TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
APPLICATIONS FOR LICENCES TO OPERATE NEW PAY AND SPECIALTY
SERVICES FOR DIGITAL DISTRIBUTION / DEMANDES DE LICENCES
VISANT LA DISTRIBUTION NUMÉRIQUE DE NOUVEAUX SERVICES DE
TÉLÉVISION SPÉCIALISÉE ET PAYANTE
HELD AT: TENUE À:
Conference Centre Centre de Conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
August 25, 2000 le 25 août 2000
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Canadian Radio-television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Applications for Licences to operate New Pay and Specialty
Services for Digital Distribution / Demandes de licences
visant la distribution numérique de nouveaux services de
télévision spécialisée et payante
BEFORE / DEVANT:
Françoise Bertrand Chairperson of the
Commission / Présidente
Andrée Wylie Chairperson / Présidente
Jean-Marc Demers Commissioner / Conseiller
Ronald Williams Commissioner / Conseiller
Martha Wilson Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Peter Cussons Hearing Manager and
Secretary / Gérant de
l'audience et secrétaire
Alastair Stewart Legal Counsel /
Peter McCallum Legal Counsel /
HELD AT: TENUE À:
Conference Centre Centre de Conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
August 25, 2000 le 25 août 2000
TABLE OF CONTENTS / TABLE DES MATIÈRES
PRESENTATION BY / PRÉSENTATION PAR
METROMEDIA CMR BROADCASTING AND/ET 2980
COGECO RADIO-TELEVISION INC. (OBCI/SDEC)
PRESENTATION BY / PRÉSENTATION PAR
WETV CANADA (OBCI/SDEC) 3046
PRESENTATION BY / PRÉSENTATION PAR
LIFESTYLE TELEVISION (1994) LIMITED 3145
PRESENTATION BY / PRÉSENTATION PAR
VISION TV DIGITAL INC. (OBCI/SDEC) 3221
Hull, Quebec / Hull (Québec)
--- Upon resuming on Friday, August 25, 2000
at 0830 / L'audience reprend le vendredi
25 août à 0830
22245 THE CHAIRPERSON: Good morning and welcome to day ten of our hearing.
22246 Bonjour. Nous vous souhaitons la bienvenue à la dixième journée de notre audience.
22247 Monsieur le Secrétaire, s'il vos plaît. Mr. Secretary, please.
22248 MR. CUSSONS: Thank you, Madam Chair.
22249 Our first applicant this morning is Metromedia CMR Broadcasting and Cogeco Radio-Television Inc., OBCI, proposing one new Category 1 service to be called the Travel and Leisure Network.
22250 There is a maximum presentation time of 20 minutes and we have Mr. Béland and his colleagues.
PRESENTATION / PRÉSENTATION
22251 MR. BÉLAND: Merci, Madam Chair, Madame Chairperson, Commissioners.
22252 My name is Pierre Béland and I am the President of Metromedia CMR Broadcasting. I would like to introduce the people with me this morning. First of all, at my left, Madame Monique Lacharité. Madame Lacharité is Vice-President Finance, Control and Administration of Cogeco Radio-Television.
22253 A ma gauche ici Monsieur Michel Carter. Michel Carter is Vice-President and General Manager of Cogeco Radio-Television. And on my right Pierre Arcand, Executive Vice-President of Metromedia CMR Broadcasting.
22254 Behind me at my left, first of all, Don McGowan, Consultant for the T&L Network; Gerry Dixon, Program Manager of the T&L Network; Yves Mayrand, Secretary of Cogeco Radio-Television and finally Gilles Senécal, responsible for Metromedia of Corporate Affairs.
22255 We appear this morning before the Commission as part of a public process that is familiar to us. It is, nevertheless, a first for us in two ways: It is the first time we are appearing before the Commission as a member of a partnership. It is also the first time that a joint Metromedia-Cogeco Radio-Television application is being presented to you. It is also a first for this partnership as regards establishing a new specialty television service.
22256 We are very proud to present our project to you, one in which we have invested a great deal of energy. We are very enthusiastic about it and believe strongly in its success.
22257 In forming this partnership, Metromedia CMR Broadcasting and Cogeco Radio-Television ask you to recognize a dynamic new group with solid broadcast experience. One that is prepared to provide diversified, quality programming, that is sufficiently flexible to adapt to new digital opportunities and committed to meeting the needs of the consumer.
22258 This alliance between our two companies is even more natural and relevant given the corporate links that already exist between the two partners. Cogeco Metromedia, a national rep house, was created in 1993 and may be considered a great success in its area of expertise.
22259 Metromedia Broadcasting and Cogeco Radio-Television have proven experience in the broadcasting field. They enjoy many solid achievements and have practical knowledge of the daily demands of producing and promoting original audio-visual content.
22260 Metromedia CMR Broadcasting is active in both linguistic communities in Canada. It has, for example, overseen the rebirth of CFQR-FM in Montreal; Q-92, CFQR-FM, is currently the number one English language radio station in Montreal. Also, for Metromedia, 940 News is an AM station. It is now the only all-news English language radio station in Montreal on air since December 1999.
22261 MR. CARTER: Cogeco Radio-Television Inc., or CRTI, is a wholly-owned subsidiary of COGECO Inc. CRTI has been operating television licences for more than 43 years and radio licences for over 14 years.
22262 We are delighted to be partners with Metromedia CMR Broadcasting in this digital licence application and we are convinced that there is a clear need for the Travel and Leisure Network.
22263 CRTI brings television broadcasting experience, including on-air automation control, traffic and sales. CRTI, through its subsidiary Productions Carrefour, has also significant television programming and video production expertise. Carrefour has produced for a number of years many daily shows for the CBC French-language network service, as well as weekly programs for various specialty programming services.
22264 We are happy to be part of this exciting new digital network and we are committed to invest the funds required to make it succeed in the new digital world.
22266 MR. McGOWAN: The service we are presenting to you, the Travel and Leisure Network, offers a winning travel leisure combination that will fill a real need in English-language programming in Canada. Our programming approach is clear, simple and concise: We want to offer exclusively travel and leisure related information and entertainment content with original programming in this genre, without duplicating the programming of existing English-language services in Canada.
22267 This choice, and our entire approach, is bolstered by the extensive and market tested programming experience enjoyed by Metromedia and CRTI. We are convinced that our respective experience, when pooled in the Travel and Leisure Network project, will guarantee a quality television product that will meet the requirements of the Commission and will be very attractive to Canadian viewers.
22268 We believe the project we are presenting to you dovetails perfectly with the launch of new digital specialty programming packages, and would be a major factor in promoting the quickest and the widest possible deployment of digital technology.
22269 At this time, we would like to present a short video that will give you a bird's eye view of the programming we plan to offer on the T&L Network.
--- Video Presentation / Présentation vidéo
22270 MR. CARTER: Digital technology promises many fascinating new developments. Any broadcaster might be tempted to present you with a dizzying array of concepts made possible by the new digital technology and to present a package of ancillary services that could easily be considered virtual, in every sense of the word. However, we have resisted this temptation in order to focus on the realities of the existing market, while remaining proactive and open to the evolution of digital technology and various interactive platforms in Canadian households.
22271 The commitments we have made regarding Canadian content are firm commitments that we believe are realistic for an exclusively digital product. The Canadian content percentages, which will increase from a minimum of 40 per cent to at least 50 per cent over the term of the first licence, are in full compliance with the Commission policy for Canadian content for Category 1 digital services. They are also realistic and in line with the revenue and expense estimates for ensuring the success of this new service.
22272 We have also earmarked major investments for acquiring subscribers through advertising, marketing and promotions in the emerging digital distribution market. We believe this is an essential element of a realistic business plan. What is required is not only increased investments in programming, but also sustained marketing efforts throughout the initial licence term. We would like to stress that our programming expenses will be entirely and directly applicable to T&L Network programming and will not be derived from or applied to redistributing or recycling resources or content from another television service.
22274 MR. ARCAND: We appear this morning fully convinced that this programming project responds to a clear demand in the Canadian market. We asked reputable firms to conduct two market studies in support of our application: a survey by Angus Reid and a marketing survey by HYPN. Our Angus Reid survey has clearly demonstrated the popularity of this type of programming with English Canadians. Nearly six in ten of the respondents said they were likely to watch the travel channel as described, with 20 per cent reporting that they were very likely to view the channel. A large proportion of those who expressed a likelihood to view and subscribe to the channel suggested that it would become a regular habit, with 43 per cent expecting that they would watch the channel more than once a week and 49 per cent reporting that they would watch the channel roughly once a week.
22275 We have a broad target audience of 25-plus. It is directly linked to the general interest in the travel and leisure genre. Travel and Leisure Network wants to provide unprecedented service in the English television sector, a service that focuses on the travel and leisure interests of Canadians, one that will also clearly differ from and be complementary to available French-language services.
22276 We want to provide programming with a mix and content that is customized, original and consistent throughout the programming schedule. It will present a real window on Canada and the world.
22277 In order to do this, we have assembled a team of travel and programming experts. Their English content experience will ensure that success does not derive from French-language productions, nor the availability of corresponding material in French. With, among others, Don McGowan and Gerry Dixon, whose reputations in English-language travel and leisure broadcasts are recognized across Canada, we can count on unique expertise in the production and broadcasting of travel and leisure programming.
22278 Gerry Dixon is the producer of Travel Travel, which enjoys enviable popularity in Canada. Our Angus Reid survey revealed that Travel Travel has a baseline of awareness that extends across all regions of English Canada.
22279 About three in ten of all English Canadian cable and satellite subscribers, and more than 42 per cent of Core Viewers subscribers, say they are familiar with the show. An overwhelming majority of those aware of the program said they have also watched it.
22281 MR. DIXON: The arrival of the T&L Network on the Canadian television scene would also provide an incredible boost to Canadian production and talent. The programming we propose is largely built on the support of independent producers who will be mandated to reflect Canada and its regions, cultural diversity and geographical attractions, while catering to the demands of Canadian viewers.
22282 The Travel and Leisure Network will offer 825 hours of non-duplicated travel and leisure programming in year 1. Of that total, 540 hours, or 65 per cent, are Canadian productions. Independent Canadian productions account for 33 per cent of the total Canadian programming hours. Canadian program acquisitions from independent producers will amount to $10.3 million over the initial licence term. We will spend more than $3.5 million on Canadian productions in year 1 alone, and a total of more than $30 million over the initial licence term.
22283 Starting immediately in year 1, our programming schedule will include Canadian programming representing 58 per cent in the evening viewing period, growing to 67 per cent in the last year of the initial licence term.
22284 We also believe that the arrival on the scene of a new broadcaster in the specialty television market in Canada will open the door to new opportunities for talented producers and creative artists who have been largely unsuccessful or met with limited success in having access to networks that are controlled, to a large degree, by established and integrated players. We are convinced that our arrival will lead to the discovery of new talent and the emergence of innovative new ideas in the travel and leisure sector.
22286 MR. ARCAND: In the area of digital distribution, we have presented a plan pegged to a realistic technology deployment scenario. This plan has been looked at for all contingencies, corporate constraints or conflicts of interest linked to any dominant position in production, broadcasting or distribution.
22287 Our distribution plan includes a realistic, affordable wholesale rate, one that took into account the existing market, the development potential and the inherent risks of launching a new digital specialty service. We foresee an initial wholesale rate of 35 cents for the first year and 42 cents for the seventh year.
22288 MR. CARTER: Madam Chair and Commissioners, Metromedia CMR Broadcasting and CRTI will form a new group prepared to adopt an innovative approach to specialty television. The regulatory framework established by the Commission for Category 1 licences makes it particularly well adapted to introducing new players to the Canadian specialty television sector.
22289 It is, we believe, a way to ensure the diversity and innovation that will help enrich and vitalize the Canadian broadcasting system, without competing with or being detrimental to existing services.
22290 Furthermore, the financial capability of the two partners has been clearly demonstrated in the documents filed in support of our application with the Commission.
22292 MR. BÉLAND: We have applied for a Category 1 licence for the T&L Network because we believe that the privileges attached to it are essential to ensuring the successful entry of a new player that does not already enjoy a dominant position in specialty services or in digital distribution in Canada.
22293 You have noted that the Metromedia CMR Broadcasting and Cogeco Radio Television group has filed only one licence application in response to your call for digital service application with this public hearing.
22294 Madam Chair, Madam Chairperson, we firmly believe that a Travel and Leisure Network is a clear leader in the packaging of digital services and is, therefore, a must for Category 1 licensing. The clear commitments that we have made to the T&L Network amply demonstrate to you that we consider this service a priority.
22295 In closing, we submit that by allowing the creation of the T&L Network, the Commission would be making an important gesture towards television service diversity in Canada by allowing the emergence of the new player in specialty television.
22296 A player without a dominant position in the broadcasting system or distribution undertaking, one that boasts broadcasting expertise in both Canadian linguistic communities and has all the required qualifications to succeed and make a tangible, unique and new contribution to the Canadian broadcasting system.
22297 I thank you.
22298 LA PRÉSIDENTE: Bonjour, Monsieur Béland, Monsieur Carter et vos collègues.
22299 Good morning. I will pose my questions in the language in which the application was filed, but you are free, of course, to address us in either language you wish. Any third one will meet with difficulties, but either French or English you are welcome to use.
22300 We have been asking questions of other applicants before us, some of which we will ask of you as well. I have seen you, I think, in the hall, Mr. Béland, before. You have an idea what those are. Of course, we have seen Cogeco before, so they are familiar with them and you probably have ready answers for me.
22301 The first one is with regard to selection criteria. You have already put some emphasis, of course, on the lack of a travel channel in English Canada and also in the diversity of ownership that would flow in the specialty area from licensing services to this partnership.
22302 We would like to hear you on what guidelines you would recommend for the Commission in selecting the Category 1 services that it licences. In the Public Notice we have, of course, mentioned a number of them, Canadian content, exhibition levels, expenditures, the significance of the contribution to the independent production industry, affordability, your business plan. How do you think we should -- what priority should we establish on these criteria in choosing proposals?
22303 MR. BÉLAND: Madam Chair, first of all, we as a group for both Metromedia and Cogeco fully endorse the criteria outlined by the Commission. However, we believe that our specific application is based upon a certain number of criteria or points.
22304 First of all, the effectiveness of the travel format as it has been supported by the research undertaken by HY&T and August Reid. The second point I would say is the capacity of both groups to produce quality content with seasoned people already related to travel television. Don McGowan and Gerry Dixon are probably the most seasoned broadcasters in Canada related to travel television.
22305 I would say the most important point is probably the implementation of a new voice in specialty TV service. Cogeco and Micromedia are absent from TV services right now. I think this would help. It would contribute to a greater diversity of voices in TV specialty services.
22306 THE CHAIRPERSON: On that last criteria of diversity, some have argued, of course, that if we licence services that may have had a nesting experience of genre in an already existing service or will benefit from windows or the expertise of already existing services, that diversity perhaps is better achieved if it is the same owner because there will be some interest, of course, in diversifying so as to enhance your own commercial imperatives of capturing as much audience as possible.
22307 Your view is that we should not discount but put in greater priority into the specialty rather than focusing on leveraging what already exists and counting on that for diversity and strength of commercial or financial strength to meet what is probably going to be a fairly risky environment in the initial years.
22308 MR. BÉLAND: Well, first of all, as a group I think on behalf of Cogeco and Micromedia, we strongly believe that you should allow new blood into the system. I think we are bringing in new expertise, a different approach. This is why I believe that although we all fairly know that we are getting into unknown waters, we believe that we are applying for a Category 1 and we have a business plan that is livable.
22309 There is obviously a need for the service. We believe that it's a good way for us to get into this new field of activity.
22310 THE CHAIRPERSON: Does Cogeco have anything to add to this discussion?
22311 MR. CARTER: Well, we certainly can, Madam Chair. It would be sad if in the new digital environment only a few elect could apply and have the opportunity to bring new images, new content to the Canadian screens in the Canadian households.
22312 We strongly believe that bringing new players will add true diversity to the system. We did, however, apply for a Category 1 because, being a new player, we would not have the leverage of other channels for distribution. That's why we have only applied for a Category 1 licence because we would require mandatory distribution obviously.
22313 THE CHAIRPERSON: So you are picking up what we have heard before, let the seasoned players deal with the more shark environment of Category 2 and give a bit more protection to the new players in Category 1. That comment has been made before, obviously not by CHUM.
22314 Now, implementation of service. We have also discussed with applicants whether the old way of doing things is still relevant for both Category 1 and Category 2 services whereby the Commission establishes a deadline date by which services are supposed to be implemented and, if not, need a formal authorization or extension of the period.
22315 Is it your view that in the digital environment this approach is still relevant?
22316 MR. CARTER: Yes. We certainly believe that all Category 1 licences should go on air at once, facilitating packaging for distribution purposes. There should be a set date. We are very comfortable with the September 1, 2001, date that has been suggested here and there during the hearing.
22317 THE CHAIRPERSON: With regard to Category 1 services, I see two issues. One is a date, une date butoire, comme Madame Bertrand dit, a deadline date you have to implement within 12 months which has been what the Commission has done traditionally with licensees.
22318 The other is the question of common implementation and, of course, the cost effectiveness of that and the significance of having a real splash when the package of services is put together and offered to the public as a whole.
22319 Another issue is how do we -- can we just rely on the cooperation of programmers and distributors to manage to do that within this deadline date.
22320 So there's the deadline date that is aimed at ensuring that people don't sit on the genre on their licence and don't implement it, and the other is implementation.
22321 Is it your view that it would be possible that we should impose or try to impose a date for actually launching as opposed to a date when your authorization lapses?
22322 MR. CARTER: It would be, Madam Chair. We certainly understand the deadline date question that you are suggesting and we are in agreement with it, but I think the Commission could go further and mandate a simultaneous launch date for all of the services, maximizing introductory success for all of them.
22323 THE CHAIRPERSON: So the incentive that both distributors and programmers or licensees would have in your view is not sufficient to ensure that it occurs. You would want some regulatory intervention.
22324 MR. CARTER: Well, I am pretty sure that the industry would collaborate to come up to a certain date, but it seems to me that it would add an additional incentive if the Commission were to set at least an expected start up date.
22325 THE CHAIRPERSON: You are experienced broadcasters. How would you foresee this occurring, the regulatory intervention?
22326 MR. CARTER: Well, it seems to me we have had an experience in the French market recently with the launch of the four latest digital services that were all packaged together and that had the simultaneous launch date as suggested by the Commission.
22327 THE CHAIRPERSON: Yes, it's not clear to me though in this context once we have given licences what you would foresee the Commission doing and how it would do it considering that the launching of services, yes, mandatory access to a distribution system, but nevertheless still based on negotiations and the arrival of a successful negotiation which may not be concurrent with another service. Suppose you have in the English market 10, between 10 and 15 or 12 or 13, whatever, services how would you manage this?
22328 Mr. Mayrand seems anxious to tell us.
22329 MR. MAYRAND: Madam Chair, I think that Michel was referring to the possibility of the Commission signalling unit's decisions or an accompanying public notice really that it does expect -- we strongly expect a common launch and certainly based on experience we think that that would be helpful and would certainly further encourage the various parties who have to cooperate with this launch to do so.
22330 There has also been discussion, I guess, in the course of previous presentations and questions answers that may be consideration given to a certain process ahead of time to ensure that any differences having to do with affiliation questions do meet certain prior deadlines.
22331 There again, I guess past experience has shown that it may be helpful to have certain timelines ahead of the drop dead date being put forward.
22332 THE CHAIRPERSON: And have an organized arbitration process rather than have one only when things don't work out, have one that is preordained.
22333 MR. MAYRAND: Well, that really, I think, is for you to determine what is most practical and effective and convenient in the circumstances.
22334 There is, of course, a general process already embedded in the regulations. It may not be the most practical process as it stands right now when a number of players are involved, particularly when you players are involved in the equation, and when a new medium is involved with a varying situation.
22335 So I think all we can volunteer to say is that in the past the Commission has looked at adding some efficiencies and some general rules to this process rather than having it piecemeal and it may be useful in this case as well.
22336 THE CHAIRPERSON: Would a process that the Commission has been having a successful experience with. You are familiar with the SISC process on the telecom side. Now you are going to ask me to tell you what that is. It's an interconnection committee that was instituted to try, when local competition was permitted, to iron out as many things as possible by members of the industry and we are proud to say that next week we will be adjourning early one noon hour because we are receiving a prize for having instituted this process and the success of it.
22337 We hope, yes. We are one of the three finalists in having -- so the possibility is that we will come back from our luncheon disappointed or pleased, depending on whether we were chosen among the three.
22338 So that is the type of thing that you would envisage, possibly an industry group with possible --
22339 MR. MAYRAND: Madam Chair, it certainly is a very, I would say obvious possibility, and I would be so bold as to say that whether the Commission is fortunate enough to win this contest or not, it still remains an very interesting avenue that has helped resolve fairly intricate commercial and technical issues in the past, particularly on the telecom side, but not only --
22340 THE CHAIRPERSON: Maybe we can converge. Of course, I am an eternal optimist so I am sure we are going to be the happy winners.
22341 Now, your suggestion that we could say something in a public notice about getting along and negotiating in good faith and arriving at conclusions in due course, this type of expressed hope. Is Cogeco prepared to promise that that would lead them to a successful negotiation by itself? If all we did was to express -- you know, often we are told, "Well, just say it in your covering public notice that this is what you are expecting". It hasn't always been good enough to meet our goals.
22342 So perhaps the second would be more practical.
22343 MR. MAYRAND: Madam Chair, I think we were probably referring a little earlier to a combination of both and certainly I think there has to be signalling in the decisions and accompanying notices, but also a path in the process that all parties are aware of.
22344 THE CHAIRPERSON: An invitation to actually converge ideas. It will probably have to be at least a month after licences are issued as there will be some recalcitrant and disappointed people, obviously, with 88 applications before us. But that is interesting that the Commission could not only signal its interest in seeing this launch, this common launch, which everyone has said is necessary to make a success of this as early as possible in the more difficult years, beginning of it, and this would be an invitation for people to actually put their money where their mouth is and participate in an organized process.
22345 Now, in your nature of service, in many cases we have ended up in a process of removing categories from the nature of service. In your case we wonder whether we shouldn't discuss the addition of some. You have one category and it's going to cover 90 percent of the programming.
22346 So it raises the question, of course, of what the rest of the 10 per cent will be, which becomes a number of hours based on a 24-hour day.
22347 In Schedule 10, all the programs there are 5(b). And in 7(1)(c), where you describe your service, you only choose 5(b) as a category.
22348 So what does the other 10 per cent of the programming consist of?
22349 MR. BÉLAND: Before leaving Gerry Dixon to give you the answer, I think, overall, Madam Chair, what has guided us in making this presentation is that the entire channel is totally devoted to travel, so we are not trying to find other sources or other types of programming. It's totally and fully dedicated to travel.
22350 I would ask Gerry Dixon to give you other details on the programming.
22351 MR. DIXON: I don't really have anything else to add because the entire schedule, as Pierre mentioned, is devoted to travel products.
22352 THE CHAIRPERSON: Except that our experience has been that whether's it's travel, whether it's mens', whether it's youth, most categories, other categories, can be fitted into the travel mode; for example, you are going to have a blockbuster movie -- to exaggerate -- that is based on travel.
22353 So, we would like to know what else in the category is -- 5(b) is informal education, recreation and leisure -- what other form it could take.
22354 MR. DIXON: As a group, we have decided to approach the entire schedule to devoting everything to travel and are not interested, at all, in movies, music videos or filler programming. We are a travel station and network.
22355 THE CHAIRPERSON: Well, why isn't it 100 per cent 5(b), then?
22356 MR. DIXON: I think that we wanted to at least have some flexibility across that seven-year period. In our submission of the Year 7, we had a vision of possibly having a travel game show, having, possibly, other types of travel-related products that would, somewhere along the line, end up in the later years of our licence. So that 10 per cent would probably make that up.
22357 THE CHAIRPERSON: Then, though, the programming you would add would not be indicated in the categories? As long as 90 per cent can be found to be informal education, recreation and leisure, you would feel that your condition of licence, with regard to the nature of service, has been fulfilled? So, basically, you could have a long-form documentary; you could have a movie about travel?
22358 MR. DIXON: I think I would like to reiterate --
22359 THE CHAIRPERSON: For that 10 per cent.
22360 MR. DIXON: -- that we were really looking at just travel and not entering any type of --
22361 THE CHAIRPERSON: Yes. I think you may be confusing genres and categories -- which you may or may not be familiar with the manner in which we fence in the genres.
22362 MR. CARTER: We note, Madam Chair, that other applicants in the travel genre have asked for a number of categories, including drama and music and dance video and public announcements, infomercials, corporate videos, filler programming. We are not going to do any of this. That's why we are not asking for it.
22363 Now, if -- we think that even the game show that Gerry has just mentioned would be captured into informal education, recreation and leisure.
22364 THE CHAIRPERSON: You could -- it would all fit in.
22365 So, possibly, it could be 100 per cent?
22366 MR. CARTER: That's the intent of the channel; it's going to be all about travel.
22367 THE CHAIRPERSON: Usually, the concerns are, of course, the categories that you -- so, you would be satisfied if drama was specifically excluded. Which is --
22368 MR. CARTER: Yes.
22369 THE CHAIRPERSON: -- which is usually what raises a question, drama, which would take in movies, et cetera.
22370 So, if 7 were excluded, that would not cause a problem?
22371 MR. CARTER: No. We would be --
22372 THE CHAIRPERSON: And then you would have more -- because they are usually where you add 24 hours, even at 10 per cent, you can have movies which, depending on where you situate them, raises questions of overlap. Of course, 10 per cent is not as much as we have seen.
22373 So, you would have no problem if 7 was excluded, rather than taking off more boxes?
22374 MR. CARTER: That's fine. We would agree with this. As well as 15, if --
22375 THE CHAIRPERSON: Yes; we didn't have the pleasure of asking you if you had dog named "Category 15".
22376 Independent production. You do say, in your supplementary brief, that you will make extensive use of the independent production industry and you have a commitment which is expressed, particularly today and at page 5 of your presentation, about Canadian production and the portion that would be attributed to the Canadian independent production sector.
22377 Now, it raises, of course -- as it has with everyone -- the -- what you would see as a reasonable definition of an "independent producer". And, of course, it's fair to say that Carrefour is a related producer for Cogeco.
22378 MR. BÉLAND: A certain number of points we have taken into consideration in the definition of an independent producer. We feel that an independent producer, in relation to a licensee, is a producer that is not subject to significant influence by the licensee, whether directory or indirectly, through the licensee's owner or other affiliates.
22379 We also feel that an aggregate financial interest of more than a third in the capital of the production entity by a licensee or its owners or affiliates clearly involve significant influence by the licensed broadcasters, such that the production entity should be deemed an affiliate of the licensee.
22380 We also feel, Cogeco and Metromedia -- that significant influence can still be exercised at the lower threshold of financial interest, depending, obviously, on circumstances, and we would be comfortable with a threshold of as low as 10 per cent.
22381 THE CHAIRPERSON: Does Carrefour produce in the English language, at the moment?
22382 MR. CARTER: No -- well, we have produced one specific corporate video in English, but no series at all.
22383 THE CHAIRPERSON: And I noticed that -- I think I'm correct -- in your presentation, you put some emphasis on the fact that it was not your intention to use French-language programming and simply translate it and reuse it. Am I correct?
22384 MR. CARTER: That is correct, Madam Chair.
22385 THE CHAIRPERSON: So, in your commitment to independent production, you would be satisfied -- Carrefour would be eliminated by as low a threshold as 10 per cent, would it not?
22386 MR. CARTER: Yes, it would.
22387 THE CHAIRPERSON: So that any production money directed to Carrefour would have to be in the "non-affiliated" box of your commitments. Right?
22388 MR. CARTER: This is correct. This is how we understand it.
22389 THE CHAIRPERSON: Now, the script and concept development money, which is $50,000 a year -- with my trusty calculator I could check that it was included in the sum, to arrive at your 34 per cent of expenditures on Canadian content -- that 50,000 was built into the formula?
22390 MR. CARTER: I don't think so, Madam Chair. It was over and above. What's included in the formula is programs to be telecast. This is over and above.
22391 THE CHAIRPERSON: Anyway, you can recheck that. But to get to 34 per cent, which you agreed to as a percentage, I think it requires putting in the numerator, that 50,000. That's the way I calculated it anyway. So that you would have about -- first year 3.59 of programs telecast, and then another 50,000 under script and concept development for Canadian program. I think it's necessary to add it in if you are going to get 34 per cent. And if it were, you know, what we do? We aggregate -- especially those of you involved in TV -- aggregate the seven years' projected revenues for the denominator and aggregate the -- and then you get -- well, you get your percentage by taking all seven years of revenues and of expenditures; and it seemed to me I needed to put in the $50,000 a year for script and concept development to arrive at 34 per cent.
22392 In any event, I want to know, if that were the case, whether this $50,000 is a firm commitment or whether it would shift in a pro rata way if your revenues did not generate the money expected?
22393 MR. DIXON: It's a firm commitment.
22394 THE CHAIRPERSON: The $50,000?
22395 MR. DIXON: The $50,000 per year.
22396 THE CHAIRPERSON: Mr. Carter can tell me later on whether it is the 34,000 or not -- the 34 per cent, rather, or not. So that's a firm commitment. That will flow to independent producers, basically, regardless of whether your revenues are met and the 34,000 generates less money than expected?
22397 MR. DIXON: Yes, Madam Chair.
22398 THE CHAIRPERSON: Interactivity. You have discussed in your supplementary brief access to a Web site. We have seen it this morning and you have in Schedule 10 the travel hour that we saw a bit of, I believe, which is an interactive program. You have also included a cost of the web presence in your assumptions of $100,000 in the first year, rising by 5 per cent a year which is in your expenses.
22399 Are we to believe that this is mostly Internet Web site interactivity?
22400 MR. DIXON: Yes. The $100,000 to the Web site is that.
22401 THE CHAIRPERSON: Do you foresee, as the technology develops and penetration of digital technology in the homes develop, using interactivity of a second level or generation for your service?
22402 MR. CARTER: Yes, Madam Chair. As interactive television develops, for example, we certainly want to use as much of it as we can as it develops, so that we will use all of the digital capacity of the broadcasting licence and of Internet as well to make this a true experience, a true new travel experience for Canadian listeners across the country.
22403 So at this time we believe that interactivity truly exists through the Web site, but as technology evolves and as interactive television becomes available, then we will want to make use of every bit of it.
22404 THE CHAIRPERSON: And I suppose a travel channel is ideal for this type of use.
22405 Do you have anything to add to what has been said already or what are your views of the development of this second generation interactivity? When would you see that in your business plan as becoming a reality? It's that top box that would allow interactivity.
22406 MR. CARTER: I don't think we would defer from what has been said by previous applicants.
22407 As far as the deployment of digital set-top boxes that will allow interactivity, we are still looking 18 months at least. Then, before there is a critical mass out there that it makes sense to install the servers and the software at the broadcaster site to make it happen, it will be even a little longer. But we are generally in agreement with what has been said.
22408 THE CHAIRPERSON: Would you see the expenses for this being far more significant than the amounts attributed to the establishment of a Web site in 8.2, which is your expenses schedule?
22409 MR. CARTER: It could very well be, Madam Chair. As you have noticed, we have no revenue from interactivity.
22410 THE CHAIRPERSON: Yes, I did.
22411 MR. CARTER: So all we have at this point is about $800 and some odd thousand dollars of expenses, $814,000 to be exact. It may very well be that as interactive television comes in we will have to invest more in both capital and expenditures, but on the other hand it can generate revenues and neither of those are in the business plan.
22412 THE CHAIRPERSON: So they would, hopefully, work in tandem. You would generate revenues from it as you expand?
22413 MR. CARTER: As is usually the case with new technology, you generally have to invest a little bit before you get the revenues, but the closest possible.
22414 THE CHAIRPERSON: Yes. But usually the schedules show you getting it back over time is what I meant.
22415 MR. CARTER: I guess if we were to have a revenue and expense schedule for interactivity alone, I guess we would see some expenses and investments a little bit ahead of revenue, but catching up hopefully with time.
22416 Madam Chair, can I come back with this 34 per cent question that you previously asked?
22417 THE CHAIRPERSON: Hopefully I am right.
22418 MR. CARTER: Well, you are always right, Madam Chair.
--- Laughter / Rires
22419 MR. CARTER: But my calculations are that total telecast expenses for the seven years amount to thirty million, five thousand dollars and fifty-seven, which represents 34 per cent of the total revenue of the seven years, which itself amounts to $89,272,000, which is where the 34 per cent comes from. So that would suggest that maybe that the commitment of the $50,000 a year is over and above the programming commitment.
22420 THE CHAIRPERSON: Well, Mr. Carter, if you add the figures and you don't put the $50,000 in it's difficult to arrive at $30.4 million. But anyway, it is not --
22421 MR. CARTER: We would be happy to clarify this, Madam Chair.
22422 THE CHAIRPERSON: It would appear to have been included to arrive at that sum.
22423 To go back to interactivity, since these revenues that maybe you would prepare a schedule for as it develops, would you see sharing any of this money with Cogeco Cable?
22424 MR. CARTER: I must say that there is no agreement currently with Cogeco Cable or any --
22425 THE CHAIRPERSON: I was being facetious.
22426 MR. CARTER: -- distributor.
22427 THE CHAIRPERSON: But we have been asking people how do they see this world developing. Would there be a sharing of revenues, if it requires more bandwidth, more infrastructure from the cable companies.
22428 MR. CARTER: We fully expect that the distribution undertaking would carry 100 per cent of the broadcast content, even if it's interactive, to all of their subscribers. However, if there were going to be revenues derived from the set-top boxes or the infrastructure of the cable companies, we fully anticipate there would be a negotiation process for a fair sharing of those revenues.
22429 THE CHAIRPERSON: And since you are in general agreement with the discussions we have had, you would also agree to abide by the Personal Information Protection and Electronic Documents Act?
22430 MR. CARTER: We certainly would, Madam Chair.
22431 THE CHAIRPERSON: Now, the Canadian content expenditures, I don't think we have a problem with where we are at about the 34 per cent and we understand that you are prepared to accept that as a condition of licence, if this were the way the Commission expected to measure compliance.
22432 MR. BÉLAND: Yes.
22433 THE CHAIRPERSON: Having said that, do you have any comments about whether this is necessary in the digital world, whether it has any impact on the equity of looking at all the applications before us and using the numbers that people put forward and establishing a mechanism that is generally applicable and equally applicable to all? Do you have any comments about that?
22434 We have had various suggestions as to what other mechanism we would use. So we would like to hear you on whether there is a need for it and whether equity and ease of regulatory -- the application of regulatory mechanism requires an across-the-board mechanism.
22435 MR. CARTER: Thank you, Madam Chair.
22436 Maybe Yves Mayrand will want to add something to this, but we fully expect that there will be requirements for Canadian content and for independent production investment.
22437 We feel that those percentages will vary from licensee to licensee. However, we would expect that the mechanism would be the same for everyone, so that it would be a fair application of the mechanism for everyone.
22438 Yves, maybe you want to add to this?
22439 MR. MAYRAND: Yes, Michel, maybe briefly. It is certainly the view of this group that what we are applying for here is a Category 1 licence which, as the Commission has said, involves certain rights attached to this licence status.
22440 It's our view that it is perfectly understandable. The Commission would want to have specific assurances as to certain contributions, given those rights and privileges.
22441 Conversely, it also means that all applicants, and eventually successful applicants operating a Category 1 digital licence, do have very specific expenditure commitments and I think have a reasonable expectation that their service will be effectively launched and carried and dynamically marketed at terms that make the business plan possible and that's an equation you are familiar with. So there are two sides to the ledger but, yes, we understand that this is the particular equation we are talking about with a Category 1 licence.
22442 THE CHAIRPERSON: Presumably, as we discussed earlier, if by the end of this hearing there is a sense of a firm commitment, perhaps motored by the Commission initially to have this type of discussion among distributors and programmers in order to make sure there is a significant achievement of what is expected. It all goes together, if you don't succeed or you don't have reasonable -- even if you have a reasonable business plan, you have to be carried by the distributor and also get into the home.
22443 So we go back to attractiveness and negotiations in goodwill, to the extent possible, based on business plans which we are supposed to look at the reasonableness of, which leads me to ask you to comment on the penetration, which is relatively high -- 55 per cent in the first year -- and is constant throughout the term, which is usually not what is projected by applicants. Usually there is a ramp-up.
22444 I would like to hear you on matching this 55 per cent with your research, and also why you feel that the penetration will be constant throughout.
22445 MR. CARTER: Probably Pierre Arcand will want to add something with respect to the research.
22446 We fully anticipate that all new licences will be sold in various packaging. For subscribers, this is what currently works in the digital world, not only in Canada but elsewhere. Therefore, we fully expect that there will be extensive packaging by the distributors.
22447 Pierre will mention in a moment how attractive our service is and why we are anticipating 55 per cent penetration, but we feel that in addition to the research and the attractiveness of our service we need to take into account the attractiveness of other services that would be in the same package, driving the whole penetration.
22448 Now, why we have opted for an average penetration of 55 per cent across the seven years is a choice of the business model. I guess it could be somewhat lower in the beginning and somewhat higher at the end, with very few impacts on the business model.
22450 MR. ARCAND: Yes. If I might add, when we made that survey by Angus Reid, almost 60 per cent said they were likely to watch the channel.
22451 Also, one of the things that was very important is that a large proportion of those who expressed a likelihood to view and subscribe to the channel suggested that it would become a regular habit.
22452 We have to understand that this was made in March 2000, when this research was done, and there was no publicity surrounding all of the applications and whatever has been made. So we have a tendency to believe that this demand will even be stronger in the months to come, once you have some publicity and marketing surrounding those new stations.
22453 THE CHAIRPERSON: You mentioned the attractiveness of the package. Obviously attractiveness is involved in diversity, the programming that has not been seen before. The reasonableness of the business plan, of course, involves the extent to which any service also licensed may in your view be competitive or overlap too much -- in the same program genre it would be too closely aligned.
22454 You have followed the hearing. You are aware that at Phase IV we will expect licensees to tell us which services, if they were licensed along with yours, would jeopardize your business plan, and also to tell us how many services you think would be a reasonable number to license.
22455 You don't have to answer the first question, since you only have one service, because it is to tell us which of a number of services we should give priority to. So we will expect at that time to perhaps get a bit more comments that are not theoretical but that are real about what other services applicants feel are competitive with theirs.
22456 I don't know if you have started thinking of it.
22457 MR. CARTER: We certainly will be there to tell you more at that point.
22458 I was wondering whether we could ask Don McGowan, who has hands-on experience about attractiveness, which goes back to the question of penetration, to tell you how Canadians enjoy travel programming.
22459 THE CHAIRPERSON: Yes. Why you feel your penetration is not overly optimistic.
22460 MR. McGOWAN: I have been waiting 15 years for this. I will not talk into the lunch hour, but I hope you will indulge me.
22461 I have been a broadcaster for 43 years. I think I predate the Board of Broadcast Governors.
--- Laughter / Rires
22462 MR. McGOWAN: I have been around that long.
22463 THE CHAIRPERSON: You have survived regulation all this time.
22464 MR. McGOWAN: Yes.
22465 THE CHAIRPERSON: You look rather well for --
22466 MR. McGOWAN: I appreciate that.
22467 I spent 35 years of my professional life at CFCF. The last 20 years of my professional life -- those years dealt largely with the production of television programs, produced entirely on location. That began in the late seventies and early eighties with the new technology. The betacam changed forever the way we did our work. The betacam has almost made the traditional studio an anachronism.
22468 I went on location first in the early eighties with a travel and leisure-type program/magazine called McGowan's World, and then that begat Travel Travel.
22469 In 1987, when I was Executive Producer of CFCF, I approached the programmer with the notion of producing a travel program. It seemed to me that kind of program was just made for the new technology -- for betacam technology. He said: How long do you think this might last on our schedule? I thought perhaps three years or five years. Five years for a program to be on the air is an eternity in our industry.
22470 This fall Travel Travel will start its 14th year on CFCF and on conventional stations across the country, and in international distribution.
22471 The programmer at CFCF hasn't scheduled Travel Travel because he happens to like me. The show is on the air because people watch it.
22472 Indeed, last spring in the ratings Travel Travel was the ninth highest rated program in the entire CFCF schedule. People watch the program. I continue to be overwhelmed by its success.
22473 My experience and my intuition tells me that Canadians will watch this kind of service -- this niche service. The Travel and Leisure Network will stick to its knitting. It is a travel channel, and there is nothing novel about a travel channel. There has been one in the United States for over 15 years, Central America, the U.K. and Germany. There is a French-language travel channel in our country.
22474 It is not a movie channel, it is not a drama channel, it is a travel channel. You will never see The Snows of Kilimanjaro, Casablanca or Roman Holiday on our travel channel, because it is a real stretch to suggest that they belong under the travel channel umbrella.
22475 Our channel will focus on an activity in which we all participate: travel. Some of us are business travellers here. T&L will speak to the business traveller.
22476 We could have enjoyed some aspects of tourism ourselves as business travellers. I understand that there is a casino nearby. We will speak to that aspect for the business traveller.
22477 We will speak to the budget traveller, a small family going outside town to camp for a day or two, perhaps not with the means to go to another continent. We will speak to that traveller, to the disabled traveller, to the traveller who does have the means to go to fields afar, and, most importantly, to the armchair traveller who lives vicariously through the travel hosts.
22478 It is a simple statement of fact that this channel will exploit the joys of exploration and travel consumerism.
22479 It has been wonderful to meet Canadians around the world. I have been stopped in Christ Church, New Zealand, in Harare, and in Trafalgar Square by people saying: Are you shooting Travel Travel here? I say: Yes, we are. It will be on your air in BCTV in several months.
22480 I am convinced there is a large audience out there for this particular niche programming.
22481 THE CHAIRPERSON: Is it fair to say, Mr. McGowan, to summarize, that you want to add your experience with Travel Travel to Mr. Reid's scientific conclusions?
22482 MR. McGOWAN: This is what I can bring to the party. I am not a lawyer. I am not an MBA. I am an artiste.
--- Laughter / Rires
22483 MR. McGOWAN: But I bring this wealth of expertise to the party, yes, you are right.
22484 THE CHAIRPERSON: I wasn't trying to be funny. I think it is relevant to look beyond the more scientific testing of what will be popular to look at similar experiences and how they fared, either an American service or programming of that genre that has already nested somewhere else. That is what I meant, as to the scientific surveys. I think it is relevant to also factor in experiences, even if they may -- well, they are not really anecdotal because there are BBMs and there is success in some genre programs.
22485 Before I leave you to my colleagues, there were two more specific questions that I missed asking you.
22486 Original hours: As you know, in Phase II we have invited applicants to tell us about original first window hours per year. Again, it has a lot to do with diversity and the extent to which the service's licence will provide it.
22487 In your application you spoke of 540 hours of Canadian production -- original production -- in year 1 and 825 non-duplicated travel and leisure programming. Would that be original programming as well, so that if you deducted the 540 from the 825 you would get the number of original foreign hours?
22488 MR. DIXON: It's largely original. We would have 540 Canadian.
22489 THE CHAIRPERSON: Yes.
22490 MR. DIXON: 149 U.S.A. and 136 international.
22491 THE CHAIRPERSON: Okay. So 285 would be the non-Canadian for a total of 825 hours.
22492 MR. DIXON: Yes.
22493 THE CHAIRPERSON: And this would be a commitment for year one. Either now or at Phase II you perhaps will tell us what your commitments will be throughout the term or whether we just increase the percentage. You can tell us at Phase II if you haven't thought that through year by year because this gives us year one.
22494 The other question was on the Canadian programming expenditures. You have probably noticed how both in their written applications and during the oral process, applicants have expressed a need or desire to inject more flexibility into the mechanism as the Commission identified it in the past.
22495 I wonder what your thoughts are on that as to how important that is for you.
22496 MR. CARTER: Obviously, Madam Chair, we are certainly for more flexibility. To get back to your previous comment, we have in our application committed for a minimum of 40 per cent programming, although our year one programming schedule calls for 65 per cent of the total production.
22497 We think in this digital environment, which is largely unknown, with a new player in the digital world, although with mandatory distribution as a Category 1, it would be appropriate to have flexibility in terms of accounting for Canadian programming.
22498 I guess our commitments as they are stated in the application are a minimum, but we can do better.
22499 THE CHAIRPERSON: Do you think that the suggestion of, let's say, a 10, 15 per cent flexibility from year to year with a minimum -- with a requirement of meeting 90 per cent of the 34 per cent of the previous year's revenue in each year as we go by is a workable formula that would both ensure that over the seven years the amount is spent, but you would be in conformity with your condition of licence if you spent 90 per cent of the sum that is generated by applying the 34 per cent only to give you the flexibility of overspending and underspending year by year which has the effect, I believe, of smoothing out perhaps the first year a bit.
22500 MR. CARTER: That is certainly an opportunity that would be welcome because if you made the calculations on a year by year basis, it is more demanding at the beginning because the revenues are over and somewhat less demanding at the end.
22501 If licensees were able to average out and come up at the end of the seven year period with at least 90 per cent of the 34 per cent commitment in our case then --
22502 THE CHAIRPERSON: What was intended was that 100 per cent would have to be met over the seven years, but one could meet it by doing only 90 per cent as a minimum in one year and, you know, the first year, for example, may be enough to compensate for the rest of the year. In other words, each year the Commission would be able to test that you were in conformity if you did 90 per cent of the sum generated by applying the 34 per cent, but over the seven years the entire sum of 34 per cent would have to have been spent which would allow -- do you understand?
22503 MR. CARTER: Yes.
22504 THE CHAIRPERSON: -- whether that's workable.
22505 MR. CARTER: Would that be on a cumulative basis, Madam Chair? In other words, a 30 year two, would we calculate the two years and make --
22506 THE CHAIRPERSON: We have to work that out, but the aim would be to ensure some type of regulatory conformity that is reasonable so that at year six you don't find that you have to spend sums that make no sense to be in conformity and yet you can smooth out the first years by having the benefit of the overspending and then you manage it as best you can.
22507 MR. CARTER: Well, we are comfortable with the 34 per cent commitment obviously. If it's going to be calculated on a cumulative basis year after year, I mean this is perfect.
22508 THE CHAIRPERSON: And, of course, flexibility need not be used. It's only an opportunity
22509 MR. CARTER: Yes.
22510 THE CHAIRPERSON: Some services, of course, have programming genres that require a very large expense in the first year or second.
22511 Mr. Mayrand.
22512 MR. MAYRAND: Yes, Madam Chair. Thank you. I just wanted to add quickly that it is our understanding that whatever the actual formula the Commission would determine in the end of this process, it would be applicable across the board to the various Category 1 licensees. In other words, there wouldn't be a custom tailored formula for each licence.
22513 THE CHAIRPERSON: No. I think most parties have agreed that an applicable mechanism that you use or you don't, your flexibility would be applied according to the needs, but it would be available across the board for everyone.
22514 I think the idea of doing it over seven years does raise a regulatory problem that I have mentioned. It's difficult then year by year to see whether parties are actually in conformity in discharging their commitment or meeting their commitments. It raises, of course, this possible balloon in the last years that would be practically impossible to meet.
22515 These are my questions, but I believe some of my colleagues may have some.
22516 Madam Bertrand.
22517 CHAIRPERSON OF THE COMMISSION: Oui. Bonjour. Just to clarify on the latter part, although c'est Madame la Présidente who is the expert on the CPE acutériat. I wouldn't throw myself into the calculation, but I just want to clarify, although the calculation might be different.
22518 If the Commission was to grant you a licence, would you accept the 40 per cent of Canadian programming expenditures in the method that would be established as the universal method?
22519 MR. CARTER: We are not sure we understand. We thought that our commitment was 34 per cent. That's what we have in our business plan.
22520 CHAIRPERSON OF THE COMMISSION: Oh, I misunderstood then. I thought yours was 40 and the calculation of stat was 34. You see, I'm not the expert, so I will mind my own business and I will go on with my own questioning.
22521 MR. CARTER: The 34 per cent is in terms of dollars whereas the 40 per cent is the minimum Canadian content over the run of the schedule.
22522 CHAIRPERSON OF THE COMMISSION: Okay.
22523 MR. CARTER: We are happy to take both of them as conditions of licence.
22524 CHAIRPERSON OF THE COMMISSION: Okay. thank you. I'm sorry. I want to talk about partnering because we talk about the necessity of diversity to bring to the digital world. We talk about the necessity of attractiveness so that the consumer, the viewer, will be inclined to make that decision.
22525 I understand from your surveys that when you were kind of testing the attractiveness, you were always testing it along with "Are they willing to pay for it" and when it was willing to pay for it, it was on a stand alone, like 50 cents.
22526 MR. ARCAND: Yes, you know, we didn't do a lot of testing regarding the rates per se because we just used -- the reasons why we decided to use at one point in time in our survey some rates is just to see if there was a strong reluctance on the part of the people to really pay extra, but it was useless to talk about more than that about the rates because obviously, like Michel said, they will probably come in two packages.
22527 The only think I can tell you though is that when you look at all the surveys that we have done, I must tell you that many of the interest-related in proposed programs that we gave to the listeners are really, a lot of it talks about money, you know, targeting the needs of individuals travelling on limited budgets and, you know, how you can use the Internet to help Canadians and how to help travellers in their dealings with travel agents. That came out very strongly. So, you know, there are a lot of things related to that, but we did not go very specifically in the argument of which would be the most attractive amount of money that you are willing to pay, and so on.
22528 CHAIRPERSON OF THE COMMISSION: Because it's difficult at this point. You don't know how it's going to come out.
22529 MR. ARCAND: That's right.
22530 CHAIRPERSON OF THE COMMISSION: But still coming back to our criteria, the attractiveness, the diversity, the partnership. You may say, "Indeed we don't own as it stands in the analog world, a specialty channel", but the partners that are in front of us this morning are not newcomers to the broadcasting system. You all have great expertise and you make a really good point in reminding us of your expertise and your success.
22531 Can you tell us how your specific partnering is a plus in the digital world because that's the step two, it's not only about interesting the viewer to once they will be there to your programs, but it has to be kind of also a guarantee -- well, guarantee is a bad word, but certainly an incentive -- to the consumer to pay those extra dollars because I think it will be in terms of dollars at the end of the day when it will be offered in a package, to really participate fully into the quality of what could be a digital package so that the promise that will be made to the viewer will be really fully delivered.
22532 How do you see -- you have talked to us in your partners and resources, you have talked to us somewhat in a silo manner of your expertise -- that presenting your application and if you were to be granted a licence, that the synergy among those forces or those strands would make a difference in really providing the diversity, but also contributing to the success of a possible package in the digital world.
22533 Am I making sense?
22534 MR. MAYRAND: Madame Bertrand, let me just say that from our vantage point it's very difficult for us to know exactly what the composition of this new tier of services is really going to be in the end.
22535 Obviously, we have been telling you this morning that we have a very strong sense that travel is a must in that package, that clearly it's an available format, it's needed, it has appeal and it's a genre that that has proven its medal on conventional broadcasting.
22536 So we have that element at hand. We know that it will be only one of the several components of this digital launch. I wouldn't think that one should say that because there is one applicant making one proposal and not having previously nested services that that detracts in any way from the type of package that effectively will be licensed in the end, nor should it.
22537 As a matter of fact, we have certainly approached this call for applications as an open call really demanding that interested parties come forward with interesting proposals that meet those criteria. So in that regard, certainly we would not expect to determine what the overall offerings of packages by various specific distributors would be in the end, but we expect to make a difference and we expect that with Category 1 status we have a real opportunity to contribute positively to packaging of digital services.
22538 Now, in terms of the abilities of this group, even though the partners do not come forth with, as you mentioned, preexisting analog specialty services, we view this not really as a problem, quite the contrary as an opportunity.
22539 CHAIRPERSON OF THE COMMISSION: That's my question, Mr. Mayrand.
22540 Ce que je demande c'est: how will the synergy between you -- granted, you are a newcomer in the specialty world, but how will the particular partnership you have establish work in the profit of the whole advancement of the project of digital distribution at the end of the day, for the viewers, of course.
22541 MR. MAYRAND: Well, I think you have this unique, rather unique blend of people who have a very, very good understanding of content, particularly of this particular type of content which is travel and leisure, so we are bringing that into the mix of new digital services. We are bringing synergies of more administrative and financial nature which we have referred to. We have each the requisite financial backing. We have synergies in traffic, sales and generally the setting-up of broadcasting undertakings which we can use. We bring all that to the table, and I should say conversely we bring that without any strings attached to support or help out other ventures, whether analog or otherwise.
22542 M. BÉLAND: Madam Chairperson, maybe I can bring another version because I am the one responsible for this alliance getting into the travel business.
22543 I think there are three elements. When we decided to talk to the Cogeco people and see if we could form an alliance to get to the travel business, I think we have three main points. We are specialists in formatting. I think the closest thing to a specialty TV station is a radio station.
22544 Radio is niche formatting now. Both Cogeco and ourselves, we have over the years experienced broadcasting's specific formats and maybe in our case it's a little bit more because we are in the rock music, we are an all new station, we are in adult format. So we have learned over the years, and the same for Cogeco, we have learned the formatting system in order to reach a targeted audience.
22545 The second point that we have is that we have also the capacity of marketing our own products, and if there is a one weakness that I would see on the specialty channel is the lack of ability of marketing those various TV services. This is something we have learned at both companies to market our radio station, to sell our products and to reach the specific audience we are trying to reach.
22546 The third point is that we have complementary experiences. We are on radio, we are on billboard, they are on radio, they are also on television and also on cable, and we believe that this is a marriage that can produce very positive results because we have different experiences.
22547 So all in all we feel that from the moment that we had also with us people experienced and seasoned broadcasters in the travel domain we felt that it was a super alliance between Cogeco and Metromedia.
22548 MR. CARTER: I may add just one think with respect to technology. Cogeco Radio-Télévision, I would say we have had guts in the digital technology. We were the first affiliate regional television station to have automation, fully automated computer-based, digital-based control room.
22549 As well, for our radio stations. We were a little bit ahead of the pack. And we are early adopters in digital technology. We have that guts. And we will continue with those specialty channels.
22550 CHAIRPERSON OF THE COMMISSION: And my I ask your other partners, Mr. Dixon and McGowan, why they have chosen you? Because, with their expertise, they are bringing to the table, like, the content or the substance or the knowledge of the specific element. Why have they chosen you?
22551 Is it too indiscreet to -- because I would suppose that it really is part of the synergy that you are promising to deliver if it was to be granted a licence.
22552 MR. McGOWAN: Well, I spent some time at 405 Ogilvy Avenue, and so did two of my colleagues. They bought some radio stations from the Pouliot family. I'm a Quebecker. They are Quebeckers. Two very successful broadcasters. High profile in our community. Two responsible broadcasters. The chemistry was good. I'm a Montrealer. They are Montrealers.
22553 MR. DIXON: Both Pierres I have known for years, even as a radio reporter, in Montreal, for the station that they bought -- which was CFCF, at that time -- and I trust these people and, also, they have the professional know-how of putting business plans together, and this was a marriage to be.
22554 MR. BÉLAND: And it's funny -- just one small incident -- Gerry Dixon and I are friends for a long -- we have been friends for a long period of time. And while thinking to put in place this travel channel, I was trying to find out who would be the best person, and it reminded me that, a year ago, I was having breakfast, one morning, two summers ago, in a small village in France, called Beaune. You are in the middle of nowhere, in the middle of France. It was 8:30 in the morning. I was all alone in the old Beaune. And all of a sudden, I hear somebody yelling at me, "Béland! What are you doing here this morning?" and it's Gerry Dixon, who is taking pictures of Beaune for Travel Travel. So it started there.
22555 CHAIRPERSON OF THE COMMISSION: It's a good start. Good wine. But too early in the morning to have that wine.
--- Laughter / Rires
22556 THE CHAIRPERSON: I hope you had a glass of wine, over your engagement.
--- Laughter / Rires
22557 THE CHAIRPERSON: Counsel...?
22558 MR. STEWART: Thank you, Madam Chair.
22559 Would you accept that your commitment to the independent production sector of 10.3 million be in the form of a COL?
22560 MR. CARTER: Yes, we would.
22561 MR. STEWART: Thank you.
22562 And will your proposed service be equipped to broadcast descriptive video?
22563 MR. MAYRAND: Maybe I can answer this question.
22564 In our written application, we did not indicate specific plans for descriptive video. Obviously, we would be prepared to consider that, should the Commission feel it is a necessary component of the licence.
22565 MR. STEWART: Thank you.
22566 And I take it, from your responses to various questions, that you wouldn't object to the word "exclusively" being inserted in the definition of your nature of service in a COL so as to read:
The licensee shall provide a national English-language television specialty service, exclusively devoted to travel, tourism and leisure?
22567 MR. CARTER: We agree with that.
22568 MR. STEWART: Thank you.
22569 Thank you, Madam Chair. Those are my questions.
22570 THE CHAIRPERSON: Thank you, Counsel.
22571 Now the last word is yours, in French or English, and either of you, but not all of you.
22572 MR. BÉLAND: Thank you, Madam Chair, Madam Chairperson, Commissioners.
22573 First of all, I would like to thank you for the opportunity of appearing before you today, in support of the T&L Network.
22574 In closing this presentation, I would like to emphasize that our proposal for a Category 1 digital licence has the advantage of clarity and certainty, with respect to several key elements discussed in this proceeding.
22575 Just a few points that, for me, are very important.
22576 First of all: clarity of need. We believe that there is no English-language travel and leisure service available, at the present time, and I think there is a substantial demonstrated need for such a service, and it should have, and it will have, a broad appeal with English audiences.
22577 Clarity of purpose. T&L Network will be fully devoted to travel, falling squarely within the content category of informal education, recreation and leisure.
22578 Clarity of focus. Our partnership is committed to and focused on the successful launch of this service, and this service alone.
22579 Clarity of interest. The board partners are non-dominant in production, broadcasting and distribution and cannot take unfair advantage of related-party transactions.
22580 Clarity of commitments. Our commitments to the Canadian broadcasting system are unequivocal.
22581 And, finally, clarity of know-how. We have the people that have made, for many years, attractive, successful and enduring English-language television programming content, specifically, in the travel and leisure genre.
22582 And just before completing this presentation, I was watching, last night, "Le Point", on the CBC. There was an interview with Jacques Atally -- Jacques Atally is a French writer; former assistant to French President François Mitterrand -- and he said, at some point, this thing, in French, "le tourisme sera la première forme de distraction du 21e siècle".
22583 So we are slightly ahead of our time.
--- Laughter / Rires
22584 THE CHAIRPERSON: Hopefully, we will meet you in France, some day --
--- Laughter / Rires
22585 THE CHAIRPERSON: -- at 8:30 in the morning, rather than here at 8:30 in the morning.
--- Laughter / Rires
22586 MR. BÉLAND: Thank you very much.
22587 THE CHAIRPERSON: We thank you for your co-operation.
22588 You have certainly given a good beginning to the last day of the week.
22589 MR. CARTER: Thank you, Madam Chair, Madam Chairperson, Commissioners.
22590 THE CHAIRPERSON: We will now take a 15-minute break.
22591 Nous prendrons maintenant une pause de 15 minutes.
--- Recess at 1017 / Suspension à 1017
--- Upon resuming at 1040 / Reprise à 1040
22592 THE CHAIRPERSON: Welcome back to our hearing after this coffee break.
22593 Mr. Secretary, please.
22594 MR. CUSSONS: Thank you, Madam Chair.
22595 We will now hear an application by WETV Canada, OBCI, for a new Category 1 service, to be called "WETV Canada".
22596 There is a maximum presentation time of 20 minutes.
22597 We have Mr. Nostbakken, Ms Rankin and colleagues. Welcome.
22598 THE CHAIRPERSON: Go ahead when you are ready.
PRESENTATION / PRÉSENTATION
22599 MR. NOSTBAKKEN: Good morning, Madam Chair --
22600 THE CHAIRPERSON: Welcome.
22601 MR. NOSTBAKKEN: -- Madam Chairperson, Commissioners.
22602 We will begin, as do all candidates, by introducing the panel here.
22603 My name is David Nostbakken. I'm the Chairman of WETV Canada and I'm President and CEO of WETV International.
22604 To my right is my partner, Linda Rankin, who is the President and CEO of WETV Canada and the Executive Vice-President and General Manager of WETV International.
22605 Beside her, to the right, is Kathleen Forsythe, who is the President of Generation 7 Marketing, which is a consulting company to our wetv.com. She is the Chair of WETV China -- and she's the founding Executive Director, by the way, of Knowledge Network, in British Columbia.
22606 Beside Kathleen is Eric Vanderham, who is the President of CV Marketing Research, in British Columbia, which did our audio survey.
22607 To my immediate left is Abby Hampton, who is WETV's Program Manager.
22608 Behind Abby, to my left, at the back, is Keith Peveril, who is from the Sierra Club of Canada.
22609 Beside Keith, to his right, is Janis Nostbakken, who is WETV's Children's Television Programmer -- and, by the way, she's the founder and founding editor of "Chickadee Magazine".
22610 Beside Janis is Debra McLaughlin, today, in her capacity as Senior Associate of PricewaterhouseCoopers.
22611 Beside Debra is another Deborah Henke, who is our legal counsel, from McCarthy Tétrault.
22612 Beside Deborah is Harry Qualman, who is the Executive Director of the United Nations Association in Canada.
22613 THE CHAIRPERSON: We are happy to see that Ms McLaughlin is a "survivor".
--- Laughter / Rires
22614 MR. NOSTBAKKEN: Madam Chair, Madam Chairperson, Commissioners, we are excited about being part of this ground-breaking initiative as we move into a new digital realm in Canadian broadcasting.
22615 We have been here before, as successful applicants of two other innovative services.
22616 My partner, Linda Rankin, presented WTN, the world's first specialty service designed for and about women, and I, for Vision Television, the world's first specialty service designed to reflect the diversity of faith views in Canada and the world.
22617 The team before you today represents the kinds of experienced entrepreneurial professionals needed to take on the digital challenge.
22618 WETV meets a big market demand in Canada that has not been exploited by existing broadcasters and, curiously, has escaped the notice of other applicants here: the environment.
22619 We will show here, today, that the environmental interest stretches the boundaries of what we traditionally think of as a niche. The interest in the environment is large, broadly based, and it's international.
22620 One of the strengths of our application is being part of a larger family.
22621 WETV International has been built on a global interest in the environment that parallels Canada's.
22622 Based on Environics International research, we know that environmental concerns, worldwide, outrank all other concerns, including the safety on our streets and the economy, in general.
22623 WETV Canada will be a franchise of a global platform that we have created that includes WETV Europe, WETV China, soon-to-be WETV Latin America and, I might add, the Caribbean, and, through distribution agreements, we are partnering with broadcasters in Asia and Africa.
22624 WETV redefines "environment" for the 21st Century television viewer.
22625 What does "green" mean for Canadians today? How would it look on television?
22626 Well, it's more than nature documentaries on endangered species and "doom and gloom" stories on depleting natural resources.
22627 The premise of our service, both on-screen and through our web-based activities is that: We are the environment.
22628 Madam Chair, the "we" in WETV means us, all of us.
22629 All of us, from cradle to grave, how we live, through every action we take -- or don't take -- that affects our environment.
22630 Commissioners, what we present to you today is an opportunity to license a service that is much wanted.
22631 We have the research to support our proposal.
22632 We have a commitment to the Canadian independent production community and the betterment of the Canadian broadcasting system as a whole.
22633 We have the programming and marketing know-how.
22634 We have connections to the environmental organizations and agencies that reach to every community and represent millions of motivated people in Canada and around the world.
22635 We have some unique digital applications that will create new audiences and greater demand for set-top boxes.
22636 We have a solid business plan to make it work.
22637 Now, Linda Rankin will lead us further.
22638 MS RANKIN: While we agree that all of the Commission's proposed categories are important, we think that attractiveness of service, affordability, and a Canadian heart, all uniquely presented for a digital environment will be key determinants.
22639 We asked 1,000 Canadian households, 39 per cent of whom had children living at home, their views on our programmatic theme: How the environment is affected by human behaviour and what we can do to positively change the course of events.
22640 Eric Vanderham, through his company CV Marketing Research of British Columbia, conducted our audience research.
22642 MR. VANDERHAM: The results of our national survey demonstrate a strong demand for WETV program themes. We read off eight environmental topics to respondents. Interest in these topics ranged from 67 per cent of respondents to 95 per cent depending on the topic. Specifically, over 90 per cent of respondents indicated significant interest in six out of the eight environmental topics posed.
22643 We then described to respondents five specific program series that are representative of the proposed program schedule. Between 69 per cent and 84 per cent of the households indicated they would watch depending on the program described. There was even stronger support from those households that had children at home. Between 66 per cent and 89 per cent of parents indicated they would encourage their children to watch these programs.
22644 And a high of 93 per cent of them would want their children to watch a program specifically targeted to children about the environment.
22645 The litmus test for any research determining demand is people's willingness to pay for the product or service in which they have shown interest. A majority, 59 per cent, of the Canadian households surveyed indicated that they would pay $3 a month for WETV on a stand-alone basis! Not surprisingly, a higher number of respondents, 75 per cent, would pay $3 for a bundle of 10 channels that would include WETV.
22646 Of these bundle buyers, over 70 per cent indicated that WETV's inclusion in a package of 10 channels would influence them to buy.
22647 MS RANKIN: Our conclusion is that Canadian families will tune into WETV.
22648 Environics International research tells us that we Canadians define ourselves in terms of our environment, but we more and more distrust current sources to tell us what's going on. They say that our trust in what we see and hear on television about the environment has declined by 13 per cent over the past 13 years. Yet concern about the environment is rising the fastest amongst baby boomers and their families.
22649 WETV will provide this audience with attractive programming they can trust for one of the lowest of the proposed wholesale fees: 15 cents per sub per month.
22650 Our conclusion is that Canadians will consider WETV affordable as well as a good value proposition.
22651 Environics International research also shows that Canadians live and breathe "environment". They say: Concern and care about the environment is a core value for Canadians based on legacy, health and quality of life.
22652 Canadians as consumers are prepared to pay more for a range of environmentally friendly products, and Canadians are among the most environmentally active in the world.
22653 This is a strong case for telling our own stories, portraying our own role models, covering environmental news and events from Canadian points of view, and doing consumer product reviews for Canadians, by Canadians.
22654 As good programmers know, the very best television -- the kind that resonates with viewers, that entertains as well as enlightens -- is good story telling. The basis of WETV lies in the telling of stories about our plant and stories about our many and diverse cultural and regional viewpoints. And, in the year of "Survivor", WETV looks at the whole world as our island.
22655 Our conclusion is that we must dedicate the majority of our schedule to new, honest information attractively presented about how to live better on Planet Earth here in Canada, but that our audience wants to hear from other parts of the world too.
22656 WETV's programming is about living in harmony with our natural and human environment: from reducing, re-using, recycling to investing in triple bottom line businesses and volunteering time to a society that supports sustainable human development. WETV's programming is the human antidote to the headlines of this past summer and this past week.
22657 It is through independent producers that we take a fresh approach to these weighty global concerns. The result is a surprisingly wide array of appealing programs for living differently: growing-up green shows for kids, bios of eco-warriors and local heroes, organic how-to's, creating healthy environments and healing hints, eco-travel and fashion, global dialogues, commentaries, stories of our land and its people. Programs that entertain, inform, and inspire to action.
22658 Roll the video, please.
--- Video presentation / Présentation vidéo
22659 MS RANKIN: Over the seven years, 58 per cent of WETV's $58 million in Canadian program expenditure will be for production from independent producers. The balance will be in-house production. Our program schedule has an international flavour as well. Abby Hampton, our Program Manager, has just flown in from Europe, where earlier this year we launched WETV Europe.
22661 MS HAMPTON: I have just arrived from EXPO 2000 in Hanover, Germany. WETV is there because the theme of this world fair is the environment. WETV has a Canadian independent production team on-site producing two of the network's flagship series "Welcome to the Global Village" and "Fusion".
22662 "Welcome to the Global Village" is a good example of a WETV magazine format that provides Canadian independent producers an opportunity to be seen around the world and to participate in our $2.8 million Independent Production Copyright Dividend Fund.
22663 I also manage WETV's Video Training and Production Program. Our commitment to independent production is also through the $50,000 annual internship for Canadian producers. This allows them to join with producers from other countries in experimenting in new, lively on-the-street and interactive programs to bring vitality to the screen on environmental themes. Programming produced in the VTP is for the series "Living Green".
22664 I was overwhelmed with the response to WETV's call for proposals from Canadian independent producers for another series we were fortunate to have sponsored by Canada 2000. "This Land Is My Land" was originally conceived as five-minute documentaries and biographies about Canadians who have made significant contributions to sustainable living. The stories were so rich and abundant that WETV has turned it into a half-hour series.
22666 MS RANKIN: The future ain't what it used to be. It's a lot more fun, it moves faster and it's interactive. Our program series are ideally suited for Web site and on-screen audience response, both as green consumers and activities in the community.
22667 The program strand "Eco-Living" includes five series: "Rural and Urban Living", "Ethical Investing", "Eco-Travel", "Eco-Style" and "Healing Clinic". They all make extensive use of our complementary Web site for information on consumer goods and access to green products and services.
22668 On the TV screen, several program series are designed to use the starting applications and develop along with the generations of technology.
22669 "Environmental News Desk" will use the split screen applications for multiple sourced information. "Poll to Poll" and "Town Hall" will use the on-screen voting application and in "Town Hall", we will multi-screen the curmudgeons and "local colour commentators" from dozen doughnut shops in small town Canada.
22670 Postcards from Away and United Nations will eventually make extensive use of e-mail and chat room applications to encourage local volunteers and donors to communicate freely and often with their chosen environmentally friendly charity, like World Wildlife Fund or Sierra Club, Oxfam or The Campaign to Ban Landmines.
22672 MS FORSYTHE: We will link together the thousands of NGOs in Canada to exchange project information and data, for feedback on programming, for program promotion, for merchandising, bartering and displaying, for fundraising and for sponsorship as donors.
22673 This will provide support to specific environmental projects and a framework for putting donors directly in touch with the communities and projects they support in Canada and around the world. Best of all, we will be able to show everyone what their actions are doing to make a difference for the environment. We think this activity will create new viewers to the broadcast system who will buy the set-top box just to gain access to WETV.
22674 WETV.com, our partnership with Venture Resources of Vancouver, opens the door to the future for WETV and drags us old boomers all along, kicking and screaming. But our children and our grandchildren know better. It is really for the next generation of viewers that we are getting ready, the ones growing up with interactive technologies.
22675 That means that we must support young, upstart, independent producers and encourage their experimentation with this increased capacity to delight and confound.
22676 This is why we have also put an annual amount of $50,000 toward the training and development of young producers in digital technologies to keep current with the technology moving at warp speed.
22678 MS RANKIN: You have been presented with a number of outstanding applications to drive set-top box penetration. WETV has a high audience demand and is seen as a driver of this new package. To get us they will have to get the box. We will be ready with unique interactive and complementary program features on themes of high interest.
22679 Today's teenagers will be 20-something in seven years. They create a strong demand for the latest and fastest and hottest technology, and they care passionately about the environment.
22680 Thus, we have been conservative in our subscriber forecasts in the near term and more bullish in the later years. The strong audience research suggests that our viewership will gather strength quickly.
22681 Our advertising research tells us that we are a very good buy both for TV and Internet. This has influenced our forecast of advertising revenues and transaction revenues from green e-commerce.
22682 Being a member of the WETV family gives WETV Canada a helpful headstart in the early years. WETV China will take as much programming as we can produce or acquire. WETV International will provide services and products at cost; international broadcast partners provide programming for barter.
22683 We are able to put more money into Canadian production and leverage those dollars through sales to WETV International. Our Internet partner has the experience in on-line barter and e-commerce that gives us an early entry to revenues from transactions.
22685 MR. NOSTBAKKEN: WETV is a creative and quality response to a market opportunity that advertisers like and audiences demand. But we are more than that.
22686 If over 90 per cent of Canadians are interested in the environment, then WETV is their network. And if WETV is licensed, of course, they will have to buy a box. We are the only applicant in this genre before you. So to the millions of passionate green Canadians and to all those in environmental organizations who support us we say: Get your digital box, and tell your friends.
22687 We are a network designed to do well by doing good. We are committed here to something we believe in for Canada and the world. We are a network in the public interest. We are the environment.
22688 Thank you. We look forward to your questions.
22689 THE CHAIRPERSON: Thank you, Mr. Nostbakken, Ms Rankin and your colleagues.
22690 Commissioner Williams, please.
22691 COMMISSIONER WILLIAMS: Thank you, Madam Chair.
22692 Good morning, Ms Rankin, Mr. Nostbakken and panel members for WETV.
22693 As is the custom at this hearing, I will begin with general and corporate questions, and then finish up with some service-specific questions.
22694 My goal is to try to create a relaxed environment for you to present your application in its best light.
22695 I am not a lawyer, but I just happen to have a few here with me to ensure that all areas are covered in order to ensure that your application receives a fair and complete hearing.
22696 Let me begin.
22697 Ms Rankin, in your opening remarks you talked a bit about the key determinants, or why we should pick one application over another. Would you care to expand on those comments a bit? I think you said attractiveness, affordability and the Canadian heart. If you could speak a bit to that, please.
22698 MS RANKIN: We have been watching, obviously, the last two weeks of hearings and have worked very hard to come up with fresh, original answers that would entertain you somewhat on this 10th day. Do you know what? We can't.
--- Laughter / Rires
22699 MS RANKIN: In the final analysis, we think that all the criteria you put forward at the beginning are the right criteria. We grouped four of them into something that we call audience appeal. We think that audience appeal is probably the single most important criteria, which lumps together attractiveness of service, based on audience research. It includes affordability, because if they can't afford it they won't be able to buy it, no matter how attractive is. And it also includes a Canadian heart. It has to be from where we live and speak. What we know about what Canadians want to see on whatever screen they are looking at is that they want to see Canadian.
22700 Finally, this is the opportunity to unleash all of the creative talent that we have in creating a new look and feel on television, using the digital applications.
22701 It is also an opportunity to see how we can create value added to a television viewer through the digital applications, so that they are engaged more in a dialogue. They are engaged in a very active way with what is happening on the television screen.
22702 If you would permit me, I would like to ask our market researcher to give you a bit of a sense of what attractiveness constituted for us and how we then thought that attractiveness, affordability and Canadianness became such drivers with this digital application.
22703 COMMISSIONER WILLIAMS: Please proceed.
22704 MS RANKIN: Thank you.
22706 MR. VANDERHAM: Thank you. I think throughout the study there are strong indicators of appeal and interest among Canadian households that are exceptionally strong. Several examples, of course, being when we read off the initial topics -- environmental topics -- 95 per cent of the respondents indicated that they were interested in protecting the environment.
22707 As well, 63 per cent of them indicated that they would want more programming regarding those topics as well, and, ultimately, that they would be willing to watch the different program themes that we put in front of them. Between 69 per cent and 84 per cent of the households indicated that they were in favour of that kind of programming.
22708 Ultimately, the willingness to pay -- 59 per cent of the households that we talked to are willing to pay an amount of money specifically just for WETV.
22709 Then we thought we would take it a step further and determine that if WETV were put into a bundle of ten, would that influence them in buying that bundle, and 70 per cent said there would be that influence as well.
22710 As a last point, and as sort of a stand-alone question, we simply asked: What do you think of the idea of a channel that is focused specifically on environmental issues? And a very strong 94 per cent said it was a good idea.
22711 COMMISSIONER WILLIAMS: Mr. Vanderham, was much information gathered on the fact that this channel would be on a digital service and would be operating in the digital environment?
22712 MR. VANDERHAM: That is a good question.
22713 Yes, there were several questions, very briefly, about the ability to choose through digital technology. That was introduced because that is a foreign concept at the moment, so we did integrate that. We didn't focus on that, though, Commissioner Williams, because the main objective, again, is to determine -- it was almost done focus group style. We wanted to get a sense from respondents: Are these topics at all of interest to you? If they are, are these types of programs of interest to you? That was the most important component of it.
22714 But certainly we wanted, of course, to do that litmus test to determine -- put your money where your mouth is, which is really what we wanted to do as well.
22715 To answer your question, again, we only really mentioned it specifically in their ability to choose a channel such as that. We didn't go into a lot of detail on the digital box or a set-top box itself.
22716 COMMISSIONER WILLIAMS: Do you think if you had suggested that this service would be part of our digital package that you would have got responses that were different than you have received from subscribers that may or may not want to become digital subscribers?
22717 MR. VANDERHAM: We actually did mention the fact that if the WETV concept was tied into a bundle of channels that would be available to them, how likely would you be to purchase that. My answer is that did include it, not specifically with the digital box but as far as programming goes in a bundle.
22718 The issue of value and then the influence of WETV within that bundle was addressed.
22719 COMMISSIONER WILLIAMS: So the proposed package price that you used in your survey was how many dollars?
22720 MR. VANDERHAM: It was $3 on a stand alone basis for WETV. Then we said $3 -- obviously results go up -- $3 for a package of ten. Yes, both were used.
22721 COMMISSIONER WILLIAMS: So $3 either stand alone --
22722 MR. VANDERHAM: Yes.
22723 COMMISSIONER WILLIAMS: -- or $3 included in a package of ten.
22724 MR. VANDERHAM: Correct. Of course, the appeal increased, more for your money.
22725 COMMISSIONER WILLIAMS: Yes. It is the same price and number of channels.
22726 MR. VANDERHAM: Absolutely, and the reason why we wanted to do that, Commissioner Williams, was we wanted to get to the point of the level of influence that WETV would have in a bundle of ten rather than on its own.
22727 Scientifically, because studying something on its own, which we did, you get a very good sense of the strength and the value that people place in the concept of WETV, we felt it was also important to put it into a package format or a bundle to see if there would be also influence, of course, and how likely they would be to purchase it.
22728 We loosely described what this bundle would look like. Of course, your job will be to determine that perfect mix to appeal to the Canadian households.
22729 COMMISSIONER WILLIAMS: We may determine total ingredient lists, but it's still up in the air --
22730 MR. VANDERHAM: Right.
22731 COMMISSIONER WILLIAMS: -- as to whether distributors or distributors and broadcasters will determine the actual bundle.
22732 MR. VANDERHAM: Exactly.
22733 COMMISSIONER WILLIAMS: Well, given that they were the same price, I guess many people would like WETV for $3 along with nine others is my point. Then you seem to have based your rapid rise in penetration or earnings over the years based upon this survey.
22734 Those are the reasons for my questioning in this area since so many assumptions are based on this surveying, how accurate was the survey.
22735 MR. VANDERHAM: Yes, and I think it's important to note that before we mention anything about a bundle of ten for the same price, we asked on a stand alone basis, WETV alone, "Would you spend $3 a month for that" and 59 per cent indicated they would. Specifically, 26 per cent said they would very likely purchase that.
22736 COMMISSIONER WILLIAMS: The penetration rates for WETV are quite high. In fact, they are higher than the average penetration for any of the existing digital services. A penetration rate of 75 per cent envisaged for year three would make it the second-most subscribed to service after CBC Newsworld.
22737 Based on your survey work and your ideas and experience with this channel in other parts of the world, would it in fact be that popular?
22738 MS RANKIN: The penetration rate that I developed was based on the notion that it will be a must carry. That is based on penetration of the digital box. If there's a digital box out there, that box will be carrying us. If it's carrying us, it means that we are getting a subscriber fee for it.
22739 In fact, the penetration rate there for discounts, the rate that was forecast by the DBS-DTH providers and the cablecasters in terms of the penetration of the set-top box, so we are taking -- the assumption was that it was must carry. The assumption was that the forecasts that the service providers provide us with, plus or minus something that we can count on, and then we discounted that.
22740 In fact, it's not a penetration rate as a separate package as we would have an extended basic. It's in fact basic. It's the digital, in which case anybody who buys a box gets the package. If that's an incorrect assumption, then probably we would have to look at how we forecast that number.
22741 COMMISSIONER WILLIAMS: Thank you for that clarification. It gives me a better understanding of how you --
22742 MS RANKIN: Right.
22743 COMMISSIONER WILLIAMS: -- those rates.
22744 MS RANKIN: When the cable companies in their last go round, when the cable companies said they had forecast a minimum and a maximum, and many of us have taken the mid-point, and then the cable companies themselves discounted their numbers by 20 per cent because of -- there would be some kind of crossover between cable and DTH. In fact, we discounted that by 40 per cent.
22745 COMMISSIONER WILLIAMS: Thank you. In general terms, can you please describe the ownership and control of WETV.
22746 MS RANKIN: WETV Canada?
22747 COMMISSIONER WILLIAMS: Yes, WETV Canada, the applicant.
22748 MS RANKIN: WETV International owns 37 per cent of it and Murray Lester Investment Council owns 63 per cent of it. Murray Lester Investment Council is a Quebec based investment broker.
22749 COMMISSIONER WILLIAMS: Okay. So the Murray Lester Investment Council owns 63 per cent.
22750 MS RANKIN: Right.
22751 COMMISSIONER WILLIAMS: And who owns the balance again?
22752 MS RANKIN: WETV International, the owner of the franchise, the owner of the trademarks and the product.
22753 COMMISSIONER WILLIAMS: So the 63 per cent is the Canadian ownership then.
22754 MS RANKIN: No. WETV International is a Canadian company as well. We do business internationally, but we are a Canadian --
22755 COMMISSIONER WILLIAMS: Yes, a Canadian corporation.
22756 MS RANKIN: -- corporation as well. Yes. Here in Ottawa. They are in Ottawa.
22757 COMMISSIONER WILLIAMS: The other side of the river, so to speak. How important is diversity of ownership to the new digital environment? I want to hear your view.
22758 MS RANKIN: Well, --
22759 COMMISSIONER WILLIAMS: I have an idea what it's going to be.
22760 MS RANKIN: We have views on that, obviously. We think that Canada would be well served by having a greater diversity of ownership in this round for a number of reasons.
22761 We have talked amongst ourselves about the fact that, you know, we have this biodiversity sense to us and that genetically the organism is stronger if the genes that make it up come from diverse sources.
22762 I perhaps could ask David to wax eloquent on this subject.
22763 MR. NOSTBAKKEN: Well, we think diversity with this new digital offering is very important and that diversity includes a number of factors, one of which is a diversity of genres. Sometimes ownership structure determines what kind of genre you can be in.
22764 WETV is the only environmental offering here and so it will add diversity. We think diversity of ownership is important in an age of consolidation and corporate takeover, a vested interested -- vested or nested, whatever you want to say.
22765 The thing about nests is they result in eggs which result in birds and the birds and sometimes of a different feather or the same feather. We think there's room for birds of a different feather.
22766 COMMISSIONER WILLIAMS: I guess those are either reptiles or green eggs.
22767 MR. NOSTBAKKEN: We think -- it's very clear to us that whoever owns and operates a service becomes the determining influence of the energy and the look of that service. If you want diversity in the look of this tier, you had better have some diverse ownership arrangements.
22768 One of the interesting things about WETV is that one of its owners is an international play and because environment is not Canadian, it's global, because when you ask people in surveys "When you think of environment, do you think first of home or first globally", most people think globally first.
22769 It's important that this network have as part of its owner someone who knows what's going on in the rest of the world and has partners in the rest of the world and that's WETV International.
22770 There are other aspects of diversity which we think are important including, of course, independent producers on a matter like environment. We need to reinvent programming on this because a lot of what is out there now is pretty boring. The fact that there is a large audience interest in environment, a large Canadian interest is, in our view, an opportunity to develop new programming to meet that need and the digital play allows for maximum diversity in the kind of programming that we can offer.
22771 So again ownership sometimes has an influence on who produces and who doesn't produce. Clearly, our ownership arrangement is committed very, very much to finding young, on-the-street, ambitious, talented independent producers to come up with a whole new breed of programming and the ownership structure we have certainly supports that.
22772 COMMISSIONER WILLIAMS: Thank you, Mr. Nostbakken.
22773 How many services do you think the Commission should licence? In our communication, we have said approximately 10. We have had suggestions from some applicants that because of this diversity issue that we consider as many as 22. How many do you think we should consider?
22774 MR. NOSTBAKKEN: Well, we don't know whether it should be 22 or 25, but we think that having watched these proceedings over the week, we are very impressed that there is a large array of very good services that in a Category 1 offering would certainly spark new interest.
22775 There are a lot of kitchen sink applications too, but if you go through the roster there certainly are more than 20 who that if they have solid business plans and they can do what they say they are going to do would add a fresh look, and I don't think you can squeeze that all into 10.
22776 I also think that on the question which you will ask later on the subject of launch, whether it should be a simultaneous launch and whether Category 1 and Category 2 should be launched at the same time. A larger Category 1 on its own would be a very good first launch and if we had more than 20 very strong services. I don't think you want to burry them in a group that is much larger, whatever that number is going to be, but both in terms of quality of programming and in the marketability of a new group of services we think that a larger number is a supportable principle and we have seen that many others who have appeared in front of you over the last two weeks feel the same way.
22777 Having said that, we are quite hopeful that if you restrict it to 10 that WETV would be in that number 10. So this is not a play to include us in a large number. We just think that it makes good business sense for the Canadian system to have more of Category 1 offerings which has within it implicit the notion that these are particularly good and solid offerings.
22778 COMMISSIONER WILLIAMS: Thank you.
22779 I am going to come back to the financial area just for a second.
22780 With 63 per cent of your available shares -- I understand that some shares are available for sale from the Murray Lester Investment Council. Can you tell us a bit about the Murray Lester Investment Council? The offer to purchase shares come from an investment group that I am certainly not familiar with, and I guess my concern would be about their ability to actually conduct the purchase of the shares. So maybe a bit of comfort in that area.
22781 MS RANKIN: I will do my best. We had not expected to have questions asked about ownership and so we told them not to come. But we thought that this was going to be covered afterwards.
22782 COMMISSIONER WILLIAMS: If you like, in fairness, we can save that question for a little later on in the process to give you some time. But really I am not looking for definitive, exact answers.
22783 MS RANKIN: Just to know who he is.
22784 COMMISSIONER WILLIAMS: I just want a general overall statement or two to give some comfort, I guess, to the full package.
22785 MS RANKIN: Sure. Murray Lester Investment Council is a registered broker of the Quebec Securities Commission with a special licence that apparently you can only have in Quebec to market securities to a small but identified group of investors that are known to you, and he has a group of investors who he works with. They number 300, they are all Canadian citizens. His portfolio I think is around $300 million and that is who he will redistribute the 63 per cent that he has guaranteed.
22786 COMMISSIONER WILLIAMS: Okay, so in your opinion he has done $7 million dollar deals like this many times before.
22787 MS. RANKIN: Oh, yes.
22788 COMMISSIONER WILLIAMS: We probably shouldn't be concerned that you would have a financing difficulty if this licence were approved.
22789 MS RANKIN: No, no. Certainly we are not concerned. He is very involved in film in Canada, in investing in film in Canada, and I think he feels that he has made quite a bit of money in Canadian film investment and in television. So he seems, I would have to say on his behalf, that he is very comfortable with this.
22790 COMMISSIONER WILLIAMS: He sees a little green in this proposed bit of work for you then.
--- Laughter / Rires
22791 MS RANKIN: Just a bit.
22792 COMMISSIONER WILLIAMS: Okay. With two-thirds of the voting shares being issued to the public, how does the WETV Foundation propose to retain control?
22793 MS RANKIN: Just a couple of corrections. It's not the Foundation. It would be WETV International. The WETV Foundation is a shareholder in WETV International and it is also a Canadian foundation.
22794 That's old news, if I may say.
22795 COMMISSIONER WILLIAMS: Sure.
22796 MS RANKIN: It was advice that we were given at a time when the market was quite buoyant and we have since declined to go that route. So in fact we are still a private company.
22797 COMMISSIONER WILLIAMS: In the area of implementation of service, should the Commission impose a minimum amount of time by which a Category 1 licensee must implement its service? How about a Category 2 service and should the time frame be the same as for a Category 1 service?
22798 MS RANKIN: Once again, we have heard all of the answers. We believe very strongly that we should all launch together Category 1s and that we need to collaborate and cooperate on that amongst all players.
22799 COMMISSIONER WILLIAMS: September 1 is a good date for you?
22800 MS RANKIN: September 1, 2001. I believe we showed 2000 in our schedule. Yes, 2001 would be fine. As to the question of whether or not you need to regulate that, if you do it takes away one of the things that we have to negotiate, that's helpful. But it opens up a whole other raft of questions as to, for example, what happens if somebody is not ready.
22801 So I think the best answer is yes, we all know we need to launch together, yes we all know we need to collaborate and cooperate on that and whether or not, through anything that you say in your licensing decision that would help make that happen, I think that's a good thing. And if, in fact, mandating that would bring that about, that's a good thing.
22802 As I say, I think that leads to other concerns that you would then have to work out and that is when the first person that comes knocking on your door to say they didn't do what you said we should do, what do you do?
22803 COMMISSIONER WILLIAMS: How about a steering committee much like the Chair mentioned earlier today?
22804 MS RANKIN: I think that's an excellent idea and we should be doing that in any case.
22805 COMMISSIONER WILLIAMS: Yes, because everybody has a vested interest.
22806 MS RANKIN: Yes, it only makes good business sense.
22807 As to Category 2's launching, I think David has already proposed that we think Category 2 should launch afterwards, that we should focus on quality versus quantity and that we did think that we did think that there is also this old issue of moving analog to digital and that perhaps Category 2s could help ease that process and maybe a strategy to help that in particular.
22808 COMMISSIONER WILLIAMS: Sweeten the pot.
22809 MS RANKIN: Yes.
22810 COMMISSIONER WILLIAMS: And given that your service constitutes a genre that could cover a fairly broad range of programming, how can you assure us that your service would serve a distinguishable environment, human behaviour related programming genre?
22811 MS RANKIN: We can assure you that it will always be about the environment and how human behaviour affects the environment, not animals, not plants, but human behaviour.
22812 I just want to tell you that in the newspaper article about the polar cap melting, the scientists said that the reason for that was human activity. It wasn't God or the weather. It was human activity and that's what we want to deal with. We want to show you we can change that course of events through human activity.
22813 COMMISSIONER WILLIAMS: All right.
22814 MR. NOSTBAKKEN: May I just add to that?
22815 Discovery is a science channel and Nature is about nature. WETV is helped in defining it by what David Suzuki says when he is asked what's the most single important element affecting the environment. His answer is the human mind and what we think about it and how we act on it.
22816 So our emphasis will be on that, not on the scientific aspect as the starting point or the beauty of nature.
22817 COMMISSIONER WILLIAMS: Thank you.
22818 In the area of Canadian programming expenditure, given the competitive operating environment that new services will be competing in, the uncertainty related to digital distribution and the requirements related to minimum Canadian content levels, is a condition of licence requiring minimum levels of annual Canadian programming expenditures necessary for the digital services?
22819 MS RANKIN: Yes.
22820 COMMISSIONER WILLIAMS: Would you care to elaborate on that? You don't have to.
22821 MS RANKIN: Well, if we were all really good at our business this would be a no brainer. What we know Canadians want is Canadian programming, programming about themselves, where they come from, where they live, how they do it and so Canadian content is the outfall of that.
22822 But Canadian content, as legislated or as mandated, has always, always been a difficult thing to carry out. So, I do believe that it's -- I mean, in the face of what we have got across the border in the U.S. it still is a very important part of what makes our Canadian broadcast system work and its Canadianness.
22823 COMMISSIONER WILLIAMS: The Commission has proposed a condition on expenditures, used an overall average from all seven of the projection years to calculate an annual spending percentage. Some applicants expressed concerns on this approach, given the lack of flexibility it provides.
22824 If the Commission's calculation of the percentage remained the same, but compliance was based over the entire licence term, as opposed to annually, would this alleviate the concern?
22825 MS RANKIN: We prefer the calculation averaged over the period. Certainly we know that in order to be attractive in the early years we have to expend up front.
22826 COMMISSIONER WILLIAMS: And that's the percentage that's arrived at by taking the seven year total Canadian expenditure and dividing it by the total seven year projected advertising and subscription revenues?
22827 MS RANKIN: That's correct and for us that comes to 50 per cent.
22828 If we were to spend 50 per cent in our first year we wouldn't have any programming.
22829 COMMISSIONER WILLIAMS: So you would have no problem accepting a condition of licence that would require you to spend 38 per cent of the previous year's advertising and subscription revenue then, based on the information that we have here. I may have to enlist the Chairman's calculator to go through it with your people.
22830 MS RANKIN: Can you tell me how you figured that out?
22831 COMMISSIONER WILLIAMS: Chair Wylie.
22832 THE CHAIRPERSON: The Commission has done this before with television stations and also with specialty services in the analog world, which is to look at the projections and say "Well, these are your projections. We expect you'll live by them, at least to a certain extent."
22833 Therefore, we will calculate all your projected revenues over seven years, get a total number which will be the denominator of a fraction and then take all your projected expenses on Canadian content for seven years and create a numerator.
22834 So the denominator would be revenues from what we call regulated revenues, so advertising and subscription revenues. That fraction gives us a percentage.
22835 Year one, there is no requirement. Year two, that fraction is applied to the revenues of the first year and that's what you have to spend on Canadian content. Year three, the fraction is applied to the revenues of the second year and that's the amount you have to spend on Canadian content, and there is a bit of flexibility of about 5 per cent going forward.
22836 So that is basically how we arrive at what you tell us you will be doing. So, my understanding is that this exercise has produced a Canadian content of 50 per cent, unless the staff has some concern about -- I haven't done the calculation myself.
22837 If we look at 8.2, we would get your Canadian content expenditures and then, you know, your 8.2 schedule. I believe 8.1 or around that gives the revenues attributable to advertising and subscriber revenues and you have other revenues here. I am not clear at the moment, I don't have the application before me, whether those were put into the calculation, but that is basically how it is done.
22838 The aim is when in a competitive process is to say this is what you brought forward, as what you are going to do. To a certain extent we will hold you to it because it had an impact in part of the criteria we used to establish the services that we think should be licensed out of a number of applications which are greater than the services that will be licensed.
22839 There have been suggestions made as to increasing the flexibility of under-expenditure and overexpenditure year by year, but to arrive at the total at the end of the period in any event.
22840 So that's the simple formula. Perhaps you can tell us whether, or tell Commissioner Williams whether it's your view that it's a good regulatory idea to have a mechanism that is applied equally to everyone and then tell us whether in that calculation you are willing to accept the 50 per cent that is generated.
22841 Yes, staff tells me that their calculation does generate 50 per cent.
22842 MR. McCALLUM: If I may, Madam Chair, there was some exchange of correspondence on this point and indeed the figure of 50 per cent was sent to the applicant.
22843 The applicant did state that they would be pleased to accept an expectation with respect to the 50 per cent calculation. They did not specifically answer, from my reading of the answer, whether they would be willing to accept 50 per cent as a condition of licence, which I think is the question that was on the table now.
22844 THE CHAIRPERSON: So you now have many questions. The basic one is: Do you think it's necessary in this context to have a formula that is applicable to everyone equally, based on what they tell us they can do?
22845 Secondly, do you understand how it was done and how it generates 50 per cent?
22846 Thirdly, would you accept the 50 per cent as a condition of licence?
22847 Fourthly, you know from having been here that there has been discussion of allowing some flexibility year by year to smooth out the additional expenditures that most applicants will encounter in the first year, compared to the other years.
22848 So, Commissioner Williams will take the answers to these four questions.
22849 MS RANKIN: Yes, yes, yes and yes.
22850 COMMISSIONER WILLIAMS: Thank you, Madam Chair. That was four quick yes's.
--- Laughter / Rires
22851 THE CHAIRPERSON: It's important that you tell us what you think is fair and that you understand how it's done.
22852 MS RANKIN: Absolutely.
22853 THE CHAIRPERSON: It's not very complicated.
22854 MS RANKIN: No; what was throwing me was 38 per cent when, in fact, we had talked 50 per cent. And we have shown 50 per cent over the period -- the average, over the period, would end up being 50 per cent. And, in our first year, in fact, it ends up being about 167 per cent and, in our last year, about 43 per cent. So --
22855 THE CHAIRPERSON: Voilà. That's the idea. That suggestions have been made that instead of -- that over the period, you would have to achieve the numbers --
22856 MS RANKIN: Yes.
22857 THE CHAIRPERSON: -- and year by year, the suggestion, to date, that has seemed most acceptable to the parties is that there would be a requirement that 90 per cent of the number generated by applying the percentage to the previous year's revenues would be spent year by year and the other 10 per cent could be carried, if that happens to be a way of giving flexibility.
22858 MS RANKIN: And our answer would be that 10 per cent is a very good flexible amount for us. We like the average over the year. We like the 10 per cent, plus or minus, on an annualized basis. And, yes, we would accept it as a condition of licence.
22859 THE CHAIRPERSON: There you are, Commissioner Williams.
22860 COMMISSIONER WILLIAMS: I feel much better, now, with that new information.
22861 THE CHAIRPERSON: I'm sure you do.
22862 COMMISSIONER WILLIAMS: WETV has stated that it's committed to the representation of Canadian people and their diversity, and to work with First Nations, in particular.
22863 Could you tell me some of your specific plans to do environmental-type of projects in that area and who you will be working with and what types of projects, et cetera?
22864 MS RANKIN: We have just completed a project called. "This Land is my Land". It was sponsored by Millennium Bureau of Canada 2000, for the millennium year. Our proposal was 15 short five-minute episodes on sustainable projects going on, in Canada, that they would come one from each of the provinces and one from each of the founding nations and one from each of the territories.
22865 The stories were rich, abundant, many more than we could have possibly used and, as a result, we have turned that into a program series called, "This Land is my Land" -- and many of those stories, in fact, will come from the founding nations of the country, the aboriginal communities, particularly in the north. There are just an abundance of stories and a serious concern, on their part, for living in a sustainable fashion, obviously.
22866 That's one particular area.
22867 We have another program that we have talked about -- that is in development, that we have talked about over the past couple of years, called, "Stories of the People", which deal with cultural values, about how we live in harmony with nature, where we come from and how we got here, which are stories of -- native stories, aboriginal stories, of how the world came to be and how people came to be in their place. And that will be a joint venture between us and TVNC.
22868 Abby, did you want to say something about that?
22869 MS HAMPTON: Well, maybe I can speak somewhat anecdotally to this, being on the front line of the -- WETV's front line with the independent production community in Canada.
22870 I am absolutely stunned by the numbers of producers who get in touch with us with proposals of fantastic quality. I mean there is no shortage of relationships ripe for the picking, as soon as WETV is licensed in order to support that community.
22871 Linda, I think, can speak to -- I believe the CIFEF had contributed a letter of support to our application, representing a large constituency of independent producers across Canada and, as well, as you may know, WETV International has enjoyed a close working relationship with TVNC, now APTN.
22872 So, this is an excited community of people who are just waiting in line for WETV to be able to support them.
22873 MR. NOSTBAKKEN: Perhaps I can just add one more word on that.
22874 Perhaps it sounds less sexy than the rich independent production reality in this country, but there are, in Canada, on or around 20,000 what are called NGOs, non-government organizations. These are not-for-profit volunteer entities that work in the backyards of our nation. There are 200 of them that are international; that is, they operate out of Canada, but they have activities all around the world. There are at least 1,000 that are exclusively focused on issues of the environment.
22875 We have a representative of Sierra Club here, with us, which is an example.
22876 Now, we are working with them, of course; they are not running the network. But they are good partners in the communities and they all are supporting the production of programming on the issues, realities and communities in which they participate.
22877 So, this is another source of programming idea. It's a source of funding for programming and co-production. And it is a source of what's really happening in this country, in environmental terms. And it's all across the country. And it's in every community of this country.
22878 COMMISSIONER WILLIAMS: Thank you, Ms Hampton and Mr. Nostbakken.
22879 In the area of independent production, should the Commission require digital services to make specific commitments to our independent production? Like, you have made commitments to independent production. For the purpose of those commitments, I guess, we all should be curious as to understanding what do you mean by an "independent producer" and how you would define an "affiliate producer"?
22880 MS RANKIN: We define an "independent producer" as an independent producer who has no broadcast ownership. We define "affiliated producer" as one who has up to or less than 30 per cent broadcast ownership. We have none. We are not in any way engaged in, invested in, in independent production. We outsource it all.
22881 COMMISSIONER WILLIAMS: Okay. If I can get you just to expand in the area of: should the Commission require the digital licence services Category 1s to make specific commitments to independent producers?
22882 MS RANKIN: Well, it's an easy one for us to say "yes" to because, by and large, that's who has to produce our programming.
22883 COMMISSIONER WILLIAMS: Yes, has to do your work.
22884 MS RANKIN: So, yes, you should require us to do that.
22885 COMMISSIONER WILLIAMS: Okay. As I said, at the beginning, part of my job in creating this --
22886 MS RANKIN: Yes.
22887 COMMISSIONER WILLIAMS: -- environment is to help you present your project in --
22888 MS RANKIN: Yes.
22889 COMMISSIONER WILLIAMS: -- that positive manner.
22890 MR. NOSTBAKKEN: Could I just add to that, though.
22891 It certainly serves us well. But I think it serves the system as a whole, as we were talking about diversity, in the past. I think that the real juice, you know, in terms of lively and new creative activity is in independent producers. And they keep cropping up.
22892 And so, if a part of what we are trying to do, in the overall broadcast system, in a digital reality, is to introduce something that's different than what has been there, in the past, clearly, one of the advantages of independent producers is it maximizes the likelihood that there's some new creative stuff going on there.
22893 COMMISSIONER WILLIAMS: Thank you.
22894 I'm going to, now, move into the area of interactivity.
22895 If we license a Category 1 service with interactive elements via the set-top box, do you think distributors should be obligated to carry those interactive components?
22896 MS RANKIN: Yes. I must confess that I have not really understood why the question is being asked. If this is all about moving set-top boxes out with interactive capability, and we are keen to provide that interaction, that one-on-one dialogue with a viewer, why --
22897 COMMISSIONER WILLIAMS: An applicant may propose a type of service that's a tremendous bandwidth eater, for example, and distributors may balk at that, saying, "Well, this one particular service has taken up the space that five or six other services could take", and so, it raises those kinds of issues. That's the reason for --
22898 MS RANKIN: Thank you.
22899 COMMISSIONER WILLIAMS: -- interest in the question.
22900 MS RANKIN: I understand.
22901 That being said, yes, I think that the distributors should be carrying the applications that are licensed. But that goes along with saying that in the beginning we all have to be collaborative and co-operative in making this work and in rolling out as many set-top boxes as quickly as possible. It is only in all of our own best interests to do that.
22902 Therefore, we should be making sure that we provide a good push-pull environment for the digital set-top box to continue in its development, because we are pushing it out there as a result of our applications.
22903 COMMISSIONER WILLIAMS: Yes, and in your application you have described a broad variety of interactive elements that would appear to be accessible through the set-top box.
22904 When do you see full interactivity via the set-top box being made available?
22905 MS RANKIN: Everybody is forecasting at least 18 to 24 months -- sure. If it is going to be longer than that it will be overtaken, I think, by technological events --
22906 COMMISSIONER WILLIAMS: Other technology.
22907 MS RANKIN: -- on the other side.
22908 COMMISSIONER WILLIAMS: If you are unable to provide the interactive elements proposed, does this affect your proposal in any way?
22909 MS RANKIN: Oh, yes. We have really designed WETV Canada to be able to talk to Canadians in their living rooms, on their TV sets, and to create that dialogue on the screen. So it is a very important element of our plans and it would have some impact on some of the revenues we forecast, obviously. But, more importantly, what we see WETV Canada being able to do is engaging those passionate green Canadians in living and doing the things they want to do.
22910 COMMISSIONER WILLIAMS: Thank you, Ms Rankin.
22911 Given that your service constitutes a genre that could cover a fairly broad range of programming, how can you assure us that the service would serve a distinguishable -- I'm sorry, I covered that earlier.
22912 You have included movies and drama programming in your proposed description. What mechanisms have you put in place to ensure that the movies and drama selected for your service reflect the nature of your service?
22913 MS RANKIN: The movies and drama that we have identified are specifically from WETV International's broadcast partners. These broadcast partners are all around the world. Part of the deal is that they provide an hour of programming to WETV International for the WETV International Hour Day that it provides. So it will be programming that has never been seen before on issues of the environment, where they live, about their own stories, and I guess because it is such a small part of our schedule, we didn't expect that it would constitute a major hurdle. It does provide an additional diversity to our program schedule on issues of the environment.
22914 COMMISSIONER WILLIAMS: Can you provide specific examples of the types of Category 7 programs that you propose to air?
22915 I am just building from your past answers.
22916 MR. NOSTBAKKEN: We thought we would be asked this question and we were trying to think of titles that you all would know, because if we give you titles of movies that nobody has seen you won't know what we are talking about.
22917 Examples of movies that you have already seen that are environmental are: The China Syndrome, Erin Brockovitch, Under Silkwood. These are movies that actually have as their core to the dramatic tension of the movie something to do with the environment.
22918 COMMISSIONER WILLIAMS: Great.
22919 MR. NOSTBAKKEN: That is not to say we are going to carry those.
22920 COMMISSIONER WILLIAMS: No, no, I understand.
22921 Would you accept a condition of licence limiting the amount of such programming -- the movie portion of the application?
22922 MS RANKIN: Yes.
22923 COMMISSIONER WILLIAMS: If you need another opportunity, this isn't an opportunity to sum up, but it is another opportunity to sell your service.
22924 How can you assure us that you would contribute to program diversity given your channel's array of environment, human behaviour and other programming?
22925 MS RANKIN: There is no other programming on the environment in Canada. Therefore, from a thematic point of view, we automatically add diversity.
22926 The issues of how humans live in this world, how we Canadians live in our communities and contribute to a better environment are not anywhere on the television screen. There are more and more and more critical pieces of information and opportunities to learn that we now need -- that we now need more than ever.
22927 In the 21st century, the need for good, honest, trustworthy information on what I can do -- what I can do for my lawn. We all had rotten lawns this summer and everybody has been spraying with pesticide. That pesticide goes into the water and causes cancer in our children. We want to know what to do about that. We want to know how to stop doing some of the things that we are currently doing and start doing new things to make life better for our children.
22928 Help me out here, you guys.
22929 We have tonnes of examples about what kinds of programming will cause people to want to live new ways.
22930 Clayoquot Sound -- we have programming that shows people putting themselves in front of bulldozers to stop the destruction of old-growth forests. These are real people. They are people we all know. They could be us.
22931 At some point in our lives we have to stop and take a stand to say: I am not taking it any more. I am no longer going to drive my car to work every day, because of the impact of those fumes on the air that I breathe, the air that my children breathe -- and the air that in fact they end up breathing at the North Pole is polluted.
22932 We have to stop doing certain things and start doing others, and it is going to take a mainstream television network in our homes, every day, with programming that we can count on, to help make that happen.
22933 It took a long time for city councils to get used to the fact that blue boxes really were important. Now we have black boxes. Soon, hopefully, we will have those composting boxes back.
22934 What do we do with garbage, for heaven's sake? Toronto is trying to move its garbage up to Sudbury. Sudbury is saying: We don't want your garbage.
22935 We have to stop creating garbage. That starts in our homes. That starts with families.
22936 That is the kind of programming that we want to provide to Canadian families.
22937 MR. NOSTBAKKEN: If I might just add a couple of notes ...
22938 In addition to the Walkerton-type news and information out there, it is also the case that some of Canada's top popular musicians are producing programming on our themes, some of which is mainstream and some of which doesn't fit into the Much or the MTV format, and they are very keen to provide music to WETV.
22939 Children are passionately interested in the subject of where they live and how people live elsewhere and environmental issues. In fact, they are more idealistically passionate than adults.
22940 We will have some music, as you know, in our schedule. We will have some children's programming. We will have some drama that we are able to acquire or produce. We will have some documentary. And we will have some of what I can only call "new form" television. It is the new stuff that our independent producers come up with on these subjects that delight and entertain, both on screen for a television viewer and on the Net for the mix between on-line services and on screen services, and then, when available, on screen itself.
22941 We don't want to give the impression that WETV is about gloom and doom or just the practicalities of lives. The environmental themes are really important, dynamic tension now for entertainment television and music.
22942 We find more and more, and this is what Abby is referring to, you go to the Banff Film Festival and it's very easy to have a crowd of independent producers anxious to do programming that is both entertaining and that matters.
22943 It goes across the program types that we hope we will be able to come up with a new kind of programming. You heard us mention having the local curmudgeons in the donut shops of Canada. This is in fact a serious concept. If we want, there are very interesting, colourful characters in every community in this country.
22944 The more digital we get, the easier it will be for us on a daily basis or a regular basis to eavesdrop on them in a formal sense and, in fact, the plant is used for them to debate, to find out what they have to say on the issue of the day and as much as possible to the viewer to give an opportunity to pick and choose who it is they want to hear from that day.
22945 The more experimentation we can do in that kind of programming, the better we like it because we think it is what's needed to take the broad interest that Canadians have in environment and make it something they actually want to watch. What people say they want to do and what they actually do are not always the same.
22946 We have to through our independent producers create new styles of programming that meet this particular audience niche demand.
22947 MS FORSYTHE: Yes. I felt that we didn't get a chance to really explore the synergy of the interactivity that WETV is designing because our approach has not been just what's the technicality and how do you press some buttons. It has been more conceptual.
22948 In looking at the dynamics of how we use technology to promote human dialogue and feedback, I think that the synergy between wetv.com, which is not just a set of complementary Web sites, but if you like is an e-commerce energy in its own right, and the dynamics between it and its relationship to the NGO community and through them to the community and then back to WETV, and the dynamics between them so people can actually see the results of the actions that we inspire them to take.
22949 What happens between the synergy of WETV and wetv.com, the uses of Internet and the uses of digital television do truly converge, but they converge not because we have technology telling us it should, but because human beings use media to have conversations with each other about things that really matter.
22950 COMMISSIONER WILLIAMS: Okay. I will try and summarize from the three of you.
22951 So on this innovative interactive programming to inform, educate, with the goal of causing positive behavioural change towards the environment that we live in --
22952 MR. NOSTBAKKEN: I think it's also, just to follow up on what Kathleen has said, what we read from our research on the audience that we think we are going to reach, and Deborah may want to comment on this at this point or some other point.
22953 Some of our audience is just the broad Canadian audience. Ninety per cent of Canadians say they are interested in environmental issues and are to some extent active in it, but then there are -- when you look at the demographics and you see those that are more and more committed, these are people who want more information.
22954 What we provide on WETV has to not only entertain, but provide information. That's where the Web comes in in particular. We can drive people to the Web and there can be an interaction between what we put on the programming and the information people want.
22955 People also want -- the environmentally interested people want to know what other people say and what other people do. Whatever we do in terms of our interactivity, we have to find a way of satisfying that aspect about our particular audience.
22956 Some of our audience is more interested in the interactivity that's available through digital now than they are in television. We think we are going to bring some people to television because we are engaging them through the Net.
22957 Also, people are more and more, especially environmentally interested people are not just interested in being bystanders. They want to do something. They want to know what to do. Then they want to know what's the result of what they have done.
22958 Because of the ubiquitous now Web, we are able to put people in touch with the communities that they are interested in directly. We can talk about it, we can represent it on television and we can put people directly in touch with the constituencies that they are interested in.
22959 We think that our audience, which is both broad and narrow, has within it a group that is especially amenable to a high level of interactivity because it's the nature of how they are responding to the world around them. It's fairly active, fairly demanding.
22960 COMMISSIONER WILLIAMS: So this, I guess it's a relatively target service or certainly some programs could be in. You would have through the interactive component the ability to poll and obtain the viewers' perceptions, feelings, directions that they wished, even public policy, to go, or whether large non-renewable resource projects should proceed or not proceed or with what types of safeguards, which would be valuable information to many sources.
22961 Do you plan on selling this information?
22962 MS RANKIN: No. I anticipate -- we have already taken an oath of privacy on our Web site. We currently poll for information on people's concerns for the environment. We have adhered to the upcoming privacy code that Canada will introduce and we will introduce. We make no information available for commercial use.
22963 COMMISSIONER WILLIAMS: Law-abiding applicant.
22964 MS RANKIN: You bet. Just on that theme though, we have two programs, Poll to Poll and Town Hall, that really get at the roots of participatory democracy and having the capacity onscreen to vote, even if it has to be downloaded in the evening, increases people's ability to participate in forums for a global interest and national interest and local interest.
22965 MR. NOSTBAKKEN: I presume to add one more comment. In the areas like environment or areas like sustainable development or areas like development, when you enter those cultures, you know, of organizations and people, what is talked about in the year 2000 as much as anything is what they call the rise of the civil society, which is a jargon way of saying that in the age of Internet, more and people want to know things for themselves, respond for themselves, and act on their own. Forget the institutions, let's do it on our own.
22966 You have seen the protests, you know, in relation to the World Trade Organization and so on. This is the result of people wanting to get people involved. We think that WETV as an environmental service has to respond through out interactive elements to this phenomenon.
22967 It may not sound like good television, but when you connect programming to that groundswell of attitude, perception and activism, we think it's a very good and synergistic relationship.
22968 COMMISSIONER WILLIAMS: This civil society, did it also contribute to the breakdown of the two most recent World Trade Organization conferences?
22969 MR. NOSTBAKKEN: I'm not sure. It has to do with the fact that people wonder whether or not they are getting all the information accurately from the institutions that are supposed to serve them. Whether they are right or not is not what one would want to say here. It is, however, the case that people today want to know really for themselves more perhaps than in the past.
22970 What the Internet has given is a possibility for people to interconnect on these issues. I would say that as broadcasters, we have chronically underestimated the power of the non-broadcast media and as a partner in what we do onscreen. There's a whole new thing happening out there. WETV wants to be a part of exploiting that, to put it in positive terms.
22971 We think that the Web gives us a chance to build new constituencies and new interest in our television programming.
22972 So in other words, we see the activity that is already ongoing among the organized people in this country on the issue of the environment. We will encourage to watch television and we will encourage them to watch WETV, we will encourage them to get the box.
22973 Some of our viewers, we think, will be new viewers or they will be like viewers, as Debora McDougall will be able to speak about when it's appropriate from the study they did for us, that the environmental area is one where there are lots of interested people out there in the subject who may not yet be veteran television viewers. We are going to pull them in. So we are going to create new audience interest in this digital tier.
22974 COMMISSIONER WILLIAMS: And maybe pull a few of them in a little further so we can see them on your proposed services.
22975 MS RANKIN: I was just going to comment that what we heard about the situation in Seattle was all the bad stuff. We did not hear any of the good stuff. Nobody was there covering what the real issues were and how important they are to all of us. All we saw was demonstrations and police helmets and I don't think that that's good coverage of major issues confronting us as global citizens and as Canadian citizens, and that's why the research shows that people don't trust what they see on TV any more because what they see is the bad news and they have to have not just good news, but information and news that they can use for their own behaviours.
22976 COMMISSIONER WILLIAMS: Yes. My understand is that most of their activity is Internet-based anyway, so it may not be readily apparent or available to see without the benefit of a service, something like what you are proposing.
22977 MS RANKIN: There is another part to that, and that is the good news part. There are people like Craig Kilberger and Roy McGarry who have organized -- Roy McGarry, for example, has organized tools for development and he could really, really use a service like WETV that is showing the work of Canadians in let's say a portrait series. We highlight Roy McGarry and the work that he has done in Canada as a leader in this area and then during his program he gets an opportunity to make his pitch for tools, "Cast-off tools that you don't need, send to me and I send them to my project in Peru" and people can do that. As they sit there, "Oh, I have a hammer, I have a saw, I have..." you know, whatever.
22978 And through their television remote they can make that donation, make the offer of that donation that can be followed up with later.
22979 Craig Kilberger is another Canadian that we are all very proud of because he, as a boy, organized a lot of Canadians and people all around the world to make a real significant difference in child labour practices to the point where we now have notices on our consumer tags about child labour. These are people that other people would like to see and hear about, and in that instance can perhaps contribute to them or become another one of them.
22980 MS FORSYTHE: In that sense, what we have been trying to design in looking at how digital television and the Internet and what interactivity really means, we have been trying to design, if you want to call it co-inspiration network, a network where we can be inspired by seeing people who are making a difference in the world and who inspire us also as the viewer to make the difference. But more importantly, what television can do emotionally is to inspire you, but what it hasn't been able to do other than in advertising to buy consumer products, it hasn't been able to move you to act in this other new way which is the other part of the civil society which is that we all together have to find a way to survive for our children and our grandchildren.
22981 So we want to co-inspire people to find a way to take action that's meaningful at the local level which will all contribute to our survival at the global level.
22982 COMMISSIONER WILLIAMS: Thank you, Ms Forshythe.
22983 MR. NOSTBAKKEN: Can I just add that all this talk of NGOs and all these important and practical matters of environment should not confuse you into thinking that this is going to be do-gooder television. Our commitment is the opposite. It is to take this issue that everyone says they are interested in and turn it into highly entertaining television.
22984 So we see these realities that we are describing to you as a platform of intent interest which if we are shrewd and creative we can develop programming to meet that market demand. So if we are giving you examples of the kind of realities and demands of organizations out there, but it all has to end up in being highly entertaining and engaging programming, and all that, to our independent producers.
22985 MS NOSTBAKKEN: May I add something because this is the fun part when we talked about kids. I was just thinking when you were talking, Kathleen, that often what environmental programming ends up looking like is about a problem and, as we said in our opening, the doom and gloom stories, enough already, we have that.
22986 When it comes to kids and programming for them in an environmental way -- and I have spent my whole career through print and multimedia addressing environmental issues for kids as young as pre-schoolers -- you know that you have to start with the good news, you have to start from the positive and you have to start with the fun. We are envisioning, certainly in our children's area of programming, highly entertaining and interactive programming that works no matter what your topic is for kids, but we know that anybody who has kids or grand-kids these are the zealots when it comes to environment.
22987 So if you want an anti-smoking zealot you go to a kid. If you want somebody to make sure that you separate your garbage and recycle it, at least in my household certainly, it's the kids who haul the blue boxes out. But it's not just how to's for kids, it's programming that shows the good news story in terms of what life can be like when we all work together well and properly.
22988 So it does smack of "do-gooderism", but it has to be fun otherwise there is no point. We just won't have the audience.
22989 COMMISSIONER WILLIAMS: Thank you, Ms Nostbakken.
22990 Madam Chair, that completes my questions for this panel on both the general and corporate and specific nature of service. I would like to thank Ms Rankin, Mr. Nostbakken and the WETV panel for their presentation and answers to my questions and I will turn it back to you, Chair Wylie.
22991 THE CHAIRPERSON: Thank you.
22992 Madame Bertrand.
22993 CHAIRPERSON OF THE COMMISSION: Good morning. As you may know, or you don't know, I am a graduate of environmental studies of York University so I was listening carefully and trying to understand what was the nature of the service you are proposing, and it raises for me the question that was put forward by other applicants because although you have surveyed that kind of support figures, it's true that the concern on environment for Canadians, all the surveys show that it's very high.
22994 But that's not really what we are testing here. It's what you have tested, it seems. I haven't seen the survey itself, but it's about would I engage in buying -- and I can see by the resume I have read here made by staff and your own presentation that that was really the questions put forward, but the test is always in the pudding and it's going to be down the road.
22995 But my question is much more -- so I am not disputing whether environment is a concern to Canadians. It is. But that doesn't turn itself into really attractiveness necessarily to drive digital box. You are making that and you having a survey and for future discussion after the hearing that we will be comparing that.
22996 My concern is about should we in Category 1, like some applicants have proposed, give importance to the kind of social issues, because you are presenting yourselves also -- on one hand, you say there is a great demand, there is a lot of attractiveness, will be appealing and it's going to be fun, it's going to be entertaining, but you are making a large space to saying it's about changing the behaviour of people, it's about changing attitudes.
22997 So, somehow, it's a very engaging type of proposal you have. Some applicants have said, when it concerns more types of niches or more engaging types of action and social issues, maybe we should give priority in Category 1 because if they were to be Category 2, they might not really do it on their own and they need the more safeguards, let's say, proposed by Category 1. The very attractive, more appealing TV, traditional kind of format should be on their own. They have enough background to kind of be on that level where they have less safeguards.
22998 I would like to hear your views.
22999 Do you see WETV being in one or the other? Or you have no comment on that?
23000 MR. NOSTBAKKEN: We think WETV should be Category 1, more because it adds to the diversity of that tier, because we are a stand-alone genre. No one else has put forward an environmental service. So we think that -- it's not because we need to be Tier 1 more than any other, it's that it adds a dimension to the group of 10, or 20, that otherwise wouldn't be there.
23001 Now, we think it ought to be there, also, because of the level of what we think is marketable interest out there.
23002 I heard you ask questions, as we were panicking yesterday, getting ready for today, so I couldn't watch it very carefully, but I heard you talking to Ron Keast and his group, about education. A lot of people say that education is important, but does that mean that they are going to watch?
23003 To me the question should be put the other way around. When we see an area where there is a high level of interest, we should figure out how to create something that meets that interest. The fact that we haven't done it yet -- shame on us. What gives us a chance to do something to capture the interest of viewers, vis-à-vis the environment, it is the digitalness of it. It gives us a chance to interact with this broad constituency of people interested in the area, because they want to not only be entertained, they want to get at something and they want to get information, they want a viewpoint, they want interaction. So we think that the interactivity that digital provides is one of the elements that allows us to capture something that will work with this market opportunity.
23004 Now, of course, it's also important that it matters, you know, the issue matters, and the fact that it matters should be turned around into a driving force for people wanting to get the service. It shouldn't be seen as "We should license it Category 1 because it's the subject that matters"; we should license it because, since it matters, we should have an innovative service to reach that viewership potential. That's how I see it, at least -- and my colleagues may want to add to that.
23005 CHAIRPERSON OF THE COMMISSION: I don't want to comment on the demand and -- you know. We all have our points of view and experiences on that and, certainly, we will have to consider, somehow -- at the end of the day, we will have to measure and compare. But my question was much more.
23006 Do you feel that what you are proposing here, given what you see as being -- its importance should be, you know, more -- I was kind of seeking your views on why is it that you should be on Category 1 rather than Category 2. To make it simple.
23007 MR. NOSTBAKKEN: Well, the answer, to me, is simple: There's such a high interest in the area we should have a dedicated service to this area. And no one else is approaching it, so we ought to be in Category 1, given that we have a good business plan and that we can carry what we say we are going to do.
23008 The issue of Category 2. I mean there are other issues that I think are not meant to be discussed here, but the question of carriage ownership and, you know, the capacity to carry programs in Category 2 that stand alone, new players like WETV cannot do. Given everything else, that it's a good service, there's a market opportunity, it's a driver and so on, on that basis, it makes a lot more sense to license a WETV than -- on Category 1 -- than a service that can guarantee its own carriage anyway.
23009 CHAIRPERSON OF THE COMMISSION: In terms of -- you made a comment, in terms of saying this is about the relationship of environment and men or women in the -- I don't know if in the large or generous sense or the conventional sense of saying it -- and that would mean that you would see the possibility of cohabiting with nature-type of services?
23010 MR. NOSTBAKKEN: Yes, we think that if -- this not a take-home question but this is a mainstream question here: are there applicants that we would be comfortable or uncomfortable with? The natural question that people have been asking us: what about Nature? What about Explore? We think there's a good synergy among those. It would depend upon how big a package you are putting out and the combination of services. But we don't see them at all in competition. We see them building one on the other, in a very positive way.
23011 CHAIRPERSON OF THE COMMISSION: Last question, and not least.
23012 In environment concerns or preoccupation, like any other ones, in a general question, you can attract people. But the way you will convey and kind of drive the content could, eventually, address to -- or be meant to address only part of what was originally the old population, in a sense that you could turn yourself into a content that is really calling so much for action that, eventually, it is interesting not to the viewers but, rather, to people committed towards making environment, you know, or improving environment and creating a better world, which is a very different type or segment of population, it seems to me, that the ones identified -- although I admit my ignorance because I didn't study the whole application like my colleague did, but, you know, it could be two different populations, it seems to me.
23013 MS RANKIN: I absolutely agree with you. And that would be our Category 2 application, after we have nested it for a while. I think we would -- that would be a natural spin-off of WETV Canada into a -- I don't know what we would call it, but it could be as a result of a program series on the activist -- the activist greens. But it's not the whole channel. The whole channel is devoted to passionate green Canadians who comprise 98 per cent per cent of the population. It's not to that 2 per cent who don't care, on one end, or that 2 per cent who care too much, on the other end.
23014 CHAIRPERSON OF THE COMMISSION: Thank you.
23015 THE CHAIRPERSON: Commissioner Wilson...?
23016 COMMISSIONER WILSON: Good morning.
23017 I had a laugh when you talked about the doughnut shops because, I don't know if you read the same article that I did but Canadians eat more doughnuts per capita than any other population in the world, and we have more doughnut shops than anybody else, so. I thought that was an appropriate venue from which to gather Canadian opinions.
23018 I want to pursue, just a bit, on the comments that you make, Miss Rankin, about the launch of the Category 2s. And one of the reasons that I want to pursue on this is because I want to get your answer, but the other reasons is that your answer seemed to me maybe a little bit -- and maybe I'm taking this too far -- but a little bit inconsistent with your philosophical orientation vis-à-vis the kind of channel that you are proposing, because what I heard you say was that we should not launch the Category 2s at the same time, but afterwards, that we should focus on quality and, essentially, let the Category 1 services get established.
23019 This strikes me as a particularly analog approach, and an approach that may be better for the programming service, but not better for the consumer. An approach that doesn't necessary honour the nature of the technology that we are dealing with, which is choice, which is what the consumer is saying they want after all of these years.
23020 One of the real challenges as a regulator is to balance the health of the system against the public interest and the desire of the consumer. There are those who would argue that in the analog world that we have created a very healthy system of Canadian content in specialty services, but that we have done that to some extent at the expense of the subscriber.
23021 The subscriber has had to pay for those services. For the ones that are carried on basic, of course, they had to pay as part of their basic and the penetration level of tier one is so high you could almost consider it an extension of basic, 90 per cent penetration of tier one.
23022 So any services that end up on tier one, any specialty services that end up there have a virtually guaranteed business plan, which is great for the programming services and very good for the system and good for Canadian content, but what about the consumer who is saying "hey, enough already. I want to be able to choose the services that I want and I want lots of selection."
23023 That is the beauty of this technology. It's addressable. It allows -- it puts the programming decision closer to the consumer, which I think was the spirit of our licensing framework, recognizing that we are in a period of transition, where we want to maintain some level of support for Canadian content, but we also want to move to the open entry approach because it puts the programming decision closer to the consumer.
23024 So if you put that context up and you think about the comments that have been made about driving digital penetration, which ultimately will allow us to build a stronger Canadian system and the more people we get who go out there and buy boxes, whether they are cable boxes or DTH boxes, don't you think it's better to offer them as much as possible right off the bat?
23025 Would you rethink your position if I am throwing all of that at you and saying, "okay, what about this?" Is this a good argument against that?
23026 I am just curious about -- and I thought maybe it would be consistent with your philosophical orientation to give the individual choice and an opportunity to be empowered in terms of what they want to see on their television set because it fits in very much with the whole notion of civil society.
23027 MS RANKIN: Commissioner Wilson, you know the answer to that question has to be yes, that being said.
23028 COMMISSIONER WILSON: I know it was very long. It was a set up. I'm sorry about that.
23029 MS RANKIN: We are not supposed to say no, are we?
23030 COMMISSIONER WILSON: I want you to be honest with me.
23031 MS RANKIN: I believe I made my comments, though, in the context of David's to a question about how many there should be in Category 1. Our feeling was that perhaps 22, perhaps 25, but that 10 is not enough in Category 1 and that the applications presented here have been so varied and so good that you could easily create Category 1 that was larger than 10 and, as a result, offer choice.
23032 COMMISSIONER WILSON: And if they are so good --
23033 MS RANKIN: Pardon?
23034 COMMISSIONER WILSON: And if they are so good, could they not survive as a Category 2 and many of them have applied for Category 2 licences.
23035 MS RANKIN: Yes, and many of them will survive very well as Category 2 licences, absolutely.
23036 Your question, though, had to do with --
23037 COMMISSIONER WILSON: With the launch, the timing of the launch, the Category 1s, then sometime later Category 2s.
23038 MS RANKIN: Yes. With a big package that offers extraordinary choice to consumers, with a launch of Category 2 to follow on, I guess I am not sure I see how I would be inconsistent in that.
23039 COMMISSIONER WILSON: Why could the Category 2s not launch simultaneously and are you assuming that all the Category 1s are being offered in one big package and why are you assuming that?
23040 MS RANKIN: No. I am only assuming that all Category 1s are must carry. So it would be an interesting market challenge to come up with the packages for must carry versus the others I guess.
23041 COMMISSIONER WILSON: I will give you a little example and I won't take long because I know we are at lunch time here, but for cable, for example, for DTH -- DTH is carrying their digital. They are completely digital. They are carrying all of the existing services, so it's very easy for them to create themed packages because they have MuchMusic, MuchMoreMusic, MusicPlus, so they can offer all the music channels in one package. If we licensed another music channel they could add that.
23042 For cable that's not the case. They have their analog service and they have their digital service. So if they want to create themed packages and we said we are not going to licence competitive genres and we licence 24 services, none of which are competitive directly, how are they going to create themed packages, unless the Category 2 services launch at the same time?
23043 MR. NOSTBAKKEN: Can I take a crack at this? I think that when we are talking about simultaneously or not, we are talking about months not years.
23044 COMMISSIONER WILSON: Okay.
23045 MR. NOSTBAKKEN: I think the world can generally afford to wait three or four months and still be well served. But I think the real question is, it's your question. It's a good question. It's what best serves the viewers and Canadians.
23046 If we can find the formula that best serves them, it's the formula that will work best.
23047 I guess the question I have is if you get -- I don't know what the total realm is you would be thinking of in terms of offerings. Is it 100? Is it 200? Is it 300?
23048 I am not sure that starting a new service with a new box with that many choices necessarily serves the viewers and this is a matter that you have to research. It's a deliberative matter.
23049 I can remember when I was a first year university student walking into a library and saying to the librarian "do you have any books on British prose writers?"
23050 She pointed to a row of stacks that looked like a mile long and she said, "there they are." So I just turned on my heel and left because I did not know which book to pull out and I was sure if I pulled a book out it would be the wrong book or there'd be a better book.
23051 I think this is a marketing question. If we are trying to make sure that we have a driver for a new digital offering, what's the threshold, the numbers of choices before you begin to frustrate the viewer? I have no answer to this question, but it seemed to me that if you are going to license Category 1 services you want them to work.
23052 I would assume that it's important that they work. So the question is: Do they work more likely in a larger field, or do they introduce more discretely how options vary on digital and, by the way, the difference is not just that it's on digital, but it's a new kind of programming we would hope.
23053 So maybe the question is how much variety can you introduce without blowing the fuses? We think a small delay between Category 1 and Category 2 is probably something to seriously consider, but as a licensed service we will go with whatever happens. It's just an opinion we have without the basis of our own research or analysis on the subject.
23054 COMMISSIONER WILSON: Thank you, Mr. Nostbakken.
23055 THE CHAIRPERSON: Commissioner Demers.
23056 COMMISSIONER DEMERS: Thank you, Madam Chair.
23057 I am interested in the partners that you have with you, but in particular in your oral presentation you have referred to WETV Europe and China and links with Latin America. At the very moment what is the activity of these at the present time?
23058 MS RANKIN: Two weeks ago we signed a contract with two Chinese-based companies to deliver WETV China to them.
23059 Kathleen is the Chair of that, having been the company that was instrumental in putting these three companies together and she can talk about what the situation is there.
23060 MS FORSYTHE: What we are going to be doing is working with agencies to assist the Chinese cable industry which at the moment has about 100 different state-owned enterprises which have no facility for working together or talking to each other.
23061 Through the creation of Extra China, that's an outside China vehicle which includes WETV China and the provision of programming to them through WETV, we are going to be opening basically a distribution access to the Chinese cable television system for specialty services.
23062 We are at the point of providing program lists and beginning the negotiations with all of the various operators inside China.
23063 COMMISSIONER DEMERS: So your own operation is out of Canada, is it? WETV --
23064 MS FORSYTHE: WETV China is an offshore company: offshore to China and offshore to Canada. It is owned in part by WETV International, which is a Canadian company, and also by Chinese oriented companies.
23065 COMMISSIONER DEMERS: I am not really questioning the ownership; I am more concerned about what will come as programming and what are the activities.
23066 MS FORSYTHE: What we anticipate -- my office, for example, the company that I work in, is in Vancouver. What we anticipate is that we will act with WETV International as the agency through which any of the programming that goes to China will pass, as it goes to China, and that we can take basically any programming out of Canada that is cleared for use in China, regardless of whether it comes from WETV or not.
23067 COMMISSIONER DEMERS: Thank you.
23068 MR. NOSTBAKKEN: Perhaps I could just give a brief overview of WETV International in general, because I think that may be your question.
23069 We have been building WETV since 1993, and the way we have built it is to put public and private money together through a company. We produce programming with independent producers in as many as 50 countries. We have formed partnerships with broadcasters in those countries, who become de facto affiliates, and we distribute our programming to these broadcast partners in these countries on a business basis.
23070 At the same time, we are establishing these regional franchises. WETV China is an example. We are 20 per cent owners of a company that we have built that delivers us China. So all the programming, or all the programming that we clear the rights for from WETV Canada, we will also have the distribution vehicle for China, if we wish to distribute them there.
23071 Similarly, in Europe this summer we have begun broadcasting to all Europe through Astravision -- which is an SCS Luxembourg satellite system -- the programming that we are producing from Hanover and our other programming. So we are creating a European distribution approach for our programming.
23072 In addition to that, we have partnerships with broadcasters in other countries for producing and distributing programming from their cultural perspective to the rest of the world.
23073 That is the nature of our operation.
23074 COMMISSIONER DEMERS: Thank you. I have my answer. What is produced in Hanover is already being seen --
23075 MR. NOSTBAKKEN: Yes.
23076 COMMISSIONER DEMERS: -- somewhere.
23077 MS RANKIN: In Europe.
23078 COMMISSIONER DEMERS: In Europe.
23079 Thank you, Madam Chair.
23080 THE CHAIRPERSON: Commissioner Williams?
23081 COMMISSIONER WILLIAMS: Last night, while multi-tasking away in my hotel room, reading your file and preparing questions and watching TV, the more than slightly irreverent program This Hour has 22 Minutes presented a short spot on the antics of a British Columbia environmental protest group celebrating the shelving of plans for a major, mega-mining project in a remote part of British Columbia.
23082 One of the methods of celebration involved a young female protester attaching herself to a tree, with small chains coming from each nostril that had been installed through a method of body piercing.
--- Laughter / Rires
23083 COMMISSIONER WILLIAMS: When you mentioned earlier in part of your presentation and in responses to some of the questions about the B.C. activist chained to a tree, I have to confess that this image did run through my mind and I may have smiled during your answer.
23084 Thank you.
23085 THE CHAIRPERSON: And I sneezed.
--- Laughter / Rires
23086 THE CHAIRPERSON: I have a couple of questions, which will seem quite detailed after that conversation.
23087 You were asked by Commissioner Williams whether you would accept a limitation on drama, on Category 7 programming, and you said yes, but, as far as I know, no percentage of programming has been suggested, as to what level. At least I can't recall one. But you were prepared to accept a condition of licence limiting the amount of drama, but I believe it has been left open as to what that limitation would be, which should be of concern to you, so we would like to hear from you what you suggest.
23088 MS RANKIN: We would propose a condition of licence that limits us to 15 per cent for categories of drama, and within that we would be prepared to restrict our U.S. or U.K. programming to 6 per cent.
23089 THE CHAIRPERSON: And am I right that those numbers were not provided?
23090 MS RANKIN: You are right, they were not provided.
23091 THE CHAIRPERSON: I hope that I am not duplicating --
23092 MS RANKIN: Yes.
23093 THE CHAIRPERSON: I was a bit puzzled by your comment about: If you are not able to implement interactive programming via the set-top box, other technology will take over. I believe I heard you say that, and I wondered what you were referring to.
23094 MS RANKIN: I was referring to a convergence in -- if it is not in the set-top box, it will be in the computer, and one of them will just absorb the other. It is going to happen one way or another, and whether television happens on the Internet or the Internet happens on television, it will happen.
23095 THE CHAIRPERSON: So you would see the quality and character of the TV set being in a computer instead.
23096 You are saying that a convergence is possible the other way --
23097 MS RANKIN: Personally, I don't. But, you know, I am not seven years old today, or even 15 years old today. So it is very hard for me to assess what 15 year olds or 12 year olds or kids who have grown up with it all their lives feel --
23098 THE CHAIRPERSON: When they are 40 their backs will be sore.
--- Laughter / Rires
23099 THE CHAIRPERSON: Like everybody else if they are trying to watch TV on their computer screen.
23100 I was just curious to see whether you had thought of something we hadn't --
23101 MS RANKIN: No, I don't think so.
23102 THE CHAIRPERSON: -- which would have been obvious, since you have thought of many things we hadn't.
23103 MS RANKIN: All I can say is that the future ain't what it used to be. This is for sure.
23104 THE CHAIRPERSON: Yes. One's back remains firm the same, probably, as one ages.
23105 MR. NOSTBAKKEN: Madam Chair, when you go to big conventions that have heretofore been essentially on broadcasting and you see where are the popular sessions, the popular sessions are in the .com and the computer-based convergence realities, where it used to be that everyone crowded into the broadcast room.
23106 So there are definitely lots of things happening in computer-based technologies and .com companies that are innovating very, very quickly approaches to put broadband together with data services.
23107 So, in a sense, we have to move quickly.
23108 THE CHAIRPERSON: It is a comfort that we have a variety of views, because one applicant thought that one way of convincing us was to bring us each a bag of popcorn, which would be limiting if you needed both of your hands to get the programming you wanted.
23110 MR. McCALLUM: Thank you.
23111 The 15 per cent of drama that you just proposed as a limit, just to be sure about that, there are several categories of Category 7. Would the 15 per cent be across all of the categories, or just some of the sub-categories?
23112 MS RANKIN: Not all of the categories. I have a list here. Let me find it.
23113 MR. McCALLUM: If it is helpful, I can read to you the categories and you can tell me, or propose a limit for each of the categories, if that is helpful.
23114 MS RANKIN: I have it: 7(a), (c), (d) and (e).
23115 MR. McCALLUM: So your 15 per cent is a total across --
23116 MS RANKIN: Total across those.
23117 I just would comment that we don't know exactly what kind of programming we will receive from the international broadcast partners. So I guess we are asking for some flexibility in being able to program that.
23118 MR. McCALLUM: Thank you.
23119 Will the service be technically equipped to allow for the broadcast of descriptive video?
23120 MS RANKIN: Yes. I would comment that when we put our application together we didn't know much about that, but I read with interest Rob Trimbee's intervention and I think that is a very good thing they are doing. And yes, we will equip ourselves.
23121 MR. McCALLUM: The high figures that I note from your projections for other revenues, or syndication revenues, do I understand that that reflects sales to WETV International?
23122 MS RANKIN: Only. Yes.
23123 MR. McCALLUM: So the other revenues are only those syndicated sales.
23124 MS RANKIN: Sorry. The sales of programming or syndicated sales are sales of programming to WETV International only. I haven't included sales to anybody else in there.
23125 MR. McCALLUM: And that explains what?
23126 MS RANKIN: Because we -- sorry?
23127 MR. McCALLUM: That explains why there's a high figure.
23128 MS RANKIN: Yes. Exactly. We have an arrangement that we must provide them with programming, they must provide us with programming. At the moment, given the -- when we put this application together, we did not have WETV China in the mix. I have a feeling that that figure would be even higher.
23129 MR. McCALLUM: Thank you. Finally, in responding to questions about the penetration figures, you referred to, I guess, digital basic. I wondered if you could clarify what you meant by digital basic.
23130 MS RANKIN: No, I can't, except that my understanding was that Category 1 was for must carry. If there was a box out there, we would be carried in that box.
23131 MR. McCALLUM: You are not -- sorry, go ahead.
23132 MS RANKIN: As a result, I discounted the number of boxes that would be out there based on the forecast, total forecast combined of DTH, DBS and cable, which was as a result the total penetration rate.
23133 I was not penetrating on the basis of package of services, so if it's a must carry, I assumed it was like basic to the analog world.
23134 MR. McCALLUM: Were you assuming that all subscribers must receive and subscribe to those services?
23135 MS RANKIN: Well, I assumed that because they were with the box, yes. I guess that would be the answer. Yes.
23136 MR. McCALLUM: So you built your penetration levels on the assumption that all subscribers would be taking these services, including specifically the WETV service.
23137 MS RANKIN: Yes, yes, I did. Based on the subscriber box forecast, I discounted that by 40 per cent. I show a penetration rate of 60 per cent, I guess. Does that make sense?
23138 MR. McCALLUM: Thank you.
23139 Thank you, Madam Chair.
23140 THE CHAIRPERSON: My understanding of must carry is the distributor must carry and that equals must offer. The subscriber may choose the same thing in DTH. My understanding is with the digital box it will be possible to market services in the same way as DTH or MDS can, which is here is all the services I must carry according to the Regulator and you may choose two from column A, one from column B, or ten of them, whatever, as long as every subscriber has the opportunity to choose every one of the licence.
23141 That's my understanding, is must carry equals must offer. Then the subscriber will have presumably in a digital environment a greater choice to package his own -- to create his own tier. I'm sure you have had experience and you know whether it will be a discretionary tier, must carry, to the distributor because it's a Category 1 service.
23142 MS RANKIN: Thank you for that clarification. In any case, our research would suggest that the demand for our service will be high and that we will be a driver in any package that's carried and that if we were to have to stand alone, we would need 285,000 subscribers to make our business case in the first year.
23143 THE CHAIRPERSON: Yes, and you will recall that the framework envisaged a regulatory requirement that each distributor offer each service in a package or the possibility of packaging it, not only stand alone, may offer in both. It envisages a system for the Category 1 where it's a system we have known where the subscriber will presumably have somewhat more choice in getting a package and all of this will be negotiated in good will, good faith, very quickly between distributors and programmers and that terrific committee that will be formed very quickly.
23144 MS RANKIN: And we look forward to that.
23145 THE CHAIRPERSON: Yes. Good. The last word is yours, Ms Rankin.
23146 MS RANKIN: Thank you, but I would like to give the last word to David Nostbakken.
23147 MR. NOSTBAKKEN: There has been a good deal of talk about grandmothers and grandchildren. All birthdays with zeroes on them matter. We tend to pay attention to things more, especially the big five zero. We begin to ask "Are we going anywhere? Are we amounting to anything? Is it too late?" I'm sure you have that to experience yet, but it's a fact of life.
23148 The year 2000 has three zeroes, so in a time when the majority of our population is turning into grandfatherhood and grandmotherhood in a new millennium and the issues of environment are much more a part of our landscape and are likely to increase, partly because we have a larger population and the issues are becoming more serious and there's more evidence.
23149 It would seem reasonable in a large array of television services to have at least one service that deals with this prevalent and likely to increase matter.
23150 Those of us involved in WETV, WETV Canada, WETV International, have been aware of this for quite some time and began acting on it almost a decade ago. We recognize that environment is not just Canadian, but international. We also recognize now that the Internet is not Canadian, it's international.
23151 We have taken effort to link ourselves and form partnerships around the world. This is part of what is unique about WETV or distinctive about us. We are connected to a larger broadcast enterprise on the same theme.
23152 We think that some of our audience in Canada -- we think it's a broad-based niche, but some of our audience is particularly interested in the interactivity. In that sense, as we have already discussed, we think that WETV will be an attractive part of any package that is meant to inspire Canadians to buy into digital.
23153 We think that diversity is really important here as well. As the only service vis-à-vis the environment, we think we contribute to that. We think our ownership contributes and our stand alone status contributes to our diversity.
23154 We think because of our audience, our customers, the range and variety of interactivity is perhaps as large or greater than that of most candidates in the environmental sector.
23155 We hope that you can see us as one of the attractive elements of this new opportunity, attractive especially to as large a population as Canadians as possible.
23156 We thank you very much for sitting through your lunch with us on this subject.
23157 THE CHAIRPERSON: We haven't given up yet. Thank you for your interesting proposal and your cooperation in answering our questions. You have obviously interested our Commissioners. They all had questions, the lawyer as well.
23158 We thank you again and we will see you again in the additional phases of this hearing with hallmark in hand where it's relevant.
23159 Thank you very much.
23160 Nous prendrons maintenant une pause pour le déjeuner, jusqu'à deux heure et demi.
23161 We will be back at 2:30.
--- Upon recessing at 1305 / Suspension à 1305
--- Upon resuming at 1430 / Reprise à 1430
23162 LA PRÉSIDENTE: Nous vous souhaitons la bienvenue au dernier après-midi de cette semaine.
23163 Monsieur le Secrétaire. Mr. Secretary, please.
23164 MR. CUSSONS: Thank you, Madam Chair.
23165 We will now hear an application by Lifestyle Television (1994) Limited for one new Category 1 service. The service would be called R&R, Romance and Relationships. A maximum presentation time is permitted of 20 minutes and we have Ms Elaine Ali and her team.
23166 Ms Ali.
PRESENTATION / PRÉSENTATION
23167 MS ALI: Thank you, and greetings from Manitoba. Good afternoon, Madam Chairperson, Commissioners.
23168 I am Elaine Ali, President of Lifestyle Television 1994 Ltd., the applicant for this new service and I am pleased to introduce the members of our panel today.
23169 On my far left is Susan Millican, Vice-President of Programming. Next to her is Laurie Stovel, who has assisted us in preparing our application. On my far right is Carol Darling, Vice-President of Engineering and Affiliate Relations and to my immediate right is Shirley Hassan, Vice-President - Finance.
23170 Supporting us in the back row are Randy Moffat, President of Moffat Communications Limited, Jan di Clemente, Vice-President of Sales for Lifestyle and Lee Simpson of Totum Research, who undertook the consumer research studies filed as part of our application.
23171 We are delighted to be here today to present our proposal to establish a new Category 1 digital specialty programming service dedicated to romance and relationship.
23172 R&R - Romance and Relationships, promises to be an exciting and entertaining new television service in the digital world that meets identified interests of Canadians. R&R will add diversity to the Canadian broadcasting system and provide a strong incentive for Canadians to welcome this new technology into their homes.
23173 We know that romance and relationship-themed programming is highly popular with Canadian viewers and that a channel devoted to these themes will have significant appeal to audiences and advertisers alike.
23174 We know this because we have seen the enthusiastic response to Romance Sunday programming offered on our WTN service. Both quantitative and qualitative research filed with our application support the demand for a programming service of this nature.
23175 Lifestyle has responded to this demand by creating an attractive, viable programming alternative for the digital universe.
23176 Our business plan recognizes the challenges of an early digital launch and balances the need for interesting, high quality programming with the financial realities of the digital marketplace. We have listened to the concerns of distributors for the need to minimize economic barriers to the speedy adoption of this technology. At the same time, services must offer programming that is of high consumer appeal. R&R meets both these criteria.
23177 We have established a monthly wholesale rate of 25 cents per subscriber, allowing for a reasonable mark-up by distributors while still maintaining a low package rate to consumers.
23178 We anticipate modest revenues in the early years of this discretionary service. Accordingly, operating and program costs must be carefully controlled to maintain a reasonable wholesale rate that is ultimately borne by subscribers.
23179 Our proposal ensures the emergence of a strong Canadian programming component, complemented by the best romance and relationship programming from around the world. High quality, non-Canadian programming with significant audience appeal will provide a solid economic base in the early years while we build our Canadian content.
23180 Our commitment to the development, creation and presentation of Canadian programming through WTN is well known, both to the Commission and the independent production community. We will bring this same commitment to R&R.
23181 Exhibition of Canadian programming has been designed to grow with the penetration of digital technology and resulting increases in projected subscriber and advertising revenues. Annual Canadian content levels proposed in our application represent minimums that we intend to surpass should actual revenues exceed our expectations.
23182 The level of expenditure on Canadian programming is charted to increase throughout the licence term, reaching a minimum commitment of 43 per cent of prior year's revenues by year seven, as proposed in our response to CRTC's question on this matter.
23183 Of significant importance is our commitment to the development and creation of original new Canadian programming, produced entirely by Canada's independent production community, unaffiliated with Lifestyle. R&R will commission more than 870 hours of new Canadian programming representing an investment in development and production of over $11 million during the licence term.
23184 In year seven, new production will reach 247 hours per year and will comprise over 58 per cent of our total programming budgets. This significant commitment to the creation of new programming will enable R&R to offer a distinctive service to Canadian viewers, ensuring a strong Canadian presence in the digital television world of the future.
23185 I would now like ask Susan Millican to describe our specific programming plans for the R&R service.
23186 MS MILLICAN: Thank you, Elaine.
23187 Romance and Relationships, Love, Sex, Romance. These are topics that we know from our extensive research and from our everyday experience are of interest to Canadians, both men and women. They are topics that drive conversations at cocktail parties, dinner parties, book clubs and in the office. We know they are topics that will drive an audience to the digital tier.
23188 We have created a program schedule that combines the best romantically themed programs from around the world, with Canadian drama and information programming. Our programmers at R&R have some experience in Romance and Relationships programming. We will use that experience to buy programs from Britain, New Zealand, Australia, world class dramas like HeartBeat, Reckless, Love in the 21st Century, all shows we know have a strong audience appeal, designed specifically for R&R.
23189 We have also scheduled high quality Canadian programming: Emily, Blanche, Love and Larceny, all shows that would have a perfect home on R&R.
23190 Romance and relationships are indeed part of the human experience. Our information programming that we will produce exclusively for R&R will reflect the differences in the Canadian experience. The programs we will produce will deal with subjects like wedding customs, different dating customs, cross-cultural relationships, intermarriages, teenagers in love, all topics that we know are of interest to Canadians.
23191 Series such as Perfect Match, profiling real-life Canadian couples; Gettin' Hitched, offering information and advice to the marriage minded; The Romance Guide, exploring the dynamics of the human
relationship; Sex after Sixty, addressing sexuality among Canada's growing older population; Call Me Love and Manners, an interactive show offering advice on relationship problems and Breaking Up is Hard to Do, exploring the world of divorce and, finally, Off the Shelf, a national book club that will deal with the literary movies airing on the network.
23192 Lifestyle is committed to independent production in this country and R&R will create significant new opportunities for producers in Canada. First, we will commission new, original programming designed specifically for our network. Second, we will provide an additional second window for existing Canadian programs and, third, we will provide new funding opportunities for program development.
23193 We already have a special relationship with independent producers in this country. The letters of support we received for this application and also for the WTN renewal was gratifying. Our audience will benefit from this relationship. So will the independent production community and so will R&R.
23194 We currently work with some of the best and brightest producers in this country. We are committed to mentoring new producers, directors and writers. We are excited about our new schedule, our new network, and I would like to take this opportunity to just show you a bit about what our network will look like when it goes on air.
--- Video presentation / Présentation vidéo
23195 Romance and relationships are not just popular in real life, in magazines and on television. They have proved to be topics that are immensely popular on the Internet.
23196 Carol Darling will now tell us about some of those possibilities.
23197 MS DARLING: Thank you, Susan.
23198 Both the fantasy aspects of romance and realities in dealing with human relationships have been two prominent drivers on the Internet. The marriage of Romance and Relationships programming and Web content creates an excellent opportunity for interactive television development.
23199 At Lifestyle, we have been interactive with our audiences, from Day One, with programs such as "Open for Discussion", "The Sunday Night Sex Show", through our viewer's hotline, audience and consumer search, and through our WTN Web site. We are excited about using new technologies to extend our dialogue and communication with our audiences.
23200 We believe that a successful interactive programming venture will require the creation of very strong bonds between selected on-air programs and a Web community of interest.
23201 In addition to our internal commitment, the ingredients to create this success will involve: programming and Web development partners, to ensure integration of on-air programming and Web content; complementary content providers; e-commerce partners; and advertisers and sponsors.
23202 Lifestyle's new media implementation is planned to track the roll-out capabilities of TV interactivity across the distribution infrastructure.
23203 We also recognize the challenges distribution undertakings face in providing a platform for programming interactivity.
23204 We want to ensure interactive programming activities are realistic and well-placed.
23205 For example, it may not make sense to invest heavily in interactive programming content that requires full Web access from the set-top box or interactive content that works on only one distributor's platform if the result is that a substantial base of digital subscribers cannot access this content.
23206 These technical difficulties will not constrain us in our development, however. In fact, there is much to be learned to create successful converged applications. Programming and Web content providers must work together to find those compelling links for the consumer. These program/Web bonds can be established in parallel or in advance of interactive television deployment. Our model, in which we work directly through program development with our independent producers, will allow us to foster this joint content development.
23207 Two examples of programs especially suited to interactive development are: "The Off the Shelf Book Club", where extensions can include lesson plans, discussion forums, access to community book clubs, inter-club contests and moderated debate, opportunity for recommendations and novel purchase; and, secondly, "Breaking Up is Hard to Do", where extensions can include both discussion forums and sound professional advice on issues of breaking up and divorce, such as custody, visitation rights, local support agencies, et cetera.
23208 Further to our written application, Lifestyle will work with the WTN Foundation to assist in fostering specialized expertise in the area of interactive television. This undertaking is in keeping with our corporate commitment to support women who are currently under-represented in the multi-media field. And, also, this will assist in creating opportunities for skill development in this new environment.
23209 I am personally very excited about driving these new interactive applications. It is going to require us to be clever, entrepreneurial and to build some new relationships.
23210 We look forward to extending our commitment to Canadians to provide a high-quality service that delivers on the digital promise.
23212 MS ALI: Thank you, Carol.
23213 R&R will be a distinctive new Canadian service for the digital world. It is unique. It offers programming for which there is a proven consumer demand. It is based on a sound business plan. It marries affordability with a growing commitment to the development of original new Canadian programming. And it will be operated by a speciality broadcaster with a proven track record in creating a high-quality programming service and fulfilling its role in the Canadian broadcasting system.
23214 This new service represents a logical step in the business development of Lifestyle Television.
23215 Over the past several years, we have responded to the demands of our female audiences to provide them with programming in the romance genre, through the introduction of the "Romance Sunday" programming strand, in 1998.
23216 We have gained considerable experience in acquiring and creating to meet this demand and we are ready to extend this expertise to create a specialty service dedicated entirely to programming about affairs of the heart.
23217 We are making significant commitments to ensure that R&R fulfils its obligations to Canadians and to the system:
Forty-three per cent of prior year's revenues expended on Canadian programming by Year 7;
More than 870 hours of original new Canadian programming created entirely by Canada's independent production community, representing more than 74 per cent of our total Canadian programming expenditures;
A total investment of $15 million to acquire, develop and produce Canadian programming;
Strengthened support for the WTN Foundation by extending our corporate commitment to provide three-quarters of 1 per cent of gross revenues to increase the involvement of women in the multi-media industry;
And a service located outside the major production centres of Canada, offering increased opportunities for regional participation in the Canadian broadcasting system.
23218 All these commitments are based on a sound and viable business plan that recognizes the need to balance attractive programming with affordable pricing.
23219 Lifestyle is committed to developing R&R as a distinctive and appealing specialty service, providing additional diversity for Canadian television audiences and making a strong contribution.
23220 We believe this application meets all the objectives outlined by the Commission for the introduction of new digital services in Canada and we ask that you grant us a licence.
23221 That concludes our formal presentation, Madam Chairperson.
23222 We would be pleased to answer any of your questions.
23223 THE CHAIRPERSON: Thank you, Miss Ali, and welcome, you and your colleagues.
23224 Commissioner Wilson, please.
23225 COMMISSIONER WILSON: Good afternoon.
23226 I hope it gives you some comfort that I am the "regulatory relationship queen". I'm the only single member of the Panel and this is the third relationship service for which I have been posing questions.
--- Laughter / Rires
23227 COMMISSIONER WILSON: I don't know if that was a coincidence, on the part of staff, or if there's a hidden message because I spend so much time talking about my dog.
--- Laughter / Rires
23228 COMMISSIONER WILSON: It's probably the latter.
23229 So, anyway, it's nice to see you all here, and I'm sure you understand the organization we have brought to how we approach the questions. I was impressed with the fact that a number of them had been answered in your opening remarks. It's always -- as the Chair says: you get bonus points when you anticipate what we are going to ask.
23230 I am going to go through, though, the standard questions and give you an opportunity to add your voices to the discussion that we have been having about how to select the services that will, ultimately, be given licences for Category 1 and how to implement them. And, then, on issues surrounding your Canadian programming expenditures and stuff like that, we will get into a little more specific detail, with respect to your application.
23231 So, maybe you can begin, Miss Ali, by talking about the selection criteria that you consider to be most important for the Commission to use in determining who gets the licences for Category 1.
23232 MS ALI: Thank you.
23233 Yes, we have spent a lot of time discussing the weighting of the criteria and the order of the criteria, certainly not in the last two weeks as before we developed our application.
23234 We feel, very strongly, that attractiveness and affordability are linked and those are two very, very key components and are imperative to the success of the digital roll-out and to the services licensed. We have got to be attractive, from the start, and we have got to provide real value, from Day One.
23235 Number two: The level of support for truly independent Canadian production and new original production. Specialty services have supported, to date, the independent production community in a very major way, and it's important to grow that support to all sizes of production companies from coast to coast.
23236 Thirdly, diversity. And diversity in programming content -- re-purposed or new -- and on our approach is a given to us. But we see diversity as also being applied to other factors. Example: Ownership; location of the service; geographical diversity; regional perspective; the size of the organization; the approach to doing business; diversity in voices; and diversity in the different expertise in the program area that's been applied for.
23237 Fourthly, a commitment to participate in interactivity within a realistic and meaningful way. Obviously, all of these are wrapped around together and are key and must come together to form a very solid, viable business plan and a realistic business plan, one that is going to take us much further than seven years. That would be our order.
23238 COMMISSIONER WILSON: Thanks, Ms Ali.
23239 With respect to the implementation of the service, we have been having some discussion, as you know, about a number of aspects of implementation, ranging from whether or not the Commission should prescribe the launch date, if we should prescribe a timetable for negotiating terms with the BDUs and the programming services, the sizes of the packages. I am just wondering if you have some ideas about how involved the Commission should get in those kinds of discussions?
23240 MS ALI: We have listened to a lot of comments in this area. We agree with many of our colleagues that the implementation date should be considered as part of the overall commitments. I think that's very, very important.
23241 And that certainly there should be a common launch date in order to maximize the promotion of marketing activities that are inherent to a successful launch.
23242 But probably most importantly, the co-ordination with distributors to ensure the supply of boxes are available for demands to be met. I think it would be very frustrating and very disappointing if there were a launch date set without that assurance.
23243 Certainly, an implementation date that considers these three factors I believe would require the Commission's involvement.
23244 COMMISSIONER WILSON: I think there was a suggestion made by one of the applicants that there should be some kind of a working group, made up of the BDUs and the programming services and get together and sort of talk through a number of the issues related to the launch of the services. Do you think that is a good idea?
23245 MS ALI: That would be a good starting point. I think that would be terrific. I think a number of these issues can be addressed and tabled and talked about and perhaps a recommendation brought to the Commission.
23246 COMMISSIONER WILSON: What's your opinion about Category 1's launching before Category 2's or should they all launch together? Should there be a limitation on Category 2's launching before Category 1's?
23247 MS ALI: I believe that you have seen and heard a lot of very attractive, viable, interesting and creative services being talked about this week. So as to size of packages, certainly there should be a mix in our opinion of the general interest, broad appeal services, with the very specific niche services.
23248 I am not sure that 10 will accommodate all the wonderful ideas that you have heard.
23249 But with regard to implementation of Category 2 at the same time as Category 1, as a programmer we would like sometime, if it were in fact correct, if my assumption is correct that Category 1 is going to be launched first, we would certainly want some time to settle in and find our place and all those things that we as business people and programmers like to have the comfort of.
23250 I certainly heard your opinion loudly and clearly this morning and you have a good one, so I don't know, coming from a consumer --
23251 COMMISSIONER WILSON: I don't know if that was so much opinion as it was sort of --
23252 MS ALI: A thought.
23253 COMMISSIONER WILSON: Well, just sort of posing a scenario, which is, you know, where do we come out in terms of what the consumer wants and what the programmer wants and is digital the time to put the emphasis more on the consumer.
23254 MS ALI: That's what this is all about, isn't it? We are providing choice and alternatives and, hopefully, attractive and affordable services to the consumer. I suppose from that point of view the Category 2 services may well serve the consumer very well if they implement at the same time as the Category 1 services.
23255 However, I truly do believe it depends on the size of the package that the Commission is entertaining for the Category 1 services because if there are, in fact, numerous services, many more than 10, for example, 20 or whatever it may be, then I would think that that would be quite appealing to the consumer to pony up and get the box and subscribe to the services.
23256 COMMISSIONER WILSON: You are probably aware that the Commission often imposes a minimum amount of time by which a licensee has to implement their licence. Do you agree that there should be a minimum amount of time within which the Category 1 licensee should launch their service?
23257 MS ALI: Yes, very much so.
23258 COMMISSIONER WILSON: A year within the date of the decision or --
23259 MS ALI: That sounds reasonable, yes.
23260 COMMISSIONER WILSON: And should there be more flexibility for Category 2 services?
23261 MS ALI: You know, because they don't have mandated carriage and, therefore, there are no guarantees, I wouldn't feel it would be appropriate to fix a date because it's not really within the services' control to actually launch at times. So I think it's a process that will have to be worked out.
23262 COMMISSIONER WILSON: I want to talk about your Canadian programming expenditures, first of all, by asking sort of the general question with respect to the challenges of the digital environment.
23263 Do you think -- and actually you, in your application, suggested or proposed a graduated approach.
23264 MS ALI: That's correct.
23265 COMMISSIONER WILSON: I think it's the only example of that that I have seen, that I personally have seen in the material that I have looked through.
23266 That would suggest that you think it's a good idea that there be some flexibility with respect to how Canadian programming expenditures are calculated in this environment. But do you think it's necessary or appropriate for the Commission to require minimum levels of Canadian programming expenditures?
23267 MS ALI: Yes. I think that in this competitive environment it provides one of the elements for a level playing field. I think that one is a very important one.
23268 COMMISSIONER WILSON: So, talk to me a little bit about the idea behind the graduated approach. Actually, at the same time maybe clarify for me the comment that you made in your opening remarks. It's on page 9 at the bottom of the page because I think that what you did was you proposed two approaches in your response to our deficiency letter. Where in the first one you said, "this is what we would prefer. We prefer the graduated approach, going from 35 per cent to 43 per cent by year seven."
23269 Or, if the Commission felt that we wanted to have a level, the same level across all seven years of the licence, that that level would be 39 per cent and in your opening remarks you said 43 per cent. So are you proposing 43 per cent across all seven years? Are we seeing an opportunity here?
23270 MS ALI: I am too.
23271 I believe in my opening remarks I was talking about the graduated approach, which is what our application is based on and that we would be at 43 per cent in year seven.
23272 COMMISSIONER WILSON: Oh, by year seven?
23273 MS ALI: That's correct. Forty per cent by year five. It's the graduated approach, so 43 per cent by year seven.
23274 COMMISSIONER WILSON: All right. I see that little word in there.
23275 MS ALI: Yes.
23276 COMMISSIONER WILSON: Now, this is your suggestion, that we do this graduated approach, but there have been some other suggestions about how Canadian programming expenditures could be calculated, a number of different methods. One is that you average, take the average over the entire seven-year period versus the traditional approach.
23277 The other is that we have a 10 per cent over or under, which would allow the service -- and that would be calculated on an annual basis. Did either of those methods appeal to you, as opposed to the approach that you have proposed?
23278 MS ALI: Well, the approach we have proposed is really what our whole model is based on. We have used the Commission's framework and we feel it was fair, in that we reach a Canadian content level of 50 per cent by the end of the licence term.
23279 In so doing what we have done, and also in order to come out of the gate with an attractive, ready service, we have taken the approach whereby we increase over the seven years both the content and, of course, the expenditures. The expenditures in fact increase at a much higher rate than our revenue increases.
23280 So that is why the graduated approach, and so I can understand that different applicants used different approaches, but certainly our number one suggestion would be to use that graduated approach.
23281 It does work out to some kind of an average at the end of the year, but with a year one amount as being fixed and then in our case it goes years two to four 35 per cent and years five and six 40 per cent, and then year seven, 43 per cent.
23282 That accommodates what we believe are our programming requirements in terms of the production, the original new production, as well as the need to increase the original independent production dollars as we become more viable and as the revenue increases.
23283 That being the case -- and we have tabled that in previous correspondence with the Commission -- measured over the entire licence term, we still believe that year 1 should be fixed and years 2 to 7, in our case, would result in a 39 per cent commitment, and that would be acceptable as well.
23284 The fixed annual we would need a little bit more thought on because that really differs from our approach. Certainly we could think about it, but the calculation, which is one of the approaches that the Commission or other applicants have thrown out and we are here to consider, which is year 1 to 7 -- over year 1 to 7 -- and that becomes your average. That in our case, given the ramp-up approach, has worked out to a percentage that is not consistent with the numbers filed in our application. So we would have an issue with the percentage as calculated that way. Thirty-nine is what our averages work out to.
23285 So three different approaches, but certainly we would vote for the first one. That suits our model well.
23286 COMMISSIONER WILSON: It did occur to me that there was some logic in the way your Canadian programming expenditures ramped up as your Canadian content ramped up, because typically we don't ramp up the Canadian content over the course of a licence.
23287 Or do we?
23288 I guess some will go a certain number of years at one level and then go up. But it did seem to make sense in terms of how you increased the level of Canadian content.
23289 But speaking of the Canadian content, you start out at about half the level of the other romance and relationship channels. I wonder if you want to talk about that.
23290 MS ALI: Sure. I am going to ask Susan Millican to talk about some specifics with regard to that approach.
23291 We think, again, as I said before, that the CRTC's policy framework was a thoughtful and reasonable approach to ramping up Canadian content to reach 50 per cent by year 7. We did take that approach, and I would like to ask Susan to talk about some of the specifics as to what resulted.
23292 MS MILLICAN: First, I want to make it very clear that we are seriously committed to Canadian independent production, and we have traditionally been so at WTN as well.
23293 We also recognize the challenge of producing quality programming that will attract a viewer, if you are in a hurry and you have to rush and don't spend any time on development.
23294 Our strategy is to reach 50 per cent Canadian by the end of year 6, which I believe is a year earlier than required. By the end of year 7 we will in fact have produced 870 hours of original Canadian programming from independent, unaffiliated producers. In fact, that means we will have spent over $10.5 million on Canadian independent -- truly Canadian independent production, and have spent three-quarters of our Canadian expenditures on independent production.
23295 Another point I wanted to make here, which I think shows how we are doing things a little bit differently as well is, our shows are only repeating, on average, about four times a week. That is a decision we made intentionally, so that our viewers will not become tired of our programming; that our viewers will not be suffering from viewer fatigue.
23296 It would have been easy to play our Canadian programming over and over and over again. Our content level would have been higher, but that does not seem, in my mind, to be good programming sense and does not serve our viewers well.
23297 COMMISSIONER WILSON: That is a good response to my question. It answers what I wanted to know.
23298 CHAIRPERSON OF THE COMMISSION: It's a clear one.
23299 COMMISSIONER WILSON: It's a clear answer to my question, that's right. I shouldn't be saying it's good. It's a clear answer. Excuse me.
23300 Talking about independent production, which you raised in terms of how your Canadian content levels work, you have stated very clearly in your application, in your opening remarks and again just now that all of your production will be done by independent producers. So I am assuming, maybe incorrectly, that you would think that we should require some level of commitment to independent producers in these digital applications.
23301 MS ALI: Your assumption is correct. We are very committed to that. We feel that diversity is served by ensuring that different voices are heard and providing different opportunities to that very industry that has certainly served us very well at WTN. We produce about 83 per cent of our Canadian programming through independent production and have been very successful at that.
23302 COMMISSIONER WILSON: Just so we can add your opinion to the discussion, how do you define an independent producer?
23303 MS ALI: From our perspective, being unaffiliated, the discussion is really academic, as we are truly 100 per cent unaffiliated with any independent producers. But we have heard a number of different options and we feel that 30 per cent to 35 per cent voting ownership sounds like a fair guide to defining an affiliation, and believe strongly that there should be a maximum of dollars flowing to an affiliate, and 25 per cent has been tabled on a number of occasions, and we feel that is reasonable.
23304 COMMISSIONER WILSON: I believe that when Global was here they separated out information-based and entertainment-based programming, and the information-based was at 25 per cent and the entertainment-based was at 50 per cent. Do you see a distinction between those two -- a natural distinction of any kind?
23305 MS ALI: No, actually, I don't. However, our experience has mostly been with information-based, so that is what we are basing our suggestion on.
23306 COMMISSIONER WILSON: Okay. That's helpful.
23307 Is that an okay word to use?
--- Laughter / Rires
23308 MS ALI: "Good" works well too.
23309 COMMISSIONER WILSON: "Helpful", that's clear. That is very clear. You have to be careful with your words.
23310 Again in your opening remarks, let me just ask you about the number that you quote on page 10, at the top. The total Canadian programming expenses that I have from your application and your deficiency letter is $13.7 million, and you say a total investment of $15 million.
23311 MS ALI: Yes. That, again, is the difference between the amortized and the cash component, so the higher one is obviously the total investment.
23312 COMMISSIONER WILSON: Okay.
23313 MS ALI: The $13.7 million is the amortized expense costs.
23314 COMMISSIONER WILSON: Thank you.
23315 I want to talk a little bit about your nature of service. In section 7.1 you describe your service. You say that at least 95 per cent of the programming shall be drawn exclusively from a number of different categories.
23316 Maybe I will just confirm them with you: 2, 5(b), 7, 8, 10 and 11. Is that correct?
23317 MS ALI: That is what our application states, yes.
23318 COMMISSIONER WILSON: And you were one of the few applicants who did not ask for Category 15?
23319 MS ALI: That is correct, as well.
23320 COMMISSIONER WILSON: Was that an oversight?
23321 MS ALI: No, but something else was an oversight. We also didn't ask for Categories 12, 13 and 14.
23322 COMMISSIONER WILSON: Okay. So you --
23323 MS ALI: So we would like to add those categories to our list.
23324 COMMISSIONER WILSON: -- would like to add Categories 12, 13 and 14.
23325 MS ALI: But not 15.
23326 COMMISSIONER WILSON: Obviously.
23327 MS ALI: Yes.
23328 COMMISSIONER WILSON: If the Commission wished to establish a nature of service definition for your service that established the exclusive range of categories -- because it is a fairly broad range of categories that you have asked for -- if we were going to try to establish an exclusive range of categories from which your programming would be drawn, what categories would your programming fall into primarily?
23329 MS ALI: I am going to ask Laurie Stovel to help you out with that.
23330 MS STOVEL: The schedules that we submitted with our application include, principally, Categories 2(a), 2(b), 5(b), 7(a), 7(c), 7(d), 8(a), 10 and 11. But we have requested the flexibility to include in our nature of service definition the categories in 7 -- or the sub-categories in Category 7 that I didn't mention -- as well as 8(b), music video clips.
23331 COMMISSIONER WILSON: Yes. I think in your deficiencies you said that it would be all sub-categories of 7 and 8.
23332 MS STOVEL: Right, yes.
23333 So, principally, with the addition of Categories 12, 13 and 14, what we gave you is what we would like to have in terms of program categories.
23334 COMMISSIONER WILSON: Okay. I will ask the question again.
23335 If we wished to limit it, because the categories are so broad, to which categories would you limit your nature of service definition, setting aside what you want to have as opposed to --
23336 MS STOVEL: You are asking us to remove some?
23337 COMMISSIONER WILSON: If you were going to focus your service a little more clearly.
23338 I understand that at WTN you have a wide range of categories with limits in certain categories. WTN is very clearly an audience targeted genre. It's for women. And many of those services have a wide number of categories. Romance and Relationships is for both men and women. It is not targeted in quite the same way as WTN perhaps.
23339 I am just suggesting that if --
23340 MS STOVEL: Yes. We are talking about two different kinds of targeting. The one with WTN is targeted to a specific demographic group, an audience group, and this service is more of a program oriented target.
23341 COMMISSIONER WILSON: Genre, right.
23342 MS STOVEL: If you would like to develop more of a fence around us, we would be quite comfortable with saying in our nature of service definition that the specialty service would be dedicated exclusively to entertainment and information programming about romance, relationships and romantic themes. We could say a hundred per cent of our programming would come from the categories that we have listed.
23343 We are sure open to talking with you about limitations which you have done with some of the other applicants, I think, in specific areas. I think the one that has been mentioned in respect of entertainment service has been animation, for example. We could sure talk to you about some limits there.
23344 I think what -- and Susan may want to jump in here as the programmer because that certainly isn't what I am -- what we have talked about when we have talked about niching a service to kind of a specific area like romance and relationships and for projecting out for seven years, so the programming that might be available in seven years might be quite different than what is available to us now.
23345 The real value of that kind of a niche is being able to drive down into a lot of different kinds of program categories and present programming from a couple of -- from a number of different categories, all related to romance and relationship themes.
23346 I think that's our desire, to provide a fairly full romance and relationships service within the program categories that we have requested. You know, we have left several out that clearly in our mind don't apply like sports, religion, news, formal education, I think variety, filler programming.
23347 COMMISSIONER WILSON: You don't get any marks for leaving them in.
23348 MS STOVEL: You know, if you would like -- Susan, I don't know if you want to add something about the types of programming.
23349 COMMISSIONER WILLIAMS: I guess the argument you are making is about argument, but I guess what I'm trying to or what I'm struggling with is the definition of what's directly competitive with other services and if you are offering such a broad range from all these different categories within a single theme of romance and relationships, not pets or nature or the environment or mystery or suspense or justice or law and order. It's very strictly confined to romance and relationships.
23350 MS STOVEL: I don't know, Elaine, if you want to talk a little bit about what's directly competitive and with whom we might be directly competitive right now.
23351 MS ALI: Well, in our view, directly competitive needs to be looked on a case by case basis, but if a service were approaching a 25 per cent overlap, direct overlap in programming, that should be looked at quite carefully.
23352 I think that romance and relationships -- I mean there is nobody out there doing romance and relationships. WTN does some romance and relationships. Conventional broadcasters do some romance and relationships, but there's no service out there that becomes directly competitive or is directly competitive with a romance and relationships service.
23353 I believe that the program -- as Laurie said, the programming within that type of programming needs to be from a variety of sources. It is entertainment and it is information. When you start confining yourself, I don't think that would serve to make us less competitive with anybody else, but would serve to limit the possibilities of how we can serve that particular niche of programming.
23354 COMMISSIONER WILSON: Let me just ask you sort of a specific question with respect to potential limits. How much music video programming, for example, would you possibly do on this service? I mean everybody writes about love, there are songs about love. I mean almost any song could be played on your service and could be tied to your theme because so many songs are about romance and relationships.
23355 MS MILLICAN: To be honest with you --
23356 COMMISSIONER WILSON: Breaking Up is Hard to Do in fact is the title of a song.
23357 MS MILLICAN: And a good song it is. Music videos are not a huge part of our schedule or our plans.
23358 COMMISSIONER WILLIAMS: It's not?
23359 MS MILLICAN: No, it's not.
23360 MS MILLICAN: I think what we are trying to do here is not restrict our possibilities for the future. When we look at -- like we have lists here, animation. At this point in time I can't imagine an animated show that would deal with romance right now, but we are talking to animators in this country.
23361 We all know how wonderful the reputation is for Canadian animators in this country. If there is the possibility to do a show in five years with some talented Canadian animators that was geared towards men and women and romance, I would hate to be in a position where we had agreed not to do it, not understanding the possibilities that were out there for us in the future.
23362 There are certainly categories that are more important to us at this point in time than music videos and animation.
23363 COMMISSIONER WILSON: I guess it's not a lack of understanding on our part in terms of what you want to do. It's trying to offer some reassurance to existing services that what you are going to become over time is going to be something that is going to compete directly with they are doing.
23364 I imagine how you would feel about WTN. You wouldn't want anybody to be licensed in Category 1 or Category 2 that might compete directly with that service. That's the kind of thing that I am trying to get at here.
23365 MS ALI: If it would offer some assistance as you have talked about to other applicants, we would certainly be very open to putting some maximum amounts on some of those categories, example, animation is one that -- so a 10 per cent level, maximum level, to animation would be appropriate in our view.
23366 COMMISSIONER WILSON: Okay. I think I will leave it to our counsel and possibly our Chair to explore that further if they feel the need.
23367 MS ALI: Sure.
23368 COMMISSIONER WILSON: Now, the proposed program goods that you gave to us for years one and seven don't include any U.S. based dramas that are sort of tied to your theme. I'm just wondering to what extent you might foresee programs like The Loveboat or Mad About You being added to your program schedule.
23369 Is it in your plans? Is it on your radar screen?
23370 MS ALI: I think I will ask the expert in that area, Susan Millican, to talk about our program plans and what is in our dreams.
23371 MS MILLICAN: Our programming plans, as you see in year one and year seven, are pretty much the way we imagine it to be now. Our American and foreign content is mainly made up of movies and dramas from around the world.
23372 At this point in time we do not have a sitcom in there. We do have an American daytime drama which we were hopeful and are hopeful would draw eyeballs to the network.
23373 COMMISSIONER WILSON: We don't talk of eyeballs.
23374 MS MILLICAN: But at this point in time we don't have, you know, a plan to air a lot of American sitcoms. It seems that that's being done on other networks.
23375 COMMISSIONER WILSON: What's the soap opera?
23376 MS MILLICAN: Right now it's Another World in our dream. It's Another World.
23377 COMMISSIONER WILSON: The soap?
23378 MS MILLICAN: The soap, yes, which is a discontinued show --
23379 COMMISSIONER WILSON: I was going to say wasn't it cancelled?
23380 MS MILLICAN: It was cancelled to a huge audience outcry. We are really interested in developing programming from around the world, dramas that are, as I said earlier, that we know on WTN have huge audience appeal that aren't shown a lot of other places.
23381 Earlier you talked about overlap. I think that's important to talk about. If we were granted the licence, I think we could control that overlap. I see our program schedule and WTN's program schedule as having about a 15 per cent overlap. Everybody does romance somewhere.
23382 COMMISSIONER WILSON: That was my next question.
23383 MS MILLICAN: If someone else is going to get the licence, those overlap possibilities could be greater.
23384 COMMISSIONER WILSON: You anticipated my next question on the overlap of programming between WTN and R&R.
23385 MS MILLICAN: Did I explain that well for you, the 15 per cent for us. If we have control over the network, we feel it would be 15 per cent. We are not as confident that if someone else was granted the licence, the overlap wouldn't be greater because from a programming point of view, it just would not make good sense for us to air the same movies or dramas within the same day or week or month that we would have it on a competing network.
23386 COMMISSIONER WILSON: Okay. The next thing that I wanted to ask you about -- and I think you know, from other discussions that we have had, that when we get down to talking about the application, we usually talk about these little nuts and bolts, and it's not that we are not interested in talking about the programming concept, it's just there are certain things that we need to clarify, for the public record.
23387 So, in terms of your business plan, your business plan includes French-language subscribers and they constitute not a large percentage but a percentage of your projected subscriber revenue that's been higher than what we have seen in other applications and I'm just wondering if you could talk about that. It represents 9 per cent of your total subscribers and I'm just wondering if you could talk about your assumptions, the assumptions that you used to come up with that level of penetration and the cost and how you would get carriage and that kind of thing.
23388 MS ALI: Well it wasn't specifically done that way. The way we approached it was on the same basis, kind of, as our WTN experience. And so, instead of a 30 to 45 per cent penetration level, as we have projected for English subscribers, the penetration level is 15 per cent. That, give or take a little bit, is, I think, about the penetration that we may get. And, again, the rate, consistent with the approach we have taken at WTN, is a percentage of the English subscriber rate.
23389 So those were our basic assumptions there, that the universe was built on the projections and estimates that were provided to us by the CCTA and DTH, being 15 per cent of their total universe. DTH projected 15 per cent of their total universe would be French. So, those are kind of the assumptions we used to get there.
23390 COMMISSIONER WILSON: So their take-up rate of English services for French subscribers is 15 per cent?
23391 MS ALI: When Bell ExpressVu tabled their projections for the digital universe from DTH, they suggested that whatever that universe was -- and I can't remember the numbers -- 85 per cent of it was English, 15 per cent was French. And that's where we picked up that 15 per cent. That's where we picked up our universe numbers for. And then we applied a 15 per cent penetration level to that. Right?
23392 COMMISSIONER WILSON: Okay. So you picked up the universe numbers --
23393 MS ALI: So it wasn't as a --
23394 COMMISSIONER WILSON: -- from that report?
23395 MS ALI: -- as a factor of the English-language subscribers, or anything like that. That's just how the calculations worked out.
23396 COMMISSIONER WILSON: Did I hear you say that you looked at the level of carriage that WTN has for French subscribers as part of your assumptions for that?
23397 MS ALI: As one of the factors. Not a major one, but one of the factors.
23398 COMMISSIONER WILSON: Would your penetration for WTN be as high as that?
23399 MS ALI: No. No, it's not as high as that.
23400 Carol, can you give some percentage there?
23401 MS DARLING: Actually, WTN is currently carried in Quebec. Places where it is carried were mostly carried in a digital box right now. And within markets that have a substantial anglophone population, we have received fairly good penetration, up to, I think, about 25 per cent, from the digital packages. But, certainly, areas where the population is primarily francophone, this has not been our experience, and we tried to kind of average out those penetrations to project a realistic penetration figure for Romance and Relationships.
23402 COMMISSIONER WILSON: I wondered if this wasn't maybe a bit optimistic.
23403 MS DARLING: Well, certainly, you know, I think we have been a little bit surprised at the take-up on a digital box of WTN in some of those markets, particularly Quebec City -- and those figures are realistic, from that point of view.
23404 MS ALI: If I could just add something, as well.
23405 When you take a look at the total subscribers that we have estimated from French language, you know, we start at 72,000 and end up at 176,000. So when you translate that into a revenue dollar, we are only really looking at about a 3 per cent component of our total subscriber revenue being allocated to French subscribers.
23406 COMMISSIONER WILSON: Okay. Thank you.
23407 With respect to your interactivity, I think you said that you -- and this certainly was the tone of what you said in your application -- that you wanted to do something that was both realistic and reasonable. And I noticed in your opening remarks, where you talk about -- you give the two examples of programs especially suited to interactive development: "Off the Shelf Book Club" and "Breaking Up is Hard to Do". These two applications that you talk about, they are essentially Web-based, and we have been talking -- I'm sure Ms Darling will appreciate -- the dual-platform and single-platform delivery of the interactive elements to the viewer.
23408 Right now, we are using both the computer and a television, and, at some point, the set-top box is going to bring those two things together and you will be able to offer everything over the set-top box so there will just be the one window.
23409 These two applications that you have talked about here, the -- you say the extensions can include lesson plans, discussion forums. These are PC Web-based applications of interactivity. Is that what they are?
23410 MS DARLING: Not solely, no. And perhaps if you would like me to sort of take you through our thoughts on this whole interactivity thing, I could do that.
23411 COMMISSIONER WILSON: Yes, if you could, because it wasn't clear to me whether or not -- well, two things. It wasn't clear to me whether or not you were suggesting that you would be, at some point, offering true TV interactivity where, through your remote control --
23412 MS DARLING: Absolutely.
23413 COMMISSIONER WILSON: -- you are actually --
23414 MS DARLING: Absolutely.
23415 COMMISSIONER WILSON: -- doing that and whether or not that figured in your programming plans and your approach to programming and whether or not the viewers would be involved in the programming from more than just looking up background information on your Web site that's related to a particular program.
23416 MS DARLING: Absolutely. Certainly, we can't imagine doing a Romance and Relationship television channel without including interactivity in many forums, you know. I think if we take a look at our experiences right now, on the Internet, there are many, many popular sites that touch on these topics -- certainly, e-commerce activities, sites having expert and not-so-expert advice, and chat rooms -- and our own experience at WTN, right now, on our Web site, in our discussion forums, over almost 80 per cent of the posts that we receive are to our discussion forum on romance and relationships, from both women and men.
23417 So, certainly, you know, we can't ignore that appetite and we see lots of application to move ourselves into other forums of interactivity. But we think that interactivity will take many forms, and should take many forms. We certainly had some experience with interactivity with our audience at WTN using some very old-fashioned tools, like the telephone and, certainly, Web, and we see extending these applications to use the new tools we are going to see as they come into the television household.
23418 To give you a couple of examples of some of these successes we think we can extend, our "Open for Discussion" program and our "Viewer Hotline" allow us to provide an ongoing reference service to our viewers with support agencies and social service agencies that we have established relationships with across the country. These kinds of applications extend very well into the Romance and Relationships area for many of our programs and certainly will extend very well into interactive applications right on the television set.
23419 We also see lots of opportunity to do some fun things, and the programs we mentioned, like "Off the Shelf" and "Breaking Up is Hard to Do", Call Me Love and Manners", will be suited to engaging our viewers and also providing credible advice from our expert hosts, probably starting by developing these relationships on the Web. But they can't end there.
23420 I need to inject a bit of a note of reality related to the technology we see being in the viewer's household as we are rolling these services out. In the fall of next year we expect about zero set-top boxes to be out there that can really handle programming interactivity within the viewer's household.
23421 So we have to be kind of clever about where we spend our energies and at the same time start creating these compelling interactive applications.
23422 We think we have a really good model to do this. Corporately, we will be working with our independent producers to find those really strong, compelling, engaging interactive links between program content and web initially.
23423 Certainly, we have a very, very keen production community out there. Almost every proposal that WTN is currently receiving includes some element of interactivity.
23424 Our job has to be to work with them very closely to find the realistic application, so we create this interactivity with our viewers using some very old-fashioned tools initially, the telephone.
23425 Certainly, web has to be there and then bringing the elements that will make sense into the television receiver in part because we have to bring our target audience along with us. I think we have to use a mix of all these tools to ensure that when we are creating this interactivity and engaging our audience that they are there with us and understanding how to use the television remote and have many, many ways to move into this new world of fun, cool toys. Does that answer your question?
23426 COMMISSIONER WILSON: I'm not sure how much fun it is going to be for me. I am sure the younger -- like the younger girls --
23427 MS DARLING: Well, exactly.
23428 COMMISSIONER WILSON: -- are going to enjoy all of that a lot more than I will. I just like to watch a program.
23429 MS DARLING: Exactly, and that's why we know we have to develop, use a combination of these tools to create this essence of interactivity. We can't just do it on the television set, but have to have a strong community built on our Web site too.
23430 COMMISSIONER WILSON: I am sure you have heard us talking about the whole area of whether or not distributors should be obligated to deliver the interactive elements.
23431 MS DARLING: Yes.
23432 COMMISSIONER WILSON: And the sort of variations on that theme in terms of if it is only going to require a little bit of extra bandwidth then that's one thing, but if programmers start developing these bandwidth eating applications that hog the space that a whole extra channel could go on, what happens then? I am just wondering if you could talk about your views on that.
23433 Should the distributors be obligated to carry the interactive elements and should there be discussions when you are getting to the level where there is so much extra bandwidth required that it's like an extra channel? Should there be some compensation to the BDU at that point and how should those issues be dealt with? Someone suggested a separate process would take place.
23434 MS DARLING: Perhaps I could just speak to our own plans. Certainly, we do think distributors should carry this integrated programming content.
23435 Our own plans don't see any significant bandwidth requirements for the delivery of this integrated programming to the consumer, if any in fact. Certainly we don't see a significant return path or upstream requirement being required from the distributor either.
23436 There is a lot, initially, that can be done with one-way applications to create a lot of fun things to do for the consumer interactively.
23437 COMMISSIONER WILSON: Of course, I can't help but notice the composition of your panel. There is someone in the back row who probably would have no opinion on this. I was wondering if Mr. Moffat might like to make a comment on the discussion that we are having.
23438 MR. MOFFAT: I would be glad to, but, first of all, I would like to thank you for asking me a question. I run the risk of coming off as a token man back here.
23439 COMMISSIONER WILSON: I'm so glad that you said it because I never would have because I have been in that position. I have been the token.
23440 MR. MOFFAT: As other discussions that have been held previously have indicated, I think that we don't really know what the requirements are in a digital two-way world and until we do it is very, very hard to predict how those elements will work together.
23441 From a 30,000 foot view I can only assume that other cable companies like ourselves are interested in as many kinds of fascinating, interactive functions as we can get to drive a digital box into our subscribers' homes, which is our salvation in the long term.
23442 COMMISSIONER WILSON: Obviously, the programmers would seem to be the ones that have the strongest vested interest in terms of developing the interactive elements.
23443 MS. MILLICAN: We already have a list of programs that have been suggested to us from producers across this country, a pile of them waiting for us to go through. I think I would be safe in saying that most of them had some kind of interactive component involved in it. They are all very keen to get into this field as well.
23444 COMMISSIONER WILSON: I am wondering if you have discussed your interactive plans with any distributors besides the one in your back row?
23445 MS DARLING: I did ask him first.
23446 COMMISSIONER WILSON: Obviously.
23447 MS DARLING: There has been a certain amount of discussion between distributors, programmers and many of us in some of our industry forums. I think after listening to some of the discussion this week I think there is clearly a need to extend those discussions within our forums to really develop a common understanding of what's possible and how things are going to roll out and how programming authoring needs to fit into the whole context of what's going on out there.
23448 Certainly, yes, we have discussed preliminary plans, but there is a whole lot of things to still talk about for all of us.
23449 COMMISSIONER WILSON: So this separate process, I think the suggestion to us was that the CRTC would conduct some kind of separate process, but would this potentially be another area where an industry working group could sit down and start talking about the kinds of issues that might come up?
23450 MS DARLING: Certainly, from a business point of view I think some of these issues will have to be discussed prior to the launch of these services in this industry forum.
23451 From a technical point of view, certainly we have already put interactivity on the list of topics that we hope our CDTV board will let us chat about in our technical working group. We have some stuff to talk about.
23452 COMMISSIONER WILSON: Ms Darling, from the point of view of -- I think you have said that you think, generally speaking, the early interactive applications are not going to require. I mean you said from the point of view of your own service that was certainly the case, that it wouldn't require a lot of extra bandwidth.
23453 From what I can tell from what I have seen here, most of the applications are still in the fairly early stages and probably wouldn't require a significant amount of bandwidth. Is that your impression?
23454 MS DARLING: Yes. I can't speak for some of the other services' plans, but certainly there is a lot we can do to integrate this complementary content and distribute it with our program stream.
23455 I think, realistically, the way this will happen is we will embed it right in our program stream delivery to the distributor. I don't plan on buying any more bandwidth. The requirements are minimal, kilobits, not megabits, and it really doesn't compromise the signal quality.
23456 COMMISSIONER WILSON: I noticed that you didn't provide any information on revenue that might result from your interactive elements.
23457 MS DARLING: You know, like many of our colleagues, we are looking for that pot of gold at the end of the Internet right now. I am sure we are going to find it, but because we are still in the looking stage we felt it was really premature to base our business plans on these kinds of uncertain revenues right now, but we would love to find them.
23458 COMMISSIONER WILSON: Wouldn't everybody.
23459 This is an easy question, the Personal Information Protection and Electronic Documents Act.
23460 MS ALI: Yes.
23461 COMMISSIONER WILSON: You have been watching.
23462 That concludes my questions. Some of my colleagues may have questions, but before I turn it back to the Chair, Ms Darling, I was wondering if Ms Millican had talked to you about doing your own show on the Romance and Relationships Channel since you seem to have a name that would be so well suited to the genre.
23463 MS DARLING: I thought you were going to ask me to talk about something technical. That is a little scary.
23464 COMMISSIONER WILSON: I'm giving you a break. For once I'm not asking you something technical.
23465 Madam Chair...?
23466 THE CHAIRPERSON: You discussed with Commissioner Wilson the question of nature of service, and there is no doubt, when you look at all the categories, that you want to be able to use to 95 per cent -- and even your sample schedule -- that you could program a whole day cleverly to get a target audience that is the one sought by another genre of programming that has come before us.
23467 For example, you could have a cooking show as a prelude to Seduction, which I guess Cooking for Love may be. You could have a documentary or even legal advice about divorce. You could have how to organize a wedding. You could have the pitfalls of a young, romantic couple organizing and decorating their first home. You could have a documentary about parenting. You could have a stand-up comedy about relationships; a program about gay and lesbian relationships; suspense and mystery or crime, where passion is the underlying problem; a documentary about men's approach to dating; health advice about safe sex or sex after 60, assuming they are not the same.
--- Laughter / Rires
23468 THE CHAIRPERSON: You could have biographies of great lovers. You could have travel programs, which I think you have, about the most romantic places: the best places to kiss, the best spas. You could have a cartoon about Bugs Bunny's romantic antics.
23469 How do we sort this out between crime, suspense, mystery, vital TV, travel, existing animation, the decorating and home and garden-type genre?
23470 Clever scheduling could in fact pitch any of these genre at a proper time to get the demographic, and there would be nothing anyone could say because everything I have described could fit into these categories.
23471 It could be dance. In fact, you do have a dance program.
23472 And it could be blocked. It could be scheduled in any given way, in any given percentage. Other services would be crying foul, but you would be well within your description of service.
23473 MS STOVEL: We really appreciate the question, because that is certainly the issue that we are facing as WTN, when we see some of the proposals that are before you as well. How do you corral a service in the context of who they say they will be and what they may become, based on program categories? That is a really difficult choice and a difficult decision that you have before you.
23474 I think that it is not just program categories that do the corralling. Certainly some services -- and I think of Teletoon, for example -- clearly are one category of programming. However, there is nothing -- and I am just kind of guessing here. I don't think there is anything that necessarily limits them to programming to a specific target market. Perhaps there is.
23475 Are they specifically kids?
23476 So it's a combination, in my view, of both the nature of service definition that says, "Who are you?", which is the Part A, "What kind of programming are you going to provide?", and "From which program categories will you draw that nature of programming?"
23477 I am not certain -- you know, we have had a bit of a sidebar discussion here about: Okay, what can you give up? What would you be prepared to give up or limit and still be able to provide an attractive, in-depth niche service in the romance and relationship genre?
23478 I don't know that limiting program categories is necessarily going to limit those who choose to step outside their nature of service definition.
23479 THE CHAIRPERSON: If you don't think the categories can do it, can Part A do it?
23480 What you have is a national, English-language, Category 1, digital specialty service dedicated to entertainment and information programming related to relationships, romance and romantic themes. I ask myself how many of these --
23481 I don't know if I mentioned, also, that a documentary about parenting is about relationships.
23482 What could you do to eliminate some of these programs if you want a romance and romantic theme? That is certainly more limited than relationships. Relationships is everything.
23483 MS MILLICAN: There are categories that I would reluctantly give up, being reluctant to give up much in life, but I want to assure you, first of all, that the schedule of shows you suggested was very impressive, except for Bugs Bunny. But it sounded very --
23484 THE CHAIRPERSON: What about Loupie de Loup? Very romantic.
23485 MS MILLICAN: Yes, it is, but not what our intentions are. If we did all of those great shows that you suggested, we would be very, very close to WTN, which is not our intention. We don't want to do shows that resemble what we are already doing. We want to do one network that is totally devoted to romance and relationships. Documentaries would fit in, but they would not be documentaries about parenting. We do documentaries about parenting on WTN. That would not serve our purpose well.
23486 THE CHAIRPERSON: Yes, I understand, except that the exercise here is that there are 88 applications --
23487 Let me ask you: Would you like Violet to be licensed?
23488 MS MILLICAN: Me?
23489 THE CHAIRPERSON: Yes. At the same time as yours?
23490 That is a question you will be asked in Phase IV.
23491 It is not a question of giving up; it's a question of a competitive environment where, probably to everybody's benefit, the consumer for diversity, and the licensee for protection -- we have said that we will license services that are not directly competitive.
23492 So the exercise is not to ask you to give up something; it's to say: What will there be on the screen in a regulated environment? There is a test as to: Is what your intent was at the beginning what is on the screen in year 4? The only test we have is what you have provided.
23493 So it is more a question of you meeting perhaps the concerns that may be expressed, that without any limitation of percentages there could be a clever block of programming that would steal away audiences from other genres quite easily.
23494 Because you just show me a human being and you have a relationship.
23495 MS ALI: Perhaps we can offer a suggestion for the nature of service, Part A, where we would have it read: The licence shall provide a national, English-language, Category 1, digital specialty service dedicated to entertainment and information programming related to romantic relationships, romance and romantic themes. And then limit through condition of licence, as we have seen in the last two weeks, to a maximum percentage of some of the categories that we don't have concrete plans for right now, so we can't tell you what they are.
23496 THE CHAIRPERSON: Of course, often the word "exclusively" has been used to try to create fences or parameters.
23497 MS ALI: We would be fine with that as well. Exclusively. That is our intent --
23498 THE CHAIRPERSON: To romantic relationships.
23499 MS ALI: To romantic relationships, romance and romantic themes; correct.
23500 THE CHAIRPERSON: We are not negotiating with you what genre of programming you want. We try to see, as regulators, whether the reflection matches the intent, so that we can have a view of how the pieces fit together, considering the framework we have proposed.
23501 Of course, you know what you intend to do or what you would like to do. We try to see whether you can be held to it, with the reflection in words that you get it.
23502 MS ALI: Those two word changes would reflect very well precisely what we intend to do over the licence period, so we are comfortable with that.
23503 THE CHAIRPERSON: Madam Bertrand, or did you have something to add? I apologize.
23504 MS ALI: I was just wondering if you wanted to go the one step further and talk about the specific categories or whether that was something -- we hadn't talked about specific percentage maximums on the various categories that we may want to offer some limitations to.
23505 THE CHAIRPERSON: Well, I'm not sure. I haven't really thought about exactly how one would do it, but I suppose you would have to say no one category more than its percentage because romantic relationships can be found in most categories. Therefore, it would be a question -- it's just difficult because it's very broad.
23506 I guess the question for those who are at the parent channel or those who are at the movie channel or those who are at the men's channel are the ones who would look at this and say "Well, what's the room here for turning something into something?" Not quite what may have been intended or believed to be the case. This is certainly a step forward.
23507 Madam Bertrand.
23508 CHAIRPERSON OF THE COMMISSION: Good afternoon, messieurs et mesdames. Just that when you were rephrasing this Madam Chair, you dropped the word "divorce". Does that mean that in the 21st century we will see that relationships are always so happy ending that we won't have divorce any more?
23509 More seriously, I see results. You know, it's Commissioner Wilson who has really with staff looked at the more in-depth look at your application, so I won't pretend that I have looked at your surveys and that I know exactly what I am talking about.
23510 From the notes here the staff has prepared, which is a resume, I see that you are quite optimistic about reaching an audience of men and women. Maybe I am living with the wrong man. He's a very, you know, interesting companion and certainly I have interesting colleagues around the table at the Commission, yet I have difficulty that the approach would be one that would really kind of be attractive, at least in order to admit it in front of others -- maybe alone in your living room, you know, it's something.
23511 I'm just challenging the idea that you would really reach a broad audience made up of an equal number of men and women. Maybe you have figures out of your women's network that would surprise not only the Commission, but maybe the viewers of CPAC.
23512 MS ALI: I think sometimes it is a matter of not admitting it. Certainly we have done research for some four years now, not specifically on romance, but certainly for WTN. More specifically, we have experienced firsthand the success of Romance Sundays on WTN which is a seven hour block of programming on Sunday afternoon which we launched in 1998.
23513 You may be surprised to know that the audience composition of Romance Sundays is somewhere close to 60-40, 65-35. When we picked our target, which is men and women, we did I think hopefully clearly make our position that it would be skewing women. All our research is kind of directed the same way.
23514 I would like Jan Di Clemente to talk a little bit about that and tell you what we found out over the last four years through our romantic programming.
23515 MS DI CLEMENTE: We have done a lot of research at Lifestyle, both quantitative and qualitative, to understand who our target audience is. There has been a common thread that runs through this research. It always seems to lead back to relationships.
23516 Obviously a lot of the research that we have conducted has been against women, but a lot of this is relevant when we look at the fact that Romance and Relationships will skew women. We are probably looking at about a 60 per cent skew to women, 40 per cent male.
23517 CHAIRPERSON OF THE COMMISSION: You are using a word in English that I am not too sure I understand.
23518 MS DI CLEMENTE: For example, we have ongoing research at W10 called The Hearts and Mind Study. We interviewed 1,600 Canadian women. We asked them how they were feeling about their lives. They were very interested in telling us since no one ever really asked them.
23519 Relationships were really top priority with them, relationships in their many forms, but especially partners in sexual relationships.
23520 When we looked at the audience requirements, as Elaine said, for Romance Sundays, even though we are programming to women on Romance Sundays, 35 per cent men are watching Romance Sundays. Then when we add in the Sunday Night Sex Show, it goes right up to 40 per cent, so we have a balance.
23521 We understand that if we program a network unlike WTN with more of a male skew that it will balance 60-40.
23522 We have also commissioned research with Totem on the specific Romance and Relationships Channel. We did a very robust sample of 2,000 men and women, 50-50. Fifty-one per cent of the respondents indicated an interest in a Romance and Relationships channel while 36 per cent indicated they would be somewhat likely or very likely to purchase such a service.
23523 If you would like any more information on the research we conducted, Lee Simpson is here from Totem and she would be happy to answer your questions.
23524 Thank you.
23525 CHAIRPERSON OF THE COMMISSION: As I say, I haven't read the whole file of the survey, so I don't want to take the time, as Commissioner Wilson was explaining. It was just that I wanted to -- rather than asking about the surveys relating it to your experience in terms of market share, in terms of your programming experience at WTN and how -- because I'm sure that if we would ask around, my assumption would be that you don't necessarily admit if you are a man that you are watching WTN.
23526 I just wanted to know if you had figures to kind of confirm or contradict that assumption. I may be wrong in that. Maybe I'm just showing my prejudices. I apologize for that. I just wanted to get a light coming from viewing habits that you have observed in your experience.
23527 MS ALI: Just a little anecdote. Men are actually talking about WTN more and more and they will start out talking about "Oh, my wife loved that show and my daughter loves that show". Then if you get into a little bit more conversation with them, it's very interesting to see that they too enjoy much of the programming on WTN, but won't readily admit it at the start.
23528 CHAIRPERSON OF THE COMMISSION: Thank you.
23529 COMMISSIONER WILSON: It's like people only watch PBS and the educational channels. They only admit that.
23530 MS ALI: That's correct.
23531 THE CHAIRPERSON: But doesn't the ability of WTN to get a male audience making the point that it's supposed to be pitched to women, that you can indeed pitch to an audience other than the one that was intended?
23532 Well, it makes the point that you have a women's channel, that's what it was licensed as, as a genre and as a fenced in genre, but now we are waxing poetic about how much men's BBM you can get. Isn't that the point we are making about difficulty of nature of service and of giving audiences diversity?
23533 There are really, as we are fencing in -- it requires a lot of energy. You are now telling us how easy it is to get men BBM with a women's channel when the programming to women was what was intended when you came in a competitive process where we were trying to find genres at a time when, of course, it was much easier to find the genres that were not filled because we did not have the panoply of services we have now.
23534 The Women's Channel was licensed in 1994?
23535 MS ALI: Nineteen ninety four, that's correct, yes.
23536 THE CHAIRPERSON: And we have had another round since and many more. But I am just making -- it illustrates the point of the difficulty in certain areas of saying we found a niche here that ensures that the system will get diversity.
23537 MS ALI: I think that you are absolutely right. WTN's licence is on their description of -- or our description of programming service, is programming specifically with the interest of women in mind, you know. What we certainly wouldn't want to do and wouldn't feel about doing is separating a woman in her household from the rest of the people in her household.
23538 And so there are many, many programs on WTN that are predominantly women, 95, 98, 100 per cent women. However, the romance movies, the art, you know, that's what the women watch with their partners and I think that is a very positive thing and I don't quite u understand -- and maybe I have a bit of a block here, but I am not quite understanding how that relates to a programming type, a programming genre. WTN is not a programming type.
23539 Romance and romantic themes and romantic programming is a programming type and I am not making the leap, and I might be a little thick here.
23540 THE CHAIRPERSON: Every applicant is going to look at it presumably as they see fit and tell us in Phase IV, but if you have Men's Entertainment or Crone TV or whatever, that has a pitch or a description of service such as that it can have romantic movies which we all know are interesting to men. We have just said so. And romantic programming then it's not, it's competitive with yours and there is this diversity in the system. That's the only thing that we are talking about, is the ability when it's a niche that is by nature a broad description covers many categories and does not limit any category to a percentage. It's open to pretty well anything.
23541 MS MILLICAN: I just want to say, I think I understand your dilemma, but I want to assure you that at WTN we program totally for women, everything we buy, everything we produce is for our target audience which is women.
23542 Unfortunately, we have been doing a pretty good job of that. We are buying really good movies, we are buying great dramas and we are producing good Canadian independent production and maybe the men in the house aren't leaving the living room when their wives or partners are watching these shows as maybe they thought they would and it could happen, as you say, with the Men's Network and that's a decision that will be difficult.
23543 If you program a good network, all sorts of people will watch it, not the major demographic, but there will be a few who will stick around for it.
23544 MS ALI: Hopefully, with the rewording and some of the suggestions we have talked about today, we put the box around in a satisfactory way. We believe we have.
23545 THE CHAIRPERSON: Counsel.
23546 MR. STEWART: Thank you, Madam Chair.
23547 I believe you offered a limit of 10 per cent with respect to animation and I think you indicated that you may be in a position to offer limits with respect to other categories, for instance music video.
23548 Are you in a position to do so?
23549 MS ALI: Yes, we would feel comfortable to offer a maximum limit, both for animation and music videos of a 10 per cent limit and perhaps game shows and comedy sketches at a 5 per cent maximum.
23550 MR. STEWART: And would you be prepared to accept those limits in the form of condition of licence?
23551 MS ALI: Yes, we would.
23552 MR. STEWART: Thank you.
23553 Can you give a breakdown in your schedules between entertainment and information, please?
23554 MS ALI: Year one, year seven, I will do both maybe to show a bit of transition there from start to end of licence.
23555 MR. STEWART: Thank you.
23556 MS ALI: Information in year one is at 29 per cent and year seven is between 43 and 45 per cent. Entertainment year one is 72 per cent and in year seven it's between 58 and 60 per cent.
23557 MR. STEWART: Thank you.
23558 And is there any particular explanation for the variation in these percentages?
23559 MS ALI: As we introduce more independent production, more newer original Canadian production, we are looking at those programs as you see, example year seven schedule, as being information programming, romantic relationship programming like the ones we have talked about. So there would be a shift in some of those programs being produced over the last number of years, over the last four years actually.
23560 MR. STEWART: Thank you. And my final question whether your proposed service will be technically equipped to permit descriptive video?
23561 MS ALI: Correct.
23562 MR. STEWART: Thank you. Thank you, Madam Chair.
23563 THE CHAIRPERSON: Thank you. The last word is yours Ms Rankin -- Ali, sorry. But we do thank Ms Rankin. Ms Rankin was before.
23564 MS ALI: That's right.
23565 Well I would certainly like to take this opportunity to thank the Commission for providing us first and foremost with a realistic and workable framework for the introduction of these digital services and for the development of the R&R application.
23566 I think we have covered all the points and we truly appreciate your due diligence and patience and would like to leave you with a couple of key thoughts. We believe very sincerely, and we hope we have convinced you as well, that services that you licence must be appealing and affordable. I think that is absolutely key for driving this new universe of ours, and those services need to be offered by broadcasters with a proven track record.
23567 You have had a chance to see our lifestyle team up here today, each of whom brings experience and knowledge in their respective areas of expertise. It doesn't surprise you that they are supported by a committed and dedicated team back home, a team ready and able to deliver on our commitments, and we want only one service, we want R&R.
23568 We look forward to the decision following your deliberations. Good luck and thank you very much.
23569 THE CHAIRPERSON: Thank you, Ms Ali and your colleagues, and Mr. Moffat.
23570 It's a good beginning to the weekend to talk about romance and relationships.
23571 MS ALI: Have a good weekend.
23572 THE CHAIRPERSON: We'll see you again and you are aware, of course, that we will expecting applicants at Phase IV to answer a few questions, one of which you will be spared because you have only one application before us.
23573 You are not?
23574 MS ALI: Yes.
23575 THE CHAIRPERSON: Yes, you are.
23576 Thank you very much and have a good romantic weekend.
23577 We will take a ten-minute break. We will be back at 4:30.
23578 Nous prendrons une pause de 10 minutes.
--- Upon recessing at 1620 / Suspension à 1620
--- Upon resuming at 1633 / Reprise à 1633
23579 Nous vous souhaitons la bienvenue encore une fois.
23580 Monsieur le Secrétaire, s'il vous plaît. Mr. Secretary, please.
23581 MR. CUSSONS: Thank you, Madam Chair.
23582 We will now hear an application by Vision TV Digital Inc., OBCI, for a new Category 1 specialty service that will be called Wisdom: Canada's Body, Mind and Spirit Channel.
23583 There is a maximum presentation time of 20 minutes and I would like to welcome Mr. Fraser to our hearing. Mr. Fraser.
PRESENTATION / PRÉSENTATION
23584 MR. FRASER: Good afternoon, Madam Chair, members of the Commission, staff.
23585 My name is indeed Fil Fraser and I am the President and CEO of Vision TV which holds control of the applicant.
23586 We have, of course, been following these hearings closely for the past 10 days and we have mixed feelings about being here, the last one on Friday afternoon on the one hand. We have had the benefit of hearing everyone else and hearing your questions.
23587 On the other hand, we know it's Friday afternoon and we hope that the weather forecast is going to hold up for the weekend and we know everybody wants to get out of here and have a good time.
23588 So we hope that we are prepared to answer your questions in the appropriate fashion. We will keep the answers short and to the point, at least we will try.
23589 Before starting, I would like to introduce our team to you. To my immediate right is Rita Deverell, one of Vision TV's founders and our Vice-President of Production and Presentation.
23590 To Rita's right is our Director of Programming, Paul de Silva. Paul has had long experience in the independent production sector and Vision TV.
23591 To my immediate left is Susan Bower, our Vice-President of Finance and the person who is responsible for our business plan.
23592 To Susan's left is Sheila Shayon, Vice-President of Programming, Production and Operations for Wisdom Television in the U.S. Before coming to the Wisdom Media Group, Ms Shayon had a distinguished career at Time Warner HBO, holding a variety of senior positions, including Vice-President of Time Warner New Media Consulting and Vice-President, Special Projects and Manager of Documentary Programming at HBO.
23593 In the row behind me, starting on your left, Kaan Yigit. You have seen him before, of the Solutions Research Group who undertook our consumer research.
23594 Beside Kaan is Nancy Smith of NextMedia who did a very interesting advertising survey for us which you will hear about.
23595 Next to Nancy is Erika Kramer, our Director of Operations and our in-house technology whiz and certainly our expert on interactivity.
23596 Next to Erika is Peter Flemington, Vice-President of Programming and Development and also one of Vision TV's founders and beside Peter is Stan Freedman of Heenan Blaikie, our regulatory counsel.
23597 I would also like to point out the presence of some of our board members, our partners and strategic allies at the side table. On your left is a well-known Canadian, Professor Irving Abella, historian, author and we are proud to have him as the Chair of Vision TV's Board of Directors.
23598 Next to him, equally famous at least in Atlantic Canada, is Charles Keating, former cable operator. He is the Secretary-Treasurer of our Board of Directors.
23599 Next to him is Pierre Brosseau, the CEO of one of our shareholders, Radio Nord Communications.
23600 Beside Pierre is Nick Kiernan. He is the Vice-President and General Manager of Internet and Radio for the Wisdom Media Group in New York. He joined Wisdom following a long tenure at CBS, most recently as Senior Vice-President of Affiliate Relations of the CBS subsidiary Westwood One.
23601 Beside Nick, last but not least, is Beverley Milligan, Director of Industry Liaison at Ryerson University's Interactive Broadcast Development Group, a very interesting group. Beverley will be familiar to some of you as one of the developers of digital radio and the closed captioning systems that many of us in the broadcasting business use.
23602 With those introductions, Madam Chair, I am pleased to present our presentation.
23603 We are here today to talk about Wisdom: Canada's Body, Mind and Spirit Channel, a channel of real personal benefit to Canadians; a channel that has the potential to change your life, and one that will create a new programming niche that no other Category 1 applicant proposes to serve.
23604 Wisdom will be an attractive addition to a new package of services. Its diverse programming will respond to a real and growing demand in our population. Wisdom will focus on a new subject area for television, broadcasting a significant amount of programming never before seen in Canada. Its roster of Canadian programs, produced in-house and acquired from a wide variety of independent Canadian producers, will be strong, diverse and appealing.
23605 Judicious use of our resources and the forging of strategic alliances will enable Wisdom to integrate high quality interactive elements. And all of this for one of the most affordable wholesale rates before you.
23606 Today we would like to demonstrate three things: First of all, that there is a substantial audience for body, mind and spirit programming that is currently underserved;
23607 Secondly, we would like to show you Wisdom's diverse, new programming genre and have a look at what it looks like;
23608 And, third, we would like to demonstrate how our unique team -- notice the colour co-ordination here -- will provide the diverse Canadian programming and interactive elements necessary to be attractive in the digital environment.
23609 Commissioners, the word has changed dramatically since I was a kid growing up in east end Montreal. Then, we mostly knew where we stood in the world. Today, we are all much less certain of our place in an increasingly complicated universe. That's why so many Canadians are searching for ways to centre their lives.
23610 This passion for information on techniques, practices and philosophies to improve our lives can be seen all over the place, in the course lists of educational institutions like the University of Toronto's School of Continuing Studies, for example, which offers courses such as The Meaning of Life and Death, Sacred Music and Art, Process for Personal Renewal and Passionate Mystics: Spiritual Partnerships. And there are a growing number of institutions like Hollyhock Institute in British Columbia that offer facilities and programs for those seeking personal growth.
23611 So what's going on here? Michael Adams, the President of Environics and one of Canada's leading demographers, noted in his book Sex in the Snow, that the quest for meeting is a -- that the quest for meaning is a key motivating -- I get thrown by that word every time -- that the quest for meaning is a key motivating factor in the life of most Canadians.
23612 The quest for meaning and for wisdom is also becoming part of the corporate world. John Dalla Costa, the author of Working Wisdom and a consultant to companies including Bell Canada, CIBC, Procter & Gamble, notes that ambiguity exists in every level of human reality.
23613 For him, wisdom is that rare capacity to deal effectively with ambiguity, managing through insight and sacrifice to create solutions of lasting integrity and validity. It requires not just knowledge, but also the patience, prudence and commitment to justice that come from a deeply seated moral consciousness.
23614 Just as Vision TV has met the need for balanced religious programming and defined the genre in Canada, Wisdom will meet the needs and interests of a significant demographic and psychographic group of Canadians with a distinct genre of programming. Let's have a look.
--- Video presentation / Présentation vidéo
23615 MR. de SILVA: Madam Chair and members of the Commission, our programming will be made up of a number of pillars.
23616 First, our daily programming includes First Day which will open the day for our viewers providing a workout for body, mind and spirit. It also sets up the day's programming, pointing out the various program topics and the complementary resources available on the Web site or interactively.
23617 Our flagship program, Touchstone, will be a daily magazine, whose host will interview guests, animate discussions and bring in opinion, suggestions and questions sent to our Web site. And Winding Down will wrap up the day, providing a relaxing blend of music, images and contemplative thoughts to sleep on.
23618 Secondly, a diverse array of independent Canadian productions will make up a significant and growing portion of our schedule. Fantastic Fact and Fiction will showcase long form documentaries and drama, while Walk the Walk, Lighthouse and Bytes and Bookworms will feature Canadian documentary series, how-to programs and talk programs from the independent sector.
23619 And our Canadian programs will be supplemented by thoughtfully chosen foreign programs, both acquired and with our U.S. partner, and from the many other sources identified in our application.
23620 For example, Sighted Offshore will feature foreign drama series focusing on the inexplicable, the spiritual and other inspiring and intriguing themes related to the interconnection between body, mind and spirit.
23621 The results -- a unique and diverse package of programs and significant commitments: Canadian content starting at 50 per cent in year 1 and growing to 60 per cent over the course of the licence; $27 million for Canadian programs over the course of the licence; 6,000 hours of original Canadian programs over the course of the licence, supplemented by 2,500 hours of foreign programming not otherwise available in the system; and finally, $21 million over the course of the licence to be spent on initiatives with the independent sector, representing over 75 per cent of our Canadian programming budget.
23622 MS KRAMER: Good afternoon. Interactivity will be a signature of Wisdom: Body, Mind and Spirit.
23623 Increasingly, people are watching television while surfing the Net. Vision TV is already serving that audience. visiontv.ca is an important source of information and resources on world spirituality. It's becoming a kind of mini-portal. We supplement our programming with carefully selected hyperlinks and constantly updated information.
23624 Skylight, Vision's flagship show, features a weekly viewer response program which uses the Web site to familiarize viewers with the current topic and invite suggestions for future shows. It was gratifying that the Globe and Mail chose visiontv.ca as one of the top television Web sites to visit.
23625 And Wisdom: Body, Mind and Spirit will be supplemented by our connection to the Wisdom Media Group, a web broadcaster of both radio and television programming of significant stature.
23626 In addition, we have created an alliance with Ryerson University's Interactive Broadcast Development Group as an incubator to develop new media products. Our first project is The Residential Schools Interactive Broadcast Project, initiated by Vision TV as a co-venture with Ryerson, Newsworld, APTN and the relevant churches. It will harness web-based interactivity to meet a real social need, creating an interactive forum for aboriginal peoples, churches, government and citizens to facilitate dialogue and healing. The project will extend over at least two months, with an interactive two hour live broadcast in November as the centrepoint.
23627 To support our interactive initiatives, Wisdom has budgeted $2.4 million over the course of the licence. Wisdom's programming will include layers of added value, which can be accessed at the user's personal pace.
23628 In the initial years of the service, Wisdom's interactivity will primarily be web-based. As open standards are defined and the second and third generations of set-top boxes are deployed, true interactive television will become available, as will new programming opportunities.
23629 The alliance with Ryerson will keep us on the cutting edge of new interactive hardware and software, serving as an incubator for new kinds of content.
23630 MS BOWER: Madam Chair and Commissioners, our business plan for Wisdom started with an analysis of the demand for the product category. To begin to understand consumer demand, let's start with a look at a bookstore like Chapters.
23631 It stocks more than 70 magazines focusing on or consistently covering aspects of body, mind and spirit. Canadian magazines in this subject area have a combined circulation of almost four million. And books in this category dominate the best seller lists. They represent approximately 25 per cent of all best selling books in Canada.
23632 In 1998 Canadians spent approximately $80 million on books about body, mind and spirit.
23633 The survey from Solutions Research Group included with our application is consistent with evidence of broad public support for this genre. It indicates that a significant percentage of Canadians, particularly women, are willing to subscribe and pay 40 cents per month for Wisdom: Body, Mind and Spirit.
23634 As the advertiser study prepared by NextMedia clearly indicates, advertisers are highly interested in the service and are willing to devote new resources to it. The interest shown is all the more remarkable in that advertisers, by nature, are conservative, usually showing enthusiasm only for products supported by Nielsen numbers.
23635 Our application is based on a realistic and attainable business plan.
23636 Most applicants have recognized the need for a joint launch effort, co-ordinated with programmers and with distributors. We agree, and for this reason we have projected $1.8 million for pre-launch and year 1 promotion and marketing.
23637 Our monthly fee is a modest 30 cents per subscriber, enabling the launch of a quality service at a low price.
23638 Wisdom represents the next step in our evolution -- a for-profit enterprise with compatible partners. Vision will manage the channel, applying our proven approach to day-to-day operations. We will be able to meet our ambitious commitments because of our unique approach: lean and entrepreneurial, leveraging our core competencies and the synergies of operating more than one service from a single plant.
23639 The synergy of Wisdom and Vision TV will also provide increased bargaining power to negotiate distribution arrangements.
23640 Our partners bring programming and financial strengths, as well as an interest in positive life-enhancing programming. Jean-Joffre Gourd, founder of Radio Nord, is well known for his interest in spirituality, and his company has partnered with Vision on other projects.
23641 Our partnership with an American broadcaster is also unique. We are not Canadianizing an American service; rather, we are learning from each other how to implement this genre.
23642 Shiela Shayon, Vice-President of Programming for Wisdom Media Group U.S., will tell us a bit about their activities.
23643 MS SHAYON: Thank you, Susan.
23644 Good afternoon, members of the Commission.
23645 The Wisdom Media Group was founded in 1997 by cable television pioneer Bill Turner. Following his success in building out local systems and customer service call centres, he turned his energies to sharing the wisdom he discovered on his own life's journey. He is committed to providing content that meets the needs and interests of consumers in the areas of personal growth, healthier living and social consciousness.
23646 During this journey over the past two years of creating and launching Wisdom there has been a consistency to the comments we have received from celebrities, industry experts and just plain folks in reaction to our programming and our mission.
"Wisdom is the last big idea in television as we know it."
"Finally it's fashionable to be spiritually-minded."
"Programming that restores the lost art of conversation -- that is smart and has heart."
23647 Wisdom Media seeks to inspire, nurture, entertain and challenge. It offers television viewers, radio listeners and Internet users new ways of seeing themselves and the world through informative, entertaining and motivating programming.
23648 Our television service is currently available to a universe of C-band subscribers with a footprint that covers from North America to South America. Our strategy is to secure carriage on the digital tiers of the principal MSOs as they roll out their system upgrades.
23649 We are finalizing negotiations with cable MSOs and a direct broadcast satellite provider. We expect to be available in nearly 10 million homes by year end 2000 and hope to reach over 25 million in two years.
23650 We are also very active in radio and have secured a channel on Sirius Satellite Radio, a national subscription audio service launching next year. At present we are streaming both radio and television programs on our Web site at wisdommedia.com.
23651 We are excited about our association with Vision TV in this enterprise. We have already had the pleasure of working with them on a number of Canadian programming projects and we have plans for more.
23652 Currently about 30 per cent of our channel's offering is original content, branded to Wisdom. We recognize that in the emerging digital world original branded content is what will differentiate us and attract viewers and subscribers.
23653 We believe that our association with Vision TV and independent Canadian producers will result in an important source of new original content, making our service more interesting to U.S. subscribers.
23654 Wisdom Media operates in an entirely digital environment and we are confident that this new venture will thrive as a digital channel, as there is such a clear market hunger for programming that is helpful, intelligent and empowering.
23655 MS DEVERELL: Madam Chair, 13 year-old Vision TV is unlike any other broadcaster in Canada and is, in fact, unique in the world. We are a not-for-profit, entrepreneurial business that meets public sector goals.
23656 Our approach is unique in at least four ways. It has four unique characteristics. We are driven by mandate, not by profit; by stakeholders rather than shareholders. Our modest resources, I can assure you, have given us lots of experience in being both nimble and efficient. We partner and contract out wherever possible and desirable, whether it is our master control to the CBC Broadcast Centre or our pay and benefits function. Perhaps most importantly, we commission and acquire a great deal of our programming from the Canadian independent sector. Even our in-house programming is produced by freelance crews and producers.
23657 Our approach generates many benefits to the system. Our independent programming offices in Victoria and Halifax ensure a diversity of regional voices, and our commitment for our entire history to racial, cultural, regional and gender diversity is obvious in our programming and in our workforce.
23658 Our approach works. We attract significant audiences. We are debt free. And we are the pioneers on this one: Vision TV is proof positive that you can do well while doing good.
23659 MR. FRASER: Commissioners, we are very well aware of the many issues and challenges that you are grappling with, and have over the last ten days, and indeed will in the days ahead. With Wisdom we bring unique answers to the challenges of the new digital universe.
23660 Our application merits a Category 1 licence because it will be attractive to consumers, bringing a new subject area to Canadian television at an affordable rate.
23661 It will contribute significantly to the production of diverse, high quality Canadian programming, 75 per cent of which will come from the independent sector, much of which has the opportunity to be exported. Our business plan is sound and realistic.
23662 Wisdom: Body Mind and Spirit brings the last big idea to television. It builds on the booming market for information about body, mind and spirit now being served by every medium other than television.
23663 We need a Category 1 licence to bolster the development of new programming in an important new subject area and to ensure that as a smaller player, we are positioned to succeed fully within the broadcasting system.
23664 Commissioners, thank you very much. We are ready for your questions.
23665 THE CHAIRPERSON: Thank you, Mr. Fraser, and your panel.
23666 Commissioner Demers, please.
23667 COMMISSIONER DEMERS: Good afternoon, Mr. Fraser, and good afternoon to the Wisdom panel. You will see that even it befits Friday afternoon, we keep to our plan. You will be able to answer most of the general questions that have been put to other applicants. Of course, as you have probably seen on your television screen, the first question is always or most of the time on criteria.
23668 I'm sure you have some wisdom to offer to us at this time. I'm sure you have read in the Public Notice the criteria that the Commission offered. We would now like to hear your panel on the choice, the hard choice, the Commission will have to make in three weeks.
23669 MR. FRASER: Well, thank you, Commissioner Demers. I think the Commission exercised great wisdom in choosing these criteria which we would like to now comment on. We have talked about this and thought about it. It was very easy for us to come to our weighting.
23670 First of all, attractive is very important. We see that as including affordability and interactivity and doability. Contribution to Canadian programming is of great importance as well. It's what the Canadian system is all about. Most of all, in terms of where we come from, diversity.
23671 A voice of genre is of great importance. We will bring to the Canadian broadcasting system with this application something that doesn't exist there now and won't exist unless we are there. Our answers to your question, in short we can expand on it, we would be happy to in any of the areas, but attractiveness, contribution to Canadian programming, diversity.
23672 COMMISSIONER DEMERS: Thank you, Mr. Fraser. I will let my colleagues maybe ask you a few more questions on this point. I will pass on to implementation. I believe you covered it indirectly in your oral presentation.
23673 Could you maybe be more specific and emphasize a few points, whether the Commission should have a minimum time limit for licensees to get on with their business and then the relationship between Category 1 and Category 2 as far as launching is concerned.
23674 MR. FRASER: It's a large question. I will ask my colleagues to help me to answer it, Commissioner Demers. We have heard the discussion over the last couple of weeks and agree that there should be a coordinated launch date of services, certainly the Category 1 services and, I would say, as many as possible of the Category 2 services next fall.
23675 September is very good. We will be ready to be there. In fact, we planned on that. I would like to ask my colleague, Susan Bower, to talk about how we will be ready to launch and how we would launch in September.
23676 If you would like to talk more about timetables, we can come back to that.
23677 MS BOWER: We understand that every participant in these hearings has put a great deal of effort into designing their services to meet your criteria. We believe the criteria you have set out has set a very fair and equitable framework for the launch of the digital tier.
23678 When we prepared our own business plan, we put together a $1.8 million marketing and promotion package in order to be there and be ready for September 1. I believe it is important, as most of your other applicants have stated, that we do have a joint launch. We are quite prepared for that.
23679 On the Category 2s, we understand there has been some discussion over the past two weeks about whether we should also launch them within the same time framework. We understand there is more considerations to be given to Category 2s who do not have mandatory carriage.
23680 We have been talking internally that perhaps a three year time frame would be the appropriate time frame for Category 2s.
23681 MR. FRASER: If I can add just a touch to that, Commissioner. There has also been a great deal of conversation about the number of services to be launched. The Commission said about 10. We hope that "about" means you are flexible.
23682 We would echo and support those who suggest that given what appears to be the reality that there will be some 30, perhaps 40, available channels for this launch in September of 2001, that you consider being flexible in your definition of the term "about".
23683 I don't think I want to put a number on it, but certainly there have been so many good services -- we have watched this for a couple of weeks. There are a lot of great channels being proposed. I would like to have a lot of them myself. I know you can't license all of them, but perhaps more than ten, perhaps 15, 20, would be very nice.
23684 COMMISSIONER DEMERS: Thank you, Mr. Fraser. On the involvement of the Commission in the launch, do you have comments? Although you have launched a long time, you probably have good wisdom on that.
23685 MR. FRASER: We try. We try from you as well. The fact that we are still living in a scarcity environment of channels and the fact that this launch is going to be occurring in an environment where there is an imbalance of power between the various players who are going to participate in it, I think that the role of the CRTC should continue, that your present framework is adequate. We hope you stick to it and don't leave it.
23686 You may, I think, in looking closely at the evolution of the digital universe and migration issues that also hang on that, know that the Commission in our view has a clear role to play. We hope that you are there.
23687 COMMISSIONER DEMERS: Thank you. I will pass on to independent production. The first question is a general one. Should the Commission require digital services to make specific commitments to independent producers?
23688 MR. FRASER: It's easy for us, Commissioner. In our history, we have done most of our programming in the independent sector. We have a great relationship with the independent production community in this country. We outsource even a great deal of our so-called inhouse programming.
23689 Perhaps my colleague, Rita Deverell, can expand on that relationship because it has been important to our success. It's a relationship that we would continue in Body, Mind and Spirit.
23691 MR. de SILVA: I take it Rita is handing it over to me, being my most recent position. I was Director of Independent Production. Having been an independent producer for close to 20 years and still bearing the psychological and financial scars of that, I think I can maybe speak to that a little bit.
23692 I think, as Fil said, we have a very, very good, strong relationship with the independent sector. It's maybe a bit of a secret somehow, but we have about -- over 140 projects at any given time at Vision with independent producers across this country.
23693 I would like to hasten to add that I think we are the only specialty channel that actually has representatives on each of the coasts. We have a representative on the east coast and the west coast. We have a very ongoing and strong and, I think, dynamic relationship with independent producers, particularly, I would say, with the small and medium size producers because of the nature of the kinds of independent documentary production that we do.
23694 I anticipate this will continue and only be strengthened by having another channel with related programming to work with.
23695 MR. FRASER: This may be the time for me to point out why we applied for a Category 1 licence.
23696 It is because of the carriage that comes with Category 1 that we will be able to continue and expand that relationship with the independent production sector. Category 1 calls for a high level of programming. We start at 50 per cent and go to 60 percent Canadian content by the end of the licence term and that would certainly deal with the issue of independent production.
23697 MR. de SILVA: May I quickly just say we have said that 75 per cent of our budget, our Canadian programming, will be done with the independent sector. So that's a significant number.
23698 MS BOWER: And if I could just add a footnote from a regulatory point of view.
23699 We do see the Category 1s and the framework that you set out as a privileged position, and so we do see the contribution to Canadian programming, in particularly to the Canadian independent sector as one of the responsibilities of owning that privilege.
23700 COMMISSIONER DEMERS: Thank you.
23701 Maybe if you could offer some comments on what is an independent producer. I may not have exact relations to your at work, but certainly --
23702 MR. FRASER: I'll ask Paul de Silva to answer that question.
23703 MR. de SILVA: Well, for us it's quite simple, Commissioner Demers. It's because we don't have any affiliation with any other production company directly. We don't have any output deals with anybody. For us it's simply a company that has a charter. When we, in fact, issue a contract, we require paperwork that says they have a chartered company, that says they are in the business of film and video. So because we don't have any conflicts of interest, it's fairly simple. I know this has been an issue for the Commission in terms of other proposals.
23704 So if they have a chartered company and in fact I think if they can say EIP, LFP, CIFV, CAVCO really quickly and a lot, they are an independent producer.
23705 MR. FRASER: Perhaps this short answer is we do not own any interest into any independent production company and we do not intend to do so.
23706 COMMISSIONER DEMERS: Yes. On the other hand, the Commission may have to make a pronouncement on that and if you have any thoughts on what would be an independent producer, it may be that experience has shown to you what difference there is in dealing with somebody who is related to a broadcaster or a distributor and one who is not.
23707 MR. FRASER: We have heard the various approaches and suggestions that anything up to 49 per cent down to zero would be at arm's length, certainly as an issue of control when a broadcaster owns or has part of a production company interest.
23708 I think we would agree that somewhere along the 15 per cent, or less than 20 per cent range gives enough control to the independent producer to keep it in the more or less arm's length relationship.
23709 COMMISSIONER DEMERS: Thank you.
23710 Now I move on to nature of service. You state that the service with a focus on the interconnectedness of body, mind and spirit will enhance and will hence be distinct due to that. Will all programs be about the interconnectedness?
23711 MR. FRASER: We certainly have a very clear idea of the nature of service, and I will ask Rita Deverell to speak to that, but when you are creating a new genre, it's very difficult to describe it precisely. One way of understanding it is to look at everything outside of television.
23712 If you walk into a book store, or go by a magazine rack, or even get on the Internet, you will find that there is a great deal of activity in the area of people trying to improve their lives, to find the centre of their lives, to live a better life, and that goes all the way from meditation to yoga to eating practices, to a whole range of things, philosophy, and so on.
23713 So it's hard to put that into a tight little box, but we all know what we are talking about when we talk about life improvement and I will ask Rita to talk about the nature of service from the point of view of this network, but I will also ask Sheila Shayon, who is already doing that in the United States, to talk about how it works there and how they have begun to define more precisely what it is we are talking about.
23715 MS DEVERELL: Yes, all of the programming will be about the interconnectedness of body, mind and spirit and, as Fil said, this is a genre that has hit other media, has definitely hit books and magazines especially, and newspapers.
23716 But there is not the kind of -- this genre doesn't not exist in television. So it is possible to say that the interconnectedness of body, mind and spirit, a distinct genre, is the only big idea left in television -- to hand off to Sheila.
23717 MS SHAYON: Thank you. My data is mostly anecdotal, but of that I have quite a bit since we have been operating for about two years now, and I think the answer to your question in terms of the definition of nature of service and the interconnectedness of mind, body and spirit is that we are really talking about wellness and we are talking about in our country there is a lot of programming that deals with what is known as the acute phase of care, when somebody is very sick or in crisis or in hospital.
23718 But what we are interested in more is the phase before that and the phase after that. How do you lead a life that is healthy to prevent you from becoming ill? How do you have relationships with your colleagues and your loved ones and your work and your environment and the world at large that allows you to maintain balance and health both of mind, body and spirit? And then if you do fall prey to disease of any kind, how do you get out of it and change your life accordingly?
23719 This is not about one of television. This is not programming that you can look at one program, and then poof! some magical thing happens and you are different. People who engage in this journey are on a journey and what we have found is that everybody is on the journey. Some people are at the very beginning, some people are at the end, most are somewhere in the middle, but it needs sustainability. This is about changing your lifestyle, changing the way you think, changing the way you behave with other people and it's a lifelong opportunity and a lifelong challenge.
23720 So it is interconnected because it's about each of us individually as well as collectively.
23721 COMMISSIONER DEMERS: Thank you.
23722 Could we look at it from another point of view and the question could be how can you assure the Commission that the programming would maintain this orientation?
23723 MR. FRASER: It's very clear that the strand of programming within Vision TV -- and perhaps others can talk about it -- that we have developed, and it's a very small strand so far in our programming, but programs like Like -- like Like After -- programs like Life After Death -- I am getting on, you know. These questions were before me.
--- Laughter / Rires
23724 Programs in a totally different range like the Age of V which we recently co-produced with Wisdom Networks, are clearly about what your mind does in relation to your spirit, your body, your soul, all of those connections, and everything that we do will be focused on that.
23725 We are clearly not a health channel. There are a number of health proposals before you. They are all doctor related. In fact, you had a doctor supporting one of the channels. They are connected to medical schools, they are connected to the issues of --I don't want to talk about too many operations on television, but there is going to be some of that.
23726 That's certainly not what we are going to do. It's very different. I think there is a very clear differentiation and we did not, you may have noticed in the intervention file against any other applicant in terms of them being competitive with us, we don't believe that we compete with anyone else. We are in a class by ourselves.
23727 In fact, a health channel, a physical health channel, would be a wonderful complement to our Body, Mind and Spirit channel.
23728 MR. de SILVA: May I just add a quick thing to what Fil said, Commissioner Demers?
23729 In terms of the programming aspect, if you look through our programming day and all the programs, there's really an overriding ethos to the channel; that is, body, mind and spirit. So, within each program, there will be some addressing of all three of those, in some way, through our magazine programs, through our daily flagship programs, and I think even our music programs will all have that aspect. So overriding and imbued within all of the programming will be the ethos of connecting the three: body, mind and spirit.
23730 COMMISSIONER DEMERS: Thank you.
23731 Speaking of music, maybe we can go on.
23732 You are proposing to broadcast two music programs: one called "Music of the Morning"; and the other "Music in the Middle".
23733 Would you please describe the visual elements that would accompany the music. What will viewers see on their television screen?
23734 MS DEVERELL: I think I will pass that on to Peter Flemington.
23735 MR. FLEMINGTON: When I sit down for my weekly massage, I do not let the masseuse start until she has put on my favourite cassette, which is the "Pachelbel Canon", mixed with wonderful sounds of waves lapping on the shore and gulls screeching and the rigging noises on the sailboat and so on.
23736 We are talking -- this channel is a channel -- among other things, it is a channel of moods. It is a channel for people who are stressed out, who want to sit and relax and have something wash over them.
23737 So, indeed, there will be that kind of music and that kind of visuals.
23738 There's a fairly broad source of that kind of material.
23739 But, also, there will some performance of music by what might be called "new age" musicians playing different kinds of instruments, eastern music, that sort of thing. It will be a fairly broad variety of musical forms.
23740 MR. FRASER: What it won't be, Commissioner, is rock videos. No rock videos on here.
23741 THE CHAIRPERSON: Neither your masseuse, I hope.
--- Laughter / Rires
23742 MR. FRASER: We thought, at one point, Commissioner Wylie, that it would be a very nice idea if we brought a team of masseurs and masseuses to come and give you a little help on a Friday afternoon, but we thought that was probably outside of the parameters of this hearing.
--- Laughter / Rires
23743 COMMISSIONER DEMERS: I saw, during our noon break, that "la Flamme du Souvenir" was on this channel; so it's quite inspiring.
23744 One of your colleagues, Mr. Fraser, mentioned the Mood Channel and this, in a sense, indirectly, brings me to a proposal that has been in front of the Commission that is part of these applications, which is mood music; and my question is: If both your channel and -- a mood channel was licensed -- if we were licensing both and wished to limit that amount of music programming you could air, what limit would you recommend?
23745 MR. FRASER: Well, first of all, the schedule would have a very small amount of music that will be of the interlude, relaxing, mood variety, not at all like the CHUM application for mood music of other kinds. But my colleague, Rita, can be more specific about percentages.
23746 MS DEVERELL: If you notice, Commissioners, we have four people talking about programming; maybe that's because all the rest is housekeeping.
--- Laughter / Rires
23747 MS DEVERELL: So, on this issue of the overlap with music, we are looking at, in Category 8, "Music and Dance", certainly no more than 12 per cent of the schedule. So, it's a relatively modest percentage of the schedule. Although that will be important.
23748 COMMISSIONER DEMERS: Thank you.
23749 In your application, you indicated that programming would come from Categories 2, 7 and 8.
23750 Would you please specify which sub-categories you wish to include in your nature of service definition.
23751 MS DEVERELL: Yes. We, in fact, in requesting categories, did stipulate more categories than that, and if I may provide some guidance on how we would like those categories dealt with, the smaller ones, the smallest of the categories, for us, would be Category 10, "Game Shows"; Category 13, "PSAs"; Category 14, "Infomercials"; Category 4, "Religion"; and Category 12, "Interstitial". For all of those categories, we would be quite happy with under 5 per cent, as a guideline.
23752 The other categories that are somewhat larger, for us, that I put in the medium range, would be Category 8, "Music and Dance"; Category 2(b), "Long Format Documentaries"; and Category 7, "Drama".
23753 With those categories, I think we are talking around, as I said, with reference to music, the 12 per cent range.
23754 And the largest category, for us, is, indeed, Category 5(b), "Informal Education", and that would need to be around the 70 per cent range for the schedule that we are currently proposing; and that's how I think we see it growing, over the seven-year term.
23755 COMMISSIONER DEMERS: Thank you.
23756 What types of Category 7, "Drama, Films", et cetera, would you consider to be suitable for the service? What criteria would you use in choosing such programming?
23757 MS DEVERELL: I will hand off to Peter Flemington.
23758 MR. FLEMINGTON: The criteria that we would use for the selection of drama would be the same criteria we would use for the selection of any other programming on our schedule; and that is, the interconnectedness of mind, body and spirit -- and that holds for drama, I believe, as well as for music and other categories.
23759 COMMISSIONER DEMERS: Thank you.
23760 A question on competitiveness. Maybe you have already answered, but it would be nice to have comments.
23761 Four other Category 1 applicants have proposed health and wellness services.
23762 Do you feel that your service could compete directly with any of these applications? I think you have answered.
23763 MR. FRASER: For the record, Commissioner, no, we don't feel we are competitive with any of those applications. In fact, we think we could be complementary.
23764 COMMISSIONER DEMERS: So, do you think there is, therefore, room for two health services: a holistic-type service that you propose; and a channel with traditional health focus? That's the meaning of your answer?
23765 MR. FRASER: If you were to license a health channel of the style that is before you, which are medically-oriented, and the Body, Mind and Spirit Channel, which is oriented in a non-medical fashion, let me put it that way, I think the two would live very well together and would not compete with one another. I think they would attract -- they may attract -- everyone's interested in both subjects, but they would attract different people at different times.
23766 COMMISSIONER DEMERS: Thank you.
23767 On foreign programming. You have alluded to that in your oral presentation but, maybe to make sure we have the right figure...
23768 Approximately how much foreign programming will be acquired from your U.S. partner, Weston?
23769 MR. de SILVA: In terms of the overall numbers of foreign programming, there is approximately 375 hours a year of U.S. programming. Not, obviously, all of that will come from Wisdom, but we anticipate there may be anywhere from 10 per cent to 12 per cent programming that may come.
23770 I should stress that we are in a very early evolutionary phase of our relationship with the Wisdom channel in terms of programming, as they are in terms of developing it. We have done the program "The Age of E" for instance. That was a co-production with Wisdom.
23771 So I think as the relationship develops it will continue in terms of growing, but I think in our first year there will be I think a small amount, maybe even less than 10 per cent in the first year.
23772 MS BOWER: If I could clarify from a business point of view, we do not have an output deal, so there is no commitment on behalf of Wisdom Canada to accept any certain quantity of programming from Wisdom U.S.
23773 COMMISSIONER DEMERS: And I understand from your oral presentation that there will be circulation from your side and from them. That's -- you are a victim.
23774 Canadian original programming, you have touched on that in your oral presentation, but let's make sure we have things very clear. You have proposed a 50 per cent in first year, rising to 60 in the seventh, commitment to Canadian programming exhibition.
23775 What will be your weekly and annual repeat levels?
23776 MS DEVERELL: Yes. The level of Canadian content that you state is what we have requested.
23777 As far as the repeat factor is concerned, we estimate that some series, as in our demonstration schedule, would repeat only once and some would go up to six repeats in a year, based on an 18-hour day, which is what we have based our schedule on.
23778 If we went to a 24-hour day it would range between one repeat and go up to eight, but no higher than that.
23779 COMMISSIONER DEMERS: Thank you.
23780 Can you estimate how many hours of original Canadian programming you would air in each year of the licence term?
23781 MS DEVERELL: Yes. We plan to start with approximately 600 hours of Canadian programming and by year seven our totals would be over 6,000 hours. So we see a slight escalation, hopefully escalations in revenue.
23782 COMMISSIONER DEMERS: So 600 hours the first year, towards a total of 6,000?
23783 MS DEVERELL: That's correct.
23784 COMMISSIONER DEMERS: You would not have a figure let's say for the second year?
23785 MS DEVERELL: Well, in an informal way I do. If Ms Bower's calculations hold, the business plan holds, we should be able to increase between 7 and 10 per cent each year on the number of hours.
23786 MR. de SILVA: May I just make a quick additional comment, Commissioner Demers, on the number of hours from the production point of view. That is, as you know, the vagaries of the financing system in Canada for independent production in terms of where the money comes from, the Telefilm, the licence fee program, the tax credit system, that it is quite difficult sometimes to estimate exactly the number of hours because it depends on how much money we put in per independent production.
23787 So the amount varies. For instance, you may need $10,000 or $15,000 to trigger a budget for let's say $100,000 or $150,000 in some instances. Some of the hours we may be doing completely in terms of paying 50 or 60 per cent of the budget. So it's a very difficult and I think you probably heard this over the course of the hearings in terms of giving a hard number of hours, but what will hold is the percentage over the time of 75 per cent that will go into Canadian production.
23788 COMMISSIONER DEMERS: Thank you.
23789 On demand and subscriber projection I have a question. Your demand research shows that, among other findings, 48 per cent of respondents found the channel a good or excellent idea. However, only 13 thought it an excellent idea.
23790 Given your research findings, could you explain how you arrive at an estimated subscriber penetration of 60 per cent in year one?
23791 MR. FRASER: Commissioners, you have had a lot of research presented to you over these past couple of weeks from various sources. We took our approach to research very seriously and we worked with a highly credible firm, Solutions Research.
23792 One of the things that I will ask Kaan Yigit to underline when I pass to him is that we tested our concept as best we could describe it because no one has ever seen anything like this on television, and we tested it against a price point of 40 cents, which is higher than what we are asking for, but let me ask Mr. Yigit and, if you like, we could also go into the other research that we did on advertiser demand because we have some very interesting results and the methodology was sound.
23793 Mr. Yigit.
23794 MR. YIGIT: Thanks, Fil.
23795 A couple of points, we asked a series of questions to quantify demand and to provide a base line for business planning purposes. One of them is, as you point out, was what we call the concept assessment question.
23796 In addition, and as Fil pointed out, we had a price point filter in the questionnaire to be able to develop some sort of an estimate of the size of audience available to a channel such as this.
23797 Based on that question we found that 40 per cent in total -- 38 per cent in total of the cable subscriber base and DTH subscriber base would be interested in paying an additional fee to get this channel.
23798 But what's perhaps more interesting and relevant is we subsequently broke those results down into results within the current digital base, which is subscribers to current digital service, DTH, wireless or the very few I guess digital cable subscribers, and we also were able to generate results for what we called likely digital subscribers.
23799 These are people we feel, as part of the research as we found, would be early adopters of the service. So within that group, like the digital subscribers, the interest level at an additional price point was 42 per cent as a base line. That doesn't include any -- that's almost a stand-alone type of estimate, not accounting for any distribution arrangements which may include various packaging options and that kind of thing.
23800 I think I will hand it over to Susan to perhaps go from there into the business plan with that base line estimate.
23801 MS BOWER: For the business plan we began with qualitative analysis, if you like. The figures that we present to you in our opening remarks led us to believe that there is an untapped or an underserved market, an untapped demand for product in the genre of the interconnection of body, mind and spirit -- $80 million of books purchased in this area.
23802 That coordinates or substantiates the viewer response that we have to some of the programs that we have on Vision TV in this area. For instance, a program like Quiet Places, which explores retreat centres, is one show that has received significant audience response.
23803 We believe that that audience interest or consumer interest in the genre is reflective of what Michael Adams has found in his research, that the quest for meaning is one of the three social values that Canadians are currently preoccupied with.
23804 The research, the quantitative research then that we conducted with Solutions Research Groups supported that where 40 per cent was quite interested in this genre. I will ask Nancy in a moment to speak to the advertiser interest.
23805 When we looked at that underserved genre and then combined that with our understanding of the roll-out of digital, which we believe is quite different than the roll-out of analog, and I believe you have heard some representations in this regard throughout the past ten days, that the take-up rate within the digital subscriber universe for more channels, for a take everything package, is up in the 60 per cent range.
23806 When you add on top of that subscriber base the fact that 40 per cent would be interested in this genre and combine that with a lift from other genres, we believe that the 60 per cent penetration rate is realistic and probably somewhat conservative.
23807 Nancy, would you like to elaborate on the advertiser research.
23808 MS SMITH: Thank you. When we surveyed the advertisers, quite frankly, we were surprised at how high a response we got in terms of where they positioned the service in terms of a buy.
23809 It's typically advertisers won't give you a very high response unless they can see the service or they can see some numbers, but we touched a nerve with them. I think we touched a nerve professionally and personally because the kind of responses we got were things like "We think there's a great opportunity for this channel".
23810 Sixty per cent of them rated it as a medium priority buy which is quite high for a specialty service. Ten per cent is a high priority buy. They spoke about the fact that they could reach this audience within this environment in other mediums, but until now they had not been able to reach them within broadcasting.
23811 The target demographic that they believe would be most likely to watch would be the baby boomers, which is really the most desirable audience from an advertiser's point of view.
23812 Then they talked about the possible partnerships, the feel good aspect of the service, and the categories of products that could probably find a very good environment here within that audience. So overall, we got quite a tremendous response. Really it was almost as if they felt that television was catching up to where print media already had been.
23813 The other aspect is they saw the possibility for the Internet and the interactivity. This kind of service, really you can see the video sales and the book sales and the television -- I'm sorry, the newspaper and the magazine opportunities.
23814 Well, virtually all of those mediums could be rolled into this if you looked at what you can do on television, how you can roll it out interactively, take it to the Internet and potentially even create print or "e" kind of newsletters around it, so they were excited about the opportunities.
23815 They also saw the possibility of taking dollars from other mediums and placing them into television.
23816 MR. FRASER: Commissioner, if I may, if you will allow me to extend this just a little bit because this is a very important aspect of this whole business, the attractiveness and the knowledge that there's an audience.
23817 When you enter a new area -- we are working very hard to try to pin that down. I think we can benefit from the experience of the Wisdom network in the United States which has done some research, quite interesting research. While it doesn't connect directly with Canada, I think we will illuminate this quite a bit.
23818 Sheila, could you talk about that.
23819 MS SHAYON: We conducted the second research study ever done into this genre. The first was done by a gentleman named Paul Ray about four years ago. He coined the term "the cultural creatives".
23820 We commissioned a survey just this past year. It was done by telephone primarily, a universe of 1,200, very diverse national, done by an independent firm called Centrus. The most interesting thing that came up to us was we were all in search of a new niche market that we could capitalize on.
23821 What we found was this was not a new niche market all, that the audience in the market was all of us, that it was the aging baby boomers that we have recoined the phrase "cultural creatives" to "evolutionaries", that it's people who are, as I said before, on the journey, seeking new information.
23822 Somebody like Wayne Dyer, who is quite a guru in the States, has sold over 60 million books. That's more than any rock star has ever sold in terms of a CD or musical records. It's just phenomenal the kind of appetite there is for this kind of information and, as Nancy said, also for the cross-media opportunities.
23823 People have said "I want to watch it on television, then I want to hear it on radio and then I want to go online and I want to be able to drill down into that content according to my personal choice".
23824 There's clear evidence in the States from both Wall Street and Madison Avenue of the attractiveness of this market. I mean it's just beginning, but it's a boom, cover stories on major magazines -- Newsweek, Time, et cetera -- about this emerging market and the opportunities for it. We are clear.
23825 There's also one other specific example I would like to mention to you which I think is substantial. Recently in the States on a Monday night, prime time, the major networks did their first spiritual kind of programming. On CNN, Larry King Live, were two guests, Deepak Chopra and His Holiness, the Dali Lama. It was then that the genon was discovered. He had them both on to discuss this.
23826 On ABC, same time, two hours with Peter Jennings entitled In Search of Jesus caused a lot of stir in the print reaction to this, but it was a pretty significant cultural event I think that two of the bigger networks did spiritual kind of programming, prime time, eight o'clock, on a Monday night.
23827 The final item that I would mention again, a cultural anecdotal metaphor. Are you familiar with a play and a movie called Six Degrees of Separation? Well, it's about how generally within six questions you can establish a connection with anybody you meet, some interconnectedness if you will.
23828 We in the States feel that we are now down to two degrees of separation. It's just extraordinary the synchronicity you find once you jump into this journey. Even when we are approaching the most hard boiled MSOs and trying to sell this concept to them, they may not come out immediately, but they will say "Oh, yes, I have a brother-in-law who is trying to master his golf game and he is looking at this book by so and so" or "Oh, yes, my sister meditates in the morning".
23829 Even though there is still a little bit of resistance, what you find is that very closely you can push the button and identify this interconnectedness both with each other and also with this content.
23830 MR. FRASER: The point is if I can make it finally, Commissioners, this really is part of the mainstream. It is not the fringe. It's not being served by television. It's being served by the National Post. Here's a front page in The Financial Post a couple of days ago "Stressed out COs seek relaxed saints". Did you see that?
23831 COMMISSIONER DEMERS: Thank you very much. My last question will be maybe an open question addressed to Wisdom Network. If you agree, Mr. Fraser. I pose it maybe in a negative way to get a lot of information.
23832 How successful has U.S. Wisdom Network been in terms of audience and overall financial success?
23833 MR. FRASER: Clearly a question for Ms Shayon.
23834 MS SHAYON: Well, we have not yet begun to make money, but by grace of our visionary leader, we have a business commitment for five years. We are into our third, so we are debt free because we are fully financed by a family owned business.
23835 The best news I can tell you is that we are very close to two significant deals. One is with dish TV, which is a digital service, part of Echo Star, one of the larger ones in the country, which would put us into all of the significant urban markets.
23836 Presently, we exist on a C-band universe of some 4 million plus subscribers, but this would put us into the homes of an additional couple of million.
23837 We also are in negotiation and close to deals with three of the larger MSOs, including AT&T and Time Warner and Comcast.
23838 I would hope that certainly before the end of the year, as I said in my remarks, we could be in homes of at least 10 million.
23839 COMMISSIONER DEMERS: Thank you, Mr. Fraser. Thank you to your team. Madam Chair.
23840 THE CHAIRPERSON: You realize that that would be almost every Canadian house. You would be a real star here.
23841 MS SHAYON: We would like that.
23842 THE CHAIRPERSON: Commissioner Williams.
23843 COMMISSIONER WILLIAMS: Mr. Fraser, Erika Kramer in part of the opening presentation spoke of co-production initiatives with APTN, including this interactive broadcast group alliance that you have created with Ryerson to create an incubator for new media products.
23844 She also described your first project, the residential school project with APTN and Newsworld and the various churches being involved. I guess I would be interested to hear from both you and Ms Milligan on have you discussed other co-venture projects with anyone, with APTN and, if so, what is the nature of these projects?
23845 MR. FRASER: First of all, in general terms, Commissioner, we have got a very solid relationship with APTN since they launched. In fact, we look after their affiliate relations with cable operators and MSOs and all of the distributors, so we have a business relationship with them that's very healthy and growing.
23846 Secondly, we also share our advertising sales, so we have a very solid business relationship and a personal relationship between many of us and many of the people who are a part of APTN. In fact, I can tell you that Brenda Chambers, who is a member of the board of APTN, is also a member of the Vision TV board.
23847 But let me ask first Beverley Milligan to tell you something about what I consider to be one of the most exciting projects that speak to what we are all trying to do here and that's to get from where we are to digital and how the Ryerson group is really on the cutting edge of figuring out how to do that.
23848 Then I will ask Rita Deverell to describe this very exciting project and where it came from, which is going to be a national town hall broadcast in which aboriginal communities, north, south, east, west church groups and citizens across the country will be able to enter into this very important dialogue that we have to have in this country about the residential schools issue.
23849 So if you will indulge us to really give you a full answer to the question perhaps we can start with Ms Milligan.
23850 MS MILLIGAN: Hi. The interactive broadcast development group at Ryerson University is a research initiative that is focused on interactive broadband communications in the area of technology content and business modelling. It is university-wide and we recognize as a university this is an area that cannot be researched alone. We need to recruit into what we do, which is research and dissemination of cutting-edge information.
23851 We need to recruit partnerships in that and in the area of interactive broadband communications that means working with the broadcast community.
23852 So, in the area of the residential schools project, along with any content initiative, really in the area of interactivity it is through the creation of interactive content that we are going to learn the business modelling and we are going to test the new and the cutting-edge technologies only through the creation of contents. That's what we are focused on and that is the way in which we are partnering in this particular project with Vision TV, looking at the creation of the interactive content and how we can enhance that which exists from a research point of view.
23853 MR. FRASER: And we are hanging onto them for lots of other projects which we will tell you about in a minute, but let me ask Rita Deverell to talk about this specific project on the residential schools.
23854 MS DEVERELL: I am tempted to say how long you have got, but I won't do that since I am the co-ordinating producer of this project, but I think you referred earlier to do we have these other co-operative ventures? The answer is yes.
23855 In fact, the residential schools project, which is a Vision TV project, builds on other co-operative relationships with APTN and indeed with Newsworld. We had a whole variety of partnerships going on all the time, but on the interactive elements specifically I will ask Erika Kramer to speak about some of our other projects.
23856 MS. KRAMER: In the Wisdom application we have allocated $1.3 million specifically to the development of new interactive content and the alliance with Ryerson is especially exciting because it gives us access to some of the most creative minds in the country and also to the infrastructure in order to develop the content.
23857 We tend to focus on content and outsource for the infrastructure. We also have the ability to partner with anybody. So the creative options are almost endless.
23858 MR. de SILVA: May I respond very quickly, Commissioner Williams, to the first part of your question, which was what other projects in terms of APTN. I would just like to tell you very quickly about a project that is under way as we speak.
23859 It is being shot, a major five-part series called "Alkali Lake" which, as you probably know, featured the issues involving the Alkali Lake Reservation.
23860 David Cherniak, who is a very well-known filmmaker, was with the "Man Alive" series is doing that. It is in association with APTN. There will be five one hours exploring all the aspects of social change, spirituality.
23861 I should say that Jim Compton, who is my counterpart at APTN, and I talk at least once every two or three weeks, we share first windows with them sometimes, second windows, so there is a very healthy, growing relationship with APTN with several projects in development on the way.
23862 MR. FLEMINGTON: If I could just add a small bit. I don't know why it is --
23863 COMMISSIONER WILLIAMS: Keep it coming.
23864 MR. FLEMINGTON: I don't know why it is programmers can't shut up, but I just wanted to comment that there is a real sense in which prior to APTN being licensed Vision TV was the APTN. For many years we carried a very high percentage of aboriginal programming.
23865 Also, in addition to the Alkali Lake series which Paul has mentioned, we have been talking with them about jointly producing a series on aboriginal spirituality for the new Wisdom Channel, and also I should note that APTN, Vision and SPS Australia are also involved in an international co-production about the problem of stolen childhoods in the various cultures.
23866 COMMISSIONER WILLIAMS: On this particular project, this residential schools initiative, you say it is a co-venture with Ryerson, Newsworld, APTN and the relevant churches, so the churches bring something to this partnership as well?
23867 MS DEVERELL: Yes. If I might speak to that. There is an ecumenical broadcasting support group called Religious Television Associates. The churches who have mainly been involved with residential schools are members of that group. So our aim is to bring all of the parties involved to a town hall forum, much like what CBC did on the farm crisis, if you remember that coverage, that will deal with this very significant issue because there is a level on which it's everybody's problem.
23868 COMMISSIONER WILLIAMS: Yes, agreed. I guess there are some of the former residents are suing some of the churches, so to make the church a partner and not some of the former residents a partner might be viewed as having a small element of bias involved there which I am sure there isn't. I am just saying it might be viewed as that. That's why I made that comment.
23869 MS DEVERELL: No. If I may speak to that. Because APTN is involved, so we had aboriginal people who are a significant part of this project, Newsworld because it is news, and the churches because the churches were, as you say, being sued, but also because the churches remain front-line workers in social service organizations and all of these constituencies are constituencies that we deal with all the time. So Vision becomes a sort of meeting ground.
23870 MR. FRASER: I should just add to that, Commissioner Williams, that we haven't got all the nuts and bolts in place yet, but the expectation is that we will have monitors and television sets and we are using the -- and Erika can describe this more fully than I can -- a system developed by ExpressVU, who are also working with us on this, to make sure that this gets out to the communities.
23871 We will have monitors and the ability to access the program and participate in it all over Canada, in aboriginal communities, in church communities, in ordinary communities of all kinds.
23872 COMMISSIONER WILLIAMS: Yes. I am confident that you would have the vision to handle such a sensitive project for Wisdom.
23873 MR. FRASER: And the wisdom.
--- Laughter / Rires
23874 THE CHAIRPERSON: Madam Bertrand...?
23875 CHAIRPERSON OF THE COMMISSION: Good afternoon. I had one question because it is kind of -- well, not on the last question of Commissioner Williams, but talking about the synergy of your partnership. I would have liked to hear, because you kind of referred to the origin of Radio Nord and the commitment of its founder to the same objectives pursued by Vision in the project here, but I would like to hear you and Mr. Brosseau in terms of how the synergy between you two as partners will work out, and for us to appreciate when we deliberate and do the analysis on how the synergy could be helpful to the roll-out of the digital world, yet bringing the kind of quality we are to expect in the Canadian broadcasting system.
23876 MR. FRASER: Thank you, Madam Bertrand.
23877 I can start by saying that Jean-Joffre Gourd was a very wise man who brought spirituality to his broadcasting operations in a very special way in the province of Quebec.
23878 It might be interesting for me to just take half a second to tell you about how we got together, and then I will ask Mr. Brosseau to take it from there.
23879 When we applied in the last round for Réseau Vision, the French version of Vision TV, it is quite interesting that Mr. Brosseau found us and said: This is important to us and we would like to be part of it. And we developed a partnership that is based on trust and friendship, and is based on a common view of some of the things that we ought to be doing in broadcasting. So it has a philosophical base.
23880 We are both, of course, interested in the business of it. Radio Nord Communications is a for-profit enterprise. We, of course, operate on a business basis, even though our profits go back into programming.
23881 So we, in the longer term, see building this relationship into other things that we might do. There may be a French version of Wisdom. As the technology of translation and closed captioning on the fly in various languages comes into being, we are looking at all of those possibilities.
23882 At the end of the day, the stronger we are and the more we can help each other to bring these services to television -- it will help, we think, with the roll-out of boxes and it will help us get more effectively into the digital world.
23883 Vision TV has been a small stand-alone service in the broadcasting universe. We recognized some time ago that we need to form partnerships and alliances with others so that we can grow and we can grow with our partners.
23884 Let me stop there and not turn this into a long speech. Monsieur Brosseau, si vous voulez.
23885 MR. BROSSEAU: First -- and I won't repeat what Fil just said, but our recent partnership proved to be very satisfactory and we have enjoyed working with the Vision people.
23886 Secondly, as we have said, we at Radio Nord have had a tradition -- a preoccupation about quality programming. We believe that this application is -- specifically, an important aspect of it is the quality of the programming, which gives a balance to the general offer that viewers have.
23887 Thirdly -- and, again, I don't want to repeat, but what we would be interested in eventually doing, technology permitting, would be possibly to look at a French version of that type of service.
23888 MS BOWER: If I may make some comments, generally, on the issue of synergies and what they will contribute to the broadcasting system as we know it now in Canada, we see several results from the economies of scope that this tripartite partnership brings to the system, and they will result in increased commitments to Canadian content, increased exhibition of Canadian content, and a reduced wholesale fee for the service.
23889 We gain synergies by the fact that Vision is a mature organization. We are positioned now to leverage our experience in operating specialty channels. We invested very little in capital expenditures, as you will know from our business plan, but we do work very well in strategic alliances and strategic partnerships.
23890 On the maturity issue, for instance, we have recently invested a quarter of a million dollars in a program inventory scheduling system that can handle multiple channels.
23891 On the partnership issue, for instance, we have outsourced many parts of our technical services through a public tender process. We ended up outsourcing our master control to CBC, at their facility in Toronto.
23892 When we crunch the numbers and look at what these synergies will contribute, my analysis shows that about $1.6 million annually will be saved by Vision managing this second service and working in partnership with our shareholders. That is about $11.2 million over the seven year licence term.
23893 So that is a significant dollar amount that is going back into original Canadian production, primarily with the independent sector.
23894 CHAIRPERSON OF THE COMMISSION: Thank you very much.
23895 THE CHAIRPERSON: Thank you, Madam Bertrand.
23896 Commissioner Williams...?
23897 COMMISSIONER WILLIAMS: Mr. Fraser, let me clarify one last issue. From what I understand, you have the Vision -- in fact you have it now -- but you are here requesting the Wisdom. Would that not be correct?
--- Laughter / Rires
23898 MR. FRASER: That is correct, and we think we came to the right place.
23899 THE CHAIRPERSON: Counsel...?
23900 MR. McCALLUM: Thank you.
23901 Will the service be technically equipped to allow for the broadcast of descriptive video?
23902 MR. FRASER: The descriptive video issue is one that I know you have dealt with all the way through, and we have a view on that which I will ask Erika Kramer to express.
23903 MS KRAMER: Yes. We will be technically equipped to support descriptive video, and we are in discussions with NRBS to find more cost effective ways to implement it on specific projects.
23904 MR. McCALLUM: I think you are also aware of the new privacy legislation that is coming out, and I assume you will be complying with it?
23905 MR. FRASER: Yes.
23906 MR. McCALLUM: Also, I assume you are aware of the discussion that has happened about filler programming, and you would redistribute from that category to other --
23907 MR. FRASER: There is no such thing in our schedule.
23908 MR. McCALLUM: Thank you.
23909 With respect to the percentages from the program categories that you gave in response to questions asked earlier, if these were made into conditions of licence I assume you would have no difficulty with that.
23910 MR. FRASER: Yes, that's correct.
23911 MR. McCALLUM: In terms of the description of the service, what you said in response to one of the questions, I think, was that the service is not a health channel, because the health channels are kind of doctor-related. I wonder if some words could be built into the nature of service description or condition of licence that would be something along the lines of: It could relate to holistic medicine, but not relate to traditional medicine.
23912 Could words like that be built into the description of the service?
23913 MR. FRASER: Yes. We would be happy to work with the Commission and its staff to find the right balance of words to express what I think we understand here.
23914 MR. McCALLUM: But what I just explained was kind of your understanding of what it is?
23915 MR. FRASER: Yes.
23916 MR. FLEMINGTON: Counsel, I would think that the words "western medicine" might be more appropriate than the phrase you used.
23917 MR. McCALLUM: Thank you.
23918 In correspondence with the Commission, in your letter dated the 12th of May on Canadian programming expenditures, you agreed to accept 41 per cent as a condition of licence. There has been discussion, as you probably have heard, with respect to different proposals for a condition of licence on Canadian programming expenditures. Do you have any comments on that?
23919 MR. FRASER: Gosh, counsel, we thought that one had got lost in the shuffle and had slipped by.
23920 Certainly we have a response.
23921 In general terms, we are in favour of having as much flexibility as possible, because we are entering a very uncertain business environment, but Ms Bower can be very clear about our response.
23922 MS BOWER: If the Commission chose to, as I understand it, set up a different calculation where it was an average over the seven year term, we would accept that.
23923 Either calculation ends us up with a very close percentage. So 41 per cent would be fine.
23924 MR. McCALLLUM: Thank you very much.
23925 I guess just one final question on interactivity. In your business plan you show interactivity costs, but not interactivity revenues and I just wanted to know if there is a reason for the exclusion of that.
23926 MS BOWER: Those in our activity revenues are primarily directed towards embedding interactivity into the programming and are not for creating e-commerce.
23927 However, we will embrace e-commerce technologies as they arrive. We did not make a business plan for that because the take-up rate for e-commerce transactions is so low currently in Canada. But we do have some expertise on our team, the Wisdom Internet site has an e-commerce portion. So we will embrace that as it arises, but I expect for this first licence term that it would be a break even proposition.
23928 The amount of money we put into it will probably exceed actually what we gain in revenue. So that's why it's not in the business plan.
23929 MR. McCALLLUM: Thank you. Thank you, Madam Chair.
23930 THE CHAIRPERSON: Thank you.
23931 The last word is your, Mr. Fraser. You can tell your American colleague that this is the part where one answers questions that were not asked.
--- Laughter / Rires
23932 MR. FRASER: Well, Madam Chair and Commissioners, we are very happy to have been here to send you off into a nice weekend.
23933 We think we brought a great application to you, one which meets all of the criteria and all of the tests that we hope to bring into being as we move into the new digital universe.
23934 We believe that packaging of services is very important, and I think I said that it's important that the Commission play some role in that.
23935 This is a situation in which there are no drivers. Everyone thinks their service is a driver, but we don't believe that. We believe that the package is the driver and a package of services, a menu of services which has within it a diversity of opportunities for viewing will create a situation where in fact the whole is greater than the sum of the parts.
23936 So we would hope that in your deliberations, which we understand are difficult and challenging, that you note that Canadians who want more services, want a variety of services. They want a panorama of services for themselves and their families. So it's not just individuals, but it's people who think of other people in the family. So they have a full menu to choose from.
23937 And we think we need to part of that menu. We are addressing an area that is not addressed by television at this time in this country and no other applicant before you has brought forward anything that will cover this area. It really is for television a new genre.
23938 We will bring balance to the system. We, with our experience of 13 years as a broadcaster, which created the genre, have the experience and the knowledge and the know how to bring this to the system. But we need the Category 1 licence. We are very well aware of the environment that will start to unfold sooner than we think in terms of the jockeying and the negotiations and the positioning for launching channels, who gets on, who gets off. It's very important that we believe that this service be part of the menu that you put forward for Category 1 because I fear that if it is not part of that menu, it will have a more difficult time getting on.
23939 I think it will get on in the fullness of time, but the amount of programming won't be there, the commitment to the independent production sector won't be there, and I think that many Canadians who are moving into this area, it's interested that the people who are most likely to take up digital service as the early adaptors are the same people who are interesting in improving their lives.
23940 So we wish you well in your deliberations. It's not going to be a piece of cake. Please exercise all of your wisdom --
--- Laughter / Rires
23941 Merci beaucoup. I hope you have a wonderful weekend. I hope the weather is good in Ottawa. I know what has been going on. The forecast says it's going to be beautiful on Monday when you are back here again.
23942 THE CHAIRPERSON: Thank you, Mr. Fraser and your team, especially for being so patient and staying with us on a Friday night.
23943 I hope you have enjoyed this truly Canadian regulatory experience.
--- Laughter / Rires
23944 And don't ever let anyone tell you that our Canadian federal civil servants don't work hard.
--- Laughter / Rires
23945 MS SHOYAN: I actually have great respect for the process. It has been an education.
23946 Thank you.
23947 THE CHAIRPERSON: Have a safe trip home all of you and we will see you, or some of you again, in the next phases.
23948 MR. FRASER: Pretty soon.
23949 THE CHAIRPERSON: Thank you again. Have a nice weekend.
23950 This will be the end of our business for today. We will resume at 8:30 on Monday morning.
23951 Nous reprendrons à 8 h 30 lundi matin.
--- Whereupon the hearing adjourned at 1820, to resume
on Monday, August 28, 2000 at 0830 / L'audience
est adjournée à 1820, pour reprendre le lundi
28 août 2000 à 0830