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TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TELECOMMUNICATIONS COMMISSION
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
CANADIAN TELEVISION POLICY REVIEW /
EXAMEN DES POLITIQUES DU CONSEIL
RELATIVES À LA TÉLÉVISION CANADIENNE
HELD AT: TENUE À:
Conference Centre Centre des conférences
Outaouais Room Salle Outaouais
Place du Portage Place du Portage
Phase IV Phase IV
Hull, Quebec Hull (Québec)
October 3, 1998 3 octobre 1998
Volume 9
tel: 613-521-0703 StenoTran fax: 613-521-7668
Transcripts
Transcription
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
StenoTran
Canadian Radio-television and
Telecommunications Commission
Conseil de la radiodiffusion et des
télécommunications canadiennes
Transcript / Transcription
Public Hearing / Audience publique
Canadian Television Policy Review /
Examen des politiques du Conseil
relatives à la télévision canadienne
BEFORE / DEVANT:
Andrée Wylie Chairperson / Présidente
Vice-Chairperson, Radio-
television / Vice-
présidente, Radiodiffusion
Joan Pennefather Commissioner / Conseillère
Andrew Cardozo Commissioner / Conseiller
Martha Wilson Commissioner / Conseillère
David McKendry Commissioner / Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Jean-Pierre Blais Commission Counsel /
Avocat du Conseil
Margot Patterson Articling Student /
Stagiaire
Carole Bénard / Secretaries/Secrétaires
Diane Santerre
Nick Ketchum Hearing Manager / Gérant de
l'audience
HELD AT: TENUE À:
Conference Centre Centre des conférences
Outaouais Room Salle Outaouais
Place du Portage Place du Portage
Phase IV Phase IV
Hull, Quebec Hull (Québec)
October 3, 1998 3 octobre 1998
Volume 9
StenoTran
ii
TABLE OF CONTENTS / TABLE DES MATIÈRES
PAGE
Presentation by / Présentation par:
Paul Baines 2654
Canadian Media Guild/GCM / La Guilde canadienne
des médias 2689
Canadian Caption Industry Association /
Association canadienne industrie du sous-titrage 2742
CIBINT, Canadian Institute for Broadband and
Information Network Technologies, Inc. 2776
Bell Satellite Services Inc. 2810
CCTA, Canadian Cable Television Association /
ACTC, Association canadienne de télévision
par câble 2845
StenoTran
iii
ERRATA
Volume 8
October 2, 1998 / Le 2 octobre 1998
Page Lines /
Lignes
2476 19 "Saulnier Entredos"
should read / devrait se lire
"Sonja Smits"
2498 11 "non"
should read / devrait se lire
"donc"
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2654
1 Hull, Quebec / Hull (Québec)
2 --- Upon resuming on Saturday, October 3, 1998,
3 at 0910 / L'audience reprend le samedi
4 3 octobre 1998, à 0910
5 12596 THE CHAIRPERSON: Good morning.
6 12597 Madam Secretary, would you introduce
7 the first presentation, please.
8 12598 MS BÉNARD: Thank you, Madam Chair.
9 12599 The first presentation will be by Mr.
10 Paul Baines. Please proceed, Mr. Baines.
11 PRESENTATION / PRÉSENTATION
12 12600 MR. BAINES: Good morning. This
13 presentation is about control over television
14 resources. Even in today's corporate and globalized
15 culture, the mass media, and Canadian television
16 broadcasting in particular, should serve the public
17 interest and not money and power.
18 12601 I am here today because I believe the
19 Commission has sold out Canadian television, and the
20 liquidation must stop. The Commission's neglect for
21 public interest television is most clearly illustrated
22 by its treatment of community access channels offered
23 by cable operators.
24 12602 For the past 25 years the Commission
25 has heard from the public and from commissioned
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2655
1 television studies that these resources should be
2 licensed to the community. In response, the Commission
3 has lifted access responsibility from cable operators,
4 allowing the owners to do as they please.
5 12603 I have witnessed first-hand that
6 community channels are now public relations machines
7 for its operator, providing it with 24 hours of
8 explicit corporate goodwill and promotion of its
9 interests.
10 12604 In my opinion, not only should
11 community channels be mandatory under the Broadcasting
12 Act, maintaining the integrity of Canadian television
13 alongside the public and private channels, but they
14 should always be owned by the communities they serve.
15 12605 I think the Commission's neglect is
16 based on the belief that market forces and private
17 ownership are the best mechanisms to manage the
18 Canadian television system. So deep into the mindset
19 of corporate interest, the Commission now weighs
20 comments from the advertising industry in this review
21 process.
22 12606 This industry dedicates itself to
23 transform human relationships into transactions and
24 lobbies for an unregulated commercial TV system.
25 12607 Only in our hyper capitalist society
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2656
1 would such an industry be welcomed to a hearing focused
2 on improving the television system. If this
3 contradiction is not blatant to the Commission, then
4 the corporations' interest has won over the public's.
5 12608 In my opinion, advertisers should
6 wait until Canadians decide what type of system we want
7 and then try to find a place for themselves.
8 12609 Commercial television should claim
9 the identity it deserves: a marketing machine.
10 Subsidized by public resources -- those being the
11 spectrum -- commercial television offers a steady diet
12 of consumer dreams to create private profit. The
13 content is unbalanced because it cannot criticize the
14 commercialization of culture, the power structures that
15 are responsible, nor the effects of our throwaway
16 materialistic, yet empty, lifestyle.
17 12610 The channels multiply, but this has
18 not led to more diversity. Programs must fit into the
19 consumer based paradigm of passivity and happiness
20 through material acquisition.
21 12611 Power is concentrated among a few
22 large corporations, letting its staff and advertising
23 dollars do the talking and the audience do the
24 listening. These corporations want access to larger
25 markets while deny the public access to its operations.
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2657
1 12612 Competition and economies of scale
2 both work to dissolve any meaningful Canadian
3 television for Canadians or international audiences.
4 Even our largest broadcasters can't kick the American
5 program addiction to pay for their massive commercial
6 enterprises.
7 12613 Commercial television is not free.
8 Consumers pick up the billion dollar price tag at the
9 cash register, while the environment takes a hit as
10 well. The question is not who pays, but rather what is
11 the best method of paying to meet our communication
12 needs.
13 12614 The myth makers of commercial
14 television like to tell us that this system gives
15 people what they want, based on consumer demand. This
16 argument contradicts the purpose of advertising, which
17 is to control consumer demand. $6 billion was spent
18 last year on advertising. Are we still supposed to
19 believe that the TV industry gives us what we want?
20 12615 Our participation is reduced to
21 changing the channel or turning the TV off. We have no
22 control over what or how the programs are made. We
23 don't define our needs or our role. Instead, the terms
24 are pre-set for us.
25 12616 I read through the hearings this
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1 summer and the 87 public submissions that were actually
2 public out of the 287 listed on the Web. What
3 Canadians want is a TV system that has more local,
4 diverse, Canadian, representative programming and
5 channels that are supportive of community projects and
6 accessible to ordinary and minority voices.
7 12617 In my opinion, community channels can
8 best deliver these needs. My opinion is not only based
9 on my experience working at two community channels, but
10 also extensive research on the failures of commercial
11 television and the potential for quality community
12 programming, both described in my written submission.
13 12618 If the Commission is serious about
14 diversifying the content of Canadian television, then
15 diversifying the ownership structures would be the best
16 start. Content which respects dissent and the
17 principles of democracy could only be produced by an
18 organization that is also democratic, that is
19 controlled over the social economic systems and
20 institutions that affect the people who have to live
21 with the decisions.
22 12619 We need to change our relationship to
23 our media and become speakers as well as consumers,
24 activating our role as citizens and our collective
25 control over the resource. No amount of policy,
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2659
1 funding formulas or corporate goodwill can balance the
2 profits of the industry and meet the needs of
3 Canadians.
4 12620 Instead of tinkering for a master
5 plan that will solve the problems of Canadian TV, I
6 recommend that the Commission diversify and
7 decentralize part of this system that makes the most
8 sense for local ownership and empowerment.
9 12621 Decentralizing television ownership
10 will bring it closer and make it more sensitive to
11 community needs. We have to start communicating
12 through ourselves before we can be successful at
13 exporting it to the rest of the world -- that is, if we
14 want our communication to have any meaning.
15 12622 I believe my opinions and
16 recommendations fit with the goals of this review,
17 which was to further the development of a strong and
18 viable programming industry. I think that diversity of
19 content, as well as ownership, is a strength, and I
20 think a strong and viable programming industry needs to
21 change access into participation.
22 12623 Another goal was to ensure that
23 Canadians receive a wide range of attractive and
24 distinctive Canadian program choices. I recommend to
25 give Canadians the tools to tell their own stories.
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2660
1 12624 The Commission wants to ensure that
2 the Canadian broadcasting systems meets the needs of
3 Canadian viewers and reflects their values. I say let
4 Canadians have some control over that content -- more
5 than just the remote control.
6 12625 The Commission wants to explore how
7 all participants in the system can work effectively to
8 strengthen the Canadian presence on our television
9 screens. I think this cooperation should start with
10 public channels, private channels and community
11 channels working together, changing consumers into
12 producers as community channels have 100 percent
13 Canadian content and they offer a new model of
14 ownership.
15 12626 Lastly, the Commission wants to
16 support a healthy broadcasting and production industry,
17 capable of competing successfully at home and abroad.
18 I think a good industry would let the community
19 channels offer grassroots learning and experimentation
20 with the medium. They would challenge the norms and
21 they would be democratic.
22 12627 To close -- I hope -- the Commission
23 can break out of its indoctrinated ideas on access,
24 diversity, competition, commercialization,
25 concentration of ownership and dissent. It is time the
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2661
1 community started controlling their own channels, and
2 that starts by putting the licence in their name.
3 12628 The licences should be given to not
4 for profit community groups, dedicated to providing
5 television and the public interest. Financial support
6 for community channels should be increased along the
7 public interest objectives of the Act, to materialize
8 in a TV system dominated by advertising and profit.
9 12629 Community television should be
10 recognized as important to the health of Canadian
11 television, just like commercial and public television
12 is.
13 12630 Finally, to protect the public
14 interest in television, the Commission should examine
15 the impact of ownership concentration and
16 commercialization, and then act upon its findings.
17 12631 The Commission should also review the
18 Peoples Communication Charter, as attached in my
19 submission -- the Charter which instills the values
20 that I have been talking about today and a hybrid of
21 human rights action for the 21st century and the
22 information age.
23 12632 Thank you.
24 12633 THE CHAIRPERSON: Thank you, Mr.
25 Baines.
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2662
1 12634 Commissioner Cardozo, please.
2 12635 COMMISSIONER CARDOZO: Thank you,
3 Madam Chair, and thank you, Mr. Baines.
4 12636 First, my compliments for coming to
5 make this presentation. We don't have many individuals
6 coming to say their own piece. We certainly respect
7 the associations and corporations that come forward,
8 but it is also refreshing when individuals come of
9 their own accord.
10 12637 You note in your written submission
11 that you would be 26 years of age by the time this
12 hearing rolled around. So whether you are 25 or 26,
13 from what I can tell, you are the youngest witness to
14 come forward. I congratulate you for that too.
15 12638 As somebody who works for a public
16 agency, I think it is very important that people keep a
17 close eye on us from all perspectives.
18 0920
19 12639 I find your stuff very refreshing,
20 especially where in one of these sections you have
21 taken part of our public notice line by line and
22 examined it for its underlying values.
23 12640 Part of this whole exercise is to
24 take a look at how television is going and where we go
25 from here, but I think you have afforded us the extra
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2663
1 opportunity of taking us a step back and looking at the
2 underlying assumptions with your issues about
3 ownership.
4 12641 I wonder if we can go to a couple of
5 things in your written brief. Paragraph 3 where you
6 say:
7 "This paper argues that the
8 Canadian Community Channels
9 should be owned by the
10 communities they represent and
11 be recognized as a third, and
12 perhaps the most, essential type
13 of Canadian broadcasting for
14 Canadians."
15 12642 I'm wondering how this thought goes
16 with the sense that, technically at least, the CBC is
17 owned by the public corporation. Unlike the private
18 sector broadcasters, it is the public sector
19 corporation. I say technically because several people
20 will believe that the public may or may not have access
21 to making the decisions as to what appears on the CBC.
22 12643 What are your thoughts as to whether
23 the CBC fulfils that function of being owned by the
24 communities and the people that it serves?
25 12644 MR. BAINES: Well, if it did, why was
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2664
1 community channels created in the seventies? Obviously
2 they were created in the seventies to fulfil a
3 particular type of objective. That was to be more
4 local, to be more community representative and to be
5 accessible to the tools to create television for
6 themselves.
7 12645 COMMISSIONER CARDOZO: Okay. I am
8 not disputing what you are saying about community
9 channels. I am thinking about the rest of the system
10 first and then I will come to community channels.
11 12646 The CBC, as I say, is a public
12 corporation, as there are some at the provincial level
13 such as TV Ontario. There's also Vision TV which is a
14 non-profit, not-for-profit, television broadcaster.
15 Does the publicly owned or the not-for-profit type go
16 part way to satisfying your interests?
17 12647 MR. BAINES: Well, judging by the
18 number of television channels that we have right now
19 and are going to be able to have in the near future and
20 based on the sort of industry created standards that
21 community channels should operate by, all the different
22 objectives that community channels set out to achieve
23 in the 1970s which they haven't, are the same types of
24 objectives that Vision or CBC or TVO has. It's quite
25 distinctive and its focus and it's not its method of
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2665
1 producing information.
2 12648 COMMISSIONER CARDOZO: Let's take a
3 community channel then, either one that you worked for,
4 one where you live, what are the kinds of programming
5 you would like to see?
6 12649 MR. BAINES: It's not about what I
7 would like to see. It's about what the community would
8 like to see.
9 12650 COMMISSIONER CARDOZO: But what do
10 you think? What do you --
11 12651 MR. BAINES: I have talked to lots of
12 people in the community who are very frustrated that
13 when they had an idea for a television program, usually
14 what ended up happening was their original vision was
15 changed drastically to fit the time, conditions and the
16 overall sort of workings of the channel.
17 12652 They didn't have control over
18 producing it or directing it. They would be let on
19 camera, for example. A lot of community groups don't
20 even use the TV channel any more. That's been
21 documented amongst many commissions, television reviews
22 and also by independent investigators.
23 12653 The community groups are turned off.
24 They know that it's a waste of time. They are going to
25 go down to the community station. They are going to
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2666
1 get, you know, the same old sort of talk. It's not
2 going to be their program.
3 12654 When all is said and done, where does
4 the credit go? It goes to the cable operator who is
5 providing this great opportunity for all these
6 community groups. That's not where the recognition
7 should go, I don't think. I don't think it should be
8 owned by the cable operator. I don't understand why it
9 still is.
10 12655 COMMISSIONER CARDOZO: So you would
11 want a community channel that is not owned by the cable
12 operator, but owned by some kind of community-based,
13 not-for-profit entity.
14 12656 MR. BAINES: Yes. Well, I think in
15 Quebec, there's sort of a co-licence type of thing
16 where the licence is in the community's name. It's not
17 in the cable operator's. There wasn't much information
18 about that in the readings I did, but you know, yes,
19 definitely, that's the distinction. The licence is not
20 in the name of the cable operator. It's in the name of
21 a community group, but it's democratically structured.
22 12657 COMMISSIONER CARDOZO: One of the
23 advantages, I suppose, of having the community channel
24 run by the cable company is that you have got a certain
25 infrastructure there. They are covering a certain
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2667
1 amount of the costs in terms of the studio, the
2 equipment and they usually have one producer, staff
3 producer -- maybe more, but usually one or two people
4 on staff.
5 12658 I have done some community
6 programming myself and there were often up to about ten
7 volunteers who worked in various capacities around the
8 show. Do you see that as being valuable in at least
9 there is that infrastructure there for it to happen and
10 the volunteers and community groups?
11 12659 MR. BAINES: Having the technical
12 infrastructure is great. The station that I worked at
13 was very sort of high tech and looking better every
14 day. There was a problem with that, but I won't touch
15 that.
16 12660 I think it's the structure of the
17 organization which is most important where decisions
18 are made by, you know, the PR people and the managers
19 and they want a certain look and they want a certain
20 feel for the show. I mean, you don't have to be a real
21 good media critic or media analyst to know how
22 decisions are made and how gatekeepers work and how
23 topics are selected and how, you know, it all works.
24 12661 The same structure is present in the
25 community channel and the sorts of outcomes will
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2668
1 result.
2 12662 COMMISSIONER CARDOZO: Certainly I
3 think the idea of the community channel was to have
4 less gatekeeping and more access.
5 12663 MR. BAINES: Yes. Again, with
6 managers and producers deciding what goes on. You
7 know, alternative voices aren't welcomed. It's clear.
8 That's why they are not used.
9 12664 I mean I read through all the public
10 submissions that I could. Local television, you know,
11 like commercial stations out west and out east, were
12 mentioned for doing good jobs, you know. People were
13 saying that they were doing great jobs. No one
14 mentioned the community channels. Nobody said "Oh, the
15 community channel job did a real good job of this".
16 12665 No one watches the community channel
17 because it's the same format, the same idea as the
18 local channel does, but doesn't look as good and it's
19 not as up to date. I mean it's trying to be something
20 that it was never intended to be, in my opinion. It's
21 trying to copy local television.
22 12666 COMMISSIONER CARDOZO: On the issue
23 of the look and the feel, is there a valid argument
24 that when there's so much competition on the screen,
25 and most people have remote control sitting in their
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2669
1 hand --
2 12667 MR. BAINES: No, I don't buy that.
3 12668 COMMISSIONER CARDOZO: You have about
4 three or four seconds to capture the viewer as they are
5 flicking by your channel.
6 12669 MR. BAINES: Yes.
7 12670 COMMISSIONER CARDOZO: Does it not
8 need to have a certain look?
9 12671 MR. BAINES: It does, but the higher
10 tech it gets, the less accessible it becomes. The
11 average person can't work an avid system and all the
12 technical bells and whistles that television has going.
13 12672 Do you want to keep that accessible?
14 You have got to have lots of training, which the
15 station I worked at didn't, or you got to have -- you
16 know, television doesn't take a lot of know-how to
17 produce basically.
18 12673 The station I worked at this summer
19 was very low budget and low tech, but if you assume
20 that all people want to see is sort of bells and
21 whistles and celebrities, I think you're wrong. We had
22 a whole bunch of channels. People do watch the
23 channel, not because of its look but because they know
24 the people that are on TV. They can relate to the
25 issues.
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2670
1 12674 COMMISSIONER CARDOZO: Right.
2 12675 MR. BAINES: They feel a sense of
3 ownership and power and involvement with the television
4 channel. That's why they watch. It's not the look of
5 the TV. As long as they can hear it and recognize
6 what's going on, that's what's important. I think that
7 kind of value shift has to take place on what is good
8 TV.
9 12676 The station I worked at was putting a
10 lot of resources, again into its look. Meanwhile, the
11 principles of the station were being undermined in
12 terms of access and copying and other types of formats.
13 12677 COMMISSIONER CARDOZO: You talked
14 about the show on Rogers in paragraph 19, "Plugged In".
15 You say:
16 "The format of the show strips
17 away creativity and the story
18 length makes covering complex
19 and anti-established ideas
20 pointless because they can't be
21 effective."
22 12678 Can you give us some more information
23 on that show and what you thought, sir, about it?
24 12679 MR. BAINES: Well, I mean I know
25 about concision. Right? It's a nice word to use. You
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2671
1 can't talk to people. If you have only got five or ten
2 minutes to do something, to talk about something, you
3 really can't go beyond the norm, right?
4 12680 What you are trying to do, like I was
5 trying to do today, is break out of some boxes. You
6 can't do that in five minutes. If you want to do a
7 story about a shopping mall going up on the outskirts
8 of town, you really can't get to the issues of, you
9 know, proper planning and transportation and access to
10 resources and, you know, use of farmland and the
11 highways involved. You really can't look at an issue
12 such as that, for example, in five or ten minutes and
13 do a balanced story or even try to seek out an
14 alternative opinion.
15 0930
16 12681 So I think the format and the use of
17 concision is used in all television. That was one of
18 the strengths or ideals of the community channel which,
19 you know, these alternative voices could be heard
20 because they weren't constricted by commercial
21 interest. You know you are not going to upset any
22 advertisers; or you have only got to speak between
23 commercials. That was the beauty of it.
24 12682 The magazine-type format that Plugged
25 In has chosen, it is, again, it is what is going on in
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1 the local communities, like, you don't get any critical
2 voice. It doesn't fit with, you know, the attitude of
3 the hosts or the look of the show or what it is
4 following.
5 12683 COMMISSIONER CARDOZO: So you prefer
6 to see community channel documentaries type of thing?
7 12684 MR. BAINES: Whatever the community
8 wanted to produce. If somebody -- you know, yeah, like
9 a space; like a program or -- how many submissions did
10 I read where independent producers were starving for
11 access to the airways? There is so much talent out
12 there, but no one is playing their stuff.
13 12685 So, I mean, sure, like a program -- I
14 mean the cable operator could offer the public more
15 space on the community channel. But, again, it is not
16 what goes on on TV; it's the relationship of producers
17 having to go through a corporation to get their stuff
18 on the air, especially at a community channel. I mean
19 the community channel shouldn't be that way. I think
20 that line has to be said over and over again.
21 12686 COMMISSIONER CARDOZO: In the
22 community channels that you have been involved in, have
23 there been community oversight or advisory committees
24 of any kind, that look at the overall programming?
25 12687 MR. BAINES: Some stations, I think
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2673
1 it is very few, have community advisory boards. The
2 one I was met twice a year, and little information is
3 given. I spent a week on the phone and looking through
4 the web page of the corporation, looking for
5 information about how to get more information about how
6 these boards work or, you know, who is on them, or how
7 they decide. I couldn't find anything.
8 12688 If you are meeting twice a year, your
9 role isn't very large.
10 12689 COMMISSIONER CARDOZO: In terms of
11 running a community channel full time from beginning to
12 end, do you think there is enough voluntary willingness
13 out there to take it on and carry it through day to
14 day, or do you need some kind of at least coordination
15 by paid staff?
16 12690 MR. BAINES: I think you need paid
17 staff. You definitely need paid staff. Is that what
18 you are asking?
19 12691 COMMISSIONER CARDOZO: Yes.
20 12692 MR. BAINES: It can't all be
21 volunteer.
22 12693 COMMISSIONER CARDOZO: If it is a
23 community channel, then where would you get the
24 funding?
25 12694 MR. BAINES: Cable operators and the
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2674
1 new -- the old and the new cable operator should still
2 be paying for it because they are the ones benefiting.
3 12695 My submission, obviously, is light on
4 the actual implementation of my idea. But, you know, I
5 am not a professional.
6 12696 COMMISSIONER CARDOZO: That is fine.
7 12697 MR. BAINES: I think, first, you have
8 got to make a decision of: Are these stations going to
9 be part of the Canadian broadcasting system as they
10 were originally intended to be? If so, how will we
11 continue funding them? If that is coming out of cable
12 operators or, you know, taxes on télé-TVs or taking a
13 piece of the advertising pie, or licence money, or
14 whatever. There should be money available.
15 12698 COMMISSIONER CARDOZO: Have you
16 noticed any change in the last year, because we changed
17 the broadcast distribution rules and made it less
18 obligatory for them to have community programming?
19 Have you noticed a drop off, or an increase, or is it
20 the same?
21 12699 MR. BAINES: I noticed -- I mean, I
22 just started at the station two years ago, and I heard
23 that things were massively changing right then and
24 there. So, unfortunately, I didn't see how things used
25 to be. But I noticed -- I mean I have noticed more
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2675
1 advertising on them and I have read about a submission
2 that someone out west that their community channel was
3 totally breaking the rules and advertising well beyond
4 what it was supposed to have been. But, again, they
5 are just guidelines, right?
6 12700 COMMISSIONER CARDOZO: I won't carry
7 that discussion on further right now simply because in
8 about a year from now we will be reviewing the
9 broadcasters distribution regulations and that will be
10 the time to evaluate that in more detail. So keep
11 working on that paper of yours.
12 12701 MR. BAINES: What do you mean
13 "broadcast distribution"?
14 12702 COMMISSIONER CARDOZO: Essentially,
15 they are the rules that the cable companies and the
16 other distribution, like the non-cable distributors
17 operate under. Those rules will be coming up for
18 review in about a year from now. If you just keep
19 working on that paper and come back to us in a year, we
20 can look at that a lot more closely.
21 12703 MR. BAINES: This review is here to
22 adjust these same issues, though, right?
23 12704 COMMISSIONER CARDOZO: Perhaps a bit
24 more generally. We won't be --
25 12705 MR. BAINES: Oh, the financing.
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2676
1 12706 COMMISSIONER CARDOZO: -- changing
2 those rules at this point. They sort of go on to the
3 mix of things that we are talking about, but I think we
4 are dealing with some of -- a different set of rules.
5 We are not looking at community programming that
6 closely; but that is not to say we can't talk about it
7 and raise these issues.
8 12707 I wonder if we could go through a
9 couple of other things.
10 12708 MR. BAINES: Oh sure.
11 12709 COMMISSIONER CARDOZO: On paragraph
12 33, where you have looked at one of the paragraphs in
13 our Public Notice 1998-44, and analyzed it line by
14 line. The first is:
15 "The Commissions' goals for this
16 review of its regulatory and
17 policy framework for television
18 are straightforward -- further
19 the development of a strong and
20 viable programming industry..."
21 12710 And your comment is:
22 "[Again the problem of seeing
23 culture as an industry]"
24 12711 I see the point you are making. But
25 the flip side of it is that we do have a largely
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2677
1 private sector situation with television. You have a
2 reducing amount of public funds going into television.
3 Given that, can you allow that this is a fair issue to
4 be looking at the health of this cultural industry
5 essentially?
6 12712 MR. BAINES: I want to see the
7 industry grow just as much as anybody else, and for
8 there to be Canadian jobs and create Canadian programs.
9 But I think if you just see it as an industry, then you
10 have lost it; you have missed something. I mean
11 culture and communications isn't just about that. That
12 is where the particular vision of the community channel
13 sort of differs from the norm; and also, you know, and
14 vision television as well, where you are not just
15 selling stuff. You are not just employing people. You
16 are actually communicating and you are actually
17 producing culture out of the minds and activities of
18 Canadians.
19 12713 I didn't see that mentioned anywhere
20 in the goals of the Commission's review. I just saw
21 strengthening the industry and in my mind that is --
22 just the wording reflects --
23 12714 COMMISSIONER CARDOZO: So you would
24 have liked to see more mention about strengthening
25 culture; is that what you are saying?
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2678
1 12715 MR. BAINES: Or at least of the
2 connection between, you know, an industry that is
3 strong and viable and a culture which is going to be
4 able to survive, you know, outside influences and
5 internal struggles, yes.
6 12716 COMMISSIONER CARDOZO: The next
7 sentence -- this is our sentence:
8 "...ensure that Canadians
9 receive a wide range of
10 attractive and distinctive
11 Canadian program choices..."
12 12717 Your comment:
13 "[Again Canadians are receivers
14 of information and our
15 participation is reduced to that
16 of consumer choice]..."
17 12718 Some would argue that encouraging
18 consumer choice is a pretty good public objective in
19 itself.
20 12719 MR. BAINES: Oh sure, having choice
21 over 100 different kinds of running shoes is nice; but
22 if you can't decide what countries those kinds of
23 running shoes are made in -- the conditions those shoes
24 are made in, that is a whole different thing
25 altogether. I think that is the kind of society -- a
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1 more democratic society is a society which can choose
2 the kind of material working conditions and the kinds
3 of shoes that it wants, rather than choosing from 100
4 varieties produced by somebody else.
5 12720 Because there is a difference there,
6 you know. One is we are receiving. I am looking at
7 the language you are using in your goals and I am
8 breaking it down to sort of uncover where you guys are
9 coming from.
10 12721 COMMISSIONER CARDOZO: Okay. As I
11 say, I find this particular paragraph particularly
12 interesting and invaluable because what you have done
13 is to take it apart and --
14 12722 MR. BAINES: I wish I would have
15 written more about that. I was trying to be brief.
16 12723 COMMISSIONER CARDOZO: Certainly,
17 feel free to do more.
18 12724 MR. BAINES: I could have written a
19 book on each one -- no, I could have written a lot
20 more.
21 0940
22 12725 COMMISSIONER CARDOZO: A few more
23 questions. What are your thoughts -- you had mentioned
24 briefly about concentration of ownership or
25 consolidation of ownership.
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2680
1 12726 MR. BAINES: My thoughts?
2 12727 COMMISSIONER CARDOZO: Yes. There is
3 two sides to it. One is the side you mentioned
4 briefly, the other side is that it allows for a
5 stronger industry and, therefore, more -- I am trying
6 to interpret some of the things in light of some of the
7 issues you have raised, but it allows for more Canadian
8 content.
9 12728 MR. BAINES: What does, more
10 consolidation of ownership?
11 12729 COMMISSIONER CARDOZO: If you have
12 stronger corporations with deeper pockets, they have
13 more resources. They can share various expenses --
14 12730 MR. BAINES: Has that happened?
15 12731 COMMISSIONER CARDOZO: I am asking
16 you.
17 12732 MR. BAINES: I don't think it has
18 happened at all. I don't think there has been a
19 relation between larger corporations with more power
20 and more Canadian content or even better TV. I can go
21 on for days about that, but --
22 12733 COMMISSIONER CARDOZO: Well, go on
23 for about a minute or two.
24 12734 MR. BAINES: Well, I mean if we all
25 watched, you know, CTV night and day, I don't think
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2681
1 the -- I don't see how the public gains from that.
2 Again you are consolidating power and I mean, you know,
3 I think a society is only as democratic as its
4 institutions are and I personally don't find
5 corporations democratic, which is fine, but I think
6 there should be controls and limits and that kind of
7 thing. But if you lose those controls and limits, then
8 competition and capitalism just becomes a game in which
9 the winners keep playing and everybody else is
10 watching.
11 12735 So, you have less people whose
12 interest is important and less people who are making
13 the decisions. These people have got more resources to
14 lobby their own interest and they have also got more to
15 lose. So, they are going to fight tooth and nail so
16 they don't lose what they have got because they have
17 got more, you know.
18 12736 I mean I couldn't even finish reading
19 the submission by the Canadian Association of
20 Broadcasters. It was huge. I mean they must have had
21 a staff of about four working on that thing for about a
22 month. I mean they have more and more resources, but
23 they are using those resources for public gain. I
24 don't think it has benefitted me.
25 12737 COMMISSIONER CARDOZO: In terms of
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2682
1 this whole issue that you have talked about, the public
2 good, my sense is that one of the roles that the
3 Commission plays is to balance that private good versus
4 the public good.
5 12738 MR. BAINES: See, that's the problem,
6 right. That's the problem. You are already -- like I
7 mentioned with having the industry part of this review
8 process. You are already opening up the doors for
9 problems. The public interest should be the only
10 interest which the Commission has and that public
11 interest is the primary objective, which has to balance
12 other competing interests, one of those being
13 corporate.
14 12739 COMMISSIONER CARDOZO: But you are
15 not suggesting that we shouldn't hear from people who
16 may have private interests, such as advertisers?
17 12740 MR. BAINES: No, but I think the
18 public interest should be decided first. Right? That
19 should be the primary focus and then --
20 12741 COMMISSIONER CARDOZO: Can't we do
21 both at the same time, because it's a constant
22 balancing act.
23 12742 MR. BAINES: It's like having a round
24 table on development of a national park and everyone is
25 there, right. I mean what's the difference of having
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2683
1 that round table for a park as having a round table for
2 any other piece of land? I mean everyone's voice is
3 equal. Well, half of those voices are going to
4 individually gain financially from that. Are they
5 really thinking about the Act and what broadcasting is
6 for? No, they are not. So, I don't think they should
7 have an equal voice because they are totally looking at
8 it for personal gain.
9 12743 COMMISSIONER CARDOZO: Let me ask
10 you. You have sent a submission in based on -- how did
11 you hear about the process?
12 12744 MR. BAINES: Accidentally.
13 12745 COMMISSIONER CARDOZO: And how did
14 that accident happen?
15 12746 MR. BAINES: I am a student and I was
16 looking for a research topic and I came across the May
17 6th press release, which was buried in the CRTC home
18 page. I can't find anything on that home page. I
19 said, "Well, if I am going to do any work for school, I
20 want to make it count." Yes, I had to find it myself.
21 I don't watch much TV. The CBC had mentioned it on the
22 first day, on the 23rd, on the radio, but I haven't
23 seen anything. All throughout May and June I never
24 heard anybody mentioning it.
25 12747 COMMISSIONER CARDOZO: I guess the
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2684
1 second part of the question is the process is open
2 inasmuch as we have put a public notice out on the
3 website, so there is a certain openness to that. We
4 are not picking who the notice goes to. We haven't
5 had, as I said at the beginning, many individuals such
6 as yourself write in. A certain number have.
7 12748 Of the 287, a good proportion of them
8 are individuals, but not many of them indicated that
9 they wanted to come to the hearing, which is not
10 necessarily a cost issue because we had said we were
11 prepared to do teleconference connections and we did
12 have the round tables across the country. So, I guess
13 I am asking: Do you think in a process like this the
14 public and the average individual have enough access as
15 compared to the corporate interests?
16 12749 MR. BAINES: For this review?
17 12750 COMMISSIONER CARDOZO: Or any, yes,
18 but this review. Perhaps you are more familiar with
19 this review than any of the others that we have had.
20 12751 MR. BAINES: I think the Commission
21 should be looking solely at providing television
22 broadcasting regulations that serve the public interest
23 and to accomplish that I think you have to hear it from
24 mostly people -- people or organizations which are
25 coming from that perspective first. So, I think there
StenoTran
2685
1 is a bit of a problem of how power is distributed
2 because obviously the average person doesn't have the
3 resources of the CAB or knows about it.
4 12752 So, there is an unequal level playing
5 field to begin with and I think if you are looking at
6 public interest broadcasting, then you have to actually
7 go out and seek it because you are not going to just
8 find it by saying everyone is welcome, because who is
9 going to come is going to be the vested interest and
10 money that are going to already have their foot in the
11 door. So, that's my main point.
12 12753 The review has sort of been public.
13 I'm sad to see that 200 of the submissions weren't
14 available for people to look at unless they are in a
15 major city centre. I would have expected at least the
16 executive summaries to be scanned in on the web so at
17 least I could see where the other 200 people and
18 organizations were coming from. They were due the end
19 of June. I mean it's October now. It's only 200. I
20 mean it would take a day. So, that's quite sad.
21 12754 COMMISSIONER CARDOZO: Well, at least
22 we will have -- this is post-hearing or at least post
23 each day, but, as I understand it, the transcripts of
24 each day go on the net pretty well by the next day, so
25 everything that is getting said here is available on
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2686
1 the net --
2 12755 MR. BAINES: That's good.
3 12756 COMMISSIONER CARDOZO: -- across the
4 country and internationally.
5 12757 MR. BAINES: I enjoyed reading the
6 hearings from this summer. I read through all those,
7 the English ones.
8 12758 COMMISSIONER CARDOZO: I am glad to
9 know somebody reads these things.
10 12759 The last question. The people's
11 Charter that you have appended, could you just tell us
12 what the source of that is?
13 12760 MR. BAINES: Oh, sure. A couple of
14 years ago I went to a conference in St. Louis,
15 Missouri. It was the founding convention of the
16 Cultural Environment Movement, which is mainly --
17 12761 COMMISSIONER CARDOZO: Sorry, the
18 Cultural...?
19 12762 MR. BAINES: Cultural Environment
20 Movement. They are one of the founding organizations
21 of the Charter and I think there was a few groups that
22 were working on it.
23 12763 COMMISSIONER CARDOZO: And this
24 Charter was developed at that meeting?
25 12764 MR. BAINES: No. It's still in draft
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2687
1 formation, as far as I know, and at this convention it
2 was sort of shown to the members because the members
3 were pretty much North American groups from backgrounds
4 of legal, health, minority, every kind of sort of
5 public interest based organization you could think of
6 that were all rallying around the need for democratic,
7 diverse media, and that's why they all came together in
8 St. Louis. The organization is for that. It's a
9 coalition of groups that are focusing on media
10 democracy.
11 12765 So, the Charter was shown by these
12 members -- I'm not sure how much it was changed --
13 because the Cultural Environment Movement is one of the
14 members. So, it's a pretty interesting -- I think I
15 submitted what seems to be a short form of it in my
16 submission. I have a longer draft thing here today,
17 but there is the web thing. I gave the web address. I
18 mean I think it's a pretty interesting document. They
19 go back 40 years in human rights and the needs of that
20 kind of world.
21 12766 I think the world we are moving into
22 today is quite different and I think this Charter
23 addresses some of the concerns because again back when
24 I was at this convention in St. Louis there were so
25 many groups, be it religious, women, native, people
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2688
1 that were disabled, children, the elderly, health
2 professionals, legal experts, educators. I mean they
3 all had a beef with the media. They all had serious
4 problems with the way that their issues were being
5 portrayed or weren't being portrayed and how decisions
6 were being made and how the system works and they were
7 fed up and frustrated, so they came together.
8 0950
9 12767 I think the Charter is the result of
10 that sort of frustration, where people aren't enjoying,
11 aren't reaping the benefits of a communication system,
12 which they should be. So --
13 12768 COMMISSIONER CARDOZO: Thank you very
14 much. This is my evaluation, you can pass it on to
15 your professor: The student has shown a good
16 understanding of the subject matter, has done extensive
17 research, and has determination of his convictions.
18 12769 You can pass that on to your
19 professor, and I hope you keep in touch with us.
20 12770 MR. BAINES: Oh, I will. Thank you
21 very much.
22 12771 THE CHAIRPERSON: Thank you,
23 Mr. Baines.
24 12772 Madam Secretary, would you call the
25 next participant, please.
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2689
1 12773 MS BÉNARD: Thank you, Madam Chair.
2 12774 The next presentation will be by
3 Canadian Media Guild, and I would invite Mr. Arnold
4 Amber and Ms Kathleen Petty to please come forward.
5 PRESENTATION / PRÉSENTATION
6 12775 THE CHAIRPERSON: Good morning.
7 12776 MS PETTY: Good morning, and thank
8 you in advance for your attention. We do appreciate
9 your time today.
10 12777 We are here representing the Canadian
11 Media Guild. My name is Kathleen Petty. I work for
12 CBC "Newsworld", out of Calgary. I am suffering a
13 little jet lag today, but nothing too serious.
14 12778 I work on a program called "Dayside",
15 which is a daily program on "Newsworld", Monday through
16 Friday. I am one of many members of the Canadian Media
17 Guild at the CBC. We are -- essentially, if you turn
18 on the CBC, and obviously we hope that you do, often,
19 and view the programs that we broadcast, a member of
20 the Canadian Media Guild had a hand in that program.
21 12779 The Guild represents journalists,
22 directors, producers, researchers, hosts, like myself,
23 secretaries, business employees, the sales ad force.
24 In one way or another, we all have a hand on what you
25 see, and in some cases, two hands. We are
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1 multi-skilled. I'm sure that's a term that all of us
2 are hearing more and more of, cross-skilled, and that
3 is a reality just of clearly greater demands on all of
4 us, but the cutbacks of the CBC have contributed to
5 that as well.
6 12780 At the same time, I would hope that
7 it has strengthened us and made us better at what we
8 do, because clearly if we understand better what other
9 people have been doing all these years, and appreciate
10 their efforts, it can only improve the job we ourselves
11 do.
12 12781 The poster boy of cross-skilling, or
13 the poster man, might be Arnold Amber, so it seems like
14 a good time to turn it over to him.
15 12782 MR. AMBER: Thank you, Kathleen.
16 12783 I obviously am behind the scenes. If
17 you look at the two of us, you can figure out which one
18 we decided to put on camera and which one we decided to
19 keep in the background.
20 12784 I, for many years, was an executive
21 producer of something called TV news specials, which
22 covered conventions, politics, budgets, elections,
23 things of that sort, Pope's visits. More recently, I am
24 actually working on a project which is interesting in
25 light of this discussion, because I have been assigned
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2691
1 to a project about looking at the CBC archives in order
2 to get programming together which we can rebroadcast on
3 the CBC and equally sell both in Canada and abroad. I
4 think that is an interesting conception and an
5 interesting point that has to be made about where
6 television is going.
7 12785 I also should say that with my
8 advanced age I have had the opportunity to represent
9 the Union at other CRTC hearings before. I personally
10 welcome this initiative, because it is going to take a
11 new look at television in this changing environment.
12 We have a changing environment about how we do our work
13 at the CBC, but certainly the whole industry is
14 changing, and with the bold initiatives that this
15 particular version of the CRTC brought down about radio
16 a few months ago, it heartens us to believe that the
17 study, and the various studies that we will be doing
18 over the next months to years, will benefit us all.
19 12786 There is no doubt, in our view, that
20 the CRTC, in some fundamental decisions it makes, has
21 an incredible impact on what Canadians get to see, and
22 we hope that over the next little while here we will be
23 able to expand on the brief that we sent in to you.
24 12787 MS PETTY: Something that I would
25 like to address over here is local programming, not
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2692
1 because I do local programming, I do network
2 programming, but I live in Calgary. I'm not sure how
3 many people you hear from here come from outside the
4 Ontario area, although I'm sure there have been a few,
5 but probably not a whole bunch from Calgary, so I would
6 like to talk to you from that perspective, because I
7 was born and raised in Calgary and have worked most of
8 my professional life in Calgary and yet have the
9 opportunity, indeed the privilege, to work in network
10 television and yet be based there. Also, Mr. Baines
11 was talking about average viewers. Sometimes it's easy
12 to forget that even those of us who work in the
13 industry are also viewers, and I dare say some of us
14 are pretty average as well.
15 12788 When you take a look at the CBC, in
16 Calgary in particular, it wasn't that long ago that it
17 was the number one station in the market. People who
18 sort of have a view of Calgary, perhaps a right of
19 centre view, might find that surprising, because the
20 CBC typically is not viewed as a station that necessary
21 appeals to that kind of marketplace, but clearly what
22 really appeals to people is content, and some
23 reflection of who you are in the community, essentially
24 a mirror so that you see yourself reflected. Again, I
25 think Mr. Baines made that point very well in the
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1 previous submission.
2 12789 Right now, the CBC, after the
3 cutbacks and the process of reinventing ourselves over
4 and over again, we are fighting for third place right
5 now. We now have four stations in the market.
6 12790 What is unfortunate about that is,
7 here I am living in Calgary, proud to be living in
8 Calgary and be from Calgary, also proud to be working
9 for the CBC and a national network, yet when I meet
10 people for the first time and they don't know who I
11 am -- and gosh, that does happen, they don't know --
12 invariably in a social situation people say, "So, what
13 do you do for a living?", to which I respond, "Oh, I
14 work for the CBC". And conservatively, nine times out
15 of ten the response is, and this is a quote, "I thought
16 they shut you down." They don't even know we're there.
17 12791 The other response, if they do
18 recognize me, and I am always pleased when they do,
19 because it means they're watching, obviously, they say:
20 "Hi. Nice to meet you. I watch "Newsworld". What are
21 you doing in Calgary?" "Well, I live here." "Oh, you
22 commute." "No. I'm here all the time."
23 12792 The reason why I bring that up, the
24 reason why I think that is really important is that if
25 the CBC isn't a factor in the local community, you lose
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2694
1 the connection. Here we always talk about this
2 geographical area that we are all scattered across, and
3 how we are looking for something to bind us together.
4 It sounds so cliché, I know, but it's true, that if you
5 can't make that connection, it's just that much easier
6 to feel more and more separate all the time. The
7 irony, particularly with the CBC in Calgary, is that
8 even though people don't think we're there, when
9 there's an election, they look for us anyway. They
10 just instinctively know that we are going to cover it.
11 12793 Indeed, we have a municipal election
12 in two weeks, and we have four stations in that market.
13 The CBC will be covering all of it. The CTV affiliate
14 will. The other two will not. You will get it in the
15 newscasts essentially. And I wonder that if the CBC
16 were not covering it, whether any of them would be.
17 12794 MR. AMBER: If we go from a concept
18 of how important local television is and how important
19 CBC at local television is, let's go to the wider
20 picture, the picture that I think we are all facing in
21 the industry now, which is the 500-channel world.
22 12795 In that new world, the ability to
23 rebroadcast something, I mentioned before, and which
24 our paper talks about extensively at its start, is
25 really really important.
StenoTran
2695
1 1000
2 12796 It would seem to me as a Canadian, as
3 a voluntary Canadian, as someone who moved away but
4 chose to move back, that the issue about rebroadcast is
5 incredibly important. I think, as we have more and
6 more channels coming into this country from abroad and
7 programming from abroad to fill up those 500 channels,
8 that Canadian television -- which is the desire of the
9 CRTC to be improved both in quantity and quality.
10 12797 To me the issue is Canadian TV is
11 indispensable. It is not just an issue of it is a
12 luxury or it is something nice to aim for; but it is
13 indispensable.
14 12798 One of the things that we would like
15 to direct your attention to that exists in our paper --
16 but I will elucidate on it a bit -- is that we actually
17 said that the broadcaster CBC and private broadcasters
18 should have access to public funding which now exists
19 basically through independent producers.
20 12799 As you all know, independent
21 producers who apply for the money generally get to keep
22 the copyright, get to have the ownership of the
23 program, get the ability to resell broadcast rights,
24 both in this country and in other countries.
25 12800 I have sat at meetings where members
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2696
1 of the private television industry have said: "I've
2 got a great success."
3 12801 I remember at the height of the
4 success of "ENG", the programming director at CTV said:
5 "Do you realize that every time we put that to air, it
6 costs us $30,000 of red ink?" He said: "The more we
7 run, the deeper the red ink goes."
8 12802 It is because you cannot generate
9 enough money in advertising on your first play on your
10 first network to get that money back. So selling it
11 around the world is important. Selling it again to
12 specialty channels in Canada is important.
13 12803 I don't often take the claims of the
14 private broadcasters at face value. However, I know
15 enough about the way television is made and the way it
16 is financed to know that they do have a legitimate
17 concern about the costs that would be involved in
18 increasing both the quantity and quality of the
19 categories of broadcasting we are interested in here:
20 music, drama, variety.
21 12804 Therefore, we think that there is a
22 way to share the public money. We think of it in two
23 ways. At the moment, there is about $200 million a
24 year that comes out the Cable Fund. We believe that
25 about 10 percent to 15 percent of that, on a trial
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1 basis, should be allotted to both the private and
2 public broadcaster to let them generate work.
3 12805 Most of that work will end up with
4 the independent producers. As we say in our paper,
5 nobody in Canada, with the exception of SRC in
6 Montreal, has any ability right now to do in-house
7 production. All the production will still come from
8 private producers.
9 12806 The issue of how the deals are
10 constructed with independent producers will be
11 different. The broadcaster will get to keep title,
12 will get to keep the ability to sell that product
13 abroad.
14 12807 We think that this is essential, and
15 we would like to see that change made.
16 12808 We also offered up another idea --
17 12809 And by the way, our paper is full of
18 ideas. We thought that the exercise at this stage was
19 to present some ideas. We hold no belief that God came
20 down and tapped us on the forehead and said: "This is
21 the way to save Canadian television."
22 12810 But we think there are some
23 interesting ideas here.
24 12811 The other idea was to say: Canadian
25 television networks and stations now pump out about
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2698
1 $350 million a year in buying foreign product. If
2 there were some sort of -- I am going to use the word
3 levy. If there were some sort of assessment, at maybe
4 3 percent, this would result in approximately another
5 $10 million that could be added to a fund which would
6 go to the broadcasters, which would allow them, we
7 think, to increase the amount of programming and the
8 quality of it.
9 12812 In the new 500-channel universe,
10 there is no doubt that over-the-air broadcasters,
11 whether they be CBC, CTV, Global, are under an
12 incredible amount of pressure. You know this. You are
13 in the business.
14 12813 Every time a specialty channel comes
15 on the air and takes a smidgen of an audience away from
16 the over-the-air broadcasters, it doesn't seem like
17 much; but when you have a bunch of smidgens taken away
18 from you, you have declining audiences for over-the-air
19 broadcasters.
20 12814 Despite my normal reticence or belief
21 in some of their claims, maybe this is a time, in
22 looking to the future in the new century, to draw up a
23 new formula where both the private broadcasters can
24 prosper and the CBC can continue as a national public
25 broadcaster to turn out high quality content for you.
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1 12815 MS PETTY: Within the context of the
2 content, the CRTC -- I am going to inform you of a poll
3 that you had commissioned, but I will remind you of it
4 again -- commissioned a poll that showed that 79
5 percent of Canadians named an American program as their
6 favourite program.
7 12816 I don't know that we even needed a
8 poll to find that out. I am sure we all could have
9 probably guessed that, or at least come close. It is
10 not surprising to anyone, although it should be
11 profoundly disappointing. I know it is to me.
12 12817 Yet at the same time I thought there
13 was encouragement in the poll that you had
14 commissioned. It also showed that two-thirds of
15 Canadians want to see more programming that reflects
16 them; programs with Canadian stories.
17 12818 I would suggest that it is human
18 nature to want to see more about yourself. It is who
19 we are.
20 12819 Michael MacMillan, head of Alliance
21 Atlantis, spoke before you, and I thought he said it
22 better than I have heard anyone say it so far -- and it
23 is so deceptively simple. The first step to having
24 Canadians watch Canadian programs is to give them the
25 chance to see them.
StenoTran
2700
1 12820 MS BÉNARD: Ms Petty, you have gone
2 over your ten minutes by quite a few minutes. Could
3 you summarize your comments, please.
4 12821 MS PETTY: Actually, I was just
5 there.
6 12822 Finally, there is something to be
7 said for the law of averages. I don't think that is
8 physics, but it seems like a pretty good law to me.
9 The more you do, the greater the chance of having
10 better programs on the air.
11 12823 THE CHAIRPERSON: Thank you, Ms Petty
12 and Mr. Amber.
13 12824 Commissioner Pennefather, please.
14 12825 COMMISSIONER PENNEFATHER: Good
15 morning, and thank you for coming from Calgary.
16 12826 Did you come from Calgary too, Ms
17 Petty?
18 12827 MS PETTY: I only came from Toronto.
19 12828 MR. AMBER: It was easy getting up at
20 5 o'clock in the morning; no problem at all.
21 12829 COMMISSIONER PENNEFATHER: I want to
22 reassure you that in fact public consultations did take
23 place across the country. We were in Calgary and did
24 hear from a number of people from the community there.
25 12830 MS PETTY: I meant travelling in the
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2701
1 other direction. I was not suggesting that you have
2 not talked to people across the country.
3 12831 COMMISSIONER PENNEFATHER: I
4 understand that.
5 12832 As we discussed earlier this morning,
6 the process is one which we hope more and more will
7 allow more participation in a constructive way and in a
8 way that is on the public record. I will come back to
9 that in a moment regarding your comments on local
10 programming.
11 12833 I would like to go through some of
12 the things that you have said in your oral presentation
13 which have answered or triggered new questions
14 vis-à-vis your written submission.
15 12834 We will jump around a little bit. So
16 let's go with this as best we can.
17 12835 First, the role of the CBC; and let's
18 talk about local programming as well.
19 12836 Mr. Baines said to us this morning
20 that television should be more about allowing Canadians
21 to be speakers rather than consumers. What is your
22 reaction to that comment as regards the CBC?
23 12837 MS PETTY: I happen to think that he
24 is right.
25 12838 COMMISSIONER PENNEFATHER: How would
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2702
1 that happen?
2 12839 MS PETTY: Actually, I think it is
3 happening, particularly on "Newsworld". I think
4 "Newsworld" is a terrific vehicle for that kind of
5 thing.
6 12840 Do I think we can do a better job?
7 Yes. But the job we are doing is this: CBC
8 "Newsworld" has a fair number of open line programs,
9 first of all, from "Benmurghi Live" to "Ann Petrie's
10 Talk TV", to "Patrick Conlon on the Line".
11 12841 We are also very aggressively using
12 new medium; by that, I am talking about e-mail, for
13 example, Internet.
14 12842 I know on my program "Dayside", we do
15 something we call "Connections" every day, which has us
16 go out into the streets in different cities across the
17 country. We plan all this ahead of time so that we can
18 make sure we get from end to the other, as well as into
19 the north, and ask what we hope are questions about
20 issues that people are talking about -- since you don't
21 always want to be dictating what you think people are
22 talking about.
23 12843 We also have a segment where we read
24 e-mail from viewers who write in, and also play back
25 voicemail.
StenoTran
2703
1 12844 Could we do more? Clearly. I enjoy
2 open line programs, not as some sort of exercise in
3 polling -- because they don't do that -- but as an
4 exercise in communication.
5 12845 COMMISSIONER PENNEFATHER: We are
6 talking about open line or talk-TV, the kinds of shows
7 that can edge toward voyeurism, the other day with a
8 representative from Trinity Television in terms of
9 realistic and meaningful participation by the community
10 in using television as a communication tool -- which is
11 a very different concept from a programming
12 perspective.
13 12846 In your community you have A Channel,
14 for example.
15 12847 MR. AMBER: Right.
16 12848 COMMISSIONER PENNEFATHER: We have
17 heard a lot of comments about programming and presence
18 in the community.
19 12849 Is that a role for CBC? Is that what
20 local programming is for CBC -- more of that kind, or
21 is it still one that is talk shows but a concept that
22 is in effect imposed by the corporation in terms of
23 what local programming should be?
24 12850 MS PETTY: I think all local
25 programming by stations, whether they be public or
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2704
1 private, are to some extent imposed. You have people
2 running stations who have very strong opinions on what
3 programs people want or need to see. And I think that
4 is a danger that all of us have to be very careful of.
5 12851 I think the way to at least
6 unmitigate that somewhat is to be in the community. I
7 think it is critical in local television. You have to
8 have some sense that they are there. It is not enough,
9 for example, that CBC in Calgary does a "Newscast",
10 because if people don't know it is there and if they
11 don't see you out in the community, they don't make
12 that connection that they are part of their community.
13 12852 It doesn't matter if you are doing
14 Calgary news. You can turn on a national newscast and
15 see Calgary news if it is interesting enough to a
16 national audience.
17 12853 I am not sure if I am exactly
18 answering your question.
19 12854 COMMISSIONER PENNEFATHER: It is a
20 long subject. I hear you saying news. So, for you,
21 local programming is news.
22 12855 MS PETTY: That is all local
23 programming essentially is. It is information
24 programming.
25 12856 They have morning shows, for example,
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2705
1 local morning shows. I can think of two of the
2 stations, two of the four; the A Channel and the WIC
3 station both do morning shows. They are sort of
4 entertainment, but essentially it is news and
5 information.
6 12857 My understanding is based on studies
7 done in the industry and the general prevailing wisdom
8 out there. We have no shortage of that on Canadian
9 television.
10 12858 I guess what you are saying is: Do
11 we have the kinds of programs that step beyond news and
12 reflect the community? I would say, as a viewer just
13 watching it, no.
14 12859 MR. AMBER: It was not always just
15 news. As you may recall, years ago every CBC local
16 station had a whole panoply of different types of
17 programming. But with the massive cutbacks, we then
18 shrunk back to where the basic service at the local
19 level is news.
20 12860 In my view, it is extremely
21 unfortunate. It is hard to keep up with changing needs
22 and demands and things you should do as a programmer.
23 I think elevating the citizenry to greater
24 participation on the air is one of those new needs and
25 desirable things to do. But after you have been
StenoTran
2706
1 slashed and cut, you go back to a basic shell. The
2 shell at the moment is news. That does not mean that
3 we should get rid of news. We should use that as a
4 base for building up more local programming.
5 12861 COMMISSIONER PENNEFATHER: As you
6 know, we will have a process to look at a number of
7 issues more in depth.
8 12862 MR. AMBER: Yes.
9 12863 COMMISSIONER PENNEFATHER: But
10 certainly in this hearing we have raised the question
11 of complementarity and the roles of the various players
12 in providing, as you said, that Canadian TV is
13 indispensable. Canadian television is the full panoply
14 of services and public and private that we have to
15 offer in this country. So it is important to get a
16 sense of how you see this mix occurring.
17 12864 You have raised it in terms of costs,
18 because vision costs. It is in that light, as I
19 understand it, that you have proposed access to public
20 funds for public and private broadcasters, which has
21 been a major discussion, and will continue to be at
22 these hearings.
23 12865 Can we look at that for a moment.
24 12866 In terms of the CBC, I was not clear
25 from your submission -- so maybe you can clarify this.
StenoTran
2707
1 It is an important point. As you know, I don't think
2 anybody here has argued against the importance of the
3 CBC, but certainly there have been various opinions
4 about even what the current access to public funding is
5 for the CBC.
6 12867 TVA, for example, suggested a gradual
7 decrease of their portion of the equity investment
8 program.
9 1015
10 12868 So, when you are saying CBC has
11 access to public funding, they already have access to
12 the equity investment program, 45 to 55 per cent of the
13 resources going to independent producers via CBC
14 broadcast licence with 50 per cent average over three
15 years being the goal.
16 12869 Are you talking about something over
17 and above that?
18 12870 MR. AMBER: What the issue is, as we
19 see it, and maybe the paper wasn't as clear upon it as
20 it should have been, was that the CBC at the moment
21 when it makes a deal with an independent producer
22 invariably does not have the rights towards
23 rebroadcast.
24 12871 When I started speaking to you today,
25 maybe I should have taken more time to do that. The
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2708
1 rebroadcast issue is a major issue. You do not make
2 back in a country with this size population the money
3 you need to cover the costs of the production.
4 12872 What we are basically saying here is
5 right now the CBC cannot have the idea about the
6 greatest drama that ever existed, the life and times of
7 the CRTC for example, and have this great script ready
8 to go. The CBC cannot apply and make that program with
9 public funding and continue to own that program.
10 12873 What would invariably happen is that
11 this program would be proposed by an independent
12 producer who would keep copyright and the ability to
13 sell it. What is happening now is there's a grey
14 market getting involved, whether it's CTV or CBC and I
15 won't go too far in this. I think some of the
16 independent producers are now being asked to make
17 agreements concerning distribution rights.
18 12874 Rather than do it behind closed doors
19 on a grey market area, our view is that the CBC in
20 order to prosper and to provide even more Canadian
21 product has to have two streams. Stream one is the one
22 you just spoke of, the traditional stream. The other
23 one is the ability to access funds so that it can
24 actually make and own a program.
25 12875 Concerning the issue of cutting back
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2709
1 on the percentage of the funds that now go to
2 productions that appear on the CBC, I don't like to use
3 a lot of figures but one I will use is that right now
4 the CBC gets 65 per cent of the fund -- you know, the
5 audience. All the money that's put into the fund, 65
6 per cent of the audience that watches those programs is
7 on the CBC, although it's approximately 50 per cent of
8 the money.
9 12876 The CBC is very successful in taking
10 money, using money from the fund, working with
11 independent producers and actually producing high
12 quality program which people watch. They certainly
13 watch more on the CBC than they are on the others.
14 12877 I think the reason why the CBC should
15 not be cut away from this percentage of public funding
16 is two reasons.
17 12878 One of them is that traditionally,
18 and every record, every statistic proves it, the only
19 network that has always wanted to do Canadian
20 programming is the CBC. That's reason number one.
21 12879 Reason number two is there was an
22 incredible reason why in the early eighties, and you go
23 right back to Francis Fox when he was the Minister, why
24 public funding was basically taken away from the CBC
25 and it was set up in these fund ways to encourage
StenoTran
2710
1 independent production.
2 12880 One of them was an industrial
3 strategy. We wanted to really develop a movie and
4 television industry in this country. We have done
5 that.
6 12881 It seems to me that the issue you are
7 facing now is increasing the quality and quantity of
8 Canadian content. Part of that is, and that's why we
9 say that the CBC is the foundation of the Canadian
10 television system, is because you have a willing
11 partner here to produce more and better Canadian
12 television programming.
13 12882 We have the record. We have had some
14 very, very fine programming in the past. I think the
15 issue we are looking at today is the CRTC and people in
16 the business. It would not even necessarily be on the
17 table if years ago a CRTC from many years ago would
18 have granted the CBC the right to create a CBC2 akin to
19 the BBC2 in Britain.
20 12883 We need more outlet for the one
21 organization in this country on the national level that
22 wants to make Canadian programming, so when somebody
23 comes to you and says "Hey, let's cut away more of that
24 money so they can do less", it doesn't sound like a
25 great idea.
StenoTran
2711
1 12884 The great idea, in my view, would be
2 to continue on the idea that the CBC is the foundation
3 and cannot be as -- we got very upset about the word
4 complementary service.
5 12885 The reason that we wrote a lot about
6 the CBC in this brief, because we know the CBC's issue
7 is coming up later, is we don't want the doors closed
8 so that rulings of the CRTC in this preliminary stage
9 so restrict what the CBC can do that when we get around
10 to discussing what the CBC should do, it's already
11 focused and channelled in a way that doesn't make any
12 sense.
13 12886 COMMISSIONER PENNEFATHER: I
14 understand. You have raised a couple of very important
15 points, this business of the rights and ownership. As
16 I understand it then, your proposal is for access to
17 public funds over and above what the CBC currently has,
18 and still however the ownership remains in the hands of
19 the independent producer. You also would have your 10
20 to 15 per cent new envelope include the CBC as well.
21 You said public --
22 12887 MR. AMBER: Yes. We would be one of
23 the players. I'm not suggesting that this is money
24 just for the CBC. No. It's for everybody because I
25 think that the issue is across the board.
StenoTran
2712
1 12888 COMMISSIONER PENNEFATHER: But
2 looking at across the board, looking at the system as a
3 whole and looking at your point that broadcasters,
4 private broadcasters, should have access to production
5 funds, why? How is this going to help Canadian
6 television and Canadian programming?
7 12889 Here I am speaking about the system
8 as a whole. It's a delicate balancing act. Everybody
9 said that. It's important to many that the independent
10 production sector remain vibrant. We have come a long
11 way.
12 12890 To many this is a very serious
13 threat, an evolution which some have said like in the
14 United States, would end up in the demise of the
15 independent production sector and, therefore, greatly
16 diminish the diversity of programming in this country.
17 12891 From that sense, it's an important
18 step which can lead in various directions. Speaking
19 now about not just the public broadcaster, but
20 certainly the private sector and access to public
21 funding, in a way, if I understood it, means ownership
22 of property by the broadcaster, not to say it's ideas
23 on the table. As you said, great ideas. That's what
24 we are here for.
25 12892 Don't you have some concerns in this
StenoTran
2713
1 regard?
2 12893 MR. AMBER: Yes, I have.
3 12894 COMMISSIONER PENNEFATHER: If I could
4 ask you as well in answering that, if you have
5 concerns, what kind of safeguards would you propose be
6 put in place to ensure that there is not abuse in
7 preferential treatment?
8 12895 MR. AMBER: Okay. The history is so
9 bad that I could see why people would be reluctant to
10 do anything more for the private broadcasters. I don't
11 want to name names, but you can go back and look at
12 very many of the applications for new networks and new
13 stations in this country and then trace what they
14 promised to do what they have done.
15 12896 The figures and facts that we know
16 after they have been in business for a while are clear
17 cut. They don't generally do what they say they are
18 going to do. That is why in our proposal we said a
19 small amount of money. We are saying to you do not
20 change the way the funds are administered now. Try a
21 little bit of extra.
22 12897 One of the proposals would take a
23 little bit off the fund from the independent producers
24 and give it to the broadcasters. The second one would
25 actually generate new money coming from the
StenoTran
2714
1 broadcasters to pay for Canadian content.
2 12898 In both cases, my answer to you is
3 this is an experiment. At a certain point I think the
4 CRTC is right in saying to the private broadcasters
5 "This time will you kindly live up to what you promised
6 to do".
7 12899 I am going to obviously be very
8 general because my union cannot handle any libel suits.
9 In a general sense, it is time to make them live up to
10 something. They have no problem about coming here and
11 pleading their own case. I won't do it for them.
12 12900 I do understand though, having been
13 in this business for 30 years, that at a certain point
14 on this particular issue, I know that they have to have
15 the ability to sell these programs.
16 12901 I happened to travel a lot in Europe
17 and in Africa recently. I see Canadian programs all
18 over the place. In fact, one of the largest buyers of
19 Canadian programs is South African Broadcasting
20 Corporation. I work with them. I could tell you that
21 they buy these things and they spend good hard currency
22 to buy them.
23 12902 The broadcasters claim they need the
24 ability to share in some of that money in order to keep
25 going the way they are going. When you look at their
StenoTran
2715
1 profit sheets, you don't believe that, but there is no
2 doubt that over-the-air broadcasting is considered by
3 everyone to be the mature part of the industry. The
4 newer parts of the industry are the cable, the
5 specialty channels and new media type of ventures.
6 12903 When you get to the point where you
7 have in fact a mature part of the industry, it could
8 very well be this time that they are not selling us a
9 story. Our proposal is straightforward. It's try it
10 on an experiment and watch what they do.
11 12904 COMMISSIONER PENNEFATHER: So in
12 other words, you are looking at current requirements,
13 the current regulatory framework which have in specific
14 cases expenditure and exhibition requirements over and
15 above the 60/50. You agree then that there should be
16 both expenditure and exhibition requirements on the
17 private conventional broadcasters.
18 12905 MR. AMBER: Yes, and we think that
19 the amount of Canadian content should be increased.
20 12906 COMMISSIONER PENNEFATHER: What do
21 you mean by increased?
22 12907 MR. AMBER: Well, the percentage of
23 Canadian programming that's on the private broadcasting
24 day, 24 hours.
25 12908 COMMISSIONER PENNEFATHER: Are you
StenoTran
2716
1 talking about a formula like 10/10/10 then?
2 12909 MR. AMBER: We suggested we even be
3 more explicit because when you lump all the Canadian
4 programming together, then you will get more hockey
5 games and football games.
6 12910 If the area of concern on the CRTC's
7 part is about drama and music and variety and
8 documentaries, long-form documentaries, that is where
9 the content should also increase.
10 12911 We have a four point proposal. One
11 of them is generally increase the amount. Secondly is
12 stipulate these 7, 8 and 9 as being special. One is
13 make it more in prime time, that prime time should run
14 seven to eleven. Perhaps the most controversial thing
15 we said was number four about newscasts.
16 12912 As somebody who has been in the news
17 business, I find it very aggravating that Canadian
18 broadcasters not only bring in little items of American
19 and put them on the newscasts.
20 12913 Kathleen and I both -- you know, you
21 feel it when you watch some of the private broadcasters
22 and they show you, you know, situations that exist in
23 the United States that are all about American culture
24 and the American way of life.
25 12914 Also, as we put in our paper about
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2717
1 the odd-ball stories that are used in Canada, they do
2 that because it's cheaper to do that than obviously go
3 out and get your own Canadian news. We think all these
4 four things should be dealt with in that way.
5 12915 MS PETTY: I was just going to add as
6 an example of that, we keep hearing about how Canadians
7 are afraid of increasing violence in our society. I
8 have no empirical data to back this up. It's just an
9 observation.
10 12916 We have study after study telling us
11 that we don't have a more violent society, but I would
12 suggest that the U.S. does. Because we do get so much
13 foreign news and local programming from U.S. sources,
14 and I used to work in private television, in private
15 television news, so I know where I got my material
16 from.
17 12917 You can't help but just sort of
18 absorb that and absorb that into your own sense of that
19 being the reality that you live in in this country just
20 because television by its very nature can be so
21 pervasive.
22 12918 COMMISSIONER PENNEFATHER: Yes. I
23 appreciate that. Thank you for that point and drawing
24 my attention again to what you suggest, that we serve
25 Canadian content with a little more punch. These four
StenoTran
2718
1 points then are elaborating on that.
2 12919 Also, you are saying more of Canada
3 in Canadian content, which is your point about news.
4 Do you care to comment on this business of what defines
5 a Canadian program, the Canadianness, because you do
6 propose giving credit for that without a specific list
7 of credit, although we have had several suggestions.
8 12920 The Canadianness is what in your
9 opinion?
10 12921 MS PETTY: Well, to put it very
11 simply, I think it's something that you can describe
12 it, although I think you know it instinctively. It's
13 recognizing, I think, yourself.
14 12922 I know I have said this before, but I
15 will just re-emphasize it. I think it's the ability to
16 turn on the television and recognize your own
17 experiences, to not just be an observer or a
18 dispassionate observer, but to watch a program, I
19 guess, with empathy, with a recognition that if you are
20 not represented, somebody you know is represented
21 there. Those are experiences that ring true for you
22 and perhaps provide clarity for you.
23 12923 You see the communities in which you
24 live or in which friends of yours live, for example.
25 You see the people that you see on the streets. You
StenoTran
2719
1 see the situations and dilemmas that you deal with on a
2 daily basis. You see Canadian licence plates and
3 Canadian landscapes.
4 12924 COMMISSIONER PENNEFATHER: I can't
5 resist asking this question then. You have raised the
6 500 channel world, you have raised the importance of
7 rebroadcast in terms of financially if not culturally.
8 How are such programs which are so localized, if I may
9 put it that way, in nature going to reach and have
10 impact on an international scale?
11 12925 MS PETTY: That's the problem right
12 there, to view it as being localized.
13 12926 In the United States, if you are
14 living in Kansas and you are watching a sitcom that is
15 based in Los Angeles, you don't go "Ha, another one of
16 those local L.A. shows". You don't.
17 1030
18 12927 We, as Canadians, do this all the
19 time; and that is something that I think we need to get
20 away from.
21 12928 In other words, if I am sitting in
22 Calgary and there is a program taking place in Toronto,
23 the temptation -- and I think just because there is not
24 enough content on the air -- is, "Oh, it's another
25 Toronto program." Sitting in Toronto -- and I don't
StenoTran
2720
1 want to presume anything on behalf of Torontonians --
2 but I would assume the same would hold true if they saw
3 a program out of Calgary, not because they can't be
4 interested; it is just because it isn't what we are
5 used to seeing. I think we have to start getting used
6 to seeing it.
7 12929 So that, you know, all these things
8 aren't odd-ball scenarios. They are a part of our
9 consciousness. They are a part of our viewing habits
10 and not what we are surprised to see but, rather, what
11 we expect to see.
12 12930 MR. AMBER: If I may just add
13 something to that? When we started today, our paper is
14 all about the future, it means, I think, readdressing
15 some of the decisions that have been made in the past.
16 And I noted that in the early 1980s from the Francis
17 Fox era, we went into this idea of creating this
18 industry.
19 12931 We think that the Canadian content
20 quotas as they are set now are still about the
21 industrial quota and we think -- and our proposal -- if
22 the other proposals that I discussed didn't come from
23 the mouth of God, these didn't even come from a little
24 angel because we are not sure that our three ways of
25 dealing with it are necessarily even close to what they
StenoTran
2721
1 should be.
2 12932 What we were trying to do is put in a
3 model that would basically say to the CRTC, "Please
4 consider getting away from the industrial approach," so
5 that if there were, you know, you know what the quota
6 figures are and how it all works. Basically, if there
7 are enough Canadians working on something, it could be
8 about Timbuktu, or it could be about outerspace, and
9 generally they are, and it could definitely never show
10 anything about Canada, so Vancouver looks like, you
11 name the city in the states. We all know this, right?
12 12933 We have to break away from that. We
13 are not appearing before the Trade and Commerce
14 Department. We are not appearing before Mr. Martin's
15 Finance Department. This is about CRTC. This is about
16 culture. This is about Canadian identity.
17 12934 It seems to us that what served us
18 well in the 1980s, and I think partly in the beginning
19 of the 1990s but I think is out of place now, is what
20 we want. Because we don't want another program on the
21 air that was happily made in Winnipeg and is employing
22 people and is letting people apply their trade in
23 Winnipeg rather than in L.A. or New York. That is all
24 good.
25 12935 What we are trying to do here is
StenoTran
2722
1 something more than that. We are not worried about the
2 way the industry works; and we are not worried in this
3 particular case about its benefit to the Canadian
4 economy. We are worried about culture and Canadian
5 identity and so we are saying to you here is one
6 formula. Everybody gets 50 per cent, if they make it
7 by the regular standards, it is made in Canada. It
8 could be about anything. And then we say you get
9 another 25 per cent if it actually could be even be
10 made outside of Canada but it uniquely addresses itself
11 to a portion of the increasingly diverse Canadian
12 population.
13 12936 So the examples we have put in is if
14 somebody went and took a look at Ukraine, another
15 country I have recently visited, there are so many
16 people of Ukrainian origin in Canada, it would
17 obviously qualify for another 25 per cent. The other
18 one was about Jamaica, Mr. Manley in Jamaica. There
19 are a lot of Jamaicans who have come to this country
20 and people of Jamaican origin. That is another way of
21 evaluating things.
22 12937 Finally, the play, the variety
23 program that is distinctly Canadian, it would get the
24 other 25 per cent.
25 12938 This formula is as good as you want
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2723
1 to make it and it is as bad as you want to make it.
2 The idea isn't that this formula is the answer; the
3 idea is that the question about the formula and the
4 discussion about breaking away from the industrial base
5 is at the heart of what we think we have to get to in
6 this country.
7 12939 COMMISSIONER PENNEFATHER: I realize
8 it is at the heart, and I accept that. Obviously, we
9 are all looking for solutions to not only make it
10 better but to make sure that in going forward we don't
11 throw out the success we have managed to achieve.
12 12940 Just so I am clear, I believe all
13 your remarks are addressed to the English-language
14 market as opposed to the French-language market; or
15 were you addressing both?
16 12941 MR. AMBER: In some minor cases there
17 is overlap. But, to tell you the truth, I have learned
18 as I certainly have gotten older, not when I was young,
19 that it is best to talk about what you really know
20 about. I personally cannot -- do not know enough about
21 the other area to comment on it.
22 12942 COMMISSIONER PENNEFATHER: With all
23 of that, there is a sentence here that I find
24 surprising but I am sure I am taking it out of context
25 when you say about the CBC, on page 7:
StenoTran
2724
1 "...the more it pursues
2 Canadianization, the more it
3 jeopardizes its own long-term
4 survival."
5 12943 It would seem to be a troubling
6 comment.
7 12944 MR. AMBER: The context it is in is
8 about this idea of having the ability to rebroadcast.
9 It is simply -- it is in the section about
10 rebroadcasting and the necessity of being able to own
11 and sell things. It isn't in the wider -- I see your
12 point.
13 12945 COMMISSIONER PENNEFATHER: I
14 understand.
15 12946 MR. AMBER: As a matter of fact, I
16 wish you had helped us edit this because we would have
17 redone it. I told you there is no God or angels on our
18 side. So that is probably not very well done.
19 12947 But it was slowly in the idea that
20 you can keep doing the Canadian programs, but if you --
21 if each one of them is costing you a heck of a lot of
22 money -- I could tell you, for example, that we used to
23 have a big catalogue that went with those folks that
24 went across to the South African Broadcasting
25 Corporation, and every other corporation around the
StenoTran
2725
1 world that bought our stuff. The catalogue keeps
2 getting less and less and less to the point where I
3 don't think even CBC has a catalogue this year that has
4 a lot of CBC product in it because all we have left to
5 sell are things that people will dig out of the
6 archives. We are not making stuff in 7, 8 and 9 to
7 sell abroad.
8 12948 COMMISSIONER PENNEFATHER: What is
9 left of the archives.
10 12949 MR. AMBER: Yes, what is left of the
11 archives.
12 12950 COMMISSIONER PENNEFATHER: I believe
13 some of it disappeared, unfortunately.
14 12951 You have raised a point which I think
15 we have discussed with the corporation and others, and
16 it is of great concern and an issue which must be
17 discussed at length, and I understand it is being done
18 in terms of what has been called the demands of the CBC
19 vis-à-vis asking for more rights than independent
20 producers would care to relinquish to their product.
21 12952 After all, as Salter Street Films put
22 it to us and others, the ownership of your product, of
23 your creation, is key to your future as an independent
24 producer; and that is particularly true in the new
25 universe you mentioned at the very beginning of your
StenoTran
2726
1 remarks. Copyright and ownership of your property is
2 key to the survival of your ability to continue to
3 create.
4 12953 So it is a dilemma which is part and
5 parcel of the discussions here, but I am sure you
6 recognize that it is not a one-way street; that the
7 production community is also very concerned,
8 particularly as the information world evolves, that
9 this is the key to the future, and I would say it is
10 the key to the future of Canadian content.
11 12954 So, in looking at this from one
12 perspective, I understand your point, but from a broad
13 perspective, it would seem important to balance the
14 needs of those who are doing the creating as well in
15 terms of the access to their product and the revenue
16 they will obtain for their product from all these
17 different distribution media.
18 12955 MR. AMBER: That is why, by any sense
19 of any judgment, our paper is not radical. It is very
20 moderate.
21 12956 The two proposals are not to
22 liquidate or change the basic rules of the funding. It
23 just says in one proposal as a suggestion is to take 10
24 per cent off. It would then mean that 90 per cent of
25 the present fund would still be controlled by the
StenoTran
2727
1 independent producers, just as it is today. So what
2 you are saying is just take a little bit off to give
3 some relief to the broadcasters.
4 12957 The other one looks to the point of
5 all these profits that broadcasters seemingly make by
6 buying American programming, particularly American
7 programming, although from other countries as well, and
8 saying, "If you are spending $100 million on buying
9 American programming, put some money in which will be
10 used by you and other private broadcasters and the
11 public broadcasters to make programs which they can
12 own."
13 12958 So, on the total scheme of this, if
14 we are knocking -- if we do this on an experimental
15 basis, 10 per cent maybe, I don't think that this is
16 going to drive the creative juices, you know, to at
17 least make the creative juices end. I think just
18 another way of using some of this public money.
19 12959 COMMISSIONER PENNEFATHER: I
20 appreciate your bringing those ideas. We have tabled
21 them with some of the other intervenors and had various
22 responses which I am sure you will see.
23 12960 MR. AMBER: Yes.
24 12961 COMMISSIONER PENNEFATHER: I think,
25 too, it is important to note that in addition to these
StenoTran
2728
1 two proposals you are, I think, concerned -- and what
2 you are saying is now happening is that the corporation
3 is also looking for more rights for rebroadcast in
4 programs they are currently funding through the
5 existing regime.
6 12962 With that --
7 12963 MR. AMBER: Just so you know, I am
8 not speaking for the corporation on that.
9 12964 COMMISSIONER PENNEFATHER: I
10 understand.
11 12965 MR. AMBER: But as you wander the
12 halls, you hear things.
13 12966 COMMISSIONER PENNEFATHER: Yes, I
14 believe there is a gentleman who built a whole
15 television program around that, called the "Newsroom".
16 As you say, we should talk about what we know best.
17 12967 All right. Thank you very much.
18 Thank you, Madam Chair, that completes my questions.
19 12968 THE CHAIRPERSON: Commissioner
20 Cardozo.
21 12969 COMMISSIONER CARDOZO: Can I just
22 clarify, your membership is from public broadcasters as
23 well as private?
24 12970 MR. AMBER: The Canadian Media Guild
25 represents employees at the Canadian Broadcasting
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2729
1 Corporation who do all these production jobs. We have
2 members that work in news agencies, the Canadian Press,
3 Agence France Presse, Reuters News Agency. But, in
4 broadcasting, we are just at the CBC, the Canadian
5 Media Guild is. We are also affiliated with something
6 called the Newspaper Guild of Canada, which does have
7 some members in the private sector. But, basically, we
8 are representing the Canadian Media Guild which is at
9 the CBC.
10 12971 COMMISSIONER CARDOZO: Okay. So, in
11 terms of television reflecting the people they serve, I
12 wonder if you could just give us your sense, and I am
13 not looking for specific numbers, about how your
14 members and how the people who work for television
15 reflect the people they serve. I am thinking in terms
16 of gender, in terms of ethnicity, race, in terms of
17 disability, aboriginal peoples and so forth.
18 12972 Do you think you reflect the
19 diversity out there and through the ranks to --
20 12973 MS PETTY: I can address television
21 news, keeping with the whole theme of talking about
22 what you know. I think that is what I better stick to.
23 12974 We are always trying, first of all,
24 to be as representative as we can. I don't think there
25 is a broadcaster or cable or over-the-air who can't do
StenoTran
2730
1 better, and anyone who suggests that they are doing
2 everything that they should be doing --
3 12975 COMMISSIONER CARDOZO: Are you giving
4 me a corporate defence here? I am not asking for that.
5 What is your sense -- --
6 12976 MS PETTY: Do you think we are doing
7 it?
8 12977 COMMISSIONER CARDOZO: Yes. Do you
9 think it is happening?
10 12978 MS PETTY: Oh sure, I think it is
11 happening. But you still have to sort of quantify it a
12 little bit, I think. I think we can do better. I
13 think we hear from more voices and see more people,
14 certainly on "Newsworld" -- I mean only because of the
15 demands. If you are on 24 hours a day, seven days a
16 week, you have all kinds of opportunities to give any
17 number of people a voice.
18 12979 Sure, quantity -- and that is what I
19 was talking about before, I guess in a sense, when
20 talking about Canadian content, you push enough of it
21 out there, some of it works. Some of it accomplishes
22 the goals that you set out.
23 12980 There is a lot to be said for
24 quantity. Clearly, the pursuit of quality should go
25 hand-in-hand with that. But I think particularly
StenoTran
2731
1 "Newsworld" just because of the sheer amount of
2 airtime. We are hungry, you know, we are ravenous.
3 There is never enough.
4 12981 COMMISSIONER CARDOZO: How about in
5 terms of the people who work in the corporation?
6 12982 MS PETTY: Individual people?
7 12983 COMMISSIONER CARDOZO: And especially
8 through the ranks; do the number of women, for example,
9 in senior positions reflect the number of women in
10 society?
11 12984 MS PETTY: Actually, we probably
12 outnumber them. A lot of women -- there is a lot of
13 women at "Newsworld" in Calgary; and, actually, we sort
14 of joke about that some times because it is rather
15 startling when you walk through the doors. We
16 definitely have no problem in that area, lots of women
17 and --
18 12985 But I would suggest in Calgary
19 probably not as many visible minorities as we should
20 have. That is partially a reflection of the
21 demographic of the city, frankly.
22 12986 COMMISSIONER CARDOZO: How about
23 aboriginal people?
24 12987 MS PETTY: Again, I would have to
25 say, no, it is not well represented at CBC in Calgary.
StenoTran
2732
1 12988 MR. AMBER: If I may, just to show
2 the democracy that exists in the union, I don't think
3 we are doing nearly as well as we should, and I think
4 there are three or four reasons for that.
5 1045
6 12989 I should tell you, by the way, the
7 CBC won an award a few years ago from the Canadian
8 Human Rights for having actually fulfilled all those
9 mandates that you spoke of. When you wander around the
10 halls of a city like Toronto, with the big building in
11 Toronto, you understand that we have a ways to go.
12 Toronto is almost reaching the point where, on the
13 racial issue, it is going to be 50/50 and we are not
14 anywhere near that in that building in the CBC.
15 12990 I think part of it is breaking down
16 old ways of thinking, number one. Number two, the
17 other issue that exists there is it's very hard to keep
18 changing the racial make-up and the demographics of
19 your work force in downsizing situations, and we have
20 been downsized nearly to death.
21 12991 However, if you go to Toronto, the
22 anchors of our news programs are both visible
23 minorities and women. I think that some of the
24 programming units make an extremely -- go out of their
25 way to make sure it's happening, but some of it's
StenoTran
2733
1 slower in other units. I am very happy to see that on
2 Newsworld and on the main service we recently hired, a
3 couple of months ago, years late, an aboriginal woman
4 who is now one of our newscasters and anchors. So, I
5 think that you can go with the corporate answer and you
6 can go with the general answers.
7 12992 I myself don't believe that we have
8 done as much as we could do. I come from a family
9 where my family is interracial, so I understand the
10 sensitivity. I also agree with Kathleen the answer
11 isn't just to put numbers in, but to put numbers in, be
12 representative and have quality as well.
13 12993 COMMISSIONER CARDOZO: Sure, and the
14 trick is to find the quality people who happen to
15 represent the diversity who are there.
16 12994 MR. AMBER: And they are there. They
17 are there.
18 12995 COMMISSIONER CARDOZO: I think that
19 in terms of on-air personalities CBC probably offers a
20 reflection that's better than any other, although I
21 look at the senior management that we have seen and
22 there was rather an over-abundance of white males.
23 Considering some of them were new, the argument of you
24 have to go with what's in there because there are
25 cutbacks doesn't cut it.
StenoTran
2734
1 12996 The other thing worth pointing out is
2 that among your new directors on the Board of Directors
3 of the CBC, the government has just appointed John Kim
4 Bell, the first aboriginal person, I think, to be on
5 the Board. So, maybe there will be some changes there.
6 12997 The other thing is I just wanted to
7 make a comment, Mr. Amber. You said, comparing the two
8 of you, you can guess who is on TV. If TV is to
9 reflect the people who watch it, as a person who is
10 rapidly balding, might I say there should be more of
11 you.
12 12998 MR. AMBER: You see, you are
13 misinterpreting it. What I meant was about my height.
14 Do I have a problem here? Are you telling me I have
15 another problem?
16 12999 COMMISSIONER CARDOZO: Thank you,
17 Madam Chair.
18 13000 THE CHAIRPERSON: Counsel?
19 13001 MS PATTERSON: Thank you, Madam
20 Chair.
21 13002 This morning you mentioned that local
22 programming other than news would be welcome. Can you
23 suggest some categories in which local programming
24 would be more welcome; for example, public affairs or
25 entertainment?
StenoTran
2735
1 13003 MS PETTY: Public affairs is sort of
2 the same thing as news, although I can tell you that
3 there is a dearth in Calgary of -- I would love to see
4 more public affairs on local issues because you don't
5 see them in prime time because there is never an
6 opportunity in a local market, at least our local
7 market, to debate issues, except on radio. Radio
8 actually does it reasonably well, but television
9 doesn't do it -- at least in Calgary doesn't do it at
10 all and I mean not anywhere on the dial. It simply is
11 not done.
12 13004 But other programming would be -- I
13 would like to see music programming. I would like to
14 see some of the local talent. Although cable
15 television does it -- the local cable station
16 occasionally does it to some extent and the odd morning
17 show in the city and both morning shows are done by
18 private television, but a lot of people aren't
19 available to watch them at the time that they are on
20 because they are at work or getting ready for work.
21 13005 So, it's important, I think, to be
22 able to see those kinds of programs in prime time
23 during the peak viewing hours when most people are at
24 home and have an opportunity to discover the talent in
25 your community, because a great many of us aren't going
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2736
1 to nightclubs quite as often as we used to. So, you
2 don't have the same opportunity to see what's out
3 there.
4 13006 MS PATTERSON: Would you, therefore,
5 go so far as to suggest that local programming should
6 be considered a priority for the Commission to be
7 boosted through, for example, conditions of licence or
8 exhibition requirements?
9 13007 MS PETTY: Yes, without a doubt. I
10 am speaking again -- I mentioned this earlier, but I
11 will just re-emphasize this -- I am speaking about this
12 as a viewer primarily, as someone who is flicking
13 around like everyone else with my remote control
14 looking for something to watch and not finding it.
15 13008 MS PATTERSON: Thanks.
16 13009 I have one further question. One of
17 your recommendations was to remove the 100 per cent
18 designation from news programs which contain a
19 significant amount of foreign items. I wonder if you
20 have any mechanisms that you could suggest that could
21 be in place to monitor the commitments to show
22 primarily Canadian items.
23 13010 MS PETTY: It's interesting you
24 should bring this up, because we were having this
25 discussion quietly and I said to Arnold, "It's a great
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2737
1 idea, but exactly how do you do it?" It's pretty
2 tough. I wish I had a good idea for it. I'm not sure
3 that I do.
4 13011 You could never monitor all of them,
5 obviously, so the only way I could think of off the top
6 of my head is the whole spot check idea. We have all
7 worked, I think, or most of us have worked probably in
8 places where you have spot checkers, phony customers,
9 shills, who come in to see -- for example, if you are a
10 clerk in a store, to see if you are doing your job and
11 whether you are being courteous and following all the
12 store policies.
13 13012 Something along those lines, I guess,
14 you could use for local television where you just pick
15 stations at random and get some sense of how much
16 American content would be in those newscasts because
17 clearly you can't monitor every newscast in every
18 community across the country. So, I think you would
19 have to go with, I guess, the law of averages, use a
20 polling kind of approach to it in terms of coming up
21 with percentages.
22 13013 MR. AMBER: If I may just add, I
23 think really that perhaps we were reaching beyond on
24 this one because it would be very difficult. The
25 monitoring would have to be done on the local level and
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2738
1 all the way through the country. However, I believe
2 that somewhere along the line someone has to write a
3 paper or a directive that speaks to the issue, probably
4 in the end setting a fast rule.
5 13014 I don't believe you set rules that
6 you know you can't make sure that people follow and
7 this one is very, very difficult. I think it also
8 enters the strange issue of what is news and correct
9 this and correct that, but definitely some sort of
10 proposal or some sort of paper about this issue would
11 at least have some moral suasion or might have some
12 moral suasion which might be useful.
13 13015 MS PATTERSON: Just to possibly get
14 us started, would you suggest counting the number of
15 items shown or the amount of time that was devoted to
16 them or a combination of the two?
17 13016 MS PETTY: You go ahead.
18 13017 MR. AMBER: A lot of times -- you
19 know I did a lot of election work and the CBC always
20 keeps these counts saying how many items are there on
21 party one, party two, party three, party four, party
22 five, all the different parties. It doesn't ever tell
23 you whether or not the piece was a positive thing about
24 the party or was an investigation telling you that that
25 party just stole $50 million. They just kept logging
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2739
1 how many times that party was mentioned and how long
2 the item was.
3 13018 I would suggest that if you are going
4 to do this, doing the number of items doesn't work.
5 Doing the time on itself also wouldn't work. I think
6 you would probably have to do both if you actually are
7 looking to a monitoring system. I think you probably
8 have to be very careful on this.
9 13019 Both in Canada, the United States and
10 Britain and in other places in the world that I have
11 been to, there are in fact universities that go into
12 how do you actually monitor the media. Some of the
13 processes and some of the ways they actually do it are
14 totally bizarre and don't really touch reality -- I say
15 that as a practitioner -- don't really touch on what
16 you are doing. So, you have to be careful what you do,
17 but certainly the number and the time percentage of a
18 newscast that might be devoted to non-Canadian items is
19 a way of looking at it.
20 13020 MS PATTERSON: Thank you.
21 13021 Thank you, Madam Chair.
22 13022 THE CHAIRPERSON: If you look at the
23 amount of non-Canadian, even non-North American news
24 items on television on the weekend, you get the
25 impression that all the newsrooms have been closed, all
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2740
1 the newscasters have gone to the cottage, and possibly
2 all Canadians have gone home and locked the door
3 because nothing is happening in Canada until Monday
4 morning.
5 13023 MS PETTY: It's true, it's true.
6 13024 THE CHAIRPERSON: That would be one
7 good way to start. Probably if you did it from Monday
8 to Friday and then included Saturday and Sunday, the
9 numbers would be incredible where you see the CBC, for
10 example, give you all the ghoulish details of an
11 earthquake in a part of the world that you know nothing
12 about, followed by something else happening in
13 Argentina that you understand very little about. Not
14 that it's not interesting, but one wonders on Saturday
15 night or Sunday where are the Canadian journalists.
16 13025 MS PETTY: And who isn't sick of
17 Monica Lewinsky?
18 13026 THE CHAIRPERSON: And where are the
19 Canadians? Are they not doing anything, saying
20 anything that can be reported? That is something that
21 I find quite bizarre.
22 13027 MS PETTY: I used to do weekend
23 anchoring a few moons ago and I put those newscasts
24 together and I can tell you that -- I worked for
25 private television at the time, at ABC. We had a
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2741
1 reporter assigned for the weekend, the entire weekend,
2 and she or he would be working their butt off, I can
3 tell you. But, essentially, they brought back
4 ribbon-cutting kinds of stories. They were flipping
5 burgers over here, they were walking their dogs over
6 there.
7 13028 So, you go and collect these cute
8 little snippets of all the fun things people were doing
9 on the weekend and then the rest of it was death and
10 destruction according to ABC News. Literally -- I
11 can't remember the exact numbers, but I'm sure I must
12 have run in a newscast at least five Amnet stories,
13 some days more, it would just depend on what my one
14 reporter could give me in terms of a newscast. We
15 always gave sports a little more time on the weekend as
16 a result.
17 13029 THE CHAIRPERSON: So, maybe we have
18 to keep more journalists awake on the weekend and on
19 the job and Canadians, too. Maybe they should not
20 sleep from Friday to Monday and do something that the
21 journalists who are there can report.
22 13030 MS PETTY: Have something to report
23 on, that's right.
24 13031 THE CHAIRPERSON: We thank you very
25 much, Ms Petty, Mr. Amber, and have a good trip back to
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2742
1 Calgary and to Toronto.
2 13032 MR. AMBER: Thank you.
3 13033 MS PETTY: Thank you so much.
4 13034 THE CHAIRPERSON: I understand that's
5 not necessarily easy these days.
6 13035 MS PETTY: Actually, it's going okay.
7 I don't think the airport is too terrible from what I
8 hear.
9 13036 THE CHAIRPERSON: Good. I hope
10 somebody is watching here where he can get a scoop for
11 Météomedia.
12 13037 We will now take a break for 15
13 minutes. We will be back at a quarter after 11:00.
14 --- Short recess at / Courte suspension à 1100
15 --- Upon resuming at / Reprise à 1120
16 13038 THE CHAIRPERSON: Order, please.
17 13039 Madam Secretary.
18 13040 MS BÉNARD: Thank you, Madam Chair.
19 13041 The next presentation will be the
20 Canadian Caption Industry Association, and I would
21 invite Mr. Plamondon to make the presentation.
22 PRESENTATION / PRÉSENTATION
23 13042 MR. PLAMONDON: Good morning. Thank
24 you very much.
25 13043 THE CHAIRPERSON: Good morning,
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2743
1 Mr. Plamondon.
2 13044 MR. PLAMONDON: Madam Chair, my name
3 is Tom Plamondon. I am here today on behalf of the
4 CCIA, which is the Canadian Captioning Industry
5 Association. I think by default I am the interim
6 president of the Association.
7 13045 My remarks today follow our letter of
8 June 30th 1998 to the Secretary General of the CRTC,
9 Mrs. Laura Talbot-Allan, an opportunity given to us
10 this morning to speak on behalf of the CCIA.
11 13046 The CCIA is a new association formed
12 to represent the independent Canadian captioning
13 companies and provide a unified framework from which
14 issues, concerns and positions can be developed and
15 brought forward. Clearly, over the last few years,
16 with rapid growth in the industry and focus on the
17 benefits brought to the television medium through
18 closed captioning, there has been a need to bring
19 representatives of the industry together. To this end,
20 the CCIA has been established.
21 13047 My objective today is three-fold: To
22 ask the CRTC, (1) recognize the captioning industry as
23 an industry in any new CRTC policies. This follows the
24 leadership role taken by the Canadian Captioning
25 Industry internationally and demonstrated track record
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2744
1 for quality, quantity and technology. In doing so, (2)
2 we are asking the CRTC to reinforce and encourage any
3 current and new funding initiatives and granting
4 agencies to recognize captioning as part of the
5 production process, and an essential part of television
6 programming.
7 13048 For example, Telefilm Canada used to
8 underwrite the cost of captioning when it was
9 integrated into the production budget. Unfortunately,
10 most of the applications did not include captioning
11 costs in their budgets. Telefilm Canada has now ceased
12 and discontinued underwriting the cost of captioning.
13 13049 It is important to note, however,
14 that when they did, there was a requirement to provide
15 quality captioning. Third, to ask the CRTC to set a
16 new framework that puts emphasis on Canadian produced
17 captions and sets measurable quality standards for
18 captioning in Canada. The same framework should also
19 encourage captioning as part of every production
20 budget.
21 13050 Although the deaf and the hard of
22 hearing are the beneficiaries of closed captioning, it
23 is important that the CRTC recognize that our customer,
24 or consumer, is the broadcaster and the program
25 producer. As such, we are really not asking for
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2745
1 anything more than the independent production sector
2 has already asked for in the context of Canadian
3 content.
4 13051 The CRTC has recognized, through the
5 Canadian content code, the requirement for Canadian
6 programming. There is no captioning content regulation
7 that reinforces and recognizes this fact. The unique
8 identity of Canadian culture, Canada's linguistic
9 duality, expressions and flavour, contribute, in our
10 opinion, that closed captioning contributes to the
11 program content. In some environments, captioning is
12 used where audio is not possible.
13 13052 It is important that the CRTC
14 recognizes the difference between foreign deliverables,
15 where standards are different, or non-existent, and
16 expectations of the deaf and hard of hearing who are
17 entitled to appreciate the entire program from the
18 Canadian perspective.
19 13053 Under copyright law, the Canadian
20 broadcasters will pay upwards of $225 U.S. to purchase
21 the right to broadcast the American produced captions
22 of a foreign or American television programming, using
23 American spelling. These same dollars could be going
24 to the Canadian industry, where linguistic content
25 could be reflected at no greater cost to the
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2746
1 broadcaster.
2 13054 If costs are indeed comparable, if
3 not less, why not have the captions provided by
4 Canadian captioning companies? Why not support the
5 Canadian captioning industry? Why not create jobs in
6 this country that recognizes the importance of our
7 linguistic differences and contributes to the fabric of
8 our country?
9 13055 Partnerships have been developed out
10 of this rapidly growing industry. Win-win stories,
11 success stories, are being written, as demonstrated
12 through public/private partnering, particularly in the
13 area of training. Recent initiatives between private
14 sector companies working in partnership with Human
15 Resources Development Canada and Industry Canada, for
16 example, are encouraging signs that will result in the
17 creation of jobs, and provide training for Canadians in
18 a growth industry.
19 13056 Of course, the ultimate winner is the
20 deaf and hard-of-hearing community, not to mention the
21 educational value for new Canadians and youth.
22 13057 I want to mention the technology is
23 not the problem. Training must be the focus of our
24 attention, given it takes anywhere between three and
25 six months to train a real time captionist prior to
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2747
1 having the necessary skills to go on-air. There is a
2 cost associated with that, but not at the expense of
3 technology. Canadian produced captioning is vital to
4 the industry.
5 13058 In conclusion, I would like to thank
6 the CRTC for giving me the opportunity to address the
7 Commission today, and I would be more than happy to
8 answer any questions that you may have at this time.
9 13059 Thank you.
10 13060 THE CHAIRPERSON: Thank you,
11 Mr. Plamondon.
12 13061 Commissioner Cardozo.
13 13062 COMMISSIONER CARDOZO: Thank you,
14 Madam Chair. Thanks, Mr. Plamondon. That was a good
15 overview of the issues.
16 13063 Let me just start by clarifying, and
17 let me read you a couple of paragraphs of the written
18 brief from the Canadian Association of Broadcasters and
19 the transcript of when they appeared.
20 13064 In the written brief, with regards to
21 the question we had on this topic, they said:
22 "Closed captioning has become an
23 integral operation within most
24 television stations who are
25 moving towards the goals of
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1 captioning most of their
2 programming, particularly news."
3 13065 In the transcript, in response to a
4 question, they said:
5 "The Commission is aware that we
6 have met just very recently the
7 closed captioning policy
8 requiring us, particularly the
9 large stations, to move towards
10 100..."
11 13066 It says "100", but I suppose it means
12 100 per cent.
13 "...closed captioning in our
14 news."
15 13067 Is that a fair statement? Are you in
16 agreement with that? I think they are talking here
17 more about quantity, as opposed to quality, and we can
18 get to that in a minute.
19 13068 MR. PLAMONDON: Yes, and I would
20 agree. Clearly, the Canadian Association of
21 Broadcasters in general terms have worked very
22 diligently and hard at providing captioning. I think
23 what we have to understand here is that you can't
24 separate the issue of quantity and quality, or it is
25 very difficult to, but I think that correctly they have
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2749
1 moved in that direction. I think that the CRTC Public
2 Notice 1995-48 which, as of September 1, required
3 broadcasters with sales -- stations with sales in
4 excess of 10 million to caption, we, as an industry,
5 work very diligently, very hard, to make sure that that
6 in fact was a reality. The real question then becomes,
7 how do you define quality?
8 13069 COMMISSIONER CARDOZO: With regards
9 to quality, you raised the issue of American spelling.
10 The other issue would be accuracy, which you haven't
11 raised. I will come back to American spelling in a
12 moment, but is accuracy a problem or an issue that you
13 are satisfied with? Do you feel that captioning
14 accurately reflects what is happening?
15 13070 MR. PLAMONDON: It's a good question,
16 and it's something that the Industry Association, on
17 its own, is trying to come to grips with.
18 13071 I can only speak for our company as
19 much as when I mentioned earlier the cost of bringing
20 in a captionist up to a skill level that we, as a
21 company, define as acceptable may not be the same for
22 all of the companies in Canada.
23 13072 To answer the question, I can only
24 speak from our company, which does set a very high
25 standard.
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2750
1 13073 The quality issue is really a
2 function of the training that is offered to the
3 individual. As such -- just to give you some numbers,
4 and these are not substantiated by anything other than
5 the records that we keep, to be hitting in terms of
6 accuracy over 99 per cent is something that is
7 achievable and is a standard that we set for ourselves.
8 13074 COMMISSIONER CARDOZO: Just so we
9 understand how this works, if you want to have closed
10 captioning, you need to have a set-top box of some
11 kind, either rented or purchased, and you press some
12 kind of button when you want closed captioning on, and
13 then you will get closed captioning of the program.
14 13075 My last question on that is, is
15 everything said verbally in writing as well?
16 13076 MR. PLAMONDON: To answer the first
17 part of the question, it wasn't that long ago that you
18 did have to buy the little black box that you would put
19 on top of your television in order to view the
20 captions. Today, televisions that are made for the
21 North American market, and I believe it is in excess of
22 13 inches, have the chip built into the television, so
23 you can go into the menu set-up of any television today
24 that is in excess of 13 inches, and I don't pretend to
25 be a master of that little remote, but I am told that
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2751
1 most 10- or 11-year-old kids can get in there and pull
2 the captioning up.
3 13077 Until I was involved in this
4 particular business, which really isn't that long ago,
5 I have to admit, I was aware that captions were
6 provided. I did not realize the degree to which the
7 television manufacturers had been asked to make sure
8 that that option was available on television. So the
9 black box, for any television built 13 inches, for the
10 North American market, since 1993 has had it built in.
11 13078 To answer the second part of your
12 question, yes, a hundred per cent of what is said is
13 captioned. It's quite an art.
14 13079 COMMISSIONER CARDOZO: With regards
15 to spelling, you are concerned about American spelling.
16 I can understand that concern a bit. When I use
17 Spellcheck on a computer, I am always frustrated when
18 it recognizes American spelling and not Canadian. It
19 tells me that I have spelled "labour" incorrectly, or
20 "colour" incorrectly.
21 13080 Is it possible -- I am trying to
22 ascertain how serious an issue this is and how much
23 people are willing to put up with American spelling.
24 Is it acceptable to have American programs captioned
25 with American spelling because, if you think of it,
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1 they may be using American terminology as well, which
2 everybody puts up with, if we can use that term, but
3 that you would want Canadian spelling, at least for the
4 Canadian programs. Is that an acceptable saw-off for
5 you?
6 1135
7 13081 MR. PLAMONDON: I think in the
8 context of -- relating that to the question of quality:
9 There is no question that American programming that is
10 coming here that is captioned with American spelling on
11 it is a source of comment, certainly from the deaf and
12 hard of hearing community.
13 13082 I think the other aspect of that that
14 probably ties into that question is from the
15 educational perspective.
16 13083 When you look at the side benefits,
17 if you will, in terms of captioning and the impact that
18 it is having, clearly when we talk about Canadian
19 identity, Canadian content and the straight numbers
20 that were mentioned earlier, particularly in Toronto
21 with the non-Canadian population growing to the year
22 2003 or 2004, where it will be more than 50 percent
23 non-Canadian, those issues become more important
24 because captioning is being used as an educational
25 tool. No question about it.
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1 13084 COMMISSIONER CARDOZO: By
2 "non-Canadian", do you mean non-white --
3 13085 MR. PLAMONDON: I would say immigrant
4 population, sure.
5 13086 COMMISSIONER CARDOZO: They come here
6 to be Canadians.
7 13087 MR. PLAMONDON: Yes. But to answer
8 the question, it is an issue from both perspectives;
9 from the perspective of --
10 13088 COMMISSIONER CARDOZO: You are saying
11 that people get taught the wrong spelling.
12 13089 MR. PLAMONDON: Correct.
13 13090 COMMISSIONER CARDOZO: I an trying to
14 figure out where one can draw the line, because there
15 is a cost involved. I am not saying that cost should
16 be the only defining factor. But is there an
17 accommodation one can reach?
18 13091 If you read American publications,
19 whether it is the "New York Times" or a book from the
20 United States, you are going to get American spelling.
21 In fact, until recently, the "Toronto Star" ran
22 American spellings. I used to write a column for them,
23 and I always found it very frustrating to read my
24 column with American spelling when I had written it
25 with Canadian spelling.
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1 13092 I am wondering whether, from a cost
2 perspective, one is willing to say that overall,
3 everything being equal, there are some things you
4 really want and this is one you are prepared to live
5 with.
6 13093 MR. PLAMONDON: One of the issues
7 that I may not have raised to the level that we might
8 have wanted is simply that when you look at American
9 programming or foreign programming with American
10 captioning included on it, and you look at the cost --
11 I mentioned a figure of $225 (U.S.), which is a number
12 that is realistic for, let's say, a half hour program.
13 13094 I can tell you that that kind of a
14 number is a very realistic number, if not less than
15 that number, for a Canadian company to be providing the
16 captioning for the same program.
17 13095 COMMISSIONER CARDOZO: And it is not
18 a lot of money.
19 13096 MR. PLAMONDON: No, it isn't.
20 13097 COMMISSIONER CARDOZO: That is more
21 in Canadian dollars than the $225.
22 13098 MR. PLAMONDON: That is correct. And
23 in the context of captioning there, I am talking of
24 real time dollars. In other words, I am not talking
25 about something that is done post-production; I am
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1 talking about something that is done live.
2 13099 COMMISSIONER CARDOZO: Are the
3 American programs coming to us with captioning?
4 13100 MR. PLAMONDON: That is correct.
5 Most of them are.
6 13101 COMMISSIONER CARDOZO: What you would
7 want is to have them recaptioned, and a Canadian
8 captioning track be made available rather than the
9 American captioning track.
10 13102 MR. PLAMONDON: Correct.
11 13103 COMMISSIONER CARDOZO: Just to
12 clarify here: We are talking about English language
13 captioning overall, are we?
14 13104 MR. PLAMONDON: Yes, we are.
15 13105 COMMISSIONER CARDOZO: The French
16 language situation is a bit different. They are far
17 behind in terms of quantity, as well.
18 13106 You mentioned in your oral
19 presentation that Telefilm was not underwritten in the
20 cost, but you note in the written brief that the
21 broadcasters were not showing the amount of money they
22 were spending on captioning. In their budgeting, they
23 were not allocating for that.
24 13107 MR. PLAMONDON: Yes, that is correct.
25 There was a study commissioned that asked that
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2756
1 question: In applications made to Telefilm Canada,
2 were the costs of captioning actually included in the
3 budgets?
4 13108 Surprisingly, no, they were not.
5 13109 So that certainly raises an issue
6 with respect to the requirement of having captioning
7 included in a budget. That would be something that we
8 would, as an industry, like to see.
9 13110 COMMISSIONER CARDOZO: What you are
10 saying is that this ought to be considered as a
11 production expense. Can I say that, by that, you also
12 mean a programming expense?
13 13111 MR. PLAMONDON: Correct. And also,
14 by extension --
15 13112 COMMISSIONER CARDOZO: And a Canadian
16 programming expense?
17 13113 MR. PLAMONDON: Exactly. There is no
18 reason why it should not be included as part of
19 Canadian content, as part of recognition of culture in
20 the country, and included when funds are being
21 allocated and distributed, for that matter.
22 13114 COMMISSIONER CARDOZO: When closed
23 captioning is done or keyboarded or typed in, does the
24 person typing the stuff in have access to the script?
25 Would that not make it a lot easier?
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1 13115 In a drama, everything is already on
2 script. So can't we just sort of take that and say
3 there's the closed captioning?
4 13116 MR. PLAMONDON: Actually, you have
5 overlapped the two main ways the captioning actually
6 takes place. When you look at live programming --
7 news, for example, is done live.
8 13117 The process itself involves taking a
9 very skilled courtroom reporter, using a steno machine
10 as opposed to a keyboard. The investment that I talked
11 about earlier, in getting them where they need to be in
12 order to actually physically be able to do what they
13 do, requires that they be able to, in real time, handle
14 up to 220, 230 words a minute.
15 13118 That process goes through their
16 computer, which has a dictionary established, and then
17 in real time gets fed back out to the broadcaster and
18 aired. The delay, when you are talking live
19 captioning, between the time the word is spoken and the
20 time you see it, runs anywhere from three and a half to
21 five and a half seconds.
22 13119 Some of the very best captioners in
23 this country, if they have an opportunity to receive
24 the audio a second before it goes out, can actually
25 correct mistakes before it actually goes to air.
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2758
1 13120 That process is the process that we
2 talk about in terms of live.
3 13121 The other process, when we are
4 talking about productions that come with a script, is
5 done off-line. That process is actually far more
6 labour intensive, but the skill levels that are
7 required in order to do that are completely different.
8 13122 In that case, the software that the
9 individual uses to create the captions is actually an
10 offshoot of the same type of software, but it is keyed
11 in on a normal --
12 13123 COMMISSIONER CARDOZO: Why can't you
13 just use the same diskette that has the script on it,
14 and just turn that into captioning?
15 13124 MR. PLAMONDON: The reason, from a
16 technical perspective, why you just can't take the disk
17 if you have a word file, for example, a script file and
18 then plug it into a computer and generate the captions,
19 is because all of it has to be timed. It all has to be
20 blocked.
21 13125 In the off-line scenario, it actually
22 does go out perfect, 100 percent perfect. From that
23 perspective, that is just one of the reasons why you
24 just can't take the file, throw it in and expect that
25 the timing of the spoken word and what you see coming
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2759
1 up is going to automatically materialize.
2 13126 COMMISSIONER CARDOZO: It is easier
3 to have somebody type it all over again rather than sit
4 there and just adjust the timing.
5 13127 MR. PLAMONDON: The file itself can
6 be just a straight word file that gets loaded into the
7 computer. It then does have to be blocked, and it has
8 to be timed.
9 13128 COMMISSIONER CARDOZO: Two questions
10 come to mind.
11 13129 If you are typing in stuff at that
12 high speed, can you read the stuff that fast? What is
13 the feedback you get as to how fast people can read the
14 stuff?
15 13130 Or do people who use captioning
16 become fast readers or have to be fast readers?
17 13131 MR. PLAMONDON: In a sense, the deaf
18 and hard of hearing do develop a speed that does allow
19 them to read that quickly.
20 13132 What is interesting about it is when
21 people say that you have the audio going out and that
22 two, three, four, up to five second delay is what is
23 going to trouble people when they are deaf or hard of
24 hearing, it is actually a bonus in the sense that if
25 they are actually reading lips and the camera pans off
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2760
1 the individual who is speaking, it gives them a chance
2 to look down at the captioning as it is coming up.
3 13133 But their ability to read it
4 develops, as would yours or mine after a while.
5 13134 COMMISSIONER CARDOZO: It has to be a
6 skill. The Chair was telling me recently about
7 "Babette's Feast", the movie. I rented it and watched
8 it and wished I spoke Danish, because I spent more time
9 reading than watching what was a very interesting
10 movie.
11 13135 Is there a descriptive element to
12 captioning? I am thinking of descriptive video
13 service, where you have what is being talked about and
14 a description of other things.
15 13136 Does captioning include any
16 description, such as sounds that may come on, like a
17 siren or a thud, or whatever?
18 13137 MR. PLAMONDON: There is a
19 descriptive element to it, to answer your question.
20 13138 Typically, if there is time to insert
21 the symbol for music, for example, it is done. If
22 there is an opportunity to insert a sound in between
23 dialogue, it is done.
24 13139 What the captionist is really trying
25 to do is to ensure that 100 percent of what is being
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2761
1 said is captioned; and beyond that, that as much of the
2 flavour of the program, if you will -- background
3 sounds, that kind of thing -- is available.
4 13140 I am noting of interest that one of
5 the things that is happening in the industry itself is
6 the evolution of using captioning in music videos. I,
7 for one, have to tell you that I appreciate it because
8 half the time I can't understand the lyrics. It is
9 interesting to be able to sit and actually look at what
10 is being sung.
11 13141 Some of the words are --
12 13142 COMMISSIONER CARDOZO: I'm not sure
13 the artist would like that so much. I think there are
14 a lot of artists who hope nobody can understand what
15 they are saying.
16 13143 MR. PLAMONDON: It is curious, too.
17 Where do you go with that?
18 13144 You have a responsibility to the
19 industry and to the viewer to be accurate. So what do
20 you put out there that is accurate?
21 13145 As an industry, we have wrestled with
22 that issue on a number of occasions. Certainly if you
23 change a lyric or a word -- I have to tell you that the
24 deaf and hard of hearing community are very vocal. I
25 am sure you have heard representation before this
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2762
1 Commission by them. There is certainly a
2 responsibility to ensure that it is as accurate as
3 possible.
4 1150
5 13146 COMMISSIONER CARDOZO: One of the
6 things you mentioned in the written brief is closed
7 captioned billboards. What are the billboards?
8 13147 MR. PLAMONDON: Closed captioned
9 billboards are a means by which the broadcasters are
10 able to in part pay for captioning. In actual fact,
11 closed captioned billboards have, along with the
12 industry itself, the captioning industry itself,
13 evolved to the point where credit for captioning is
14 given by a sponsor.
15 13148 That whole vehicle has gained in
16 popularity to the point where we as an industry feel
17 comfortable that the broadcasters are actually in a
18 position to more than cover their cost.
19 13149 COMMISSIONER CARDOZO: So the
20 billboard is just the announcement that comes on and
21 says this program captioned with the assistance of "X"
22 or "Y".
23 13150 MR. PLAMONDON: Correct. And the
24 broadcasters all comment. To this extent, the
25 broadcasters are very aware that the lead-in for the
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2763
1 audio on the ten second or five second captioned
2 billboard recognizes -- you are quite correct, the
3 lead-in is "Closed captioning for this program brought
4 to you by --". The recognition for a sponsor for the
5 captioning of that program is very, very important to
6 them.
7 13151 COMMISSIONER CARDOZO: So in the
8 brief you are saying that it's your feeling there are
9 some broadcasters who are taking in money with these
10 sponsorships, but not necessarily spending that amount
11 on captioning, that that money in some cases is going
12 to general revenues.
13 13152 MR. PLAMONDON: That is correct.
14 13153 COMMISSIONER CARDOZO: When you
15 mention in 3(b) Canwest Video, do you mean Canwest
16 Global?
17 13154 MR. PLAMONDON: Yes. That's right.
18 13155 COMMISSIONER CARDOZO: Among the
19 different broadcasters out there, are there some who
20 are doing better, some who are doing worse, and would
21 you care to share that with us? I hope it doesn't lead
22 to lawsuits.
23 13156 MR. PLAMONDON: I will say this much.
24 Certainly as an opportunity to recover costs for
25 captioning, the broadcasters are certainly taking
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1 advantage of it. There are two ways that they do that.
2 13157 To a large degree the broadcasters
3 themselves are promoting that as a vehicle to generate
4 revenue in order to cover in part costs of captioning.
5 Some of them are doing it in-house. Other broadcasters
6 are involving captioning companies that allow them to
7 provide captioning for programming and sell the ten
8 second or five second billboard sponsorships.
9 13158 I'm really, unfortunately, at this
10 point in time not at liberty to comment on the actual
11 dollars.
12 13159 COMMISSIONER CARDOZO: Essentially
13 you represent various companies and individuals too
14 that do captioning.
15 13160 MR. PLAMONDON: Correct.
16 13161 COMMISSIONER CARDOZO: So you are
17 like the CFTPA of captioning, the Production
18 Association of Canada. Who is your Michael MacMillan?
19 13162 MR. PLAMONDON: I won't go that far.
20 The Canadian Captioning Industry Association is really
21 born out of -- it is the private companies -- born out
22 of the fact that this industry has grown so quickly.
23 To a large degree, like any growing industry in any
24 company who is trying to be responsible, they are
25 looking very much at their own bottom line and their
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1 viability.
2 13163 That is something that preoccupies a
3 lot of individuals' time. Because of the growth of the
4 industry, I think what has happened is the industry
5 itself has said "We need to take a step back and look
6 at what's happening collectively".
7 13164 At this point I have to tell you, as
8 I said at the onset, I don't know if I am the
9 President, the interim President, by request or by
10 default. I am going to defer that to the people that
11 made the comment initially and said "Please, Tom, would
12 you represent us at the CRTC hearing".
13 13165 Only recognize that there certainly
14 is a need for us to be communicating. There is
15 certainly an agenda for all of us that we share that
16 needs to be expressed and brought forward and dealt
17 with.
18 13166 COMMISSIONER CARDOZO: And the
19 association is just English language.
20 13167 MR. PLAMONDON: No. No, it isn't.
21 We do have a French company in Montreal that is part of
22 the association.
23 13168 COMMISSIONER CARDOZO: Do you do any
24 captioning in other languages for the multilingual
25 television networks?
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1 13169 MR. PLAMONDON: What we do in Canada
2 is English off line and the software associated to
3 doing captioning off line, un-live if you will, allows
4 us to do captioning in a number of languages. It's a
5 company in post-production. We do captioning in many
6 languages.
7 13170 What we have a problem with right now
8 and the technology isn't there is in the Oriental
9 languages, including Japanese. The generation of
10 Japanese and Chinese characters is very difficult at
11 this point in time and very expensive to do.
12 13171 COMMISSIONER CARDOZO: So you are
13 doing captioning for an export market.
14 13172 MR. PLAMONDON: Correct. In that
15 sense we do. Most of it, though, I have to tell you is
16 corporate work. It's training videos and that kind of
17 thing that we do multilanguage captioning for.
18 13173 COMMISSIONER CARDOZO: Okay. Lastly,
19 I just wanted to ask you if you have off the top of
20 your head numbers of people that we are talking about,
21 and we are talking about people who are deaf or hard of
22 hearing.
23 13174 MR. PLAMONDON: The last numbers that
24 I can substantiate --
25 13175 COMMISSIONER CARDOZO: You can get
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1 back to us too with that. It's on the record.
2 13176 MR. PLAMONDON: I can offer this.
3 There are about two and a half million Canadians who
4 are deafened and hard of hearing. That is a very
5 conservative number.
6 13177 COMMISSIONER CARDOZO: And your sense
7 is that is about the number of people who are using
8 closed captioning.
9 13178 MR. PLAMONDON: No. If you include
10 the individuals and new Canadians, if you will,
11 learning either English or French for the first time
12 and the youth of the country, and I am talking about
13 youth in terms of the pre-school to four and a half
14 five, they are using closed captioning as an
15 educational vehicle. It's probably more like seven and
16 a half million.
17 13179 COMMISSIONER CARDOZO: A lot of
18 pre-school kids are used closed captioning?
19 13180 MR. PLAMONDON: If you look at, for
20 example -- my own day care provider has television on.
21 The captioning for children's programming, for example,
22 is always on. There have been a number of studies that
23 prove children who are watching captioning learn to
24 spell far quicker and more accurately when you can see
25 the words as well as hear them. The reinforcement
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1 there is just terrific. It's tremendous.
2 13181 Similarly, the educational value for
3 people who are learning this language, coming from
4 another country, is immense. Similarly, as I mentioned
5 earlier, if you are in an environment, for example a
6 restaurant, where there is a lot of background noise
7 going on and you may be watching a program on
8 television, the only way you are going to be able to
9 understand what is being said is if the captioning is
10 on.
11 13182 There are a number of very good
12 examples where it is being used as a matter of routine.
13 It's hard to put a number on that audience that are
14 benefiting from captioning, but there is no question
15 that the numbers are increasing.
16 13183 Similarly, I think there's medical
17 evidence to support the fact that if you look at the
18 baby boomers who are getting a little older and abused
19 the eardrums at many rock concerts and what have you,
20 their hearing is likely something that's going to
21 suffer over extended periods of time, so captioning
22 becomes a more valued, if you will, and I will put in
23 in terms of the commodity, to them as they get older.
24 13184 There's certainly benefits that
25 captioning in itself bring beyond the deaf, the
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1 deafened and the hard of hearing.
2 13185 COMMISSIONER CARDOZO: Okay. Those
3 cover my questions, Mr. Plamondon.
4 13186 Thanks very much.
5 13187 Thanks, Madam Chair.
6 13188 THE CHAIRPERSON: Commissioner
7 Wilson.
8 13189 COMMISSIONER WILSON: I can't resist,
9 I have to ask you one question. When you talked about
10 foreign captioning, you and Commissioner Cardozo had
11 quite a long discussion about the spelling issue.
12 13190 We had one representation so far and
13 I guess we will be having another one about the whole
14 issue of descriptive video, so maybe it's not a fair
15 question to ask you because you are representing one
16 particular interest.
17 13191 While I understand your concerns
18 about the threat to the Canadian captioning industry in
19 terms of buying programming captioning already there
20 and buying the rights to display that captioning, if we
21 had to choose between placing an emphasis on Canadian
22 produced captioning or trying to move forward on
23 descriptive video for a segment of the population that
24 is nor served at all in any way, what do you think we
25 should do?
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1 13192 MR. PLAMONDON: It's a good question
2 and a valid question. I would have to say that
3 obviously my focus is certainly towards the accuracy
4 and the quality of captioning that we produce and that
5 the population enjoy.
6 13193 Certainly the deaf and the hard of
7 hearing community have a right to enjoy the program to
8 its fullest extent, so obviously for me I am for
9 obvious reasons going to side on the side of captioning
10 and captioning quality and promoting Canadian
11 captioning for all programming that is coming into this
12 country.
13 13194 COMMISSIONER WILSON: I'm sure you
14 can appreciate it is quite a balancing act as a
15 regulator to try and determine whose interests seem
16 more desperate at the moment.
17 13195 Thank you for your comment, though.
18 13196 MR. PLAMONDON: You're welcome.
19 13197 THE CHAIRPERSON: Mr. Plamondon, am I
20 correct that if you have SAP facility in your
21 television you can get captioning without any further
22 equipment, you just switch that on?
23 13198 MR. PLAMONDON: That's correct. Yes.
24 All you have to do is scan into the menu function.
25 13199 THE CHAIRPERSON: You just need that
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1 second audio capacity for the captioning to come
2 through.
3 13200 MR. PLAMONDON: No, no. There's no
4 second audio capacity required. Captioning actually is
5 encoded on to --
6 13201 THE CHAIRPERSON: Of course, it's
7 writing. That's right.
8 13202 MR. PLAMONDON: Yes.
9 13203 THE CHAIRPERSON: So it doesn't need
10 that. What is it with television sets that cannot give
11 you captioning without any decoding? Are there
12 television sets that you just switch on and the
13 captioning, if it is there on the program, will come on
14 and somewhere if you don't have that capacity in your
15 television set, you have to buy a decoder.
16 13204 MR. PLAMONDON: The encoder has to be
17 built into the television set.
18 13205 THE CHAIRPERSON: Into newer sets, I
19 suppose.
20 13206 MR. PLAMONDON: Correct. What is
21 interesting is one of the events that the industry
22 sponsors, Captioning Awareness Week, actually coincided
23 with the September 1 deadline on captioning. That week
24 a number of broadcasters open-captioned, if you will --
25 13207 THE CHAIRPERSON: Yes.
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1 13208 MR. PLAMONDON: -- the programming.
2 The previous submission by the CBC raised an issue in
3 terms of Canadian content. The CBC was the recipient,
4 for example, of an award that was given, the Golden Cup
5 award that was given to a broadcaster for its
6 commitment made to captioning, given the fact that the
7 CBC doesn't have to caption to the same degree at this
8 point as the rest of the broadcast industry.
9 13209 It's curious that within the industry
10 itself, up until September 1 it's amazing the number of
11 people who didn't realize that all they had to do was
12 turn the captioning on and how easy it actually is to
13 turn it on.
14 13210 THE CHAIRPERSON: Yes.
15 13211 MR. PLAMONDON: I have to salute a
16 number of the broadcasters who when they went on air on
17 September 1 for the very first time drew attention to
18 that fact. In particular, one broadcasters whose name
19 has come up a number of times, A Channel in Alberta for
20 example, they went to captioning for the first time on
21 September 1.
22 13212 Their on-air personalities as much as
23 went over to the television monitors in their studios
24 and said "This captioning. Turn this on. This is good
25 stuff".
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1 1205
2 13213 All of that contributes to raising
3 the awareness of that. The technology is built into
4 your television, if you want to turn it on, number one.
5 13214 Number two, the broadcasters are
6 actually -- have gone a long way to raise the awareness
7 of the value, and their commitment that they have made
8 to captioning.
9 13215 I think what we have to do now as an
10 industry is recognize the fact that captioning is an
11 industry, and recognize that we have gone to the point
12 and we have gone so far that we can now be looking at
13 issues like quality. We can now be looking at issues
14 like what is an acceptable level of captioning in
15 Canadian broadcasting.
16 13216 THE CHAIRPERSON: Your interest would
17 be both in the quality of the open captioning and of
18 the closed captioning?
19 13217 MR. PLAMONDON: Correct.
20 13218 THE CHAIRPERSON: That is where the
21 SAP facility would be used, for the closed captioning,
22 and that is also built in, in a lot of television sets.
23 13219 MR. PLAMONDON: That is correct.
24 13220 THE CHAIRPERSON: Just by switching
25 it, you can get that second audio that you can hear.
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1 13221 When you say that the community whose
2 interests you represent have to be made aware of it,
3 there must be some role you play in that as well
4 because there must be some coherence within that
5 community, or maybe not registrations but you must have
6 member associations or connections with those who
7 represent the interests of the deaf and hard of
8 hearing.
9 13222 MR. PLAMONDON: Without question.
10 13223 THE CHAIRPERSON: You can use those
11 avenues to help make it known that it is fairly easy to
12 have access.
13 13224 MR. PLAMONDON: The Canadian Hearing
14 Society and the various provincial chapters, the
15 individual groups themselves who support the needs of
16 the deaf community are very well organized. And, as I
17 said earlier, they are quite vocal and the broadcasters
18 have, as well as our own industry, the companies that
19 provide captioning, have had no trouble at all in
20 communicating what has been happening in the industry.
21 They are very well organized, as we are, and obviously
22 it is in our best interests that we communicate with
23 them, finding out what really defines their needs.
24 13225 There is no doubt that the
25 partnerships that we talk about go well beyond just the
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1 individual companies with the broadcasters. We are now
2 involving partnerships between ourselves and other
3 levels of government in order to ensure that the people
4 and the resources are made available in order for the
5 industry to continue to grow.
6 13226 THE CHAIRPERSON: Your concerns about
7 quality would go to both, I suppose. The closed
8 captioning would be the accuracy of the spelling and
9 the oral one would be whether all the words are, and
10 presumably also intonation and so on, to make it as
11 helpful as possible.
12 13227 MR. PLAMONDON: Correct.
13 13228 THE CHAIRPERSON: Rather than to just
14 have a monotone, which doesn't reflect very much what
15 the program is about.
16 13229 Thank you very much, Mr. Plamondon.
17 13230 MR. PLAMONDON: Thank you very much.
18 13231 THE CHAIRPERSON: Thank you for
19 coming.
20 13232 Madam Secretary.
21 13233 MS BÉNARD: Thank you, Madam Chair.
22 The next presentation will be by the Canadian Institute
23 for Broadband and Information Network Technologies
24 incorporated, and I would invite Mr. Hara to come
25 forward.
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1 PRESENTATION / PRÉSENTATION
2 13234 MR. HARA: Thank you very much, Madam
3 Chair, commissioners and ladies and gentlemen.
4 13235 MS BÉNARD: Mr. Hara, can you turn
5 your microphone on?
6 13236 THE CHAIRPERSON: Just a moment. Do
7 the camera men need any time to readjust, or are we
8 okay?
9 13237 Okay. Go ahead, Mr. Hara.
10 13238 MR. HARA: Thank you very much, Madam
11 Chair, commissioners, ladies and gentlemen.
12 13239 My name is Elmer H. Hara, the H.
13 stands for Hiroshi, part of my Japanese heritage.
14 13240 I am currently serving as director of
15 research and development for the Canadian Institute for
16 Broadband and Information Network Technologies. It is
17 a not-for-profit institute set up by the University of
18 Regina to transfer the technology developed by the
19 Faculty of Engineering to the Canadian industry,
20 primarily to the Canadian industry.
21 13241 Today, I would like to speak on
22 the -- or recommend a policy that might be instituted
23 by CRTC regarding access or universal access for
24 Canadian programs and films under a free market policy.
25 By this I mean -- by free market policy, I mean any
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1 entity who constructs a delivery system that can
2 guarantee universal access to Canadian content should
3 be allowed to operate the provision supply of content
4 on a free market basis.
5 13242 Now, free market, I really don't mean
6 it is going to be a dog-eat-dog jungle out there. It
7 will be orderly business approach, of course, of the
8 supplier, content supplier should be required to have a
9 business licence. Any corporation or business that
10 preys on the elderly, senior citizens and children,
11 well, they will promptly lose their licence.
12 13243 In the free market, competition, of
13 course, quality, plus the promotion, marketing
14 promotion will play a very important role.
15 13244 If you are a Canadian content
16 provider, with known quality, known entity, known
17 producer, with quality, if you are recognized as such,
18 known as such, then the entity that built this delivery
19 system will certainly pay you for getting, obtaining
20 your contents.
21 13245 Now, if you are an unknown producer,
22 then there will be an access fee and rates in
23 proportion to the time, length of the content, that you
24 will have to pay.
25 13246 Of course, in the free market
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1 situation, the access fees and rates should become
2 competitive and fair, but maybe here is a role for CRTC
3 to play, to monitor and make sure that these rates are
4 fair and competitive.
5 13247 In the spirit of the NAFTA,
6 non-Canadian contents will also have to be treated
7 equally. This means that the Canadian contents will be
8 competing on an equal footing and, therefore, quality
9 and promotion will count.
10 13248 Now, you might ask: Is there such a
11 transmission system, delivery system that can guarantee
12 universal access? And, yes, there is. I will give a
13 brief description of the system.
14 13249 The system is based on a
15 centrally-switched fibre to the home network design.
16 The way it works is there is two fibres -- it could be
17 single fibre, too -- from a central switching centre
18 and the subscriber's premises unit has an option to
19 insert application interface cards. Whatever the
20 subscriber wishes to subscribe to, the interface card
21 is inserted and you can receive that service.
22 13250 So this would include digital high
23 definition TV, which is coming up very shortly, very
24 rapidly; and digital TV, one, two channels; and all the
25 other services to the home, like meter reading; of
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1 course, home security; telephone, data services; and,
2 in the near future, Internet access through a very high
3 speed link like 6 megabytes per second.
4 13251 The subscriber premises unit is
5 replicated in the switching centre and the band width
6 required to provide this service is very low compared
7 to the other -- the broadcast-type approach that the
8 cable TV system adopts, is using, using for telephone,
9 data, and high speed Internet access, and all these
10 meter reading, digital TV, 1, 2 and high definition TV,
11 it requires less than 100 megabytes per second.
12 13252 This means that the technology that
13 this system uses is very well established. There is no
14 experimentation. It is also comparatively low in cost
15 and very reliable.
16 13253 So, the thing to keep in mind is that
17 it only requires 100 megabytes per second.
18 13254 Then the question comes up: How do
19 you guarantee universal access? That is done by a
20 switching system at the switching centre. For example,
21 if we take the digital TV-1 signal, it is supplied
22 through a switching system. Switching systems today,
23 digital switching systems today are very compact and
24 not expensive. Therefore, you can have many, many
25 sources -- 5,000 I picked here, but it could be 10,000,
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1 20,000, whatever the market will support.
2 13255 This way, you can guarantee universal
3 access either if a customer comes up, wants to pay a
4 fee to supply their software content to the subscriber,
5 they are free to do so. The switching equipment can be
6 rented out from the entity that constructed the
7 delivery system, or the content supplier can install it
8 in the switching centre.
9 13256 Among these services, if you look at
10 the switching system, the important part is the
11 consumer is -- wishes to have, first of all, choice of
12 content, but then also choice of viewing time. It is
13 very annoying missing some of the currently broadcast
14 major league baseball play-offs. Now, if you can get
15 it on video-on-demand, time shift or rebroadcasting, I
16 would be willing to pay to watch, maybe $5 for a good
17 game.
18 13257 So that system is possible by
19 using -- video-on-demand system uses video disks with
20 multiple play-back heads. This is a very standard
21 technology. Already, there is Karaoke juke box
22 installed in some hotels. And, of course, the
23 extension of that is you put in a multiple play-back
24 heads on each disk. You can have your choice of
25 10,000, or more, movies, if you wish, or broadcast
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1 contents, if you wish.
2 13258 So, once you have this system in --
3 now, the entity that constructed this delivery system,
4 Guaranteed Universal Access, the earnings will
5 depend -- they start to earn more and more money, that
6 will depend on the quality of the content and the
7 largest selection that it can provide. That means
8 higher earnings; and, of course, in this choice of time
9 and content turns toward the video-on-demand system.
10 13259 Now, video-on-demand, the Canadian
11 content can be all the TV programs and films that have
12 been produced in the past; and, of course, we can
13 support, provide aboriginal TV programs and films as
14 well.
15 13260 Another interesting point is that the
16 National Arts Centre, as well as the regional
17 performing centres all across the country, can -- each
18 centre can become a provider of content. That means
19 additional revenue for the National Arts Centre, as
20 well as all the regional centres, that have quality.
21 13261 Aside from the performing arts, the
22 National Art Gallery, regional galleries could also
23 offer their contents, display their contents
24 nationally.
25 13262 Then, also, Museum of Civilization,
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1 which at any given time displays less than 20 per cent
2 of its holdings. It can make its whole holdings
3 available on video disks.
4 13263 Now, continuing on with the market
5 forces. The non-Canadian content will also have equal
6 opportunity to provide -- be one of the content
7 providers, and this will contribute to the
8 multicultural diversity of our country.
9 13264 For me, I live in Regina. I miss
10 seeing Japanese movies. If there was a Japanese movie
11 made available on video-on-demand, I would certainly be
12 willing to pay $10 for a good movie.
13 1220
14 13265 So, the market is there and this
15 approach of universal access will certainly support all
16 of our multicultural efforts. Of course, other program
17 sources can equally become content providers, satellite
18 TV, the recent wireless local multi-point
19 communications system TV or the other wireless
20 multi-point microwave distribution system TVs and cable
21 TV, if they wish to do so, can also provide the signals
22 over this system, either on a real-time basis or, if
23 they wish, on a delayed basis through the video and
24 demand system.
25 13266 These sources are not limited to
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1 entertainment. All educational courses can be made
2 available on university air and this becomes very
3 important in terms of today's high tuition costs.
4 University air can offer many courses to alleviate and
5 reduce the educational burden on parents and students
6 as well.
7 13267 The last point I would like to make
8 is about Canadian content support. Since this delivery
9 system guaranteeing universal access will have a lot of
10 digital traffic because it's catering to the desire of
11 the subscriber, to the consumer, to select their
12 content that they wish to see and also the time of
13 their choosing to view the content, that means a great
14 deal of digital traffic and with a very small tariff,
15 like the gas -- well, gasoline tax is a bit too high,
16 but in a similar vein, to charge a tariff on each bit
17 that goes through the system, you can produce funds for
18 production and most important of all is the funds for
19 promotion for the smaller organizations that produce
20 content.
21 13268 So, in concluding, I would like to
22 just sort of borrow from a movie and say that if the
23 CRTC builds a policy -- build a policy and they will
24 make it happen. Thank you.
25 13269 THE CHAIRPERSON: Thank you, Mr.
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1 Hara.
2 13270 Commissioner McKendry?
3 13271 COMMISSIONER McKENDRY: Thank you,
4 Madam Chair.
5 13272 What today prevents a business person
6 from doing what you have set out here?
7 13273 MR. HARA: One is the CRTC
8 regulations. Technically, there is no hindrance. We
9 can do it today as long as the entity who builds
10 this -- they can build it, but in the Canadian content
11 regulations there is not a free market approach. They
12 cannot take signals in whatever they can contract or
13 buy and supply. There are roadblocks there. So, if
14 the CRTC comes out and says as a policy, "Any entity
15 that guarantees universal access, particularly Canadian
16 content," then it will be built.
17 13274 COMMISSIONER McKENDRY: What content
18 couldn't an entrepreneur who built this system buy
19 today?
20 13275 MR. HARA: I think everything. You
21 are correct, everything is purchasable, yes.
22 13276 COMMISSIONER McKENDRY: So, that goes
23 to my point. If what you are proposing is a viable
24 business idea, why wouldn't somebody do it today? What
25 do you need us to specifically change? I don't think
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1 we place any restrictions on what can be offered in
2 terms of Canadian content on the --
3 13277 MR. HARA: Plus foreign content.
4 13278 COMMISSIONER McKENDRY: The
5 distribution is here. Are you asking for unrestricted
6 access to foreign content?
7 13279 MR. HARA: That's right, just open it
8 up. Just have a free-market approach to the supply
9 provided its universally accessible to every supplier.
10 13280 COMMISSIONER McKENDRY: So, what you
11 need us to change is the ability of distribution
12 networks to freely distribute foreign content?
13 13281 MR. HARA: Yes.
14 13282 COMMISSIONER McKENDRY: Taking into
15 account the Broadcasting Act and the objectives under
16 the Act that we are required by law to implement
17 through the regulatory process, what levers would we
18 have under your system to ensure that the objectives of
19 the Act are met. For example, some of the levers we
20 use now are expenditure requirements by broadcasters on
21 Canadian content. We have exhibition requirements, for
22 example, relating around prime time and so on. What
23 levers would we have in your system to ensure that the
24 objectives of the Broadcasting Act were implemented?
25 13283 MR. HARA: I think that comes back to
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1 my last point, the tariff on the bits passing through
2 the system generating funds. Then you can assist the
3 CBC and any other Canadian producer/content-provider in
4 terms of production and more important I think is the
5 promotional aspects.
6 13284 COMMISSIONER McKENDRY: So, the
7 primary lever then would be simply a tax or a tariff on
8 the transmission of data --
9 13285 MR. HARA: Information or the bits
10 passing through.
11 13286 COMMISSIONER McKENDRY: -- or bits
12 and bytes through your network and that money would
13 flow back to Canadian program producers and you would
14 guarantee them access on your system.
15 13287 MR. HARA: Yes.
16 13288 COMMISSIONER McKENDRY: It would be
17 up to viewers then to decide what they wanted to view.
18 13289 MR. HARA: So, the entity who built
19 the system, since they have to follow universal access
20 principles, they cannot refuse entity or
21 content-provider access. Of course, as I mentioned,
22 there are two ways of access. If it's very good, the
23 entity will buy your product. If you are not known,
24 you don't have to pay an access fee, but once you pay
25 the access fee, your profits providing that is all
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1 yours.
2 13290 COMMISSIONER McKENDRY: I will
3 probably come back to that in a minute.
4 13291 Help me understand what would happen
5 to the existing distribution networks we have in Canada
6 today. We have two major ones, the telephone one and
7 the cable one. One of them is a narrowband switched
8 intelligent network, the other one is broadband
9 unswitched network with less intelligence in it that
10 exists in the telecommunications network. What happens
11 to them under this scenario? Do they still exist?
12 13292 MR. HARA: There are a number of
13 paths that we can think of. One thing that I am very
14 sure of is that eventually the fibre to the home
15 switched network will be a standard delivery system, be
16 it maybe 10 years down the road, depending on what
17 policies the CRTC will follow. It might be even five
18 years from now or it could start within three years.
19 13293 The cable TV and telephone companies
20 can compete. For example, the cable TV company can
21 enter into a joint enterprise with the electric power
22 utilities. The electric power utilities have the right
23 of way to every home, so they can make use of that
24 right-of-way. There is also options through the city
25 municipality water and sewer systems. That is a right
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1 of way that can be also utilized. So, there could be
2 two competing systems. Cable can compete and the
3 telephone company can compete.
4 13294 There is another scenario where the
5 cable TV, as its licensed today, instead of making use
6 or expanding or switching over to their plant that they
7 have today, they could make use of this universal
8 access delivery system and pay a tariff for the use of
9 that plant. That's another scenario.
10 13295 COMMISSIONER McKENDRY: To make sure
11 I understand, the scenario, though, that you envisage
12 is that there would be three networks, the network you
13 are talking about, the cable-based network, the
14 telephone-based network that exists today, and I
15 suppose in terms of access into my home, there is the
16 wireless network as well. So, we would have competing
17 networks.
18 13296 MR. HARA: Yes --
19 13297 COMMISSIONER McKENDRY: Just to
20 finish, I think you talked about two fibres into the
21 home. Was it two fibres?
22 13298 MR. HARA: Yes.
23 13299 COMMISSIONER McKENDRY: Now I have a
24 coaxial cable into my home as well and I have the
25 copper pair from the telephone company and I have
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1 over-the-air signals available to me from
2 direct-to-home satellite services as well. They would
3 all continue under our scenario. Your system would be
4 a new entrant, a competitor for these systems?
5 13300 MR. HARA: I wouldn't think of it as
6 a completely independent approach. It's one of the
7 approaches that the telephone companies can take. So,
8 that will be one. The cable TV companies can also take
9 the same approach. That would be two.
10 13301 There is the wireless to be there,
11 but the wireless has one cost element of the set-top
12 box, the receiver that you have to pay for. Since the
13 switching equipment is much cheaper, once the fibre
14 comes to your home, it will be much better for these
15 wireless people to also offer their signals to this
16 delivery system. So, they can widen their subscriber
17 base very easily.
18 13302 COMMISSIONER McKENDRY: Is the most
19 likely scenario under what you set out for us a
20 monopoly system where there would be the one
21 distribution system? Is that the most likely outcome
22 of this?
23 13303 MR. HARA: Yes. If you have free
24 market competition in the scenario that I speak of,
25 there is a danger that the company entity with the
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1 deepest pocket will win out. Now, something like that
2 is happening in the long distance telephone. AT&T is
3 very strong in the United States. If it was a
4 completely free market, AT&T could very well become a
5 monopoly in long distance again. The same scenario
6 could happen in this case, too.
7 13304 So, the issue that the CRTC will have
8 to consider then is going back to the concept of
9 separation of carrier and content. So, the common
10 carrier concept will probably have to be revived and
11 the common carrier will have to provide service for
12 every comer.
13 13305 COMMISSIONER McKENDRY: Would your
14 system also deliver telephony signals as well as the
15 other signals we have talked about?
16 13306 MR. HARA: Yes. Telephone will be
17 such a small fraction of the total bit stream to the
18 whole, you can probably say it would be almost free.
19 13307 COMMISSIONER McKENDRY: Is there a
20 vulnerability issue for society if we just have one
21 distribution system, one fibre, in effect, distributing
22 all of these services to businesses and to homes?
23 Would a failure of the system put us at risk? Are we
24 too vulnerable?
25 13308 MR. HARA: No, the risk is very
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1 small. The biggest risk is the switching centre
2 catching fire. Otherwise, there is a fibre cable going
3 from the switching centre to each home and this is
4 independent. A breakdown in a single fibre to the home
5 only affects -- the equipment breakdown will affect
6 only one subscriber and, therefore, the vulnerability
7 is very low for the system as a whole.
8 13309 Now, if you look at the concentration
9 of switching equipment and telephone switching centres,
10 then if you look at the statistics of a fire destroying
11 a switching centre like the telephone exchange, it's
12 very, very small.
13 13310 COMMISSIONER McKENDRY: But if there
14 was a failure, it would represent a significant problem
15 if we only had one distribution network?
16 13311 MR. HARA: Yes, but it hasn't
17 happened. The design is such for the prevention of
18 fire and earthquake. There hasn't been a major
19 telephone exchange fire, I don't think, in North
20 America for a long time.
21 13312 COMMISSIONER McKENDRY: But there has
22 been major telephone system failures primarily due to
23 software faults.
24 13313 MR. HARA: Software, yes, that's
25 human fallibility. But again by sharing information
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1 throughout the world -- like SaskTel recently did have
2 a software breakdown. The only way they could start it
3 up again was to, as they say, reboot, reload the
4 program. I don't think they have found the bug yet.
5 These problems have been solved.
6 13314 NTT had the same problem and they
7 shut down Kobe City for 48 hours. They found the bug,
8 so that has been corrected and they corrected other
9 programs throughout the nation. I have offered SaskTel
10 help to contact NTT about that.
11 13315 COMMISSIONER McKENDRY: Your proposed
12 system would be very software-dependent and you are
13 absolutely confident that today we have resolved all
14 the software defects that exist in these systems?
15 13316 MR. HARA: Yes, since it's only
16 switching that we are talking about. Digital switching
17 has been going on for a very long time, so technically
18 it's very reliable and the software bugs -- well,
19 sometimes they come up, but it's very rare. It's like
20 arguing that one airplane crash makes flying very
21 dangerous, but if you look at the statistics, it's much
22 safer than driving your car.
23 1235
24 13317 COMMISSIONER McKENDRY: Let me ask
25 you about the table you have on page 3 of your written
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1 submission. It is headed "Free Market Contents". It's
2 Table 1 on page 3.
3 13318 I'm curious. When I read down the
4 list, it leads me to a question that I would be
5 interested in having your comments on. When I read
6 down the list, there is very little on your list that
7 isn't more or less available on the Internet today.
8 13319 How does the Internet scenario and
9 the vision that the federal government has for
10 connecting homes in Canada to the information highway,
11 to the Internet -- in a sense, are we evolving a system
12 already that meets some of the objectives and goals
13 that you have? For example, there is broadcast
14 television on the Internet today in a quality that is
15 probably not acceptable to most people, but undoubtedly
16 that will change over time.
17 13320 Are we really heading already towards
18 what you are talking about?
19 13321 MR. HARA: We are heading, dragging
20 many problems -- bottlenecks -- like you mentioned,
21 quality. Once you have seen high definition TV on a
22 big screen, it's very difficult to go back to the
23 standard screen that we see today. Every time I visit
24 Japan, almost every year, I go to Akihabara, sit down
25 for a whole afternoon looking at high definition TV.
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1 It's that enjoyable. So quality is the issue.
2 13322 Also, the bandwidth that is delivered
3 to the home is an issue too, because if you want high
4 definition TV plus a TV channel -- one TV channel or
5 two TV sets serviced -- the current Internet quality
6 and bandwidth speed also is an issue. For Internet, to
7 access information and waiting for the screen to fill
8 up with graphic data, it is very time-consuming. It is
9 a waste of time. If that comes up within an instant,
10 everybody is pleased. For that, you need a system that
11 I have described.
12 13323 COMMISSIONER McKENDRY: The point I
13 am trying to make is, don't we have a free market
14 policy already? Isn't the Internet a free market
15 policy? There is content on there ranging from
16 broadcast TV from South America to broadcast television
17 from North America. There is American content,
18 Ukrainian content. The Internet is a free market, so
19 isn't --
20 13324 I guess the point I am putting to you
21 with respect to the Internet, it strikes me that it is
22 a free market policy that has happened. The logic of
23 your submission to us is, if the free market policy is
24 put in place, somebody will build it. Well, there's
25 the free market policy, the Internet.
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1 13325 My question to you is, why would it
2 be built then? You have your free market policy.
3 13326 MR. HARA: The bandwidth to the home
4 is insufficient to support everything that a consumer
5 would really pay for.
6 13327 It is not clear to the enterprisers
7 that there is indeed a free market policy to put the
8 fibre to the home in, and that they are free to choose
9 whatever content they wish to supply on an universal
10 access basis. That is not clear right now. Also,
11 there is no guarantee that they will provide universal
12 access, and that is where CRTC's policy should come
13 into, in the interest on the side of the consumer.
14 13328 COMMISSIONER McKENDRY: So the
15 problem essentially is resolving the technical problems
16 associated with the Internet, more bandwidth, which
17 your network would take care of, and so on. That is
18 the missing link, really, it isn't the free market
19 policy; the missing link is the infrastructure.
20 13329 MR. HARA: Yes. Right now, to make
21 really the Internet or -- really the delivery system I
22 described is ideal for Internet, plus every other
23 service that the home or the subscriber office will
24 need.
25 13330 COMMISSIONER McKENDRY: Do you have
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1 any information to help us think this through in terms
2 of financial modelling and so on, that would underlie
3 your proposal? I understand the theory of it, if you
4 like, but have you done any financial modelling in
5 terms of the capital costs that would be required, all
6 the other related expenses, the forecast revenues and
7 so on?
8 13331 MR. HARA: I have done a very basic
9 capital cost analysis, and assuming something like 10
10 per cent capital cost, interest, that sort of thing, I
11 have done the per subscriber cost. It's anywhere
12 between $2,000 -- $2,500 Cdn dollars, $2,000, fibre to
13 the home cost. In addition to that is the switching
14 system.
15 13332 Yes, I have done those analyses. I
16 included that in my last appearance when I appeared
17 here last time -- two years ago, was it?
18 13333 COMMISSIONER McKENDRY: Two years ago
19 I wasn't here, so I can't tell you.
20 13334 MR. HARA: If you wish to have that,
21 I would be glad to revise the numbers.
22 13335 COMMISSIONER McKENDRY: If it
23 isn't -- I don't want you to go through any extreme
24 amount of work --
25 13336 MR. HARA: They will be very basic
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1 numbers.
2 13337 COMMISSIONER McKENDRY: -- but in
3 order for us to properly think this through, I think we
4 have to have some sense of what it would cost to do,
5 and what the associated revenues would be. For
6 example, you indicated that the fibre to the home would
7 cost $2,500 per subscriber?
8 13338 MR. HARA: Yes. So you have to --
9 13339 COMMISSIONER McKENDRY: That's the
10 fibre from the switch to the home?
11 13340 MR. HARA: From the switching centre
12 to the home, yes.
13 13341 COMMISSIONER McKENDRY: And that is
14 assuming what? That you will get access to existing
15 ducts that are there?
16 13342 MR. HARA: Yes. We will use the
17 available right-of-way.
18 13343 COMMISSIONER McKENDRY: Those are my
19 questions for you. It is an interesting idea, and I
20 appreciate very much your taking the time to come and
21 talk to us about it.
22 13344 MR. HARA: I appreciate the
23 opportunity to speak on technology, which not very
24 often is listened to. I am glad to have had the
25 audience today.
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1 13345 COMMISSIONER McKENDRY: Thank you,
2 Madam Chair.
3 13346 THE CHAIRPERSON: Commissioner
4 Cardozo.
5 13347 COMMISSIONER CARDOZO: Thanks, Madam
6 Chair.
7 13348 Dr. Hara, just a couple of questions.
8 I wanted to perhaps just summarize your discussion, as
9 I understood it, with Commissioner McKendry.
10 13349 Are you talking about essentially
11 having a new set of wires with a higher bandwidth?
12 13350 MR. HARA: Yes.
13 13351 COMMISSIONER McKENDRY: And that
14 would carry all the services you have listed.
15 13352 MR. HARA: Yes, on a centrally
16 switched basis. That's where the -- basically,
17 infinite bandwidth comes in, or universal access can be
18 guaranteed.
19 13353 COMMISSIONER McKENDRY: Could you
20 carry hydro as well?
21 13354 MR. HARA: Electrical power?
22 13355 COMMISSIONER McKENDRY: Yes.
23 13356 MR. HARA: No.
24 13357 COMMISSIONER McKENDRY: That would be
25 separate. So at least you have two wires going into
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1 the home.
2 13358 MR. HARA: You can also -- along with
3 the hydro wire, you can lash the fibre to the hydro
4 wire. You can do that.
5 13359 COMMISSIONER McKENDRY: I take it
6 with this infinite capacity you could deal with the
7 capacity problem we have with television, which is that
8 the current cable system is not able to take the kind
9 of -- not able to accommodate, say, another 50 or 10
10 channels.
11 13360 MR. HARA: That's right, particularly
12 when it comes to high definition, digital high
13 definition TV, and the new digital TV broadcast
14 standard. If I may elaborate.
15 13361 The approach that the cable TV
16 companies have to take, they are forced to have a
17 mixed -- it is basically digital in signal, but when
18 they transmit it, they have to have an analog
19 component, meaning either it is amplitude or in time.
20 That makes a set top box $500. They are having a tough
21 time bringing it lower than $500.
22 13362 When you go to the system I
23 described, it's pure digital pulse code modulation.
24 It's just 0s and 1s, nothing else. That makes the cost
25 much lower, and you are getting a lot of bandwidth that
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1 way too, using fibre.
2 13363 COMMISSIONER McKENDRY: So you
3 wouldn't be able to transmit analog over this system.
4 13364 MR. HARA: The way you deal with
5 analog signals is you digitize it, the interface guard
6 take it over the fibre, and the subscriber unit inserts
7 a card and you go from digital to analog conversion.
8 So analog is handled as well.
9 13365 COMMISSIONER McKENDRY: Thanks very
10 much. That covers my questions.
11 13366 THE CHAIRPERSON: Commissioner
12 Pennefather.
13 13367 COMMISSIONER PENNEFATHER: Just a
14 quick question on the content side.
15 13368 You mentioned, for example, National
16 Arts Centre productions. Are you talking about live
17 performances?
18 13369 MR. HARA: Both ways. It could be
19 live performance, real time, and it can be record on
20 the digital video disk and offered throughout the
21 country. So you can have it both ways. That means
22 much more revenue for the National Arts Centre, or any
23 other performing centre, for that matter.
24 13370 COMMISSIONER PENNEFATHER: We assume
25 that that could be done now, assuming that people had
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1 the money to produce a live performance. Why would
2 this system suddenly make it better or easier to do
3 that? Who is going to pay?
4 13371 MR. HARA: Let's say you make a
5 digital video disk and offer it for sale. It would be,
6 on an expensive side, let's say $10, $20 -- even $10,
7 $20, would be -- well, $20 would be expensive, maybe
8 $10 is all right. But when you can dial up and get
9 that for $2 or $3, then it will be much more popular,
10 and your revenue consequently will reach the mass
11 market stage.
12 13372 COMMISSIONER PENNEFATHER: So it is
13 basically a video on-demand system. For example, the
14 collection of the National Film Board could be
15 available to me on demand?
16 13373 MR. HARA: Exactly, yes. Everything
17 that the National Film Board holds now can be made
18 available.
19 13374 COMMISSIONER PENNEFATHER: Even in
20 its current analog capacity?
21 13375 MR. HARA: Yes. Conversion from
22 analog to digital format is a very standard technology.
23 13376 COMMISSIONER PENNEFATHER: And the
24 cost of that conversion would be borne by the
25 institution, if one had to place the entire collection
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1 on video disk?
2 13377 MR. HARA: It will be borne
3 eventually by the subscriber. The cost to watch that
4 film contains the conversion cost as well, but the
5 conversion is only done once, and it is sold to many,
6 therefore the per subscriber cost will be very small.
7 13378 COMMISSIONER PENNEFATHER: So you are
8 saying that those revenues eventually will go back to
9 the producer, the Arts Centre, the Film Board, et
10 cetera?
11 13379 MR. HARA: It should.
12 13380 COMMISSIONER PENNEFATHER: It should?
13 13381 MR. HARA: Yes. Of course, if the
14 delivery system entity that constructed the delivery
15 system could buy the rights outright and maybe make
16 more money that way -- it's a competitive commerce.
17 13382 COMMISSIONER PENNEFATHER: Does your
18 system assure that if everybody, for example, in the
19 country wanted the same film at the same time, it could
20 happen?
21 13383 MR. HARA: Yes. That's very easy to
22 do in the switching system. It's called -- you have
23 one source, and everybody can connect up to it.
24 13384 This happens in -- some switches have
25 blocking, the same thing as your telephone, you get a
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1 busy signal. You design it to make sure that blocking
2 does not take place. So within that switching centre,
3 yes, everybody could see the same program.
4 13385 COMMISSIONER PENNEFATHER: If I am
5 right, you said to Commissioner McKendry that this
6 system, to be universal access, there should be no
7 Canadian content requirements. It should be -- I
8 didn't quite understand that.
9 13386 MR. HARA: The Canadian contents
10 should be guaranteed access, but once you do that,
11 it's -- if you follow the spirit of the NAFTA, the
12 North American Free Trade Act, I think you will have to
13 provide access to non-Canadian content as well.
14 13387 COMMISSIONER PENNEFATHER: Guaranteed
15 access by whom? Who would guarantee this access? I
16 must not be understanding.
17 13388 MR. HARA: The entity that built the
18 delivery system. Everybody who comes will put your
19 signal on, either for a fee, or we like your contents
20 so much we will pay you for it.
21 13389 COMMISSIONER PENNEFATHER: So it is
22 another gatekeeper system basically. It's like a
23 gatekeeper. You will choose the content for the
24 system?
25 13390 MR. HARA: The gatekeeper is the
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1 subscriber. They pick and choose what they want. And
2 since it is universally accessible -- well, eventually
3 the subscriber will decide what is shown or what is
4 viewed, of course.
5 13391 COMMISSIONER PENNEFATHER: Thank you.
6 13392 THE CHAIRPERSON: Professor Hara,
7 when you do your economic modelling of taking this from
8 slides to reality, do you take into consideration the
9 fact that, as regards investment in fibre to the home
10 and this type of ideal system for delivery, that
11 investors take into consideration the systems that
12 exist already, especially in Canada, where the coaxial
13 cable has penetrated very deeply into the country.
14 13393 Therefore, the desire to increase the
15 intelligence of the coaxial cable capacity or
16 infrastructure, and increase the bandwidth of the
17 copper infrastructure rather than find an economic way
18 of bringing a new switched fibre to the home, I have
19 never to date seen a modelling that can bring
20 fibre-optics any further than the curb.
21 13394 Do you take that into consideration,
22 that it's not only the cost of building this, it's the
23 cost of having an infrastructure which, to a certain
24 extent, delivers or works. Are you saying that you can
25 abandon that for a new structure, or abandon at least
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1 part of it, and that the services you will be able to
2 deliver will be enough to then recover --
3 13395 MR. HARA: The capital costs.
4 13396 THE CHAIRPERSON: -- the extremely
5 expensive capital costs.
6 13397 MR. HARA: Yes, but --
7 1255
8 13398 THE CHAIRPERSON: Have you ever seen
9 a model, other than yours, that says that it is
10 economically possible to bring fibre to the home?
11 13399 MR. HARA: The one problem is the
12 broadcast type cable TV approach of fibre to the curb
13 or fibre coax hybrid that the Americans are pursuing.
14 One thing that is happening is that the brilliant
15 engineers and inventors have all gone into the computer
16 side. They always think broadcast, local air networks.
17 It is all broadcast mode.
18 13400 On the telephone side, the centrally
19 switched approach has been neglected. This sort of
20 thinking about this sort of centrally switched
21 configuration has not reached the decision-makers in
22 almost all the corporations.
23 13401 Middle management, however, from
24 their technology, they are aware of my arguments. I
25 gave a seminar at the Pacific Telecommunication
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1 Conference. They agreed. They said: Your approach is
2 the best, common sense, and it is good for the people,
3 good for the country. But you have to tell your
4 management."
5 13402 No, they never listen to us.
6 13403 One thing that --
7 13404 THE CHAIRPERSON: Perhaps they are a
8 banker.
9 13405 MR. HARA: The banker has to listen
10 to this.
11 13406 The videotape shops are making lots
12 of money. If you look at the sales in Canada between
13 1984 to 1994, in over ten years the videotape sales or
14 rentals have doubled -- and that is with very poor
15 quality tapes. In comparison, in that same period, the
16 theatre goer's income has only increased about 10, 20
17 percent.
18 13407 Videotape shops are an indicator that
19 people want choice of content and time. At SaskTel's
20 videotape trial using fibreoptics -- I had the
21 privilege of designing their transmission system --
22 their statistics indicate that if you have video on
23 demand, even with a very small videotape shop
24 selection, the sales doubled.
25 13408 Add to that standard audio type
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1 selection, the ethnic movie selection, National Arts
2 Centre performances, and also education, information,
3 Internet access, the income is going to be very large.
4 This has not been understood by management, or
5 management has not spoken to the bankers about this.
6 13409 Statistics show that it is here in
7 Canada, but more so in detail in Japan. The videotape
8 sales have exponentially grown.
9 13410 THE CHAIRPERSON: I have only one
10 more question.
11 13411 Your approach is based on this free
12 market concern. Yet you have admitted or acknowledged,
13 I think, the possibility that we would end up with one
14 system because the cost will be such that we will have
15 one infrastructure and one carrier, or possibly that
16 would happen.
17 13412 Even now there are those who have
18 concerns that as more and more money is put into
19 increasing the bandwidth of copper, increasing the
20 intelligence of coaxial cable by bringing fibre closer
21 and closer to the home -- and I am simplifying,
22 obviously. There are those who have concerns that
23 these two industries may end up being owned by one
24 party with deeper pockets.
25 13413 I find that somewhat contradictory
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1 that you start with a desire for a free market
2 approach, but that leads then to a monopoly carrier
3 that one would require, I suspect, to regulate.
4 13414 MR. HARA: Yes.
5 13415 THE CHAIRPERSON: And then to have
6 another layer of the packager or wholesaler of content,
7 and then the producer of content at the other end.
8 13416 I can't see in a society like Canada
9 having --
10 13417 Commissioner McKendry raised the
11 vulnerability of having one system technically. There
12 is also vulnerability with regard to gatekeeping, et
13 cetera. It would need intensive economic regulation.
14 So your free market approach tends to lead us to a
15 monopoly of carriage.
16 13418 MR. HARA: The free market approach,
17 the old fashioned capitalism, the strongest will
18 dominate and then become a monopoly, that seems to be
19 the progression. That is where the CRTC regulatory
20 function must come in.
21 13419 If it does indeed get to the danger
22 of a single entity controlling transmission to the
23 home, you have to do something. That is why I
24 mentioned separation of carrying content.
25 13420 We used to have that in telephone
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1 service.
2 13421 THE CHAIRPERSON: This was at a time
3 when you mainly delivered voice, which was very
4 narrowcast, obviously, not broadcast.
5 13422 The separation of content had a
6 different flavour, it seems to me. It is more like
7 e-commerce or e-mail. But certainly broadcast type of
8 content does not raise the same questions, I don't
9 think, as the old style of separation of carriage and
10 content.
11 13423 MR. HARA: One thing occurred to me
12 about the bankers' interest.
13 13424 The system I described, the centrally
14 switched fibre to the home, compared to the fibre coax
15 hybrid -- fibre coax hybrid has a lot of equipment out
16 in the field to be serviced. Fibre to the home has the
17 equipment at the switching centre or the subscriber's
18 home, which is independent from everybody else's units.
19 13425 This means that the maintenance cost
20 is very low. Even today the cable TV people have a
21 difficult task in maintaining their distribution
22 amplifiers in the field in minus 40 Saskatchewan
23 weather or plus 30 or 40 weather sometimes in Ontario.
24 13426 The maintenance costs, when you start
25 including that, the fibre to the home looks much better
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1 with the increased traffic.
2 13427 THE CHAIRPERSON: Thank you very
3 much, Professor Hara. That was interesting. It should
4 lead us to do some more homework.
5 13428 MR. HARA: I will do my homework and
6 I hope you will be able to read what I have to provide.
7 13429 THE CHAIRPERSON: Thank you very
8 much.
9 13430 We will take our lunch break until
10 2:00.
11 --- Recess at / Suspension à 1300
12 --- Upon resuming at / Reprise à 1400
13 13431 THE CHAIRPERSON: Good afternoon.
14 13432 Madam Secretary, would you please
15 introduce the next participant.
16 13433 MS BÉNARD: Thank you, Madam Chair.
17 13434 The next presentation will be by Bell
18 ExpressVu, and I would invite Mr. Chris Frank to start
19 the presentation.
20 PRESENTATION / PRÉSENTATION
21 13435 MR. FRANK: Thank you very much.
22 13436 Good afternoon, Madam Chair, Members
23 of the Commission. It has been a while since Bell
24 ExpressVu has appeared before you. I see a number of
25 new faces, and at least one familiar one in a new
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1 position.
2 13437 Congratulations on your appointments,
3 new and not so new.
4 13438 My name is Chris Frank. I am
5 Vice-President of Government Relations and Corporate
6 Development at Bell ExpressVu.
7 13439 My main message today is that
8 Canadians definitely do have a significant appetite for
9 Canadian programming and Canadian broadcasting
10 services. Our company's success in the last 12 months
11 is a testament to this reality.
12 13440 Before jumping into the heart of my
13 presentation, perhaps I can start with an update on our
14 company.
15 13441 Bell ExpressVu is 100 percent owned
16 by BCE. Corporately, we are a division of Bell
17 Satellite Services Inc., which is also 100 percent
18 owned by BCE.
19 13442 The DTH business, along with
20 pay-per-view and SRDU -- if we are fortunate enough to
21 be awarded licences for these separate undertakings --
22 will be operated under the name of Bell ExpressVu.
23 13443 Since we launched our service a year
24 ago, we have been fortunate enough to enjoy a warm
25 reception from consumers across the country. Our
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1 subscriber brace broke through the 100,000 mark during
2 the summer, and we are now well on our way to reaching
3 200,000 customers.
4 13444 As was originally projected, the
5 majority of our early subscribers are from rural and
6 under-served Canada. Therefore, it is fair to say that
7 Canadian DTH is meeting the original public policy
8 objective envisaged for it, extending Canadian
9 programming and Canadian broadcasting services to
10 consumers who have traditionally been without any real
11 choice and variety.
12 13445 With our soon to be upgraded plant
13 and equipment, combined with a new incremental space
14 segment, our company will have sufficient satellite
15 capacity to create a service offering second to none.
16 With this next step, we will mount a significant
17 competitive challenge in all market sectors, including
18 major urban centres.
19 13446 Our current channel line-up offers an
20 impressive digital, audio and video count in eastern
21 and western Canada. In the east, we have 40 audio and
22 82 video broadcasting services; in the west, 40 audio
23 and 59 video signals.
24 13447 Later this fall, on or about November
25 17th, we will be increasing our channel line-up by 30
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1 video channels through technical improvements to our
2 digital video compression equipment. This will
3 increase our video count in the east to 103 channels;
4 and in the west, to 75 channels.
5 13448 You might be interested in knowing
6 that all of these additional broadcasting services will
7 be licensed Canadian broadcasting channels.
8 13449 Here is a breakdown: 6 pay-per-view
9 channels -- 4 English, 2 French; 7 Canadian speciality
10 TV services; 16 local off-air services from Vancouver,
11 Calgary, Edmonton, Winnipeg, Toronto, Ottawa, Montreal
12 and Saint John, as well as one U.S. service.
13 13450 My overriding message to you today is
14 that Bell ExpressVu's advantage in the marketplace is
15 really twofold: first and foremost, and in the context
16 of this hearing, our Canadian content.
17 13451 The main difference between Bell
18 ExpressVu and DirecTV, and other U.S. DBS service
19 providers for that matter, is that we distribute a full
20 range of Canadian services in English, French,
21 Cantonese, German, Hindi, Tamil, Punjabi, Italian and
22 other languages found across this diverse country of
23 ours.
24 13452 In the final analysis, the
25 competitive struggle between licensed Canadian DTH
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1 companies and the unlicensed U.S. grey market will be
2 won or lost in the marketplace. We firmly believe that
3 our absolute best point of demarcation is Canadian
4 programming, programming not readily available on
5 foreign services. When we obtain new incremental
6 satellite capacity, and after we have added all the new
7 Canadian specialty services, we hope that the
8 Commission would authorize new foreign services for
9 digital distributors to complement this robust Canadian
10 line-up.
11 13453 The second significant advantage we
12 have is our state of the art digital 100 percent
13 addressable technology. The picture and sound quality
14 that we provide helps drive our sales. Please note,
15 for instance, that movies and sports top our
16 subscribers' "wish list" of service.
17 13454 To that end, more than 60 percent of
18 our customers currently buy Pay TV. That is six times
19 the percentage that purchase Pay TV from cable. And
20 our sports packages are in more than 90 percent of our
21 customers' homes.
22 13455 That is why CTV sports and
23 pay-per-view are at the head of the new programming
24 services we are launching next month. It is also why
25 we have applied for our own pay-per-view licence. This
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1 will give us an opportunity to custom design our own à
2 la carte service for our subscribers and develop a
3 further point of product differentiation from our
4 cable, grey market and other competitors.
5 13456 Our launch of new -- to us, that
6 is -- local channels this fall means that we will have
7 service from ten of Canada's largest broadcasting
8 markets. Thanks to a mutually satisfactory and
9 beneficial arrangement between Bell ExpressVu and the
10 Canadian Association of Broadcasters, we will be able
11 to offer all these local signals without blackout.
12 13457 Perhaps I can delve into that
13 agreement a bit, because I believe it demonstrates our
14 commitment to Canadian programming and Canadian
15 broadcasting services.
16 13458 As an aside, you might be interested
17 in knowing that ExpressVu offers local broadcasting
18 services in an all-Canadian basic package which sells
19 for $7.95. This includes multiple time shifted
20 stations of CBC, Radio-Canada, TV Ontario, Knowledge
21 Network, CTV, Global, Chum, WIC, Baton, A Channel and
22 ATV, as well as the specialty services Newsworld, RDI,
23 CBC Radio and the Galaxy Digital Audio Service.
24 13459 This last service, I might add, many
25 of our subscribers believe is the digital icing on the
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1 cake. CBC's unique blend of mostly Canadian and the
2 best of foreign produced music is proof positive that
3 an expanded specialty broadcasting sector without the
4 CBC would be like an ocean without fish.
5 13460 Our basic French language package
6 includes Radio-Canada, Télé-Québec, TFO, TVA, TQS, CBC,
7 CTV, as well as the aforementioned specialty services.
8 13461 For a modest increment of $1.95, an
9 English-language subscriber can add the French-language
10 basic services, and vice versa.
11 13462 So for less than $10 a month, an
12 ExpressVu subscriber can fill his or her screen with 50
13 essential and important Canadian broadcasting services.
14 13463 Our agreement with the CAB is a
15 first. By this agreement, Bell ExpressVu is committed
16 to maximize interest system simultaneous substitution,
17 offer non-simultaneous substitution, and provide two
18 streams of direct compensation, totalling as much as 45
19 cents per subscriber per month to broadcasters not
20 distributed on our DTH system in respect of subscribers
21 in their broadcast markets.
22 13464 THE CHAIRPERSON: Mr. Frank, this
23 application is still before the Commission?
24 13465 Are you referring to the agreement
25 that would allow you to not substitute?
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1 13466 MR. FRANK: No. It is an agreement
2 that we have signed with the CAB. It is part of an
3 application, but the agreement itself is not in for
4 approval.
5 13467 THE CHAIRPERSON: It is not central
6 to --
7 13468 MR. FRANK: No, it is not what we are
8 seeking approval for. It is just part of the
9 documentation.
10 13469 The agreement itself is signed and
11 sealed between us and the CAB, but it does not, I don't
12 believe, form --
13 1410
14 13470 MR. BLAIS: It is just that it is the
15 basis of something the Commission will have to decide.
16 You know, if you could perhaps --
17 13471 MR. FRANK: Exercise those parts.
18 13472 MR. BLAIS: That's right.
19 13473 MR. FRANK: On a prospective basis.
20 13474 MR. BLAIS: Yes.
21 13475 THE CHAIRPERSON: Yes, just to
22 forewarn you before that --
23 13476 MR. FRANK: I'm sorry. I didn't even
24 think this would -- I understand.
25 13477 THE CHAIRPERSON: Just to remind
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1 ourselves that it is before the Commission and it would
2 not be quite appropriate to go into the value of it at
3 this time, if you understand.
4 13478 MR. FRANK: We are heartened by the
5 recently made comments of the Specialty and Premium
6 Television Association in a recent intervention to the
7 Commission. This important association comment on the
8 diligence of our company in respect of the distribution
9 of Canadian specialty and premium broadcast services.
10 13479 They made special reference to the
11 multicultural services we carry and went on to note
12 that this was essentially telling in light of satellite
13 capacity challenges that we have faced since our
14 inception.
15 13480 The point of the foregoing is that
16 our recent successes across the country in the
17 extremely competitive electronics retail market are
18 based in no small measure on Canadians' obvious desire
19 to watch Canadian programming and Canadian broadcasting
20 services.
21 13481 How can Bell ExpressVu and other
22 digital distributors continue to contribute to the
23 promotion of domestic programming and broadcasting
24 services? We should be prepared first of all to
25 provide adequate shelf space so that all Canadian
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1 services contemplated by public policy be carried.
2 13482 Next, we should be prepared to
3 discuss the widening of the application of simultaneous
4 substitution to include specialty channels. I
5 understand that this is not a universally supported
6 idea on the part of programmers, however, many
7 specialty services would undoubtedly benefit from this
8 voluntary negotiated extension of public policy.
9 13483 Programming siphoning is an issue,
10 however, it should be tempered by the competitive world
11 in which we now live and do business. As an example,
12 TSN is clearly benefiting from our substitution of
13 their signal over the Fox network for the current major
14 league baseball playoffs.
15 13484 This practice could be extended to
16 other specialty TV services on mutually beneficial
17 terms. In this way, those specialty services that are
18 not interested in such a practice or would not be
19 affected by the give-and-take of this public policy
20 enhancement.
21 13485 Express believes that it can sell
22 more Canadian programming and broadcasting services if
23 it is better able to harness the potential of its
24 digital delivery platform. For some time we have
25 advocated the removal of tiering and linkage rules for
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1 digital distributors.
2 13486 We believe that a digital world
3 simple predominance combined in today's access
4 requirements will ensure Canadians have lots of
5 opportunity to watch the widest selection of Canadian
6 programs and services. This suggestion has not taken
7 root, so perhaps a transition plan might be a more
8 reasonable approach to this issue.
9 13487 In that vein, may I suggest, first,
10 that the five to one linkage of pay services to B list
11 items be increased to eight to one for digital services
12 and that digital BTUs be permitted to add 2B list
13 services in specialty packages and that the 2B list
14 services included in specialty packages could be
15 different from one customer to another. This is
16 possible with addressable hardware and allows for the
17 regional and time zone sensitivities of this vast
18 country.
19 13488 With respect to the first suggestion,
20 the pay-TV services should see an even greater
21 penetration of our subscriber base without erosion of
22 any other services. The first proposal would be
23 complemented by the second suggestion in that Canadian
24 specialty services would get more lift from additional
25 B list items.
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1 13489 The third suggestion simply gives
2 Canadian consumers more choice in value from the
3 relevant and complementary foreign services by
4 maximizing the inherent utility of the digital
5 platform.
6 13490 In the final analysis, these
7 suggestions are about giving Canadian consumers more
8 choice and variety while assuring that Canadian
9 programmers get plenty of high visibility shelf space
10 to sell their products. After all, without
11 distribution, even the best product can fail. Plus, a
12 change in the rules for digital distributors will
13 incent other distributors to upgrade their antiquated
14 plant and equipment to remain competitive and to the
15 benefit of all Canadian consumers.
16 13491 I thank you for your attention and
17 the opportunity to make this presentation on a chilly
18 fall afternoon. I would be pleased to answer any
19 questions you might have for us.
20 13492 I do apologize if it was
21 inappropriate to mention the ExpressVu-CAB deal.
22 13493 THE CHAIRPERSON: No problem at all.
23 13494 For us, it's almost good news that
24 it's bad weather outside. Then we don't feel so sorry
25 for ourselves. Thank you for bringing us the bad news.
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2822
1 We and multimedia like bad weather news. Apparently
2 that's when they get the most viewers, when there is
3 bad weather.
4 13495 MR. FRANK: Weather uncertainty.
5 13496 THE CHAIRPERSON: We feel less sorry
6 for ourselves when there's bad weather, so thank you
7 for that.
8 13497 Commissioner Pennefather.
9 13498 COMMISSIONER PENNEFATHER: And to try
10 to be as gracious as the Chair, I hope that we can
11 offer you a warm reception if it's that chilly outside.
12 13499 MR. FRANK: Thank you very much. I
13 feel the heat.
14 13500 COMMISSIONER PENNEFATHER: We could
15 go on, but I think we better proceed.
16 13501 I would like to just take a bit of a
17 break and step back a bit and really ask you, since you
18 are here in the context of a broader policy discussion,
19 to, if you would, summarize some of your remarks,
20 comments and recommendations in light of the four
21 policy objectives that the Chair tabled in her opening
22 remarks. I will repeat them for you.
23 13502 Just a comment. I will go through a
24 number of points with you in that regard. A lot of
25 what you have said today and certainly what you noted
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2823
1 in your written submission are areas which will be
2 covered in an upcoming licensing framework proceeding,
3 so we will leave those to that point.
4 13503 Again, if we look from your
5 perspective and your side of the business at the four
6 objectives we are looking for, how can the Commission
7 assure that quality Canadian programming, particularly
8 under-represented categories, is produced and broadcast
9 to the largest number of Canadians? Question one.
10 13504 Two, how can the Commission help to
11 ensure that all players have the ability to adapt to a
12 changing environment characterized by new technologies,
13 new competitors, new corporate structures, new national
14 and international opportunities?
15 13505 The third point, and this will be I
16 think very interesting to hear your comments on, how
17 can the regulatory framework ensure the unique
18 characteristics of the French language market are
19 maintained and recognized?
20 13506 Finally, how can a regulatory
21 framework recognize the particular requirements of the
22 different elements of the system and balance the desire
23 for flexibility with the need to ensure equity and the
24 protection of the public interest?
25 13507 I do read these points within your
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2824
1 remarks. I wonder if you could comment on them and how
2 your recommendations fit these four objectives.
3 13508 MR. FRANK: The objective of our
4 company is to take Canadian programming and the foreign
5 programming we are allowed to distribute to as many
6 Canadians as possible. The ubiquity of satellite
7 offers us the opportunity to reach Canadians wherever
8 they may live, in urban Canada, in rural Canada and
9 underserved Canada.
10 13509 We know that the U.S. DBS providers
11 got to the Canadian market before us. In this context,
12 we in retrieving those subscribers from the clutches,
13 if you will, of the U.S. DBS providers, we are able to
14 offer those Canadians and Canadians who buy our service
15 for the first time the opportunity for a full range of
16 conventional broadcasting, specialty broadcasting and
17 premium broadcasting.
18 13510 We contribute 5 per cent of the
19 revenue we earn from those folks to the creation -- to
20 a production fund which aids and abets the development
21 of more Canadian production.
22 13511 Part of my message today was that by
23 bringing more Canadian services, perhaps even launching
24 some new Canadian services because of the traffic jam
25 on the current analog cable systems across the country,
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2825
1 we can provide more diverse service, better service and
2 at the same time provide incremental revenue to the
3 production of existing and new Canadian product.
4 13512 COMMISSIONER PENNEFATHER: Two points
5 on that. In so saying, and I think in your paper you
6 have also noted in paragraph 8, the pairing of
7 non-Canadian services gives lift to Canadian services
8 and yet I have noted other interveners have brought to
9 our attention that this is no longer the case. It's
10 not a thesis that is holding true today.
11 13513 I also noted in your remarks you are
12 putting a lot of emphasis on the strength and the
13 excellence of Canadian specialties and the fact that --
14 you also say in paragraph 5 that you recognize a large
15 part of your competitive edge lies in Canadian
16 programming.
17 13514 Is this traditional assumption that
18 American services provide the lift to Canadian services
19 still true or not? Do you want to comment on this?
20 13515 MR. FRANK: Sure. It may or it may
21 not be true, depending on the individual
22 consumer/subscriber. Consumers are becoming much more
23 sophisticated every day. They know what they want.
24 13516 I think the quick answer is that some
25 customers of ours enjoy a bigger, fuller package and if
StenoTran
2826
1 we are able to complement all of the Canadian services
2 with American services, that's more attractive to that
3 subset of customers. Other customers would like to
4 have smaller packages, more selective, tailor their
5 programming to their particular needs and they don't
6 wish enhanced product or add-on packages.
7 13517 As a 100 per cent addressable
8 distributor, we can tailor our packages to those two
9 universes. The quick answer is we can provide, for
10 instance, a film package with eight -- if you accept my
11 thesis this afternoon -- with eight U.S. B list items
12 or we could provide the film service on a stand-alone
13 basis.
14 13518 COMMISSIONER PENNEFATHER: Even if
15 you say that the competitive edge lies in the Canadian
16 programming.
17 13519 MR. FRANK: There's no question for
18 us that the competitive edge for us is in Canadian
19 services because that's why people buy our service.
20 It's a very direct sort of relationship.
21 13520 COMMISSIONER PENNEFATHER: But you
22 still feel you need the American programming.
23 13521 MR. FRANK: Simply because our
24 competition has it and to the extent we have shelf
25 space for it without compromising Canadian services, we
StenoTran
2827
1 believe yes, we need it to be competitive.
2 13522 If you are looking at the DirecTV
3 service, for instance, they have a full range of U.S.
4 services and virtually no Canadian services. If we can
5 offer the best of both, I think that our product will
6 sell and sell like hotcakes.
7 13523 COMMISSIONER PENNEFATHER: As I
8 mentioned, one of our important policy objectives is to
9 look at the regulatory framework in terms of the unique
10 characteristics of the French market.
11 13524 What are your comments on how we
12 should address the French market in particular and in
13 relation to what you have just said about the
14 competitive edge of Canadian programming, I am assuming
15 you are approaching the French market quite
16 differently.
17 13525 MR. FRANK: Yes, we are. We have to
18 the extent possible and practicable, we have two
19 distinct linguistic streams of programming.
20 13526 I think the biggest thing that we
21 bring to Canada and the French language market
22 immediately is the opportunity to take all of the
23 conventional and specialty and premium services coast
24 to coast to coast.
25 13527 As soon as we acquire more national
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2828
1 transponder space, we will be able to take TV off, for
2 instance, the basic French service, TQS, TéléQuebec,
3 TFO, right across the country so that a customer in
4 British Columbia can see exactly what a customer can in
5 Quebec. The current terrestrial systems, I think,
6 don't offer that kind of opportunity.
7 13528 COMMISSIONER PENNEFATHER: I wanted
8 to ask you about your paragraph 6 in your written
9 submission. Part of it says:
10 "Consequently, as a general
11 principle and to reward
12 innovation, investment in new
13 programming and modern
14 distribution systems should be
15 rewarded with increased
16 regulatory flexibility that
17 stimulates program production,
18 subscriber growth and respects
19 the objectives of the Canadian
20 broadcasting policy."
21 13529 That sentence does sum up some of our
22 concerns. Could you just expand on that paragraph what
23 you mean.
24 1425
25 13530 MR. FRANK: What we were driving at
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2829
1 there is the fact that we were digital. Our
2 shareholders have made the investment to launch an
3 all-digital service. It is the service of the future.
4 It is national in scope.
5 13531 By rewarding companies that invest in
6 the technology of the future, technology that provides
7 increased flexibility, both in terms of subscriber
8 choice and operation, you will encourage those
9 distributors who aren't digital to digitize and bring
10 Canadian consumers the digital opportunity in all modes
11 of distribution.
12 13532 The more we sell, the more Canadians
13 get the opportunity, especially in the DTH context, DBS
14 context to see Canadian programming. If you go back to
15 my comments on the U.S. grey market, there is virtually
16 no Canadian programming offered by the U.S. services.
17 We fill that opportunity and, in so doing, bring
18 Canadians back to Canadian services and create money,
19 incremental money for Canadian productions. So there
20 is a direct and an indirect benefit.
21 13533 COMMISSIONER PENNEFATHER: I am not
22 sure how this benefits Canadian productions. I don't
23 follow you.
24 13534 MR. FRANK: Through our contribution
25 to the 5 per cent programming fund, and the fact that
StenoTran
2830
1 we are delivering more eye-balls for Canadian
2 television programs.
3 13535 COMMISSIONER PENNEFATHER: Just an
4 editorial comment, the word "eye-balls" is banished
5 from our vocabulary here. So you should be careful how
6 you use it.
7 13536 But, in fact, speaking of viewership,
8 I would be interested to know, you mentioned a number
9 of subscribers now, if we just take a factual moment
10 here. Who are the subscribers now? Who is joining up
11 to this satellite world? Are they people new to the
12 system? Are they people who are converting from cable?
13 What is the profile?
14 13537 MR. FRANK: Mostly new to the system.
15 13538 COMMISSIONER PENNEFATHER: New to the
16 system.
17 13539 MR. FRANK: Mostly new to the system,
18 in rural and underserved Canada. Our early forecasts
19 were that that is where the majority of our customers
20 would come from. We have churned a number of people
21 out of the grey market into our service, and we are
22 making some in-roads in big cities.
23 13540 We expect that when we increase our
24 channel capacity significantly and begin to offer the
25 new services I was talking about earlier, that we will
StenoTran
2831
1 be even more competitive in urban Canada, and be able
2 to join the kind of competition that the Commission
3 envisaged when it released its pro-competition
4 doctrines over the last three or four years.
5 13541 COMMISSIONER PENNEFATHER: Am I
6 hearing you right that you are going to be -- your
7 competitive edge will be American digital services in
8 the future?
9 13542 MR. FRANK: No. That would be part
10 of our competitive edge, but the major part of our
11 competitive edge will be new Canadian services, new
12 Canadian specialty services, local broadcasting
13 services from across the country, and licences that
14 have yet to be issued.
15 13543 COMMISSIONER PENNEFATHER: What I am
16 getting at is we have had a number of discussions
17 around the time-frame for digital services and digital
18 programming and the transition to digital, et cetera,
19 in this country; and, in the United States, it is our
20 understanding that we can be looking to the near future
21 for digital programming being available.
22 13544 I am curious to know what you think
23 the impact of the transition there will be on your
24 business to digital programs that will be available to
25 American viewers. Do you think Canadians will begin to
StenoTran
2832
1 demand these same digital services?
2 13545 MR. FRANK: Are we talking about high
3 definition television?
4 13546 COMMISSIONER PENNEFATHER: We are
5 talking about both, high definition television
6 programming and the switch over from digital to analog
7 in the United States and how that will impact on your
8 business.
9 13547 MR. FRANK: Well, we are, as a
10 corporation, a member of the Canadian digital
11 television not-for-profit enterprise, and we are
12 committed -- we are digital now and we are committed to
13 bringing digital television to Canadians.
14 13548 We will have to work through that
15 process. I am not sure anybody fully understands how
16 quickly it is going to take off, or what kind of
17 consumer demand there is out there for it.
18 13549 Our challenge will be to ensure that
19 we can bring it -- that kind of service to Canadians in
20 a band width efficient way so that the number of
21 channels we offer doesn't shrink.
22 13550 I think Canadians have indicated to
23 us through their purchases that they want choice and
24 variety, and that will be a big challenge for us. But
25 we are committed to work with this group and committed
StenoTran
2833
1 to bring high definition television to Canadians sooner
2 rather than later.
3 13551 COMMISSIONER PENNEFATHER: I wondered
4 if you could also comment for us in terms, again, of
5 the broad policy objectives we were looking at. We
6 have had a number of proposals. One is from the CAB
7 regarding the importance of viewership. I am sure we
8 all agree that viewership is very central to the future
9 of Canadian television in this country. But they have
10 proposed that viewership be the process for a
11 regulatory framework, numbers of Canadians viewing
12 Canadian television.
13 13552 What are your comments on their
14 proposal?
15 13553 MR. FRANK: As a distributor, I would
16 be reluctant to wade into the debate with both feet. I
17 would simply like to say for the record that Canadian
18 programming is very important to us. The issue of
19 quality versus quantity, I think is best left to the
20 broadcasters and the Commission to determine.
21 13554 What is clear to us is that we need
22 to have a point of differentiation from U.S. providers,
23 and we want to bring this programming to Canadians
24 before.
25 13555 Obviously, it has to be good
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2834
1 programming, or people won't watch it. The trade-off,
2 though, between the absolute amount and the dollars
3 available for quality, I am not sure that I am
4 qualified to make a judgment --
5 13556 COMMISSIONER PENNEFATHER: Okay.
6 13557 MR. FRANK: -- as a distributor.
7 13558 COMMISSIONER PENNEFATHER: Thank you
8 very much. That completes my questions, Madam Chair.
9 13559 THE CHAIRPERSON: Commissioner
10 Cardozo.
11 13560 COMMISSIONER CARDOZO: Thanks, Madam
12 Chair.
13 13561 Mr. Frank, a couple of questions.
14 One is -- I hope this doesn't seem too blunt, but in
15 the whole discussion about distribution some people
16 have said we have a -- cable has a monopoly and ain't
17 nothing much changing in the near future, and despite
18 your numbers there is a theory that it isn't going to
19 change a lot, that cable will continue to have almost a
20 monopoly despite the other technologies.
21 13562 What is your take on that? I would
22 guess you don't agree.
23 13563 MR. FRANK: Well, it is clear that
24 cable is by far the most dominant carrier, distributor
25 of broadcasting services in this country, and I am not
StenoTran
2835
1 sure over the course of our initial licence period, our
2 seven-year licence period, that we are going to make a
3 significant dent in their numbers.
4 13564 However, having said that, I think
5 there is room, over a 10-year horizon, for DTH,
6 Canadian DTH companies to capture from 1.5 to 2 million
7 customers in this country.
8 13565 COMMISSIONER CARDOZO: So your
9 figures are likely to come from people who don't have
10 cable now in the rural areas only.
11 13566 MR. FRANK: Those are clearly the
12 early adopters. But I believe, our company believes
13 that when we are able to offer a significant point of
14 differentiation, which we anticipate will start as
15 early as the middle of November this year, that we will
16 start to make in-roads in urban Canada.
17 13567 COMMISSIONER CARDOZO: Okay. The
18 other question I had was you mentioned providing
19 services in different languages other than English and
20 French. I am wondering how many of those are Canadian
21 services, such as Fairchild and Asian Television
22 Network and how many are foreign services?
23 13568 MR. FRANK: My comments were almost
24 exclusively to Canadian programming services, such as
25 the Asian Television Network and Fairchild and
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2836
1 TéléLatino and CFMT, services such as that.
2 13569 COMMISSIONER CARDOZO: The question I
3 was going to ask relates to something that was put to
4 us by CJNT, the station out of Montreal who was
5 concerned that the foreign services would not have --
6 are not required to make -- or to carry Canadian
7 content and are not making contribution to the Canadian
8 content field but are taking customers away from them
9 and they, as a multi-lingual broadcaster, are required
10 to produce Canadian content.
11 13570 Do you have any thoughts on that area
12 or do you not see that issue affecting you?
13 13571 MR. FRANK: I think it could affect
14 us indirectly. I understand their issue very clearly,
15 and that is why we are attempting to carry as many of
16 those types of Canadian services as possible. If we
17 add American services in that genre, it would be on a
18 complementary basis, not on a competitive basis. It
19 wouldn't be either/or. That is why I was talking about
20 lift.
21 13572 COMMISSIONER CARDOZO: Just to
22 clarify in my mind, what is your brand name at this
23 point?
24 13573 MR. FRANK: Bell ExpressVu.
25 13574 COMMISSIONER CARDOZO: So Bell
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2837
1 Satellite Services is the --
2 13575 MR. FRANK: We are a division of Bell
3 Satellite Services Inc. Bell ExpressVu is a division
4 of Bell Satellite Services Inc.
5 13576 COMMISSIONER CARDOZO: And Bell
6 ExpressVu is the brand name that will continue.
7 13577 MR. FRANK: Yes.
8 13578 COMMISSIONER CARDOZO: Thanks very
9 much. Thank you, Madam Chair.
10 13579 THE CHAIRPERSON: Mr. Frank, when you
11 speak about differentiation at the level of the
12 Canadian services offered, does that rely on services,
13 new services being licensed for satellite delivery on
14 the short term when, in most cases, only the DTH
15 providers would be able to supply those services?
16 13580 MR. FRANK: Not on a
17 contract-exclusive basis.
18 13581 THE CHAIRPERSON: No, no.
19 13582 MR. FRANK: It might be on a
20 bottleneck basis, yes.
21 13583 THE CHAIRPERSON: The reality would
22 be that the congestion on many cable systems would be
23 such that more licences granted, realistically, would
24 have to be granted on the basis of satellite delivery
25 only, at least on the short term.
StenoTran
2838
1 13584 MR. FRANK: Yes, we see that as an
2 option.
3 13585 THE CHAIRPERSON: That appears to be
4 your vision of the near future.
5 13586 MR. FRANK: Excuse me, as a policy
6 option.
7 13587 THE CHAIRPERSON: Yes. But from a
8 business perspective, that would be one way to be able
9 to make in-roads into the distribution markets, by
10 offering over and above digital quality and more
11 ability to choose, et cetera, a more -- a bigger menu
12 of services.
13 13588 MR. FRANK: Correct.
14 13589 THE CHAIRPERSON: Which then brings
15 the question of, since we are now looking at -- this
16 policy hearing is to look at Canadian content on
17 television and how to improve it, would, in your view,
18 services with a similar level of Canadian content,
19 could they be licensed and survive on digital delivery
20 only on the short term; or would it require, as some
21 interveners say, an adjusted expectation or level of
22 Canadian content so that they are viable?
23 13590 MR. FRANK: I think it is the latter.
24 It would be --
25 13591 THE CHAIRPERSON: It would require an
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2839
1 adjustment.
2 13592 MR. FRANK: Yes, I would think so.
3 13593 THE CHAIRPERSON: In Canadian
4 content, except for maybe the odd service that,
5 especially if it is incremental, to another service
6 where there would not be duplication of costs for the
7 licensee.
8 13594 You were read by Commissioner
9 Pennefather the four aims of this hearing. It is your
10 view that it is so important to be able to compete with
11 incumbent distribution systems, and I guess to want to
12 offer more narrow niche programming than we have, that
13 that -- it weighed against a lowering of Canadian
14 content is worthwhile.
15 13595 MR. FRANK: When you spoke a few
16 minutes ago about an adjustment, I was thinking in
17 terms of revenue adjustment, not in terms of adjustment
18 of Canadian content. I offer no opinion.
19 13596 THE CHAIRPERSON: I see. But the
20 level of revenue is based on the level of expenses.
21 13597 MR. FRANK: Correct.
22 13598 THE CHAIRPERSON: And on the
23 penetration. So we know one factor, at least we can
24 estimate what it is, and it will be low.
25 13599 MR. FRANK: M'hmm.
StenoTran
2840
1 13600 THE CHAIRPERSON: Therefore, when you
2 look at expenses, programming expenses, are -- is the
3 major component, especially where we have multiple
4 licensees who can benefit from synergies, et cetera.
5 1440
6 13601 In that case, how would you not think
7 it would also require an adjustment in the level of
8 Canadian content? If the aim will be to adjust
9 expenses so that they are sensible in the light of the
10 revenues you can expect, but yet you want a service
11 that is appealing -- that would be the subscriber's
12 view -- the Commission's view would have to be that
13 there is an acceptable level of Canadian content in it,
14 especially since eventually, as cable eventually does
15 digitize, that service will get a wider penetration.
16 13602 I suppose you can adjust the
17 requirements at the time, but I am wondering, how many
18 DTH subscribers would you think is necessary to have
19 the aim of a high level of Canadian content in it and
20 remain viable?
21 13603 MR. FRANK: Well, there is certainly
22 a challenge there, no question. In such a proposal,
23 there may have to be some compromise with catch-up
24 later on all the way around. In the final analysis, I
25 believe it's preferable to have a Canadian service
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2841
1 offering primary service to a particular need or genre
2 of programming than simply importing a foreign one.
3 13604 THE CHAIRPERSON: Considering the
4 number of, let me just use the general term,
5 "narrowcast" services that are available when you
6 combine the Canadian licensees with the eligible list,
7 as a marketer do you feel right now that there are
8 certain genres of programming that are so important or
9 requested by a large number of people that that aim of
10 differentiation is a big item in marketing?
11 13605 MR. FRANK: Yes. We believe that
12 niche marketing is going to be very beneficial to us in
13 the future.
14 13606 THE CHAIRPERSON: Because we are
15 getting to super niche really. We have SpeedVision, we
16 have a number of cooking -- I mean are we going to get
17 into niche to the extent that it's now wok cooking or
18 sandwich-making? I am being facetious, but there is a
19 point where the demand for niche services becomes a bit
20 questionable. But you are the one who markets, you
21 think that it matters. I would have thought that the
22 big difference is the ability to package yourself, the
23 subscriber packaging.
24 13607 MR. FRANK: That is a very large
25 element, but --
StenoTran
2842
1 13608 THE CHAIRPERSON: Rather than being
2 offered a package that is preordained by someone else.
3 13609 MR. FRANK: Yes. There is no
4 question about that, but also to be competitive you
5 have to have the popular services and the not so
6 popular services that your competition has.
7 13610 THE CHAIRPERSON: Popular, of course,
8 is in the mind of the beholder. The person who wants
9 SpeedVision for that group or the golf channel, that's
10 popular, but if you measure popular by the number of
11 people who would take it if it were a choice among many
12 other services, it is measured really by viewership and
13 we know that some have very low viewership because the
14 so-called popular niches are being felt.
15 13611 To what extent do you think that a
16 major lift to DTH penetration is having more channels
17 for pay more than having more niche Canadian
18 programming?
19 13612 MR. FRANK: I wouldn't want to --
20 13613 THE CHAIRPERSON: You may not want to
21 answer this question.
22 13614 MR. FRANK: I will give it a try, but
23 I wouldn't want to cut one off at the expense of the
24 other. Pay TV and movies are very, very important.
25 Sixty per cent of our customers buy pay TV, so it's
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2843
1 obviously a very popular service. There is no question
2 that every week our CSRs, our customer service
3 representatives, tell us that people want more movies.
4 They want more recent movies. So, there will be
5 pressure to create that window and I suppose as
6 technology improves and we can persuade the Hollywood
7 studios and the Canadian film producers and filmmakers
8 to release the movies earlier, then we will get even
9 more sales.
10 13615 But the other -- what you referred to
11 as niche programming, that's very important, too,
12 because it rounds out our thematic packages. It
13 provides us with a point of differentiation. You talk
14 about SpeedVision. It, in and of itself, is probably
15 not an integral or essential service, but it rounds out
16 our sports bar very, very nicely and it's amazing how
17 many people actually watch it.
18 13616 THE CHAIRPERSON: I suppose, to go
19 back to the pay channels, in the markets that you have,
20 which are the markets that either don't have cable or
21 have cable that is not upgraded sufficiently to satisfy
22 customers, they would be the very areas where the
23 availability of renting movies is very limited.
24 13617 MR. FRANK: Yes.
25 13618 THE CHAIRPERSON: It's either miles
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2844
1 away or it's only a few shelves. So, that would be a
2 bigger demand than in cities where there is easy
3 availability of wide choice.
4 13619 MR. FRANK: There is that. There is
5 also the digital quality of our delivery system.
6 13620 THE CHAIRPERSON: Yes.
7 13621 MR. FRANK: It's quite phenomenal how
8 many ExpressVu systems go out the door with a very
9 large brand new television set, complete with satellite
10 surround sound. That hasn't been lost on our
11 customers. It's quite impressive.
12 13622 THE CHAIRPERSON: That's another part
13 of the market, I suspect, that in urban areas would be
14 available to you, the video files or people who are
15 interested in new technology.
16 13623 MR. FRANK: And the music services
17 such as Galaxy. They also complement that market very
18 nicely and are very popular. It's a bit of a sleeper
19 service and amazingly popular.
20 13624 THE CHAIRPERSON: I guess these are
21 our questions. Thank you very much, Mr. Frank.
22 13625 MR. FRANK: Thank you.
23 13626 THE CHAIRPERSON: You have to go back
24 into that bad weather now. If anyone I know sees you
25 on the golf course, I will be dubious about --
StenoTran
2845
1 13627 MR. FRANK: Well, one place you won't
2 find me this afternoon is in the lake.
3 13628 THE CHAIRPERSON: You hope.
4 13629 MR. FRANK: Thank you very much.
5 13630 THE CHAIRPERSON: Thank you.
6 13631 MR. FRANK: I may be in the soup, but
7 not in the lake.
8 13632 THE CHAIRPERSON: Madam Secretary?
9 13633 MS BÉNARD: Thank you, Madam Chair.
10 13634 The next presentation will be made by
11 the Canadian Cable Television Association and I would
12 invite Mr. Stursberg and his colleagues to come
13 forward.
14 13635 THE CHAIRPERSON: Good afternoon,
15 Madam Beck, Mr. Stursberg, and colleagues. We will
16 hear your presentation and then we will take our
17 afternoon break, which will make more sense than
18 interrupting the questioning at 3:30. Is that
19 acceptable? Go ahead when you are ready.
20 13636 You are in a good mood, despite the
21 bad weather.
22 PRESENTATION / PRÉSENTATION
23 13637 MR. STURSBERG: Despite the terrible
24 weather. It's actually a remarkably beautiful day.
25 It's a shame to be stuck in here, but there we are.
StenoTran
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1 13638 It's a pleasure to be back here
2 again. Comme vous le savez, je suis Richard Stursberg,
3 Président de l'Association de télévision par câble.
4 J'ai avec moi cet après-midi, ici à ma gauche, Mr. Fred
5 Wagman, qui préside notre conseil d'administration et
6 qui est président de Regina Cablevision; ici à ma
7 droite j'ai Michèle Beck, qui est vice-présidente,
8 Ingénierie et réglementation, qui est responsable pour
9 les questions techniques chez nous.
10 13639 A l'arrière, j'ai Jay Thomson, qui
11 est notre avocat responsable pour les questions
12 juridiques dans le domaine de la radiodiffusion, et
13 aussi avec nous Dave Watt, qui est vice-président
14 principal responsable pour les questions économiques.
15 13640 Perhaps I will begin by just passing
16 the microphone to Mr. Wagman.
17 13641 MR. WAGMAN: Thank you, Richard.
18 13642 Over the past 40 years the Canadian
19 broadcasting system has developed into one of the
20 strongest and most diverse systems in the world. In
21 initiating this proceeding, the Commission has
22 acknowledged that some adjustments may be required to
23 the existing regulatory framework to "ensure that all
24 players have the ability to adapt to a changing
25 environment characterized by new opportunities, new
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1 competitors, new corporate structures and new national
2 and international opportunities". Certainly, we agree.
3 13643 To date at this hearing, you have
4 heard from numerous parties who have offered their
5 comments and suggestions respecting how the framework
6 and the rules for Canadian content should be changed or
7 adjusted or tinkered with. For the most part, their
8 comments have focused on the details of those suggested
9 changes and the impact their proposals would have in
10 the near term.
11 13644 Given our role in the system as
12 distributors rather than producers or broadcasters, we
13 would like to take a different approach. We would like
14 to take this opportunity to outline for you a broader
15 and more long-term perspective on where the system is
16 going and what it will take to get there. The future
17 holds many challenges for producers, broadcasters and
18 distributors, challenges we all must meet if we are to
19 maintain and build upon the strengths of our Canadian
20 system.
21 13645 It is clear to us that the future for
22 the Canadian broadcasting system and, therefore, for
23 Canadian programming is digital. In our specific case,
24 it's digital distribution. Digital distribution will
25 open up a host of new opportunities for Canadian
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1 programmers and make possible a wide array of new and
2 exciting services for Canadian consumers. As an
3 industry, we are excited about the possibilities that
4 digital will create and fully embrace the movement to a
5 digital world.
6 13646 Among other things, digital will help
7 us increase channel capacity so that there will be room
8 for many new services. Since its inception, the cable
9 industry has looked for ways to increase bandwidth in
10 order to offer consumers more and more programming
11 options. In the analog world over the last three
12 decades, the cable industry has spent billions of
13 dollars on network rebuilds to increase its capacity
14 from 12 analog channels to the current 70 to 80
15 channels now available in most urban systems.
16 13647 In this decade alone, the larger
17 systems have grown from an average of 45 analog
18 channels to 73 channels, more than a 60 per cent
19 increase. With digital, we will have the tools not
20 only to continue these efforts, but to vastly expand
21 upon them.
22 13648 Digital will be terrific for Canadian
23 consumers. As the Commission well knows, our customers
24 have long been frustrated by their inability with
25 current technology to exercise real choice over their
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1 programming options. Our competitors who have the
2 benefit of starting their business in digital are in
3 many ways focusing on this frustration in their
4 marketing plans. We, too, want to offer consumers the
5 control and the choices they are demanding. Digital
6 will allow us to do so.
7 13649 Digital distribution technology,
8 however, will be more than a channel expander. While
9 that, together with its navigational capabilities, are
10 currently its main selling points, in the near future
11 it will mean much, much more. With the OpenCable
12 digital system, now under development by CableLabs in
13 Colorado and expected to be available some time late
14 next year, the cable industry will soon be poised to
15 also offer exciting cost-effective interactive
16 services, such as enhanced video, video-on-demand,
17 streaming video applications, the Internet, IP Voice,
18 video telephony, and advanced transaction-based
19 services.
20 13650 Digital distribution technology will
21 provide important and sustaining benefits not only for
22 consumers but for the entire Canadian broadcasting
23 system. It will open the door to a variety of new and
24 innovative Canadian programming services. These
25 services will, in turn, create numerous new
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1 opportunities for independent producers and for
2 Canadian creators, performers and technicians.
3 13651 Richard?
4 13652 MR. STURSBERG: At the same time, it
5 is clear that the movement to digital will present many
6 challenges and bring with it many new risks. At the
7 Cable Television Association we have spent a great deal
8 of time exploring the economics of the transition to
9 digital. The economic models we have filed with you
10 show that there are significant hurdles which we must
11 first overcome if we are ever to realize the potential
12 which digital represents for the Canadian broadcasting
13 system.
14 1455
15 13653 For example, a key issue in
16 introducing digital is where to find the necessary
17 analog channels to digitize. Most observers are quite
18 clear that they will have to come from the channels
19 that are currently offered as premium services through
20 the analog descramblers -- the analog boxes that are
21 currently on your television sets for the Pay services.
22 Once the premium service is digitized, say, for
23 example, at an 8:1 ratio, it will leave one digital
24 channel for the original service, that was on there
25 right now, say, for example, the Movie Network, and
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1 another seven for new services. The analog descrambler
2 box is then replaced with a digital one, so that the
3 customer can continue to receive the premium service.
4 13654 We estimate that the exchange of
5 existing analog set-top units for currently available
6 digital terminals would cost $225 million in the first
7 year. To break-even, the industry will have to double
8 the current penetration of set-top units from 9 per
9 cent to about 18 per cent. It is only the addition of
10 new premium customers providing new revenue streams
11 that will make the launch of digital service
12 economical.
13 13655 In effect, what we have to do is we
14 swap out the existing analog boxes. That gives us 9
15 per cent now digitized to the base. We then have to
16 grow. We have to in effect double the number of
17 subscribers who are taking digital, to be able to make
18 the entire proposition break even. So the question is,
19 what are they actually going to take?
20 13656 As Fred said, we as an industry are
21 committed to embracing the world of digital. We both
22 want to do it and, to be perfectly frank, we have to do
23 it. As Chris Frank was mentioning to you earlier on,
24 it's a good thing that there are digital competitors
25 out there. It will force the cable industry to move
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1 digital to digital, frankly whether we wanted to or
2 not. Since our digital competitors can offer their
3 customers the choices and control and the navigational
4 capabilities that digital offers, we must be able to do
5 the same thing.
6 13657 But the key questions are: Can we
7 double the current penetration of the set-top boxes?
8 Will new premium customers sign up?
9 13658 Presumably they will only do so if
10 there are attractive new services available. And yet,
11 we seem to be reaching the outer limits of demand for
12 new services. What we are finding is that the number
13 of customers taking each additional tier of new
14 channels has been shrinking.
15 13659 For example, the first tier in
16 English Canada is taken by approximately 85 per cent of
17 our basic service customers. The second tier, however,
18 has only about 65 per cent of this base, and we
19 estimate that the third tier, launched about a year
20 ago, will ultimately achieve a penetration in the mid
21 50 per cent range.
22 13660 The significance of this for digital
23 is that we will be required, as I said earlier, to
24 double our penetration of set top boxes to make the
25 economics for digital work, both for us and the
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1 programming services, but we will be required to do so
2 in an environment where demand for new services appears
3 to be waning.
4 13661 Faced with these challenges, we all
5 have to recognize that this will be a very risky
6 business, for both us and the services. It will
7 require significant up-front investments, with no
8 guaranteed returns.
9 13662 Now, some people may be of the view
10 that, as we move from simple digital channel expanders
11 to OpenCable set-top boxes, the economics will be
12 better and the risks will be reduced. We certainly
13 hope this is going to be the case, but we really don't
14 have any way of knowing at this stage, since the costs
15 of the OpenCable boxes, their final functionality and
16 the new revenue streams that they may develop are still
17 unknown. When we have this information, we will
18 revisit our economic models, but we can't do it yet.
19 Nevertheless, even to the extent that the OpenCable
20 set-top boxes do improve the economics for us, with new
21 services and new revenue streams, even in the best of
22 all possible worlds, this will be a very tricky and
23 risky business both for us and for the new services.
24 13663 So what do we need? We need players
25 in the market and in the business who are both willing
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1 and able to take on these risks, and to do so for more
2 than just the short term.
3 13664 L'industrie s'oriente déjà dans ce
4 sens sur la scène internationale. Des entreprises
5 médiatiques qui ont des intérêts dans le secteur de la
6 distribution, comme TCI et Time Warner aux États-Unis,
7 se réorganisent et consolident leur position, en
8 intégrant leurs activités. Elles évitent les risques
9 que pose la transition au numérique en tirant partie
10 d'événements d'actifs existants, tels des services de
11 programmation actuels, plutôt de créer de nouveaux
12 services de toutes pièces. Elles amortissent ces
13 risques en faisant appel à leur propre infrastructure
14 réseau pour offrir leurs nouveaux services et elles
15 acceptent ces risques, parce que la création de
16 services et le lancement de canaux câblodistribués
17 analogiques, au fil des années, leur ont appris à
18 prendre des risques et comment les prendre.
19 13665 Dans notre mémoire, nous exhortons le
20 Conseil à encourager la croissance de grandes
21 entreprises médiatiques canadiennes actives dans les
22 domaines à la fois de la production et de la
23 distribution d'émissions. L'allégement des
24 restrictions visant l'intégration verticale et
25 horizontale inter-médias mettra à la portée du système
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1 canadien de radiodiffusion des ressources financières
2 qui profiteront à la programmation canadienne.
3 13666 La combinaison du plus grand nombre
4 d'activités possibles des domaines de la production, de
5 la commercialisation et de la distribution d'émissions
6 canadiennes permettra en effet des économies d'échelle
7 et de diversification.
8 13667 Nous savons que le Conseil, comme Mme
9 Pennefather a noté, a introduit une autre instance qui
10 portera sur le cadre de réglementation des services
11 numériques et que l'examen en cours ne constitue donc
12 pas le contexte dans lequel se pencher sur les
13 préoccupations que notre plaidoyer en faveur de
14 l'intégration verticale et du regroupement peut faire
15 naître à l'égard des transactions intéressées, par
16 exemple. Nous sommes certes disposés à étudier ce
17 genre de préoccupations, dans la mesure où elles
18 demeureront valables dans un monde numérique, dans le
19 cadre de cette deuxième instance.
20 13668 Toutefois, ce sur quoi nous
21 souhaitons attirer votre attention aujourd'hui c'est
22 qu'il est clair que les défis que suppose
23 l'implantation des techniques qui paveront la voie à
24 une croissance continue des nouveaux services canadiens
25 sont considérables. Il est par ailleurs manifeste que
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1 la création du contenu et sa distribution aux
2 téléspectateurs et téléspectatrices canadiennes sont
3 des activités interdépendantes.
4 13669 Par conséquent, pour être en mesure
5 de tirer avantage des débouchés qui s'ouvrent, sur la
6 scène internationale et nationale, et assurer la
7 prestation de services numériques canadiens novateurs
8 et attrayants, il est primordial que les entreprises
9 canadiennes puissent se prévaloir des économies et
10 synergies à la disposition de leurs pendants à
11 l'étranger.
12 13670 Dans un milieu où la croissance
13 s'avive chaque jour, sur le marché national comme
14 international, il faut savoir tirer parti de ce que
15 nous avons accompli pour relever les nouveaux défis et
16 exploiter les débouchés qui s'ouvrent. La conversion
17 au numérique est un impératif pour la câblodistribution
18 et la croissance à venir des services de programmation
19 canadiens.
20 13671 Voilà. Il nous fera plaisir de
21 répondre à vos questions, après la pause, si j'ai bien
22 compris.
23 13672 LA PRÉSIDENTE: Vous apprenez vite,
24 Monsieur Stursberg, plus vite que M. Macerola avec son
25 micro hier.
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1 13673 Nous prendrons une pause de
2 15 minutes. Nous reviendrons donc à 3 heures 20. We
3 will take a 15-minute break, until 20 after 3.
4 13674 It may be a good time to remind
5 parties that we are resuming at 11:00 on Monday, and
6 that we are not sitting on Tuesday, and will be back on
7 Wednesday morning at 9:00.
8 --- Short recess at / Courte suspension à 1505
9 --- Upon resuming at / Reprise à 1525
10 13675 THE CHAIRPERSON: Welcome back.
11 13676 Commissioner Pennefather, please.
12 13677 COMMISSIONER PENNEFATHER: Good
13 afternoon, again.
14 13678 I have a few questions, and I would
15 like your help in understanding some of the digital
16 game plan you have presented.
17 13679 My first question is on your written
18 submission.
19 13680 The thesis of the market-driven
20 approach uses the term giving you a free rein in
21 several instances, and we will come back to that. But
22 could you clarify for me: On one page it is spelled
23 r-e-i-g-n, and on the next page it is spelled r-e-i-n.
24 13681 Are we riding a horse or are we
25 genuflecting to the Queen here?
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1 13682 MR. STURSBERG: It was a mistake. It
2 was actually a meteorological observation; it should
3 have been spelled r-a-i-n.
4 13683 COMMISSIONER PENNEFATHER: Sorry, I
5 didn't mean to rain on your parade.
6 13684 We may come back to the point, but I
7 think it is, in all seriousness, key to my question.
8 13685 Could you start by going through
9 again the box story. If I understand it, the steps
10 that you have decided on are to replace the analog box,
11 at a cost of some $225 million, for a digital box. And
12 to do so, you need to double your subscriber base.
13 13686 When these pay boxes are available,
14 what will you be able to offer? Will you be able to
15 offer high definition programming on these pay boxes?
16 13687 In your written submission, on page
17 28, you say that good programming will drive the
18 penetration of the set-up boxes; in other words,
19 doubling the subscriber base, I assume you mean, is
20 going to need good programming.
21 13688 Where is this programming going to
22 come from, especially if it is high definition
23 programming?
24 13689 MR. STURSBERG: First of all, with
25 respect to high definition programming, the digital
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1 boxes that exist right now will not carry HDTV.
2 13690 One of the things that we have been
3 working on -- when I say "we", what I mean is
4 CableLabs. Let me just back up.
5 13691 CableLabs is an industry R&D
6 consortium that was set up a number of years ago to
7 focus all the work of the cable industry throughout
8 North America. So all of the large MSOs, both in the
9 United States and in Canada, are members of CableLabs.
10 13692 Over the course of the years, they
11 have been working on essentially these kinds of
12 technical problems. It is at CableLabs right now that
13 the whole standardization of high speed modems and the
14 evolution of the digital set-tops for television sets
15 and the open cable initiative are being organized and
16 being managed.
17 13693 The digital boxes that exist at this
18 moment will not carry high definition television. It
19 is a standards issue between the broadcasting
20 over-the-air technologies and the box as it currently
21 is formulated.
22 13694 Obviously, one of the things that is
23 going to have to be done is the boxes are ultimately
24 going to have to carry high definition television. And
25 they will. But we are not there yet.
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1 13695 The bigger issue, however, is not a
2 technical issue, I think. The bigger issue is slightly
3 different, and it is this: High definition television
4 takes a very large amount of capacity, because it
5 carries a very large amount of information.
6 13696 Typically, we think that it will
7 require approximately half an existing analog
8 channel -- and Michelle will correct me when I get this
9 wrong. It will require approximately half an existing
10 analog channel. So whereas I was talking about 8-to-1
11 conversion compression ratios in my opening remarks, at
12 best you will be able to get a 2-to-1 compression ratio
13 to be able to insert a high definition television
14 signal.
15 13697 The difficulty, however, is as
16 follows: If you say, for the purposes of argument,
17 that we have ten channels available on the box right
18 now, and let's say for the purposes of argument we are
19 going to have ten -- say they are all full. So we
20 compress at an 8-to-1 ratio. That would generate 80
21 digital channels; ten of which we would need for the
22 ten existing channels, plus an extra 70.
23 13698 If we took those 70 -- and bearing in
24 mind that actually we would need about three or three
25 and a half of each of those to carry a high definition
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1 channel -- you could not put more than, say, 15 or 20
2 high definition channels into the 70 that are
3 available.
4 13699 The problem is that a lot of the
5 broadcasters are going to say: "Well, I have made the
6 investment into the conversion. I now want you to
7 carry me on HDTV."
8 13700 I presume that that will be true of
9 the over-the-air broadcasters. People will say that
10 you should be carrying the American broadcasters on
11 HDTV. The specialties will be saying: "You should
12 carry us on HDTV." And so on and so forth. Everybody
13 is going to want this.
14 13701 You can see that if you are
15 carrying -- right now, we carry about 70 or 80
16 channels. But if you had to carry all of them on HDTV,
17 and you get a 2-to-1 compression ratio, it would take
18 40 channels to carry all that.
19 13702 But in fact the maximum number of
20 analog channels we would have liberated, using the
21 numbers that I was just talking about, would have been
22 nine. So we can't squeeze them all in. We simply
23 can't squeeze in all those HDTV channels if we did it
24 that way.
25 13703 The question that we are going to
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1 have to face at a certain point is: If we took all
2 that capacity that was liberated -- even if we used it
3 all, we couldn't carry everybody on HDTV because you
4 are going to have to continue to carry them on analog
5 as well, obviously.
6 13704 Then what happens is that you have a
7 question to answer, which is: What do we do? Do we
8 put in new specialty services of one variety or
9 another? Or do we take the existing ones and put them
10 in HDTV?
11 13705 The issue, I guess, is going to come
12 down to something like this: What do you think the
13 drivers for the box are? Do you think that people will
14 spend money to buy boxes in order to be able to get
15 HDTV versions of what it is they are already getting on
16 analog? I doubt it.
17 13706 COMMISSIONER PENNEFATHER: Is it your
18 thesis then -- and correct me if I am wrong -- that you
19 are going straight through to the open cable box so
20 there is incentive to buy?
21 13707 Have I understood that correctly?
22 13708 MR. STURSBERG: I don't think so.
23 The open cable box does not change the trade-off
24 between capacity taken for HDTV versus capacity taken
25 for other kinds of new digital services. It does not
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1 change that.
2 13709 The only way in which we could do it
3 would be that we would actually have to build more
4 analog capacity, which we would then digitize and then
5 use that extra analog capacity for the purposes of
6 carrying HDTV. It is the only way you could do it.
7 13710 One of the fundamental things about
8 digital that I think people sometimes become a little
9 confused about is that to make digital, as we were
10 pointing out in our remarks, you have to have analog.
11 You harvest the analog channels literally to make the
12 digital channels.
13 13711 So the amount of digital you can make
14 is completely a function of how much analog you can
15 free up. That is the problem. The digital capacity is
16 limited to the amount of analog that you can actually
17 free up for the purpose.
18 13712 Having freed it up, you then have the
19 choice: What do you want to do with it? Do you want
20 to put HDTV signals into it? Do you want to put in new
21 Canadian specialty services? Those are the kinds of
22 questions you have to ask yourself.
23 13713 The fact is that to build analog
24 channels is a hugely expensive proposition. Your own
25 numbers estimate that for us to build one new analog
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1 channel and maintain it for the year costs, on an
2 ongoing basis, $15 million a year. It is a very
3 expensive proposition.
4 13714 So all these kinds of cost trade-offs
5 are what is involved in our thinking about the
6 relationship between building new analog channels,
7 digitizing them and what we put on to them as we go
8 forward. I think we have to see this against the
9 backdrop of what it is that people are actually going
10 to want to buy.
11 13715 At the end of the day, we can put a
12 digital box into somebody's house. But there is no
13 interest unless they can get new services that they
14 could not otherwise get.
15 13716 COMMISSIONER PENNEFATHER: Is that
16 what you think will drive the system: new services
17 that they could not get before?
18 13717 MR. STURSBERG: Yes.
19 13718 COMMISSIONER PENNEFATHER: Is this
20 what you mean by good programming?
21 13719 MR. STURSBERG: Absolutely. Nobody
22 buys a cable because they like beige wires. They buy
23 cable television because they like the services they
24 can get. Nobody buys little boxes to put on their TV
25 sets because they like boxes. They buy them for the
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1 services they can get.
2 13720 The reason that people will subscribe
3 to digital television and be prepared to pay the extra
4 money is because they are getting services that are so
5 attractive and so interesting that they could not
6 otherwise get.
7 13721 COMMISSIONER PENNEFATHER: How long a
8 period of time are we talking about here, where you are
9 doing this conversion?
10 13722 I think you are aware of our exchange
11 at this time last week -- actually a little earlier in
12 the day -- with Mr. McEwen and Mr. Sward regarding what
13 appears to be a waiting game in terms of the
14 broadcasters advancing the conversion to digital and
15 the fact that the broadcast community is very dependent
16 on cable and the process that you are undertaking to
17 ensure that Canadians can access this digital
18 programming.
19 13723 What kind of timing are we talking
20 about here?
21 13724 MR. STURSBERG: This is what I think
22 the timing is, and this is how I think it will
23 unfold -- but who knows. As I say, it is very
24 difficult to cost technology and revenue tradeoffs.
25 13725 The Shaws have already digitized, and
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1 they have used the kinds of boxes that are already on
2 the market. They are called channel expansion boxes --
3 and we can talk, if you like, about why they did that
4 and some of the others have not yet.
5 13726 The plan for the other cable
6 companies is that they will put in open cable boxes.
7 The current estimate is that open cable boxes will be
8 available commercially at the end of 1999.
9 13727 So if you say all of the other cable
10 companies are going to follow the same path, they are
11 going swap out their analog boxes. They would do that,
12 for the purposes of the argument, in the year 2000. At
13 that point you would have a situation where 9 percent
14 of the Canadian population roughly -- it varies a
15 little bit from system to system; but say 9 percent of
16 the Canadian population -- will all have digital boxes.
17 13728 Those digital boxes, if we just ran
18 with the numbers I was talking about -- and say you
19 have, on average, ten analog channels that are being
20 harvested and you have 8-to-1 compression ratios, you
21 would have 70 digital channels available to fill.
22 13729 So you would say to yourself: What
23 are we going to put into those 70 digital channels that
24 is likely to be sufficiently attractive by way of new
25 programming services that it will allow you to pull the
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1 boxes up to the 18 percent test level?
2 13730 The 18 percent level is not a level
3 where you want to finish obviously. That is just the
4 level at which we break even.
5 13731 COMMISSIONER PENNEFATHER: Right.
6 What is your answer to that?
7 13732 MR. STURSBERG: I think the answer to
8 it is that we don't altogether know. What we do know
9 is that there is demand for some kinds of services. As
10 Chris Frank was saying, we think that VOD is going to
11 be probably a very important service.
12 13733 That will take about three channels,
13 Michelle?
14 13734 MS BECK: Three to five.
15 13735 MR. STURSBERG: Three to five. The
16 trick with VOD is --
17 13736 It is attractive because it is like
18 renting something from a video store. You can get it,
19 rewind it, fast forward it, get it whenever you want.
20 13737 I personally think that the real
21 trick to VOD will be when you can actually move the
22 release windows so that you can get the releases at the
23 same time as the video stores do. If you could do
24 that, then I don't think there is any doubt that VOD
25 would be a killer application. That would be one
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1 thing.
2 13738 I think it is probably true that some
3 of what people have called ethnic channels will be also
4 big draws in limited sorts of ways.
5 13739 For example, all Chinese channels --
6 there are a number of them that have already been
7 licensed: all Greek channels, the South Asian
8 channels, and whatnot will be important.
9 13740 But beyond that, it is difficult to
10 say. Part of the problem I was talking about earlier
11 is that we seem to be in a situation of decreasing
12 demand for new -- if I can put it this way --
13 conventional specialties.
14 13741 COMMISSIONER PENNEFATHER: Let's talk
15 about programming. You have on page 4 defined quality
16 programming, which you said on page 28 of your
17 submission is what will really drive the penetration of
18 the boxes.
19 13742 You define quality as:
20 "...programming that both has
21 high production values and is in
22 high demand by consumers."
23 13743 MR. STURSBERG: Right.
24 13744 COMMISSIONER PENNEFATHER: Perhaps
25 VOD eventually, but that does not describe the niche
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1 programming you just tabled.
2 13745 MR. STURSBERG: No.
3 13746 COMMISSIONER PENNEFATHER: Let me get
4 to the point here. Don't you think that at about this
5 time the pressure from your subscribers will be to
6 carry U.S. digital signals, and that the kind of
7 production values and high demand will be ready to go
8 from American services?
9 13747 Is this not what is going to possibly
10 drive the penetration of digital boxes, in your mind?
11 13748 MR. STURSBERG: Perhaps I could make
12 a couple of points.
13 13749 I assume here we are putting to one
14 side the issue of HDTV -- which we can come back to
15 again, if you would like to.
16 13750 COMMISSIONER PENNEFATHER: Yes, I
17 would, just so that we are clear about digital services
18 and then HDTV as a special case. I will want to talk
19 about that.
20 13751 MR. STURSBERG: Well, doubtless there
21 will be American channels that will be attractive
22 channels.
23 13752 One of the big advantages that the
24 Americans have right now is something else we have
25 alluded to in our brief, which is that they have been
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1 over the course of the last number of years assembling
2 themselves into very large, very sophisticated, highly
3 integrated media conglomerates.
4 1540
5 13753 What that does is it allows them to
6 do certain kinds of things that are more difficult to
7 do in Canada. It allows them in fact to handle much
8 higher levels of risk. I mean, they face the same kind
9 of problems in terms of launching digital channels in
10 the United States as we do here.
11 13754 They are inherently very, very risky.
12 Everybody is a little bit unclear as to what's going to
13 work and what's not going to work. The Americans are
14 in a position, there's no doubt about it, to take
15 greater risks than we are, partly because of their size
16 and partly because of their media structure.
17 13755 What they will do is they will do a
18 lot of experiments. They will try things, see if they
19 work. If they don't, they will give them the hoof and
20 start new things. That's what's going to be going on.
21 They are going to lever off their existing channels so
22 that, you know, as I think Commissioner Wylie was
23 pointing out, they will start with one base channel,
24 not unlike what Discovery is starting to do in the
25 United States right now, and they will split out of
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1 Discovery a whole series of niche channels, you know.
2 13756 Instead of animal plant, they will
3 have insect world and fish world and so on and so
4 forth. These channels will be relatively inexpensive
5 because they are levering off the existing
6 infrastructure base of the existing channel.
7 13757 Many of the larger companies, Time
8 Warner, TCI, et cetera, et cetera, can handle the risks
9 associated with starting up those new channels partly
10 because they own cable infrastructure. The risks
11 associated with launching a channel off of your own
12 infrastructure are less than -- you can internalize the
13 risks to a large extent -- are less than they would be
14 otherwise.
15 13758 I think it's true to say, as you
16 point out, that the Americans certainly will be at an
17 advantage in terms of developing digital channels.
18 13759 Our own feeling is if we are going to
19 keep pace with this and ensure that there are Canadian
20 digital channels that will be sufficiently attractive,
21 we are going to have to move a little bit in the
22 direction of the Americans. I personally think that
23 our problem in a digital world is going to be very
24 different from our problem in an analog world.
25 13760 In an analog world with the existing
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1 access rules, you license a channel and it's boom, they
2 get on immediately. They have a guaranteed revenue
3 stream. They go black in many cases in terms of their
4 financials within the first six to nine months. These
5 are like little gold mines.
6 13761 In a digital world, it's a different
7 proposition altogether. I think John Cassaday was
8 saying the other day when you launch into a $500,000 or
9 $600,000 universe -- 500,000 or 600,000 subscriber
10 universe, you have a completely different problem on
11 your hands. There are no guarantees any more. It's
12 highly risky.
13 13762 Our difficulty is going to be not to
14 keep people off. Our people is going to be how do we
15 get people encouraged sufficiently that they will be
16 prepared to take the risks associated with launching
17 Canadian digital channels. That is going to be our
18 challenge.
19 13763 I really believe that as we think
20 about the transition that is taking place in the
21 Canadian broadcasting industry, we have to understand
22 that there is a huge divide that separates us from the
23 old world of analog and the new world of digital, that
24 the new world of digital is a world of much smaller
25 numbers. It's a world of much higher risk. It's a
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1 world in which there is a genuine chicken and egg
2 problem.
3 13764 How do we get boxes out there if
4 there aren't new services and why would new service
5 people launch if we only have a 9 per cent base to
6 launch into? So when we talk about all of these
7 problems and we compound it with the fact, as you point
8 out, that the Americans have much greater capacity to
9 finance and take risks associated with these new kinds
10 of channels, we face a kind of watershed shift in a
11 way, I believe, that we have to start thinking about
12 digital services and the emergence of new Canadian
13 digital services.
14 13765 COMMISSIONER PENNEFATHER: Okay.
15 Remembering too your own comments this morning about
16 what we will reserve for other discussions --
17 13766 MR. STURSBERG: Sure.
18 13767 COMMISSIONER PENNEFATHER: -- if we
19 take what you just described and now we go to one of
20 the other theses in your papers, for example in the
21 written submission, page 4, let's look at the distinct
22 Canadian market in light of this and keep our remarks
23 to some alternatives that we have been using
24 traditionally in this country and see how this digital
25 story works through.
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1 13768 MR. STURSBERG: Yes.
2 13769 COMMISSIONER PENNEFATHER: At the top
3 of the page you say the three key mechanisms now in
4 place for defining a Canadian market which you have
5 previously noted is key.
6 13770 MR. STURSBERG: I'm sorry, are you in
7 the brief?
8 13771 COMMISSIONER PENNEFATHER: I am in
9 the written submission.
10 13772 MR. STURSBERG: Oh, the written
11 submission. I'm sorry.
12 13773 COMMISSIONER PENNEFATHER: Page 4.
13 13774 MR. STURSBERG: Yes.
14 13775 COMMISSIONER PENNEFATHER: The top of
15 the page.
16 13776 MR. STURSBERG: Yes.
17 13777 COMMISSIONER PENNEFATHER: It's a
18 point you repeat quite frequently in your written
19 submission.
20 13778 MR. STURSBERG: Yes.
21 13779 COMMISSIONER PENNEFATHER:
22 "Canadian content requirements,
23 access rules and controlled
24 admission of foreign services --
25 should be applied so as to
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1 strengthen the development and
2 viewing of Canadian programs."
3 13780 In your view:
4 "-- this result is most likely
5 to occur when market forces work
6 to achieve the best possible fit
7 between the demand of Canadian
8 consumers and production and
9 distribution of Canadian
10 programming."
11 13781 This market driven approach which is
12 fundamental to this presentation is expressed this way
13 here: What does "when market forces work" mean? What
14 are you asking for?
15 13782 MR. STURSBERG: Again, I want to
16 distinguish, and you will have to stop me if you think
17 I am talking too much about upcoming hearings, but in
18 your public notice calling this hearing, you ask for
19 people to talk about where they thought the broadcast
20 system was going and what were the fundamental,
21 economic and technological forces that were driving the
22 change.
23 13783 What we have done in our brief is we
24 have said quite clearly that we really believe that
25 there really are two worlds, as I was saying before.
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1 There is the existing analog world.
2 13784 The Commission and the government
3 over the last 30 years has done a very good job. We
4 don't propose that you change any of those rules. We
5 think that the rules as they currently stand are by and
6 large very good. Tiering and linkage, authorized
7 service lists, Canadian content rules, et cetera, et
8 cetera.
9 13785 What we think you have to do, though,
10 as you think about where you are going is you have to
11 look at the level of risk associated with the new
12 digital world.
13 13786 When we say market based what we mean
14 is that the test as to whether a service succeeds or
15 fails in the new world must be a test that is uniquely
16 in the hands of Canadian customers, not in the hands,
17 frankly, of the regulator or of the cable company, that
18 the test of whether this is going to work, whether we
19 are actually going to be able to get services out there
20 that are attractive enough to drive the digital box is,
21 at the end of the day, going to be based on really
22 whether we like it or not, what it is that Canadian
23 customers are prepared to buy.
24 13787 We have some other ideas on this
25 subject that we are going to be talking to you about in
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1 the next hearing, so I will not try to anticipate them
2 too much. We have said that one thing that we believe
3 is absolutely fundamental here is to allow for the
4 evolution of larger Canadian companies that can manage
5 that kind of risk, this is sort of the sine quo non of
6 being able to do this, that can manage that kind of
7 risk and that have a sufficient number of different
8 kinds of properties altogether that they can maximize
9 the economies associated with the production and
10 distribution of content.
11 13788 All we are saying here is it's a
12 different world, you are going to have to have much
13 stronger Canadian companies out there. Those companies
14 have to be able to manage that kind of risk if they are
15 going to compete effectively with the Americans.
16 13789 We recognize, I think, that in
17 putting this together you obviously have to do so in a
18 way that limits any forms of self-dealing. I know
19 there have been some preoccupations expressed by
20 various parties about self dealing.
21 13790 The good news is, I think, that in a
22 digital world, self dealing, and here I will only speak
23 about cable versus services as opposed to the other
24 forms of self dealing that have been discussed before
25 the Commission over the last little while -- the good
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1 news is that in a digital world, self dealing questions
2 become much less severe.
3 13791 The reason they become much less
4 severe is precisely because it will be hard to
5 encourage companies to actually launch services in
6 those very restricted environments.
7 13792 As I was saying earlier, our problem
8 is not going to be a problem of saying we don't have
9 enough capacity, you can't get on. Our problem is
10 going to be the reverse problem. We are going to say
11 we have got 70 channels that we have to fill, will you
12 please launch a service and get on.
13 13793 If we launch services that we own of
14 our own under those circumstances a number of things
15 happen. (a) it certainly doesn't consume all the
16 capacity, but (b) what it does it ensures that
17 sufficient services get launched, that there may
18 actually be a chance to grow the box base to make it
19 big enough by way of a market that others will be
20 incented to launch too. We have to figure some way, in
21 other words, of breaking out of the chicken and egg
22 problem associated with boxes and services.
23 13794 The other thing that's different
24 about a digital world under those circumstances is, of
25 course, like channel placement issues kind of go away.
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1 There are no real channel placements in a digital
2 world. There's no, you know, basic tier with low level
3 numbers. There's just channels. You can assign
4 whatever number you want to those channels on the basis
5 of your own personal preferences and code them in that
6 way round.
7 13795 A lot of the concerns that people
8 have had in the past are kind of irrelevant. When we
9 look forward into that kind of world, we think that
10 what will be required is a shift in the way in which
11 the Commission begins to think about these questions
12 with less of a focus on the details of the regulations
13 on this and that, as we have done traditionally in the
14 analog world, and more of a focus on ensuring that
15 market forces operate and the absolute sine quo non of
16 that being to make sure that we can build companies in
17 this country that are as sophisticated and as well
18 organized as what the Americans are doing.
19 13796 COMMISSIONER PENNEFATHER: Okay, but
20 you keep going to this one theme. I would like you to
21 talk some alternatives to that.
22 13797 I am confused when you say that you
23 support a framework as it is. If I listened carefully,
24 I heard you backing away from a regulatory framework
25 which would support, for example, Canadian content
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1 requirements.
2 13798 The world that I heard you
3 describing, the digital world, would be one which I
4 would assume would place even greater demands on us for
5 Canadian content and support for Canadian programming.
6 I take then that you still agree that expenditure
7 requirements and exhibition requirements are crucial to
8 a distinctive Canadian market and that the free rein
9 perpetuates in fact greater choice for Canadians as
10 opposed to less choice in which we find Canadian
11 choices.
12 13799 MR. STURSBERG: I thought I was
13 actually saying something which went like this, that in
14 the analog world, the rules that have been established
15 have been very successful. That was a world in which
16 there was, if you will, abundance of product supply and
17 scarcity of channels.
18 13800 As we move into a digital world, we
19 have a different problem. We have relative abundance
20 of channel supply, of capacity supply, and scarcity of
21 product. When we ask ourself the question as Canadians
22 "How do we want to cope with what amount to sort of an
23 inversion of the way we have thought about things in
24 the past", I say we have to think about them in a novel
25 fashion, looking forward.
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1 13801 If we want to have Canadian services
2 that are going to be attractive enough to drive a box,
3 then we are going to have to build the services here.
4 Two questions.
5 13802 One, who builds them? I think the
6 answer we have given in our brief is they are only
7 likely to get built by relatively large companies
8 prepared to take substantial risk.
9 13803 Question No. 2, as we grow them, how
10 do we reflect the requirements associated with being
11 able to assure that there is lots of Canadian content
12 on those services.
13 13804 I think candidly we will have to
14 begin to imagine a world in which we say the following.
15 We recognize the risk associated for people launching
16 services in small environments, 500,000 subscribers to
17 begin with, 9 per cent box penetration. We will reward
18 you for taking the risks. What we will say to you is
19 when you launch to begin with, the amount of expense
20 and cost that we are going to build into your business
21 plan is going to be as small as we can make it. As
22 your revenues increase, we will expect you to do more
23 and more by way of Canadian content.
24 13805 What we can do is we can create a
25 situation where Canadian services can flourish,
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1 recognizing the financial difficulties they are going
2 to have at the beginning until we can get more and more
3 boxes and a bigger and bigger digital universe. As the
4 universe gets bigger and as the revenues of the
5 services increase, we will say in fairness now, you are
6 in a position to do it, you should put more into the
7 system.
8 13806 It's a different way of thinking
9 about the way in which you grow Canadian services and
10 you grow Canadian content on those services, but I
11 really do think we are going to have to shift our
12 mindset a little bit to recognize the risk problem I
13 have been describing.
14 13807 COMMISSIONER PENNEFATHER: We did
15 speak to another player in the digital business
16 earlier. It seems to me we are also talking about a
17 situation where you really have put your finger on the
18 cable industry's role in bringing digital services to
19 Canadians and it is not the only view and perspective
20 from which we should be looking at Canadian programming
21 and its growth in the next century whether it's
22 delivered to us by digital mechanisms, by your digital
23 mechanism or not.
24 1555
25 13808 So my concern is, indeed, the
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1 resources that these systems, inclusive of the cable
2 systems, will provide to the development of Canadian
3 programming, and that many of the players who have come
4 to us, you in perhaps another hat or two this week,
5 have underlined the importance of finding mechanisms
6 and continuing to support those mechanisms which bring
7 Canadian programming to Canadian people through various
8 sources of funding.
9 13809 One of the kinds of programming that
10 I would like to get back to is high definition
11 television, and when I mention high definition
12 television I am not just referring to a delivery
13 system, I am referring to an actual product. I am
14 referring, of course, to a consumer issue -- the cost
15 of the set, the time it will take for consumers to buy
16 and be able to afford a set.
17 13810 You mentioned HDTV as a different
18 phenomenon. Could you expand on that and where you see
19 and how -- what the time-frame is for Canadians having
20 high definition sets and for Canadians having their own
21 high definition programming through the broadcasting
22 system, for example?
23 13811 MR. STURSBERG: Could I just say --
24 because I thought it was an interesting point you were
25 making, I think it was about Chris's presentation on
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1 ExpressVu, because I think that is another fundamental
2 shift that is worth thinking about as we think about
3 digital Canadian services, which is that he points out,
4 rightly, that when it comes to thinking about digital,
5 cable is not the only game in town. In fact, right
6 now, between Star Choice and ExpressVu, they have
7 200,000-plus subs, which are digital subs. Right now,
8 the cable industry with -- if Shaw were fully swathed
9 out, they have about 1.5 million subs.
10 13812 Dave, about that?
11 13813 MR. WATT: Yes, but they have 65,000
12 boxes deployed currently.
13 13814 MR. STURSBERG: So they have 65,000
14 boxes deployed. So, right now, of the competitors to
15 the cable industry have more than three times as many
16 digital subs as we do.
17 13815 I think, in a way, that is a good
18 thing, because it means that there is multiple players
19 who have digital subs who are larger, in fact, in terms
20 of the digital universe than we are right now.
21 13816 But, again, it changes the dynamic of
22 how you think about building digital services in an
23 environment where there is competitive distribution and
24 where, in fact, the previously dominant distributor is
25 now not only not dominant, he is in fact in the
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1 minority position in terms of the total number of
2 digital subs in the universe.
3 13817 Anyhow, I make that point because I
4 think it is important as we think about the future for
5 digital services.
6 13818 As far as HDTV is concerned, this is
7 a great puzzle to many people. Right now, digital sets
8 will be coming on the market this Christmas, I believe.
9 They will be coming priced in at about $7,000 to $8,000
10 U.S. So, we are looking at sets that will be retailing
11 out there for $12,000 Canadian. It doesn't seem to me
12 likely that there is going to be a lot of buyers for
13 those sets to begin with. This is an exceptionally
14 pricey item.
15 13819 The Americans are, as far as I can
16 make out, all over the map with respect to what is
17 actually going to happen by way of HDTV transmissions.
18 Different broadcasters have made different undertakings
19 as to how much of their service they will put out in
20 HDTV.
21 13820 So, the proposition, if you were to
22 think about buying an HDTV set right now in the United
23 States is, "I will put out $12,000 Canadian and I will
24 be able to get a few hours per day maximum from the
25 over-the air broadcasters in the United States." I
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1 think HBO has said it will also go HDTV. So there is a
2 very small amount of stuff that you will be able to
3 get.
4 13821 Presumably, if you want to get all
5 the rest of the stuff, you will stay hooked up to your
6 cable.
7 13822 In Canada, the proposition is this:
8 If you bought an HDTV set right now, you wouldn't be
9 able to get anything, except a few hours, if you live
10 close to the border, of over-the-air broadcasting.
11 That would be it.
12 13823 HDTV, at root, is a problem, I
13 believe, for the Canadian broadcasting system in the
14 following sense: It layers in a whole level of cost
15 that has associated with it no new revenues that
16 anybody can define. Now, that is a problem in the
17 United States, too. Many of the players in the United
18 States are big enough that they think they can absorb
19 that level of cost, although the broadcasters in many
20 cases are trying to get out from under it because they
21 don't understand the business proposition either.
22 13824 But in Canada it is more complicated
23 because we would be layering in all these extra levels
24 of costs, both for us and for the broadcasters, and we
25 don't see any new revenues. So it is going to be
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1 creating pressure on the financial structure of the
2 Canadian industry.
3 13825 We know what happens when we apply
4 pressure to the financial structure of the Canadian
5 industry. We know what gives first. What tends to
6 give first is expenditures on Canadian content. So, it
7 is a problem.
8 13826 I honestly don't know right now how
9 this thing is going to sort itself out.
10 13827 In the United States, the other
11 problem that I mentioned earlier on, this whole
12 question about the extent to which HDTV, if you use up
13 the digital capacity on the cable to carry HDTV, the
14 extent to which that will displace the creation of new
15 digital services, whether it is VOD or the other kinds
16 of services we talked about, the extent to which that
17 will displace it and then limit deployment of boxes is
18 a serious problem.
19 13828 Right now, there is a huge debate
20 going on in the United States, it is all over the
21 American government and the FCC, about the so-called
22 must carry rules, where, you know, all the broadcasters
23 are saying you have to carry us, both in analog and
24 HDTV, and the cable industry and other people are
25 saying, well, wait a minute, why would we do that? We
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1 will simply be making the future of new services
2 hostage, in a sense, to the past, which will consume
3 all the money and all the capacity.
4 13829 A lot of people in the United States
5 are also trying to understand what the social
6 consequences of this are, because I mean if you are
7 busy consuming capacity to put on HDTV services that
8 only people with $12,000 can afford to buy a receiver
9 to get, then the question is: To whose benefit is
10 this? They have argued that, in fact, that kind of a
11 policy is regressive in income terms because what it
12 does is, in effect, it means that you are creating a
13 policy which is designed exclusively for people who are
14 very wealthy, and it is because it is only the very
15 wealthy who are going to be able to benefit because
16 they are the only ones who will be able to afford HDTV
17 television sets. So, it is puzzling.
18 13830 COMMISSIONER PENNEFATHER: There are
19 differences how quickly technology will change and
20 prices go down, but I am going to go back to, perhaps,
21 what is too simplistic, step by step again. The
22 digital -- the first step in the digital equation is
23 more services available, greater capacity.
24 13831 That issue of capacity was one
25 discussed some time ago, with assurances that that
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1 capacity would be up and running. It isn't, as I
2 understand it. There seems to be still the effort to
3 get the digital boxes in place just to increase the
4 capacity available to us.
5 13832 So, we are still stalled on that, and
6 you also say that we seem to be reaching the outer
7 limits of demand for new services. Why do you say
8 that? How do you know that?
9 13833 MR. STURSBERG: Well, we look at the
10 penetrations.
11 13834 COMMISSIONER PENNEFATHER: Is that
12 because people aren't interested in certain kinds of
13 services or because of the way that they are presented
14 to them, packaged, if you will?
15 13835 MR. STURSBERG: I don't know. I mean
16 right now if you are a cable subscriber, you could
17 decide I am going to take basic plus one tier. I am
18 going to take basic plus two tiers; basic plus three
19 tiers. You could pick and match any of the tiers that
20 you want.
21 13836 So, you know, you could conceivably
22 say, I will take basic plus the third tier, but I will
23 forget the first and second tiers. That could happen.
24 13837 Obviously, what the cable industry
25 tries to do is it tries to sell through. So, it tries
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1 to encourage people to take the first, second and third
2 tiers, and the reason we try to do that is not only is
3 it better for us in revenue terms, but as well it
4 protects the position of the first and second tier
5 services because if we encourage people to dump then,
6 then some of the people who have services on the first
7 and second tier might rather take a dim view of that.
8 13838 When we look at the numbers, the
9 numbers are as I described. We are at about 85 per
10 cent penetration on the first tier off basic. We are
11 sitting about 65-66 per cent on the second tier. We
12 are going to settle in somewhere in the low to
13 mid-fifties on the third tier.
14 13839 So just as a measure of demand, it's
15 pretty clear that people are taking fewer of the new
16 services that we are offering now than they did in the
17 past. What is the reason for it? I don't know.
18 13840 It's -- the bills for cable -- for
19 cable subscribers, if you take the entire menu, are
20 getting pretty steep. You know, all in, with taxes and
21 everything, if you take the full gamut of services, you
22 are looking at paying, you know, 70 bucks a month.
23 13841 Those prices are good compared to
24 U.S. prices. They are substantially lower than U.S.
25 prices, but they are still, you know, a fair whack of
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1 dough.
2 13842 So, I think to myself, well, if we
3 want to put more services in, and not cannibalize the
4 existing Canadian services we already have, it begins
5 to be a stretch. You are bumping up at the limits of
6 people's pocket books, at the limits apparently of what
7 they say they would like to have, just as we read it
8 through the penetration numbers.
9 13843 So that is why it is challenging and
10 that is why, again, I come back to this notion that we
11 have to start thinking about some kind of different
12 model that will allow the market to adjust more
13 effectively to what it is that customers really want.
14 The model we have now is one in which, essentially, we
15 say to the Commission, please license these services.
16 You pick and choose which ones will get licensed. Once
17 they get licensed they get on and we are reluctant, all
18 of us, including the cable industry, deeply
19 reluctant -- in our case, I am not sure if we could
20 even do it -- to say, no, I am sorry this service is
21 not performing well; it is going to get the hoof.
22 13844 We cannot do that because of the
23 access rules. But if we can can't start to make
24 adjustments so that the services reflect what it is
25 that people really want, then given the kind of
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1 environment of depressed demand, and given the level of
2 risks associated with digital, I think we are going to
3 find ourselves in a more -- we are going to find
4 ourselves in a harder circumstance, if we can't somehow
5 or other get to what I was describing earlier as a more
6 market-based model.
7 13845 COMMISSIONER PENNEFATHER: So I
8 assume that the market forces and the freer rein that
9 you are discussing will largely be expanded in the
10 other process we will be dealing with, where you will
11 want to have, I am assuming as the broadcasters have
12 said about certain elements of the current system,
13 greater flexibility or something of that nature to
14 respond to what you see as the market forces at play
15 within the digital universe.
16 13846 It would appear from what you are
17 saying that you wish to deal with it in that hearing,
18 or that discussion, and that at the same time can we
19 assume that you will continue to support Canadian
20 content regulations, that you will continue to support
21 those regulations and those funding components of the
22 system which are so valuable in terms of supporting
23 Canadian production?
24 13847 MR. STURSBERG: Oh sure, for the
25 existing system, as we have said in our brief, you
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1 know, we are big supporters of the existing sets of
2 rules, we think they have worked very well. I think it
3 is important to remember that a lot of this machinery
4 was dreamt up in the early days, eg. the funds and what
5 not by the cable industry, which have been partisans of
6 it. The cable industry is a very, very important
7 provider of financial support.
8 13848 We have spent about $4 billion over
9 the course of the last 10 years building channel
10 capacity so we can have Canadian specialty services.
11 We currently spend about $700 million a year in terms
12 of payments to the services directly from the cable
13 companies to be able to ensure their survival.
14 13849 I might add that the services, as a
15 financial matter, do exceptionally well. They do
16 actually much better than the cable industry. The
17 services overwhelmingly of the ones that are on the
18 first and second tier, not only as I mentioned earlier,
19 went black in terms of their financials within six to
20 nine months of launch. They are all of them making --
21 they are all of them profitable and, in the case of the
22 cable industry, we aren't currently even making our
23 costs of capital.
24 13850 No, it is not about the analog thing.
25 I think the analog service environment absolutely is
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1 fine; and I think it has worked very, very well both in
2 terms of delivering Canadian services and Canadian
3 content.
4 13851 I think it is a different point I am
5 trying to make, and the point is this: Everybody is
6 committed to ensuring that in future there will be new,
7 exciting, vibrant Canadian services and that they will
8 carry substantial quantities of Canadian content so
9 that we can see ourselves and speak to ourselves as a
10 people.
11 13852 The trick will be, however, to be
12 able to construct an industrial structure and a
13 regulatory environment that will allow that to happen,
14 and that may require some radical thinking.
15 1610
16 13853 COMMISSIONER PENNEFATHER: There is
17 no problem with radical thinking, as long as what's in
18 the equation is more than the industrial needs of the
19 system, the cultural needs of the system as well, and
20 in getting there, from here to there, you support
21 current regulation, but not any change, because on page
22 14 am I correct that when we talk about steps that
23 would increase the funding for under-represented
24 categories, you think that this is a premature move,
25 all measures supporting these categories should be
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1 explored before more funding is committed, and I gather
2 you support the CAB proposal that the real test is
3 greater viewership for under-represented programming
4 receives any further support through the system.
5 13854 So, in the current environment, which
6 should be, rightfully so, a stepping stone of program
7 content and making sure the supply is there, why would
8 you pull the reins in, so to speak, on greater funding
9 for under-represented categories. Am I right in what
10 this paragraph means?
11 13855 MR. STURSBERG: I think that if -- it
12 depends on what you are saying. If you say to me would
13 we support further taxes on the cable industry, the
14 answer is "no". The reason why we say that is because
15 further taxes -- as I mentioned, people are paying --
16 if they buy the whole enchilada right now, they are
17 paying upwards of $70 a month. If you impose further
18 costs, the costs fall straight through to subscribers.
19 I mean they fall straight through to consumers. So, if
20 you do that, then, in effect, all you are doing is you
21 are depressing demand further and, as I mentioned, we
22 are a little concerned about the relative levels of
23 demand right now. So, you are pushing demand down
24 further.
25 13856 As we look out into a new environment
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1 where we are going to be asking customers to commission
2 ourselves, the new service is going to be asking
3 customers to spend more money and buy new services. We
4 don't think that it's a good plan to layer new costs in
5 in advance of doing that. So, that would be my first
6 point.
7 13857 My second point is that some of the
8 schemes that I have seen suggested so far, I'm not sure
9 that they are practicable or fair. These are
10 essentially schemes in which we would ask that the U.S.
11 services be charged a special amount of money one way
12 or another.
13 13858 Right now they indirectly contribute
14 their five per cent into the Fund because we have to
15 pay on the revenues that we pay to them, but I think
16 that the bigger problem you will run into is that they
17 would say, I think not unreasonably, "Well, wait a
18 minute now, if we have to pay into a fund, then we
19 should be offered an opportunity to draw from the
20 fund", and I think the likelihood of anybody agreeing
21 to that proposition is pretty low. But if one doesn't
22 agree to that proposition, I think that inevitably they
23 would have cause to make some complaints about fair
24 dealing in trade terms.
25 13859 Now, if there was another way of
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1 getting the money and if it was possible to convince
2 the government that they should put up another $100
3 million as they did in the past from general revenues
4 for the further support of the program production
5 industry, I don't think anybody would object to that.
6 13860 COMMISSIONER PENNEFATHER: I'm going
7 to pass the questioning to my colleagues. I'm sure
8 that they have a list. I'm just glad to hear you say
9 that you agree that the funds coming into the Cable
10 Production Fund are coming from the subscriber, that he
11 and she is really paying for production in this
12 country.
13 13861 MR. STURSBERG: Ultimately, every
14 single dime that is spent on anything in this country
15 on anything is coming from citizens. I mean whether
16 you are talking about the costs of health care, whether
17 you are talking about the costs of servicing your
18 automobile, whether you are talking about anything,
19 obviously the costs are being borne by individuals who
20 are buying the service. Subscribers to automobiles,
21 people who are buying lemons, people who are buying
22 insurance policies, they are all bearing the freight of
23 all of that stuff and they are bearing the freight of
24 all the taxes and they are bearing the freight of all
25 the government programs.
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1 13862 I will just say one last thing,
2 however, about the cable contribution to the Fund. One
3 thing I think it's useful to bear in mind is that the
4 level of financing to the Fund will increase over time
5 and it will increase for two reasons, one of which is,
6 as Chris again was pointing out in his presentation,
7 about 25 per cent of the country is currently not
8 served by cable. The DTH guys have been doing a very
9 good job and I anticipate will do an even better job in
10 the future in terms of servicing that 25 per cent of
11 the country that cannot get cable.
12 13863 If the total revenues within the
13 system were to remain -- the total expenditures by
14 average Canadians, which remain roughly constant, this
15 year we will put up about $51 million in terms of what
16 we pay. If they didn't put up community channels and
17 coughed in the whole lot, they would obviously put up
18 more than we do. But just say they put up the same as
19 we did and they were actually able to blanket the
20 country that way around, that would be another $15
21 million coming in.
22 13864 Now, as the number of services grows
23 and as, therefore, the revenues grow to the cable
24 companies and to the DTH guys, then what happens, of
25 course, is that the level of revenue that's yielded by
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1 the three per cent tax goes up accordingly. So, one of
2 the good benefits of encouraging growth of services in
3 the system is that you automatically, because you are
4 increasing the revenues, increase the flow of revenues
5 to the fund. So, one of the things it's important to
6 bear in mind when we think about how much money is
7 available to the Fund is to think about how much more
8 will also become available as a result of DTH offering
9 services to areas we can't get to and in terms of the
10 general growth in the system.
11 13865 But it comes back to my earlier
12 point, which is I don't think you want to add further
13 taxes either to us or to them which depress demand and,
14 therefore, limit growth because the growth will, in and
15 of itself, increase the volume of revenues that are
16 sent to the fund.
17 13866 COMMISSIONER PENNEFATHER: Thank you,
18 Mr. Stursberg.
19 13867 MR. WATT: Excuse me. If I could
20 just interject back to the discussion that took place
21 about consumers' dollars paying for all the costs,
22 consumers' dollars do pay for a vast majority of the
23 costs, but we should bear in mind that the cable
24 industry is carrying probably currently about $4
25 billion in debt. That is money that was put in to
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1 build the systems originally in both a combination of
2 debt and equity from owners. Then on top of that comes
3 the money from subscribers that go to pay for the
4 system.
5 13868 So, there are three sources of money
6 to keep the system going. One was the original seed
7 money that people put in to establish the business
8 before any monies were received from consumers and then
9 ongoing costs are recovered from consumers and
10 hopefully the revenues exceed the costs and that gives
11 you some internally generated funding with which to
12 expand your system, but generally that has not been
13 sufficient to pay for the capacity increases that the
14 cable industry has put in place. Those have been
15 financed by additional debt assumed by the companies
16 and equity infusions from the owners of the companies.
17 13869 COMMISSIONER PENNEFATHER: Madam
18 Chair, thank you.
19 13870 THE CHAIRPERSON: Commissioner
20 Wilson?
21 13871 COMMISSIONER WILSON: Mr. Stursberg,
22 I want to go back to the regulatory model that you are
23 proposing because I'm really not sure that I understand
24 it. In fact there was some talk earlier this week
25 about a parallel universe on a number of levels and I
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1 am wondering if that's what you are suggesting as sort
2 of a parallel system, one set of rules for the analog
3 world, one set of rules for the digital world, but how
4 do you integrate those two sets of rules?
5 13872 I have just been sitting here as you
6 have been talking, looking back through your submission
7 and trying to figure out how all of this works. Let me
8 just run this by you. You can correct me if I am
9 wrong, but essentially what I see and what I hear is,
10 "Let us grow and integrate and get bigger and the more
11 sophisticated and successful we get, the more our
12 companies will be worth and the more we will be able to
13 assume the risk of building, creating that digital
14 world and, at the same time, as we grow, protect us
15 from our competitors by keeping the same rules in
16 place, the analog rules, the tiering and linkage
17 rules", because those rules affect your competitors'
18 abilities to compete with you.
19 13873 If they have to, essentially, present
20 exactly the same kinds of services, the same services
21 maybe in a slightly different kind of packaging
22 situation than yours, it is essentially the same. So,
23 if we keep all of those rules in place, then their
24 ability to -- even though they will have -- I mean you
25 talked about the difference between the analog system
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1 where you say there is an abundance of product and not
2 enough channels and in the digital world there is an
3 abundance of channels and not enough product. Well,
4 the DTH providers, for example, are going to have those
5 channels. They are going to have that abundance of
6 channels, so they are going to need those services
7 before you do.
8 13874 So, in my mind, you are saying: Keep
9 the analog rules in place. That helps you, but that
10 doesn't help them. It also doesn't help the 25 per
11 cent of Canadians who don't get cable and those people
12 are potential subscribers to DTH. They could be drawn
13 in maybe more successfully.
14 13875 I actually had just written down --
15 and maybe this is something that you don't want to talk
16 about publicly -- how many of the 200,000 subscribers
17 to DTH are a result of a loss of subscribers to cable
18 versus brand new people who have just been receiving
19 signals over air and have never had the benefit of
20 cable television and that huge menu of services that
21 has been available.
22 13876 So, on the one hand, you are saying,
23 "Let's do some radical thinking and go for a more
24 market driven approach." Certainly I think we are at a
25 critical point and we do have to look at a shift in the
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1 paradigm, to use a very much over-used phrase, but at
2 the same time maintain those analog rules. Well, if we
3 are really going to go for it, if we are really going
4 to go for a completely market-driven approach, then why
5 don't we just throw it all open right now and see what
6 happens.
7 13877 I mean on the one hand there is this
8 let's be more market driven, but Canada -- I mean we
9 are so used to being regulated. That's something you
10 have said yourself many times, we are so accustomed to
11 regulation. So, it's like, "We will be this market
12 driven and this much protected." How do you marry
13 those two competing visions?
14 13878 MR. STURSBERG: I think there are two
15 or three questions that you are asking me, if I can try
16 them on one by one.
17 13879 First of all, as far as the existing
18 tiering and linkage rules are concerned, they were
19 originally constructed to assist the channels
20 themselves. So, the rules associated with how many
21 American services you can link with Canadian services
22 were designed to assist the Canadian services. That
23 was the purpose of the rules. If you were to unwind
24 the rules in an analog world, the tiering and linkage
25 rules, I think the impact would be fundamentally on the
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1 existing Canadian services.
2 13880 But the second point I would make is
3 it's not clear to me, even in the current environment,
4 that there are tremendous impediments to the new
5 competitors distinguishing and differentiating their
6 product. I don't know if any of you have seen the
7 current Look TV ads that are in the papers right now.
8 One of the things that we know very well that our
9 customers are frustrated about is their lack of choice.
10 They would like to pick and choose the services they
11 can get.
12 13881 Look TV has a great big ad. You will
13 see it in the papers, I have seen it in the Toronto
14 Star, in which it says: "We offer choice." That's
15 what they offer, they offer choice and they offer you
16 an opportunity to pick and choose your own tiers, how
17 you would like to construct them. They have a tiny
18 asterisk there that says, "Subject to the CRTC's
19 tiering and linkage rules", but it still gives them,
20 even the rules as they exist today, enormous capacity
21 to allow customers to pick and choose and, therefore,
22 for them to differentiate on the basis of the existing
23 rules the product that they are offering.
24 13882 As far as the future is concerned, I
25 think that when we look to the future -- as Chris was
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1 saying, the DTH guys have a certain advantage. They
2 have 200,000 subs. Right now we have 65 digital subs.
3 13883 COMMISSIONER WILSON: I was just
4 going to say 65 --
5 13884 MR. STURSBERG: Digital subs.
6 13885 COMMISSIONER WILSON: -- thousand,
7 plus 7.6 million.
8 13886 MR. STURSBERG: That's right, but I
9 am saying if they want --
10 13887 COMMISSIONER WILSON: But you still
11 have those subscribers. Whether they are digital or
12 not, you have still got them.
13 13888 MR. STURSBERG: Absolutely, but my
14 only point is that when you look into a digital
15 world -- his view is, he says, "I would like guys to
16 launch digital services right now. I would like guys
17 to launch into my bigger digital environment." We say
18 fine, they can launch into the bigger digital
19 environment that they have. If that gives them the
20 capacity to further differentiate their product, I
21 don't have a problem with that. I think that's a
22 perfectly reasonable thing to say.
23 13889 I think our concern is -- only
24 concern is this, and it comes back to the original
25 rationale for the rules. You are right to say that we
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1 are going to leave our digital services off the
2 existing analog base.
3 1625
4 13890 Again, to come back to the example
5 that John Cassidy was using, I think yesterday or the
6 day before, where he said the reason why they can do
7 certain kinds of things is because they already own a
8 series of relatively stable analog specialities. So
9 they can share overheads with them, and so on and so
10 forth.
11 13891 I think that you are going to see a
12 lot of developments that will be similar to that, and
13 in a digital world, where people are going to say: We
14 have stable analog specialities; we now have the
15 opportunity to launch relatively inexpensive digital
16 services that lever off the existing analog specialty
17 infrastructure, whether that's by way of sharing
18 overheads, by way of sharing transmission equipment, or
19 whatever it happens to be, that's all good.
20 13892 I think that what we should do,
21 though, is -- therefore, you asked the question what is
22 the relationship between analog services and digital
23 services in that world, apart from all the differences
24 we have talked about? One of the things you want to do
25 is maintain the relative stability of the existing
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1 analog world, so that you can in fact lever more
2 effectively into the digital one.
3 13893 COMMISSIONER WILSON: I think what I
4 asked you was, how do you mesh the two systems, the
5 rules?
6 13894 MR. STURSBERG: Well, the rules --
7 no, I think the rules will be different, and I think
8 that is precisely my point, that for us to succeed --
9 13895 COMMISSIONER WILSON: So we put a
10 parallel set of rules into place to deal with digital.
11 13896 MR. STURSBERG: They will be
12 different. They will be different rules, because I
13 think that if you were to put in place exactly the same
14 set of rules that you have right now for digital
15 services, you would make it very difficult for those
16 services to succeed, is my point.
17 13897 Again, we are sort of anticipating
18 your next hearing a little bit.
19 13898 COMMISSIONER WILSON: When you say
20 digital services, do you mean digital channels, or
21 digital distribution services?
22 13899 MR. STURSBERG: I mean digital
23 specialty services.
24 13900 COMMISSIONER WILSON: We don't really
25 have any of those.
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1 13901 MR. STURSBERG: That's right, but I
2 am saying that when you think about the rules that you
3 will put in place for those new digital services, we
4 are certainly hoping we can convince you, when the time
5 comes, that you are going to have to think about them
6 quite differently from the way in which you have
7 thought about the regulation of existing analog
8 specialty services.
9 13902 The reason for that is because, as I
10 was saying earlier, the world they were launched into
11 is much smaller, it's much riskier, we face a
12 fundamental chicken-and-egg problem as to getting
13 services and boxes out there and, beyond that, we are
14 in a situation where we are exploring the sort of outer
15 limits of demand for these services, so we have to find
16 new ways of generating demand, or at least allowing the
17 services to change, to evolve and to develop in a way
18 that reflects demand.
19 13903 So I think this is going to require a
20 different form of thinking as to where we are going.
21 13904 Just one last point on your question
22 as to whether the DTH guys are taking customers from
23 us, or whether they are new customers. I don't know
24 Chris Frank's numbers -- he knows them better than I --
25 but I take him at his word that those are principally
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1 coming right now from under-served areas, which is a
2 very good thing for the broadcasting system as a
3 whole --
4 13905 COMMISSIONER WILSON: Yes, it is.
5 13906 MR. STURSBERG: -- because you are
6 actually growing it. Maybe I will just make one last
7 general point on growing it, then I'll stop talking for
8 a second.
9 13907 COMMISSIONER WILSON: And then I'll
10 ask you another question.
11 13908 MR. STURSBERG: Okay.
12 13909 To a certain extent, when we talk
13 about a demand or market-driven system, we are talking
14 about a system in which all you are trying to do is
15 create growth under rather difficult circumstances, and
16 growth is obviously what we want, because when you
17 grow, the entire thing becomes a positive sum game.
18 13910 COMMISSIONER WILSON: We thought that
19 too.
20 13911 MR. STURSBERG: Yes. Everybody wants
21 growth, so the question is, how can we get that most
22 effectively if we are going to have new Canadian
23 services, new Canadian content.
24 13912 COMMISSIONER WILSON: Okay. I want
25 to ask you about viewership to Canadian programming.
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1 Again, when I was looking through I was -- you talk
2 about the regulatory and government support mechanisms
3 that have resulted in a number of very positive things
4 for the Canadian broadcasting system -- the number of
5 television channels that we have available to us, "the
6 number and variety of television undertakings" I
7 believe is what you say, a burgeoning Canadian
8 independent production industry, Canada becoming the
9 second largest exporter in the world of English
10 language television, but in spite of all of that, the
11 Canadian audience has not grown.
12 13913 I had written down a little note here
13 saying sort of, okay, what's your point in presenting
14 those numbers, and then actually Commissioner
15 Pennefather pointed out the paragraph on page 14, which
16 ties viewership to funding, and that is that until the
17 audience grows, then let's not throw in more money at
18 Canadian content, especially not through the cable
19 industry as a mechanism. We could spread it across the
20 wider base of all taxpayers, if the government wants to
21 give another 100 million dollars, but not through the
22 cable companies specifically.
23 13914 Just on the whole topic of
24 viewership, I want to question the numbers. My
25 questions have been sort of coming up over a period of
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1 time since we first started this hearing, and some of
2 the questions may not be fair to ask you, and I should
3 have asked the CAB some of the same questions. I have
4 looked at their numbers, I have looked at our numbers,
5 I have looked at your numbers, and the comment that you
6 make that one would think that the combination of all
7 of these successes would have resulted in an increased
8 Canadian audience for Canadian programming.
9 13915 Does scheduling of Canadian
10 programming have an impact on the audience? If you
11 schedule Canadian programming at a time when people are
12 watching television, would you get more people watching
13 it?
14 13916 MR. STURSBERG: If there is more
15 people watching TV when you put a program on, then just
16 as a sheer matter of statistical probability, there is
17 more probability that they are more likely to watch a
18 Canadian program.
19 13917 COMMISSIONER WILSON: And if you
20 spent more money promoting Canadian programming, would
21 more people watch?
22 13918 MR. STURSBERG: I would think that
23 would likely be true.
24 13919 COMMISSIONER WILSON: So how come
25 everybody is talking about the fact that the Canadian
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2912
1 audience hasn't grown since the 1960s, that it has been
2 relatively flat, at 30 per cent, when nothing really
3 extraordinary has happened during all that time in
4 terms of scheduling or promoting it, that no major
5 changes have taken place.
6 13920 I guess I am wondering, why is 30 per
7 cent so significant? To me, it is not really a good
8 argument, for viewing to Canadian programming remaining
9 flat at 30 per cent for almost 40 years, because
10 American programming has always been scheduled in the
11 prime time, and Canadian programming has never been
12 promoted as strongly as American programming. So, is
13 it surprising that it stayed flat? No? Not really.
14 13921 MR. STURSBERG: You are talking now
15 about English Canadian programming.
16 13922 COMMISSIONER WILSON: Yes, because --
17 I mean, the Quebec market is quite different, and they
18 have a very different success story there, but --
19 13923 MR. STURSBERG: You know, I'd like to
20 help --
21 13924 COMMISSIONER WILSON: It just seems
22 to me a pretty weak argument for the fact that Canadian
23 programming has not succeeded, and to tie it to
24 viewership, because maybe it hasn't been given the
25 chance.
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1 13925 MR. STURSBERG: I don't know that it
2 would be altogether appropriate for us as the cable
3 industry to comment on that. We don't buy programming,
4 we don't schedule it. We --
5 13926 COMMISSIONER WILSON: But you do talk
6 about viewership in here, and you do tie it to funding.
7 13927 MR. STURSBERG: The only general
8 point that we are making there is that a lot of money
9 has gone in, and viewership levels have not increased
10 dramatically.
11 13928 The question I think that we would
12 ask ourselves is this: Is there a better way of
13 allocating the money, which is the question the Fund is
14 asking itself in a way that it will get a better bang
15 for its buck in terms of viewership, and is there a
16 better way of thinking about the way in which the
17 regulations work, which is, I presume, the purpose of
18 this hearing, in a way that it will give a better bang
19 for the bucks that are available.
20 13929 So we make that same general point,
21 and we make that point also because, for the other
22 reasons that I mention, we don't think it would be a
23 good idea to impose further taxes to levy the money.
24 13930 I think that it's difficult for the
25 cable industry to say anything terribly helpful to you
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1 about issues of scheduling or that kind of question
2 just because, as I say, we don't buy programming, we
3 don't schedule programming, and we don't have any
4 particular expertise in those areas, or we can't really
5 bring very much to the party by way of expert
6 information on that.
7 13931 I think that is the great challenge.
8 Surely the great challenge is to not just make Canadian
9 shows, but to make Canadian shows that Canadians want
10 to see, and that they watch, and that the two --
11 13932 COMMISSIONER WILSON: But maybe they
12 do. Maybe they do want to see them, but they just
13 don't have the same opportunity that they have to see
14 Canadian programs that they have to see American
15 programs. That's what I --
16 13933 MR. STURSBERG: That's the purpose of
17 the hearing.
18 13934 COMMISSIONER WILSON: Right. That's
19 why we are sitting here.
20 13935 MR. STURSBERG: Exactly.
21 13936 COMMISSIONER WILSON: I prefaced it
22 by saying maybe it wasn't a fair question to ask you,
23 but it was on my mind, so --
24 13937 MR. STURSBERG: Maybe it's a fair
25 question to ask Dave Watt.
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1 13938 MR. WATT: I was just going to make
2 two observations. One, I would think actually that --
3 I don't know this answer, that it's really an empirical
4 matter, what the promotion spending has been on
5 Canadian programming. I guess without having looked at
6 the numbers, I would have thought there would be more
7 dollars spent today than there were 30 years ago. On
8 the other hand, I --
9 13939 COMMISSIONER WILSON: But it may be
10 relative. The number of dollars spent on promoting
11 Canadian programming may be relative to the amount of
12 money that was spent on producing that programming.
13 13940 MR. STURSBERG: That may well be the
14 case.
15 13941 The other point I would make is that
16 another way to look at the 30 per cent number is to say
17 that things had gone quite well for Canadian content,
18 because at the same time as there has been additional
19 Canadian outlets brought to air, there has also been
20 greater competition faced coming from the United States
21 in terms of over-the-air broadcasters and specialty
22 channels, so that the Canadian viewership has been
23 holding against greater choices from the south.
24 13942 COMMISSIONER WILSON: And I guess one
25 of the things that I would like to look at is what has
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1 the viewership been to specifically American
2 programming over the last 40 years? That's the flip
3 side of the 30 per cent, so --
4 13943 MR. STURSBERG: I think you'll find
5 that the majority of the other 70 per cent is American.
6 13944 COMMISSIONER WILSON: So that has
7 been pretty flat too, over the last 40 years.
8 Anyway -- thank you.
9 13945 THE CHAIRPERSON: Commissioner
10 McKendry.
11 13946 COMMISSIONER McKENDRY: Thank you,
12 Madam Chair.
13 13947 There were just a couple of things
14 you referred to that I wanted to clarify.
15 13948 You mentioned that one of your
16 members, Shaw, is proceeding more quickly than your
17 other members with digital roll-out, and when Mr. Shaw
18 appeared before us earlier, he said that his company is
19 spending more than 50 million dollars annually for the
20 conversion to digital, which would be about 10 per cent
21 of their revenues, maybe a little less.
22 13949 You indicated you were prepared to
23 elaborate as to why they are pushing ahead and
24 seemingly the other members are waiting for the second
25 generation. Could you please do that.
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1 13950 MR. STURSBERG: Sure. I think there
2 is -- we can show you some numbers, if you are
3 interested in seeing them, which we brought along
4 today, but I think there is an answer on the cost side,
5 and there is an answer on the revenue side.
6 13951 On the cost side --
7 13952 THE CHAIRPERSON: And how do we
8 relate it to Canadian content?
9 13953 MR. STURSBERG: With respect to the
10 digital boxes, at this particular point in time I'm not
11 sure that there is a tight relationship on these costs
12 and revenue matters. I thought what you were trying to
13 get at is why has Shaw moved now and the others are
14 waiting, is your question.
15 13954 When it came time to launch the third
16 tier in Calgary, the Shaws faced a problem, which was
17 whereas the analog boxes in most of the other cable
18 systems would accommodate the third tier, and theirs
19 would not. So for them to offer the third tier, they
20 were going to have to replace the analog boxes in any
21 event, so -- I don't know what they cost, $150 a piece,
22 $200 a piece -- US.
23 13955 The alternative was to put in digital
24 boxes, knowing they were going to have to go there in
25 any event, so in fact the box cost fell for them in a
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1 way that it didn't fall for anybody else. That would
2 be point number 1.
3 13956 Point number 2 is that, as our model
4 shows, the model is highly sensitive on the revenue
5 side. When we look at potential revenue streams to
6 drive the box, one of the streams that we put into it
7 is a stream which is not real revenues but is retained
8 customer based. In other words, the customers that we
9 would otherwise have lost to the competitors we treat
10 as revenues for the purposes of justifying the box
11 investment.
12 13957 I think it's fair to say that people
13 can differ as to how many customers they think they
14 would otherwise lose by not moving ahead. As that
15 number goes up or down, then obviously the case for the
16 investment in the box changes accordingly. And I think
17 it is probably fair to say that Shaws are greater
18 partisans of the potential effects of competition from
19 satellite than some of the other cable companies might
20 be, so that their view of the likely erosion would be
21 greater than the view of the likely erosion from the
22 other cable companies, and therefore the amount of
23 money that you would draw in by way of avoided losses
24 would be higher, so it makes it easier to justify the
25 business case.
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2919
1 13958 Dave, you may want to comment on
2 this.
3 1640
4 13959 MR. WATT: The only other issue that
5 comes to mind is that in a decision to move forward
6 with a digital box, you would have to decide what you
7 thought the useful life of the first generation box
8 would be.
9 13960 In the case of Shaw, they have a
10 number of various sized systems spread out across the
11 country that perhaps give them greater flexibility in
12 redeploying those boxes to smaller locations as open
13 cable boxes came forward in the next couple of years.
14 13961 Beyond that, I don't think we should
15 speculate any more on their motivations.
16 13962 MR. STURSBERG: We actually did bring
17 some slides, and we would be happy to show you how the
18 numbers move around as a percentage of the total costs
19 and total revenues with respect to making the business
20 case, so that you could see what the impact of what we
21 are talking about would likely be.
22 13963 COMMISSIONER McKENDRY: I was
23 primarily interested in the strategic reason as to why
24 one company would be proceeding while another one is
25 not. But if you feel you would like to file that
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2920
1 information with us, we certainly would not object.
2 13964 MR. STURSBERG: You have it. We
3 filed it with you. It is in the models.
4 13965 I think those are the strategic
5 reasons. One is they faced the swap-out costs
6 associated with their analog boxes inevitably in
7 Calgary already.
8 13966 Number two, as I said, they are
9 obviously partisans of satellites. They have invested
10 a great deal of money in Star Choice, so they believe
11 that it is going to do well. They are more likely to
12 believe that cable companies that do not convert to
13 digital are more likely to lose more customers faster.
14 Therefore, the revenue stream that you bring in by way
15 of the customers that you have not lost, so to speak,
16 is bigger.
17 13967 And finally the point that Dave makes
18 is that when you are thinking about whether to invest
19 now in the existing boxes or whether to invest later
20 when the new open boxes come on the market, the
21 critical variable is: How long do you think the useful
22 life of the box is going to be?
23 13968 If you think the useful life of the
24 box is only going to be a year and a half to two years
25 until the open boxes are available, obviously you would
StenoTran
2921
1 not do it. But if you have a way of redeploying those
2 boxes so that they can extend their useful life to a
3 full seven or eight years, that is a different matter
4 altogether. You get out from under that problem.
5 13969 As Dave was saying, they can do that
6 just because of the nature of the systems that they
7 own.
8 13970 COMMISSIONER McKENDRY: Thank you.
9 13971 The other matter I wanted to see if I
10 could get some more information about is the issue of
11 why, in your Association's view, one needs large
12 organization in your industry.
13 13972 I think you offered two reasons for
14 that. One was economies of production and
15 distribution. The other reason that I took down in my
16 notes while you were speaking was that companies in
17 your industry that are going to incur the risk of
18 marketing new digital services to customers need to be
19 big to incur those risks.
20 13973 Are those essentially the two
21 reasons?
22 13974 MR. STURSBERG: I actually have a
23 little talk on this, if you would like to have it.
24 13975 We filed a piece that we did on the
25 economies associated with vertically integrated
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2922
1 companies, that is an appendix to our document. We
2 looked at the nature of the kinds of large companies
3 that are being formed internationally. So we looked at
4 Time Warner, Disney, TCI, and so on. They tended to
5 draw some general conclusions, and I don't think the
6 conclusions are terribly controversial.
7 13976 The reason why people are investing
8 all of this money to be able to buy up all of these
9 companies and form them into large media groups is
10 associated essentially with the question of risk that I
11 was talking about earlier.
12 13977 What large companies allow you to do
13 is they allow you to manage risk essentially in three
14 or four different kinds of ways.
15 13978 One is that obviously what it means
16 to have a lot of risk is that you are going to have a
17 lot of losers, and you hope a lot of winners to offset
18 the losses. Your capacity to be able to deal with that
19 is a function of your financial capacity. So the
20 greater the cashflows that you have available at your
21 disposal, the easier it is going to be for you to deal
22 with that.
23 13979 Secondly, it becomes clear that there
24 are certain kinds of new economies associated -- which
25 are almost scale economies. I guess not quite scale,
StenoTran
2923
1 but they look --
2 13980 Whether you call them scope economies
3 or scale economies, there are certain kinds of
4 economies of content production that people are
5 beginning to realize now that they were not able to
6 realize in the past.
7 13981 For example, if you make a product in
8 one medium, you can then repurpose it through a series
9 of media. If you make a movie, you can sell it to a
10 cinema; then you sell it to a video store, to a pay
11 system, and then on to conventional television. You
12 can support it with a website, and you can have a
13 spinoff in collateral properties of one variety or
14 another associated with it.
15 13982 To the extent that you are involved
16 in the various different revenue streams associated
17 with the product, you can maximize the revenues that
18 you realize from it.
19 13983 I think the third, and probably the
20 most important from our point of view, is that if you
21 own both the distribution infrastructure and the
22 service, then obviously the risks associated with
23 building and launching the service are smaller than
24 they would otherwise be.
25 13984 As I mentioned earlier, I think in a
StenoTran
2924
1 digital world --
2 13985 It will be difficult to encourage
3 people to launch digital services, so it will therefore
4 be difficult to get people to buy the box. And because
5 it is difficult for people, because people will not
6 want to buy the box, there will not be a big market for
7 people to launch digital services into.
8 13986 One of the questions is: How do we
9 deal with this? The answer is, in part, that you are
10 going to want the cable companies to launch digital
11 services because then they will be deeply incented at
12 the same time to take the risks associated with the
13 box. So you lay off your risk on both sides.
14 13987 I think that the long and the short
15 of the answer is that as you move to greater risk with
16 these kinds of products and services, then you are in a
17 better situation for cash reasons, for reasons of
18 maximizing the extent of the value of your product, and
19 for reasons of being able to deal with the synergies
20 between distribution and production, if you can
21 organize yourself into larger companies. And that is
22 why they have done it in the United States.
23 13988 COMMISSIONER McKENDRY: With respect
24 to the risk that your members will incur with respect
25 to the marketing of new digital services to customers,
StenoTran
2925
1 who really incurs the risk? Is it in fact the cable
2 operator, or is it the person who owns the new service?
3 13989 For example, I recall in the last
4 launch that the services contributed a substantial
5 amount of marketing money to the effort of launching
6 these new services.
7 13990 Where is the risk? Is it really in
8 fact with the cable operator or is it with the owner of
9 the new service?
10 13991 MR. STURSBERG: We qualified the risk
11 in digital. The risk for us is $225 million of swapped
12 out boxes, that if we cannot grow the base, is a dead
13 loss.
14 13992 There is just no way of recovering
15 that money. That is the size of the risk that
16 confronts the industry. And that is a quantifiable
17 risk.
18 13993 I think, in fairness, with respect to
19 the launch of the last tier -- which is what I think
20 you are referring to -- the measure of the extent of
21 which risk was loaded or unloaded by the cable industry
22 under the services can only be measured, I think, as to
23 when did the services go black versus when does the
24 cable industry go black in terms of the third tier.
25 13994 What we did, in an attempt to try to
StenoTran
2926
1 understand this question, is we took the business plans
2 of the services as filed with the Commission; we looked
3 at the amount of money we were giving them and the
4 costs that we were -- including the costs that were
5 being taken up by way of the extra marketing money,
6 which they were contributing. And we said: When will
7 they become profitable, at what penetration levels of
8 the third tier? And are those penetration levels
9 higher or lower than the penetration levels for the
10 cable company?
11 13995 The answer is, in almost all cases --
12 and we filed these models with you as well. In almost
13 every single case the services became profitable at
14 lower levels of penetration than the cable industry's
15 third tier.
16 13996 The issue here is: Was that a fair
17 allocation of risk? And I think the answer, in
18 quantitative terms is: Probably not. Probably the
19 cable industries bore too much of the risk associated
20 with the launch of the third tier.
21 13997 The third tier was not unlike what is
22 going to happen in digital. It is a bit of a chicken
23 and egg, as well. It was a positive option tier. You
24 had to get people out there to buy it if everybody was
25 going to succeed.
StenoTran
2927
1 13998 The same thing will be true on the
2 digital side. If everybody is going to succeed, then
3 the services are going to have to take risk. We are
4 going to have to take the $225 million plunge.
5 13999 What is the fair allocation of risk
6 under the circumstances? I think in financial terms
7 you would have to say the fair allocation of risk was
8 that we would become profitable at about the same time,
9 in penetration terms, as they became profitable --
10 which, as I mentioned earlier, was not the case with
11 the third tier. In fact, they became profitable ahead
12 of us.
13 14000 COMMISSIONER McKENDRY: It is this
14 evolution of new risks that drives you to say that we
15 need to think about a new set of regulatory rules with
16 respect to Canadian content in the digital world.
17 14001 MR. STURSBERG: Yes.
18 14002 COMMISSIONER McKENDRY: A number that
19 came up earlier in this hearing with respect to the
20 conversion to digital came from Mr. McCabe of the new
21 digital organization that has been set up --
22 14003 MR. STURSBERG: Mr. McEwen?
23 14004 COMMISSIONER McKENDRY: Mr. McEwen,
24 who sets up the new digital organization that has been
25 set up to deal with digital TV in Canada. I think he
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2928
1 gave us a number, as I recall, of a $1 billion price
2 tag to convert the cable network to be able to deliver
3 digital broadcast signals into homes.
4 14005 Do you agree with that $1 billion
5 number?
6 14006 MR. STURSBERG: We have actually
7 filed numbers in our brief. If you turn to page 29,
8 you will find the filed numbers.
9 14007 The cost to the cable industry of
10 converting to high definition television is a function
11 of two things: how many channels do you have to carry
12 on high definition television; and what is the
13 compression ratio.
14 14008 What we did in order to calculate the
15 number is: The Commission's number is that the cost of
16 a channel is 16.2 cents per sub. That is an all-in
17 cost, including the cost of capital. So for every
18 channel that we have to build out to all of our
19 subscribers, it costs about $15 million a year.
20 14009 We looked at it that way and said:
21 So what happens if we have to carry a whole bunch of
22 new channels, and we have to carry them at different
23 compression ratios? Obviously, if you have a higher
24 compression ratio, you need fewer analog channels to be
25 able to carry them; and if you have a lower compression
StenoTran
2929
1 ratio, you need more. And it costs you more money.
2 14010 The estimates that we have put in
3 front of you are that if we can get very good
4 compression, 3 HDTV channels per 1 analog 6 megahertz
5 channel, we have to carry 30 HDTV channels; it will
6 cost us about $900 million.
7 14011 If we can get only two stuffed into
8 each 6 megahertz analog channel, and we have to carry
9 60 -- as you know, right now we carry about 70 or 80
10 channels on the dial -- then it is going to cost us
11 about $2.7 billion.
12 14012 So the range of costs for the cable
13 industry, using the Commission's own numbers, varies, I
14 think it is fair to say, from a low of a billion
15 dollars upwards, depending on the number of channels
16 and the compression ratios.
17 14013 MS BECK: I would like to clarify
18 that the first numbers that were quoted, at about $900
19 million, are based on a national representation. We
20 indicated that there were about 30 channels that had to
21 be supported.
22 14014 If you think about it, in the ten
23 major markets, that is about three broadcast channels
24 per major market. So we are not talking about 30
25 signals per system; we are talking about three HDTV
StenoTran
2930
1 signals per system across the ten major markets.
2 14015 COMMISSIONER McKENDRY: My
3 understanding is that digital broadcast television is
4 not necessarily high definition digital television.
5 14016 MR. STURSBERG: That is absolutely
6 right.
7 14017 COMMISSIONER McKENDRY: You seem to
8 have focused your numbers on the assumption that there
9 is going to be widespread high definition digital
10 television.
11 14018 The discussion from the broadcaster
12 seems to be more along the lines of the conversion to
13 what is called digital television, with the possibility
14 that there may be some high definition television.
15 1655
16 14019 MR. STURSBERG: You are exactly
17 right. Just to be absolutely clear on it, the model
18 that we have provided to the Commission as part of this
19 filing is a model that looks at the costs of converting
20 just to digital, not the high definition at all.
21 14020 The numbers I'm citing now would be
22 in addition to those costs because you have to have
23 these extra channels that Commissioner Pennefather and
24 I were talking about earlier on. You have to have all
25 these extra channels to cover the HDTV signals. Those
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2931
1 are the additional costs associated with that.
2 14021 COMMISSIONER McKENDRY: Thank you
3 very much.
4 14022 Thank you, Madam Chair.
5 14023 THE CHAIRPERSON: Commissioner
6 Cardozo.
7 14024 COMMISSIONER CARDOZO: Thank you,
8 Madam Chair.
9 14025 I have just got two or three quick
10 questions which require quick answers.
11 14026 The first is just on the issue of set
12 top boxes as it relates to this hearing. Is it not
13 fair to say that with set top boxes, whether you look
14 at it as a channel expander or digitization that we are
15 talking about, more channels and therefore more
16 Canadian content, more avenues for Canadian content.
17 14027 MR. STURSBERG: Absolutely.
18 14028 COMMISSIONER CARDOZO: Thank you for
19 that short answer.
20 14029 MR. STURSBERG: I took it that you
21 were chastising me.
22 14030 COMMISSIONER CARDOZO: No, no, I
23 wasn't. Far be it from me to even think to assume that
24 role.
25 14031 I just want to make sure I understand
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1 your recommendation with regard to contributions to
2 production and quote a recommendation from ACTRA who
3 are appearing next week. In their written brief they
4 said that the Commission should begin to increase the
5 contributions to a new benchmark of 7 per cent and
6 should limit to 2 per cent the amount which BDUs can
7 reduce their contribution in respect of spending on the
8 community channel.
9 14032 I would take it you are not in favour
10 of that.
11 14033 MR. STURSBERG: Well, I am not in
12 favour of it with respect to the reasons which I
13 mentioned earlier which I think that will only serve to
14 make, you know, the future hostage the past and I don't
15 think that's wise. I don't think it's wise for the
16 depressed demand, but I think as well, you know, for
17 the reasons that I was mentioning earlier that the
18 overall level of contribution to the fund will
19 certainly grow as a result of growth in the system and
20 it will grow, I think, substantially.
21 14034 On the community channel, maybe I
22 will just ask Fred Wagman to make a comment on that.
23 14035 MR. WAGMAN: I think that would be a
24 drastic impact on the system as has the already
25 contribution been addressed an impact on the system,
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1 Commissioner.
2 14036 In our particular case, I can tell
3 you what is happening in our area. Broadcast is
4 becoming more regional. The community channel is
5 picking up more of the things that they did on a local
6 basis and really the community is more dependent on the
7 community channel than ever before.
8 14037 If we don't have the funding to be
9 able to do that, and it was redirected somewhere else,
10 all of that local expression would go out the window.
11 I think when you look at what is being done at the
12 present time, the number of hours that are being
13 produced, the involvement of community in community
14 television, I think it would be a step in the wrong
15 direction to take more of the system and literally
16 eliminate community channels.
17 14038 COMMISSIONER CARDOZO: Thanks for
18 introducing that because that was my third question.
19 It was regarding local programming.
20 14039 As you will know from the round
21 tables we had in various parts of the country and some
22 of the submissions that we have received, there is a
23 growing concern that local reflection is reducing in
24 both news, I suppose community affairs and drama.
25 14040 What do you do, Mr. Wagman, as a
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2934
1 cable company in Regina? What does your community
2 channel do? You mentioned that the conventionals are
3 going more regional and you are doing more local. What
4 kinds of --
5 14041 MR. WAGMAN: We are moving into the
6 gap obviously, Commissioner, filling in with news and
7 styling our programming in such a way that what was
8 important to community before continues to be
9 important. That's obvious.
10 14042 In terms of doing news coverage and
11 local coverage now, we have moved in to fill into that
12 spot and do more direct news coverage, et cetera.
13 14043 I made a comment while we were
14 talking about this earlier that you used to be able in
15 Regina call a press conference and you would have about
16 four cameras there, one from each of the networks and
17 an independent as well. Now when you call a news
18 conference, you can hold it in a telephone booth. They
19 are not there.
20 14044 COMMISSIONER CARDOZO: Are you there?
21 14045 MR. WAGMAN: We are there.
22 14046 COMMISSIONER CARDOZO: Were you
23 outside the telephone booth?
24 14047 MR. WAGMAN: We're there.
25 14048 COMMISSIONER CARDOZO: Okay.
StenoTran
2935
1 14049 MR. WAGMAN: The point they make, and
2 I can give you another example. Last week our newly
3 ordained head of the university in fact made his first
4 public representation. We were the only ones on the
5 site to pick it up.
6 14050 That's what's happening out there in
7 different regions. I have noticed when I have been in
8 some of the major centres, you don't experience the
9 same thing, but in some of the other provinces and some
10 of the other areas, that's what's happening.
11 14051 The community channel has become far
12 more vital to the community than it ever has been
13 before.
14 14052 COMMISSIONER CARDOZO: When you say
15 news, you don't have an actual news hour.
16 14053 MR. WAGMAN: No. What we do is
17 approach news in what I think what is a little softer
18 way. We cover what are the highlights of the day from
19 a news point of view, be they political or what have
20 you, but try to have the people involved on and have
21 them discuss their point of view and their topic and
22 try to relate to the community why they have taken that
23 kind of a position and, of course, try to balance that
24 with other people who have a different view.
25 14054 It's a different approach to news
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2936
1 than one might see someone sitting behind a desk giving
2 the hard punch for ten minutes.
3 14055 COMMISSIONER CARDOZO: How is that
4 show set up? What time does it run?
5 14056 MR. WAGMAN: We set it up at a 5:30
6 time and then a repeat time at 9:30 in the evening.
7 14057 COMMISSIONER CARDOZO: Do you have a
8 host who runs this?
9 14058 MR. WAGMAN: Oh, yes.
10 14059 COMMISSIONER CARDOZO: Okay.
11 14060 MR. WAGMAN: In fact, we contract
12 some of the professionals in the community to come in
13 who have worked in this field and have more experience
14 at it, but we have community people totally involved in
15 the operation so that we have people doing camera and
16 producing and all the rest of it that are, you know,
17 doing other jobs and do other things.
18 14061 COMMISSIONER CARDOZO: Do groups like
19 community groups and charities and sports groups get
20 access as well?
21 14062 MR. WAGMAN: Right across the board.
22 The variety that is there I can assure you of ethnic
23 groups, aboriginal groups, I mean our door is open to
24 sit down -- we have always looked at ourselves as
25 animatours. Those people come with an idea, a program
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2937
1 that they would like to do. Obviously we have the
2 professional help to sit down with them and help them
3 and produce a program that is of interest to their
4 group and conveys the message that they want conveyed.
5 14063 It's not our program. It's a
6 community program and their program.
7 14064 COMMISSIONER CARDOZO: We had a
8 witness on this morning who was of the view that
9 another cable company exercised too much control in
10 terms of what went on the air. You are saying you
11 don't do much of that.
12 14065 MR. WAGMAN: Well, I think you have
13 to do a certain amount of control. Let me put it this
14 way. If someone comes along just with an idea, I mean
15 we could be doing programs with nice ideas and I could
16 cite an example.
17 14066 You have a group that comes and some
18 celebrity is coming to town to make a speech. "Oh,
19 let's do that and cover it and put it on cable
20 television." Hardly is that very interesting for cable
21 television. I think that what we have to do is produce
22 programming that has that professional air about it.
23 That's what people are used to in terms of watching
24 programming.
25 14067 When I differentiate and say that we
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2938
1 do have to have some control on it, if you went ahead
2 and produced, say, some important person, let's say
3 Wayne Gretzky, and I am not trying to be hard on him,
4 but if he was in town to make a speech to the local
5 Rotary group or what have you and you covered it and
6 put it on the air, he really didn't come there to do a
7 television production. He came there to speak to an
8 audience in a particular hall. I'm not certain that's
9 worthy of the time and effort and resources that we put
10 into it.
11 14068 On the other hand, you could take
12 another group that was doing something locally. It
13 might be the Humane Society who has a particular need
14 this week with respect to the animals that are in the
15 shelter. It would seem better if we put the resources
16 that way than use them in the first instance, but you
17 have to make decisions like that as you go through any
18 given day in production or any given week in
19 production.
20 14069 COMMISSIONER CARDOZO: In an average
21 day, how many hours of first run programming do you
22 have?
23 14070 MR. WAGMAN: We do 60 hours a month
24 of first run programming, so on average that would be,
25 you would say, two hours a day.
StenoTran
2939
1 14071 COMMISSIONER CARDOZO: A couple of
2 hours a day. A lot of that is repeated so people get
3 to see it.
4 14072 MR. WAGMAN: The repeat time is not
5 included in that 60 hours, but certainly the news break
6 is repeated at a later time in the day.
7 14073 COMMISSIONER CARDOZO: Okay. From
8 your knowledge as the relatively new chair of CCTA, are
9 you doing more than your fellow members?
10 14074 MR. WAGMAN: Our company started off
11 that way with a definite commitment to the community
12 channel and the programming that was done. I think in
13 fairness you have to look across the country at each
14 particular situation and the kind of programming and
15 the amount of programming that's done and its
16 importance to community.
17 14075 I think that varies from system to
18 system. I don't it's, you know, we copy anybody, nor
19 does anyone copy us in the way we do it.
20 14076 COMMISSIONER CARDOZO: The question
21 facing us that has been put to us is people are not
22 seeing enough local programming and that we should do
23 something about it. Should we or should we not?
24 14077 MR. WAGMAN: Well, one of the
25 difficult things, Commissioner, that we are faced with,
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2940
1 of course, as I said is we have had, and I don't mean
2 this in a negative way, but our 3 per cent contribution
3 to the production funds means 3 per cent that we don't
4 have any more. It had to come out of what we were
5 formerly using in community programming.
6 14078 I can tell you within our system that
7 was going to look like ten cuts on staff and a reduced
8 number of hours. We have made the commitment to carry
9 on and continue with an excess of 5 per cent
10 contribution as well as the contribution we make to the
11 programming fund and we are going to continue to do
12 that and that's just our decision because I mean
13 everybody has to do that, but we are going to continue
14 to do it because we think it's important.
15 14079 MR. STURSBERG: Can I just make one
16 comment on that, Fred?
17 14080 MR. WAGMAN: Yes.
18 14081 MR. STURSBERG: I think it's
19 important to understand also a little bit about the
20 difference about the financial structure of Cable
21 Regina and the financial structure of some of the
22 others.
23 14082 Cable Regina is a co-op. They have
24 an opportunity to be able to make greater investments
25 over and above the 2 per cent the Commission has
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2941
1 mandated which for other companies, particularly
2 publicly traded companies, would be very difficult to
3 make.
4 14083 On the more general question, as the
5 broadcasters retreat from local broadcasting, then the
6 community channels are -- my general sense of the
7 industry as a whole -- enthusiastic and happy to step
8 into that role. In fact, there isn't anybody else who
9 can step into that role. They are the only ones with
10 the facilities and the experience and the staff to be
11 able to do it. They would love to do it. They would
12 love to do it.
13 14084 There will be, as Fred has mentioned,
14 financial constraints which in his case, because his
15 financial structure is somewhat easier to deal with
16 than it will be the case of others, so we would like to
17 do that, we would like to step up to that, but we are
18 going to have to think a little bit about how, you
19 know, to get a little bit more revenue into it so it
20 can be a quality service that will be a service to the
21 community that will genuinely replace, if not more so,
22 the kind of local broadcasting service Canadians have
23 come to depend on.
24 14085 COMMISSIONER CARDOZO: In response to
25 the people who are asking the Commission to do
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2942
1 something about the lack of local programming, do you
2 have any suggestions beyond what Mr. Wagman said,
3 unless you want to add something more, Mr. Wagman.
4 14086 MR. WAGMAN: No.
5 14087 MR. STURSBERG: Yes, we will have
6 some suggestions for you.
7 14088 I do think that we would like an
8 opportunity to -- you know, we have obviously been
9 following this hearing. It's no secret that the
10 broadcasters have been withdrawing from local
11 broadcasting for years now. I understand why that is
12 and I understand that's where they are going. That is
13 what it is.
14 14089 We have been thinking very hard about
15 the community channel over the course of the last two
16 or three years. We have done a great deal of work
17 recently to try to improve the community channel, to
18 strengthen it. You heard from the Shaws what they were
19 doing. It's quite innovative. Rogers has done a great
20 deal of work. Videotron is just putting in a new
21 strategy right now.
22 14090 Fred's community channel I think is
23 certainly one of the most important in the country in
24 the sense that it is absolutely central to the life of
25 Regina. We have been doing a lot of studies of the
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1 community channel to try to find out what things are
2 working well in terms of changes, how do customers
3 respond to it. We have learned some things there.
4 14091 One of the things that I have learned
5 which is probably the most interesting for me, in any
6 event, is that obviously the community channels are
7 most important in the smallest media centres.
8 14092 In Toronto, you know, they are doing
9 a good job with their community channel at Rogers. In
10 Ottawa they are doing a good job, but it's not
11 obviously as important to the community because there
12 are other sources. There are other sources of
13 television news.
14 14093 If you look at a place like
15 Chicoutimi or Trois Rivieres or Moose Jaw or Penticton,
16 then the community channels become exceptionally
17 important and they will take on more and more
18 importance, even in mid-size centres like Regina
19 because, as Fred says, there is nobody left in Regina
20 and there's nobody left in Saskatoon.
21 14094 MR. WAGMAN: The people are there.
22 14095 MR. STURSBERG: No, no. Sorry. I
23 meant there are no TV guys from the networks.
24 1705
25 14096 So it is going to become more
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1 important and we would like an opportunity to come back
2 to you to talk to you some more about the community
3 channel.
4 14097 COMMISSIONER CARDOZO: In the context
5 of this hearing or next year with BDU?
6 14098 MR. STURSBERG: Our thinking was
7 this, that once you have concluded this hearing, I
8 think you will draw some conclusions to the effect that
9 there is an issue about local programming, and it is
10 going to be difficult for the broadcasters to deal with
11 that.
12 14099 You know, however -- however you want
13 to move forward after that, if you would like to have a
14 further discussion about local programming, or the role
15 of the community channel, we would welcome that.
16 14100 COMMISSIONER CARDOZO: Okay. So if
17 you have any more suggestions within the context of
18 this hearing, you will let us know by the famous date
19 of October 15.
20 14101 MR. STURSBERG: We will.
21 14102 COMMISSIONER CARDOZO: Thank you.
22 14103 Thank you, Madam Chair.
23 14104 THE CHAIRPERSON: Commissioner
24 Pennefather.
25 14105 COMMISSIONER PENNEFATHER: My
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1 question was asked, Madam Chair. Thank you.
2 14106 THE CHAIRPERSON: I have very few
3 questions, but I do have some questions related to this
4 hearing. I am glad to see that at page 13 you say
5 that:
6 "...it is unlikely that changes
7 in the existing regulatory
8 mechanisms, including increases
9 in Canadian content quotas, will
10 change this pattern."
11 14107 Of 30 per cent, or whatever level of
12 viewing, to Canadian content.
13 14108 You have calculated, and at 4.3,
14 which is just one paragraph, two paragraphs lower, you
15 note that:
16 "According to the CBC research,
17 three types of programming --
18 news, public affairs and
19 sports -- account for about
20 three-quarters of Canadian
21 viewing of Canadian
22 English-language programs."
23 14109 I take it from your response to
24 Commissioner Wilson that, indeed, there are some
25 regulatory mechanisms available to improve that,
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1 contrary to what you say here, that:
2 "...it is unlikely that changes
3 in the existing regulatory
4 mechanisms...."
5 14110 If you mean exhibition requirements,
6 spending requirements, scheduling requirements, that
7 they could, indeed, change that pattern.
8 14111 MR. STURSBERG: Yeah, I didn't mean
9 to imply that there was no way of improving the
10 machinery that is in place.
11 14112 THE CHAIRPERSON: Because the two, if
12 you put the two together, that three-quarters of the
13 viewing is to news, public affairs and sports, and if
14 you did try to improve the availability and the
15 scheduling of those other categories that are not
16 watched, possibly you would have watchers, you would
17 have viewers.
18 14113 MR. STURSBERG: Yes. As I was saying
19 earlier to Commissioner Wilson, as you are struggling
20 with this from a regulatory point of view, changing
21 hats, we are obviously struggling with that question
22 from a financing point of view.
23 14114 Obviously, I think what everybody
24 would like to be able to do is, if at all possible, to
25 find machinery that would allow better viewership for
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1 the unrepresented categories and drive the numbers up.
2 14115 Our only point here is this is a
3 challenge, this is hard, and that I think Dave's point
4 is right, it is an accomplishment to have been able to
5 hold at 30, but we seem to be a bit stalled so we are
6 going to have to use some imagination whether on the
7 regulatory side, and you have heard a gazillion briefs
8 at this point, but whether on the financing side; and,
9 as I mentioned yesterday, we have been doing a lot of
10 work to try to figure out how to help lift those
11 numbers.
12 14116 THE CHAIRPERSON: At page 28, you
13 say, when you discuss digital capacity, that:
14 "...the model adopted by the
15 Commission for the launch of new
16 digital services should give
17 customers' wishes regarding
18 Canadian programming services
19 absolute precedence, and allow
20 customers to determine what
21 services they do, and do not,
22 want to receive."
23 14117 And, at page 38, in the fourth
24 bullet, that:
25 "The Canadian content rules
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2948
1 should be put on a more market
2 driven basis;"
3 14118 Are you saying here that customers
4 should -- that programming should be -- services should
5 be made available to customers in a manner that they
6 can choose not to receive any Canadian programming at
7 all? Is that what you mean by market "driven" and
8 "customers' wishes should take precedence" altogether?
9 14119 If it means that, how do you marry
10 that, to use Commissioner Wilson's expression, to the
11 mandate that we have to ensure that we keep a viable,
12 vibrant programming -- Canadian programming sector with
13 a diversity of high quality programming made available?
14 Do you mean here that --
15 14120 MR. STURSBERG: No.
16 14121 THE CHAIRPERSON: -- you would want
17 the, for example, the one-to-one ratio changed, or that
18 the precedent -- at least as many Canadian services
19 being offered as non-Canadian, that all that should be
20 market driven, and that Look TV should take that little
21 asterisk comment at the bottom of the page and say, "We
22 will sell you 15 American channels, if that is what you
23 want"?
24 14122 MR. STURSBERG: I think we are
25 anticipating a little bit the framework hearing that is
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1 coming up.
2 14123 THE CHAIRPERSON: Oh, it is not like
3 we haven't today.
4 14124 MR. STURSBERG: Have there been a few
5 words about it already today?
6 14125 THE CHAIRPERSON: You have had a
7 pretty fair earful.
8 14126 MR. STURSBERG: We haven't got to the
9 really good proposals that we have sitting back at the
10 office to offer.
11 14127 THE CHAIRPERSON: I am surprised that
12 you would raise that.
13 14128 MR. STURSBERG: But I think that is
14 an admonishment; I think I am chastised.
15 14129 THE CHAIRPERSON: Not that you didn't
16 get any help.
17 14130 MR. STURSBERG: I am trying to walk a
18 fine line here.
19 14131 No. I think the short answer is no;
20 that obviously that our proposal is not going to be
21 that people should be able to receive uniquely just
22 exclusively American services. How the linkage rules
23 will work in a future digital environment will depend
24 on part, of course, on what happens to the authorized
25 services lists, and people have different views about
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1 that.
2 14132 I think our point is a slightly
3 different point. Our point here is this: There has
4 been a lot of discussion by some of the services that
5 they are worried about moving into much more customer
6 friendly distribution environments where the customers
7 get to pick the services they want. You have heard
8 some observations by some of the services saying, "No,
9 no, you shouldn't allow that to happen in a digital
10 world. You should force them to be all packed up
11 together in tiers. You should never let customers take
12 full advantage of the technology."
13 14133 Now, our view would be different.
14 Our view would be that we understand that customers are
15 frustrated by their lack of choice. It is one of the
16 reasons we must go into digital. We would like them to
17 be able to enjoy the maximum level of choice possible
18 consistent with ensuring that there are strong Canadian
19 services available.
20 14134 THE CHAIRPERSON: So you would agree
21 with the view that the mandate of the Commission in the
22 act is an active one; it is one that says, try to find
23 some ways that will ensure that quality and diverse
24 Canadian programming is available and, hopefully,
25 encourage the knowledge of its existence and the -- to
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1 encourage people to get to know what it is, and there
2 have been various proposals put forward on conventional
3 television, which is really what this hearing is about,
4 is how do we improve that system?
5 14135 Considering what this hearing is
6 about, those comments would lead me to believe,
7 perhaps, that you would endorse, if you had a choice
8 between the CAB and the CFTPA view, you are speaking
9 here not with the same hat as you spoke yesterday, that
10 looking at viewership would be, indeed, a very good
11 idea because that is how people express what it is they
12 want to watch in the greatest number.
13 14136 MR. STURSBERG: I have been following
14 this hearing with great interest, and I know that a lot
15 of the questions that you have put to people have been
16 questions about quality versus viewership. I think
17 myself that this is a kind of false dichotomy.
18 14137 THE CHAIRPERSON: I don't mean
19 quality. I think I made it clear that I don't mean
20 quality of a program. I mean quality in the sense of
21 the quality of the system and the extent to which it
22 matches the directions that are given to the regulator
23 in a Broadcasting Act which is still on part of the
24 legislation. I think I am -- if you did watch the
25 hearing, I am not talking about the quality of a
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1 series, of a program, of a soap opera. I am talking
2 about the quality of the system in the sense of its
3 diversity and the hours at which Canadian programming
4 is available so that people get to know and develop a
5 loyalty towards certain Canadian program quality in
6 that sense. Because it is very difficult to take a
7 program and say, "This is quality". But that is
8 exactly what you would be doing if you use viewership.
9 You would say, that which is the most watched is the
10 best program to offer the public to satisfy the
11 dictates of the Broadcasting Act.
12 14138 MR. STURSBERG: I don't think we
13 would take that view. I think we would take a slightly
14 different view, which would be this, that the way the
15 system is structured right now is one that is designed
16 to encourage radical levels of diversity. We have more
17 diverse programming in Canada than practically any
18 country in the world.
19 14139 THE CHAIRPERSON: Canadian
20 programming. So you don't think we have
21 underrepresented categories of programming, then.
22 14140 MR. STURSBERG: No, I didn't say
23 that; that what is a great program for a specialty
24 channel may be a different test for a conventional
25 broadcaster. So what you would say on the History
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1 Channel or on the Life Channel or on Bravo, you would
2 expect those services to put on programs which would
3 perform very differently in terms of viewership.
4 14141 I wouldn't even say viewership was
5 the gigantic test in those circumstances; but for
6 certain kinds of programming, I think we would all
7 agree that when it comes, for example, to mainstream
8 popular Canadian drama, we would like to see dramas
9 made, promoted and scheduled in a way where they are
10 watched more. That is the beginning and the end of it.
11 14142 I am not sure that anybody that has
12 been here so far would necessarily disagree with that.
13 Certainly, I don't detect anything that the producers
14 have said that they would like to see Canadian dramas
15 watched less. I think they would like to see Canadian
16 dramas watched more, too.
17 14143 THE CHAIRPERSON: Yes, but they were
18 not the ones who put forward the idea that we should
19 measure success of how we meet --
20 14144 MR. STURSBERG: That is not our
21 proposal either.
22 14145 THE CHAIRPERSON: -- the mandate of
23 the Broadcasting Act.
24 14146 So there has been two different views
25 put forward, one which would measure success or quality
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2954
1 of the system, perhaps I shouldn't use that word any
2 more, but the extent to which it matches what it is we
3 are supposed to strive toward, and a different view is
4 spend enough money on the programming, put it on when
5 people are watching and you may see that 30 per cent
6 increase and a loyalty being developed, et cetera.
7 14147 So that was my question, which is not
8 entirely free market. If you say, "I will take the
9 BBMs and I will see what it is people like to watch,
10 that is what I will offer." You get a different result
11 altogether.
12 14148 It isn't as managed a system, but I
13 don't know just what room there is considering all
14 kinds of factors you are aware of to not have some
15 management, and it is a question of how you do it.
16 14149 MR. STURSBERG: I agree completely.
17 14150 THE CHAIRPERSON: I know that there
18 is one area where the CCTA's proposal and the Shaw
19 proposal are identical. That is at page 8 where Shaw,
20 as you heard the question yesterday, also made a very
21 similar chart, identifying the total value of cable
22 industry contributions to Canadian programming. I
23 would be repeating myself if I went down the list to
24 end up with the same proposal that I would set up that
25 list differently.
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2955
1 14151 MR. STURSBERG: Yes, I heard their
2 answer.
3 14152 THE CHAIRPERSON: Because you are in
4 the business of selling product that you purchase.
5 14153 MR. STURSBERG: Yes.
6 14154 THE CHAIRPERSON: And your
7 contribution, your largest contributions are the
8 payments you made to Canadian specialty services.
9 Those are not donations.
10 14155 MR. STURSBERG: Correct.
11 14156 THE CHAIRPERSON: Okay. So, anyway,
12 you know what my point is.
13 14157 MR. STURSBERG: Yes, and I still
14 disagree with your point.
15 14158 I mean, for example, the broadcasters
16 point out that they make very substantial contributions
17 to Canadian content, and they make it in two forms.
18 14159 THE CHAIRPERSON: And so do you and I
19 have not raised the CPAC matter.
20 14160 MR. STURSBERG: No, but content.
21 14161 THE CHAIRPERSON: Or the Production
22 Fund contributions, even though they come from the
23 subscribers.
24 14162 MR. STURSBERG: If you don't mind my
25 just carrying on for one second longer because I think
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2956
1 this is a little unfair.
2 14163 The broadcasters buy programming and
3 they spend money hiring people to make programming.
4 That is a genuine contribution on their part to
5 Canadian programming. We do exactly the same thing.
6 We are buying channels of Canadian programming and
7 making them available to Canadian customers. There is
8 no difference.
9 14164 I think that that -- to look at it
10 that way around puts us on exactly the same footing as
11 the broadcasters for purposes of comparing who is
12 making what contribution to Canadian programming. This
13 $700 million that we spend on Canadian channels --
14 Canadian channels -- is 25 per cent, pretty well, of
15 our total revenues. This is far and away, aside from
16 debt and just simply putting cables in the ground, the
17 biggest component of expense. And that is as surely a
18 contribution to Canadian programming as the
19 broadcasters buying programs from independent
20 producers. We are buying them from the channels.
21 1725
22 14165 If we didn't pay this money to them,
23 if we didn't go out and market those services so that
24 we would have the money to pay to them, there wouldn't
25 be any Canadian channels. Overwhelmingly, the Canadian
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2957
1 channels depend on this source of revenue. This is
2 about depending on the channel, but on average between
3 80 and 85 per cent of the total revenues go to the
4 Canadian channels. That's quite apart from the amount
5 of money, which we mentioned earlier. We have sunk $4
6 billion into glass and copper in the ground so that
7 those channels can exist.
8 14166 THE CHAIRPERSON: I quite understand
9 and I did mention during the presentation of Shaw
10 Communications as well that the specialty services
11 would not get to the customer but for you, but when the
12 specialty services come before us, quite possibly in
13 many cases their programming service would look quite
14 different if the Commission didn't impose spending and
15 exhibition requirements on Canadian content, and that's
16 what they call the contribution.
17 14167 I understand sufficiently how this
18 works to know that that's not perfect, either, but then
19 they bring to you those services where they contributed
20 to Canadian content and you retailed them to your
21 subscribers. Of course, without you, it's true, they
22 wouldn't get there, but it's a bit bizarre --
23 14168 MR. STURSBERG: No, no, sorry, it's
24 more than that.
25 14169 THE CHAIRPERSON: Anyway, I don't
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2958
1 think it's worth --
2 14170 MR. STURSBERG: No, I think it is
3 because I think that it's really important to
4 understand the role of the cable industry with respect
5 to the support of Canadian programming. We have spent
6 a fortune building those channels and we have spent a
7 small fortune marketing the third tier. The amount of
8 money that we have spent marketing the third tier
9 dwarfs anything that has been put into it by the
10 channels. If we didn't build those channels, if we
11 didn't market those tiers, they would have no business.
12 14171 Now then what happens is --
13 14172 THE CHAIRPERSON: I have already
14 acknowledged that.
15 14173 MR. STURSBERG: I know, but why is it
16 unfair to say that this $700 million that we pay to the
17 Canadian channels is an illegitimate contribution to
18 Canadian programming when, if the broadcasters go and
19 buy programming from an independent producer, that's a
20 legitimate contribution. I don't understand the
21 distinction.
22 14174 THE CHAIRPERSON: That is not the
23 distinction I was going to make. The one that I made
24 yesterday and make today is that these columns of a
25 different sort and your contribution, for example, to
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1 cable in the classroom and to CPAC is not of the same
2 type. I would put them both on the page, it's quite
3 legitimate to, it's just that there is a distinction to
4 be made between some of these lines and others.
5 14175 My last question or comment is, I
6 suppose, part of my contribution to the rehearsal for
7 the next process. This morning on my way to the
8 hearing I crossed the Eddy bridge, as I do every
9 morning when I come to work, and I could see that
10 Cirque du Soleil was setting up. I think for most
11 citizens who have seen the Cirque du Soleil, perhaps
12 what you remember the most is the contortionists and I
13 thought that's a bit where we are at now, isn't it?
14 14176 We have throughout your oral
15 presentation and in this presentation a situation that
16 is going to take a lot of patience and cooperation to
17 get into some uncontortioned status. In 1996, when
18 many channels that were supposed to be digital channels
19 were licensed and only four channels were to be given
20 access, the Commission had been told, of course, that
21 there were very few channels to be used.
22 14177 Lo and behold, 16 channels were used,
23 some to carry these digital intended services and many
24 to carry American services. In the process, my
25 understanding is that many channels were harvested from
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1 the premium services. If I remember, there were as
2 many as 18 or 19 channels in Toronto devoted to premium
3 services and certainly many in Ottawa, which have been
4 reduced drastically in most large cable companies. Is
5 that correct?
6 14178 MR. STURSBERG: Yes.
7 14179 THE CHAIRPERSON: So, those channels
8 were harvested for that purpose. Now we are saying
9 that to move to digital we have to have analog channels
10 to harvest and we can't do that because they are being
11 used to carry all these services. So, there is my
12 imagery of contortion.
13 14180 Then at page 6 you talk about using
14 the premium services customers to move into the digital
15 world and yet the premium services' appeal is greatly
16 reduced. So, I assume by that, in large part, it's
17 your pay customers to which, presumably, you will
18 increase -- how will you increase the appeal of what
19 you consider is the part of the service that will allow
20 you to move into digital if you take away these analog
21 services to offer other services and get a full house,
22 so to speak, with a greatly reduced premium service
23 number of channels? It's a contortion that has no end.
24 14181 MR. STURSBERG: What we harvested was
25 some pay-per-view channels.
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1 14182 MR. STURSBERG: Yes, and that's the
2 core of your premium service.
3 14183 MR. STURSBERG: I don't know that I
4 would call that the core of the premium service.
5 14184 THE CHAIRPERSON: Well, what is it
6 then?
7 14185 MR. STURSBERG: It's the pay
8 television service itself.
9 14186 THE CHAIRPERSON: Yes, but that's
10 what is less appealing when there are fewer channels.
11 14187 MR. STURSBERG: No, it's because --
12 in most cases, what happened was they were pay-per-view
13 channels, so they were not the pay channels themselves.
14 They were the pay-per-views.
15 14188 THE CHAIRPERSON: Well, pay-per-view
16 would be part of the premium service, too, in the
17 regulatory --
18 14189 MR. STURSBERG: Yes, it's part of it,
19 but, on the other --
20 14190 THE CHAIRPERSON: -- environment.
21 14191 MR. STURSBERG: I think you are
22 partly right, but not because of the pay-per-view
23 channels. I think the way in which the pay service was
24 diminished was, frankly, by the moving of the Family
25 Channel and WTBS onto the third tier. I agree with --
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1 14192 THE CHAIRPERSON: That's also a
2 choice. I am simply questioning how we will ever get
3 out of this contortion of: We don't have enough
4 channels, so then we won't license too many that you
5 can't carry because we are going to wait for digital.
6 Then those are carried by Choice, as well as American
7 services. Then we have no analog channels left. Then
8 you say today that it's the premium customers that will
9 make it easier to go to digital, but at the same time
10 you talk about the need to have analog channels to
11 harvest.
12 14193 MR. STURSBERG: Let me try to help
13 this out. I will do my best.
14 14194 Right now the premium channels are
15 analog. Those are the ones that we propose to harvest
16 for digital. So, they are there right now. We have
17 those channels to harvest for digital.
18 14195 THE CHAIRPERSON: You have not used
19 any of these channels since 1996 to put any of the
20 Me-16 on or the new American and Canadian.
21 14196 MR. STURSBERG: What happened to
22 build the third tier was there was some channel
23 capacity available already. In certain systems to get
24 enough channels to accommodate the relatively large
25 tier, what they had to do was kick out exempt services
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1 and/or harvest some of the pay-per-view channels.
2 14197 THE CHAIRPERSON: Yes. Well, that's
3 my point.
4 14198 MR. STURSBERG: Right. So, we did
5 that.
6 14199 Now, having done that, we still have
7 the premium service and sufficient analog channels on
8 it. On average, about 10, I think.
9 14200 MS BECK: Yes.
10 14201 MR. STURSBERG: About 10.
11 14202 MS BECK: And they are scrambled.
12 14203 MR. STURSBERG: But we have about 10.
13 So, we say, "All right, those are the 10 we are going
14 to take and that we are going to digitize and put the
15 boxes in and swap out the boxes." Now, that's where
16 you would want to do it, in any event. So, we have
17 enough channels because you figure that the first
18 people who are going to take it are the people who are
19 most interested in television; i.e., those who take the
20 most already.
21 14204 As far as the third tier launch is
22 concerned, there is -- you are absolutely right, there
23 is a very complicated trade-off associated with this.
24 Are we better off culturally, are we better off as a
25 broadcasting system for us to have harvested the
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1 pay-per-view channels, which I tell you right now are
2 basically American movies, that's all they are, and
3 boxing matches. Are we right to have taken those
4 channels and made them available for a whole bunch of
5 digital Canadian services that otherwise wouldn't have
6 gotten launched?
7 14205 My own view would be I think that was
8 a good choice. I think it was a good choice in terms
9 of making sure the third tier was a strong tier that
10 people would want to take. The numbers have been very
11 good. They have held up between 12 and 15 per cent
12 shares since launch and, secondly, it has been very
13 good because it allowed a whole bunch of Canadian
14 channels to get on, the digital ones --
15 14206 THE CHAIRPERSON: And American.
16 14207 MR. STURSBERG: Oh, yes, and some
17 American channels, too. In fact one of the things that
18 has done very well for us is TBS. TBS has taken
19 typically a two and a half to three share. It has been
20 a very powerful driver of that channel, there is no
21 doubt about it. So, we got a package out there that
22 was good for the analogs and it was good for the
23 digitals. Has it been hard to sell it? You bet.
24 14208 THE CHAIRPERSON: I am not
25 criticizing your choice, I am talking about how do we
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1 get out of the contortions. I'm not criticizing what
2 choices you make. If you say that was better for
3 Canadian content, that was your choice, but then each
4 time -- how many analog channels does Ottawa have, for
5 example, that are supposedly required to be harvested
6 to move into the digital world?
7 14209 MR. STURSBERG: Can I ask you a
8 question, though. I mean in fairness, you know,
9 wasn't -- okay, I won't ask the question. But I think,
10 in fairness, everybody would agree that when we
11 launched the extra digitals onto the third tier, the
12 Canadian digitals -- in fact, as you know now MuchMusic
13 is getting up and "Sports Desk" is getting up, and so
14 on. Once we did that, that was a good trade-off from a
15 public policy point of view and a Canadian cultural
16 point of view to say it's more important to have
17 Canadian specialty services than American pay-per-view
18 movies. I make that point.
19 14210 As far as the sufficient capacity to
20 be able to do analog is concerned -- I mean digital,
21 right now we have about 10 channels on the premium. It
22 varies from system to system. Some still have more
23 pay-per-views that we could take out, but,
24 nevertheless, we still have about 10 that we could
25 shift over. Will we have to build more analog capacity
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1 to be able to handle HDTV? You bet. We are going to
2 have to do that. We don't have enough capacity.
3 14211 THE CHAIRPERSON: That's
4 contortioning way too high. We haven't even gotten to
5 digital. Mr. Sward and Mr. McEwen agreed that there
6 will not be a whole lot of movement towards HDTV until
7 cable is digital. That's the first step.
8 14212 MR. STURSBERG: Well, until we are
9 not only digital, but we have enough capacity to handle
10 it. I mean all these trade-offs between -- this is
11 exactly what we were saying before. The trade-offs
12 between Canadian services, on the one hand, versus
13 duplicate Canadian services or duplicate American
14 services in HDTV is going to be a fundamental issue
15 with respect to the utilization of digital capacity in
16 the future.
17 14213 The other fundamental issue that
18 confronts us is this. As the Commission has ruled
19 already, these channels cost 16.2 cents per channel.
20 So, we have to find services that will cover those
21 costs so we can pay the debt that Dave was referring to
22 at the bank. Now, if we get only 50 per cent
23 penetration on one of those channels, we don't need
24 16.2 cents, we need to have 32.4 cents revenue coming
25 from the customer per channel to be able to cover the
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1 costs.
2 14214 So, there are very complicated cost
3 revenue trade-offs as well that I think we all confront
4 collectively -- the Commission, the services, the cable
5 industry -- to be able to ensure that we can build that
6 capacity and guarantee that there is going to be more
7 room for new Canadian services as we move forward.
8 14215 THE CHAIRPERSON: We will obviously
9 have more chance to discuss all this the next time, but
10 within a span of two years the environment shifts
11 dramatically and doesn't necessarily see us going
12 towards our goal of presumably giving more choice to
13 the subscriber by having more capacity. I just don't
14 see at the moment how the contortions allow us to get
15 back into a straight shape.
16 14216 Mr. Watt, when you talk about
17 harvesting analog channels, that's a timing problem, is
18 it? At a certain point you would have to shut down
19 certain services, harvest those channels, do the
20 compression and presumably then you release more
21 channels. It's a timing problem.
22 14217 MR. WATT: It is a timing issue. I
23 think the point you are getting at is that in order to
24 take the analog channel, you have to shut down whatever
25 else was on that channel previously so that --
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1 14218 THE CHAIRPERSON: For how long?
2 14219 MR. WATT: It is gone forever.
3 14220 THE CHAIRPERSON: Presumably you shut
4 down service X on analog channel X and then you
5 compress and release more channels. So, service X
6 presumably could then be put on the release channel.
7 1740
8 14221 MR. WATT: It can be put on -- let me
9 back up. Let's say if you take -- say take the most
10 constrained system today and say there is only one
11 pay-per-view offered, you would -- that would be the
12 easiest one to take and then you would say, "Well, we
13 now have eight channels that we could put digital
14 services on," but what that means is that no one could
15 take in that system and that one analog pay-per-view
16 channelling. So, in other words, that system is gone.
17 14222 THE CHAIRPERSON: But for your --
18 14223 MR. WATT: Service.
19 14224 THE CHAIRPERSON: For your premium
20 services, you would not have a digital box, that is
21 fine.
22 14225 MR. WATT: That is right.
23 14226 THE CHAIRPERSON: Because if you are
24 a premium service the problem I understand is that not
25 everybody is going to have a box. You are going to
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1 have a duplication. But there is a timing problem. It
2 is not a completely -- maybe there would have to be
3 some shutdown or whatever, but you always get the
4 impression that somehow or other we are going to
5 compress from eight to one and nothing helpful is going
6 to come out of this. You need dozens of analog
7 channels harvested to do it. There are other ways of
8 looking at this so that this timing problem is managed.
9 14227 Because it can't be that you are
10 going to compress and release channels and not have
11 anything at the end of the day that is more -- where
12 there is more space left for the same number of
13 services.
14 14228 MR. STURSBERG: Can I try it on to
15 see if we can -- the problem is that when we take the
16 existing analog channels, say we have got 10 premium
17 channels, and then we convert them over to digital,
18 that is fine. You are right to say that what happens
19 at that point if we are running on eight to one is we
20 get 80 channels, so we keep back 10 for the 10 services
21 that are already on there, and you are left with 70 new
22 ones. Those 10 services that were already on there are
23 now available in digital. Fair enough.
24 14229 What you can't do, however, is
25 simultaneously run both an analog and a digital network
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1 infrastructure. In other words, if you would be saying
2 to us, "Keep the analog premium boxes in," and then
3 take a bunch of other analog capacity that you would
4 get from somewhere or other, say you built it, and
5 digitize that capacity, then people would say, "It's
6 impractical both economically and technically to do
7 that," because we would effectively be running two
8 systems and make ourselves completely crazy in the
9 process.
10 14230 So, I don't know if that answers your
11 question, but I think that the reason why we keep
12 looking at it this way around about, taking out the
13 pay, premium analog channels is because that is the
14 simplest, most practical and most economic way of going
15 at what is quite a difficult proposition.
16 14231 But if we duplicated the
17 infrastructure so we are running both analog and
18 digital simultaneously, we will make the costs even
19 worse and the technical complexity of managing the
20 network just too great.
21 14232 THE CHAIRPERSON: More services, of
22 course, could be moved to the premium that are not
23 analog -- now analog and not offered on analog.
24 14233 MR. STURSBERG: Yes, but if we moved
25 more services up from the tiers on to the premium, I
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1 think that we would have problems with our customers.
2 14234 THE CHAIRPERSON: It is not like you
3 don't have some now when you can't have the third tier
4 penetration as high as it was hoped for. So, nothing
5 it perfect. That is why I am talking about
6 contortions, but there has to be some -- any way, we
7 will have lots of time to look at all this. But there
8 are various views as to how this can be done.
9 14235 Certainly, what has been obvious in
10 the last few years is that what the needs are and the
11 ability or the capacity is appears to be one thing, and
12 then it is another, and then it is another again,
13 within a very short span of time.
14 14236 So somehow or other, hopefully, we
15 will be able to address this in a manner that can move
16 us forward with the goal that we are looking at in this
17 proceeding, which is to offer as many Canadian services
18 as possible, and other services to the public, at good
19 prices.
20 14237 I think everybody is agreed that
21 having more channel capacity is central to that. We
22 are not -- I think we have gotten ourselves into more
23 knots in the last two years than there were before.
24 There is a shift of what the needs and the capacity is
25 and, in the end, it is related to a large extent to
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1 what the goals are.
2 14238 Counsel.
3 14239 MR. BLAIS: Thank you. I realize it
4 is late in the day and everyone is a bit tired, but
5 there are just two points I want to clarify with you.
6 With a bit of trepidation I would like to bring you
7 back to page 8 and the contribution. In fairness to
8 you I really want to understand your point here.
9 14240 On the first line you say, "Payments
10 to Canadian cable specialty channels". So this is the
11 gross amount that all cable companies are paying
12 specialty channels?
13 14241 MR. STURSBERG: Yes.
14 14242 MR. BLAIS: And on the "Payments to
15 Canadian cable pay-TV channels" it is a gross amount
16 being paid.
17 14243 MR. STURSBERG: Yes, as far as I
18 know. Dave, you will have to help me out here.
19 14244 MR. WATT: That is correct.
20 14245 MR. BLAIS: You will agree with me
21 that both cable specialty channels and pay-TV channels
22 are not 100 per cent Canadian, that in fact the
23 programming, Canadian programming is less than 100 per
24 cent.
25 14246 MR. WATT: Yes.
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1 14247 MR. BLAIS: I put it to you that even
2 the broadcasters are not suggesting that their entire
3 programming expenses, whether Canadian or non-Canadian,
4 are contributions to Canadian programming. Is that
5 correct, Mr. Stursberg?
6 14248 MR. WATT: That is fair.
7 14249 MR. BLAIS: Would you agree with
8 that, Mr. Stursberg?
9 14250 MR. STURSBERG: Yes, I would agree
10 with that.
11 14251 MR. BLAIS: So, in fact, if you were
12 to use your philosophy to make an equation, the numbers
13 ought to be reduced by the actual amount of Canadian
14 programming being presented on those specialty and
15 pay-TV channels?
16 14252 MR. STURSBERG: We can do that
17 calculation, if we can get the numbers from the
18 services themselves. We would be happy to do it for
19 you.
20 14253 MR. BLAIS: It is not the exact
21 number that was --
22 14254 MR. STURSBERG: No, but these are the
23 numbers that we know.
24 14255 MR. BLAIS: I realize that. But it
25 was the methodology that I wanted to get to.
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1 14256 The second area I would like to
2 clarify with you is on page 15. Here, we are talking
3 about the contribution by the unregulated elements of
4 the Canadian broadcasting system, you refer to them as
5 U.S. satellite services. I think I understand your
6 point, and I do understand your point. You are saying
7 that the revenues that -- the 5 per cent you are
8 contributing, in a sense, already accounts for the
9 American U.S. services and their good packaging
10 partners and provide some lift. But, as you know,
11 other parties in the proceeding have, like the CAB,
12 have suggested that the contribution on an ongoing
13 forward basis, and we will be hearing that from them a
14 little later on. As well, the CFPTA has suggested that
15 there be a condition to being added to the eligible
16 list not to buy North American rights.
17 14257 I was intrigued by your -- the point
18 there where you say:
19 "First, as the providers of
20 these services are not regulated
21 by the CRTC, there is no
22 practical means of compelling
23 such a contribution."
24 14258 Are you saying here that the
25 Commission couldn't do it; or that it is a bad idea to
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1 do it?
2 14259 MR. STURSBERG: We are saying that if
3 you decided to do it, we would think that because you
4 don't regulate the U.S. services the only practical way
5 in which you could extract the money would be from us.
6 So that the way it would work as a practical matter is
7 you would say, "That is worth whatever it is worth. So
8 the cable companies now have to cough it up; and what
9 we would like you to do is to go back to the American
10 services and renegotiate your affiliation payments with
11 them to reflect the new costs".
12 14260 Therefore, we think that the danger
13 from your point of view is that this will simply turn
14 back into a tax on top of the cable companies and then
15 we will be back in the problems I was talking about
16 before.
17 14261 MR. BLAIS: Okay, thank you. I
18 appreciate that.
19 14262 You also mention the possible trade
20 disputes. I was wondering if you have had the
21 opportunity to raise this either with U.S. services or
22 foreign trade representatives?
23 14263 MR. STURSBERG: No, I don't believe
24 we have.
25 14264 MR. BLAIS: Thank you. Those are my
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1 questions.
2 14265 MR. STURSBERG: I haven't.
3 14266 THE CHAIRPERSON: Thank you very much
4 for your patience. You have been sharing quite a bit
5 of your weekend with us. We are expecting great things
6 from the phase two of the coming process. If you
7 haven't seen the Cirque de Soleil, I recommend it
8 greatly. You will see what I mean.
9 14267 MR. STURSBERG: Well, if we felt like
10 contortionists over the last two years, I guess my
11 feeling is that things will be even more complicated as
12 we move forward and that the impact of these
13 technologies, changes in markets, globalization, the
14 shifts we have been talking about today will make the
15 past seem simple by comparison. Thank you very much
16 for your time.
17 14268 THE CHAIRPERSON: Do remember that
18 some of us are aging and contortions are very
19 difficult.
20 14269 MR. STURSBERG: Exactly. Thanks very
21 much for your time.
22 14270 THE CHAIRPERSON: As I mentioned
23 earlier, we are resuming at 11 Monday morning and not
24 sitting on Tuesday.
25 14271 Alors, nous reprendrons à 11 heures
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1 lundi, et nous ne siégerons pas mardi, mais nous serons
2 de retour mercredi.
3 14272 Bon week-end à tout le monde.
4 --- Whereupon the hearing adjourned at 1750, to resume
5 on Monday, October 6, 1998 at 0900 / L'audience
6 est ajournée à 1750, pour reprendre le lundi
7 6 octobre 1998 à 0900
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