to over-the-air.

4558   MR. GOLDSTEIN: Sure. The approach that we took for over-the-air is a little bit different. It took into consideration that a large portion of the over-the-air schedule, especially Canadian, is made up of local news and local programming, especially in prime time.

4559   Also, the proposal we advanced was within the context of our local specialty model. So what we advocated in that context was a 50 percent overall CPE --

4560   THE CHAIRPERSON: I am not asking -- you have answered that already. I am asking about, over-the-air, deregulating exhibition in the day part.

4561   MR. GOLDSTEIN: We will give it some thought and get back to you.

Undertaking

4562   THE CHAIRPERSON: The 19th.

4563   MR. GOLDSTEIN: Thank you.

4564   THE CHAIRPERSON: Commissioner Molnar, sorry to interrupt.

4565   COMMISSIONER MOLNAR: No, that's fine. It was a good follow-up, because I was getting a little confused, too, as to why it was of so little value. But, you are right, it was only a discussion of specialty.

4566   I want to follow up on your comments on the French-language market. You are proposing that CPE be increased, without changes to genre, to 35 percent.

4567   Now, some of the producers in the French-language market have proposed that French-language services be required to devote a portion of their CPE to original French-language production, and there are basically two levels that have been submitted, 65 and 75 percent.

4568   What are your thoughts on that?

4569   MS MELOUL: Currently, when we talk about 35 percent of our spend, I think it is important to also let you know that that comprises anywhere between 60 and 80 percent of the budgets for each of our services. So a huge part of our budget is spent on Canadian programming.

4570   Of that, again, 80 percent -- perhaps even more than 80 percent -- is done with French producers.

4571   So most of the content that we put on is already French original programming, so we don't know to what extent it is necessary to mandate that, because that is the natural progression in our market.

4572   I do appreciate the fact that there was a concern at the time of the acquisition that Bell would naturally buy content from the English Canadian producers and flip it onto our services. That has not proven to be the case.

4573   We currently have 57 productions going on with AQPM producers.

4574   Since being acquired and being part of Bell, not only have we renewed our Terms of Trade with the AQPM, but we also entered into our first Terms of Trade with APFC. We deal with French producers on a daily basis. It is done from our offices in Montreal and --

4575   COMMISSIONER MOLNAR: So your perspective is that there is no need to mandate anything, because it is working well.

4576   MS MELOUL: Our perspective is that it is absolutely working.

4577   COMMISSIONER MOLNAR: Okay. Thank you.

4578   I want to go back now to CPE again.

4579   The Working Document proposes that some amount of CPE may be used for promotional purposes. I assume that you are going to support that.

4580   Could I ask for an undertaking to file, in confidence, how much you spend on the promotion of Canadian programming?

4581   MR. GOLDSTEIN: With third party sources?

4582   We have a lot of internal promotion that we do, but we could do both.

4583   COMMISSIONER MOLNAR: Yes, do both. Thank you.

4584   MR. GOLDSTEIN: Yes, we will.

Undertaking

4585   COMMISSIONER MOLNAR: You can identify them separately, I assume?

4586   MR. GOLDSTEIN: No problem.

4587   COMMISSIONER MOLNAR: Thank you.

4588   I think in your document you had proposed that 10 percent of CPE be directed to promotion. Is that still your position?

4589   MR. GOLDSTEIN: Yes.

4590   COMMISSIONER MOLNAR: So is it your position that we reduce CPE, and then allow 10 percent of the reduced CPE levels to be used for promotion?

4591   MS PEARCE: Yes.

4592   COMMISSIONER MOLNAR: Okay. And you would say that that should occur for all specialty services -- well, conventional, too, I guess?

4593   MR. GOLDSTEIN: Yes.

4594   The rationale behind our proposal is quite simple. We recognize that promotion is a key element to the success of a Canadian program, and it is not just internal promotion, it is third party spend that we are talking about.

4595   We have found that, to the extent that you spend money on promotion, it definitely comes back in terms of -- it can come back in terms of increased audience.

4596   One of the challenges with promotion, as with any marketing budget, in any business, is that when you are looking to -- when you are squeezing money out of something in a challenged environment, the marketing budget is the first to go.

4597   So if the objective is to try to foster the success of Canadian programming, promotion is a key element of it, and if it was included in CPE, it would provide an incentive to do that.

4598   Many, many years ago, in the first BCE/CTV benefits package, there actually was a benefits amount for that third party promotion, and we found that it was actually very successful.

4599   COMMISSIONER MOLNAR: Okay. Thank you.

4600   MR. BIBIC: The strategy behind it is, we are going to create great Canadian content, let's tell people about it, and tell them loudly. Let them know about it, that it's fantastic, and then they will be attracted to the programming.

4601   It's what I said in my opening statement, the virtual cycle. That is what we are trying to create here, and that is why we have linked these together.

4602   So focus on the big budget programming, take a little bit from the CPE to promotion, it will link together. It is not trying to diminish one to benefit another, they are actually completely linked.

4603   Now, 10 percent or some different number is obviously open to discussion and the Commission's judgment, but that is what we are trying to do in the proposal.

4604   COMMISSIONER MOLNAR: Right. And I assume that 10 percent has been calculated, and I guess we will see it when you submit your undertaking, but that is something that would be sufficient to adequately promote Canadian programming?

4605   MR. BIBIC: We believe so, and I think that Kevin mentioned that this would be allocated toward third party spending, so we would continue to promote, obviously, on our own platforms, the way we really do now quite effectively.

4606   So we are kind of, basically, doubling down on promotion -- do more.

4607   COMMISSIONER MOLNAR: Do you believe that is a proposal that should be implemented in both linguistic markets, the French market as well?

4608   MR. GOLDSTEIN: Yes.

4609   COMMISSIONER MOLNAR: Let's move on to Programs of National Interest. Do you support the notion of a category called Programs of National Interest?

4610   MR. GOLDSTEIN: Yes.

4611   COMMISSIONER MOLNAR: You do.

4612   At this point, the programming that has been contained in that category has really been deemed to be programming that would be at risk without some kind of directed regulatory attention.

4613   Do you believe that, for programming to be considered Programs of National Interest, it should be some type of programming category that is at risk and not commercially successful, or commercially viable?

4614   MR. GOLDSTEIN: I think our hope in terms of any programming that we produce, whether it's PNI or whether it falls more broadly into our CPE spend, is that we can find a way to make it not just viable, but successful.

4615   I think that one of the characteristics of the PNI envelope is that the programming that falls into that envelope is more risky in nature. You can have shows that emerge from that that become commercial successes, and I think that is something we should applaud, and it is a goal for the system.

4616   But the characteristic of PNI is that there is always going to be more risk associated with those programs. So it isn't necessarily the commercial viability of the programming, it is really creating an incentive to want to produce something, as opposed to looking to spend those dollars in a way where it might be less risky.

4617   COMMISSIONER MOLNAR: Is producing an award show risky?

4618   MR. CRULL: It is for sure, financially. We don't cover the cost. The Juno Awards is, unfortunately, a pretty significant negative contributor.

4619   COMMISSIONER MOLNAR: I think I just heard, though, that commercial viability is not the measure -- should not be the test of what is or is not considered PNI.

4620   MR. GOLDSTEIN: Sorry, I think I was looking at it the other way, which is to say that, if you are commercially viable, you shouldn't be excluded.

4621   I think the test should really be that it's a risky proposition to undertake, and I think that the Juno Awards definitely falls into that category.

4622   COMMISSIONER MOLNAR: So is there something that you would produce that is not a risky undertaking?

4623   MR. GOLDSTEIN: Unfortunately, in this environment, the categories that fall into that seem to be mounting.

4624   MR. CRULL: It is always a challenge to try to interpret the intent and the angle, and maybe how this will influence your deliberations. We support --

4625   COMMISSIONER MOLNAR: Please don't think there is more to the question than --

4626   MR. CRULL: Okay.

4627   COMMISSIONER MOLNAR: You said that you support PNI, and what I am kind of interested in knowing is -- I mean, PNI is certain categories of programming today, but any regulatory framework should be able to evolve.

4628   So if the criterion is that they are in there because they are at risk and not commercially viable, should that be the criterion going forward, or what is it?

4629   MR. CRULL: I understand the risk, so let's put drama and award shows in this category.

4630   But there is a chance for those. As Kevin said, there is a chance, through experimentation and failure, to find a drama that rises and does become commercially successful.

4631   I don't think you should put categories in PNI on us that have no chance, ever, for commercial success. I think that defeats the modernization of what we are trying to do, which is removing a lot of the benefits of the system and adding that further obligation.

4632   So we really support the category of PNI, and the programming we produce today, but I think that those programs -- an awards show -- the MMVAs is a commercial success for us. The Juno's is not.

4633   So what can we do to fix it, to make it that? And we work very hard with the producers to find it.

4634   I wouldn't want a category to be added in there that has no chance, ever, of commercial success.

4635   COMMISSIONER MOLNAR: Would children's programming have a chance of commercial success?

4636   MR. CRULL: I would say absolutely. We are not big children's programmers, so I think that question is better directed at some of our colleagues.

4637   COMMISSIONER MOLNAR: You may have heard, however, that some of the parties coming forward were saying that there should be more children's programming on conventional television, through the daytime at least.

4638   MR. GOLDSTEIN: I think the challenge we have with that is that, when you listen to that, it is somewhat looking in the rear-view mirror, to a system where -- you know, when kids' programming existed on conventional television, conventional television was the only game in town.

4639   You can't look at something and say, now that we have YTV and Treehouse and Family, and a variety of other children's programming options available, in terms of discretionary services, that that isn't going to have an impact in terms of the desirability of that programming on conventional television.

4640   I remember running home at lunch to watch children's programming on conventional TV. It's now on 24/7, you can watch it anytime you want.

4641   COMMISSIONER MOLNAR: I don't believe we are asking to mandate that you begin to produce or exhibit children's programming. Adding it into the category of PNI would not be an issue for you, and you could --

4642   MR. GOLDSTEIN: No, that's fine. What Kevin was saying is that we don't want prescriptions within that category, in terms of areas where we really have no ability to make it a success.

4643   COMMISSIONER MOLNAR: Okay. As it regards the French-language market, would you see the PNI categories that exist today continuing to be relevant, or would they need adjusting?

4644   MS MELOUL: The categories, as they are today, are relevant, and we fully endorse the Commission's modified report last week, which also wanted to add youth programming. Again, I understand that it came also from AQPM and others.

4645   We think that's a subset of programming that is in dire need of improvement in the French market and we fully endorse adding that.

4646   COMMISSIONER MOLNAR: Okay, thank you.

4647   The other element of CPE that was proposed in the working document was that online programming be included, revenues associated with online -- and expenditures, I guess, associated with online be eligible to be included in CPE. What are your thoughts on that?

4648   MR. BIBIC: Okay. That one --

4649   COMMISSIONER MOLNAR: Clearly, it is complex.

4650   MR. BIBIC: Well, there was a discussion about different -- you arrived at it differently yesterday with the Québecor panel but, you know, Working Document item number 10 concerns us greatly. It says:

"The definition of broadcasting revenues for licensees would be revised to include revenues from programming offered online..."

4651   Now, if I interpret this correctly, it's suggesting when a Canadian licensed broadcaster is generating revenues from online activities -- it could be CTV GO, it could be Shomi -- then those revenues count towards CPE, et cetera. And then there's of course you would be allowed to count those towards CPE. So I understand the other side of it.

4652   But I also read the Minister's statement Monday evening saying there shall be no Netflix tax. And we come at this -- and the Chair said -- sorry, the Vice Chairman asked quite directly yesterday: What prevents Québecor from competing on Netflix's turf with the same regulatory rules?

4653   I was surprised yesterday that this didn't come up because I would have said, well, there's a proposal here that would treat Canadian licensees in that space differently than the Netflixes of the world.

4654   So we would view that as awful because -- as you know, we said this before in other contexts, in other hearings -- we asked the regulator to have symmetrical regulation.

4655   From the consumer's perspective -- the consumer's perspective is this. They're watching content. So there's your screen. I can watch one piece of content through my linear subscription and the very same piece of content through my PS4 on Netflix. To me as a consumer, I don't care and all these rules don't matter to me.

4656   COMMISSIONER MOLNAR: Mr. Bibic, let's talk about your situation instead because what you told me earlier is that all of your online activity is tied to your regulated subscriber.

4657   MR. BIBIC: But that is so rule-driven.

4658   COMMISSIONER MOLNAR: Is that true?

4659   MR. BIBIC: It's not outcome-driven. It may be the case, but we may be offering a piece of content through TMN, which is unavailable on TMN GO, and it's the movie "Usual Suspects," which Netflix also has. Yet, they would come at it with a structural cost advantage that we could never take advantage of, and there are several. Number one is --

4660   COMMISSIONER MOLNAR: Are you assuming -- do you see here somewhere --

4661   MR. BIBIC: Commissioner, well, it's so important that --

4662   COMMISSIONER MOLNAR: -- that we would --

4663   MR. BIBIC: Yes.

4664   COMMISSIONER MOLNAR: -- impose --

4665   MR. BIBIC: Because this says that the revenues -- as I read this, the revenues that we would generate from TMN GO would be subject to CPE. You subscribe to TMN, you get TMN GO, we generate revenues from that, you watch "Usual Suspects," we have to meet a CPE obligation, which is a cost structure. Netflix doesn't. It would not have to.

4666   COMMISSIONER MOLNAR: But there is nothing I have heard from Mr. Crull about his vision for his portfolio of services that would indicate CPE is a great obligation --

4667   MR. BIBIC: But, Commissioner Molnar, this says --

4668   COMMISSIONER MOLNAR: -- is how you're going to define yourself, differentiate yourself --

4669   MR. BIBIC: Okay. We can take --

4670   COMMISSIONER MOLNAR: -- through spending on Canadian.

4671   MR. BIBIC: It says revenues from online activities. They could be online revenues which are tied to a linear subscription. They could be unauthenticated over-the-top revenues. In either case under this proposal those revenues would come with a CPE obligation, Netflix's revenues would not, and that's not a level playing field.

4672   And to the Vice Chair's questioning yesterday, that would be an example of how the regulatory framework would impose one set of rules on one competitor versus another competitor. And let's not go into the sales tax advantage. I know it's not your issue, you don't govern the Income Tax Act. That's another advantage that these players have.

4673   And yesterday's debate, unfortunately, was very rules-driven. If you're in this lane, you're not going to be subject to rules. If you're in this lane, you will be. But the consumer is watching the same piece of content on the same TV screen or on the same mobile screen or on the same tablet.

4674   MR. OOSTERMAN: I think this is the most important issue facing the hearing because it is trying to recognize that consumers don't actually care about how the signal is delivered, what they care about is the signal is delivered to the screen of my choice.

4675   And to Mr. Bibic's point, if I'm sitting in my den and I decide to watch "The Usual Suspects" and my PlayStation 4 is hooked up to my TV and so is my set-top box, if I pick up the remote control on the left it attracts CPE, if I pick up the remote control on the right it does not. That just seems odd.

4676   And, you know, I know that as Canadians we're kind-hearted people and we look at the U.S. and we take sympathy on their economic plights but when did it become okay to favour U.S. companies over Canadian ones?

4677   It just feels -- like if we want to recognize that consumer behaviour is evolving too and we want to recognize the evolvement of the ecosystem, our proposal tries to do a pretty good job of balancing all the conflicting perspectives and it tries to create a level framework where the same rules apply to all players regardless of the way you choose to get the signal to a viewer.

4678   Netflix charges more if you want to watch on multiple screens. What Mr. Crull is doing by saying, look, if you pay for TSN, there is a fee, just like Netflix. If you want to watch Netflix, there is a fee. If you want to watch it in multiple environments, the fee changes, the same as Netflix. So we must have the framework right or we favour some parties over others. That seems very anti-Canadian.

4679   MR. CRULL: If I could try a pragmatic --

4680   COMMISSIONER MOLNAR: Could I try a little bit? Because, I don't know, you know, you look at this and you say this is the most important part of the framework because it's so unfair. It's proposing that Canadian companies spend money on Canadian. I don't know why that's such a big obligation when that is what you've defined yourselves to be your differentiator.

4681   MR. CRULL: Right. I think it is --

4682   COMMISSIONER MOLNAR: It's not proposing anything more. In fact, it's proposing that if you're spending that money on your online platforms that you be able to recognize it towards your CPE.

4683   MR. CRULL: I think I would answer it this way. Our principle that Wade and Mr. Bibic impassionedly delivered is a level playing field and equal treatment, but we acknowledge the burden that the Commission has is the market is dynamic and it evolves and sometimes it's hard to put genies back in bottles. And so I think, practically speaking --

4684   COMMISSIONER MOLNAR: And just to be clear to you, we are not talking about a level playing field. You know, Netflix is always brought up. Netflix is over-the-top. You will have your multiplatform tied to a BDU subscription which enables you both to generate revenue out of the BDU and to bundle it with multiple services. All of those things are advantages for you --

4685   MR. CRULL: No.

4686   COMMISSIONER MOLNAR: -- with your presence here. Not being able to bundle, it's not an advantage?

4687   MR. CRULL: So the services that we're speaking of here -- and I think I'd rather go to like a Shomi or a Bell version of this. Let me --

4688   COMMISSIONER MOLNAR: But you're not offering that. You're going to offer yours tied to a BDU subscription?

4689   MR. CRULL: Yes. Yes, absolutely. But it's a standalone --

4690   COMMISSIONER MOLNAR: So you will always be able to fill it with --

4691   MR. CRULL: It's a standalone service.

4692   Look, decades ago a Canadian licence to a broadcasting service brought great privileges. I think today we tremendously value the business we're in and the value that we serve but there has to be a balance between the obligations and the benefits and I don't think our case is in any extreme.

4693   What we've said, putting the genie back in the bottle and probably obligating Netflix and other OTT providers to the linear world isn't feasible. I think it's adding insult to injury a bit for us to say: And if you do a Netflix it's going to be subject to the old rules.

4694   Is it the biggest issue in front of the hearing? I think the biggest issue in front of the hearing is that we have -- that the policies and the framework that govern our core business allow us to be healthy and sustainable so that we can compete with the new entrants in our own way. But for me, this paragraph 10 is adding insult to injury, that no, we really don't see a level playing field and if you do what they do, we'll burden that as well.

4695   MR. BIBIC: And part of the -- I mean it's not altogether clear because it says revenues for licensees. We all understand that there are no OTT licensees or online licensees because they're exempt. So that must mean that we will impose these rules on traditional linear licensees who generate revenue in the online space or other exempt platforms, Bell Mobility platform.

4696   So is CTV GO captured? I don't know. Are all our TV Everywhere apps captured? I don't know. Would a new service, that Kevin conceded at the beginning of our appearance, tied to a linear subscription be captured? Would Shomi be captured?

4697   The only difference between Shomi and what Kevin was talking to you about, you're quite right, is one is tied to a linear subscription and Shomi is not necessarily tied.

4698   But our strategy -- that would be our strategy to actually compete directly and head-on with Netflix. So to say, well, the rules -- that's why we're struggling with it. It is our competitive response to Netflix and it is viewing online and it would be generating revenues and therefore would be captured and there's what -- that's our position on the issue.

4699   COMMISSIONER MOLNAR: Okay. I understand your position.

4700   We will move on to genre protection. You're fine with the proposal to eliminate genre protection?

4701   MR. BIBIC: In the English-language market, yes.

4702   COMMISSIONER MOLNAR: Right, in English. I'm sorry. That's right.

4703   MR. BIBIC: In the French-language market, no.

4704   COMMISSIONER MOLNAR: And you also are advocating for a standard CPE requirement for all specialties?

4705   MR. GOLDSTEIN: For the large groups. Independents would come and have it set on an individual basis, as now occurs.

4706   COMMISSIONER MOLNAR: Okay. We'll just keep going here. National news services. As I said, we have a lot to cover.

4707   You had laid out in your initial remarks some enhancements you thought that would be necessary to ensure any new national news services would be of value to the system. The Working Document itself lays out some potential modifications to what would be required to be licensed as a Cat C national news service. Do you have any comments on the Working Document?

4708   MR. GOLDSTEIN: Yeah, we have a couple.

4709   COMMISSIONER MOLNAR: Okay.

4710   MR. GOLDSTEIN: So there's two issues we want to talk about. One is the requirement relating to original programming. The other relates to the -- in terms of the proposal in the Working Document for an average of 16 hours a day. The second one relates to the categories of programming that would air on national news.

4711   So the first one -- and it's more of a clarification that we're seeking -- which is if it's original programming and not specifically first-run original programming, then we're fine with the proposal in the Working Document.

4712   So, for example, when Wendy airs the news at 10:00 to 10:30 and if she repeats that same newscast from 10:30 to 11:00 and then has another new half-hour at 11:00, that whole hour would be original. We produced it, it's original content and, you know, it's just a replay for the benefit of the viewer. So if that's the way the Commission is measuring it as opposed to live first-run news, then we're fine with the 16 hours.

4713   If it's first-run original news, the 16 hours a day would be extremely difficult to meet for any national news licensee. What we would be comfortable with would be an average of 12 hours, which is two-thirds of the broadcast day. You would still get news, it's just not going to be live, it will be -- you know, you'll do half an hour and then half an hour delayed and that's really to accommodate the weekends as opposed to during the week.

4714   In terms of the categories specifically that the Commission has identified, I think it's news and current affairs. The one category we would add to that would be long-form documentaries to facilitate shows like "W5" and long-form investigative reporting that would fall into the documentary genre, which is entirely consistent with the nature of a national news service.

4715   But those would be our only comments on the Working Document.

4716   COMMISSIONER MOLNAR: And you believe under those conditions any new services to be licensed would also be of value to Canadians?

4717   MR. GOLDSTEIN: Yeah. So it's those criteria as well as the additional criteria the Commission identified relating to new licensees in terms of the things they have to demonstrate.

4718   COMMISSIONER MOLNAR: Right. Okay. Thank you.

4719   Audience measurement. You supported the creation of a working group to look at the set-top box data?

4720   MR. BIBIC: Yes.

4721   COMMISSIONER MOLNAR: Could you tell me --

4722   MR. BIBIC: With the one caveat that we'd like that working group to also look at dynamic ad insertion and the monetization around video on demand, recognizing the new environment where consumers are watching multiplatforms.

4723   COMMISSIONER MOLNAR: Do you think anybody who might be part of the working group would disagree with adding that in?

4724   MR. BIBIC: I'm not sure. I think we might have been one of the -- maybe the only one, I can't remember, to speak about it in our proposal and it wasn't directly addressed, I don't think, in those consultations.

4725   COMMISSIONER MOLNAR: Yeah, which is why I'm kind of wondering would there be anybody opposed to that. I don't know.

4726   MR. BIBIC: I hope not.

4727   COMMISSIONER MOLNAR: Yeah. Okay.

4728   MR. BIBIC: It's really a technical infrastructure issue to get all BDUs able to or getting to move towards providing that functionality.

4729   COMMISSIONER MOLNAR: Okay. Do you have some views as it regards the timeframe to put this working group together and report back to the Commission? What would be reasonable?

4730   MR. BIBIC: We propose by September 2016, I believe, for actual implementation.

4731   THE CHAIRPERSON: That wasn't a typo?

4732   MR. BIBIC: No.

4733   COMMISSIONER MOLNAR: For implementation?

4734   MR. BIBIC: We wouldn't wait until the working group to start. Hold on. That's what we propose. Let me go back and get the message.

4735   COMMISSIONER MOLNAR: Actually, why don't I let you do that as an undertaking? Because what really I'm asking is a process.

4736   MR. BIBIC: I am just looking at it. The working group would be established within three months of the date of the decision, okay, and report within eight months, okay. So that's, you know, 11 months from the date of the decision to provide a report and then you've got to get together and actually execute on the report to get the model going. So when I gave a date, I'm talking about implementation on the ground.

4737   COMMISSIONER MOLNAR: Would you need anything from the Commission to facilitate this, any guidelines or anything at all, or do you believe the industry can go away and create this working group without any input from us?

4738   MR. BIBIC: Well, we've put in some parameters in our submission or our proposal that we believe would be helpful for the Commission to elaborate in the decision so that we're all operating from kind of the same understanding and, you know, the issues around privacy.

4739   This data has commercial value, it is clear, and so, you know, again, back to the overall proposal to try to balance obligations and privileges. And I know the Vice Chair met with members of the industry before this was kick-started and our view was pretty clear in those discussions that there is commercial value to this. So, you know, there ought to be compensation for it.

4740   A lot of effort and innovation has gone towards those set-top boxes and gathering that data. So we could have taken that position. We did. We said, we'll come together as an industry and figure this out. There has to be, at a minimum, cost recovery -- at a minimum. I think there ought to be discussion about potentially more than that. And then parameters around who can draw from the system and who should contribute into the system would be helpful.

4741   COMMISSIONER MOLNAR: Okay. Do you need a conclusion as it regards the cost recovery or payment or value delivery in order to do the work of the working group?

4742   MR. BIBIC: No.

4743   COMMISSIONER MOLNAR: No. Okay. Thank you.

4744   MR. BIBIC: No.

4745   COMMISSIONER MOLNAR: Okay, let's move on to the issue of affiliation agreements.

4746   THE CHAIRPERSON: If you are starting a new topic, we could take a break if --

4747   COMMISSIONER MOLNAR: It's up to you.

4748   THE CHAIRPERSON: -- because I think --

4749   COMMISSIONER MOLNAR: It is, after all, the wholesale relationship that I'm beginning to discuss.

4750   THE CHAIRPERSON: Yeah, which I don't think you'll be able to do in 5-10 minutes.

4751   COMMISSIONER MOLNAR: No.

4752   THE CHAIRPERSON: So why don't we take an hour-break and come back at 1:30 and do it that way, okay. Thank you.

--- Upon recessing at 1230

--- Upon resuming at 1330

4753   LE PRÉSIDENT : À l'ordre, s'il vous plait.

4754   On continue alors avec les questions.

4755   Commissioner Molnar...?

4756   COMMISSIONER MOLNAR: Well, good afternoon again.

4757   As I said before lunch I want to get into the whole issue of the wholesale arrangements. Starting off -- I think, maybe to be fair I'll let you guys go first.

4758   You have proposed that under the conditions that will exist going forward, that you would propose to have the code not apply to BDUs with more than $500,000 subscribers. And maybe you could explain why conditions have changed that would make that appropriate?

4759   MR. BIBIC: Okay. So the code -- so our proposal is this.

4760   The code would apply, as amended in the manner we suggest in our submission, to everybody. It's the standstill rule and the final offer arbitration of dispute resolution mechanisms that would not apply as between the large players. So BDUs, I believe, that have more than 500,000 subscribers.

4761   And independent programmers and smaller BDUs would continue to benefit from the standstill rule and the dispute resolution mechanism.

4762   But the code of commercial interaction would continue to apply to all players in the industry.

4763   COMMISSIONER MOLNAR: So what would be the reason that the standstill rule should be eliminated?

4764   MR. CRULL: Well, Commissioner Molnar, as we are embarking on what is truly an unprecedented remake of an industry model that's existed for 20 or 25 years, we are looking at how can we enable the economic circumstances such that the outcomes are desired, as desired.

4765   I said the words in my opening statement that were purposefully bold that we're trying to defy gravity. I think in the studies that the Commission included in its own response to the Order-in-Council and to the studies from Needham in the United States, the studies that Dr. Jeffrey Eisenach has done for us would suggest that unbundling is going to create a tremendous economic strain on the way that content is created, monetized and delivered and enjoyed.

4766   So we are seeking to create the most likely circumstances that the outcomes can be as desired.

4767   Let me say there's a couple of truths about content that we must take into account and then -- which lead me to two bad outcomes of unbundling that we would like to avoid.

4768   First of all, the three truths are; one, there is a belief that you can only pay for the hits. The content business doesn't work that way. You have to produce a lot of bad shows to find the good show and nobody knows what is going to be a good show until they watch it and they fall in love with it and then it builds momentum.

4769   This idea that, I want to look in the rearview mirror and I only want to pay for the shows that I like after I know I like them, the system won't work that way. We also have to have adequate financing for the shows that don't succeed. And I think you've all heard the statistics of the number of shows that have to be produced and aired and commercially supported in order to find one show that is really commercially successful.

4770   The second truth about content is subscriber -- content costs are not variable with subscribers. So it costs me the same amount to produce Saving Hope, to produce Orphan Black, to produce the evening news if I deliver it to 10 million households or 10,000 households.

4771   And so -- and we've talked about our scaled disadvantage. In fact, versus the U.S., you know, it costs us the same amount to produce those shows as it does for Americans.

4772   When we recognize that as subscriber volume falls, costs don't go away. So we wind up faced with a binary decision. Should a specialty service stay in business or not? And if it does stay in business we simply want an environment that we can generate sufficient revenue to cover the costs of operating the channel.

4773   We don't want to be forced into a situation where, okay, we can keep the channel open but we have to keep cutting programming costs, keep running more repeats, you know, buy lesser quality shows, don't experiment.

4774   If a specialty channel is going to stay in business it's a binary decision. Then it needs to generate the revenues sufficient to cover its costs.

4775   And we are presenting a set of proposals that will see, in my estimation, about 20 or 25 of the top hundred specialty in channels in Canada disappear. So those will be the ones that don't have sufficient consumer demand and that under our affiliate negotiation where the affiliate says, "Hey, this doesn't have enough consumer demand for me to pay a penny or a nickel" and I say, "Well, guys, I can't keep it open for a nickel" then it's going to go away.

4776   But for those channels that should stay in business we want -- we want to find -- again, in an unprecedented way, the way to generate sufficient revenue.

4777   The last truth about content and about our system is that discoverability is a form of promotion that many people consider choice to be whenever I'm navigating my channels with my clicker. We want our Canadian content to be available, to be easily reachable and discoverability is a huge form of promotion and support for Canadian content.

4778   I just don't think if I didn't subscribe to Space, and I hear about this show Orphan Black and I hear people say, "Hey, Tatiana Maslany, she's pretty good. You ought to see the performance that she gives in this show". The amount of effort that it takes then to go, "Hmm, I have to go subscribe to Space. Let me call my provider. Let me find out how much it is. Let me change my packaging to find Orphan Black" I'm afraid that's a burden too large to motivate as lot of viewers to discover new shows. But today when you have these large packages discoverability occurs naturally, okay.

4779   So I've mentioned that we're not resisting and we're trying to find a way to enable this but we have to acknowledge those truths about a very big multibillion dollar business that has operated under those conditions since its beginning.

4780   So our proposal does this. I mentioned that for four years I've been wrestling with this topic and wrestling with it both at forums with you all and with my distribution partners. And I think we've improved our position such to alleviate all the concerns.

4781   Because we allow the BDU to offer a la carte or pick-and-pay, they now have an environment where they will never be denied and they will never deny their subscribers access to the service. So let me take TSN, Discovery, Bravo, Space, take any one of these.

4782   We negotiate under a penetration based rate card, because I'm going to assume and I hope I'm not flawed, that the Commission acknowledges as they have said in decisions before, that declining volume would support a flexible rate and flexible packaging could be tied to a flexible rate. Then the decision -- the rub always comes to, okay, how flexible? What's the curve look like?

4783   If we negotiate for TSN, for example, and we can't agree on the penetration curve, I have to offer that distributor an a la carte rate for TSN and they are -- they are completely protected from the risk of a failed negotiation. They only pay for that TSN a la carte service when a subscriber takes it, it's available to all their subscribers and they mark it up and they make the margin that they want on the price that I give them.

4784   And so I think by enabling a la carte we've really come a long way.

4785   Other criticisms we've heard in our packaging is a penetration floor. We've removed it.

4786   And so --

4787   COMMISSIONER MOLNAR: Mr. Crull, sorry.

4788   And I did want to give you an opportunity to speak to this because I think it is important. But I'm still trying to understand why a standstill or final offer arbitration doesn't fit --

4789   MR. CRULL: Right. So the two outcomes --

4790   COMMISSIONER MOLNAR: -- for a select number of BDUs.

4791   MR. CRULL: Yes, absolutely. So let me cover -- there's two outcomes that I think are really concerning to the system and then I'll say what challenges me about final offer arbitration.

4792   The two outcomes are, one, if we set a consumer price that doesn't reflect the true cost of the value tradeoff that the consumer makes when they go from a big bundle to a small bundles or to an a la carte. If we artificially set that price at retail, we're going to create a non-working marketplace. And instead of 15 or 20 of the top 100 services failing, we'll see 70 of them fail. And I have data and analysis to show that.

4793   So we don't want an artificial price at the consumer level on this choice tradeoff. So that means we have to get the wholesale price right because that's what, you know what influences the consumer price.

4794   And then the second thing may come across as a bit pedantic, but I don't want the process of unbundling and this really big sea change in the way we do business, I also don't want it to be a point where the BDUs just drive down their content costs, increase their margins and squeeze me. I want some fairness and some shared exposure in this process.

4795   And because of my experience with FOA I believe that the best way -- I want to be -- I want to be the one in control of this outcome. It's my destiny and I believe a commercial negotiation is the best way to do it.

4796   In the FOA process, the challenge is the distributors just don't have an incentive to negotiate. They just don't have an incentive to be active problem solvers in the negotiation because there is a backstop that once it goes far enough through the dispute they just know they are going to get the market price. They know they're going to get the best price that anybody else signed up for. And I see this in the behavior of how we work with them.

4797   I think that -- another big challenge I've had is the FOA process creates an environment where it's really hard for me to customize solutions for BDU's unique circumstances.

4798   I've had many of these conversations with distributors since the vertical integration hearing and the code and since our initial dispute where we start out with a really constructive outlook towards finding a solution and then I have to customize the deal to meet their unique circumstances. But as soon as I start to do that, I panic over the precedent that it sets for others and I say, "Well, gosh, in an FOA if I find the solution now I just know I'm going to get picked apart by, you know, all of the bad things that distributor B, C and D got under their unique circumstances are going to go to A".

4799   So I hope that that makes some sense. These are the flaws in FOA.

4800   And look -- when we look I'd like to ask Dr. Eisenach if you'll give us the chance. The U.S. market is amazingly effective, actually, at resolving these disputes with very little actual consumer impact and setting market prices. You know, you read the headlines and it makes you smile.

4801   But I'd like to ask Dr. Eisenach to share the real facts.

4802   DR. EISENACH: And I'll do so very briefly.

4803   First of all, let me just support what was just said with respect to the turmoil I think that you can expect in this market if you adopt any of these pick-and-pay options.

4804   The best evidence according to the estimates here are between 12 and 20 percent reduction in overall revenues. And given the fixed cost nature of the business you're talking about a larger impact than that on the number of channels. Frankly, I think at the end of the day that will be a bargain that most consumers, many consumers will deeply regret.

4805   In terms of the negotiating -- in negotiating context, in the U.S. you hear an awful lot about impasses but the fact of the matter is they are extraordinarily rare and tend to be extremely brief.

4806   In the case of one that was very widely publicized, some people in New York did not receive 13 minutes of the Oscar ceremony a couple of years ago. Well, that was 13 minutes of the Oscar ceremony. No one died and life went on for everyone involved.

4807   More broadly, when you look at the statistics, the odds of an individual not being able to choose to see the television programming of his or her choice as a result of a bargaining impasse in the United States is much less than the odds of the electricity going out or the cable system going out and not being able to see any programming. It's an extraordinarily rare circumstance.

4808   The other thing that we're finding is that programming which some programmers would like to think as "must have" programming, at the end of the day there are a couple of impasses that have gone on for a long time.

4809   And the impasses have gone on for a long time and consumers are not tearing down the walls. The fact of the matter is television is important but it's just television. So impasses are rare but even when they occur, impasses are not causing tremendous consumer damage given that they are extraordinarily rare.

4810   And the last thing is it does facilitate and particularly in this market, the kind of change that you're going to need to see. Channels which are currently viable are no longer going to be viable. Channels which may be less important today are going to become more important.

4811   Viewing share is going to go up, right?

4812   In a world in which we have 20 or 30 percent fewer channels the channels that do exist are going to have larger viewing shares. That's going to imply a different pricing regime. So you need to let that happen, I think, in a framework environment.

4813   COMMISSIONER MOLNAR: So how did you choose 500,000?

4814   MR. BIBIC: I'll take that one.

4815   So what we tried to do is put these kind of requirements on the business side and kind of put them together into a package that we think makes a lot of sense from --

4816   THE CHAIRPERSON: Could you approach the mic? I think that's the problem.

4817   MR. BIBIC: So that was the problem.

4818   THE CHAIRPERSON: It's a "lean forward" hearing instead of a "lean back" hearing.

--- Laughter

4819   MR. BIBIC: So we tried to take what Kevin and Dr. Eisenach have said and put together a package that we think is very coherent from a public policy and regulatory perspective. Here is how we approached it.

4820   Principle one: The code of commercial interaction remains in place. It's -- you know, modifications are made to it, including having it apply to all programming services including the U.S. services. That's there and that would guide all our interactions in the marketplace.

4821   And everyone could have access to it or refer to it in the event that an issue goes to dispute resolution or in an event that an issue like undue preference comes forward because the undue preference rule would always remain. That's the first point.

4822   The second point is we understand from a public policy perspective there is concern for independent programming access to the system and there is concern for smaller BDUs and from the point of view of concern around leverage and bargaining power.

4823   So from the perspective of the independent programmers we've put together some proposals. The linkage rule is one example and we endorse what the Commission has put forward in the working document. That would be one example.

4824   Plus, from an independent programmer perspective we said keep the dispute resolution rules there and the standstill. The standstill is important so that a large BDU doesn't exert leverage during a negotiation with a small programmer; the inverse for the smaller BDU.

4825   Now, we come to the large players in the marketplace. We're saying the large players ought to be able to sort these things out -- I'm not going to repeat Kevin's answer or Dr. Eisenach's answer -- they ought to be able to.

4826   There is a level of equal bargaining power there and the ultimate protection for the consumer because that's -- I know and we all should be concerned first and foremost with the consumer -- what's the ultimate protection? If the BDU doesn't like the price of TSN -- and I'll make a number up. It's $25 wholesale -- the BDU can take the product, put it up, standalone at $25 wholesale. So they mark it up. It's $40 retail.

4827   If nobody takes it then obviously the market discovers the price because Kevin goes out of business if nobody takes it out of $40 retail. So Kevin is going to have to lower his price, lower his price, lower his price to a point where people start taking it standalone and the BDU is incented to package it differently than only standalone.

4828   And through that mechanism -- in the meantime, the BDUs never disadvantage vis-à-vis the BDU competitor because both have access to it. And if one BDU happens to get a price of $5 wholesale but we're holding out for $25 wholesale for another competing BDU, the undue preference rule is there. That's why -- that's how we constructed the proposal that we have.

4829   MR. CRULL: And the 500,000 so you kind of say what percent of my business. In Mirko's circumstance the BDU does have TSN available. You know, they would, even though it's at a high price. It would be available to their subscribers but if it doesn't sell the smallest of those over 500,000 represent 10 percent of my business.

4830   And we kind of said, you know what? A BDU that represents 10 percent of my business has very significant leverage in a world where my margins average just over 20 percent.

4831   MR. BIBIC: And the last point, and then I will turn it over to you -- I apologize -- but paragraph 7 that's where we really wanted to make a point of putting it in our opening statement.

4832   We've been through these discussions within our negotiations and in final offer arbitration from the Commission. The irritants were always around BDUs saying programmers -- and not just Bell Media but programmers not allowing us to offer a service standalone.

4833   They're not permitting pick-a-packs. They're not permitting other flexible retail packaging. They are demanding packaging penetration and pay on commitments. Those, we are suggesting, be made clear in the Code of Conduct, you cannot do this, and so it's well understood.

4834   Now, the BDU can say, "I've got it. I can take your point. I don't like your price but I'm going to put up anyway. And Kevin, I will show you that with the price you want isn't working" if we get to that. We don't think we will.

4835   COMMISSIONER MOLNAR: I want to make sure I understand pay on commitments. So that means like a penetration rate card?

4836   Well, maybe you tell me what it means.

4837   MR. BIBIC: Well, back to the example of the U.S. specialty that I described earlier. So this is an example where they -- so penetration guarantees.

4838   So this is a specialty service. In that case has said, "Bell TV, you're only delivering my service to 50 percent of your subscriber base today. I want that to be 75 percent tomorrow". That's a penetration commitment, a penetration guarantee.

4839   They're also saying you're going to have to get it to 75 percent or you don't get my product. But even if you get it to 76 you're going to have to pay me for every single subscriber in your base even though they're not getting it. That's the pay on commitment.

4840   MR. CRULL: Now, so, I think it's interesting --

4841   COMMISSIONER MOLNAR: I think --

4842   MR. CRULL: -- that is a punitive. I've seen the word punitive used in terms of some of the rate cards. That is a punitive rate card, pay on 100 percent.

4843   You know, I'm a walk in the park compared to -- and by the way, that programming supplier is signing deals like that with Canadians because you know, because they have got the content and things of that sort. You would have a backstop. And now we would, if we implore you to apply the code to them as well, that will no longer exist.

4844   And, you know, my offers are not only nothing like that but are very reasonable.

4845   MR. OOSTERMAN: And I would say it's not just the programming. It's the fact that we, as a BDU, have no dispute resolutions that are effective. So it's another case of favouring foreign companies over domestic ones. I don't know when we got to that state, but it seems wrong.

4846   COMMISSIONER MOLNAR: I guess some of the other BDUs who may not be vertically-integrated holding some content that is valuable to you and are more than 500,000 will have an opportunity to comment on your proposals.

4847   So we'll just leave it right now.

4848   MR. CRULL: I can't -- I don't know if there will be more questions on this topic or are we finished with wholesale?

4849   COMMISSIONER MOLNAR: We're not finished.

4850   MR. CRULL: Okay, thank you.

4851   COMMISSIONER MOLNAR: Yeah.

4852   Well, let me ask just first specifically, in the working document it talks about certain provisions that would be essentially prohibited. You have indicated in your paragraph 7 that you agree that some of these things should be prohibited from programmer arrangements or wholesale arrangements. The list in Item number 6 in the working document includes things like: most favoured nation provisions, unreasonable volume-based rate cards, unreasonable penetration-based rate cards, grandfathering.

4853   What are your thoughts on that? Do you agree?

4854   MR. BIBIC: Well, the magic is in the word "unreasonable".

4855   COMMISSIONER MOLNAR: Unreasonable.

4856   MR. BIBIC: We certainly believe that penetration-based rate cards are appropriate. So if by unreasonable the Commission means things like, you know, packaging and penetration commitments and minimum revenue guarantees and the like, if that's what unreasonable means then the answer is, yes, paragraph 7 of our opening statement.

4857   If unreasonable means rate cannot fluctuate as a virtue of the volume a BDU delivers, then we would disagree because obviously, you know, as volume changes so should the wholesale unit rate.

4858   COMMISSIONER MOLNAR: Fair enough. So this --

4859   MR. BIBIC: And MFNs -- MFNs are a different issue.

4860   COMMISSIONER MOLNAR: -- would really be a case-by-case analysis.

4861   MR. BIBIC: Well, if the Commission went with unreasonable in the code, yes, it would be a case-by-case analysis and that makes sense.

4862   The Commission could also take the approach as it has in the code in some instances to say, for example, this kind of thing or that kind of thing. And in that case we would say, well, let's use the wording of something along the lines or the concepts in paragraph 7 of our opening statement.

4863   So it could be done either way, maybe both.

4864   COMMISSIONER MOLNAR: Okay. And so just -- I hate to go back to this but I want to understand it.

4865   For those where you would eliminate the standstill rule and final offer arbitration, the code would apply and their recourse if they did not -- if they felt something was unreasonable would be what?

4866   MR. BIBIC: Undue preference. An undue preference complaint could be filed and the Commission could look at the facts and determine if there was an undue preference granted by virtue of the principles outlined in the Code of Commercial Interaction.

4867   I don't think it would go there because I think there would be price discoverability in the market once a BDU put up a service on a standalone basis and could establish if there is demand at that price.

4868   MR. CRULL: I really believe that the ultimate recourse is the fact that they have it available on a pick-and-pay basis. So it really -- it creates a massive incentive.

4869   I have to tell you, I've laid awake at nights with, as we said, how do we enable -- how do we enable this level of unbundling?

4870   I absolutely in these negotiations, the fact that they have that available as pick-and-pay -- the ultimate -- the ultimate recourse that they have is to not offer the service and packages and let me struggle through the loss of the subscribers, the loss of the viewing and let me wrestle with is my price too high or to say, no, you know what? I'm not going to sell it that low.

4871   And that's the ultimate recourse.

4872   MR. GOLDSTEIN: And if I could just add to it, Mr. Bibic --

4873   COMMISSIONER MOLNAR: Well, that recourse has always been there. They can decide. There were discretionary services and they could decide not to.

4874   You know, let's use TSN as the example because you've read that this has come up a number of times as issues related to -- with some of the smaller BDUs as it regards achieving --

4875   MR. BIBIC: Commissioner Molnar, the --

4876   COMMISSIONER MOLNAR: -- achieving agreements.

4877   MR. BIBIC: Commissioner Molnar, this remedy that we're proposing was not available there today. Let me now put on a BDU hat.

4878   A BDU would tell you --

4879   COMMISSIONER MOLNAR: That you could chose not to carry it?

4880   MR. BIBIC: No, well, the BDU would tell you that in the old days a programmer -- it doesn't have to be Bell Media -- would tell me, the BDU, i.e. if I wanted that service, discretionary let's say, it either had to be in basic or it had to be in a highly penetrated tier.

4881   So you know, the BDU is saying, well, I've got to package it one way or the other. I can't -- if I don't want to package it the way it's being proposed with all these packaging restrictions I can't just take the service.

4882   I can't just say, "I'm going to take your service anyway and put it on a standalone basis and give me a right for that, a wholesale rate". Affiliated agreements didn't have that.

4883   COMMISSIONER MOLNAR: Right. Well --

4884   MR. CRULL: So two things are new. We're talking about Category A services. They couldn't drop those in the past.

4885   So no, they didn't have that leverage and those are -- those are really the services that we're here talking about because Category B services have ultimate flexibility as it is.

4886   So we're talking about Category A --

4887   COMMISSIONER MOLNAR: And Category C services?

4888   MR. CRULL: And Category -- we're talking about As and Cs. So that's fair.

4889   And then, secondly, Mirko's point about a la carte is, you know, that really solves -- it's the availability and not having to deny their customers that totally changes the negotiation framework.

4890   But, listen, here's what I'm trying to avoid. If you deem it's unreasonable -- and it would have come up in another question, I hope, so I have to -- if you deem, boy, this idea of advertising revenue recovery, oh --

4891   THE CHAIRPERSON: It might be more efficient if you just gave us your talking points that you slip in between the question.

4892   MR. CRULL: My notes, thank you. I thought submitting them would be a bit bold.

--- Laughter

4893   MR. CRULL: Let me take a service like Discovery.

4894   Once again, I've already said there are services that are going to die from this process. You know, from my services, BookTV, FashionTV. Probably much more, ESPN Classic, MuchVibe. There are services that have below a 3 AMA of viewing.

4895   But let me take one of the most popular services in the country: Discovery.

4896   Discovery generates subscriber revenue of $49 million, just in advertising --

4897   COMMISSIONER MOLNAR: I'm just going to follow up with the Chair, because we are talking here wholesale arrangements.

4898   MR. CRULL: Yes, that's right. And if this is deemed unreasonable, that I can't have a flexible curve that recovers revenue when penetration declines, then that's not reasonable.

4899   The cost of operating Discovery is much higher than the sub-revenue. If I can only recover sub-revenue, Discovery is out of business -- 70 of the top 100 channels are out of business.

4900   So, what you're going to hear from some others through the course of the week is, oh, my gosh, the PBR that Bell presents is so unreasonable, for this variety of reasons.

4901   And why I'm trying to go on the record with this is, no, we're trying to stay in business. We're trying to generate enough revenue to cover the costs of providing services that Canadians value, in an unprecedented and untested unbundling way.

4902   COMMISSIONER MOLNAR: So, you've brought up the point that this changes everything and negotiations will be very different and, really, everything needs to be renegotiated and you're focused, not on the bottom 10 percent, but on the large players and you have a little more room.

4903   What would you think about some kind of industry-wide wholesale rate that could be available to small players, to make it easier than negotiating with each?

4904   MR. CRULL: I'm not sure I understand.

4905   An industry -- so, you would price regulate the wholesale rate?

4906   COMMISSIONER MOLNAR: Well, we don't really have to price regulate it. You could set it, I suppose.

4907   MR. CRULL: Our belief is that the small guys will benefit from the big guys' negotiation leverage, in this case.

4908   So, I absolutely believe that the big guys are going to negotiate and we're going to arm-wrestle and we're going to find the price that works for everybody and then, through the process, since we're keeping standstill rules and FOA and everything else, the little guys are going to benefit from that.

4909   COMMISSIONER MOLNAR: Could you make it easy? Could you set a standard, just provide it to all of them, and they don't have to --

4910   MR. CRULL: Well, the trick will be this -- because I think that we'll wind up with a different -- Rogers will get a different-shaped deal than Telus, than Shaw will get, because their circumstances are each different. And so, I don't think that these things are as easy as to say, as a result of this, here's the rate.

4911   But I absolutely do believe that the little guys will benefit by the buying power and the negotiation leverage of the big guys as that framework and then, I'll offer it very voluntarily. I'll say, here's the kind of deal we did here, here's the kind of deal we did here, here's how it works for you, to the CCSA.

4912   MR. OOSTERMAN: Just as a BDU -- and I appreciate I'm a larger one, not a smaller one -- if we take an average approach, some players will get hurt badly and some players will be assisted to a greater extent. And so, it seems to me that each BDU -- I know for sure I do, I have my own circumstances and, therefore, I want to negotiate my own deal and I don't actually want to be guided by circumstances that have nothing to do with my own.

4913   COMMISSIONER MOLNAR: M'hmm. And I wasn't proposing you couldn't. I was just suggesting that maybe there's an easy way, given that everything's going to be shaken up, lots to redo and sort of a tough thing for the bottom end -- they're neither the priority, nor are they the ones that have a lot of bargaining power -- that maybe there might be a way of setting some kind of standard rates and giving it, making it available and --

4914   MR. BIBIC: I hadn't thought of that. So, why don't we come back in -- was it the 19th or final written?

4915   THE CHAIRPERSON: The 19th would be better.

4916   MR. BIBIC: Okay. We'll do that.

4917   COMMISSIONER MOLNAR: Okay. Just to be clear, and I think you said it, that you support the linkage of -- what is it? It's like two-to-one, the ratio of related to non-vertically-integrated or independent services. You're okay with that?

4918   MR. BIBIC: Yes, we're okay with item 7 in the working document.

4919   COMMISSIONER MOLNAR: Okay.

4920   MR. BIBIC: Yes, that's the one.

4921   COMMISSIONER MOLNAR: Okay. Thanks.

4922   My last area, and it relates to cancellation fees on your BDU services. If I understand -- maybe just please confirm, first, do your BDU services have a 30-day cancellation fee policy?

4923   MR. BIBIC: Yes.

4924   COMMISSIONER MOLNAR: Could you tell us what's the rationale for that policy?

4925   MR. BIBIC: I think we have it in page 143 of our submission. So, the answer to question 77.

4926   One of the reasons is around -- well, let me just go there so I get it right.

4927   COMMISSIONER MOLNAR: Well, if you're going to do nothing more, we'll promise to go read that page.

4928   MR. BIBIC: Well, there's one aspect that's missing in the answer. So, that's what I -- I'm not going to reread everything.

4929   So, there's a distant television signal retransmission tariff. And the way it works is it calculates -- this is what's not in the answer -- it calculates the number of subs under the tariff, you're calculating the number of subs at the end of the month, and what you're doing is you're making a payment at the end of the following month.

4930   So, let's say you have 100 subscribers on September 30th but you only have 97 subscribers on October 31st. You're paying for three subscribers as a BDU more than you actually have.

4931   So, it's a question of getting all the timing right when a customer just leaves, you know mid-month --

4932   COMMISSIONER MOLNAR: So, if you end up at the end of the month with 103 because you've won three of them from Rogers --

4933   MR. BIBIC: It could go the other way. Absolutely. So, it's just working through that idea --

4934   COMMISSIONER MOLNAR: The dynamics of a competitive market. Sometimes you have three more and sometimes you have three less?

4935   MR. BIBIC: It could happen.

4936   COMMISSIONER MOLNAR: Okay. And everybody's going to charge the 90-day cancellation, even though --

4937   MR. BIBIC: Well, it's 30.

4938   COMMISSIONER MOLNAR: Oh, yes. Right. Thirty.

4939   Could you provide, as an undertaking the following -- and I'll just read this out -- provide an itemized list of costs that you seek to recover with your 30-day cancellation, including a total of these costs for the broadcast years 2009-2010 to 2013-14; provide the total revenue generated per broadcast year from these 30-day cancellation fees for the broadcast years 2009-2010 to 2013-14; and, in the event that the revenues generated from the 30-day cancellation fee are greater than the costs that are sought to be recovered, an explanation for why?

Undertaking

4940   MR. BIBIC: Yes.

4941   COMMISSIONER MOLNAR: Thank you.

4942   Those are all my questions.

4943   THE CHAIRPERSON: Of course, that question assumes that you aren't going to take the position that we could remove the 30-day switch provision in your relationship with the subscribers, which a number of subscribers have raised concerns about.

4944   MR. BIBIC: Understood.

4945   THE CHAIRPERSON: Okay. And lining it up, perhaps, with what's in the wireless code, since there's a lot of bundling occurring, as well.

4946   A dynamic marketplace allows a subscriber to switch the next day. I know you want to convince them to stay on with you. You either can answer the question in detail and we'll decide later or you could agree perhaps --

4947   MR. BIBIC: No, no, that -- again, the reason I looked quizzically when you made the point is because I did read some submissions that suggested that, you know, in a bundled world, it makes it difficult for the consumer to leave, because I'm affecting my bundle discount if I choose to leave for one or more products, and the way we structure our bundle discounts, that doesn't actually happen.

4948   THE CHAIRPERSON: In your case.

4949   MR. BIBIC: In our case, yes. If you leave for TV, you're not going to lose your discount from your other products, so long as you actually have two, because that's --

4950   THE CHAIRPERSON: The consumer issue here, and you saw my conversation with PIAC the other day, is that the challenge is sometimes if you are, for whatever reason, wanting to leave one BDU to go to another, you might be stuck having to pay for two, for a 30-day period.

4951   MR. BIBIC: That I understand, if that's what you were getting at, if I understood the request, I don't want to answer. We want to think it through.

4952   But I thought you were going at the interlinkages between the bundled discounts and in our case, there are no interlinkages.

4953   THE CHAIRPERSON: No. I was making the point that the wireless code might be the standard now.

4954   MR. BIBIC: I understand.

4955   THE CHAIRPERSON: Okay. Thank you.

4956   The Vice-Chair will have some questions for you.

4957   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

4958   First of all, I want to thank and congratulate my colleague for covering an awful lot of racetrack with you and most ably done, as well. I think I share with my colleagues in telling you that we're happy it wasn't one of us that had to take on the task of dealing with so many issues with one of the most important players in the Canadian system.

4959   Maybe we'll go back-to-front, in terms of the ground that was covered.

4960   Before we sort of get to that, maybe sort of on the philosophical level, and we'll give Mr. Crull a chance to pull out one of his notes that I'm sure is appropriate.

4961   But in listening to you, some Canadians may sort of come with the feeling, at the end of sort of three hours of examination, that you, notwithstanding all the hard work you put into running Bell Media and Bell Distribution on a daily basis, but the feeling might be that you expect the Commission and the system -- or you feel they have the obligation to continue to keep you whole. And we talked about dynamic markets and we talked about changing dynamics of media and distribution.

4962   At the end of the day, how would you respond to someone that would sort of come to you and say, you know what, you guys sound like nothing should ever change and you should just keep on keeping business as usual and the consumers are just going to have to go into their pocket and pay whatever they have to pay to make sure that Bell, and perhaps other companies, continue to remain whole?

4963   MR. OOSTERMAN: I would actually say our proposal is anything but a request for standing still. I think we recognize profound behaviour --

4964   COMMISSIONER PENTEFOUNTAS: Keeping you whole, more than standing still.

4965   MR. OOSTERMAN: They are not keeping us whole, either. I think what we're trying to do is protect the Canadian system.

4966   And, again, it comes down to what is it that you're trying to accomplish. Because any one singular item is relatively easy to achieve. To get the balance right is much more difficult. That's why we don't envy you the work you have ahead of you.

4967   But, you know, there is an absolute change in consumer behaviour. They don't care about what technology is used to deliver the program to them. They just want to watch the program.

4968   In that environment, we have to enable all those choices -- and that only happens if the costs that each of those choices faces, from a regulatory perspective, is relatively similar, if not identical. It's got to be a level playing field.

4969   It's driven by, not our desire for that, it's driven by consumers' desire for that.

4970   And so, you cannot have an environment where, as we talked about before, I watched a movie on Netflix, there is no CPE; if I watched the movie on my set-top box, there is. It just defies logic. You can't have an environment where U.S. programmers have enormous leverage over Canadian purchasers of content and the reverse isn't true. There are no remedies available. You have to create an environment where the rules are equal for all.

4971   So, we've tried to balance that and said, look, our proposal is this: make consumers have the ultimate in choice by making every program not available in basic, available on a pick-and-pay basis. That has profound implications to us. There are absolutely going to be revenue deteriorations for Bell. And we think that every possible outcome of this hearing will result in some negative impact to some players in the system, if not all, but it does the best job of balancing all the conflicting and competing interests to the best of our ability.

4972   MR. CRULL: I think it would be a really unfortunate conclusion to look at this. I think everything that we're saying is not "keep us whole or protect us", it's "don't make things worse".

4973   What we are trying to do is say, let us help you deliver your vision in a way that doesn't, frankly, destroy our business.

4974   And we also do, often, have to step back and acknowledge there's some unique things that haven't changed about our system that are still in place. For all the things that have changed, I think there's many more things that haven't changed about the Canadian broadcasting system.

4975   Local TV and specialty TV, I just want the ability to operate where I can serve viewers and generate enough revenue to cover our costs. And I think that's what we've outlined.

4976   COMMISSIONER PENTEFOUNTAS: We're kind of moving around.

4977   Before we get to local TV, Mr. Oosterman, you talked about the challenges and it wasn't long before Netflix came to the fore, as well. Many have put forth the idea of a skinny basic, or there may be other regulatory measures that can come to the fore that can help offset the challenge for foreign OTTs to the system.

4978   I'm not going to sort of steal my Chairman's big question, but perhaps if it's not going to be a skinny basic, what would be the greatest tool, regulatory tool, that can be used to offset any challenges that may come from foreign OTT services?

4979   MR. OOSTERMAN: Wow. In the Canadian environment,we're disadvantaged from a scale perspective to a meaningful way. So, what is it that the Canadian environment can deliver as a competitive advantage? And it's clearly the production and delivery of Canadian content to Canadian consumers.

4980   So, one of the things that is important, I think, in our overall submission, is the protection of that.

4981   I don't know what the Chairman's question will be, but if can I just get back to the whole question of over-the-top. Because when we talk about equality, we're not just talking about equality between U.S. and Canadian players.

4982   If consumers are absolutely ambivalent about the delivery platform used to get the signal to the consumer, then we need neutrality there, too.

4983   And so, let's just play it out again. I'm sitting in my den. I'm watching "The Usual Suspects". If I watch it on Netflix, no CPE; if I watch it on a set-top box, yes, CPE. And I think there was a suggestion over the last couple of days, and I may have misunderstood, well, why don't you guys just do the same thing? Do it over the top and then you don't have to worry CPE.

4984   Is that really an outcome that's positive for Canada, if everybody did that -- 4 billion of CPE of gone? Is that good for Canada? It's a question in front of you.

4985   I would suggest, no, it's not.

4986   I think, no doubt, if we take out 4 billion of regulatory contributions, there is an opportunity lower retail price points. But what do we give up? A tremendous loss to our culture, to our way of life, to all the things we stand for as a nation. I think that would be bad.

4987   COMMISSIONER PENTEFOUNTAS: To that point, to answer a question that Mr. Mirko put forward, in terms of item 10 or prop or, prop 10, I think -- I don't know how it was read or not read, and I took a look at it again. But I don't think the proposition intended to bring into the regulatory -- the non-exempt world the idea of an unauthenticated OTT -- unauthenticated OTT revenues.

4988   MR. BIBIC: Here's where we differ, I guess, because we read this question knowing that one of our strategies to meet the foreign OTT platform, or competitors, head-on is to offer our content, including, obviously, first and foremost, our Canadian content, in a multiplatform way but generated from the ecosystem.

4989   So, we will have Canadian content delivered in the traditional generate revenue.

4990   We will then, for sure, make it available in a multiplatform way -- it could be long-tail content, too -- and put together a full offering that competes head-on with that, and that will be revenues generated from an exempt platform and that would be subject to the CPE and the one wouldn't, when we're creating actually to go head-to-head. It's a different way of going head-to-head, but we're going head-to-head, and that's why we would offer that product. Yet, one would be subject to the permanent structural regulatory contribution, the other not.

4991   COMMISSIONER PENTEFOUNTAS: And if the unauthenticated OTT service were part of the structured regulatory service?

4992   MR. BIBIC: Ours would be -- what we were talking about, this morning, in terms of our current vision, is authenticated.

4993   COMMISSIONER PENTEFOUNTAS: I understand.

4994   MR. BIBIC: And we think that that's going to -- I think we believe it should be our decision to decide, do we go head-to-head with a foreign unauthenticated service, with a Canadian unauthenticated service, which could be Shomi, or an authenticated one? That's a judgement for our own players to make.

4995   But if Bell takes the view that the authenticated one is the way to go, because we actually want to preserve the ecosystem and use that as the leverage point in a comparative --

4996   COMMISSIONER PENTEFOUNTAS: I understand. But you could do both, Mr. Bibic.

4997   MR. BIBIC: -- scale is not going to be our advantage.

4998   COMMISSIONER PENTEFOUNTAS: You can do, Mr. Bibic.

4999   MR. BIBIC: How?

5000   COMMISSIONER PENTEFOUNTAS: You can do the authenticated and the non-authenticated, and the non-authenticated will be exempt. And you can bring all the power to bear of monetizing that content, most of it will be long tail, on numerous platforms before you get to the unauthenticated OTT platform.

5001   MR. OOSTERMAN: I get very confused by the use of the word "authenticated".

5002   "Authenticated" means I've paid for the content, as a consumer.

5003   COMMISSIONER PENTEFOUNTAS: I understand that.

5004   MR. OOSTERMAN: Okay. So, there's no difference.

5005   COMMISSIONER PENTEFOUNTAS: In the same way -- and we'll use the example of Netflix -- Netflix charges $8.00 a month or $9.00 a month, Bell would be able to charge $9.00 a month.

5006   MR. OOSTERMAN: Right. But if we did that 100 percent of the time, no -- I think I understood what you said -- no CPE.

5007   Would that be good for Canada?

5008   COMMISSIONER PENTEFOUNTAS: It wouldn't be. Obviously not.

5009   MR. OOSTERMAN: So, our proposal makes all those trade-offs and tries to come up with the best possible solution to still give us a chance to complete, but protect the Canadian environment.

5010   MR. CRULL: I think, Mr. Vice-Chair, we've not said it well to get the point across.

5011   We can't, frankly, we can't beat them at their game because -- look at the example of "Gotham". Overwhelmingly, if we're going to complete in an unauthenticated over-the-top service, it's going to be led by American services and the ones that are the most popular, you really do wind up, in that case, with just buy the hits. They draft on the promotion of the linear system and so, we can't outbid them for -- "Gotham" is going to be the biggest promoted show this fall season and they just paid $4.2 million an episode for the global rights. We can't beat them at their game.

5012   Our game is to use the system, the system as it is today, and build all the multiplatform and all the consumer benefits on top of that.

5013   And, look, we'll dabble in their game, but truly, it's a dabble. They have a very different business model than we have and we're both going to try and serve consumers.

5014   COMMISSIONER PENTEFOUNTAS: We'll maybe sort of switch gears.

5015   What does paying for hits have to do with the standstill clause? And how does the standstill clause impede you from paying for hits?

5016   MR. CRULL: Great question.

5017   What I've is if a channel is only selected by 30 percent of Canadians, well, then, it's obviously not popular enough to warrant a certain rate that we're asking for. And that channel, at that time, may not have the hit that is going to drive its penetration or warrant its justification. So, you --

5018   COMMISSIONER PENTEFOUNTAS: Back to standstill, though.

5019   MR. CRULL: Yes, because I have to be able to negotiate the rate to operate the channel. Without a --

5020   COMMISSIONER PENTEFOUNTAS: You can negotiate the rate.

5021   MR. CRULL: -- standstill, with FOA setting my prices, then there's not a market that is going to pay for the content that both succeeds and fails.

5022   COMMISSIONER PENTEFOUNTAS: I'm not sure I follow.

5023   MR. OOSTERMAN: Let me give you a more practical example.

5024   I negotiated with one of our suppliers a rate for a product. After we signed the deal, that supplier made that product available in a different way that practically makes it very difficult for me to monetize it.

5025   If I want to, as a response, say, okay, then, I'm not carrying it any more, I actually can't. Because they'd just invoke a standstill.

5026   So, I have no negotiating leverage at all when they've stripped my ability to monetize a specific bit of content that I've paid for.

5027   COMMISSIONER PENTEFOUNTAS: I'm not going to go into your sort of agreements and --

5028   MR. OOSTERMAN: No.

5029   COMMISSIONER PENTEFOUNTAS: -- whether or not they're properly negotiated or not and what rights you acquired or didn't acquire.

5030   The point is that you're sharing the risk in a standstill situation. If you're the broadcaster, your product stays on the air, but you don't know what you're going to be getting for it. If you're the distributor, the product stays on the air and you don't know what you're going to be getting it for either.

5031   And to Mr. Crull's point, the distributor is just as much at risk as you are because he's charging his subscribers a rate. He doesn't know if that's the appropriate rate because, in a year's time, after an FOA process, that rate may be different and retroactivity would apply.

5032   So, I don't see where standstill does not allow you to fully monetize the value of your product.

5033   MR. BIBIC: No access rights anymore under this proposed model of the Commission's, so the BDU says, Ha, standstill, I don't like the programmer's price, but I still get to carry the product. Inevitably standstill leads to coming to you for assistance to resolve it. I mean --

5034   COMMISSIONER PENTEFOUNTAS: As a last resort.

5035   MR. BIBIC: Yeah, that's fine. I mean --

5036   COMMISSIONER PENTEFOUNTAS: M'hmm.

5037   MR. BIBIC: -- I guess. We don't like it, but I suppose the product is there. It's available. You resolve the price, it's decided.

5038   This issue of retroactivity, yeah, you will get paid retroactively, but with no access rights, the BDU then says, I don't like the price. I walk.

5039   It's not category A, category -- there's not category A anymore, right? BDU doesn't have an obligation to carry anymore.

5040   COMMISSIONER PENTEFOUNTAS: Yeah, but you're signing an affiliation agreement. There's a term to that affiliation agreement.

5041   MR. BIBIC: No, there's no affiliation agreement anymore. We've now not -- the agreement's expired. We no longer have a rate, so we've having a dispute over the rate.

5042   COMMISSIONER PENTEFOUNTAS: Yeah, we are.

5043   MR. BIBIC: One party invokes the standstill. The Commission resolves it. The BDU walks away if the BDU does not like the price.

5044   COMMISSIONER PENTEFOUNTAS: And the term wouldn't be part of the resolution process, is that...?

5045   MR. BIBIC: The BDU can walk away. There's no access rights, unless -- unless -- what the question suggest is: by virtue of invoking the standstill, a service with no access rights -- like today a category B or tomorrow every service --

5046   COMMISSIONER PENTEFOUNTAS: M'hmm.

5047   MR. BIBIC: -- a service with no access rights could invoke the standstill, and through the invocation of the standstill gets a rate from the Commission, and is bound by that, then what you've essentially done through dispute resolution is converted all services to services with access rights --

5048   COMMISSIONER PENTEFOUNTAS: Yes.

5049   MR. BIBIC: -- because the first thing I'm going to do is say, Ha, ha, standstill, I'm going to the Commission. I may get a crappy rate, but I'm going to be on the system.

5050   COMMISSIONER PENTEFOUNTAS: That would still be the case with BDUs under 500 subs under --

5051   MR. BIBIC: That's correct -- well --

5052   COMMISSIONER PENTEFOUNTAS: -- your proposition.

5053   MR. BIBIC: -- unless we resolve that mechanism. But, yes. But then -- then -- and we're cognizant of it, but we said, Okay, let's take a step back. Concerns about leverage and access for independents, let's do it.

5054   COMMISSIONER PENTEFOUNTAS: Mr. Crull, you also made a pretty tight link between MFN and FOA, in that given that there's an FOA process that's available any deal you sign you've got to take that into consideration: that down the road that may be put back in your face, and say, Well, this is the deal. You signed here.

5055   You don't see a way around that in your negotiations? I mean the deal you would sign with x BDU may not -- there other things to be taken into consideration, all kinds of other programming, as you mentioned, penetration and other elements. Do you really think that it is such -- it's so easy to take one deal with one BDU and apply it to another BDU going forward? Because at that point you're getting into a standarized rate, as was asked by my colleague.

5056   MR. CRULL: Well, the circumstances just differ. I think the point I was making is -- you know, we've seen it, and we've even seen it in some of our disputes that we've participated in, that there's a tendency to pick the lowest common denominator of each of the marketplace deals, and that doesn't work for us. Now you're saying, Wait a minute, trust us, we won't allow that to happen. And that may be the case, but it's just it's such a -- it's such an unknown.

5057   Look, the studies that have been done on unbundling actually assume marketplace negotiations, where the interests of the programmer in continuing to cover the cost in a declining penetration world have -- those interests are served and you still have the outcomes that the studies promote.

5058   I won't rehash, but I said I -- the two things that I really fear, unless -- unless we are in control of the structure, I really fear an artificial retail price for the value trade-off of unbundling, and that won't last, or I just feel a value transfer. And, frankly, I've seen it happen. I've provided some evidence that we have a value transfer from content owners to content distributors in Canada. This is a great opportunity to perpetuate that, and I'd rather avoid that.

5059   COMMISSIONER PENTEFOUNTAS: Back to PNI.

5060   We talked about -- you're obviously not that hot on the idea of a subcategory for children's programming, or it's just not -- Mr. Goldstein.

5061   MR. GOLDSTEIN: It's not that we're not hot on the idea, it's just we are not -- we don't own any specialty services that compete in that area or have genres in that area. We don't have a problem if children's programming is included in the list. Ultimately, the broadcasters decide which of those categories they want to access.

5062   So we don't have a problem with that.

5063   COMMISSIONER PENTEFOUNTAS: I was talking about OTA services, in terms of creating --

5064   MR. GOLDSTEIN: We're not in favour of a situation where OTA services have a mandatory spend or exhibition requirement relating to children's programming.

5065   COMMISSIONER PENTEFOUNTAS: To children's programming, okay.

5066   Would that also apply to scripted content?

5067   MR. GOLDSTEIN: Well, there's not that many categories left, so...the vast majority of our PNI spend goes to scripted programming, so...but we do have a -- we still think it should be within the discretion of the broadcaster to formulate their programming strategy and plans on how they meet their PNI obligations. Traditionally, for us, that's been -- that's been unscripted.

5068   I'll pass -- toss it over to maybe Tracey or Corrie to talk more about that.

5069   MS COE: Sure, I can jump in on that.

5070   Kevin's right when he says that the vast majority of our PNI is unscripted programming, both for CTV, the conventional service, and for specialties, but we do a lot of factual programming, obviously, for a couple of our specialties, being Discovery, primarily, and then sprinkled in with some of the others.

5071   So I think it would --

5072   COMMISSIONER PENTEFOUNTAS: I get it.

5073   MS COE: Probably Kevin would want me to say it would depend on what level you are looking to, in terms of ascribing a certain proportion to PNI --

5074   COMMISSIONER PENTEFOUNTAS: You're best to say what Kevin would want you to say.

--- Laughter

5075   COMMISSIONER PENTEFOUNTAS: No one will hold it against you.

5076   Ms Coe, I have your big budget proposition proposal. Who decides who gets that funding? What kind of structure would you put in place there?

5077   MS COE: Well, basically, the parameter that we set was we felt in the English market a base level of $1.75 million budget per episode would be a useful sort of --

5078   COMMISSIONER PENTEFOUNTAS: Floor.

5079   MS COE: -- floor to start from --

5080   COMMISSIONER PENTEFOUNTAS: Right.

5081   MS COE: -- and then at that point we suggested it could be administered by whoever, as long as the money was kind of kept separate and discrete. So the worry was if it went into the Canada Media Fund, which is a terrific institution, it might get diluted with some of their other funding envelopes, et cetera.

5082   But whether it was that fund or another fund or something new set up, as long as it were kept discretely just for this particular problem, we thought that would be effective. And whether it was a first-come, first-serve or whether it was, you know, some other sort of decision-making --

5083   COMMISSIONER PENTEFOUNTAS: I'm not sure first-come, first-served is perhaps the best way to go, but --

5084   MS COE: Maybe.

5085   COMMISSIONER PENTEFOUNTAS: And that would be triggered above and beyond your CPE spend or your PNI spend, obviously, would be the equivalent -- they would be sort of --

5086   MS COE: I'm not following.

5087   COMMISSIONER PENTEFOUNTAS: -- moneys that you would draw out of the CMF --

5088   MS COE: Yes. Yeah.

5089   COMMISSIONER PENTEFOUNTAS: --the equivalent. Yeah.

5090   MS COE: Yes.

5091   COMMISSIONER PENTEFOUNTAS: Okay.

5092   Mr. Crull, your local speciality, how does that differ from value-for-signal?

5093   MR. BIBIC: The services are not available over-the-air, so you don't run into the issue of the Copyright Act and the --

5094   COMMISSIONER PENTEFOUNTAS: That's your --

5095   MR. BIBIC: Yeah.

5096   COMMISSIONER PENTEFOUNTAS: -- your hook?

5097   MR. GOLDSTEIN: There's actually another key difference also -- sorry, just to add to what Mirko was saying -- in that the value-for-signal regime envisioned a situation where, if the parties didn't reach an agreement, the service could be pulled, essentially, and you wouldn't deal with it. Our model doesn't envision that. It's a must-carry service in all instances, with an FOA backstop.

5098   COMMISSIONER PENTEFOUNTAS: Yeah, because it looks like speciality with must-carry sort of. It looks like 9(1)(h) without a preset rate --

5099   MR. BIBIC: Yeah.

5100   COMMISSIONER PENTEFOUNTAS: -- would that be a good way of qualifying it?

5101   MR. BIBIC: Yeah.

5102   COMMISSIONER PENTEFOUNTAS: I mean we're not --

5103   MR. BIBIC: I didn't conceive it that way --

5104   COMMISSIONER PENTEFOUNTAS: You don't have to beat around the bush --

5105   MR. BIBIC: -- but that's correct, 9(1)(a), so it would be a mandatory distribution order to be in basic, and then the marketplace would set the rate, and then dispute resolution, under our proposal, would apply to these because of their nature.

5106   COMMISSIONER PENTEFOUNTAS: Because it looks awful like a value-for-signal fine --

5107   MR. BIBIC: Well, again. But --

5108   COMMISSIONER PENTEFOUNTAS: -- but that's fine, in different clothing.

5109   MR. BIBIC: Yeah, but there's a -- there was a clear legal issue that, you know, vacated the value-for-signal decision, which would not be present if the over-the-air transmitters were no longer in place.

5110   COMMISSIONER PENTEFOUNTAS: That's the way of getting around it --

5111   MR. BIBIC: So there's the legal --

5112   COMMISSIONER PENTEFOUNTAS: -- from your perspective.

5113   MR. BIBIC: There's a legal issue, which I answered, and Kevin gave a policy answer, which is we still gain -- you know, ensure access for everyone in the basic package.

5114   COMMISSIONER PENTEFOUNTAS: Yeah.

5115   MR. BIBIC: That's the policy side of it.

5116   COMMISSIONER PENTEFOUNTAS: I think I've heard from you, Mr. Crull, in the past, and correct me if I'm wrong, that Cancon is 30 points off the top loser from the get-go.

5117   Is that still the case? Can we make a general statement to that effect: that Canadian content is a money-losing enterprise?

5118   MR. CRULL: No, I don't think that we can generalize to that. I think --

5119   COMMISSIONER PENTEFOUNTAS: Are we closing the gap? I mean has something changed in the past few years?

5120   MR. CRULL: Well, you know what, boy, I have to toss it to Corrie.

5121   We do have -- I would say that we have a tremendous success rate, that actually we're very proud of, on a lot of our scripted, big Canadian productions, and break even is more of the zone --

5122   COMMISSIONER PENTEFOUNTAS: And are we breaking even on that these days?

5123   MR. CRULL: -- that they're in. Because of the long tail stuff, that's what really enables it to. You definitely don't break even in the few years.

5124   Corrie.

5125   MS COE: Sure.

5126   I actually agree with Kevin. There's a couple of our scripted, particularly on CTV, that get to that sort of break-even place more quickly, and that's part of why we're so concerned about the conventional side of things. Because not only do we get way bigger audiences as far as scripted on that service, but it also, because of advertising and because of -- related to those numbers, we're able to get with a few repeats much closer to that break-even mark than we're able to do on a specialty service, where the costs of production are the same, but the numbers are way smaller.

5127   So with repeats and with those more successful numbers that we've been getting for our projects, and that's largely due to the incredible quality from some of our producing friends --

5128   COMMISSIONER PENTEFOUNTAS: Yeah.

5129   MS COE: -- it's starting -- it feels like it's starting to turn a bit of corner, so it's kind of exciting.

5130   COMMISSIONER PENTEFOUNTAS: And a U.S. network deal would be essential to breaking even?

5131   MS COE: Well, to getting the financing in the first place, you do need to have a broadcaster from outside of Canada in just about every instance I can think of to actually close that financing gap.

5132   COMMISSIONER PENTEFOUNTAS: And when the broadcaster drops you, as I think was the case with Saving Hope -- tremendously successful in Canada, not as successful south of the border -- can you still get close to breaking even without that revenue?

5133   MR. CRULL: Well, we actually -- in that case, we topped up our investment to keep the show alive --

5134   COMMISSIONER PENTEFOUNTAS: Yeah, I know.

5135   MR. CRULL: -- and we've done that. We can't always do that.

5136   MS COE: Yeah.

5137   MR. CRULL: But in that instance, we did, and I think that it's repicked up.

5138   MS COE: Yeah, it kind of hurt our margin quite a bit. That set me back, so my conversation with my bosses were a less happy there for a while, but I still have hopes that, with time, it will. Because it's definitely a beloved program, and our audiences love it, and I think we'll be able to repeat it enough to get it there.

5139   COMMISSIONER PENTEFOUNTAS: Okay.

5140   Mr. Oosterman, we talked about how difficult negotiations often are with the U.S. broadcast undertakings.

5141   What if, at the end of the day, they're not happy with any conditions that may or may not be imposed and say, You know, what, we're picking up our nicks and nacks and we're heading home, what would the consumers' reaction be then when some of these products are no longer available?

5142   MR. OOSTERMAN: Well, the practical reality is that the only thing that would happen is they'd be no longer available through linear television --

5143   COMMISSIONER PENTEFOUNTAS: Right. So still --

5144   MR. OOSTERMAN: -- to the consumer. Right.

5145   COMMISSIONER PENTEFOUNTAS: There'd be other ways of accessing that quantity --

5146   MR. OOSTERMAN: Absolutely.

5147   COMMISSIONER PENTEFOUNTAS: -- and those channels, right?

5148   MR. OOSTERMAN: Yes.

5149   COMMISSIONER PENTEFOUNTAS: Okay.

5150   MR. CRULL: You may see, Mr. Vice-Chair, that then they come -- bring that content to our Canadian services and license it for our services. So there'd be many different options, I think, to get the content into the market.

5151   COMMISSIONER PENTEFOUNTAS: Oh, that's interesting. That would be advantageous, would it not, to Canadian broadcasters --

5152   MR. CRULL: It would.

5153   COMMISSIONER PENTEFOUNTAS: -- and the Canadian system? It would?

5154   MR. CRULL: It would.

5155   COMMISSIONER PENTEFOUNTAS: Yeah.

5156   You want full discretionary powers on your basic package saved for mandating the exclusion of 4+1s in that basic?

5157   MR. OOSTERMAN: That's correct.

5158   COMMISSIONER PENTEFOUNTAS: Is that correct?

5159   MR. OOSTERMAN: Yes.

5160   COMMISSIONER PENTEFOUNTAS: Okay.

5161   MR. OOSTERMAN: And the specific reason for excluding the 4+1 is to protect the Canadian system.

5162   COMMISSIONER PENTEFOUNTAS: Yeah, and to make it easier for Canadians to find --

5163   MR. OOSTERMAN: Right.

5164   COMMISSIONER PENTEFOUNTAS: -- that content on Canadian OTAs --

5165   MR. OOSTERMAN: Right.

5166   COMMISSIONER PENTEFOUNTAS: -- as an example?

5167   MR. OOSTERMAN: Again, our proposals suggests make them available on a discretionary basis or a pick-and-pay basis.

5168   COMMISSIONER PENTEFOUNTAS: And if that wasn't mandated, you wouldn't have the strength to do it on your own, take them out of basic?

5169   MR. OOSTERMAN: I don't think so. It'd be difficult.

5170   COMMISSIONER PENTEFOUNTAS: And got to be followed --

5171   MR. BIBIC: As soon as --

5172   COMMISSIONER PENTEFOUNTAS: -- by someone.

5173   MR. BIBIC: As soon as one --

5174   COMMISSIONER PENTEFOUNTAS: Or --

5175   MR. OOSTERMAN: Yeah.

5176   MR. BIBIC: -- BDU puts them in there --

5177   MR. OOSTERMAN: It's over.

5178   MR. BIBIC: -- it's over. And there are BDUs who really cling to having U.S. 4+1s in basic, and we think -- like, I mean, at some point these -- and we've explored a lot today, and, you know, it's very important, obviously, that an individual consumer says -- if an individual consumer wants the ability to select and the ability to manage their budget and the ability to reduce their spend, that's important for that individual.

5179   From a programmer or from a BDU perspective, we have positions, and we try to construct it. Obviously, as we construct our positions, we're obviously interested in making sure that, you know, our interests are looked out after. That's normal. At some point, though, we also have to take a step back and say, the system is not just about Mr. Pentefountas --

5180   MR. OOSTERMAN: Right.

5181   MR. BIBIC: -- or Bell TV. It's a system for a reason.

5182   And we think in the system, as we look forward, actually Canadian programming and Canadian services ought to have better placement and better pride of place than U.S. channels, without denying the customer, because the content will be there either on a discretionary tier, as an individual show --

5183   MR. OOSTERMAN: Okay.

5184   COMMISSIONER PENTEFOUNTAS: Right.

5185   MR. BIBIC: -- or otherwise. It'll be there.

5186   COMMISSIONER PENTEFOUNTAS: And 4+1s on a discretionary tier, would the retracked-consent-fee argument gain strength north or the border? Or is that strictly a copyright issue and --

5187   MR. GOLDSTEIN: I don't know.

5188   COMMISSIONER PENTEFOUNTAS: -- and it wouldn't come --

5189   MR. GOLDSTEIN: To be honest, I don't even think it's a legal issue. I think it's a red herring. The services will continue to be available over the air. The act is entirely crystal clear that the Commission has the ability to dictate the terms under which foreign programming services are carried by BDUs. If they're carried on a discretionary basis versus on basic --

5190   COMMISSIONER PENTEFOUNTAS: Doesn't change anything.

5191   MR. GOLDSTEIN: -- doesn't change anything.

5192   COMMISSIONER PENTEFOUNTAS: No. I just wanted your opinion that.

5193   Your basic package right now in Quebec, I think the skinniest basic is at, someone told us yesterday, $30-some.

--- Off microphone

5194   MR. BIBIC: Excuse me, $26.95 in Quebec, both on satellite and Fibe. That's the cost of basic.

5195   MR. CRULL: That price 10 years ago was $25, so...

5196   COMMISSIONER PENTEFOUNTAS: And on that service you've got your 9(1)(h)s, your OTAs, educationals, the radio stations, and, I guess -- are the Galaxy services also in that?

5197   MR. BIBIC: Yeah. The Galaxy services are in that, yes. There's audio.

5198   COMMISSIONER PENTEFOUNTAS: Okay. And in -- I guess is the rest of Canada, or do you have different rates, depending on the province or the market?

5199   MR. BIBIC: Well, we have different rates. So Fibe is only in Ontario and Quebec --

5200   COMMISSIONER PENTEFOUNTAS: Right.

5201   MR. BIBIC: -- and we have a different Fibe rate in Ontario.

5202   COMMISSIONER PENTEFOUNTAS: What would the rate be in Ontario?

5203   MR. BIBIC: Undiscounted, 41.

5204   COMMISSIONER PENTEFOUNTAS: Stand-alone, no bundling, 41?

5205   MR. BIBIC: Stand-alone, no bundling, 41.

5206   COMMISSIONER PENTEFOUNTAS: And the 27 is also stand-alone, no bundling, in Quebec?

5207   MR. OOSTERMAN: M'hmm. Yes.

5208   THE CHAIRPERSON: That's a yes I heard by nodding of heads.

5209   MR. OOSTERMAN: Yes, sorry.

5210   COMMISSIONER PENTEFOUNTAS: What would happen to that entry-level price under your proposal?

5211   MR. BIBIC: It depends where the market goes.

5212   MR. OOSTERMAN: Yes. I --

5213   COMMISSIONER PENTEFOUNTAS: Given the fact that you'd have sort of an à la carte type proposal that you put forward, would that --

5214   MR. OOSTERMAN: Yeah. I think --

5215   COMMISSIONER PENTEFOUNTAS: -- skinny basic grow?

5216   MR. OOSTERMAN: No, I think the beautiful element in our proposal is that, you know, by and large every consumer would have a chance to lower their individual television expenditure bill by being able to move up in smaller increments than today. I don't think our entry-level-position price would change, such to market conditions and what others decided to do. You know, our job is to stay competitive, as I said. But --

5217   COMMISSIONER PENTEFOUNTAS: But it would change. Under a mandated à la carte regime, your basic would change --

5218   MR. OOSTERMAN: Okay.

5219   COMMISSIONER PENTEFOUNTAS: -- and that's part of why you'd like --

5220   MR. OOSTERMAN: Well, if it's under your suggested --

5221   COMMISSIONER PENTEFOUNTAS: -- the discretionary power: to do what you want with it.

5222   MR. OOSTERMAN: Yes, if it's your suggested implementation, I thought you asked us under our proposal.

5223   COMMISSIONER PENTEFOUNTAS: Well, under your proposal. You're proposing an à la carte, that à la carte --

5224   MR. OOSTERMAN: Right, but we're --

5225   COMMISSIONER PENTEFOUNTAS: -- above and beyond -- that you'd have a basic and --

5226   MR. OOSTERMAN: Yes.

5227   COMMISSIONER PENTEFOUNTAS: -- above and beyond that anything goes.

5228   MR. OOSTERMAN: Exactly. So our basic, which these numbers are, would stay the same, subject to what happens in the market, and then the ability to add channels would be at a lower cost increment than exists today.

5229   COMMISSIONER PENTEFOUNTAS: But given the fact that overall you'd be losing money because you've got your packages better or bestest and so on -- and I don't live in Ontario, so I don't know how it works -- best, better --

5230   MR. OOSTERMAN: I like that "bestest." It's a new one.

5231   COMMISSIONER PENTEFOUNTAS: -- better than best and --

--- Laughter

5232   MR. OOSTERMAN: Yeah, yeah.

5233   COMMISSIONER PENTEFOUNTAS: -- and best and better, you -- there would be a revenue loss there for the distributor and the programmer.

5234   Wouldn't you have to make some of that up under your unregulated discretionary, fully at the discretion of the BDU basic?

5235   MR. OOSTERMAN: That's, of course, subject to the pricing of the à la carte channels. We would, as an entity, look to make sure that we were getting an appropriate return for our shareholders. But we also know that if we don't price it right, we won't get the demand from consumers, so it's a --

5236   COMMISSIONER PENTEFOUNTAS: But under an à la carte --

5237   MR. OOSTERMAN: -- it's a trade-off.

5238   COMMISSIONER PENTEFOUNTAS: -- regime, your contention is that there'd be loss of revenue?

5239   MR. OOSTERMAN: I --

5240   COMMISSIONER PENTEFOUNTAS: That felt like the starting point this morning.

5241   MR. OOSTERMAN: Well, I think if we see the penetration losses that we talked about that we've seen in other markets, then, yes, that's the inevitable conclusion. You have to --

5242   COMMISSIONER PENTEFOUNTAS: Well, you mentioned the experiment in London --

5243   MR. OOSTERMAN: Yeah, that's --

5244   COMMISSIONER PENTEFOUNTAS: -- for Rogers, and --

5245   MR. OOSTERMAN: -- that's what I'm referencing.

5246   COMMISSIONER PENTEFOUNTAS: -- it's huge.

5247   MR. OOSTERMAN: Yeah.

5248   COMMISSIONER PENTEFOUNTAS: Fifty-seven per cent, I think, was the number.

5249   MR. OOSTERMAN: M'hmm.

5250   COMMISSIONER PENTEFOUNTAS: Wouldn't you have to make some of that up in your basic, where you --

5251   MR. OOSTERMAN: You may.

5252   COMMISSIONER PENTEFOUNTAS: -- where you are free to do what you want with it, and price it as you wish?

5253   MR. OOSTERMAN: The competitive dynamics would manage that, and so if we need to we would try. If the competitors have the same cost pressures, then I presume they would have a similar move.

5254   To the extent they'd say, This is an opportunity for us to gain share in the market, so we're going to make less money and use it to gain share, then that's the approach they would take.

5255   We've seen every combination of price point and market share, you know, take place in the market. I referenced Eastlink and Alliant this morning, where Eastlink is at a significantly lower price, yet is losing share. So maybe we would actually increase the size of that basic package to make it worth more and, you know, move it up that way.

5256   COMMISSIONER PENTEFOUNTAS: The entry-level basic.

5257   MR. OOSTERMAN: Yeah.

5258   COMMISSIONER PENTEFOUNTAS: Yeah.

5259   MR. OOSTERMAN: So it's impossible to predict precisely what would happen.

5260   MR. BIBIC: But your impression is the one you conveyed, and you felt that that was the one from the start, yet we are actually saying, and so I brought Dr. Eisenach, unbundling, to this extent, either under our proposal or the Commission's proposal, doesn't seem to have been tried anywhere. And there will be implications for sure through unbundling, because it's -- even our unbundling is big unbundling and there will be implications.

5261   So in our model there'll be -- a starting point is good. If people take good and very little else, it's going to have an impact. If we have the Commission's model, where you start with skinny basic, the cost of good has to go up for the reasons expressed in appendix 3 of our submission.

5262   So unbundling will have impacts, and we'll just have to sort through those in a competitive marketplace. What we want is more ability to differentiate ourselves from the competitor than the Commission's put forward in the working document.

5263   COMMISSIONER PENTEFOUNTAS: And you'll also be able to create bundles above and beyond the basic. That will make it more attractive for the customer to go with the bundle, instead of going on an à la carte --

5264   MR. BIBIC: Admittedly, under both models, yes. We just --

5265   MR. OOSTERMAN: Yes.

5266   MR. BIBIC: There's less differentiation under the Commission's model, we feel, because it'll be a lot more mandated sameness. Skinny basic will be the same --

5267   COMMISSIONER PENTEFOUNTAS: Yeah.

5268   MR. BIBIC: -- won't be differentiation.

5269   COMMISSIONER PENTEFOUNTAS: Yeah.

5270   MR. BIBIC: Pick-a-packs, I mean essentially the same.

5271   COMMISSIONER PENTEFOUNTAS: Thank you.

5272   Thank you, Mr. Chairman.

5273   THE CHAIRPERSON: Thank you very much.

5274   My colleagues have done a very good job, so I don't have a lot of questions, but I do have few.

5275   I'll start by congratulating Bell. It's not that I necessarily agree or disagree, I don't think I've formed a view, but you've done a good job preparing, I think, for this hearing. You've done your homework.

5276   Now apologies to Mr. Oosterman if you've had this title for a long time. Chief Brand Office, what does that do?

5277   MR. OOSTERMAN: What does it do?

--- Laughter

5278   COMMISSIONER PENTEFOUNTAS: Maybe you speak to a CEO about that.

5279   MR. OOSTERMAN: I keep that a mystery --

5280   THE CHAIRPERSON: I understand it's a new sort of thing --

5281   MR. OOSTERMAN: -- from my boss.

5282   THE CHAIRPERSON: -- that people are having Chief Branding Officers in a company, but what's the area of your responsibility in that regard?

5283   MR. OOSTERMAN: To manage the overall impression of the Bell brand in the market.

5284   THE CHAIRPERSON: So all the Bell services --

5285   MR. OOSTERMAN: Correct.

5286   THE CHAIRPERSON: -- as well, from distribution to wireless to Internet, everything.

5287   MR. OOSTERMAN: Correct, business, consumer, everything.

5288   THE CHAIRPERSON: So how well do you think you're doing compared to other large corporations in the country?

5289   MR. OOSTERMAN: On the brand side?

5290   THE CHAIRPERSON: Yes.

5291   MR. OOSTERMAN: Well, we're the fifth -- fourth most valuable brand in Canada, and the only non-financial institution to make the top five, so that would suggest not bad. Our market share results would suggest, since we're gaining so much market share, not bad. But we are a long way from perfect, as the number of issues that are raised about various aspects of Bell would suggest. So we have some work to do on the care side for sure.

5292   THE CHAIRPERSON: Okay, and that's --

5293   MR. OOSTERMAN: But, you know, do I think we're think we're better than we were five years ago? Yes.

5294   THE CHAIRPERSON: But there's room to improve?

5295   MR. OOSTERMAN: Oh, my goodness --

5296   THE CHAIRPERSON: Okay.

5297   MR. OOSTERMAN: -- yes.

5298   THE CHAIRPERSON: And that's responsibility?

5299   MR. OOSTERMAN: Yes.

5300   THE CHAIRPERSON: With your colleagues, obviously.

5301   MR. OOSTERMAN: Yes, yes.

5302   THE CHAIRPERSON: Okay.

5303   I mean it's obvious you have a large customer base, and it's an imperfect gauge, but I do seem to see a lot of negative comments. But then, again, you probably have more customers than most.

5304   MR. OOSTERMAN: We do have more subscribers than most, and we participate in more areas than most. But I can tell you unequivocally that, aside from our investment in networks and the technology of the network, it is the single largest investment area at Bell: is to improve our customer service. We take it very, very seriously. And in every one of our business units discretely call volumes are down in terms of complaint calls.

5305   THE CHAIRPERSON: And there is a reward structure within the companies, to reward that sort of behaviour by executives and employees, as well?

5306   MR. OOSTERMAN: It is the entirety of our award system.

5307   THE CHAIRPERSON: Okay. Good to know.

5308   You referred in your presentation to a road map. As I suggested to Vidéotron yesterday, it has taken years to build this regulatory system -- probably decades, frankly. I am not suggesting that we take as long to dismantle it, to adapt to a new environment, but there is a management of change that needs to occur, and how much change the system can absorb within a short period of time.

5309   I often think of -- it probably dates me when I think of these things -- the old Kerplunk game. I don't know if you remember that.

5310   MR. OOSTERMAN: Yes.

5311   THE CHAIRPERSON: All the marbles at the top, and you took turns pulling out a little stick, and the crashing of the marbles at the end.

5312   I often think of that when I think about deregulation, and adapting to the system, and going to the right pace, or not.

5313   You have provided for a road map, have you given some thought, though, that maybe the Commission could set out a road map, but also do it in steps over time?

5314   You might not have an answer for that now. I believe that Québecor is going to do it through an undertaking. I was wondering if you have given some thought to that.

--- Pause

5315   MR. OOSTERMAN: I would suggest that our pausing is an answer all on its own.

5316   THE CHAIRPERSON: Okay. So maybe you could come back to that. It is just that there may be differences in the French and English markets on how quickly you can deregulate or remove certain rules, which, maybe, were based in the regulatory system of the past that we might like to adapt.

5317   Because there are a lot of nervous people out there. I mean, we are a bit delayed in our schedule, but you will hear a lot of other intervenors today who are worried about, well, if this goes away, I lose this, and if this goes away, I lose that.

5318   So that's why I am saying that it is a challenging change management that we are facing, and I was wondering if you had a thought about doing it over a short period of time.

5319   And by analogy -- and I am thinking back to when -- you would know this -- when the Commission, facing similar technological changes, had a road map, first to get out of terminal equipment, and then we introduced local competition, and then we split the rate base, and we had Price Cap 1 and Price Cap 2.

5320   I mean, that was part of an overall plan to get from Point A to Point B, and still deal with the challenges of that conversion.

5321   MR. BIBIC: Okay. We will take that for -- the real reason is it's an interesting question and we want to think through all the puts and takes.

Undertaking

5322   THE CHAIRPERSON: Sure. And it may be a different answer for the English and French markets.

5323   MR. BIBIC: Absolutely.

5324   I paused initially because I thought that Kevin, actually, on one issue, did give a bit of a road map, saying: Okay, why don't we move the U.S. Four Plus 1s out of Basic.

5325   We will see over a number of years the take-up of that, and maybe then we revisit the issue of simultaneous substitution, for example.

5326   That was a staged road map of sorts. That is an example.

5327   Now, there are also issues with staging like that, because in the Telecom analogy, when local loops were unbundled, there was a sunset clause, which was never, ultimately, respected, and we are still offering unbundled local loops 15 years later.

5328   THE CHAIRPERSON: Sunset sometimes takes time.

5329   Let me get to the local specialty model. If you are a specialty, I assume that simultaneous substitution would not occur?

5330   MR. GOLDSTEIN: No.

5331   MR. CRULL: We did not assume that, no. We considered that it would continue.

5332   THE CHAIRPERSON: That's interesting, because the whole issue of whether there would be simultaneous substitution in the specialty world was considered in the 1999 hearing, and the Commission reasserted that, no, it would be limited to conventional -- compulsory simsub.

5333   Do you want to speak to that?

5334   MR. CRULL: This would be an exception.

5335   THE CHAIRPERSON: So you think that we have to amend our regulations to do simsub, that there has to be simsub?

5336   MR. GOLDSTEIN: I think there are a couple of things to say on that.

5337   First of all, there actually are services in the system that don't have over-the-air transmitters, that actually are entitled to mandatory simsub -- what we call CTV Atlantic, or CTV Two Atlantic, which is ASN, and the former Access, which is now CTV Two Alberta, has that right.

5338   THE CHAIRPERSON: Those are exceptions, rather than the rule.

5339   MR. GOLDSTEIN: They are exceptions, but the other thing is that one of the rationales, I think, in the differentiators between the local specialty model versus simsub for specialty, in general, is that specialty services predominantly operate on a national basis, and simsub generally lines up on a time zone-specific basis.

5340   The local specialties are going to be operating on a time zone-specific basis.

5341   As we indicated, I think, in a previous answer, what we have really tried to do is fix the value for signal problem and take the decision from 2010 and say: Okay, nothing has really changed in terms of the problems affecting conventional television, but we have a legal problem. Let's figure out, in the least intrusive way, how we get there to fix this problem.

5342   THE CHAIRPERSON: Right. That is your conclusion on the problem, which may not necessarily be our conclusion on the problem, if indeed there is a problem.

5343   MR. BIBIC: We have tried to put what, in our view, is compelling evidence showing that there is a problem.

5344   THE CHAIRPERSON: Sure. Fair enough.

5345   I take it that it might be your intention to put that local specialty model as part of your proposal for a less-than-skinny basic?

5346   MR. BIBIC: My colleagues understood the question, but I didn't.

5347   THE CHAIRPERSON: Let's say that we were going down the road, and your notion that this local specialty model -- this new licensee that has specialty content, so let's leave it over-the-air, but it's not -- would it be on Basic?

5348   MR. BIBIC: Yes.

5349   THE CHAIRPERSON: By way of exception, unless we accept your notion of a skinny basic that would allow you to add additional --

5350   MR. BIBIC: No, we are --

5351   Again, I may not understand the question.

5352   Under our local specialty model, those conventional stations which are now specialties would be in each BDU's basic package by the Commission's order. Whether or not it's a skinny basic because you have mandated that, or discretionary -- a larger basic because you have allowed us to build ---

5353   THE CHAIRPERSON: And you are not concerned that that is giving yourself some sort of a preference, because we would be doing it?

5354   MR. BIBIC: What we would be doing is ensuring that every single Canadian who subscribes to the system gets access to the television they cherish the most.

5355   THE CHAIRPERSON: Okay. At an additional cost that they didn't have to pay when it was over-the-air.

5356   MR. BIBIC: Yes, with the quid pro quo that for those for whom it would be an issue -- and I don't want to discount that -- there would be far more flexibility to manage the overall spend.

5357   THE CHAIRPERSON: Right.

5358   On the question of simultaneous substitution, you undertook to go off and try to figure out, with the working group, the technical issues around that. Would you go so far as agreeing, when there is a technical screw-up, that customers should be entitled to a rebate, to put some teeth into your commitment?

5359   MR. OOSTERMAN: May we charge more when there is overtime?

5360   THE CHAIRPERSON: Well, I don't know. When there is a frustrated customer at the end of the line, do you provide them rebates currently?

5361   MR. OOSTERMAN: We always try to deal with our subscribers. If they have an issue that is really irksome to them, we try to find a way to make them feel better about their relationship with Bell.

5362   I don't think that regulatory rules need to be put in place to accomplish that.

5363   THE CHAIRPERSON: It is interesting that you say that as the person in charge of brand value, because recently we saw a company like Home Depot go out of its way, even though it cost them a lot of money, to make sure that their customers were happy.

5364   I would have thought you would be jumping at the bit to say that you will rebate.

5365   MR. OOSTERMAN: We do. We do look after our clients. It's a fiercely competitive market. The battle for subscribers is intense, and we face very capable competitors.

5366   So we need to do that ---

5367   THE CHAIRPERSON: And you plan to keep that secret? Why not have a clear policy on your website saying: If we screw up on simultaneous substitution, we will rebate you -- whatever?

5368   MR. OOSTERMAN: That is something we will think about.

5369   THE CHAIRPERSON: I suspect that you do a lot more than you are trumpeting you do with your customer care, and I think that maybe that is unfortunate.

5370   I think that when people phone and complain, you do show flexibility, and I think that maybe Canadians are frustrated by that, that they have to phone and complain, and then go up to the next level, and the level after that.

5371   MR. OOSTERMAN: I think it is a very complex dynamic. We do a tremendous amount of proactive make-it-goods for our subscribers, and we react to complaints in some cases.

5372   In some cases those complaints are legitimate, and in some cases they are not.

5373   So, for us, it is actually a case-by-case discussion, to find out what really transpired and what the right thing to do is, and to the best of our ability --

5374   THE CHAIRPERSON: So it would be okay for me, during the football season, when there are errors like there were last year -- I am not talking about the Super Bowl, but leading up to it -- we clearly suggest that, if you go and complain to your BDU -- in this case the Bell BDUs -- push, because they will give you a rebate?

5375   MR. OOSTERMAN: I think it would be difficult for me to commit to a blanket answer, when the circumstances that create the issue can be so varied and complex.

5376   MR. BIBIC: Mr. Chairman, are you referring to technical issues --

5377   THE CHAIRPERSON: Yes.

5378   MR. BIBIC: -- as opposed to: I want to watch a Doritos' ad from the U.S., give me a rebate?

5379   THE CHAIRPERSON: No, I am talking about technical switching issues.

5380   You say, "We are going to fix it." You are putting your name behind that.

5381   Well, if you are actually putting your name behind that, why wouldn't you give a rebate when it actually is occurring?

5382   If actually there was a screw-up --

5383   MR. OOSTERMAN: Let me ask a practical question, which may not be popular, but it's practical. We have a million subscribers for -- whatever program. On that program something happens. Do I rebate a million subscribers?

5384   What if only 10,000 were watching? What if only 3 were in the room when it actually happened?

5385   THE CHAIRPERSON: I would suggest to you that, because there is that downside, you would go out of your way to make sure there aren't technical screw-ups.

5386   MR. OOSTERMAN: Yes, and we do that to the best of our ability. That's why we are winning in the market.

5387   MR. BIBIC: That is not something that I had ever paid particular attention to, in terms of, you know, the call centre scripts of a BDU suggesting that if there was a problem, where you don't like the Super Bowl, it's the Commission's fault.

5388   That is something that, candidly, hadn't occurred to me, until it became an issue, and the Commission was receiving these complaints and discovering that BDUs were blaming the Commission.

5389   Those things, definitely, ought to be fixed, and that is one of the things, as Kevin said, the working group ought to address.

5390   We could have a standard call centre script that clearly, succinctly, and not with regulatory bafflegab, explains why we have simultaneous substitution.

5391   That's one thing we could do.

5392   We could try to improve the technical issues.

5393   And, then, let's just take back the area you were exploring, because there are practical difficulties. I hear, philosophically, where you are trying to go --

5394   THE CHAIRPERSON: If it is worth that much money to you --

5395   MR. BIBIC: I hear you.

5396   THE CHAIRPERSON: We will be hearing from others that are on the public record, and I just want to give you a chance to, maybe, put your views.

5397   Some are saying that your OTA -- you have not fully exploited the value of that spectrum through other business lines that would be available.

5398   What is your view of that?

5399   You have transmitter capability, digital capability there, for offering other types of services; not broadcasting services, but other types of services.

5400   MR. GOLDSTEIN: Is this the reference to -- for example, I think in the early days -- and I am not sure if they continue to do it -- some of the U.S. services offered a multiplex -- kind of like a Weather Channel or something like that?

5401   THE CHAIRPERSON: Something like that.

5402   MR. GOLDSTEIN: I am not sure that is really possible in Canada.

5403   THE CHAIRPERSON: What are the barriers?

5404   MR. BIBIC: Hold on. So a 600 MHz spectrum, let's say. Multiplexing is just using it for another broadcast channel.

5405   So that's kind of like doubling, tripling, quadrupling down on conventional over-the-air with one revenue stream.

5406   In terms of using 600 MHz for mobile, I don't know off the top of my head, but I would have to look at the commercial mobile spectrum outlook of Industry Canada and its plans for that, and what our current access to that spectrum allows us to do. I suspect there are limitations.

5407   And there will be other players who will come forward, who are also mobile carriers, and in the meantime, I am sure they will have a chance to look that up and be able to answer, and we can do that on the 19th.

5408   THE CHAIRPERSON: Yes, there are parties that have suggested that that may be another source of revenue. Not broadcasting, obviously, non-broadcasting.

5409   MR. BIBIC: I am not prepared to answer that. I didn't come equipped to answer it.

5410   THE CHAIRPERSON: Did you want to come back?

5411   MR. BIBIC: Yes.

5412   THE CHAIRPERSON: Don't tell me that I asked you a question that is not in your speaking points.

--- Laughter

5413   THE CHAIRPERSON: Could you come back with an undertaking by the 19th?

5414   MR. BIBIC: Yes, sure.

5415   And, Mr. Chair, I did not memorize the 600 MHz rules, that's for sure.

Undertaking

5416   THE CHAIRPERSON: Okay. A final question -- and this is the final question.

5417   I think that is what the Vice-Chair was referring to. Now I get it.

5418   I have been asking others: In your view, if you look at the Working Document, what is the best proposal to achieve the objectives that you have defined, and which one is the worst?

5419   M. BIBIC : Monsieur le Président, permettez-nous de vous donner une réponse pour les marchés francophone et anglophone.

5420   LE PRÉSIDENT : Absolument.

5421   M. BIBIC : O.K. Merci.

5422   LE PRÉSIDENT : J'aurais dû vous poser plus de questions en français. Je suis désolé.

5423   M. BIBIC : Non, non. C'est parce que je veux... notre réponse est différente pour les deux marchés.

5424   For the English-language market, we would say, assuming that we are interpreting some of the language correctly, that the drive toward more consumer choice we think is the best idea here, looking forward --

5425   THE CHAIRPERSON: I am looking for a more specific --

5426   MR. BIBIC: Yes, I know -- with the puts and takes that we have expressed, but, specifically, that all programming services would have to be subject to those rules, and we interpret that as being the U.S. specialities, as well.

5427   THE CHAIRPERSON: Okay.

5428   MR. BIBIC: The most disappointing aspect of the Working Document -- and you won't be surprised to hear me say this -- is what we feel is the absence of support for conventional TV, which we do believe can continue to anchor the ecosystem going forward, if the right mechanisms are put in place, and we actually do, sincerely, believe that the proposals put together here take a step backwards for conventional TV, which is already struggling, in particular simsub, but not exclusively.

5429   So that is --

5430   LE PRÉSIDENT : Pour le marché anglophone.

5431   M. BIBIC : Ça, c'est pour le marché anglophone, et je vais demander à Dany de vous répondre pour le marché francophone.

5432   MME MELOUL : Bonjour, Monsieur le Président.

5433   Je vous dirais que pour... la meilleure proposition, c'est la même que pour le marché anglais. On endosse ce qu'on a essayé d'établir en termes de flexibilité de choix avec les considérations qu'on a mises sur la table aujourd'hui.

5434   Je vous dirais, pour le marché de langue française, la lacune pour nous ou l'endroit où on a la plus grande préoccupation, c'est justement qu'on a essayé de traiter les deux marchés linguistiques de la même façon, et que, donc, on parle d'enlever la protection du genre pour le marché de langue française. Vous savez très bien que c'est un marché d'une taille beaucoup plus restreinte. Je pense qu'en date de vendredi prochain, on aura 39 services dans le marché. Il est nécessaire, bien sûr, de maintenir une diversité du choix.

5435   Je pense, la première journée, c'était vous qui avez dit, on ne veut pas se retrouver avec seulement du hockey ou des concours de cuisine en ondes, et on est tout à fait d'accord avec vous, le choix est nécessaire. C'est un marché aussi qui est déjà très établi en termes de choix et de flexibilité au consommateur avec le genre qui est encore là. Donc, on ne pense pas que c'est, à ce stade-ci, le bon moment pour éliminer cette politique dans le marché de langue française.

5436   LE PRÉSIDENT : D'accord. Et vous avez ajouté « à ce stade-ci ». Donc, lorsque vous donnez votre réponse sur la feuille de route, peut-être vous pouvez traiter à quel point alors.

5437   On peut comprendre peut-être que le marché, il y a un argument -- ça toujours été le cas -- que parfois le marché francophone, pour toute sorte de raisons, retarde dans son développement ou fait face à des défis un petit peu différents, et peut-être que dans la feuille de route, la réponse à la feuille de route, vous pouvez traiter de ça.

5438   M. BIBIC : Absolument.

5439   LE PRÉSIDENT : D'accord.

5440   Un instant.

--- Pause

5441   COMMISSIONER PENTEFOUNTAS:

5442   On the return path data, Mr. Bibic, given that it is commercially valuable information and data, is that data being currently used internally by Bell?

5443   MR. OOSTERMAN: Not by the media part of the business. I know that Mr. Wright can talk a little bit about what they look at. Over the four years, I have seen two reports of set-top box data, and it's very ad hoc. It's not in a condition that is useable, so the media side of the business is not looking at that data.

5444   COMMISSIONER PENTEFOUNTAS: No commercial value there, notwithstanding Mr. Bibic's statement earlier?

5445   MR. WRIGHT: I would say commercial value whenever accessible, sortable, available in that fashion, and it hasn't been.

5446   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Wright.

5447   Mr. Oosterman?

5448   MR. OOSTERMAN: If you are asking about do we share it with other parts of the business? No. Kevin's earlier description --

5449   COMMISSIONER PENTEFOUNTAS: Does the distribution arm of the business consult that data?

5450   MR. OOSTERMAN: I think that I am having difficulty sorting out precisely what data you are referencing. We look at all kinds of data.

5451   COMMISSIONER PENTEFOUNTAS: Return path data from the set-top box.

5452   MR. OOSTERMAN: We do look at program viewership, to determine what programs are relevant when we are out acquiring content.

5453   COMMISSIONER PENTEFOUNTAS: And given the fact that that information is not shared internally, it is certainly not shared with other broadcasters.

5454   MR. OOSTERMAN: That is correct.

5455   COMMISSIONER PENTEFOUNTAS: Ergo, you have information in negotiations that the broadcasters do not.

5456   MR. OOSTERMAN: Oh, I don't know if they don't have their own assessments of what programming ratings are.

5457   COMMISSIONER PENTEFOUNTAS: Well, they certainly don't have set-top box data.

5458   MR. OOSTERMAN: They do not have set-top box --

5459   COMMISSIONER PENTEFOUNTAS: They may have BBM data, if they are captured by BBM data.

5460   MR. OOSTERMAN: Sure, yes.

5461   COMMISSIONER PENTEFOUNTAS: Okay. Thank you.

5462   THE CHAIRPERSON: Thank you. You have been on the stand for a long time, and I thank you because I think it was required.

5463   I do warn people that we will probably be sitting quite late this evening, so if you have child care issues, or you might want to grab a sandwich, because everything closes up here at one point, but we will be sitting late. Thank you.

5464   We will adjourn until 3:25.

--- Upon recessing at 1508

--- Upon resuming at 1525

5465   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

5466   Avant de passer la parole à la secrétaire, pour rattraper notre retard, nous allons commencer à 8 h 30 demain matin, plutôt que 9 h 00.

5467   So just be aware of that. And I also warn you that the traffic in Gatineau in September is very, very bad. So plan accordingly. So 8:30 tomorrow morning. Thanks.

5468   Madame la Secrétaire.

5469   LA SECRÉTAIRE : Merci.

5470   We will now hear the presentation of Blue Ant Media.

5471   Please introduce yourselves and you have 10 minutes for your presentation.

PRESENTATION

5472   MR. KHANNA: Thank you very much.

5473   My notes say I'm supposed to say good morning.

--- Laughter

5474   MR. KHANNA: Good afternoon, Mr. Chairman, Vice Chairman and Commissioners, and thank you for the opportunity to appear at this public hearing. My name is Raja Khanna and I am CEO of Television and Digital at Blue Ant Media.

5475   Blue Ant is one of the few remaining independent broadcasters licensed by the CRTC to provide Canadian English language Category A and B specialty services.

5476   I am accompanied by Michael MacMillan, CEO of Blue Ant Media, and Asha Daniere, EVP of Business and Legal Affairs.

5477   We support the Commission's objective to enhance choice and flexibility for Canadian consumers. We agree that sustainability of the broadcast industry is dependent on ensuring the widest possible array of programming and flexibility in how content is delivered to and consumed by Canadians.

5478   This year alone, Blue Ant Media commissioned 29 new television series from Canadian independent producers and created approximately 1,000 digital episodes, largely in our in-house YouTube studio.

5479   The concept of diverse programming created by and about Canadians is enshrined in the Broadcasting Act, which states that the industry must encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity.

5480   As the Commission has noted, non-vertically integrated programmers are most at risk in an environment where television services are unbundled and regulatory protections for such services are removed. This means that the hours of content they produce and commission are also at risk.

5481   Series like "A Park For All Seasons" or "Hope For Wildlife" -- these, by the way, are hits for Blue Ant, little mini-hits as opposed to some of the bigger shows you've been hearing about -- are great examples of content produced by Canadians about Canadians and about Canada that would not have found an audience were it not for Blue Ant channels like Oasis and Cottage Life.

5482   Key questions follow, therefore, from the Working Document published recently by the Commission:

5483   First, how will Canadians continue to receive the diverse array of content that is contributed by independent channels to the broadcast system?

5484   And second, how will we build a regime that ensures negotiations between vertically integrated carriers and independent programmers are conducted fairly?

5485   As others have said in this proceeding, when modifying any policy, the Commission must be mindful of the collateral consequences that might arise, especially if such consequences do damage to the achievement of the Commission's policy objectives or its obligations under the Broadcasting Act.

5486   Unfortunately, in our view, the particular mix of new, reduced or amended regulations being contemplated by the Commission as set out in the Working Document do create the "perfect storm" that will further disadvantage independent programmers. We will first address why we believe this to be true and subsequently we will propose solutions which will help maintain programming diversity, will reduce the administrative burden on the Commission and will retain and create jobs in our sector.

5487   The perfect storm we refer to is the combination of:

5488   (a) lack of bright line regulation around penetration of existing independent services;

5489   (b) lack of clear rules governing the terms of affiliation agreements with independent broadcasters;

5490   (c) the elimination of carriage requirements for independent Category A services; and

5491   (d) the reduction of the linkage requirement for VI-related services vis-à-vis independent services.

5492   Here is an example of how the combination of these measures could play out.

5493   Under the proposed new rules, the three largest carriers in this country in English Canada could remove any of Blue Ant's channels, including our two Category A services, Cottage Life TV and Travel and Escape, from the dial and immediately thereafter launch mirror services of their own. And in light of the timing suggested in the recent Broadcasting Information Bulletin, they could do this during Blue Ant's current licence term. Make no mistake, VI carriers could do exactly this. There is nothing in the proposed regulations to stop them. Such a move would be devastating to Blue Ant and would dramatically reduce the amount of independent programming in the system.

5494   We must ask the Commission how these outcomes could serve Canadians. How would the elimination of independent channels from the dial or from meaningful distribution contribute to a diverse array of programming? How does the threat of elimination of an independent channel by a VI carrier promote fair negotiation of affiliate agreements? We submit that it does not.

5495   As noted by the Commission, independent channels will be the most disadvantaged by a pure pick-and-pay regime. The VI carriers control the pipe, the customer relationship and the marketing and pricing of services. They have access and control over all direct points of contact with the consumer for their own services as well as ours. Without clear, enforceable rules in the VI Code to counteract these market inequalities, independent channels will be disproportionately harmed.

5496   Blue Ant proposes three specific solutions to address these imbalances and to assist the transition to a pick-and-pay world while maximizing consumer choice. These are:

5497   (a) a rule for existing independent channels that maintains percentage penetration levels for at least the remainder of their licence terms;

5498   (b) a properly amended VI Code that includes clear, measurable and enforceable rules and that prohibits the use of certain provisions in affiliate agreements;

5499   (c) maintenance of the current linkage rule for VI-related services vis-à-vis independent services.

5500   Firstly, for at least the duration of the current licence term, we propose the imposition of a minimum subscription penetration level, on a percentage basis, equal to current subscription penetration levels.

5501   By way of example, if Cottage Life TV is at 35-percent penetration with a particular BDU today, then over the length of the current licence term that BDU would have to ensure that Cottage Life remains at 35-percent penetration. How they do this, whether it is through marketing, creative pricing, packaging, this is up to them and BDUs would have flexibility in how they achieve the net result.

5502   Note that our proposal does not guarantee that the revenue or subscriber numbers for Cottage Life will stay where they are today. It is simply a maintenance of percentage penetration levels. If the overall industry and size of the pie declines, Cottage Life's subscriber fees and overall revenue will decline along with the others. The proposed rule simply ensures that this decline is not disproportionate.

5503   One of the strengths of this approach is that it is a bright line that leaves little room for creative interpretation and will reduce the volume of disputes that ultimately have to be administered by the Commission.

5504   Our second proposal is in respect of the VI Code. Regulations that ensure a channel is merely available to consumers without ensuring it is marketed, priced and packaged effectively will do nothing to ensure fair dealing or access for Canadian viewers.

5505   We therefore support the Commission's proposal that the VI Code be expanded and given the force of regulation. Moreover, in our written submission we proposed a set of measures for all stakeholders to follow that we recommend be incorporated into the VI Code.

5506   Our proposed rules include prohibitions against certain provisions in affiliate agreements in order to ensure fair negotiations between programmers and carriers. We agree with the suggested prohibitions in the Working Document, particularly in respect of MFN clauses which we propose should be prohibited industry-wide, particularly as between independent programmers and BDUs.

5507   We also propose that the Commission should prohibit VI carriers from charging collateral fees of any kind in connection with distribution of independent services. It is in this context that we wish to draw the Commission's attention to the issue of uplink and satellite equalization fees.

5508   As a brief reminder, uplink fees are charged by some, but not all, satellite carriers, ostensibly for transporting the programming signal of a service to their satellite. Why this is not covered by their markup and profit on subscriber fees is unclear.

5509   In our experience, the amount of uplink fees charged varies from specialty service to specialty service with virtually no discernible rationale. In some cases, there is no charge for uplink fees and in others it seems inordinately high for the service being provided by the carrier. Accordingly, the value for the service cannot be substantiated. To be clear, however, in most cases when fees are charged they are substantial and have a material impact on Blue Ant's bottom line.

5510   We submit that the Commission should regulate these fees in order to ensure that they are fair and reasonable for the service being provided. This will ensure that money is not unnecessarily leaving the Canadian production community and will inject transparency and fairness into the fees charged by carriers.

5511   Adding insult to injury, a satellite carrier that does not charge uplink fees instead imposes a satellite equalization fee that requires programmers to pay to that BDU the same dollar amount that the programming service is paying another BDU for uplink fees -- if you follow. Again, there is no business rationale whatsoever -- apart from "if another BDU gets paid that money, we ought to get it too." This is baked into our affiliation agreements. This is grossly inequitable and represents, in our view, a clear abuse of market power. Programmers have no leverage to withstand these fees and it is only through regulatory intervention that this practice will change.

5512   Thus, the Commission should enact regulations in the Code that prohibit a BDU from charging any fees to programmers that are not based on a service provided at a fair price.

5513   Our last comment is in respect of linkage rules. Currently, for every related Category B service that a VI carrier distributes, it must also distribute three unrelated Category B services, one of which must be independent. When you reverse engineer that, it equates to a 1:1 rule as between VI-related channels and independent channels. For every one of my own related channels, I have to carry one independent.

5514   Now, us considering ourselves creative people and content people, we are not very good at math. So the next paragraph has a couple of errors in it. What I will read out are the correct numbers. What you're reading there you can ignore.

5515   The Commission has now proposed a 2:1 rule. This could have a devastating negative impact on independent services and on choice for Canadian consumers. I don't think anyone has done the math properly here because we are assuming this is a good thing for independent programmers. We propose that it's quite terrible.

5516   Assuming this proposal would apply to all services in the new discretionary category, Bell could offer 13 independent services under the new regime where today it must offer 18; for Rogers the number goes from 11 to 5; for Shaw it is a change from 24 to 17. This means that Bell will have the option to offer 28 percent fewer independent services under the new regime, Rogers may offer 55 percent fewer and Shaw 29 percent fewer. Maintaining the current 3:1 rule is therefore critical to maximizing consumer choice and to preventing substantial reduction of independent services by the VI carriers. I hope we did the math wrong but that's what it looks like to us.

5517   Some of the measures proposed by the Commission could in theory increase choices for Canadian viewers. However, if the Commission enacts these without any countermeasures to balance the disproportionate effects on independents, irreparable harm will come to our small independent ecosystem that already lives under the burden of media concentration and vertical integration. It will also have the unintended consequence of reducing the amount of available Canadian programming and limiting the options available to Canadian consumers.

5518   We are hopeful that the suggestions we have put forward today and in our written submission will be helpful to the Commission in reaching its desired outcomes for these proceedings, while continuing to further the objectives of the Broadcasting Act.

5519   Thank you.

5520   THE CHAIRPERSON: Thank you very much. We took note of that and we have folks that can verify the math and we have a list. So we heard you.

5521   I'll be asking some questions first and I wanted to know whether -- you've probably read by now paragraphs 25 to 32 of the Notice of Consultation 2014-190 and do you agree with the future description of the environment the Commission has put forward for the world of television broadly defined?

5522   MR. KHANNA: Well, without referring specifically to those paragraphs, I would say that it's our belief that the world is changing. We started Blue Ant because the world was changing, the media world was being disrupted, chaos was coming and entrepreneurs always see opportunity in chaos and disruption, as we do.

5523   We believe that the technological changes happening in consumer consumption patterns and in how content is delivered and distributed will create opportunity for young, agile entrepreneurial companies that are not married to one system or the other. We are, as we've talked about before, very heavily invested in the digital universe, as we are in the "traditional" one. So not only do we believe in change, we've based our entire business on change.

5524   However, we will say that the new model of consumer consumption has not yet revealed its business case and, you know, you can count the number of companies making a lot of money in the new world on one hand. That's not an ecosystem, that's not an industry, that's a company and we've heard their name 18,000 times in this hearing and in this room. And we're not there yet. It's not mature.

5525   What we see is -- what we assumed when we were building Blue Ant in its early days was that there would be a transition period, over time the world will evolve from this to this and that companies that are more adaptable and can change more quickly because of lack of legacy businesses could win and gain some market share.

5526   What we feel is happening with these new "Let's Talk TV" rules is we're accelerating -- you know, we're accelerating the push to this new world. Unfortunately, the new world is not yet defined. It's like a black hole. It's like we're pushing the accelerator button on a spaceship that's headed towards a black hole.

5527   We have to, in our view, take our time, be more managed and responsible about how we get there, and that is where our penetration rule came from. We've said it's just for the remainder of our licence term, we'll reassess it at that time, but if you don't do that -- if you can suffer through a bad analogy, I'll give you one. You guys kick me if it's terrible.

5528   If you imagine Blue Ant, Bell, Shaw, Rogers and Videotron on a hot air balloon that is slowly losing altitude and running out of gas or whatever it is, in the absence of rules, I know exactly what would happen. The four of them would look at each other, nod, look over at Blue Ant and toss us over the side --

--- Laughter

5529   MR. KHANNA: -- not because they're cruel, evil people, because they're just trying to save themselves and they have the power to do that and they have an economic incentive to do that.

5530   What we're asking for is, you know what, no, tether us to that balloon, we're part of the team, it will still be declining and we'll work together as an industry to save it and to change it and to migrate to a new system, because our fear is that in the absence of something to protect us, we will be disproportionately affected. We will lose altitude way faster than the balloon.

5531   Was that all right?

5532   MS DANIERE: That was good.

5533   MR. KHANNA: You know, that's how we think about that question. So yes, we agree that the world is changing, but just how do we manage ourselves through that transition.

5534   THE CHAIRPERSON: Okay. You know, this is the advantage of oral hearings because I must tell you, last night when I was reading your written submission -- and I have tremendous respect for the people at your table, their clever, unique, insightful perspective, all three of you -- and so I was a bit disappointed when, first of all, you focus your comments mostly on the wholesale issue and I didn't get a lot of meat on the bone with respect to the whole broadcasting system and I'm sure you have views about that.

5535   But on top of that a new -- and you describe a little bit in paragraph 19 about this transition to a new world, but the rest of the document was very -- by its nature, I get that -- was very regulatory. So perhaps -- I know for smaller companies it's a big burden to give an insight on the entire broadcasting system but perhaps you could take a few moments now to give us your perspective on the broader issues within this public hearing.

5536   MR. KHANNA: I'll start and then Mike might have something to add to that.

5537   You know, broadly speaking, we got into this industry ready to compete despite the odds of being a little guy in a market that's largely controlled by three companies in English Canada. Close to 90 percent of both the revenue and the market share is controlled by three companies. Some people thought we were bananas for getting into this space but we believe we can compete. We believe that we can be innovative and create great Canadian content that niche audiences want.

5538   In the case of an example I gave you, "Hope For Wildlife" is a show about a woman in Nova Scotia who saves animals. It's fantastic. It's great. It rates very highly on our channel Oasis. It sells in over 50 countries around the world. It is a very profitable enterprise of its own, similarly for another show we do called "A Park For All Seasons." These are small by comparison to other things you've hearing but for us these are fantastic.

5539   So we believe we can compete and we believed, you know, at the beginning when we started with the VI Code and the way the Commission was talking that the Commission was there to, you know, generally either support our competing in the environment or frankly did not be a burden -- or a hurdle.

5540   This document was -- the Working Document that came out was the first time in our history that we read it and went, oh, wow, regulation is actually going to hurt us, we have to start paying attention and talking like other folks talk and, you know, push back a little bit. So that is conceptually -- it was the first time we said, this is actually going to accelerate.

5541   We already -- you know, there's already media concentration, there's already vertical integration. We already have challenges. This is a whole new set of challenges with pick-and-pay and there wasn't enough in here to kind of stabilize our shift.

5542   MR. MACMILLAN: Just to add. I thought the hot air balloon was a good metaphor, by the way. The first time I heard it.

5543   I guess I would also just add that we look forward to the future world -- perhaps it's a fantasy world -- where a creator programmer like Blue Ant is able to have a direct relationship with its customers, with its viewers, with its users around the world.

5544   In our other non-TV broadcasting businesses we enjoy that -- and I'm referring now to magazine publishing, to the YouTube business, to live event, consumer show, exhibitions -- we really enjoy that direct relationship and we kind of feel we have our hands more or less on the steering wheel. We can respond to what our customers want, try to fix what they don't like and have that direct relationship.

5545   In the case of our channels, through the ownership of which we come before you, we don't have any relationship with our real customers, with the viewers. Everything is mediated through the major, as we call them here, BDUs. It's they that do the pricing, the marketing, the packaging. We all know all this, there's nothing new I'm saying in this.

5546   But, you know, in our view of five years from now or some great Camelot time in the future we'll have that direct relationship. We don't today and that's why, as Raja said, our response to these proposals is so worrisome, slashing the linkage rules, as is proposed, getting rid of the carriage status for the Cat A's. We're less fixed on the genre protection piece, as you know.

5547   But we see that -- you know, Kevin Crull and the others at Bell this morning talked about how it was the BDUs that managed the relationship with the customers and that Bell Media did not and he was talking about how therefore the value had been transferred from channel owners to BDUs and they saw that continuing. If they have that worry, we have it in spades since we have no corporate connection with that distribution piece.

5548   So we'd love a world where we can deal directly with consumers. We're working towards that one day but we see some of these proposals as a big setback for that because we do not have any relationship with our real customers.

5549   THE CHAIRPERSON: So before these proposals, if I had asked you, is there anything in our current regulatory system that prevents you from having a constructive foot both in the licensed and unlicensed world to do those consumer shows, those experiential events that you're involved in, you would have said, no, it's mostly this particular set of recommendations that worry you?

5550   MR. KHANNA: What we would have said is we have three different proposals here around this new penetration rule and the linkage. Both of those are related to the new rules you put out.

5551   The VI Code changes we're suggesting, we would have had them regardless because the VI Code is a relatively new thing. We've now had a few years of experience with it and what we're saying is it's not working.

5552   THE CHAIRPERSON: Has your view changed between the original Public Notice and the current working document, or are there things that are improved in there that you -- because I get -- I got the impression from what you were saying today in your oral remarks that your position has evolved a little bit.

5553   MR. KHANNA: Yeah, the penetration piece, the more we thought about it and after we saw your working document, you know we're not -- our proposals don't make us one extra penny of money, just to be clear. Even the penetration proposal we have on existing indies is just a -- it's not even to maintain status quo of dollars, just of penetration. So we'll probably still see a decline in revenue.

5554   So we take --

5555   THE CHAIRPERSON: I must tell you when I read your original written --

5556   MR. KHANNA: Yes.

5557   THE CHAIRPERSON: -- I felt like I had stepped into a time travel capsule when Mr. MacMillan was still in the 1990s and he was still ahead of Alliance with regulated wholesale rates, essentially.

5558   MR. MacMILLAN: Our thinking evolved and sharpened and also expressed it better, I think, today.

5559   THE CHAIRPERSON: Okay.

5560   MR. KHANNA: Yeah, conceptually it's still there but when we re-read our old one too we were like, yeah, we could have said that a lot better. We really are -- what we didn't focus on was just, you know, this transition is really how we think about it.

5561   Bu that thing we're asking for is not a permanent ask.

5562   THE CHAIRPERSON: So it's not so much a protection as much as measures to ensure a buffer while we transition into a new state?

5563   MR. KHANNA: I wouldn't even necessarily say buffer. I'd say we will probably decline in revenue and subscribers in certain cases as the whole industry does. It's to stop independents from disproportionally declining faster, more aggressively than others, because they naturally have an economic incentive to protect themselves.

5564   If, for example, some sports service loses subscribers in the new pick-and-pay world and loses margin, they've got to look around to find their margin. We know where they're looking. There's not a lot of places to look and Blue Ant is there in the crosshairs, not because anyone has it out for us but because it's natural business.

5565   THE CHAIRPERSON: Right.

5566   MR. KHANNA: We don't have the market leverage to compete.

5567   THE CHAIRPERSON: Now, attached to your written submission there is a report prepared by Wall Communications prepared for yourself, the IBG and Pelmorex. I just want to make sure that you agree with the conclusions because somewhat ironically the report starts with a note that says:

"The views expressed in this document are solely those of Wall Communications,...not necessarily those of Blue Ant..."

5568   But since you've filed it in evidence, I take it you agree with everything in there or not?

5569   MR. KHANNA: I think we agree with the spirit of it. And the idea was to be as objective as we can to have as much evidence on the table about the plight of independents as we can. You know, we can talk about specifics of it but it's --

5570   THE CHAIRPERSON: Well, I have a few quotes maybe. I want to see whether you agree or not with what Mr. Wall has concluded. On page -- it's page 30 of the total submission where he says:

"We see no reason to expect that going to an a la carte system will reduce the number of subscriptions -- it will likely result in a marginally greater number of customers taking service, but more importantly it will likely change the type of subscription that some customers purchase."

5571   Would you agree with that statement?

5572   MR. KHANNA: I would disagree with it.

5573   THE CHAIRPERSON: Okay.

5574   MR. KHANNA: I imagine that a significant move to an a la carte or pick-and-pay system may actually increase the number of Canadians who subscribe to something in the system, yes. But I would argue that it would lead to a reduced number of channels subscribed in total.

5575   THE CHAIRPERSON: In total.

5576   MR. KHANNA: I think this -- I think the context here is maybe it's not as clearly written as it should. I think they're talking about the overall number of subscribers to the system.

5577   THE CHAIRPERSON: Yes, it's not -- I realize it's not specific to the independents.

5578   MR. KHANNA: It's not specific.

5579   THE CHAIRPERSON: It's not the entire -- trying to get you to talk about the entire system.

5580   MR. KHANNA: Yeah.

5581   THE CHAIRPERSON: I'll get to your issue in a moment.

5582   MR. KHANNA: So I think -- I don't think there is a reason to expect that going a la carte will reduce the 11.9 million households that pay for TV down to some other number.

5583   THE CHAIRPERSON: Okay.

5584   MR. MacMILLAN: I think, sorry, if I can take just one more crack at this?

5585   I think it should mean that it won't reduce the number of subscribers.

5586   THE CHAIRPERSON: Right.

5587   MR. MacMILLAN: It will reduce the number of subscriptions, i.e. the number of channels subscribed to.

5588   MR. KHANNA: That's right. So it is a wording issue here.

5589   THE CHAIRPERSON: Okay. So the next statement he says:

"Our view is that the new mix of subscriptions will not likely impact overall BDU revenues in a significant way."

5590   MR. MacMILLAN: That's possibly true and some of the discussion with Bell and also with the Competition Bureau a couple of days ago, I think, got to this. There is, presumably, going to be a significantly higher price per channel when offered a la carte or pick-and-pay.

5591   And to the extent it's meaningful, otherwise the channel owners will need to -- in order to not have suffered too much -- increase the price that they charge for their channels when packaged so that another customer getting the very same package that he or she had last week before this was introduced, might actually see an increase --

5592   THE CHAIRPERSON: Right.

5593   MR. MacMILLAN: -- in their total subscription.

5594   THE CHAIRPERSON: So you would also agree with the statement:

"...one way for the BDUs to minimize revenue impact is to price individual channels so high that customers are incented to continue with a bundled package..."

5595   MR. MacMILLAN: That's one thing, yes. A high probability of that, I would assume.

5596   And, secondly, to increase the price of some of the other bundles just to try to, you know, to counteract.

5597   I don't know how friendly that is for the consumers who said, no, I like my package. I didn't want to have that pick-and-pay. I like my package and, now, gosh, the price has gone up.

5598   THE CHAIRPERSON: Right, which is something we are struggling with.

5599   MR. MacMILLAN: Yeah.

5600   THE CHAIRPERSON: And of course, getting more to your issue, he's added that:

"We also expect that the large conglomerate BDUs [the VIs] will recognize the ongoing benefit of carrying each other's channels and to accept those channels at the new terms (including rates) and conditions proposed by each other."

5601   MR. MacMILLAN: Well, and here is the -- that's one of the big issues for us. We don't do pricing packaging marketing. We all know that. And we don't have another club to fight back with by wearing our carrier hat.

5602   So you know, Bell, Rogers and Shaw, Shaw/Corus can have a discussion about which of their channels will get packaged and presented and marketed and priced in this way, and the other guys know. They are having a reciprocal conversation about the Bell channels coming onto Shaw or whatever. We don't have that.

5603   So we're not the packagers or the marketers nor do we have that club. And, therefore, we're most likely to be either the accidental or purposeful ones chucked off that balloon.

5604   MR. KHANNA: Yeah, if I can add, you know, two things.

5605   I would amend that statement to say that the mix of subscriptions will not likely impact overall BDU margins. I think revenues is the wrong term because the revenues may go down. The RPU, average RPU today of $61 might go to $55. And whereas, you know, it's the margins that they will fight desperately to maintain. Of course they would. I would too.

5606   THE CHAIRPERSON: You think the RPUs will remain constant?

5607   MR. KHANNA: No, I'm saying that they --

5608   THE CHAIRPERSON: The other way?

5609   MR. KHANNA: Sorry, they could down.

5610   THE CHAIRPERSON: They could go down.

5611   MR. KHANNA: You know, I believe that. I mean, from my household.

5612   I would say though that, you know, referring to Bell's comments this morning, Mr. Crull mentioned stats saying, "Oh, those services that have less than a 3.0 AMA, oh, they're not going to survive". That's seven out of eight Blue Ant services.

5613   But to be clear, this is the head of Bell Media saying that those channels are no longer relevant. Are we worried about these types of statements? Yes.

5614   THE CHAIRPERSON: Luckily --

5615   MR. KHANNA: Good business --

5616   THE CHAIRPERSON: -- you negotiate with the distribution arm rather than the media arm.

5617   MR. KHANNA: Yeah. Well, we make a good business set of channels with less than a 3.0 AMA. We're quite happy with it, actually.

5618   THE CHAIRPERSON: M'hmm.

5619   MR. KHANNA: And it's growing, believe it or not, in a lot of ways. And we are, as you know, investing in the digital side and doing some different types of things.

5620   THE CHAIRPERSON: Right.

5621   MR. KHANNA: But you know, they are willing just to toss that out as just as a margin error.

5622   THE CHAIRPERSON: Now, in the Wall report, and this is at paragraph 35 -- there is:

"This marginalization is evidenced by the fact that independent Category..."

5623   This is your issue about independent:

"...independent Category A services represent only 14.64 percent of total Category A or pay specialty television revenues despite representing more than 38 percent of such services."

5624   And as I understand it, you attribute this to their -- the revenue success of, let's say, the VIs to the fact that they are owned by VIs.

5625   Some might say that it's because they actually have the more popular services. It's not so much the VI nature of it. It's that they, for whatever reason, they've ended up owning the services that so far seem to be connecting more with subscribers and advertisers.

5626   MR. MacMILLAN: All those points are correct and they all fit together. Also, they bought some of the most successful ones so that's how they ended up being owned by the VI players.

5627   But it's a circle. It's a circular thing. If you don't have the effective carriage you're not going to get much viewership and many of the Cat As, although they had to be carried, never got effective carriage and still don't have effective carriage.

5628   Our Category As don't have effective carriage with some of the major BDUs. Cottage Life is carried by one BDU as a Cat A in 3.5 percent of the homes by that major BDU.

5629   So if you don't have effective carriage, it's hard to get ratings and it is a vicious circle in that regard.

5630   THE CHAIRPERSON: Right.

5631   MS DANIERE: But my favourite sound bite from Kevin Crull this morning was that discoverability is akin to promotion. I thought he's exactly right. And the issue is, at least now repeated 14 times, is that we don't have any control over that discoverability.

5632   But did you just want to go to the stats, sir?

5633   MR. KHANNA: Well, actually I was going to the stats, but Mike mentioned it. I mean, the Cat A services with 3 percent penetration, how does that make any sense? You know, they have to carry a 40 percent CPE, the idea of which was to contribute back into the system. At 3 percent penetration it's not contributing anything from that BDU.

5634   So you know, there is a fundamental disconnect, we think, in that.

5635   THE CHAIRPERSON: Right. And let's not get into the math.

5636   But I take it from your perspective, at least conceptually if you're going to abandon as the working document suggests, Category A, Bs and carriage that -- and we can debate what the right ratio is, but you think that a ratio approach to independents versus -- or related companies and non-related is a way to get systemically to access as sufficient, if the right number is chosen I guess?

5637   MR. KHANNA: No, we don't think so. We think the linkage is but a small part of the solution and it doesn't provide for meaningful access.

5638   Just to that point of the Cat A I was saying, you know, the Cat A says it has to be carried. It doesn't say how or how meaningfully it's carried and can result and has resulted in a 3 percent penetration for a Cat A service.

5639   So the linkage rules alone don't do it. The linkage rules help and the proposed --

5640   THE CHAIRPERSON: They get you carried.

5641   MR. KHANNA: They help get you on the dial but that's akin to getting you into the app store.

5642   THE CHAIRPERSON: Okay.

5643   MR. KHANNA: You know, so what? There's 500,000 apps in the app store. It doesn't give you anything.

5644   So I think there has to be meaningful penetration and I think that's the next level up. So we don't think linkage on its own does the trick.

5645   MR. MacMILLAN: If I may add to that, the percentage solution that we've proposed has another aspect to it and that is in a world of specialty, of pick-and-pay and different kinds of bundles and packages, you could drive -- you can go blind trying to figure out all the different permutations and we are trying to think of some simple bright line rule that would not result in us getting an extra nickel and it would be not an administrative burden for the Commission.

5646   And that was one of the advantages that we saw of that simple percent. Even though that means we're probably going to decline, it would be very easy to administer.

5647   THE CHAIRPERSON: Right. And I noted your reference to simple administration. But we said in the PN that the regulatory measures should be not only as simple as possible to administer but also proportionate, easily administered and adaptable to change. You're of the view that your proposals are consistent with that?

5648   MR. KHANNA: Yes, not only consistent with that but we're specifically saying today that that penetration rule would be reviewed at our next licence renewal.

5649   THE CHAIRPERSON: Okay.

5650   Now, I was wondering, obviously that it's maybe the -- because it is called by shorthand the VI Code I notice that, keeping in mind the four principles I talked about, that you advocate for the regulation to apply to all BDUs in their wholesale dealings with independents. Yet, I got the very contrary impression that your concern was more with VIs and BDUs as opposed to some of the other, like TELUS and Eastlink and Cogeco and the CCSA members.

5651   MR. KHANNA: It's not a contrary view, but you are correct. Our concern is more with the VIs --

5652   THE CHAIRPERSON: Right.

5653   MR. KHANNA: -- but they are still a concern across the board.

5654   THE CHAIRPERSON: So when we look at rules of proportionality of the measure versus the nature of the problem, you're still of the view it should apply to all BDUs --

5655   MR. KHANNA: The reason --

5656   THE CHAIRPERSON: -- size and impact?

5657   MR. KHANNA: We are making an assumption based on recent experience that the effect of the VIs is felt on us even through the independent BDUs by nature of the affiliate agreements that they do between themselves. So if a -- if you know, a VI programming or media company requires a certain amount of penetration or certain rates or a certain bundle of services be carried and that affects the margins of that independent BDU, they also will look to recover from Blue Ant.

5658   So the effect of the VIs is felt across the industry and that's kind of why we proposed it this way.

5659   MR. MacMILLAN: Some of the issues that Bell mentioned or some of the concerns, rather, that they highlighted vis-à-vis the U.S. services wanting to get paid or, you know, delivered 75 percent paid for 100, you know, complex deals are made between the vertically integrated channel owners and the other distributors in Canada and has the exact effect on all of us that Raja alludes to.

5660   MS DANIERE: Also some of the rules we proposed obviously aren't relevant to non-vertically integrated players. The linkage rule, for example, would not apply.

5661   But something like the penetration rule, again, remember it's all relative to current penetration. So we're not putting an additional burden on any of those large distributors.

5662   THE CHAIRPERSON: Right. And the timeline you have established for that transitional regime is linked to the licence term of the various licences at play.

5663   Why that as opposed to a more -- if it's in reaction to a more systemic, across the system issue that you're dealing with, why link it to a hodgepodge of various licensing dates?

5664   MR. KHANNA: For the reason that we had to stick in a date and we've made up that one.

--- Laughter

5665   MR. KHANNA: And the reality is all of our licenses are in sync now and largely in sync with many of the independents. So we just chose a date. We could choose any date.

5666   MR. MacMILLAN: And we didn't want to, in choosing a different date, make it even more complicated by saying, well, actually the sooner the licence term then let's change our CPE or let's change our benefits and let's change, like, a variety of other parts of sort of the bargain that we had for those licence terms. So we just thought this was simpler and would have us not asking for as much.

5667   THE CHAIRPERSON: Right. But there is the point where I think we have got one foot in that time machine where in the old days, certainly, the Commission would regulate the whole sale largely out of that business except maybe for 9(1)(h) services which is a bit different.

5668   But we're, you know, making sure you have enough revenues to be commensurate with your content obligations. It's not something we've been in the business of in a little bit of a while.

5669   MR. KHANNA: We are not asking for anything like that on revenue. This is just purely -- if the industry is 20 percent smaller we'll have 20 percent less revenue.

5670   THE CHAIRPERSON: Right. Not in the presentation you've made today. I may have seen that in --

5671   MR. KHANNA: You're absolutely right. Our thinking became more precise based on the reading of the working document.

5672   THE CHAIRPERSON: I was wondering if, when you look at some of the changes, it's true that obviously you've made the point that some of the changes we're providing may have in your view some negative impact. But are there also possibly upsides for you?

5673   Opening the genre exclusivity, would it not provide you with an opportunity to morph your programing or purchase programming in a positive way so you can -- you could increase the value of the licence services you have?

5674   MR. KHANNA: We have -- yeah, there could be. I think that already the regime -- our point on genre exclusivity is that it's already a bit of a false, you know, concept. We have the --

5675   THE CHAIRPERSON: It is a challenge to police.

5676   MR. KHANNA: Yeah, and not only that. We have the genre protection around the travel category. We have maybe 5 percent of the travel content in this country. The big VIs own that content. One of them -- a different company than us owns the output agreement with the Travel channel in the U.S. The biggest travel show is on CTV.

5677   Like, there is no -- you know, when you have -- when you own 30 channels you can spread travel content amongst them and, as a whole, dwarf what we as a Category A genre exclusive channel can buy.

5678   THE CHAIRPERSON: But there may be an upside for you having a lighter regulatory burden as well.

5679   MR. KHANNA: There could be.

5680   THE CHAIRPERSON: Despite those environmental issues that in reality is the marketplace.

5681   MR. MacMILLAN: In theory it could be attractive for us to try to, you know, change from what we already have in order to take advantage of the -- if we did sort of just quit the genre protection concept.

5682   On the other hand, our problem is that we can only get delivered to homes via a handful of BDUs and it is those same BDUs that own the other channels that are the current occupants of those genres who will be loath to see us offering any kind of competition.

5683   So it's very, very hard. I mean, we're not frightened of big competitors. The issue is merely that the conduit through which we get the customers actually owns our competitive channels.

5684   THE CHAIRPERSON: Right.

5685   Now, in your written submission you had some specific language and amendments proposed to the code. Since your position has somewhat morphed and if I understand your point correctly, is that drafting will be important because you have a bright line test. You have to know which side of the line you're on.

5686   MS DANIERE: Yeah, we would propose to submit a draft set of regulations and proposals after this hearing. Really, we -- yeah, we actually have one drafted and we thought about submitting it today but then we thought --

5687   THE CHAIRPERSON: Well, you could do it for the 19th of September.

Undertaking

5688   MS DANIERE: Yes.

5689   THE CHAIRPERSON: Right, so other people could comment on it?

5690   MS DANIERE: Yeah.

5691   THE CHAIRPERSON: Okay, well, that's fair enough.

5692   MR. MacMILLAN: Could I just go back to the genre protection point?

5693   I mean, you're correct, I think, in sort of describing or imagining how we're thinking about it. And that's why in our original submission we were sort of blasé in a way about the genre protection point, per se.

5694   What got us very fearful was that combined with that in the new road map issued in August, was the idea of eliminating any access rights for that same channel at the same time as slashing the linkage ratio and at the same time as this sort of new pick-and-pay, skinny basic, that new marketing environment. Those things in combination make us very, very, very worried.

5695   The genre protection bit by itself we weren't that fussed about.

5696   MS DANIERE: Well, I would say -- and in addition, it was those things and then the lack of a quid pro quo. So there was a lack of any other protection that we saw as being meaningful.

5697   So you know, I don't want to come in here and say, "Throw out everything you've done. All of your rules are wrong". I think there's -- we all agree there are many things that are ultimately going to lead to better choice. What we're saying is we'd like to add on a few of the strategies we're putting forward.

5698   THE CHAIRPERSON: In the wholesale market as between BDUs and programming undertakings?

5699   MS DANIERE: Yeah.

5700   THE CHAIRPERSON: Are you fearful that some of the program categories you have, somebody could say, "Well, I'll launch my own" rather than taking yours?

5701   MR. MacMILLAN: Oh, yeah. Yeah, I mean, I think they already -- but we already compete. And we think we have a unique strategy of not just being a broadcaster but having multiple channels and ways of connecting with fans of our genres.

5702   THE CHAIRPERSON: So that's your way of reducing that or managing or mitigating that?

5703   MR. KHANNA: That is half the way. The other half is by being an international company. We've launched an international distribution business. We are -- we have the YouTube network around the world and we think as a small player that's what we need to do, is export our content.

5704   THE CHAIRPERSON: You get it to a larger audience and --

5705   MR. KHANNA: Yeah, and economically.

5706   MR. MacMILLAN: That is the glass half full view of it and a good one, and one we try to offer on most of the days. The other side of it is there is no doubt that being a small player without owning the conduit, without owning the pipe, puts us at a real disadvantage.

5707   THE CHAIRPERSON: Right. Since you have commented only on one portion of the bigger model, it's pretty hard for me to ask you what's the best idea; what's the worst idea, but give it a shot.

5708   MR. KHANNA: The best -- well, the best thing we read in the working document was that you were willing to add provisions to the VI Code. That's fantastic because we feel like it was a great effort to begin with but not quite workable.

5709   So I think that we will draft a new submission around that and hopefully we can get some things in there to give it some more teeth.

5710   And clearly, the worst thing in here was the math on this linkage rule, I think.

--- Laughter

5711   MR. MacMILLAN: Or the combo of the linkage rule, lack of access and genre protection all going away. That sort of perfect storm as we described it would be the worst part. Yeah.

5712   THE CHAIRPERSON: Sure.

5713   MS DANIERE: I'm going to add one more best. I think addressing -- it's the first time I've seen a commission address the inherent leverage inequity in negotiating affiliate agreements.

5714   In the past, we felt that that was something that was sort of, it's a commercial agreement between arm's-length parties. We don't want to go there. Figure it out. A fair principle.

5715   But it is heartening to see that we can actually go there.

5716   And, again, we'll be putting specific proposals --

5717   THE CHAIRPERSON: We may all regret the day that we thought that was a good idea, for the simple reason that, you know, the unfortunate part of pulling out of a regulatory solution is that you get pulled into a lot of issues, on a daily basis. So, we'll see how that goes.

5718   Mr. Vice-Chair...?

5719   COMMISSIONER PENTEFOUNTAS: Merci, monsieur le Président.

5720   That may not have been our best idea. But let's keep at it.

5721   Just briefly, will you -- I gather from your opening statement that you were somewhat surprised by the latency of a viable digital business model and you're, I think, to use your terms, you're looking for a buffer.

5722   What happens if that business model hasn't arrived in three or five years' time?

5723   MR. KHANNA: I think we're all --

5724   COMMISSIONER PENTEFOUNTAS: Or when will it arrive?

5725   MR. KHANNA: If I knew...

5726   In December 2016, we'll figure it out.

5727   No, I'm just kidding.

5728   I have no idea. I've been trying to figure out that one for about 18 years.

5729   And I think the point is we've made a ton of progress and we are trying new things and we are experimenting and learning, and there is real revenue, now -- not yet margin but actually dollars -- in that whole digital industry, which is an exciting change from seven years ago.

5730   So, now, the next phase is to figure out how to eke out margin.

5731   We know a few key learnings about the digital world. We know that it's all about it's a lower-margin business and, therefore, you need more scale -- and for us, that means you need to be international.

5732   So, there are things like that we have learned and we know and we are working on and building upon.

5733   But it's by my means a great stand-alone business.

5734   With very few exceptions, every interesting digital video business is fuelled by traditional content that has been funded through traditional funding regimes, whether it's licences of CMF dollars. Like, that is including Netflix. Netflix is subsidized by CMF, if you look at the Canadian programs that they carry.

5735   So, I think there is no question that we do not have a stand-alone margin-driven business, yet, that we can drive towards.

5736   COMMISSIONER PENTEFOUNTAS: The regulated world is still the launching pad for the digital and the international sales.

5737   MR. KHANNA: Absolutely. In trying to increase the possibility that in a few years we have sorted out or have got a better view on it, the odds are far better if we don't respond in this process and after it by saying, wait a minute, it's Netflix, therefore, the only thing we should do is cut CPE or cut hours of Canadian programming and take the view that it used to be of value to hold a Canadian broadcast licence, but that no longer is the case.

5738   It still is of great value to hold a Canadian broadcast licence and there still is great merit in CPE and Canadian programming on the air.

5739   If we all run away from that, we're running away from everything we have.

5740   So, if we're going to figure it out, it's going on the back of, actually, obliging us and helping us make sure that we are spending our time and money creating and presenting Canadian programming.

5741   COMMISSIONER PENTEFOUNTAS: And the biggest regulatory incentive to create that environment and help us compete for an OTT service, as an example?

5742   MR. MacMILLAN: Access to Canadian viewers.

5743   If we're really going to have -- we framed this discussion mostly in terms of consumer choice. But for a consumer to have an actual choice, they have to have channels available where there is discoverability, where they actually could, if they wanted, try out a show and look at it, as Kevin Crull was saying.

5744   But that's almost the single-biggest issue.

5745   COMMISSIONER PENTEFOUNTAS: On the issue on discoverability, it's my last question, knowing you guys are probably tired of waiting around all day.

5746   So, there's one BDU, VI BDU that has you at 3 percent penetration. And what is the highest penetration for that channel?

5747   MR. MacMILLAN: About 65 percent, I think.

5748   MR. KHANNA: It's 60.9 percent.

5749   COMMISSIONER PENTEFOUNTAS: Okay. And the overall average would be...?

5750   MR. KHANNA: Probably roughly about 30.

5751   COMMISSIONER PENTEFOUNTAS: And would that 60 percent be in the same region? The other BDU that has you at 60 percent penetration, as opposed to 3 percent.

5752   MR. KHANNA: Would that be in the same region?

5753   COMMISSIONER PENTEFOUNTAS: Geographic region.

5754   MR. KHANNA: If you like, we could confidentially file all this in total detail, next week.

5755   COMMISSIONER PENTEFOUNTAS: That's fine.

5756   Thank you, Mr. Chairman.

5757   THE CHAIRPERSON: While you're in the category of doing some homework, there's one thing I forgot to ask; and that is, with respect to the issues you raise, both in your written submission and your presentation, about satellite and uplink transport issues, I have no sense of materiality.

5758   Would it be possible for you to file that?

5759   MR. MacMILLAN: We would love to.

5760   MR. KHANNA: We would be thrilled to file that.

5761   THE CHAIRPERSON: I take it you'll do it in confidence, but that's your request to make.

5762   All right. Thank you.

5763   Those, I believe, are our questions.

5764   And, again, I apologize to you to have to wait around all day, but that's --

5765   COMMISSIONER PENTEFOUNTAS: May I ask another question, Mr. Chairman?

5766   THE CHAIRPERSON: Sure.

5767   COMMISSIONER PENTEFOUNTAS: I'm very, very sorry.

5768   This also struck me, that the linkage proposal is one question and the other question I forgot was, you're talking about Cat Bs in our three-to-one linkage. Well, the three-to-one linkage is on Cat Bs and the proposition is to do a two-to-one on Cat As.

5769   MR. KHANNA: The two-to-one on Cat As and Bs.

5770   MS DANIERE: That is a great clarification.

5771   We made the assumption that the new rule would apply to the new discretionary category, so it would be all As and Bs, all Cs, and it would be a two-to-one rule for all of those services.

5772   How's that?

5773   MR. KHANNA: Yeah, that's my understanding.

5774   MS DANIERE: So, what ends up happening is, originally, all of those VIs were --

5775   COMMISSIONER PENTEFOUNTAS: Can we just get you on a mic? Just move the mic over.

5776   MS DANIERE: Under the current rule, the VIs are required to carry all of our Cat As, which are a must-carry, and a one-to-one rule for all of their related Cat fees. That's one set of numbers.

5777   You go to proposed rule, it's all in and you divide by two. You get half of the total services and you end up with the declines that we've put --

5778   COMMISSIONER PENTEFOUNTAS: We'll take a look at the math again.

5779   Thanks so much.

5780   MR. KHANNA: Thank you for your time, Mr. Chairman.

5781   THE CHAIRPERSON: Thank you very much.

5782   Madam Secretary...?

5783   THE SECRETARY: Thank you.

5784   I will now ask the Canadian Media Production Association to come to the presentation table.

--- Pause

5785   THE CHAIRPERSON: Welcome, Mr. Hennessy, Mr. Thomson, and Mr. Miller.

5786   Just before you get started, Mr. Hennessy, I hope your health is well. I've read recent reports that, on the weekend. your head was starting to blow up.

--- Laughter

5787   MR. HENNESSY: You know, I knew you were going to say that, and you'll be glad to know that over the last couple of days, it's really just been rent asunder. But I'm well-medicated today, Mr. Chair.

--- Laughter

5788   THE CHAIRPERSON: Go ahead.

PRESENTATION

5789   MR. HENNESSY: Good afternoon, Mr. Chair, Commissioners.

5790   My name is Michael Hennessy and I am president of the Canadian Media Production Association.

5791   With me today, on my right, is Jay Thomson, our VP regulatory.

5792   Also with me, on my left, is Peter Miller, who prepared two of the evidentiary reports we and others filed with our respective written submissions; namely, the environmental scan and program rights papers.

5793   Mr. Chair, as representative of the Canadian English-language TV and film digital media production industry, we wish to focus our comments today primarily on two objectives you identified for this proceeding: maximizing choice; and fostering compelling programming.

5794   In particular, we wish to focus on how to address the tension that will arise between the two objectives once pick-and-pay is introduced.

5795   We use the word "tension" because, absent mitigating action, maximizing choice and flexibility through pick-and-pay will likely be incompatible with fostering the creation of compelling, innovative, and diverse Canadian programming. That is certainly what we read from the overwhelming message from the extensive evidence you have before us.

5796   Our submission tries to make achieving those two objectives more compatible, as I think is the goal of paragraph 32 of your original public notice.

5797   It's very clear from the evidence that the offering of channels on a pick-and-pay basis will reduce broadcaster revenues and, all other things being equal, the more broadcaster revenues are reduced, the less money they will have to invest in compelling programming, whether that's Canadian or foreign.

5798   In order to mitigate this impact, we submit that the Commission should pursue only those regulatory changes absolutely necessary to implement pick-and-pay.

5799   Specifically, we submit that you should refrain from making other changes to the current system that would further serve to reduce revenues needed to support the creation and presentation of Canadian programming across all platforms.

5800   In this respect, we appreciate in your recent notice you propose maintaining your current approach to authorizing non-Canadian services for distribution in Canada.

5801   We strongly support that proposal.

5802   We also appreciate that you've now proposed, as one option, that exhibition obligations would continue for the evening broadcast period.

5803   We see some logic and value in that approach.

5804   At the same time, however, we are concerned about its impact on children's services, where there should still be an obligation to broadcast during the daytime.

5805   Lastly, we appreciate your apparent unwillingness to permit some broadcasters to use this forum to continue their attempts to undermine terms of trade.

5806   Terms of trade is as important a safeguard for independent producers as the VI Code is for independent BDU users, like TELUS and Cogeco, and for independent broadcasters, like Blue Ant.

5807   There are still additional proposals on the table, however, that we cannot support.

5808   Specifically, we submit that you should not eliminate or limit simultaneous substitution, unduly restrict penetration-based pricing, or constrain the abilities of BDUs to add important programming services to basic or to recover their legitimate basic service costs and, finally, alter your long-standing preponderance policy.

5809   None of these additional changes, in our view, are necessary in order to give consumers more choice and control through pick-and-pay.

5810   But each one of them would exacerbate the negative impact that pick-and-pay will have on the revenues in the system and; therefore, undermine the system's ability to support Canadian programming.

5811   We also struggle with how the elimination of the genre exclusivity policy would be implemented.

5812   In particular, what would happen to the existing service-specific obligations, like CPE and exhibition levels, which differ per genre, should a service morph from, say, a genre with low obligation to one with higher requirements?

5813   We don't know.

5814   Let me start with simultaneous substitution.

5815   As the Commission has long recognized, simultaneous substitution ensures that broadcasters can fully and legitimately exploit the exclusive territorial programming rights they acquire, whether these are rights for drama, lifestyle, reality show,s or live sporting events, like the Super Bowl.

5816   In our view, there is no logic to the Commission encouraging broadcasters to offer more compelling content, including more local programming, while, at the same time, proposing to undermine the broadcasters' ability to finance that content.

5817   But that is what would happen by eliminating simultaneous substitution.

5818   We submit that the Commission should maintain the current simultaneous substitution rules. To do otherwise would be inconsistent, in our view, with the objective of fostering compelling Canadian programming, including local.

5819   Second on our list of unnecessary change: undue restrictions on penetration-based pricing.

5820   We submit that broadcasters should retain the opportunity to negotiate penetration-based rates in order to recover the subscriber and advertising revenues that they would lose as a result of their distribution on a pick-and-pay basis.

5821   Otherwise, they will have even less to spend on Canadian programming.

5822   But that being said, just because broadcasters should have the opportunity to negotiate make whole rates doesn't mean that they will succeed in doing so.

5823   But, in our view, that is a market-based call.

5824   Nevertheless, if a broadcaster could not achieve a rate that would generate sufficient revenues to at least partially offset its losses, the net result is less money.

5825   Third, Mr. Chairman, and along similar lines, we submit that BDUs should not be required to price their basic service in a manner that would preclude them from recovering their legitimate costs or from including services that contribute most to the objectives of the Act.

5826   We appreciate the Commission has now proposed the possibility that more services could be offered on a capped skinny basic.

5827   We submit, as is the case now, non-Canadian services on the eligible satellite list should not qualify.

5828   But whatever the rate or skinny option, we submit it's important to ensure mandatory inclusion of children's services, at a minimum, and the option to add other Canadian services that, focus, particularly on other forms of PNI, whether Canadian dramas or documentaries.

5829   Like the Shaw Rocket Fund and the Youth Alliance, we believe that while children's programming is essential for content diversity, it is also at risk in a pure marked-based, pick-and-pay environment.

5830   In our view, we all pay taxes for kids' education, regardless of whether we have children in school, because it's an investment in the future.

5831   Surely, the same applies to investing in Canadian programming for younger citizens.

5832   You will have noticed in our written submission we also identified Canadian theatrical films as an at-risk genre.

5833   Being mid-way through yet another successful TIFF, I'd like to let you know that we are currently working with broadcasters to come up with a mutually-beneficial, incentive-based approach to getting more broadcaster support for Canadian films.

5834   Fourth, we continue to submit that the Commission should maintain its policy of requiring preponderance at the subscriber level.

5835   In a pick-and-pay model, preponderance only at the carriage level would mean that beyond skinny basic, subscribers could only opt for foreign services.

5836   In other words, they could effectively abandon the Canadian system -- and, frankly, we cannot fathom how that would achieve the objectives of the Act or foster the creation of compelling and diverse programming.

5837   There is, in our view, no technical impediment to maintaining the current preponderance rule in a pick-and-pay environment. The current rule is working now, even where BDUs offer pick-a-pack options and limited pick-and-pay.

5838   Mr. Chairman, having identified the changes we submit should not be made, I want to speak about an additional change that should be made.

5839   In our view, even if the Commission accepts the recommendations I've just outlined, the fact remains that pick-and-pay will still reduce the system's ability to invest in Canadian content and platforms -- unless, we submit, the Commission turns to other ways to generate revenues from elsewhere in the system.

5840   One way that has been discussed to mitigate that forthcoming drop is to require contributions from all services offering broadcasting services in Canada, including OTT subscription-based SVOD services, both Canadian and foreign.

5841   You proposed that licensed Canadian broadcasters would have to include their online broadcasting revenues when calculating CPE obligations.

5842   We support that approach.

5843   But we also submit that fairness dictates a similar approach for foreign online services broadcasting in Canada.

5844   We know Netflix, the predominant digital or broadband TV broadcaster in Canada, collects hundreds of millions of dollars in subscriber fees from Canadians.

5845   It is the emergence of such foreign OTT SVOD services broadcasting in Canada that requires a debate as to whether and, if so, how they should contribute to, and participate in, the Canadian broadcasting system.

5846   Please note we are serious when we speak of foreign OTT services, not just contributing to the system, but also participating in it.

5847   One argument foreign OTT services often use is that it would be unfair to require them to contribute to Canadian programming when they cannot benefit from access to the Canadian programming supports funds, like the CMF.

5848   And while presently there may be certain regulatory and tax barriers that would limit foreign OTT from participating in the system in that way, we submit we need to at least explore how to remove those barriers in the new broadcasting environment, rather than simply abandon the concept of OTT contributions -- and that doesn't have to be in this proceeding.

5849   But, in saying all this, Mr. Chairman, just to ask everybody to put the brakes on, on Twitter, in saying this. We're more than aware that no matter how much more money foreign OTT services take out of the Canadian system right now, requiring them to contribute something back to the system has now been clearly taken off the table for this proceeding.

5850   Some might argue that, perhaps, it was never on the table.

5851   So, we are proposing another, more politically-palatable, and perhaps more significant, way to ensure that the balance between choice and compelling content can be maintained.

5852   As an alternative, we recommend, again, that the CRTC re-apply the tangible benefits policy to BDU acquisitions.

5853   Mr. Chairman, in your recent benefits policy review decision last week, you noted this idea was not covered within the scope of that proceeding and that sufficient evidence was not provided.

5854   In our view, however, re-applying the policy to BDUs may actually be the best way to offset the impact of pick-and-pay arising out of this proceeding.

5855   Let me put it this way. The line between broadcasting and broadcast distribution has blurred, due to digital developments. I think we all agree that our broadcasting system is in for a period of prolonged disruption, with or without regulatory intervention, and we believe, as a consequence, there will be further consolidation, not only as programming services are sold, but, also, as broadcasting distributors change hands.

5856   This suggests to us that if the Commission re-applied its benefits policy to BDUs, the end result could be hundreds of millions of incremental dollars to the CMF and independent funds to help achieve the Commission's over-arching objectives for this proceeding.

5857   Mr. Chairman, before concluding, I'd like to step back and just look a bit at the big picture.

5858   In this respect, I think it's important for all us, as stakeholders, to note that in this proceeding we're really focused on more choice in channels on demand and not so much about programs on demand -- and that's appropriate because the market has already moved to provide more choice in programs on demand.

5859   PVRs, VOD, SVOD, broadcaster websites, Shomi, Netflix, and iTunes are only a few of the ways the market is already responding to consumer demand by delivering more programming choice. This is happening without regulatory intervention. This reality is important to appreciate because some argue that the future of broadcasting is more about programs on demand than channels.

5860   We suspect it's a bit of both: programs and channels on demand.

5861   However, we also submit that because there is already a functioning VOD/SVOD/broadband TV market delivering personalized choices, in terms of individual programs, the Commission can proceed more cautiously in introducing choice, in terms of channels.

5862   This, to us, is a critical point because the revenues to support compelling shows, as others have said, still come, primarily, from subscription and ad revenues derived from bundling channels. This is the case even as VOD is becoming an increasingly important option.

5863   Bundling, in our view, not only generates revenues to support Canadian programming, it also lets neighbours float each other's boats, from the preference of one household for science to the preference of the neighbour for kids' programming.

5864   So, the more we unintentionally diminish the value of channels and bundles, the more we may hurt the delivery of compelling Canadian content on Canadian channels, absent offsetting measures.

5865   Even as you move to implement pick-and-pay, it's also important to note that there are already financial pressures on broadcasters that are compounded by the programming cost increases they're already going to face to meet consumer demands for the existing shows they have.

5866   Specifically, broadcasters already have to spend more on acquiring the rights to their programs in order to offer consumers catch-up opportunities, stacking, and multi-platform access.

5867   That's what the consumers are demanding, and that's going to cost them money.

5868   So, in conclusion, as we have said, there are two ways in which you can mitigate the negative impact which, according to be evidence, will be inevitable under pick-and-pay, and we advocate you adopt both.

5869   First, don't do more than you have to, to introduce pick-and-pay. Don't make changes to the regulatory framework for TV that are not absolutely necessary to offer this choice and flexibility.

5870   And, second, pursue new sources of financial support for Canadian programming to replace, or at least partially offset, the revenues that will disappear under pick-and-pay.

5871   Mr. Chairman, Commissioners, we submit that if the Commission does not accept the need to mitigate lost broadcasting revenues, you won't be able to achieve your twin objectives of both maximizing choice and fostering compelling Canadian programming.

5872   Thank you.

5873   We would be pleased to respond to your questions.

5874   THE CHAIRPERSON: Thank you for that.

5875   I will start off with some questions.

5876   You know, words chosen matter, and I've noticed, both in your written submission, and even today, you've chosen to -- and I know you don't do things by accident, Mr. Hennessy -- you've chosen to describe the Commission's proposal and preliminary review as pick-and-pay, when, in fact, it's, wouldn't you agree, a little bit more elaborate than that.

5877   It also involves, potentially, a skinnier basic, it involves choices of pick your own pack, and the choice even, for those that would prefer, of staying with their status-quo offering.

5878   Why have you chosen to call it pick- and-pay?

5879   MR. HENNESSY: Well, I think -- well, you know, pick-and-pay can be pick-packs, build-your-own package or à la carte, so I would define it that way.

5880   You're right about skinny basic, and I did not intend to ignore that as an element of choice because you're introducing it for affordability. But I do believe that if -- when I read your report to the government, I read, you know, the initial government request that says we want the ability of the consumer to be able to pick more channels -- or the channels they wish without dramatic impacts on jobs.

5881   The political expectation, what I read from the Commission, what I read in the media and what I sense from consumers, is that the predominant issue, in terms of choice, is about channels on demand. So that's really why I pick it. I believe that completely.

5882   THE CHAIRPERSON: Well, I won't make any comments about what people might be saying elsewhere, but let's just say that I think we're well beyond our response to the government and all that.

5883   What we've proposed is a set, a package, of more choice, it's not just about pick-and-pay.

5884   MR. HENNESSY: I know there's -- you know, there are -- well, that -- you know --

5885   THE CHAIRPERSON: People may choose to label it elsewhere in other places, but I don't think it's fair in this hearing room to call it anything other than what it is.

5886   MR. HENNESSY: Well, let me --

5887   THE CHAIRPERSON: It's got more choice and flexibility.

5888   MR. HENNESSY: -- then let me go back to -- let me go back to -- and we can make this all mine for now, if you wish, because I'm not trying to unnecessarily offend. I'm trying to suggest that, if one looks at objective one and two of August's PN, the first two overarching principles, objectives, to discuss are, really, choice, which I think said choice through pick-and-pay, and maximizing compelling Canadian -- the exhibition and production of Canadian programming, compelling Canadian programming.

5889   Then, as I said at the beginning, if you take the guidance of the original public notice, and paragraph 32, which -- and the point that, as you were saying, when you take the environment -- and I don't disagree with much of what you said before, that in the environment:

"Taking into consideration the environment described above, the Commission considers that there may be risks to public policy objectives if its current approach remains unchanged."

5890   I believe, again going back to where a lot of this came from -- and I'm not saying all of it came from there -- that there is also a significant risk in doing a multiplicity of things all at the same time that may actually, if all done together, exceed the risk that would occur from doing nothing.

5891   THE CHAIRPERSON: Right. Okay --

5892   MR. HENNESSY: And I think that the --

5893   THE CHAIRPERSON: -- I'll get back to --

5894   MR. HENNESSY: -- biggest expectation from people about doing something is pick-and-pay.

5895   THE CHAIRPERSON: Right. I'll get to that a moment.

5896   Now you've mentioned that you've filed two reports with your submissions, and a bit like with our colleagues from Blue Ant I'm faced with a conundrum because some of these reports have statements to the effect, even though they appear to be your evidence, that say they're not necessarily your views.

5897   I'll give you the example of Mr. -- the environmental scan Mr. Miller put forward. He's got a note saying:

"These are the views of the author and should not necessarily be construed as representing the views of the commissioning parties."

5898   Which I guess would include you.

5899   So do you agree or you don't agree with the evidence put forward in those three reports?

5900   MR. HENNESSY: I do, I do agree with the evidence. You may find a quote or two that I don't, but in general I do. And there were -- you know, as it said, there were a number of us that came together so we could finance evidence, and, you know, a lot of it, at the end of the day, we left certain conclusions to Peter, because I trust his judgment.

5901   THE CHAIRPERSON: Okay.

5902   MR. HENNESSY: So if you want a -- if you want a definitive answer, I'll stick with the agree, if that's helpful.

5903   THE CHAIRPERSON: Okay. Well, if there's anything -- because I'll put a couple of statements to you, and I was wondering if you're -- as the intervenor, the CMPA agrees with them.

5904   For instance, in the environmental scan, at page 6, this is paragraph 2.12 -- well, first of all, 2.11, on page 5, it's says:

"Non-controversial observation on the future of TV would be that it's not going to fundamentally change overnight;"

5905   Would you agree with that?

5906   MR. HENNESSY: Yeah. I think that with the -- with, you know, the block that we exist in, the -- you know, the stakeholders that are generally here before you, it's going to evolve -- you know, that the balance of revenue over the next two years is going to -- it won't be stable, but I think that it's not going to change anymore -- at a, really, a lot of greater rate than it has.

5907   The world outside is changing radically, but in terms of the two things crashing into each other, there is still, in the short run, a certain amount of time, absent, you know, some of the things that might occur out of this hearing.

5908   THE CHAIRPERSON: So are you suggesting that the unlicensed part of television will change quickly overnight --

5909   MR. HENNESSY: Beyond the licence --

5910   THE CHAIRPERSON: -- keeping in mind that our definition of "television" has been actually quite wide, not just the traditional --

5911   MR. HENNESSY: M'hmm.

5912   THE CHAIRPERSON: -- licence part of the system.

5913   MR. HENNESSY: Well, I think it has been -- you know, we're talking about, say, Netflix, iTunes, the emergence of smaller niche Netflixy-type services?

5914   THE CHAIRPERSON: Yes.

5915   MR. HENNESSY: I think that's -- I believe that's happening --

5916   THE CHAIRPERSON: You include that in your notion of television when you're speaking?

5917   MR. HENNESSY: No, I was thinking more about the old -- well, I certainly am. Peter, maybe you can tell me if we diverge here, but I was thinking more in terms of the television universe that falls under the regularly rubric.

5918   MR. MILLER: Mr. Chair --

5919   THE CHAIRPERSON: Maybe we should ask the person who wrote the report.

5920   MR. MILLER: Sure -- I think the statement is made in the aggregate, so while elements --

5921   THE CHAIRPERSON: The traditional and the emerging?

5922   MR. MILLER: Together. So in the aggregate, there wasn't a massive change. Components, obviously, are very new, changing massively, but in aggregate there wasn't a massive change.

5923   THE CHAIRPERSON: Okay, that's how I had read it.

5924   Based on that interpretation, do you agree?

5925   MR. HENNESSY: Yeah.

5926   THE CHAIRPERSON: Yes, okay.

5927   Then on page 2.12, it says:

"That consumers are largely creatures of habit who do not change these habits unless something materially better comes along, and even then it takes time."

5928   Do you agree with that statement?

5929   MR. HENNESSY: Yes. Yeah, I guess, and I'll give you a quick example.

5930   There may be as many as 4 million Netflix subscribers in the country, so it's a significant number, and it's, you know, had probably hundreds of millions of dollars going to Netflix. And yet while we've seen -- you know, while we are starting to see a decline, you know we've seen growth disappear, and now starting to cut into the -- you know, cut to the bone of the industry, it's been a very gradual thing.

5931   I think the reason for that is, number one, that there's still tremendous value in the system; and number two, that in any system -- and, you know, I was around when we deregulated long distance competition -- there is a period of inertia after you introduce competition and options before you start to see a significant take-up.

5932   THE CHAIRPERSON: Well, it's, in fact -- and I'll get to long distance -- that was a point I was going to make -- in a second and ask you question --

5933   MR. HENNESSY: I was giving you that segue --

5934   THE CHAIRPERSON: -- but you anticipated that already.

5935   No, I was -- my question about this quote is more with -- and it builds on the conversation I had with the folks from the consumer groups a little earlier -- as we go to an environment with more choice for subscribers to choose the bundling packages or the individual services that makes more sense for them, that we aren't going to be suggesting that everybody has to go out, you know, on the 16th of December of a given year and reselect all their channels, that we will assume that somebody who wants a more selective choice would go out and make that choice.

5936   Coupled with this statement, one would think that it's not going to be such a dramatic turnover overnight.

5937   MR. HENNESSY: It is -- no, and I don't want to suggest it is a dramatic turnover overnight, but it does -- it affects the system -- you know, the internal working of the system, I think, sometimes faster than it impacts some of the consumer market.

5938   So what I can almost guarantee, you know if past it prologue, that broadcasters will become, as those things get closer and closer to implementation, more and more uncertain as to how much and what type of programming they want to commission or put into development relative today till they have a better understanding of what the market's going to be like, how the street will react in terms of share price, and, ultimately, what consumers do.

5939   Uncertainty always tends to slow down the reaction of parts of the system.

5940   THE CHAIRPERSON: Right.

5941   MR. HENNESSY: That would be my first worry.

5942   THE CHAIRPERSON: Okay.

5943   Now I'll give you an opportunity to respond to this, but one might conclude, reading your overall submission, that the impression it may leave is that, okay, if you really, really must give consumers more choice, okay, we can live with that, but please don't make any other changes.

5944   You know, you even say: "We submit that it would be" -- this is at page 9 -- page 7 of the -- paragraph 9, at page 7:

"We submit that it would be more prudent, and in the end more constructive, to pursue a series of incremental changes which are regularly assessed than attempting a singular dramatic overhaul."

5945   To some it might look like you're trying to delay change.

5946   And you mentioned earlier -- and I believe you were at the Commission back then when events occurred in the telecom sector -- where there was a roadmap: the Commission progressively got out of terminal equipment, then allowed for long distance competition, and then were changes about the rate base, splitting the rate base, and price cap and one and two, and that was an entire process.

5947   And it wasn't just an economic process, because there are also social issues at play, which you would know of, that we are trying to manage as an institution because there was an ultimate outcome.

5948   I'm wondering if your point about prudence is just: okay, do the choice on flexibility, but don't touch anything else, or have a more measured rollout for the other aspects of it and start another big hearing in two years about the future of television.

5949   MR. HENNESSY: No, I don't think quite that. Some things I question whether we really have to do, given where I think the market is going.

5950   But let me start with the -- because I did, I joined the Telecom Branch just around 1982, just after the terminal equipment decision came in.

5951   I would say that the Commission having a roadmap might be a bit of a strong statement. I know I may be one of the few people left in the room, apart from one of the commissioners sitting here for a second time. But we actually internally within the Commission, both at the staff and Commission level, for a few years in the mid-eighties, until about 1990, it was kind of a bloodbath between people who believed if you made changes to allow more competition in the long distance market you would kill the subsidy that ensured that people had very low local telephone rates. So they were back and forth.

5952   Over time there was an increasing belief in the importance of competition and choice, and I think it really culminated at one point in Decision 92-12, which was the long distance competition decision, which occurred across the country, but in this room.

5953   It was a hearing. Actually, we had 50,000 page of evidence and transcripts really to decide not the mechanics of how to make things happen, but a decision to move ahead, which is a bit like right now, and it was really -- experts from all over the world discussed whether or not competition was a good thing and, you know, what the impact of competition on total fact or productivity, market stimulation, elasticity, all these kind of things. We sawed it off in the middle usually.

5954   What happened was -- and this is where I said, you know, the problem sometimes with roadmaps is -- we had, I think, philosophically, as a Commission in support of -- or the staff, and certainly the commissioners as well, that competition was a good thing and we should move forward. What we failed to do, when you think of that considerable amount of evidence -- and these were in the days when you had lawyers cross-examining witnesses, I mean the hearing itself was an eight- or nine-week process -- was we didn't get into the mechanics because we spent so much time fighting on the principle that we didn't try to figure out: well, what happens -- you know, if you do x, then what happens?

5955   An example of that, to bring it to the present, would be when we said, you know, there are problems when you think about genre exclusivity, not from a policy perspective, but from implementation, because it has a dramatic impact on how CPE and exhibition, all these other things that are in people's condition of licence, change and how you do one thing impacts the other.

5956   So my guidance to that would be I think you already have the principle. You know, we're not here to say, Well, we looked and pick-and-a-pay could be really bad for producers because we're going to -- we'll have less money. Yes, it absolutely will probably produce less money over a prolonged period of time for producers, but that's why I'm spending more and more of my time focusing outside the country with our members and looking at opportunities to sell into -- right now I have a project to sell into 120 digital platforms like Netflix around the world for every possible genre, and trying to get the leap on others to do this, because it's inevitable.

5957   So that's why we're -- we're not here to say, you know, Oh, pick-and-pay's bad. Pick-and-pay is inevitable. It reflects consumer choice. It's wanted. It has political, media, social media support, I think of the Commission, if I read between the lines, and let's talk about: how do you make it work? So forget about, you know, like, whether or not it has an impact. Let's just -- how do you make it work --

5958   THE CHAIRPERSON: But I think you're making --

5959   MR. HENNESSY: -- and how do you achieve section 32?

5960   THE CHAIRPERSON: -- you're making exactly my point. Back then the balancing had to be maybe competition, and the impact on that --

5961   MR. HENNESSY: M'hmm.

5962   THE CHAIRPERSON: -- due to affordability, or high-cost areas and those sorts of issues. We're maybe not balancing those issues in this case, we're balancing the greater flexibility and choice, on the one hand, and making sure we continue to produce Canadian-made --

5963   MR. HENNESSY: Yes.

5964   THE CHAIRPERSON: -- content, so -- and that's --

5965   MR. HENNESSY: Absolutely.

5966   THE CHAIRPERSON: -- and, therefore, there is some benefit to think about -- not just saying, Well, we shouldn't talk about certain issues, which may be the impression your submission leaves.

5967   MR. HENNESSY: Okay. No, and that's why, you know, we tried to boil things down and very much said, If you're going to do A, we suggest don't do B, C, D, E -- I think that's four -- and then consider something dramatic to actually change the contribution level.

5968   And I'm not saying -- that's not going to fill up the tank necessarily, but it does -- you know, that, in my view, is a plan. So there are things like we have in our submission, where we talk about PNI -- and I'm happy to talk about that today -- but we talk about PNI and subcategories and how do you ensure that there's actually money flowing to original content.

5969   And most of that we say, Look, you know, we got -- in two years, we're going to be back up talking about group licensing. We still haven't seen what the data is on the spend on the subgenres, which -- you know, we raise it at many hearing, and you can put that off. You know, you can accept the principle that -- or not, as, you know, I'm sure there will be some questions on why is PNI important. But if we accept that principle, then the place to work on it is here, is, you know, in two years, 2016, when we're doing the Group Licensing Framework.

5970   So there are things that I think that, you know, you can't -- I don't believe you can do it all at once. I believe you will never get to December 2015 if you try to jam too many of those things together, because, as you started to hear today, and I'm sure you will continue to hear, people will start to talk about the mechanics, and say, Well, if you push this button, you're going to have fix these things -- or not fix them, but address them, and it becomes -- it's going to get harder and harder.

5971   And you don't want to lose sight of the things -- you know, the consumer expectation at the end of the pipe, so what we're trying to say is prioritize.

5972   THE CHAIRPERSON: Right. And what I'm saying is perhaps we can also prioritize, make decisions, but not necessarily implement them all at the same time, and roll it out over a period of time so you don't shock the system.

5973   MR. HENNESSY: It might not be too different from what I'm saying. It depends, of course, what decisions you make, but...

5974   THE CHAIRPERSON: Of course.

5975   MR. HENNESSY: But that's your call, at the end of the day, not mine --

5976   THE CHAIRPERSON: Yes.

5977   MR. HENNESSY: -- and you know that, and I do, too.

5978   THE CHAIRPERSON: Right. I just want to make sure you're not suggesting that we ignore some of these issues entirely, which I don't think is what you're saying.

5979   MR. HENNESSY: You know, beyond the issues I raised or that -- does it seem like --

5980   THE CHAIRPERSON: Well, all the --

5981   MR. HENNESSY: -- I'm ignoring them?

5982   THE CHAIRPERSON: -- all matter on the PN.

5983   Look, the impression is, look, if you really -- I'm not kidding, this is the impression that my read was is if you really much have more choice to consumers, we'll hold our noses, but don't change anything, particularly nothing that affects our money flow, so we can continue to make tonnage of Canadian content.

5984   MR. HENNESSY: No. I hear what you're saying. No, that wouldn't be right. I mean, if I was going to take that position, or let's say what you sometimes take as the historical position of producers at other hearings, I would have started by saying, Oh, pick-and-pay is really bad. But, as I said, we're already into a program --

5985   THE CHAIRPERSON: Right.

5986   MR. HENNESSY: -- on-demand environment.

5987   So, like, I think, you know, it would be -- kind of I'd be standing on my -- it's been hard to work for a whole bunch of different people in the industry, but I have some fundamental principles. And, you know, I was about choice at the Commission in the mid-nineties when there was no competition, we were just starting to open things up, and I've managed to carry that with me wherever I go --

5988   THE CHAIRPERSON: Right.

5989   MR. HENNESSY: -- and I still got it.

5990   THE CHAIRPERSON: But the reason I wonder whether it's not -- your push in this proceeding is not just about building the amount of money available for producers, independent producers, is that, you know, the Commission on a number of occasions in its PN asked: How do we measure success? And correct me if I'm wrong, but I only saw at paragraph 186 that the measure of success was anywhere linked to connecting with audiences, whether Canadian or foreign.

5991   At paragraph 67 and paragraph 105 of your submission, it was all about volume of dollars available. Even today, your submission's about finding more sources of money, and I'm wondering whether, in fact, is more money really the issue --

5992   MR. HENNESSY: I'm not looking for more money. I fully expect that there will be less money in the system and there will be less volume in the system and there will be less channels, and none of those things in and of themselves -- even though I may have some members that would worry, I don't think that any of those things are remarkable.

5993   They're all things that, you know, the CMPA board expected to start happening when they hired me. It's why we're doing the digital media project. It's why we're doing a project with CMF to see about how you develop a market for creating original product online. It's why I'm working with Telefilm and CMF about selling things overseas and, you know, looking -- very much looking beyond the borders. Because the world -- you know, to your point, the status quo is not an option. I totally accept that. What I'm trying to say is, recognizing that there's less, there is no reason, necessarily, as we progress to exacerbate it.

5994   Let me use one concrete example, if I may, and that would be on simultaneous substitution. To me, simultaneous substitution -- dropping simultaneous substitution, has very little to do with choice, at least relative to the importance of respect for and protection of the territorial rights that Canadian broadcasters have bought legitimately as -- you know, as you're going to see from American sellers who come here and tell you, We sold them to those guys. In America we'd probably have more blackouts in terms of distant signals coming. But we have a regime in Canada.

5995   And so I'm saying, why would we undermine the, you know, territorial rights? It will be eroded over time by the Netflix's of the world. But why would we -- why would be speed that up? Why would we speed up that erosion ourselves through our own regulatory system? And isn't the consequence of doing that when the conventional broadcasters are at zero profitability -- isn't the consequence that they're just going to have even less money to spend on things like local programming, which is Objective 3 of the four you set?

5996   So, it's -- we're trying to think like, okay, what do -- you know, because we started with the thing you don't want to -- you know, if people are unhappy with the system, and there are obviously some people that would much rather watch the Super Bowl ads and would find it kind of contemptible to say to them, well, you can get it, you can watch all the Super Bowl ads on the internet. They'd actually like to see them interspersed in the game. I get that.

5997   I get that, but, you know, again, it's the tradeoff -- I go back to that paragraph 32 -- is the risk of the erosion and the impact that it's going to have on local programming on conventional channels, is that worth the fact that you have complaints about people that are annoyed about the fact they don't get Super Bowl. That's the tradeoff.

5998   THE CHAIRPERSON: Well, perhaps we could get back to the question I was asking, and this is the impression you have left, that it's about getting more money into the system, because it's the indicia of success that you've identified, and you've made at least two proposals with seeking a financial contribution from just non-Canadian OTTs, if I understand you correctly.

5999   MR. HENNESSY: Well, I said, you know, if you read it carefully you carefully, I said that's where we were going. But having followed the proceeding and the, you know, media around it, that there's no point in pursuing that. We're not pursuing that.

6000   THE CHAIRPERSON: But you are also suggesting that we should get a financial contribution, and you really got this from the museum of unsuccessful past hearing submissions, financial contribution --

--- Laughter

6001   THE CHAIRPERSON: -- from foreign services added to the satellite list, in your written submission. You haven't mentioned it this morning.

6002   MR. HENNESSY: You already killed that. As far as I am concerned you killed it when you put down that proposal that we would have the status quo when it comes to more entry on a channel basis, which I think is a good thing because we got more entry on a non-channel basis, so you know a non-channel entry on a -- or that kind of -- you know, the Netflix, etcetera, kind of entry is the future channels, I think we all recognize are, you know, in some respects, disappearing. They won't totally --

6003   THE CHAIRPERSON: Now, you may have heard my conversation with another submission -- intervener about -- and maybe you've done some studies on this, and I'd be curious about, foreign OTTs and their contribution to, and payment of HST when goods are serviced, so what --

6004   MR. HENNESSY: There is a -- the federal government is right now doing a post-budget exercise review on e-commerce, because right now they're not, you know, paying sales tax in the country. It's not just Netflix, it's much broader than that digital e-commerce thing. So they do at the same time -- I'm almost certain that Netflix pays income on the households that subscribe to it in Canada.

6005   That's probably not absolutely correct because if, you know, the MTM report that you use and the monitoring report that came out last week, they also suggest that perhaps as many as 30 percent of the subscribers to Netflix in Canada are actually subscribing to the US service, unbeknownst --

6006   THE CHAIRPERSON: Through some sort of proxy.

6007   MR. HENNESSY: So Netflix is actually probably, you know, let's say collecting, you know, a hundred million dollars from Canadian households that are not aware of, that is probably paying tax in the States, but really owes tax to CRA. But, that's not my problem, I just thought I'd flag it for you.

6008   THE CHAIRPERSON: Right. There is also a discussion -- I'm trying to remember, your association might be in a better position on this, is, if you go back to 2004, the number of hours that were spent by Canadians per week on audio-visual content through VCRs or DVD players, before the collapse of the home video market. Do you have numbers on that? Maybe you could do that, I'm sure, with all the research the association --

6009   MR. HENNESSY: What is it you are looking for us to --

6010   THE CHAIRPERSON: The average number of hours per week back in 2004 that were spent watching home videos on DVDs or VCRs, those that had them at the time, still.

6011   MR. HENNESSY: I could hunt around for that. I know we wouldn't have that on a report, but it might be a nearest thing. But we'll look. I think you're asking us could we at least give it a shot?

6012   THE CHAIRPERSON: Yes. I am not expecting you to have it at your fingertips.

6013   MR. HENNESSY: One thing, if I could, Mr. Chairman, you know, you keep coming back to the subject of money.

6014   THE CHAIRPERSON: Well, it's because you did.

6015   MR. HENNESSY: Well, I think --

6016   THE CHAIRPERSON: You did in almost every page.

6017   MR. HENNESSY: -- it's is a segue.

6018   THE CHAIRPERSON: Have you mentioned audiences once?

6019   MR. HENNESSY: It's a segue. The business of broadcasting is a money business.

6020   The business of creating content is a money business. You know, ultimately, it's driven by, you know, business models that, say, to produce a show that maybe cost, you know, two and a half million dollars an episode, you kind of hope you're going to make a little more to, you know, cover your other costs -- not just producers, but everybody in that tree.

6021   And, so it's great to say well, you know, this thing over here is really super, but if the models aren't actually able to generate the revenues to create the programming, and it doesn't have to be the volume, so it doesn't have to be today's number doesn't have to be tomorrow's number to equal, you know, the same amount of compelling programming. I accept that, I think you were -- when you talk about, you know, volume, I think that may be part of what -- but at the end of the day it's still --

6022   THE CHAIRPERSON: It has got to connect with the audiences. And it's not just about money, it's also about the soul of the country, isn't it?

6023   MR. HENNESSY: Well, I just wanted to start at -- money has got a lot to do with the soul of the country, too.

6024   I just wanted to start at the money point because it's -- we can never ignore that. You can't -- if you don't have business cases that make sense, if you don't have return on investment, if you don't have a lot of things basically in terms of financing content, it doesn't get made, that's all.

6025   But, yes, you are. In terms of the heart of the country, I think, and the number one thing we talk about in terms of the heart of the country is the children. That, you know, if you're looking at, say, children's programming, it's -- you've got to assume it's at risk, Pick and Pay, because who subscribes to children's programming?

6026   The number one group that subscribes to children programming is parents. And they are also usually -- I can remember when I was in the cable industry and we were trying to, you know, find new services to sell to them, they were always the ones the most cash strapped because of, you know, mortgage, schools, everything. So, that's a limited number of people, you know. I don't watch Treehouse. Most of my friends don't watch Treehouse because, you know, some of them now have grandchildren. And, so it's not that in a Pick and Pay world I'm going to reject the children, I just really won't think that I need to subscribe to Treehouse.

6027   And, unfortunately, that leaves you with a very small number of people potentially who do. And that really goes to our point as to why we think on Skinny Basic that there are certain categories of Canadian services, particularly children. If you told me to do the Sophie's Choice thing between, say, many categories and children, I would say particularly children.

6028   THE CHAIRPERSON: How do you define children? Is it 17 year olds or more pre-school?

6029   MR. HENNESSY: I think the same way that --

6030   THE CHAIRPERSON: Because, yesterday, someone who was here --

6031   MR. HENNESSY: It was the Shaw Rocket Fund Panel that you asked this question --

6032   THE CHAIRPERSON: So if somebody has a --

6033   MR. HENNESSY: You know, it's the Y -- you were asking about the YTV.

6034   THE CHAIRPERSON: Right. So somebody that is eligible for a driver's license you would consider a child?

6035   MR. HENNESSY: Well, as -- you know, as Mrs. Sleight suggested, their brains aren't fully formed yet.

6036   THE CHAIRPERSON: Yes, but they've left the system.

6037   MR. HENNESSY: I know, certainly mine still isn't, we're still working on it.

--- Laughter

6038   THE CHAIRPERSON: But they've left the system.

6039   MR. HENNESSY: I would say, you know, let's go back. There are only really, you know, three significant English language services and there is a question on children about, depending on the channel. I think sometimes you need both, right, in the trench.

6040   But, you know, when you look at a Treehouse family channel YTV, they are pretty much the elements of the system.

6041   Now, there's some stuff on BCC Kids and Nick but not much you know in terms of the spending on Canadian is really on those three. It is, you know -- so, I would say children's -- children's and youth, because you know it goes -- remember, we had this conversation, I can't remember if Peter Moss was --

6042   THE CHAIRPERSON: No, but if you say children and youth, I am more comfortable with that, I --

6043   MR. HENNESSY: Yeah, Peter Moss was -- Peter Moss, I think, made that point that you've got to get, you know -- we're -- right now the last generation of children are lost. They're the lost children. They're -- it's okay, though, they're out there in the internet somewhere.

--- Laughter

6044   MR. HENNESSY: But, you know, they are -- they're lost. And we could put, you know, have a wonderful Pick and Pay kind of thing, you get all these channels on demand and they kind of look at you and go, like, `So, why would I come back and subscribed to cable even if I had to buy Skinny Basic first to get these channels? I want it, right.' They would --

6045   THE CHAIRPERSON: We've heard that. I just wanted to make sure I've understood what you -- but it's clear that you have a -- it's more than children. It's children and youth.

6046   MR. HENNESSY: Children and youth, yes.

6047   THE CHAIRPERSON: Children and youth.

6048   MR. HENNESSY: Yes.

6049   THE CHAIRPERSON: The other impression that I got, and maybe this is an opportunity for you to correct that impression, in your submission and even today you talk a lot about specialities and discretionary services, but I didn't hear you speak a lot about over-the-air, perhaps a little bit with children's, but I'm -- because most of the big budget Canadian programs are still being viewed and financed for that window.

6050   MR. HENNESSY: Yeah, so and you know my key point on over-the-air was, yes, it's still, in my view, critically important. It still drives the biggest audiences to Canadian programming. It still commissions probably the majority of big scripted Canadian programming and that's, you know, point number one. In terms of, you know the importance of simultaneous substitution to that I think shouldn't be underestimated, so ---

6051   The problem is, as you can tell, Mr. Chairman, sometimes I talk too much to say too little and I only had fifteen minutes. But that was really the goal, as I said, in the --

6052   THE CHAIRPERSON: But there was no limit in the written submission.

6053   MR. HENNESSY: Yeah.

6054   THE CHAIRPERSON: There was very few comments about that, so I'm glad you had the opportunity to correct that.

6055   We had a discussion earlier on with a few interveners about Question -- and you've answered it at paragraph 179, and this is about the definition of broadcasting revenues. And it specifically referred to licensees. But your answer is about anything but licensees.

6056   Just to save time, you might want to re-read the question more carefully and provide the answer as an undertaking?

6057   MR. HENNESSY: Sure.

6058   THE CHAIRPERSON: You do represent over a dozen of your members produce English language TV or films, or new media in Quebec; am I correct?

6059   MR. HENNESSY: Yes, in fact we have a lot of -- some of the big Quebec producers that produce in French and English. They have people like Andre Rouleau that are also members.

6060   THE CHAIRPERSON: I was a bit surprised then when we ask questions about OLMCs which of course would include English language speakers in Quebec, you expressed the view that you had no position and others were in a better position to speak to that. Is it because you interpreted OLMCs as just being minority Francophone communities?

6061   MR. HENNESSY: No, no. You know, it's people like Arnie Gelbart and Janis Lundman and some you know the big producers in Montreal, they do remind me of their presence should I forget them.

6062   THE CHAIRPERSON: But you may have really --

6063   MR. HENNESSY: It really wasn't -- Jay, do you want to -- do you want to eat that question?

6064   MR. THOMSON: While we recognize that the more specialized group, the Quebec English Language Producers' Council, would be addressing most of those issues, so we defer it to them.

6065   THE CHAIRPERSON: Okay. Now maybe just one last question and it very much relates to Mr. Miller's study, The Environmental Scan. I had a lot of trouble figuring out the economic analysis.

6066   First of all, Mr. Miller, we've known each other for a number of years. I don't recall you speaking about yourself in the royal "we", so you use "we" all the time in the economic analysis. Did you do this on your own, or did you have some help from an economist, or something like that?

6067   MR. MILLER: I had some help from some people that wanted to remain nameless.

6068   THE CHAIRPERSON: Oh. Well, they've been successful then because we had no idea where this was coming from.

6069   At paragraph 11.12 you refer to a number of 530 FTEs, but I'm at a loss where you came with that number, or how you came to that number.

6070   MR. MILLER: First of all, if you would like me to take an undertaking to give whatever specificity on the methodology, I'd be happy to do that. I could talk to Staff as to what you want.

6071   I have tried to outline with probably more specificity than you see in most studies, you know, what the assumptions were.

6072   FTE is obviously Full Time Equivalence, and it's just using the methodology that has been used for example by Nordicity in the profile and various other studies. How you take that --

6073   THE CHAIRPERSON: I can assure you that before I asked the question, I hunted around a lot to find out where it came from, and we were at a loss, so perhaps if you could provide us the reference or your methodology to get to that number. It just seemed to drop there.

6074   MR. MILLER: Okay. Happy to do that.

6075   THE CHAIRPERSON: By the same token, at 11.14 you try to evaluate job losses, but you -- the assumption, the regulatory assumption is both what you call Pick and Pay bundled with lower barriers to entry. And of course, you come up with rather a huge number. But it's pretty hard to figure out what, in your view, is attributable to one as opposed to the other.

6076   MR. MILLER: And that was intentional. You have studies that are looking at specific impacts of specific measures. What I wanted to look at is an aggregate if we did what was on the table at the time. And, of course, that's changed now. But, if we did what was on the table, decide what could happen.

6077   And, I hope it's clear in this study that these are not predictions. I'm not suggesting this is what will happen. I'm suggesting these are plausible worst case scenarios, and I think -- I hope I was clear in the analysis in that arriving at these plausible worst case scenarios I wasn't doing the worst, worst case on anything, I was looking at, okay, well, what's -- what could happen here? What's a plausible worst case scenario?

6078   But, again, if there's some more specificity I can provide, I'm happy to.

6079   THE CHAIRPERSON: Well, if you could, but I take it you might not be able to as to how you attribute the job losses to those scenarios separately. But I thought he just said that he would be -- you couldn't -- you're not in a position to do that.

6080   MR. MILLER: That's not the way I did it.

6081   THE CHAIRPERSON: Okay. That's fine. That's good. Okay.

6082   You started answering the question I hadn't quite asked yet, Mr. Hennessy, about the worst and the best in the working document, so I'll give you a chance to complete your answer.

6083   MR. HENNESSY: Yeah. So I struggled with that a bit.

6084   So, let's start with the worst. I had a lot of focus trying to trade off between, you know, predominance in terms of only offered and not received, versus simultaneous substitution.

6085   Since, for whatever list you're constructing, you only want one answer, I landed on the worst thing to do would be to drop predominance received.

6086   THE CHAIRPERSON: Fair enough. And on the other, the best?

6087   MR. HENNESSY: The best. Let me just back that up, because we've changed it four time today so far.

6088   THE CHAIRPERSON: Are you putting it to a popular vote?

--- Off-record discussion

6089   MR. HENNESSY: Oh, yes, thank you. No, I got it. It's late in the day. It was expanding the Skinny Basic to include --

6090   THE CHAIRPERSON: So, you're more of an Option B?

6091   MR. HENNESSY: More Canadian services that, you know, might otherwise make a contribution. Although, I think that's probably -- sorry, let me do that again. Expanding Skinny Basic to include more Canadian services. They could be either contributing diversity or they could be just the most popular, and that's fine.

6092   THE CHAIRPERSON: I see. But that would be more an Option B?

6093   MR. HENNESSY: That's -- yeah, it is.

6094   THE CHAIRPERSON: Okay.

6095   MR. HENNESSY: Yeah.

6096   THE CHAIRPERSON: Understood.

6097   Commissioner Simpson?

6098   COMMISSIONER SIMPSON: Mr. Hennessy, I just want to go back to your page 7 of your document. And, just for clarification's sake, you had said to the Chair's question that your use of the term Pick and Pay was really an umbrella term that was representing the new model in our working document of choice. But, I couldn't help but notice in the last paragraph that when you make the statement that the current rule of preponderance is working well now. And, you seem to be inferring that it's working well in an environment with Pick A Pack options and limited Pick and Pay. And you've sort of bifurcated what -- the two terms. And I'm just trying to -- I just want you to qualify that.

6099   MR. HENNESSY: Yes, it was -- it was -- I think we were thinking, you know, in Quebec territory, right, it's kind of Build Your Own Pack.

6100   COMMISSIONER SIMPSON: Yeah.

6101   MR. HENNESSY: And in EastLink territory there are a la carte channels, but not necessarily some of the biggest.

6102   MR. THOMSON: And some of the other BDUs have a limited Pick and Pay option right now and they're still able to meet the preponderance rule.

6103   COMMISSIONER SIMPSON: Okay. I was just trying to see if you were inferring that, you know, in the wisdom of our decisions that we put a thumb on the scale more toward Pick A Pack.

6104   MR. HENNESSY: Well, I did and it is more of an issue with confusion, my own confusion with the options, the Pick and Pay options that were put on the table. The first being, you know, Pick and Pay a la carte. The second being, Build Your Own Package. And I wasn't sure, first, whether, you know, that was supposed to be put forward as an either/or. I presume no, because it wasn't A/B.

6105   But, you know, in my mind if you have a la carte you can build your own package. So, I wasn't sure whether there was a presumption that a Build Your Own Pack would be something that, you know, define ten services at a regulated price, or not.

6106   I just don't know the answer to that.

6107   COMMISSIONER SIMPSON: Okay. Thank you for that.

6108   MR. HENNESSY: I still don't.

6109   COMMISSIONER SIMPSON: Thank you. The only other question I have has to do with children's programming.

6110   I take your point that children's programming should be included in the context of a basic package, whether it's Skinny or however big that basic package gets. But I'm struggling with the mechanics of how, because we've heard that kids programming is -- is not finding a home on conventional television as much as it is finding a home of speciality. And I'm wondering if not now, do you have anything by way of an undertaking you can offer that would help us understand how children's programming could be put into a basic package, if it is not individual programs that are being bought, but an actual channel?

6111   MR. HENNESSY: Yeah, you know, I can do it right now.

6112   COMMISSIONER SIMPSON: Okay.

6113   MR. HENNESSY: So, what I am suggesting is that you specifically look at adding Treehouse Family Channel and YTV, some of which are on the basic package. Either keep them on, or add them to that.

6114   I am not suggesting that you put additional requirements on conventional channels to do children's programming because I think given the financial pressures that they are under that you have a bigger objective of local programming and drama at night to meet.

6115   COMMISSIONER SIMPSON: M'hmm.

6116   MR. HENNESSY: And you can -- I think if you do that for the children's thing, you've solved a lot of the concerns we have with PNI.

6117   COMMISSIONER SIMPSON: But you still get into a favourite son kind of a scenario as to who you choose? I mean, there's BBC Kids, as well.

6118   MR. HENNESSY: It depends, yeah. If you say, Well, I'm only going to take one -- Yes. If you say you're going to take, you know, two related and one independent -- No, you don't have a problem because there aren't really -- that's pretty much it in English language for children's programming.

6119   Now, I think there are probably some channels where it's probably important to have, you know, something mirrored in terms of French/English.

6120   But, it is -- you know, to go to the Chairman's point, one of the things we did try to do when we were talking about consumers in our paper, is, recognize that consumers are anything but homogeneous and you know it goes to what the Commission has often said, we're talking -- we're talking about consumers as people that pay prices. We're talking about very diverse audiences. We're talking about consumers as citizens. And, even within a household you're going to have conflicts between serving the needs of people, depending on the role in society they happen to be, you know, taking at that very point in time.

6121   MR. THOMSON: And those three services are currently Cat A services, which historically have contributed the most to Canadian programming, and that's why we have chosen them.

6122   COMMISSIONER SIMPSON: Thank you.

6123   COMMISSIONER PENTEFOUNTAS: I understand that Cat A service is an only kid programming. If the idea is to try to arrive at a Skinny, or Skinnier Basic, or to put sort of Basic on some kind diet, Treehouse Family and YTV would bloat that sucker up pretty good pretty quickly in terms of the cost as an Entry Level Basic, would you not agree?

6124   MR. HENNESSY: Not necessarily, but, you know, I'd have to sort of back up and think. I would suspect that probably the biggest wholesale rate today on basic would be YTV, and I really don't know whether that's 25 cents or 30 cents, or whatever it is.

6125   So I'm not sure that is necessarily the case. I know when you were talking about, you know, a price-capped basic up to $30 that you presumed that there would be additional services beyond the over-the-air services, which, you know, don't carry a rate with them. So, no, I don't know if that's the case at all.

6126   I do agree to some extent, and, you know, we tried to suggest with people, that trying to figure out exactly, you know, what is the overall, you know, cost is a challenge, and it -- you know, it may be easier to be arbitrary. But I'm not sure it bloats. You know, I'd -- like, do I have the math for what each of the rates would be? No, but, you know, I would suspect that the three of them could quite possibly be well under a dollar.

6127   COMMISSIONER PENTEFOUNTAS: Well, we'll figure out the math perhaps later on with one of the other intervenors, but that being said, we can perhaps do that in confidence, in terms of the actual numbers.

6128   The other issue is: are we kind of looking in the rear-view mirror? I think it was Mr. Goldstein that spoke earlier about the availability of children's programming everywhere. I can tell you from personal experience, you know, the two-year-olds are on their iPad watching kids programming, as amazing at that may sound, forget about the 16-year-olds.

6129   But given the availability of this content everywhere, do we really need to make an exception for it in a skinny package in Canada in 2015 going forward?

6130   MR. HENNESSY: I think -- you know, Mr. Vice-Chair, I think unless -- and I know we're not planning to kind of blow the system up to, you know, get the future, which I don't think is the intent, then we still want a system that reflects not only the needs of consumers, you know, and is reflected through the most popular channels, but we need -- you know, in terms of the act, we need to reflect diversity.

6131   As somebody said, while children don't vote, and even those youth that, you know, just turned 16, they do make up a significant element of the system as citizens. I don't know if we can all the people who watch Treehouse citizens, but --

6132   COMMISSIONER PENTEFOUNTAS: And they get access to the content that they desire online.

6133   MR. HENNESSY: But as a Canadian? Because that is, ultimately, why, you know, you're here, why -- and, because of the things you've done, why we're here.

6134   COMMISSIONER PENTEFOUNTAS: Exactly. So the -- yeah.

6135   MR. HENNESSY: And that is -- you know, that's in terms of -- going back to that paragraph 32, and the objective, we can't forget the kids.

6136   COMMISSIONER PENTEFOUNTAS: So we'd keep them in a basic package to continue to produce content for children that is Canadian?

6137   MR. HENNESSY: Yeah, and hopefully export it.

6138   COMMISSIONER PENTEFOUNTAS: In its origins at least.

6139   MR. HENNESSY: And hopefully export it. Like, you know, we know that DHX is -- as the Google people pointed out, they're -- you know, they're pursuing those new avenues, in terms of MCN Networks, and that's great.

6140   I think we've always had a huge, you know, reputation in the world as a seller of high-quality children's programming that -- particularly -- and I think part of it is because it's not always commercial-driven. In fact, the younger you are, it's not. I think that reflects a level of quality that really sells well around the world, and it would be a shame to lose that.

6141   COMMISSIONER PENTEFOUNTAS: And that's the principal reason why it should be part of a basic package?

6142   MR. HENNESSY: Yeah.

6143   COMMISSIONER PENTEFOUNTAS: Yeah.

6144   MR. HENNESSY: Because it -- you know, it contributes so much overall to the system.

6145   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Hennessy.

6146   Mr. Chairman, thank you.

6147   THE CHAIRPERSON: Thank you. Those are our questions, gentlemen.

6148   MR. HENNESSY: Thank you very much, Chairman.

6149   THE CHAIRPERSON: Thank you.

6150   Our next intervenor, please.

6151   THE SECRETARY: Thank you.

6152   I will now ask Friends of Canadian Broadcasting to come to the presentation table.

--- Pause

6153   THE CHAIRPERSON: Welcome, Mr. Morrison.

6154   You're almost making it to prime time, but not quite yet. Sorry for making you wait, but please go ahead.

PRESENTATION

6155   M. MORRISON : Merci de nous accorder la possibilité de comparaître devant vous. Les AMIS ont changé de place avec Shaw suite à un problème d'horaire déclenché par le décès inopportun de Paul Robertson.

6156   Unfortunately, the chair of our governing body, Dr. Noreen Golfman, who's the Provost and Vice-President Academic at Memorial University, could not rearrange her schedule on short notice to join me here today. Peter Miller, author of the Environmental Scan and Canadian program rights studies that you've already been discussing, is at my side in case you have any questions about those studies, because we are one of those co-sponsors.

6157   Defining a regulatory framework for the future of Canadian television is a complex assignment. In it's 1999 TV policy, the Commission noted that:

"given the scope, complexity and pace of change, it is difficult to predict the exact nature of those changes and how and when they may have an impact."

6158   Prescient words.

6159   In essence, we have four messages for you.

6160   First, do no harm, or when in doubt do nothing. You owe it to viewers and listeners to take the time to get it right.

6161   Second, do not look on viewers and listeners only as consumers. In the words of Sonia Livingstone:

"the promise of media literacy, surely, is that it can...reposition the media user -- from passive to active, from recipient to participant, from consumer to citizen."

6162   Three, lay out a vision of a dynamic, functioning and contributing broadcasting system, and a regulatory framework to support it. Focus on topics that require immediate attention, such as the plight of local broadcasting in small and medium markets, where the future of important but vulnerable specialty channels, such as Treehouse, or protecting Canadian content, or the importance of the long-term viability of the CBC/SRC. Lay out an agenda of focused future proceedings to address priority issues and report to government publicly on the state and stakes of Canadian television.

6163   And four, any regulatory framework arising from this proceeding should have a sunset of possibly three or five years. Peter Miller's scan presents, to our way of thinking, convincing evidence that our system has great potential to thrive within that timeframe. You should identify exceptions and proceed to address them with care.

6164   Now we wish to comment on four topics. The first is the role of the national public broadcaster.

6165   CBC/SRC is the only non-vertically integrated service with the experience and resources to provide programming of public interest across all platforms from coast to coast to coast in both official and also aboriginal languages. As private broadcasters face increased pressure at the local level, CBC/SRC can leverage its combined resource of radio, TV and digital to provide appropriate local content to fill the gap.

6166   In a sea of foreign and vertically integrated TV voices, CBC/SRC is a crucial independent and potentially non-commercial voice, valuable for maintaining a distinct country on the northern half of the North American continent and essential for predominantly and distinctively Canadian programming in a variety of genres, in other words essential for a system that, to quote your notice, "encourages the creation of compelling and diverse Canadian programming."

6167   But to do this, CBC/SRC must be empowered to play a much larger role. It is within your powers to do three things to build this capacity: one, substantially reduce the CBC/SRC's draw on the ad market; two, allocate 1 per cent, eventually growing to 2 per cent, of BDU revenues to CBC/SRC; and, three, direct Netflix and other OTT operators to contribute 5 per cent of their Canadian revenue to support CBC/SRC.

6168   We've outlined these proposals in greater detail in our June 27 submission, and that includes your advising government on the crucial importance of financing CBC/SRC.

6169   Second, the relevance of the New Media Exemption Order.

6170   No one can sit here and credibly assert that new media, including Over-the-Top, remain merely complementary and pose no threat to broadcasting licensees' capacity to meet their obligations. You should revisit the order to determine what contribution OTT services and other foreign-based TV players should be mandated to make in order to conform to the requirements of the Broadcasting Act.

6171   Third, a word about simultaneous substitution.

6172   For 42 years simulcasting has protected the rights purchased by Canadian broadcasters, while avoiding the blackouts that are, from a viewer's perspective, the scourge of rights protection south of the border.

6173   The Armstrong study indicates that simulcasting boosts system revenue by as much as $458 million -- that's a year -- close to 25 per cent of conventional TV revenue.

6174   What is at stake is production values and, in small- and medium-sized markets, the risk of station closures. We find the Coalition of Small Market Independent Television Stations' arguments persuasive and alarming. That's why Friends recently commissioned a Nanos poll of 500 respondents to gauge public opinion in communities at risk.

6175   Nanos interviewed 100 persons in five new federal ridings, that is the ridings that will operate in the forthcoming general election, each one considered a swing riding -- St. John's--Mount Pearl, Ottawa West--Nepean, Hamilton West--Ancaster--Dundas, London West, and Thunder Bay--Rainy River -- and the results: 81 per cent consider local news valuable; 77 per cent would care if local news were to stop; 71 per cent think the CRTC should avoid regulatory changes that would undermine their local TV station; 89 per cent think their MP should work to keep local broadcasting strong; and 79 per cent think local news contributes to making their community stronger.

6176   These data align with the Nanos research survey of 1,000 Canadians we commissioned with ACTRA and Unifor, which found that 95 per cent of Canadians consider local news important.

6177   As you know, the Coalition indicates that its nine members' 19 stations in 13 markets are even more dependent on simulcasting than larger stations, and the Commission should also be concerned with the viability of the CTV2 network, once Bell's regulatory obligation to maintain it expires.

6178   The elimination, or even reduction of simulcasting, is a dangerous idea that should not receive serious consideration.

6179   And fourth, and finally, unbundling or pick-and-pay, which was first broached in the October 16, 2013 throne speech, the next day Canadian Heritage Minister, Shelly Glover, commented in the House of Commons, and I quote:

"Canadian families work hard to make ends meet and every dollar counts.... Our government believes Canadian families should be able to choose the combination of television channels they want, and will require channels to be unbundled, while protecting Canadian jobs."

6180   On the other hand, you, Mr. Chairman, have recently been quoted as saying:

"I've never promised that pick-and-pay would be cheaper."

6181   According to Nanos research, 62 per cent of Canadians agree, they believe major cable and satellite providers who have advised your Commission that pick-and-pay will not reduce consumer prices, and 24 per cent believe Minister Glover.

6182   The environmental scan reports on U.S. studies, suggesting an impact as high as a 50-per-cent loss of channel revenues. Even Mr. Miller's more conservative estimate of 20 per cent reduction in subscription revenues suggests that pick-and-pay is not the kind of gamble that a prudent CRTC would take with the future of the Canadian broadcasting system.

6183   You have indicated that you would still require some form of basic package. Unless you were to abandon the principle of predominance of Canadian services, which in our view would be illegal, Canadians would still have to pick Canadian channels paired with U.S. channels, and fundamental economic principles dictate that, if everyone picked fewer channels, the per-channel cost would rise.

6184   How would unbundling make the system stronger or create more or better Canadian programming? None of this would further the objectives of the Broadcasting Act. It is essential that your commission study the options carefully, as it has in the past, to ensure the vitality of our carefully constructed broadcasting ecosystem. Adopting an ill-conceived, focus-group-generated proposal would do a disservice to all Canadians, and once Canadians experienced the results they would know whom to blame.

6185   On both the simulcast and pick-and-pay files, you should take care to avoid oversimplification of argument and, most of all, unintended consequences.

6186   Le sondage Nanos démontre que les décisions du Conseil au fil des ans vous ont mérité la confiance de près des deux-tiers des Canadiens quant à la protection de la culture et de l'identité canadiennes. Nous vous demandons de faire attention de continuer de mériter cette confiance soigneusement gagnée. Merci de votre écoute.

6187   LE PRÉSIDENT : Merci beaucoup. Je vais demander au conseiller Simpson de commencer les questions.

--- Off microphone

6188   COMMISSIONER SIMPSON: I was just saying it's nice to see you again, Mr. Morrison, and you, too, Mr. Miller. I haven't seen you for ages.

6189   Mr. Hennessy, before you, had said something that I'm going to add to, and it just sets the tone for some of my questions.

6190   He said the business of broadcasting is a money-making business and that the business of program production is a money-making business. I put it to you that in the perfect world of Friends of Canadian Broadcasting, if it was up to you, public broadcasting would not be a money-making business, it would be out of the commercial side of the business.

6191   But the question that's before us that looms large, even though we're going to get into national-building and the rest of it, is that the money for public broadcasting comes from the commercial side of broadcasting, as does the money for program production. That model's changing, and the question, I think, that all of us are plagued with is: How fast is it changing and what will look like?

6192   So where I'd like to start is by asking you whether you think that the notion of having regulation move and chase the digital side of the business, the online side, the on-demand side of the business, and going into the sphere of regulating that, is a solution? Or is the solution possibly letting the privates do what the privates seemingly do well, which is compete with this new competition on a level playing field, where there's actually relaxed regulation that allows them to compete and still make the profits that contribute to public broadcasting and production?

6193   MR. MORRISON: Well, Commissioner Simpson, you tossed a question at me that might tempt me to answer as long as Michael Hennessy, but I'll try to be brief.

6194   COMMISSIONER SIMPSON: Thanks.

6195   MR. MORRISON: Number one, the reference to public broadcasting at the beginning of that.

6196   SRC/Radio-Canada has been described, I think accurately, if it's a money-making organization, it has, you know, a loss every year in the range of $1-point-something billion. It's a subsidized commercial broadcaster, if it is one.

6197   Your question about the CRTC kind of chasing digital, I think you have been leaders, in fact, of getting out in front of digital for much of the time that I followed your work and had occasion to sit underneath these lights. So I don't think that what -- I don't see what your doing here today, and the notice that you put out, as a departure from the past role of the Commission.

6198   The anxiety that I have is that you appear to be countenancing ideas that would contribute to take money out of the system. Mr. Armstrong is somebody that I have a lot of confidence in, maybe he's wrong by 10 per cent, but when you're talking about something in the range of half-a-billion dollars a year, which is something in the range of a quarter of the system, and the Schmitz people are telling us almost 100 per cent lift in their advertising revenues, you know that frightens me.

6199   And then I hear that -- and I do have some confidence in your wisdom. I don't imagine that the kind of -- I was going to say pick-and-pay, but out of deference to the chair I'll say some unbundling notion, that, you know, it should have as little deleterious effect as possible to the revenues of the system. Because maybe Michael has a conflict of interest, from a production association, to be talking about money, but I'm here representing something in the range of three four hundred thousand viewers and listeners, who actually spend money to enable the work we do, including financing work by Mr. Miller, and I would say to you that we understand the link between the money and the results that are there, and if we're not going to have the production values that will compete on the English side with the Americans, we might as well throw in the towel.

6200   Now there was just one other comment, and it was referenced by one of your notice documents, and that is how the profitability -- or how the price, excuse me, of cable packages has been rising much faster than inflation, and it is a concern of ours that you might use your regulatory powers to harness some of that profit and bring it back into the system.

6201   You asked me a general question and I've given you a general answer.

6202   COMMISSIONER SIMPSON: That's fine. And it did exactly what I was wanting to do, because now I'd like to talk about the regulatory dial.

6203   One option is to do more in the way of regulation, which has positive and negative affects, one is to do nothing, and another option is to do less. So let's start in the middle, where you had said on page 2 of your written submission that:

"In our view there's not need to change fundamentally the current regulatory framework for three to five years."

6204   Now I know that there's a lot of trailing buts to that, buts being but we think that there should be a rejigging of the appropriations of the BDU spend, that 5 per cent. There's other buts with respect to local television and community.

6205   But just in the general term of -- we don't think anything needs to be done generally for three to five years. Why do you say that, and what happens in three to five years when we reach that sunset period that you talked about?

6206   MR. MORRISON: Well, I will stick with the words that I used on behalf of the Friends of Canadian Broadcasting, rather than you description of them, but some famous American once said, "If it ain't broke, don't fix it." There's an element of that in what we have to say.

6207   I would also say that you have proposed some new regulation, of which we greatly approve. For example, the skinny basic idea -- and, by the way, subject to exactly the caveats that CMPA put forward about children's programming has to be in there. Subject to that, that would be the answer, Mr. Chair, to the first question about what do you like the best in the August 21 document.

6208   So, you know, you are doing more than tinkering and we are just concerned that you are proposing some things that we consider to be excessively radical and without good evidence.

6209   I guess I would add, in one or two of your comments, I think it was you, Mr. Chair, were asking questions about the Miller analysis, but the Miller analysis at the very worst is an expert allegation that some of the things you are proposing to do would take a significant chunk out of the GDP of this country. I mean, you know, .1, .2 percent, something like that. That is not something that a prudent CRTC would do without a lot of care.

6210   So what we have proposed, and since I just said it once here today, maybe I will just repeat, we think that the best thing you could do in this overarching hearing is to identify critical issues and then to proceed on a timeline of your choosing, recognizing all the other things you have to do, to hold more specific hearings about genre, for example, or whatever your list is and to proceed that way with care.

6211   And I did hear with interest in the exchange, I can't remember if it was Blue Ant or CMPA was here, where the Chair said, well maybe you could announce that you intend to do a number of things and then you could space them over time. That would be -- that would be better than everything all happening by some date in 2015.

6212   The main concern -- just the essence of the concern is, when you do a number of things together, as anybody can tell you in research, you know, you can't isolate the variables and you don't know what the interaction between the various things would be, and if what you are playing with is not a sandbox but the Canadian broadcasting system, we urge you to be cautious, that's all.

6213   COMMISSIONER SIMPSON: I think engineers call that exogenous variables where you have more variables than costs.

6214   MR. MORRISON: I should have thought of it, Mr. Simpson.

6215   COMMISSIONER SIMPSON: It's just one of those nickel words that I picked up somewhere along the way, but it seemed to fit.

6216   Just to restate why I was taking the middle ground, I was not trying to imply that you had said categorically that nothing needs to change, but it was a direct lift.

"In our view there is no need to change fundamentally the current regulatory framework for at least three, if not five years."

6217   And I was using that as a starting point.

6218   MR. MORRISON: And the adjective "fundamental" is fundamental.

6219   COMMISSIONER SIMPSON: And that's the buts.

6220   I think it was actually Mr. Miller who had said that we are moving from a closed to an open system in one of his reports. What is also happening is we are moving from a linear to a non-linear world and that, in itself, brings a whole raft of technological and consumption issues, some of which Mr. Hennessy addressed.

6221   But I'm curious, if this three to five-year window that you are looking at where you would like to somewhat maintain the status quo with a few tweaks, there is going to be a day where there is going to be a Friends of Digital Delivery in the future. In other words, if we are moving to non-linear, do you think broadcasting has a sunset as well and, if so, when do you think that is?

6222   MR. MORRISON: I wouldn't even pretend to give a thoughtful answer to that, but I think it's a lot longer than three to five years.

6223   COMMISSIONER SIMPSON: Okay.

6224   MR. MORRISON: And I would urge you to pay attention to the next three to five years, not to the exclusion, but certainly predominantly in your work as opposed to a decade or two decades hence.

6225   COMMISSIONER SIMPSON: I would like to now go into the issues of finding more money for the cultural industry and system and the idea of looking at shifting regulatory burdens.

6226   Now, in the area -- what I found interesting is that in your view, and I thought it was refreshing, you had said very simply impose a 10 percent levy on OTTs such as Netflix. You didn't get into complicated formulas or anything else, you just simply said --

6227   MR. MORRISON: But we did it -- you know, you can't keep everybody's hundred paragraph briefs at the top of your head --

6228   COMMISSIONER SIMPSON: Yes.

6229   MR. MORRISON: -- but what we said was, you know, you have broadcasters where you are putting 30 percent obligations on them and you have distributors where you are putting five percent obligations on them. What are some of these companies like? Well, they are somewhere in between and so we hit upon 10 as what we thought of was at the modest end between five and 30, but a reasonable suggestion.

6230   But it's only a non-profit organization coming to you with a suggestion, but we think it's a decent suggestion and it doesn't matter to us at all that some, you know, Minister in the Conservative government says nobody is going to tax Netflix.

6231   We think it's a good idea and I would just like to underline for you that the essence of our idea, the Netflix contribution would be a fairly modest contribution initially, but it would presumably grow in scale as Netflix grew. And we were talking only about the over-the-board, not the sneaking in and pretending to be American side of things.

6232   But we also, and much more significantly, thought that if you look at the portion of the BDU contribution that does not go to the Canadian Media Fund that there should be a look at the priorities of that other two percent that is currently flowing into -- although your rules try to discourage it -- cable-controlled local programming and we thought that it would be a good idea to take a little bit of that money and to help the SMITS people. And we care about those people a lot and we have a lot of supporters.

6233   The poll I mentioned to you was released today and it's big stuff in St. John's and London and Thunder Bay. So a little bit of money would help them a great deal.

6234   COMMISSIONER SIMPSON: But let's put them over to one side because I'm still trying to deal with OTT and digital delivery.

6235   MR. MORRISON: But if you want to focus on OTT, I'm your man.

6236   COMMISSIONER SIMPSON: Well, only because the 10 percent issue is interesting, but interesting because it brings about another question to me; which is, if conventional broadcasters as they go down this road and they get into the area of other forms of linear delivery via digital means rather than pure cable, even though it seems to come over the same system, if they find themselves needing to compete on a non-linear OTT platform basis like a Shomi, should they have different regulatory expectations that we place on them or would it be just simpler to let them fight fire with fire and do what's necessary to be able to compete with the foreign OTT and just pay a straight percentage instead?

6237   MR. MORRISON: I hear you, but it seems to me that the fire with fire metaphor is inappropriate, it's more like charcoal fighting gasoline or something like that. And you, particularly with your statutory responsibilities, should be looking at the equity question between them.

6238   A group like the Friends is not going to come here and give you a definitive answer to that question, we are more in the way of trying to urge certain considerations on you such as, for example, the consideration to temper your near total attention on consumer issues.

6239   COMMISSIONER SIMPSON: Well, the reason why I ask the question the way I did is that we have heard over the last two and a half days, three days now, that functionally the broadcasting system is still in relatively good shape the way it is currently structured.

6240   MR. MORRISON: The system, yes.

6241   COMMISSIONER SIMPSON: The system, and that on the low side of the 90s we still have Canadians watching television in the home in a live environment, not a PVR environment, which I take everyone's word that's true, so therefore, this OTT outlier -- I'm trying to understand whether it's something that is what the industry is going to or it is simply an anomaly, it's the difference between buffet and à la carte and do we have to look at it differently than broadcasting?

6242   Because I am assuming that if broadcasting is okay for the three to five-year future, that you seem to be saying it is, and others, then is OTT a red herring and we just have to look at it as an anomaly.

6243   MR. MILLER: If I may, Commissioner Simpson, make a crack at this. As you know, and as has been referred to in this proceeding, predicting the precise form of the future is impossible, but there are certain things you can do and that is you can look after the fundamentals and the fundamental of the Canadian Broadcasting System is a separate Canadian rights market.

6244   I did a study on that and you will see that there are references to that, that notion of a separate Canadian rights market throughout most of the submissions in this proceeding. Even Disney comments on it.

6245   Now, why is that notion so important? That notion is so important because if you can have the rights to programming within your territory, if you can profit from foreign programming, if you can protect so that you can profit from domestic programming, it doesn't matter so much how it evolves, you have the programming, now all you have to do is monetize it.

6246   So one of the things that I believe has troubled so many parties to this proceeding is that some of the key measures the CRTC has in place to protect the Canadian program rights market seem to be on the table, so everything from simultaneous substitution to predominance of Canadian services, to the entry rules for foreign services, which you have now actually taken off the table, to issues of access rights.

6247   All of those are measures that the CRTC put in place over the course of 30, 40, 50 years to allow the sector to flourish because they help maintain a Canadian rights market.

6248   I think you will see one of the themes coming from most interventions here is, don't mess up with those measures. Something like pick-and-pay by contrast -- and I believe I even pointed this out in the rights paper -- it may have an impact, it may even have a material impact financially, but if it's done okay it won't have a negative impact on the ability of people to acquire and maintain rights.

6249   So these are where the distinctions show. Genre protection, which you know I did a paper for the Commission on, again an issue with many complexities, and I won't depart from the work I did for the Commission in trying to suggest, you know, whether it should or shouldn't be changed.

6250   So those are ones that don't have a fundamental impact, but you change simultaneous substitution, you change predominance of Canadian, you change entry rules or foreign services, you are going to the heart of how the system protects itself and remains Canadian. As long as you don't do that, the business models can evolve.

6251   One of the things that's clear, and this again has been referred to but I'm not sure it's fully understood, is, as you say, the movement to on-demand is relatively slow, so TVB reports that linear viewing to linear channels, not PVR, not anything else, it's still 93 percent of viewing, which is kind of startling when you think about it. Really, is it really 93 percent of viewing? But apparently it is.

6252   But as more and more of this viewing goes on down, because it will, it will, I mean that is something we can reasonably predict. We don't know exactly how fast it is going to happen, but it is going to happen.

6253   Here is the interesting thing, the money is still coming from the linear side. People referred to this. It's very hard to monetize the on-demand side.

6254   So I will give an example. Take a Treehouse or a YTV, if you ask Corus I'm sure they will be able to tell you that they get an increasing amount of viewing on-demand, but where are they making the money? They are making the money from the services, the linear services that are subscribed to. So these are the things that get difficult.

6255   So the thing that I would submit, and what I tried to say in the papers is, don't try and predict the future, you know, do what the Commission has always done, be technologically neutral, but be careful which are the things that are played with because some of the stuff is fundamental to how the system has to evolve.

6256   COMMISSIONER SIMPSON: Go ahead.

6257   MR. MORRISON: Just on a lighter note, some of my colleagues who are not as deep into all of the jargon, certainly they would have had trouble understanding what language was being spoken was when Bell was here today, but what one of them said, and this is intended in jest, Mr. Chair, they said one of your predecessors was responsible for doing something really great for the Canadian music industry and so they named the Juno Awards after him. Tell Jean-Pierre Blais we don't want you to be the Commissioner after whom the Blais Blackouts are named, okay.

--- Laughter

6258   COMMISSIONER SIMPSON: Okay. I will follow that.

6259   MR. MORRISON: Yes.

6260   COMMISSIONER SIMPSON: Thank you for the dissertation, Mr. Miller. We are going to have to scoot along and we will get to the reason why you are here, Mr. Morrison.

6261   But I just wanted to -- you know, where I'm going with this is OTT broadcasting, that's pretty well what I'm asking. As we sort of examine regulatory reach, I'm trying to come, in my own, mind to where broadcasting ends and content vending via on-demand starts and whether or not that constitutes a need to examine it --

6262   MR. MORRISON: Well, we think it is --

6263   COMMISSIONER SIMPSON: -- and put the exemption order in.

6264   MR. MORRISON: -- and we have data and, if you wish, I would be happy to table it. But, you know, anybody in the world can get it from the Internet.

6265   COMMISSIONER SIMPSON: Yes.

6266   MR. MORRISON: That says that Canadians do, too.

6267   COMMISSIONER SIMPSON: Okay. Thank you.

6268   Let's move on to the issue -- I'm going to go first into your recommendations on the public broadcaster and then talk about community and then talk about local TV.

6269   So first for the public broadcaster, you have inferred -- I think you were categoric at one point and you have modified your position that the CBC really should be getting out of the advertising side of the business because it would help the privates where, admittedly, they are a source of funding for public broadcasting, but I ask you, in the course of this whole -- the scope of everything we are looking at, is public broadcasting becoming more the ground by which the spirit of the Act, I'm thinking 3.2 here, but the spirit of nation-building when the Act was originally built, is public broadcasting carrying more and more of that burden and do private broadcasters -- or should they be carrying the burden of Canadian content to the extent they are if they are becoming more and more required to be globally competitive?

6270   MR. MORRISON: Well, Canada's national public broadcaster is a feeble public broadcaster by comparison with the public broadcasting that's available in most OECD countries. I don't think I need to give you the details, but that's a fact, and that is because it has become weaker and weaker.

6271   Do you recall two years ago we were here before you saying that you shouldn't give the Corporation a seven-year licence when they were going to lose Hockey Night in Canada in a year or two. So I mean we have been following this.

6272   And one of the things about the public broadcaster, Commissioner Simpson, is that -- and I'm not talking -- I'm going to specifically exclude SRC television from this. And as you may know, you can't even find a decimal place to find any economic value from the ads that were allowed by you on Espace Musique and Radio 2, but the English television network has now lost more than half of its revenue stream and the cost of selling does not go down accordingly.

6273   So our estimate is that what was once a nine-digit problem is now in the high eight digits and I'm told it's even worse than that because in cities like Edmonton the people who used to put ads on Hockey Night in Canada and sort of put ads locally on the station there, that is drying up too.

6274   So it's getting to a point where you could contemplate taking away that distorting factor and allow it to be, as other OECD countries have, a public broadcaster rather than a hybrid public/private.

6275   So our thought was that -- and I won't repeat the details, they are in the presentation and also in the brief -- but by switching even initially one percent of the BTU contribution over you would be giving them cash which would create a wash with their advertising net revenues now. And if, you know, say that they are an independent institution, we can't tell them what to do; you could say, well, if you accept what we are offering you and guarantee to put it into local programming, you can have $90 million, they would pretty soon come into line.

6276   So those are things -- and by the way, the $90 million is a kind of a wash because the vertically integrated companies would suck up the $90 million in advertising, you know, and that equals the costs.

6277   So we thought it was something that was modest, attainable and practical and it is along with two or three other suggestions we make.

6278   COMMISSIONER SIMPSON: But in today's terms, but what about five years from now? I mean, profitable private broadcasting creates the money to create more robust public broadcasting. That may be the case today, but we are trying to look at the next few years.

6279   MR. MORRISON: The whole Canadian economy creates that money. We invest about .2 percent of the GDP on public broadcasting in this country.

6280   But the point I was coming to was that you also, as we have recommended, should be, on your own initiative, making a report, a public report to government about the state of Canadian television arising out of this and one of the sections of that report should be that public broadcasting needs to be better financed to pick up the slack.

6281   And we know, I know very well that the current government will not want to hear that, but that's not necessarily the thing that would deter an independent regulator.

6282   COMMISSIONER SIMPSON: Well, I think that it's not so much whether the government wants to hear that, it's just a question of, you know, who pays.

6283   I think one of the fomenting drivers of this hearing was the concern over what things cost and it's to that end that I ask my questions.

6284   With respect to the local side of things, you have proposed that community television should have a reframed programming requirement that is a minimum of 50 percent public access and that it be better financed through perhaps an increase in the contributions from the BDUs, but I ask you --

6285   MR. MORRISON: I thought that you had taken that issue off the table on August 21st, so we tried not to get into it in our statement today.

6286   COMMISSIONER SIMPSON: Well, I am asking it in context to a broader question, which is: do you think that community television has had its day as a public utility?

6287   MR. MORRISON: No. It could be much -- it's much, much more effective in the French language in this country than it is in the English language, it is more effective in other countries, so I don't think there is any kind of deterministic thing, it's just a question of resources, but I stress that we didn't get into that topic because we were trying to respect your priorities.

6288   COMMISSIONER SIMPSON: Yes. The value of community channels has been local expression, local reflection and it has been my experience that different BDUs have different views as to how that is done, but notwithstanding that, in the context of the previous statement I made about the viability of commercial broadcasting, we are hearing and seeing evidence that the local side of that industry is under financial stress.

6289   And you heard Mr. Crull today saying that it's not his choice, but it may be his need to look at shuttering as many as a third of his local stations.

6290   MR. MORRISON: I think I heard him say 15 out of 30. Maybe I got it wrong.

6291   COMMISSIONER SIMPSON: Maybe I got it wrong, but notwithstanding that, something is wrong there.

6292   And I ask you whether, in the way they are looking at having to compete over this next five years as a network, whether the local station formula of over-the-air is necessary in order to be a viable private broadcaster in the cable world?

6293   MR. MORRISON: But his answer would come as a businessman running a profit-making organization --

6294   COMMISSIONER SIMPSON: That's what he does.

6295   MR. MORRISON: -- responsible to shareholders and that's his role. But your role is to ensure that -- I mean, forgive me if I'm wrong, but my clear recollection is that your own research as part of this process has identified something that -- I saw Barry Kiefl here earlier today, there is a 10-year chart I think in our presentation which shows that far more than any other type of broadcasting people care about local news and our own Nanos Research confirms that not only is that the case, Friends has been polling for a long time, but the intensity of that view is higher.

6296   And there is an Act of Parliament, I would be wasting your time to quote the clause, which mandates the importance of this. So when you have the public wanting it, it being threatened, it being a statute that says it should happen, you know, the words simultaneous substitution come to my mind. You should be very careful about what you are doing there.

6297   COMMISSIONER SIMPSON: I will ask a question about that in a minute, but staying with local TV for a minute, when we were looking at saving local TV, which was the rally cry back in 2009 I think --

6298   MR. MORRISON: You mean around the LPIF.

6299   COMMISSIONER SIMPSON: The LPIF came later, but in looking at what local television is and was then and is now, yes, the local television -- or local news is vitally important, but in the scope of a broadcast wheel it's something like two to three hours out of the broadcast day and the rest of it is fundamentally network that's over-the-air.

6300   That's why I ask the question the way I do: If 95 percent of the marketplace is watching a CTV or a Global, is it necessary to have the local OTA simultaneously broadcast that over-the-air for the purpose of being able to deliver two and a half to three hours of news today, or is there a different way to do this, looking at the money that's going into community television and the money that's being spent on local OTAs?

6301   Your formula had said that independents should receive money, but locals don't, yet the amount of vertically integrated owned local stations far outnumbers the Smith stations.

6302   MR. MORRISON: Well, you have raised several things. One is that, you know, if you were bargaining with the Kevin Crulls of this world, and I suppose such a thing might just happen at some point, you know, you put simultaneous substitution on the table and they are even considering maybe taking it off the table, what do you ask for in return?

6303   It seems to me that Canada needs those 30 stations; doesn't it, you know. So I mean, there could be quid pro quos.

6304   With respect to your comment about whether it's over-the-air or not, we care about over-the-air because people who support us care about over-the-air. It is five percent of Canadians, somewhat higher among Francophones than Anglophones, that's still the better part of two million people. I mean, any political party in this country, you get two million more votes.

6305   It also is heavily concentrated among low-income people and particularly people who have paid their dues, who are on fixed income pensions where even $30 is not going to be considered skinny, you know.

6306   So the OTA is an issue and I think Crull in his comments, if I heard it properly, did talk about the fact that it's over-the-air creates the opportunity for moving into distant markets through the BDUs, et cetera.

6307   So it's not something that I would hope you would do.

6308   COMMISSIONER SIMPSON: I'm not implying that and I do agree with you that there is a strong correlation with that five percent to lower income and hardship households.

6309   MR. MORRISON: Yes.

6310   COMMISSIONER SIMPSON: No, what I was more getting at is, if funding was available to independent stations, should it not be made available to all local market stations of a certain size?

6311   MR. MORRISON: No. I think you have to take -- the size of the market is very much important here. You know, you defined the major markets as the big cities, you did that during the LPIF, right?

6312   COMMISSIONER SIMPSON: Yes.

6313   MR. MORRISON: And so then you are into medium and smaller sized markets.

6314   When you are into a market where there is only one source of local news -- Barrie, Ontario comes to mind -- would I be right to say perhaps not for Kelowna or Kamloops, but in any case, where it's alone it would be really, really, really important that it be protected, and so something needs to be done and we were suggesting a modest slice of that two percent of the BDU funds could solve the problem of the SMITS coalition.

6315   COMMISSIONER SIMPSON: Would it be your desire to see, at a local level, more local programming other than news, if it was possible?

6316   MR. MORRISON: Yes.

6317   COMMISSIONER SIMPSON: Again, I'm going back to the scenario of these two universes right now of community, which is struggling for access, and money to produce content and I'm looking at local television which is functionally two and a half hours of locally originated programming, the rest is network.

6318   MR. MORRISON: On our website is a study that was authored by a man called Arlan Gates who appeared at the 1998 hearings around the '99 policy and we presented a study about what's available over-the-air in Winnipeg in 1986 and 1997 and we should update that study, because back in '86 there was, you know, gospel singing and all kinds of things that were local and they had declined somewhat.

6319   But right now I think we are more preoccupied with stations fading to black or losing local news entirely than we are with the nirvana that there might be more locally generated content. That's something that would require a larger public investment than appears to be possible in the current environment.

6320   And, of course, just connecting dots, the role of an empowered Canadian Broadcasting Corporation in picking up the local slack is also something that should be on the table.

6321   COMMISSIONER SIMPSON: Moving to programming for a second and the importance of national and local reflection, there was a very interesting presentation done by Ms Berkowitz the other day.

6322   Did you have a chance to hear or see portions of her presentation?

6323   MR. MORRISON: No, I didn't. No. I heard about it.

6324   COMMISSIONER SIMPSON: Yes. Well, her thesis was that in terms of program funding we perhaps have to rethink, not the merits, but the mechanics of how Canadian content is produced and her thesis essentially said that we should be preoccupying ourselves more with the idea of rebranding the Canadian brand, looking to produce hits, not just content.

6325   I think the essence of what she was getting at is that under the system we have we dig holes in the highway and then create money to fill those holes, but it isn't necessarily part of building a better highway, it's just filling the holes. I'm wondering if you have a comment on that?

6326   MR. MORRISON: I think I would contribute the time that would go into that comment to just speeding up your process here today. I will remain silent, okay.

6327   COMMISSIONER SIMPSON: Okay. But she also said that she believes drama can be a silver bullet for both the broadcaster and the Broadcast Act and, in so many words, what do you think about that statement?

6328   MR. MORRISON: It's the fiction side of the country. It's telling stories that enable people to identify with their own culture. So much of the power of drama is Hollywood in this country, and this affects young people, but people of all ages, that they see a lot more of Miami and Los Angeles on their screens than they ever do of Halifax or Edmonton or Chicoutimi and it's the drama that affects the emotional side of the brain, the fiction side of the storytelling, it's critical and it's expensive and I guess that brings me around two point one, we mustn't allow the money to creep out of the system.

6329   The people that support Michael Hennessy's organization are some of Canada's most creative people and the stories they tell are critical to the long-term existence of an independent country on the northern half of the North American continent in both official languages.

6330   COMMISSIONER SIMPSON: Thank you.

6331   My last question has to do again with your point about moving slowly and carefully and it's to do with your position on simultaneous substitution.

6332   And again, I get back to that comment about the window of three to five years that you tell us is necessary to review anything we do because things won't change significantly by then.

6333   There is a point of view that simultaneous substitution, while it is creating revenue that then is portioned back into the production system which creates Canadian content, there is the inverse view that what it's really doing is that it's consuming inventory in prime time and at the same time just simply monetizing U.S. productions for the purpose of feeding the Canadian production machinery.

6334   Would you comment on that, and does that comment play at all into your view as to why we have to move slowly on it before we -- if we were to ever consider removing it?

6335   MR. MORRISON: I understand some glimmer of merit in that comment, but --

6336   COMMISSIONER SIMPSON: A glimmer is good.

6337   MR. MORRISON: -- but there is a legal dimension to this. People have paid for this programming, it has been brought into the country, only with your Commission support have they been able to monetize that and you would be giving a huge gift to all of those -- you would resuscitate all of those broadcasters on the kind of rust belt south of the Canadian border, of course, but it's such an important piece of the system.

6338   Well, you would be unwise to tinker with that.

6339   COMMISSIONER SIMPSON: Does that view tie to a view regarding an all Canadian basic service and putting any American services onto a paid discretionary tier?

6340   MR. MORRISON: What is it, 1B was our candidate for -- yes, 1B plus three children and the French equivalent is our -- we support that.

6341   Mind you, I accept their logic that only a very small portion of Canadians are going to take that, a lot of people will then go beyond and that's where you get into all of the other options, and we just urge you with those other options to keep your eye on the gas tank of funds that is being accumulated to be turned into production values.

6342   COMMISSIONER SIMPSON: A housekeeping question. Are we to assume then, by Mr. Miller's presence, that the content of both of his reports you agree with in full, or are there any exceptions?

6343   MR. MORRISON: No, no, nor disagree. The reason -- I can't speak for other funders, but Friends of Canadian Broadcasting's investment in both of the Miller studies was our feeling that we weren't sure who else was bringing objective expert evidence to this table and we wanted to make that contribution.

6344   We didn't make the contribution -- I mean, if we were in that kind of business we could just write press releases, and we do, but this is different, this is an investment in trying to -- and by the way, my colleague, whom I respect greatly, he could be wrong, but the best way to find him wrong would be to commission some other study that says no, it's the best thing since sliced bread, whatever the proposal is, you know.

6345   And so that's why we did it, we thought an evidence-based contribution was of some value and was an investment in the success of your work.

6346   COMMISSIONER SIMPSON: Thank you very much.

6347   THE CHAIRPERSON: Thank you very much, Mr. Morrison. I believe those are our questions. But before it I let you go, you and others have made reference to some noise that's occurring outside this hearing room, I can't prevent that noise occurring outside this hearing room, but what I can assure you is that, figuratively at least, you will have your day in court.

6348   We are not a court, we are an administrative tribunal, and you will, I can assure you, a fair hearing before us. So thank you for participating in this proceeding.

6349   MR. MORRISON: Thanks for the opportunity.

6350   THE CHAIRPERSON: Thank you.

6351   I think we are due for a short health break at this point, about 10 minutes.

6352   Thank you very much.

--- Upon recessing at 1827

--- Upon resuming at 1839

6353   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

6354   Madame la Secrétaire.

6355   LA SECRÉTAIRE : Merci.

6356   Nous entendrons maintenant la présentation de l'Alliance des producteurs francophones du Canada.

6357   Vous avez 15 minutes pour votre présentation. S'il vous plaît vous présenter et présenter votre collègue. Merci.

PRESENTATION

6358   M. BELLEFEUILLE : Merci.

6359   Monsieur le Président, Monsieur le Vice Président, Madame la Conseillère, Messieurs les Conseillers, je suis Jean-Claude Bellefeuille, vice-président de l'Alliance des producteurs francophones du Canada (APFC). Natalie McNeil, notre consultante, m'accompagne.

6360   L'APFC représente les producteurs indépendants francophones oeuvrant dans les CLOSM francophones, et elle est le porte-parole de l'industrie francophone de la télévision, du multimédia et du film à l'échelle canadienne.

6361   Nous tenons à remercier le CRTC de nous permettre de nous prononcer sur l'avenir de la télévision canadienne. D'emblée, nous nous permettons de rappeler que les enjeux sont d'une importance capitale pour notre système.

6362   Favoriser l'épanouissement de l'expression canadienne, traduire la créativité artistique canadienne et faire appel aux ressources canadiennes pour la création et la présentation de la programmation de toutes les entreprises canadiennes de radiodiffusion sont les objectifs fondamentaux inscrits dans la Loi sur la radiodiffusion, et ceux-ci doivent guider la réflexion et les décisions dans ce processus de révision de l'approche politique et réglementaire du Conseil.

6363   Nous sommes nombreux à craindre que cette révision ne vienne modifier la capacité des entreprises de radiodiffusion à contribuer au financement et à la diffusion d'émissions canadiennes de qualité produites par et pour eux. Nous croyons également que ce sont nos contenus canadiens qui nous déterminent et nous distinguent culturellement. En ce sens, et tout en respectant les opinions des consommateurs, nous pensons que le Conseil ne doit pas perdre de vue ou négliger les intérêts des Canadiens en tant que citoyens et créateurs.

6364   Notre présentation de ce jour couvrira certaines des questions posées par le Conseil dans le document de travail de l'avis 2014-190-3.

6365   À la question du petit service de base, l'APFC retient l'option A proposée par le Conseil, soit que ce service comprendrait des stations locales canadiennes, les services 9(1)h), les services éducatifs et, si elles sont disponibles, une chaîne communautaire et une chaîne législative provinciale. Attendu que le consommateur ne serait nullement dans l'obligation d'acheter d'autres chaînes en s'abonnant à ce forfait. Nous estimons que cette proposition permettrait au Conseil de répondre aux attentes des Canadiens en matière de maximisation des choix et de souplesse.

6366   Nous suggérons toutefois que les EDR aient la possibilité d'offrir, en parallèle à ce service de base restreint, un service de base élargi. De cette façon, les consommateurs auraient plus de liberté de choix : tous les abonnés à la télédistribution numérique auraient en tout temps la possibilité de choisir le service de base restreint entièrement canadien; en parallèle, ceux -- et uniquement ceux -- qui le désirent pourraient s'abonner plutôt au service de base étendu que leur propose leur EDR, si cela leur convient mieux. Il appartiendra aux EDR qui mettront en oeuvre cette option de proposer un service de base étendu offrant un bon rapport qualité/prix si elles veulent être en mesure de susciter l'intérêt des consommateurs, qui auront toujours loisir par ailleurs d'opter pour le petit service de base restreint entièrement canadien.

6367   De plus, à titre exceptionnel et pour répondre aux besoins des communautés francophones du Nouveau-Brunswick, les stations CHAU-TV Carleton et CIMT-TV de Rivière-du-Loup, propriétés de Télé Inter-Rives qui desservent le Nord de cette province, devraient être offertes au petit service de base reçu par tous les abonnés à la télédistribution de cette province.

6368   À la question d'une application de l'option « à la carte », permettant aux abonnés des EDR de choisir individuellement tous les services facultatifs souhaités, il ne faut pas perdre de vue qu'une approche complètement radicale impacterait grandement sur les capacités de notre système à financer des produits de qualité.

6369   Une approche moins radicale serait celle d'obliger les EDR de permettre à leurs abonnés de créer leur propre bouquet personnalisé de services facultatifs de programmation, tout en continuant d'offrir également des forfaits préassemblés.

6370   À la question de la prépondérance, nous retenons l'option A, qui obligerait les EDR de s'assurer que chaque abonné reçoit une prépondérance de services canadiens sur des chaînes non canadiennes.

6371   Enfin, nous recommandons au Conseil de prendre des mesures pour inciter les EDR terrestres et par satellite opérant en milieu minoritaire à offrir un plus grand nombre de services spécialisés de langue française de catégories A et B, car si les forces du marché sont les seuls barèmes décisionnels, il y aura une diminution considérable de l'offre de canaux de langue française dans certains marchés, et cela pénaliserait grandement les CLOSM francophones.

6372   Le Conseil émet l'hypothèse de redéfinir les revenus de radiodiffusion pour les titulaires afin d'y inclure les revenus provenant des émissions offertes en ligne et sur d'autres plateformes exemptées. Ainsi, les radiodiffuseurs pourraient comptabiliser, au titre de dépenses d'émissions canadiennes, leurs dépenses relatives à des émissions originales diffusées exclusivement en ligne. L'APFC est en accord avec la proposition dans la mesure où ces nouveaux contenus originaux seraient canadiens.

6373   Nous en profitons pour soulever que la véritable problématique porte sur le fait que tous ces nouveaux services de programmation par Internet non réglementés se bâtissent de nouveaux empires et qu'ils contribuent très peu au financement de nouveaux contenus canadiens. Ils profitent donc d'un contenu financé par les distributeurs et les diffuseurs traditionnels, sans avoir à y contribuer à l'étape du développement et du financement.

6374   L'APFC, comme la très grande majorité du milieu, soutient qu'il est impératif que tous les utilisateurs de contenus professionnels de radiodiffusion soient mis à contribution : les fournisseurs d'accès Internet, les fournisseurs de services de téléphonie mobile, les services de programmation par contournement, ou encore les fabricants ou vendeurs d'appareils de réception. Les mécanismes de financement de la programmation canadienne doivent être modifiés et de nouvelles mesures fiscales, financières ou réglementaires doivent être mises en place pour encourager la production d'émissions canadiennes nouvelles, innovatrices et captivantes.

6375   À la question des émissions d'intérêt national (ÉIN), la proposition discutée est de conserver le pourcentage des revenus consacrés aux ÉIN et d'imposer aux groupes privés des contributions de leurs revenus à la production indépendante. Enfin, compte tenu des circonstances particulières du marché de langue française, les exigences actuelles en matière de diffusion d'ÉIN doivent être maintenues et réévaluées lors des renouvellements de licence. De plus, les émissions enfants/jeunesse seraient comprises dorénavant dans la définition d'ÉIN. En ce qui concerne les services individuels, le Conseil n'impose pas de dépenses en ÉIN; c'est donc la nature de leur service qui détermine leurs dépenses.

6376   Nous sommes d'accord avec cette proposition et nous remercions le Conseil d'intégrer les émissions enfants/jeunesse dans la définition des ÉIN. Par contre, l'APEC recommande respectueusement au Conseil de commencer à imposer à tous les réseaux de télévision traditionnelle des obligations de dépenses DIN en pourcentage de revenus bruts réalisés au cours de l'année précédente.

6377   Concernant les exigences liées à la programmation, nous sommes d'avis que toutes les stations de télévision autorisées, les services payants et spécialisés doivent contribuer financièrement à la production d'émissions canadiennes, les DEC. Ils doivent avoir des obligations de DEC calculées de la même façon, soit en pourcentage des revenus bruts totaux de radiodiffusion réalisés par le service au cours de l'année précédente.

6378   Enfin, nous pensons que le Conseil ne doit pas supprimer les exigences de présentation au cours de la journée de radiodiffusion. Ceci pourrait avoir pour effet néfaste de réduire considérablement la demande d'émissions canadiennes diffusées durant cette période de la journée et pourrait mettre en péril certains genres, émissions préscolaires, enfants jeunesse, magazines, émissions-causerie ou encore des jeux.

6379   À la question de la protection des genres, l'APFC est très inquiète des conséquences extrêmement négatives que pourraient avoir l'élimination des genres sur l'ensemble de la production de langue française, auteurs, scénaristes, réalisateurs, producteurs, artistes, interprètes, animateurs, techniciens, scénographes, et caetera, et plus fondamentalement encore sur la capacité de la télévision de langue française à maintenir les liens étroits qu'elle a su tisser jusqu'à ce jour avec les auditoires francophones d'ici.

6380   L'APFC recommande au Conseil de maintenir la protection des genres par service de catégorie A de langue française. Nous pensons que le Conseil doit leur imposer en contrepartie l'obligation de consacrer au moins 65 pour cent de leur DEC annuel au financement et à l'acquisition d'émissions canadiennes de langue originale française.

6381   Cette obligation nouvelle nous semble s'imposer dans le contexte qui découle de la récente série de transactions impliquant des services de catégorie A de langue française, transactions qui ont fait passer plusieurs d'entre eux sous le contrôle d'entreprises pancanadiennes réalisant l'essentiel de leur activité dans le marché de langue anglaise, qui dispose souvent de services de langue anglaise exploitant des genres similaires et dont le centre ultime de décision se situe hors Québec.

6382   Dans un tel contexte, la tentation risque d'être grande de concentrer les investissements en développement et en production vers les émissions originales canadiennes de langue anglaise.

6383   Enfin, l'APFC appuie tout à fait la position du Conseil que l'industrie mette sur pied un groupe de travail afin de développer collectivement un système de mesure de cotes d'écoute. Il faudra que l'industrie tienne en compte les réalités des parts de marché des francophones en milieu minoritaire, car ces derniers, bien intégrés dans le marché majoritaire, n'ont pas une valeur spécifique pour les annonceurs.

6384   Quant aux droits des CLOSM d'accéder à des chaînes dans leurs langues officielles, l'APFC pense que le Conseil doit mettre en place des mesures qui, tout à la fois, reconnaissent le rôle central que la télévision traditionnelle joue et doit continuer de jouer en matière de programmation locale et permet aux producteurs locaux et régionaux de contribuer à une programmation plus diversifiée.

6385   Rappelons-nous le FAPL, qui était alimenté par une contribution des EDR propriétaires de la quasi-totalité des réseaux régionaux et nationaux de télévision traditionnelle. Il a grandement contribué à la diversité de la programmation locale et soutenu nos stations locales et plus particulièrement les stations de la Société Radio-Canada, qui sont d'une importance capitale pour nos concitoyens francophones vivant en milieu minoritaire.

6386   De manière à soutenir la production indépendante régionale et plus spécifiquement celle des CLOSM francophones afin de garantir un avenir aux producteurs locaux et régionaux enracinés dans les communautés desservies, nous demandons respectueusement au Conseil de réintroduire une mesure de ce type dont les sommes seraient versées au Fonds des médias du Canada. Attendu que ce dernier veillerait à la répartition juste et équitable des sommes entre les régions du Québec et les CLOSM francophones et entre les régions du Canada et les CLOSM anglophones.

6387   De manière à permettre aux francophones en situation minoritaire d'exercer pleinement leur liberté de choix, nous demandons au Conseil d'inciter grandement les EDR à offrir un éventail significatif de services facultatifs de langue française. En ce sens et minimalement, nous pensons que le Conseil doit maintenir l'exigence à toutes les EDR terrestres de distribuer un service facultatif dans la langue de la minorité pour 10 services distribués dans la langue de la majorité.

6388   En ce qui concerne le reflet des CLOSM à la télévision, la seule et unique manière d'assurer son reflet est que le Conseil continue d'imposer des conditions de licence en lien avec la production indépendante francophone issue des CLOSM à tous les diffuseurs, qu'ils soient privés ou publics, s'assure de la survie des stations régionales de la Société Radio-Canada ainsi que des diffuseurs indépendants situés en région.

6389   Enfin, comme la très grande majorité de la francophonie canadienne, nous voulons souligner notre satisfaction de la venue d'Unis dans notre paysage médiatique. L'APFC, dans le cadre du processus de renouvellement de ses licences, demande respectueusement au Conseil d'alléger le processus de reconduction de ses services de distribution obligatoire 9(1)(h).

6390   Il va de soi que le bénéficiaire du service devra démontrer qu'il a respecté les obligations qui lui ont été imposées et qu'il doit remplir la mission qui lui a été dévolue. Nous pensons que ceci permettrait à ses services 9(1)(h) de mieux planifier leur développement et de travailler avec les communautés desservies.

6391   En conclusion, l'APFC a exprimé ses grandes inquiétudes quant à l'ampleur et à la variété des changements envisagés dans ce processus. Parlons télé : si le conseil devait priver tous les services facultatifs canadiens de leur accès à la distribution, de leur protection par genre, voire de toute nature de service, rien ne les distinguera plus des services étrangers en matière d'accès au système canadien de distribution. La seule différence avec un service étranger serait qu'ils conserveront certaines obligations en matière de programmation canadienne.

6392   L'APFC demande donc au Conseil de faire en sorte que, dans l'environnement de radiodiffusion élargi qui se dessine, que le cadre politique et réglementaire demeure fidèle aux objectifs de la politique canadienne de radiodiffusion et qu'il encourage et récompense les services qui contribue le plus à l'atteinte de ces objectifs et qu'il incite tous les acteurs de ce nouvel environnement à contribuer de la manière qui convient au financement de nouvelles émissions canadiennes de qualité compétitives, innovatrices et captivantes.

6393   Nous sommes persuadés qu'ainsi, les Canadiens en tant que créateurs, citoyens et consommateurs y gagneront. Merci de votre attention et nous sommes prêts à répondre à vos questions. Merci, monsieur Bellefeuille, madame McNeil. Monsieur le Conseiller Dupras.

6394   CONSEILLER DUPRAS : Merci, Monsieur le Président.

6395   Bonjour, monsieur Bellefeuille. Alors, à part les nouvelles, les membres que vous représentez produisent quel genre d'émissions et comment assurent-ils le reflet des communautés que vous représentez?

6396   M. BELLEFEUILLE : Le pays est vaste. Alors, les communautés de langues officielles en milieu minoritaire francophone d'est en ouest assurent la diversité des genres, que ce soit au niveau dramatique, dont, présentement, il s'en tourne deux. Il s'en est tourné une l'an dernier.

6397   Également, au niveau de variétés, alors, genres musicaux, documentaires, évidemment, qui est un des genres prisés, et nous opérons avec toute cette belle membriété-là (sic) à travers le Canada dans tous les genres télévisuels.

6398   CONSEILLER DUPRAS : Et est-ce que c'est surtout les producteurs hors Québec que vous représentez ou ça inclut également tout le milieu de la production du Québec?

6399   M. BELLEFEUILLE : Non, nous représentons... L'Alliance des producteurs francophones du Canada a été fondée en 1990, dont je suis un des membres fondateurs, et pour contrer effectivement un manque de financement, un manque d'opportunités au niveau télévisuel et d'assurer une présence dans nos communautés et de pouvoir montrer justement que ces communautés-là, le reflet de la communauté, d'avoir une incidence directe sur la production dans toutes nos communautés à travers le pays.

6400   Alors, on existe maintenant un peu plus... ça fait déjà 15 ans. Alors, on a célébré notre 15e anniversaire. Il y a une initiative également que nous avons réussi à mettre sur pied, qui est portée maintenant à non loin de 10,6 millions de dollars en production à travers le Canada...

6401   CONSEILLER DUPRAS : Ah bon.

6402   M. BELLEFEUILLE : ... au Fonds des médias du Canada.

6403   CONSEILLER DUPRAS : Et les diffuseurs principaux des émissions des producteurs de ces régions...

6404   M. BELLEFEUILLE : Bon...

6405   CONSEILLER DUPRAS : ...c'est surtout Radio-Canada?

6406   M. BELLEFEUILLE : Radio-Canada, effectivement. Lors des débuts de l'Alliance, on pouvait comptabiliser presque à 100 pour cent entre la télévision française de l'Ontario et la Société Radio-Canada au niveau régional. Maintenant, d'autres joueurs viennent de s'ajouter, comme je le mentionnais dans mon allocution : Unis. Alors, déjà... et j'assistais au gala de lancement il y a quelques semaines et la présidente d'Unis a comptabilisé non loin de 7 millions pour une station qui a reçu son aval il y a à peine 13 mois et, là, qui est en onde depuis une semaine. Alors, ce sont, en fait, de nouveaux chiffres qui sont disponibles et de nouvelles possibilités au niveau de production.

6407   CONSEILLER DUPRAS : D'accord. Vous dites que les services américains ou les compagnies américaines qui sont en affaires en partenariat avec les compagnies canadiennes dans des services spécialisés au Canada, si la protection des genres est délaissée, qu'ils pourraient tout simplement laisser tomber leur partenaire canadien et demander à être admis par la suite comme service américain.

6408   Vous nous dites dans votre demande que cela ne devrait pas se faire avant un certain temps, mais vous ne spécifiez pas de délai. Est-ce que vous avez des détails là-dessus?

6409   M. BELLEFEUILLE : Non, pour l'instant. Nathalie, est-ce que...

6410   MME MCNEIL : Ce qu'on dit dans le mémoire, en fait, là, vous vous référez au mémoire...

6411   CONSEILLER DUPRAS : Oui.

6412   MME MCNEIL : ...et non pas à la présentation d'aujourd'hui...

6413   CONSEILLER DUPRAS : C'est ça.

6414   MME MCNEIL : ...c'est que, s'il y a des... on parlait...

6415   CONSEILLER DUPRAS : Paragraphe 26.

6416   MME MCNEIL : Pardon?

6417   CONSEILLER DUPRAS : Paragraphe 26.

6418   MME MCNEIL : Il faut que je mette mes lunettes, excusez. Ce qu'on disait, c'est qu'on parlait de la distribution et non pas de la protection des genres dans cette section du mémoire et que, s'il y avait un retrait, il fallait que le Conseil mette un délai avant que ces distributeurs reviennent dans le marché, mais on ne parlait pas de la protection des genres.

6419   CONSEILLER DUPRAS : O.K. Bien, c'est ce que je voulais savoir, c'était le délai, là.

6420   MME MCNEIL : Le délai.

6421   CONSEILLER DUPRAS : Oui.

6422   MME MCNEIL : Écoutez, je crois qu'on ne l'a pas déterminé. On n'est pas assez -- comment dire? -- experts pour déterminer le délai.

6423   CONSEILLER DUPRAS : Um-hum.

6424   MME MCNEIL : C'est à vous de le déterminer, mais c'est évident que ça doit être beaucoup plus que quelques mois.

6425   CONSEILLER DUPRAS : Quelques... oui, c'est ça, bon. Alors, bien, je vous remercie pour ça. Pour ce qui est de la protection des genres, vous dites que les services de catégorie A, on devrait continuer à leur donner de la protection au Québec. Pouvez-vous m'expliquer un peu plus ce que vous pensez de ce côté-là?

6426   M. BELLEFEUILLE : Bien, pour nous, je crois que c'est important, l'accès hors du Québec, cette protection des genres-là, parce qu'on peut produire, que ce soit au niveau musical, au niveau variétés, arts de la scène, documentaires, on peut produire en dramatiques également, c'est ce qu'on fait.

6427   Là, moi, je vous parle de l'extérieur effectivement du Québec parce qu'on représente les CLOSM francophones. Alors, un peu difficile de parler pour le Québec, mais, en ce qui nous concerne, la protection des genres est importante pour qu'on puisse diversifier. Et, ça, on le mentionnait afin de pouvoir créer justement les habiletés nécessaires à la production dans tous les genres, que ce soit en dramatique, en émissions pour enfants également.

6428   On parlait tout à l'heure que le théâtre était en péril. Bon, bien, ça, c'est une autre opportunité vers la télévision. Et ça s'est joué, ça, au Québec, il y a plusieurs années et, nous, bien, c'est un phénomène qui est plutôt récent et nouveau. Et, comme on mentionnait avec le nouveau 9(1)(h), avec Unis, bien, il y aura des possibilités. Sauf que ça prend tout de même une expertise. Ça fait que, pour nous, c'est très important d'être capable de développer cette expertise-là dans tous les genres et non pas de se restreindre.

6429   CONSEILLER DUPRAS : Ah bon. Mais, au Québec, est-ce que vous pensez que ça peut créer un problème s'il n'y a plus de protection de genres, compte tenu que la plupart des signaux, là, sont détenus par des grands joueurs?

6430   MME MCNEIL : En ce qui concerne la protection des genres, ce matin, Bell a très bien répondu dans le choix de ce qui était, là...

6431   CONSEILLER DUPRAS : Oui.

6432   MME MCNEIL : ...ce qui serait le pire pour eux et on adhère absolument à leur explication au niveau des chaînes. Les diffuseurs québécois travaillent avec les producteurs indépendants en situation minoritaire. C'est exactement les mêmes diffuseurs et on pense que la protection des genres est une façon de, bien, de protéger des gens qui sont plus en danger et qui sont le reflet de la culture canadienne aussi.

6433   CONSEILLER DUPRAS : Bon, alors, ça limite mes questions, je vous remercie.

6434   LE PRÉSIDENT : Monsieur le Vice-Président.

6435   CONSEILLER PENTEFOUNTAS : (Inaudible), Monsieur le Président. Juste pour clarification, huitième paragraphe de votre présentation orale du jour, vous avez suggéré que les stations francophones du Nouveau-Brunswick, Carleton et Rivière-du-Loup, bien, Rivière-du-Loup, ça se trouve au Québec ainsi que Carleton, qu'elles soient offertes au service de base reçu par les abonnés de la télédiffusion de cette province, vous voulez dire à travers la province?

6436   M. BELLEFEUILLE : Maintenant, grâce à des pressions auprès de Bell ExpressVu, ils ont fini par acquiescer effectivement à ces pressions-là. Maintenant, à travers la province, c'est disponible. Je crois même, il y a des cablos en Nouvelle-Écosse et, là, bon, ça doit être facultatif effectivement. Je sais qu'au Nouveau-Brunswick, on l'a, parce que le diffuseur a communiqué directement avec moi puis on l'a vérifié dans la grande région du Sud-Est également et, je crois, dans le Sud-Ouest de la province. Ça fait que, maintenant, ils ont un balayage.

6437   C'est qu'ils ont des réémetteurs également, bon, et ils diffusent également en ondes hertziennes, mais, dans notre cas, bien, c'est en mode... c'était en SD, là, maintenant, je crois que le service Bell nous envoie le service, ils ont fait une substitution, là, au niveau de la... bon, lorsqu'on parle de prépondérance, là, vous m'excuserez le terme...

6438   CONSEILLER PENTEFOUNTAS : Non, non, ça va.

6439   M. BELLEFEUILLE : ...O.K., pour substituer Carleton...

6440   CONSEILLER PENTEFOUNTAS : Mais vous voulez que ce soit disponible au Nouveau-Brunswick?

6441   M. BELLEFEUILLE : Ah oui, oui, oui.

6442   CONSEILLER PENTEFOUNTAS : O.K., pas au Québec?

6443   M. BELLEFEUILLE : Effectivement.

6444   CONSEILLER PENTEFOUNTAS : O.K., parce que, sur le service de base...

6445   M. BELLEFEUILLE : Oui, oui.

6446   CONSEILLER PENTEFOUNTAS : ...les chaînes conventionnelles sont disponibles?

6447   M. BELLEFEUILLE : Oui, oui, une est affiliée à TVA et l'autre à V.

6448   CONSEILLER PENTEFOUNTAS : Oui, tout à fait. Alors, paragraphe 10 également, vous avez parlé d'une approche que vous avez trouvée radicale. Devrais-je dire que, dans le 9e paragraphe, vous avez parlé d'une approche radicale, mais rien n'empêche les EDR d'offrir ces services facultatifs de programmation et les bouquets personnalisés. Ce n'est pas exclusivement un service à la carte qui doit être offert?

6449   M. BELLEFEUILLE : Non, nous, notre position, c'est un (inaudible) hybride. Moi, je suis issu de la câblodistribution. Alors, j'ai vécu le premier balbutiement, la première...

6450   CONSEILLER PENTEFOUNTAS : Mais, si j'ai bien compris votre...

6451   M. BELLEFEUILLE : Oui.

6452   CONSEILLER PENTEFOUNTAS : ...votre point de vue, votre proposition est la nôtre, également?

6453   M. BELLEFEUILLE : Oh oui, oui, oui, effectivement.

6454   CONSEILLER PENTEFOUNTAS : O.K.

6455   M. BELLEFEUILLE : Oui, oui.

6456   CONSEILLER PENTEFOUNTAS : Parce que...

6457   M. BELLEFEUILLE : Oui, oui, oui.

6458   CONSEILLER PENTEFOUNTAS : ...parce qu'on ne prône pas cette position radicale.

6459   M. BELLEFEUILLE : Effectivement.

6460   CONSEILLER PENTEFOUNTAS : O.K., ça va. Monsieur le Président, merci.

6461   LE PRÉSIDENT : Merci beaucoup, monsieur, madame, ce sont nos questions. Madame la Secrétaire, s'il vous plaît.

6462   LA SECRÉTAIRE : Merci. J'inviterais maintenant l'Union des artistes, la Société des auteurs de radiotélévision...

6463   M. BELLEFEUILLE : Merci.

6464   LA SECRÉTAIRE : ...et cinéma et l'Association des réalisateurs et réalisatrices du Québec à venir à la table.

6465   LE PRÉSIDENT : Messieurs, mesdames, bienvenue. Désolé pour l'heure. On n'est pas en matinée, définitivement, là, pour votre présentation, mais on vous écoute quand même. Allez-y.

PRESENTATION

6466   MME LUSSIER : D'accord. Alors, bonsoir, Monsieur le Président, membres du panel. Je m'appelle Sylvie Lussier et je suis la présidente de la Société des auteurs de radio, télévision et cinéma.

6467   Aujourd'hui, je suis accompagnée de :

6468   - Gabriel Pelletier, président de l'Association des réalisateurs et réalisatrices du Québec;

6469   - Denis Mercier, premier vice-président de l'Union des artistes;

6470   - et sont également présents Pierre Blanchet, directeur des communications de l'UDA;

6471   - Caroline Fortier, directrice générale de l'ARRQ;

6472   - et Yves Légaré, directeur général de la SARTEC.

6473   Alors, l'univers de la télévision francophone possède ses propres caractéristiques. C'est un secteur nécessitant des mesures qui prennent en considération ce caractère distinctif.

6474   Les résultats des deux premières étapes de la consultation auprès du public de Parlons Télé sont beaucoup plus ambigus que ne le suggère le Conseil. D'après l'échantillon de Canadiens qui ont participé au sondage lors de la première étape de la consultation, aucun véritable consensus ne se dégage des grandes questions qui préoccupent les francophones. L'orientation des interventions du 27 juin dernier, quant à elle, était moins ambiguë. La majorité des acteurs du milieu, autant francophones et anglophones, ont rejeté l'approche du CRTC et ont prôné le maintien des grandes lignes du système réglementaire actuel.

6475   Malgré cela, l'avis de consultation CRTC 2014-190-3 du 21 août dernier présente un ensemble de propositions qui témoignent de nouveau d'un parti pris vis-à-vis le libre choix. Ainsi, le Conseil semble vouloir modifier le régime réglementaire en télévision, malgré l'opposition généralisée du milieu. Gabriel.

6476   M. PELLETIER : Merci, Sylvie. Le CRTC veut imposer le libre choix des services télévisuels, entre autres, parce qu'il est préoccupé par le fait que les pratiques actuelles de forfaits préassemblés ne répondent pas à l'objectif de la Loi sur la radiodiffusion voulant que les exploitants par câble et satellite fournissent de la programmation à des tarifs abordables.

6477   Nous ne sommes pas d'accord avec cette évaluation en ce qui concerne la distribution de services de langue française au Québec. Selon l'étude de David Keeble, d'ailleurs, le choix du consommateur à l'égard des offres de télévision linéaire est plus grand au Canada qu'aux États-Unis.

6478   Dans son avis de consultation, le Conseil dit estimer que la question de la « maximisation des choix et de la souplesse » exige un examen plus détaillé lors de la présente audience. Nous sommes d'accord que le choix et la souplesse devraient caractériser l'offre des EDR, mais nous considérons que ce choix et cette souplesse ne devraient pas avoir priorité sur tout autre objectif. Le système canadien de radiodiffusion devrait avant tout « favoriser l'épanouissement de l'expression canadienne en proposant une très large programmation qui traduise des attitudes, des opinions, des idées, des valeurs et une créativité artistique canadiennes, qui mette en valeur des divertissements faisant appel à des artistes canadiens... » comme le veut l'article 3 de la Loi sur la radiodiffusion.

6479   Nous croyons que « toutes les entreprises de radiodiffusion sont tenues de faire appel au maximum, et dans tous les cas au moins de manière prédominante, aux ressources -- créatrices et autres -- canadiennes pour la création et la présentation de leur programmation » comme le veut la Loi.

6480   Plus précisément, nous appuyons la volonté du CRTC d'obliger les EDR à offrir à leurs abonnés un petit service de base entièrement canadien. Cependant, selon la proposition du Conseil, les EDR seraient aussi tenues de permettre aux abonnés de choisir individuellement tous les services facultatifs. Cette approche serait semblable au choix et à la souplesse actuellement offerts par certaines EDR autorisées au Québec et dans les provinces de l'Atlantique.

6481   Or, à l'heure actuelle, en matière de prépondérance, les abonnés des fournisseurs de télévision par câble ou satellite reçoivent un plus grand nombre de chaînes canadiennes que de chaînes non canadiennes. Si l'approche proposée aujourd'hui par le CRTC est semblable au choix et à la souplesse déjà offerts au Québec, pourquoi vouloir modifier le régime actuel encadrant les relations entre les EDR et leurs abonnés?

6482   Beaucoup d'intervenants dans la phase écrite de la présente instance se posent cette même question.

6483   De notre côté, nous appréhendons les effets de la mise en oeuvre de l'approche à la carte du Conseil sur la survie de maints services spécialisés et payants francophones de catégorie A.

6484   Leur rentabilité et leur capacité de financer des émissions dans les catégories sous-représentées, dramatiques, documentaires, émissions pour enfants et jeunes, variété et hors de la scène en seraient à tout le moins affectées.

6485   À l'heure actuelle, les services de catégorie A, tels que Séries+, Histora, VRAK TV, Ztélé, Canal D, Télétoon et Super Écran, bien que très rentables, ne contribuent pas assez au financement et à la diffusion d'émissions souvent coûteuses dans les catégories sous-représentées.

6486   Quelle serait la réaction de ces services si l'approche du Conseil était adoptée et leur rentabilité menacée?

6487   Prétendre que l'imposition d'une option à la carte n'aura pas d'incidence significative sur les services de programmation de langue française existants, comme l'a fait le Conseil dans son avis 2014-190, témoigne d'une mauvaise évaluation à laquelle nous ne souscrivons pas.

6488   Puisque le Conseil a déjà assoupli ses exigences envers les grands groupes de radiodiffusions et que les exigences minimales du CRTC s'avèrent être des plafonds pour des entreprises de programmation commerciale, l'approche du Conseil aurait comme conséquence de réduire le volume d'émissions sous-représentées à la télévision canadienne francophone par rapport au niveau actuel.

6489   L'approche du Conseil favorise un seul objectif de l'article 3 de la Loi sur la radiodiffusion au détriment des autres.

6490   Denis?

6491   M. MERCIER : Merci Gabriel.

6492   Depuis plus d'une trentaine d'années, le CRTC reconnaît les émissions sous-représentées identifiées aujourd'hui comme émissions d'intérêt international.

6493   Malgré cet historique, nulle part dans l'avis de consultation du 24 avril dernier n'est-il fait mention des émissions d'intérêt national.

6494   L'UDA, la SARTEC et l'ARRQ considèrent que les catégories sous-représentées constituent la pierre angulaire de la programmation télévisuelle canadienne de langue française et que mettre de côté ce concept serait désastreux.

6495   Selon la proposition du Conseil du 21 août dernier pour les grands groupes de radiodiffusion, le pourcentage de revenu consacré aux émissions d'intérêt national serait conservé.

6496   Or, cette concession risquait d'avoir peu d'effet de côté francophone, car les exigences actuelles en matière d'EIN sont faibles ou inexistantes.

6497   Le réseau TVA n'a pas d'exigences précises, si ce n'est une attente de diffuser les EIN dans la même mesure qu'il l'a fait au cours de la période de licence précédente.

6498   Il n'y a aucune exigence concernant V Interaction même si celle-ci s'est engagée à diffuser cinq heures d'émissions prioritaires en 2014-2015, la dernière année de sa licence actuelle.

6499   BCE est obligé de dépenser seulement 18 p. cent des revenus bruts de Canal D, Canal Vie, VRAK TV, Ztele, Super Écran et Cinépop sur les EIN.

6500   Corus n'est obligé de ne dépenser que 26 p. cent des revenus bruts de Télétoon, service anglais et français mis ensemble sur les EIN. Mais, elle n'a aucune exigence de cette nature relativement à Série+ et Historia.

6501   Le statu quo est préférable à la suppression de toute exigence en matière EIN comme le proposait le Conseil le 24 avril dernier.

6502   Mais, nous continuons à croire que la solution au problème de la programmation originale francophone dans les catégories sous-représentées réside dans des conditions de licences précises et ciblées : service par service et catégorie d'émissions par catégorie d'émissions.

6503   Dans son avis 2014-190 du 21 août dernier, le Conseil propose que toutes les stations de télévision autorisée et les services payants et spécialisés soient assujettis aux exigences en matière de dépenses sur les émissions canadiennes.

6504   Nous sommes d'accord avec cette approche en ce qui concerne les DIC (ph). Mais nous nous opposons à la proposition que les exigences de présentation au cours de la journée de radiodiffusion soient supprimées.

6505   Nous croyons que les exigences de présentation actuelle devraient être maintenues.

6506   Enfin, les télédiffuseurs ont tendance à se concurrencer en favorisant la diffusion du même genre d'émissions, telles que les comédies ou les télés réalité plutôt de fournir des genres sous-représentés tels que les dramatiques ou les documentaires d'auteur.

6507   Dans le but de promouvoir la diversité de la programmation, la politique de l'exclusivité du genre sert d'épine dorsale de l'approche courante du Conseil et devrait être maintenue.

6508   Nous croyons que la suppression de la politique de l'exclusivité des genres, ainsi que propose le Conseil, aurait des effets néfastes sur la viabilité de plusieurs services de programmation francophones.

6509   L'abandon de cette politique entraînerait une réduction du nombre de services francophone de catégorie A.

6510   Les services ayant résisté se verraient dans l'obligation de réduire leurs coûts afin de maintenir leur marge bénéficiaire.

6511   Un tel comportement de la part des services de catégorie A réduirait le coût moyen d'acquisition des productions indépendantes et augmenterait le taux de reprise par émissions, taux déjà trop élevé, ainsi que le volume d'émissions doublé de l'anglais. Le tous au détriment de la production originale francophone dans des catégories d'émissions coûteuses telles que les dramatiques et les documentaires d'auteurs.

6512   Beaucoup d'intervenants dans la phase écrite de cette instance s'opposent à l'élimination de la politique sur l'exclusivité des genres, à tout le moins pour le marché francophone.

6513   Nous ne comprenons pas comment l'approche du CRTC, axée sur la suppression de la politique de l'exclusivité des genres et le libre choix, encouragerait la production et la promotion d'une programmation captivante et diversifiée au Canada.

6514   Même si le pourcentage de revenus consacrés aux émissions d'intérêt national était conservé et les exigences actuelles sur la division d'EIN étaient maintenues, la question posée est la suivante. Comment la réduction du volume des abonnés aux services de catégorie A et la faillite probable de certaines chaînes contribueraient-elles à l'atteinte de ses objectifs?

6515   Sylvie?

6516   MME LUSSIER : Merci.

6517   En se servant des résultats ambigus de ces consultations, le Conseil cherche à donner une orientation particulière à celle-ci en dérèglementant la télévision canadienne pour la rendre plus conforme à l'environnement caractérisant les plateformes alternatives exemptées.

6518   Si l'ensemble des mesures proposées par le Conseil au moyen des questions soulevées par l'avis 2014-190(3) du 21 août dernier était mis en oeuvre, il aurait des effets très néfastes sur la création d'une programmation canadienne captivante et diversifiée par le secteur réglementé.

6519   Considérant le succès du système francophone, pourquoi remettre en question le cadre règlementaire qui le sous-tend.

6520   Au lieu de réduire la réglementation du secteur de la télévision autorisée par licence, L'UDA, la SARTEC et l'ARRQ considèrent que le CRTC devrait chercher à mieux intégrer les plateformes alternatives exemptées au secteur réglementé.

6521   À cette fin, le Conseil devrait mettre sur pied une instance qui examinerait comment mieux intégrer ces plateformes dans le secteur réglementé de la télévision, notamment ce qui concerne les contributions au financement des émissions dans les catégories sous-représentées.

6522   Monsieur le Président, cela complète notre présentation, et nous répondrons à vos questions avec plaisir.

6523   Merci.

6524   LE PRÉSIDENT : Merci bien.

6525   Monsieur le Vice-président, s'il vous plaît.

6526   CONSEILLER PENTEFOUNTAS : Merci beaucoup. Mais vous avez très bien fait ça, parce que vous avez répondu à quelques questions que j'avais, suite à ma lecture de votre intervention de plus tôt cette année.

6527   D'abord, je dois commencer à vous disant que le Conseil est très sensible du fait que l'univers de la télévision francophone possède ses propres caractéristiques.

6528   Et je vous dirais même à contrario (ph), que nous y sommes hyper attentifs à ce marché-là et le caractère distinctif de ce marché-là.

6529   Alors, soyez pas inquiets sur ce point-là parce que vous avez commencé votre document en l'indiquant. Alors...

6530   MME LUSSIER : Mais on aime ça.

6531   CONSEILLER PENTEFOUNTAS : Pas que c'est pas inutile, mais c'est bien noté.

6532   Je comprends votre inquiétude. C'est assez clair et dans votre intervention d'un retrait discussion du jour. Vous avez en quelque sorte déjà répondu à la question.

6533   Mais d'abord, la souplesse a été une préoccupation des consommateurs, ce désir d'avoir plus de choix, plus de flexibilité. Vous ne le voyez pas comme si important peut-être. Et c'est peut-être moins le cas au Québec qu'ailleurs au Canada.

6534   Alors, est-ce que la communauté créative n'a pas moins à inquiéter des changements proposés au Québec, qu'ailleurs?

6535   MME LUSSIER : Je suis pas certaine de comprendre.

6536   CONSEILLER PENTEFOUNTAS : Sur le choix à la souplesse, parce qu'une grande partie, c'est déjà offert. C'est déjà le cas au Québec.

6537   MME LUSSIER : En fait, la question qu'on se pose, c'est puisque c'est déjà possible dans le système actuel, puisqu'on le voit au Québec, pourquoi le déréglementer, puisque les consommateurs peuvent avoir déjà accès à une assez grande souplesse dans le cadre actuel?

6538   L'inquiétude... je sais pas si tu veux... t'avais l'air d'avoir le doigt... vas-y.

6539   En fait, l'inquiétude c'est bien sûr, à moyen terme ou même à court terme, une baisse de revenus des câblodistributeurs qui eux, contribuent au Fonds des médias, qui lui contribue à faire des émissions sur lesquelles on travaille.

6540   CONSEILLER PENTEFOUNTAS : Les bouquets sont en place au Québec. C'est pas le même contexte que ce qui se passe ailleurs au Canada.

6541   Il y a pas autant de désir peut-être de changer le système comme tel, et l'offre à la carte, c'est juste une offre supplémentaire.

6542   Et c'est pas nécessairement le cas que le consommateur irait dans cette direction-là.

6543   M. LÉGARÉ : Mais la souplesse que le Conseil propose ne semble pas être la souplesse qui existe au Québec dans le sens où les câblodistributeurs conçoivent des bouquets. Et cette souplesse, elle est à l'intérieur de ces bouquets.

6544   Alors, on sent que le Conseil veut laisser le consommateur faire ses propres bouquets, ce qui aurait une incidence.

6545   L'autre élément aussi, c'est que...

6546   CONSEILLER PENTEFOUNTAS : C'est déjà le cas au Québec. On peut choisir les chaînes que nous désirons.

6547   M. LÉGARÉ : Mais l'autre élément au Québec, c'est que le Québec est quand même pas un village isolé. Et si des décisions ont un impact important sur le reste du Canada, les contributions des câblodistributeurs au Fonds des médias vont être réduites. Et le Québec a une partie de ces contributions-là.

6548   Et donc, le système, même si le système québécois est assez solide au niveau de l'audience, il reste qu'au niveau du financement, il est très fragile. Et une fragilisation du Canada anglais aura un impact aussi sur le Québec.

6549   CONSEILLER PENTEFOUNTAS : Alors, on va garder la souplesse pour les Québécois. Mais pour les autres Canadiens, tant pis pour eux autres.

6550   M. PELLETIER : Il y a quand même, vous parlez de souplesse.

6551   Au Québec, il y a quand même, dans le système dont vous parlez, il faut prendre cinq... Il y a quand même des bouquets qui sont imposés de cinq, 10 20 ou 30.

6552   CONSEILLER PENTEFOUNTAS : Des forfaits personnalisés quand même.

6553   M. PELLETIER : Oui, oui. Quand même.

6554   CONSEILLER PENTEFOUNTAS : O.K.

6555   Votre position est assez claire.

6556   Sur, je vais essayer de toucher juste de trois ou trois sujets supplémentaires.

6557   L'idée d'éliminer des exigences de présentation au cours de la journée, vous êtes contre, les présentateurs qui vous ont précédé étaient également contre.

6558   Vous pensez pas que c'est une bonne idée de concentrer ses dépenses et ses présentations lors des heures de grande écoute?

6559   MME LUSSIER : On était ambivalent en examinant cette question-là.

--- Laughter

6560   MME LUSSIER : On a décidé de contre, pour...

--- Laughter

6561   CONSEILLER PENTEFOUNTAS : Oui...

6562   M. PELLETIER : Non...

6563   MME LUSSIER : Comme ça... Non, c'est qu'on a peur que certains genres...

6564   M. PELLETIER : Les débats...

6565   MME LUSSIER : Bien c'est ça. Il fallait pas être trop pour vous!

6566   Non, on a peur que certains genres qui ont tendance à être diffusés plus dans la journée, comme les émissions préscolaires.

6567   M. PELLETIER : Les émissions pour enfants, oui.

6568   MME LUSSIER : Comme certaines autres émissions que nos prédécesseurs ont mentionnées jouissent à ce moment-là de moins de financements et finissent par disparaître.

6569   Donc, c'est pour ça des émissions canadiennes de cette nature-là -- je veux dire, on peut toujours en mettre des américaines ou des traduites. Mais...

6570   Alors, c'est pour ça qu'on préfère avoir une...

6571   M. PELLETIER : C'est surtout le genre pour les enfants, les jeunes.

6572   M. LÉGARÉ : Parce qu'il est vrai que les émissions sont sous-représentées, la plupart du temps, sont diffusées en soirée. Mais effectivement pour les enfants, il y a cette exception-là.

6573   CONSEILLER PENTEFOUNTAS : Maintenant qu'on entame le sujet des enfants, vous avez sans doute vu dans notre document de travail que l'idée a été mise de l'avant d'inclure la programmation pour enfants dans les EIN.

6574   MME LUSSIER : Oui.

6575   M. LÉGARÉ : En principe ça nous convient. En principe.

6576   Mais le faire maintenant dérange dans le sens où déjà les obligations existent. Et si vous ajoutez un genre, celle de diluer.

6577   Nous, ce qu'on souhaiterait, c'est que lors du renouvellement des licences, effectivement, les règles maintenant incluent les émissions pour enfants et que les exigences soient ajustées en fonction de cette option.

6578   MME LUSSIER : C'est l'ajout d'un nouveau genre dans les EIN. Mais c'est certain que pour nous, les émissions jeunesse sont très prioritaires.

6579   Mais, si on fait seulement les ajouter aux EIN sans augmenter les exigences en EIN, on ne se rend pas service.

6580   CONSEILLER PENTEFOUNTAS : L'autre option, peut-être, c'est d'enlever une sous-catégorie à l'intérieur des EIN. Est-ce que vous avez pensé à cette possibilité-là?

6581   MME LUSSIER : Jamais de la vie!

6582   Non, on n'y a pas pensé.

6583   CONSEILLER PENTEFOUNTAS : Ce que les EIN, si on regarde ça globalement, on peut pas être contre. Ça a été une bonne idée à l'époque, une bonne condition de licence, si vous voulez?

6584   MME LUSSIER : Oui.

6585   M. LÉGARÉ : Oui.

6586   CONSEILLER PENTEFOUNTAS : Vous êtes tout le monde d'accord avec ça?

6587   M. PELLETIER : Oui.

6588   CONSEILLER PENTEFOUNTAS : Et est-ce que si on regarde la façon que ça s'est découlé jusqu'ici, est-ce qu'on peut dire que les galas, les émissions de ce genre-là, est-ce qu'il continue d'y avoir besoin de cet appui supplémentaire à l'intérieur d'EIN pour continuer à être produits?

6589   MME LUSSIER : En toute honnêteté, c'est pas quelque chose...

6590   CONSEILLER PENTEFOUNTAS : Que vous avez pensé?

6591   MME LUSSIER : À quoi on a réfléchi dans cette instance. On peut certainement y réfléchir. Mais pour le moment...

6592   CONSEILLER PENTEFOUNTAS : Vous avez d'ici le 19 septembre.

6593   M. LÉGARÉ : Mais, il est sûr que par exemple, un gala comme celui des Jutras a eu besoin d'un financement particulier pour exister d'une certaine façon.

6594   M. PELLETIER : Oui, et c'est des instruments de promotion de la créativité canadienne dont on a besoin, donc, pour justement attirer l'attention sur les créateurs d'ici.

6595   CONSEILLER PENTEFOUNTAS : Maintenant qu'on parle de promotion, nous avons également notre proposition qui met de l'avant l'idée de dépenser un pourcentage de DEC (ph) en promotion.

6596   M. LÉGARÉ : On n'était pas très chauds à l'idée.

6597   CONSEILLER PENTEFOUNTAS : Non? Pourquoi?

6598   M. LÉGARÉ : Je pense que la meilleure promotion, c'est d'avoir des émissions de qualité et de financer les émissions de qualité avec les ressources qui sont de plus en plus restreintes.

6599   M. PELLETIER : Oui.

6600   M. LÉGARÉ : Mettre de l'argent sur un volet promotion n'aurait pas nécessairement un apport intéressant.

6601   CONSEILLER PENTEFOUNTAS : Mais sûrement, on peut pas écarter l'importance de la promotion en 2014 et suivant.

6602   M. LÉGARÉ : Tout à fait. Et cette promotion-là...

6603   CONSEILLER PENTEFOUNTAS : Vous pensez pas que ça vaut la peine?

6604   M. LÉGARÉ : Cette promotion-là est d'autant plus facilitée si on a les ressources nécessaires pour faire des émissions de qualité. Et lorsque l'émission de qualité, effectivement, rejoint un public, il est beaucoup plus facile d'en faire par la suite la promotion.

6605   CONSEILLER PENTEFOUNTAS : Alors, la qualité du produit suffit et la promotion n'est pas nécessaire?

6606   M. PELLETIER : C'est, je pense qu'on ne peut pas être contre la vertu. C'est-à-dire que oui, la promotion est importante.

6607   Je pense que ce qu'on dit, c'est que dans un contexte où les budgets de production sont en baisse ou en danger, on préfère mettre l'argent sur le contenu lui-même.

6608   CONSEILLER PENTEFOUNTAS : Et si dans un monde horrible, catastrophique vous devez absolument choisir un niveau, un niveau de dépenses promotionnelles qui doit être considéré à l'intérieur des DEC, quel serait ce niveau-là?

6609   Un petit le choix de Sophie que le Président a souvent mentionné.

6610   M. PELLETIER : Oui, je vois. Je pense qu'il faudrait vous revenir là-dessus.

6611   CONSEILLER PENTEFOUNTAS : Vous vouez pensez à ça aussi d'ici le 19 septembre?

6612   M. MERCIER : Oui. Oui.

6613   CONSEILLER PENTEFOUNTAS : Je comprends, c'est tard.

6614   M. MERCIER : Mais d'autant plus que certains prédécesseurs qui étaient à la table ici ne se sont pas fait reprocher de parler argent. Mais on aime l'argent, mais on peut parler de créativité aussi.

6615   CONSEILLER PENTEFOUNTAS : Bien sûr. Un n'empêche pas l'autre.

6616   M. MERCIER : Je suis d'accord avec vous.

6617   CONSEILLER PENTEFOUNTAS : Une est presque l'essence pour l'autre. Mais ça, c'est un autre débat pour une autre journée, si on tient compte de l'heure.

6618   Pour retourner sur les émissions pour enfants, la question a déjà été posée. Puis, il y a des intervenants qui en ont parlé. C'est que contenu-là est disponible ailleurs. Ce n'est pas comme dans le temps où monsieur Goldstein était jeune puis il courait pendant l'heure du lunch pour regarder, visionner une émission pour enfants. C'est plus le cas. C'est disponible 24/24 sur plusieurs plateformes.

6619   Est-ce vraiment nécessaire d'un point de vue, l'offre? Est-ce qu'il y a pas tellement d'autres lieux où on peut chercher ce contenu-là?

6620   MME LUSSIER : Je pense que c'est un peu vrai pour à peu près tous les types de contenu. Pas nécessairement les émissions jeunesse.

6621   Alors, je vois pas pourquoi il faudrait, dans le contexte actuel où effectivement, tout type d'oeuvre est disponible sur à peu près toutes les plateformes et 24 heures par jour.

6622   Pourquoi cibler dans cette question-là la télévision jeunesse?

6623   CONSEILLER PENTEFOUNTAS : Parce qu'on demande des protections supplémentaires, si vous voulez, ou des avantages autres.

6624   MME LUSSIER : Mais, l'importance de produire une production... pas une production, excusez-moi. De produire des émissions jeunesse canadiennes et d'avoir le moyen de les faire autant en français qu'en anglais est primordial, je pense, pour notre avenir à tous.

6625   C'est là qu'on va créer, en tout cas au Québec, je connais moins le marché du Canada anglais. Et au Québec, c'est là, on vous en a parlé souvent, qu'on a créé notre Star système et qu'on crée les habitudes d'écoute.

6626   Donc, je pense qu'il faut préserver à tout le moins, et encourager ces habitudes d'écoute d'émissions de télévision jeunesse canadiennes.

6627   CONSEILLER PENTEFOUNTAS : Et le rôle... Non, c'est très bien.

6628   MME FORTIER : Si je peux me permettre.

6629   CONSEILLER PENTEFOUNTAS : Oui.

6630   MME FORTIER : Je suis pas certaine que toutes les familles canadiennes ont nécessairement non plus les moyens d'accéder à toutes ces chaînes spécialisées dans des bouquets plus... qui demandent des investissements supplémentaires.

6631   Ce qu'on a toujours... ce qu'on soutenu, c'est qu'en fait, les émissions jeunesse au Québec en particulier, sont fondatrices de, non seulement de notre Star système, mais de toute la production.

6632   Presque tous les gens sont passés par le Jeunesse. Et nos comédiens et toutes les équipes qui les entourent évoluent dans l'industrie. Et c'est comme ça que cette industrie-là se construit.

6633   Si je reviens aux familles canadiennes. Je suis pas certaine que toutes les familles canadiennes ont les moyens. Et on a toujours soutenu que de pouvoir l'offrir d'une... comment dire? D'une... à la base. C'était essentiel. Et on le maintient, je pense, cette position-là.

6634   CONSEILLER PENTEFOUNTAS : C'est la raison principale pour laquelle ça doit faire partie du service de base.

6635   M. LÉGARÉ : Oui.

6636   CONSEILLER PENTEFOUNTAS : Peu importe sa grosseur.

6637   Et le rôle...

6638   Oui, pardon?

6639   M. MERCIER : Comme j'ai oeuvré à titre de comédien pendant des années dans les émissions pour enfants; j'en ai fait plusieurs séries. Et c'est effectivement une identité à laquelle il faut absolument tenir.

6640   Parce que la qualité, on en a fait foi, il y a que quelques témoignages aujourd'hui là-dessus. Et je pense qu'effectivement la télévision canadienne s'est fait connaître internationalement, surtout à cause de la qualité... qualité pédagogique et de créativité des émissions pour enfants.

6641   CONSEILLER PENTEFOUNTAS : Le rôle du diffuseur d'état, diffuseurs provinciaux et éducatifs dans les émissions pour enfants?

6642   M. MERCIER : Je pense que c'est capital effectivement que ça le soit.

6643   Je pense que c'est d'un intérêt national, puisque c'est là que notre identité se forme avant tout.

6644   CONSEILLER PENTEFOUNTAS : Et quelqu'un de votre expérience, est-ce que que vous pensez que le travail qu'ils font est satisfaisant?

6645   M. MERCIER : Je pense qu'il y a toujours lieu de s'améliorer.

6646   CONSEILLER PENTEFOUNTAS : Oui, oui. Sans doute.

6647   M. MERCIER : Ça, c'est certain. On peut comparer, mais je pense que la meilleure chose à faire, c'est de continuer à oeuvrer dans le sens, aller plus loin, toujours un peu plus loin, quoi.

6648   On peut avoir fait en cours de route certains oublis dans les orientations des priorités qu'on veut transmettre des priorités d'idées, de concept à nos enfants. Mais, il est toujours temps de rajuster le tir, quoi.

6649   Et, si je peux me permettre, on parle de nouvelles plateformes. Mais toutefois, on pense toujours, malgré toute télévision, la télévision n'est pas nécessairement que la boîte à travers laquelle on regarde, quoi. C'est un concept qui a pris une modernité, si je prends effectivement les termes du vocabulaire de monsieur Blais à travers son mot d'ouverture.

6650   Oui, effectivement, il faut se mettre à la page. Et, je pense que la télévision elle-même ne représente plus seulement la boîte à travers laquelle on reçoit des images. C'est un concept qui est élargi, et que les autres plateformes n'ont tenté nécessairement de supplanter. Mais sont obligés aujourd'hui de considérer que non, la télévision n'est pas prête de mourir, quoi.

6651   CONSEILLER PENTEFOUNTAS : Vous faites bien de le citer souvent avec conviction.

6652   M. MERCIER : Merci.

6653   CONSEILLER PENTEFOUNTAS : Vous avez parlé également d'EIN à un moment donné. Vous vous êtes plaint de BCE est à 18, Corus est à 26. EIN, nous parlons là.

6654   Vous trouvez que c'est pas assez quand on regarde ça dans le contexte de l'équivalent qui est le PNI dans le Canada anglais, qui est à 5 p. cent et chez Corus qui est à 9.

6655   MME LUSSIER : Mais quand ont regarde ça, juste une seconde.

6656   CONSEILLER PENTEFOUNTAS : Oui.

6657   MME LUSSIER : Au Québec, c'est Série+. Leur obligation c'est une série par année de cinq à six épisodes pour une chaîne qui est consacrée aux téléséries.

6658   CONSEILLER PENTEFOUNTAS : Il y a une dépense également attachée à ça ou...

6659   MME LUSSIER : Bien sûr, ils doivent commander et produite. Pas produire, mais acheter une production, une nouvelle production, mais cinq épisodes par année, ça nous semble très peu.

6660   Alors, sur le terrain, en réalité, les obligations, c'est à ça que ça se résume.

6661   M. LÉGARÉ : Et, je vous réfère aussi dans notre document de juin au paragraphe 73 où on disait qu'effectivement, entre 2012 et 2013, les dépenses totales sur les EIN par la télévision généraliste, par exemple, ont diminué de 57,2 à 52,6.

6662   Donc, si on regarde l'ensemble, oui, on déplorait qu'effectivement sur certains canaux spécialisés, c'était moins que ce qu'on souhaitait. Mais on disait aussi dans notre document que TVA n'avait pas d'obligation, et que donc, n'ayant pas d'obligation, avait réduit ses dépenses et que V n'avait pas d'obligation.

6663   Et donc, pour l'ensemble des télévisions, il y avait une perte sèche, en peu de temps d'ailleurs, de plusieurs millions de dollars, ce qui est important.

6664   MME FORTIER : Si je peux me permettre de poursuivre, le raisonnement va plus loin. Imaginons si on augmente la concurrence parce qu'on offre la possibilité aux consommateurs de choisir, ça va augmenter la pression sur l'ensemble de ces chaînes-là, et quel sera leur réflexe si ce n'est pas, d'emblée, de couper et d'essayer de réduire les coûts de toutes les façons possibles?

6665   CONSEILLER PENTEFOUNTAS : Vous aimeriez sans doute avoir des dépenses en émissions canadiennes à des émissions originales de langue française fixées...

6666   M. LÉGARÉ : Oui.

6667   CONSEILLER PENTEFOUNTAS : ...pour les prochaines périodes de licence. C'est sûr que vous préférez le chiffre de 75 pour cent par rapport à l'autre chiffre de 65 pour cent qui est proposé par les producteurs sans doute. Et d'après vos calculs, nous sommes à quel chiffre présentement? Parce que TVA, lors de l'audience, il y a deux ans, parlait d'un chiffre aux alentours de 88 pour cent en DÉC. Vous n'avez pas ça?

6668   MME LUSSIER : Non. Le chiffre que j'ai connu pour Radio-Canada est que, pour le moment, ils sont près de 90 pour cent.

6669   CONSEILLER PENTEFOUNTAS : Oui. Et c'est semblable pour TVA. Alors, vous risquez d'être en bas de ce qui se fait déjà.

6670   MME LUSSIER : Quatre-vingt, pardon. Pas 90; 80, oui.

6671   CONSEILLER PENTEFOUNTAS : O.K. Ça va.

6672   Ça complète pour moi, Monsieur le Président. Merci beaucoup.

6673   LE PRÉSIDENT : Monsieur Dupras.

6674   CONSEILLER DUPRAS : Tantôt, on posait des questions sur la promotion, si des dépenses devaient être allouées à ça. Est-ce que vous pensez qu'au Québec les émissions ont besoin de financement pour la promotion des émissions ou si...

6675   M. PELLETIER : Déjà...

6676   CONSEILLER DUPRAS : ...du marché fait que les émissions sont connues et que ce n'est pas aussi requis que dans le Canada anglais où on a à concurrencer les Américains?

6677   M. PELLETIER : Oui, effectivement, je pense que si on regarde le marché québécois, il est extrêmement performant. C'est-à-dire que les Québécois, à 95 pour cent de temps d'écoute, écoutent des émissions canadiennes et généralement francophones québécoises. Donc, c'est un marché qui est déjà extrêmement performant et effectivement qui n'est pas semblable au marché canadien anglais, qui doit se compétitionner avec la télévision américaine.

6678   M. LÉGARÉ : C'est le rôle du diffuseur de faire la promotion. L'avantage au Québec, c'est que le diffuseur a intérêt à faire la promotion d'émissions québécoises puisque ces émissions-là fonctionnent. Au Canada anglais, peut-être que la situation est différente.

6679   Mais donc, c'est sûr que les réseaux ont intérêt, que ce soit même sur leur propre chaîne et aussi parfois avec les revues... comme TVA a des revues, bien sûr, qu'elle publie à beaucoup d'exemplaires. Elle fait la promotion de ses émissions.

6680   Et les émissions québécoises ont du succès. Donc, il n'y a pas besoin d'incitatif supplémentaire pour que le diffuseur les mette de l'avant. Et c'est la même chose pour les canaux spécialisés. Lorsque Canal D a une série québécoise qui marche, ils en font une publicité beaucoup plus grande que pour des émissions étrangères. Ils la mettent de l'avant.

6681   CONSEILLER DUPRAS : Merci.

6682   LE PRÉSIDENT : Ce sont nos questions. Merci beaucoup.

6683   Mais avant que vous quittiez, Monsieur Mercier, je vais vous dire que lorsqu'on a lancé l'initiative « Parlons télé » à Laval, à l'Université Laval, j'avais mentionné qu'une de mes émissions favorites, c'était « Bunker », et donc, je sais que ça remonte à 2002 probablement.

6684   M. MERCIER : Oui.

6685   LE PRÉSIDENT : Mais je voulais vous mentionner que je l'avais fort apprécié.

6686   M. MERCIER : Merci, mais ça n'entre pas dans le volet d'émissions pour enfants.

--- Laughter

6687   LE PRÉSIDENT : Merci beaucoup.

6688   M. MERCIER : Merci.

6689   MME LUSSIER : Est-ce que vous nous proposez de faire une émission jeunesse avec le CRTC?

--- Laughter

6690   LE PRÉSIDENT : Aux heures de grande écoute, oui.

6691   M. MERCIER : Merci.

6692   MME LUSSIER : Merci.

6693   LE PRÉSIDENT : Merci, Messieurs, Mesdames.

6694   Madame la Secrétaire.

6695   LA SECRÉTAIRE : Merci.

6696   I would like to invite Corus Entertainment Inc. to come to the presentation table.

--- Pause

6697   THE SECRETARY: Please introduce yourselves and you have 20 minutes for your presentation. Thank you.

6698   THE CHAIRPERSON: Just before you start, I wanted to apologize for the late hour at which we're starting. I know that you've had a long day.

6699   I also wanted to say that we were happy to accommodate your schedule so that many of you could attend the funeral for Paul Robertson. Certainly, I have very good, positive memories of Paul's contribution in CRTC work and at this hearing. He was always very constructive and hopefully his spirit will carry through in our work here at this hearing but I did want to extend on behalf of the Commission our condolences to his friends and former families and our thoughts are with his family and his friends.

6700   Second of all, I would like to congratulate you. You weren't required to do this but you did file an MP3 version of your proceeding and I think that that was a good positive step for helping those in the accessibility community to hear your proceeding. So the floor is yours now.

PRESENTATION

6701   MR. CASSADAY: Thank you, Mr. Chairman, on both counts. We do appreciate your willingness to move our schedule around so we could do an appropriate send-off to our friend and colleague Paul and I know all of us appreciate your comments and he will be missed by all of us.

6702   As for the technical component, I think we can thank our friend Mr. Maavara here, who's always thinking about those extra touches.

6703   Mr. Chairman, members of the Commission and Commission staff, my name is John Cassaday. I am the President and CEO of Corus Entertainment.

6704   We would like to introduce our panel. To my left is Sylvie Courtemanche, Vice President and Associate General Counsel, Government Relations and Compliance. To my right is Gary Maavara, Executive Vice President and General Counsel.

6705   Seated behind us in the audience is Heather Shaw, the Executive Chair of the Corus Board of Directors, Doug Murphy, our Chief Operating Officer, and Mario Cecchini, who heads up all of our assets east of Yonge Street in Toronto. So we're delighted to have the team here to join us this evening.

6706   You have our written brief. The Commission proposed a new framework on August 21st which will be the subject of our filing early next month. Today, we will use our allotted time to concentrate on a limited number of topics related mainly to the core issues of consumer choice and carriage.

6707   Our comments today will focus on three key recommendations:

6708   - The first and foremost is that Canadians should have the right to select the status quo as a default;

6709   - The second is that the Commission test the carriage proposals under consideration and the potential impacts on the market; and that,

6710   - Third, we maintain a mechanism for Canadian children to have access to the type of world-class Canadian Content that they have now in the safe haven established by regulation and codes.

6711   Corus has been successful and is confident about its future. That said, we are concerned that the Commission's "straw-man" proposals represent a significant risk to our system. These are being contemplated at a time when our country continues to struggle and when the adjustments and investments that we are making for the digital economy have yet to bear fruit.

6712   Context is always important and it's even more important today as we contemplate regulatory disruption at a time when the value chain is changing so dramatically.

6713   MR. MAAVARA: The production, broadcasting and distribution system is built upon half a century of applied public policy and the business value chains that have evolved through them. The system is a complex weave of interconnected and interdependent rules and operational realities.

6714   Over the decades we have developed an array of policies to meet the key social policy objective of having a Canadian broadcasting system that is reflective of all regions served and that meets the high standards established by the Broadcasting Act.

6715   These social goals have had a significant and material impact on the Canadian economy and on Canadian culture.

6716   The rules are broad and deep. Canadian Content needs to meet certain standards and be certified. Advertising is also subject to standards and review that are unique to Canada. Types and volumes of ads are regulated by various agencies. And even the sound of ads is regulated.

6717   Content is also subject to standards and Canadians have a right to an immediate say based on the codes and procedures overseen by the Canadian Broadcast Standards Council.

6718   Copyright tariffs are also unique to Canada.

6719   In the event that the Canadian presence from the system in the form of content or channels disappears, so does this framework of oversight.

6720   Of course this framework is defined by the fact that we are a small population next to the largest information and entertainment machine on the planet.

6721   Canadians decided a long time ago that they needed to take some steps to ensure that we had a domestic business so our stories could be told and so our businesses had a local vehicle to reach their customers. We also decided that we wanted to maintain access to the best that the rest of the world had to offer.

6722   As we sit here today we can all agree that Canadians have access to domestic and foreign content that meets and often exceeds what is available anywhere else in the world.

6723   MR. CASSADAY: Mr. Chairman, we recognize the enormous challenge that you and your colleagues face in this proceeding. We all need to be thoughtful, open-minded and respectful of our disparate points of view as we all have the same goal in mind and that is to serve all segments of Canadian viewers in every region of the country. Corus is passionate about doing that. We have the audiences, financial results and awards to prove it.

6724   Corus has 1,800 employees. At Corus we host family events that are always a reminder to us of the number of people who rely upon our success for their livelihood. Each day the Corus team lives by its core values to meet the expectations of the people we deal with, our viewers, customers and, yes, even our regulators.

6725   Over 80 percent of our revenue is derived from our core television business. We operate in English, French, Italian and Spanish. Our television and production revenues in the last broadcast year were around $620 million.

6726   This public hearing is unique in that it is hearing from several foreign-owned and unregulated companies who now compete significantly in the Canadian market for subscribers, advertising and for program rights. Compare our annual revenues to Google which had total revenues of over U.S. $55 billion and Netflix with revenues of over U.S. $4.3 billion.

6727   Our view is that the Canadian broadcasting system is working well for all constituents, including consumers. All of the research on the record supports that.

6728   We believe that the Canadian broadcasting system already provides Canadians with both tremendous choice as well as diversity in their television services and we can compete with the new players. We know this because we receive and respond to hundreds of one-to-one comments with our viewers each week. We also see it in our audience ratings, which continue to improve despite massive fragmentation.

6729   The word "choice" is at the centre of this debate. It is obvious in this proceeding that we have are varying definitions of what choice means. Is it possible to offer too much choice?

6730   We filed a report by a leading consumer behaviorist, Dr. Dilip Soman. He cautions us that too much choice can be paralyzing, not empowering, and he bases his conclusions on over 20 years of research about actual consumer behavior.

6731   Our fear is that if Canadians are pushed away from a system that is working for most Canadians into an a la carte system, many will be paralyzed and default to something that resembles just skinny basic and Netflix. Sure, they could change their minds later but the damage to the Canadian system may be irreparable.

6732   If any of us could predict consumer behavior we would not need marketers. No policies or products would ever fail and election results would be as predictable as the seasons. But they're not.

6733   The reality is that modeling behavior and developing popular products is complex. People don't always act the way they say they will and Dr. Soman's report provides many real world examples of where those given choice have blamed the government that gave it to them.

6734   We understand the environment is changing. We are working hard with our industry partners in the entire value chain to meet the diverse needs of all Canadians.

6735   We invested hundreds of millions of dollars in a new plant, Corus Quay, to deliver content in digital format in multiple languages to multiple platforms, both linear and non-linear. We are one of the largest producers in Canada and we export globally.

6736   We believe the task before the Commission is to ensure that the broadcasting system is able to build upon the success it currently enjoys. This will only occur if we maintain our collective ability to tell great Canadian stories. This will be essential if we hope to preserve this important segment of the Canadian economy, including the jobs it creates.

6737   MS COURTEMANCHE: The Commission's proposals much be examined in this context. We must ask how all the elements of the supply chain will be impacted by the proposals. Perhaps we need to understand even better what consumers are telling us about choice and how to meet it.

6738   The Commission is also proposing to take on a new direct hands-on role in managing economic relationships between regulated parties as well as unregulated parties such as domestic and foreign producers and consumers. This represents a sea change that impacts all elements of the supply chain, including ordinary consumers, and it suggests that those of us who produce and distribute content are incapable of doing it without your intervention.

6739   Mr. Chairman, we know what we have to do and we are doing it.

6740   Programmers, distributors and content providers are providing more value for consumers with multi-platform exploitation of content and multi-packaging alternatives. Some examples of these include: Rogers' AnyplaceTV, Bell Fibe TV and ShawGo.

6741   Just last week we announced an expanded agreement with HBO that will provide our subscribers an expanded menu of highly popular shows that will be available on demand. This expanded menu is offered free to subscribers.

6742   La question la plus formulée dans ces audiences est celle du paiement pour des services non désirés. Nous croyons qu'on devrait plutôt mieux communiquer la valeur de notre offre et ce que celle-ci représente pour nos abonnés.

6743   De plus, nous sommes confrontés à des effets négatifs provoqués par l'arrivée des technologies numériques. Des nouveaux concurrents émergent qui ne détiennent pas de licences de radiodiffusion. De plus, ces derniers ne sont pas contenus sur un plan géographique ou sur un plan de propriété intellectuelle. Le tout a eu l'effet de freiner notre habileté à accéder aux droits étrangers. Enfin, le piratage pertube également la chaîne de valeur. Nous formulons ici un état de faits et non une plainte.

6744   Corus estime que de la réglementation supplémentaire ne créera pas de nouveaux marchés médiatiques pour l'industrie canadienne et elle n'aura pas l'effet d'augmenter la satisfaction de nos auditoires.

6745   MR. CASSADAY: We believe that the pick-and-pay model could well result in the destruction of the existing broadcasting could well result in the destruction of the existing broadcasting infrastructure and a massive reduction of jobs across Canada.

6746   There is nothing on the public record which suggests or supports an economic benefit for consumers or the system with a la carte distribution. The evidence on the record is to the contrary. The only real debate is about the magnitude of the negative impact.

6747   We believe it will lead to a material reduction in Canadian programming choices. Further, economic evidence from here and the United States suggests that such a regime would actually lead to increased costs and reduced diversity for consumers, a result that would be at odds with the Commission's stated goals.

6748   However, the expectation of increased consumer choice has clearly been conveyed, so where do we go from here?

6749   Dr. Soman recommended a market test based on a simulation and we agree. Let's find out what consumers really want. We would be happy to explain how such an option could work in this context.

6750   We now turn to some of the key questions posed by the Commission. The Corus vision for the Canadian broadcasting system is for a principles-based system that can evolve quickly to a changing media environment. This means that strict rules that require constant revisions should be replaced with broader principles.

6751   There are many examples of existing codes and guidelines that work well. An example is the Canadian Code of Advertising Standards. There are also other proposals on the record that the Commission should consider carefully.

6752   Let's talk about skinny basic.

6753   The proposals on skinny basic and pick-and-pay really strike at the heart of the Canadian system. Local television and Category A and C services provide and finance the largest share of meaningful Canadian content to audiences. The Commission proposals impact upon them the most.

6754   The Commission has proposed that all BDUs be required to offer a "small basic" package that would include only a small selection of Canadian television services.

6755   Corus submits that most Canadians are happy with what they have now. There is a new study published by CTAM last week that confirms this. 57 percent of the respondents said they were satisfied with their package. Most Canadians also change their first impressions of the models when they understand the implications better.

6756   The Commission should let the market decide how best to serve customers through various options from different BDUs. This is the best way to maximize choice and flexibility for Canadian consumers. This is already taking place. Virtually all Canadians have access to many licensed distribution alternatives -- cable, satellite, telcos and IPTV systems -- each with unique offerings that include a diverse set of packaging options. Canadians can build their own bundles from a variety of services to reduce cost.

6757   Canadians have access to unlicensed programming sources, notably Netflix, YouTube, Amazon and iTunes. So broadcasters and carriers have an enormous interest in retaining their customers.

6758   The industry will respond to the unregulated players in a market-responsible way by providing more innovation with increased value. Corus submits that regulation is neither warranted nor required. It may also be practically impossible.

6759   But should the Commission proceed with a mandatory skinny basic, it should first establish as a principle that all Canadians can opt for the status quo. We are confident that most Canadians will happily stay with their current offering.

6760   Corus notes the Commission's concern about maintaining programming for Canadian children in its proposed framework. Children's services would be among the most threatened in an a la carte environment.

6761   In this proceeding the voice of Canadian children has not been heard in the research that is on the record. Understanding that children's channels offer an important public service, we submit that a preschool network should be offered as part of the basic service, with Canadian content and CPE obligations.

6762   A general interest children's service targeting 6-11 year olds should also be included to ensure that Canadian children have continued access to Canadian stories and characters inside the safe haven of Canadian rules. These have been available on basic for decades and this offering should not be jeopardized.

6763   The existence of these channels on basic for decades also underlines the need for the Commission to consider a transition mechanism for any new policy.

6764   On the subject of transitional mechanisms, the Commission has not set out any elements of that save for the date. The success of the massive changes proposed to the regulatory framework will depend on adopting transition mechanisms that will allow for an ordered manageable changeover.

6765   To assist the Commission in developing such a transition mechanism we have tried to identify consumer and industry questions and have attached them to our speakers' notes for everyone's review. There are probably many others.

6766   Let's talk about pick-and-pay.

6767   We believe that the most troubling of the Commission's proposals are those related to the distribution of discretionary services. While complicated in some of its detailed measures, the existing framework has been tremendously successful in creating a vibrant specialty and pay sector that provides an abundance of choice at a reasonable cost to Canadian viewers.

6768   The bundles work because they offer a range of services that meet a variety of viewer interests. We know from the ratings that these interests are diverse. Bundles also help people discover new programming through "drive-by" or "channel surfing". We all do this.

6769   A longstanding fact of life in television is that people don't really know what they like until they see it. This ecosystem is also crucial to helping Canadian shows find an audience, and this has a revenue impact.

6770   So breaking up the existing system is risky. As we said, we suggest testing the model first.

6771   The evidence on the record is compelling. In the U.S. market, to quote from an EM survey:

"...unbundling dwarfs any other risk to the TV ecosystem. 50 percent of the total TV ecosystem revenue would evaporate and fewer than 20 channels would survive in an a la carte world."

6772   We believe that bundling provides the greatest boost to the value of all elements of the system. It is the only reason why television revenues continue to grow when other media elements such as newspapers and music have seen substantial decreases to their revenue base. It also serves the public policy interests set out in the Broadcasting Act.

6773   A la carte distribution would, according to the evidence provided in this proceeding, increase the overall costs to the majority of consumers and decrease diversity of choice. We note that the diversity of choice that would be lost would include offerings that are mandated under section 3 of the Broadcasting Act.

6774   Innovation would also be very challenging in an a la carte environment. It would be impossible to launch new channels.

6775   As far as determining the quantum of potential negative impacts, the Commission already has real world evidence before it. Fully discretionary services such as Category B, pay television and ethnic services have penetration levels today below 50 percent of the market.

6776   We noted the complexity of the value chain. We must ask if Canadian producers can withstand a 50 percent or higher drop in program spending and how funding agencies can adapt to that. At the same time, program acquisition competition is already increasing and is a huge challenge for Canadian broadcasters. Corus has already experienced significant escalations in program acquisition costs for our television services as a result of Netflix operating in Canada. We have also lost access to some major studio programming.

6777   We do not believe the Commission should be trying to insert itself into the middle of the value equation by proposing a mandatory a la carte regime. The Commission removed itself from rate regulation of basic cable more than a decade ago and in 2008 removed itself from packaging requirements for all cable, satellite and telco distribution distributors. This approach is what developed the vibrant system we have today.

6778   Further, the Commission should not dictate the size or criteria such as price or genre for theme-packs that may be offered. Corus strongly believes that the broadcasting value equation will be guided by consumer demand.

6779   A la carte distribution does not work in the United States, a market 10 times the size of Canada, because of concerns on diversity and cost. It will certainly not succeed in this market.

6780   The paradox of the Commission's a la carte proposal is that, as the media value chain is evolving into complex, unpredictable formats with unregulated players, the Commission is seeking to establish greater controls over the traditional regulated system. And, at the end of the day, consumers will not get a price break and they will have less choice.

6781   No one has a crystal ball to accurately predict the march of technology or viewing habits. The Commission must be extremely cautious. We shouldn't be rolling the dice here by adopting wholesale regulatory changes for the broadcasting industry that may result in unintended and undesirable consequences.

6782   At the very least the Commission should conduct a controlled test. You could start on this now.

6783   The Canadian broadcasting industry has always sought and will continue to meet consumer demand. Given the competition we will need to enhance that effort and we will do so.

6784   We believe our proposals strike the appropriate balance between meeting consumer demands and meeting the objectives of the Broadcasting Act and that is to continue to build on the successes of the Canadian broadcasting system. The majority of Canadians who like the system should have the right to select the status quo and Canadian children should have a chance to see their stories on the screen within a safe haven. We believe we can meet the consumer challenge and we need you to believe it too.

6785   This completes our presentation. We thank you for your attention. We would be pleased to respond to any questions that you may have.

6786   THE CHAIRPERSON: Thank you very much, Mr. Cassaday and your colleagues.

6787   Commissioner Molnar will start us off.

6788   COMMISSIONER MOLNAR: Thank you.

6789   I just want to clarify some points in your presentation. On page 6 you say -- I mean the theme, the entire theme here is the system is working well for all constituents.

6790   So there is no -- all of the research supports -- all of the research on this record supports that the system is working well for everyone, including consumers. And then on page 12 you say that most Canadians are happy with what they have now and 50 percent of the respondents said they were satisfied with their package.

6791   Would you say that 57 percent being satisfied is what we should consider to be a good outcome?

6792   MR. CASSADAY: As a lifetime marketer I would say that having 57 percent say anything is acceptable to them is great. And the other side of it is how many people are dissatisfied. The answer to that is much, much fewer than 55 percent. There is a number that are indifferent.

6793   So the question is should we be dramatically altering the system when the overwhelming majority of governments are elected with 30 percent of the vote. We're saying that we have 55 percent of the vote here.

6794   And on that basis, my answer to your question would be, yeah, I think that's a terrific level of satisfaction.

6795   COMMISSIONER MOLNAR: Well, but they are not choosing between various options. It's you are satisfied or you are not satisfied. I mean, I'm just -- I'm just not sure why we think 57 percent would cause us to say, you know, consumers are satisfied and everything is working well.

6796   MR. CASSADAY: 57 per cent represents a majority of Canadians and that, by virtually any definition, would constitute a victory.

6797   COMMISSIONER MOLNAR: As a marketer is that what you want, 57 percent for your product?

6798   MR. CASSADAY: Yeah, I think that's a very -- this is a relatively low interest category. I think that it's a very acceptable number and we should be satisfied with it. As we also said, we're doing everything we can to improve it.

6799   We talked about the fact that in this particular hearing a lot of choice -- a lot of the conversation has been about the choice and price. We think the big issue here is about value. And what we're trying to do right now is lead the consumer along a value continuum where that level of satisfaction increases. We're doing that by offering HD --

6800   COMMISSIONER MOLNAR: Could I just hold off for one second because I certainly want to talk to you about how you're increasing your value?

6801   MR. CASSADAY: M'hmm.

6802   COMMISSIONER MOLNAR: Just before we go on, I just wanted to follow up the study that says 57 percent were satisfied. Did it ask any questions regarding price?

6803   MR. MAAVARA: The short answer is yes.

6804   COMMISSIONER MOLNAR: They were satisfied with the price? They were satisfied with the price, the majority?

6805   MR. MAAVARA: There were -- it was a pretty deep study with a very large sample of over 3,000 people.

6806   I guess we could ask CTAM if they could deliver the study to you. It's not our study to deliver. But the short answer to your question is it was quite a broad and deep analysis of people's perceptions on different things.

6807   COMMISSIONER MOLNAR: I am sure you may be aware -- I'm sure you may be. I expect you are aware of the fact that the Commission did also get some -- I think it's Harris/Decima did a survey on behalf of the Commission and asked how they were satisfied and 36 percent were satisfied with the price.

6808   MR. CASSADAY: All consumers would always like a lower price. It's like all kids would rather have two scoops of ice cream than one. That's why we think it really should be about value.

6809   And the question is do you think you're getting good value? Everyone always would prefer to pay less for it.

6810   COMMISSIONER MOLNAR: M'hmm.

6811   MR. CASSADAY: So the focus should be on how do we enhance the value that we're offering to Canadians?

6812   MR. MAAVARA: Also, Commissioner Molnar, you are going down exactly the path, I think, in terms of the analysis of this question that we think you should.

6813   And that's why we're recommending the type of study that Dr. Soman recommended. It's not an opinion poll. It's actually putting someone in the chair and having -- and watching how they are actually making the decisions.

6814   His view -- we're not experts in it, but he is and he's got 20 years of research to prove it. He thinks that that would be a more valid way of understanding how people want to do things. And as we said in our remarks we can --

6815   COMMISSIONER MOLNAR: And actually, that is another thing that I want to come back to.

6816   MR. MAAVARA: Okay.

6817   COMMISSIONER MOLNAR: Because it is a little bit -- you may have heard some discussions about road maps. And I wondered if that might be part of a road map.

6818   But I want to give you an opportunity first to talk about how it is you are enhancing the value for your audience.

6819   MR. CASSADAY: We are doing that in a number of ways. And again, as we mentioned, this is really early days for the development of what we're capable of doing in digital technology. But of course, one of the things is making our programming available to them in high definition.

6820   The second thing is making our programming available to them in video-on-demand.

6821   And a third area is making the programming that they pay for available on multiple platforms.

6822   We talked about -- Sylvie talked about the recent deal that we did with HBO to allow us to buy all the back catalogue for every series that's currently on the air so that someone that wants to tap into Season 4 of Game of Thrones can go back and watch the first three years at no additional charge. This is a way of helping them come to the conclusion that our pay TV offering represents great value for them.

6823   COMMISSIONER MOLNAR: We talked a little bit this morning with Bell about their approach with the HBO as well as some of their other products. You have that right now, if I understand, as an additional value to those who subscribed to your -- to the linear television service.

6824   MR. CASSADAY: M'hmm.

6825   COMMISSIONER MOLNAR: Would you have any expectation or any plans at any time to make that available to those who are not subscribed?

6826   MR. CASSADAY: The perspective that we have taken on that historically has been to support the Canadian ecosystems. So what we are trying to do is make sure that each of our distribution partners in each region of the country has access to select program offerings that meet their individual needs so that they can add value to their incremental customers.

6827   We have not as a company gone around our distribution partners to disrupt the system. So at this point in time we're dealing directly with our partners in making that content available on authenticated basis.

6828   MR. MAAVARA: One of the other ways that our content is being made available is actually something that we're not happy about, but it's been mentioned this week and we mentioned it in our brief, and that's piracy.

6829   For example, Google was here on Monday and they talked about the deal that they had with us. And we're happy to have the deal with them to try to exploit that platform, but the reason that we did it was because of the massive piracy of all of our programming on YouTube. We just couldn't keep up with it, so we decided that we would try to monetize it.

6830   To date, we're literally looking at five-figure sums. It's not very big.

6831   And then, you mentioned HBO. A "Game of Thrones" episode is probably the most pirated program on the planet.

6832   And the reason I mention those two things is that's part of the reality of the value equation for us is that our content is being pirated in ways that we just didn't imagine five years ago.

6833   COMMISSIONER MOLNAR: Okay. Thanks.

6834   And your response, at least with some of your content, was to put it subscription-based on YouTube?

6835   MR. CASSADAY: Yes. We want to make sure that we get as deep as we can so that people can see back library current shows and that each of them are differentiated.

6836   One of the ironies of this discussion is that we're talking about unbundling cable. At the end of the day, what the customer and consumer probably really wants is to unbundle TV channels. What they really love is "Duck Dynasty" on A&E, not necessarily A&E.

6837   So, what we've got to make sure is that as we begin to evolve the system, people begin to understand the kinds of utility that they're going to get from our on-demand services, just as they now recognize on our linear services what they can expect when they turn on a WiTV or a W Network.

6838   But, clearly, the unbundling question, I think, at its ultimate extension, is unbundling shows, not unbundling cable, and we're, I think, a little bit ahead of ourselves in even beginning to contemplate how we get there.

6839   COMMISSIONER MOLNAR: I'm sorry. We're ahead of ourselves...?

6840   MR. CASSADAY: Well, to begin thinking about how we can allow people to just have "Duck Dynasty" instead of A&E may be just beyond our technical capability right now.

6841   But, ultimately, what we've got to do is we've got to lead people towards this non-linear on-demand world so they begin to know how to utilize it, they know what to expect, they understand the link between the brands and the shows, and they can ultimately increase their level of satisfaction.

6842   When you think about it, the expression "there's nothing on" is a complete fallacy because in the world that we have here today, if we can get people to understand how to use this technology, they should be able, at the beginning of the week, to ensure that whenever they turn on the TV, not necessarily in a linear fashion but in a non-linear fashion, they can get something that's going to delight them.

6843   COMMISSIONER MOLNAR: Yes, I know. A lot of what I've read here in your submission -- your first point is to focus on the fact that Canadians should have the right to select the status quo as a default.

6844   In the working document that was submitted, there's nothing that would prohibit BDUs from providing customers with the basic -- or with the packages that are available today.

6845   You're aware of that?

6846   MR. CASSADAY: We're aware of that.

6847   But there was also nothing that expressly suggested that it needed to be offered.

6848   What we're saying is that we think that most Canadians, when they receive either a letter or a phone call, are going to put their hands up in the air and wonder what they do next and whether it's worth the trip.

6849   What we're simply saying is that we would like to have you consider the notion of actually insisting that the status quo be made available to each Canadian, so if they choose not to take a "a build your own package" approach or not to take an à la carte approach, that they can simply default to what they currently have.

6850   And I think that's a way of meeting many of the needs that you have here, which is potentially to allow people to reduce costs, potentially to allow people to not have what they want, but for the bulk of those Canadians, that 57 percent, that are pretty darned happy with what they have, that that option still exists for them, and we think including that as part of the framework makes a lot of sense.

6851   COMMISSIONER MOLNAR: I'm a bit confused by that, actually. Because a lot of what else I read here was "stay out of this", "leave it to us", "leave it to the industry", "leave it to the programmers' industry" --

6852   MR. CASSADAY: I think the overwhelming --

6853   COMMISSIONER MOLNAR: -- will meet the value.

6854   So, if this is what customers value, you don't have faith in your partners that they will continue to deliver this to customers --

6855   MR. CASSADAY: Every partner is going --

6856   COMMISSIONER MOLNAR: -- get away?

6857   MR. CASSADAY: Every partner is going to have the opportunity to innovate,

6858   In our approach, the whole question of how do you get lower pricing will emerge because somebody will want to be the low-cost provider.

6859   In our approach, we're recommending that we don't prescribe even what skinny basic should be because, ultimately, that makes the system more homogenous and less choice. Let people do what they want.

6860   What we're simply saying, though, is if in fact we are going to have regulatory intervention, that at least we ensure that Canadians have the opportunity to take what they currently have so that they don't opt out.

6861   My biggest concern is that this choice that we're talking about providing them will be paralysing, not empowering, and we'll end up in a situation where we put the system at risk, which can be, I think, mitigated, to a large extent, by simply offering people to default to the status quo.

6862   COMMISSIONER MOLNAR: Okay. I understand your position. I'm not certain that I agree that it would require the Commission to involve ourselves in that but, you know, I understand what you're saying.

6863   I mean part of the things in putting forward a new approach is, how do you get there, and that is a question, and if these new packages and choices and selections are offered, how are they made available?

6864   I think customers -- we've heard it and we've seen it in other markets, as it regards, you know, customer inertia and many customers will stay until there's a trigger that causes them to take action.

6865   I don't think we're trying to paralyse all customers here. There obviously needs to be a reasonable transition.

6866   You have some thoughts on that?

6867   MS COURTEMANCHE: Yes, we do, as a matter of fact, and I even started crafting, last night, my timeline mechanism chart. So, I'll be filing that on the 19th of September.

6868   It's a chart that was used by the Commission back in -- this type of chart was used by the Commission in 1993, at the structural hearing, where there were some very significant changes that were being made to the system. And, you know, how we managed that transition is as important as the changes we're making. It's that fundamental.

6869   So, you're absolutely right. We need to, you know, lay it out, expressly, how do we get from here and how do we get from there and what are all the timelines and the milestones that, you know, we need, in order to make that transition.

6870   So, it's our intention to file something on the 19th.

6871   Like I've said, I've already started working on it last night. It'll be easy for anybody to look at; they'll understand it. It's a picture that sets it out fairly well, I hope.

6872   COMMISSIONER MOLNAR: Thank you.

6873   You also mentioned in here somewhere that you had some speaking notes to consider as it regards the transition. I think I saw --

6874   MS COURTEMANCHE: That's the chart that we attached. And, basically, what we did is we took your August 21st document and when we were trying to figure --

6875   COMMISSIONER MOLNAR: I don't know that I have it. But I see that others do. So, that's okay. I can't read it now anyway.

6876   MS COURTEMANCHE: Okay. So, what we did is we took your August 21st document, verbatim, you know, with the chart that you created, and then what we did is we basically created two columns --

6877   COMMISSIONER MOLNAR: Okay. Sorry. I found it. Sorry. I just didn't see what you --

6878   MS COURTEMANCHE: Right. And then we created two columns, one for the industry and one for the consumers, and all of the questions that we raise in there relate to the transition, how is this going to work.

6879   We thought that, you know, as important as the change, as I said earlier, is how we get there.

6880   And so, when I provide my timeline mechanism chart, I'm going to be guided by all of these questions in trying to establish, you know, how do we roll this out, and what makes sense, both for the industry, as well as the consumer.

6881   Because the consumer is going to need to try to understand how, actually, does this work? Do I have to do anything? When do I do something? How quickly would it happen?

6882   So, these are all of the things we think that we need to take into consideration in moving towards a new framework, a new model.

6883   So, yes, absolutely, this is very important. So, we're hoping that is helpful to anybody else that's going to be looking at a transition mechanism. You need to know the questions that you need answers to before you actually offer what the solution is.

6884   So, that's what we did here.

6885   COMMISSIONER MOLNAR: Okay. Thanks.

6886   Back when I worked in operations, I used to always have a little mantra for my folks, saying we needed to execute with excellence.

6887   MS COURTEMANCHE: Exactly.

6888   COMMISSIONER MOLNAR: If we are going to, or if we do execute with excellence, if we have this backstop that says we're not mandating that people move to a skinny basic, we're not mandating pick-and-pay, we're making it available, if that's the outcome, that it be made available in addition to other choices that you and your partner BDUs may choose to deliver to the customers, does that relieve some of the concerns that you have and the extent to which you believe this could impact the industry?

6889   MS COURTEMANCHE: There's also the issue of how that's promoted and marketed and, you know, rolls out, as well. That's going to be as important as how you roll out the choices. So, you know, if --

6890   COMMISSIONER MOLNAR: That's what I said. We're going to execute with excellence.

6891   MS COURTEMANCHE: Right. Yes.

6892   COMMISSIONER MOLNAR: Commission and the industry. I mean everybody's in here to win it. Right? Assuming that that's done.

6893   MS COURTEMANCHE: It's done in excellence. Well, we hope that everybody rises to that standard, absolutely. Anything less would be harmful to the system.

6894   John...?

6895   MR. CASSADAY: Just to put it on the record, from a pure programmer's perspective, because we are not a vertically-integrated company, we're a pure programming company with long-term obligations to Discovery and Harpo, to Viacom and to others, we would like the comfort of knowing that the status quo is an option that's available to our customers, to help us ensure that we can live up to our obligations to all of our stakeholders.

6896   COMMISSIONER MOLNAR: Yes, I think you were clear on that. And whether it's the status quo or what your BDU partners determine does provide the best value in the new environment, nothing in the working document would preclude that from occurring.

6897   So --

6898   MS COURTEMANCHE: There is one issue, I will let John talk about it, but the one issue we would have would be what will happen to children's programming, because that goes -- and I know you're going to get there. But, in addition to just pick-and-pay and skinny basic, it's also the issue of children's programming.

6899   COMMISSIONER MOLNAR: Yes, and I expect you've heard there has been discussion regarding children's programming, two different discussions; one being should it form part of the PNI categories and another being should it be part of the basic service.

6900   MS COURTEMANCHE: On the issue of the PNI, we certainly support that.

6901   But just so you know, at Corus, all of our children's programming is scripted programming. So is drama. So it falls under drama.

6902   But we certainly encourage, you know, including it as PNI.

6903   As far as being on basic, I'll let John --

6904   MR. CASSADAY: As far as the basic issue, the one thing that we've done relative to -- changed relative to our original submission is become agnostic on the subject of what children's services should be included. And that's just an effort to try to be fair-handed on this one.

6905   At the end of the day, we think the category needs to be represented.

6906   Which particular services are chosen by distributors across the country would be done in a fair and equitable fashion, based on the merits of each service.

6907   COMMISSIONER MOLNAR: Okay. I am flipping through, trying to find where in your notes, this morning, or just now that you spoke about, because you put an age -- oh, here it is.

6908   So, you think --

6909   MR. CASSADAY: Yes, we talked about two segments that need to be represented; one is preschool two to six, and the other is six to 11, which are the two principal areas that aren't covered by the sort of co-view or family viewing that virtually all the networks are actively involved in.

6910   COMMISSIONER MOLNAR: So, how many Canadian services are there available right now that would serve these markets?

6911   MR. CASSADAY: In the preschool area, two that are principally dedicated to preschool, and in the six to 11, probably at least a half a dozen, maybe a dozen, that would fit into that category. And that excludes the ethnic services that target those audiences.

6912   COMMISSIONER MOLNAR: Okay. Thank you.

6913   I want to go through just a couple more questions I had on your speaking notes here before I go through the rest of the questions here, sort of some of the details of the framework.

6914   On page 16 on your remarks, you say that the diversity of choice that would be lost would include offerings that are mandated under section 3 of the Broadcasting Act.

6915   Could you be more specific as to what that refers to?

6916   MR. MAAVARA: Well, as you know, the Act, in section 3, contemplates various groups and they're defined in the Act, and what we're saying is that there are a variety of channels that fit within those groups, whether it be women, children, ethnic, and that sort of thing, and the risk is that, in fact, some of those channels are probably going to take the hardest hit in an à la carte environment.

6917   COMMISSIONER MOLNAR: Okay. Under the environment that is being proposed. Which would include the ability to retain the packages and so on?

6918   MS COURTEMANCHE: Right. It's based on the research in the proceeding, because when you look at, you know, what's in the top 10, it's not children's.

6919   COMMISSIONER MOLNAR: Okay.

6920   MS COURTEMANCHE: And it's not women, either.

6921   So, we base that comment based on the research that revealed that we're not considered, you know, within the top 10.

6922   MR. MAAVARA: And, again, as we said, when one looks at the actual performance of Category B, which is a pretty solid market test, you can see that even the popular Category Bs are only hitting a fraction of the market.

6923   COMMISSIONER MOLNAR: The next comment you make is that it would be impossible to launch new channels.

6924   Explain that, please.

6925   MR. MAAVARA: Well, it would be very difficult, in an environment where there is -- let's say, in an à la carte environment, there's 100 channels. To come along with something brand new and to try to promote that and to build it into a critical mass, even in a world of, say, four million households, would be enormously difficult.

6926   And, again, if one looks at Category B, even some of the channels where we've been successful in securing a bundle package, we still struggle. It's tough slugging to add subscribers.

6927   MR. CASSADAY: In the United States, right now, talking to our colleagues there, they consider the threshold for a viable service to be 70 million households, which means that there's not going to be any more new services launched in the U.S. either.

6928   Here, we've defined success as being four million. We just don't see any way it would be possible to achieve that level of penetration in an à la carte world. So, as a result, our comment that we think innovation through new product introduction is going to become a thing of the past.

6929   COMMISSIONER MOLNAR: Have you considered what sort of safeguards might enable innovation and new channels to be launched?

6930   I mean it's easy to say you can't do it. Or you could say, this is what we need to allow us, to allow the system to continue to innovate and offer new channels and services and offering.

6931   I mean I'll just toss something out very simply.

6932   MR. CASSADAY: What we've -- sorry. Go ahead.

6933   COMMISSIONER MOLNAR: Well, I mean, just as I read it, what came to me was, well, what if the skinny basic allowed any service with no wholesale fee? So, you could run it, you know, if you chose, as a new services, to run it for a period of time as a free promo to all customers. I mean it's not going to affect affordability.

6934   MR. CASSADAY: Yeah.

6935   COMMISSIONER MOLNAR: Are there solutions like that, that you could come back with to say there are ways new services could be within this framework --

6936   MR. CASSADAY: We have included that very question in the documentation that we provided you, on some of the transactional mechanisms.

6937   But we can also tell you that, based on history, that the free promo period will not result in pushing it into the kind of acceptance that's required.

6938   Certainly getting back to the comment that Gary made, we've learned from all the Cat Bs, many of which, if not all, have had the free promo period, we haven't been able to get the desired level of penetration we're looking for, simply because we're at the stage, now, where what we're doing is introducing the more niche services. They don't have the mass appeal.

6939   Together, what we did is we built this great array of services because we decided we were going to collectively launch a half a dozen at the same time. We put them into tiers, we presented them as bundles of unique offerings to customers, and they embraced them.

6940   Now, when you start launching them one by one, as we did recently with the Cosmo channel, we held out for a year and a half to try to get the level of penetration that we knew we needed to make that service successful to get to that four million threshold. We finally did, but we had the strength of the Cosmo brand. We had the Hearst relationship to back us up, and the support that we got through their magazine each and every issue to continue to promote that service.

6941   So, it's really, really tough -- and I don't think "impossible" is really overstating how difficult it would be to launch something new in an à la carte world without the benefit of a really expanded basic service or the tiers that we enjoy today.

6942   COMMISSIONER MOLNAR: But nobody here is talking about removing the potential to have those tiers. Right?

6943   Like, we agree that the starting point here is not what the working document has proposed. The working document proposed those types of arrangements can occur.

6944   MR. MAAVARA: I guess, Commissioner Molnar, I'll bring you back to a conversation earlier with the Chairman about the power of words, and we take great comfort in your statements and we look forward to those words in the policy when you roll it out.

6945   COMMISSIONER MOLNAR: Do you see it as missing from the working document?

6946   MR. MAAVARA: There is really -- there's no express mention in the working document.

6947   COMMISSIONER MOLNAR: Okay. Well, I'm glad you take comfort, then.

6948   I'm just going to go on to a couple of more detailed things within the framework, some of the other proposals in the framework.

6949   One of them was to eliminate the daytime exhibition requirement.

6950   Do you have any comments on that?

6951   MS COURTEMANCHE: We'd support that, absolutely.

6952   And as far as the nighttime requirement, we're not sure how that -- I'm assuming that's going to be established on a case-by-case basis, or I'm not sure whether it's going to be a stand -- what's not clear to us is, is it going to be a standardized Canadian content in primetime? That wasn't clear to me in the -- it just says that there will be a primetime Canadian content requirement, not whether it's a standardized one. So, I wasn't sure.

6953   COMMISSIONER MOLNAR: Is it your view it should or should not --

6954   MS COURTEMANCHE: Well, I think it should be standardized, yes.

6955   COMMISSIONER MOLNAR: It should be standardized?

6956   MS COURTEMANCHE: Yes, absolutely.

6957   COMMISSIONER MOLNAR: Okay.

6958   MS COURTEMANCHE: When you remove genre protection, I think then you need to standardize the Canadian content.

6959   So, that was one of the issues we weren't sure about.

6960   But if that's the question, yes, we would say standardize Canadian content.

6961   COMMISSIONER MOLNAR: Okay. Thank you.

6962   And how about CPE. Would you consider that that should be standardized?

6963   MS COURTEMANCHE: Well, for us it is, in the sense that we have a group CPE. So, we do have a -- although we do have a specific CPE that's attached to each of our services, we have an overall group requirement of 30 percent. So, for us, in a sense, we're already.

6964   So, we'd support. We'd continue on a going-forward basis -- we just have to talk about what that number is -- and we'd say that, yes, generally speaking, that should be standardized, as well.

6965   MR. MAAVARA: An important consideration, though, in the context of how -- and, again, this is a really important transition issue. To the extent that the protections of Category A and C are somehow going to be evaporated, then, clearly, there's going to have to be some transitional mechanism as to what some of these conditions that have traditionally applied to those channels, and this is all in our workbook, when does that start to happen; is it as part of the licence renewal, or is there going to be some form of standardized position where the Commission says we want the system by channel to create a certain amount of spend on Canadian and some of the other issues like that. That's a really important transitional issue.

6966   MS COURTEMANCHE: Yes, because we have a lot of legacy COLs, especially with the Category As that, you know, how do we get from those legacy COLs to, you know... So that's what we are talking about there and that's what we are going to have to present to you as a transition methodology is, how do you get from there to here once you standardize everything and over what kind of a timeframe can you do that.

6967   MR. MAAVARA: And this is a hugely important issue. John mentioned earlier about the obligations we have. What we are going to have to, over the next obviously six months or 18 months, create new obligations to producers and producers are going to have to plan on how do they invest. So it's really -- this is about as complicated as it gets in terms of, how do we roll out a new plan. So all we are suggesting is that we are all going to have to think very carefully about how that's done.

6968   COMMISSIONER MOLNAR: Exactly. And you folks are the experts. So as you noted, I found the document you were referencing and I see a lot of questions. Are you proposing to provide some recommended answers to these questions?

6969   MS COURTEMANCHE: Exactly.

6970   COMMISSIONER MOLNAR: That is your timeline? Thank you.

6971   MS COURTEMANCHE: That's what my timeline mechanism chart is about, is we framed the questions and then now we need to frame what we think will be a workable solution.

6972   COMMISSIONER MOLNAR: Okay. Thank you.

6973   MR. MAAVARA: And we should point out that this is -- it's only a tool. I think you will see that there are questions in there that could be seen as adverse in interest to Corus, but we felt it was important to put those in.

6974   The questions in a sense don't take a point of view one way or the other, they are just questions that we think need to be asked and, as we said earlier, there may be others as well that we missed.

6975   COMMISSIONER MOLNAR: But the point is, you are also going to propose answers that you think are appropriate?

6976   MS COURTEMANCHE: Exactly.

6977   MR. MAAVARA: Yes.

6978   COMMISSIONER MOLNAR: Okay. Thank you.

6979   MS COURTEMANCHE: But we won't be answering -- I guess what Gary is trying to say is that there are some questions that don't pertain specifically to our role as a programmer, so we will answer the ones that we think are essential in the context of Corus' suite of services and the activities that we are in. We are not going to be answering the ones about, you know, audience data measurement and things like that, just to be clear.

6980   COMMISSIONER MOLNAR: Okay. I want to go back to the issue of CPE for a minute. In the submission that you sent in you mentioned that you did not believe that CPE should apply to small-market local stations. Could you explain why?

6981   MS COURTEMANCHE: Well, in our case we are members of SMITS Coalition and the SMITS Coalition is advocating that position. For our case, our local television is subject to a CPE because we are part of group-based licensing, so we are caught. So we are just supporting our SMITS members who are not --

6982   COMMISSIONER MOLNAR: Okay.

6983   MS COURTEMANCHE: Excuse me, who are not part of group-based licensing and don't currently have a CPE. That's why we said that. But we have a CPE right now for OTA and we could continue in that way.

6984   COMMISSIONER MOLNAR: Okay, thank you. It was just a bit confusing for me. Okay.

6985   More on the issue of CPE, there is --the proposal is that promotion be considered to count toward CPE. Do you support that?

6986   MS COURTEMANCHE: Yes, we do.

6987   COMMISSIONER MOLNAR: Third-party promotion?

6988   MS COURTEMANCHE: Yes, we do.

6989   COMMISSIONER MOLNAR: Do you have any thoughts as to the amount or the quantum of CPE that could be directed that way or should be directed that way?

6990   MS COURTEMANCHE: Well, we were looking at what, you know, you allow in other context, you know, as far as cable, how much promotion they can do of their own services and I think it's -- is it 25 percent? So maybe that's a good number, just because it's there already.

6991   COMMISSIONER MOLNAR: And you looked at that before coming here, so that's kind of where you settled?

6992   MS COURTEMANCHE: Well, it's something that's out there already, yes. We didn't look at something specific. We didn't do a dollar chart or an analysis of what it means, but somewhere --

6993   MR. MAAVARA: We could undertake to make a recommendation.

6994   MS COURTEMANCHE: We can undertake. Yes, we can certainly come back on the 19th.

6995   COMMISSIONER MOLNAR: If you want a little more time.

6996   MS COURTEMANCHE: We can come back on the 19th and make a more firm recommendation.

6997   COMMISSIONER MOLNAR: Sure. Thank you.

Undertaking

6998   COMMISSIONER MOLNAR: In your initial submission you stated that without genre protection PNI is no longer relevant. Do you still stand by that statement?

6999   MS COURTEMANCHE: We, in our context, Corus, we spend virtually all of our Canadian productions, you know, there is a good, just overwhelmingly -- and I'm not sure if it's 90 percent or something, it is in the order of that, is already PNI programming.

7000   So we just thought that that's what we're doing already. We don't need to have that specific requirement, but we have noticed that in your August 21st document you have proposed the continuation of PNI and we can certainly live with that, but in our circumstance we certainly don't need that to invest in PMI programming. Like I said, our children's programming is all scripted, it's all drama, we are doing it already.

7001   COMMISSIONER MOLNAR: Okay, thank you. I didn't understand, I thought you were talking as a framework, you know, by eliminating genre protection PNI was no longer relevant and I wasn't clear how that tied, but I understand you are talking about your particular case, okay.

7002   You mentioned you have no issues regarding the audience measurement. Are you interested in the outcomes?

7003   MR. CASSADAY: What we are saying is it's not our issue, we don't control that, so we are just deferring any comment on that.

7004   COMMISSIONER MOLNAR: Okay. You mentioned that you were part of SMITS and they are coming forward. Would it be appropriate for us to just defer the conversation as it regards the local television to that?

7005   MS COURTEMANCHE: Yes, that would be -- yes, thank you.

7006   COMMISSIONER MOLNAR: Okay, thanks. We will leave that then, thanks.

7007   On the issue of affiliation agreements, you need to remind me, I know that you were determined to be subject to the Vertical Integration Code and I can't remember if they were made conditions of licence.

7008   MS COURTEMANCHE: They were as a result of the transaction, yes.

7009   COMMISSIONER MOLNAR: Okay, thank you.

7010   So in the working document it speaks to prohibiting certain provisions in affiliation agreements, including things like most favoured nations, grandfathering, unreasonable penetration-based rate cards. Do you have any concerns with that?

7011   MR. MAAVARA: Yes. I guess the first thing, as John said earlier, Corus is not a vertically integrated company. Although we are affiliated with a BDU, we are not as a matter of fact or of law vertically integrated.

7012   The questions that are posed in the framework document, first of all, we are not sure exactly what they mean in the sense that there are a number of terms that have been set out but we don't necessarily know what the process means, and I guess what we do know is the process that we have now in the CIDG decision, CRTC 2012-208, the Commission set out some provisions as to how it's going to examine agreements.

7013   Our view is that that system is working pretty well. As Bell said this morning, you already have the undue preference processes. This really, in some ways, almost goes to an ideological question which is what we put in our speakers notes, which is, at a time when the entire system is becoming harder to manage, the Commission is saying I'm going to manage it more with these various things.

7014   So I guess we are saying we are a little bit unsure of that approach and we really need to wait and see as to exactly what is meant by some of these terms before we can comment on them.

7015   COMMISSIONER MOLNAR: Okay. Fair enough. Just as it regards why this is here, you may have seen some of the submissions by different independent broadcasters, independent BDUs speaking of some of the issues, some of the experience they have had under the VI Code, it's not like we just make it up and want to regulate more for no reason.

7016   The last thing I wanted to ask about was your ethnic specialty services. There are provisions, as you know, that would change ethnic services. So could you just tell me your thoughts as it regards the working document proposal?

7017   MS COURTEMANCHE: Thanks for asking. The buy-through requirement was introduced about 10 years ago and it was created as a safety net for what we call or we know as the legacy ethnic services, so that is ATN, Fairchild, RAI, Odyssey and TLN.

7018   And TLN, as you know, is a service that has been around for the last 30 years. And it was done because at that point we basically opened the doors up to foreign ethnic services and we said, well, we are going to let pretty much everybody else in, except that we are going to have this buy-through requirement for the legacies and that is what's going to sustain you.

7019   And, you know, there were some provisions that said, okay, we have open door, except that they can't have exclusive rights or whatever. The reality is that has been very hard to police.

7020   In 2010 during the FIFA World Cup Tournament, Rye was playing all kinds of -- you know, played -- we had purchased -- sorry, TLN had purchased the exclusive rights for the soccer programming back in 2010 and Rye was playing all of that exclusive content in Canada on its service and we had to complain to FIFA and after two weeks they finally told Rye to stop doing that.

7021   So it's very hard to police. But the buy requirement, or the buy-through requirement we think is essential because without it I think we would be in the ironic position of having to provide a better situation for foreign ethnic services than we would for Canadian ethnic services.

7022   Now, the one-to-one. Then let's get to the one-to-one. Well, the one-to-one does not guarantee obviously that we are going to be the one that is picked. TLN has, you know, a very unique model, it's carried in six million homes in Canada. The type of service it provides is unique as well.

7023   We have Spanish, we have Italian content, but we also have English language content on TLN. Why? Because it was a service that was created to provide an offering to a multigenerational group of people. Reality is as over the years, you know, as the new generations live in Canada they don't always speak the mother tongues of their parents, or even of their grandparents, but we wanted to have programming that spoke to their community as well even though -- it's ethnic programming, but it's in English and it speaks to the subsequent generations.

7024   So when we looked at this we said, you know, between the streaming licensing and the one-to-one, a service such as TLN quite frankly very high chance is that it would just disappear or certainly we would lose significant penetration.

7025   And we know that -- we understand that the Commission has said that they are not here to preserve any one particular service, that the consequences of a new framework may be that some may disappear, but when we look at the changing demographics in Canada, and we all know that if there are new groups that will require more programming that is directed to them, it is the ethnic communities. We think it would be a real shame that after 30 years and a service, like I say, that provides that multigenerational type service could disappear.

7026   So for TLN it is more problematic than for probably other ethnic services.

7027   COMMISSIONER MOLNAR: Okay. And just so I understand, it will disappear because it does not have audience of its own, it was simply a buy-through for other ethnic channels?

7028   MS COURTEMANCHE: Right.

7029   COMMISSIONER MOLNAR: Is that what you're saying?

7030   MS COURTEMANCHE: Sorry, yes.

7031   MR. MAAVARA: Well, under the proposal the way it's written its status would change and the difficulty we would have is that, in effect, it becomes sort of an à la carte. We already have real world experience of where the channel has shifted from its existing position to a different position, for example, from an analogue to digital, the drop in households is astronomical.

7032   It's a bit of a unique case, as Sylvie described, because it is sort of a different ethnic than the others.

7033   COMMISSIONER MOLNAR: Okay. Thank you. Those are my questions.

7034   THE CHAIRPERSON: Thank you.

7035   Monsieur le vice Président...?

7036   COMMISSIONER PENTEFOUNTAS: Merci. Well, Rye still causing problems after all these years.

7037   With that being said, I'm not sure the programming for second and third-generation members of the Italian community should be constituted by sort of Bobby De Niro, Leo DiCaprio and Al Pacino movies, but that's a whole different issue.

7038   La question la plus formulée dans ces audiences -- I won't be speaking French long, Mr. Cassaday -- est celle du paiement pour des services non désirés. Je vous cite, madame Courtemanche, et je peux également cite le sondage de CTAM, raison principale et deuxième raison : un, coût; et, deux, du contenu qui ne les intéresse pas. Alors, ce sont les raisons pour lesquelles les gens ont l'intention d'amaigrir leur plan d'abonnement à des EDR. Alors, de toute évidence, la tâche de communiquer la valeur de votre offre n'a pas réussi jusqu'ici, là.

7039   And that is part of -- that's fundamental to the reason and is core to a lot of what's happening over the next couple of weeks. You would agree with me on that.

7040   So I think it's more than what you mentioned here. I think there is a real dissatisfaction that seems to be -- and maybe the dissatisfied are the ones that are making more noise than the quiet, happy majority, that may be the case, but even the CTAM study clearly indicates that price and availability of things they are not interested in watching are the two major reasons why people are thinking about core shaving.

7041   MR. CASSADAY: I think it is a silent majority that are being overrun here by a few that are dissatisfied. We think that the service that the Canadian system is working exceedingly well and will continue to work better.

7042   All of us are aware that customers and consumers are constantly looking for better value in everything that they secure, whether it's services or goods, and we are on it.

7043   COMMISSIONER PENTEFOUNTAS: Okay. I have some questions later on on the French market and I don't want to catch Mr. Cecchini offguard if he wants to come and join in, or Madam Courtemanche can answer the questions, we will take it as it comes.

7044   MS COURTEMANCHE: Okay.

7045   COMMISSIONER PENTEFOUNTAS: You also mentioned a couple of services that are of note, a preschool network and a children's network that would be part of the basic package. I suppose the preschool network would be Treehouse and the 6-12 youth network or station would be YTV?

7046   MR. CASSADAY: They would be two candidates for distributors to consider if, in fact, you mandated that those two categories of children's services be included, but they would not necessarily be the ones that they would be required to take.

7047   COMMISSIONER PENTEFOUNTAS: So the idea would be one of each category and the market would be free to decide what service?

7048   MR. CASSADAY: Yes. We believe that they are two distinct offerings.

7049   COMMISSIONER PENTEFOUNTAS: Okay.

7050   MR. MAAVARA: I should just add, the one important aspect of that is what we called the safe haven. For example, Treehouse has reduced advertising content and the ads that run are vetted and they are subject to the ASC Codes. So that is an important aspect of that.

7051   COMMISSIONER PENTEFOUNTAS: Okay.

7052   MS COURTEMANCHE: Plus that Treehouse has a period of time where we can't have any advertising either.

7053   COMMISSIONER PENTEFOUNTAS: Right.

7054   MS COURTEMANCH: So there is that concept as well.

7055   COMMISSIONER PENTEFOUNTAS: Yes. You also talked about the period of experiment following Dr. Solomon's report. Don't we already have a pretty good idea of what à la carte would look like if we looked at the London experiment by Rogers and you also mentioned yourselves, you have referenced the Cat B, ethnic and pay-TV experience and those are all running at under 50 percent penetration and the London experience, if we listen to what -- and we saw that I think it was last year, the drop was pretty dramatic there as well, in excess of 50 percent often times.

7056   So do we have enough there to decide on what the impact would be or do we need a supplemental study above and beyond?

7057   MR. CASSADAY: Well, I think if we were convinced of that we wouldn't be having this discussion because those are pretty scary numbers.

7058   COMMISSIONER PENTEFOUNTAS: I have to concur.

7059   MR. CASSADAY: And those are the kind of numbers that cause us to make claims like we are worried about the actual viability of the industry under an à la carte scenario.

7060   What we are suggesting, we can talk a little bit more and I'm not sure whether it's necessary at this point, but what we are suggesting is just get people in a real-world simulation where they have to start sorting through 300 different channel options, they have to get in touch with the call centre and figure out how to put this all together.

7061   And our view is we would like to see this as well. Our view is that for most Canadians it will be so darn complicated that they will throw their hands up and default to some form of skinny basic and something else, whether it's a group of foreign services or Netflix, but it won't be a thoughtful one.

7062   And imagine, because most of the research talks to men 35-54 or women 18-35, the decision that is going to be made in a family is going to take into account the interests of a teenage girl, a six to 11-year-old boy, a multitude of views are going to be brought to the table which complicates it even further.

7063   We just think we need to be aware, you know. I mean, would someone launch a new commercial jet without testing it first? I mean, the consequences here are significant and we think it would be worthwhile to understand what the likely implications are.

7064   COMMISSIONER PENTEFOUNTAS: And the Québec and the Atlantic Canada model couldn't be transposed?

7065   MR. CASSADAY: Well, certainly the Québec model we think is completely different and I know people have argued that that is an effective proxy, but the bottom line is that the language difference is huge.

7066   I remember when I first came in this business 25 years ago my mentor at the time said the thing you have to remember is that this is the only theatre in the world with 85 percent of the seats facing the back of the auditorium, and what he was talking about is in English Canada everyone has access to everything that is available in the United States, so they can turn away from us in an instant and we have to be mindful of that in every decision that we make.

7067   COMMISSIONER PENTEFOUNTAS: Yes. But you do still have over a million strong English market in Québec and that can also be a sort of microcosm of what's happening in the rest of the country because they have access to American content as well and they are living under this regime that has been present in Québec for a decade now.

7068   MR. CASSADAY: Although given capacity constraints they have a lot less services.

7069   COMMISSIONER PENTEFOUNTAS: I'm sorry, Mr. Cassaday?

7070   MR. CASSADAY: Given the capacity constraints, they have a lot less services generally available in English than they do in the rest of the country.

7071   COMMISSIONER PENTEFOUNTAS: I don't know if that's so much the case anymore.

7072   But I understand on the French market, I mean the choice is much more restricted than it would be in the English market, but there is still a substantial English market there and a more supple, a more flexible selection process is there for the English community and I would dare say that the numbers are quite similar with what is happening in English Canada already.

7073   I mean, you can take a look at that and come back to us with an idea before the 19th of September and we can go from there.

7074   MR. CASSADAY: I mean, really virtually none of our services are available in English in Québec. W is not available. I mean, so I think there is the roster of choice. And again, we get back to the fact that there are just so many darn choices that that is what confounds the --

7075   COMMISSIONER PENTEFOUNTAS: Okay. But all of your choices are available in Québec, all of your stations are available in Québec.

7076   MR. CASSADAY: The other question is what --

7077   COMMISSIONER PENTEFOUNTAS: Cosmo and Net, I mean everything here, Treehouse, Teletoon, Nickelodeon, CN, TLN, everything is available.

7078   MR. CASSADAY: Very limited distribution of our English services in Québec, but --

7079   COMMISSIONER PENTEFOUNTAS: Okay. Briefly before I get to the French market, in terms of à la carte and launching new services, I mean launching new services whether it be à la carte or under the current system is quite difficult today in Canada, is it not?

7080   MR. CASSADAY: Yes, it is.

7081   COMMISSIONER PENTEFOUNTAS: All the good ideas are already taken up. I think Mr. Greenberg spoke to us on that issue a few years back. So changing it to à la carte or not changing it wouldn't make launching new services that -- wouldn't change the dynamic of launching new services in 2015 and going forward?

7082   MR. CASSADAY: Yes, I think it would. As I mentioned in the example that we used in Cosmo, obviously we could have got Cosmo launched instantly had we been willing to go on an à la carte basis, but we spent a year and a half trying to ensure that that was packaged so that we could get the level of penetration and the number of subscribers required to have a viable service.

7083   CONSEILLER PENTEFOUNTAS : Le marché francophone est différent, madame Courtemanche, on s'entend là-dessus.

7084   MME COURTEMANCHE : Oui, on s'entend là-dessus.

7085   CONSEILLER PENTEFOUNTAS : Sur les questions qui ont été soulevées, vous avez entendu la communauté créative québécoise en grande partie qui nous parlait de leur perception de la situation et des changements qui sont proposés par le Conseil. Sur les questions des DEC, des EEN, des 4A, protections de genres et autres, commentaires?

7086   MME COURTEMANCHE : Bien, dans notre mémoire, on avait soumis que, justement, à cause des distinctions entre le marché anglophone et francophone, qu'il ne serait probablement pas garant de faire l'élimination des genres et, à ce moment-là, on soutiendrait justement le format d'octroi de licence qui existe présentement. On a regardé le document du 21 août...

7087   CONSEILLER PENTEFOUNTAS : Um-hum.

7088   MME COURTEMANCHE : ...et on a bien noté que le Conseil suggérait que tout le monde, incluant les services indépendants, il n'y aurait plus la protection des genres et on a regardé ça très étroitement et on s'est dit : « Est-ce qu'on pourrait effectivement vivre nos services qu'on opère, qu'on vient tout juste de commencer d'opérer au Québec, est-ce qu'on pourrait les opérer sans la protection des genres? »

7089   Je pense que la réponse est oui dans la mesure qu'on a sécurisé la programmation qui est nécessaire pour avoir un service qui est attrayant et pour lesquels on va pouvoir aller chercher les auditoires. Je pense que, dans le cas de Historia et Séries+, on peut le faire.

7090   Mais, ce qui va être important, c'est que les règles, les vieilles règles avec lesquelles les services ont été lancés, il va falloir faire un ajustement aussi. Alors, ce n'est pas juste la protection des genres et garder les vieilles règles, les vieilles conditions de licence qui ont été posées...

7091   CONSEILLER PENTEFOUNTAS : Des obligations à la baisse également?

7092   MME COURTEMANCHE : ...c'est ça, les obligations, là, au niveau de combien de contenu qui vient des États-Unis qu'on peut inclure, là...

7093   CONSEILLER PENTEFOUNTAS : Um-hum.

7094   MME COURTEMANCHE : ...comme, par exemple, dans Séries+. Alors, il y a des conditions dans lesquelles il faudrait qu'on ait des modifications, mais j'imagine -- et puis on l'a dit du côté anglophone -- que, à ce moment-là, il y aurait une standardisation qui se ferait et ce genre-là.

7095   Nous autres, ce n'est pas notre façon préférée, mais on comprend que le Conseil veut qu'on aille de l'avant, qu'il faut démontrer qu'on pourrait le faire. Alors, on dit : oui, ce serait quelque chose avec laquelle on pourrait dans la situation où on aurait une flexibilité, là, la flexibilité qui est nécessaire avec l'élimination des genres, à ce moment-là, on pourrait continuer à concurrencer dans le marché francophone, nonobstant le fait que c'est beaucoup plus difficile avec la base d'auditoire et d'abonnés qu'on a.

7096   Et on sait que les coûts de production sont les mêmes. Alors... Mais on croit qu'on pourrait développer un modèle d'affaires qui... Mais c'est clair qu'on n'aura pas le même niveau de revenus, ça, c'est clair. Avec l'élimination des genres et le changement qu'on propose, on ne pourra pas garantir le même niveau de revenus dans le marché, mais on accepte que c'est une évolution qui se ferait.

7097   CONSEILLER PENTEFOUNTAS : Merci, Monsieur le Président, ça complète.

7098   LE PRÉSIDENT : Merci. Juste trois (3) petites choses, je sais que la journée a été longue.

7099   With respect to children and youth, what would your view be if in fact we said, well, that's an interesting idea but it has to go through the 9(1)(h) exceptional test?

7100   MR. MAAVARA: That's a really interesting question. We applied for a 9(1)(h) years ago and I think we would certainly consider that.

7101   THE CHAIRPERSON: You may not be the one -- I mean, others may actually apply, but I took your answer earlier that there is an exceptional argument to be made, especially in a new framework, maybe that's the case to be had.

7102   With respect to status quo, it's not so much a question, but you may have missed this on Tuesday. I had an exchange with the consumer groups at lines 33 -- it starts at line 3344, and I'm cutting out a little bit here:

"Have you given some thought of how we migrate from the current world to the next world..."

7103   As I reread that it sounds like I'm asking spiritual advice questions, but no:

"Have you given some thought of how we migrate from the current world to the next world...?"

7104   I was talking about skinny basic in that context:

"...because there is a risk of creating, at least in consumer's mind, a lot of chaos, frustration and confusion generally because some may, and perhaps even a majority of Canadians might be happy with what they have now."

7105   And the answer from the group is:

"I think it should be at the option of the consumer."

7106   And then I asked another question:

"So you are not contemplating a system whereby every consumer in Canada or every subscriber in Canada would have to make a positive selection of the new era."

7107   Answer: "No."

7108   So even the consumer groups I think are not -- or this particular group of consumers is on the same page as you are I think.

7109   MR. CASSADAY: That has often been the case. I think that from our standpoint what we are talking about is a group that is entirely dependent on broadcast revenues for our survival. We have done a lot of work to establish relationships with our subscribers and our suppliers and we are saying that as long as the consumer has choice, and undoubtedly they will, one of those choices could and should be to default to what they currently have.

7110   We see no harm in that and we see the potential benefit to this system is the majority of Canadians opt to stay with the status quo.

7111   THE CHAIRPERSON: Right. And even the Commission has done it recently with the do not call list where, assuming most people wanted to stay on the list, we didn't force them to change perspective.

7112   My third and final question, and I have asked others and sort of hinted at it, but nevertheless I have been asking everybody. Looking at the working document, what in your mind would be the most important positive change that comes from that working document and which is your least favourite?

7113   MS COURTEMANCHE: I will talk about the positive, which is your position on the access to foreign programming because we think that you have it bang on there, so 100 percent. Thank you very much.

7114   THE CHAIRPERSON: That's adding services onto the eligible list.

7115   MS COURTEMANCHE: Yes. Where you said that you will keep the status quo and that any regime that is imposed on Canadian service would also be imposed on non-Canadian services.

7116   THE CHAIRPERSON: Okay. In terms of the Code and --

7117   MS COURTEMANCHE: In terms of the codes and stuff. So we think --

7118   THE CHAIRPERSON: Okay. Understood.

7119   MS COURTEMANCHE: Yes.

7120   MR. CASSADAY: And it would not be a surprise to you to hear me say we are not that enthusiastic about skinny basic or à la carte, pick-and-pay.

7121   THE CHAIRPERSON: Indeed. But, as I said to others, I think it does a disfavour to the Commission's option to describe it as an à la carte, it's actually a little bit more subtle than that.

7122   MR. CASSADAY: Indeed. I think I corrected that.

7123   THE CHAIRPERSON: All right then. It has been a long day, I don't think we have any other questions. Thank you very much.

7124   MS COURTEMANCHE: Merci.

7125   MR. CASSADAY: Merci. Thank you all very much.

7126   THE CHAIRPERSON: And we start off in less than 12 hours, at 8:30 tomorrow morning. Thank you very much.

--- Whereupon the hearing adjourned at 2108, to resume on Thursday, September 11 2014 at 0830

REPORTERS
Lynda Johansson
Jean Desaulniers
Madeleine Matte
Monique Mahoney

Date modified:

2014-09-11