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TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TELECOMMUNICATIONS COMMISSION
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
APPLICATIONS FOR BROADCAST LICENCES /
REQUÊTES POUR LICENCES DE RADIODIFFUSION
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)
November 12, 1998 12 novembre 1998
Volume 1
tel: 613-521-0703 StenoTran fax: 613-521-7668
Transcripts
Transcription
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
StenoTran
Canadian Radio-television and
Telecommunications Commission
Conseil de la radiodiffusion et des
télécommunications canadiennes
Transcript / Transcription
Public Hearing / Audience publique
Applications for Broadcast Licences
Requêtes pour licences de radiodiffusion
BEFORE / DEVANT:
Andrée Wylie Chairperson / Présidente
Vice-Chairperson, Radio-
television / Vice-
présidente, Radiodiffusion
Joan Pennefather Commissioner / Conseillère
Andrew Cardozo Commissioner / Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Geoff Batstone Commission Counsel /
Avocat du Conseil
Dylan Jones Policy Co-ordinator (BSSI)
Morag York Policy Co-ordinator (TVNC)
Mike Burnside Hearing Manager / Gérant
d'audience
Diane Santerre Secretary / Secrétaire
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)
November 12, 1998 12 novembre 1998
Volume 1
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TABLE OF CONTENTS / TABLE DES MATIÈRES
PAGE
Presentation by / Présentation par:
Bell Satellite Services inc. 7
Viewer's Choice Inc./Canal Indigo SENC 176
3216195 Canada Inc. 232
WIC Premium Television Ltd. 262
Reply by / Réplique par:
Bell Satellite Services Inc. 302
Presentation by / Présentation par:
Television Northern Canada Incorporated 320
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1 Hull, Quebec / Hull (Québec)
2 --- Upon commencing on Thursday, November 12, 1998 /
3 L'audience débute le jeudi 12 novembre 1998 à 0900
4 1 THE CHAIRPERSON: Good morning,
5 ladies and gentlemen, and welcome to the hearing on the
6 applications by Television Northern Canada Incorporated
7 or TVNC and Bell Satellite Services Incorporated or
8 BSSI.
9 2 Bonjour, mesdames et messieurs, et
10 bienvenue à l'audience publique sur les requêtes
11 déposées par Television Northern Canada Incorporated,
12 ou TVNC, et par Bell Services Satellite Incorporated,
13 ou BSSI.
14 3 My name is Andrée Wylie. I am the
15 Vice-Chair of Broadcasting for the CRTC, and I will be
16 presiding over this hearing.
17 4 Allow me to introduce my colleagues
18 and fellow Commissioners. To my left is Joan
19 Pennefather and to my right is Andrew Cardozo.
20 5 TVNC, Canada's only aboriginal
21 television programming network, has applied for
22 national distribution of an aboriginal television
23 programming service. TVNC has said that national
24 distribution of this service, to be called Aboriginal
25 Peoples Television Network or APTN, would achieve a
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1 number of the Broadcasting Act's goals, including:
2 (1) that the Canadian
3 broadcasting system should serve
4 the diverse needs and interests,
5 as well as the special place of
6 aboriginal peoples within
7 Canada; and
8 (2) that the system should
9 provide "through its
10 programming, a public service,
11 essential to the maintenance and
12 enhancement of national
13 identity, and cultural
14 sovereignty".
15 6 This application is for a
16 conventional television network licence. In it, TVNC
17 states that APTN would provide a first level of service
18 to Canada's diverse aboriginal population, like that
19 originally provided by Canadians by CBC/Radio-Canada
20 when radio and television were first introduced.
21 7 TVNC propose que sa chaîne diffuse
22 des émissions en langues anglaise, française et
23 autochtone. La programmation viserait tout aussi bien
24 les autochtones que les non-autochtones, vivant dans le
25 nord comme dans le sud, alors que présentement seuls
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1 les téléspectateurs dans le nord du Canada ont accès au
2 réseau TVNC.
3 8 This applications stems partly from
4 the Commission's public hearing last November on the
5 appropriateness of a third national network. In that
6 proceeding, TVNC emphasized the need for a national
7 service that would meet the demands of aboriginal
8 people across the country.
9 9 Le Conseil a reconnu depuis longtemps
10 l'importance du rôle unique que joue TVNC dans notre
11 système de radiodiffusion en tant que service
12 autochtone sans but lucratif subventionné à même les
13 fonds publics et destiné à desservir les intérêts
14 publics et les objectifs de la Loi sur la
15 radiodiffusion.
16 10 In its report to the government on
17 the issue of a third national network, the Commission
18 said that it would consider any application to make
19 TVNC widely available throughout Canada to meet the
20 needs of Canada's various aboriginal communities, as
21 well as the needs of other Canadians.
22 11 The hearing will consider issues
23 related to the appropriate licensing framework for APTN
24 including its request for mandatory distribution, its
25 programming plans, its financing and marketing plans,
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1 and the impact of the application on Canadian
2 consumers.
3 12 In addition to the APTN application,
4 we will also consider an application by Bell Satellite
5 Services Incorporated, or BSSI. BSSI has applied for a
6 licence to operate two pay-per-view services, an
7 English and a French language service. The proposed
8 services would be an integral part of the direct-to-
9 home service offered by BSSI already.
10 13 BSSI also asks that it be permitted
11 to offer up to 10 percent of its programming on the
12 English service in languages other than English and
13 French. In its application BSSI states that it wants
14 to distinguish its service by offering increased
15 children's and multicultural programming.
16 14 The Commission will examine a number
17 of issues and concerns related to BSSI's application;
18 in particular, issues relating to satellite capacity
19 and the impact of licensing on consumers and existing
20 competitors.
21 15 Now for the administrative and
22 housekeeping matters regarding the conduct of this
23 hearing.
24 16 Over the next two days the Commission
25 will hear a number of oral presentations by interested
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1 parties. In addition, written submissions have been
2 filed with the CRTC and will form part of the public
3 record.
4 17 The proceedings will be transcribed
5 as usual and filed on the public record. In order that
6 people responsible for the recording of the transcripts
7 can provide an accurate record, I would ask that when
8 you speak, you press the famous little red button --
9 it's not red, it's green -- the green button on the
10 microphone, which will then become red and indicate
11 that "you're on".
12 18 When you are not speaking, please
13 ensure that you remove it; otherwise, there is
14 eventually feedback in the system.
15 19 CRTC staff who will be assisting us
16 during these hearings are our legal counsel, Geoff
17 Batstone; policy co-ordinators, Dylan Jones for BSSI,
18 and Morag York for TVNC; hearing manager, Mike
19 Burnside; and the hearing secretary, Dianne Santerre.
20 20 Please don't hesitate to call on Ms
21 Santerre regarding matters of process.
22 21 This hearing, as I said, will run for
23 two days, we expect. We will sit until approximately
24 5:00. And you will know what approximations of the
25 Commission have been: 5:00 has become 8:00.
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1 22 But we will try to divide the two
2 days reasonably.
3 23 Tomorrow we will start at 9:00 a.m.
4 and sit until we have heard all parties.
5 24 I thank you and welcome you all to
6 this hearing. Madam Secretary, would you call the
7 first participant, please.
8 25 MS SANTERRE: Thank you, Madam Chair.
9 26 First, I would like to address the
10 procedure for the hearing.
11 27 In Phase I, the applicant will have
12 20 minutes maximum for their presentation, of course
13 including audiovisual or other material. Questions
14 will follow by the members.
15 28 In Phase II, each appearing
16 intervenor is given up to 10 minutes for their
17 presentation. Questions again by members of the CRTC
18 panel may follow.
19 29 In Phase III, the applicant is given
20 an additional 10 minutes to comment or rebut
21 interventions filed to its application. Again,
22 questions may follow.
23 30 This is the procedure that will be
24 followed at the hearing.
25 31 I would like now to invite the
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1 application by Bell Satellite Services Inc. for a
2 broadcasting licence to carry on a national direct-to-
3 home pay-per-view television programming undertaking.
4 32 All the details of this application
5 are in the Order of Appearance for today.
6 33 Please proceed.
7 PRÉSENTATION / PRESENTATION
8 34 M. GOURD: Madame la Présidente,
9 Madame et Monsieur les Conseillers, mon nom est Alain
10 Gourd et je suis président-directeur général de la
11 société Bell Services Satellite Inc. M'accompagnent
12 aujourd'hui M. Michael Neuman, deux chaises à ma
13 droite, président-directeur général de Bell ExpressVu,
14 notre service de radiodiffusion directe par satellite,
15 ainsi que, à ma droite immédiate, M. David McLennan,
16 vice-président des opérations et principal
17 administrateur financier et, à la droite de Michael
18 Neuman, Chris Frank, vice-président des relations
19 gouvernementales et du développement corporatif.
20 Enfin, nous avons aussi avec nous, sur la table d'en
21 arrière, M. Tony Keenleyside, un associé du cabinet
22 McCarthy Tétrault, qui est notre avocat-conseil
23 extérieur pour les questions réglementaires.
24 35 Madame la Président, Madame et
25 Monsieur les Conseillers, nous sommes réunis ici ce
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1 matin, mes collègues et moi, pour présenter les
2 avantages des services de télévision à la carte par
3 radiodiffusion directe par satellite de langue
4 française et de langue anglaise que nous proposons. Si
5 vous le permettez, et avant que mon collègue M. Neuman
6 ne vous donne un aperçu de notre soumission, j'aimerais
7 vous décrire brièvement notre nouvelle structure
8 corporative et l'orientation que nous voulons lui
9 donner à l'avenir.
10 36 Comme vous le savez, la société Bell
11 Services Satellite est une filiale à part entière de
12 BCE et elle se propose trois objectifs de base: le
13 premier et le plus évident est notre service de
14 radiodiffusion directe par satellite, que dirige fort
15 bien M. Michael Neuman. Ce service, avec son équipe de
16 gestion distincte, a la responsabilité de faire croître
17 au Canada la distribution par satellite de services de
18 programmation, en particulier canadienne. Cet éventail
19 comprend, nous l'espérons, notre proposition de
20 services de télévision à la carte par RDS Express
21 Choix/Express Choice, laquelle constitue l'objet de la
22 présente audience.
23 37 BSSI's other two areas of focus are
24 business-oriented satellite services and broadcast and
25 multimedia programming services.
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1 38 Briefly, in the former we are in the
2 process of developing a broad portfolio of fixed and
3 mobile satellite services directed at Canadian and U.S.
4 businesses. These include such services as business
5 television, high speed data services, including
6 Internet-based services, and other value added fixed
7 and mobile satellite services on Canadian facilities.
8 39 As to the latter, we are currently
9 involved in certain specialty programming ventures,
10 applications which are currently before the Commission
11 and therefore will be discussed publicly at the
12 appropriate time.
13 40 In essence, we hope to be a
14 comprehensive services-based satellite company to grow
15 a domestic, North American and international business
16 which will capitalize on free trade and Canada's
17 enviable international reputation, especially in
18 satellite communications.
19 0910
20 41 Cependant, le service de
21 radiodiffusion directe par satellite que nous proposons
22 aujourd'hui a pour mission de desservir la population
23 canadienne. Ce ciblage du marché domestique est
24 évidemment exigé par la réglementation mais est aussi
25 renforcé par nos ententes contractuelles avec une
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1 société américaine de RDS, par les exigences du
2 commerce international et par les limites qu'impose
3 l'achat des droits de programmation.
4 42 Maintenant, en ce qui concerne le
5 sujet qui nous intéresse directement, la télévision à
6 la carte, permettez-moi de vous dire, en ce début
7 d'audience, que la présente demande pour des services
8 de télévision à la carte par radiodiffusion directe par
9 satellite s'est méritée l'appui entier de notre
10 actionnaire. En sa qualité d'entreprise canadienne
11 basée au Québec, la société BCE appuie évidemment sans
12 réserve les services proposés dans les deux langues
13 officielles du pays. En effet, il est important pour
14 notre entreprise que ces deux services de programmation
15 distincts soient aménagés de telle façon que nos
16 clients d'expression française et anglaise reçoivent le
17 meilleur service possible dans leur langue.
18 43 Je sais que dans le passé le Conseil
19 a pu exprimer certaines préoccupations à l'effet qu'un
20 service français de télévision à la carte par RDS ait
21 pu sembler avoir une importance moindre dans certaines
22 demandes. Permettez-moi de vous rassurer que tel n'est
23 pas le cas ici. La société Bell ExpressVu comprend
24 qu'il faut s'assurer que les besoins de tous nos
25 clients soient bien desservis. C'est la raison pour
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1 laquelle nous avons déjà rassemblé un éventail complet
2 de services pour les deux groupes linguistiques
3 officiels. Si nous obtenons la licence demandée, nous
4 appliquerons vigoureusement cette politique aux
5 services de télévision à la carte par radiodiffusion
6 directe par satellite.
7 44 La programmation du service français
8 de télévision à la carte par RDS que nous proposons
9 sera conçue par des francophones pour des francophones.
10 De plus, des ressources suffisantes, y compris la
11 capacité du satellite, seront disponibles afin
12 d'assurer le développement d'une entreprise de
13 programmation francophone à la fois compétitive et de
14 première classe.
15 45 La participation de BCE nous a permis
16 d'adopter une stratégie à long terme pour l'entreprise.
17 Bell ExpressVu a donc pu démontrer la ténacité et
18 l'engagement voulus pour surmonter les défis majeurs
19 qui ont ponctué l'essor de l'industrie domestique de la
20 radiodiffusion directe par satellite. En vérité, n'eût
21 été la société BCE, notre compagnie n'aurait
22 probablement pas survécu à ses expériences initiales.
23 46 Maintenant, grâce à l'appui entier et
24 à l'encouragement de notre actionnaire, nous sommes
25 capables aujourd'hui de présenter un projet qui, nous
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1 l'espérons, renforcera l'éventail des services que nous
2 offrons et appuiera notre bilan financier, alors que
3 nous aborderons un avenir compétitif plein de défis, un
4 avenir offrant par ailleurs une diversité et des choix
5 véritables aux consommateurs canadiens. Nous espérons
6 aider à transformer cet éventail de choix en réalité.
7 47 Nous vous demandons votre approbation
8 pour faire démarrer cette entreprise.
9 48 Maintenant, j'aimerais inviter
10 Michael Neuman à vous présenter les points saillants de
11 notre demande.
12 49 Michael.
13 50 MR. NEUMAN: Thank you, Alain.
14 51 Good morning. It is a real pleasure
15 for me, Madam Chair and Members of the Commission, to
16 have the opportunity to speak with you this morning
17 about our DTH pay-per-view plans.
18 52 We would like to think that our track
19 record thus far in DTH has well illustrated our ability
20 to meet our commitments when we have made them.
21 53 We intend to devote the same tenacity
22 to our pay-per-view proposal, thus delivering exciting
23 à la carte programming services in both French and
24 English, which will enrich our subscribers' viewing
25 experience and contribute to the growth and development
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1 of the Canadian broadcasting and program production
2 industries.
3 54 An interesting aspect of our proposal
4 is that we propose English language service which will
5 include multicultural programming.
6 55 In order to understand our future, I
7 believe it is very important to understand our past.
8 This industry has been built on the cusp of change: a
9 change that is sweeping away yesterday's monopoly
10 structures and injecting in their stead competitive
11 alternatives which are now offering Canadians
12 unprecedented programming choice and variety.
13 56 In my estimation the clear winners in
14 this process are the customers of these new services
15 and the suppliers of the programming product.
16 57 In our case that is Bell ExpressVu
17 subscribers and the Canadian program production
18 industry which makes the creative product that we sell.
19 58 Bell ExpressVu's business is built
20 for and around increasingly sophisticated and
21 knowledgeable consumers who have been conditioned by
22 U.S. DBS or grey market companies which occupied the
23 market prior to our arrival. Of course, it is buoyed
24 by the Canadian public which is quickly realizing that
25 a new digital television opportunity beckons; a digital
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1 opportunity that includes impulse pay-per-view in both
2 official languages.
3 59 It is also built on a comprehensive
4 regulatory framework developed by this Commission and
5 reinforced by licensing precedent over four separate
6 licensing hearings. These proceedings have resulted in
7 the authorization of five DTH and six DTH pay-per-view
8 licences. Of those six DTH pay-per-view licences, two
9 were integrated DTH and DTH pay-per-view licences
10 granted to Power DirecTV and AlphaStar.
11 60 We are involved in a business which
12 has been created in a competitive crucible. The
13 industry is expected to provide a competitive
14 alternative to the unauthorized or illegal U.S. grey
15 market companies, owned by such companies as General
16 Motors, Rupert Murdock's news corporation and TCI,
17 America's largest cable conglomerate, and Canadian
18 cable with an entrenched market of over seven and a
19 half million subscribers.
20 61 In such an environment Bell ExpressVu
21 has, from a standing start on September 10 last year,
22 created a very dynamic competitive environment in the
23 BDU marketplace. We have grown from zero to over
24 140,000 subscribers in that period of time. We have
25 distributed nearly 200,000 digital set-top boxes. We
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1 have packaged and promoted programming in ways that
2 consumers clearly find compelling, and the result is
3 that Bell ExpressVu and the programmers we carry enjoy
4 the highest average subscriber revenue in Canada,
5 despite the fact that we offer subscribers the
6 opportunity to purchase the smallest basic package in
7 the industry.
8 62 And finally, Bell ExpressVu has
9 enjoyed unprecedented success in the selling of pay-TV,
10 where we have achieved penetration in the range of six
11 times that ever achieved in cable, despite the
12 significant length of time the monopoly pay-per-view
13 providers and cable BDUs have had to promote services
14 in a manner that consumers might find more appealing.
15 63 Notwithstanding these early
16 successes, if we wanted a challenge, my colleagues and
17 I, we have found one.
18 64 I am happy to say that we have taken
19 a small rump of satellite capacity and turned it into a
20 high performance digital platform that generates over
21 100 high quality video and audio signals.
22 65 Our competitive edge is the array of
23 Canadian services that we provide. Within our 140,000
24 subscriber base is a significant number of U.S. ex-grey
25 market subscribers and ex-cable subscribers. With the
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1 advent of Nimiq, our DBS satellite, next spring, we
2 will migrate to a high powered DBS platform with at
3 least twice our present capacity, which will let us put
4 this company into high competitive gear.
5 66 We have clearly joined the
6 competitive fray. We have demonstrated that there can
7 be no competition without an effective competitor. We
8 have effectively slowed, if not stopped and reversed
9 the sale of U.S. grey market satellite dishes. We are
10 changing the way Canadians view the delivery of
11 television. In short, we are pleased with our progress
12 to date and would note that, in combination with Star
13 Choice, we have surpassed the estimated number of U.S.
14 grey market subscribers in Canada.
15 67 With the imminent arrival of more
16 satellite capacity now and the increased programming
17 flexibility that this will bring, we will repatriate
18 more of these subscribers and become an even more
19 effective alternative to cable in major urban markets.
20 68 Nevertheless, we are a long way from
21 profitability, so we must simply continue to grow our
22 business by increasing and improving our service,
23 including seeking all the technical and financial
24 efficiencies that might be possible. Please bear in
25 mind that this is a business with very large upfront
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1 costs, combined with all the business and technical
2 risk normally associated with the satellite industry.
3 69 An obvious efficiency available to
4 us, if licensed, is a DTH pay-per-view service which we
5 can integrate into our existing DTH business; an à la
6 carte programming service which we can customize for
7 our customers within the prescribed policy and
8 regulatory framework by packaging, pricing and
9 promoting in ways consumers are demanding but the
10 incumbent pay-per-view monopolies have not yet seen fit
11 to offer.
12 70 Our own pay-per-view service would
13 enable us to provide a competitive alternative to help
14 differentiate and streamline our business and improve
15 our bottom line. A pay-per-view licence is essential
16 as we strive for continued success in meeting our
17 commercial and public policy objectives and
18 commitments, not to mention achieving the pinnacle of
19 customer satisfaction that we have always sought to
20 achieve.
21 71 Our DTH pay-per-view proposal
22 contemplates the licensing of a national service with
23 two integral components: a French language DTH pay-
24 per-view service programmed, as Alain has said, by
25 francophones, for francophones; and an English language
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1 service with a multicultural element compromising no
2 more than 10 per cent of its programming.
3 72 Our minimum commitment to the French
4 language service is five channels of DTH pay-per-view
5 programming, which would grow proportionately with the
6 English language service, which is to say, at the
7 proposed level of 30 channels, that 25 per cent or
8 eight channels would be allocated to the French
9 language service.
10 73 However, as I have said, the minimum
11 number of French language channels would be five,
12 irrespective of the number of English language
13 channels.
14 0920
15 74 Your approval of this application
16 will provide us with the opportunity to program DTH
17 pay-per-view with our customers foremost in mind. It
18 will finally give Canadian consumers a real choice in
19 respect of both pay-per-view and BDU provider. It will
20 also bring to the fore unprecedented programming
21 formats such as multicultural, children's and special
22 events.
23 75 Over and above our commitments
24 contained in our licence application -- commitments
25 designed to ensure that we are at the same commitment
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1 level as the other licensees, thereby ensuring fair
2 competition -- we are pleased to note the following
3 strategies we would like to utilize.
4 76 Our DTH pay-per-view service would
5 begin high definition transmissions within its first
6 year of operation. It would be our intention to begin
7 high definition exhibition as soon as possible to place
8 us on the same competitive footing as the U.S. DBS
9 services that have similar plans, and to ensure a
10 Canadian response to this emerging technology.
11 Moreover, we would ensure that Canadian programming is
12 featured prominently in high-definition format.
13 77 We would also like to trial
14 made-in-Canada "described programming" in order to make
15 our DTH pay-per-view programming service more
16 accessible to sight-challenged Canadians.
17 78 We would program our DTH pay-per-view
18 service, to the extent practicable, in a complementary
19 fashion to our off-air, specialty and Pay-TV
20 affiliates. This makes good business sense for both
21 our affiliates and our DTH service; in addition, it
22 ensures greater choice and variety for customers.
23 79 In respect of the 5 per cent
24 contribution of gross DTH pay-per-view revenue which we
25 make available to stimulate the Canadian program
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1 production industry, we support the notion that this
2 seed money should benefit the Canadian feature film
3 industry. Therefore, we would readily contribute a
4 minimum of 80 per cent of the 5 per cent contribution
5 to a separate envelope of funds -- either inside or
6 outside the CTF -- as determined in consultation with
7 the industry and the current government feature film
8 policy review.
9 80 As well, as suggested to us in
10 discussions with the CFTPA and the ATPFQ, we would be
11 prepared to provide suitable shelf space for our
12 English language DTH pay-per-view service for new
13 French language feature films which have been dubbed
14 into English. We would also be prepared to reciprocate
15 on the French language DTH pay-per-view service in
16 respect of recent Canadian films shot in English. This
17 would, of course, in no way dilute or alter any of our
18 commitments in our application. It would be over and
19 above those commitments.
20 81 In concluding, given our track
21 record, we hope that the Commission is satisfied that
22 Bell ExpressVu has delivered on our promise to deliver
23 dynamic competition in the BDU business, against great
24 odds and very formidable competition. We further hope
25 that the Commission shares our enthusiasm over this
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1 pay-per-view proposal.
2 82 Our goal is very clear. We would
3 like to provide Canadian consumers with more choice and
4 variety as well as the economic benefits of competition
5 such as better service and pricing. It will also
6 provide us with a more efficient and effective
7 corporate vehicle and the additional margin dollars to
8 more aggressively promote our service in rural and
9 underserved Canada, as well as financially
10 strengthening our competition stance in urban Canada.
11 83 A pay-per-view licence will help us
12 take on the U.S. DBS providers which currently employ
13 integrated DTH pay-per-view operations that help them
14 penetrate the Canadian market as well as their home
15 market.
16 84 Thank you very much for your
17 attention. My colleagues and I will not be pleased to
18 respond to your questions.
19 85 THE CHAIRPERSON: Bonjour et merci,
20 Monsieur Gourd, gentlemen.
21 86 I will address my questions to you
22 generally in English, but feel free to respond in
23 French since I will not know who will respond to them.
24 That will be true throughout the process. You can
25 answer us in French or engage in conversation in
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1 French, as is comfortable.
2 87 I will have first a number of
3 questions for you with respect to the licensing
4 framework aspect of your application. Then my
5 colleagues will have some questions on technical
6 aspects, distribution aspects, competition aspects,
7 programming and finance.
8 88 As is obvious from your application
9 and from the interventions that have been filed in it,
10 we are looking at an application in the context of a
11 number of policies or even legislative instruments,
12 regulatory instruments that are in place. I would like
13 to pursue further with you the importance or impact or
14 limitations that may or may not be contained in these
15 instruments. This would include the Direction, which
16 is still on our regulatory books, that was issued by
17 the government in 1995 with regard to DTH pay-per-view,
18 government and CRTC policy statements that have been
19 referred to, and in the last analysis, what licensing
20 action may be, in light of the circumstances that exist
21 today, in the public interest.
22 89 As we examine these other
23 instruments, there always seems to be discretion there
24 to find public interest in various ways, depending on
25 which end of the telescope one is looking into, whether
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1 you are an applicant or intervenor.
2 90 I would like to first look at the
3 direction with you and ask you what, in your view, is
4 the meaning of "dynamically competitive market," which
5 is referred to in the preamble of the direction, as
6 well as in Section 3.
7 91 At Section 3 it directs the CRTC to
8 promote, through licensing, a dynamically competitive
9 market for DTH pay-per-view. Would you see that as
10 meaning that there should be competition between DTH
11 pay-per-view services?
12 92 MR. NEUMAN: Madam Chair, our view of
13 dynamic competition, as I said briefly in my opening
14 remarks, is that in order for there to be real
15 competition, there has to be a competitor, a viable
16 competitor that has an opportunity to package, price
17 and promote in ways that the consumer might find more
18 appealing.
19 93 Our view with respect to this
20 application is that, as there is currently no
21 competition either in eastern Canada or western Canada
22 in the DTH pay-per-view business, the advent of an
23 ExpressVu-sponsored DTH pay-per-view business would be
24 that new competitor. The competition would give rise
25 to new ideas in the market, new ways of promoting
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1 product, new ways of packaging product, not necessarily
2 the same product, but in some cases the same product
3 packaged or promoted differently or even priced
4 differently.
5 94 We found this in our existing
6 business in BDU. Simply by being there, oftentimes
7 offering the same programming but packaged differently,
8 gives rise to higher penetration. For instance, both
9 ourselves and the cable companies offer pay services in
10 eastern Canada. For instance, we offer TMN, the same
11 service, packaged differently, promoted differently.
12 The result is that consumers within our service
13 purchase TMN in greater quantities than do consumers
14 within cable services.
15 95 There is a reason for this, and it
16 has to do with marketing, including pricing, packaging
17 and promotion. That kind of dynamic competition, until
18 Star Choice entered the market and later ourselves,
19 didn't exist.
20 96 We demonstrated that competition is
21 good, and we propose that it would also be good in the
22 pay-per-view business.
23 97 THE CHAIRPERSON: Do you have a
24 different interpretation to the use of the promotion of
25 a dynamically competitive market that is in the
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1 preamble of the direction? For example, would you say
2 that possibly this addresses competition not between
3 two DTH pay-per-view services, but between perhaps
4 pay-per-view delivered by cable and pay-per-view
5 delivered by DTH? Do you think that there is a
6 different interpretation to be given to the use of that
7 phrase in the preamble rather than the various ones in
8 Section 3?
9 98 MR. NEUMAN: I will ask my colleague,
10 Chris Frank, to comment on that after I have said this.
11 99 The very fact that there is already
12 competition now with respect to BDUs, although not
13 competition with respect to pay-per-view, only meets
14 half the test of a real competitive environment.
15 0930
16 100 THE CHAIRPERSON: You would add
17 another layer, which would be competition between pay-
18 per-view and pay-per-view -- DTH BDUs and DTH BDUs.
19 101 MR. NEUMAN: Yes, we would.
20 102 THE CHAIRPERSON: Would you go as
21 far, as I asked earlier, as saying that it may also
22 address competition between DTH delivery of pay-per-
23 view and cable delivery of pay-per-view?
24 103 MR. NEUMAN: I think our existence in
25 the pay-per-view business will provide that level of
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1 competition.
2 104 THE CHAIRPERSON: No, my question
3 was, do you think the direction could be read in that
4 fashion.
5 105 MR. NEUMAN: Chris?
6 106 THE CHAIRPERSON: I would like you to
7 have an opportunity to expand further on what you think
8 these words mean because we have had various
9 interpretations of what they mean and what their import
10 is. That phrase is in the preamble of both the pay-
11 per-view and the BDU direction.
12 107 MR. FRANK: The thrust of our
13 application this morning, Madam Chair, is to create for
14 our company and for our business the best possible
15 opportunity to bring a wide range of services to the
16 Canadian public. We think that both inter and
17 intramodal competition is in the public interest. We
18 think through a competitive DTH pay-per-view service we
19 can offer Canadians more variety, more choice, and
20 essentially real competition. We believe that's in the
21 public interest.
22 108 I think the specifics of your
23 question have a legal connotation, and Tony Keenleyside
24 would be prepared to provide those.
25 109 Thank you.
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1 110 MR. KEENLEYSIDE: Thank you, Chris.
2 111 Vice-Chair Wylie, the recital that
3 you are referring to, I think your question is
4 basically do we read the direction as saying that the
5 direction contemplates not only DTH pay-per-view
6 competition with cable pay-per-view, but does it also
7 contemplate DTH pay-per-view with DTH pay-per-view as
8 well.
9 112 Am I getting the question correctly{
10 113 THE CHAIRPERSON: It could mean all
11 three. It could mean it is in the public interest to
12 have competition in DTH pay-per-view licensees; it
13 could mean that you would want competition in the
14 delivery of DTH pay-per-view, so you would want to have
15 more than one DTH distributor, but could it also mean
16 that a dynamically competitive market with regard to
17 pay-per-view may mean competition between pay-per-view
18 delivered by different types of BDUs?
19 114 MR. KEENLEYSIDE: I see.
20 115 THE CHAIRPERSON: So I would see
21 three possible arguments as to what this preamble would
22 raise.
23 116 MR. KEENLEYSIDE: Of course, as you
24 know, there are the two directions, and this one just
25 deals with the issue of pay-per-view itself by DTH. If
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1 you look at the entire recital that you are referring
2 to, it says:
3 "Whereas pay-per-view television
4 programming undertaking should
5 operate through licensing in a
6 dynamically competitive market,
7 subject to appropriate
8 requirements, including their
9 contribution to the development
10 of programming, in order to
11 provide to their subscribers,
12 [and here is the key phrase] in
13 competition with each other, the
14 widest range of Canadian and
15 foreign feature films and other
16 programming" (As read)
17 117 The "in competition with each other"
18 goes to the heart of your question, which means that we
19 need to understand what the direction meant by "pay-
20 per-view television programming undertakings". That's
21 a defined term in the actual order, and the defined
22 term means a pay television programming undertaking
23 that provides a pay-per-view service. Then there is a
24 subset to that called a DTH pay-per-view television
25 programming undertaking, which is also defined.
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1 118 So the way we read it, if they had
2 intended there not to be competition within the DTH
3 pay-per-view industry but just as between DTH and non-
4 DTH, it would not have said the all encompassing pay-
5 per-view television programming undertakings, the whole
6 set, including cable and DTH.
7 119 THE CHAIRPERSON: So your answer is
8 that that phrase may exhort us to try to ensure that
9 all three of the layers I mentioned be competitive.
10 120 MR. KEENLEYSIDE: That's correct.
11 121 THE CHAIRPERSON: Now, given the
12 importance of that phrase expressed both in section 3
13 and in the preamble, would you say that under certain
14 circumstances it would be possible that vertically-
15 integrated companies would limit competition and work
16 against the exhortation to a dynamically competitive
17 market? Is that possible?
18 122 MR. NEUMAN: Madam Chair, I think
19 that in the current environment that is possible. To
20 the extent that there are one or more pay-per-view
21 businesses in operation that provide a diversity of
22 programming for consumers, that possibility is reduced.
23 That, of course, is one of the benefits that we believe
24 licensing of ExpressVu as DTH pay-per-view operation
25 will bring to bear.
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1 123 MR. GOURD: If I may add, as we
2 speak, cable subscribers represent I believe around 8
3 million subscribers. Bell ExpressVu has around
4 140,000. We were reading in the newspaper this morning
5 that Star Choice has 125,000. Therefore, I do not see
6 for quite a long time the possibility of DTH pay-per-
7 view reducing competition by impacting significantly
8 another pay-per-view licensee which has as its main
9 subscriber base the cable subscriber base.
10 124 THE CHAIRPERSON: My question was
11 slightly different. Let me repeat it.
12 125 My question is, is it possible that
13 achieving competitive services in pay-per-view, that is
14 having two or more, the effect that this would have in
15 producing competition would be reduced if that second
16 service was licensed to a vertically-integrated company
17 such as yours?
18 126 You are aware, obviously, that this
19 is the argument that has been made. Do you see the
20 possibility that arriving at a dynamically competitive
21 market would be slowed, less likely to occur, if we had
22 an integrated BDU -- DTH BDU and DTH pay-per-view?
23 127 Do you see my question now?
24 128 MR. NEUMAN: Yes, I do now, thank
25 you.
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1 129 The answer is we do not think
2 competition would be slowed. We think it would be
3 spurred on.
4 130 THE CHAIRPERSON: I am talking about
5 degree.
6 131 MR. NEUMAN: I think competition
7 would be enhanced dramatically.
8 132 THE CHAIRPERSON: Of course, getting
9 another service -- you can't have competition if you
10 have only one service. My question is, is it wise for
11 the Commission to license that second service rather
12 than wait until a non-integrated company applies for
13 one if the aim is to achieve a dynamically competitive
14 market? What may be the effect of that vertical
15 integration as opposed to a licensing framework where
16 two different companies would own the BDU and the pay-
17 per-view{
18 133 MR. NEUMAN: My response would be,
19 Madam Chair, that I can only speak to our experience to
20 date, thus far, in the DTH BDU business. We have
21 demonstrated a propensity to promote products in a very
22 efficient fashion. I would expect that we will take
23 the same view with DTH pay-per-view; in fact, we commit
24 to do that.
25 134 So I believe that having the
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1 efficiency of integration, having it under the
2 direction of management that has already demonstrated a
3 propensity to promote and enhance services in a very
4 dynamic fashion will give rise to such an outcome.
5 135 I do not personally believe that a
6 non-integrated pay-per-view business has the same
7 propensity to achieve the efficiencies as between the
8 existing services of the BDU and its own services as we
9 would have. So I think our integration actually gives
10 rise to a more efficient approach and, as our past
11 would demonstrate, we certainly have a vested interest
12 and a propensity to sell more pay-per-view, which gives
13 rise to more program revenue and all the knock-on
14 benefits that we have described.
15 136 MR. GOURD: May I add a comment?
16 137 I would like to echo what Michael has
17 said from another perspective. You can have
18 competition in pay-per-view from a horizontal
19 perspective and/or from a vertical perspective. First,
20 the horizontal perspective.
21 0940
22 138 In the future, you might have two
23 pay-per-view licensees which are supplying with the
24 same stream of product, both cable and direct-to-home.
25 So, therefore, they compete against each other, but
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1 using the same distribution mechanism, the same BDUs.
2 Or, in addition -- and both could be complementary, you
3 could have both kinds at the same time -- you could
4 have, also, in addition, a horizontal competition where
5 a direct-to-home BDU program is a pay-per-view for its
6 market, for its subscriber and it will inevitably be
7 programming differently than a pay-per-view licensee
8 which has 95 per cent of its subscribers in cable.
9 139 So the main programming thrust of the
10 licensee which is rooted basically in cable will be
11 around cable subscribers because that is where the
12 growth is.
13 140 So our view is that to achieve
14 program differentiation, in order to achieve different
15 packaging, in order to achieve even different
16 acquisitions of product, more children, more
17 multi-lingual, more special events, to have dynamic
18 competition as the direction goes for their
19 subscribers, it is preferable to have as many forms of
20 competition as possible and there is very little chance
21 that an integrated DTH pay-per-view licensee can impact
22 in a significant fashion a pay-per-view licensee which
23 has also the cable subscriber base.
24 141 We could take a look at other
25 jurisdictions. For example, in the U.S. For example,
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1 in France where we have both TPS et LCS, qui se
2 concurrencent l'un l'autre. And there, the integrated
3 pay-per-view approach has been retained with great and
4 dynamic competition as opposed to lesser competition.
5 142 THE CHAIRPERSON: So your position
6 would be premised on the unlikely possibility that
7 there would be in Canada two DTH pay-per-view and both
8 of them not be also providing pay-per-view to cable.
9 You are making that assumption?
10 143 MR. GOURD: Our application is
11 clearly to provide --
12 144 THE CHAIRPERSON: No, no. I am
13 trying to discuss with you why it is that in light of
14 the dynamically competitive exhortation, to create a
15 dynamically competitive market theoretically, theorists
16 would say that an integrated system may in usual
17 circumstances be anti-competitive and you are giving
18 the answers as to why that theoretical danger is
19 balanced by the advantages of having integration and
20 that, in your view, the advantages are so great as to
21 eliminate the theoretical possibilities or the
22 potential. Intervenors will tell us a different story.
23 They will say that the potential is so bad that it
24 outweighs the efficiency.
25 145 So one argument is efficiencies, that
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1 I have heard today, and all the public interest
2 advantages that can flow from it. The other you are
3 giving me, Monsieur Gourd, is that a DTH pay-per-view,
4 integrated with a DTH BDU will differentiate itself
5 because it will have a different market, it will have
6 different aims. But you are basing that on the fact
7 that the other DTH pay-per-view licensees are now also
8 offering pay-per-view to cable.
9 146 MR. GOURD: Exactly.
10 147 THE CHAIRPERSON: So if they were
11 both offering pay-per-view via DTH, if you had two
12 licensees, then you would not have that answer. So I
13 am asking you, are you premising your position on the
14 argument that it is impossible to have two purely DTH
15 pay-per-view services in Canada and that necessarily
16 one of them will also be offering cable and, therefore,
17 your differentiation argument.
18 148 MR. GOURD: It is difficult to say,
19 Madam la Président, what the other DTH licensee will
20 do. However, the two arguments are integration and
21 product differentiation.
22 149 In terms of integration, we are
23 facing two integrations here but a different kind. The
24 first integration is the current licensee which have
25 integrated pay-per-view undertaking supplying both
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1 cable cable and direct-to-home. So it is a form of
2 integration because they have a central programming
3 point and they feed a variety of distribution
4 mechanism. And they have some efficiencies there, too.
5 They have some financial and economic advantage.
6 Another integration is the one we are proposing where
7 we tailor the pay-per-view offering towards our
8 direct-to-home subscriber and that brings indeed the
9 second argument which is product differentiation.
10 150 But we do not believe that we would
11 be interpreted and the other competitor would not be.
12 Both would be integrated from a different perspective
13 and in a different fashion.
14 151 At the end of the day, as Michael
15 said, dynamic competition means competitors and means
16 competitors having different approaches, different
17 programming perspective, different background and so on
18 and so forth. If all the competitors are of the same
19 kind, both are integrated. To some extent it will
20 represent more similar product as if you were to allow
21 different approaches like DTH and pay-per-view
22 licensees or licences combined in one entity.
23 152 MR. FRANK: Madam Chair, perhaps I
24 could provide an answer at a macro economic level. I
25 think the issue here is one of materiality or, plainly
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1 spoken, one of market power.
2 153 Both DTH companies, ExpressVu and
3 Star Choice, in their original licensing hearings
4 predicted at full maturity a subscriber base around
5 600,000. That may or may not be accurate. But I think
6 everyone agrees that the DTH business will be always,
7 at least for the foreseeable future anyway,
8 non-dominant. If you accept the present market split,
9 it is approximately 50-50.
10 154 If a DTH BDU integrates into a DTH
11 pay-per-view, as we are proposing, I do not think there
12 will be a material impact on the competitiveness of the
13 industry. I do not think the issue of integration at a
14 macro level will be significant because we will always
15 be non-dominant and, more to the point, probably no
16 more than 50 to 60 per cent of the marketplace.
17 155 THE CHAIRPERSON: Would be your
18 optimum goal.
19 156 MR. FRANK: Our optimum goal, I
20 think, is to have a dish on every house in Canada and
21 two cars in every garage and maybe even a chicken in
22 every pot. But dreams do not always come true. We
23 have to be realistic.
24 157 I think the bottom line is that cable
25 is very well entrenched in this country. Cable is
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1 going to digitize. There is going to be fierce
2 competition in the years to come. DTH will be
3 non-dominant and I truly believe that in terms of macro
4 economic competitiveness, that an integrated DTH
5 pay-per-view undertaking addressing just the
6 pay-per-view market is not a competitive force that is
7 going to upset the current balance.
8 158 THE CHAIRPERSON: I quite understand
9 your comment about wanting two cars in the garage, one
10 chicken in every pot. The regulator is well aware.
11 Sometimes it ends up with turkeys when it wanted
12 chickens. Sometimes it ends up with a featherless
13 goose.
14 159 MR. FRANK: I hope you see no turkey
15 here, madam.
16 160 THE CHAIRPERSON: Let me ask the
17 question very simply: Is it your belief that a DTH
18 pay-per-view service that would be for DTH only and,
19 therefore, likely to differentiate itself by focusing
20 on that market and that market alone, possible in
21 Canada without vertical integration with the BDU?
22 161 MR. NEUMAN: Madam Chair, such an
23 outcome is possible, but we believe not the best
24 outcome. The reason I say that is because the
25 realization of the efficiencies that we have spoken to
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1 in the last few minutes would be much more difficult to
2 realize on the cost side of our infrastructure.
3 162 On the upside, on the revenue side,
4 as I said earlier in my owning remarks, we also seek to
5 achieve the higher margin dollars and, of course,
6 through selling within our customer base which we have
7 done with pay television, thus achieving five to six
8 times the penetration of pay television within the DTH
9 subscriber base as compared to cable, higher
10 contribution margins to our business which can be used
11 for -- to achieve ever-greater penetration of the
12 subscriber base, both cabled and uncabled.
13 163 All this gives rise to a couple of
14 benefits from my perspective: More subscribers in
15 Canada, fewer DTH grey market installations in Canada,
16 more programming sold in Canada, more Canadians
17 watching Canadian programming.
18 0950
19 164 To me, those are natural offshoots of
20 our application.
21 165 THE CHAIRPERSON: We have been
22 reminded in numerous instances in the written material
23 that has been filed to date in this application that
24 paragraph 5(f) of the Direction says that the
25 Commission is not to refuse to issue a licence to an
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1 applicant for the sole reason that the applicant holds
2 a licence to carry on a DTH BDU.
3 166 Is it your view that the Commission
4 can nevertheless properly consider issues of vertical
5 integration between a DTH BDU and DTH pay-per-view if
6 it had lingering concerns?
7 167 MR. NEUMAN: Madam Chair, we believe
8 that it is within the purview of the Commission to take
9 into account all the matters that you have already
10 described, including this matter, in consideration of
11 our application.
12 168 I would fall back on the answer of my
13 colleague Mr. Frank with respect to our view that there
14 really is no reason, given our relative market power
15 and even our proposed market power, to be concerned
16 about integration.
17 169 I would add one further thought in
18 that regard. We have been involved in the DTH business
19 now for a few years and as a live service now for some
20 14, 15 months. There has been a learning curve, but
21 there has also been an evolution in the cable side of
22 the business. For a long time cable has been proposing
23 to roll out digital set-top boxes.
24 170 One might assume that as cable does
25 roll out digital set-top boxes at some point in the
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1 future in more vast numbers, that working together with
2 the existing pay-per-view companies, they may begin to
3 achieve a vastly higher penetration of pay-per-view
4 within the cable base. Hence, the prospect of their
5 being vastly dominant in the provision of pay-per-view,
6 in conjunction with the existing pay-per-view
7 operators, becomes a very real prospect, and possibly
8 within the next couple of years.
9 171 So while Chris talked about there
10 being, in our hopes and dreams, significantly more
11 dishes in homes than there are today -- and we
12 certainly hope that is the case and that with a pay-
13 per-view licence we could achieve that faster and more
14 efficiently. Even as we are successful, we expect that
15 there will be vastly more pay-per-view provided by the
16 incumbent pay-per-view operators within cable than has
17 ever been seen before as well.
18 172 So integration, we think, is really a
19 non-issue.
20 173 MR. FRANK: Maybe one further point
21 to that is that the existing companies, the existing
22 pay-per-view licensees, integrated as they are both in
23 cable and DTH -- and MMDS for that matter -- also have
24 significant other broadcasting holdings.
25 174 I think Alain made the point that
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1 there is significant horizontal integration.
2 175 These are big companies. They are
3 experienced. They are well positioned to compete.
4 Dynamic competition in the broadest sense is very much
5 in the public interest, and that is what we represent
6 here today.
7 176 THE CHAIRPERSON: Mr. Neuman, you
8 think that that would be one good way of getting
9 feathers on our golden goose, or boxes on our
10 televisions?
11 177 MR. NEUMAN: I would say that whether
12 or not it puts feathers on our goose, it would
13 certainly help put boxes on TVs. In fact, I would
14 suggest that our very existence as a competitor to
15 cable, speaking of our BTU business, has been a major
16 impetus to get cable to digitize.
17 178 Likewise, our existence as a
18 competitor in the pay-per-view business, I believe,
19 will cause the incumbent pay-per-view companies to
20 become more creative in how they package, price,
21 promote and work together with their existing customers
22 to put more pay-per-view out in the market and hence to
23 put more Canadian films into the marketplace and to
24 propagate the services which to date have not been
25 particularly successful.
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1 179 I think it will give rise to that
2 conclusion, whether you are a DTH customer or a cable
3 customer.
4 180 THE CHAIRPERSON: Having agreed that
5 paragraph 5(f) does leave some discretion to the
6 Commission in addressing concerns it may have about
7 vertical integration, would you go so far as saying
8 that the Commission would have the power to impose
9 conditions of licence to meet these concerns if it
10 still has them?
11 181 I hear you that we should not. But
12 we are not always as wise as applicants.
13 182 If we had lingering concerns, would
14 you agree that the direction does not take away the
15 power of the Commission to address by regulatory means
16 concerns about the effect of vertical integration?
17 183 MR. FRANK: Yes, we would agree with
18 that. We have seen that in previous DTH pay-per-view
19 licensing decisions. We certainly agree with that.
20 184 However, as you pointed out in your
21 question, we would be reluctant to agree with
22 conditions of licence that don't impact our
23 competition. As Michael said in his opening statement,
24 fair competition and sustainable competition I think
25 means that everyone plays by the same rules.
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1 185 THE CHAIRPERSON: Even if not
2 everyone is constructed in the same manner?
3 186 MR. FRANK: There are tradeoffs --
4 187 THE CHAIRPERSON: Because is you say
5 that, you could get yourself into a corner very
6 quickly.
7 188 MR. FRANK: I take your point, Madam
8 Chair. But I would fall back, to use Michael's phrase,
9 on the fact that we are non-dominant, we are new in the
10 marketplace. Whereas we might have, if we are
11 fortunate enough to be licensed, vertical integration,
12 our competitors are well horizontally integrated.
13 189 For competition to be effectively and
14 sustainably joined in the marketplace, we believe that
15 the same rules should apply to all players in this
16 regard.
17 190 THE CHAIRPERSON: Applying the same
18 rules to everybody without regard to particular
19 circumstances may not be what you want.
20 191 MR. GOURD: If I may, we are talking
21 about the regulatory framework. Each company, each
22 licensee being different, details and specifically
23 tailored conditions inevitably would differ.
24 192 THE CHAIRPERSON: Or even policy
25 framework at a very generic level, it seems to me,
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1 would have to look at the circumstances of each case,
2 and that there would be room in the Commission's
3 discretion to find something in one circumstance and
4 something else in another.
5 193 Let me ask you, for the purpose of
6 allowing you to expand on the record, what your
7 reaction is to the following mechanisms that would
8 possibly --
9 194 I tried to pull out the ones that
10 would be the most obvious to meet problems that may in
11 the view of some flow from vertical integration as
12 proposed in this case and see what your reaction is.
13 195 And let's not at the moment look at
14 what the exact mechanism would be, because I quite
15 understand that you are before us for a pay-per-view
16 licence and that some of these proposals would require
17 addressing the distribution undertaking.
18 196 Nevertheless, there is always a way,
19 if the remedy is required. So let's talk about what
20 the remedies could be.
21 197 They would be obviously aimed at
22 limiting or prohibiting undue preference or anti-
23 competitive behaviour or any behaviour that may lead in
24 the short or long term to a reduction in competition.
25 198 What would be your view, for example,
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1 of a rule that would say if you distribute your own,
2 you have to distribute your competitor as well; and in
3 the same breath, if that were the case, giving the same
4 number of channels to each?
5 199 MR. NEUMAN: Madam Chair, we
6 considered this with respect to other programming that
7 we carry, and we run into an interesting thing.
8 Starting from the finite satellite capacity for a
9 start, you can envisage a situation where if those
10 rules are taken to an extreme, we end up carrying too
11 much of the same genre, the same type of programming,
12 which may give rise to a scenario that we meet the test
13 but we don't provide the consumers with what they are
14 really looking for. You end up with, if not
15 duplication of the exact programming, a degree of
16 duplication within programming of a very similar genre.
17 200 I think that that runs contrary
18 certainly to what we intended when we suggested that we
19 would like to help create a dynamically competitive
20 environment.
21 201 In a competitive environment I would
22 look to the consumer first -- and I use that word
23 broadly. I would look to the marketplace to see what
24 it is the marketplace is demanding of us that we carry,
25 and then carry that product.
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1 202 We already carry services on
2 ExpressVu's DTH service that are owned by our
3 competitors, for instance. We carry them in some cases
4 because we have access obligations. But I can think of
5 cases where, access obligations aside, we would carry
6 them because they are very highly rated services that
7 are in tremendous demand by the public. And we would
8 be competitively disadvantaged, frankly, if we did not.
9 203 So we package them and promote them
10 in a manner that guarantees their broadest possible
11 distribution.
12 204 I would not want to -- if the goal is
13 to really create dynamic competition, I would not want
14 to find ourselves somehow hemmed in with conditions
15 that would cause us to have to add Channel A because we
16 added Channel B. I would rather look to the consumer
17 and say: "What channel are you finding most attractive
18 and how would you like to receive it and at what price
19 would you like to receive it?" And then package
20 accordingly.
21 205 Our experience in doing that thus far
22 has yielded, as I said earlier, tremendous customer
23 satisfaction. It has yielded a scenario where 92
24 percent of our customer base is very, very satisfied
25 with our product, so much so that they would recommend
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1 our overall service to family members and friends when
2 we surveyed our base this summer.
3 206 It certainly yielded -- if we can say
4 that the consumers had voted with their chequebooks, it
5 has yielded the highest average subscriber revenue in
6 Canada because we have not --
7 207 I think you have left us thus far
8 enough flexibility to really create something that
9 consumers find new and different, such that they want
10 to buy more of it.
11 208 THE CHAIRPERSON: I fail to see how
12 for the consumer having two services to pick from isn't
13 better than one. Therefore, I have a bit of a problem
14 walking with you from the question of why should we not
15 impose a requirement that if you carry your own, carry
16 another to the consumer being better off having one
17 rather than two.
18 209 But I do hear you saying that it
19 would make little sense to devote that many
20 transponders to pay-per-view because of the limited
21 differentiation possible.
22 210 And that is why it would not be wise
23 to say you have to carry two.
24 211 MR. GOURD: There is no objection in
25 principle, from a business perspective as opposed to a
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1 regulatory perspective, to having two. The proof of
2 the matter is that when Nimiq is launched, Bell
3 ExpressVu will have two, because an agreement has been
4 entered with Astral and I believe an agreement in
5 principle with Premium Services to carry indeed their
6 pay-per-view service --
7 212 THE CHAIRPERSON: For a time.
8 213 MR. GOURD: For a period of a few
9 years. Therefore --
10 214 THE CHAIRPERSON: It may be a few
11 months by then. Anyway, we can discuss that further.
12 215 MR. GOURD: What we want to say is
13 that from a business perspective, indeed it is all a
14 matter of what kind of product the supplier would offer
15 and how it could be complementary with the product
16 differentiation that on top of that first pay-per-view
17 our own pay-per-view can offer.
18 216 However, we do have some experience
19 with must carry because there is one service that you
20 have already introduced the notion in another
21 programming category that if a licensee has his own
22 service, it must carry the other.
23 217 There is a bit of a risk in there
24 because it introduces program rigidity.
25 218 If as a supplier I am guaranteed
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1 equal number of channels, if I am guaranteed a specific
2 presence on the BDU, why should I program differently
3 than what I offer cable? I don't have to to be
4 necessarily creative. I have guaranteed distribution.
5 219 So we believe that the preferred
6 approach is to let the parties discuss and then each
7 side has to develop creativity in order to make sure
8 that the two pay-per-view offerings are complementary.
9 If not, you will have the first one and it will be
10 homogenized toward all distribution mechanisms, and
11 then we have less room to achieve product
12 differentiation.
13 1005
14 220 THE CHAIRPERSON: I would expect that
15 if there was a rule -- a must-carry rule -- that if you
16 carry your own you have to carry your competitor, your
17 competitor would attempt to differentiate itself. Or,
18 even more, is your answer that it would likely do that
19 if it was at your option that you carried two rather
20 than one? Otherwise it would be non-differentiated
21 because it would be geared toward cable.
22 221 MR. NEUMAN: That is correct. In
23 fact, many elements of the offer could become different
24 if there wasn't an assumption that they get carried no
25 matter what.
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1 222 They could become more efficient.
2 They could propose to package differently. They could
3 propose to work with us in co-promotion.
4 223 But if there is simply a right on
5 their part and an obligation on their part, really they
6 will realize they have a right to it and we have an
7 obligation that they won't do anything any differently
8 than they ever have for their dominant customer.
9 224 THE CHAIRPERSON: So the bottom line
10 is: you are not against carrying two, but you want to
11 make that choice based on what is offered to you and
12 the economics of it and the number of transponders
13 available.
14 225 MR. NEUMAN: That is correct.
15 226 THE CHAIRPERSON: And so you would be
16 against any requirement --
17 227 MR. NEUMAN: That is correct.
18 228 MR. FRANK: Madam Chair, I would
19 simply add the comment that the condition of licence
20 which precludes DTH pay-per-view companies from
21 acquiring programming on an exclusive basis sets the
22 stage for fair and sustainable competition, and we are
23 in full agreement with the Commission's finding of 1995
24 that in an environment where pay-per-view companies
25 acquire product on a non-exclusive basis, the
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1 requirement to carry more than one pay-per-view
2 undertaking could result in program duplication and
3 wasted satellite space, which could be used for new
4 Canadian services, both broadcasting services and, I
5 suppose, new emerging multi-media services, to better
6 satisfy our customers.
7 229 THE CHAIRPERSON: If I go down the
8 rest of my list of possible mechanisms or remedies to
9 meet the concerns of the effect of vertical
10 integration, the idea has been raised that there should
11 be -- or do you think it would be necessary to have a
12 prohibition against BSSI purchasing North American
13 rights for programming, without going into the alleged
14 effect that that would have on the competitor?
15 230 MR. FRANK: We think that is
16 unnecessary for two reasons, Madam Chair.
17 231 First of all, we are not a North
18 American-wide DTH company. In that context, we note
19 that we are actually, by commercial contract, precluded
20 from selling our product in the United States.
21 232 Secondly, the acquisition of film and
22 other programming on a non-exclusive basis effectively
23 means that -- it renders the issue, I think, moot,
24 because we wouldn't be acquiring product and we
25 wouldn't have an opportunity to discriminate.
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1 233 In fact, we would be somewhat like
2 Saul on the road to Damascus on that issue because we
3 are very, very strongly supportive of the non-
4 exclusivity provision, as you would imagine for a non-
5 dominated, non-allied company.
6 234 MR. GOURD: But if in its wisdom the
7 Commission -- we don't believe it is necessary, but --
8 235 THE CHAIRPERSON: Your view is that
9 it is moot, it would have no effect.
10 236 What about the -- I know it has had a
11 checkered history, but the condition of licence
12 requiring a three-way split as between the BDU, the
13 program holder and --
14 237 Is there a need to possibly attach
15 this condition of licence because there is vertical
16 integration?
17 238 MR. NEUMAN: Madam Chair, we believe
18 that in the normal course of operating our business we
19 have demonstrated a propensity to follow normal
20 business principles, one of which would be to maximize
21 revenue and ensure the lowest possible cost. We do
22 that throughout our business and we hope to do that as
23 well in pay-per-view.
24 239 That gives rise to a scenario where
25 we would hope to keep the highest possible margin after
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1 paying for the rights to events and movies that we
2 would carry in our pay-per-view service.
3 240 So we have a natural propensity to
4 maximize margin and, therefore, keep, as opposed to
5 split anything more than we have to.
6 241 I think that will be the case. It
7 has been the case in other product areas and that will
8 be the case in pay-per-view. So I don't think there is
9 any reason to believe that a condition would need to be
10 imposed in order to require us to do something that our
11 normal business propensities would cause us to strive
12 to do in any event.
13 242 THE CHAIRPERSON: So that the three-
14 way split would be followed whether or not there is a
15 condition of licence attached. Therefore, would you
16 have a problem with a licence condition requiring it?
17 243 MR. FRANK: It might preclude us from
18 acquiring product if it is mandated.
19 244 As Michael said, we have a natural
20 propensity to bargain and earn as much money as we can.
21 245 I believe that the Commission found
22 in a recent previous proceeding that the removal of
23 those splits would allow the DTH pay-per-view industry
24 to move ahead smartly and acquire product and provide a
25 service. I would be a little afraid that imposing that
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1 on us might block our access to product.
2 246 I note also, Madam Chair, that it has
3 been suggested in a written intervention that somehow
4 without this or a similar condition there might be a
5 sleight of hand which would reduce the amount of money
6 available to independent production funds. Clearly,
7 our intention is to play by exactly the same rules as
8 the other licensees and provide 5 per cent of gross to
9 the applicable production fund.
10 247 That is our position.
11 248 THE CHAIRPERSON: One more item that
12 has raised concerns and may be of importance because of
13 vertical integration -- would you have a problem with
14 the Commission establishing -- or to what extent do you
15 think it would be required for the Commission to
16 establish very specific accounting separation and
17 allocation of cost requirements because of the
18 vertically integrated status of pay-per-view, should
19 this licence be awarded?
20 249 MR. NEUMAN: Madam Chair, I think
21 that if the Commission has a belief that such
22 protections are required, then that would be a more
23 appropriate way to ensure that accounting happens in
24 such a fashion so as to maximize, for example, the
25 payment of the 5 per cent.
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1 250 So we would be more disposed to that
2 kind of a solution if you believe that such a solution
3 is required.
4 251 THE CHAIRPERSON: I will discuss it
5 further with my colleagues and explain further how your
6 proformas have been set up and whether they do lead one
7 to the conclusion that a remedy or some type of
8 different accounting separation is required.
9 252 Now, if we go back to the direction,
10 the preamble also has an exhortation to the Commission
11 not to refuse to issue a DTH pay-per-view television
12 programming undertaking licence on the basis of a
13 concern of economic viability. That is in the third
14 "whereas".
15 253 Whose economic viability is intended,
16 in your view, in this paragraph?
17 254 Would it be that of the applicant;
18 that of the incumbents?
19 255 MR. FRANK: We believe, essentially,
20 that it is both; both the applicant and the DTH pay-
21 per-view incumbents.
22 256 THE CHAIRPERSON: So the Commission
23 should not be concerned as to whether you will make a
24 go of this or not, and neither should it be concerned
25 about the effect it may have on the incumbent.
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1 257 MR. FRANK: We would like to note
2 that our shareholder is 100 per cent in support of this
3 undertaking and that we will have the resources
4 necessary to raise a first-class system, and also --
5 258 THE CHAIRPERSON: That is exactly the
6 fear of the incumbent.
7 259 Now, having assured me that you will
8 have economic viability no matter what, what do you
9 think we should do about the incumbent?
10 260 MR. FRANK: This goes back to the
11 issue we spoke about a few minutes ago, Madam Chair;
12 the issue of materiality. We are non-dominant. We do
13 represent, at this point, only slightly more than 50
14 per cent of the DTH marketplace. The incumbents do
15 have the available cable market and the available MMDS
16 market. Judging from recent reorganizations in the
17 broadcasting business, it seems like they will have
18 approximately 50 per cent of the DTH business as well.
19 261 We think that they are in a good
20 position -- an excellent position in fact -- to compete
21 very effectively with us.
22 262 MR. NEUMAN: I would add, Madam
23 Chair, as I mentioned earlier, that we think their
24 market potential is going to expand very dramatically
25 for reasons that Mr. Frank has just mentioned, but also
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1 for reasons of the further digitization within the
2 cable market, within which they currently have a
3 monopoly.
4 263 Cable companies are going to be
5 digitizing at a fabulous pace. We have seen recent
6 news reports from Vidéotron that Vidéotron has plans to
7 put IP over its network, to roll out new services, and
8 we would assume including a vast array of pay-per-view
9 of all kinds.
10 264 We have seen certainly a discussion
11 by Rogers, of its plans now and by mid-1999, to
12 dramatically expand the availability of digital and, as
13 a result, make a market, if you will, for pay-per-view
14 of a size and shape that has never before been
15 contemplated by the existing company.
16 265 So I think there is a tremendous
17 upside available to the incumbents that will in no way,
18 shape or form be impacted by us, either at our current
19 size or our proposed size in the next few years.
20 266 MR. GOURD: If I may, as well ...
21 267 If we take a look at the "whereas",
22 it does not refer to the economic viability of the
23 applicant; it is economic viability generally.
24 268 Secondly, in concrete terms, as it
25 has been said, the two incumbents are very sizeable and
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1 strong groups, with a diversity of ownership, both
2 actual and also potential. Therefore, it is our
3 reading that all competitors would have significant
4 resources because they are a diversified group,
5 particularly in terms of the current incumbents.
6 269 MR. NEUMAN: I would add just one
7 further comment to that, that there is a third
8 incumbent, CTV, which itself is a formidable company
9 with considerable resources to withstand a competitive
10 environment, an environment that they in fact
11 contemplated at the time of their own licensing.
12 270 THE CHAIRPERSON: You are now
13 explaining to us how we shouldn't worry about the
14 economic viability, but is it your view that you have
15 an onus to actually -- not prove, but illustrate to us
16 that that will be the case or won't be the case, or do
17 you think that this "whereas" removes any such onus on
18 the applicant or the incumbent?
19 271 MR. NEUMAN: Madam Chair, there are
20 no facts in the future. So, I suppose, depending on
21 who you ask and whose proforma financial statements you
22 examine --
23 272 THE CHAIRPERSON: Oh, yes. You are
24 telling me that you will achieve certain efficiencies.
25 If there weren't facts in the future we wouldn't have
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1 these hearings. The question is, they don't always
2 come to pass. But one makes them with the best -- puts
3 his or her best foot forward, and we then try to sort
4 out what to use as potential facts or developments to
5 licence. They don't always come to pass. There go the
6 feathers.
7 273 But theirs is a different question
8 from whether someone -- either the applicant or the
9 incumbent has an onus to demonstrate, in a credible
10 way, whether or not it will harm the viability of the
11 incumbent to licence an integrated competitor.
12 1020
13 274 That was my question. You are giving
14 argument as to why it won't affect the economic
15 viability, but is it your view that you have an onus to
16 demonstrate that?
17 275 MR. NEUMAN: It is not our view that
18 the onus is on us to demonstrate the economic
19 viability. Therefore, we have not taken pains to
20 forecast the financials of the incumbents going
21 forward.
22 276 However, our discussion of our view
23 as to how the market will evolve, particularly the
24 market within which the incumbents currently enjoy a
25 monopoly, reasonably suggests that their market
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1 potential two years, four years, six years from now
2 will be dramatically greater than it has ever been.
3 277 As I said earlier, the fact that we
4 are in the marketplace as an alternative pay-per-view,
5 albeit within the DTH realm, will cause them to be more
6 competitive and take advantage of that larger market
7 size like never before. We will see healthy incumbents
8 in the years going forward.
9 278 MR. GOURD: Madam Chair, perhaps I
10 could approach what Michael has said another way.
11 279 We may have our own legal
12 interpretation of the first whereas as a whereas.
13 However, we do agree with all parties, including the
14 Commissioners, that the purpose of this hearing is to
15 put the facts on the table, and all facts, including
16 the facts about which number of subscribers each
17 applicant believes it will obtain and so on and so
18 forth.
19 280 Putting the legal interpretation
20 aside, we feel two things. First, the facts kind of
21 speak for themselves in terms of the number of
22 subscribers we can obtain as compared to the number of
23 subscribers cable can obtain, and secondly, our
24 application is not tailored at competing against
25 pay-per-view proper on cable.
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1 281 Our vision in our application is to
2 have the best programming possible, including
3 pay-per-view, in order to obtain the greatest number of
4 subscribers possible. In fact, we're competing against
5 other BDUs as opposed to competing against a
6 per-per-view service on cable. Therefore, if you
7 compare the respective potential of the various DBUs
8 three years from now, we feel that even in our best
9 dreams our penetration would not represent a
10 significant impact on the other BDUs and, therefore, on
11 the other pay-per-view services on these other BDUs
12 partly because they will have a great increase in terms
13 of digitization of cable.
14 282 THE CHAIRPERSON: You have applied
15 for one licence with two distinct services in the
16 French language and English language. You have given
17 some reasons for that in your written presentations or
18 written material.
19 283 This morning in your presentation you
20 have also emphasized:
21 "... deux services de
22 programmation distincts aménagés
23 de telle façon que nos clients
24 d'expression française et
25 anglaise reçoivent le meilleur
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1 service possible dans leur
2 langue."
3 284 That goal could be achieved with two
4 separate licences, could it not?
5 285 MR. FRANK: Yes, it could. We
6 applied for one licence as a matter of simplicity and
7 to demonstrate to the Commission that it was an
8 integrated undertaking, that we were after one to
9 service our French-language customers and our
10 English-language customers equally in terms of
11 benefits, choice and variety of programming.
12 286 THE CHAIRPERSON: Is there not, from
13 a regulatory perspective, some possible confusion? For
14 example, when you look at compliance, you will have
15 different conditions of licence that you are prepared
16 to accept on the French side or the English side, but
17 it's one licence. If you're non-compliant on one,
18 doesn't that create a regulatory problem for the
19 Commission?
20 287 I am trying to raise some issues.
21 Would it not be more simple to have two licences from a
22 regulatory perspective?
23 288 MR. FRANK: If the Commission feels
24 that there are certain difficulties with one licence as
25 opposed to issuing two separate licences, we would be
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1 delighted to receive two licences.
2 289 THE CHAIRPERSON: In the deficiency
3 question which you answered on July 17, it is the
4 response to Question 26, which asks you to comment on
5 why the Commission should issue only one licence
6 instead of one for each service. You say, as you said
7 this morning, that if the Commission chooses toward two
8 separate licences, the company would initiate business
9 under them as issued.
10 290 What I am curious about, though, is
11 your response to Question 4 of the same letter. The
12 question was:
13 "In your supplementary brief,
14 you stated that this application
15 seeks authority to operate an
16 English and a French language
17 DTH PPV programming undertaking
18 with a separate barker channel
19 for each service."
20 291 It asks you if your applications are
21 severable, which is a different question from having
22 two, and to provide two sets of financial projections.
23 292 There is a very lengthy answer which
24 ends up saying that in Attachment 1 you are supplying
25 standalone financial statements predicated on the
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1 denial of a French language DTH pay-per-view licence
2 and Attachment 2 predicated on the denial of the
3 English one. Rather than look at two services and
4 getting two licences, your answer there says that they
5 are severable, we'll accept one without the other.
6 293 Is that true for both languages that
7 you would initiate your undertaking if we didn't give
8 you the English language licence, as well as if we
9 didn't give you the French language licence?
10 294 MR. FRANK: I hope our intent is
11 clear here. We would like to provide service in both
12 official languages.
13 295 THE CHAIRPERSON: Oh yes. Applicants
14 always want everything they ask for.
15 296 I am now asking you what is it that
16 you would accept that is less than, and it is a bit
17 confusing. When you look at the last sentences of the
18 long response to Question 4, it sounds as though you
19 would accept, for example, the French language one,
20 even if you didn't get the English language one.
21 297 MR. FRANK: I would like to ask my
22 colleague, David McLennan, to comment on the financial
23 implications of that.
24 298 Basically, having been at a number of
25 these DTH and DTH pay-per-view hearings, we didn't want
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1 to use the word "deal breaker." We want to be
2 responsive to the Commission's --
3 299 THE CHAIRPERSON: What if I used it
4 and asked you to respond?
5 300 MR. GOURD: Quite frankly, Madam
6 Chair, we don't make a difference between the
7 importance of a pay-per-view service in French and the
8 importance of the pay-per-view service in English.
9 301 As I said, both BCE and Bell
10 Satellite are national companies. Both of them have
11 their head office in Quebec, so they are both Canadian
12 companies. For us, the privilege to offer a
13 pay-per-view service in English and a pay-per-view
14 service in French are equally important from a national
15 perspective.
16 302 Being national, we would wish to
17 have, of course, pay-per-view offering in both official
18 languages. But having said that, we wouldn't take the
19 position that we would accept only as a standalone the
20 English pay-per-view service, and we would not do the
21 same for the French one.
22 303 Having said very strongly that being
23 national companies with national offerings we would
24 wish to have both, our position would be the same. We
25 would accept with great chagrin only one in French or
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1 one in English, because we know that you know that we
2 strongly wish to have both.
3 304 MR. NEUMAN: I would add, Madam
4 Chair, that the benefits that we talked about -- the
5 marketing benefits, pricing, packaging, promotion --
6 that would be unique to our service, we would like
7 those to accrue to both services and not find ourselves
8 in a situation where one of the languages that we
9 offered as a pay-per-view service was significantly
10 better than that offered in the other language.
11 305 I believe that what is good for a
12 French language service, for example, is also good for
13 an English language service in terms of our
14 propensities to improve service for consumers.
15 306 I would like to add that something
16 will occur early next year which will happen for the
17 first time with respect to French language services,
18 and that is with the advent of our Nimiq satellite,
19 which has national beams as opposed to the east and
20 west beams that have been the case with ANIK-E II, we
21 will for the first time be in a position to take all of
22 our French language services all over Canada, whereas
23 you may know in the current case, because of a lack of
24 satellite capacity and the fact that the satellite is
25 configured with east and west beams, we are only
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1 allowed to take most of the French services just to
2 eastern Canada.
3 307 For the first time, with all of our
4 French services -- and we would, of course propose this
5 for our French pay-per-view services, should you
6 licence us -- these will be available to
7 French-speaking Canadians everywhere in Canada, not
8 just in eastern Canada.
9 308 MR. McLENNAN: From a financial
10 perspective, we would certainly consider both licences
11 to be the most preferential one. That is simply
12 because the infrastructure investment required to put
13 the business in place is better spread over the whole
14 market as opposed to a subset of that market.
15 309 THE CHAIRPERSON: With regard to
16 whether you have one licence or two licences from a
17 regulatory perspective, I haven't seen anything earth
18 shaking as to what advantages there are to the company
19 in having only one licence. Can you expand on that?
20 310 Given that one problem I have raised,
21 for example, is compliance, suppose from a regulatory
22 perspective -- the regulator has to look at it from all
23 sides -- there is a non-compliance in the French part
24 of the service which, as I have said, will have
25 different divisions of licence, that jeopardizes the
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1 English side; suppose there is a need to give, in the
2 future, a shorter term to one than the other, it is
3 very difficult to do.
4 311 I am not saying it is impossible, but
5 you can see where, prima facie, it seems more
6 complicated. Therefore, from your perspective, as the
7 licensee, what else do you have to add as to why it was
8 a good idea to apply for one licence rather than two?
9 312 M. GOURD: Madame la Présidente, on
10 pourrait peut-être rapidement clarifier cette
11 situation.
12 313 On n'a pas vraiment donné une extrême
13 importance au principe d'une licence par rapport à
14 deux. On comprend mieux maintenant la perspective de
15 la Commission, et si...
16 314 LA PRÉSIDENTE: Non, non, ce sont des
17 questions.
18 315 M. GOURD: Alors laissez-moi patiner
19 par en arrière, vu que l'hiver s'en vient.
20 316 Nous serons disposés évidemment,
21 comme M. Chris Frank l'a dit, à avoir deux licences
22 plutôt qu'une avec des particularités différentes.
23 317 LA PRÉSIDENTE: Et, je répète, ce
24 sont simplement des questions pour essayer de nous
25 assurer que le dossier est complet et que nous vous
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1 avons donné l'opportunité de nous indiquer quelles
2 seraient vos inquiétudes si nous choisissions une
3 direction plutôt qu'une autre.
4 318 Maintenant, Nimiq. Évidemment,
5 things were slightly different when the material that
6 was filed in writing was filed with regard to the
7 launch of Nimiq, but there is, nevertheless, an
8 indication in your written material that the deployment
9 of the service, should the licence be granted, would be
10 when Nimiq is launched, and that's contained in a
11 variety of places, one of which is in Schedule 31 and
12 also, I believe, in the deficiency letter that I was
13 looking at at Question 23, that the company would work
14 closely with Telesat to see a placement on the DBS
15 segment and it would lead to successful deployment for
16 commercial purposes by October of 1998.
17 319 Is it still true that, should we
18 grant this licence, its implementation would be
19 concurrent with the launch of Nimiq?
20 320 MR. NEUMAN: Madam Chair, as you
21 noted, circumstances changed very dramatically. I got
22 up on the morning of September 23rd and found that
23 Nimiq, in fact, did not launch.
24 1035
25 321 We plan that it will launch in the
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1 April-May time frame and be available to us in the May-
2 June time frame to broadcast nationally. We very much
3 hope that will be the case and are assured by our
4 suppliers that there is a high likelihood that it will.
5 322 However, the vagaries of launching
6 satellites, readying satellites for launch are such
7 that we won't know that it happened until it is up
8 there. And, if it should come to pass that there is a
9 failure, which is a remote but real possibility, we
10 would seek to use other satellite space that is
11 additional to the satellite space that we currently
12 have. So we would propose that a pay-per-view licence,
13 should you decide to grant it, would come into effect
14 now and that we would use it to broadcast pay-per-view
15 either when Nimiq becomes available or some other
16 additional satellite capacity that we may find becomes
17 available.
18 323 THE CHAIRPERSON: So you are looking
19 at the possibility that you may indeed be on Anik E2 or
20 Anik F?
21 324 MR. NEUMAN: No. We are very much
22 planning to migrate to Nimiq, but, as I say, the
23 vagaries of satellite capacity being --
24 325 THE CHAIRPERSON: Well, the beginning
25 of my question was, should Nimiq be launched now as
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1 planned in the second date, are you going to aim to go
2 on Nimiq and not implement the service before then?
3 That's one question. And would it only be if there is
4 an indication that Nimiq has not been launched or there
5 is a further wait that you would go on the non-DBS
6 satellites?
7 326 MR. NEUMAN: That's correct. We
8 would propose to launch a pay-per-view service when
9 Nimiq is launched, and only if it turns out that Nimiq,
10 for some reason, is not launched would we consider
11 moving to another satellite, in which case we would
12 want to launch the pay-per-view service on that
13 successor satellite.
14 327 THE CHAIRPERSON: What if, instead of
15 May of 1999, which is what you hope now, it is another
16 year? Would you then wait for the DBS? Because there
17 are problems in launching on the other satellite as a
18 transition, are there not, technical problems with
19 replacement of -- are there not problems for the
20 subscriber if you launch on one type of satellite, with
21 the equipment? You can just transit then from the non-
22 DBS to the DBS without any changes technically?
23 328 MR. NEUMAN: We are currently on an
24 FSS satellite, so migration to an FSS satellite is very
25 doable for us.
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1 329 THE CHAIRPERSON: No, I mean when
2 Nimiq launches, to go from wherever you are at that
3 time to Nimiq, does that not cause technical problems,
4 costs?
5 330 MR. NEUMAN: We have undertaken to
6 incur the costs of replacing what is known as the LNB
7 for every customer that migrates from --
8 331 THE CHAIRPERSON: At your expense.
9 332 MR. NEUMAN: At our expense, that's
10 correct.
11 333 THE CHAIRPERSON: What do you think
12 the cost of that would be per subscriber? Just a
13 ballpark figure.
14 334 MR. NEUMAN: We have never disclosed,
15 that I am aware, in a public forum what those costs
16 will be, but --
17 335 THE CHAIRPERSON: Even a ballpark
18 figure?
19 336 MR. NEUMAN: -- I can assure you they
20 will be --
21 337 THE CHAIRPERSON: Surely I can get a
22 list and find that myself. I don't want the 95 cents,
23 I just want a ballpark figure.
24 338 MR. NEUMAN: The ballpark figure, of
25 course, changes as time goes on because we have more
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1 subscribers, but against our current forecast, it will
2 be in the range of $25 million in total.
3 339 THE CHAIRPERSON: Oh, so you are not
4 prepared to say per subscriber, because that is a
5 moveable fee depending on the numbers, but how do you
6 arrive at the 25 million, then? You have to multiply
7 it by subscribers.
8 340 If I ask you 25 millions, how many
9 subscribers, I will get my calculator and I will have
10 the answer.
11 341 MR. McLENNAN: There is a number of
12 components here --
13 342 THE CHAIRPERSON: Even women can do
14 that.
15 343 MR. McLENNAN: There is a number of
16 components to the migration to the new satellite. One
17 component would be the physical replacement of the
18 hardware, which would be in around the $40 to $50 mark,
19 and then there would be also the cost of actually doing
20 the replacement.
21 344 THE CHAIRPERSON: All that to lead to
22 the question of the desire or the incentive to wait for
23 Nimiq, even if there were a further delay, would be
24 fairly high and to my question of, could one say that
25 your application is premature now, in light of what has
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1 happened.
2 345 MR. FRANK: We are positing a
3 successful launch of Nimiq in the late April-early May
4 time frame. We have every reason to believe that
5 that's the correct time and we have our fingers crossed
6 that it will go successfully.
7 346 To your question about the
8 application being premature, we would note that many
9 other DTH applications have been successful when there
10 have been, shall we say, less probable space segment
11 alternatives. We think we have a very solid transition
12 plan to Nimiq and we look forward to a successful
13 migration in the early to mid-summer of next year.
14 347 MR. GOURD: If I may add, Madam
15 Chairman, our application is not premature because,
16 first, we are told by our supplier that the odds are 97
17 per cent now that Nimiq will be launched, and as you
18 get closer it increases all the time. However, if
19 Nimiq doesn't launch, we have alternative plans and,
20 therefore, we would have every intention to launch the
21 pay-per-view offerings for what we call cottage season
22 whether on Nimiq or on another satellite., including
23 E2 -- because you did ask a technical question.
24 348 There is no technical impediment to
25 have our own pay-per-view offerings on E2 and we
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1 continuously improve the compression ratios, creating
2 more breathing space for new programming services. For
3 example, we were, when we launched, I believe, at seven
4 to one; we have moved to better compression ratios, and
5 as technology improves we will continue to do so.
6 349 Therefore, our conclusion is we would
7 wish to launch as soon as the licence is obtained. It
8 might coincide with the launch of Nimiq. If for some
9 reason, some very unfortunate reason, Nimiq is not
10 launched, we wouldn't wish the Commission to interpret
11 our position as meaning that we would not launch the
12 pay-per-view offerings. We would undertake indeed to
13 launch it.
14 350 THE CHAIRPERSON: You have indicated
15 in the written material that you have achieved an
16 agreement with Viewer's Choice and Canal Indigo for
17 carriage for I think a period of time.
18 351 Is the end of that contract by
19 reference to a date certain or by reference to the
20 launch of Nimiq, and therefore the launch of BSSI if it
21 is licensed?
22 352 MR. FRANK: There is certainty to the
23 end of the contract. The contract is tied both to an
24 FSS probability and a broadcast satellite Nimiq
25 possibility.
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1 353 THE CHAIRPERSON: But that's not a
2 date certain. By "date certain" I mean does the
3 contract expire on the 30th of November or whatever, or
4 does it expire when those satellites become available?
5 354 MR. FRANK: There is certainty to the
6 expiration of the contract in one context, and that is,
7 if Nimiq doesn't launch, the contract will run 30
8 months from the 17th of November, on or about the 17th
9 of November, whenever the service is successfully
10 launched. If Nimiq launched successfully, it is two
11 years from the date when DTH pay-per-view service from
12 Viewer's Choice and Canal Indigo was provided from
13 Nimiq. To the extent that Nimiq could launch on the
14 25th of April or the 5th of May, there is not absolute
15 certainty, but there is relative certainty.
16 355 So, to be clear, if a high power
17 satellite isn't in our future, it is 30 months on Anik
18 E2, and if Nimiq launches, it is two years from the
19 date when pay-per-view services are carried on that
20 high power satellite.
21 356 THE CHAIRPERSON: Now, the contract
22 with Viewer's Choice and Canal Indigo -- well, the
23 contract with Viewer's Choice allows the sale of DTH
24 pay-per-view in eastern Canada. What is the situation
25 in western Canada, west of the Ontario-Manitoba border?
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1 357 MR. FRANK: We have reached a
2 successful arrangement with all three companies, with
3 Viewer's Choice, with Premium Television and Canal
4 Indigo, and the terms and conditions are similar.
5 358 THE CHAIRPERSON: Are they identical
6 in the area I just asked you about, that is,
7 termination?
8 359 MR. FRANK: Yes, they are.
9 360 THE CHAIRPERSON: These are my
10 questions. We will take a break for 15 minutes, and my
11 colleagues will have questions for you as well. I
12 thank you for your co-operation in the meantime.
13 361 So we will resume at 11:00. Nous
14 reprendrons à 11 h 00.
15 --- Short recess at / Courte suspension à 1046
16 --- Upon resuming at / Reprise à 1105
17 362 THE CHAIRPERSON: Welcome back.
18 Commissioner Pennefather, please.
19 363 COMMISSIONER PENNEFATHER: Thank you,
20 Madam Chair.
21 364 Gentlemen, good morning. I should
22 like to ask a few questions in the areas of technical
23 distribution and contribution. The chair has covered a
24 number of my points and, in fact, I have your responses
25 fairly clearly marked down, but there are some aspects
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1 in each of those areas I just wish to confirm or ask
2 you different questions about.
3 365 On the technical side, both in this
4 morning's presentation and in the material, written
5 material, we have talked about the capacity of the ANIK
6 E2. What I understood from our conversation earlier --
7 and I was going to ask you as well -- is the
8 relationship of launch to the Nimiq and its
9 availability. But that is assuming that that
10 availability is not as you hope and certainly if we
11 look at the current situation.
12 366 Could you just from a technical point
13 of view clarify for me the current capacity of the E2,
14 what you meant by taking a small rump of satellite
15 capacity -- I will not tell you what image came to mind
16 -- and turn it into high performance digital platform
17 which sounds like a very positive approach and which,
18 in fact, I think intervenors such as WPT mentioned
19 regarding your newly increased channel lineup capacity
20 as a questionable situation. I do not want to confuse
21 the issue in terms of the current agreement, so let us
22 just keep it on a technical side.
23 367 What are the capacity probabilities
24 for the ANIK E2? What are its limitations? Is this
25 satellite not nearing the end of its life, et cetera?
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1 What are these other satellites that you would depend
2 on should the Nimiq not be available?
3 368 MR. NEUMAN: First of all, maybe I
4 should define what I meant by "a small rump".
5 369 COMMISSIONER PENNEFATHER: Yes.
6 370 MR. NEUMAN: I guess, if you think
7 back to when we and Star Choice first began our
8 businesses, we actually went into business before we
9 knew that we had any satellite capacity. We, in
10 particular, lived through the loss of ANIK E1 and then
11 really had to scramble to find on a
12 transponder-by-transponder basis, largely through the
13 resale market, enough capacity to put up the service.
14 371 At some point, I think we had cobbled
15 together enough capacity to have the prospect of
16 launching about a 45-channel service. And we looked at
17 each other and took a deep breath and decided that that
18 was enough capacity to be a rural service but that we
19 had enough faith in the prospect in the future that
20 either more capacity could become available through
21 digitization of existing analogue signals that
22 co-resided on the satellite, or through new satellites,
23 et cetera, that we should, in fact, start the service.
24 Because the grey market was expanding at an exponential
25 rate at that point and there was nothing to stop it so
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1 we decided to go ahead.
2 372 We announced that at a certain point
3 ahead we would do just that and we would launch that
4 summer -- that was in early 1997 -- on that small rump
5 of capacity.
6 373 We then built a digital broadcast
7 centre and that is the reference, I suppose, that I was
8 making that referred to turning it into a digital
9 platform because up until that point it had been
10 largely used for the broadcast of analogue signals.
11 374 So on an integrated basis, ANIK E2,
12 together with our digital broadcast centre, which is
13 filled with digital video compressed systems which at
14 the time of our launch were state-of-the-art, gave rise
15 to an integrated digital platform and gave rise to the
16 distribution nationally of the first ever national
17 digital programming lineup other than what you may have
18 seen on cable in the shape of a smaller digital tier
19 which, of course, is local in any event.
20 375 So that is how we started. We
21 started without much and then gradually got more. But
22 you heard us also allude to new channels without the
23 benefit of new space.
24 376 In anticipation of Nimiq, because
25 Nimiq is a very expensive undertaking no matter which
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1 way you slice it, we decided to upgrade. Even though
2 we had only been in business for one year, we decided
3 to do a complete upgrade of our digital video
4 compression systems with a one-year newer version at
5 great expense because it would give us that much more
6 efficiency on the new satellite and lower, if you will,
7 our cost per television channel on the new satellite.
8 377 And when the new satellite was
9 delayed, and you might recall that at the time it was
10 delayed, we did not know exactly when the new date
11 might be, we decided to bring forward the upgrade of
12 our digital video compression technology and do it
13 earlier in order to have an even more competitive
14 channel offering nation-wide in advance of having that
15 expanded capacity that Nimiq would have provided us.
16 378 So we then scrambled, frankly, to
17 acquire that digital video compression. It is now
18 being installed and it is installed in roughly half of
19 our plant and it is enabling us to launch new channels,
20 including, as has been discussed earlier by Alain and
21 Chris, the WIC Premium Television pay-per-view and
22 Viewer's Choice pay-per-view and Indigo as well as
23 specialty channels and off-air channels and the like to
24 create a balance and to make us more competitive in
25 advance of Nimiq.
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1 379 COMMISSIONER PENNEFATHER: Thank you.
2 One of the reasons I wanted to pursue that point was
3 obviously during our discussion about competition and
4 some of the concerns registered by the intervenors that
5 certainly, when it many comes to access to satellite
6 capacity, this is one of the areas where we might
7 assume from a different point of view that there would
8 be anti -- the potential for anti-competitive behaviour
9 or reduction to competition.
10 380 And it is important to understand,
11 then, that currently you have increased your satellite
12 capacity and are saying to us that if the Nimiq does --
13 is delayed further, you feel that you will remain with
14 the ANIK E2 or will you move to ANIK F, or what are the
15 other satellites you would use?
16 381 And I understand earlier from your
17 discussion with the chair that how this will affect
18 your agreements with the VCC and Canada Indigo and WPT.
19 It is not clear to me yet how all of this is going to
20 work out.
21 382 MR. NEUMAN: Well, of course, as I
22 think Chris pointed out, we are very actively planning
23 Nimiq. And the probability is so high that -- and we
24 are so sufficiently confidence that we are going to
25 move to Nimiq that we are not frankly planning an
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1 alternative other than status quo.
2 383 However, it is clear to us that there
3 are other satellite alternatives. There are satellites
4 that exist on the ground or in the air that could, if
5 we were able to, if we did not have Nimiq and we were
6 able to successfully negotiate space on other
7 satellites, could become available to us thereafter.
8 But they are in the back of our mind but not something
9 that we are actively planning. We are not in
10 negotiation with someone else for satellite capacity
11 because we are so significantly confident in Nimiq at
12 this time.
13 384 Just to come back to something you
14 said, I hope I did not mislead you. It is not that we
15 have got new satellite capacity, it is, in effect, that
16 we have created new satellite capacity through digital
17 video compression that has enabled us to increase our
18 channel lineup.
19 385 So I would suggest that once again,
20 because this market is so competitive, at great expense
21 we have reinvested or actually duplicated our
22 investment in the short space of time that we have been
23 in business to once again offer more channels and a
24 diversity of channel to be competitive in this market.
25 That is why I made the reference earlier about our
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1 propensity to, once we are licensed, in this case the
2 BDU license, to really do our utmost to really create a
3 dynamic and competitive environment.
4 386 MR. GOURD: If I may, Madame la
5 Commissaire, Télésat nous assurés, sans nous donner de
6 nom, si pour quelque raison que ce soit Nimiq n'était
7 pas lancé, que Télésat avait définitivement d'autres
8 alternatives très rapides, peut-être plus coûteuses
9 mais très rapides, pour nous offrir un satellite à
10 haute puissance.
11 387 That would be my second comment. So
12 there are backups to Nimiq, according to Telesat.
13 388 The second one, the life of E2 is
14 probably at least 2003. Now, let us talk about
15 satellite capacity. First, because of compression
16 ratios, as Michael has said, the current pay-per-view
17 services will be on E2 and, therefore, their
18 distribution is assured as of the end of November.
19 With or without Nimiq, they will be offered.
20 389 However, if for some reason there was
21 a bit of a slippage in getting DBS heard, the
22 compression ratios could continue to improve on Nimiq
23 and would allow greeting space for additional new
24 services, including our pay-per-view offerings.
25 390 THE CHAIRPERSON: I take it you do
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1 not mean on Nimiq.
2 391 MR. GOURD: What I am saying is that
3 --
4 392 THE CHAIRPERSON: Are you saying the
5 compression ratio would improve on Nimiq?
6 393 MR. GOURD: And E2.
7 394 THE CHAIRPERSON: You mean E2.
8 395 MR. GOURD: That's correct. Thank
9 you, madam la président.
10 396 THE CHAIRPERSON: When I am confused,
11 I think I don't understand. So, sorry.
12 397 COMMISSIONER PENNEFATHER: That is
13 fine. It is important to understand.
14 398 MR. FRANK: Madam commissioner,
15 perhaps I could help by discussing the absolute numbers
16 in terms of ANIK E2 at this point.
17 399 We have the equivalent of 11 RF
18 channels in the east around 8 RF channels in the west.
19 Our competitor has the equivalent of 12 channels in the
20 east and 11 in the west. In terms of how the current
21 satellite situation is constructed, we are actually
22 behind in total channel count on ANIK E2.
23 400 COMMISSIONER PENNEFATHER: What is,
24 in fact, the minimum and maximum desired channel
25 requirements for your DTH pay-per-view service?
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1 401 MR. FRANK: That really depends on
2 the marketplace and how much capacity we can afford
3 relative to our subscriber base and relative to where
4 we want to grow the business. I think it is a matter
5 of public record that we have signed up with Telesat
6 for 17 channels on Nimiq, 17 transponders, which
7 effectively increases the amount of capacity we will
8 have available in the east from 11 to 17, and from 8 to
9 17 in the west. So it is a considerable jump.
10 402 COMMISSIONER PENNEFATHER: Just
11 before we leave the technical area, you mentioned this
12 morning high definition transmissions in the first year
13 of operation. I am assuming it is the Nimiq that is in
14 operation when you say that, or is that also going to
15 be possible with the increased capacity of the E2?
16 403 MR. NEUMAN: Good question. We
17 tested high definition this summer on channels that we
18 had been holding open, and I mean satellite capacity
19 that we had been holding open, in anticipation of the
20 possibility of reaching pay-per-view incumbents for
21 pay-per-view. And we had some very interesting and
22 successful tests that led us to the conclusion that we
23 are able to outline today that we would be able to,
24 that when space became available through Nimiq, offer
25 high definition service within the first year of Nimiq.
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1 404 Interestingly, we will have an HDTV
2 compatible set up box available to us in the second
3 quarter of 1999 and that is one of the -- that and
4 satellite space are some of the impediments to actually
5 being in the HDTV business. So we are actual actively
6 pursuing that. We have placed orders for those boxes.
7 405 COMMISSIONER PENNEFATHER: You
8 mentioned, just on this high definition exhibition, to
9 place this on the same competitive rung as the U.S. DBS
10 services, which is a theme that comes up often in your
11 written material and today, and to ensure Canadian
12 response to this emerging technology.
13 406 Where is this high definition
14 programming coming from and when will consumers be able
15 to actually watch this high definition programming in
16 their homes?
17 407 MR. NEUMAN: There is a bit of a
18 chicken and egg problem with high definition
19 television, a bit like colour television a long time
20 ago. The cost of a high definition set is expensive.
21 You will not see them in every living room in the near
22 term.
23 408 And, of course, without there being a
24 critical mass of television sets, I do not think you
25 will see programmers rushing into it. But I think it
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1 is crucial that each of us do what we can to create an
2 infrastructure that will at least make it possible.
3 409 So to the extent that the U.S.
4 mandates migration to high definition television ahead
5 of us, to the extent that we put an infrastructure in
6 place that makes it possible for Canadian programmers
7 with whom we are talking right now about getting
8 together on this, it will happen faster than if we did
9 not.
10 410 We have taken the view that being
11 part of the high definition world is yet one more thing
12 that we can do, given the investments that we have made
13 in infrastructure and satellite space, to make us that
14 much more competitive and leading edge and that
15 attracts the kind of customers that want that sort of
16 thing.
17 411 COMMISSIONER PENNEFATHER: This
18 matter was discussed at some length during the
19 television policy hearings for a number of reasons, but
20 certainly one of them was looking at it from the
21 consumer point of view. And there was considerable
22 discussion around specific dates when consumers would
23 be interested, have access, can afford to view either
24 current programming, 35-millimetre current programming
25 for the United States in their homes or not.
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1 412 In other words, time lines were very
2 important. And I assume, since we were discussing
3 competition earlier, that you were looking at time
4 lines in terms of digital programming, not just
5 delivery.
6 1115
7 413 MR. NEUMAN: To the extent that there
8 is digital programming available, in this instance in
9 the pay-per-view sphere, for middle of next year, we
10 will be broadcasting it in the middle of next year. It
11 will come together with Nimiq; it will come together
12 with the availability of our set-top boxes. It will
13 just be a question of whether or not it comes together
14 with people actually having the sets.
15 414 A gentleman in our audience, Terry
16 Snazel, our Vice-President of Technology, has informed
17 me that he will have one of those sets coincident with
18 that middle of next year timetable. So I know at least
19 one person that will be watching HDTV in Canada.
20 415 COMMISSIONER PENNEFATHER: Well, it
21 won't be me. And that's my next line of questioning,
22 if you will, even just in terms of not digital
23 programming but what I receive in my home as a
24 consumer.
25 416 Let's look at this competition issue
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1 from the consumer's point of view, which I don't think
2 we have touched on this morning yet.
3 417 What effect will approving your
4 application have on consumers? Is it possible for a
5 consumer really to benefit from this competition if in
6 fact once I have invested, for example, in DTH, that's
7 it, I will have the DTH delivered to my home?
8 418 How then can I benefit from
9 competition if there is only one form of delivery?
10 419 In other words, wouldn't the consumer
11 really benefit from competition if I had different
12 services available to me through a DTH BDU, as opposed
13 to just one service?
14 420 MR. NEUMAN: We believe that there
15 are several benefits to the consumer. You are right,
16 we did not go into great detail about how we would
17 package, price and promote. But I did speak to the
18 marketing issues in general terms earlier.
19 421 I suppose one of the reasons I didn't
20 get into any more detailed discussion of that is the
21 fact that this is a competitive environment. We don't
22 propose that there be exclusive programming available.
23 So the things that we have left at our disposal, the
24 tools that we have left at our disposal to compete with
25 the incumbent pay-per-view operators, as is the case in
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1 our BDU licence to compete with the existing BDU
2 operators, have to do with pricing, packaging and
3 promotion.
4 422 I left out something else under
5 promotion: just the selling of services.
6 423 I happened to mention earlier that we
7 have about six times the penetration -- because we
8 don't carry pay-per-view, at least until the 24th of
9 this month, I can't use it as an example. But when it
10 comes to discretionary services like pay television, we
11 have about six times the penetration of pay television
12 as compared to the average cable company in this
13 country, and yet it is the same pay service.
14 424 So we have promoted and sold through
15 our call centre and through other means, through
16 advertising in co-promotion with our other services,
17 our package, our hardware, and so forth, these services
18 in a very aggressive fashion. As a result, from the
19 perspective of the pay companies, we look a lot like a
20 cable company that is five times our current size, just
21 by virtue of the relatively greater number of pay
22 packages that we have sold.
23 425 That seems to illustrate the point
24 that if you package services in a way that consumers
25 like and you promote it in a manner that is compelling
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1 to them, they will buy more. I think we have
2 demonstrated that.
3 426 I don't want to be vague. I would
4 like to give you at least one illustration of something
5 that we might do. Now that I give it to you and
6 everyone else in the room, I suppose we might see it in
7 the next month or two from one of the incumbents.
8 427 Let me speak to something like
9 children's programming.
10 428 When my daughter was growing up, she
11 would ask me to get her a video from the video store.
12 She would put it in the machine and watch it once, and
13 sometimes I would watch it too. Then every time I came
14 downstairs I would see her watching it again and again
15 and again. Of course, that gave rise to a video sell-
16 through market because rather than rent it 25 times,
17 you buy it and your kids get to watch it as often as
18 they like.
19 429 And it seems that, as I speak to my
20 colleagues, their kids do the same thing. Not much has
21 changed in the 15 years since she was doing it.
22 430 That is the problem with pay-per-
23 view, the way pay-per-view is currently offered. At
24 $3.99 a go, you sure wouldn't want to buy it again and
25 again and again. So one could envisage, from the
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1 perspective at least of some parents, that they might
2 be better off buying packages of children's pay-per-
3 view in a chunk or with multiple views or more views
4 during a period of time. And that might be more
5 appealing, given the way that their children like to
6 watch the movies or the events, as the case may be.
7 431 That is something that we would do.
8 We would promote it as such, and we think it would be
9 that much more appealing to our subscribers.
10 432 We know this from our personal
11 experience, but we also know it because since we have
12 been in the BDU business nationally for some 13 or 14
13 months now, we are across the country every week. We
14 are in towns and cities in Canada. People are not shy,
15 as I am sure is the case with the CRTC, about telling
16 us what is wrong with our existing service and what
17 they want from our existing service. They send me
18 letters. They e-mail me, as they do my colleagues.
19 433 One of the things that they speak to
20 is packaging: Why do you package this with that? Why
21 don't you do this? Why don't you that? We know you
22 have an addressable system. Why don't you unlink that
23 and give it to me differently?
24 434 Our innate desire is to give it to
25 them the way they want to buy it. The best way we know
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1 to find that out, other than just going and observing
2 and listening and getting the letters, is to survey
3 them, to listen very carefully to try to interpret, as
4 would any marketing organization, what they are asking
5 for; and then package it in a way that would give rise
6 to a greater volume of sales.
7 435 It has worked for us thus far, as I
8 said, in pay. Both we and the pay companies and their
9 suppliers have enjoyed vastly greater penetration than
10 has ever happened before, and we think we can duplicate
11 that success in pay-per-view.
12 436 COMMISSIONER PENNEFATHER: Thank you.
13 So when it comes down to it, one of the angles of this
14 point that I was getting at was from the consumer's
15 point of view. If I have DTH in my home, do you feel
16 that I will have greater choice?
17 437 I believe what one of your arguments
18 has been is that on the delivery of DTH you would offer
19 only your own pay-per-view service. Whereas wouldn't
20 it provide me as a consumer with grater choice to have
21 access, through DTH BDU ExpressVu, to different pay-
22 per-view choices, not just packaging within your pay-
23 per-view service, but a different pay-per-view service?
24 438 We did speak earlier about the
25 importance of program differentiation. I would like to
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1 see that advantage described in terms of the consumer.
2 439 MR. NEUMAN: I see your point.
3 440 As Chris mentioned a moment ago,
4 certainly for a period of time there would be two pay-
5 per-view services on our service. I think that is
6 going to be an interesting time, because then you are
7 going to see competition, not because it is mandated
8 that they must get carriage if we are there, but
9 because we are both there.
10 441 So the kinds of things that I have
11 just described they would then be struggling to
12 provide. They would then be wanting to have a dialogue
13 with consumers that pointed to their superiority over
14 other means of getting pay-per-view, albeit on our
15 service, or on Star Choice for that matter.
16 442 We have always said we are talking
17 about non-exclusive rights, which gets us down to how
18 we price, promote, sell and deliver other marketing
19 advantages that give rise to higher sales.
20 443 I think we are not averse to seeing
21 both services there. We think it is going to make
22 their service better. That is what competition is good
23 for. That will bring benefits not only to the
24 ExpressVu subscriber, at least in the early days that
25 we carry both services for certain -- because that is a
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1 certainty at this stage -- but beyond that there will
2 be a knock-on effect or benefit for subscribers of
3 cable because the incumbent pay-per-view company will
4 have become creative by virtue of competition with us.
5 444 When we reach the point that I think
6 we reached a little while ago when we discussed the end
7 of those agreements, I would hope that the advent of
8 competition would have made them sufficiently
9 competitive that they may have decided to package in a
10 way and enhance their brand sufficiently that, as I
11 said, as is possibly the case with another service, we
12 would be loathe to take them off, because people will
13 really demand it and that might give rise to even
14 greater sales.
15 445 Or they would have found a niche.
16 And instead of going and trying to boil the ocean with
17 all programming that comes available, they may be super
18 strong in children's programming or have a dramatic
19 advantage in multicultural programming that is not a
20 slant that we have put on our particular service.
21 446 That is what should drive whether or
22 not they find their way on to the Nimiq satellite
23 beyond the end of their agreement.
24 447 We are very good customers right now
25 of WIC and Astral. I see not reason for that to
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1 change. As is the case with all suppliers, I just want
2 them to continuously have an incentive, a market
3 incentive to do better, not sort of an entitlement
4 incentive to remain.
5 448 M. GOURD: Si je peux compléter ce
6 que Michael a dit, on a dit plus tôt qu'on a aucun,
7 aucun problème philosophique, théorique, pratique à
8 avoir deux services de pay-per-view, mais il est
9 préférable que ce soit dans le cadre d'une
10 programmation optimale pour le client plutôt qu'à
11 travers une rigidité additionnelle qui viendrait de la
12 réglementation. Par exemple, dans le cas des services
13 américains, ExpressVu avait le choix de les prendre,
14 Prime Time 24; on aurait pu les monter nous-mêmes à
15 partir de liaisons ascendantes aux États-Unis. Cancom
16 a fait une offre intéressante et sans obligation
17 réglementaire ces services sont présents.
18 449 Michael a parlé de plusieurs produits
19 qu'on achète de Shaw, même si Shaw contrôle de fait
20 Star Choice, notre compétiteur. On peut parler de
21 l'ensemble des produits, des autres produits que la
22 télévision à péage et le pay-per-view, qu'on prend
23 d'Astral, parce qu'avec 17 transpondeurs et un taux de
24 compression de neuf, notre intérêt est d'avoir les
25 meilleurs produits, mais on se dit que c'est très
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1 important que l'offre totale soit la meilleure pour le
2 consommateur et que tout le monde programme dans cette
3 perspective-là pour le client du direct-to-home plutôt
4 qu'avoir une offre homogène qui serait relativement la
5 même pour le MMDS, pour le direct-to-home ou pour le
6 câble.
7 450 Alors à la fin de la journée, vu
8 qu'Astral et WIC vont être déjà présents sur notre
9 système de distribution, il y a une pression réelle de
10 la part du souscripteur, qui n'aime pas voir des
11 perturbations, que cette offre-là continue, surtout si
12 elle est excellente.
13 451 COMMISSAIRE PENNEFATHER: Merci. En
14 effet -- I am sorry, I should continue in English. But
15 we may of course respond in either language, as we
16 wish.
17 452 I really want to pursue the point
18 that Viewer's Choice, Canal Indigo and WPT have opposed
19 your application, as you know. They argue in fact a
20 different story: "that your service will replace their
21 own; that your service will contribute nothing new to
22 the system".
23 453 Would you care to comment on that?
24 What will your service contribute to the system? Why
25 in fact are they making this comment?
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1 454 MR. NEUMAN: I think it is clear to
2 us at least that in a monopoly environment, when there
3 is the prospect of a monopoly going away, one of the
4 natural actions of the incumbent is resistance of that
5 change.
6 455 I have always said that I don't like
7 monopolies; but in my next life, I want to be at the
8 front of the line when they are giving them out. As
9 long as you don't have to compete, it's a pretty
10 comfortable environment. They have no incentive. You
11 can understand why they would have no desire to see us
12 disrupt that cosy situation.
13 456 However, as I said a few moments ago,
14 I think it is clear that at least we have demonstrated
15 through our actions in other programming genres that we
16 carry that we have an opportunity here to package in a
17 manner that consumers will find attractive. If they
18 find it attractive, they will buy more of it; and if
19 they buy more of it, it has knock-on economic benefits
20 throughout the broadcast system, including the
21 production community.
22 457 I think this is one of the reasons
23 that we have been so supported by intervenors that are
24 not enjoying the benefits of monopoly, as are the
25 intervenors that you have described.
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1 458 Coming back to the perspective of
2 consumers -- because it is our perspective, first and
3 foremost, as we operate Bell ExpressVu -- the knowledge
4 that we have gained by speaking to consumers is that
5 they want diversity.
6 459 Again, I wish I could speak in the
7 context of pay-per-view; but, as I say, we have not
8 carried it so I cannot. So I keep referring back to
9 pay, for instance.
10 460 Right now, we offer a pay service in
11 eastern Canada which is, as you know, different than
12 the pay service that we offer in western Canada. I am
13 asked all the time: Why don't you give us both? Why
14 don't you let us have both so we have a choice?
15 461 One offers services packaged in a
16 certain way, and one offers them packaged in another
17 way. They have different names. They take different
18 marketing approaches, and so forth. Consumers would
19 like to have that choice.
20 462 To use this as a hypothetical
21 illustration, if I may, if they did have that choice, I
22 would put it to you that one would succeed over the
23 other -- or at least they would strive to succeed over
24 the other and garner a larger share of their respective
25 subscriber bases within what was a monopoly up to that
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1 point. Consumers really like that choice.
2 1130
3 463 One thing that we found when we gave
4 them choice -- and when we gave consumers choice -- and
5 we were the first in the country to package it in such
6 a way that gave customers a lot more choice, with this
7 very small $7.95 basic service -- is that customers
8 have fed back to us "We really like that you offered us
9 the choice", but large numbers of them don't take it.
10 They tend to take our larger bundled packages because
11 they like those too.
12 464 But they like to be offered the
13 choice. It is a matter of freedom. In every other
14 respect of their commercial lives they are offered
15 choice. When you walk into a Kmart store and you want
16 a bottle of Windex, when you are checking out they
17 don't force you to take three cans of 10W30 motor oil
18 because that is the way that Kmart wants to package it.
19 You would never go back.
20 465 So the same thing is true in
21 programming.
22 466 Now that they realize we can offer
23 them more choice, they are really demanding it. They
24 are a more sophisticated customer group and I think
25 that we, through our pay-per-view application,
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1 represent a real opportunity to show them what can be
2 done in terms of distinguishing one pay-per-view
3 service from another and giving them more to choose
4 from.
5 467 COMMISSIONER PENNEFATHER: As long as
6 I do have access to one choice over another, not just
7 of individual programs, but I am always concerned about
8 the fact that there are different approaches to
9 packaging, that is where the choice is also very much
10 made for me, as a consumer or not.
11 468 On another point regarding an
12 important discussion we had this morning, I just wanted
13 to bring one further point to the discussion on what
14 you have described as the benefits of an affiliated
15 integrated national service operation, and one of them
16 was the matter of efficiency. I think you say that it
17 would be the most cost effective and competitive
18 business structure to grow and develop this nascent
19 industry, namely, the DTH pay-per-view industry, and
20 yet opposing interventions don't see this. In fact,
21 they argue that it makes little business sense from an
22 operational perspective.
23 469 This is Viewer's Choice, page 3,
24 paragraph (vi), saying that your economies of scope are
25 vastly overstated.
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1 470 Would you care to comment on that
2 point?
3 471 MR. NEUMAN: Yes, I would.
4 472 Again, my reading of it is that you
5 would expect them to say that, but I think the
6 operational facts that we face are clear and contrary,
7 and they have to do with the fact that we can house the
8 service in the same place; that we can get some
9 synergies between the various people that operate and
10 have roles within our existing organization that,
11 coincident with those roles, could work on the pay-per-
12 view service.
13 473 But I would go beyond what are our
14 hypothetical or our planned approaches to operating our
15 business, as opposed to the structure of the industry
16 at present, and talk about my observations in other
17 businesses.
18 474 I have had the opportunity over the
19 last two years, particularly before we started our
20 business, to visit satellite TV companies all over the
21 world, to visit cable companies like TCI, at their
22 headquarters, and to discuss various ways and means of
23 organizing the business. As a result, Bell ExpressVu
24 has organized its business in such a way which is
25 unique, but the sum of those experiences and
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1 observations.
2 475 One of the things that we have done
3 thus far is to integrate all of our operations. So if
4 you visit Bell ExpressVu, you will note that we are
5 unique in that all of the means of our production are
6 under one roof. We have our call centre, our
7 management, our technical operations, our uplink, our
8 digitization centre, our marketing and our sales all
9 under one roof, and the synergies are amazing.
10 476 It means that we can be in closer
11 touch with what customers are saying to us in the call
12 centre and make changes faster and implement them
13 faster and be more responsive to consumers that way.
14 477 Our competitor has to travel many
15 hours by air to get from their headquarters to their
16 call centre and isn't in day-to-day touch. We are
17 cheek to jowl with them in our business life day to
18 day.
19 478 Can I quantify that for you? No.
20 But I would describe to you the impact -- our
21 observation that our having organized in that way has
22 had on other operators.
23 479 Echo Star, for example, in the United
24 States, used to have their call centre very far afield,
25 and after they saw our experience, when they built
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1 their new headquarters they brought a very large chunk
2 of their call centre back inside, because it is the
3 heartbeat of the organization. You learn so much ...
4 480 I have a call centre phone on my
5 desk, beside my regular phone, that puts me in much
6 closer touch than the president of any other BDU that I
7 can think of in this country and many in the United
8 States, in terms of understanding what is happening
9 with the customers.
10 481 Those kinds of synergies are
11 difficult to quantify in a proforma financial
12 statement, but I would argue that, in a truly
13 competitive environment, being in touch with your
14 market to that degree is very, very important. It is a
15 vastly more important and beneficial thing than being
16 non-integrated. That is why we are seeing a trend
17 toward further integration in the call centre, as I
18 mentioned, but also in pay-per-view.
19 482 When I visited the new MMDS operator
20 in Los Angeles last year, one that was just sold to a
21 cable company -- and it was started by PacBell -- they
22 operate a 100-channel MMDS service in the Los Angeles
23 area and a 40-channel near-video-on-demand system,
24 integrated. It was a fabulous system. I really
25 enjoyed using it in their demonstration centre, and I
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1 asked to see the video-on-demand department, fully
2 expecting, because of my Canadian experience with the
3 existing operators, to see legions of people and
4 systems and space and management, and what have you.
5 He took me into a room and showed me a Sun server,
6 which was sitting on a bench, and he introduced me to
7 the person who is responsible for liaising with the
8 studios and buying the events and so forth. I asked
9 him: "Is this it?" His response was: "No, there are
10 other people involved, obviously". But having it
11 tight, close and integrated gives them an opportunity
12 to be responsive.
13 483 I realized he was feeding me back all
14 of the things that were the same kinds of things that I
15 had ascertained when I decided to have our call centre
16 integrated. It made sense for all of the same reasons
17 and it gave rise to lower costs and more efficiency --
18 more responsiveness in the market.
19 484 MR. McLENNAN: Pardon me. I would
20 like to add a bit more about the financial perspective
21 on that.
22 485 The vertical integration allows us to
23 really maximize revenues as well. So it is not only on
24 the cost side but on maximizing revenues. From a
25 decision-making process we had to invest -- make
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1 capital expenditures to put together the infrastructure
2 to start this business, and we also incur operating
3 costs that we wouldn't incur if we were buying from a
4 third party.
5 486 But offsetting that is that we keep
6 more of the revenue stream. We keep approximately two-
7 thirds of the revenue, for argument's sake. That is a
8 positive financial trade-off in our minds. We incur
9 costs, we incur some business risk, but we are
10 compensated for that by keeping more of the revenue
11 stream as well.
12 487 So we believe, from a financial
13 perspective, on an integrated basis, that we are better
14 off doing this ourselves.
15 488 COMMISSIONER PENNEFATHER: Thank you
16 very much.
17 489 Thank you, Madam Chair.
18 490 THE CHAIRPERSON: May I ask, given
19 the co-operation and co-operative arrangements between
20 Viewer's Choice and WPT, how much more transponder
21 space was required to accommodate WPT? What
22 incremental space was required?
23 491 MR. FRANK: Viewer's Choice and WPT
24 offer us an integrated national service. So the answer
25 is --
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1 492 THE CHAIRPERSON: Was there any
2 incremental at all?
3 493 MR. FRANK: No.
4 494 THE CHAIRPERSON: None at all.
5 495 MR. FRANK: No.
6 496 THE CHAIRPERSON: Now, Mr. Neuman,
7 you have given me a golden opportunity to give you a
8 commercial or a tip which I gave to Mr. McEwen when he
9 appeared about HDTV.
10 497 You differentiate yourself by saying
11 that you are transmitting in HDTV. It may well be that
12 it is not relevant whether people have the receiver.
13 The fact that they see it on the screen and that you
14 say it is, they may believe they are getting HDTV
15 without buying the receiver.
16 498 You are raising your eyebrows, but
17 the story is that you related it to the change from
18 black and white to colour. When my children were
19 small, in the early sixties, ABC displayed on our black
20 and white TV a big peacock and announced that this
21 program would be in living colour. My kids got very
22 excited and told me "Come and see this one. It will be
23 in colour". Granted, the story has a sad end, which is
24 that maybe my children were a bit slow. Hopefully they
25 won't watch CPAC in the next two weeks, because I may
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1 not get any Christmas presents.
2 499 Commissioner Cardozo ...
3 500 COMMISSIONER CARDOZO: Thank you,
4 Madam Chair.
5 501 Good morning. I have a few questions
6 that I will pursue on the issues of programming, and
7 then some financial questions too.
8 502 Let me start with a couple of
9 specific issues, the first being the number of Canadian
10 feature films, which you have address in section 4.1 of
11 your supplementary brief.
12 503 With regard to the English language
13 pay-per-view component you have noted that a minimum of
14 12 Canadian feature films, including "all new" Canadian
15 feature films that are suitable for pay-per-view
16 exhibition, will be aired, provided that they meet the
17 pay television standards and practices codes.
18 504 I look at that number of 12 and I
19 look at the number of "all new" and, on the one hand,
20 12 doesn't look like a whole lot and, on the other
21 hand, "all new" looks like quite a lot.
22 505 My question is: If you just did 12,
23 do you think that is a reasonable amount, in terms of
24 the area of Canadian feature films? On the other hand,
25 how would you determine which films meet the pay
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1 television standards and practices codes, because there
2 are a lot of things that get produced? What are the
3 kinds of movies that would meet your standards?
4 506 MR. FRANK: I think the quick answer
5 to this question is that 12 is a minimum and it is what
6 our competitors are offering.
7 507 Clearly, we would offer as many
8 Canadian films as we could. We want to provide a
9 competitive service, and we would be very sensitive to
10 offering the widest range of choice possible.
11 508 COMMISSIONER CARDOZO: At this point
12 do you have any sense of how many you would end up
13 with, or is it too early to tell in advance?
14 509 MR. FRANK: I think it is probably
15 the early days. We intend to program a very
16 competitive, robust service.
17 510 COMMISSIONER CARDOZO: With regard to
18 the French language pay-per-view, you note a minimum of
19 20 Canadian feature films, similarly including "all
20 new". You are also talking about dubbing English
21 language films into French. In the application, and
22 today, you have talked about dubbing in both
23 directions.
24 511 With regard to the French language
25 component, do you think that 20 -- and I don't want to
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1 be going back to my first question, saying that 12
2 wasn't that many -- is 20 a reasonable figure, given
3 that the French language production industry is not as
4 numerous as the English language?
5 512 MR. FRANK: Again, this is a standard
6 that has already been set and we wish to meet all of
7 the conditions that our competition would be meeting.
8 And we would develop over and above that if it was
9 possible to do so.
10 513 MR. NEUMAN: I would just add that in
11 your question you raised an interesting point, and that
12 is that the volume of available films has some bearing
13 on our ability to do that. I think that with our
14 proposal of dubbing either way, as you outlined, which
15 I mentioned in my opening remarks -- our hope with that
16 is that we would expand the universe of Canadians who
17 would be able to see and enjoy the film, despite it not
18 having been originally produced in their native
19 language.
20 514 So we intend to create through that
21 kind of mechanism -- and this also touches on my
22 comments earlier about packaging, doing something that
23 hasn't been offered before in quite the same way -- we
24 intend to try to promote Canadian films, be they French
25 or English, to the population that wouldn't otherwise
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1 have seen them and broaden the universe.
2 515 If we are successful at that to some
3 degree, or if the fact that we simply do it has an
4 impact on the competitive environment and causes others
5 to do it, I think that does a couple of things. It
6 creates a more robust -- let's use the French film
7 industry as an example -- a more robust environment
8 financially and gives rise to the possibility of more
9 productions, and gives rise to the possibility of even
10 more people watching them, both English speaking and
11 French speaking.
12 516 I think that those are the kinds of
13 knock-on effects that we were thinking of when we made
14 the assertion that that would be something that we
15 would very much want to do.
16 1150
17 517 MR. FRANK: I think it's important to
18 note that this was a suggestion that was made in our
19 consultation with the industry. It made eminent sense
20 to us because it makes more new Canadian product
21 available coast to coast.
22 518 COMMISSIONER CARDOZO: Which is a
23 suggestion in your consultation.
24 519 MR. FRANK: As you characterize it,
25 the reverse dubbing suggestion, and it's over and above
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1 our baseline commitments.
2 520 COMMISSIONER CARDOZO: Certainly if
3 you approach the dubbing issue from merely meeting a
4 numerical target, I have one fear that it will be the
5 French component that will have a lot of dubbed
6 material just because of numbers. I don't think that
7 French language viewers would be that interested in new
8 service if it contained a lot of dubbing films.
9 521 But if you're looking at dubbing in
10 both directions, and the other point you made was
11 people being able to watch films that have been
12 produced in the other official language, that is
13 certainly a very strong reason to do it because there
14 is a lot that goes on in this country in one language
15 that the other language group might never know about.
16 522 MR. FRANK: Just to be clear, it's
17 not our intent to use this reverse dubbing to meet our
18 minimum commitments at all. This is over and above.
19 523 COMMISSIONER CARDOZO: Let me ask you
20 also about the percentage of English-to-French
21 channels. You've outlined on page 11 of the oral
22 presentation today the 25 per cent with a minimum of
23 five French channels.
24 524 Would you be prepared to accept that
25 as a condition of licence, if the licence was granted?
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1 525 MR. NEUMAN: Yes, we would.
2 526 COMMISSIONER CARDOZO: The sports
3 coverage, how would the sports coverage differ from
4 everything else that happens in sports coverage? What
5 events would you be focusing on?
6 527 MR. NEUMAN: Again, without making
7 reference to whether we might, for example, focus on
8 boxing in the hopes that someone else would focus on
9 hockey or football or what have you, I think it would
10 be premature for me to suggest what our strategy might
11 be in that respect. I certainly wouldn't want to do it
12 in front of my prospective competitors.
13 528 What I would like to convey with
14 respect to sports coverage is that there are vast
15 markets in sports, but there isn't a sports market per
16 se. It's a segmented market.
17 529 I was out west last week and everyone
18 but everyone was asking me about curling. Yet, in
19 other markets I don't hear any mention of curling. I
20 hear nothing but hockey in other markets. Well,
21 actually, I hear about hockey in every market, but
22 that's another story.
23 530 I suppose what we would like to have
24 the flexibility to do is to meet consumer demand and to
25 not be hemmed in in terms of the flexibility that we
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1 might need to respond on the fly to such demand,
2 whether that means that in a particular season we would
3 like to put up football; in another season we would
4 like to put up a particular kind of package of
5 out-of-market games in Highlife, for that matter, or
6 through the rightsholders we would like to bring
7 cricket in a package or a single game, for that matter,
8 a finals game.
9 531 We would like to have the flexibility
10 to do that because once we have a pay-per-view service
11 we do cover the whole country. We are not a localized
12 service or even a regional service; we cover the whole
13 country. We have a vast array of different likes and
14 needs to respond to. So, our view at this stage is
15 that we would like to be able to offer sports as and
16 when we determine a demand for a particular kind of
17 sport, wherever that may be in Canada.
18 532 MR. GOURD: In view of the fact that
19 in our head office building we have a skating rink 12
20 months per year, le patinage de fantaisie serait
21 également intéressant.
22 533 COMMISSIONER CARDOZO: But you're not
23 going to be showing the skating that happens right
24 there as part of your sports component. You've always
25 got a back-up then.
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1 534 Essentially, in terms of your sports,
2 is it just going to be like the others?
3 535 MR. NEUMAN: Sorry?
4 536 COMMISSIONER CARDOZO: In terms of
5 your sports coverage, is it going to be like the
6 others? I think there was some reference to premium
7 sports events which I thought may be the sports where
8 people get paid the most, so that's okey -- hockey and
9 basketball.
10 537 MR. NEUMAN: They all get paid a lot.
11 The word "premium" is simply utilization of the word as
12 it applies to all things other than the conventional
13 television really, I think, pay-per-view sports that
14 are packaged to meet the needs of a particular group
15 like those segments of our country that are crazy for
16 cricket.
17 538 We have people in our office -- two,
18 as it happens -- that would take days off to watch
19 cricket. I know that they aren't alone in this
20 country. We would seek to define the groups nationwide
21 that are desirous of packaged cricket matches from
22 wherever they happen in the world, and put together
23 packages to meet that need. We'd like to do that
24 across all types of sports, and I can anticipate it
25 could include, and we're very excited about the
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1 prospect of it including hockey, it including football,
2 cricket, and a broad range of sports in a manner that
3 they haven't been packaged before.
4 539 This speaks to my comment earlier
5 about packaging. It's interesting what happens when
6 you package things differently than consumers have been
7 used to receiving them before. Sometimes simply the
8 availability of them in a more convenient way at a
9 price point that makes sense is a spur to sales.
10 That's something certainly consumers have told us: To
11 use my last week example in Kamloops, as it happens,
12 why don't you put together a package of curling from
13 across the country because I'd buy that. I hope that
14 wasn't a market survey of one and, of course, we
15 wouldn't put up such a package until we did a more
16 significant market survey, but that's the kind of thing
17 I would be thinking of. That would distinguish our
18 pay-per-view service from others that might be in the
19 market.
20 540 MR. FRANK: Also, we're very much
21 focused on programming in a complementary way so that
22 we complement the sports programming services of our
23 conventional television affiliates, our specialty
24 television affiliates in such a way that we have a more
25 comprehensive package.
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1 541 I'm thinking of hockey, for instance.
2 It's well known that off-air signals -- TSN and CTV
3 Sports -- have very robust hockey packages, but there's
4 a bigger package available in the United States and we
5 hope, for instance, very soon it will be available in
6 Canada. That's the kind of programming service we hope
7 to offer, amongst others.
8 542 COMMISSIONER CARDOZO: I'll bet you
9 won't do cricket because cricket matches last two or
10 three days. If your employees took two or three days
11 off, it would cause major economic problems for the
12 economy.
13 543 MR. FRANK: We do understand a little
14 bit about cricket, sir, and I understand that ten over
15 cricket is becoming increasingly popular. So, maybe
16 that will speed the game up.
17 544 COMMISSIONER CARDOZO: Could be.
18 545 Let me ask you about one of the
19 suggestions that is being put forward by one of the
20 intervenors, namely CTV Sports pay-per-view. They've
21 suggested that we impose a condition of licence of 10
22 per cent sports coverage on your licence. What are
23 your thoughts about that?
24 546 MR. NEUMAN: If we're really striving
25 to create a dynamically competitive environment here,
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1 since we are of course proposing that there not be any
2 exclusivity in programming, I think each participant in
3 this marketplace should do their utmost to acquire
4 programs and package them in a way that is compelling,
5 and that should apply to CTV Sports is my thought.
6 547 I would also fall back on the comment
7 I made earlier about the prospect of not so much CTV
8 Sports, but the idea that both the incumbents in
9 general pay-per-view also be carried irrespective of
10 whether they offer the right packaging and pricing and
11 promotion. There shouldn't be a "must carry" or a
12 limitation on our carriage of sports, but the
13 competitive environment should determine those factors
14 for all participants.
15 548 MR. FRANK: I would offer two further
16 thoughts on that, Commissioner Cardozo, and that is
17 that at their original licensing hearing, they spoke
18 specifically this issue and made it real clear, I
19 thought, that they wouldn't require a "must carry,"
20 that because of their size and their involvement in the
21 sports market both in Canada and worldwide, that their
22 product would stand on its own merit, as Michael has
23 just said.
24 549 COMMISSIONER CARDOZO: That's in
25 relation to the "must carry" issue. In terms of the
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1 percentage of sports coverage that you would have,
2 would you accept any other percentage or do you think
3 that's just wrong for the market?
4 550 MR. NEUMAN: We believe that that's
5 not going to give rise to the kind of dynamic
6 competitive environment that I think consumers would
7 wish to see. I say this beyond our position on our own
8 application. I would not want to see any pay-per-view
9 operator in Canada prevented from carrying sports if
10 that pay-per-view operator has determined that there's
11 a market that they can serve in conjunction with the
12 BDUs that carry them to bring more diversity to
13 consumers.
14 551 So, I think that would be an
15 inappropriate conclusion if, in fact, the goal is to
16 create a dynamic competitive environment.
17 552 COMMISSIONER CARDOZO: With regards
18 to events, you've talked about a ratio of one to seven
19 Canadian to non-Canadian events. Could you give us
20 some examples of the kinds of events you're talking
21 about here?
22 553 MR. NEUMAN: There are all sorts of
23 things that have been done. Of course, the event of
24 all events are sporting events. I understand that Mike
25 Tyson has his licence back now and that's an event that
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1 everyone in the pay-per-view business worldwide is
2 looking forward to, if only for the prospect to witness
3 another ear biting.
4 554 But, again, that speaks to the run of
5 the mill or status quo kind of event. There are other
6 kinds of events -- cultural events -- that aren't often
7 available to all Canadians that we will have an
8 opportunity to broadcast from wherever they happen in
9 Canada.
10 555 One of the unique opportunities that
11 we have --
12 556 COMMISSIONER CARDOZO: How about CRTC
13 hearings?
14 557 MR. NEUMAN: I think we would like to
15 survey the market on that one and see whether or not
16 there is demand.
17 558 Let me see if I can tie this into an
18 interesting technical anecdote for you. We are in the
19 process now of building a nationwide fibre backhaul
20 network because, as you know, we broadcast from Toronto
21 to a satellite and then our signal is cast down
22 nationwide. By having that fibre network in place,
23 we're able to do very clean, crisp, inexpensive signal
24 gathering from many, many parts of Canada. We're not
25 everywhere in Canada with that signal gathering at this
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1 stage, but it's going to expand as our channel capacity
2 expands on the satellite.
3 559 But it gives rise to another
4 interesting opportunity for us again that is a unique
5 advantage that we built into our infrastructure, and
6 that is to gather cultural events from those places
7 inexpensively that it would be impractical for others
8 to carry because they hadn't gone to the trouble of
9 building such a backhaul network. So, I can envisage
10 making on-the-fly programming decisions to bring a
11 cultural event from Vancouver to Toronto, putting it on
12 the satellite, and making it available certainly to
13 people in Vancouver but nationwide that wouldn't have
14 otherwise been possible had we not built that fibre
15 backhaul network.
16 560 I think that that raises a very
17 interesting opportunity to us but, more importantly,
18 for consumers to see things they just couldn't see
19 before. In a similar vein, although not with respect
20 to events, that, for example, is what gives rise to our
21 ability to take all French programming and all French
22 pay-per-view nationwide. We can gather it from where
23 it happens and put it on the satellite and take it to
24 wherever it wants to be consumed.
25 561 MR. GOURD: Michael mentioned that
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1 our fibre optics gathering system would allow us to
2 show events that would not be seen otherwise. In
3 addition, we would be able to present shows that would
4 be seen but from a different perspective, particularly
5 a technical perspective.
6 562 Let me refer to the Céline Dion last
7 show, le spectacle d'adieu de Céline Dion, which is
8 supposed to be broadcast December 31, 1999 and it will
9 go until minute 001 of Year 2000. Of course, a lot of
10 distribution undertakings would present that show
11 because of the personality and the popularity of Céline
12 Dion. However, because of our decision to have high
13 definition TV, we are discussing as we speak, in the
14 event that we would have a licence, with other parties
15 to broadcast it in high definition TV. Therefore, that
16 way we could also have an additional contribution in
17 terms of a show which would have been seen anyway, but
18 we can bring another dimension.
19 563 COMMISSIONER CARDOZO: With regards
20 to the carriage of special events, the commitment I've
21 just mentioned was made with regards to the English
22 language component. I may be wrong, but I didn't see
23 it made with regards to the French language component.
24 Does it apply in both?
25 564 MR. FRANK: I believe it does.
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1 565 COMMISSIONER CARDOZO: This is in
2 regard to Section 4.1, the two sections there.
3 566 MR. GOURD: While my colleagues are
4 looking, as a francophone, obviously, yes, it does.
5 567 COMMISSIONER CARDOZO: That's fine.
6 That's good enough.
7 1205
8 568 COMMISSIONER CARDOZO: That's fine.
9 That's good enough.
10 569 Let me ask about children's
11 programming. It seemed a bit unusual that a pay-per-
12 view service would have children's programming. So
13 tell us about it. What is going to be special about --
14 why would people want your service for children's
15 programming when there is quite a bit of other fairly
16 good children's programming out there?
17 570 MR. NEUMAN: I think you hit the
18 keyword. It is quite unusual that there be children's
19 programming associated with pay-per-view.
20 571 COMMISSIONER CARDOZO: And you want
21 to be unusual.
22 572 MR. NEUMAN: In fact, we would like
23 to be unusual in the sense that we would like to create
24 viewing opportunities that people will find new and
25 refreshing. I gave one example of how that might occur
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1 and the market driver that might cause parents on
2 behalf of their children or children themselves to wish
3 to use pay-per-view as a means of getting programming
4 that they haven't otherwise had an opportunity to view,
5 in a way and at a price point that they haven't
6 otherwise had an opportunity to acquire it. That's one
7 example. And I think that we may change the paradigm a
8 little bit with respect to opportunities to view
9 children's programming through marketing approaches
10 like that.
11 573 So the very fact that it is unusual
12 suggests to me that there has been no incentive thus
13 far for anyone to really be very creative in going
14 after what has become a very, very significant market
15 and for which there is a great deal of production
16 occurring in Canada with a limited number of ways to
17 get the programming to the consumer in Canada. We
18 represent another potential way, and the only thing
19 separating us, in terms of exercising that opportunity
20 to do that, from others is the desire to do it and a
21 belief that, if we understand the consumer well enough,
22 we will find products and packages of products that
23 will cause them to consume more of that programming.
24 574 I gave an example earlier of how that
25 type of marketing approaches worked with respect to,
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1 for example, pay programming.
2 575 MR. GOURD: If I may, Michael
3 referred to his daughter, I could refer to my
4 grandchildren. We all started young. That's why I
5 have grandchildren at my age.
6 576 Having said that, yes, they like to
7 see again and again "Mme Champagne", "Anne of Green
8 Gables". Therefore, it is not because a children's
9 program has been shown on, let's say, YTV or Teletoon
10 that it would not find an audience if repeated on an
11 another distribution undertaking. Therefore, whether
12 it is original programming or whether it is programming
13 that has been shown already and is repeated, we believe
14 very, very strongly that we have a good potential there
15 if programmed at the proper hours and also if packaged
16 differently. As Michael said, they could buy three
17 passes of "Carmen Champagne" or "Anne of Green Gables"
18 or they could buy a grouping of different programs, and
19 so on, and so forth.
20 577 COMMISSIONER CARDOZO: Since we are
21 airing family stories, let me tell you that I would
22 have reluctance ascribing to this channel because it
23 means I would have to increase my kids' allowance in
24 order for them to watch more of these programs, but I
25 assure you I have long since learned that my family
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1 practices shouldn't govern my decisions at the
2 Commission, so I don't hold that against you.
3 578 I haven't told my kids that the
4 average child in Canada watches something like I think
5 it is 17 or 22 hours a week, because it is far, far
6 lower at my home at this point. I hope they don't
7 watch CRTC hearings either because they might find out.
8 579 Let me ask you about multicultural-
9 multilingual programming that you have talked about.
10 In various places you refer to it differently. It is
11 being referred to as -- in section 1.1 you say that the
12 applicant also seeks authority to offer up to 10 per
13 cent of its foreign programming in the English language
14 in the English language service component and languages
15 other than English and French. * You have talked about
16 it as being a multicultural service.
17 580 So I would just like an idea of what
18 it is we are talking about here.
19 581 MR. NEUMAN: Yes, of course.
20 582 When we first got into the business
21 of DTH on the BDU side we did a lot of market surveys
22 trying to understand what were the segments of the
23 market. I suppose, if you are a cable company, there
24 is less requirement to do that because you have a
25 geographic territory and you just do your best to serve
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1 everyone that lives in that territory with a
2 homogeneous group of offerings. In our case, we are
3 marketers first and foremost, so we take the view that
4 we must understand who is out there and what they want
5 to consume, and then try to deliver just that. That's
6 the simple marketing equation that we pursue.
7 583 Of course, in the course of that
8 research we learned that there are a great many people
9 in Canada who would have a desire to view programming
10 in their native tongue, which is often different than
11 English and French, as well as English and/or French
12 programming. As a result of that, even though we
13 weren't, and still aren't until the 24th of this month,
14 carrying pay-per-view, you will note that we were the
15 first in Canada to broadcast nationally Asian
16 Television, for example. We put Fairchild on the
17 satellite at the same time. We recently launched a
18 service to meet the needs of German-speaking people
19 nationwide and we remain the only service to offer such
20 a service nationwide; Deutsche Velle is that one.
21 584 Now we are just about tapped out in
22 terms of our satellite capacity, but you know that we
23 have made plans to do something about that. To the
24 extent that there are markets for such programming,
25 multicultural programming in the language of those who
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1 would like to receive it other than English or French,
2 we want to be the supplier.
3 585 So, to the extent that you have seen
4 us behave that way in our existing service right from
5 the beginning of that offering on September the 10th
6 last year, you could expect us to behave in a similar
7 fashion with respect to pay-per-view. We would look to
8 the marketplace, try to ascertain demand and then find
9 distributors in Canada that have product that meets the
10 needs of those groups, and then promote with cultural
11 organizations, for instance, to find where are those
12 people, how do we communicate with them properly, how
13 do we let them know that we have this programming that
14 they wouldn't otherwise have available to them on
15 another pay-per-view service because we have taken the
16 strategy to go after them as a market.
17 586 So that would be the underlying
18 reason for doing it and an illustration of our
19 background in actually carrying it out.
20 587 COMMISSIONER CARDOZO: So would you
21 probably do it in a language other than English,
22 French, as well as other than the other language
23 channels that you carry, namely, other than the South
24 Asian languages, Chinese and German?
25 588 MR. NEUMAN: Yes. As it happens,
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1 those are, as you know, very large populations within
2 the country but they aren't unique in the sense that
3 they are the only market opportunities. We have been
4 approached by many other cultural groups to carry
5 certain programming, and, in anticipation of additional
6 satellite space next year on Nimiq we are undertaking
7 negotiations right now with other groups, other
8 rightsholders that would give us an opportunity to
9 broadcast pay-per-view programming in languages other
10 than English and French and other than the ones you
11 mentioned.
12 589 COMMISSIONER CARDOZO: I just want to
13 ask you about where that programming would come from.
14 I note in your submission you have talked about
15 negotiating with European and Asian distributors. The
16 Canadian Jewish Federation and the Federation of Jewish
17 Community Services in Montreal in their intervention
18 note:
19 "The aspect of the application
20 that intrigues me the most is
21 Bell Satellite's plan to provide
22 foreign-language programming.
23 My understanding is that this
24 will be a combination of
25 domestic programs and signals
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1 broadcast from countries around
2 the world." (As read)
3 590 So I am wondering whether you have a
4 sense at this point of how much of that other language
5 programming would be Canadian made. In the
6 intervention you seem to suggest it would be all
7 foreign programming, but these people are of the view
8 that some of it would be Canadian made in other
9 languages.
10 591 MR. NEUMAN: I think their assertion
11 is correct and I hope we haven't given the impression
12 that it is all imported. It somewhat depends on the
13 language we are talking about because, obviously, some
14 of them, there is more programming domestically in
15 language for which there is a larger population in
16 Canada.
17 592 One of the things that we have
18 learned through some of the programming that we have
19 already distributed is that, while Canadians that are
20 speaking a mother tongue other than English or French,
21 do like to hear programming that is simply in their
22 language, they also like to hear and listen to
23 programming that actually comes from their home
24 country, not filtered by a Canadian, albeit Canadian
25 speaking in their own language. It is an interesting
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1 distinction and one that I wasn't frankly aware of
2 until I had Canadians for whom English or French isn't
3 their mother tongue say this to me. So I think to be
4 successful we would have to offer a combination of the
5 two.
6 593 In some cases there is a wealth of
7 Canadian-made programming in those languages that we
8 could access, and it would be easier for us to access
9 it and co-promote with those that have the rights
10 because they are here; in other cases we would have
11 difficulty finding it and we would have to look
12 elsewhere for it.
13 594 The very fact that we would have as a
14 part of our mission to do that might give rise to
15 people that are interested in promoting such product --
16 it might give rise to them looking for product that
17 they could then bring to us with a view to creating
18 markets for it in Canada.
19 595 COMMISSIONER CARDOZO: Have you given
20 any thought to the issue of dubbing in this regard, if
21 you have a Canadian epic like a Kamouraska or something
22 that has a really interesting cultural historical
23 component that people in other languages would be able
24 to experience it or through subtitles, that type of
25 stuff?
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1 596 MR. NEUMAN: In particular -- and I
2 am not sure, thinking back, in our documentation
3 whether we have actually mentioned this, but it is of
4 interest to us to offer programs, be they in English or
5 French, or for that matter a program produced in a
6 language other than English or French and then have it
7 dubbed for speakers of the other languages. I think
8 that, to the extent that we could put up another track
9 that is offered to us by the producer of the film, that
10 could be a very exciting opportunity both for the
11 rightsholder and for the consumer.
12 597 COMMISSIONER CARDOZO: One of the
13 issues -- obviously, you are looking at all your stuff
14 in English and French to see whether it meets the basic
15 standards. Do you have a plan in place as to how you
16 would review the other language films for
17 appropriateness, to make sure they meet your standards?
18 598 MR. NEUMAN: In some cases we have
19 among us employees either on our staff or we would
20 propose to have employees on our staff in the broader
21 used languages, the languages that you might expect --
22 that is already the case. For instance, we have
23 employees that subscribe to the services that we
24 already carry, not pay-per-view of course but services
25 that we already carry in those languages, but we would
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1 have to take pains to ensure that they were viewed and
2 understood in the language that they are offered before
3 we would play them.
4 599 COMMISSIONER CARDOZO: You just have
5 to make sure that the employees who are doing that are
6 not the ones who are going to watch the cricket game or
7 you have a bit of a bottleneck problem.
8 600 One of the issues we were looking at
9 in the previous hearing on television policy was the
10 reflection of Canadian diversity in the general
11 conventional specialty channels. Rather than just
12 looking at the multilingual broadcasters, we were
13 asking broadcasters like CBC and CTV and Global, in
14 their programming news and so forth, how did they
15 reflect the diversity, the cultural and racial
16 diversity of Canadians.
17 601 Is that an issue that you have given
18 thought to in terms of the kinds of things you will be
19 airing?
20 602 MR. NEUMAN: It was interesting, when
21 we set up our first lineup -- as I said, we are
22 marketers first and foremost, but one thing to be a
23 successful marketer is you have to understand the
24 market. So when we first got into DTH we spent a lot
25 of time with promoters of programming, in this case
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1 usually specialty TV, to learn what it is from them,
2 what the market looked like, how they would address the
3 market, how they would work with us to address the
4 needs of that market. So we have come up a learning
5 curve, I have to confess, over the last 14 or 15
6 months, that wasn't available to us before that.
7 603 Having come up that learning curve,
8 it is really that learning curve which gave rise to our
9 assertion that we would like to offer up to 10 per cent
10 of our English pay-per-view programming in languages
11 other than French or English because we are now a big
12 believer in that marketplace. So, while we are not a
13 producer, we don't propose to produce programming and,
14 therefore, don't have any control, if you will, over
15 what ends up on network television or specialty TV,
16 through our pay-per-view licence we would have an
17 opportunity to offer pay-per-view that met the needs
18 that we have identified.
19 604 COMMISSIONER CARDOZO: I am talking
20 specifically about the programming in English and
21 French. There were a number of community groups, for
22 example, which were asserting that the diversity, their
23 experience, et cetera, just doesn't get viewed, get
24 reflected in terms of the English and French
25 programming. So what I am asking is whether you would
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1 be giving that issue -- you are not producing stuff,
2 but you are selecting stuff. So you have the choice of
3 selecting between different kinds of programming to see
4 whether your English and French programming reflects
5 the aboriginal diversity as well.
6 1220
7 605 MR. GOURD: If I may, Commissioner
8 Cardoso, as I said earlier, both our company and our
9 holding company are national companies with head office
10 in Quebec and servicing all of Canada. And for us,
11 indeed, diversity is very important. In terms of the
12 nature and the vision of the service that we want to
13 offer.
14 606 And it will happen, indeed, because
15 we are a national company. Just to give you an
16 example, I just spent four and a half in Mississauga.
17 And on my local cable, I had four francophone services
18 and then suddenly it dropped to three. But with the
19 kind of distribution mechanism we have, a francophone
20 outside of Quebec will basically, partly with Nimiq,
21 receive every francophone service available because we
22 would do it anyway and also to ensure the rule of
23 preponderance of Canadian services.
24 607 Conversely, in Chicoutimi or Amos, in
25 Abitibe, where I was born, every anglophone service
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1 will be basically offered, including ethnic and
2 multilingual service. So, therefore, it is not only
3 the -- a good business approach for us to offer great
4 diversity of programming services, it is, in addition,
5 an objective we have in mind.
6 608 COMMISSIONER CARDOZO: Okay. With
7 respect, I do not think I am getting an answer to what
8 I am asking about and that is with regards to the
9 English and -- I see what you're saying in terms of
10 providing services in both official languages and other
11 languages and so forth.
12 609 But in terms of the English and
13 French language programming, when you are selecting
14 movies, do you select movies that have in their
15 characters, in the people, in their themes and the
16 issues a sense of the diversity? And if I can use
17 television programs as an example -- and I know you are
18 not dealing with programs -- Degrassi Junior High, for
19 example, had a multiracial cast as reflective of what
20 Toronto schools were like then and are today. It was
21 not in another language, it was not directed at a
22 specific group, but it just talked about Canadian
23 society as it exists in one component, namely, in
24 schools.
25 610 On the other hand you get a lot of
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1 programming that tends to ignore or portray Canadian
2 society or society as not having that kind of
3 diversity. Is this an issue of importance to you or
4 have you given it much consideration?
5 611 MR. NEUMAN: You will appreciate that
6 because we are not yet selecting movies for
7 pay-per-view, there are issues that we have not
8 encountered yet.
9 612 So I would be -- I do not want to be
10 quick to say that we have thought -- have spent a great
11 deal of time thinking about that issue. But I think
12 one of the things that we can say at this stage is that
13 we would endeavour to -- it is very important for us
14 not to be offensive in the context of programming that
15 we offer. We have not yet established a policy with
16 respect to the issues you raise and -- or a framework
17 for measuring the degree that they might be -- that a
18 program might find itself offside because it
19 misrepresented or presented a view that was offside
20 with the status quo in Canadian society in terms of its
21 mix.
22 613 But I think it is a noble and
23 desirable approach to take that we would take into
24 account that. And I think -- those issues -- and I
25 think the very fact that we were first in raising
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1 programming already, prior to pay-per-view, is some
2 indication of our sensitivity in that respect. So
3 while we do not have a policy, I think you should
4 expect us to have a sensitivity.
5 614 MR. GOURD: If I may, commissioner,
6 when I answered a bit earlier, I was talking about the
7 diversity of the total programming offering and, as you
8 noted, your question was more focused at the choice of
9 movies and events that would be on our pay-per-view
10 offering. Michael mentioned that we do not have a
11 policy yet, but we will focus on it and develop one.
12 And what I would like to add is that we would be very
13 pleased to file it with the commission.
14 615 COMMISSIONER CARDOZO: I am not
15 suggesting that I want to have just numbers or measure
16 it sort of in an exact science. But, if you were
17 covering events, would you cover the Caribana parade,
18 for example, which is sort of a major Toronto festival
19 as well as the Santa Clause parade or a hockey game or
20 whatever. Those are the types of issues. I will leave
21 that at that.
22 616 Let me go to closed captioning and
23 just clarify what your commitments are with regard to
24 closed captioning. I cannot locate it right now, but
25 somewhere you note that you will have a captioned
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1 service.
2 617 Our policy with regard to captioning
3 has been for broadcasters with over $10 million
4 revenue, we expect by the end of their licence that
5 they would have 100 per cent in news coverage, which I
6 guess you do not have, and 90 per cent in the rest of
7 their coverage.
8 618 So the question is, what is the
9 closed captioning commitment that you are making?
10 619 MR. FRANK: We are prepared to
11 acquire all of the -- let me start again.
12 620 When a film or an event or other type
13 of programming has closed captioning, we commit to
14 carry it, to provide it.
15 621 COMMISSIONER CARDOZO: And if it does
16 not? Are you prepared to make a commitment in terms of
17 a percentage of overall closed captioned programming?
18 622 MR. FRANK: We are certainly prepared
19 to meet what is currently required of other
20 pay-per-view licensees, yes, sir.
21 623 COMMISSIONER CARDOZO: Another issue
22 that was raised by the NBRS was with regard to DVS,
23 descriptive video service. They, in their
24 intervention, the NBRS suggests that BSSI advised NBRS
25 that if its application is approved at trial during the
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1 initial term of license, the exhibition of DBRS in
2 Canada, they note in their view that the applicant is
3 assuming a significant leadership role in terms of
4 descriptive video service that is the described video
5 service for people who are blind or hard of seeing.
6 624 I am thinking of the CAB's position
7 which is evolving which seems to be that it is just too
8 expensive to do, we will not be doing much of it. What
9 is your position on described video service?
10 625 MR. FRANK: This group has approached
11 us, and we said to the extent that it makes sense for
12 our subscribers, we would be prepared to trial it.
13 That is exactly what we agreed with them. We are going
14 to work with them and in the first year of operation
15 provide a market trial and see how it is accepted.
16 626 COMMISSIONER CARDOZO: So you are not
17 making commitments in terms of expenditures.
18 627 MR. FRANK: Not at this point. We
19 did agree that we would work with them and that we
20 would, within the first year of our operation, provide
21 film and other material in that forum and measure its
22 market acceptance and how our subscribers reacted to
23 it. On the face of it, it seems to make sense, but I
24 understand what you are saying about --
25 628 COMMISSIONER CARDOZO: There are
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1 various views. The NBRS is of the view that the CAB is
2 not looking at it in its economic forum, but has an
3 exaggerated view of the cost. The CAB feels that it is
4 out of line or that they cannot afford it. So perhaps
5 there is something there in the middle that we need to
6 find out.
7 629 MR. FRANK: We are going to approach
8 this with an open mind and, as I said, in the first
9 year of our operation trial it and see how it works.
10 630 COMMISSIONER CARDOZO: Okay. With
11 regard to the codes on gender portrayal and violence,
12 you noted in section 4.1 that you will be adhering to
13 those codes. Would you be looking at seeking a
14 suspensive condition of license at some point and
15 joining the Canadian Broadcast Standards Council? It
16 would not necessarily be at this point, but as I
17 understand it, the CBSC does allow it, has encouraged
18 membership from pay-per-view but does not have any
19 pay-per-view members at this point.
20 631 MR. NEUMAN: We have been active on a
21 consultation basis with that group and we would be
22 prepared to give that active consideration. To be
23 honest with you, they have not approached us on that
24 front other than to say could we discuss it and we
25 said, yes, we certainly would.
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1 632 COMMISSIONER CARDOZO: Okay. In your
2 oral presentation there is one thing that popped out to
3 me, it is a technical issue, I just wanted you to
4 clarify it for me. On page 8, you note that we have
5 grown from 0 to 140,000 subscribers, we have
6 distributed nearly 200,000 digital set-top boxes. And
7 I thought the number should be the other way around.
8 Or how come you have distributed more but have less
9 subscribers? Are those Christmas gifts, the other
10 60,000?
11 633 MR. NEUMAN: That is a good question.
12 One of the interesting nuances of our business is that
13 because we distribute through retail, there will always
14 have been more dishes distributed than are actually lit
15 or being used by subscribers and paying subscribers.
16 And here is how it works.
17 634 Right now, as we go into the
18 Christmas season, that number will go up quite
19 dramatically. It is called the float. The float is
20 the number of boxes out there that are not yet lit.
21 And that float, for example, includes boxes that we
22 have -- we call them boxes or dishes that have been
23 sold but not yet installed, that are on trucks on their
24 way to retail that are in distributors' hands but not
25 yet at the store, that are in the store, for instance,
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1 because coming into the Christmas season there will be
2 in this case some 60,000 out there, but in some stage,
3 about to get sold, about to get authorized so customers
4 can subscribe.
5 635 And, in fact, it is our plan to have
6 many 175 -- actually it is 176,250 subscribers by
7 Christmas morning. I do not think we ever discussed
8 that goal, but, hey, it is out there. And we plan to.
9 And to do that you have to have the boxes in the
10 pipeline. So it follows that on Christmas morning, if
11 we do not buy any more, using those numbers, we would
12 have something just slightly less than 25,000 in our
13 float going into the sort of post-Christmas time-frame.
14 636 COMMISSIONER CARDOZO: Okay. Lastly,
15 on programming, let me ask you this question. In your
16 submission you said that programs will be drawn from
17 all categories of item 6 of schedule 1 of pay TV regs
18 1990, which includes everything in the category. So
19 you are planning to show a bit of everything.
20 637 I am not clear at this point about
21 the description of the service that we would be
22 licensing if we were to licence it. So my question is:
23 Should I be concerned about that? In a sense, it is
24 going to be everything. You had mentioned the relation
25 to one question that choices would be made as and when
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1 we can. Could you summarize what your service is as
2 distinct from the others if there is a distinction from
3 the others?
4 638 MR. FRANK: Our programming is
5 generally intended to be movies, events and sporting
6 events. And we will draw from other categories, as
7 Michael has said, as requested and as confirmed by our
8 subscribers. But we are a general interest, we would
9 like to be a general interest pay-per-view service.
10 639 COMMISSIONER CARDOZO: So it is a
11 general interest. What you would be providing is
12 similar to what your would-be competitors are
13 providing, all of them, plus the multilingual and
14 children's, is that --
15 640 MR. NEUMAN: That is correct.
16 641 COMMISSIONER CARDOZO: And then you
17 have got the English and French.
18 642 MR. NEUMAN: English and French, you
19 mentioned multicultural. And, of course, we have also
20 referenced our plans to move to high definition as well
21 because we believe in the future of the high definition
22 market.
23 643 But I would like to come back to my
24 comments earlier about what distinguishes us from the
25 existing incumbents. And what distinguishes us are
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1 business practices and marketing approaches, pricing,
2 the actual promotion and packaging of the products that
3 we will bring to bear for consumers in a way that they
4 find more compelling and in a way that the existing
5 pay-per-view providers have, for a variety of reasons
6 known only to them, decided not to do.
7 1230
8 644 If you have a monopoly, there really
9 is no need to go into the marketplace and try to better
10 understand what consumers want. We would argue that,
11 in a competitive environment, there is a very
12 compelling need to go and understand what consumers
13 want, because if you are not providing it to them they
14 will go to someone else.
15 645 You could expect us to have an
16 offering that cuts across the kinds of programming that
17 Chris just mentioned, but to offer it in ways that
18 consumers will find more compelling. Packaging is a
19 big part of that.
20 646 As is the case in other very dynamic
21 marketing environments, often there are many players
22 and the components of their products are often very
23 similar. Yet one will have a dramatically higher
24 market share than the other simply due to differences
25 in their packaging, promotion and pricing.
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1 647 I should have mentioned that there
2 are many subsets of those marketing issues. But
3 branding is also important and the promotion of it.
4 648 I think it is clear from our pay
5 distribution efforts and the success we have enjoyed
6 there that a lot can be done, beyond that which has
7 already been done, to make this a very distinctive
8 service indeed.
9 649 COMMISSIONER CARDOZO: I have some
10 more questions on the financial issues. I am looking
11 at another 15 minutes for those of us whose stomachs
12 are growling. The quicker, more to the point you are,
13 the quicker we will be through. And I will try and be
14 to the point too.
15 650 We have talked about the Nimiq quite
16 a bit. From what you have filed, that changes your
17 business plan as well.
18 651 Let me just ask you if the delay so
19 far has meant a major change in your business plan; and
20 if it is to be delayed further, would that continue to
21 be a change to your business plan?
22 652 MR. NEUMAN: The short answer is yes,
23 it has changed our business plan. The most fundamental
24 change is that the whole purpose of Nimiq was to enable
25 us to be more competitive than we were before. On the
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1 fly, when we realized it was delayed, the big thing
2 that we did was reorganize our capital upgrade program
3 to put in the DVC equipment sooner than would have been
4 the case, so that we could, without Nimiq, still add
5 significantly more channels and have channel
6 superiority over our various competitors, particularly
7 going into the Christmas season. This was going to be
8 very crucial to us.
9 653 We have just announced this week that
10 we have done that.
11 654 So it did dramatically upset our
12 apple cart and cause us to have to reorganize on the
13 fly and consider the marketing and the financial
14 implications of the delay.
15 655 Businesses like certainty. There is
16 no question about that. It makes it easier to run a
17 company when there is more certainty. Our whole
18 industry has been plagued with lack of certainty in a
19 lot of cases, including Nimiq. Now that we are quite
20 confident that Nimiq will go up in the spring and be
21 available to us in June, we are beginning to plan in
22 more concrete ways, including financial forecasting,
23 exactly what that means to us going into the future.
24 656 Needless to say, we are quite excited
25 about the prospect of having it.
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1 657 COMMISSIONER CARDOZO: But you woke
2 up one morning and it wasn't there. So how can you be
3 sure it is going to be there with your spring date?
4 658 MR. NEUMAN: You are very right. You
5 can never be absolutely certain. There is no
6 certainty.
7 659 Alain mentioned 97 percent certainty.
8 I would also attribute that level of certainty to it.
9 660 COMMISSIONER CARDOZO: So the key
10 difference is that without Nimiq you have less channels
11 --
12 661 MR. NEUMAN: That is correct.
13 662 COMMISSIONER CARDOZO: And that could
14 affect your attractiveness.
15 663 MR. NEUMAN: Absolutely. It
16 absolutely could.
17 664 COMMISSIONER CARDOZO: With regard to
18 revenue streams, you have noted that there are three
19 revenue streams: namely movies, annual events and
20 premium sports.
21 665 What would be useful to us is to have
22 a breakdown by those three streams over the seven-year
23 period like you usually project on your financial
24 issues.
25 666 Is that something you could provide
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1 us with -- not in the next minute, but in the next few
2 days?
3 667 MR. McLENNAN: If I understand the
4 question correctly, it is contained in Attachment 4.1,
5 which delineates movie revenues, event revenue and
6 premium sport revenues.
7 668 That would be an attachment to our
8 response to the July 17th CRTC letter.
9 669 COMMISSIONER CARDOZO: Okay. I think
10 that will be sufficient.
11 670 On the matter of financial
12 contributions to production of Canadian programming, I
13 just want a clarification of the point at which the 5
14 percent contributions would be made.
15 671 Would it be both at the BDU level and
16 the pay-per-view service level?
17 672 MR. FRANK: Yes.
18 673 COMMISSIONER CARDOZO: And on gross
19 revenues?
20 674 MR. FRANK: Correct.
21 675 COMMISSIONER CARDOZO: Let me take
22 you to one of the interventions with regard to income.
23 676 I will put that aside for now. We
24 may come back to it.
25 677 Revenues from exhibition of films,
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1 you have noted that the licensees shall remit to the
2 rights-holders of all English language Canadian feature
3 films 100 percent of the revenues earned by licensee
4 from the exhibition of these films.
5 678 With regard to the French component,
6 you say -- and I think this is in Section 4.1 of the
7 supplementary. It is a bit different for the French,
8 where you say that:
9 "...the licensee shall remit all
10 gross revenues derived from the
11 broadcast service of French
12 language Canadian feature films
13 to distributors and providers
14 with a minimum of 60 percent to
15 the program providers."
16 679 Could you explain the difference and
17 why the difference between the two?
18 680 MR. FRANK: We are in the
19 Commission's hands on this one.
20 681 The intention is the same as on the
21 English side. We understand that there was a different
22 condition of licence for Canal Indigo because of
23 concerns or a difference in the marketplace relative to
24 the rights-holder and the distributor. That was the
25 point of the difference in the condition of licence.
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1 682 But the intent, as far as we are
2 concerned, is the same.
3 683 If you would like to impose on a
4 prospective licence identical wording, that would be
5 acceptable to us; or keep the wording as it is.
6 684 COMMISSIONER CARDOZO: The difference
7 you are saying is because you understand that Canal
8 Indigo has a similar system for the French language.
9 685 MR. FRANK: That is correct. We have
10 attempted, Commissioner, to build our conditions on a
11 par with the competitors to foster fair and equitable
12 competition.
13 686 COMMISSIONER CARDOZO: When you are
14 remitting 100 percent of the revenues earned from
15 Canadian feature films back to the rights-holder, you
16 are not making a profit on Canadian feature films. Is
17 that right?
18 687 MR. FRANK: That is my understanding.
19 688 COMMISSIONER CARDOZO: And you are
20 okay with that. I guess you make the money on the rest
21 of what you carry.
22 689 MR. FRANK: It is an industry
23 standard we are pleased to commit to.
24 690 COMMISSIONER CARDOZO: Finally, with
25 regard to the annual events, my reading of it was --
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1 you talk about the revenues from the annual events, and
2 I don't have the precise location here.
3 691 You say that you would be remitting
4 revenues to the people who held the event in English,
5 but you did not make that same component for the French
6 language component.
7 692 I assume it would work in both
8 languages?
9 693 MR. FRANK: We will meet the industry
10 standard on that.
11 694 COMMISSIONER CARDOZO: My question is
12 that what you have said here is that you would do it in
13 the English. You have not said about the French.
14 695 Can I read from that that --
15 696 MR. GOURD: As I said earlier on a
16 similar question, the answer is yes.
17 697 COMMISSIONER CARDOZO: Okay. That
18 covers my questions; thank you very much.
19 698 Thank you, Madam Chair.
20 --- Short pause / Courte pause
21 699 COMMISSIONER CARDOZO: Let me come
22 back to the question and put it in a fairly general way
23 in terms of one of the interventions that suggested --
24 and I think this is quite an important point about your
25 finances.
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1 700 It was suggested that in a sense by
2 allocating the transponder costs to the DTH pay-per-
3 view as opposed to the BDU operation, through a kind of
4 tax shelter you would have a considerable windfall.
5 701 You may know the reference I am
6 making. Do you have any response to that?
7 702 MR. McLENNAN: I think the
8 characterization in both the interventions from WIC and
9 VCC, when they took a look at both the BDU and the pay-
10 per-view entity and added the two up, I think their
11 characterization is a fairly accurate one in terms of
12 the total financial picture. And in fact I think it
13 supports our view that it is financially beneficial for
14 us to have an integrated pay-per-view offering as
15 opposed to buying from third parties.
16 703 In terms of having a tax windfall
17 specifically, the plan that we put forth to you did not
18 have any specific tax monetization plans in it. We are
19 working on that, but those plans are not in place.
20 They certainly would not be any sort of unusual plans
21 that would be put in place.
22 704 COMMISSIONER CARDOZO: Is it normal
23 for you to be allocating the transponder costs to the
24 pay-per-view as opposed to the BDU?
25 705 MR. McLENNAN: I am not sure about
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1 "is it normal". But from looking at this business in
2 its entirety, and if you add the two entities up, you
3 capture all of those costs.
4 706 The total picture is very much
5 looking at both the financials of the BDU and the
6 financials of the pay-per-view entity, which in between
7 the two would have transponder costs included in them.
8 707 MR. GOURD: It is a pure accounting
9 decision. Whether you put it in one place or in
10 another place, it is the same corporation. So we can
11 present financial reporting any way the Commission
12 wishes. It does not need any change in terms of the
13 financial viability of the corporation.
14 708 We would be pleased to adjust to any
15 accounting reporting the Commission would wish to
16 propose to us.
17 709 COMMISSIONER CARDOZO: I appreciate
18 that answer. I wanted to put it in the general
19 context, because it is not my role to do other people's
20 arguments. But it is an issue that I did want to hear
21 your views on.
22 710 So thank you for that. And that is
23 my last question.
24 711 Thank you, Madam Chair.
25 712 THE CHAIRPERSON: Commissioner
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1 Pennefather?
2 713 COMMISSIONER PENNEFATHER: A quick
3 clarification.
4 714 In this morning's presentation, on
5 page 12, you refer to the Canadian feature film
6 industry, and you say:
7 "...we would readily contribute
8 a minimum of 80% of the 5%
9 contribution to a separate
10 envelope of funds -- either
11 inside or outside the CTF..."
12 715 Could you clarify what you mean by
13 that?
14 716 MR. FRANK: Simply we were attempting
15 to indicate that we would be flexible and forward-
16 thinking, as would the rest of the industry. If there
17 is a movement to establishing a separate fund, we are
18 indicting to you that we would be favourable to that;
19 if there is not, we would continue to channel the funds
20 the way we are channelling them now.
21 717 COMMISSIONER PENNEFATHER: Thank you.
22 718 Thank you, Madam Chair.
23 719 THE CHAIRPERSON: Legal counsel?
24 720 MR. BATSTONE: Thank you, Madam
25 Chairperson.
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1 721 You indicated earlier today that you
2 have no philosophical problem with carrying more than
3 one pay-per-view service. Would you be prepared to
4 accept a condition of licence stating that your pay-
5 per-view service may not be carried unless a second
6 additional service is carried?
7 722 MR. NEUMAN: When we touched on that
8 general area briefly this morning, I tried to indicate
9 that we believe that market forces should dictate that.
10 Then in fact we will start life carrying two pay-per-
11 view services -- three, actually, counting Indigo, as
12 well as our own if we are granted a licence.
13 723 Throughout that period, there would
14 be a lot of competition happening. We will do things
15 of the type that we have described here, that will make
16 us very competitive. I think you will see a
17 competitive response from the incumbents, and it will
18 go back and forth like that; each trying to outdo the
19 other for subscribers.
20 724 That will be a healthy thing, one of
21 the healthy benefits of competition in my view.
22 725 At the end of that period, one may
23 have achieved penetration in certain market segments,
24 the other in other market segments. And the result
25 could be that there would be a compelling reason to
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1 keep more than one pay-per-view service on our service.
2 726 That should be something that flows
3 from competition.
4 727 As an illustration of that, when we
5 look at our friends at Echo Star in the United States
6 -- and again, I won't use pay-per-view as an example
7 but in this case pay -- they carry 16 different pay
8 services, not just one. In fact, all those pay
9 services fish from the same pool, as it were, for
10 programming and yet have found their own niche; have
11 created their own brand that customers identify. And
12 they promote it differently.
13 1250
14 728 So in fact there is a demand for Echo
15 Star to carry that many pay services because some
16 customers like one or two over the other, and subscribe
17 to them at the expense of the other.
18 729 So I believe that it is crucial that
19 we not create, through the imposition of a condition of
20 licence, an entitlement mentality that would destroy
21 that propensity that a competitor would have to improve
22 in order to be carried by virtue of his knowledge that
23 he would just get carried by virtue of a condition of
24 licence.
25 730 MR. FRANK: Also, counsel, we are
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1 mindful of the decision that was made in 1995 by the
2 Commission, that when you have a programming sector
3 that has non-exclusive rights as a condition of
4 licence, and you have relatively scarce satellite
5 capacity, and the possibility of much program
6 duplication, it was found that it was only necessary to
7 distribute one.
8 731 PowerDirect Ticket was licensed at
9 that time and it proposed a general interest pay-per-
10 view service that was predicated on 50-plus channels.
11 732 So, as Michael said, we would prefer
12 a competitive solution.
13 733 Finally, I would note that it is,
14 arguably, not competitively dynamic if you are required
15 to carry another pay-per-view service in that context.
16 734 MR. BATSTONE: To clarify that,
17 because at the end of this process if the Commission
18 considers that there are competitive aspects which need
19 to be addressed, and this is considered as one
20 potential option to do that, notwithstanding your
21 argument that that potentially could detract from a
22 dynamically competitive market, what I am hearing you
23 say is that carrying more than one service may in fact
24 work to the advantage of BSSI, in the sense that they
25 may differentiate services and different customers may
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1 pick them up for those reasons.
2 735 Are you saying, then, that you would
3 not want the condition -- or you would refuse to have
4 the condition imposed?
5 736 I just want to clarify exactly --
6 737 MR. FRANK: Our position is that we
7 wouldn't like to have such a condition imposed on us.
8 738 MR. BATSTONE: But would you be
9 prepared to accept one if the Commission felt that that
10 was appropriate to address the types of vertical
11 integration concerns which are being addressed in the
12 context of this hearing?
13 739 MR. FRANK: We would very reluctantly
14 accept that as a condition of licence.
15 740 MR. BATSTONE: All right. I will
16 move on.
17 741 MR. FRANK: I would note
18 parenthetically that if the Commission does go down
19 that road they might wish to think about the flip-side
20 of the argument, and that is that our DTH pay-per-view
21 service would be carried by our competitor as well.
22 742 MR. BATSTONE: Thank you. I
23 understand your position on that.
24 743 Turning now to the question of CTV
25 sports specials pay-per-view, in the intervention --
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1 and you spoke to Commissioner Cardozo a bit about
2 this -- they raised two potential conditions. One was
3 the limitation of 10 per cent programming. Another was
4 that BSSI be required to carry CTV sports specials.
5 744 I am just wondering what the effect
6 would be on your service if the Commission were to
7 require you to carry the CTV service as well, and
8 whether you would be prepared to accept that as a
9 condition of licence.
10 745 MR. NEUMAN: I think some of the same
11 threads of Chris' response would apply here.
12 746 When I discussed this earlier I had
13 hoped to convey that I believe that carriage should be
14 based on demand and quality of programming, and all of
15 the good things that normally you would look for in a
16 supplier relationship, whereas an entitlement approach
17 gives rise to an environment where quality is not
18 necessarily assured.
19 747 That is how we feel about the must-
20 carry approach.
21 748 With respect to limiting us in a
22 licence to only 10 per cent, I think that takes away
23 from the level of competition that could otherwise
24 exist in the environment we are in. It runs contrary
25 to our view of what we consider to be a dynamically
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1 competitive environment. It would severely limit our
2 ability to supply the diversity of programming that we
3 believe Canadian consumers would like to enjoy.
4 749 In effect, it sets up yet another
5 monopoly, this time in sports programming.
6 750 MR. FRANK: Also, I would just add
7 that when PowerDirect Ticket was licensed in 1995, they
8 had the opportunity to access pay-per-view services
9 from a U.S. satellite, from one of the Hughes
10 satellites, which has a vast array of sports on it.
11 This condition wasn't imposed then, and we believe it
12 is not the right way to go at this point.
13 751 MR. BATSTONE: Thank you. Again,
14 these are hypothetical questions. I appreciate your
15 position, but I would still like to get your response
16 to these specific questions.
17 752 If the Commission were to require
18 carriage of more than one pay-per-view service, can you
19 give me some indication as to whether it would be
20 appropriate to set a minimum amount of capacity that
21 would be provided to the alternative pay-per-view
22 service and, if so, how much capacity that should be?
23 753 MR. FRANK: As you said, these are
24 hypothetical questions, and they are very difficult for
25 us to respond to because, quite frankly, we had not
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1 contemplated the requirement to carry another pay-per-
2 view service because of the Commission's previous
3 rulings.
4 754 But you raise a very good question.
5 There is the issue of satellite capacity. Would there
6 be enough satellite capacity to carry a second service?
7 755 I note in the 1995 decision that was
8 one of the reasons why the Commission rejected the
9 required carriage of a second service, that and the
10 amount of program duplication there would be.
11 756 There would also be the issue of the
12 substantial costs associated with the carriage of a
13 second DTH pay-per-view service and, in the fullness of
14 time, it might persuade a company not to have one's own
15 DTH pay-per-view undertaking, which I think would be
16 unfortunate for all of the reasons and the benefits
17 that we have cited already.
18 757 MR. NEUMAN: I might just add, again
19 from a competitive perspective, that I think it sets up
20 a trend. It sets up an incorrect direction, at least
21 in my view, if the direction is toward more, not less,
22 competition.
23 758 I know that when we were setting up
24 our channel offering initially we were approached by
25 everyone -- and, of course, I am talking about pay-per-
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1 view -- and some were must-carries, but others were
2 discretionary on our part. It was very interesting for
3 us, from a business perspective, to get the sales
4 pitch; to hear what the program provider was planning
5 on putting on the air and to make a conscious business
6 decision against the markets that we wish to serve, as
7 to whether or not that programming met the needs of the
8 markets we were going to serve and whether or not it
9 would ultimately be in the best interests of our
10 service in terms of making our overall service more
11 competitive.
12 759 It was actually through the sales
13 pitches and conversations like that, and the analyses
14 that flowed from those conversations, that gave rise to
15 us putting Asian Television, for example, on our
16 service when no one else in the country did.
17 760 If there is a requirement that we
18 must carry something else, all of that goes out the
19 window. It is just: Here is the service. Here is the
20 price. Put it up. And I don't think that gives rise
21 to the kind of competition that one would envisage in
22 the future.
23 761 MR. BATSTONE: Assume for a moment
24 that the Commission does make that decision, that there
25 should be more than one carried. What nature of
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1 service would you suggest is the maximum that you
2 should have to carry in that situation, in terms of
3 size?
4 762 MR. FRANK: Could we approach this
5 hypothetical question, again, in the 1995 context,
6 where, although the Commission rejected it in DTH pay-
7 per-view, they did embrace it in pay-audio and, as I
8 recall, as a condition of licence, the Commission
9 required that the competitive pay-audio service pay 100
10 per cent of the satellite transmission costs: that is,
11 uplink and coding and transponder costs. So I think
12 that would be our starting point for that discussion.
13 763 MR. BATSTONE: Any service that you
14 were obliged to carry, the costs would have to be paid?
15 You wouldn't have to pay the transponder and uplink
16 costs? Is that what you are suggesting?
17 764 MR. FRANK: In dealing with a
18 hypothetical question I look back to 1995 and I see a
19 precedent and if the Commission goes that route -- and
20 we hope they don't, for all of the reasons that Michael
21 has said -- that would seem to be a reasonable request
22 from our point, because we would be bearing the
23 satellite costs associated with our DTH pay-per-view
24 service, and they would be competing one against the
25 other.
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1 765 This is a different type of
2 programming service than pay TV, specialty and
3 conventional. It is an à la carte -- as one of the
4 intervenors said, it is more like a distribution
5 offering than it is like a programming offering. It is
6 an elective, à la carte, discretionary service.
7 766 MR. GOURD: May we come back to you
8 during the course of the day, counsel?
9 767 MR. BATSTONE: Sure.
10 768 I think I will turn now to a couple
11 of conditions of licence.
12 769 There is another condition of licence
13 in some of the other DTH pay-per-view licences, which
14 is to say that the licensee shall not acquire, or seek
15 to acquire, by any means, exclusive or preferential
16 rights to distribute any programming.
17 770 Would you be prepared to accept the
18 same condition?
19 771 MR. FRANK: Yes, very much so.
20 772 MR. BATSTONE: Similarly, there is a
21 condition in those licences referring to commercial
22 messages, saying that the licensee shall not sell or
23 accept compensation for any commercial message on the
24 service.
25 773 Would you be willing to accept that
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1 as a condition of licence as well?
2 774 MR. FRANK: Provided that that allows
3 us to carry sports feeds that contain, yes, we would.
4 775 MR. BATSTONE: And I believe there is
5 another condition in those licences which addresses
6 that particular situation.
7 776 Thirdly, you spoke with Commissioner
8 Cardozo about the nature of the service itself and the
9 nature of French programming versus English, and the
10 amount, and I understand that you would agree to a
11 condition of licence requiring 25 per cent of the
12 channels to be French --
13 777 MR. FRANK: With a minimum floor of
14 five channels.
15 778 MR. BATSTONE: That is what I was
16 getting at. Exclusive of the barker channel. Is that
17 correct?
18 779 The barker would be on top of the
19 five channels. Is that correct?
20 780 MR. FRANK: Actually, in
21 discussion -- and we have had extensive discussions
22 with our competitors in the last month or so. We have
23 been busy working on a satisfactory affiliation
24 agreement. They have made it real clear to us that the
25 barker channel is an integral part of a pay-per-view
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1 service. So we would hope that it would be inclusive
2 of barker, but --
3 781 MR. BATSTONE: Is it five channels of
4 French programming plus the barker channel? Or do
5 those five channels of French programming include the
6 barker channel?
7 782 MR. FRANK: It is inclusive of the
8 barker channel.
9 783 MR. BATSTONE: So, in effect, four
10 channels plus the barker. Is that correct?
11 784 MR. FRANK: Yes, that's correct.
12 785 MR. GOURD: Yes, but it is at par
13 with the English one.
14 786 MR. BATSTONE: The only reason I am
15 asking is that it was my understanding from the
16 application that it was five channels plus the barker.
17 787 MR. FRANK: And I stand to be
18 corrected.
19 788 Counsel, we will check that. If I am
20 mistaken, if we have said that it is five channels plus
21 the barker in a licence, that is the commitment we will
22 stand with. We are not trying to change on the fly
23 here.
24 789 MR. BATSTONE: All right.
25 790 You referred in your opening remarks
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1 and again in response to questions to a program supply
2 agreement with a U.S. company. I was wondering if you
3 would be prepared to file that on the record.
4 791 MR. FRANK: I think there might be
5 some confusion here. We don't have a program supply
6 arrangement with any U.S. DBS entity. What we have is
7 a contractual requirement that we not sell our service
8 in the United States.
9 792 MR. BATSTONE: And that is in
10 exchange for what?
11 793 MR. FRANK: A broad range of
12 technical and hardware related benefits. It is a
13 technical hardware agreement; it is not a programming
14 agreement.
15 794 It is basically a technology DVC-DTH
16 driven agreement.
17 795 MR. BATSTONE: Would you be prepared
18 to put that on the record, notwithstanding my
19 misunderstanding of what it is about?
20 796 MR. FRANK: We would be prepared to
21 file it with the Commission in confidence, yes.
22 797 MR. BATSTONE: Sure. All right.
23 798 Similarly, the agreement with Premium
24 TV and Viewer's Choice with respect to the interim
25 arrangement, would you be prepared to file that?
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1 799 MR. FRANK: Yes, we would, as I am
2 sure the other parties would too.
3 800 MR. BATSTONE: Turning to the
4 question of accounting in general, would you be
5 prepared to accept a condition of licence to the effect
6 that any annual return which you have to file would
7 also include a supplementary schedule reconciling both
8 the DTH and the DTH pay-per-view revenue?
9 801 MR. FRANK: Yes, we would.
10 1305
11 802 MR. BATSTONE: Going back to the
12 issue of the carriage of two services on a
13 going-forward basis for, depending on which satellite,
14 I guess a certain period of time, at the end of that
15 period of time, in the model that you're putting
16 forward, you would be able to decide at that point
17 whether or not to continue carrying an alternative
18 pay-per-view service.
19 803 My question is: At that point, would
20 BSSI not be in a fundamental conflict of interest
21 situation in that why would you necessarily -- I guess
22 I'm not convinced that you would necessarily continue
23 to carry a second service when it is a direct
24 competitor to your own service.
25 804 MR. NEUMAN: By way of an example,
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1 because there is no way other than to ask you to trust
2 me about what I might do in the future, but I might use
3 an example from the past as an illustration.
4 805 On the music side, we carry Galaxy
5 Music. We don't own Galaxy Music, but we carry it; our
6 customers enjoy it. We're also in the midst of
7 considering carrying DMX, which comes from Shaw, which
8 owns just as of this morning -- subject to CRTC
9 approval, of course -- I believe 52.6 per cent of Star
10 Choice. So, it isn't so much a question of where it
11 comes from. They're both music and they're both 30
12 channels and they have many genres of music in common.
13 It's more a question of what consumers demand.
14 806 In our view, in that particular case,
15 the way they have programmed many of the genres of
16 music that they've chosen, they don't offer the full
17 dynamic range musically on DMX and, therefore, there
18 are cases where certain genres of their music is more
19 applicable for commercial environments, whereas some of
20 our genres of music are not applicable to commercial
21 environments. Just as I've described is possible with
22 pay-per-view, they've differentiated their service in
23 such a manner that we believe that there's a compelling
24 competitive reason to carry it.
25 807 They approached me. I was very
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1 interested. They're now in the throes of demonstrating
2 their product to us, and we're discussing the
3 possibility of bringing them on. I think that we are
4 actually living the same approach that we would apply
5 to pay-per-view. If the pay-per-view provider sharpens
6 their pencil, makes a good proposal, demonstrates their
7 ability to attract customers against packaging, pricing
8 and promotion which is unique to their service, then
9 they could make a very strong case. One thing is for
10 sure. If they have a guarantee of carriage without
11 doing anything to their product, they won't be making
12 any sales pitch to us or sharpening their pencil or
13 trying new things in pricing, packaging, promotion
14 because they won't have to.
15 808 If history repeats itself, I think
16 they have a shot. It would be good and healthy for the
17 competitive environment if they took that shot.
18 809 MR. GOURD: Please allow me very
19 quickly to table two additional comments that will
20 reenforce what Michael has said.
21 810 Our strategic business plan has two
22 priorities: Number one, maximum subscriber
23 penetration; number two, maximum revenue per
24 subscriber. It's not the success of a given segment or
25 the penetration of another piece. We go for the total
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1 picture around these two priorities. If it makes more
2 sense to have more subscribers and more revenue per
3 subscriber to carry both DMX, which is owned by Shaw,
4 and Galaxy, owned by CBC, we'll simply do it.
5 811 If it makes more sense, when you have
6 the two offerings, in a few years from now to carry
7 both Astral and our own pay-per-view, we will do it if
8 it achieves more subscriber penetration and more
9 revenue per subscriber. There might be a case where
10 you might say indeed, to have two pay-per-view
11 offerings will maximize revenue per subscriber because
12 more will take pay-per-view and they will take more
13 pay-per-view.
14 812 What we're saying is that it has to
15 be because the concrete offerings are conducive to
16 maximum subscriber penetration and maximum revenue
17 penetration that we would do it. However, as we said,
18 if the Commission believes that it's a condition of
19 licence, with great reluctance, because it would
20 introduce rigidity in the system in the total offering,
21 we would accept it.
22 813 We will come back to you further
23 pertaining to the complimentary question you have
24 posed, which will be the respective treatment of the
25 two offerings if, unfortunately, you choose to have
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1 that as a condition of licence.
2 814 MR. FRANK: You did throw it out as a
3 hypothetical, and perhaps we can throw into the hopper
4 the opportunity for us to have greater exposure of our
5 DTH pay-per-view service by gaining a "must carry"
6 status on our competitor system.
7 815 MR. BATSTONE: My final question is a
8 clarification question with respect to the revenue
9 forecast.
10 816 In the forecast you disaggregated the
11 revenues for movies and for events, but then there was
12 just a single aggregated line for the premium sports.
13 I was wondering if there's a particular reason for
14 that. What I mean by disaggregated is there was a buy
15 rate in the price which gave the revenues for the
16 movies and the events, and there wasn't the same for
17 the sports. I was wondering if there's a particular
18 reason for that and, if not, if we could get some sort
19 of analysis of it in a more disaggregated form?
20 817 MR. McLENNAN: The underpinning
21 assumption, if I recall correctly on the sports
22 packaging, was a percentage of the subscribers taking
23 the sports events and then a yearly fee of I believe it
24 was around $180.
25 818 MR. BATSTONE: So it's not premised
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1 on a particular event by rate the way the others are.
2 Is that correct?
3 819 MR. McLENNAN: That was the modelling
4 assumption behind the sports, yes.
5 820 MR. BATSTONE: Thanks very much.
6 Those are all my questions.
7 821 COMMISSIONER CARDOZO: Thank you.
8 Merci, Monsieur Gourd, gentlemen. We will probably see
9 you back in reply, but first we will send you to lunch.
10 We will be back at 2:15. Nous reprendrons à deux
11 heures et quart.
12 --- Recess at / Suspension à 1310
13 --- Upon resuming at / Reprise à 1415
14 822 THE CHAIRPERSON: Good afternoon.
15 Bonjour.
16 823 Madame la Sécretaire.
17 824 Mme SANTERRE: Merci, Madame la
18 Présidente.
19 825 The first intervenor will be Viewer's
20 Choice Canada Inc., Canal Indigo SENC.
21 PRESENTATION / PRÉSENTATION
22 826 MS de WILDE: Good afternoon, Madam
23 Chair, members of the Commission.
24 827 My name is Lisa de Wilde. I'm the
25 President of Viewer's Choice Canada and I'm a member of
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1 the Board of Directors of Canal Indigo.
2 828 Before I start this afternoon, I want
3 to extend a sincere thank you to Michael Neuman for his
4 many incredibly complimentary remarks this morning
5 about pay television and TMN, in particular. I agree
6 enthusiastically with Michael about the successes that
7 have already been achieved by ExpressVu in the DTH
8 market.
9 829 So, you may wonder why are we here
10 today? In a nutshell, we believe that Bell Satellite
11 can be as successful in pay-per-view as it has been
12 with pay TV by working with the existing licensees,
13 namely Canal Indigo and Viewer's Choice.
14 830 Before we begin our intervention this
15 afternoon, I would first like to introduce the members
16 of our panel. I have with me today Rene Bourdages, the
17 Vice-President et Directeur-General, Canal Indigo; Vash
18 Ramnarace, who is the Director of Finance for TMN
19 Networks. Vash also has another claim to fame, which
20 is that he has brought cricket to Canadian pay-per-view
21 for the last three years, whether it's cricket at the
22 World Cup level or the Sahara Cup level, which is
23 running out of Toronto. Lastly, we have Stephen Zolf,
24 who will hopefully keep me from falling back into
25 previous areas of some expertise.
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1 831 I have to apologize that the document
2 that you have in front of you this afternoon was a
3 noble effort to give you a clean copy of what we wanted
4 to say to you this afternoon. But this morning was a
5 pretty interesting one, and so I hope that you will
6 bear with me when I depart from the text. Usually it's
7 that I've chopped out a paragraph and sometimes that
8 I've added in something that I think is more
9 interesting.
10 832 With all of those caveats, we are
11 appearing today, Madam Wylie, to highlight our
12 opposition to Bell Satellite's DTH pay-per-view
13 application. Bell Satellite claims that its
14 application is simply about competition, diversity and
15 efficiency. Simply put, we disagree. We believe that
16 their application raises a much more fundamental issue
17 about the role of DBUs in programming undertakings.
18 833 This is an issue that has been
19 subject to much Commission attention over the last few
20 months. In fact, the Commission recently decided to
21 defer its consideration of a number of licence
22 applications for new programming services until a
23 number of really big issues, including the issue of
24 distributor participation in the ownership of
25 programming services could be resolved.
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1 834 These issues are to be addressed in
2 an upcoming licensing framework hearing. We submit
3 that Bell Satellite's application raises similar
4 issues, as well as a whole host of other issues about
5 market structure.
6 835 The Commission should, in our view,
7 give serious consideration to all of these big issues
8 before making any determinations with respect to this
9 particular application.
10 836 Our intervention will address five
11 key issues.
12 837 Bell repeatedly argues that its
13 proposed service will bring about "real competition and
14 choice and diversity of service," as well as giving
15 Canadian consumers an alternative to the pay-per-view
16 services offered by cable and those in the U.S. grey
17 market. It has persuaded several parties to support
18 its application on the basis of this supposed increased
19 choice and diversity for DTH customers.
20 838 In fact, Bell Satellite's
21 pay-per-view service will not enhance the level of
22 programming diversity in the least. Let's be clear
23 about what it is we're dealing with here. Viewer's
24 Choice, Canal Indigo, as well as the proposed Bell
25 Satellite service, are all general-interest
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1 pay-per-view services, whose offering, by definition,
2 is the same core of movies and events. Michael Neuman
3 acknowledged this fact this morning.
4 839 But the reality also is that with 22
5 channels that Bell Satellite has proposed for its
6 English service, Viewer's Choice would also be able to
7 provide that same level of diversity. But Bell's BDU
8 controls the number of channels that we have at our
9 disposal to address and to delivery against diversity.
10 840 When our DTH pay-per-view service
11 commenced operation last spring with Star Choice, Bell
12 Satellite refused to carry our service, probably in
13 anticipation of its pending application for its own
14 licence. It was only after seeking Commission relief
15 to order Bell Satellite to provide access to VCC and
16 Canal Indigo that we were able to force a negotiation
17 and to achieve carriage.
18 841 But this access is, to say the least,
19 severely limited, with only four channels for Viewer's
20 Choice and a mere two channels for Canal Indigo, with
21 no barker. Bell Satellite has been content to
22 constrain our service to a minimum channel offering,
23 and we reluctantly agreed to these terms because, on
24 balance, we thought that it was important to make our
25 service available to all DTH subscribers.
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1 842 But even these arrangements will be
2 short lived. Despite all the talk this morning, Bell
3 Satellite's position on the record is that our services
4 will be dropped in a mere 30 months if Bell receives a
5 licence.
6 843 This morning Bell Satellite was asked
7 if they would agree to carry existing unaffiliated
8 pay-per-view services in addition to their own. Based
9 on their responses today, it's painfully clear that
10 Bell wants to have free reign to confer any manner of
11 undue preferences on its affiliated pay-per-view
12 service, whether it's through the number of channels,
13 who pays for the satellite transponder, whether it's at
14 the level of the marketing, the packaging, the
15 promotion, you name it, and, finally, they get to
16 decide whether or not they'll keep up.
17 844 Based on the posture that they had
18 this morning, I'm just not sure that there really is
19 any amount of Commission involvement that could prevent
20 Bell Satellite's BDU from favouring its own
21 pay-per-view service. We're not convinced that there
22 are enough conditions of licence out there that could
23 provide a complete fix, when you have a deep-pocketed,
24 integrated competitor.
25 845 Our conclusion is we would always be
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1 the second-class citizen who got to pick up those
2 portions of the programming mix that Bell decided it
3 didn't want.
4 846 Bell Satellite has repeatedly
5 suggested that its proposed pay-per-view service will
6 also allow consumers to enjoy more choice. This, too,
7 in our view, is misleading. A consumer will never have
8 more than one general-interest pay-per-view service to
9 choose from. The reason for that is simple. An
10 integrated DTH company will always bundle its own
11 pay-per-view service to its customers, notwithstanding
12 what you've been told this morning.
13 847 The diagram that we've attached to
14 our intervention illustrates the programming choices
15 that would be available to viewers under two scenarios,
16 the status quo called today, and the scenario if Bell
17 Satellite receives a licence from the Commission. As
18 you can see from the diagram, under either scenario,
19 after having made a commitment to the technology of
20 either ExpressVu or Star Choice, the DTH consumer would
21 receive only one general-interest pay-per-view service.
22 848 Bell is asking the Commission to take
23 an unprecedented action. What's unprecedented is to
24 allow an existing BDU to drop an existing licensed
25 programming service and to replace them with its own
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1 fully integrated undertaking. Let's be clear.
2 Competition is a means to an end, and that end is
3 greater choice and greater welfare for consumers. It's
4 not competition if the result is simply to replace one
5 programming service with another more anti-competitive
6 one. In the end, the ExpressVu DTH customer will have
7 no greater choice than he has now or will have at the
8 end of November.
9 849 Surely this was not the intent of the
10 government's DTH policy. The government directions to
11 the Commission were permissive, rather than mandatory.
12 They were issued at the time not for the purpose of
13 requiring the Commission to licence an integrated
14 undertaking. Rather, they only directed the Commission
15 not to refuse to license such a service under the
16 appropriate circumstances. We believe those
17 circumstances do not exist. For the ExpressVu DTH
18 customer, there would be no competition from which he
19 or she would benefit. Thus, allowing Bell Satellite
20 into the pay-per-view sector would not ensure the
21 continued integrity of the Canadian broadcasting
22 system, as the Commission is required to do under both
23 directions.
24 1425
25 850 As I said earlier, the implications
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1 of Bell Satellite's application go far beyond the DTH
2 sector. Notwithstanding all the buzzwords we hear of
3 competition, choice, diversity, this application raises
4 squarely the question of whether BDUs should own
5 programming undertakings.
6 851 It is our view that Bell Satellite's
7 application represents the thin edge of the wedge.
8 Giving a licence to Bell Satellite would surely cause a
9 move to integration in the entire DTH sector.
10 StarChoice would obviously come seeking its own pay-
11 per-view licence. To put it simply, our DTH pay-per-
12 view licences would be shortly without a home, and
13 there is every reason to believe that cable would also
14 be there applying for their own pay-per-view services.
15 In the CCTA's own intervention, they are
16 enthusiastically asking the Commission to approve this
17 application so that they can come to the Commission and
18 ask you to approve similar ones.
19 852 Bell Satellite tente de persuader le
20 Conseil qu'une entreprise nationale de SRD intégrée
21 serait rentable et concurrentielle. Elle soutient
22 aussi que seule l'intégration est en mesure d'assurer
23 la viabilité du secteur canadien de la SRD.
24 853 Aucun de ces arguments ne peut être
25 valablement soutenu. Tel que nous l'avons noté dans
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1 notre intervention écrite, Bell Satellite a arrangé ses
2 prévisions financières en imputant ses coûts principaux
3 de telle manière qu'ils dépeignent la nécessité
4 économique au niveau du secteur SRD. Ce jeu de
5 chiffres détourne le Conseil de ce qui apparaît comme
6 une évidence dans le secteur de SRD aujourd'hui: La
7 rentabilité du secteur SRD ne requiert pas
8 l'intégration. Ce secteur est viable, même si les
9 entreprises de distribution par SRD, incluant Bell
10 ExpressVu, continuent de s'associer avec des services
11 indépendants de télévision à la carte par SRD. Bell
12 Satellite a donc qualifié à mauvais escient le secteur
13 SRD comme vacillant au bord du gouffre financier afin
14 de justifier sa demande de service intégré.
15 854 Bell Satellite a aussi soulevé la
16 taille du marché de SRD en se qualifiant de
17 distributeur non dominant qui n'occupe qu'une infime
18 partie du secteur de la distribution au Canada.
19 Cependant, ses propres projections la contredisent et
20 font état d'un bassin de plus de 750 000 abonnés
21 adressables pour son EDR, et ce, au premier terme de sa
22 licence. Pour mettre ce chiffre en perspective, cela
23 équivaut approximativement au nombre total d'abonnés de
24 câblodistribution adressables au pays. Donc, en
25 réalité, Bell Satellite a de loin sous-estimé la portée
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1 du secteur de SRD dans son ensemble.
2 855 Selon les propres hypothèses de Bell
3 Satellite, le secteur de SRD atteindrait au total,
4 donc, 1,5 million d'abonnés adressables d'ici à la fin
5 de sa période de licence. Ceci est confirmé par le
6 fait que les services de SRD s'enrichissent
7 actuellement de près de 35 000 abonnés par mois. Et,
8 contrairement au secteur de la câblodistribution,
9 chaque client SRD est adressable.
10 856 On peut également douter de la
11 sincérité de Bell Satellite lorsqu'elle décrit l'impact
12 du service proposé sur les marchés de langue française.
13 Selon elle, ses abonnés de langue française ne
14 représentent que 1,5 pour cent du marché total de la
15 câblodistribution. Mais ceci ne tient pas compte,
16 encore une fois, de la vraie question, à savoir le
17 nombre d'abonnés au câble adressables comparativement à
18 celui des abonnés SRD.
19 857 La demande de Bell Satellite indique
20 que le nombre total d'abonnés SRD adressables dans les
21 marchés de langue française excédera celui des abonnés
22 du câble adressables dans ces marchés. Le fait est
23 qu'au Québec le marché actuel du câble ne peut suffire
24 par lui-même à soutenir la viabilité d'un service de
25 langue française. Si l'un des principaux objectifs de
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1 la politique du Conseil est de faire en sorte qu'un
2 menu complet de services de programmation de langue
3 française soit mis à la disposition des Canadiens,
4 alors l'accès de Canal Indigo aux abonnés de SRD est
5 fondamental.
6 858 De plus, si Bell Satellite venait à
7 enlever l'accès de Canal Indigo à ces abonnés, cela
8 compromettrait les engagements actuels de notre service
9 de consacrer 10 pour cent de nos recettes brutes à la
10 production indépendante, ce qui représente le double de
11 ce que Bell Satellite propose.
12 859 MS de WILDE: Finally, Bell Satellite
13 has noted that integration is a common practice in the
14 more established U.S. DBS market, but they have
15 neglected to mention that in that integrated U.S.
16 market, where there is a two-way split of revenues, as
17 much as 60 per cent, and not the one-third that
18 Mr. McLennan mentioned today -- 60 per cent of all
19 retail revenues flow to the rightsholders. By
20 contrast, under the current non-integrated DTH market
21 structure in Canada, rightsholders for feature films
22 generally receive the one-third of the total retail
23 revenues.
24 860 The Commission recognized the
25 particular problem of upward pressure on splits when it
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1 imposed a revenue splits condition in previous DTH
2 licensing decisions in 1995. That condition would have
3 ensured that retail pay-per-view revenues earned on
4 feature films were split three ways -- among the BDU,
5 the pay-per-view provider and the rightsholder. The
6 condition was designed to prevent integrated DTH pay-
7 per-view licensees from paying increased revenue shares
8 to foreign rightsholders.
9 861 Of course, the Commission has not had
10 to remove the revenue splits condition, and without
11 that condition, and despite Mr. Neuman's propensity to
12 pay low prices, Bell Satellite's pay-per-view service
13 will face severe pressure from foreign rightsholders,
14 seeking at least one-half of the revenues because he
15 will be perceived as the integrated undertaking that he
16 is. In the end, gross margins that would have remained
17 in Canada through existing DTH pay-per-view licensees
18 will flow inevitably to non-Canadians. Moreover, even
19 the non-integrated pay-per-view services will be forced
20 to meet these more onerous split conditions. The
21 result will be a far poorer DTH sector.
22 862 That concludes my intervention.
23 863 THE CHAIRPERSON: Good afternoon and
24 thank you, Ms de Wilde and gentlemen.
25 864 Commissioner Pennefather.
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1 865 COMMISSIONER PENNEFATHER: Thank you.
2 866 Good afternoon. I guess I will start
3 by working from your presentation, which, as you said,
4 brought some nuance and some additional comments to
5 your written intervention.
6 867 In summary, if I am right, the basic
7 issues you have raised -- correct me if I am wrong --
8 which are fundamental to your request that we deny this
9 application were first and foremost that you feel
10 strongly that the existing licenses should be used by
11 the BDU as opposed to a new service, that you object to
12 the non-use of an existing pay-per-view licence;
13 secondly, your concerns about integration; and,
14 thirdly, access to satellite capacity to distribution
15 and even to program rights.
16 868 These seemed to me, as I looked
17 through and listened this afternoon, to be central to
18 your concerns, and you have added a few highlights
19 today.
20 869 Perhaps, then, I could begin by
21 starting where we started this morning with the Pay-
22 Per-View Direction and ask you as well to expand on
23 your views about what is inferred by paragraph 3, where
24 it says:
25 "The CRTC is directed to
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1 promote, through licensing, a
2 dynamically competitive market
3 for DTH pay-per-view television
4 programming undertakings."
5 870 Could I ask you to expand on that and
6 what market you think is being referred to there, and
7 what in fact such a direction means for this process?
8 871 MS de WILDE: We would be happy to.
9 Stephen Zolf will address this.
10 872 MR. ZOLF: Thank you, Lisa.
11 873 Commissioner Pennefather, as we have
12 said on the record to date, in our view, a close
13 reading of the direction suggests that in fact it is
14 permissive in terms of licensing an integrated provider
15 and, rather, it is not mandatory. In fact, nowhere in
16 that direction is there an express requirement that
17 directs the Commission to award a licence to a
18 vertically-integrated DTH provider. Therefore, that in
19 turn suggests that the onus is on the Commission, if
20 you will, to look at a number of issues and the
21 appropriate circumstances to determine whether in fact
22 licensing that entity is indeed warranted; and, for the
23 reasons we have set out on the record, we feel that it
24 isn't.
25 874 The direction itself does ask, in
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1 terms of dynamic competition, that the Commission
2 should look at whether this will be dynamic competition
3 within the DTH pay-per-view sector and in fact that
4 analysis alone, that narrow calculus alone, we submit,
5 is the only relevant criterion for then going on to
6 determine whether in fact the DTH market will indeed be
7 dynamically competitive.
8 875 That's it in a nutshell.
9 876 COMMISSIONER PENNEFATHER: Good.
10 And, remember, this is not a lawyer speaking to you, so
11 I may be fairly simple in my comments here, but just
12 let's pursue that for a moment.
13 877 You do agree that, under 5(f), it is
14 clear that the CRTC is directed not to refuse to issue
15 a licence for the sole reason that the applicant holds
16 a licence to carry on a DTH distribution undertaking.
17 878 MR. ZOLF: Yes.
18 Commissioner Pennefather, that's the permissive aspect
19 we referred to. You are not precluded from going ahead
20 and licensing for that sole reason, but the other side
21 of that coin is you are not required to license, and in
22 fact there are a number of circumstances at play that I
23 think you need to consider.
24 879 We also, of course, put on the record
25 that the chronology, if you will, has changed since the
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1 time that the directions were issued, which in turn
2 leads to a conclusion that, really, you can't fetter
3 your discretion. You do have to look at all the
4 circumstances before you and determine whether in fact
5 licensing the integrated player is indeed justified.
6 880 COMMISSIONER PENNEFATHER: Good.
7 That's what I would like to pursue with you, what are
8 the various circumstances which lead you to your
9 conclusion and look at this from your perspective.
10 881 If I may summarize, certainly this is
11 a direction to promote a competitive market, which I
12 don't think you would disagree with, but on the other
13 hand you are very convinced that the proposal which is
14 before us is, if I may coin a phrase, anti-competitive.
15 882 Could you expand on why you say the
16 model proposed by Bell Satellite Services is anti-
17 competitive?
18 883 MS de WILDE: Our view turns on the
19 fact that it is an integrated competitor, and it is an
20 integrated competitor that also happens to have
21 extremely deep pockets. I think that it is very
22 important to understand our position through that
23 prism.
24 884 We are here to talk to you today and
25 to say that, in the facts that are before you of this
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1 precise applicant, the down sides, the risks the ugly
2 sides of licensing them are so much more significant
3 than any possible benefits that it is not worth putting
4 at stake, really, the structure of the pay-per-view
5 sector in DTH, but frankly the whole structure of the
6 system in terms of the relative roles of programming
7 undertakings and distribution undertakings.
8 885 So our concern really is, we have an
9 integrated competitor. Well, you can't have dynamic,
10 fair competition with an integrated competitor.
11 886 COMMISSIONER PENNEFATHER: Could we
12 go through that point, then, with some specifics, and
13 not for the moment talk about the broader scope, which
14 you have also mentioned this afternoon.
15 887 Specifically, what are the aspects
16 which bring you to that conclusion that this is an
17 approach which is so anti-competitive that it should be
18 denied? I understand you generally, but what are some
19 of the specifics?
20 888 MS de WILDE: I guess I would come at
21 that from two different tracks.
22 889 First of all, there is no commitment
23 to carry our service on ExpressVu if they get a
24 licence. That's the sort of simple temporal one. Our
25 agreement expires in a maximum of 30 months, and then
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1 we are toast.
2 890 Coming at it from the slightly
3 broader, more down in the dust of the arena, if you
4 want to put it that way, when we sit and listen to all
5 of the wonderful things that ExpressVu wants to do in
6 terms of packaging and marketing and promoting, you
7 start to get a sense of exactly all the levers that
8 would be at their disposal to favour their own service
9 and to disfavour any other service. So, even for the
10 period of time when we are carried on ExpressVu, we are
11 going to be in the second class seats on the train.
12 891 The discussion this morning went so
13 far as to suggest that transponder costs, they wouldn't
14 pay them for the second service, that they would pay
15 them for their own, to say nothing of the fact that we
16 couldn't even get a clear sense that the number of
17 channels, which is a pretty basic and transparent way
18 of measuring fairness -- there was no commitment there.
19 1440
20 892 So, I mean, if you summarize it, it
21 is from the beginning of will they carry you? Well,
22 not for long. To the number of channels, to the
23 promotion, the marketing, the packaging, will they do a
24 direct mail campaign for you? Will they not? Where
25 will they put you on your electronic programming guide?
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1 I mean, you can think -- actually, I fear that you
2 think that I might be paranoid as I rhyme off this
3 shopping list of things, but I think having sat through
4 the discussion this morning that the opportunities for
5 those undue preferences are just endless.
6 893 COMMISSIONER PENNEFATHER: So you
7 feel undue preference would follow through and nothing
8 you heard this morning changed your opinion that the
9 opportunity for you to be carried would still remain.
10 You are referring to an agreement, I believe, which was
11 repeated this morning in terms of the 30-month period
12 after that, as you say, to quote, you would be toast.
13 Why would you be toast if you are also be carried on
14 cable?
15 894 MS de WILDE: We would be toast with
16 ExpressVu, that was my point.
17 895 COMMISSIONER PENNEFATHER: I see.
18 But as DTH pay-per-view service, would you still be
19 viable, would you still survive?
20 896 MS de WILDE: As I have alluded to, I
21 cannot believe that if the Commission were to make such
22 a fundamental decision as to licence an integrated
23 pay-per-view undertaking, every other distribution
24 undertaking will want their own.
25 897 So the cable guys have been, quite
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1 frankly, incredibly clear about their views on what you
2 should do and they are exhorting you to run for it,
3 license ExpressVu, and then they have been honest and
4 said they will be lining up for licences.
5 898 COMMISSIONER PENNEFATHER: So it is
6 this aspect of the integration, be it DTH, be it cable,
7 that is as a pay-per-view service is your concern?
8 899 MS de WILDE: That's right,
9 Commissioner Pennefather. And I think that over the
10 course of the last several months, we have all had a
11 lot of experience as to what are the levers the
12 distribution undertakings have at their disposal. And
13 I think there is a pretty fundamental question that
14 faces all of us. You know, how can programming
15 undertakings be successful if they do not have BDU
16 shareholders?
17 900 And our argument to you is we should
18 be putting in place a framework that allows that to
19 happen, that there are a lot of advantages to not
20 having simply integrated undertakings.
21 901 COMMISSIONER PENNEFATHER: What did
22 you think of -- I think there was a discussion this
23 morning about vertically integrated situations and
24 horizontally. And I believe you were described as
25 horizontal-vertical integration. In other words, are
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1 there aspects in your ownership that include
2 distribution undertakings and is it different from what
3 you are describing?
4 902 MS de WILDE: Well, in the case of
5 Viewer's Choice, as well as in the case -- to a
6 different degree in Indigo we do have a cable
7 shareholder. But I can tell you that it is a small
8 interest, less than 25 per cent. And I do not feel
9 integrated. When I say I do not feel, I do not mean I
10 personally. I mean the way in which the business is
11 run, the way in which channels are allocated, the way
12 in which our service goes to market, I do not feel
13 integrated.
14 903 COMMISSIONER PENNEFATHER: I would
15 appreciate it if you expanded more on that. I believe
16 you raised that in your written comments as well in
17 terms of describing the economies of scope and the
18 positive side of integration in terms of efficiencies
19 in that regard which would be as I have described.
20 Whereas you are saying that is not the case, that is
21 not the way it works in an operational sense.
22 904 What does that mean in the day-to-day
23 operations? What does that mean in terms of the
24 results of the success, for the success of the
25 programming service and for, in fact, what the consumer
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1 will receive?
2 905 MS de WILDE: I will take a run at it
3 and Vash can jump in and fill in the gaps.
4 906 I think that it is important to get a
5 sense of what exactly running a pay-per-view
6 undertaking involves. And while the technology is very
7 seductive and the size of servers continues to shrink
8 -- you know, I sometimes embarrass my technical people
9 by saying they look like refrigerators. We are not
10 talking about huge broadcast operation centres. But to
11 me that is the front end, that is how it happens to get
12 out to our BDUs.
13 907 What is really interesting and
14 exciting about undertaking an undertaking like that is
15 what happens before it ends up in my two refrigerators.
16 There it really is a question of understanding how you
17 can deliver customers, maximum convenience and choice.
18 And, of course, movies and big-ticket events are the
19 core offerings of pay-per-view. But what I am most
20 proud of, quite frankly, are when we find niche events.
21 908 And, you know, we have an in-house
22 joke about cricket. Because it is something, when we
23 first launched it, we were not really sure how much
24 demand there would be. Well there are a lot of people,
25 especially in Toronto, who will sit in front of their
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1 TV even if the match starts at 2 in the morning. And
2 they will sit there for the 8 or 12 hours of that
3 match.
4 909 So I think it is really --
5 pay-per-view offers you the opportunity to target those
6 niche audiences. We also have had successes with
7 concerts. We had Sarah McLachlan's first pay-per-view
8 concert -- or first televised concert. And we also had
9 the Spice Girls. So you can see the gamut of what
10 pay-per-view can offer. That is the exciting part of
11 it. How do you go ahead acquiring those rights,
12 putting them together in a schedule that is compelling
13 and then marketing them to customers.
14 910 COMMISSIONER PENNEFATHER: That is
15 what I am coming at, too. What you have described and
16 what you have brought up in terms of the diversity is,
17 in fact, for the consumer, pay-per-view service X would
18 be presenting perhaps, yes, movies, sports, events,
19 that is the nature of the game, and perhaps adding
20 other elements. But is that not where the challenge
21 is? Also, the challenge in terms of packaging, picking
22 and choosing and so on. And yet you claim that the
23 Bell Satellite pay-per-view service will be exactly the
24 same, that, in fact, they will not offer any diversity.
25 But what you have just described is the capacity for
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1 different pay-per-view services to, in fact, be very
2 different whether they are integrated or not. Because
3 you are very different, and you are not, as you say,
4 suffering under integration.
5 911 MS de WILDE: What I am trying to
6 explain is that, at the end of the day, pay-per-view is
7 going to be in terms of the percentage of time largely
8 about movies. And it will have the same, you know,
9 core, big-ticket events that are made available from
10 rates holders.
11 912 But the capacity to offer a better
12 pay-per-view service whether it is more convenient
13 start times for movies, or to add more concerts or
14 niche programming into the mix is a function of the
15 number of channels that we have at our disposal. And,
16 you know, right now, quite frankly, in the cable
17 market, we are like lots of other people waiting for
18 digital. And so waiting for digital means that we are
19 living in a very constrained channel world. But if we
20 had the 22 channels that ExpressVu wants to devote to
21 their English channel pay-per-view, there is nothing
22 that they could do that we could not do.
23 913 COMMISSIONER PENNEFATHER: You
24 mentioned the satellite capacity and that is key, a
25 very specific point, I just want to come back to that.
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1 So that, in terms of the consumer, is it not better for
2 a consumer to have a choice of different pay-per-view
3 services?
4 914 MS de WILDE: As you were alluding to
5 this morning, the fundamental choice that the consumer
6 makes when it comes to how they are going to consume
7 television programming in Canada is they decide: Am I
8 going to become a new DTH subscriber? If that is the
9 case, they have two choices. Do I go to Star Choice or
10 do I choose ExpressVu?
11 915 If I choose not to be a DTH
12 subscriber, I have a couple of other options out there.
13 But once having made that equipment decision and having
14 that, you know, beautiful dish installed on the side of
15 your house, you are locked in. I mean, you have made
16 your commitment at that point. As my diagram tries to
17 show, there is no incremental choice in the scenario
18 that would see the licensing of ExpressVu.
19 916 COMMISSIONER PENNEFATHER: Just as an
20 aside, I assume the diagram is a sort of generic
21 person?
22 917 MS de WILDE: It is what I call a
23 guy, which is it is gender-neutral.
24 918 COMMISSIONER PENNEFATHER: To get
25 back to that, once one is locked in with respect to
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1 ExpressVu or Star Choice, should the viewer not then
2 have a choice of the pay-per-view services within that?
3 What does competition mean for I the consumer in the
4 end?
5 919
6 920 MS de WILDE: Well, I think what we
7 were trying to explain to you was that, from the
8 consumer's point of view, the service, the pay-per-view
9 service, will be stronger, more appealing, more
10 compelling when more channels are put at its disposal.
11 And the proposition that you have before you today from
12 Bell Satellite does not involve any incremental choice
13 for a customer.
14 921 COMMISSIONER PENNEFATHER: All right.
15 So specifically, then, what are you're assumptions
16 regarding channel capacity? What is the minimum
17 requirement for a pay-per-view service to operate in a
18 viable fashion? This seems to be one of your main
19 concerns about the result of integration, an integrated
20 approach, is restriction to yourselves or other
21 competitors in terms of channel capacity. What is the
22 minimum? What is the maximum?
23 922 MS de WILDE: In a scenario where
24 there was an integrated pay-per-view service and that
25 BDU that had the integrated pay-per-view service was
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1 also offering a second pay-per-view, that is your
2 scenario?
3 923 COMMISSIONER PENNEFATHER: Yeah, from
4 the point of view of saying that -- you just said the
5 problem is that you do not have enough channel capacity
6 to present the viable service to compete. And one of
7 the reasons you do not, forgive me if I am putting
8 words in your mouth, is that the integrated
9 pay-per-view service has control of that channel
10 capacity and is limiting by virtue of that limitation,
11 putting you at a disadvantage, a second-rate player, as
12 I think you said earlier.
13 924 Just to be clear, what is a realistic
14 minimum number and realistic maximum number of channel
15 capacity that would make it fair? And we are looking
16 at the current and perhaps the future in terms of the
17 Nimiq satellite. This was discussed earlier as well.
18 I was not entirely clear on that.
19 925 MS de WILDE: Okay. I am sorry that
20 it was taking me so long to grasp. I think the answer
21 is not one of numbers, it is a question of equality.
22 You need the same number of channels in order to have a
23 reasonable chance of competing.
24 926 COMMISSIONER PENNEFATHER: So this is
25 the 22 channels referred to on page 3?
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1 927 MS de WILDE: That is correct.
2 928 COMMISSIONER PENNEFATHER: However,
3 this access to say the least is severely limited with
4 only four channels, et cetera, which is an example you
5 are using of how that limitation can affect your
6 ability to compete, correct?
7 929 MS de WILDE: That's right, and how
8 preferences are granted.
9 930 COMMISSIONER PENNEFATHER: Okay. So
10 this to you is one of the anti-competitive effects of
11 your competitor being an integrated service?
12 931 MS de WILDE: If I was -- if I had
13 the opportunity to compete head-to-head with them in
14 the sense that if I -- if they had made the decision to
15 keep me on, which they have not made, that is right.
16 With that assumption, yes.
17 932 COMMISSIONER PENNEFATHER: Now, given
18 the -- you are talking about the effect on your
19 service, your pay-per-view service. But given your
20 existing distribution on cable, I will go back to this
21 question, again. Is it really realistic to suggest
22 that approving this application will have a profound
23 impact on your situation?
24 933 MS de WILDE: I think, Commissioner
25 Pennefather, the most helpful I can be on that is to
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1 simply point you to the CCTA intervention where there
2 really was no ambiguity in the words that they used to
3 describe what their next steps would be.
4 934 COMMISSIONER PENNEFATHER: Oh, I see.
5 You are referring to the potential for integration and
6 that side. What I was referring to specifically was in
7 terms of subscriber base, your subscribers through your
8 cable access -- through cable to your pay-per-view
9 service is substantial. The comment was made this
10 morning that the number of subscribers or the potential
11 of subscribers through DTH would be so minimal as to
12 not cause you that much financial concern.
13 935 MS de WILDE: Well, it is
14 interesting. There are a lot of changes going on in
15 the Canadian broadcasting market right now and it is
16 really quite hard to have a crystal ball and understand
17 how fast digital will roll out in cable. We can all
18 pray every night that it is fast, but the experience of
19 the last several years suggests that it will not be all
20 that rapid.
21 936 Already DTH is starting to be, you
22 know, a significant player, as was alluded to this
23 morning, in our pay television business.
24 1455
25 937 I think it would be in error to focus
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1 on the cable market and say that the cable market is
2 going to suddenly explode. It has been our experience
3 over the last couple of years that in fact it has
4 shrunk by factors of 20 percent and 30 percent at the
5 level of the number of homes that we access, which is
6 the number of customers that we can potentially sell
7 something to, and that it has also shrunk in terms of
8 the number of channels.
9 938 I think that we have to be quite
10 prudent in terms of how fast that market will develop.
11 939 COMMISSIONER PENNEFATHER: This goes
12 back to the question about the direction and what is
13 understood as the competitive market. This morning we
14 talked about basically several layers within the pay-
15 per-view DTH, within pay-per-view DTH cable, with BDU
16 distribution.
17 940 Do you agree, as was stated this
18 morning, that the directions really concern all those
19 layers of competition?
20 941 MS de WILDE: Yes. And I think to
21 step back, the directions are there. But more
22 fundamentally, the Commission is looking at what kind
23 of a Canadian broadcasting system it wants to shape for
24 the years ahead.
25 942 Competition is one of the policy
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1 objectives, but it is one of a number of objectives. I
2 think we really need to keep our eye on the ball and
3 make sure that we end up with strong Canadian
4 programming services that can deliver on the
5 contributions and support what we are supposed to be
6 here to do -- which is to build a strong Canadian
7 programming sector, whether it is the independent
8 production or the window for people to get to see
9 Canadian stories on BDUs.
10 943 COMMISSIONER PENNEFATHER: Turning it
11 around to that positive side, turning to page 6 what
12 you have said regarding the direction is:
13 "Rather, they only directed the
14 Commission not to refuse to
15 license such a service, under
16 the appropriate circumstances.
17 We believe those circumstances
18 do not exist."
19 944 What would the appropriate
20 circumstances be? You must agree with me that the idea
21 is, for some of the purposes you have mentioned --
22 programming, development of Canadian services -- that
23 competition will be important, and competition in pay-
24 per-view services will be important.
25 945 What are the appropriate
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1 circumstances if these are not they?
2 946 MS de WILDE: I think the test is
3 more in the direction of: Do we have a net improvement
4 in the Canadian broadcasting system? Is the licensing
5 of a second pay-per-view player going to produce more
6 dollars that flow into this system and produce Canadian
7 programming?
8 947 To me, that is the test. It is not a
9 question of: Do we achieve competition per se?
10 948 In figuring out whether the
11 competition is truly competition and not simply
12 licensing one player to replace another, you are going
13 to look at what is the impact on consumers? Are they
14 truly better off?
15 949 COMMISSIONER PENNEFATHER: So it is
16 your contention that this is licensing one player to
17 replace another? And I think in several points you say
18 that there is no additional contribution to the
19 broadcasting system as a whole as a result of issuing
20 this.
21 950 Is that right?
22 951 MS de WILDE: That is correct.
23 952 COMMISSIONER PENNEFATHER: Why? Why
24 do you say that?
25 953 MS de WILDE: Because I am focusing
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1 on the DTH market and specifically ExpressVu.
2 954 COMMISSIONER PENNEFATHER: Even with
3 the contribution to programming as was discussed this
4 morning, which is programming funds to potentially have
5 support for feature films? That is not a contribution?
6 955 MS de WILDE: If one were to take the
7 scenario where ExpressVu was working with Viewer's
8 Choice and Canal Indigo, those same contributions would
9 flow.
10 956 In fact, in the case of Canal Indigo,
11 there is a commitment to drive 10 percent of the gross
12 revenues back into the production sector. So my answer
13 has two parts: In the case of the French language pay-
14 per-view service, I believe that we in fact represent a
15 larger contribution; and the second part of my answer
16 is that we could drive and generate the same
17 contribution if we were on ExpressVu with 22 channels,
18 having the benefit of Mr. Neuman's marketing
19 brilliance.
20 957 COMMISSAIRE PENNEFATHER: J'aimerais
21 en fait aborder un paragraphe dans l'intervention de
22 Canal Indigo, le paragraphe 34, à la page 17, qui est
23 répété en anglais aussi.
24 958 Pourriez-vous faire un commentaire
25 sur ce paragraphe qui dit qu'une seconde entreprise à
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1 pénétrer le marché serait contraire à la politique, et
2 caetera, de se concurrencer dans un même marché, et que
3 VCC/Indigo considère qu'il n'existe aucune
4 justification de s'éloigner de cette politique,
5 particulièrement dans le marché précaire de la
6 télévision à la carte par câble de la langue française.
7 959 Me DE WILDE: Est-ce que vous pouvez
8 juste nous indiquer le paragraphe?
9 960 COMMISSAIRE PENNEFATHER: Le
10 paragraphe 31, sur la page 17.
11 961 Me DE WILDE: Merci.
12 962 M. BOURDAGES: Écoutez,
13 Madame Pennefather, j'aimerais dire que, malgré les
14 succès qu'on enregistre, malgré l'adhésion des abonnés
15 de Canal Indigo, Canal Indigo essuie toujours des
16 pertes d'opération après deux ans.
17 963 Je pense que la rentabilité du
18 secteur de la télévision à la carte de langue française
19 va passer par une plus grande base adressable parce que
20 ce n'est pas au niveau des taux d'achat en ce moment
21 qu'on sous-performe, c'est simplement qu'il n'y a pas
22 suffisamment de foyers qui ont la technologie
23 adressable pour profiter de la programmation.
24 964 Donc, pour nous, c'est essentiel
25 d'avoir ces ailes-là qui vont nous permettre de prendre
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1 notre envol, c'est-à-dire le secteur SRD.
2 965 COMMISSAIRE PENNEFATHER: Merci.
3 966 Pour les deux, Canal Indigo et
4 Viewer's Choice, j'ai remarqué qu'il y a plusieurs
5 organisations du secteur de création, secteur de
6 production de film, et caetera, qui a supporté cette
7 demande... Canadian Directors' Guild, CHUM, National
8 Film Board TV or Friends of Canadian Broadcasting.
9 967 Seeing this as a plus, do you have
10 some comments on this?
11 968 MS de WILDE: Well, I think it is in
12 fact also interesting who is not there as an
13 intervenor. There are other extremely important
14 players in the production sector: La PFTQ, the CFTPA,
15 who did not see the advantages of licensing this
16 service.
17 969 I will be brief. I don't believe
18 that it does represent choice, and I don't believe that
19 it represents a strengthening of the system.
20 970 COMMISSIONER PENNEFATHER: I am
21 coming to the last question, and it comes back to what
22 you said this afternoon, which was to the point and
23 very clear.
24 971 If I am quoting you right, you said
25 nothing the Commission can do can prevent this. I
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1 think it was the undue preference and the nefarious
2 results of this application if it were to be licensed
3 as proposed.
4 972 In terms of licensing this specific
5 application, there is nothing you can suggest which
6 would alleviate your concerns?
7 973 MS de WILDE: I think my answer or my
8 statement this afternoon has to be seen in the
9 following light. The Commission has a certain amount
10 of regulatory resources, and you have a huge agenda.
11 It is not my sense of where the Commission has been
12 headed over the last several years that you want to
13 enter into an extremely detailed regulatory regime
14 where there would be reporting requirements that would
15 be so detailed that you would probably be creating a
16 new boutique within the Commission.
17 974 The takeaway that I had after the
18 discussion this morning kind of put into graphic relief
19 all the niggles that you have in the pit of your
20 stomach about how you would compete with an integrated
21 player. They run the gamut from channels to how I am
22 invoiced.
23 975 I can't envisage a regulator in 1998
24 willing to become involved in every detail of the
25 business. And yet I can't understand how we could
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1 compete fairly without being on an even footing. I
2 think there are too many levers that the BDU has at its
3 disposal for us to have a level playing field.
4 976 COMMISSIONER PENNEFATHER: In terms
5 of the pay-per-view licence being discussed today,
6 though, we discussed some possible remedies this
7 morning. None of those you feel have any merit in
8 terms of alleviating some of your concerns?
9 977 MS de WILDE: Quite honestly, I was
10 listening very carefully this morning, and on key
11 variables that affect our business and our ability to
12 be successful -- things like channels; the number of
13 channels; whether you have a barker; how you appear on
14 the electronic programming guide; how you are marketed,
15 packaged, promoted; who pays for the satellite
16 transponders.
17 978 The list is long and I don't want to
18 repeat it.
19 979 The fact is that that is a fair sense
20 of how many levers they have, and I did not get any
21 comfort that they were willing to come to the table and
22 say: "Yes, we will compete fairly."
23 980 In fact, I think they were quite
24 honest in articulating what their objective was, which
25 was to maximize the efficiencies and to have the
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1 flexibility to use those levers the way that they want
2 to.
3 981 COMMISSIONER PENNEFATHER: Thank you
4 very much. That helps me understand your perspective
5 on this.
6 982 Thank you, Madam Chair.
7 983 MS de WILDE: Thank you.
8 984 THE CHAIRPERSON: Ms de Wilde, how
9 many channels do you have on Star Choice now for your
10 pay-per-view service?
11 985 MR. RAMNARACE: Four plus one; four
12 channels plus one barker channel.
13 986 THE CHAIRPERSON: Is that for both
14 Viewer's Choice and Indigo?
15 987 MS de WILDE: In Indigo we have two.
16 988 THE CHAIRPERSON: Two for Indigo and
17 five?
18 989 MR. RAMNARACE: Five for Viewer's
19 Choice.
20 990 THE CHAIRPERSON: Five for Viewer's
21 Choice.
22 991 How many channels do you have for
23 pay-per-view on cable currently, for example in
24 Toronto?
25 992 MS de WILDE: On average, four.
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1 993 THE CHAIRPERSON: In Calgary?
2 994 MS de WILDE: I am not in Calgary.
3 995 THE CHAIRPERSON: Do you know what
4 your friends have? Or I could ask them.
5 996 MS de WILDE: To be honest, I don't.
6 997 THE CHAIRPERSON: I will ask them.
7 In Ottawa?
8 998 MR. RAMNARACE: There are three
9 channels in Ottawa.
10 999 THE CHAIRPERSON: Would you oppose an
11 application by a company for a pay-per-view DTH licence
12 that was no more vertically integrated with the BDU
13 than your own?
14 1000 MS de WILDE: Probably not.
15 1001 THE CHAIRPERSON: Probably not.
16 1002 MS de WILDE: It is hard to give a
17 blank cheque, Madam Wylie -- and I am not trying to
18 dodge.
19 1003 THE CHAIRPERSON: I am just trying to
20 find out how we go about getting a dynamically
21 competitive market if we can't have a competitor.
22 1004 If a vertically integrated competitor
23 comes forward, you say you can't license them. But
24 what if we met your concerns by some regulatory
25 measures -- and you say it is impossible; you don't
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1 have enough powers to do that.
2 1005 Do we ever have but one DTH operating
3 pay-per-view service?
4 1006 You say probably not. So if it were
5 25 percent owned by Bell, you would not have a problem.
6 1007 If the direction stays on our books
7 and it says it is supposed to be dynamically
8 competitive, how do we get that competitiveness?
9 1008 For example, at the end of this
10 hearing, would there be competition if we denied the
11 application? The answer is no, because there would not
12 be another service.
13 1009 I agree with you that the Commission
14 has the discretion. But surely it would have to say:
15 The evils of this are so bad that we can't have another
16 service licensed.
17 1010 Of course, you say probably not. If
18 it were 25 percent owned by Bell, you would have no
19 problem.
20 1011 If not, how do we ever get to
21 competition in the DTH pay-per-view market?
22 1012 MS de WILDE: I think there is an
23 interesting example already licensed by the Commission
24 which does provide competition when it comes to sports,
25 and that is the CTV Sports Special Line. It may well
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1 be possible that there are completely unintegrated
2 players out there who would look for niches in the pay-
3 per-view market and seek licences.
4 1510
5 1013 So to reframe my answer, when I say
6 "probably not", it is that it is tough to give, in a
7 sense, a blanket answer without understanding what the
8 application represented. I would want to understand,
9 for example, what it would do to program splits, which
10 are the economic driver of pay-per-view.
11 1014 Forgive me if I am being too
12 cautious. For me to say "probably not" is a pretty big
13 "yes".
14 1015 THE CHAIRPERSON: That you would not
15 oppose?
16 1016 MS de WILDE: That's correct.
17 1017 THE CHAIRPERSON: Now, we have
18 pursued one solution, which is not readily easy to
19 handle, but to somehow or other find a regulatory means
20 of forcing BSSI to carry both. Suppose they were given
21 the same number of channels. They would give you the
22 same number of channels as they use for themselves.
23 Would you then oppose or support Mr. Frank's
24 application to compete with you on cable for DTH?
25 1018 Suppose a solution was to say: "Yes,
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1 you can have your own", but if you have your own you
2 have to carry Viewer's Choice and you have to give them
3 the same number of channels, and then Mr. Frank says he
4 will come and apply to put his service on cable. Would
5 you oppose or support that?
6 1019 MS de WILDE: I haven't really
7 thought that through. I am not sure. I think those
8 are really tough "what ifs" and I would like to suggest
9 that what we are really wrestling with here is whether
10 there is an upside to the Canadian system and that
11 competition really has to be seen as an objective --
12 one objective.
13 1020 But I think that we are doing
14 ourselves and the system a huge disservice if we turn
15 it into the be all and end all.
16 1021 THE CHAIRPERSON: You said that in 30
17 months you would be toast. Do you expect Star Choice
18 to continue having a similar penetration of the DTH
19 market as ExpressVu -- as BSSI -- as we go forward in
20 the short term and the medium term? Or do you expect
21 Star Choice to lose completely to BSSI?
22 1022 MS de WILDE: Since Star Choice is
23 one of my favourite customers, I sincerely hope that
24 they are as successful as ExpressVu.
25 1023 THE CHAIRPERSON: Yes. I am asking
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1 whether you feel that there are indices that this would
2 not be the case.
3 1024 Do you expect Star Choice to ever
4 voluntarily carry BSSI's service in eastern Canada,
5 rather than your own, if it were licensed?
6 1025 MS de WILDE: My sense of the more --
7 1026 THE CHAIRPERSON: If it had a choice
8 between anyone but Bell's service, which one do you
9 think it would carry? Are there any indices that Star
10 Choice, that has national coverage as well, and that
11 you expect to keep up with BSSI -- would Star Choice
12 likely drop Viewer's Choice and carry BSSI in eastern
13 Canada if it were licensed?
14 1027 MS de WILDE: I think the more likely
15 scenario is that they would apply for their own
16 service.
17 1028 THE CHAIRPERSON: Yes, but the
18 Commission decides that.
19 1029 I understand the idea of the
20 precedent. You can do anything here because you are
21 going to do it there as well. But we spent a good part
22 of the morning discussing the fact that the Commission
23 is well able to determine what are the circumstances
24 surrounding each circumstance: whether there is
25 dominance; whether there is not; what the situation
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1 really is.
2 1030 So to say that if you do this you
3 will definitely do that next year only takes you so
4 far.
5 1031 MS de WILDE: But I would submit
6 that, dealing with two DTH BDUs, it would be very hard
7 to find reasons to distinguish between them when it
8 would come to the question of whether they should have
9 pay-per-view licences.
10 1032 THE CHAIRPERSON: What do you mean?
11 To distinguish whether you would allow DTH pay-per-view
12 to be owned by a cable company --
13 1033 MS de WILDE: I am focusing --
14 1034 THE CHAIRPERSON: -- to come forward?
15 What you are saying is, if you allow this, Star Choice
16 is going to drop me and come forward and get a licence
17 of its own. Well, there is a long row to hoe for that.
18 1035 MS de WILDE: It is the same row
19 that --
20 1036 This time last year I didn't think
21 ExpressVu would apply for their own licence.
22 1037 THE CHAIRPERSON: Well, the
23 Commission had already licensed two integrated DTH pay-
24 per-view services, so there were better indices that
25 this had been done before than there are indices that,
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1 if we say yes to this, integration is in everywhere, on
2 all counts, which is what you are suggesting.
3 1038 When you say you are toast, I look at
4 this and I say, "As the world exists now in eastern
5 Canada, would Star Choice carry BSSI or Viewer's Choice
6 on its BDU service?", which is your assumption. And
7 then you would also --
8 1039 So you would keep Star Choice, which
9 may be 50 or 40 per cent of the DTH market. You would
10 also be in the cable market and, hopefully, sometime
11 with digital. To conclude from that that you will be
12 toast in 30 months is a stretch.
13 1040 MS de WILDE: My "toast" scenario is
14 with regard to ExpressVu. If I misspoke myself, excuse
15 me.
16 1041 THE CHAIRPERSON: Okay. Let's
17 discuss that. What would, in fact, be the effect on
18 Viewer's Choice if we were to license BSSI?
19 1042 I find it very difficult to believe
20 that tomorrow Star Choice, however owned, would carry
21 BSSI instead of another service.
22 1043 It is not impossible, but --
23 1044 MS de WILDE: Madam Wylie, it is not
24 my contention that Star Choice would carry a Bell
25 service --
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1 1045 THE CHAIRPERSON: No, no, but so you
2 would keep half of the country on DTH and all of the
3 country on cable.
4 1046 So what is the undue harm? I would
5 like you to expand further on the level of undue harm
6 that is such as to say no to a competitive application
7 just because it is integrated.
8 1047 MS de WILDE: If we start to move
9 down the road to integrated pay-per-view undertakings,
10 I believe that is the first step toward a fundamental
11 restructuring of the way in which pay-per-view is
12 offered.
13 1048 THE CHAIRPERSON: We go back to your
14 assumption that that approval, necessarily, takes us
15 down the path of saying "We have lost all power to
16 address vertical integration, no matter what the
17 circumstance".
18 1049 MS de WILDE: In the case of trying
19 to create a competitive DTH market at the level of the
20 distribution undertakings, my appreciation of that
21 market is that they would be looking to equalize the
22 advantages that they would each have, and that it would
23 be difficult to constrain one and say "No, you can't
24 have a pay-per-view service of your own" if you had
25 decided to give their competitor that powerful tool.
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1 1050 THE CHAIRPERSON: Do you mean a DTH
2 pay-per-view?
3 1051 MS de WILDE: Yes.
4 1052 MR. ZOLF: Madam Wylie, if I may add
5 to that, in terms of the Commission's regulatory
6 framework, obviously you would still have your
7 discretion to examine every subsequent application that
8 comes before you. Nonetheless, it may be an unprovable
9 assumption that the market would somehow crystallize
10 upon licensing BSSI.
11 1053 In fact, right now the BDU market is
12 fairly competitive and the Commission has recently, for
13 example with respect to 4+1 rulings, acknowledged that
14 the level of competition and the need to be treated
15 equally amongst BDUs warrants an equitable playing
16 field.
17 1054 So, I think, as we submitted in our
18 oral presentation today, it would be difficult for the
19 Commission to make that distinction.
20 1055 THE CHAIRPERSON: In percentage, what
21 is the current percentage of penetration of DTH in
22 English Canada?
23 1056 MS de WILDE: I don't think --
24 1057 THE CHAIRPERSON: The current
25 penetration when you compare it to cable or to
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1 potential homes.
2 1058 MS de WILDE: The penetration of pay
3 television?
4 1059 THE CHAIRPERSON: No, no, DTH.
5 1060 MS de WILDE: I don't have access to
6 those numbers.
7 1061 THE CHAIRPERSON: No, but when you do
8 the calculation of the market right now, when is it
9 that it is going to be other than a very non-dominant
10 purveyor of video?
11 1062 MR. RAMNARACE: Chairman Wylie, if we
12 were to look at the numbers that BSSI has submitted in
13 their projections, as we have indicated in our oral
14 presentation, their projections by year seven show a
15 DTH market size of 1.5 million subscribers.
16 1063 THE CHAIRPERSON: Of what, eight
17 million in English Canada?
18 1064 MR. RAMNARACE: Of eight million
19 cable households.
20 1065 Now, in all cases BSSI has
21 successfully drawn the comparison as between DTH
22 subscribers and basic cable, while in front of the
23 Commission requesting a pay-per-view licence. So to
24 run the comparison what we need to do is to look at the
25 current cable pay-per-view base, which is in fact the
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1 addressable base.
2 1066 The addressable base, as it stands
3 today in all of Canada, is approximately between
4 700,000 and 800,000. Even if we were to assume digital
5 roll-out at a 15 per cent level, as is projected, that
6 takes the market size to 1.1 million.
7 1067 So, in aggregate, the non-dominant
8 player, as has been indicated here, by year seven, in
9 fact, exceeds the total digital projected market by
10 over 40 per cent.
11 1068 THE CHAIRPERSON: You are looking, of
12 course, on the basis of addressability.
13 1069 MR. RAMNARACE: But pay-per-view is
14 offered only to addressable subscribers.
15 1070 THE CHAIRPERSON: No, but on the
16 basis of suddenly having digital and more channels --
17 1071 MR. RAMNARACE: Which is probably
18 more far-fetched than we can see.
19 1072 We have been looking at projections
20 that talk about digital roll-out which was supposed to
21 start back in 1996.
22 1073 THE CHAIRPERSON: Would that not be a
23 good way of getting your digital on cable, if you put a
24 bit of pressure into the system?
25 1074 MS de WILDE: But I think that the
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1 way Vash has set out those numbers shows that, even
2 with an aggressive digital roll-out over the course of
3 the next few years, by year seven of the ExpressVu
4 projections they would be ahead in terms of the number
5 of addressable households -- ahead of the cable
6 sector -- by about 400,000.
7 1075 THE CHAIRPERSON: Except that there
8 are a lot of other decisions to be made by the consumer
9 before that. You know, one doesn't make one's decision
10 on cable versus DTH just based on pay-per-view. So it
11 is not necessarily in lock step because cable is
12 suddenly -- whether or not cable is addressable, people
13 don't make their decision completely on the basis of
14 whether it is addressable, whether they disconnect
15 their cable and take DTH at the moment. There is a
16 whole lot more in that decision than just that aspect.
17 1076 Now, the consumer -- I am puzzled by
18 the fact that you say there would be no choice for the
19 consumer. I understand that once you have bought your
20 hardware you are stuck with it, unless you buy a second
21 set of hardware. But, initially, could it not be said
22 that if you have a different DTH pay-per-view service
23 on one than on the other you have an initial choice,
24 which is better than yesterday, if you were to license
25 a competitor?
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1 1077 In other words, when the consumer --
2 the problem now is lack of differentiation. The
3 consumer has no choice after he has made his initial
4 choice. But his initial choice is going to be broader
5 if there is a different purveyor of pay-per-view on DTH
6 than on cable. That, initially, is going to be an
7 increased choice.
8 1078 MS de WILDE: What we are suggesting
9 is that, in fact, there will be the same number of
10 choices.
11 1079 As to the diversity, the sort of
12 depth of the choice, what we have argued is that
13 diversity is really a function of how many channels the
14 BDU decides to dedicate to the pay-per-view service.
15 There is not new diversity simply by virtue of
16 licensing A over B.
17 1080 The core offering of the movies and
18 big ticket events will be constant and the capacity to
19 round out the service is driven simply by the number of
20 channels that we would have access to.
21 1081 We can be as diverse as the proposed
22 applicant.
23 1082 THE CHAIRPERSON: You have made the
24 argument that there would be nothing incremental to the
25 broadcasting system as a whole as a result of BSSI, and
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1 concurrently you have made the argument that there are
2 going to be wonderful efficiencies and savings because
3 of integration.
4 1083 To make your argument that they are
5 exaggerating the benefits that will flow from
6 integration you have gone through an exercise of
7 showing just how high those benefits will be.
8 1525
9 1084 I ask myself if it's true that it is
10 going to be more cost efficient, could it not be true
11 that there will be an advantage to the system because
12 there will be more takeup, there will be less video
13 rentals, there will be perhaps less DBS, et cetera.
14 The fact that the integrated company will achieve cost
15 efficiencies may make it more efficient in selling more
16 pay-per-view; therefore, more Canadian films are shown
17 and more money flows to the programming funds and so
18 on.
19 1085 If I recall your written intervention
20 and again today, you say that there's not going to be
21 anything added, but that is not evident. If it's such
22 a good deal, could it not then create better prices,
23 more consumption of the product; therefore, more money
24 flowing to the fund? I don't understand the argument
25 that they're going to save money and have a great deal
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1 out of this from tax purposes reasons, et cetera, and
2 there will be nothing incremental to the system. You
3 may not have said tax reasons, but the flow of money
4 between the two and the efficiencies and so on are
5 raised. Those efficiencies could lead to incremental
6 value to the broadcasting system by allowing more
7 efficient marketing, more takeup of DTH pay-per-view.
8 1086 I don't want to put words into your
9 mouth, but you say in writing and today that what's in
10 it for anyone, there's not going to be choice, but more
11 choice for the consumer, and there's not going to be
12 any incremental benefit to the broadcasting system.
13 1087 Yet, it appears that because it's
14 integrated it's going to do well financially and be
15 able to achieve efficiencies, which could be passed on
16 in various indirect ways to the consumer and to the
17 fund by increasing consumption.
18 1088 MS de WILDE: I can only go on the
19 business plan that they filed. I can understand the
20 price points that they're suggesting to consumers are
21 the same in the case today. So, the individual
22 consumer isn't going to see a difference.
23 1089 The point, Madam Wylie, that we
24 really tried to make when we did that rather lengthy
25 financial analysis was to simply try to give the
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1 Commission comfort that in fact BSSI doesn't need this
2 licence in order to be viable, and that they can have a
3 viable business and a viable pay-per-view business
4 dealing with a non-affiliated player. That's the core
5 conclusion of that analysis.
6 1090 Whether there will be efficiencies
7 that will be passed on to the system, I don't know.
8 All I can say is that the contribution will be taken at
9 the level of the gross revenues. If we're in there
10 selling our product, you can be confident that that's
11 where the contribution will flow from. If we are
12 simply being replaced by another player, I don't get
13 it.
14 1091 THE CHAIRPERSON: What if it's a
15 player that is more efficient by virtue of integration?
16 That can end up having benefits flowing from it, can't
17 it?
18 1092 MS de WILDE: Then I would simply say
19 ExpressVu has been extremely efficient in the context
20 of selling pay television. They're arguably six times
21 more effective, to quote Michael Neuman, than the cable
22 guys are today.
23 1093 I would be pretty happy if we could
24 be that successful with ExpressVu in the pay-per-view
25 market. Maybe the missing ingredient is not that he
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1 needs an integrated service. He just needs to get on
2 with getting out there and marketing pay-per-view.
3 1094 THE CHAIRPERSON: Your pay-per-view.
4 1095 MS de WILDE: Of course, yes.
5 1096 THE CHAIRPERSON: Counsel.
6 1097 MR. BATSTONE: Just one quick
7 question. In your intervention you referred to
8 coordination between WIC Premium Television and VCC.
9 1098 I was just wondering if you could
10 clarify for me: Does that coordination extend to
11 acquisition and scheduling of programming?
12 1099 MS de WILDE: No.
13 1100 MR. BATSTONE: What exactly does it
14 relate to, then?
15 1101 MS de WILDE: It makes sure that they
16 end up on the transponders in a way that can be
17 received across the country in a way that is
18 efficiently using satellite capacity.
19 1102 MR. BATSTONE: That's fine. Thanks.
20 1103 THE CHAIRPERSON: Thank you very
21 much.
22 1104 Madam Secretary.
23 1105 MS SANTERRE: The next intervention
24 will be by 3216195 Canada Inc.
25 1106 THE CHAIRPERSON: Good afternoon, Ms
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1 Steeves.
2 1107 MS STEEVES: Good afternoon.
3 1108 THE CHAIRPERSON: Go ahead when
4 you're ready.
5 PRESENTATION / PRÉSENTATION
6 1109 MS STEEVES: Madam Chair, members of
7 the Commission, staff and legal counsel, my name is
8 Suzanne Steeves, and I am Senior Vice-President of the
9 CTV Sports Group. Seated beside me are Nikki Poulos,
10 Vice-President and Controller, CTV Sports Group, and
11 Robert Malcolmson, a partner in the Toronto law firm of
12 Goodman, Phillips & Vineberg.
13 1110 CTV is strongly opposed to the Bell
14 ExpressVu application for a national DTH pay-per-view
15 licence. Let me explain why.
16 1111 This application gives rise to the
17 very same issues regarding distributor ownership of
18 programming that the Commission has recently dealt with
19 in the cable sector. Indeed, many of the same factors
20 that prompted the Commission's recent denial of cable
21 ownership positions in specialty services apply to the
22 Bell ExpressVu application. Bell ExpressVu operates in
23 an environment of scarce channel capacity, has
24 significant market power, and is a gatekeeper with
25 respect to programming services licensed for DTH
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1 distribution.
2 1112 Unless Bell ExpressVu is prepared to
3 fully address the concerns that flow from its position
4 in the DTH market, its application should be denied.
5 1113 When CTV Sports Specials was licensed
6 as a DTH pay-per-view service in 1995, it was
7 anticipated that there would be numerous DTH
8 undertakings. For CTV, this meant that there would be
9 multiple options for carriage. Unfortunately, these
10 distribution options have not materialized. Despite
11 the licensing of five different DTH BDUs between 1995
12 and 1997, only two are in operation today -- Bell
13 ExpressVU and Star Choice.
14 1114 Despite its assertions to the
15 contrary, Bell ExpressVu is clearly a dominant player
16 in the DTH sector today. Bell ExpressVu controls
17 approximately 50 per cent of the total DTH subscriber
18 universe. This market power is particularly potent
19 given the relatively small size of the DTH market, with
20 a total DTH subscriber base of approximately 250,000.
21 1115 CTV Sports Specials is not licensed
22 for analogue cable carriage. Consequently, CTV's
23 pay-per-view business is completely dependent on the
24 DTH and digital cable subscriber universe. As the
25 Commission knows, digital cable is just now being
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1 rolled out and only by some cable operators.
2 Consequently, access to ExpressVu's DTH subscriber base
3 makes or breaks CTV's Sports Specials. This
4 marketplace reality confers a substantial level of
5 control and influence on Bell ExpressVu.
6 1116 If the applicant is permitted to
7 offer its own integrated DTH pay-per-view service, it
8 will have no incentive to distribute arm's length
9 pay-per-view services. To the contrary, it will be in
10 Bell ExpressVu's competitive self-interest to exclude
11 competitive arm's length programming undertakings from
12 accessing its DTH subscriber base. As the DTH
13 gatekeeper of 50 per cent of the market, Bell ExpressVu
14 will be unique positioned to control the customer base
15 of its pay-per-view competitors. Moreover, with
16 guaranteed distribution on Bell ExpressVu's DTH
17 service, its pay-per-view undertaking will have the
18 ability to confer on itself unwarranted competitive
19 advantages, particularly in the acquisition of sports
20 pay-per-view programming.
21 1117 In our view, these competitive
22 advantages will undermine the creation of a
23 "dynamically competitive" DTH pay-per-view market
24 mandated by the government in its 1995 direction to the
25 Commission. Dynamic competition will not develop if
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1 Bell ExpressVu has the ability to deny its competitors
2 access to 50 per cent of the consumer base.
3 1118 Recent events in the marketplace
4 substantiate CTV's concerns regarding the Bell
5 ExpressVu strategy. On two recent occasions, CTV has
6 been involved in discussions with Bell ExpressVu
7 regarding carriage of pay-per-view programming. In the
8 first instance, CTV sought a pay-per-view carriage
9 arrangement with Bell ExpressVu and Star Choice for
10 English premier league soccer games. Bell ExpressVu's
11 response was that it had no desire to carry the CTV
12 pay-per-view programming, as it was developing its own
13 pay-per-view initiative. By way of contrast, CTV
14 reached immediate agreement with Star Choice.
15 1119 Similarly, CTV and Bell ExpressVu had
16 occasion to consider a potential pay-per-view joint
17 venture with ExpressVu for a major new package of
18 sports pay-per-view -- NHL hockey. Bell ExpressVu's
19 position was that it was not interested in any joint
20 venture and would pursue the initiative on its own in
21 its dual capacity as distributor and content provider.
22 1120 Bell ExpressVu's strategy is clear
23 and unequivocal. Upon licensing, it will create a
24 fully integrated DTH BDU pay-per-view service that will
25 aggressively pursue sports pay-per-view properties for
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1 its own account, with no corresponding obligation to
2 distribute arm's length DTH pay-per-view services. In
3 doing so, Bell ExpressVu will shut its competitors out
4 of 50 per cent of the market and make it difficult, if
5 not impossible, for them to mount any kind of
6 competitive pay-per-view offering.
7 1121 There are solutions to the problem.
8 First, the Commission could deny the Bell ExpressVu
9 application. Clearly much has changed since DTH
10 services were first licensed in 1995. At that time, it
11 was anticipated that there would be multiple DTH BDUs,
12 which meant multiple distribution options. Neither has
13 materialized to date. Instead, we operate in an
14 environment where Bell ExpressVu controls half of the
15 total market that CTV is licensed to serve. Bell
16 ExpressVu's desire to become an integrated
17 distributor/content provider must be evaluated with
18 these new marketplace realities in mind.
19 1122 We are not asking the Commission to
20 deny the application strictly on the basis that Bell
21 ExpressVu will be an integrated undertaking. Instead,
22 we are urging the Commission to recognize that in
23 today's DTH market, Bell ExpressVu is a gatekeeper in
24 its own right. In our submission, the application
25 should not be approved unless conditions of licence
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1 limiting Bell ExpressVu's gatekeeper role are imposed.
2 1123 For example, conditions of licence
3 requiring Bell ExpressVu to distribute arm's length
4 services could be imposed. This will limit Bell
5 ExpressVu's market power by ensuring that arm's length
6 competitors have access to Bell ExpressVu's subscriber
7 base, thereby allowing third parties to pursue a viable
8 business strategy. A condition of licence to this
9 effect accompanied CTV's written intervention.
10 1124 Bell ExpressVu's refusal to make any
11 commitments to carry CTV's pay-per-view service stands
12 in stark contrast to its commitment at the time that it
13 was seeking a DTH BDU licence. At that time, in
14 response to concerns from Viewer's Choice and Allarcom
15 that they would not be carried by Power Direct TV's
16 integrated DTH pay-per-view service, ExpressVu
17 committed to carry the Viewer's Choice and Allarcom
18 pay-per-view services.
19 1125 It appears Bell ExpressVu is no
20 longer prepared to abide by this commitment. While
21 Bell ExpressVu is seeking a general interest
22 pay-per-view licence, it is clear from both the
23 application and its conduct in the marketplace that
24 sports events properties will be significant components
25 of its DTH pay-per-view service.
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1 1540
2 1126 As described in our written
3 intervention, Bell ExpressVu's financial projections,
4 while vague, place a heavy emphasis on sports with
5 approximately 30 per cent of total revenues appearing
6 to come from this programming category. With this
7 focus on sports, Bell ExpressVu will have little, if
8 any, incentive to carry an arm's length service while
9 its own sports pay-per-view needs can be met through
10 its own integrated operation.
11 1127 Again, there is a solution to this
12 problem. The solution is to impose conditions of
13 licence which limit the amount of sports event
14 programming that Bell ExpressVu is permitted to
15 broadcast. We believe such restrictions are fair and
16 reasonable as the applicant is seeking a general
17 interest pay-per-view licence, not a sports licence.
18 Accordingly, CTV has suggested a condition of licence
19 to this effect as part of its written intervention.
20 1128 We are asking the Commission to
21 recognize that, as a fully integrated
22 distributor/content provider, Bell ExpressVu will
23 become the new gatekeeper. Its subscribers will be
24 captive to the DTH pay-per-view programming that Bell
25 ExpressVu sees fit to offer, and its competitors will
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1 be shut out of 50 per cent of the market. While this
2 may be in the corporate best interest of Bell ExpressVu
3 and the BCE Group, it is not in the interest of the
4 Canadian broadcasting system; it will not achieve the
5 dynamically competitive DTH pay-per-view market
6 mandated by government policy and it will not result in
7 the distribution of the widest possible array of high
8 quality pay-per-view programming to DTH subscribers.
9 Absent conditions of licence that limit the gatekeeper
10 role, this application should be denied.
11 1129 We appreciate this opportunity to
12 appear before you and we would be pleased to answer any
13 questions that you have.
14 1130 THE CHAIRPERSON: Thank you,
15 Ms Steeves.
16 1131 Commissioner Cardozo.
17 1132 COMMISSIONER CARDOZO: Thank you,
18 Madam Chair.
19 1133 Good afternoon. Let me just go over
20 some of the issues that you have talked about, which
21 are at the core of today's discussion and which were
22 also addressed by BSSI. If you don't mind, I will put
23 to you a paragraph that was in the replies by BSSI. It
24 is a general one and I just want your response to that,
25 but it is sort of the crux of what BSSI feels, and I
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1 put that to you to get your intervention, not to say
2 that I agree with this or the opposing view.
3 1134 In paragraph 8 in the Executive
4 Summary of the reply it says:
5 "When all is said and done, none
6 of the opposing intervenors has
7 dealt with the essential
8 question: how can a
9 competitively dynamic
10 marketplace for English- and
11 French-language DTH PPV
12 undertakings evolve within an
13 industry structure based on
14 regional monopolies for the
15 former and a single national
16 monopoly for the latter?"
17 1135 And they are not talking here, from
18 what I can tell, about your service, but what are your
19 views on the issue of the competitively dynamic
20 marketplace? Do you think they have a case that they
21 ought to be able to enter the market?
22 1136 MS STEEVES: I don't believe that
23 dynamic competition could possibly mean that customers
24 are captive to their distributor. Instead, it has to
25 mean that they have choice, and I think that, based on
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1 our own recent experience in discussions with them,
2 that will not be the case.
3 1137 COMMISSIONER CARDOZO: Is there an
4 argument that if a subscriber wants your service,
5 which, according to BSSI's plan will be discontinued in
6 30 months, they would simply go to their competitor?
7 1138 MS STEEVES: We do not have an
8 arrangement with BSSI. We do not have a contract with
9 BSSI.
10 1139 COMMISSIONER CARDOZO: Oh, sorry.
11 Okay. So what is your current status of --
12 1140 MS STEEVES: Our pay-per-view service
13 is more of an up-and-down, per-event, per-package type
14 service. It is not a continuous service, a general
15 interest service. So what we do is we find packages,
16 we work with rightsholders then to take those packages
17 to either DTH or digital cable, the latter being
18 somewhat lacking in terms of availability. So, in our
19 case, we would take the packages to them and discuss
20 them with them.
21 1141 We have done that on two occasions
22 with no success.
23 1142 COMMISSIONER CARDOZO: And you are
24 concerned that, if they have their own sort of multi-
25 service, they will then not need your service.
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1 1143 MS STEEVES: I think that's quite
2 apparent when the answer is, both times we have
3 discussed it, that they would wait to see if they got
4 their own licence and then they would do the package
5 themselves.
6 1144 MR. MALCOLMSON: If I could just add
7 to that point, Commissioner Cardozo, this particular
8 licence, the CTV licence, is somewhat unique compared
9 to the other pay-per-view licensees that are
10 intervening here today as well. Unlike the other pay-
11 per-view licensees, the CTV licence is not licensed for
12 analog cable carriage, it has a DTH licence and a
13 digital cable licence.
14 1145 When we are talking about CTV's
15 access to a subscriber universe, we are strictly
16 talking about the DTH subscriber universe and the
17 digital cable universe that is slowly rolling out. So
18 there is a difference in terms of order of magnitude
19 when we are talking about the impact of the denial of
20 access vis-à-vis CTV sports specials as compared to
21 some of the other pay-per-view interventions that you
22 have heard.
23 1146 COMMISSIONER CARDOZO: So, when BSSI
24 doesn't carry you, you are saying that's pretty well 50
25 per cent of your market whereas with the others it is a
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1 much smaller proportion.
2 1147 MS STEEVES: And it is 50 per cent of
3 a very small market. So it is one thing to have 50 per
4 cent of the analog cable market lost to you, but it is
5 a completely different matter to lose 50 per cent of
6 250,000 subscribers.
7 1148 COMMISSIONER CARDOZO: In terms of
8 undue preference, what you have suggested is that --
9 well, your first preference is that we not license, but
10 if we were to license, that we place two conditions of
11 licence: one is that they limit their sports coverage
12 to 10 per cent and the other is that you would have a
13 "must carry" status.
14 1149 As I understand it, when you were
15 licensed, you didn't ask for the "must carry" status at
16 that point.
17 1150 MS STEEVES: That is correct, but
18 that was in I believe 1995, at which time it was
19 anticipated there would be multiple operations, DTH BDU
20 undertakings in existence, and the forecast at that
21 point for roll-out of DTH was much more aggressive than
22 where we are today because those operations started
23 later than was originally anticipated. So we were, I
24 think, in a completely different environment or a
25 projected completely different environment at that
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1 time.
2 1151 COMMISSIONER CARDOZO: I see what you
3 are saying, but surely, a business plan ought to have
4 different scenarios, and while nobody can project the
5 future, you could have projected that one scenario
6 would have been two DTH BDUs as opposed to five.
7 1152 MS STEEVES: I should add that at
8 those particular hearings concerns were also raised by
9 the CTV Group at that time about a fully-integrated
10 situation for precisely these reasons. So, on one
11 hand, while they did not seek mandatory carriage, they
12 did raise serious concerns at that time about a fully-
13 integrated situation precisely for the reasons that we
14 are dealing with today.
15 1153 COMMISSIONER CARDOZO: With regard to
16 the 10 per cent that you are suggesting, why 10 per
17 cent? What is the reasoning for coming to a figure of
18 10 per cent and not 25 per cent or some other figure?
19 1154 MS STEEVES: I think what we did was
20 we looked at, realistically, how many options currently
21 exist in the marketplace for this type of programming.
22 Clearly, there are a lot of sports available on over-
23 the-air and on licensed specialty services as well. So
24 we looked at the number of options and we felt that
25 that type of a limit would leave room, then, for two
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1 players, or possibly three or more, because in fact our
2 other competitors, Viewer's Choice and Allarcom, both
3 also carry sports. So we felt that that would leave
4 some room in the marketplace and it would not create a
5 situation where they then would be in complete control
6 of the marketplace.
7 1155 MR. MALCOLMSON: If I could just add
8 to that, when we looked at this we didn't want to come
9 forward and appear to you as if we were attempting to
10 create a sports monopoly by seeking to restrict our
11 competitor. What we are saying is ExpressVu has
12 applied for a general interest licence, that
13 contemplates some sports, they have not been specific
14 or very specific in their application in terms of
15 disclosing their programming plans, but we do know
16 that, based on our calculations, they may generate
17 about 30 per cent of their revenues from sports.
18 1156 We believe that if they can skew
19 their programming focus towards sports and don't have
20 any obligation to carry CTV, then we will quickly find
21 ourselves in a position where we are very limited in
22 terms of our subscriber universe to the other DTH
23 player and the digital cable universe.
24 1157 COMMISSIONER CARDOZO: With regard to
25 the other DTH player, isn't one of the arguments that,
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1 in order to have competition between the two BDUs, a
2 differentiation of product is useful? If they are both
3 presenting the same options to consumers and their
4 prices are roughly the same, what makes a consumer pick
5 one over the other? So, if one did evolve into a
6 situation where BSSI had its pay-per-view and didn't
7 have all the others, that would give the consumer a
8 choice between one or the other.
9 1158 MS STEEVES: I guess there are a
10 couple of points. The first would be economic
11 viability of a certain product, and as you look at your
12 options with a product, with a sports package, there
13 are certain fixed costs that are applicable whether you
14 are distributing to one or two. I mean, there are just
15 certain fixed costs. So the issue for us will become
16 the economic viability of a package if we only have
17 access to one of the companies.
18 1159 COMMISSIONER CARDOZO: The economic
19 viability of your service.
20 1160 MS STEEVES: That's correct.
21 1161 I guess, when I look at it, the real
22 benefit our particular licence plays in the Canadian
23 marketplace is that we are not licensed for analog
24 carriage, and the biggest competition right now, I
25 would assume, will be between DTH and cable. There is
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1 a certain point where you are no longer just attracting
2 consumers from the rural and remote areas of the
3 country that previously haven't had access to cable,
4 you are now into cannibalizing in other parts. So
5 that's actually one of the benefits of our licence, is
6 that many of the offerings we will make will be unique
7 to DTH.
8 1162 COMMISSIONER CARDOZO: You mentioned
9 earlier you don't want to be a monopoly in the pay-per-
10 view market, but if we were to limit them to 10 per
11 cent of sports coverage, wouldn't that make you almost
12 a monopoly minus 10 per cent?
13 1163 MS STEEVES: I don't believe it
14 would, particularly when you have to also bear in mind
15 that both Viewer's Choice and Allarcom have access, and
16 I don't believe there are any restrictions on their
17 licences.
18 1164 I think basically the same concerns
19 that were raised by CTV in 1995 during the hearings
20 have become validated in the recent experience in the
21 marketplace.
22 1165 COMMISSIONER CARDOZO: So what is the
23 reason you wouldn't want us to put that same 10 per
24 cent on VCC?
25 1166 MS STEEVES: Because they are not an
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1 integrated -- they are not going to keep us from
2 access. We are on a level playing field at that point.
3 When we are going and offering our product and the
4 promotion, marketing and packaging and delivery and all
5 of the things that we bring to the table, we are on a
6 level playing field. We are not on a level playing
7 field with someone who has access to gate. That's just
8 completely different.
9 1167 COMMISSIONER CARDOZO: Essentially,
10 what you are asking us today, with these two suggested
11 conditions of licence, or to deny BSSI, is you are
12 asking the Commission to protect your interests for a
13 period of time, or indefinitely, but I am wondering, if
14 that's a period of time issue, if cable were to roll
15 out in some significant fashion say in five years,
16 would your concerns change if digital was to roll out,
17 because at that point you would have much more digital
18 and then your DTH would be a smaller part of your
19 operation. Is that right?
20 1168 MS STEEVES: That's correct, and I
21 would suggest that if in fact we could predict that
22 with any certainty we would not be as concerned as we
23 currently are.
24 1169 COMMISSIONER CARDOZO: It is a
25 question we wonder about too.
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1 1170 What is the capacity you need for
2 your services? How many channels?
3 1171 MS STEEVES: Our services vary from
4 package to package. For instance, with something like
5 an NHL out-of-market package, you could be talking
6 about 10 channels within a very finite period of time
7 on certain days of the week. With things like our
8 English Premier League soccer, we are talking about one
9 channel on Sunday mornings dedicated for less than
10 three hours.
11 1172 So it really is on a package-by-
12 package basis. Again, we don't operate like a
13 continuous service of programming.
14 1173 COMMISSIONER CARDOZO: And, on
15 average, how many hours a week are you broadcasting?
16 1555
17 1174 MS STEEVES: Well, we just, just
18 literally launched a week ago. So we launched with our
19 English Premier League soccer package which Bell
20 ExpressVu refused to carry, and that is just a couple
21 of hours a week. And we are in current discussions
22 with a number of other rights holders.
23 1175 COMMISSIONER CARDOSO: How many hours
24 do you anticipate your needs to be?
25 1176 MS STEEVES: It will be in the
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1 thousands and thousands of hours. I mean, on an annual
2 basis.
3 1177 COMMISSIONER CARDOSO: Okay. Per
4 week?
5 1178 MS STEEVES: Per week? What are our
6 latest numbers?
7 1179 COMMISSIONER CARDOSO: And are we
8 talking six to ten games a week?
9 1180 MS STEEVES: There will be overlaps,
10 but, I mean, again, it is by package, so it will vary
11 and it will depend on what we --
12 1181 COMMISSIONER CARDOSO: And the number
13 of packages will be three to ten, in that range?
14 1182 MS STEEVES: Yes, for the most part,
15 on an average.
16 1183 COMMISSIONER CARDOSO: Do you have
17 any suggestions, if we were, one of the questions --
18 one of the issues this whole series of questions raises
19 is whether we should have access or carriage rules for
20 pay-per-view service. Do you have any ideas for us in
21 that regard?
22 1184 MS STEEVES: I think that there is no
23 question that the minute you have a situation where
24 someone has control over access and also has a
25 competitive service that the issues start to raise
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1 their heads and as we have seen in this particular
2 instance and as we have seen in others.
3 1185 So I think that, you know, I do not
4 think -- I think for most of the pay-per-view
5 operations, competing has not been an issue when,
6 again, it is a level playing field and you are not
7 dealing with someone who has also the distribution
8 access under their control. So I think it has to be
9 addressed.
10 1186 COMMISSIONER CARDOSO: Okay. Lastly,
11 let me just close off by getting a clear understanding.
12 Are you looking or have you had discussions with BCC --
13 BSSI about having an agreement of the kind that BCC and
14 WPT and --
15 1187 MS STEEVES: We have had two
16 discussions. One about a package of soccer games that
17 we launched with Star Choice about a week ago. That
18 discussion was met with a flat out "no" because they
19 were applying for their own licence. And a subsequent
20 conversation between the NHL, Bell ExpressVu and
21 ourselves to talk about the NHL's package called Centre
22 Ice.
23 1188 There was a suggestion that I made in
24 that meeting that we should be exploring a three-way
25 partnership. I mean, what CTV brings to a partnership
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1 like that is formidable in terms of promotion and
2 cross-promotion opportunities, which would be of great
3 benefit, I would think, to Bell ExpressVu. But it was
4 made very clear in that meeting that there was no
5 interest in that discussion, that they were applying
6 for their own programming licence and would seek the
7 product on their own at the time they got the licence.
8 Now, if they did not get the licence, of course, they
9 would be more than happy to take the product as a BDU,
10 I assume.
11 1189 COMMISSIONER CARDOSO: And what is
12 the connection or relation between what you carry and
13 what you do not between the pay-per-view service and
14 SportsNet.
15 1190 MS STEEVES: And SportsNet?
16 1191 COMMISSIONER CARDOSO: Yes.
17 1192 MS STEEVES: There is not necessarily
18 any connection. I mean, because they are different
19 products and different rights. You know, for the most
20 part, because we do not have a situation where we
21 negotiate a deal with the BDU that is just a guaranteed
22 carriage, it is done on a package-by-package basis.
23 That is really the way our service works. So we
24 basically have the discussions with the distributor and
25 the rights holder and then, you know, see what can be
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1 worked out.
2 1193 COMMISSIONER CARDOSO: So one is not
3 the overflow container for the other?
4 1194 MS STEEVES: Not at all.
5 1195 COMMISSIONER CARDOSO: That covers my
6 questions, thank you.
7 1196 THE CHAIRPERSON: Counsel?
8 1197 MR. BATSTONE: I just have a couple
9 of questions in relation to the conditions which you
10 have proposed in your written intervention and
11 specifically the second condition with respect to
12 mandatory carriage. I am just trying to understand.
13 You have discussed this to some extent with
14 Commissioner Cardozo, the amount of capacity, if you
15 will, that would be required on differing occasions
16 would differ quite a bit, I gather, depending on the
17 event that is being shown.
18 1198 In the condition that you have
19 proposed, it basically boils down to the BSSI
20 pay-per-view would not be able to put its signal up
21 unless it was also carrying the CTV sports specials
22 signal; is that a fair characterization?
23 1199 MR. MALCOLMSON: That is correct.
24 1200 MR. BATSTONE: So how would it work
25 from an operative standpoint if -- I mean, I can see
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1 where this might work if you are talking about a
2 continuous signal that is programmed and scheduled.
3 1201 But here you have got particular
4 events which are put up at various different times.
5 Would this condition sort of drive -- would BSSI be
6 forced by this condition to sort of every time it wants
7 to air a sports special ensure that the same sports
8 special is aired by CTV? I am not sure how it would
9 work.
10 1202 MR. MALCOLMSON: That was not the
11 intention of the condition. And the wording, quite
12 frankly, may not be perfect. The intention of the
13 condition was to ensure that during those times that
14 CTV sports specials was offering a sporting event, a
15 boxing match or a football game, that it would know it
16 would have access to Bell subscribers, BDU subscriber
17 base.
18 1203 So those times that it is offering a
19 particular event, it would not be refused carriage, it
20 would know it would get carriage. Obviously, the
21 ExpressVu pay-per-view service is a full-time, fully
22 dedicated pay-per-view service and that makes a
23 logistical difference. But the purpose of the
24 condition is guaranteed access at the time the signals
25 are going up on CTV.
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1 1204 MR. BATSTONE: So you would be
2 contemplating sort of an automatic carriage with
3 respect to the CTV signal; is that correct?
4 1205 MR. MALCOLMSON: That is correct.
5 1206 MR. BATSTONE: Anytime you had a
6 particular event which you wished to air, BSSI would be
7 obliged to air it?
8 1207 MR. MALCOLMSON: That is correct.
9 1208 MR. BATSTONE: I see. I guess the
10 next logical question from that is should that
11 obligation, if it were imposed -- I assume it would
12 have to be tempered with respect to capacity concerns
13 or something like that?
14 1209 MR. MALCOLMSON: Yes, it would.
15 1210 MR. BATSTONE: Okay. The only other
16 question I had -- yeah, I guess I should clarify, then.
17 How would you propose, then, to sort of -- to include
18 that exception in it with respect to the capacity?
19 Would it just be that BSSI as the pay-per-view is only
20 obliged to carry the CTV sports special signal where it
21 has adequate capacity or something like that? Is there
22 a minimum number of channels, for instance?
23 1211 MR. MALCOLMSON: I may have
24 misunderstood your question earlier. If you are saying
25 that Bell ExpressVu's commitment to carry sports
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1 specials should somehow be qualified by them
2 determining that they have capacity at a certain point
3 in time, that is not our position.
4 1212 Our position is that if and when we
5 launch a specific sporting event, there should be
6 capacity made available to us to be able to broadcast
7 that event. Otherwise, ExpressVu becomes the
8 gatekeeper and can simply say "no" and under its
9 general from licence, program its own sporting events.
10 1213 MR. BATSTONE: Are you assuming that
11 there would always be sufficient capacity available,
12 then, to carry those events?
13 1214 MR. MALCOLMSON: There would need to
14 be some standard of reasonableness. I would agree with
15 you that in the short term before Nimiq is launched,
16 there may be a capacity issue. But we think the amount
17 of capacity that sports specials -- which is really an
18 occasional use service -- would occupy is not going to
19 raise the same capacity issues that a full-time,
20 dedicated pay-per-view service like a Viewer's Choice
21 or an Allarcom would raise.
22 1215 MR. BATSTONE: Although, if you are
23 talking about ten signals for -- was it hockey or
24 football? I am not sure which one it was. It seems to
25 me that is a fairly significant capacity. Maybe you do
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1 not understand exactly how it goes up, but --
2 1216 MS STEEVES: I would agree that it
3 may sound so. I think that my understanding of the
4 Bell ExpressVu application is they have dedicated 22
5 channels for their own use.
6 1217 So I mean, obviously, we would be
7 prepared to accept an upward limit of how many channels
8 on any given day at any given time would be dedicated.
9 I think that is reasonable. So, I mean, if it is a
10 question of coming up with a number, we can do that.
11 1218 MR. BATSTONE: So do you have a sense
12 at this point of what that number would be?
13 1219 MS STEEVES: Just give me one minute.
14 1220 Yes, I think we would be prepared to
15 live with a maximum of ten at any given time.
16 1221 MR. BATSTONE: And what about a
17 minimum?
18 1222 MS STEEVES: A minimum could be as
19 low as one. I mean, it is quite possible that with
20 certain niche events that you are bringing in just --
21 or a very large event like a boxing match, it may be on
22 uniquely in its own time.
23 1223 MR. BATSTONE: Okay. I think -- so
24 you are saying it should be up to ten.
25 1224 Okay. We will leave it that at that.
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1 1225 Would you be happy with up to five?
2 Is ten designed to address that particular situation?
3 1226 MS STEEVES: Ten is designed to deal
4 with a very large out-of-market package. I mean it may
5 be eight. I would be concerned at five, just because
6 there are certain packages I am aware of where five
7 would not cover them.
8 1227 MR. BATSTONE: Okay. The only other
9 question I had, then, was with respect to the mechanism
10 by which these conditions would be imposed. And by
11 that, I mean, these would be conditions of licence,
12 presumably, on the pay-per-view licence and so you can
13 see where it is somewhat indirect. Is it your view
14 that that is an appropriate way to do this?
15 1228 MS STEEVES: I do not profess to be
16 an expert in these matters. And I am sure that Mr.
17 Malcolmson will want to address them. But my sense is
18 that it relates to the distribution undertaking given.
19 But they are an integrated company, so I will let Mr.
20 Malcolmson answer that question.
21 1229 MR. MALCOLMSON: That is one of the
22 reasons the condition you have in front of you is
23 generally worded requiring mandatory carriage at all
24 times. We are seeking to impose the condition on the
25 pay-per-view service that is in front of you, seeking a
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1 licence, we are not asking you to impose a condition of
2 licence on ExpressVu's BDU service, because they are
3 not here, their licence is not in front of you.
4 1230 You asked the question as to whether
5 the commission can impose indirect conditions of
6 licence. And I think the answer, the answer is clearly
7 "yes". And to give you an example, CTV sports specials
8 itself has a condition of licence applicable to it that
9 says it shall not enter into an affiliation agreement
10 with the licensee of a DTH BDU unless the agreement
11 incorporates a prohibition against the linkage with
12 non-Canadian services.
13 1231 That gives you an example -- a
14 condition of licence which has an indirect effect on
15 another licensee. So I think mechanically you can
16 accomplish what we are asking you to accomplish here by
17 imposing the condition on the pay-per-view licences in
18 front of you today.
19 1232 MR. BATSTONE: Thank you. Those are
20 all my questions.
21 1233 THE CHAIRPERSON: Mr. Malcolmson, you
22 want to make a comparison between this last example and
23 imposing a condition of licence that is addressed to
24 one licensee by imposing it on another licensee?
25 1234 This is an indirect effect, if you
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1 say you cannot enter into exclusive contracts, well, a
2 whole lot of people are affected indirectly but the
3 condition is nevertheless imposed on the licensee
4 before the commission. But you have a high level of
5 comfort that jurisprudence, et cetera, shows that the
6 commission can address the licensee that is before it
7 and effect the licensee, directly? That is not -- in
8 fact, the prohibition is you, BDU, shall not do X and
9 you are saying that to the pay-per-view. You think
10 that that is comparable?
11 1235 MR. MALCOLMSON: I think --
12 1236 THE CHAIRPERSON: When you have two
13 licences, it does not really -- or does it matter that
14 it is the same corporation? It has two different
15 licences. That is not an indirect. It is through one
16 applicant that is before you arguing its case where you
17 have a choice between saying, "No, this is not good",
18 or it would be better if I could catch you here. Do
19 you think that the commission can do that?
20 1237 MR. MALCOLMSON: Well, I think we
21 must deal with the application that is in front of you.
22 I mean, you have an application for a pay-per-view
23 licence. To go back to general principles, your powers
24 under the act, specifically under section 9 of the act,
25 empower you to impose such conditions on a licensee as
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1 are related to the circumstances of the licensee.
2 1610
3 1238 THE CHAIRPERSON: Not hearing it at a
4 public hearing.
5 1239 MR. MALCOLMSON: But we are here
6 asking you to impose conditions of licence on the pay-
7 per-view licensee that is here before you seeking that
8 approval.
9 1240 THE CHAIRPERSON: Without hearing the
10 BDU.
11 1241 MR. MALCOLMSON That is correct.
12 1242 THE CHAIRPERSON: Okay.
13 1243 MR. MALCOLMSON: In my view, Section
14 9 gives you very wide latitude and very wide discretion
15 to achieve indirect effects on other parties, whether
16 they be other licensees, whether they be related
17 parties to effect their conduct through a condition of
18 licence on, in this case, a pay-per-view service.
19 1244 THE CHAIRPERSON: Thank you, Ms
20 Steeves and your colleagues.
21 1245 MS STEEVES: Thank you.
22 1246 THE CHAIRPERSON: Madam Secretary?
23 1247 MS SANTERRE: Thank you, Madam Chair.
24 1248 The next intervention will be by WIC
25 Premium Television Ltd.
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1 1249 THE CHAIRPERSON: Good afternoon,
2 gentlemen.
3 PRESENTATION /PRÉSENTATION
4 1250 MR. BUCHANAN: Good afternoon, Madam
5 Chair, Members of the Commission and Staff.
6 1251 My name is Grant Buchanan, and I am
7 the Vice-President, Corporate Affairs of WIC Premium
8 Television Ltd. ("WPT"). With me today on my left is
9 Luther Haave, Vice-President and General Manager of
10 WPT; and on my right is Ric Davies, WPT's Vice-
11 President, Programming.
12 1252 We are pleased to have an opportunity
13 to share some thoughts with you today regarding DTH
14 pay-per-view. Within the past week, as you heard
15 today, an agreement was signed with Bell that confirms
16 that they will provide a minimum of 10 channels on
17 Nimiq for the carriage of DTH pay-per-view services
18 provided by WPT, Viewer's Choice Canada and Canal
19 Indigo for a 24-month period.
20 1253 In addition, the agreement will see
21 Bell offer an interim English-language pay-per-view
22 service that will consist of four channels plus a
23 barker, beginning next week -- or maybe in two weeks,
24 as we heard this morning.
25 1254 We outlined in our written
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1 intervention why we feel that the application should be
2 denied, and you will be relieved to learn that, despite
3 not being persuaded by Bell's reply arguments, we do
4 not propose to revisit all of those issues here.
5 Rather, there are four points we wish to highlight.
6 1255 First, the entire rationale for this
7 application is hinged on the economic efficiencies of a
8 combined DTH and DTH pay-per-view operation. There are
9 none, of course, and despite the "where's the beef?"
10 questioning in our intervention, Bell's reply in this
11 regard was sorely lacking in detail. This is not
12 surprising. It is clearly cheaper to rent than to buy
13 a complete programming operation "especially in the
14 early years when subscribers re low", to use Bell's
15 phrase.
16 1256 The Commission's current model
17 embraces the notion that licensed programming
18 undertakings serve a wide variety of distribution
19 undertakings. It makes no sense for each distribution
20 undertaking to go out and spend money on duplicative
21 infrastructure to satisfy its programming needs.
22 1257 Nevertheless, that is the Bell model.
23 Rather than horizontal integration, it militates in
24 favour of vertical integration.
25 1258 Thus, each BDU, in Bell's view, is
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1 entitled to it own pay-per-view undertaking, which in
2 turn will beget duplicative programming departments,
3 who will each then trundle off to Hollywood and
4 elsewhere to make their programming deals.
5 1259 How can this possibly be economically
6 efficient? It isn't.
7 1260 What is efficient is having Ric
8 Davies and his programming department look after the
9 procurement of product for variety of programming
10 services which are then distributed to a wide variety
11 of BDUs.
12 1261 In a country like Canada, we need to
13 be as streamlined as possible in order to ensure that
14 the maximum possible resources are devoted to product
15 that is seen on our screens. Duplicating
16 infrastructures is not part of that equation. In
17 short, we believe the Commission has already set up the
18 correct regulatory structure.
19 1262 Second, the CCTA's intervention
20 suggested that Canada's cable operators are watching
21 this proceeding very closely. They may even be getting
22 their "me, too" applications ready as we speak. Bell
23 wants you not only to rubberstamp the application
24 before you, but also suggests that you can slam the
25 door shut as soon as they get through.
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1 1263 One marvels at the chutzpah of
2 Canada's largest company.
3 1264 While the DTH licensees have been
4 portrayed as struggling start-up operations, the
5 Commission will be interested to know that Bell and
6 Star Choice combined already have more addressable
7 subscribers in our licensed territory than Shaw and
8 Rogers combined.
9 1265 This is very important, because we
10 have been hearing this morning about this numbers game
11 and the comparison of 8 million to a much smaller
12 number. The real comparison is between homes that can
13 get pay-per-view on DTH and homes that can get pay-per-
14 view on cable.
15 1266 By the time you get to deciding this
16 matter, the number will be larger in our licensed
17 territory for DTH than it is for cable.
18 1267 As you are aware, the number of
19 addressable households in our licensed territory has
20 been virtually stagnant over the last 15 years.
21 1268 One would think that there must be a
22 limit to how long Bell can go on seeking special
23 privileges for itself in some areas (i.e. integrated
24 PPV undertakings) while arguing that it must have the
25 identical conditions as cable whenever it finds cable
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1 regulatory attributes that it likes.
2 1269 Our strong suspicion is that in a
3 universe where the number of DTH addressable subs
4 exceeds the number of cable addressable subs, it is
5 going to be very difficult to hold back the floodgates
6 and deny applications from any and all cable, wireless
7 or DTH BDUs for the same regulatory treatment as Bell
8 seeks before you today.
9 1270 In the competitive distribution
10 environment that is emerging, it would not be
11 surprising to see other BDUs feeling compelled to
12 follow Bell's example and use the Federal Court to
13 challenge the Commission's decisions in order to
14 achieve their version of regulatory symmetry.
15 1271 Thirdly, the so-called "disputed
16 conditions" (that is, the "non-proprietary rights
17 condition" and the "splits condition") were crafted to
18 give teeth to the Cabinet directive regarding
19 "exclusive or other preferential rights" within the
20 context of an integrated undertaking.
21 1272 As the Commission is well aware, we
22 at WPT believe that these two conditions would render a
23 licence difficult to implement, even for Canada's
24 largest company. But without these or similar
25 conditions, if the Commission were to give Bell the
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1 licence it wants, one can easily envisage pan-
2 continental program buying scenarios, crafted to avoid
3 the "exclusive and other preferential rights"
4 prohibition.
5 1273 Frankly, we don't have any
6 alternative suggestions to those conditions which would
7 serve the same purpose in complying with the very
8 explicit requirement contained within the Cabinet
9 directive. Our suggestion, as noted above, is to deny
10 the application.
11 1274 Finally, there is no need for this
12 service at this time. Consumers don't need it. And
13 since our agreement of last week, even Bell doesn't
14 need it.
15 1275 There is nothing that has been
16 proposed in Bell's cookie cutter application that
17 couldn't (and indeed wouldn't) be delivered by existing
18 DTH pay-per-view licensees if they could only get
19 access to the same kind of shelf space that Bell will
20 undoubtedly offer itself, if licensed.
21 1276 The model that Bell has created for
22 the next two years following the launch of Nimiq
23 involves a 20-channel pay-per-view offering, of which
24 10 channels will be offered by the incumbents and 10
25 channels by Bell. Some would argue that this is also
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1 an in efficient way to run a pay-per-view service.
2 1277 Will not both of the licensed DTH
3 pay-per-view undertakings be acquiring, for example,
4 the next Mike Tyson fight and will not both of them be
5 running the same movies, probably at the same time?
6 1278 Would it not make a lot more sense to
7 have one 20-channel pay-per-view offering, especially
8 when Bell's purported enemies (i.e. U.S. DBS services)
9 run even larger pay-per-view operations?
10 1279 From a subscriber's perspective,
11 either the carriage of two 10-channel DTH pay-per-view
12 services is a good idea or it is a bad idea. If it is
13 a bad idea, then the Commission should, at a minimum,
14 delay the implementation of Bell's proposed licence at
15 least until the expiry of our recently signed
16 agreement.
17 1280 We would be more than willing to
18 supply the extra channels during that period,
19 obviously.
20 1281 If, on the other hand, carriage of
21 two DTH pay-per-view services is a good idea, then the
22 arrangement could be made perpetual with the carriage
23 of two competing services with an equivalent number of
24 channels being made an ongoing obligation.
25 1282 In conclusion, however, as the
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1 Commission will have gathered from our previous
2 comments, it is our respectful view that neither of
3 these possibilities is anything but a second-best
4 alternative to denial of the application.
5 1283 That concludes our remarks, and we
6 look forward to your questions.
7 1284 THE CHAIRPERSON: Thank you, Mr.
8 Buchanan.
9 1285 I am sure some of the questions that
10 I might ask will be very repetitive and you will
11 respond immediately.
12 1286 So let me ask you whether, in all
13 fairness, you want to put something on the record at
14 this intervention stage on the general questions that
15 have been asked of the applicant and of intervenors,
16 such as what is your understanding of the meaning of
17 the direction as to what "dynamically competitive"
18 addresses; whether it addresses pay-per-view only, DTH
19 pay-per-view versus cable pay-per-view, or even DTH
20 versus cable.
21 1287 If you don't feel that there is
22 anything else to add, that's fine. But if you want to
23 address what that competitive dynamic market is
24 intended to be, and the extent to which the denial of
25 the application will push forward this goal, if you
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1 have anything to add, you are welcome.
2 1288 You have heard the conversations to
3 date as to how the various parties interpret those
4 words in the direction.
5 1289 MR. BUCHANAN: We see "dynamically
6 competitive" as broad in the directions -- anything you
7 license -- and the economic viability as narrow.
8 1290 THE CHAIRPERSON: The economic
9 viability of the incumbent?
10 1291 MR. BUCHANAN: Limited to the
11 licensee applying in front of you.
12 1292 THE CHAIRPERSON: So of the
13 applicant?
14 1293 MR. BUCHANAN: Of the applicant.
15 1294 THE CHAIRPERSON: Whether the
16 applicant will succeed or not, not whether an approval
17 would affect the incumbent.
18 1295 MR. BUCHANAN: Right. So all of the
19 shell game that went on in this application as between
20 the applicant as a BDU and the applicant as a putative
21 BDU pay-per-view undertaking is in a way irrelevant if
22 you decide that they may or may not make money. That
23 is not important to you.
24 1296 Listening to the conversation today,
25 one of the central features is the fact that what we
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1 have here is our retailer now going to enter into
2 competition with us at the wholesale level.
3 1297 I would like to ask Ric Davies to
4 pick up on that, because some of the very practical
5 problems have not yet come to light as we have heard
6 the discussion unfold so far today. As to the actual
7 mechanics of how you acquire a program, how you set up
8 your marketing, we have heard lots of smoke: price,
9 promotion and packaging, and so on.
10 1298 The applicant's panel was unburdened
11 by a programmer and we thought it might be helpful to
12 you to have somebody speak to you who is actually gone
13 and acquired programs, and explain our view of some of
14 the problems it creates having them perform both
15 functions.
16 1299 MR. DAVIES: Thank you, Grant.
17 1300 The first thing I would like to say
18 is that Mr. Neuman mentioned this morning the example
19 of being in Los Angeles and going to see a pay-per-view
20 operation, and he referred, if I recall correctly, to
21 the guy who goes out and gets the rights from the
22 studios.
23 1301 In our case, I'm that guy. I have
24 the dubious distinction of having negotiated the very
25 first pay-per-view rights ever for the country of
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1 Canada back in eighteen -- 1989 and 1990.
2 1302 Sorry, not that long ago; 1989 and
3 1990.
4 1303 THE CHAIRPERSON: Don't tell me you
5 were giving pay-per-view before you had a licence.
6 1304 MR. DAVIES: We would never, Madam
7 Chair.
8 1305 THE CHAIRPERSON: Thank the lord I
9 wasn't around.
10 1306 MR. DAVIES: As we all know, of
11 course, in the U.S. -- and we have heard it today
12 repeatedly -- it is typically 50 percent to 60 percent
13 that goes to the Hollywood studios. As we also know,
14 as the Commission is well aware, and as we have heard
15 today, that is not the norm in Canada.
16 1625
17 1307 If someone wanted to go out, like
18 this purported guy in Los Angeles, and pay 50 to 60 per
19 cent to the studios, it is actually quite easy and it
20 is quite quick, and you can go down and pick them up.
21 1308 If, on the other hand, you want the
22 deals like we have in Canada, which happen to be the
23 envy of the world I should add, it takes time and a lot
24 of effort and a lot of work. This isn't the kind of
25 thing where you just drop by and say "Oh, yeah, we will
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1 take two of those and three Titanics". It doesn't work
2 that way.
3 1309 There are huge differences, not only
4 in the regulatory model between Canada and the United
5 States, but in the pricing model between Canada and the
6 United States, and we hope that we can maintain that
7 pricing model differentiation between the two countries
8 because that is what allows us to fulfil our regulatory
9 obligations in this country.
10 1310 Another interest point that came out
11 is that we are, in essence, in full partnership with
12 our distributors -- with our BDUs -- in offering pay-
13 per-view, and it creates a very interesting situation
14 when your full partner also happens to be your
15 competitor.
16 1311 To take a very simplistic example, if
17 a movie is selling for $3.99 on our service, to use the
18 traditional example of one-third to the supplier, one-
19 third to us and one-third to the BDU, that would mean
20 that in this example ExpressVu would sell that movie,
21 whatever it may be, and they would get $1.33 out of
22 that movie.
23 1312 Now, if they happen to be running on
24 their own service at the same time the same movie, they
25 could offer that movie instead of for $3.99, say,
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1 perhaps they could offer it for $2.99. They would
2 still give the distributor the same $1.33, and
3 ExpressVu, as a whole, would come out ahead. And
4 certainly Bell has the deep pockets to do this. But
5 they would get their own $1.33 and the additional 33
6 cents. They would come out ahead by undercutting us
7 completely and very easily.
8 1313 There are a number of other shell
9 games that are possible.
10 1314 It was mentioned this morning that it
11 makes no difference where they put the money, whether
12 it goes to the distributor or to the pay-per-view
13 operation, but it certainly does make a difference in
14 terms of the 5 per cent contributions. There is a 5
15 per cent contribution that is taken at the BDU level.
16 There is a 5 per cent contribution that is taken at the
17 programming undertaking level. If the BDU level were
18 to take a higher split, and therefore give less to the
19 programming undertaking, the second 5 per cent
20 contribution would be correspondingly lower.
21 1315 We heard today that, of course, the
22 application is based on a 50:50 split, but I certainly
23 didn't hear any guarantees that that is the way it
24 would be. Mr. Neuman mentioned things that would be in
25 his natural interest. Certainly, it is in any
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1 businessman's natural interest, I suppose, to do those
2 things that would increase their own profitability.
3 1316 Finally, while I am rambling on this
4 subject I would like to say that Mr. Neuman himself
5 referred this morning to a sense of entitlement that
6 could lead to a sense of apathy or complacency. I
7 cannot imagine any situation that would lead to a
8 greater sense of entitlement than owning the store that
9 is selling your own product, or owning the product that
10 you are selling in your own store. It is controlling
11 the shelf space entirely with your own product.
12 1317 If that sense of entitlement leads to
13 complacency, then on that basis alone I think this is a
14 bad application.
15 1318 MR. BUCHANAN: Can we get a question
16 now?
17 1319 THE CHAIRPERSON: Are you of the same
18 view as previous intervenors that none of these
19 concerns can be fixed? Is this just impossible? We
20 just don't have the regulatory levers that are
21 sufficient to stop this evil from occurring if we were
22 to license BSSI?
23 1320 Or are you advocating that we
24 rejuvenate the three-way split as a condition of
25 license, if we were to license them? That would meet
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1 one of your concerns, would it not? It may open the
2 floodgates though.
3 1321 MR. BUCHANAN: Well, you would.
4 1322 THE CHAIRPERSON: And all of you may
5 end up with it again. Wouldn't that be fun?
6 1323 MR. BUCHANAN: I'm sorry?
7 1324 THE CHAIRPERSON: That three-way
8 split condition.
9 1325 Are you saying that if you are
10 integrated, then you should be subject to it?
11 1326 MR. DAVIES: I would think, Madam
12 Chair, at the very least -- and this won't solve all
13 the problems, but in terms of the split condition, at
14 the very least, a condition should be imposed regarding
15 the 50:50 split between the BDU operation and the pay-
16 per-view programming operation. That would, at least,
17 protect the contributions that are going to the
18 Canadian television fund.
19 1327 MR. BUCHANAN: The answer is that,
20 yes, we are of the same mind as Viewer's Choice. It is
21 very hard to try to keep figuring out where the next
22 problem is going to occur, the next preference, the
23 after-the-fact finding of some kind of undue
24 preference. I mean, you and we don't want to be tied
25 up forever trying to figure out whether something is
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1 abusive or not.
2 1328 That long litany of things that Ms de
3 Wilde outlined as pressure points in the relationship
4 between a BDU distributor and a BDU pay-per-view
5 undertaking just highlights all of the possible areas
6 where you could have problems, and we don't see them as
7 being "fix-uppable".
8 1329 MR. HAAVE: Perhaps to add a little
9 detail to that an example might help.
10 1330 I suspect that both BSSI and
11 ourselves would be interested in offering the next
12 Tyson fight, for example, at the same time. BSSI
13 subscribers would have two possible choices of who they
14 could purchase that event from, if they were both being
15 carried for this at least 30-month period.
16 1331 When you think of it from a pay-per-
17 view perspective, after making our business
18 arrangements to carry the Tyson fight we would be
19 obliged to share the information on the price, the
20 splits, the marketing conditions that are required by
21 that provider, et cetera, with BSSI our customer, who
22 would immediately be able to go and talk to that same
23 supplier and make either the same deal or a better
24 deal, and then offer the consumer the choice of getting
25 the Tyson fight from them instead of from us.
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1 1332 We note, for example, that we have
2 included a 10 per cent marketing budget to make sure
3 that people know it is available from us. They have a
4 1 per cent budget. Maybe they are relying on our
5 marketing efforts getting them the business. Maybe the
6 service they could provide would include a 1-800 number
7 to offer people who have ordered from us to switch to
8 them and save $5.
9 1333 How we would ever craft conditions of
10 licence that could stop that kind of thing would, I
11 think, be an incredible burden for the Commission. I
12 think Ms de Wilde had it exactly right.
13 1334 THE CHAIRPERSON: And it is
14 impossible. But to achieve dynamic competition -- and
15 I asked this question of Viewer's Choice -- would you
16 have a problem with a non-integrated competitor?
17 1335 MR. BUCHANAN: Philosophically?
18 1336 THE CHAIRPERSON: Or would some of
19 these problems also surface?
20 1337 MR. HAAVE: We already have one, in
21 the form of CTV sports, where we will both be competing
22 sometimes, I am sure, for sports events.
23 1338 So if something like that were to
24 come forward, we would have to judge it on the merits
25 of what was before us, I suppose, as to whether we
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1 would find it problematic or not.
2 1339 THE CHAIRPERSON: So you are of the
3 view that there is no control that we can exercise.
4 But there are some things that raise questions.
5 1340 For example, at paragraph 69 you talk
6 about North American program rights. You have heard
7 the applicant suggest that that is not possible with a
8 non-exclusive contracting condition of licence. Is
9 that an answer to paragraph 69, that there is
10 nothing -- in the last sentence, that, were a licence
11 to be issued to Bell without a condition against
12 acquiring exclusive or other preferential rights, they
13 could get North American programming rights? But in
14 their application they accept that condition of
15 licence.
16 1341 Is that an answer to that problem?
17 1342 MR. BUCHANAN: There were several
18 possible answers. I will let Rick fill in if I miss
19 anything.
20 1343 It wasn't necessarily the idea that
21 they would go out by themselves. They can act in
22 concert with someone in the U.S. --
23 1344 THE CHAIRPERSON: No, I suspect not,
24 with 200 -- whatever number of subscribers to amortize
25 your cost over.
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1 1345 MR. BUCHANAN: That's right.
2 1346 THE CHAIRPERSON: There is a limit to
3 what one can do, including buying Hollywood studios,
4 even if one has a big wallet.
5 1347 MR. BUCHANAN: Yes, I saw that
6 interpretation in the reply. It wasn't meant to buy
7 the studios; it was simply to enter into an output
8 agreement with a studio.
9 1348 THE CHAIRPERSON: No, but there is a
10 limit. Would you agree, Mr. Davies, in your
11 experience, that there is a limit to what one can
12 actually accomplish, short of one throwing one's funds
13 into the river when one has a quarter of a million
14 subscribers or less?
15 1349 MR. DAVIES: Absolutely. But what we
16 were contemplating here was the very real possibility
17 of Bell or an affiliated company -- we heard this
18 morning that their ambitions certainly are to become
19 more North American and more international. So it is
20 Bell and/or an affiliated company, and/or a partner
21 company, and/or any other kind of arrangement, looking
22 at the possibility of North American rights.
23 1350 This was the issue that we visited
24 very thoroughly back in 1995 regarding the differences
25 between DirecTV and Power DirecTV. In that case very
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1 affiliated companies were entering into arrangements to
2 gain North American rights and winding up getting
3 preferential rights through a back door for Canada
4 without the Canadian licensee ever doing anything that
5 was overtly preferential.
6 1351 That was what I think led to the
7 splits condition in the first place. It was an effort
8 to remedy that situation where the Commission had
9 absolutely no control over the U.S. part of that
10 partnership.
11 1352 MR. HAAVE: For example, even if BSSI
12 wasn't itself selling its service in the United States,
13 if it teamed up with somebody who was operating a DBS
14 service in the United States to collectively go to one
15 studio, say Paramount, and say "We want to buy your
16 product exclusively, so make sure that no other DTH
17 competitors in our two respective territories that we
18 operate have those titles", there would be nothing to
19 stop that.
20 1353 THE CHAIRPERSON: And your view is
21 that the condition of licence that was imposed at the
22 time -- your view is that both of these conditions that
23 have since been removed were to address DirecTV.
24 1354 Suppose you are right. Are you of
25 the view that, as it solved the problem then, it would
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1 solve it now if it were reimposed?
2 1355 MR. DAVIES: I am not sure, Madam
3 Chair, that I would say --
4 1356 Would it solve it? It would
5 certainly solve it for us were it imposed on Bell,
6 because I think it would be very unlikely that they
7 would be able to launch with those conditions in place.
8 1357 I am sure the Commission is well
9 aware of our feelings on those conditions through the
10 application we made last year.
11 1358 MR. HAAVE: But I think the point we
12 were making was that we thought the direction required
13 the Commission to deal with that problem and, as long
14 as the potential exists for an integrated undertaking
15 to behave in that fashion, if that door hasn't been
16 closed, is there perhaps a hole in --
17 1359 THE CHAIRPERSON: Yes, and what you
18 are saying is that the condition of licence that the
19 Commission has imposed on all licensees, which BSSI is
20 prepared to accept with regard to exclusive rights, was
21 not a sufficient instrument to meet the requirement of
22 the direction.
23 1360 MR. DAVIES: That is exactly what we
24 are saying and that is why we believe that the other
25 two so-called disputed conditions came into being
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1 several years ago. It was specifically to address the
2 fact that the non-preferential rights clause did not
3 solve all the problems.
4 1361 THE CHAIRPERSON: Ergo, an integrated
5 undertaking is impossible is what you are saying.
6 1362 MR. DAVIES: In fact, Madam Chair, in
7 our application to remove those two conditions, the
8 Commission may recall that at that time there were no
9 operating integrated undertakings and at that time we
10 felt that we had an agreement with ExpressVu about the
11 carriage of our service, and we had no reason to
12 believe there would be one.
13 1363 THE CHAIRPERSON: Now, you criticize
14 in your intervention BSSI's proformas. It wasn't clear
15 to me whether you were criticizing them on the basis
16 that their flow of revenue and their cost allocations
17 were not in keeping with previous licensing decisions
18 when there was no integration -- that is, that the BDU
19 should pay -- or whether your concern was that it
20 helped BSSI make its argument on the financial need for
21 integration and that that was not demonstrated, or, I
22 gather from your comments today that your concern may
23 be instead that it leads to an improper allocation of
24 gross revenues and, therefore, reduces the 5 per cent
25 that has to be paid as a benefit.
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1 1640
2 1364 MR. BUCHANAN: The answer is (d), all
3 of the above.
4 1365 THE CHAIRPERSON: I know what your
5 view is, that there are no solutions, but you don't
6 always convince the Commission of what is the right
7 thing to do.
8 1366 Suppose the Commission were to
9 licence BSSI and try to at least meet some of these
10 concerns, could cost separation or some accounting
11 rules cure that to ensure that gross revenues from both
12 services are properly accounted for and that the amount
13 to which the 5 per cent is applied is the correct one?
14 1367 MR. BUCHANAN: On that narrow issue,
15 you can probably go some way down the road to fixing
16 that particular problem. I didn't see them tripping
17 over themselves to volunteer to say yes to those types
18 of conditions.
19 1368 THE CHAIRPERSON: I heard them say
20 they would accept a condition of licence to that
21 effect.
22 1369 MR. BUCHANAN: On split?
23 1370 THE CHAIRPERSON: No, no.
24 1371 MR. BUCHANAN: I thought that was
25 what you just asked me.
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1 1372 THE CHAIRPERSON: We're talking about
2 cost allocation and your concern about how their
3 proformas are constructed, how the costs are allocated
4 between the two and the flow of revenue. Mr. Davies
5 suggested I think in writing and certainly today that
6 the effect of that would be to reduce the amount to
7 which the 5 per cent is established.
8 1373 My question was: Can that not be
9 cured by a rule as to how they do this allocation. I
10 thought I heard yes, as I say.
11 1374 MR. DAVIES: Yes, that is the splits
12 condition.
13 1375 MR. BUCHANAN: That is what the
14 splits condition does.
15 1376 MR. DAVIES: Or it could be a
16 modified splits conditions just applying to the BDU
17 portion and the programming portion.
18 1377 THE CHAIRPERSON: Your concern was
19 also that they were allocating their transponder costs
20 on the pay-per-view side rather than the BDU side.
21 1378 MR. BUCHANAN: But that doesn't enter
22 into the equation when you're dealing with a percentage
23 of revenue condition. That doesn't enter into the
24 equation. Revenues are revenues. These are cost
25 allocations.
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1 1379 THE CHAIRPERSON: But that is one of
2 your complaints, isn't it? You're talking about the
3 amount of money that is given to one and the other, I
4 understand that's one issue, whether the split is three
5 ways or how it's done.
6 1380 MR. BUCHANAN: Maybe I can answer the
7 question.
8 1381 THE CHAIRPERSON: But there is
9 another problem, isn't there, which is whereas the
10 Commission, in past DTH decisions, has said the BDU has
11 to bear the cost of uplinking the DTH pay-per-view
12 service, you seem to have a concern with the fact that
13 BSSI is attributing those costs on the other side.
14 1382 MR. BUCHANAN: We were not going to
15 let this go through with an application that ran
16 contrary to ExpressVu's existing licence, which says at
17 its own cost and, yet, in this application misallocated
18 those costs over to the pay-per-view side.
19 1383 THE CHAIRPERSON: What I want to know
20 is for you to demonstrate to me that that problem, the
21 allocation of transponder costs to one or the other of
22 the undertakings, is a problem.
23 1384 MR. BUCHANAN: It's not a problem,
24 other than the perception that it creates that this DTH
25 pay-per-view undertaking is a struggling little
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1 enterprise that only the depocketed Bell can sort out.
2 1385 THE CHAIRPERSON: But you said all of
3 the three concerns, and one concern I put to you was:
4 Is it because you're concerned that there will be less
5 funds flowing, the 5 per cent will be a tad smaller?
6 1386 MR. BUCHANAN: That is a concern of
7 ours, but it does not flow from the allocation of the
8 transponder costs to the wrong entity. That flows from
9 that fact that once you've got both operations in
10 house, you can allocate the sharing of revenue as
11 between them in an artificial way.
12 1387 Acting logically, the first thing you
13 would do is immediately shrink the portion that the
14 pay-per-view operation got of the revenue stream. You
15 would hike up the percentage for the BDU and shrink the
16 percentage for the pay-per-view. If you own both
17 sides, what do you care? All it does is it minimizes
18 the amount on which you're going to have to pay the
19 second 5 per cent.
20 1388 THE CHAIRPERSON: But the other is
21 larger. It's always gross revenues that flow from the
22 retail.
23 1389 MR. DAVIES: Madam Wylie, if you take
24 in the $100 at the retail level and pay the 5 per cent
25 on that on the retail level, as the BDU would do, that
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1 would be the first $5. Then it's only the portion of
2 that that is passed through to the DTH pay-per-view
3 undertaking that the second 5 per cent is triggered on.
4 1390 So, if the pay-per-view undertaking
5 were to take a smaller proportion of the gross, the
6 second 5 per cent would be much smaller.
7 1391 MR. BUCHANAN: This is very
8 important. If we haven't made this clear to you, we
9 can have another run at it.
10 1392 But the system gets shortchanged
11 because of the ability to allocate revenues as between
12 the two undertakings and approach the U.S. model, where
13 of course they squeeze the middle man into oblivion.
14 1393 THE CHAIRPERSON: Your intervention
15 also looks at the effect of the way in which costs are
16 allocated in between and raises tax concerns and so on.
17 To the extent that the Commission can ensure that the
18 returns that it may require or the allocation that it
19 may require, my question to you is is this not fixable
20 with some ordered accounting?
21 1394 MR. BUCHANAN: That particular
22 problem ought to be able to be fixed.
23 1395 THE CHAIRPERSON: I fail to see why
24 or do you think the Commission should be concerned
25 about whether or not they can manage their business in
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1 a manner that provides efficiencies? It should not be
2 a concern of ours.
3 1396 MR. BUCHANAN: This was presented as
4 a money loser, this application.
5 1397 THE CHAIRPERSON: Yes, but that's
6 another issue.
7 1398 MR. BUCHANAN: The only point we were
8 making was to correct that part of the record, and that
9 ought not to be your concern whether they get taxed --
10 1399 THE CHAIRPERSON: And your argument
11 there is they are showing this as a money loser by
12 sleight of hand, and they're using this argument to
13 say, "I need to be integrated."
14 1400 MR. BUCHANAN: Exactly.
15 1401 THE CHAIRPERSON: That's one problem.
16 The other problem is is this sleight of hand also
17 shortchanging the system by reducing the amount of
18 money that flows to the system rather than into Bell's
19 coffers.
20 1402 MR. BUCHANAN: That's correct, but
21 they are two different things. One affects revenue,
22 one affects costs, and the conditions of licence only
23 relate to the revenue.
24 1403 THE CHAIRPERSON: Should the
25 Commission be concerned about the first if it feels
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1 that it's in the public interest for other reasons that
2 integration is going to originate advantages?
3 1404 MR. BUCHANAN: If you decide after
4 looking at this, despite everything we have said and
5 others, that this is a licensable application and you
6 want to go ahead and do it, that ought not to be your
7 fundamental concern worrying about the tax side of
8 things.
9 1405 The problem that we tried to correct
10 there by showing that this was a contravention of the
11 licence is more like what you heard later when you got
12 into the positing of imagine two services being
13 carried, and they hit the mic and say, "Yes, if they're
14 paying their own costs." You see, they've moved it
15 over to their own side now on their wholly-owned
16 service. So it doesn't matter if they don't have to
17 carry a second service, they can allocate as they want.
18 1406 But if they then say to a second
19 service, "We load the costs onto our pay-per-view
20 operation. If you expect us to carry you as well, then
21 you're also going to have to pay your own costs." That
22 isn't the scheme that was set up in 1995, after
23 listening to everybody.
24 1407 THE CHAIRPERSON: Remember the
25 parties that were before us when this was addressed.
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1 There were parties with different technologies and the
2 Commission in the end said the DTH BDU is going to pay
3 for the costs of transforming the service into a
4 technology that works with theirs. That was the reason
5 for it. I don't think it had anything to do with
6 vertical integration and the way that the revenues
7 flowed, as long as the 5 per cent is calculated in a
8 manner that gives all that it should give to the
9 system.
10 1408 But I don't remember it as a
11 condition of licence. It was simply you have to carry
12 all these services and you, at your cost, BDU, must
13 transform them for the benefit of the specialty that
14 brings the signal to you into your chosen technology
15 because you chose it. That was the aim, if I recall.
16 1409 MR. BUCHANAN: As you know, it was a
17 very heated discussion point at the hearing. ExpressVu
18 volunteered to pay the costs, and it was written into
19 their licence that it was at its cost.
20 1410 THE CHAIRPERSON: And it was imposed
21 on DirecTV, had it uplinked its service or implemented
22 it. It was a question of all these services, whatever
23 technology they're in, you must carry them and you must
24 transform them yourself at your cost, speaking to the
25 BDU.
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1 1411 But I fail to see why this is such a
2 problem here if it does achieve cost efficiencies. You
3 also say at paragraph 43 that nothing would be
4 accomplished by this application that couldn't be
5 accomplished by the status quo. The same question was
6 asked of Viewer's Choice, whether it's necessarily true
7 that the cost efficiencies that you are so anxious
8 about will not eventually generate advantages for the
9 DTH market and the consumers that purchase it.
10 1412 MR. BUCHANAN: You've started using
11 the word "efficiencies" in this discussion. There are
12 no efficiencies. Whether you allocate transponder
13 costs to one entity or another, it's not a question of
14 efficiencies. It's simply a question of accounting.
15 There are no efficiencies.
16 1413 What we were saying is they have to
17 go out, they have no programming. Somebody has to go
18 out and be hired to go and create a programming
19 department, a whole programming infrastructure to do
20 what we already do. We can't see how that's efficient.
21 It's not like they can stretch their existing
22 programming department to now do this. When we get a
23 new licence, we don't have to hire anybody new. We're
24 already there.
25 1414 THE CHAIRPERSON: But we just had a
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1 discussion that the fact that the transponder costs can
2 be dealt with in a different manner for financial
3 purposes will be beneficial to them, which is as a
4 result of integration, which can lead to efficiencies.
5 1415 MR. HAAVE: It costs the same amount
6 for the transponders, regardless of whether the BDU
7 pays or the BDU pay-per-view.
8 1416 THE CHAIRPERSON: So why do you have
9 a problem with it?
10 1417 MR. HAAVE: The only reason we raised
11 it was in the context of their presenting this
12 application to you as a poor little money losing
13 operation. As long as you strip that away and realize
14 that that isn't the case, that's all.
15 1418 MR. BUCHANAN: Picking up from that,
16 then we need to talk about where the efficiencies are,
17 because we don't think there are any efficiencies. If
18 there are any, we certainly don't think they're being
19 passed on to the consumer.
20 1419 Certainly all the price points and
21 things they used in their application were exactly the
22 same things we charge now. So, we're confused by how
23 there is a notion of efficiencies here. The word
24 sounds great, just like competition. But when you
25 actually get to analyzing it, where are the
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1 efficiencies?
2 1420 They showed a hiring of 16 people,
3 including six in traffic, which we didn't quite
4 understand. But they have to go out and do that. They
5 have to go out and pay Hollywood; they have to go out
6 and do the same things. Far and away your biggest
7 costs are going to be identical. Where are the
8 efficiencies?
9 1421 MR. HAAVE: So, without hiring those
10 16 people, we could provide the same number of channels
11 of pay-per-view to them without that incremental cost
12 that would not otherwise have to be spent.
13 1422 From the very beginning we have
14 customized the pay-per-view service that we provide to
15 BDUs to the amount of capacity that they are prepared
16 to dedicate, whether cable Regina was prepared to put
17 up 15 channels, whether Rogers Vancouver 19, Shaw
18 Winnipeg nine. We will provide whatever amount of
19 capacity the BDU is prepared to allocate to
20 pay-per-view. We'll fill it for them and give the
21 customer the full benefit of different choices at all
22 times on every channel that they will dedicate to
23 pay-per-view. That could happen right now.
24 1423 We don't give them the same service
25 as one of their other competitors. Whatever they are
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1 prepared to dedicate to pay-per-view, we would fill for
2 them in an instant.
3 1424 MR. DAVIES: If I could expand on
4 that for two seconds -- I'll be very quick -- going
5 back to our original sign-on in 1990, September 20th, I
6 believe, 1990, we programmed only three small cable
7 systems at that point and each headend, each cable
8 system was programmed individually for that cable
9 headend.
10 1655
11 1425 We have kept that practice ever
12 since; we treat each headend separately and
13 differently.
14 1426 The other thing I should point out --
15 and there was a huge misnomer and I think a very wrong
16 impression given that somehow we would cater to this
17 big behemoth that's cable and the poor DTH side would
18 suffer and have to accept what was good for cable. As
19 Grant pointed out earlier, it is certainly going to be
20 within the year, if not within months, that our DTH or
21 potential DTH customers in western Canada outnumber our
22 potential cable customers. It would be absolutely
23 silly to cater to one side rather than the other, which
24 we wouldn't do anyway.
25 1427 THE CHAIRPERSON: So your view is you
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1 can't fix the damage or remedy the problem of vertical
2 integration and you have no belief that there will be a
3 differentiation of services that will allow the
4 consumer then to choose between two DTH providers.
5 1428 MR. HAAVE: In fact, during this
6 short period where they propose to carry both, the
7 consumer would probably have less choice because they
8 would have one channel tied up with a Mike Tyson fight
9 from BSSI, another channel tied up with a Mike Tyson
10 fight from our service, another channel, the same
11 Paramount movie that's running on ours whereas instead,
12 if they had the one service that we had originally
13 thought they were going to carry, the consumer could
14 have those duplicative channels offering different
15 choices for people who didn't want to buy those at the
16 time.
17 1429 So it is a very strange idea, and we
18 think it was one they came up with only when they
19 realized that this key fall selling time wasn't
20 coincident with when there might be a decision in this
21 process.
22 1430 MR. BUCHANAN: The availability of
23 product for pay-per-view that will draw an audience,
24 that will encourage you to pull out your wallet and
25 part with cash, is going to be extremely similar for
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1 the overwhelming percentage of the product that will
2 ever show up on a pay-per-view service in this country.
3 1431 THE CHAIRPERSON: So this is a
4 misguided application, and hopefully we will see in
5 reply whether Bell has been convinced that this is a
6 poor idea that will not make them any money and will
7 only create headaches when they can purchase what is
8 there without having to construct it themselves.
9 1432 MR. BUCHANAN: Well, ask yourself the
10 question: If you ceased to be a cable subscriber and
11 became a DTH subscriber, would you want to be
12 programmed to differently on the pay-per-view side? I
13 mean, you are the same person. What is the difference
14 between a Canadian cable subscriber and a Canadian DTH
15 subscriber?
16 1433 THE CHAIRPERSON: As a consumer, if I
17 wanted to buy DTH and I saw the lineup of programming
18 now when I was deciding whether to purchase BSSI or
19 Star Choice, and I saw the list of services that are
20 carried, which by regulation are all the same, and at
21 the end I saw that there were two different pay-per-
22 view services, I would say, well, at last, I have one
23 little bit of choice here. Would that not be true? I
24 will take this DTH or that DTH because I have more
25 faith in what they will offer me in pay-per-view, which
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1 is one of the big items that encourage change to DTH,
2 isn't it, movies?
3 1434 So you don't think that this is of
4 any value at all as even a small choice when the
5 lineups, right now, are not differentiated? And I
6 know, once you have made your choice -- I agree with
7 Viewer's Choice -- unless you want to spend a lot of
8 money, that's the equipment you have; it is not a large
9 increment, but you are saying it is not an increment at
10 all because they will be the same.
11 1435 MR. HAAVE: Let's carry that one step
12 further. Let's say that you have two DTH competitors
13 who both are prepared to dedicate 22 channels to pay-
14 per-view. One of them is BSSI, who is going to carry
15 one and ten of another competitor who are going to be
16 highly duplicative, two versions of the Mike Tyson
17 fight, two versions of the Paramount movie of the week,
18 two versions of the Fox movie of the week, whereas the
19 other DTH provider has 22 channels, all different
20 choices. Which one would you pick?
21 1436 MR. DAVIES: I also think it was a
22 bit disingenuous this morning, it seemed to be implied
23 that perhaps, as long as we were having both services
24 carried on the BSSI system, perhaps we would agree that
25 maybe we would take one movie and they would take one
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1 movie; having negotiated with BSSI, I can see that this
2 would be -- well, ExpressVu will have the Mike Tyson
3 fight and we will take the Scotty Olson fight, and
4 ExpressVu will tell you they will run Titanic and we
5 will run some other movie.
6 1437 There is no way that that can work.
7 1438 THE CHAIRPERSON: My question was one
8 DTH pay-per-view that is carried by Star Choice and the
9 other, the scenario I was maintaining was
10 differentiation as between the two DTH BDUs and
11 differentiation between one DTH BDU and cable.
12 1439 Now, of course, for the first time it
13 is so prominent that the numbers now that are being
14 compared are not cable delivery but boxes and cable --
15 1440 MR. HAAVE: Those are the only homes
16 that can get --
17 1441 THE CHAIRPERSON: -- that I used to
18 compare against DTH.
19 1442 MR. HAAVE: They are the only homes
20 that can get our service.
21 1443 MR. BUCHANAN: If we have convinced
22 you of nothing else, we are delighted, because that is
23 the real comparison.
24 1444 THE CHAIRPERSON: We will take a ten-
25 minute break and then see how persuasive the
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1 interveners have been when we hear BSSI in reply. We
2 will then hear TVNC, at least its presentation -- oh,
3 counsel, yes.
4 1445 MR. BATSTONE: I just have one
5 question and it relates to the government's Convergence
6 Policy Statement. You raised the issue of that policy
7 statement in your intervention, specifically the aspect
8 of it which says that programming undertakings should
9 be structurally separate from BDUs and telcos.
10 1446 How do you reconcile those statements
11 against the statements in the direction.
12 1447 MR. BUCHANAN: They were made later.
13 Is that what you mean? The Convergence Policy came
14 along after the --
15 1448 MR. BATSTONE: But are you suggesting
16 that the Convergence Policy is the operative regulatory
17 instrument in this case?
18 1449 MR. BUCHANAN: Do you take the
19 temporal view or do you take the specific overrule in a
20 general view? I don't have a legal opinion to offer to
21 you.
22 1450 Our problems, significant problems,
23 with this application flowed from the structural
24 integration, but that's a mechanical issue. Could you
25 reapply in a different guise or on behalf of a company
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1 to be incorporated -- it would have solved all the
2 problems. I didn't want to dwell on that as being the
3 central pillar on which you should deny the thing.
4 1451 MR. BATSTONE: I guess what I am
5 getting at is, obviously the directive has directory
6 effect with respect to the Commission; the policy
7 statement, presumably, is just a policy.
8 1452 I just wanted to be clear of your
9 position, whether it has any sort of regulatory effect
10 for the Commission in making its decision.
11 1453 MR. BUCHANAN: No, other than it
12 flowed from a very long Commission process. I hope we
13 weren't wasting our time in participating in that
14 process.
15 1454 MR. BATSTONE: Thanks.
16 1455 THE CHAIRPERSON: Thank you very
17 much, gentlemen.
18 1456 We will be back in 10 minutes.
19 --- Short recess at / Courte suspension à 1705
20 --- Upon resuming at / Reprise à 1715
21 1457 THE CHAIRPERSON: Order, please.
22 Madam Secretary.
23 1458 MS SANTERRE: Thank you, Madam Chair.
24 1459 Now I would like to invite BSSI to
25 comment on intervention files to its application.
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1 REPLY / RÉPLIQUE
2 1460 MR. KEENLEYSIDE: Thank you, Madam
3 Secretary.
4 1461 Members of the Commission, if I could
5 just start by responding to a question that counsel
6 raised this morning related to the carriage or must
7 carriage of, in effect, competing or unaffiliated
8 pay-per-view service.
9 1462 We used the phrase "extremely
10 reluctant" a number of times. I think it was frankly
11 more the fact that we were caught by surprise that this
12 issue was raised because you had ruled fairly clearly,
13 we thought, in '95 in the licensing framework that this
14 was not a requirement to duplicate services at the same
15 time that you made quite a different decision in the
16 pay-audio framework. So frankly we were not prepared
17 for this.
18 1463 But we did caucus over lunch to try
19 to come up with a solution and we think that we have
20 combined a couple of models that you have put into the
21 original licensing framework that will meet what you
22 are looking for. Just as a starting point, we would
23 prefer an expectation rather than a condition of
24 licence. These are -- someone said this morning --
25 early days in terms of an integrated service actually
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1 operating. And conditions of licence are obviously
2 more serious than expectations in terms of their
3 potential consequences.
4 1464 So with that in mind, that is our
5 preferred way to go. But if you do want to go by way
6 of a condition of licence, we think that we would like
7 to offer the following as a solution you might like to
8 consider. And it draws on two of the models you have
9 in the licensing framework and it really consists of
10 six points. And the first five come out of the
11 pay-audio approach.
12 1465 We are proposing an approach that
13 would apply equally to English and French services.
14 The approach would apply to one national, unaffiliated,
15 general interest DTH pay-per-view service. By
16 "national", we would regard the current VCC WPT
17 seamless arrangement as being national. So we are not
18 playing games with that word.
19 1466 General interest, we do mean that.
20 That is what we have applied for. We have not applied
21 for a niche pay-per-view licence. So we think it is
22 appropriate that this apply in that context. The third
23 point is that the independent undertaking that would be
24 carried would pay all uplink and transponder costs.
25 And I would just quote, if I may, the phrase from your
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1 licensing framework and pay-audio that that entity pay
2 the satellite uplink and transmission costs associated
3 with the distribution of a signal. Exactly that
4 wording would be acceptable.
5 1467 In terms of where the costs for
6 satellite would be borne internally, I understand Mr.
7 Frank will be speaking to the 50/50 split and that
8 should be resolved as between pay-per-view and BDU. So
9 that should not be an issue. We agreed this morning
10 that any accounting separation techniques that you
11 think are appropriate we will comply with. So the
12 issue of what does a transponder cost should not be
13 problematic.
14 1468 The fourth point would be that the
15 transponders would be obtained from the existing Bell
16 ExpressVu inventory. Clearly, it has to be a seamless
17 service, it cannot be on different satellites or
18 different types of satellites. And we would suggest a
19 limit of parity. I notice that Ms de Wilde said it is
20 not really a question of numbers, it is a question of
21 parity.
22 1469 So because it applies to English
23 and/or French then parity would apply. To take a very
24 specific example, if the English independent or
25 unaffiliated group wanted carriage, under the current
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1 proposal, it would be 11 to them, 11 transponders to
2 them, 11 transponders to Bell ExpressVu, and five to
3 the Bell ExpressVu French service if Indigo did not
4 want to share it. So we would do one or both of the
5 different languages. So that is the pay audio model.
6 1470 The sixth point which I think is
7 probably as critical would be the program deletion
8 model that you proposed in the licensing framework
9 originally which essentially says you have to do the
10 foregoing unless the parties affected may mutually
11 agree on other terms.
12 1471 And we think that should be a safety
13 valve that would be allowed for the parties to work out
14 their own arrangements. That, in fact, did happen.
15 Bell ExpressVu did work a deal with the Canadian
16 Association of Broadcasters. So that avenue is a
17 realistic alternative, as well.
18 1472 Thank you.
19 1473 MR. NEUMAN: Madam Chair, Members of
20 the Commission, thank you for this further opportunity
21 to rebut.
22 1474 As we stated in our written reply
23 comments, Madam Chair, we believe, and as you have just
24 heard, there are no issues just raised by the
25 intervenors this afternoon. In fact, those of us who
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1 have been in and around the industry since 1995 have
2 not only heard these arguments before but have seen the
3 commission's response which is framed in today's public
4 policy and regulation.
5 1475 We have heard essentially two
6 versions of dynamic competition this afternoon as
7 compared to our view of dynamic competition this
8 morning. One where there is no competitor to the
9 incumbents at all and the other wherein the competitor
10 is there but hobbled.
11 1476 I would like to leave you with the
12 following positive thoughts, as we attempted to do this
13 morning, regarding our proposed service. One is we
14 believe competition is a good thing. It will make our
15 business more efficient, as we described, certainly
16 provide the additional margins to our business, which
17 certainly seems to have been concurred with by some of
18 the intervenors that would endeavour us to be more
19 competitive in the marketplace on the whole.
20 1477 And perhaps more importantly, it will
21 directly benefit Canadian consumers through better
22 service, more choice and variety as well as obvious
23 economic advantages derived from improved technical and
24 financial efficiency. I am referring here specifically
25 to the faster roll-out of digital technology and real
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1 price competition which are positive byproducts of our
2 application I believe and in the public interest.
3 1478 I believe it is clear that while DTH
4 may, in fact, have more digital boxes in Western
5 Canada, for instance, and maybe at some point in
6 Eastern Canada than in the five-year time-frame than
7 are currently there for cable, I think what is clear is
8 that cable plans to and certainly with the advent of
9 DTH digital boxes now on the market, has an impetus or
10 an incentive to put more digital boxes out there and no
11 doubt will have 30 or 40 per cent of their base
12 digitized in the five-year time horizon. So there
13 clearly will be a very large market for the incumbents
14 to enjoy as they have enjoyed with their monopoly to
15 date.
16 1479 First and foremost, I suppose it is
17 clear after hearing everyone that there can certainly
18 be no competition unless there is a competitor. And a
19 competitor that is unfettered by rules or conditions of
20 licence that would blunt the benefits of competition to
21 consumers.
22 1480 Other important beneficiaries are the
23 Canadian broadcasting and program production industries
24 of our licence. With respect to the former, please
25 note that that a wide cross-section of support has been
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1 generated and these, you will not, are not form
2 letters, but rather straight-from-the-heart
3 testimonials about the benefits of a competitive
4 domestic DTH industry in the pay-per-view application
5 that we propose.
6 1481 We live in a competitive environment
7 characterized by cable control or at least significant
8 participation in monopoly pay-per-view licensees. And
9 with the recent news today or yesterday regarding the
10 Cancom Star Choice announcement, we have a pay-per-view
11 provider under the common control of a dominant cable
12 competitor that also controls our BTH competitor. If
13 ever there was an opportunity for a monopoly
14 pay-per-view licensee whose major customer will always
15 be my competitor to treat a BDU like a second-class
16 citizen, this is it. You can only imagine negotiating
17 in such a circumstance.
18 1482 You need a really narrow definition
19 of integrated or integration to be able to construe
20 Viewer's Choice and WPT as not integrated, in my view.
21 1483 Broadcasters, film-makers and the
22 cultural community understand this. And you only have
23 to look south of the border where DTH and DTH
24 pay-per-view integration is a structural and beneficial
25 fact of life.
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1 1484 In closing, I would like to note the
2 support of the government film commissioner in the NFB,
3 the Canadian Congress of the Arts, the Friends of
4 Canadian Broadcasting, CAFTI, a major player in the
5 feature film industry in this country, among others,
6 have supported us and we thank them for that.
7 1485 We are heartened by the wide range of
8 support that our application has garnered and we think
9 it serves us all well and certainly you in trying to
10 make the decision.
11 1486 Madam Chair and members of the
12 commission, we understand and are ready, willing and
13 able to deliver on our commitments to you as we have
14 under the aegis of our DTH BDU pay-per-view
15 application. DTH pay-per-view will make us stronger so
16 that we can compete more vigorously with the
17 well-entrenched cable industry. It will also help
18 immeasurably in our quest to repatriate grey market
19 dishes and staunch the flow of millions of programming
20 dollars going south of the border, dollars lost to
21 Canadian broadcasters, program producers and the
22 independent funds that stimulate home-grown film and TV
23 product.
24 1487 To reiterate, the diversity of
25 product that we will bring to bear, particularly the
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1 approaches to packaging promotion which clearly are not
2 going to be the case if we are both showing exactly the
3 same product, but we find those niches, those segments
4 that we wish to address as I outlined this morning.
5 1488 Compelling children's packaging and
6 programming, competition for sports programming, high
7 definition television, a trial of described programs
8 that we have proposed. Certainly, our proposal to
9 provide movies and cultural events in the mother tongue
10 of Canadians other than French and English is new and
11 underserved in this country, I believe. And, of
12 course, a better return to Bell ExpressVu by taking the
13 middle man out of the equation that currently does not
14 provide sufficient value added to maintain that
15 position going into the future.
16 1489 Thank you for the opportunity to
17 appear this afternoon and I thank you for your interest
18 in Bell ExpressVu.
19 1490 I am going to ask Mr. Frank to add
20 any comments he may still have.
21 1491 MR. FRANK: It falls to me to answer
22 some of the specific -- rebut some of the specific
23 allegations made by the contrary intervenors today.
24 1492 With respect to Madam Chair's
25 question about -- to Astral and WPT about their
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1 concurrence with the licensing of a non-vertically
2 integrated BTH undertaking, I understand and I hope my
3 memory is correct here, it has been bolstered by a
4 couple of my colleagues that both companies actually
5 intervened against CTV sports specials back in 1995.
6 1493 With respect to VCC's comment about
7 undue preference, I would like to be clear about our
8 current agreements with both WPT and VCC. They at the
9 two licensees' suggestion and readily agreed to by us,
10 there is an undue preference clause in the agreement
11 whereby we cannot confirm upon ourselves any special or
12 undue treatment. And we would be happy to, with their
13 concurrence, to file these agreements with you.
14 1494 Ms de Wilde stated that the CFTPA and
15 the ATPFQ did not support our application. That is
16 true. Neither did they intervene against us. I would
17 like to say that we met with them and you have the
18 benefits of their comments to us in separate meetings.
19 Those comments were contained in Michael's opening
20 statements this morning.
21 1495 Finally, VCC states that our
22 application is predicated on 1.8 million subscribers.
23 That is actually double the number and then some that
24 we predicted and that is over seven years. So we are
25 talking in the 800,000 range and that is over seven
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1 years. And I know there are no facts in the future,
2 but I think it is fair to assume that cable will be
3 well and truly digitized by that point. So Mr.
4 Neuman's comments on that, I think, were well taken
5 earlier today.
6 1496 Now, moving on to the WIC premium
7 television, I would like to be clear about the 5 per
8 cent contribution. We are paying the 5 per cent on
9 gross and I believe that is consistent with current
10 practice. However, if a belt-and-suspenders approach
11 is required here, we would agree readily to Mr. Davies'
12 point about the 50/50 split as between the BDU and the
13 DDH pay-per-view undertaking.
14 1497 And finally, in respect of WPT, we
15 are heartened by their characterization of our
16 application as a cookie-cutter, because that carries,
17 of course, the connotation that our conditions are
18 exactly the same as theirs and VCC's, which would mean
19 that we are 100 per cent symmetrical with the current
20 regulatory and public policy framework respecting DTH
21 and DTH pay-per-view.
22 1498 I will finish quickly with CTV sports
23 which I will note is involved in cable, MMDDS and DTH
24 pay-per-view through their licence. They comment --
25 they characterize us as a gatekeeper. Heavens, we
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1 thought that only applied to cable.
2 1499 But I would like to point out that we
3 have only got 50 per cent of the DTH market. And with
4 respect to our competitor, Star Choice, which is also
5 owned by a company of substantial means, they currently
6 have four more RF channels on ANIK E2 than us. They
7 have just inked a deal with Telesat Canada for 30
8 transponders. That is 13 more than we have in our bag
9 with respect to Nimiq.
10 1500 So I think that we are anything but a
11 gatekeeper. We are not dominant and we have no
12 particular control over satellite or satellite space
13 segment.
14 1501 I would like to note that Ms Steeves
15 has conceded that the other two general interest
16 pay-per-view companies are not encumbered by the
17 conditions of licence that she would like to impose on
18 us.
19 1502 As a final point, I am somewhat
20 confused by her comments on Premier League English
21 soccer, a wonderful support, I watch it all the time.
22 But at no time do my colleagues or I recall discussing
23 the distribution of that on a pay-per-view basis. And
24 with respect to the meeting we had, the three-way
25 meeting we had with the NHL, I would like to tell you
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1 that that meeting was held at the behest of the NHL and
2 it was concerning the orderly development of the NHL
3 Centre Ice package in Canada. A centre ice package
4 that will not be able to be provided at least by a BTH
5 pay-per-view on Star Choice or ExpressVu until next
6 year because there simply is not enough space segment.
7 There will not be enough space segment available until
8 next hockey season.
9 1730
10 1503 However, I would note that that
11 product is available on DirecTv, which is one of our
12 competitors.
13 1504 I would also note that we were
14 referred to as the biggest DTH company in Canada. It
15 is very flattering. Unfortunately, DirecTV still has
16 more subscribers than us, and by a good margin.
17 1505 But God willing, we will close that
18 gap and move on and make this a successful business.
19 1506 Thank you very much. And thank you
20 very much for hearing us today. It was a pleasure to
21 be here to bring to you our application. We hope you
22 are as enthusiastic about it as we are.
23 1507 THE CHAIRPERSON: With regard to this
24 allocation of revenues as between the two if you were
25 licensed, would you, in a few sentences, put on the
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1 record how you actually did the split for the basis of
2 the pro forma.
3 1508 MR. McLENNAN: What we did in the
4 calculations was that the 5 percent that the DTH pay-
5 per-view kept was based on about 68 percent of the
6 total revenue stream. So the 5 percent was based on
7 that.
8 1509 Then of course, being the BDU
9 operator as well, we would pay 5 percent on 100 percent
10 of the retail revenues.
11 1510 THE CHAIRPERSON: To make it clear,
12 you say you would be prepared to accept whatever
13 allocation the Commission required. The Commission
14 would be, if you were licensed, especially anxious to
15 see how it is done.
16 1511 Would you accept a condition of
17 licence that would be imposed on the licence, should it
18 be granted, to the effect that any type of return that
19 may be required from the pay-per-view service would
20 also include a supplementary schedule reconciling both
21 your BDU and your DTH revenues, and the basis for the
22 allocation of the revenues signed off by your auditors?
23 1512 MR. NEUMAN: Yes, Madam Chair, we
24 would.
25 1513 THE CHAIRPERSON: Thank you. I
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1 believe these re all of our questions.
2 1514 We thank you for your participation,
3 as well as that of the intervenors. It provided for
4 lively discussion, and hopefully every company is going
5 to go home smarter than it was when it came in.
6 1515 We wish you a good evening.
7 1516 I would like to indicate that we will
8 sit until 7:00. Therefore, we will hear TVNC's
9 application and we will begin the questioning.
10 1517 Before we call the next applicant, in
11 light of the very many parties that were not here
12 before, I will go very quickly over the opening remarks
13 and the procedure as it relates to TVNC.
14 1518 I don't think we need to introduce
15 ourselves at this time to the new participants. I am
16 chairing the hearing, and my colleagues are
17 Commissioner Pennefather and Commissioner Cardozo.
18 1519 We will her today TVNC, which is
19 Canada's only aboriginal television programming
20 network. We will hear its application for national
21 distribution of an aboriginal programming service.
22 1520 TVNC has said that national
23 distribution of this service, to be called Aboriginal
24 Peoples Television Network, or APTN, would achieve a
25 number of the Broadcasting Act's goals, including that:
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1 "the Canadian broadcasting
2 system should serve the diverse
3 needs and interests, as well as
4 the special place of aboriginal
5 peoples within Canada; and
6 (2) that the system should
7 provide "through its
8 programming, a public service,
9 essential to the maintenance and
10 enhancement of national identity
11 and cultural sovereignty"."
12 1521 The application is for a conventional
13 television network licence. In it, TVNC states that
14 APTN would provide a first level of service for
15 Canada's diverse aboriginal population, like that
16 originally provided to Canadians by CBC/Radio-Canada
17 when radio and television were first introduced.
18 1522 This application stems partly from
19 the Commission's public hearing last November on the
20 appropriateness of licensing a third national network.
21 In that proceeding, TVNC emphasized the need for a
22 national service that would meet the demands of
23 aboriginal people across the country.
24 1523 TVNC proposes to broadcast in
25 English, French and aboriginal or first languages.
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1 Programming would be aimed at both aboriginal peoples
2 and non-aboriginal people who live in the north and the
3 south of the country; whereas presently only the
4 audiences in the north of Canada have access to TVNC.
5 1524 The Commission has of course long
6 recognized the importance of the unique role that TVNC
7 plays in our radio broadcasting system as an aboriginal
8 service which is non-profit, subsidized by public funds
9 and which aims at serving the public interest and the
10 objectives of the Broadcasting Act.
11 1525 This hearing will then consider
12 issues related to the appropriate licensing framework
13 for APTN, including its request for mandatory
14 distribution, its programming plans, its financing and
15 marketing plans, and the impact of the application on
16 Canadian consumers.
17 1526 As for housekeeping, regarding the
18 conduct of the hearing, we will sit until 7:00 tonight,
19 as I indicated, and resume at 9:00 tomorrow morning.
20 1527 We will hear during that time a
21 number of oral presentations by interested parties, and
22 we plan to conclude the hearing tomorrow.
23 1528 In addition, as you know, written
24 submissions have been filed with the CRTC and form part
25 of the record.
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1 1529 The proceedings will be transcribed,
2 as well as all interventions, and filed on the public
3 record. In order that the person responsible for
4 recording the transcripts can provide an accurate
5 record, we ask all participants, including the
6 intervenors, to make sure that they activate their
7 microphone before speaking and specifically that they
8 de-activate it to prevent feedback.
9 1530 We have staff assisting us. Diane
10 Santerre is our hearing secretary, and I am sure will
11 be pleased to help any of you with procedural matters
12 as they arise.
13 1531 We are now ready to ask Madam
14 Santerre, when she has distributed your presentation,
15 to officially invite you to present your proposal.
16 1532 MS SANTERRE: Thank you, Madam Chair.
17 1533 The application is by Television
18 Northern Canada Incorporated for a broadcasting licence
19 to operate a national aboriginal television programming
20 network, to be called Aboriginal Peoples Television
21 Network, upon surrender of the current licences to
22 TVNC.
23 1534 THE CHAIRPERSON: Good evening to you
24 all. We will ask you to present your team.
25 PRESENTATION / PRÉSENTATION
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1 1535 MR. TAGALIK: Thank you.
2 --- Opening comment in native language / Commentaire
3 d'introduction en langue autochtone
4 1536 Good evening, Madam Chairperson and
5 Commissioners, and people in the audience. We had a
6 lot more people here this afternoon. I hope they do
7 get a chance to come back during the course of today
8 and tomorrow.
9 1537 My name is Abraham Tagalik, Chairman
10 of Television Northern Canada.
11 1538 Before we begin, I would like to
12 introduce our team.
13 1539 On my right is Patrick Tourigny,
14 TVNC's Director of Regulatory Affairs. Next to Pat is
15 Joanne MacDonald, TVNC's Secretary and our board member
16 representing Northern Native Broadcasting Yukon. Next
17 to Joanne is Gary Farmer, Chairman of our Southern
18 Advisory Group and a busy actor and publisher of
19 Aboriginal Voices magazine.
20 1540 At the back table behind me is Linda
21 O'Shaughnessy, who coordintes TVNC's programs. Next to
22 Linda is Roman Bittman. Roman is also a member of our
23 Southern Advisory Group and an independent producer.
24 Next to Roman is Glenn Suart of Price Waterhouse
25 Coopers. Alanis Obomsawin is another member of our
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1 Southern Advisory Group and a producer with the
2 National Film Board, just coming back from New York.
3 Sylvie Courtemanche is our legal counsel. And Patty
4 Hutton is our financial coordinator.
5 1541 At the side table is Gerry Giberson,
6 our Director of Operations with TVNC. Also, we have
7 Debra McLaughlin of Price Waterhouse Coopers.
8 1542 In the audience are our board
9 members. I would like them to stand up.
10 1543 From Okalaqagit is Selpa Edmonds.
11 Selpa is an Elder lady who spent time here today but
12 had other things to do.
13 1544 From TNI is Sammi Duncan, from
14 northern Quebec.
15 1545 From IBC is Pat Lyall. Pat also had
16 other things to deal with.
17 1546 J. C. Catholic is from Native
18 Communications Society in Yellowknife.
19 1547 From Yukon College is Dudley Morgan.
20 1548 From GNWT is Peter Crass; and our
21 member at large, Edward Mesher.
22 1549 From Inuvik ICS is Debbie Gordon
23 Rubin; also a member of our Southern Advisory Group,
24 Jim Compton.
25 1550 We have a group here from Missinipi
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1 Broadcasting, also our associate member Marie Wilson
2 with CBC.
3 1551 Also, the young people on our right
4 are with Nunavut Sivuniksavot. I am really glad that
5 they could come here today.
6 1552 There were quite a few people here
7 today from Ottawa and around the area that really care
8 about our application.
9 1553 Madam Chair and Commissioners, this
10 is an historic opportunity. It is about breaking with
11 the past and building for the future. It is about
12 Canada, through the powers invested in the Commission,
13 demonstrating a commitment to improving the quality of
14 life of native Canadians. It is about providing a
15 window on aboriginal life and culture for all Canadians
16 to see and share.
17 1554 It was last November when Gary Farmer
18 and I appeared before this Commission to tell you about
19 our dreams for a national aboriginal television
20 service. That was during the Third Network hearing.
21 We told you of our plans for a nation-wide service
22 supported by a modest subscriber fee.
23 1555 We were extremely gratified when the
24 Commission subsequently announced last February, in
25 Public Notice CRTC 1998-8, that it recognized the
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1 important role that TVNC played in serving the needs of
2 aboriginal people in the north; that such a service
3 should be widely available throughout Canada; and that
4 TVNC was invited to submit an application for a
5 national aboriginal service.
6 1556 This was sweet music to our ears. We
7 immediately began planning our application by
8 undertaking extensive consultations with all the
9 national and regional aboriginal organizations and with
10 over 150 independent aboriginal film and television
11 producers.
12 1557 We have been overwhelmed by the
13 support for this application across the country, from
14 native elders and aboriginal youth, non-native groups
15 and individuals, endorsements from other broadcasters
16 and industry players.
17 1558 No one has denied the need for APTN.
18 We have also had inquiries from interested parties in
19 South America, Mexico, Germany, Australia, New Zealand
20 and many states in the U.S.
21 1559 Clearly, people are keenly interested
22 in t his public hearing and its outcome.
23 1560 The Aboriginal Peoples Television
24 Network will be the first of its kind anywhere. By
25 granting APTN an opportunity to meet this challenge,
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1 the Commission will demonstrate its leadership and
2 foresight to the rest of the world. Receipt of the
3 prestigious Carl Bertelsmann Prize is testimony to the
4 international recognition of the Commission's vision
5 and accomplishments.
6 1561 Many nations around the world have
7 indigenous people who are marginalized and under-
8 served. These countries are looking to Canada for
9 leadership, because Canada has always been a model of
10 tolerance and inclusion, of diversity and acceptance.
11 1562 MR. FARMER: Our goal with APTN is to
12 present a celebration of our rich heritage and a
13 sharing of our ideas and storage within the native
14 community and with fellow Canadians. This historic
15 initiative is about an investment in Canada's future
16 and a Canada that includes an aboriginal community as
17 an integral and vital part of this nation.
18 1745
19 1563 It is about our founding nations
20 finally getting access to a dedicated and broadly
21 available television service so that our stories, our
22 dreams, our history and our cultures are made available
23 for all to hear and see.
24 1564 As Canada's founding peoples we want
25 to be given the chance to remove the barriers of
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1 misunderstanding that often exist between our community
2 and the rest of Canada. We want Canadians to know
3 about aboriginal people from a native perspective.
4 1565 MR. TAGALIK: Over the past two
5 decades there have been many studies and reports on the
6 need for better communications systems for aboriginal
7 people. Most recently, the Royal Commission on
8 Aboriginal Peoples examined the situation in southern
9 Canada and recommended:
10 "The Canadian Radio-television
11 and Telecommunications
12 Commission be mandated to
13 establish fee structures and
14 provisions for joint ventures as
15 part of licensing conditions to
16 ensure a stable financial base
17 for the production and
18 distribution of Aboriginal
19 broadcast media products,
20 particularly in southern
21 Canada."
22 1566 While the wording of this
23 recommendation may be somewhat opaque, we believe the
24 intent is quite clear. First, the RCAP report
25 recognized that a stable financial base is essential to
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1 support the production and distribution of native-
2 provided programming and, second, the report looks to
3 the Commission to resolve this funding issue.
4 1567 The aboriginal people need a vehicle
5 to exchange ideas, stories, news and information. The
6 issues facing the aboriginal community are large and
7 complex and affect the very soul of Canada as a
8 country: self-government, health, healing, language,
9 housing, substance abuse, education and training,
10 employment, identity, racism and many more. There is
11 currently no single vehicle to examine and discuss
12 these issues. Consequently, the potential social value
13 of the service is immense and goes well beyond the mere
14 delivery of programs.
15 1568 MS OBOMSAWIN: The issues of the
16 urban Indian are different from those on the reserve or
17 living in remote areas. The needs of our elders, many
18 of whom don't speak English or French, are different
19 from our youth, many of whom speak only English or
20 French.
21 1569 APTN will put together a
22 comprehensive programming schedule that will meet the
23 divergent needs of the aboriginal community. APTN will
24 provide positive role models for our youth. It will
25 provide much needed employment opportunities for our
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1 artists, journalists, storytellers and technicians.
2 But most important, it will be a celebration of our
3 culture, our rich heritage and our accomplishments.
4 1570 We are confident that non-natives
5 will be amazed at what they see. They will marvel at
6 our stories, our value systems and our sense of humour.
7 They will become much more knowledgeable about our
8 culture and the issues that affect our lives. APTN
9 will contribute to a cross-cultural environment of
10 mutual trust and respect.
11 1571 Nous faisons partie intégrante d'une
12 nouvelle culture, la culture du cinéma et de la
13 télévision.
14 1572 La force de l'image est omnipotente.
15 1573 Depuis le début du siècle, et pendant
16 les 50 premières années, des milliers d'histoires
17 mensongères ont été véhiculées par les films de cinéma
18 et, plus tard, au travers de différents média, dont la
19 télévision, sans oublier les nombreux livres d'histoire
20 enseignés dans nos écoles. Certains ont appelé cette
21 période "La conjuration du silence".
22 1574 C'est l'époque de la naissance d'une
23 nouvelle tribu: la tribu d'Hollywood. Notre peuple
24 devint alors la tribu invisible.
25 1575 Depuis le début des années cinquante,
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1 beaucoup d'entre nous ont oeuvré afin d'établir des
2 changements nécessaires dans le système éducatif, puis
3 éventuellement dans le monde du film documentaire.
4 1576 De nos jours, un vivier de talents
5 confirmés se révèle capable de travailler dans tous les
6 secteurs professionnels de la réalisation de films et
7 de vidéos, et de la radiodiffusion.
8 1577 Le besoin de créer une chaîne de
9 télévision aborigène est vital. Cela signifie que nous
10 pourrons finalement accéder à un espace de pouvoir. Ce
11 pouvoir, transféré sur notre peuple, sera notre porte-
12 parole sur l'ensemble du pays.
13 1578 MS MacDONALD: Our market research
14 clearly demonstrates that a large majority of Canadians
15 embrace the idea of a national aboriginal channel. In
16 January of this year TVNC participated in an Angus Reid
17 omnibus survey which revealed that nearly four in five
18 Canadians indicated that they would watch the service.
19 Nearly two-thirds of those surveyed supported the
20 national distribution of an aboriginal television
21 network on the basis that it would encourage
22 understanding between aboriginal and non-aboriginal
23 communities.
24 1579 In a separate and more comprehensive
25 study conducted by Pollara in May, over 80 per cent of
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1 the general population felt this service would be a
2 positive addition to the Canadian broadcasting system.
3 When consumers were asked if they would pay an extra 15
4 cents per month to support this service, 68 per cent of
5 the general population said they would and 84 per cent
6 of the aboriginal population also indicated their
7 willingness to pay for the proposed service.
8 1580 MR. BITTMAN: The one thing that will
9 define APTN and differentiate it from other services is
10 programming. APTN will be programmed by and about
11 aboriginal people. The majority of the programming
12 will appeal to all Canadians. Like any general
13 interest television service, APTN will provide a mix of
14 all types of programming categories targeted to all age
15 groups and interests. It will serve as a cultural
16 bridge between the native and non-native communities,
17 and as a conduit among aboriginal peoples from coast to
18 coast to coast. The vast majority of the programming
19 will be acquired from aboriginal producers.
20 1581 Our programming day will begin with
21 an opening prayer. There will be 63 different
22 prayers -- 63 episodes -- one for each aboriginal
23 language, and they will be filmed on location.
24 1582 This will be followed by our morning
25 newscast, which will be an update of the previous
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1 evening's newscast. Our focus groups told us that news
2 and information programming was very important to them.
3 1583 It is also vitally important that we
4 reach out and embrace our young people in order to give
5 them a sense of where they fit into the native way of
6 life and to reinforce their sense of identity and pride
7 in being aboriginal.
8 1584 As you will see in our program
9 schedule, we intend to provide a richly diverse
10 collection of unique and compelling programs.
11 1585 More than anything else, we will be
12 distinctively and proudly Canadian, with a Canadian
13 content level of 90 per cent, both overall and in the
14 critical and crucial evening broadcast period.
15 1586 MR. TOURIGNY: The very heart of the
16 APTN service is its devotion to serving the national
17 public interest. It is intended to be a core service,
18 joining those other priority services that form part of
19 the basic or first level of service.
20 1587 APTN should not be marginalized by
21 being stranded on an expensive discretionary tier,
22 whether analog or digital. We feel that the service is
23 just too important to the country to treat it as
24 anything less than a core service.
25 1588 As you know, we filed our application
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1 on the basis that the requisite mandatory carriage
2 would be accomplished through the provisions of
3 subsections 17(5) and 37(b) of the BDU regulations.
4 1589 In Notice of Public Hearing
5 CRTC 1998-6-2 the Commission proposed an alternative
6 mechanism of accomplishing mandatory carriage. We
7 fully support your suggested alternative of employing
8 paragraph 9(1)(h) of the Broadcasting Act and we
9 believe that this mechanism will fully achieve our goal
10 of national distribution and availability.
11 1590 We also note and applaud your recent
12 landmark decision involving the TVA network. In the
13 TVA decision the Commission emphasized the benefits
14 that would result for Canada's broadcasting system as a
15 result of its ruling on the mandatory, national
16 distribution of the TVA service.
17 1591 The news release accompanying the
18 decision emphasized the diversity of programs in all
19 categories offered by the TVA network and its very high
20 Canadian content.
21 1592 The Commission also noted that there
22 would be no subscriber charges associated with the TVA
23 service.
24 1593 APTN will similarly provide
25 substantial benefits for the broadcasting system. Our
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1 programming will be highly distinctive and will add
2 much diversity to the system. At 90 per cent Cancon,
3 it even exceeds TVA.
4 1594 But where TVA and APTN differ is the
5 cost factor. TVA is a highly profitable commercial
6 undertaking. Their profits will likely increase as a
7 result of the mandatory national distribution the
8 Commission intends to implement. TVNC can therefore
9 understand why the Commission would want to take the
10 necessary steps in order to ensure that its public
11 service decision to provide an equitable level of
12 service to francophones across the country does not,
13 through a subscriber fee, result in a financial gain
14 for the commercial network.
15 1595 APTN is a non-profit entity. The
16 existence of APTN is dependent on a subscriber fee.
17 There is no business case that can be made for APTN to
18 be solely advertiser supported. There are no
19 additional public funds available.
20 1596 TVNC's budget has been cut by 30 per
21 cent in the past few years and we have been
22 unsuccessful in our numerous attempts to have these
23 funds restored or augmented. Although everyone in
24 government applauded the efforts of TVNC in
25 establishing a new national aboriginal television
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1 service, it is not reasonable to assume that a steady
2 source of financing will be made available to APTN
3 either in the short or long term.
4 1597 TVNC was cognizant of the public
5 funding restrictions when it appeared last fall before
6 the Commission during the third network hearing. It is
7 precisely for this reason that the discussion last fall
8 regarding the proposed service also raised the issue of
9 the subscriber fee that would be required to support
10 such a service.
11 1598 MR. TAGALIK: For 15 cents per month
12 Canadians will receive a core service, rich in its
13 distinctiveness and programming diversity. One dollar
14 and eighty cents per year will support an essential
15 service that will provide social dividends for
16 generations to come. Just think, for less than the
17 cost of a Coke and a chocolate bar a year our First
18 Peoples will finally achieve their rightful position
19 within the Canadian broadcasting system.
20 1599 We think Canadians will agree that
21 this is a bargain. This is a minor investment to fill
22 an enormous gap. The social benefits go well beyond
23 the programs themselves. APTN will continue to improve
24 the quality of life of native Canadians and will
25 provide a bridge of understanding for all citizens.
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1 1600 Commissioners, we submit that APTN is
2 of vital, national public interest and deserves being
3 licensed under the terms set out in our application.
4 1601 Just before we show you a short video
5 I will quote from a positive intervention from a woman
6 in Regina who foresees the immense public benefits of
7 APTN:
8 "As a parent of young aboriginal
9 children that are growing up in
10 mainstream society, I have
11 always tried to instill a sense
12 of personal pride in their
13 cultural identity as well as
14 pride in their community. As it
15 happens, most of their community
16 is non-aboriginal and therefore
17 it has always been up to me to
18 integrate both societies so that
19 they are equal rather than one
20 or the other being the `norm'.
21 This has been an upward battle
22 since we do live in a society
23 that often sees colour before
24 anything else. It seems that
25 what is being shown on the
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1 television is either
2 sensationalized, romanticized,
3 or plain lies when it comes to
4 aboriginal people. APTN is a
5 chance to ensure that all
6 Canadian children will be
7 exposed to the aboriginal
8 perspective before they are
9 socialized to believe the often
10 negative stereotypes that are
11 out there about native people.
12 Closer to home, I believe that
13 APTN will unconsciously teach my
14 children pride and belonging in
15 not only our community, but in
16 the larger one in Canada."
17 1602 We now have a video presentation for
18 you.
19 1800
20 --- Video Presentation / Présentation vidéo
21 1603 MR. TAGALIK: That concludes our
22 opening remarks. We would be pleased to answer any
23 questions you may have. Thank you.
24 1604 THE CHAIRPERSON: Thank you, Mr.
25 Tagalik. We welcome you all, of course, and thank you
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1 for your presentation.
2 1605 We will have some questions on your
3 programming proposals in this order: On the licensing
4 framework, although it seems to have been simplified
5 somewhat by your presentation; and your financial
6 presentations; then on distribution, a few technical
7 questions; and eventually a few questions in marketing.
8 1606 We obviously will not achieve all of
9 this this evening, but we will start with programming
10 questions that Commissioner Cardozo has for you. We
11 will try to find some intelligent spot to adjourn and
12 resume in the morning. You must feel comfortable that
13 you have all the time you need between this evening and
14 tomorrow to feel that you've had a chance to make a
15 full presentation to us.
16 1607 Commissioner Cardozo.
17 1608 COMMISSIONER CARDOZO: Thank you,
18 Madam Chair. Welcome all of you.
19 1609 I certainly share the sense of the
20 historic initiative that Gary Farmer mentioned. As a
21 Commissioner, I am bound to approach this hearing and
22 the decision we have to make with an open mind. It is
23 going to be your task to make your case today as you
24 will in the public record, as the Chair mentioned,
25 through all the letters that have come in and the
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1 intervenors.
2 1610 I have to say that I can't help but
3 feel awed and humbled by the issue that we are going to
4 be dealing with today and tomorrow.
5 1611 I also want to make a special note of
6 the young adults who are here today, those who are in
7 the room with us now and who were here earlier this
8 afternoon. It's not often that we see that the age
9 range extends that young at the CRTC hearings. So it's
10 a particular joy to have you here, and I hope you find
11 this as interesting as we all find it.
12 1612 A couple of points on the questions I
13 would like to raise about programming is that the
14 questions that I'll be raising more have to do with
15 trying to get information that either I'm not clear
16 about or I would like more information or information
17 on the record. If there are certain issues I don't
18 address, it's probably because we have enough
19 information that we're comfortable with, but feel free
20 to add in any points that you think would help us in
21 understanding the issues and making our decision.
22 1613 Secondly, I should also say quite
23 openly that I'm not an expert on aboriginal issues at
24 all. I've had the privilege in my previous life in the
25 last 10 or 15 years of working with aboriginal
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1 organizations and people on a number of issues. So,
2 feel free to correct me, educate me along the way,
3 especially as it relates to aboriginal issues. Now, if
4 you want to correct me on regulatory issues, I would
5 suggest you do that at your own peril.
6 1614 With regards to the programming that
7 reflects the diverse needs, Mr. Tagalik mentioned that
8 in our report on the third networks of February 1998.
9 Let me quote a couple of sentences from that report
10 which sets the stage for the question I have for you.
11 1615 We said, in responding to TVNC's
12 request:
13 "Such a service should be widely
14 available throughout Canada in
15 order to serve the diverse needs
16 of various aboriginal
17 communities, as well as other
18 Canadians."
19 1616 In the next paragraph we said:
20 "The Commission expects any
21 application by TVNC to
22 demonstrate how it will adapt
23 its programming service to
24 reflect the diversity of the
25 needs and interests of
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1 aboriginal peoples throughout
2 Canada."
3 1617 That is what I would like to go
4 through in a bit of detail, perhaps using the schedule
5 -- this beautifully-coloured schedule -- as looking at
6 the programming, as well as any other issues you want
7 to tell us about in terms of the people involved,
8 issues involved and so forth.
9 1618 What I would like to do is break it
10 down into four ways of looking at it. There's cross
11 over among these, but the first is the diversity of
12 aboriginal peoples, First Nations, Inuit, Métis, and
13 the diversity within those. So, I want to talk about
14 how the programming responds to reflect the three
15 groups, as well as the diversity within that. Second,
16 how the programming reflects northern and southern
17 residents or responds to their needs; third, a sense of
18 across Canada from southern coast to southern coast;
19 fourth, the non-aboriginal Canadians which we have, I
20 think, all agreed are also part of your target
21 audience.
22 1619 Let me start with the diversity of
23 aboriginal peoples. Perhaps we can look at First
24 Nations, Inuit and Métis. Maybe I'll start with Métis
25 because, in a sense, it's a newer group for your
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1 clientele. Correct me if I'm wrong, but my sense is
2 that with your programming being in the north where the
3 Métis population is not very high, you might have
4 focused more on Inuit and First Nations. So, perhaps
5 we can start with Métis and if you can tell me some of
6 the things in the schedule that respond to the needs of
7 Métis people.
8 1620 MR. TAGALIK: If I may start, when
9 you look at our schedule and what we're proposing to
10 do, we want to look at the aboriginal community as a
11 whole. I think that includes not only Métis but Inuit
12 and First Nations.
13 1621 What we're looking to do is set up a
14 basic level of service. We're looking at providing a
15 new service that each day would tackle some of the
16 issues that are out there today. That's not really
17 specific per group, but it includes everyone.
18 1622 If you look at the schedule, this is
19 a proposed schedule that is very adaptable to the needs
20 of the aboriginal community, including the Métis.
21 Maybe if I hand it over to Linda to go over the
22 structure of the programming as it relates to APTN.
23 1623 COMMISSIONER CARDOZO: Or maybe we
24 can look at all three together, if you like, if that
25 will be easier.
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1 1624 I agree with your point about
2 addressing aboriginal people as a whole, but part of it
3 will be ensuring that everybody feels part of it,
4 whether it's through issues that cover everybody or
5 particular programming.
6 1625 MS O'SHAUGHNESSY: What I've got
7 established on this schedule consists of 121.5 hours
8 per week. Of the 11 CRTC program categories we have in
9 here, I've used all but Reporting in Actualities and
10 Game Shows. Again, I would just like to note that this
11 is a sample schedule. It was based on the submissions
12 that we received from the southern aboriginal
13 producers, as well as what we currently have with TVNC
14 and our NNBAP members.
15 1626 How did you want me to run through
16 this?
17 1627 COMMISSIONER CARDOZO: Maybe we could
18 take a day or if you want to pick a particular day,
19 just pick any one of the days and just go down that and
20 give us a sense of what some of the different
21 programming does.
22 1628 MS O'SHAUGHNESSY: If we start with
23 Monday, first of all, Environment Canada will be the
24 wrap around alphanumeric service with weather.
25 1629 We start off at 6:30 with the opening
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1 prayer, and that would be for a half hour. The opening
2 prayer will come in 63 aboriginal languages.
3 1630 COMMISSIONER CARDOZO: How many would
4 you air in one day?
5 1631 MS O'SHAUGHNESSY: One per day. So,
6 it goes on a 63-day cycle.
7 1632 COMMISSIONER CARDOZO: Within that,
8 then, you've got a fair amount of diversity covered?
9 1633 MS O'SHAUGHNESSY: Yes, we do. Then
10 followed by that will be our 7:00 a.m. news. That
11 would be the rerun of the previous nights 2200 All
12 Nations News; 7:30, we start getting into children's
13 programming. This will be a French-language program,
14 Jeux les enfants, followed by Tales from the Longhouse,
15 which is an animated live action-type show with
16 animals, followed by A Paddle Song Called Memem in
17 Squamish, the Squamish word meaning children, followed
18 by Beading with Bernelda, KSB Presents, the Kativik
19 Schoolboard, the Aboriginal Public Show.
20 1820
21 1634 COMMISSIONER CARDOZO: So what is the
22 KSB?
23 1635 MS O'SULLIVAN: KSB is the Kativik
24 School Board.
25 1636 COMMISSIONER CARDOZO: Okay.
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1 1637 MS O'SULLIVAN: A member of Northern
2 Television Northern Canada and the programs are
3 various. It could be documentary, it could be
4 educational.
5 1638 COMMISSIONER CARDOZO: Okay.
6 1639 MS O'SULLIVAN: With the Kativik
7 School Board programming, too, they do alternate
8 between, they will use English, French and Inuktitut.
9 1640 At 10 o'clock we have the Aboriginal
10 Puppet Show in various aboriginal languages.
11 1641 COMMISSIONER CARDOZO: So would that
12 be each day it may be different, or within a show will
13 there be variety?
14 1642 MS O'SULLIVAN: It could be most
15 likely within a show for that particular.
16 1643 Then we have the best of Takuginai,
17 which is produced by the Native Broadcasting
18 Corporation. It is in the Inuktitut language.
19 1644 And then we get into current affairs,
20 current events, Qaggiq. Again, the Inuit Broadcasting
21 Corporation's program.
22 1645 Labradorimiut, programming for
23 Labrador. That comes in English and Inuktitut.
24 1646 And at 12, for one hour, the network
25 will do a live noon talk show in English.
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1 1647 COMMISSIONER CARDOZO: And can you
2 tell us a bit more about that show?
3 1648 MS O'SULLIVAN: Yes. This new talk
4 show will be produced with -- by the news team for the
5 in-house productions and it would be for viewers all
6 across Canada, discussing -- we would have different
7 topics each day.
8 1649 COMMISSIONER CORDOZA: So it is an
9 hour-long talk show. Would you have like a panel each
10 day or would there be a variety of items?
11 1650 MS O'SULLIVAN: It would be an
12 individual dealing with -- it would be a different
13 topic each day and just callers calling in on that
14 topic.
15 1651 COMMISSIONER CARDOZO: So it is a
16 phone-in show.
17 1652 MS O'SULLIVAN: Yes.
18 1653 COMMISSIONER CARDOZO: By the way, if
19 things are in early development, I understand that. I
20 understand what you are saying about it being a
21 proposed schedule. Carry on.
22 1654 MS O'SULLIVAN: At 1300, we have
23 Suangaan, which is from the Innuvialuit Communications
24 Society, in the Inuvik, Fulfort Delta region.
25 1655 At 1330, we have an hour long of
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1 community show case and we are hoping to collect
2 various programs from local cable companies to go
3 within this, from all across Canada.
4 1656 1430, is Yukon Outdoors.
5 1657 1500, Seasons of Change. This is a
6 U.S. acquired program.
7 1658 And 1600, First Perspective. It
8 would be -- it was submitted by Brenda Chambers.
9 Celebrating Design --
10 1659 COMMISSIONER CARDOZO: The First
11 Perspective, would that be --
12 1660 MS O'SULLIVAN: It is a talk show.
13 1661 COMMISSIONER CARDOZO: -- First
14 Nations?
15 1662 MS O'SULLIVAN: Yes, it will be.
16 1663 COMMISSIONER CARDOZO: Sorry, go
17 ahead.
18 1664 MS O'SULLIVAN: And then Celebrating
19 Design is arts and crafts.
20 1665 COMMISSIONER CARDOZO: Okay. An
21 aboriginal version of Martha Stewart?
22 1666 MS O'SULLIVAN: Exactly.
23 1667 COMMISSIONER CARDOZO: Maybe we can
24 beat her in the ratings, too.
25 1668 MS O'SULLIVAN: At 1700, we have a
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1 youth show called Hey You! We start getting into youth
2 programming before supper, now. And Hey You! is fast
3 paced, you know, it would be intriguing for the youth
4 audience.
5 1669 COMMISSIONER CARDOZO: Okay.
6 1670 MS O'SULLIVAN: 1730 we have
7 Qaujisaut, another youth program. It is produced by
8 the Inuit Broadcasting Corporation. It is geared
9 toward the youth of Nunavut.
10 1671 At 1800, is CBC's news program
11 Iqalaaq. It starts off with the first ten minutes of
12 news in Inuktitut followed by segments and it could be
13 in various languages, either English, Dene or
14 Inuktitut.
15 1672 1830, Métis Perspective. This was a
16 program submission by an aboriginal, southern
17 aboriginal producer.
18 1673 Wawatay Presents, Wawatay, Northern
19 Ontario. It alternates between Cree and Oji-Cree as
20 well as English.
21 1674 At 1930, Kippinguijautiit. It is the
22 Inuit Broadcasting Corporation's entertainment program.
23 It could be on funny stories or anything entertaining.
24 1675 Mind Your Own Business is a half-hour
25 show dealing on economic business issues.
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1 1676 COMMISSIONER CARDOZO: Are you going
2 to call it that?
3 1677 MS O'SULLIVAN: It was submitted as
4 Mind Your Own Business.
5 1678 COMMISSIONER CARDOZO: A lot of
6 people would tune in just to find out what it is about.
7 1679 MS O'SULLIVAN: Circle of Knowledge,
8 is a half-hour exposing aboriginals who have excelled
9 as people, professionals and ambassadors to aboriginal
10 culture.
11 1680 COMMISSIONER CARDOZO: So you will
12 have profiles of people there.
13 1681 MS O'SULLIVAN: Yes. Followed by
14 Chiefs, which is a one-hour long human interest series
15 and I would like for Roman just to give a brief
16 description of that.
17 1682 MR. BITTMAN: I am at this point
18 involved in that particular production. It is a
19 revisionist history, if you like, of the great chiefs
20 in North American aboriginal history. The other side
21 of Custer, you know, that sort of thing. But we will
22 use a dramatic re-enactment as well as dramatic
23 re-enactors, groups, and this sort of thing right now
24 both from the European as well as from the aboriginal
25 point of view.
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1 1683 MS O'SULLIVAN: Followed by Chiefs, I
2 have got All Nations News, which would be the network's
3 news. This would be the original time slot, Monday to
4 Friday, 2200. And within the newscast, what you will
5 see is the 10 minutes -- the first 10 minutes of the
6 first half-hour will be in the English language. The
7 next 10-minutes would consist of two or three feature
8 stories and then the last 10-minutes would be French
9 language news.
10 1684 COMMISSIONER CARDOZO: Okay.
11 1685 MS O'SULLIVAN: I also have, followed
12 by that at 2230 is CBC's Northbeat. This program, the
13 news portion is in English, the first 10-minutes or so,
14 followed by segments. And, again, they could be in
15 English, they could be in a Dene language, a Dene
16 language or in Inuktitut.
17 1686 At 2300, I have Nedaa-Your Eye on the
18 Yukon, which is produced by the Northern Native
19 Broadcasting Yukon. It is geared more to -- it is for
20 the Yukon region. Followed by Haa Shagoon. Again, it
21 is a Northern Native Broadcasting Yukon production.
22 1687 I would just like to also ask Alanis
23 to describe the puppet show which I mentioned we have
24 at 10 o'clock each morning. It is on Monday to Friday
25 and she is the one who did the submission so she can
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1 give you an idea.
2 1688 COMMISSIONER CARDOZO: Okay. Thanks.
3 1689 MS OBOMSAWIN: It would be in the
4 form of story-telling in having a continuity and with
5 the relationship of animals and people, but all in the
6 form of puppets where children could look at these
7 programs and identify themselves with the characters
8 and it would be in the form of teachings for children
9 to be good children and be part of those stories which
10 would be a continuity day after day.
11 1690 And I think it would be mainly to
12 develop the sense of so many animals have gone, but the
13 ones that are remaining, to develop the respect that
14 our people always had for the animals and give them a
15 place and a history, because we always believe that
16 each animal has its own history and it would be a
17 continuity where it will be teaching at the same time.
18 1691 COMMISSIONER CARDOZO: And what
19 language will that be in?
20 1692 It could be done so that the language
21 could differ from places. It would be just in the form
22 of voice-over to do the different languages, it would
23 be very easy.
24 1693 COMMISSIONER CARDOZO: Right, thank
25 you.
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1 1694 MR. TOURIGNY: I think, Commissioner
2 Cordoza, to go back to your initial question, what is
3 in our schedule that reflects the interests of the
4 Métis, I think on Monday there was one specific
5 program, but more importantly is in our news and public
6 affairs, our daily news cast and the new phone in show
7 which would be a public affairs show. Those are the
8 only two in-house programs. They will be produced by
9 our news department and they will cover the full range
10 of issues.
11 1695 Also, you know, out of the 150-odd
12 independent aboriginal producers that we have been in
13 contact with, I don't know how many were Métis. They
14 didn't identify themselves when they submitted
15 proposals. But I would suspect it would be
16 proportionate to the population. So their ideas, their
17 stories, their story-telling will find a way on to the
18 network.
19 1696 COMMISSIONER CARDOZO: Okay. So if
20 you take whether it is First Nations, Inuit or Métis,
21 do you have a sense that you will be covering all three
22 over a period of time through your productions as well
23 as what is on the -- on your news programs? Is it going
24 to happen automatically, or will you have to also keep
25 an eye on that?
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1 1697 MR. TAGALIK: You know, I think what
2 we are trying to do through APT, and it is also to
3 preserve some of our languages and some of that culture
4 related to Aboriginal peoples. And we, I think, stand
5 very fairly in front of everyone and say that they all
6 have opportunity to make use of APT and anything we can
7 do to help enhance language, preserve language and, you
8 know, make the use of the language, we will, you know,
9 definitely do that.
10 1698 COMMISSIONER CARDOZO: In terms of
11 the southern and northern residents, one of the
12 concerns, of course, is that because TVNC was primarily
13 northern and is now going to be serving the whole
14 country, how do you respond and reflect the needs of
15 people in the south?
16 1699 And from what your description is, I
17 am taking it there is two things, one is that you have
18 got certain new programs and the other is some of your
19 existing programs like your news get refocused more to
20 be more inclusive; is that fair?
21 1700 MR. TAGALIK: Yes. And currently we
22 do not do news on TVNC. This is one of the
23 cornerstones we are trying to entrench into APT is a
24 newscast and the sharing of ideas and information which
25 does not exist today.
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1 1701 MR. TOURIGNY: I think the ratio --
2 Linda can correct me if I am wrong -- about 30 per cent
3 of the weekly schedule is existing TVNC programming.
4 The other 70 per cent is new and fused programming from
5 all regions of the country, predominantly from the
6 south.
7 1702 COMMISSIONER CARDOZO: Sorry, could
8 you say that again? How much is new?
9 1703 MR. TOURIGNY: Roughly 30 per cent of
10 the existing schedule is existing TVNC programming. In
11 other words, northern-based programming. The remainder
12 of the schedule is new and fused programming.
13 1704 COMMISSIONER CARDOZO: So about 70
14 per cent is new?
15 1705 MR. TOURIGNY: The bulk of which will
16 come from the south. There will be new programming in
17 the north, from independent film producers located in
18 the north.
19 1706 MR. FARMER: Excuse me, doing a quick
20 evaluation of the program schedule, and having been in
21 contact with the program producers, I would say at
22 least 30 per cent of this schedule has the potential to
23 have Métis content in it specifically, and that the
24 Métis producers are very active in the southern regions
25 of Canada and have been for -- and one of the biggest
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1 issues that we face as a native community, of course,
2 is our identity and who we are, and the mixed heritage
3 that many of us come from. So it is a huge issue with
4 the Aboriginal Voices magazine has been a priority for
5 us and I am sure it will be reflected in the television
6 program that is brought forward.
7 1835
8 1707 COMMISSIONER CARDOSO: As I move on,
9 certainly as far as I am concerned, I have my answer
10 about how you are also serving Inuit and First Nations.
11 If there is anything else, feel free to add.
12 1708 MR. BITTMAN: Perhaps I could speak
13 as a Metis producer from Alberta.
14 1709 I spent a lot of my career learning
15 how to work when there wasn't the resources available
16 as now and certainly not the resources that will be
17 available to aboriginal producers if APTN is indeed
18 licensed.
19 1710 I think what was previously said was
20 exactly right: there are a lot of very active Metis
21 producers, and they will be very active in proposing
22 projects to the Network Programming Committee.
23 1711 COMMISSIONER CARDOSO: Let me just
24 ask you the flip question; which is when you go from
25 serving one area to serving a large area, the people
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1 who were part of the first system are going to feel a
2 bit crowded out. This is a possibility. When you
3 bring more people into the circle, there are some who
4 feel they are going to get crowded out.
5 1712 Is that a concern at all among
6 northern producers and people?
7 1713 MR. TAGALIK: What we have tried to
8 do is we are looking at a break-away. In the north, if
9 we have program, like a phone-in show for the Inuit
10 from the Inuit Broadcasting Corporation, that will not
11 be seen through the whole network.
12 1714 We also break the feed between the
13 east and the west, so that it is not all seen at the
14 same time across the country.
15 1715 We have also the north which might
16 cover the Nunavut Legislature or the NWT or the Yukon
17 Legislature which only really relates to the north.
18 That we try to build in --
19 1716 What is the term?
20 1717 MR. TOURIGNY: A split feed?
21 1718 MR. TAGALIK: Yes.
22 1719 COMMISSIONER CARDOSO: So you have
23 three feeds then?
24 1720 MR. TOURIGNY: Yes, because a lot of
25 our programming is time sensitive, particularly the
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1 news and the children's block. So typically what YTV
2 and a number of the specialities do is they have a
3 split feed. They have a three-hour delay.
4 1721 The identical schedule is not needed.
5 The only thing that is a challenge, then, is the noon
6 talk show because it is live across the country.
7 1722 COMMISSIONER CARDOSO: You might have
8 to call it something else.
9 1723 MR. TOURIGNY: It will be the 10:00
10 to noon or the noon to 2:00, whatever.
11 1724 COMMISSIONER CARDOSO: Mid-day.
12 1725 MR. TOURIGNY: The mid-day. But in
13 order to maintain the integrity of the existing
14 northern service, TVNC has been running the coverage of
15 the Legislature. They don't sit all the time. But
16 when they do, TVNC has historically been covering that.
17 And the Legislatures look to TVNC to continue that.
18 1726 TVNC has also carried distance
19 learning programs from the various educational
20 institutions. That programming has been cut back in
21 recent years due to funding situations. But should it
22 come back, the northern feed would be able to
23 accommodate that.
24 1727 And then with the new territory of
25 Nunavut, there would be another legislative thing.
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1 1728 And any long-form programming -- like
2 you said, if IBC is doing a phone-in show, that could
3 be just discrete to the north because our receivers are
4 agile. They are addressable.
5 1729 MR. BITTMAN: If I may add to that,
6 with regard to the existing and now the bigger group,
7 this will also be addressed in our programming criteria
8 when we have completed them and they are approved by
9 the new APTN Board. It will have a regional criterion
10 that we have to be representative across the country in
11 terms of where programs are originated from, as well as
12 culturally representative. And then we talk about high
13 quality. So those criteria will address this as well.
14 1730 COMMISSIONER CARDOSO: If you are
15 talking about, for example, the Mi'qma who are probably
16 not numerous in the north, you try to find a way to
17 ensure that they are included?
18 1731 MR. BITTMAN: Yes. We would --
19 1732 COMMISSIONER CARDOSO: And I don't
20 mean to pick on them; but in general, there are various
21 nations in the south.
22 1733 MR. BITTMAN: Yes, they are a
23 southern nation. We would of course not look to the
24 north for them. But if they are not being proactive,
25 we would be proactive in trying to find someone. And
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1 this breaks out in terms also of the way our boards
2 will be set up with regional representatives. We will
3 make every effort to get all of the regions involved
4 and all the nations.
5 1734 COMMISSIONER CARDOSO: In terms of
6 non-aboriginal Canadians, are there --
7 1735 I look at this and it is hard to
8 think of programs that would not be of interest. But
9 are there programs that perhaps would be of more
10 interest or that you want to make sure that non-
11 aboriginal peoples are watching?
12 1736 MR. TOURIGNY: Maybe as a non-
13 aboriginal person, I can start that one off.
14 1737 COMMISSIONER CARDOSO: Go ahead.
15 1738 MR. TOURIGNY: I would love to
16 experience going out on an ice floe. I would love to
17 experience some of the -- I guess this is showing my
18 age, but some of the traditional healing and
19 traditional medicines that are all of a sudden becoming
20 of more interest to mainstream society and different
21 herbal remedies, and so on and so forth that might ease
22 some of these problems that came on to people of middle
23 age. I would be keenly interested in that.
24 1739 I have seen some of TVNC's
25 programming, and believe me, it is riveting.
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1 1740 Also, being a news and public affairs
2 junky, it used to be there was a half-hour radio
3 program called Our Native Land, so that people could
4 tune in for half an hour or an hour a week, whatever it
5 was. And there was a platform -- albeit it a small
6 platform -- for a discussion of native issues, current
7 affairs.
8 1741 That disappeared. CBC said: "We
9 will sprinkle it throughout our schedule." So I stayed
10 up all night, day after day after day., It didn't work
11 for me.
12 1742 COMMISSIONER CARDOSO: So you still
13 haven't heard it yet?
14 1743 MR. TOURIGNY: No. You hear them as
15 it happens. You hear a bit here and a bit there, but
16 there was no focus. What we are providing is a common
17 vehicle for all sorts of things, not just news and
18 public affairs but human interest and so on.
19 1744 I probably won't be interested in
20 children's programming as an adult, non-aboriginal
21 consumer.
22 1745 But most of the other stuff, in
23 looking at the schedule, I would certainly give it a
24 try. I might not tune in. The tuning levels -- and we
25 can get into the marketing on what we expect there.
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1 1746 There is going to be a lot of
2 crossover potential for an awful lot of this
3 programming.
4 1747 MR. TAGALIK: I think, too, there is
5 real hunger out there for different unique programming.
6 That is what we bring to the table today.
7 1748 If you tune in to the channels and
8 Mr. Clinton is on, he is on 20 channels all at the same
9 time. And you get that. No matter if you start
10 switching, it's all the same after a while.
11 1749 COMMISSIONER CARDOSO: He wants a
12 Clinton channel too, which might be very popular.
13 1750 MR. TAGALIK: We do also provide
14 sports. Junior A Eagles Hockey is on TVNC right now.
15 There is great interest in hockey not only in the north
16 but I think also in the south as well.
17 1751 I think people look to APTN to see
18 something different, something unique, something real,
19 not just a commercial that is on for half an hour.
20 1752 I certainly can't wait to see some of
21 this programming myself. I think we have a lot to be
22 proud of in what we have on the schedule here.
23 1753 MS O'SHAUGHNESSY: For the English
24 audience, my breakdown for language on what is on this
25 sample schedule, I have 84 hours of English.
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1 1754 MR. BITTMAN: I would add to that in
2 terms of actual programming: For example, Chiefs will
3 have an NET and probably a German licence as well. It
4 is one of the things that I think will be really
5 interesting to non-native peoples as well as to native
6 peoples, to get a true perspective from the aboriginal
7 point of view of aboriginal history, which has so far
8 been mostly written by non-aboriginals and portrayed in
9 a different way than aboriginal people will do it.
10 1755 I also know that there is a lot of
11 interest in the export market for films which are about
12 Canadian and other aboriginal peoples. This is
13 expressed to me in co-production conferences that I
14 attend as a producer. For example, ZDF right now wants
15 me involved in trying to get a co-production on an
16 Inuit story.
17 1756 COMMISSIONER CARDOSO: I had a
18 question later on on export, but let me ask you now.
19 1757 Do you think there is a lot of this
20 programming that will be of export potential, both to a
21 general audience in other countries and to indigenous
22 peoples in other countries?
23 1758 MR. BITTMAN: I firmly believe that
24 there is going to be a huge audience for very well
25 produced stories, universal stories and also stories
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1 specific to native history or culture, that will have a
2 huge interest because it is different and told
3 differently from a different perspective. I think the
4 international market is saying that already to us.
5 1759 COMMISSIONER CARDOSO: As Ms
6 Obomsawin talked about Hollywood, it doesn't have to be
7 aboriginal stories à la Hollywood.
8 1760 MR. TOURIGNY: I think if you look at
9 Australia and why they are successful in their film
10 export market, it is because they are distinctly
11 Australian. They are not watered down Australians.
12 1761 The British film industry isn't doing
13 as well as it has in the past, but British dramas excel
14 in television because they are seeping in
15 "Britishness". They are distinctive and that's what
16 makes them sell. They are not diluted.
17 1762 If you look at the aboriginal
18 cultures and the aboriginal perspectives, it is going
19 to have a similar type of selling factor. I think in
20 Europe there will be a tremendous acceptance for it.
21 1763 COMMISSIONER CARDOSO: Let me talk
22 about languages. There are some who believe that there
23 are only three aboriginal languages which are not
24 endangered and which will live a long time, which are
25 Cree, Ojibway and Inuktitut.
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1 1764 But there are many other languages.
2 Certainly if you look at the larger groups by StatsCan
3 figures, Montagnais, Naskapi, Dene, Mi'qma are all
4 languages that also have significant populations.
5 1765 I was looking at the intervention by
6 CBC and they were talking about some of the languages
7 that they broadcast primarily in the north.
8 1766 Let me ask you first what languages
9 TVNC currently provides services in.
10 1767 MS O'SHAUGHNESSY: We have English,
11 Inuktitut, French, Inuvialuktun, various Dene languages
12 which could be in North Slavey, South Slavey. We also
13 have Gwi'chen.
14 1768 In the Dene languages there is also
15 Chipewyan. There is also Gwi'chen.
16 1769 COMMISSIONER CARDOSO: And Cree?
17 1770 MS O'SHAUGHNESSY: And Cree,
18 Inuvialuktun.
19 1771 COMMISSIONER CARDOSO: Do you think
20 you need to expand the number of languages with APTN?
21 1772 MS O'SHAUGHNESSY: Yes, we would.
22 1773 COMMISSIONER CARDOSO: Have you
23 identified those as yet?
24 1774 MS O'SHAUGHNESSY: We will have up to
25 63 aboriginal languages on APTN. On TVNC right now, we
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1 could broadcast up to as many as 15 aboriginal
2 languages for the region that we serve.
3 1775 COMMISSIONER CARDOSO: That is quite
4 a challenge with 63. I guess people could look at the
5 schedule, but how do you get the message out there
6 about when certain languages come up?
7 1776 In parts of the north especially,
8 there will be people who just speak one language and
9 will not be reading English, for example.
10 1777 MS O'SHAUGHNESSY: That could be part
11 of our marketing plan and just getting people familiar
12 with the type of schedule that it is, and promote for
13 languages in the language so that they know when the
14 language they understand is available.
15 1778 MR. FARMER: If I could add,
16 Commissioner, with the languages and recovery in my
17 community, there were less than eight speakers under
18 the age of 40 with six of our languages. I have had
19 success in producing half-hour dramatic programs where
20 one leading character out of four would speak about 70
21 percent in Kiyuga language and the story would still
22 have a thrust of English language.
23 1779 COMMISSIONER CARDOSO: So mixed
24 languages?
25 1780 MR. FARMER: So a creative mix of
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1 indigenous language in English or indigenous language
2 in French is going to be the way that we are going to
3 restore our confidence in our language and build on
4 that. So maybe in 10 or 15 years we could have more
5 characters, or 50 percent of the program may appear in
6 Kiyuga and have a wider acceptance of that and
7 following through on the story.
8 1781 I think it is a creative issue.
9 1782 COMMISSIONER CARDOSO: Do you think
10 TV is a good medium for language recovery, especially
11 those language groups that are becoming very small in
12 number?
13 1783 MR. FARMER: I think it has great
14 potential and is something that we are going to have to
15 explore. Of course, radio is a much more solid medium
16 for language development. But certainly TV has a great
17 potential. And I think that TVNC has been successful
18 in doing that, trying to help recover languages in
19 certain specific regions.
20 1850
21 1784 MR. BITTMAN: From the programming
22 perspective, this will fall under, again, being
23 inclusive and trying, in fact, to make an effort to
24 program languages that aren't usually programmed in now
25 and will be among the group that will be extended to
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1 when we are in full production.
2 1785 As far as motivating by television,
3 what the network can do is provide a whole positive
4 environment on the tube, which is in fact a great part
5 of where young people get culturized and become more
6 enthusiastic and accepting of their own language, even
7 if it's a very endangered one. That is another way
8 that it will be helpful, not only in producing but also
9 in preserving and encouraging the development of
10 languages that are near extinction.
11 1786 MR. TOURIGNY: I can't speak too much
12 for preserving language, but what I can say is that in
13 most cases, English is sort of a common language, if
14 not the first language then the second language. That
15 is reflected in our schedule. It's well over 80 per
16 cent or around 80 per cent would be in the English
17 language. So that you would be building up gradually
18 and finding which of the 63 -- I mean, the daily prayer
19 covers a total of the 63, but our programming committee
20 will have to look and see and work maybe with educators
21 and people that are experts in language preservation as
22 to how we can tailor our programming to help bring
23 those levels up.
24 1787 COMMISSIONER CARDOZO: Just in terms
25 of languages, can you tell me a little bit about the
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1 process you've had. I understand you put our requests
2 for proposals for programs, which is how you put the
3 schedule together. Was language part of that thinking
4 in terms of getting more languages in your programming?
5 1788 MR. FARMER: I think it's always a
6 priority about how we're going to integrate language
7 into our programming. It's certainly an effort that's
8 being worked on by producers currently as a
9 prerequisite even to get funding. Oddly enough, even
10 with the telephone portfolio, language has to become a
11 priority even to receive the funding in order to
12 produce.
13 1789 It's been a great initiative. But I
14 think there's also percentages of content that we could
15 work to fulfil starting with something that's
16 acceptable that we could work with and gradually
17 increasing that content to improve the development of
18 languages in the country.
19 1790 COMMISSIONER CARDOZO: Have you
20 looked at issues of translation and dubbing and
21 subtitles?
22 1791 MR. TAGALIK: Yes, we have. Within
23 our programming budget, we have allocated for
24 versioning into either English, if it's an aboriginal
25 language, or from English into an aboriginal language
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1 or between English and French.
2 1792 Let's say you're watching Inuktituk
3 programming. Underneath there would be English
4 subtitles to it.
5 1793 We also are trying to encourage
6 programmers to do an English version of the aboriginal
7 language production so that it's in two languages. So
8 much today English is the working language because it
9 is so universal. We will make a real strong effort to
10 do the programs in original language of choice.
11 1794 COMMISSIONER CARDOZO: Lastly on
12 languages, let me ask you about French language. I say
13 "lastly" because there's a whole lot of things we're
14 trying to work out. One is English language is the
15 language spoken by most aboriginal people. Then you
16 want to increase the amount of aboriginal languages
17 across the schedule.
18 1795 I notice some of the programs here
19 are in French, and I'm thinking of both French-speaking
20 aboriginal people and other non-aboriginal
21 French-speaking people. What are your thoughts about
22 whether you will be able to go beyond the 7.5 per cent
23 in French? One of the interventions has talked about
24 that and I wonder if you have any thoughts about that.
25 1796 MR. TAGALIK: What we really try to
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1 do is serve the underserved portion of the native
2 population. There are French program networks, and CBC
3 does a lot of French programming. So, for us, although
4 it was important, it wasn't a priority.
5 1797 We do have Alanis here, who speaks
6 very good French. I didn't understand it, but --
7 1798 COMMISSIONER CARDOZO: It was good.
8 Trust me.
9 1799 MR. TAGALIK: We will certainly
10 encourage use of the language if that's what the native
11 people use in that area. Perhaps Linda or Roman, from
12 the programming side, can speak to this a bit more.
13 1800 MR. BITTMAN: Yes, we will have a
14 certain amount of French language programming as part
15 of what we will do. But in the idea of
16 underrepresented, the aboriginal languages really is
17 where our market is and where our focus must be in an
18 area that's been underrepresented up till now.
19 1801 COMMISSIONER CARDOZO: In your split
20 fee, the two fees, where is the line? Is it
21 Ontario-Manitoba?
22 1802 MR. TOURIGNY: Probably.
23 1803 COMMISSIONER CARDOZO: Would you be
24 providing the identical in both or do you have the
25 ability to --
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1 1804 MR. TOURIGNY: We're going to crawl
2 before we walk. It would be a three-hour delay, full
3 schedule three-hour delay.
4 1805 MS COURTEMANCHE: May I say something
5 here?
6 1806 COMMISSIONER CARDOZO: Please.
7 1807 MS COURTEMANCHE: French is a very
8 important language. If you think of Quebec, for
9 instance, where all the Montagnais people, their second
10 language is French and it's a very special French that
11 they speak. The accent that they have, because of
12 where they are located, I believe, much of it is very
13 old French and very, very beautiful. They are unique
14 in the way they speak the language.
15 1808 When you look at the Atikameg people,
16 their second language is French. The Montagnais
17 language and the Atikameg language and the Cree
18 language in Quebec is very much alive. Everybody in
19 the community speaks their own language, but they also
20 have a second language. I think you really have to
21 consider that aspect of the life of our people in the
22 province of Quebec.
23 1809 French really, as we go along, is
24 going to have to have a good content so that the rest
25 of the province, if there is a place that there is a
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1 need for better understanding, Quebec is certainly
2 number one. We really need badly to have good programs
3 in French that reaches not only our people, certainly
4 the number one is them, but the rest of the population.
5 1810 COMMISSIONER CARDOZO: Let me ask you
6 about the board. I notice that you've increased the
7 size of the board. You've kept the northern component
8 the size it is now and you've added another nine people
9 for the south. Then, as I recall, it's three
10 additional members at large.
11 1811 Could you just outline that for us in
12 terms of what you're trying to do there?
13 1812 MR. TAGALIK: We're looking at a
14 21-member board. We really tried to reflect the north
15 on there; we tried to reflect the south, and the east,
16 and the west so that we get a really good blend of
17 representation across the country. We're looking at 11
18 members from the south and ten from the north. North
19 also will include the Hemlin line, Wawatay. For us, we
20 consider that south, but for the purposes of APTN,
21 we'll be representing the northern board members.
22 1813 That's one area that our current
23 board is very concerned about. We are going to deal
24 with it more through workshops and our board meeting
25 happening after the hearings this weekend in Ottawa.
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1 Although we don't have APTN, we have to be ready for
2 APTN, and that is one area that is very crucial in this
3 whole thing. We really believe that there should be
4 fair representation for everyone across the country on
5 the APTN board.
6 1814 COMMISSIONER CARDOZO: Within that
7 21-member board, will you be doing it province-by-
8 province or is that yet to be worked out?
9 1815 MR. TOURIGNY: The model that was
10 used to develop for this application and the
11 information in here was there would be eight from the
12 north, and that would include Wawatay and all the NNBAP
13 members that currently produce television programming.
14 So that would be Wawatay and NCI.
15 1816 COMMISSIONER CARDOZO: So the
16 northern members have primarily been producers. Is
17 that right?
18 1817 MR. TOURIGNY: Yes, the NNBAP members
19 produce the programming for TVNC.
20 1818 COMMISSIONER CARDOZO: So, will the
21 others also be producers?
22 1819 MR. TOURIGNY: They could be. The
23 southern ones could be producers or they could be
24 representatives of other cultural organizations and so
25 on.
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1 1820 In the north there will be eight
2 members that will be most likely comprised of the
3 existing NNBAP members who produce television. There
4 will be another northern member that will represent the
5 independent production community in the north and a
6 member at large from the north. So, that's ten.
7 1821 In the south, the model we developed
8 was practically province-by-province. It worked out to
9 be British Columbia, Alberta, Saskatchewan, Manitoba,
10 Ontario, Quebec, Maritimes and Atlantic Canada, and two
11 sort of members at large representing the independent
12 community but not tied to any particular region, and
13 then a third member at large.
14 1822 COMMISSIONER CARDOZO: I understand
15 that they would all be aboriginal. Has consideration
16 been given to having any non-aboriginal people on the
17 board?
18 1823 MR. TAGALIK: Not really, no.
19 1824 COMMISSIONER CARDOZO: Do you think
20 that could help in terms of what you want to do to
21 understand the others?
22 1825 MR. TAGALIK: I think we have enough
23 problems just having an aboriginal and to throw another
24 twist in there, we are looking at how do we select, how
25 do we elect a person from the south. What we don't
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1 want to do is set up an incredible amount of
2 infrastructure that would take away from programming
3 and getting the producers to make the network happen.
4 1826 So, that's part of our challenge to
5 either use the Friendship Centres or something existent
6 that is widely based aboriginal in the south. That was
7 one thing we have a few options on this weekend to
8 really go which direction.
9 1827 COMMISSIONER CARDOZO: Let me ask you
10 one more question for today, and that flows from this
11 one regarding the independent program committee.
12 You've indicated that you have five high-profile or
13 well-known people on it.
14 1828 I'm wondering if you could tell us
15 what the role of the program committee would be. If
16 they are five prominent busy people, you probably won't
17 get a lot of their time. Do they look at the schedule
18 season-by-season or on a day-to-day basis?
19 1829 MR. TAGALIK: We've had a few people
20 working on that very issue. Roman has worked on it a
21 bit.
22 1830 We know that we can't have the board
23 deciding what will be on in terms of programs.
24 Somewhere all of our members at one time or another
25 produces programming that will be on here. We really
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1 tried to make the program selection more independent
2 away from our board working with a program director and
3 developing programming that way.
4 1831 I think Roman would want to speak to
5 this issue.
6 1832 MR. BITTMAN: Yes, it is an issue of
7 busy people. So, the program director will really be
8 the front door to the network and will do a lot of the
9 initial filtering and relationships with producers.
10 But three or four or five times a year, the program
11 selection committee will meet and make the big
12 decisions.
13 1833 There's also, of course, a small
14 program development fund which will allow us to develop
15 eight or ten or more new program ideas each year
16 initially, and probably a lot more will come from the
17 initiatives of the independent producers who have their
18 own means as well.
19 1834 All of that will work together. It
20 works in other provincial agencies, for example, in
21 that way as well quite successfully. I've had some
22 experience myself in that area and it can work and it
23 will work.
24 1905
25 1835 COMMISSIONER CARDOZO: There is an
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1 old adage that if you want a job done, give it to a
2 busy person.
3 1836 MR. TOURIGNY: If I could interject,
4 the first schedule -- the first season -- will be the
5 busiest one because we will be expanding into this
6 totally new animal.
7 1837 After that -- programmers tend to
8 fine-tune on a seasonal basis. So I think that after
9 that initial hurdle it will be saying "Has this program
10 been successful? Did it meet the objectives and
11 mandate of the network?" Or it has run its course.
12 Its 13 or 26 episodes are over and "What are we going
13 to select to replace it?"
14 1838 I think that then becomes a less busy
15 function for the -- or there will be less volume of
16 stuff to deal with once we get into our second season.
17 1839 COMMISSIONER CARDOZO: What is the
18 relationship between the programming director and the
19 independent programming committee?
20 1840 MR. BITTMAN: The programming
21 director will be the instrument of the programming
22 committee, to some extent, but both are instruments of
23 the board. The rules and guidelines and structure
24 within which they work will be set up by the board
25 initially.
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1 1841 COMMISSIONER CARDOZO: And would you
2 have a connection between the board and the programming
3 committee?
4 1842 MR. BITTMAN: There will be a yearly
5 review of the efforts and success of --
6 1843 COMMISSIONER CARDOZO: But you
7 wouldn't have an overlap between the board and the
8 programming committee?
9 1844 MR. TOURIGNY: They will be
10 independent members. A board member will not also sit
11 on the program selection committee, no.
12 1845 COMMISSIONER CARDOZO: There is logic
13 to that. The flip side is: What if the program
14 committee has a different mind than the board?
15 1846 MR. TOURIGNY: Then the board can
16 change the program selection committee.
17 1847 COMMISSIONER CARDOZO: All right.
18 That is on the record.
19 1848 MS MacDONALD: Excuse me, may I make
20 a comment?
21 1849 I just wanted to add to what Abraham
22 and Patrick were saying about the board. I think that
23 one of the main things we have to recognize is that in
24 the north the organizations and the board members are
25 representative of the aboriginal communities.
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1 1850 One of the criteria of TVNC was to
2 make sure that the aboriginal communities were
3 represented across the north. That is the same type of
4 model and the same type of thing that we wish for the
5 southern members as they come on board with APTN, and
6 within that this current board has experienced a lot of
7 things, growing and everything like that, and it is
8 willing to share that expertise on how to bring people
9 in so that the south will be representative of the
10 aboriginal communities as well.
11 1851 As far as that goes, I think that it
12 is very important to recognize that what is in place
13 now will only be growing further; that we are not going
14 to try to change things around so that the aboriginal
15 communities will not be represented. That is the main
16 focus of all of this.
17 1852 I just wanted to add that. Thank
18 you.
19 1853 COMMISSIONER CARDOZO: Are there any
20 other comments on the independent programming
21 committee?
22 1854 MR. TOURIGNY: Not unless you have
23 more questions.
24 1855 COMMISSIONER CARDOZO: No, I don't.
25 I have other questions on programming which I will ask
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1 tomorrow. Thank you very much. That was very helpful.
2 1856 Thank you, Madam Chair.
3 1857 THE CHAIRPERSON: Thank you, Mr.
4 Cardozo.
5 1858 Ladies and gentlemen, we will adjourn
6 for today and resume at nine o'clock tomorrow morning.
7 --- Whereupon the hearing adjourned at 1907,
8 to resume on Friday, November 13, 1998 /
9 L'audience est ajournée à 1907, pour reprendre le
10 vendrdi 13 novembre 1998 à 0900
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