ARCHIVED -  Transcript - Hull, QC - 1998/10/14

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 14, 1998 14 octobre 1998

Volume 14

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

Canadian Radio-television and

Telecommunications Commission

Conseil de la radiodiffusion et des

télécommunications canadiennes

Transcript / Transcription

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 14, 1998 14 octobre 1998

Volume 14

ii

TABLE OF CONTENTS / TABLE DES MATIÈRES

PAGE

Presentation by / Présentation par:

Alliance Broacasting Inc. 4081

Baton Broadcasting Incorporated 4121

Global Television Network 4309

Hull, Quebec / Hull (Québec)

--- Upon resuming on Wednesday, October 14, 1998,

at 0901 / L'audience reprend le mercredi

14 octobre 1998, à 0901

1. THE CHAIRPERSON: Good morning. Bonjour à tous.
2. Madame la Secrétaire.
3. M^me SANTERRE: Merci, Madame la Présidente.
4. The first presentation this morning will be by Alliance Broadcasting Inc.
5. Good morning.

   PRESENTATION / PRÉSENTATION

6. MS YAFFE: Good morning. My name is Phyllis Yaffe and I am President and CEO of Showcase and History Television. I am joined today by my colleagues: Norm Bolen, who is Vice-President of Programming for History Television; Jennifer Fong, who is our in-house regulatory counsel; and Laura Michalchyshyn, who is our programmer for Showcase.
7. Canadians are demanding more quality and more choice when they watch television and this is precisely what specialty services deliver. When Canadian viewers watch English-language specialty services, they tune to Canadian programs 64 per cent of the time and to foreign programs 36 per cent of the time. This reverses the trend from conventional television where English-language television viewing has traditionally been in the order of 30 per cent Canadian and 70 per cent foreign.
8. We attribute this success to many factors. One of the most important of these is the requirement that specialty services spend a percentage of their revenues on Canadian programs. This formula is based on a simple but effective cycle with three components: higher specialty revenues leading to more Canadian program investment leading to better quality programs. More service revenues means more re-investment in Canadian content. When these guaranteed expenditures are linked to specific scheduling conditions that fit a specialty services niche, the result is a regulatory policy that works.
9. I will now ask Laura Michalchyshyn to give some specific examples of how this formula has been a success for Showcase.
10. MS MICHALCHYSHYN: Thank you, Phyllis.
11. Current CRTC policies have worked well for Showcase, our specialty service which features the best of Canadian and international fiction programming. In terms of scheduling Canadian content, Showcase has made an extraordinary commitment. We carry a minimum of 60 per cent during each of the broadcast day and broadcast evening and during prime time from 7:00 to 10:00 p.m. Showcase broadcasts 100 per cent Canadian content.
12. We are proud to note that since its launch Showcase has attained these levels during all relevant time periods. Showcase is the most watched of all the Canadian services that launched in 1995. We believe that our success is not in spite of our commitment to Canadian content, but, rather, it is because of that commitment.
13. Showcase has proven that Canadians want to watch Canadian drama. The proof of this is in the numbers. We currently have an impressive 1.4 per cent audience share. Our commitment to 100 per cent Canadian drama in prime time is a perfect illustration of why "pride of placement" works. This season Showcase's audience during its prime time 7:00 to 10:00 p.m. 100 per cent Canadian block has increased by over 50 per cent as compared to last fall's audience.
14. Showcase was created to give Canadian drama in second window a home where viewers could always find it. That theory has now become a successful reality meeting both our cultural and business goals. To date, Showcase has acquired the rights to Canadian series, feature films, mini-series and made-for-television movies from 53 Canadian suppliers totalling 4,500 hours of Canadian drama.
15. Showcase has also commissioned its first original series production called "Welcome to Paradox". We are excited about the prospects for this new series and will continue to invest in Showcase originals and other acquisitions from Canada's independent production community.
16. I will now ask Norm Bolen to speak to you briefly about History Television and its success in attracting viewers with quality Canadian programs.
17. MR. BOLEN: Thank you, Laura.
18. In its first year, History Television is already a significant contributor to Canadian broadcasting objectives. To date, History Television has commissioned 60 projects, with a further 18 projects in active development. These projects are produced by 49 Canadian independent production companies located in seven provinces. We have commissioned 355 hours of original Canadian programming. We have also acquired 234 hours of Canadian programming.
19. History Television is a hit with viewers attracting a .8 per cent audience share in its first year. We are particularly proud of History Television, not only because we believe it has been a success with viewers, but because it plays an important role in Canadians understanding their past much of the discussion during this hearing has focused on the concept of quality television. We believe that the type of programming shown and originated by History Television is of tremendous value or quality. Our programs give a voice to the stories that make up our heritage, which we have all too often ignored.
20. We are particularly proud of series, such as "The Canadians". "The Canadians" is a History Television original biography series which presents real stories of the men and the women who built this country and established its character. Another series is the award winning "A Scattering of Seeds". This series documents the lives of ordinary immigrants who came to Canada to make a better life for themselves, from the Schumiatcher family in Calgary who gave us Alberta's famous white cowboy hat to Mary Ann Shadd, the first black woman to edit a newspaper in North America.
21. A program entitled "Our House" is a unique documentary presentation about the story of the Canadian House of Commons hosted by the Honourable Gilbert Parent, Speaker of the House of Commons. "Our House" was broadcast proudly on July 1st this year as part of History Television's special all-Canadian Canada Day schedule. These are just a few examples of how History Television attracts viewers with quality Canadian programming.
22. MS YAFFE: For the remainder of our presentation, we will address the issue of safeguards for self-dealing between broadcasters and producers. The issue focuses on two areas. First, should conventional broadcasters be able to access Telefilm's Equity Investment Program for their own drama or under-represented category productions; second, should specialty services owned by producers continue to be prohibited from triggering Telefilm's Equity Investment Program for its owners' productions; and, furthermore, should these same services continue to be prohibited from running their owners' productions in first window regardless of whether Telefilm money is involved.
23. We believe the self-dealing rules, both Telefilm's and the CRTC's, continue to serve as an important mechanism ensuring that broadcaster and independent producer interest remain balanced. Telefilm's self-dealing rules were imposed to encourage the growth of a vibrant Canadian independent production community. The CRTC shared these goals and mirrored Telefilm's self-dealing rules with rules of its own.
24. For example, at the time of the licensing of Showcase, we made commitments limiting us from carrying all first-run productions of our shareholders and their affiliates regardless of whether Telefilm money was involved. This requirement ensured that arm's length independent producers would have prime access to Showcase's original programming dollars. History's commitment was similar.
25. Today some of the conventional broadcasters are concerned that they are prevented from entering the field of production and are being treated unfairly in the process. Our view is different. Broadcasters have not been barred from being producers. They already produce for themselves and have always been able to do so. Even without tapping into Telefilm funds, conventional broadcasters have access to private and public financing which allows them to produce for themselves. Rather, the issue is whether conventional broadcasters should be given further financing in the form of Telefilm's Equity Investment Program.
26. Broadcasters argue that by being denied this access, they are being treated unfairly when compared to a production company which holds broadcaster interests. This is simply untrue. At the Telefilm level, conventional broadcasters with production aspirations are treated the same as a production company with broadcast interests. Neither can use its own or its affiliate's broadcast licence to trigger Telefilm money.
27. We have noted already that Showcase and History Television are subject to even more stringent safeguards to protect the independent production industry. The CRTC has not required conventional broadcasters who produce for themselves to do the same. In this regard, conventional broadcasters are at a considerable competitive advantage over Showcase and History.
28. Regardless of this difference in regulatory treatment, Showcase and History Television are prepared to live with the current self-dealing rules. Under the current situation, we accept the self-dealing rules because the continue to be a necessary protection to ensure that Canada's independent production industry remains strong.
29. That being said, we realize the world of broadcasting and the relationships within it are changing quickly. We believe that balanced rules should exist for all broadcasters. If self-dealing is permitted by Telefilm to some extent, then we would hope that the CRTC would review its self-dealing rules for specialty services with producer owners. What must be preserved is a strong independent production community with the ability to serve the growing needs of broadcasters for quality programming.
30. This concludes our presentation. We would be pleased to address any questions which the panel may have for us.
31. THE CHAIRPERSON: Good morning, Ms Yaffe. I am a little confused this morning as to what exactly we are hearing. I thought that we would be discussing with you both submissions that were filed by Atlantis, both broadcasting and communications. I gather that all these questions should be left to the appearance of Alliance.
32. MS YAFFE: The production questions are best dealt with by the Alliance Atlantis Communications presentation tomorrow, I believe.
33. THE CHAIRPERSON: Well, I think it goes beyond corporate questions. Is this panel prepared to discuss the positions originally filed by Atlantis Communications as opposed to broadcasting on the regulatory framework?
34. MS YAFFE: Alliance Communications? I'm sorry, you said Atlantis, but I think you meant Alliance.
35. THE CHAIRPERSON: Well, it was filed as Atlantis Communications. I have three submissions here, one by Atlantis Broadcasting, one by Atlantis Communications and one by Alliance Communications slated to be heard tomorrow.

    0910

36. I thought this morning -- I was not advised that the panel would only address what was filed by Atlantis Broadcasting, which is very different from what was filed by Atlantis Communications, which looks at the regulatory framework and not only the more limited presentation you made this morning.
37. I just want to know -- you handle whatever it is you prefer -- but I just want to know whether all questions related to the regulatory framework, which were filed at the time by Alliance and by Atlantis Communications will be handled by that panel tomorrow.
38. MS YAFFE: Yes.
39. THE CHAIRPERSON: And you only want to speak to the matters you spoke to in your oral presentation?
40. MS YAFFE: We prefer that because, of course, that is the area that we are actually familiar with and live and breathe every day.
41. On the production side, clearly, we are not producers and those issues are better dealt with, I think, tomorrow by that panel.
42. THE CHAIRPERSON: Yes. And the regulatory side, which is really the focus, is how to examine the regulatory framework, which includes, but is not limited to, the relationship between producers and broadcasters.
43. MS YAFFE: The regulatory framework on issues that we think are within the scope that we understand and are happy to deal with are issues about the questions of providing more quality programming for Canadians in a profitable way. Those kinds of regulatory issues that have been the focus of this hearing are certainly issues we have been dealing with and underline our philosophy as a specialty broadcaster.
44. So, I think it is probably -- the reason I am probably not being totally precise is because I think there are some regulatory issues of a general nature we would be happy to deal with; but those that really deal with a producer's point of view are certainly not those that we deal with. We look at if from the specialty broadcasters' point of view.
45. Have I completely confused you?
46. THE CHAIRPERSON: No, no. I will hold the questions on the presentation, the written presentation of Atlantis Broadcasting, to tomorrow, and presumably both interveners, such as they were when they filed, will sing from the same hymn book at that time.
47. So your concern, then, is limited to the relationship, the direct relationship between broadcasters, their access to the funds and not to, you know, how much spending there should be on Canadian content and how many hours and in peak time or prime time or daytime.
48. MS YAFFE: Yes.
49. THE CHAIRPERSON: So we will then -- I will then have limited questions to ask you since, number one, this is a surprise to me that this is the way it was going to be addressed.
50. I note your concern about self-dealing and broadcasters' access to the fund. Would similar safeguards be sufficient to allay your concerns and allow broadcasters access to the IP and to the ability to be distributors?
51. MS YAFFE: Well, on the distribution side, I guess the issue for us has always been the separate negotiation, which I think others have talked about as well, in terms of allowing broadcasters to act as distributors. For us, I think the key fundamental position is that the licence fee negotiation between a broadcaster and a producer needs to be in a category that is defined by the needs of the production of the program, and that the acquisition of international and foreign rights be done in a separate negotiation that is above and beyond the essential licence fee that gets the program made.
52. Our concern on that front is that although I think it has and probably can be done in some situations in a separate negotiation, our concern is how that would be monitored, how it would be managed, whose involvement that would need to -- or what structure would actually have to be in place in order to make sure that the negotiations have been done at fair market value with competitive bids being accepted, being rejected on the grounds that they either do or do not serve the program best in its ability to recoup as much as it can from the foreign markets.
53. Our question really remains more of a question than an answer: How would that be administered? Whose responsibility would that be to make sure that that negotiation is separate and beyond the control of the triggering broadcaster to incorporate it in the question of: Would I buy the program?
54. THE CHAIRPERSON: The limitations for distributions are the fund's limitation at the moment, and the limitations, the self-dealing limitations are imposed by the Commission in your licences.
55. MS YAFFE: Yes.
56. THE CHAIRPERSON: Would that format be acceptable to you if there were to be a change in -- would you want to ensure that it is the CRTC that imposes conditions of licence --
57. MS YAFFE: In conditions --
58. THE CHAIRPERSON:  -- against self-dealing?
59. MS YAFFE: Against self-dealing in terms of distribution?
60. THE CHAIRPERSON: Or in terms of the programming that they invest in and whether or not they are for their own services, which is the limitations I understand your services have.
61. MS YAFFE: I guess our position on that is that although we probably have the most stringent requirements in the system in terms of self-dealing because of the nature of our regional ownership, and we believe that it was a safeguard that was important at the time, it seems that, although we continue to live with it, it never has been in place for conventional broadcasters who, without the assistance of Telefilm, have always been able to produce for themselves, and do all the time, not particularly in the area of under-represented programming but in other areas always.
62. I guess to move the yardsticks further for them to equal our position is, in some ways, I think, a balancing of interests, and probably given the nature of the change in the industry may be the approach the Commission wants to take. At least I guess at a minimum what we would say is if the rules move the other way, and we have certainly seen people here during the last two weeks asking that the access to funding and the ability for broadcasters to become drama and other under-represented category producers become part of the system, if that becomes a reality, then I guess the stringent criteria we live with are probably an extreme that no longer plays an important role in the system and we would like to see that re-examined.
63. My view of using our criteria for others certainly is, I think in some ways, a positive step because I think it would continue to balance the system, and I think in other ways asks the question, you know: Would they then be limited from producing news and documentaries and information programs for themselves, as we are prohibited from producing for ourselves? That is a question which I think calls into question the structure of how production exists in this country today.
64. THE CHAIRPERSON: In areas other than the so-called under-represented categories for which you get funds?
65. MS YAFFE: They continue to produce for themselves and always have, and I imagine you wouldn't want to impose criteria on that.
66. THE CHAIRPERSON: The focus is usually access to funds.
67. MS YAFFE: Yes.
68. THE CHAIRPERSON: Can you get access to funds to do for yourselves...
69. MS YAFFE: Our view is that at this point the important -- the unilateral rule is no broadcaster who owns a producer can trigger any funds for their own -- Telefilm funds for their own production. Nor can we. We believe that is absolutely crucial to maintain.
70. THE CHAIRPERSON: That would not have relation to the in-house production of news and information.
71. MS YAFFE: No.
72. THE CHAIRPERSON: That would be -- because normally it is tied to these areas of programming or categories of programming that are subsidized through the funds.
73. In the Atlantis Communications brief there was some reference to the importance of the linkage and tiering rules, and some suggestions -- I know it overlaps somewhat with the regulatory framework process that we are planning to hold, but there was -- I am curious about -- you must be aware of what Atlantis Communications filed, are you?
74. MS YAFFE: Yes.
75. THE CHAIRPERSON: So I don't want to ask you questions about something you haven't read.
76. MS YAFFE: I have certainly read it.
77. THE CHAIRPERSON: I assumed at the time you wrote it or wrote it.
78. MS YAFFE: Can I just ask you, are you referring to the Alliance Communications?
79. THE CHAIRPERSON: Ms Yaffe, on our books in writing are submissions. Unless you want to retrieve them, they are part of -- and I identify them as they were filed in June. Atlantis Broadcasting filed a short brief. Atlantis Communications filed a large brief and so did Alliance -- no one has said they wanted those retrieved.
80. MS YAFFE: No, no, no.
81. THE CHAIRPERSON: That is why I am referring to --
82. MS YAFFE: Yes.
83. THE CHAIRPERSON: And even this morning the list made for me crossed out "Atlantis" and put "Alliance". I think we are getting confused.
84. So forgive me if I call a company a name it used to have when it wrote to me.

    0920

85. MS YAFFE: We have that problem all the time.
86. THE CHAIRPERSON: So in the linkage and tiering proposals it seems that one of the suggestions made was that the Commission should find a way of determining who should have priority carriage by reference to the level of Canadian content.
87. Can you tell us more about how you would see that determined? I know you have been involved in access issues, but should format be considered in light of the fact that the level of Canadian content varies greatly with format as required by the Commission? Should one look at the popularity of packaging? Should one also be concerned about obvious limitations because of the way trapping is accomplished with today's technology? I am a little intrigued about how one would do that.
88. MS YAFFE: Well, I certainly see it as an important and a valid approach. Having read it myself, I agree with it on the principle, and I think the Commission agreed with it when History Television was licensed and the regime of analog and digital licences were first established, because I think what we saw there was the Commission giving some priority to high Canadian content services that the Commission felt had a role to play in the structure of the industry and in the fibre of the nation. It's always been a concern of mine that a service with an analog licence, such as History Television, which in both of date of being able to be carried and in Canadian content requirements was given both high Canadian content spending and requirements on air, as well as urgency to be brought to Canadians, has now found itself in a position where, because of packaging, it has somewhere between 2 million and 3 million subscribers fewer than services that were licensed originally as digital services, given lower Canadian content and seen as less of a priority by this Commission.
89. So I think the fundamental issue is, if we address the question of Canadian content and assess an application that comes before you for a licence on the grounds that its contribution to Canadian programming is what will determine primarily its role in the system, then I think there is a role to be played in terms assigning it a higher priority in terms of distribution within the BDU system.
90. It's always very simple to say it's a tiering issue, it's a linkage issue, or it's pricing and package, or it's marketing, and then, in my estimation, unfortunately, the cow is out of the barn. The issues come before us long after we have a chance to assess whether or not the packaging assumptions by the distributors are accomplishing the goals the Commission established by its licensing framework. And unfortunately we don't seem to have a way to address those questions right now.
91. The suggestion by Atlantis was that higher Canadian content --
92. THE CHAIRPERSON: You said it.
93. MS YAFFE: Yes, I did, because I read it.
94. THE CHAIRPERSON: You said Atlantis.
95. MS YAFFE: No, but the Atlantis suggestion, which I agree with, is that higher Canadian content should give you pride of place on the system, and I think that we have always thought that. As a matter of fact, I think there are those who would actually say it was built into the system long ago with channels placements between 21, below 30. All those rules existed, but we seem to have lost our way on that road, and I think that that's an unfortunate set of circumstances that in some ways we have lost the momentum for dealing with.
96. I guess I refer particularly back to the licensing round for History, because we felt very much that the decision there actually addressed these issues, but it does not seem to have actually played out that way.
97. THE CHAIRPERSON: So you would see some addition to the access rules where there would be, perhaps not a particular channel but a linkage that would recognize certainly Canadian services and so on.
98. MS YAFFE: Yes.
99. THE CHAIRPERSON: But you acknowledge it's not easy with the technology as it exists now and the rules that permit packaging with non-Canadian services?
100. MS YAFFE: I admit it's not easy. I guess I would ask the question; is the spirit or the will to accomplish that there, because I think if it were we would have a process of open negotiation based on some criteria the Commission had established early in the process for launching services. I mean, in a way, when I look back at the launch of History, what I think of is we had a year between licensing and launching for all of these issues to be worked out and yet many of them were done days before the service went on air. And I think because the process is unclear and done separately between the launch -- the hard work that goes into launching a service -- and the distributor's hard work that goes into selling it, and there is no linkage between those two processes, we find ourselves with a fait accompli, and in this case, unfortunately, not one that is serving the purpose of more Canadian programming on the service.
101. THE CHAIRPERSON: You will have, obviously, occasion to expand more on these types of problems in the process that will look at possible changes to the regulatory framework that governs these matters.
102. Is there anything, Ms Yaffe, else that you would want to discuss with us, or your colleagues, about Alliance Broadcasting?
103. MS YAFFE: I guess the only other issue we would underline is the philosophy we think that has worked with specialty services, is the linking of the percentage of revenue as a formula for addressing our Canadian expenditures, which I think is a formula for success, and I think our services have proved that.
104. Above that, I think any of the changes that have been suggested, simultaneous substitution for specialty services, which is another example, I think, of an opportunity to enhance the revenue without depleting revenues from anyone else, without attacking conventional broadcaster revenue but adding revenue to the system, is an urgent matter which I think has the ability to strengthen our ability to spend money on Canadian programming.
105. I guess I believe all of those issues add to what is at the heart of our presentation, which is the balance between -- we see ourselves as broadcasters. We happen to have conditions of licence as a specialty broadcaster, but the rights and the privileges of being a broadcaster and the assumptions we make about our business are the same as any other broadcaster, and we would hope that the Commission would see this part of industry that way, and that we would start to see our revenue streams as similar to others and be given the privileges and the rights and the responsibilities that come with those.
106. THE CHAIRPERSON: And we can discuss with Alliance tomorrow whether this spending formula is also the best to continue for conventional broadcasters. I take the point that it works for the broadcasting system, in your view, for specialty services, but they are a different type of service.
107. Well, we thank you very much. I hope you take care of your cold. You should make sure your colleagues know tomorrow that we will refer to the Atlantis Communications brief and the Alliance Communications brief, and hopefully no one will be offended. Otherwise it will be quite confusing if we try to discuss positions that have been put forward in writing, because we do read them and know them by paragraph and identify them as they were identified when they were filed. So I am not trying to be difficult, I am just trying to be clear.
108. MS YAFFE: I appreciate that.
109. THE CHAIRPERSON: Commissioner Wilson has a question.
110. COMMISSIONER WILSON: Ms Yaffe, I just wanted to ask you a quick question about one of the statements that you made in your oral presentation this morning on page 2. It's the third paragraph where you talk about your commitment to Canadian drama in prime time as an illustration of why pride of placement works. You state:

     "Showcase's audience during its prime time 7 p.m. to 10 p.m., 100 % Canadian drama block increased by over 50 % as compared to last fall's audience."

111. What do you think accounts for that? Is it just the fact that it's Canadian programming; is it the fact that you are promoting it aggressively? What's driving the audience to that programming?
112. MS YAFFE: I think about two or three things, and I will give you the overall view of the strategy behind growing the audience for Showcase and then I will let Laura tell you some of the programs we have added. But the primary concern this fall was to get out of the gate early in comparison to the conventional broadcasters who would launch their schedules later. So we launched early with a very aggressive marketing campaign that was radio, print, as well as outdoor boards in Montreal, Toronto and Vancouver, and some radio and print in Ottawa as well.

     0935

113. So that we had a national presence and drove people to our schedule and to the network, but at a time when conventional broadcasters were not yet launching their new schedules. But I will let Laura tell you a little bit about the programming that we have added to the network this fall.
114. MS MICHALCHYSHYN: August 21st was our launch date and between the 7:00 and 10:00 Cancon 100 per cent drama block we have decided to really promote the programs and included some strategies for thematic programming on a vertical and horizontal basis. So, we thought: Who would be watching at certain times and what kind of programs would work?
115. We have included strong Canadian programs like "Due South" and "Destiny Ridge" and "Lonesome Dove", "Counterstrike Matrix", we have stripped "Forever Knight" at 7:00 o'clock, and thought how can we counter some of the conventionals and counter-program some of the blockbuster American series with alternatives and creative thematic linking and also with the on-air strategies talking about the themes that we have used for our Canadian program days and really gone out with an aggressive campaign in both the print and billboard markets.
116. MS YAFFE: I will just add to that by saying I think as one of the real functions, one of the realities of spending more on Canadian programming, which is the process we live in -- as our revenues grow, we spend more --
117. COMMISSIONER WILSON: That's the virtuous circle that SPTV talked about.
118. MS YAFFE: Right. It allows us to buy newer and newer programming. So, we are not buying the oldest and the most used, but buying newer and newer programs that have had less exposure and that is helping grow the audience in prime time. That is just a function of that cycle, that as we get more dollars to spend, we are able to buy programs sooner, faster, and bring them back to Canadians before they have lost their glamour.
119. COMMISSIONER WILSON: Do you get feedback from your audience on your programming? I mean this is clearly a strategy that you have adopted for the channel.
120. MR. MICHALCHYSHYN: Absolutely. What we have noticed, actually, is there is a renewed audience for what we would consider some of the top dramas. "Degrassi High" for our schedule proved to be one of the top -- in the top two Canadian programs. We stripped it at 7:00 and had great success with it and had response from families, parents, kids who said, "I missed it the first time round, it's five, seven years later, I am glad you have brought it back, continue to do so", and brought it back in prime.
121. So, absolutely. We have a website where we have chat groups about specific Canadian programs and stars in the Canadian programs. So, we have definitely had feedback about the Canadian programming.
122. COMMISSIONER WILSON: Thank you very much.
123. THE CHAIRPERSON: Commissioner Pennefather?
124. COMMISSIONER PENNEFATHER: No.
125. THE CHAIRPERSON: Oh, sorry.
126. Commissioner McKendry?
127. COMMISSIONER McKENDRY: I think I heard you say you favour mandatory simultaneous substitution, Ms Yaffe?
128. MS YAFFE: Yes.
129. COMMISSIONER McKENDRY: Have you made requests to the cable operators for simultaneous substitution?
130. MS YAFFE: Yes, we have. Very recently, actually, we requested it for a series that History Television is now running called "The Cold War", which is broadcast in the United States and in Canada on CNN and History Television is broadcasting. We asked the cable industry and the other BDUs for simultaneous substitution and the major cable operators declined.
131. COMMISSIONER McKENDRY: Did some cable operators comply with your request?
132. MS YAFFE: No, none of the cable operators complied. One of the satellite companies agreed, but, unfortunately, with that limited number of subscribers the changes we would have had to accommodate to do it just didn't seem economic. We need one or two of the major MSOs in the country to agree to it before it becomes financially viable for us on our side, although we understand that's one of the arguments they continually raise, is that it's a difficult financial obstacle for them.
133. I think what we haven't perhaps explained is just what kind of added new revenue it would bring to us with an audience that would triple the general audience we assume we will get for that kind of show. We are talking about somewhere in the order of a quarter of million dollars of revenue to us that would then become -- 34 per cent of that would turn into programming dollars for Canadians. It's not that that money is in the system, it's just lost to the system because we don't have the right to request mandatory simultaneous substitution.
134. COMMISSIONER McKENDRY: What reasons did the cable operators give you with respect to declining your request?
135. MS FONG: The reasons that were given to us by two of the major cable MSOs was simply that it is a policy that they have not to grant these requests to specialty services because of the cost that it means to them. So, the impression was given that we were not being singled out when they declined our request. Rather, all other specialty services who had made similar requests received the same no answer on the basis of costs. As we indicated, we did have one of the satellite BDUs who said absolutely they would be prepared to do it, but we elected not to take them up on it.
136. COMMISSIONER McKENDRY: You elected not to take them up because you would have to incur costs in order to make your program compatible with simultaneous substitution. Is that the reason?
137. MS FONG: It's the reasons that Phyllis mentioned earlier. While we were very happy that we did have one affirmative response to our request, the economics are such that without at least one of the major cable operators also indicating they are prepared to grant it, we just don't have the economic background to justify making the changes we would have to do for the small number of subscribers that is represented by the one satellite BDU that said yes.
138. COMMISSIONER McKENDRY: Did the large cable operators provide you with any specific information about the costs they would incur?
139. MS FONG: Not specific information, just simply that there were costs associated with doing this for specialties that they were not prepared or not able to incur at this time.
140. MS YAFFE: Just to add to the cost factor, one of the issues always is the switching costs across the country for cable operators, but History is a service with only one feed, a national feed that covers all time zones. So, actually, when we talk about simultaneous substitution for History, it really would only be applicable in the time zone for which it's most obvious, and that would be Ontario and Quebec where we would have the same time zone as the cable industry.
141. So, first of all, it would not really be feasible to simultaneously substitute other than in the prime area of distribution in Ontario and Quebec. So, costs outside of that area are just not even on the table. We wouldn't be asking for them. It wouldn't be feasible, it wouldn't work. We would be broadcasting at the wrong time for them to do it.
142. Second, my information from the CAB, which looked into this matter I guess a couple of years ago, was that some of the costs related to the switching have all come down in price due to the fact people are doing it with more and more technological solutions and it's not quite as cumbersome and as expensive as it perhaps was in the past. I think perhaps cable operators haven't examined the costs in the recent past in a more careful way and the answer we are getting is maybe the answer that was appropriate a couple of years ago, but may not even be as expensive today as it was then.
143. I think, as Jennifer said, it seems to be -- we were told not to take it personally, they just don't do this. As much as we don't take it personally, we still believe the underlying and most important assumption you have to make about this issue is we have bought those rights exclusively for this country and we should be able to protect them the way anybody who buys rights in this country should be able to. It's a fundamental principle of how we stay in business and we need the distributors to help us make sure that that continues to be the case.
144. If it's at their request, unfortunately, what we have to come to understand is the assumption is the answer is "no" unless you hear otherwise.
145. COMMISSIONER McKENDRY: Do you believe the mandatory substitution should be extended to just Class I systems or Class I and Class II or beyond that?
146. MS YAFFE: I would be thrilled and delighted with Class I and I would fight the battle on IIs and IIIs later, but I think for Class Is -- given that there are some services such as History which really only have a national feed, I think if we were able to do it in Class Is where it is actually simultaneous, I think that would be a very good starting point.
147. COMMISSIONER McKENDRY: Thank you very much.
148. Thank you, Madam Chair.
149. THE CHAIRPERSON: Commissioner Cardozo?
150. COMMISSIONER CARDOZO: Thank you, Madam Chair.
151. I have a couple of questions about some of the issues. You did mention them in your oral submission, so I know we can talk about them.
152. Yesterday we heard from MUSE Entertainment, an operation that deals with -- that tries to assist financing of Canadian productions and I wanted to ask you if you could take us through a couple of your productions here. I am interested in a couple of the documentaries you have mentioned. One is "Scattering of Seeds" and the other is "Our House". I note earlier on page 3 you say:

     "Our programs give a voice to the stories that make up our heritage, which are all too often ignored."

153. I think both of these documentaries fill that bill.
154. In terms of "Scattering of Seeds", we have heard a lot about the absence of cultural diversity being aired on our airwaves and one of the long-standing views has been that the diversity, if portrayed, is portrayed as something relatively recent, problematic and so forth, and that our diverse history is not shown and, indeed, most of our history books don't do that, either.
155. With "Our House", I think it's particularly interesting because we don't popularize our political history. I think more kids know about the fifth amendment and will plead it if ever arrested, not knowing that we don't have it. I suppose part of it has to go to the particular Speaker in office now who is also interested in popularizing the House of Commons, but I wonder if you could do a couple of things.
156. Share with us how you came to the conclusion that these documentaries were important, were useful, were worth buying and airing, and, second, how you got the financing together without giving us details that are not on the public record, but just who the partners are, that type of thing.
157. MS YAFFE: I would ask Norm to do that for us.
158. MR. BOLEN: First, let me deal with the "Scattering of Seeds". These types of programs that deal with our multicultural past are at the very essence of what we are about at History Television. So a program like a "Scattering of Seeds" when it was proposed to us seemed like a natural because it had such diversity geographically, culturally, and the producer who brought it forward had an excellent track record at working with directors across the country, at putting together a project of that magnitude.
159. So, the decision was based on the content, but also on the people who came forward with the ideas and they were groups of directors across the country who came from diverse backgrounds themselves and were often telling the stories of their own cultural heritage.
160. COMMISSIONER CARDOZO: So, it's not just one director involved in that?
161. MR. BOLEN: No. There is one company that oversees the project and arranges the financing, but there are individual directors for each of the 26 documentaries and those directors generally came from the same multicultural backgrounds as the people they were profiling. In some cases they profiled their own family members. So, it had a very authentic feel to it, the whole idea. It really resonated.
162. Something like that is rather expensive to finance. These documentaries, even though they are only a half hour in length, have budgets in excess of $100,000 each, which is a significant amount of money for a specialty service. We finance those with partners. The Canadian Millennium Partnership Program is a participant in this, the Department of Canadian Heritage and Citizenship and Immigration have all taken part in helping to fund this series, as well as Telefilm and the Cable Fund, because the series helps to meet some of their goals and helps to provide some of the programming that they believe is important for them.
163. So, it's really a collective partnership. We licensed the program, but they come into it as well. This is a formula that works well for us. We often seek very many different partners in our programs. For instance, the CRB Foundation, the Heritage Project, is very much involved in our programming as well in our Canadian biography series. We are doing 30 original one-hour Canadian biographies and we have partnered with CRB because again our aims are in parallel with their aims.
164. So, we are often looking for projects like that and it's not that difficult for us because, as we said, we are doing the kind of quality programming that brings value to the airwaves that looks at Canada's heritage and there are a lot of agencies and government departments in Canada and private foundations that share these aims.
165. "Our House" was very serendipitous. We were at a producers convention in Ottawa, a group of us, and we actually were invited to attend in the House of Commons, because our meeting was being held in the Parliament Buildings, a presentation by the Speaker, the Honourable Gilbert Parent. During this presentation to us, a group of producers and broadcasters from around the country, he challenged us to actually do something about telling the history of our House to Canadians and I was struck instantly by the idea. This is History Television, this is what we are about.
166. A producer friend of mine, Neil Bregman from Sound Venture, an Ottawa producer, was sitting in front of me. We have done work together before. I tapped him on the shoulder and I looked at him and said, "Let's do it." He said, "Yes, let's do it", and he went out and started working on pulling it together. We licensed the program, we accessed the Cable Fund and Neil also invested some of his own money in the program. We had a lot of support, not financial support, but logistical and organizational support from the House itself and from the Speaker's office and we were able to pull this program together that way.
167. COMMISSIONER CARDOZO: Thanks.
168. THE CHAIRPERSON: Now I understand why Mr. MacMillan and Ms Cugini were frowning at me. I apparently owe you many apologies. You had actually advised us -- I am going to go by numbers -- that there was an inversion between interventions 186 and 197, which were filed by what was then Atlantis, and 144, which was filed by what was then Alliance Broadcasting. Apparently this communication was not transmitted to us here. We are still on slow analog.
169. As a result, I was the one who was confused this morning. We certainly are open to accommodating what you feel you need to correct this and make sure that the right people are here on the right day and told us the right things at the right time. So, do feel free to speak to counsel or the Secretary. We want to make sure we have treated you properly, which doesn't seem to have been the case this morning. So, thank you very much.
170. MS YAFFE: And thank you. I appreciate that our timing and yours was a little complicated, but I think the issues we wanted to deal with as Showcase and History have been brought forward and we appreciate the time.
171. THE CHAIRPERSON: I wasn't told and apparently no one conveyed the message that a letter had been sent advising us of this change. So, we will try to get numerical a little faster. Thank you.
172. Just so we all get ourselves together, we will take a break now of 10 minutes. We will be back at 10:00 o'clock.

     --- Short recess at / Courte suspension à 0950

     --- Upon resuming at / Reprise à 1000

173. THE CHAIRPERSON: Madam Secretary.
174. MS SANTERRE: Thank you, Madam Chair.
175. For the record and for the audience, I would like to advise that CIRPA will not be appearing in front of us today, but its oral representation has been sent to us and it will be part of the public file.
176. THE CHAIRPERSON: Thank you.
177. MS SANTERRE: I would like now to invite Baton Broadcasting Incorporated to make their presentation.

     PRESENTATION / PRÉSENTATION

178. MR. BEATTIE: Madam Chair and members of the Commission, I am Allan Beattie, Chairman of the Board of Baton Broadcasting Incorporated.
179. Since CTV Television Inc. now holds all of our conventional broadcast licences, we will refer to ourselves as the CTV Group.
180. In the front row beginning at your left are Bruce Cowie, Executive Vice-President and Chief Operating Officer of the group; Ivan Fecan, President and Chief Executive Officer; Susanne Boyce, Senior Vice-President, Programming; and Bill Mustos, Vice-President, Dramatic Programming.
181. Behind Mr. Mustos are Robin Fillingham, Executive Vice-President and Chief Financial Officer; Kathryn Robinson of Goodman, Phillips and Vineberg, our legal counsel and a member of Baton's board; and to my right Beverley Oda, Senior Vice-President, Industry Affairs.
182. At the side table are Stephen Armstrong, author of the studies filed with our earlier submission to these proceedings; and Conrad Winn, Chairman of COMPAS Inc., who is responsible for the public opinion poll we filed with our submission.
183. Madam Chair and members of the Commission, we welcome the opportunity to contribute to these proceedings. Their importance to the future of Canadian broadcasting cannot be overstated.
184. Ivan Fecan will present our position.
185. MR. FECAN: Thank you, Allan.
186. We appear before you today in the hope that we can make a real contribution to Canadian programming. Many of us on this panel have worked for years developing, producing, scheduling and promoting Canadian programs. Personally, I count among my proudest achievements contributions to long-form dramas such as "Love and Hate", "Conspiracy of Silence", "The Donald Marshall Story" and "Boys of St. Vincent"; dramatic series such as "Road to Avonlea", "Street Legal", the Montreal-based "Urban Angel" and "Degrassi Junior High"; and comedies such as "Codco", "Air Farce", "This Hour has 22 Minutes" and "Kids in the Hall".
187. At CTV this season, joining Vancouver-based "Cold Squad", "Double Exposure", "On the Edge", "Gabereau" and "First Story", our aboriginal magazine, are "Due South", our top-rated Canadian drama; "Nikita", winner of the Chrysler People's Choice Gemini Award, "Earth, Final Conflict"; "Open Mike" with Mike Bullard, English Canada's first, and only successful, late-night talk show; "W-5", Canada's longest-running public affairs magazine; "Dini Petty"; "Sunday Edition"; the "CTV National News", Canada's number one national newscast; and "E Now", English Canada's first and only entertainment magazine.
188. This year, we will add to that two new Canadian drama series: "Power Play", the Hamilton-based hockey drama which debuts tomorrow night; and "Flesh and Blood", a compelling urban drama which covers diversity issues in downtown Toronto.
189. As well, we have great new Canadian movies based on real people, with real stories, such as "The Sheldon Kennedy Story" and "The David Milgaard Story".
190. If it sounds like we are proud of our line-up, we are. But I am talking about this for another reason. Programming is my passion, and I am proud of the fact that I have spent 24 of my 26 years in broadcasting doing everything I could to enable Canadian programs to thrive, both creatively and financially. And the passion remains undiminished.
191. I believe in the adage that in the specific you will find the universal. It is no fluke that some of the most Canadian of our programs have been the most successful abroad. Think of Anne of Avonlea's P.E.I.; or the vulnerable Newfoundland orphans and their complex tormenter in the "Boys of St. Vincent"; or Paul Gross's brilliant and funny evocation of the differences between Canadians and Americans in "Due South". Vibrant characters, rooted in the strong sense of place, speak to viewers everywhere; and these are precisely the kinds of programs in which we as a country take pride...because they speak to us, and about us. These are the kinds of programs we define as indigenous.
192. With the help of a sound public policy and your regulatory decisions, we have built one of the world's best broadcasting systems, and the healthiest independent production sectors. Even while these hearings have been underway, the international community paid tribute to Canada as the world's second-largest producer of television programs. During "Spotlight on Canada" day at MIPCOM, market attendees were told that Canadian TV production has grown by 70 per cent in the last five years, and that there are currently 500 production houses doing a total of nearly $3 billion in business. So how can we reconcile all of this with the viewing levels of Canadian drama?
193. It may help to think of the Canadian programming universe as a Rubik's cube. The broadcasters, the producers, the distributors and the public funding bodies are all distinct moving parts. Making each and every piece fall into place is never simple.
194. As broadcasters, we spot talent and nurture it. We work with producers to figure out what will best engage our audiences. We actively participate in story development, casting and creative decisions. We schedule programs where we think they will have the best chance of drawing an audience, and then we promote the heck out of them, doing our best to get TV book covers and interviews for them, while competing with the great spillover marketing engine to the south of us. All of this takes skill, time and money.
195. Producers come in two distinct groups: the large studios, which provide production financing and worldwide distribution, and the smaller creative producers.
196. The big companies have had to diversify, expand internationally, and raise money on the stock market in order to grow. They are successful and profitable businesses, active in areas ranging from broadcasting and international distribution, to representing U.S. networks in Canada.
197. Indigenous Canadian programming is no longer the engine of their businesses. Without public money, they simply could not justify these programs to their shareholders who hold them accountable for earnings. The Canadian programs they generate and distribute are geared to the world market, and the largest contributors to production budgets -- usually non-Canadians -- drive the creative process.
198. This is a very different business from that of the small and medium sized creative producers who often concentrate on one or two indigenous projects to which they pin their hopes, their dreams and too often their mortgages.
199. English Canadian audiences are used to U.S. television's quality of writing, performing and technical standards. Canadian creators and crews have no problem meeting these standards. Canadian talent makes a big contribution to the success of Hollywood.
200. But everyone agrees that if you are to have any high-production-value indigenous programming, the size of our market makes it necessary to have public money.
201. But the scarcity of funds makes it impossible for the system to realize our collective ambitions for Canadian indigenous programming. Here is our experience.
202. We have been able to finance an average of 13 original episodes for each of our indigenous series. However, each episode must run three to four times in a year to bring it up to 52 weeks. So few episodes works against building audiences, and so many repeats devalues commercial airtime.
203. This year, we did manage to help fund four indigenous dramas: "Due South", "Cold Squad", "Power Play" and "Flesh and Blood". But, next year, the funds have signalled us that four is out of the question; three is highly unlikely; two is not guaranteed; and just one is a possibility. While we don't know which it is, and therefore can't really plan our schedule, we do know the funds borrowed money from next year to solve this year's financial crisis. We won't know with any certainty until the spring, when we put our schedule together, just what is there.
204. At fall launch, media buyers compare slick U.S. pilots to new Canadian shows which may or may not be on the schedule. They have to evaluate them sight unseen because there will be no pilot in most cases -- we can't afford it. This makes the Canadian show a second-class citizen before it even exists. Obviously, it also lowers the rates we can charge for it.
205. No matter how much the regulator and broadcasters agree on commitments for indigenous programming, nothing happens without the agreements of the funds which are the de facto gatekeepers. So we have to maintain several different development tracks so that if they turn down our preferred indigenous drama, we can still provide Canadian content without public money.
206. Our fallback is industrial Canadian drama, usually shows developed for foreign specialty services serving narrow niche markets such as science fiction or action genres. To CTV, a general interest network, these are not our ideal programming choices; but they do qualify as Canadian and they can be made without public money.
207. We recognize that choosing to do indigenous shows incurs higher costs because of the absence of foreign investors. Therefore, we often pay twice as much for an indigenous Canadian show as for an industrial show. But we believe these shows stand a better chance of connecting with our audiences and building our brand. Other broadcasters may feel differently. But if the funding existed, we would prefer to do an entirely indigenous slate because we would view it as a better audience strategy for CTV.
208. Some intervenors have told you that licence fees are not high enough. As a broadcaster, we look at licence fees in terms of their costs per potential viewer, as shown in the document filed with our written submission. In fact, we at CTV already pay more per potential viewer for 10 out of 10 indigenous Canadian programs than American networks do for programming in their own market.
209. There has been a lot of talk at these hearings about broadcaster profits. But we as a company haven't seen any real profit for a long time. In fiscal 1997, we made $4 million -- about a 2 per cent return on revenue -- clearly insufficient for a publicly traded company. This stands in stark contrast with the returns of our two principal competitors.
210. You will find attached to this presentation our fall/winter schedule. We appreciate that the Commission has been working with historical figures that do not reflect what we are doing now. This year, in prime time, we have introduced a dramatic increase in Canadian indigenous 7, 8 and 9. This schedule includes 5.5 hours of Canadian drama series, of which at least four are indigenous. In addition, there is one hour per week of 7, 8 and 9 for almost 6.5 hours per week overall. Added to our substantial local program schedule, it is a significant contribution.
211. In our view, the principle of system-wide equitable contributions by station groups should be sacrosanct. It is completely unacceptable that some station groups should be contributing so much less than others. However, each group, we believe, should be free to make its own equivalent contribution in its very own way. This will encourage diversity and unique identities.
212. To enable this, we have designed a matrix which we would propose to apply to all station groups with a reach of more than 70 per cent of households in English-speaking Canada. Our matrix would: one, continue to support a Canadian content requirement of 60-50; two, continue to allow access to local advertising markets only to those broadcasters who provide local news and public affairs; three, require seven hours of under-represented programming, including documentaries and a half-hour of "star system" programming such as "E Now" during the 7 to 11 p.m. period, using the CRTC's existing definition of first run; four, maintain the existing 150 per cent drama credit for 10 out of 10 production; five, provide a new 200 per cent credit for episodes 14 to 22 in the same year of any distinctly Canadian series as defined by the CTF -- this credit would be applicable to the seven-hour requirement; six, institute a spending requirement of a base amount for under-represented programming established for the initial year of implementation -- contributions to local and children's would be taken into account in this base amount; seven, implement these provisions over fiscal 2000-2001.
213. We do have one more idea which could help increase the pool of available funding for Canadian programming: introduce a public bidding process to be adjudicated by Telefilm for international distribution rights. This would be fair and transparent, and would ensure producers the best offer for their work. It would also allow us to increase our investment in the programming we believe in, without penalizing the producers, the program itself, or our shareholders. It would be in the interests of the Canadian broadcasting system.
214. There has been much talk about the impact of the CFTPA and the DGC proposals. As you can see by looking at our fall/winter schedule, we have made tremendous strides to generate more high quality Canadian 7, 8 and 9 in prime time. We share their goals of higher quality and fewer repeats.
215. But, in redefining first-run programming to only two showings, the DGC and CFTPA have priced their proposals way beyond our means. As I explained before, being able to fund only 13 episodes means having to run them three to four times just to meet our licence conditions. The DGC and CFTPA proposals are unrealistic because their definition -- their new definition of first run acts as a hidden multiplier. This would require the production of a high volume of new episodes, and there is absolutely no way the system can fund them.
216. As filed, these proposals would force us to sacrifice quality for quantity. More, lower quality programs, we believe would necessarily translate into fewer viewers. We would have to bleed off a huge portion of the resources now assigned to local or national news, our lifeblood. The consequence would be to seriously undermine both our financial viability and our capacity to meet some of our most important commitments to the Canadian broadcasting system.
217. We do not believe this would be in the interest of the Canadian broadcasting system, nor in the interest of the future of Canadian programming.
218. Above all, we do not want to be pushed into a strategy we simply do not believe will work. Our viewers don't win in this kind of strategy. You know viewers have more choices than ever before -- not just from Canadian licensed TV, but from the Internet and much more TV spilling in over the border. We can't turn the clock back; there will be more choice, not less. And, as people get more choice, they are more discriminating with their time. As viewers choose more carefully, it would be counterproductive, in our opinion, to give them more repeats, more generic industrial product, more of the same.
219. In an exploding competitive world, we believe the only answer for CTV is to value our viewers' time as highly as they value it, and to engage them with quality. This is what we want to do and, with the right regulatory framework, we believe we can get there.
220. To sum up, Madam Chair, in your opening remarks you set out no small challenge: to find ways to generate more Canadian programming of higher quality and with increased profitability.
221. We believe our proposed station group matrix will generate more original Canadian programming. It will increase quality. It will help increase profitability for both broadcasters and producers.
222. That concludes our presentation, Madam Chair. We await your questions.
223. THE CHAIRPERSON: Thank you, Mr. Fecan.
224. Commissioner McKendry.
225. COMMISSIONER McKENDRY: Thank you, Madam Chair. Good morning.
226. I thought it might be helpful if I set out the areas that I would like to talk with you about, before we start to talk about them, so you have an idea of where I would like our discussion to go.
227. I wanted to start with a brief discussion about the current state of affairs, and I think that is how you start your submission as well, with some comments about the current status of the system.
228. From that, I want to lead into your strategy, as you do in your submission, and talk about your quality focus and the measures you recommend with respect to quality and how the quality strategy relates to our regulatory levers.
229. Then, I would like to talk about the relationship of our eligible expenditure rules for Canadian programs with the Canadian Television Fund's rules. As you are probably aware, there has been a discussion in the proceeding about a lack of congruence between our rules and the fund's rules. I would like to get your views on that.
230. Then, I would like to talk about equitable contributions to the broadcasting system; and I would like to talk a bit about your matrix, about which you have provided us with some more information this morning.
231. Fair licence fees; I would like to discuss the independent production sector and the international distribution rights you talk about.
232. I would like to take a look at the comparison you have done between CanWest and your own expenditures.
233. I would like to talk a bit about digital TV, the costs, new revenue opportunities and the timing from your perspective.
234. Local and regional programming; talk a bit about diversity, cultural diversity, and then the relationship of your proposals to what CAB has proposed to us.
235. Perhaps we could start with talking a little bit about the current state of affairs so we understand -- so I understand at least where we are today and how that takes you to where you would like to go.
236. On page 45 of your submission -- I am going to read a brief quote from page 45, and the quote is:

     "Generally, the current Canadian content requirements for conventional broadcasters are an effective mechanism for achieving the objectives of the Act.

     The current regulatory regime also ensures there is a significant level of Canadian news and entertainment programming in prime time. In short, we believe that the CanCon requirements have achieved the objective of ensuring there is a specified amount of Canadian programming in the Canadian broadcasting system."

237. Taken at face value, this is high praise for the current situation that we face or that we had faced in recent times. But the Canadian Association of Broadcasters gave us some data that revealed I guess what I would call a dark side to this picture. They pointed out to us that Canadian program expenditures tripled between 1985 and 1997; Canadian program hours broadcast in the same period increased six times; the number of Canadian channels has increased dramatically at the same time.
238. But, in spite of all that, Canadian viewing share is flat and the day-to-day provided was between '92 and '97. The all-Canadian programming and viewing share is flat at 40 per cent in category 7, 8 and 9 viewing share was flat at 10 per cent. So, in spite of all that money being spent, viewing share remained flat.
239. I guess I would like you to relate your positive view of the existing system to that scenario set out for us by the Canadian Association of Broadcasters.
240. MR. FECAN: Well, I think what we are probably more comfortable discussing is what our particular experience is with this particular group of stations than getting into some kind of aggregated data. I think we have a comment on it. But our real experience and the thing we can speak best about is what we live every day and what we know.

     1020

241. I think, as I mentioned in my remarks, we live in an era of more choice, not less choice, and the flip side of that is fragmentation. To quote another aggregate statistic from another country, in the U.S., I think some ten years ago, the big three networks had some 70 or 80 per cent of viewing and today the big four -- Fox has been included now -- maybe do 50 per cent. Fragmentation has had a toll on all that were there before and the beneficiaries of the fragmentation has been specialty, Internet, and other kinds of leisure time activities. So I think you have to profile the performance of any one entity or any one group of programs against the background of what's happening in the industry and with viewers and people at home in general.
242. So therefore, in this kind of fragmenting world, I feel that what our duty is, as a system, is to provide Canadians with the choices that, in our economy, perhaps without your intervention, would not be there if it was just pure market and if the border was totally open.
243. So I think that's the role and that's the opportunity. And if we do our jobs properly, and certainly it is our view that we want to do our jobs properly as the CTV group -- we want to invest in programming that we think will get an audience and we are working very hard to promote that programming, to drive viewers to sample that programming and, after that, frankly, it's between the show and the audience; it's between the creators and the audience. You can bring an audience to a show; you can't make the audience watch the show, but hopefully we have all done our jobs as a system -- producers, writers, directors, broadcasters, promoters -- well enough that the show is of a quality that people will be engaged. And we understand that in order to move our business forward and for us to stake so much of our time and our reputations on the importance of Canadian programming, we need to get audiences and margins, we need to make money on that Canadian programming, and that, in turn, I think will encourage all of us, not just the CTV group, to, by choice, want to invest more in it.
244. But just to take you back to your figures, I do not think you can underestimate how the impact of fragmentation has affected all services and so therefore it's very hard when you pull out, well, you know, viewing to Canadian drama. Yeah, there's a lot more specialty services but very few of them concentrate on Canadian drama -- a few of them.
245. So, against that tide, I am not sure that a break-even or a flat performance is bad. I think we can do better, and in a very real business case way we are trying to put forward how we think we as a group can contribute and do better to the cause of increasing viewers, because if we don't do it, our business strategy will be flawed.
246. COMMISSIONER McKENDRY: So essentially the flat viewing we have seen is a result, in your view, of fragmentation, it's not a reflection of inadequate promotion of Canadian programming or anything that was in the hands of your organization or the other Canadian broadcasters?
247. MR. FECAN: Well, that's a tough question. Some people say everybody is a director, but I happen to think everybody is a programmer, and I am loath to be critical of others or those who came before us. I think everybody is trying -- you have got to take them at face value and believe that they tried to do their best in their time.
248. I think in our situation now we have got such a thorough and rigorous national and regional development system, we have concentrated so much on promoting our Canadian programs that we really think that what we can talk about is the steps we are taking to move the bar, to improve the performance. In a different time and a different place I have to believe everybody did their best. Why would they do something different? I think what you have with this group, however, is a group of people who have done it in various lives, in different places, to various degrees, and who are professional and very committed to doing it because we have staked a fair part of our business strategy as a company -- as a publicly traded company -- on being able to move that bar.
249. COMMISSIONER McKENDRY: One broadcaster who appeared before us earlier suggested that the primary explanation for this flat viewing was that fragmentation had occurred, as you have pointed out, but in addition there was more competition now for U.S. programming which had raised the cost of U.S. programming, reduced the profitability of U.S. programming, and had thereby reduced the ability of Canadian broadcasters to cross-subsidize Canadian programming, and that in the old world, where -- according to this particular party -- U.S. programming was highly profitable, one could not only cross-subsidize to Canadian programming but could also earn an adequate profit for shareholders in that situation, one did not really need to worry or pay much attention to Canadian programming, but that the world has now changed; you cannot cross-subsidize any more, U.S. programming is too expensive, and fragmentation has occurred.
250. Is there any validity, in terms of the CTV group's experience, in that argument that the era of cross-subsidization is over and now one has to pay attention to Canadian programming?
251. MR. FECAN: Well, I would like to comment on, as you might imagine, a few parts of that.
252. I am not sure that we would subscribe to the causal events, the causal relationships as described as A causing B causing C kind of thing.
253. There is competition for foreign programming, but you could just as easily argue that, with the consolidations taking place at CTV, there is not as much competition. And presumably there may even be less competition depending on what comes in front of you in terms of transfer hearings in the next year or so.
254. So I don't know if that is something that I would subscribe to, but I think it's pretty clear that the fragmentation which has driven everyone's shares down has made every minute of one's inventory, of one's schedule, something that has to perform to some degree. And I believe it's more of a fragmentation issue than it is a cost of foreign programming issue and I do not think you can underscore or underestimate the effect of that fragmentation on particularly conventional, mainstream broadcasters. The growth has come largely at the expense of that one sector.
255. Viewing; you can debate whether it's remained constant or not, but it's relatively constant over the period. But there are more choices and the growth to these other choices has come from conventional, mainstream kinds of broadcasters, and I believe that has made every conventional, mainstream broadcaster look more and more carefully at every minute and every opportunity.
256. You could argue that maybe they should have been doing that before. It's easy to argue it in retrospect, but today that's certainly the case. We are looking at every minute. And I do not know that in this fragmented environment cross-subsidization really -- if it ever existed as a regulatory model, I don't see it in the regs anywhere -- I think every minute has to count for this thing to go forward, and that means that everything, the Canadian, the Canadian 7, 8 and 9, the news, the foreign programming, all has to make a contribution.
257. I guess our hope is that, as we can improve viewing and advertiser acceptance to particularly the 7, 8 and 9 Canadian, it will make our business that much stronger, and we have tried to approach the issue in a very professional kind of way with the tools that programmers and developers around the world use to try to get a result.
258. COMMISSIONER McKENDRY: The cross-subsidization was not a regulatory model; it was being put forward to us as a business model that existed within the broadcasting industry.
259. Have the margins in the CTV group's experience on foreign programming, U.S. programming, declined?
260. MR. FECAN: I think it's fair to say that -- I will turn to Bruce in a second -- but I think it's fair to say that in television, as in a lot of life these days, there are the top 10 or top 20 and there is the rest, and the middle gets kind of marginalized.
261. I think the top 10 or top 20 are pretty good profit earners, but the rest may not be what they used to be because the middle is marginalized enormously. The middle has become part of the low end as a commodity kind of thing rather than a premium kind of thing. I think it's true in a lot of life and culture right now.
262. Bruce.
263. MR. COWIE: I think that describes it very well. The real driver of where we are going here is choice. The more choice there is of foreign programs, the better the opportunity, we believe, in distinctively Canadian programs because that will not be a proliferation from the south. So it's a combination of those things, but I think Ivan is quite right; it's not competition for U.S. programs, it's the multitude of programs that are out there that have caused the fragmentation that we believe will drive us to where we need to go and help us get there.
264. MR. FECAN: Just to add, it's kind of interesting that these days, in our current schedule, which used to be, I guess, the paradigm for all conventional broadcasters were pretty well simulcast and then Canadian shows, we are relying more than we ever have on shows that are not simulcast in Canada. "Felicity" and "Charmed" are two of our shows from our Sunday night schedule that comes from the Warner Brothers network, and to the effect that they're simulcast in Canada, I think that the last time we looked they get, on a simulcast basis, like .5 per cent penetration. It's irrelevant.
265. So we are looking to different kinds of foreign programming even to try and distinguish ourselves and make a difference. I think so much of the model is in flux as we all try and find whatever we believe our unique brand identities are in that world.
266. COMMISSIONER McKENDRY: I would like to talk now about the strategy you set out in your submission to us.
267. As we discussed, on page 45 you state that the current regulatory system has achieved its objective. You then state that now is the time "to concentrate on providing quality Canadian programming".
268. With respect to quality, you state on page 30, "relevance is a stringent test". How do you measure relevance?
269. MR. FECAN: Well, I think I tried to take a shot at defining that in my oral. To paraphrase, stories that we can garner pride in, that are about us in some ways, that might be about different people in our country, it might be about different specific situations in different communities. Somehow, they are set here or different parts of Canada or the world seen through distinctly Canadian eyes.
270. We really see that sense of place, the sense of character, the sense of uniqueness as the defining element and as the thing that makes the connection with our audience. A show that has that may well appeal to others around the world on a pure entertainment basis, but we think it has a special relevance to a Canadian audience because of all of the different cultural cues, because they can recognize themselves or some part of the country.
271. But then, as I also hope I got it across, I really do believe that in the specific comes the universal. I think something that is set in a mid-Atlantic location with no real fixed anything -- Toronto disguised as London or something else, or disguised as some other place, or not specifically rooted somewhere -- I think that those shows can have their place and their merit, but I do not think they will have the special connection that shows that are specific can have because I really do believe that the more specific you make it, the more real the characters, the more clearly you understand their passions and their desires and their conflicts, and the more you can buy into it as a viewer.
272. If you are a Canadian viewer, and if it happens to be in a Canadian cultural context, then I believe that that has a special significance in the Canadian viewer. There is maybe a connection there that is not there around the world and that's just, I guess, sort of value-added for the Canadian viewer.
273. We believe that that's one indicator of quality. We think the number of originals is another indicator of quality. We think technical standards, writing and performing standards, directing standards, are yet another indicator of quality.
274. We did some surveying on this, and if it's helpful -- I don't know whether you want me to go to Mr. Winn to give you some of the surveying we did, both in the focus groups and in the more empirical stuff, the kinds of things that we turned up as to what the people thought quality was.
275. COMMISSIONER McKENDRY: I have some questions later about the COMPAS survey so probably that would be a better time to deal with the survey. What I was hoping when I asked you about relevance as a stringent test is that you would have some benchmarks to offer up to us in terms of how we could establish whether or not the relevance criteria, which is a central component of your quality focus, had been met.
276. For example, when I read much of your submission, I took relevance and the quality discussion to mean audience size.
277. MR. FECAN: I think audience size is certainly an important measure, but I think that is more, from how we look at it, the proof of the relevance rather than the one thing or the group of things that defines whether something is relevant or not. You know, you can have a really well executed show that unfortunately ends up in a bad time period. It does not make the show less relevant; it just means maybe the broadcaster needs to promote it more and move it to a safer time period where it can build an audience.
278. So I think audience acceptance and audience endorsement is, at the end of the day, a very important factor and ultimately the deciding factor for a private broadcaster -- ultimately -- but I think there is a lot a private broadcaster can do to try different things and to try and get a show to catch fire with an audience before one has to go to that test. And the relevance we spoke of I think was more in terms of the softer story and other kinds of issues that we look for.
279. It's tough to define it from a regs point of view, and I appreciate the difficulty, but if you go too far in trying to define it, then you really, I think, take the freedom away from the creator to tell a story in his or her own way, and I think one has to be fairly comfortable that the program, the concept, is in creative Canadian hands, that it's a creative vision that's driving it. And then I think, with those kinds of provisos, you have to let the creative people tell their stories in their own way. If you try to benchmark relevance too carefully from a regulatory point of view, then I fear that, while it may be well-intentioned, you really possibly impede some of the creativity. So it's a fine balance I think we have to find.
280. COMMISSIONER McKENDRY: I just want to come back to this a little bit to ensure I understand fully what you have just told us. Perhaps I will just read out your definition of quality that was on page 1. The quote is:

     "Quality, as we define it, has specific meaning: programs with excellent scriptwriting, acting and direction; sufficient numbers of original episodes; and a high degree of relevance to Canadian audiences."

281. Relevance, I take it from what you have said, is the test that one would apply to this. If I have understood what you have just told me now, the proof of relevance would in fact be in audience size. In the end that's what it comes down to, is audience size.
282. MR. FECAN: Ultimately -- there are different broadcasters in the system, of course -- I mean it's a public and a private system and different parts of the system may choose to use different tests, but at the end of the day for a private broadcaster, if you have done everything you possibly can in terms of promoting, if you have done everything you possibly can in terms of scheduling, if you are convinced that you have done everything you can in terms of ensuring the resources are there for it to be creatively sound, and after all of that the audience tells you that they don't get it, they don't connect, the audience has to be right.

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283. COMMISSIONER McKENDRY: Thank you.
284. Now, I would like to turn to the COMPAS public opinion survey for a moment in terms of your quality strategy that you propose we should adopt. You state in page 10 of your submission that "viewers care a lot about quality programming on television".
285. If I have read the COMPAS report correctly, only 22 per cent, or one in five Canadians identified quality as the most important issue in television programming; that's on page 3 of the COMPAS report. So my question to you is how does a quality concern by one in five Canadians translate into a statement that viewers have a strong concern about quality?
286. MR. FECAN: I would ask Mr. Winn to answer that question.
287. COMMISSIONER McKENDRY: Thank you.
288. MR. WINN: Quality emerges as important in several contexts. One is in the focus groups, and that's why in fact we pursued detailed aspects of quality in the survey. The survey structure simply emerged from the focus groups. In the focus groups, participants expressed a wide variety of technical concerns about quality, even volunteering repeats in some instances. On page 3, where you see the bar chart, quality refers to technical or production quality. You can treat quality as an element of morals or violence or culture.
289. We pursued quality in follow-up questions because we knew from the focus groups that that was a concern, and there were a number of direct and indirect indicators of quality preoccupations in the follow-up questions. One indirect measure is the readiness with which people could talk about the elements of quality, as on page 8, where they talked about acting and scripts and camera work and directing as more important to quality than let's say special effects or costumes, and their readiness to talk about this and to avoid don't-know answers is pretty powerful indirect evidence of a preoccupation with quality.
290. Quality also emerged when we asked them later on -- let me just put my glasses on here -- about the choice between quality and quantity. In this instance, in response to two questions, they said it was important to focus on quality as opposed to quantity, a theme that in fact re-emerged in the CRTC's own opinion research.
291. So the bottom line is that there are lots of measures that indicate a preoccupation with quality, partly in the open-ended questions, partly in the batteries, partly in the preference for quality over quantity, even with a view to regulation, and partly in your own CRTC-supported public opinion research.
292. In our own research over more than a decade quality has emerged in many contexts, including a posited concern that where you have quality you have pride. In fact, the earliest poll I personally ever did on this was for the federal government, where we looked at the contribution of the federal government's aid to arts and culture and its impact on national pride and national identity. We found that in fact some provincially-supported arts programs contributed more to national pride and national identity than many federal government-supported arts programs because they were viewed as being better in quality.
293. COMMISSIONER McKENDRY: Thank you. Just to make sure I have understood your response correctly, page 3, the table there, does show that only one in five Canadians identified quality as the most important issue in television programming -- just restricting yourself to that table for a moment.
294. MR. WINN: Just to that table, it means only 22 per cent referred to quality alone without a reference to quality and morals, quality in news, quality and education and so forth.
295. COMMISSIONER McKENDRY: Thank you. Now, just with respect to that table, I wanted to ask you a question that relates to page 1 of an appendix that's attached to your report; and I can't be more specific than page 1 of an appendix, but it is where there is a detailed breakdown of the responses to that question. It is headed "Q1. Thinking of television programming these days, what do you see is the most important issue?". There are five columns on the table -- just to help you locate it.
296. MR. WINN: It is a graphical chart? This is the one?
297. COMMISSIONER McKENDRY: No, it is this.
298. MR. WINN: Oh, it is that.
299. COMMISSIONER McKENDRY: It looks like that.
300. I take it that that's the detail that underlies --
301. MR. WINN: Right.
302. COMMISSIONER McKENDRY:  -- the summary table on page 3.
303. Have you found that table?
304. MR. WINN: Yes.
305. COMMISSIONER McKENDRY: My question to you is, on that table, the valid per cent response to the quality factor was 17 per cent and it is shown as 23 per cent on page 3, and I wonder if you could explain the difference.
306. MR. WINN: The graphs typically had the don't-knows removed, and that would in all likelihood explain the difference.
307. I haven't looked at this in a few months, but that's the conventional way of dealing with numbers.
308. COMMISSIONER McKENDRY: Well, I understood them to be removed near the bottom of your table, the page 1 table, to calculate the valid per cent. The initial per cent is 14 per cent, then it rises to 17 per cent.
309. MR. WINN: Well, what we are getting to here is the way you treat open-ended questions. Typically, you treat open-ended questions in several stages. You have initial coding and then you have collapses.
310. Without getting into the details, which I would be happy to in a written note, you clearly see immediately, when you look at the tabular display as opposed to the graphical display, that you have a lot more response options in the graphical display and you would have had amalgamations, which is just standard procedure when you go from large numbers of tabular response categories to a smaller number of graphically displayed categories. Quite often you start off with 30 responses and you amalgamate them under a broad theme, and that's probably what happened here.
311. COMMISSIONER McKENDRY: Perhaps you could provide us with the written note that would --
312. MR. WINN: I would be happy to, sure.
313. COMMISSIONER McKENDRY:  -- link the two numbers together.
314. I think the date we are using now for those kinds of responses is November the 5th?
315. MR. BLAIS: That's right.
316. COMMISSIONER McKENDRY: So if you could file it with the Commission --
317. MR. WINN: I would be happy to.
318. COMMISSIONER McKENDRY:  -- by November 5th, that would be helpful to us.
319. Looking at page 10 now of the COMPAS report, page 10 shows those who think Canadian shows have better cultural values outnumber those who think American shows are better by a factor of three to one, and those who think American shows have better production values outnumber those who favour Canadian programs by a factor of three to one.
320. The way I interpret that is that, in other words, the quality problem is primarily a production value problem, not a cultural value problem in the eyes of the public. Have I got that correct?
321. MR. WINN: I think you do.
322. COMMISSIONER McKENDRY: Thank you.
323. I want now to be sure that I understand how you propose to translate your emphasis on quality in the regulatory initiatives by the Commission. I take it first it is by redefining under-represented categories as priority programming; essentially all types of programming excluding sports but including local news, all of these categories now become under-represented for regulatory purposes.
324. Have I summed that up fairly?
325. MR. FECAN: I think we have focused it a little since our presentation, and the result of that focusing is in our matrix.
326. Our concept of priority programming essentially was kind of like a wider net than just what you currently see as under-represented; it excludes national news as well, by the way, not just sports, and I think it excludes several other categories, game shows and that kind of thing.
327. The reason that we went to this wider definition initially was just to remind ourselves, as we were writing this and putting this together, that there are certain categories of programming that aren't currently captured by the existing under-represented that we should not lose sight of, so that something doesn't happen to them just simply because they are not top of mind, so they are kind of a top-of-mind list.
328. As we have been specific in the matrix, we have defined "under-represented" as the current 7, 8, 9, documentaries and half-hour of star system. I think we have children's qualifying as under-represented if it happens to run in prime time, but we certainly include it as part of the larger group and we include local news as part of the larger group, just again to put a little string on it so that in these proceedings we don't forget about local news. In our own way, we have kind of tried to deal with how you might consider those kinds of things and at what point you might consider those kinds of things, and we have tried to list it in our matrix.
329. So, if you will forgive us, the process is evolutionary over the last little while.
330. COMMISSIONER McKENDRY: We want revolutionary.
331. I just need to clarify this now. In your written submission you propose ending the term "under-represented categories" and now calling it "priority programming". You are still sticking with the priority programming term?
332. MR. FECAN: No.
333. COMMISSIONER McKENDRY: No?
334. MR. FECAN: What we are saying is priority programming is the larger pool from which under-represented is drawn and we specifically look at under-represented, if you pull out our little matrix sheet, as the 7, 8, 9, documentaries, half-hour of star system. And we have specific incentives that deal with under-represented.
335. I think the difference between what you currently look at and what we have is this half-hour of star system and documentaries.
336. COMMISSIONER McKENDRY: So you have narrowed the definition of "under-represented" that was set out in effect in your written submission. You have narrowed it today. Is that correct? Local news isn't priority programming any more?
337. MR. FECAN: It is priority. It is the larger pool. It is something we shouldn't forget about, and we deal with it in bullet 6 in our matrix, but it is not under-represented by the definition. Under-represented is I guess the smaller group from the larger pool; that's conceptually how we are thinking of it. And, as I say, you need to forgive us a bit of evolution.
338. So, just to be clear, under-represented, 7, 8, 9, documentary, half-hour of star system, priority, all of that plus children's and local news.
339. COMMISSIONER McKENDRY: Sorry, priority is children's?
340. MR. FECAN: All of that plus children's and local news.
341. COMMISSIONER McKENDRY: Oh, sorry.
342. MR. FECAN: So priority is the larger group, under-represented is a subset.
343. COMMISSIONER McKENDRY: So the only categories that aren't in under-represented, just to make sure, are children and local news. They are not in under-represented but they are part of priority.
344. MR. FECAN: Correct, but we would advocate children's counting towards the seven hours if it happens to fall in prime time.
345. COMMISSIONER McKENDRY: Now, in your scenario, for example local news being in priority, what privileges go with that?
346. MR. FECAN: In our matrix, we are saying several things about local news. We are saying that we believe you should uphold your current policy of ensuring that local news and public affairs are provided in exchange for access to local advertising. We think that that ought to remain. And we think that, as you set the equitable base amount between station groups, you take into account, when you do that setting, contributions to local news and children's programming.
347. What we are trying to say is that while we feel different groups ought to have some sort of measurable equitable performance -- I am speaking in terms of station groups -- they ought to have flexibility in how to pursue that, so that we all can take our best shots at business and cultural success.
348. COMMISSIONER McKENDRY: I think I understand that. We will ask you a few more questions around that area so that we can be sure we have a good understanding of what is on the table now from your perspective.
349. As I understood your written submission, the program categories that were in priority programming, a broadcaster could focus on any one of those categories or any combination of those categories. So, for the sake of discussion, if they wanted to do all documentaries in prime time, if they felt that was what was good for their business and what viewers wanted, they could do that.
350. Is that still part of what you are talking about?
351. MR. FECAN: What we are talking about I think is really best described if you just look at the matrix sheet, because what we try to do with this matrix sheet is take a run at providing the balancing formula that gives, on one hand, some measure of equitability and, on the other hand, lots of opportunity for one's own incentive to do their own thing.
352. So, to answer your question, if someone chose to do seven hours of documentaries, that fits under our seven hours in bullet 3, but there would also be some sort of set base amount for the under-represented that would be determined between yourself and the station group to ensure that there is an equitable level of spending towards those documentaries.
353. COMMISSIONER McKENDRY: So there would be a spending in your original proposal -- you said the expenditure requirement should attach to the priority programming group as a whole. What would the expenditure attach to now?
354. MR. FECAN: Under our evolution, it would deal with the under-represented, but in the base amount we would also take into account, as you look at each group and do your deliberations, their contributions to local and children's.
355. COMMISSIONER McKENDRY: Just coming back now to the -- well, I won't ask you that at this moment.
356. When I read your written submission I was a little confused about the exhibition requirements from your perspective; in fact, I couldn't find any reference at all to exhibition requirements in the written submission. But I take it in your submission today you in fact are setting out certain exhibition requirements, for example the seven hours.
357. MR. FECAN: Seven hours of under-represented as we define it, which would include documentaries and a half-hour of star system between 7:00 and 11:00 p.m. while maintaining your existing definition of "first run".
358. COMMISSIONER McKENDRY: And all of this taken together would lead, I take it, to helping your group and other broadcasters -- because I take it you are proposing this for the system, not just for the CTV group --
359. MR. FECAN: That's right.
360. COMMISSIONER McKENDRY:  -- towards achieving that quality objective; in the end, large audiences or at least audiences are the ultimate proof of whether the quality objective is being achieved.
361. I take it the strategy here is flexibility. Is that really what it is coming down to?
362. MR. FECAN: The strategy is flexibility, the objective is giving different station groups opportunities to contribute in an equitable way but in their own way, so that not everybody is going to do exactly the same kind of thing. I don't think the viewers benefit by all of us being the same. I think the differences are sometimes what is most interesting.
363. It also has that level of an exchange for the privilege of broadcasting to 70 per cent of the country, or over 70 per cent. There is some sort of equitability in terms of the contributions.
364. COMMISSIONER McKENDRY: In your written submission I recall that you proposed the 150 per cent credit for distinctively Canadian drama be extended throughout the broadcast day. Is that still part of your proposal?

     1105

365. MR. FECAN: Yes, it is and I have to say this is not necessarily something that we would want to pursue as a group, but in listening to and reading through the presentations, there are some producers who have come forward and said, "Look, we would love to do a Canadian soap opera." So, we kind of said, "Look, if it's 10 out of 10 and it's a particular kind of genre that plays better in a different kind of time period, we should try and enable people to achieve those kinds of things." So, that's where it comes from. That's the philosophical underpinning of that.
366. COMMISSIONER McKENDRY: And the protection against shifting this type of drama out of prime time from -- let me start over again. The protection from shifting this kind of drama out of prime time into the daytime schedule, I guess, would be your seven-hour requirement in prime time, although that seven hours doesn't necessarily have to be devoted to drama.
367. MR. FECAN: The existing 150 per cent credit is applicable against the 60/50. We support the continuation of that linkage. We are saying that in addition to that, if that's what someone chooses to do, there is seven hours of under-represented between 7:00 and 11:00.
368. COMMISSIONER McKENDRY: One area that nags at me in all of this --
369. MR. FECAN: Commissioner McKendry, the 150 per cent on all day, this is not like number one on our list. We put it there because we thought that it would provide some flexibility, but this should not be what comes between us.
370. COMMISSIONER McKENDRY: My next question, actually, wasn't going to be about that, but I'm pleased to hear that that shouldn't come between us.
371. In terms of your focus on quality and what you are proposing here, to what extent does it address the concern that came out in the COMPAS Report -- and Mr. Winn agreed that was the concern -- that viewers are worried about production value quality, they are not worried about cultural value quality? So, out of this is there anything that would address that concern that viewers apparently have about production values? Would this lead to better production values?
372. MR. FECAN: You know, I think some of that is a hangover from the past when some people said that you could hear a Canadian show by the sound or you could see it by the graininess. I don't think that's the case any more as production budgets have increased, but I think there is a relationship between the amount of money one spends and the gloss that a show has.
373. I don't think there is any question our craftspeople and artisans and artists know how to do slick. We do a lot of the Hollywood slick because a lot of it is shot here. So, our crews do it, our directors do it, our writers write it, our producers put it together and our actors deliver the performances.
374. So, there is no issue about whether we know how to do this or not. We have long since proved we know how to do this, but there is a difference between 35 millimetre and 16 millimetre to the eye, there is a difference to the amount of days you shoot on location. A show like "Cold Squad", for instance, I think shoots six or seven days and can afford, by the virtue of its budget, maybe one or two days on location. Maybe "X-Files" shoots 10 days and can afford three or four days on location.
375. All of these things are kind of, you know, indicators, visual cues that our people who are fortunate to see probably the widest range of television that anyone sees in the world, they can pick these things up. So, by trying to go for longer runs, it gives, I think, creative teams an opportunity -- you know, if you have 22 episodes, you have more opportunity to build up a head of steam. You maybe have more opportunity to get a volume deal and get a 35 millimetre camera instead of a 16 millimetre camera. I think you could inch that quality up.
376. I don't think there is any question we can do it. It's a question of whether there is enough money on that budget to execute it. I think while the concern obviously is there because the survey was done only a few months ago, I think some of it really is a hangover because I think when you look at the quality of the stuff lately and currently, in most cases it, I think, is pretty good.
377. I also take one other thing from that interesting twin set of charts and that is that if Canadians find that content connection, the relevance connection with a Canadian show, they might be prepared to take a little more grain in the film, they might be prepared to accept something just a touch less than the gloss of a $2 million one-hour U.S. series. But I think what they are saying is they don't really feel they ought to take a whole lot less. It ought to be close, but if it's close and it has this other factor, I think it wins them over.
378. COMMISSIONER McKENDRY: Let me ask you a question with respect to the ability under your scenario of broadcasters to focus on a particular category; documentaries, for example. What is your response to a concern that some might have that this has the potential for putting diversity in the system at risk, everybody will focus on documentaries or everybody will focus on some other category? Is that a problem from your point of view?
379. MR. FECAN: If you believe every conventional broadcaster will agree on something, then it might be, but I think, if anything, during the course of these proceedings we have demonstrated that we all have our own ideas.
380. Susanne, do you want to say something to that?
381. MS BOYCE: I was just going to add that I don't think we would do that. We do what we believe in, very much so. My background is in production, so I know we would want a certain mix, but we are very interested in developing high-quality drama because we know that news and current affairs is well served in this country, thank goodness, and that we love it and we are passionately committed to it and we want to get to that next level.
382. We are at a turning point right now, which is actually very exciting. Unfortunately, as life is, the conundrum is we don't have the money. I don't mean private broadcasters clearly, I mean as a country. So, we have this great thing happening. We are turning a corner and we can tell our stories extremely well.
383. I would like to point out "Cold Squad", as an example, just from where we sit, last year that show almost didn't get made, but got made through, honestly, a kind of a passion driven by producers, writers and then the funding group coming together. We came together and blah, blah, blah. The point is the values this year in terms of production are probably higher, but last year we got an audience because there was something that connected to viewers. So, I think we tend to do -- we will do what we believe in and each broadcaster will do the same.
384. I don't know if that adds, but I will stop.
385. COMMISSIONER McKENDRY: Thank you. It's helpful, but I take it the answer is there would be diversity -- we don't need to worry because there would be diversity in the system. The chances of everybody doing the same thing are nil.
386. MR. FECAN: We certainly believe that that's the case and we think, on a competitive model, everybody will want to be different and trumpet their differences as what it is that makes them special and will be used to convince viewers that that's why they should spend their valuable time with that group instead of another group. So, we think that's the essence of the competitive system.
387. COMMISSIONER McKENDRY: You talked in your earlier comments about the proposals of the Directors Guild and of the CFTPA and I take your points. CFTPA, in their submission -- well, not in their submission, they alluded to it, and in questioning they noted that CTV was very close to what they were proposing from a scheduling point of view. I wasn't clear from what you said to us in your oral presentation that you agreed with that.
388. MR. FECAN: I think we share both groups' goals of more originals and more quality. I think both the CFTPA panel and when Allan King and Peter Grant were up, many of the things they said we, as goals, endorse. What we are pointing out, however, is that in the mechanic they have chosen to use, particularly the redefinition of first-run programming, it ends up being a fairly massive hidden multiplier that takes us way, way offside from living up to either of what the two proposals advocate.
389. I don't know, Bill, if you want to get into more of that, but that is the active difference that takes what appears to be a similar -- you know, when you look at our schedule in prime time and when you look at their list, it seems to be fairly -- maybe not there, but maybe within striking distance. When you put in the multiplier, it so radically changes it that we are very, very far away.
390. Bill?
391. MR. MUSTOS: That's right. Looking at the 1998/99 CTV schedule, which is the most Canadian schedule this network has ever had, when we drop the CFTPA proposal on that, we come up almost four hours short a week and that's not including the CFTPA's proposal on children's programs, which would just make the gap that much further.
392. COMMISSIONER McKENDRY: And, similarly, for the Directors Guild proposal?
393. MR. MUSTOS: We did the same analysis and what we discovered is with the DGC proposal dropping it down onto the same schedule, it would be almost two hours again without encompassing their proposal on children's, and that's two hours a week.
394. MR. FECAN: Two hours may not sound like a lot, but if you are thinking about drama, roughly $1 million an episode, the money has to come from somewhere and it's this hidden multiplier that really puts us that far offside.
395. COMMISSIONER McKENDRY: I had some questions for you about local news and they were in the context of your written submission that said local news was going to be part of priority programming and that priority programming was, in effect, the under-represented category. I took it the reason that it was being elevated in its status was that it wasn't profitable any more to do local news.
396. I am not sure that we should spend a lot of time on this now because I am not sure -- I still don't quite understand what the status of local news is now in your schedule given that it's not under-represented, I take it, but it's still part of priority programming.
397. MR. FECAN: We feel that when you adjudicate the relative performance of station groups, you should take into account the local news and reflection and that these different groups do. Clearly, in the large markets they are profitable. In small and medium markets they are largely not profitable. When I say a small market, I am thinking of Timmins or North Bay or Prince Albert or Yorkton.
398. I guess we kind of wanted to put a string around them just so that we don't forget these things. We are saying that if we are not careful, some of that will be lost because it is not profitable. The assumption that it is, which I think has been in several submissions, is just not true. Sometimes it is in the large places, in Toronto for sure it would be, but it's not in a lot of smaller places. I don't think we ought to lose sight of that reality.
399. Part of the reason, of course, is that as more signals are licensed in a market, distant signals and coming in from various places -- and you see this particularly in small and medium-sized markets in Ontario -- it affects the viability of the station itself. In exchange for doing local news, you have the right to sell local advertising, but it is not the advertising within your 12 or 14 or 15 hours of local news that you measure as an indicator of whether you break even or not, it's the local advertising over the entire schedule. In exchange for doing the news, you have the privilege of selling retail in that particular market.
400. So, if the viability of the station is lessened because there are more distant signals competing for audience, that has an effect on the profit/loss equation on local news in that particular market and we see it most dramatically in small and medium-sized markets. That was the concept we wanted to just put forward and remind everybody of because we think that local news is one of the things that our viewers like the most.
401. I don't think by choice Air Canada flies 320s to Sault Ste. Marie any more. You have to redefine what the market can support if you license a lot of distant signals into a smaller market. The equation is a little offside on the small and medium-sized markets, we feel.
402. COMMISSIONER McKENDRY: There was something you said here. I just want to make sure I understand this. Correct me where I have this wrong or tell me if I have it right. The reason local news is in priority programming, but not under-represented in your current scenario is that it then goes into the matrix against which all broadcasters would be judged, so to speak, in terms of their contribution to the system.
403. MR. FECAN: The matrix is not for all broadcasters, it's for station groups defined as having over 70 per cent of the reach of English Canada.
404. COMMISSIONER McKENDRY: So, that's the only special thing about local news being in priority programming now, is that gets it into the matrix.
405. MR. FECAN: Right.
406. COMMISSIONER McKENDRY: It doesn't put it in the under-represented category as it was --
407. MR. FECAN: You have it now.
408. COMMISSIONER McKENDRY:  -- in your written submission.
409. MR. FECAN: Yes.
410. COMMISSIONER McKENDRY: I think I understand now, thank you.
411. Whether or not local news is making money isn't really relevant, is it, for it going into the matrix. It's, I take it, something that you believe is important in terms of contribution by station groups to the system?
412. MR. FECAN: I think whether it makes money or not as you measure these base amounts, the commitments of various station groups has a relevance because at a certain point if -- keep in mind, we are a publicly-traded company, we have to do share responsibility to shareholders, and the market says and our shareholders quite rightly say, "You must make a profit."
413. If there is no reason for us to have local news in -- pick a market. I hate to pick a market, so I won't, but just imagine a small market because I don't want to talk to the mayor of that town tomorrow morning. If there is some reason that we can't make money doing that, then we have to consider whether we really want the privilege of selling local retail advertising in that particular market. So, somewhere in the balancing when you come to that point, I think it becomes an issue that needs to be considered as part of the whole.
414. COMMISSIONER McKENDRY: Just in terms of the matrix -- and, as I indicated in my opening comments, I am going to come back to the matrix when we talk about equitable contributions more generally, but by putting local news in the matrix, is that a must-do for every station group then?
415. MR. FECAN: No. We feel that -- I mean some station groups are licensed that way and choose to do that. Some in Ontario, for instance, aren't licensed for local news and choose to do a different kind of thing. We are putting it there so that we don't lose sight of it.
416. Bruce?
417. MR. COWIE: We have to make sure local news is kept on the radar screen. That's why it's there. I think in an earlier conversation Madam Chair was discussing with someone -- I don't recall -- in the last 10 days and talked about the balance between local service and the focus on categories 7, 8 and 9 in Canadian drama. So, we want that balance to be discussed at the time of the setting of the base amount.
418. So, it's there, as Ivan said earlier, to keep a string on it and make sure we don't forget it's there, that it's a vital part of Canadian television broadcasting. We have an ongoing interest in doing it the best we can, so the balance of where we end up out of this proceeding has to have local news as part of that focus.
419. COMMISSIONER McKENDRY: Thank you. As I say, I will return to the mechanics of the matrix in terms of equitable contributions a little later.
420. If it's important -- and, quite frankly, in the context of the matrix, I would have to think about this a bit, but if your argument that local news doesn't necessarily make money, it is important for us to accept your matrix. I think it will be important, at least in my perspective, to have some understanding of that situation.
421. I am not asking you to disclose sensitive financial information in the hearing, but I think to support your argument when we come to make decisions about this, if you believe that that's an important argument in support of elevating news into priority programming and putting it in the matrix, you may want to consider providing us with some financial information by November 5th on that about local news. I think there are opportunities to file that confidentially if you believe it is confidential information.

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422. MR. FECAN: Duly noted.
423. COMMISSIONER McKENDRY: I would like to talk now about the Canadian Television Fund for a moment. And we had a lot of discussion earlier in the hearing, particularly with the Directors Guild and the Canadian Television Fund, about the lack of congruence about our Canadian program expenditure requirements and the Canadian Television Fund's rules.
424. The first thing I want to ask you about is if you have any comments on the Directors Guild study about the fund's licence fee top-up rules, that is, the portion of the licence fee contributed by the fund.
425. You may recall that Mr. King, the Guild's president, said in connection with the study that to allow Canadian private broadcasters to treat the top-up money as if it was spent by them is "unsupportable and undermines the whole integrity of the broadcasting system."
426. Do you agree with Mr. King; and do you have any comments on that study that was filed by the Directors Guild?
427. MR. FECAN: Before I pass it on to Bill Mustos, who is our expert on these matters and who has in a previous life had some direct experience with the issues raised, I guess the only thing I want to respond to in terms of the quote you had is I guess there is a vague smell there that something wrong was done.
428. I just think it is important to clearly on the record understand that we live by the rules, and those were the rules and, as such, it is entirely proper to live by the rules. I am not sure what else one could do.
429. So now that in my mind, at least, I have addressed the vague smell, I turn it over to Bill.
430. MR. MUSTOS: Thanks a lot, I think.
431. There are some very legitimate concerns and comments that the DGC has laid out in their study. As you know, when the Cable Production Fund was created back in 1993-94, there was this notion of allowing broadcasters to include as part of their Canadian content expenditures claim that portion of the cable fund's top-up that was paid in addition to broadcasters' licence fees.
432. At that point in time, the policy underpinning for it, I believe, was to encourage broadcasters to do more high Canadian content production in that the cable fund has a higher standard than the Cavco and CRTC requirements of 6 out of 10. The cable fund had a requirement, and continues to have a requirement, of 8 out of 10, and that the further incentive was to put that 8 out of 10 programming in prime time, which was a rule of the cable fund as well, and that the bonus, or the incentive, if you will, for the broadcaster was to be able to include that top-up in their claim.
433. Over the course of the ensuing years, a couple of things happened. The licence fee thresholds for the fund did, indeed, decline.
434. Secondly, there was the infusion of new money when the Department of Heritage pulled together the money from Telefilm, the cable fund and then topped that up with an additional $100 million from the department.
435. Thirdly, the administrative jurisdiction for the fund was transferred from the CRTC to Heritage and the board of directors of the fund.
436. What the DGC study, I think, is focusing on primarily is the fact that the licence fees at the fund level have gone down from 1994, when the Commission laid them out in Public Notice 94-10.
437. As Ivan said, the rules continue to be what they are and any broadcaster who is claiming that top-up as part of their Canadian content expenditures isn't doing anything wrong; but I would add, and I don't know if Robin Fillingham wants to add to this, but at CTV we are actually not including the licence fee top-up in our Cancon expenditures claim.
438. MR. FILLINGHAM: I will just add, we are including it in our Cancon expenditures because that is what the rules allow. But it is not used to meet existing spending requirements.
439. I think the first time it will appear as this group will actually be in '98 filings because none were used in 1997, and I think CTV Television Network Limited used it the first time in 1996 for, I think it was, "Due South".
440. COMMISSIONER McKENDRY: That goes to another question I had on this. So from the CTV group's perspective, you wouldn't propose to claim as eligible expenditures for our purposes top-up fees that exceeded those set out in our -- the decision that you have referred to, 94-10 I think it is.
441. MR. FILLINGHAM: Yes. I think the important thing in setting the rules for the base amount are to set it at the time people provide their base amount, to the extent it is included; and I would recommend that it not be included only to the extent that it is one of these items that can go up and down as to availability. So it is a difficult one to kind of continue on, on an ongoing basis.
442. COMMISSIONER McKENDRY: To what extent do you think it is necessary that the fund's rules be consistent with our rules? Is that something that would be desirable?
443. MR. MUSTOS: I think as much as possible there should be harmony in terms of the policy of the Commission and the policy at the fund.
444. I think on a broader scale there is a bit of a disconnect between some of the expectations that the Commission has, some of the expectations that we have as CTV in terms of the quantity and quality of programming we would like to do and see go through the fund. But the reality is there isn't enough money at the fund to accommodate that and so that is one illustration of a kind of disconnect between the Commission and the funds. I think the same would hold true for other policies.
445. COMMISSIONER McKENDRY: Thank you. On page 43 of your submission, you state, and I quote:

     "Through whatever direct measures the Commission has available, and through use of its considerable influence, ensuring that the funding system supports the priorities of the regulator and of the broadcasters whose business it is to connect with Canadian viewers;"

446. I take it that you see our role with the fund as one of moral suasion rather than one of jurisdiction over the fund.
447. MR. MUSTOS: I think that is right, although I do think that the Commission could play a very powerful role in terms of suggesting to the fund that certain policies be looked at, and we have a few ideas in mind on that front. I don't know if this is the time to talk about it.
448. COMMISSIONER McKENDRY: Talk about which?
449. MR. MUSTOS: The kinds of policies at the fund that we think the Commission could actually have quite a powerful influence on suggesting that the fund re-examine.
450. COMMISSIONER McKENDRY: Well, you have talked about some of those, I think, in your written submission. If there is anything in your written submission that you want to reinforce today with us or add to it, you know, feel free to do that.
451. MR. MUSTOS: Yes, I think that would be helpful.
452. Two policies in particular that I think the Commission might want to look at, at the newly named CTF, would be their policy with respect to broadcasters as distributors, and that is one of the points that we did lay out in our brief.
453. As you probably know, that is a policy that only applies to one-half of the fund. It is not an issue on the old cable fund half; but it is an issue on the Telefilm half. So there is an inconsistency within the fund as it exists today.
454. More specifically, we feel that Canadian programming would benefit significantly if broadcasters were given the ability to compete for distribution rights. We absolutely understand the producers' concerns that there might be an opportunity there for broadcasters to tie the negotiation for broadcast licence fees with distribution rights. We feel that there are safeguards that can be developed, and we have proposed them in our brief, which I will not get into unless you like, that would set those out.
455. We think that by allowing an open bidding process for distribution rights that, in fact, there will be more competition for those rights and that more money will ultimately be put on the table. That additional money would ultimately help defray at least some of the draw on the fund. It wouldn't solve the funding crisis, I want to underscore, but it would help defray some of the pressure that is on the fund. We think that having more choice for small and medium sized producers to go to a number of doors in terms of seeking access to distribution is an incredibly positive thing.
456. Finally, I think it only provides a greater incentive for broadcasters to care about the success of the program when they are committed to it, both emotionally but also financially internationally.
457. The second issue that I think that the Commission might want to address as an issue for the fund has to do with the envelopes within the fund in terms of how the money flows out the door to different types of broadcasters. Right now, there is a guaranteed 50 per cent envelope for the CBC. As Ivan was alluding to earlier, the pay television and specialty television access at the fund has been rising dramatically. That can only come as an expense to one broadcast sector.
458. You have the CBC locked in at 50 per cent and you have specialities rising on the other end and who gets squeezed in the middle are private conventional broadcasters. This is a very, very serious concern for us.
459. We are the broadcast sector that is bringing the largest audience to Canadian under-represented programming, specifically drama, variety and children's in prime time. We are bringing somewhere in the neighbourhood of 50 per cent of the audience, and we get these figures from Nielsen's and, yet, in terms of trying to finance these distinctively Canadian shows in prime time, we are getting access to a shrinking piece of the pie.
460. So that would be the second issue that I think that the Commission might want to turn its attention to; and that one is not laid out in our brief.
461. MR. FECAN: I might just add one, and I touched on it in the oral, and that is some greater measure of predictability. That really speaks to us being able to maximize our resources so that we develop some sort of reasonable ratio and not have to do all kinds of development along different tracks because we just don't know to what degree they will be there, the fund will be there or not. Any measure of predictability, I think, would be beneficial to someone in our situation.
462. COMMISSIONER McKENDRY: On the second problem you set out you did a good job of describing the problem. What is your solution?
463. MR. MUSTOS: I have a couple. One might be a new envelope division that could be 40, 40, 20 -- 40 for the CBC/SRC, 40 for all private conventional broadcasters. And I would just point out there we are talking about all private broadcasters across the country sharing an envelope that is the same size as the CBC's; and then a 20 per cent envelope for pay and specialty, which happens to be about the level that they have reached just this past year. So they have been climbing up to a 20 per cent level.
464. Another proposal might be to say to the CBC that they do have an up-to 50 per cent level of access on the old cable fund side. Again, here is a situation where the rules are different between two sides of the fund where they have a fixed 50 per cent level of access on the Telefilm side. So, if one wanted to move away from the notion of fixed envelopes, 40, 40, 20, one could simply harmonize the two sides of the fund to say up to 50 per cent across the board.
465. MR. FECAN: To underscore what Bill is saying and the consequences of the direction things are drifting in, if we all agree, and I think producers and broadcasters and pretty well everybody I have ever heard of in the industry agrees that you need these funds to finance indigenous programs, that they are project specific rather than sector specific. They are there to do a specific purpose.
466. If something of the order that Bill has suggested doesn't happen, it creates a situation where the indigenous stuff will probably largely appear on the CBC, and less and less of it can appear on private broadcasting.
467. Since it is project specific, I am not sure that that intent was ever part of any public policy purpose.
468. So that kind of underscores why we feel strongly about that particular point.
469. COMMISSIONER McKENDRY: Thank you. In terms of the first problem you identified you say that is described in your brief. Now, I just want to make sure I understand, you are not asking for access to the Telefilm equity funds?
470. MR. MUSTOS: No, we are not.
471. COMMISSIONER McKENDRY: I would like now to talk about the equitable contributions area in my questions, and that is going to bring us back to the matrix and in the questions I prepared for our discussion today, my first question was: Where is the matrix? You have done a good job of answering that question.
472. Before we get into some of the details on it, you point out that the matrix would provide some flexibility in how broadcasters arrive at an equitable contribution to the system, and that is a point you have reinforced here this morning.
473. Let's just talk about that for a moment, the flexibility. This is for station groups. It is a tool that we, the regulator, would have that would be known to all the station groups. As I understand it, a station group would come in front of us, presumably at the time their licence was going to be renewed, and say, "Well, out of these matters that are on the matrix, we are going to focus on this, this and this. Please approve our licence renewal."
474. There would be no minimum -- in your proposal, there would be no minimum components of the matrix that one would need to satisfy in order to even be considered for having met the matrix's requirements.
475. MR. FECAN: I am not sure I clearly understand you, but let me --
476. COMMISSIONER McKENDRY: Basically, how would it work? That is what I want to know.
477. MR. FECAN: How it will work is that at the earliest possible moment, and hopefully relatively at the same time, the three station groups -- I have to say three because that is what exists today -- come before you, and we are hoping that that is as early as fiscal '01, and who knows what happens in the future through transactions that CIRPA asked to approve or whatever else, but we think there may be some opportunity to do that for fiscal '01.
478. Each of the groups would have to meet a bunch of minimum issues, the 60-50 must be there. If you wish, if you have local news, you get local access to advertising, that linkage is there. You must have seven hours of under-represented in prime time. We have talked about our definition of under-represented, and we are talking about a slightly expanded prime time of 7 to 11 p.m.
479. Those are musts.
480. The other must is that based on a whole bunch of things, including local and children's programming, you set a base amount of spending requirements for under-represented programming. So there is a must of some kind there.
481. We have put it that way to give you flexibility in terms of adjudicating the different opportunities that different station groups have and the different responsibilities that different station groups have, but there is -- in our view, you will come to some sort of fixed percentage spending on under-represented as a base amount, which would not take into account the top-up. As I think Robin indicated before, this would be set on some basis, not including that particular issue, that entry.

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482. So there are a whole bunch of things that are musts, that are there as base obligations.
483. COMMISSIONER McKENDRY: So these are all musts?
484. MR. FECAN: Yes.
485. COMMISSIONER McKENDRY: How does that provide the flexibility that you refer to in your written submission with respect to the matrix; all the groups must do these things?
486. MR. FECAN: The flexibility comes from how you choose to fill that seven hours; how much of it is from 7, from 8, from 9; how much of it is indigenous; how much of it is industrial. We have included incentives for ten out of ten which currently exists but, in particular, that apply along a wider day part. We include a specific incentive to try and get the 22 episodes of whatever we are describing these days as distinctly Canadian as described by the CTF minimum ten out of ten productions.
487. So that we see as a bit of a quality incentive to try and compel our people to watch more because they are not going to see the same show four times. And as you set the base amount, you take into account the amount of local and children's that that particular group does. So we hope that in our suggestion there is lots of opportunity to do your own thing, but we hope that this mechanism, on reflection, will convince you that it also ensures some sort of element of equatability as well.
488. COMMISSIONER McKENDRY: What caused you to change from the priority programming proposal that you had in your written submission to this? There was much more flexibility envisioned in your written submission than you are presenting us with today. What happened to cause you to change your mind?
489. MR. FECAN: We have been listening to the arguments here. It's a fluid process and as we have heard the concerns of different groups, including the producers and the directors and others, we have concluded that some of their arguments are hitting a chord with us and that, therefore, it is necessary to have some sort of prime time exhibition requirement specified in such a way.
490. So I think we have tried to advance the conversation and not necessarily stick to something that we thought made sense which we filed in isolation many months ago.
491. COMMISSIONER McKENDRY: So from your perspective one of the key developments in the proceeding up until now has been a development that would cause you to think there should be less flexibility in the system rather than more?
492. MR. FECAN: No, I think what we are trying to do is express the flexibility in a particular way, but ensure that -- to use Michael MacMillan's often quoted line -- you fish where the fish are. And I think our expansion of that is, well maybe you add an hour because maybe there are 80 per cent of the fish there but none of the other competing fishermen. So we are trying to expand it a little bit and give flexibility there, but we do believe this achieves the flexible mandate.
493. COMMISSIONER McKENDRY: One of the matters that has been before us in the hearing is representations by groups and individuals arguing that the broadcasting system does not reflect the cultural diversity of our country today.
494. What would your view be on expanding the matrix to include cultural diversity?
495. MR. FECAN: Well, I think in our own way that's what we are trying to do by providing a bias towards indigenous programming. If you just think back to how we are defining indigenous programming, in terms of being about real characters and real situations, if one takes that real seriously, it has to reflect the country that's out there.
496. That's why we think indigenous programming does a better job of reflecting that diversity. That's part of why we have it as a preference and are trying to given indigenous programming, through this matrix, opportunities that purely industrial programming would not have. So in our own way we feel we have taken that into account in our matrix.
497. I have to say that, as broadcasters, reflecting back to your audience the reality of what they see around them is a really important issue. In our own way, particularly in the new things that we develop, I think we are getting there very, very fast. In some of the other operations that are more of an evolution over time, they are getting there as fast as they can.
498. But some of the drama we have commissioned, particularly "Flesh and Blood", deals precisely with socio-economic and multicultural diversity issues on Sherbourne Street that goes from Rosedale to Regent Park. There are a lot of things that we are trying to do to do that, but as a rule we believe indigenous programming will serve that better because, by definition, it has to be about real stories, real things, not necessarily out of the headlines, but having a reality in a particular situation in our country and our culture. So that's how we have tried to address that very valid concern.
499. COMMISSIONER McKENDRY: So you would prefer cultural diversity to be implicit in your matrix rather than explicit?
500. MR. FECAN: We think that's what indigenous is. If it reflects a real situation, except it does not exist, it's not real. That's the very nature of what we believe indigenous compels you to do.
501. COMMISSIONER McKENDRY: Where does regional programming fit into your matrix?
502. MR. FECAN: As a matter of practice-- and I am going to turn to Bill, because he does a lot of our development -- we have regional development offices in the Maritimes, in Halifax. We have an office in Vancouver. Again, the whole indigenous idea I think compels you to locate shows in different parts of the country and work with different producers in different parts of the country who have a unique take on a particular situation.
503. That is so much part of our daily operating philosophy in how we do this that it is implicit in indigenous, but Bill, you may wish to add on that.
504. MR. MUSTOS: I think it was well said. What Ivan describes is exactly what we concern ourselves with and talk about every single day. We have an on-the-ground person in both Halifax and Vancouver and we speak on a very regular basis about the kind of programming that they are coming across, the kinds of projects they are putting into development, and working with them to find programs that might be of suitable interest for production financing and broadcast across the whole network. So it's very much part and parcel of what we do every day.
505. COMMISSIONER McKENDRY: I will come back to those areas a little later in my questioning. Really now my questioning is focused on should we make the matrix bigger because, in theory, you could have a role, cultural diversity; you could have a role, local programming, regional programming, and so on. I mean there are roles that could be added because all of these things are important to the Commission and important to the broadcasting system, as I am sure they are important to you as well. So really that's what my questions are directed towards and I take it from your responses that these matters are implicit in you matrix and should not be made explicit.
506. MR. FECAN: They are implicit in our matrix and they are also explicit in some of the funding rules that various funds have. There are bonusing systems in place for regional productions. So I think there is a mechanism that already exists, not directly on this matrix, that addresses some of what you are talking about.
507. COMMISSIONER McKENDRY: Thank you. Maybe I could change the topic now to licence fees.
508. On page 21, you cite a Stephen M. Armstrong Consulting Inc. study to conclude that additional money for production of Canadian drama cannot come from higher licence fees.
509. I take it that the underpinning of that position is that the cost per 1,000 potential viewers paid by CTV meets or exceeds the cost per 1,000 potential viewers in the U.S. and the U.K. Do I have that correct?
510. MR. FECAN: For ten out of ten indigenous productions, yes.
511. COMMISSIONER McKENDRY: I am hoping you can clarify, or Mr. Armstrong can clarify something for me, and that's the measure of 1,000 potential viewers. I am just trying to clarify in my mind that that's a reasonable measure to adopt and that would lead one logically to the conclusion you have come to.
512. Is the cost per 1,000 potential viewers the basis on which you negotiate licence fees? Is that a tool that you use when you are negotiating licence fees?
513. MR. FECAN: Yes, I think particularly with foreign programming. What you can make out of what you can earn from a program, there is some relationship to the licence fee you pay.
514. I think there are two classic ways of looking at licence fees and I guess both have validity depending on your point of view. If you are a producer, naturally your interest is in getting as high a percentage of the budget as possible from licence fees because it reduces your risk in terms of other markets or what you might have to borrow or deficit finance or other kinds of things, and I really appreciate the validity of that from a producer's point of view, but percentage of budget is percentage of budget and while we certainly have something to say as a broadcaster about what's in the budget, it is not ultimately something that we have control over. I mean, that's what a producer does; figure out what it costs to do something.
515. From a broadcaster's point of view, we look at it as cost per potential viewers because we are looking at it from the economic model of a broadcaster: How much do I need to spend to reach potential viewers? Obviously it's potential viewers because it's up to all the different things that we have talked about how well you succeed in that. When you are negotiating for a show and the show has a demonstrated ability -- whatever the show's nationality is -- has a demonstrated ability to reach a certain audience, you will pay more for it because you can earn more from that.
516. Where it's a higher risk proposition, it's a new show -- again, regardless of the nationality -- you are paying less because there are many more risks involved. There is much less certainty in how that particular program will fare in terms of reaching an audience.
517. In terms of some of the specific issues you raise in terms of the cost per 1,000 and how Steve went about that, I would like to turn it over.
518. COMMISSIONER McKENDRY: Just let me interject before Mr. Armstrong answers. My question is, and Mr. Armstrong may want to comment on it too, is cost per 1,000 potential viewers a generally accepted measure in your industry?
519. MR. FECAN: I think it's an implicit measure as you value what you are prepared to pay for something as a business. You are not going to pay more for it than what you believe it will earn. That leads to ruin very quickly. So as you drill it down, that becomes the measure. You figure out how much you can make, what's the cost -- to figure out how much you can make you have got to figure out what the cost is per potential viewer, and the potential part becomes the risk equation: How sure is that bet? On "Due South" it might be a lot more sure than on something that is a new show. "Due South" has a track record; a new show does not.
520. So you might be prepared to say it's worth more to pay this because I know I am going to get this back.
521. Steve.
522. MR. ARMSTRONG: I will just comment from a researcher's point of view in that I think it's an interesting analysis to compare programming expenditures between different countries, but if we just look at the absolute numbers we are comparing apples and oranges. By going to the cost per 1,000 potential views we can compare apples to apples and that way, I think, draw some conclusions that mean something.
523. COMMISSIONER McKENDRY: And it's apples to oranges because it costs more to produce drama in the U.S. than it does in Canada; is that why it's apples to oranges?
524. MR. ARMSTRONG: If we have two countries with different market sizes and different market structures, and a broadcaster in one country spends something and a broadcaster in another country spends something, all we know is that they have spent those two somethings; we don't know what that means.
525. If we convert it to a measure such as cost per 1,000 potential viewers, then we have a sense of, in effect, the commitment that the broadcasters is making to that program, and that gives us something to compare.
526. MR. FECAN: The cost per potential viewer does not factor in the production budgets. We are looking at it not from the producer's point of view but the broadcaster's point of view, and that's why it has legitimacy.
527. COMMISSIONER McKENDRY: My bottom line sort of concern is, or question is -- not a concern -- is that when one takes costs that may not vary dramatically between countries and divides them by different population bases, the population base in the U.S. being ten times greater than it is in Canada, you almost pre-determine that you are going to come up with numbers such as you have. So that's why I wanted to understand that that was a reasonable approach to take, not an approach that was taken simply to capitalize on the fact that there is a much larger population base in the United States and the U.K. than there is here in Canada.
528. MR. FECAN: But as broadcasters operating private sector businesses, those are the economies that we have to make work. We can talk about whether it's right or wrong; it is reality, and we felt it important to portray reality from our point of view. It's the only point of view we can honestly speak about and know something about directly.
529. COMMISSIONER McKENDRY: Thank you.
530. To change to taking a look at the independent production sector discussion you have in your submission to us, could you take a look at page 27, Table I. I think in fact this is a table from one of Mr. Armstrong's studies.
531. Looking at that table, what is the conclusion you want us to take away from looking at that table?
532. MR. FECAN: Steve.
533. MR. ARMSTRONG: I think the principal conclusion there is simply that revenues are -- just let me make sure that I have got this. The conclusion I would draw looking at this table is that revenues to Canadian production companies grew more quickly than revenues to private television broadcasters over the period 1996 to 1997.
534. COMMISSIONER McKENDRY: And what about the relative magnitude of the percentage of private television revenues; is that an important factor in your point of view?
535. MR. ARMSTRONG: I think it is interesting in terms of the mandate of the study -- which was to look at the establishment of an independent production industry -- that the top five publicly traded production companies in Canada now are almost half the size of the entire private television broadcasting industry; I mean 38 per cent and 42 per cent, so 40 per cent the size.
536. COMMISSIONER McKENDRY: In the private television revenues that you used in your table, did you include the revenues from the specialty and premium services?
537. MR. ARMSTRONG: No, I include air time revenues to television broadcasters -- just private television broadcasters, not their specialty services.
538. COMMISSIONER McKENDRY: Given that in other areas of the CTV group submission we are encouraged to look at the system as a whole, if one was including the specialty services, wouldn't it be logical to include the specialty revenues in the private television revenues in your table?
539. MR. FECAN: I am not sure which category you put them in because plenty of specialty channels are owned by producers.
540. COMMISSIONER McKENDRY: If the purpose is to show the relative size of the production companies as a percentage of the private television revenues, one could still make the adjustment you just referred to, I think, assuming that adjustment should be in fact made.
541. MR. ARMSTRONG: I think that if we are looking at the private television broadcasting industry compared to the production industry, this table is relevant. If we want to compare the broadcasting industry that includes various industry sectors, including pay television and specialty and private television, then we would do another table to make that comparison.
542. COMMISSIONER McKENDRY: If one did include the specialty revenues and premium revenues with the private television revenues, it would make quite a difference, would it not, to the 42 per cent calculation? That would fall significantly.
543. MR. ARMSTRONG: I would have to do the calculation before I could comment.
544. MR. FECAN: If you look at Table III, broadcast for the two largest -- I guess the one largest now -- seems to be 10 per cent. So I think that might be the sensitivity.
545. COMMISSIONER McKENDRY: I did the calculation, and you can check it later. The 42 per cent drops to 29 per cent according to my calculations.
546. Coming to the 10 per cent, I guess that goes to your point, on page 28, that:

     "The independent production industry has become, in effect, an increasingly powerful, profitable and publicly funded competitor to the private television broadcasting industry."

547. But, going back to the 10 per cent on Table III, broadcasting revenues are only 10 per cent of Alliance's and Atlantis' revenues.
548. Now, when I look at 10 per cent, frankly, it does not strike me that that is, in and of itself, evidence that they are significant competitors to the conventional industry. Do you have any comments on that?
549. MR. FECAN: I think specialty is clearly growing and I think one also needs to recognize how revenues are treated in production companies. For instance, in most production companies the entire cost of a program is treated usually as a revenue because they've offsetting things that come in to balance that cost.

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550. So I think you would need to probably drill down a little deeper to examine what the five-year probabilities are on the EBITDA lines for those relative sectors.
551. COMMISSIONER McKENDRY: The other calculation I did to try to get some more insight into it -- and I would like to get your reaction to it -- is the combined broadcasting revenues of Alliance and Atlantis. I calculate it to be 1.9 per cent of private television revenues, which again, in my mind at least, made me question to what extent their broadcasting activities are significant competitive threats.
552. MR. FECAN: Well, we will certainly do our own calculation on that.
553. I think really what our purpose is in filing these charts is to say that the policy put in place by the government and yourself as a regulator has been very effective in growing an industry, and I think what we are trying to focus on is, from our point of view, we want to find a way of putting more indigenous quality on the air, and that is not necessarily the same thing as making a large sector that is already very successful even more successful through a higher volume of industrial productions.
554. I guess we are just trying to distinguish between the different public policy objectives and saying, if one of the objectives in the past was to make this sector strong, well, I think it is; it is a good, solid sector. We are proud of it and we are proud of its success. Nothing against them or what they have accomplished.
555. I think, for the large companies, what this indicates is there is no tag day necessary. We have to deal with specific public policy objectives now.
556. COMMISSIONER McKENDRY: Thank you.
557. I would like to talk for a moment about the study that you have provided that compares your or CTV Group's expenditures on Canadian programming with CanWest's expenditures. The study concludes that CTV spends more and earns less than CanWest.
558. What I need to understand is, are you saying that CTV has a smaller PBIT because the company spends more than CanWest on Canadian programming? Is that the factor, the single factor that explains your lower PBIT, the fact that you are spending more than CanWest?
559. MR. FECAN: I would pass it on to Robin.
560. MR. FILLINGHAM: No. I wouldn't put it down to that simple equation; it is not just the Canadian at all. More likely it is the result in terms of some of the layers of obligations that come, rightly so, with a network licence.
561. Those obligations -- and the way that Baton grew vis-à-vis CanWest's growth factor through their acquisition was really acquiring each step local obligations, carrying them on and then ultimately, with the network obligation being layered on, there is a combination of obligations that really become a total factor.
562. So it is not all just spending, but some of the obligations in terms of even the exhibitions really -- because of the current exhibition requirements we are up to with the Vancouver acquisition and with the network obligation, it is also a factor of margin return in terms of the Canadian programming and really a factor now of putting those assets together, of approving those margins.
563. I don't think it is just a factor of Canadian programming; that's one, but it really relates to the various obligations.
564. MR. FECAN: I think the other thing I just want to chime in is that this particular chart is of course using the figures that we all have available. In our situation, between 1997 and the fiscal 1999 season we are in now, our spending in terms of 7, 8 and 9 has gone up rather dramatically, as evidenced by our schedule and what is actually on the air. That won't show in these numbers for a year or two depending on the timeliness of the reporting systems.
565. I just wanted to put that proviso in there.
566. COMMISSIONER McKENDRY: When I look at two companies' PBITs and they are different, and in this case it is CanWest and the CTV Group -- I take it from your submission and what you are telling me today there is one reason that explains your lower PBIT, and that's that CanWest spends less on Canadian programming than you do.
567. It struck me that, well, conceivably there could be other factors that explain your lower PBIT. I don't know what they are, but the things I jotted down were differences in year ends, non-recurring charges related to the CTV acquisition, such as severance costs, the impact of results from specialty channels that the company owns -- for example, I would guess that CTV Sportsnet has incurred acquisition costs and some of those may be flowed through to your financial statements, program acquisition costs.
568. Is the difference between your two PBITs just because you spend more than CanWest does?
569. MR. FECAN: Before I get to Robin again, I think it is important to note that in fiscal 1997 I don't believe we had any specialty operations, certainly none booked. The licences may have been awarded, but I don't think we actually had any of those kinds of operations at that time.
570. Of course, the most significant last two rounds of restructuring, the CTV one and the one that took place when you approved Electrohome and Baton, I believe those took place post-fiscal 1997 as well. But Robin is the truth squad on the numbers, so I will put you on to Robin.
571. MR. FILLINGHAM: And I think I did state last time that it was not just the spending on Canadian programming.
572. As Ivan points out very correctly, fiscal 1997 results for Baton, the compilation that we have seen is really -- and I think on public records -- a compilation of stations that weren't under our ownership either. So what you are dealing with in fiscal 1997 is Baton strictly owning at that time the stations within Ontario; the stations in Saskatchewan and Calgary were being operated under a strategic alliance arrangement, so that you really had a real mixture of what Baton is currently.
573. In those situations -- and part of the reason for profitability for Baton and part of the reason much behind the growth of the various transactions that got us to where we were was that, even our non-Canadian expenditures and the Canadian national expenditures we were making at the time were really being amortized over a very small base, so that within the Baton numbers you are dealing with national costs being amortized over a very small base.
574. You really don't get a true picture of Baton on a national scale, really, until fiscal 1999, because 1998 itself was really part and parcel of different companies.
575. So, in truth, there are a lot of different reasons why the PBITs would be different, growth as I think I have mentioned before being a big part of it, but definitely not just the Canadian expenditure requirement, although again dealing with this on a national scale I think will show up in terms of the difference of the various obligations inherent in the two companies.
576. COMMISSIONER McKENDRY: Thank you.
577. In order to come to the conclusions that I think you want us to come to with respect to the comparison you have done, do we need to sort these items out, because I take it the bottom line of your comparison is, "there is a problem here because we are earning less than they are". So if that in fact is your bottom line, you want us to act in some way because your bottom line is less than theirs is and you are saying that's because you spend more on Canadian programming than they do, but we can agree there are other factors that are flowing into that PBIT comparison.
578. Do we need to have more insight into those factors in a numerical way?
579. MR. FECAN: We will take some advice on that, but I would kind of like to just try to shift the perspective a touch.
580. The past is the past. We are not going to go into the past and change anything. What we are here to talk about is, given there are three station groups, all who exceed the 70 per cent reach of English Canada benchmark, we feel that, going forward, there needs to be some kind of equivalence.
581. I don't know how much is really served by dwelling too much on what has happened in the past. I think we have tried to explain as best we could with the numbers that we had what happened a few years ago; I think it is also valid to look at our fall-winter prime time schedule and see six and a half hours of 7, 8 and 9 in prime time and compare it to the other two station groups and count up, well, if we all reach over 70 per cent, what are they doing on that kind of benchmark? I think that's also perhaps a more timely way because it deals with what is happening right now.
582. Ultimately, I think our point here is that, going forward, we think it is important there is some equivalence between the three station groups.
583. COMMISSIONER McKENDRY: I take your point, but I think you can understand why I might be asking a few questions about this because you have gone through the trouble of hiring an outside expert to do a study which you have put in front of us and are saying, "There is a problem here", and we presumably need to do something about it. So that's why we are asking these questions, because you have asked us to take a look at this.
584. I take your point now that you are saying, "Let's not worry about what went on in the past, let's worry about what is going on in the future, and your matrix proposal, I think in your view, would ensure that everybody or the station groups were making an equitable contribution.
585. MR. FECAN: Correct.
586. COMMISSIONER McKENDRY: I had another question about the comparison, but maybe I shouldn't ask it -- but I can't resist, because I think it is relevant and might be relevant to the kinds of decisions you would like us to think about if we adopted your matrix proposal.
587. The comparison in programming, the question is, is this an apples-to-apples comparison? For example, do CanWest's expenditures relate primarily to under-represented, distinctively Canadian drama, where the company may lose money on those productions? In other words, is a straight dollar-for-dollar comparison fair unless one looks at the type, the cultural value of the programs being exhibited?
588. In light of what you just said, you may want to frame your response in a more general way, but presumably this is an issue that we would confront in other situations. Can you do straight dollar-for-dollar comparisons without understanding the nature of the programming that underlines those comparisons and how profitable that particular programming is?
589. MR. COWIE: I think, Commissioner McKendry, we can't dwell on a historical basis on just the under-served area. There are infrastructure differences that are quite pronounced between the two operating groups, particularly in the province of Ontario, and that's why we have, in part, asked the Commission to consider as part of the matrix, should the matrix be acceptable to you, the obligations to local services, because those drive infrastructure costs that create differences in the companies.
590. But ongoing, what we are asking you to consider is the relative obligations of the station groups to under-served programming production, to 10 out of 10 indigenous Canadian programming, and as part of that keeping in mind other obligations that these groups will make to children's programming and to provision of local services. The Armstrong Study in fact pointed out some of those differences between the major groups, and what we are trying to do through the matrix is to deal with all of those issues, and coming out the other side of that should be an equitable contribution that's based on presentations of each of the groups and dealing with the Commission and presenting their proposed obligations at that time.
591. COMMISSIONER McKENDRY: Thank you.
592. Madam Chair, I have four more areas I wanted to talk about; I estimate it would take about half an hour. The CTV group has been sitting there for quite a while.
593. I am quite happy to proceed -- and I am sure my fellow commissioners may have questions. I am happy to proceed. I just was wondering if the panel might like a break for a while or keep going.
594. THE CHAIRPERSON: If we don't take a break now, the Panel Members may not have questions, so we will take a break now.
595. So we will take our lunch break now, and let's come back at 1:30, so that you don't miss us for too long.

     --- Recess at / Suspension à 1222

     --- Upon resuming at / Reprise à 1330

596. THE CHAIRPERSON: Welcome back.
597. Madam Secretary, please.
598. MS SANTERRE: I think we will proceed with the second step of our questions.
599. Mr. McKendry?
600. COMMISSIONER McKENDRY: Thank you very much.
601. Welcome back. I hope you had an enjoyable lunch hour.
602. I want to talk to you about digital television for a while and I am going to start by reading you a statement by Dr. J.A. Flaherty, Senior Vice-President, Technology, at CDS. That statement was taken from the submission by the North American National Broadcaster's Association in this proceeding. He said:

     "Digital technology will radically change television's means of communications, its quality, its flexibility, the conduct of the business, the scope and effectiveness of the service and every aspect of the medium." (As read)

603. That's the end of the quote.
604. I am wondering if that's a statement that you agree with given your significant role here in Canada and our broadcasting system.
605. MR. FECAN: I think those who work in the technology field are correct in being able to say that digital will change all of these things. I'm not sure anybody quite knows what they will change it to or where it goes. Television was invented in the 1930s, but it took 20 more years after that for people to really figure out what to do with it. So, I think the opportunity for change certainly is there with digital, particularly digital, more so than the narrower definition that sometimes we talk about HDTV, but I am not quite sure where it ultimately goes.
606. I think what it promises is even more choice. Rooting back to our philosophical position in the beginning, which is we are not going to turn the clock back on choice, there is going to be more choice, digital is one way that there might become more choice, but where it goes, I think that's where a lot of the fun and exciting times in the next few years are going to be, figuring out where it goes and then trying to see how you can harness that.
607. COMMISSIONER McKENDRY: In terms of more choice, one of the concerns that has been brought to our attention is that there will be digital television available over the air to some Canadians at least in major urban centres in November of this year. So, it's a change that in fact we do know something about because in the U.S. it seems to be progressing rapidly. Is this introduction of it into the marketplace very soon in the United States and its spillover into Canada something that's a concern for you?
608. MR. FECAN: I am going to ask Bruce to answer, but I just want to set it up a bit. When I have been talking about digital, I am talking about the change from analog technology to digital technology. As a company, we have been undergoing that change for, I guess, probably about a year and a half. Our Vancouver station is all digital, all of our specialty channels are now all digital, our CTV master control room and the master control room serving most of our southern Ontario stations are now digital and because they are digital, they are ready with some modifications for HDTV. HDTV, of course, is the letterbox aspect ratio.
609. There will, of course, be some experimental broadcasting of HDTV -- I think Detroit in particular and Seattle are the two border markets that come closest to ours, I don't think there is any plan for the near future in Buffalo -- and there is very little produced in HDTV. The obvious, of course, is feature films shot in 35 millimetre already of the aspect ratio and the quality, the pixels, the lines, that HDTV promises.
610. I know that at least one of the U.S. satellite providers, Direct, will be doing some experimental broadcasting of features in that digital format, but, of course, that high definition format requires a huge amount of bandwidth and I don't think any cable system in North America is yet ready to accommodate that kind of bandwidth. It's kind of like a cascade. You need the digital boxes to accommodate the bandwidth that HDTV requires.
611. We have looked at the specific question you have asked, though, and that's what I would ask Bruce to address.
612. COMMISSIONER McKENDRY: Could I just interrupt to clarify that my question doesn't really refer to HDTV, it refers to the digital transmission of signals that we are now receiving on an analog basis. That's my understanding, apart from the DirecTV service, which is providing, as I understand it, two channels of high definition television since the beginning of October. I am referring to the digital transmission of existing analog services, which we are led to understand from a consumer point of view is a big plus because the quality of the picture is much more superior than it is to analog.
613. So, that's what my question relates to and that's what I understand will be coming available November 1st from some border stations and by the end of next year widely available, including from PBS stations.
614. MR. COWIE: I think, to begin with, the fairest answer in terms of a critical path to where we want to get to with both digital and high definition is widely unknown. The only thing we do know is that the FCC has required certain major markets in the U.S. to be into some form of digital transmission by the fall of this year.
615. As I understand it, the only one that directly touches Canada is Detroit and how quickly the others will fold in in the United States and the other top 20 or 30 markets is also an unknown. So, our path is somewhat connected to that in terms of when we get our transmitters in place and begin to telecast in digital in this country and in high definition.
616. The common thinking currently is somewhere in the five to seven-year time frame. It likely will be in three tranches. The first is transmitters and the attendant towers that the transmitters may need for additional antennas and so on. So, everyone, I think, has had a good look at that in terms of what the costs will be, but there still is not a determined roll-out of that.
617. From a digital point of view, in our company every time we change equipment we are moving from analog to digital, wherever that opportunity presents itself, starting with our station in Vancouver, which was the first fully digital private station in Canada, the make-over of the CFTO-CTV headquarters at Agincourt in Ontario. It's largely digital now in terms of both conventional signals now and specialty signals and we will continue that as we go along.
618. The second phase of that when more programming becomes available -- the transmitter part is strictly a pass-through of whatever signals we can get to those transmitters that are in HDTV format. The second phase is a simple master control in each of our stations across the country -- there will be 20 of them -- where the input of local programming done in digital format can be put into the system.
619. The third phase then is a complete digitalization of our studios, program production facilities, editing bays and all of that. That's tranche number three. So, somewhere within that critical time period of five to seven years is where we currently think this is going to roll out, but the first will be transmitters to pick up whatever digital is available to us.
620. MR. FECAN: We should clarify that our specialty channels -- the programs that we receive largely are digital, the master control is digital. If the distributor, in the case of ExpressVu or Star Choice, have the capability -- I think they are digital -- then the consumer gets them that way, assuming they have the capacity to -- their TV sets are of that quality. So, that's happening, I think, already on the specialty side. When they are delivered by cable, cable doesn't have digital delivery systems, then it just gets bumped down to analog.
621. So, I think we may have misinterpreted your question and went to the HDTV thing. You were talking about more particularly digital transmission of existing signals and the existing aspect ratio. It's really, in large part, just our transmitters that aren't there and as they get phased out, as they reach the end of their useful life -- and most of them are pretty close to that -- everything we buy now is digital. There is no point in buying an analog piece.
622. COMMISSIONER McKENDRY: So, essentially, the piece of the pie you are missing is the digital transmitters?
623. MR. COWIE: Yes.
624. MR. FECAN: Yes.
625. COMMISSIONER McKENDRY: And you don't anticipate that viewers will be receiving digital signals from the CTV group for five years?
626. MR. FECAN: I think Bruce was referring to digital transmitters capable of broadcasting HDTV. As we phase in our transmitters -- and I think they are on a pretty normal phase-in period -- some of the larger ones, particularly Toronto, are due to be looked at in the next year or two.
627. Having said that, the majority of our audience on conventional picks us off cable. So, we can broadcast digital, but that doesn't mean the majority of our consumers will receive it in a digital format, although they do now in specialty I think if they are on one of the Canadian DBS systems.
628. COMMISSIONER McKENDRY: Digital is typically presented to us as a cost of doing business and a significant cost. I think the number in your submission refers to the CAB number of $535 million for the industry over the next five to ten years.
629. When we talked to the Chair of the Canadian Digital Television organization, he made the point to us that we should go easy on any incremental Canadian content requirements that would lead to more expenditures because the broadcasting industry was faced with this huge bill for digital television. So, that's the cost side of things. What I am wondering about is: Is there a revenue side that we need to be sensitive to here at the Commission?
630. I asked Mr. Miller from the CAB about that and he set out three business opportunities. I would like to run those by you and get your view from the perspective of a broadcaster as to whether or not, in your business planning, you are giving much weight to these revenue opportunities. I will just quote from what he said. This is from page 203 of the transcript, Volume 1.

     "Number one is in the data area because digital gives us more capability to provide data services, and that could lead us into non-traditional businesses such as paging or even telecommunications. Second is in a sense enhanced programming or secondary programming streams. Obviously, digital television gives us the potential to not only have HDTV but also second channels, which could be more windows and possibly subscription revenues. And the third broad opportunity comes from interactivity, both in terms of providing interactivity in programming and downloading additional information, but also in particular the value added to the advertiser as you are able to focus very specifically on the advertiser's interests and target much more precisely particular advertising messages to particular audiences and getting the feedback in terms of direct marketing."

631. From your business planning point of view, how much weight do you give to these revenue opportunities associated with digital?
632. MR. COWIE: We have thought about it. We have also thought about the multiples of it against the number of new transmitters that will be in place in that time period and play that back against the size of the marketplace and wonder what real opportunities may exist there, but certainly all broadcasters will look at those opportunities. It's a matter of very high level of debate in the United States right now as to how they can make those additional opportunities work. In fact I am told that some of them even hold out the opportunity of being picked up as specialty services on cable systems off a digital transmitter.
633. So, we know those opportunities are there. Quite frankly, we have not costed them nor have we laid against them opportunity, but it will be part of our planning as we go forward.
634. MR. FECAN: But from listening to the things that you quote Mr. Miller as saying, I think they all imply the wider bandwidth made possible through HDTV channels, whether they are utilized as HDTV channels or, as in the States, some of the broadcasters are choosing to use that bandwidth to mount four or five different services and the other kinds of telecommunications services you describe. So, I am wondering -- I don't know, I didn't write his bit -- whether he was really thinking about the additional bandwidth created by HDTV-sized channels.
635. COMMISSIONER McKENDRY: Thank you.
636. In any event, you could do what you are setting out to do in your group matrix if we decided to go down that road and still undertake the digital expenditures that you have talked about here?
637. MR. FECAN: Digital for us is part of the normal phase-in and changing of equipment. As I mentioned, every time we buy something new you would have to really examine your head to buy analog.
638. I think when you are going to make the jump to HDTV, that's going to require, I think, from all parts of the system, the producers and the broadcasters, a lot of thinking about how we are going to make that particular jump because you are dealing with a bunch of libraries that aren't in that format, you are dealing with a whole bunch of other issues that probably are the worthy subject of another hearing.
639. COMMISSIONER McKENDRY: Let me now switch to ask you for a few minutes about local programming. Concerns about the actual or possible decline of local programming have surfaced in this proceeding from a number of people who have appeared before us. I know you are making or proposing to make local news part of your priority programming and putting it on the matrix, which would obviously lead station groups and others to focus on it, but I am wondering if there are any other measures that you have in mind that the Commission could use to implement or to enhance local programming in Canada.
640. MR. COWIE: I think what will flow from the matrix that we are presenting today is that we have historically had as a company a twin pillar vision in terms of local programming and having the critical mass to build national programs of interest to Canadians. So, we are continually looking for ways to continue to provide local service at the highest level that's possible.
641. So, in that we have made some changes and I prefer to describe those as, rather than less, different in terms of serving local markets. Susanne Boyce may wish to describe some of that to you. The key issue here is for us to not lose focus, that the local stations are where the people connect with the programs we make even though they are national programs. They play back to us what we are doing right and what we are doing wrong on a regular basis. So, they are a vital part of the broadcasting industry in this country and our matrix and our plans going forward are to preserve that just as long and as best we can.
642. MS BOYCE: Just to pick up on what Bruce was saying, we do have finite resources, we recognize that. Also there is a kind of difference between sometimes perception and reality. We are doing, actually, 16 hours over our COLs in terms of local original news programming.
643. One of the things that we have known and also is in our COMPAS Study is that Canadians like to see Canadians from other parts of the country. So, one of our goals is to take local programming and also provide it across the system. So, technically, you can call it a national program.
644. I can cite three off the top in Vancouver, our newest station. Vicki Gabereau, which is a national program, but, by nature of her guests and the people who appear on her program, that is definitely of local character (a) because of Vicki and also because there is a sense of place. It is very much a Vancouver-based or B.C.-based program. That feedback has been quite wonderfully given or received because a lot of times people actually think I am Vicki and I don't dissuade them.
645. Also, there is Robert Mason Lee, a very smart, interesting Rhodes scholar, who belongs on, if we are able to launch it, talk television and will actually get a prime time spot. No, I'm kidding. Robert Mason Lee also -- by the nature of his guests, you will see guests that you would not see necessarily appearing on a similar type program out of Ottawa, Toronto or Halifax.
646. Then the third is a purely local program called "First Story". It is an in-house production, but Jeff Bayer, the producer, came to me when we were setting up the station and we hired an aboriginal camera person and an aboriginal host. It was not set up to be what often people refer to as kind of ghetto -- we didn't want to ghettoize that program at all. He had a real passion for the show. As a result of that, we ran that on our O&O stations nationally and are repeating that this summer or, rather, this fall.

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647. Candace Collison, who is the first host of the program, has moved -- initially moved on to local news and became the web person on CIVT's news program, and has since, in the last three months, left, unfortunately, for San Francisco, but I hope we will get her back.
648. We use local in different ways.
649. Another synergy we have is our comedy hour specialty channels, and Tom Green, who is considered a local comic -- was -- is now known across the system.
650. So these are kind of different ways that we approach local reflection another way.
651. MR. COWIE: Just to add to that, the way we are structured has a great deal to do with how local reflection is supported. Local reflection is not only news. We have had no lessening of our interest in the needs of the communities in any that we serve in this country. We continue to support those things that community groups need to support on an ongoing basis.
652. We continue to produce regional programming in Saskatchewan. Agricultural shows are produced there, as are First Nation programs, and so on. Add to that two very active morning shows, breakfast shows, one on each coast, where parades of talent, interest groups, interesting people, are seen every day, are all part of the reflection of the communities we serve.
653. And to a point of discipline within our own company, that even national inventives that come forward from time to time, we require of ourselves that our program managers in each of those markets and station managers have input into what the ultimate outcome of those program line-ups will be.
654. That is a discipline we have imposed on ourselves because all of the stories don't originate on the 401 in Toronto. So we make sure that we are receiving input from across the country.
655. COMMISSIONER McKENDRY: A previous intervenor mentioned Dudley the dragon when they were talking to us, and then all of a sudden Dudley came in. When you mentioned Tom Green, you had me a little concerned that you were going to have Tom Green come in.
656. I was taken by the statistic in the COMPAS study that you referred to under the reasons to support -- this is on page 9 -- the one that you referred to reasons to support the Canadian content rule, and the number one reason given was so Canadians could see the rest of the country, which is the point you just made. In fact, 88 per cent of the respondents agreed with that a lot or somewhat.
657. Given the significance of that view, and given the obvious importance it has to you as a broadcaster, I am a bit surprised that that isn't explicitly in your matrix as something that we would take into account in a formal way.
658. MR. FECAN: It is funny because in our minds it is, because that is what we mean by indigenous. It is part of -- it is so central to our definition, it is so central to what we believe in, that maybe we just kind of made that assumption for everyone else, and that is a very good observation. But, for us, it is of the essence.
659. COMMISSIONER McKENDRY: Is it a fair assumption for everybody else? Is it something that you think the broadcasting system is in fact adequately taking into account or do we need to make it explicit?
660. MR. FECAN: I would be loathe to suggest to you how you should view such a -- our matrix and the kinds of things that you feel you ought to put in it. If it is deficient in places, then obviously you should add to it.
661. It is not explicit, from our point of view, because it is implicit in everything we do. But I think you are best in the position to judge whether that comes across in the matrix or whether some additional prescription is necessary.
662. COMMISSIONER McKENDRY: I want to end my questions by asking you about the position put forward by the Canadian Association of Broadcasters so I can understand how your proposals as a broadcaster fits into the industry position that was set out for the system.
663. As you know, the Canadian Association of Broadcasters has proposed that the Commission set a national audience or viewership goal for the broadcasting system in consultation with the industry. CAB states that each licensee should contribute in its own way toward realization of the audience goal and that licensees should be required to demonstrate how their program plans would contribute to the audience goal.
664. First of all, do you agree with this approach?
665. MR. FECAN: The CAB is an organization that represents all private broadcasters and, as such, has to find a balance point that covers a whole wide range of things.
666. We agree with the general philosophy that audience is good and that we should be putting policies into place to try and drive quality and drive more audience.
667. I guess our way of advancing the discussion is to -- is with our proposal, our matrix proposal that deals with the station groups over 70 per cent of English Canada national reach. So that is -- we are kind of trying to put a bit more structure in and a bit more focus in to deal with the particular situation.
668. Bruce, you may...
669. MR. COWIE: I think inside the matrix you will see that we are attempting to promote more underserved programming to be produced in total numbers, that is the seven hours per week. The special incentive for 10 out of 10 is also going to the same point, more indigenous Canadian programming, higher quality, quality that attracts audiences.
670. Thirdly, making sure that we can get to the next step, which is less repeats, so that the brand has a longer -- higher quality life and is not diminished by three or four repeats in a year.
671. So, all of that is compatible with the CAB position on audience gathering because the other part of this, in responding to the Chair's point about profitability, is we do believe that higher quality programs will drive higher audiences, and the results of that allows us to reinvest in the full circle.
672. So we have no distance between us in terms of the principle of what they talk about.
673. COMMISSIONER McKENDRY: In terms of the national audience or viewership goal that they believe should be established, is that something that should then be added to the matrix, the goal?
674. MR. COWIE: We don't think so. I think they have made a fair offer on behalf of the private industry to meet again with the Commission at some point in time and to collectively, in a round table session or whatever forum you would prefer, to have a look at how we are doing.
675. But, to try to attach that to each individual licence or to station groups and so on, we agree with you, we are not quite sure how you would do that.
676. We believe that the contribution made by this matrix in terms of driving towards improved audiences will be measurable at some point in time. But we are more interested in the content and doing better Canadian programs that will connect with Canadian audiences and therein we think is the secret for the future.
677. COMMISSIONER McKENDRY: Thank you very much for answering my questions. Those are my questions for you.
678. Thank you, Madam Chair.
679. THE CHAIRPERSON: Commissioner Cardozo.
680. COMMISSIONER CARDOZO: Thank you, Madam Chair.
681. I would just like to follow up on one of the issues that you have discussed, that Commissioner McKendry has talked to you about, and it is local programming. As you note in your written submission, on page 34:

     "The Commission has heard from citizens across the country in its Town Halls how strongly people feel about local news."

682. And in your oral statement today, in your matrix, and if I can call this your revolutionary manifesto, you refer to the importance of local news again. But in addition to news we also heard entertainment and drama programming which, obviously, is an expensive item.
683. I am just trying to get a clear fix, a, on what you do currently, and any ideas you have about the future, because as you have said, Mr. Fecan, we don't have to dwell on the past; this is not a licensing hearing, so we can talk more about the future.
684. I am looking at conventional broadcasters, specialty services and the community channel, the cable channel, which a lot of people see as important, and I would like your ideas on that.
685. Ms Boyce, you have mentioned some of the things that VTV does, for example, "Gabereau" and "On The Edge, "First Story" and Tom Green on comedy.
686. You are doing all this stuff and during this period we are hearing from Canadians that they are not satisfied. I think there is merit to what you are doing, but how does one respond to that? What other kinds of things can we do?
687. I just wonder whether it is possible in this red and white chart of the red and white boxes -- I must say whoever wrote this up, your program, has done very well in this hearing because everybody has been using it. I am wondering if there could be a box in there that said "local" and your stations across the country could make a local non-news program; or is that just way too expensive to do?
688. MS BOYCE: We do that now. When I was referring to Vicki Gabereau's show and Robert Mason Lee, Double Ex is another example and "First Story", they are, except for "First Story", they are actually national shows done out of Vancouver, correct, but local. Also, on VTV we do 31 hours of original programming. Included in that is a variety program called "Applause"; a 26-part series called "Pacific Profiles" which is a really interesting half hour series, highlighting two British Columbians from, you know, a variety of backgrounds, age, gender, et cetera. It is a really neat little show. It also ran in the summer nationally.
689. So we produce -- and "Breakfast Show" is done locally just for VTV.
690. COMMISSIONER CARDOZO: And the "Breakfast Show", would you call it news and current affairs?
691. MS BOYCE: You can call it news and current affairs. It is news and information programming.
692. MR. FECAN: They sit on styrofoam toast and a styrofoam egg. It might be a stretch to call it news.
693. MS BOYCE: Let's put it this way, news people don't call it news, but it is news.
694. In Halifax, as well, we do a very popular breakfast show.
695. We have "Regional Contact" that is still on in Ottawa.
696. I think what happens is, again, you know when programs get cancelled and suddenly there is this sense that you know 4,000 things have happened. I still in fact was -- when I was at the CBC in the last year in 1992, I was held accountable and responsible for cancelling "Don Messer's Jubilee" which, of course, was 30 years before, but people still care about things that matter to them.
697. So, I think when -- there will never be enough. I am probably not clear on this but --
698. COMMISSIONER CARDOZO: Are you reluctant to get into local programming because when it finally ends people will squeal about it for years?
699. MS BOYCE: It doesn't end; it changes. Again, speaking to a former place, after the CBC budget cuts, one of the -- what was one of their funniest shows? "This Hour has 22 Minutes". Now, the background of that show was that it was a local program, called "Codco" in Newfoundland, and then two of those people stayed together and that troop worked very hard and then moved and became "This Hour has 22 Minutes".
700. So creativity doesn't stop under the worst circumstances and those cuts were pretty horrific.
701. We have had cuts. So I don't think of -- status quo, often, as much as we like to cling to it, doesn't always -- it just -- what am I trying to say? Change happens and I see local changing, I don't think it will ever go away, if we believe in it. It is just different in different places.
702. MR. FECAN: I think Susanne has said it best, but just to kind of encapsulate it, local-to-local is important, but providing national platforms for local is also really important. I think you need the mix.
703. I think it is also -- I think it is part of the responsibility to -- particularly outside of an urban centre like Toronto -- have almost disproportionate efforts in development of regional talent because, you know, we have all in different guises heard about the $500 or $1,000 or $2,000 cup of coffee.
704. So we very seriously take the idea of having a regional office out west with people that travel throughout those provinces, out east in the Maritimes, to work with the creative people directly on the ground, to try and get their scripts, their series proposals to a level where it can go on a national stage.
705. So I think there is like a whole range of things that are necessary, and change does happen. You try and focus it and you try and provide the platforms where the creative people can do things. That is part of our indigenous philosophy of having some sort of special meaning to the audience. It is part of what we took heart when we looked at the COMPAS thing and people talked about how important it was for them to see the rest of the country and understand people in the rest of the country.
706. So, I don't think we have got, you know, a three-point prescription. There is a lot of different things that we do, including in every community assessing what the need is. If the need is to do more than just a local newscast, whether it is a farm broadcast in Saskatchewan, or whether it is a "Regional Contact" kind of program in Ottawa, or whether it is something else in Vancouver, a variety show, there we try and find room for that. But, it is also really important to provide the national platforms where these creative people can talk to everyone.
707. You know, when we started VTV we wanted very much to get Robert Mason Lee to appear on the channel. He, I think, wrote for a national newspaper for quite awhile up to then. He felt kind of, I guess, kind of offended with the newspaper's idea that his view would be a view from the west and therefore should only concentrate on western issues. He was a westerner who had views about Ottawa, about Parliament, about all kinds of things. He wanted a national platform so that he as a citizen of this country, who happens to live in Vancouver and has his own unique perspective, can comment on the whole thing and not be ghettoized just to say, "You can only comment on B.C."
708. I think it is really important to note that I think many of the creative people in this country want an opportunity to talk to the whole country. You need the local part there, but you need those national platforms for them as well. I think it is where we have found our best energy and success as we have been trying to make it work within our system.
709. COMMISSIONER CARDOZO: What are the avenues for local programming in specialty channels? I suppose you have got a particularly good model with your SportsNet. That has got four feeds?
710. MR. FECAN: SportsNet, by definition, is regional and it has four feeds: B.C.; the three Prairie provinces; Ontario, with the exception of Ottawa and the Ottawa Valley, and the Ottawa Valley, including Ottawa East to the Maritimes, and to some degree that is a function of how the territories work for some of the teams that we cover.
711. Some 40 per cent, I believe, of that service is different in each part of the country, and that gives us an opportunity to give hometown events or hometown teams, professional and amateur of all kinds of different status, and tailor them to that particular region. So it works very well, I think, in that particular model.
712. In the model of, let's say, the Comedy Channel, for instance, that is a model where, by definition, it is one national service. We have two feeds of it to deal with some of the time sensitivity and the language sensitivity to make sure that it plays at appropriate times across the country.
713. But the Comedy Channel has found local talent, like Tom Green, that we have been able to provide national platforms for within their niche of comedy.
714. Our News Channel is a very heavy consumer of the local journalism that each of our stations in the CTV system produces. It is part of the material that we hope regularly finds its way on to that News Channel. So it is kind of like a feeder system for that.

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715. When we get our talk channel up, we expect that to have a lot of input from across the country because we think that's kind of what that discourse, that channel, is going to be about.
716. So I think specialty has a role but much of the role deals in the niche categories that specialty deals in.
717. COMMISSIONER CARDOZO: What are your thoughts about the community channel on cable? What kind of role can they have, or should they have, in terms of satisfying the need for local programming?
718. MR. FECAN: I think the more the better. I would not be one to argue against local reflection from any sector, but I am conscious of the fact that some of the money that cable could spend to community channels has gone into the Cable Production Fund and so there is an inherent conflict, from my point of view. We, of course, want the resources to be there for the national. It's what we are trying to stake ourselves on.
719. COMMISSIONER CARDOZO: So you are not proposing giving any of that up in favour of local programming.
720. MR. FECAN: No. And we think it's important that our local, particularly small market stations, retain their viability so that if their community channel somehow took revenues out of the market -- not through any mechanisms that exist now, but that might be the next step once the service is provided -- then that also is, I think, putting in jeopardy some of those smaller local stations. So it's a really complicated balancing act, as I know you appreciate, every day.
721. COMMISSIONER CARDOZO: Do you have any thoughts about conditions of licence on this matter?
722. MR. FECAN: On local?
723. COMMISSIONER CARDOZO: Yes.
724. MR. FECAN: Yes. Well, the obvious and the first one is I think you must ensure that local retail advertising revenues are only accessible to those that provide a local television service.
725. COMMISSIONER CARDOZO: And that could be news or drama? In your submissions you talk more about news.
726. MR. FECAN: We focus more on news and information. I do not know, beyond development, how much of the other forms one can do with any real volume given that these dramas also will need public money. And to raise the quality bar to a point, if we kind of just go to one possible outcome, let us say that instead of one of these particular red things there was a local drama slot in that red thing, you are dealing with a pretty big multiplication factor, because instead of doing one episode you will be doing a lot of episodes across the country. You might be able to show some of those to other parts of the region, but it is going to have a real impact on the funding system as well and I think that has to be taken into account.
727. COMMISSIONER CARDOZO: So your number 2 in the matrix can really only support local news?
728. MR. FECAN: Local news, some of what we generally would like to consider as local reflection because often on our stations it's more than local news. Local news is probably the bulk of the quantity, but we, on a station-by-station, community-by-community basis, try and assess whether there are other things that we can do that make sense for the community, what the community's needs are, and we try to put them in place, and they vary from community to community.
729. COMMISSIONER CARDOZO: Okay. Thanks very much.
730. COMMISSIONER PENNEFATHER: Thank you, Madam Chair.
731. Good afternoon. I'd just like to go back to some of the points that we have already discussed here, and there are a couple of clarifications, but a general comment from you.
732. I was struck, in the written submission, by many statement, but there are a couple that I would just like to table on pages 31 and 32. On page 31, you say, middle of the page:

     "When we can achieve a critical mass of audiences to these programs [namely Canadian programs] the advertising community may overcome its reluctance to support them."

733. I think at another point in the submission you call the advertisers your customers.
734. Further down on the same page:

     "The Canadian system simply does not have the resources to generate that kind of critical mass. Therefore our choices matter that much more."

735. Then another statement on the next page:

     "We need to create the financial and psychological room for experimentation, pilots and the occasional failure. We particularly need extensive promotion of Canadian programming..."

736. That paints quite a challenging picture and I was wondering if you could focus back on the station group matrix that you presented today and just clarify for me how this matrix will meet these challenges more than the current requirements, the current system. This relates to Commissioner McKendry's last question, obviously, about more audiences, but also more resources to Canadian programming.
737. What is it in this matrix that will make a difference?
738. MR. FECAN: Well, it will allow us to concentrate, as a group -- and others may choose to do different things -- but it will allow us to concentrate on more originals and more quality. We think that will make a difference with audience and we think that will make the programs more saleable because they will have a demonstrated track record of that audience.
739. The picture we were trying to paint in this thing in the submission was that because we do not do pilots generally -- I mean sometimes we do but generally the system cannot afford it -- when it comes time for advertisers to buy programs, all they see is the name of a show in a square. We can tell them as much as we want about them, but they cannot look at the pilot, they cannot judge for themselves how it will do, so there is a bit of a reluctance there.
740. I think if you can demonstrate a show regularly does a certain kind of rating, then they overcome their reluctance to it being there and paying what the fair market rate is for it. But when as a group we cannot say that that show will be there because we don't know if the funding will there, we are not sure how many will be made, all of these things are not factors to give advertisers a great deal of confidence that what they buy will be there so they have to discount in some way in their minds until you can prove. And even when you can prove it, I think we tried to describe a situation this morning that because the fund borrowed from next year for this year's problem we do not even know which of our indigenous shows, assuming they are all hits, could possibly return.
741. So there are a lot of moving pieces here we have to try and sync up. But it is our belief that if as a group we are allowed to maybe concentrate on more originals, fewer repeats, lose a little bit of quantity in order to do that as this matrix allows, we think we will drive audiences up for those shows. That's our fundamental proposition here.
742. COMMISSIONER PENNEFATHER: So the key, as I understand it then, is the flexibility within the seven-hour period to do perhaps less but of higher quality and, as our earlier discussion put forward, that means more expensive shows with greater production values? Am I over simplifying?
743. MR. FECAN: And more originals. I cannot stress the importance of that. And with that we agree with the producers and the directors. We just don't agree on where to find the money to do it.
744. We think when you ask an audience to watch a show, a particular episode, four times in the course of the year, it's not surprising that they might be getting bored by this. The typical pattern that they are used to is one original and one repeat, and the only time an American show does not follow that pattern is when it fails and it gets cancelled.
745. Other countries have other systems, but our English Canadian audiences have grown up watching that particular system so that's the benchmarking, and I think we have to have more originals there. What we are trying to do is address ways of paying for that.
746. COMMISSIONER PENNEFATHER: So you feel you have addressed the chair's three points; more original Canadian programming, increased quality, and increased profitability. When you say "more original Canadian programming", in effect, and maybe a little simplistically, the number of red boxes in prime time may be reduced?
747. MR. FECAN: May be reduced, but when we run the numbers we think that the maximum it might be reduced by is one, and that is -- I think Bill did the calculation -- if we have five or six indigenous series of 22 episodes each, which is highly unlikely in this particular public funding environment. So I think we protected the downside risk from an abuse scenario.
748. But we are convinced that more indigenous, more original, gives us a better shot at more audience. We are also convinced that when Atlantis-Alliance or Linda Schuyler with Epitome, or with any of these companies, go to the market, the market buys in quantities of 22 or 26. They do not buy in quantities of 13. Often it's much harder to sell 13 of anything to the international market because that's not the standard of trade. So I suspect maybe "Cold Squad" will have more sales this year because the back half of the order was there in year two. So I think it will give producers an opportunity to have more timely profits, and possibly larger ones, but certainly more timely.
749. COMMISSIONER PENNEFATHER: That's helping understand the goal of this, which at one point I thought was just equitable contribution, but I was trying to see it from the point of those three specific requirements and then how these various elements play into that.
750. There is one other question in that sense that concerned me, and I have probably got the wrong angle on this. When we included the study on the independent production community, and the conclusion of that study is that there is no evident need for further policy and regulatory initiatives to rebalance the Canadian broadcasting system in favour of the Canadian independent production industry, and then we look at the matrix, if we wanted to be cynical we could assume that what you are saying here is that all these regulatory initiatives have nothing to do with the independent production industry.
751. What is the role of the independent production industry in this matrix? How will it support, or is it not intended to support, the independent production industry?
752. MR. FECAN: It's intended to support the creative producer, and that's why I tried to break it out in our oral. It's intended to support the people that actually work on getting indigenous programming made. I think it is supportive of those who do industrial as well but I think it's biased a little towards the indigenous.
753. Our point in the study was to show that the large companies are large enough to probably not worry about their financial viability. I don't mean to speak for them. I am sure they have legitimate and real concerns, but it seems to me that public policy objective set up 10, 12, 15 years ago really did not focus on the big financial studios, distribution houses, but they focused more on how can we get different voices seen and heard on our national airways, and that is what we are trying to give a lift to.
754. If you look at our matrix in connection with our statement that as a broadcaster we don't want to take away from producers any money currently allocated to them by Telefilm, I think is a recognition that we see a very important role for independent production and we have no interest in taking away public money that is earmarked for those particular creative producers. We think it is theirs and we have no contest with that. We think that's a good thing. So again, of our six and a half hours of largely dramatic content -- to be fair it's 7, 8 and 9 on average in our prime time schedule between seven and 11, none of it is in-house. It's all independent.
755. COMMISSIONER PENNEFATHER: Thanks.
756. Question to Mr. Mustos. You brought up the issue of the first run and your concern about the proposals from CFPTA and the directors' guild, and I want to be sure I understand. In fact, I did not understand what you were saying about your concern about their proposals.
757. I guess the simplest thing to say is what definition are you using of "first run"?
758. MR. MUSTOS: The definition that we are using is the definition that relates to the 150 per cent drama credit, which is unlimited plays for two years. So we are sort of superimposing that definition into our matrix.
759. COMMISSIONER PENNEFATHER: I believe that is the 1988-197 definition; is that what it is?
760. MS ROBINSON: That is in Public Notice 1984-94, and what Mr. Mustos is saying is the suggestion would be that we take the definition of the number of showings per minute under the 150 credits set out in that Public Notice and use that within the matrix. So that would permit, under the seven hours that we have set out under point 3 of the matrix, each showing of a program occurring within a two-year period from the date of the first showing. That's the definition that we are suggesting to the Commission.
761. COMMISSIONER PENNEFATHER: I thought at first "one" meant one showing.
762. MS ROBINSON: There is a Public Notice, which is the one you referred to, that deals with first run programming, and in that Public Notice you are quite right, it deals with one showing. However, it does say "subject to any specific condition of licence", and it would be our view that the matrix would be implemented by way of a condition of licence on the three station groups, and it's the definition that I just stated, each showing of a program occurring within a two-year period from the date of the first showing, that we are suggesting is the definition that you include under point 3 of the matrix.
763. COMMISSIONER PENNEFATHER: Thank you.
764. Thank you Madam Chair.
765. THE CHAIRPERSON: Commissioner Wilson.
766. COMMISSIONER WILSON: Just two or three quick questions. You stated that you are not seeking access to the equity investment program and I am just wondering why this is not an issue for you. It seems to be an issue for a number of other broadcasters.
767. MR. FECAN: Look, ultimately the world appears to be going the way of vertical integration, but that did not seem to be the appropriate time or place to have that discussion from our point of view. We did not want to be in a position to take something away, or be perceived to take something away, from the creators in this country. And so that's why we stated that. We felt that we could achieve what we wanted to achieve, which is the ability to invest more money and have some hope of returning that money if we can access or have a shot at getting world-wide distribution for projects that Telefilm might finance that we broadcast. Because that does not come out of the pocket of the producer, that becomes an open market bid and the most money gets it, and presumably that will either give, (a) the producer more money, or (b) lessen the producer's dependence on the public funds for that particular project.
768. So we thought that that was a way where we could get at what we wanted to get at without taking a nickel away from the producer. That's why we constructed it in that particular way. I can understand some broadcasters and some producers feeling that vertical integration is maybe closer at hand but I think that discussion is best to be had when that kind of thing ever happens.
769. COMMISSIONER WILSON: And what about the suggestion that, if you are allowed distribution rights, that what you are really doing is you are sharing in the revenues of a program that's being produced, by and large, by taxpayers' money; you are going to make money off a production that you have not really paid for?
770. MR. FECAN: Well neither has the distributor. You see, the distributor generally puts up a guarantee against world revenues. So an indigenous program will have three basic sources of financing; the domestic licence fee, public funds, and a foreign distribution guarantee, and I am not counting the tax credits or other kinds of things.

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771. Foreign distribution guarantee is a commercial transaction; it is not a public policy transaction, it is an entity, and we note in many cases a related entity to the production company putting up money to cover, to guarantee what something might make in the rest of the world. Generally, when you look at how that money comes back, the first 50 per cent is commission and expenses and goes to that distributor.
772. We are saying that in one situation that we know of, the project "Flesh and Blood", no Canadian distributor would put up enough of a guarantee to cause this project to happen. Between our licence fees and the fund, there was a shortfall of money. Telefilm currently says that, in that situation, you can open it up to foreign bidding, and Pearson, a multinational media company based in London and associated with Michael Prupas, who was in front of you yesterday -- we are very grateful to them because they came in with a distribution guarantee that topped what any Canadian would do.
773. Our observation is that it would be nice if we could have come up with that kind of money so that the rights and the money stayed in Canadian control. At the moment, we can't, and we just think that that's a disincentive that no longer serves any public policy purpose.
774. It is entirely within Telefilm's ability to change that, and I was very pleased in reading the transcript when Telefilm was up to see that they are open to thinking about changing that.
775. COMMISSIONER WILSON: I just have one final question, and that's with respect to a suggestion that was made to us yesterday by the Specialty and Premium Television Association. I don't know if you are familiar with the terminology they use, but they called the spending requirement which is linked to a percentage of revenues the virtuous circle -- were you here when they talked about this -- as opposed to the vicious circle. They say the virtuous circle is where more revenues drive better Canadian programs, which drive higher viewership and subscribers, which in turn results in higher revenues which allow us to invest in even better Canadian programming.
776. I am just wondering -- that's the argument that they use for suggesting that the model of tying the spending requirement to a percentage of revenues is probably the best one to apply across the board. They did qualify that by saying, "We are not" -- well, they did say they were broadcasters, but "conventional broadcasters", so they said, "This is something you might want to consider".
777. I just thought it would be interesting to have your views on that.
778. MR. FECAN: I am going to ask Bruce to jump in on this as well, but I think you have kind of made the essential point that the specialty broadcasting is a very different kind of business than conventional broadcasting, of course. Many of these channels have exhibition requirements that are very different and higher from the exhibition requirements of conventional broadcasting.
779. I think it is probably important -- we believe it is important to have exhibition requirements of under-represented in prime time with some base amount in terms of spending.
780. Bruce.
781. MR. COWIE: I think the other issue too is, conventional broadcasters operate on a single stream, and that's advertising revenue. We have no other source of income. Specialties have subscription fees.
782. So we have to manage our resources as best we can, and in responding to the Commission's call of more Canadian programming in prime time of better quality on a profitable base, it was our best judgment that the matrix gets us there because it focuses on programs that must become profitable for our future and just be made better, presented better, promoted better, exhibited better. And, within that matrix, all of the three station groups can participate in different ways on the same basis and reach the same goals.
783. MR. FECAN: And, of course, our base amount gets adjusted by the revenue already. So the mechanism, with a bit of a lag, is already there.
784. COMMISSIONER WILSON: Thank you.
785. THE CHAIRPERSON: I would like to go back to your matrix and understand this a bit better, and the difference between what you had in your written submission and the matrix.
786. If I look at page 50, you invented the word "priority programming", and it appears to me, if I look at the third paragraph, that one of the reasons was it was related to spending, because at that time you thought that spending requirements should apply only to under-represented programming and you put in "under-represented programming", which you call "priority programming", local news and children's.
787. Now, in your matrix, you have as No. 3 under-represented programming and the number of hours, and then as 6 you have spending requirements for under-represented programming, which does not include local and children's, because that's a subset of priority, which is really no longer relevant, but it nevertheless fits into spending requirements.
788. MR. FECAN: On a case-by-case basis, as you look at the current three existing station groups, we think that you should take into account local and children's as you determine the base percentage spending requirement for under-represented.
789. THE CHAIRPERSON: So we should really forget priority programming other than to say, if you establish spending requirements, take into consideration children's, which the CFTPA, for example, took into consideration, and add documentaries to under-represented. But it is only for spending requirements.
790. What I have a problem with is, I look at this and I say, a matrix is a grid of some sort that presumably is simple and in its application is likely to result in more macro regulation and more certainty and hopefully more equity. But where we have very little detail is in how we will establish spending requirements.
791. So, like Global, who we will hear next, there is a big part of the regulation which will be left to the persuasiveness of the licensee when they come forward and the receptivity of the Commission at that time, in that form, in that panel to decide what is equitable here. I mean, are we getting here a grid that will take us one step further in establishing equity because of the detail and the discretion left?
792. When we look at that, I guess spending requirements will no longer cover other Canadian programming except local news and children's programming. Once you have established a spending -- a floor, that won't be taken into account. So that's different from what we had before.
793. We have documentaries added to under-represented categories and your half-hour program, which I have a question to ask you about, and the seven hours. So that's basically the difference between the regulation from now on. In fact, I don't see anything as to how we are going to establish the base and what the percentage of revenues or of advertising we will use to establish spending.
794. MR. FECAN: Just to be clear, we see the base percentage to be a percentage of revenue of spending on under-represented categories, not including local news and children's.
795. THE CHAIRPERSON: But, in establishing that, you would take into account --
796. MR. FECAN: You would take into account --
797. THE CHAIRPERSON:  -- the expenses.
798. MR. FECAN: What we are trying to say here is that there are three different station groups that might hypothetically come in front of you, and they have different obligations, they have different desires. We think that you are in the best position to judge what would be equitable in setting that percentage amount.
799. We felt that, in this kind of situation, flexibility for the regulator would be an asset.
800. THE CHAIRPERSON: Well, there have been proposals discussed and things put on the table where there would be less discretion, flexibility, and hopefully equity -- it is not easy to arrive at that, but I don't see how this solves the problem of he is doing more than I am and I am not doing enough -- of trying to find a mechanism that gives a level of comfort that requirements, especially once you get very large groups, are such that they are fairly high level, so that they are not intrusive, leaving flexibility, and they are hopefully similar. And then you leave it to the broadcaster to use his scheduling acumen, his business acumen, her programming acumen to make the best of the situation with what they have, and hopefully they are not going to do the same thing, as Ms Boyce said, because it wouldn't make much sense.
801. It makes me long back to the beginning of this hearing, when we had formulas I could remember; 10/10/10, 7/7/7 was easy for my slow mind to know what they were talking about.
802. I find it difficult. If you agree with me that a matrix is a grid, there is a piece missing here which is very important, and what I would like to ask you, Mr. Fecan, is, what if we just removed that piece altogether?
803. MR. FECAN: Remove spending totally?
804. THE CHAIRPERSON: The spending, and say, "Thou are going to have this many hours of this type of programming in this time of day when people watch TV, and you are going to spend money on it"?
805. MR. FECAN: As you imagine, we might have thought a bit about that.
806. THE CHAIRPERSON: Well, obviously, you don't like it, but I want to know why. If our goals are to get more television of a quality that people will watch, not all the audiences -- I have been chastised for using the word "quality"  -- but some Canadian audiences will watch some of the programming shown because it will be of good quality for them, it hopefully will be diverse, it will be at peak hours, and then we can look at credits and this type of thing and see whether we can adjust, and what is fair and not, and then say, "You do your own thing". Why not?
807. MR. FECAN: Well, I will tell you.
808. I guess before I tell you I would like to shed a bit of light on how we thought that this base thing would work. We thought that you might choose to pick a number, percentage of revenue spending on under-represented, and that that number might be probably the same for the three groups, and then adjust that, up or down, by local programming considerations and children's programming considerations. So you start from probably the same number and then you make your adjustments according to the fact that different groups have different obligations and may wish to do different things. That's where the judgment part would come in.
809. So, in our way of looking at it, it wouldn't necessarily be one number is X and another number is like totally different and bears no relationship to the first number. We see it kind of starting at a similar level and then adjusting up or down for those two particular categories.
810. To get to your question of why should there be some sort of spending, I think you want to ensure that in balancing this matrix -- I think Trina McQueen had a line about temptation the other day. I think you want to ensure that --
811. THE CHAIRPERSON: She needed the witness protection program. I hope you got that part too.
812. MR. FECAN: Yes, I imagine she would.
813. THE CHAIRPERSON: That's what she said. I just want you to know.
814. MR. FECAN: I feel that it is important to have a minimum spending to ensure that money gets spent for quality and to prevent any temptation to abuse such a matrix by just scheduling seven hours of low cost material.
815. THE CHAIRPERSON: I am not asking you why it is a good idea to have spending. I am asking you what is your matrix for -- setting equitable spending requirements; what is the grid, the subset of the matrix, for spending? I am asking that because, otherwise, we are just left in the discretionary field of looking at each renewal -- and it can be seven years -- and how persuasive the licensee is about how he should get a break or the other one should do more.
816. It is not giving any assurance of any sort that -- is it because it is too difficult to tell us how to do it or is it because it is not doable? Can you not tell us more? We have so many details about hours and credits and 200 and 175, and take this away and add many runs and so on, but when it comes to the big item, spending, at first you said it should only apply to under-represented, then it should apply to two other categories you realized were important to you, and then you put that in your matrix. Where does it leave me about what it should be?
817. MR. FECAN: It leaves you everywhere without the hard number, and I think the hard number is one that, if you look at the file data of the three station groups, you can very quickly arrive at a number of what the existing spending is as a percentage of revenue for 7, 8 and 9.
818. I imagine you might want to set that number higher than what was there before in order to meet your goal of more. How high you set that is I think something that, once you set it, that number is in place, then we would suggest that it is the same for the three groups, modified by local and children's contributions on a case-by-case basis.
819. So I guess our view of it was that that was a reasonable way to approach the particular problem you draw.
820. THE CHAIRPERSON: And the reason why we wouldn't have any problem to do that in mid-course is because you are changing, you are taking out news, for example, other than local out of the spending formula.
821. MR. FECAN: This would not include local news in the spending formula. It is under-represented 7, 8 and 9 plus docs plus the half-hour of star system, and then adjusted by levels of local news --
822. THE CHAIRPERSON: Yes, but your matrix, at No. 6, says, "Spending requirements for under-represented programming", and that's why I was asking you, suddenly two categories that are not in No. 3 appear in the next box:

     "Set base amount without including top-up from public funds; take into account local and children's programming"

823. You say take it into account but don't count the amount spent on it? Is that what you are saying?
824. MR. FECAN: What we are saying is, pick a hard number for under-represented that you apply across the three station groups as they currently exist, then adjust up or down for what you believe the local contributions for news and children's are. But start with a hard number.
825. THE CHAIRPERSON: And for the next seven years, then, there will be no monitoring about whether that percentage or base amount was correct because, lo and behold, four or five years later you are doing less children's or local. There would be no monitoring of local any more unless you would have a condition of licence to do X number of hours of local? Because what you are telling me -- I misunderstood.
826. I thought that the amount spent on that would also go to meeting your spending requirements, but it is not.
827. MR. FECAN: It is not.
828. THE CHAIRPERSON: It would just be taken into account when one decides what is a sensible spending requirement for you without knowing if you are going to continue doing that.
829. MR. FECAN: No, but if you felt that that was part of the offset for a particular group, you may wish to impose some exhibition requirements for that particular part.
830. THE CHAIRPERSON: And if there were some exhibition requirements, you wouldn't feel the need, then, to have that level count at the end when you decide -- you could have a disconnect between the spending requirement, base amount or percentage, and those areas that were taken into consideration?

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831. MR. FECAN: Because we all start from the same number and then adjust with those two factors. So, we feel that that is a basis for equitability.
832. THE CHAIRPERSON: And then we would adjust that spending requirement on under-represented categories. I guess children's is usually -- well, some proposals have children's, that we have heard, in and some out.
833. In the matrix at number 3 on the right, you say that we will have a guaranteed level of national 7, 8, 9 programming as a result of this matrix and that the effect, in your view, will be to increase the number of quality hours of Canadian programming during the 7:00 to 11:00 period.
834. MR. FECAN: This is how we would propose to use the matrix. Others may choose to propose it through a volume approach. We would propose to use the matrix to try and get more quality and that may result in a little less.
835. THE CHAIRPERSON: Yes, that's where I was going. You know that the CFTPA put forward this 10/10/10 formula and when we heard Ms Schuyler with Epitome -- I don't know if you saw that part, but I think she was having second thoughts. I have the transcript now, Volume 5. She was saying:

     "We know that to reach the 10/10/10 benchmark is very, very difficult. So, what we are trying to build in there is some incentive so that we can get an opportunity for the most Canadian of Canadian shows to find a home in the broadcasting system."

836. Later on I asked her, "Are you wavering on that", and Mr. Stohn replied, yes, they were.
837. Then we went into a discussion as to what was happening. Well, we weren't to worry about the 10/10/10 because in fact, with all the credits and so on, it was going to be down to 7 in no time. In fact with a 200 credit, we would be down to five hours. So, I was sure you had heard that part of the hearing, because here we are. We have seven hours, we are going to be able to have credits. So, I want to understand how your credits work. You want to extend the 150 credits to drama programming -- 10/10 to drama programming anytime during the day.
838. MR. FECAN: Ten out of 10 programming.
839. THE CHAIRPERSON: Now, the effect of that credit, can that reduce the amount of programming in the 7:00 to 11:00 period?
840. MR. FECAN: No.
841. THE CHAIRPERSON: When can it be used, in the same period where it was --
842. MR. FECAN: It's only applicable towards the 60/50, just like the existing 150.
843. THE CHAIRPERSON: Yes, but part of the 50 is 7:00 to 11:00.
844. MR. FECAN: Yes, but there would still be a seven-hour requirement between 7:00 and 11:00.
845. THE CHAIRPERSON: Okay. So, it would not reduce the seven hours?
846. MR. FECAN: No.
847. THE CHAIRPERSON: But the 200 per cent credit would?
848. MR. FECAN: Correct.
849. THE CHAIRPERSON: So, for every hour of a certain time of programming, you would get another hour credit. So, if you had two hours and you have two hours credit, we are already down to five.
850. MR. FECAN: No, because there is a maximum pay-out on the thing. It's only for episodes 14 to 22 in a given year, so it's a maximum of nine hours per series times two, 18 hours.
851. THE CHAIRPERSON: That can be reduced?
852. MR. FECAN: That can be reduced. Factor it into a broadcast slot of 52 and you will see very quickly when you do the math -- and we have done it every which way -- we think the maximum possible reduction is an hour out of the seven.
853. THE CHAIRPERSON: Per week?
854. MR. FECAN: Per week.
855. THE CHAIRPERSON: So, six.
856. MR. FECAN: Right.
857. THE CHAIRPERSON: And then we are down to five and a half with a half hour for "E Now".
858. MR. FECAN: The truth squad here.
859. MR. MUSTOS: It would reduce the total number of series if we were looking at series as our examples because it would only be series that could take advantage of the 200 per cent credit. If you did all of them at 22 episodes distinctively Canadian, you would be able to reduce the number of series from seven to six, assuming that you were taking two runs, an original run and then a repeat run.
860. What that practically means, though, in terms of the total seven hours is five because the 22 runs taken once and then taken in repeat is only 44. So, in order to make up the difference between the 44 and the 52-week year, you would have to have that sixth series in there, but if you took the 18 hours that you could actually get as a bonus per series and you multiplied that by the number of series, you could reduce two hours in total. So, it's two hours less than the seven, but it would require you to do six series in order to achieve it.
861. Is that confusing?
862. THE CHAIRPERSON: All I hear is you have taken another half hour off from Mr. Fecan, so you may have to go back to Toronto by bus.
863. Now we have a half hour of "E Now", so we are now down to possibly four and a half hours. I know I am exaggerating, but it's all possible.
864. MR. MUSTOS: It may be theoretically possible, but I think that we would be extraordinarily lucky as a company if we could accomplish one series next year at the 22 episode level.
865. THE CHAIRPERSON: You got a half hour back. You are back on the plane.
866. MR. MUSTOS: That's it.
867. MR. FECAN: But only in economy.
868. THE CHAIRPERSON: But you get my point. Now we get to Ms Robinson's plan to use repeats, as many as the market will bear, within two years for a first-run program. So, there could be lots of repeats there as well, which is not a reduction in Canadian content, but the producers will certainly say it is.
869. MR. FECAN: But it is the current 150 per cent rule, as we understand it.
870. THE CHAIRPERSON: Yes, but my understanding was that the plan was to redefine first-run for other categories as well? No, only 10/10 drama?
871. MR. FECAN: Yes.
872. THE CHAIRPERSON: You couldn't do that with documentaries. It would be just one run?
873. MR. FECAN: That's right.
874. THE CHAIRPERSON: But it still gets you down to Ms Schuyler's scheme. You start with 10/10/10 and then you reduce it, all of that to say you can find any number that makes sense with the other rules you put around it and if it has to be aired at a certain time, then presumably there is some equity there at least.
875. MR. FECAN: Agreed.
876. THE CHAIRPERSON: Or at least some easy grid to impose without leaving an enormous amount of discretion.
877. I don't know if it was Mr. Fillingham or Mr. Mustos who talked about the multiplier effect -- I think it was you, Mr. Fecan -- in factoring drama. You were looking at the CFTPA 10/10/10 and perhaps with Ms Schuyler's hindsight examining how quickly it would put you into bankruptcy. What did you factor in when you did this multiplier effect to arrive at a conclusion that this was not possible? Did you put in all these helpful credits and two runs and so on? Did you factor all that in to get to a very bad bottom line or a reasonable one in light of all the factors on your matrix?
878. MR. FECAN: We did not run the analysis against Linda Schuyler's proposal --
879. THE CHAIRPERSON: I was only teasing.
880. MR. FECAN:  -- but we did against the DGC and CFTPA proposal as filed. The multiplier effect we are referring to is the change in definition of this 150 per cent drama currently any time within two years counted as first run. Their definition was effectively two plays, the first play and the second play. That's the multiplier effect that we refer to.
881. When you run our current 1998/99 schedule, which many feel is at least anecdotally pretty close to or appears to be pretty close to what the DGC and CFTPA filed, it doesn't add with that multiplier effect. So, all we could do was really test it as filed -- that's the only thing we had -- and that's what brought the result that the effect for us is very bad as a company.
882. THE CHAIRPERSON: But in doing that exercise, there are many, many ways one could do it. One could decide that you are not going to try to make a go of it and not be clever in scheduling and choosing the categories of programming and using the first run and using your credits and find that it's financially impossible to do -- let's say, the DG's was 7/7/7, if I recall -- or you could say, "This is what I have to do. How can I cleverly be flexible and make it work for me through scheduling to taking advantage of any of the flexibility that is inserted in your matrix?"
883. So, it would be interesting to see how -- I am sure the two exercises could be done by someone with your experience and arrive at something that is impossible and something that is workable.
884. MR. FECAN: Other systems may be simpler, but we really feel our matrix is an honourable attempt at ensuring quality and ensuring as many originals as possible, ensuring indigenous, and I'm not sure that the other suggestions really leave that open. Yes, we could probably find a way of living with a 7/7/7, but not with indigenous programming. So, all of a sudden we are going to be faced with the idea of taking resources out of one place, putting it in another, putting on programs that are, frankly, not of the nature that we are trying to build as a network.
885. In order to make a system simpler, I don't think it's a good effect to have to do something that doesn't help quality and doesn't help indigenous. What we are trying to do is develop something, albeit that is more complex than the most simpler, but accomplishes a great deal of diversity and gives a great deal of opportunity for different entities to do different things and allows for the fact that there is a limited amount of money in the system.
886. THE CHAIRPERSON: Mr. Fecan, I like your matrix because it has boxes, it's simple. I am just trying to test to see which would work better and that's the reason for my questions.
887. Because of the fact that you again today -- and that's what we hear a lot. "The importance of equivalence" I wrote down you said. I suppose that's what one means when one says "equitable contribution". How do you do that? The least discretion, I suppose, is helpful because the years go on, you have long licence terms, et cetera, and things change.
888. When you look, for example, at whether the matrix is workable or not, you say today, "The problem is we will have to do more exportable programming so we can get more revenue out of it", but haven't we been hearing that what's important is to provide programming that is relevant -- those are your words again -- and appealing to the viewer who has a choice during the time that he or she watches TV to watch an American program and a non-American one?
889. Your aim is going to have an audience, so won't there be some push there to create programming that maybe will have that additional edge -- I thought that's what I heard Ms Boyce say -- over exportable programming, at least some of it?
890. MR. FECAN: I'm not sure I clearly understand the question, but what we are trying to say --
891. THE CHAIRPERSON: Let me rephrase it. We hear that with all the fragmentation and the amount of American programming available, the future for conventional television is to show programming that has more relevance to Canadian, that is somewhat indigenous; not all of it, but some of it.
892. I would have thought that in making the matrix work and putting in all the pieces that would lead to a greater number of hours, that would be factored in, but your response was that will only lead us -- if there is too many hours, that will lead us to do exportable programming, which seems to be counter to the philosophy that if you have relevant programming, people will watch it.
893. MR. FECAN: I don't recall saying the second part of it.
894. THE CHAIRPERSON: Oh, no, no, I said we hear that.
895. MR. FECAN: We believe, as I said at the outset, that in the specific, one finds the universal. It may be easier to sell a generic show that is pre-sold to the U.S.A. network or the sci-fi network around the world because it's of a particular genre, but ultimately I don't know that it's necessarily going to do as well. But who is going to take a chance on us as a country if we don't take the chance?
896. So, sometimes it's harder -- all the time it's harder to finance the indigenous because we are asking other people to take a chance on us and our creative teams and our specific stories. My proposition to you is: Done well with quality, those sell better, ultimately. But someone has to take a gamble on them and if we won't, why would anybody else?
897. THE CHAIRPERSON: Ms Boyce, I thought you had something to say.
898. MS BOYCE: I just wanted to add an example because Ivan was again instrumental in this program. There are a couple of examples, but one that I remember is a program called "Love and Hate". It occurred in Saskatchewan, which an American network bought, and it was the number one program of the week.
899. There was, in the development stage, I gather, quite a bit of discussion -- Ivan, you can pick up on that -- about it couldn't work because Saskatchewan is a funny sounding name, because again it speaks from the specific to the universal, it had fabulous writing, it was beautifully produced, it was exportable, but it wouldn't matter because it had just played in Canada. That was also a program of high quality and of relevance.
900. THE CHAIRPERSON: Imagine Massachusetts for a francophone.
901. Mr. Fecan, you have something else to add?
902. MR. FECAN: Yes, thank you, Madam Chair.
903. Just to clear up the example, the show was done by the CBC, "Love and Hate". There was no foreign financing into it because no one believed it would be relevant to anybody else. When the Americans first looked at it, they said, "Why are these funny people wearing robes in a funny place called Saskatchewan?" When they put it on the air, it was number one in the U.S. and it was number one across the world. The relevance was in the specificity of the story and the context.
904. We don't doubt that industrial programming can get an audience. It has a role in the system, but I guess what we are saying is that we are here trying to talk about public policy and cultural policy, among other things, and we believe that somewhere in the matrix, somewhere in our deliberations we have to ensure that whatever the result is at the end of the day, there is room for the indigenous and we find ways of encouraging it and that it would be unfortunate if somehow or other at the end of the day we lost sight of that and we ended up with some kind of a regime or rules going forward that discouraged indigenous.
905. THE CHAIRPERSON: And what you want to leave us with is the idea that the number of hours required of under-represented categories in peak time, should we retain that model, would lead to more exportable programming and less indigenous programming, that that would be one of the results and that's why we shouldn't aim too high.
906. MR. FECAN: I think what I want to leave you with is that of the three station groups, if someone wanted to take on the role of putting on more indigenous and maybe less industrial, more originals and maybe less repeats, there should be room in whatever the regime is to allow that to happen. Not everybody will choose to do that. Some will choose to do other things and those are entirely legitimate choices, but we want to make sure there is room for the indigenous, the high quality, the original.
907. THE CHAIRPERSON: Thank you.
908. Before I pass you on to counsel, I want to pick up on a question that Commissioner McKendry raised about the need to have better information about margins that are achieved from the exhibition of certain categories of programming because each one of the big operators raise that matter somewhere or other either by saying that foreign programming no longer gives the results it used to or that local news doesn't do, either.
909. So, counsel will explain to you the procedure we will follow in asking for this information from all the English-language television stations. So, the same type of information will be requested from WIC, which has appeared, and from Global, who we will hear, and from CHUM. Again mention was made that confidentiality may be requested for some of the information.
910. We thank you very much and counsel has some questions.

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911. MR. BLAIS: Yes. Thank you, Madam Chair.
912. As was mentioned, the Commission will be sending a letter to the four English-language broadcasting groups to get some better information on margins for both foreign programming and Canadian programming, including news and entertainment.
913. The written questions will also seek some information on revenue trends by programming source to cover national results for 1995, 1996 and 1997, as well as projections for 1998 and 1999. The letter -- I think it is more efficient to do it by letter so you understand exactly the format we are looking for, and that will be explained; and, as has been mentioned, according to our regular practices, you can request confidentiality for all or part of that information.
914. We will be asking for those answers by the 5th of November. So parties who are monitoring the file, to the extent that any -- well, the questions will be public, so this exchange will be transparent to other participants.
915. Now, I have a number of questions. The first question I have is that you in your presentation seem to be referring to three station groups. I take it you are referring to WIC, Global and CTV.
916. MR. FECAN: That is correct.
917. MR. BLAIS: Why have you decided to exclude CHUM from that -- from your matrix?
918. MR. FECAN: Well, the definition that we have been using is 70 per cent region English-speaking Canada and I didn't -- I don't believe that CHUM reaches that definition.
919. MR. BLAIS: Then I will ask you why you have chosen 70 per cent then.
920. MR. FECAN: Bruce.
921. MR. COWIE: Seventy per cent comes from two or three different bases. One is that you are effectively a national broadcaster from an advertiser point of view at 70 per cent.
922. Generally speaking, the other measurement of that is access to major markets, to the largest number of major markets. Nobody has them all in this country yet, except CBC. But, as time goes on, I think that likely will change.
923. So, generally, it is when national advertisers attempt to capture the country it is in the 70-plus range.
924. MR. BLAIS: Thank you. Now, I thought I understood when you were talking to Commissioner Pennefather about your position on first run, but then I got confused again when we were talking with Commissioner Wylie.
925. Now, your definition, as I understood it, was -- when it is the 150 per cent credit we are allowed for two years unlimited runs, but when Ms Wylie was asking you questions about point 3 on your matrix, you answered, "Well, it only applies to drama." But as I read your proposal, and perhaps I am misunderstanding it, you are at point 3 there in the second column referring to documentaries and your star system programming, and you are referring to definition of first run.
926. Now, those -- obviously, documentaries, and the star system programming, are not dramas. So what definition do we use for first run in those cases?
927. MR. FECAN: I think we tried to clarify that just a few minutes ago. It would focus on drama 150 per cent, on 10 out of 10 drama, knowledgeable for the 150.
928. MR. BLAIS: So when we come to documentaries which are identified there, seven hours, including documentaries and half hour of star system programming, that would be under what definition for first run? Would that also be unlimited during two years or would we use --
929. MR. FECAN: I think we would be happy with whatever existing definition is there. I don't see how you can do a star system show and not have it fresh every week.
930. MR. BLAIS: I agree with you for the star system show; but perhaps the documentaries might have longer legs.
931. MR. FECAN: Perhaps. But I think what we really had in mind was the drama.
932. MR. BLAIS: Thank you. I think that clarifies your position on that.
933. Now, you have -- on your matrix, again, you have referred to provision of local news and public affairs, and I was wondering whether you were using those as separate and distinct categories or were you putting them as a pool interchangeably?
934. MR. FECAN: I guess we were using them as a broad definition of local information.
935. MR. BLAIS: So one could be in a position where, to meet that element of the matrix, one would be providing public affairs but not necessarily local news.
936. MR. FECAN: I think it would be the opposite probably.
937. MR. BLAIS: Are you in your matrix -- just to get specifics on it -- were you thinking of a particular amount of local news or public affairs?
938. MR. FECAN: I think that is something that we would want to discuss at -- when this gets implemented among the three groups. But I think the Commission may wish to, in exchange for giving any group the right to go for retail advertising in a market, establish some sort of appropriate level of exhibition.
939. MR. BLAIS: And would the public affairs be local public affairs or would it be possible for network public affair programming to be carried through various stations?
940. MR. FECAN: This particular idea deals with local.
941. MR. BLAIS: So it would have to be a local public affairs --
942. MR. FECAN: We are not talking about "W-5" here.
943. MR. BLAIS: Now, you have also proposed 200 per cent credit for episodes 14 to 22 to be part of the seven-hour requirement. Would it also apply to the -- as a credit for the regulatory 60 per cent and 50 per cent?
944. MR. FECAN: No.
945. MR. BLAIS: So just for the 7 per cent?
946. MR. FECAN: Just applies for the 7 per cent -- that is seven hours, sorry.
947. MR. BLAIS: How would we decide or determine or try to define if it is -- is it a question of there would have to be a single contractual commitment or financing structure to identify that it was a package, a single package of 22 episodes?
948. MR. FECAN: Telecast in a year.
949. MR. BLAIS: Within the broad --
950. MR. FECAN: Broadcast year.
951. MR. BLAIS: Broadcasting year. Even though it may be the subject matter of several -- or a couple of financing stages?
952. MR. FECAN: I think our issue here is to try and get to a stage to encourage more originals in a given season. So, you know, whether within a given season it is financed in one or two tranches, you know, is not the issue for us. The issue for us is our audience would get 22 originals and 22 repeats of something in a given season.
953. MR. BLAIS: I thought one of the aspects was that you wanted early commitment to make sure that 22 would be made. Isn't there a risk that if you split it up that those decisions will be made in part?
954. MR. FECAN: It is not our interest to split it up. I am just referring to your question of how do you measure it. We measure it in a given program within a given slot in a given telecast year, September to August. So that is -- you know, that is the box that we measure it within.
955. Obviously, we would try and get it financed as early as possible so we would have some assurance of it being there.
956. MR. BLAIS: Now, you have also mentioned this 30-minute star system programming. Unfortunately, I am not familiar with "E Now". I suspect that the "E" stands for entertainment rather than expenditure.
957. Perhaps you could describe it to me so that we could draw from that, perhaps, some elements to come to a more generic definition. If the Commission were to accept this proposal, we would have to define it somehow.
958. MR. FECAN: Many, I think, before us have tried to define it. I will take an ad hoc stab.
959. The idea is that one of the things that would be beneficial, and I think would be helpful, for us in English Canada is to build more of a star system than we have. We face a deluge of star system kind of vehicles coming in over the border, through magazines, newspapers, and television shows. So the idea of such a show would be to cover the Canadian entertainment scene; to do profiles on Canadian stars, not specifically those that only appear on CTV but on an across-the-board basis; to go behind the scenes and watch productions being done; to generally do whatever they could to get our performers, actors and writers better known to the audience so that they have maybe a greater interest to catch the show when it comes along, the show that these people might be working on.
960. So it is part of the machine of building stars within English Canada, and we think this would be a positive contribution.
961. MR. BLAIS: Some have suggested that there is a danger that not all of this promotion programming would be Canadian in outlook in the sense that it might cover other entertainment stories and have proposed minimum percentages of stories that would have to be Canadian. Do you have any views on that?
962. MS BOYCE: We already do that in the program we run now; it is between 60 and 70 per cent Canadian, which was an editorial decision made when the program started.
963. Just to pick up on another point, we do within all our schedule, we use "Open Mike", "Dini Petty" and "Vicki Gabereau" to try and build that star system. Even a little decorating show, where you will see Open Mike and Paul Gross doing interesting things.
964. In the case of "Dini Petty" we increased the Canadian content by a third and the ratings went up because we put Canadian stars. So it is a myth that Canadian stars do not exist.
965. MR. BLAIS: I wasn't suggesting that that wasn't the case. I was just trying to understand how we could make sure that it was reaching the objective.
966. For instance, you mention that from an editorial perspective you have chosen a certain two-thirds of it, approximately. How do you define a story as being Canadian? For instance, if you have got a Canadian production which stars an American actor, would that be considered a Canadian story?
967. MS BOYCE: We would do that. Sure, I think this season is a great example of the fact that American shows have an enormous amount of Canadians on their programs, like I think of about three different angles. But in terms of an easy one that comes to mind is Alanis Morissette, for example, who was on every cover a few years ago, and we did the story of Alanis Morissette without getting an interview with her by going through an Ottawa local show getting old clips and created a story about her success.
968. That is just an expertise one would have in hiring our staff.
969. MR. BLAIS: The focus is on the Canadianness of the performer or star rather than the production in which they are --
970. MS BOYCE: It could be anything.
971. MR. FECAN: If the production was Canadian and industrial, it would certainly qualify for coverage.
972. I think, you know, if Bryan Adams does a record, whether the maple system calls it Canadian or not, we would want to cover Bryan Adams recording it because he is Canadian and he is somebody -- he is one of our heroes. We want to build heroes in prime time.
973. MR. BLAIS: I appreciate all those points. It is just if we are going to define it in some certain way, we have to put some parameters around it. I was trying to put some meat on the proposal.
974. In your discussion with Commissioner McKendry you indicated that if the provision of local news in certain markets was, perhaps, starting to get less profitable you might be considering ceasing those activities. Would you agree that when local licences were approved they were approved on the basis of a certain amount of local programming commitment, and that if you were to ask the Commission to cease to provide local news the Commission would have to balance, you know, your economic constraints with the desire of the local population for some relevant local television services.
975. MR. FECAN: In principle that sounds reasonable.
976. MR. BLAIS: Thank you. Now, with respect to your proposal for spending requirements, off the top you are suggesting that the -- when we set the base amount we would not include the top-up public funds.
977. Mr. Fillingham, you mentioned earlier it was -- I understand from your perspective that was because it was not predictable from year to year and therefore it wasn't appropriate to be included in the base amount. Is that the basic rationale?
978. MR. FILLINGHAM: Yes. That is the way I would look at the base, when it was being presented, if a real clarification which exists now, and definition I guess on expenditure that has evolved. So that if we are moving forward, as long as the proper definition is in place, then it can all move from that. But I find -- I would think that an allowable expenditure right now to be built into a base could cause real fluctuations depending on availability of funds in any particular year. You could have some major swings, I would think.
979. MR. FECAN: I guess what he is saying is that whether we have for some of our productions access to top-off funds or not is not necessarily within our control, and so we thought from your point of view a better way of pegging it was without that in, but setting an appropriate level considering that it is not in.
980. MR. BLAIS: But on a going-forward basis, once we set the base, would it be your view that that top-up would form part of the calculation of your expenditures?
981. MR. FECAN: No.
982. MR. BLAIS: It would not?
983. MR. FECAN: Not towards COL.
984. MR. BLAIS: So, in essence, we would have to modify Public Notice 94-10?
985. MR. FECAN: I am not sure if that is the case or not; but you would be the expert.
986. MS ROBINSON: We would see the matrix being implemented by way of condition of licence, and I believe, taking a look at Public Notice 94-10, there is provision in there for exceptions by way of condition of licence, and that is what we would see would be the appropriate regime.
987. MR. BLAIS: My next question relates to -- is to explore whether or not categories 8 and 9, variety and music, are truly under-represented, and this comes out of a staff analysis looking at the enhanced BBM data.
988. When staff considered -- the Commission staff considered all programming available to Canadians, both American, foreign, cable, over-the-air, we come up with a figure of about 3.8 per cent as the total amount of category 8 and 9 available.
989. Then, when we look at the private conventional English-language services it would appear that out of those two categories we get about 4.3 per cent and, therefore, somewhat over the overall amount available in the system.
990. Therefore, one could argue that category 8 and 9 is, perhaps, not under-represented, although I understand your perspective is a question of priority rather than under-represented.
991. If these numbers bear out, how would you feel if the Commission were to remove category 8 and 9 from the Option B formula?
992. MR. FECAN: We think it will be a mistake to limit 7, 8 and 9 down to just 7. We are not sure, and we would need to understand how the coding was done, for you to have arrived at the figures that the BBM extended analysis gave you. But we know that in our experience we believe there is less mainstream music on the air, on conventional television. I grant you there are two specialty services that focus in -- several, actually, a country and a couple of music specialty services that focus in on music, but it is music video.
993. In private broadcasting, I don't know that there is a lot of room for music performance, and I think one of the great successes of the regulatory regime has been allowing to happen the great comedy talent that exists in our country.
994. So I think that we have got something in one case -- in the music case, I don't really believe look -- judging from the monitors I look at, as I look at conventional television, I don't see it on the air a lot. In fact, I see it on the air less because the public funding bodies choose not to prioritize their resources towards music; and, in some cases, not towards comedy if it is performance comedy.
995. In the instance of comedy, I think it is clear, this has been one of the successes of the system, of the kind of comedy as a group, public and private, we have gotten on the air. I think we should continue to encourage it and not do anything that might turn off the tap on it.
996. So I would -- to really thoroughly respond we would really need to understand how this stuff was coded and what actual shows were in there. But, in our experience, we don't think there is a lot of it on the air. We think it is still very much under-represented and one of the strong suits of this country that I think needs to get out on conventional television more.
997. MR. BLAIS: I appreciate your point. It is difficult to comment without knowing the methodology, but I think your point is still well taken about the priority nature of that program.
998. My last question deals with your proposal to expand the broadcasting -- evening hours of broadcasting to allow family-oriented programming in the 7 to 8 p.m. time period.
999. As you understand, the major simulcast opportunities vis-à-vis American networks occur from 8:00 o'clock on, and this family programming in the 7 to 8 period, there may be a tendency to do more of that and, perhaps, to the detriment -- because of the economics of it -- and perhaps to the detriment of adult-oriented programming in the 8 to 11 period.

     1535

1000. I was wondering if that's a legitimate risk of this added flexibility you are proposing in this process.
1001. MR. FECAN: Yes, if you are basing your logic on the fact that there is more simulcast between eight and 11 and therefore the temptation will be to do more between seven and eight, I have to tell you that in most of our particular stations we simulcast "Wheel" and "Jeopardy" and they are pretty regularly top 20 shows. So I do not know that that basis of logic is necessarily true in everyone's case.
1002. But I do think there is something to be said for giving flexibility to broadcasters and to producers to design programs that are aimed at a family audience. To put the shows up against the most significant American competition at eight o'clock is not necessarily in their best interest. I think there are opportunities between seven and eight on some stations to compete more effectively for that audience because they are not up against programs of that type. They are up, generally, against reality shows or game shows. They are generally not up against other dramas, family or otherwise, which gives them an opportunity to stand out.
1003. I am not sure who, but one of the other groups before you filed data, and you can easily get data in terms of the persons using television between seven and eight versus the persons using television between eight and 11, and I think that would demonstrate that between seven and eight you do not have quite as much as between eight and 11 but you have probably somewhere around 80 per cent. A shot at 80 per cent of the audience with less competition, and no competition of that kind of type, can be a pretty compelling proposition for a broadcaster and a producer.
1004. So I think that that particular enlargement has a lot of basis in practical fact and I think it presents an opportunity. I do not think everyone will choose to use it and I think you can count on the differences between the people and the different groups and the different producers, who all want to do different things, to have a fair mix throughout the system.
1005. MR. BLAIS: Thank you very much. Those were my questions.
1006. THE CHAIRPERSON: Thank you, Mr. Fecan, and be kind to Mr. Mustos.
1007. Thank you, ladies and gentlemen. We will take a 15-minute break. We will be back at five to four.

      --- Short recess at / Courte suspension à 1540

      --- Upon resuming at / Reprise à 1555

1008. THE CHAIRPERSON: Madam secretary.
1009. MS SANTERRE: Our last presentation today will be by Global Television Network.
1010. Please proceed.

      PRESENTATION / PRÉSENTATION

1011. MR. SWARD Thank you very much. Good afternoon, Madam Chair, members of the Commission.
1012. I would like to first introduce this eclectic group of people who are with me here today, and it does not quite fit the grid that is attached to your presentation, but that's not unusual for us, but the front row is all here as organized.
1013. My name is Jim Sward. I am the President and CEO of Global Television Network. To my left is Charlotte Bell, Director of Regulatory Affairs. To my right is Loren Mawhinney, who is Vice-president of Canadian Production, and to Loren's right is Kevin Shea, who is the President and CEO of Eastern Operations of Global Television Network.
1014. Behind me to my left is Glenn O'Farrel, who is Vice-president of Legal and Regulatory Affairs. To his right is Peter Viner, President and Chief Executive Officer of the parent company, CanWest Global Communications Corp. To his right, as a special guest, is Mr. I.H. Asper, who is the founder and the Executive Chairman of our company. We are delighted to have him here. To his right is Leonard Asper, who is the Executive Vice-president, Corporate Development for CanWest Global Communications.
1015. At the table over here, in the wine coloured jacket, is Howard Slutsken, Director of Programming for Global. To his right, your left, is Dr. Gerald Wall of Gerry Wall and Associates, who is the author of two studies which are attached to our presentation.
1016. I would like to invite Peter Viner to make a few brief opening comments, please.
1017. MR. VINER: Thank you, James.
1018. I grew up in the Canadian broadcasting system, but it has been seven years since I personally appeared before the Commission. I was banished to Australia in 1992 and returned only last year. The system I returned to is very different from the one I left. The choices that viewers and advertisers have now are almost overwhelming. The fact that the system is reasonably healthy is a remarkable accomplishment.
1019. We are proud of our success in Canada and overseas, and we trust this hearing is about rebalancing the entire system, not just redistributing success.
1020. CanWest has been successful for many reasons. The standard ones include better program selection, aggressive promotion, marshalling our resources where we can make a difference and, of course, meeting and exceeding our licence commitments.
1021. In addition, we have two very significant hidden assets: Firstly, committed, stable and focused owners; and secondly, we believe, the best management and staff in Canada. This group and our philosophy have also formed the core of our leadership and expertise in Australia, New Zealand and most recently in Ireland.
1022. We support and are proud of CanWest Global's achievements and we endorse today's presentation. We hope we can make a constructive contribution to this important policy debate.
1023. Jim.
1024. MR. SWARD: Madame Chair, members o the Commission, our presentation today will consist of four elements. First, I will briefly outline our Canadian programming accomplishments, of which we are very proud. Secondly, Loren will share a few lessons that we have learned along the way; what works, what does not work, and what is the primary obstacle before us as we strive to do more. Third, Kevin will focus on where and how we want to do more, and, finally, Charlotte will summarize changes to Commission policy and regulations we advocate on the firmly held belief that they will improve the environment for more Canadian programming that attracts larger audiences.
1025. Six years ago, we took a long and hard look at the future for Canadian television and developed a brand new course for our stations. You were licensing and authorizing an array of new Canadian and U.S. services competing for Canadian viewers. We were losing audience and we were losing advertiser support. We were in negative growth in 1993. We designed a plan consisting of many components. In Canadian programming, this plan focused on three specific areas where we were determined to do better, and eventually be the best.
1026. Number one is prime time Canadian dramatic series programs. Number two is supper hour local news and information in each of our markets. Number 3 is children's and youth's programming. That's where we decided to focus our efforts.
1027. You have heard that, despite the addition of hundreds of new hours of Canadian programming and millions of dollars invested in the last ten years, Canadians viewing to Canadian programming has remained flat at about 32 per cent.
1028. This is true of the average but it's not true of Global. Between the fall BBM surveys of 1993 and 1997, our audience to our local supper hour news all across the country has increased by 21 per cent. Viewing to our prime time Canadian drama schedule by Canadians has increased by more than 150 per cent.
1029. In these two important areas, and in the face of many new choices for Canadian viewers, we have increased Canadian viewing to Canadian programs. We are not your average performer when it comes to getting more Canadians to watch Canadian programs. In fact, today, Global's prime time line up of Canadian drama is the top performing Canadian schedule in the private sector by a substantial margin.
1030. We have heard that licence fees for Canadian drama have not increased. As a matter of fact, some have suggested that they have gone down in recent years. Again, this is not the Global experience. A sample of three hours per week of Canadian prime time series drama, which we are now licensing for the third season, shows that our average licence fee for these programs has increased by 31 per cent over the last three seasons.
1031. As a matter of fact, our reported spending for the first two years of this licence term are tracking 30 per cent above our required expenditures in Global Ontario.
1032. Global is not your average performer. We consistently overperform. We have done more Canadian programming, won more viewing to our Canadian programming, and significantly increased our expenditure on Canadian programming, and we have learned an awful lot throughout our journey.
1033. Loren.
1034. MS MAWHINNEY: For the past five years, my specific area of responsibility has concentrated on developing a winning prime time schedule of Canadian drama series. We have done very well and we can do better.
1035. Here are four lessons that we have learned about what works and why. With regard to dramatic programming series, 22 original episodes per season in prime time puts Canadian series on an equal footing with U.S. prime time series. Launching a Canadian drama series in September, with your season finale in December, does not work in the prime time arena because you come back in January with Canadian repeats that are up against new and fresh U.S. program episodes.
1036. Two, Canadian programs, where the Canadian broadcaster is the primary customer, and where Canadian audiences are the primary target, works.
1037. Three, bringing back a series with a committed creative team builds audiences. Removal of funding support or abandonment by your Canadian creative team to U.S. opportunities can lose audience.
1038. Four, putting formidable and expensive promotion resources behind your prime time Canadian schedule works. Limiting your promotion to a few on-air promos does not work.
1039. That's our list of the four major things that work and don't work. We at Global have more than doubled our prime time audience to our Canadian drama programming during the last five years by doing more of what works and less of what does not.
1040. Can we do more? Can we grow our audiences more? You bet we can, but first, let us focus on two questions: What do we want more of? We want more Canadian drama series with 22 fresh episodes each season, where we are the controlling customer, and where our Canadian audience is the primary target.
1041. What is the obstacle to doing more of this programming? This type of indigenous Canadian programming is the most expensive of all. Our licence fees for this genre is double the licence fee for product made in Canada for American customers and audiences. The route we advocate is not the least expensive way. In the majority, indigenous Canadian programming requires funding support, and therein lies the major obstacle.
1042. Currently, public funding mechanisms are not in harmony with our objectives. For example, Telefilm prefers 13-week series, not 22-week series. We are working to change this policy. But the biggest problem is that there is not enough money in the funding system for conventional private broadcasters' prime time schedules.
1043. Let me give you some specifics. Telefilm's budget for next year is around $100 million. This sounds impressive, and it is, but after all the appropriations are computed, Telefilm will be left with only a fraction -- $16 million -- to support all programming, including drama, documentaries and kids for all conventional English language private television. CBC, on the other hand, will receive approximately $25 million from Telefilm for its one and only national English schedule.
1044. The sad fact is that this $16 million will not support renewals of existing series and would not allow for any new drama series or MOWs or specials. If we want to do more, we have to change this, and we have advocated an envelope of 40 per cent for the private conventional share, which would bring our portion of the $100 million for next year to $21 million.
1045. Kevin.
1046. MR. SHEA: Thank you, Loren.
1047. You have heard many suggestions outlining various schemes to attain more and better Canadian programming; namely, 10/10/10 or 7-7, for example, and we want to ensure that the CRTC clearly understands the consequences of these schemes as they relate to the type of incremental programs that will come to the system.
1048. I draw your attention to the chart on the TV screen in front of you entitled "Canadian Programming". For the sake of simplicity, there are two types of Canadian drama; namely, industrial and indigenous. The chart speaks to the benefits of the two.
1049. Indigenous programming, the likes of "Traders", for example, is the program type we at Global want to do more of. Why? It's Canadian in every respect. It's made here, its creative control is here, and we are the primary buyer, and the rights are owned by a Canadian company. It's therefore uniquely relevant to Canadian viewers. Now, you have heard that this type of production requires the most financial assistance from public funding and these sources are already exhausted. What then happens if the CRTC simply says, "Let's do more hours"? Where do we go?
1050. In fact, the answer is very simple. We have no choice. We all have to move directly to industrial productions where the primary buyer is American, creative control is American, and all foreign rights for resale remain in the hand of Americans. Who wins? Clearly not the Canadian broadcasting system.
1051. Now, I must be clear: We are not opposed to Canadian industrial productions as a concept. We are only concerned about the balance, or the right proportion of these types of shows in the overall mix of types.
1052. There are other opportunities for us to pursue for prime time Canadian programming which is relevant to Canadians. When we review U.S. conventional network schedules, we see a growing trend of public affairs shows; for example, "20-20", "48 Hours", and now "Dateline NBC" is on nightly. If we could do more of this type of public affairs programming, it would be better for the Canadian broadcasting system and provide programming that's very popular with viewers.
1053. In closing, we wish to point out to the CRTC that most industrial programs made in Canada are intended for U.S. specialty networks, not NBC, CBS or ABC, where we buy network programming. We must remember too that every hour added to Canadian prime time broadcasters' schedules allows one more hour of unsubstituted U.S. programming back to the Canadian consumers via the cable market. Border stations in Buffalo, Pattsburgh, Seattle and the others are all back in the Canadian TV advertising selling business under 10/10/10 plan.
1054. It is for these reasons, Commissioners, that we prefer a strategy that puts more dollars into the existing hours of Canadian content, produces more indigenous television shows, and wins over more Canadian audiences, to do what we do already, but by doing it better, and we are not alone. According to your own CROP survey, released at the beginning of this proceeding, 58 per cent of Canadian think that we should reduce the quantity while increasing the quality of Canadian content.
1055. Charlotte.
1056. MS BELL: Building a loyal audience for prime time quality Canadian programming should be the priority goal of our regulatory framework. Here are some key principles that the CRTC can adopt to achieve that goal.
1057. First, adopt a regulatory platform that seeks to ensure that, from this point forward, viewership growth is a system-wide priority.
1058. Second, enable broadcasters to develop distinctive scheduling strategies by extending the peak prime time period to 7 p.m. to 11 p.m. seven days a week.
1059. Third, recognize promotional efforts as essential to building audiences for Canadian programming.
1060. Fourth, build on the foundation of the 150 per cent drama credit to overcome the unfavourable economics of Canadian drama.
1061. Fifth, adopt and enforce more advanced rights protection rules.
1062. Sixth, ensure that foreign services make a contribution to the Canadian broadcasting system and, finally, adopt a corporate approach to licence renewals.
1063. We have discussed each of these initiatives in our written submission and we look forward to offering any clarifications you may require.
1064. MR. SWARD: Before closing our presentation, I would like to clarify one very important matter. Attached to our script for this presentation are two Global program schedules. One is a prime time schedule and the other is for children and youth. These schedules are representative of what you will see on Global in the midst of this year's television season. We have noted that several other participants have provided you with Global program schedules and we thought you would appreciate receiving one from us. It's the real thing.
1065. Madam Chair, members of the Commission, our track record demonstrates that we consistently overperform, and we are proud of that. I hope that has not come across as arrogant. We are sincerely proud of that.
1066. We have shared with you the lessons we have learned as we have tried to do better, and we have clearly put on the table what we want to do more of. We hope that this is a helpful contribution to this important process and we look forward to your questions. Thank you.

      1615

1067. THE CHAIRPERSON: Thank you, Mr. Sward, ladies and gentlemen.
1068. I would like to first outline what my concerns are.
1069. Global has filed a written submission on what it characterizes on the first page of its written submission as the need to modernize the overall policy framework supporting the production and exhibition of Canadian programming, and today you have expanded orally on your submission. So the exercise today will consist in seeking clarification from you on your proposals -- and I quote from page 3 now -- "for increasing sustainable viewing to Canadian programming", and it will consist to a certain extent in testing your proposals.
1070. Our aim is to better understand your proposals and their ability to meet our stated goals and to see to what extent they are more likely to do that than what is now in place or proposed by other parties, and I ask you to take my questions in that spirit.
1071. Many of them will focus on two apparent contradictions in your position as follows: First, given your conclusion at page 16 "that the current spending formula is relatively ineffective in achieving broadcast policy objectives", why do you recommend that it be kept as a basic regulatory mechanism for achieving Canadian content goals? And, secondly, given that you recommend, at page 2 of your written submission, a shift by the Commission from a micro to a macro regulatory system, why do you advocate the regulatory status quo, to which you would propose adding a number of regulatory incentives requiring added intrusion by the regulator in the affairs of licensees? And I will also have some additional questions in discrete areas of your proposal.
1072. So I would like to discuss first why the discrepancy between not accepting the spending formula as anything helpful and proposing to retain Options A and B as they were before, and also the extent to which the changes to the status quo that you propose are micro changes, they require more calculations, more monitoring; they are usually a positive relaxation for you, but for us, it will require more monitoring of performance.
1073. So if we first look at spending, at page 16 of your presentation you say that spending requirements established as a function of advertising revenues are not an effective mechanism for ensuring equitable contributions, and Dr. Wall in his study, at page 8, is indeed vehemently opposed to spending requirements as an effective tool. He says, at page 8, that it is apparent that greater expenditures on Cancon does not necessarily result in an equivalent or proportionate increase in viewership and that the spending formula is complex, burdensome, relatively ineffective in achieving broadcast objectives.
1074. Again, at page 9:

      "The [spending] formula... tends to dampen the enthusiasm of regulated parties to excel in their fields."

1075. If I look at Table 1, where your recommendations are outlined in a table form, you have spending requirements, as set out in Public Notice 95-48, as a mechanism that should be kept as a choice for TV licences; that is, licensees could continue to choose Option A, spending requirements, or Option B.
1076. Given all that one gets from reading your submission and reading Dr. Wall's study -- and you do recommend also the 60-50 rule, which is no change, and the case-by-case imposition possibly of additional contributions, including possibly exhibition of programming during viewing periods, which is also the status quo -- why have you not looked at the possibility of not using spending requirements? Since it is an ineffective regulatory mechanism, why should it remain the base for regulation? There has not been one party that has been as adamant as you have about the ineffectiveness of using dollars to regulate.
1077. Let's start with the premise that there will be some form of regulation for Canadian content. What are your arguments for maintaining it rather than looking at something which is entirely different and which drops that, since it is ineffective?
1078. MR. SWARD: Madam Chair, we have found in our experience, based on the directions that we wanted to go in, that the spending formula or that measuring by spending was counterproductive. It put us together with our accountants too often and not with our programmers often enough. It required complex overlays that we just felt were counterproductive.
1079. When the Commission offered us a choice and they said, "A or B", we were the only company that chose B. It was a tough choice to make: seven hours a week in the evening hours of 7:00, 8:00 and 9:00, and when you are committed regardless of where you sales go, you still have to do it. That was a tough choice. It was so tough that only one broadcasting group in the country chose it. We chose it. We found it outstanding for us.
1080. We asked Dr. Wall to look at the whole issue of spending because we found that the simple challenge of prime time content was so much more effective as it applied to our company, and we have asked him if he could contribute to the process by writing about, and having a look at, spending and giving us a view as to its role.
1081. So that's the reason why the words, the way we express it, our own experience is very strongly felt.
1082. However, our objective or our contribution to this process, we concluded and believe, is to come before you with more than self-serving positions that revolve around our unique experience. We talked to other broadcasters, and there are other broadcasters who are in much different positions than we are. Most of them are heritage broadcasters. They have been here since the early 1960s. They have enormous commitments to news, to sports, to public affairs programming, to play-by-play sports. They see their future in that kind of area.
1083. That can't be captured by 7, 8 and 9, and they find a great deal of comfort and security in Option A because that's the category you want to be in if you are spending big dollars on big Canadian programming that gets big audiences and makes big profits. You want to be Option A. That isn't where Global is. Global is focusing, as I told you, on three areas.
1084. So we recognize that there are a number of broadcasters, all of them except for us, to date, including Baton/CTV, that are far more comfortable with that Option A, and we didn't think that it was constructive, appropriate to suggest that our way was the only way.
1085. So, Madam Chair, that's why on that issue there appears to be a conflict, but I submit there is no conflict. And I am sure, Dr. Wall, if you would like to explore his findings and views, would look forward to that.
1086. THE CHAIRPERSON: I gather from your response that what you are saying is, "Well, we wanted to take Option B, but you forced Option A on us in the past; that that's the status quo we now have, and it works for the others so we will keep it."
1087. If it is not a proper way to calculate, then, you would suggest you would choose Option B at the first opportunity and leave additional contribution for peak time hours to the discretion of the regulator is what you are saying. If you don't think that spending requirements work for you and there is a true option of A or B, the way I understand it is you would keep the 60-50 as a safety net, you would let the licensee choose between Options A and B, and I don't see here that there would be a predetermined number of hours of any category of programming in peak time; that would be left to additional contribution at the discretion of the regulator.
1088. MR. SWARD: That's correct.
1089. THE CHAIRPERSON: I have difficulty finding how different that is from the status quo other, I suppose, that you are saying you would not be entitled to mix A and B, as a regulator. If I say I want Option B, that's what I will have, and your only discretion is to tell me how many hours I have to do of what kind of programming during what period of hours. That's what Global would like.
1090. MR. SWARD: Madam Chair, we would never suggest that you are restricted to certain instruments. They are all there for your use.
1091. One of our fundamental recommendations, which is new, and we have detailed on pages 30 and 31 of our presentation, is the corporate group licence renewal process. What we are looking at here is making recommendations on just the basic rules, the basic structures; 60-50, 95-48 we are attracted to and like the CAB's proposal to add a third choice to 95-48, which is spending choice on the under-represented categories. We think that could release some new opportunities for some diversity, some interesting new proposals.
1092. Then we come over to the licence renewal process, or the process that's applied when a major transaction is happening. That's where, Madam Chair, you would use the instruments in whatever way that you felt was appropriate to hone in, as you did almost three years ago to this day, when Global's licence renewal was done, and we ended up after a day long hearing with four hours of 7, 8 and 9 between 8:00 and 11:00 Monday through Friday, 7:00 and 11:00 on Saturday and Sunday. It was after a day long exchange with lots of people participating, interveners -- most of them are probably here today.
1093. So, through that process, we ended up focusing on a particular role within these broad parameters.
1094. So I don't see anything constructive about getting any more precise than these parameters already are as we have recommended them, understanding that your instrument of precision is the licence renewal and the conditions of licence.
1095. MR. SHEA: I think, Madam Chair, what we are advocating is that for sake of simplicity there are some base regulations, knowing full well that, at time of licence renewal, you may elect to create your own Option C, which is a combination of spending dollars and other requirements that may be appropriate as they are raised at the hearing, and we are leaving that to your discretion to invent at that time.
1096. THE CHAIRPERSON: So, but for some incentives that we can go through that would be relatively minor changes to the regulatory system, you think the system is working well as it is, that you would rather rely on your persuasive skills, as I said to Baton before, and the discretion of the Commission every seven years as to what it is that should be imposed that is not pre-determined.
1097. So your participation today is basically because you have been invited. You really don't have any grid or any changes or any major suggestions as to how the regulatory system would work better and more equitably -- because that's what we hear: "Not fair." "You have pushed me into this. I should have been able to do this instead." But what you are saying today is, "Carry on. You are doing a good job at that."
1098. MR. SWARD: Madam Chair, I don't think that we have said that you have pushed us into anything. We submitted a thoughtful brief that has a lot of changes to it, it represents an awful lot of change. The theme of the brief is not dissimilar to the refrain from "Hey Jude", it is "Take a good thing and make it better".
1099. We are not here to recommend to you that you need to turn the system upside down on its head. We don't think the system is broken and needs repair. We have proceeded on the direction that we proceeded in good faith, that we are building something and doing something right and something good here, and our results, which we presented earlier, are that it is working. We have more people watching Canadian television, we are putting more money into it, attracting more viewers. So there is an awful lot of substance to our recommendations.
1100. We have made suggestions as to how 95-48 can be expanded perhaps to invite more innovation, more diversity, how you can use a revolutionary I guess new approach to licence renewals as an instrument for measuring equitable contribution and appropriate contribution in a more effective way than you do now.
1101. I submit to you, Madam Chair, that our proposal is not without substance and significant proposals on ways the system can do better, but at the end of the day, Madam Chair, it is the broadcaster that has to go out and do better. It is the broadcaster that has to work within the rules and do better in the private sector.
1102. THE CHAIRPERSON: I did not say that your presentation was without substance, I said it did not propose substantive changes, which is different. You are entitled to tell the Commission that the way things are is working well and there is no need for any change. What we are discussing is the fact that there have been other proposals which presumably would lead to a more equitable contribution.
1103. When you say vehemently that spending requirements are not a good measurement and then maybe two of the other groups, or perhaps even one, choose that option, presumably there is something askew because that's not a good measurement; if it is not a good measurement as a regulatory mechanism, it is not a good idea to let the other player use it either.
1104. MR. SWARD: As in Mr. Wall's report, we have concerns -- it was 1990 when the instrument of a percentage of revenue was first adopted as a way to measure Canadian programming contribution, 1989 or 1990 -- 1990. So we have been eight years down the road.
1105. Section 5(2)(g) of the Broadcasting Act does suggest that we should try to avoid burdensome administrative procedures. Our experience with that regulation, 1990 through the end of our last licence term -- because we operated under it, it was a spending requirement on all Canadian programming; that was the previous terms of our licence.
1106. We found it becoming more and more complex, more and more counterproductive. We found ourselves making decisions which were counterproductive to getting programs in front of people to watch.

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1107. So, I am back to the point. Our experience is that this thing has a life of its own. As we go further down the road and use this instrument, it's going to require more and more and more clarification. That means that's going to require more administration on both sides.
1108. So, yes, we do have concerns about that big test that we have been on since it was introduced in 1990 and that's the reason why we asked Dr. Wall to write the report he did. That's our point of view. That's a contribution to this process. By the same token, we do recognize that others do find it appropriate, are comfortable with it, and, therefore, it should remain as a choice.
1109. THE CHAIRPERSON: As I have mentioned before, we want to find a formula that will provide more equity and will be satisfactory to the players generally that the system is equitable instead of the feeling that it's not.
1110. At your renewal I'm not sure you thought you were being treated fairly or maybe you were just pretending to scare me.
1111. At page 17, paragraph 2 says:

      "Spending requirements relating to all categories of Canadian programming is not an even measurement of contribution because certain program categories produce profits while others don't."

1112. That is an issue, of course, grumbling around in this hearing, that, therefore, it gives us an inequitable requirement as between one and another of the major broadcasters. Do you have any suggestions as to how -- surely, you have some interest that for those who will choose Option B, it's done in a manner that you feel is equitable. So, what would that be since what we have now is not?
1113. MR. SWARD: I'm not sure that we agree that what we have now is not. I don't want to take this in a direction that breaks with your train. Is the fundamental issue here the instruments of equitability?
1114. THE CHAIRPERSON: I will get back on the track, don't worry.
1115. MR. SWARD: Let me just, if I may, speak to the issue of equitability because I have listened to you and others wrestle with this issue of equitability. Perhaps I will offer a view on it, if I may, because, you are absolutely right, it can get terribly complex if you come at it from a mathematical point of view.
1116. Let me just first say that we believe that our contribution is absolutely more than equitable. Our audience delivery and the progress that we have made with the toughest of all challenges is industry leading in prime time. Our spending on 7, 8 and 9 as a percentage of revenue from what we have seen put on the public record is the highest in private broadcasting. As a percentage of revenue, nobody spends more than we do on 7, 8 and 9.
1117. So, in terms of contribution, we feel that we are right up there on an equitable basis, but let me just give you a view on equity. When considering equity, consider that the fundamental equity is that we in the private sector all play by the same rules. We have the same regulations, the same processes and we have the same procedures. We all have the same rules.
1118. I was at a hearing, Madam Chair, and a former Commissioner made an impression on me when he said, "You have all got the same rules. You have one obligation and you have two rights. Your obligation is you always play by the rules. Your two rights are the right to profit and the right to go broke and we are not going to get in your way on either one."
1119. You see, we all have the same rules and we all make different choices about where we are going to go with our enterprise. At the end of the day we all end up in different places. If, by your choices, over the last two years or ten years you are in a hole, you dug it.
1120. Equitability, when we come to licensing new opportunities in the Canadian broadcasting system, is not a value that I have heard on the public record. When we go and a bunch of people go and they compete for a new opportunity, like the one in Vancouver, for example, in, I think it was, September 1996, there was about eight of us there full of hopes and pitching and so on and so forth. The Commission approached that from the point of view, which is the way they should approach it, and said, "What's the best deal here for Canadians?"
1121. I never heard them say, "I'm not sure if this is equitable", I never heard them say, "Gee, these proposals you are making are kind of rich. Can you afford it? What is going to stop you coming back here five years from now and say, 'We are not making enough money. There is a problem here.'"
1122. Our broadcasting system has been built, Madam Chair, as I have watched it, on a series of unequitable deals as licences have been awarded out. They have been awarded to those who are prepared to put the most on the table for the benefit of Canadians. To come around in 1999 and look at different players and different circumstances that they are in and say, "Everybody doesn't think it's equitable", you are right.
1123. You are absolutely right, but that's not because of anything that you did. It's not because of anything this Commission did and, frankly, I don't think it's a lot of this Commission's business in the private sector as long as the rules are equal. We all got to where we are on our own, we are responsible for it. If it's good, good; if it's not, it's our job to fix it.
1124. This preoccupation with, "Gee, I'm not sure, it doesn't look even to me", God bless private enterprise. That's the juice that makes it work. If we start to play around with that, compromise it, stop it, take the excitement out of it for the entrepreneurs by coming and looking to level it, then we are not going to have the energy and the commitment and the drive that have built the broadcasting system the way it is today.
1125. I'm sorry, it was a bit of a soapbox issue with me.
1126. THE CHAIRPERSON: Well, let me get you back on track. The train you are on is regulated. It has been regulated from the start and it has worked very well for most parties in some ways, less well in others. You have mentioned the words "private sector" many times. I don't know if it's because you don't think I understand there is such a thing, but there is an act of Parliament that says that we should pursue some goals. We have established these goals and what we are looking at is how do we reach them and achieve them better while still allowing for profit, but getting closer to the goals of having better programming and more of it.
1127. The question we have before us in this hearing is: Is the regulatory system we have achieving those goals of getting more programming in certain categories in hours where we know people are watching television? Do we have the right way of achieving that? Also, do we have the right combination or the right mechanisms that gives a certain level of comfort that there is a fairness in what's exacted towards the aim from parties?
1128. I guess what I hear you say is what is there but for some of the micro-mechanisms for incentives is acceptable to you, that we have the proper mechanisms to achieve the regulatory goals we have while keeping you profitable in exploiting regulated undertaking. So, I would like to know why you would reject, for example, other proposals that have been made, including if spending requirements is not a good mechanism, let's not allow anybody to take advantage of it. Let's have only hours of exhibition and that would be flexible because you would have a number of categories of programming you could choose from.
1129. What is wrong with that picture if spending requirements is such an ineffective mechanism? If it's ineffective on one broadcaster as a regulatory tool, I can't see it as being effective for another.
1130. MR. O'FARRELL: Madam Chair, maybe I can help in this discussion. We read the Public Notice that called for comments in relation to this television content hearing, 52 questions, 52 issues; perhaps even more than 52 issues, frankly. What we did was we saw that as an opportunity to ask ourselves some hard questions about what are the things we think work now, what are things we think can be changed, reasonably speaking, and which are the things that will bring more Canadians to watch Canadian programming? Ultimately, that's where we were going.
1131. On the spending issue, we feel emphatically -- I think that's the term you used -- or very strongly because we don't see the causal relationship between spending dollars as a requirement by regulation and producing audiences to Canadian programming. I would like to ask Gerry to speak to that because we have talked around the point. It is a substantive issue that I believe this process would be better enlightened by if we had Gerry maybe take us through the primary conclusions of his report.
1132. Then I would like to come back and tell you what we did say in terms of priorities because the 52 questions were laid out in such a way that sometimes you found yourself more or less repeating something from somewhere else, which is why we tried to summarize -- Charlotte summarized for you the seven points that we think are the directions from a regulatory perspective that you can improve on. As Jim was saying earlier, we have a good thing. Here are our ideas about how to make it better.
1133. Gerry, would you give us a --
1134. MR. WALL: I will give you the quick version, but I am glad that I have been given the opportunity to speak to the conclusions that I came to about spending.
1135. I guess you really have to start with looking at the Public Notice, which builds upon the Broadcasting Act itself, to see what is it that we are trying to accomplish here. I very much agree with you, Madam Chair, that that's the source of what this industry has to do. As much as it's driven significantly by the private sector now, there is an act of legislation that tells us what this industry must accomplish.
1136. You are required to do your job through regulating that and you can break it up in a number of different ways, the objective span, the economic, cultural, political, social, that deal with technological change and scientific change. You can cut it in terms of different communities of interest, the creative is mentioned, the production community, exhibition which would get into the broadcasting field, but also, very importantly, as I hope I have pointed out in one of the papers, ultimately we need to take account of the audience needs because if we are not doing that, we are not accomplishing the goals. If we are not producing programming that Canadians watch, then we cannot possibly achieve the goals that are set out in that Act.
1137. So, my take on examining expenditures was twofold. The first is that spending does not necessarily lead to greater viewership, end of statement. I see that as a significant problem with existing regulations and the notion of extending spending requirements to me is going in the wrong direction. To me the right direction is to focus directly on what you want to accomplish in that area and I would agree with what Jim Sward said. I find that there are problems with spending, but I'm not sure that I would abandon them, either, because the spending requirements help you accomplish some of those goals in the creative side and in the exhibition side, as does exhibition requirements.
1138. So, I guess the notion is that I don't look at a single tool as the best means of achieving all those goals. I don't think you can. It's a multiplicity of goals. So, I guess the first point that I would make is that I really think that you need to look now at what we can do to gain Canadian audiences, to bring the viewer in.
1139. The second point, and it's a lesser one but I think still worth making, is that the formula has become fairly complex. Over the last 10 years or less, a number of different interpretations have come out and some of them have been at the request of broadcasters who have asked for further clarification or further flexibility. So, that has really been the -- it has been something that parties have come to you to deal with and you have tried to do that. The end result, however, in some instances, is to make that administrative process more burdensome.
1140. My point here is more a cautionary one and that is that any extension of the spending requirements should take account of the fact that we have put in place a fairly complex process that takes up resources, that perhaps could be better applied to some of those more fundamental goals like creativity and programming or exhibition.
1141. MR. O'FARRELL: Madam Chair, with your permission, from that point we say, "All right, we have exposed to you our concerns and what we believe to be the flaws or the shortcomings of a spending requirement per se." However, recognize that you may feel the necessity in certain regards to maintain it going forward as a measure of contribution. We recognize that as a regulatory mechanism it may have a usefulness, not in producing audiences but a regulatory usefulness in quantifying contribution.
1142. To go back to the point that Gerry Wall was making, which is the key point, we say in our submission to you today in summarizing our position that the first and foremost goal is to adopt a regulatory platform that goes to viewership, that says the Canadian broadcasting system has to produce more viewers to Canadian programs and we have a plan.
1143. The second one we say -- and it's all driven by the viewership objective -- is to enable broadcasters to develop distinctive scheduling strategies by extending peak prime time to 7:00 to 11:00 seven days a week. We think that is one of the ways that you are going to get more Canadians to watch Canadian programs.
1144. Third, we think that it's important that we recognize the promotional efforts that are required to drive audiences to the screens and watch Canadian programming.
1145. We, fourthly, say that there is room to improve the 150 per cent drama credit.
1146. Fifth, we do believe that there is room to advance protection of rights, that the Commission could assist in that respect.
1147. Sixth, the issue of contribution by foreign services is something you have heard throughout this hearing by various intervenors. We also have some views on that. We think they should be required to make a contribution and we have some suggestions there as well.
1148. Finally, we think that because of the way the industry has consolidated over the last little while, it would be appropriate for the Commission to adopt what we are calling a corporate approach to group licensing. In the end, if you take those proposals as a whole, we think that we will be serving the first and foremost proposal, which is create larger audiences for Canadian programs.
1149. THE CHAIRPERSON: In the event that the spending formula was an option for your competitor or competitors, depending, do you have any suggestion as to how it can be improved to alleviate or minimize what you see as ineffective in it or do you have no suggestions to make as to what the spending formula ought to be on a going-forward basis if it's an option for your competitor?
1150. You have just heard, for example, Baton has some views as to what it should be. The CFTPA has some views as to what it should be and what it should apply to, which is not necessarily the status quo. There is also the question of what should be the base amount when we see these multi-station groups. Do you have any interest in how well we formulate a spending requirement into the figure for multi-station groups or do you not?
1151. MR. SWARD: We would defer to those broadcasters who have chosen to offer constructive views on the application of Option A; that is, a spending requirement as it applies to all Canadian programming, period, paragraph.
1152. When you narrow it down to the under-served categories and you simply focus and say, "Deal with the spending test on the under-served categories", we don't have as many problems with that as an instrument, as a regulatory instrument. It is far less complex and I guess it's because it's just narrower, it's not as much to have to deal with.
1153. As you know, Madam Chair, we do have both an exhibition and a minimum expenditure required on the under-served categories on our Global Ontario licence. We have lived quite comfortably with that in the first two years of the licence, which we have just completed the second year.

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1154. But, frankly, our experience is it's the hours commitment that pulls all the rest along. If you are going to make a serious commitment in prime time, the money follows.
1155. As I say, Loren and I do not spend any time meeting with the accountants on this spending side of our prime time obligation on Global.
1156. THE CHAIRPERSON: So it was a good idea, wasn't it?
1157. MR. SWARD: Pardon me?
1158. THE CHAIRPERSON: Wasn't it a good idea?
1159. MR. SWARD: I guess it is there in case something happens. But I don't agree that the premise should be avoid temptation, or just in case you can't be trusted because you might do -- you know, it is -- it is a small industry. It is a small country and it is a long life. You don't start cutting corners in prime time television. You just don't do it.
1160. I guess that I, fundamentally, and this is just me, feel that the way -- the time to bring in extra measures to stop people from doing things is when there is some evidence that they are doing it.
1161. Regardless, our -- so that we have said, we are not uncomfortable with the proposition that has been tabled at this hearing that why not offer a third option, an Option C, which says commit to spending only on 7, 8 and 9?
1162. Now, you see that would open up some new possibilities. Somebody might say, "I would really like to get into long-form Canadian programming theatrical movies" but you can't do seven hours of those a week that is fresh and relevant. There is 35 to 40 new movies made a year. So, maybe what they want to come forward to this Commission and propose is a good big chunk of money, but not a lot of content because they are going to focus on something like that.
1163. So that third Option C opens up the possibility for more diversity, more proposals that can come forward to this Commission on how somebody proposes to tackle this whole area of contribution to Canadian broadcasting.
1164. THE CHAIRPERSON: But you see this Option C as being one where it would be spending on under-represented categories, not hours of exhibition, that is a problem for you.
1165. MR. SWARD: We say --
1166. THE CHAIRPERSON: No, but if you didn't have spending, just hours.
1167. MR. SWARD:  -- choose A or B or C.
1168. THE CHAIRPERSON: No, but your C is spending, but on the under-represented categories only.
1169. MR. SWARD: That is correct.
1170. THE CHAIRPERSON: There is a possible D, which would be a number of hours of programming in prime time, and you figure out how to get the money to do it.
1171. MR. SWARD: I am sorry, isn't that already B, Madam Chair, number of hours in prime time? Option B is seven hours. It is going to be seven hours.
1172. THE CHAIRPERSON: But it is not on under-represented categories.
1173. MR. SWARD: Yes, it is.
1174. THE CHAIRPERSON: This is because you have a condition of licence.
1175. MR. SWARD: No. Option B in 95-48 is for --
1176. THE CHAIRPERSON: Prime time. It is just that it is --
1177. MR. SWARD: To be technical, I think it is called evening broadcast, and it is in hours and it is in 7, 8 and 9. It is under-represented.
1178. THE CHAIRPERSON: But in the evening period.
1179. MR. SWARD: Six p.m. to midnight.
1180. THE CHAIRPERSON: But the proposals that have been put forward, the 10, 10, 10 and 7, 7, 7, there could be an option where you would reduce it to 7 hours, 10 hours, in the under-represented categories between 7 and 11 and not have any requirements for spending, which would, it seems to me --
1181. MR. SWARD: Basically, it is sort of an Option B on steroids kind of thing. It is, you know, just do a little bit more.
1182. What Kevin pointed out is that if we force the system to show more now, and we are going to make a difference in the funds through being involved -- Loren is on the board; we are involved in a way -- we are going to make the difference in terms of getting it to fund more indigenous drama. If we do it right now, we are going to force more of the made-in-Canada but, in all other aspects, U.S. programming on to the schedule of Canadian broadcasters.
1183. All we are doing is just saying, just be aware of that. If you go for the 7, 7, 7 or the 10, 10, 10, that is what you are going to get more of. And, of course, we certainly -- we think we certainly do not support -- we think it would be a tragedy -- a tragic outcome of this hearing if a 10, 10, 10 or a 7, 7 was adopted as a one size fits all for the entire industry.
1184. THE CHAIRPERSON: But how does it not -- other statements we find throughout your submission are, for example, you do talk about the weight of common regulation. I would have thought that if one knew what the regulation was, and it was as minimalist as possible to achieve the goals, then you would then find out how it is best for you to fill in these hours in the manner that works the best for you in terms of scheduling, et cetera; and one could then look at hours, depending on the type of programming, if you decided you wanted to do only drama, maybe there would be fewer hours, and if you wanted the whole panoply between documentaries and all the items, the categories in 7, 8 and 9 as opposed to just drama, you could adjust that, too.
1185. Wouldn't that be the most simple way of doing it?
1186. MR. SWARD: Perhaps I will --
1187. THE CHAIRPERSON: And more easy to find equity because you can -- we will be asking you also at the end of this process to give us some information as to the recent margins on programming. It is just -- I am just trying to see is there a way of easing the regulatory burden, finding an easy way of having the comfort that the system is equitable --
1188. MR. SWARD: I will ask Kevin to --
1189. THE CHAIRPERSON:  -- and reaching our goals, which I know are not private industry goals, they are legislative goals; they are regulatory goals. And I don't see why I should have any problem saying that those are the goals that I am looking for solutions for.
1190. MR. SWARD: No, I don't, and we fully accept them and we tackled those very goals starting in 1993 and have represented that we have made significant gains against those goals.
1191. Our expenditure on 7, 8, 9 programming between 1993 and 1997 has gone up 100 per cent. Our audience has gone up 150 per cent.
1192. I sense that those are the kind of values that you are looking for on -- and sometimes -- we have done well. Sometimes I wonder why we aren't the toast of this hearing, why the theme isn't -- how do we make more --
1193. THE CHAIRPERSON: I don't know about you, but I am enjoying myself.
1194. MR. SWARD: So am I, Madam Chair.
1195. A lot of what you are talking about, we find already existing in the regulations. The 50-60 -- 60-50 safety net is there; it doesn't talk about type of content. On top of that are choices that you can make, incentives that you can access that leads you into the tougher areas. There is lots of checks and balances that can take you --
1196. So the hypothetical approach that you are speaking of, it has been our experience that it seems to fundamentally be there. Now, we can make it better. We can refine it and improve it and that's what we are talking about to a great extent. But I know Kevin wants to help me out on this one.
1197. MR. SHEA: I am going to try.
1198. Madam Chair, my sense is that what you are proposing or putting forward to us is: Is there a simplistic notion of regulation that is a combination of hours and dollars that at the end of the day we have got equity in the system when we look at all the private broadcasters or the big three?
1199. I think our proposition is that maybe the answer is "no". Maybe there isn't a simple set of regulations that apply against a number of competitive broadcasters.
1200. Why? Well, we all do different things, which speaks to the aspect of diversity which is a fundamental of marketing in the private sector.
1201. We anticipate that one day we are going to be coming forward for licence renewal with all of our systems, with all of our stations in tow, and you will hear from us a mix of hours, dollars targeted at the under-represented categories. What we are asking for is that there should be flexibility, perhaps a stated Option C that says, "Bring forward your proposals. We have objectives with respect to hours; and we are also going to be looking for equity in terms of dollars in under-represented categories."
1202. So the mix is going to be different. We don't like the 7, 7, 7 or the 10, 10, 10, or anyone else's plan because it is one size fits all. What we have tried to say is that there are real risks in those types of plans; but one day we will come before you, we will give you our stated plan with respect to hours, dollars and under-represented categories -- it probably won't change much from today; there will still be drama, kids and local programming -- and then you will have to determine, at the end of the day, is it equitable in terms of the under-represented categories, because that is where you seem to be focused; and, hopefully, you are also going to move on to this notion of what are your viewership objectives?
1203. Because I think the Canadian public, when I read your survey is saying, "It is time to shift the pendulum to viewership." You have solved access to the broadcasting system in the 1980s, a key measure of the Broadcasting Act. Every Canadian now can get television programming. They can buy a dish or they can get cable. You have solved diversity in the system, by and large, because you have licensed such a plethora of channels.
1204. We are one of the richest broadcasting systems in the world; but the consumers are now saying to the Commission that it is time to look at viewership; and that is where we hope to be with our plan when we arrive here in 2002 or 2003 with our mix of hours, with our mix of ideas, with our mix of diverse dramatic programming. And, at the end of the day, you will say, "With what they have put forward against the other competitors and against the regulations that we have set in place: Is it equitable?"
1205. How can we determine equity because we only know what is equitable today, which is the job that we do in providing the level of service that Global does. We think it is pretty equitable.
1206. THE CHAIRPERSON: You are only planning to be before us in five years?
1207. MR. SHEA: That is when you are going to call us, we hope.
1208. MR. SWARD: We know we are up a little sooner than that with a little deal that we have been working on.
1209. THE CHAIRPERSON: Of course we pay no attention to the private sector.
1210. MR. SHEA: Specific to license renewals, Madam Chair, because I think that is when you are going to get at this whole level of equity.
1211. THE CHAIRPERSON: The danger, of course, is -- you know, we are just listening to various views and then we are going to try to decide what is the mechanism -- whether there should be any shift, any changes, including some of the more intrusive or microincentives that most people are proposing, and we will have to come to a decision as to whether something in our view would work better considering all we have heard. So we are just trying to make sure we give you every opportunity to comment on other proposals that have been put before you or that we try to put before you so that we understand what your position vis-à-vis them.
1212. Yes, Mr. Asper.
1213. MR. I. ASPER: Madam Chair, I don't intend to intercede in the discussion of the submission that Global has made because it is made with the complete support of the company. But I think I should point out, first of all, that it is our first time before you as Deputy Chair, and we salute that, and the new Commissioners as you bring them on --
1214. THE CHAIRPERSON: You are getting a little closer to the locomotive.
1215. MR. I. ASPER: We congratulate them. I put it in the context of one who first appeared before this Commission 45 years ago when it was called the Board of Broadcast Governors and I was applying for a quality music radio station in Winnipeg. I have followed this 45 years of evolution of this system, and I am very pleased to be here as I hear you maybe suggesting something a bit revolutionary, and I would like to comment on it because Global came to this hearing with two things: first of all, a definition under the notice as to what was expected, which was read as being: How can we make the present structure -- as opposed to scrapping the present structure -- how can we make it produce better results in our mandate, the Commission's mandate?
1216. But if you wanted the more avant- garde, the more revolutionary outside-the-system attitudes, if you look at Global's submissions over the past five or six years, in the various think-tank sessions we have had with the Commission, the summit, and so on, over the last few years, you will find that Global did propose -- CanWest Global as the parent company -- I know I proposed a number of dramatic changes in the system when we were in those free-wheeling discussions. But we approach this as: Within the context of the present structure, what can we do?
1217. The second problem for us -- and I am going to address the point you made because I think it is remarkably important, if I understood you correctly, if you are willing to take the chance, I think you indicated you would consider. Global came under a bit of a cloud and a bit defensively because some mischievous, ill-founded disinformation spread liberally amongst the media about Global's contribution to the Canadian program system was deficient, and we know all -- we all know who were the authors of this disinformation, and we didn't respond. We believe that the Commission knows and evaluates very fairly what Global's contribution has been.
1218. The producers, I was saddened to see, came before you and presented almost unilaterally, or universally, a pretty self-serving package, in effect calling on you to reinstitute a socialistic approach of redistribution of wealth from broadcasters' into the producers' pockets. No one is denied the right to have self-interest, but they are not licensed. They are not regulated. Any one of us can go out tomorrow and create an independent producer and come and appeal for funds and benefits.
1219. As Kevin Shea indicated, those days are gone. We have created a tremendous Canadian production industry, winning awards internationally. That was one of the ways we believed, you believed and your predecessors believed was the way to create good Canadian programming and so we did it. We did it by subsidizing every single program we put on the air.
1220. We spend on Canadian programming about 200 per cent of what -- that is Global -- of what we take in. By the way, I might say that one of our critics, Baton, spends about half that. I am quite happy to defend CanWest Global's pro rata proportional equitable contribution to the system.
1221. By the way, that is not just one phenomenal year; that is the last two years, those statistics, and perhaps at the end of this we will give you some statistics like that to demonstrate.
1222. But we also, when I dismiss the producers, many of whom are marching around with their multi-tens of millions of dollars of cashed-in profits, many are, and I am proud of it, I don't deny them that wonderful result. Let's make more of them. But at least seven of our Canadian producers are wealthy public companies today, and there were none when we started a few years ago.
1223. So, as I say, let's put that to the side. Let's talk about only the people now that we have to serve -- the Canadian consumer and the social policies that have been asked -- that the broadcast system act asks the private sector to take on. That is fair ball.
1224. Well, the corner-stone of this is your 60-50. We believe implicitly in that because of what it has achieved so far.
1225. I think the new corner-stone that Jim Sward is talking about and that Global is talking about is, having done that, audience participation becomes number two, not dollars, not hours, audience participation. Other than the, you know, generic 60-50, which is another way of their saying in this submission, quality will get it, quantity will not likely get it.
1226. Our figures, which we can certainly table with you, we -- if you want to narrow this to 7, 8 and 9, and ignore all the invidious comparisons that CTV and some of its propagandists have spread in the last few months, you know, they have 25 stations; we have eight stations. They reach 98 per cent of Canada; we reach 79 per cent. We are quite confident the Commission knows the difference between hyperbole and self-serving as opposed to the hard facts.
1227. We have a lot of facts that we will at some point, either in our response to this, table with you as to the relative contributions to the system.
1228. Now, back to your main point, against that background, when you say something as, I believe, adventuresome as should we be talking hours, not dollars, I would be one who would agree with you; but I am a profound believer in the market. I believe that if you say to Canadian broadcasters, "In prime time you must run 50 per cent Canadian. We don't care what you spend. If you are suicidal, if you are Titanic, you will spend too little and you won't get the audience and you will go down. But if you have any brains, you will spend more money; you will spend it wisely to attract audience and we won't regulate that because that goes to your profit margins; that goes to your return on equity; and God bless you if you get it."
1229. If that is what you were saying, then you presented quite a challenge to our regulatory thinking, and I would accept it.
1230. THE CHAIRPERSON: Thank you, Mr. Asper, and thank you for not suggesting that I was before the BBG.
1231. Then, of course, one would have to look at what are the categories and what -- but you see that as a possibility.
1232. So, let's move on to the other and we will -- before I forget, we will -- you probably have heard before that we do want to have more information on margins made on various categories of Canadian and foreign programming, and counsel at the end will put on the record the dates and so on and the fact that, of course, you can claim confidentiality and the reasons for your claim at the same time. So that we can sort out a little better these interpretive battles as to who is doing what and what it is worth.
1233. So, let's look now at your more microincentives for making sure that there is sufficient hours of -- sufficient incentive to have hours of Canadian programming in prime time, and I have a few questions about how that would work.
1234. It becomes, again, a microregulatory system. I don't know if you were here to -- with the discussion of -- we had the CFPTA with 10, 10, 10 and the Directors Guild with 7, 7, 7. We had the discussion with Baton, with some of the producers who weren't quite sure that 10, 10, 10 was reasonable; and then people started whittling away at it by having credits, 150 per cent for this, 100 per cent if you do this, and in the end it allows the number of hours to be whittled down, but it requires intrusive regulation to test compliance at the end and see whether the credits are properly claimed, the complications of what they really mean, and whether someone is getting out of doing what they are supposed to do.
1235. So, one of the ones I want to understand better is I am looking at page 12 where you want 150 per cent drama credit, which is currently available to conventional broadcasters who schedule the programming in peak viewing hours, to be kept in prime time in your view, or would you advise or recommend like some have that it also be given for 10, 10 programming produced in day parts?
1236. MR. O'FARRELL: Our proposal, Madam Chair, as it relates to the 150 per cent credit is really a two-tier approach. We suggest that the 150 per cent credit could grow to 175 per cent when promotional expenditures to third parties are equal to or greater than 5 per cent of the licence fee for the program series. That 175 per cent could then grow to 200 per cent, if the programming achieves what we call a significant audience level, such as a five rating.
1237. We think that these are measures that would "incentivize" broadcasters, a, to promote heavily, extensively to third parties so it is not self-dealing; and, secondly, draw maximum audiences to their programming which in the end serves the objective of putting more Canadians in front of Canadian programs.
1238. THE CHAIRPERSON: My question was whether you wanted it to be just -- the credit be given only for exhibition of 10, 10 programming and prime time because there has been some recommendations that it also be given when it is that type of programming during the day.
1239. MR. O'FARRELL: It is under-represented programming and it is across the program day, the entire program schedule.
1240. THE CHAIRPERSON: So that the credit would be available no matter when you program, no matter when you show the 10, 10 program?
1241. MR. O'FARRELL: Yes, and I think Loren wants to add something on that.
1242. MS MAWHINNEY: Actually, the current regulations are if it is a drama program scheduled for adults between 7 and 10 and it is for kids if it is in any day part where you feel there is a maximum kids' audience.
1243. THE CHAIRPERSON: My question is whether your recommendation is that it still be limited to that period for adult drama or whether, if it were adult drama outside of those periods, it would still be available?
1244. MS MAWHINNEY: We hadn't dealt with that in our submission; but certainly I take Mr. Fecan's point that in the event somebody managed to achieve a 10-point production for day side, a soap for instance, I think that deserves merit because it is very difficult to fund and it is good to have Canadian programs throughout the day. So we would certainly consider it, but it was not part of our brief.
1245. THE CHAIRPERSON: Yes, I realize that. I wanted to see what your reaction was to other parties suggesting it.
1246. Now, the extension to the 175 per cent, would it be -- what level of expenditures? It says if it is promoted by expenditures to three party, would it be a certain amount of money, a certain value? There is no details.
1247. MR. O'FARRELL: Madam Chair, we are proposing that the broadcaster be entitled to 175 per cent only when that broadcaster has spent an amount equal to or greater than 5 per cent of the licence fee for the series.
1248. THE CHAIRPERSON: So 5 per cent of -- okay. I am just looking at this to -- you know, when you look at them you see how difficult all this is to calculate and to account for and to --
1249. In some ways, it is an attempt to, as I see it from some of the presentations we have had, to start with a very high level of hours and then say, "Well, it won't be so bad because if you do this and get this credit and spend money on promotion and you will be down to four and a half hours in no time". Whether that is a sensible way of doing things, rather than trying to hit a number of hours and not saddling yourself with intrusive mechanisms, that -- although I understand the word "incentive" as well; I am just trying to see what are the various ways this can be looked at.
1250. And the credit would be extended to 200 per cent if a significant audience level is reached. So what would be the details of the level of that?
1251. MR. O'FARRELL: A five rating. Let me just -- a five rating.
1252. THE CHAIRPERSON: I don't remember seeing that in your presentation.
1253. MR. O'FARRELL: That is correct. The reason why, Madam Chair, we have not -- let me back up for a -- what is behind this proposal is audience. It is the question: How do we bring more audience to watch the programs? How do we "incentivize" broadcasters' to feel that there is an upside in doing what, perhaps, they are not doing well enough now? Are we promoting enough? We certainly feel we are promoting enough, but maybe we can promote more. We think we can and should.
1254. If there was an incentive there, other broadcasters would probably feel the same way; and, if there is an audience threshold at the end of the day that raises the credit to 200 per cent, that again is an incentive that we think speaks to drawing more audience to Canadian programming.
1255. THE CHAIRPERSON: I understand the incentive and collecting it to audiences when it is promotion; but you are not going to get more audience because you have got a 175 credit. You know, that is a regulatory mechanism or an incentive. It is not for building audience; it is for promotion, yes, I can see.
1256. Page 10, you talk about if you overperform in Canadian drama in prime time, then the broadcaster would be rewarded by allowing relief from Canadian content in day time on the basis of one to five credit. So each hour of drama in prime time would entitle you to do five hours less of your safety net of 60 per cent.
1257. MS BELL: That is correct.

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1258. THE CHAIRPERSON: And over-performance would be based on the 50 per cent Canadian content?
1259. MS BELL: For the evening broadcast period, yes.
1260. THE CHAIRPERSON: And that would be in the six-hour block chosen in prime time between -- I think it's five and 12.
1261. MS BELL: We had suggested, to give some flexibility there, to allow broadcasters to pursue their own scheduling strategies so they could choose a period, any consecutive six-hour period between 5 p.m. and midnight, as their evening broadcast period.
1262. THE CHAIRPERSON: And if you did have hours of exhibition in certain categories in prime time, would the over-performance be measured by reference to that or by reference to the 50 per cent?
1263. MS BELL: The over-performance that we suggested was --
1264. THE CHAIRPERSON: To get the one to five credit.
1265. MS BELL: Yes, was measured against the 50 per cent, not against other commitments.
1266. THE CHAIRPERSON: So now one would again look at why is it necessary to make a hole in your safety net if you chose the sensible number of hours in prime time. You would think that the incentive would to be achieve that in the most profitable way possible.
1267. MR. SHEA: Madam Chair, if I may, you are quite right when you sit back and you say, gees, we are going to have much more work to do as a consequence of 175s and 200s and 250s, which we have not talked about yet, but who are these incentives for? They are primarily for the independent production sector. That's who they are for, because if we have 150s, they can get access to certain funds and so on. This is all about them.
1268. If we stay for a second on the day side part, because this entire hearing has been about three hours a night, and we are on the air and we have responsibilities to viewers 24 hours a day. And by and large our day parts, for the last number of years, have fallen apart from an advertising revenue point of view -- totally fallen apart -- primarily because of specialty. That's okay; new competition.
1269. But there is no incentive for small producers, whatsoever, to participate in day part programming. If the only thing that comes out of this hearing is more hours of prime time drama -- if that's the only thing -- you have made three companies richer, that's all you have done. You have not done one thing for the small independent producer. And what we were trying to do was to come up with some mechanisms -- for them, not us -- to try and get more participation from smaller independent producers in our day part programming.
1270. It's the only reason why we have also said let's do infomercials. Our day part has fallen apart; small producers make infomercials. It's kind of ludricrous that we have not got them on during the day when a group of Canadian consumers happen to like to watch them. But it's about them -- incentives for them -- not necessarily for us.
1271. THE CHAIRPERSON: I'm not quite sure I understand the incentives which we have just been looking at, how they result in an incentive for smaller producers.
1272. MR. SHEA: Because if we can come up with some mechanism that allows a benefit, we can then have more participation from independent producers. That's how.
1273. THE CHAIRPERSON: I was curious about the smaller ones, because presumably the incentive would be to produce the prime time type programming that would be produced by larger producers.
1274. MR. SHEA: On that square you are absolutely right.
1275. THE CHAIRPERSON: And then it would have the opposite effect by taking five hours that you could have devoted to infomercials.
1276. MR. SHEA: You are right.
1277. MR. O'FARRELL: You might like some ideas and not others.
1278. THE CHAIRPERSON: My colleagues tease me because I think infomercials are okay.
1279. MR. SHEA: So we are going to get it then.
1280. THE CHAIRPERSON: They'll have to be Canadian.
1281. MR. SWARD: Deal.
1282. CHAIRPERSON: We are getting derailed here.
1283. MS MAWHINEY: Madame Chairman, I think it's interesting that so many groups have proposed various proposals for incenting prime time drama. Obviously the reason is it's the most expensive to produce and it's the hardest to produce. So our perspective, that's different from Baton's, different from the CFPTA's, is with the added 200 with regard to ratings I think the direct result of that is encouraging scheduling decisions to maximize audiences. So that's the benefit that comes out of that one.
1284. THE CHAIRPERSON: Well, the result of the incentive is to draw down the number of hours also. It acts as a clawback and, if I read you, Ms Schuyler, when she appeared as Epitome, it's not -- incentives are good but they do have that effect. They claw back a number of hours and if you hit on the right number of hours, you would not really need them to incent you to do what you are supposed to if you had the right number of hours. It's not a perfect equation, of course, but they do have that effect.
1285. MR. SWARD: I would like you to look at the 150 per cent credit a little bit differently and sort of move behind my desk for a minute and pull up a chair and have a look at what it means.
1286. You are about to make a choice. Loren has two choices and we can go with this industrial drama that has been offered to us and it costs $60,000 a negative -- a play -- $60,000 a play. There is no credit. It's about six out of ten; it's Canadian. That's choice number one.
1287. Choice number two is $200,000 a play; it's ten out of ten, and there is nothing you can see that tells you you are going to get a lot more audience with one than the other. So just on those facts, you are automatically attracted to go to the $60,000 one.
1288. But here's the magic of the 150. The 150 says, look, if you choose this, I will give you another half an hour of U.S. prime time programming that you can program, and the margin on the U.S. prime time programming all of a sudden is partnered into this. All of a sudden you say, okay, I've got a new $50,000 here I can add to this, and it makes sense, and for other reasons you go ahead and do it.
1289. So this 150 credit serves as a real incentive to make that big step because all hours are not created equal. We can fill prime time drama with 99-cent repeats of "Beachcombers" or $225,000 every Thursday night for "Traders", and there is lots of spots in between, and that's where these incentives start to come in.
1290. Perhaps, Madam Chair, what you are thinking of is -- and we are not uncomfortable with the four hours that we have for Global Ontario right now in core prime because we cannot take credits against it. It's always four hours. We have to average four hours. You don't get to four hours by starting at seven and then having credits apply. The credits apply against the basic 50/60. So we are not uncomfortable with that aspect of the simplicity of it, but there is a very real and important role that the 150 plays. To the extent that we are suggesting it get more complex, it's simply again back to the theme of finding out the things that work, taking the good things, and making them better.
1291. THE CHAIRPERSON: I was looking for a statement, for example, that -- and I cannot find it now -- where you talked about being able to recoup your investment. I suppose the rest of the sentence is by having more opportunity to exhibit foreign programming that may have a better margin.
1292. MR. SWARD: That's certainly one way.
1293. THE CHAIRPERSON: Because when you say you will put some 99-cent programming, that depends on how many hours you have left in prime time to lose audiences.
1294. MR. SWARD: Certainly I agree with Mr. Asper though. You do not go into the prime time field with anything but your best shot and your biggest investments and your biggest risks. You cannot afford not to be there.
1295. THE CHAIRPERSON: That's a good incentive, isn't it? It's far less complicated than all this, is my point. I just want your comments.
1296. Your next incentive is -- or the next determination that I see as very difficult as well -- is at page 14 when you say that the determination of equitable contribution should be made on the basis of the economic potential of undertakings, and you give as an example, well we should analyze how much money you can get out of Alberta for advertising as opposed to the Atlantic; complicated formulas that would have to be taken into account to establish spending requirements. Presumably, they should be taken into account when there is exhibition requirements as well, but it's not quite as refined.
1297. And you also say, on the same page, that in establishing equitable contribution you should consider a number of market-related inputs. What are they besides advertising, or do you have other examples?
1298. MR. SWARD: I am sorry?
1299. THE CHAIRPERSON: This is at page 14 where you say, in the middle of the page, that we have an onus or responsibility to determine what is an appropriate contribution and that it should be made on the basis not only of how many people you reach, how many stations you have, but much more refined, the economic potential of where those undertakings are.
1300. Do I understand that statement properly?
1301. MR. SWARD: Yes, and that's an example --
1302. THE CHAIRPERSON: And other market inputs.
1303. MR. SWARD: That's an example that determining equitable and appropriate contribution is not some simple percentage of revenue or some simple test. And so these are offered as examples saying it's not a simple test.
1304. That goes to the corporate licence renewal process that we are recommending, and that's a process. It's a process where people can participate, interveners. You put your plans on the public record. It's the place where the whole issue can be discussed in detail. This might be one of the issues that we might put in our presentation when rationalizing why what we are putting forward, for either our licence renewal or our major transaction, is equitable and in the public interest.
1305. We may be using a number of different complex factors, and other people will have a chance to comment on them. It again speaks to the issue, Madame Chair, that the whole issue of appropriate and equitable is not a simple one-size-fits-all issue. It's not a simple issue, and the only way you could do it is to sit down and at once examine the assets of a company and determine individually, licence-by-licence, community-by-community, what it should be doing based on input from that community and then look at the total, in all its synergistic power, and determine what it could and should be on a going forward basis. And we cannot see any other way to do it than on that basis.
1306. THE CHAIRPERSON: And another rather complex matter, if we have spending requirements, is if -- I cannot find where the comment was, but if I recall it was that the Commission should look at other expense inputs to measure spending requirements, other than the ones we have. And if I recall, they had more something to do with what could be called overhead expenditures.
1307. MR. O'FARRELL: Indeed. We had this discussion, I think, at a licence renewal hearing where the subject of spending was on the table and we were saying the forms that the Commission uses and the definitions that the Commission has used over the years have not perhaps evolved with some of the changes that have occurred in the industry.
1308. For instance, capital amortization is not allowed --
1309. THE CHAIRPERSON: I found it on page 19.
1310. MR. O'FARRELL: Capital amortization is not an allowable expenditure. So somebody who takes a newsroom and builds computerized, roboticized systems does not have the benefit of including that as a Canadian program expenditure, while somebody who puts older technology -- useful but older technology that is less computerized and roboticized and has warm bodies holding that equipment, can report that program expenditure.
1311. It was simply to say that if you are going to go back, Madame Chair, to a program spending formula in one shape or another because you have decided that it's essential or required under the circumstances, when you do, it would be also very helpful to try to modernize and make the formula and the definition more current with certain realities that have changed since the definition was introduced.
1312. THE CHAIRPERSON: And it would certainly make it complex, is my point, because it would depend on the type of infrastructure, the age, how one manages one's business, and it would further complicate arriving at --
1313. MR. O'FARRELL: I do not think this is further complicated. I think it's simply fleshing out and modernizing a definition where certain elements may no longer be as useful and new concepts in the definition will capture more of what it is in fact you are interested in knowing in terms of spending.
1314. THE CHAIRPERSON: The examples you have here is "amortzation of capital costs of facilities, production equipment and other costs relating to program exhibition and marketing." We will have to ask Mr. Fecan to create a grid for that.
1315. MR. I. ASPER: Excuse me, Madame Chair, one more interjection. While you are doing that you might ask him to create a grid that makes the distinction on your first point, the quality of revenue between a Baton or a CTV who is able to participate in the $300 million national advertisement pool that only CTV and CBC have access to, and to which Global is denied because we are not national. And yes -- I'm not being facetious.
1316. THE CHAIRPERSON: That grid we will expect from you.
1317. MR. I. ASPER: You will get that with the WIC application, if it ever happens.
1318. THE CHAIRPERSON: But it certainly illustrates how difficult this can become.
1319. On pages 3 and 4, you make various comments that one of your aims is to ensure diversity and flexibility. We are going back full circle to the beginning of our discussion that you would rely on the 60/50 net, with possibly some holes in it, and additional requirements in peak viewing as the Commission determines at renewal, and that could be every seven years.
1320. MR. SWARD: That's correct.
1321. THE CHAIRPERSON: And now that we have at least discussed various ways of doing this, what in your view is the best way to achieve these particular goals, which is that there is diverse programming available to the audience and that it is brought to them by the broadcaster within a fairly flexible structure? What of the formulas we have looked at would best achieve that?
1322. MR. SWARD: We have come a long way towards diversity and quality. We have not quite got the viewing right yet but we have come a long way towards diversity and quality in Canadian services that are offered.
1323. This Commission has licensed and authorized more new services in the last six years than they had in the previous 15 -- Canadian services. On top of that, a whole bunch of other ones have been authorized. So we have diversity. There are instruments that we have that are working and what we are saying is let's take those instruments and where they are working, if we can make them better, let's make them better. So there is no revolutionary proposals that we have that take and change the entire platform to something new.
1324. We are here to strongly object to any concept of a simplified one-size-fits-all approach for the entire industry.
1325. Madame Chair, you raised the issue of diversity and micro on a number of occasions. Let me just characterize the recommendations that we are making in the following way: If you take all of the regulations and policies that this Commission has, and you put them into two baskets, basket number one is all those that relate to Canadian programming and basket number two a everything else.
1326. In the "everything else" basket, we have recommended a number of initiatives that you shouldn't do any more; you don't need to do. We have suggested you do not need to regulate commercial content. You don't need to have people counting whether it's a promo or it's commercial and is it Canadian and is it 12-minutes an hour or what the heck is it. You don't need that any more. The market is such a powerful regulator of that that you can get out of that business.
1327. So there are a number of areas where we have recommended that you can redeploy resources.
1328. Now over in the Canadian basket we are not recommending less regulation. We are saying there are a number of instruments here that have worked. Our recommendation is we build on those and make them work better.
1329. So there is no embarrassment that we have in saying let's take the 150 and make it more complex, because it works. And if we can fine tune it and even make it more of a rifle shot, more of a target, it will work better.
1330. THE CHAIRPERSON: You mention that at renewal, so that an equitable regulatory expectation is addressed for you, that the Commission would need clear, measurable benchmarks. Are those the number of audience you reach, the markets you are in, the type of programming you propose to do? Is that what you mean by benchmarks?
1331. MR. SWARD: Perhaps you can help me and give me a reference on that so I can just understand the context.
1332. THE CHAIRPERSON: I think it was in the context of your proposal for coming forward as a group. So it must be in --
1333. MR. SWARD: That's page 30, yes.
1334. THE CHAIRPERSON: Hopefully I'm not misreading what you said.
1335. MR. SWARD: I'm sure you are not.
1336. THE CHAIRPERSON: I thought there was a --
1337. MR. SWARD: It's just late and I just didn't want to get off on a tangent without fully --
1338. THE CHAIRPERSON: On page 31, what is it that you see? Phase one would be licence-by-licence reviews, at the top, and phase two would be a corporate presentation?
1339. MR. SWARD: Yes. If I could just take you to this room for 90 seconds and tell you our vision on this.
1340. We would think that looking at Global's licence renewal would probably be a two-day process. On the first day we would individually, market by market, starting from the east, the Atlantic, have our management teams come up and present what they are doing. We would arrange a town hall satellite delivery of people in Halifax who wanted to watch it or who had intervened and wanted to participate. So they could participate right there. And those that felt very strongly, I think we do have to consider some sort of assistance to attend if they feel personally that they want to attend.
1341. So we would go over each station throughout the day, market by market; the Atlantic, Quebec City-Montreal, Ontario, across the country. And in each case you would have a discussion both with the management, with their proposals, and with the local community.
1342. The next day, we -- me and the men and women I work with -- would talk about our corporate national commitments, what we as a group could do with corporate national commitments. Again, people that have commented on and intervened on that aspect, in one way or another of our presentation or our filed proposal, would appear and comment on it.
1343. At the end of the day of the two-day period, we would end up getting licences issued which we see as, in each case, being for the Atlantic with a specific set of terms and conditions that were determined to be appropriate for the Atlantic operations; local programming, anything that's relative to that would be specific to that. All the way across the country the same thing. And then, commonly attached to every one of them, the national obligations, goals and conditions of licence that would apply to all those stations.
1344. That is the way we see that process taking place, how it can include the people from different communities, and how you can have a look at the piece parts and the whole thing all at once, and others can at the same time.
1345. THE CHAIRPERSON: I would like to go back to benchmarks. What do you mean by that? What would be the criteria to decide what is to be done? Is it the type of thing we have been talking about? What is the type of programming you are prepared to do and, therefore, based on the cost of it, the returns expected; how many hours; what type of market are you in. These would be the benchmarks?
1346. MR. SWARD: These would be for licence renewals, Madame Chair, and there is no -- I am still having trouble finding the word "benchmark" but I understand what you are saying. We are not --
1347. THE CHAIRPERSON: Anyway, I think it's a good word to use -- benchmarks. You didn't use it; I did.
1348. MR. SWARD: Next time you will find the word "benchmark" frequently placed throughout our brief. We will use it a lot.
1349. THE CHAIRPERSON: But they are the type of things we have been talking about today? Depending on the type of direction the Commission is going in, it would look at markets reached and the returns possibly on the various types of programming?
1350. MR. SWARD: Absolutely. These are businesses that are ongoing. They have a history; they have a role. They have a vested interest in what they are doing. The history of this Commission has been to look at where it's going in the context of where it is and how it's performed. The process that this Commission has used, and used quite effectively, is to examine how the licensee has conducted themselves in the previous licence period, what has changed, and where can they do better, and listen to other people's opinions on that.
1351. So there is no fundamental change that we are recommending to anything other than the process, but changing the process, being able to examine what we have in one process, will make a major difference in your ability and others to be able to understand and get equitable and appropriate contributions from multi-faceted organizations like ours.
1352. THE CHAIRPERSON: Because presumably criteria, benchmarks, whatever they are, would have to be determined and then used as a point of reference for competitors.
1353. MR. SWARD: I think the benchmarks already exist and are commonly discussed. They are part of the currency between us and they are --
1354. THE CHAIRPERSON: But the need for them and the extent to which they are focused on would presumably grow when you have a multi-station group approach to looking at requirements.
1355. MR. SWARD: We can only assume --
1356. THE CHAIRPERSON: Because it's not going to be discrete as it has been.
1357. MR. SWARD: We can only assume that the reason why we have the formidable requirements on the Global Ontario licence is because we have the privilege to have other television licences in Canada. In the absence of that privilege, I'm sure that we would not have the Global Television Ontario licence requirements which are very close, almost mirror, the national CTV requirements as a network.
1358. THE CHAIRPERSON: Good point.
1359. MR. SWARD: Can I can go now?
1360. THE CHAIRPERSON: We do have a benchmark, and for having made such a good point I will give you a five-minute break.
1361. I have just a few discrete questions -- the extent of my questions on the regulatory framework, as I explained earlier I was going to look at, and my colleagues probably have questions as well. So we will take a five-minute break and come back and I will not be long and give them an opportunity if they have questions.

      --- Short recess at / Courte suspension à 1750

      --- Upon resuming at / Reprise à 1803

1362. THE CHAIRPERSON: I have to admit now that my five-minute break was so I could find the word "benchmark" and here it is. It's at the top of page 4, where you are talking about:

      "...corporate group clearly present its current performance in a number of key areas including Canadian programming and their plans to improve and enhance their performance. It could include clear, measurable benchmarks that could be tracked in future years."

1363. That's what I meant was: What would those benchmarks be? Presumably, they would be looked at over time and for various players in the industry.
1364. MR. SWARD: I can explain the use of that word in that context, if you --
1365. THE CHAIRPERSON: Yes, go ahead.
1366. MR. SWARD: This feeds to our belief that we would really like to get the Canadian viewer into the national dialogue, we would like to get performance into the currency. In the future debate discussion, we would like performance to be part of the currency that we talked about, not replacing anything. This refers to setting a benchmark saying, "How are you doing with Canadians watching your Canadian programs? Show what your plans are to do better, pick a benchmark and report annually on a public basis on how you are doing against that benchmark."
1367. THE CHAIRPERSON: So, it's used more in the sense of a performance measurement --
1368. MR. SWARD: That's correct.
1369. THE CHAIRPERSON:  -- rather than benchmarking as to what you look at to establish contribution?
1370. MR. SWARD: And it's pursuant to -- again we are not people without strongly-held views on things -- our strongly-held view that getting the concept of performance into the process is critically important if we are going to make progress.
1371. THE CHAIRPERSON: At page 18 you state at the bottom, the very last sentence:

      "...the only realistic qualification of success for Canadian programming is not what is spent, but whether they are available and watched by Canadian audiences."

1372. Do you have any comment on how helpful the CAB's viewership goals would be in reaching our objectives?
1373. MR. SWARD: Absolutely. We not only have comments on how they would be helpful, but some very specific proposals to put on the record on how to make them work. Glenn has the specifics on how to make it work and I am just looking for my notes in order to try and not go on too long. If I follow my notes, I find that I get my point --
1374. THE CHAIRPERSON: You have all the time you need. It took me 10 minutes to find "benchmark".
1375. MR. SWARD: We see the adoption of the recognition of viewers in Canadians watching Canadian television. We see that as an instrument of leadership, not a regulatory instrument per se, not designed to replace anything that exists, not designed to do anything other than to, number one, put on the table that we want to grow. It's our objective to get more Canadians watching Canadian programming.
1376. If the Commission takes that as a leadership perspective, if somewhere in whatever comes out of this hearing is a statement that on a going-forward basis that is important, that sets a common bond and glue between all of us. Whether it's the independent producer, big, small, in between, us, the small broadcaster, we all have a new aspect, something that we have to stand up to.
1377. It is not a fuzzy concept. It's not a fuzzy concept. We are all uncomfortable with the fact that we spent millions of dollars and a lot more hours and we have only got Canadians spending 32 per cent of their time watching Canadian programming. Nobody has challenged the 32 per cent. Being able to track this is very easy. It's definitive.
1378. Let me tell you that it's not a comfortable test to stand before for any of us, including the CRTC, but it's a necessary test. I personally believe that there is a great danger in underestimating how powerful a Commission statement on viewership -- viewing of Canadian programming, how powerful a motivator that's going to be. Let me just go one step further and give you an example. Part of the seduction that can take you off track going after Canadian viewers is the political nature of it. By the Commission saying performance is an issue, you start to depoliticize Canadian programming.
1379. I have had people come to me and say to me, "Sward, you are pretty good at getting an audience, you and Loren and Kevin and the rest of you. You are pretty good at it, but politically you are not very smart. You have four one-hour 22 episode series on television, they are delivering the top rated Canadian schedule, but that could be eight 13-hour series, that could be 16 half-hour programs. Think about it. You would have 16 friends at this hearing, rather than four. You would have 16 entries in the Geminis rather than four."
1380. Right now there is a fair component in the system where the Canadian content is programmed not enough to the audience and too much to processes like the one we are in today. If the Commission put the issue of performance on the table, if they say, "We are going to be really interested in how does it perform. It's nice to hear about who produced it and where they are from and what it is and so on and so forth. We want to hear that, but we also want to know how is it performing", that will, I submit, make a difference that I think you underestimate how big of a difference it will make.
1381. Specifically, in terms of how to put it into place, if that would be constructive, Glenn has some detailed advice on how to put it into place.
1382. MR. O'FARRELL: Our suggestions, Madam Chair, are based, for the purpose of this exercise, on the goals to viewing that the CAB advocated. If you bear with me for a moment, assuming that that were the goals the Commission felt were relevant to achieving the objectives of the Act, they would be increasing viewing to Canadian services overall. The second goal would be increasing viewing to Canadian programming and the third goal would be to increase viewing to the under-represented categories whichever way they may be defined as a product of this hearing.
1383. So, three goals: Canadian services, Canadian programming and then under-represented. Once those goals are set, all the players in the system would be required to make a contribution to achieving those goals. This can be tied in, we think, to the corporate approach to group licensing, where those specific proposals are laid out in detail so we can understand how the contribution to the overall goals flows from each corporate group. When? Well, of course, it would be at the time of that licence renewal or first corporate group licensing exercise.
1384. As to accountability, our people in research in Global have had extensive conversations with the folks at Stats Canada and the good news is that the information is all there. It is there compiled on a program-by-program basis, daytime, so you have all of the categories of the program and when it was exhibited and then it's married to the BBM numbers. StatsCan does do that. The question then was: Can StatsCan translate it into information that can be put on the public record that would be useful for the Commission, for the stakeholders, but for the public at large also to see how Canadian programming is either improving or not in terms of viewing trends?
1385. Would you mind putting that screen up?
1386. What we did was we showed you without the data in it, because it's not available right now and I will come back to that in a minute. On the screen you will have the first document, which is called "Annual Report Canadian Programming". It will take a minute to get this up here.
1387. THE CHAIRPERSON: Let me ask while this is occurring, in the end it would be to give that goal a profile?
1388. MR. O'FARRELL: And a commitment on a corporate group basis.
1389. THE CHAIRPERSON: But not as a regulatory --
1390. MR. SWARD: For the Commission to give it a profile, for the Commission to talk about it as an important priority as we go forward, and for all of us to put on the record how we are going to do it and to be held accountable to the embarrassment of not doing it or the joy of doing it.
1391. MR. O'FARRELL: So, allow me to walk you through these charts. The first chart is Canadian programming. This is share of all viewing to English-language services. On the left-hand side of the chart you have a breakdown and we put the year 1997 for no good reason. It can be whichever year. Then we track going forward. In each year you would have the historic performance of the programming. So, it wouldn't be year-by-year, it would be historic and current year -- or past year, I should say. So, you get your total.
1392. You then have the sector of private broadcasters as a whole, the CBC, specialty and pay. Then, on the same basis, share of all viewing to English corporate groups operating English-language services. You would have the various corporate groups broken down, Global, CTV, CHUM, WIC, Craig, NetStar, Astral, Alliance Atlantis.
1393. If we go to the second chart -- and again just to reinforce this, this is information that Stats Can has and is capable of putting in this format. We thought that it would be helpful for you to see it presented as such. It's the share of Canadian viewing to English services. So, this is Canadian programming, again private broadcasters, CBC, specialty and pay, and the corporate groups on the right-hand side.
1394. In the last chart we put it to categories 7, 8 and 9 because those are the current under-represented categories, but our suggestion would be it would apply to the under-represented categories as defined as a product of this hearing. The net effect would be that you would be in a position to monitor on a year-to-year basis the performance of each corporate group and determine the level of commitment and compliance or not as a matter of the commitment that they had made at their corporate group licence renewal.
1395. The one issue that we should table here is that StatsCan said this information can be treated -- the timeliness of it would be a matter of the Commission, again coming back to Jim's point, stating that it has become a priority for the Commission to measure viewing and, therefore, to allow perhaps resources within the Commission to process the material more expediently than currently may be the case because it doesn't go on to a public record in a format such as this.
1396. THE CHAIRPERSON: I knew sooner or later you would come up with a helpful grid. This certainly puts it in a better perspective when you look at it that way. As an adjunct to regulatory mechanisms, it can certainly be very helpful. It's a little more difficult to understand how it would work as a basic regulatory mechanism.
1397. You have heard other parties ask the question of the redefinition of peak time hours and the possibility that we would get more family drama at the expense of the more adult theme dramas. Do you have any comment perhaps, Ms Mawhinney, about whether that's a preoccupation we should have, the idea that if you allow 7:00 to 8:00 to be added to the peak hours for 7, 8, 9 programming, there may be a temptation to have family drama in the 7:00 to 8:00 at the expense of more adult drama in the rest of the peak hours?
1398. MS MAWHINNEY: I would suggest to you that may be an opportunity. We have found, for instance, when we varied "Ready Or Not" at 7:30, which doesn't count towards our COL, the repeat of that program performed 30 per cent better than the original did post 8:00 o'clock. So, there is not an incentive to do Canadian programs -- to do family-oriented programs and air it at the appropriate time because one can't count it against our COL mechanism. So, there is an enormous amount of programming available in that genre.
1399. To Kevin's point about the small and medium-sized enterprises, a lot of them do programming of that nature. So, we think it's an opportunity for the system that presently discourages that kind of programming. It would instead open it up.
1400. THE CHAIRPERSON: And there is enough product there that there would not be the temptation then to do less adult programming in the other hours.
1401. MR. MAWHINNEY: Absolutely not.
1402. THE CHAIRPERSON: It would be to you a clear addition not at the expense of the other types of programming?
1403. MS MAWHINNEY: We are not advocating an abandonment of peak prime time. "Traders" is a 10:00 o'clock show, "Outer Limits" is a post 9:00 o'clock show, but there should be room on our schedule for programming that is geared to families or to tweens during the weekday periods. We had have an enormous amount of submissions that we have not been able to pursue because we really have no arena for them to be properly placed.
1404. MR. SHEA: Can I also add, Madam Chair, that our most successful programming from an export point of view, is in this category of family programming. Unfortunately, there aren't incentives or opportunities to schedule it at the appropriate time -- namely, 7:00 to 8:00 -- but it has the highest return in the export market of any other programming we do.
1405. THE CHAIRPERSON: Most parties have advocated, I think, lowering the peak from 8:00 to 7:00 and, in large part, for that reason.
1406. Access to funds by broadcasters. At page 41 there are comments about a 40 per cent envelope for private conventional broadcasters. So, that would be direct access by broadcasters?
1407. MR. MAWHINNEY: No. What that is referring to is the fact that in the EIP envelope of the Canadian Television Fund, the CBC has a discrete envelope of 50 per cent. Once that is taken into account and then you add the usage that pay and specialties are creeping up to -- at one point they were 12 per cent, last year they were 20 per cent -- the conventional broadcaster's share of that portion of the envelope is shrinking at the same time we are desirous of doing more, particularly more indigenous.
1408. So, we are advocating a discrete envelope for ourselves of a 40 per cent share of that envelope, but that refers to programming that will appear on our networks as opposed to affiliated production company access.
1409. THE CHAIRPERSON: So, you are not proposing any changes as to the rules for access to the EIP. What you are proposing is that there be a reduction -- well, there be an envelope set aside for projects?
1410. MS MAWHINNEY: Those are really two questions.
1411. THE CHAIRPERSON: Yes.
1412. MS MAWHINNEY: So, indeed, with regard to a conventional share, we are advocating an envelope because we want to protect our --
1413. THE CHAIRPERSON: And that would be for you and others --
1414. MS MAWHINNEY: And Baton and CHUM and A Channel and everybody, but Baton and Global have a condition of licence at present that speaks to dramatic hours, which are dependent on the funds. So, that's the first question.
1415. The second question you are asking is about affiliated production company access. Baton spoke this afternoon about affiliated production distributors should have access to Telefilm programming. We would agree with that and we would also go further.
1416. When the Fund was created, the CRTC recognized that doing under-served categories of production is the hardest to do. In the PN, it was stated that the Fund should precipitate benefits to both the production community and to the broadcast community. So, in two ways: One, the LFP portion of the licence fee was allowed to count against the expenditure requirements for those broadcasters that had them and, number two, broadcaster affiliated production companies could get access to 33 per cent maximum on the licence fee side.
1417. We would suggest to you that it may be time to look at the EIP envelope and wonder whether or not a production company affiliated with a broadcaster should not be discriminated against.
1418. THE CHAIRPERSON: And this, in your view, should be for even productions that are intended for their own?
1419. MS MAWHINNEY: For our own air.
1420. THE CHAIRPERSON: Because you have heard, of course, producers and other parties telling us or being asked by us to comment on what safeguards there should be and the production companies who already have broadcasting licences, of course, have such terms and conditions and propose that they be imposed if there is any relaxation for broadcaster access; in other words, that it shouldn't be for your own --

      1820

1421. MS MAWHINNEY: First of all, yes, I think that we would agree that there should be some safeguards to make everybody more comfortable.
1422. Secondly, we at -- the conventional broadcasters are the only ones that have obligations with regard to first-run programming. So it is a lot easier for specialty channels to not produce for themselves because, often times, they are running either repeats or genres of programming that are not so fund-dependent.
1423. However, I would point out that Teletoon has -- the owners of that particular entity have access to produce for themselves.
1424. THE CHAIRPERSON: Yes, as opposed to the ones that are held by -- Alliance and Atlantis, I believe, have similar conditions.
1425. So, what would be the safeguards that you feel are required to give a level of comfort to parties and that would be acceptable to you?
1426. MS MAWHINNEY: Well, we could certainly look at the envelope that was issued for the LFP. I don't believe that there has been an abuse on that side in terms of that envelope has never been completely drawn down. So, perhaps, that maximum of 33 per cent could apply to the EIP as well.
1427. THE CHAIRPERSON: But no safeguards as to whether you -- or you would want complete freedom to be able to have access to the funds for programming intended for your own screen?
1428. MS MAWHINNEY: In terms of --
1429. THE CHAIRPERSON: Or your own --
1430. MS MAWHINNEY: In terms of our guarantee to the production community that we would not abandon them completely; I think there has to be --
1431. THE CHAIRPERSON: I am sure they won't even like "completely".
1432. MS MAWHINNEY: I think there has to be some safeguards.
1433. THE CHAIRPERSON: What should they be?
1434. MR. O'FARRELL: Maybe I can offer a thought.
1435. THE CHAIRPERSON: Well, you haven't thought of safeguards yet?
1436. MR. O'FARRELL: No, we have thought of it, and we think that the way to approach it, Madam Chair, is perhaps that throughout the range, we would be comfortable in the vicinity something to the tune of 25 per cent to 33-1/3 of productions that we would acquire from related companies that would have access to Telefilm funding. On that basis, it would seem to us to be responsible.
1437. The basic premise is you don't want any good ideas shut out because of an ownership issue. We think that within that kind of a range we would be able to bring value to the system.
1438. THE CHAIRPERSON: And you also find important that the limitations vis-à-vis being able to be a distributor as regards the funds should in your view be removed?
1439. MS MAWHINNEY: We think that the situation that happened with Baton this year, and specifically with regard to "Flesh and Blood", where a foreign distributor, a British distributor, was the only entity that could outbid the traditional incumbents in this country is a good reason to look at opening the field up to non-traditional distribution entities; and provided that the distribution agreement was negotiated separately from the licence fee, and provided that -- I don't suspect that we would have -- or Baton would have -- any luck in persuading Alliance Atlantis to give up distribution rights. That is a core part of their business; but there are an awful lot of smaller, medium-sized enterprises which are not vertically integrated which may relish going to a broadcaster, say a broadcaster-affiliated distribution company that is not a direct competitor to them, in order to have access to foreign markets.
1440. THE CHAIRPERSON: I think I heard CTV proposing that there be a bidding process for distribution rights.
1441. MS MAWHINNEY: Sure, so that, say it was a kids' show and this company, you know, offered a guarantee of $200,000 for worldwide rights per episode and Cambian outbid us and said it was 250, then obviously they would go to Cambian.
1442. THE CHAIRPERSON: Now, you on page 17, paragraph 3, which is another complication of spending -- of Canadian program spending requirements, you are concerned or opposed to the requirement that the Commission has to deduct cost recoveries from sales of programming to third parties when -- to go towards meeting spending requirements; and you make the statement that it encourages counterproductive program exhibition practices and encourages the creation of less rather than more windows for Canadian programming.
1443. I assume that what you are saying is if you are not going to sell it for a second window, then you have to deduct the money you made from meeting your spending requirements. Is that it?
1444. MR. SWARD: This goes back to an experience, and I guess once bitten, and it gets back to our appetite for Option B, but this goes back to more than one occasion when we were operating under I guess what has become Option A, Madam Chair, in the last licence period. We had a couple of examples where we had programs and people wanting to acquire those programs in the interior of British Columbia, Newfoundland and one other place, and we were all set to ship them out and we were quite thrilled and the accountants weighed in and said, "Now, just a second, this means we have to reduce it and it might put you off side on the spending requirement because our sales have really gone up. We have had a good year." And so we had to put everything on park -- we didn't put everything on park, we sent them the programs any way.
1445. But just that experience of having everything sort of stopped because there was some kind of a problem that it might cause in a form that we have to fill out when the objective was to get this program to as many Canadians as we could. So that is a very -- that comes from a very remote, not experienced often, incident that left an impression on me and a few of the men and women I work with.
1446. I wouldn't go -- as Mr. Fecan said, I wouldn't let this come between us, but there is -- the locomotive is behind me and in front of me. I am the sandwich in the process.
1447. THE CHAIRPERSON: I understand this regulatory mechanism, I think, came into play to prevent double counting.
1448. MR. SWARD: Yes, it did.
1449. THE CHAIRPERSON: So do you have any suggestions as to how you could do both? You know, not have the double counting.
1450. MR. SWARD: I think, Glen, double counting -- and we are back into these long discussions we used to have --
1451. THE CHAIRPERSON: Until we settled it and said, "No, you can't do it."
1452. MR. SWARD: As long as you only count it one place, it is not double counting. That was not our problem with this, was it?
1453. MR. O'FARRELL: No.
1454. MR. SWARD: We were only counting it in one place. We weren't --
1455. THE CHAIRPERSON: We wouldn't have a problem with that. It is just that the other party then counts it as well.
1456. MR. O'FARRELL: We thought it was fair to put back on the table in terms of third party sales. The rationale for that is, to be very candid with you, it doesn't happen all that often; and the fact that we have to go back and do another accounting exercise to reconcile it is -- this was an accountant's suggestion, by the way, so I take no ownership in it. And they were looking to do less work, basically.
1457. THE CHAIRPERSON: U.S. contribution, everybody has had some say about that in various ways and have suggested various things the Commission should or could do -- the "should" is always stronger than the "could" -- to ensure that there is a contribution, and yours is at page 18 where you suggest, if I recall, that 25 per cent of wholesale rate paid to U.S. services should be contributed to the fund.
1458. Now, my question is: Isn't that going to then be negotiated between the U.S. service and passed on to the subscriber?
1459. MR. SHEA: I guess what we should do is take it to this ultimate year where you are going to have a review of licences.
1460. Madam Chair, we took the point of view that you randomly put these channels on an eligible list and you can randomly take them off and create a scenario to put them back on again. So we hypothetically say pick the year 2001 or 2002 now and put the U.S. services on notice that there is going to be a new methodology in getting on the eligible list in Canada; and the list will include whatever your rate is, it is going to be negotiated here, and I will come back to that in a second.
1461. Secondly, you will agree not to buy exclusive North American rights; that you will allow rights opportunity in Canada on a non-exclusive basis.
1462. Thirdly, from a consumer perspective, you will respect our advertising regulations in this country because much of the advertising that is carried on U.S. specialty services is inappropriate, one might say against the law, for this country. So I think what we are suggesting is stiffen it up a little bit.
1463. Coming back to the rates, Madam Chair, last Friday we got a cheque sent to us for prime television and the cable operator made a rather drastic mistake because he included his entire list of payments to every other network, both domestic and foreign.
1464. THE CHAIRPERSON: This is the window we were looking for yesterday.
1465. MR. SHEA: I hope if Jane Logan is not here she is aware of this.
1466. THE CHAIRPERSON: Because she will be -- she will find you a very interesting man.
1467. MR. SHEA: Madam Chair, I was --
1468. THE CHAIRPERSON: And I may, too.
1469. MR. SHEA: I respect that this was a mistake. We are not going to enter this in as evidence.
1470. But we were absolutely stunned to see some of the rates paid to American services -- stunned. On average, most of those in tier three, as we know, took a dramatic cut in their wholesale fee -- dramatic from what our plans were. We are seeing U.S. services that are getting in excess of 40 cents -- absolutely shocked.
1471. In America, most of these services are two or three or five cents. They are charging much more in this country than they are in their own country. We think from a consumer perspective, Madam Chair, you have every right to call these characters in and say, "We are going to reset the rules here." Because in effect what you have created is that these are now monopolies in this country.
1472. Jim and I witnessed a situation this summer with a small little cable operator down east who just got notice from a very powerful American service that was doubling his rate; and they had done market research in their area to determine that if they took it off, they would have consumer outrage.
1473. But I think -- and it is too bad Antonia is not here -- that if the consumers ever saw what they were paying for these U.S. services, in comparison to the Canadians, they would be outraged.
1474. So we think it is high time to reset the stage, put them on notice, bring them in and say, "You want to get on the list? We regulate the rates of every other Canadian specialty and they make contributions. So, 2002, anyone on the list, your rate is 10 cents, just the way it is in America". That is what we think you should do. We think you owe it to Canadian consumers because you do regulate our rates. Even though we are in a tier, you regulate the basic rate and then we regulate the rate -- pardon me, we negotiate the rate from there with the cable operator.
1475. So we think it is time to get stern on this.
1476. THE CHAIRPERSON: Is it in Global's presentation that there is a suggestion that the fee should be no less -- the rate should be no less than that charged for the lowest rate charge in the States?
1477. MR. SHEA: That is correct; and you can get the published rate cards of these services, because they are three or four or five times the price here and this market is all gravy.
1478. THE CHAIRPERSON: Now, rather than get a missile from the Americans, should we risk getting one from the cable industry by getting the cable industry to deal with this, or is that possible?
1479. MR. SHEA: Madam Chair, these services are being directly sold to Canadian consumers. I think you have absolutely every right to have a discussion about rates. You will help the cable industry because the rates will come down. You have created this monopoly list. You get on it and then they turn around and they say, "Here is our rate," to the cable company up here. It is not Mr. Rogers' or Mr. Shaw's fault. They are saying, "Here is our rate. We are on the list. We are special."
1480. THE CHAIRPERSON: But presumably --
1481. MR. SHEA: Why don't we just go down and start a service in the U.S. and get on this list?
1482. THE CHAIRPERSON: It has been tried.
1483. Presumably, the wholesale rate and the retail rate go hand in hand, though.
1484. MR. SHEA: Precisely my point.
1485. THE CHAIRPERSON: The cable industry has something to lose as well.
1486. MR. SHEA: Precisely my point. If the rate goes down, the rate to the consumer should go up; or, more importantly, as I think Ms Logan tried to indicate, maybe the Canadian services can get more balance back to our wholesale rates because it is our rates that have been affected because the other rates are so high.
1487. THE CHAIRPERSON: My question was: What is the most sensible or effective regulatory way of getting at this?
1488. MR. SHEA: I think it is rather simple --
1489. THE CHAIRPERSON: And that is why we are saying we will get a missile from either and which is easier to handle?
1490. MR. SWARD: In this case, you are going to have the Vice-President of regulatory and legal on this subject.
1491. MR. SHEA: I go back to 1987 when they first made it on the list, which was an absolute shock. At the hearing, the first specialty hearing, the notion of -- it was then CNN and so on -- weren't even discussed, and suddenly they are on this eligible list. They were elated. And since then you have added various people to the list, and I say quite simply, we have licences that last seven years, so should they in specialty and pick your date and say, "At this point if you want back into Canada, we are going to have a discussion about your rates and your contribution". Get them back on the list. They will want to get back on the list.
1492. THE CHAIRPERSON: North American rights now, another problem. You raise it at page 24, I think, yes, we have been asking various broadcasters to get a better understanding of it. How wide spread is this practice of having the North American -- the long-term agreements for exclusive North American rights depriving the Canadian possibility of getting rights to programming? Is that something that is growing very quickly? Have you experienced it often; or is it the few cases that we have heard about --
1493. MR. SHEA: I will start and I think --
1494. THE CHAIRPERSON:  -- such as the Lion King?
1495. MR. SHEA: I think Jim will also want to supplement.
1496. We are seeing it more and more. We recently tried to acquire a movie for prime only to find out that now the Gulf Network is buying exclusive North American rights. Again, it is this whole subject of you put them on the list and there is absolutely no accountability as to how they conduct themselves. So, we are seeing it firsthand directly now as we try to acquire product.
1497. But I think the most significant fear is not necessarily exclusively the American networks but, rather, what is happening as a consequence of consolidation on the advertising side. We now have, Madam Chair, one advertiser that represents about 35 per cent of our business. That is rather frightening.
1498. In America, there are essentially now 10 or 12 major agencies, and they, in many instances, now own content, they own product. There may well be a day, unless we have this notion of non-exclusive Canadian rights in conventional and specialty, where Ford says, "I am buying North American rights. I want this product on all the border stations. I don't necessarily care about the contribution I am going to get from Canada" and it is that that we find frightening.
1499. But I know that Jim has another example of a specific show that is familiar to you and who owns the product for Canada.
1500. MR. SWARD: Which one is that?
1501. MR. SHEA: Rosie.
1502. MR. SWARD: We found a number of rights have, for example, like the "Rosie O'Donnell Show", which has -- if you go back 10 years ago, all the rights to the programs were held by broadcasters somewhere. Now, it is no longer the case. They are either held in the United States on an exclusive North American basis, or they are held by advertisers who are multinational advertisers, and they basically put them where they want with barter or other kinds of arrangements.
1503. This is growing. Is it overwhelming at this point? It is in specialty, almost. I guess it is overwhelming in specialty because as long as the American services distribute it here, they have got their North American rights, that closes the door for a Canadian enterprise to come along and say, "I can buy those rights and do a Canadian service out of this; it is better".
1504. So it is overwhelming on the specialty side. On the conventional side, you can feel the hot breath of it starting on the back of your neck, and it is the shifting, it is the slow elephantine shift of economics between the two countries. In the environmental scan, you probably -- or perhaps -- noted that the advertising -- television advertising spending per capita in the United States five years ago was double what it is in Canada. So every viewer and American broadcaster got -- they could get twice as much of a return in advertising from it.
1505. In the last five years that has gone to triple. It is now very, very, very close to the point where an American broadcaster with access into this market through the border stations can say, "We will buy that program" -- an American advertiser -- "We will buy that program on North American rights. We are actually getting a bargain because we are getting Canada thrown in".
1506. There is a slow shift southward of economic power and of control of advertising dollars and of Canadian enterprise that is becoming international or selling out to international enterprise that is making this border disappear.
1507. So that it is not something we deal with every day. We find more often there was a couple of very strong mid-seasons that came out last year -- mid-season shows on the U.S. networks. We weren't interested. We had our plate full with shows, but we know another broadcaster that was interested and they put in what should have been a pretty good bid for them and they said, "You know, we are just going to let the border broadcasters have it and let it go into your markets and we are going to up their price for it. We can do better that way."
1508. THE CHAIRPERSON: That is another problem, though, that there are some other solutions for that which are suggested --
1509. MR. SWARD: There are.
1510. THE CHAIRPERSON:  -- such as more sophisticated substitution.
1511. MR. SWARD: So it is happening. I certainly don't want to represent on the conventional side that it is at the crisis point or we are at the point where it is about to collapse or that we need any sort of emergency measures, other than to be aware of it, and that is what leads us to other instruments, that all it does is just sort of gives us -- tighten up our ability to be able to stand up at that border, whether it is the non-simultaneous substitution recommendations we have made, or the sourcing of U.S. services by BDUs from same time zone, larger city.
1512. THE CHAIRPERSON: So that will be phase two of Mr. Shea's impassioned stand at the border.
1513. MR. L. ASPER: Madam Chair, one other point on that is that one of the things that can be done not necessarily by the Commission but by the Canadian government is to help us change the U.S. foreign ownership laws of broadcasting because one of the solutions to all of this is to let Canadians own U.S. broadcast outlets. The only way we can do that is we are going to have to open up our borders somewhat, but as long as we have the content restrictions we can do that, and all the other restrictions and regulations we have in this country.
1514. We benefit a lot more from owning U.S. broadcast outlets than they do from owning our outlets because they don't have the same protection issues; and I think, number one, owning the U.S. border broadcasters is one thing, but also being able to own the U.S. networks, by them going in to say, "Okay, we are going to make sure that "Traders" gets on a U.S. broadcast," you know, a wide distribution in the U.S. system, which will encourage and create a lot of jobs in Canada, and more opportunity for Canadians than it will be vice versa. It is the whole free trade benefit to Canada. I think that is something that we also have to try to establish.
1515. THE CHAIRPERSON: Thank the lord I don't have to decide that one.
1516. THE CHAIRPERSON: My last question: On page 35 you were asked, as was everyone else, whether Canadian cultural and racial minorities and aboriginal peoples are well-served by mainstream conventional television broadcasters, and your answer with regard to cultural and racial minorities is:

      "We believe that multicultural stations such as CFMT are best positioned to provide programming that reflects the needs and interests of multi-racial audiences."

1517. Would you agree with the position that there are two things involved here: One is to serve multicultural, multi-racial Canadians in their language, with some maybe programming that is imported, some that is Canadian, and that is CFMT's role, at least for part of the day, and then there is another question, which is: Are mainstream or conventional broadcasters making an effort to ensure that the programming they show, the people they hire, the on-air people, are reflected, that the population as it exists is reflected?
1518. I know that you do it with children's programming, I believe. So I am a bit puzzled by this answer. It seems to be a lack of distinction between the two. CFMT has one role, that is one issue, that is ethnic broadcasting as we know it.
1519. The other is reflection, not on mainstream programming. Is that a conscious policy? Because we are told that it doesn't occur naturally. What you end up with more often than not are white, five-piece suit males.
1520. MR. SWARD: You don't see that here.
1521. We agree exactly with your premise, with your assumption, and we may have just been a bit too efficient. We also recognize that you can't make a difference in this area in your mainstream operation without some sort of affirmative action program going on somewhere.
1522. Charlotte.
1523. THE CHAIRPERSON: I suspected children's programming -- not that I watch children's programming that often -- but it seems that there is, there must be an effort to make sure that there are children from visible minorities, as well, visible on the program. At least that is the impression I have as a viewer. I am wondering whether there is a positive policy effort to do that and whether it exists in the rest of your programming as well, or whether it should?
1524. MS BELL: I will begin to address the issue and then I will pass it over to Kevin or Loren on the children's programming issue.
1525. We do do a number of things in that area and so we apologize if we didn't answer the question correctly in our submission.
1526. In terms of --
1527. THE CHAIRPERSON: You mean it is not reflective of what you do --
1528. MS BELL: Exactly.
1529. THE CHAIRPERSON:  -- rather than correctly in terms of what I would like to hear?
1530. MS BELL: It is -- pardon me?
1531. THE CHAIRPERSON: That is not reflective of what you do?
1532. MS BELL: Exactly, the way we answer.
1533. THE CHAIRPERSON: So obviously you didn't write this.
1534. MS BELL: That is correct.
1535. We do endeavour to reflect the needs and interests of the aboriginal community and multi-racial communities in our programming. In our news programming, we do this regularly. We cover a variety of stories every night in our newscasts and we try to ensure that our stories are reflective, of course, of ground breaking news events, but that we are also taking into account the interests of our various -- or the various people in our audience.
1536. In terms of our staffing practices, we practice -- we are an equal opportunity employer and we have policies in place to ensure that our staff across the country is representative of the Canadian population. I think one example is I think we have 59 per cent of our staff is women, and I do have some other statistics if you want me to go through that with you.
1537. THE CHAIRPERSON: I was more interested in not correcting but discussing with you the understanding that at least I have that there are two issues here, one is serving ethnic minorities and the other is making a conscious effort to represent, to have participants also in programming where possible, et cetera, as experts and that give a better reflection of what society -- our society looks like.
1538. MS BELL: We do do that, and I think as part of our Vancouver station's last renewal, they made a commitment for eight documentary specials, and I think three or four of them have been dedicated to aboriginal issues, and they started airing those in 1996 and there are more.
1539. THE CHAIRPERSON: I saw that in the previous paragraph, that it was just a comment that it should be left to ethnic broadcasters, and we have had many comments made that there seems to be a need for a conscious effort to do it. We were speaking to Ms Schuyler about the production of "Riverdale", for example, and that it would be nearly impossible to represent a Toronto high school without having -- but, yet, not in "Riverdale" but in -- it does happen in various programs.
1540. I thank you very much for your patience. My colleagues have some questions. We are keeping you very late, but I think it has been, at least for me, a fruitful exercise.
1541. MR. I. ASPER: Madam Chair, could I on a philosophical basis just interject in response to your last exchange that we are being asked to rethink our contribution and the structure and the results of the Canadian broadcasting system.

      1850

1542. I think, too, we are asking, given the freshness of the Commission, that this is a good time too for the Commission to reflect on what this millennium group of you see as the mandate and the contribution from the Canadian broadcast system. And you have just touched on one, that really it's timely to review multiculturalism. It's not politically correct to talk about what I am about to say, but I think you're free to think too.
1543. We have two founding linguistic cultural groups in Canada and we have decent policy in that respect, and we have an aboriginal group and we have policy in that respect. But really, it's becoming questionable as to whether the issue of the political popularity of hyphenated Canadians, it is not time to have another look at it.
1544. I personally, as I suppose maybe even a hyphenated Canadian, although you would never know it by me, but I have some deep concerns about it and I do not think the Canadian broadcast system should foster a divisiveness in our community. Perhaps the whole Diefenbaker concept of 1958 of multiculturalism really should be revisited by all of us, just while we are opening doors and looking in them.
1545. THE CHAIRPERSON: You would be looking at more mainstream reflection and less exclusive, or some parties will say ghettoizing, of the service to minorities.
1546. MR. I. ASPER: I do not think there is any risk of ghettoization with all my hyphenated friends. They are part of --
1547. THE CHAIRPERSON: I meant on the air.
1548. MR. I. ASPER: I am talking about on the air. I will tell you, the greatest contribution I think we can make is to getting rid of divisiveness and I think we should be, to whatever extent -- again, this is a philosophical exchange, but we should be running programming that make people feel Canadian and proud.
1549. THE CHAIRPERSON: Which would require the type of reflection that I am talking about.
1550. MR. I. ASPER: Yeah, but within the context of being Canadian, and we have promoted diversity more than harmonization in some ways over the last 30 years, and I'm saying it's worth looking at.
1551. THE CHAIRPERSON: Well, I am tempted to tell you now that one of the persons we were talking to -- I forget whom -- said, don't worry, there are so many now visible minorities in Canada that don't get on the air. I reminded her we had all kinds of task forces -- or him, I forget which -- task forces to even get what is considered a proper reflection of women on the air, and they were a majority all along. So sometimes it's not good enough. You need some prodding to make sure that it occurs because it's not necessarily inherent in the system that it will happen by itself.
1552. MR. I. ASPER: No, but you will agree that, on the one you raise, the promotion and development of opportunity for women, if you go back 20 years, we have made magnificent strides. Yes, there is still a glass ceiling and yes, we will break through it, but we are doing it.
1553. But the male-female problem has been a civil rights issue to me. This is not civil rights. This is the promotion of diversity over harmony. There are those who take it to that extreme. I am just saying there has to be some great care that we don't celebrate our differences to the exclusion of celebrating our commonality, and I think that's a contribution I have always wanted to make personally through the broadcast system.
1554. I think there have been ebbs and flows and pendulum swings that have promoted friction in communities by -- I am not talking about visible minorities, that's a social thing we are dealing with and absorbing. But a profession has grown up that makes a living out of promoting, in this country, in the last 30 years, 40 years, promoting difference rather than sameness, and there are some disadvantages to that as a nation. It's a value judgment.
1555. THE CHAIRPERSON: So you are not clawing back from the correction of this paragraph?
1556. MR. I. ASPER: No, no. It was the comment you made that really --
1557. THE CHAIRPERSON: But you agree that there should be some --
1558. MR. I. ASPER: A recognition, yes. For example, in jobs for sure. Now you come to programming. You still are a mass appeal broadcaster, so there are instruments. There is the community channels -- which called themselves stations when I was here last week -- there is the CBC. So where certain social problems have to be addressed, those are instruments you could use. And you should just look to the broadcast system as you would look to any other business as being capable of making a contribution, but principally paying taxes to be able to solve the other aspects of the problems.
1559. THE CHAIRPERSON: Some of my colleagues may have questions for you now.
1560. Commissioner McKendry.
1561. COMMISSIONER McKENDRY: Thank you Madam Chair. I have a question that in a sense follows on this discussion.
1562. The CTV group filed a public opinion survey that identified the reasons to support the Canadian content rule, and the number one reason cited by Canadians was to let Canadians see the rest of the country. Eighty-eight per cent of the respondents agreed with that a lot or somewhat.
1563. Are we now at a stage where we need to revisit how we reflect the regions to each other in our broadcasting system, or is it your view that that's being adequately addressed at this time?
1564. MR. SWARD: From the perspective of all programming, Commissioner, or from the perspective of dramatic programming?
1565. COMMISSIONER McKENDRY: I would say from the perspective of all programming, although if you wanted, in your response, to distinguish between the two, that would be fine with me.
1566. MR. SWARD: Certainly the sharing of the commonality and moving information about one community to the rest of the country and making sure that stories and creative works are moved across the country is a benefit, and we should keep doing it and we should try and do more of it.
1567. In the last ten years we have done a lot more of it with the bringing on stream of the specialty services where I can watch a gardening show from Victoria, which I am interested in, and another show about boats from the Atlantic provinces that I am interested in. It's opened up a whole new perspective. And that's come in on top of what we are doing which we should continue to do.
1568. So it's a very important principle that I think that we have even done more about in recent times than any time in our past.
1569. COMMISSIONER McKENDRY: If I interpreted the CTV group's response to this question that I posed to them properly, I took it that their view was that the focus on regional programming was implicit or integral to their definition of indigenous programming and we did not need to give it explicit attention. And I had asked the question in the context of the matrix they proposed to us; should it be something that explicitly went in their matrix, and I realize you are not proposing a matrix to us, but is the Global group, is that your approach as well, that regional programming is integral to indigenous and we do not need to explicitly address the regional issue in this proceeding?
1570. MR. SWARD: Yes, it is.
1571. COMMISSIONER McKENDRY: I just wanted to make sure I understood what Mr. Asper said about cultural diversity. The groups that have appeared in front of us to talk about that issue and to ask us to address that issue, if I have listened to them correctly, the comment they have made is that when any of us walk down the main street of Toronto or Vancouver or St. John's, what we see in the street in terms of the cultural diversity, or what we see in our schools, is not, in the view of some of these groups, adequately reflected on our screens and they would like for us to consider initiatives that would address that problem.
1572. Is that the issue, Mr. Asper, you were talking about, is that you would like to see an initiative by the Commission that would ensure that what we see on our screens reflects the diversity that is a reality of Canadian life today?
1573. MR. I. ASPER: I am going to comment and then I think Loren has something to add to that.
1574. What you said is precisely the distance I am willing to go. I believe our programming should reflect Canada and its diversity. What I was really responding to was the promotion of diversity and division is something that this thing can sometimes slop over into. You have got to maintain balance because I have seen, in my part of the country, from time to time, multiculturalism -- and by my part I mean from say Winnipeg to Vancouver -- become a social problem rather than a social celebration.
1575. But the reflection of the reality of Canada, absolutely. And that ties in to your earlier question about regional. There is probably nobody in this country who feels more strongly about it than I do and it is probably the most critical of the broadcast system for its failings, including ours. We are not good enough. We have to get better.
1576. And yes, regional representation in terms of jobs, production and relevance -- programming relevance -- is something none of us broadcasters are doing well enough, including Global, and we have to get better at it.
1577. MS MAWHINNEY: Can I just add further. Absolutely we believe that we have to reflect our Canadian communities back to our audiences, and the best vehicles to do that are through our indigenous programming such that, like Linda Schuyler said with regard to "Riverdale", "Ready or Not" could not have been shot in a downtown high school without having many different people, many different kids, as part of the makeup of that school. And in fact, some of our plot lines absolutely dealt with disabled people or racism when Lanny got a black boyfriend and her Italian father did not like it. So its inherent in that.
1578. I think that every program has to reflect a reality of its own. So "Jake and The Kid" did not look like "Ready or Not", but it had native characters in it because it's shot in the prairies in the fifties; it had a Chinese character in it, reflective of the fact that that was part of that community. And we also dealt with the problems of a Ukrainian family who would come to that community.
1579. So we also take further than that our responsibilities to reflect minorities in a positive light. In "Traders", for instance, we always have, within the ensemble cast, a character that is part of the minority that is indicating some sort of leadership role. And within the actual episodes arcs are issues that deal with our country; the problems in our country, Quebec separation, native land rights, all that stuff. So absolutely it's inherent in doing indigenous production.
1580. Mr. Asper points out that we are doing a terrific documentary about Canadian survivors -- Canadian kids that go back to the scenes of the holocaust with holocaust survivors. It's part of a larger world effort but there are 300 Canadian kids that we followed and it's quite a moving piece.
1581. COMMISSIONER McKENDRY: Thank you. I just want to come back to the regional issue for a moment. If I heard Mr. Asper correctly, he said with respect to the cultural diversity issue it would be appropriate now for the Commission and others to focus on that issue and think about it and see what we should be doing to do a better job. You also mentioned though you thought we could be doing a better job on the regional issue; the issue of reflecting the regions to each other.
1582. Did you have anything in mind that you thought we should be doing in that respect?
1583. MR. I. ASPER: Not in the regulatory sense. If I were wrapping up at some point, I would be saying, the good old days had a couple -- or the bad old days had a couple of good things in them. It really addresses the Chairman's comment about, well, I'll see you in seven years. I'll give you a bunch of rules and you -- I am not sure if it's in our submission, but we used to meet annually with the Commission informally; CBC did, CTV did, and Global did. So we got a barometer, we got an informal exchange for several hours once a year to get a report card in effect. Not a legal regulatory ruling, but are we carrying out your expectations. If not, for heaven's sakes, don't wait until licence renewal, tell us about it. And it worked very well. This has not been for a couple of chairs now.
1584. Now, what I meant was the Commission should state as a policy that it expects a Canadian broadcaster, to the extent its got national reach say, to reflect region to region -- not within the region but to the regions. Because we do not, in Regina, really have a full sense of what the fishery means to Newfoundland, and we do not have adequately in this country a sense of why western lack of representation in the centre leads to an election of senators in Alberta. The people in Ontario think that's nuts. They don't understand that well enough. That goes to documentaries, which I passionately believe in, public affairs broadcasting and news.
1585. So yes, the Commission should state an expectation so that when you come to your annual review, they say, well, what have you done to help reflect Canada region to region? And somebody is accountable. Somebody is going to be sitting there and saying, gee, we did such and such, and the Commissioner is going to say, that's all in a whole year? It's a report card.
1586. I think it's awfully important. If you define our social responsibility for being given the privilege of using the airwaves, which is something I accept, one of them is that.
1587. COMMISSIONER McKENDRY: Thank you very much.
1588. Those are my questions, Madam Chair.
1589. THE CHAIRPERSON: Imagine all those documentaries can you put on either side of your Canadian drama in peak time.
1590. MR. I. ASPER: Or on Hamilton.
1591. THE CHAIRPERSON: We didn't hear that.
1592. Commissioner Cardozo.
1593. COMMISSIONER CARDOZO: Thank you, Madam Chair.
1594. Let me just pick up on the relay race that we are running here and pick up from what Commissioner McKendry had to say about local programming and just take one more step.
1595. In your written brief, on page 34, you say that the regulatory approach that we have now "has allowed broadcasters to diversify their local programming strategies to better meet the needs of viewers within specific markets."
1596. In the next paragraph, half way down the page, you say:

      "...there is already a business incentive to bolster local news coverage. As a result, viewers are well served in this area."

1597. As you will be aware, a lot of the feedback we got during the town halls we had, during written submissions, and during these hearings in Hull, there is a feeling that they have not been served well, both in terms of news and in terms of precisely the kind of reflection that, Mr. Asper, you were talking about.
1598. So despite what you have been doing, and CTV was talking about some of the things they were doing just before you, people have said that what we ought to do is to place requirements on you to do more in terms of local programming, news, and/or entertainment.
1599. What are your thoughts on that?
1600. MR. SHEA: In our opening comments, we indicated that there were three areas of programming that we believe are our key focus, namely; drama, kids and local. We also I think shared with the Commission that we have seen a 21 per cent improvement in our ratings of local programming over the last five years, which is principally in the area of news.
1601. I think the Commission, over the course of the last three and a half weeks, has heard two things. One is that there has been a reduction in hours of local programming nationally and, secondly, that there has been a reduction in expenditure to local programming. I think it's fair to say that there has been a reduction of hours locally, but it is not fair to say that there has been a reduction in dollars. I think the CAB pointed out that nationally from 1992 there was about $280 million being spent on local programming and in 1997 about $324 million. So that clearly is a trend that's moving upward, not downward, but it is different.
1602. We have had to react to competition, and principally the most significant area we have had to react to is in day part television where an awful lot of local programming used to be housed, because there is now just chock-a-block talk on specialty TV covering absolutely every aspect of whatever the problem or issue is.
1603. But here's what we have done collectively. I think we have put far more resources into our local and national news efforts and you are now seeing diversity within newscasts that you didn't see ten years ago. We have all got health specialists, we have got business specialists, that are covering these aspects of lifestyle locally. So it's housed somewhere different and it's done more professionally, quite honestly.
1604. So I think, Commissioner, in fairness, there is more money being spent. It's being spent differently and it's being packaged traditionally around the news.
1605. Now, having said that, what you don't see when you ask for a regular schedule of any television network is all the specials we do in our respective markets. In Halifax, we do an annual telethon to support a Christmas effort. In Ontario, we do a regional Ontario report every week. In Winnipeg, we cover a bunch of hockey games by the Moose League. Those are all local programs relevant to viewers and important to viewers.
1606. What you also don't see or you don't count are the vignettes and the PSAs that we produce which are far more effective to many local interest groups than anything else we can do. I hope that when you rewrite the regulations you will ensure that PSAs -- we should be able to run as many as we can because they are the most effective communication tool for local interest groups, local charities, and people who have something to say locally. And why we are relegated to 30 seconds per hour in this day and age is kind of ridiculous. I think it can be very effective and really help local communities because now we could produce an awful lot more of them.
1607. COMMISSIONER McKENDRY: I sense that the problem, this is sort of a large one that's going to be with us for a while, and part of it is just what's happening globally in every country and then every city and every community where, with globalization on the one hand -- and we are seeing more globalization in television -- there is a sense that the local is getting left lower and lower down the totem pole and more and more stuff is happening at the national and international level. So I see that as sort of a long-term issue that's going to be with us for a while until we get some sort of equilibrium.
1608. But what you are saying, and what other broadcasters have said to us is -- I'm sorry if this sounds rude, but it's sort of like the old political refrain of a government when it becomes unpopular; it says, perhaps we are not communicating well.
1609. Are you saying that you are not telling your story, you are not perhaps promoting local programming enough, and that's why people don't know what you're doing, and are you suggesting that that's what we should say to the public in response to what they have said to us?
1610. MR. SHEA: I think it's partially that because the shifts towards doing local differently have essentially happened in the last two or three years and it's the demographic that tends to sit at home during the day that I am sure is the group that's complained the most, because that's where the losses have been. They are in day part television, not prime time or in our news. We are still doing news, we are just doing it a little bit differently.
1611. COMMISSIONER McKENDRY: My sense is that we have heard from people who would be watching in the evening as well and some of that as being community programming from cable companies that have gone down too.
1612. MR. SHEA: That may well be the case.
1613. COMMISSIONER McKENDRY: And to some extent there is a sense that community programming could pick up where you folks were dropping off.
1614. MR. SHEA: But I think too, in fairness, that what is happening is that, from a distribution point of view or programming point of view, things are being done differently. It's why we filed for five regional news applications that had the prospect of providing programming well beyond just local news, and we are somewhat disappointed we have not been heard yet.
1615. COMMISSIONER McKENDRY: So to keep on with my question, should we then assume that what you are saying is this is not a real problem, don't fix it?
1616. MR. SHEA: No, I don't think we are saying that at all. I think what we should be cognizant of is, as we go through the traditional licence renewal process, I think that's the Commission's best test because you will hear, either by direct intervention or by letters, if there is real concerns about local programming you look licensee by licensee. My suspicion is that it is more in smaller markets than it is in big urban markets where the Commission might be hearing this from, and my suspicion goes further that it may be a different way that the community channels are performing in those small markets compared to how they were 20 years ago when I worked there.
1617. COMMISSIONER McKENDRY: So when you are saying deal with it, as you have said in your written submission, licence renewal by licence renewal, should we have some kind of standard that we talk about coming out of this process that would then get applied; not necessarily a one-size-fits-all, which seems to be a real bad phrase these days, but some kind of standard that would then be applied at the time of licence renewals or new licences?
1618. MR. SHEA: I think absolutely. I think recognition, and I think most every broadcaster that's appeared with you over the last three weeks has echoed the importance of local programming, both from a revenue point of view and from a level of service point of view. And I think it's at that specific time of licence renewals, because stations are different, that the Commission should revisit the commitment by that station and the service by that station.
1619. COMMISSIONER McKENDRY: Let me ask you about the incentive issue because I have heard a couple of different things and I just want to clarify what your view is.
1620. In the oral presentation, on page 14, you say that the fourth principle is to build on the foundation of the 150 per cent drama credit to overcome the unfavourable economics of Canadian drama.
1621. Mr. Shea, you said 150 per cent is for them, the producers. Mr. Sward, you said 150 per cent gives you, the broadcaster, that extra half hour of American programming which is translated directly into dollars and changes the complexion of the decisions as to what you are going to run.
1622. So who is 150 --
1623. MR. SWARD: I was right, sir.
1624. COMMISSIONER McKENDRY: Okay, thank you.
1625. In terms of -- not because I want him to win or anything, I just...
1626. MR. SHEA: I always agree with Jim, but he is not totally right. Just 30 seconds on this.
1627. What I meant, Commissioner --
1628. COMMISSIONER McKENDRY: You are not going to contradict him?
1629. MR. SHEA: No, but what I meant, Commissioner, was that -- and it was to the Chair's point about all these various things that have to be added up and allocated. But the 150 per cent, the reason why it came into being, was to assist in the development of an independent production sector that was viable, and producing indigenous programming was difficult because the budgets weren't there. But it was developed with the notion of building that sector into a sense of viability, which they certainly have demonstrated they are.
1630. COMMISSIONER McKENDRY: One of the issues in relation to this that the Chair mentioned earlier was the clawing back issue; the more you provide incentives on one hand, you claw back the hours and so ten become seven or five or whatever.
1631. If we get to the issue of viewing Canadian programming, which is one of the key messages of your submission and that of the CAB, does it make a difference that there is an incentive? Some people have suggested that as we go up and up with these incentives -- 150, 175, 200 and 250 you're going to dream up -- you have got nothing left in terms of hours. So what have you got in terms of viewers? The viewers have not got a whole lot to watch at the end of the day. So does this incentive system take away from Canadian viewing which is --
1632. MR. SWARD: Certainly that's not the intention, and to the extent that somebody mathematically can say, oops this could happen, then we shouldn't allow that to happen. That's not the intention. The intention is simply to say, what can we do with this 150 per cent instrument that would just push them, just hang a carrot out there maybe to take a different approach on scheduling or a different approach on promotion, or any number of things that might get them to spend more on promotion or stretch for and reach for a serious audience.
1633. What our objective is, personally, when we as a team and a group sit down, we eventually want to have -- the last time we talked about it it was five hours -- five hours a week of Canadian programming which is performing equal to the average of our U.S. programming. Five years ago, the ratio -- and we set benchmarks for ourselves -- the ratio five years ago was 4.2 to 1. It means that our American schedule was averaging 4.2 times what our Canadian schedule was averaging. We have got it down to 3.2 to 1 five years later. We have improved that ratio by 25 per cent. We are determined to get it there. So we are looking for any kind of -- or just suggesting any kind of incentives that lead towards improving that ratio.
1634. COMMISSIONER McKENDRY: Excuse me if I am still confused on this because the incentive system means less hours of Canadian programming, and so if you are after viewers watching Canadian programming, then part of that has to be providing a supply of enough Canadian programming so that that percentage of 30 per cent can go upwards. But if we are going to go into this incentive process, which is really an expenditure issue, which you have been criticizing -- to put if nicely -- I seem to see you arguing for an expenditure system which really undermines your viewing system.
1635. MR. SWARD: I am not sure that it does.
1636. COMMISSIONER McKENDRY: I see what you are saying, but do you see the point I am making, that there is an element of contradiction there?
1637. MR. SWARD: Just so that I am clear in terms of -- we are speaking from the perspective of our current experience and obligations. When we get a 150 per cent credit in our ten out of ten prime time drama, we cannot apply it to reduce the amount of prime time drama we are required to do. We can only bring it back and use it against the 50 per cent prime time requirement. So it does not reduce the commitment to the under-served categories, but it does allow you some place else in your schedule to, I guess, expatriate a piece of your programming, pick up some cash on the way, and bring it back to help you with this particular program.

      1930

1638. We have to be careful of the mathematics because sometimes when you do the mathematics, you find yourself stuck with some pretty tough decisions about, "Oops, what do I do? I have more here than I need." Sometimes you can end up in that kind of situation. The 150 can take you there and I recognize that.
1639. COMMISSIONER CARDOZO: Thanks. I thought you were going to clear it up. You just confirmed my confusion.
1640. MR. SHEA: But so we are clear, if we have conditions of licence that are very specific hours in the under-served categories, the 150 per cent cannot be applied against that. It's only against your overall day. So, if you are asking us about dramatic television, would there be a reduction as a consequence of new incentives applied to dramatic television in terms of hours, no, there would be no reduction. There might be somewhere else in the schedule, but not there.
1641. COMMISSIONER CARDOZO: Let me, lastly, just ask you about promotion. You say the third goal that -- you suggest at page 13 of your presentation today:

      "...recognize promotional efforts as essential to building audiences for Canadian programming..."

1642. Others have talked to you about this already. I just want to get your view on the kind of "Entertainment Tonight" type program, whether you have any thoughts about having something like that. The previous CTV was talking about "E Now". Have you got thoughts about whether you would consider doing something of that nature? You will be building up the Star system, building up Canadian programming, going beyond the -- I take it what you are talking about here is advertising for Canadian programming.
1643. MS MAWHINNEY: Could you give me the --
1644. COMMISSIONER CARDOZO: Sorry, page 13, the third point you have. Page 13 of your oral submission today, sorry.
1645. MS MAWHINNEY: Oh, the oral.
1646. MR. SWARD: While Loren is looking for that, let me say that "E Now" and the "E Now" program concept is one that we like and applaud what they have done with that and both that and the Bullard program has featured Global programs and the stars that are on those programs that we have. So, we certainly endorse the direction that those programs are going, the innovative nature particularly of the Bullard program and what they have contributed so far to bringing greater recognition to the creative talents that go on in Canadian programming.
1647. Loren?
1648. MS MAWHINNEY: Of course, anything that helps build the Star system in English Canada is, in our view, a good thing, but that bullet point, I believe, is specifically talking about our incentive plan where we had said that a broadcaster could claim a 175 credit in the event that they spent that five per cent of the licence fee on third party promotional efforts. So, it's to recognize that it is not your own on-air time you are dealing with, it's real dollars going out to other people to help promote your schedule and the success of that program.
1649. COMMISSIONER CARDOZO: And in terms of the program, Mr. Sward, that you like what CTV is doing -- I don't want to take you too far down that road -- does Global have any plans in that area? Is that something you have thought about? Do you have a variety-type program that does that kind of promotion?
1650. MR. SWARD: On local levels, but not on a national level at this current time. We have entertainment programming and each of our schedules on a local level across the country and reporters assigned to that specific initiative. At this particular time we do not have one show that is distributed throughout the group, that local programming.
1651. COMMISSIONER CARDOZO: So, those are more localized, talking about what's up, what's on, what's coming, that type of thing?
1652. MR. SWARD: And visiting and featuring people when they are in town for whatever reason.
1653. Loren?
1654. MS MAWHINNEY: It's part of our regularly scheduled news system where Rob Davidson or Elaine Loring talk to all the people that flow through Toronto, for instance, with regard to Global Ontario. So, it's absolutely talking about entertainment vehicles, including Canadian.
1655. MR. SWARD: We certainly have a very strong representation of Canadian entertainers, actors, artists, on the new national daily show "Bynon" that's on 12:00 noon across the country, but that is not an entertainment show. It's a dialogue show, it's public affairs, current events. It has a human interest entertainment side to it, but it's not fully dedicated in an entertainment basis.
1656. COMMISSIONER CARDOZO: Thanks very much. Those are my questions.
1657. Thanks, Madam Chair.
1658. THE CHAIRPERSON: Commissioner Pennefather?
1659. COMMISSIONER PENNEFATHER: Thank you, Madam Chair.
1660. Actually, the large part of my question was answered and it concerned page 35, paragraph 37, but I just have one point of information. You refer to aboriginal programming in markets where aboriginal peoples represent a significant segment of their audience. What is "significant segment" in your thinking? It's page 35, the first paragraph. What does "significant segment of the audience" refer to?
1661. MS BELL: I think what we are saying is in markets where there is a large concentration of aboriginal people like Winnipeg and our western stations. We are not really quantifying what "significant means".
1662. COMMISSIONER PENNEFATHER: Okay, thank you. I am asking because a representative of TVNC, on discussing this issue of aboriginal programming and mainstream programming in a broader context, referred to the 1996 census that aboriginal Canadians represent 2.8 per cent of the population, but that didn't figure into your analysis.
1663. MS BELL: No.
1664. COMMISSIONER PENNEFATHER: One other quick point of clarification. The viewership goals that were outlined earlier were three, were they not: viewership overall to the Canadian service; second, Canadian programming viewership; and, third, viewership to under-represented. Is that correct?
1665. MR. O'FARRELL: That is correct.
1666. COMMISSIONER PENNEFATHER: Is that in order of priority?
1667. MR. O'FARRELL: Not necessarily. It was just the way we came from the more generic Canadian services category to the much more focused under-represented programming categories.
1668. COMMISSIONER PENNEFATHER: Thank you.
1669. Thank you, Madam Chair.
1670. THE CHAIRPERSON: Commissioner Wilson?
1671. COMMISSIONER WILSON: Just three quick questions.
1672. On page 12 of your oral submission in the second paragraph, you say:

      "We must remember too that every hour added to Canadian prime-time broadcasters' schedules allows one more hour of un-substituted U.S. programming back to the Canadian consumers via the cable market."

1673. I think this is the first time that I have heard this as an argument. I understand exactly what you are saying, but it's the first time that I have heard it used as an argument that we shouldn't be putting Canadian programming in prime time. I understand the business case for it, but I wonder if you could just comment on it for me.
1674. MR. SHEA: Commissioner Wilson, we selected a market -- we will call it Toronto -- and the 10/10/10 plan is now in full force. So, incrementally -- and I am averaging -- Global, CTV, Citytv, CKVR, CFMT, because the 10/10/10 applies to all of those stations because they are over $10 million in revenue, 25 hours of new Canadian television would suddenly be in prime time. We don't know what kind of Canadian TV it is, but there is 25 new hours, which means that there is 25 hours now of border station product back into the market.
1675. What that means, quite simply, is that the Buffalo stations are back in business. So, not only will we see a loss of revenue because we have lost an American show, we are going to see loss of revenue out of the market back to Buffalo because the schedules are unduplicated. It's the one key foundation of the 10/10/10 plan that was never discussed, and that is: What is the impact with respect to the market and the stations as a consequence of it being implemented? Real quickly, we are all out of business.
1676. COMMISSIONER WILSON: Yes, I heard that. I guess it was after the Directors Guild appeared and the CAB issued its press release with the additional information that they didn't quite get done in time to file at the hearing.
1677. On page 5 of your oral submission, I just want to ask you a couple of questions of clarification with respect to the comment you make about viewing to the prime time Canadian drama schedule. When you say that it has increased by more than 150 per cent, you are referring to the same time period of 1993 to 1997?
1678. MR. SWARD: Absolutely comparable, BBM fall sweeps, 1993-1997, adults, two plus total hours.
1679. COMMISSIONER WILSON: Total hours. So, when you say "schedule", you mean every Canadian drama that you carry you measure?
1680. MR. SWARD: Absolutely, yes, during that period. During the sweeps and then compare it.
1681. COMMISSIONER WILSON: How many hours of Canadian drama would have been on your schedule in 1993?
1682. MR. SWARD: Three to four. The comparison has gone up 25 per cent in terms of hours.
1683. COMMISSIONER WILSON: Okay. So, when you say that it has increased 150 per cent, is it weighted to account for the fact that there is now more Canadian drama on your schedule or it's just raw numbers?
1684. MR. SWARD: Part of the increase in 156 per cent is because there is another hour there. So, that accounts for --
1685. COMMISSIONER WILSON: I guess what I am trying to get at is that using viewership as a goal from year to year would certainly have to take into account the fact that there might be more hours which is driving more viewership.
1686. MR. SWARD: I'm not sure what purpose it does, Commissioner Wilson, in getting that sort of --
1687. COMMISSIONER WILSON: Getting that detailed?
1688. MR. SWARD: At the end of the day, we have increased our Canadians watching Canadian television, the prime time schedule of Global, by 156 per cent. We did it in part by doing more and we did it in a big part by doing it better.
1689. Maybe when we do the system that Glenn tabled, you might want to have the ability to drill down and say, "Well, how did they do it", but when we speak of viewing goals, we are really keeping it on the level of trying to get more Canadians watching Canadian television.
1690. COMMISSIONER WILSON: Just finally on page 10 of your written submission -- and again this has to do more with scheduling -- I guess, we asked the question:

      "What incentives would be effective to ensure that a greater quantity of high quality Canadian programs is scheduled during peak evening viewing hours?"

1691. You have suggested a number of different ways. You say:

      "The most effective way to increase the presence of Canadian programming in peak viewing hours is to introduce incentive that would encourage broadcasters to over-perform in prime time."

1692. One of your suggestions is that we should offer broadcasters the flexibility to choose any consecutive six-hour period between 5:00 p.m. and midnight to determine their prime time period. "Any consecutive six-hour period", so it would be either -- oh, okay, that's fine.
1693. I think there are only two, aren't there?
1694. MR. SWARD: That's correct, and that's for the definition of evening --
1695. COMMISSIONER WILSON: "Any" makes it sound like there is more than two. It could have said "either".
1696. MR. SWARD: That's for the purposes of the definition of the evening broadcast period. That's separate from the definition of peak prime time, which we, I think, are one among many who suggest it's 7:00 to 11:00 Monday to Sunday.
1697. COMMISSIONER WILSON: Right. So, how does offering broadcasters the flexibility to choose either of those six-hour periods between 5:00 p.m. and midnight increase the presence of Canadian programming in prime time?
1698. MR. SHEA: It's more, Commissioner Wilson, an opportunity for some flexibility in certain regional markets where the American stations come in at a different time zone. We have that in Atlantic Canada, it's the situation in Alberta. It's more to recognize that and the opportunity to counter-program. It doesn't necessarily initiate more, it's just flexibility to schedule better, that's all.
1699. COMMISSIONER WILSON: Okay. Thanks very much.
1700. THE CHAIRPERSON: Counsel?
1701. MR. BLAIS: Thank you. I will be quick. I know it's late and everyone is tired, not the least of which are the translators and stenographers.
1702. The first point is we will be asking written questions. I saw you were in the room when I explained that earlier, so I won't go over that in detail.
1703. The second housekeeping point is that you presented some slides earlier, Mr. O'Farrell was presenting them, if could provide us hard copies of that to put on the public record.
1704. I note, Mr. Sward, that attached to your oral presentation you had what you call the real schedule for Global, which you presented to us. I was intrigued that on October 1st somebody from your staff forwarded to the Commission your fall schedule that differs somewhat from what you have presented today in peak hours. It tends to be more green and not as red. There is a little fish at the bottom here. I guess he is the fish Mr. MacMillan is looking for.
1705. MR. SWARD: That doesn't look like anything I have. Our colours aren't green and yellow and red.
1706. MR. BLAIS: Well, we received this and you may want to comment on that to make sure that we do have the last version of it because it was sent to us on October 1st.
1707. MR. SWARD: This came out of another sales kit. Part of the reason for the confusion in schedules, I think, is our own fault. We just were not as careful about the optics for this hearing as others should have been or others have been.
1708. The schedule that we have handed out today is a representative schedule. The schedule changes an awful lot based on program pre-emptions and the actual air -- what you put on air has a tendency to have a fair amount of change involved in it. What we were concerned about was that annually -- in May we complete all our negotiations for U.S. program rights. When we come back, the sales department immediately sends out a schedule to all of the advertisers. It's addressed from the sales department to the advertisers and we have been doing this for years.
1709. The primary purpose is to say, "Here are the rights that we have returning and new and here is a kit on it." It's addressed primarily to the U.S. side of our schedule. That's the one that showed up in sort of -- I guess they got it from an advertiser in the CTV one and it also showed up, I think, in a CBC file.
1710. I was a little bit discouraged because it clearly isn't reflective of what we have on the air. It shows a broadcaster who is in complete violation of their condition of licence, which you know we are not, but, by the same token, I did remind myself that we could have been a little bit more conscious of the optics coming into this hearing and the potential of giving something like this to an advertiser, that it might be flipped over and used in this kind of hearing.
1711. So, the schedule that we have brought to this hearing as the real thing -- and this is important because very seldom do people talk about our children. We do, it's a big part of our business, children and youth. But this is how we comply. This is the other side of the coin. This is what we believe  -- and I will send this back to you about mid-January because we predict when all these programs change and there is a few cancellations that we are expecting, this is sort of going to be the mainstream driving piece that we are going to have on the air through that period.
1712. MR. BLAIS: Thank you. I just wanted to clarify the position in our files.
1713. MR. SWARD: I hadn't seen this one before, as I say.
1714. MR. BLAIS: It was sent to us by one of your representatives.
1715. MR. SWARD: Did you offer to buy some time, sir?
1716. MR. BLAIS: The other question I have -- and it's a question I asked of the CTV group -- is this calculation we did of categories 8 and 9 with respect to variety, that when you do the numerical analysis is not perhaps under-represented, as we look at the numbers. I appreciate that you don't have the calculation you did, so you can't really comment on that aspect of it, but let us take as a hypothesis that in fact mathematically categories 8 and 9 are not under-represented. What would your view be if those categories of programming were removed from the Option B formula?
1717. MS MAWHINNEY: We don't ourselves do a lot of this kind of production, but I do think that it is absolutely under-represented. It's difficult to finance this kind of material, unless you are talking about a skating special, which can get done better than an arts special. So, I still think it's valid to count it as part of under-represented. Forgive me, though, I don't know the calculations you are referring to.
1718. MR. BLAIS: It was a calculation we did internally with staff. We looked at all the available categories 8 and 9 available to Canadian viewers, foreign sources, as well as Canadian sources, whether conventional or cable delivery. It would appear that overall there was 3.8 per cent that fell into this category, but in the Canadian private conventional English sub-category, it came out to 4.3 in categories 8 and 9. So, we are above the average and one could argue that it was not, therefore, under-represented in the system.

      1940

1719. MR. SHEA: I think, in fairness -- not to prolong this -- in certain demos, in certain age groups, music and variety programming is dramatically under-represented. If you really analyze the demos -- because I am sure that what you have looked at is the inclusion of specialty programming, which is targeted at, typically, a much younger audience in those areas of content.
1720. MR. BLAIS: It definitely included all specialty and conventionals.
1721. MR. SHEA: Right.
1722. MR. BLAIS: Now, you had a quick discussion earlier concerning the use of the 7:00-to-8:00 time slot for family-oriented programming. I understand your point that it is valuable from a scheduling perspective. The risk is one of sort of a slippery slope: if you create an incentive that way, there may be abuses down the road.
1723. There seems to be two possible proddings towards abuses. First of all, you have noted that it is very exportable, therefore there is some incentive already to go towards more of that. And, secondly, it liberates the hours from 8:00 to 11:00, where you can maximize the simultaneous substitution.
1724. What sort of protection or comfort level can we have that the use of the 7:00-to-8:00 period doesn't result in a net decrease in other adult-oriented drama in the after-8:00 time slot?
1725. MR. SHEA: With due respect, the fact that it is more exportable, we should harness quite enthusiastically. If we don't get Canadian programming to start to make a return, which is the indigenous programming -- because it does not traditionally sell well around the world, except for family programming; and the more success stories we can have from a marketing point of view and a return point of view, the better it is for the system.
1726. So that shouldn't be taken into account. That should be enthusiastically endorsed.
1727. MR. BLAIS: I am not suggesting that the exportability is a bad thing, I am just saying that it is an economic driver that would force you to do more of that to perhaps the detriment of other types of drama, more adult-oriented drama.
1728. MR. SHEA: And, hypothetically, that would also hopefully increase our overall viewing to Canadian television, because that's what we are trying to do. We have to get there somehow.
1729. MR. BLAIS: There may very well be -- so you are saying we should accept that, as a consequence of this, there may actually be less adult --
1730. MR. SHEA: Adult oriented, there may well be.
1731. MR. BLAIS: And you think that is an appropriate situation and we shouldn't be concerned about that.
1732. MR. SHEA: I think it is appropriate because the family side is so under-served, and there has to be some element of balance; that may well be that there is one less hour of adult programming on schedules, but there is one more hour of family programming. In many instances, adults are watching.
1733. I think we are really kind of getting too micro with respect to this whole notion of what is family and are adults in or out, but it is a totally under-serviced area in terms of our schedule.
1734. MR. SWARD: We have been, I think, pretty clear on what we want to do more of, and that is more indigenous programming where it is produced in Canada, the rights are held in Canada, we are the principal buyer, our advertisers -- our audiences are the principal focus. Opening up 7:00 to 8:00 gives us the chance to do more of that because, as Kevin says, the economics are a bit stronger, the export economics.
1735. Maybe we can do some 10 out of 10, 22-episode stuff without the fund in the family area; that means that if we were swapping it for half an hour, we would be swapping it for some of the industrial stuff that we are doing in another part of our schedule. From our perspective, and given our experience and our objectives, that's a good swap.
1736. MR. BLAIS: Now, you followed the hearing, no doubt, and there was some discussion about top-up fees from the funds. I was wondering what your perspective on that was on a going-forward basis, whether they should be included in expenditures.
1737. MS BELL: We believe it should still be included.
1738. MR. BLAIS: According to the existing public notice?
1739. MS BELL: Absolutely, yes.
1740. MR. SWARD: We believe that that's one of the incentives that has worked. It was put there to draw broadcasters to this high-end, very expensive -- twice as expensive as buying a piece of industrial Canadian. Somehow there had to be incentives to draw broadcasters; this worked, and it worked very well.
1741. As you know, it was captured in 1994, consideration of it is imbedded in the licences that are in existence right now. Sure, it moves up and down and around a little bit, but it has been one of the things that worked, and we can't see any reason now to walk away from it.
1742. MS BELL: I would also add to that that it was put there in recognition of the fact that drama was under-served, drama and documentaries and other areas, and I don't think that anybody can come before you during this hearing and tell you that drama is no longer an under-served category. So I think it still should apply.
1743. MR. O'FARRELL: There is one point to note that the Commission might want to just bear in mind as it does consider this issue, and that is, in 1996 our annual return excluded the CTF top-up fund, and we were quite surprised to see the Commission calling us back to request that we file that information on that basis because it was considered appropriate, and we were happy to do so. Therefore, we think that it is one of those categories of the definition that should stay there for the reasons that Jim and Charlotte were mentioning.
1744. MR. BLAIS: Now, when you put up your slide on the way we could look at viewership on a going-forward basis, I noted that you had, as far as corporate groups, Global, CTV, CHUM, WIC, Craig, NetStar, Astral and Alliance Atlantis. Is it your view, when we talk about the group licensing issue, that those would be the appropriate groups we should be looking at?
1745. MR. O'FARRELL: Not necessarily. You may have other criteria in mind. We thought that, from a contribution to the overall national viewing goals, from an English Canada perspective, those were probably the players that would be making the most meaningful contributions and that you can divide them up on that basis for that purpose. If you turn to French Canada, we would suggest that you would obviously be looking at a different list. Interestingly, Astral would appear on both lists in light of their holdings.
1746. MR. BLAIS: The CTV Group have suggested, for the purposes of the group licensing, 70 per cent. I don't know if you have a particular perspective on that issue.
1747. MR. SWARD: I am sorry, the group licensing on --
1748. MR. BLAIS: The group licensing model that they are proposing, the matrix, would apply to -- we would bring in people as a group when they represented 70 per cent or had access to 70 per cent of the market.
1749. MR. SWARD: Yes. Their proposal is the matrix that I have --
1750. MR. BLAIS: I took it that they would also apply that model to the group licensing scenario.
1751. MR. SWARD: In the proposal that we have put in our brief, we are suggesting that it apply to broadcasters that have more than one licence of a typical type; so a broadcaster that had two conventional television licences would have them done both at the same time.
1752. MR. BLAIS: Regardless of the access to market.
1753. MR. SWARD: Regardless of size, that you would always, where there was the privilege of multiple ownership in the same class of licence, in all cases have the opportunity to look at the pieces and the whole.
1754. MR. BLAIS: My last question deals with submissions made by the Manitoba Film and Sound, who intervened. They made reference to a Department of Canadian Heritage study entitled "Western Television Production Study", and according to those results the Global Group posted a steady decline in their Canadian content production's financing in the west -- so it is a regional production issue -- over the past five years and hit zero in the 1997-98 period.
1755. I was wondering if you had any comments on that implicit criticism of your regional purchasing.
1756. MR. SWARD: We will have comments. As I understand the process, we have a period of time after the hearing to respond to issues that have come up and that we have heard about, and it is our plan to take advantage of that to clarify that and some other matters that we have heard during the course of this hearing.
1757. MR. BLAIS: That's fine. I just wanted to make sure that you were aware of that rather pointed comment.
1758. MR. SWARD: Yes, we certainly did notice it in the transcript.
1759. MR. BLAIS: Thank you.
1760. Those are my questions.
1761. THE CHAIRPERSON: Thank you.
1762. I expect you will be getting lots of program schedules.
1763. MR. SWARD: Well, thank you for your interest in our proposals and our story, and thank you for staying so late.
1764. THE CHAIRPERSON: Mr. Sward, you can't leave yet, I apologize, Commissioner Cardozo has another question.
1765. COMMISSIONER CARDOZO: This is just my attempt to take us past eight o'clock so that we have a new record.
1766. Just one question of clarification --
1767. MR. SWARD: We are in the peak prime time now.
1768. COMMISSIONER CARDOZO: We are off the air from six o'clock, I think.
1769. A follow-up question from counsel's question on the real thing. I am glad you brought this to our attention at the beginning; I pulled out a number of our other charts and looked at them and saw various differences among various people's programming; the one consistency is that there is red and white in everybody's schedule, but the proportions differ.
1770. I just wondered if you could tell us what date this covers, because all the other schedules that have been filed had a date on them, either a season or a specific week, time period. What would you say the time period for this is? Is it what you have currently or is it what you are building towards?
1771. MR. SWARD: No, this isn't what is currently on the air. It is close, but we are holding back one of the programs right now because we are hoping for a cancellation because we have a nice spot for it, which is "Bob and Margaret".
1772. COMMISSIONER CARDOZO: Have you told them this, or is this --
1773. MR. SWARD: I am sorry...?
1774. COMMISSIONER CARDOZO: Have you told them this yet, or is this news to them?
1775. MR. SWARD: No, I am not talking about "Bob and Margaret", I am talking about the show that's sitting in there right now; we think that we have a cancellation and we can drop this show in there.
1776. This is pretty close. I don't know how -- what we decided to do, Commissioner Cardozo, was to bring to you a representative schedule. You see, our requirement is that we have to be 50 per cent Canadian content in prime time and that we have to have four hours of 7, 8 and 9 in core prime time. There isn't a schedule that anybody else has provided you that shows Global as an organization in compliance with those regulations. This one does, and it is a complying schedule, it is how we average -- you know, it would be how we end up with the average compliance. It is our best guess that, by mid-December, mid-January, this is exactly what our schedule will look like.
1777. The schedule we have on the air right now is not far off this, there are just a couple of shows that we are holding back and we are looking for scheduling opportunity when the first wave of new U.S. stuff starts to fail and drop off the schedule.
1778. COMMISSIONER CARDOZO: So, just for a date for the record, you would say this is your projected for January and February?
1779. MR. SWARD: This is a representative -- that's projected, that's correct.
1780. COMMISSIONER CARDOZO: Okay, thanks.
1781. Thanks, Madam Chair -- and we are at eight o'clock.
1782. THE CHAIRPERSON: So this is your best guess, and what is on schedule now is worse than the worst guess of the schedule that we have been shown.
1783. MR. SWARD: Absolutely.
1784. THE CHAIRPERSON: So we will expect a flood of schedules.
1785. We thank you very much. It is very late. We appreciated your participation. We always want to hear as much as possible and push things if we can to get as much on the record as possible.
1786. We appreciate your presence, Mr. Asper. We conclude from that that the whole organization takes this exercise seriously, and we say good night.
1787. We will adjourn now until nine o'clock tomorrow morning.

--- Whereupon the hearing adjourned at 2001,

to resume on Thursday, October 15, 1998

at 0900 / L'audience est ajournée à 2001,

pour reprendre le jeudi 15 octobre 1998

à 0900