TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
APPLICATIONS FOR LICENCES TO OPERATE NEW PAY AND SPECIALTY
SERVICES FOR DIGITAL DISTRIBUTION / DEMANDES DE LICENCES
VISANT LA DISTRIBUTION NUMÉRIQUE DE NOUVEAUX SERVICES DE
TÉLÉVISION SPÉCIALISÉE ET PAYANTE
HELD AT: TENUE À:
Conference Centre Centre de Conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
August 14, 2000 le 14 août 2000
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
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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
Applications for Licences to operate New Pay and Specialty
Services for Digital Distribution / Demandes de licences
visant la distribution numérique de nouveaux services de
télévision spécialisée et payante
BEFORE / DEVANT:
Françoise Bertrand Chairperson of the
Commission / Présidente
Andrée Wylie Chairperson / Présidente
Jean-Marc Demers Commissioner / Conseiller
Ronald Williams Commissioner / Conseiller
Martha Wilson Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Peter Cussons Hearing Manager and
Secretary / Gérant de
l'audience et secrétaire
Alastair Stewart Legal Counsel /
Peter McCallum Legal Counsel /
HELD AT: TENUE À:
Conference Centre Centre de Conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
August 14, 2000 le 14 août 2000
TABLE OF CONTENTS / TABLE DES MATIÈRES
PRESENTATION BY / PRÉSENTATION PAR
Alliance Atlantis Communications Inc. 12
PRESENTATION BY / PRÉSENTATION PAR
Rogers Broadcasting Limited 157
Hull, Quebec /Hull (Québec)
--- Upon commencing on Monday, August 14, 2000
at 0900 / L'audience commence le lundi 14
août 2000 à 0900
1 THE CHAIRPERSON: Ladies and gentlemen, good morning and welcome to this public hearing to consider applications for new digital pay and specialty television programming undertakings.
2 This hearing will also consider applications for new pay-per-view and video on demand service.
3 I am Andrée Wylie, Vice-Chair Broadcasting and I will be presiding over this hearing. Joining me on the panel are to my right Madame Françoise Bertrand, Commission Chairperson. To her right Jean-Marc Demers, National Commissioner, to my left Ronald Williams, Commissioner for Alberta and Northwest Territories and to his left Martha Wilson, Commissioner for Ontario.
4 I would also like to present the Commission's staff who will be assisting us for this hearing. Commission counsel Alastair Stewart and Peter McCallum, and Hearing Manager and Secretary Peter Cussons. As well, Martine Vallée, head of the staff team for this hearing.
5 Please don't hesitate to speak to them if you have any procedural questions.
6 This hearing is significant primarily because it marks the new stage for Canada in its progression towards digital era, and for the Commission in harnessing new technologies and furthering the objectives of the Broadcasting Act, an era that will offer us more opportunities to bring the world to our doorstep, to promote and maintain a healthy balance of programming sources in our Canadian broadcasting system and to offer Canadian consumers more choices in programming services, particularly more Canadian choices.
7 Cette audience est aussi une première pour le Conseil compte tenu du nombre important de demandes de licences reçues, plus de 450, provenant de différents secteurs de l'industrie et d'ailleurs, de joueurs existants et de nouveaux venus. Et quel choix de services! Les nouveaux services de télévision proposés portent sur des sujets comme la musique, le yoga, le droit, les relations inter-personnelles, les animaux domestiques, et j'en passe.
8 In February 1999, the Commission issued a call for comments to determine the opinions of interested parties on various issues related to the creation of a new licensing framework for pay and specialty services.
9 These included whether new licences should be issued in the changing environment, the mode of distribution and what criteria should be used for issuing new licences.
10 On January 13, 2000, the Commission announced a licensing framework. it set out the guidelines it would use to issue licences for new pay and specialty services to be distributed in digital mode only. The Commission decided to create two categories of new services.
11 Les services de Catégorie 1 seront des services spécialisés qui contribueront dans une grande mesure au développement, à la diversité et à la distribution de la programmation canadienne. Ce seront les plus attrayants dans le cadre d'une distribution à court terme.
12 Les services de Catégorie 1 ne pourront pas être en concurrence directe les uns avec les autres ni avec les services payants ou spécialisés existants. Tous les distributeurs canadiens utilisant la technologie numérique devront distribuer des services de Catégorie 1 en tenant compte de la langue du marché.
13 Et enfin, le Conseil s'attend à autoriser environ une dizaine de services Catégorie 1 suivant la formule d'un service par genre.
14 Le Conseil entendra 88 demandes lors d'un processus qui sera nécessairement concurrentiel pour toutes les requérantes. Soixante-douze de ces demandes visent des services de langue anglais, 13 demandes visent un service de langue française, et trois demandes visent des services bilingues.
15 De plus, tel que précisé dans l'avis d'audience publique, pendant l'examen de ces demandes nous explorerons le rôle que les services de langue française étrangers pourraient jouer pour augmenter la disponibilité et la diversité de la programmation de langue française au Canada.
16 Category 2 services will not have guaranteed distribution rights. The Commission will licence a limited number of Category 2 services on an open entry basis as long as they satisfy certain basic criteria.
17 Proposed Category 2 services may not be in direct competition with any proposed Category 1 of existing pay or specialty analog services, but they may be competitive with each other. The Commission has received 361 Category 2 applications.
18 And now I would like to turn to the hearing procedure which has been simplified to the extent possible in light of the large volume of applications to be considered.
19 As no Category 2 applicant has been asked to appear at this hearing, and in conformity with the spirit of our digital framework, hearing participants must confine their comments to Category 1 applications.
20 Category 1 applications have been grouped and will be heard by applicant or corporate group rather than by type. Each group has been advised of the date of its appearance and of the time allowed for its presentation.
21 We expect the hearing to last approximately four weeks. During the first part of the hearing, we will examine Category 1 applications. This will be followed by an examination of the applications for pay-per-view and video-on-demand services.
22 Our examination of the Category 1 applications will take place in four phases. First, the Commission will hear the 88 Category 1 applications. The proposed order for this portion of the hearing is available on the CRTC Web site and also the hearing agenda.
23 Due to the number of applications being heard, we will expect all parties to cooperate in keeping to the announced schedules and to the time allowed for their appearance.
24 In the second phase, each applicant or corporate group will be given the opportunity to make comments on the other applications. We will hear from these applicants in the same order as in Phase I.
25 In the third phase, we will hear interventions from other parties regarding these applications. We will hear general comments first from other parties not directed to specific applications, including comments on the issue of the distribution of non-Canadian French-language services I referred to already.
26 Then we will hear from those with comments and objections related to specific applications.
27 We will then hear from intervenors in support of the applications. So as to allow as many people as possible to make their views known, the panel may not engage in discussion with or ask questions of supporting intervenors unless it appears to be necessary.
28 We want to emphasize however that all interventions are of great importance to the Commission. They are transcribed and their form part of the record.
29 In the fourth phase, the applicants will come back in reverse order and reply to all interventions and comments. I would like to put all applicants on notice that at that phase we might ask them since they will have heard all other applicants to tell us to which two or three of their applications we should give priority in licensing and why.
30 Après notre examen des demandes de la Catégorie 1, nous entendrons les requérantes qui souhaitent exploiter des services à la carte et vidéos sur demande. Le format de cette partie de l'audience a été modifié pour refléter la situation non-concurrentielle des six requérantes.
31 Nous commencerons par une présentation de groupes de 15 minutes données par trois des requérantes nous expliquant comment fonctionne la technologie de vidéos sur demande. Nous entendrons ensuite les présentations individuelles de chaque requérante.
32 Dans l'étape deux de cette partie de l'audience, nous entendrons toutes les interventions. Dans l'étape trois, toutes les requérantes répondront aux interventions en ordre inversé.
33 Before we move onto a few housekeeping matters, I would like to touch on a couple of issues. First, in their submissions, a number of parties discussed the migration of existing services from analog to digital distribution. This hearing will not address such analog migration issues. These will be discussed in a separate proceeding following a procedure which was the subject of a recent public notice.
34 Secondly, parties are reminded that the analysis of ownership and control will be completed after the oral part of the hearing.
35 Although we reserve the right to ask for clarification regarding Canadian ownership and control issues following the oral phase of the hearing, we do not intend to examine such issues during the oral phase.
36 Thirdly, I would like to point out that the CCTA has recently filed its CableLabs report. This report addresses the state of the technology and the state of the industry without addressing any particular application and these documents will be added to the CRTC Web site as soon as possible if it hasn't already, but my understanding is that it is available on the record.
37 Now, I would like to go over some housekeeping matters with you. The proceedings will be transcribed and placed on the public record. I ask that you turn off your cell phones and pagers when you are in the hearing room. They are an unwelcome distraction for both applicants and commissioners and, as you all know, especially to grandmothers.
--- Laughter / Rires
38 They are not used to cell phones. Your cooperation in this regard would be greatly appreciated at all times. Usually it works the first day, but it starts ringing on the third.
39 CPAC will be covering this hearing live. It should facilitate keeping track of developments for all parties during this lengthy hearing.
40 We will sit every day, Monday to Friday, beginning at 8:30. Every effort will be made to keep reasonable hearing hours.
41 As I said earlier, we hope to be finished within four weeks. If we have to modify the hearing schedule in order to meet this goal I will keep you informed.
42 I now call upon the Secretary, Mr. Peter Cussons, to explain the procedures to be followed.
43 MR. CUSSONS: Thank you, Madam Chair. Good morning everyone.
44 There are just a few points I would like to mention before I introduce the first applicant.
45 I would like to confirm that the CRTC examination room is next door, the Papineau Room, where anyone can view the applications considered at the hearing, along with any related documents, interventions and replies.
46 There is also a monitor set up so that people in the examination room can still follow the hearing, thanks to CPAC.
47 In order to ensure that the transcripts for the hearing are accurate, before speaking you must turn on your microphone by pushing the small button in front of you. The microphone must be turned off when you are not speaking to avoid creating interference. The red light indicates whether the microphone is on or off.
48 Also, while I realize that everyone wants to make the best use of the time allotted to them, it would be appreciated by the panel, legal counsel, and particularly our hard-working translators if people would not speak too quickly. We don't want to miss anything.
49 The panel Chair has already mentioned the processes that will take place in dealing with the Category 1 pay-per-view and video-on-demand applications. All applications and appearing intervenors should now be aware of the time that has been granted to them for their presentations and replies.
50 As we start Phase I of the competitive process for Category 1 applications this morning, I remind the applicants that the time allotted for their presentations is in accordance with the formula specified in the Notice of Public Hearing, based on the number of different Category 1 applications that they have filed.
51 In keeping with past practice, the timing of presentations will not commence until all members of an applicant's team have been introduced. At the same time, in fairness to all parties, when the clock starts I intend to be very conscientious in ensuring that people do not exceed their time limit.
52 The agenda that is now available concerns the specialty applications. A list of appearing intervenors will also follow, as well as a separate agenda for the pay-per-view and video-on-demand applications and related interventions.
53 One final matter: For those not aware, the company formally known as 90721184 Quebec Inc. has changed its name to Diffusion Quebecor Inc., or in English, Quebecor Broadcast Inc.
54 Quebecor has applied for licences for the following services which we will consider later in the week: specifically, Téléservice, Canal Nature, Canal F, and ARC-en-ciel, the Rainbow Channel.
55 I am now pleased to introduce the first applicant of our hearing, Alliance Atlantis Broadcasting Incorporated, which is proposing four services: The Independent Film and Documentary Channel, Health Network Canada, The Book Channel, and Signature Television. I will ask Mr. MacMillan to introduce his team and make the presentation, for which, sir, you have 35 minutes.
PRESENTATION / PRÉSENTATION
56 MR. MacMILLAN: Good morning, Madam Chair and Commissioners. My name is Michael MacMillan. I am the Chairman and CEO of Alliance Atlantis Communications Inc. I am here with the Alliance Atlantis team to present our applications for Category 1 specialty digital services.
57 We are very honoured to be the first applicant to make a presentation to you at this hearing. Since we have four applications before you, I hope you will forgive us for the number of troops we have brought with us. We have very specific resources required for each of the applications and we wanted to make sure that all of those resources were available to you.
58 Let me start by introducing our team.
59 From our broadcast division and to my immediate right: Phyllis Yaffe, President; Rita Cugini, Vice-President, Business Development; and Norm Bolen, Senior Vice-President Programming for Showcase and History Television.
60 To my immediate left: Rita Middleton, Senior Vice-President Finance and Corporate Development, and Laura Michalchyshyn, Vice-President Programming at Showcase.
61 Directly behind Laura: Barbara Jones, Vice-President, On-line. Barbara has just recently joined Alliance Atlantis Broadcasting and she brings a wealth of experience in the world of interactivity and on-line ventures.
62 Continuing with the back row, to Barbara's right: Kathleen Brown, Vice-President Business and Legal Affairs; Dr. Brian Goldman, who is with us here today not only as a consultant but also as the chair of the advisory committee of one of our applications, Health Network Canada.
63 To his right: Barbara Williams, Senior Vice-President Programming, HGTV Canada and Life Network; Jack Rabinovitch, Chairman, Associated Producers Inc.; and Jane Armstrong, Senior Vice-President, Environics Research Group.
64 Moving to the side table: Peter Grant, Partner at McCarthy Tetrault; Pat Fili-Krushel, CEO WebMD Health Network, which is our partner in Canada's Health Network application; and Kathy Kastner, Director of Programming and CEO of The Health Television System. Kathy began producing health education programs for hospitalized patients and their families in 1993, and the service is now in 47 teaching hospitals, reaching 1.2 million viewers.
65 Next to Kathy is Sydney Suissa, Vice-President Programming, History Television; Brad Alles, Vice-President Sales; Janet Eastwood, Senior Vice-President, Marketing, Communications and Creative Services; Lisa Lyons, Vice-President Distribution and Affiliate Relations; and Harvey Rogers, Vice-President Operations and Engineering.
66 That is our team.
67 Madam Chair and Commissioners, this hearing, obviously, is a watershed. It puts Canada in the forefront in the development and launch of new digital programming services.
68 We hope that Canadians at home will watch these hearings on CPAC. If they do, they will get a unique window into an exciting digital future.
69 Over the next few weeks we frankly think that Canadians will be amazed at what is in store for them, through our company and through many others.
70 As we speak today, there are already 1.4 million digital subscribers to multichannel television in Canada. That is about 14 per cent of television households. By digital subscribers I mean people with an addressable digital set-top box in their home, able to access hundreds of channels.
71 We have already entered the digital world. But the digital boxes out there today are still very much like the early VCRs. When VCRs first became available in the early and mid-1980s they were high cost and relatively few movie titles were available for rent or for sale. But once those issues were addressed, look what happened to VCR penetration over the next few years.
72 Today digital set-top boxes offer quality reception and a much better program guide, but the list of program services they offer -- specialty, pay and pay per view -- is still largely carried over from the analog era.
73 What is holding the digital boxes back from real growth is quite simple. We lack a critical mass of exciting new program services that are responsive to Canadian interest and demand and that will take digital box penetration to a whole new level.
74 With this hearing all of that changes.
75 There are programming services being applied for in this hearing, including our own, that we think will drive digital box penetration steadily upwards. If all goes well, by the end of year 7 we expect that over half of Canadian homes will have a digital set-top box.
76 By adding new program services in this way and stimulating demand, in fact, the digital set-top box has the potential to be as ubiquitous as the VCR or the CD or the cell phone.
77 What kind of services will be attractive enough to drive box penetration?
78 We have four new services to propose. To introduce you to them, I will turn now to Phyllis Yaffe, the President of Alliance Atlantis Broadcasting.
79 MS YAFFE: Thank you, Michael.
80 Good morning, Madam Chair and members of the Commission.
81 Over the last seven years I have had the privilege of launching two of Canada's most successful and innovative specialty services: Showcase and History Television. I also am proud to manage Life Network, Home and Garden Television Canada, and the soon-to-be-launched Food Network Canada.
82 But as Michael noted, to drive the digital future we need exciting new Canadian program services.
83 Alliance Atlantis has four to propose to you today: an independent film and documentary channel, a channel devoted to biography programming, a health and wellness channel, and a channel focused entirely on the world of books.
84 Each of these channels will be distinctive, appealing, affordable and uniquely interesting to Canadians.
85 Let me start with our proposal for The Independent Film and Documentary Channel. This channel is near and dear to our hearts.
86 The term "independent" means everything to us. In the film world, of course, the term "independent film" means a theatrical film or documentary produced without the development or financing support of a major Hollywood studio. That has been the story of the Canadian film industry, and that has been the story of Alliance Atlantis.
87 In fact, there is no company in Canada that has a closer involvement with the history of Canadian independent film than Alliance Atlantis. That is why we have a special interest in this application.
88 This service will give you, in a phrase, the "best films you've never seen".
89 To tell you about these films, let me introduce Laura Michalchyshyn, our resident expert on the indie film sector in Canada and abroad, and herself an award-winning documentary filmmaker.
90 MS MICHALCHYSHYN: Thank you, Phyllis.
91 Madam Chair, I program the Showcase specialty service, including the independent films appearing every evening on the "Showcase Revue". This is one of Showcase's most popular program strands, showing indie films from around the world.
92 The concept of the Independent Film and Documentary Channel is to take the Showcase Review to its logical conclusion: to launch a new service devoted entirely to the world of indie films and documentaries 24 hours a day.
93 There are two U.S. services with this concept: the Sundance Channel and the Independent Film Channel. But what our service would provide is not only the international indie films but, also, a powerful window for Canadian films and documentaries. The schedule would start out at 50 per cent Canadian and would rise to over 60 per cent over the period of the licence.
94 Independent filmmakers are a breed unto themselves, yet, they all share one trait; and that is the belief and insistence on telling stories from their own unique perspective, independent of the Hollywood studies, which dictate both the type of films made and how they are produced.
95 So, what will the channel look like on the air? Here is a brief video to give you an idea.
--- Video presentation / Présentation vidéo
96 MS MICHALCHYSHYN: We know this channel will be a popular choice.
97 The experience of the many film festivals across Canada -- where unknown, off-beat films often get sell-out audiences -- tells us that there is a real interest in the harder edge, quirky, non-mainstream kind of film. Whether you are at the Hot Docs Festival, in Toronto, the Local Heroes Festival, in Winnipeg, the Atlantic Film Festival, in Halifax, or the Imagination, the Gay and Lesbian Film and Video Festival, in Montreal, there is an intense demand for films and documentaries with a different vision. And our experience, with the Showcase Revue, shows that this interest is not confined to a few urban areas but is actually found throughout Canada.
98 If licensed, this service is projected to spend over $19 million on Canadian program expenditures. That is over 35 per cent of our projected revenue.
99 But over and above that, if this service is licensed, Alliance Atlantis will invigorate Canada's film industry and Canadian independent filmmakers with an unprecedented corporate commitment.
100 MR. MacMILLAN: The problems of the Canadian feature film industry are well known; they were reviewed in the report of the Feature Film Advisory Committee, just last year, and a new government policy is expected to be announced shortly.
101 If our channel is licensed, this will increase television access for feature films and documentaries -- and it will add some licence fees. But that alone will only go part way to address the fundamental problem; and that is, the chronic lack of funding for independent film and documentary producers.
102 As the single largest player in the Canadian film industry, Alliance Atlantis has a special role to play in addressing the problem. And we propose to make an unprecedented new commitment for the benefit of the independent production industry. If we are licensed to operate this service, Alliance Atlantis will spend $140 million in cash, over the licence term, on the financing of new Canadian films and documentaries made by non-affiliated Canadian companies.
103 Over the last number of years, we have never expended sums of that magnitude with non-affiliated producers for Canadian feature films. The most we have ever expended has been $5 million, in one recent year, but typically less -- and, of course, we have no regulatory obligation to do so.
104 So the $140 million commitment from Alliance Atlantis -- that is, $20 million each year, for seven years -- is an incredible new development for the independent film industry in Canada. It reflects our view of the importance of this channel, as well as our commitment to the cause of independent films and documentaries.
105 MS. YAFFE: Thank you, Michael.
106 I would like to turn, now, to our second application. Called "Signature Television", it will be devoted entirely to programming of a biographical nature. In a phrase, the service will give Canadian viewers the greatest stories ever lived, with profiles, interviews, documentaries and dramas about people with interesting lives.
107 This is a programming concept that will be very popular. Survey after survey ranks a biography-type channel as among the top three of the formats tested.
108 I will ask Norm Bolen, the Senior Vice-President of Programming for History and Showcase, to tell you more about what we plan for this service.
109 MR. BOLEN: Thank you, Phyllis.
110 Good morning, Madam Chair.
111 Signature Television will build on the lessons we have learned at History Television; and a key lesson is that Canadians are hungry for factual stories about Canadians. Our program stream entitled "The Canadians", for example, had a cumulative viewership, on History Television, of more than 3.4 million. "A Scattering of Seeds", our documentary series on immigrants to Canada, had a cumulative viewership of more than 5 million.
112 Of course, Canadians are also interested in the stories of American celebrities as well -- but they can see those stories every night, on U.S. services already available in Canada. So, if this service is to succeed, it must do much more. It needs to focus on Canadian biographies.
113 For this reason, we have committed to a Canadian content level of at least 60 per cent, right from the start of the service, and we expect to spend over $32 million on Canadian programs in the biography genre over the period of the licence.
114 This is also a channel that will be able to focus on more than just the heroes and celebrities. If you take a look at one of the most popular daily features in the Globe and Mail, "Lives Lived", it is noteworthy that many of the lives described are not of politicians or celebrities; they are of ordinary people who had something special in their lives -- and that's what we intend to capture in Signature Television.
115 The service will also tie in with the Internet. Our Web site will be linked to genealogical organizations and Web sites across Canada to cross-promote the channel to Canadians interested in the personal history of their forebears.
116 Through this approach, we will create what we call "The Canadian Family Album Project", a collection of family archives, photos, diaries and letters which will also form the basis for selected hour-long documentaries.
117 So, with that background, let me show you, in a short video, some of what we have in mind.
--- Video presentation / Présentation vidéo
118 MS YAFFE: Thank you, Norm.
119 I would now like to tell you about our third application: Health Network Canada.
120 This service will offer Canadian viewers a 24-hour seven-days-a-week schedule dedicated to programming that explores health, wellness and medicine.
121 I will now turn to Barbara Williams to give you more background.
122 Barbara is the Senior Vice-President, Programming, for Life Network, Home and Garden Television Canada and Food Network Canada and has been instrumental in developing the program concepts for Health Network Canada.
123 MS. WILLIAMS: Thank you, Phyllis.
124 It is hard to overestimate the importance of a health and wellness service for Canadians. Canadians are very concerned about their health and about their healthcare system, probably never more so than now.
125 But to create a strong Canadian health service, you need strong partners, both at home and abroad. With that in mind, Alliance Atlantis has joined with WebMD International to create Health Network Canada. WebMD International is a joint venture of Fox' Health Network and Healtheon WebMD.
126 The Health Network -- formerly FitTV -- is already on the eligible list. We represent that service in Canada and it has almost 500,000 digital subscribers in this country. If Health Network Canada is licensed, however, our U.S. partner has agreed to have their service dropped from the eligible list.
127 What will Health Network Canada look like? Let me give you a brief preview.
--- Video presentation / Présentation vidéo
128 MS WILLIAMS: Madam Chair, you can see that this kind of service will have an extraordinary appeal for Canadians, because it focuses on an issue that comes before everything else -- one's health.
129 As the video indicates, our service will be compelling and compassionate. But in the area of medical information, it is also crucial that we be accurate and reliable.
130 In that regard, we were delighted to receive an intervention from the University of Toronto Faculty of Medicine, the largest medical school in Canada, supporting our application and describing our service as both "necessary and timely". As you will see from their letter, the Faculty of Medicine has undertaken to co-operate with us to broadcast educational programs created by the university.
131 We have also enlisted the support of Dr. Brian Goldman, who will act as the service's consulting executive producer. Dr. Goldman is probably Canada's best known broadcast journalist on health issues, and a recognized authority in his own right on emergency medicine and pain management.
132 DR. GOLDMAN: Thank you, Barbara.
133 Good morning, Members of the Commission.
134 I have been honoured to be able to work with the team that has organized the Health Network Canada application.
135 To ensure that the information on health issues is reliable and responsive to the needs of Canadians, the service will be able to draw not only upon my experience but also on an advisory board of distinguished Canadians in the health field. The members of the board represent the diversity of the medical and other health professions from coast to coast. They include Dr. Margaret Somerville of McGill University, Dr. Robert Filler at the Hospital for Sick Children in Toronto, Linda Turner, a clinical nursing specialist at the Vancouver Hospital, and Kathy Kastner, who is here with us today. All of them have agreed to lend their support to make this channel a Canadian success story.
136 I also want to talk to you about the Internet and this service. The Internet has caused a revolution in the availability of medical and health information for consumers. There are thousands of Web sites and chat lines dealing with every conceivable illness and medical condition, but all too many of them are unreliable or misleading.
137 Health Network Canada will be in a unique position to address this problem. One of our U.S. partners, Healtheon WebMD, owns WebMD.com, the most widely consulted healthcare Web site in the world. Last month alone it had over 140 million page-views from users, including over 1 million page views from Canadians, even though the site is not even promoted in Canada.
138 When Health Network Canada is licensed, a new site will be created called "WebMD Canada" in collaboration with the service, and it will become a vital and indispensable source of information and exchange for Canadian health consumers.
139 MS WILLIAMS: Thanks, Dr. Goldman.
140 Reflecting its focus on Canadian health issues, Health Network Canada will be 60 per cent Canadian from its inception and that number will rise to 70 per cent over the licence term. To achieve that goal, we will be expending more than $38 million on Canadian programming.
141 Our original Canadian programming will include programs like: The Canadian Health Journal, Family Matters, Medical Frontiers, and Second Opinion.
142 Health Network Canada will also be affordable, to ensure that the widest possible audience can subscribe. In a word, we seek to make this service indispensable for Canadians concerned about their health.
143 MS YAFFE: Thanks, Barbara.
144 Finally, we come to the fourth service we have applied for, The Book Channel, a channel for the mind and a channel devoted entirely to the world of books.
145 This service has a special meaning to me for a personal reason. I started my professional career as a librarian -- everyone knows that now --
--- Laughter / Rires
146 MS YAFFE: -- and then became the Executive Director -- maybe more importantly -- of the Association of Canadian Publishers, which represents Canada's book publishers. For a number of years, I lived and breathed books and book publishing in Canada.
147 So when Jack Rabinovitch approached us to develop a book channel, of course I was hooked right from the start.
148 Now, a lot of people may have thought: Books? How could you make a popular television service out of a book channel? Who would be interested in authors and words?
149 Well, for those doubting Thomases, I recommend they drop by the SkyDome on October 24, as part of Toronto's International Authors Festival. There they are likely to find no less than 60,000 people listening as J.K. Rowling gives readings from her Harry Potter books.
150 As Rex Murphy recently put it, the audience "may surpass the most recent Monster Truck Rally and Wrestlemania 4 combined."
151 The fact is that Canada does have a secret love affair with books and authors. Our authors are world renowned, but until recently, this was rarely noticed in Canadian media.
152 Jack Rabinovitch, who recently received the Order of Canada, deserves some of the credit for bringing our literary authors to public attention. Seven years ago, he created the Giller Prize as a tribute to his late wife, an annual award of $25,000 to the best Canadian work of fiction in the English language.
153 I will now ask Jack to speak a bit about his concept for The Book Channel.
154 MR. RABINOVITCH: Thank you, Phyllis.
155 When I created the Giller Prize in 1993, it was to honour my late wife, Doris Giller. She was an extraordinary woman, a gifted editor, a dedicated book reviewer, and a woman who devoured novels and loved the written word.
156 Doris would have been delighted to know how the publishing industry in Canada has been galvanized by the prize named after her. Publicity from the Giller Prize has increases sales of Canadian hardcover books by over a million copies.
157 Now I think it is time for a book channel, a time to bring our authors and books to life through the medium of television.
158 The Book Channel will be fascinating, distinctive and popular. In programs like Writer's Voice, Honouring Authors, A writer's Tale, and Living by the Book, we will have author interviews, documentaries and film adaptations of the great novels.
159 Canadian programming naturally will be the foundation of the service starting at 55 per cent of the schedule at launch, and rising to 65 per cent by the end of the licence term.
160 Our channel will be a platform that will feature new kinds of writers and will attract new kinds of readers, both young and old.
161 We will also tie the service into an interactive Web site that will become Canada's book club.
162 This channel will not be a substitute for books, just as a performing arts channel can never be a substitute for a live theatrical performance. But what it can do is enhance our books and our appreciation of the treasures that are in the written word.
163 MS YAFFE: Thank you, Jack.
164 The Book Channel will be distinctive and interesting, but it will also be popular. It will not be limited to the literary giants. There is a remarkable diversity in the world of books reflecting a range of cultures, attitudes and experiences. The Book Channel will celebrate and explore this diversity, with programs on the new young writers, the new hot books on computers, and -- dare I suggest -- the Harlequin Romance.
165 Just as you now see the books selected by Oprah Winfrey in her popular daytime television show featured in your local bookstores, we hope you will see a new table with choices "Recommended by The Book Channel".
166 That takes us to the real question, which is: What will the service look like?
167 Here is a brief video to give you a look.
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168 MS YAFFE: Madam Chair and Members of the Commission, you have now been introduced to the four new services we propose: The Independent Film and Documentary Channel, Signature Television, Health Network Canada, and The Book Channel. These will be distinctive, affordable and attractive services, and unapologetically Canadian.
169 But they also share something else. They all are uniquely interesting to the people likely to be digital subscribers.
170 I will ask Jane Armstrong of Environics Research to tell you more on that point.
171 MS ARMSTRONG: Thank you, Phyllis.
172 Madam Chair, when Environics was first asked by Alliance Atlantis to assess the appeal of these four services, we did far more than carry out a standard poll. We also examined the social values database that we have been developing at Environics since the mid-1980s, a values database that we call the 3SC Social Values Monitor.
173 One of the findings of our 3SC Monitor is that many Canadians today are seeking out new points of view and new, perhaps untried, ways of navigating the complexity of the world in an effort to be self-reliant and to maximize their enjoyment of life.
174 Each of the services proposed by Alliance Atlantis will present programming that will offer new, often unconventional perspectives that may challenge viewers to see the world in a new light. This is exactly what many Canadians want.
175 But even more telling, we have concluded that the four services proposed by Alliance Atlantis are precisely the kinds of services that will appeal to people who are likely to adopt leading edge technologies and who are likely to buy digital television.
176 Canadians who are open to adopting new technologies -- which is actually more than half the population -- are virtually defined by their inclination to question and often reject traditional authorities and points of view, and by their need to control their destinies through innovation and exploration. They buy new technologies to help them meet these needs.
177 The same motivations will lead these technology adopters to have a special interest in services like a biography service, a health service, a book channel and an independent film channel.
178 These are perfect services for the digital age.
179 MR. MacMILLAN: Thank you, Jane.
180 Madam Chair and Commissioners. We thought long and hard about what kind of services would work best in a digital environment. We know that this new environment is going to be more challenging for services than has ever been the case before.
181 When you come to licensing services that will survive in that environment, we think you need to ask five hard questions.
182 The first question relates to wholesale rate. Has the service built its business plan around a rate that is as low as possible to enable it to be included in affordable, higher penetration digital packages?
183 Our average wholesale rate in packages is only 30 cents, markedly lower than the rate proposed by many others.
184 The second question is how much original Canadian programming is proposed. To succeed with digital service, we cannot focus on simply more of the same. We need services that will show programs that you can't see anywhere else.
185 In all of our services, we have significant commitments for original programming in each and every year, programs that will only be available on the new service, and there is a reason for that -- to drive digital box penetration.
186 A third question is how will your service be synergistic with existing services? To minimize risk, it is going to be important to be able to build on existing infrastructure.
187 In our case, we have purposely picked services that grow out of our existing services, services where we have unique experience in terms of programming access, and services where cross-promotion will work especially well. And we have taken a conservative approach to budgeting to ensure that we achieve our financial plans.
188 The fourth question. Will your services be integrated with interactive Web sites to increase the likelihood of success, and did you commit funding to interactivity?
189 In our case, we have developed a unique Web site strategy for each of our services --Canada's Book Club for the Book Channel, the Canadian Family Album for Signature, WebMDCanada for Health Network Canada and Indie Café.com for the Independent Film and Documentary Channel. All of our services will be compatible with interactive television and that will be a strong component of the digital future.
190 And fifth and finally, the most important question. Will this service be an attractive, distinctive and popular service, not just to the general population, but particularly to those that are digital box subscribers?
191 In our case, we have done the research to demonstrate that this is true for all four of our service.
192 So we have asked the hard questions and we have not shied away from addressing them in our applications.
193 There is a reason for that, Madam Chair and Commissioners. We are believers in the specialty programming business and we are in it for the long haul.
194 Coming out of this hearing, what we are seeking is to give Canadians a group of distinctive and attractive services that will be uniquely interesting and which will present an incredible value.
195 We think that the services that we have proposed do exactly that. They are services that will make Canada proud and which will truly launch our digital future.
196 That completes our presentation and we are eager to answer your questions.
197 THE CHAIRPERSON: Good morning, Mr. MacMillan, Ms Yaffe and your team.
198 Mr. MacMillan, you, your team and I will be the guinea pigs for this lengthy public process since we are the first on the agenda and since the procedure will be slightly altered from what we are all used to.
199 What I will do is strive in my question to explore your application in as orderly a fashion as possible, and I know already that you will give me answers in an orderly fashion -- or else!
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200 First, I will seek from you some comments on issues of a more general nature so that you can provide us with your corporate view on these issues without having to repeat the questions when examining each application specifically.
201 Next, I will have some questions of clarification or seeking explanation on your four individual applications, one at a time, and I will indicate clearly to you when I move from one to the other.
202 You will understand, of course, the regulatory risk for your as licensee if we do not treat each as discretely as possible, as you provide clarification and commitments. And conversely, of course, I invite you to correct me if I make any error in referring to your application. I am sure you will understand that having to sort out 88 of those can easily create this result.
203 So first I will start with where you ended which is the criteria that you feel are necessary for the Commission -- or that the Commission should focus on in licensing.
204 In its call for applications, the Commission indicated certain selection criteria. Some of them were obviously Canadian programming, both exhibition levels, amount of original production, Canadian programming expenditures, diversity, attractiveness for demand, the use of interactivity, and affordability and the reasonableness of the business plan.
205 You have ended your presentation by focusing on five of those, and I am curious to hear you about how the Commission should weigh the importance of these criteria in each case, whether it should be in the same fashion and whether it should give each the same importance in each genre, and if not, why not?
206 One of the reasons I am asking you this is although you made the general comments, if I look, for example, at exhibition levels, they range from 50 per cent in the first year -- 60 per cent in the first year to 55 per cent in the 7th year, to 70 per cent in the last year.
207 If I look at expenditure, they range in the first year from a low of 30 per cent to a high of 51 per cent. If I look at original production, that also has a range from 80 hours in one case to 172 in another.
208 So obviously in preparing your own applications you have assigned different values to different criteria and we would like to hear you on how this is arrived at and how the Commission should examine it in each case.
209 MS YAFFE: Thank you, Madam Chair. I would like to begin, and I will ask Michael to contribute when he feels it appropriate. We have four applications before you today as Category 1s, each of them handcrafted, each of them given a great deal of consideration in terms of how we see those ideas being packaged, being shaped for a successful Canadian television service.
210 We started to create these applications by asking ourselves these hard questions that Michael ended with by really asking ourselves some questions about the digital world, not just our own services. I think we concluded that the first and foremost criteria for all services has to be: Do we have an attractive concept. Do we have an idea that will make for a successful television service. Will people really want to watch this service.
211 Because in the digital world, as we have heard, packaging and marketing will all be very important, but the consumer will drive decisions like they have never driven them before.
212 So our first and foremost consideration is: Are we putting together an attractive looking service that Canadians have shown us, through our experience in the television business, they would want to watch, and of course pay for. I think that is a huge issue and I think it should be asked in every case. For us, of course, both the research that we did through Environics, but also our experience in the industry, gave us the four categories that we brought forward today.
213 The balancing of that criteria is perhaps the most important.
214 The second was: How can we make a service that really does offer diversity to the system and adds Canadian programming at a level that we think is significant.
215 As you stated in the opening remarks, the Commission set guidelines for the ultimate Canadian content level but not for the opening Canadian content level for Category 1s. From our point of view, all four of these services could sustain, but more importantly deserve to at least start at that 50 per cent Canadian content level. You will see us grow higher than that, of course, across each service.
216 But we also had to take into account the third, and maybe I think --
217 Let me go back to that. That Canadian content, for us, comes in several different ways. Of course, there is programming we will acquire from without the system, from the distributors and producers who exist today, that is already on the shelf or will be made for the service. But what we also felt was absolutely crucial in the digital world to entice people to buy the services was to offer them programming they can't find anywhere else. It may be self-evident, but obviously value will be judged by consumers if they feel they are getting something they couldn't find other ways.
218 So, for us, we decided that in each application, as you will see, we would make a commitment, which we would be happy to accept as a condition of licence, for original hours of Canadian programming each year, always rising throughout the term of the licence.
219 It is one thing to suggest that you might do some original programming. It is always nice to keep it as an asset in a bag of tricks. But what we said was: We commit to it. Because not only do we believe in the production of Canadian programming, we think it is a fundamental way that Canadians will judge whether or not they want these services. So we made that a criteria for all of our services.
220 Then we asked ourselves what else will people be looking at. I think what they will be looking at is: I want to leap into the future. I really want to get there, but I don't want to have to spend more money than I have ever thought was necessary for any entertainment.
221 So we took a very hard look at how do we make the channels affordable. That was another element that, for us, was absolutely crucial. We tried to keep that price as low as we possibly could.
222 Then we said: What will the last -- the special thing that makes these services so different and so unusual compared to analog services. And of course it is going to be that they will be layered with many different layers of interactive potential. Some of that can be realized very quickly; some of that will take longer to realize. But we will commit in each application, as we did, a significant amount of money to interactive development, right from day one.
223 Each of our applications, I think, has over $3 million devoted to interactive kinds of programming. That is a separate commitment, above and beyond our Canadian content commitments.
224 We looked at the world and we said: Those are the ways consumers are going to judge us.
225 At this point we would love to have you support us, as the Commission. We would like you to choose all four. But, at the end of the day, even if we do get all four licences, we have to sell them to consumers. So we have to make sure that when the circle is completed we have all of our ducks in a row.
226 Finally, we said: The way we will sell these services is with a significant marketing budget. So we agreed, much to our Vice-President of Marketing's delight, that each service would have approximately $1.5 million to launch, and continue to have that kind of robust marketing budget, so that as the boxes roll out we continue to be able to add new subscribers.
227 Maybe that is a long answer, but I think it is important to say that when you leave the beaten path of analog and walk into the digital world, you have to have a plan. I think what we did is come to that plan. These were our sort of -- the framework that we created these applications with.
228 We certainly believe, for instance, that a health network, if it isn't substantially Canadian from the very beginning, is not going to fulfil Canadians' needs for relevant information. But to balance that, we all know that a lung or a heart or a liver will probably be information that will be the same wherever you make television or watch television. So we took that into account.
229 In The Independent Film and Documentary Channel we hope we create, with our corporate commitment as well as our dollars, a new and improved Canadian film industry that will drive more films for that channel, eventually.
230 Book to us is so absolutely from the heart and soul of the Canadian industry -- so much of the talent we have here just goes unexplored -- that we wanted to commit a significant level there as well.
231 Signature -- I can't imagine a biography-type service in this country that doesn't say: Clearly, Canadians have to lead the way in that service. Clearly, it has to offer us opportunities to learn about each other, because lives are what makes up a country; individuals who tell our stories. So, for us, that was obvious.
232 I hope that hasn't been too long an answer.
234 MR. MacMILLAN: If I may, I just wanted to add one observation to this. I think that as digital boxes roll out, and perhaps even with as much impact or more impact as broadband becomes, soon or eventually, ubiquitous, and the Internet delivers an even greater selection or a greater choice, it is going to be very hard for viewers to figure out what to watch, what to choose from from amongst all of those offerings.
235 To us it seems that very clearly defined, vertically themed with the channels stand the best chance to be distinctive and to be different. And we think that our four channels have those vertical themes.
236 But if you are going to be distinctive -- two very important ways. You need original programming. That is one of the most important aspects to being new and distinctive and different. We can't prove that Bruce Springsteen is still correct 10 or 15 years on with so many channels and nothing on.
237 Likewise, an interactive component is also very critical in making that vertically themed channel distinctive.
238 That is why those two are on the top of our chart.
239 THE CHAIRPERSON: So, obviously, there are variations in the criteria, depending on the genre and the availability of programming, et cetera.
240 Your second most important criteria was that it offered a diverse offering, and this is, of course, central to the framework for the Category 1 application, since the Commission has said that it would license one per genre, which, of course, leads us to focus on diversity in a very significant way.
241 But it also leads to what appears to be a bit of a contradiction, that in many cases the point is made that the ability of the parent company, in some cases due to the fact that they themselves already have services they control, will help their viability, their affordability and their ability to contribute to Canadian content.
242 I think you are one of the applicants who has spoken, for example, of a nesting concept. If I recall, in your health application, in your supplementary brief at page 406 -- and I don't think you need to refer to it, but perhaps I do. I believe you spoke of nesting programming on Showcase, and then moving it to HGTV. Correct?
243 MS YAFFE: Well, something like that.
244 THE CHAIRPERSON: And then the suggestion that programming could be nested on the Life Channel and moved to your proposed Health Channel.
245 I think that's a fair rendition of what you said.
246 MS YAFFE: Yes.
247 THE CHAIRPERSON: That concept, of course, is a bit contradictory to diversity and original programming, et cetera. So I'm curious to hear from you, as a licensee -- you are already a licensee, and you have some applications before us -- as to the significance that the Commission should give to that in assessing diversity and, therefore, this famous concept of direct or indirect competition to existing channels or to other proposals. And I think that you have suggested, as a company, that that be measured by reference to the question whether a significant part of the programming of the proposed service forms part of the core mandate of an existing service.
248 Would that be a fair rendition?
249 MS YAFFE: Yes.
250 THE CHAIRPERSON: Do you think the Commission should use a percentage -- many applicants -- I don't recall that you have done that, specifically, as some others have gone through -- although you have, in some cases -- the offering of existing channels and a percentage of programs that you feel are competitive, et cetera.
251 So, my question has two prongs, obviously.
252 One is: How do you do it?
253 And, secondly: Should we take into consideration the advantages of whether it's nesting or extending services or leveraging what you already have because you are a licensee?
254 MS YAFFE: How we did it is one of the ways we got to the nesting concept. It certainly -- nesting is not a new term, for the digital era. It was a term that gave us -- we had some terrific experience with, in our company, when Life Network, which is now six years old, was originally actually conceived as a combination of services that would nest and give rise to new services as they matured and grew. And we have seen the success of Home and Garden Television, which was nested on Life Network, both literally and in spirit, and we hope to see that kind of success with Food Network Canada, in October.
255 Health Network, we would argue, is exactly the same kind of opportunity that Life Network gives rise to because we have always done, and continue to do, some very successful health programming on Life Network.
256 So it's a question for us -- you know, the world isn't as straightforward as a simple line. So we appreciate that there is this complex relationship. Services can give birth to other services. But what we think they have done by nesting programming there is nurture both the kinds of programming that we see becoming very popular on these services but also nurture demand.
257 For instance -- and, you know, one of the more outstanding moments, I think, in my career, is the moment we started Showcase, where I always describe it as: We turned on a tap that must have been turned off for many, many years, and that was the availability of independent film from around the world. Because the very first night Showcase went on the air, and every night since, a very loyal growing audience has said, "These are exactly the kinds of films I'd love to see. I've never seen them on television" -- and you know, Laura receives love letters from across the country with people saying, "Thank you for bringing me this opportunity to see something I couldn't see before". And I think that is what we have done with nesting. We have nurtured a genre which we now think has the ability to take off and fly, I guess. And so, for us, there is that relationship. You do build an audience. You do build your experience. And when you have that sufficient critical mass of both those and the opportunity to come forward today, we think all of these channels have really, in a way, been nested on our other services.
258 That isn't to say that we don't believe they will add something diverse and unfulfilled to the broadcasting system. We do believe that there will be very little significant overlap service to service as they grow.
259 For instance, Home and Garden has really taken over the gardening part of our schedule, the design part of our schedule and even the construction part of the schedule at Life Network, and Life Network has gone a different way -- happily, successful for both services -- and that is offering diversity.
260 We don't really think there would ever be more than about 10 per cent of our schedules that would actually duplicate themselves service to service, at any one time. There may be opportunities to share programming as the services grow -- and, of course, you, in your call, have suggested that repurpose programming, shared programming, will give the services an opportunity to survive in what might be dangerous waters as we begin.
261 So, we see it as both a corporate advantage -- it gives us an ability to make sure the services are strong, right from the start, balanced by a commitment for original programming, which will make new and exciting things happen on each of these channels -- but, also, we think what we have is sort of real-life experience that tells us we have genres that people really want to watch.
262 We do not believe -- and we have never suggested in any of our written material to you earlier -- that there is a simple answer to this question when you get to make these decisions. We don't want to be in your shoes, actually, this time.
263 THE CHAIRPERSON: You will be dragged in whether you like it or not.
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264 MS YAFFE: Well, we are sort of up to our ankles.
265 THE CHAIRPERSON: I warn you my feet are much longer than you would believe.
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266 MS YAFFE: It is a complicated issue, but, for us, we try to look at it and ask ourselves, "How does one deal with this competitive issue? How would -- is there a certain percentage? Does the world unfold that easily?" And, no, it doesn't, not in the real-life situation of keeping whole television channels on the air.
267 We did try to define, for instance, our issue around the Showcase comparison to independent film, and we generalized with some existing principles that I think you have mentioned. The one is a significant part of its programming, programming that forms the core mandate of an existing service; that is, that you would understand the service is representing. For us, for instance, independent film on Showcase is about 33 per cent of its prime time schedule -- a pretty significant amount. More importantly even than that, it's about 50 per cent of our audience. More important than that, maybe even, is that every time we go out to talk to the audience -- and we do it regularly, in many different ways -- they tell us, "Oh, yes, Showcase. It's that service that shows those great films that I could never see anywhere". For us, that's how they describe the service; that's what it means to them. And for us, that's an important element, in terms of saying it would be directly competitive, in our view, for someone to take what has become a fundamental part of Showcase outside of our group.
268 Of course, you know, we realize others might say, "Well, that's awfully self-serving of you fellows" and, of course, I have trouble defending it totally, but I would say --
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269 MS YAFFE: I'm sure everyone else will make that point, later, in their services.
270 -- but I would say that that's the issue. And you have asked us not to come up with services that will directly compete and harm existing services. And for us, the way to avoid that is for us, obviously, to be carefully controlling both services so we are building different audiences, offering different programming, creating that diversity but growing from what have been created, nurtured, tested strengths.
271 THE CHAIRPERSON: Although we will probably revisit this issue when we look at the applications individually, you have given us some cues as to how to apply your test and I want to discuss with you whether I'm right in concluding that -- suppose we were to arrive at a percentage or a way of calculating whether there's competitiveness or not. Am I right in gathering from your comments, and particularly some in two other applications, that the test, perhaps, should be applied more leniently if we are dealing with a sub-genre or an extension of a service proposed by the licensee of the parent genre?
272 For example, if I look at your film "A Supplementary Brief", at page 38, by using the page on the top -- do you have that pagination, as well? Because there's pagination at the bottom. -- that when you are discussing which ones of the possibly, I think as many as eight applications could be competitive, not only among themselves in the new Category 1 but with existing services -- you say that Showcase, as you indicated this morning, does have quite a bit of independent films as well.
273 But if I read from that middle paragraph on page 388, you say:
"...we don't consider our service to be directly competitive with any existing ... pay or specialty services except, in part, for Showcase. However, because the channel will be commonly owned with Showcase, and because the channel would include a significant focus on documentaries that Showcase does not ... we do not consider the channel to be directly competitive with Showcase."
274 And in the case of Signature, again, in your supplementary brief at page 509 you say, in the middle paragraph again:
"By having both History Television and Signature Television under common ownership and control, it will be possible to minimize overlap and maximize differentiation between the two services."
275 So I gather from that that, in your view, when we look at what will be competitive, when we look at the list of film and documentaries or documentary services, one of the criteria should be that if it is going to compete with your own we shouldn't get two exercised.
276 MS YAFFE: In fact, that is what we said in both those cases, and that's what we believe.
277 I mean, the example we would have is that the application we did for Home and Garden exactly focused on that and suggested that there were real inherent strengths in sharing the expertise between a channel like Life Network that had already grown that expertise -- and transplanting it here garden analogies go wild, but anyway -- to Home and Garden, and that has been a very successful format. We have managed to grow both services. Different programs exist on both. We do very well to avoid the overlap issue.
278 I think our argument, and I'm sure others would agree, is there is an advantage to a corporate ownership structure that allows you to maximize the diversity but also take advantage of the strengths of the skills you have. That's why we have the talent we have with us today.
279 THE CHAIRPERSON: When we have this advantage inherent in licensing, for example, if you were to be licensed for -- which ones did the newspaper give you already?
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280 THE CHAIRPERSON: Signature, I believe.
281 MS YAFFE: Yes.
282 THE CHAIRPERSON: Poor, Mr. MacMillan.
283 THE CHAIRPERSON: When that is the case, should we be more demanding in other areas as a balance? Should we expect more Canadian content, more original programming?
284 MS YAFFE: I mean, I think the commitments you would ask for were that the service really met all the tasks. I mean, I guess I would say there is that, the issue of competitiveness, and directly competitive from a service that exists are important.
285 You also, I think, in our view, have to meet all the tests of high quality Canadian and original programming, all of those kinds of things, I think they all have to be met.
286 THE CHAIRPERSON: But the tests are not that precise in some cases.
287 MS YAFFE: Right.
288 THE CHAIRPERSON: For example, as I pointed out earlier, the number of hours of original programming varies quite a bit in your proposals. There is some difference in exhibition levels, although they are already at 50 per cent, which is what we aim for, the seven tiers, so you would say you have met the test there. But the interesting thing is there is a variance which you earlier had tried to explain how one goes about it.
289 But would you be surprised if the Commission, when there is this inherent corporate advantage, was perhaps more demanding in the amount of original programming, the commitments to the independent sector, et cetera, to balance the fact that you have the corporate strength of the window of the extension, the repurposing?
290 MR. MacMILLAN: Well, I certainly think that there shouldn't be any lightening of obligations or any expectation that one shouldn't do at least the same that another applicant or another channel might be presenting. Part of that comment is based on the fact that I hope that the channels licensed and launched will each be chosen on their own separate merits, separate from each other.
291 THE CHAIRPERSON: So is...
292 MR. MacMILLAN: Yes, but I mean as opposed to a corporate strategy or a corporate philosophy dealing with Alliance Atlantis and each of the other larger applicants who have applied for a number of channels and have a number of existing channels. Our applications are terrific but, you know, so are most of the others as well. I think that it has to be based on the merits of the application and not a corporate solution.
293 That said, we think that if a channel is a sister channel to an existing one, you're right, there are additional advantages, there are more tools at the disposal of the operator -- and we think we have done some of those things. That's, for example, part of the thinking behind our $140 million commitment for The Independent Film Channel, for example. That's part of the reason why we can make significant improvements as we have on health, because of its relation, albeit a small overlap with Life Network. But, yes, I think you're quite right.
294 THE CHAIRPERSON: So it's a balancing, in your view, of diversity which includes this issue of competitiveness to serve the consumer with additional attractive programming, but affordability and the ability to produce and to exhibit Canadian content and expand on it would obviously be improved where there is an apparent sub-genre connection.
295 Now, another issue of general significance is the issue of the implementation of service. As an experienced licensee you know that usually the Commission establishes -- a time frame within which to service has to be implemented or else an extension has to be requested, which suggests that the Commission wants implementation within a certain time frame.
296 The underlying reasons, of course, to support the deployment of digital equipment and of digital technology, is to offer more appealing and more numerous services to those who choose to purchase or rent digital equipment. Do you think, then, that the need to prevent licensees from occupying a genre and not implementing to actually further that objective requires a reasonable period to implement?
297 I think all your launches in all four cases is September 2001, but do you foresee a need for the Commission to continue this requirement for Category 1 services?
298 MS YAFFE: Yes. You know, the industry at large suggested that September 2001 was a good date, and we certainly think that we could meet that date with any of the services we have before you today. We don't believe that sort of hoarding a category and not coming to the table with a service would be an appropriate -- would serve any benefit to the Canadian system.
299 So, yes, we would suggest that a must-be-implemented period be part of every licence as Category 1.
300 MR. MacMILLAN: I would say it's part of the obligation of this process. You know, we are trying to drive digital penetration and if you don't build it, for sure nobody is going to bother to come. We want cable and DTH to get out there and install boxes and sell digital, but it's up to us to be there with them in the front line marketing and selling and spending. Absolutely, there should be a definite commitment, a tight time frame, to make sure that these things are launched properly and swiftly.
301 THE CHAIRPERSON: Although I have already indicated that we wouldn't speak about Category 2 services, I will break the rule right now, but only I can do that.
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302 THE CHAIRPERSON: Would you think that considering the framework we have suggested or established -- not suggested, established for Category 2 services, that the same need applies to insist on an implementation schedule?
303 MR. MacMILLAN: I don't think the same need applies. There should be, I think, much greater leeway given for the obvious reasons: carriage is not assured, how they are packaged, or whatever ways aren't known. So I would think that a much more flexible time frame would be appropriate.
304 THE CHAIRPERSON: Yes. The reason I ask, of course, is it's easier to understand your approach. If you tell us why it's not necessary in Category 2, it illuminates a bit your reason for why you should do it in Category 1.
305 Now, independent production. You are, of course, a very large production company and in some cases you have teamed with another Canadian producer and this raises again the approach that remains or not appropriate to this vertical integration between programming undertaking and a production company and you yourself speak, I think, in film and documentaries at 386 of your supplementary brief of arm's length producers and again this morning I think in your presentation you spoke of non-affiliated Canadian companies and made what I see as an additional or clearer commitment about the $20 million.
306 It raises the question of how you define arm's length, how you define a non-affiliated production company and the last time I think I saw you -- I don't know why you are laughing Ms Yaffe -- was in Vancouver where in the Food Network a commitment was accepted and a requirement made that 75 per cent minimum of Canadian programs broadcast be produced by independent production companies in which Alliance Atlantis owns directly or indirectly less than 30 per cent equity.
307 Is that an appropriate test for arm's length or non-affiliated in this context?
308 MS YAFFE: Yes, we believe that it continues to be appropriate in this context as well as in the analog route.
309 THE CHAIRPERSON: What would be your response if somebody said this wasn't good enough?
310 MS YAFFE: I guess I would like to know why. I would find it interesting because I believe that we have spent some time thinking about that definition, and we find it to be appropriate. We think we can live with it there. We certainly intend to and we find it totally appropriate in this context as well.
311 I guess we would be surprised to see that bar raised at this time given that this is, as you will hear over and over again, a much more challenging environment than the analog one. So to raise that bar would seem to us to be odd at this time.
312 THE CHAIRPERSON: You mean in the digital environment?
313 MS YAFFE: Right.
314 THE CHAIRPERSON: Can you explain why? You are not suggesting it should be lower than 30 per cent.
315 MS YAFFE: No, I am not.
316 THE CHAIRPERSON: As a test.
317 MS YAFFE: No, I think 30 per cent is fine.
318 THE CHAIRPERSON: And I think there has been more demanding requirements placed in the past or offered. I don't have them at hand now, but I don't think that that 70 per cent was the most stringent requirement. You feel that this should be the -- that the bar should not be higher than that test.
319 MR. MacMILLAN: I think we -- actually I am not sure why you decided the 29.9, but the reason that we thought it was a reasonable idea at the time was that under 30 per cent it is difficult to exercise control. I mean, 33 per cent or more gives the company certain rights under the Canadian Business Corporations Act which a 29.9 threshold doesn't achieve -- 29.9 also has certain similarities in other issues that you are dealing with at the Commission in terms of the percentage ownership.
320 It really was not so much the exact percentage, but whether or not control was exercises, legally or practically and control could be exercised at under 50 per cent if by contract the producer had guaranteed rights of access to the broadcast outlet.
321 The whole issue here isn't that we ought to care who the creator of the programs are -- we should encourage all Canadians to create great Canadian programming -- but whether or not the producer, in other words the seller, and the licensor or the buyer are really connected and the seller has a privileged right of contract to make that access.
322 So we thought, and still believe, that 29.9 does that. It is not inconsistent with anything else within the Commission that we are aware of and certainly it is consistent with the CBCA threshold.
323 THE CHAIRPERSON: Now, I forget exactly how it was drafted in. Was voting equity in for that one?
324 MS BROWN: I believe it was voting equity.
325 THE CHAIRPERSON: And you are not suggesting, Mr. MacMillan, that there is a need for an additional test of control. You feel that below 30 per cent would be quite unusual to exercise control.
326 MR. MacMILLAN: In our experience, absolutely.
327 THE CHAIRPERSON: Now, in the case of your partner, Associated Producers Inc., the test would be applied as well?
328 MR. MacMILLAN: No. In the case of Associated Producers because they would be a direct shareholder in the channel, they would fall under the same category as Alliance Atlantis. They would be subject to the same restrictions.
329 THE CHAIRPERSON: I am not sure I understand. When we calculate then whether --
330 MR. MacMILLAN: They would be considered non-arm's length.
331 THE CHAIRPERSON: Non-arm's length.
332 MR. MacMILLAN: From the channel.
333 THE CHAIRPERSON: And if it had itself companies that produce, we would look at that as well.
334 MR. MacMILLAN: Exactly.
335 THE CHAIRPERSON: Okay. So the test would be applicable to your partner who is itself a producer.
336 MR. MacMILLAN: Exactly.
337 THE CHAIRPERSON: Okay.
338 MR. MacMILLAN: So anything produced by AP would be as if it were an Alliance Atlantis production even though we are --
339 THE CHAIRPERSON: I meant or any company affiliated to AP.
340 MR. MacMILLAN: Yes, indeed.
341 THE CHAIRPERSON: That is what I meant.
342 MR. MacMILLAN: It's the same test.
343 THE CHAIRPERSON: Because otherwise you could make it flow.
344 I will go over another section and then I will give you a break.
345 Exhibition of -- we prefer giving breaks to panels than to ourselves. It looks more elegant.
--- Laughter / Rires
346 Exhibition of Canadian content levels. Correct me if I am wrong, but I believe by looking at all four of your applications that you propose of levels of Canadian exhibition which increase by reference to the applicant meeting certain projected penetration levels.
347 MS YAFFE: We propose as a commitment of licence a growing percentage of Canadian exhibition, as we have outlined in the application. We have explained in our business plan how one would describe that level -- that growth or reflected --
348 THE CHAIRPERSON: To acquire the increase.
349 MS YAFFE: No, but --
350 THE CHAIRPERSON: My question is quite simple. It is: If you -- well let's take an example, let's say, of your first one although this is a general question.
351 If you say that you will have 50 per cent Canadian content level in both day and evening in year one in film and documentaries, for example, 50 in year two, 50 in year three and in year four 53 per cent dependent on a certain level of subscribership having been reached and the same principle is present, I believe, in all four of your applications in a variety of ways. Sometimes it kicks in year four, or whatever.
352 My question is simply when that is the case then, the 50 would continue in year four if the penetration hadn't been reached.
353 MS YAFFE: No, I think a better way to look at it is to look at the actual application form itself, Item 7.4 Canadian content, and I think the way to understand our condition is to look at Item C in Item 7.4 of the application which says:
"The applicant undertakes by condition of licence to broadcast the following minimum levels of Canadian content".
354 And then we have done the broadcast day between six and midnight with actual percentages. That we would say is our condition of licence that we are willing to accept.
355 THE CHAIRPERSON: What I am trying to have you clarify is that if the penetration level hasn't been reached in year four then you don't have to go to 53 per cent.
356 MS YAFFE: Yes.
357 THE CHAIRPERSON: I want you to clarify for us whether in each case then in year four you would do what you were doing in year 3.
358 MS YAFFE: No. We would live up to Item 7.4, Item C which we would believe, or have always assumed and built our business plan based on that level of Canadian content.
359 So in year one it would be the first number, in year two it would be the second number and going through the seven years we would live up to and transfer to the higher level of Canadian content automatically as the calendar unfolded through this Item 7.4(c).
360 THE CHAIRPERSON: Yes. I think I have complicated matters. All I want to know is if the penetration level doesn't kick in --
361 MS YAFFE: That's right.
362 THE CHAIRPERSON: -- it is the previous year, then, that remains your commitment.
363 MS YAFFE: No.
364 MR. MacMILLAN: No. These obligations and commitments are triggered by calendar dates, not by penetration. And they will stand regardless of penetration.
365 THE CHAIRPERSON: You will extend regardless.
366 MR. MacMILLAN: Yes.
367 THE CHAIRPERSON: It is good that you clarified that, because your applications -- whether I am going to find this quickly -- as you read them, appear to say "conditional upon". They use those words.
368 So that is not the case, then.
369 MS YAFFE: No.
370 THE CHAIRPERSON: Whatever is there is what is going to happen.
371 MS YAFFE: Yes.
372 THE CHAIRPERSON: Here is an example, I believe, in film and documentaries. No. In any event, that is the commitment in all four of them?
373 MS YAFFE: Yes, all four.
374 THE CHAIRPERSON: And it is not conditional upon changing ...
375 I don't have a problem with the "conditional"; all I wanted to clarify is, if it were conditional on the penetration level, is it the 50 per cent, if it is the previous year, that would draw --
376 MS YAFFE: Right.
377 THE CHAIRPERSON: So, then, whatever is in that 7.4 is the commitment regardless --
378 MS YAFFE: Yes.
379 THE CHAIRPERSON: I will give you a break while I try to find that "conditional". I may have misled you or misinformed people.
380 Thank you.
381 MS YAFFE: Thank you.
382 THE CHAIRPERSON: We will return in 15 minutes. It is now 20 to 11. That makes it 5 to 11.
383 I would like to point out to people that CPAC is doing a gavel-to-gavel televised program of this hearing, so we will be following the timeframes we were given quite closely to make it as intelligent a program as possible.
--- Upon recessing at 1045 / Suspension à 1045
--- Upon resuming at 1105 / Reprise à 1105
384 THE CHAIRPERSON: Mr. MacMillan, it would appear that the word "conditional" was my own deduction, or construction, but I do want to clarify this on the record.
385 I have before me your 7.4(c), in the first part of your licence, and that is true throughout. Each application has a differing one, but has commitments. However, I think I have found one in each application -- or at least in three of them -- a comment that resembles this in each case.
386 If you look at your film and documentary supplementary brief at page 347, if you take the top pagination, the second-last paragraph states:
The Independent Film and Documentary Channel will broadcast at least 50 per cent Canadian content in the first broadcast year, rising to 53 in the year after 2 million subscribers have been reached, then to 55 per cent at 2.5 million subscribers, and to 60 at 3 million." (As read)
387 From that I deducted that you started at 50 and, conditional upon reaching certain subscribers, because those projections can't be exact, you would or would not increase.
388 What I heard you say this morning is that 7.4(c) is it, regardless of the penetration in years 1, 2, 3, or whatever year.
389 MS YAFFE: Yes.
390 THE CHAIRPERSON: How do you interpret that paragraph?
391 MS YAFFE: I think it was a description of how we came to the business plan. Those were ways of describing what we thought the universe would be like when we raised our Canadian content. And it is true that you will see those numbers reflected in our subscriber base for those years.
392 So it is a description of the universe, as we hoped it would unfold, but where we made our commitment, where we said what our condition of licence we would accept is, is 7.4.
393 THE CHAIRPERSON: Yes. But it is of great interest to us, of course, to see whether the commitment has an asterisk to it --
394 MS YAFFE: No, it --
395 THE CHAIRPERSON: -- via some other part of the application, which I think one, in my defence, could deduct was the case.
396 MS YAFFE: Yes.
397 THE CHAIRPERSON: But it is not.
398 MS YAFFE: Right.
399 THE CHAIRPERSON: Canadian programming expenditures which have ended up being, in some cases, at the deficiency level, in some cases, earlier are a problem or a concern for a number of applicants. Am I correct that you have made commitment levels in all of your applications and you are willing to accept a condition of licence to that effect under the formula usually applied by the Commission?
400 MS MIDDLETON: Yes, that's correct.
401 THE CHAIRPERSON: Yes. Without discussing, in this case, the particular number that is specific to an application.
402 Now, when you made that commitment, which is framed often as "We will accept as a condition of licence this percentage, calculated on the basis of revenues", et cetera -- you are familiar with the formula -- were you also accepting that the first year commitment would be a condition of licence, as is, which is also part of the formula? Or, were you thinking of some other --
403 It is not clear. You say that you are willing to accept a percentage based on the previous year's revenue, but I want you to tell me whether it involves, as well, accepting the first year expenditures as they are proposed.
404 MS YAFFE: I will ask Rita Middleton to respond to that.
405 MS MIDDLETON: The calculation used included the first year expenditures. But we appreciate that in previous experience the calculation has excluded a commitment -- an absolute commitment -- for the first year, and the percentage begins in the second year of licence.
406 THE CHAIRPERSON: And without an imposition of the exact numbers suggested for the first year, which -- and I may be corrected -- I believe the formula involves.
407 MS YAFFE: Our understanding of the formula is that the first year is not -- although it is the number we use -- or could be the number we use for the calculation of the second year, it is not a fixed number.
408 THE CHAIRPERSON: It is not a fixed amount, so there is no condition of licence applicable to Canadian expenditures in the first year, in your view.
409 MS YAFFE: Right.
410 THE CHAIRPERSON: In any event, that is what you would want.
411 MS YAFFE: I think in this environment it makes a great deal of sense. It has been the case in the analog world. It has always, of course, been very difficult to start a new television service without spending a great deal of money on Canadian content when one starts at either 50 or a higher percentage of Canadian programming. Our experience to date is that we have overspent any percentage in the first year, just by --
412 THE CHAIRPERSON: Simply to be able to program something.
413 MS YAFFE: Right.
414 THE CHAIRPERSON: Now, you suggest in Book and Health -- at least in the Book and the Health Network -- at least in those two -- in response to a clarification question, an alternative way of calculating it, for the reasons we need not go into, but that are fairly readily understood: about the need to spend a lot in the first year, and then, when you apply the percentage, it ends up being higher because you didn't consider those first years. You suggest that perhaps an alternative way would be to take the average of years 4 to 7 instead and apply them to the entire licence term.
415 In other words, if I understand it, you would not take into consideration years 1, 2 and 3 in arriving at that percentage.
416 MS YAFFE: I will ask Rita to answer that.
417 MS MIDDLETON: Yes, that is correct.
418 THE CHAIRPERSON: In that case, then, you would apply that percentage to years 1, 2 and 3? Or only 2 and 3?
419 What would you do with 1, 2 and 3 after you have established a percentage that only takes into consideration the revenues, I guess, of 4, 5, 6 and 7?
420 MS MIDDLETON: I think, as Phyllis has indicated, what you will notice in our business plan is that in the initial years of licence the spending as a percentage of previous years' revenue is much more than in the latter years.
421 THE CHAIRPERSON: Yes, I understand that, but you are talking as an accountant or a CFO. I am talking as a regulator here.
422 What happens to 1, 2 and 3? Are you bound by that?
423 MS MIDDLETON: Yes, absolutely.
424 THE CHAIRPERSON: If the result of taking the revenues of 4 to 7 is 40 per cent, in year 2 you would apply 40 per cent to the revenues of the previous year.
425 MS MIDDLETON: Absolutely.
426 THE CHAIRPERSON: And what happens in year 1? Is it the same answer as Ms Yaffe provided?
427 MS MIDDLETON: Yes.
428 THE CHAIRPERSON: You just consider that the licensee will spend a large amount, probably more than in the following years --
429 MS MIDDLETON: Yes.
430 THE CHAIRPERSON: -- just by virtue of implementing the service.
431 I guess you must have looked at all of the competitors' applications, like I have, and hopefully are less confused.
432 You must have noted that there are some other alternatives suggested.
433 One alternative that one could think of is what if the calculation of the percentage by the Commission was according to the formula but, then, you would give the flexibility by applying it to the entire term rather than year by year. In other words, over seven years. I guess this suggestion would be that over seven years, then, you would spend 40 per cent of all the regulated revenues, calculated as per the formula that exists now.
434 MS. MIDDLETON: We accept that that would be reasonable.
435 THE CHAIRPERSON: And using your suggestion of 4 to 7, do you see any reason why that's a better idea than the one I have just put forward?
436 MS MIDDLETON: No, I do not.
437 THE CHAIRPERSON: So the idea is flexibility.
438 You understand, of course, that your 4 to 7 would be lower than if I calculated it according to our formula. It would just be the application that would be flexible. I think. I'm not an accountant.
439 MS MIDDLETON: I think, in the case of health, for example, where we have agreed to a 51 per cent condition of licence, if you take the average over the term it is also 51 per cent. So I think your last --
440 THE CHAIRPERSON: But if you take 4 to 7, it's not.
441 MS MIDDLETON: No, it's not.
442 THE CHAIRPERSON: It's lower.
443 MS MIDDLETON: Yes.
444 THE CHAIRPERSON: Yes. But you would live with either?
445 MS MIDDLETON: Yes.
446 THE CHAIRPERSON: So you would live with any of those three, even the one that the Commission has applied traditionally?
447 MS MIDDLETON: Yes, we would.
448 THE CHAIRPERSON: Because you have committed -- I think I found it in all your applications -- to a certain percentage. I think there is one application where we will clarify our number was lower than yours, so whether we can give you a break...
--- Laughter / Rires
449 THE CHAIRPERSON: Interactivity. I'm not an accountant and I'm not a technophile either, so I would like you to explain to me whether other applications have the same proposal with regard to interactivity. And the distinction I want to make is between an ordinary -- well, ordinary, or traditional; we're already talking about traditional Web sites -- but a Web site on one's computer, as opposed to the use of the set-box making the television itself interactive, I would like to discuss it at the beginning, you know, at that simplistic level, and I would like to know whether your applications all propose the same thing or whether -- for example, it seemed to me that in The Book Channel it was more closely interactivity via the television set. Is that the case? Or is it the same in all four?
450 And I note that your expenditures and expected revenues are similar in each case, in the four cases, but not necessarily identical.
451 So are you looking at a Web site or actual interactivity via the set-top box? And in what time frame?
452 MS YAFFE: I'm sure this will be a conversation you will have with many people over the next few weeks but, for us, it is a fundamental point of departure analog to digital, is this opportunity to bring more to television to truly make it a different kind of experience, and we think it's one of the reasons consumers will go to the digital world.
453 Different set-top boxes, whether they be satellite or cable or differently-abled boxes, will offer viewers different abilities to interact with the behind-the-scenes content and we can only -- what we would like to do is bring as much to each channel as possible to make it interactive within the abilities of the systems that people use to receive that information.
454 Right now, if you watch "Who Wants to be a Millionaire?", you will often notice a little icon show up on the screen that allows you to play along at home. That already is there in an analog world, or in a television show that's generally distributed through analog and allows people to play along. I think that is very much the front line of what will become interactivity.
455 And, clearly, there are opportunities to do that kind of programming with each of our applications.
456 What we have suggested as the use of the funds which are generally in the same ball park for each of our services is to create the behind-the-scenes information that would become the basis of interactive television. And we would hope to be able to deliver them, obviously, through the Web -- which we could do tomorrow if we wished -- but, more importantly, through set-top boxes as they become able to handle more and more of these higher levels of interactivity.
457 We believe very, very strongly in this part of the business.
458 We did not suggest that there were endless amounts of revenue to be derived from it because we thought we would be optimistic, but cautious, in terms of that side of the revenue scale.
459 But, to give you a sense of what we think this could do, I would like to ask my colleagues to jump in here because I think you are right, it is the future and it does offer a lot more than television as we know it today, so -- particularly outside The Book Channel.
460 Let me ask Norm Bolen to talk to you a little bit about what we think is a unique property of Signature Family Album, and I am going to ask Barbara Jones, who is our new on-line expert to help us explain to you how that could come to both the Web and interactive television.
461 THE CHAIRPERSON: Before we proceed with that, I notice that you say "could come in in the future". Our interest, of course, is examining just when this will happen, if it will happen; is it an integral part of your proposal. And I do have some questions which may be unnecessary once you have explained. So we want to have a better feeling as to when this happens, that could happen.
462 MS YAFFE: I think our understanding of this world -- and I'll ask Harvey Rogers if he wants to help me here -- is that there are some boxes, the satellite services that are delivered to Canadians today do allow for some of this interactivity today, and that when we have it available, we will be able to offer it through satellite, but that the set-top boxes generally available through cable today do not have the sophisticated capacity to offer this kind of interactivity yet.
463 Of course, we are talking about 2001 when these services might launch and we are optimistic that a second level of digital box would be out there that would offer this ability. But, Harvey, would you like to add something?
464 MR. ROGERS: As Phyllis said, there are two scenarios running parallel.
465 Scenario 1 is the roll out of boxes that are existing today -- and let's call those Level 1 -- mostly a lean-in kind of technology, PC-based, and it will drive you from the set-top to the Web for information.
466 The Level 2 is the lean-back, more the television experience, where you have enhanced television and you will be able to move your pictures around, put data onto the screen and watch data and pictures at the same time.
467 The set-top boxes are not presently there. That is the next level of roll-out. Altogether, the DTH side is a little more ahead of the cable because they are not dependent on the cable modems for a return path; they will be more in the activity of the lean-back enhanced television side of things.
468 We, as a company, are very interested in being somewhat of the pioneers in this area and will work with both the cable and the DTH to develop programming to become very interactive on both sides.
469 I would also like to ask Barbara to illuminate some of the activities on the push-forward.
470 MS JONES: Well, we have seen, in studies in the United States, that the penetration, at a household basis, is about 1 per cent currently and on-line is made of not just what you experience on your PC at home but also through your telephone, as well as your personal devices, and certainly through interactive television.
471 So if you look at that whole share of on-line experience, currently interactive television, in the form that Harvey has described it, is only at 1 per cent currently.
472 Over the next five years, that number should increase to about 40 per cent of penetration and 16 per cent of the total on-line share of use.
473 So we are certainly looking closely at that.
474 And, for us, interactive television and, certainly, the $12 million that is reflected in our application is about interactive television programming; it is not any funds that have been dedicated toward building Web sites. So, for us --
475 THE CHAIRPERSON: That is 12 million if you get four licences, is it?
476 MS JONES: It is 12, but, actually, over $3 million per licence dedicated to creating interactive television programming.
477 Interactive television is about viewers participating with programming so that, as Harvey described, you are sitting back in the comfort of your own home and moving through the menus on your screen, very similarly to how you use your remote currently.
478 As Michael has described, we are very much about vertically-themed communities and we see an integration occurring through all of our media properties. If it's The Book Channel, then the book interactive television product is going to bring authors and readers together in a way to be able to interact on the screen and bring their works to the screen and, certainly, be criticized via the screen as to what their works might be.
479 With the Health Channel, with support from our good partners at WebMD who have spent more than a billion dollars creating their WebMD product, we are going to be able to tap into that across all of our on-line platforms and create some superb television programming.
480 In the film and documentary genre, we are going to be again leveraging that incredible community that we have currently and we have discovered through the Showcase Review, and provide, through interaction not just video clips and interviews but a place where that community can come together and get information on casting calls, on how to get funding, and certainly the traditional approach is featuring what directors may have to say.
481 On Signature, both Norm and I are amateur genealogists, and we are quite passionate about the opportunity to bring Canadian stories to life via this type of interactivity. I think Norm can best describe our family album project for us.
482 THE CHAIRPERSON: So as a company you have investigated, with equipment manufacturers, where things are at and how quickly this could develop, and the possibilities offered by Level 2 and have tried to determine just how quickly this may develop.
483 MR. ROGERS: That is correct.
484 THE CHAIRPERSON: Now, what investigation have you made with distributors and their preparedness or ability to use what I understand to be additional bandwidth to be able to do this.
485 MR. ROGERS: We have discussed with cable companies and DTH the ability to market our program through the set-top box. As I said before, the basic set-top box is only allowing Web-type of activities. Naturally, as we would launch in September of 2001, that would be the first kind of activity that you would see on our programming. At the same time, we will be developing interactive programming that would have triggers within the digital MPEG datastream; and, as soon as the box had the proper middleware in place, it was uniform between DTH and cable, our second level of programming would roll out.
486 The time frame? Probably within two to three years.
487 THE CHAIRPERSON: Two to three years. And you don't have -- well, we will hear from the distributors, of course, in that regard because you will have your programming service will have access rights so there may be a discussion as to whether the distributor is prepared to also offer the additional bandwidth and I guess ability for upstream information, storage of information, et cetera, which I understand is an extra strain on the distributor's bandwidth capacity.
488 MR. ROGERS: Yes, that is true. I think there is a new world going to be developing where we will work in partnership with our distributors on using that extra bandwidth and deriving shared revenues.
489 THE CHAIRPERSON: Sharing revenues generated by this interactivity. Is that what you mean?
490 MR. ROGERS: Yes, that's correct.
491 THE CHAIRPERSON: As the quid pro quo for being able to have the additional bandwidth.
492 MR. ROGERS: Yes.
493 THE CHAIRPERSON: And this would all be at a very embryonic stage since you say two or three years before the very equipment is not only accepted by consumers but available to them.
494 MR. ROGERS: Yes, as we see it.
495 THE CHAIRPERSON: Do you see any additional hardware/software, cameras, et cetera, necessary for your proposal of this type of set box interactivity?
496 MR. ROGERS: Probably you're right, that as we develop our programming in our studios we would be looking at virtual technology which is able to be streamed on the Web as well as a set-top box. Additional programming material and hardware will be also used in post production to hide the triggers within the actual broadcast program. So, yes, there is a whole world that is rapidly being developed, such that within the two to three years we hope to be on the leading edge and being able to provide the program as we would like it to be provided.
497 THE CHAIRPERSON: Some of which would be equipment enhancement that you would be responsible for?
498 MR. ROGERS: Yes. We particularly would not be driving the --
499 THE CHAIRPERSON: In your production?
500 MR. ROGERS: Yes, that's correct.
501 THE CHAIRPERSON: You have given us in each case revenues and costs associated with interactivity. Considering the time frame you are talking about, what is in there at the moment?
502 MS YAFFE: There really is no revenue stream associated with this part of our business yet. As Harvey says, the model for how that revenue will be dealt with is still, I think, being decided in the industry. We have identified approximately $3 million per application to create the interactive components of the programming and we see that as a beginning.
503 It's hard for us to predict when and just how this will all roll out, but I think what we have said, what we asked ourselves is, you know, we know we are going to go here, we know we want to, let's make sure we have a sufficient amount of money in the budget or in the plan to make sure that we can do it and do it well. But we have not isolated a revenue stream from this side of our business.
504 THE CHAIRPERSON: Do you not have, in each of your applications, revenues and costs related to interactivity or are you saying that's for the Web? I thought there was a revenue stream -- well, there is in your application a line "Merchandising transaction revenue" which matches the revenue/cost little table. I'm not sure at the moment whether this table was created for me or it was part of your application, but I believe it was.
505 MS YAFFE: Yes.
506 THE CHAIRPERSON: Anyway, what is that line of merchandising revenue?
507 I'm looking at The Book Channel, for example, "8.1 Financial operations", which is page 474, where there is a line "Merchandising transaction revenue", $50,000, $100,000 going up. What is that?
508 MS YAFFE: It's related to merchandising that we might sell as a channel, which we might have done without the development of interactivity or without the Web. It's not tied to that.
509 THE CHAIRPERSON: And the expenses that are attributed to interactivity, where are they in your financial operations?
510 MS YAFFE: There is a single line for that. I believe there's a single line in the application for that that was requested.
511 In the "Other programming expenses, Cost of interactive and merchandising transactional components" --
512 THE CHAIRPERSON: What are you reading from?
513 MS YAFFE: I'm looking at -- and this -- I think I'm in Book, and on page 473 in your page numbers.
514 THE CHAIRPERSON: Okay.
515 MS YAFFE: So I can see where you might have assumed the merchandising and transactional was related to cost of interactive, but we didn't see it that way.
516 THE CHAIRPERSON: So "Cost of interactive and merchandising transactional components" on that page?
517 MS YAFFE: Yes.
518 THE CHAIRPERSON: Six hundred.
519 Another thing that is curious is that it goes down every two years.
520 MS YAFFE: Well, it changes every two years is I think a better way to put it.
521 THE CHAIRPERSON: But always down, downward.
--- Laughter / Rires
522 THE CHAIRPERSON: Year 2 it's down and year 3 it's -- in all cases. Is there any explanation for that?
523 MS YAFFE: The way I would look at it is it goes down in year 2 and up in year 3, so I would say that what we said was it's hard for us to --
524 THE CHAIRPERSON: Oh, in 3 as well. Yes. Okay.
525 MS YAFFE: You know, it's a flowing number that we said: We think this is what it will cost to get into this business. To sustain it I don't know that it will be the same number.
526 Some of us would -- and Barbara Jones would say that we may find that we want to do more and more programs, and that's not enough.
527 THE CHAIRPERSON: You know what I mean by going down?
528 MS YAFFE: No, I do.
529 THE CHAIRPERSON: We have 600,000; year 2, 300,000; year 3, 500,000; and then year 4, 300,000. And that's true in every case.
530 MS YAFFE: Yes.
531 THE CHAIRPERSON: There must be some sophisticated formula here.
--- Laughter / Rires
532 MS YAFFE: Yes, there is a sophisticated formula.
533 If I may, I'm going go ask Barbara to explain it, but I think what you do see, because I can't, but I think what you do see is that the first year is where we put the most amount of our money so that we leapfrog into the technology.
535 MS JONES: There are some efficiencies to be gained as all of the industry learns more and more about interactive television. In the same way that initial start-up costs for Web sites may be a little frightening, they, over time, as we, are all developing more and more sophistication in how we build these things, finding those efficiencies. I suspect that will be the case with interactive television as well.
536 THE CHAIRPERSON: I think it's fair to say, then, that you will embrace this technology as quickly as possible and see it as an advantage, but we are likely to have Web sites for two or three years at least.
537 MS YAFFE: Yes.
538 THE CHAIRPERSON: If it took longer than two or three years to establish this real interactivity, do you see that as a big drawback on the attractiveness of your programming?
539 MS YAFFE: No, I don't think it would be a -- I mean, I guess what we would do is supplement as much as we could through the Web. I guess where we thought we built in the cushion was by not including revenue from this stream. We though whether it is revenue this way or another way won't affect our business plan.
540 I think the key question though is will it affect the roll out of digital boxes if people don't have this ability and I believe that in this competitive world we are going to see everybody chomping at the bit to get the most interactivity out of the technology they deliver, so I am hoping that that will spur everybody to get therm as soon as possible.
541 THE CHAIRPERSON: That there is a commercial incentive here.
542 MS JONES: Yes.
543 THE CHAIRPERSON: To make the most of the technology.
544 MS JONES: Right. The key is that the programming needs to be appealing regardless of the technology. I think what is an important element here is that it need not be two years away. Alliance Atlantis is already committed to two Canadian programs, both Dish It Out and through our association with Drop the Beat. Those are programs that exist today and have shown that there is an opportunity for interactive television production by independent producers in this country.
545 MR. ROGERS: I would also like to point out that given the digital roll out of television itself, the high definition and standard definition, there is also an interactivity built into that program as well so that we will really see three things happening: Interactivity through the high definition, standard definition; interactivity through the set-top box enhanced television, and interactivity through the Web.
546 THE CHAIRPERSON: Now, I have been reminded by our legal branch that beginning January 1, 2001, we will have a new federal act called Personal Information Protection and Electronic Documents Act which obviously would affect private sector use of the flow of information.
547 So I gather that you have two or three years to examine that Act and find what measures will be necessary to abide by it.
548 MR. ROGERS: Yes.
549 THE CHAIRPERSON: Close captioning. You are not the star for the first year.
--- Laughter / Rires
550 Why is that?
551 MS YAFFE: I guess our approach to close captioning was to take the regulatory approach we have seen before at the Commission and suggest that we would absolutely get to 90 per cent close captioning by the end of the licence. We would hope to overachieve on the numbers we have suggested to you as minimums, but close captioning in this sphere one of our choices is where to put our resources, and I guess what we thought was original Canadian programming was our key priority although we take close captioning very seriously and I suppose one of the things that has been frustrating to us over the years has been that we still don't have in this country what other countries have, and that is a library, a facility that holds and stores the captioning that is done by all of us for all our programs.
552 We are working through the CAB with the National Book Reading Service to hope to create that king of a database library where we could actually take all the captioning that all of us do, leave it in the library and rent it, paying rights, to be able to use it again and again. But today that doesn't exist in this country so every time, or very often, when programmers choose programming that has been captioned we have to go back to square one and start all over again.
553 We hope to be able to fix that over the next little while and of course that would make our on air close captioning dramatically higher to begin with.
554 THE CHAIRPERSON: I guess you were smart enough to put 90 per cent in year seven, but it is 10 per cent, at least in two of the applications I am looking at now, for three years and then ranging to 30 per cent in year four, 45 in year five, 50 in year six. So you will have to have a jump of 40 per cent between year six and seven.
555 MS YAFFE: We know.
556 THE CHAIRPERSON: How is that manageable?
557 MS YAFFE: Well, what is problematic is to get to 90 per cent in any one year because --
558 THE CHAIRPERSON: What is problematic is having to commit to it, right, in year seven.
559 MS YAFFE: No, I wouldn't say it was problematic. The problem, I think, for everybody is if you have reached that number very early on and you are not using those programs in year seven, then you really have to make that gigantic leap. That is inevitable for every service, wherever you are. So wherever you were the year before unless you show all the same programs again, you have to take that big leap by the end of the licence.
560 MR. ROGERS: But that -- sorry.
561 THE CHAIRPERSON: So these are minimum commitments, but you probably have to ramp up faster than that if you have to make that leap between year six and seven.
562 I think I interrupted someone.
563 MR. ROGERS: Sorry, Commissioner. I just wanted to support Phyllis in saying that we have committed ourselves to the close captioning division. We have expanded our facilities and we also have an ability to use outside agencies if we are not able to reach our commitments.
564 So using the three things: Our internal services, outside services and if we can get this free exchange of close captioning on Canadian programming working -- and we are actively working in association with the CAB on this -- we will be able to reach our 90 per cent in the seventh year and as well the industry will be able to accomplish that goal.
565 THE CHAIRPERSON: Video description. Will your service be technically equipped to make it possible?
566 MR. ROGER: Yes, we will.
567 THE CHAIRPERSON: Well, this completes my general questions. I have a few questions on each of your applications to clarify so we will now deal with -- I certainly have not addressed them in the same order I have them, but since I easily get confused I will impose my order.
--- Laughter / Rires
568 So the first one we will look at is the independent films and documentary application and I understand that it is independent, but I may shorten it to films and documentaries throughout. I still read "independent" in front of it.
569 At Section 7.1(c) of Part 1 of the application, you provide a description of your nature of service as a service entirely devoted to films and documentaries from independent filmmakers from Canada and around the world, and you provide a definition of independent as films neither developed nor financed by the major Hollywood studios and this definition has raised some questions by intervenors, although I don't want to invade the intervention process at the moment.
570 You have proposed a new definition, I believe, of independent, and your description of service then would be changed and it would be the licensee shall not broadcast any feature film originally made in the English language that was developed or financed by -- and you have a list of companies there.
571 Is that what you would be prepared to accept as a condition of licence as a response to the concern that the previous definition, the one at 7.1(c) was too broad?
572 MS YAFFE: Yes, we would.
573 THE CHAIRPERSON: Now, in the definition you have entirely devoted to, so I guess we would now see a description of service that would still keep that, would define independently and differently, but would still keep that concept of devoted entirely to film and documentaries.
574 MS YAFFE: Yes.
575 THE CHAIRPERSON: Now, what does the word "entirely" in the description apply to? Films and documentary only? I raise that because you have a list of categories of the programming you will draw upon and they include, for example, theatrical feature films aired on television, animated television programs and films, other drama, and of course long-form documentaries. "Entirely" would that apply?
576 MS YAFFE: I am not sure if --
577 THE CHAIRPERSON: Because "entirely" is not your entire programming.
578 MS YAFFE: Perhaps the best way to answer this -- and I am going to ask Laura to give us more of a sense of what that entire schedule might include -- but I would say that it is the founding definition of how we see the channel, why it is different from other movie services, and I think it is fair to say that there would be no element throughout the programming that would be about anything but our form -- our definition -- of independent film. It might take other approaches, but however it was put together, the elements would form a service that was entirely about independent -- or featuring independent films, documentaries and drama.
579 Laura could give you a sense of what those elements that are not the films themselves might be like.
580 THE CHAIRPERSON: And of interest, of course, to anyone who is looking at how competitive -- indirectly or directly -- the directly competitive test is, what would be the proportion of other drama, rather than documentaries and films?
581 For example, animated television programs, et cetera. The other parts of 7 that are categories you will draw from. What will be the proportion of film and documentaries compared to these other categories?
582 MS MICHALCHYSHYN: Currently, in the schedule that we have proposed, we are looking at having, in prime time, 61 per cent of dramatic feature films, 22 per cent of documentaries, and 17 per cent of what I think, Commissioner, you are calling "other". This includes short films and videos, including short documentaries or short dramatic films; information programs about the art and business of filmmaking, be it our "Quiet on the Set" half-hour daily show, which includes a behind-the-scenes look at festivals around the world, producers from across the country reporting on festivals that are going on in cities across Canada, interviews with directors, critical reviews with directors ...
583 This is a half-hour program that we would call an "other", but it is all about the art and business of filmmaking.
584 We will not be putting any of the eight Hollywood studio pictures that we have so defined in our application, the blockbuster Hollywood pictures, and we have also made a commitment not to broadcast any made-for-television movies, series or mini-series in our independent film and documentary channel.
585 THE CHAIRPERSON: If the Commission found it necessary to impose as conditions of licence these percentages you just gave me, would that be acceptable?
586 MS YAFFE: Yes, that would be acceptable.
587 THE CHAIRPERSON: It is not true in all of your applications -- I don't know whether it is accidental that you didn't, or because you have some explanation why not in one and yes in the other. Is this question of filler programming, which --
588 If we look back to the 1994 licensing of your special and pay television services, the Commission said at page 15 that filler programming is not included in the categories of programming prescribed in conditions of licence setting out the nature of service for specialty licensees, but rather the Commission considers that such filler programming would fall under any number of existing categories and should be logged as such by new and existing licensees alike.
589 Now everybody is forewarned to look at Public Notice 94-59, because no one has -- or else you all have very good explanations as to why this should not be followed.
590 I think the understanding was that filler programming was necessary perhaps on movie channels but not on specialty. Whatever it is you put there should be categorized under a particular category.
591 So what is your comment? Do you have an explanation as to why we should move from that categorization?
592 MS YAFFE: Actually, given that explanation, I don't see that it is particularly necessary. We could remove it.
593 It is in all four of our applications.
594 THE CHAIRPERSON: I think it was not in one. I think --
595 MS YAFFE: Maybe it wasn't and --
596 THE CHAIRPERSON: I thought there was one version --
597 MS YAFFE: Yes. We were right that time is what the answer is.
--- Laughter / Rires
598 MS YAFFE: It is really not necessary, because we really don't see any role for programming other than the categories we have before you that are clearly --
599 THE CHAIRPERSON: So you would be prepared to abide by the categorization of that type of programming. Of course, interest issues are another story, in accordance with the category it falls in.
600 MR. MacMILLAN: Madam Chair, may I go back to a comment that Laura made a moment ago?
601 THE CHAIRPERSON: Yes.
602 MR. MacMILLAN: Our proposal for the independent film and documentary channel contains no made-for-television productions: no made-for-TV movies, no mini-series, no ongoing made-for-TV series -- drama series. That is a very important distinction and a very important commitment not to include that, because if it did include that it would be almost a duplication of Showcase.
603 THE CHAIRPERSON: So category (e), animated television programs and films --
604 MS YAFFE: For us that really refers to the film side of it. That has allowed us to show animated films. We have no interest in showing animated television series.
605 THE CHAIRPERSON: But it would not include television programs, as such.
606 If we excised that from 7(e) as a special for you, would that be acceptable?
607 MS YAFFE: Yes.
608 THE CHAIRPERSON: I discussed with you earlier the question of competitiveness and diversity. There are potentially eight Category 1 applications which could be competitive with your proposal. Should the Commission not consider as competitive the two that are devoted exclusively to documentaries?
609 MS YAFFE: Not in our view. We see them as having very different approaches.
610 We do have, as Laura said, 22 per cent of the prime time schedule as documentaries, but as we said right at the beginning, the definition of a program that would be suitable for this channel is that it is made by an independent producer, outside the Hollywood system, but also that it has a very strong point of view; that it is those exceptional documentaries that tell a story that only those documentary makers could make.
611 So, to us, they are very much out of the norm kind of documentaries, and we see, absolutely, a role for them on an independent film and -- obviously by the title -- documentary channel.
612 It seems to be the case wherever independent film channels exist around the world. It is a good mix. But we don't see it as competitive.
613 Of course, we weren't able to know whether or not there would be documentary applications when we filed this, but we still see that there is room for both in the system.
614 THE CHAIRPERSON: So you would have no problem.
615 Now, if it is one that has film and documentaries, at what level of percentage of documentary? Would your answer be the same?
616 MS YAFFE: Yes. I think if there were a documentary channel licensed, I think the 22 per cent or 25 per cent level that is already in our prime time schedule seems sufficient to us.
617 Now, that excludes the very intricately woven elements that are described many different ways, that Laura was talking about, in terms of the behind-the-scenes programming, which we see as more information-based rather than point-of-view documentary.
618 THE CHAIRPERSON: You will have the opportunity to revisit that at the intervention stage, as to, considering the long lists -- and some are independent films and documentaries, or only documentaries -- how you see everybody surviving.
619 As we discussed earlier, you seem not to consider that a service of this type would be a problem for Showcase, but you did add that was because you were the owner of Showcase. Would you consider, then, that if the Commission decided to license an independent film and documentary proposal, but not yours, that it would be competitive with Showcase?
620 MS YAFFE: Yes, and we did intervene to that point of view for a couple of reasons.
621 First of all, as far as we can tell, the other competitors have asked to show television drama, which, as you know, is the heart and soul of the prime time schedule of Showcase, and we have abandoned that category from The Independent Film and Documentary Channel altogether.
622 As well, Showcase does not show documentaries, and this channel would. So there is a real point of differentiation. But we do believe that the role this channel would play would be completely different if it were carefully scheduled, carefully managed, and, as we said earlier in our definition of "directly competitive", we see a different way of judging that once it is within the same parent company as we do outside that.
623 Do you want to add anything?
624 MR. MacMILLAN: I think you have made the point, Phyllis. The other applicants have got television movies, mini-series and drama series in their schedules, and we don't. Therefore, that is an additional overlap that we don't have.
625 THE CHAIRPERSON: In your supplementary brief at page 399, at paragraph 2, you say that the channel will be able to run a full complement of four independent films and documentaries, many of which may never be otherwise available in Canada.
626 I didn't see anywhere a proportion of programming that would be from non-North American sources.
627 MS YAFFE: I will ask Laura to answer that.
628 MS MICHALCHYSHYN: First of all, of course, we have the 50 per cent Canadian programming to start, going up to 60 per cent by the seventh year of the licence, and of the remaining other, you know, non-Canadian programming, we feel that it's difficult -- the reality is it's difficult to put proportions onto what kind of, you know, levels of foreign versus American.
629 But the Showcase experience, just to give you a little anecdote, is that I see no less than 3,000 films a year that are submitted to Showcase for, you know, potential licensing. We, on average, licensed 300 of those films. So we are looking at a 1-in-10 ratio. And I can attest that of those that are not licensed, no -- at least 65 per cent are foreign language, they are subtitled or dubbed, from countries like Italy, Spain, France, Germany, Argentina, you know, the Asian countries, China, Japan, and the interest in an independent film channel really, truly, is to provide an independent point of view "autre"-driven perspective. So, there would be no doubt in my mind that a huge proportion would be of the foreign nature.
630 Now, on the same hand, talking about American independent filmmaking, there's a strong tradition, in the U.S., of indie films coming from the U.S. I mean every child, whether you are from a more privileged background or a less privileged background, picks up a video camera à la Blair Witch Project and goes off and shoots, you know, a feature film or documentary. So, that being said, there is a wealth of material from the U.S. that has not had any television exploitation.
631 But there's a quality issue. And as a programmer, you know, we realize that though there is a wealth of material from the U.S., in many cases it's not up to broadcast standards or content standards that we would be interested in having reflected on this independent film and doc. channel.
632 THE CHAIRPERSON: And, now, the $20 million on Canadian programming, I'm looking at -- it's mentioned in a number of cases, but I'm looking at page 362, the top pagination, of your supplementary brief, at paragraph 9. I believe that's probably your conclusion -- yes. Nowhere, I don't think, had I seen that it would be 140 million, over seven years, for financing of films and documentaries made by non-affiliated Canadian companies, but you made this commitment, this morning, in your presentation.
633 MR. MacMILLAN: Absolutely.
634 THE CHAIRPERSON: And in the manner in which we discussed, arm's-length, non-affiliated, et cetera, the 30 per cent. So that's a commitment. I don't think it's in your application. It usually refers to 20 million per year, for each year of the licence, on the creation of Canadian films and documentaries that would be suitable for other channels. So we have established that --
635 MR. MacMILLAN: That's correct. And I think we said that in our interventions, after the application.
636 THE CHAIRPERSON: Now, this will be a separate sum to your Canadian-content expenditures and separately audited, from what I understand.
637 Why have you chosen to make this separate from your Canadian-content level?
638 MR. MacMILLAN: Well, this is not licence fees. This is above and beyond licence fees. And so, we have, typically, only reflected in the business plan for a channel. The money that we are spending on licence fees for the use on the channel, which is sort of consistent with 93/93 and so on, this is above and beyond that. Separate. It's going to be equity investments and/or distribution advances to those movies.
639 THE CHAIRPERSON: Except that, presumably, it could have been worked into your Canadian content.
640 The aim of my question is to find out: Does the programming that will result from these expenditures also show up, for example, on Showcase, History Television? Or is it going to be licence fees for this particular channel only?
641 MR. MacMILLAN: No. The licence fees in the application are for this channel's use of a variety of movies.
642 THE CHAIRPERSON: And this 20 million?
643 MR. MacMILLAN: But this $20 million is separate, and it is to create new movies that, once they have had a theatrical and a home video and a DVD, I hope you first, then, on television, see them on a Canadian pay and pay per view outlet, but not --
644 THE CHAIRPERSON: But not on your other channels?
645 What I'm driving at is: Is it going to be used, in part, to satisfy your Canadian content --
646 MR. MacMILLAN: No.
647 THE CHAIRPERSON: -- requirements on services for which you are already licensed?
648 MR. MacMILLAN: Absolutely not.
649 THE CHAIRPERSON: This will be a commitment --
650 MR. MacMILLAN: Completely separate from all licence expenditures on any or all of our channels. It's not being -- the same dollar is not showing up as a licence fee --
651 THE CHAIRPERSON: No, but it's not impossible that it would satisfy exhibition levels on your other services?
652 MR. MacMILLAN: That's possible.
653 THE CHAIRPERSON: As second windows. Even first windows.
654 MR. MacMILLAN: Yes, but --
655 THE CHAIRPERSON: It's not going to be just for this service; it could enrich or enhance your ability to meet your commitments on your other channels.
656 MR. MacMILLAN: Which would be great.
657 And we think that the more great Canadian movies that are made available for all Canadian broadcasters -- pay , specialty, conventional -- to use. that's fantastic. If it increases the pool --
658 THE CHAIRPERSON: But it will at least be audited separately, so that if we look at Showcase's requirements, or History, we will audit them and then we will have to find another $20 million a year. Correct?
659 MR. MacMILLAN: Correct.
660 THE CHAIRPERSON: Over and above, I believe, the first year's 30 per cent?
661 MS YAFFE: Yes, and this channel, The Independent Film and Documentary Channel, does have a commitment to licence, at a very significant Level 6, films directly for that channel which is beyond and in the general programming budget for the channel. Those would be distinct and probably find, after pay, their first window on the Independent Film Channel. But that's a different -- that's right in the general budget of the channel.
662 THE CHAIRPERSON: Now, your particular commitments to independent producers in this application. At page 386 of your supplementary brief, you have a commitment for six two-hour original feature-length films and documentaries with first window licences given to independent producers who are at arm's length from Alliance Atlantis And at page 378, you talk about your commitment to other producers. So this $20 million is going to be, really, an additional commitment to independent producers, the way it's framed now; so it's quite important that the commitment made at page 9 be your commitment that it be made by non-affiliated Canadian companies because, as I explained, I had not seen, anywhere, this particular limitation.
663 MS YAFFE: Yes, they are different. Can I --
664 THE CHAIRPERSON: That completes the questions I have for the independent films and documentaries.
665 Now, we will move on to The Health Network.
666 At the beginning, the nature of service and, therefore, the issue of whether it's competitive, there's a possibility of competition, according to them, with the Women's Network, also with Life Network -- which, again, you can explain away, so to speak -- related to the categories of services that you have chosen.
667 Do you have further comments about the extent to which this will be not competitive with an existing service?
668 MS YAFFE: Yes, and I will ask Barbara Williams to take you through that. Perhaps that's the best approach.
669 MS WILLIAMS: Our experience with lifestyle programming is long. As you know, commitment to lifestyle programming has been ongoing with Alliance Atlantis for many years. And, in particular, our experience has been that lifestyle programming has been done, traditionally, in bits and pieces, on a variety of other services, but, often, quite honestly, it kind of gets lost in a broader schedule -- and the magic of specialty, frankly, is when you pull that programming together and put it in the context of one dedicated service that is serving one dedicated community, that that's when the programming starts to leap off the screen and really become valuable and important to the viewers.
670 My experience, obviously, is most obviously with Life Network and I have, maybe, as a programmer, a bit of an additional explanation as to why this service wouldn't be competitive to Life -- and I think it applies to other services that are doing limited amounts of health programming -- and that is that health is one of the many strands of programming that are important to Life Network viewers, and we have had the wonderful opportunity to experiment with health-related programming at Life for many years now and we have experimented with a broad variety of genres, whether it's phone-in programs, documentary programs, live operations -- which we did a fascinating experiment on Life a couple of years ago where we broadcast a life operation -- and all of that has taught us that there's incredible demand for health information and we are seeing that where people are turning to every source they can imagine, in addition to television, and we know that on Life Network, because health is only one small part of its mandate, we can never fulfil that demand from viewers -- and other services that are doing limited amounts of health programming are in the same position, frankly -- and so, the opportunity to offer a 24-hour seven-day-a-week service that is dedicated exclusively to health programming, I think, is very valuable.
671 In speaking to the program categories, if I could add that you will see in our program category list that we have excluded one category which is found in all of the competing health applications, and that is, we have not asked to include any dramatic programming at all on our health service. We have done that very consciously. We take the health genre very, very seriously. We believe that what is most important in terms of offering a health service to Canadians is that it be a reliable, trustworthy, accurate source of information that they can go to for every health need they may have.
672 One of our concerns with running dramatic programming, frankly, is that in all of its attempts to be the exciting, compelling and engaging drama that it is, it does often take creative licence with the content, and we would not want to put ourselves in the position, frankly, of having to explain that creative licence that has been taken to our viewers to have to put movies in the context of: Don't believe this part because they really just said that in order to make the movie a little better. We wanted all the time to be providing accurate and reliable information, and we believe that there are plenty of opportunities to run compelling drama films based on medical issues on other services.
673 THE CHAIRPERSON: This application is the one, I believe, that has the highest Canadian content beginning in year 1 -- 60 per cent. What is your level of confidence that there will be sufficient Canadian programming of the type that you have just described to reach 60 per cent in the first year?
674 MS WILLIAMS: Again, I could speak to our experience.
675 I think that one of the reasons we are a very strong applicant for this channel is that we know better than anyone what it is to offer a 24-hour a day, seven day a week lifestyle information channel that has a high Canadian content. We are experienced at this. We have been doing it at Life Network very successfully, as you know, for many years.
676 So we built a plan that has very realistic, very doable, very practical numbers in it of dollars to be spent on original hours that will make a strong, successful program schedule. We know we can do it because we have been doing it for a long time.
677 I am very confident that we can meet our 172 original hour commitment in the first year handily and with quality programming.
678 THE CHAIRPERSON: Yes, I notice that it is by far the highest number of original hours, which I gather from your presentation are minimums for original programming.
679 MS WILLIAMS: Yes.
680 THE CHAIRPERSON: Can you tell me, however, what will be your weekly and annual repeat levels, if you have calculated one or the other, of Canadian programming during the first, second and third wheel; that is, six to midnight?
681 Have you calculated the repeats that will be required to reach 60 per cent?
682 MS MIDDLETON: Our average repeat factor in year 1 is about 9 to 10, and stays pretty stable over the entire licence term.
683 MS WILLIAMS: If I could just add to that, again back to our experience, we have found that that repeat level is a valuable repeat level for viewers of specialty television. In fact, it honestly would not be advantageous at some point to bring that repeat level down too much lower, because one of the reasons specialty television is so successful with viewers is our ability to provide programming to them at a variety of times when they may find it useful for their life and their needs.
684 THE CHAIRPERSON: Now, you had not reached conversion yet when you wrote this application, so you have category 15. If I asked the same question, would I get the same answer as with films and documentaries?
685 MS WILLIAMS: Yes.
686 THE CHAIRPERSON: Independent production -- other than the $20 million, according to Schedule 10, I think, we can calculate approximately 44 per cent Canadian content acquired and 44 per cent in-house production. Does that sound right to you?
687 MS WILLIAMS: That is approximately what our illustrative schedule would show, yes.
688 THE CHAIRPERSON: And of that budget, what is the proportion that would be dedicated to non-affiliated producers? Have you thought about a number?
689 MS YAFFE: We have, and we have thought about it in a general sense, I guess. Probably this answer would --
690 There are two ways to look at our contribution to non-affiliated producers. In the drama category, obviously, we have committed all $20 million of the above-the-expenditures budget and several of the other features of that channel. Obviously we are a significant producer of drama, but we have already gone to about 50 per cent of all the original programming on The Independent Film and Documentary Channel that will be done by unaffiliated producers.
691 On the information side of the programming, the programming being created for the other three applications, we also have addressed this question. We have thought about it a great deal. We have, as Barbara said, had an enormous track record in working with independent producers through all of our services, and continue to do that, and we are determined to do it.
692 In this case, I guess because of the challenging nature of the digital world, we have been wondering how best to reflect some of those changes in the business plan. Not to suggest that we don't need to continue to work with independent producers, but we raise the question of whether or not the best quality programming, wherever you get it, is what is going to make people buy these services.
693 We are also quite aware that the relationship between these programs and their interactive capability is going to be a driver at some point, two years, three years from now. A lot of that is best done in a relationship inside the broadcast company.
694 However, we would never suggest that we can or should produce all of the programming ourselves. So we have looked at all three of our primarily non-fiction program schedules and suggested that we could live with a commitment of about 35 per cent of the original Canadian programming, in whatever format, going to the non-affiliated producers, as the definition we discussed earlier today. That might rise over the licence period as we become more stable and the business becomes more mature, but we are willing to make that commitment from the beginning of the licences.
695 THE CHAIRPERSON: The $20 million a year, then, is over and above, to the benefit of independent production.
696 MS YAFFE: Right.
697 THE CHAIRPERSON: At page 445, at the bottom of that page, of your supplementary brief -- again the top pagination -- and again this morning, I believe, in your presentation you talked about the removal of the health network, U.S., from the eligible list if you were licensed. It says here that there are currently 900,000 Canadian homes receiving the U.S. health network. What would be the proportion of the subscribers that would be receiving it on an analog basis?
698 MS YAFFE: It actually is a mistake. It should be 500,000. I am not sure if we had the opportunity to correct that.
699 THE CHAIRPERSON: Is that, then, all digital?
700 MS YAFFE: It is not all digital, but it is primarily digital. By far the vast number of those subscribers are digital.
701 THE CHAIRPERSON: This correction is helpful, in that, obviously, you would be removing it from analog by changing a digital-only service for an analog service.
702 MS YAFFE: It is available in some very small cable systems and was launched years ago, but those are very, very small --
703 THE CHAIRPERSON: But they would likely be Class 3s --
704 MS YAFFE: Yes, they would.
705 THE CHAIRPERSON: -- that already we have acknowledged.
706 MS YAFFE: Primarily.
707 THE CHAIRPERSON: Maybe a digital network programming service, which would be the Canadian one, could be --
708 MS YAFFE: Right.
709 THE CHAIRPERSON: That is helpful. So we should strike 900,000 and change it to 500,000.
710 MS YAFFE: Yes.
711 THE CHAIRPERSON: The Book Network -- the nature of service definition, which I think I find at page --
712 MS YAFFE: Is it 478 maybe?
713 THE CHAIRPERSON: This is the one. The Book Channel. It is 491 in the deficiency response. Fifteen disappeared. That was the day of the conversion.
714 MS YAFFE: Yes.
715 THE CHAIRPERSON: Look at 491, which is your response to a clarification question. I think we should use those as your categories. Part 1 of your application, 15, is gone; right?
716 MS YAFFE: Yes.
717 THE CHAIRPERSON: I believe it was there at the beginning.
719 Now, these categories include 7(a), ongoing dramatic series; 7(g), other drama; 7(c), specials, mini-series, made-for-TV future films -- which raises again, of course, what is going to be the use of these categories and what does it mean for the competitiveness and the diversity of the service.
720 Because, the way I understand it, any book can be translated into a movie or a drama or some other type of programming.
721 MS YAFFE: Our commitment on the drama side is that no drama would be shown on the service that didn't derive from a book. And you are right, almost any book could be turned into a drama, but not all are. So we are committing to the description of the drama being derived from the printed word, the published material, books, et cetera.
722 As for the percentage of the overall schedule, we believe that there is -- I think there is a response to an intervention that we could live with a criteria or commitment that limited the number of films on the service to reflect a similar condition we live with on History Television, and that is that there would be one film in prime time -- no more than one film in prime time -- dramatic film.
723 We don't actually see --
724 THE CHAIRPERSON: Per...?
725 MS YAFFE: Per night. Per prime time period.
726 We haven't proposed that in our illustrative schedule. We have somewhere between, I think, three or four films in the week. But I think they are an important way of showing people how the book has come to television, and it would seem to me to be not as useful to limit it beyond what we have suggested.
727 THE CHAIRPERSON: With regard to family-oriented programming -- and I believe that animation is included; right?
728 MS YAFFE: Yes.
729 THE CHAIRPERSON: In your 7(e), my understanding is that you would be prepared to accept a limitation?
730 MS YAFFE: Yes. We have agreed that only 25 per cent of the programming on the Book Channel will be programming that is designed to appeal to children, youth, age 17, and families.
731 It is a significant part of the channel, and we would be wrong to suggest that children should be eliminated from the target audience of the channel. But it isn't our primary focus. We really don't see this as another children's channel. We believe there is a daytime schedule for adults as well as a prime time schedule for adults that is important to bring to the audience.
732 THE CHAIRPERSON: So the 25 per cent is something you could life with as the limitation?
733 MS YAFFE: Yes.
734 THE CHAIRPERSON: And then for films, the one you mentioned earlier?
735 MS YAFFE: Yes.
736 THE CHAIRPERSON: Independent production, in this case, do you have a percentage of the amount of programming -- other than the general discussion we have had on this specific channel, where all of it is owned by producers, 75 per cent by you and 25 per cent by Associated Producers Inc., what would be the percentage, in your program schedule, that would be produced by non-affiliated?
737 MS YAFFE: A minimum of 35 per cent, at the beginning of the licence.
738 THE CHAIRPERSON: And you could be committed to that, even by a condition of licence, without a problem?
739 MS YAFFE: Without a problem.
740 THE CHAIRPERSON: The program schedule shows five co-productions, I believe, that would be probably derived from Schedule 10.
741 What is the source? Do you know already what will be the source of the co-production?
742 MS YAFFE: I will give Barbara a minute to find that and then ask her to respond.
743 Do you have a title that has been --
744 THE CHAIRPERSON: No. I think this has been derived from our analysis of --
745 MS WILLIAMS: You are speaking I think of --
746 THE CHAIRPERSON: There are five co-productions.
747 MS WILLIAMS: Some of them in Schedule 10 have been listed as co-production with independent producers, such as Book Browsers.
748 THE CHAIRPERSON: Yes. What would be the source?
749 MS WILLIAMS: The Canadian Independent Production Community would be the source for those programs.
750 THE CHAIRPERSON: But no particular --
751 MS WILLIAMS: We have not identified producers, at this point in time, no.
752 THE CHAIRPERSON: And it could be associated producers, affiliated producers, if it doesn't put you beyond your limit?
753 MS WILLIAMS: That's right.
754 MS YAFFE: Yes.
755 THE CHAIRPERSON: I think this is the one where there is quite a number -- or is it the one with Great North?
756 There is one particular application that shows many -- the source of programming. No, that's not the one. I think it's in Signature.
757 MS YAFFE: Yes.
758 THE CHAIRPERSON: Great North and the National Film Board -- correct? -- is often the source?
759 MR. MacMILLAN: We could address that right now.
760 At the time of this application, Great North was arm's length, as defined.
761 THE CHAIRPERSON: So there may have to be some correction in the pages of Great North?
762 MR. MacMILLAN: Yes, but when we were putting the application together, we didn't know that we were going to purchase the balance.
763 THE CHAIRPERSON: Right.
764 MR. MacMILLAN: Now that we have, it's obviously related and it would qualify in a different way.
765 THE CHAIRPERSON: Yes. So we won't have to reclarify that because it fits within your broad commitment, in that regard.
766 So Book Network, that's it.
767 Now, the last one, Signature. It's getting shorter. Maybe I am getting smarter or more tired.
--- Laughter / Rires
768 MS YAFFE: I can hardly wait until the end of theirs.
769 THE CHAIRPERSON: So, nature of service: entirely devoted to programming of a biographical nature.
770 Again, we have a broad range of program categories, which is described in Part One, I think it's page 538, at the top, which -- we are back to Category 15 -- at 538 you have 7A, 7F, 7G and, of course, it raises the question of how the programming of a biographical nature will be displayed or broadcast in what proportion to retain the biographical nature of your service?
771 MS YAFFE: All of the programming will focus on the telling of real people's real life stories. Whether they be famous or infamous or unknown, our view is that there would not be a program on the service that would not tell the story of a person's life. So that's the theme that would run through all these categories of programming.
772 THE CHAIRPERSON: So you don't have any proportion projected as to how many films, how much drama, how much programming, other than film or drama?
773 MR. BOLEN, SR.: This would make up a very small proportion of the schedule. It would be, primarily, documentaries.
774 THE CHAIRPERSON: What would? What's the "this"?
775 MR. BOLEN, SR.: Other than films about individuals and drama, there would be a very small proportion of other programs.
776 The reason we put in a category, for instance -- am I misunderstanding the question?
777 MS YAFFE: If I can, I think that the three categories of programming we do believe will make up a substantial amount of the programming will be documentaries about individuals and dramatic works about individuals.
778 Other programming, for instance, comedy sketches, might be a very small part of the programming.
779 MR. BOLEN, SR.: Yes, that's where I was going. It's all about individual lives. Every program is about the individual life of some person or persons' individual lives.
780 Comedy was put in, for instance, because you might occasionally have a program -- for instance, we have a program on History, called "History Bytes", which actually does historical sketches based on the true lives of individuals. For instance, we did a piece on Charlemagne. Well, we would want to exclude that, but it would be a very, very small part of the schedule. That's not the way we are going. It is a serious service, which is primarily documentaries and feature films about individuals.
781 THE CHAIRPERSON: In response to concerns about competitiveness, should the Commission limit the amount or number of films?
782 MS YAFFE: We would accept the same condition that we suggested or modified to fit this service that all films would tell the story of an individual's life -- that would be the theme that all films would have to address -- and that we would live with the condition of one film in prime time as a maximum on the schedule.
783 THE CHAIRPERSON: Would you accept the condition of licence that none of your documentaries be about CRTC commissioners --
--- Laughter / Rires
784 MR. BOLEN, SR.: No.
785 THE CHAIRPERSON: -- and their foibles?
786 MR. BOLEN, SR.: No. Their lives are far too interesting. We would definitely want to deal with them.
--- Laughter / Rires
787 THE CHAIRPERSON: You don't think it would make for interesting programming? We will leave it to CPAC.
788 If I ask the same question about filler programming, I would get the converted answer. Correct? That you would categorize it according to categories. That's right?
789 MS YAFFE: Yes.
790 THE CHAIRPERSON: You make a commitment, I think at page 490, that only 15 per cent of your programming would be about Americans.
791 How would you define that?
792 MR. BOLEN, SR.: These would be programs that are about the lives of Americans. American citizens. Very simple.
--- Laughter / Rires
793 MR. BOLEN, SR.: And the reason we do that is we think that there already are a great number of biographies about Americans available in the marketplace.
794 For instance, the only daily biographical program available in Canada comes from the United States. It's on the U.S. service and largely, not exclusively, but largely deals with U.S. celebrities and politicians. We don't think that there is much point in doing that on a Canadian service, like Signature, where we are trying to meet the demand for Canadian stories with a high level of Canadian content.
795 THE CHAIRPERSON: So it would be rather simple to monitor that?
796 MR. BOLEN, SR.: Absolutely. If they are an American citizen they are not on our channel -- I mean other than the 15 per cent. I mean the 15 per cent, yes.
797 THE CHAIRPERSON: And it wouldn't matter what these Americans are doing in any one year?
798 MS YAFFE: Or where they are living or what they are associated with. We would use their country of origin.
799 THE CHAIRPERSON: Now, your Canadian programming expenditures, we touched upon that earlier and I had forewarned you that there was a proposal and this is it, where the calculation that we have made, according to the formula, is 42 per cent and your commitment is 45.
800 MS YAFFE: I am sorry. I apologize.
801 THE CHAIRPERSON: The one time I am trying to give you a break and you are not listening.
802 MS YAFFE: Yes.
--- Laughter / Rires
803 THE CHAIRPERSON: You have committed to 45 per cent of expenditures. However, at least you would be prepared to live with the formula we have -- and we have discussed how it could be different.
804 Our calculation is 42 per cent, rather than 45. Do you still want to hold to 45 per cent?
805 MS YAFFE: Yes, 45.
806 THE CHAIRPERSON: Believe it or not, this is it.
807 Now, Commissioner Wilson has a question. I don't know if any -- Madame Bertrand has one and perhaps legal counsel -- no.
808 Before I leave you to them, do you feel you have had a good airing of your proposals?
809 MS YAFFE: Yes, we do.
810 THE CHAIRPERSON: And that this formula has not been disadvantaged?
811 MS YAFFE: No. I think it's efficient and I think we have -- beginning with the general issues and going to the additional channels is a good idea.
812 THE CHAIRPERSON: And there is nothing you feel you want to add that --
813 MS YAFFE: I will just ask my colleague --
814 THE CHAIRPERSON: Well, not a sermon.
--- Laughter / Rires
815 THE CHAIRPERSON: Something that would ensure that you have been treated fairly.
816 MS YAFFE: Yes, absolutely, we would --
817 THE CHAIRPERSON: And perhaps at the end, if we are not too hungry, maybe you will have a chance to wrap up, but we have further questions first.
818 Commissioner Wilson, I will first ask Madam Chair to ask her questions and then to you and then to counsel.
819 CHAIRPERSON OF THE COMMISSION: Alors, good morning. It's me. It's my voice. It's really me. It's just a change of colour.
--- Laughter / Rires
820 CHAIRPERSON OF THE COMMISSION: I would like a clarification. I think it has been well covered, and probably if I would have the transcript I would see it, but it's when we talk about diversity and the fact that owning other analog services then you can niche and leverage the content yet the original Canadian programming would be really only -- the first viewing would be on the digital channels, yet at a further question Mr. MacMillan kind of specified that it would be an advantage because then it could help the Canadian exhibition on all channels, in a sense, that the same program, although considered to be original programming, on only one of the licenses, it could help the general wealth of Canadian programs of your undertakings if you were to be licensed.
821 You have said, earlier on, that there wouldn't be more than a 10 per cent overlap. So what's the overlap? Is it the general exhibition? Would the 10 per cent apply as well to Canadian programming?
822 I just want to make sure that I didn't grab that figure out of not understanding correctly?
823 MR. MacMILLAN: I think Phyllis would like to add, but I think that my comment was mainly focusing on the $20 million a year of new movies. There, what I was alluding to, was that these movies would, after they have run in the theatres and DVD and home video, appear on a variety of Canadian broadcast outlets, pay per view, pay, conventional and specialties, including even the film and doc and perhaps Showcase or others.
824 So I was referring to them being available to a wide range of broadcast outlets in that comment. But I think your question is wider than that, and I will let Phyllis address that.
825 MS YAFFE: We looked at each of the services and we suggested that there should be a limit -- our view is there should be a limit of shared programming, and our view is, particular, for instance, for Signature and History Television, the overlap could be no more than 10 per cent of the schedule; for Book and History, an appropriate 10 per cent; for Life and Health, 10 per cent.
826 For Showcase and Independent Film, we would never program the same film on both services, so I think it would be even less than 10 per cent. We would always be going in different directions creating two vibrant services.
827 There are elements of programs that might be used in different ways. That clearly is one of those issues that you raised in the call and that is repurpose programming. Of course that's one of the advantages that an incumbent does -- a licensee does have. We do have a library of programming we could repurpose, but that would be a separate issue.
828 So we see that as a very small overlap between any of the services.
829 CHAIRPERSON OF THE COMMISSION: And would that be in a given year?
830 MS YAFFE: Yes.
831 CHAIRPERSON OF THE COMMISSION: Could we have a greater overlap, like, from one year to the other, if we were to consider -- like, on a three-year basis, could we have more of the same or you --
832 MS YAFFE: I think we could live with it in any one year.
833 CHAIRPERSON OF THE COMMISSION: Okay.
834 MS YAFFE: It could be appropriate for a year.
835 CHAIRPERSON OF THE COMMISSION: Okay. thank you.
836 Thank you.
837 THE CHAIRPERSON: Commissioner Wilson.
838 COMMISSIONER WILSON: Thank you, Madam Chair.
839 I just want to pursue for a minute on the notion of direct competitiveness, because I'm having a bit of a problem understanding the notion of competitiveness when we are talking about such a limited subscriber universe and digital.
840 I just wanted to sort of pick your brains on at what point does a digital service become truly directly competitive with an analog service given that it will be years before the digital subscriber universe will be significant in any sense of the word. If that is the case, does that give the Commission more flexibility in terms of approaching the issue of direct competitiveness?
841 I will just quote you some numbers. Some of them are yours and some of them are CHUM's.
842 As an example, for the Independent Film and Documentary Channel, you project your first year at 1.5 million subs and increasing to 3.2 million over seven years; CHUM projects, in year 1, 915,000 increasing fairly slowly to 1.5 million. Theirs may be a little more pessimistic than yours. They are quite a bit more pessimistic than yours.
843 Given that the analog world will continue to exist in cable, as they sort of tier digital above it, and your service, Showcase, for example, will be available on analog and your subscribers will continue to receive that service, and a much smaller number of subscribers will receive any independent film or documentary channel, whether it's yours or somebody else's, how realistic is the threat of direct competitiveness considering that we are talking about a universe where the number of subscribers are so low?
844 Maybe you could just begin by telling me how many subscribers does Showcase have today in analog and digital combined?
845 MS YAFFE: Showcase has, I think, 5.2 million subscribers at this point. It has taken us awhile to get there but we are very delighted with it.
846 And you're right. You know, immediately out of the gate we don't project to be anywhere near that. But, our view, and I think a thread that runs through all of our applications here today, is we are very optimistic about this. We have put very high Canadian content levels on the table -- we have put very high original Canadian programming levels on the table, and of course our commitment to the 20 million above and beyond for independent film because we think these are going to be very viable, exciting businesses for us, as well as programming opportunities.
847 So our view is that we will get, within this licence term, to about 50 per cent of the households in the country having a digital technology in their homes.
848 I think people underestimate -- there is a sort of a truism about new technologies we have all sort of -- we may or may not learn from, and that is we are always overly optimistic about what they will do in the short term but not realistic about how much they will change our lives in the long term. I guess we tried to take that long-term view and say that by the time this licence period has run out we would have about half the homes in the country with access to this technology.
849 So for us directly competitive is a very serious issue. It may happen a little faster or it may happen a little slower, but I think it's important that it be taken into account. Our approach I think has been to say there are ways to test. They are complicated, I agree, but they are important and they give the Commission the ability to maintain the strength of the analogue services. I know we are not dealing with the migration issue, but that too will come into play as time goes on.
850 So, for us, we believe that it is a significant issue and it has to be taken very seriously here.
851 COMMISSIONER WILSON: Right from day one, or do we have, you know, a two to three-year period where there is more flexibility?
852 MS YAFFE: I guess the issue would be that once the service is licensed and out there it will be that service. It will compete for programming, it will compete for viewers, it will create its own brand in the marketplace. I'm not sure how one could change that throughout a period of a licence.
853 I guess, you know, I wouldn't have said it awhile ago, but seven years of a licence goes by very quickly, and we have learned that we should be thinking about the long term for these licenses and that's why we think directly competitive is important.
854 COMMISSIONER WILSON: Mr. MacMillan, you have nothing to add?
855 MR. MacMILLAN: It's hard to get a word in edgewise sometimes.
--- Laughter / Rires
856 COMMISSIONER WILSON: I mean, I would expect you to give that answer.
857 But I'm trying to approach this -- you know, as I sit here and I look at 88 applications, I'm trying to define what "directly competitive" means. Obviously, we are entering into a universe where the niche has become smaller and more distinct as opposed to the analog world. I'm trying to get a handle on, realistically, how direct is the threat? I mean, how many people are actually going to be watching?
858 We have been warned over the last couple of years not to refer to viewers as "eyeballs", but how many people are going to be watching the services versus the analog services which have such strong incumbent position.
859 MR. MacMILLAN: I think that the experience here and elsewhere is that people love choice and the reason why such a high percentage relatively of Canadian TV viewing is spent now watching Canadian specialty, American specialty and Canadian pay is because it offers a huge choice that wasn't on the table five or ten years ago.
860 So I think that Canadians are going to continue to pursue that demand for choice. I think that time will show that our projections on the digital roll out in fact are conservative not optimistic. I can't imagine why people wouldn't want to have a box that can deliver this range of channels, pay per view. There are a lot of other goodies and bells and whistles that come with this technology.
861 And we have to get it right now. You know, you are right. The penetration in day one isn't the penetration of year two or year three, but once you have made your decisions we will all live with them for quite some time, and if the issue of overlap is a certain concern or a certain size on day one it is only going to become a bigger and bigger issue every month that goes by, every month that more and more Canadians subscribe to digital.
862 COMMISSIONER WILSON: I guess you would be getting better at marketing and selling your product as time goes by as well and building your brands and establishing yourselves in the marketplace. So there is that activity taking place on a parallel basis as well.
863 MR. MacMILLAN: Looking back five or ten years ago it is have to imagine some of the pessimism and the nay saying that was used to describe the previous several rounds of analog digital channels. How may channels do we need? Who is going to watch them? It has been proven that people want that choice. I think we are going to enjoy this digital. I know it is a new technology, but nevertheless I think we are underestimating how popular they can be if they are properly marketed.
864 COMMISSIONER WILSON: Thank you.
865 THE CHAIRPERSON: And I suspect, Mr. MacMillan, that we will hear more about competitiveness of Category 1 services when we discuss the migration of analog to digital when the same "eyeballs" -- I didn't say that -- will be watching both and the idea of Category 1, I guess, is to try to increase diversity and protect so to speak the genre so it is not unrelated although it is not a matter that is before us as I said earlier this morning.
867 MR. STEWART: Thank you, Madam Chair. A couple of questions of clarification.
868 In your opening remarks you said that I believe the Health Network has approximately 500,000 digital subscribers and yet I note in your reply of the 17th of July, I believe in paragraph 8 you said that there were already close to 300,000 Canadian subscribers to the Health Network.
869 Could you explain?
870 MS YAFFE: We have been adding them and we are I think just over 500,000 to date -- at this moment.
871 MR. STEWART: And I believe you also mention that there was some analog subscribers.
872 MS YAFFE: There are a small number of analogue subscribers in Class 3, primarily cable companies.
873 MR. STEWART: Can you give us, or can you give the Commission any idea of what proportion?
874 MS YAFFE: I could actually file at the Commission a list of those companies and the size of our subscribers if you would like.
875 MR. STEWART: Thank you very much.
876 MS LYONS: I could add to that that the digital subscribers amount to 433 so it is very minimal.
877 MR. STEWART: Thank you.
878 With respect to the Book Channel, you may have covered this with Chairperson Madame Wylie, but the number of hours with respect to drama that you propose to show, can you just clarify that for the record please?
879 MS YAFFE: I think our commitment was that we would accept a condition limiting us to two things: Films that were derived from published works, and also no more than one film in prime time a night.
880 MR. STEWART: And that is the extent of your commitment, is it, with respect to drama.
881 MS YAFFE: To feature films.
882 MR. STEWART: To feature films. But my question was with respect to drama in general as a percentage of the schedule. Are you in a position to say?
883 MS YAFFE: I am going to ask Barbara to respond to tell you where we are in our proposal today.
884 MR. STEWART: Thank you.
885 MS WILLIAMS: On the Book Channel what we are looking at right now is approximately 20 per cent, actually on the illustrated schedule you will see is dedicated to drama. There were sort of two approaches to this. One is a percentage and one is a scheduling opportunity and the reason why we were asking from a programmer's perspective to have the ability to run one movie a night is not for the cumulative percentage frankly that that allows us because we wouldn't be able to take advantage of that frankly and still hit our Cancon requirements, but rather because as a programmer you want the flexibility to maybe some weeks run a whole week of movies that are related to one author and be able to provide that as a block of programming to viewers and to have that kind of flexibility as a programmer to organize your drama content was what we were after in terms of the flexibility to run one a night although as you will see from our schedule at this point we only see managing four films a week on an ongoing basis in the evenings and still hit our Cancon.
886 MS YAFFE: So I think as a percentage of schedule, we were suggesting somewhere around 20-25 per cent drama would be appropriate prime time.
887 MR. STEWART: Thank you.
888 Those are all my questions, Madam Chairman.
889 THE CHAIRPERSON: Mr. MacMillan I am told that Torontonians don't eat lunch before the sophisticated hour of one. So we will give you five minutes to wrap up.
--- Laughter / Rires
890 Should you want it, should you want it or have an Ottawa lunch.
891 MR. MacMILLAN: After my last comment, Phyllis wants me to go first.
892 Thank you very much. First of all, we have enjoyed this opportunity to present to you. It sort of fun to be the first applicant and to see the direction of the hearing, but we have been looking forward to this for a long time -- a very, very long time.
893 One of the most important reasons why we merged Atlantis and Alliance a couple of years ago was to create a broadcast platform that was big enough and robust enough that we would be able to launch new channels into this new digital world.
894 So this is central to our overall corporate strategy. We know we have the marketing skills, we have the programming experience, we have the channel platform because of the merger, we have the financial resources and we think that the four applications we put in front of you really do not only meet our corporate goals, but more relevantly from your point of view no doubt the needs of Canadian viewers.
895 As I said in our opening remarks, we think that we have hit five very important themes and criteria. We have dealt head on with the issue of wholesale rates which we think is very, very important, Canadian original content, not just more of the same, synergistic applications with existing services and yet creating diversity not just more of the same, interactive TV and Web applications and even though all that technology is not here today, these vertically themed clearly defined communities of interest are going to be the types of programming that will survive when interactive is more a reality, and finally, categories and genres that are attractive to digital box subscribers.
896 So I submit that we are not shy about the future. Our projections for digital penetration are strong, but we think this is not the time for shrinking violets to be here applying for very important privileges. Even tough this is digital, it is still a privilege and that is one of the reasons why our commitments to Canadian content is so clear and so front and centre.
897 THE CHAIRPERSON: That's not a comment about the Violet Channel.
--- Laughter / Rires
898 Because it is not the right phase for it.
899 We thank you for your cooperation, Mr. MacMillan, Ms Yaffe and your team. It has been, I am sure, a long morning. I am sure the term goes by faster, Ms Yaffe, than the hearing.
--- Laughter / Rires
900 Have a good lunch. Unless my producer disagrees, we will be back at two o'clock. Do I hear anything from CPAC? No.
901 So at two o'clock we will resume.
--- Upon recessing at 1240 / Suspension à 1240
--- Upon resuming at 1405 / Reprise à 1405
902 THE CHAIRPERSON: Mr. Secretary.
903 MR. CUSSONS: Thank you, Madam Chair.
904 Our next applicant is Rogers Broadcasting Limited, OBCI, for four new Category 1 services namely ZDTV Canada, Today's Parent TV, the Biography Channel and the Documentary Channel.
905 there is a maximum presentation time of 35 minutes. I will ask Mr. Viner to introduce his colleagues, and I understand, Mr. Viner, after your presentation that there will be a brief break while various members of your party change seats.
906 Mr. Viner.
PRESENTATION / PRÉSENTATION
907 MR. VINER: Thank you, Mr. Secretary.
908 Madam Chair, Members of the Commission. Before we begin, I would like to introduce our panel.
909 I am Tony Viner, President of Rogers Media. With me today are a diverse and dynamic group of people representing the four Category 1 applications we have before you.
910 On my far left is Shelley Blaine Goodman, A&E's "ambassador" to Canada. Next to Shelley is Holly Bennett, editorial director of Today's Parent Group. To my immediate left is Alison Clayton, the Executive Director of the Rogers Cable Network Fund, a former producer, distributor and broadcaster and our "quaterback" on these applications. If we are successful, Alison will be responsible for managing these services.
911 On my right is Joe Gillespie, the Executive Vice-President and COO of ZDTV, the U.S. cable network and integrated Web sit that is all about computing, technology and the Internet.
912 Next to Joe is Peter Raymont, one of Canada's most respected filmmakers and a partner in our documentary application.
913 In the second row, far left, is David Paperny an Academy Award nominated filmmaker from Vancouver, also a partner in our documentary channel application. Next to David is Evan Solomon, the co-founder, along with Andrew Heintzman of Shift Magazine. Next to Evan is Kevin Sullivan, the producer of Anne of Green Gables and Road to Avonlea. Laura Nixon, Vice-President, Finance and CFO of Rogers Media is seated to Kevin's right. Next to Laura is Mike Lee, Vice-President and General Manager of interactive Television Services for Rogers Cable.
914 At the far right of the second row is Jim Nelles, Vice-President, Marketing of CFMT-TV. Finally, Chris Kelly, President of Strategic Council Inc. will address research questions.
915 On the side panel, starting on the far left is Ken Englehart, Vice-President Regulatory, Rogers Communications. Phil Lind, Vice-Chair of Rogers Communications. Ken Stein, Senior Vice-President, Corporate and Regulatory Affairs, Shaw Communications. Steve Stander, Vice-President, Legal and Business Affairs, International and Business Development, A&E Networks. CarolAnn Dolan, Vice-President, Documentary Programming and Administration and Executive Producer Biography, and Andrew Cochran, President, Cochran Entertainment Inc.
916 Madam Chair, Members of the Commission, we are here today because we are both striving for the same thing, the successful roll out of digital services to Canadian consumers. This has been our mutual goal for some time. To that end, the cable industry has invested billions of dollars and the Commission, through its decisions, has encouraged the movements towards digital.
917 Now, however, we both realize that the fundamental driver for digital penetration is programming. Without attractive programming choices, digital boxes will never be anything more than a piece of hardware.
918 In putting together our applications, we first looked at the criteria you set for new programming services.
919 We then examined our strengths. The result is four Category 1 applications that meet and indeed surpass your criteria and build on strengths within our company.
920 MS CLAYTON: The Documentary Channel is a logical extension of our long established relationship with Canada's documentary filmmakers. For over 20 years though Rogers TeleFund, Rogers Documentary Fund and Rogers Cable Network Fund, we have been an unwavering champion of Canadian documentaries. Rogers has earned the trust and respect of Canada's documentary filmmaking community through our ongoing financial commitment to their productions and our knowledge of their craft and their business in the view of Canada's documentary filmmaking community through our ongoing financial commitment to their productions and our knowledge of their craft and their business.
921 In the view of at least 160 Canadian filmmakers who wrote letters of support there is no company in Canada better equipped than Rogers to launch a new programming service devoted to this uniquely Canadian forum of expression. This expertise is only enhanced by our partnering with some of Canada's most respected filmmakers.
922 Today's Parent, Rogers parenting magazine and Web site is a Canadian success story with 17 years experience and more than 700,000 readers each month, Rogers is extending that knowledge to Today's Parent TV.
923 Add in the internationally renowned programming expertise of Kevin Sullivan and Trudy Grant and we have a channel that will be as trusted and as popular with Canadian parents as is our magazine.
924 You encouraged relationships with foreign programming services. The Biography Canada application is based on the strong historic relationship that Rogers and Shaw have established with A&E. A&E is one of the most successful specialty services in North America. It pioneered biography programming and has now launched a digital specialty service in the United States entirely devoted to that genre.
925 ZDTV is a perfect fit with our companies and Shaw's extensive experience in new media, the Internet and interactive television. We have worked together through @ Home Canada, now Excite.ca, to create some of the most innovative audio and video Canadian new media content.
926 ZDTV is the fastest growing cable channel in the United States. It currently reaches over 19 million homes and is the world's leading source of computer technology and Internet programming.
927 These partnerships with Biography and ZDTV give us immediate access to category leading brands, proven marketing expertise and vast established programming libraries. This instant knowledge and know-how will allow us to hit the ground running when we launch.
928 MR. VINER: In your licensing framework policy notice, you noted that in order to facilitate the roll out of digital services, the new specialty services would have to be attractive to consumers. Our research clearly shows strong consumer demand for the categories that we have applied for, with two of our applications, the Documentary Channel and Biography Canada making it into the top five choices for Canadians.
929 Today's Parent TV generates substantial interest -- that is 76 per cent of those parents with young children. Our technology in computer channel, ZDTV Canada, is of interest to nearly 690 per cent of those connected to the Internet. More than 13.5 million Canadians have access to the Internet, a number growing every day.
930 So we see this channel as a very strong driver for digital services. You wanted diversity. There are no channels in Canada similar to what we are proposing. We plan to offer Canadians round the clock documentaries, biographies day and night, programs for parents whenever their busy schedules permit, and shows about technology, computers and the Internet 24 by 7.
931 Most of the programming will never have been seen on Canadian television as there just haven't been any venues available.
932 Contribution to Canadian programming is another important requisite. Each of our applications provides a higher level of Canadian content than that specified by the Commission and two of our programming services, the Documentary Channel and Biography Canada, have committed to acquiring a minimum of 95 per cent of their Canadian programming from independent producers.
933 There is no broadcasting company in Canada better equipped than Rogers to introduce new services which will make the most innovative use of the digital medium.
934 Our position at the forefront of new media and interactive television combined with the award winning Web sites of Today's Parent, Biography.com and ZDTV.com, gives us a decided advantage in a digital world.
935 Our proposed services are based on reliable business plans that combine realistic subscriber projections with affordable rates, high enough to be assured of enough revenue to support quality Canadian programming yet reasonable enough that consumers will be able to afford the channels.
936 And finally Rogers has the proven ability to fulfil our commitments to Canadian viewers and to the Canadian Broadcasting System.
937 We have an established track record in specialty television. We were a founding partner in YTV, playing a significant role in making it one of Canada's most successful specialty television services. In fact, we were there at the beginning when the future of specialty channels was uncertain and when no one else was willing to invest in a programming service for children and young people.
938 We will now address each of our applications in greater detail in the following order: Biography Canada, ZDTV Canada, Today's Parent TV and the Documentary Channel. In the interest of time, we will present each without interruption.
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939 MS GOODMAN: Harry is right when he says that Biography is more popular in Canada than in the United States. We know that Canadians love Biography. The program consistently attracts a larger share of the viewing audience in Canada than in the U.S.
940 MS CLAYTON: Harry also makes a good point when he says that it isn't where a person comes from that is relevant with biographical programming, but rather what that individual has accomplished in their life that is remarkable, noteworthy or inspirational.
941 As part of our research for Biography Canada, Rogers and Shaw have launched a Web site at Excite.ca, asking Canadians who they would like to see featured on Biography. We have received well over 1,700 responses from all across Canada, and the results are both enlightening and entertaining.
942 As of this past weekend, the top six choices include: a Greek folk singer, Nana Miskouri; a Canadian wrestler, Brett Hart; Pierre Trudeau; Wayne Gretzky; Jamaica's Bob Marley; and Garth Brooks. A diverse group, to say the least.
943 The Biography Channel builds on the very successful Biography brand. It is for those viewers who want a more in-depth biographical experience. This is accomplished by matching biographies with documentaries and movies to offer multi-dimensional looks at the people who fascinate us.
944 For example, one programming block could be centred around Anna Leonowens of Anna and the King fame. Anna, who in the 19th century became governess to the children of the King of Siam, is buried in Montreal. Our biography, "Anna Without the King", from a Quebec based filmmaker, is a look at this controversial woman through the eyes of her great-granddaughters who live in Canada. The companion movie would be the 1956 Yul Brynner classic "The King and I". The documentary could be "Nannies", produced for Britain's Channel 4, a critical examination of the relationship between employers and nannies.
945 Another example where Biography Canada could offer viewers an in-depth look at an exceptional Canadian would be centred on Billy Barker, a Canadian farm boy who rose from the trenches in the first world war to become a brilliant fighter ace. From Ocean Entertainment in Halifax, "Barker VC: Forgotten Hero" is a one-hour biography of Canada's most decorated war hero, a man portrayed by some as a crusading knight of the sky, while others, such as Ernest Hemingway, portrayed Barker as an angle of death in "The Snows of Kilimanjaro", which would be our companion feature film.
946 Biography Canada has what it takes to be a successful driver for digital: One, a powerful brand. This is a key consideration when launching a new digital channel in a multi-channel universe. Biography, supported by its monthly magazine, is one of the most popular and recognized television brands in North America.
947 Two, quality programming: another key consideration if digital is to be launched successfully. If Canadians don't like what they see, they will not support the roll-out of digital. A&E's library will make possible the quality that will attract both subscribers and advertisers.
948 Three, a companion Web site: Biography.ca will be able to piggyback on to Biography's existing award-winning Web site, which will make it the ultimate on-line biographical resource, with 25,000 names to search.
949 Four, an economical cost structure: co-locating at CFMT's state of the art facilities will make it possible for Rogers to launch a high-quality, yet affordable programming service.
950 Five, diversity: consumers will be attracted to digital only if it offers something that they currently don't have. Biography Canada, with its round the clock focus on interesting, entertaining people, certainly meets this criteria.
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951 MR. GILLESPIE: As you have heard from Tilde, our virtual host, ZDTV is the fastest growing cable channel in the United States. We are currently in 19 million homes and expect to be in 23 million by the end of this year.
952 We are optimistic that this growth will continue, given the ongoing explosion of the Web and the fact that we have new ownership.
953 ZDTV was launched three years ago by the publishing group Ziff Davis -- thus the name ZD -- publishers of such magazines as PCWeek and MacUser. Late last year Paul Allen, one of the two cofounding partners of Microsoft and an early investor in the channel, increased his stake to become the sole shareholder. Mr. Allen is very committed to the channel, and along with plans to invest significantly in the programming and marketing we will also be changing the name -- which will remove the ZeeD/ZedD issue.
954 I expect that we will have an announcement in the next few weeks, and of course this would be the name of the channel in Canada as well.
955 MR. SOLOMON: Technology is central to every modern society. No single issue will have as much impact on the way we live, and nothing will separate people, cultures and countries in the future more than technology. Every country that wants to remain culturally and economically vibrant must understand technology.
956 From theorists like Marshal McLuhan and Harold Innis, to companies like Northern Telecom and entrepreneurs like Terry Matthews, Canada has been at the centre of many of the most vital developments in technology globally. We have covered the vast geographic distance of this country with one of the most sophisticated communications infrastructures in the world, and we have used it to tie together a probably small and diverse population across an impossibly large land mass. Canada has a rightful place at the table as a country that uses and understands technology at the highest level.
957 Television itself will be centrally involved in the next wave of communications as television and the Web begin to merge, opening the door to a wide range of new programming and new content options. Canadians need to be at the forefront of these developments, looking for the new formats to tell these stories.
958 ZDTV Canada will personalize the subject that is often seen as cold and faceless, dominated by machines, binary numbers and arcane jargon. In reality, technology is about people and things that matter to people. It is about entrepreneurs and it is about risk takers. It is about big dreamers, big dreams and big ideas. And it is about the styles and attitudes that are centrally interwoven into our daily lives.
959 Building on the skills of ZDTV, ZDTV Canada will make technology interesting, useful and relevant. In doing so, we will take away the fear of technology and replace it with the incredible promise and excitement of technology and the need to understand it fully.
960 Canada has watched the rise of powerful American technological clusters, such as Silicon Valley and Silicon Alley radically redefine our economies and lure some of our best and our brightest talent to the U.S. We need to confront and embrace the role that technology has on our lives and turn this trend around to our own advantage.
961 For all of these reasons, it is vitally important that Canadians have a channel that is devoted to the subject of technology. ZDTV Canada is the best choice to make.
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962 MS BENNETT: Parents want to be part of a community of parents. They relish opportunities to share the joys and challenges of raising children. They want to hear about other parents' experiences and recount their own. They want to exchange information and parenting tips. In times past, parents found community by talking with their own parents and other members of the family or by chatting with the neighbours over the back fence. Today, when families are more geographically dispersed and both parents are often working, they need to find new ways to belong to a community of parents.
963 Today's Parent has established such a community of Canadian parents through its widely read magazines and its much-visited Web site.
964 Today's Parent TV will extend that community of parents to television.
965 MR. SULLIVAN: My wife, Trudy and I, as the parents of three young children, have been members of Today's Parent community since our first daughter was born nearly 12 years ago. We came home from the hospital with a copy and a baby. So we certainly were not surprised when the research for this television channel demonstrated such a high level of interest amongst families with young children. I can't count the times we have thumbed through the pages looking for specific advice or information.
966 We are really thrilled to be part of this application for Today's Parent TV. It seems like such a logical extension to the magazine, and we are very excited by the wide parameters of interactive television because of our firm personal belief in electronic neighbourhoods.
967 At Sullivan Entertainment we have been committed to creating interactive environments for all of our programming, having seen the phenomenal success of the Web site we set up this spring for Anne of Green Gables: The Continuing Story. We had a staggering 4.5 million hits in one month alone. And at the request of Yahoo, we also set up a program of chat sessions.
968 We believe in an interactive environment for the dissemination of knowledge. As independent producers, we applaud Rogers' commitment to 65 per cent Canadian content by Year 5. There is currently very little Canadian programming available to audiences, and Today's Parent TV will be a definite stimulus.
969 We also like the proposed programming philosophy -- which is very similar to that of the magazine. That is to say that the channel will not position itself as an expert that comes in with the answers but will ensure that parents themselves are heard from.
970 We know this is a strong partnership with each member bringing their own expertise to the application: Rogers, obviously a leader in new media and interactive television; Today's Parent Group, Canada's leading parenting communications company; Global, one of the most experienced broadcasters in Canada; and ourselves, independent producers with an unparalleled track record in reaching some of the widest audiences in Canadian TV history, with exclusively high quality Canadian programming that wins awards at home and around the world.
971 We are confident in the venture's solid business plan and that Today's Parent TV will be the destination of choice for Canadian parents.
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972 MR. RAYMONT: As one of the founders of the Canadian Independent Film Caucus, which is the industry group representing Canadian independent filmmakers, I really found it extraordinary that these very successful established filmmakers that you saw in the video came out in such public support of the Rogers Documentary Channel. It's very rare, I can say from my own experience, for independent filmmakers to publicly support any applicant for a new channel and even rarer for them to support one applicant over another. It's considered too risky from a business perspective for a filmmaker to put their name on the line in this way. There are only a limited number of broadcasters in Canada that support documentaries and we are dependent on them to licence our work.
973 One hundred and sixty independent filmmakers did come out this time, did come forward. They wrote passionate, personal and very thoughtful letters to the Commission in support of the Rogers Documentary Channel -- a clear indication of how strongly these filmmakers feel about the need for a dedicated documentary channel -- and a strong endorsement from this community that Rogers is the company they trust to operate this channel.
974 I think there are four critical aspects to Rogers' application which won the support of the independent documentary community:
975 Number one, their intelligent and creative programming of independently-produced documentaries which reflect the extraordinary range of creative filmmaking in Canada -- from coast to coast -- from a new generation of filmmakers who represent the multi-cultural reality of Canada today.
976 Number two, paying decent, market-value licence fees for our work, nurturing the production of many new documentaries across the country.
977 Number three, showcasing documentaries produced in French Canada. This is the first real attempt by any Canadian broadcaster to break down the two solitudes in this country.
978 Finally, number four, Rogers' acknowledged experience in the convergence of television and the Internet, the future of documentary production and distribution.
980 MR. PAPERNY: Thank you.
981 Madam Chairperson and fellow Commissioners, the real-life stories that we documentary filmmakers tell are clearly a powerful way for Canadians to find out about ourselves and the world we are a part of. The Rogers Documentary Channel will not be just another channel in the already crowded multi-channel universe. I believe that the documentary programs we produce actually help make Canada a stronger country, a more unified country. Hearing our own diverse stories of love, of tragedy, of courage, this is what constitutes the soul of a nation.
982 Rogers has been there for Canadian independent filmmakers for the past 20 years and they have especially been there for filmmakers like myself, from the far-flung regions, where the distance from the centres of power can be a serious handicap. Rogers knows us and we trust them.
983 On behalf of our many colleagues who have voiced strong support for this channel, we urge the Commission to recognize the commitment shown by Rogers to this vital form of Canadian expression and to grant a Category 1 licence for The Documentary Channel.
984 MR. VINER: Madam Chair, that concludes our presentation.
985 We ask your indulgence while we reassemble our group to respond to your questions.
--- Pause / Pause
986 MR. VINER: I think we are assembled. We would be happy to respond to any questions you may have.
987 LA PRÉSIDENTE: Madame Bertrand, s'il vous plaît.
988 CHAIRPERSON OF THE COMMISSION: Good afternoon, Mr. Viner --
989 MR. VINER: Good afternoon.
990 CHAIRPERSON OF THE COMMISSION: -- and all your team, all the family and partners.
991 I will follow the path so carefully shown and traced by Andrée, Mrs. Chair, and also the first applicant this morning and really follow the same pattern. So I will start with the general questions and then we will take a break and I will come back for the individual questions on specific projects.
992 Let me start by telling you and refreshing your memory, I'm sure you have taken some notes, on this morning's outline, but we will be talking about criteria and bringing into the criteria what also should be our consideration over competitiveness and also diversity versus synergies. I think it's an important element of our consideration going forward to make sure that we are strengthening the broadcasting system in Canada.
993 Then we will talk about implementation -- should there be a drop-dead kind of date -- and talk about independent producers.
994 Then we will come to Canadian content and Canadian programming expenditures.
995 We will conclude this part of the discussion with the matters concerning interactivity. I will need your guidance because I'm quite novice into those areas, so I will have to be taken by the hand to really understand what you mean.
996 Let's start with criteria. If you were to be at our place after four weeks of hearing and would have to weigh the different applications but first try to make it in a framework or a more theoretical level, what for you would be really the criteria that are the most important going forward?
997 I read in your presentation that for you, at the end of the day, it is really to ensure the digital rollout, and for that good programming is necessary of course, but how would you do that?
998 MR. VINER: Madam Chair, this has been the subject of some discussion among us and I am going to ask Alison to respond to the order of the criteria.
999 I would just like to note that this is perhaps a unique time in history in that the programmers and the distributors and the Commission together all have the same objective which is to ensure that we accelerate as much as we possibly can the roll out of digital services. So we have had some debate about the most -- and discussion and have reached consensus and I am going to ask Alison to address those issues.
1000 MS CLAYTON: Thank you.
1001 We believe that the first criteria really has to be the attractiveness of the service. We want to get boxes into homes and it has to be attractive basically in two ways. One it must be a very attractive genre. It must have high appeal, it has to be something that consumers say, "Oh, yes. That's great. That sounds like an interesting channel to me". But it is very important that it is also an attractive looking service, not just attractive in its appeal, but this is going to be a very, very crowded universe. There are going to be hundreds and hundreds of channels and just because these channels are digital doesn't mean that Canadians are going to accept a lower quality than they currently get on analog.
1002 So when we say "attractive" we mean, of course, in terms of appeal, but also the look of the channel and this quality has to apply to both the Canadian programming and the foreign programming. For our second choice, we basically would like to offer up a tie if we could that it would be between diversity and the contribution to quality Canadian programming.
1003 Diversity obviously these are going to be successful if there is nothing else out there, so that is going to be very important. Does this add anything to the Canadian Broadcasting System? Will this attract Canadians to say, "Hey, I am going to go out and get a box because I can watch channels that I don't currently see". But again we go back to the point that it must contribute to Canadian quality programming.
1004 So for example, our application for ZDTV Canada it will be all new, brand new programming. There is none out there, and we have partnered with the largest producers of this type of programming in the world. So we will have an all new service. None of this will have been available to Canadians before.
1005 Similarly with our Parenting Channel. There is very little parenting programming available and so we will acquire, cause it to be produced and this will be new to the system.
1006 In terms of the quality Canadian programming, both the Biography Channel and Documentary Channel are going to have 95 per cent of their Canadian programming acquired from Canada's independent filmmakers. This is a very solid contribution to this industry.
1007 The next criteria for ranking them would be the innovative use of the digital medium. We at Rogers believe that we are leaders in this area and each of our applications will take full advantage of our abilities to offer digital to our consumers. Of course, the application of ZDTV Canada is truly an innovative use of the digital medium, but they all will be. It is just that the technology has to work for the type of programming that will be offered.
1008 The next point that we would consider in ranking is very much the ability to fulfil proposed commitments. You need to have people that obviously can deliver on their promises, but if these channels are going to be up and running within let's say six months of the decision they must hit the ground running. We need to have channels that can deliver quality programming right away. They can't fill the schedule with bulk programming that is not of high quality. This will be a true turn off to Canadian consumers.
1009 And then the last point would be affordability and we believe that all our applications meet that criteria clearly. There must be enough money there that good quality Canadian programming can be produced and yet it cannot be so expensive that the consumer is turned off going with digital.
1010 CHAIRPERSON OF THE COMMISSION: I noticed that in your description you make no reference of contribution to Canadian programming as such -- Canadian programs as such. You talk about quality programming, you talk about diversity, you talk about bringing unique experience. What about Canadian programs and the support to Canadian programs per se?
1011 MS CLAYTON: In each of our applications we start off with 25 per cent Canadian content in year one and grow it through the terms so that two of the channels were at 50 per cent by year five, and with two of the channels we hit 65 per cent by year seven.
1012 We feel that we need to have a strong channel to begin with, and with 25 per cent Canadian content it will mean that our percentage of gross revenues which will go to licence fees to Canadian producers will allow us to pay very healthy substantial licence fees for the programming and this will benefit Canadian producers in terms of what we pay them.
1013 MR. VINER: If I could just clarify for a moment, Madam Chairperson?
1014 I believe that Alison did rank Canadian programming sort of tied for number two. We said, "Production of quality Canadian programming". So "quality" and "Canadian" in her description just in case you thought we had left it out. We would have probably had attractiveness, diversity and Canadian tied for first. I didn't know if you would allows to do that. But if you will, we would like to tie those for first.
--- Laughter / Rires
1015 CHAIRPERSON OF THE COMMISSION: Thank you. Going from there, and we will be talking about the business plan you are proposing, kind of a model you have developed for everyone, not specifically immediately keeping it general, but first let's keep with the criteria and considering the balancing act, we will have again to be doing it, but this time it will be probably more difficult given the quality of the applications and the multitude of the applications.
1016 Can you help us through over the kind of ranking you have done for the criteria how to look at the matter of competitiveness with existing and upcoming channels? How do you see that? Especially with the experience you have being in the business, and from different points of view too, of being in specialty channels as well as in direct tie with the consumer through the cable systems. It would be important to us to understand how you see the competitiveness criteria.
1017 MR. VINER: Well, I was present this morning, Madam Chairperson, when the earlier panel responded to this and I would have to agree with them that the nesting concept is self-serving to those incumbents. The Commission has, I think, in the past heard arguments with respect to this concept, specifically when they licensed CTV NewsNet or News One, I think it was at the time, over CBC NewsWorld to argue that the headline news service was more appropriate for the system and used what I believe to have been essentially the nesting argument.
1018 I think a similar argument was made by CTV again successfully on the licensing of SportsNet where TSN argued that they would be the better owner of a regional sports service.
1019 So I think -- and you and I, Madam Chairperson, have been at several hearings over time where people have argued that if you were going to give a licence you ought to give it to them because they would be most hurt if you gave it to somebody else. I don't think I have made those arguments, but you have heard them before.
1020 So our view is that diversity of ownership in this particular segment of the industry is crucial to its development. We believe that none of the services -- incidentally we believe it is clear -- that we are proposing incidentally are directly competitive and I think that is generally shared by the other applicants and by existing services.
1021 So in our case, I think that it is clear. We think that the Commission should look at these, I think, some have argued that you should look at it on a case-by-case basis on the basis that you will know the difference.
1022 In our particular case, we think it's clear. But we do believe that diversity of ownership is important and that for digital rollout to occur successfully, we do need diverse programming formats but because someone plays a sub-genre of an existing service can't disqualify it, in our view.
1023 CHAIRPERSON OF THE COMMISSION: Okay. How would you consider, on one hand, the diversity of ownership and the need that you are talking about yourself when you say of the advantages of considering your applications and the fact that synergies will be played with CFMT and, you know, that there is an expertise there, or the Parent Magazine, or the Web sites that exist, or the partners of A&E or independent -- how do you see that? Is it just on a case-by-case?
1024 What would be a general kind of approach you would have or that you would recommend to the Commission to have?
1025 MR. VINER: My opinion, Madam Chairperson, is that the concentration should not occur just in one sector. I think the Commission has previously determined that ownership or domination of a particular genre is not necessarily in the best interests of Canadians. Now, I know CRTC decisions aren't precedent-setting, but I think the Commission has previously determined that, and I would agree with it.
1026 I similarly agree that synergies are good for services that we are describing because it is going to be a challenging environment, and what we bring in terms of synergies are not synergies in terms of this sector but other synergies that -- the magazines, the production capability at CFMT, I think those are areas, but we can bring fresh, new programming ideas, and I think that is one of the things that is going to be able to drive the digital tier, if we can have exciting new ownership and exciting new services.
1027 CHAIRPERSON OF THE COMMISSION: Tell me, other than the condition of licence that we can impose on licensing services and saying, "Well, you are kind of trying to fence a type of specialty channel", don't you think that owning already a more general kind of licence and getting more a niche with the digital universe would help in bringing diversity to the viewer because then you can more easily be distinct and not create overlap? Would you have a comment about that?
1028 MR. VINER: I think that's an argument in favour of it. But, frankly, I don't find it a compelling argument. I think that, frankly, the business imperative of ensuring that you are as differentiated from your competition as you can possibly be is equally compelling. So for me the overriding consideration is the differentiation of ownership. I think an intelligent businessperson, not that I necessarily qualify for that description, would try to differentiate the services. So I think that that is just a business imperative that anyone will follow.
1029 CHAIRPERSON OF THE COMMISSION: What about access to programs? Would you see that as a challenge if you are not vertically integrated from one type of licence to the other?
1030 MR. VINER: I would be happy to have Alison respond to that. But, no, our view is that there is programming available and that we can have access to it. We don't think that there is a scarcity of supply.
1031 Alison, do you want to comment?
1032 MS CLAYTON: Access to programming I think is going to be more difficult in the early years because, you know, when we are offering non-competitive channels, the reason we believe that our channels, for example, are not directly competitive is because there is very little, if any, type of programming out there already. So we believe that there has to be a ramp-up period to make sure that that programming is produced.
1033 So, for example, when we partner with two established players that already have large libraries of the type of programming that we want to make, the signature programming on the channel, we believe that that will allow the time for gestation of an increasing amount of Canadian programming.
1034 So, as you will notice, our reliance on our foreign partners' programming does go down every single year. You know, when we go out into the market to have biographies produced, documentaries produced, Canadian ones, the filmmakers will need some lead time to get their programs going, and so we see this as an opportunity to start with an extremely strong service and then build up, gradually but steadily, 5, 10 per cent every year with the Canadian programming.
1035 ZDTV, for example, is the largest supplier of this type of programming in the world, so that will not be a problem. The A&E library is very extensive. While there is very little Canadian programming available, there are programs definitely in this genre available from the United States, Australia, Britain, overseas, so we will have access to that while making sure that Canadian programs are produced as well.
1036 MR. VINER: As always, Alison has brought me from the general to the specific. She hates to correct me, but she does it frequently.
1037 The fact of the matter is she is right, we are bringing forward today proposals that anticipate that we will have secure programming supply, and at the same time be able to produce the highest quality Canadian programming. So these applications, if we can go to the specifics here, do have secure programming supply arrangements.
1038 CHAIRPERSON OF THE COMMISSION: Thank you.
1039 Let's move now to implementation date.
1040 Everybody now is talking about the first of September of 2001. What is your view about the necessity to impose a date by which, if you were granted your licenses, Category 1, you would have to be launching within a certain period? Do you see a necessity for more flexibility, less flexibility? How do you see that?
1041 MS CLAYTON: Madam Chairperson, certainly in our case, the September 1 date would be easily achievable. I won't go through all the reasons again, but I just mentioned that we already have very solid programming supply arrangements in place and I would encourage that everybody does launch at the same time, because I think if we are going to introduce digital rollout successfully, we want to have as attractive a package as possible for the consumer to say, "I'll take the box, but you know what? It's coming with 10, 13, 15 pretty good channels so it's worthwhile." I don't think they should just, you know, come on ad hoc.
1042 CHAIRPERSON OF THE COMMISSION: But you would see the necessity for a common launch, is what I understand.
1043 MS CLAYTON: Yes. Yes.
1044 CHAIRPERSON OF THE COMMISSION: So that it would imply a lot of rigidity somehow on the necessity to --
1045 MR. VINER: Yes. An imposition of a date, September the 1st we have indicated would be fine for us, but we think there is not going to be huge amounts of money from marketing and so forth and it makes sense that we do it all together and all at the same time.
1046 As Alison has already stated, I think we should go with our best offering right out of the gate.
1047 CHAIRPERSON OF THE COMMISSION: What about Category 2? Do you have the same view on those?
1048 MR. VINER: No, I don't have the same view.
1049 I think the Category 2s have to make their own negotiations and I think necessarily are going to have to wait until the Category 1 services are lined up and ready to go and so forth. So I don't think it's as necessary to impose the strict implementation that's required.
1050 The other thing I think is that they are not -- it's not as if they can't be competitive with one another, so the idea of hatching a service or holding it back and protecting a territory, I don't believe is as relevant.
1051 CHAIRPERSON OF THE COMMISSION: Thank you.
1052 Independent producers, you have heard the conversation we had this morning with Alliance Atlantis, you have some partnering with independent producers that are well-represented here today but also support some independent producers -- some investments and some independent producers. So what is your view in terms of when you talk about independent producers? Who do you talk about and how do you see the affiliation rule play in the Category 1 licences?
1053 MR. VINER: I would ask Alison to respond.
1054 MS CLAYTON: With our documentary channel, 10 per cent of the channel is with five independent filmmakers, which is, you know, very small, -- it's 2 per cent each. There are no special arrangements, there are no programming deals. We invited the filmmakers to be part of the application because they are so well recognized in their field.
1055 If Rogers Documentary Channel is going to be, as we hope, the voice of independent production, then we want to make sure we have access to advice, consulting, input in that arrangement, on the documentary channel.
1056 With Today's Parent, our partnership is with Sullivan Entertainment and there are no special requirements of program acquisition. We would be more than glad to accept a condition of licence that would limit any programming but, certainly at this point of time, Sullivan's expertise is in family drama, and this is not the role of Today's Parent TV. This is very much an entertaining but helpful channel for parents; it's very informational, instructional. We have a tiny, tiny amount of drama and, you know, we could, at some point, look to acquire from Sullivan, but we are looking at such a small per cent of the schedule and, certainly, with Sullivan Entertainment, their programs are committed to other broadcasters in the Canadian Broadcasting System so many years down the line that it would be a very long time before any of the Sullivan catalogue would be available to the channel.
1057 But, as I said, we would be more than prepared to accept a condition of licence if so suggested.
1058 MR. VINER: With respect to affiliated production companies, though, Madam Chairperson, we have no such affiliations. We would be happy to accept a restriction on dealing with production companies that -- in which we hold an interest. Although there are none. So that's why I'm so free to offer it.
--- Laughter / Rires
1059 CHAIRPERSON OF THE COMMISSION: But the world changes rapidly and --
1060 MR. VINER: Seriously, that's a very good point, and we understand that, and we would be happy to take a restriction.
1061 CHAIRPERSON OF THE COMMISSION: And that would be for your partners, too, and, you know, same kind of consideration we were talking about earlier this morning.
1062 MR. VINER: Absolutely. Yes.
1063 CHAIRPERSON OF THE COMMISSION: You feel that it's still warranted to have that kind of preoccupation and concern in the digital world. Beside the fact that you are not yet concerned because you don't have any interests, do you feel that it's appropriate to keep that measure in the going forward?
1064 MS CLAYTON: I think, certainly, in the early years, when the numbers are so small -- and I mean there's this David and Goliath -- that it's not nearly the same consideration because there won't be the revenues and the licence fees available to compete with the more established analog players. But, as you did say, the world changes and, with luck, digital roll-out will be very successful, the numbers will be even better than we predict and so, there could come a time when it would be more of a concern. So, yes, it's probably a good idea.
1065 MR. VINER: We, as you know, Madam Chairperson, are -- our applications differ in their use of independent production. ZDTV Canada is a newsworld, constantly ever changing, and so, that's more like a news service than it is like a production service. And those in Biography Canada and Documentary, we are relying on independent producers and we do see the licensing of these Category 1s as a stimulus to that industry sector.
1066 CHAIRPERSON OF THE COMMISSION: Thank you.
1067 Now, let's talk about your business plan and the relationship to Canadian context, because I would like to make a correction. I think we share the same goal of seeing the roll-out of digital but, of course, the Broadcasting Act has many objectives to fulfil and one is really to make sure that the broadcasting system is enhanced by choices for the consumer at affordable prices but, also, it will be an opportunity to develop Canadian context. So we are looking for Canadian content. We would, for example, roll out digital, without any consideration to make sure that there is a proper space for Canadian content.
1068 I would like to understand. You start, in all your projects, with Year 1, 25 per cent Canadian content; Year 2, 35; and some ramp up quite high, others a bit lower but, you know, very in line with what was the framework. You have alluded to why that approach, but I would like you to make us understand clearly why you have that approach because it's a bit lower in Year 2 and Year 1 than it is for other applicants. So, given that criteria of Canadian content is important, we would like to know what's the quid pro quo.
1069 MR. VINER: Absolutely, Madam Chairperson. I will all ask Alison to go into this in some detail.
1070 I will tell you, when we were forming the applications, there was a great temptation to just get into the bidding war, higher and higher and higher volumes of Canadian content. Our strategy, though, for the reasons that Alison will outline, was to try to provide higher licence fees to take into account the kind and nature of the programming that we hope to provide on these services and so that we would try hard to ensure that we provided quality and were able to build our Canadian capability over time.
1071 Alison, can I ask you to...
1072 MS CLAYTON: First of all, in terms of percentage of 25 per cent, that is at least 200 hours of new Canadian programming -- now, new to the service. If you -- I know it's a general question, but it really does differ with each of our channels.
1073 With ZDTV, for example, because it is quite similar to the CNN of technology, we are actually looking at about 350 to 400 hours of totally brand new, never-before-seen programming, right out of the gate in Year 1.
1074 With Today's Parent, there will be a minimum of 200 hours of new programming. Again, it's not in the system; this will be new.
1075 Biography, it will be between 150 and 200 hours of new, in Year 1.
1076 And similarly with Documentary.
1077 But I would like to point out that when we met with independent producers and we talked about this -- because we have certainly learned over the years you don't want to put together an application in isolation and then just sort of present it as a fait accompli; and having been a producer myself we talked about this -- and, for example, with the documentary filmmakers, we said, now, we can go with a higher amount of Canadian content but there's limited revenues in Year 1 -- we are predicting less than 800,000 subscribers; there's not an awful lot -- but we could pay some pretty good healthy licence fees, but we are listening to you, "Are you looking for volume? Are you looking for higher licence fees and we will buy fewer hours to begin with? Or do you want us to buy in bulk but we can't pay as much?" -- and certainly, in the letters that you saw to the Commission, we were commended and very much the filmmakers said, we supported Rogers because these are significant licence fees.
1078 Documentaries are generally an expensive type of programming. They are not quite as expensive as drama, but they do range from anywhere from 50,000 to 500,000 for an hour. And we need to make sure that we don't fill the service, in Year 1 with inexpensive talk shows about documentaries. That's not what it's all about. And we can't, with the licence fees, acquire 200 hours of first-run documentary programming. But there are many wonderful documentaries that are out there that we can give licence fees to, for a second window, that will make the difference between breaking even and not covering the cost of production with the filmmakers -- and it will just be a short aside, but I would really like Peter Raymont to address that, because he was very involved, in terms of talking about licence fees.
1080 MR. RAYMONT: Thanks, Alison.
1081 I talked to a lot of independent filmmakers across the country, when Rogers was figuring out what to propose, in terms of licence fees and percentage of Canadian content and, you know, there's so many times when you are $8,000-$10,000 away, in adding up your various Canadian licensing fees, from being eligible for Canadian Television Fund and Telefilm Canada financing and you don't quite make it because you need that -- it's often around 8,000 to 10,000 that you are missing.
1082 And so, we discussed this at length and thought that this was, by the far, the best way to go: higher licensing fees at the beginning and less number of hours, less volume.
1083 And when you compare it to the other applicants, who are offering $2,000 or $3,000 per hour licensing fees in the first year, there's no question, I mean that's one of the key reasons, frankly, why the independent production community, 160 letters, are support Rogers.
1084 CHAIRPERSON OF THE COMMISSION: Thank you.
1085 So I will have to reassure myself and reassure my colleagues that it's not because you are hoping, by Year 5, that there will be no regulation over digital.
1086 MR. VINER: Not at all. We are looking forward to it.
1087 CHAIRPERSON OF THE COMMISSION: No, of course not.
--- Laughter / Rires
1088 CHAIRPERSON OF THE COMMISSION: That was one of my nightmares during the reading I had been doing.
1089 Concerning the Canadian programming expenditures, there has been some discussion from the public notice and that again was discussed this morning, it will be discussed in the forthcoming weeks. What is your view on the approach we have been taking of calculating, as of year 2, based on the revenues for the following year to be the expenses in Canadian programming, and that another hypothesis would be to go for a licensed term rather, which would allow more flexibility? What's your view?
1090 MS CLAYTON: Madam Chairperson, when we put together the business models it was based on the historic manner in which the Commission did not set a percentage of gross revenues in year 1, and then from year 2 forward it was based on a percentage of the previous year's gross revenues. So that is how we calculated our spending. So it is more or less with very slight variations but more or less the same each year right through to year 7.
1091 MR. VINER: I'm not sure that we have done the calculation, though, based on this morning's discussion. You are asking whether or not it would be better to average it? I'm not sure we have done that calculation yet. But we would always opt for greater flexibility rather than less. But it's clear that the commitments that we have made in our applications stand.
1092 CHAIRPERSON OF THE COMMISSION: So I understand that you would be prepared to go for more flexibility, if that was the view that was developed through the process and eventually be the position of the Commission, but if not the historical approach --
1093 MR. VINER: That's correct.
1094 CHAIRPERSON OF THE COMMISSION: -- is one that you are capable of living with.
1095 MR. VINER: Absolutely.
1096 CHAIRPERSON OF THE COMMISSION: Okay. And it's feasible in your business plan?
1097 MS CLAYTON: Yes.
1098 MR. VINER: Yes, it is.
1099 CHAIRPERSON OF THE COMMISSION: Okay.
1100 Now interactivity.
1101 First, would you, concerning the Act, you know, that will enter into effect in January 1st, 2001, the Protection of Electronic Documents Act, will you obey or abide by this Act and make sure that all your undertakings, if you were to be licensed, will conform?
1102 MR. VINER: Yes. We have actually appointed privacy officers.
1103 CHAIRPERSON OF THE COMMISSION: Okay. So that being aside, I'm glad that you are going to be running a legal undertaking if you are granted a licence.
1104 Let me understand, please, what you intend to do. I hear lots of things, I have been reading a lot of things, seen a lot of things. I would like to understand on a general -- because I know that there are differences, especially between ZDTV and the other ones.
1105 What is your view and what will be immediately available to the viewer? Also, what will I see on my screen -- that one -- and what difference will there be between my computer screen and my TV screen? What kind of equipment will I need at home?
1106 So please...
1107 MR. VINER: Because we thought you might ask this question and because I was incapable of answering it, we have brought with us Mike Lee. Mike is Head of Interactive Television.
1108 I should say, for purposes of clarification, I guess, there are two initiatives. One is interactive television, what's going to happen on your television screen. The second is the Web initiatives that are associated, which are a little bit different.
1109 So just with that clarification, Mike, perhaps I could ask you to describe what's going to happen and what's going to happen on the television set.
1110 MR. LEE: Interactive television is, at this point, a fairly confusing space, and it's even confusing within the industry, but the best way to look at it is sort of an evolutionary path: where we are today, where we are within 18 to 24 months, and then sometime beyond five years.
1111 So in the early stages of most of the applications, interactivity will be defined basically as a complementing Web site. There will be a Web site that's available on a PC that you will be able to go to and there will be probably throes from within the programming over to the Web set and then from the Web site referrals back to what's on air.
1112 Within the period of the next 12 months and, actually, within the period of over the next probably three months, you will see the introduction of the ability to actually access that Web site over a television. So that would be the first sort of real convergence of an Internet-based Web sight available over a television set and that will be through a first generation set-top box.
1113 So with a set-top box, the remote control that our current digital choice customers already have, and the addition of a wireless keyboard, they will be able to simply go from the television, the on-air product, over to a channel that's dedicated to Internet access, type in the URL that's being referred from within the program, and access that service on the TV. They will also be able to do e-mail and access some customized content.
1114 Within the next 12 to 18 months you will see the introduction of what is essentially a second generation in interactivity.
1115 So in the first generation you have sort of the Internet access and interactivity and the on-air product separated. They are not an integrated product. In the second generation, it's actually an integrated product. So you will be watching the television program and the interactivity that was originally available only on the Web site or on a specialized channel dedicated to the Internet will then be integrated into the television program itself.
1116 So this is what everybody sort of classically thinks of as interactive TV. I could be watching a documentary, similar to the way people watch -- when you're watching like pop-up video and an icon comes up that has a little bit of information, on that documentary the independent producer could integrate interactivity into their documentary and provide more information about that particular piece of information that was on TV at that time. So it's synchronized to the actual program itself.
1117 The types of interactivity that can be integrated at that point are things like more information. You could have a chat or instant message. So you can actually talk with everybody else who is watching the show or just your friends who happen to be watching the show. You could integrate interactive in the form of, like, games, so if it was -- or a demonstration of software, so if ZD Net -- sorry, ZDTV, and they were talking about a specific software application, you could actually pull up the software on the TV and actually try it.
1118 Also, there is the sort of common example of being able to buy whatever is on TV, so there always is the opportunity to do a transaction or t-commerce.
1119 In the fifth year to the seventh year, you will probably see the introduction of streaming media into the experience, whether that be streaming audio or streaming video. The way that will effectively impact the nature of the programming is that you will move from what has traditionally been limited to just simply being a linear experience -- I start on the hour, I watch for the next half hour, and it is absolutely linear -- to being a non-linear experience, I could potentially introduce other video clips or audio enhancements that would take me off of that linear half/one hour track.
1120 So that essentially is what we are going to see over the next probably three to five years.
1121 MR. VINER: Madam Chairperson, I don't want to unduly prolong this, but it's an important area. We have with us Joe Gillespie who is from ZDTV in the United States and he can tell you a little bit about how his channel, if you would like, how it's using it.
1122 Then, perhaps very briefly, Andrew Cochrane is a producer who is producing now some programming with interactive capability.
1123 I will, by this instruction, ask them both to be brief.
1124 Joe, could I ask you to --
1125 MR. GILLESPIE: Yes. You've got it, Tony.
1126 First, I would like to say that I thought that Mike's timeline and chronology, as it relates to the crawl, walk and run of interactive from what today we describe as manual convergence as a two-box solution between the personal computer and the television to the one-box solution of the future, I think is spot on.
1127 I would say, though, and I think somebody mentioned this in the earlier panel this morning, that we really should pay very, very close attention to the manual convergence that is happening today, because consumers aren't waiting for us. I think from that behaviour we can learn a lot and prepare ourselves for what will be a fully converged future.
1128 At ZDTV in the US, the convergence behaviours are pretty incredible. Right now we have about three-quarters of a million to a million subscribers coming to our Web site every month. Of that number, 50 per cent claim to actually be watching our television channel while surfing our Web site at the same time.
1129 What they have done, as digital consumers, people who are very ambitious about the use of technology from both everything at work to lifestyle, to help improve all sorts of different facets of their lives is that they want to interact with the programming. They want answers to their questions. They want to be able to basically share their thoughts with others in their community. So they really view interactivity today very much as a chance to participate and develop a sense of community, obviously a sense of community they have actually found elsewhere.
1130 On the channel right now we have basically three forms of interactivity going on. We have chat, we have electronic mail -- by the way, I should say the live chat actually goes on, though, on the screen.
1131 So, for example, we have a Call for Help show with Leo Laporte, who is our host, who could be talking about installing the latest version of Windows and at the bottom of our screen we would have a live chat session going on among users about the struggles or positive experiences they were having with it.
1132 We also have e-mail so people can e-mail Leo and other members of our staff with questions and so forth. And then the last, and we think a pretty revolutionary aspect to our convergence and our activities the NetCan Network where through these golf ball-like size video cameras that now for $199.00 U.S. you can put on top of your personal computer. We have viewers sending video pictures and images of themselves into our studios. Basically, they have created a virtual ZDTV studio across the United States.
1133 The had this to correspondence, they add this to colleagues and their peers to help other people with their problems. We actually use the NetCan Network also to reach out to people in the high-tech community when there are virus problems such as Bubble Boy and Melissa that popped up.
1134 The NetCan network from a convergence stand point, we call it a defining feature of our channel and ZDTV would not be the experience it is today without those levels of convergence and I think one, first and foremost, it is what digital consumers demand and secondly it just makes for a better television experience, especially around technology and I will end on this note. When we started the channel, everybody worried that it was going to be two people in lab coats and it would be deadly boring and the convergence aspect is really what has helped us make it engaging, entertaining, informative, fun and to help our viewers really feel that they are as much a part of this as anyone else.
1135 And the last thing -- I said the last was my last, but this is really my last -- is that the opportunity here when viewers see this kind of convergence going on today in this manual world, I think it is incredibly important because what they are doing is they are helping us understand the behaviours, as I said before, for the one-box world and I think we can all learn a great deal from that.
1136 MR. COCHRAN: Madam Chairperson, fellow Commissioners. Our attitude towards producing interactivity is to start with the premise of not the technology, but how does it enhance the storage, how does it make it a richer experience for the viewer and so with the documentary that we are producing right now, actually fortunate to be doing it with CTV, it is a documentary about Danny Doherty who you may know was the original member of the Mamas and the Papas, the lead singer to the Mamas and the Papas from North end Halifax, and this story documents his growing up in Halifax and rising to the top of the rock and roll revolution, and reporting back on the story of what happened from his point of view.
1137 That to us presents a number of interesting entry points to make use of interactivity, while it is a linear story, very much, and that is the best use of television, if you will, to this point, traditional television to present the linear story, as Mike Lee suggests, and to future proof the program we are embedding a series of tigers so that at given points during the program you are able to see more biographical information about the various people who we are talking to at the time in the program or extra background about the places that we are visiting and seeing.
1138 As well, we have a very rich legacy Web site to the program that you can visit after seeing the show. We are populating this with a lot of extra material that is not available for the time constraints of the program. For example, we have a joint venture with the Canadian Press for broadband information, and by virtue of that we are able to present a complete interactive timeline of the 60s during the period that Danny's story is taking place. So at any given point during his story you can go and see what were the news events that were happening at the time and what were some pictures around those news events. So you can see how that was influencing the music and the experiences of the time which he speaks to throughout the show.
1139 As well we are able to present some of the interview material that doesn't make it into the two-hour television version. We are able to augment on the Wed site, both in transcript form and for broadband users in moving video, to see some of the extra clips that they have.
1140 We are also talking about the ability to remix some of the music in the program to get a sense more of how work goes into music so the ability to take some of the songs that are presented and try at home yourself to rearrange the vocals and rearrange the music tracks, et cetera. And also very much to create -- to provide a sense of community and it comes up a lot when talking about the new world to be able to provide the opportunity for users to be able to join in not only the discussion forum, but also to post some of their own memories of the 60s and meld that with some of the material we have on and then be able to show that to others.
1141 So again, the intent is a very rich backhand environment that draws on the best of each of the worlds. I think that is one of the most important things, where television does best what it does, the Web does best what it does, interactivity does best what it does, and that is really the promise of digital TV, is how to bring all that together and deliver it through the home, your home television set.
1142 CHAIRPERSON OF THE COMMISSION: Well, thank you. We will certainly have a chance to pursue that with each project, but let me understand because nowhere did I see any costs or revenues linked to interactivity and what is your view? Why is it, first, to haven't included it in your business plan, and secondly, who is going to pay for it? We are hearing that in terms of production you can use some material that is already shot so, you know, it is not necessarily extra cost, but I suppose in some cases it will be extra cost at the production level. It certainly is in terms of the set-top box.
1143 How will it be accounted for? Who is going to pay for it?
1144 MR. VINER: Well, I think again, I would like to separate the Web activity from the interactive component. I think I can answer simply that the interactive component currently is paid for by the producer and reflected in the licence fees.
1145 With respect to the Web site, I am going to turn it over to Mike Lee, but just to remind the Commission that of the four proposals that we have in front of you, three already have -- we don't have to build Web sites which can be expensive. We have existing strong, robust award-winning Web sites.
1147 MR. LEE: I think this is one of the great strengths we bring to these applications in addition to our programming strengths, is that we have an extensive amount of experience in the interactive Web site and interactive side of the business.
1148 Since 1994, we have built at this point over 20 on-line businesses that survive on their own, are very successful. We employ over 200 people actually working on those initiatives.
1149 We bring a significant amount of experience, knowledge and understanding of what it takes to be successful on-line and we have done that through successes and we have done that through failures and one of the things you have to learn through this process is that you are with any of your on-line initiatives, whether they be Internet-based or interactive-based, competing against everybody else who is available out there on the Internet because if you don't produce a quality product you are simply one click away from going to another product.
1150 And so while the programming component of the Category 1 applications are going to be must carry, the interactive Web site is not must carry, so you have to be able to present a case, a compelling product and a business model that allows you to support that in a way that will be determined and classified as being world class.
1151 So in the four applications, we have not broken out in the cost. We have roughly about $750,000 allocated for each of the applications.
1152 CHAIRPERSON OF THE COMMISSION: How much did you say?
1153 MR. LEE: Seven hundred and fifty thousand dollars, and I will describe each allocation in more detail, but in each particular case that $750,000 is deployed differently depending on the nature of the existing assets and the relationship we have.
1154 So with Biography -- actually, I will just describe one more thing. You should think about the cost structure of interactivity under three different large categories. One is infrastructure, basically the cost of getting something up in terms of the technology and all the code and development that needs to be done.
1155 The second one is content development. So after having built all the infrastructure to be able to deliver that product, you now need to invest in the content to be able to create a compelling experience for your viewers.
1156 The third one is ongoing operational costs. So with Biography Canada, we have a business relationship with Biography and Biography has done an exceptional job of building out biography.com.
1157 The intent and the plan is to create a biography.ca Web site which cherry picks the specific content that would be relevant to Canadians and leverages off the existing infrastructure.
1158 As opposed to having to dedicate that $750,000 to trying to build something from scratch, we can take the infrastructure that biography.com is building and continues to build and then pop and focus that $750,000 on purely just content development. It really means that all the money is being dedicated to adding value to Canadians who are using the product.
1159 In ZDTV we also have a similar type relationship where we have a business agreement with ZDTV where they will Canadianize and put a Canadianized front end of ZDTV.com, leveraging off what we collectively agree upon are the most relevant pieces of infrastructure and content for Canadians and then, again, taking the $750,000 and dedicating it purely to content development.
1160 With Today's Parent, Today's Parent has an outstanding Web site today. As a complement, sort of a conversion strategy for the magazine, they have already gone out and created a separate Web site at Today's Parent. That one actually is run as a separate P&L because we found at Rogers that the best way to make sure that we can focus the business people on producing a profitable online business that complements an offline business is to separate the P&L.
1161 With Documentary Channel, we will be leveraging off our business relationship with Rogers I Media which already has 200 people developing infrastructure. We will develop the infrastructure with our business relationship with I Media and then develop some content associated with documentaries and then also work with each of the independent producers to integrate their interactivity into that product.
1162 CHAIRPERSON OF THE COMMISSION: What about the relationship with the cable companies in some of the projects or applications Rogers and Shaw are partners? We talk about the set-top box. Will it be Rogers Cable and Shaw Cable responsible for the set-top box or do you see that as a cost sharing going into interactivity? How do you see that?
1163 What you have been talking about, the Web site, is one thing. I can see what you are explaining. In terms of the creation of real Canadian programs that are interactive, then it's a matter of the cost of programming. Then you have a higher licensing fee in order to respond to that.
1164 What is the situation with the top-box? I understand that the real interactivity will be coming through the second generation of said top-box. What's your responsibility there? Do you see a responsibility from the program undertaking vis-à-vis the rollout of those boxes?
1165 MR. VINER: Madam Chairperson, I guess the short answer is no. I think the distributors, that's their responsibility. I have no idea how they are going to fulfil that, either through leasing the boxes or selling them and making them generally available.
1166 I think our role is to provide superb Canadian programming that will make Canadians want to purchase those boxes. Our costs are in the development, as Mike has described, of our Web initiatives and, as Andrew has described, with respect to production of interactive components in production.
1167 We don't see ourselves having any role with respect to the hardware part of the equation.
1168 CHAIRPERSON OF THE COMMISSION: Presently we know that most of the digital subscribers with DTH or MDS presently as we speak by the 1st of September 2000, then of course the stake could be quite different. At this point in time that's the situation.
1169 What's your perspective on the possibility for DTH and MDS technology to enter into that second generation set-top box and what would be the impact if there was no possibility or immediate possibility or as soon as the cable industry for your services if they were to be licensed to kind of really offer to the viewers their full capacity?
1170 MR. VINER: First off, if the question in part, Madam Chairperson, relates to our desire for the widest possible distribution as a program supplier, I will say unequivocally that we will do everything we can to ensure that the services that we proposed and, if licensed, are widely distributed, we would be happy to have them on DTH or cable or MDS or any platform.
1171 With respect to the relative technical capabilities of DTH versus cable, I can't answer the question. I don't know.
1172 MR. LEE: I think that you will see -- I think the thing to take into consideration when you are talking about how we are going to program for cables that are actually versus potentially where DTH and MDS are is that it is -- the key point to remember is the issue of the return path and the fact that it's always on.
1173 In the cable incidents, the interactivity, we are expecting that the interactivity will probably evolve in such a way that you assume that you always have an always on path and with DTH and MDS you may have a delay of sorts, so you may design your interactivity differently, understanding that you may not be able to immediately assume that immediately in that second when that person clicks that button they are going to get instant connection with someone who is outside of their home.
1174 A great example would be an online chat. If you create an online chat in cable, you understand that you will be able to actually talk with other people because you already have an always on established line, but you may not want to activate that online chat because it will create an inconvenience for your viewers because there will be a dial-out process as the phone line activates to get back out to the network.
1175 So what it means is it probably will complicate our jobs with regard to how we design the overall interactive component of our programs.
1176 CHAIRPERSON OF THE COMMISSION: If I understand you correctly, that would not prevent you from reaching the DTH and MMDS subscribers. It would just complicate your life in the sense that you would have to have a different pattern going to cable and going to DTH and MDS.
1177 MR. LEE: And you may make the decision that you want to program to a base level of interactivity. That may be your decision. It will depend on, from a creative perspective, whether you believe that that two way aspect of it is integral to the overall product.
1178 CHAIRPERSON OF THE COMMISSION: Yes. I understand.
1179 Thank you. That completes my first part of the questioning. I would suggest, like you did, that we give the panel a coffee break.
1180 THE CHAIRPERSON: We will take a 15 minute break. We should resume at five after four.
1181 Alors nous reprendrons à quatre heures cinq.
1182 ZDTV first? Yes.
--- Upon recessing at 1550 / Suspension à 1550
--- Upon resuming at 1605 / Reprise à 1605
1183 THE CHAIRPERSON: Welcome back. We will now talk about specific applications.
1184 CHAIRPERSON OF THE COMMISSION: In the approach to each application, of course, it's mainly where there is a need for clarification. There are questions on all of them about the nature of the service to make sure we understand what exactly the service is about and how to fence it in a way. Of course, pertaining to that will be programming questions on the expenses and Canadian content and from there we will go to interactivity questions, more specific ones to every project.
1185 So let me first talk about the matter concerning ZDTV. You said somehow it's like a Newsworld but strictly on the Internet and technology. It will be news, essentially. You are not sure? I misunderstood.
1186 MS CLAYTON: No, no. First of all, we describe it as a lifestyle channel for the "e" generation and because the people that want to watch it want their information current, up-to-date, super, super quickly and this is a very rapidly changing environment, the programs have a very short shelf life. They have to be produced very quickly and they might often be relevant for only a week or two. So that was the comparison to news when I was saying it was like the CNN of technology.
1187 These are not programs that can sit around on the shelf, especially for the consumers that are going to want this channel.
1188 CHAIRPERSON OF THE COMMISSION: So it will be different kinds of programs, not strictly news, but in the news updates that you will have in order to really understand what it will be about, and again it is to help us understand the nature of this service, so that we can fence it in a way that we are not creating overlapping.
1189 Will it be strictly computer technology and Internet?
1190 MS CLAYTON: Yes.
1191 CHAIRPERSON OF THE COMMISSION: It will be strictly about that, although you will be giving business advice or --
1192 MS CLAYTON: Absolutely. It will be looking at the hot new Internet companies, what are the latest video games that all the kids are talking about, who are the big thinkers, what's happening at Mitel, what's happening at Northern Telecom. So anything to do with technology or computers, but in the genre it could be a talk show with a big thinker.
1193 It could be an examination of the newest video games. It could be a phone-in show, those are very popular, a call for help.
1194 So, it's a variety, but the subject will always be about either computer, technology or the Internet.
1195 CHAIRPERSON OF THE COMMISSION: Okay. Will it be the same thing about lifestyles because lifestyles can be very broad? It can be already in genres that exist or licences that exist in the analog world. Would you be considering lifestyle with the same focus and very limited in terms of the focus of attention in the array of subjects and topics?
1196 MS CLAYTON: Well, for example, we have no drama programming, so when we say lifestyle it's as a gardening channel is for those people who are interested in gardening and this channel will be all different program categories, but definitely not drama.
1197 When I say lifestyle, it's how do you set up your computer. How do you e-mail. It's lifestyle for people who are interested in technology.
1198 CHAIRPERSON OF THE COMMISSION: Okay. So would you accept, eventually, a condition of licence that would say, whether it's news or whether it's your lifestyle program, that it would deal exclusively with programming related to computing technology and the Internet? Would that be acceptable in terms of what you have been developing as a concept?
1199 MS CLAYTON: Yes, it would be.
1200 CHAIRPERSON OF THE COMMISSION: Thank you.
1201 Tell me, in terms of the programs that would be general entertainment and long-form documentaries, what in your view would be the space that it would occupy on your channel? Would there be, you say, no drama? What about long-form documentary and what kind of proportion would it take into your schedule?
1202 MS CLAYTON: I am going to ask Julie Osborne, who worked very closely on the programming schedule, to answer it more directly, but long-form documentary we don't have any even in the sample program schedule. It was to give flexibility if there was a documentary about a subject related to computers, technology or the Internet because it could be a logical examination and in-depth look at something that relates to technology. So we wanted to give ourselves that room, but it is a very, very small part of the schedule. We would accept any limitations that would make the Commission feel more comfortable.
1203 Julie, do you have anything to add?
1204 MS OSBORNE: Yes. Thanks Alison.
1205 There are actually five basic zones of the schedule. They consist of news, entertainment programming, health, product reviews -- that could be anything from games to hardware, and money -- that would be primarily text docs and following the markets, things like where you go for the great deals on the Internet, anything like that. That's what the entire schedule will speak to.
1206 CHAIRPERSON OF THE COMMISSION: Well, our concern in the need for more precision is about on one hand the subcategory 2(b), the long-form documentary and Ms Clayton was answering to that.
1207 The other one is category 11, to which you are alluding, which is general entertainment and human interest. What would be a proportion and when would be an example of what you would program or have on your schedule in that kind of category?
1208 MS OSBORNE: One of the best examples of that type of programming is a program called "Internet Tonight". It's a kind of an "Entertainment Tonight" for the people who are interested in digital culture. So it would look at things that are happening on the Internet. What are the book launches that are Internet only published. What are these concerts that are only available on the Internet? Lots of events happen on the net only and so this whole net culture is the subject of this program.
1209 CHAIRPERSON OF THE COMMISSION: So it would be, again, directly focused on the immediate computer technology and Internet strictly?
1210 MS OSBORNE: Yes.
1211 CHAIRPERSON OF THE COMMISSION: Thank you.
1212 MS CLAYTON: I could suggest that no more of the program schedule than 5 per cent would ever be long-form documentary.
1213 CHAIRPERSON OF THE COMMISSION: No more than 5 per cent?
1214 MS CLAYTON: That's right.
1215 CHAIRPERSON OF THE COMMISSION: What about entertainment and human interest?
1216 MS CLAYTON: That's a hard one to put down as a program category. Just a second.
1217 MR. VINER: I was going to say, Madam Chairperson, I think we have agreed, and I know it's difficult and I know that you have to put fences around things.
1218 This entertainment -- generally, we would accept any condition or restriction limiting the subject matter, but the Internet itself is a form of entertainment and if we were to show people how to play games or to talk about entertaining aspects of the Internet, that is something which we believe people are intensely interested.
1219 So the documentary issue isn't crucial to the service and neither is general entertainment. There is not a category or a subcategory, unfortunately, for entertainment that deals with the Internet, computers or technology. If there were, we would be happy to accept it.
1220 CHAIRPERSON OF THE COMMISSION: Let me ask you a question. For example, I know that Celine Dion's show on the 31st of December was simulcast on the net with AOL, as a matter of fact. Would you consider that entertainment to be computer technology and Internet focused? Is that the kind of thing you would feel would be covered?
1221 MR. VINER: Would we consider sort of rebroadcasting that on the basis -- I mean it's a good point and not one I had thought of. No.
1222 I think that we would report that Celine Dion or any has launched a record on the Internet or had a performance on the Internet that would be part of the reporting, but we wouldn't sort of somehow use the fact that it was on the Internet to become part of our programming.
1223 MS CLAYTON: I would think that, and I am looking for the exact category, but I would think that would be categorized as variety programming and we have not requested that. It wouldn't have occurred to us that that would be general entertainment.
1224 General entertainment is people phoning in and talking about what they like in the way of a video game. It's human interest. It's general entertainment, but a concert is completely a separate category as per the program categories from the Commission.
1225 CHAIRPERSON OF THE COMMISSION: Okay. So if there was more precision brought to make sure that it is properly defined and that exclusive nature of computer technology and Internet would be as a condition of licence you would feel comfortable given the concept you have developed?
1226 MS CLAYTON: Yes. I was just handed this and something like the Celine Dion concert would be categorized as Category 9, variety, and we have not asked for that.
1227 CHAIRPERSON OF THE COMMISSION: Thank you.
1228 Filler. We talked about this earlier this morning. I have here the Public Notice that the Chair brought with her where when we licensed in 1994. In the statement, the introductory statement, we said that filler programming could not be an integral part of the definition of nature of service.
1229 You have put it as a category of programming to help define the nature of service. What's your view on this and why does it have to be a category per se? Why can it not be with the others, being covered by the other categories?
6911 MS CLAYTON: I think I heard you say this morning, someone on the panel, that it seemed that many of the applicants did the same thing. I can only think that we were all looking at the same document, which is obviously not the right one.
6912 Certainly with the case of ZDTV, we would be glad to take that out of our program categories. We had understood that it was offered, that it was a possibility. Knowing sometimes it's nice to have that flexibility to bring a program up to time, we had put it in, but it has never been any part of our programming strategy or philosophy. We would be glad to accept as a condition of licence that that would not be one of our program categories.
6913 CHAIRPERSON OF THE COMMISSION: So we are all being converted today.
6914 MS CLAYTON: Yes, and I think I can assure you that by the time the other companies all come up, they will have been able to make the same offer.
6915 CHAIRPERSON OF THE COMMISSION: I'm pretty sure they will.
6916 MS CLAYTON: It just caught all of us by surprise.
6917 THE CHAIRPERSON: We shouldn't confuse the fact that you can't have Category 15 with -- you can't have filler programming. You can have filler programming, but whatever it is at that time should be categorized under categories under other than just "filler" which was designed, I believe, to help Pay-TV when it's difficult to have a continuous string.
6918 MS CLAYTON: Thank you for the clarification.
6919 CHAIRPERSON OF THE COMMISSION: But you couldn't have Category 9. We have established that.
6920 MS CLAYTON: I cannot have Category 9.
6921 CHAIRPERSON OF THE COMMISSION: Okay. Canadian content. We have talked about it earlier in a more general approach you are having with all your applications. What exactly is it you are committing to? I think it's very important that we understand and how much of it, the foreign programming, will be coming from ZDTV. What are we going to see?
6922 You have referred to it as 95 per cent will be new type of programming. What will be new? Is it the program to Canada or the program itself or the program with an interactive component? Again, please take us by the hand and explain to us what you mean.
6923 MS CLAYTON: In the case of ZDTV we have made a commitment that we will start at 25 per cent in year one Canadian content and this grows to 50 per cent by year five. We have also committed to a minimum of 40 per cent of the previous year's gross revenues to be spent on Canadian.
6924 In the case of ZDTV, basically because of the nature of computer and technology programming, this is very, very new. The number of people hooked up to the Internet is just growing every day. The interest in it is growing every day. There is such a small amount available in Canada or elsewhere other than from ZDTV that we have, you know, a great deal of confidence in saying that this will all be new programming for the channel.
6925 In the beginning, a good deal of it will come from our partner. That will decrease each year. Again, because of the nature of the programming and the fact that it's very immediate and does not have a long shelf life, there will be more hours produced than there might be with a channel that had more drama, for example, that can last, or animation that can last for many, many years.
6926 What we are saying is that our commitment is to a minimum of 25 per cent of the on-air in year one. Our analysis shows that would be approximately between 350 and 400 hours of new Canadian programming. The rest of it would be coming from our partner in the United States. They produce 1,300 hours of original programming every year. We will look at, whenever possible, encouraging them to acquire some of the Canadian programming from us for their channel, but this is also programming that doesn't really rely on border distinctions.
6927 The interest comes from people who are interested in technology, in the Internet. We are thinking that it could travel across borders very easily, but it does have a very short shelf life.
6928 CHAIRPERSON OF THE COMMISSION: That means that for the first year and the second year, everything that is not Canadian will be coming from ZDTV.
6929 MS CLAYTON: Certainly from our discussions with ZDTV it would seem, because we have of course asked them what else is available because we would like to be able to acquire from other sources, especially from overseas, not just because I would like to go to the television markets over there.
6930 At this point in time they assure me that there really is very, very little, if any, other programming except coming from them, but I think as we are all going to see in two years, three years, this is going to change. There will be other players. There will be other people producing the programming.
6931 We do have a cap on the number of hours that we can acquire from our partner. We would very much look to find programming from Europe, Australia, Asia as well. Those are approximately the numbers.
6932 CHAIRPERSON OF THE COMMISSION: Is the cap different from year to year or is it --
6933 MS CLAYTON: There is a range. What does change very much is the percentage so that it's much higher in year one. It's 75 per cent coming from foreign source, but it drops right away until it is down at 50 per cent by year five.
6934 If I could just point out, at all times we will be paying significantly higher licence fees for the Canadian than for the foreign. For example, it's approximately eight times more in licence fees per hour for Canadian than for the foreign.
6935 CHAIRPERSON OF THE COMMISSION: I understand that it goes from 75 to 50 per cent which is the exact reverse to what you are committing to for Canadian content.
6936 MS CLAYTON: It matches the Canadian content. As the Canadian goes up, the foreign will definitely go down.
6937 CHAIRPERSON OF THE COMMISSION: But that foreign part has been capped coming from ZDTV.
6938 MS CLAYTON: Yes. There is definitely a cap.
6939 CHAIRPERSON OF THE COMMISSION: Okay. That is not the same year to year.
6940 MS CLAYTON: I beg your pardon?
6941 CHAIRPERSON OF THE COMMISSION: The cap is different from year to year or not?
6942 MS CLAYTON: No. The programming arrangement is flexible. It was filed with the Commission on a confidential basis with our application. There is a range. Let's figure out the math. Probably -- it's a very significant range. We have the flexibility to definitely continue to fill some of the foreign hours with programming other than from ZDTV.
6943 CHAIRPERSON OF THE COMMISSION: Okay. Talking about Canadian program expenditures. Okay?
6944 MS CLAYTON: I'm sorry.
6945 CHAIRPERSON OF THE COMMISSION: No.
6946 MR. VINER: We didn't hear the question.
6947 CHAIRPERSON OF THE COMMISSION: That's all right. On Canadian program expenditures, you have committed 40 per cent of your revenues to Canadian programs for a total of $32.5 million over the licence term.
6948 MS CLAYTON: Yes. That's correct.
6949 CHAIRPERSON OF THE COMMISSION: Okay. When we did the calculation, and I should not say "we" because competent people at the staff level have done the calculation, they came up with a different figure. With the historical method we used, they came up with 44 per cent of total advertising and subscriber revenues.
6950 Given the historic approach of starting year two, you would have to spend the equivalent of your revenues in advertising and subscribed revenues in programming. Would you be prepared to accept a 44 per cent commitment or do you want to keep your 40 per cent figure?
6951 MS CLAYTON: We did feel that the 40 per cent did give us some flexibility in terms of going on a year by year basis. We do feel that that is a good sum of money for the Canadian programming that we will be acquiring for the channel. I think I am confident in saying that we are happy with the 40 per cent of gross revenue.
6952 CHAIRPERSON OF THE COMMISSION: If the Commission were to consider it a possibility of changing its approach and going for an average over the licence period, kind of a greater flexibility, would you then consider it a possibility of raising your commitment to 44 per cent? Or would you still feel that the 40 per cent is the proper amount?
6953 MS CLAYTON: I am going to ask Laura Nixon to answer that, please.
6954 MS NIXON: I think we should just clarify. It would be helpful to me to understand and clarify it.
6955 What I understand you are saying is that if we took the total expenditure over the seven years, divided by the total revenue over the seven years, you would like to make that the new criteria and allow us to be more flexible in how we would spend that?
6956 CHAIRPERSON OF THE COMMISSION: Yes. Rather from going from one year to the other, we would establish an amount; and that you could have some variance from one year to the other, depending on the project. That is what seems to have been the proposal or some comments we have received in interventions.
6957 MS NIXON: Okay.
6958 MS CLAYTON: Madam Chairperson we would be prepared to accept that.
6959 CHAIRPERSON OF THE COMMISSION: So if we were to go with the more flexible approach on a licensed term, the 44 per cent would be appropriate. If we keep the historical approach, then you would like the 40 per cent, which is your original commitment, to remain.
6960 MS CLAYTON: Yes.
6961 CHAIRPERSON OF THE COMMISSION: The original programming, what will it be? I guess it somehow jumps in the interactive part of my question.
6962 What will be the original programming, the 25 per cent you are committing as of Year 1? What will I see that will be Canadian? What will be done with the independent producers? What will be done in-house in comparison? What will it be?
6963 MS CLAYTON: I am going to ask Julie Osborne, who worked extensively on the schedule, to answer the question.
6964 MS OSBORNE: Thanks, Alison. For starters, I think I will focus my remarks on Year 5. But if you have questions about other years, we can certainly talk about that. That is the sample schedule that we filed.
6965 We are looking at approximately 650 to 700 hours of Canadian in Year 5, and about 500 will be done in-house. Those hours will be the shortest shelf life programs.
6966 Those would include programs that you will see in the schedule like ZDTV News -- that would be our Canadian version of the program that they do in the United States; Call For Help, which is again a format that we would adapt for Canadian viewers -- callers calling in with any number of questions about computers, Internet, new software, whatever; and a program that is all about following the markets. Again, that sort of activity on the stock market is becoming less and less available to be used as a program that you can do other than during the day. So we would do that in-house, and that would permit us to follow the Canadian markets.
6967 CHAIRPERSON OF THE COMMISSION: That is Year 5.
6968 MS OSBORNE: Yes.
6969 CHAIRPERSON OF THE COMMISSION: That is a long way.
6970 MS CLAYTON: Julie addressed that because that was what we filed with the application. So we thought if there had been an analysis of Schedules 9 and 10, that would be the focus. But we would be glad to now give you the breakdown on Year 1.
6971 CHAIRPERSON OF THE COMMISSION: It is important that we understand, given that Year 5 is far. I am a here and now person. That tells you my age. It is important that we understand quite rapidly what is going to happen. It is like the interactivity. If it is something down the road, it is important, if we are to consider licensing people, what will be available to viewers.
6972 MS CLAYTON: Julie...?
6973 MS OSBORNE: Thanks, Alison. We will be beginning our Day 1, Year 1 with a news program. It is ZDTV Canada News. It has less interactivity than some of the programs that are on ZDTV.
6974 Another show that we will be beginning with as of Day 1 is Call For Help. That is the opposite end of the interactivity spectrum, where viewers participate in the programming in any range of ways.
6975 Another program is called ZDTV Zip File. It is a bit of a survey program. It sort of repackages all of the highlights from the day's programming. So if you could only get to one show a day, this will get what's the newest game, feature story from the news that might have legs, interesting information on new product developments. It packages them into a half-hour, kind of a highlight show of the day. It is hosted by the virtual host Tilde that you saw in the video that we presented in our opening remarks.
6976 CHAIRPERSON OF THE COMMISSION: But how much of this will be in-house in comparison to what will be done with the independent producers in the first and second year?
6977 MS CLAYTON: In the first two years it will all be produced in-house, basically because of how quickly we have to turn it around. This is a brand new type of programming, and as there are more producers out there that are looking for programs to produce that would be relevant to our channel, then we will definitely be working with them.
6978 Again, it has to be thought of as a news and sports in terms of the immediacy. There is not a great deal of time to have proposals and develop ideas with producers and say this would make a great show. As the channel gets going and builds its audience, we will be looking to producers to develop the programs that could have a slightly longer shelf life and that we can use where we don't need to take advantage of our studios.
6979 One of the things is that with the amount of programming that we have to produce for this service that we can't rely on shelf product, with the licence fees that we would be able to pay a producer they would still have to go out and find other people who would want to contribute so that the show could get produced.
6980 Since we have the studio -- it is very state of the art and we have the staff -- a lot of the programming will be produced in our studio because it can be done at a much, much less expensive price. And we need to do volume.
6981 CHAIRPERSON OF THE COMMISSION: Talking about what will be interactive in that first and second year -- I think we referred to what will be available down the road, but for the first couple of years that will be mainly the Web site. So there will be really no major difference from what we see on analog today except that there would be direct Internet access with the set-top box as we know it?
6982 MS CLAYTON: I would like Mike to answer that, please.
6983 MR. LEE: Over the course of the first two years you will have the traditional web product still. Also, those subscribers who want interactivity on the set-top box will be able to access that interactivity through the set-top box on the television.
6984 I would emphasize that in the first two years I think the ZDTV product and the ZDTV Canada product offers an exceptional amount of interactivity as compared to probably some of the other applications, primarily because the audience that is actually attracted to the service is already naturally self-segmented to want to do those kinds of activities.
6985 A great example would be that Call For Help show. Where in a traditional talk show, an interactive talk show, you could call in by phone, now you have the format evolving where you can actually e-mail questions. ZDTV -- and the U.S. has taken it to a new level where people can actually videotape themselves from their home and transmit over the Internet and actually appear on the television show itself.
6986 So as you create this community of people where the host is helping them and they are helping each other, it is really truly a very strong community, and sort of exemplifies the types of interactive opportunities that ZDTV has.
6987 CHAIRPERSON OF THE COMMISSION: What I will see immediately is like what we see today on CPAC. Tomorrow what I will see will be the possibility of splitting the screen? Or will it not be split screen when I get access to the Web site on my TV set?
6988 MR. LEE: In the first generation set-top box, the set-top box as available today, that experience is a separate channel experience. So I will be watching ZDTV Canada on one channel, and I flip over to another channel to go to the Web site and flip back. So I could use, like, the last button.
6989 CHAIRPERSON OF THE COMMISSION: Okay.
6990 MR. LEE: In the second generation of the set-top box you could go to a split screen or a quarter screen, or you could even have the graphic come up on top of the video so you could see through the graphic. It would be somewhat translucent.
6991 So there are a lot of different creative approaches to it.
6992 CHAIRPERSON OF THE COMMISSION: When can I, with my camera at home, participate in your programs? Will that be in the last generation of the set-top box?
6993 MR. LEE: For those users which Joe referred to, called manual convergents, where people have taken their computer and put it in the same room as their TV -- and we know from statistics out of the U.S., and we tend to trend slightly ahead of them with regard to technology adoption, that it is about 50 per cent of the population of the U.S. who are on the Internet at this point. That you could do today, day one, on Call for Help. That will be a feature that will be available the first day that we have Call for Help Canada.
6994 CHAIRPERSON OF THE COMMISSION: So when you are talking about the Netcam Network, that will be immediately doable?
6995 MR. LEE: Exactly.
6996 CHAIRPERSON OF THE COMMISSION: And the viewers, or the subscribers, will be part of the program. Will that cost you a lot of money to put together?
6997 Will you do like they do in the States, where they have bought the camera, or somehow subsidized the subscribers for those cameras in order to participate?
6998 MR. LEE: In terms of the technology reported to actually make that happen, one of the benefits of ZDTV as a partner is that they can bring a lot of that technology to the table.
6999 With regards to the model in terms of how we get viewers to adopt those cameras, there is already going to be a certain population of those people, because they are available in stores now, who have already bought those cameras. It is not a special camera.
7000 I think that ZDTV in the U.S. has adopted some unique marketing initiatives that we may want to consider on an ongoing basis, and I am sure that Joe would be more than happy to speak to that.
7001 MR. GILLESPIE: Yes, that is correct.
7002 When we launched the Netcam Network -- it is actually an interesting story. We went to 3.com, which was actually the company that created the first commercially available version, and 3.com got so excited about the application that they actually gave us, I think, in excess of 50,000 cameras to give away free on our air. The feeling was that nothing draws a crowd like a crowd, and let's get people out there understanding what is the magic behind this video technology. It was just a wonderful partnership with 3.com early on, and it since has expanded. Cisco, Nortel, Phillips and Consumer Electronics -- we have several camera manufacturers that are now looking to make their technologies available, if you will, on a seeding basis, as a way to get the early adopters to get the technology in their hands.
7003 If I could, I would like to add one other point as it relates to interactivity, in terms of U.S. supply content and Canadian supply content, a point that I think really should be made. Even on shows such as Internet Tonight, and maybe Cyber Crime, that initially will have to come out of the U.S. in terms of whole production, even there there is a great opportunity -- and we hope it is taken full advantage of -- to make them indigenous to this market. Because in order for technology and these shows to work they have to be for Canadians and about Canadians.
7004 The interactivity element, which you can overlay on any of the programs that we deliver from day one, makes that possible.
7005 For example, on Internet Tonight, which I think Alison was referring to before, the technology exists and Mike and his people possess the understanding of how they could overlay Canadian chat sessions, Canadian e-mail sessions, Canadian Web sites, for example, on top of that programming. So they are barking people -- that is our term -- calling them to go to ZDTVCanada.com to basically, again, involve themselves in their own community.
7006 So you don't have to wait, for example, until such time as you are producing your own shows. The beauty of this convergence and this interaction is, you can make those shows your own -- very much your own -- from day one.
7007 CHAIRPERSON OF THE COMMISSION: Would it be possible, though -- and this is a question I forgot when we talked about the portion that would come from ZDTV. Would it be possible that, for example, long form documentaries down the road -- you know, the kinds of programs that have a longer life or that have more relevance for the larger public -- would find themselves in the ZDTV U.S. schedule?
7008 MS CLAYTON: Do you mean that were produced in Canada?
7009 CHAIRPERSON OF THE COMMISSION: Yes.
7010 MS CLAYTON: It certainly is our hope that there would be a reciprocal arrangement where they would look and see what we had in Canada and say: That looks really good. I think our audience would like that.
7011 We certainly see that as a possibility.
7012 CHAIRPERSON OF THE COMMISSION: You have not given any expenses or revenues around interactivity. Why is that and what can be expected?
7013 MS CLAYTON: I am going to ask Mike Lee to answer that.
7014 MR. LEE: In the early stages of all of these businesses what we have found is that the revenue streams, particularly the ones dealing with interactivity, are at this point highly speculative. We still are unclear about even the business models that are associated with some of these businesses.
7015 So we have decided, for the purposes of being conservative, to not list those revenues as part of our model.
7016 CHAIRPERSON OF THE COMMISSION: But do you think toward the end of the licence term you would start having revenue flow, just by the Web site per se? Certainly, I suppose, kind of engaging in some commercial activities through the Web site would be a possibility.
7017 MR. LEE: As we sort of take a look at the model -- I have an inability to understand what is going on beyond 18 months. So looking out three years or five years is --
7018 CHAIRPERSON OF THE COMMISSION: Well, you described it to me just now, saying for sure --
--- Laughter / Rires
7019 MR. LEE: That is the general path of migration.
7020 CHAIRPERSON OF THE COMMISSION: -- in three to six months, and then 12 to 18 months -- I will write it down. Everything.
7021 MR. LEE: The business models are changing. I think even if you watched the business models over the last 12 months or 18 months on just the general Internet and dot.com companies, they are radically shifting. It is very hard to determine where your revenue streams are going to be and who your "customers" are going to be who are supplying you with those revenue streams. It just makes it very, very difficult to project out, because we know that everything, basically, is in motion on us.
7022 MR. VINER: Madam Chairperson, if I could add to this, when we looked at the revenue possibilities -- I think that StatsCan has just released a study that says something like 0.2 per cent of Canadian retailing occurs on the Internet. So our e-commerce objectives weren't particularly high.
7023 With respect to the commercial opportunities, frankly, we thought they would be so integrated with the television opportunities that we didn't really forecast a huge uptake in revenues that would be Internet only. We thought that we might sell to an advertiser the ability to be on the service and supply that advertiser with the opportunity also to be on our net presence as well, but that we wouldn't generate a whole lot of separate revenue, and that is the approach we took. Perhaps it was wrong, but that is the one we took.
7024 CHAIRPERSON OF THE COMMISSION: A last question on interactivity. Given that Rogers and Shaw are partners in that project, that kind of interactivity you are proposing within ZDTV, would that be a kind of interactivity that would be available for other undertakings that would be licensed?
7025 MR. LEE: The interactivity that we are contemplating within our applications assumes that there will be infrastructure available to us from all of the BDUs, and our expectation is that if we are able to take advantage of it, other applications will also be able to take advantage of it.
7026 MR. VINER: I think the point we would like to make, Madam Chairperson, is that we have the expertise and we are willing to take advantage of it. The question of whether or not others --
7027 The capability exists. Whether or not they choose to exploit it to the same extent that we do is really going to be up to them. It may be that because of our experience already in interactive media that we will be ahead of the curve, and we would argue that. We think that is why you should license us, because we will be ahead of the curve.
7028 CHAIRPERSON OF THE COMMISSION: But you understand that it is important, given that in the criteria the interactivity is one component, that we assess the accessibility or the availability of that interactivity for other players, so that when we compare it is about the expertise that exists and the capacity and the concept that has been put together and not because of a special relationship.
7029 MR. VINER: I understand that. I think the answer is that it will be generally available to anyone.
7030 ZDTV in the United States is carried on satellite. Would it be appropriate perhaps to ask Joe to relate his experience with respect to interactivity?
7031 CHAIRPERSON OF THE COMMISSION: Sure.
7032 MR. GILLESPIE: I will use, I guess, DirecTV as the example in the U.S. They have an interactive initiative with Wink, which is a platform that they are making available on interactive set-top boxes that they actually started to roll out as far back as June of this year. They have projections of having about half a million to a million boxes installed. Actually, it is about 500,000 by the end of this year.
7033 The way they approached it with us was to basically partner, to create a strategic partnership which together we would talk about what kinds of programming we could develop for this, frankly, at the very beginning a small audience, a test-based audience. The idea was to just work together and trying to understand what kind of behaviour was working, what type of interactive ingredients the programming was working.
7034 There is mutual interest there for two reasons, obviously. The first is it helps us build a better programming product in anticipation of a one-box world.
7035 The other which gets, frankly, really complicated is the issue of transactions and how do you split the money. We are really eager and excited to be involved in those discussions today versus three or four years from now. So there too the cement isn't dry. We are having ongoing dialogues on basically where the transactions are going to occur and, basically, how we are going to share in the success.
7036 MR. VINER: Madame Chairperson, the only other thing I would say is that for the first several years of our licence we will rely more heavily on DTH to be the distributors of this service than we will on cable distributors. It will be incumbent upon us to provide programming and interactive activity. There is a business imperative to ensure that those services aren't inconvenienced or prejudiced in some way. So, it is our intention, as I said earlier, to provide for the broadest possible distribution.
7037 It would just make sense for us to develop programming that our majority distributor can make use of.
7038 MR. STEIN: Just building on Tony's remark, both Shaw and Rogers have agreed that in terms of as we roll out the new digital technologies, which we have been doing and moving with acceleration over the last bit of time, it's clearly in the interests of our customers to make sure that that technology is available to all users, and that we would want to make it a priority to whomever you licence that we would work closely with all of them to make sure that they had full access in terms of the kind of capabilities we have to make sure that the launch of the service was a success and it was also related to the Internet products that we have available. So that would be our commitment to do that.
7039 CHAIRPERSON OF THE COMMISSION: Thank you.
7040 I think that covers questions that I had for ZDTV, but given that it is different panels I am looking to my colleagues and maybe staff if they have additional -- not answers, but questions.
7041 A SPEAKER: They might have answers.
7042 CHAIRPERSON OF THE COMMISSION: Yes.
7043 MR. McCALLUM: I would like to come back to the Canadian programming expenditures condition of licence that you discussed with Madame Bertrand and just ask it in a slightly different way.
7044 If the Commission, for the purpose of consistency between all the applications, decided that it wanted to impose a condition of licence in the more traditional way and not the flexible way and the calculation came up to 44 per cent and not the 40 per cent that was discussed, would you accept the condition of licence at 44 per cent, knowing that you had preferred to accept it at 40 per cent?
7045 MS CLAYTON: If you could just give us a second, please.
---Pause / Pause
7046 MS CLAYTON: Yes, we would
7047 MR. McCALLUM: Thank you.
7048 You were also having a discussion about the interactivity. Do you think that distributors should be obligated to carry the interactive components that you are preparing to distribute via the set-top box?
7049 MR. LEE: I believe that in the process of enabling this interactivity there is going to be additional strain on resources and the actual network and technology. The best approach would be to have each of the parties co-operate in moving to a new model for interactivity in interactive revenues.
7050 MR. McCALLUM: So you wouldn't extend it as far as being obligated at this stage. Is that your suggestion?
7051 MR. LEE: Well, the interactive component may not necessarily be something that all customers adopt. It will be a choice, basically, for our subscribers. So, no. I would say no.
7052 MR. McCALLUM: Thank you.
7053 THE CHAIRPERSON: If I may, was it explained to you how -- it's not clear to me from here whether you were sent a clarification question, but were you ever told why there was this discrepancy in the calculation?
7054 MS CLAYTON: Yes, we --
7055 THE CHAIRPERSON: You were told?
7056 MS CLAYTON: Yes.
7057 THE CHAIRPERSON: It's not a question of having put not enough -- not having calculated enough revenues, so you didn't calculate it in the traditional way?
7058 MS CLAYTON: We based all of our programming budgets on the 40 per cent of gross revenue. The difference came about because in the schedule that was filed with the application it was the amortized amount which would appear to be lower, but all of our calculations were based on 40 per cent of gross revenue, which is why we have no hesitation in accepting that as a condition of licence. It was an accounting misunderstanding.
7059 THE CHAIRPERSON: But the 44 is now what counsel is discussing with you?
7060 MS CLAYTON: Yes.
7061 THE CHAIRPERSON: And you understand what the difference was and why we arrive at different calculations?
7062 MS CLAYTON: Yes, we do.
7063 THE CHAIRPERSON: That's fine.
7064 MS CLAYTON: Thank you.
7065 THE CHAIRPERSON: I just wanted to make sure you understand how we arrived at this, which wasn't clear from the limited amount of material I have. Thank you.
7066 MS CLAYTON: Yes.
7067 CHAIRPERSON OF THE COMMISSION: I will thank you for the use of ZDTV.
7068 THE CHAIRPERSON: Thank you, Madame Chair.
7069 CHAIRPERSON OF THE COMMISSION: You are the Chair.
7070 THE CHAIRPERSON: Commissioner Williams has a question now. Commissioner Williams has a question on this part.
7071 COMMISSIONER WILLIAMS: You could easily get into trouble with two chairpersons at the same hearing.
7072 THE CHAIRPERSON: I know.
7073 COMMISSIONER WILLIAMS: Given that your business plan is that the Canadian content will gradually displace or replace the ZDTV USA content over a period of time, has any thought been given to in the future as Canadian content develops that Canadian content would do a similar thing on the ZDTV USA network? And have provisions been made for this potential opportunity in your partnership agreements?
7074 MS CLAYTON: If I understand correctly, it is would there be an exchange of programming from the programming produced for ZDTV in Canada with the American channel? Certainly there are definite discussions and I think anyone in broadcasting in Canada would say that when there are these partnerships with Americans there is always a real -- it's like picking up a phone and you have one programmer call the other and say, "look, I have got this really hot program. I think it would be great for your service," and it cuts through the producer having to knock on the door and not knowing the programming people.
7075 So there are really wonderful opportunities there and it's not outlined in the shareholder agreement, but both networks want to have absolutely the best programming. We will be very glad to let the American people know about the great stuff we are looking at in Canada.
7076 MR. GILLESPIE: I would like to add to that, if I could. One, we eagerly look forward to all of the new programming ideas that we think will come from Canada. I would just offer that, as lovers and believers in technology, our experience has taught us that, for example, you can take just about any invention over the last 10 or 15 years in the category of computing. For example, 1-2-3 from Lotus comes to mind and the engineers all think they have understood exactly what the product is going to be used for and then it gets in the open market and once again the user's imagination blows them away because they are using the product in ways that even the engineers never imagined.
7077 The Lotus engineers always used to say, "We thought it was about counting beans and then lo and behold people are counting chickens with the product." I offer that as an analogy because we really hope that we learn from our partners at Rogers who show us whole new ways to use this platform that we call ZTV or ZDTV. We do not have the corner of the market of just how big and how much more fun and exciting the platform can be.
7078 So, again, we eagerly look forward to working closely with and hearing about all the many new ways they come up with to use the platform.
7079 COMMISSIONER WILLIAMS: Thank you.
7080 THE CHAIRPERSON: With this business of CPE, I'm a bit confused. Of course when we ask you will you accept 44 per cent in the traditional way you eventually say yes.
--- Laughter / Rires
7081 THE CHAIRPERSON: -- but we want this to work. And there are a number of applicants who have put forward various proposals and we have put another one on the table. There are others that will come up later in the week that at least I'm aware of. There was one this morning about calculating from years 4 to 7.
7082 The one we are talking about now, about calculating over the whole year, assuming you believe it when you say, Mr. Viner, that we will still be around in year 5, that would mean you arrive at year 6 and maybe you have to spend 200 per cent on Canadian content to make it before your renewal. So there are problems.
7083 We talk about 40 per cent, 44 per cent. That's a fair amount. What is the problem? I gather, from reading the applications, that it's flexibility more than amount, is it?
7084 MS CLAYTON: When we put together the business models you come at it from many different directions, but one is basically, in this case: What is it going to cost to produce the amount of programming that we want and we need for this channel? So it doesn't fall out that you say, "Here is our gross revenue. Cap it at 40 per cent and that's all we are going to spend on Canadian." The number drops out by how much programming you have to produce for the channel.
7085 So in the business model there is a great deal of flexibility in terms of what the actual, real percentage is in terms of the previous year's gross revenues, but some years it's more than others, other years it's less. So we knew that we always had to have -- we have never dropped below 44 per cent of gross revenues in order to achieve the quality and the amount of programming that we need for the service.
7086 THE CHAIRPERSON: I'm just suggesting another way -- I mean, we will speak to you again and we will speak to other people because we want it to work, and we understand it is going to be a riskier business than we have known before to launch these.
7087 I suppose right now you have the possibility of carrying 5 per cent, I understand of being below or carrying 5 per cent above the following year. Correct? Would another possibility be 10 per cent instead so that the number would still be 44 per cent but we would find that flexibility you want. So that we don't have this small amount of revenue at the beginning with a very large amount of programming that is factored in?
7088 Anyway, you don't have to answer now, but there are ways of achieving the expenses in Canadian content and perhaps recognizing, in a reasonable manner, the desire for more flexibility. Hopefully we will hear more suggestions, because just to say, "Well, if that's what I must do I will do 44 per cent." We want it to work.
7089 MR. VINER: Yes. We understand, Madam Chair.
7090 I think that we will always opt for more flexibility, but we have been down this road in a variety of ways before and no matter how much flexibility you offered us, if you said, "You have to spend it all by your seventh year but you didn't have to spend any of it until then", it wouldn't make sense for us to do that.
7091 THE CHAIRPERSON: No. That one doesn't work unless you assume that in year 6 we have all gone.
7092 MR. VINER: Yes. Exactly.
--- Laughter / Rires
7093 THE CHAIRPERSON: And nobody will be checking. And of course other assumptions have to be made that your interest is not in enticing -- you know, the belief is that if you have some good quality Canadian programs you will have a better chance of keeping subscribers. So there are a number of ways.
7094 But, in any event, we are interested in hearing how that flexibility, which has been well argued in a number of other applications, can be achieved while retaining a possibility for the regulator to check.
7095 Part of it is obviously equity because this is a competitive process for Category 1 and I suppose we will be looking at various criteria including Canadian content so we will want, and you will want, to see that your competitors' promises, presumably, are --
7096 But anyway, everybody is on notice. We are open to looking at a more flexible way of achieving the same thing in this new environment.
7097 MR. VINER: We appreciate that very much, Madam Chair.
7098 The point I was trying to make is there is a certain level of self-imposed discipline no matter how much flexibility that you do offer. But I will also say that, you know, until we got to this morning we weren't -- you know, we didn't put our minds to providing you with different alternatives.
7099 THE CHAIRPERSON: You don't want to be too disciplined either because then you won't need us.
7100 MR. VINER: A good point.
7101 THE CHAIRPERSON: Madam Bertrand, finally back to you.
7102 It's tough not to be the real Chair.
7103 CHAIRPERSON OF THE COMMISSION: Mind you, coming back from vacation, I prefer the role of Commissioner today.
7104 We will now talk about the Parent Channel.
7105 MR. VINER: I'm sorry? What's next?
7106 CHAIRPERSON OF THE COMMISSION: Parent.
7107 MS CLAYTON: If you will just give us a second to pull out the appropriate paper.
7108 CHAIRPERSON OF THE COMMISSION: Okay. Would there be another one that would be easier for you to make immediately --
7109 MR. VINER: No, not at all. Not at all.
7110 CHAIRPERSON OF THE COMMISSION: -- because all my questions are ready. I can --
7111 MR. VINER: No, no.
7112 CHAIRPERSON OF THE COMMISSION: Whatever is easier for you.
7113 MR. VINER: No. This would be just fine.
7114 I, Madam Chairperson, would like to introduce -- the only person I think we haven't introduced is Mitch Dent, who is the President of the Today's Parent group. You have met Holly earlier in the presentation. So they are our experts as it relates to this application, along with Julie and Robin -- oh, and Kevin, I'm sorry, Kevin Sullivan.
7115 CHAIRPERSON OF THE COMMISSION: Okay. So I have maybe more to the point kind of questions for the next three.
7116 First, on the Parent Channel, the nature of service here again has to be very clear in our mind and how distinguishable it will be in order to help us do that I'm looking for guidance from you.
7117 You have said in your application that the weekend will be geared towards family viewing. What kind of proportion of user schedule would be such programming, and would you accept a limit on it, because it could be very similar to other things and so the diversity would not be as well served? So what is the proportion you had in mind?
7118 MS CLAYTON: Certainly, the family programming is a very, very small component of the channel, definitely less than 10 per cent. The channel is for parents, first and foremost, so we would accept a condition of licence that limited programming that was aimed at families or, if you would like, if you would prefer to say the drama category, we would accept that as well.
7119 CHAIRPERSON OF THE COMMISSION: But that would be over the week. So what would happen for the weekend?
7120 MS CLAYTON: Oh, no. That includes it. That would be over the year, the month, the week. It works out the same --
7121 CHAIRPERSON OF THE COMMISSION: Ten per cent at all times.
7122 MS CLAYTON: Maximum. Absolutely maximum. Yes.
7123 CHAIRPERSON OF THE COMMISSION: Okay.
7124 Would you accept a condition of licence of that?
7125 MS CLAYTON: Yes, we would.
7126 CHAIRPERSON OF THE COMMISSION: Okay.
7127 Concerning your programming of interested children, that presents the same kind of concern in terms of fencing it. How would you see your schedule to be composed with such programming? How much of your programming?
7128 MS CLAYTON: If you want more specifics I can turn it to Julie, but the 10 per cent that we mentioned includes the programming for children. It includes any of the programming that is on the Sunday morning. The draft schedule there is one movie in prime time in the whole week, and that is geared for families.
7129 In fact, we don't have programming for children. We have programming for families, but that 10 per cent covers everything that is drama and is not aimed directly at parents. If you would like more detail, I can certainly ask Julie Osborne to take us through it.
7130 CHAIRPERSON OF THE COMMISSION: Yes, that would be helpful. We have drawn from your description family, children and drama separately. You seem to be folding it into one, the three. Am I reading correctly that it should be read as three and then those three together would not account for more than 10 per cent of your programming schedule?
7131 MS CLAYTON: We looked at it as saying that the programming that would be of appeal to family was limited to the weekend and except for one movie, it's all in non-prime. That 10 per cent is for families and drama. It's wrapped up together.
7132 CHAIRPERSON OF THE COMMISSION: Okay.
7133 MS CLAYTON: It would seem I'm not being clear.
7134 CHAIRPERSON OF THE COMMISSION: I think it might be my mind that is not clear in understanding either. Go over it again, please. I'm sorry.
7135 MS CLAYTON: We would be glad to accept a condition of licence that limited to 10 per cent programming from the Category 7 that we listed.
7136 CHAIRPERSON OF THE COMMISSION: Yes.
7137 MS CLAYTON: Including in that 10 per cent any programming that was directed at families as opposed to parents.
7138 CHAIRPERSON OF THE COMMISSION: Okay. That would cover the interest in children as well.
7139 MS CLAYTON: Yes, it would.
7140 CHAIRPERSON OF THE COMMISSION: Because for you that was the same kind of programming.
7141 MS CLAYTON: Yes.
7142 CHAIRPERSON OF THE COMMISSION: Okay. I understand. Thank you. What about the filler programming?
7143 MS CLAYTON: Okay. The same as this morning. We would be glad to take that out of the mix.
7144 CHAIRPERSON OF THE COMMISSION: I will have to take lessons from Chair Wylie because she has much more success in converting people than I have had. I will have to --
7145 Program schedule. Here again there's a difference between year two and first year compared to year five and, of course, the schedule is based on year five. Can you explain exactly what kind of program wheel you have in mind and what will be the differences between the first two years and year five?
7146 MS CLAYTON: I'm going to ask Julie Osborne to answer that question.
7147 MS OSBORNE: First, with respect to the wheel, we had actually envisioned keeping the same sort of pattern where we could help parents find their way on the dial by using themed evenings. It just makes it easier that they know, for example, that Friday nights is for children with special needs. Monday night is parentology. Thursday night is for grandparents. It just makes it easier to turn on the tube and know you are going to find something that's relevant to you.
7148 With respect to the amount of programming, our Canadian commitments are higher in year five, so we would be looking to foreign sources for more of the programming in year one.
7149 CHAIRPERSON OF THE COMMISSION: So it's the share between Canadian and foreign that would be different and not the approach on the wheel.
7150 MS OSBORNE: That's right.
7151 CHAIRPERSON OF THE COMMISSION: We understood that you would have the six hour programming wheel repeated once and then followed by a four hour wheel repeated three times.
7152 MS OSBORNE: That's right.
7153 CHAIRPERSON OF THE COMMISSION: Okay. On Canadian content, we will go from 25 per cent to 65 per cent?
7154 MS OSBORNE: Yes.
7155 CHAIRPERSON OF THE COMMISSION: You would be considering the possibility of being imposed at a level of Canadian content?
7156 MS CLAYTON: Absolutely.
7157 CHAIRPERSON OF THE COMMISSION: What about Canadian programming expenditures? Here, contrary to the ZDTV, when we do our calculation, we arrive at a level of 36 per cent, but you have proposed a level of 40 per cent. Would you be prepared to maintain your 40 per cent commitment?
7158 MS CLAYTON: Absolutely.
7159 CHAIRPERSON OF THE COMMISSION: Okay. The Web site, I understand there is a question here that I won't really need to ask because it says "Would you be prepared to launch your Web site at the same time as your channel if you were to be licensed?"
7160 I understand that the Web site exists already, so it would be the other way around. You would like to be able to launch the channel as soon as possible. I suppose that there is still adaptations really to reflect on the Web site the reality that the channel exists and more interactivity. Would that be ready to be launched at the same time, the 1st of September 2001, if that kind of schedule is kept?
7161 MS CLAYTON: I see Mike nodding his head, so I feel I can say yes.
7162 CHAIRPERSON OF THE COMMISSION: Will there be any other interactive component than the Web site on the parent channel? What will the interactivity be about in the parent channel?
7163 MS CLAYTON: I will have Mike go into a bit more detail, but basically all of our applications anticipated that as different features became available with different generations of the digital box that the programming would reflect that, would always be geared and designed for that.
7164 Mike, you can address it.
7165 MR. LEE: Sure. We can take a specific example, something like choosing a summer camp, which would be a great show that has very natural sort of interactives, sort of capabilities where you could refer from the show directly to the Web site or potentially interactive developments on the TV itself where you could actually go and visit and gather more information about the specific camps that they have discussed, talk to other people who have sent their kids to that same camp.
7166 You can get actual referrals and real testimony from people and ask them questions about how their children liked that camp and also even book right there a reservation for your child for next summer or for this summer.
7167 There's a lot of things, a lot of applications for specifically with parenting where you are interested in talking with other parents because that really is what makes it so compelling, that you get a chance to find other people who have children one to two years old and recount stories with them and get some experience or other people have gone through that process, to be able to bring them together, share that information and make that experience that much more richer that already started from a TV experience.
7168 I think Mitch probably --
7169 MS CLAYTON: I think Mitch would like to add a brief word.
7170 MR. DENT: Thanks. Basically, the experience of parenting we are finding more and more is one of searching for community. We think there's a myriad of really exciting interactions that are possible with the channel, both in the short term and long term.
7171 In addition to that, parents are going to be looking for both information and connecting to other parents via the channel, so there's lot of opportunity for dialogue with experts on the channel, but also on interactivity that could involve other media.
7172 We already had the leading Web site in the country. It's won a number of awards. We are finding that the vast majority of people now are coming in to work on chats and connecting with other people. They aren't necessarily there just to find a content, find some information on something like sleep.
7173 When you get people that are having kids, you know, it's a passionate issue. That's what makes this channel so special. It's something about the heart. It's something in passion. You have got a dynamic here where people are going through change. Sometimes they are scared. Your baby is not sleeping, you are tired, you know there's a show coming up on sleeping.
7174 We will be able to tell people on the Web and in the magazine shows are coming, they can go on the Web, they can research a very deep archive of activity and articles on sleep, including a book we have got coming out this fall on sleep. They will be able to have a chat discussion on the Web site after the program and possibly connect with the author of the book or an expert on the subject.
7175 The whole area of community, parenting and interactivities is really, really an exciting one.
7176 CHAIRPERSON OF THE COMMISSION: I see that there is still a difference between what we were talking about in the previous application and this one. It's more based and interlinked with the Internet and the possibility of using the two than the fact, for example, of the Netcam Network where it is really part of the programming itself. It might get there, but if you need a grandmother, you know that we have one here that certainly would be interested and is quite good.
7177 THE CHAIRPERSON: My methods would not be so scientific.
7178 CHAIRPERSON OF THE COMMISSION: Well, here again we have noticed no costs as well as no revenues coming from your interactivity proposal.
7179 Do you have any comment about it?
7180 MR. VINER: Well, the no cost is a result again of having the Web site up and available. I would try the same explanation. We think it was hard to integrate to say there would be Web only revenues. We took it that the question was narrow and meant Web only as opposed to those revenues that would be integrated into the television service.
7181 Perhaps we should not have done that, but that is the approach we took.
7182 CHAIRPERSON OF THE COMMISSION: I just wanted to make sure that it was the same element.
7183 In terms of independent production, do you have any comment in that respect, because there is the participation of an independent producer. Are you prepared, as we were talking more generally speaking in terms of accepting a condition of licence, to cap the possibility of using the material and the programs of that affiliated producer?
7184 MS CLAYTON: We would accept such a condition of licence, yes.
7185 CHAIRPERSON OF THE COMMISSION: Would there be a commitment on your part to go with other independent producers? A lot of what we saw in ZDTV, especially in the first two years, was to be in-house production. What about here on The Parent Channel? What will be the proportion in the first two years of in-house in comparison to what you will do with outside producers? Will that change over time as you evolve?
7186 MS CLAYTON: As we see the service, we have 50 per cent of the Canadian programming being produced in-house again because of the nature of the programming. These are phone-in shows, ask a paediatrician, ask an expert, and these are in-studio call-ins. The other half will definitely be coming from independent producers.
7187 We heard Kevin Sullivan say at the beginning that there is very little parenting programming available right now in Canada. I certainly think that licensing a parenting channel would be a direct stimulus of that. As there were those programs, then we would be acquiring them for the service.
7188 CHAIRPERSON OF THE COMMISSION: Thank you. That takes care of my questions, Madam Chair, for The Parent Channel.
7189 THE CHAIRPERSON: Counsel...?
7190 MR. McCALLUM: Just on one point. You said you would be prepared to cap the material coming from independent production. I just wondered at what level you had in mind.
7191 MS CLAYTON: Are we talking percentage of the schedule, number of hours? I am not sure I understand.
7192 MR. McCALLUM: I will ask you either way.
7193 MR. VINER: Could I just clarify.
7194 I thought that the cap related to our relationship with Sullivan. Is that correct?
7195 MR. McCALLUM: Yes, that's right.
7196 Just picking up on the point that was made a minute ago, and also earlier this morning, that you would be willing to accept some sort of relationship cap. I wondered at what level that would be.
7197 MS CLAYTON: I am sorry, if you don't mind I need a bit of clarification.
7198 The clarification is that there would be a cap on the amount of programming that we would acquire from an affiliated independent producer. Is that the question?
7199 MR. McCALLUM: That's what I understand your undertaking was earlier this afternoon. So I am rephrasing it in those terms, yes.
7200 THE CHAIRPERSON: There are presumably two questions here, in my understanding. One is the cap or the floor of the production; how much production would come from non-affiliated and how much not.
7201 A second question is: How would you define affiliated?
7202 MS CLAYTON: What we had accepted, that Sullivan Entertainment as a third owner would be considered as an affiliated party, so right away it puts them in the category where there would be a cap. So now what we are discussing is either number of hours or percentage of the Canadian programming that would be the cap from an affiliated independent producer.
7203 MR. McCALLUM: Yes, that's the way. If you have a problem with the first assumption, that he should be considered an independent producer, this is the time to state it. But assuming that that assumption is --
7204 MS CLAYTON: No. We accept that. We don't have any problem with that. I am just wondering if you would prefer the cap in percentage or hours. I would think hours would make more sense.
7205 MR. McCALLUM: If you could provide it in that.
7206 MS CLAYTON: May I provide it to you, or would you like it right now?
7207 THE CHAIRPERSON: If you feel more comfortable, there will be another opportunity to come back with these answers.
7208 MR. McCALLUM: There is a Phase II. If you don't have it right now, this could be an undertaking that you could fulfil at Phase II where you appear as an intervenor against all of the other applications.
7209 If you are more comfortable providing it at that stage, that would be acceptable.
7210 MS CLAYTON: Yes. I had not prepared that number.
7211 THE CHAIRPERSON: With regard to the definition of affiliation, I understood earlier this morning, in the general questions with Madam Bertrand, that we asked you what you thought was an appropriate way to define an affiliated company should you be affiliated with one between now and Year 7 or what you think should be the case with the competitive applicants, and so on.
7212 That is another kind of general question on the table: In this environment, with these Category 1 services and the vertical integration with producers, what is an appropriate way of defining -- well, one way of looking at it is: What is an independent producer? And the other is: What is a non arm's length or a not independent producer?
7213 We discussed that with Alliance Atlantis this morning, and I thought you were asked the general question as to what you thought was appropriate. We wouldn't mind hearing from you later since you had not had time to talk about it.
7214 MS CLAYTON: May I just have five seconds to confer with Bob Buchan?
--- Pause / Pause
7215 THE CHAIRPERSON: By later, we didn't mean in the next five minutes. It could be the next time you are before us.
7216 It is open to you to discuss whether this is not even an appropriate limitation to place on Category 1 services in a digital environment.
7217 MS CLAYTON: No. We do understand where the Commission is coming from.
7218 MR. McCALLUM: So are you going to provide an answer then in Phase II? Is that the plan?
7219 MR. VINER: Perhaps I am missing something. I think that what was proposed by Alliance Atlantis is perfectly fine for us, a company that is affiliated, one in which we own less than 30 per cent. That is fine for us.
7220 I mentioned earlier that we don't have any ownership positions, but there is a good point made that we may well. So we think that is appropriate.
7221 I would certainly accept a cap that says that no more than 10 per cent of our programming would come from those people.
7222 THE CHAIRPERSON: Even then, Mr. Viner, it is not that simple because 30 per cent is a voting equity. It is an issue that we have discussed before in the analog environment and we are discussing now.
7223 MR. VINER: I agree. I think that your counsel is wise. We will come back. It is more complicated. I didn't want to convey the impression that this was a source of great concern or that there was some sort of other agenda.
7224 But I do think we should think about it and come back with a reasoned response. Thank you for your advice.
7225 THE CHAIRPERSON: Mr. Viner, I want to reassure you that I don't have a production company to sell you.
--- Laughter / Rires
7226 CHAIRPERSON OF THE COMMISSION: The question the way we are raising it now is also a question that we want to raise with all the participants, with all the applicants. As you said, you may not have an interest today but you may have tomorrow. So going into the new world, vertical integration is not at its conclusion at this point in time. So we might see situations.
7227 I think the question is asked to all the applicants.
7228 MR. VINER: I think it's a very good point and I will admit because, you know, we had not considered it because we did not have any particular plans, but, as usual, you are a step or two ahead.
7229 THE CHAIRPERSON: But you did come forward with Sullivan.
7230 MR. VINER: Absolutely.
7231 CHAIRPERSON OF THE COMMISSION: We have the opportunity of having had access to all the applications and that was our homework for the summer. So that's our advantage.
7232 MR. BUCHAN: Madame Chair, if I could just clarify, I think Alison Clayton was quite clear that we consider that Sullivan are the third ownership in this application would be bound by any rule that related and that --
7233 THE CHAIRPERSON: Yes. We are asking you, Mr. Buchan. I think, unfortunately, we are on a track now where we just want to discuss it. Is it necessary? Is it appropriate in this environment? Is it a limitation? Should it be considered maybe an advantage or not necessarily, but just want to discuss the issue and then how to -- whether to limit and how to limit. But it's an open question as to whether what we did with analog is appropriate.
7234 MR. BUCHAN: I just want to put Mr. Viner's comments in that context, that the Sullivan relationship to this application isn't, to use a colloquial expression, a big deal to the application and we accept the appropriateness of it and the position that Alliance Atlantis took this morning. Thank you.
7235 MR. McCALLUM: Thank you, Madame Chair.
7236 THE CHAIRPERSON: Madame Bertrand.
7237 CHAIRPERSON OF THE COMMISSION: Thank you.
7238 I think that concludes our questions about the Parent Channel. Thank you. We are moving to Biography, another binder.
--- Pause / Pause
7239 MS CLAYTON: You don't want to look under there.
7240 CHAIRPERSON OF THE COMMISSION: I will start with nature of service here again and use in your description of your channel that you will be primarily devoted to biography programming, meaning that you may have other type of programming. What kind of other programs would you have than biography?
7241 MS CLAYTON: Ten per cent of the channel will be documentaries and 20 per cent would be theatrical feature films that have already aired on television. Those are just so that we are able to put into better context a person's life.
7242 It is the way the channel is scheduled that you don't just have a one hour biography about the person, but you have a documentary about the time in which they lived or what was happening in their country at the time. And then a film that might either be -- for example, if the biography was about Norman Jewison, then it could be one of his films, "Moonstruck", or it could be related in some way. But there is a common element to the person that was featured in the biography, so we have asked for the flexibility, but it is no more than 20 per cent of the schedule. These are theatrical films that have already aired on television.
7243 CHAIRPERSON OF THE COMMISSION: Okay. So that would be 7(c) and 7(d)?
7244 MS CLAYTON: Yes, that's right.
7245 CHAIRPERSON OF THE COMMISSION: It would be no more than 20 per cent of the schedule?
7246 MS CLAYTON: Absolutely.
7247 CHAIRPERSON OF THE COMMISSION: And documentaries 10 per cent?
7248 MS CLAYTON: Absolutely, yes.
7249 CHAIRPERSON OF THE COMMISSION: Here again, we had -- and you would accept a condition of licence?
7250 MS CLAYTON: Yes, we would.
7251 CHAIRPERSON OF THE COMMISSION: Here again we need some clarification on your wheel or on your schedule from year one and year two and year five. What's, for example, the theme evening that you are proposing? Will it be right from the start or will that occur strictly as you come in year five?
7252 MS CLAYTON: I will have Robin Mirsky who put together the schedule address that question.
7253 MS MIRSKY: Good afternoon.
7254 You are correct, the theme evenings will start at the very beginning of the licence period, then overall schedule and wheel will remain the same for the beginning to the end of the first licence term.
7255 The most significant change will be the number of Canadian hours versus foreign hours. As we proceed during a licence term the Canadian content goes up from 25 per cent in year one to 50 per cent by year five.
7256 CHAIRPERSON OF THE COMMISSION: And do you have some kind of arrangement similar to ZDTV where you have most of your foreign programming coming from A&E and that you have a cap on this as well?
7257 MS CLAYTON: Yes. This is one of the strengths of our partnership with A&E is that they have a vast library of biographical programming, and as part of our shareholders' agreement we do have a cap on the number of hours. So while we would be able to acquire very strong programming right from day one, which as I mentioned earlier we really do believe is important to hit the ground running, the amount of foreign programming will go down quite dramatically until it is no more than 50 per cent of the schedule.
7258 As well, we will be able to search out biographies from around the world. As we found from our Web site, there is a great deal of interest in biographies from people in England, Australia, Jamaica, Greece. It isn't the country of origin, but we, of course, will be going overseas to look for some of these biographies.
7259 CHAIRPERSON OF THE COMMISSION: Could we expect if we were to licence this channel that on year one and year two the 75 per cent would be almost all A&E origin and as we moved towards the fifth and the seventh year that we would have in the foreign content more 50/50 per cent with other than A&E or other than U.S.?
7260 MS CLAYTON: Yes, that would be an accurate reflection. The amount of programming that we would get from other sources by year five would probably be 15 to 20 per cent of the foreign content.
7261 CHAIRPERSON OF THE COMMISSION: On the going forward?
7262 MS CLAYTON: Yes.
7263 CHAIRPERSON OF THE COMMISSION: As of the fifth year?
7264 MS CLAYTON: As of the fifth year, yes.
7265 CHAIRPERSON OF THE COMMISSION: And before that that would be closer to kind of the entirety coming from A&E?
7266 MS CLAYTON: Virtually all, but highly unlikely that all of it would. For one thing, there is a cap on the number of hours, but the library that we would have access to is biographies and some theatrical, but in order to put together the best schedule we absolutely do not want to be limited by only what is in the A&E catalogue.
7267 So if we are doing a Canadian biography and there is nothing that could be possible relevance in their library that would make for a strong theme, then we would, of course, be searching out for more relevant programming, whether it is from the United States, but more likely from overseas.
7268 CHAIRPERSON OF THE COMMISSION: What is the hope you have in being successful in having windows in A&E U.S. for programs that you will be developing if you were to be granted the licence?
7269 MS CLAYTON: It would be the same relationship that I mentioned earlier. It is really truly wonderful. I have been a producer and a broadcaster and I know how difficult it could be to go and knock on somebody's door cold. So if a producer comes to us with a fabulous biography, I mean it doesn't have to be about a Canadian or an American necessarily, just about an interesting person.
7270 Then, definitely, our programmer would pick up the phone and call the Biography Channel and saying to CarolAnne Dolan, "hey, listen, there is this really good biography that has just been produced by a Canadian on St. Patrick," which is an actual example, "and we think it's terrific and we think that you should have it." So this is the sort of exchange. It's not a cold call. It's a friendly programmer-to-programmer call. I think there are great opportunities.
7271 MR. VINER: Perhaps CarolAnne might like to comment.
7272 MS DOLAN: Yes. I would second that. In fact, we have had this occur most recently with shows like the biography of Owen Hart, with a Canadian program on the Cartier family. It's definitely, you know, we are looking for quality programming wherever it comes from, and so I would just second what Alison said.
7273 CHAIRPERSON OF THE COMMISSION: If we have a concern over the presence of A&E through what could be that undertaking if it was to be licensed in terms of making sure that the diversity of sources is really brought to the viewers, do you see a possible limit put on what could come from A&E and I suppose they would be different from the first couple of years that you would launch up to the fifth, going into the seventh year of the licence?
7274 MS CLAYTON: Well, as a suggestion, we could accept as a condition of licence that there be a certain amount acquired from the partner A&E, but then it could say that, you know, 5 to 10 per cent of the non-Canadian portion must be the best from around the world, must be the best international. It could say that it was non-American. We certainly would not have a problem with that.
7275 CHAIRPERSON OF THE COMMISSION: And you would say 5 to 10 per cent for the duration of the licence or the early period because that seems a bit low going forward, when you come to 50 per cent Canadian and 50 per cent foreign.
7276 MS CLAYTON: If we are looking at 50 per cent of the hours coming from foreign by year five, that truly is only between 350 and 450 hours of programming.
7277 Being a specialty channel, we are looking at repeats of, you know, eight to twelve or maybe four play dates, but we are -- that's not a great deal of programming to acquire when you have got a library the size of A&E's, and they continue to produce 150 new biographies every year.
7278 There is a huge brand recognition. There is a huge asset in having access to this. If we are looking at 350 to 450 foreign hours by year five and we said that 10 per cent of that was from "other", that's still 40 hours. That's quite significant in terms of programming.
7279 MR. VINER: Madam Chairperson, I would just like to interject for a moment here. Returning to our original premise, which was what we need to drive this digital penetration is the presence of excellent services and highly popular services.
7280 I think it's important for us to say that the fact that we have an outstanding partnership with A&E is important and that the research has shown that Canadians love biographies and this is an important way in which they become familiar with the service.
7281 I don't know -- Chris Kelly, who is our research guy, head of Strategic Counsel -- I shouldn't call him our research guy. Christ, I don't know if you want to talk about biographies, Canadians' liking for biographies.
7282 MR. KELLY: Sure, Tony, I would be happy to do that.
7283 We looked at 14 different genres in our testing that was included in our submission and biography emerges as one of the strongest. It is in the top five of the different genres that we looked at. It generates substantial interest from Canadians. It truly is one of the most popular that could be licensed.
7284 As Tony points out, we are looking for popular channels. This is going to be important for the digital rollout. Biographies certainly fits that bill.
7285 MR. VINER: We think that these brands are important and we think, as Alison has said, to the digital subscriber. Whether or not we have got 800,000 subscribers or 5.2 million, as Alliance Atlantis does, it doesn't matter to them. They are going to expect top quality, first class programming out of these digital services.
7286 We think that the fact that we have access to the very highest quality biographies from A&E is a huge advantage to us. Alison described and suggested ways in which we might also do some international recruitment or acquisitions as well as a possibility.
7287 I think it's important for me to say that we believe this is an extremely strong brand. We think it's a huge strength for both ourselves and for the digital tier.
7288 CHAIRPERSON OF THE COMMISSION: My question was open, so it's for you. I'm not debating here. I was asking what you feel would be an appropriate limit given the concept you have developed and the business relationship you have developed as well.
7289 Given the fact that you are putting some emphasis -- I don't know how to do it as a verb -- on the fact that you have an expertise in multicultural programming, it seems to me we would expect that the foreign sources would be reflective of a multicultural point of view.
7290 Although you may have good quality, and I am not disputing at all the quality of A&E, far from it, especially not in the presence of the ambassador of A&E in front of me, still some figures can be perceived or maybe the story can be told differently, whether you are French, German or South American.
7291 I was kind of trying to get also a flavour or a taste of what the viewer would eventually see.
7292 MR. VINER: I understand.
7293 CHAIRPERSON OF THE COMMISSION: On the original Canadian, in Schedule 1 you refer to $14.8 million in new funding into the Canadian independent production industry. Would this be for totally new productions or would that be an additional amount on things that are already being done?
7294 MS CLAYTON: I am going to turn it to Robin Mirsky, but before I do so, I just want to say that one of the main reasons that we have applied for Biography Canada is because there is not a great deal of biographical programming available in Canada.
7295 There is some and certainly Biography as a genre, whether it's in books or magazines or movies, is becoming increasingly more popular, so we are seeing more programs available. Basically there's not a great deal out there.
7296 So, to begin with, we would be acquiring second windows from biographies that are already produced for other broadcasters while at the same time prelicensing and funding new biographies that will be made in the future.
7297 I hope I haven't stolen all of Robin's answer, but Robin would you like to add to it?
7298 MS MIRSKY: Again, I will use year five as an example because that's the program that is scheduled to be filed with the Commission.
7299 By year five we will acquire or cause to be produced 150 to 400 hours of Canadian programming. Ninety-five per cent of that will be licensed or acquired from Canadian independent producers. As far as original Canadian goes, we plan to license 20 to 25 new biography programs within the first two years of the licence and then that amount would remain for each year of the licence term.
7300 There is an element in our application for new as well as for -- new first run as well as taking a second window on new Canadian programming.
7301 CHAIRPERSON OF THE COMMISSION: Thank you. We were referring earlier to your research specialist or expert. Maybe you would like to call upon him again. We see from the market study that Biography runs one of the highest ranked among the taste and not necessarily need, but certainly taste, yet in terms of penetration level, you have projected only 35 per cent where in terms of the ranking, it was 51 per cent. Why that caution?
7302 MS CLAYTON: The 35 per cent is our projected takeup of the services when they are in a package. We looked at the whole digital universe and we certainly are hoping that there will be 10 to 12 strong, highly attractive to consumers, channels licensed.
7303 We believe that in any package Biography would be a very welcome addition as a digital driver, but basically our projections of 35 per cent are very much in line with virtually all of the applicants. Only a few went higher than that. That is a new technology. We have to get the boxes out there and we have to get Canadians to see that it is a worthwhile investment and that there are good channels.
7304 It is not a reflection on the strength of the channel; it is more of a realistic assessment of the rate of take-up.
7305 CHAIRPERSON OF THE COMMISSION: Thank you. Interactivity -- what is the type of interactivity you have in mind for that channel? It is a different Web site for sure, but what else?
7306 MS CLAYTON: This is a channel -- and, again, I will throw to Mike Lee ...
7307 This type of genre really does do very well with interactivity in that people want to know more information. So they might like to see a biography on Norman Jewison, but then they would love to be able to find out very quickly, as they are sitting there watching with their family: Hey, wait a minute. Did he do "The Russians Are Coming", or did he not? What about "Jesus Christ Superstar"? How many movies has he produced?
7308 They would like to be able to get access to that information very quickly.
7309 So the people who are interested in Biography programming are very interested in the possibilities with interactivity. I know that Biography in the United States has found this, and they have a Web site that has, basically, a library of information on 25,000 people.
7310 Mike, can you add anything to that?
7311 MR. LEE: Absolutely. I am going to very briefly talk about how the Biography aspect -- the interactive aspect -- is slightly different from the previous two applications, and then I am going to ask CarolAnne Dolan to describe another property that they have, which they found to be very, very successful and popular, which is Genealogy.com.
7312 A little bit more on how people use it -- when you are watching television and you get one hour to go from an account of life to the current life or the death of an individual, you don't get a chance to stop very often in the middle and drill down on some detail. What the Web site really provides is an ability to aggregate all of that information that you have already collected through the process of producing that feature and provide more depth into the detail of that individual's life.
7313 In addition, if an individual is inclined they may want to buy things that are associated. They may want to buy the book about that individual's life, or watch another video.
7314 It really adds more depth from where you have had your appetite whetted from the television show.
7315 If CarolAnne wants to talk a bit about Genealogy.com ...
7316 MS DOLAN: Sure. I would be happy to.
7317 Also building on what Mike just said, the existing Biography.com Web site, in addition to bringing that kind of information, has chat rooms -- discussions -- all of which we have found extraordinarily popular with people who view A&E and who come to the Biography Web site.
7318 One of the features is Genealogy.com, which is basically on our Web site as a link to Genealogy.com. A&E has an ownership stake in this Web site, which is the leading existing Web site for research of family history.
7319 It is really a guide to conducting research. It shows people how to research their family histories. It links to thousands of global resources: archives, libraries, local records, death, birth, marriages -- those kinds of things. Specifically, it includes more than 1,200 Canadian on-line resources, genealogical records, et cetera, and it has a very active community centre as well where people can go and share their family histories and connect with other people who are interested in genealogical research.
7320 In addition, Biography.com, as a very important component of the Web site, has a tie to Cable in the Classroom. So there is a whole feature of teachers, materials, that go along with the Cable in the Classroom programming, Biography being one of the key components in that effort.
7321 MR. LEE: I would just like to add that much of the content within the Genealogy.com environment is really user generated because they create their own genealogical trees.
7322 The budget focused on -- this is a great example of the real asset that the partnership brings. The focus of interactive budgets for Biography.ca is to be focused on creation and extending the Canadian biographies within Biography.com. So we would select the biographies within Biography.com that are applicable to Canada, and then spend most of the budget -- the majority of the budget -- on creating new biographies, on-line biographies, about Canadians.
7323 CHAIRPERSON OF THE COMMISSION: So I understand correctly that most of the interactivity will come from the Web site. When the set-top box gives access to the Web site, that will reach more viewers. It may not be necessarily the early adopters of technology who will be interested in Biography, so that interactivity will certainly be meaningful to the viewers of Biography.
7324 MR. LEE: In fact, most of our research shows that the first generation of interactive TV, where you have easy access to the Internet on your television with a remote control, really appeals not to that early adopter technology set; it appeals to someone who doesn't feel comfortable with technology, and this would be an excellent product for that customer.
7325 CHAIRPERSON OF THE COMMISSION: And that is how you have built the approach of interactivity into that --
7326 MR. LEE: Exactly.
7327 CHAIRPERSON OF THE COMMISSION: Thank you.
7328 The last question for Biography -- and I kind of jumped over it -- concerns the aspect of competitiveness.
7329 As you know, The History Channel has many programs that could be similar to what you are proposing to do.
7330 What do you see as the possible overlap of what you know right now of The History Channel and what you intend to do?
7331 MS CLAYTON: We are certainly very familiar with the biographical programming on History, and similarly with CBC. We know that there is not a great deal of it around, and those programs that are playing right now on History would very likely in our early years find a second window on Biography. It is not a huge amount, it is certainly not that this would be ever enough to be considered competitive, but it would be packaged differently.
7332 The approach on The History Channel is that this is a historical figure or a political figure, so we are looking at them from that point of view. Ours could be taken completely differently and they wouldn't be packaged all as the Prime Ministers, for example. We would talk about interesting Canadians who travelled overseas.
7333 There are so many different ways to look at a person's life. It is not just what they did that would make them eligible to be part of a Biography strand on The History Channel. We would repackage and we would be able to provide very significant licence fees to the producer who would be looking for a second window.
7334 This would be while we were also putting money into the system for the creation of new biographies that would not come from a historical point of view.
7335 CHAIRPERSON OF THE COMMISSION: I am not totally clear on what you are saying. You are saying that, as you know it right now, there would not be much of an overlap, but certainly you could provide a second window, and that second window would be the repackaging of existing material. You would like a -- comment on dit donc, un présentateur -- that would come and do the links differently of the same material.
7336 MS CLAYTON: The primary focus of The History Channel is not biographical programming. They look for programs that are primarily historical. That does include a strand that features biographies of historical figures.
7337 Our channel would have as its main theme biographies, not that they would be historical. So if we were putting together a theme night, we might choose only one or two of the biographies that played on History, but we would package them in a different way. If they are talking about a Prime Minister on The History Channel, we could do it in a theme. For example, we could talk about around-the-world politicians. We would have Indira Ghandi. We could have Kim Campbell. We could have Pierre Trudeau. There would be an entire mix, but we would be coming at it from politicians who were in power for X amount of time. We would come at it from a different way.
7338 But simply because there is a biographical strand on The History Channel should not preclude a biography channel from playing biographies of people who have done interesting things in a historical context.
7339 There is such a small amount of biographical programming that would ever be on The History Channel that would then come to Biography.
7340 CHAIRPERSON OF THE COMMISSION: But I still would need to understand what you see the degree of overlapping. You have Biography but you have also related non-biographical programs, like 10 per cent long form documentaries and 20 per cent theatrical features.
7341 What can we expect if we were to license you? As a viewer, if I am already a subscriber of The History Channel and now Biography is there, what would be the degree of overlapping, whether it is presented with a different approach as special nights on the Prime Minister or special nights on women in politics, or whatever? But still, if the program is the same, it's the same.
7342 I am asking for the viewer: What will be the degree? I understand that you will be marketing it differently, of course. You have a different channel under Biography than History. But at the end of the day, what I will be watching on the screen might be somewhat similar. What will be the degree of overlapping, from your understanding?
7343 MS CLAYTON: I don't think I could give a percentage. I would just have to say that it would be negligible. When I watch The History Channel, I have to tell you that I have never actually thought of it as being a place that I would turn to to find out more about historical figures. That is not what its purpose is, certainly from my point of view as a viewer.
7344 I don't know. I'm sorry, I just don't know how many biographies they play in a year. I do know it's not very many. Several of them have been funded through Rogers Cable Network Fund and Rogers Documentary Fund. We have a great relationship with the producers who produce these biographies, but there are not very many. I'm sorry, I just don't know the exact number.
7345 I do know, having seen the financing plans for all of these historical biographies, because they do apply to Rogers for funding, that they really are looking for second and third windows. They need it for their financing.
7346 There is a finite amount of government money available through CTF and Téléfilm to have the audience on an analog channel where the main feature is historical versus the small, much smaller audience on the digital channel where the whole focus is the person's life, an examination of that person's life. First of all, the producer would welcome the added licence fee; and secondly, it would be out of window. We would never buy a program that was still in window with another broadcaster. So it would have long ago left its first window of The History Channel.
7347 Almost all programs of a documentary or drama nature in Canada do need second and third windows. I think the digital universe is ideal for that, because the licence fees will be smaller because the universe is smaller. And yet it is still money in the producer's pocket.
7348 I don't know if I have addressed your question.
7349 CHAIRPERSON OF THE COMMISSION: I am not disputing that. I am trying to understand. There is the competitiveness but there is the diversity. Certainly I can understand the necessity and the importance for producers and eventually for viewers in order to get quality Canadian programs that there is a possibility of multiple sourcing of financing which is provided by many windows. I understand that.
7350 All I was trying to understand is History, and if we were to license Biography, how much would be overlapping.
7351 MS CLAYTON: I think if the Commission was looking for some criteria to help in this determination, it would be to go to the process at the beginning of June where people filed interventions against those applications that they thought were competitive.
7352 It is noteworthy that History definitely did not intervene against Biography.
7353 MR. VINER: If I could --
7354 CHAIRPERSON OF THE COMMISSION: We are not limited in our questions.
7355 MR. VINER: No, absolutely.
7356 I think the overlap you would find, Madam Chairperson, is 5 per cent. Biography will deal with entertainment figures and sports figures, a wide variety of people in all walks of life, as opposed to History which has a much more narrow focus.
7357 As I think Alison has said, there was sort of a general intervention -- not that you are confined to what others have said, but I think History would acknowledge that there is little difference, little overlap.
7358 CHAIRPERSON OF THE COMMISSION: Thank you. That takes care of my questions for this channel.
7359 Do you have any additional questions, counsel?
7360 MR. McCALLUM: Just one.
7361 At the top of page 7 of the presentation you made earlier today, you said:
"The program Biography consistently attracts a larger share of the viewer audience in Canada than in the U.S."
7362 I just wondered what was the source of that statement.
7363 MS CLAYTON: I will ask A&E to answer that question.
7364 Do you have it there, CarolAnne?
--- Pause / Pause
7365 MR. VINER: Our Canadian ambassador is helping us answer.
7366 MS DOLAN: I can give you some recent examples. Oprah Winfrey, which aired in the U.S., rated 4.7; in Canada, it rated 8.6.
7367 Hitman Hart aired in the U.S. at 3.2; in Canada, it rated a 5.9.
7368 The Samuel Bronfman Biography in the U.S. did a 2.1; in Canada, it did a 4.1.
7369 Biography of the Year in the U.S. did a 2.0; in Canada, it did a 4.9.
7370 I could cite many more examples. This is based on Nielsen Cable Meter Index.
7371 MR. McCALLUM: Thank you.
7372 THE CHAIRPERSON: Thank you.
7373 Madame Bertrand, you are not done yet.
7374 CHAIRPERSON OF THE COMMISSION: No, I am not done yet. The last one but not the least, documentaries.
7375 Do you have a different colour of binder for each one?
7376 MS CLAYTON: You bet!
7377 CHAIRPERSON OF THE COMMISSION: That's what we have too. We have different colours of binders per week. The blue is Week One.
7378 Again, to define the nature of service, what would be the respective proportion of documentaries and other types of programs on the proposed service?
7379 MS CLAYTON: I am sorry, I didn't hear the question.
7380 CHAIRPERSON OF THE COMMISSION: The respective proportion of documentaries and other types of programs. All documentaries?
7381 MS CLAYTON: Yes.
7382 CHAIRPERSON OF THE COMMISSION: 100 per cent.
7383 MS CLAYTON: Yes.
7384 CHAIRPERSON OF THE COMMISSION: And you would accept a condition of licence?
7385 MS CLAYTON: Yes.
7386 CHAIRPERSON OF THE COMMISSION: Again comes the question concerning the non-affiliated producers and the independent producers.
7387 Maybe you would like to come back with this as well, in terms of what would be for you the right level, given that here you have five independent producers that are shareholders with you.
7388 But there is also the question about affiliated producers that you may not have in the present time, other than the partners you have in that project, but that you may have down the road.
7389 Again, that could be a question that we keep there for which you will come back later.
7390 MS CLAYTON: Yes, we will.
7391 CHAIRPERSON OF THE COMMISSION: Program expenditures, here it is similar to the other two where your calculation or your commitment is higher than the calculation of the Commission. We have calculated on the historical basis, 35 per cent, and you have committed 40 per cent.
7392 Are you prepared --
7393 MS CLAYTON: All of our programming budgets were based on the 40 per cent, and we would accept 40 per cent as a condition of licence.
7394 CHAIRPERSON OF THE COMMISSION: Thank you.
7395 You include infomercial in your description of this channel, yet you have no revenues estimated.
7396 MS CLAYTON: Excuse me. We did not apply for infomercials with the Documentary Channel.
7397 CHAIRPERSON OF THE COMMISSION: You didn't. Well, if you haven't, you won't need any condition of licence there.
--- Laughter / Rires
7398 MS CLAYTON: No, no.
7399 CHAIRPERSON OF THE COMMISSION: I was a bit surprised to see that as part of --
7400 MS CLAYTON: No, you see, we just didn't see it with the Documentary Channel.
7401 CHAIRPERSON OF THE COMMISSION: That is strange. Okay, sorry.
7402 Pardon? So where are the revenues? Qu'est-ce que tu dis? You don't have the category, you have the revenues.
7403 THE CHAIRPERSON: You may see some differences here tomorrow.
--- Laughter / Rires
7404 CHAIRPERSON OF THE COMMISSION: J'en ai fumé du bon, comme on dit.
7405 In your penetration of the Documentary Channel, you put a very high penetration rate here. By year seven you have projected 70 per cent. Given that you will be in a package here again, I suppose, like Biography, and when we compare to other applications of the same nature, your projection is the highest.
7406 Why are you so optimistic here?
7407 MS CLAYTON: First of all, the Documentary Channel tested the highest of any of the applications that we applied for. In the 14 that we tested it came in number three -- and Chris can correct me if I am wrong, but I believe it was 56 per cent of all Canadians -- and it was very, very even and across the board. It was not particularly a certain age group, it wasn't a particular gender, income, education. It appealed to a very wide segment of the population, so we felt very comfortable that this will do well.
7408 Canadians love documentaries. We are known for our documentaries and we felt very, very comfortable with that number. Again, we believe it will be in a package of highly attractive services, but also our number was definitely not out of the ballpark. Our suggestion that take up would be 70 per cent by year seven is in agreement with the majority of the applicants who did project rates between 55 and 70 per cent.
7409 So we are very optimistic that seven years from launch, so in 2008, with attractive services out there, we certainly think that 70 per cent is achievable.
7410 CHAIRPERSON OF THE COMMISSION: If your projection was to be too optimistic, what could be the impact on your commitments. Let's say you meet only 60 per cent penetration.
7411 MS CLAYTON: Well, there wouldn't be. I mean, we know of an application out there -- we are in year one so we are talking next September -- the applicant is suggesting that there will be a 70 per cent take up right now and we think that is a little optimistic.
7412 Everything is based on a percentage of gross revenue so there would be a very slight -- it would mean that there were less revenues if we had fewer subscribers, but we really do believe, especially with the Documentary Channel -- I mean, all the research has come in that shows that this is very, very high in terms of its appeal.
7413 Yes, I know the other applicants have got different take-up rates, but they all do agree on the popularity of documentary. So that is what we believe.
7414 CHAIRPERSON OF THE COMMISSION: You are the most optimistic of all the optimists.
--- Laughter / Rires
7415 MS CLAYTON: In terms of the Documentary Channel?
7416 CHAIRPERSON OF THE COMMISSION: Yes, yes.
7417 MS CLAYTON: I do think that is because of how much knowledge and expertise Rogers does have in this area and our filmmakers that we have spent so much time with, we truly genuinely believe in the ability of documentaries to attract an audience and, therefore, consumers to the boxes.
7418 CHAIRPERSON OF THE COMMISSION: And I understand, given that all your commitments are made in terms of percentage, that it would not affect your Canadian content commitment, for example.
7419 MS CLAYTON: No, because we have committed to 40 per cent of gross revenues.
7420 CHAIRPERSON OF THE COMMISSION: And neither are your expenditures.
7421 Well, Madam Chair, that concludes my questioning. Thank you very much for your collaboration and your patience with me and maybe you would like to see if the staff has any final questions, but to make a final comment, if I hadn't had the proper question for many answers that you had prepared.
7422 THE CHAIRPERSON: Counsel?
7423 MR. McCALLUM: Thank you. Just to clarify. If it is going to be 100 per cent documentaries, we note that you have in your commitments Category 2(a) which is analysis and interpretation, Category 3, reporting in actualities, and Category 11, general entertainment and human interest.
7424 How do these relate to 100 per cent documentaries?
7425 MS CLAYTON: The programming philosophy for the channel is wall-to-wall documentaries 24 hours a day, the best from Canada, the best from around the world. We did apply for additional program categories to give flexibility if we wanted to do any programs that were discussions with filmmakers, but if there needs to be a distinction made between documentaries and all other types of programming and the Commission decides that that then limits it 2(b), we would not have a problem accepting that because that is so in line with our philosophy for the channel.
7426 When you are putting together a seven-year business plan, you always want to have some flexibility. I mean, for example, Rogers if the largest private sponsor of Hot Docs, the documentary festival, and we would just love to be able to cover it and do interviews with the filmmakers, and we think this would be exceptionally strong programming on the channel. So we included a program category for that.
7427 But I do understand that when trying to make a determination in terms of what is directly competitive that the Commission may feel we would like to narrow it down. There is a lot of program categories out there. Then it would not change our plans for the channel if it was limited to that category.
7428 We would prefer the flexibility. We do believe it would make a stronger service, but we know it would not affect our ability to deliver a good service if you limited it to 2(b).
7429 MR. McCALLUM: Right. Thank you very much for that clarification.
7430 Just one other further question. At page 18 of your presentation earlier today, you mentioned the documentaries produced in French Canada.
7431 I note that in your application you mention French-language programming or the French programming at page 249 of your application, and you also mention it at pages 62 to 64. But I wondered if you could explain a bit more about what is meant by this French-language programming. Is it programming in the French language? Is it programming subtitled in English or dubbed in English?
7432 MS CLAYTON: I am going to ask Robin Mirsky to answer that question.
7433 MS MIRSKY: As we saw in the video and in the supplementary brief, we see this trend as an opportunity to bring French-language documentaries to English Canada which there is really no outlets for now. So we would primarily broadcast the subtitled version of those French-language documentaries.
7434 MR. McCALLUM: Subtitled in English.
7435 MS MIRSKY: Yes.
7436 MS CLAYTON: Yes, but the viewer would be hearing the film produced in its original language.
7437 MR. McCALLUM: Thank you.
7438 THE CHAIRPERSON: Ms Clayton, when you were asked what will be the respective proportion between documentaries and these other categories, wouldn't it be more simple to tell us what amount of flexibility you do want that will not go under long-form documentaries?
7439 MS CLAYTON: Certainly. Just give me one second.
7440 Could we have flexibility on 5 per cent of the flexibility would be anything other than Category 2(b) which is long-form documentary.
7441 THE CHAIRPERSON: I believe that is the simple answer we were looking for, not to deny the flexibility, but to have a sense of how much of these other categories would form part of your proposal.
7442 MS CLAYTON: Thank you. Thank you for the clarification.
7443 THE CHAIRPERSON: Madame Bertrand?
7444 CHAIRPERSON OF THE COMMISSION: That concludes my questions. Thank you. And if you have a last comment or some further consideration, this is the time.
7445 MR. VINER: Well, thank you very much, Madam Chairperson. I would like to take just a couple of seconds and then perhaps ask Peter Raymont to close.
7446 I think what we tried to do today is bring forward -- as I mentioned, this is unusual in that the distributors and the programmers and the Commission all have the same objective together to drive the penetration of digital services in Canada and we think that we have put together a series of proposals that are both attractive. We hope we have addressed the Canadian quality issue to your satisfaction.
7447 We believe that we are in the forefront of interactivity and you can rely on us to ensure that the services are ready not only when they are launched in terms of the television service, but also the interactive service.
7448 We have some outstanding partners in each of our applications, and I just wondered if I could ask Peter Raymont as a representative of the Canadian independent production industry to just close very briefly.
7449 MR. RAYMONT: Thank you, Tony.
7450 I know we are all very tired and we have been here a long time under hot lights, but for us independent filmmakers, I just wanted to stress how important this Documentary Channel is to us. There are many outlets for documentaries on Canadian television, but there is no home for documentaries, and Canadians really invented the forum, you know. Canadians nurtured the forum. We are known all over the world for the high quality of our documentaries and I think it is really time that there was a home for it.
7451 I know it is not polite to slag your opponents, but I think it is very telling -- and I really feel I have to say this -- that if you look at the 160 letters of support for this channel from the independent filmmakers across this country, many of them worked for many years inside the CBC and inside the National Film Board and they looked very carefully at the alternative applications and read them very carefully and decided in their heart that this was the one to support the Rogers Channel.
7452 I think in the end, you know, it comes down to trust and you have had many people come before you over the years and make all sorts of promises to do all sorts of things on television and this is an organization that the independent community trusts. They have seen what they promised in the past and they have come through.
7453 MR. VINER: Thank you for your patience. We appreciate very much the opportunity to speak with you about our applications.
7454 THE CHAIRPERSON: We thank you as well for your cooperation.
7455 That will end our business for today. We will be back at 8:30 tomorrow morning.
7456 Alors nous reprendrons à 8 heures 30 demain matin.
7457 Bonsoir à tous.
--- Whereupon the hearing adjourned at 1826 to resume
at 0830 on Tuesday, August 15, 2000 / L'audience
est ajournée à 1826 pour reprendre le mardi
15 août à 0830