TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
BROADCASTING APPLICATIONS AND LICENCES/
DEMANDES ET LICENCES EN RADIODIFFUSION
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
December 10, 1999 Le 10 décembre 1999
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio-television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Public Hearing / Audience publique
Broadcasting Applications and Licences/
Demandes et licences en radiodiffusion
BEFORE / DEVANT:
A. Wylie Chairperson/Présidente
D. McKendry Commissioner/Conseiller
A. Noël Commissioner/Conseillère
B. Cram Commissioner/Conseillère
J.-M. Demers Commissioner/Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
P. Cussons Hearing Manager /
Gérant de l'audience
G. Batstone Legal Counsel /
D. Santerre Secretary / Secrétaire
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
December 10, 1999 Le 10 décembre 1999
TABLE OF CONTENTS / TABLE DES MATIÈRES
NewCap Inc. 1402
Questions by the Commission 1419
Questions by Commission Counsel 1470
Maritime Broadcasting System 1475
Questions by the Commission 1482
Music Industry Association of 1487
Newfoundland & Labrador Inc.
Questions by the Commission 1496
NewCap Inc. 1504
Questions by the Commission 1510
Questions by Commission Counsel 1512
Rogers Ottawa Limited/Limitée 1518
Questions by the Commission 1528
Questions by Commission Counsel 1589
Questions by the Commission 1592
Questions by Commission Counsel 1599
Jan Pachul 1601
Questions by the Commission 1614
Ashbridge Bay Watershed Council 1688
Robert Loucks 1699
Kevin Walters 1702
Questions by the Commission 1708
TABLE OF CONTENTS / TABLE DES MATIÈRES
Canadian Cable Television Association 1720
Questions by the Commission 1727
Jan Pachul 1749
Questions by the Commission 1761
Hull, Quebec / Hull (Québec)
--- Upon resuming on Friday, December 10, 1999
at 0832 / L'audience reprend le vendredi
10 décembre à 0832
7733 THE CHAIRPERSON: Good morning.
7734 Madam Secretary.
7735 MS SANTERRE: Thank you, Madam Chair.
7736 This morning we will hear the applications filed by NewCap Inc. on behalf of 3610306 Canada Inc., a wholly owned subsidiary of VOCM Radio Newfoundland Limited, to request authority to acquire the assets of seven Newfoundland radio undertakings and their transmitters.
7737 The applicant also requests broadcasting licences to continue the operation of these undertakings, upon surrender of the current licences issued to VOCM Radio Newfoundland Limited.
7738 The applicant proposes to operate the undertakings under the same terms and conditions as the current licences.
7739 NewCap Inc. seeks to gain effective control of 3610306 Canada Inc. by acquiring all of the common voting shares of the licensee.
7740 Mr. Steele.
7741 THE CHAIRPERSON: Good morning, Mr. Steele.
PRESENTATION / PRÉSENTATION
7742 MR. H. STEELE: Good morning, Madam Chair, Members of the Commission, staff of the Commission. My name is Harry Steele. I am Chairman of the Board and principal shareholder of Newfoundland Capital Corporation.
7743 With me today, to my left, is my friend Joe Butler, a long time competitor. On my right is Bob Templeton, President of NewCap Broadcasting. On Bob's right is David Murray, Vice-President of Finance and Administration of NewCap Broadcasting. And behind me is Jackie Boutilier, Manager of Human Resources. On Jackie's left is my son John, who is Vice-President, NewCap Broadcasting.
7744 We are here today, Madam Chair and Members, to present our applications that would result in the transfer of VOCM's radio licences to NewCap.
7745 Madam Chair, we are now ready to make our presentation.
7746 VOCM has been a central factor of our province's life since 1936 when Joe's father, Joseph L. Butler, started VOCM as Newfoundland's first independent private radio station: VOCM, Voice of the Common Man.
7747 At the age of 22, following his father's untimely death, Joe took over the running of the station and built a chain of stations across central and eastern Newfoundland, extending service to the people of Gander, Grand Falls/Windsor, the Baie Verte peninsula, Clarenville, Marystown and Carbonear and the surrounding areas and the communities.
7748 MR. BUTLER: Madam Chair and Members of the Commission, my name is Joe Butler, Chairman and owner of VOCM Radio Newfoundland.
7749 Today is a major milestone for the radio broadcasting industry in Newfoundland and Labrador.
7750 VOCM has developed from a small single pioneering station in 1936 to the powerhouse it is today -- recognized in every part of the province as a continuing part of people's lives, as demonstrated by our growing audience.
7751 In the 1960s VOCM started its expansion into rural Newfoundland, becoming the first radio broadcaster to offer a local radio service outside of St. John's. Today thousands of Newfoundlanders throughout the province have their own "local" radio station.
7752 This is a goal we set out in the early 1960s and we are very proud to have achieved it.
7753 We set out to provide our listeners with the very best radio service.
7754 Our high profile open line shows consistently achieve a 50 per cent plus market share in all age groups, and the VOCM news service has won 64 regional, national and international news awards, and we have won thousands of local community awards.
7755 The VOCM Cares Foundation, a registered charity mandated to provide assistance to organizations working with children, with emphasis on education, health and safety, has raised over $3 million since its inception in the early 1980s.
7756 The new CRTC Commercial Radio Policy which came into effect last year was a major positive development in the radio industry.
7757 The costs associated with providing quality radio programming, along with future costs associated with the move to digital radio, meant that radio had to get financially stronger. The new CRTC policy now allows radio to do exactly that, by operating multiple licences in a single market.
7758 Our original planning included increasing our own holdings in St. John's, either by acquiring existing radio properties or by requesting an additional FM licence for the market. Standing still with our existing holdings was not an option.
7759 To move forward, we had to get bigger.
7760 When it became clear that there were no sellers in the market, we started planning for an additional FM station for the St. John's market. This was not our preferred choice but seemed to be the best available option.
7761 Before we filed the application with the CRTC earlier this year, NewCap Broadcasting made an unsolicited offer to buy all stations of the VOCM radio service.
7762 After much deliberation with my two sons Gary and Joe, who each have been in the business for over 20 years, we came to the unanimous decision that to sell was in the best interests of all parties involved.
7763 We are particularly happy that a successful Newfoundland businessman, Harry Steele, will become the new owner of VOCM.
7764 If approved by the CRTC, VOCM's ownership stays in Atlantic Canada with a company that has radio broadcasting as its primary focus.
7765 In my discussions with Harry Steele, there is a real understanding of what has made VOCM the success that it is, and I know he wants not only to maintain that success but to build on it.
7766 I will be leaving the radio business knowing that VOCM is indeed in good hands.
7767 Thank you.
7768 MR. H. STEELE: We sat down to see if we could find a way to move forward, Joe and I. Frankly, I knew that if we sold to Joe, the stations would be in good hands, and I guess he felt the same about us.
7769 It was clear to both of us that there is not room for three radio competitors in St. John's or across the province and that to continue the level of service that Newfoundlanders have come to deserve and expect, we needed to join the stations together.
7770 The other lesson we have learned over the years is that only Newfoundlanders like Joe, Geoff Stirling and Dr. Murphy, and maybe ourselves, have been able to generate enough desire and stickability to hang around in Newfoundland over the long haul and see if we can make a dollar and provide good service.
7771 We are here today to request that the Commission approves the transfer of the stations licensed to VOCM Radio Newfoundland to a numbered company and then transfer those assets to NewCap.
7772 This, along with your recent approval of AM to FM conversions in Gander and Grand Falls, will result in NewCap operating AM-FM combos in Gander and Grand Falls along with providing AM service in the other markets currently served by VOCM.
7773 In addition, we are requesting that the Commission make an exception to its ownership policy to allow us to operate four radio stations in St. John's. We are proposing to convert the fourth station, Q93, to a station reflecting our unique culture in Newfoundland and particularly our Newfoundland music.
7775 MR. MURRAY: Much has been made about the recent good news in the Newfoundland economy with increases fuelled by the oil discoveries. We are pleased about these developments and are cautiously optimistic about the future of the economy, but let's not fool ourselves. Newfoundlanders have heard enough predictions of economic bounty just around the corner to be somewhat sceptical.
7776 The growth in the economy must be taken in context. As our application indicates, there are a number of points to be considered.
7777 First, the Newfoundland economy is starting from very far behind the rest of the country.
7778 Just a few facts:
7779 (1) Newfoundland has the highest child poverty rate in Canada.
7780 (2) Newfoundland lost almost 5 per cent of its population from 1993 to 1998, and most of this can be attributed to people of working age leaving to find jobs; furthermore, rural Newfoundland's population is declining even faster. The graph shows the decline of the Newfoundland population, which will still remain below the 1993 level in 2004.
7781 (3) While retail sales, an important predictor of radio revenues, increased some 30 per cent in Canada from 1993 to 1999, in Newfoundland they increased a meagre 2.2 per cent, actually losing ground to inflation.
7782 (4) Newfoundland still has unemployment levels of approximately 17 per cent.
7783 This chart of Conference Board of Canada data shows key indicators for the Newfoundland economy.
7784 Second, the recovery to a great extent is a jobless, capital recovery. The oil industry creates a relatively small number of high-end jobs requiring high skill levels. It does not generate the larger number of middle income jobs that were lost with the collapse of the fishery. This explains the Conference Board's predictions of continuing high levels of unemployment.
7785 Third, the benefit of this recovery is almost exclusively in St. John's, with the offshore business using the city as its base.
7786 As you can see from the chart, the population is expected to decline in 1999 and 2000; the unemployment rate will remain above or close to 15 per cent over the next five years; and personal income and retail sales will grow more slowly than the GDP.
7787 A number of these factors would be even worse without the presence of St. John's.
7788 MR. TEMPLETON: The historical problems of the economy have been more than reflected in the radio economy. Newfoundland trails the average of English-language radio stations in revenue growth over the past many years and has been unprofitable as a whole since the early nineties, with accumulated losses of some $2.5 million in the years between 1993 and 1998.
7789 NewCap alone has poured almost $12.6 million into capital costs and operating losses since entering the market. Radio in Newfoundland and Labrador only draws half the Canadian average in national advertising as a percentage of advertising revenues.
7790 St. John's has always been the motor driving the provision of high quality radio to the other communities that we serve and the same is true for Mr. Stirling's radio and television operations. Many of the smaller cities and towns have a level of choice in local radio that could not really be expected in smaller communities -- for example, Gander has two local originating stations and the regional FM from the OZ chain. They have high quality news and information service from VOCM's AM station, country music from NewCap and a rock FM service from OZ. In addition, CBC Radio provides a local service in the community. All of this in a community of 12,100 persons.
7791 The presence of the St. John's stations allows this kind of diversity -- VOCM's news and talk service is anchored by the networked programs from St. John's, our service is music-based and OZ-FM is a rebroadcaster.
7792 Without St. John's, the other stations would attract little or no national revenue. Simply put, St. John's makes or breaks radio throughout the province. This requires a strong radio market in St. John's.
7793 Unfortunately, there hasn't been a strong market in St. John's for quite some time. The CRTC's annual return information, from 1993 through 1998, shows accumulated losses at the PBIT level of some $2.1 million. And although Newfoundland recorded small profits in 1997 and 1998, the margins still greatly trail the Canadian averages. National advertising is barely half the Canadian average.
7794 Radio has been losing its share of national advertising over the past 10 to 15 years. Advertisers perceive it as hard to buy, requiring multiple buys in order to reach the kinds of mass audiences that a single purchase from a television station or a newspaper can deliver. If national advertisers find it difficult to buy radio in the larger markets, why would they even bother with Newfoundland?
7795 But a stronger group with four stations to offer, giving a wider range of demographics, becomes a more interesting and easier buy for a national advertiser. As the map shows, this would provide a stronger backbone for the provision of service elsewhere in Newfoundland, just as a province-wide FM and TV combination does for Mr. Stirling.
7796 It is clear to us that we need to make significant increases in national advertising. If we could even increase our national revenues by 25 per cent, we would start to approach PBIT margins of 10 per cent, still low by national standards but enabling us to continue our level of local service.
7797 We are asking you for an exception to your ownership rule for markets with fewer than eight stations. When we looked at what we would do with the fourth station in St. John's, we quickly realized that the only options were to sell it or to continue to run it. We did not consider shutting down a station as a viable option.
7798 We purchased these stations to repair the radio market in Newfoundland, not to weaken it. It was clear to us that if we were required to divest of a station, it would be CJYQ. Without the VOCM newsroom that comes with the AM station, we could not maintain the news in the smaller markets, never mind improve on it. If we wish to make radio more competitive in delivering national advertising to the market, we need the numbers and demographic profile that the FM station would bring us.
7799 In our opinion, selling CJYQ to another broadcaster was also not a viable option. We have already learned that three radio companies in the market is one too many. We cannot imagine how another broadcaster could run CJYQ as a successful stand-alone AM station.
7800 We concluded that we should ask for an exception to the policy and, at the same time, give something back to the people of Newfoundland. We commissioned research to look into the popularity of various music formats and we were not greatly surprised to see that there is continuing love of the music of Newfoundland musicians. We do not believe that this is strong enough to draw a sufficient market share, particularly in the demographic groups that advertisers seek, to enable a stand-alone station to survive. But we believe that the station can survive when supported by three other stations, sharing administrative and sales resources; being part of a combo buy will bring advertising revenues that it would not normally attract.
7801 For this reason, we commit to operating CJYQ as a Newfoundland-music oriented station. We will accept a condition of licence that the station meets 40 per cent Canadian content, of which half or 20 per cent will be music performed by Newfoundlanders. Given the immense popularity of this music elsewhere in Newfoundland, we will use the St. John's station as a sort of network centre to provide a minimum of eight hours of this programming per week to the other markets that we serve.
7802 I would now like to ask John Steele to address our benefits proposals.
7803 MR. J. STEELE: Good morning.
7804 Both Radio Newfoundland and NewCap have been active supporters of Newfoundland talent. NewCap was recognized for the second year in a row by the Music Industry Association of Newfoundland and Labrador, quite a mouthful, which I will refer to as the MIA from here on in. The MIA named NewCap the Outstanding Company of the Year for our efforts on behalf of local talent and our news director, Tony Hann, as Industry Person of the Year. NewCap is also a past recipient of a CAB Gold Ribbon Award for Canadian Talent Development.
7805 We want our 1 per cent to really make a difference, so we decided to combine it with the spending that we are currently doing under the CAB plan. This allows us to provide about $45,000 per year to the MIA to develop new talent and support the music industry in Newfoundland and Labrador. We know that Newfoundland is brimming with talent such as Great Big Sea and Kim Stockwood, and we would like to help a few more make it big.
7806 We have developed a plan with the MIA to be administered by them. The plan has four elements: $12,000 in music industry scholarships each year; $15,000 each year to support the MIA's Annual Conference and Awards Show to provide them with a better showcase for their talents; $6,000 annually to reach out to the smaller centres across the province, with information on entering the music business; and, $12,000 each year will be awarded in $1,500 bursaries to support the creation of eight recording projects wether demos or CDs.
7807 A total of $45,000 per year for the next seven years or some $315,000 to support Newfoundland talent.
7808 In addition, we decided that we needed something that would really jumpstart our new Newfoundland music station. We will contribute an additional $100,000 to support the station: $75,000 for recordings and $25,000 to augment its Web sites to include information about Newfoundland music and allow Newfoundland artists to reach a wider audience.
7809 On the screen you see a model of the home page. The station will be provided on our Web site so that Newfoundlanders around the rest of Canada and the world will be able to keep in touch with the latest music from home. We expect that we will spend much of the $75,000 on recordings early on in the licence term, perhaps even before re-launch to help create a larger supply of digitally mastered recordings to showcase the music.
7810 This chart shows the total incremental benefits that NewCap will provide if the Commission approves this transaction. They total more than $1.1 million over the next seven years.
7811 The next chart shows that including our existing commitments to Canadian talent, we will contribute $415,000 in support of Newfoundland music and musicians.
7812 MR. H. STEELE: We are excited about the opportunity to operate the fine stations developed by the Butler family. We see this as a merger of energies; the strengths of our companies complement each other.
7813 I would like to reiterate the following points in putting forward our case.
7814 In total, Newfoundland radio has not been on a sound financial footing for some time. It is only our commitment and pride as Newfoundlanders that has kept us involved -- and I guess some would say is just plain stubbornness. Approval of our application will create a stronger radio company, one that can maintain the high quality that radio provides now and that can create a greater diversity of service.
7815 When I appeared before the Commission to purchase the Q radio stations from the CHUM group, I was asked how long I was willing to invest in the stations if things did not turn around in the time we had hoped for. I said then and I say now, "We will do whatever it takes."
7816 Well, in the 10 years we have operated, as you have heard earlier, we have invested some $12.6 million before getting finally to a cash break-even position in 1998. We will bring the same patience and dedication and commitment to the VOCM group of stations.
7817 Approval of our application for an exception to your ownership policy will mean that radio in Newfoundland will be put on a sound financial footing. It will also bring a better reflection of our own culture in all the markets of Newfoundland and Labrador, a new Newfoundland music-oriented station for all Newfoundland that will showcase our music and culture and an investment in the music industry to support it.
7818 Before closing I would like once more to pay tribute to the incredible job done by the Butler family over the past 63 years of radio in Newfoundland. We know that if you grant this application for us that we have big shoes to fill and an important trust to keep. We feel we are up to it.
7819 It is interesting that no Newfoundlander or Labradorean has intervened against this application. As a matter of fact, we have received support from our biggest competitor, the Stirlings. As proud Newfoundlanders we know we have to perform. We know we have to face our neighbours every day, because in Newfoundland there is a closeness you don't find anywhere else in this country, right across the Board. We compete competitively, but we also support each other.
7820 In our small land we know we have to deliver. We not only have to meet the expectation of the Newfoundland people, we have to exceed it.
7821 Madam Chair and Commissioners, we really would like to keep that fourth station. I promise you we will provide something to Newfoundlanders that nobody else is in a position or will offer to provide. Nobody else will do it. We are not going to make money at it. As a matter of fact, it will cost us some. But in the end it is going to be worth it.
7822 Madam Chair and Commissioners, that completes our presentation and we now invite your questions.
7823 THE CHAIRPERSON: Thank you, Mr. Steele and your colleagues.
7824 As you have stated at the beginning, there is a need for an exception to the Commission's policy, so obviously that is what we will discuss since the other applications are non-appearing.
7825 We understand that you want to keep the four stations, but we have to discuss how we can find the justification for an exception to the policy.
7826 So I will discuss with you some of the effect in Newfoundland of these four stations in light of the Commission's policy and the reason for the policy, which was to ensure that there was, nevertheless, competition left and no undue market dominance and that there was also a diversity of voices. So we will discuss that.
7827 Then I also want to discuss with you the programming proposals you have put forward and the benefits you have put forward.
7828 Lastly, of course, the whole issue of divestiture should the Commission not find a way of granting you four stations in the same market for Christmas.
7829 First, I have with me your application and especially the supplementary brief so I will be referring to it.
7830 On page 2 of that application, and again this morning, you suggest that:
"The emergence of this stronger group in St. John's..."
7831 We are speaking here mostly of St. John's:
"...will place the station on an even ground with the major competitor in the province..."
7832 Which is Newfoundland Broadcasting:
"...which is able to package its province-wide FM and television networks in an efficient and effective buy." (As read)
7833 So I gather your position is, it is only going to make it a more even playing field in Newfoundland, but it nevertheless will lead to the disappearance of one player. I know Mr. Butler is not going to disappear, but instead in St. John's of three commercial broadcasters we will have two.
7834 The effect of that, if we look at the BBMs for the fall of 1998, would be to reduce, by adding the VOCM, 41 per cent share of the audience reach would give NewCap 54 per cent of that, of the radio reach, with Newfoundland Broadcasting remaining -- having 20 per cent and then the remainder split between the religious stations, the CBC, et cetera.
7835 That is certainly a major change. What we had before was NewCap with 13 per cent, VOCM was 41 per cent and Newfoundland Broadcasting was 20 per cent. Assuming that this remains the same, we will now have NewCap with 54 per cent and Newfoundland Broadcasting with 20 per cent.
7836 Do you have any comment on how one reconciles that with levelling the playing field?
7837 MR. TEMPLETON: I will respond to that question, Madam Chairman.
7838 The 54 per cent reach that you are quoting. I believe that is a 12-plus. Is that correct?
7839 THE CHAIRPERSON: Yes.
7840 MR. TEMPLETON: Yes.
7841 The reality of radio advertising and where we drive our revenues, well over 90 per cent of all advertising is between the demographics of 18 and 54. The VOCM numbers are distorted quite a bit because of their tremendous impact on the 45-plus audience. They perform extremely well, especially with VOCM-AM.
7842 That's number one. So in 18-54 it is much more equitable than those numbers would reflect.
7843 The second point I wanted to make, although that may sound, from a competitive point, an imbalance -- and if this is where you are heading with this questioning -- you must realize that what we face as independent broadcasters, and hopefully now coming together as a group, we compete on a day-in/day-out basis with the OZ-FM network, which is a station in St. John's with repeater broadcast right across virtually ever corner of Newfoundland with repeater, no local service.
7844 On top of that, OZ-FM TV -- OZ-TV. This is sold in combination. It is sold locally in combination, it is sold regionally in combination and it sold nationally in combination. It is the way it is presented. It is a total Newfoundland situation to the advertiser. It is a combination of both and these are printed documents that are sold on a regular basis.
7845 This is what we are up against every day. Although it may look here that it is an imbalance of radio, when you look at media, electronic media, OZ is by far -- by far, even with this combination -- the dominant advertiser in the marketplace across the island.
7846 On top of that, we are still trying to provide local service in all those communities across Newfoundland. We need this strong St. John's base if we are going to continue to provide that.
7847 As I said it earlier, Gander is an example. I think you would be hard-pressed to find a community of 12,100 anywhere in Canada that has the level of service that Gander has. Remember, there is VOCM service, there is our service, there is the OZ-FM service, there is CBC local service. It is a service Newfoundlanders have come to expect and we would like to continue that.
7848 MR. J. STEELE: If I could intercede just for one second.
7849 Also another factor in this market is that The Evening Telegram, a Southam newspaper is extremely strong in the St. John's and in the Newfoundland market as a whole. In fact, I think it might be one of their most profitable ones in Canada. So they are a very strong competitor to us, obviously in another media or another forum, but they are still there and they are still very strong.
7850 THE CHAIRPERSON: And is not blind to the presence of newspapers in the hands of the same company as broadcaster, but more when it looks at diversity of voices than -- which we can discuss again.
7851 We are talking here about the competition in radio, both with regard to audience and with market sales.
7852 Now, if your application were approved as it is, is it your expectation that you would actually even improve this audience share of the 12-plus?
7853 MR. TEMPLETON: I think there is a good chance it would decrease some from competitive broadcasting and that may sound like a funny statement. You must remember that in the -- in 12 plus it may increase, but in the key demographics where our business is, the 18 to 54, we expect it might actually drop a bit because we will be focusing -- CJYQ will be totally a Newfoundland based music station.
7854 I don't think it's going to have a lot of advertiser appeal, but it will be a reinvestment in the culture of Newfoundland to continue.
7855 THE CHAIRPERSON: When you talk about advertiser appeal, this is sales. I'm talking about reach.
7856 MR. TEMPLETON: Reach.
7857 THE CHAIRPERSON: What does CJYK do now? What demographic does it appeal to? By making it a music station, aren't you likely to also get some of the younger demographic?
7858 MR. TEMPLETON: It's roughly the same demographic profile as what we are currently dealing on, but I think John Steele is better equipped to address that.
7859 THE CHAIRPERSON: I want to understand your comment that it may drop, that the combined audiences you have now, presumably you are going to keep the stations you are buying at the same level of performance.
7860 You speak often of the well performing VOCM-AM station on your stock. I assume you are going to continue that. You are going to improve your AM station if you keep Pop 4, so that should improve, not decrease.
7861 I don't understand why you would expect audiences to decrease.
7862 MR. TEMPLETON: I don't think we are claiming with this commitment to relaunch CJYQ with a Newfoundland based music station will have more appeal than the current programming that's being offered.
7863 THE CHAIRPERSON: And you are suggesting it may have less.
7864 MR. TEMPLETON: It may have less.
7865 THE CHAIRPERSON: Because of the demographic change?
7866 MR. TEMPLETON: That and it's not a commercially viable format. I think Mr. Steele mentioned that earlier, that no one else could provide the service. It really is an investment in Newfoundland music, Newfoundland culture.
7867 We will, I'm almost certain, lose money by providing this service. We think some of that AM tuning may switch over to either our new FM, if we are granted the licence, or OZ because we will be discontinuing that service.
7868 THE CHAIRPERSON: You talk your intention. So this is going to be a loss leader just because you have the station. You are not going to attempt to change its programming in a way that would increase audience share, but you will do something that is appealing in the public interest, not with a view to improving its bottom line.
7869 MR. TEMPLETON: It's hard to respond to that, but let me try and explain. The current audience we have will go somewhere on the AM station. Some will come over to our FM station, the new FM station that we are trying to acquire, and some I would think would go to OZ-FM as well.
7870 We fully expect that the AM station audience will decline. If we didn't believe this, we would have done this many, many years ago, if we thought this was commercially viable to offer this on a full time basis.
7871 THE CHAIRPERSON: Well, I'm puzzled by that. We will discuss that later. It raises concerns because if you were given an exception and you are not proposing to attempt to improve the performance in audience and sales of the AM station, then the question becomes well, how long will that stay open or continue.
7872 I would have thought your plan would have lead to keeping as much as possible the audience you have and improving even so that there is a benefit to owning the four stations, which is to allow you to make CJYQ more appealing or are you just saying it's going to be a Newfoundland music station in the public interest, that's what we are putting forward as a benefit, so to speak, of a station that we don't expect to get out of a negative PBIT.
7873 MR. TEMPLETON: Yes, Madam Chair. If I can make this comment.
7874 We are fully committed to this and we will accept it as a condition of licence that we will commit to this format for the full term of the licence. I think Mr. Steele has owned these properties for a decade and has never wavered in his financial support to continue these operations.
7875 We will do whatever it takes to maintain that service 24 hours a day, seven days a week, for at least the term of this licence, and if you will extend it longer than that, we will accept that as well.
7876 THE CHAIRPERSON: I understand that, but why is it not your plan to find a way of making it appealing to us as a proposition, but appealing to audiences and advertisers as well to improve your capacity to perform on all four stations?
7877 MR. J. STEELE: If I can just step in for a second.
7878 THE CHAIRPERSON: I hope you don't think it's a negative to tell us let us keep the four stations and we will make all of them good stations that will appeal to audiences and sell and make us money.
7879 MR. J. STEELE: We will make every effort to sell on the four stations. Right now the proposed format for Q93 there will be some cannibalization of the CKIX country FM signal. There is some crossover there.
7880 We also see that there might be some cannibalization of some of the other formats on the news/talk possibly and also a little bit off the rock.
7881 One thing I think you have got to remember, Newfoundland music right now is probably at its apex, something like country music was when Garth Brooks came on it. Great Big Sea is our Garth Brooks. How long they can keep it going and keep it at the forefront, who knows, but to bring in people to that fold right now and will that wane in a year or two, we don't know, we hope not.
7882 I think that is something to consider. We are probably at the popularity peak of the format right now.
7883 THE CHAIRPERSON: Explain to me further what you mean by "cannibalization". I would have thought that if you were allowed to own three stations instead of two, four stations instead of three, you would have synergies.
7884 You have in an appendix to your supplementary brief tried to quantify synergies, but I don't understand what you mean by cannibalization. You don't mean as between the stations that you would now own. Why would the situation get worse just because you own them?
7885 MR. J. STEELE: What I meant by cannibalization, if you are listening to country music on CKIX country because there's some crossover appeal there with mandolins and violins and some of that sound does play to our Celtic music that some of those listeners may go to the AM. That's what I mean by cannibalization.
7886 THE CHAIRPERSON: That the change in CJYQ would be similar enough to other stations so that you wouldn't get the full.
7887 I want to understand why when there are four stations in a market, one losing money, others doing better, both the AM that you are purchasing -- well, the AM is certainly doing much better than the AM the AM that you now own -- why would that when it's under your ownership, all four of them, would not cumulatively be as good financially and from audience as it was when it was owned by two people.
7888 MR. H. STEELE: Madam Chair, cumulatively we expect the audience level overall to be about what it is now, but what we expect is the AM station to probably decrease and that will be picked up amongst the stations we have in OZ-FM.
7889 It's difficult to predict because this service has never been offered in Newfoundland on a full time basis. We have researched it. There does appear to be a strong level of support. We don't think it's commercially -- we are certain it's not a commercially viable level of support.
7890 We are committed to offering this service and we think we can help proffer it, Newfoundland music.
7891 THE CHAIRPERSON: How much worse can it do than it's doing now without it being an absolute impossibility for a company to keep programming it?
7892 MR. H. STEELE: Madam Chair, nothing is impossible in Newfoundland, number one. Anything can happen.
7893 THE CHAIRPERSON: Even exceptions.
7894 MR. H. STEELE: We don't want to over-promise. The thing is that we are prepared to do this. We want to do this and we are prepared to pay for it. If it doesn't take a nickel in revenue, it's not going to be an economic disaster for us. It's something we want to do and we are prepared to provide it.
7895 I can assure you, because I know Newfoundland better than most, there's nobody else going to offer to do this. We like to do it and we will take the economic consequence. If it was better, we hope it is, there's more money than we expect but I have learned a long time ago, when you over-promise you get in trouble, and I am not going to do that.
7896 THE CHAIRPERSON: The reason I'm asking this question, which we will probably discuss again at the end when we talk about what happens if the Commission is not prepared to allow an exception, is both this morning and in more than one place in your application -- I'm looking now at page 13 of the supplementary brief.
7897 You talk about the commitments you made before and the fact that you have spent -- they have lost $9 million in operating losses and $3.6 million in capital expenditures. There is a suggestion that one of the reasons why we should allow this exception is you can't continue losing this much money, investing this much money without results.
7898 So it's important for us to look at the credibility of this four-station proposal and why an exception should be granted; is that that station you will do what you can to make that station at least operating as well as it is now. Otherwise, you are into more losses and it doesn't look very appealing for us to put all the benefits, programming and otherwise, into CJYQ if it going to get even worse in its results.
7899 MR. H. STEELE: I think we have got to be prepared for that. Maybe it will get better. I don't know, but I think --
7900 THE CHAIRPERSON: But I would have thought you would have a plan to tell us it's going to improve.
7901 MR. H. STEELE: Yes, but I don't want to come back here in five years' time and you say, "Well, you didn't improve." I'll feel a lot better.
7902 THE CHAIRPERSON: Well, that's what has happened now, but you have lost -- you have made a lot of investments that are barely turning around now and that's laudable obviously, but what you put before us now also has to look credible for the future. That because of the particular situation in Newfoundland we should grant an exception and one of the advantages is there will be four, I would have thought, stations that are operating in such a fashion that a reasonable businessman, and I know even Newfoundlanders are reasonable, would keep operating it over time.
7903 MR. J. STEELE: There will be synergies on the back end of the business, in the real estate, in the administrative, in probably some saving of promotional monies, that type of thing. That's what makes this attractive to us. That's where the savings will be.
7904 We don't see big savings in programming or in news.
7905 THE CHAIRPERSON: I will look at that chart of synergies with you, but before we leave this, the competition that would be reduced if we allowed this in the St. John's market, and you have reasons for saying why an exemption would make sense, would not only possibly end up with a large audience share in the hands of one company, but also the market -- the radio sales which from our calculation would be close to 75 per cent, possibly, of radio market sales. So that's quite -- you know, you get quite close to calling that dominance in the radio market.
7906 MR. TEMPLETON: From a purely radio perspective 75/25 is a fairly dominant position, I agree. But I really think you have to think what we are talking about. This is Newfoundland and people look for simple, easy ways to advertise to all Newfoundlanders. St. John's is the hub, that's where it is all happening, but through television and radio and combination you can reach the entire province. That's what we compete with every day, day in and day out.
7907 THE CHAIRPERSON: Because of your radio competitor also being in television.
7908 MR. TEMPLETON: That's right, and it is sold in combination.
7909 THE CHAIRPERSON: Now, those stations that Newfoundland Broadcasting has, they are pure rebroadcasters, I gathered from your comment, the A3 broadcasters.
7910 MR. TEMPLETON: I'm sorry, OZ-FM?
7911 THE CHAIRPERSON: Yes.
7912 MR. TEMPLETON: Yes, it's a --
7913 THE CHAIRPERSON: They are pure rebroadcasters?
7914 MR. TEMPLETON: St. John's and rebroadcast right upon the island.
7915 THE CHAIRPERSON: And what about the television?
7916 MR. TEMPLETON: Television. John can speak to television.
7917 MR. J. STEELE: Television comes out of St. John's is rebroadcast right across also.
7918 THE CHAIRPERSON: So what you are saying is don't get too excited about the 75 per cent radio market sales because my competitor can sell the entire province, both in television and in radio --
7919 MR. TEMPLETON: That's correct.
7920 THE CHAIRPERSON: -- which is not the same thing that I have.
7921 MR. TEMPLETON: Madam Chair, if I can just add one other comment. I know you are quite concerned about this four stations and it sounds like we are trying to act like we are Santa Clause here. I wouldn't look for economic logic with this commitment to this station. It is an issue of pride.
7922 Quite frankly, we could have listed it down in our benefits package. We wouldn't do that, but we consider it in our world it's a benefit. It's not economically logical. It's an issue of pride.
7923 I've worked for this man for six years and Newfoundland is tattooed on his forehead. He is a proud Newfoundlander and I've learned when it comes to Newfoundland whatever Newfoundland needs Newfoundland gets, period, end of sentence.
7924 THE CHAIRPERSON: That's a very long province to get tattooed.
--- Laughter / Rires
7925 THE CHAIRPERSON: You would have done better with PEI.
--- Laughter / Rires
7926 THE CHAIRPERSON: Before we leave this area of competition -- so, we'll talk again, of course, about your plans for your own station. I always fear I will say it's CJYQ, that I will say the wrong -- use Newfoundland Broadcasting instead of yours.
7927 We have talked also about the sales and the advantage that your competitor would have, which, of course, VOCM has dealt with as well and has managed to program an AM station that does reasonably well in comparison to CJYQ, so that's why we have these questions. All the stations should be programmed in a manner that is financially successful, as well as providing service to the public obviously.
7928 In the area of diversity, although it is not our bailiwick, when we look at the number of voices in the market we also look at other media. You mentioned your competitor being involved in print and so is NewCap. Would you explain to me more -- first of all, tell me what is available in St. John's from NewCap in relation to print? I am going to use NewCap, if you don't mind, rather than the subsidiary company.
7929 MR. H. STEELE: Sure, absolutely.
7930 In NewCap the only thing we have in print is our weekly newspapers. We have got in St. John's it's called The Express. It used to be The Sunday Express and they changed it to The Express and that comes out once a week. It competes with The Evening Telegram, which is a very successful paper. It belongs to Southam, extremely successful and covers the whole province.
7931 In addition to The Express in St. John's we have 15 other weekly newspapers across Newfoundland and Labrador.
7932 THE CHAIRPERSON: So they would be available in some cases where some of the radio stations that you are purchasing are?
7933 MR. H. STEELE: That's right.
7934 THE CHAIRPERSON: So there would be some instances where a NewCap newspaper would be available in an area where you will have a radio station other than St. John's.
7935 MR. H. STEELE: Absolutely, yes.
7936 THE CHAIRPERSON: Now, you say at page 30 of your supplementary brief that the news organization and the broadcasting are kept separate and they are separate and distinct from each other. How is that accomplished?
7937 MR. H. STEELE: Well, they don't work together at all. Like each newspaper has its manager, has its own editor. We don't have any editorial policy as such and we don't cover a lot of national news, even much provincial news. Most of the things we cover in all our newspapers are local to the area which we serve and there is absolutely no interface whatsoever between the newspapers and the radio.
7938 THE CHAIRPERSON: And what about in sales?
7939 MR. H. STEELE: No accommodation in sales whatsoever. We tried it. As a matter of fact, we have tried to do that when we owned the daily newspaper in Halifax. We tried to interface it with the radio and they are entirely different cultures and we couldn't get it to work and we have never tried it in Newfoundland.
7940 THE CHAIRPERSON: You don't think you would be tempted to try it once you have -- if you were to have four radio stations in Newfoundland?
7941 MR. H. STEELE: Not at all.
7942 THE CHAIRPERSON: Rather than --
7943 MR. H. STEELE: Not at all. The newspapers are extremely successful on their own and there is absolutely no reason to try and interface with radio whatsoever.
7944 MR. TEMPLETON: Madam Chairman?
7945 THE CHAIRPERSON: Yes.
7946 MR. TEMPLETON: Sorry, Madam Chair, I was going to add to Mr. Steele's comments. He has had some experience trying to combine in Halifax. He mentioned The Daily News.
7947 I used to look after the Ontario group of stations for Telemedia. We had a community newspaper group and we tried in vain, believe me we tried for over three years to try and combine operations of small community papers and that's the papers we are talking about. These are small weekly newspapers we are talking about, and with nothing but frustration. They are completely different media. They are sold differently. It was a disaster and that was my experience and Mr. Steele had some as well and it's just not viable.
7948 MR. H. STEELE: Madam Chair, I found the culture so very different, like radio people love to talk and newspaper people love to listen and they can never get together. I find whenever I am talking to radio people they are not listening.
7949 THE CHAIRPERSON: It would be a great combination. It makes for a terrific marriage, one talks and the other one listens.
7950 How do you -- I cannot attest to that.
--- Laughter / Rires
7951 THE CHAIRPERSON: How do we ensure that you are not going to try this again differently and it will work, to combine them? Are there any assurances you can give the Commission or commitments? You probably know that in some circumstances we have either asked for the institution of an ombudsman or commitments about the separation of the news services of the two media. Do you have any suggestion as to what you would be prepared to make as a commitment so that you don't try again, Mr. Templeton, and find the right way this time of making it work for you?
7952 MR. H. STEELE: Madam Chair, I have thought about it because I know the history of what has been said about this in the past. I can't give --
7953 THE CHAIRPERSON: Primarily as a maritimer.
7954 MR. H. STEELE: But I can't give you anything other than my word because I just don't know how to do it.
7955 I see no requirement for us now or in the foreseeable future to want to put these together. We have no plan to do it.
7956 I am afraid there is no more I can say about it than that.
7957 THE CHAIRPERSON: Other than registering the Commission's concern that it would have if there were to be a change in this policy in the company, then it would bring another concern into the mix.
7958 So you have no problem with us requiring that this continue.
7959 MR. H. STEELE: None whatsoever. And Newfoundland, although it is a big area, it is still a small place in terms of population.
7960 When I look at the choices that are available in Newfoundland, we are pretty small potatoes really. You have the CBC, which is everywhere. You have NTV, Newfoundland Broadcasting with NTV, and OZ-FM. They are everywhere. OZ-FM has by far and away the best coverage in all of Newfoundland, the most extensive. I go all over and I hear them everywhere.
7961 You have any of these centres where we are, Grand Falls, Gander, Corner Brook and St. John's, of course, get the National Post, the Globe and Mail and the Evening Telegram, which is everywhere; and the Western Star on the west coast of Newfoundland, which is owned by Southam.
7962 So there are lots of people out there competing. There is lots of competition. And you have the mighty CBC.
7963 THE CHAIRPERSON: I gather from your earlier comments that since Newfoundlanders watch each other anyway, we don't need an ombudsman.
7964 MR. H. STEELE: That's right. They know how to deal with you. Joe can tell you that.
7965 THE CHAIRPERSON: My concern is that competitors can be so friendly.
--- Laughter / Rires
7966 MR. J. STEELE: It wasn't always like this.
7967 THE CHAIRPERSON: I would like to have another look at that Appendix C that is attached to your deficiencies outlining the synergies.
7968 I heard you say, Mr. Steele, that -- shall I call you "Mr. Steele The Younger"?
7969 MR. J. STEELE: No; John.
7970 THE CHAIRPERSON: I heard you say that the synergies will just be as a result of technical costs that would go down, sales and administration, but no synergies in programming.
7971 MR. J. STEELE: That is correct. As we spoke of earlier, VOCM is a very successful new service and that is one of the pillars of their strength.
7972 Quite frankly, in order for us to survive over the years, we have had to pare back our programming and news to almost a bare bones level. We have no more area there to go in terms of reductions.
7973 We think that the VOCM news service will enhance our products.
7974 THE CHAIRPERSON: You talk somewhere in your supplementary brief about their facilities, physical facilities for news and production, which should enhance --
7975 MR. J. STEELE: Exactly.
7976 THE CHAIRPERSON: I don't suspect Mr. Butler invited you for coffee every morning last year.
7977 MR. J. STEELE: Definitely not.
7978 If I could say one thing: To mess with the news programming in terms of reducing it with VOCM would be like buying McDonald's and trying to change the recipe to the Big Mac. It would be absolutely ludicrous to do it. That is one of their strengths.
7979 So we would not want to do it, and we don't entertain doing it.
7980 THE CHAIRPERSON: Nevertheless, where synergies are concerned, it could strengthen areas of your own station where there may be --
7981 MR. J. STEELE: Very much so.
7982 THE CHAIRPERSON: And you are saying it won't be at the expense of having fewer staff in programming.
7983 MR. J. STEELE: That is correct.
7984 THE CHAIRPERSON: It would be a benefit. You will use it for the benefit.
7985 MR. J. STEELE: That is correct.
7986 MR. TEMPLETON: Madam Chair, perhaps I could add to this, to relate it back radio.
7987 VOCM-AM is the franchise, and there are not many cases in Canada where somebody will say the AM station is the franchise.
7988 We all know the power of CKNW in Vancouver; we know the power of CJAD; we know the power of CFRB. They pale in comparison to the power that VOCM, the audience it commands right across Newfoundland. It is the voice of the common man. It is the radio of record.
7989 Government policy falls out from open line shows that go right across the island. It is the franchise. That is what we are buying. So we are committed to maintaining that.
7990 Mr. Butler -- believe me, we looked at it many, many times. It was like taking on Goliath. That was their franchise. They built it up, and we intend to maintain that dignity and that wonderful service.
7991 Newfoundlanders demand it. They are information hungry in Newfoundland. It is part of the culture and the heritage of that severe climate that they have grown up with over the centuries. They are so dependent on information because they are so isolated.
7992 Joe recognized that, and he has been offering that service for 63 years. We intend to maintain and hopefully maybe improve on it.
7993 MR. J. STEELE: Perhaps I could add one thing to that.
7994 I think the fact that nobody from Newfoundland intervened against us goes to show the trust that people of Newfoundland and Labrador have that we are not going to mess with it. They have had lots of avenues and forums that they could express concern about if that was an issue with them. I think they are comfortable with what we are putting forth.
7995 THE CHAIRPERSON: In the synergies appendix, at about the middle, you have combined without approval technical sales and administration.
7996 Is that the combination of your own two stations? What does that mean, as opposed to combined assuming approval?
7997 I am looking at Appendix C attached to your supplementary brief.
7998 MR. TEMPLETON: I am not certain if I understood your question.
7999 THE CHAIRPERSON: I am trying to understand what the numbers are where you talk about the synergies of the transaction. Under operating expenses you have technical sales and administration under two different titles. One is Combined Without Approval and Combined Assuming Approval.
8000 What is Combined Without Approval?
8001 MR. MURRAY: We were obviously trying to make this as confusing as possible, to ourselves as well.
8002 What that means is that that is the total of the estimated operating expenses of the two independent businesses, assuming the purchase did not take place. And then assuming approval would be NewCap's expenses of all of the licences. And the difference in each of the departments is shown just below that in Year One: $55,000 technical; $248,000, et cetera.
8003 THE CHAIRPERSON: So combined with that approval are the costs under those rubrics for VOCM and your two stations owned separately.
8004 MR. MURRAY: Well, it is not just St. John's; it is the entire network.
8005 THE CHAIRPERSON: Oh, the entire network.
8006 I was trying to relate this to owning the four stations. So we can't really do this from this sheet.
8007 We can't say what is the difference going to be if you have three stations in St. John's rather than four. I couldn't find any answer to that.
8008 Here you are talking about synergies that would result from the entire applications, all the applications being approved as filed.
8009 MR. MURRAY: That is right. That is what we interpreted the question to be.
8010 THE CHAIRPERSON: So we wouldn't know what would happen if you had to divest of one station; what the synergies would be. From this sheet I can't get that.
8011 MR. MURRAY: If we had to divest of the fourth station in St. John's, we believe we would be more profitable. As we have indicated a couple of times --
8012 THE CHAIRPERSON: If it were that station. But you and I may not agree as to which one is the fourth station.
8013 Anyway, we will discuss that a bit later.
8014 MR. MURRAY: No comment.
8015 THE CHAIRPERSON: I thought you were looking a little bit too happy there.
--- Laughter / Rires
8016 THE CHAIRPERSON: Let's look at the benefits. I don't have too many questions. They are usually fairly understandable.
8017 At the bottom of page 3, I have a question as to what this is: that you will combine your existing Canadian talent development moneys with the 1 per cent benefits money that you already are bound to spend and perhaps VOCM stations as well.
8018 MR. MURRAY: Yes, that's --
8019 THE CHAIRPERSON: To an amount that would be some $45,000 a year to MIA. Is that it?
8020 You would take the 1 per cent in benefits -- I understand benefits as being quite different from CTDs. So the 1 per cent in benefits from this transaction would be added to the CTD commitments of both companies for the St. John's station.
8021 MR. MURRAY: Yes, that is correct. As the chart shows there, the NewCap existing CTD initiatives would total $81,500. That is actually inflated -- and I can explain that, if you like.
8022 The VOCM existing CTD, if no purchase took place, would be the $56,000. And because of the purchase, we are adding the 1 per cent, or an additional $177,500, to come up with $315,000 over seven years, which is the $45,000 per year.
8023 THE CHAIRPERSON: And these are the CTD commitments for the remaining years of the licence.
8024 MR. MURRAY: Yes. Those would continue onward once the seven-year licence expired and the $1,162,000 commitment was made. We would be continuing to make this $130,000, approximately.
8025 THE CHAIRPERSON: As I understand it, the first part of this transaction is that there will be new licences issued, the assets are sold, and then you buy the shares of the company to which the assets were sold. So when these licences are reissued, are those commitments normally stated by year so it wouldn't matter how many years are left?
8026 The Canadian talent development ones are annual sums, because I don't really know whether we will issue the licences then for a full seven years. There will be new licences issued technically in this context on the same terms and conditions as before.
8027 MR. TEMPLETON: Yes. They are ongoing commitments as long as that policy remains in effect.
8028 THE CHAIRPERSON: Stated annually --
8029 Mr. TEMPLETON: Yes.
8030 THE CHAIRPERSON: -- and will end up with the additional 1 per cent benefits of CTDs of $45,000 a year.
8031 MR. TEMPLETON: Over the term of the licence.
8032 THE CHAIRPERSON: Now, in programming, at page 39, you say that you are prepared to commit yourself to 40 per cent Cancon. That is instead of 35 per cent in the Category II music. Is that correct?
8033 MR. J. STEELE: Yes, that's correct. I don't know if it is appropriate, but that is -- we erred on the side of caution there. We are confident that it will be much higher than that.
8034 THE CHAIRPERSON: But you are prepared, from what I read at page 39, to accept a condition of licence on CJYQ-AM of 40 per cent Canadian content --
8035 MR. J. STEELE: That's correct.
8036 THE CHAIRPERSON: -- in Category II music, of which 20 per cent would be Newfoundland music from Newfoundland artists.
8037 MR. J. STEELE: At least.
8038 THE CHAIRPERSON: How would that be defined, how that 20 per cent is met?
8039 MR. J. STEELE: Do you mean by using the Maple System or --
8040 THE CHAIRPERSON: No. Obviously, the 40 per cent will.
8041 MR. J. STEELE: Yes.
8042 THE CHAIRPERSON: But how would one then test the 20 per cent from Newfoundland artists?
8043 MR. J. STEELE: We would have it that people that are born in Newfoundland or current residents of Newfoundland would be determined as Newfoundland music.
8044 THE CHAIRPERSON: Born in Newfoundland would be good enough?
8045 MR. TEMPLETON: I think the MIA probably --
8046 THE CHAIRPERSON: Has a definition?
8047 MR. TEMPLETON: -- has a definition of a Newfoundland musician, I would think, and they will be speaking later on.
8048 THE CHAIRPERSON: Because if it is put forward, that 20 per cent of the 40 per cent --
8049 MR. TEMPLETON: We would accept that, that 50 per cent of the 40 would be.
8050 THE CHAIRPERSON: You also are -- yes?
8051 MR. TEMPLETON: It is 50 per cent of the 40 per cent, meaning 20 per cent of the total but 50 per cent of the 40.
8052 Half the Canadian music that we are committing will be Newfoundland music, and we have been very conservative, Madam Chair. The only hesitation we have is the availability of the amount of music and how quickly it turns over.
8053 There is a good universe of Newfoundland music already and we intend to add to that and encourage more. We will drive that up as high as we possibly can. If we can get it to 60 per cent, we will.
8054 THE CHAIRPERSON: I'm not sure I understand. Forty per cent of Category II music will be Canadian.
8055 MR. TEMPLETON: Correct.
8056 THE CHAIRPERSON: And 20 per cent, are you saying, of Category II music will be from Newfoundland artists?
8057 MR. TEMPLETON: I'm just trying to remember my categories. That's Canadian, isn't it?
8058 THE CHAIRPERSON: Yes.
8059 MR. TEMPLETON: Yes. Of the Canadian commitment of 40 per cent, half of that will be Newfoundland music as a minimum.
8060 THE CHAIRPERSON: Yes. But why is it not 20 per cent of 40 per cent, because I assume that the Newfoundland artists will also be in the 40 per cent; it won't be in addition. It will be Canadian if they are Newfoundlanders, unless there is something going on that I don't know about.
8061 MR. TEMPLETON: Four out of 10 selections played on the station will Canadian music.
8062 THE CHAIRPERSON: Right.
8063 MR. TEMPLETON: Two of those four will be -- minimum, will be Newfoundland music.
8064 THE CHAIRPERSON: Okay. Okay.
8065 So that is where you get the 50 per cent?
8066 MR. TEMPLETON: Yes. A minimum of that. We expect it to be considerably higher, considerably higher.
8067 THE CHAIRPERSON: You also have a project to which you will assign $100,000 in addition to your benefits to have a minimum of eight hours of special programming devoted to Newfoundland artists.
8068 What is the relationship between these two commitments? I assume that some of that will be music, some may be something else. Tell me more about what it is that this eight hours will be.
8069 MR. J. STEELE: That eight ours is for the outside stations that NewCap serves. We will use this station as a funnel to create eight hours of programming for those outside stations.
8070 THE CHAIRPERSON: But it will also be on CJYQ?
8071 MR. J. STEELE: That's correct.
8072 THE CHAIRPERSON: So on CJYQ we will have 40 per cent Cancon in Category II, and half of that will be from Newfoundland artists, and eight hours of programming devoted to Newfoundland artists, not only music. It could be comedy, it could be --
8073 MR. J. STEELE: It could be comedy, it could be interviews that artists -- you know, different plays, that type of thing.
8074 THE CHAIRPERSON: And some of it could be fulfilled by this Category II music?
8075 MR. J. STEELE: Correct.
8076 THE CHAIRPERSON: And that will be made available to the areas where you have originating stations?
8077 MR. J. STEELE: That's correct.
8078 MR. TEMPLETON: Madam Chair, if I could add to that.
8079 It is our intention to program these stations with a minimum of 40 per cent, and half of that being -- 40 per cent Canadian, half of that being Newfoundland music, traditional and new Newfoundland music.
8080 In addition, we are offering eight hours of programming per week of high quality to smaller communities that could not produce anything at this level so that this music can be shared right across the island or through most of the island. We have not promised that, that that will be in addition to, but we are very confident that we will be able to meet that.
8081 THE CHAIRPERSON: How will that be funnelled to your other stations in the other markets in Newfoundland?
8082 MR. TEMPLETON: There are a number of ways of distributing, from tape to satellite. I don't think the actual details have been worked. Probably it will be electronically transmitted.
8083 THE CHAIRPERSON: They will then insert that in blocks of some sort depending on whether it is music, comedy or --
8084 MR. TEMPLETON: Yes.
8085 THE CHAIRPERSON: It could be theatre as well?
8086 MR. TEMPLETON: That's correct.
8087 THE CHAIRPERSON: It could be bicycled, it could be by satellite, it could be whatever.
8088 MR. TEMPLETON: Tape.
8089 MR. J. STEELE: It's a long way across, though.
--- Laughter / Rires
8090 THE CHAIRPERSON: Yes.
8091 MR. J. STEELE: I don't think that transmission is an issue.
8092 THE CHAIRPERSON: Is a problem.
8093 MR. J. STEELE: No.
8094 THE CHAIRPERSON: And those stations may not all program it in the same manner at the same time.
8095 MR. TEMPLETON: No. When it fits locally, when it is most appropriate locally.
8096 Also, there will probably be a stronger element of traditional Newfoundland music, because in some of these communities, the outports -- and Mr. Steele is much more qualified to speak on the culture of those outports -- when you get into some of these communities, this is the music that a lot of these communities grew up on, and they really appreciate it when you feature this music from the past 20 or 30 years.
8097 The MIA initiative we are talking about is primarily new contemporary, but there is a very strong Newfoundland-based traditional music which we intend to feature as well to service these areas.
8098 John, do you want to comment on this?
8099 MR. J. STEELE: Yes.
8100 For example, in St. John's there is a big Irish heritage, so that Celtic sound in St. John's is very popular, and it is popular in other parts of the island too. But outside of St. John's and central Newfoundland, for example, there is more of a Newfoundland-country sound which doesn't incorporate fiddles and those type of Celtic influences as much into their music.
8101 Then you have some of the French communities in Newfoundland on the outports that are very accordion-based, but it is a different style of playing accordion than a person in St. John's plays. I can't give you the technical details of it, I don't play it, but, you know, I know it sounds different.
8102 So, for example, in central Newfoundland, when you are playing music, you may not have as much Celtic music into -- a Newfoundland Celtic, but there would be some, and in St. John's we find that this Newfoundland country, for lack of a better term, doesn't really go over that well.
8103 THE CHAIRPERSON: But won't the same eight hours be heard in St. John's that will be heard in the other stations?
8104 MR. TEMPLETON: Yes. Yes, it will be. This high quality centralized product we will supply to the smaller markets, but they may air it at different times as opposed to a network.
8105 THE CHAIRPERSON: Right.
8106 MR. TEMPLETON: One may find it more appropriate Saturday afternoon for four hours. Another market may find it more appropriate on Friday nights or whatever the case.
8107 THE CHAIRPERSON: Yes, for scheduling and what kind of logs.
8108 MR. TEMPLETON: Yes.
8109 THE CHAIRPERSON: Because from what I heard you say, Mr. Steele, not everything that is appealing in some areas of Newfoundland may be appealing in St. John's, but, nevertheless, it will be on CJYQ. Those eight hours will be produced by CJYQ and distributed for playing in the other stations.
8110 MR. J. STEELE: But it can be fine tuned in the markets that it goes out to.
8111 THE CHAIRPERSON: Not only in scheduling, but in what you pick.
8112 MR. J. STEELE: Exactly.
8113 THE CHAIRPERSON: But your commitment is that in all those stations that you identify I think in one of the appendices there will be eight hours of Newfoundland artists production.
8114 MR. J. STEELE: Correct.
8115 MR. TEMPLETON: That is a minimum commitment.
8116 THE CHAIRPERSON: With the fine-tuning in each market, both in relation to what they what they choose and how they schedule it.
8117 MR. TEMPLETON: That's correct. A local decision, yes.
8118 THE CHAIRPERSON: Now divestiture or an exception.
8119 You referred this morning, and in many places in your application, that CJYQ-AM being the fourth station that causes a problem.
8120 Before you bought Mr. Butler's stations you didn't have a problem with CJYQ. Why is it the fourth station? Why isn't one of the stations you are purchasing the problem?
8121 MR. H. STEELE: Madam Chairman, why is it?
8122 THE CHAIRPERSON: What I am driving at is, if the Commission can't grant the exception, why could it not require you to divest of one of the stations you purchased?
8123 MR. H. STEELE: I don't think that would be appropriate because, look, what we are doing is we have tried for 10 years, we are a long way astern. We caught up to some degree, but we could carry on. I mean, we are never going to leave the market.
8124 But Mr. Butler's station, VOCM, as Mr. Templeton said just now, I mean that is the franchise. That is the rock-solid franchise. The other station, being FM, is more attractive than AM. So that is what we want to buy.
8125 If we, in reasonable time, could have caught up with VOCM in Q radio we would have done it, but it was a long ride and we weren't making enough progress. Your lifetime would go by.
8126 So I don't think the issue is whether it should be VOCM or Magic 97. That is what we are buying, is a combination. That's where the --
8127 THE CHAIRPERSON: But that is what you are seeking permission to purchase.
8128 MR. H. STEELE: That's right.
8129 THE CHAIRPERSON: That's why I say it's not that clear to me that the problematic station is the one that you own. The problem is, you are coming before us with a purchase which creates -- the purchase creates a problem.
8130 Is your Agreement of Purchase and Sale such that if you weren't purchasing all the stations that Mr. Butler is selling you that the deal would be impossible?
8131 MR. H. STEELE: It would be. It would be.
8132 The market is St. John's. That's where most of the people live, that is where most of the money is, and the rest of Newfoundland, large area that it is -- I mean, generally people think of Newfoundland, you think you can just go there on an afternoon. Well, it's 547 miles from St. John's to Port-aux-Basques. The thing is that we have to provide the service over that whole area out here and we have to get some revenues to do it and that's where it is is in St. John's.
8133 THE CHAIRPERSON: I meant your Agreement of Purchase and Sale, not what you view as an impossibility in operation, but is this deal unseverable, either the purchaser, NewCap, purchases all the stations or the deal is off?
8134 MR. H. STEELE: I have never thought that would -- I never thought in those terms because of the history. I don't know where anybody has been directed to sell a particular station.
8135 THE CHAIRPERSON: Well, yes. It is far more difficult for us to direct you to sell a station that you own and that is not before us legally, than it is for us to require you to make our approval of the whole deal dependent on a part of it being divested.
8136 MR. H. STEELE: Well, Madam Chair, you know, that's a -- what we are asking you is to buy the VOCM ratio stations and what we already own you can tell us to do with as you see fit and, of course, we will do it.
8137 But the issue is, I can't see proceeding with a deal you are telling us to divest of VOCM or Magic 97. I mean, that becomes unpalatable.
8138 I'm at your mercy on the other thing, but --
8139 THE CHAIRPERSON: Because you reluctantly agree in response to that question that you would be prepared to accept a condition of approval to divest of CJYQ-AM. But, on the other hand, on page 5 you say you can't see how a stand-alone operation could be viable whether on the AM or FM band.
8140 Therefore, are you taking the position that no one would buy CJYQ anyway?
8141 MR. H. STEELE: Well, I don't think anybody that -- I was going to say "in their right mind", I don't want to be that harsh. But I don't see why anybody would. I have never received any offers or any expression of interest.
8142 If you look at what the competition is, you are up against formidable odds. We looked at it every way seven ways to Sunday. We have struggled with it. We have thought long and hard about this and we never anticipated closing it down.
8143 If I thought the choice was either sell it or do something with it, like that made some sense, and we thought that what we are offering makes some sense. You know, that is the best face I can put on it.
8144 MR. TEMPLETON: Madam Chair, could I --
8145 THE CHAIRPERSON: Yes.
8146 MR. TEMPLETON: I just want to make sure. Did I get the impression that you thought CJYQ was not a financial hardship to us? Or it wasn't a problem I think is the word you used?
8147 THE CHAIRPERSON: No. I am saying if the Commission can't find a way to grant you the exception, I know Mr. Steele may say only someone not in their right mind would ask such a question --
8148 MR. J. STEELE: No, I didn't mean that.
--- Laughter / Rires
8149 THE CHAIRPERSON: My question is, why would it be, if we can't grant you the exception, that it would necessarily be CJYQ we would feel it is in the public interest to sell, rather than to say "Yes, you can buy all these stations but you can only buy one of them in St. John's because otherwise you have a problem."
8150 MR. H. STEELE: Madam Chair, I think there is a practical aspect to this as well.
8151 Look, we have 63 years of continuous radio since the Butler family put this marvellous asset together. It has gone through three generations of working there. As a matter of fact, there is nobody going to step up to the line and buy VOCM or buy Magic 97 separately and pay anywhere near the money, unless it is somebody who never went to school, because I'm telling you, they won't do it. So Mr. Butler is faced with the prospect of what he would receive probably being cut in half.
8152 THE CHAIRPERSON: Because of the separation of his assets.
8153 MR. H. STEELE: Absolutely.
8154 THE CHAIRPERSON: Now, what about CJYQ? How purchasable is that, if that were the answer to if we could not grant you an exception, as opposed to closing it down.
8155 MR. H. STEELE: I don't know -- we are not going to close it down, we will do whatever you --
8156 THE CHAIRPERSON: No, but if you can't -- if we say a condition of approval is that you divest of CJYQ, which is what you reluctantly offer, but is that a saleable asset by itself to anyone?
8157 MR. H. STEELE: I don't really know. I don't know the total --
8158 THE CHAIRPERSON: Because if we have a problem and you can't sell it, is there any concern that it would stop operating eventually?
8159 MR. H. STEELE: It could only stop operating if you told us to. We will keep operating it.
8160 THE CHAIRPERSON: So you are prepared to give us assurances that CJYQ will remain open?
8161 MR. H. STEELE: Absolutely.
8162 THE CHAIRPERSON: And that you will try to make it a viable station over time?
8163 MR. H. STEELE: Absolutely.
8164 THE CHAIRPERSON: Because your plans and many of your benefits are tied to CJYQ --
8165 MR. H. STEELE: Absolutely.
8166 THE CHAIRPERSON: -- so that if CJYQ were to stop operating the whole concept that you brought forward would fall apart, so to speak. You know, the eight hours and the enrichment of the other services which are brought to us as a benefit to this transaction, and in some way as a counterpoint to the fact that we would have to give you an exception to the policy.
8167 MR. H. STEELE: Yes, of course. But, you know, if you said divest of it, whatever you have to do and tell me what you want done, I will do my best, whatever it is.
8168 And if we can't operate it, as David Murray said just now, it is probably going to cost us money, we are prepared to live with that for the term of the license, whatever it is. So we are making our best considered judgment.
8169 I mean, I'm over there, I live with this every day, I think I know it. I know what we can do. Even the losses, if we don't get any revenue, is not something that we can't endure.
8170 I mean, I like making money as much as anybody, but I lived without money too for a long time so I can get by, believe me.
--- Laughter / Rires
8171 THE CHAIRPERSON: Some of us find it easier to say that than others. So you are prepared to give assurances that CJYQ will, if there were an exception granted and you had the four stations, would be enriched and you would make every attempt to improve its PBIT, because a station that doesn't do well in the market usually is not the service that people expect.
8172 There's that aspect, that it would not simply be something that you have to live with because that was the price that you had to pay for getting this transaction approved and, secondly, there is the concern that a lot of the benefits are attached to the operation of CJYQ in a more appealing fashion, so it is very much tied to the entire concept you place before us.
8173 MR. J. STEELE: Madam Chair, I will be responsible for the station if we are granted what we want to do. I can give you my word, I live there, I have gone to the DMRA. I have asked for their approval. I'm not going to embarrass myself, my family or our company.
8174 We will make every effort that we can to grow this thing. I'm very confident that we will in the long haul do it.
8175 MR. TEMPLETON: And we absolutely commit to maintain that service for as long a licence as you choose to grant us.
8176 THE CHAIRPERSON: Thank you, Mr. Steele.
8177 Counsel has questions for you.
8178 MR. BATSTONE: I would just like to ask a few questions about the benefits. Specifically, there was the hundred thousand dollars that was committed. This is in respect of CJYQ.
8179 Would you be prepared to accept as a conditional licence to devote the $75,000 to the development of local artists specializing in traditional Newfoundland music? I guess I'm just asking for that commitment as a condition of licence.
8180 MR. TEMPLETON: Absolutely.
8181 MR. BATSTONE: With respect to the $25,000 that you had indicated would be directed towards the Web site, I would just like get your comments on -- first of all, are you proposing this as a CTD commitment? Are you saying this would be a CTD commitment?
8182 THE CHAIRPERSON: I don't think that's related. It's a benefit.
8183 MR. TEMPLETON: This is an additional $100,000 over and above the 6 per cent. We chose to allocate 75/25 and the reason behind that is with the Internet exploding, there are Newfoundlanders spread out all across the country and, for that matter, across the world who will now be able to tap in to their proud Newfoundland culture.
8184 MR. BATSTONE: I was confusing that with something else.
8185 MR. TEMPLETON: Okay. That's fine.
8186 MR. BATSTONE: The only other question I think I would like to ask is in respect of the commitments you made for Canadian content and showing Newfoundland artists on CJYQ. It has to do with the fact that CJYQ is not one of the licenses that are being transferred in this process.
8187 I guess my first question to you would be is CJYQ currently more than five years into its licence?
8188 MR. TEMPLETON: I'm not certain of that answer, but we -- I don't know if this is protocol, but we would be more than prepared to reissue a licence if you wanted to do it without making it a conditional licence.
8189 MR. BATSTONE: I will explain the reason for that. The Broadcasting Act permits the Commission to amend a conditional licence after five years into the licence. Where that's not the case, you would have to apply for a condition.
8190 If one were in the situation where you would have to apply, I guess what I'm saying is would you be prepared to come in for an amendment for the licence.
8191 MR. TEMPLETON: Absolutely.
8192 MR. BATSTONE: Those are all my questions.
8193 THE CHAIRPERSON: Thank you, counsel.
8194 Do you have something to add, Mr. Templeton? Any answer to a question not asked?
8195 MR. TEMPLETON: I think Mr. Steele would like to make a closing remark, but I did want to add something that's kind of near and dear to me, the broadcaster in me, diversity of programming.
8196 I have always thought, and you know in our industry it's so silly, especially in smaller communities, unlike the Torontos, Montreals and Ottawas where you have so many choices, there's enough diversity.
8197 In the smaller communities, you end up with two or three broadcasters. You know what happens? They all end up going after the same pie. Half the audience is not being served. With this -- I look at markets in St. John's, but even more importantly, in the Gander and Grand Falls.
8198 Joe Butler, he's got the news information franchise in Gander and Grand Falls, but the non-news and information, which is the majority of the programming, we go to head to head. With this we will be able to diversify.
8199 You granted us, thank you very much, the conversion to FM. We expect to be up and running by this spring with those in Gander and Grand Falls. I mean it's the year 2000 and they don't have FM service other than a repeater.
8200 The programming will be so distinct between the AM and the FM, who wins? The market wins. The consumer wins. As a broadcaster, I want to provide as many products as we possibly can with the resources we have got to diversify programming. It's part of the makeup of our company and this plays right into that.
8201 I am very excited about that. It didn't come out. I wanted to make sure you understood our commitment to diversity, not only in St. John's with this wonderful initiative, but also in the Ganders and the Grand Falls of the world.
8202 The public is going to love this. They are going to have another totally distinct service to choose from. There's a lot of sharing back and forth. We expect audience levels to grow and hours spent listening to grow. It's very exciting to the broadcaster.
8203 MR. H. STEELE: Madam Chair, Commissioners, thank you very much for this opportunity.
8204 I am excited about the prospect of doing this. I feel challenged by it and I promise that we will do everything we said.
8205 Thank you very much.
8206 THE CHAIRPERSON: Thank you. We will see you again at reply.
8207 We will now take a ten minute break before proceeding with interventions.
8208 Thank you.
--- Upon recessing at 1002 / Suspension à 1002
--- Upon resuming at 1020 / Reprise à 1020
8209 THE CHAIRPERSON: Order, please.
8210 I will now ask Madam Secretary to announce the second phase.
8211 MS SANTERRE: We will now hear the intervenors concerning the application by NewCap. The first intervenor this morning will be Maritime Broadcasting System, Mr. Russell.
8212 THE CHAIRPERSON: Good morning.
8213 MR. RUSSELL: Good morning.
8214 THE CHAIRPERSON: And you are not a Newfoundlander, we were told.
8215 MR. RUSSELL: Well, I'd like to address that. I sort of feel like a skunk at a garden party.
--- Laughter / Rires
8216 THE CHAIRPERSON: By the time you get to Ontario I'd hate to think what they would call us.
8217 MR. RUSSELL: I am wondering. I checked my tattoos as well.
INTERVENTION / INTERVENTION
8218 MR. RUSSELL: Thank you, Madam Secretary.
8219 Madam Chair, members of the Commission, my name is Merv Russell and I am the President of Maritime Broadcasting System Limited. Maritime appreciates this opportunity of appearing here before you today.
8220 I couldn't help but sitting there reflecting on the previous presentation and reviewing my history with Newfoundland. I cut my teeth in Newfoundland Broadcasting with Mr. Butler and his family. I know the contribution that the Butler family has made to broadcasting. They have set the trend in Newfoundland.
8221 Then, of course, I spent a number of years with Mr. Steele. As a matter of fact, Mr. Steele's indoctrination of the radio business was not unlike what I am doing here today. He and I sat side by each, as they would say, and intervened against CHUM on the acquisition of the radio stations that Mr. Steele currently owns. So you are going to have to forgive me if I feel a little out of place, but I did spend 10 years in Newfoundland and I am somewhat familiar with it. My son was born in Newfoundland he is in the broadcasting business, so I think, if I may, I hope our intervention is taken as constructive. I feel that there is a potential problem and maybe we have a constructive solution.
8222 As our name indicates, Maritime Broadcasting owns a number of radio stations throughout the maritimes. We have a long and proud history of serving the communities in which we operate, and we believe we have gained considerable insight into the east coast radio market.
8223 Maritime does not oppose the acquisition of NewCap stations in Grand Falls, Gander, Marystown, Carbonear or Clarenville. We agree rationalizing their interests in Grand Falls and Gander, and adding stations in Marystown, Carbonear and Clarenville, will strengthen NewCap's ability to compete with Newfoundland Broadcasting.
8224 Moreover, we agree with NewCap that it is in the public interest to maintain four distinct radio stations in St. John's. However, we do take issue with NewCap's assertions that its acquisition of these stations is in the best interests of the listeners, the community or the Canadian broadcasting system.
8225 NewCap's proposed acquisition is contrary to the common ownership framework established by the Commission in the Commercial Radio Policy of 1998.
8226 This framework was the result of extensive participation by broadcasters and other interested Canadians. While it is clearly within the Commission's powers to permit an exception to this policy, we believe that such an exception is not warranted in these circumstances. Quite simply, Maritime submits that common ownership of four stations in the St. John's market by NewCap is not in the public interest.
8227 Firstly, we take issue with the suggestion that the stagnant economy of Newfoundland means that common ownership of four stations in St. John's is necessary to ensure the viability of these undertakings.
8228 Newfoundland's economy has showed significant improvement in 1999, and forecasters expect this strong economic growth to continue.
8229 Recently, Standard & Poor's rated Newfoundland and Labrador with an "A" rating, mind you it was an "A" minus, but with a strong classification.
8230 The Blood & Mail's semi-annual ranking of provincial economies placed Newfoundland and Labrador first among the 10 provinces in five of the seven indicators used in ranking provincial economic momentum as of October this year. This included: first in GDP; first in capital spending; first in employment; first in wholesale trade; and first in manufacturing shipments. Furthermore, Newfoundland was second in housing starts and third in retail trade.
8231 The Globe & Mail article went on to state:
"...even better, the good times are expected to continue. Toronto Dominion Bank thinks Newfoundland will lead the country in growth in both 2000 and 2001."
8232 In our view, the future bodes well for the economy of Newfoundland and Labrador, contrary to the submissions you have received. We simply do not accept that common ownership of these four stations is necessary to ensure their viability.
8233 We can also assure the Commission that should we be successful in acquiring one of these stations, we would provide public benefits of no less than $100,000, commensurate with that proposed by NewCap.
8234 Secondly, we reject NewCap's assertion that its only options for complying with the Commercial Radio Policy relate to either the closing of CJYQ-AM, the divestiture of CJYQ-AM, or an application for an exception to retain CJYQ-AM.
8235 As the Commission knows, compliance with the Commercial Radio Policy could be achieved simply by limiting NewCap's acquisition in St. John's to either VOCM-AM or VOCM-FM. It would not require the closing or the sale of CJYQ-AM, nor does it necessitate an exception to the Commercial Radio Policy.
8236 Thirdly, the transaction as proposed by NewCap could result in a significant reduction in the diversity of news voices in St. John's. The common ownership of these four stations will eliminate one of the only three distinct, privately-owned radio voices in the market. We further note that the owners of NewCap, Newfoundland Capital Corporation, have major Newfoundland newspaper holdings, thus giving rise to further concerns about the diversity of news voices in Newfoundland and Labrador.
8237 And, fourthly, the proposed acquisition will have a significant and negative impact on the level of competition in the local market. It seems clear to us that the ownership of four out of five radio stations in St. John's will provide NewCap with a profound competitive advantage.
8238 Moreover, Maritime is prepared to put its money where its mouth is. We would be pleased to enter into negotiations for the acquisition of either VOCM-AM or VOCM-FM, with NewCap retaining its current ownership of CKIX-FM and CJYQ-AM, and one of the two VOCM stations, in accordance with the Commercial Radio Policy of 1998.
8239 Ladies and gentlemen of the Commission, in summary Maritime submits the exception to the Commercial Radio Policy sought by NewCap is not in the public interest. Common ownership of four stations in a market of five could clearly reduce the diversity of new services, have a negative impact on the market and create a competitive imbalance.
8240 We reject NewCap's assertions that common ownership is necessary to preserve the four stations in this market, and that the only options for compliance with the policy relate to the closing or selling of CJYQ.
8241 NewCap seeks to acquire two additional stations. Acquisition of one would be within the existing policy, and the remaining station, either VOCM-AM or VOCM-FM, could be sold to a third party, thereby eliminating the concerns raised by the acquisition.
8242 As a good faith indication that such a proposal is a possibility, Maritime is prepared to enter into negotiations for the acquisition of either of Radio Newfoundland's stations.
8243 I would be pleased to answer any questions that you might have.
8244 THE CHAIRPERSON: Thank you, Mr. Russell.
8245 Commissioner McKendry.
8246 COMMISSIONER McKENDRY: Thank you, Madam Chair.
8247 Now, I take it from your comments you aren't interested in negotiations with respect to acquiring CJYQ?
8248 MR. RUSSELL: I'll take Mr. Steele's word for that, that you would have to be out of your mind.
8249 COMMISSIONER McKENDRY: Have you touched base at all with NewCap about this subject with respect to entering into negotiations for the acquisition of either VOCM-AM or VOCM-FM?
8250 MR. RUSSELL: I have not. I was not aware of the sale until it became public. I was very thrilled for the Butler family that this is their opportunity to see the fruits of the labour and the interest in the investment and the commitment that they have made over the 60 years. I haven't had the opportunity, but, hopefully, I will.
8251 COMMISSIONER McKENDRY: Do you have any thoughts about the comments from Mr. Steele this morning about the necessity of being able to acquire the VOCM-AM and FM stations in terms of the objectives that his company has in the radio market? He indicated to us that without these stations the value of the transaction was much less in his view. Do you have any comments on that?
8252 MR. RUSSELL: I am sure Mr. Steele has thought this out well. He is a fine businessman and understands our broadcast industry very well, but perhaps I could develop a scenario, and it is presumptuous of me, but that could satisfy the whole situation.
8253 If NewCap were to keep the two stations they currently have and VOCM-AM, as was clearly -- the point was clearly made here this morning its the radio station in St. John's and its the program generator for a number of stations across Newfoundland and Labrador.
8254 If NewCap were to keep VOCM-AM, it would provide the opportunity to purchase VOCM-FM by another party.
8255 I am sure that at the outset that would look like a disadvantage to NewCap, that they would have two AMs and an FM. However, within the radio policy NewCap could certainly apply to flip CJYQ from an AM to an FM and still remain within the policy. Or perhaps they would be interested in selling CKIX-FM.
8256 COMMISSIONER McKENDRY: Thank you.
8257 A moment ago I asked you whether or not you had had any contact with NewCap about acquiring VOCM-AM or FM. I also want to ask you whether you have had any contact with Radio Newfoundland or VOCM about this as well.
8258 MR. RUSSELL: No. I haven't seen Mr. Butler until I saw him with his son Gary here and said hello yesterday or today.
8259 COMMISSIONER McKENDRY: Touching for a moment on your oral comments to us earlier, you pointed out that you are concerned about the common ownership of radio stations and newspaper holdings in that market.
8260 Mr. Steele explained to us this morning that, in his view, that wasn't an issue because they were operated as distinct organizations without any interfacing in terms of common management with respect to editorial matters, and so on, and even I suppose marketing of advertising.
8261 Do any of those comments give you any comfort with respect to this concern you have?
8262 MR. RUSSELL: I have the ultimate of comfort in what Mr. Steele is saying, absolutely. But what if Mr. Steele sells?
8263 COMMISSIONER McKENDRY: So your concern does not relate to the existing ownership.
8264 MR. RUSSELL: Not at all.
8265 COMMISSIONER McKENDRY: It is if the ownership changed.
8266 If we did grant an exemption, do you have any thoughts about what criteria we should base that on -- an exemption to radio policy I am speaking of.
8267 Do you have any thoughts about the criteria that we should take into account, criteria such as market dominance, and so on?
8268 MR. RUSSELL: That is best left in the hands of the Commission. We have a similar situation in Saint John, New Brunswick, Maritime does, where we have three of four radio stations. It is a very dominant situation at this time. But it is certainly within the commercial policy.
8269 What it has done is it has created expressions of interest, and four people have expressed interest recently that they wish to enter the market now.
8270 I don't think it would be appropriate, and I really wouldn't have anything to offer.
8271 COMMISSIONER McKENDRY: If you did acquire either VOCM-AM or VOCM-FM, you would have a stand-alone station in that market.
8272 Is that an issue or a concern for you? Can you operate a stand-alone station successfully in that market?
8273 MR. RUSSELL: I think working with Mr. Steele over those years, he has "sticktoitiveness", and I think a little bit of that rubbed off on me.
8274 I have reviewed this with my partners some time ago, and they didn't have any concern about it.
8275 COMMISSIONER McKENDRY: Thank you very much.
8276 Those are my questions, Madam Chair.
8277 THE CHAIRPERSON: Thank you, Mr. Russell.
8278 MR. RUSSELL: Thank you.
8279 THE CHAIRPERSON: Madam Secretary.
8280 MS SANTERRE: I would like now to invite now the Music Industry Association of Newfoundland & Labrador Inc., Mr. Denis Parker.
8281 THE CHAIRPERSON: Good morning, Mr. Parker.
INTERVENTION / INTERVENTION
8282 MR. PARKER: Madam Chair, Members of the Commission, my name is Denis Parker. I am a founding member of the Music Industry Association of Newfoundland & Labrador, which was formed in 1992. I am currently the Executive Director of that association.
8283 The mandate of our association I will read to you briefly.
8284 The mission of the Music Industry Association of Newfoundland & Labrador is to increase awareness locally, nationally and internationally of provincially-produced music as an art form and as a viable industry with significant impact in the economy and to create and encourage opportunities which will stimulate the growth of the industry.
8285 Since 1992, when we became incorporated as a non-profit association, we have seen tremendous growth in our provincial industry.
8286 With the unique culture which was mentioned before -- and I want to talk a little bit about that.
8287 I am originally from England, and I have been in Newfoundland for 28 years. I have seen, since coming to Newfoundland and travelling to other parts of Canada, that indeed such a unique culture exists in the Province of Newfoundland and Labrador. There is a huge local recording industry in the province, and a Newfoundland station would absolutely help promote and market these initiatives.
8288 We have seen in our industry in the province in excess of 80 releases a year in the past four or five years, and I think it is going to increase.
8289 These releases are front rack. If you go to a record store in the province, certainly in St. John's where there are four main retailers of music product, the local music is front racked, right in the front door. There is a considerable amount of it, and it takes up a huge share of the retailer's profits.
8290 In other words, Newfoundlanders buy Newfoundland music.
8291 I would like to talk a little bit about the Cancon criteria that was mentioned earlier in the proposal.
8292 We are extremely excited about having a radio station that will commit to playing 20 per cent of a 40 per cent of product from the local region. I know that the 35 per cent is now in place by the CRTC, and we certainly herald that. I see that as the reason the Newfoundland and Canadian music has made such an impact on the world market.
8293 When I came here in 1971 there wasn't a music industry in Canada, let alone in Newfoundland. I think that Cancon has gone a long way to build those bridges and help foster and develop the music industry in Canada.
8294 I think the same thing will apply to Newfoundland. Newfoundland music has come a long way, and we have several star status artists currently within the Canadian industry. And we are talking about A Great Big Sea, Kim Stockwood, as those artists.
8295 They have got there by hard work, not only in their own region but also across the country.
8296 With the 35 per cent that is required to be played by broadcasters across this country -- and it was recently raised from 30 to 35 per cent, which we think is fabulous -- you are talking about national play lists that focus on a handful of star status artists.
8297 What NewCap is proposing with this new radio station would promote Newfoundland and Labrador artists in their own region and beyond, to the amount of 20 per cent, which is something that we are tremendously excited about at the association.
8298 My board of directors is over the moon about this. They see it as a strong commitment from NewCap in the region.
8299 They would be able to concentrate on broadcasting a greater number of artists from the region through play lists, interviews and media exposure.
8300 They have been voted outstanding company for the past two years by MIA members. And let me explain that the MIA is made up of approximately 350 to 500 members that are distributed throughout the province. In other words, approximately 50 per cent of our membership is in St. John's and the Avalon, and the other 50 per cent is outside of the capital city.
8301 Our award system is such that it is a vote by our membership. The nominations are made by our membership, and the votes are made by our membership on the final ballot.
8302 I think this is an indication that NewCap has won these awards because they are showing that commitment outside of St. John's. In fact, they are showing a commitment provincially, in the whole province of Newfoundland and Labrador, because the votes relate to that. They are making that impact. They have that profile in the community, and they are looking to help promote and develop the music of the province.
8303 I would like to talk a little bit about the proposed programs. This is probably the most exciting part for us as an association.
8304 The $45,000 that is proposed, we see $12,000 going straight into music scholarships, something that we are impressed with. We have two music programs on the west coast of our province in Stephenville. At the College of the North Atlantic, there is a sound technology course and there is a music industry and performance course that the MIA was very involved in putting the curriculum together for that course. There is no other course that is comparable this side of probably the Harris Institute and Trebus in Toronto. To give bursaries, scholarships to two people to attend these courses -- they are two-year courses -- I think will serve to strengthen our already growing infrastructure within the industry.
8305 In the industry, of course, you have to have your natural talent, your songwriters, your performers, but you also have to have, going hand in hand with that, a good business infrastructure. That is what we are trying to build on the island, that is, managers, publicists, booking agents, sound reinforcement companies, recording studies. So I think that would be a tremendous benefit.
8306 Also, already those programs are doing extremely well and the graduates are getting jobs, not only inside Newfoundland but outside Newfoundland and the rest of Canada, to learn experience in the industry.
8307 The second phase of the proposed benefits from NewCap is the MIA's annual award show and conference. This year was our finest year. Every November we have our award show and conference where we offer workshops, seminars, musical clinics, and to round off the weekend we have an award show to acknowledge the people that have done well that past year.
8308 This year we filled the Arts and Culture Centre in St. John's. It is a thousand seater. The year before we were in the Ellesby(ph) Hall which holds 200. So I think that demonstrates that the people want to work with us, not only our members, not only business that is directly involved with the music industry, but also the public, the buying public that buy the CDs, buy our artists and will support their live performance and acknowledgement.
8309 Phase three of the benefits are of particular interest to me because I'm the person that goes out around the province, both on the Island and up to Labrador, on regular occasions to conduct outreach programs. When I say "outreach", that means making connections with people in the regions, answer their questions, help to educate them and help to guide them on a career path that will put them as a renewable resource in the forefront of the industry.
8310 It is a very expensive program and it is at the point now where it is pretty minimal because as we can only afford, as a non-profit association, to send out just me around the province to conduct these outreach programs, what we would like to do is take songwriting workshops, copyright reform workshops, this kind of thing, around the province to our members that are not able to get into our annual conference in St. John's.
8311 The fourth part, the recording bursaries, certainly there are existing programs and let me talk to that.
8312 Certainly the FACTOR programs are already in place. That's true. Anyone in Canada can apply to these programs. I myself sit on the National Advisory Board -- in fact I'm the co-chair of the FACTOR National Advisory Board. I will also say that that opportunity is there, but it is a very diminishing amount of money and is currently being evaluated, because the programs, the SRDP programs, expire March 31st of 2000. We are hoping, desperately hoping, that they will continue and even receive more investment.
8313 The bursaries that are included here at $1,500 each, eight bursaries, would only be demo -- these would be demo projects. I think it is incredibly important within our region to have that demo process where you are going to prepare people pre-production -- when you are doing a sound recording, pre-production is the most important part. This is going to set you up and put you in the studio where you don't have to spend more money than you need to, where projects go over budget and fail.
8314 So I think this is an incredible thing here with these bursaries and I think we could also look at the New Brunswick Sound Recording Initiative that is doing extremely well and we are very -- we would love to have a similar thing in our province, and I think New Brunswick is very lucky to have that pot of money to be dealing with just in their local industry.
8315 The $45,000 I think represents what we see, the Board of Directors of the MIA see, as critical investment in our industry. Certainly, up to this point, our association has been funded primarily by memberships, individual support from companies, some corporate support, but we are mostly funded by the government, both the federal and provincial governments. We have always been encouraged to look for additional corporate sponsorship so that we may wean ourselves from the federal-provincial support that we are currently receiving. I think this is one of those steps. I see this money as a tremendous shot in the arm for the Newfoundland-Labrador music industry.
8316 I think granting a licence for a Newfoundland radio station would bring that commitment to another level. I truly believe this. I think denying new capital casting to this CJYQ Newfoundland radio station would severely hamper us in our growth.
8317 I think we have come to a point -- as a musical community and a music industry association that has worked tirelessly to help promote the province's music, I think we have come to a turning point. We either have to grow -- because we have a tremendous talent pool, as any of you know that have visited the province, all people can talk about is there is just so much fantastic talent in this province, and I believe it is going to be a global market that we are going to be looking at in the future.
8318 I just hope that the Commission recognizes that investment to the MIA and I would like to see them grant their licence.
8319 Thank you.
8320 THE CHAIRPERSON: Thank you very much.
8321 Commissioner Noël.
8322 THE CHAIRPERSON: We have a few questions for you.
8323 MR. PARKER: Oh, okay.
8324 COMMISSIONER NOËL: The MIA is an association of musicians, agents, record companies, artists, managers and others involved in the music industry in Newfoundland and Labrador. So they are involved in all aspects of the --
8325 MR. PARKER: We certainly represent all aspects of the music industry.
8326 COMMISSIONER NOËL: Okay.
8327 You mentioned that you plan to spend, more or less, $45,000 per year that NewCap intends to provide you in a different manner of projects. Did NewCap give you any guarantee about the $45,000 in question?
8328 MR. PARKER: You mean a guarantee in writing?
8329 COMMISSIONER NOËL: Well, in writing --
8330 MR. PARKER: The guarantee has been a verbal commitment.
8331 COMMISSIONER NOËL: A verbal commitment.
8332 MR. PARKER: They made a presentation to the Board of Directors of the association.
8333 COMMISSIONER NOËL: Thank you.
8334 If NewCap fails to provide you the $45,000, how would it affect the four projects that you were supposed to invest in?
8335 MR. PARKER: It would totally affect them because at this current time we don't have that kind of revenue to be able to mount those kind of projects. Right now we are currently existing with one paid person in the office and a board of 15 with four regional directors around the province. It is extremely difficult to keep it afloat.
8336 COMMISSIONER NOËL: You mentioned that Newfoundland, including St. John's, needs strong radio companies to continue the tradition of high service to their communities.
8337 Could you give us some examples of how NewCap will be able to give higher services to their communities by acquiring VOCM radio stations?
8338 MR. PARKER: Well, I think that, you know, you have your national play lists. Certainly radio stations in the province do support Newfoundland music. Of course, as we have said, CKIX has been -- certainly CKIX and NewCap have been the strongest ones of those.
8339 I think that an increase in that commitment to play the product because, as we know, radio is just so important in breaking artists, that I just think that it's a step in the right direction, as it was when the Cancon started up.
8340 COMMISSIONER NOËL: I understand. Is NewCap actually providing high service to their communities, in your view?
8341 MR. PARKER: Pardon? I missed --
8342 COMMISSIONER NOËL: Is NewCap actually providing high service to their communities?
8343 MR. PARKER: Oh, absolutely. I think that is reflected in the fact that they were voted outstanding company of the year two years in a row. Tony Hann, an employee of NewCap, was voted industry professional at our recent award show.
8344 COMMISSIONER NOËL: You indicated the transaction before us aims to be beneficial to the audiences, the music creators and the MIA.
8345 Could you emphasize how you foresee those changes happening?
8346 MR. PARKER: I think, you know, awareness and profiles is everything. Certainly on one side we are trying to get our artists into the global market. To that end I will be attending MIDEM(ph) for the first time in France in January.
8347 I think we have to start at the grassroots. We have to start in the schools and we have to start with the demo process.
8348 It is a renewable resource. It is something that we have the wonderful talent pool for right now, but if we don't nurture and develop it from its roots we are not going to have that kind of talent pool in the future.
8349 So we have to make sure that through -- the reason why the broadcasters are so important in this area is because they are being beamed into the homes in the radio service.
8350 The people in Newfoundland want to hear local music, music from Newfoundland artists. That is all genres. We represent all genres of music.
8351 I just see that that commitment, that outreach, not only from the MIAs perspective of outreach, going out and garnering new membership which is more of an education, I think the outreach by NewCap would also serve to be an education in playing that final product.
8352 COMMISSIONER NOËL: Playing the Newfoundland music?
8353 MR. PARKER: Exactly.
8354 COMMISSIONER NOËL: Should an exception be granted, on what criteria do you suggest the Commission should base that exception?
8355 MR. PARKER: Well, certainly our board, the criteria is included in the benefits for us.
8356 COMMISSIONER NOËL: Would you have any concern about market dominance if the exemption were granted?
8357 MR. PARKER: We wouldn't have any worry about that. This is something that is -- it's a first for us. I think we see that this is an incredible step forward in corporate sponsorship of an industry that is on an incredible growth level, not only provincially but nationally and globally. So I think that this is a real big step in the right direction.
8358 So I just -- no one else has come forward with this kind of proposal to our board and it is something that we have been working, nurturing and developing since 1992 to help educate and develop the industry within the province and we are just so terribly excited about this extra infusion of money. That goes without the extra $100,000 that was spoken about.
8359 COMMISSIONER NOËL: But you don't feel that NewCap companies would dominate the market in St. John's -- the radio market in St. John's?
8360 MR. PARKER: No, I don't. Because, I mean, also there has been no intervention from the other major player in the area, that being Newfoundland Broadcast.
8361 COMMISSIONER NOËL: So you feel that if he didn't intervene he doesn't feel threatened?
8362 MR. PARKER: Exactly.
8363 COMMISSIONER NOËL: Thank you.
8364 THE CHAIRPERSON: Commissioner Cram.
8365 COMMISSIONER CRAM: Mr. Parker, we were talking previously with the panel from NewCap about a definition for Newfoundland music.
8366 MR. PARKER: Yes.
8367 COMMISSIONER CRAM: How do you define it?
8368 MR. PARKER: Well, as someone who comes from London, England --
8369 COMMISSIONER CRAM: I know that.
8370 MR. PARKER: -- and has been in the business for over 30 years -- and particularly I'm a blues player -- I think that Newfoundland music is all music that is created in Newfoundland.
8371 Certainly there is a lot to be said for the Celtic and British Isle traditional music that has come over and is a huge part of the heritage and the culture of the province. That is an absolute given.
8372 But we do represent all genres in the Music Industry Association and we do have all genres of music in the province.
8373 COMMISSIONER CRAM: So when you say "created in Newfoundland", would that exclude somebody from Newfoundland who, God forbid, moved to the centre of the universe, Toronto, and produced a CD there?
8374 MR. PARKER: Well, no, because some people would do that. Certainly that has been the trend in the past, which has totally been reversed now because of the advent of technology and the building of the infrastructure, as I mentioned. You know, groups like Great Big Sea actually record in St. John's. They don't -- people don't need to go to the bigger centre to avail of those services any more.
8375 I think anyone that moves -- we encourage people to move from Newfoundland and Labrador in that way because they are trying to improve their career. They are trying to build their careers. Some people it is important. If they are songwriters they have to co-write so they have to be in the places, Toronto, Nashville, Los Angeles, where these things take place.
8376 COMMISSIONER CRAM: So the definition then would be either produced in Newfoundland or produced by someone from Newfoundland?
8377 MR. PARKER: Yes. I think when we are talking about -- I think you are referring to Phase IV with the bursaries I guess.
8378 COMMISSIONER CRAM: No, no. I'm referring to the 20 per cent production of Newfoundland music on the other stations in the --
8379 MR. PARKER: Okay. All right, yes.
8380 Well, I would certainly like to see that 20 per cent being Newfoundland artists. I don't think we are going to restrict it to totally recorded in the province.
8381 COMMISSIONER CRAM: Okay.
8382 How do you define "Newfoundland artist"?
8383 MR. PARKER: I guess we would have to say someone that was born or has been residing in the province for more than 12 months.
8384 COMMISSIONER CRAM: Thank you.
8385 THE CHAIRPERSON: Thank you very much.
8386 MR. PARKER: Thank you.
8387 THE CHAIRPERSON: Thank you for your appearance.
8388 Does the NewCap panel want 10 minutes before the reply? Are you ready?
8389 We are ready.
--- Pause / Pause
8390 THE CHAIRPERSON: Welcome back. Go ahead when you are ready.
REPLY / RÉPLIQUE
8391 MR. TEMPLETON: Thank you, Madam Chair.
8392 I will lead off and I think Mr. Steele would like to have a closing comment as well.
8393 In response to the Maritime intervention, I would first like to point out that Mr. Russell and I go back a long way. We are currently fierce competitors and we have a lot of fun in the process, but I value my friendship with Mr. Russell because it goes back, as I say, over two decades.
8394 At one point in my career Mr. Russell was my mentor and my boss. He taught me a lot about this business.
8395 I wanted to clarify a point before the Commission that the reference that Mr. Russell made that if they were successful in acquiring one of the two VOCM-AM or FM properties that their benefits would be in excess of $100,000.
8396 I just wanted to remind you that this is an over $1.3 million benefit package. The $100,000 relates specifically to CJYQ. That is in addition to the 1.2.
8397 It has taken decades of very seasoned broadcasters to come to the conclusion, proving time and time again that three operators cannot be sustained and provide community service throughout Newfoundland. We have decades of fine broadcasters who have tried and failed, including the CHUM organization.
8398 A standalone, in our opinion, cannot possibly compete, AM or FM in St. John's. I learned a long time ago in this business don't accept a no win situation. If I have ever seen a no win situation, that is a no win situation.
8399 I'm having difficulty understanding the motivation of Maritime and Mr. Russell in the intervention. To suggest they would come in and cherry pick one of the two VOCM stations, I am really having a hard time with understanding the motivation.
8400 Mr. Russell made reference that he would be prepared to negotiate with VOCM for one of those two properties. This application has been gazetted and has been on the public record for quite some time. Here we are before the CRTC now being heard for this.
8401 I have never received a phone call from Mr. Russell that he has showed any interest whatsoever. Joe Butler has never received a phone call from Mr. Russell inquiring as to the possibilities of acquiring one of the stations nor, to the best of my knowledge, has Mr. Stirling.
8402 As we stated earlier, Newfoundland capital has invested over $12.6 million in capital and operating losses. If we include interest, I don't know how we will ever, ever recoup our investment we made in Newfoundland.
8403 There's a lot of pride in this application. Newfoundland without question is one of the worst radio markets in Canada. It's hard times. Despite what you might read in the Globe and Mail, we are starting from such a low base it's going to take decades if this continues for Newfoundland to get anywhere a national average.
8404 As I have said, St. John's cannot support three operators when you are up against a competitor that has an operation in St. John's distributed all over the province in combination with a television station that is totally distributed across the province. I mean that's formidable competition. You better have a strong base.
8405 Rural Newfoundland is totally dependent upon St. John's to maintain the level of service that I have mentioned.
8406 An exception to this rule would not be precedent setting. I recall your decision on Windsor. That's a border situation. I came to the Commission a number of years ago, I'm sure it must have been at least 12 years ago.
8407 We had a similar situation to Windsor in Sault Ste. Marie where the American competition with no hit to non-hit issues and no Canadian content levels to be maintained and no benefits to be pledged. It was impossible to compete the with the status quo.
8408 We asked for an exception. It was granted and that market has been reasonably healthy ever since, as has Windsor.
8409 It's not precedent setting. We think we have argued a solid case why we need this exception to the rule. If there is an exception to be granted in this country, I can't think of a more appropriate place than for Newfoundland.
8411 MR. H. STEELE: Madam Chair, Commissioners, I am trying to break over the form that our deal is not severable legally. We can't buy VOCM and Magic 97 or Newfoundland capital will walk away.
There is no question about that.
8412 It's unfortunate. Mr. Templeton says this came up so late, the intervention was the last day possible. I find it unusual that an overture would be made at a forum like this. I mean Maritime Broadcasting are very experienced inquisitors. They bought a lot of properties in Atlantic Canada. As a matter of fact, they bought almost all the properties that have been sold in Atlantic Canada in the last ten years.
8413 They are everywhere, very experienced. Why the phone hasn't rung for Mr. Butler or mine, I don't know. I don't know why that is.
8414 This has gone on now for over a year. This has been known. This is Mr. Butler's family's heritage. As a matter of fact, I rather suspect Mr. Butler would not sell if he had to to Magic 97 and VOCM. It is still his property.
8415 Frankly, you know what happens when you say you are selling or buying a company. People leave, become nervous, they go elsewhere. It causes all kinds of problems, so we want to bring this thing to a speedy conclusion one way or another.
8416 I think that, you know, Mr. Russell made the greatest point for me because he could scarcely restrain his enthusiasm to buy Q radio. His enthusiasm was really something. I think that tells the real value and I think it reaffirms what we are trying to do and how much we believe in what we want to do.
8417 That's about all I want to say. I think that's the point. I think that Q radio is a tough piece to handle and we think we have come forward with the best conclusion. Madam Chair, Commissioners, we leave it entirely to you.
8418 Thank you very much.
8419 THE CHAIRPERSON: I have one question. If you were wearing our hat, what would you use as the criteria for giving this exception without opening the traditional floodgates of requests? What would you suggest to us as criteria which would allow us to fence in the exception? Do you follow me?
8420 MR. H. STEELE: Yes. I think Newfoundland is a special case. You have got the authority to deal with special cases. This has been tried for a long time, as was said a few minutes ago, with very successful broadcasters.
8421 Frankly, if we can't purchase VOCM, we will carry on. As long as I am involved, Q will operate, unless I'm told to divest it by you. We will be there.
8422 THE CHAIRPERSON: Did you have anything to add?
8423 MR. H. STEELE: I have nothing further to say. Thank you.
8424 THE CHAIRPERSON: We know that Newfoundland is special.
8425 MR. TEMPLETON: Thank you.
8426 THE CHAIRPERSON: Can you be more specific about what are the actual criteria that you would suggest we use to grant the exception? When you refer to the difficulty of Q, you mean the fact that it's a losing proposition and it would not be in the public interest to let it go.
8427 What are the reasons that would allow us to say to the 15 other applications we may get "Oh, we did that for Newfoundland because it was special". It does not get me very far. What would be the more specific criteria?
8428 MR. TEMPLETON: If I can step in there. I think that the instability in the marketplace has been proven for many years. If you grant the exception to your rules, I think it shores up the market, makes it stronger and as a result, we can offer you a Canadian content service.
8429 If we are forced to divest, we will have to sell our signal to another player that would probably have 60 per cent American content on that signal, whether it be AM or FM, most likely. We are prepared to address the Canadian content issue.
8430 I think that's a very unique proposal that we are putting forth. We are shoring up the market to ensure better broadcasting for Newfoundland and Labrador for many years to come.
8431 If I can just add that this is required to support the levels of service as we have stated numerous times right throughout the entire province of Newfoundland. We are the only radio operator providing that resource throughout Newfoundland locally and we need the strong foundation.
8432 Again to remind all of us, not one single Newfoundlander or Labradorean has intervened negatively against this application. It has all been in positive support. A number of interventions, unfortunately, did not make the deadline. I may be out of order, so I won't recite who they are, but there is a very high profile of individuals and community leaders. We have the total support for this application.
8433 MR. J. STEELE: And they didn't make the deadline because they were before the gazetting date, not after.
8434 THE CHAIRPERSON: Thank you very much.
8435 Counsel has a few questions of clarification as well.
8436 MR. BATSTONE: I want to go back to this issue of the Internet Web site again. I had raised it before. I had mistakenly referred to it as the CTD commitment. Of course it's not, it was a benefit commitment.
8437 What I wanted to ask was this. As you know, the Commission has a policy that it may disallow benefits where they can be seen as self-serving, given that an Internet site would often involve station promotion, that kind of thing.
8438 I would just ask you to elaborate on why this particular benefit would not be self-serving.
8439 MR. J. STEELE: We don't think it is going to be self-serving because it's going to be primarily for the artist. We are prepared to put the Web site up. We had budgeted $25,000. If it's not $25,000, we will roll the rest of it in on top of the $75,000 that we contribute to recording CDs or demos.
8440 MR. BATSTONE: So that in the event the Commission concluded it was self-serving, you would do the entire $100,000 towards CDs and demos. Is that correct?
8441 MR. J. STEELE: Correct. And we would still do the Web site over and above. It's approximately that price tag to maintain that annually.
8442 MR. BATSTONE: Sure. The only other question then, Maritime Broadcasting raised two alternative scenarios to granting an exemption. Specifically, they said that you could purchase VOCM-AM only and then flip CJYQ to FM, and the second was to sell CKIX. I was just wondering if you would care to comment on why those wouldn't be more appropriate options as opposed to granting an exemption to the policy?
8443 MR. J. STEELE: If I could answer that. I would like to answer that.
8444 If we flip, I think, basically, the option that was put forth by Mr. Russell, it would result in more American music. I was reading a book the other day written by Richard Gwynn and it's on Joey Smallwood. There is a quote in there from George Storey who is a noted scholar and the compiler of the Dictionary of Newfoundland English. The quote is:
"It's our creative ability that ensures our survival as a recognizable people and culture and enables us to contribute to the enrichment of the nation of which we form a distinctive part." (As read)
8445 I think that's the reason why you should give it to us.
8446 THE CHAIRPERSON: You are not going to send your son to his room now are you?
--- Laughter / Rires
8447 MR. H. STEELE: No. I agree with what he said.
8448 Madam Chair, thank you very much. That's all we have got to say. We have told you everything we know, what we are prepared to do and I think we responded to my friend Merv. He started me in the broadcast business, you should know that, so it goes back a long time. So there are many turns in the road, but, however, we are excited about the prospect of this. We want to see Mr. Butler get his deal concluded and, believe me, like they say in Newfoundland, "the savage loves his native shore," so I'm going back.
8449 MR. BATSTONE: Just on that though too follow up, what do you think of the option of selling CKIX, for instance? Why wouldn't that work?
8450 MR. H. STEELE: The option of selling ...?
8451 MR. BATSTONE: CKIX. CKIX-FM. I hope I am referring to the right call sign, CKIX, your existing FM.
8452 MR. TEMPLETON: I would like to respond to that. I think we have clearly demonstrated over decades of trying that a stand alone AM or FM and three operators just cannot survive and provide that level of service certainly, or even operate as a stand alone in the market.
8453 Mr. Russell earlier mentioned he would be willing to negotiate, sit down and see if there was a possible way to work out the AM -- the FM purchase.
8454 As Mr. Steele mentioned, this has been going on for a year now and no attempt has been made whatsoever. We didn't come here saying we are going to try and negotiate. We came here and said we are committed and we have made our commitment and I -- negotiating and attempting negotiating, those are weak words.
8455 We came here with a firm plan and a firm commitment that will benefit all Newfoundlanders.
8456 MR. BATSTONE: Those are all my questions.
8457 THE CHAIRPERSON: Thank you, Mr. Steele and colleagues.
8458 I want to ask you now whether you felt that a long day yesterday and a half a day today was still easier than flying planes?
8459 MR. H. STEELE: Much easier. I am also finding out that radio stations are much easier to sell than airlines.
--- Laughter / Rires
8460 THE CHAIRPERSON: Thank you very much.
8461 We hope you have a good trip home and a Merry Christmas.
8462 MR. H. STEELE: Thank you, everybody.
8463 THE CHAIRPERSON: That will complete this item. We thank the applicants and the intervenors for their co-operation, participation and patience with the long day and the long night yesterday. Thank you.
8464 We will now take a 10-minute break and then year the Rogers application.
--- Upon recessing at 1117 / Suspension à 1117
--- Upon resuming at 1129 / Reprise à 1129
8465 THE CHAIRPERSON: Order, please.
8466 Madam Secretary.
8467 MS SANTERRE: The next application is by Rogers Ottawa Limited/Limitée.
8468 The applicant is requesting a broadcasting licence for a regional cable distribution undertaking at Ottawa and surrounding areas.
8469 The proposed regional licence will replace the current individual licences held by the applicant, with certain modifications as described in the application.
8470 Ms Dinsmore.
PRESENTATION / PRÉSENTATION
8471 MS DINSMORE: Thank you, Madam Secretary.
8472 My name is Pam Dinsmore and I am the Vice-President, Regulatory, for Rogers Cable and I would like to introduce my team.
8473 On my left is Ken Engelhart, Vice-President, Regulatory at Rogers Communication.
8474 On my far right is Colette Watson who is Vice-President of Programming and Public Relations for Rogers Cable and is based here in Ottawa.
8475 On my right is Bruce Melhuish who is Vice-President, Finance, as well as Chief Financial Officer for Rogers Cable.
8476 In the second row from my left is Peter Kovacs, Director of Regulatory, and to his right is George MacDonald, Manager, Finance. Both Peter and George are at Rogers Cable.
8477 Good morning, Madam Chair, Commissioners.
8478 Rogers comes before you today with an application to amalgamate our three Ottawa cable licences, Ottawa East, Ottawa West and Carp, into one regional licence.
8479 In this presentation we will address the principal reasons why we believe our application is in the public interest and should be approved. We will review Rogers Cablesystems' overall regional licensing strategy, the improvements our customers will experience if our Ottawa application is approved, and the rationale that underpins our request for a new revenue neutral basic rate. Approval of our application will lead to simplified customer communications and business processes without any new revenues accruing to Rogers.
8480 In the Framework Policy for Broadcast Distribution Undertakings, the Commission stated that existing cable companies could apply for regional licences. It noted that these applications should meet certain basic criteria and would be dealt with on a case by case basis. Our application is a response to the Commission's invitation. Through this process we wish to clarify the steps required to implement the Commission's regional licensing policy.
8481 Our application is being considered at the same time as the Regional Municipality of Ottawa-Carleton is becoming a new entity with one city and one government. Its message is consistent with ours: amalgamation will lead to simpler processes for end user customers.
8483 Mme WATSON: Rogers exploite son service à Ottawa depuis 1991, au moment où le Conseil a approuvé la demande de Skyline Cablevision pour transférer son système de la ville d'Ottawa Est à Rogers. A cette époque, Rogers s'était engagé à lancer un canal communautaire français distinct pour mieux refléter la culture franco-ontarienne dans la région d'Ottawa-Carleton.
8484 Cet engagement s'est concrétisé en 1992 avec le lancement de la Télé-communautaire 23. Deux ans plus tard, en 1994, le Conseil a approuvé notre acquisition des anciens systèmes Maclean Hunter servant la partie ouest d'Ottawa. Dans le cadre de notre engagement envers la communauté d'Ottawa, nous avons convenu de continuer à exploiter le canal Télé-communautaire 23 pendant cinq autres années.
8485 Au cours des neuf dernières années, Rogers a entrepris des démarches pour rationaliser son service de câble dans la région d'Ottawa-Carleton. Nous sommes fiers de vous affirmer qu'à Ottawa nous avons réalisé une bonne partie des améliorations au bénéfice de nos clients dont nous avions parlé lors des auditions de 1994 portant sur Maclean Hunter. Ceci comprend, dans l'ensemble de la région d'Ottawa-Carleton, une carte commune des canaux de télévision et des canaux audio, des stations de télévision communautaire en français et en anglais, des centres d'appels communs, un service à la clientèle rehaussé et une meilleure souplesse pour les rendez-vous du service technique.
8486 Nous avons également fait des investissements substantiels pour la reconstruction de nos systèmes d'Ottawa dans la gamme des 600 MHz. Nous prévoyons moderniser encore ces systèmes en fonction de la gamme des 750 MHz d'ici l'an 2002. A mesure que nous rapprochons notre réseau de fibres optiques bi-directionnel des foyers de notre clientèle, nous modifiions leur approche de la télévision et de l'Internet. En bénéficiant d'une capacité de bande passante accrue, nos clients peuvent maintenant recevoir un service de télévision numérique par le biais du Choix numérique de Rogers, ainsi qu'un accès à haute vitesse à l'Internet par le biais du service Rogers@Home.
8487 We are seeking a new regional licence at a revenue neutral basic rate. This licence application represents the first step in a company-wide strategy to regionalize other systems so we can simplify the way we do business with our customers. We strongly believe that one cable licensee in one region providing one face to our customers is a better way to serve them and a simpler way to run our business.
8488 Rogers currently operates in four general regions in B.C. and Ontario. Yet, for historical reasons, we hold 29 different licences, each with its own CRTC approved basic rate. This adds a layer of complexity to our operations that is a source of frustration for our customers and our employees, as well as being a source of workload for us and the Commission.
8489 Ideally, we would hold four regional licences with revenue neutral basic rates in British Columbia, Ottawa, the Greater Toronto Area and southwestern Ontario. This would significantly simplify our customer communications. It would also lessen the administrative burden caused by multiple licences for Rogers and for the CRTC. For example, last week Rogers filed 29 StatsCan filings with the Commission. Should we complete our vision, the number of annual StatsCan filings would fall over time to four.
8490 MS DINSMORE: Rogers strongly believes that simplifying our basic rates across entire communities in a revenue neutral fashion is in our customers' best interests.
8491 A key factor in our application is our need to simplify our business relationship with them. The Commission's approval of our application will improve our ability to market our cable services to our customers and their ability to do business with us.
8492 As we move into the next millennium, cable is providing more services than ever before. In fact, there are now a multitude of services available at Rogers Cable. Our cable television offering includes our basic service, three tiers of specialty services, and premium pay, and pay-per-view services.
8493 With the rollout of our digital offering this past summer, Rogers Ottawa customers now have access to Rogers Digital Choice Television. It provides customers with a range of a la carte programming services that we will continue to expand over the next few months.
8494 We also offer our customers Rogers@Home, our high-speed Internet access service. Looking ahead, there are more exciting products coming, including video-on-demand and interactive TV.
8495 In an increasingly complex competitive environment, customers are being bombarded daily with different messages about the pricing and packaging of distribution services from satellite, MDS and cable providers. We need a simple message to get through to our customers. The reality is that different basic rates inhibit our ability to communicate simple messages to them.
8496 Under the circumstances, Rogers has simplified the overall cable rate as best we can. In the Ottawa area, we offer our VIP Program, which provides customers with basic cable, three tiers of specialty channels, and up to four outlets, at a discount of 10 per cent in Ottawa West and 11.2 per cent in Ottawa East off their regular cable bill.
8497 The difference in the VIP cable discount, depending on which side of Bank Street a customer resides, is a direct result of the differing basic rates between the systems. It has made the launch of this program in Ottawa complicated for the purposes of print, radio and television advertising, not to mention the communications challenges it poses for our customer service representatives.
8498 Our customers want a simple message about our products in Ottawa, and we simply don't have one.
8499 Madam Chair, Commissioners, a comparison with any new entrant brings this point sharply into focus.
8500 In Ottawa, we compete with ExpressVu, StarChoice and Look TV/Look Télé. It is difficult to imagine any of our competitors launching their service in the Ottawa market with a lower rate for customers in Ottawa West than in Ottawa East. And yet this is the situation that we face in Ottawa today, which we are seeking to address through our application.
8501 Not only does the basic rate difference hamper our marketing efforts, it is also perceived to be extremely customer unfriendly. In Ottawa, customers experience a rate difference of 51 cents, depending on which side of Bank Street they reside. While this is simply an historical legacy, customers regularly question why they have to pay more to receive cable service that is identical across Ottawa-Carleton. This consumes the telephone time of our customer service representatives and rarely results in a satisfied customer.
8502 Approval of our application will eliminate the confusion and frustration our customers experience as a result of different cable rates within the Ottawa area. The effect will be that customers in the eastern part of Ottawa-Carleton will see their basic rates go down by 26 cents, while those in the west will experience a basic rate increase of 25 cents.
8503 We strongly believe that a common revenue-neutral basic rate will allow our customer-facing employees to spend more time helping customers with issues other than the difference in basic cable rates, resulting in a higher level of service overall.
8504 Last year, Rogers embarked on an ambitious rebuild plan to replace coaxial cable with fibre in our Ottawa East and West systems. We have upgraded the Carp system to 550 MHz and our Ottawa systems to 600 MHz. These network improvements to date have increased our channel capacity and improved our signal quality. By the end of 2001, we will complete our Ottawa system upgrades to 750 MHz.
8505 The cost of the rebuild is estimated to be almost twice as much in Ottawa West as in Ottawa East due to the need to deploy more fibre in the former Maclean Hunter system. We strongly believe that this state of the art network will equip us to meet our customers' future needs for new interactive services.
8506 The Commission's approval of a new uniform basic rate as part of our new Ottawa licence is fundamental to our application. Uniform rates will ensure that the customer service and marketing improvements we have envisioned for Ottawa can be realized.
8507 It will also eliminate the historical anomalies caused by the licensing of particular cable territories and will ensure that each customer is paying the same basic rate for the identical basic service. And it will not result in any additional revenues for Rogers.
8508 In summary, Madam Chair and Commissioners, Ottawa is a single community. This has been true for some time and is now being politically recognized. Rogers has integrated our operations in Ottawa over the past five years. We now have common channel line-ups, a common call centre, common community channels and common customer and technical service.
8509 We are engaged in a rebuild that will result in a state of the art cable network across Ottawa-Carleton. Approval of our application is the final step in regionalizing our Ottawa area systems. It will result in simpler business processes for Rogers and less administrative work for the Commission. Most importantly, it will simplify the way we do business with our customers.
8510 Madam Chair, that concludes our remarks. We would be pleased, of course, to answer any questions you may have.
8511 THE CHAIRPERSON: Thank you, Ms Dinsmore.
8512 Commissioner McKendry.
8513 COMMISSIONER McKENDRY: Thank you, Madam Chair.
8514 Let me start by asking you a couple of questions about your oral presentation this morning.
8515 On page 3 you link what you are doing to the merger that is going on at a political level here in Ottawa, and then you say at the top of page 3:
"Its message is consistent with ours: amalgamation will lead to simpler processes for end user customers."
8516 And I take that to be subscribers.
8517 Can you elaborate for me why this will be simpler for a cable subscriber whose primary contact with the company, I take it, is to get a bill and send a cheque in for the bill?
8518 Why would this be simpler?
8519 MS DINSMORE: I would like to ask Colette Watson to answer that question.
8520 MS WATSON: Thank you.
8521 Commissioner McKendry, I guess it was August 1991, after a decision in May of that year, that Rogers took over running the Skyline side of the cable business. At that time the business office hours were 8:00 a.m. to 4:00 p.m., so any time customers were watching television or had a question or a problem they got an answering machine.
8522 So in August 1991 we introduced 24 by 7; we introduced seven days a week community television. At that time, Skyline was operating three and a half days a week of community television.
8523 And we introduced bilingual communications, so bills went out in French to those French customers requiring it. All of our brochures were done in French and English, and we added new channels.
8524 Then we embarked on a rebuild to enhance and grow the channel capacity on that side. There was a real difference east and west of bank in terms of cable service product.
8525 Then in 1994, with the Maclean Hunter merger, we tried to bring that over to the west side, which is 24 by 7, hourly appointments, bilingual communications, expanded channel line-up, seven days a week community channel in French and English, and so on.
8526 Those customers on the west side were now being introduced to a higher level of customer service, one that had been introduced in 1991 on the east side.
8527 Therefore, over time, over the last four or five years, the customers in the west end were now getting equalized and were getting the same level of service that we were providing in the east end.
8528 But because of regulation, the way basic rates were determined, the price was different. So this way, now our customers will be able to benefit from the same price east or west of town. It won't matter what side of Bank you live on now, in terms of when you are shopping for real estate, and our ability to provide service east or west of Bank is transparent. There is no boundary for the level of service that we would deliver.
8529 COMMISSIONER McKENDRY: Thank you.
8530 I just want to understand, going forward, if we grant this application, why there will be a simpler process for subscribers.
8531 If we grant the application and we get a call at the Commission from a subscriber in the west end who wants to know why rates are going up and we tell them that, according to Rogers, there will be simpler processes for you, what is the simpler process for the customer in the west end that would be used to explain why their rates went up?
8532 MS WATSON: We take, in our call centres, an average of about two or 3,000 calls a week.
8533 I guess the single biggest source of those questions or calls is the bill, the cable bill. So we spend a lot of time, our CSRs spend a lot of time with those callers, taking them through their invoice, taking them through the bill, and then answering, you know, "Why is my basic rate this and my mother's basic rate that? It's the same thing."
8534 This applies to, you know, most of our markets. As we alluded to, we have 29 different basic rates.
8535 So the ability to have one rate for all of Ottawa means now that the subsidy we had been providing to the west-end subscribers would then be equalized over all of our subscribers in this one market because we had been providing to them the level of service that our east-end customers were getting with no boundary, except now normalizing the rate will allow us to equalize the rate across the boundary as we did with the service.
8536 COMMISSIONER McKENDRY: So when you say in your comments here that the amalgamation will lead to simpler processes for end-user customers, you are talking about the times when customers call your office and want an explanation of why rates are lower in one half of the city than they are in the other half of the city.
8537 That is what that means, "the simpler processes for end-user customers"?
8538 MS WATSON: That is one thing it means.
8539 It also means different communications. Now we can go out and advertise 10 per -- when you buy VIP cable, it is 10 per cent off. It is much easier to market through a whole market and say "Save on your cable bill" when we can promote 10 per cent off, as opposed to saying, you know, "It depends on where you live" at the bottom of the communication process. And all of our communications, any future product we might roll out, we could then assign a price point to a market which would be much easier to communicate and then be heard by our customers.
8540 COMMISSIONER McKENDRY: I will come back in a moment to the ability to market your services in Ottawa under the current situation.
8541 How many complaints has Rogers received in the last year with respect to the difference in rates between east and west?
8542 MS WATSON: As I stated earlier, we get about two or 3,000 phone calls a week in our national call centre, most of them billing related. Once it is explained to them that, you know, it is a historical thing, it's the way regulation works in terms of why their rate is this or their rate is that, they usually go away without feeling a need to either launch a formal complaint either with you or with us.
8543 So I can't give you a quantifiable number of complaints people have raised with us in terms of letters. You know, as people who live in Ottawa, it is something people notice.
8544 COMMISSIONER McKENDRY: So you don't split out the number of complaints that you have received in your call centre about this issue but you have received complaints?
8545 MS WATSON: Inquiries.
8546 COMMISSIONER McKENDRY: Have you inquired at the Commission as to how many complaints the Commission has received with respect to the difference in rates between the eastern part of the city and the western part of the city?
8547 MS DINSMORE: Yes, we do monitor the number of complaints. There haven't been, as Colette said, a lot of formal complaints to the Commission, but the complaints are more manifested in the phone calls that we get in our call centres.
8548 COMMISSIONER McKENDRY: How many complaints has the Commission received?
8549 MS DINSMORE: I couldn't tell you, but I don't think very many. Maybe none.
8550 COMMISSIONER McKENDRY: On page 7 of your oral comments this morning you talk about the VIP cable discount. I take it from there, and what Ms Watson said earlier, that one of the difficulties is that you can't say in Ottawa 10 per cent off, or at least you can't say "10 per cent off your cable rate." Because of the difference in rates you provide a unified VIP rate across the entire city.
8551 Why wouldn't it be, from a marketing perspective, just as useful to say at least 10 per cent off?
8552 MR. MELHUISH: Thanks for the question.
8553 We actually do say in our marketing communication "at least 10 per cent off", which probably relates also to your earlier question. Picture the customer calling in and sometimes we are marketed against, you know, that you can buy this alternative package with another provider and they say, "Well, that is the same price as Rogers" or "It is 4 per cent off or 5 per cent different."
8554 This is where the extent of the conversation happens in the call centre where we say, "Well, you get 11.2 per cent off" and the discussion is, "Well, my understanding is I actually get a different discount" from the shopping around that they are doing more and more. The calls are more and more related to news services, bundled services and comparative shopping, and that is where the average call time is extended.
8555 So we do give the facts because they have them calculated: 11.2 per cent on one side, 10.1 per cent, and when we decided to implement the VIP cable rate. We chose to do the simplification that we are saying to our customers and say, you know, "That price is $35.52 and that is the discount."
8556 Where that also introduces the confusion is, "Why is it different? I was told something else when I phoned somebody else about what the rate was that they were doing?" if the price was the same and different and you get caught up in this 51 cent conversation. So when we implemented VIP we chose to harmonize at the VIP level and market at least 10 per cent off.
8557 COMMISSIONER McKENDRY: When you market the VIP program, the promotional material I have seen at least, and it may be the material I haven't, doesn't promote the fact that there is 10 per cent off your cable rate. The document I'm looking at here only refers to: 10 per cent off the Internet service, 10 per cent off Cantel, 10 per cent off movie rentals, 10 per cent off Radio Shack brand merchandise and 10 per cent off movie rentals at the Rogers video stores.
8558 So the inability to be able to say 10 per cent off your cable rate, why is that a problem, because, as far as I can tell from the promotional material, the discount on cable rate isn't promoted in any event?
8559 MR. MELHUISH: It actually does relate right back to this point of the basic cable rate. Perhaps we are overly sensitive about rates at Rogers, and pricing, and we didn't want to get into a discussion that, first of all, highlighted the differences where we had to. So if we said up to 10 per cent, we wanted a clear, simple message: 10 per cent off the Rogers' products. If we had put "up to 10 per cent" and then complicated it with an 11 per cent or a 10 and change, we were being just overly sensitive to saying something different than what we were actually going to deliver, and when we get them on the phone, figuring out what side of the street they live on, we do capture which rate it is.
8560 COMMISSIONER McKENDRY: I just want to make sure I understand the VIP program. The VIP program, you are eligible if you take basic cable, all the tiers and more than one cable outlet?
8561 MR. MELHUISH: That's correct.
8562 COMMISSIONER McKENDRY: And the 10 per cent off or the 11.2 per cent off applies to the entire package, so it does apply to the basic cable rate as well?
8563 MR. MELHUISH: That's correct.
8564 COMMISSIONER McKENDRY: You are offering that on a standard basis across Ottawa now so, in a sense, you have implemented a unified rate in a partial way with the VIP program. Is that correct?
8565 MR. MELHUISH: That's correct.
8566 COMMISSIONER McKENDRY: How many customers in Ottawa, east and west, would be eligible for the VIP program? How many customers have the tiers, the basic service and more than one outlet?
8567 MR. MELHUISH: At the end of November it was just over 60 per cent of the customers in the Ottawa region.
8568 COMMISSIONER McKENDRY: So you are prepared to implement a unified rate across Ottawa for 60 per cent of your customers without any rate increase for subscribers in Ottawa West under the VIP program?
8569 MR. MELHUISH: Yes. We are prepared to implement -- what we are prepared to implement is a simple message to our customer, a unified rate, one rate for all customers across the customer base.
8570 COMMISSIONER McKENDRY: I understand to get the VIP program, somebody that is eligible has to ask for it. You don't get it unless you ask.
8571 MR. MELHUISH: Well, we advertise for people to sign up for the VIP program. Part of the VIP program entitles Rogers to market the other group of companies' products to the customer and, again, you know, given Rogers' history of pricing and bundling and negative optioning, the last thing we wanted to do was force somebody to convert and then have people write to us and say, you know, "I don't want your program. This isn't what I want. I don't want you calling me about your at-home service. I never asked for this." We decided that that would cause, you know, customer irritation as opposed to customer satisfaction.
8572 I think on many of our mailings, on our new Big Picture magazine, in our ads, our ad avails on the television set, we are out there in full force offering everybody that wants this product 10 per cent off and all they have to do is call in. They don't have to mail anything in and can satisfy that reduction with a call to the call centre.
8573 COMMISSIONER McKENDRY: I want to make sure I understand. You were concerned that if you reduced people's cable rates by 10 per cent this would lead to complaints?
8574 MR. MELHUISH: If we did a massive mailing list what we were concerned with is telling everybody their bill changed and worried about complaints there because not everybody would have just taken it as, "Oh, this is 10 per cent off". Some people would have taken it as "You are trying to get rid of my cellular phone company. You are trying to market to me. Rogers, you are just trying to have all my business". So we didn't want to just, in a way, negative option them on this bill.
8575 COMMISSIONER McKENDRY: To come back to my question before that, I just want to make sure that I understand the situation.
8576 Rogers is prepared to offer 60 per cent of its subscribers in Ottawa West and Ottawa East together a unified rate that is 10 per cent less than existing rates without any rate increase to other subscribers?
8577 MR. MELHUISH: Yes. If I may explain the concept of the VIP Program, obviously our goal in the VIP Program is to up-sell our existing customer base. Today we are at 60-plus per cent that can get it, but when the program started we were at less than 60 per cent.
8578 So people who have signed up to the VIP Program saw the extra value in getting the extra services for less, and then our motivation is to then offer them other products like at-home VIP digital premium, Cantel phones, video store discounts and Rogers goal is to provide them discounts on all the Rogers products or, said another way, rewarding them for doing more business with Rogers.
8579 COMMISSIONER McKENDRY: What is the penetration of cable in the Ottawa serving area?
8580 MS WATSON: It's about 80 per cent. Basic penetration of homes passes 80 per cent.
8581 COMMISSIONER McKENDRY: I understand that one of the reasons you want us to approve this application is to allow you to deal more effectively with the competitive environment that you find yourself in.
8582 Now, you have explained to us, I think, that you are competing with direct-to-home satellite service and wireless cable as well. I'm wondering how that competition has manifested itself, though, in the marketplace if you have 80 per cent of the market. How much of your market share have you lost since these competitors entered the marketplace?
8583 MS WATSON: Well, over the last three years our growth has been about 1 per cent. Typically, prior to competition, new growth was usually in the 4 to 5 per cent a year, which would have, over three years, accumulated to a 15 per cent difference.
8584 So we are not growing at the same pace that we were, which indicates that new entrants are getting some of those customers.
8585 My colleagues, Mr. Engelhart and Mr. Melhuish, have more to offer on that as well.
8586 MR. ENGELHART: Well, it's true that, as Colette says, we have been pretty flat or with very mild growth as opposed to the normal growth that is generated by new home construction.
8587 But our costs have also gone up. We have had to put a lot into network upgrades, introduce the programs like VIP Cable that have led to considerable revenue reductions. We have had to spend a lot more on sales and marketing.
8588 So the net result that you see is pretty flat growth, mild increase, but that has come at the expense of considerable effort and expenditures by us.
8589 COMMISSIONER McKENDRY: If I understand what you have said, you have been able to grow your market share under the existing rate structure in Ottawa in the face of competition?
8590 MR. MELHUISH: We actually -- it's in such small numbers we actually lose market share, but I guess I would say it this way: In the Ottawa market we have gained 1,000 customers. So if you had 246,000 and it went to 247,000, in the old days we would have -- three years ago, you know, 246,000 over a number of 300,000 is now 246,000 over a number of 310,000.
8591 So it is an actual loss in market share because we only got 1,000 of the new home constructions over that period of time. But it is not what one would call a massive drop in market share.
8592 COMMISSIONER McKENDRY: I wanted to ask you a couple of questions that flow from my review of your application.
8593 Before I do that, though, just one question. Perhaps I should know the answer to this question, but I don't.
8594 To what extent have you notified your customers of this application?
8595 MR. KOVACS: We did a broadcast notice, I guess the required number of times before the end of the comment period for the public notice and hadn't heard -- that was on our community channel in prime time and we hadn't heard any comments back during that process.
8596 COMMISSIONER McKENDRY: There wasn't a billing insert?
8597 MR. KOVACS: No, there wasn't.
8598 COMMISSIONER McKENDRY: Thank you.
8599 Just in terms of existing unified rates for Ottawa, we have talked about the VIP Program.
8600 The other question I had in that area was what about multiple unit dwellings? Is the rate different if you live in a multiple unit dwelling in Ottawa East and Ottawa West? I assume for some of these buildings you have bulk rates and the subscriber in one of these buildings the rate wouldn't necessarily be visible to them.
8601 Would there be a group of your subscribers who have a common rate by virtue of living in multiple unit dwellings?
8602 MR. MELHUISH: The only case where that could be possible is when it's buried in their bill where there is a bulk rate involved, and I will just check with my colleague.
--- Pause / Pause
8603 MR. MELHUISH: So the other group of MDU occupants are people that we call tenant-pay where they get the bill just as if they were in a single-family unit or a townhome, or whatever, and so that is determined on the side of the street that they are on.
8604 But somebody that is a bulk-bill, which is a small per cent overall, it is 7 per cent of the subscriber base as opposed to the end-view market which is 40 per cent of our subscriber base. Only 7 per cent are in a bulk environment and therefore the cable bill would be varied and depends on the individual building owner. How they package that up is up to them.
8605 COMMISSIONER McKENDRY: Just to make sure I understand, 7 per cent of your subscriber base in Ottawa are in multiple unit dwellings where there is a bulk billing arrangement?
8606 MR. MELHUISH: I'm sorry, that is a national number and the one in Ottawa is actually lower. I was trying to give 40 per cent of our customers are in multiple dwelling units and that is more concentrated in the Toronto area.
8607 In the Ottawa market it is in the low 30-35 per cent range that are in multiple dwelling units and it is not as high as 40 here. The 7 per cent bulk I believe is also correspondingly lower just because there are less MDU buildings in the Ottawa market.
8608 COMMISSIONER McKENDRY: So say, for the purpose of discussion, it was 5 per cent rather than 7 per cent, that would bring us up to 65 per cent of your subscriber base in Ottawa that is already eligible for a standard rate without any consequent rate increases for the other subscribers?
8609 MR. MELHUISH: I guess I believe that math is correct.
8610 COMMISSIONER McKENDRY: Okay.
8611 MR. MELHUISH: So I think what you are saying is, of the 60 per cent that qualify for a VIP that the ones that are in the MDU buildings you subtract from that and therefore "X" per cent, yes. So a small percentage have their cable bill embedded in their bill from the MD owner.
8612 COMMISSIONER McKENDRY: Thank you.
8613 In your application you discussed, or you said at the time you wrote your application:
"At this time Rogers has no intention..."
8614 And I'm quoting:
"At this time Rogers has no intention of passing through to our customers the wholesale fees associated with these services." (As read)
8615 That was in reference to APTN, the Aboriginal Peoples' Television Network.
8616 Since that time it is my understanding that you have in fact decided to pass that through to your customers.
8617 To what extent does that then impact the revenue loss of $700,000 per year, or does that temper at all your views about the revenue loss?
8618 MR. MELHUISH: I wouldn't say it tempers our views of the revenue loss on the $700,000. The objective of the rate increase is actually to pay for all our cost of services that are going up which are exceeding basically any revenue growth that we have in the cable marketplace, particularly in the programming area. It's growing by over 12 per cent, the payments we make to our affiliates and our general wage increases and facilities costs are growing.
8619 COMMISSIONER McKENDRY: I guess what I was driving at, and I wasn't being very clear, was if you are now going to pass the 15 cents through, do you need to look at the same rate increase in Ottawa West that you were looking at before?
8620 MR. MELHUISH: I'm sorry, I didn't understand the question. The 15 cent APTN rate increase actually is passed right through to APTN. That's their bill to us. We turn around and get that revenue right to them.
8621 COMMISSIONER McKENDRY: But at the time you wrote the application, I take it you were prepared to absorb that 15 cents.
8622 MS WATSON: We are currently absorbing that 15 cents now.
8623 COMMISSIONER McKENDRY: But you have changed.
8624 MS WATSON: Effective January 1 we won't absorb it any more.
8625 COMMISSIONER McKENDRY: So when you wrote this, was it your intention to not absorb it after January 1?
8626 MS WATSON: It was our intention to not absorb it until the rate increase in 2000. There was some debate as to what month of the year 2000 that rate increase would take place, so it had not been decided at the time of writing the application.
8627 MR. ENGELHART: If I could just add, Commissioner McKendry, that 15 cents wasn't part of the $700,000 if that's your question. The $700,000, if we lowered Ottawa East down by 50 cents, what would the revenue impact be? It would be $700,000. The 15 cents was not in that calculation.
8628 COMMISSIONER McKENDRY: Thank you. I think I understand that. Really my question was I assumed from reading this that you had no intention of passing through the 15 cents to subscribers in the foreseeable future. Now that you do, I just wondered if it would help you temper your rate increase in Ottawa West, but I take it from your answer, and you did say when you wrote this, at this time that you anticipated that you would be passing the 15 cents through to your subscribers.
8629 MS WATSON: Just for informational purposes, Commissioner, I would like to ask our CFO to explain even a pass through, even when you pass through that amount, it still ends up costing us money on both sides of Bank Street.
8630 MR. MELHUISH: The main reason is any revenue that we bill our customers draws a 5 per cent cost to the production fund and the one and a half per cent CRTC fees we pay. Although on 15 cents it's not a lot of money, but every time we have a pass through, we get people asking us all the time when we used to have two cents to add on to a rate increase, you know, what's the two cents for.
8631 Depending on whether it was greater than 50 cents or not, the two cents doesn't even cover the extra costs that we incur just from passing through a rate increase to our customers.
8632 COMMISSIONER McKENDRY: Now, I take it the essence of the problem from your point of view is that if you did this without increasing rates in Ottawa West, if you unified the rate without increasing the rates in Ottawa West, it would cost you $700,000.
8633 If you could find $700,000 by reducing your expenses, presumably that would solve the problem, or if you could find some portion of the $700,00, that would at least contribute to reducing the rate increase in the west. Is that right?
8634 MR. MELHUISH: That would be correct. However, as any business is trying to do, we are always trying to reduce expenses. What we have been doing actually with any expense reduction we have had, we have actually been ploughing it back into what we would call customer service oriented action plans.
8635 For example, when we implemented 724, that cost us money. We have increased a considerable amount of money in our technical call centre, in our billing call centre and in marketing and in sales costs in explaining our product. Next year we would hope any money that we would find, one of the customer inquiries we always get is we now provide half day appointments.
8636 Our goal next year is to find more money to invest in a tighter window of appointments. It's very frustrating for our customers to, you know, give up half a day on whatever they are doing to wait for a Rogers Cable van to come up to their house.
8637 That's one of the areas we are trying to invest in. We are always trying to invest back into the customer base. More and more, that is obviously driven by competition.
8638 MS WATSON: If I might add. Some of our expense based on the Ottawa market is higher than most of our other markets. We have additional programming services in this market that we don't have in other markets. We do print communications pieces in two official languages. We have a different set of signs and letterhead in an official incorporation here to reflect the linguistic duality of the market. So it is all more expensive to do.
8639 You also have to pay a premium for bilingual CSRs. That adds to the cost base.
8640 COMMISSIONER McKENDRY: Thanks. To be honest, I haven't had a chance to look in detail at a lot of your expenses, but I was intrigued by a couple of the items on appendix A in your application. I guess this is appendix A to the responses to the deficiency questions, dated July 9. It's headed "Model Assumptions".
8641 One thing -- I will just give you a minute to find it. One thing that struck me in there is I noticed with respect to bad debt expense, it says that that's 1 per cent of revenues. I take that to be in effect one in every hundred customers doesn't pay their bill. That struck me as unusually high. I'm wondering if you can comment on that.
8642 MR. MELHUISH: Actually 1 per cent of revenue is a low bad debt expense rate. If you were to look at, for example, our Cantel business, they are more than double that rate of expense for bad debt.
8643 In our new services, we would experience a greater than 1 per cent expense for bad debt as people are buying more and buying at home and those sorts of things, so 1 per cent actually is low in an industry.
8644 COMMISSIONER McKENDRY: In Ottawa, one out of every hundred customers doesn't pay the bill.
8645 MR. MELHUISH: One out of every hundred dollars is not collected.
8646 COMMISSIONER McKENDRY: Have you done any comparisons with other cable system operators to see how this bench marks against the industry?
8647 MR. MELHUISH: I was just checking. We bench mark quite a bit in the cable industry and we are one of the lowest, but again, in the cable industry versus other industries, it's not 1 per cent versus 2 per cent. It's 1 per cent versus 1.1. versus 1.2 per cent of the revenue.
8648 The reason why, it really isn't tied to how many customers, it's tied to actually more of the revenue and it is in most industries tied to a revenue thing. It doesn't mean if you have more customers, you will have more bad debts.
8649 COMMISSIONER McKENDRY: And this is because people are subscribing to Rogers at home, the tiers pay television. Is that what they are defaulting on?
8650 MR. MELHUISH: No. What I was trying to indicate, you mentioned versus industry 1 per cent seems high. I was trying to point out that in the cable industry, if you take the basic cable and the three tiers, 1 per cent is what basically drives that rate because that's the majority of our business.
8651 If you actually segmented out the at home piece, it would be higher than 1 per cent because their bill is actually larger. What drives the bad debt expenses is just the daily burden of a bill within the family income situation. My point was that 1 per cent is just low as an industry figure.
8652 COMMISSIONER McKENDRY: Could you provide that bench marking material to us? Is that material that you can provide to us?
8653 MR. MELHUISH: I believe so. We have all signed a confidentiality agreement amongst the cable companies and the people that we have looked at, but we don't mind sending that out.
8654 MS DINSMORE: I think we will just have to check into that and get back to you.
8655 COMMISSIONER McKENDRY: If there's a confidentiality issue, you can think about it. Yes.
8656 Promotion I see is increasing 6 per cent over the forecast period, including travel.
8657 Why is promotion increasing by that amount and, in particular, why travel given we are talking about the Ottawa system?
8658 MR. MELHUISH: It's primarily driven by promotion in that figure. It's just the way we group our expenses together that that does include travel. What has gone up significantly is our promotional material, our sales and marketing expense and that's mainly what drives the 6 per cent.
8659 COMMISSIONER McKENDRY: And that's a reflection of the new competitive environment?
8660 MR. MELHUISH: The new competitive environment and the multiple offerings that we have actually had in the last two years, not only the Tier 3, but NFL Sunday Ticket and VIP Cable have driven that expense.
8661 COMMISSIONER McKENDRY: The system distribution costs that are increasing 6 per cent, what is that? I assume that isn't the capital expenditures, that's an operating expense. Why would that be increasing by 6 per cent?
8662 MR. MELHUISH: It's basically maintaining the plant and when you have multiple things going down the pipe and delivering them into home the maintenance program is critical to delivering the proper channel signal and superior quality. Our maintenance costs have gone up and up year after year and they are going up again next year.
8663 COMMISSIONER McKENDRY: As I recall, in the telecommunications industry when new technology was introduced maintenance costs decreased. Is there a difference in the cable industry? I think you have explained to us you have a significant program under way to introduce new technology into the network. Typically, one would expect less maintenance.
8664 MR. MELHUISH: That's correct. If I could share with you as the CFO of the company I am waiting for that day. I am currently about to go to the board of directors next week and increasing in customer care, technical service and maintenance in my plant. So, first of all, it is just something we are very dedicated to and I believe when we finish the rebuild we will have less maintenance issues, but it's the coax in the home. It's the water leakage that can happen around the house.
8665 In addition to that, in that number are poles and duct costs from municipalities is in that number. They have gone from $10 to $15 and that is also in that line item, so people are charging us more to use their facilities.
8666 COMMISSIONER McKENDRY: Thank you.
8667 In your projections that you have filed with us and in your scenarios with respect to maintaining the status quo or implementing the application, the operating expenses are shown as a identical as I recall. I take it that's an expectation that you don't anticipate that there will be any significant administrative savings as a result of having this application approved?
8668 MR. MELHUISH: Not significant administrative savings that would offset out cost of living adjustments and general expenses that go up with inflation.
8669 COMMISSIONER McKENDRY: Let me discuss a couple of options -- I'm sorry, did you want to add something? No.
8670 Let me discuss a couple of options with you to make sure that we understand all the dimensions of your application. I suppose one option would be to establish -- allow consolidation of the licences, but maintain the status quo and rates, so you would have rate zones within the one licence structure.
8671 I would like to ask you -- well, I would like to ask you to comment on that scenario.
8672 MS DINSMORE: We have looked at that as a possibility. If the Commission did do that, we would obviously look at it and consider it, but for us while it would meet our desire to have one regional licence, we wouldn't get the benefit of having the revenue neutral rate.
8673 All the benefits of simplified ways of doing business with our customers and for our customers doing business with us, better call centre service, ironing out the rates between the two areas and ensuring that everyone is paying the same rate, so that confusion goes away and, therefore, CSRs can spend their time talking to our customers about other things. Those benefits wouldn't be achieved.
8674 So, we would look at it, but it certainly wouldn't achieve the sort of fundamental objectives which lie behind our application.
8675 COMMISSIONER McKENDRY: The other -- or another option, I shouldn't say the other option. Another option would be to consolidate the licences and implement the lowest rate that exists throughout the territory and we have discussed that to a certain extent because it has happened to a certain degree or it is possible for it to happen to a certain degree because of the VIP program.
8676 Perhaps you could just react to that option. I know a lot of what you have said in your oral comments and so on deals with that, but to what extent have you discussed that amongst yourselves, the viability of implementing the lowest rate across the Ottawa East and Ottawa West. Presumably, there would be benefits in the sense of perhaps losing less customers to your competitors, for example?
8677 MR. MELHUISH: Yes. I would say we have discussed that internally and there are two ways to do it. The first is your question of why not just lower the rate and you've got harmonization.
8678 Therefore, we would have $700,000 less cash flow into the company and that is really the primary reason why we did not want to do it that way. I believe a lot of people believe cable makes a lot of money, but cable is actually in the negative cash flow position, not just at Rogers, but in the rest of Canada and in North America. That is primarily driven, if I may in very simple terms, people read about Rogers making this year $400 million of what they call EBITDA and I think radio licensees have tried to explain that to you as long as ourselves. That's $400 million of cash people think of, but that's earnings before interest, tax, depreciation and amortization.
8679 I don't want to bore anybody in the room, but you take that $400 million and then what we do, if you take 1999 as an example, is we spent $400 million in capital programs this year and then we have $300 million of interest expense to service our debt. So we actually are in a negative cash flow position and we try not to make any decisions that further reduce the cash flow of the company to a further larger negative position.
8680 The investment community is very tough on us because they are always asking us when will we be cash flow positive. Five days before my latest board meeting that will be the number one question and I will be reporting to them that I will be negative cash flow $300 million this year.
8681 It actually grows next year because I invest $600 million in capital programs, which is partially the $54 million we talked about here in Ottawa on the rebuild and then the next year it's $250 million. So we will not be cash flow positive for at least three years and that's the fundamental reason why we didn't want to do it ourselves was to further the erosion of cash flow.
8682 COMMISSIONER McKENDRY: The last option that I wanted to discuss with you is -- I will summarize it as follows, revenue neutrality, consolidating the licence, revenue neutrality. But also calculating specific system profitability using an economic need methodology. So to see if there is an economic need to justify a rate increase in Ottawa West.
8683 That's the approach I think that the Commission took in Decision 99-183 with respect to Calgary basic service rate adjustments. I will ask you first are you familiar with that decision?
8684 MR. ENGELHART: Yes, we are.
8685 COMMISSIONER McKENDRY: Do you have any comments on that approach, in applying that approach in the situation you are in and what would be the results of applying that approach in your situation?
8686 MR. ENGELHART: As you know, Commissioner, the economic need test is a two-part test. The first part looks at the return on next fixed assets for the regulated basic assets and the second part of the test looks at the overall company return on net fixed assets.
8687 The bench mark for the first part of the test is 11.5 per cent, and the bench mark for the second part of the test is 23 per cent. Our calculations are that we would qualify under the first part of the test because we have a return on next fixed assets of 10.7 per cent. We would not qualify under the second part of the test, which would be 28.3 per cent.
8688 As Bruce mentioned, we are embarking on a network build and when you add assets that has the effect of reducing the return on net fixed assets. And so because of that impact, by the years 2000 or 2001 we would probably fall below the bench mark RNFA on the second part of the test.
8689 I guess we don't want to wait -- I guess it's 2001, according to the calculations I have seen and I guess we would rather do it now than wait to that point.
8690 COMMISSIONER McKENDRY: I want to finish up by just following up on a couple of matters that we discussed earlier. One of the matters that we discussed was the burden on your call centre now with people calling in and wanting an explanation as to why the rates are different in Ottawa West than it is in Ottawa East.
8691 If we approved your application, to what extent are you concerned about the burden that would flow from subscribers in Ottawa West calling in to complain about the rate increase?
8692 MS WATSON: Commissioner McKendry, it's always very difficult to predict the action to a rate increase. Some cause a huge amount of ire, and others go through.
8693 If you look at the last three years of the Bell Canada rate increases of $2-and-change, you may have seen a different set of numbers but publicly, in the media, we didn't see that much outrage.
8694 However, when we introduced TVA in May, people automatically assumed the rate was going up and it created calls. We then explained that there was no rate increase associated with that.
8695 So yes, we will expect our customers to call. But once we explain to them that they have been subsidized, that customers on the east side of Bank Street have been subsidizing the level of service that the entire market is getting, we feel that we will be able to explain to them.
8696 We will communicate it in writing. We would be happy to vet it by the Commission before we do that as well, just to ensure that everyone is happy with the language we would use to communicate that message.
8697 I believe Mr. Engelhart has something to add to that.
8698 MR. ENGELHART: You mentioned before your experience from the telecom world, and I see this type of rate increase as not that dissimilar from a couple of experiences on the telecommunications side.
8699 One, I guess, is the local telephone rates that go up as a result of an EAS expansion. So in Toronto if Newmarket was brought into the extended area of service, everyone's rates would go up. The people who call Newmarket would have a fairly big saving, but the people who don't ever call long distance to Newmarket would not see a saving. They would just have a higher local rate.
8700 There is typically fairly modest negative reaction to those types of increases, because people understand that it is revenue-neutral.
8701 Similarly, the rate rebalancing that took place with a $6.00 increase in local rates and a decrease in long distance rates, again, for the people who made a lot of LD calling that was a good deal. For the people who didn't, it was a higher local rate.
8702 But again people understood it was revenue-neutral, and people understood, I think, that it was an effort to remove some historical anomalies and move to cost-based rates. That is really part of what we are doing here.
8703 We have the same level of service in both parts of Ottawa, so people are getting the same service. It costs the same to serve someone in Ottawa East and Ottawa West. We just have a different price because of historical reasons.
8704 I think most people will understand that. That is not to say that there won't be some complaints, but I think it will be a message that we can deliver.
8705 COMMISSIONER McKENDRY: I just want to follow up on two things I heard here.
8706 One, when the Ottawa West subscriber calls your call centre, they are going to be told it is revenue-neutral for Rogers. It seems to me that the customer is going to say: "Well, it is not revenue-neutral for me. My bill is going up 25 cents a month. Why are you telling me that what is good for Rogers is good for me?"
8707 What would your response be to that?
8708 MR. MELHUISH: I don't expect the people in Ottawa West to cheer. I am not saying that there won't be any negative reaction. But as Colette said, when the customer understands the logic of what is going on, you generally don't get a hostile reaction. People understand that as you are moving from a monopoly world to a competitive world, there are all sorts of regulatory artifacts that have to be ironed out as part of the transition period.
8709 I am sure there will be some complaints, but I think most people will understand the logic of it. And when they realize that it is not a money-maker for us, I think that also will have an impact on the customer reaction.
8710 MS WATSON: If I might add, it is also important to know what our plans are. If you were to approve this in February or March of 2000, it doesn't mean the next day we will go out and do this.
8711 Perhaps Bruce can explain.
8712 MR. MELHUISH: Again, we are sensitive on how we do this. We have just implemented a rate increase and customers have called. If we could, I don't have any plans, nor does the company right now, on reducing rates or increasing rates beyond January 2000 in the year 2000. Our Ottawa licence is renewed in August.
8713 If we extended that to the year 2001, as an example, we might incorporate it into a larger message that we give to our customers.
8714 Does that mean that rates will go up in 2001? Only the competition and the competitive environment and the value of services that all of us as service providers give our customers I think will determine that.
8715 I certainly would never want to implement it over night and would not want it just to be a 25/25 explanation. I would rather do it in an overall pricing package that we deliver to our customers, and explain it the way we are doing it; that it is revenue-neutral, but they are dealing with the overall issue of their bill at that time.
8716 I would, believe it or not, think it is the most customer-friendly way to deal with the subject, as difficult as it may or may not be.
8717 COMMISSIONER McKENDRY: The other thing I heard from you, when the customer from Ottawa West calls in and asks for an explanation, is that one argument would be that it is revenue-neutral. The other argument would be that you have been subsidized by Ottawa East and that is not appropriate.
8718 What if the customer said back: "Well, Ottawa West is a much more densely populated, smaller geographic area than Ottawa East is, and as a result it has cost less to serve people here in Ottawa West, and the rates are historically different because it costs less to build the network here and to serve people here. So, Mr. or Ms Call Centre Representative, why are you telling me that I am being subsidized by Ottawa East?"
8719 MR. MELHUISH: I would hope that call would come to one of our better trained call centre representatives. I think it would depend on the actual skills of that individual, because you can actually get that question today from an MDU person who believes that their bill perhaps should be a little bit lower because of the density in the multiple dwelling unit versus going down the street, because there are some of the same economies there.
8720 I would just hope that we will train our reps with as best a standard answer as we can and hope that in the majority of the cases that explanation will satisfy. We do have a tiering ability, when somebody is not happy with that explanation, that we could transfer the call to somebody that perhaps has more experience in dealing with a customer, not just on this type of situation but any type of situation. And we would hope to resolve it at that level.
8721 MS WATSON: If I might add, the cost of the network is the same east of Bank or west of Bank, regardless of density. The cost of a person to deal with those issues is the same, whether they are dealing with a customer east or west of Bank Street.
8722 The cost of providing a community channel is unrelated to density. The cost of printing brochures is unrelated to density. The cost of radio and television ads is unrelated to density.
8723 The single biggest cost item that we have is the cost of the product, the amount of money that we pay out to Canadian and foreign program suppliers. And density can, in some cases, factor into the formula we use to pay them, in terms that we pay a discount for bulk rates.
8724 But by and large, the hundreds of millions of dollars that we pay out for programming services, which are more in the Ottawa market, are not related to density.
8725 COMMISSIONER McKENDRY: Let me put this to you, then. Isn't it correct that it costs less to serve people in Ottawa West than Ottawa East?
8726 It seems to me, looking at this map -- which I am sure, with your excellent vision, you can see from 50 feet away -- that you could fit three Ottawa Wests into Ottawa East.
8727 I assume, when you have more subscribers per kilometre of network, that the cost per subscriber is lower.
8728 Isn't that in fact why the rate in Ottawa West is lower than the rate in Ottawa East? I put to you that in fact people in Ottawa East are not subsidizing people in Ottawa West.
8729 MR. MELHUISH: If you got into a discussion on density, you could go many places.
8730 Ottawa enjoys the lowest basic cable rates for the Rogers systems. When I say "lowest", somebody else is in the $16 range, but our average basic rate is $19 and change across the country. That is mainly because of the way the original methodology was derived on the capital you were spending at the time in those neighbourhoods. The systems that were acquired or divested of, depending on who you were, drove the rate.
8731 So there are many places that have a lot higher density than Ottawa, which I certainly wouldn't want to introduce to an Ottawa customer on the phone, that would have higher rates and there are places like Agassiz out in B.C. that have, you know, no density and higher rates or comparable rates.
8732 So, you know, that is why I say, if you have a customer that is on the phone with you that is getting into this type of discussion, it is a similar discussion to being perhaps angry with Rogers for some reason, and that is why I would rather spill that call up into somebody that tries to find out what the real issue here is with the customer: Are we not providing the service? What is the problem?
8733 As Colette said, programming costs makes up greater than 15 per cent now of our expense in the business and the costs of, you know, the trucks rolling down the street, and sending people out is a lower portion every day. As programming costs rise, it double-digits every year, I don't want to take a person through a lesson on the phone. As I see, I'm probably waning all of you on this. But I think you have a different issue on the phone if the person won't take the first or second explanation.
8734 MS WATSON: The -- no. I'm sorry. I will wait.
8735 MR. ENGELHART: If I could just add one small point, Commissioner.
8736 The only kind of work I have ever seen done to try and make this density cost comparison is I have seen some work done on comparison of costs between an MDU, or multiple dwelling unit building, and a single family home building. That work indicated that the capital costs were lower in MDUs but that in our experience the churn is higher -- people move in and out more -- and the churn impact overwhelmed the capital saving impact.
8737 So I'm not sure what the definitive answer is on the density question, but that MDU model that I saw showed that it could be overwhelmed by churn.
8738 COMMISSIONER McKENDRY: On the churn issue, don't you charge an installation fee each time a new subscriber is connected to your network?
8739 MR. MELHUISH: We do. And depending on the -- first of all, to back up, yes, we do, but it does not cover the cost of rolling a truck to the house. And depending on what the customer's situation was, they wouldn't necessarily pay a full rate on the truck roll.
8740 COMMISSIONER McKENDRY: In any event, I want to go back to see if I can get a crisp answer on whether or not the fact that the difference in rates between Ottawa East and Ottawa West is accounted for by the fact that Ottawa West is a much more compact, dense serving area in terms of population than Ottawa East. It seems to me this is a well-known fact in the provision of telecommunication services or cable services, that it costs a lot more to serve a subscriber in a rural area, to go to extremes, than it does in an urban area.
8741 What we have here in Ottawa West is essentially an urban area and in Ottawa East a part urban area and a part rural area. Ottawa East goes out to Vars, it goes out to Russell, Kenmore. So what I would like from you is, in a sense, a yes or no answer, because the difference in rates is accounted for by the difference in population densities.
8742 MS WATSON: Let me try on -- what I was going to say earlier is you are absolutely right in capital expenditure. It is much easier. You can get a much better ratio of dollars spent to homes passed and homes rewired in an urban area, which is why we still have some of our pockets, Embrun, Russell, where they are at 550 and not at 600 because it is hugely expensive to go that far east and south to rewire and upgrade the network there. So we focused on the urban part.
8743 So in terms of capital expenditure, yes, but I don't think it applies on the operating cost side.
8744 COMMISSIONER McKENDRY: Thank you.
8745 I just wanted to follow up on the comment about not being as -- that it isn't necessarily less costly to serve a multiple dwelling unit.
8746 My understanding is you have bulk rate arrangements when people are densely packed together in a multiple unit dwelling. So in a very dense area, like a multiple unit dwelling, those subscribers, perhaps through the building owner, are offered a much lower rate than the people that are spread out horizontally all around that vertically-packed group of people.
8747 MR. MELHUISH: The bulk rate isn't correlated with the density of a building. It is an old program we used to have, and I couldn't tell you if the rate that the customer pays is -- all the difference in the bulk versus what they are paying is going to the landlord's pocketbook or not. It doesn't necessarily mean that the landlord passed on the savings to the customer and -- each individual one -- if Rogers was to change its rate, has the ability to also increase the rate at the time.
8748 The largest MDU owner here, which I believe might be Minto and another consortium, the bulk of those customers are tenant pay, as are the bulk of our MDU customers. So they see the same bill as a person in a single family dwelling or a townhouse or whatever.
8749 MR. ENGELHART: Just to underline what Bruce said, the penetration of bulk service is quite small. Most MDU buildings are tenant pay. The landlords in Ontario didn't want to get involved with bulk because of its connection with rent control legislation. They don't want to be in that business. So most of the apartment buildings are on a tenant pay.
8750 Where you find more interest in bulk is with condominiums where the condominium owners get together and decide that is where they would like to go.
8751 COMMISSIONER McKENDRY: Thanks very much. Those are the questions I had.
8752 THE CHAIRPERSON: Other colleagues have a question.
8753 But before we leave this subsidization question, isn't another issue that basic rates are regulated and they are regulated on a particular test so that, in that context, you can't say to a customer, without going through very difficult explanations, that one subsidizes the other if the customer in the area that is presumably subsidized, Ottawa West, is actually not in need of a rate increase because they can't meet the tests that are required for economic need?
8754 In other words, before being able to say that Ottawa East subsidizes Ottawa West, in the specific system of regulation we have for basic rates, you would have to find that Ottawa West needs a rate increase on the basis of the two tests, 11.5 and 23, because you are only subsidized if, in the particular context, someone else is paying more than you qualify for under the tests because we don't have an ordinary situation here.
8755 We have a situation where territories were licensed and basic rates were established, and the Commission, after a long process, still has an economic test that says: If you meet these two thresholds, you can't have a rate increase. So if Ottawa West meets these thresholds, no one is subsidizing their basic rate.
8756 MR. ENGELHART: I guess, Madam Chair, it boils down to a question of what that economic need threshold was intended to measure.
8757 I believe when the Commission went to the economic need, the lower threshold, the 11.5 per cent threshold for basic customers, I think part of the thinking at that time was you should get your new sources of revenue from new services. We are not going to continue to increase basic rates with the CAPX rate increase. You can get your return on your capital from launching new services.
8758 The economic need increase, which is now in section 50 and which at that time was in section 18.8, was put in, as I understood it, as something of a floor to say: If you do fall below this level, then we will consider you to be in such dire need that you can get an increase. Rate increases under that economic need test have been fairly few and far between with the Commission.
8759 Early in the 1990 proceeding I think, the Commission took the 23 per cent return on net fixed assets, which still exists as the second leg of the 18.8 rate increase, and said: That is what we take to be a benchmark level for returns for cable operators.
8760 In the calculations that were done by Dr. Cleveland Patterson at the time there was a comparison of that to return on equity and that return on equity was compared to other industries and that was sort of considered to be the benchmark.
8761 So when we talk about there being a subsidy from Ottawa East to Ottawa West, what we are saying is that if you take the assumption that we are at sort of a normal level of return right now -- and, as Bruce said, we are actually cashflow negative. But if you take us at a normal level of return now, then there is a subsidy in the sense that the service costs the same and one group is paying more.
8762 I understand your equally legitimate way of looking at it, which is that if we take anything above the economic need increase to be extra or gravy, then you couldn't say that there is a subsidy.
8763 I guess the difference between those two viewpoints is that I don't see the economic need threshold as measuring a normal rate of return, I see it as measuring an extraordinary low level of return that would justify Commission action.
8764 THE CHAIRPERSON: But you would have to go back to what you have argued is the fundamental reason for you explanation and tell the customers "I'm doing this in the context of the regulatory system as it exists because there are so many people in Ottawa who are unhappy with us, not because of rate increases, not because they feel they are paying too much, but because their mother-in-law pays less than they do."
8765 You know, you can't tell them it's because your mother-in-law was subsidizing you in the context of this regulatory system. You would have to set up another response to why you are doing this which, earlier in your conversation with Commissioner McKendry, was the fundamental reason for -- was the complaints that those who live on one side of Bank Street and the other side of Bank Street don't pay the same fee.
8766 If it is your fundamental reason, that would be what is an explanation that is acceptable to your customer and the Commission would have to be convinced that this is a problem.
8767 Although I understand, Ms Watson, the other points you have made. You obviously, as Commissioner McKendry pointed out, managed to manage that at the moment.
8768 Mr. Engelhart, I would say that your response, of course, is these tests are not very good, they should be altered. Well, that is for another day presumably.
8769 At the moment you would agree with me that you can't talk subsidy within the context that we have, whether you agree with it or not, unless these tests are -- unless the thresholds are exceeded -- are below and somebody else from another territory is paying for it.
8770 MR. ENGELHART: I'm not saying the test should be altered. I'm saying the tests work very well to do what they were intended to do, which was to capture a very low base level of return and say "Below that level we will grant a rate increase."
8771 With so many matters of costing, Madam Chair, it's not science so much as it is there are different methodological frameworks. I understand what you are saying, that until you fall below the base level that justifies a Commissioner-approved rate increase you can't say that you are below cost, and if you can't say that you are below cost you can't say that you are being subsidized. I understand that argument.
8772 The argument that we are making, which I think is a different -- comes at it from a different direction, which is: If it costs the same and the rates are different somebody must be subsidizing somebody. But it's a kind of philosophical difference that can drive accountants mad. And I appreciate your framework as well.
8773 THE CHAIRPERSON: Would you say that perhaps regionalization of territories makes eminent sense? I hear Ms Watson in her answers to Commissioner McKendry, but that it is difficult for the Commission to let it happen at the expense of any customer in the context of the framework -- however flawed it may be, Mr. Engelhart, there it is.
8774 MR. MELHUISH: It's interesting. If we had qualified for economic need, I have to tell you, communicating that message to the customer, to me and to the company, is easier or, quite frankly, puts the burden, which I don't want to do, on saying "Oh, the CRTC section 18 -- sorry, 50, to quote the right number -- XYZ says we qualify and out goes the notice and up goes 25 cents. And let's say we did the neutralization because we really want to harmonize.
8775 That customer communication is perhaps easier for Rogers, but at the same time still takes all the same call centre training. The one that we are proposing -- and that's why we would want you to vet the letter that we would send to our customers -- we would want to put the burden completely this way.
8776 It will cause the same training and the same angst and that's why we will try to communicate it like the Shaws did, if I read what they did in 99. I didn't read the words they used, but I know that they did it when they did another price increase.
8777 The irritation for the customer becomes the price increase, not the plus-25/minus-25. You know, I wouldn't want to hang economic need on it because I think what makes some of us angry is we wash our hands and say "Well, this isn't us, this is a rule and we are just abiding by it."
8778 This 25/26 thing becomes a challenge for us. We have to think it through how we do it. We are here, you know, it makes sense, one region, one city, one government. It happens. Ken's example in his experience in the telephony industry, they faced the challenge.
8779 I'm not saying this is, you know, something we want to go implement tomorrow, we want a regionalization of licence strategy. We think it makes sense. And yes, that call centre call, that new bill customer communication is going to be important, take a lot of time, and I would rather do it with something else the company is doing and not say section 50 I get to economic need because I would have just as many phone calls, and I believe I would have a lot of angry phone calls, as much as I might get if I do the bigger picture story.
8780 THE CHAIRPERSON: Thank you.
8781 Commissioner Cram.
8782 MR. ENGELHART: Could I just add one more thing, because I think part of your question, Madam Chair, was getting to the procedural structure of the Commission's rate increase mechanisms.
8783 You are quite correct, if I understood your question correctly, that under the current regulations the only mechanisms for increasing basic rates are the passthrough and the section 50 economic need increase.
8784 We think those procedural objections are overcome if we surrender the three individual licences and receive a new regional licence. We think the Commission would have the ability to assign a new standard basic rate to that regional licence.
8785 So I think there is no procedural hurdle to unifying the basic rates if the Commission considers it an appropriate policy.
8786 THE CHAIRPERSON: Commissioner Cram.
8787 COMMISSIONER CRAM: I'm just trying to figure out who is going to -- how many people are going to win and lose and, I mean, face the increase.
8788 If I have it right, we have 60 per cent penetration of VIP, so there would be no increase for those people even if they do live in the west. Is that correct?
8789 MR. MELHUISH: Correct.
8790 COMMISSIONER CRAM: So then I have another 5 per cent --
8791 MR. MELHUISH: I'm sorry, the penetration of VIP. So 60 per cent are eligible, the penetration in the Ottawa market is 20 per cent right now.
8792 COMMISSIONER CRAM: Oh, okay.
8793 MR. MELHUISH: So 60 per cent are available, get it -- I'm sorry. Some would say all customers can get VIP Cable if they upgrade their service.
8794 COMMISSIONER CRAM: I understand, yes.
8795 How many people are actually going to pay the increase? That's my point.
8796 So the 20 per cent is out, 5 per cent is out because they are in MUDs or MDU, as you call that. Is that correct.
8797 MR. MELHUISH: So the ones that are out are the VIP Cable customers --
8798 COMMISSIONER CRAM: Twenty per cent, yes.
8799 MR. MELHUISH: Yes. To there are 50,000, and if we assume it splits evenly it would be about 124,000 of the -- let me just get my numbers right on the sides of the street as far as who is going to get an increase.
8800 One twenty-four in the west and --
8801 COMMISSIONER CRAM: A hundred and twenty in the east.
8802 MR. MELHUISH: Correct.
8803 So if the distribution is the same on VIP you are looking at, you know, 100,000 customers getting an increase.
8804 COMMISSIONER CRAM: Minus 5 per cent people in MDUs.
8805 MR. MELHUISH: Correct. If that, yes.
8806 COMMISSIONER CRAM: So we are looking at about 90,000.
8807 MR. MELHUISH: The majority of the customers in the neighbourhood, and it's at least 90,000 customers.
8808 COMMISSIONER CRAM: So it would be 90,000 people who are facing an increase of 25 cents.
8809 Thank you.
8810 THE CHAIRPERSON: Commissioner McKendry has another question.
8811 COMMISSIONER McKENDRY: I just want to make sure I understand this VIP situation. Sixty per cent of your subscriber base are eligible for the VIP program. Twenty per cent have it.
8812 MR. MELHUISH: Twenty per cent have it. The whole customer base is eligible for the VIP program.
8813 COMMISSIONER McKENDRY: Let me start over again. Sixty per cent of your subscriber base qualify today for the VIP program. Okay. Twenty per cent have it.
8814 MR. MELHUISH: It's probably an internal number we use. Sixty per cent of the Ottawa people have all three tiers. To get extra outlets at $5.99, of that 60 per cent, and you have to go by neighbourhood, 38 per cent of them might have an extra outlet already and they might have to pay $1.50 to become part of the program.
8815 I guess you have to go back and say they are all eligible. Some people think of them as 60 per cent being on the verge of being in the program and just have to go for extra outlets to take the number. I'm saying that 20 per cent of them have signed up by the end of November.
8816 COMMISSIONER McKENDRY: But 40 per cent of your subscriber base here in Ottawa are entitled to a 10 per cent rate increase if they would merely pick up the telephone and give you a call and say "I want it".
8817 MR. MELHUISH: Decrease.
8818 COMMISSIONER McKENDRY: Decrease. I'm sorry. If forty per cent of your subscriber base here picked up the telephone today and said "I want a 10 per cent rate decrease, you would give it to them."
8819 MR. MELHUISH: Every one of our customer base is eligible for the program --
8820 COMMISSIONER McKENDRY: I'm talking about people that have already got the tiers, met all the qualifications, they are out there, they are paying 10 per cent more than they have to.
8821 MS DINSMORE: If they buy the next round.
8822 MR. MELHUISH: The ones in Tier 3 have to buy an extra outlet if they didn't already have one.
8823 COMMISSIONER McKENDRY: But I thought you said most of those people had the extra outlet.
8824 MR. MELHUISH: A subset of the 60 per cent have an extra outlet. It could be as high as, depending on the neighbourhood, 30 per cent of the 60 per cent.
8825 MR. ENGELHART: If you just hang on one sec, Commissioner, we will get you the actual numbers.
--- Pause / Pause
8826 MR. MELHUISH: Okay. In the Ottawa market, 60 per cent have Tier 3, 70 per cent of the 60 per cent have extra outlets already, so that's I believe about 40 per cent are eligible of which 20 per cent have taken it so far, of which that number increases nationally at about a point a week almost. We went from zero to 16 per cent penetration of this program in 12 months.
8827 COMMISSIONER McKENDRY: And the VIP rate is a unified rate across the entire Ottawa area.
8828 MR. MELHUISH: Yes. Correct.
8829 COMMISSIONER McKENDRY: Thanks.
8830 MS WATSON: It's important to note to your point and Commissioner Cram's point that conversely then, you know, the percentage of people who would be getting a rate decrease would be larger. Ninety thousand of our subscribers would get a rate increase.
8831 COMMISSIONER CRAM: And about the same number would get a decrease.
8832 MS WATSON: Right.
8833 THE CHAIRPERSON: Commissioner Demers.
8834 CONSEILLER DEMERS: Pour revenir à un autre point que vous avez mentionné au début. Les gens de l'ouest ont eu une augmentation de 25 sous et vous dites que c'est dans cette partie-là que vous avez fait des investissements dernièrement, plus d'investissements que par comparaison à l'est.
8835 Je n'ai pas saisi pourquoi il y a eu plus d'investissements dans la zone de l'ouest.
8836 Mme WATSON: Le réseau qu'on a acheté de Skyline en 1991, on était à 450 MHz. Donc on a débuté dès 1991 le changement du réseau avec, disons, les normes de Rogers dès le début.
8837 En même temps, Maclean Hunter faisait des augmentations ou des améliorations au réseau du côté ouest de la rue Bank, mais se servait de différentes normes pour améliorer le réseau et le construisait unidirectionnel à 550 MHz. Donc quand on pris le réseau du côté ouest, il fallait recommencer. On en pouvait pas prendre -- comment on dit en français, "amplifier"?
8838 CONSEILLER DEMERS: Amplificateur.
8839 Mme WATSON: Donc il y avait des amplificateurs qui fournissaient, disons, 10 petits mini "hub". Donc ces fournisseurs-là étaient unidirectionnels et n'avaient pas de fibres. Donc nous on mettait du fibre à moins de gens. On fournissait plus de réseaux et eux avaient une plus grande capacité et un plus grand espace entre les amplificateurs ce qui voulait dire que nous on pouvait fournir des foyers, disons 200 foyers, 400 foyers, avec un centre de fibres où le réseau de l'ouest était probablement 1 000 ou 2 000. Donc il fallait tout recommencer du côté ouest pour offrir les services interactifs et l'Internet sur câble.
8840 COMMISSAIRE DEMERS: Merci.
8841 THE CHAIRPERSON: Counsel.
8842 MR. BATSTONE: Just one question. Can you just confirm for the record that if the Commission determines that a rate increase is not appropriate, you would still want the regional licence.
8843 MS DINSMORE: As I said in my earlier answer, you know, we would look at it, but I suppose if the Commission granted it to us, that would be the new reality. It certainly isn't our first choice.
8844 MR. BATSTONE: So in effect you are saying the only benefit is the benefit attached to the rate harmonization.
8845 MR. ENGELHART: No. Many of the benefits of regionalization have already been realized as we noted, I guess, in our opening remarks. We already got a lot of the, you know, common systems in place that come from regionalization.
8846 The revenue neutral rate is really the last step in that process. As I said before, it is fundamental to this application. If we didn't get the revenue neutral rate, if we had, as Commissioner McKendry stated, rate zones, we would consider that. I guess if the Commission gave us the new licence with the two rates, that would be our new licence with two rates. That's what we would have.
8847 It would lead to some administrative savings for us because we wouldn't again -- as we pointed out, we would have fewer licences we would have to file StatsCan filings for and digital capacity reports for and licence renewals for. From that respect, it would be an administrative savings for both Rogers and the Commission. However, as I said before, we really do think the revenue neutral rate has a lot of advantages for our customers. We would hope the Commission would approve it that way.
8848 I wasn't asked this question, so I guess I better put it on the record.
8849 In terms of implementation, if the Commission does approve this licence, we would ask that the Commission give us a year to implement it because our licences for Ottawa expire in August of 2000. We have already filed our renewal licences.
8850 I would expect that whatever decision the Commission might make, it will make in Q1 of the year 2000. The impact of a regional licence with a revenue neutral rate would require that we give you our old licences and have those licences revoked and at that point in time bring the rates into line, bring the higher rate down and bring the lower rate up.
8851 As Bruce Melhuish pointed out, we would prefer to find the opportune time over a time period to do that and to have the time to communicate with our customers the messages that we have spoken about and have the Commission look at that message and vet it.
8852 I would like to put on the record that we would like to have a 12 month implementation period.
8853 MR. ENGELHART: Counsel, if I could also just correct some of the numbers. One of my colleagues pointed out when I gave the return on net fixed asset numbers before, I was giving those for the combined east and west. I think the relevant numbers, if we are using the test from the Shaw decision would be the numbers for the Ottawa West system.
8854 If that's true, we would fall below the basic return on net fixed asset threshold in the year 2000 and the total company business return on net fixed assets threshold in 2002. I was giving the combined figures before, not the Ottawa West figures.
8855 THE CHAIRPERSON: Mr. Engelhart, I would assume that your calculations as to whether you qualify for a section 50 has been put on your -- whether you qualify or not or revenue neutrality has been calculated, I don't have the full application.
8856 Presumably, if you tell us it is revenue neutral, you have to take into consideration the economic test and the thresholds. Calculations have been made as to how you arrive at revenue neutrality, which would require that you show us the numbers that lead to the 2,000 being below the threshold. Is that on the record.
8857 MR. ENGELHART: We did not apply on the basis of the Shaw test --
8858 THE CHAIRPERSON: No, but revenue neutrality within the context of our regulatory system would still take into consideration those two thresholds?
8859 MR. ENGELHART: The context that we are using the words "revenue neutral" just mean that there is no incremental revenues to Rogers.
8860 THE CHAIRPERSON: Ah, it's not the test that was applied in Shaw.
8861 MR. ENGELHART: Correct, Madam Chair.
8862 THE CHAIRPERSON: Okay.
8863 So you haven't done this type of calculation, which you must have guessed that's the first thing the Commission would do. Did you? I don't have the full application. Perhaps Commissioner McKendry knows whether you did or not.
8864 MR. ENGELHART: We did not apply on the basis that we were qualified for an 18.8 increase now. I will find out from my colleagues about the material that was filed.
8865 THE CHAIRPERSON: Apparently, that was not filed in that fashion.
8866 MR. ENGELHART: Correct.
8867 THE CHAIRPERSON: But you must have guessed that that's the first thing the Commission would do after reading the Shaw decision.
8868 MR. MacDONALD: Madam Chair, we did as part of our internal process calculate the RENFRA(ph), at both a revenue neutral basis and a status quo. Given the small differential between the two basic rates there is not much of a disparity between a revenue neutral return on net fixed assets and a status quo return on net fixed assets. We do have that calculation and I can provide that to you if you do wish.
8869 THE CHAIRPERSON: I am not sure we are talking about the same thing. Obviously, we are going to take the Shaw model and make an analysis of whether Ottawa West by itself, considering our tests, however weak, Mr. Engelhart, whether the test is met. So I am asking you whether you file with the Commission your calculation on that basis to show that Ottawa West is not beyond the thresholds that would allow the rate increase were it filed separately, which is the manner in which we arrived at our Shaw decision.
8870 MR. ENGELHART: Madam Chair, we did not file it on that basis. We did not file for the rate consolidation on the basis that Ottawa West would be entitled to a section 50 rate increase because, as I said, it wouldn't be entitled.
8871 Our current forecasts show that it wouldn't be entitled until the year 2000, sorry 2002. So, our proposal was, and I presume the reason that we are here before you today is because we don't meet the Shaw test and we are looking for an extension of your policy to allow regional licences for incumbent operators in circumstances where a section 50 rate increase wouldn't be warranted.
8872 THE CHAIRPERSON: Okay.
8873 Now, Ms Dinsmore, I have difficulty understanding your implementation problem because we are dealing with price caps here. If we give you the right to increase your rate in Ottawa West you can do it whenever you want to that level; early, late, whatever and you can always decrease the rates. So, I don't understand the problem.
8874 We could issue a decision, let's say a favourable decision and you could do whatever you want with it, increase the rate whenever you found the right circumstances because this is the maximum rate you could charge in Ottawa West and you could decrease in Ottawa East whenever you think the circumstances are right and you can do that without our approval or coming before us, whenever you want and whatever percentage you want.
8875 MR. ENGELHART: Again, I think the proposal that we are making is that we would surrender the three licences, Ottawa East, Ottawa West and Carp. We would receive a new licence that had a standard rate throughout the three regions. So, --
8876 THE CHAIRPERSON: A cap. How does it change my comment?
8877 MR. ENGELHART: Because the cap, I believe, would be at the rate which was 25 cents lower than the east and 25 cents higher than the west. So the cap for the east would not be at a lower rate than it was before because there would be a single cap throughout the entire region.
8878 THE CHAIRPERSON: I see.
8879 MR. ENGELHART: And that's why we would prefer to have a bit of time to implement.
8880 THE CHAIRPERSON: Because of the new cap for the eastern portion. Okay.
8881 Now, if you had a decision that said, yes, you can have a regional licence, but there are zones. In that case you could adjust as you can. You could make the decision depending on VIP penetration, et cetera, to gradually correct your underlying problem of mother-in-law and daughter not paying the same rates and the problems that flow from that gradually, and yourself correct that problem?
8882 MR. ENGELHART: I'm not sure --
8883 THE CHAIRPERSON: If we gave you a regional licence with zones inside, or if you gave your original licence and not the rate increase you could equalize the rates gradually over time?
8884 MR. ENGELHART: Well, I guess that would be -- you could always lower the higher rate, but again I don't think you can raise the lower one unless you have a pass through or an 18.8 increase. Those are the only two mechanisms under the regs to raise the rates, so that's why we thought the only procedural solution was a new licence with a new rate.
8885 THE CHAIRPERSON: Because what you have done with the VIP rate really is correct that problem --
8886 MR. ENGELHART: Yes.
8887 THE CHAIRPERSON: -- for as many customers as possible, and I suppose for the ones who qualify for VIP, but don't call for it, you must not send too much literature to them?
8888 MR. MELHUISH: We actually send literature all the time and --
8889 THE CHAIRPERSON: Well, I suppose there are other advantages of bundling, et cetera.
8890 MR. MELHUISH: And it is going up every day and we would love it if everybody became a VIP customer.
8891 THE CHAIRPERSON: It's bizarre that people who qualify for it wouldn't get it when it's a pure deduction.
8892 MR. MELHUISH: I believe when Bell implemented their discount saving program they had a 1-888 number for people to qualify and they did not have 100 per cent of their customer base phoning in.
8893 THE CHAIRPERSON: Thanks.
8894 Commissioner McKendry.
8895 COMMISSIONER McKENDRY: Well, just on that point, I can't resist asking this question, the literature doesn't say 10 per cent off your cable rate. It just says 10 per cent off your Cantel bill. I know you are going to give it when somebody calls in, but the literature, some might say, leaves out an important element of the VIP program because what people get in the mail doesn't say 10 per cent off your cable rate if you meet certain conditions. It just says 10 per cent off your video rentals and so on.
8896 MR. MELHUISH: As you pointed out earlier, the sensitivity on misleading our customers as to what it is was, the primary reason, if you see the ads that we have on the television and all the radio spots that we have, we explain the 10 per cent in that medium.
8897 You know, I think the implication is I am hiding from the customers signing up and that is not the implication or our intent.
8898 COMMISSIONER McKENDRY: Thanks.
8899 THE CHAIRPERSON: Counsel.
8900 MR. BATSTONE: Just one more question on this implementation issue because I have to admit I didn't realize that the licences came up in August of next year.
8901 Assuming the Commission granted authority for a single licence, you would then have a year under your proposal in which to implement that. Assuming you didn't implement it until after the renewal process was dealt with, how would you see meshing the two?
8902 MS DINSMORE: I would need a licence extension.
8903 MR. BATSTONE: A licence extension, okay.
8904 MS DINSMORE: From August 2000 and I think six months would probably do it for all three.
8905 MR. BATSTONE: So what you would say is put off the renewal and extend the current licence?
8906 MS DINSMORE: An admin renewal for six months.
8907 MR. BATSTONE: Okay. Thanks.
8908 MS DINSMORE: For all three licences.
8909 THE CHAIRPERSON: Thank you very much.
8910 We are going to have a late lunch.
8911 Thank you for your patience. We will resume at 2:30.
8912 MS DINSMORE: Thank you very much, Madam Chair and Commissioners.
8913 THE CHAIRPERSON: Thank you.
--- Upon recessing at 1322 / Suspension à 1322
--- Upon resuming at 1436 / Reprise à 1436
8914 THE CHAIRPERSON: Welcome back.
8915 Madam Secretary.
8916 MS SANTERRE: Thank you, Madam Chair.
8917 I would like to introduce the group that we will be hearing this afternoon.
8918 It is an application by Jan Pachul for a broadcasting licence to carry on an English-language low power television programming undertaking at Toronto. The new station would operate on channel 15 with a transmitter power of 476 watts.
8919 THE CHAIRPERSON: Good afternoon, Mr. Pachul.
PRESENTATION / PRÉSENTATION
8920 MR. PACHUL: Thank you very much. I really appreciate being here. It has been a long route for us to actually show up today.
8921 I would like to start out with an AV presentation, which will be possibly ten minutes in length. The first six minutes will be a profile that was produced by CBC television possibly two years ago during our exemption from the Broadcast Act application. It expresses a lot more than I could say in an hour.
8922 After that we have on Charalene Zacks, who did want to appear today but did not have the financial means to come to Ottawa. What we did was we videotaped her, and you will see her message after the CBC presentation.
8923 We felt that her message is quite important, and that is the reason that we made sure she is on the tape.
8924 So without further ado, I would like to start up our tape.
--- Video presentation / Présentation vidéo
8925 MR. PACHUL: Thank you, Charalene.
8926 I will speak more about Charalene's speech once I talk about some of the interventions later on.
8927 One thing I would like to emphasize. So far what we have done is like an old fashioned barn raising where people in the community get together for a common cause and decide to do it. There are a lot of people that walk into the studio and say, "Well, I can't believe one person did all this." I tell people, "There is no way one person could have done this." You know, there has been a whole group of people doing this for over a five-year period, an army of volunteers.
8928 I would like to also introduce Spyro Vendouras, who has been quite instrumental in doing quite a bit of the work on Star Ray TV. He is my tower man. We put up the satellite dishes together. We have really come along way in that respect.
8929 I really don't want to go over things that you already know from reading our application and studying our application, but there is one thing that I particularly want to bring up that is not contained within the application but is published on our Web site, which is the "Star Ray TV viewers Bill of Rights."
8930 What we have done is, we have come up with the things that we consider annoying about television and various ways that we felt that we could distance ourselves from our competitors, and also other things that we considered to be within our pro-social mandate. We felt that we wanted to go past CRTC regulations in some of the concepts that we have. So I'm going to, like, review the Star Ray Viewers Bill of Rights right now.
8931 Article 1:
"It is resolved that TV is a fun activity."
8932 Now, that is one of the main reasons why I wanted to put on Charalene Zacks today, because my recollection of doing community television in the U.S. and when I was younger was that it was fun. Charalene is basically making a plea for it to be fun again.
8933 I think since Rogers has taken over all these cable systems and closed all these community access stations, community television is no longer fun. We want to express, you know, our happiness and our exuberance through our personalities and the way we present ourselves on TV.
8934 Article 2 also addresses this:
"It is resolved that no `talking-down-to-you hyper personalities' are allowed on Star Ray TV. We talk to you like you are our neighbour."
8935 We try to emulate that style in everything we do. Yes, we are from Toronto, but we don't want to exhibit that Toronto attitude, and I'm sure everybody knows what we are talking about in that regard.
8936 Article 3:
"It is resolved that Star Ray TV will not display logos or other junk on the side of the screen during programs. Our programming is so different you'll know what station you're watching without us reminding you all the time."
8937 Now, that is something that has always personally bugged me. There are several Web sites that address the fact of these logos, and they are getting uglier all the time. They are getting full colour, animated, and they are straight through the program -- for what reason I don't really know. I think somebody started this trend and everybody followed suit.
8938 This is something else that seems to bug a lot of people, especially people in our area, and this area too that watch Citytv:
"It is resolved that no shaky camera work will appear on Star Ray TV. We are your eyes. Your eyes don't shake around unless you are very drunk."
8939 Now, this goes back to my classical film training. Your eyes don't zoom, they don't shake around, and we are the substitute for your eyes. We would much rather use a cut shot than use a zoom.
8940 It seems that trendy TV these days is all pan and zoom, pan and zoom, pan and zoom. There seems to be a real lack of content. Everything we want to do, we want it to be content rich, where we are actually supplying people with some information. I think what is happening now is that style is triumphing over substance in television. So we want to get back to some substance in TV.
8941 Okay. Here is another one:
"It is resolved that no cameras are to be used as personal props unless we use cyborgs."
8942 If you know what a cyborg is -- this is a group at the University of Toronto that decided to view the world through cameras -- they have, like, these cameras inside their glasses, and they also filter out advertising. For instance, if they are walking down the street the camera system would filter out a billboard.
8943 What we tried to do is get away from this concept of videographer. Contrary to what Citytv says, they never started that concept. That concept was started by NY1 in New York City many years ago where they were too cheap to pay a cameraperson so they made the reporter do everything, which I think is a joke because it means that nobody does their job right.
"It is resolved that Star Ray TV will not use popups or frames on the station or website. Don't they just drive you nuts?"
8944 Now, if anybody read our Web site, it reads like a book. We don't really go into this, like, multiple column thing that a lot of people do on the Web site. A lot of people advised me, "Well, that's the way to do it." But I thought, well, if the Web site reads like a book it will appeal to people that read books.
8945 There has been a movement to integrate the Internet with television by having like various popups that you can push on your screen. We feel that distracts from viewing television. If you want to watch the Internet watch the Internet. Why are you watching TV too?
8946 Like, I don't really think the convergence is going to occur in that manner, where you are going to see a model which is like a cross between TV and the Internet. I think you are going to see TV on the Internet. I think that is the direction we are going into, like, similar to this "I Crave TV" which has just debuted in Toronto a few days ago.
8947 This we consider very important here. I think this has a lot to do with what makes Star Ray TV different. I think that this is also the reason why we have as many opposing interventions as we do, because I don't think any of our opposition like the idea that we want to air 100 per cent Canadian content during prime time. But if a station would do that, you are actually reducing your financial success, because obviously you can make a lot more money just pushing a network switch and just running a satellite fee from the U.S. It is a lot more work to produce your own programming.
8948 Also, overall, we wanted to make a statement that our programming is Canadian, so we came up with the 80 per cent figure because we did want to air some Hollywood movies. The idea behind the movies was to air them at a time when other stations are airing their local content, so we would provide an alternative to news programming, because you have noticed that we have scheduled our movies at 12 noon and 11:00 p.m. and that is when all the other stations are pretty much running their news.
8949 Also, going along with the idea of diversity, we decided not to do any news programming because we felt that that was an unnecessary duplication in the market. Like just about everybody does news.
8950 Personally, I really don't like the concept of news because it doesn't really provide you with any information. You just get like a 15-20 second sound byte, and what does that tell you about the news? Not much.
8951 So the idea behind our public forum show was that we would cover one issue in-depth rather than giving you little snippets of the days activities.
8952 Now, here is another one that we consider rather important to our concept.
"It is resolved that Star Ray TV will not air any excessively violent programming. There is a big difference between incidental violence and glorifying violence."
8953 Again, along those lines:
Why do the most depraved criminals also become the most famous?"
8954 So I think that is something else that is an issue. I think that broadcasters have to exhibit some kind of social responsibility in this regard and I really don't see it right now.
8955 Like, for instance, as prime example, I have seen people air this one movie called "The Money Train". There have been copycat crimes occurring in New York City. Because in one of the scenes I think there is somebody that takes some gasoline and throws it into a subway toll booth. Well, there are copycat crimes that occurred when that movie was in theatres in New York City.
8956 So would it be responsible to air a movie like that? I don't think so.
8957 Again going with the Star Ray concept:
"In an emergency situation Star Ray TV pledges to do whatever it takes to stay on the air to help you through."
8958 Now, we have a rather unique situation because we have a broadcast site that is away from the CN Tower. If anything happened to the CN Tower we would be it. There wouldn't be anybody else on the air.
8959 Also, we have designed our whole plant to sustain emergency operation under generator power for long periods of time. We are going to be using gasoline generators, so if worst comes worst we will just ask for donations of gas cans on the air to keep going, if we have to.
8960 Well, we felt that that was a very important point because we don't see anybody has made any plans for any kind of emergency broadcasting or disaster broadcasting whatsoever. In the U.S. the emergency broadcast system is a very important part of their whole broadcast infrastructure.
8961 That is about it for the Viewers Bill of Rights.
8962 I wanted Spyro to talk a bit about all the various technical hurdles we have done over the years and some of the other things we got involved in.
8963 Spyro, I will give the microphone over to you now.
8964 MR. VENDOURAS: Thank you, Jan.
8965 I don't really know where to start. A long time ago I was his customer. I bought a camera off him, that's where it all started. One thing led to another and we sort of both had the same interests.
8966 I said, "Jan, what are you doing up there? What are you doing up there?" I said, "Jan, you are going to kill yourself. Come on down. You are doing everything wrong. I don't have any experience in power work, but I am an industrial electrician and you have to do things safe."
8967 So we got on the computer and in virtual reality I started designing this tower. Eventually we put it together in reality, tied it off with guy wires.
8968 I said "What are you building anyway?" He said "I'm building a transmitter." I go, "What, are you a pirate? What are you going to be pirating?" He goes, "Oh, no, no." He goes, "It's a little dream I have. Just simulate this. Just play along." I said, "Okay, no problem." About three years ago.
8969 So we were doing some tests to see how far this thing would travel. We were driving around the block, we were driving here, driving there, worst conditions, snow conditions. We got stuck a few times and I think we ran out of gas a few times, but we collected our data.
8970 We found that the location that we are at Eastern was too low ground and we found a signal being really powerful on Main Square of Main and Danforth so we decided that is a good place to move. So we packed up and we moved there.
8971 We tore everything down. Of course we dropped the transmitter and --
8972 MR. PACHUL: And we dropped the antenna, remember?
8973 MR. VENDOURAS: We dropped the antenna. He was wearing his old -- well, it's not important, but --
8974 MR. PACHUL: Safety gear.
8975 MR. VENDOURAS: Your safety gear, this old World War II German helmet. He looked pretty comical.
8976 We collected footage, took pictures from the tower.
8977 It was windy one day, there were tornado warnings and here I am 80 feet above wiggling back and forth. I was scared, scared stiff. He's like "Hurry up", he goes, "We have to bring it down." I says "Okay, we will bring it down."
8978 I forgot to tie my guy wire and of course there goes the transmitter, 80 feet, bounces off the wires, crashes down on the roof." "Are you okay, Jan?" "What?" "Are you okay?" But anyway, we got it all down.
8979 Then we saw this new building. Of course, I went back on my computer -- I collected my computer and designed it again, however this time the roof has these little anchors. I go, "This is good. This building has great designs. It was all meant to be." Then we put 40 feet of trussing instead of 80 feet because the building is already 60 feet high, 200 feet above Lake Ontario, which is great. Then we ran some more tresses.
8980 Hamilton. We had a call from Hamilton --
8981 MR. PACHUL: Yes. You have to remind them that we did have an experimental licence from --
8982 MR. VENDOURAS: I'm not sure if that --
8983 MR. PACHUL: From Industry Canada.
8984 MR. VENDOURAS: Yes, he has -- I'm just talking freely.
8985 Then that is where we got other people who came.
8986 I don't know. That's about it I guess.
8987 MR. PACHUL: Yes. Yes, I think that's about it.
8988 I think we took up our 20 minutes, didn't we?
8989 MR. VENDOURAS: There are so many things to say I don't even know where to start, unless you have a question.
8990 THE CHAIRPERSON: Yes, we do.
8991 Commissioner Noël.
--- Off microphone / Sans microphone
8992 COMMISSIONER NOËL: I'm not as good as you are in the English language, so maybe my questions will look a little raspy, but I will try my best.
8993 I appreciated your presentation, it was quite amusing, but I will stick to your application if you don't mind.
8994 I have a number of questions and they will be by blocks, so we will start with your experience.
8995 You mentioned that you had some experience in the U.S. with a low power --
8996 MR. PACHUL: Yes. I had quite a bit of experience. Actually, when I was about 15 years old I got hooked up with this one guy.
8997 COMMISSIONER NOËL: I will ask you my questions and then maybe you can answer.
8998 MR. PACHUL: Oh, okay. You would like to ask the questions first and then I answer them, or --
8999 COMMISSIONER NOËL: Yes.
9000 MR. PACHUL: Okay. I'm sorry.
9001 COMMISSIONER NOËL: It works better that way.
9002 MR. PACHUL: Okay.
9003 COMMISSIONER NOËL: You mentioned that after you graduated from the Pennsylvania State University you became the Program Director of York Access TV in York, Pennsylvania. In what year was that?
9004 MR. PACHUL: That was 1977, if I recall, just before release of Saturday Night Fever. Yes, we had --
9005 COMMISSIONER NOËL: You were in your early 20s?
9006 MR. PACHUL: Yes. I was actually very young for that type of position. I was 22 years old.
9007 COMMISSIONER NOËL: You stayed there for how long?
9008 MR. PACHUL: I was there -- well, what happened was, we ended up getting fired. Like I got fired along with the founder of the station, and that is why I'm not very keen on this non-profit model.
9009 COMMISSIONER NOËL: I hope it wasn't for cause.
9010 MR. PACHUL: Actually, what happened was, we were a bit too progressive in our programming and the Board of Directors didn't like it. I think that was what it boiled down to.
9011 COMMISSIONER NOËL: Okay.
9012 MR. PACHUL: But we did an awful lot of programming back in those days.
9013 COMMISSIONER NOËL: But those were quiet years, you know, the '70s. Nothing to compare with the late '60s and early '70s. You were in the late '70s.
9014 MR. PACHUL: Well, I actually did it in the late '60s too, when I was 15 years old. Like that is when I actually got started in it and I worked for a profit-making cable station in the west shore area of Harrisburg, Pennsylvania. I met up with this one guy, he is still my personal friend Gerry Gilbert.
9015 He actually was one of the pioneers of the early days of live TV. He was the floor director for the Arthur Godfrey Show, if anyone can remember Arthur Godfrey. Like this is going back many, many years.
9016 Back then everything was live. We got involved in all types of community programming at that time. I was the host of a teenage dance show. We did all types of sports coverage, football, basketball. I think we once even did a snowmobile race in a blizzard. We had quite a bit of experience there.
9017 COMMISSIONER NOËL: Okay, but this was before they had laws to protect children from working too young.
9018 MR. PACHUL: I wasn't working. I was volunteering.
9019 COMMISSIONER NOËL: You were volunteering.
9020 MR. PACHUL: I actually started working -- well, actually back then you could start work when you were 15 years old, but I actually started working for the station when I was 16.
9021 COMMISSIONER NOËL: Because now there's all sorts of regulations against children working.
9022 MR. PACHUL: I was fairly young, yes. I admit it.
9023 COMMISSIONER NOËL: If we sort of wrap it up, you had about a year's experience maybe at the low power --
9024 MR. PACHUL: Oh, no, it was longer than that.
9025 COMMISSIONER NOËL: I'm talking the Access TV.
9026 MR. PACHUL: Oh, no. After that year was up, I still volunteered at that station. What happened was that the people got rid of us, eventually somebody got rid of them and then we were back in again for a few more years after that.
9027 The problem is we alienated the people that were giving us the grant money, so we were out of luck on getting any more money for salary fundings.
9028 COMMISSIONER NOËL: Okay. So you had that experience in your twenties.
9029 MR. PACHUL: Yes.
9030 COMMISSIONER NOËL: Since 1978 you have been working in all sorts of related activities.
9031 MR. PACHUL: Yes. I worked for a television corporation. I sold advertising, local advertising, for about seven years. I also produced all local breaks for Televisual. Televisual at that time had licences to rebroadcast three UHF TV channels out of Philadelphia.
9032 Also, I seemed to learn a lot about programming and counter-programming from the Philadelphia independent stations. They are really masters at counter-programming the networks.
9033 COMMISSIONER NOËL: You indicated in your application, and I don't have the exact page, that there about 1,600 local low power stations operating in the U.S.
9034 MR. PACHUL: Actually, there's about 2,000 now. That figure is incorrect. There's actually more low power stations than there are full service stations in the U.S. presently. I have been just reading up on this.
9035 COMMISSIONER NOËL: Could you tell us how these stations differ at all from the community channels operated in Canadian companies.
9036 MR. PACHUL: Well, for one, they are distinguished by local ownership. Another thing, they are generally separate from any other entity. They are not owned by the cable companies. The cable companies generally do not have any interest in these.
9037 Also, they work on a profit-making model. They are not non-profit stations. They generally sell local advertising. It's very difficult in the low power business to get any type of advertising agency recognition.
9038 The big stations don't really bother much with low powers because they know they are not really their competition.
9039 COMMISSIONER NOËL: On another footing, do they have operational relationships with cable companies in the sense that low power stations get carried on cable?
9040 MR. PACHUL: Well, it's kind of like a double-edged sword cable coverage there because, for one, they won't give cable coverage if you are not in one of the lower markets. Mandatory cable coverage is cut off at about the 150th market. Also, if you are in a bigger market, the only way you can get on is if you have a certain percentage of the audience. I think it's something like 3 per cent of the audience, but if you are on cable, how are you going to get the audience to get on cable?
9041 COMMISSIONER NOËL: But they don't have in the bigger markets carriage of cable.
9042 MR. PACHUL: Generally they do, but the cable companies actually provide them with the carriage independent of any government mandate.
9043 COMMISSIONER NOËL: It's not mandatory.
9044 MR. PACHUL: No, but they still do it. You know, I don't think they have the same type of conflict that we are having here with our opposing interventions. Like there's actually more of a spirit of cooperation.
9045 For instance, a prime example is one station that I can talk about is in Santa Monica, California. It's KPAL. They have only been on the air for six months and they are already carried by about three different cable services. None of the cable services had to carry them at all.
9046 COMMISSIONER NOËL: Now --
9047 MR. PACHUL: They do it on strength of programming. That's how they do it.
9048 COMMISSIONER NOËL: Okay. Now, if we go back to your experience. You mention in your CV that you established Northstar Media in 1985.
9049 MR. PACHUL: That's correct.
9050 COMMISSIONER NOËL: Are you still involved with the -- are you still the owner of Northstar Media?
9051 MR. PACHUL: Yes, but the last few months, truthfully, I have been neglecting my business to try to get this station going.
9052 COMMISSIONER NOËL: Okay. Would there be any links between Northstar Media and the station --
9053 MR. PACHUL: No. I plan on closing Northstar Media once, you know, we get into the station. There won't be any links at all. They will be closed. Too much of a conflict of interest to try to keep everything going.
9054 COMMISSIONER NOËL: Okay. Let's move to something else. You have proposed a revenue scheme based on advertising.
9055 MR. PACHUL: Yes, that's correct.
9056 COMMISSIONER NOËL: Some of it would be selling advertising and some of the revenues would come from producing advertising.
9057 MR. PACHUL: Yes.
9058 COMMISSIONER NOËL: Can you be more explicit as to how you arrived at your annual predictions of price per spot and sell out rates for advertising?
9059 MR. PACHUL: Well, what we try to do is we knew that when we first got on the air, we wouldn't have much name recognition, so we would have to come up with a fairly low price to entice people to buy advertising.
9060 Certainly one of the biggest things is that we get some kind of cable coverage because like my experience in the U.S. was as soon as you walk into an advertiser, the first thing they ask you is what channel are you on cable. If you can't come up with a positive answer there, you already got a problem.
9061 COMMISSIONER NOËL: So you count that you would be carried on cable.
9062 MR. PACHUL: Yes, but we did come up with a compromise on cable which I think you have in front of you there somewhere.
9063 COMMISSIONER NOËL: Okay. Now, in those projections did you consider at all audience projections and, if so, in what way?
9064 MR. PACHUL: Well, I think the way those projections were done, they were done on a rather simple formula because I felt that if I tried to get into a too complex formula, it may not work.
9065 What I figured we would do, well, initially we would have to produce a lot of spots if we are doing local advertising. Okay? The formula for the financial is very simple. You sell 200 customers a year, you produce their spots to go with it, you keep 50 per cent of them and then sell 200 every year and just keep on doing it.
9066 While the percentage of spot availabilities decline, you start inching up the average price per spot. Now, the average price per spot is based on -- we are on a schedule which means that if there is a specific placement, okay, we would charge more for that. We might charge -- I think the figure we have thrown around is about $50 a spot for a specific placement.
9067 COMMISSIONER NOËL: For what? For a one minute spot?
9068 MR. PACHUL: Thirty second spot.
9069 COMMISSIONER NOËL: Thirty seconds.
9070 MR. PACHUL: Yes. We pretty much base everything on a 30 second spot. I would say my experience has been 90 per cent of all the spots are thirties.
9071 COMMISSIONER NOËL: How would you charge to produce a 30 second spot?
9072 MR. PACHUL: Well, I think what we were doing was we were working on an average of about $1,000 a spot which is fairly cheap, but it's pretty easy to do with new technology, especially if you are working with this new digital equipment. Like we could come up with very high production values for very low cost. That's mostly a function of the new technology that is out right now.
9073 COMMISSIONER NOËL: Now, could you give us examples of the type of -- I know you don't have national in the first year, but the type of national, regional and local advertisers that you would be targeting and what is the breakdown of revenues between those types of advertisers?
9074 MR. PACHUL: Well, I really don't expect much national advertising at any time. You see that in my projections. We started very low. I think most of it as far as national advertising would probably be more like boutique agencies, smaller agencies.
9075 I have had experience working at large agencies. It was very tough to break into those. Unless you have got an outstanding book, you are pretty much out of luck, especially if you are a new guy there.
9076 On the other hand, I think in general the way television is structured in Toronto, there is a need for local advertising because the only station from my recollection that can sell local advertising in the Toronto market would be CFTO because all the rest are regional stations.
9077 Consequently, if you bought a spot on one of those stations that have to go on the air everywhere. Like, for instance, you buy at a spot at City-TV, you would be watching it here. That's like a rather inefficient method of advertising.
9078 So I think that's why there is such a concentration on local advertising, plus also we found that in the past it's fairly easy to sell your neighbour, you know, somebody across the street. They want to be able to see their spot in maybe 20 square blocks. They don't care of their spot gets on in Ottawa here.
9079 I don't know if I have fully answered your question there. Maybe I should elaborate a little more.
9080 COMMISSIONER NOËL: No. It will do. Okay.
9081 Now, let's go to your audience, your targeted audience.
9082 MR. PACHUL: Yes.
9083 COMMISSIONER NOËL: You have indicated in your plan to target 329,000 persons that reside within your principal marketing area, which is Toronto, Wards 23, 24, 25 and 26.
9084 MR. PACHUL: Yes.
9085 COMMISSIONER NOËL: And up to 1.25 million persons that reside within the Grade B broadcast contour of your proposed service. Can you give us an idea of the portions of Toronto that is included? To me this means nothing, Wards 23 to 26.
9086 MR. PACHUL: Okay. Well, if you look at our broadcast site at Main and Danforth and you go east of there towards downtown, then that would pretty much cover those wards.
9087 The wars that we are specifying are the wards where we have the highest RF signal strength. So, like in those particular areas it will be the best station that you can pick up off the air. That's how we arrived at that calculation.
9088 Also, if you look at those particular wards, they are right in the Beaches area. The Beaches seems to be a rather outstanding community for civic pride. They really get involved in their community. We felt that if we wanted to get something like this going, the Beaches area is the place to do it.
9089 If you read our interventions, it comes through quite clear what type of community the Beaches is. So, I think that had a lot to do with targeting that particular area.
9090 COMMISSIONER NOËL: Okay. Can you estimate how many persons within both the Grade A and Grade B contours you would expect to reach during the start up of your operations?
9091 MR. PACHUL: What our audience would be like?
9092 COMMISSIONER NOËL: Yes.
9093 MR. PACHUL: Well, I would estimate initially, if we can pull off 3 per cent of the audience I think we would be doing pretty well, which is like probably a little more than what a specialty channel would be looking at in audience.
9094 Independent stations in the U.S. that have a similar style, I would say 3 per cent is probably what they are getting. An outstanding independent station in the U.S. would get 10 per cent audience share all the time. That's probably realistic.
9095 COMMISSIONER NOËL: So, roughly, 10,000 people in the initial stage?
9096 MR. PACHUL: Yes. I would say maybe a little more than that. If I wanted to throw out some figures I'd throw out 25,000 to 30,000, something like that initially. Once we get going, yes, it would be a lot bigger.
9097 COMMISSIONER NOËL: That's a bit more than 3 per cent, according to my math.
9098 MR. PACHUL: Three per cent of -- we are talking 329,000 and 3 per cent, yes, you are right.
9099 COMMISSIONER NOËL: Well, I went to school the old way and we didn't use calculators in those days.
9100 MR. PACHUL: I use Trackenburg's system of speed mathematics.
9101 COMMISSIONER NOËL: Okay. How would that increase over the years until the end of the initial term of seven years?
9102 MR. PACHUL: I would think that the station would not do much better than 10 per cent no matter what we broadcast. I think that is probably the peak and that's fairly similar to the demographics you would see in a U.S. city like Philadelphia or Buffalo, New York or something like that.
9103 COMMISSIONER NOËL: How many hours per week do you think your viewers will watch your channel?
9104 MR. PACHUL: That's a good question. I would be happy if we could get five to ten hours a week. Now, from what I can tell from the people we talked to, there is going to be quite a few people interested in public forum and quite a few people interested in local sports.
9105 Also, there is a lot of people who expressed interest in the movies as an alternative to watching news. There are other people who share my distaste for news programming.
9106 COMMISSIONER NOËL: Now, I have a question and I don't know what happened to that generation, but it seems to have disappeared from your business plan. You are targeting people from the ages of five to nineteen and then 35 and over.
9107 MR. PACHUL: Yes, that's correct.
9108 COMMISSIONER NOËL: What is the missing link here?
9109 MR. PACHUL: Well, the missing link is stuff other people do. For instance, CityTV targets more of a younger crowd, so does MuchMusic and so do other outlets in the area. So, we figured why duplicate that crowd.
9110 Also, another thing, if we start them young, we have got viewers for life. We don't particularly want to be trendy either. I think that has a lot to do with it.
9111 We have a few built-in constituencies that we wanted to address. One of those constituencies were the hearing impaired and that's a whole story about how I got involved with them too.
9112 COMMISSIONER NOËL: Yes.
9113 MR. PACHUL: In general, it would be prudent for a station to target an older audience that has money. Like the baby boomers is the largest pool of money you could possibly target right now.
9114 COMMISSIONER NOËL: You are one of the late boomers?
9115 MR. PACHUL: I'm actually one of the early boomers because I'm 45. The late boomers would be about 55 I think.
9116 COMMISSIONER NOËL: For me, early are those born in '45, so I put you in the late boomers category.
9117 MR. PACHUL: Yes, I see what you are saying, yes.
9118 COMMISSIONER NOËL: Now, if we go to your capacity to invest. From your financial projection it appears that you will be profitable from day one, which is a very ambitious plan. But it doesn't materialize, if your projected advertising revenues aren't there what will you do to make the things happen?
9119 MR. PACHUL: I've got investors calling me every day, but nobody wants to give me a dime without a licence. It's the chicken and egg approach, no licence no money. I got that message loud and clear from Bay Street.
9120 You know, like you can't have somebody working out all the financials before the guy will have a licence.
9121 COMMISSIONER NOËL: Besides Bay Street where, you know, those people are -- how will I put it -- they ask a lot of questions before they invest into your business. Besides Bay Street do you have any other people in mind who would put in some money in your --
9122 MR. PACHUL: I have a brother who's a millionaire for starters.
9123 COMMISSIONER NOËL: Pardon?
9124 MR. PACHUL: I have a brother who is a millionaire for starters.
9125 COMMISSIONER NOËL: And does he agree?
9126 MR. PACHUL: Well, so far he has financed me --
9127 COMMISSIONER NOËL: Will you just spend his money?
9128 MR. PACHUL: To tell you the truth, so far I've spent about $50,000 of his money just to do this, just to appear today. In fact, he even financed this trip right now and the suit I'm wearing too.
--- Laughter / Rires
9129 COMMISSIONER NOËL: Now, let's go to something else. We will go into programming. There are many similarities between the programming proposals found in your application for a low power TV station and some of the community channels provided by cable operators. How will you propose service will be different from those offered by local communities?
9130 MR. PACHUL: The only similarities I have seen is that we have some talking heads and they have some talking heads.
9131 Now, what we are trying to do is we are trying to get away from talking heads because you look at Rogers' intervention, the only programs they are talking about is talking heads, which I consider a very boring type of programming. Like, we were trying to get away from talking heads. Even in a public forum we hope to break up the talking heads with streeters, which is a man in the street interview that relates to the topic at hand. Also, we plan on using quite a few graphics and other materials to present our shows.
9132 Also, I really don't see the similarities, like I think what you could do is you take the Rogers' intervention and you could lump all the shows that they are saying are similar to ours into one show which is "Public Forum". So all we are really doing is doing one show that might cover some of the same ground.
9133 One point I always make is why should a community channel only be available to people on cable? Isn't there like a bigger community outside of cable?
9134 Also, how did this high status all of a sudden by ascribed to a cable station? That's what I would like to know.
9135 COMMISSIONER NOËL: Still talking about that subject, do you see yourself in dire competition with them, with the community cables for your staff, your volunteers, your programming concepts?
9136 MR. PACHUL: No. For one, the people we have run into from Rogers TV were not really taught in the style and the manner that we desire.
9137 For instance, one thing we ran into when we were doing some pilot shows, the people who were volunteering at Rogers, the camera person would think nothing of engaging the on-the-air talent in a conversation on the air. That is totally unacceptable behaviour; yet that is common behaviour at Rogers Television.
9138 You have to realize that our culture is totally different than theirs. We are not into this Rogers superiority thing that they seem to be into. They claim that our programming has to be clearly inferior to theirs.
9139 COMMISSIONER NOËL: So you are not competing with them.
9140 MR. PACHUL: No, not at all.
9141 COMMISSIONER NOËL: You are on another path.
9142 If we go back to staffing, when your proposed station begins to broadcast, how many fulltime and part-time staff will be directly involved in producing the programming?
9143 MR. PACHUL: I think we are looking at nine employees, if you add the fulltime and part-time together -- it would come to nine fulltime. I think that three of them were mostly administrative, and the rest of them would be involved in production; about six.
9144 The model would be similar to a lot of other stations where maybe 80 per cent of everybody that is there is a volunteer. The idea is to have the paid staff to be extremely qualified people so they could be teachers and teach other people broadcasting techniques.
9145 Another thing is that the control room operator has an enhanced role in our station, because they also have to direct the live shows. A lot of our programming is live broadcasting.
9146 So the control room operator has an enhanced role.
9147 Another thing you have to realize in the way the station is run is that it is 100 per cent computerized.
9148 For instance, I was just reading some transcripts of a hearing you had just recently with the Knowledge Network, where they are having problems coming up with logs. They could not really come up with a proper calculation of what their Canadian content was.
9149 We don't have that problem. We are going to have a custom FoxPro program to keep track of all that.
9150 I hate to say it, but we are eliminating a fair amount of people with the sophisticated computer system.
9151 COMMISSIONER NOËL: Let's go to your programming. You mention in your application that the cornerstone of your programming or your proposal would be the access to the station by the public and independent producers.
9152 You referred to four programs that would be produced by independent producers. One is Tomorrow Today; one is Vipos; A Sense of Place; and the Superior Fishing Show.
9153 And we are back into sports. We had a couple of days of sports.
9154 MR. PACHUL: I see.
9155 COMMISSIONER NOËL: Do you still have commitments for these productions at this time? This was also referred to in your previous --
9156 MR. PACHUL: Yes, we do. Also, we have several extra commitments that came in. If you read the interventions, there are approximately 11 program proposals in the interventions. Since the closing of the interventions, I got three more proposals.
9157 In my response to the CAB, I think I have a sheet that lists the extra commitments that we got.
9158 COMMISSIONER NOËL: What percentage of your schedule would feature independent producers?
9159 MR. PACHUL: As much as we can. What we would like is a model similar to Internet ISP where you are the pipeline for people's content. I think the criteria is to have as many independent people on the air as possible. The less programming we personally produce the better. That is pretty much the concept.
9160 The idea behind easy access was to make it easy.
9161 COMMISSIONER NOËL: Do you have a development plan for the sector to ensure that they continue to have an easy access to your station?
9162 MR. PACHUL: Yes. We are willing to make certain commitments to people.
9163 For instance, let's say you really don't have funding for your show, but we like the idea. We will let you put the show on for maybe three, four months, six months, without any payment. You put on advertising and you keep the money to get the show going.
9164 Those are the types of plans we intend to offer.
9165 Another thing, by allowing people to sell their own advertising, we are also ensuring the financial viability of the station. It is almost like the Avon lady, or Amway.
9166 Then again, there are people like Charalene, who just want to get on the air, period. So we don't have a problem with that. We will put it on the air.
9167 COMMISSIONER NOËL: Your station is supposed to be community oriented, but you have a fly fishing show --
9168 MR. PACHUL: Yes, that is correct.
9169 COMMISSIONER NOËL: -- that is produced from Thunder Bay. As far as I remember, Thunder Bay is quite a distance from Toronto.
9170 MR. PACHUL: Yes. But it is not produced in L.A., is it?
9171 COMMISSIONER NOËL: Do you have any other producers that are out of town that you have in mind?
9172 MR. PACHUL: Well, this woman I have known for quite a bit of time through Northstar Media. There are few other people that we do know.
9173 In her case, if you had seen the show you would know why I would want to put it on. It is so nice and serene. It is such a contrast from the city. It doesn't have any Toronto attitude in it, which I consider quite important.
9174 Also, one thing I want to emphasize is that she is Canadian. She isn't from the U.S. And she is real too. She is not a figment of my imagination.
9175 COMMISSIONER NOËL: You stated that these programs would be provided on a barter basis and that you would share the advertising inventory with the producers on a contract basis; a 50/50 split per hour or as determined by the contract.
9176 MR. PACHUL: Right.
9177 COMMISSIONER NOËL: Could you give us more details about the way you are going to do that.
9178 MR. PACHUL: I think what happens is somebody comes up with a show idea. They can either hand us the tape and just pay us to run it, which I think a fair amount of people will do. But a lot of people will require production assistance.
9179 What we will do, if the idea is something that we consider viable -- and sometimes, even if it is not viable, we will still take a chance on it.
9180 It is kind of like old vaudeville where they let anybody on, but if the program didn't work or it didn't go over, they got out the big hook and pulled you back.
9181 In our case, let's say you have a program that is on and I can't even run a schedule spot on it. Then we have a problem. If advertisers tell me "I don't mind your station but don't put me on that show", well, then I would consider it not to be viable.
9182 If we are on a schedule -- take Charalene, for instance. She comes in there and we produce a show for her and she goes on the air. But she doesn't want to sell advertising; she just wants to do it. That is certainly allowed. She will just become part of our run of schedule and that's how we will make money on it.
9183 COMMISSIONER NOËL: Let's go to advertising for a minute. Will you produce any of the commercials for these programs?
9184 MR. PACHUL: Absolutely; most of them.
9185 In fact, that is our biggest problem the first few months, is producing all the advertising material.
9186 COMMISSIONER NOËL: One little concern that we have is that you indicated you would sell blocks of air time at reasonable cost to producers for programs to meet your guidelines and format.
9187 What are the guidelines to which you refer?
9188 MR. PACHUL: It is right here, the Viewers Bill of Rights.
9189 COMMISSIONER NOËL: The Viewers Bill of Rights.
9190 MR. PACHUL: Yes.
9191 COMMISSIONER NOËL: Would you retain, as the licensee, the responsibility for all programs broadcast?
9192 MR. PACHUL: Absolutely. What we would like to do is, as much as possible, remain at arm's length from the producers. We do not want to influence content.
9193 But if there is a problem with the content, it is not going on the air. For instance, one thing that we are going to be pretty strict on is any type of abusive comment, any type of personal comments.
9194 For instance, take our open line show when we are on Public Forum. If there are any types of personal attacks, they are not allowed. You have to stick to the issue.
9195 COMMISSIONER NOËL: You would cut --
9196 MR. PACHUL: Yes. What we would do is -- let's say somebody made an inappropriate remark. We would immediately rebut the person. We would say: "Sir, this is not allowed on this program. You are off the air."
9197 So there would be immediate rebuttal, and they would be immediately cut off.
9198 Also, as far as independent producers, I think that it would be prudent for us to have the person submit taped shows until we trust them.
9199 COMMISSIONER NOËL: That was my next question, your viewing committee or something --
9200 MR. PACHUL: Yes. We plan on establishing a committee that is of the public at large to review this because I don't want to be the final arbitrator of what is going on. I really don't. You know, to have --
9201 COMMISSIONER NOËL: You don't want to be the censor.
9202 MR. PACHUL: I don't want to be the censor. Yes, that's a better word. Yes.
9203 COMMISSIONER NOËL: Okay. Now station productions.
9204 From your application it appears that station productions by staff and volunteers represent approximately 22 hours on the block program broadcast schedule. There would be 11 hours of original programs repeated once each week.
9205 MR. PACHUL: Right.
9206 COMMISSIONER NOËL: There is another 19 hours of local access time available, 10 hours on weekends and nine hours on weekdays.
9207 You have stated that you have experience with low-power television stations in several cities in the U.S., sufficient experience to transfer your knowledge to a Toronto station. From that experience, who do you think will come forward with proposals to fill those time slots?
9208 MR. PACHUL: I think the easiest way to answer that question is refer you to the proposals that just came in through the interventions. You know, like, I think the biggest problem we have with proposals for programs is people are cynical, especially in Toronto. They figure: Well, CRTC won't ever give you a licence, so why bother? That is the kind of attitude people have.
9209 In fact, the press is the same way. We never were able to break into the mainstream press other than CBC. That's it. The rest, like, has been marginal press.
9210 So there has been this cynicism about the operation which I think will totally change once we get a licence.
9211 The same with, you know, finances. It all hinges on the licence. No licence, no nothing.
9212 COMMISSIONER NOËL: Okay.
9213 How many people do you consider will be needed to produce this amount of programming?
9214 MR. PACHUL: Most of that programming is very similar to what we did in Access TV. We had a full-time staff of six and we were doing about 20-25 hours a week of original programming. It wouldn't take much more than what we had called for in the application.
9215 COMMISSIONER NOËL: More or less six people.
9216 Could you tell me why volunteers would be interested to work for free for a profit --
9217 MR. PACHUL: Mostly for experience. Excuse me?
9218 COMMISSIONER NOËL: -- for a profit-generating enterprise? Because you are not a not-for-profit company.
9219 MR. PACHUL: Well, I think we are a marginal profit-generating enterprise, because if you look at the amount of money that I plan on taking out personally, I must be awfully committed to the operation to only want to earn, after taxes, like, $12,000 the first year.
9220 Also, another thing, a lot of people will do it to achieve experience. Also, once they have achieved that experience, and we are hiring more people, we always will go back to that pool of volunteers. We won't hire from the outside.
9221 COMMISSIONER NOËL: You have experience in the field. On average, how many hours would it take you to train a volunteer to a point where they can produce programs without assistance?
9222 MR. PACHUL: Without assistance? A lot has to do with how much of a background they have to begin with. But if you go look at all the various applications we have, oh, I would say you have got quite a few applications from people that have already gone through the various programs, like, for instance, Ryerson, Seneca College, so they already have some background.
9223 I think what is required more than anything else is they need to know something about the digital equipment we are running, how to do digital editing. But if you either start somebody from scratch, obviously it would take years to do it, you know, but, the thing is, most of the people that are showing up already have some background from spooling and they are just looking for hands-on experience. Now, those people, they could be brought up to speed in a few months.
9224 In Access TV, the way we always did it, we always started people out as camera people and work your way up from that, because it is pretty easy to teach somebody how to run a studio camera and then, you know, you work from there.
9225 Some people are fairly gifted. One of the individuals that is going to be appearing, Robert Loucks, he is sitting there, he was able to run the control room after a few hours. But then, he is I think pretty much a techie.
9226 COMMISSIONER NOËL: Okay.
9227 When we discussed programming, you told me that you might have a board to review the programming.
9228 MR. PACHUL: Yes, that's correct.
9229 COMMISSIONER NOËL: What about feedback from the population? Will you have a way of gathering feedback --
9230 MR. PACHUL: Oh, absolutely. Yes.
9231 There are several methods of getting into the station. For one, we have a videoconferencing server running on the Internet. If you want to use that method you can call us up on the phone, and I will actually call you back and answer the phone personally, which I doubt would happen at Citytv, that Moses Znaimer would actually answer the phone.
9232 For one, you send in a press release. It is not going to go into the wastebasket, which is I think what happens at a lot of places now.
9233 I think what is happening is the media in Toronto seems to have this agenda and it doesn't seem to include the local community. Like, they are into this bigger thing where they are national but yet they try to be local when there is no local. Time and time again, we have people telling us they can't get on the air and they can't get coverage for their event.
9234 I think one of the problems we do have, since we have that targeted ward versus that larger audience, we have to find a balance between our targeted wards and the larger audience. What we tried to do is come up with programming that would be suitable for the whole market.
9235 For instance, if you take city council coverage, well, everybody that is in the city limits would be interested in that. That's what we try to do, we try to --
9236 COMMISSIONER NOËL: We will come to city council.
9237 MR. PACHUL: Yes. Okay.
9238 COMMISSIONER NOËL: I have one more question pertaining to your production. The thing we saw on the screen is your studio?
9239 MR. PACHUL: Yes.
9240 COMMISSIONER NOËL: It seems like there is not much space in there. You were rolling on a chair with wheels and stuff like that.
9241 How do you plan to do your Junior Talent Hour and your Oldies Dancing in that area?
9242 MR. PACHUL: Well, for one, that is rather inaccurate because we have an extra 2,000 square feet in addition to that. You see, when that was shot, that was shot two years ago, we just had an industrial unit that you see there. It's about 1,500 square feet.
9243 Since then, we have taken over a storefront next door which is about 2,000 square feet.
9244 COMMISSIONER NOËL: Which would be big enough for the older people to dance.
9245 MR. PACHUL: Yes. Well, the dance show, there are several venues we can do that at that are just close by. For instance, we have a community room in our co-op because we are running out of the Main/Gerrard Co-Op. We have a facility right across the street from us that we can use, which is Ted Reeves Arena.
9246 COMMISSIONER NOËL: And you just move your equipment there because -- your electronic equipment?
9247 MR. PACHUL: No. We have a truck. We have a truck.
9248 COMMISSIONER NOËL: Oh, you have a truck. Okay.
9249 MR. PACHUL: Yes. We just put everything in the truck and we use a 2.4 gigaHertz low-power transmitter and just feed it back and that's it.
9250 COMMISSIONER NOËL: I see.
9251 MR. PACHUL: I don't know if you are really very familiar -- that video didn't really show very much of what our location is like, but we have a lot of venues right around our area. That's one of the reasons why we picked it.
9252 COMMISSIONER NOËL: My experience, in a previous life, was more with construction and telecommunications. I was a bit surprised about your proposal that the CN Tower might fall down because we actually built it. It is very solid.
--- Laughter / Rires
9253 MR. PACHUL: I don't think we are referring to that. We were more referring to a lack of electricity, which did occur last summer, where all the Toronto stations were off the air because a substation blew up and there was no power to the CN Tower. We were totally functional. I think we were referring more to that.
9254 Also, if you are looking at it from an emergency point of view, when Hurricane Hazel blew through there it flooded the whole downtown out. We are on high ground. We would still be on the air.
9255 COMMISSIONER NOËL: Going to the City of Toronto, you mentioned -- did you have any further discussions with the City of Toronto concerning the broadcast of the programming from City Hall?
9256 MR. PACHUL: Oh, sure. Sure. I had probably a few discussions with them on several occasions.
9257 COMMISSIONER NOËL: Do you have a feeling that you have an agreement with them, or are you still in preliminary discussions?
9258 MR. PACHUL: I think what it boiled down to is we took it about as far as we could without a licence, you know, because I think a big problem I have with this whole procedure you have here is, like, you want us to pretty much work out a station before we even have one. Like, how much can you do on speculation? I think that is the big problem that I have with this, because we basically build a station on speculation.
9259 COMMISSIONER NOËL: I raise that because, if I counted right, there are 23 to 24 hours that is devoted to City Hall.
9260 MR. PACHUL: Yes. One point I do make, if you look through the intervenors there, we do have two positive interventions from our local city councillors, so that means we at least have two votes already.
9261 COMMISSIONER NOËL: How many do you have to get?
9262 MR. PACHUL: I don't think we will have a problem doing it, mostly because the City of Toronto is quite unhappy with Rogers' television coverage. That's the reason why they are talking to us because they want to produce the program themselves, and they don't really feel that Rogers Television is presenting them in the best light presently. So we hope to alleviate that problem.
9263 COMMISSIONER NOËL: Okay.
9264 MR. PACHUL: Also, another point about city council, Rogers has been cutting them off around 6:30. Usually when city council goes past 6:30 p.m. there is something really heavy going on. This really infuriates the city more than anything else, because the most important things have been occurring after 6:30 p.m. Rogers hasn't been covering any committee meetings at all.
9265 They seemed to talk about pool cameras. There is no such thing as pool cameras at City Toronto. They own all the equipment. They don't need Rogers for nothing, other than distribution.
9266 COMMISSIONER NOËL: Now let's go to your other programming, namely movies.
9267 There are more broadcasters and distributors competing for programming. Are you confident that the movies will still be available? You mentioned in your application that there were a number of movies where the rights have expired --
9268 MR. PACHUL: Yes.
9269 COMMISSIONER NOËL: -- that weren't available. Are you confident that you can find those movies?
9270 MR. PACHUL: Yes. Well, I have new information since that application was written. You have to realize, I wrote that application almost a year ago exactly.
9271 COMMISSIONER NOËL: Yes, December of last year.
9272 MR. PACHUL: Since then I have found many different ways of acquiring public domain films. I have a listing of expired rights of about -- at the present time about 3,000 films. I have found that E-Bay has a very big listing of lasers for sale. At last count I think they had 6,500 lasers. I was able to recognize several hundred public domain titles right there.
9273 Also, since then DVD has come out and I have recognized about 80 DVD public domain films.
9274 Now also, another thing about public domain, a lot of it is trash. So you have to watch a lot of movies to know which ones are good and which ones aren't.
9275 COMMISSIONER NOËL: How do you know when a movie has entered the public domain?
9276 MR. PACHUL: Well, it's a rather complicated process. Most of these movies are in the U.S., okay, so what happens is the original copyright -- that is assuming they copyrighted the movie -- is good for 28 years. Now, in the 28th year they can renew it for an extra 47.
9277 I think the whole thing changed prior to the year -- I believe 1968. I think that now everything is under the Berne Convention, which means that the original copyright I believe is like 47 years. So most of these movies would be prior to 1968.
9278 Now, there are other people that neglected to copyright their movies period, which is the case with American Pictures International. They neglected to copyright almost every movie that they made.
9279 COMMISSIONER NOËL: They probably fired their legal counsel.
9280 MR. PACHUL: Well, they must have fired somebody because -- just to give you an idea of some of the stuff American Pictures International did that they never copyrighted: Did you ever hear of those Bikini Beach movies with Frankie Avalon and Annette Funicello? Can you believe they neglected to copyright that material?
9281 COMMISSIONER NOËL: I am from French origin. I don't know these films.
--- Laughter / Rires
9282 COMMISSIONER NOËL: Now, when you purchase or acquire a movie like that, does it mean that others won't have access to it or it's more like you are buying it on the shelf and you are putting it in your system and anybody else can show it at the same time?
9283 MR. PACHUL: No. Anybody else could show it, but as a rule I have never really seen much public domain works on the air in Canada other than Citytv. I would say a high percentage of the stuff they run overnight is public domain. I have seen some there.
9284 But, in general, most of these movies have not gotten any type of air play at all in Canada, but it is a big thing for low power stations in the U.S. They are public domain.
9285 COMMISSIONER NOËL: Okay. Now, you also have an educational aspect --
9286 MR. PACHUL: Yes.
9287 COMMISSIONER NOËL: -- to your programming and you were mentioning the NASA programming.
9288 MR. PACHUL: Yes.
9289 COMMISSIONER NOËL: With respect to that feed, is it all the time available or --
9290 MR. PACHUL: It's on fairly consistent. The educational programming for children that we were referring to at five o'clock is always on and it has to do mostly with space exploration.
9291 A lot of the stuff they have on is live from the shuttle. Like, for instance, they will have kids -- they allow kids to interview astronauts on the shuttle. I think a lot of it is to aspire kids to get involved with the heavens.
9292 Like I am fond of saying that we have real space on rather than big space like Star Trek.
9293 COMMISSIONER NOËL: Will you take part of the feed and build an educational program around it, or will you take the whole feed?
9294 MR. PACHUL: We will take the whole feed and there is educational material that goes along with those feeds and we will make those available to the market.
9295 COMMISSIONER NOËL: So you will take the whole program and just air it?
9296 MR. PACHUL: Oh, yes. Oh, yes.
9297 COMMISSIONER NOËL: Now, you mentioned that there were guidelines to follow pertaining to the use of the NASA logo.
9298 MR. PACHUL: Yes, that's correct.
9299 COMMISSIONER NOËL: Do you know what they are and how they --
9300 MR. PACHUL: Mostly that you do not use the NASA logo for financial gain, which we don't really plan on doing.
9301 COMMISSIONER NOËL: But this is public domain? You don't have to acquire rights?
9302 MR. PACHUL: Yes. Just log onto NASA Web site and it's quite clear there. They specifically state that it's in public domain.
9303 COMMISSIONER NOËL: Okay. Now let's go to more technical considerations.
9304 MR. PACHUL: Okay.
9305 COMMISSIONER NOËL: I have a couple of questions in that regard, not that I am technical myself, but --
9306 MR. PACHUL: That's okay, I'm a techie so I don't mind.
9307 COMMISSIONER NOËL: You will help me. I have learned how to put the computer on and off. It's not that bad.
9308 Your application is based on the use of a low power UHF television Channel 15, which is a drop-in allotment in Toronto.
9309 MR. PACHUL: Right.
9310 COMMISSIONER NOËL: We have had word that that channel could interfere with a Buffalo channel, a religious station, and maybe it would not be the best --
9311 MR. PACHUL: No, I don't really --
9312 COMMISSIONER NOËL: -- frequency available.
9313 MR. PACHUL: I don't really see the interference, for several reasons.
9314 For one, the station is 90 kilometres away.
9315 COMMISSIONER NOËL: Is not -- I'm sorry, I didn't hear you.
9316 MR. PACHUL: The station is 90 kilometres away.
9317 COMMISSIONER NOËL: Yes. It's across the lake.
9318 MR. PACHUL: Yes. It's about 90 kilometres away.
9319 I don't know if you are familiar with the horizon, like they are 1,000 feet up and the average height above sea level of Toronto I believe may be about 200-220 feet. So you have about 800 feet to work with. They basically would hit the horizon at about 45 kilometres.
9320 So the only possible way you could even pick up the signal is if you were at a high point because it would be a combination of both high points, okay. But most of our viewing area is at about 75 metres above sea level. So there wouldn't -- there is nothing there. There is nothing to pick up.
9321 Also, they are low power station and they have applied for a directional pattern -- a non-directional pattern and they are running directional pattern now.
9322 COMMISSIONER NOËL: Now you will have to help me. Which will mean?
9323 MR. PACHUL: Which will mean that they are concentrating on their local audience. Because previously I think their concept was to run a directional signal into southern Ontario and compete against Channel 36 in Burlington, CITS, but since then they abandoned that plan.
9324 After the DTV regulations came out Channel 15 is actually the DTV companion for channel -- I believe it's 43 that doesn't exist in Hamilton. So that means that they would have to protect that frequency. That is in Hamilton.
9325 So I think that -- and the FCC has been pretty strict about low power stations protecting the DTV assignments.
9326 COMMISSIONER NOËL: Let's say that channel is working fine, but you are not protected from interference by a regular station operating on standard channel allotment, whether or not those regular stations are established after you have commenced operation or before. So if in the hypothesis that you have some problems, what would be your solution?
9327 MR. PACHUL: I really don't understand what kind of problems you are talking about. Could you be more specific?
9328 COMMISSIONER NOËL: If you cause interference, you are not protected. You have to locate the frequency.
9329 MR. PACHUL: Well, who are you talking about specifically we would cause interference to? I think that you need to be more specific as to who the interference is being caused to.
9330 COMMISSIONER NOËL: Other broadcasters.
9331 MR. PACHUL: Well, there wouldn't be any because we are running a clean transmitter. We run a power mosset technology. We use like extremely tight filtering so there is like next to no spillover on adjacent channels. Like you could be like several miles away from the transmitter and still watch an adjacent channel because the ratio would be about a hundred to one on the adjacent channel.
9332 COMMISSIONER NOËL: I'm not very familiar with that field. Okay.
9333 MR. PACHUL: Like if I wanted to elaborate on the interference question, the only real possible interference which is like totally remote would be to Channel 19, TVO. Now, if there would be a case, if you were really close to the tower and there was interference from us, we would supply a filter to filter out our station.
9334 That's under the Industry Canada regulations. We plan to scrupulously adhere to the Industry Canada regulations.
9335 COMMISSIONER NOËL: Even if your filters didn't work, do you have an alternate channel. You know that you would be required under the regulations to --
9336 MR. PACHUL: Well, for one, the filters would work. I don't know how familiar you are with RF, but you have got to realize that it would be rather impossible for us to cause interference to Channel 19 because there's such a difference between the power ratios of the two channels.
9337 If anything, we have to accept interference from 19.
9338 COMMISSIONER NOËL: Okay. Let's go to a line of questioning where I feel a bit more at ease than interference.
9339 Coverage. Would you please explain to us the reasons why you have chosen to apply for a licence to operate a low power television station rather than the higher power regular station in Toronto.
9340 MR. PACHUL: Yes, several reasons. For one, we could never afford a high power application. For one, I would have to hire a consulting engineer to do the technical when I can do it myself. Okay? The fee would be, oh, I would say at least $20,000 to $30,000 just for the application.
9341 Also, the transmitter is extremely expensive and also the achilles heel of a high powered station is the electric bill. That's usually what gets you is the electricity required to run it.
9342 COMMISSIONER NOËL: Okay. Now, is your object to operate that proposed low power television undertaking a permanent service or is it an interim cost effective solution in your mind?
9343 MR. PACHUL: Well, we would like to go full power and be the biggest station in Canada at some point in history. I think it's more of a stepping stone. You have got to realize another thing too, what is the future going to bring.
9344 If high speed Internet takes off, everything we are talking about right now is going to be irrelevant five years from now. I don't really have a crystal ball as to, you know, what actually will occur.
9345 I will say one thing. If you look at our proposal, we are planning to go digital TV year four. We have a fair amount of money allocated for that.
9346 COMMISSIONER NOËL: We will come to that. Are you confident that your target of coverage area in the grade B contour will be satisfactorily served?
9347 MR. PACHUL: Oh, pretty much. We are going to have a pretty good reception mostly because we have direct line of sight. We don't have anything in the way. Like, if you go on top of 275 Main Street, you will find that it's all low rise until you get to the downtown towers.
9348 Low power TV, you must have a line of sight. We have several efficiencies in the plan which makes our signal fairly good. For one, since we are running off the top of a building, our RF cables are going to be very short. We are looking at about maybe three metres worth of RF cabling. If you are running a tower, you are losing maybe -- if you are running a high UHF channel, you are losing maybe 30, 40 per cent of your signal right in the transmission cable.
9349 You have other problems too with antennas. Like the way the CN Tower is operating, they are using one main antenna to broadcast everything, which is totally inefficient. They are wasting most of their power going up that stack which we are not having. We are having antennas that are designed specifically for the frequency we are using. They are cut antennas.
9350 COMMISSIONER NOËL: Okay. We will go on with another question. Did you conduct any measurements of the off air received signals during the period when you held your development licence?
9351 MR. PACHUL: Yes, absolutely, all over the place.
9352 COMMISSIONER NOËL: And what were the results?
9353 MR. PACHUL: They were quite satisfactory. In fact, two of the people appearing today actually watched our off air signal. That's why they are here today. They watched the experimental licence on the air. They were pretty far away from the station too.
9354 Like the one individual, Robert Loucks, he watched us with a black and white set with loop antenna approximately, I don't know, six, seven kilometres away on the wrong side of the building. He picked it up and he watched it.
9355 COMMISSIONER NOËL: Those black and white TVs were very sensitive.
9356 MR. PACHUL: Yes. I admit they are extremely sensitive. Yes.
9357 COMMISSIONER NOËL: What means would you employ to rectify any signal deficiencies that might occur within the --
9358 MR. PACHUL: I tell you, the biggest problem we have in that regard is that Industry Canada is limiting our power. Now, I would be very happy to put on a transmitter power of 500 watts, as you recall in our notice here, but you know that's incorrect, don't you, a transmitter power of 500 watts. It's actually radiated power of 500 watts.
9359 The limit is not me. I would want to run the maximum, but Industry Canada is limiting us to that power at that height. I will say one thing about Industry Canada. If there is the coverage problem that you are referring to, Industry Canada said I can go back and make an argument for more power at that time which I plan on doing.
9360 I wanted to have a 500 watt transmitter power right off the bat, not 500 watts ERP. That would give us an ERP of about 5,000 watts, but they told us we couldn't run that much power at that height.
9361 COMMISSIONER NOËL: Do you have plans to establish any other similar low power TV transmitters or to expand the service to other parts of Toronto, assuming that additional low power TV channels could be found in the area?
9362 MR. PACHUL: Yes, absolutely. We plan on being the flagship station for a nation-wide movement. We wanted to be characterized by local ownership. We don't want to own the station. We don't mind assisting people, but we don't want to own it. I think there's a real problem with diversity of ownership in Canada.
9363 COMMISSIONER NOËL: Okay. Do you have any future plans to convert your station to a regular high power protected service should the current application be approved and, if so, what time frame do you have in mind?
9364 MR. PACHUL: Well, it depends upon how fast we take off. Now, one thing you have got to realize about the financial plan there. Okay. That was a worst case scenario. Okay? The reason why it's a worst case scenario is because I didn't want to come to you a year after we got the licence saying "Oh, we can't do this".
9365 We thought what was on that financial plan is doable. On the other point of view, we didn't want to exaggerate what we would be doing because we didn't want you to question "Well, there's no reasonable expectation you are going to come up with it".
9366 The station could take off. You know, we might be coming back here three, four years from now to apply for a full power station.
9367 COMMISSIONER NOËL: Do I understand that all your equipment is already available?
9368 MR. PACHUL: Oh, yes, it's all in place, it's all ready built. What we did was we basically built a station on speculation. That's what we did.
9369 COMMISSIONER NOËL: So the costs of the equipment is not in your --
9370 MR. PACHUL: No. There is no cost because it is already there. It is basically financed through my regular Northstar Media business because I had a studio operation anyhow. Then you see, like Spyro was saying, I had this bug back in 1994 where I wanted to run a station.
9371 MR. VENDOURAS: That's where Jan has his talents of gathering all bankruptcy equipment, going down behind, getting the soldering guy out with a gun and building it from scratch. It's really nice equipment that he refurbished, so I got some of his equipment by bartering with him. "I'll give you so many hours work if you will give me so much equipment".
9372 COMMISSIONER NOËL: I understand. What I would like to know is your Northstar company will actually give that equipment away to the new station.
9373 MR. PACHUL: Well, you see, since I am applying for this station as an individual they stole my assets. So even though I am dissolving the company, I've still got the assets of Northstar Media.
9374 See, like I don't really have the problem of transferring the assets to a corporation because I'm not a corporation.
9375 COMMISSIONER NOËL: Northstar Media is not a corporation?
9376 MR. PACHUL: No, never was. It was a sole proprietorship and so was Star Ray TV, so where is the problem with transferring the assets? That was one of the reasons why I wanted to do it as an individual because I knew I had the problem of transferring the assets.
9377 COMMISSIONER NOËL: Okay.
9378 Now, let's go to some other considerations, one that is the scarcity of the television channel allotment in Toronto.
9379 MR. PACHUL: That's a myth.
9380 COMMISSIONER NOËL: On page 6 of your application in section 8.3.6 you made the following statement:
"We plan a migration to a fully digital plan within four years. Our transmission plant incorporates broadband amplifiers and antennas permitting the easy addition of extra digital channel. We plan on being early adopters of digital broadcasting." (As read)
9381 Could you explain a bit more what you mean by this statement?
9382 MR. PACHUL: Well, for one, there is a big movement to go to DTV in the U.S. I believe all the top markets already are on the air with DTV transmitters. What we wanted to do was be one of the first ones that runs a DTV channel in Toronto. We have already looked at some major manufacturers that may be interested in financing such a venture, people that are related in the computer business, like --
9383 COMMISSIONER NOËL: Do you envisage that migration with the low-power station or do you anticipate that you will convert to a high power regular Class E station before going digital?
9384 MR. PACHUL: I think that the digital probably will be full power because I think the original plan, from what I can tell, is most DTV channels will be low power when they first go on air until there is enough TV sets sold. I think the big problem with DTV right now in the U.S., they have a fair amount of stations on air, but so far they have only sold 25,000 sets in the whole U.S.
9385 You see, we have another idea where we can make some kind of deal with the computer manufacturers, so you can watch DTV on your computer off the air. So, I think that's the direction we are planning on going into there, where we do have a convergence between the computer and regular television, but not quite the way a lot of people envision it.
9386 COMMISSIONER NOËL: You mention that were doing your own engineering and so you are not using a consultant?
9387 MR. PACHUL: I am the consultant.
9388 COMMISSIONER NOËL: You are the consultant. Okay. Have you conducted any studies to determine whether or not there is a possibility to add other low-powered TV channels as drop ins in the Toronto area?
9389 MR. PACHUL: Yes, there are quite a few channels available. In fact, there is a lone DTV channel assigned to Toronto. I believe it is channel 21, is it? It's one of the lower end UHF channels.
9390 Also, a point I would like to make about scarcity of spectrum space, that's a total joke because the U.S. doesn't even have the land mass of Canada. Okay? You are looking at 2,000 low-power stations on the air, 1,500 high-power stations.
9391 Now, using CRTC figures that I have in front of me here somewhere, there is a total of 156 stations on the air in Canada. Does that ring a bell? Is that about right, 156 stations of various programming undertakings? And there are 38 in Ontario.
9392 So, if you are looking at spectrum space, you should be able to put on at least as many as the U.S., which is 3,500. So, I think we have got a long way to go there.
9393 As far as the Toronto market, if you go and look at New York City, there are approximately 30 UHF stations on the air there and they are fitting it all in the same spectrum space. Now, they are doing it somehow.
9394 So I don't know where this idea came up with that there is scarcity of spectrum space. There is a bunch of allocated channels that nobody ever applied for in Toronto. Channel 30 recently was allocated DTV to Global. That never was applied for. That's a full service station there. Channel 53, I think it was channel 62, what else, maybe channel 67. There is a bunch of channels -- we are talking assignments. We are not talking about like short spacing anybody. This is just assignments.
9395 COMMISSIONER NOËL: Have you ever discussed this with Industry Canada?
9396 MR. PACHUL: Absolutely. Many times. I have a history going back for years.
9397 COMMISSIONER NOËL: What's their feeling about that?
9398 MR. PACHUL: Well, they seem to have given us a broadcast certificate for this frequency. Actually, they like us, mostly because I think techies talk the same language, I think has a lot to do with it.
9399 COMMISSIONER NOËL: We are probably on a different wavelength because I am not exactly a techie here.
9400 Do you anticipate that this proposed low power TV station can be sustained over a long term?
9401 MR. PACHUL: Oh, absolutely, especially in Toronto.
9402 If you go and look at the surveys we did on target businesses, I think the whole market has 45,000 businesses. I think our target market has 10,000 businesses. Now, I think it is rather ludicrous to think that we can't sell 200 of them a year, which is basically what the whole business model is based on.
9403 Selling 200, having a turnover of 50 per cent a year and producing the commercials to go with it; so I think that's a fairly easy method to make money. It's certainly easier than what I am doing right now.
9404 COMMISSIONER NOËL: Now let's go to something a little bit more contentious. If I read from your supplementary brief on page 3 of section 29.3, you say:
"This station will differ from a current and traditional attempts at providing community access is that as a low power transmitter it is rooted in a geographic location." (As read)
9405 Which means what you want to serve are those four wards, if I read correctly.
9406 MR. PACHUL: That's correct, yes.
9407 But then I think what needs to be explained there is the balance between those four wards and the larger coverage area because we have to establish some type of balance between the coverage of those four wards and the greater market that we are covering.
9408 COMMISSIONER NOËL: Which is still over the air? What I am aiming at is cable carriage.
9409 MR. PACHUL: All right.
9410 COMMISSIONER NOËL: So we are talking community, at a small level, over the air low power transmitter.
9411 You are aware that under the current provisions of section 17(1)(c) of the Broadcast Distribution Undertaking Regulations all Class 1 and Class 2 cable distribution undertakings are required to distribute the programming of local TV stations on their basic service. Have you had any discussions with any cable distribution licensees in the Toronto area concerning possible future carriage of your low-powered television stations on their cable?
9412 MR. PACHUL: No, we haven't really had any discussions with them, but I don't really think they want to talk to us from what I can tell.
9413 COMMISSIONER CRAM: Have you reached -- no, you haven't reached any tentative understanding.
9414 MR. PACHUL: I think this Star Ray cable TV compromise that I handed out today was an attempt to reach some type of compromise with the cable people.
9415 COMMISSIONER CRAM: Okay. I see what you wrote. From our assessment, the carriers involved would be Rogers and Shaw and they would be required to distribute the proposed station, if approved, on their basic service. Do you think it could be accommodated on basic service?
9416 MR. PACHUL: Well, the only way it could be accommodated on basic service, I don't think Rogers would like too much because Rogers Television is not mandated cable coverage. But I doubt they would give us Channel 10. I don't really see any type of consideration in the Broadcast Act for a cable community channel. That is not a primary service.
9417 But I don't think that will occur. I think that would be about the only accommodation, but I am sure that Rogers would not go for it.
9418 COMMISSIONER NOËL: Would you object to an arrangement with Rogers and Shaw that would exempt them from the requirement of distributing your signal?
9419 MR. PACHUL: We remove about two-thirds of our income if we did that, if we were just an on-the-air service.
9420 COMMISSIONER NOËL: So your business plan is based on being carried on cable.
9421 MR. PACHUL: Absolutely. How else would you do it?
9422 There are a fair amount of people that watch off UHF, but I don't know if there is enough there to increase our programming values. Obviously if we are removing all this money out of the system, what are our programming values going to be like? We are always going to be marginal station. I think we need to have some cable access.
9423 But we are willing to accept any channel, just as long as it is unencoded.
9424 COMMISSIONER NOËL: Let's go back to digital. Your financial assumptions indicate that you anticipate a gradual conversion to a digital plant with digital broadcasting projected in year four.
9425 Conversion to digital is going to be a very expensive proposition for commercial conventional TVs. That is what we hear all the time.
9426 Can you tell us about your plans for digital TV?
9427 MR. PACHUL: For one, we are fairly digital already. We can produce programming 100 per cent digital, right up to going on the air. We can run it off hard drives. In fact, all of our commercials will be 100 per cent digital.
9428 So we already have a fair amount of digital infrastructure.
9429 It is a little early to go 100 per cent digital, because some of the technology is still not in place.
9430 We have a little device here just so people know what it is like these days to do digital. This is a digital camcorder. This thing puts out a picture that is comparable to a betacam.
9431 Do you know how much this thing costs on the market right now? Twelve hundred bucks. That's it.
9432 We can take this picture and feed it directly into a computer using firewire, edit it and output it, and it is ready to go on the air just like that. We are replacing a million dollars worth of AB roll equipment just like that.
9433 That just gives you an idea of how powerful the technology is.
9434 I think, in general, we have not found too many broadcasters that are very inclined to do digital. A lot of them are looking for a turnkey solution like Avid, which is like big bucks and you really don't get anything for it.
9435 I have been experimenting with digital now since 1995, and I have been pretty much upgrading it constantly and continuously. I think in three, four years it will be amazing what we can do.
9436 It is amazing already what we can do.
9437 COMMISSIONER NOËL: Can you tell me what your capital costs would be to convert? I understand, from what you said, that they would be minimal.
9438 MR. PACHUL: Sure. For one, all you would have to do is throw in another transmitter. We would just use the same antennas; just multiplex the antennas.
9439 Initially, I think what a lot of people are going to do is convert their analog stream to digital with the converter. I doubt we will be taking that route. I think we are going to do it exactly the opposite. The analog channel will have an analog converter, and the digital stuff will just run the way it is: digital.
9440 COMMISSIONER NOËL: So you don't see any major capital investments.
9441 MR. PACHUL: Yes. Mostly because we are very advanced right now. I think we are more advanced than most people in Canada when it comes to digital.
9442 COMMISSIONER NOËL: Therefore, you don't have a financing problem.
9443 MR. PACHUL: Not at all. We are looking at standard hardware. With that one camera there, we are replacing a $15,000 betacam.
9444 COMMISSIONER NOËL: Now let's go to our policy and the nature of service and conditions of licence.
9445 The Commission, as you know, does not yet have a policy on the over-the-air TV stations in the urban communities.
9446 MR. PACHUL: Yes.
9447 COMMISSIONER NOËL: To assist us with your proposal, we reference the community radio policy and the policy on low power TV in remote communities contained in Public Notice 1997-8.
9448 Both policies expect community undertakings to be owned by local residents and to offer programming that is relevant to all members of the community.
9449 Therefore, the Commission may wish to impose restrictions or limitations on your undertaking in order to ensure that the basic nature and/or parameters of the stations don't change.
9450 The following items are based on the specifics of your application and could become conditions of licence.
9451 I will read to you a list of possible conditions of licence, and I would like you to tell me if you agree to have these form part of the description of service that could become a condition of your licence if this application is approved.
9452 (a) local ownership of the station.
9453 Could you say it so that --
9454 MR. PACHUL: Well, I think --
9455 COMMISSIONER NOËL: It is just that the system doesn't register signs.
9456 MR. PACHUL: I already have local ownership. I live about a block away from the station.
9457 COMMISSIONER NOËL: Would you agree that the station must contribute to diversity in the market and reflect the interests and demographics of what you have called the neighbourhood?
9458 MR. PACHUL: Absolutely. I think that is quite obvious in what we are trying to do.
9459 COMMISSIONER NOËL: When I asked you to answer, it is because the system here doesn't catch your nods.
9460 MR. PACHUL: Yes, I understand.
9461 COMMISSIONER NOËL: And (c), that at least 75 per cent of the programming be from local sources, provides access to local residents and that a high percentage of that programming be directly related to the community.
9462 MR. PACHUL: Yes, agree with that 100 per cent. I really do.
9463 COMMISSIONER NOËL: That the Canadian content broadcast on the station exceed regulatory requirements in both daytime and prime time evening hours.
9464 MR. PACHUL: Yes. I think that the Viewers Bill of Rights makes that quite clear.
9465 COMMISSIONER NOËL: And that any non-Canadian films or other non-Canadian programs have been produced prior to 1975.
9466 MR. PACHUL: Yes, because most of the films would be prior to 1968 in order to quality for public domain.
9467 COMMISSIONER NOËL: Would you accept as a condition of licence the Canadian content percentages you have made in your applications; i.e., 80 per cent in each six-month period, both in daytime and evening broadcast periods?
9468 MR. PACHUL: Sure. We plan on -- this is our guide, this Viewers Bill of Rights. We are not going to deviate from this under any circumstances. We are not going to be like The Knowledge Network.
9469 COMMISSIONER NOËL: We noted in your application in Schedule D that you referred to industry codes.
9470 Would you accept as a condition of licence that adheres to the broadcast code for advertising to children?
9471 MR. PACHUL: Yes, absolutely.
9472 COMMISSIONER NOËL: And the CAB's guidelines on sex role portrayal?
9473 MR. PACHUL: Yes. We are very respectful of women; we are.
9474 COMMISSIONER NOËL: I think I have covered the grounds I wanted to cover.
9475 Thank you.
9476 THE CHAIRPERSON: Commissioner Cram.
9477 COMMISSIONER CRAM: Mr. Pachul, I read your 100 per cent Canadian content during prime time and 80 per cent Canadian content overall, and I recognize where you are coming from, which is a technical background.
9478 You do recognize that Canadian is Canadian, as we define it.
9479 MR. PACHUL: Right.
9480 COMMISSIONER CRAM: And there are all sorts of rules where you have to get a Canadian production number.
9481 MR. PACHUL: Yes, I understand that.
9482 COMMISSIONER CRAM: So we are not having any problem with that.
9483 Do I understand that your projections on viewership and therefore your projections on revenue are based on carriage on cable in a 60s, 70s channel?
9484 MR. PACHUL: Absolutely. I never ever expected to get on basic cable. I have had lots of run-ins with cable companies in the U.S., so I got the general idea.
9485 COMMISSIONER CRAM: Your best-case scenario, then, is to be in the sixties, seventies of --
9486 MR. PACHUL: Yes. There is another reason, too, because we have gone out of way to ensure a very nice, clean broadcast signal, and we wouldn't like all the interference you get on the lower channels. Like, we would have a cleaner picture than those higher channels.
9487 Also, most people have direct access remote controls. So I don't think it is much of a problem any more.
9488 COMMISSIONER CRAM: The reason you believe you have to have cable coverage is, you say, advertisers won't even take your business card unless --
9489 MR. PACHUL: Yes. That's the first question they ask you. Yes. Yes.
9490 COMMISSIONER CRAM: It doesn't appear to matter whether the cable number is 999 or 2.
9491 MR. PACHUL: No. No. They just ask you whether you are on cable. That's all they want to know. It doesn't matter what channel, just as long as you are on the cable. The channels are irrelevant.
9492 COMMISSIONER CRAM: Okay.
9493 But you are going to be so very local, you would only appeal to, you know, Mr. Smith's Dry Cleaning in one ward or another ward. Why would they care, then, if you are on cable?
9494 I guess maybe I'm asking what is in somebody else's mind.
9495 MR. PACHUL: I think what we have run into -- like, when we had the experimental licence -- one thing that we ran into is a lot of people, they have been so brainwashed by this cable idea that they didn't even know on-the-air TV exists. They say, "Oh, you can actually pick up TV out of the air. How? Is it magic? How does it work." Yes, we have run into this.
9496 COMMISSIONER CRAM: Thank you very much.
9497 THE CHAIRPERSON: Commissioner Noël has another question.
9498 COMMISSIONER NOËL: Would you believe I still have rabbit ears.
9499 MR. PACHUL: Excuse me?
9500 COMMISSIONER NOËL: I still have rabbit ears.
9501 MR. PACHUL: Well, you are a viewer for sure, then.
9502 COMMISSIONER NOËL: Thank you.
--- Laughter / Rires
9503 THE CHAIRPERSON: Because Commissioner Noël is moving to Toronto, to the beaches.
9504 MR. PACHUL: Yes. To the beaches, yes.
9505 MR. VENDOURAS: Unless we get a really super high-powered -- to transmit to you.
--- Laughter / Rires
9506 THE CHAIRPERSON: We have no further questions.
9507 So we will see you again at reply after we have heard the interventions.
9508 MR. PACHUL: Okay. Thank you. Yes. Yes.
9509 THE CHAIRPERSON: For the moment, we will take a well deserved 10-minute break, all of us, including you, no doubt.
9510 MR. PACHUL: Okay. Thank you very much.
--- Recess at 1627 / Suspension à 1627
--- Upon resuming at 1641 / Reprise à 1641
9511 THE CHAIRPERSON: Order please.
9512 Madam Secretary.
9513 MS SANTERRE: Thank you, Madam Chair.
9514 I will now introduce the first intervenor in support of Mr. Jan Pachul. It is by Ashbridge Bay Watershed Council.
9515 Mr. Oliver Zielke.
INTERVENTION / INTERVENTIONS
9516 MR. ZIELKE: Hi.
9517 Thanks a lot for providing me with this opportunity to make an oral submission to the Commission in support of the application for a low power broadcasting licence by Jan Pachul.
9518 I want to say right off that I appreciate all the work of the Commissioners and of the staff for bringing our initiative to this point. Being here now for me culminates three years of volunteer activity in support of establishing a television station in our community.
9519 I am here as a volunteer with a non-profit ecology group -- The Ashbridge Bay Watershed Council. I'm on the Board of Directors. We advocate for an ecosystem approach to urban issues, so we are active in schools and on planning issue in our community.
9520 As well, for the last 10 years, I have been working in east Toronto as an activist on social housing, anti-racism, food security, access to technology and community economic development issues.
9521 I want to say also that I'm here on behalf of the people in the community who I have worked alongside in the last 10 years. Obviously, I live in the community. My wife is a teacher in the neighbourhood, and I'm the father of twin boys who are 12.
9522 Awhile back on TV I remember seeing Leonard Cohen and he gave this metaphor for current social life: there is a big flood and everywhere you just see the tops of roofs. The water is swirling and people are holding on to garage doors, and some people have a bit of furniture they have that they are clinging on to, and there are pets kind of paddling around. Amidst this scene, every once in awhile we encounter each other and you meet someone who is kind of hanging on to the side of a piece of construction timber, and you say, "Hi". And they say, "Oh, hi." You say, "How are you?" They say, "Terrific. How are you?" You say, "Fine", and then off you float down in the swirling water.
9523 Well, I'm here, I travelled to Ottawa this week, because I believe very strongly that it is time for us to pierce this bubble that everything is just peachy.
9524 I understand that the current state of affairs in our local communities and globally is very complex, and that any solution is not easy or simplistic.
9525 I also understand that local community access to television is definitely part of how we are going to better our communities.
9526 I first heard about Star Ray TV from an article in a community newspaper. As Jan said, I made a phone call; he answered. He invited me down. He was very respectful of my work as an activist in the community. He encouraged me to participate. He encouraged me to consider using this medium to further the causes that I was active in.
9527 So what do I mean by "easy access to television"? Just this, that the person operating the endeavour lives, works and plays in the local community, that there is an openness to programming, and that the entire operation is what we call, in the environmental movement, place-based.
9528 Now, a sense of place is that collection of environmental and cultural factors that give meaning to a particular location -- it is the characteristic. Natural features will often have a great impact on creating a sense of place.
9529 I live between two neighbourhoods whose names come from the natural features that they are near: the Beaches and Riverdale. Property values are often determined by natural features.
9530 What I'm concerned about as a citizen and what has motivated me to contribute hundreds of hours of volunteer time to support this television station is the loss of a sense of a place that has occurred in so many spots around this earth.
9531 This is a good example of a loss of sense of place -- a windowless room.
9532 We can't act locally in a spirit of social change if we are not aware of local realities. By local realities I mean planning issues, land use, transportation, culture, amateur athletics, amateur talent, natural history, politics, issues of race, gender, poverty, what our children are doing, what's happening with our elders, what's being built, torn down, restored and celebrated.
9533 What this TV station is going to do is bring forward these very local realities. Therefore, we, as people in the community who are concerned about quality of life, are going to have a foundation in which we can act, in which we can accomplish the goals of social change.
9534 I think we all know at this time that top-down doesn't work. The solutions to these crises that we are in the midst of has to be rooted in the vernacular. This TV station is going to assist in the fostering of a sense of that vernacular. That sense currently appears very infrequently in the media. Therefore, the media is not supporting the development of that sense of vernacular currently. It is manifested marginally and informally.
9535 I think we would all agree that a broadcasting initiative that operates locally and that targets a local audience and is supported by local advertisers is going to fill a real gap in the current Toronto media landscape.
9536 When we had the experimental licence I understood -- I came into contact with this incredible pent-up demand for our services. We were covering an issue in which a developer was taking a piece of land in our neighbourhood and was proposing highrise development, a very standard, urban kind of situation. So we had developers, local residents associations and politicians.
9537 The people who were involved in this issue were incredibly grateful to us, not only that we were very open to covering the issue, but that we were covering it on an ongoing basis. It wasn't just "Oh, come in" and then "See you later". It was week after week.
9538 They were very respectful or appreciative of the fact that we understood the issues. The issues that they were bringing forward were ones that were current to our own lives. We had guests, we had phone-ins, we had taped interviews, we had maps, stills that we were showing. It was at that moment that I realized that television could actually play a role in local community development.
9539 Now, the Ashbridge Bay Watershed Council is scheduled to produce a weekly show called "A Sense of Place". In that show we are going to present the next generation of environmental thinking. That suggests that it is possible for human culture and economy to function harmoniously with the natural systems that are present in a local buyer region and that we can flourish.
9540 We are going to profile new community gardens at Roden public school and at Bowmore public school. We are going to talk about restoration efforts that are going on in High Park and in Williamson Ravine and other parks.
9541 I think really importantly here is we are going to be partners in the community economic development movement. Here we are talking about initiatives like A-way Express Couriers where I guess the jargon here is victims and users of psychiatric services who operate a courier company, a very successful business. These people are going to be profiled, but they are also, I think, going to be potentially advertisers.
9542 The Toronto Dollar project is a very successful initiative that is going on which is an alternative trading system. The Carlaw Street Business Development initiative is a warehouse that has been very marginalized and some artists are moving in and it is growing.
9543 These are the small and medium enterprises, and the whole -- SMEs, is the jargon here. The SMEs are going to be very crucial partners in this endeavour. I am very excited about the community economic development partnership in this whole initiative because it addresses so many issues.
9544 Now, it is no accident that the philosophy of this show "A Sense of Place" is congruent to the whole philosophy of the proposed TV station, because I think at lot of the shows on Star Ray are going to show this sense of the local: Public forum and amateur talent and the local sports. There is going to a be a brand.
9545 Now, that brand is not like Pat & Mario's where you walk in and you just know that a team of people has designed something. It's not about graphics or slogans, it is actually about a respectful way of mirroring the vernacular. People's antenna are very acute when you actually mirror that vernacular, and that is the brand that -- the "Aha" that people will get when they see this show.
9546 Here I suggest to think "In the Skin of a Lion", Michael Ondatjee. Roddy Doyle. Walker Evans. Diane Arbus.
9547 So what we are doing in East Toronto is not trying to slightly modify the cable community information-rich formula. It is, in fact, true media activism that is nonpartisan. We are not doing the left-right kind of thing here. This is a movement from that. But, nonetheless, it is still radical.
9548 This is kitchen-table television and I think the culture of our presentation has come out in that area. It is professional, it is friendly, it is hopeful, it is extremely wise. Because of the advanced digital recording technology and the integration with the Internet -- especially videoconferencing, which I think is going to be just fascinating -- it is going to be current and up to speed.
9549 So why bother with this endeavour?
9550 Well, we really do take seriously the imperatives of the Broadcast Act. When I helped Jan write the application it was very interesting for me to read the Broadcast Act and go "Oh, my goodness, I didn't know this is what the Broadcast Act stated". I was very excited that there was this document which really put forth the philosophy that we were all striving for, because the times call for it.
9551 This is from an intervention by Paul Connelly, a local resident:
"For most of us, what we see on mainstream TV is not the norm for our lives, so there is generated widespread confusion about what is normal or acceptable. This confusion tends to make certain ideas, which actually may be an appropriate reflection of an existing local reality, somehow seem `weird', illegitimate or even not worthy of discussion. The homogeneous nature of the vision of the world that is played back through the mainstream media thus contributes to the narrowing and atrophying of public discourse and eventually impairs people's ability to exercise fully their right to participate in the political and cultural life of our society."
9552 We have a gap between the vernacular that you might find in the laundry-mat, at the pub, at the street corner, in moments of compassion when people are grieving, that sense of the vernacular and what is presented on the media.
9553 Now, I became very aware of this when recently a huge event in Toronto, and I know it is happening elsewhere, when the province imposed a megacity amalgamation on our local government. I realized that the only accurate information I could get was from Internet e-mail lists. There was an incredible gap there.
9554 So I am not personally that interested in gauging about why there is that gap, whether you say Chompsky provides this analysis, or whatever theory you want to ascribe to this issue, but I do know that as soon as this station goes on the air there is going to be immediate, not promised over time or anything, but a closing of that gap in our community.
9555 In the end I think that it's all about inclusion in media. That is of independent producers, of the needs of handicapped viewers, of non-cable subscribers like myself. Very excited about the inclusion of amateur athletics and culture and just the expansion and the diversification of views at the local level which will be the engine for the views that we are currently talking about in our globalization.
9556 So I think today is a significant day in the history of Canadian broadcasting, the beginning of the low power television movement.
9557 I want to thank again the CRTC and Industry Canada and Jan and all the volunteers for making this possible and I look forward to many years of creative partnership with everyone here.
9558 Thanks a lot.
9559 THE CHAIRPERSON: Do we hear the other two intervenors?
9560 Yes. Mr. Loucks next.
INTERVENTION / INTERVENTION
9561 MR. LOUCKS: I wanted to take the opportunity to be here today. I had first learned of Star Ray TV and Mr. Jan Pachul's idea after I had been -- I was tuning a black and white TV in my kitchen and I saw Mr. Pachul's test pattern on Channel 15 with a phone number.
9562 I was watching the channel for a while and I became curious about the phone number and what the service was. I called and had spoken with Janet Pachul. Mr. Pachul explained about his experimental TV licence and his plan to apply for a licence to operate a TV station based on community programming.
9563 That would make TV service that focused on the Toronto community with a mandate to provide service to the community in general, not catering to any one special interest group.
9564 I particularly liked Mr. Pachul's proposal to carry City Hall council meetings and to have public forums with city council members and Toronto citizens in general to discuss issues and programs on his TV station. I feel this service is a valuable addition to Toronto television services that exist now.
9565 I know similar types of programming are available on cable TV community channels. I myself do not subscribe to cable. Mr. Pachul has a proposed service that makes community TV programming more accessible to persons who do not subscribe to cable service for personal or financial reasons.
9566 As a TV viewer using conventional antenna or rabbit ears, I receive approximately nine Canadian channels and six American channels. Of these channels, about five have acceptable picture quality. However, I do not see very many channels with programming that focuses on community issues in general.
9567 Most of the time I see a lot of bad news and a lot of violent programming. If I see any people that are active in the community interviewed on TV, it's usually for a very limited time.
9568 During a newscast, for example, I will see a politician being interviewed on an issue that's happening in the city, but they really don't have a lot of time to describe their ideas or views relating to that particular issue.
9569 One example of Mr. Pachul's proposed TV coverage was an interview I had seen during his experimental broadcasts with a local municipal councillor. It was related to a housing project that was proposed in his neighbourhood. I had never seen this type of programming on any of the channels that I receive now. For example, such as Global Television or CFTO Television, although I do see these types of programming on CBC Television from time to time if I am near the TV at the times these types of programs are shown.
9570 I really wanted to support Mr. Pachul because he wants to focus on very local and overlooked types of events in the community such as local sports or local musicians. During one of our conversations, I mentioned a TV show that I used to watch back in the 1970s. It was on a Hamilton TV station on Channel 11 and it was called "Tiny Talent Time".
9571 During the conversation I mentioned that I don't see this type of programming that shows the talents of young children and kids in the community. He agreed that that would be a good type of programming to show on his proposed community TV station on UHF channel 15.
9572 I would like to thank the Commission for allowing me to speak here today and the CRTC and Industry Canada and Mr. Pachul.
9573 Thank you.
9574 THE CHAIRPERSON: Thank you, Mr. Loucks.
9575 Mr. Walters.
INTERVENTION / INTERVENTION
9576 MR. WALTERS: Yes, thank you. Good afternoon.
9577 I am first and foremost a resident of downtown Toronto. I am actually a Civil Engineer, but my line of work is in the municipal and land development consulting business. I have no affiliation or business interests in either electronics or the media.
9578 I would also like the CRTC to know that I took my valuable vacation time to come up here to Ottawa-Hull to address this issue because I think it's an important one.
9579 Like Mr. Loucks, I discovered Mr. Pachul's test transmissions a year ago, flipping through the TV dial looking for new U.S. presumably stations. No, I do not subscribe to cable TV and probably never will. I grew to intensely dislike the expense of a monopoly and the inherent censorship cable TV embodies.
9580 I have encountered an outstanding number of like-minded people who similarly do not subscribe to cable TV for usually the same reasons.
9581 I understand that within Toronto cable penetration is close to 80 per cent. In spite of this high penetration, this means that in a city of two and a quarter million people, about 425,000 people are not reached by cable and probably only a small percentage of these subscribe to either satellite or LOOK.
9582 My antenna brings me 17 English speaking channels, nine from the U.S. and eight from Canada. Under good reception conditions, I can receive up to 24 U.S. channels but only 12 Canadian. The U.S. choices are also increasing while the Canadian choices are stagnant.
9583 I was almost ecstatic to discover the emergence of a new Canadian, especially local alternative, so I feel compelled now to speak out to try to preserve it.
9584 I read the objections presented by CHUM and Rogers. There are few significant differences between them. I cannot comment on the objections based on CRTC's policy as I am not familiar with it, but can only suggest that if some of these are legitimate, then perhaps changes to policy may be warranted.
9585 However, many of the other objections that I read are either false, overstated or simply delusional. They certainly strike me as arrogant and protectionist. Much of their objections focus on the alleged current availability of ample local news coverage. I'm sorry, but real local news coverage is non-existent in the Toronto TV broadcasting.
9586 Only so much program time is allocated to local news and being a very big city, only big headline news items are covered and all stations cover essentially the same items. A possible rare exception, CHUM refers to its City Pulse program at 4 p.m., but realistically, what percentage of the population can watch TV at that time of day? I certainly can't.
9587 Rogers extols the virtues of its cable 10 community channel. However, a friend of mine and a retired cable television community channel executive, advises me that this is a farce. The local access community channel is virtually extinct in Toronto.
9588 Whereas 20 years ago eight to ten cable companies within recognizable communities and offered local access, today due to cable company amalgamation and facility consolidation, no more than two or three community access studios exist. That's one outlet per million persons. Rogers in particular simply shut them all down.
9589 Similar objections have focused on the alleged availability of similar programming offerings on cable only services or broadcast channels. They allege that, for example, older sci-fis are not needed because ample sci-fi programming is already in existence.
9590 Aside from the cable subscriber only issue, older sci-fi movies are simply not carried on over the air stations, at least not at normal viewing times when I am watching. Programs like "Star Trek II" are not sci-fi.
9591 CHUM and Rogers beef about the station's 15 kilometre range requiring cable carriage in Etobicoke, Mississauga and Richmond Hill. However, their own map shows that the 15 kilometre circle falls short of Etobicoke and, therefore, Mississauga and the mere 900 metre penetration into Richmond Hill may be grounds enough for them to apply for an exemption to preclude carriage on that system. Mr. Pachul might even agree.
9592 They state that broadcast frequencies are a scarce commodity. They are limited, to be sure, but in Canada they are not being utilized. Unlike most of the U.S., the UHF band remains largely unused here, even in this, Toronto being the country's most populous region.
9593 I watched U.S. signals extending beyond their normal range to fill in the Canadian vacuum.
9594 They object that basic band coverage would be obligatory, but Mr. Pachul is likely to accept, as we heard today, a channel above this band. Essentially they seem to be complaining about having to carry a signal at all, but is this a legitimate objection? Is this not their supposed business to carry as many channel options as they can, particularly Canadian ones, to their customers?
9595 You would think they would be pleased to offer their customers such a service if they really cared about customer satisfaction. And I suggest too that customer dissatisfaction is not caused by channel realignments. It is merely a lightening rod for it.
9596 Cable's technical problems, real or otherwise, should not be considered in the licensing of any on-air broadcast services. They'll solve the problem if they really want to.
9597 CHUM whines that Mr. Pachul's station will gain coverage via cable. Coverage does not guarantee viewers. If there are no viewers, Mr. Pachul's station will fail and leave the cable dial. Besides, Mr. Pachul will not actually gain coverage by cable. If there had been no cable TV, or there was no cable TV, the population would be able to watch Mr. Pachul's station via their antennas which they would all surely have.
9598 I have to think sour grapes too when I see an objection based on Mr. Pachul's expenditure allegedly being less than presumably Citytv's was in its infancy.
9599 Finally, an objection is based upon a precedent, that of encouraging others to apply for similar licences. Ignoring the cost issue, which will always continue to deter applicants, anything that encourages applications should be supported. The current monopolistic climate surely discourages legitimate applications. Regardless of the number of applications, it would remain as always for the CRTC to evaluate each such application on its own merits.
9600 Thankfully, Rogers and friends have now reinforced my conviction to remain cable-free and, hopefully, the CRTC will allow Mr. Pachul to increase the TV viewing options available to all of us.
9601 And I would like to just address one item regarding the Channel 15 that came up via the Commission. I had raised the issue about Channel 15 being occupied by a Buffalo station. It is actually a very weak Buffalo station and this Commission has probably never had the misfortune of actually viewing it. It is the most obnoxious, non-stop, hard-hitting, bible thumping, send your money now or hell, fire and damnation, evangelism you can possibly imagine. If Mr. Pachul can actually succeed in pushing that station out of the country, it would be to all of our benefit.
9602 Thank you very much.
--- Laughter / Rires
9603 THE CHAIRPERSON: Thank you, Mr. Walters.
9604 Commissioner Cram.
9605 COMMISSIONER CRAM: For your information, gentlemen, what happens is each of us will ask each of you questions. And it is Mr. Zielke?
9606 Mr. Zielke in your presentation -- and you will excuse my preoccupation with grammar -- you used the plural, "We had the experimental licence". You talked about "our initiative" and the pent-up demand for "our services". Are you part of a group that is supporting this? Can you tell me what --
9607 MR. ZIELKE: I understand that this is an application for a licence by an individual. His application is based on a community outreach program that I volunteered on for the last few years. So when I say "we", I am taking some licence, but it is based on my sense that this is a community initiative. I am part of a non-profit group that is going to work specifically on a show about ecology. But really I am just, I guess, saying that I have always felt that it is a community initiative and it is, I guess, testimony to a sense of trust that I have that this initiative will be very rooted in the community.
9608 COMMISSIONER CRAM: And when the experimental licence was there, how long was it operating?
9609 MR. ZIELKE: It must have been a couple of months, three months. How long was it? Six months, yes.
9610 COMMISSIONER CRAM: And were you providing that program a sense of place then at all?
9611 MR. ZIELKE: No, no. This was definitely trial by fire for me. I arrived to man the phones one day and the person who was going to do the control panel didn't show up, and so the person who was going on air manned the control panel. I was live on the air interviewing the budget chief of the City of Toronto, Tom Jacovik, who taught me a lot about interviewing on the air very quickly and I have to admit I did get a buzz for the imperative of the live. I really appreciate the commitment in this application for the live which I think goes back to what was a potential for this technology in the 50s that somehow got lost. I am not sure how.
9612 So I was always a volunteer and I have always done everything from writing press releases to going out to the community to talk about it, to, you know, I think Jan had me sweep up many times too.
9613 COMMISSIONER CRAM: And have you or your group, the Ashbridge Bay Watershed Council, ever approached either Shaw or Rogers to gain access to their community channel?
9614 MR. ZIELKE: No, and there are a couple of reasons there: a) I don't have cable, so my wife and kids wouldn't be able to see me and most of my friends don't have cable either, and, b) where would I go to do this show? I would basically have to kind of contradict this sort of guiding philosophy which is a place-based approach to produce a show. So for those two reasons, I have been involved in a lot of outreach and I see the value of television, but certainly for the circle of people who I work with as opposed to the advertisers, their first question is, "Can you get it on the air?"
9615 Of course, I support that this station has to be on cable apart from that.
9616 THE CHAIRPERSON: Thank you.
9617 Commissioner Demers.
9618 COMMISSIONER DEMERS: Mr. Loucks, you first started by the anecdote of the fact that you saw Mr. Pachul's broadcasting or experience on your television screen.
9619 Did you see any program -- you referred only to the fact that there was a telephone number, but could you explain more what you saw?
9620 MR. LOUCKS: What I had seen was a type of a test pattern and it had the name Star Ray TV on it and it had a type of call sign. It sort of struck me as being one of those amateur radio-type call signs. I think it was VA3AMK -- I am just taking from memory -- and that was on for about 20 minutes or so. Actually I had turned the TV off because I had to step out in the evening, and on my return home, when I first called Mr. Pachul I had received his answering service and then I left a message and he had telephoned me back, and after I heard the message I turned the TV on and there was a movie playing. It was a type of a science fiction movie. It struck me as being an early 60s-type movie anyway.
9621 That is all I could really describe of the TV reception at the time.
9622 COMMISSIONER DEMERS: Thank you.
9623 You referred to the importance for you of local programming that this station would provide. This station's coverage would cover about 900,000 people.
9624 Can you explain such a coverage in the locality being 900,000 people what you see as local programming that would answer what you wish to see?
9625 MR. LOUCKS: Well, local programming, I seem to follow politics and what politicians do, particularly in the city quite a bit, and I do catch things on the news and I know there are a lot of things that the news -- really they don't have the time to allow politicians to speak like in an open forum or an interview.
9626 When I think of the community, I think of many different associations and groups in the community and people who don't necessarily have access to large commercialized television stations. That could include certain types of hobbyists or business people or minor sports leagues or athletics.
9627 It could also include musicians. Some of them could be up-and-coming bands and musicians that are undiscovered. I do know a few musicians in the community, and I know that there is a certain protocol or establishment that they have to go through to be recognized as musicians, like in the recording industry or in the community itself.
9628 Basically, community TV I would look at it as -- I have seen the cable Community Channel, and I have seen some of the things that they do cover or programs that are on CBC which strike me as being -- they go in depth.
9629 I believe there is a show called The National. There was a show that went in depth on certain subjects in the community, or shows such as David Suzuki. That is how I see community TV, where you are dealing with issues and people in the community itself.
9630 COMMISSIONER DEMERS: Thank you.
9631 This is my last question. This representation, this intervention that you make, is in your own name. You are not representing a group. You are not part of the former speaker's group.
9632 MR. LOUCKS: That is correct. I met Mr. Pachul, and everything I am saying here today -- basically I submitted the intervention.
9633 He had described to me -- like I agree with him that he had a good idea. He described to me how the intervention procedure worked, so I had submitted a written intervention and then I had indicated I wished to appear here today.
9634 I am appearing solely as a TV viewer myself. I am not representing any group in the community. But I do have knowledge and an understanding of what people like in the community or what is happening in the community, including with TV viewing as well.
9635 I had mentioned that some persons would be unable to -- for example, they wouldn't necessarily be able to afford cable services for financial reasons. I sort of presumed that because I know there are people who are paying a fairly high rent and they don't have enough income. Some people are on fixed income.
9636 I hear people all the time in the city, like Toronto, talking about that they don't have money for groceries and there are people who don't have telephone service. I just presume that they don't have access to community TV on cable.
9637 As for myself, I don't use cable service by choice, because I only watch TV for a few hours of the day, if I am ever home.
9638 COMMISSIONER DEMERS: The knowledge you have of what the other people, neighbours or others in the neighbourhood, is through what? It is through just normal life or through professional activities?
9639 MR. LOUCKS: It is just through day to day activities. I could meet people in the local cafe or coffee shop. I meet people through friends; many different outlets in the community. Friends of friends and acquaintances.
9640 I don't have any ties to any special interest groups or cliches in the community, or anything like that. I pretty well just go to work and come home, kind of thing, see things as I go along in life.
9641 COMMISSIONER DEMERS: Thank you, Mr. Loucks.
9642 THE CHAIRPERSON: Thank you.
9643 Commissioner McKendry.
9644 COMMISSIONER McKENDRY: Thank you, Madam Chair.
9645 Mr. Walters, I did have a question for you, based on your written submission, about the Buffalo station and the interference. I took it from your written intervention that that was a concern for you, that Mr. Pachul's service might interfere with your reception of that signal.
9646 But I understand now, from your oral submission, that Mr. Pachul's service is a plus.
9647 MR. WALTERS: I was actually concerned from Mr. Pachul's perspective that maybe on the fringes of his reception range he would find too much interference from that station and miss out on a few viewers.
9648 COMMISSIONER McKENDRY: I see. I understand that now. Thank you.
9649 Let me ask you this: You talked about the importance of the kind of programming that is being proposed to you and to others in your community. One of the things that we often hear is that the Internet is now, or very shortly will be, the way for people to express themselves in this community based sense of place perspective.
9650 Do you have any thoughts about whether or not the Internet can be a substitute or is a substitute for the kinds of things that are being talked about from a community development perspective in this application?
9651 MR. WALTERS: I think the Internet is a good medium, but I don't think it would ever be a perfect substitute. You have to be sitting at your computer and actively participating, reading the information that is on the Internet, versus television which you can have on while you are doing other chores in the house, or whatever.
9652 The television medium, I think is quite important and will always be quite relevant.
9653 COMMISSIONER McKENDRY: Mr. Zielke, I wonder if you have any comments on that. I would assume your group probably uses the Internet.
9654 MR. ZIELKE: Yes. For two years I worked with a non-profit group called Web Networks, which assisted other non-profits using the Internet. I got very deeply involved in the Internet.
9655 There is a technical thing that is very interesting, and that is in the Internet everyone talks about bandwidth and this kind of stuff. And Jan, in his inimitable fashion, informed of the bandwidth that is happening on UHF, which is something like 25 to 30 megabytes -- not "bits". Right? It's bytes per second.
9656 I have Bell high speed at home, and I spend a lot of time on the Internet and I have worked on different access projects in getting video on the Internet. We are looking at three to five years.
9657 That is an interesting purely technical issue.
9658 The second one that I think is interesting is that when I worked at Web Networks I met a lot of people who had a difficulty with the entire computer base kind of thing, and I think that is something to respect and consider.
9659 The other thing that is extremely fascinating is that the way that the plant is set up now -- I noticed that a lot of TV shows started looking like Web sites. One of my jobs at Web was to design Web sites for churches, activists, labour unions. So I got into the design.
9660 I started looking at TV screens and saying what is going on here. Why are all these TV screens looking like Web sites? They even have the drop down menu. It seemed kind of bizarre.
9661 My own sense is that people want downstream. UHF is downstream. That is major downstream. And if anything, I see the potential -- because the plant is set up so that whatever is on this computer screen now we can broadcast.
9662 Imagine the possibilities of broadcasting using videoconferencing. It is quite amazing: the meetings that people could have that could then be shared and witnessed that could be broadcast over UHF using Internet technologies.
9663 What I'm interested in now, which is the sort of three to five year term, is how we can use the Internet to gather content which will then display through a very accessible medium. That to me is really exciting. I could see even doing programming which was -- you know, Web sites, the penetration there.
9664 How we successfully used the Internet in the last three or four years is how it is being used, and that is: What is the killer application? It is e-mail. That is the killer sort of deal here.
9665 And the WTO thing was organized by e-mail. How we organized, you know, these hundreds of hours of volunteers and, you know, evenings and all this stuff, was using e-mail effectively.
9666 COMMISSIONER McKENDRY: Thank you very much.
9667 Those were my questions, Madam Chair.
9668 THE CHAIRPERSON: Thank you very much, gentlemen, for your participation.
9669 Madam Secretary.
9670 MS SANTERRE: Thank you, Madam Chair.
9671 The next intervention will be by the Canadian Cable Television Association.
--- Pause / Pause
9672 THE CHAIRPERSON: Good afternoon.
INTERVENTION / INTERVENTION
9673 MR. TAYLOR: Good afternoon, Madam Chair, Commissioners.
9674 I have to get to the front page of my thing so I can remember my name.
9675 I'm Chris Taylor. I'm Senior Vice-President, Law and Regulatory, at the CCTA. With me is Colette Watson who is Vice-President, Programming and Public Relations of Rogers Cable Systems.
9676 We are here today to oppose Jan Pachul's application to establish a low-power over-the-air television service to serve parts of Toronto.
9677 As outlined in our written intervention, the CCTA has three concerns with respect to this application.
9678 First, we do not believe that the proposed service conforms with the Commission's policy and licensing criteria respecting low-power television undertakings. Therefore, for this reason alone we believe the application should be denied.
9679 Second, if the Commission is in any way disposed to deviate from its existing policy, we believe it should first hold a public process on whether its existing policy framework should be revised, and, if necessary, develop an appropriate licensing and distribution framework. Only after the completion of such a process should the Commission consider individual applications for low-powered television stations under the revised policy.
9680 Finally, in the event that the Commission approves the proposed service, we have concerns relating to the priority carriage requirements of this signal under the broadcasting distribution regulations.
9681 Now, as outlined in our intervention, as well as the interventions of the broadcasters and distributors who participated in the process in writing, it is clear that the proposed service does not meet either the policy or the licensing criteria established by the Commission on low-power television undertakings.
9682 The Commission's policy was specifically designed to encourage off-air community television operations in remote or under-served communities. The application, on the other hand, is seeking approval for a station to serve Toronto, the largest urban market in Canada.
9683 Second, the Commission's licensing criteria provides that the communities should have no competing local or regional television service. We believe that Toronto is already well served by local and regional television services, including seven private television stations, two CBC stations, a regional news and specialty service, and two provincial educational stations.
9684 Next, the Commission's licensing criteria also provide that there should be no community cable channel operating on a regular basis.
9685 As the Commission is well aware, Toronto is home to community channels operated by both Rogers and Shaw Cable Systems.
9686 Colette Watson would be pleased to discuss with the Commission the enormous success of Rogers Television and the diverse mix of programming it offers to subscribers.
9687 So it is for these three reasons we believe that the application should be denied. It does not come within the policy.
9688 We are also concerned, though, that the licensing of the proposed service would result in a clear departure from the existing policy, for granting approval to this application would have a significant precedential value and open the floodgates to other potential applicants to offer similar services in other urban markets, or even multiple low-power television services in some markets.
9689 Indeed, Mr. Pachul indicated today that is exactly what he would like to see happen.
9690 In light of the potential impact on distributors, broadcasters and television viewers everywhere, we believe that it would be premature to licence this service at this time.
9691 If the Commission is of the view that it should give serious consideration to this or any other application for a low-power television service in an urban area, we believe the Commission should first hold a public process on whether its existing policy framework for these types of services should be revised.
9692 If necessary, the Commission may develop a licensing and distribution framework for such services that sets out the expected role and contribution of low-power television services to the broadcasting system, as well as the carriage and access obligations of BDUs in relation to these services.
9693 The CCTA would be pleased to participate in such a proceeding, should the Commission decide to initiate one.
9694 Notwithstanding these concerns, in the event that the Commission decides to approve the proposed service, we are concerned about the carriage requirements of the signal under the broadcasting distribution regulations, in particular, in respect of: Rogers' Etobicoke, Mississauga, Toronto, Peel, York and Downsview cable systems, and Shaw's Scarborough and Richmond Hill cable systems.
9695 As has already been pointed out, it appears that the proposed service would be considered a priority signal on the basic service in those licensed areas, regardless of whether the applicant has requested or contemplated cable distribution of its service.
9696 Clearly, the applicant has contemplated cable distribution of its service.
9697 For the following reasons, we believe that if the Commission approves this application it should clearly state in its decision that the affected cable operators will be relieved from the obligation to distribute this service on a compulsory basis under the regulations.
9698 Mandatory carriage would transform the service from a marginal over-the-air service to a full scale television broadcasting service reaching over 950 households in the largest city in Canada. We believe that these type of carriage obligations in the Toronto market would be inconsistent with the role and contribution of low-power television services to the Canadian broadcasting system.
9699 It is also important for the Commission and others, including the applicant, to appreciate that the effective cable companies will not have sufficient analog capacity to accommodate the proposed service without significant disruption to their programming line-ups.
9700 In order to make room for the channel on the basic band, other services would have to be bumped from basic and moved to a tier, if there is room, or perhaps dropped completely if there is no room. We would be pleased to discuss specific examples with the Commission.
9701 In any event, the experience of our members is that channel realignments cause significant customer disruption. Given the nature of the proposed service, these changes would be difficult to justify to our customer.
9702 Further, as the Commission is aware, Rogers and Shaw have embarked on a digital strategy to increase channel capacity which involves converting existing analog channels and certain premium channels to digital. Therefore, new services for analog distribution cannot be easily accommodated and their introduction impairs the roll-out and transformation of the broadcasting system to digital.
9703 In conclusion, we believe the Commission should review this application against its existing policy and licensing framework for low power TV.
9704 If it does, then we submit there can be only one conclusion: The application does not meet the criteria established by the Commission for licensing low power television stations and cannot be approved on this basis.
9705 These are our comments and we welcome your questions.
9706 THE CHAIRPERSON: Thank you, Mr. Taylor.
9707 As you know, quite often policy is pushed and dragged and altered through application. You seem to be convinced that it is impossible to change the policy after this type of public process.
9708 But it has been a public process. We have had an intervention from you and have invited you to appear. CTV has filed an intervention, Rogers Cable, CHUM and the CAB.
9709 So what is it that is so difficult here to consider this application without interrupting this process and having a public process to hear those interested parties tell us more than what they told us in these interventions?
9710 MR. TAYLOR: Well, I think the scope of the process is one that is focused on -- or initially focused on a local television service, low power local television service application. That was the initial scope, but it is clear that the implications are much broader. As you indicated, policy can change incrementally or it can change in larger steps.
9711 Mr. Pachul has indicated that he sees this as the start of a national movement and I think he may be right, that if it were to be approved the effect of the change in policy -- because at that point there would be a change in policy -- would have national implications.
9712 In those circumstances I believe it would be most appropriate to have a public notice that would indicate that it is a national policy that is being changed and not simply deal with a significant policy change in the context of one application.
9713 THE CHAIRPERSON: You, as a representative of the cable industry, have made the comments that you consider appropriate for your industry to fence in the effect of any change in policy that would flow from licensing, that is: Don't force cable operators to carry it. So you have made your point.
9714 Why couldn't the television broadcasters make their points as well as to what was necessary to protect them in this process?
9715 I'm curious about what is wrong with considering this application without having a full-scale process and why is it that the television broadcasters didn't come forward like you did and say "For my industry, if you license this this is what I want to protect me."
9716 MR. TAYLOR: You are correct on certainly we have made our initial point from the distributor's point of view, which is that we would look for an exemption from carriage. The two largest cable systems in Canada have taken a direct interest in this process because they happen to be situated in Toronto.
9717 Other cable systems haven't necessarily had exactly the same level of attention paid to it because it may not be affecting them directly, but as the Association --
9718 THE CHAIRPERSON: I assumed you were representing them.
9719 MR. TAYLOR: Yes, that's correct. I'm getting there.
9720 But as the Association we represent them and we certainly consult with our members.
9721 This is all a lead-in. I can't speak on behalf of the broadcasters, but the same issue would arise with respect to the broadcasters.
9722 The Association has intervened and had a -- on behalf of its members but, nonetheless, the specific members in Vancouver or wherever may have taken a little more interest if it had been happening in their area.
9723 The other points, though, that I would like to say is that, firstly, generally if there is to be a call for -- if there is to be an application for a new television station there is generally a call for competitive applications. Given the potential implications for this particular system where there is potentially mandatory carriage on cable, which would turn it effectively into the equivalent of a full-blown television station, that is also an important aspect of the process and so we would wonder whether that would be appropriate.
9724 Again, this is a broadcaster's argument or issue more than my own and I hesitate to speak for Mr. McCabe.
9725 I would also note that Mr. Pachul has introduced some additional information later in the process which might have affected other people's perceptions on the issue. Again, I can't speak for what exactly they might have said if they had seen other aspects of his application.
9726 THE CHAIRPERSON: I understand that. My question was more generic as to the extent to which you are sure that in the way the Commission usually operates there has to be a full-scale public policy process before altering, perhaps, the policy we have when the issues were really made obvious through the application?
9727 MR. TAYLOR: Well, I think it is fair to say that we have picked up on things because some large members would be affected by the application.
9728 I would return to the fact that a change in the policy has national implication and I think that to be fair to other participants in the broadcasting industry generally, to make a change in a policy with national implications in the context of an extremely local application is something that the Commission should be very, very cautious about doing because it is -- well, as a precedent I just don't know that it would be one that you would want to continue with.
9729 THE CHAIRPERSON: I only have one other question. I am asking it of you, although -- well, it is relevant to your members I guess.
9730 You make the point that it is obvious from reading the policy on low power television as it exists now, that it was intended to be used in what you call under-served communities in your presentation of a few minutes ago.
9731 What is your response to the proposition put forward by the Applicant and the intervenors that indeed those communities are under-served, not because there aren't many channels and many services reaching them, but because they are not of the type of television that they feel is still necessary to be received and perhaps more than ever?
9732 In that sense they may not be remote in the sense of they are in Nunavut, but that they are under-served in the sense that they are not getting the full panoply of what television can offer, that is at the very local level?
9733 MR. TAYLOR: Well, the first comment would be I'm not sure that we would necessarily agree that they are under-served with respect to the particular types of programming that the Applicants are focusing on. I think Colette Watson could comment on that.
9734 On the more abstract issue of whether or not a particular area as well-served as Toronto could still be under-served in a particular area of program, that certainly is a possibility.
9735 But I would have thought -- and again I don't want to take on too much of the role of the CAB here, but I would have thought that if there was an under-served area the proper approach would be to have a call for applications rather than to have an ad hoc application that, shall we say -- and I don't want to impugn this too much, but sort of sneaks in under a policy that people didn't really think was the appropriate policy.
9736 So that you sort of get in through the door on the basis of a policy that appears to apply on its face to places that are situated in remote areas or rural areas of the country and once you are sort of in the door you then make the arguments that "Well, we are actually talking about programming, types of programming, not the total lack of services all together."
9737 MS WATSON: If I can contribute.
9738 If I look at the applicant's programming grid, the NASA feed, some of you may remember we used to apply for a temporary network licence to distribute the NASA feed every time there was a shuttle launch or when the Mars Explorer landed. We also have an application in to carry the channel full time on our digital service.
9739 There's lots of science fiction. The movies pre-1968, I don't see that as serving an under-served market. In terms of public affairs and local issues, city council is carried gavel to gavel. There were three times in 1999 that they went beyond 6:30. We did have an agreement with them that we would cut off at 6:30.
9740 To address their point that the city is unhappy with their coverage, well, it's gavel to gavel and they say we make them look bad. Well, it's gavel to gavel. I don't know any other way to make them look than who they are. You know, it's there.
9741 Where people are under-served, I guess, what I heard are people who are not cable subscribers who are looking for community information. If they want to have low powered operations that don't require cable carriage, then we as a cable company would not have an issue with that.
9742 THE CHAIRPERSON: Thank you.
9743 Commissioner McKendry.
9744 COMMISSIONER McKENDRY: Mr. Pachul made the point to us that in the United States the cable companies and low powered over the air television stations seem to work together. He indicated that it's common for them to be carried on cable systems and I think indicated that cable systems certainly weren't adverse. I don't know if he went so far as to say they welcomed them, but they were carrying them.
9745 What's the difference between the situation faced by American cable systems and your members? What accounts for the carriage in the United States?
9746 MR. TAYLOR: I don't know the situation in the States sufficiently to comment on that, but I would have thought that the preliminary issue here is the one that we have identified which is the capacity one and the realignment one, but I think Colette would be in a better position to address the specifics in this particular case.
9747 MS WATSON: One of the differences are the amount of off air priority signals we are required to carry versus what they are required to carry. In a busy off air market like Toronto, it takes up a lot of the dial.
9748 There are markets like Kitchener-Guelph in Toronto where the grade B contours of a lot of transmitters overlap. So you have this spirograph happening, you know, around your head end where we just have a lot of stations to squeeze into that spectrum.
9749 COMMISSIONER McKENDRY: So the essence of your objection to this application is a capacity problem. If you had an extra 20 channels that you didn't know what to do with in Toronto, you would be comfortable with this application.
9750 MS WATSON: I guess I don't want to go down that road because we will never have an extra 20 channels, right? We don't have --
9751 COMMISSIONER McKENDRY: I don't mean 20, but if you had channel capacity available, you wouldn't have an objection I take it then.
9752 MS WATSON: As a cable carrier, we would not have an issue with mandatory carriage, but we are more and more wanting to deliver a product, an ensemble product that appeals to our subscribers.
9753 Just because someone has a great idea and says "Give me a licence, trust me, I will figure it out" doesn't mean we can say "Yes, we will give them six megahertz of spectrum". We need more than that.
9754 There's no market research that shows customers want this. Would we be required to pay for it? Rather than answering, there are a whole lot of questions I would need to ask before answering beyond that.
9755 COMMISSIONER McKENDRY: So your concern just isn't capacity, it's the nature of the content as well.
9756 MS WATSON: The viability of the service, you know. If we displace something to make room for it and then as they said, if it doesn't work we will shut it down and hand back the channel, that's disruptive.
9757 COMMISSIONER McKENDRY: I was putting to you a situation where you had capacity available.
9758 MS WATSON: If we had capacity available, that's one factor.
9759 COMMISSIONER McKENDRY: And the other factor is the content.
9760 MS WATSON: Yes, and the mix, and the application to the mix.
9761 COMMISSIONER McKENDRY: Yes. So before you would carry -- assuming you had the capacity available, you would look at their content and you would say "Well, we're not going to carry this because we don't think the content is appropriate".
9762 MS WATSON: Or this is great content, you know, why don't we go for this.
9763 COMMISSIONER McKENDRY: But you might say "We don't like this content. It's not consistent with the package of services that we like to put out to our customers. We are not going to carry it". That would be a possibility even if you had the capacity.
9764 MS WATSON: We would enter into a discussion with the provider, the service provider, to explore where the content ideas are coming from, to perhaps point out that some of that programming is duplicated elsewhere and do you have something else to build from to make it bigger, better?
9765 We wouldn't play the censor role that way, but we would on behalf of our customers and Canadian viewers want some assurances that there's content people want.
9766 MR. TAYLOR: Also, from the policy perspective, if you are going to be looking at a mandatory carriage arrangement for these low power TV situations and you are driving at whether or not you do any analysis or consideration of the content, that to my mind brings it right back to the "Why aren't you having a competitive call" so that the Commission itself can assess, you know, if there are going to be low power television stations in particular non-remote regions, you know, well then maybe it's appropriate to have a competitive call and say "Well, who gets in the door and who gets to have these?"
9767 I just think this is a first, shall we say, and it could set a precedent. I think in fairness for other potential applicants and that who wouldn't mind being in this situation.
9768 COMMISSIONER McKENDRY: On page 4 you say, and I quote:
"If the Commission has the view that it should give serious consideration to this or any other application for a low power television service in an urban area --" (As read)
9769 It goes on. I just want to make the point, and perhaps it's for the benefit of Mr. Pachul and the intervenors, we give serious consideration to any application that comes in front of us. I think that should be clear probably to CCTA and it should be clear to the applicant that we will give serious consideration to his application, as we do to any application.
9770 MR. TAYLOR: I take the reprimand.
9771 THE CHAIRPERSON: Commissioner Cram.
9772 COMMISSIONER CRAM: I just have a couple of questions. Thank you, Madam Chair.
9773 Ms Watson, do you know the audience share that your community channel has, say in Rogers Toronto, Peel, Mississauga?
9774 MS WATSON: Yes, I do. I have to admit that Mr. -- I'm sorry. Could you tell me how to pronounce your name -- Mr. Pachul's interpretation of market share where he said 3 per cent, if I can just put that into context for you.
9775 TSN, which is the highest rated specialty service, A&E and TBS which are the highest rated specialty services, get 3 per cent market share. We get 1.1. In Toronto, in terms of weekly reach of all English, French and other TV stations, all persons 2 per cent in cable households. We got a 16 per cent reach the week of October 4.
9776 The week of October 25th to 31st, we had a 17 per cent reach. This compares to Headline Sports, Comedy Network Vision, Country Music TV, Prime Outdoor Life and so on.
9777 COMMISSIONER CRAM: So they are about the same?
9778 MS WATSON: Yes.
9779 COMMISSIONER CRAM: Okay. And regional audience share -- so actual share, though, is 1.1?
9780 MS WATSON: Yes.
9781 COMMISSIONER CRAM: Good. And on your community channel, in Rogers Toronto, Peel, Mississauga, I think, how much regular programming per week do you have that is specific to these -- the wards in question -- where this low-power television would propose to program?
9782 MS WATSON: Well, our Peel licence doesn't go to the Beaches, so.
9783 COMMISSIONER CRAM: Well, then I am sorry -- whatever area it is.
9784 MS WATSON: It would be our Toronto Centre.
9785 COMMISSIONER CRAM: York?
9786 MS WATSON: Not quite York. So that system did 143 original hours last month. We do an average of close to 36 hours a week, but it is not a divided ward, right, it is general-specific. We go out into the community and if Carabana goes through, we will be there.
9787 I remember last year we did a documentary on the Danforth and the business on the Danforth. It was part of a Toronto.com program. So we profile different neighbourhoods, different areas of Toronto, and that is one of the neighbourhoods that we would provide. One of the things we just recently launched through the at-home link that we have, what we do is feed onto the at-home site local information in terms of whatever, city politics, you know, if there is a bylaw that our liaison with the Toronto City Council want to promote, they do that there, whether any kind of school closure notices or things like that.
9788 COMMISSIONER CRAM: So did I hear you say 36 hours a week?
9789 MS WATSON: Yes.
9790 COMMISSIONER CRAM: And how many wards would that actually cover?
9791 MS WATSON: You know, I have to admit, I live in Ottawa and I don't know how many wards there are in the City of Toronto. So it covers the geographic boundary for which we are licensed.
9792 COMMISSIONER CRAM: The whole area for which you are licensed, not just the specific licence in question that we are talking about?
9793 MS WATSON: The specific Rogers Toronto licence, not the Peel or the Mississauga licence. You are trying to compare apples to apples, is that it?
9794 COMMISSIONER CRAM: That's right.
9795 MS WATSON: So we'll have to take Peel out of the equation and Etobicoke because they are west and so this area is about three block east of where we actually work in Toronto, on the corner of Bloor and Jarvis. So just over that bridge starts the Danforth and then goes east to the Beaches. It also then goes into Shaw territory, so it kind of splits over.
9796 So in terms of specific to that area, we do specific to our geographic boundary for that market which is Parkdale which is kind of more Bathurst to the Danforth.
9797 COMMISSIONER CRAM: So do I have it right then? The 36 hours may or may not have any specific programming on the wards in question that Mr. Pachul is trying to address?
9798 MS WATSON: Well, it has the City Council coverage.
9799 COMMISSIONER CRAM: No, no. I am not talking about that.
9800 MS WATSON: And it has public affairs programming. So if something is happening in terms of an election in that area, it will be there.
9801 COMMISSIONER CRAM: Okay. But other than that, there is nothing specific that actually directs you to these individual wards?
9802 MS WATSON: No.
9803 COMMISSIONER CRAM: And maybe, Mr. Taylor, you can help me because I need help on Toronto. Toronto is not my area and I don't know the geographics. I have here sort of a map of the contour.
9804 Can you tell me what the primary cable licence where Mr. Pachul's licence would be -- the major licence area?
9805 MS WATSON: It would be the Downsview, York, Rogers Toronto.
9806 COMMISSIONER CRAM: Downsview, York?
9807 MR. TAYLOR: And Rogers Toronto.
9808 COMMISSIONER CRAM: Okay. And that, if I have that right, that one has a population of 35,250 -- that particular licence?
9809 MS WATSON: Downsview?
9810 COMMISSIONER CRAM: Yes.
9811 MS WATSON: Yes, that one, right.
9812 COMMISSIONER CRAM: That licence has 35,250?
9813 MS WATSON: That sounds about right, yes.
9814 COMMISSIONER CRAM: Okay. It also touches on what other -- and is the totality then --
9815 MS WATSON: Then there is York, and then there is Toronto. Those are other licences.
9816 COMMISSIONER CRAM: On air, would it cover the totality of Toronto, York also?
9817 MS WATSON: Off air?
9818 COMMISSIONER CRAM: Off air, sorry.
9819 MS WATSON: Is it 15 or 32 kilometres? Low power?
9820 COMMISSIONER CRAM: Yes.
9821 MS WATSON: The low power policy is 15 kilometres. So it just touches the edge of -- it covers pretty much all of our Toronto Centre and then just briefly touches, barely touches our Toronto, Peel.
9822 COMMISSIONER CRAM: So when you say Toronto Centre, you mean Toronto, York, and Toronto, Downsview that it covers?
9823 MS WATSON: And then we also have a licence that is Toronto, Peel and it covers some of that territory.
9824 COMMISSIONER CRAM: It covers some of Toronto, Peel?
9825 MS WATSON: Yes.
9826 COMMISSIONER CRAM: Okay.
9827 MS WATSON: See, I go back to this morning's regional application.
9828 COMMISSIONER CRAM: Yes, but this is one of the repercussions of doing a regional application.
9829 MS WATSON: But the fact that it falls into the Toronto, Peel licence now, that means I have to put it on in Mississauga.
9830 COMMISSIONER CRAM: Yes. So although there is no off-air coverage in Mississauga as a result of the mandatory nature of the BDU regs, there would be coverage in Mississauga. Is that correct?
9831 MS WATSON: Right, because it touches our head-in that feeds the Toronto, Peel licence. So the head-end which is at 855 York Mills Road is just at 401 and Leslie. It's in the east end of the city. The 15 kilometre radius touches that and then that means we have to deliver it to Brampton which is like 40 minutes away down the highway.
9832 COMMISSIONER CRAM: If on-air, if this was also carried in Toronto,York and Toronto, Downsview, would that approximate the coverage of the off-air?
9833 MS WATSON: All of our 1.1 million subscribers in the GTA are fed pretty much. We have broken them up into three kind of head-ends. So Newmarket would be excluded, Oshawa and Ajax which are on the other side of Shaw, and then everything else is fed out of 855 York Mills. So pretty much 900,000 of our customers would get this.
9834 COMMISSIONER CRAM: Okay. What I am trying to do is fit your licences into the coverage of the off-air in an approximate way, and if I did that, would that only be the two licences Toronto, York and Toronto, Downsview?
9835 MS WATSON: No, Toronto, Peel as well.
9836 COMMISSIONER CRAM: Without Mississauga?
9837 MS WATSON: Well, as soon as it traces into the circle, it doesn't matter how deeply into the circle it goes, it has to go in.
9838 COMMISSIONER CRAM: And how deep does it go into the Peel-Mississauga circle?
9839 MS WATSON: It doesn't, but it hits the Toronto, Peel licence. So because it hits the Toronto end of it, it goes into Peel.
9840 COMMISSIONER CRAM: Thank you.
9841 THE CHAIRPERSON: Mr. Taylor, you mentioned earlier that you had an apparent objection to Mr. Pachul having deposited information at the last minute. I am wondering what you are referring to?
9842 MR. TAYLOR: Well, he introduced his Bill of Viewers' Rights which I wasn't aware of. He also introduced a proposal for cable carriage which I wasn't aware of and still actually haven't seen.
9843 THE CHAIRPERSON: You mean his proposal on the basic band.
9844 MR. TAYLOR: On the basic band. I mean those are things that are coming in pretty late in the day. I don't know about the first, why it wouldn't have been available later, but the second clearly might have been in response at the interventions and I understand that Mr. Pachul is perhaps not as familiar with the procedures as others might be --
9845 THE CHAIRPERSON: Oh, maybe he is very familiar with the procedure.
9846 MR. TAYLOR: Maybe he is actually a lawyer in disguise.
--- Laughter / Rires
9847 THE CHAIRPERSON: He knows exactly what to do.
9848 Do you have any other comments you would like to make on those points at the moment?
9849 MR. TAYLOR: No, I believe between our written intervention and our current comments --
9850 THE CHAIRPERSON: You are satisfied that you have spoken to this file, to this application to your satisfaction?
9851 MR. TAYLOR: Yes.
9852 THE CHAIRPERSON: You are satisfied that you had an opportunity to speak to it?
9853 MR. TAYLOR: Yes, yes.
9854 THE CHAIRPERSON: Counsel?
9855 Thank you very much for your intervention.
9856 We will take -- is a five-minute break sufficient, Mr. Pachul, before hearing you in intervention? It sounds to me as if we are torturing your name, but we are doing our best.
--- Upon recessing at 1808 / Suspension à 1808
--- Upon resuming at 1814 / Reprise à 1814
9857 THE CHAIRPERSON: Welcome back.
9858 Madam Secretary.
9859 MS SANTERRE: Thank you, Madam Chair.
9860 We will now hear the reply by Mr. Pachul.
REPLY / RÉPLIQUE
9861 MR. PACHUL: Thank you very much.
9862 I also want to thank our supportive intervenors who made such a great effort to show up today. I was quite impressed with the eloquence of the people who appeared today in support of our application.
9863 I did not know in advance what they were going to say, so I was quite surprised when I heard it. I did not have any influence whatsoever over the content of what they were going to say -- and I didn't really want to either.
9864 We have had quite a few positive intervenors. I think altogether we had about 46. Most of these people we got through this outreach program that we did work on for a few years.
9865 Our negative interventions talk about doing studies and surveys. But being one that took advanced statistics in college, I can make a poll do anything I want it to do. I can skew the results to have a poll express anything I would like it to express. I can structure the questions in such a way that I can elicit certain answers. I don't know what is so scientific or legitimate about polling.
9866 I think our outreach program is much more legitimate than any polling could come up with as far as the need for the station.
9867 If you want to talk about need for our service, just look at our positive interventions. Also, look at how many negative interventions we got from the general public: none.
9868 There is not one single viewer that does not support Star Ray TV. That is a fact.
9869 If we look at our negative intervenors, it seems like there is no diversity whatsoever in their interventions. All they are doing is misquoting and misrepresenting the same documents. I don't understand how we could be reading the same document.
9870 One document that they seemed to be pulling out all the time is the document that I am extremely familiar with, because back in 1994 I had some conversations with Peter Foster of the CRTC and we did talk in detail about -- I believe the document is 1987-8, which is Regulations Respecting Television.
9871 What these negative intervenors have done is they have taken a document that is designed to encourage and promote television in rural areas, and they are claiming that these are low powered television regulations.
9872 I fail to see where any of this restrictive language that they are coming up with is anywhere in that document. For instance, both the CCTA and Rogers -- let me see if I can get the exact quote here. I wrote it down somewhere.
9873 Here is the quote.
"These are four criteria that have to be satisfied by an applicant before the Commission would issue a licence."
9874 Where is it? I don't see that in that document anywhere.
9875 I see the word "flexibility"; I see the word "encourage". So where is this restrictive language?
9876 It seems to me that what these people are doing is inventing some kind of regulations for their own purpose. I don't really see the intent of the CRTC to limit low power TV just to rural areas.
9877 I think what the CRTC was trying to do with that document was encourage stations in remote areas. But there is nowhere any kind of restrictive language that says that a low power station cannot be established anywhere else.
9878 Going further on this regulatory flexibility, we never really asked for any regulatory flexibility. We did not ask to be relieved of doing logs or any other type of flexibility that is specified in that document. It never happened.
9879 Also, another document that seems to be greatly misrepresented in their interventions is the proposed Community Channel regulations which were proposed, I believe, in document no. 1989-176.
9880 Is that correct? I believe that is correct.
9881 This is a proposed document. The CRTC in its wisdom has a disclaimer right at the end stating that this document is not supposed to be misconstrued as regulation.
9882 They are claiming that this is the regulation.
9883 From what I can tell through researching CRTC documents, there is a void right now in the regulation of low powered television. We tried to address that void with our exemption from the Broadcast Act application, where we had proposed a three-year trial to assist the CRTC in developing final regulations.
9884 Also, I wonder why there are not final regulations to this day. We are looking at a document that was originally released in 1989.
9885 And to top everything off, if we go to that other regulation, 1987-8, there is a disclaimer in that document that states that this document is not community television. So it is quite obvious that they are misrepresenting all these documents, and they all did it in the same fashion.
9886 Obviously they are comparing notes. If they can't even provide diversity in their interventions, how are they going to provide diversity in programming? That is what I would like to know.
9887 Another thing that was quite upsetting -- I believe it was Ms Watson from Rogers. She seems to be putting Rogers in the position of censoring programming material, which I think is totally out of their purview.
9888 More than that, I believe it is against the Constitution of Canada to even talk in that respect.
9889 Who are they to censor what material goes on the air, and who are they to make a judgment call as to whether our programming is good or whether our programming is clearly inferior to theirs?
9890 We never stated that our programming is so much superior to theirs.
9891 I received an e-mail a few days ago from a gentleman from Mississauga. He read my Web site and he read all these interventions. He seemed to think that well, since all these high priced lawyers were saying the same thing, it must be true.
9892 In Rogers case they seemed to be of the opinion that the only people that are allowed to watch a community channel are people who are cable subscribers. But it seems to me that the CRTC opened up competition in distribution. There is LookTV; there is ExpressVu; there is Star Choice. Are these people all supposed to run their own community channel?
9893 Why can't Star Ray be the community channel for all of them?
9894 At the beginning of my presentation you saw Charalene Zacks. If Rogers was as good at local television as they claim they are, how come Charalene Zacks, of her own volition, tells us how she has been denied access to Rogers, where she applied several times and go nowhere?
9895 It is true that Rogers seems to just want to use the community channel as a value added to their cable. They don't really care what is on it, just as long as they can say: We got it; therefore, that is a reason why you should get cable.
9896 Also, another thing that I particularly don't understand is how the cable companies can be making these value judgments over what programming people should watch and what they should not watch. I think that is totally out of their purview; it really is.
9897 I am really offended that these people have this kind of attitude.
9898 Going back to this e-mail I received from this gentleman, he basically said that he experienced this Rogers superiority complex first-hand. Rogers believes that everything they do is so much better than everybody else and there is nobody that could even hold a candle to them.
9899 I think, if you look at all of the negative interventions, that is true of all of them. They all think that they are the best, and whatever we could possibly come up with is crap.
9900 I think if we receive a licence we will be a breath of fresh air in the Toronto market because we just don't have their attitude.
9901 I would never misrepresent documents. If I were Rogers of Citytv, I think I would just stick to the cable issue and that's it. Everything else -- quite frankly, all I think they are doing is embarrassing themselves. And they are also embarrassing Canada too, because we posted all that material on our Web site and anybody in the world can see what these people are actually like.
9902 So I would like to know what they are trying to prove.
9903 One statement that was made many years ago which I think is very apropos right now is that freedom of the press belongs to those that own one. I think that is very true.
9904 I think it has been very true in our case. We have never been able to break through to any of the mainstream press. Certainly none of our opposing intervenors ever ran a story about us and probably never will. I doubt we will ever become a member of the CAB. You know, that's kind of obvious. I think we are always going to be outsiders.
9905 I don't think mainstream broadcasting will ever accept us. I think the main reason why they are so after us is because we are coming up with a few policies where we are going to lead by example, and they certainly don't like the example we are going to set.
9906 For one, do you think they like the concept of 100 per cent Canadian programming during prime time or prime time for Canadians? They don't want anybody to start anything like that because then what is going to happen is people are going to question, "Well, how come these guys are doing this and you are doing that?"
9907 Also, other policies we have I'm sure they are not going to like. We have been trying to separate ourselves from the culture of the other stations in Toronto, especially Citytv. Citytv, our culture is nothing like theirs. We have been trying to do our best to distance ourselves from their culture and the culture of other stations.
9908 For one, we want to be content-rich. We don't want to be vapid. We don't want to be doing like 15-second news bites where nobody really knows what is going on. We want to have a station where people can watch the station on a regular basis and have fun watching the station.
9909 I think that is exactly what Charalene Zacks was talking about. She wants to have this sense of fun in doing what she was doing, and she definitely misses it now. She seems to attribute most of the problems she has had with access to Rogers taking over the cable systems.
9910 One of the biggest oxymorons I have ever run into is a regional community channel. How can you be a community channel and be regional at the same time? Like, I can never figure that one out. But that is what Rogers is trying to do.
9911 As far as TV stations in Canada, yes, we want to set a precedent. It is a joke as to the amount of TV stations that are on the air right now if you look at any country in the world. Like, according to the CRTC figures I have, every station, including rebroadcasters, amounts to something like 156 stations in a country as big as Canada. Here we have people arguing against us going on the air? You could easily put on 200 low-power stations overnight.
9912 Also, they are saying, "Well, the floodgates are opening up." How many applications have you gotten from people like us in the last 10 years? I really don't know if too many people even attempted anything like this. The application process is fairly extensive, and I think the process alone will prevent a lot of people coming forward.
9913 As far as a call for applications, that would do nothing for diversity of ownership. Like, for instance, you had a call for applications out in Vancouver. Who got the licence? The same old people again. I don't know how many licences CTV controls, but they want to control another one. Is that the idea?
9914 You know, CHUM Television is knocking us but yet, as far as I know, they are controlling 17 licences at the present time in television undertakings. I'm also including their specialty channels too.
9915 Also, none of the opposing intervenors came up with anything of substance. None of them said anything about how many viewers we are going to take away from them, how we are going to impact them financially, anything about their ability to fulfil their licence requirements. There is none of that there. All I see is a bunch of misrepresentation of documents and that's about it.
9916 The only real argument that they have I believe we addressed, which is cable carriage. We are willing to take whatever cable channel they want to come up with, which I think is fair.
9917 What about the legitimacy of our station? Like, do we need to broadcast 50 per cent American content during prime time to get on cable? Is that how we do it or what?
9918 Now, low power in the U.S. I have this little thing here that I got from the FCC. It says it was established by the Federal Communications Commission, 1982. It was primarily intended to provide opportunities for local-oriented television service in small communities, both rural communities and individual communities within larger urban areas.
"LPTV presents a less expensive and very flexible means of delivering programming tailored to the interests of viewers in small localized areas providing a means of local self- expression. In addition..." (As read)
9919 And I think this is quite important as far as what they are looking to do with LPTV:
"...LPTV has created abundant opportunities for new entry into television broadcasting and has permitted fuller use of the broadcasting spectrum." (As read)
9920 This is a quote from the FCC in the U.S. on low-power TV.
9921 I guess that is about all I have to say for now.
9922 I really appreciate this opportunity that the Commission has given us. I thank all our positive intervenors. I don't know what to say about our negative ones. I guess that is all I have to say.
9923 Thank you very much.
9924 THE CHAIRPERSON: Commissioner Cram has a further question.
9925 COMMISSIONER CRAM: Thank you, Madam Chair.
9926 Mr. Pachul, I'm thinking about my question to you before about the necessity for you to get a cable channel. Is it necessary to have to tell advertisers -- because your reason for doing that is you need to tell an advertiser that you are on cable, so would you only need to be on one cable licence, not the mandatory ones that are covered --
9927 MR. PACHUL: I think they are just searching for straws, the cable companies, and they are trying to use this concept that we are going to get into Peel and all these outlying areas as some kind of reasoning that they can't seem to come up with.
9928 COMMISSIONER CRAM: Mr. Pachul, my question was, based on your basis that you say you need to have cable so you can tell advertisers that you are on cable, if I follow that through, you only need to tell them you are on one cable system and that's all you need.
9929 MR. PACHUL: Pretty much, yes. Sure. Sure. Absolutely.
9930 COMMISSIONER CRAM: So do I understand it right that, if that is your reasoning, you only then need to be on one cable system and you are fine and you are covered with your advertisers?
9931 MR. PACHUL: Sure. Sure. As long as -- we don't even need 15 kilometres. As long as we could do the 12 kilometres that is specified by Industry Canada, that would be fine by --
9932 MR. PACHUL: No, Mr. Pachul. I'm saying if the reason you say you need to be on cable is to say to an advertiser, "I'm on cable", and if your coverage covers five or six licences, you only need coverage -- you only need cable carriage on one licence to be able to say to an advertiser, "I'm on cable"?
9933 MR. PACHUL: Well, yes. Technically, yes.
9934 COMMISSIONER CRAM: Isn't that correct?
9935 MR. PACHUL: Yes. Yes.
9936 COMMISSIONER CRAM: And you think that your attractiveness is in fact on -- really to the off-air industry --
9937 MR. PACHUL: Actually, I have an interesting point to make there.
9938 I don't(sic) really see why Rogers and the cable people are so objecting to this, the coverage of our channel, because what happens if a bunch of people start wanting to watch Star Ray TV off-the-air and they start becoming educated to the fact that there is off-the-air TV. It would be to their detriment because people would all of a sudden start watching off-the-air.
9939 COMMISSIONER CRAM: Then they will come and pay you money to carry Star Ray TV.
9940 Thank you very much.
9941 THE CHAIRPERSON: Mr. Pachul, just so that we have you on the record in that regard, is the desire to be carried on basic service, I understand not on the basic band, integral to your application and not severable from it? In other words, you wouldn't want to proceed without some assurance that there is cable carriage?
9942 MR. PACHUL: I would accept the licence on-air only, but I don't think I could meet the various targets that I have because I think my targets were based on a high channel of some sort.
9943 THE CHAIRPERSON: So would affect your business plan --
9944 MR. PACHUL: Oh, sure. Sure.
9945 THE CHAIRPERSON: -- to the point where the programming plan that you posited would no longer be possible?
9946 MR. PACHUL: Well, just like they were saying, you know, we would be a marginal channel, which I agree with.
9947 THE CHAIRPERSON: I'm not sure I understand your answer to Commissioner Cram, because what if theoretically the only cable operator that carried you was a Class 3 with very few subscribers? Surely that wouldn't impress an advertiser.
9948 MR. PACHUL: Well, that is what I was trying to get at.
9949 THE CHAIRPERSON: The advertisers would ask you how many homes --
9950 MR. PACHUL: Yes, yes. Sure, sure.
9951 Yes, that's what I was trying to get at. I was trying to be more specific as to what Ms Cram was referring to.
9952 Basically my concept is, if we got on within those 12 kilometres I would be happy, but the regulations state 15, which I'm happy with too, but I don't really see any need to get into Mississauga.
9953 THE CHAIRPERSON: But that would be, as was discussed with Ms Watson, whether it's 12 kilometres or 15, if the Grade B contour reached the head end then you would want the entire territory concerned to carry you?
9954 MR. PACHUL: Yes. Well, I just wonder why there is so much controversy because Citytv claims they are a local TV station in Toronto and I was in my hotel room today and I saw Citytv on and it seems to me I am in Hull, Quebec, aren't I?
9955 THE CHAIRPERSON: Because they have a retransmitting tower. They have a rebroadcasting transmitter here so their own basic -- in fact, my understanding is they also have lower band priority, don't they? You know, that doesn't mean the very basic band, but they have priority as well, and so does CHCH Hamilton.
9956 Thank you very much.
9957 MR. PACHUL: Thank you.
9958 THE CHAIRPERSON: I believe those are all our questions.
9959 We appreciate your patience. We are very late for a Friday night, but we have to sit tomorrow as well.
9960 So have a good trip back to Toronto and thank you.
9961 MR. PACHUL: Thank you.
9962 THE CHAIRPERSON: So we will adjourn for today.
9963 We will start at nine o'clock tomorrow morning to hear Mr. Rajda's application as well as the Belleville application.
9964 Thank you.
--- Whereupon the hearing adjourned at 1837, to resume
on Saturday, December 11, 1999 at 0900 /
L'audience est ajournée à 1837, pour rependre
samedi le 11 décembre 1999 à 0900