ARCHIVED -  Transcript - Hull, QC - 2000/08/24

This page has been archived on the Web

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.

Providing Content in Canada's Official Languages

Please note that the Official Languages Act requires that government publications be available in both official languages.

In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.






Conference Centre Centre de Conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

August 24, 2000 le 24 août 2000

Volume 9


In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of


However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.


Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

Canadian Radio-television and
Telecommunications Commission

Conseil de la radiodiffusion et des
télécommunications canadiennes

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


Françoise Bertrand Chairperson of the

Commission / Présidente

du Conseil

Andrée Wylie Chairperson / Présidente

Jean-Marc Demers Commissioner / Conseiller

Ronald Williams Commissioner / Conseiller

Martha Wilson Commissioner / Conseillère


Peter Cussons Hearing Manager and

Secretary / Gérant de

l'audience et secrétaire

Alastair Stewart Legal Counsel /

conseiller juridique

Peter McCallum Legal Counsel /

conseiller juridique


Conference Centre Centre de Conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

August 24, 2000 le 24 août 2000

Volume 9








Hull, Quebec / Hull (Québec)

---  Upon resuming on Thursday, August 24, 2000

at 0830 / L'audience reprend le jeudi

24 aôut 2000 à 0830

19222 THE CHAIRPERSON: Good morning and welcome to the ninth day of our hearing.

19223 Bonjour et bienvenue à la neuvième journée de notre audience.

19224 Monsieur le Secrétaire, s'il vous plaît.

19225 Mr. Secretary, please.

19226 MR. CUSSONS: Thank you, Madam Chair.

19227 Next on our agenda, we have six applications, for new Category 1 services, by Learning and Skills Television of Alberta Limited. This means that the applicant will have 45 minutes for their presentation.

19228 The six proposed services are:

19229 Book Television - The Channel; Travel Access - The Destination Station; The Law & Order Channel; Computer Access - The Technology Channel; Careers TV - The Jobs and Management Channel; and DocsTV.

19230 Mr. Ron Keast and his colleagues.

19231 Good morning, sir.


19232 DR. KEAST: Good morning, Madam Chair, Madam Chairperson, Commissioners and staff.

19233 My name is Ron Keast. I am President and CEO of Learning and Skills Television of Alberta. I am very pleased to be here, with my colleagues, to present the six new digital service applications that we have proposed for your consideration.

19234 Before we begin our presentation, I would like to introduce my colleagues.

19235 To my far left, and your right, is Tasha Larson, Producer and Host of Careers TV and Help!TV.

19236 To my left is Moses Znaimer, Chairman and Executive Producer.

19237 On my right is Peter Palframan, Director of Finance and Operations.

19238 Next to Peter is Jill Bonenfant, Director of Programming.

19239 In the second row, on your right, is Ross Mayot, Vice-President, Development.

19240 Next to Ross is Daniel Richler, Host and Producer our Book strand.

19241 Next is Steve Dotto, Host of the nationally syndicated "Dotto's Data Café" and our production consultant in Computer Access.

19242 Next to Steve is Peter Flemington, Head of Programming and Development for Vision TV, our partner in Docs TV.

19243 And, finally, Paul de Silva, the newly-appointed Director of Programming at Vision.

19244 At our side table are Paul and Sheryl Shard, Hosts and Producers of "Exploring Under Sail", and Mark Lewis, who acts as our general counsel.

19245 Learning and Skills Television of Alberta owns and operates Access - The Education Station, Alberta's official provincial educational television service, and Canadian Learning Television, Canada's only national English adult educational specialty service.

19246 Both Access and CLT are based in, and operate from, our Edmonton broadcast and production centre, which is fully equipped for the new digital production and distribution environment.

19247 Various members of our team have worked at TVO, helped to launch Vision TV and, now, are gathered, here, at Access and CLT.

19248 We have learned what it takes to make relevant and learning-based television that's attractive to viewers. As individuals, educational specialty television is what we have been doing for over 20 years, and it is what our business will be for the future. It's television that teaches.

19249 With our rescue of Access, in September, 1995, we returned educational television to its roots in actual instruction. The majority of Access' programming -- well over 60 per cent -- supports formal education and multi-media courses of study available at a distance.

19250 Over the last five years, the new Access has significantly improved its reach and ratings, and audience appreciation has grown throughout the province. A viewer survey conducted, this past June, in Alberta, by TeleResearch Inc., shows that 90 per cent of viewers find Access programming to be not only educational but also entertaining and informative.

19251 We launched CLT, in September 1999, into a difficult environment that required a dogged and resourceful approach to negotiations with BDUs. The hybrid analog/digital scheme that resulted limits Canadian Learning Television's current distribution to 2.3 million households, in Canada: 1.3 million and 1 million digital -- almost all of which is DTH.

19252 This hard-won experience of the real-world environment that the new digital services will face will be a real advantage in knowing what it takes to launch and operate digital services.

19253 Both Access and CLT provide attractive and popular programming, but their programs are also socially, culturally and educationally relevant and important -- and this is a key distinction in the six new services that we are proposing and the reason we believe they merit Category 1 designation.

19254 Another key distinction is our dedication to interactivity, which is integral to education. And in our approach to interactivity, we make the best use of available technology.

19255 These applications, and our planned program expenditures, reflect our expertise as educational broadcasters.

19256 An information society -- which is what the digitized world is becoming -- presupposes a learning society -- and this is our special area of expertise. It's the methods behind these applications.

19257 Now, just as a final overview comment, I would like to acknowledge our relationship with our majority owner, CHUM Limited.

19258 While we operate quite independently, CHUM's specialty television experience and support is very important. Specifically, we benefit from Moses' creative experience and drive, from the stability that derives from CHUM's size and from powerful cross-promotion and joint marketing of new services across all existing CHUM platforms -- radio, as well as television.

19259 MS BONENFANT: When we developed our original application for CLT, and since operating Access, we anticipated expanding certain program strands, or blocks, to create a comprehensive suite of learning-oriented services and so, today, our applications complement and are a natural extension of the television-based, multi-media learning strategies that we have successfully established. They evolve directly and logically from specific strands we are currently offering as part of the CLT schedule -- to which reaction has been great.

19260 They have the benefit of being piloted and proven as programs, series and blocks and are, therefore, grounded solidly in which we have been doing for some time, and will continue to do.

19261 Based on our experience and success with these blocks, our own and other research done over the last two or three years, interaction and feedback from viewers and the specific market research we undertook for this call, we are confident that there is demand for these services and that they will, in fact, be excellent digital drivers. And that's because they are all services that, in different ways, are not only entertaining and attractive -- as all good channels must be -- but are also relevant and useful to people's lives and will benefit from the learning paradigm that is inherent in everything we do.

19262 MR. MAYOT: We commissioned specific market research for this hearing, by TeleResearch Inc., which demonstrates a favourable interest for all of the services we are proposing. Between 27 per cent and 51 per cent of those surveyed expressed interest in our genres, with another 15 per cent undecided.

19263 These positive results corroborate the market research we commissioned for our two previous applications for a computer channel, in 1996 and again in 1997, and for our travel channel application, in 1997. The CCTA's research, for the 1996 hearing, ranked a computer channel second only to a history channel, in English Canada. In fact, all of the research consistently shows education rates in the top five genres.

19264 In addition to these formal research findings -- and as evidenced by the positive interventions on file -- our proposed services have received enthusiastic support from a wide range of professionals expressing strong support for the positive impact our proposed services will have on their industries and on society.

19265 We are pleased to note that Canada's largest cultural advocacy association, The Canadian Conference of the Arts, has recommended three of our proposed new services -- Book Television, Careers TV and Computer Access -- for inclusion in the 10 Category 1 applications it recommends for licensing.

19266 MR. ZNAIMER: Many people have speculated on the eventual withering away of the CRTC -- including a recent chairman of the CRTC -- and who could blame you if you, too, harboured such thoughts as you contemplate two more weeks picking your way through the conflicting applications and views, knowing that it's impossible to make everyone happy, let alone hold faith with your own principles.

19267 But imagine what would happen if you were not here! Then we would have the American system. A handful of BDUs -- no, make that two, maybe three BDUs would control between them almost each and every specialty channel and there would be no consideration of the public interest because the services wouldn't be licensed.

19268 So, we say, "Don't go. Your work is not yet finished."

19269 Because while digital is the new television frontier, it may also be the end of an era. Some have suggested that this hearing is the last, or at least one of the last, opportunities the Commission will have to reinforce an orderly relationship between program undertakings and distribution undertakings and to put its own imprint on the shape of the digital future.

19270 It stands to reason that for Canadians to be motivated, to take the extra trouble and spend the extra money to buy more television, the new digital screen will have to offer something dramatically different.

19271 Luckily, this hearing has, in our opinion, already produced an interesting array of proposals that demonstrate considerable diversity.

19272 Given their quality, and given their quantity, we urge the Commission to license as many Category 1 services that satisfy you that they are focused, attractive and socially useful.

19273 Our own assessment suggests that there are about 22 distinctive, non-competitive, English-language genres that could be licensed to non-BDU-affiliated applicants for Category 1.

19274 We say "non-affiliated" because we believe that even with the current access rules in place, ownership and commerciality will drive the selection of Category 2s and foreign imports. In other words, they will largely take care of themselves.

19275 Now, when CHUM made a similar point, the other day, the Commission asked if our modest proposal for an all-non-BUD-affiliated tier of Category 1 licences might not be seen to be challenging the Commission's framework.

19276 We say, not at all! Quite the contrary. We take that framework to be well thought through and therefore we assume that its consequences are intended. So we are simply pointing out that if the structure leaves clear advantages with one side in Category 2, surely they will be taken.

19277 If the consequences that were discussed are not intended, then certain loopholes will have to be plugged. But, if they are meant to be taken up, then Category 1 is the only place where ideas the Commission deems important and useful can be assured access, which is to say existence. Otherwise, to quote the Vice-Chair from an earlier decision:

"The Commission will have licensed programming services whose implementation depends on distribution by other licensees, without any reasonable evidence as to whether, when and in what circumstances, they will in fact be distributed."

19278 Commissioners, with this cluster of lively learning-oriented applications, we are arguing that there is still a place, there should still be a place for idealism and the public interest in this process. Learning deserves more shelf space and we say to you, if not here, where? And if not now, when? And if not you, who?

19279 Ladies and gentlemen of the Commission, it is our view and we hope we convince you to share it, that if you are offered quality Canadian services that are "potentially popular, clearly defined, alternative and socially useful in unserved or badly underserved genres or fields", by well-financed, realistically budgeted, tightly run Canadian groups, well, that's an offer the public interest should not refuse.

19280 MR. PALFRAMAN: Our business plans are based on our experience, market research and a realistic approach to the new environment. It is very easy to get caught up in the enthusiasm of new propositions and forget that even at the end of the full seven year license term of these new services it is unlikely that they will achieve even 50 per cent of the subscribers that has been the norm in the analog world.

19281 The CCTA's intervention to this hearing states that it will be some time yet before cable's subscriber base will migrate to digital, noting that even at the optimistic level only about 30 per cent of cable subscribers will have digital service by 2005. That's a far cry from the confident projections by the cable industry in 1993 and again in 1996 at the last license hearing.

19282 One of the things that made the launch of CLT possible, despite the difficult circumstances, was the synergy and operational efficiency that comes from having the plant, facilities and staff already in place for Access. Going forward we believe this leveraging of existing resources will be crucial to the successful launch of digital services. We have carefully upgraded our plant over the last five years so that we are now capable of launching and operating all the services for which we have submitted applications.

19283 The business plans for each of our applications are realistic and achievable, and the Canadian programming commitments we have made in our applications are significant. In all our applications we will broadcast at least 50 per cent Canadian content well before the seventh year. Our programming expenditure commitments are in the range of 39 per cent to 41 per cent of previous year's revenues starting in the second year.

19284 We already make a major contribution to the independent production community and will continue to do so with these proposed new channels. It is our policy, backed by six years of practice, to work closely with independent producers, especially in western Canada. LTA has been a key partner in over 200 hours of original Canadian production with over 25 different independent producers.

19285 And with additional services, we will be able to extend the already significant contribution that we make, through our partnerships with the universities, colleges and other institutions with whom we work extensively in the delivery of distance learning opportunities.

19286 Finally, an integral part of our business is interactivity and the use of current technology. Our Web sites support and enhance our television services and are the gateway to interactive learning resources. We already have more than 200 courses available online, ranging from an MBA to Creative Writing to the History of Dreaming.

19287 In addition, our Web sites link to hundreds of other courses on our partners' sites. For over a year, we have been in the e-commerce business, with an online store offering a range of educational and learning products. Along with some very forward thinking partners such as Athabasca University, University of Waterloo and Alberta Learning, we have been active since 1995 in seeking ways to take advantage of the new multi-media technologies.

19288 DR. KEAST: With that overview, Madame Chair, we would now like to give you a tape tour of what we are doing, as well as a taste of the new services we propose, which are today "nested" within the CLT program schedule.

--- Video presentation / Présentation vidéo

19289 DR. KEAST: Now I would like to ask other members of the team to present each of the specific applications.

19290 First up is Book Television -- The Channel, which will be described by Daniel Richler.

19291 MR. RICHLER: Good morning, Commissioners.

19292 Ten years ago TVOntario asked me to develop a book show, so I attended a taping of Bernard Pivot's legendary program, Apostrophes, In Paris. After, I asked him, "Can anyone make a show like this?" He said, "Mais oui, bien sûr." Then he sipped his sherry and frowned. "D'autre part, les Belges l'ont essayé, et ils sont tellement ennuyeux. Et les Anglais sont si prétentieux, quoi. Puis les Italiens sont toujours en train de s'engueuler. Non, toute réflexion faite, ce n'est pas possible."

19293 Well, you know, we created Imprint regardless, and I'm pleased to see it is still on the air today and part of the other book channel applications as well.

19294 What, then, makes a successful Canadian book show?

19295 My experience has taught me that the secret lies in respect for our jostling cultural diversity and all forms of the creative word: screen and playwriting, journalism, librettos, popular lyrics and hip-hop rhyme, academia, slam poetry, Web sites and hypertext, fantasy, romance, `zines, spoken word and, yes, books.

19296 Of course our channel will be charged with a love of Canadian literature in the formal sense, but for it to attract a larger audience it must reflect the myriad ways people of all ages and cultures use words. This is just one of the respects in which I passionately believe our application stands out from the others. I think it is worth noting that Monsieur Pivot has, in recent years, moved from Apostrophes to Bouillon de Culture.

19297 As our application describes in detail, Book Television -- The Channel will develop, over several years, shows on critics and criticism, kidlit, reading festivals and erotica, support for new writers with the WordFACT Foundation and more.

19298 You might say this is just ink on paper. Yet, as I speak, Canadian Learning Television already boasts a weekly four-hour book strand. This summer alone we have produced an International Adult Literacy Conference, a TooMuchForMuch episode in which young people discussed drug reportage in print, and coverage of the mind expanding TEDCity Conference, which CLT also produced.

19299 We are launching such live television events as Ziggy's Celebrity Book Club -- on which Margaret Atwood is appearing to discuss her new novel. I would like to take this opportunity of being on television to recommend it to viewers.

19300 If you watch CLT right now you can see the nascent book strand we call The Word, original interviews and other material gathered as literary news: the Cowboy Poetry Gathering in Maple Creek, Saskatchewan; a Canadian response to Stephen King's on-line auto-publishing stunt. These interstitials have been designed to come together as a weekly half hour feature we call Word News Tonight.

19301 In addition, as part of the CHUM group, we can work with the teams responsible for shows like BookTelevision -- which, flatteringly, the other book applications also cite as part of their plan -- and Rock'n'roll and reading, which we first developed with Frontier College.

19302 We can adapt book items made by MuchMoreMusic, Space, Access, and CityTV which, with CLT, is about to become the Official Channel of the Harbourfront International Reading Services.

19303 We have the growing library of BravoFACT literary videos and co-produced series such as The Originals. And, thanks to Bravo!, the Giller Prize is being televised this fall for the third year with class and pizzazz.

19304 Commissioners, have you ever been to somebody's home and noticed no books on the shelves, perhaps a few paperbacks leftover from high school? This to me is a sad and disorienting sight, the same I sometimes feel about television today. A mature nation should have a channel to celebrate and challenge its own literature. We are seeking a licence to air a book channel with imagination and electricity: a channel for everyone, philosophers, punks and poets, each in their own voice and in their own time.

19305 Thank you.

19306 DR. KEAST: Next up with CareersTV -- The Jobs and Management Channel is Tasha Larson.

19307 MS LARSON: Thank you, Dr. Keast.

19308 The most compelling argument for a channel that is devoted to careers and entrepreneurship is very simply the fact that many Canadians feel nervous about their own futures: Will my job survive? What are the successful businesses of the future? With the pace of change in a globally competitive economy we need to feel we can take advantage of these changes instead of feeling overwhelmed.

19309 The good news is that there are answers, of which we are a part, to help Canadians create resilient careers and businesses. Our purpose is to widen awareness of this information and of the available resources.

19310 LTA has the only track record in Canada of providing regular prime time, entertaining career information with programs such as Learning & Jobs News, L&J Interactive, Help!TV and, this year, Careers TV.

19311 We are committed to and experienced in a dialogue with Canadians about their careers. We are already connected already to a network of resources to deliver a truly interactive channel.

19312 Interactivity has always been at the heart of what we do. Interactivity is not just about available technology, it is also about the commitment a broadcaster has to provide depth of information as well as responding to viewer questions and requests. Our productions are always connected to further information on our Web site or by toll free phone.

19313 I was proud to receive a letter of support for CareersTV from Arthur Kent, the well-known journalist and documentary producer and an often harsh critic of today's media.

19314 I quote from his letter:

"LTA has provided not only highly useful information, but has also CROSSED THE INTERACTIVE FRONTIER by connecting viewers with the resources they need to seize the initiative for themselves."

19315 What Mr. Kent is referring to is the fact that any viewer question sparked by our programming is answered through our interactive Web site or our network of career and business experts.

19316 As you can see from our letters of support, we know there is a large community of career development professionals and viewers across the country eagerly watching our efforts to broaden Canadians' access to career information through television.

19317 Just three examples of our supporters are The Canada Career Consortium, The Canada Career Information Partnership -- which represents all provincial, federal and territorial jurisdictions -- and the National Life-Work Centre, which is recognized as one of the leading developers internationally of job-related information for youth.

19318 And Canada's best-known private sector "career guru" Barbara Moses recognizes us as the undisputed leaders in the field of televised career development.

19319 Careers TV - The Channel will allow us to provide even more. The shows identified in our program schedule fit in clearly with the high levels of interest we have already found among our viewers. We will also be expanding our own production by creating a new daily live show, Career Connection, that will provide new information on the labour market, management and for entrepreneurs, and it will also serve as a sort of hotline for people seeking more information.

19320 For myself, as a producer of the current programming provided by LTA related to careers, I can tell you that the greatest satisfaction in providing this service is the thanks that we receive daily from our viewers. The majority of these viewers are seeking even more of what we do, and this channel, if approved, will allow us the avenue to give them what they want.

19321 DR. KEAST: Our next offering is Computer Access - The Technology Channel, which will be described by Peter Palframan and Steve Dotto.

19322 MR. PALFRAMAN: We were the first to recognize the demand and need for a computer-based technology channel with our original application for Computer Access in 1996 -- the first ever application in this genre. Perhaps we were ahead of our time, but now a specialty channel fully dedicated to computers and digital technologies is essential, and we firmly believe that we are the best group to launch and operate the right kind of computer channel.

19323 Technology, computers and the Internet now touch almost every aspect of our lives. While e-mail was the domain of academics and computer techies a few years ago, it's now ubiquitous -- people are as likely to receive an e-mail from their grandchildren as from a business colleague.

19324 As fast as the technology changes, there is one constant however: everyone needs help with how to use it. To be effective and meet consumer needs, a computer channel must be informative, instructional and learning focused; and that's what we do.

19325 This proposed channel is a natural outgrowth of our computer-related programming block on CLT. In fact, we were the first to bring the best of ZDTV's programming to Canadian viewers where CLT launched almost one year ago, and those programs can still be seen on CLT.

19326 Over the last five years we have supported the computer-based programming right here in Canada by independent producers like Steve Dotto from Primetime/Galileo, How To Productions and Omni Film & Video. We also carry programming from C/Net and we are currently negotiating a programming output arrangement with .tv, the British equivalent of ZDTV that is already distributed as a digital service as part of Sky Broadcasting.

19327 MR. DOTTO: As a television producer, I was fortunate to appreciate early on the kind of impact the P.C. was going to have and devoted my work and efforts to the production of entertaining, useful and informative television programs about computers and technology.

19328 Contrary to what you may have heard, television programming on high tech is alive and well in Canada. I am proud to produce 65 hours of unique Canadian technology content each year which plays to a national audience. In fact, next week we begin our ninth season of Dotto's Data Café.

19329 Computer Access programming will appeal to a broad audience; it will not just be focused on the "propeller heads". With over 50 per cent of Canadian households now with computers, it is obvious that computers are no longer just for nerds.

19330 The Computer Access schedule will contain two distinctive and complementary programming strands:

19331 First, there will be a core of "how to" programming, presented in a warm, friendly, entertaining manner, covering hardware, software, communications and the practical applications we use today, as well as the exciting products we will rely on tomorrow. This will be the information that viewers need, the information that they can use.

19332 Secondly, we will cover current, late-breaking and topical information related to computing, digital technologies and communications. We will analyze, review and contextualize events to give viewers a comprehensive understanding of our wired society.

19333 Tied into everything we do will be the Internet and interactivity. At the core and weaving through all the programming that we do will be the Web.

19334 I can assure you that technology viewers in Canada expect and will utilize high levels of interactivity. Computer Access will, itself, be on the leading edge of convergence technology. It will include simulcasting on the Internet, streaming video on the Web site, and a feature of the daily live show will be a full video interactivity with viewers, probably even live programs originating from home or "boutique" studios.

19335 DR. KEAST: And now here is Jill Bonenfant to introduce The Law & Order Channel.

19336 MS BONENFANT: Canada is consistently rated as the most desirable country in the world to live in, and one of the main reasons is the fact that it is probably the safest country in the world. In large measure, we can thank Canada's founding father for making "Peace, Order and Good Government" a cornerstone of Confederation.

19337 Many thousands of Canadians are involved fulltime or as volunteers in creating and maintaining the safe and secure society that we all take for granted. This channel will tell their stories.

19338 We are proposing an educational and entertaining service that will cover every facet of law and order in Canada. In spite of Canada's enviable status, the reality is that crimes, fires, medical emergencies and natural disasters are part of everyday life in the community.

19339 The multiple programming formats of reality TV, live and interactive talk shows, drama and documentaries will make for fascinating television. Our flagship in-house production, Law and Order Help!, will be a daily live and interactive show that will follow nightly themes, from legal, medical and social issues, to police and security and emergency concerns. It will include the latest tips on everything from burglar-proofing your home to surviving a car breakdown on a deserted highway.

19340 Hero of the Week will be a profile of an individual who went above and beyond in helping in an emergency situation. There will also be short and informative programs profiling individuals in all law and order professions and related activities. For the first time, Canadian television viewers will have the opportunity to learn about, and get a better understanding of, just what it takes to maintain the orderly society we have.

19341 Many of these programs will be connected to, or drawn from, formal courses of study at educational institutions.

19342 Canadians are justifiably proud of the safe and secure society we live in. The Law & Order Channel will help them better understand and appreciate what goes into keeping it that way.

19343 DR. KEAST: A natural follow-up to maintaining good order is our DocsTV application which will be presented by Ross Mayot, Peter Flemington and Paul de Silva.

19344 MR. MAYOT: Documentary programming has always been a staple of educational television in Canada and certainly a core programming ingredient for Access and CLT. It has also been an essential programming genre for our partner in this project, Vision TV, whose contribution to the creation and broadcast of Canadian independent production over the last dozen years has been remarkable.

19345 Our collective experience, the world-renowned documentary film tradition in Canada, and the viewer appetite for documentary programming leads us to the overwhelming conclusion that there should be a dedicated documentary channel in the new digital universe.

19346 We have the expertise to launch and operate one that will be the very best in its commitment to the genre as a discrete category, not blended with other kinds of production, and in its support for new and young filmmaking talent through our DocsFACT initiative.

19347 MR. FLEMINGTON: Good morning, Madam Chair and Commissioners.

19348 We at Vision TV are delighted to be associated in this application with our colleagues at Canadian learning television. Ron Keast and Peter Palframan were among my partners in the founding of Vision and, collectively, we know something about starting from scratch with very limited resources and building services which bring something new, different and valuable to system.

19349 You have heard a number of documentary channel applications, and I don't envy you the task of sorting out their relative merits. What I can tell you about this application is that we bring to the table a strong sense of public service, a passion for the genre, and untold years of collective experience, both as independent producers and as commissioning editors and nurturers of documentary film.

19350 The Alberta base of DocsTV is a natural for us. Vision has fulltime folks working on behalf of local and regional filmmakers in the west, in the east, and in the centre. We know the filmmakers; we know the business.

19351 At any given time, we have up to 150 different projects on the go: in development, in production, in post, in rough cut, in fine cut, in ready-for-prime time.

19352 MR. de SILVA: With the partners in this application you have the broadcasters who put the "D" in diversity in the Canadian system. And I am not talking here simply about a variety of program formats or even an under-represented content area. I am talking about the reflection -- on-air and off -- of Canada's rich multicultural character, of its many "voices", opinions and passions, often edgy and against the grain.

19353 We debated the merits of bringing selective independent producers in on this partnership. We decided in the end that it would not be useful, either to us or to them, and would be fraught with potential conflicts of interest.

19354 It was certainly not a matter of indifference. Some of our best friends are filmmakers. We felt that for every one we would choose a dozen or more would be left out in the cold.

19355 It is apparent that this application is independent producer friendly. We know it and the filmmakers know it, and they have told us as much. We will operate on merit, maximizing opportunity and access, and nurturing the bright, young storytellers who are struggling for a leg up in this interactive age.

19356 We appreciate the clarity of your criteria, we agree with their importance, and we will revel in the challenge of bringing them to air.

19357 DR. KEAST: And finally, Ross Mayot and Paul Shard to present Travel Access - The Destination Station.

19358 MR. MAYOT: Travel Access will feature entertaining and informative programs about travel and recreation opportunities, destinations and costs. The service and accompanying Web site will inform and assist Canadians in selecting just the right holiday. In particular, they will feature travel by Canadians inside Canada and travel destinations that offer learning opportunities as well as relaxation.

19359 All of the programs will be complemented and augmented by the Web site. It will provide a full range of information on opportunities, destinations, processes and costs. It will also facilitate booking on-line. It will connect to other travel and destination sites and will be an invaluable research resource for Canadian travellers.

19360 Canadian co-productions and acquisitions will include series on adventure travel, wine-making in British Columbia, Canadian historic sites and other vacation marvels.

19361 Our daily live and interactive program, TravelHelp!, as well as our interstitial or program "flow" will cover all aspects of travel, including where to stay, safety tips, around the world weather, foreign exchange, time share opportunities and job opportunities within the travel and hospitality industries, as well as the educational programs that are available to prepare people for their jobs.

19362 The travel industry is huge now and is expected to become even bigger as Canada's seven million baby boomers edge into retirement. And the face of travel has changed dramatically in the last few years.

19363 Alison Hermansen, the travel services director with the Canadian Automobile Association, in an interview done for this application, told us that today's traveller is more demanding and is doing more research. They don't want to just sit on a beach for a week. Increasingly they are looking for added value, including learning opportunities about the culture and history of the place and the people where they are vacationing.

19364 MR. SHARD: Ten years ago, when Sheryl and I first began documenting our sailing adventures on a voyage to 24 countries, the demand was for beautiful scenes and escapism. This has changed progressively over the years as more and more people have expressed interest in learning how to make exciting voyages of their own.

19365 Instead of escapism, people want information, and this is shown in the demand for TV programming, instructional videos and the seminars we are asked to give across the country.

19366 The nature of learning holidays is unlimited. They can be as simple and informal as a self-planned tour of geographical, cultural or historic sites in the area where one is vacationing. They can involve specifically planned complete holidays that focus on history, culture, art, architecture, museums, eco-tourism, adventure tourism, wine tasting and cooking. And they can involve quite structured formal courses of study offered by institutions in all parts of the world.

19367 With its wide range of programming covering all aspects of travel, with its special emphasis on travel and learning, especially within Canada, and with its dynamic and interactive Web site, Travel Access will be a popular and valuable new Canadian digital service.

19368 DR. KEAST: Madam Chair, Madam Chairperson and Commissioners, I hope this overview of who we are, what we have achieved and what we are proposing demonstrates that we are ready, willing and able to make a major contribution to the new digital era of broadcasting in Canada. The six new Category 1 digital services that we have been cultivating with CLT are ready to take flight. All the expertise, support and enthusiasm is in place for us to launch these attractive and exciting services.

19369 Thank you for your attention. We look forward to your questions.

19370 THE CHAIRPERSON: Thank you and good morning, Dr. Keast, Mr. Znaimer and your colleagues.

19371 Madam Bertrand...?

19372 CHAIRPERSON OF THE COMMISSION: Good morning. I will have the pleasure of understanding better your applications. Given my background in educational broadcasting, I am definitely interested in understanding the links and the kinds of synergies you are proposing to draw from those projects, but also in terms of our responsibility at the Commission, in terms of diversity, and also the public interest. As you pointed out, it is quite important that we understand how much diversity we would get in those applications, if they were to be licensed.

19373 Before I start, I would like to make a correction. Sitting on the beach might be very useful, especially when you have lots of reading to do; unfortunately not necessarily books, but in preparation for a hearing that will last four weeks. That was what I was doing before I came to the hearing, reading on the beach. So if some of my sheets have a bit of sand on them, you will understand.

19374 As you well know now -- especially you, Mr. Znaimer, having been with us on a few occasions already since we started -- I think it is important that we offer you the possibility of situating those elements within the educational dimension of the broadcasting system. Maybe there are nuances that you want to bring. Although I don't want to prolong that aspect. If it is really the same, we will just go back to our notes and to the transcripts, and we will just take the time for really understanding better each application.

19375 I will then go to questions on understanding the overlapping between Access, CLT and the projects you have, not only quantitatively but also qualitatively, and then I will go to more specific questions about original content in relation to independent producers understanding interactivity for each of the projects.

19376 That will be the road we will follow this morning. We will talk about the difference between Apostrophes to Bouillon de Culture parce que je ne crois pas qu'il y a une grande différence personnellement si ce n'est, l'attrait du titre qui promet une plus grande invitation mais on parle encore de livre dans cette émission.

19377 M. RICHLER: Je respecte votre avis madame.

19378 CHAIRPERSON OF THE COMMISSION: Okay. Let's start with the general question, the first one: the criteria. I was looking back -- and I didn't have those notes. I had left them here, and when I was reviewing my notes early this morning I would have liked to have really in mind the criteria you had and the order you had established, Mr. Znaimer, in the context, more generally, of the other applications you have presented. But here I think it has a particular characteristic which is linked to the educational portion of your application.

19379 Could you please take us to how you see the criteria being prioritized, but in link with the difficult relationship between attractiveness and public interest, or attractiveness and education?

19380 DR. KEAST: Yes, I will. Thank you, Madam Chairperson.

19381 First of all, as Moses said last week -- and we are certainly in tune with what was discussed last week -- we take likewise as a given that the service must be attractive. Obviously there must be a demand for it and the service must be attractive. Otherwise we are all out of business. It must be affordable. So attractiveness and affordability.

19382 The third item in that sort of given area was the importance of the digital media.

19383 I would like to say a note about that because we are educational broadcasters. The basis of education is interactivity. That is what the teacher does in the classroom all the time. The basis of the Socratic method of teaching is interactivity. That is what we have done since we started in educational broadcasting when we took over Access some five years ago, and we use whatever technology is available.

19384 When we started it was mainly the telephone and letters. But we were on the air throughout the schedule to encourage people to interact with us: to call, to find out more, to get more information. Because at the base of many of the programs, the majority as a matter of fact, that we do on Access, and the majority are at least 50/50 currently on CLT, is the formal courses of study that connect, usually at a distance, with many of the programs.

19385 We are interacting. We are marketing. We are promoting interactivity, constantly, in both services.

19386 The interactive component is really important for us as educators. Whatever the technology turns out to be in the future, we will be using it, and using it effectively to meet the learning goals that we have set for ourselves.

19387 The other one is, I think, diversity. It is clearly important, particularly as it relates to social and cultural and educational importance. Obviously that is our major concern as educational broadcasters, and so it is of prime concern to us here.

19388 Contributions of Canadian programming in this new digital universe -- what is going to, I think, highlight these services, will be the innovative, new Canadian programs that we can present on them. That is very important.

19389 Also, there is the ability to fulfil the proposed commitments. We have a track record of meeting the goals and the conditions that have been set for us with Access and with CLT, and we are able to do that in whatever services we are fortunate enough to have.

19390 CHAIRPERSON OF THE COMMISSION: So the major difference you would see in terms of the order, given the kind of applications you are putting forward, is the interactivity component, which was very important last week in the configuration Mr. Znaimer presented. But here, given the angle that is taken for all of the projects and the expertise, it is even more so.

19391 Generally speaking -- I will go back there again -- depending on the project -- and I am not a nerd in the computer business. I use e-mail. I can do that. And I know that the mouse is not a pet for the pet channel, and it is not a télécommande non plus. So I have really progressed, but I don't have a really great understanding or great experience. But from my understanding, generally speaking, there are only some of your channels' proposals that are really going all the way -- the kind of possibilities or the potential of the second and third generation of what will be web TV. It seems that some of your channels rely more on a more traditional -- if we can say that. It is hard to say that about the Internet, that it is a tradition, being that young, but, still, much more of a relationship with the viewer that is based through a Web site or a porthole or the Internet.

19392 I would like to know -- when you are saying interactivity, in the case of those applications, it is really at the forefront of our thinking, given that, depending on the channels, the interactivity is not totally, fully deployed. What is your perspective on that and why is it so?

19393 MR. ZNAIMER: I think that's exactly right. People in the business, of late, have come to talk about lean-in and lean-back channels -- and that's just a fancy way of saying entertainment, when you are feeling in a more passive mood, it's the end of a long day, you know, plop down on a couch, have a relaxation, have the thing wash over you and if something occurs, on an impulse basis, that may cause you to interact, fine. Lean-in channels are where the interactivity is buried in the heart of the proposition. It's so much more central to a computer service than to one that offers gossip about stars, let's say, so much more central to an educational mission where, as Dr. Keast said, it's buried in the nature of teaching than it is to other channels that are putting their emphasis rather more on leisure. And it's because of this, I think, we have a different take on the idea of attractiveness.

19394 The idea of attractiveness has to do with getting people to vote for digital, and I think the -- well, the flaw in the suggestion that the popular will drive the tier is that the popular is frequently a reflection of what's known, but, generally, appeals to more passive people. I think the niches that we are discussing here have low popularity relative to sports or mystery movies or series, but high motivation -- in fact, intense motivation -- and we think that a surprise driver, the driver that no one expects, will come precisely from these niche media with a learning component that appeals to, albeit, a small number of people who are intensely motivated and they will put up the extra money and they will turn to a medium, in the case of education, that they have considered to be an enemy for all these years.

19395 So, I think an educational cluster, tucked into a larger offering, would actually be a powerful driver and will be a driver for people who probably aren't big users of TV or may, in fact, be shielding -- shielding, actively shielding -- their kids and their students from TV because, until recently, they thought television was the enemy.

19396 CHAIRPERSON OF THE COMMISSION: Couldn't we say that it would be like the second class, or the second phase of subscribers to digital; that the first one might be the early adopters but not necessarily the one that is necessarily turned on by technology or computer sciences but more turned on by showing off, you know, the kind of "le snobisme" of having digital because it's the newest thing to have in television and that that kind of viewer would be one that is more traditional and more passive, and if we were to take that assumption as being reality, then should we, at the Commission, choose among services that are more the bridge between the analog, more conventional, passive way of watching TV and helping the bridge to be done to, eventually, a much more interactive --

19397 MR. ZNAIMER: Well, our view on that question is that "le snobisme", the commercial stuff, the self-interested stuff, will take care of itself. Those who want to get it, for that reason, will get it.

19398 The extra push, the unexpected push, will come from these intense communities of highly-motivated people who finally say, "Ah, at last. Something I have never had before", not more stuff in existing genres but, really, new stuff in genres that don't exist. Queer Television. Unprecedented. That kind of thing. Educational Bouquet. Unprecedented. That kind of thing. And if -- I feel like I'm on dangerous ground, but if you can open to the possibility that 10 is not a magic number, then you could have both. Why be "either or" when you can be both.

19399 MR. RICHLER: May I jump in, please.

19400 My understanding of the growing popularity of the Internet has not so much to do with the corporate behemoths and extravagant multi-media experiences moving in but with early opportunities for people to seek information to set up their own Web sites devoted to particular and idiosyncratic interests. Some people say sex is also the "killer app." but I certainly remember the first --

19401 MR. ZNAIMER: It always is.

--- Laughter / Rires

19402 CHAIRPERSON OF THE COMMISSION: In all the platforms.

--- Laughter / Rires

19403 MR. RICHLER: In every one.

19404 But I do remember the first time I went on-line, I was seeking information from the Toronto Library system. I was astounded to find that I did not have to go to the library, I could look it up on my computer screen. This was an amazing thing. And look where were are now.

19405 We have to be realistic and somewhat modest about what we mean when we talk about interactivity. And, anyway, there are two kinds. There is the relatively passive kind, where you click on an icon and up pops some hypertext. But my experience has told me that people actually like to converse; they like to participate; they like to see greater depth in the areas in which they are interested.

19406 Last year, I spent quite a bit of time working with, which is probably the world's most celebrated daily Web-based news magazine. You would think that they would have every opportunity to explore all aspects of complicated interactivity. They have tried radio. They have tried broadband and DSL streaming. But daily, on a daily basis, what really counts for them is their chat room they call "Table Talk", and that is what we are already doing, in the programs and the strands that we are exercising presently. I think it's the opportunity to talk back to the otherwise, you know, impermeable medium of television that would attract people to this kind of service.

19407 MR. DOTTO: Actually, if I can jump in, as well.


--- Laughter / Rires

19409 MR. DOTTO: Well, the subject of interactivity is core and it's actually crucial to comprehend exactly -- I don't look at interactivity, necessarily, as a technology but as an attitude.

19410 With our programming, we celebrate interactivity in computers on a regular basis. But, still, it's the simple forms, e-mail, and even our 1-800 numbers, when we have callers calling in on a live television program, that really drives the passion of the viewers. And it's the fact that because we are interactive and response, the attitude on our side is we respond, we don't just try and give them something to do to occupy their mind and to make them feel like they are involved but we actually allow them to become involved in the process of our television programs, which gives them a sense of ownership and a feeling of power within it, and I think that's the most compelling argument for interactivity. It's the attitude of the television producers and the stations themselves to actually respond to the viewers' interests.

19411 At that point, there, once technology advances and we have better technologies available than the static chat rooms where we are just dealing with text, then we will embrace it. But only when the viewers are able to participate as equal partners.

19412 MS LARSON: I'm sorry. I have to leap in, too, just --

--- Laughter / Rires

19413 MS LARSON: I think that the Internet has shown us that the digital world is seen as a place where there are a lot of options and where people can now find the information that's tailored to their own needs -- and that's exactly what we already, do through our productions. But I see the digital world as one where we are able to do that in an even greater depth -- and I think that that's what Canadians are expecting.


19415 I see that you have, Dr. Keast, a very interactive team with you.

--- Laughter / Rires

19416 CHAIRPERSON OF THE COMMISSION: The launching date and the approach to launch and, you know, the -- what's your view? Is it --

19417 DR. KEAST: Well, we would be certainly prepared to launch on September 1, I think this was -- September, 2001, is the date that I have been hearing. Certainly, I think it's very important that --

19418 CHAIRPERSON OF THE COMMISSION: Not this coming September --

--- Laughter / Rires

19419 DR. KEAST: No, no. A year from now.

19420 But I think it is important that as large a number of channels get launched at the same time.

19421 So we would think that September 1 would be an ideal time to launch.

19422 CHAIRPERSON OF THE COMMISSION: And do you see the same -- what's your views on Category 2s?

19423 DR. KEAST: Well, I think if we get as many of Category 2s, as well, launched at the same date, the more the better, I think.

19424 I think it's important, however, in the mix of that, to make sure that the Category 1s have their launch agreements with the distributors before the Category 2s come to the table. But other than that, I think it's great if we can get as many as possible at the same time.

19425 CHAIRPERSON OF THE COMMISSION: In terms of the licence not being valid beyond a certain point -- when we talk about age, we say beyond "40 years old". That means that at least I am kind of not valid any more. But what would you say would be the age limit of a licence, if not acted upon in the Category 1 and Category 2?

19426 Category 1, you are saying that if it's not ready the 1st of September 2001 when everybody launches, then it should be at least questioned by the Commission. It would have to come back to the Commission.

19427 DR. KEAST: I think it would be reasonable to come back to the Commission, but I think it should be dealt with on a case-by-case basis because the reason for not launching may not be the problem of the program supplier. It may be a distributor problem. I think that is quite reasonable, to come back to the Commission.

19428 CHAIRPERSON OF THE COMMISSION: Or a negotiation problem?

19429 DR. KEAST: Or a negotiation problem, a whole lot of --

19430 CHAIRPERSON OF THE COMMISSION: And it's like a good divorce, fifty/fifty.

19431 DR. KEAST: Absolutely. That's right, exactly.

19432 MR. ZNAIMER: That's particularly pressing in Category 2 because there is no guarantee of access and as that ticking clock gets closer to midnight the content provider's position continues to erode and erode and erode.

19433 It would make perfect sense for a hard-nosed negotiator on the other side of the table to drag it out.

19434 CHAIRPERSON OF THE COMMISSION: So for Category 2 what would you see as being a reasonable limit, considering it could be a case-by-case after that.

19435 MR. ZNAIMER: Well, again, I think case-by-case will probably tell the tale, but in a way not putting a limit on it and having that genre then occupied would be a stimulus for BDUs to get to the table.

19436 Equally, I am sure, BDU could sit here and argue: Well, what do you do with a recalcitrant program provider, which is why it comes back to case-by-case.

19437 It's hard to imagine that you will actually have people who acquire licences sit on them and don't enter into negotiations with good faith and are just squatting in the hope that they might flip it out without ever putting it on the air. That, obviously, wouldn't pass when it comes before your review. So I don't know about that ticking clock.

19438 CHAIRPERSON OF THE COMMISSION: Some have proposed three years for the Category 2, kind of leaving some space. It could be less, of course, depending on what we get on the public record and the kind of analysis, but it seems to us that it's a valid question certainly. I can certainly understand that on the one hand you have to negotiate with the BDUs and getting on and that's not a guarantee. That's the way the framework has been thought through.

19439 On the other hand, I could imagine getting a Category 2, holding onto it and not being in a situation financially or, you know, the team you have not wanting to spread out your team. And while you are not launching, the viewer might be deprived, you know, from a genre that could be maybe niche, but very interesting to them. I could think of an ethnic kind of genre where it could be very smaller communities of viewers, but it could be very important in terms of what it means to them for their communities, but also in terms of even pushing the digital.

19440 MR. ZNAIMER: So, as I say, most groups that come before you do it because they have a desire to get going. I am just improvising here, but maybe, say, in the course of a three-year licence, at the end of every year any service which is not yet on air would have to file with the Commission a short explanation as to why not and where things stand.

19441 That at least would get some kind of narrative going. Of course, from the content provider's point of view we are always concerned about stonewalling on the other side.

19442 I think it's really fascinating to see and the Category 1 applications by BDUs seem to suggest that they too are worried, that when they sit on our side of the table and have to negotiate with the other BDU, they may not get the kind of results they want and so they turn to you and seek the protection of a Category 1 licence.

19443 CHAIRPERSON OF THE COMMISSION: I guess it reveals too that the digital universe is not yet shaped and formed and there is a lot of uncertainty. So it takes a lot of faith and passion, I suppose, in order to look at that universe. But one thing we all know is it's going to be there and we want it to be Canadian and to be reflective of the best of what the broadcasting system in Canada has been able to achieve, so that's why we are here.

19444 Can I get your views on independent production, what's an affiliated independent production because it will be discussing case-by-case and there is some need for clarity there. But as a general principle, what's your view on what is affiliated and then what's your view on should we impose a percentage or universal or a case-by-case there again.

19445 MR. ZNAIMER: Our view is that an affiliated independent as producer is where the broadcaster has control. An unaffiliated or non-affiliated is where they do not have control.

19446 So a broadcaster could have up to 49 per cent and it would still be unaffiliated. I am sure my colleague, Peter, would say 49.9 per cent, but I think it's 49. That would be our overall definition I would think.

19447 CHAIRPERSON OF THE COMMISSION: Forty-nine per cent of your production will be --

19448 MR. ZNAIMER: No, no. What I was saying is that the definition --

19449 CHAIRPERSON OF THE COMMISSION: Oh, of affiliated.

19450 MR. ZNAIMER:  -- of affiliated or non-affiliated. So a non-affiliated --

19451 CHAIRPERSON OF THE COMMISSION: What happens there on the Green Giant, does it become --

19452 MR. ZNAIMER: The Sleeping Giant.


--- Laugher / Rires

19454 DR. KEAST: The Sleeping Giant would be non-affiliated.


19456 DR. KEAST: That's right.

19457 CHAIRPERSON OF THE COMMISSION: With that definition?

19458 DR. KEAST: Not with that definition, exactly.

19459 THE CHAIRPERSON: Just give him back his colour.

19460 CHAIRPERSON OF THE COMMISSION: I kind of harmonize everything, not only my glasses, but the independent production companies as well. I'm sorry about that.

19461 Alors, le 49 pour cent. Would you see the necessity to go by genre and case-by-case on each licence that we would be granting, or would you see that percentage, kind of a minimum should be imposed on everybody in terms of the necessity to really keep the relationship or the interactivity with that sector of the broadcasting system?

19462 DR. KEAST: I think it's very important for having as many non-affiliated, independent producers involved in the process as possible. Whatever that percentage is, I think that's the key and we would certainly support that.

19463 CHAIRPERSON OF THE COMMISSION: Wouldn't many say that 49 per cent to define affiliated or non-affiliated is very high, and that in fact it captures too much and that actually the work or the programs that can be given to affiliated or in-house type of production would be too high a level?

19464 DR. KEAST: I think that's as I recall the general sort of Telefilm definition and it makes it quite simple. You don't have control unless you have over 50 per cent and whether it's 35 or 49 I don't think that makes a huge difference, but it's quite reasonable to have a 49 per cent and still maintain that the independent producer is non-affiliated with the broadcaster.

19465 CHAIRPERSON OF THE COMMISSION: You have heard through, I don't know how many days now we have been sitting, that there are views to the point that there are very divergent opinions on this. Some say not at all, others say it should be around 10, 15, others 30 per cent. Having heard that do you still maintain -- would you say that it is particular to the digital environment, that it's a necessity in order to be able to make a business case? What's your view?

19466 DR. KEAST: I think that's important as well, but even without the digital environment I still think that the -- yes, with the digital environment it is equally, it is very important and we are going to have to marshal all the resources we possibly can in this very fine air we are going to be breathing in the next little while.

19467 But, nonetheless, we take the view that the 49 per cent is reasonable to maintain that arm's length distance, as it would be if it were 39 per cent. I don't think it matters a whole lot.

19468 MR. ZNAIMER: I would like to add that if it were approached on the basis of common sense, in fact, practically how does it happen? The stuff that binds a channel, that creates its identity on the air, the information material about the universe that that channel is addressing, that high-volume stuff, especially in the thin business environment of digital will typically, will necessarily come from the operators I think.

19469 It's hard to imagine how an independent producer could even survive, make any kind of living off the kind of budgets that are involved where you are doing lots of stuff for very low prices, especially if it is done internally.

19470 So where does one turn to the independent production sector? It's when you have a larger scale project. It's when you want to do fiction, when you want to do a feature documentary, when you have quite an isolated sort of series that is not part and parcel of the daily drive of the channel.

19471 So in another application with another group we took the view that we would name the slots, we would name the large scale projects and devote those on an undertaking basis to the independent production community.

19472 Then, of course, there is the further nuance that not every channel is the same. Some are, in their nature, commissioning channels, others are more, in their nature, self-produced channels.

19473 So that is just to add a little more nuance, and I think the Doctor is trying to cut through all that stuff and lay out a rather more simple rule based on a telephone concept.

19474 CHAIRPERSON OF THE COMMISSION: But with that thinking, Mr. Znaimer, isn't there a risk that the independent producer's community, who have been very key to developing the analog world that we have and that we want the same rich kind of diversity, and even richer because we are bringing new players -- and to the computer people who are not in the analog world, they will be part of our world in the digital the broadcasting system.

19475 Wouldn't you say that saying because of low budget we cannot really -- well, independent producers could not really make a living or there wouldn't be a business case for them.

19476 But saying that, and leaving them for the more traditional form of drama and documentaries, aren't we saying, in a way -- or aren't you saying, because I'm not saying it, you are saying it, I'm kind of just repeating -- isn't it somewhat disadvantageous for the independent producers because they will not be brought in the digital universe the same way as talent will be and programmers will be?

19477 MR. ZNAIMER: Well, I don't think so, because there still will be lots of featured programs to go around. That's where I see the independent community making its contribution and working in program elements that have large enough budgets so that they themselves can make a reasonable living.

19478 But our approach is, you know, a live and let live approach. So ultimately, as the Doctor says, you want to find a reasonable formula that is based on percentages as opposed to our suggestion of specific time slots and particular projects, that's okay.

19479 CHAIRPERSON OF THE COMMISSION: You would be open to --

19480 MR. ZNAIMER: Yes, yes.

19481 CHAIRPERSON OF THE COMMISSION: Original Canadian programming.

19482 We will be discussing that in clarification of every application and we will certainly take a break between the general discussion before we go to the specific, so you may wish -- if you are not prepared -- to identify for us what is original Canadian programs and which ones will be done in-house or with affiliated types of independent producers and which ones will be kind of given to non-affiliated, or at arm's length it was called yesterday. So that would be helpful.

19483 But maybe you want to make a general statement on that, Dr. Keast?

19484 DR. KEAST: Perhaps just a general statement, yes.

19485 In general for the -- the DocsTV channel is somewhat separate, we can speak to that separately.

19486 But, in general, the other channels our approach has been that no more than 50 per cent of the dollars dedicated to Canadian programming would be spent on programs done in-house and at least 50 per cent would be done with unaffiliated independent producers.

19487 That is the general rule that we have established, because many of the programs -- and we have a facility in Edmonton and, like Help!TV, a live, daily interactive program. It's really the news kind of programs. These sorts of things you really can't do with an independent producer, you have to do it in-house. That is the general approach we have taken.

19488 With DocsTV it is slightly different. So we have said there that a maximum of 25 per cent would be done either in-house by ourselves or our partner Vision. That allows commentary and promotional material, et cetera, about documentary filmmaking. And 75 per cent would be done by non-affiliated independent producers.

19489 CHAIRPERSON OF THE COMMISSION: What is difficult here, I suppose, is also when you are talking about the 50 per cent in the other type of applications, that includes the possibility -- in that 50 per cent given outside, that would include the Sleeping --

19490 DR. KEAST: Sleeping Giant?

19491 CHAIRPERSON OF THE COMMISSION: See if I have it right now, Sleeping Giant.

19492 DR. KEAST: Yes, it would. Yes.

19493 CHAIRPERSON OF THE COMMISSION: If we were to choose a lower level of what is allowed, like if we were to choose 25 per cent, would it change dramatically the figure --

19494 DR. KEAST: No, I think that --

19495 CHAIRPERSON OF THE COMMISSION:  -- and would you be still considering the possibility of a condition of license of the level of 50 per cent except in the documentary channel?

19496 DR. KEAST: No. I think that if the non-affiliated part were to be split in some way to make sure that we didn't give it all to Sleeping Giant -- that is not our intent of course -- but that would be fine. I think that would work. If that is a concern -- but I don't think it should be a concern.

19497 I think that our record, certainly in Alberta, while we view Sleeping -- and I might just make a comment about Sleeping Giant, because the reason we have used Sleeping Giant as an independent producer is because Jim Hanley, who runs Sleeping Giant, was general manager of programming at TVO before I was and he understands the business that we are in, he understands educational production and not all independent producers do. We are gradually educating some more to get a feeling for that. But he understands how you can take a formal course of study and use it as a research base and develop exciting television, entertaining television from that and have it directly connected.

19498 So the context is the course. Jim knows that.

19499 So The Psychology of Death and Dying, which was a beautiful series that he did with the University of Guelph and Athabasca University a couple of years ago -- as a matter of fact, just to give a little picture of this and the advantage of working with an independent producer as well as one who happens to know the business we are in, but basically Jim, because he is an independent, we in Alberta put in about 15 per cent of that budget.

19500 Jim got Telefilm, the Cable Production Fund, he sold it to Hanenberg in the United States -- the first time I think there has been a sale from Canada to Hanenberg -- and raised significant dollars to make an outstanding documentary series.

19501 So that is why we have been using -- and I would like to be able to continue to use, on occasion, Sleeping Giant, but that experience is being now developed in other independent producers. So they know the business that we are in

19502 As you can appreciate, Madam Chairperson, we don't -- well, we do accept proposals of course all the time, but we have things, we have educational objectives that we want to meet and we want to do it with independents, but independents don't understand the business we are in.

19503 CHAIRPERSON OF THE COMMISSION: I understand. But I suppose the more we will go into the digital world, and if you are to say interactivity and more kind of targeting type of services is certainly one of the genre that would be harmonious with the digital world, I guess it should appeal to the viewer but also take by the hand the independent production community as a whole in order to kind of all together go into that world.

19504 That is the concern I guess. What has been the richness of the analog world in the broadcasting system has been like the complementarity of all the players and the partnering that has occurred. Certainly we have, at the Commission, a concern to make sure that in this new world, you know, the diversity of all the different visage will help the success of the --

19505 DR. KEAST: Yes, yes.

19506 Well, I think that you can be assured that our objective is to work with independent producers. It has been our objective since we took over Access and CLT. Basically we do the studio programs, the in-house programs. Everything else we do with independents, and that has been our approach from the day we started with Access and last year with CLT, and that would continue to be our approach.

19507 CHAIRPERSON OF THE COMMISSION: But I understand -- and we will go back to each project, but that even if you have a definition that is quite high, if it was to be a lower threshold you would still maintain the kind of commitment you have there?

19508 DR. KEAST: Absolutely. Absolutely.

19509 MR. ZNAIMER: I thought I heard the Doctor saying 50 would be in-house, 50 would be out --


19511 MR. ZNAIMER:  -- and of that half again could be guaranteed to arm's length.

19512 DR. KEAST: Absolutely.


19514 DR. KEAST: Absolutely. And, as a matter of fact -- yes, absolutely. That would be perfectly acceptable.

19515 MS LARSON: I would just like to add something because I don't like to see this picture painted of the digital world being one that will eventually squeeze out independent producers at all. Quite the opposite.

19516 For example, with Careers TV would be generated a whole new opportunity for the development of career-related television.

19517 As I have said, and as you have seen in the letters of support, there is a very keen interest across the country in making that kind of information available to everybody and from organizations that are really keen to work with television producers and to put that information out and to make it multi-use information.

19518 I think that all of our channels create an opportunity for more television production, which is good for the independent community.

19519 MR. RICHLER: I want to say something very briefly, if you don't mind.

19520 The technology that we are using at digital television now also is far more affordable to the individual. Digital cameras cost a fraction of what beta did in the past.

19521 The last program I produced and hosted was on CBC Newsworld, called Big Life, an alternative culture magazine show. Every single week we use material from independents, video post cards we called them.

19522 If we want to be true to the creative notion, to the ideals that we are holding up for our channels, we simply have to plumb the depths of the independent culture.

19523 If I wanted, for example, to produce a series on the immigrant experience here in Canada, it is easy for me to say: "Well, let's go talk to Dany Laferrière, let's go talk to Neil Bissondath or M.G. Vassanji". But I am of a certain generation. I have to make the call to people who are living freshly in this country, who are using this new equipment in their homes.

19524 So it is also a new definition of what constitutes independent. There is not an enormous amount of money going around necessarily, but the involvement is essential for us to be true to our mandates.


19526 Canadian expenditures: what is your point of view in terms of what should be our approach in terms of flexibility? Should we in this world still maintain a demand or a condition of licence on Canadian programming expenditures?

19527 DR. KEAST: Yes, absolutely. We believe that very strongly.

19528 CHAIRPERSON OF THE COMMISSION: What is your view in terms of should we maintain the more traditional approach, although we could have a bit of flexibility, as the Chair has been explaining over the past days?

19529 What is your view?

19530 DR. KEAST: We favour the traditional approach. But if you wanted to build in some flexibility, that is fine for us.

19531 CHAIRPERSON OF THE COMMISSION: You would be prepared to go from the second year on a percentage of the revenue?

19532 DR. KEAST: Yes.

19533 CHAIRPERSON OF THE COMMISSION: And we will go, project by project, to read exactly what it means.

19534 DR. KEAST: Yes.

19535 CHAIRPERSON OF THE COMMISSION: I would like to come back. I do not wish this morning to go back to your idea in Category 1 of excluding the BDUs. We talked about it the other day, and you have made your point here; the framework has been established.

19536 There is one thing I would like to pursue, and that is your idea that the responsibility -- and thank you for still seeing a role for the Commission. We feel better.

19537 You are invoking the public interest. Certainly there would not be a Broadcasting Act and there would not be institutions, Telefilm, the CRTC, and the CBC, if there was not that concern in Canada about the public interest.

19538 Public interest in the broadcasting system and one of the elements of that public interest that we have in the new world is to make sure that eventually the digital world will not be strictly one of the early adopters; that it will be at a reasonable price, that it will really bring about real choice, but that it will be with real space with good quality of Canadian content.

19539 Generally speaking when we look at your applications, given the expertise you have -- and you refer yourself in your presentation to the fact that you have great expertise by CHUM, City, all the other specialty channels you own, Access, CLT -- when we measure in a way of percentage what your applications promise in terms of Canadian content and with the other promises, they are not in the low range. But they are not the highest range either.

19540 So you are not going 75 per cent of Canadian content or 85 per cent of Canadian content. You are meeting what we have put in the framework, which is 50 per cent. But some, as you well know, have promised more.

19541 Given your expertise, should we not have expected more? That is the first question.

19542 Secondly, when we know that in the analog world an average budget for a specialty channel -- I am saying an average one -- is let's say $25 million, and that we are talking about significantly less budget for the digital applications -- and there your projections are quite in the range of all the other ones -- how will we be able to really deliver there?

19543 DR. KEAST: I wish our budget was $25 million -- CLT's, I mean -- because isn't.

19544 What we tried to do is be as practical as we can. We will be delivering a high percentage of Canadian content, as much as we think we can afford, and as viable for the business in the short term.

19545 Also, I think what is important is the percentage that we are putting into Canadian programming. That will make the difference.

19546 As I say, our budget -- and Peter Palframan can speak to this.

19547 Our projections were as realistic as we can make them, because we are out there trying to get carriage and trying to sell advertising for CLT, and it is a tough road when you are not into three or four million households.

19548 I guess the short answer to your question is that our budgets are practical, and we think that the level of Canadian content is practical for the kind of service it is going to be.

19549 Also, I think if you look at our repeat factors, you will find that they are reasonably average -- that is, four to six repeats -- rather than ten to twelve. What will happen is that Canadian programming will just get worn out.

19550 I think in many cases with these services they will not be a first window service; they might be a second window service or so. You don't want the same programs to be there all the time.

19551 So for all those reasons, for practicality, for a reasonably balanced and attractive service without a gazillion repeats, I think those are the main reasons why we did what we did.

19552 Moses, do you want to comment?

19553 MR. ZNAIMER: No, I think you have covered it.

19554 MR. FLEMINGTON: Madam Bertrand, could I speak to the question of the 50 per cent or whatever.

19555 I think we knew, when we were drawing up the application for DocsTV, that you would conceivably respond favourably to higher numbers. So your question comes as no surprise.

19556 Ron Keast has indicated that, in a sense, this is a numbers game. We believe that our repeat factor is quite low. And we believe, as he says, that what is important is the percentage commitment to the Canadian sector.

19557 If we promise more Canadian, perhaps our repeat factor could have doubled.

19558 I think, also, I should point out that our vision for the channel includes a strong international component. Canadians are, after all, players internationally: our membership in the G8, presidency of the Security Council, the Pearson legacy, and so on. We are an immigrant people. We are a multicultural society. We feel that the foreign portion of our schedule will comprise a significant part of the attractiveness of our schedule, which I think is important to you and to the success of the digital roll-out.

19559 Also, I think the foreign content will account for much of the new programming that we will bring to the system, significantly adding to the diversity of the content available.

19560 Furthermore, it is our feeling that those seeking reality or factual programming are almost, by definition, interested in the world.

19561 It is not that we don't have the desire or the passion to promote Canadian programming. Obviously, we do. This is in our history. This is in our genes. But there are reasons for specific channels having those different levels, and I think it is important that we keep those in mind as we go on.

19562 CHAIRPERSON OF THE COMMISSION: I suppose when we go back project by project we will be able to identify clearly what is the original programming, and the one that is Canadian, and where it is produced; but also in the foreign ones, which ones are U.S. and non-U.S., because it brings that element of diversity.

19563 Before I forget, my last question will be about the survey you ran. But before that, I forgot something.

19564 You made a proposal about Category 1 should be excluding BDUs in terms of licence granting.

19565 But some other applicants have said that in order to really bring diversity -- whether we consider that it is the last chance or not, because life is long and it is difficult to say that this is the last round of licences. I came to the Commission in 1996 and when I announced -- I think it was 13 then, or 17 -- licences, it was supposed to be the last round. And certainly, with the four weeks we embarked on last week, definitely, that was not the last round. So who knows.

19566 But there is certainly a point of view and a valid opinion out there that we will have to consider, like all the others, about the fact that it is important to bring diversity through new players -- not new players necessarily, because they have been there, like independent producers, but programmers -- and that Category 1 should be capped, or décerné, or granted to the new player as a programmer, as a broadcaster, and that Category 2 should be the category where existing players that have already platforms and already some negotiation power with the BDUs, and the BDUs themselves, could be in a position, or a stronger position to establish themselves at the Category 2 level.

19567 Would you have any comment about that?

19568 MR. ZNAIMER: I was smiling because the powers of existing content providers in their negotiations with BDUs are, nonetheless, still very limited. I mean, we have all of our deals in place. They are long-term. So our leverage in Category 2 is not that strong.

19569 Not to belabour the point, we think Category 2 will take care of itself. Any genre that is left over will be immediately provided by the people who have that leverage in Category 2, which is why we focused our attention on 1 and think you should license lots.

19570 We are here, frankly, as everyone else is, to get as many of these things launched as possible, and we think that the best way for us to get more is for everybody to get more.

19571 CHAIRPERSON OF THE COMMISSION: The last question in the general arena is on market research. In your survey you have excluded the Quebec market because you are proposing anglophone markets. But when you talk about your business plan and what you seek as penetration and the number of subscribers, then we see coming some francophone subscribers. So I was wondering, what are your assumptions, given that you cannot draw them from your survey, given that you have excluded francophone --

19572 DR. KEAST: I will ask Peter Palframan to respond to that.

19573 MR. PALFRAMAN: Thanks, Ron.

19574 Madam Chairperson, you have obviously looked at the business plans. The number of subscribers that we expect from the French market is very limited. The reason we included them is because we believe that the kinds of services we are offering will have some attraction to some operators in the Quebec market and that will give them an opportunity to put them in a package.

19575 So we didn't want to exclude it, but obviously it is a very limited opportunity and there is limited potential.

19576 In terms of the rates for those subscribers, the rate that we used is essentially an average rate. We discounted it. We discounted what our package price would be in the English markets. And then we also knew that there might be some instances where it might be carried on an à la carte basis. But, in terms of the rate, we have averaged the rate.

19577 But, as I say, it is very limited, and we didn't want to exclude it completely because we want to have that opportunity to offer it to some of those French market distributors.

19578 CHAIRPERSON OF THE COMMISSION: I see that you have still an expectation of starting with a 5 per cent penetration in francophone, going as high as 12.5, one might say, especially when we look at "Survivor" having reached only 3 per cent of the francophone households. Maybe it is a blessing more than a curse, but who knows. It is definitely one element that has not really --

19579 I can see your reasoning, yet there isn't a strong basis for that. Our concern, when we talk about each application, is how solid your commitments are, despite the fact that you would be able to reach that level of penetration. That is really our concern here.

19580 MR. PALFRAMAN: Right, and certainly if we look at it application-by-application I am sure we can look at how important it is.

19581 CHAIRPERSON OF THE COMMISSION: In your projections, in most of them, you say "from MMDS and other distribution modes". What do you mean by "other"?

19582 MR. PALFRAMAN: The "other" would just be any other wireless. Essentially it is MDS, but in the event that there are any other small wireless distributors, that is just a net to capture those.


19584 In interactivity -- there again we will talk element-by-element, but one concern -- it is not a concern, it is a question, in terms of the learning process we are all going through -- is the understanding between the costs, the ones that are really part of the creation of the content, which are added costs, because it is interactive, and yet the relationship we can draw to the revenues, and which ones should be part of the revenue calculation for Canadian programming expenditures and which ones should be left out because they don't belong to the broadcasting system.

19585 DR. KEAST: Yes. Peter Palframan will speak to this, but currently, for example, within our career television, it is totally interactive -- Help!TV -- and that is built within the budgets of those programs.

19586 In certain of these applications, I think, Peter built in some specifics, but in general they were captured within the budgets of the programs.

19587 Peter...?

19588 MR. PALFRAMAN: Yes, Madam Chairperson. Obviously we would look at it application-by-application, but just as a general comment, when we were looking at interactivity, what we built into each application were some basic costs for Web and on-line development, and those are within our general and administrative expenses.

19589 So those costs are built in as a discrete expense. But for the most part, we expect that the costs for interactivity will be captured within the production budgets, whether they are done in-house or whether they are done within the independent production community.

19590 So it will be an integral component of that.

19591 I guess the other general aspect is that we do have a fairly significant capability in-house already. We have full-time staff that works on our various interactive components, whether they are production related or whether they are Web related. So we have that already in place. It is an engine, if you like, that we can draw on, that will help to produce efficiencies for those activities within each application.

19592 We also have access -- and we don't use it extensively because we do operate independently, but we do also have access to the City interactive group, which operates out of the CHUM-City building.

19593 Just in general comment, that would be, I guess, the approach we took.

19594 One other thing is that, obviously in terms of revenues, we think it is premature to be looking too aggressively at revenues from on-line or interactive activities or businesses. I think we certainly agree with the CCTA in that respect.

19595 We looked at each of ours and tried to project which ones we might have more on-line revenue from because of the nature of the service. So you will see that reflected. There are different levels of revenues.

19596 But, again, they are realistic. I think for anybody to be projecting really significant interactive revenues or business plans that are dependent on interactive revenues is risky, given what we know today. I think it is going to be a good business, but just with what we have seen, I guess, in the last year, in terms of some of the .com companies that are now struggling and the lower percentages of Canadians adopting e-commerce, that would concern me, if that was a part of my business plan anyway.

19597 CHAIRPERSON OF THE COMMISSION: And you would know. You are the CFO of --

19598 MR. PALFRAMAN: Yes, that's right.

19599 CHAIRPERSON OF THE COMMISSION: You are the person the Chair will want to talk with in terms of making sure that the commitment is really the one that can be feasible.

19600 To understand better at the general level the percentage of cost, as you see it, in terms of interactivity -- and I am not talking about, necessarily -- well, yes, maybe --

19601 You say that one ingredient, or one element, is in the administration cost and the other one is included in the program cost. If we were to do a program that doesn't have that component, how less a budget would you need, or how much profit would you have -- or a sooner profit would you have on your bottom line.

19602 MR. PALFRAMAN: I think it's premature to even be able to project that, at this stage, given what we know today. I guess in the programs, in the productions, that we do, now, it's -- and Tasha might want to comment on it; she works and lives with her budget every day -- but I would guess that the interactive elements that are specific to the production today are probably 10 to 15 per cent. That would just be an off-the-top sense of working with the production budgets.

19603 But I can see, in two or three years' time, as the technology advances, I can see it being 50 per cent. And, in some cases -- and Steve Dotto may want to speak to this -- it could be as much as 100 per cent, because all of the people working on it will be a truly interactive production, so it will be a fully-interactive production. But I think we are at least two years away.

19604 And, certainly, you have heard other more technical experts, in the last week and a half. Certainly the people that work for us and monitor this and work with this, on a regular basis, certainly have the same view, that what's important is to use the technology we have today and maximize our use out of that and be looking and working with industry groups that are developing the new technologies.

19605 I was at a StarChoice presentation, a couple of weeks ago, where Liberate were there demonstrating their new Middleware software that will be -- that the next generation of set-top boxes will use to promote interactivity and better than we even get from Web TV today.

19606 I'm sorry. It's a long answer to your question, but I -- and it's because we don't really know.

19607 What we do know, today, is that it can be 10 to 15 per cent of the budget. I can see, in two or three years, or four years, it being 50 per cent.

19608 MS LARSON: I would say about 20 per cent of the work that we do on the production of Careers Help! and Help!TV goes to some form of interactivity -- and I say at least 20 per cent -- but there's also a layer of what is, essentially, volunteer help and partnerships that help with our interactivity, and that's what we can do, today, given the budget that we have. It doesn't mean that we are even going as far as we want, and I agree that, ultimately, it will be 100 per cent. So, you know, it's something that just becomes part of the way that you do a production.


19610 That concludes my general questions, Madam Chair.

19611 THE CHAIRPERSON: Counsel...?

19612 MR. STEWART: Thank you, Madam Chair.

19613 I believe you gave a commitment that 50 per cent of the independent production money would go to what could be defined as true arm's-length independent producers.

19614 Can you confirm that commitment. And if so, can you confirm that you would accept it as a COL. And also define what you would propose as a true arm's-length independent producer.

19615 DR. KEAST: Yes. We said that, in all of the program proposals, other than DocsTV, maximum 50 per cent in-house, 50 per cent to unaffiliated independent producers, and we said, of that 50 per cent, we would agree that at least half of that went to whatever of your definition is of "real arm's-length". We have said it's 49 per cent, but if yours is nothing, we would adhere to that, for half of that, yes.

19616 MR. STEWART: You would accept that as a COL?

19617 DR. KEAST: Yes.

19618 MR. STEWART: Thank you.

19619 You refer, in your oral remarks and in your applications, to interstitials. But, with respect, for instance, to the Law & Order and Computer Access nature of service definitions, you don't include the Category 12 interstitial there.

19620 Can you explain?

19621 DR. KEAST: Yes, because we probably shouldn't have used that term. In fact, everything that we do in the breaks we call "program flow" -- it's content-specific -- relates directly to the objectives. It's programming. It's brief programs. We do this, now, all the time, with our Careers. With Learning and Jobs News, we have L&J flow throughout our program schedule. So it's not interstitial material, in the classic sense; it's actual program material.

19622 MR. STEWART: Thank you.

19623 And I believe that with respect to Book Television, Law & Order and DocsTV, you didn't include, in your nature of service definition, infomercials, the Category 14, although you do refer to it in your revenue projections.

19624 Can you explain that?

19625 DR. KEAST: I believe that's an oversight.

19626 Would you like to speak to that, Peter?

19627 MR. PALFRAMAN: Yes. Counsel, that's simply an oversight and, given that you have raised the question, it's something that we should include, and that category should be included as part of the definition of service.

19628 MR. STEWART: Thank you.

19629 This question has been put --

19630 THE CHAIRPERSON: Counsel, we are now looking at the general questions, not individual -- each individual application.

19631 MR. STEWART: Thank you, Madam Chair.

19632 I just thought it might be appropriate just to clear up those preliminary matters.

19633 My next questions will be very much general in their --

19634 THE CHAIRPERSON: Yes, because if they are not applicable to all the applications, it may -- we may get confusing commitments made, not necessarily applicable to all of them.

19635 Thanks.

19636 MR. STEWART: Thank you, Madam Chair.

19637 My next questions will be very general, and they have been put to other applicants.

19638 Could you please confirm that you will be taking measures to conform to the Personal Information Protection on Electronics Documents Act?

19639 DR. KEAST: Yes, we do.

19640 MR. STEWART: Thank you.

19641 And could you please confirm that your proposed services would be technically equipped to permit descriptive video?

19642 DR. KEAST: Yes, they will.

19643 MR. STEWART: Thank you.

19644 Thank you, Madam Chair. Those are all my questions.

19645 THE CHAIRPERSON: You recognize that the "Green Giant" is applicable to all your applications.

19646 What is your investment in the Sleeping Giant?

19647 MR. ZNAIMER: Forty per cent. And that investment was only made in the last --

19648 THE CHAIRPERSON: That's all equity, not just voting interest?

19649 MR. PALFRAMAN: And that's a CHUM Limited investment, Madam Chair.

19650 THE CHAIRPERSON: And 40 per cent is of the entire equity?

19651 MR. ZNAIMER: Yes.

19652 MR. PALFRAMAN: Yes.

19653 THE CHAIRPERSON: Thank you.

19654 Thanks, Counsel.

19655 We will now give you a break, for 15 minutes, and we will be back, then, with the individual applications.

19656 Thank you.

--- Recess at 1025 / Suspension à 1025

--- Upon resuming at 1045 / Reprise à 1045

19657 THE CHAIRPERSON: Welcome back.

19658 Commissioner -- no. Madame Bertrand, s'il vous plaît.

19659 CHAIRPERSON OF THE COMMISSION: I get to vote, too.

19660 DR. KEAST: Madam Chairperson, I wonder if, before we begin this section, can we just clarify a point that was raised in the first part before the break. Could we do that?


19662 MR. ZNAIMER: Yes, Madame Bertrand, colleagues pointed out that, in your second-to-last question, there were two parts to it. I answered the second part but forget to get back to the first part. And if I understood it correctly, you said, why wouldn't the Commission use the opportunity of Category 1s to license a whole bunch of new players --


19664 MR. ZNAIMER:  -- and that the established companies could take care of themselves in Category 2. And I answered that our powers in Category 2 were not so strong but I forgot to address the first part of your question. And the answer why not just the small players, what's the advantage, in this digital life, of going with people like us, not too big but not too small, is, first, precisely that these are not $20-million businesses. They are not even $10-million businesses. Ron made the point they are $5- and $6-million businesses and they need every bit of leverage they can get if there's a corporate operation that's got a great interactive division going, that's less cost and no big start-up burden on the individual programs. Promotion, sales experience, every one of these nuances, are vitally important, and a new player simply does not dispose of these things.

19665 And, also, getting back to your point about why not just operate in Category 2 and what to do about operators who don't bring forth services, the thing about Category 2s that I forgot, obviously, is that genres are not protected, in that class; so if we, notionally, are sitting on a licence and we don't bring it forth, somebody else will. So there is a form of self-regulation there.

19666 And I hope that, with this answer, we have put our answer to the first part of your question clearly on the record.

19667 DR. KEAST: Just one further point.

19668 I think I can't see how it would have been possible for us to launch CLT if we hadn't been operating Access.

19669 The facilities, the talent, the people, the experience, as well, of course, as CHUM's support, but with Access, we were able to bring CLT in and launch it into a very difficult environment, and it will be fine, thank you very much. And that's the kind of facility and potential that we have for these new services.

19670 MR. PALFRAMAN: Madam Chairperson, I think that it's important to appreciate -- just to follow on Ron's point -- that Canadian Learning Television is, today, a $6- or $7-million business, and that's what these digital applications are affecting, those same kinds of revenues. That flows through to everything, in terms of Canadian independent producers. We know how to work with them, with those kinds of budgets. So we live this world every day, today.

19671 CHAIRPERSON OF THE COMMISSION: How much of overlapping programming is there, as we speak, between Access and CLT?

19672 DR. KEAST: I think -- we didn't do a calculation of that -- it's probably in the neighbourhood of 20 per cent, perhaps.


19674 DR. KEAST: About 20 to 25 per cent. Something like that. I think it's about 20-25 per cent.

19675 But what's important is that, in these new services coming out of the nesting in CLT, there will be no more than 15 per cent.

19676 So, in other words, Book Television, Books programming on CLT, would never be more than 15 per cent of the CLT program schedule.

19677 Computers, which is a block on CLT, would never be more. It's about 10 per cent now I think, would never be more than 15. So that's another important element I think.

19678 CHAIRPERSON OF THE COMMISSION: And that's a general rule you apply to all your applications?

19679 DR. KEAST: That's right, except for documentaries. Documentaries are a little exception because they pop up all over the place.

19680 CHAIRPERSON OF THE COMMISSION: All right. So we will talk about it. But the general rule for all the other five is no more than 15?

19681 DR. KEAST: No more than 15 per cent would it ever be on CLT.

19682 CHAIRPERSON OF THE COMMISSION: All right. What about Access?

19683 DR. KEAST: Actually, very little of this is on Access at all. We don't have books on Access. I am not even sure we have any computers on Access. Jill, do we? No, we don't.

19684 CHAIRPERSON OF THE COMMISSION: But you might. Wouldn't you develop?

19685 DR. KEAST: It could be. Yes, it could be.

19686 CHAIRPERSON OF THE COMMISSION: Wouldn't that be helpful to us to know, the same way, you see, and it's true that Access is not a national broadcasting undertaking yet. Life is long and who knows, so that it be important at least for the viewers who have presently access to Access and CLT and eventually to other applications of yours how much will be --

19687 DR. KEAST: Yes, it's a very good point and I think that if something were to be developed and nested on Access it would be the same per cent. It would be no more 15 per cent on Access, whatever the subject matter, it wouldn't take up any more than 15 per cent of the space on Access if it were on a specialized channel.

19688 CHAIRPERSON OF THE COMMISSION: All right. So between Access and CLT you keep the 25 per cent, no more than 25 per cent?

19689 DR. KEAST: I can't remember exactly what that is, but I think it's in that neighbourhood somewhere. But it's really between -- CLT is the nesting for these services, not Access.


19691 DR. KEAST: It could be at some point that we might play something on Access, but it's really CLT that's nesting these services.

19692 CHAIRPERSON OF THE COMMISSION: All right. So for CLT and those applications there wouldn't be more than 15 per cent, except for the documentary application.

19693 DR. KEAST: That's right.

19694 CHAIRPERSON OF THE COMMISSION: And that would prevail for Access, whatever kind of projects you might develop.

19695 DR. KEAST: Yes, whatever is nested on Access, sure.


19697 THE CHAIRPERSON: On this subject do you see a relationship between how limiting or restrictive our definition of independent producer should be and the advantages to be taken from nesting; in the sense that if one company nests and then expands into services, different genres, but it's still the same company, and also does most of the programming in-house or with perhaps only one producer to whom it is affiliated, then you may get much of the same thing or the same approach. It has a dampening effect on diversity, doesn't it?

19698 In other words, is there a relationship between taking advantage of synergies and of the cost effectiveness of doing things by nesting and by having a number of licences and also not giving too many diverse producers the opportunity to add programming?

19699 DR. KEAST: I think that's possible, but it is certainly not in any of our plans. As a matter of fact, I think the nesting helped --

19700 THE CHAIRPERSON: But sometimes people don't plan things, but the way they make their plans affect their planning.

19701 DR. KEAST: I would say that in fact the nesting encourages independent producers because in most of these case the digital channels are not going to be first window channels for these. So we are all going to have to co-operate as best we can to provide -- which we do now, to provide various windows for independent producers, so they can collect dollars from a variety of sources.

19702 I would make the case very strongly that the nesting potential because nesting, by the way, keep in mind is only 15 per cent. It's not a large part of the schedule. It just starts, it really just proves it's a pilot, basically, for the new service.

19703 So the variety of programming that would be in the new service would swamp the small focus that we would have on the nest on CLT. But I think it is a promoter of independent production, rather than the opposite.

19704 MR. PALFRAMAN: Madam Chair, I think the point has been made earlier also that when you move the programming to a dedicated channel it also makes it the place that people can go to get all of the programming of their particular type, as opposed to having it all within the home channel.

19705 So we would just confirm that that certainly would be a good idea.

19706 THE CHAIRPERSON: I understand Destination TV is supposed to have it.

19707 I was more speaking to the potential sameness of approach if there isn't a broader mix of producers brought into the picture when you start fragmenting or splitting genres into more and more niche programming, but if the same approach is applied there is eventually a danger of eroding diversity.

19708 You have heard us through the week, for example, look at various plans of people who plan to brand their programming as a niche service, but when you look at their actual plans it's not the same as what we are talking about now, but it is another issue and diversity at peak hours you may end up having the same type of programming on every screen.

19709 DR. KEAST: We agree that that would be a danger. It's not something that we would have in our proposals, but we agree it --

19710 THE CHAIRPERSON: Our hope, of course, is that commercial imperatives will keep the fire of diversity burning.

19711 DR. KEAST: Yes.

19712 THE CHAIRPERSON: Madame Bertrand, thank you.

19713 CHAIRPERSON OF THE COMMISSION: Merci. Alors, we will start with the books. Tout Seigneur, Tout Honneur! Alors, since Gutenberg is the father of all media we will start there.

19714 It is first questions concerning the nature of service and that nature is kind of further defined by the categories you have chosen. You have included Category 7 and, if I am not mistaken, except for comedy you have all Category 7.

19715 DR. KEAST: Yes. We have (a), (c), (d), (e) and (g).

19716 CHAIRPERSON OF THE COMMISSION: You are talking about 14 hours a week, but what would be really the weekly number of hours you propose to allocate towards drama programs per se?

19717 DR. KEAST: I will ask Jill Bonenfant to answer that.

19718 MS BONENFANT: That would be 35 per cent of the schedule.

19719 CHAIRPERSON OF THE COMMISSION: Thirty-five per cent of the schedule.

19720 MS BONENFANT: Yes.

19721 CHAIRPERSON OF THE COMMISSION: How much would it be in prime time, the TV policy as defined.

19722 MS BONENFANT: I'm sorry, I didn't calculate that. Can I get back to you in just one second?


19724 And the question, of course, because Madame Chair has alluded to that just now and we had a discussion on the use of drama at prime time hours doesn't really, even if it is really related to the "propos" of you genre still. What is transparent to the viewer is drama and it's not as much diversity as we could have expected.

19725 DR. KEAST: Yes.

19726 CHAIRPERSON OF THE COMMISSION: So the question is around there. Maybe it's absolutely crucial, but we are kind of investigating if there wouldn't be a possibility to make sure that the average viewer will still be watching television or interacting with television at prime-time hours will have really a diversity offered to him or her, rather than only during the daytime where he might be caught in the hearing or watching CPAC and not necessarily have a possibility of interacting on the questions asked.

19727 DR. KEAST: Certainly, Madame Chairperson, the drama is important to us because it's literature-based drama always, but we have no means a preponderance -- Jill, do you have those --

19728 MS BONENFANT: Yes. It's 30 per cent in prime time.

19729 CHAIRPERSON OF THE COMMISSION: Thirty per cent in prime time. That's quite high in a sense. I see that it's mainly from seven to nine o'clock.

19730 DR. KEAST: That's Mountain Time.


19732 Would you be prepared to accept a condition of licence on that category?

19733 DR. KEAST: Absolutely.

19734 CHAIRPERSON OF THE COMMISSION: Because that is really where we define it seems because we can use lots of words, but at the end of the day it's what the viewer will be able to access.

19735 DR. KEAST: Yes, quite.

19736 CHAIRPERSON OF THE COMMISSION: And so it has to be -- what about family, youth, kids and animation programming? What are the number of hours you are planning there?

19737 DR. KEAST: Jill.

19738 MS BONENFANT: Basically, under preschool it's 13 per cent.


19740 MS BONENFANT: Yes.

19741 CHAIRPERSON OF THE COMMISSION: Yes. But that is the problem, you see, preschool is not really something we have as a category yet. We might evolve, but in the present terms of what we define as categories --

19742 MS BONENFANT: Right.

19743 CHAIRPERSON OF THE COMMISSION: So if you would refer to the existing, what would be animated television? Formal education and preschool would be how much, 5(a)?

19744 MS BONENFANT: Yes.

19745 CHAIRPERSON OF THE COMMISSION: So it would be 13 per cent of 5(a)?

19746 MS BONENFANT: Yes.

19747 CHAIRPERSON OF THE COMMISSION: What other percentage would be dedicated to children and animation? You have 7(e).

19748 MS BONENFANT: 7(e), and that would be 5 per cent.

19749 CHAIRPERSON OF THE COMMISSION: That would be 5 per cent?

19750 MS BONENFANT: Yes.

19751 CHAIRPERSON OF THE COMMISSION: You would accept a condition of license --

19752 DR. KEAST: Yes.

19753 CHAIRPERSON OF THE COMMISSION:  -- that would kind of reflect that approach?

19754 DR. KEAST: Yes.

19755 CHAIRPERSON OF THE COMMISSION: In those categories it is to be book-related do you say?

19756 DR. KEAST: Yes, absolutely.

19757 CHAIRPERSON OF THE COMMISSION: What does it mean?

19758 DR. KEAST: Well, for example, my favourite is Wishbone. It is a wonderful animated program of -- well, it isn't animated actually, it's a little dog and the dog gets caught up in classic stories. It is a wonderful introducer to young people -- not preschoolers but young people -- to read those stories.

19759 So this would be -- the basis of everything here is to encourage reading, to encourage reading in families, to encourage reading by young children. So all of these animated programs would be based on printed works.

19760 As I say, the major objective -- one of the major objectives of this whole service is to promote reading and reading together.

19761 CHAIRPERSON OF THE COMMISSION: When I look at titles you have, you know, you have Harlequin Romance. You know, you seem to have like themes per night, in a sense, and that means that it would be always driven by the book based.

19762 DR. KEAST: All of the --

19763 CHAIRPERSON OF THE COMMISSION: First the story in a book and then eventually a series or a film?

19764 DR. KEAST: All would be based on books. All the drama, all the kids programming for the various levels are all based on printed, published works.

19765 CHAIRPERSON OF THE COMMISSION: How will we identify as viewers -- what would be the difference of seeing, for example, Harlequin Romance on Book Channel than watching it on City? What would be for the viewer --

19766 DR. KEAST: I think maybe I will ask Daniel speak a bit to this.

19767 MR. RICHLER: It has a great deal to do with context. We intend to wrap around whenever possible, not to mention use our Internet capabilities to provide background and conversation.

19768 I think particularly with kids we shouldn't ever, I think, look down on animation or comic books as being less than literature. They are the training potty of reading in some regards. You cannot have a lengthy sit-down discussion about Babar with four year olds watching, but you can certainly do your best to drive them places.

19769 I have been discussing this kind of thing with, which is a Toronto-based children's Web site of some considerable imagination and energy. They were very interested in working with us to produce short-form videos that might be streamed on their site but which would give us a very strong link to people who understand how to discuss the context with young people of young -- what you might call literature or pre-literature. But I think the context and conversation is everything.

19770 We were also discussing recently with Raincoast Books in Vancouver the possibility of some Harry Potter readathons. Now, as we know, this has exploded, it was mentioned the other day, the Sky Dome, 60,000 people are anticipated to come.

19771 But I am much more interested in a kind of a kid's play-by-play. We would love to see, whether it's that book or another, a series of readings with a kid's commentary as we go so that it becomes an interactive and a live activity.

19772 We are very good a live programming. We have the facilities to do it and a great deal of experience and I think that it is delicious to see kids actually doing the reading, not to have a formal and somewhat paternalistic format where adults are always reading to passive children. So that our attitude is one of dynamism and context.

19773 CHAIRPERSON OF THE COMMISSION: I understand what you are saying and it refers to the kind of concerns we have raised over the days, which is how do we assure that? Because the intent might be that, but if we issue a licence and it is feature film book-related, then it is pretty vague.

19774 What you are giving as an explanation now pushes it a bit further, but you have started when you have said -- what were the words? I would need the transcript. I think you say when appropriate or when we can, whenever we can.

19775 Well, the context is certainly added value, which would make you different than the City showing or viewing experience, yet there is nowhere here where we kind of specify that that would allow a real commitment to that difference.

19776 DR. KEAST: Madam Bertrand, if I could just add something here. The context is everything as to an educational broadcaster, as you know. We build context that leads all the way to formal courses of study, in not everything we do but in as much as we can possible do. We are pushing that envelope all the time. This comes out of this educational experience.

19777 So the context to us is vitally important. As Daniel said, there is -- sometimes you just don't have the facilities to build complicated context, but there always should be somewhere to go for further learning, and that is the principle underlying this book application.

19778 CHAIRPERSON OF THE COMMISSION: But that will not always be available on television. It will be first on the Web site --

19779 DR. KEAST: It will be on the Web.

19780 CHAIRPERSON OF THE COMMISSION:  -- or reference there.

19781 Would there be the possibility of pushing your definition of nature of service and saying "We will be identifiably book-related and always contexted" --

19782 DR. KEAST: Absolutely.

19783 CHAIRPERSON OF THE COMMISSION:  -- so that it gives -- otherwise, what is the difference between a Harlequin movie on Book Television and a Harlequin movie on any other --

19784 DR. KEAST: Quite. Absolutely. Yes.

19785 CHAIRPERSON OF THE COMMISSION: It goes for the family and youth and kids and animation, and at the end of the day you are really kind of making a case for the importance of diversity.

19786 So it is very important that we get that notion of what is the contribution you really make to that diversity by the offering you have here. The intent is very good, it starts there, but it has to be illustrated by some action I suppose.

19787 MR. ZNAIMER: We would happily accept that precision of language.

19788 CHAIRPERSON OF THE COMMISSION: You meant to add something, Dr. Keast?

19789 DR. KEAST: Only that I hope we can get Daniel to go into some of the programs that would show up here that would be specific to this channel as well, why -- how this channel allows us to deal with the various book audiences, if you will, in a way that they are not being dealt with now.

19790 But that may be a subsequent question.

19791 CHAIRPERSON OF THE COMMISSION: Well, that will be -- I have about three general questions about the book channel. As you certainly have learned through the process up to now, we don't go through the whole presentation of each channel. We go for clarity questions --

19792 DR. KEAST: Yes.

19793 CHAIRPERSON OF THE COMMISSION:  -- otherwise we would be here four months rather than four weeks and instead of being the 1st of September, 2001 it might be 2002. So we are trying very hard to meet what seems to be a target that everybody has kind of agreed upon.

19794 So if you have to add something on the precision on the nature of service, it would be a good time to do it, because I am not coming back to that.

19795 I will be then talking about original program, the percentages and what goes to independent producers and what has been the Green to the Sleeping Giant, and maybe will become a Friendly Giant, who knows.

19796 DR. KEAST: I think your reference to book context is absolutely key.


19798 DR. KEAST: That would be key to this proposed service and that would be basic to everything we do.

19799 CHAIRPERSON OF THE COMMISSION: Well, it is your own proposal because I picked it up on the explanation you gave in terms of explaining what you meant by book-related.

19800 DR. KEAST: Yes. Right.

19801 MR. RICHLER: Well, my feeling is that if we air a series based on the Narnia Chronicles -- that particular example is cited in our application -- it wouldn't necessarily follow that there should be some discussion.

19802 I think children who are old enough to read that series are old enough to participate in a discussion about C.S. Lewis and what he meant to say, what kind of metaphors were at work.

19803 Perhaps we wouldn't use the word "metaphors", perhaps we would. I don't think that we take a particularly condescending approach to children.

19804 Our experience -- well, CHUM's experience with MuchMusic has shown that a great many young people are drawn to the electricity of rock videos and from the earliest days when I was first involved with that organization in the 1980s I wanted to find what educational opportunities might be found.

19805 At that time we connected with Frontier College which, as you know, is committed to teaching people to read. We found that rock and roll, which is ordinarily thought of as the grease pan of culture, was actually a fantastic spark plug for kids of all ages to take an interest in politics, in literature, in context.

19806 Chuck D of Public Enemy, the rap group in America, has referred to hip hop as the CNN of black America. Everybody knows that this is an educational tool. It is an unorthodox one. But in my experience in speaking to teachers' conferences over the years, I have found that they are increasingly concerned about how such connections, informed connections, might be made.

19807 Many teachers in the classroom are quite clueless about who is in the Top Ten these days. Fortunately, I still take an interest in it. I am certainly very interested in making imaginative connections between the kind of unruly entertainment that children enjoy and the information that lies behind it.

19808 CHAIRPERSON OF THE COMMISSION: How much of that connection will be on television?

19809 If I look at your schedule, would WordFACT or Writer's Profile, for example, that comes right after your drama block, be about drama that will be viewed earlier on? Is there a link that will be made there?

19810 How will it work? Will it work only if I go on the Web site, or will it be referred to in programs you have scheduled here?

19811 MR. RICHLER: Sorry, could you possibly ask the question again.

19812 CHAIRPERSON OF THE COMMISSION: We are talking about the book related being context.

19813 MR. RICHLER: Yes.

19814 CHAIRPERSON OF THE COMMISSION: And my question is --

19815 MR. RICHLER: Are we speaking still about children? I am sorry.

19816 CHAIRPERSON OF THE COMMISSION: Whether children or drama.

19817 My question is: Will it be available in that context strictly if I am going on the Web site, or will it be included in programs that you have already blocked in your schedule?

19818 MR. RICHLER: Yes.

19819 CHAIRPERSON OF THE COMMISSION: Will it be on screen?

19820 MR. ZNAIMER: In a word, yes.

19821 MR. RICHLER: Yes; in a word, yes.

19822 It is so evident. A feedback loop is quickly established. Any program of ours that you see already refers to the e-mail and to the interaction. Not every program, of course, is aired live; live to tape, perhaps. But it is important, then, to use e-mail as a tool.

19823 We recently conducted an interview with the editor of Tribe magazine, which is devoted to the rave culture -- I am interested in how young people read magazines -- and this editor explained to me that the bulk of their editorial material comes from e-mails.

19824 It is a chance for children -- unfortunately, yes, there are children at all-night raves these days. But it is a chance for them to feel empowered, and that kind of feedback loop is essential to the programs.

19825 MR. LEWIS: If I could clarify: 7.1(c) in our application has a definition of service. Perhaps by moving a word or two forward, that may be helpful.

19826 The definition says:

"Book Television will be a national English language specialty television programming service that will feature English language programs, magazine talk shows, dramas, documentaries." (As read)

19827 And I was going to add the words: "that are exclusively based upon printed and published works".

19828 That may be the clearer definition and then continue on with the rest of the definition.

19829 MR. ZNAIMER: I was going to offer this added thought that yes, we would make as much use of co-ordinated additional programs, follow-on programs, and so on.

19830 One of the things we favoured over the years is added text on screen. It is now known as pop-up video, but we have called it dense television for 20 years. We are great believers in it.

19831 As the program is running, subject to getting agreement on whoever owns that property, we would also pop up information that contextualizes the material to the identity of the channel all through the piece.

19832 CHAIRPERSON OF THE COMMISSION: Thank you. That helps in our understanding of what you mean by Book Channel.

19833 Contribution to independent producers: I believe counsel has a couple on that in follow-up to my own questioning. So unless you have something to add to what was said, unless there was something different about The Book Channel, I will not take time to go over that again.

19834 In Other Revenue, in Section 8.1, you project almost a million dollars in other revenues. What do you mean by other revenues?

19835 You are aware that the Commission will not be doing any donation to any of the specialty channels. We thought that it had to be some business.

19836 Do you know what I am talking about?

19837 It starts with $52,000. It is in total. It goes from $52,000 and it ramps up, and the last year, the seventh year, is $250,000.

19838 MR. PALFRAMAN: Yes, Madam Chair. There are two components to that. One is merchandising revenue, which is a relatively small component; and the other is online revenue, that we think we will get from online advertising on our Web site and perhaps some transactional revenue.

19839 Particularly on The Book Channel it was one area where we did project some transactional revenue, because we think this channel lends itself to online transactions.

19840 As I said in the general comments, it is a little hard to project today what those revenues might be. But I think it is quite realistic. From the perspective of the business plan, I was quite happy to project some transactional revenues. There will obviously be book sales, CD sales.

19841 I think is probably one of the best e-commerce sites that we have in Canada. That gives an indication. Obviously we have the example as well.

19842 So those are the two components that are shown in Other Revenue.

19843 I can give you the specific breakdown.

19844 CHAIRPERSON OF THE COMMISSION: Yes. If you could, please, that would help in our learning process.

19845 MR. PALFRAMAN: Sure.

--- Pause / Pause

19846 MR. PALFRAMAN: I can give you those exact totals. By year?

19847 CHAIRPERSON OF THE COMMISSION: Well, general. It is a ramping-up?

19848 Well, by year if you have it. That would be even better.

19849 MR. PALFRAMAN: Sure. For example, the product or retail sales would go from $2,000 in the first year, and that runs at $2,000 all the way through to Year 7.

19850 The online transactions is a net figure. So in the first year it is $4,900, growing to $48,500 in the seventh year.

19851 I can give you the full detail.

19852 But that is a net amount. So the gross amount reflects gross sales, and then we take off the cost of sales because it is primarily books and CDs, and that sort of thing.

19853 So that would be a net amount of $4,900 growing to $48,500 in Year 7.

19854 CHAIRPERSON OF THE COMMISSION: In total, your net net.

19855 MR. PALFRAMAN: Net. So the total for Other Revenue for Year 7 should be $50,500.

19856 CHAIRPERSON OF THE COMMISSION: Okay, I understand.

19857 MR. PALFRAMAN: And the $48,500 from online, and $2,000 from merchandising and retail sales.

19858 CHAIRPERSON OF THE COMMISSION: Okay. I was going from the expenditure.

19859 I understand that once you get the revenues and the -- okay.

19860 Of course, it is part of the uncertainty, and you hope for better results.

19861 MR. PALFRAMAN: Well, we do. Like I say, I think to be looking for significantly more revenues does not make sense.

19862 Certainly our experience to date -- and we have been in this business certainly at Access and CLT for over a year and within City Interactive probably for two or three years.

19863 Our experience is that it is very tough to get the revenues from online and interactive. It is reasonable to expect that there will be some, but to project anything aggressive I think would be risky in terms of these business plans.

19864 CHAIRPERSON OF THE COMMISSION: When you do your calculation for Canadian expenditures, do you take into account those other revenues?

19865 MR. PALFRAMAN: No. We exclude them. At this point we take the view -- and I think it is consistent with the Commission's policy -- that those are unregulated revenues. So we exclude those from our calculation.

19866 CHAIRPERSON OF THE COMMISSION: Certainly the expert here at the table is our Chair. But I will try.

19867 In terms of the percentage you have committed to Canadian expenditures, you have committed 40 per cent.

19868 MR. PALFRAMAN: That is correct.

19869 CHAIRPERSON OF THE COMMISSION: The calculation, based on the average of the seven years, is 38.

19870 Would you prefer 38 or 40? And would you accept a condition of licence that would bind you to the expenditure?

19871 DR. KEAST: We would certainly accept a condition of licence. And I think it was 40 that we had in the --

19872 MR. PALFRAMAN: Yes, starting in the second year.

19873 DR. KEAST: Starting in the second year.

19874 CHAIRPERSON OF THE COMMISSION: Okay. So you would accept the 40 per cent.

19875 DR. KEAST: Yes.

19876 CHAIRPERSON OF THE COMMISSION: Thank you. Oh, yes, the original content on Book Television. Can you make the different proportions of what is original content, what is Canadian, what is foreign? And in the foreign, what is U.S. and non-U.S.?

19877 DR. KEAST: In the program schedule, of course, it is 40 per cent Canadian content that we are promising in this at launch.

19878 CHAIRPERSON OF THE COMMISSION: Yes, but there is the repeat factor.

19879 DR. KEAST: Yes, it is 40 per cent at launch.

19880 I think I will ask Jill to speak to this, but I believe that in this channel our repeat factor is between 4 and 6, consistent with most of the services.

19881 Jill, is that --

19882 MS BONENFANT: Yes, that's correct.

19883 CHAIRPERSON OF THE COMMISSION: Okay. And the 60 per cent, that would be original form?

19884 DR. KEAST: That would be foreign?

19885 CHAIRPERSON OF THE COMMISSION: The 60 per cent, that would be --

19886 You have 40 per cent Canadian content.

19887 DR. KEAST: Yes.

19888 CHAIRPERSON OF THE COMMISSION: That doesn't mean original.

19889 DR. KEAST: No.

19890 CHAIRPERSON OF THE COMMISSION: Okay. I am talking original here. In the 40 per cent Canadian content --

19891 DR. KEAST: Yes.

19892 CHAIRPERSON OF THE COMMISSION:  -- how much is original?

19893 DR. KEAST: We are looking at, for that first year -- and we just really have it here for the first year. We have Book News. We have our WordFACT, which is really part of the "flow" material on the service, and our Reader's Corner, which is kind of like Speaker's Corner. The WordFACT won't be shot in-house, but Book News is something we would likely do in-house, as the Reader's Corner, of course, we would do ourselves as well. And there are a couple of others.

19894 That comes to something -- it depends on how much WordFACT we get. That is a little uncertain at the moment. But it could be in the neighbourhood of -- oh, probably 145 hours there, and then another 35 to 40 hours of co-production.

19895 So that would be the original programming in that first year.

19896 CHAIRPERSON OF THE COMMISSION: We will be asking all of the applicants to clarify their facts about original Canadian programming, so maybe that will give you more time to kind of prepare that and it will be less -- fastidieux for now, but also for people who might be watching or listening. So maybe we can kind of throw out the question and say that it is important that we get that information. But I will leave it, because --

19897 THE CHAIRPERSON: Yes. The question was asked and will be put on the Web site, if it hasn't already been, which is to provide the number of hours of original, first window, Canadian programs, excluding repeats, each of your services would provide each year, and indicate where in your application your response is substantiated.

19898 CHAIRPERSON OF THE COMMISSION: And I add to that question the foreign original programming, because you referred to it earlier on, explaining the necessity to give an international flavour, and that is a way of meeting diversity needs. In the foreign content, what would be the percentage between U.S. and non-U.S.?

19899 DR. KEAST: Yes, we can provide that.

19900 Jill, would you look at that, please?

19901 MS BONENFANT: Thirty per cent non-U.S. and 30 per cent U.S.

19902 CHAIRPERSON OF THE COMMISSION: Okay, and 40 per cent Canadian content.

19903 MS BONENFANT: Right.

19904 CHAIRPERSON OF THE COMMISSION: Thank you. That takes care of the questions I had on the book channel. I can pursue on every project and then turn the attention to you, and to you, counsel.

19905 MR. PALFRAMAN: Madam Chairperson, just before you go to the next one, I just wanted to clarify, because I think I did a terrific job of answering your question on merchandising and transaction revenue and completely ignored other revenue, which was really your question.


19907 MR. PALFRAMAN: The other revenue, which starts at $52,000 in year 1, going to $249,600 in year 7, is revenue related to sponsored programming. It is an area that we have --

--- Fire alarm / Alerte d'incendie

19908 CHAIRPERSON OF THE COMMISSION: I hope we are not burning!

19909 The books!

--- Laughter / Rires

19910 MR. PALFRAMAN: Actually, maybe it would be a good idea if we did.

19911 CHAIRPERSON OF THE COMMISSION: We would need that famous door of the parliamentary library.

19912 MR. PALFRAMAN: That revenue is for sponsored programming, and we may explore it a little later. Given the nature of the CLT service and the Access service, there are commercial interests or institutions that will find this kind of programming, particularly because of the contextualization -- that it is appropriate to be involved with the program, rather than just buying 30-second spots.

19913 So that is something that we have put in as a separate item and specifically identified as sponsored programming. I just wanted to come back to that to make sure I had answered that question.

19914 CHAIRPERSON OF THE COMMISSION: Thank you. I thought that what you were saying was that it was other revenue and that, eventually, with the costs you had, the profit was really small. But I see that we were not on the same wavelength.

19915 MR. PALFRAMAN: Right.

19916 CHAIRPERSON OF THE COMMISSION: Or on the same page.

19917 MR. PALFRAMAN: Yes, that's right. I just wanted to clarify that.

19918 CHAIRPERSON OF THE COMMISSION: Okay. Je comprends, merci.

19919 But that would be counted in your program expenditures.

19920 MR. PALFRAMAN: Yes, it would. Absolutely.

19921 CHAIRPERSON OF THE COMMISSION: Okay. Some do fall, then, in the advertising revenues, but you have separated it. Okay, thank you.

19922 That takes care of the book channel for my line of questioning. We will move now to travel. That is really moving.

19923 There was, in the reading of your proposal, the need to define better what it means and what really you are seeking, especially when we think about comparing demands and what you see as being possibly your service, and eventually it could become competitive. You talk about travel, but you talk about in one package providing all of the elements of geography, history, science, travel and adventure.

19924 What is the nature? Will it be travel, the pretext, and eventually a history class, a geography class, a science class?

19925 It is difficult to know exactly what the composition for the viewer will be. Can you help us?

19926 DR. KEAST: There are two elements. One, again to reflect our objective as educational broadcasters, we are focusing this particular application on learning travel, informal and formal. That is, as we understand it, a very fast growing part of the travel business. People are electing -- as my wife and I did this past spring when we spent a week in Florence, informally lining up what we wanted to see -- museums, art galleries, et cetera, in Florence -- rather than electing to go to the south of France and veg out for five days.

19927 I mean, either one is just great. I am not suggesting one over the other at all. But the approach for this particular application was on those elements -- those learning travel elements. And they can be, as I said, quite informal. If you are going to vacation in X place, in that area there are Y and Z and other places that you might want to take advantage of.

19928 To point those things out to travellers, to provide information about what is available in certain areas -- and also, what more structured travel opportunities there are. So you can have a good vacation, enjoy yourself, and in fact learn something at the same time. That was the major element, I think, of our --

19929 MR. ZNAIMER: I want to echo that and harken back to another age when someone could not be considered educated unless they went on the grand tour. We are approaching this channel from the point of view of education -- sorry, travel is broadening. That is the core concept.

19930 CHAIRPERSON OF THE COMMISSION: If you were granted the documentary channel, in your mind, how much overlap would there be between the documentary channel and the travel channel?

19931 DR. KEAST: I would think, just off the top of my head, very little. I can't recall that there were very many travel-type documentaries in our documentary application. But there would be documentary-type travel programs on the travel channel.

19932 But I don't think, from a subject standpoint, there would be very much overlap at all.

19933 CHAIRPERSON OF THE COMMISSION: So, you see that as -- I am asking the question as a means to understanding even further your previous response, in terms of getting a feel or a flavour for it. That means that the angle is very educational?

19934 DR. KEAST: It is, indeed. That's what we are doing here.

19935 Most of the things -- certainly the things that we will be doing in-house, in this particular channel, are live, interactive programs, to give people travel information. So it's a help -- it's a travel help for example, travel facts, short, specific flow material that would go through the schedule that would relate to helpful facts for business travellers, for safety issues, but it's a factual-based kind of thing.

19936 So, the acquired programs, the co-productions that we would do with independent producers, such as our colleagues that are at the table here, would be the kinds of educationally-oriented travel that they are known for.

19937 So, that's the general thrust.

19938 And, also, the other part of our proposal is to try to reflect the opportunities in Canada, because there's an increasing interest in people to travel across the country and see what's available in Canada, not just the mountains -- which are great, too -- but what cultural opportunities there are and historic sites and things of that nature, in the country.

19939 CHAIRPERSON OF THE COMMISSION: How much of what you are proposing here, opening up to all those ancillary-type of questions that are related to travel, will be accessible through the Net, in comparison to the TV set itself?

19940 DR. KEAST. Well, again --

19941 CHAIRPERSON OF THE COMMISSION: Through the set-top box, of course.

19942 DR. KEAST: Well, again, the context here is important because, if we are visiting Florence, we will only be able to touch on the element that would be available to see in a half-hour program, for example. But we should have the Web site information about specific information of where to stay, what to see, what the costs are, all that detail that would be available on the Web that you couldn't possibly cover in a television program.

19943 What we might want to do, in some of them, is, in fact, put them on screen information. So when we are, you know, travelling into the Ufizzi, in Florence, some information about if you get there the day before, at four o'clock, you can book a special tour, rather than standing in line for four hours. That kind of thing. That could be on the screen -- and it probably would be -- but it could be, but certainly would be available on the accompanying supportive Web site.

19944 CHAIRPERSON OF THE COMMISSION: And when you talk about creating an understanding of economics, is it the economics of the country or the region you are visiting? Or is it the economics of travelling?

19945 DR. KEAST: Well, it could be both, actually, what the foreign exchange rates might be, but it could certainly be more information about the particular country. Any particular -- yes, I think --

19946 MS LARSON: Well, actually, Ron, if I can just jump in --

19947 DR. KEAST: Yes.

19948 MS LARSON:  -- because, as Help!TV, the strand that I produce, is part of CLT, which is nesting all of this -- and we have done several live shows on travel, in particular; people have been really interested in working abroad -- but there is always much, much more information available than we are able to get out.

19949 I would foresee, for example, on a travel help show, that the focus of some of what we produce, in terms of tape, may be very well-directed towards educational opportunities in an area. I mean that would just be what would turn us on. If we were to choose a location and we went there, we would be looking at it from an education -- which we think is an extremely interesting area -- but also around that, around any tape inserts, is the whole live show, the whole interactive element which would allow you to do things like, you know, find out, "Well, gee, you know, if I want to go there, for my location, how much is it going to cost me? Which airlines have the best deals?". They may want to know, yes, exchange rates, best hotels.

19950 But we always find, too, what people are primarily interested in -- and which Daniel has referred to before -- is an interactive chat element. People always want to talk to someone who's been there. They want to find out from personal first-hand experience and don't want to just be told by their travel agent, "Oh, yes, that's a swell place to go".

19951 So there are all these interactive elements around it which can just answer really simple travel questions. But I think what we would be driving towards, in terms of which stories are worth telling on that show, I think we would probably be more turned on by learning something from our destination.

19952 DR. KEAST: Madam Chairperson, could I ask our travel experts, Paul and Sheryl, just to say a word on this?

19953 MS SHARD: Yes. Thanks.

19954 I just wanted to add something that -- with travel, half the fun is getting there. People love to plan. Our special niche is sailing and water sports and people who are enthusiastic in that are rabid; they want to know everything about sailing or about a sailing destination or "What's it like? How should I equip my boat? How can I charter a boat?" Hikers are the same. Whatever type of travel you are interested in, people just seem to be very passionate.

19955 So we are quite excited about this channel because it would give those special interests the information that they are seeking, plus the depth, through the interactivity, through Web sites, being able to phone people, the possible links that are available.

19956 We have a site for our, "Exploring Under Sail". People can track us on our adventures. They can e-mail us on site. We have references to various destinations and so on. And we see, in the future, with the development of digital television, that, you know, there may be possibilities, while a program is running, to push buttons on the screen to get information right away on those particular types of questions and information that people just really hunger for. So I think it will meet quite a need.

19957 CHAIRPERSON OF THE COMMISSION: Still, in order to go back to the fencing...

19958 I know you talk about service fully dedicated to travel and travel-related programming. But given that you refer, immediately after, in your definition, to elements of geography, history and science so that it would not be a repeat of CLT or Access, could we say exclusively to travel --

19959 DR. KEAST: Absolutely.

19960 CHAIRPERSON OF THE COMMISSION:  -- and that would --

19961 DR. KEAST: Yes.

19962 CHAIRPERSON OF THE COMMISSION:  -- kind of, you know, be more precise, in terms of what I hear you say is the concept that is --

19963 DR. KEAST: Yes.

19964 CHAIRPERSON OF THE COMMISSION:  -- really always creating the relationship? It's always related --

19965 DR. KEAST: Absolutely.

19966 CHAIRPERSON OF THE COMMISSION:  -- it's never --

19967 DR. KEAST: Yes.


19969 Canadian expenditures. We have the same -- we arrive at the same percentage; which is 40 per cent.

19970 Would you accept a condition of licence?

19971 DR. KEAST: Yes.

19972 CHAIRPERSON OF THE COMMISSION: And you have talked about a total expenditure in excess of 16 million on which you include 600,000 on script and concept development.

19973 Is that a particular commitment, you know, kind of specific commitment, independent of the general commitment you have made on Canadian expenditures?

19974 DR. KEAST: That's part of the 40 per cent.

19975 CHAIRPERSON OF THE COMMISSION: It is part of the 40 per cent?

19976 DR. KEAST: Yes.


19978 DR. KEAST: Specific, yes.

19979 CHAIRPERSON OF THE COMMISSION: And that would be reserved to independent producers?

19980 DR. KEAST: That's right.

19981 CHAIRPERSON OF THE COMMISSION: The affiliated or the non-affiliated?

--- Laughter / Rires

19982 CHAIRPERSON OF THE COMMISSION: The "Friendly Giant" or --

--- Laughter / Rires

19983 DR. KEAST: Probably in terms of the percentage that -- I don't think we sort of made that percentage because, when we did this, we weren't thinking about affiliated or unaffiliated. But, basically, we would hope to be able to put that in the development of material that would be -- that would turn out to be excellent programs. But I would think most of it would go into non-affiliated, certainly.

19984 CHAIRPERSON OF THE COMMISSION: And what do call "most"? What's a figure to describe "most"?

19985 DR. KEAST: I would say all of it.


19987 DR. KEAST: I would say all of it would go into --


--- Laughter / Rires

19989 CHAIRPERSON OF THE COMMISSION: Easy to understand. Okay.

19990 That's all for me, on the travel channel.

19991 The Law & Order Channel. That was a bit more complicated.

--- Laughter / Rires

19992 CHAIRPERSON OF THE COMMISSION: Frankly, for a more general question here, it wasn't clear -- and maybe it's meant to be the two -- whether it would be more entertainment or more indicative -- educational. And I know it can be both. I know entertainment exists. But, you know, exactly what kind of proposition is it to the viewer? I wasn't very clear --

19993 DR. KEAST: Well, I think it's -- you know. As you know, we believe, really passionately, and have proven, with CLT and Access, that you can have a very entertaining commercially-viable television series that's fundamentally educational.

19994 We buy programs. We have to entertain people, otherwise we are talking to ourselves. This particular channel has a whole range of popular entertaining programming, but the context is -- and certain specific programs, the daily program and "Law and Order Help!", the flow material, the individual documentaries or magazine programs that we might do are there to help people understand the truths, the reality of law and order in Canada versus other parts of the world.

19995 What is it to be a Canadian? What does peace, order and good government mean? Does it have a different meaning to different Canadians? What about the new Canadians? Does it have a different meaning to them? This kind of exploration we would be able to place in an entertaining context.

19996 I mean, that was basically a hundred years ago it seems when we first introduce "Saturday Night at the Movies" at TVOntario. I remember it was Bergman's films and the theme was a search for God.

19997 If we had just put a program up to search for God we would have had nine people watching it, but with the film and the discussion we had a significant number of people watching it. This is the hope for this channel, as it is for all the channels, as a matter of fact, that because it's a popular, attractive, program service, the context will involve quite a number of people.

19998 The other programs that wrap around these popular programs will bring people back to a discussion of those issues, those educational issues that we have set for ourselves for this particular channel.

19999 CHAIRPERSON OF THE COMMISSION: In order to convey that message and that intention, of course the categories you choose and the proportion in which you will use each of them is significant. So could we kind of go back to those because there is, for example, some discrepancy in terms of, and it might be my reading or understanding, when there is some discrepancy in terms of what you define as your nature of service and what we find in Schedule 10 in terms of your program.

20000 So, the categories you choose and the program description there is some discrepancy. For example, Category 5(b), which you say will be the -- which is formal education and preschool which will be your in-house productions. We didn't find them at first in your categories that you had listed. So we want to make sure that what you have listed is there.

20001 Secondly, what will be the proportion on some of them, especially like the education type of programming, especially in drama because, of course, drama is there again. So how much of the two will we see so that we get a better flavour of it.

20002 DR. KEAST: Yes, we can and perhaps Jill could give us some of those percentages for drama.

20003 CHAIRPERSON OF THE COMMISSION: But can we first go to -- you have 2(a), 2(b), 3, 7(a). Am I going too fast now?

20004 DR. KEAST: No.

20005 CHAIRPERSON OF THE COMMISSION: 7(d), 7(g), 11 and 13 and I heard you answer to counsel that we would add 14 now.

20006 DR. KEAST: Yes.

20007 CHAIRPERSON OF THE COMMISSION: Infomercials would be there.

20008 MR. PALFRAMAN: But 5(b) was included in our application as well when I checked last.

20009 CHAIRPERSON OF THE COMMISSION: It was. So it's my --

20010 MR. PALFRAMAN: It's on page 12, our page 12 of the --


20012 MR. PALFRAMAN: Not 5(a); 5(b).

20013 CHAIRPERSON OF THE COMMISSION: I'm sorry, but 5(a), you are proposing some programs when you are in Schedule 10. So do you intend to use 5(a) at all? Have you forgotten about using it?

20014 DR. KEAST: It's a good question. I think, quite frankly, it would be better to include it because it is possible for many of these programs -- we are doing one right now, for example, "The New Detectives", for example, that connects to a formal course of study in policing and security at Grant MacEwan College. So I think that's a good point and I think we should add 5(a), if that's permissible.

20015 CHAIRPERSON OF THE COMMISSION: And how much -- you know, if we were to take the two extremes, being the 5 and the 7, 5 being of course more educational and 7 being more the entertainment type of programs, what would be, generally speaking, in a schedule put forward by Law & Order the proportion of each?

20016 DR. KEAST: Jill, could you just give us a fix on particularly the drama in the schedule?

20017 THE CHAIRPERSON: If I can help, before we leave, I think in your description you have mixed 5(a) and 5(b). You have called it formal education and preschool when that is taking part of 5(a) and introducing it into 5(b), so perhaps you can clarify that as well. It means that the category is a creation because you called it formal education and preschool.

20018 CHAIRPERSON OF THE COMMISSION: It's 5(c). It's a new one. We will review the Canadian content annually. We have just done that.

20019 THE CHAIRPERSON: I am not sure, but I believe that's what has happened which has created confusion.

20020 MR. PALFRAMAN: Is that in the Schedule 9 or 10, Madame Chair, that you are looking at?


20022 MR. PALFRAMAN: Schedule 10. Just to clarify because in the actual nature of service.

20023 THE CHAIRPERSON: Part 7(1), but one of you can look and see, 7(1) is where you give the category. Somewhere or other I think there has been a mixture between 5(a) and 5(b) which results in confusion.

20024 MR. PALFRAMAN: Okay. Because in the 7(1)(c) all we have listed is 5(b), education, informal.

20025 CHAIRPERSON OF THE COMMISSION: But when you describe your program in Schedule 10 you talk about --

20026 DR. KEAST: Yes, we do.

20027 THE CHAIRPERSON: It's in Schedule 10, yes, the confusion is introduced I think. I don't have that with me.

20028 CHAIRPERSON OF THE COMMISSION: But what you are saying now is you would add 5(a) and 5(b).

20029 DR. KEAST: I would like to add 5(a), yes.


20031 DR. KEAST: Yes.

20032 CHAIRPERSON OF THE COMMISSION: And what I am asking in order to get really a sense of what you mean is what would be the proportion of each in an average schedule of The Law & Order Channel, so that how much will be entertainment or more entertainment as we see on other channels and what will be more education.

20033 DR. KEAST: I will get Jill to talk about the percentage of drama especially, but I would hope, as we do not to the same extent necessarily, but which we do now, we bring in what programming might fit in category analysis interpretation or documentary or indeed drama and comedy and connect that to a formal course of study.

20034 So it's all entertaining, but it also is the context is the formal course of study. But I think what we can do is -- and how much of that we would do in the terms of this licence I am not sure at this point in time, but it would be our intent to do, to build the context for as much as possible.

20035 Whether it's formal context or an informal context that would be the objective to do that.

20036 But, Jill, maybe just say something about the drama, if you would, please.

20037 MS BONENFANT: Currently, the drama is 25 per cent of the schedule -- actually, 24 per cent of the overall schedule, 25 per cent in prime time.

20038 CHAIRPERSON OF THE COMMISSION: And what you would call 5(a) and 5(b) now would be how much of the schedule?

20039 MS BONENFANT: Thirteen per cent of the schedule that would formally fit under those definitions.

20040 CHAIRPERSON OF THE COMMISSION: And how much of that would be in prime time?

20041 MS BONENFANT: None of that is in prime time currently. No, I am sorry, that would be, I didn't calculate that, 24 per cent in prime time.

20042 CHAIRPERSON OF THE COMMISSION: Twenty-four per cent.

20043 MS BONENFANT: Yes.

20044 CHAIRPERSON OF THE COMMISSION: That would be mostly in prime time in formal education, the 5(b)?

20045 MS BONENFANT: Yes.

20046 CHAIRPERSON OF THE COMMISSION: Could you give me examples on your schedule, on Schedule 9, of what it is that you call 5(b) please?

20047 MS BONENFANT: That refers specifically to the Law and Order Help!, the live daily show, the daily program.


20049 MS BONENFANT: 6:00 to 7:00 and repeated and 11:00.

20050 CHAIRPERSON OF THE COMMISSION: How do you categorize what's between 8:00 and 11:00?

20051 MS BONENFANT: The majority of those -- well, 50 per cent of those would be drama and 50 per cent documentary.


20053 So when we talk about the 24 per cent in prime time of drama there would be moments mainly here?

20054 MS BONENFANT: Yes.


20056 Looking at the applications we have in front of us what do you consider to be competitive? I know that the Chair has had a question, but there have been different angles by which projects have been proposed. What do you see mainly as being your signature and where do you see that you could live with another applicant without feeling that there will be too much overlapping for buying rights, but also overlapping for the viewer?

20057 DR. KEAST: I think the only one that looked to us at all potentially competitive was the Justice Channel I think it was. Although their focus is much narrower, but nonetheless they deal with courts and this kind of thing which we would certainly deal with here. I can't see any of the other applications as being especially competitive.

20058 CHAIRPERSON OF THE COMMISSION: So what is more around mystery and suspense is not --

20059 DR. KEAST: I don't think so.

20060 CHAIRPERSON OF THE COMMISSION:  -- for you a genre where you feel --

20061 DR. KEAST: I don't think so, no.

20062 CHAIRPERSON OF THE COMMISSION:  -- although that there may be correspondence --

20063 DR. KEAST: There might. There might be.

20064 CHAIRPERSON OF THE COMMISSION:  -- yet you don't see --

20065 DR. KEAST: No.

20066 CHAIRPERSON OF THE COMMISSION: And you feel that in terms of the diversity criteria you have been talking about that it would not -- comment dire donc -- harm that --

20067 DR. KEAST: No, I don't think so.


20069 DR. KEAST: I think it would be quite complementary.

20070 In this service again what we are bringing in is programs from all around the world, so it isn't American police and security all the time, it is Australian and British. So there is a whole range of police -- and it's police and security. It's not just police shows, but rescue and all of that kind of thing, but it's an international flavour to this channel.

20071 CHAIRPERSON OF THE COMMISSION: Talking of which, in your programming you have committed 40 per cent of Canadian programming expenditures. Would you be open to accept a condition of license of that level?

20072 DR. KEAST: Yes.

20073 CHAIRPERSON OF THE COMMISSION: In original programming, we will come back to that, but in the foreign programming, how much is U.S. and how much is foreign -- well, non-U.S.?

20074 DR. KEAST: Yes.

20075 Jill?

20076 CHAIRPERSON OF THE COMMISSION: Let's just say "foreign", truly foreign.

20077 MS BONENFANT: Based on the draft schedule that was submitted, the percentages are 45 per cent non-Canadian -- 45 Canadian, 35 foreign and about 20 U.S. -- 20 per cent U.S. Forty-five per cent Canadian.

20078 CHAIRPERSON OF THE COMMISSION: I have 40 per cent.

20079 MS BONENFANT: Well, that's -- yes. That is the minimum for the first year, but in the actual draft schedule that was submitted --

20080 DR. KEAST: I think if we go to the 40 per cent it is the division between American and non-American.

20081 MS BONENFANT: Right. Right, 40 per cent --

20082 DR. KEAST: I think that should be clarified.

20083 MS BONENFANT: It would be 40/20.


20085 DR. KEAST: Forty non-American, 20 American.


--- Pause / Pause

20087 CHAIRPERSON OF THE COMMISSION: You talk about $5 million for Canadian independent production to stimulate the creation of programs there. That is a firm commitment?

20088 DR. KEAST: Yes.

20089 CHAIRPERSON OF THE COMMISSION: How much of this would be commitments to original Canadian programming? That would all be original first window on Law & Order?

20090 DR. KEAST: I don't think we have looked at that. I'm not sure in any of these applications how much -- I know our own in-house programming and the live programs would all be first window, but in terms of the independent production I think we would have to work that in terms of what other windows the independent producer might have. But I don't think we have done that calculation to see what that might be.

20091 CHAIRPERSON OF THE COMMISSION: Okay. But the $5 million is a firm commitment --

20092 DR. KEAST: That's right.

20093 CHAIRPERSON OF THE COMMISSION:  -- for original Canadian programming?

20094 DR. KEAST: Yes. Yes.

20095 CHAIRPERSON OF THE COMMISSION: Okay. Well, that might be helpful if you would provide us with what you -- because our understanding was that it would be to commission to independent producers, so it would be important to understand what is your intent and your commitment.

20096 MR. PALFRAMAN: Madam Chairperson, I think just to add, particularly I guess as a general comment, for these digital services it is important in terms of independent production that what we are allocating to that is absolute and there is no question about it.

20097 But it may not result in first window on these channels because we see that this kind of funding will be additional funding that might be used to leverage -- for independent producers to leverage first window funding that gets the production completed. So if that meant that on these channels it would be second or third window, that would be totally fine.

20098 But the point is that it is new money going into the independent production community that primarily will be for programming that will have its best home on these channels, in the case of Law & Order on Law & Order, but that it is important new money going into the independent production system.

20099 CHAIRPERSON OF THE COMMISSION: Alors, it is money for -- what is clear is the commitment to $5 million for the independent production sector, not clear whether it is original but you will clarify the number of original following the request, and how much of that $5 million to independent producers will be affiliated and non-affiliated?

20100 DR. KEAST: I think that would reflect the 50/50 that we identified.

20101 CHAIRPERSON OF THE COMMISSION: Okay. That would be your proposal --

20102 DR. KEAST: Yes.

20103 CHAIRPERSON OF THE COMMISSION:  -- but you would be prepared to live with the definition we will come up with.

20104 DR. KEAST: Yes. Yes, of course.


20106 Et qu'est ce que j'avais? Oh, yes, on-line order.

20107 You put a lot of emphasis in terms of your distinctiveness being a Canadian way of approaching it and kind of reflecting peace, order and good government. Yet when we look at Canadian content it is 35 per cent going to a level of 50 per cent minimum, but that is the commitment you are making.

20108 Isn't there a kind of contradiction there if, on one hand, what is really your trademark in the proposal you are putting forward is to talk about the specificity of being Canadian and what makes us so unique, and yet the presence of a lot of foreign content.

20109 DR. KEAST: I think the issues around peace, order and good government and life, liberty and the pursuit of happiness will be really focused on our own programming that we do ourselves or that we get by independent producers within this context. I mean, there isn't a lot of it.

20110 I think the reality is that we wanted to make sure that it was an attractive service that would provide a context for this kind of discussion. Certainly that will be our focus in terms of everything we do that is live and interactive. The Law & Order, Help, for example, and the interstitial -- I shouldn't say that, I'm sorry.

20111 The flow material, the program-related flow material that we will be running through the schedule, and it will be that that we will bringing out that distinctiveness and those distinctions throughout the entire program day.

20112 MS LARSON: Ron, if I can just add something.

20113 I think there is a thirst for these kinds of programs but since we are subversively trying to educate Canadians I think again it is the context.

20114 For example, the strand of the Help programs. There are all kinds of issues to discuss and they would, by necessity, be specifically issues that are relevant to Canadians, so issues of personal security, issues of privacy, jobs in the law and order field in Canada. Various issues, aboriginals in the system, injustices done to me that can be discussed on-air.

20115 And then there is the programming, the flow that Ron talks about that surrounds the material so you are no longer just looking at -- sort of vicariously looking at some crime that has been committed in the United States, but you are putting it in a completely different context. I think that that is important because people are watching these shows and I think that it is really important that we bring it back to our own reality in Canada, which is specifically different than what exists elsewhere.

20116 DR. KEAST: As an example, I might just draw your attention to a bit from the tape that we showed. We had an RCMP officer commenting on the business of the movie Jagged Edge and putting that in context vis-à-vis Canada. So what you see there is simply not realistic in the Canadian context. Well, it isn't even realistic for policing, let alone in the Canadian context, but it is that sort of thing that we would do also on this channel.

20117 CHAIRPERSON OF THE COMMISSION: Somehow it is similar to the kind of discussion we were having with the Book Channel. It's a lot about context and the --

20118 DR. KEAST: Yes. And even when it looks like it's foreign it really is Canadian because what we are doing is we are drawing the distinctiveness from what is foreign to what in fact the reality is in the Canadian context.

20119 CHAIRPERSON OF THE COMMISSION: We could certainly start a large discussion here, but I won't.

20120 Okay, let me see.

20121 On your financial projections there was some question, but it is throughout that the market research you have done is giving some indications but cannot really give the full depth of your projects, neither, really, what eventually will be the offering and the vagueness somehow of what will be the rate.

20122 There is not really a solid base to say tomorrow we are totally guaranteed with a success formula, or no, we forget about it -- maybe you have forgotten about a few. But in the ones you are putting forward there is not a real guarantee; there is vagueness because the sampling is quite small, considering the whole country.

20123 Your projections are pretty high. How do you account for it and what is the value of your commitments? Are they solid?

20124 When we talk about dollars of expenses in Canadian programs, that total is $17 million. Do you make a firm commitment to that in total, or is it depending on whether you will meet your projections?

20125 DR. KEAST: The key is the 40 per cent. Nobody knows in this environment. We have been very conservative, because we are living with that every day. But we have tried to be realistic.

20126 So the real key is the 40 per cent. Whatever the total amounts, we could have projected twice the penetration and twice the advertising, et cetera, and we would have had a lot larger totals. But the reality is we don't know.

20127 So we are realistic in our projections. We know what we have been going through this past year. We know what kinds of revenues we have. And that was the base of our projections for all these new channels.

20128 CHAIRPERSON OF THE COMMISSION: When we were talking about $5 million earlier, is that subject to variation depending on the revenues? Or is it a firm $5 million?

20129 MR. PALFRAMAN: Madam Chairperson, I was going to come back to that if it didn't come up in a further question.

20130 I was going to clarify with you that in all of our discussions that we have had so far we have been looking at that as a percentage of previous years' revenues. Now we are looking at the $5 million.

20131 I am not sure why we would vary in this particular case. I guess I would suggest that we would propose going with the 40 per cent on previous years' revenues as our commitment.

20132 I think in the environment that we will be launching into, that would be a reasonable approach to take. So I am not sure that we would see a need to vary it for this particular channel.

20133 I can close there and then answer your question.

20134 CHAIRPERSON OF THE COMMISSION: I am not negotiating here. I am just asking what you mean and to understand, because we will be kind of assessing things.

20135 MR. PALFRAMAN: Right.

20136 CHAIRPERSON OF THE COMMISSION: You certainly have heard all kinds of propositions that have been put forward.

20137 MR. PALFRAMAN: Sure.

20138 CHAIRPERSON OF THE COMMISSION: I am just trying to define what is yours. That is all. So I don't want to mean something that you don't.

20139 MR. PALFRAMAN: I think, for clarification, that is what we would be looking at as our commitment; and as a CRL, it would be the 40 per cent of previous years' revenues.

20140 If that came to be $5 million, that would be fine; and if it came to be $10 million, if this was enormously successfully, then that would be fine too.

20141 CHAIRPERSON OF THE COMMISSION: You see, one of the questions we are pursuing in the understanding of the application is: What is original programming and what is repeats?

20142 When we talk about 40 per cent of Canadian programming expenditures, if only 5 per cent goes for original programming and the rest is all repeats, then it does not have the same impact in the system in terms of diversity.

20143 So it is very important and relates again to the question. It is important that we get your commitment.

20144 So if you say our commitment is 40 per cent, we take it as you propose it. And you are prepared to take a condition of licence in terms of a percentage base.

20145 What we would ask you then is to tell us in round two what the commitments are, specific and factual, on original programming so that we will be able to include that in our analysis after the hearing. That is what we are trying to understand.

20146 DR. KEAST: Yes.

20147 THE CHAIRPERSON: The way I understand it, if the $5 million is not firm and it moves with whether or not the 40 per cent generates sufficient funds, then I suppose what happens is that your Canadian content has more repeats and less original programming.

20148 Isn't that correct?

20149 DR. KEAST: That is right.

20150 THE CHAIRPERSON: So, unless we have a feeling for both, it is difficult to assess.

20151 That is why we added for Phase II this request to tell us how many original programming hours annually, excluding repeats.

20152 Do you have a problem with the suggestion I am making; that if the $5 million moves with the 40 per cent, which moves with the revenues, it is not necessarily $5 million any more and it has consequences?

20153 DR. KEAST: No. We fully understand. And it can move up as well as down of course. That is the other point.

20154 CHAIRPERSON OF THE COMMISSION: Before we leave Law & Order -- mind you, we will still be in the mind of Law & Order -- your PBIT in the financial projects you have provided us, we have a little curiosity. It might be minor, but we saw that you have a little dip in years five and six and you rise again in year seven.

20155 We were just wondering if there was something in investments that you were making or an amortization -- was there something in terms of the programs that was related to that fluctuation?

20156 MR. PALFRAMAN: Yes, there is, Madam Chairperson. In fact, what that represents -- and particularly in this channel -- in an effort to ensure that during the course of the seven-year licence we did as much as possible to Canadianize it, in year five there is a significant bump-up in our Canadian original production. It would be primarily in-house, but that is where the bump-up is.

20157 Assuming that these projections unfold the way we have them, we expect that around that time is when we will make an additional investment in what we will be doing for specific Canadian production.

20158 CHAIRPERSON OF THE COMMISSION: It is when you go to the level of 50 per cent Canadian content --

20159 MR. PALFRAMAN: Yes, that's right.

20160 CHAIRPERSON OF THE COMMISSION:  -- that it creates additional expenses.

20161 MR. PALFRAMAN: That's correct.

20162 CHAIRPERSON OF THE COMMISSION: It is not totally reflected in the Cancon expenditure that you have projected. It is not quite clear. You certainly recognize that yourself.

20163 MR. PALFRAMAN: Yes.

20164 CHAIRPERSON OF THE COMMISSION: You cannot get a really clear reading on where it is. If you go from the Canadian content expenditure from one year to the other, there is a gradation that seems to be not exponential like the PBIT seems to be.

20165 MR. PALFRAMAN: Yes, that is correct.

20166 It is not a steady line through the seven-year licence period because of that commitment that we have made in these projections.

20167 CHAIRPERSON OF THE COMMISSION: All I am saying is that in the Cancon expenditures, which is your explanation, we don't really see that there is -- you go from 35 to 50, and we would expect the same kind of relationship year by year.

20168 It all of a sudden occurs in five and six, and healthy finance comes back in year seven.

20169 MR. PALFRAMAN: Yes. The increase in our Cancon -- I guess part of the reason is that we are looking at more in-house production or co-production as opposed to acquisitions as we move through the seven years of the licence period. So there will not necessarily be a specific relationship between the expenditures on an annual basis and when the Cancon moves up, on a percentage basis of the schedule.

20170 CHAIRPERSON OF THE COMMISSION: In fact, what I read myself is when you reach year seven you are not raising either the content any more or the expenditures, yet you will have more revenues, hoping for better penetration. So your profit line is more interesting.

20171 MR. PALFRAMAN: Yes, it is.

20172 CHAIRPERSON OF THE COMMISSION: That is the way -- and there is a kind of continuing progression you have from year one to year six. I would say that it is only in year seven that you seem to be established.

20173 MR. PALFRAMAN: Yes.

20174 DR. KEAST: I think what that will allow us, hopefully, is better budgeted programs too by the time we get to that. This is going to be a very thin assent.

20175 I think our hope is that if we can be as successful as these projections, or better, we will be able to put significantly more money into the programs that we do originally.

20176 CHAIRPERSON OF THE COMMISSION: Okay. That covers my questions. Certainly there might be more questions from my colleagues or counsel, but ...

20177 Computer access: Here again there was a kind of broad approach to it. We might recognize an educational imprint, but in terms of understanding the nature of the service and the necessity to everybody -- the Commission, but also everybody that is involved in the proceeding in the public -- what does it mean exactly? Here you talk about a service fully dedicated to computers and technology -- and computer technology -- yet we have in your description of programs, programs that deal with science and technology. It might be the context again, but it seems to be a bit at distance.

20178 Is it a very targeted type of channel that we are talking about? It seemed to be when I was hearing this morning the presentation again and reading your application. Would you accept to fence it a bit more, so that it is more targeted, at least to our understanding?

20179 DR. KEAST: Yes, if that seemed to be a problem.

20180 We wanted to make sure we included programs about technology -- about the development of technology, the development of the computer -- in order to put the current issues that we will be dealing with and the current programs on this schedule in some kind of context. I think that the technology-related programming would be to that end in the schedule.

20181 Peter, did you want to say something? Or Jill?

20182 MR. PALFRAMAN: I think that Jill could give you a better idea, but I think the key thing in this channel is that it is a truly instructional channel. It will include, obviously, news and information about new products and developments in technology, but the key is that it has to be an instructional channel.

20183 There is no question in our minds, based on our research and everything -- all the feedback that we get -- that people do need help with how to use their computers, how to use their PDAs, how to use e-mail, how to use voice mail. So this is the perfect example of something that shouldn't just be a news channel. People don't need to know more news about the products; they need that as part of this channel. That is what we will offer, just as part of this channel.

20184 But the key is that it is instructional, that it will help people learn how to use the equipment. It is the kind of thing that Steve Dotto does. He has built his business doing that. And we have many, many stories of people who I know will benefit from this kind of channel.

20185 But, in terms of specifics, Jill might be able to give you some additional information.

20186 DR. KEAST: And perhaps Steve. Steve might want to say a word here, because I think we would be happy with a more focused definition, if you are concerned about that. Because this is very much an educational channel, and the Net means that it is also going to be a wonderfully attractive and fun channel. That is what Steve does.

20187 Steve, do you want to say a word about this?

20188 MR. DOTTO: Sure. When you deal with technology, especially in an educational focus, you aren't dealing with static media or static content any more. It is not mathematics, where we can create a program teaching you about how to do something and then it is still going to be the same. Numbers don't change over the years.

20189 Any educational focus on technology has to deal with the changing and the dynamic technologies that we are dealing with today.

20190 For example, it is purely educational to deal with viruses as they come up, because people need to learn how to deal with them. That is not something that we can plan for in the schedule in advance; it is something we have to deal with when it happens. Or to deal with new problems that parents are going to face with sticky Web sites that lead their children to pornography and they can't get out.

20191 All of these sorts of things we have to deal with in an educational focus to allow people to feel comfortable using their computers.

20192 Consequently, we do have to mix in a good amount of very current news-type information, which is the basis of what we are doing with Technology, so that people can actually apply technology to their day-to-day lives.

20193 A couple of the kinds of focuses that we would really be remiss if we did not mention them to you include seniors and computing and socially how we can deal with the growing technology gap which is currently occurring.

20194 My partner and I have done extensive research and we are actually well on the way to launching a new program specifically designed for seniors and computing, because we feel that there is a real change that we face with an aging --

20195 CHAIRPERSON OF THE COMMISSION: You are not looking at me when you say that.

20196 MR. DOTTO: No.

--- Laughter / Rires


20198 MR. DOTTO: I apologize. It was your earlier comments that you were somewhat technically challenged occasionally that caused it. It had nothing to do with longevity on this planet.

20199 However, there is a growing concern that we are creating a technology gulf between seniors, between people who have established themselves in their lives, and the youth who are moving up. So we see a profound need to bring seniors -- to allow them to be comfortable, especially as we are aging. We are lasting longer. Unfortunately, we are lasting longer, but our bodies don't seem to be holding up all that well in our latter years. Technology and the Internet can really be a wonderful social factor and really comfort people as they go on.

20200 We have iterative stories galore of grandparents who watch our show who have learned how to e-mail. And they aren't communicating with their kids. They couldn't care less about their kids. They care about their grandkids. Their grandkids are communicating with them, because kids don't think anything of firing off a quick e-mail to grandma and granddad. I never wrote letters to my grandparents unless I was absolutely forced to, but my kids send e-mail back and forth all the time with them. That is allowing them to be really a part of each other's lives, and those are the sorts of things we really have to illustrate within our programming.

20201 CHAIRPERSON OF THE COMMISSION: Can we go back? And I understand and thank you for that passion. It is helpful for a soon-to-be-senior, I suppose, to understand.

20202 If we were to try to define more precisely --

20203 You say fully dedicated to computers and technology. If we were to say exclusively dedicated to computers and computer technology, so that it would be all about computers, so that we don't --

20204 DR. KEAST: Absolutely. Yes.

20205 CHAIRPERSON OF THE COMMISSION: And the instructional dimension.

20206 When you do your categories, in determining which ones you need, you have a more restricted number of them than what you use in Schedule 10 categories to talk about your programs.

20207 For example, you have programs in your schedule that are computer games -- that are games -- and yet, when we look at your Schedule 7, you don't have game shows and animated shows, which you have in your Schedule 10.

20208 Can you tell us why the discrepancy? Will you keep the programs that you have in the schedule? Or should we add categories that you had forgotten?

20209 MS BONENFANT: Yes. Categories 7(e) and 10 were both missing.


20211 MS BONENFANT: Both Categories 7(e) and 10 were missing. They should have been part of 7(1)(c).

20212 CHAIRPERSON OF THE COMMISSION: But with the additions, if you were to accept a condition of licence, that kind of fence with computer and computer technology related exclusively, I suppose, the games would have to be all --

20213 DR. KEAST: Absolutely. Yes.


20215 In terms of overlapping, we have talked about the overlapping on a general scale. For this particular channel, is it the same percentage, the 15 per cent?

20216 DR. KEAST: Yes, for CLT. I don't even think there is 15 per cent of computer programming on CLT currently, but there would never be more than that.

20217 CHAIRPERSON OF THE COMMISSION: No more than that?

20218 DR. KEAST: No.

20219 CHAIRPERSON OF THE COMMISSION: And with Access the same thing?

20220 DR. KEAST: Yes. Well, there is no computer programming on Access, but at the same time --

20221 CHAIRPERSON OF THE COMMISSION: Life being what it is ...

20222 DR. KEAST: Yes, exactly.

20223 CHAIRPERSON OF THE COMMISSION: We have seen moments when we are in a hearing like that and --

20224 DR. KEAST: That is a very good point, because the ministry might in fact demand some computer programming as part of their times. Absolutely.

20225 CHAIRPERSON OF THE COMMISSION: Canadian programming expenditures. Our calculation in yours comes to 39 per cent. Would you be prepared to accept a condition of licence?

20226 There again, are we talking about the same percentage to be dedicated to independently produced programs?

20227 DR. KEAST: Yes.

20228 CHAIRPERSON OF THE COMMISSION: Script and concept here -- and it's true of most of your applications -- it's not always clear in the script and concept.

20229 Is it script and concept about the on stream, more conventional type of content? Or is it the portion to be developed in order to make it a truly interactive program?

20230 DR. KEAST: I think, in this particular application, that's where we would see a lot of this, for sure, because this is going to be an extraordinarily interesting interactive service.

20231 Peter, did you want to say something descriptive on concept development that reflects it?

20232 MR. PALFRAMAN: No, I don't.

20233 CHAIRPERSON OF THE COMMISSION: It's interesting, especially in light of the sponsoring comment you made for an earlier application, this morning, that here, in the finance section of your application, we don't see any revenue at "Other" because computer and computer-related programs, you would expect, you know, kind of sponsors interested in reaching a particular clientele and maybe, also, some transactional type of revenues.

20234 Why didn't you see that -- you know, and I understand that there is no miracle expected there. Every applicant has been talking about the great risk involved, in a new era. But I'm curious, because you have incorporated that in some applications and in others, you haven't, and this one, in particular, from the limited knowledge I have about that business, I would have expected if one place to find it it would be here.

20235 MR. PALFRAMAN: Madam Chairperson, we didn't -- you are absolutely right, that is an area that might lend itself to that. There are a number of reasons why we didn't include it as a revenue line item.

20236 The first is because we allocated more, or we projected more revenue from on-line and Web interactivity of on-line interactive revenues, in this particular application, and so, we think that's where there will be more interest.

20237 But the real -- the key reason is that we expect most of what we would show as sponsorship revenues would actually go into productions, and it's -- certainly Steve Dotto, I know, his experience is important, in terms of generating production and building his production budgets, is to use as much as possible of sponsorship revenues.

20238 So that's the primary reason we -- to the extent that we can introduce sponsors and the large computer companies and the large technology companies to participate in the programs and the production will be more important than the sponsorship revenues that we might generate on an income statement.

20239 MR. DOTTO: In the style of independent production that we have been doing with our programming, or about 90 per cent of the hard cash that's gone into the actual production, has come from the industry itself, not from licences or underwriting from any broadcasters.

20240 CHAIRPERSON OF THE COMMISSION: So that would be really where you would --

20241 MR. DOTTO: If they were getting sponsors -- a sponsorless station would be harder for me to be able to give us money to produce the shows.

--- Laughter / Rires

20242 CHAIRPERSON OF THE COMMISSION: It would be more difficult, also, to take an arm's-length type of editorial approach to the industry, as well.

20243 MR. DOTTO: Considerably less balance, yes.


20245 There, again, in the Computer Access, it's really the test of the demand survey, although helpful, it's never perfect either. We were talking, earlier in the week, or last week, with you, Mr. Znaimer, saying you don't have any demand survey. Here, we have one, but it's never like the real test, of course, and there is some discrepancy between what we have seen as what seems to be the demand level, yet some vagueness into what exactly the respondent has understood and what price he would be prepared, or she would be prepared, to pay and yet, your penetration estimates. but I understand that what you are prepared to accept never ties an amount, per se. It's always a proportion of revenues.

20246 MR. ZNAIMER: That's right.

20247 CHAIRPERSON OF THE COMMISSION: So your commitments are not challenged.

20248 What might be challenged, though, is the value of the proposition, at the end of the day, because if your estimates, or your projections, would be too optimistic, that means that if we were to grant you a licence, at the end of the day, what we would see on the screen, although it's already challenging the projections you are having, and from your own admission, although you say that you are not in the range of the average $25 million, yet, that would be even more challenging. We could be in a situation where the revenues would not be there and there's no reassurance for the Commission looking at it of what could be the program proposition to the viewer.

20249 MR. PALFRAMAN: Madam Chairperson, obviously, when you are looking at revenue projections and business projections, you take all different elements into account. The research is an important part of that.

20250 I think the research that we have done now, the research that we have done over the last three years, has always been very strong and very positive for this type of channel, a computer-type channel. So that's one element.

20251 There, obviously, are a lot of other elements that go into it. And my sense is that what we have projected and the business plans we have put in are realistic and they are based on our experience.

20252 Obviously, we have done a review of other applicants and what projections other applicants have done. I think that ours, generally, fall within what I would call more realistic ranges. I don't think they are optimistic, at all. I think that we, based on our review of DTH and CCTA projections for roll-out of digital, we have discounted those, to some degree, based on our own experience. We have taken a starting point where we know the exact number. We have done our own projections over five to seven years; we have come close to what they project. So that, I think, is very realistic and very reasonable.

20253 The penetration rates that we have projected are based on our experience with CLT. As you know, CLT has rolled out into what we call a hybrid environment. We have some analog and we have some digital. We are only one of only two services. Discounting the fact that DTH is, of course, digital. But we are the only two services that have -- Star and CLT are the only two services that rolled out into their kind of -- actually, ROB have, too -- into their kind of environment.

20254 So, all of those factors went into our projections, and I think that they have resulted in what you can look at as very realistic projections. Our penetration rates are what we have experienced with Star and CLT, so that they have a base of experience. And the rates, the actual financial rates, the whole rate that we have projected, again, is reasonable, in the context of our experience.

20255 CHAIRPERSON OF THE COMMISSION: Well, let me be challenging -- and I have been in educational broadcasting business.

20256 Many surveys I have seen, there's a lot of desirability about educational program. But when comes the real thing, which is, "Do I watch it?", not necessarily -- the viewer is not necessarily meeting -- I don't know if it's -- its desire or ours, but I don't know. But that means that when you are looking for the kind of penetration you are proposing, we could -- and let's talk about the next one, which is Careers. Careers, in the demand survey, rates about around 10 per cent demand and yet, you are proposing a penetration, by the first year, of 39 per cent and, eventually, the Year 7 going as high as 48.

20257 So would that be fair to think that what you are counting on here is the surrounding, the context of other -- of other channels that would kind of be part of a package and that, all together, would create the possibility of reaching that kind of penetration?

20258 DR. KEAST: I think there are two items here. One is education is always high demand -- which is going to be a great driver for the new digital tier, because people want educational programming. Whether they watch specific programs or not, depends on the nature of the program, and the style, and the pizazz and the professionalism in the program, and that you can only guarantee by the people who are making the programs. So I take that point, absolutely.

20259 But in terms of driving the tier, I think educational programming will help people who would not necessarily run out and buy a box for 160 channels if they are not satisfied with the 50 they are getting now, just for more entertainment channels. An educational component will be really important to do that.

20260 Peter, could you...

20261 MR. PALFRAMAN: It's interesting and I think it's absolutely a valid point but, you know, we, internally, had some quite heated discussions about it because there were some who wanted to put out penetration rates even higher because it is such -- education is seen to be such a desirable area and I think that it will bring views -- I think Moses alluded to it earlier -- I think it will bring people to buy these packages that might have ignored it because it just has more of the same. It's just more entertainment. It's just more couch-potato viewing. And I think these will be entertaining and will be attractive, but they will have their added value, and I think that is an important element.

20262 And as I say, based on our experience with CLT, I think the penetration rates are reasonable.

20263 But it does also speak to packaging, Madam Chairperson. I won't discount that. We don't know yet quite how services will be packaged, but I think that in the digital environment, there will be packaging and so, there will be some overflow, based on that.

20264 MR. ZNAIMER: I hope I'm not getting into turf where I'm not qualified, but the relatively small percentage which came up in the general research can correspond to the relatively higher percentage of penetration within the -- within the population that does take digital services. So --

20265 CHAIRPERSON OF THE COMMISSION: What's under-represented in a general population survey could be over-represented or could be --

20266 MR. ZNAIMER: Yes.

20267 CHAIRPERSON OF THE COMMISSION:  -- more important --

20268 MR. ZNAIMER: Yes.

20269 CHAIRPERSON OF THE COMMISSION:  -- and it will be the early adopters is what --

20270 MR. ZNAIMER: Yes.

20271 CHAIRPERSON OF THE COMMISSION:  -- you are saying?

20272 MR. ZNAIMER: And in education there is another factor, which is the Encyclopedia Britannica factor. Every home wants to have it. It doesn't mean that they are going to necessarily look at it every day, but they do want to have it so that when they need it they could turn to it.

20273 CHAIRPERSON OF THE COMMISSION: It's important because if Mr. Richler comes into their house and sees that they have books and its effect.

20274 MS LARSON: I would just like to add something about the desirability of this kind of information, this kind of channel, because again from our experience on TV and we have several times done programs related to computers, whether it's getting on the Internet, what kind of computer do I buy because that information and, in fact, we have two regular computer experts on our phone bank that get a lot of questions, everything from the most basic, simple stuff, right through to the much more complex, high-end things.

20275 In fact, believe it or not, on these calls when we do discuss these topics, many times we will get more calls on that than we will on our sex show that week.

20276 MR. ZNAIMER: Computers are the dirty little secret.

20277 CHAIRPERSON OF THE COMMISSION: Talking about Careers TV, we have two concerns here. The first one was addressed and maybe there is something more to say here. It's about the overlap with CLT. Are we talking the same percentage here?

20278 DR. KEAST: The same percentage.

20279 CHAIRPERSON OF THE COMMISSION: The proposed -- 41 per cent is the staff calculation, as well as your calculation. Would you be prepared to commit by condition of licence that 41 per cent?

20280 DR. KEAST: Yes.

20281 CHAIRPERSON OF THE COMMISSION: I don't have really other questions, other than that seems to be really a good example of what could be fully interactive.

20282 I see revenues for the Careers TV channel, yet the costs are not there, so I would take the 15 per cent range we were talking about included in the programs' expenditures?

20283 MR. PALFRAMAN: Interactive components, yes, that's right, Madame Chair.


20285 MR. PALFRAMAN: Yes, that's right, but the expenses for them would be included in the programs, yes.

20286 CHAIRPERSON OF THE COMMISSION: And in the revenues I have "Other" and that refers to other. That is a different other than the revenues linked to interactivities. So would that be sponsoring here again?

20287 MR. PALFRAMAN: Yes, that's correct.


20289 What about revenues similar to classified ads?

20290 MR. PALFRAMAN: I think there is opportunity for that on this channel and that's included under our merchandising or transactional revenue, so that there is a total in the first year of $7,000 under that line. Two thousand dollars is product sales and $5,000 of that is from link referrals, which is the same thing essentially as linking to classified job boards. That grows to, well, the total for year seven.


20292 And for the Documentary Channel -- do you mean to say something? Do you feel frustrated?

20293 MS LARSON: Trust me, I could go on forever.

20294 CHAIRPERSON OF THE COMMISSION: You will have soon a program to talk about. You will be on air.

20295 I apologize, otherwise I could be on each channel and that would be the same for all applicants. As I say, it's not four weeks, it's four months and I have already abused your time because we have been for four hours at it.

20296 So, documentary. The nature of service of course is documentaries. Will it be exclusively documentaries?

20297 DR. KEAST: Exclusively documentaries.

20298 CHAIRPERSON OF THE COMMISSION: Would you accept a condition of licence?

20299 DR. KEAST: Yes, we would.

20300 CHAIRPERSON OF THE COMMISSION: Given that there are other applications, of course that doesn't mean that any other existing broadcasting or future broadcaster could not have documentaries, but what do you see other projects that we have, not talking about the existing broadcasters, but what would you see that -- because you know that there are applications that talk about films and documentaries. What would you see as being a threshold that would be acceptable to you of a portion that could be documentaries on those projects, yet allowing the feasibility of your own application?

20301 DR. KEAST: I don't know that we have actually put a fix on that.

--- Pause / Pause

20302 DR. KEAST: Yes, 15 per cent is a bit small because even on CLT we use a lot of documentaries. I don't know the percentage.

20303 Would you have an idea, Jill, in terms of CLT schedule what the percentage of documentaries, generally, might be on the schedule? Would it be 50 per cent?

20304 MS BONENFANT: It's probably more than that. It depends. Strictly under the documentary category I would say probably more than that, probably closer to 35 or 40 per cent. That includes telecourses. They wouldn't necessarily all fit under the documentary classification on CLT.

20305 DR. KEAST: But in terms of competing applications or different services I don't know what it might be.

20306 CHAIRPERSON OF THE COMMISSION: I don't want to force upon you, but maybe you can --

20307 DR. KEAST: We'll get back to you.

20308 CHAIRPERSON OF THE COMMISSION:  -- give it some thought and that would be helpful in our analysis.

20309 DR. KEAST: Yes.

20310 CHAIRPERSON OF THE COMMISSION: Because you know there are other applicants that have a more, not exclusive documentary, but have an important part of documentaries.

20311 DR. KEAST: Yes.

20312 MR. ZNAIMER: We have one of those applications, but, interestingly enough, the approach taken by that applicant was to limit itself in the nature of the documentaries that they would run. It relates to the Independent Film application and Mr. Gratton in that application explained that the documentaries that might appear on that channel would either be uniquely documentaries that had played in a cinema or that were about the business of filmmaking, otherwise there would be no other documentaries on that particular channel. So I think these things regulate themselves.

20313 CHAIRPERSON OF THE COMMISSION: I was more referring to the ones where there is more an approach of independent films and documentaries. I don't wish to kind of name them, but I am sure you have looked at them yourself and you will be able to tell us where you feel it is competitive and what should be, if ever we would decide to licence on one hand a documentary and on another hand an independent film channel what should be the insurance or the guarantee of diversity for the viewer.

20314 DR. KEAST: Right. We will draw that line for you.


20316 Canadian program expenditures. It is certainly important in all the applications, but here again and you have committed 40 per cent. Would you accept a condition of licence?

20317 DR. KEAST: Yes, we would.

20318 CHAIRPERSON OF THE COMMISSION: You are talking about -- I forget what it is here. I have a blank. Let me go back so that I am not saying stupid things.

20319 You are talking about allocation to DocsFACT program.

20320 DR. KEAST: Yes.

20321 CHAIRPERSON OF THE COMMISSION: Is it included in your 40 per cent or is it over and above?

20322 DR. KEAST: It's included in the 40 per cent.

20323 CHAIRPERSON OF THE COMMISSION: It's in the 40 per cent?

20324 DR. KEAST: Yes.

20325 CHAIRPERSON OF THE COMMISSION: And I suppose here again the same kind of proportion to independent producers. I am not repeating the question over and over again.

20326 DR. KEAST: This is a little different than the others, in that we are suggesting here it would only be 25 per cent to any affiliated. It would be 75 per cent, the total arm's length, no interest independent producers.

20327 CHAIRPERSON OF THE COMMISSION: Where the others, I didn't repeat the question every time, but the others it was the same proportion.

20328 DR. KEAST: Yes. This is the exception.

20329 CHAIRPERSON OF THE COMMISSION: That's the only exception?

20330 DR. KEAST: Yes.


20332 In the non-U.S. program what would be the proportion?

20333 DR. KEAST: Jill, would you speak to that, non-U.S. programming on the documentary channel.

20334 MS BONENFANT: Thirty per cent.

20335 DR. KEAST: I think one element --

20336 CHAIRPERSON OF THE COMMISSION: So 30 per cent of the 50 per cent?

20337 MS BONENFANT: Right.

20338 DR. KEAST: Maybe I could ask Peter Flemington to make a note because I think one of the really striking, unique aspects of this, besides the support, the DocsFACTS and young independent filmmakers, is the whole international context for the acquired programming. Peter, could you say a word for that?

20339 MR. FLEMINGTON: I think I made some comment earlier this morning when we got to the business of the 50 per cent and I indicated how important I thought it was, and when we put down our vision for the channel that the international portion was very important for the reasons which I stipulated.

20340 Vision, over the years, over the dozen years we have been to air, has made a lot of contacts internationally. We have a lot of wonderful sources, not only of acquisition, but increasingly for international co-production activity.

20341 Certainly I look forward in bringing a lot of the films that I see at MIP-TV and MIP-DOC and other places from Norway and increasingly from eastern Europe, from Asia, from Australia where I was last November digging out some film sources, incredibly rich, wonderful programming now seen nowhere on the Canadian system.

20342 Certainly that 30 per cent that Jill talked about is going to be extremely rich and will be programming which has not been seen previously in the system and will enrich the system to that extent.

20343 DR. KEAST: If I might, just a point of clarification on that 30 per cent.

20344 MS BONENFANT: Yes, Madam. It's 50 per cent Canadian, 20 per cent American and 30 per cent foreign.

20345 DR. KEAST: So it's 30 per cent of the 100 per cent.

20346 CHAIRPERSON OF THE COMMISSION: Ah oui, notre 30 pour cent du 50.

20347 DR. KEAST: Yes.

20348 CHAIRPERSON OF THE COMMISSION: Yes. I'm sorry, it's me who has --

20349 DR. KEAST: Okay.

20350 CHAIRPERSON OF THE COMMISSION: I had a last question. Where is it? I have lost it.

20351 Interactivity. I was a bit surprised to see revenues there. I didn't expect them.

20352 I'm just seeking a comment here. Is it that you have kind of taken an approach that every channel per position is an opportunity? I was just a bit surprised to see --

20353 MR. PALFRAMAN: Yes, that's right. In this channel it is very limited on-line revenue, but one of the things is that in all of the channels, as you have heard us describe, there will be elements of interactivity, some greater than others.

20354 In this particular channel, we think that the nature of the service will be one that will prompt people to want to use our on-line chat rooms and that will make it an attractive site that I think will be attractive to on-line advertisers.

20355 So we built in a certain amount of on-line advertising revenue or Web-related revenue, but it is limited in this case. As we have seen in some of the others, there is more significant revenue from that.

20356 CHAIRPERSON OF THE COMMISSION: Yes. I was seeing like in Book or Computer or even in Careers --

20357 MR. PALFRAMAN: It's a greater revenue.

20358 CHAIRPERSON OF THE COMMISSION: But documentaries --

20359 MR. PALFRAMAN: It's very minimal. Depending on how those evolve there may be more, but I think it was reasonable to reflect some revenues in terms of a realistic business plan.


20361 Well, you meant to add something, Dr. Keast? No?

20362 You were kind of just keen to answer another question. Well, I'm a bit out of questions so I would turn you to les bons soins de Madame la Présidante.

20363 THE CHAIRPERSON: Counsel?

20364 MR. STEWART: Thank you, Madam Chair.

20365 First of all, just a clarification, that with respect to the conditions of license on Canadian programming expenditures, just to clarify that they are applied to the previous years' expenditures?

20366 DR. KEAST: Yes.

20367 MR. STEWART: Could you just, for the benefit of the Commission, go down the list program-by-program giving us the percentages?

20368 MR. PALFRAMAN: I will work through in the order that you went through. Book was 40 per cent; Travel was 40 per cent -- what was next? Computers -- Law & Order, 40 per cent; Computer, 39 per cent, Careers 41 per cent; and DocsTV 40 per cent.

20369 MR. STEWART: Thank you very much.

20370 DR. KEAST: That is percentage of the previous years' revenues.

20371 MR. STEWART: Yes.

20372 DR. KEAST: Yes.

20373 MR. STEWART: Yes. Thank you for that clarification.

20374 This is a general question that applies to all of your applications, but basically you put forward Canadian programming expenditures of, say, 17 -- maybe over the term of the license $18 million, and then approximately $5 million to the independent sector.

20375 Is the rest in-house programming expenditure? Just very generally speaking. I'm basing myself on seeing these figures in the highlights of your application.

20376 DR. KEAST: Just give us a second here.

--- Pause / Pause

20377 MR. PALFRAMAN: Yes. If I look at it in total -- for example I'm just looking at Docs here because that is the one we were on, we have a total Canadian programming of $15 million roughly. About $6.5 million of that is for license fees, $9.5 million is for production, and that would probably be split 50/50 between in-house and independent co-production.

20378 DR. KEAST: Probably 25/75.

20379 MR. PALFRAMAN: Well, in Docs -- yes, that's right.

20380 DR. KEAST: In that particular one 25/75, but in the others probably 50/50.

20381 MR. STEWART: Okay. Thank you.

20382 My last question is with respect to your cable subscriber projections. You list "MMDS/Other". Can you explain what the "Other" refers to?

20383 MR. PALFRAMAN: Sure. It is really just a catchall for any other wireless distributors. Right now it is really MMDS, but in the event that there may be other wireless distributors that we wouldn't just describe as MDS, that is just to capture that.

20384 MR. STEWART: Thank you.

20385 Thank you, Madam Chair.

20386 THE CHAIRPERSON: It's not that you know something we don't know --

--- Laughter / Rires

20387 THE CHAIRPERSON:  -- about who is distributing.

20388 Thank you very much.

20389 You have last word now, either Dr. Keast or Mr. Znaimer --

20390 DR. KEAST: Thank you.

20391 THE CHAIRPERSON:  -- whoever has energy left.

--- Laughter / Rires

20392 DR. KEAST: Madam Chair, Madam Chairperson and Commissioners, you have, throughout the hearing, been concerned with the popularity of potential services and have asked for evidence of market demand. Well, you know, there is really plenty of evidence for the demand for education, especially life-long learning and skills development. The demand is everywhere.

20393 Modern families are indeed learning families. This is the learning society. National expenditures on education are second only to health.

20394 On the face of it, I know some might say that educational and attractive don't go together. Well, this is simply not the case, as witnessed the joy in the fact of a learner that we see of all ages.

20395 And we have proved it. We have proved it over the past five years with Access and the last year with CLT, and indeed years ago with TVOntario and VisionTV, that in fact they do go together and they do go together naturally.

20396 The fact that they do, and that we know how to make them do it, means that a cluster or a bouquet of learning-oriented services, in our opinion, will be an unexpected -- to some, not to us -- but a real driver for the development of digital TV.

20397 Many people simply won't be interested, in our opinion, in investing in digital box to get more of the same kind of programming that they are getting now. For many of them, the educational component will make the difference.

20398 So thank you for your attention. The minds of Canada await your decision.

20399 Thank you.

--- Laughter / Rires

20400 THE CHAIRPERSON: Thank you.

20401 You have been good survivors, especially Mr. Znaimer who has been here before, but maybe you develop a capacity to withstand these sessions with repetition.

20402 Thank you very much. It has been a fruitful morning and we will see you again at Phase II and Phase IV.

20403 Thank you. Have a good lunch.

20404 Nous reprendrons à deux heure et demi.

20405 We will be back at 2:30.

--- Upon recessing at 1255 / Suspension à 1255

--- Upon resuming at 1430 / Reprise à 1430

20406 THE CHAIRPERSON: Good afternoon and welcome back to our hearing. Bonjour et bienvenue à tous à notre après-midi de l'audience.

20407 Monsieur le secrétaire; Mr. Secretary, please.

20408 MR. CUSSONS: Thank you, Madam Chair.

20409 We will now hear three applications for new Category 1 services by Craig Broadcast Systems Incorporated, OBCI.

20410 A maximum presentation time of 30 minutes has been granted. The services will be known as Connect, Festival and The MET.

20411 We have Mr. Drew Craig and his team.

20412 Mr. Craig...?


20413 MR. CRAIG: Thank you very much.

20414 Good afternoon, Madam Chairperson, Commissioners, ladies and gentlemen.

20415 My name is Drew Craig and I am the President of Craig Broadcast Systems. Over the next few minutes I would like to tell you who we are, why our three Category 1 specialty television channels are an integral part of our growth strategy and how Craig is uniquely qualified to make these channels successful.

20416 But before we start our presentation, let me introduce our panel.

20417 On my right is Sandi McDonald. Sandi is Executive Vice-President of Corporate Development for the Craig group of companies. Sandi led the team that developed these applications, and she has been the driving force in the establishment of Craig's New Media division.

20418 To Sandi's right is Wayne Sterloff. Wayne is the President of A-Channel Entertainment Inc. He oversees the creative development of original independent production for Craig and manages domestic sales, as well as international program distribution. Wayne has almost 35 years of experience with CTV, BC Film and Telefilm Canada.

20419 Beside Wayne is André Link, the Chief Executive Officer of Lions Gate Films, our partner in the Festival Channel.

20420 To my left is Jennifer Strain, Vice-President Corporate and Regulatory Affairs for the Craig group of companies.

20421 Beside Jennifer is John Donnelly, President of Smooth Productions, a company based in Vancouver that produces concerts and special events across Canada, the Executive Producer of The MET and a rock'n roll musician in his own right.

20422 In the row behind me, from your left to right, is Joanne Levy, Executive Director of the A-Channel drama fund and a television producer. Last year Joanne received a Gemini Award for her part in commissioning the documentary "Hitman Hart: wrestling with shadows".

20423 Beside Joanne is Jeff Sackman, President of Lions Gate Films.

20424 Beside Jeff is Al Thorgeirson, Manager of station operations for all the Craig television stations.

20425 Beside Al is Linda Noto, CFO of Craig Broadcast Systems.

20426 Beside Linda is Cam Cowie, our General Sales Manager, who is responsible for the sales and marketing of all the Craig television stations.

20427 Beside Cam is Debra McLaughlin, Vice-President and Director of Research for Craig Airtime Sales.

20428 At the side table from your right to left is Jim Haskins, start-up specialist and Manager of our Edmonton station; Paul East, Vice-President Engineering for Craig Wireless; Glenn Suart, Principal, PwC, who developed our subscriber forecast which has now been endorsed by the CCTA; Elan Gillespie, a consultant from PwC; and Andrew Forsyth, a radio and music consultant from Bohn & Associates.

20429 Let me now turn to our presentation.

20430 We are here today with a set of applications that draw on our unique strengths.

20431 As you know, Craig has been in the broadcast business since my grandfather bought CKX radio from the Manitoba Telephone System in 1948. We operate radio and television stations in western Canada and have licences to distribute digital wireless television and Internet services in Manitoba, California, New Zealand and, most recently, in British Columbia.

20432 We are here today with three solid proposals to launch exciting new services that will build on our core strengths and add real diversity to the system while meeting your objectives for Canadian programming.

20433 These services are Festival, an independent film channel; Connect, the Canadian teen channel; and The MET, a rock music video channel.

20434 Before describing them in more detail, we would like to tell you a little bit about how we approached these applications, particularly in the context of the selection criteria that you laid out in the call for applications.

20435 First, our research demonstrates that all of our proposed services will be distinctive and attractive and will help drive the digital tier, with popular programming that is not on the system today.

20436 Second, our proposed services are all extremely affordable, with wholesale rates in the 30-cent range for Festival and Connect, and 19 cents for The MET.

20437 Third, we have committed to significant Canadian content exhibition requirements. All of our proposed services start with a minimum of 50 per cent Canadian content. Connect gets up to 60 per cent by Year 7 and The MET will launch with 60 per cent on day one.

20438 Fourth, we have based our applications on business plans that are reasonable and achievable.

20439 We will come back to these points later in our presentation. But first, let's look at our three applications in more detail.

20440 To talk about Festival, here is Wayne Sterloff.

20441 MR. STERLOFF: Thanks, Drew.

20442 Every year hundreds of thousands of Canadians seize the opportunity to see new, eclectic and innovative films at one or more of the 55 film festivals offered across the country. They are part of a growing, discriminating, international community of film lovers.

20443 Festival will satisfy this community and attract more members to it with television that re-creates the freshness and excitement of the Festival experience. We will create a new window for innovative movies, documentaries and short films from Canada and around the world, including the U.S., Europe, India and Australia.

20444 Partnering with us in this venture is Lions Gate Films, a world-class film developer, producer and distributor.

20445 With films like "Affliction", "Gods and Monsters", and the Canadian film "Red Violin" -- all of which won Academy Awards -- the Lions Gate brand is synonymous with some of the very best in Canadian and U.S. independent film product.

20446 Festival will benefit from Lions Gate's extensive experience in the independent film business, and the "" portal will be the prototype for Festival's launch of a fully operational, online platform that supports independent Canadian film writers, directors and producers.

20447 André...?

20448 MR. LINK: Canadian films deserve more screen exposure. Canadians should be given more opportunities to see feature films that now only those privileged to attend the Montreal, Toronto and Vancouver film festivals enjoy. The Festival application will remedy this inequity.

20449 Lions Gate Films has 40 years of experience in the independent film arena as a distributor and producer. Je suis particulièrement heureux que 10 pour cent des long métrages qui vont être sur ce service vont être des films de langue française.

20450 MS LEVY: Festival builds on our parent company's successful experience with the A-Channel drama fund. Most of the 13 films triggered in the three-year life of the fund have been created by regional filmmakers. They add great programming diversity to the Canadian broadcast system.

20451 The Craig commitment to quality, independent film has resulted in nominations and awards, including Genies, Geminis, Hot Docs and Rockies.

20452 Films we have supported have been invited to premier at festivals from Palm Springs to Calcutta.

20453 Over the seven-year licence term, Festival will spend close to $25 million on Canadian films, documentaries and shorts; $5 million of this will be earmarked for our Festival Priority Program fund. The fund will not operate as an interim financier. It will give independent producers the all-important licence fees they require to trigger funding from other sources. This money will be truly incremental to the system and, leveraged with other sources, will result in approximately $50 million invested in new Canadian production.

20454 Within the fund regional "envelopes" will ensure accessibility to producers from across the country.

20455 MR. STERLOFF: Festival will also commit to the promotion of Canadian film products by contributing up to $2.5 million in airtime to promote Canadian films by matching the amount of the advertising budget for such films.

20456 We will also promote Canadian film festivals through our interstitial programming which will air approximately 300 times per week.

20457 Madam Chair, Festival will not be just another movie channel. It will be a meeting place for festival film lovers from across the country to experience the great wealth of innovative material that is simply not available to them today on existing services.

20458 Canadian filmmakers will benefit from a new outlet, a source of revenue for their product and from the Craig commitment to stimulate new production from all regions of the country.

20459 Festival is the kind attractive, unique concept that will give consumers a reason to order the digital box.

20460 Now I would like to give you a brief preview.

--- Video presentation / Présentation vidéo

20461 MR. STERLOFF: I would like to turn now to Sandi McDonald, who will talk about our Connect application.

20462 MS McDONALD: Thanks, Wayne.

20463 It is my pleasure to describe Connect, the Canadian teen channel. As you can see, I am not a teenager. But I do have teenagers at home. And you don't need to be a parent or a teen or a grandparent, Madam Chair, to recognize what BBM data and the newspapers have been telling us for months.

20464 Canadian teens are flocking to the Internet and they are watching less television. Interactive digital TV is the perfect medium to reach teens, and Connect will be their channel. It will fuse traditional broadcasting with the power of the Internet to create a teen-powered, interactive service that reflects the aspirations, interests and concerns of Generation Y: Canadian youth between the ages of 12 and 24.

20465 Who are these people? Let me ask our market researcher, Debra McLaughlin, to tell you.

20466 MS McLAUGHLIN: They come from different ethnic backgrounds and family structures than the generation before them. One in three is not Caucasian. One in four lives in a single-parent household. Three in four have mothers who work outside the home. They describe themselves as cynical, critical, practical, individualistic and technologically savvy. This is the first generation to grow up on-line. They watch TV while chatting on the Web. Not surprisingly, teens have been identified as having strong influences on household purchase decisions and are known to literally drive the purchases of new technologies in the home.

20467 MS McDONALD: Perhaps the most important criterion for licensing a digital specialty channel, for you as a regulator and for us as a business, is the attractiveness of the service. When we considered which genres to apply for we looked for gaps in the marketplace that we could fill with our particular strengths. Connect was a perfect fit.

20468 Teens are not getting the kind of television experience they want and we know how to bring them back. We did both qualitative and quantitative research and got an overwhelming response. More than 90 per cent of our target market wants Connect. And advertisers believe that the service will succeed. Combining content and the Internet will give them access to their most elusive demographic target.

20469 A-Channel has direct experience in targeting a youth demographic. Research shows that the only services showing growth in teen tuning are U.S. services, mainly Fox and TBS. In our focus groups across Canada these two services were most frequently listed as best meeting the needs of teens. The sole exception was in groups which had access to the A-Channel service. A-Channel is the only terrestrial Canadian service that outranks Fox and TBS as a teen preferred service.

20470 We will build on our A-Channel brand, which is youthful, edgy and very independent, to market Connect to teenagers. For example, our concept for composite blocks of programming for teens, integrating programming with hosted segments, received overwhelming support in the demand research.

20471 Teens told us that they want new, fresh material. We will run programs not previously aired, like "Truly Weird" from the U.K., "Free TV", a Canadian series, and "Ocean Girl" and "Thunder Stone", two series from Australia. These are high quality, international programs that meet the key criteria of being both fresh and relevant to our target market.

20472 Successful Web sites have used chat groups, loyalty programs, contests, promotions and clubs to encourage a sense of belonging and ownership. That sense of belonging or safe haven will be the defining characteristic of our channel. In addition to offering innovative and entertaining program blocks targeted specifically to them, Connect will, in its original hosted daily programs like i-Connect, help teens deal with the many issues that face them.

20473 For example, our Connect Ed strand will help teens plan their next steps. We will have career days, with programs about work and the kinds of jobs that are out there. At the same time, our Web site will invite teens to send in questions to our career counsellors. The site will also provide current information from colleges and universities, and in some cases will take you on a virtual campus tour.

20474 The key to understanding the programming concept for Connect lies in the various levels of connectivity and involvement. We plan to create a community of interest among Canadian youth and their global friends. Programs will be acquired and commissioned that have a unique appeal to this audience.

20475 Joanne...?

20476 MS LEVY: Our Connect Priority Program Fund will develop and produce new Canadian youth programming. $5 million of the fund will be used to pre-license new independently produced programs, and $800,000 will be available as seed money for new screenplays, multimedia projects and advanced skills training related to digital broadcasting.

20477 MS McDONALD: And now let's connect.

--- Video presentation / Présentation vidéo

20478 MS McDONALD: We are convinced that there is a huge opportunity to bring teens back to Canadian television with a service that is programmed for them and with them, rather than at them.

20479 Now I will turn it over to John Donnelly to talk about The MET.

20480 MR. DONNELLY: Thank you, Sandi.

20481 The MET is Canadian Music and Entertainment Television, a new national music video channel devoted to rock music.

20482 The simplest explanation of how The MET will complement the broadcast system is to look at the charts published each week by Canada's national radio industry trade magazine, The Record. There are four national charts to serve the Canadian radio, record and music industries: CHR, pop adult, rock radio and country. But only three of these are properly reflected in the playlists of the established Canadian music video services. MuchMusic focuses primarily on the CHR chart -- contemporary hit radio. MuchMoreMusic was licensed to serve an older demographic with the pop adult chart, which includes AC -- adult contemporary. Country Music Canada focuses on the country chart. That leaves one chart largely unrepresented, namely, the rock radio chart.

20483 Therefore, the MET's music mix and playlists will be developed in a format which can be compared to rock radio. Our concept is to deliver a distinct new national service which focuses exclusively on rock and all its many sub-genres: classic rock, hard rock, metal, punk, alternative, emerging and even multi-lingual rock videos. All of these genres will be incorporated into our regular music mix.

20484 In virtually every city in Canada rock radio stations comfortably co-exist alongside CHR stations and AC stations. Given the growth of the industry and continued fragmentation of music, no one service can cover all the bases and program the majority of music on the rock charts.

20485 This is not just our view of the situation. Key members of the music industry, including presidents of the major labels, independent labels, artist managers, distributors and Canadian artists themselves wrote in to support this application.

20486 Let me quote from a letter from Deane Cameron, President of EMI and Virgin Music Canada:

"Rock radio has not changed its musical standard and is still supporting rock artists, however, the TV airwaves are currently geared toward the vibrant POP market. This has left a large market that is seriously under-served on a visual level."

20487 From Ian Mackay, at Sony Music Canada:

"Currently, rock music is a genre that is very under-represented on television. A new service, particularly one which provides for a high percentage of Canadian content, would be strongly supported by Sony Music."

20488 You will also see strong support for our application from Canada's largest new independent record company, The SONG Corporation, from the biggest concert promoter in the country, House of Blues Concerts Canada, and from over 150 other members of the Canadian music industry.

20489 They all recognize that there is a real void in the market, and that void is rock.

20490 If awarded this new licence we will give to the Canadian people a new music video service dedicated to rock that is fresh, accessible to artists across the country and puts Canadian talent first. Sixty per cent of all the music videos we play will be Canadian content. As well, 60 per cent of our programming schedule will be Canadian.

20491 Madam Chair, this sets a new benchmark for support of new Canadian music talent, and yes, it is achievable. There is a huge pent-up inventory of music videos that are not receiving airplay.

20492 Now to some of our other program concepts ...

20493 "Break-Out" will be hosted by our MET personalities. We are calling them Canada's newest MPs! It will incorporate music videos with other areas of rock entertainment.

20494 "Oh Canada" will be a new national anthem for Canadian rock artists and fans, featuring 100 per cent Canadian artists daily.

20495 "Building the Scene" will be a unique daily program focusing on emerging talent.

20496 To cover current affairs we contacted the biggest player in the business, Bruce Allen, Canada's foremost rock manager. He agreed to move his weekly talk radio show onto our new network for a program to be called "For the Record With Bruce Allen".

20497 Other highlights include regional-based programming, a live, in-concert program called "Live from the MET", music news, The MET Rock 10, rock documentaries and more.

20498 The bottom line is there are literally thousands of good Canadian rock artists and videos and the majority are not being played. The MET will have no trouble programming a strong rock genre playlist, which is distinct from existing services. Where today there is only one choice available for rock musicians to get all important video airplay which can make or break their careers, The MET will offer a new window for both emerging artists and established performers.

20499 Our research established that The MET's rock genre will find a substantial audience. Music fans follow their favourite artists great distances to catch shows and they spend substantial percentages of their monthly income on music and music-related purchases. They will subscribe to a new digital tier if they know that there is a new channel that "rocks". The MET will be a leader in the new tier and it will help drive subs for the entire digital roll-out.

20500 There are also major benefits to the Canadian independent production sector that will be derived from the licensing of The MET.

20501 Joanne.

20502 MS LEVY: Apart from our 60 per cent Cancon video commitment, we will also contribute $3 million over the licence term to a three-tiered Priority Program Fund. The MET Video Fund will stimulate new Canadian music video production; The MET Live Fund will support the production of live concerts for television; and The MET Documentary Fund will provide national licence fees for Canadian rock documentaries.

20503 MR. DONNELLY: Now we would like to give you a brief "rock'n roll recap" of our application.

20504 Madame Chair, Commissioners, the performer you are about to see is one of Canada's premier rock artists, but, unfortunately, he's also one of our best-kept secrets. The MET can change that! From Regina, this is Jack Semple.

--- Video presentation / Présentation vidéo

20505 MR. DONNELLY: Madame Chair, our slogan says it all, The MET Rocks!

20506 MR. CRAIG: Thanks, J.D. He wanted to turn it up louder. I wouldn't let him.

20507 So there you have our three concepts: Festival for indie film lovers, Connect for teenagers, and The MET, for rock fans. These are distinctive, attractive and affordable services which will provide diversity to the system, and a high level of Canadian content.

20508 But what does the Craig organization bring to the table?

20509 We think we have a unique contribution to make. And we have unique strengths to draw on.

20510 The first and most significant is that we know how to successfully launch new niche services; how to move from a starting point with no customers, no audience and no brand to profitable services that contribute to local communities and to the broadcasting system.

20511 Customer by customer we built conventional television services that now reach 20 per cent of English-speaking Canada. We pioneered the digital MDS business in Canada with SkyCable, the first distributor to introduce digital set-top boxes. We are good at building businesses, wooing customers with superior products and services and creating brand recognition. That's our specialty.

20512 We have come a long way from the small family business to the diversified broadcasting company that we are today. I believe one of our core strengths is the group of people that you see here today, each of whom brings unique industry knowledge and skills.

20513 We have the existing infrastructure and assets upon which to build a new stable of specialty services. All of our plants are state-of-the-art digital studio facilities. We are technically capable now of launching new digital specialty services.

20514 We also have strong relationships with the artistic, production and distribution communities across North America, and we have experience selling programs throughout Canada to our broadcast colleagues.

20515 We have award-winning in-house programming and production expertise that is second to none.

20516 We have a national marketing and sales force already in place. Craig Airtime Sales has offices in Toronto, Montreal, Vancouver, Calgary and Winnipeg. We are ready to start selling the new services tomorrow.

20517 We are also moving aggressively into new media, with over $1 million already spent in setting up a new division called Craig New Media. It's in charge of our interactive strategy to offer more online services and e-business initiatives for the Craig group of companies. Its mandate is to focus our strengths as a media company, work with partners who are experts in Internet technology and bring the benefits back to the broadcast system.

20518 Finally, our independent ownership will add diversity to the broadcast system. Our proposed services will create opportunities and open doors for creative talent from all regions of the country.

20519 The digital era we are about to embark upon will not be for the faint of heart. We know from direct experience.

20520 Madame Chair, no player regardless of size, has a lock on big ideas or how to make them work. I think that the ability to bring a new perspective, a fresh look, a different brand is going to be critically important if these new services are to be successful.

20521 We are up to the challenge.

20522 That concludes our presentation. We would be more than pleased to answer any questions that you might have.

20523 THE CHAIRPERSON: Thank you. Welcome Mr. Craig and your colleagues.

20524 MR. CRAIG: Thank you very much.

20525 THE CHAIRPERSON: I hope you had a good trip east. At least we have some sunshine today.

20526 Commissioner Wilson, please.

20527 COMMISSIONER WILSON: We may have sunshine, but we don't get to see it locked in this room with no windows.

20528 I probably would have enjoyed having the volume turned up on that video. There's nothing like television to give you an idea of what television is going to look like. So I am always happy to see video presentations that are part of the presentations that you make to us here.

20529 You know the drill, I am sure, from watching. We will be going through some general questions and picking your brains on various sort of broad issues. Then we will be going into each of the applications and, basically, clarifying areas we are not clear on. So, we won't be doing exhaustive questioning on the programming concepts and that kind of thing. It will just be to clear up certain aspects of your applications that need to be on the public record.

20530 You said in your opening remarks, Mr. Craig, and welcome to all of you, it's nice to have you here, you said that you had a unique perspective to offer and as I was preparing for this I thought that myself because you are a distributor and you operate conventional television and radio. Specialty is the only area that you are not in.

20531 I guess even though you have outlined in your opening remarks your approach to the criteria, I was wondering if you might take a few more minutes to expand on what you think is most important, especially because you have been doing so much experimentation in the digital area, what you think is going to be the most important thing in terms of driving the roll-out of digital and trying to balance that against of course what regulators love the most, which is Canadian content.

20532 We heard yesterday from Corus, from John Cassaday, that he thought we should choose genres overall, the ones that we felt would be the most popular, and then into that, into those genres, you know, pick the applications that best met our criterion. In my mind there is really no contradiction between that approach and the approach that we put out in our Public Notice, but I would be interested to hear your views.

20533 MR. CRAIG: Certainly. Well, we have had lots of lively debate on this issue and especially this over the last week and a half, as we have heard other applicants answer this question. But I think, as you pointed out, we do have a bit of a different perspective because we are also on the distribution side of things.

20534 So we have tried to sort of balance it I think from both perspectives. Essentially, we have boiled down the criteria really to three main points.

20535 Firstly, we believe that the most important criteria is simply the attractiveness --

20536 THE CHAIRPERSON: Mr. Craig, perhaps if you pushed your mic --

20537 THE CHAIRPERSON: Push it away from you because we get --

20538 MR. CRAIG: I'm sorry.

20539 THE CHAIRPERSON: I never thought I would give advice to a broadcaster.

--- Laugher / Rires

20540 MR. CRAIG: Everybody needs a good producer.

20541 THE CHAIRPERSON: That's right.

20542 MR. CRAIG: I will maybe start again in terms of how we set out the criteria.

20543 I think, first and foremost, we all agree in our company that the attractiveness of the program concept is the most important thing to the digital subscriber.

20544 The key question here is coming up with programming that isn't available now. What programming is going to be available in this new digital tier that isn't available now?

20545 In that area, we think that the Commission should be looking for new programming, should be looking for original programming and an innovative concept, with significant Canadian programming commitments.

20546 We include Canadian programming in Cancon, under this heading, because we think that, in the digital universe, the Canadian content is really what's going to make these services different and stand out from the vast array of choices the consumer is going to have coming from elsewhere.

20547 So plans to stimulate the creation and to showcase Canadian content should be weighed heavily, we believe, in your decisions and, also, we believe the presence of the interactive components that enhance the TV experience -- and, of course, from our BDU side, this is important. We have -- everybody in our universe of customers, on the SkyCable side of our company, has a digital box and as we get into second-and third-generation boxes -- and we can tell you more about that in the future -- we think that, you know, interactivity really enhances the viewing experience and we believe that's very, very important.

20548 And we also believe that interactivity is also a great leveller, in terms of breaking down barriers on this tier, in terms of regional input. Somebody from a rural part of Canada could have access to one of these digital channels, using interactivity.

20549 So we think -- in terms of what it contributes, I think it creates a tremendous amount of diversity in a country that's certainly as big as ours.

20550 The second heading that we have come up with, that we have looked at, is "Affordability", and we believe that you should give weight to services that make affordable and attractive packaging partners, and we also believe that you should be looking at, in this digital tier, looking at services that have wholesale rates in the lower end of the range to make the package attractive. Because, after all that's what we are doing here, we are selling television to the consumer, and they have to pay for it, with their hard-earned money.

20551 The third point that we think the Commission should be looking at is a new voice, in the specialty realm. And somebody asked me the other day whether or not the Commission should be considering somebody that isn't from outside the business, totally outside the broadcasting business. We have infrastructure, but I think that that's the way the broadcast system was built, in the past, and I think this is a great opportunity for the Commission to bring some new blood into this business.

20552 COMMISSIONER WILSON: I believe Catherine Tait described that as diversity but diversity of ownership instead of genre and content.

20553 MR. CRAIG: Right. You know, and I think there's a balance there.

20554 But I think that this digital -- this new digital universe needs a variety of players, each should bring something different to the table, so -- and have their own particular strengths and creativity to bring customers to this digital box and get them to buy the digital box.

20555 So, really, we boiled it all down to sort of three key components: Number 1 is attractiveness to digital subscribers; Number 2 is affordability and packaging; and Number 3 is diversity of ownership, with the wherewithal and a sound business plan.

20556 COMMISSIONER WILSON: Thanks, Mr. Craig.

20557 On the issue of implementation, we have been having some interesting discussions about what approach the Commission should take to how these services will launch and whether or not we should be involved; and if we are involved, to what extent.

20558 There have been some suggestions that we should set the launch date, and perhaps even prescribe a date by which negotiations would be concluded between the distributors and the programming services, and some suggestions, even, about how big the packages might be.

20559 I'm just wondering if you have any views on this, since you wear those two hats of distributor and programmer. What's your view of about whether or not we should be involved or how much we should be involved, if we have to be?

20560 MR. CRAIG: Well, we agree with the concept. We think that a hard launch date, where there's a collective launch, makes a lot sense, from both sides of our company. So we think that's reasonable and wise, in terms of trying to get this digital tier off the ground.

20561 There was a suggestion, I think, by somebody, that there was -- you know, set the negotiation date and then, six months later, launch. I think that's a little onerous. I think that -- you know, I think that window could be shortened, you know, to, say, three months. But I think sort of setting a date --

20562 COMMISSIONER WILSON: Three months after the conclusion of negotiations?

20563 MR. CRAIG: Yes.

20564 So we think that's fair and reasonable.

20565 And we also think, from the BDU side, that that gives the BDU, and the programmers, an opportunity to get together, form their marketing plans and launch this digital tier, collectively. So we think that's, conceptually, a good idea.

20566 COMMISSIONER WILSON: Do you think we should say that? As the Commission. Or prescribe it?

20567 MR. CRAIG: If you feel that -- I guess you are going to have to get a sense of how the other industry players want to launch this tier, and I guess if you think that you are not going to get the level of co-operation that you need and can't be assured that you are not going to get the level of co-operation that you need, then you are going to have to --

20568 COMMISSIONER WILSON: I think it's more whether or not you feel you are going to get the co-operation that you need that would suggest to us that we might want to step in.

20569 MR. CRAIG: We think it's a good idea.

20570 COMMISSIONER WILSON: Okay. What's your view about whether or not Category 2 services should be able to launch before Category 1s? Or should they be limited to launching simultaneously, or afterwards?

20571 MR. CRAIG: I think they should launch after.

20572 COMMISSIONER WILSON: Why after? I mean there's been some discussion about, you know, if you are going to pay $11 or $12 to have the digital box, in the cable universe, then you should have as large a package as possible of services that you can go to the marketplace with so that you can excite people about the possibility of what they can receive.

20573 MR. CRAIG: I'm not sure the large package matters.

20574 COMMISSIONER WILSON: I'm not talking about a large package; I'm talking about a large number of services that can be used in different configurations, whatever configurations the distributors figure out are the best for selling the services.

20575 If there are only 10 services, would you pay $12 for 10 services? And pay for those services on top of the cost of the box? I don't know. Those are the questions that I'm asking myself.

20576 I'm wondering why you are saying they should launch afterwards.

20577 MR. CRAIG: Well, I think that, you know, with the commitments that the applicants are putting forward, I think they should have a chance to get off the ground and I think, with a package of 10 services -- and Sandi may want to comment on this, from the distribution side -- but I would think, with a package of 10 services that are new and fresh, I would think that would be a good starting point to get the whole digital tier off the ground. In other words, I think that would be enough.

20578 COMMISSIONER WILSON: Okay. And do you think that we should impose a minimum amount of time by which a Category 1 licensee has to implement their licence.

20579 MR. CRAIG: Yes.

20580 COMMISSIONER WILSON: And what would that time period be?

20581 MR. CRAIG: Well, I would think that, you know, if a launch date is set, I would think a reasonable amount of time after that to get launched, if everybody else is able to make a deal and launch, I would think it should be 12 months.

20582 COMMISSIONER WILSON: So, within 12 months -- like 12 months from the date to the decision is issued?

20583 MR. CRAIG: I would say 12 months from the date that everybody else launches. In other words, if you set September 1 as the launch date and you have launched 12 months later --

20584 COMMISSIONER WILSON: I guess, you know, what I wonder about is, if you have got this valuable piece of property and your licence that brings with it all sorts of regulatory privileges and support, how long do we want to allow people to occupy that space before we say, you know, "Come back and talk to us about why you are not launching, or give it back".

20585 MR. CRAIG: Yes, I mean, typically, what the Commission has done is said, you know, when the Commission issues a licence and sets a reasonable time to get on the air, if you haven't met that deadline then you have to ask permission to get more time, and if the Commission deems it necessary, you are back at a hearing, right away.

20586 So, you know, I think if there's -- you know, from our company's perspective, we would launch and commit to launch on the firm launch date.

20587 COMMISSIONER WILSON: September 1, 2001, if that were --

20588 MR. CRAIG: Correct.

20589 COMMISSIONER WILSON:  -- the date that everyone agreed upon?

20590 Would you allow more flexibility for the Category 2 services? In terms of a time frame within which they had to launch.

20591 MR. CRAIG: I think our sense is that there should be more flexibility given because we are asking the distribution side of the business to give up more of their bandwidth and it could be tricky for some of them. So I think there should be more flexibility given if you do have a Category 2 licence to have a longer period of time in which to negotiate some sort of reasonable deal.

20592 COMMISSIONER WILSON: Okay. We have been having a lot of discussions also about the area of independent production. I guess the big question is: In the digital environment, given the challenges inherent in that environment, do we still need to impose limits? Do we need to take the same approach in that environment that we take in the analog environment where we limit the amount of programming that you can purchase from an affiliated producer. Do we need to do that in the digital environment do you think?

20593 MR. CRAIG: I think so, because I think what you are talking about is a new opportunity with new money that is technically incremental to the system. I think it opens up a lot of great opportunities for independent producers. Certainly the approach that we have taken is that there is money specifically earmarked in our applications for, in some cases, in-house production -- some channels don't have a lot of in-house production in our case -- but we have been very specific about what we are prepared to do for the independent production community.

20594 COMMISSIONER WILSON: Actually, you have an independent producer who is involved in one of your applications so that would give you some perspective on this issue.

20595 MS STRAIN: Commissioner Wilson, if I could just add something to that?

20596 COMMISSIONER WILSON: Absolutely.

20597 MS STRAIN: I guess it gets back to this idea of diversity. The industry is certainly consolidating and producers are becoming broadcasters and vice versa, so I think the principle is that we want to continue to make sure that independent producers have access to funds that are available to them.

20598 So yes, we do think it is important that you set certain benchmarks.

20599 COMMISSIONER WILSON: How do you define "independent producer"? What is your definition.

20600 MS STRAIN: I thought that question --

20601 COMMISSIONER WILSON: I'm sure you are all ready for it.

20602 MS STRAIN: Our definition of an independent production company would be one in which Craig or its affiliates own less than 30 per cent of the voting equity of that company. I think that is -- my understanding is that is consistent with your decision in the Food Network and with what some other parties have said here in these proceedings.

20603 COMMISSIONER WILSON: Okay. I guess it was CHUM who added another layer to this by talking about affiliated and non-affiliated producers, and actually I believe it was Corus and Salter Street yesterday both talked in terms of any independent producer who was at arm's length from the company because there is a legal definition of "affiliate", a corporate legal definition of "affiliate".

20604 MS STRAIN: Well, for instance, Craig right now obviously doesn't have any interests in any production companies, but, you know, were we to own, say, 10 per cent of an interest in a company, then certainly that company would be an affiliate, but we would still consider it to be an independent producer.

20605 COMMISSIONER WILSON: What about --

20606 MS STRAIN: We would consider it to be arm's length, if you want to look at it from that perspective.

20607 COMMISSIONER WILSON: What about Lions Gate?

20608 MS STRAIN: Lions Gate has --

20609 COMMISSIONER WILSON: In terms of Festival, since they would have an equity interest --

20610 MS STRAIN: Right.

20611 COMMISSIONER WILSON:  -- in the channel. Would you consider them affiliated or non-affiliated or arm's length?

20612 MS STRAIN: For the purposes of our access to our Priority Program Fund, they would have no access to that.

20613 COMMISSIONER WILSON: They would have no access.

20614 MS STRAIN: No access.


20616 I would like to talk now about some issues related to interactivity, again, Mr. Craig, drawing on your experience as a BDU, and then talk about sort of your general approach to interactivity across all of the applications, just so that we can sort of put that context on the record for discussions about each of the individual applications that you have put before us.

20617 If we license a Category 1 service that has interactive elements that are to be delivered by the set-top box, should distributors be obligated to carry those interactive components? Are they integral to the service?

20618 MR. CRAIG: Yes, they are integral. I think that -- we have been doing a lot of thinking about this. There has been a lot of discussion about should it be carried.

20619 I guess the approach that we have taken to interactivity is that it is a very efficient use of the bandwidth for the interactive component of the services. So, in other words, it is a very low volume of bandwidth and data travelling back and forth that is required for the interactivity.

20620 Part of it, I will maybe ask --

20621 COMMISSIONER WILSON: Did you say a low volume of bandwidth?

20622 MR. CRAIG: Yes. I am going to ask Paul East, who is our technical guy, to give you an idea about the approach that we have taken with interactivity.

20623 COMMISSIONER WILSON: Before you start, Mr. East --

20624 MR. CRAIG: Yes?

20625 COMMISSIONER WILSON:  -- if I can just say that when we are talking about exchanging between the programmer and the viewer textual information then you are talking about one level of bandwidth requirement --

20626 MR. CRAIG: Right.

20627 COMMISSIONER WILSON:  -- but if you are talking about simultaneous view programming or choosing camera angles or any kind of interactivity at that level, then you are talking about another level of bandwidth requirement. So I would like you to sort of talk about those two stages.

20628 MR. CRAIG: Yes.

20629 COMMISSIONER WILSON: There is a fairly simple level and then there is a more advanced level.

20630 MR. CRAIG: That's right.

20631 I guess the issue is, when you go to the advanced level you are using up bandwidth to do that.

20632 COMMISSIONER WILSON: Could you use up a whole other channel worth of bandwidth?

20633 MR. CRAIG: Yes, technically you could, if you want a full return path.


20635 MR. CRAIG: We don't think that that is (a) what the consumer wants, and (b) the most efficient way to deal with interactivity.

20636 There are more efficient ways to do it using IP protocol, and I will maybe just let Paul give you a sense of how we have approached this on SkyCable as an example.


20638 MR. EAST: As you know this Commission licensed SkyCable Pacific just last month and since then we have been working quite hard on specing out that system. As a company building from scratch a digital BDU system we definitely have found some interesting technology up there.

20639 Just last week we met with representatives of ASC Technology, a mid-sized American-Taiwanese supplier of set-top boxes, and they showed us the specs for a new box which included DVB decoding, a TiVo client with a 10 gigabyte hard drive, a docsys cable modem, a Java virtual machine and a Java-coded Web browser and e-mail client, all of this for under $400 per box in quantity. There are other manufacturers offering similar packages such as the Motorola GI 5000 Plus and the Scientific Atlantis 6000 model set-top box.

20640 So when we look at this type of technology we can make a few conclusions, and I think the inclusion of a cable modem in a set-top box greatly simplifies the return path for data, as Drew was saying. That is, our interactive TV shows and advertising can make use of Internet technologies by virtue of the built-in high-speed modem to offer seamless feedback from the viewer.

20641 For example, when a set-top is tuned to one of our specialty channels it is told where to find the interactive content server on the Internet. Then, using the built-in Java virtual machine, the set-top loads our interactive application.

20642 I would point out that this happens through the Internet connection and not the MPEG broadcast stream. That is why it is our position that, you know, to a large degree interactive TV can be relatively light in terms of additional bandwidth. That is what we are looking at from both --

20643 COMMISSIONER WILSON: Do you have to have a separate hook-up in order for the cable modem in that box to work? I mean, I have a cable modem at home for my computer and I also have cable for my television and I pay separately for both of them.

20644 MR. EAST: Well, what we are seeing from set-top box suppliers is the integration of that docsys cable modem in the set-top box. It is a logical thing to add into the set-top box because it enables this interactivity and it would also save costs from the BDU standpoint integrating the two products together and is the opportunity to sell Internet service as well.

20645 COMMISSIONER WILSON: Is it your understanding that that is the box that the cable industry is going to roll out here?

20646 Who is making that box?

20647 MR. EAST: Boxes such as that, the one I was just describing was from ASC, but both Motorola General Instruments and Scientific Atlanta also have boxes designed with RF -- well, they often label them an Ethernet connection integration into the box for interactivity.


20649 MR. EAST: So I think it is definitely the way -- it is the logical way to go for both the BDU and for the program supplier.

20650 COMMISSIONER WILSON: So, Mr. Craig, your argument would be when you said that it is the most efficient way of providing interactivity and the most efficient use of bandwidth. Is that --

20651 MR. CRAIG: I think, you know, as Paul has mentioned, the new generation bandwidths have two things going for them -- or the new generation set-top boxes have two things going for them.

20652 They have storage, high-density storage, built into the box. So it is a TiVo-like device built into the box, so they can actually store material and video in the box; plus they have a built-in modem.

20653 On SkyCable, for instance, you would have the ability to build and use that modem and use IP telephony to trigger all sorts of interactivity through the remote control on the set-top box.

20654 COMMISSIONER WILSON: How do you manage your return path for SkyCable for attractivity?

20655 MR. EAST: In the case of say SkyCable Pacific, the licence -- the return path technically is 2156 to 2160 megaHerz. There are four megaHerz set aside by Industry Canada for the MDS licence in the region.

20656 At the customer premise there is a transceiver installed with the antenna that actually transmits wireless data back to our headend. That system is operating right now in Manitoba, and that is the system that SkyCable will be building in B.C.

20657 With that said, we have not finished the RFP process.

20658 MR. CRAIG: Commissioner Wilson, could I ask Sandi McDonald to add something to this, please.


20660 MS McDONALD: Thanks, Drew. A couple of things.

20661 When we talk about our BDU strategy, I would like to go back for a moment to one of your first questions, which was: Should BDUs be required to carry and when should you launch?

20662 We were sort of hoping that everything would launch by 2001, but not too much before; just in time for us to have our SkyCable Pacific operation up and running.

20663 COMMISSIONER WILSON: Are you suggesting that we should take that into consideration?

20664 MS McDONALD: I am suggesting that we certainly should.

20665 With respect to our approach on both sides of the house to interactivity, I guess we have made it quite clear that we are concerned on the distribution side about the issues of bandwidth hungry applications.

20666 Initially on our channels that we are proposing we do have a focus on a two-screen experience, moving over the next number of years to the set-top box.

20667 So, in a way, the interactivity element -- right now we say it contributes to diversity, but in another way it is such a diversification in terms of the platforms. We have a television; we have a set-top box; we have a computer. In many of our applications we have Web cams, and so on.

20668 Along the continuum, the goal is to move from a diversification of these peripherals to a unification around the television set and that set-top box. We know that will take time.

20669 That is the continuum and the goal.

20670 COMMISSIONER WILSON: And that underlies your interactivity strategy.

20671 MS McDONALD: That is the strategy. Perhaps I could tell you a little bit more about --

20672 COMMISSIONER WILSON: Initially, it would be -- actually, I do want to talk a bit more, but there are a couple of technical things that I would like to talk about first before we talk about how you anticipate your interactive elements rolling out in the services that you are proposing. If you don't mind, I just want to get past this.

20673 You are probably wishing I was on the panel for the MDS licence in B.C. so that I would know all of this stuff and I didn't have to be asking it. But you will indulge me, I hope.

20674 You have talked about how you manage the return path in your MDS distribution undertakings. Do you have any concerns about the ability of either cable or DTH operators to make your interactive elements available to subscribers? Or is it, in fact, easier?

20675 For cable, it certainly could be. But what about DTH?

20676 MS McDONALD: We don't have a concern on the DTH side.

20677 COMMISSIONER WILSON: Okay. When do you expect the full or true TV interactivity through the set-top box to become available?

20678 MS McDONALD: Perhaps I will answer that in a technical way. I am going to ask both Paul and Elan Gillespie from PricewaterhouseCoopers to help us out with that, to give you a profile of how they think the world will unfold on the set-top box.

20679 Paul, maybe you could start.

20680 MR. EAST: Sure. I think perhaps, Commissioner Wilson, it is apparent that the current generation of set-tops does not allow the type of immediate interactivity we have been describing, although I feel that the content may be so compelling and the pressure from freshly build third generation systems such as SkyCable Pacific will be great enough to push the larger BDUs to move quickly towards full interactivity.

20681 Regardless, as Sandi has mentioned, the same Internet server that provides our set-top box interactive application will also provide a similar interactivity, via Web site, for use on a traditional PC platform.

20682 Going through the transcripts from the proceedings, I think a gentleman from Rogers described perhaps a full interactivity, their second generation of interactivity in 12 to 18 months; and a gentleman from Bell mentioned -- they mentioned several steps, but they also mentioned the desire to launch a new satellite, MIMIC II, which would give them a bidirectional interactive system.

20683 While I don't purport to speak for other companies, we actually do feel quite strongly that bidirectional communications is going to be a cornerstone in a BDU system.

20684 COMMISSIONER WILSON: Do you agree with the 12-to-18-month time frame that they have suggested?

20685 MR. EAST: Well, I would have to think that they had a reason for saying that, I would hope.

20686 COMMISSIONER WILSON: We will have to find out which reason it was, won't we.

20687 MS McDONALD: Perhaps Elan can give us some --

20688 MR. EAST: I was just going to point out that we will have ours operational within 12 months.

20689 MS McDONALD: We will be up and running within 12 to 18 months.

20690 COMMISSIONER WILSON: The reason I am asking is because -- it is fine for you to answer me as a BDU and say you will be up in 12 to 18 months. But as a programmer, those issues would be really important because the interactivity forms an important part of the concepts of the applications that you have put before us.

20691 I am really more interested in your view of how quickly you are going to be able to offer your viewers to your channels the interactivity that you envision as part of the application.

20692 MR. CRAIG: I will start with that, and Sandi may want to jump in.

20693 I think that initially, on day one, we have interactivity using the Web.


20695 MR. CRAIG: So on day one you have embedded content, but you are using Web technology to get it to the consumers. Sandi referred to it as the two-screen experience.

20696 COMMISSIONER WILSON: Right, the dual platform.

20697 MR. CRAIG: The dual platform. That is going to happen on day one.

20698 COMMISSIONER WILSON: How soon before the single platform do you anticipate it is going to be?

20699 MR. CRAIG: As Paul mentioned, the box is ready today. For instance, any new boxes that we buy for our BDU will be the latest generation.

20700 So technically, as soon as they deliver that box we can put it in the field and it's there.

20701 Even on our older generation boxes, it would not make sense for us to go backwards in terms of technology.

20702 COMMISSIONER WILSON: Right. As a programming service, though, hopefully you are going to be launched on more than just SkyCable.

20703 MR. CRAIG: Absolutely. Hopefully, we will. We will need a few more subs.

20704 COMMISSIONER WILSON: We are going to talk about that.

20705 MR. CRAIG: Yes. I guess we have to believe Rogers when they say 12 to 18 months. As Paul indicated, it is not a technology problem. They just need to buy the boxes and put them in homes.

20706 I guess, from our perspective, we believe that time frame seems reasonable.

20707 COMMISSIONER WILSON: Ms McDonald, did you want to talk about your strategy, the interactivity strategy across all of the channels.

20708 MS McDONALD: I would love to.

20709 COMMISSIONER WILSON: Not from a technical standpoint but more conceptual.

20710 MS McDONALD: From a business point of view, interactivity -- evidently we have been discussing it in terms of its role as a key driver for the digital tier, which we have just discussed and agreed upon.

20711 As Drew mentioned earlier, it is also a great equalizer in terms of breaking down those barriers of Access, of regional diversity, cultural, and what contribution to diversity.

20712 It is also a key driver for our business plan, given both sides of our various houses. Our business strategy is to be online through the Internet and interactive through the set-top box.

20713 I probably should have mentioned that actually we have a three-screen experience going on for the first couple of years, and we think probably that will be a couple of years. We have the Internet; we have these Web cams; and then we have the set-top box.

20714 As I mentioned earlier, we have indeed spent $1 million on developing our Internet strategy so far, and we are incubating the Web sites that we will be developing for each of the channels, and developing interactive content in-house as well.

20715 Our Web sites will launch before our channels. We would be prepared to launch those in advance.

20716 One final comment with respect to the channels and the development of interactive programming: our priority program funds set aside about $1.3 million for new media content development, in terms of program concepts and script development and so on.

20717 In a moment I am going to ask Glenn to take you through some of the specific interactive concepts for each of the channels. But just before I do that, I want to touch for a moment on Craig New Media.

20718 We structured Craig New Media as a separate operating company to basically be a service provider, to operate as a consulting service team to each of our units. Craig New Media is an accelerator for our business model of interactivity. It will be the incubator and provider of interactive services across the Craig group of families.

20719 At this time I will ask Glenn to take us through some of the great interactive plans that we have developed jointly for these channels.

20720 MR. SUART: Thanks, Sandi.

20721 We have been helping for the last year -- PricewaterhouseCoopers has been helping Craig New Media. We focused mostly on the Internet for the short term, because it is here and now and we can react to it. We can generate returns. And we have more viewers, in a sense, than we will have on interactive TV for a long period of time.

20722 What we did in developing these applications was put in a fairly detailed strategy, which we submitted as part of the applications to sort of give you a sense of what we are trying to do.

20723 We want to be more than "brochure-ware". We didn't want to just come here and say: Hey, we have this great Festival channel. Here are the TV listings of what we are having tonight. That is just not where we wanted to be.

20724 Drew's challenge to us basically was: Let's try to make e-business fundamental to the channel, but yet standalone by itself. For example, if you are not a subscriber to Festival or The MET or Connect, and you don't even have a digital set-top box, you could get access to the services that we are going to provide from the channel on the Internet. You could participate in the community. Theoretically, if you participate in the community and have access to some of the services, you might then want to get the digital set-top box and subscribe to the services.

20725 What we did was, we tried to develop some interesting strategies. I won't go through exactly all of the elements, but, for example, for Festival, we talked about virtual film festivals. I think you have heard something along that line already from other applicants. We want to see on the Internet that you can go to see films. You can actually see the festivals themselves.

20726 We also wanted to give the actual participants, or the viewers, a chance to possibly create their own shorts and films. We wanted to give them the tools on-line to be able to do that and to help package them.

20727 Of course, if you are going to do that, you might want to offer educational and credit courses through colleges, et cetera.

20728 There are all sorts of possibilities like that.

20729 When you go over to The MET, it is very similar. You could have live music festivals. You could have pay-per-view performances from bars in Halifax or Yukon or wherever.

20730 You could also --

20731 COMMISSIONER WILSON: And those would be streaming on the site.

20732 MR. SUART: You could do streaming on site, yes, for pay per view.

20733 And then you would work it into all sorts of other applications. You could download videos; of course, clearing all the rights. You could have --

20734 COMMISSIONER WILSON: I was just going to say, what about the rights?

20735 MR. SUART: That is a big issue of course. But in a couple of years that might be resolved, by the time we actually do it in a big way.

20736 COMMISSIONER WILSON: Because why would you bother having it on pay per view if you can get it free on the Web?

20737 MR. SUART: Very possibly. I don't know. It depends on the specific events.

20738 The other thing is, you can give, again, tools for the musicians to create their own videos. You could have amateur videos which would then get streamed on the site. You could share them with your friends on that particular site. Hey, the best ones, we could perhaps use them on the channel.

20739 For Connect, we also talked about taking the best of what we just talked about for Festival and the music channel, adding Net cams and putting them everywhere. So, again, you could have people participating through the Internet on our channel.

20740 But those are just services aimed at consumers. The other side of this whole equation is trade exchanges, actually the business side of the film industry and the music industry. Right from the beginning that is where the potential really is for the Internet, and that is creating a community for the professionals to actually interact and do things.

20741 If you are going to have, for example, a movie production, you could, as a producer, rent the hall, have the cast and crew, do all the accounting, book the travel -- do everything all in one location. If you are on The MET Web site, as a bar owner you could preview bands right across the country, choose the one that you want to have come to your bar, and then book it all on-line.

20742 So there are those kinds of possibilities.

20743 You could do the virtual pitching. You know, the $2,000 cup of coffee -- the famous one. You wouldn't have to do that in some cases.

20744 That is a trade exchange. That is a very difficult thing to do and we are trying to do it now.

20745 I guess, in a sense, the Internet strategy is both, to be to consumers and also to be to the business side, and that is what we are going to try to do.

20746 COMMISSIONER WILSON: Thanks for that elaboration on how the sites are going to work.

20747 I want to ask you about how you have structured Craig New Media, because there is a part in the application form where we have asked you to identify costs and revenues associated with your sites. They are not regulated revenues, of course, but we did ask to see costs and revenues. So you have set up this separate company and everything is going to flow through that. But you did talk about reinvesting some money in your programming services, and I wonder if you could just explain that to me a little bit.

20748 MR. CRAIG: First of all, I will maybe start on the revenue sharing concept that we put forward in the applications, and then I will let Sandi talk about the structure of Craig New Media and how it is going to work.

20749 I think we need to clarify what was in the application and tell you what our thinking was.

20750 Our thinking, simply, was that if we used the BDU's bandwidth to create revenue for the channel, then the BDU should get paid. In other words, if we use their bits and bytes to sell a product, they should get something, because we are using their valuable and precious bandwidth to do that. The concept --

20751 COMMISSIONER WILSON: So you are in favour of revenue sharing.

20752 MR. CRAIG: Yes, we are.

20753 The concept that we put forward -- and we should clarify it, because in the application it says Web and interactive revenues. It is not Web and interactive. What we mean in the concept that we put on the table is that we are prepared to give back to the BDUs 20 per cent of the revenue that we generate through interactivity using their expensive set-top box, their expensive cable network -- or wireless network -- and their expensive bandwidth. So we believe that there needs to be a spirit of co-operation between the two parties, and we are prepared to give up --

20754 COMMISSIONER WILSON: And I imagine you have heard that Mr. O'Farrell from Global suggested that there be some kind of process where issues like this were sorted out prior to the launch of the services, so that there was some kind of framework in place to deal with the notion of whether or not the BDU should be compensated for the additional bandwidth that is required to deliver the interactive elements and how that might work.

20755 MR. CRAIG: Yes. I mean --

20756 COMMISSIONER WILSON: Are you in favour of that kind of process?

20757 MR. CRAIG: Yes, we are. As we have talked about, there is a whole bunch of different ways to achieve interactivity. Some are, as Sandi calls them, bandwidth-hungry applications, and some are more efficient.

20758 So I think that we recognize that the bandwidth issue is -- it is a scarce commodity. It is a valuable commodity. If we are generating new revenues through our channel that are incremental to our business plan by using their pipe, they should be compensated.

20759 COMMISSIONER WILSON: Is that why you separated them out from the programming applications?

20760 MR. CRAIG: That's correct.

20761 COMMISSIONER WILSON: I think that answers my question.

20762 I am going to give you two quick and easy questions. They are one-word answer questions.

20763 Personal Information Protection and Electronic Documents Act: Yes?

20764 MS STRAIN: Yes.

20765 COMMISSIONER WILSON: Filler programming?

20766 MS STRAIN: Yes. No.


20768 MS STRAIN: Yes, we would be delighted to remove it from our application.

20769 COMMISSIONER WILSON: Yes; you will be delighted to remove it from your application. Okay.

20770 I want to look at Canadian programming expenditures.

20771 Do you believe that, in the digital environment, it is necessary to have a condition of licence regulating minimum levels of Canadian programming expenditures?

20772 MR. CRAIG: Yes.

20773 COMMISSIONER WILSON: That's another one-word answer. We are moving right along here.

20774 Several different approaches to calculating Canadian programming expenditures have been floated during the course of this hearing, on the basis that in this environment where, I think we heard this morning's applicants describe it as having very thin air, that you would need as much flexibility as possible to be able to fulfil the commitments that you have made, so a number of different ideas have been floated.

20775 Our current formula takes seven-year total Canadian expenditures and divides it by the total seven-year projected advertising and subscription revenues, and some people have suggested that -- actually, I don't think that's...

20776 I have to consult my lawyer. I have to consult my expert. On Canadian programming expenditures. I'm so sorry. I'm confused. We had poor Mr. Haggarty, from Corus, yesterday, talking about the traditional method and the new method, and the Chair had to have a little discussion with him about how to calculate it, his Canadian programming expenditures.

20777 Anyway, there's the traditional method. Which I'm sure you all know about. And then there are these other flexible methods where it might be 10 per cent over, or under, per year, or you would average it over the entire licence term, or you would apply the commitment and we would hold you to it from Years 3 through 7.

20778 I'm just wondering, if you have been listening to these discussions, what's your view? What kind of flexibility do you think you need? What would be the best way to achieve that?

20779 MS STRAIN: Commissioner Wilson, I think we understand -- I think we understand the existing method, which is that one is required to meet the percentage commitment on an annual basis.

20780 COMMISSIONER WILSON: That's right. On an annual basis.

20781 MS STRAIN: And we have structured our applications, and the commitments percentages that we have made in each of our applications, we are prepared to live with that on an annual basis.

20782 But, of course, I think, as everybody has said at this hearing, were you to determine that some flexibility is a good thing, we agree with you. I don't know what more I can say to that. We are prepared to stand by what we have said in the applications --


20784 MS STRAIN:  -- meet it on an annual basis but, actually, the more I think --

20785 COMMISSIONER WILSON: Would gratefully accept any flexibility we offered?

20786 MS STRAIN: Absolutely. Yes.

20787 COMMISSIONER WILSON: Okay. Now, I want to just -- just to get this out of the way, in terms of your Canadian programming expenditure commitments.

20788 For each of your services, you proposed -- well, I'm not sure I actually saw an actual proposal in The Met.

20789 Okay, for Connect and Festival, you proposed 40 per cent of the previous year's revenues. And the staff calculation was 43 per cent.

20790 Now, had you heard that through the deficiency process? I don't think so. I don't think I remember reading that --

20791 MS STRAIN: Commissioner Wilson, we didn't get any deficiency correspondence, on that issue.

20792 COMMISSIONER WILSON: You didn't --

20793 MS STRAIN: No.

20794 COMMISSIONER WILSON:  -- receive any? Okay. So I'm asking you now.

20795 You proposed 40 and we calculated 43. Would you accept 43, as a COL?

20796 MS STRAIN: If you could just give me a minute -- or maybe I will ask Al Thorgeirson --

20797 THE CHAIRPERSON: Do you know -- how did you arrive at 40 per cent? Let me tell you the simple way in which we do. We take all your regulated revenue for the seven years in your predictions; we add them up, and that gives us a numerator; we then take all your predicted Canadian content numbers in your projections, and that gives us a denominator; that gives us, then, a percentage which is applied, beginning in Year 2, to the revenue achieved in Year 1. So, do you -- I'm not sure why there is a discrepancy. It depends what you -- in some cases, the discrepancy was created by the fact that non-regulated revenue was also added in, into the revenue line, but I don't see -- I don't have your entire application. So, is that the case? Or did you only take -- by "regulated revenue", we mean advertising revenue and subscription revenue. And sometimes a discrepancy is caused by the addition. It can also be caused if you average year by year and then take an average of the seven years.

20798 There's a discrepancy of a couple of points, percentage points, so perhaps -- as we have discussed before, unless you convince us otherwise, there are -- and you are free to speak to this, of course. There is an advantage, obviously, in the name of equity, to use the same formula for everybody, and then if flexibility is indeed offered, one need not use it; one has it if one needs it or wants to use it. So it's just a question of knowing how you arrived at the calculation and why the discrepancy. I'm not sure how it occurred, but it appears to be about the same number of percentages in each case.

20799 MR. CRAIG: Madam Chair, if I could ask Linda Noto, Chief Financial Officer, to tell you how she arrived at her calculations, and maybe that will help us out here.

20800 MS NOTO: Hi.


20802 MS NOTO: For each year, we took the total programming expenses and we removed --

20803 COMMISSIONER WILSON: For Canadian?

20804 MS NOTO: For Canadian, yes.

20805 We removed the American, which will get us to the Canadian, and we removed the SOCAN number, and that gave us the percentage that we showed in our Schedule 11, under each year. So, for each year, that calculation was done, dividing by our total revenue for that year --

20806 THE CHAIRPERSON: Yes, that's probably what happened, then.

20807 MS NOTO:  -- and at the end of the Year 7, we gave an average for --

20808 THE CHAIRPERSON: It distorts --

20809 MS NOTO:  -- the seven years.

20810 THE CHAIRPERSON: It distorts by about two percentage points.

20811 So, anyway, you can speak to Commissioner Wilson about whether you, like Mr. Haggarty, are prepared to adopt the traditional method.

20812 MS NOTO: Yes; we are very welcome to --

20813 THE CHAIRPERSON: Because I think that's just about what it does: it distorts by about 2 per cent.

20814 MS NOTO: Yes, we are.

20815 COMMISSIONER WILSON: I told you she was our expert on Canadian programming expenditures. She even knows the percentage within which it distorts.

20816 Okay. So you will -- you want to stick with the 40 per cent using the calculation that Madam Wylie has talked about?

20817 MR. CRAIG: Yes.

20818 THE CHAIRPERSON: I would not be sticking to the 40 per cent. It would be accepting the two percentage points upward -- and we do have the numbers here as to what the difference is. Either Commissioner Wilson or staff can correct me, but in Connect it's a 3 per cent difference.

20819 COMMISSIONER WILSON: Yes; in Connect it's 3 per cent, in Festival it's 3 per cent, and in The Met there is no difference.

20820 THE CHAIRPERSON: It's point nine, I think.

20821 MS NOTO: We will commit to the 43 per cent on --

20822 THE CHAIRPERSON: Yes. And we don't usually -- we are not that good at calculating, so we don't usually use decimals. We round it up.

20823 COMMISSIONER WILSON: You round it up or do you round it down --

20824 THE CHAIRPERSON: So it calculates 40 -- 40 or 41.

20825 COMMISSIONER WILSON: If we round it up, it becomes 41. All right.

20826 Let's talk a little bit about independent production. And Ms Noto, maybe you are the person I can sort of go through these figures with and if you don't have some of them, then you can come back to us. You don't have to madly calculate right away; we can hear back from you. I believe there's some take-home questions for different phases of the hearing and you can come back to us during those phases.

20827 But I just want to verify some of the figures that I read in each of the applications, just so that I understand what your commitments are.

20828 You made a comment, Ms Levy, I believe, with respect to the $800,000 script and concept development amount, and I wanted to try and understand whether or not that's included in the $5 million priority programming fund.

20829 So for Connect we have calculated $29.5 million Canadian programming expenditures.

20830 MS LEVY: Yes, that's correct.

20831 COMMISSIONER WILSON: Is that correct?

20832 And $16.8 million of that goes to independent production for acquisition of new Canadian programming?

20833 MS LEVY: I think Wayne Sterloff has the calculations on exactly how much of that is for acquisition, cash acquisition.

20834 COMMISSIONER WILSON: I think I took this from your highlights section and then again deeper into the supplementary brief you repeated this information.

20835 MS LEVY: Yes, that's correct, $16.8 million is for the acquisition of Canadian content from independent producers.


20837 MR. STERLOFF: That doesn't include, however, the licence fees coming from the priority programming funds.

20838 COMMISSIONER WILSON: I haven't got there yet.

20839 MR. STERLOFF: Sorry.

20840 COMMISSIONER WILSON: That $5 million for the priority program fund on top of that $16.8?

20841 MS LEVY: That's correct.

20842 COMMISSIONER WILSON: Now, is the $800,000 included in the $5 million?

20843 MS LEVY: No. It's additional

20844 COMMISSIONER WILSON: It's additional?

20845 MS LEVY: Yes.

20846 COMMISSIONER WILSON: How will the script and concept development fund work? Who gets that money and who administers it?

20847 MS LEVY: There will be someone hired as per usual, in the way that we have designed some of these funds before. There will be someone who will administer the fund and will be consulting widely with the industry and the group of producers and others who are anxious to supply product in this area and will be coming up with a process that works both for them and for us.

20848 You can appreciate that in each of these areas we are dealing with people with slightly different takes on production. They may be -- for instance, with The MET this is often an excellent place for new filmmakers to really cut their teeth. So when we come to script and concept development there, there may be perhaps a little bit more hand holding involved, a little bit more assistance involved there to get them to where they need to be.

20849 COMMISSIONER WILSON: Okay. For Connect what's the number of original hours of programming?

20850 MS LEVY: Wayne.

20851 MR. STERLOFF: Connect original first run is 567 hours per annum.

20852 COMMISSIONER WILSON: In year one?

20853 MR. STERLOFF: Yes.

20854 COMMISSIONER WILSON: Do you know what per cent of your Canadian programming expenditures goes to original programming? If you don't, that's okay. I am curious. We were hearing some big figures yesterday, 99 per cent to original programming, so I was just curious to know if you knew what percentage of your Canadian programming expenditures went to original programming.

20855 MR. STERLOFF: I would have to break that out and report it back to you separately. We certainly, of course, took a look at the break-out between independent and in-house, but we didn't -- at least in front of me today I don't have a break-out of the next level.

20856 COMMISSIONER WILSON: For Festival, I just want to go through the numbers again, $25 million for total Canadian programming expenditures.

20857 MS LEVY: That's correct.

20858 COMMISSIONER WILSON: $14 million to the acquisition of independent productions, Canadian productions?

20859 MS LEVY: That's correct.

20860 COMMISSIONER WILSON: $5 million for a priority programming fund, and that $5 million would go to independent producers?

20861 MS LEVY: Exactly.

20862 COMMISSIONER WILSON: The $5.1 million, other Canadian production, including talent fees to artists working on in-house production. Is that in-house or independent?

20863 MS LEVY: It's a combination of the two and Wayne has some better information on that.

20864 MR. STERLOFF: We are talking about Festival specifically at this point?


20866 MR. STERLOFF: By and large that figure reflects the cost required to produce all of the interstitial programming that relates to the promotion of film festivals and new Canadian releases, for example.

20867 As you may recall from the application, Festival has committed to promote all of the film festivals across Canada. The way we intend to do that is by using in-house resources and freelance contracts, obviously, from across the country to assemble those programs and run them daily.

20868 COMMISSIONER WILSON: Do you have any idea what proportion of that $5.1 million would be going to unaffiliated parties or independent parties?

20869 MR. STERLOFF: No, I don't have an exact figure with me, but when we looked at the total cost to produce those, one advantage we have, of course, is that we have digital production facilities available to us and Festival will not be charged any cost. This is a part of the relationship between the conventional stations that we currently run and the new service.

20870 COMMISSIONER WILSON: The $700,000 script and concept development, the notation with respect to this was that Festival will commit a portion of its development fund to independent producers working on leading edge interactive films. I am just wondering what proportion?

20871 MS LEVY: That's going to be a matter of what the interest is and how it grows over time. We can look at the world as it is now, but in seven years we may find that there is either less or more. So rather than boxing ourselves in with really fixed percentages, we would like to make it an open kind of arrangement.

20872 One of the advantages that we have is on the production side of licensing some of this material and what we are finding is that people who want to produce material in the digital sphere are having a very hard time without broadcast licences in acquiring other funds.

20873 So we have the advantage I think of offering them assistance in both areas.

20874 COMMISSIONER WILSON: Okay. And that $700,000 would be administered similarly to the $800,000 for Connect?

20875 MS LEVY: That's right. The advantage that we have is that when we have designed other funds we have heard from the community that, for instance, in some cases they would like to have us consider creators at the concept stage coming to us directly even before they have producers and so forth on board. We are prepared to look at the whole gamut of what really works and how this money can really be used to the very best advantage to really create some really interesting product.

20876 COMMISSIONER WILSON: Okay. Number of original hours, I guess year one, for Festival.

20877 MR. STERLOFF: Just 70 hours.


20879 MR. STERLOFF: Seventy hours.

20880 COMMISSIONER WILSON: Do you actually have the figures for over the life of the licence, how many original hours you are projecting to do each year? I am not asking you to tell me what they are right now, but do you have those?

20881 MR. STERLOFF: I don't, but we can certainly get them for you.


20883 MR. CRAIG: Commissioner Wilson, can we just ask a question for clarification on the 70 hours number that Wayne just gave you. Is that on in-house production?

20884 COMMISSIONER WILSON: Well, no. It should be your total number of original, first-run hours on the channel.

20885 MR. CRAIG: Okay.

20886 THE CHAIRPERSON: As in radio, the question that we have asked everyone which I wrote down to ask it in the same way, which would be: Provide the number of hours of original first window Canadian programs, excluding repeats, each of your Category 1 services will provide each year and indicate where in your application your response is substantiated.

20887 MR. CRAIG: We would be happy to provide that.

20888 THE CHAIRPERSON: We don't want great big surprises.

20889 MR. CRAIG: Right.

20890 THE CHAIRPERSON: So we were requesting applicants to bring the response to this in Phase II, so you will have time. Maybe it's something that is not done yet in each of your applications.

20891 MR. CRAIG: Thank you.

20892 COMMISSIONER WILSON: So did that help, that question that the Chair explained to you, clarify it?

20893 MR. CRAIG: Yes. Thank you very much.

20894 COMMISSIONER WILSON: And is it still 70 or do you want to --

20895 MR. CRAIG: I think we will provide that information at Phase II for all of the applications. We can do it on an annual basis for the seven years for the three applications.

20896 COMMISSIONER WILSON: That is fine.

20897 MR. CRAIG: Thank you very much.

20898 COMMISSIONER WILSON: For The MET, $19.6 million total Canadian programming expenditures.

20899 MS LEVY: Yes.

20900 COMMISSIONER WILSON: And $1.26 million to the creation of Canadian music videos?

20901 MS LEVY: That's correct.

20902 COMMISSIONER WILSON: $660,000 to the production of live concerts?

20903 MS LEVY: That's right.

20904 COMMISSIONER WILSON: The production of live concerts, would that be -- the $1.26 million, is that to independent producers?

20905 MS LEVY: Yes, it is.


20907 MS LEVY: Absolutely.

20908 COMMISSIONER WILSON: Okay. And the $660,000?

20909 MS LEVY: Yes.

20910 COMMISSIONER WILSON: Okay. And the $600,000 on the documentaries?

20911 MS LEVY: Yes.

20912 COMMISSIONER WILSON: That's independent as well?

20913 MS LEVY: Very.

20914 COMMISSIONER WILSON: The $280,000 script and concept development?

20915 MS LEVY: Yes. That is script and content development and again a portion for multimedia development.

20916 COMMISSIONER WILSON: Okay. And again you are not committing yourself to any percentages to independent producers because you would like the flexibility?

20917 MS LEVY: Yes, thank you.


20919 Then the rest of your Canadian programming expenditures, if you add up these three elements for independent production they come to about $2.5 million over seven years. So then the rest of your Canadian program expenditures would be for programming already in existence or in-house?

20920 MS LEVY: Wayne?

20921 MR. THORGEIRSON: Commissioner Wilson, if you will, a good portion of that would be taken up with license fees that would be paid to the Audio Visual Licensing Association for the use of the videos.


20923 MR. THORGEIRSON: The rest, the balance would be for in-house production, original production.

20924 COMMISSIONER WILSON: Do you know what that split would be?

20925 MR. THORGEIRSON: The AVLA license fees would come to approximately 44.8 to $5 million over the course of the licence term.

20926 COMMISSIONER WILSON: Okay. Thank you.

20927 For described video, you will have the technical capability to provide described video in your services?

20928 MR. CRAIG: Yes.

20929 COMMISSIONER WILSON: In your applications you say that you:

"...are committed to working with the National Broadcast Reading Service and others to seek the development of industry-wide solutions to the concerns of blind or vision-restricted Canadians." (As read)

20930 I'm just wondering, have you actually had discussions with the NBRS and --

20931 MR. THORGEIRSON: No we have not at this time. In discussing this earlier, it probably is going to take the form of an industry-wide type of scenario.

20932 Paul East could perhaps just talk briefly about our facilities in particular and the box which will continue to be the problem in terms of development.

20933 MR. EAST: Our existing facilities, being entirely digital, are already equipped to handle not only stereo but surround sound in a number of additional audio tracks, so it is certainly not a problem at our production facilities.

20934 In terms of BDUs, I suspect the only question really is the simple question: Where does the third track of audio get played from in the case of stereo program audio and then the descriptive audio. So there is a solution there somewhere, it just needs to be standardized.


20936 I want to turn now to the viability of your business plans. I'm glad to see that you have some of your consultants here with you.

20937 Before we start I just want to clarify something. On your seating plan under Debra McLaughlin's name you had "Strategic Inc.", which is the name of the company that did some of your research for you, but then in your opening remarks you introduced her as the VP and Director of Research for Craig Airtime Sales.

20938 Are Strategic Inc. and Craig Airtime Sales the same company?

20939 MR. CRAIG: No.

20940 COMMISSIONER WILSON: Oh, so was that a mistake?

20941 MS McLAUGHLIN: I think I could best explain that, Commissioner.

20942 COMMISSIONER WILSON: Was that a mistake?

20943 MS McLAUGHLIN: Well, no, and you will see me here again later maybe with a different title.

20944 In fact, I am one of those multitasking individuals. I own Strategic Inc., I am Vice-President of Craig Airtime Sales, Director of Research. So I hope that clears it up.

20945 COMMISSIONER WILSON: I just wanted to sort of clarify what the relationship was because I was confused.

20946 MS McLAUGHLIN: You're not alone.

20947 COMMISSIONER WILSON: Okay. Just so I can figure out who is doing the research and who is providing the information.

20948 Anyway, we will go through this.

20949 I have to tell you that I did a fair amount of sort of comparison work between your applications and other applications we have received that are either directly competitive or similar in genre, and your business plans in many ways were by far the most optimistic business plans that I looked at.

20950 My first question was: Does he know something I don't about what is going to happen in the digital world?

20951 I started going through. I mean, your wholesale rates are generally lower; you have some of the most optimistic penetration levels, although there are a couple of other applicants who are sort of in the same ballpark; and you have the highest advertising revenue projections by a wide margin for Connect and The MET. While the advertising revenue projections for Festival are more in line with some of the other popular genres, they are the highest of all of the independent film channels -- applications that have been filed.

20952 So when I started looking at all of these ways in which your projections were kind of out of line with the other applicants and more optimistic, I guess the whole issue of whether or not the business plans are viable, how sensitive they are to fluctuations in any of those numbers came to my mind. So I wanted to spend a few minutes just looking at that.

20953 I guess when I read through -- I will give you an example. When I read through the analysis of the advertising potential for Connect TV I didn't find it particularly compelling in terms of supporting the level of advertising revenues that you are projecting for this service -- which are huge, $33 million over the course of the license term. They have to be the highest. They are actually double most of the others. I mean, some people are projecting only $2.5 million over the life of the license, and some of these are -- like independent Indie TV, which is a CHUM application, $2.5 million in advertising; the Canadian Documentary Channel, $2.3 million over the life of the license. They have higher subscriber revenues but the advertising is much lower.

20954 Then when I looked through this report I didn't see any sort of assumptions about what had been told to the media buyers when you talked to them. Did they understand what a limited universe this is?

20955 Why are they suddenly -- I take the point that they can't find the properties that they want to advertise on in the system that exists now, but with such a small subscriber potential for the foreseeable future in digital, why are they going to flock to connect in the huge numbers that you are projecting compared to everybody else?

20956 MR. CRAIG: Well, maybe I can start by telling you how we went about building the business plan.

20957 You know, as we said in our oral presentation, we have had a lot of experience doing start-ups over the years and we have done a lot of --

20958 COMMISSIONER WILSON: Actually, I underlined that and put a little Post-it note beside it, because I take your point and I know your reputation as a broadcaster, but you didn't face the same technological barrier that you face here, which is getting people to buy the box first, $12 just for the box possibly.

20959 MR. CRAIG: M'hm.

20960 COMMISSIONER WILSON: So to me that is different than -- and I'm sorry for interrupting you --

20961 MR. CRAIG: That's fine.

20962 COMMISSIONER WILSON:  -- but it's different than conventional television --

20963 MR. CRAIG: I understand.

20964 COMMISSIONER WILSON:  -- or radio where everybody -- you know, TV is ubiquitous and the radios are ubiquitous so people don't have to go out and invest that $12 a month.

20965 MR. SUART: Madam Commissioner, if I could just interrupt for a second.

20966 In terms of the $12 a box, that only really applies, I think, to the cable industry.

20967 COMMISSIONER WILSON: It doesn't?

20968 MR. SUART: It apples to the cable industry only in the sense that the DTH services and the MDS services --

20969 COMMISSIONER WILSON: Yes, I know that.

20970 MR. SUART:  -- they are basically just add-ons and I think cable only represents a fraction of the digital universe in the first couple of years.

20971 COMMISSIONER WILSON: Yes, I do understand that.

20972 MR. CRAIG: I guess my next point is that I think what we should do is walk you through how we arrived at the numbers.


20974 MR. CRAIG: I think we will ask Glenn to come back and talk about the set-top universe and how he arrived at his numbers.

20975 COMMISSIONER WILSON: Yes, I have some questions about that as well.

20976 MR. CRAIG: Sure. The first thing I think we need to do is talk about how we arrived at the demand.

20977 I would ask Debra to start off and then ask Cam Cowie to get involved in terms of how we arrived at the revenue projections.


20979 MS McLAUGHLIN: First of all, I would like to start with your summary of the report in that it was not a compelling argument. We have to put this in context for you in terms of what is happening in the buying community and particularly at this period of time.

20980 When the CRTC calls for these types of licence hearings, there are probably about ten of me out not only asking these questions, but there are people following me in looking for endorsements from advertisers and particularly buying shops.

20981 It has become a bit problematic, because once the endorsement is given, then there is association with their clients; and if for some reason the client is not happy with that association, or they feel it obligates them to actual financial expenditures in the future, they get uncomfortable.

20982 So the agencies by and large are hesitant to be very enthusiastic.

20983 There is a concern about success advertising revenue potential for the digital tier. But that is not the case in this particular instance.

20984 If it seems that the report is muted, it is because, as a researcher, I have to report directly what they say. They were presented the digital environment; they are fully aware of it. As I say, I am not the only one in there talking to them about it. They are aware that there is a limited potential.

20985 COMMISSIONER WILSON: I didn't mean to denigrate your work when I said that I didn't find it a compelling argument for the level of advertising that you were projecting.

20986 I didn't mean the quality was not good; I just meant that I could not make that leap.

20987 MS McLAUGHLIN: I understand that. I am not either to sell to you or to the agencies or the advertisers that I am speaking with, this concept. I am to present it in the most neutral manner.

20988 I think you are seeing research language as opposed to sales language in this.

20989 In actual fact, this market is an untapped market. It has been identified in the U.S. as being one of the key influential markets that remains out there to get into.

20990 It is estimated that $150 billion is spent by teens. But what is most important to understand is that they are credited with influencing $500 billion worth of expenditures within the household.

20991 So advertisers that don't get in and get to this market are really missing a very important part of that decision-making process in any household. Nike, Tommy Hilfiger, Disney, the list goes on in terms of who is now shifting their advertising younger and in fact developing different streams of advertising. They are not abandoning some of their traditional forms.

20992 Volkswagen is now trying to catch some of that teen because in less than five years they will be either drivers or purchasing their first car. So it has become incredibly important.

20993 In putting together those advertising estimates, I advised that a more optimistic view than what would be found in the report was necessary, because it is something that is being developed now.

20994 StarCom, which is one of the largest advertising agencies in Canada, is in their third tier of investigating across Canada, amongst 12-to-17-year-olds, their actual involvement in purchase decisions. What they are discovering, as we speak, will form the basis of their advertising plans going forward.

20995 At the time we conducted these surveys, I think you would find a lot of advertisers just waking up to that or their agencies just getting involved in how to develop that market.

20996 As a result, what we are looking at is what we know to be true, what we found from the U.S. experience, and extrapolating it to what will eventually happen in Canada in the not very distant future.

20997 COMMISSIONER WILSON: Tell me, then: What you need to do is fill in the gap for me between what you have just said about this being the largest untapped market and $33 million in advertising revenues over seven years.

20998 How do you get there?

20999 MR. COWIE: Maybe it would be helpful if we took you through how we arrived at the numbers. And before we do the boring nuts and bolts, let me take you back ten years we have been in the kid business.

21000 At the particular time we started in the kids' business, we launched the first Kids' Club in Canada, and so on. It used to be that most of the money spent on children was spent in the conventional television arena. That has pretty much gone completely to the specialty market.

21001 What has happened is that, as that has moved, the teen component has been left out. What we find with the advertisers is that they very much want to buy teens. Pizza Pockets wants access to teens; The Gap wants access to teens. But the only place they can find them in conventional is on traditional stations that tend to skew younger, like the A-Channel stations.

21002 So we are still in touch with the teen market.

21003 The problem is that when they are buying a program that is an 18-to-34 skew and selling at an 18-to-34 audience at cost of thousands, and so on, the teen market is very expensive. So it is not being attributed to television. They are going to other areas.

21004 One of our largest teen clients we have been instrumental in -- and it is something that John Donnelly has worked on -- is the DV8 Festival. We were able to broker a teen product with a teen venue.

21005 They put incredible amounts of money not only into the festival but into television support. So there was an opportunity to actually build teen revenue that was not being spent. It was tooled for the children's market, and it was inefficient and too expensive to put it into the young adult market.

21006 So we truly believe that there is a great deal of pent-up revenue that would be available specifically for a teen genre. That is one of the reasons why we concentrated on that particular genre for an application.

21007 To give you an idea of how we did it -- because when you get to the bottom component of it, it does not look so large. We also read the applications of the other and were pretty convinced that this would not be a one-word answer here: revenue projections are higher, yes. We thought there would be some explanation required.

21008 I think we were one of the few that actually did -- what we did is we took -- and I am going to use Connect as an example.

21009 We took the digital universe projection from PricewaterhouseCoopers, and we in fact downgraded the projection 10 per cent. We looked at the research that Debra did, and we took a look at 90 per cent acceptance, and so on.

21010 I have teenagers. I understand that not all teenagers get what all teenagers want, so we --

21011 COMMISSIONER WILSON: What do you mean you downgraded it by 10 per cent?

21012 MR. COWIE: The PWC penetration rate was 60 per cent. We used in our revenue calculations for Connect 54 per cent. We took into it a consideration of a bumper for households with teens.

21013 COMMISSIONER WILSON: Well, 54 per cent to start.

21014 MR. COWIE: Correct. What I am saying is that we took the consultant number and we backed it down. Then I think we are one of the few that tried to then put a demographic picture of the digital universe.

21015 So we took the Canadian averages and applied them to the households or the digital households. And then using some BBM and some StatsCan numbers, we made a projection of how many teens, how many young adults 18-to-24 would be available for this service.

21016 So what we are trying to do is like we do in conventional: You have to understand how many people are available as the base line of how many people you think you will be able to have in a quarter-hour audience.

21017 So we did that, and it is basically just shy of 400,000 potential 12-to-24-year-olds.

21018 From there, what we did is we took a look at a quarter-hour average. Again we looked at the focus research from Pollara, and so on. The Connect averages -- we are talking about 720 teen to young adults as a quarter-hour average. That is the low. Seven hundred and twenty across the country nationally out of a potential base of 400,000 teens.

21019 The high end of that was 2,380 teens to young adults, again against the base of 400,000. That is two-tenths of 1 per cent to six-tenths of 1 per cent, not even coming close to calculating even a full percentage rating point.

21020 When you do it that way, all of a sudden it looks pretty small. We are talking to 720 people.

21021 That is how we then produced the revenue projection. We took a look at that 720, a cost per thousand related to that 720, a sell-out factor related to that -- I think for Connect we used 55 per cent sell-out. And I should mention that when we used the 55 per cent we took a look at a 15-hour day for the development of revenue projections, not the full 24-hour day. We wanted to really take a look at where the potential revenue was. We assumed that for Connect that would be between 9:00 a.m. and 12:00 a.m., so a 15-hour window.

21022 When you put all those numbers together it comes to -- I think it was $1.8 million in the first year. But we are talking about 720 people at a time. We believe that we can reach those 720 people. We also believe that there is advertising support to go after it.

21023 We heard a lot of the other broadcasters saying: Until you hit the three million plateau, and it's not linear, it's this and it's that. The bottom line is, we have been dealing in niche marketing right from the very beginning. We have always had to be more creative and more aggressive than the traditional pre-post and simulcast broadcaster. We are used to this type of approach.

21024 We believe the number is a reasonable number. I hope you can see that, when we start to look at 720 teens at a time, it is not an unreasonable thing to say with a Connect application.

21025 There were some figures thrown around about the new digital that were already in excess of half a million dollars in revenue in the first year, yet most of their applications were under 200,000 for the first year projections.

21026 What is right and what is wrong? Are they optimistic? Yes, they probably are. Are they achievable? We believe they are and we would love the opportunity to go and get those dollars.

21027 COMMISSIONER WILSON: The only other service that I looked at that was in that range was women's sports. Everybody talks about how sports and movies are the two big drivers, so --

21028 MR. CRAIG: Commissioner Wilson, that is --

21029 COMMISSIONER WILSON: Not the teens. I am not saying that the teens aren't an attractive demographic and that advertisers aren't just dying to get at them, but --

21030 MR. CRAIG: When we built these business plans we obviously went through some methodology to come up with these numbers. We didn't pull them out of the sky. As Cam said, it is a very thorough analysis that we have done. And we think we have some experience. We own a national rep shop. We have offices across Canada. We are in the face of every advertising agency in Canada virtually every day. When you look at the revenue per subscriber and you look at a comparable analog service, and you look at the revenue they generate per sub -- and we looked at YTV. At the end of the day, when you view the numbers and you take a look at YTV, YTV today is doing $4.79 in revenue per subscriber -- from advertising revenue. Connect doesn't cross that line after year 7. So we don't think that the advertising revenue --

21031 You aggregate it and say it is $33 million. The first year revenue is $1.8 million. To us, it doesn't seem unreasonable. We believe that we have taken a very sound approach. As Cam and Debra have both alluded to, this is a very elusive demo to try to target. We are taking the best of two technologies. We are taking the interactive technology and television and blending them together. We think it is an advertiser's dream to target that demo.

21032 Do we think they are achievable? Absolutely.

21033 And maybe we do know something that the other applicants don't know.

21034 COMMISSIONER WILSON: That is entirely possible, Mr. Craig.

21035 MR. CRAIG: It's entirely possible.

21036 COMMISSIONER WILSON: Thank you for the explanation. It sometimes helps to talk it through. Sometimes you don't get the same feel for the kind of process that you went through when you just read the application.

21037 But I do want to probe a little further on the PricewaterhouseCoopers' take-up rates, because when I read through that there were a number of different assumptions that you presented in order to come up with the target penetration rates that have been used.

21038 Again, I am using the Connect application as the example.

21039 You say in your report that if the service is added to existing theme packages it could achieve penetration levels of 75 per cent to 85 per cent, based on estimated penetration of the average theme packages currently offered by DTH or MDS. How did you estimate the average take-up rates of those packages?

21040 MR. SUART: We did it in a couple of ways. First, we had access to a BDU, obviously, and we knew what their penetration levels were for their packages -- the ones in Manitoba. This was a Craig SkyCable system and we knew what their penetration was and their packages.

21041 We also, through a variety of other methods, found out, looking at the subscriber levels of other services, what the penetration levels were estimated at on the DTH services.

21042 COMMISSIONER WILSON: I am having a little trouble hearing you, Mr. Suart.

21043 MR. SUART: Basically, just to summarize, we had access to the SkyCable MDS numbers. We knew how that worked and how they packaged, and their penetration levels were in that range.

21044 COMMISSIONER WILSON: For the theme packages.

21045 MR. SUART: For the theme packages, that's correct.

21046 COMMISSIONER WILSON: And for the large packages, in the range of 50 per cent?

21047 MR. SUART: No. Actually, the large package, the overall launching package -- the 50 per cent level comes from the initial level that was the package of analog services that was launched last year; the big 17-channel package; the MeTV style package. They achieved 50 per cent penetration on analog to the entire universe within the first year.

21048 The reason we used 50 per cent here as the lower end was to say: This is the digital universe. These are people who have set-top boxes. They want to buy extra services.

21049 If you are going to add all of these new digital services at this time, in one big package, you might be able to achieve, certainly, at least 50 per cent penetration, if a BDU offered it in this way, because you are talking to people who want to buy television services.

21050 So that is how we set the lower bound of 50 per cent.

21051 COMMISSIONER WILSON: Were you here when Mr. Gourd from BCE appeared during the Travel TV --

21052 MR. SUART: I was not.

21053 COMMISSIONER WILSON: He said that over 70 per cent of their subscribers take one of the two large packages, and that the small theme packages in fact don't sell as well. I mean, they have those options there.

21054 MR. SUART: That's right. But, in total, a service that is part of the large package still gets that 70 per cent. The other 30 per cent who don't buy that package buy the theme package.

21055 If you are a music channel, for example -- and I am guessing here -- on DTH right now, you might get 70 per cent from that big package, and then you might be purchased by 5 per cent on the theme packs, so your total is about 75 per cent in that case. That would be the calculation.

21056 COMMISSIONER WILSON: So for DTH you would be assuming that The MET, for example, would get added to the theme package that included MuchMusic and MuchMoreMusic --

21057 MR. SUART: Each BDU will do something differently, but, yes, that is very possible. So if it gets added to that package, because it would be an easier way for DTH to do it, it would suddenly get 75 per cent penetration.

21058 COMMISSIONER WILSON: In the genres of channels for which you have filed applications, the only other applicant who has suggested penetration levels equivalent to yours is Alliance Atlantis for the Independent Film and Documentary Channel. In fact, the penetration levels are identical to the ones that you have suggested: 60 per cent in the first year and 66 per cent by year 7. But most of the rest of them, they may ultimately end up around 60 per cent, but they start much lower.

21059 I guess I am just wondering why you wouldn't be a little more conservative for the initial part of the licence.

21060 MR. CRAIG: Glenn, can I just interject here?

21061 I think we talk about penetration levels and I guess -- in percentages -- and that's, I guess, dependent on the number of the boxes in the universe that you start with.

21062 So maybe, Glenn, you might elaborate on, you know, a percentage of what, in terms of how many digital subscribers are we going to have in the first year, as an example.

21063 COMMISSIONER WILSON: That's fine. I mean I have got those numbers here in front of me and, yes, we are talking percentages, but -- because I think that the percentages are the only way you can compare, you know, number for number, with the other services. I think, using the percentage number gives us an idea.

21064 MR. CRAIG: Well, it depends on what assumption you start with, in terms of where you see how big is the digital universe. And I think that the numbers that we are starting with are low, in comparison to what other applicants have told you, or they are comparable.

21065 I mean, you know, we are using a percentage here, but in terms of -- and Glenn may want to elaborate on this -- but in terms of --

21066 COMMISSIONER WILSON: The raw number of the universe.

21067 MR. CRAIG:  -- the raw number, Day One, what's that?


21069 MR. SUART: Yes, in terms of the universe, that, of course, was the big question, right at the beginning, and we spent a lot of time, over the last two or three years, trying to develop this. We did these numbers last year, actually, for the CAB, originally, for the framework here, and we started off by talking to the BDUs and trying to get a sense of what these numbers were going to be. But I think our -- the way we ended up with the projects were quite reasonable, again. We took what the CCTA gave us, earlier this year, and the DTH services, made some analysis and it came up with a range of about 1.7 to 3 million which, I think, is quite good, and I think the CCTA has sort of endorsed that.

21070 Other services, I think, had some higher digital household penetrations by Year 7.

21071 So, if, let's say, for example, they were, for the sake of argument, five million -- I don't know any numbers -- but if they had five million and they had a penetration level of 60 per cent, at that point, that's three million subs. That's, you know, equivalent to -- or more than what we are projecting, I think, in Connect.

21072 So, bottom line is, I think, our overall digital universe projections are reasonable and, I think, are fine. And then we have used a reasonable amount of a take-up penetration based on a logical argument about how these different BDUs will take the services.

21073 MR. CRAIG: Commissioner Wilson, we have got some hard numbers here that we can give you that sort of put our assumption hard number first-year start-up versus some of the other applicants, and that might be helpful.


21075 MS STRAIN: Commissioner Wilson, I tried to do, probably, a similar exercise that you have been doing over the last several months.

21076 COMMISSIONER WILSON: You should be a commissioner.

21077 MS STRAIN: I don't think I would be up to that challenge.

21078 THE CHAIRPERSON: Very good answer.

--- Laughter / Rires

21079 MS STRAIN: I hope so.

21080 On Cinefest, for example, I looked at the total numbers of -- I mean after you take your universe and then you take a percentage -- and what they were projecting was they would have 595,000 subscribers in Year 1, rising to 1.9 million in Year 7. Alliance Atlantis started out at about 1.5 million, going up to 3.3. And, in our application, we started out at about 1 million subscribers, going up to 1.9. So, I think we are right in the ball park. It depends on what universe you start out with, you know. We may have started out with a lower universe but a higher penetration rate.

21081 COMMISSIONER WILSON: Right. Okay. That's helpful.

21082 That concludes the general questions that I have.

21083 Madam Chair, do you want to go to Counsel? Or do you have a question yourself?

21084 THE CHAIRPERSON: I have the understanding perhaps we were -- since there's only three applications -- we were touching them all, but I do have a question on Connect.

21085 COMMISSIONER WILSON: Oh, I haven't finished all my questions. I'm just going to -- I'm sorry. I just finished the general questions.

21086 THE CHAIRPERSON: Okay. Yes, I have a couple of things I wanted to take up with Miss Noto, so that you are not too worried until you get to your calculator, about the difference between -- oh, you have one. I should have brought mine. I usually do, just to intimidate a bit.

--- Laughter / Rires

21087 THE CHAIRPERSON: But I thought that parties appearing before us these two weeks were just too sophisticated to be intimidated by us, so I left it at home.

21088 I only do that with people who appear before us for the first time, who have no experience.

--- Laughter / Rires

21089 THE CHAIRPERSON: You probably have done the same calculation, but I took the first-year revenues of Connect and of Festival and the difference between -- suppose you were to achieve those revenues, in the first year -- the difference between 40 per cent and 43 per cent expenditures is only about $130,000. So, perhaps you will confirm that. I wouldn't want to look as though we are pressing you to comply at, you know, great costs. It's just administrative and, I guess, regulatory equity of using the same method across the board.

21090 MS NOTO: Well, I get 130,000 at the 3 per cent variance --

21091 THE CHAIRPERSON: Yes. For Connect.

21092 MS NOTO:  -- so I'm in the same ball park.

21093 THE CHAIRPERSON: No, the Festival, yes.

21094 MS NOTO: I'm at Connect, right now.

21095 THE CHAIRPERSON: Yes; and for Festival, my calculation gives me about 128,000.

21096 The other thing I wanted to clarify is, when you were asked the question about how to define an "independent producer", I understood you to say it was the 30 per cent equity position.

21097 MS NOTO: You are not asking me that any more, are you?

21098 THE CHAIRPERSON: No; whoever wants to respond.

21099 The response was about 30 per cent equity position.

21100 In the case of Festival, it wasn't clear to me whether that meant that Lions Gate escaped the arm's length and became non-arm's length because it has only a below-20-per-cent equity position, in the channel itself, in the service itself, or whether you would see an actual investor in the licence service differently from production company, which is completely unrelated to the service itself below that level. Now, for example, if you had 29.9 per cent in Atlantis Alliance, I guess you would be happy with that?

--- Laughter / Rires

21101 MR. CRAIG: Sounds okay.

21102 THE CHAIRPERSON: In your calculation, that would be arm's length. Should we say Lions Gate in the same manner, in light of the fact that it is an actual investor in Festival?

21103 MR. CRAIG: Well, I think we view them -- I think they are two different questions.

21104 I mean one is define an "independent producer", and I think we have done that; so we are saying anything north of 30 per cent is -- you know, they are not independent any more.

21105 In terms of the Lions Gate involvement in Festival, that's, I think, a whole different animal, if you will, and we have put in place safeguards --

21106 THE CHAIRPERSON: With regard to the fund, I understood.

21107 MR. CRAIG: With regard to the fund.

21108 THE CHAIRPERSON: What about the rest of the investment in Canadian programming? I understood your position that it would not have access to the fund. But could you expend the money intended for independent producers for acquisitions and licensing, et cetera, with Lions Gate only, all the rest of it?

21109 MR. LINK: Madam Chair, we do believe that, while we are suppliers to Festival, we are not going to be exceeding a number that would be very reasonable. There are 11 independent companies. Our library being as large it is -- it's not one of the largest in the country -- so I do not believe that we will occupy any position that would be in any way stifling competition or denying presence to others. But we would be able to, probably, live with some kind of an upward number if you so choose to --

21110 THE CHAIRPERSON: An upward number -- a number specific to Lions Gate. Because your library may increase if Mr. Craig gets three licences.

--- Laughter / Rires

21111 MR. LINK: Well, it's still very expensive to produce feature films, you know.

21112 So I would say that we certainly would be below the 20 per cent of Canadian, but it's just --

21113 THE CHAIRPERSON: Of the sums that are expended unrelated to the fund, but more to the imposition of product.

21114 MR. LINK: And as we said, we don't aspire to any production funding.

21115 THE CHAIRPERSON: Which is a different sum.

21116 MR. LINK: Yes.

21117 MR. CRAIG: We have talked about this amongst ourselves as partners and recognize that you may want a limit.

21118 THE CHAIRPERSON: And so this would be a limit that both of you could live with?

21119 MR. CRAIG: Yes. We have discussed it and we are prepared to accept that 20 per cent number.

21120 THE CHAIRPERSON: I have a question for later on when Commissioner Wilson I believe has questions on specific applications, so I have another question I wanted to ask you.

21121 I also want to know whether you are still feeling comfortable or whether you need a break? We are willing to continue to the end, but I certainly want you to have the opportunity if you need a break.

21122 MR. CRAIG: Our preference is to keep going.

21123 THE CHAIRPERSON: Madame Bertrand.

21124 CHAIRPERSON OF THE COMMISSION: Just to pursue on Commissioner Wilson's questioning. You know, there has been a lot of discussion in terms of the synergies that applicants can bring to the table versus the synergies maybe, but kind of the place for newcomers.

21125 You are in a very unique position or -- well, no, not unique because there are others, but being a BDU and a conventional broadcaster you don't have specialty channels in the analog world looking for digital licences, yet you have already invested in the Internet business.

21126 Can you tell us, in your view if you were to sit at our place after the public hearing, how you would see the benefit of the synergies versus -- and to serve the diversity, the necessity, as Commissioner Wilson was saying, of the diversity of ownership and the diversity of programming?

21127 Can you expand from one, I know that she's touched upon it, but I think it will be certainly core to our discussion. Certainly the other criteria are there, but somehow the landscape is there as well. So I would like to hear your views and why you feel?

21128 MR. CRAIG: Sure. We would be happy to share our views with you on this. Obviously, we have a different view than some.

21129 I think, as I alluded to before, I think this is a great opportunity to get some new players into this game. You know, as long as that applicant has the wherewithal to make the service actually happen and, you know, as the old saying goes, execution is everything. In other words, if you can package it up and you feel comfortable, the applicant can deliver on their promises and on their plans, I think that this represents an opportunity to get some new players into the game, so that the door doesn't close.

21130 There are a lot of first-time applicants that are here in front of the Commission looking for new services. I think that diversity of ownership does bring diversity to the screen. I firmly believe that. It's just not another outlet out of a server on a bundle of services that they already own and have packaged and they are successful marketing.

21131 I think because it's a relatively small tier initially and it is breaking new ground, it's maybe for a different type of company. It's maybe for a type of company that is willing to be very entrepreneurial and work through all these challenges and hurdles that they are going to have to get through.

21132 So I think this represents another pioneering level for some of these new players to get into the game.

21133 CHAIRPERSON OF THE COMMISSION: It's helpful. Thank you.

21134 I have been obsessed with the idea of overlapping. I have been asking that question.

21135 If you were to be granted the three licences do you see an amount of programming that would be overlapping with your existing stations and do you see a limit to it, or even with your MMDS licence to SkyCable is there content that you would use there?

21136 What would be the synergies between your forms of expression on different platforms?

21137 MR. CRAIG: I think that there is an opportunity and I think one of the examples that we have used is our Internet strategy, where we have different companies with different needs.

21138 What we have opted to do is start Craig New Media to satisfy all of those different companies. So that's been our strategy there and I think while there are sort of operational synergies in our group of companies, we have been very careful to design these services that are complimentary to our existing service, but there is very little overlap in terms of programming that we would share, but they are complementary to our overall company focus.

21139 CHAIRPERSON OF THE COMMISSION: So it's more kind of at a corporate level in terms of strategy than really what will interface precisely with the viewer or the consumer?

21140 MR. CRAIG: Right. I think that keeping the services as distinct as you can should be -- is one of the most important criteria in this process.

21141 I think that operationally and corporate it makes sense to bundle more services and have another platform to operate on, but we have designed these services to be very distinct and stand on their own as services.

21142 CHAIRPERSON OF THE COMMISSION: I will leave those kind of specifications to the discussion with Commissioner Wilson. I don't want to get into that next round. Thank you. That's helpful.

21143 THE CHAIRPERSON: Counsel.

21144 MR. McCALLUM: Not at this time. Thank you.

21145 THE CHAIRPERSON: Commissioner Wilson.


21147 I want to turn now to Connect. As I explained before, I probably won't have that many questions on each of the individual applications, just questions that we need in order to clarify for the record some of the aspects of your applications.

21148 This is a service that is defined by the target audience and you have described that as -- you have described the service as a channel devoted almost exclusively to the interests of teens. Your demand, research and focus groups and everything else focused on teens and households with teens and this large under-served market.

21149 But your target audience goes up to age 24 and I am just wondering if you can sort of explain why you don't have a slightly narrower since the teen audience seems to be what you are really aiming for and based on what we saw in the video I am just wondering why it goes to 24?

21150 MR. CRAIG: I will pass this to Debra for a comment. I would also like Cam to comment on this as well.

21151 MS McLAUGHLIN: There is actually two parts to the demand study that we have included. The original -- or the demand study specifically on Connect was targeted to a primary demographic of 12 to 17. Our secondary demographic is 18 to 24.

21152 The second study that I referred to was actually commissioned to test another idea which we obviously didn't bring forward in this environment.

21153 But one of the things we were able to cull from that study was the similarities and interests between these groups. They have similar interests in program formats. They have similar experiences in terms of using and watching television. They have similar life experiences.

21154 As you can appreciate, the difference between a 17-year old and an 18-year old can be marginal in some cases and can be wide. But in terms of programming this service we recognize that people weren't suddenly going to spend five years with the service and switch it off and that many of the habits that they had, including tuning habits, would continue on to their university years.

21155 MR. COWIE: From an advertising perspective there is also some overlap. Obviously, the highest concentration of the estimates that we used were the 12 to 17, but there are a number of products, Nike, Pizza Pockets, to name a few, Nintendo, that there's almost a blur between the primary and secondary market.

21156 As Debra mentioned, I mean this is an intuitive thing. Six year olds want to be more like 10 year olds, 10 years olds want to be more like 14 year olds and 14 -- I don't know where it ends, but I think its around 30 we stop wanting to be like the older people and more like the younger people.

21157 COMMISSIONER WILSON: The older people? I think you might want to rephrase that.

--- Laughter / Rires

21158 MR. COWIE: I don't know if there is --

21159 UNIDENTIFIED SPEAKER: Wiser people.

21160 MR. COWIE: The wiser people. Thank you.

21161 COMMISSIONER WILSON: That is a fine distinction.

21162 MR. COWIE: That is what we found in both targeting programming and targeting promotionally and targeting from an advertising perspective.

21163 MR. CRAIG: Commissioner Wilson, if I could just add one more point to that.

21164 I think that, as we indicated in the research too, the highest ranking U.S. services were TBS and Fox, and obviously Fox is an 18 to 34 target demo. That is how the advertisers buy them. But that is what the teens want to watch. They tend to -- because they are on the lower end of that demo, that is what teens aspire to be and so you sort of catch them by default.

21165 So I think that to bridge that, the whole teen gamut, you need to skew on the older side of that demo.

21166 COMMISSIONER WILSON: I wondered if it was that -- you know, when I was 18 I moved out of home. I have nieces who are 25 who are still living at home. I mean, the experience is very different these days than it used to be. When I was growing up you left home at 18.

21167 That is not the way it is now. So I wondered if there was some of that, sort of you are looking at the demographic in a slightly different way than we used to?

21168 But I'm sure you can appreciate what I'm driving at here when I'm talking about the nature of the service, and that is what we have been talking to all of the applicants about and that is in terms of fencing in your service as opposed to what is already in in terms of defining what is directly competitive in the system.

21169 So that is really the direction of my questions.

21170 I'm sure that from an advertising perspective the 18 to 24 demographic is a very appealing demographic and lots of money can be made there, but from a regulator's perspective it is how much overlap is there between your service and other services in the system that might offer similar programming and how do you define yourself.

21171 You have these two age groups, 12 to 17 and 18 to 24, and you can talk about how the younger ones aspire to be like the older ones but you are programming to two very different groups. Still at 25 years old my niece is not going to watch the same thing that a 12 year old is going to watch or a 14 year old is going to watch necessarily. So how do you program to those two demographics on the same channel?

21172 MR. CRAIG: Well, I think in a number of ways.

21173 Wayne may want to talk about this in terms of, first of all, the local shows that we have designed and how we approach that.

21174 Wayne, would you like to elaborate on that?

21175 MR. STERLOFF: The actual program schedule for Connect is made up of a number of components that pretty accurately reflect the findings of the focus groups that were conducted.

21176 When we looked at the so-called flagship program, the originating programming, these are highly interactive shows, they are hosted shows and they benefit from a fairly significant number of Web cams that we will be distributing free of charge across the system. I guess what we are discovering is that there is no strict limitation on the age group of those young people who are interested in that kind of interactive communication.

21177 I think also in the focus groups it was revealed that the subjects of interest for discussion in those particular types of programs was also broadly agreed amongst the focus group the kinds of things that they would like to talk about and get into with the host and with each other.

21178 COMMISSIONER WILSON: So when you developed your blocks did you decide that certain blocks would be for the older demographic and certain blocks would be for the younger demographic?

21179 MR. STERLOFF: Yes. I mean, to some degree we did, although that blurring did exist.

21180 But certainly when you look at the layout of our schedule, for example, we have a section called Retro Lounge which is a hosted strand of programs that you and I may have seen before -- I may have seen three or four times -- but it is new to the focus group. When we talked about these shows -- and just to run through a couple: Fantastic Voyage: The Series; Room 222, I mean there are a number of shows that --

21181 COMMISSIONER WILSON: Welcome Back Cotter.

21182 MR. STERLOFF: You know, there are a lot of great shows and on the Canadian side too, strangely enough. You know, there are titles that we are terribly familiar with, but for some of the younger people, Degrassi for example, Northwood, a vast number of episodes that they have never seen but it is of interest to them.

21183 So what we are doing is creating these strands of programming that are actually hosted.

21184 MR. CRAIG: I think, Commissioner Wilson, we have tried to daypart the programming as much as we can, taking into consideration the time zone limitations that we do have with the service.

21185 For instance, one of the cornerstone local shows "I Connect", which is the talk show Web component, and as we have described in the application I think that is a terrific forum to talk about some harder edged teen issues when required. We tried to move that sort of into as late a time period as we can in the schedule without making it inaccessible.

21186 So we have been very sensitive, I think, to recognizing that they are two very distinct groups. As we have described in the application and in the research, there is a primary target and a secondary target.

21187 COMMISSIONER WILSON: Let me tell you about the kind of sensitivity that regulator's like. They like percentages and limits, conditions of license. Those are the kinds of sensitivities that we are looking for --

21188 MR. CRAIG: We understand.


21190 MR. CRAIG: We understand.

21191 COMMISSIONER WILSON: So considering the fact that your programming comes from every programming category that there is, I guess what we are looking for -- I will give you an example, YTV, for example, has to dedicate a minimum of 30 per cent of the programming to children under the age of 5; 48 per cent to children and youth from 6 to 17; and 22 per cent to families as target audience.

21192 Did you look at those kinds of limits with respect to fencing in your genre?

21193 MR. CRAIG: I think if that was a concern we would certainly take a look at it. What we would like to do is have an opportunity to go back and discuss it and --

21194 COMMISSIONER WILSON: And come back to us.

21195 MR. CRAIG: And recognizing that you want to try to build some fences, as you said, we would be happy to try to come back to you with something.

21196 COMMISSIONER WILSON: Okay. I think that would be useful, because I think we would want to talk to you about --

21197 Another thing that you might do is look at the categories. For example, YTV can use all the categories, but they have limits on Categories 1, 2, 6, 7 and 8. WTN takes 90 per cent of its programming from 2, 5(b), 7, 8(a), 9 and 11. So even though they can use all the categories, they have, out of that, defined a way to satisfy the system and the regulators that they are not directly competitive. So I think it might be a worthwhile exercise for you to look at.

21198 MS STRAIN: Commissioner Wilson, we have actually already done that exercise in response -- some we took the initiative ourselves in the application to limit sports programming I believe, and then in response to interventions we have limited movie product, we have limited animated programming in response to a concern from Teletoon. So we are quite happy to perform that exercise if we have some ideas as to which categories might be of concern.

21199 THE CHAIRPERSON: If I may interrupt. It is a bit difficult to get into a very detailed way of redefining your service, but if I go back to more what I like to call the kitchen look at things, or a very practical look at it, when Ms McLaughlin says "Well, there is not much difference between 17 and 18 and 24 and 25", or something to that effect, then if there is a service there, let's say MuchMusic, who says "I am already there. That genre is covered", all the categories can be -- yes, there are fences, but if there is a movie that is definitely not appealing to a 15 year old, or terribly relevant to a 15 year old -- although it would be difficult to say it is relevant, but it is relevant to a 24 or 25 year old and then you go up to 30, then how do you call it a teen service?

21200 So have you looked at the possibility of teens, I suppose at 19, instead keeping the age narrower, along with the other fences which you have put in, which is a lot more simple -- this is off the top of my head.

21201 But if it is a movie that is directed to marital difficulties, or whatever, one could say it is not really for the teens.

21202 The problem is looking at the genre and alleviating the concerns; that the way it is framed permits it, if it is so wanted, without any regulatory fencing, to overlap too much into the other.

21203 Have you thought, rather than the complicated matter of putting more fences related to categories, of perhaps taking Ms McLaughlin's comment that the difference between 17 and 18 and 19 might not be that great, and that that is still a fence that prevents you from going to 30.

21204 MR. CRAIG: Right. So that I understand you --

21205 THE CHAIRPERSON: It is a possibility, because we cannot rewrite the whole nature of service now.

21206 MR. CRAIG: I understand.

21207 THE CHAIRPERSON: What I can ask you is: Do you want to have, as you describe it, a teen service?

21208 MR. CRAIG: Yes.

21209 THE CHAIRPERSON: And then the question is: Is there a teen service already there? Or do you have a competitor with a teen service?

21210 If no, then it is a good pitch. But if someone can say: Well, at 30 you have long stopped being a teen, how are you going to fence in this program when you get going?

21211 I am just asking you what your reflection is about giving that level of comfort of your intention to have it predominantly a teen service by pitching to a demographic that is understood by the market.

21212 MR. CRAIG: Right. In other words, focusing more on a target audience as opposed to the secondary --

21213 THE CHAIRPERSON: Well, my question to you is: Is that reflective of what it is you want to put on the market?

21214 MR. CRAIG: That is really the spirit and the nature of the service. In essence, it is a teen channel. Although, if they happen to cross over, as Debra said, you cannot --

21215 THE CHAIRPERSON: What would be the measure? The difficulty with Ms McLaughlin's comment is that it is never-ending on the top end. With the limit lower, you can go above it without actually doing something entirely different than a teen program.

21216 Anyway, that is just one way of looking at it.

21217 MS McDONALD: Maybe while my colleagues are thinking about limits, I am going to throw in one conceptual element to the older demo group.

21218 Part of the conceptualization of the channel was to serve the core group of 12-to-17-year-olds. As you have noticed, we have a very innovative approach to involvement, which includes a council of advisors. Through that runs a theme of mentorship, and that is the role of the 18-to-24-year-olds. They help program the service. They provide direction. They grow up through that advisory council, and they stay around to help mentor those coming behind them and who aspire to be like them.

21219 They have a little more sense of the world in terms of responsibility and probably take a meaningful role in the council and the business of the council.

21220 That does not help you with your numbers but --

21221 THE CHAIRPERSON: I am looking at your definition of service:

"All programs exhibited by the licensee shall be targeted to audience's age..." (As read)

21222 And you give an age group. It does not say -- well, all programs. But it certainly says they should be targeted to, which include even parental advice.

21223 At least it shows that what you want is a teen service. Anyway, that is one way of looking at it.

21224 MR. COWIE: Madam Chair, if I could: I guess the older component is a by-product of the primary target. We use that in calculating the revenue projections.

21225 But without question this is a teen service with a teen genre, aimed at a teen market. In developing revenue projections, there are some crossover moneys. But that type of thing happens all the time in terms of those who like a program will watch the program.

21226 However, the focus is clearly teen.

21227 MS McLAUGHLIN: Perhaps I might explain why we ended up with 12-to-24 and perhaps clarify one of my remarks.

21228 Nowhere do we discover that 12 and 24 have the same viewing habits. But when you are doing any kind of research, you are literally tied to the manner in which StatsCan collects their data. I could not possibly give you population estimates, nor draw a sample for 19 to 20.

21229 So when you are going into that whole area of developing a universe, you have to look at it and say: Will I overlap into the next age group? Yes. So what do I have to take? I have to take the entire age group, which is in this case 18 to 24, for my estimates.

21230 It was always recognized in the research that the interest amongst the 18-to-24-year-old group would be somewhat less than that of the teens, given the focus, given the topics we discovered in the focus groups that people would be interested in. We knew that it would certainly tail off. Where exactly, because we cannot research in that detail, I don't know.

21231 Certainly it was not our intention to give you the idea that we perceived the 12 and the 24 market to be the same.

21232 MR. CRAIG: Madam Chair, if I may, for simplicity: This is a teen service that we are applying for. If we limited it to teens -- in other words, 12-to-19-year-olds -- and said that is where we are headed, we would be happy to live with that as a definition of the service.

21233 COMMISSIONER WILSON: Thank you, Mr. Craig.

21234 Just one more quick question, which has to do with your programming categories. I would like to confirm that you will look at some of these percentages of your programming schedule.

21235 As far as you are concerned, limiting the target demographic to 12-to-19 would solve this problem?

21236 MR. CRAIG: Yes.

21237 COMMISSIONER WILSON: Okay. We will wait and see what the lawyers think about that -- our lawyers, that is.

21238 In Schedule 10 of your application -- you propose to draw programming from all of the categories, but in Schedule 10 of your application, where you list some of the programming that is going to run on the service, it is drawn from some of the categories but not all of them.

21239 Is that just illustrative of what is going to be on the service? It is not hard and fast?

21240 MR. CRAIG: That is correct.

21241 COMMISSIONER WILSON: Those are all the questions that I have on Connect -- except that I would like to say that the $120,000 that you are going to spend to put those Web cams out there is a very neat idea in terms of getting kids involved in the channel.

21242 MR. STERLOFF: Yes. That is one a day, every day of the week, for three years. We are going to start it, if we are so lucky to win a licence, three months prior to launch so that we can get everybody involved on the Web site, which will be up and running 90 days prior to launch as well.

21243 COMMISSIONER WILSON: That programming will appear on the channel, as well. It will be part of the schedule.

21244 MR. STERLOFF: Very much so.

21245 COMMISSIONER WILSON: I have a few questions on your Festival application.

21246 The first has to do with your definition of independent films.

21247 I don't think you set it out specifically in your application what you consider to be an independent film, but there was an exchange of opinions and views on this issue, I believe, during the deficiency stage.

21248 Now, Astral Television Network defines independent films as:

"...theatrical feature films and made for TV feature films that were not included in the top 100 films of Variety Magazine's annual list of top grossing films in the United States and Canada." (As read)

21249 Of course, they got that brilliant idea from us -- the top 100 films.

21250 In their intervention they express some concern about the fact that the lack of a definition of an independent film would allow your new service to cherry pick popular titles from the schedules of Astral's existing movie services. So I am just wondering if you can give us your definition and thereby alleviate any concern we might have.

21251 MR. CRAIG: Commissioner Wilson, this does seem to be a hot topic.


21253 MR. CRAIG: I am very fortunate to have both people from within our company who, I think, understand this issue, plus we have Mr. Link and Mr. Sackman, who are the experts on independent film in Canada.

21254 I would like to ask Jennifer to give you our definition, and I would like to get Andre and Jeff involved in this as well.

21255 MS STRAIN: Commissioner Wilson, there was in the intervention phase some correspondence between us and the pay services, as I am sure you are aware, and in our response to WIC Premium Television, as it then was, in particular, we agreed with -- they had set out three criteria, and we agreed with the first one, which was that we would agree that an independent film is an English-language feature film that was not originally released for theatrical distribution by one of the eight major Hollywood studios. I think there was an agreed upon list that everybody understands.

21256 COMMISSIONER WILSON: I think there are eight that CHUM gave us, and Salter Street agreed with those.

21257 MS STRAIN: Yes. Whatever the list was that WIC had put in its letter, that was what we had understood, excluding their art house affiliates.

21258 WIC as well as Astral had made the comment that they wanted us to abide by the top 100 restriction, and we took the view that that really isn't the best way to define what the essence of an independent film is. Not only that, but certainly there are not really that many independent films that make it into the top 100 anyway. But if they do, for instance, the Blair Witch project, well, sure, we might like the opportunity to see that, which we probably wouldn't get anyway until after it had aired on the pay services.

21259 But I might at this point ask -- I just wanted to tell you some of the background as to how we arrived at that definition, but I would maybe ask either Jeff Sackman or Mr. Link to step in here.

21260 MR. SACKMAN: Blair Witch, which Jennifer mentioned, is the quintessential independent film, and it obviously made the top 100. So that definition doesn't work for us.

21261 Likewise, studio films that bomb miserably also don't make the top 100, and they shouldn't qualify as an independent film. I don't think that anybody is going to see the Avengers on the Festival channel.

21262 We like the definition that says if it is released by the eight Hollywood majors, it is not an independent film, and just leave it at that. There are always going to be one or two -- no matter what definition you come up with, there will always be one or two in any given year --

21263 COMMISSIONER WILSON: That cross over.

21264 MR. SACKMAN: -- that are just going to cross over. And this way we in the industry understand what it means. We know an independent film when we see one, and we know what is not. Almost without exception, if it is released by a studio, it's not. There are some exceptions that we came up with in talking about this matter yesterday, and you just have to say: Okay, those films won't be played. It won't really matter in a practical way. But to deny true, successful independent films doesn't make any sense.

21265 COMMISSIONER WILSON: Thank you for that, Mr. Sackman.

21266 MS STRAIN: Commissioner Wilson, if I could just add one more thing quickly --


21268 MS STRAIN: We also think that is relatively easy for you to police and for us to understand. In some of the other definitions that have been produced, like "produced" and "developed" and "financed" --

21269 COMMISSIONER WILSON: "Financed", it would be very hard to tell sometimes --

21270 MS STRAIN: It would be very hard, not only for you but for us.

21271 COMMISSIONER WILSON: Yes. Probably harder for us. You are in the industry.

21272 In terms of being directly competitive with existing specialty services, the nature of service description for Showcase states that it will offer an all-fiction programming service consisting of the best of independently produced movies, drama, comedy and mini-series from Canada and around the world. Do you consider your application directly competitive with Showcase?

21273 You have probably been watching the responses of other people for independent film channels.

21274 MS STRAIN: Yes, we have.

21275 No, we don't consider ourselves to be directly competitive with Showcase.

21276 Showcase's core mandate is television drama and series.

21277 COMMISSIONER WILSON: Second window --

21278 MS STRAIN: Yes.

21279 COMMISSIONER WILSON:  -- drama, I think it has been described as by two of the other independent film applicants.

21280 MS STRAIN: Yes. They don't air any non-fiction programming like documentaries, as we would on our independent film channel.

21281 In particular, I noted that Mr. MacMillan, in his presentation to you -- as I recall, he stated that the reason Showcase was really concerned about the Indie film applicants was that they had included television series -- I can't remember the category offhand, but that category of programming under 7 in their applications. I was surprised to hear that because we didn't put that in our application. We don't have any television drama or series of any type. It is strictly feature films and, in some cases, Canadian MOWs.

21282 COMMISSIONER WILSON: And you think that would be sufficient in terms of ensuring that there is no competition.

21283 I mean, Showcase does show some independent films --

21284 MS STRAIN: Yes, they do.

21285 COMMISSIONER WILSON:  -- as part of their Revue.

21286 MS STRAIN: Yes, they do. But we don't think -- I mean, that is not their core mandate.

21287 MR. LINK: If I may, I would like to interject here.

21288 I have appeared several times in front of the Commission in another capacity when I deplored that there were not enough Canadian films shown by the conventional broadcasters. It is very hard for me here today to be at the same table, but it is because of this recognition that we are trying to do something which is good for Canadians and good for the Canadian film industry.

21289 I don't think that there are ever enough shown. I believe -- and what attracted us to this project was really that we are going to have thousands of films that are right now on the shelves and not seen, that people have devoted time, energy and money --

21290 COMMISSIONER WILSON: Which have passion.

21291 MR. LINK: You mention passion. I must tell you, passion, yes. And they have no way of seeing them. I think that this is an extraordinary way of giving access to the Canadian public, coast to coast, to recognize that there are good Canadian films, maybe with talent that is lesser known. As they say in French, l'appétit vient en mangeant.

21292 We have to explore more the Canadian feature films for the Canadian public. I feel very strongly about that. Thank you.

21293 COMMISSIONER WILSON: Thank you, Mr. Link.

21294 MR. STERLOFF: I wonder if I could just add that in preparing the schedule we contacted CAVCO just to see what the output of Canadian feature films alone was in recent years. Let's see. In 1996-97 they reported that they certified 101 Canadian feature films that year. In 1997-98, the last complete year, there were 105 new films.

21295 We are not intending to build a service that is focused on the block busters. We don't require that these films have theatrical release prior to being licensed. So what you are going to find on the service are the films that are not seen theatrically, in many cases, and may not be attractive certainly to pay per view, or even to pay television. These are not necessarily the Canadian films that you would see at 8:00 p.m. on your conventional services, including our own.

21296 So the kinds of feature films that are going to be included in the mix -- it's quite eclectic.

21297 Of course, the other component that is extremely important to us -- as keen patrons of film festivals, one of the important parts of the program is always the short film, the experimental film, and now, of course, the digital Web-based film. All of these will find a home on the service. I am not sure that there is any service in Canada today, anywhere in the world perhaps, where you are going to find that kind of blend of programming. It is a new window for a lot of brand new material.

21298 COMMISSIONER WILSON: Mr. Craig, is it your opinion that an independent film channel that included a portion of documentaries and a documentary channel could co-exist as non-competitive in this environment?

21299 MR. CRAIG: Yes.


21301 Would you impose limitations on the amount of dramatic independent films aired by a documentary service, just as you have offered a limit in terms of the amount of documentary programming you would carry?

21302 MR. CRAIG: That would seem appropriate.

21303 COMMISSIONER WILSON: Any suggestions?

21304 MR. CRAIG: I hadn't really thought about that, in terms of percentage terms. But, you know, possibly use the same ratio. If we are going to limit ourselves to --

21305 COMMISSIONER WILSON: Twenty-five per cent documentary, as I read this.

21306 MR. CRAIG: Twenty-five per cent. Maybe use the same ratio.

21307 I mean, it's a concept. I am not saying it is the right number, but --

21308 COMMISSIONER WILSON: You term --

21309 I'm sorry.

21310 MR. CRAIG: Certainly there needs to be limitations.


21312 In terms of the sources of your non-Canadian programs, you have said that you are going to be broadcasting independent films from Canada and around the world, including Australia, China, Europe, India and the U.S. I am wondering of the foreign programming how much is U.S. and how much is other?

21313 MR. CRAIG: It's 20 per cent of the foreign.

21314 COMMISSIONER WILSON: Twenty per cent?

21315 MR. CRAIG: Yes.

21316 COMMISSIONER WILSON: In terms of advertising, in your application form you said that you would accept the standard condition of licence limiting advertising to 12 minutes per hour, but in your supplementary brief you said that you were only planning to run eight minutes of paid commercial time per hour.

21317 MR. CRAIG: What we have tried to do is build a service that is for the film buff and for the film lover.

21318 COMMISSIONER WILSON: So, respectful of the content?

21319 MR. CRAIG: Respectful of the content. We have said: Listen, we have got enough inventory, so let's cut down on the number of commercial interruptions that we have on the service and build a real pure program service.

21320 COMMISSIONER WILSON: My final question on this application has to do with your Canadian content levels because most of the other independent film channels, with the exception of one -- the applications I should say -- propose levels in the range that you have proposed, and that one proposes a level of about 33 per cent by year seven, based on the argument that there is a possible product in this genre and that it's just not possible to achieve the 50 per cent minimum by the end of the licence term that the Commission has asked for. Obviously, you don't agree that that's the case?

21321 MR. CRAIG: We don't buy that argument. Wayne and Mr. Link and Jeff may want to add to this.

21322 MR. STERLOFF: Commissioner Wilson, a couple of my previous lives had me working at Telefilm Canada and 10 years at the head of B.C. Film. I for one am very much aware of the inventory of Canadian feature films that are not making it to the screen.

21323 In my capacity with Craig, we receive cassettes every day, demo tapes of films that are not being purchased, not being licensed in the existing system. As far as I can tell, there is plenty of inventory. I have no problem in meeting our target.

21324 MR. LINK: I have no fear that the 50 per cent can be achieved. I do believe that the variety of programming that is available in the new media is going to probably even be better eventually.

21325 MR. SACKMAN: And again, whoever was saying 33 per cent, they may be imposing limits upon themselves, that they are only theatrically released films or who knows what, but in terms of the overall available product it shouldn't be a problem at all.

21326 COMMISSIONER WILSON: Commissioner Williams has a choking problem.

21327 MR. STERLOFF: Commissioner Wilson, not to beat this into the ground, but I was just looking at some of our figures and our Canadian content which is 50 per cent, you may be interested to know that 72 per cent of the cash going to licences is being made available to acquire that product. So that's another way we think we are going to inspire a higher level of production.


21329 I want to turn now to The MET and, obviously, the nature of service and the fence building idea is one that we want to explore with reference to this service. So if I can just take you through a few of these questions, maybe you can help me out here.

21330 Seventy per cent of your broadcast week will be music and videos, and you are proposing a 60 per cent Cancon level day and evening and that 60 per cent also applies to your video level. Is that correct?

21331 MR. CRAIG: Yes.

21332 COMMISSIONER WILSON: Because you are aware, I am sure, that typically music video services have a lower level of requirement for music videos.

21333 MR. CRAIG: Yes, we do.

21334 COMMISSIONER WILSON: And I noticed in your opening remarks you talked about the thousands of artists and videos available that were not getting airplay on services that are already in the system, but that's not what we are hearing. Again, we are hearing that there is a lack of product in the video area.

21335 MR. CRAIG: Well, I would like to ask John Donnelly to start off and Andrew Forsyth is here from Bohn & Associates.

21336 COMMISSIONER WILSON: I will tell you part of what was kind of bothering me was that the $1.26 million that you had set aside over the life of the licence to produce new music videos. It's only 2.5 per cent of your regulated revenues, whereas the other music services that are already licensed, MuchMusic spent 7 per cent, MuchMoreMusic spends 5 per cent.

21337 I will lay out for you what is going through my mind and then you can come back at me and say, yes, we have product; yes, we can do 60 per cent and here's how we are going to do it.

21338 So, you are only going to spend $1.26 million, which is less than the other services. You are promising a high level of Canadian content in the music video broadcast themselves and you are going to play in a much smaller niche, so presumably the supply would be narrower because you are just doing rock. You are not doing pop and CHR and the other things, so how do you pull this off? How do you give us 60 per cent --

21339 MR. CRAIG: Mr. Donnelly.

21340 COMMISSIONER WILSON:  -- and only spend $1.26 million over seven years on producing Canadian videos, and are these good videos?

21341 MR. DONNELLY: Definitely.

21342 So I guess to start I just want to introduce a little bit of my own personal experience, in that I spent 15 years as a performer touring Canada from coast-to-coast and from Whitehorse to Windsor.

21343 I have also spent 15 years on the business side of music producing concerts and festivals and in particular a large festival which takes place in Vancouver each year, called New Music West, which really focuses on emerging and developing talent, attracts over a thousand applications from artists each year.

21344 So I know that there is an incredible volume or number of Canadian artists that are out there, that the industry has really grown exponentially over the last many years and I also know that there is an incredible library of Canadian video product.

21345 If you go back really to the history of music videos, MTV I guess really sort of invented the genre 20-some years ago of rock video as an art form and that genre has really grown over the past 20 years. So with the AVLA, which is the Audio Visual Licensing Association here in Canada, they currently have 22,260 Canadian copyright owned videos registered with the AVLA.

21346 So there is a real volume of artists, of contemporary music videos that are sitting on shelves here in Canada.

21347 COMMISSIONER WILSON: How many of those are you playing a year?

21348 MR. DONNELLY: How many of those would we play in a year?


21350 MR. DONNELLY: We do have some information. We did a break down. Over the course of a year about 960 different songs. So we have categorized our service with a variety of different genres.

21351 We looked at what we would program in terms of international hits versus Canadian emerging artists, current Canadian programming, secondary Canadian programming. Then we tried to project what the rotations would be, et cetera. I will ask Andrew Forsyth from Bohn & Associates to jump in with me a little bit here.

21352 But what we have come up with is that 960 songs on an average year is what would be programmed on our service.

21353 Andrew, do you want to just jump in a little bit?

21354 MR. FORSYTH: Just to break that out a little further, I think to go back to Commissioner Wilson's question of the library material -- in other words, the material that already exists that has been shelved and is not being viewed. It would be approximately 500 selections used on a per annual basis.

21355 The balance of those, so approximately 400 videos, would be new each year, and of that approximately 200 would be Canadian.

21356 COMMISSIONER WILSON: Two hundred would be...?

21357 MR. FORSYTH: Canadian.

21358 COMMISSIONER WILSON: And of those 22,000 that are registered, how many of those are in the rock genre?

21359 MR. DONNELLY: That's a tough question, in that --

21360 COMMISSIONER WILSON: Do they categorize them?

21361 MR. DONNELLY: They aren't categorized by genre at the AVLA, but we do know that really there is four basic genres. Now, as music has been sort of evolved and is being charted here in Canada, there are four basic genres.

21362 Although, when it really started 10 years ago or even 20 years ago it was almost all rock. So music has been fragmented, really in particular over the last 10 years, but even in the most conservative estimates, if you look at that library you would know that there would be a minimum of 6,000 of these videos would be in the rock category and it's probably in reality closer to 10,000. Many of which are classic rock, hard rock, punk, metal, et cetera, so we know there is a real library of Canadian copyright on videos there.

21363 COMMISSIONER WILSON: With that as a backdrop let's talk about how directly competitive you would be with MuchMusic, for example. These are the numbers that we will look at, according to your break down of the 500 hours between March 10 and March 30 that you analyzed from MuchMusic; Canadian modern rock, foreign modern rock, rock, metal and classic rock accounted for about 23 per cent of their schedule. But they say that they do 43 per cent rock.

21364 And you say that only 17 per cent of MuchMusic's audience is 18 to 24 and they say 50 per cent of their audience is 12 to 24. So what do we do?

21365 MR. DONNELLY: If we could talk, first, I guess about the music and really the evolution of music. We do know that when MTV started with music video and MuchMusic followed in 1984 and really since then they have been the only game in town, but over the last 10 years this genre fragmentation has really increased. It's the real thing. So we have these different charts and under each different chart, for example dance music, there is even increased fragmentation, in that there is hip hop and industrial and various kinds of sub-genres.

21366 So anyway, what has happened is as music has evolved, and in particular with the emergence of urban music, you know MuchMusic has evolved with it to program urban. In the last five years we have this real explosion of pop music. Again, they have been there with artists such as Britney Spears and the Back Street Boys programming pop. So it has really created this void that we call rock.

21367 So we decided, well, let's take a look at that and see if we can quantify this. So we went in in developing the application because we know from our experience in dealing with musicians and know how hard it is for contemporary rock artists and emerging rock artists to get airplay, we know the frustration of these groups in trying to get records played and know that because Much is playing so much CHR and so much urban that it has really limited the amount of playlist that they can dedicated to Canadian artists and emerging Canadian artists.

21368 So what we did is --

21369 COMMISSIONER WILSON: Has MuchMusic, the proportion of the different kinds of music that they play, that's obviously changed. It has evolved over the year as different genres of music have become more popular?

21370 MR. DONNELLY: Yes.

21371 MR. CRAIG: Commissioner Wilson, if I might, yes it has, we believe. I would like to ask Andrew to just give you some hard numbers. We can also get Debra to give you some BBM data on the tuning for Much, just to give you an example of where the audience is.

21372 MR. DONNELLY: And even before Andrew jumps in, I do want to point out that what we did is we did this log in March of the 500 hours and then categorized the songs with which we then presented these statistics in our application.

21373 What we have done in follow-up is we asked and contracted Bohn & Associates and Andrew Forsyth's company to again even review our numbers and see where they came up with as an independent result. So we will let Andrew speak to that as well.

21374 MR. FORSYTH: We reviewed the music logs and broke the music out by music segments, identifying each selection to a particular genre and under one heading, general heading of CHR or contemporary hit radio or top 40, as it is also known, we put these elements together. We had Canadian pop music, pop, urban and rock crossover. Rock crossover being material that had originally started on the rock charts, but it gained acceptance at top 40, so it had moved over to that side.

21375 When we totalled that material up we discovered that the CHR segment was 61 per cent of what MuchMusic played.

21376 We took the rock segments and under the rock segments we had Canadian rock, modern rock, mainstream rock, metal and classic rock. Those components added up and came out to 24 per cent, which was close to John's figure of 23 per cent that he had put in the application.

21377 THE CHAIRPERSON: Mr. Forsyth, I hate to interrupt, but there is a limit to how you can use this part of the process to actually reply to why the two -- MuchMusic's intervention that you will be competitive. So perhaps you should make sure that when you appear at Phase IV you at least summarize these numbers.

21378 The reason for this, as your counsel will understand, is in the first part of the hearing MuchMusic may not be listening. Maybe they are and maybe they are not because this is really a reply.

21379 MR. FORSYTH: I always understood that CityTV was everywhere.

21380 THE CHAIRPERSON: I know, but we have to keep the process within certain limits without being too jurisprudential about it, but you can reverse the situation sometimes and it could be you. So make sure that this reply to their comment is included in Phase IV.

21381 MR. FORSYTH: Certainly.

21382 THE CHAIRPERSON: Rather than get into it to any greater detail at this stage.

21383 MR. FORSYTH: I think the general direction then as an overall comment would be that MuchMusic -- if the question is how would this service, how would The MET differentiate itself from and not duplicate the service on Much, I will go back in history just a little bit and go back perhaps a little further than John had gone and just talk very generally about contemporary hit radio, top 40.

21384 As some of us might remember, only some of us, in the early sixties if you turned on CHUM-AM in Toronto or CKGM in Montreal or CFRA here in Ottawa, you would hear the Beatles. The next song that you would hear would be Perry Como. The next song you would hear would be Steppenwolf. There was that mix of music on top 40.

21385 We went out a few years and the people who were into the Beatles and perhaps Steppenwolf discovered that those artists also had albums and those albums were pretty good and there were songs that radio wasn't playing. There was a home for those, eventually, on of course the unused or under-used FM dial and we ended up with album radio.

21386 Well, in a sense it has kind of turned itself around, but that's where video is at now, music video is at. That is, while rock really was the original content of music videos, music video as such has become much more like CHR, and that is that it takes from the best of those services around it, or from the best of the charts around it. So CHR draws from rock. It will even draw from country, if we look at the success that people like Faith Hill and, of course, Shania Twain have had over the last few years. And, of course, it draws from the pop and the dance and the urban charts.

21387 That is sort of the conundrum that Much is in right now. It is playing something from everybody and it is doing a very good job of that.

21388 What The MET proposes to do is concentrate on rock and, therefore, expand the amount of rock that will be available to a viewer on the service.

21389 MS McLAUGHLIN: Just so I can put it in context of the analysis that was used to determine the profile of The MET against MuchMusic, we looked at the BBM survey and I ran it again today just in case there had been any change this spring, but based on a 62,680 sample, which is probably the most robust of any survey you are going to find, when we look at it, 49.9 per cent of Much --

21390 THE CHAIRPERSON: Ms McLaughlin, the same comment. You keep this for the Phase IV stage where you are responding to MuchMusic.

21391 You work with Mr. Bohn, Pat Bohn?

21392 MR. FORSYTH: That's correct.

21393 THE CHAIRPERSON: You caught on. The idea is you want to tell us how different The MET is at this stage and not go into the nitty gritty of how you arrive at that with regard to the intervenor because it's not the phase at which you respond.

21394 MR. CRAIG: Madame Chair, we respect the process and we would respect your comment I think.

21395 THE CHAIRPERSON: And it has nothing to do with the hour. It's just the process and I think you understand.

21396 MR. CRAIG: I think Ms McLaughlin was simply responding to I think what was one of the questions. We understand.

21397 THE CHAIRPERSON: We certainly want to hear how different The MET will be from existing services, but not get into exactly how you arrive at it at this stage, but we welcome these comments at Phase IV when, presumably, the intervenor will be listening to see whether you say anything to counter his intervention.

21398 COMMISSIONER WILLIAMS: Madam Chair, these people have been answering questions without benefit of water for more than an hour and I would like to offer them the rest of my jug.

--- Laughter / Rires

21399 MR. CRAIG: Thank you.

21400 COMMISSIONER WILSON: I'm sorry about that.

21401 MR. DONNELLY: If I might carry on with the question --

21402 COMMISSIONER WILSON: Let me ask you some sort of specific regulator-type questions about limits and conditions of licence, and we will kind of get at it like that. You will have an opportunity a little later on in the process to talk more about defining your niche programming. I will just finish up with these and Phase IV will look after any other comments on --

21403 I probably shouldn't have opened that Pandora's box, but there you go. It is hard not to ask.

21404 If the Commission wished to set conditions on the types of music that you were permitted to air, and if we considered using the levels and types of artists and music that you have indicated in Schedule 1, which is 60 per cent rock radio, 20 per cent breaking new artists, 15 per cent songs not currently played on radio, and 5 per cent CHR, what definitions or music charts could be used to ensure adherence to those conditions? How would you define, for example, breaking new artists?

21405 When you came up with those breakdowns, how did you do that? On what did you base that?

21406 MR. DONNELLY: We were looking at what is available, and we wanted to set a new benchmark for Canadian talent -- for the support of Canadian talent -- and the belief is so strong that we can deliver a wonderful service with the highest quality by programming emerging Canadian artists at the same level as we would program international hit artists, or relatively the same level.

21407 I think I will let Andrew speak to that, on how we would deliver a music mix that, I guess, delivers that component. Is that what you are looking for?

21408 COMMISSIONER WILSON: I am asking you, if this is your breakdown -- 60 per cent rock radio, 20 per cent breaking new artists --

21409 MR. DONNELLY: Yes.

21410 COMMISSIONER WILSON: Who makes those determinations? Is there some common way of figuring that out in the industry? Is there a book that you look in that says: This is rock radio and this is a breaking new artist?

21411 I am being facetious, of course, but I am trying to figure out, if we are going to set those limits, if we are going to hold you to the limits you have offered, then how do we --

21412 It is like defining an independent film.

21413 MR. DONNELLY: Right. I think if we look at the national industry trade magazine, which is The Record magazine, I believe that The Record magazine has been recognized by the Commission in reviewing other analyses of music. So if it is an emerging artist, then it is an artist that has not had a song charted in a national industry trade magazine, or not released by a major label.

21414 COMMISSIONER WILSON: That's a good answer. And they would all be rock.

21415 MR. DONNELLY: And they would all be rock, yes.

21416 COMMISSIONER WILSON: You stated that The MET would not air movies or animated programming, but your nature of service definition does include the categories for those types of programming: 7(c) and 7(e). In the mounds of paper that you filed with us -- and I say that with a compliment, because you did file a lot of material and that is very much appreciated -- you described programs not covered by the categories that you are proposing in section 7.1. So I am just wondering if you could confirm for us what categories you propose to include in your nature of service.

21417 MS STRAIN: Commissioner Wilson, I believe -- there have been so many phases to this process now that I forget, but I guess it was in the deficiency process that we had agreed to delete feature films and the category relating to animated programming from Category 7 --

21418 COMMISSIONER WILSON: You agreed to delete those?

21419 MS STRAIN: Yes. So that amended our original application. Or clarified it.

21420 COMMISSIONER WILSON: Okay. So you would still want --

21421 If I can just read through these. Do you have your nature of service, section 7.1, of the application form?

21422 THE CHAIRPERSON: It obviously has to be supplemented by the response to the clarification question.

21423 MS STRAIN: That's right.

21424 COMMISSIONER WILSON: Right. So you would do 2(a) --

21425 MS STRAIN: Yes.

21426 COMMISSIONER WILSON:  -- 7(a), 7(b), 7(d), 8(a), (b) and (c) --

21427 MS STRAIN: That's correct.

21428 COMMISSIONER WILSON:  -- 11, 12, 13 and 14.

21429 MS STRAIN: Did you say 9?

21430 COMMISSIONER WILSON: Oh, 9. You're right, I'm sorry. Nine.

21431 MS STRAIN: Yes.

21432 COMMISSIONER WILSON: And not 15.

21433 MS STRAIN: It was my bright idea to put 15 in there to begin with.

21434 COMMISSIONER WILSON: Many others had the same bright idea.

21435 The foreign-acquired drama, comedy and animation programming that you would propose to include on the service, as outlined in Schedule 10, can you describe that? What kind of drama, comedy --

21436 The animation you have taken out, so --

21437 MR. DONNELLY: We will look to anything that really is rock entertainment based. So we will look for things like, you know, histories of music, or discographies. If there are international-based programs that could be drama-based programs but about a rock band, that is the type of thing we want to do.

21438 I mean, our real intent for The MET is to produce a station that is 100 per cent dedicated to rock music. So we want people to know that when they tune in to The MET they are going to find great rock and roll. They are going to find information about it that they may not get anywhere else. You know, there is going to be consistency there.

21439 We do want to have some other variety programming, like our program with Bruce Allen as a current affairs issues show, but even that program -- the idea there is to focus on music, to talk about current issues in music or have guests on the program that are music related.

21440 So we left the door open --

21441 COMMISSIONER WILSON: For flexibility.

21442 MR. DONNELLY:  -- to have other things for flexibility, but really the intent of our service -- if you look at year 1, the way we intend to roll out is with almost a 90 per cent base of music-based programming.

21443 COMMISSIONER WILSON: And the comedy?

21444 I was sitting here thinking: Okay, rock comedy. I was thinking about the Monkeys. But the Monkeys were pop; right?

21445 MR. DONNELLY: The categories there, I think, leave the door open to --

21446 COMMISSIONER WILSON: And they are too retro.

21447 MR. DONNELLY: Yes. The categories there are to leave the door open for opportunities that may come up, but the focus is to come out as a music-based service.

21448 COMMISSIONER WILSON: Okay. I think you also mentioned somewhere something about music-based game shows, but you did not include Category 10.

21449 MS STRAIN: Could we? I think that was an error.

21450 COMMISSIONER WILSON: Okay. Yes, you could say that was an error and you would like to include it.

21451 MS STRAIN: That was an error.

21452 COMMISSIONER WILSON: We can always say no.

--- Laughter / Rires

21453 MS STRAIN: True enough.

21454 I'm sorry, Commissioner Wilson. I found my deficiency response on Category 7 sub-categories, and what we had agreed to include were sub-categories (a), (b), (c) and (e).

21455 COMMISSIONER WILSON: So (a), (d) --

21456 MS STRAIN: They are (a), (b), (c) and (e), excluding the other categories. So excluding (d), (f) and (g).


21458 MS STRAIN: So that does include some animated television programming.

21459 COMMISSIONER WILSON: Did you say that you would not be airing movies or animated programming?

21460 MS STRAIN: We will not be airing movies, but we did contemplate in the deficiency process that we might be airing animated television programming.

21461 I got that mixed up when we first --

21462 COMMISSIONER WILSON: So you do want 7(c)?

21463 I'm confused. Sorry.

21464 MR. STERLOFF: Is the feature film Category 7(d) or --

21465 COMMISSIONER WILSON: Yes. The theatrical feature films aired on TV is 7(d).

21466 MR. STERLOFF: Yes. So we will omit 7(d).

21467 MS STRAIN: Under Category 7, we included (a), (b), (c) and (e) as categories we wanted to include.

21468 COMMISSIONER WILSON: Okay. If we felt it was necessary, would you accept a condition of licence that limited the amount of Category 2 and Category 7 programming permitted on The MET, as has been the case with MuchMusic?

21469 MR. CRAIG: Yes.

21470 COMMISSIONER WILSON: And would you recommend any specific COLs with respect to the limitations on 2 and 7?

--- Pause / Pause

21471 COMMISSIONER WILSON: Do you want to come back to us?

21472 MR. CRAIG: Yes, we would like to come back on that one, please.

21473 COMMISSIONER WILSON: Okay. I have just one more question -- well, two more questions, actually.

21474 You are playing 70 per cent of your broadcast week is music videos, but would you accept a condition of licence that required that Canadian music videos be evenly distributed throughout the broadcast week in a reasonable manner?

21475 MR. CRAIG: Yes.

21476 COMMISSIONER WILSON: And the same for the broadcast day?

21477 MR. CRAIG: Yes.

21478 COMMISSIONER WILSON: With respect to your priority program funding proposal -- and actually, this relates to all three applications -- would you be willing to commit to those as fixed dollar amounts as conditions of licence, if we were so inclined?

21479 MR. CRAIG: Yes.

21480 COMMISSIONER WILSON: Just one other question out of curiosity.

21481 When you did your demand research and you described the service, the question that you used to describe that service starts with:

"The CRTC is considering applications for new television channels. One of the applicants being considered is proposing a music video channel." (As read)

21482 You did not include the word "rock" in there. I am wondering why not and if you think it would have any effect on the results if you had.

21483 MS McLAUGHLIN: I think I have been nominated to answer that.


21485 MS McLAUGHLIN: The survey that you have before you actually had several demand measures, and that was the specific question.

21486 You are right. It did describe a service that is not an exact mirror of what ended up in the application. It has been modified.

21487 But it has been modified in relationship and in consideration of the results of the survey.

21488 On the previous page -- I am sure you are not looking at it, but I am -- we actually tested all of the interest levels in the various music genres. When we went through it, we found that the rock category, where you correlate the three variations that we looked at -- classic rock, modern rock and alternative rock -- indicated that there was 84 per cent of the Canadian population that listened to it in some form or another, moderately or frequently.

21489 We felt that that was a very strong indication of the interest in the genre itself.

21490 The only format that scored higher was adult contemporary, and that was covered.

21491 So that was an indication. I would suspect that if we had put rock in there, we would have found that we had a higher interest level. The description in and of itself is relatively vague; and as people are limited to what they know, they may have comparatives to existing services or put their own music interpretation in terms of what the play list would be.

21492 COMMISSIONER WILSON: Ms McLaughlin, could I just ask you one more very quick question -- well, I guess how quick it is will depend on what your answer is. But I will ask it quickly.

21493 Your demand research appeared to demonstrate that the greatest appeal of this service would be to an age group of 25-to-44, which would be the age group into which I would fall. All of those songs that that guy was playing on that video were songs that I recognized from my youth.

21494 You are targeting to an 18-to-49-year-old audience concentrated to 18-to-24.

21495 MS McLAUGHLIN: I am not sure that I really understand the question.

21496 COMMISSIONER WILSON: If you are concentrating your target audience to 18-to-24, and according to your research the highest level of appeal is 25-to-44, which is the next bracket up --

21497 MS McLAUGHLIN: The bracket that you are talking about also represents the largest proportion of the population in Canada. So when you are talking about the per cent composition of the audience, you tend to see clustering in that, regardless.

21498 The way that we presented this data within the context of this study, we have also shown you within those age groups the propensity to watch this channel. The greatest response of definitely watch it came from 18-to-24. That was 27 per cent. That was a higher percentage of that age group than any other.

21499 You can see as you go through the age groups that as they age, it declines in terms of "absolutely must watch this service".

21500 In distribution in terms of how the population is laid out, yes, that would be how the bulk of our audience would distribute. But we recognize that this particular genre has a real focus and a core following in the 18-to-24.

21501 Maybe John could comment.

21502 COMMISSIONER WILSON: Everything old is new again.

21503 MR. CRAIG: Commissioner Wilson, as we went through the process and put these applications together, you start with some research and you fine-tune it and you develop a service.

21504 I think one of the most telling aspects about the demand for the service was indicated in the level of support that we got in the intervention phase. We had over 150 letters filed from people that are on the record at the Commission. We also had the support of virtually every record company president in Canada.

21505 Also, John did another bit of research in the field.

21506 COMMISSIONER WILSON: Because they would know what rock is.

21507 MR. DONNELLY: In my business as a concert promoter and producer of special events, I produced, first off, an event in Calgary just this summer, on July 29th and 30th, with a predominantly Canadian rock band lineup. We drew 64,000 people to the streets of downtown Calgary.

21508 While I was there, I said: "I have this incredible golden opportunity to speak to people about The MET." So we set up our MET booth at the festival and had a chance to speak to kids and had them come up and we said: "Would you give us a letter of support? Would you sign a card and let the CRTC know that you guys want to see more rock?"

21509 Really, there is a real frustration with this demographic of the 18-to-24 core, but older than that. They don't want to sit down have to sit through Britney Spears and B44 or The Mix to get to some rock music. They want to rock. They enjoy music. Music is a real driving force in their lives.

21510 And it was not just that festival. I actually did a series of them this summer.

21511 We attended about six different festivals, and we received over 5,000 signed letters and cards of support. Some of them, where we gave out postcards as promotional material, they mailed them back to us. So they put the stamp on it and sent it back to us.

21512 We have over 5,000 really interested in our service.

21513 In particular, to just speak about the fencing issue and how we are going to complement the system, I think really the simplest way to explain it is the fact that with the evolution of music, we have four charts. Yet, with only three music services, it means that the broadcast system is not complete; that there is a whole area of rock -- and when you look at some of the play lists, you will see upcoming Canadian rock bands that are getting four plays in one week from the incumbent.

21514 They may say: "Yes, we are playing these rock artists. We played 30 of the songs on this week's Top 75 rock." But when you look at how deep they played -- you know, Wide Mouth Mason got four and Limb Lifter got two.

21515 I believe we can complement the broadcast system by creating this niche and by sitting under the banner of rock radio and allowing MuchMusic to really serve the hit audience that they are going with and allowing MuchMoreMusic to serve the pop adult audience. CMT, of course, is safe in country.

21516 I believe we can find a nice fit and serve the broadcast system well, and then do a great job to promote Canadian artists. If we have an opportunity to receive this licence, we can do wonderful things for not just the broadcast system but the music industry and many, many artists.

21517 COMMISSIONER WILSON: Thank you, Mr. Donnelly.

21518 Those are my questions, Madam Chair.

21519 THE CHAIRPERSON: Counsel?

21520 MR. McCALLUM: None at this time, Madam.

21521 THE CHAIRPERSON: Well, I must say, if I had known we would be so long I would have insisted on giving you a break.

--- Laughter / Rires

21522 THE CHAIRPERSON: But at least you can be assured you would survive on any survivor show.

--- Laughter / Rires

21523 THE CHAIRPERSON: I also want you to know that the transcript won't show how tired you are.

21524 We certainly have had a thorough look at your applications. It has been nice to see you for the first time in this particular context and we will see you again at Phase II and at Phase IV where we fully expect to see Ms McLaughlin and Mr. Forsyth. He may be accompanied by his Pat Bohn by now to make sure he gets the answers at the right time and the right place.

21525 We now give you, Mr. Craig, the last word, if you can find the energy.

21526 MR. CRAIG: Thank you very much.

21527 I appreciate your patience through this process.

21528 I think that we have three very distinct, three very different applications before you in this process and I think that what we have tried to do is complement our core competencies and, at the same time, add some diversity to the broadcast system.

21529 I believe firmly that our company can also make all this happen. As I said earlier, I think execution is everything in this process. I think we have a track record of proving that we can do the things that we say that we are going to do.

21530 We also have a great partner as well in our Festival application in Lions Gate and I think they bring something very unique to the table in terms of their bent towards independent film and I think it is a very special relationship.

21531 We are ready right now. Our plants are ready. We can launch immediately. We also, as we mentioned earlier, have the production commissioning expertise. Over the last three years we have had a tremendous track record there. Our in-house production facilities and capabilities are second to none.

21532 I also, as we talked about earlier -- Commissioner Wilson, indicated in her opening remarks that Craig is a little unique in the sense that we have BDU experience and we have broadcaster experience and I think I would be remiss if I didn't sort of tell you where we are as a company and where we are headed.

21533 My father was one of the people who had a vision to take the company into the digital world with SkyCable, had the vision to take the broadcast company into the digital world as well and sort of set the course for where we are headed.

21534 I think that this is the first time that you have had an opportunity to see our entire team and I am very proud of the team that we have here. I think they are a very talented and bright group of people that are among the best broadcast executives in the country.

21535 So we are up for this challenge. We are ready to go. If you are kind enough to grant us a licence, we can deliver.

21536 Thank you very much.

21537 THE CHAIRPERSON: You have to say smart enough.

21538 MR. CRAIG: We are also smart enough.

--- Laughter / Rires

21539 COMMISSIONER WILLIAMS: If we were smart enough maybe is what she said.

--- Laughter / Rires

21540 THE CHAIRPERSON: Yes. We don't do kindness. We try to be smart, but kind we are not. We keep people for hours.

--- Laughter / Rires

21541 THE CHAIRPERSON: Again, we thank you for your co-operation and your patience and we are a little bit apologetic about not having taken a break. At least I asked.

21542 Have a good evening and we will see you again in other phases of the process.

21543 Have a good trip back home.

21544 MR. CRAIG: Thank you very much.

--- Whereupon the hearing adjourned at 1816, to resume

on Friday August 25, 2000 at 0830 / L'audience

est adjournée à 1816, pour reprendre le vendredi

25 août 2000 à 0830

Date modified: