ARCHIVED -  Transcript - Hull, QC - 2000/09/06

HELD AT: TENUE À:

Conference Centre Centre de Conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

September 6, 2000 le 6 septembre 2000

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

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

du Conseil

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 / Gérant

de l'audience

Carol Bénard Secretary / Secrétaire

Alastair Stewart Legal Counsel /

conseiller juridique

Peter McCallum Legal Counsel /

conseiller juridique

HELD AT: TENUE À:

Conference Centre Centre de Conférences

Outaouais Room Salle Outaouais

Hull, Quebec Hull (Québec)

September 6, 2000 le 6 septembre 2000

PAGE

PHASE IV

RÉPLIQUE PAR / REPLY BY

Diffusion Quebecor Inc. 4925

Les Chaînes Télé Astral Inc. 4940

Groupe TVA Inc. (French language) 4953

Groupe TVA Inc. (English language) 4976

Levfam Holdings Inc. 4985

CHUM Limited 5000

BCE Media Inc. 5020

CTV Inc. 5031

Rogers Broadcasting Limited (OBCI/SDEC) 5061

Alliance Atlantis Broadcasting Inc. 5076

PHASE I - PAY-PER-VIEW/VIDEO-ON-DEMAND

GENERAL PRESENTATION BY / PRÉSENTATION GÉNÉRALE PAR

Cogeco Cable Canada Inc./

Rogers Cable Inc./

Videon Cablesystems Inc. 5096

PRÉSENTATION PAR / PRESENTATION BY

Cogeco Cable Canada Inc. 5118

Rogers Cable Inc. 5182

Video Cablesystems Inc. 5241

Corus Entertainment/On-Demand Inc. (OBCI) 5282

Hull, Quebec / Hull (Québec)

--- Upon resuming on Wednesday, September 6, 2000

at 0815 / L'audience reprend le mercredi

6 septembre 2000 à 0815

32628 THE CHAIRPERSON: Good morning and welcome to our hearing.

32629 Bonjour et nous vous souhaitons la bienvenue à notre audience.

32630 Nous nous excusons d'être un peu en retard ce matin, mais je suppose que vous avez eu le temps de prendre une tasse de café de plus.

32631 Good morning and we apologize for the delay, but I am sure you could enjoy another cup of coffee as a result.

32632 Alors nous poursuivons avec la Phase IV.

32633 Madam Secretary, please.

32634 MS BÉNARD: Merci, Madame la Présidente.

32635 La prochaine présentation sera celle de Diffusion Quebecor Inc. Dix-huit minutes sont allouées.

RÉPLIQUE / REPLY

32636 M. GUIMOND: Madame la Présidente, Madame la Présidente du Conseil, madame et messieurs les Conseillers.

32637 Comme prévu dans l'avis d'audience publique 2009-5 du Conseil, nous nous emploierons, au cours des prochaines minutes, à vous faire part des commentaires que nous ont inspirés certaines interventions faites à l'égard des demandes de Diffusion Quebecor.

32638 Avant de débuter cette quatrième et dernière phase, permettez-moi de vous présenter les personnes qui m'accompagnent aujourd'hui. A mon extrême gauche, M. Mark Bradley, conseiller spécial de TQS pour le Canal Arc-en-ciel / The Rainbow Channel. M. Luc Doyon, vice-président à la programmation de TQS et à ma droite, M. Denis Rozon, vice-président, finances de TQS.

32639 Après avoir formulé quelques remarques d'ordre général, nous commenterons la prise de position de Les Chaînes Télé Astral contre Téléservice, Canal F et Canal Nature puis celles des groupes CHUM Limited et Levfam Holdings contre Arc-en-ciel / Rainbow.

32640 Mais d'abord et avant tout, je tiens à remercier chaleureusement toutes les personnes et organisations qui ont appuyé nos demandes.

32641 Comme une multitude de foyers francophones ne possèdent pas présentement de décodeurs numériques, il est acquis que le déploiement de la télévision numérique s'échelonnera sur une période qui se prolongera bien au-delà du 1^er septembre 2001 et qu'il se fera de façon progressive.

32642 Cependant, comme la longueur de cette période est difficile à prévoir, les titulaires de licences d'exploitation d'entreprises de télévision spécialisée numérique devront disposer de ressources financières considérables pour la traverser.

32643 A cet égard, la capacité financière de Quebecor, une société de communication d'envergure mondiale et un des chefs de file nord-américains des communications constitue un atout de taille, et ce d'autant plus qu'elle lui permettra de jouer un rôle de premier plan dans le nouvel univers télévisuel numérique.

32644 Cette période névralgique constitue aussi un défit pour les télédiffuseurs qui devront faire preuve de beaucoup de créativité afin de mettre en ondes des contenus de très grande qualité et susceptibles d'inciter les téléspectateurs à acquérir un décodeur afin de s'abonner aux services spécialisés numériques.

32645 Capter l'attention des téléspectateurs, stimuler leur curiosité, les convaincre de l'intérêt d'adopter la technologie numérique, leur offrir la possibilité de le faire moyennant des frais abordables et maintenir une programmation de qualité sera un défi exigeant qui nécessitera entre autres des efforts de marketing considérables.

32646 Forte d'une expertise incomparable et de multiples réussites remarquables au cours des trois dernières années, TQS possède tous les atouts humains et techniques pour relever avec brio un tel défi.

32647 Depuis trois ans maintenant, TQS démontre sa capacité de faire une télévision différente, captivante, intéressante et performante, et ce à des coûts inférieurs.

32648 Comme nous l'avons mentionné lors de la présentation de nos demandes, la convergence des médias et des contenus est une réalité quotidienne chez Quebecor.

32649 Outre les synergies que permettront ses nombreux quotidiens, journaux et magazines, de même que sa chaîne de télévision généraliste, la vaste expertise de Quebecor dans le secteur des cybermédias permet d'affirmer qu'elle est la mieux outillée pour relever avec succès le défi de l'interactivité.

32650 Or, tous en conviennent, l'interactivité constituera l'un des principaux défis que devront relever les producteurs de contenus destinés à la télévision numérique.

32651 A cet effet, la présence de filiales comme Nurun, le chef de file de l'intégration Web au Canada et en Europe, ou comme Canoë, le plus important portail national bilingue au Canada, permettra au canal et aux canaux spécialisés de Diffusion Quebecor de se démarquer sur le plan de l'interactivité avec les téléspectateurs.

32652 J'invite maintenant Luc Doyon à vous soumettre nos commentaires quant aux affirmations de Télé Astral.

32653 M. DOYON: Dans son intervention, Télé Astral a affirmé qu'aucune requérante de canaux spécialisés numériques ne devrait avoir le droit d'être présente dans les genres où les titulaires de licences d'exploitation de canaux spécialisés analogiques diffusent.

32654 Tout en partageant l'opinion de Télé Astral, nous devons faire remarquer au Conseil que nous avons respecté ce critère.

32655 A cet égard, il est opportun de retourner aux textes des licences de Télé Astral et d'y relire la nature du service, pourtant précise, que le Conseil a définie pour chacun des canaux spécialisés analogiques.

32656 Ainsi, dans sa décision 96-613 relative à Canal Vie, le Conseil a clairement énoncé que la titulaire doit offrir des émissions d'information et de divertissement axées sur les habitudes de vie, les relations humaines, sociales et inter-personnelles, la santé physique et mentale et les activités de plein air, qu'elles soient individuelles ou familiales.

32657 A l'évidence, la nature du service de Canal Vie telle que définie par le Conseil ne fait pas spécifiquement référence aux femmes. Il est donc difficile, voire impossible, de soutenir que le service spécialisé numérique Canal F constitue une menace pour le service spécialisé analogique Canal Vie.

32658 De plus, dans sa décision 94-286, relative à Canal D, et dans sa décision 2000-139, relative à Canal Famille, le Conseil a défini la nature des services concernés sans faire aucunement mention des animaux.

32659 Une fois de plus, il est difficile, voire impossible, de soutenir que le service spécialisé numérique Canal Nature constitue une menace pour les services spécialisés analogiques Canal D et Canal Famille.

32660 En s'appuyant sur les définitions précises des natures des services concernés telles que définies par le Conseil, et non pas sur ce que Télé Astral a pris l'initiative de programmer à l'antenne de ses canaux spécialisés analogiques, une seule conclusion s'impose: ni Canal F, ni Canal Nature ne sont en concurrence avec Canal Vie, Canal D ou Canal Famille.

32661 Nous désirons porter à l'attention du Conseil que si nous suivons les critères qu'il a énoncé dans son appel public et que nous les appliquons au domaine de l'humour, l'octroi de la licence demandée dans ce créneau pose un problème.

32662 En effet, dans le marché francophone l'humour est beaucoup plus qu'un genre. Nous sommes d'avis que la présence d'un canal spécialisé numérique en humour serait bénéfique pour le système canadien de radiodiffusion et pour l'ensemble de l'industrie, sous réserve cependant du respect d'un équilibre qui permette à toutes les parties concernées de se concurrencer à l'intérieur de règles de jeu équitables.

32663 Aussi serions-nous favorables, si le Conseil le jugeait à propos, à la formation dans le marché francophone de l'humour d'un consortium similaire à celui mis sur pied pour Indigo.

32664 Ce consortium éviterait de créer un déséquilibre malsain dans l'industrie de l'humour car il ne permettrait pas de favoriser outrageusement la requérante et un producteur d'événements humoristiques qui détient un quasi-monopole dans le marché francophone.

32665 Réalistes et rigoureuses, toutes les demandes de licences que nous avons soumises au Conseil sont appuyées par des engagements sérieux quant au contenu canadien.

32666 En ce qui concerne les heures de diffusion, l'engagement de Téléservice est de diffuser 50 pour cent de contenu canadien dès la première année et de porter ce pourcentage à 70 à la septième année de licence. Celui de Canal F est de diffuser 45 pour cent de contenu canadien dès la première année et de porter ce pourcentage à 54 à la septième année de licence. Celui de Canal Nature est de diffuser 55 pour cent de contenu canadien le jour, pendant toute la journée de la licence. Le soir, ce pourcentage sera de 49 pour cent pendant les deux premières années de la licence et de 50 pour cent au cours des cinq dernières années.

32667 Quant aux investissements en programmation, près de 20 millions de dollars seront investis dans la programmation canadienne de Téléservice pendant la durée de la licence, soit une proportion de 65 pour cent des revenus tirés des abonnements et de la publicité selon la formule du Conseil; 7,5 millions de dollars seront investis dans la programmation canadienne de Canal F pendant la durée de la licence, soit une proportion de 26,7 pour cent des revenus tirés des abonnements et de la publicité selon la formule du Conseil; 9,1 millions de dollars seront investis dans la programmation canadienne de Canal Nature pendant la durée de la licence, soit une proportion de 26 pour cent des revenus tirés des abonnements et de la publicité selon la formule du Conseil.

32668 Au chapitre des heures de production canadienne originale, l'engagement de Téléservice se chiffre à 30 heures par semaine, soit 780 heures par année.

32669 Celui de Canal F totalise 14 heures par semaine, soit 364 heures par année; celui de Canal Nature est de sept heures par semaine, soit 182 heures par année.

32670 Il faut également noter que Téléservice ne sera d'aucune façon un fardeau supplémentaire pour le Fonds canadien de télévision, les catégories énumérées dans la demande de licence ne permettant pas de faire appel à l'aide financière du Fonds.

32671 Je cède maintenant la parole à Mark Bradley.

32672 M. BRADLEY: Arc-en-ciel / Rainbow a été conçue dans une optique d'aide, de soutien, d'information et de divertissement.

32673 Pour accomplir adéquatement sa mission auprès des personnes et des communautés gaies et lesbiennes du Canada sans exclusion, Arc-en-ciel / Rainbow s'est engagée à procéder à l'ouverture de centres de production distincts à Montréal, à Toronto et à Vancouver. Parmi les trois projets soumis au Conseil, il est le seul à avoir pris cet engagement concret qui vise à refléter adéquatement la diversité géographique des communautés gaies et lesbiennes du Canada.

32674 Contrairement aux deux autres projets, notre plan d'affaires concerne une licence francophone et anglophone puisque 85 pour cent de sa programmation pourrait être comprise par les personnes unilingues aussi bien de langue française que de langue anglaise, Arc-en-ciel / Rainbow se qualifie à la fois comme service francophone et comme service anglophone.

32675 En conséquence, nous croyons qu'il doit être offert à titre de service francophone dans les marchés francophones et à titre de service anglophone dans les marchés anglophones.

32676 Il faut également noter qu'Arc-en-ciel / Rainbow, contrairement aux deux autres projets, est le seul qui donne accès aux francophones du Canada à un canal gai dans la Catégorie 1.

32677 Indéniablement, Arc-en-ciel / Rainbow répond le mieux aux critères établis par le Conseil, notamment par sa définition claire et précise du matériel homosexuel et par sa vocation de services complémentaires qui apportera une contribution significative au système canadien de radiodiffusion.

32678 A l'instar des trois demandes dont mon collègue Luc Doyon vous a parlé, celle d'Arc-en-ciel / Rainbow est, elle aussi, appuyée par des engagements sérieux quant au contenu canadien.

32679 En ce qui concerne les heures de diffusion, l'engagement d'Arc-en-ciel / Rainbow est de diffuser 45,7 pour cent de contenu canadien dès la première année et de porter ce pourcentage à 50 pour cent dès la sixième année de la licence.

32680 Quant aux investissements en programmation, plus de 13 millions de dollars seront investis en programmation canadienne, soit une proportion de 19 pour cent des revenus tirés des abonnements et de la publicité, selon la formule du Conseil.

32681 Au chapitre des heures de production canadienne originale, l'engagement d'Arc-en-ciel / Rainbow se chiffre à 22,5 heures par semaine, soit 585 heures par année.

32682 Sur le plan du développement de concepts et de scénarios, aucune autre requérante ne s'est engagée à dépenser autant que nous, soit plus de 3,6 millions de dollars pendant sept ans.

32683 Force est de reconnaître également qu'Arc-en-ciel / Rainbow bénéficie d'un très grand nombre d'appuis de la communauté, provenant de partout au Canada, de l'atlantique au Pacifique, de Canadiens et de Canadiennes, anglophones et francophones, de tous les milieux de vie -- des ménagères, des fonctionnaires, des jeunes, des professionnels, des retraités.

32684 De plus, Arc-en-ciel / Rainbow a reçu le soutien du plus grand nombre d'organismes et d'associations gaies, en prise directe avec les milieux homosexuels canadiens.

32685 Je fais notamment référence à Gai Écoute, un service bénévole de "counselling" et de référence qui oeuvre au sein de la communauté gaie depuis de 20 ans déjà, ainsi qu'à la Fondation BBCM de Montréal.

32686 Je vous remercie.

32687 M. GUIMOND: En conclusion, il faut rappeler que l'équilibre peut être une condition sine qua non de la progression, de la force et du rayonnement d'un système comme le système canadien de radiodiffusion.

32688 En pratique, tous les titulaires de licences d'exploitation d'entreprises de radiodiffusion doivent disposer des mêmes ressources pour remplir efficacement le mandat qu'ils se sont vu confier par le Conseil et pour assumer adéquatement les responsabilités qui leur incombent. Or, à l'évidence, les canaux spécialisés constituent l'une de ces ressources.

32689 À l'heure actuelle, dans le marché francophone, TQS est le seul réseau de télévision généraliste qui n'est pas titulaire de licences d'entreprise de programmation de télévision spécialisée.

32690 En conséquence, il est important qu'il y ait dans le marché francophone des canaux spécialisés d'autres joueurs que le réseau TVA, la Société Radio-Canada et Télé Astral.

32691 Nous soumettons respectueusement aux membres du Conseil que les demandes que nous lui avons soumises satisfont à ses critères et qu'elles méritent donc d'être agréées.

32692 Et puisque la réalité numérique interpellera les capacités d'imagination, d'audace et d'innovation de ceux qui évolueront dans ce nouvel univers, l'équipe Quebecor-TQS a la conviction profonde de pouvoir y jouer un rôle positif et significatif, et de répondre en tout temps aux attentes du Conseil.

32693 Je vous remercie de votre attention.

32694 Avant de terminer, à la suite de cette réplique, je voudrais prendre quelques secondes pour répondre à la question que Madame la Présidente nous a adressée à la suite de notre intervention.

32695 En effet, le 29 août dernier, Madame la Présidente nous a demandé de calculer le tarif qui serait exigible advenant le cas où Arc-en-ciel / Rainbow serait distribué l'intérieur d'un bouquet de services spécialisés numériques.

32696 Il faut d'abord rappeler que le plan d'affaires que nous avons élaboré pour Arc-en-ciel / Rainbow est fondé sur une distribution de services à la carte, un choix qui comporte certains éléments de risque et qui entraîne des dépenses très importantes, en particulier sur le plan du marketing.

32697 Ceci étant dit, en nous appuyant sur un taux de pénétration similaire au taux moyen de l'ensemble des requérants, soit 30 pour cent, il appert qu'avec un tarif mensuel de 50 sous par abonnement, nous serions en mesure de maintenir tous les engagements que nous avons pris dans notre demande de licence Arc-en-ciel / Rainbow, c'est-à-dire pour le contenu canadien, le développement des émissions, la diffusion et le nombre d'heures de production originale.

32698 Je désire également informer le Conseil que nous avons remis à la Secrétaire du Conseil nos réponses aux demandes d'information supplémentaire qu'il a adressées à l'ensemble des requérantes.

32699 Merci.

32700 LA PRÉSIDENTE: Nous vous remercions, Monsieur Guimond et vos collègues.

32701 Voilà, vous avez la journée à vous maintenant.

32702 M. GUIMOND: Merci.

32703 LA PRÉSIDENTE: Madame la Secrétaire, s'il vous plaît.

32704 Mme BÉNARD: Merci, Madame la Présidente.

32705 La prochaine présentation sera celle des Les Chaînes Télé Astral Inc. Treize minutes sont allouées.

RÉPLIQUE / REPLY

32706 M. BUREAU: Mesdames les Présidente, madame et messieurs les Conseillers.

32707 Il y a quelques années, plusieurs d'entre nous avions l'habitude de célébrer le mois de Marie avec un rituel qui commençait assez tôt le matin par la messe.

32708 LA PRÉSIDENTE: C'est là que vous rencontriez les filles, c'est là où on rencontrait les garçons.

--- Rires / Laughter

32709 M. BUREAU: Alors pour nous autres ç'a été remplacé par le mois du CRTC avec un rituel qui commence aussi tôt le matin, et au lieu de gagner des indulgences, on essaie de gagner des licences.

--- Rires / Laughter

32710 M. BUREAU: Madame la Présidente, chez nous la délégation ça se fait vers le haut. Pierre Roy n'est pas ici ce matin. Il participe au "French Screening" à Saint-Tropez et je le remplace aujourd'hui. Il se trouve probablement en train d'acheter des émissions produites en français en France -- c'est les dernières années qu'on peut le faire -- mais en fait dans la version anglaise, au marché de Saint-Tropez, probablement à un lunch d'affaires sur un plage à Saint-Tropez. Nous on a choisi volontairement d'être à Hull.

--- Rires / Laughter

32711 M. BUREAU: Alors m'accompagnent aujourd'hui les volontaires qui sont autour de moi. A ma droit, Jocelyn Poirier, vice-président, développement stratégique et nouveaux médias de Publications Transcontinental. A ma gauche, Mme Sophie Émond, vice-présidente, affaires réglementaires et gouvernementales du Groupe de radiodiffusion Astral, et à sa gauche, Michel Houle, consultant.

32712 Notre réplique sera divisée en deux parties. La première portera sur les observations de portée générale faites par les requérantes ou les intervenants. La seconde réagir aux commentaires faits sur nos demandes spécifiques Canal Chez-moi et Zone Jeux. Évidemment, nos devoirs sont joints en annexe 1.

32713 Nos collègues de Astral Télé Réseaux ont déjà commenté les réactions qu'a suscitées notre proposition d'échéancier de lancement conjoint de tous les services de Catégorie 1, six mois après la signature d'ententes d'affiliation avec les principales entreprises de distribution dans chaque marché linguistique.

32714 Nous tenons à répéter que nous ne demandons pas au Conseil de s'immiscer dans les négociations commerciales entre les parties ni de fixer les tarifs ou de déterminer le nombre, la taille ou la composition des différents volets qui seront offerts au public. Pas du tout.

32715 Nous lui demandons tout simplement d'exiger des deux parties qu'elles achèvent ces négociations dans un délai raisonnable préalable au lancement. Nous joignons à l'annexe 2 le libellé complet de notre proposition.

32716 Nous notons que l'ACR et plusieurs requérantes individuelles ont donné leur appui à ce principe avec parfois des variantes de modalités.

32717 L'APFTQ a invité le Conseil à exiger de toutes les requérantes qui sont déjà titulaires de licences de service spécialisé qu'elles s'engagent à ne pas faire de programmation croisée entre leurs services.

32718 Les Chaînes Télé Astral ont toujours adopté cette philosophie et pris des engagements concrets en ce sens que nous avons réitérés devant vous lors de notre présentation orale.

32719 Pour nous c'est fondamental. Pour réussir dans le marché, chacune de nos chaînes doit offrir la programmation la plus distinctive et exclusive possible.

32720 Nous joignons donc à l'annexe 3 un engagement formel en ce sens que nous serions disposés à accepter comme condition de licence si le Conseil le juge approprié.

32721 M. HOULE: Ce qui nous amène à l'intervention de BCE Media.

32722 Soulignons d'abord que le test de concurrence proposé par M. Racine est un "non-test" puisqu'il stipule que par définition tout service étranger est non-concurrent avec un service canadien du seul fait qu'il traite ses thématiques dans une perspective non-canadienne.

32723 Par ailleurs, l'affirmation de M. Vinzia à l'effet que les ordres de grandeur sont comparables en ce qui a trait à la taille respective des marchés des chaînes franco-françaises et canadiennes de langue française est démentie par les faits. Nous joignons à l'annexe 4 les données chiffrées démontrant l'inexactitude de cette affirmation.

32724 Ajoutons que le respect par des services étrangers qui seraient concurrents, des dispositions prévues dans le nouveau cadre de politique du Conseil concernant la détention ou l'exercice de droits préférentiels ne résout en rien les problèmes que nous avons soulevés, et ce pour trois raisons.

32725 Premièrement, si ces dispositions devaient permettre effectivement aux services spécialisés canadiens d'acquérir parallèlement même la quasi-totalité de la programmation des services étrangers autorisés, la question se pose alors est: Quelle contribution ces services étrangers apporteront-ils à la diversité de la programmation offerte aux Canadiens? La réponse est évidement: aucune.

32726 Deuxièmement, la réalité est qu'une fois qu'un service étranger concurrent, comme Planète, par exemple, sera distribué au Canada, cette programmation perdrait toute valeur de différenciations pour les services canadiens. Nous ne voulons pas que nos services canadiens deviennent des canaux de reprise des services étrangers disponibles dans la même langue et le même marché.

32727 Pour les mêmes raisons que nous ne sommes pas intéressés à faire de la programmation croisée d'émissions canadiennes entre nos propres chaînes, nous sommes encore moins intéressés à faire de la programmation croisée d'émissions étrangères avec un service étranger qui serait distribué en même temps au Canada.

32728 Les services qui font de telles propositions savent très bien cela. Ils savent qu'une fois qu'ils seront implantés au Canada ils s'assureront de facto d'un premier choix sur les meilleures émissions internationales et de facto d'un contrôle renforcé sur la programmation en programmes, et ce en raison de leur plus grand pouvoir d'achat.

32729 En conséquence, les services canadiens devront se contenter d'une programmation étrangère de second ou de troisième choix.

32730 Troisième point. Le Conseil ne sera pas en mesure de vérifier si les engagements d'offres à prix non-préférentiel pris par des services étrangers seront ou non respectés.

32731 Comme vous le savez, Madame la Présidente, en Europe et en France, on assiste aux mêmes tendances lourdes en faveur de l'intégration verticale et de la propriété croisée, tendances qui soulèvent les mêmes préoccupations qu'ici.

32732 Canal Plus, qui est actionnaire de Planète, Muzzik, Paris Première, Game One, Canal J, TV Sport et Canal Jimmy, entre autres, vient d'ailleurs d'être condamné par les tribunaux français pour abus de position dominante, et ce précisément pour avoir utilisé sa position dominante de façon à empêcher ses concurrents d'avoir accès aux produits et en conserver l'exclusivité.

32733 Dans un univers de liens étroits et complexes entre entreprises de production, de distribution et de programmation, les possibilités sont nombreuses de hausser artificiellement à travers des ententes contractuelles entre parties liées la valeur du marché canadien de langue française, donc de rendre le prix des programmes inabordable pour des services canadiens de taille plus réduite.

32734 A moins donc de vouloir se lancer dans une micro-réglementation approfondie des relations commerciales entre les services étrangers et leurs filiales de production ou de distribution -- ce que le Conseil est réticent à faire au Canada entre entreprises canadiennes -- nous soumettons que le Conseil n'aura aucun moyen d'assurer le respect des engagements proposés par des services étrangers.

32735 Pour toutes ces raisons, nous demandons à nouveau au Conseil de maintenir sa politique actuelle en matière d'autorisation des services étrangers, une politique juste et équilibrée qui offre aux services étrangers de langue française qui, pour des raisons historiques qui leur sont propres, ont tardé à se manifester, les mêmes opportunités d'accéder au marché canadien que celles qui ont été et sont offertes aux services étrangers de langue anglaise.

32736 M. BUREAU: Groupe TVA a tenté d'insinuer qu'Astral appartient à l'univers analogique et n'a pas compris les enjeux du numérique. L'argument étonne.

32737 Alors que nous avons longuement insisté sur le fait que la distribution numérique allait permettre d'offrir nos services simultanément dans plusieurs volets -- certains très larges et inclusifs, d'autres linguistiques ou thématiques -- Groupe TVA, lui, a passé l'audience à parler du futur volet des services francophones au singulier, comme si nous étions toujours dans l'univers analogique.

32738 Alors que tous les partenaires de l'industrie sont conscients que la technologie permettant de mettre en place la véritable télévision interactive ne sera disponible avant quelques années, Groupe TVA nous fait grief de ne pas avoir placé l'interactivité au premier rang des critères de sélection.

32739 Nous aimerions rappeler à TVA que nous ne sommes pas devant le Conseil pour demander des licences de site Web ou de portails Internet. Nous sommes ici pour solliciter des licences de services de programmation d'émissions de télévision spécialisée qui seront distribués en mode numérique, des services qui devront entrer en ondes dès l'automne 2001, des services dont la programmation télévisuelle devra être de grande qualité et susciter d'entrée de jeu un fort intérêt auprès des téléspectateurs, des services qui, bien sûr, sauront tirer profit de l'univers numérique ambiant actuellement disponible comme l'Internet et dont les émissions seront d'emblée conçues pour s'adapter à la pleine interactivité qu'offriront d'ici quelques années les nouvelles générations de décodeurs numériques.

32740 C'est exactement ce que nous avons l'intention de faire, comme nous l'avons indiqué clairement dans notre demande écrite et lors de notre comparution, et nous nous sommes donnés les moyens de le faire.

32741 Mme ÉMOND: Rappelons à cet égard que Canal Chez-moi prévoit affecter 12 600 $ de l'heure à sa programmation originale canadienne, comparativement à 3400 $ pour Téléservice. Dans le cas de Zone Jeux, nous prévoyons affecter près de 9 000 $ de l'heure à la programmation originale canadienne comparativement à 1 600 $ de l'heure pour Game One.

32742 Quiconque a une expérience de la programmation sait très bien que les sommes prévues par nos concurrents sont dérisoires. Elles ne permettront d'offrir aux téléspectateurs d'ici un contenu qui soit, même de très loin, à la hauteur de leurs attentes et de ce à quoi ils sont habitués, et ce peu importe que ces émissions soient réalisées par un producteur affilié ou non-affilié.

32743 Game One soutient que les synergies avec la chaîne anglaise peuvent compenser pour cette lacune manifeste. Notre expérience nous démontre que si les deux chaînes de Game One respectent leur public respectif il n'y aura pas d'économies significatives de coûts de programmation.

32744 Si les émissions diffusées sur chacune des chaînes ont des animateurs différents, des invités et des reportages distincts, si la sélection des jeux est effectuée en fonction des disponibilités dans chaque marché et des intérêts de chaque public, si les interfaces de ces jeux sont dans la bonne langue, alors les économies seront négligeables et la programmation de la chaîne française devra être réalisée avec des budgets de l'ordre de 1 600 $ de l'heure. Elle sera donc de très bas de gamme.

32745 Le seul moyen de réaliser des économies substantielles c'est de faire fi des caractéristiques linguistiques et culturelles de chaque marché. Nous ne croyons pas au succès d'une telle formule.

32746 Tant Quebecor que TVA ont tenté de faire valoir dans leurs interventions qu'elles disposaient d'une plus grande expertise dans les thématiques abordées et que leurs concepts de chaîne étaient mieux conçus et pertinents que ceux que nous avons proposés, ce qui est particulièrement surprenant de la part de deux requérantes qui ont passé l'audience à modifier leur concept initial.

32747 Téléservice a proposé un concept peu adapté à la télévision spécialisée reposant essentiellement sur une émission unique d'une durée de trois heures, diffusée quatre fois par jour, regroupant l'ensemble de ses thématiques principales. Il a été forcé d'admettre en cours de route que certaines thématiques n'étaient pas pertinentes à son concept, que d'autres occupaient trop d'espace. Il a plus que doublé son engagement de dépenses de programmation canadienne par rapport à ce qu'il avait indiqué initialement.

32748 Quant à l'attrait des formules respectives de programmation de Canal Chez-moi et de Téléservice les sondages parlent d'eux-mêmes.

32749 Alors que 54 pour cent des foyers francophones s'intéressent à Canal Chez-moi, seulement 41 pour cent sont intéressés à la formule 100 pour cent "How to" de Téléservice, une différence considérable en faveur de Canal Chez-moi.

32750 Dans son intervention, Diffusion Quebecor a soutenu que Canal Chez-moi prévoyait, à l'instar de Téléservice, diffuser 50 pour cent de contenu canadien en l'an un. C'est inexact. Canal Chez-moi, en fait, s'est formellement engagé à diffuser au moins 60 pour cent de contenu canadien en journée et en soirée, et ce dès l'an un.

32751 Game One, pour sa part, a fait valoir que son tarif était plus abordable que celui de Zone Jeux mais elle a admis, du même souffle, que son plan d'affaires tel que déposé ne pouvait assurer la viabilité du service sur une base autonome et que le tarif identifié dans Game One français n'avait aucune valeur en soi étant totalement conditionnel aux décisions que rendra le Conseil par rapport à sa demande de langue anglaise. Cela devrait, selon nous, suffire à disqualifier ce projet.

32752 M. BUREAU: Si, contrairement à nos concurrents, nous n'avons pas eu besoin de modifier notre concept et notre plan d'affaires en cours d'audience c'est que nos équipes one une longue expérience en télévision spécialisée et que nos projets, peu nombreux, et soigneusement sélectionnés, reflétaient dès le départ cette expertise.

32753 Et nous ne disons pas cela pour tenter de limiter la concurrence ou de bloquer l'entrée de nouveaux joueurs. Rappelons, au contraire, que c'est à travers des partenariats avec Les Chaînes Télé Astral qu'Alliance Atlantis, l'an dernier, et que Publications Transcontinental, cette année, sont venus demander au Conseil l'autorisation d'apporter du sang neuf dans le système de radiodiffusion de langue française.

32754 Nous avons, par ailleurs, insisté à plusieurs reprises auprès du Conseil pour qu'il octroie au moins cinq licences de services de Catégorie 1 de langue française, et donc pour qu'il accorde des licences à nos concurrents.

32755 Nous croyons que le choix entre deux demandes directement concurrentes devrait se faire sur la base de leurs mérites respectifs et de leur pouvoir d'attrait auprès du public. Selon nous, ce pouvoir d'attrait dépend largement de la qualité de la programmation qui sera offerte, et tout particulièrement de la qualité de la programmation originale canadienne en première diffusion.

32756 Merci à vous, Madame la Présidente, aux membres de votre panel et à votre personnel, pour avoir réussi de faire de cette méga audience une entreprise disciplinée mais ouverte où chacun a eu l'opportunité de faire valoir ses idées et le mérite de ses demandes.

32757 Merci de votre attention, de votre patience et de votre sens de l'humour sain et réconfortant.

32758 LA PRÉSIDENTE: Nous vous remercions.

32759 Madame la Secrétaire, s'il vous plaît.

32760 Mme BÉNARD: Merci, Madame la Présidente.

32761 La prochaine présentation sera celle du Groupe TVA pour les services de langue française. Dix-huit minutes sont allouées.

RÉPLIQUE / REPLY

32762 LA PRÉSIDENTE: Alors si je comprends bien, vous allez faire la réplique pour vos demandes en français, en anglais et aussi celles TVA/Global qui ont été entendues séparément.

32763 Alors il s'agira à ce moment-là d'une quarantaine de minutes.

32764 M. LAMARRE: Oui, et ce qu'on a fait, Madame, par...

32765 LA PRÉSIDENTE: Au cas où le métronome explose!

32766 M. LAMARRE: Ce qu'on a fait, Madame la Présidente, on a tenté de ne pas répéter les mêmes commentaires évidement dans les deux langues par souci d'efficacité. Alors ce qui sera dit dans une langue sera vrai dans l'autre langue également pour notre position.

32767 LA PRÉSIDENTE: Monsieur Lamarre, vous venez de gagner trois indulgences.

--- Rires / Laughter

32768 M. LAMARRE: Merci, Madame la Présidente.

32769 Alors je suis accompagné aujourd'hui à ma droite de Serge Bellerose, directeur général de LCN et du Réseau National, et à ma gauche immédiate, de Francine Côté, notre avocate et de Jacques Dorion, président de Carat Canada.

32770 Notre réplique aujourd'hui comporte trois volets, de façon à répondre aux attentes du Conseil dans cette dernière phase de la procédure.

32771 Premièrement, notre réponse aux interventions contre nos demandes Game One, EXIT et 13^e Rue. Ensuite, nous répondrons aux questions soulevées par le Conseil quant à nos priorités. En dernier lieu, nos observations quant aux discussions qui ont eu cours depuis le 14 août sur les enjeux de cette audition.

32772 Je cède la parole à Serge.

32773 M. BELLEROSE: Merci, Daniel.

32774 Premièrement, notre réplique à l'intervention de Les Chaînes Télé Astral à l'encontre de notre demande Game One.

32775 Comme le mentionne l'intervenante, notre stratégie pour Game One diffère sensiblement de celle proposée par l'intervenante pour Zone Jeux. Le concept de Game One s'appuie sur la synergie des chaînes de langue anglaise et de langue française, d'où un tarif de 0,60 $ par mois, parmi les moins élevés de toutes les chaînes de langue française qui vous sont proposées.

32776 Pour répondre à Astral qui allègue que le rapport qualité/prix de Game One serait inférieur à celui de Zone Jeux, nous rappellerons quatre facteurs qui vont permettre à Game One d'offrir un service de grande qualité avec un tarif très réduit par rapport à celui de Zone Jeux.

32777 Game One produira ses émissions à l'interne, ce qui lui permet de réduire considérablement ses coûts, la tradition de qualité des émissions canadiennes de TVA étant bien établie.

32778 La chaîne de langue française bénéficiera de la synergie de la chaîne anglaise, notamment en matière de production et de recherche.

32779 Game One tirera avantage des termes exceptionnels de l'entente conclue avec Game One France à plusieurs titres. Notre partenaire fournit gratuitement à Game One Canada l'accès à ses contenus et à ses émissions, ce qui a pour effet de réduire le coût horaire moyen de toutes les émissions proposées par Game One. Game One France ouvre aussi une fenêtre de diffusion européenne pour des émissions canadiennes et partage son expérience précieuse sur une plate-forme numérique en termes de programmation, d'interactivité et de marketing.

32780 En fait, Game One propose 876 heures de production originale canadienne alors que Zone Jeux en propose seulement 338, soit deux fois moins que Game One, pour un tarif par ailleurs deux fois et demie moins élevé que Zone Jeux. Le rapport qualité/prix favorise donc Game One plutôt que Zone Jeux.

32781 Le Conseil nous a aussi demandé en Phase II ce qu'il adviendrait du service de langue française Game One si le service Game One n'était pas lancé dans le marché anglophone. Dans cette éventualité, il nous faudrait porter le tarif de gros à 1,35 $ par mois. Nous sommes en mesure de déposer aujourd'hui notre plan d'affaires pour le seul service de langue française si le Conseil le juge opportun.

32782 Nous répondrons maintenant aux interventions de MusiquePlus et Perfecto, la Chaîne quant à notre service EXIT. Ces interventions soulèvent essentiellement trois points: MusiquePlus plaide l'exclusivité de plusieurs genres d'émissions proposés par EXIT et l'offre existante de produits semblables.

32783 Deuxièmement, EXIT est un service hybride, selon les termes de l'intervenante, par rapport à celui proposé par Perfecto, la Chaîne, et troisièmement, le caractère optimiste du plan d'affaires produit par EXIT.

32784 En premier lieu, MusiquePlus se plaint que les genres d'émissions proposés par EXIT sont semblables à ceux de MusiquePlus et MusiMax, et je cite:

32785 "Ainsi, les biographies, les magazines culturels, les profils d'artistes, les entrevues, les événements et galas représentent la majeure partie de leur grille du volet portraits et célébrités de leur demande, tous des genres d'émissions qui sont, outre les vidéoclips, la pierre angulaire de nos deux services".

32786 La position de MusiquePlus fait état d'une vision bien singulière de ce qui constitue de la concurrence directe. En résumant la position de MusiquePlus sur cette question, il faut conclure, selon eux, qu'aucun nouveau service numérique ne devrait être autorisé s'il offre un même genre d'émissions que ceux offerts par MusiquePlus, et cela même si la thématique est différente, même si le public-cible est différent. A moins, faut-il entendre que ces mêmes genres d'émissions soient offerts par d'autres services appartenant aux mêmes titulaires, selon la théorie de la parenté des services mise de l'avant par l'Association des services spécialisés et fortement soutenue par Astral et MusiquePlus.

32787 Nous pensons que cette approche de services apparentés est dangereuse à plus d'un point de vue. Tout d'abord, elle peut être la source d'une certaine paresse créatrice, la même recette étant possiblement déclinée sur plusieurs services avec le risque de programmation croisée.

32788 Elle peut ensuite nuire à l'objectif de diversité essentiel au succès du déploiement du numérique. La position des tenants de cette théorie des services apparentés est de répéter la recette dans l'univers numérique. Nous pensons que cette recette n'est pas appropriée dans le monde numérique, compte tenu de ses caractéristiques tout à fait différentes du monde analogique.

32789 MusiquePlus fait également valoir que le volet information et actualité artistique de EXIT est déjà amplement traité par les services existants. A cet effet, nous aimerions rappeler qu'aucun autre service existant ne s'est objecté à notre demande et que notre étude de marché est claire. Nous avons démontré que l'appétit des téléspectateurs pour ce genre d'informations est insatiable.

32790 La thématique hybride de EXIT, selon les termes de MusiquePlus, tient compte des caractéristiques du marché francophone selon nos recherches. Elle permet d'envisager, au terme de la licence, une part de marché de 0,5 pour cent, contrairement à Perfecto qui, avec une part marché de 0,02 pour cent, propose un service non viable qui affecterait négativement le succès du bouquet numérique.

32791 Enfin, le caractère trop optimiste de notre plan d'affaires selon MusiquePlus. Essentiellement, dans son intervention en Phase II, MusiquePlus a soulevé deux points. A son avis, nous prévoyons une progression trop rapide de l'univers numérique dans le marché francophone et les revenus publicitaires prévus au plan d'affaires de la chaîne EXIT sont trop élevés.

32792 Parlons d'abord de l'évolution de l'univers numérique dans le marché francophone. Pour établir nos projections, nous avons analysé les données communiquées par l'ACTC et Bell ExpressVu le printemps dernier. Il nous est vite apparu que ces données, bien qu'utiles, ne suffiraient pas à établir des projections éclairées. L'ACTC faisait preuve d'une extrême prudence en fournissant des prévisions qui se situaient dans une fourchette allant du simple au double. Nous avons donc consulté individuellement les principaux distributeurs -- Cogeco, Vidéotron, StarChoice, Bell ExpressVu et Look -- ainsi que quelques plus petits câblodistributeurs, et c'est sur la base des informations fournies par ces distributeurs que nous avons complété nos projections.

32793 Il y a un an, il y avait un peu moins de 100 000 décodeurs numériques dans le marché francophone. Un relevé effectué la semaine dernière indique qu'il y en a présentement 280 000. Il y en aura plus de 500 000 l'automne prochain -- nous en sommes convaincus -- et le lancement de nouveaux services va contribuer à accéder le déploiement des décodeurs.

32794 Notre prévision qui situe le nombre de décodeurs numériques à un million à l'an quatre de nos plans d'affaires est tout à fait réaliste. Mais elle traduit aussi notre conviction, tout comme celle des distributeurs, que le numérique est la voie de l'avenir et que l'offre de services attrayants est essentielle à l'accélération du déploiement des décodeurs numériques.

32795 Par contre, nous avons opté pour une certaine prudence quant aux taux de pénétration de nos services dans ce nouvel univers numérique. Nous prévoyons une pénétration de 30 pour cent au départ augmentant graduellement pour atteindre 50 pour cent au terme de la licence.

32796 Ainsi, à l'automne 2004, nous estimons qu'un peu plus de 402 000 foyers seront abonnés à EXIT. Or Les Chaînes Télé Astral, actionnaire de MusiquePlus, prévoit pour sa part que le nombre d'abonnés à ses chaînes Canal Chez-moi et Zone Jeux sera de 391 000, seulement 11 000 de moins que EXIT. Ces données tendent donc à démonter le caractère raisonnable de nos projections.

32797 Toutefois, il est vrai que les prévisions d'abonnement à Perfecto, la Chaîne sont plus faibles -- un peu plus de 333 000 abonnés à l'automne 2004. Ces projections plus modestes sont sans doute dictées par une sage prudence, compte tenu de la thématique très pointue de Perfecto, de sa part de marché très réduite et de l'absence d'étude de marché ou sondage à l'appui de sa démarche.

32798 Parlons maintenant des revenus publicitaires. Normalement, une part de marché génère entre 3,5 et 4 millions de dollars en recettes publicitaires à la télé francophone au Québec. En 1998-99, les revenus publicitaires de MusiquePlus se sont élevés à plus de 7 millions et demi de dollars. Sa part de marché dans le marché francophone était alors de 0,7 pour cent chez les 2+ et de 0,5 pour cent chez les 18+.

32799 Prenons un autre cas que nous connaissons bien, celui de LCN. Sa part de marché se situe à un peu plus de 1 pour cent. Or ses recettes publicitaires pour l'année qui vient de se terminer s'élèvent à 4 millions de dollars. Dans le cas d'EXIT, nous prévoyons une part de marché de 0,2 pour cent lors de sa première année d'opération.

32800 Dans ce contexte, les prévisions de recettes publicitaires qui se situent à 717 000 $ pour la première année nous apparaissent tout à fait réalistes. Notre plan d'affaires nous apparaît donc crédible et sérieux contrairement à celui de Perfecto, la Chaîne, qui a dû réviser le calcul de ses revenus à la demande du Conseil.

32801 Le Conseil nous a aussi demandé de clarifier notre position sur les catégorie d'émissions 10 et 7(c) et 7(d) proposées par EXIT. Nous prenons l'engagement aujourd'hui de limiter à 15 pour cent de la grille d'EXIT l'utilisation de la Catégorie 10, jeux questionnaires, et de limiter à 15 pour cent de la grille d'EXIT l'utilisation de la Catégorie 7(c) et 7(d).

32802 J'aborderai maintenant l'opposition de Les Chaînes Télé Astral contre le service 13^e Rue.

32803 Astral prétend que la programmation de 13^e Rue entre en concurrence directe avec trois des services qu'elle opère, soit Canal D, Canal Z et Séries+.

32804 Plus précisément, l'intervenante invoque un chevauchement de la programmation de 13^e Rue et de Séries+ de l'ordre de 65 pour cent durant le jour et de 76 pour cent en soirée. Ces allégations ne concordent aucunement avec l'étude de Carat Expert produite avec notre demande.

32805 Nous désirons en outre faire deux observations pour distinguer les deux services.

32806 Premièrement, le mandat de Séries+ est d'offrir un service d'émissions dramatiques en deux volets: les émissions canadiennes que les téléspectateurs n'ont pas revues depuis de nombreuses années et les émissions internationales qui n'ont majoritairement pas été vues à la télévision canadienne, dont un maximum de 20 pour cent devrait provenir de source américaine.

32807 Le mandat de 13^e Rue vise une thématique bien circonscrite: le mystère et le suspense. Il n'y a donc pas de chevauchement entre les deux. Deuxièmement, le public-cible de 13^e Rue vise les 12-34 alors que celui de Séries+ vise les 25 à 54 ans. En fait, 76 pour cent de l'auditoire de Séries+ est constitué de 35 ans et plus, dont 59 pour cent des femmes.

32808 Dans le cas de Canal Z, son mandat ne recoupe celui de 13^e Rue que par le sous-thème de la science fiction. Faut-il rappeler que la grille de programmation proposée par 13^e Rue comporte à peine 12 pour cent d'émissions qui portent sur la science fiction? L'opposition injustifiée d'Astral qui allègue qu'au moins 90 pour cent de la programmation proposée par 13^e Rue sera similaire, thème pour thème, catégorie d'émissions pour catégorie d'émissions, ne tient pas la route.

32809 Il n'est pas réaliste de fermer la porte aux services numériques sous prétexte que des services analogiques offrent déjà des émissions de science fiction ou des séries dramatiques, de suspense ou des séries cultes qui, à l'occasion, portent sur le mystère et le suspense. 13^e Rue propose un service très ciblé qui a fait ses preuves dans plusieurs pays, dont la France, sur la plate-forme numérique avec un public-cible bien défini.

32810 Rappelons en conclusion que 60 pour cent des répondants dans notre sondage se sont déclarés intéressés par le mystère et le suspense et que 13^e Rue est parmi les services les plus populaires dans notre sondage se classant en deuxième position.

32811 Pour ces raisons, nous pensons que l'intervention de Astral contre 13^e Rue doit être rejetée.

32812 Daniel Lamarre va maintenant aborder nos réponses aux autres questions soulevées par le Conseil en cours d'audition.

32813 M. LAMARRE: Le Conseil nous demande à quels deux ou trois de nos projets de Catégorie 1 devrait-il donner priorité et pourquoi.

32814 Comme nous l'avons déjà mentionné, nous sommes d'avis que tous les projets présentés par TVA sont attrayants et équilibrés pour composer un bouquet numérique qui stimulera les consommateurs à s'abonner au mode numérique. Nos partenaires sont des nouveaux entrants dans le système tout en étant expérimentés dans les thématiques proposées et apportent une contribution originale à la créativité et à la pertinence des émissions offertes.

32815 Si nous devons choisir parmi nos projets, nous priorisons les chaînes Télé Ha! Ha!, LCN Affaires et Game One pour les raisons suivantes. La demande pour une chaîne humour est établie depuis longtemps.

32816 Dans tous les sondages, la chaîne humour est la plus populaire. Rappelons que le Canada anglais compte déjà une chaîne humour alors que le Québec a toujours été un pionnier dans cette matière avec le Festival Juste pour Rire, le Gala des Olivier, l'École nationale du rire.

32817 En outre, la qualité de la proposition et sa contribution à la diversité et à l'enrichissement du système de radiodiffusion de langue française sont inégalées dans les demandes de langue française qui vous ont été présentées: 50 pour cent de contenu canadien pour toute la licence; 40 pour cent de dépenses en programmation canadienne, soit une injection de plus de 45 millions de dollars sur sept ans; 20 millions sur sept ans consacrés à la production indépendante; un effet structurant sur toute l'industrie de l'humour au Québec; une interaction entre la chaîne et son public grâce à la mise en place d'un site Internet et d'une infrastructure favorisant l'interaction des téléspectateurs. La qualité du partenariat est garante du succès de cette chaîne avec Festival Juste pour Rire, BCE Media et TVA.

32818 Dans un bouquet numérique, il est incontestable que Télé Ha! Ha! sera la locomotive de choix pour accélérer le déploiement des décodeurs numériques. Ce service s'adresse à toute la famille. Il est un élément essentiel pour un nouveau bouquet numérique. Enfin, il est utile de rappeler qu'aucune intervention n'a d'ailleurs été faite à l'encontre de Télé Ha! Ha!

32819 LCN Affaires est un service de niche qui compte offrir aux Canadiens de langue française une information financière de qualité, vulgarisée, pertinente, pratique et efficace. Le besoin d'une telle chaîne est établi par diverses considérations: l'augmentation du nombre de publications financières et le fait qu'il y a plus de ces types de publications par capita au Québec que dans le reste du Canada.

32820 Le fait que les Québécois branchés à Internet consultent davantage les sites de nature financière est un autre indicateur du besoin. Notre sondage indique que 42 pour cent des répondants sont intéressés à une chaîne affaires, ce qui nous apparaît un résultat concluant pour un sujet aussi spécialisé.

32821 En dépit de la grande sensibilité des francophones aux questions économiques, il n'existe toujours pas de chaîne consacrée aux affaires alors que le Canada anglais compte déjà ROBtv.

32822 LCN Affaires est la proposition qui offre le contenu canadien le plus élevé parmi toutes les demandes de langue française, soit 85 pour cent sur toute la durée de la licence et envisage de consacrer plus de 35 millions de dollars à la programmation canadienne sur sept ans. LCN Affaires compte créer au moins 40 nouveaux emplois.

32823 De plus, ce service se prête particulièrement bien à l'interactivité par l'offre d'un site Web et d'un carrefour de passerelles vers des sites spécialisés pour répondre aux diverses interrogations et demandes de services des abonnés. La qualité du partenariat de Publications Transcontinental, BCE Media et Groupe TVA est garante de la qualité de cette chaîne.

32824 La chaîne LCN Affaires est un service taillé sur mesure pour les francophones et représente une autre valeur sûre dans un bouquet numérique. Elle se démarque totalement de l'offre analogique. Aucune autre intervention n'a été soumise contre LCN Affaires si ce n'est celle de ROBtv, qui propose une chaîne de langue française de Catégorie 2, qui reproduirait substantiellement la programmation de la chaîne de langue anglaise.

32825 Enfin, la chaîne Game One qui porte sur les jeux vidéo s'adresse aux jeunes de 12 à 24 ans qui sont des adeptes naturels de l'ordinateur, de l'Internet et de toutes les applications disponibles sur les multiples plates-formes technologiques. Le défi de Game One sera de fédérer ces jeunes en communautés virtuelles et de fusionner la télévision à l'interactivité par le truchement de ces diverses plates-formes technologiques disponibles.

32826 Game One est un projet innovateur à un tarif qui compte parmi les plus bas de toutes les demandes de langue française. Compte tenu que son public-cible ne prend pas la décision de s'abonner au mode numérique, il nous apparaissait important de structurer le projet Game One de manière à le rendre très abordable.

32827 C'est le seul service proposé de Catégorie 1 qui vise les jeunes dont la fidélité à la télévision est beaucoup plus volatile. Le système canadien de radiodiffusion doit, selon nous, intégrer la dimension des jeux vidéo dans son offre s'il veut demeurer compétitif avec l'offre de divertissement et d'information offerte par Internet et les nouveaux médias. C'est aussi la position exprimée par le distributeur Bell ExpressVu.

32828 Le Conseil nous a demandé d'indiquer pour chacun des projets de Catégorie 1 que nous proposons, quel autre projet de Catégorie 1 d'un autre requérant qui recevrait aussi une licence remettrait en question la faisabilité de notre plan d'affaires.

32829 A cet effet, nous avons identifié la demande de Zone Jeux présentée par Les Chaînes Télé Astral qui est en concurrence directe avec notre projet Game One.

32830 Dans l'hypothèse où notre demande EXIT pour un service portant sur l'actualité artistique, la mode, la beauté et le design serait autorisée, nous pensons qu'il ne serait pas souhaitable d'autoriser la demande de Perfecto, la Chaîne présentée par MusiquePlus pour les raisons invoquées dans notre intervention et auxquelles nous avons référé préalablement aujourd'hui.

32831 Combien de projets de Catégorie 1 le Conseil devrait-i autoriser? Cette autre question du Conseil nous inspire les observations suivantes.

32832 En langue française. Pour convaincre les consommateurs de s'abonner au numérique, le Conseil doit autoriser un nombre suffisant de services pour composer un bouquet attrayant et équilibré. Ce bouquet devrait comporter au moins cinq services et ces services devraient viser les publics-cible variés. A titre d'exemples, des services qui visent la famille, les jeunes, les femmes, les hommes. Si le bouquet comporte un ombre insuffisant de services, il est à craindre que l'offre numérique ne sera pas bien reçue par les consommateurs qui n'y trouveront pas de valeur ajoutée par rapport à l'offre analogique.

32833 En langue anglaise. Pour les mêmes raisons que nous venons d'exprimer en tenant compte qu'il existe un beaucoup plus grand nombre de services spécialisés de langue anglaise analogiques, il nous apparaît souhaitable d'autoriser au moins une douzaine de services qui pourraient être offerts en deux bouquets de six services ou un seul grand bouquet de 12 services.

32834 Nous aborderons maintenant la formule relative aux dépenses de programmation canadienne.

32835 Tel que déjà mentionné dans nos représentations écrites et orales, nous pensons que pour un premier terme de licences, le Conseil devrait offrir la flexibilité nécessaire aux titulaires compte tenu des risques inhérents à l'univers numérique, risques encore plus élevés dans le marché francophone.

32836 TVA a depuis longtemps investi la majorité de son budget de programmation en programmation canadienne. Nonobstant ce qui précède, si le Conseil désire imposer une formule, celle-ci doit reconnaître l'effort sans précédent qui sera consenti par la majorité des titulaires au cours des premières années de licence en matière de dépenses de programmation canadienne.

32837 Dans de nombreux cas -- et cela se vérifie dans toutes les demandes où TVA est partie intéressée -- l'investissement en dépenses de programmation canadienne excède largement les revenus au cours des premières années. Quelle que soit la formule, il va sans dire que le bouquet numérique sera crucial et que la qualité optimale doit être au rendez-vous le jour un.

32838 La formule préconisée par le Conseil au cours de cette audition offre davantage de flexibilité que la formule traditionnelle et nous sommes bien prêts à l'accepter. Cette formule prévoit que le pourcentage de nos recettes brutes, incluant les revenus d'abonnement et les revenus publicitaires, qui serait consacré aux dépenses de programmation canadienne serait calculé en divisant les dépenses cumulatives de programmation canadienne par les revenus cumulatifs sur sept ans en appliquant un facteur de flexibilité de 10 pour cent sur chaque année de la licence à compter de l'an deux.

32839 Nous passerons maintenant à nos observations plus générales à l'issue de cette audition. Un consensus se dégage selon nous: c'est la reconnaissance du rôle de premier plan du contenu canadien pour offrir des services numériques de qualité, attrayants et distincts. Nous avons, à TVA, bénéficié depuis longtemps des fruits de cette recette. L'aptitude à saisir les opportunités qu'offre la technologie numérique est un nouvel ingrédient essentiel pour convaincre les téléspectateurs d'une valeur ajoutée grâce à l'interactivité. Chacun de nos projets est porteur d'initiatives en ce sens pour inciter le téléspectateur à devenir proactif et exercer ses choix.

32840 Enfin, l'effort de mise en marché et de marketing avec les distributeurs sera également déterminant pour le lancement des nouveaux bouquets numériques. La composition de ces bouquets devrait offrir un choix varié pour satisfaire les goûts et intérêts des différents membres de la famille, comme notre volet TVA.

32841 Notre développement dans notre marché francophone, aussi bien que dans le marché de langue anglaise, passe naturellement par l'offre de services spécialisés numériques. Il s'agit d'une occasion historique pour TVA qui peut définir pour longtemps l'évolution de notre groupe dans le marché canadien. La technologie numérique permet de réinventer la télévision par l'arrivée de nouveaux joueurs, par l'interactivité avec les téléspectateurs et la multiplication des choix.

32842 Nous voulons participer activement à cette transformation. Nous avons le personnel, les ressources, la volonté et certains succès sur lesquels nous pouvons bâtir et offrir une contribution encore plus dynamique au système canadien de radiodiffusion.

32843 Je conclus en remerciant enfin tous ceux et celles qui ont supporté et qui ont contribué à la présentation de nos projets au cours de cette audition.

32844 Merci beaucoup.

32845 Nous allons maintenant passer à la langue de Shakespeare.

32846 Alors je vais vous éviter de représenter notre équipe...

32847 LA PRÉSIDENTE: Une tasse de thé entre-temps?

32848 M. LAMARRE: Pardon?

32849 LA PRÉSIDENTE: Vous voulez une tasse de thé entre-temps?

--- Rires / Laughter

REPLY / RÉPLIQUE

32850 MR. LAMARRE: My remarks concern our four applications for new English-language specialty digital television services: Men TV, Infashion, Game One and Digipix.

32851 I will begin with a response to the intervention in Phase II opposing three of our applications and then reply to the Commission's request to all applicants for additional information.

32852 Neither of the two competitors with Men TV offered any substantive comments on our application.

32853 In the absence of any specific reference to either of the men's services applications, CTV said that proposing:

"...a substantial base of original hours, a high level of Canadian content right from the beginning and an increasing dollar investment is a good way to build digital."

32854 TVA believes that CTV's Men's Entertainment Network approach is not the best way to build digital penetration because it saves the best for last, at the end of the period when it may be too late. The Canadian digital specialty service universe will be very competitive and very different from the existing analog universe and the nature of the services the Commission will license should reflect substantial programming and marketing expenditures upfront at the beginning of the period. This is what Men TV wants to do.

32855 Corus' application for a men's service, Chrome, reflects some of the same strategic and conceptual errors as CTV's service. Instead of proposing a programming concept differentiated from existing conventional and analog services, and committing to a high level of programming and marketing expenditures at the beginning, Chrome plans to recycle existing programming and ramp up slowly to the end of the proposed seven year licence term.

32856 TVA believes that attracting new digital subscribers in the competitive digital specialty service environment will require substantial expenditures upfront and this should be reflected in the business plans of the services the Commission decides to license.

32857 With regard to CHUM's Phase II intervention against Infashion, TVA also has experience with the fashion community. Infashion is a true Canadian original that will benefit from Style's experience in the U.S. Our proposal for Infashion is no more a Canadianized version of Style than MuchMusic is a Canadianized version of MTV!

32858 In fact, CHUM's Fashion Television: The Channel is not supported with any substantial basic research. CHUM's approach to the Commission seems to be: We have had success with one fashion-oriented program, so trust us.

32859 Alliance Atlantis continues to assert that Infashion and several other applications compete directly with HGTV Canada's core mandate. HGTV is licensed to provide, and I quote:

"...practical, hands-on advice and instruction about homes and gardens".

End of quote.

32860 In Phase I of this hearing, TVA agreed to have "how to" programs excluded from Infashion's description of service and this would apply to homes and gardens as well.

32861 The Phase II intervention from Women's Television Network (WTN) is perplexing. WTN claims that Infashion "is not dedicated to fashion, beauty and interior home design" but lifestyle programming, as if the two were incompatible. WTN also finds that Infashion "includes references" to topics related to health, fitness, cooking, nutrition, the Internet, entertainment, shopping, and so on, as if these could not have any direct relation to fashion, beauty and interior home design.

32862 Our examination of WTN's program schedule indicates that 30 per cent to 35 per cent of its programming consists of drama and comedy, including movies. According to one of the two written interventions filed by WTN on July 7, in which WTN provides a breakdown of its own current programming schedule, the WTN schedule includes the following genres: romance/relationships, health/wellness, fashion/style, travel/leisure/adventure, biography, parenting, independent films/documentaries and book-based. If all of these genres were to be excluded from the new digital universe, what would be left?

32863 According to WTN's breakdown of its schedule, fashion/style programming accounts for 12.3 per cent of the total. This is consistent with the Carat Expert market study, filed with the Infashion application, that found only three programs on WTN relating to fashion or interior decoration. These programs represented 9.1 per cent of the service's total hours broadcast.

32864 In any case, WTN and HGTV treat interior decorating from the point of view of "decorating" as opposed to the "stylistic" approach adopted by Infashion.

32865 Finally, about 50 per cent of WTN's viewers are aged 50 and over, and 35 per cent are aged 60 and over. This is not Infashion's target audience which is clearly oriented to the 25 to 49 years old with an emphasis on those 35 years of age and under.

32866 And last, but not least, Digipix.

32867 In its intervention against Digipix, all that Alliance Atlantis has to say is, and I quote:

"Although purporting to be a channel devoted only to experimental films, the term `experimental' is inherently ambiguous."

End of the quote.

32868 Digipix is devoted to video, not films, and TVA provided an unambiguous definition of "experimental" digital video programming at Phase II of the hearing. Our definition relates to at least 80 per cent of Digipix's schedule and ensures that it will not be directly competitive with any of the independent film applications before you.

32869 In concluding, I would like to respond to the three questions the Commission asked of all applicants.

32870 First, we believe that all four of our English-language services are innovative and attractive as Category 1 services. As difficult as it is to determine an order of priority, and after much soul-searching, we have arrived at the following: Men TV, Game One, Infashion and Digipix.

32871 Why Men TV? Four of Canada's largest broadcasters are associated with applications for a men's service because they all believe there is a demand for some form of men's offering.

32872 CTV and Corus are already major players in the specialty service sector. It's time for new blood.

32873 With its devotion to lifestyle programming, and substantial programming and marketing expenditures upfront at the beginning of the licence period, TVA and CanWest Global's Men TV is, by far, the best application and the most innovative.

32874 Game One is a wonderful example of the potentially innovative use of new digital media in the age of convergence -- the marriage of a new digital specialty television service with a powerful new element in the computer-based home entertainment business -- digital video games. In its Phase III intervention, Bell ExpressVu said that video games are one of the leading candidates for interactivity in the future.

32875 Together with TVA's partner, Game One France, Game One proposes to launch a new service dedicated exclusively to the world of video games, 24 hours a day, seven days a week.

32876 Because of Montreal's role as one of North American's most fashion-conscious cities, Infashion is close to our hearts. The Style service has shown what can be done in the U.S. Now let's create a Canadian original here at home.

32877 Digipix is a service unlike any other before you, and we believe Digipix is an especially good candidate for a Category 2 licence.

32878 As for the second of the Commission's questions, TVA indicated, in its Phase II presentation, that the licensing and launch of either CTV's Men's Entertainment Network or Corus' CHROME will jeopardize the feasibility of Men TV business plan.

32879 We also said that the application for Fashion Television, the channel, is directly competitive with that of Infashion.

32880 There are no applications presently before the Commission for services that would be directly competitive with either Game One or Digipix.

32881 With regard to the third question, TVA believes the Commission should license a total of about 12 new English-language digital services. These could be effectively and attractively packaged in one tier of 12 services and/or two tiers of six services each.

32882 Mesdames et Messieurs, TVA's success in the French-language market is based on our savoir- faire, passion and commitment to high-quality Canadian content.

32883 Our experience suggests that sustained investment in Canadian content can foster a Canadian star system in English-language television and generate more viewer loyalty.

32884 However, major Quebec-based companies, such as TVA, are obliged to seek opportunities outside the province if we are to continue to grow, at the present time. For example, we are producing for M6, in France, and the Fox Network, in the U.S. It would be an unfortunate situation if TVA were obliged to expend all of its energy on expansion abroad. This is why our four English-language digital service applications are so important to us.

32885 J'aimerais en terminant vous remercier pour votre patience et surtout pour avoir assuré une grande discipline à cet exercice. Ç'a été pour nous un grand plaisir d'y participer et nous anticipons avec beaucoup d'anxiété la prochaine étape.

32886 Merci.

32887 LA PRÉSIDENTE: Nous vous remercions, Monsieur Lamarre, Monsieur Bellerose et vos collègues, et bonne fin de journée.

32888 Monsieur Lamarre, on voulait vous demander, vous utilisez les mots "carrefours-passerelles" pour une traduction de "portals" dans votre texte français?

32889 M. LAMARRE: Oui, en fait ce qu'on veut signifier ici c'est effectivement une passerelle qu'on créerait entre nos nouveaux canaux spécialisés et différents portails que nous amènerions.

32890 LA PRÉSIDENTE: Alors "passerelle" serait "portail" et "carrefour" serait le lien entre...

32891 M. LAMARRE: Ce serait le lien entre nos sites Web et nos canaux spécialisés.

32892 LA PRÉSIDENTE: Il y en a qui ont des indulgences et d'autres qui ajoutent des mots au dictionnaire.

32893 Au revoir. Merci.

32894 Madame la Secrétaire, s'il vous plaît.

32895 Mme BÉNARD: Merci, Madame la Présidente.

32896 The next presentation will be by Levfam Holdings.

32897 Thirteen minutes are allowed.

REPLY / RÉEPLIQUE

32898 MR. LEVY: Good morning --

32899 THE CHAIRPERSON: Good morning.

32900 MR. LEVY:  -- Madam Chair, Members of the Commission.

32901 My name is still John Levy. I'm the Vice-President of Levfam Holdings.

32902 With me, today, are Rob Malcolmson, Executive Vice-President and General Counsel, Sarah Hughes, our VP, Finance, and Tony Keenleyside, a partner at McCarthy Tétrault, here in Ottawa.

32903 As far as we can tell, no one intervened in opposition to our Wellness application, so there is nothing for us to address in reply.

32904 We, therefore, will devote our time to replying to the issues related to the PrideVision application.

32905 We would like to divide our reply into three portions.

32906 The first will respond to one generic theme that was consistently raised by most parties during all stages of the proceeding: the need for diversity.

32907 The second will reply to specific comments made during the intervention stage by our competitors in the gay and lesbian genre.

32908 And the third will respond to the general questions which the Commission has posed to all the applicants, as well as one specific question asked during the PrideVision presentation.

32909 First, with respect to the issue of diversity.

32910 Virtually everyone who appeared before you stressed the need for diversity.

32911 We agree with that fundamental premise since, without diversity, there is no reason for Canadians to take any interest in the new digital services. More of the same just won't do it and incremental repeat nesting, of course, also won't do it.

32912 Diversity comes in at least two flavours: diversity of programming genre; and diversity of ownership.

32913 Clearly, the gay and lesbian genre adds to diversity of programming genre. We are not aware of anyone who has appeared before you who has attempted to argue otherwise.

32914 However, if you ultimately decide to license only 10 new services, not all genres will emerge victorious.

32915 Therefore, we have attached to this reply our summary of those sections of the broadcasting policy set out in Section 3 of the Act that support our view that this genre ought to be one of the genres that receives a licence.

32916 Diversity of ownership is, of course, more subtle, but just as important.

32917 The two concepts are joined at the hip, when it comes to the creation of Canadian programming by the independent production sector.

32918 This was perhaps most eloquently framed by the representatives of the Canadian Conference of the Arts when they intervened here last week; and I quote:

"In theory, consolidating ownership may strengthen broadcasters' financial wherewithal, but it may also limit the opportunity for new voices to be heard and reduce opportunities for Canada's independent producers."

32919 Later in their presentation, CCA representatives returned to this theme, when they stated:

"If [ownership is] simply restricted to one group of owners, they will be well financed for the global market, but they won't necessarily have the natural inclination to become far more competitive with respect to choosing those who provide programming to them."

32920 Continuing, they ask:

"In a competitive marketplace such as our own, wouldn't it be a good thing to enhance that competitive entrepreneurial spirit."

32921 When you issue your decision, Canadians will assess not only the actual services that have been licensed but, also, the corporate entities behind them.

32922 Having heard the presentations of some 80 applicants and the interventions from a wide range of interested parties, we have concluded that there is ample room within your licensing package to include both large multo-interest corporate entities and smaller, truly independent specialty service-oriented players, such as Levfam.

32923 Madam Chair, Members of the Commission, we have the ability and the experience to make PrideVision a success and the pockets that are deep enough to stand by our commitments to you.

32924 MR. MALCOLMSON: Thank you, John.

32925 Turning, now, to the CHUM intervention.

32926 CHUM has attacked our business plan as being overly optimistic, despite the fact that it's based upon proprietary research from the Rainbow Radio application to which we were granted access and backed up by three separate pieces of research that we subsequently commissioned.

32927 What did CHUM offer in support of its business plan, other than, "Trust us, we now best"?

32928 Perhaps CHUM's attack on the business plan was based upon its misreading of our application.

32929 During the hearing, Mr. Miller stated that; and I quote:

"PrideVision expects to attain a 70 per cent penetration level and advertising revenues of $1.6 million in its first year of operation, growing to $2.6 million."

32930 In fact, our Schedule 15 states that we expect a penetration level of 50 per cent, in Year 1, rising to 70 per cent, by Year 7.

32931 CHUM is also concerned that with; and I quote:

"...a 65 per cent Cancon level, and a dearth of broadcast quality gay and lesbian programming, one can only reach one of two conclusions: [either] PrideVision will morph into a more general interest services to attract subscribers and/or PrideVision will rely heavily on cable and `spectacles aux chaises' programming to fill its Canadian programming slate."

32932 We think that CHUM is talking about PrideVision but really thinking about Q!

32933 Let's compare the relevant facts.

32934 We note that CHUM is no longer talking about what it called "that great equalizer -- Canadian programming expenditures" that it mentioned twice during its initial oral presentation. The reason is that its $17.2 million offering pales in comparison to PrideVision's commitment of $31.1 million.

32935 However, the main point is that we are prepared to accept a condition of licence requiring PrideVision to expend 49 per cent of prior's years revenues on Cancon, as compared to CHUM's 40 per cent.

32936 So, no matter how you measure it, the PrideVision commitment to Canadian content is substantially greater than CHUM's.

32937 As for the supposed "dearth of broadcast quality gay and lesbian programming", that is exactly what we talked about in our oral intervention when John referred to CHUM's tired and pessimistic view of the digital world -- a view that they repeated during their oral intervention.

32938 In our application, we recognized that there is a need to create quality programming for the genre. That's why we have committed 49 per cent of revenue, or $31 million, over the licence term.

32939 Madam Chair, Commissioners, if you accept that there is a dearth of this material now, it is certain that there would continue to be a dearth with CHUM's anaemic Cancon proposals.

32940 We take exception to CHUM accusing PrideVision of morphing into a general interest service. This is simply not the case, for two reasons:

32941 First, to do so would not make business sense, as it would kill the distinctiveness of the network faster than anything we can imagine.

32942 Second, we believe our nature of service condition of licence appropriately restricts the programming mandate of PrideVision.

32943 We also find CHUM's concern in this regard less than credible, having regard for the two applicants' programming schedules. You will note that in our programming Schedule 9, PrideVision has set out its entire programming wheel in detail. In contrast, CHUM's weekly schedule of 126 hours includes 71.5 hours of TBA or to be announced programming. That constitutes 57 per cent of the entire broadcast week. To use CHUM's favourite word, what is realistic about licensing less than half a service?

32944 MR. LEVY: We were absolutely delighted with the Canadian Conference of the Arts' assessment of the applications, as modified by their oral intervention.

32945 In their original written intervention the CCA rated PrideVision well above the CHUM and Quebecor competing applications in the gay and lesbian genre, and 34th overall. However, after having heard all of the applicants present and defend their applications during Phase I and Phase II, the CCA refined its approach.

32946 It still supported the CRTC's licensing plans and emphasized that the applicants' business plans must be realistic, but placed increased emphasis on the diversity of ownership.

32947 In total, it used 19 different factors to rank the Category 1 applications, most of which involved Canadian content, technology and audience appeal.

32948 The result was that the CCA included PrideVision in the top 10 services that it felt you should licence. We also note that at 35 cents PrideVision is below the average wholesale cost of those 10 services, which the CCA stated would total $3.67 a month.

32949 The CCA also considered the applications in terms of the criteria outlined by the CRTC in its licensing framework and call for applications. It produced a series of measures for these criteria and, again, applied them against the Category 1 applications. Five of its top 10 choices, including PrideVision, also did well in terms of measurable factors that fit the CRTC's own licensing criteria.

32950 The CCA's assessment is relevant because it is entirely independent. The CCA has no reason to support one applicant over another, except for what it concludes will be a better contribution to the Canadian broadcasting system as a whole.

32951 The CCA chose PrideVision. That speaks volumes about its objective assessment of the realism of our business plan and the attractiveness of our programming schedule.

32952 MR. MALCOLMSON: Turning now to the Arc-en-ciel intervention, this intervention also attempted to characterize PrideVision's programming as general interest, referring specifically to "What's for Dinner?" and "Galloping Gourmet". It would be easy to reply by asking what is so special about reruns of "Ellen" that Quebecor proposes to run, but that misses the point.

32953 The point is that no broadcasting service can provide 100 per cent never seen before programming. What it hopes to do is to provide an intelligent blend of old and new, but always focused directly to the target niche audience.

32954 Our research told us that the gay and lesbian communities want some cooking and gardening shows -- that's why they are there. However, respondents also made it very clear to us that they expect new and relevant programming. That is why we have committed more than three times as much to Canadian programming as Quebecor proposes.

32955 Quebecor also makes the assertion that PrideVision cannot guarantee that Canadian television viewers will have access to a leading Canadian web portal and that Quebecor has the advantage of its existing Canoe service.

32956 As you heard earlier, our strategy is to partner with a Canadian web portal that is exclusively dedicated to the gay and lesbian community. Our partner will provide a web-based window into Canada's gay and lesbian community and act as a content aggregator for our news and current affairs programming. We believe this genre deserves a dedicated Canadian web portal, rather than simply being part of a general interest portal, as Quebecor proposes.

32957 In conclusion, we will address certain questions raised by the Commission during the hearing.

32958 Madam Chair, during the PrideVision presentation you asked what limit, if any, would be appropriate on the amount of independently produced programming we would acquire from Alliance Atlantis.

32959 If the Commission decides that a limit is necessary, we would submit that 25 per cent of total hours during the broadcast year is an appropriate limitation.

32960 In terms of competing proposals, the only ones that would jeopardize our business plan are those with whom we are competing in the health and wellness and gay and lesbian genres.

32961 MR. LEVY: Madam Chair and Members of the Commission, we think that you should license at least 10 English-language genres in order to provide the maximum diversity of the programming niches. We would not be so bold as to propose -- other than ourselves, of course -- specific candidates for these genres, except to say that they should reflect diversity of ownership as well as genre.

32962 In our view, and within these 10, there are five key genres that should be licensed. Of course, numbers 1 and 2 are gay and lesbian and health and wellness, number 3 is independent film, number 4 is biography, and number 5 is environmental. These are the five genres that we feel within the group of 10 should be licensed.

32963 Since we are not applying for a French-language service it would not be appropriate to suggest which are the most attractive genres. However, we would urge the Commission to adopt a similar approach of licensing a diverse and attractive package that will play its part in driving the digital wave into Canadian homes.

32964 Now with regard to the tough question, which is the question regarding the prioritizing of our applications.

32965 We can understand why you have asked this question of the larger broadcasters, but as we have indicated on numerous occasions, our situation is quite different. We have taken a very focused approach to this process and have deliberately chosen to put forward only two Category 1 proposals. Both have substantial merit and will add both diversity of programming and diversity of ownership to the digital offering.

32966 With only two applications before you, this is a very difficult choice for us. We believe that the Wellness proposal is unique because of its partnership with McMaster. Having a leading Canadian Health Sciences Faculty as a programming partner will ensure that Canadians have access to health and wellness programming that is truly relevant to the Canadian context and that is delivered in a responsible, evidence-based fashion.

32967 However, you asked us to make a choice, and in this situation we would choose PrideVision. The reason we would choose PrideVision is very simple. This is a genre whose time is now. The community is under-served and desperately in need of a broadcast facility. Our application is also by far the strongest of the group in this genre. Lastly, in my own humble, unbiased opinion, we are the right group to get this licence.

32968 That concludes our application, but before I totally finish I would like to say two things. First of all, I want to take a moment to thank all of our supporting intervenors. We had thousands of people from all across the country sign petitions, e-mail us, fax us and appear here in Hull in front of the Commission in person over the last few days. We really, truly, were overwhelmed, not only by the numbers but by the passion and by the intensity of the support that comes from within this community, and I just wanted to take a moment to thank them personally.

32969 Lastly, just as a matter of housecleaning, we have referred in our application to our On-Air Programming Guidelines, the National Advisory Committee and the PrideVision Foundation. To complete the record, these documents have been filed with the Secretary.

32970 Madam Chair, thank you very much. We would be pleased to respond to any questions.

32971 THE CHAIRPERSON: Thank you, Mr. Levy and your colleagues.

32972 I see that at page 4 of your presentation Mr. Znaimer has gone from tired to anaemic, so we will give them a break before we hear them, in case they need some reinforcement.

--- Laugher / Rires

32973 THE CHAIRPERSON: Thank you very much.

32974 We will take a 15 minute break.

32975 Nous prendrons une pause de 15 minutes.

--- Upon recessing at 0950 / Suspension à 0950

--- Upon resuming at 1012 / Reprise à 1012

32976 THE CHAIRPERSON: Welcome back to our meeting. We come now to the end of Phase IV of our hearing.

32977 Alors nous vous souhaitons la bienvenue encore une fois et nous allons maintenant terminer la Phase IV de cette partie de l'audience.

32978 Madame la Secrétaire, s'il vous plaît.

32979 MS BÉNARD: Thank you, Madam Chair.

32980 The next presentation will be by CHUM Limited. Twenty-five minutes are allowed.

REPLY / RÉPLIQUE

32981 MR. ZNAIMER: Good morning, Commissioners. We are CHUM, in order of appearance and in the person of Moses Znaimer. On my left is Ron Waters, on his left Marcia Martin, on her left Paul Gratton and on his left Irsahd Manji.

32982 CHUM's reply comments will consist of three parts. First, we will address the Commission's questions; second, we will respond to some general comments made by intervenors; and, third, we will respond to specific interventions made in respect of four of our applications.

32983 We will address the Commission's homework questions in reverse order.

32984 In terms of the Category 1 proposals the Commission should approve, we believe the Commission could license in the order of 20 English-language services and at least five in French.

32985 This represents the number of clearly defined genres in each language group for which there are solid applications, meriting, in our view, Category 1 status. By licensing this many services, the Commission is assured not only that Canadian services will launch in these key genres, but that they make the maximum possible contribution to our system.

32986 Given these clear benefits, and the far greater number of quality applications before you than you possibly could have anticipated, we see no reason why the Commission could not significantly increase the number of Category 1 licences from that initially contemplated in the call. It would be bold, it will be effective and it's important to note that this time around capacity is not a problem.

32987 Focusing on the English language side, we note that Category 1 applications have been filed in approximately 35 genres. We arrive at the recommendation of 20 by eliminating both extremes of the spectrum, the overly broad and the overly narrow. We also note that 19 of these 20 genres include strong proposals from non-distributor affiliated applicants, thus giving preference to unaffiliated applicants would not prevent licensing in all key genres.

32988 Our list of 20 priority genres is attached with this intervention.

32989 In respect of competing services that, if licensed, would jeopardize the business plans of our applications, we believe this is what our proposed test "for directly competitive" addresses. Accordingly, our answer to this question is the same as our answer to the question, "what proposed services are directly competitive".

32990 To be precise, Q!Television is mutually exclusive with PrideVision and Arc-en-ciel;

32991 FT: The Channel is head to head with InFashion and DesigNation;

32992 The suspense Channel is competitive with 13th Street and Shadow TV;

32993 Relationship TV is in conflict with R&R and Violet; and

32994 Indie could not meet its business plan if The Independent Film & Documentary Channel, Festival, Cinefest or The Independent Film Channel are licensed.

32995 And finally, the question of our priorities.

32996 You will appreciate that the answer to this question depends heavily on the choice of selection criteria, and how they are weighed. If we answer the question based on revenue potential and hence corporate significance, the result is quite different than if we answer based on the personal passions and experience of our creative staff. At the end of the day, however, it is surely the best offer for the broadcast system that is of most significance and help to you.

32997 From that perspective, we believe that licensing movie driven services that contribute significantly to Canadian feature film could and should be a priority. CHUM has a recognized track record and a strong corporate mission of supporting Canadian feature film at all stages -- scriptwriting, development, production, promotion, exhibition and celebration.

32998 We have been doing it at CityTV since the 1970s. And if reports are accurate, because there is growing recognition that series have been well served over the last few years and that now it's time for the movies, the federal government will soon come through with its long anticipated Feature Film Fund.

32999 We, therefore, believe that more than one movie-driven application should be approved, and would be very pleased to receive a licence for any one of Indie, Relationship or Suspense -- each of which offer an alternative to competing applications in the same genres.

33000 Our remaining "top three picks" are Q!Television and FT: The Channel. Both offer something truly different, truly distinct. Both are in programming genres that we have pioneered. We have the shows, we have the people and the community support that will make these services more innovative and successful than those of any other applicant. Ron.

33001 MR. WATERS: We do not believe that there has ever been a hearing in which the balancing of different objectives has been more challenging -- from consumer choice to Canadian production contribution; competitive impact to new entry; diversity to viability. Over the last few days of interventions, the potential conflict between these objectives has been even more pronounced -- with, for example, recommendations based solely on Canadian programming contributions that virtually ignore issues of viability.

33002 By contrast, we believe our applications have met the test of balancing your objectives and selection criteria in a responsible and realistic manner. Moreover, we bring unequalled experience to the task of ensuring a successful launch for new Category 1 services.

33003 While it has been suggested to you by a few competing applicants that the penetration assumptions for our services have been too "pessimistic", your discussions of packaging have surely put an end to that view.

33004 As acknowledged by the CCTA, the business environment for digital service is much riskier and the ability to count on high penetration levels highly questionable. With a variety of packaging options that respond to the call for consumer choice, the number of competing services, plus issues of migration of existing services, it has become very clear that the vast majority of new services will have penetration levels of 30 per cent to 50 per cent, not 50 per cent to 70 per cent as put forth by many of our competitors.

33005 To reach even these levels, and reasonable box penetration, will require an unprecedented marketing and promotion effort. As important as it is, the issue is not just marketing dollars, as some applicants have suggested. Even more crucial for this launch will be the cross-promotion existing services can provide.

33006 For our part, we are fully prepared to devote considerable airtime from all our channels -- conventional, specialty and radio -- to promoting new digital services. This is no small undertaking and will benefit all players.

33007 This brings us to our final comment on one of the general issues raised in intervention, which is the question of licensing new players versus existing players. This issue has manifested itself in a number of different assertions:

33008 That ownership diversity is "necessary" for programming diversity;

33009 That nested services are inherently anti-competitive and should not be licensed; and

33010 That the Commission must resist the forces of consolidation.

33011 These assertions are overly broad or just plain wrong.

33012 Ownership diversity is important and the system has that at present. But adding to it does not automatically increase programming diversity. Indeed, for digital services, granting licences for distinct new services to existing operators is, for the most part, more likely to result in diversity. They have the resources to do more, and the incentive to complement their existing services, not compete head on.

33013 Today's economic reality puts a severe constraint on how much ownership diversity is realistic. The Commission has already recognized this -- particularly in the cable and radio sectors. Interestingly, such consolidation has not yet hit the specialty/television sector to the same extent, but it surely will.

33014 Given the thin air of the digital world, it is absolutely appropriate, therefore, for the Commission to question whether new entrants can survive and that, in particular, requires great scrutiny of their business plans. With one exception -- Salter Street -- new/small players have some of the most ambitious business plans in some of the narrowest genres before you. This has to be cause for concern.

33015 Finally, to set the record clear, none of our Category 1 services are "nested services" that share a significant amount of programming with existing services. Such services are certainly appropriate as Category 2 "extension/repeat" channels -- which we have also applied for -- but do not offer the kind of diversity the Commission has every reason to expect from Category 1 services.

33016 We do not seek to "corner the market" on popular music services through nesting or otherwise. CMT and BET are already here and most broadcasters can play all the music video, concerts and variety shows they like. In addition, we have specifically indicated in our interventions that we do not consider music services proposed in distinct genres such as Christian, dance, and R&B as directly competitive with Much or MuchMore. Our difficulty is with applications for relatively broad and duplicative musical genres such as rock or alternative music, which are the heart and soul of Much's programming.

33017 We would not like to turn to replies to comments made specifically to four of our applications.

33018 MS MARTIN: Competing applications for a fashion/design channel have proven one thing loud and clear: Canada is ripe for this genre. The question raised in intervention is: Who is the right applicant?

33019 Infashion attempts to dismiss CHUM's experience by suggesting that "one successful program does not a viable service make". Really?

33020 For 15 years Fashion Television: The Show has worked with the fashion/design industry profiling and reporting on their world, cultivating key contacts and networks and growing an important resource of rich material with the largest archival library in this genre.

33021 We have by far the most experience, and that gives us the ability to deliver quality programming right from the gate. We have produced not only FT: The Show, but Oh!La La and Perfecto and their cousins in Finland, Bogota and Barcelona. Our daily CityLine features fashion for one hour every week and, of course, fashion lurks behind most popular movies and music which we cover intensively.

33022 A successful track record means programs that work. How can that not benefit our viewers?

33023 On the issue of diversity, while both competing applications claim this as a strength over FashionTelevision: The Channel, the record shows otherwise.

33024 Only our channel recognized early the need to be distinctive from both the interior design focus of HGTV and the lifestyle focus of WTN, and only we have satisfied both of these existing services that we will not be directly competitive with them.

33025 And only FashionTelevision: The Channel has a business model that is consistent with serving only the distinctive niche of fashion, design and visual artists. We project seven year revenues of $46.5 million for our channel, as opposed to $84.5 million for DesigNation and $67.9 million for Infashion.

33026 Instead of making inflated Canadian program projections, we focus on our high 41 per cent of revenue formula for Canadian programming.

33027 We have practical knowledge of living in a digital world with Star! and CLT and we know the challenges of putting set-top boxes in homes and the low advertising dollars that come with under three million households. And yet we are still able to offer a lot of original Canadian programming, growing to more than 200 hours per year over the term, with a lower repeat factor than either of our competitors -- 7.5 for FashionTelevision: The Channel, versus 10 to 12 for Infashion and DesigNation.

33028 Finally, let us confirm why we do not believe you could reasonably license both FashionTelevision: The Channel and DesigNation.

33029 The reality is, fashion and design would be covered under either title. As an obvious program mix, FashionTelevision: The Show has been featuring design/visual art stories each week for over 15 years. If we find that a half hour show needs to embrace design in all its forms, we certainly believe a 24-hour channel needs that creative mix to be a popular and attractive service. Whether one favours more non-fashion, as with DesigNation, or more fashion as in FashionTelevision: The Channel, the overlap is significant. The worlds are too small, both in genre and the digital environment, for these two services to easily coexist.

33030 MR. GRATTON: In its intervention, Global Television stated that our Suspense Channel had levels of advertising and subscription that were too high, and that lower revenue could prevent us from achieving proposed levels of Canadian programming.

33031 Perhaps appropriately for this genre, we are truly mystified by these comments. Global's application has the highest overall revenue expectations of any application in this genre, $74.6 million over seven years, as opposed to 459 million for our Suspense Channel. Global includes by far the highest advertising revenues, growing to $4.8 million annually, in contrast to our $1.3 million.

33032 Our Suspense Channel application is clearly the only proposed mystery/suspense service that can assuredly meet not only its proposed levels of Canadian programming, but meet them in a manner that will provide a distinctive new service with a much needed kick-start to Canadian feature films in this genre. Global, CTV, Levfam, Craig, TVA, Alliance Atlantis, all those who have exceedingly high Canadian program expenditure projects, would be more believable if they offered their promises as fixed. But they don't. They hope to dazzle you with big numbers but keep the escape hatch open. We think that our job is to give you the straight goods.

33033 Competing applicants have suggested that the Commission "set aside" or "reject outright" our application for Indie: The Independent Film and Shorts Channel.

33034 In so doing, they seek to avoid what we believe should be the central question for the Commission: Shouldn't an independent film channel be essentially a movie channel?

33035 No competing applicant has suggested that our proposed overall Canadian content level of 25 per cent, growing to 30 per cent, with 100 per cent in peak viewing hours, is inappropriate for a channel that will be at least 75 per cent feature film. Instead, they believe the Commission's "expectation" of 50 per cent Canadian content by the end of the license term should be made a de facto regulation, with no exceptions. Not only does this confuse an "expectation" with a "must", it would be interesting, to say the least, to hear Canadian pay services argue the opposite if the same minimum Cancon levels were to be applied to them.

33036 No one has disputed the limited supply of Canadian theatrically released titles and the fact that these titles are already in high rotation on other movie-driven services. And while mention has been made of 1,500 Canadian titles certified by CAVCO, almost half of these are generic direct-to-video action titles set in "anywhere USA", that would not meet the standards necessary for a quality independent film channel, especially as we envisage it.

33037 The undisputed reality is that a true independent film channel cannot offer traditionally high Canadian content levels. The higher the proposed Cancon level, the more the proposed channel must rely on non-film content, made for TV docs, movies of the week, entertainment magazines, more of what is already well represented on existing and on other potential digital channels.

33038 Only a condition of license that requires a significant majority of feature length independent film will ensure a distinct new service that does not become directly competitive with existing more general entertainment services, such as Star!

33039 Only a significant new commitment to license fees for new feature films, not other independent production or a general and non-enforceable corporate commitment to distribution advances and equity financing, can make a real difference to Canadian feature films.

33040 And only Indie offers both.

33041 MS MANJI: Madam Chair, Commissioners, we don't consider it constructive to reply to the unflattering words used by one applicant to describe our Q!Television. What is more significant is the testimony you have heard from intervenors who strongly support a gay and lesbian channel and who do not feel the way one applicant does, intervenors who include one who expressed deep faith in our ability to deliver a quality, interactive, nationally relevant service based on our track record.

33042 While three applicants had the vision to apply for a gay and lesbian channel, viability must accompany vision.

33043 Q!Television will deliver a healthy investment in Canadian gay and lesbian programming based on real experience, an already solid infrastructure of production and a head start in cultivating relations with advertisers and businesses.

33044 Now, it is true that we don't treat this genre as an instant gold mine, which is wise it seems because, as Andrew Chang of Xtra! observed yesterday, this will be no bonanza. It's not that we lack enthusiasm, it is that we bring reality checks.

33045 With seven year revenue expectations of $44 million, as opposed to $77 million for PrideVision and $70 million for Arc-en-ciel, only we can survive on realistic advertising revenues of under $1 million annually, realistic subscriber penetration of 35 per cent, and a realistic average subscription fee $0.50. I guess I would agree with PrideVision on one point, "realistic" is among our favourite words. So is "responsibility". What this also means is, in our model, there is room for growth. The more revenues we generate, the more we invest.

33046 No one knows this market better than we do. We have been testing and serving it, directly, with the Q!Files and, now, QueerTelevision.

33047 We are already streaming QueerTelevision on the Internet, conducting weekly online chats, based on the show, and bringing viewers back to an interactive Web site.

33048 Having accomplished what other applicants are promising, we believe Q!Television is best suited to grow beyond the Web and move into interactivity via the set-top box when that is available.

33049 In the meantime, we have earned the investment of Planetout, the leading North American Internet portal for gays and lesbians. So, when a Kansas resident logs onto planetout.com and downloads QueerTelevision, he watches a Canadian perspective. Our relationship with Planetout is a ready platform, through which we can syndicate more Canadian material to the United States and elsewhere.

33050 And we have the track record and the ability to help provide a French-language service when Q!Television's format is established, just as MuchMusic did with MusiquePlus.

33051 At this point, Commissioners, and with the indulgence of my colleagues, I would like to just set aside my written remarks and speak from the heart, for just a minute -- and let this serve as a respectful response to PrideVision's allegation, in Phase II, that our commitments are thin.

33052 We care so much about Canadian programming that we have created it -- and we continue to.

33053 We care so much that our programmings speak to Canadians beyond Toronto that we are streaming QueerTelevision in its entirety -- one of the shows anywhere in the world to be so fully accessible online.

33054 We care so much that the world know Canadian gay and lesbian programming that we are exporting it, not just offline but also online.

33055 And we care so much that our programming be attractive to the world that we have given it high production values.

33056 Above all, we have taken the time to learn this genre before applying for a 24-hour specialty channel -- and we believe that's not a thin commitment. That's robust. And others believe that, too.

33057 To quote from a letter written to you by independent producer Steve Diguer:

"Through QueerTelevision, CHUM/City has already proven its ability to produce a powerful, unique program [that] inspires dialogue between social groups."

"Any other applicant --"

he goes on to say:

"-- will spend its first five years playing catch-up. Our community would be better served --"

he finishes:

"-- by licensing the leader to move even further ahead."

33058 MR. ZNAIMER: Commissioners, seven years ago, we shocked the industry by filing more than a single specialty application at a single hearing.

33059 We argued, not only for ourselves but for the Canadian system in its entirety, that you should license as many credible, realistically-budgeted, tightly-run offerings as possible from Canadian companies lest critical genres fall into the hands of foreign services, who would then be encouraged to tie up North American rights for U.S. and foreign programs while ignoring Canadian production and the Canadian jobs issues and personalities they contain.

33060 You responded favourably.

33061 Now, look at the success of the higher analog tiers. They are all driven by the Canadian services, not the imports.

33062 We are still singing the same song. We are still arguing the same way. For ourselves, it's true, but also with the understanding that we can't flourish without others flourishing as well. And that, perhaps, is our truest and best contribution to this process.

33063 Thank you for your genuine interest in our views.

33064 Your tough but fair questions bring out the best in all of us.

33065 THE CHAIRPERSON: Thank you, Mr. Znaimer, and your colleagues, and I hope you all have a well-deserved rest now.

--- Laughter / Rires

33066 THE CHAIRPERSON: Commissioner Williams...?

33067 COMMISSIONER WILLIAMS: Mr. Znaimer, when you take your team out for dinner, I offer you the use of this toast; it goes as follows:

Here's to those that love us. To those that do not, I ask the Lord to turn their hearts. If He cannot turn their hearts, may He at least turn their ankles so that we can easily recognize them by their limping.

--- Laughter / Rires

33068 THE CHAIRPERSON: Thank you.

33069 Madam Secretary, please.

33070 MS BÉNARD: Thank you, Madam Chair.

33071 The next presentation will be by BCE Media Incorporated, on behalf of the general partnership with Travel Co. and CTV Incorporated.

33072 Ten minutes are allowed.

REPLY / RÉPLIQUE

33073 M. GOURD: Madame la Présidente, Madame la Présidente, Mesdames et Messieurs les conseillers, mon nom est Alain Gourd. Je suis Président et Chef de la direction de BCE Media.

33074 I would like, now, to introduce the members of our panel.

33075 To my left is Trina McQueen, Executive Vice-President, CTV.

33076 And, to my right, Jim Macdonald, Senior Vice-President and Chief Media Services Officer, BCE Media.

33077 We thank you for this opportunity to appear in Phase IV of these proceedings and to respond to other intervenors.

33078 We also thank those who chose to support Travel TV over other travel applications. They were a very widely diverse group, and they gave a broad range of reasons, from the Honourable Joan MacAlpine, the Minister responsible for Tourism in New Brunswick, who cited our contribution to information technology; to the Canadian Ethnocultural Association, which was; I quote:

"...pleased that BCE Media is proposing to link with various ethnocultural communities in the production of its programming. Thus Canada's cultural diversity can once again be a rich resource."

End of quote.

33079 We received the support of French-language and English-language producers and detailed, thoughtful support from the Canadian Automobile Association, Canada's largest travel organization, and from the Canadian Association of Retail Travel Agents.

33080 The CAA said; and I quote:

"It is important for a Canadian broadcaster to enter this travel genre, so that there is no opportunity for a foreign travel channel to extend its reach into Canada."

End of quote.

33081 CARTA, meanwhile, said that, given BCE Media's involvement in Canal Évasion; and I quote:

"Travel is a bilingual business and economic efficiencies derived from running two services should result in two superior travel services for the Canadian market."

End of quote.

33082 In concluding these hearings, we believe it is appropriate to respond to the remarks of our competitors and other intervenors, particularly with regard to the criteria you laid out at the very beginning.

33083 These criteria are appropriate, fair and essential to the success of this roll-out of digital services.

33084 Throughout these hearings, you have asked applicants to rank them in order of importance -- and we concur with the CCTA that the appeal of the service is the most critical factor.

33085 Each of the six travel applicants filed research showing that Canadians consistently express a strong, clear interest in a travel channel.

33086 Canadians love to travel within Canada, and they spend most of their travel budget domestically.

33087 Without this appeal, it will not be possible to attract audiences.

33088 But the potential appeal of a travel channel is made up of a number of factors.

33089 Jim...?

33090 MR. MACDONALD: Madam Chair, we have distributed charts, which I will be referring to, which also appear on the screens in front of you.

33091 Affordability is a very important factor.

33092 As you can see on Chart 1, the average wholesale rate, for seven years, is within a three-cent range for five of the six applicants, from a low of 35 cents, for Travel TV and Pelmorex, to a high of 38 cents for Métromédia/Cogeco.

33093 Global's 60 cent rate is more than 70 per cent higher than Travel TV's rate, making it difficult to square with their comments about "consumer value".

33094 Another key factor to consider is the level of original Canadian programming. In this area we will discuss statements by both Global and Pelmorex.

33095 In examining Chart 2, you will see that Travel TV will deliver more original Canadian programming than any other applicant over seven years. While we propose to provide at least 8,162 hours of original Canadian programming over the licence term, Corus proposes to do 88 per cent less, and Global 40 per cent less overall.

33096 Our calculations based on Pelmorex's Schedule 10 showed 545 hours of original Canadian programming. In Phase II, however, they submitted 988 hours. But even using this larger number, which we are unable to reconcile with their application, Pelmorex is still offering 7 per cent fewer hours than Travel TV.

33097 Contrary to the Corus suggestion that our in-house programming is a potential weakness of our application, we view it as a tremendous strength. This programming consists primarily of our three times a day travel newsmagazine "Destination Watch", which will offer viewers access to timely, practical travel information.

33098 With respect to support from the independent production sector, we believe that our endorsement as the best travel application by the Directors' Guild of Canada says it all.

33099 We are also pleased that Canal Voyage in France is prepared to work with us to open doors to exports of Canadian programming to European audiences.

33100 Looking at the cost of programming, a key determinant of its quality, you will find that not only are we proposing to do more, we are proposing to do it at a higher level of quality.

33101 As you can see on Chart 3, Canadian programming expenditures range from a low of $16.2 million for Learning & Skills to $41 million for Travel TV.

33102 Global says it will commission more new Canadian programming than its competitors. While we are not sure of the significance of this statement, we do note that Travel TV's commitment to non-affiliated, independent producers, on record since Phase I of this proceeding, is 33 per cent of all of our Canadian programming expenditures and 75 per cent of our acquisitions budget. This amounts to approximately $13.5 million, about 17 per cent more than Global, and three times more than Corus proposes as their entire Canadian acquisitions budget.

33103 Now you understand the support of the Director's Guild.

33104 In Chart 5 you can see that once again Travel TV leads on percentage of revenue devoted to Canadian programming, with a commitment of 53 per cent of revenues. Other applicants range from 35 per cent for Métromédia/Cogeco to 46 per cent for Global.

33105 Contrary to the Pelmorex allegation in Phase II, and as we explicitly stated during Phase I, our program expenditures, as filed, do not include interactive or web-based activities.

33106 As we indicated in our Schedule 14, we will invest $400,000 in the pre-operational phase to ensure that Travel TV's Web site kicks off successfully. But in addition, over the licence term we will invest approximately $8 million to ensure that Travel TV has a strong web presence and is positioned on the leading edge of interactive television development when deployment of truly interactive boxes begins.

33107 As we said in Phase I, this $8 million is entirely incremental and is not included in our programming expenditures, as we project a net loss approximating $1.4 million over the first term of the licence on our web-based activities.

33108 Pelmorex, on the other hand, has included its web and interactive costs as part of its programming expenditures, so that fewer dollars will be dedicated to programming for the primary service.

33109 Canadian content levels are definitely another relevant factor. As shown here on Chart 5, Travel TV begins with a solid 53 per cent in year 2, rising to 70 per cent in year 7, for an average of 61 per cent over seven years.

33110 Global is at 71 per cent throughout, but at a wholesale rate we do not believe the market will support, and with less original Canadian programming and less spending on Canadian programming overall over the seven years of the licence term. We fail, therefore, to understand how this would make theirs the only travel application "offering a unique Canadian perspective".

33111 While we applaud the Commission's invitation to develop partnerships, we agree with SPTV that there is no need for foreign ownership in the travel genre. But we do believe in partnership. So while we retain full control of our schedule and our Web site, we will also enjoy access to a wide range of programming from Europe, through our relationship with Canal Voyage, the BBC, U.S. or other suppliers to augment our strong Canadian schedule.

33112 We feel that our all-Canadian application contains all of the skill sets and relationships we will need to make a strong, popular travel channel.

33113 MR. GOURD: To sum up, then, Travel TV offers the highest number of original Canadian hours.

33114 It offers the most generous Canadian content expenditures.

33115 It commits the highest percentage of revenue to Canadian programming.

33116 It is at the lowest average wholesale rate.

33117 It is the only service with a French-language partner, which will increase its diversity and help the sister service increase its quality and audience appeal.

33118 Finally, it is an all-Canadian ownership structure in a genre which can support this.

33119 We will turn now to the three questions you have posed for Phase IV.

33120 With regard to the first question about our own priorities, this ownership group has only one application before you. But in addition, we feel that travel happens to be a top-rated genre, and we feel that we have put forward the best application in this genre.

33121 Secondly, we would be pleased to be associated with any group of licensees the Commission feels would make an attractive, affordable and viable group for digital launch. We have heard no other applicant whose licensing would jeopardize our business plan, except the other travel applicants of course.

33122 Thirdly, having heard the applications, we think it may be possible for the system to accommodate not only a minimum of 10 English-language services, as we said in Phase I, but in order to have the strongest and most attractive packaging key to a successful launch, perhaps as many as 12 to 15, and five to six French-language services. We have great faith in your wisdom and your judgment to make the right choices.

33123 Madame la Présidente, Mesdames et Messieurs les Conseillers, you have many interesting decisions ahead of you, but in looking at the interests of the Canadian broadcasting system and of Canadian viewers we urge you to choose the best applications, whether they come from small independent players or larger ones.

33124 We believe that Travel TV is the strongest application in the travel genre and is, therefore, worthy of a Category 1 licence.

33125 Je profite aussi l'occasion pour remercier les membres du Conseil et leur personnel pour leur patience, leur courtoisie, et j'ajoute maintenant leur humour dans la conduite de ces audiences.

33126 Merci.

33127 LA PRÉSIDENTE: Merci, Monsieur Gourd.

33128 We will see some members of your team again tomorrow, of course. It is obvious that BCE is developing a healthy liking of the broadcasting side of our jurisdiction.

33129 MR. GOURD: Absolutely.

33130 THE CHAIRPERSON: It is much more fun.

--- Laughter / Rires

33131 MR. GOURD: We agree again.

33132 THE CHAIRPERSON: Away from wires.

33133 Thank you.

33134 Madam Secretary, please.

33135 MS BÉNARD: Thank you, Madam Chair.

33136 The next presentation will be by CTV Incorporated. Thirty minutes are allowed.

--- Pause / Pause

33137 THE CHAIRPERSON: Good morning.

REPLY / RÉPLIQUE

33138 MS McQUEEN: Thank you and good morning formally, Madam Chair, Commissioners and staff.

33139 I am Trina McQueen and I am happy to report that I am still Executive Vice-President of CTV and on behalf of CTV I would like to introduce our panel for Phase IV and all of us are pleased to appear before you again.

33140 On my left is Ken Murphy. On my right Bill Mustos. Beside Bill is Jon Festinger and Robert Hurst. Behind me, beginning on my far right, is Kathie Robinson and to Kathie's left are Nikki Moffat and Elizabeth Duffy-MacLean.

33141 First, we would like to say that we are impressed by the quality and the diversity of the applications before you. This has been a rich display of Canadian creativity and Canadian entrepreneurship. We are happy that in such an impressive group that our applications rank with the top in their proposed contributions.

33142 There are really no major interventions against our specific applications and, indeed, both competitors and intervenors have noted their positive elements. However, in Phase II CHUM did suggest that our subscriber projections and thus our revenue estimates are two risky.

33143 CTV does have wide experience in specialty channel operations and, in fact, we have been conservative. In year one we have projected a subscriber number of only 500,000 homes higher than exists now, a full year before launch and roll-out, and we have assumed that less than half of those digital subscribers will choose our services. There are modest increases in each year after that.

33144 We believe that people who are motivated to buy a digital box will certainly be motivated to buy a package of program services. That's just common sense. The boxes aren't pretty enough to sell as home decoration, but customers will not buy the boxes or the packages if the package prices are too high.

33145 Some parties have suggested that the difference between 30 cents a sub and 60 cents will be invisible. Our response to that is: What? Let's do the match. A package of 10 services at 30 cents a month versus a package of 10 at 60 cents. Add the 100 per cent mark-up. That's $6 a month versus $12 a month. In most Canadian homes that's a big difference.

33146 On interactive revenue, CHUM again suggests that CTV is too aggressive. However, they have not chosen to make public their own revenue projections. CHUM boasts about its huge investment in interactivity. Then CHUM laments the scarce revenue and profits. Then CHUM insists that no company will tolerate losing money. Commissioners, a group that can dance like this is certainly not tired!

33147 CTV's near term interactive revenue projections are based on our current successful experience. Our far term projections assume that our services will derive a very modest share of what every analyst projects will be an enormous market. We have been open and responsible in the estimates before.

33148 As well, Global and CHUM just can't believe that CTV is prepared to take some losses in the early years; and they certainly aren't. But we believe that big companies should and can take a long-term view. Our profits will be based on a solid foundation: high quality services at affordable prices.

33149 We would like now to turn to our heads of digital services for their comments on Phase II and III interventions, beginning with Robert Hurst for our news applications.

33150 MR. HURST: Good morning, Madam Chair and Commissioners. First of all, we would like to express our gratitude to those intervenors who have filed letters of intervention on behalf of our regional news applications in British Columbia, Alberta and here in the national capital region.

33151 We have four responses on behalf of our regional news applications.

33152 First, we would like to address CHUM's concerns that regional news channels will not add diversity, specifically here in the Outaouais.

33153 Today, conventional broadcasters, on their scheduled news programs, cover roughly 10 to 12 stories every day. And most nights they are the same 10 to 12 stories, told differently of course, but they are still the same 10 to 12 stories.

33154 In contrast, News Centre Nouvelles, Newsnet BC and Alberta will be covering 40 to 50 stories every day, and in much, much greater depth. More cameras and reporters will be sent across each region. And we'll be tapping into the hours and hours of news and interviews that conventional stations record every day, but that viewers never see.

33155 The very purpose of regional news channels -- their everyday assignment -- is to seek out and report on diversity in each of their regions. That's exactly what CHUM has done with their CP24 in southern Ontario. And we submit that Alberta, British Columbia and the National Capital Region need and want the same kind of new and distinctive voice of their own.

33156 Secondly, CHUM also says News Centre Nouvelles will hurt in this market: TVA, TQS, CBC and The NewRO. We note that none of the local stations here, except for CHUM, is objecting to a bilingual regional news channel. And to address CHUM's points directly, The NewRO is an English-language, general interest, conventional television station, licensed to broadcast programming from all programming categories, only one of which is news. In contrast, News Centre Nouvelles will be a bilingual service, focusing exclusively on news and information programming here in the National Capital Region.

33157 We also note that CBC is cutting local news gathering significantly, not only here, but also in B.C. and in Alberta. At the same time, there is a growing concentration of media ownership -- print and broadcast -- in each of these three regions, which makes it important, we believe, to rebalance the diversity of voices available to Canadians. In B.C. especially, one company will own three of the largest daily newspapers and two television stations that together dominate the television news in British Columbia.

33158 Our third point, CHUM in its intervention said the Outaouais is not yet ready for its own version of Pulse24 in economic terms. We acknowledge that the regional news channels will have a smaller subscriber base than the national digital channels. That's why assured distribution, under a Category 1 licence, is important to sustain the $7.3 million investment in news gathering we plan to make in these regions.

33159 Before we prepared our business plans, we studied our markets and our resources carefully. We also studied the proliferation of regional all-news channels in the United States in similar sized markets. We are encouraged that regional news channels in the U.S. are flourishing.

33160 Finally, the Canadian Conference of the Arts suggests you should not even consider the news genre. We strongly disagree. News is one of the most popular genres in specialty television. It is pure Canadian. News is always hot. The Goldfarb research, filed with our applications, found that 88 per cent of the respondents liked the idea of their own regional news channel. And in times of major stories or crises, 95 per cent viewed these channels as vital services.

33161 The regional news applications are the most attractive to viewers of any application before you. They are also the only ones that are all Canadian, 100 per cent Canadian all of the time. And on top of that, the Commission will get three-for-one. Three regional news channels for one genre.

33162 In closing, the Commission has asked us about the application of the BDU Access Rules to CTV News Centre Nouvelles. We have included an answer to this question in our formal reply here as Appendix A to this submission.

33163 MS McQUEEN: Ken Murphy will now address the reply by the Discovery Health Channel.

33164 MR. MURPHY: Madam Chair, Commissioners, our response will focus on statements made by our competitors in the health genre.

33165 Alliance Atlantis has contended that health programming is a natural offshoot of their lifestyle programming on Life Channel and Home and Garden TV. We disagree. Health is science based, and although a healthy lifestyle is important to all of us, it is the science behind such a lifestyle that is important. Health is not "how to", and we fail to see the intuitive connection between the sort of programming offered on Life and Home and Garden TV and medicine.

33166 With respect to the Alliance Atlantis contention that they should be awarded a health licence because they have arranged to displace an American Health Channel already in Canada, we submit that a Canadian health licence should be awarded on the merit of the proposed service and the credentials of the applicant, not on private arrangements made with a U.S. broadcasters. The issue is the quality of the Canadian service.

33167 Discovery Health Channel would happily co-exist with the present American Health Channel. Why? Because anyone who has seen their programming knows it is completely American-centric, without the benefit of an international much less Canadian perspective.

33168 In contrast, Discovery Health Channel will offer Canadians the best, most relevant experience and scientific credentials; and the most extensive ongoing relationships with the Canadian scientific and health community.

33169 We are leaders in the creation of original Canadian web programming and in the development of interactive television.

33170 We have the lowest subscriber fees. In fact, when combined with our digital universe and penetration projections as compared to our competitors in the health genre, we will cost Canadian subscribers between $5.1 and $25 million less over the license term.

33171 Finally, we commit to spend the most on Canadian programming, both absolutely and as a percentage of previous years' revenue. In fact, we commit to spend between $5.5 and $18.1 million more on Canadian programming than our competitors.

33172 In response to Levfam's suggestion that only they are the truly Canadian choice, our track record in this regard speaks for itself. And we note that Levfam plans to spend on foreign programming more than three times what we have proposed. Perhaps this is the best indicator of our commitment to Canadians.

33173 Furthermore, Levfam misspoke when they suggested that our digital interactive content would simply come from the U.S. Perhaps this allegation is relevant to Alliance Atlantis and CanWest, both of whom have partnered with U.S.-centred Web sites.

33174 Our digital interactive content will be produced in Canada by Canadians. And we suggest that in a digital set-top environment, partnering with a U.S. Web site will be less important than having the ability and the team to produce relevant digital health programming that will form an integral part of the television program.

33175 We also point out that Global, in their Phase I presentation, purported to offer the highest original hours of Canadian programming. Frankly, we believe bulk programming has no place on a Canadian health channel and we suggest that the commitment of dollars to Canadian programming is the essential ingredient that will produce a high quality health service. Please compare the health applications on this most important indicator.

33176 In closing, we would like to acknowledged all those who filed interventions in support of Discovery Health Channel. These interventions represent strong support from a significant number of health organizations. We would also like to acknowledged the Directors Guild of Canada's determination that our health application surpasses our competitors in terms of "Canadian content, scheduling, spending, independent production and the wholesale rate".

33177 MS McQUEEN: For TV.tv, here is Bill Mustos.

33178 MR. MUSTOS: Madam Chair, Commissioners, our reply pertaining to TV.tv is confined to two criticisms from CHUM.

33179 Firstly, CHUM suggests that TV.tv proposes to combine three programming elements that today are already served in at least three different ways: Program promotional clips on barker channels, program guides offered by distributors, and the promotion of Canadian stars and programs which they claim is a core mandate of Star!

33180 In response, CHUM has simply failed to understand the true purpose of TV.tv. Their allegations are, to put it bluntly, not correct.

33181 The primary mission of TV.tv is to showcase Canadian programs, those who create them and those who make them come alive on screen.

33182 TV.tv's second goal is to offer meaningful information about television and its place in our lives, with a particular emphasis on media literacy.

33183 Thirdly TV.tv will offer a user-friendly program guide that places Canadian offerings first within the context of a 500-channel universe.

33184 As put by Maureen Parker, Executive Director of The Writers Guild of Canada, in her supporting intervention:

"TV.tv will serve a valuable role in promoting Canadian programming in an era of rapidly-proliferating programming choices".

33185 TV.tv's program schedule will be made up of more than 200 hours per year of original programming that showcases Canadian programs from across the entire Canadian broadcast system. This type and quantity of programming is currently not available on Star! or barker channels. And no distributor in the country currently offers a program guide that prioritizes Canadian television offerings. Only TV.tv is stubbornly determined to put Canadian choices first in the emerging 500-channel digital environment, and all of this for just $0.05 a subscriber!

33186 Secondly, CHUM argues that TV.tv would duplicate the vast majority of Star!'s format and content. They further suggest that CTV "missed the boat and can't ask the Commission to reopen this matter now". Again, we feel that CHUM is failing to acknowledge a very simple fact: TV.tv will be a digital channel devoted to Canadian television.

33187 Unlike Star!, we will not focus on feature film, theatre, literature or dance. Unlike Star!, we will not place any emphasis on American network programs or stars. The limited foreign content on TV.tv will focus on quality international television and not programs from American conventional networks.

33188 While it is acknowledged that Star! also covers television within its broader "entertainment mandate", it is worth pointing out that Star! has total Canadian content levels, for their full spectrum of entertainment programming, of just 30 per cent rising to 50 per cent by the end of their seven year term. This pales in comparison to TV.tv's commitment to focus on Canadian television and to launch with 90 per cent Canadian content from day one.

33189 Finally, CTV fundamentally disagrees with CHUM's suggestion that only Star! should have the mandate to support the Canadian television sector. As we all know, there is not a real Canadian star system in this country at present, at least outside of Quebec. We firmly believe that we will never overcome this reality if there are not more and more outlets, in print, television and the Internet, that try to build awareness of and excitement around our Canadian programs and our creative talent.

33190 With all due respect to CHUM, we believe there is room within Canada for both Star! and TV.tv.

33191 MS McQUEEN: For our reply with respect to DGNet, here is Jon Festinger.

33192 MR. FESTINGER: Madam Chair and Commissioners, we would like to take this opportunity to reply to some points raised by our competitors in the technology genre.

33193 Rogers contends that "you can't out ZDTV by offering movies as suggested by CTV". In reply, we would point out that DGNet proposes to offer one movie a week. In addition, CTV has indicated that for all our services proposing to offer movies, we will not run any first-run Hollywood features, all movies will be directly related to the programming genre of the service, and movies will be limited to a maximum of 10 per cent of the programming schedule.

33194 Moreover, we don't want to out ZDTV. DGNet's Canadian content levels dramatically exceed ZDTV's, and our wholesale rate is approximately one-half of what ZDTV proposes. All the while, we will be focusing on creating an indigenous and unique Canadian perspective on computers and new media, as opposed to importing an American concept.

33195 A Canadian technology channel needs to be truly Canadian in origin, if it is to further our national interests and identity in the fastest growing segment of the world economy.

33196 With respect to Learning and Skills Television's suggestion that extremely high repeat factors go hand-in-hand with high programming content commitments, we disagree. It is a fact that DGNet's Canadian content levels dramatically exceed those of Computer Access. The representative program schedule filed with our application shows exactly how we can achieve these levels of Canadian content.

33197 The answer is clear in comparing our schedule to their schedule. In year one we have scheduled a minimum of 728 original hours of Canadian programming. In contrast, Learning and Skills has committed, in Phase II of this hearing, a minimum of 458 hours. So the answer is that DGNet achieves our high level of Canadian content, not through a high repeat factor, but the old fashioned way, by producing a great deal of original programming.

33198 Finally, Learning and Skills Television is incorrect, at least in referring to DGNet, when they suggest that we believe a computer channel should simply be a news channel about computers.

33199 Two of our original series, "Switching On" and "Switched On", are expressly instructional, while other series such as "Digital Desk" and "Scavengine" have significant learning and teaching elements in them. We believe that DGNet's balanced schedule of instructional, educational and entertaining programming will be the technology choice for Canadian viewers.

33200 MS McQUEEN: And Bill Mustos, who is doing a lot of work today, is going to address Shadow TV and the Men's Entertainment Network.

33201 MR. MUSTOS: I said in Phase I that I have been waiting for three years to talk to you about Shadow TV, and I can tell you I have been waiting for eight days to respond to some of the comments made by our competitors about Shadow!

33202 Our rebuttals with respect to Shadow TV are fairly straightforward and fall into three key areas: diversity, original programming, and partnerships.

33203 I will address these three areas one-by-one.

33204 First, CHUM has suggested that competing mystery applications offer significantly less diversity than CHUM's application, particularly when comparing CHUM's movie-driven offerings with series-driven or more general competing propositions.

33205 CTV is confused by this assertion. We have counted no less than 20 separate series in the sample schedule for CHUM's Suspense Channel, most of which are foreign series. Regarding CHUM's movie offerings, the Suspense Channel proposes two dedicated movie slots.

33206 Now, we don't take issue with CHUM's proposed mix of series and movie offerings, as both are valid, tried-and-true formats for exploring the mystery genre.

33207 We simply do not understand why CHUM believes its schedule offers more diversity. It's a mystery.

33208 In fact, Shadow TV's schedule offers the most diverse range of programming, in that we are proposing a schedule comprised of series, the same number of movie slots as CHUM, a whole documentary strand, an original magazine format series, an original interactive series and, finally, forensic and justice programming, which is unique among the three competing mystery channel applications.

33209 In short, we see Shadow TV offering the most diverse schedule, in terms of mystery programming, with the highest Canadian content levels, the highest percentage of revenues to Canadian programming expenditures, at the lowest wholesale price.

33210 Secondly -- and regarding original programming -- CHUM, again, suggests that CTV is offering little in the way of distinctively new programming and, more importantly, nothing for feature film, which CHUM said they found surprising, given CTV's high revenue expectations for the service.

33211 Interestingly, over the term, CTV is proposing 55 per cent more original hours of Canadian programming than is CHUM. That says it all.

33212 And with respect to CHUM's suggestion that our application is somehow deficient for its lack of support for feature film, we can only say that this hardly strikes us as a relevant point of comparison between competing digital television channel applications.

33213 This is particularly true, given that CHUM is proposing to support six feature films over the entire seven-year licence term, all of which are intended to follow the orderly marketplace, in terms of theatrical and broadcast windows -- including a prior window on CHUM.

33214 Now, there is nothing surprising in this plan to broadcast these feature films on CHUM before airing on Suspense TV, given the high cost of production.

33215 The only surprise is the suggestion, by CHUM, that this somehow distinguishes the Suspense TV application and places it in a more positive light.

33216 Lastly, Groupe TVA has indicated that 13^e Rue is not dependent on the licence being granted to 13th Street.

33217 In other words, TVA will implement its mystery channel and all of their programming commitments even if 13th Street is not licensed.

33218 We would be pleased to work with TVA, in a co-operative way, should the Commission decide to license 13^e Rue and CTV's Shadow TV in the mystery genre.

33219 And, finally, we would like to indicate our appreciation to the Directors Guild of Canada for choosing our application as "the best suspense or mystery application".

33220 That concludes our rebuttal, on behalf of Shadow.

33221 I'm now stepping in for Ed Robinson, on the Men's Entertainment Network.

33222 Ed was busy last Friday launching Talk TV, our new channel. And this week Ed is executive producing CTV's "Who Wants to be a Canadian Millionaire".

33223 I know Ed would like to handle today's rebuttals himself but, fortunately, he was "man enough" to realize his own limitations.

--- Laughter / Rires

33224 MR. MUSTOS: Global and TVA, the applicants of Men TV, made four criticisms of CTV's application for Men's Entertainment Network.

33225 These are our responses:

33226 First, Global and TVA state that we attempted to enhance our independent production proposal, during Phase I.

33227 In fact, for the record, as clearly written on page 2 of our supplementary brief and, again, on page 3 of Appendix A to our supplementary brief; quote:

"MEN will commission at least half of its original programming from Canadian independent producers."

End quote.

33228 This has always been, and continues to be, our commitment.

33229 We note that Global/TVA did not provide similar information, in their Men TV application, with respect to their proposed levels of original programming or their commitment to the independent production sector.

33230 Secondly, Global/TVA also state that, despite having a high number of hours of original programming, our average cost per hour is too low to create quality programming.

33231 CTV will provide reasonable licence fees to the independent production community.

33232 With respect to our in-house productions, our experience with specialty channels has taught us how to produce quality Canadian programs in the most cost-effective and efficient way.

33233 We believe that in the digital world, that will be an asset and a necessity.

33234 Thirdly, Global/TVA argue that their application is preferable because it focuses entirely on lifestyle programming, while our Men's Entertainment Network proposes to be much broader.

33235 With all due respect, we think a service devoted to creating a community for the modern man needs to have a wider selection of programming than simply lifestyle programming.

33236 The programming philosophy for Men's Entertainment Network is to create a service that focuses on programs for men that are not currently available elsewhere in a comprehensive way: information; human interest; recreation and leisure; and documentaries.

33237 At the same time, unlike the CHROME application, we were careful to craft our service so as not to include sports or music since these genres are covered sufficiently elsewhere.

33238 Corus, in its intervention, says that its application for CHROME has a higher level of Canadian content than Men's Entertainment Network.

33239 This is simply not true.

33240 Over the licence term, the Men's Entertainment Network and CHROME have exactly the same average proposed Canadian content level of 50.7 per cent.

33241 We think Men's Entertainment Network will offer the most diversity of programming and the broadest appeal to men of all ages, without infringing on existing licensees.

33242 Our channel will also provide high Canadian content levels, the most original hours, at the most affordable wholesale rates.

33243 MS McQUEEN: And, now, here is Ken Murphy, to reply with respect to Exploration Network.

33244 MR. MURPHY: Thank you.

33245 First, with respect to Salter Street's incorrect and misleading statements about Discovery Channel, surely no one familiar with Discovery Channel would actually suggest that nature programming isn't fundamental and core to our service.

33246 We trust that our written intervention of July 7th has set the record straight.

33247 In their appearance for the Leisure Network, Pelmorex suggested a need to establish clear boundaries, with respect to Exploration Network's nature of service, both on television and with digital interactive features.

33248 While we agree that all licensed services should have clearly defined natures of service, we would like to stress that Exploration Network will be a science-based, not a recreation-based, specialty service. Exploration Network's mandate of making Canada better known to Canadians and the world can simply not be confused with the pursuit of leisure activities.

33249 And while there's an enormous amount of American geographic programming all over the Canadian dial, there is yet no service truly devoted to geography and truly focused on Canada.

33250 Exploration Network is what a geography channel in Canada should be, not duplicative of Discovery Channel's nature and science programming, but focused squarely on the physical and human geography of Canada.

33251 As the Canadian Association of Geographers wrote to you, in their intervention supporting our application for Exploration Network -- I will quote:

"In an era of globalization and the ready availability of quality documentary programming from foreign sources, it is especially important that media outlets be developed that will promote specifically Canadian content."

33252 Thank you.

33253 MS McQUEEN: That concludes our reply to interventions.

33254 And just in case we messed that all up, we have attached charts to clarify what we said just now.

33255 We would now like to reply to your specific Phase IV questions. "Les devoirs", I believe.

33256 First of all, the question of whether other Category 1 licences would affect our business plans.

33257 The simple answer to that is "no", except, of course, for the directly competitive ones in health, mystery, men's and technology.

33258 And the second question concerned our priorities for licences.

33259 We have submitted nine applications. We are serious about them all. We are committed to them all. We would be happy if you licensed any of them -- and, of course, happy if you licensed all of them.

33260 Each of our services is based on the CTV strength, and we have the team, the skills and the passion to make a success of any of them. But our fundamental and consistent approach is viewer attractiveness, and we think that each individual service has to pass the "attractiveness test" -- and so does the entire Category 1 offering.

33261 Without knowing what other services might be licensed, and because we have so many licence proposals, it's hard for us to give you the CTV services that would make that overall Category 1 package the most attractive, but we do have some comments.

33262 Our news services have the highest viewer demand of all applications. News is at the top of television popularity and our services represent the only opportunity to put news in Category 1.

33263 Each of our competitive services, Shadow, Health, Men's and Digital, are at the top of the list for your criteria, and each is truly affordable.

33264 Shadow and Health are based on demonstrated CTV track records of great success in that genre. Shadow offers more original programming than its competition. Health has a guarantee from its partner to buy large amounts of Canadian programming for export.

33265 Our men's channel is more focused in its categories.

33266 Our digital channel provides a truly Canadian approach.

33267 In the non-competitive applications, our Exploration channel offers true diversity, high demand and Canadian investment. It is the most beautiful of all the channels presented and it represents an important partnership with Canadian Geographic Magazine.

33268 And this brings us to your final question, "How many services should be licensed?"

33269 You have heard from our colleagues at RDS on the French application, and we support their views.

33270 As for the English licences, you now have a really wide range of numbers on the table -- and we are going to put one more on the table for you, but this number is based on actual analysis of the services and the possible offering.

33271 We consider that the decision on Category 1 services should be based: First, on the contributions to the Canadian system that this service offers -- that's the price applicants have to pay for the "must carry" status; secondly, of course, on the attractiveness of the service; and, third, on a demonstrated ability to succeed in the genre.

33272 Big companies or small, new players or experienced ones, should compete on these grounds -- and everyone can compete on these grounds. Veteran players don't have guaranteed entitlement. But, on the other hand, new entrants don't, somehow, by some kind of definitional magic, guarantee new ideas.

33273 Building digital should be about the viewer, and only about the viewer.

33274 So, in considering the right number, first of all, our overall approach is that you should have enough services to create a wide range of interest and taste attractiveness, but you shouldn't have too many that all the Category 1s can't be embraced in an affordable package, a full meal deal that would also include Category 2 services.

33275 So, first, to lighten the load, we figured out what doesn't need to be in Category 1.

33276 We think that narrow-cast channels, like pets, dance, fashion, games, books and niche children's channels are perfect Category 2 applications. They can be put together in very exciting ways, with lower Canadian content and great foreign contributions. BDUs should love those channels.

33277 So, having lightened the selection, here's how we came to our notion of a solid digital offering.

33278 News, sports and movies are the most popular TV genres. A representative of each of those would make a powerful start.

33279 Health, mystery, travel, romance, biography, men's and computer channels offer a blend of learning and entertainment that will appeal to a wide range of viewers. These channels -- and this is really important -- have simple, strong concepts that can be easily marketed and understood and packaged in creative ways.

33280 Six or seven of these channels would be an excellent Category 1 backbone.

33281 The group could be rounded out with one or two innovations to add freshness and to widen the take-up, appeal.

33282 Our own Exploration channel is one example, as are the Wisdom Channel, the Work Channel and the Gay and Lesbian proposals. And that makes, to us, an offering of 10 to 13 very attractive services.

33283 Above all, this would be a fresh and diverse plan, giving viewers popular themes and ideas that they don't have now.

33284 Here's lots of potential to build digital and to create the future for the Canadian broadcasting system.

33285 That is what this hearing has been about. We said in our first appearance that this would likely be the most significant hearing that any of us on our team would have the chance to attend. We thank the Commissioners and the staff for their courtesy, their diligence and their continued efforts to give us the best chance to make our case. And if we are successful, we will remember our promise: that we will work as partners with you, with the distributors, with the other services, and we will do this always with the satisfaction of Canadian viewers as our primary objective.

33286 Thank you for this opportunity.

33287 THE CHAIRPERSON: Thank you, Ms McQueen.

33288 You will have to be careful that Mr. Mustos doesn't join the ranks of the tired.

--- Laughter / Rires

33289 MS McQUEEN: That is not going to happen for a long time.

33290 THE CHAIRPERSON: Thank you very much.

33291 Madam Secretary, please.

33292 THE CHAIRPERSON: Thank you, Madam Chair.

33293 The next presentation will be by Rogers Broadcasting Limited. Eighteen minutes are allowed.

33294 THE CHAIRPERSON: Welcome back, Mr. Viner.

33295 MR. VINER: Thank you, Madam Chair.

REPLY / RÉPLIQUE

33296 MR. VINER: Madam Chair and Members of the Commission, I am Tony Viner, President of Rogers Media. With me, on my left, are Alison Clayton and Peter Kovacs, and on my right, Robert Buchan.

33297 As the Commission is aware, Rogers filed four Category 1 applications: ZDTV Canada, now known as techtv Canada; Biography Canada; Today's Parent TV; and The Documentary Channel. On July 17 we submitted a detailed reply to the written interventions that we received with respect to those applications.

33298 In our presentation today Ms Clayton and I will address comments made by various intervenors in Phases II and III with respect to our four Category 1 applications.

33299 I will begin my comments with ZDTV Canada, now known as techtv Canada.

33300 If any genre of programming can drive digital it surely must be one that is dedicated to the digital lifestyle, which is exactly what Rogers, in partnership with Shaw and ZDTV of San Francisco, is proposing with its techtv Canada application.

33301 Our direct competitors for this programming genre are CTV, Global and CHUM's Learning and Skills Television.

33302 We have been criticized by some for including an American partner in our application. We should point out that each of our competitors assiduously sought to woo ZDTV to partner with them on their applications. They didn't seem too concerned then about the fact that ZDTV was an American channel.

33303 But techtv Canada will undeniably be a Canadian service, fully managed and programmed by Canadians for Canadians, with majority ownership by Rogers and Shaw, two of Canada's foremost leaders in new media, the Internet and interactive television.

33304 The strengths that each of these three partners brings to the table makes our application, by far and away, the strongest of the four competing applications.

33305 CTV, Global and Learning and Skills Television do not have anywhere near the extensive experience that Rogers and Shaw have, experience that is further bolstered through the provision of high-speed Internet service to 600,000 subscribers, a number that grows each day. No one in Canada is better equipped to launch a new digital specialty television service that marries new media content to conventional television and which incorporates interactive television.

33306 Our U.S. partner, ZDTV, is the fastest growing cable channel in the United States, with 19 million subscribers today and 23 million expected by year end. It is the world's largest producer of technology and computer programming, with over 1,300 original hours of programming produced each year.

33307 From day one, techtv Canada will be able to provide Canadians with a high appeal, high quality Canadian computer, technology and Internet programming service. The others simply do not have access to the resources and market-proven expertise that stand behind our application.

33308 Partnering with a foreign service, especially one that is the acknowledged world leader in this programming genre, makes a lot of sense, and it also falls within the framework established by the Commission in its call when it encouraged partnerships with foreign services and when it asked for levels of Canadian content of 50 per cent by the end of the first licence term.

33309 In the case of techtv Canada, the amount of foreign programming that it will provide decreases dramatically each year, and the licence fees we propose to pay for Canadian programming are, on average, eight times more than those that we will pay for our foreign partner's programming.

33310 In Phase II, CHUM's Learning and Skills Television inaccurately portrayed techtv Canada as simply "a news channel about computers". They are fully aware that when we likened techtv Canada to the CNN of technology it was to capture for the Commission the fact that the programming for this particular channel has to be current, up-to-date and produced very quickly, as it has a limited shelf life. It was in that regard that we compared our proposed service to a news channel.

33311 Rogers' vision for the channel is very clear.

33312 Techtv Canada is the lifestyle channel for the e-generation. It is the on-air and on-line network that targets the large and rapidly growing consumer population that wants to be savvy about today's technology. In Canada more than 13.5 million people have access to the Internet -- a number that grows every day. These are the people who want techtv Canada.

33313 Techtv is a radically different offering from any of the other applications which are before you in any genre. Our viewers will be more engaged, more committed, and will have higher expectations because of the exceptional amount of interactivity associated with the service. Our mission will be to empower the digital consumer to discover technology's promise for themselves.

33314 Techtv Canada's programming will encompass five core zones, including product reviews, help and how-to, news, finance, and entertainment.

33315 The programming for techtv Canada will come from Categories 1, news; 2(b), long form documentary; 3, reporting and actualities; 5(b), informal education; and 11, general entertainment and human interest -- all of the categories one would logically associate with a programming service of this nature.

33316 Unlike our competitors, we will not be padding our schedule with animation, game shows, movies and mini-series.

33317 All of the programming on techtv Canada will be original and new to the service. There will be no programming overlap, such as that proposed by Learning and Skills Television. They have requested a 15 per cent overlap with Canadian Learning and Skills Television and a 15 per cent overlap with Access. In our opinion, such a reliance on duplicative programming will not contribute to diversity in the Canadian broadcasting system.

33318 Some of our competitors also raised issues with respect to our business plan.

33319 Techtv Canada's estimates of the digital subscriber universe and the take rate are moderate, achievable and in the mid-range relative to the other applicants. Our estimated subscriber base in year 7 falls between the high estimate filed by CTV and the low estimate of Learning and Skills Television.

33320 Our business plan projects substantial expenditures on Canadian programming. Over the seven year period, techtv Canada will spend almost twice as much on its Canadian programming as Learning and Skills Television, and an amount comparable to that projected by CTV. Global proposed to spend more, but their monthly wholesale rate is the highest of any of the applicants for an English-language computer lifestyle service.

33321 Rogers' wholesale rate falls between the very high rate of Global and the low rate proposed by CTV.

33322 We believe that techtv has the strongest ownership group of any of the four applicants for this genre. It has the programming, marketing and branding resources to make techtv Canada a viable, attractive and high quality service right out of the gate. And it has an achievable business plan that combines reasonable projections with affordable rates.

33323 We have said it before and others have said it since: You just can't out-ZD ZDTV.

33324 MS CLAYTON: The Documentary Channel.

33325 I'm not sure how relevant this point is in these proceedings, but to Rogers it is very important as it is indicative of our support for documentaries in this country. In the last round of specialty applications, in the fall of 1997, Rogers was the only company who applied for a dedicated documentary channel.

33326 This time there are three applicants including Rogers. It is said that imitation is the sincerest form of flattery, but we don't see it that way. Our vision for a documentary channel has always been to celebrate the voice of the independent filmmaker -- not to use the channel as a vehicle for re-runs of programs that were produced in-house by the CBC and the NFB.

33327 Neither of these agencies needs another outlet for their programs. The CBC already has two very high profile analog channels that program a great number of documentaries. The CBC television network reaches virtually every Canadian and CBC Newsworld is in 9 million Canadian homes. The NFB's programming is widely available and broadcast extensively on at least a dozen Canadian channels.

33328 Rogers Documentary Channel will make a much greater contribution to programming diversity than that proposed by Corus/CBC/NFB. We are committed to acquiring 95 per cent of our Canadian programming from independent filmmakers.

33329 Only 35 per cent of Corus' Canadian programming will come from independent producers. The remainder -- referred to as "bulk" programming in their application -- will come from a pre-selected inventory of non-exclusive CBC and NFB titles. As is set out in the shareholders agreement, their proposed service will not have the entire CBC and NFB catalogue from which to choose its 300 hours every year. Rather, it will only have access to 450 hours pre-selected by the CBC and the NFB. How will replaying 40 seasons of "The Nature of Things" contribute to diversity? Will such programming drive digital penetration?

33330 Only half of Corus' spending on Canadian programming will go to the independent production sector, whereas 95 per cent of Rogers' Canadian spending will go to support Canada's independent filmmakers, with licence fees that are at least two to four times the amount being offered by either of the other applicants.

33331 As the Independent Film Caucus pointed out in their intervention during Phase III, such licence fees are necessary to meet the threshold requirements set by the Canadian Television Fund and Telefilm Canada. Even Corus described their licence fees of $2,000 an hour as "bargain basement".

33332 Corus has raised a concern about the amount of Canadian programming which will come from the independent producers who each own 2 per cent of our channel. If it would give the Commission comfort, we would be prepared to commit, as we did with Sullivan Entertainment vis-à-vis Today's Parent, that no more than 5 per cent of the overall Canadian programming on the Documentary Channel would collectively be programming produced by the affiliated producers.

33333 Rogers is Canada's foremost private sector supporter of documentary filmmaking. Rogers has supported more than 250 documentaries through Rogers Documentary Fund, Rogers Telefund and Rogers Cable Network Fund. We have committed more than $4 million in outright grants to Canadian independent filmmakers, along with countless millions in interim financing through Rogers Telefund. The many passionate letters of support that we received show that we have the support, trust and respect of the independent documentary community.

33334 Corus, the majority partner in their application, does not have any track record with the Canadian documentary filmmaking community. Rather, they have focused their attention on music and children's programming.

33335 We will not spend time responding to Corus' inaccurate analysis of our Canadian content. Suffice it to say that if they had looked carefully at our Schedules 9 and 10, they would have realized that they are reflective of a seven-day sample schedule, not an entire year.

33336 We have filed with the Commission our commitment to original Canadian programming on a year-by-year basis.

33337 Rogers' vision of a documentary channel reflecting the voice of independent producers is about the future. It is in the independent sector where the volume, quality and originality of documentary programming now lives. It is the independents working out there across the country who now represent the true spirit of the Canadian documentary today, and we believe that our proposed documentary channel will best reflect that spirit.

33338 Today's Parent TV.

33339 Rogers also filed for a parenting channel in 1997 -- the only one to do so. It seemed to us then -- as it does now -- to be such a logical extension to our expertise and experience with Today's Parent magazine and Web site.

33340 Corus knew a good idea when they saw one, so they applied for a parenting channel this round. The difference between the two applications, however, is that Rogers clearly has the information, expertise, brand recognition and the proven ability to provide parents and other caregivers with access to the resources that they need to address parenting issues and concerns.

33341 Corus, on the other hand, specializes in programming at the other end of the spectrum -- programming for children -- and brings no partners to its application that would help to mitigate its lack of relevant expertise.

33342 The partners in Today's Parent TV have proven expertise in all of the key areas, including parenting, family programming and broadcast management.

33343 The Today's Parent Group is Canada's leading parenting communications organization with the No. 1 Canadian parenting magazine and the No. 1 Canadian parenting Web site.

33344 Sullivan Entertainment has over 30 years of experience producing some of the most popular and successful family entertainment programming in the world.

33345 In comparison to this wealth and breadth of knowledge and expertise, Corus' experience with parenting issues is based on three parenting series which have aired on YTV and Treehouse -- and, in fact, they admit there would be programming duplication of 10 per cent between the services. There will be no such overlap on Rogers Today's Parent TV.

33346 Today's Parent TV will make a much more significant contribution to Canadian programming. We will devote at least 40 per cent of our previous year's gross revenue to Canadian programming compared to 33 per cent for Corus' Parent TV.

33347 We will spend a total of $24.6 million on Canadian programming over the licence term, compared to Corus' $15 million.

33348 We have no idea where Corus came up with the analysis of our application that they presented in Phase II. Our licence fees for Canadian will be almost $7,000 an hour, more than double what Corus says we are offering.

33349 Similarly, in 8.2 of their application, Corus commits to only $1.6 million in acquired programming, yet in Phase II this number suddenly becomes $12.9 million.

33350 Biography Canada.

33351 There are only two applicants for a biography-type channel -- Rogers, in partnership with Shaw, and A&E, the company who invented biography programming, and Alliance Atlantis.

33352 It is a misrepresentation on the part of Alliance Atlantis to say, as they did in Phase II, that Rogers is applying to bring the Biography Channel to Canada. Partnering with an American service does not mean importing the channel wholesale, as Alliance Atlantis, more than any other Canadian broadcasting company, should know.

33353 Biography Canada will be undeniably a Canadian programming service, managed and programmed by Canadians.

33354 We have chosen to partner with the industry leaders in this genre, well within the framework set out by the Commission for this hearing. Such a partnership with a foreign programming service ensures the best of both worlds, a Canadian programming service operating within the Canadian broadcasting system with all the benefits to Canadian producers that this entails, while also being able to offer Canadian consumers a strong, internationally-recognized brand, the marketing know how, and the programming library.

33355 Alliance Atlantis suggesting that it's a bad thing to have American partners in a Canadian owned specialty service seems to be a case of the pot calling the kettle black.

33356 Similarly, it seems odd that a Canadian company that has had such success importing American programming ideas to Canada would want to see a restriction of 15 per cent on programs about Americans. There are no such limits placed on History Television, Home & Garden, Life and The Food Network. Why on earth would they think this was relevant with a Biography Channel? Biographical programming has nothing to do with where a person is from. It is bout what they have done in their life that is remarkable, noteworthy or inspirational.

33357 We object to Alliance's inaccurate portrayal of our Canadian content. Hitting 50 per cent by year 5, two years ahead of the schedule suggested by the Commission in its framework, can hardly be described as "barely reaching 50 per cent by the end of the licence period".

33358 Similarly, we have no idea where Alliance came up with the definition of what type of movies would be played on Biography Canada. They came up with the misleading definition they described in Phase II. We didn't.

33359 Speaking of programming categories, how can Alliance consider its application to be for a niche specialty programming service when they are asking for 11 different categories of programming, including game shows, drama series and comedy sketches. This sounds more like a general interest service. In comparison we are only asking for three categories.

33360 We have filed with the Secretary our responses to the three questions you asked us to address at this stage of the hearing.

33361 That concludes our presentation.

33362 Thank you.

33363 THE CHAIRPERSON: Thank you very much, Ms Clayton, Mr. Viner and your colleagues.

33364 Madam Secretary.

33365 MS BÉNARD: Thank you, Madam Chair.

33366 The next presentation will be by Alliance Atlantis Broadcasting Inc. Eighteen minutes are allowed.

--- Pause / Pause

REPLY / RÉPLIQUE

33367 THE CHAIRPERSON: Welcome back.

33368 MR. MacMILLAN: Thank you.

33369 Good morning, Madam Chair and Members of the Commission.

33370 We were delighted to begin this hearing four weeks ago and we are honoured to be the last participant to appear before you in this phase.

33371 My name is Michael MacMillan and again with me, on my right, are Phyllis Yaffe and Rita Cugina, and on my left Kathleen Brown.

33372 Our oral reply today will focus on points that have arisen in the course of the public hearing. After we have addressed these points, we will deal with your three homework questions.

33373 I want to begin our reply by addressing a general point raised in the intervention of Rogers against our application for Signature Television, namely, that our penetration numbers are too high and too optimistic. This point was also made by CHUM and Astral in regard to our Independent Film and Documentary Channel.

33374 We have already responded in writing to the Rogers intervention, but let me add the following comments.

33375 In looking at this issue, it is important to note that our digital box penetration numbers are very similar to those of many others in this proceeding.

33376 The key difference, though, relates to our take-up rate. Rogers estimates that its Biography Channel will reach a 70 per cent take-up rate by year seven, but they start much lower. We reach about the same level in year seven, but we start much higher in year one.

33377 The difference between us is accounted for by several factors.

33378 To begin with, we assumed that most new digital box subscribers will be getting the box not for itself -- that is kind of pointless -- but in order to get the new digital services. That accounts for part for our higher take-up projections.

33379 A second consideration for the difference in take-up rate was the attractiveness of the genres we proposed. The extensive Environics research we commissioned into the propensity of Canadians to use digital technology showed that the four services we have proposed will be of particular interest to those persons. Signature Television was, in fact, the highest rated of our four services and the biography genre has been consistently rated among the top three genres by others in this proceeding.

33380 A third consideration underlying the take-up rate is the question of price. Now, despite what you were told yesterday afternoon, there is a big difference between 30 cents and 65 cents. If you double all the rates of the individual services in a package, then the total rate charged to the consumer will also double, and surely that will have a negative impact on penetration.

33381 Rate does matter. It is clear that in the digital environment the key to success will be packaging, where in order to maximize the take-up rate, you combine attractiveness with a low wholesale rate.

33382 We recognized this relationship from the beginning and we have purposely kept our wholesale rates low in order to achieve affordable packages and a high take-up rate right at the start.

33383 By contrast, Rogers and CHUM have proposed wholesale rates 33 per cent to 50 per cent higher than ours. Astral/CanWest has proposed a wholesale rate for their Cinefest channel that is over 100 per cent higher than our rate.

33384 In other words, the same people who criticize our take-up rate projects have themselves put in wholesale rates that will make it harder to put affordable packages together. Is it any wonder that they assume lower take-up rates than we do?

33385 It is these same critics, Rogers, CHUM and Astral/CanWest, that have proposed lower Canadian content levels than in our competing applications. They justify these low Canadian content levels by putting in self-fulfilling lower subscriber numbers and then criticizing anyone who takes a more positive approach.

33386 To be clear, our Canadian content levels are explicitly set out in section 7.4 of our applications and these are not dependent on penetration.

33387 We think the Commission should favour those applicants who have pushed the envelope in favour of low wholesale rates and higher Canadian content. That is the combination that makes sense in the digital environment and that is the combination that we have used in each of our four applications.

33388 Let me turn now to Phyllis Yaffe who will address some specific points about our application for Signature Television and for the Book Channel.

33389 MS YAFFE: Thank you, Michael.

33390 During the intervention by Rogers, Alison Clayton said, and I quote:

"Neither Rogers nor Alliance Atlantis can claim to have extensive experience in the biography programming genre."

33391 This statement is undoubtedly true of Rogers, but it is quite false when it comes to Alliance Atlantis.

33392 Our company has more experience in the biography genre than any other private company in Canada. Since it launched in 1997, our History Television services has commissioned over 100 hours of Canadian biography programs. In addition, Norm Bolen, our Senior Vice-President, Programming, who has spearheaded our Signature Television application, came from the CBC where he was involved in originating the CBC's biography series, "Life and Times".

33393 So, unlike Rogers, we have no need for an international partner to tell us how to program a biography channel.

33394 During the intervention by Learning and Skills, Ron Keast said, and I quote:

"The Book Channel and Booknet seem to be perfect examples of the phenomenon of random applications in search of a licence."

33395 His point presumably to allege that we have no affinity or experience with the book genre.

33396 Again, this is just ludicrous. If there is any company that has shown its commitment to bringing the printed word to television, it is Alliance Atlantis and its predecessor companies. We won an Academy Award for bringing Alice Munro's "Boys and Girls" to film. We won an Emmy for bringing Farley Mowat's "Lost in the Barrens" to the screen. We brought Margaret Laurence's "The Diviners" to television. We brought Brian Moore's "Black Robe" to theatres.

33397 We could go on and on. The point is, no one has come remotely close to the track record of Alliance Atlantis in bringing Canadian literature to life.

33398 Now let me turn to address some specific criticisms of our application for the Independent Film and Documentary Channel.

33399 First, I want to clarify three matters.

33400 The first is the percentage of revenue that we are prepared to spend on Canadian content.

33401 The CRTC has discussed a number of approaches and we have agreed that we would live with any of them. If the CRTC adopts a single number that would apply to the whole licence period, we want to clarify that the applicable number that we would accept is 35 per cent. That number can be derived by taking our seven year business plan and dividing the regulated revenue in years one to six by our Canadian content expenditures in years two to seven.

33402 Second, let me clarify our position on the proportion of our schedule to be made up of documentaries.

33403 Ms Michalchyshyn noted that our prime time schedule consisted of 61 per cent dramatic feature films, 22 per cent long-form documentaries and 17 per cent short films and videos and information programs about the art and business of filmmaking. To protect an all-docs channel, we would be prepared to accept those numbers as limits on our use of documentaries, not only in prime time, but throughout our schedule.

33404 Third, let me clarify our definition of what is an unaffiliated producer.

33405 We mentioned during the presentation stage that we favoured a rule that any company in which Alliance Atlantis or its affiliated companies had 30 per cent or more of the voting shares would be viewed as an affiliated producer.

33406 On review of the Food Network Canada decision, released only two months ago, to which we had referred, it is clear that the test was 30 per cent of equity, not 30 per cent of voting shares. We could live with either definition.

33407 Now let me address the concerns expressed by Astral and Corus Premium about direct competition with their pay channels. We continue to believe that our proposed limitations make sense, namely, that no film that is produced or financed by one of the eight major Hollywood studios -- not including their art-house divisions of their mini-major subsidiaries -- will be shown on our channel.

33408 So that is the first rule we would accept.

33409 A second rule relates to the annual variety list of the top 100 films.

33410 In the course of its intervention last week, Corus Premium acknowledged that 12 of the top 100 films in last year's list were in fact true independent films. Given that fact, to preclude us from running any films from that list would, we believe, be unreasonable.

33411 We have given this issue further consideration, and we would be prepared to limit our channel to no more than five of the top 100 theatrical films reported annually by Variety within each of the seven years prior to the date they are broadcast by the service. This reserves 95 per cent of the highest grossing films for all the other channels and we think it is an acceptable compromise.

33412 So that is our second rule.

33413 Astral and Corus Premium have also suggested that the terms "produced" or "financed" are too ambiguous and that the word "distributed" should be used instead.

33414 Again, we have given close consideration to this request. As we pointed out in our written reply, there are many truly independent films released by the majors so that a complete prohibition of films distributed by the majors would be quite unrealistic. However, we would be prepared to accept the limitation proposed by Corus Premium that no more than 5 per cent of the films made in the English language that are shown on our channel will have been distributed theatrically by one of the eight majors in Canada.

33415 So that is our third rule.

33416 We think that these three rules should be enough to distinguish our service from the existing pay services.

33417 MR. MacMILLAN: I will now turn to certain other criticisms of our Independent Film and Documentary Channel. These come principally from our competitors for this channel, including Craig, Salter Street and particularly Astral/CanWest.

33418 The first concern is with equitable access and self-dealing.

33419 We have put commitments on the table that address these issues.

33420 First, we will offer to license, on a fair and equitable basis, all Canadian films that are suitable for the service, regardless of who distributes them or who produced them.

33421 Secondly, we will recognize the orderly marketplace and permit a prior pay television window for any Canadian film that wants it.

33422 Third, at least 50 per cent of the original productions commissioned for the channel will be produced by unaffiliated producers.

33423 That will include all of the six original films to be made for the channel each year with a license fee of $100,000 each.

33424 And fourth, 100 per cent of the films supported with our $140 million corporate commitment will be produced by unaffiliated producers.

33425 We think that these commitments adequately address any reasonable concerns about equitable access and self-dealing.

33426 Before leaving this matter, though, I want to address an allegation made by Corus Premium that we were somehow tying up rights and making it difficult for them to buy movie titles.

33427 This is completely wrong. As a distributor we are constantly trying to sell more movies, both foreign and Canadian, to the pay services in Canada. And I can tell you that we offer them far more than they are willing to buy. To suggest that we withhold these movies from them is completely untrue.

33428 Now let me address other criticisms raised by our competitors about our corporate commitment to spend $140 million over seven years to support independent Canadian filmmakers if we win the licence this channel.

33429 Our opponents argue: (a) we will never do it;

33430 (b) we would have done it anyway;

33431 (c) you can't measure it; or

33432 (d) you shouldn't count it.

33433 We should not be surprised to have our competitors try to attack or discount this commitment, because it is real, it is meaningful, and it is unprecedented. This was specifically acknowledged last week by the Directors Guild of Canada, and we thank them for their positive intervention.

33434 Astral/CanWest has referred you to our year 2000 annual report showing "investing cash flows in film and television programs" of over $620 million. But this balance sheet number relates to television programs, films and broadcast rights for our entire company over a year. Only a tiny piece of that relates to cash spent on Canadian feature films made by unaffiliated producers.

33435 Over the last five years what has Alliance Atlantis spent annually to support Canadian feature films or feature-length documentaries by unaffiliated filmmakers? In 1995 we spent $4.8 million; in 1996, $1 million; in 1997 we spent $2.6 million; in 1998 we spent $4.1 million; and in 1999 we spent $4.0 million.

33436 Those are the real numbers.

33437 We propose to increase those numbers to $20 million per year. That represents a huge increase, more than quadrupling our efforts to date.

33438 Astral has also referred to our balance sheet showing $229 million relating to motion pictures. Referring to this number is totally irrelevant, because it relates to a range of our company's other activities, and only a tiny fraction of it, less than $5 million, relates to Canadian feature films made by unaffiliated producers.

33439 So again they have tried to mislead you with irrelevant numbers.

33440 Going forward, we will continue to support filmmaking by unaffiliated Canadian companies. But that is the riskiest part of the production business, and in the normal course there would be no reason for us to increase our level of risk beyond current levels.

33441 Astral suggests that we would probably make those investments anyway, but this comes from a company that decided to get out of the production in the 1980s and to get out of distribution in the 1990s. The reason? Because it was too risky a business.

33442 We know that our commitment is being made in a risky sector. But it has not been made lightly.

33443 We are frankly surprised that Astral presented such misleading numbers to you, taken out of context and having nothing to do with what we have actually proposed.

33444 The bottom line is this: If we win the licence for the Independent Film and Documentary Channel, we are prepared to strengthen our leadership role in the film industry. We will increase our corporate commitment to unaffiliated Canadian filmmakers from its current levels of less than $5 million a year to $20 million a year. The numbers can be easily audited and we will accept this as a condition of license.

33445 We are prepared to step up to the plate in this way because we see this channel as vitally important to our future. If we win this licence, our corporate commitment will also mark an important step forward for the independent Canadian feature film industry.

33446 This kind of commitment is also vitally important for the broadcasting system, because every feature film made with the help of this commitment will be exhibited on pay television, on conventional television and on specialty services like our Independent Film and Documentary Channel. There is a direct link between the health of our film industry and the quality and diversity of our broadcasting system.

33447 MS YAFFE: Thank you, Michael.

33448 That concludes the formal part of our reply, Madam Chair. We will now deal with our homework assignments.

33449 First, we were asked to indicate to which two or three of our Category 1 applications the Commission should give priority and why.

33450 Needless to say, this is a difficult question. In our case, we have one application which is our number one priority, that is the Independent Film and Documentary Channel. It is the single channel that relates closest to what Alliance Atlantis is about, and it is the single channel that is most closely linked to one of our existing services. So we put that application first in our priority list.

33451 As to the other three applications, we think each has its unique attractions and each is worthy of a Category 1 licence. Out of respect for our partners, however, we find it impossible to choose between them, so we wish to leave it at that.

33452 Your second question was: What other Category 1 proposals, if licensed to another applicant, would jeopardize the feasibility of our business plan?

33453 In the case of our proposal for the Independent Film and Documentary Channel, we consider that the licensing of any of the independent film channels, as well as TVA's Digipix application, would jeopardize the feasibility of our business plan, but not the documentary-only channels.

33454 Similarly, we consider that the licensing of the Rogers Biography Channel would jeopardize the feasibility of our business plan for Signature Television.

33455 Third, we consider that the licensing of any of the other health services would jeopardize the feasibility of our business plan for Health Network Canada.

33456 And, finally, we consider that the licensing of either of the other book-related applications would jeopardize the feasibility of our business plan for The Book Channel.

33457 Your third question was: How many Category 1 proposals should you license in English and in French.

33458 Given what you have before you, we think you could license 10 to 12 English language Category 1 applications and three to five French-language Category 1 applications.

33459 MR. MacMILLAN: Madam Chair and Commissioners, at the beginning of this hearing we said that Canadians would frankly be amazed at what is in store for them digitally through our company and many others. In our view, this hearing has more than fulfilled that promise.

33460 It is going to be a challenging task for you to make the choices necessary, but your decision will have a far-reaching and long-ranging, long-lasting impact on our broadcasting system.

33461 We appreciate the time and diligence you have given to this hearing and wish you well.

33462 Thank you.

33463 THE CHAIRPERSON: Thank you, Mr. MacMillan.

33464 You will recall at the beginning of the hearing I said you and I would be the guinea pigs in this rather new type of hearing considering the number of applications. Considering how well-behaved everybody has been, we must have done a good job.

33465 This completes the oral part of the hearing of applications for new digital Category 1 specialty services.

33466 Myself and my colleagues and the staff as well wish to thank the applicants and the intervenors for their co-operation throughout, including the timely filing of their homework -- their responses to their homework assignment and their helpful response to the need for the Commission to make scheduling changes during Phases III and IV of the hearing.

33467 We have been impressed by the quality of the participation and we are grateful for the help it will provide us in our difficult deliberations.

33468 We have been here slightly more than three weeks, but we must remember that we did air or give a good airing to 87 applications.

33469 Ceci complète la partie orale de l'audience portant sur l'examen des demandes des nouveaux services de télévision spécialisée numérique de Catégorie 1.

33470 Nous remercions toutes les requérantes ainsi que tous les intervenants de leur coopération.

33471 Nous les remercions particulièrement d'avoir déposé les réponses à leurs devoirs à temps et surtout d'avoir répondu positivement aux changements que le Conseil a dû faire à l'agenda pendant les Phases III et IV de l'audience.

33472 La qualité de votre participation nous a impressionnés et nous apprécions la valeur qu'elle ajoutera lors de nos délibérations.

33473 Nous sommes ici depuis plus de trois semaines, mais n'oublions pas que nous avons fait l'examen de 87 demandes.

33474 Alors nous vous remercions encore une fois et vous entendrez parler de nous quelque temps avant 2001.

33475 Merci.

33476 We will resume at 1:30, to hear the video on demand applications.

33477 Nous reprendrons à 13 h 30 pour entendre les demandes de vidéo sur demande.

33478 Merci.

--- Upon recessing at 1207 / Suspension à 1207

--- Upon resuming at 1340 / Reprise à 1340

33479 LA PRÉSIDENTE: Bienvenue à cette deuxième partie de l'audience où nous entendrons les demandes pour des services à la carte et vidéo-sur-demande et nous entendrons, avant d'entendre les demandes, une présentation par les membres de l'industrie qui vont se présenter plus tard.

33480 Welcome back to our hearing. We will now begin the second part of this hearing, which deals with video on demand and pay per view applications, and before we proceed, we will have a technical presentation by a number of members of the industry.

33481 Madam Secretary, please.

33482 MS BÉNARD: Thank you, Madam Chair.

33483 We will have a general presentation, a 15-minute presentation, by Cogeco Cable Canada Incorporated, Rogers Cable Incorporated and Videon Cablesystems Incorporated.

33484 Mr. Engelhart, if you would introduce your panel.

GENERAL PRESENTATION / PRÉSENTATION GÉNÉRALE

33485 MR. ENGELHART: Thank you.

33486 Madam Chair, Members of the Commission, my name is Ken Engelhart, and I am pleased to introduce the panel which will be giving you a technical presentation of video on demand.

33487 With me, today, on my left, from Rogers Cable -- my far left -- is Nick Hamilton-Piercy, Vice-President and Chief Technology Officer. On my immediate left is Mike Lee, Vice-President, Interactive Services.

33488 From Cogeco, we have, on my immediate right, Denis Bélanger, Vice-President, Engineering and Development, and beside Denis, Robin Lavoie, Director of Engineering.

33489 From Videon Cable, at the end, Greg McLaren, Director of Programming.

33490 Denis...?

33491 MR. BÉLANGER: The video on demand service, at a high level, is quite simple.

33492 The movies are stored on a video on demand server, which is actually a large computer that holds the movies and other contents as data files. Larger cable systems will have a centralized movie storage server and regional servers.

33493 When a customer orders a movie, the computer file containing the movie is sent through the cable network. The file data is transmitted through the cable network, to the customer, just like any other digital program service, that is using quadrature amplitude modulation, or QAM, which is decoded by the set-top at the customer's home.

33494 The stored movie files, or content assets, are catalogued by the asset or content management system. This software not only registers where the movie files are stored but comprehensively describes all aspects of the movie, such as its title, length, plot, rating, actors, originating studio, exhibit window, and so forth.

33495 Most of this information is automatically passed to the customer's navigation guide to aid movie selection for purchase. It is also key for enabling how the movie is promoted in the guide. For example, this is where the code resides that highlights Canadian movies and informs whether French and English language audio is available. The asset manager safeguards the rights holder's rights and ensures the rights holder's revenue share is appropriate recorded.

33496 The video on demand server informs the database and customer billing system that a customer has ordered a movie. This authorizes the digital set-top to decode the movie and records the purchase on the customer's bill.

33497 Through the cable network's two-way connection, the customer can actually command the server to start, stop, pause, rewind or fast-forward the movie.

33498 The other slide is another look at the stylized picture of a cable network providing video on demand service. The cable system is composed of fibre optics up to a fibre node.

33499 This particular network diagram shows four nodes marked A, B, C and D. Note that each node feeds its own QAM modulator, and one QAM modulator can encode between 8 and 12 video streams on one 6 mHz channel.

33500 The node may serve anywhere between 500 to 2,000 households, using coaxial cable to reach the homes.

33501 Although all nodes and homes receive the regular broadcast services, only the node associated with the customer ordering the movie receives the digital video on demand stream. Each node is served with the same 6 mHz channel frequency, but the digital content within that 6 mHz channel is unique to each node.

33502 The third slide shows a stylized diagram of a cable network with multiple head-ends. This diagram shows 17 head-ends, each with its own video on demand server. They are all interconnected to the centralized movie storage server.

33503 For example, Rogers might have a centralized VOD serve in Toronto, feeding regional servers interconnected throughout central and southern Ontario. Cogeco Cable would have its centralized VOD server in Burlington, feeing its four or five regional servers in Ontario and another centralized VOD server in Trois-Rivières to fee its regional servers in Quebec.

33504 The most popular movies would be located on the regional VOD servers and the less popular ones would be stored in the central storage and management system. The customer would not experience any significant increase in delay when the movie originates at the central server. Locating the most popular movies in the regional servers actually reduces transmission costs.

33505 While no one doubts that video on demand will provide customers with a greatly enhanced viewing experience, compared to pay per view, some question its ability to use network capacity efficiently.

33506 Interestingly, given the advanced cable networks being installed by Canadian cable operators, VOD uses bandwidth more efficiently than pay per view -- and this is what we will demonstrate in the next slides.

33507 Nick...?

33508 MR. HAMILTON-PIERCY: The key to understanding the bandwidth requirements of video on demand is an understanding of the number of homes served by a fibre node.

33509 As we stated, Canadian cable television systems are a hybrid of fibre and coaxial cable. The fibre extends to a network node. The capacity of the fibre optics is immense and the cable operators are not constrained by the bandwidth of this fibre.

33510 However, the capacity of the coaxial cable is limited. Since the coaxial cable is a shared resource, video on demand capacity used for some customers means that the capacity is not available for other customers.

33511 With video on demand, each customer utilizes one digital channel exclusively for itself during the time when the movie is being delivered. Of course, when that household is no longer viewing the moving, the digital channel is available for another customer to use.

33512 When fibre nodes serve a large number of households, say, 20,000, video on demand is impractical. If many of the customers all want to watch a video on demand at the same time, the BDU would need hundreds of channels to feed that service.

33513 For a BDU with fibre nodes serving lots of homes, pay per view is clearly a preferable option. The trend is to show an individual pay per view movie on several channels with staggered start times. Therefore, a customer never has to wait more than half an hour, for example, to watch a pay per view movie. This type of pay per view is sometimes referred to as "near video on demand" or NVOD. Cable and satellite providers often provide 48 channels of pay per view, or NVOD, to its customers.

33514 When node sizes get smaller, however, it is NVOD, not VOD, which uses bandwidth inefficiently. Take for example a fibre node that serves 1,000 homes. If 80 per cent of those customers subscribe to cable, the coaxial network is now serving 800 homes in that group. If 15 per cent of these homes have a digital box, the network must now serve 120 homes with digital service. If 10 per cent of these homes want to watch a movie during the peak times, a VOD service needs 12 digital channels, which occupy one analog channel.

33515 Compare that with an NVOD service that uses 48 digital channels, or four analog channels, and it is clear to see, with small node sizes, VOD uses much less bandwidth than NVOD.

33516 The results of our hypothetical example can be shown clearly on this slide.

33517 As before, we assume that 15 per cent of the homes in the node have a digital service and 10 per cent of the customers with a digital box ordering a VOD movie in the peak period. With a 15,000-home node, pay per view clearly uses less capacity than VOD. With an 800-home node, VOD uses less capacity than pay per view.

33518 We anticipate that as cable operators drive fibre to nodes serving smaller numbers of homes, they will introduce VOD. As they do this they will reduce their NVOD offering to only the most popular movies. As node sizes become sufficiently small they will utilize pay per view primarily for live events and use VOD for movies and other non-live programming.

33519 I would like now to give a demonstration of how this service works. What we would like to present is a demonstration which shows the operation of the video on demand server.

33520 The low server that we have in the corner here is small. Much larger units are at our head end. It still is a video server.

33521 We would also like to say that a very similar but not identical system will be used by Cogeco, cable and Videon, obviously larger than the unit in the corner.

33522 As you can see from the screen, the customer will have a range of options. They could select a movie from the top movies list, or they could search for the movies by actor, category, director, studio or year.

33523 By clicking on the hot list, they can find the movies they have already purchased that still have rental time remaining. They can also select a movie that is featured in the graphic, in this case "Felicia's Journey".

33524 Let me show you these functions live.

33525 Video on demand could be likened to the virtual video store.

33526 Let's look at the top movies here.

33527 As you will see from the top movies there, we are featuring "Felicia's Journey", which is a Canadian movie, and we are featuring it by the insignia at the side with the flag.

33528 Other movies that are being promoted this week are listed below this.

33529 This doesn't necessarily mean that these are movies that right now would be in the video stores or being promoted; this is a simulation of what would be available, using typical titles that you might recall.

33530 Because the service would have something like 300 or 500 titles in the library, you can't just list them all in alphabetical order like this, so we go to the next screen.

33531 Here we can look at that list of top movies. You can look at action, comedy, drama, horror, and movies that categorize each of these. Or you can search them by category, as we just talked about, by year, by studio, by actor -- there are various different ways we can search for these movies.

33532 Let's actually order a movie to show how the sequence one would go through as a customer would do it. For simplicity, we will use the top movie list here.

33533 The first movie we talked about was "Felicia's Journey", so let's order it, as though we are buying that movie.

33534 The first thing is that we want to find out a little bit more about it. It sounds like an interesting title. Here we get the story board. We also get the rating of the movie, PG-13, the running time and the price being offered.

33535 It seems interesting. Let's find out more about that movie.

--- Video presentation / Présentation vidéo

33536 MR. HAMILTON-PIERCY: In this screen we actually get a trailer of the movie and, if the description read and the trailer looks compelling, we can go to the next part, which will provide us with the movie.

33537 To prevent false buying, where people don't realize they have bought the movie, we go through the second screen where you actually authorize a purchase. This screen could also have a personal identification number, which you can go through again to order the movie, and this is to stop any spurious ordering, or also maybe where we apply parental guidance for the type of movies that can be ordered.

33538 Let's purchase this movie.

--- Video presentation / Présentation vidéo

33539 MR. HAMILTON-PIERCY: As you can see, the movie is now playing, and it has full functionality, very much like you would have if you rented a video. You can fast forward. You can pause the movie. You can play the movie.

--- Video presentation / Présentation vidéo

33540 MR. HAMILTON-PIERCY: If now, for some reason or other, you had to cease watching the movie, very much like when you rent a video cassette, you can actually put the movie on hold. Maybe you are just going to the door, or maybe during that day other things have come up and you may want, the following morning or evening, to continue that movie, especially if the rental period allows that.

33541 So let's go back and see if these movies can be stored.

33542 We have what we call the hot list. On this hot list it shows the movies that I have suspended. I have just suspended one, "Felicia's Journey", and we also had "October Sky" as another movie that was stored there. This is very much like you having a video rental for 24 hours, or maybe longer, and this way you can go back to it later.

33543 So that gives you the view on what video on demand is like. It is very compelling for the customers; very much like they experience from the video store. We believe it is very compelling because it gives the customer full choice and control of the programming they are seeking.

33544 Thank you.

33545 MR. ENGELHART: We would be pleased to answer any questions that you have about the demo or the technical aspects of the service.

33546 THE CHAIRPERSON: Madam Bertrand...?

33547 CHAIRPERSON OF THE COMMISSION: I understand, then, that if I were to be a subscriber I would never have to wait. It is like in a hotel room, it will always be available.

33548 MR. HAMILTON-PIERCY: Correct. It is there within seconds of you pushing your buy button.

33549 CHAIRPERSON OF THE COMMISSION: And the hot list -- I can make a reservation and just put it there as a kind of library? Is that what it is?

33550 MR. HAMILTON-PIERCY: Yes. This would depend on the business arrangements you have for the studios and how long we can keep that movie available. It may be for a week; it may be for 24 hours. It depends on the arrangements. And there may be different promotions where maybe you could buy up to 10 movies and keep them for a week, and then you would have to suspend.

33551 It is very much, again, like the video store -- an electronic video store.

33552 CHAIRPERSON OF THE COMMISSION: And there is never any capacity problem? For example, I hook up to the Internet and it might be slower because more people hook up. So when is the capacity problem, or too much demand --

33553 I know that it wouldn't be a problem for the people holding the licence, but it might be for the subscriber. When does that come into play?

33554 MR. HAMILTON-PIERCY: The design of the network is very much like traditional telephone networks, where you design for what they call the busy hour or the busy day, and you choose a number where you expect a certain statistic of customers accessing the movie, and you design the system to do that.

33555 In the example here, we show 10 per cent of the customers simultaneously wanting to buy a movie. That experience is supported by the number of roll-outs happening in the United States and elsewhere in the world, where it is somewhere around about 6 per cent or 7 per cent of users who can currently go for that movie.

33556 So you design for something a little bit more than that, and that gives the capacity to stop having to wait for the movie.

33557 CHAIRPERSON OF THE COMMISSION: Let's suppose we are back at the time of the availability of the "Titanic". Is there, in your configuration, if I am a subscriber, an advantage to purchase immediately when I am even outside the 10 per cent peak time and put the reservation into my hot list? Is that how it would work?

33558 MR. HAMILTON-PIERCY: The system would be designed so you wouldn't need to do that. A customer could always do that if they had little confidence in the system, but it would be designed so you wouldn't get a busy signal, if you know what I mean.

33559 CHAIRPERSON OF THE COMMISSION: But in order to make sure that at a certain given time I will be capable of watching whatever movie I want to watch, the safest -- the configuration as kind of planned, for me, the possibility of putting in reserve --

33560 MR. HAMILTON-PIERCY: The technical capability is there. I am not sure if you would offer the business that way, but the technical capability is there to do that.

33561 CHAIRPERSON OF THE COMMISSION: Thank you.

33562 MR. ENGELHART: If I could just jump in, my understanding -- and, Nick, correct me if I am wrong -- is that when it goes into the hot list it is not in any way stored on the set-top box. So when you go back to the hot list you continue to have a real-time connection with the head end.

33563 CHAIRPERSON OF THE COMMISSION: So it could be busy again is what you are saying.

33564 MR. ENGELHART: You could get a busy signal. The example that you gave is a very good example, with the "Titanic", and you could run into a problem where some customers would get a busy signal.

33565 In my discussions with my colleagues, they say that one of the things you might want to do is, with a very popular movie like that, issue it first on Tuesday, so that when you get to the Saturday night period it is not so new any more, or you could run into exactly that problem.

33566 CHAIRPERSON OF THE COMMISSION: I understand.

33567 Thank you.

33568 THE CHAIRPERSON: Commissioner Williams...?

33569 COMMISSIONER WILLIAMS: Maybe you could describe this busy signal. What happens from the viewer's perspective if in fact all of the channels are being used? What do they see on the screen?

33570 MR. HAMILTON-PIERCY: If the situation, which we believe will be very rare -- if it did happen, as in the telephone you would get a forced busy signal, on here it would say "Please wait. Movie not currently available", or a message similar to that.

33571 COMMISSIONER WILLIAMS: Okay. And do movies on pause tie up the capacity of the system?

33572 MR. HAMILTON-PIERCY: They tie up the capacity of the system for something in the order of 15 minutes, and then you release the circuit. So when a person then goes off pause it re-establishes the circuit.

33573 You wouldn't leave it on pause solidly, otherwise it does consume the bandwidth.

33574 COMMISSIONER WILLIAMS: Thank you very much.

33575 No further questions.

33576 THE CHAIRPERSON: Commissioner Wilson.

33577 COMMISSIONER WILSON: When you showed the example of "Felicia's Journey" being suspended and it's at three hours and 59 minutes remaining, does that mean you had three hours and 59 minutes within which to watch the rest of that movie?

33578 MR. HAMILTON-PIERCY: Again, that's an example. You start watching the movie in that -- I guess it's like on the video, so the rental has to be there by midnight or by noon or whatever. It's the same arrangement as the video stores.

33579 COMMISSIONER WILSON: Thank you.

33580 THE CHAIRPERSON: To follow up on the questions of Madam Bertrand and Mr. Williams, I guess in the end some of it is based on the judgment of the operator as to whether they are getting enough leeway depending on the popularity of the movie. So a judgment has to be made as you decide what to offer and you may be wrong, like with "Titanic" for example?

33581 MR. ENGELHART: That's absolutely correct and I will ask Mike to jump in too. But what makes it a little easier to manage is, as we described in the presentation, as the node sizes get smaller you have a smaller population of people and then the problem becomes a little more manageable.

33582 THE CHAIRPERSON: Easier to make the judgment correctly?

33583 MR. ENGELHART: Yes.

33584 MR. LEE: I would just add that in the early days and not quite understanding the actual real usage statistics, what we are going to have to do is monitor the system very carefully in terms of understanding what kind of movies drive what kind of activity at what times and then package accordingly against that.

33585 THE CHAIRPERSON: And you will learn, I suppose, as you go.

33586 I suspect -- this is a kitchen question, but I suspect that various configurations of homes served by a server may have different needs. You know, if you are in suburbia where you have teenagers, wouldn't it, that could be part of the judgment as to what is likely to be a hot movie in certain areas?

33587 MR. LEE: Yes. It is dependent on the density of the amount of digital set-top boxes in that given area, and then what we would have to do is segment the network and introduce more QAMs into that area to increase the capacity.

33588 THE CHAIRPERSON: No. I meant when you made the judgment as to what demand there will be for various movies -- in other words, what's a hot movie. I am sure that can be tested as well, but depending on the type of population you have under that node.

33589 MR. BÉLANGER: Yes, and it may vary from one node to the other. It's an average figure, that 7, 8 or 10 per cent peak-time use, so it may happen that in some nodes you may have to further segment to make sure that in those nodes where you know how the behaviour is --

33590 THE CHAIRPERSON: Yes. I didn't mean only the demography. I meant the movie itself. I suppose you will learn as you go along that in certain areas certain types of movies are amenable to a certain type of demography and may be in greater demand because 800 homes is small.

33591 MR. BÉLANGER: Yes. One thing I would like to add, there are some possibilities here that we have discussed with some suppliers. Let's say you have a movie and at one point a large percentage of the people want it. It's the same movie because it's very, very popular.

33592 You could use 90 per cent of your capacity that you have reserved in that pocket and keep the rest at 10 per cent to at least broadcast it. Keep two or three digital channels to broadcast this at staggered times. So at least you can provide the customer with the option of he can view it, but it's starting in 30 minutes or 40 minutes. That's the kind of solution that may also be implemented.

33593 THE CHAIRPERSON: That's near video on demand.

33594 MR. BÉLANGER: At that point when there's an over-demand.

33595 THE CHAIRPERSON: Yes.

33596 Commissioner Williams.

33597 COMMISSIONER WILLIAMS: I am sorry, I do have one more. At what point do you get the movie or the product in the distribution cycle? Do you get it before the video stores, after the video stores?

33598 MR. ENGELHART: The video on demand window is not fully established yet, but the general consensus is it will be the same as the pay per view window, which is after the video stores.

33599 COMMISSIONER WILLIAMS: Okay. So your capacity thing on a very popular movie then might not be as large as it could be if you got the windows in a -- thank you.

33600 MR. ENGELHART: That's correct.

33601 THE CHAIRPERSON: Madam Bertrand.

33602 CHAIRPERSON OF THE COMMISSION: I don't want to get into the specifics of each application, but could you again explain to me here this diagram that says that at the end of the day it requires less bandwidth to go with your solution of VOD than pay per view?

33603 MR. ENGELHART: Certainly. It's again a function of the node size. So what we have done here is we have said for a 15,000 home node if 15 per cent of those 15,000 homes have a digital box, and then let's assume that 10 per cent of the people with a digital box all decide to watch a movie at the same time, you would need 225 channels. That is clearly a huge number of channels and you would be better off to have pay per view which is 48 channels.

33604 On the other hand, if you have driven your fibre down to 800 home nodes, the same arithmetic, multiplying that by 15 per cent and then by 10 per cent gives you 12 channels. So in the smaller nodes video on demand ends up using much less capacity than pay per view.

33605 CHAIRPERSON OF THE COMMISSION: Thank you.

33606 THE CHAIRPERSON: Commissioner Williams.

33607 COMMISSIONER WILLIAMS: One more. These nodes, these smaller nodes getting deeper into the neighbourhood, do they provide other business opportunities that can help pay for the roll-out, as opposed to just video on demand?

33608 MR. ENGELHART: The kind of services that drives segmentation is primarily the Internet, high-speed Internet service. That has been the real driver of this kind of segmentation.

33609 COMMISSIONER WILLIAMS: Thank you.

33610 THE CHAIRPERSON: Well, Mr. Engelhart, what you have to do is hire one of these clever companies that have appeared before us for three weeks with their polling and their surveys and you will know exactly what people will want to watch. It will be efficiently put together. That's a good idea actually.

33611 Fifteen thousand homes is a lot. Eight hundred you could do it on foot. Maybe when I retire I can give you a call. I think these are questions.

33612 We really appreciate the effort you have made, especially since making an agenda that was possible was a bit difficult and I am sure created some extra effort to accommodate our agenda. We are grateful for your presence and for answering our questions, even the kitchen ones.

33613 Thank you very much.

--- Pause / Pause

33614 THE CHAIRPERSON: We will now begin hearing the four applications for video on demand services and that is what we will do today. We will complete the hearing of those four applications and resume tomorrow morning with the pay per view applications and the intervention stage.

33615 Madam Secretary, please.

33616 Mme BÉNARD: Merci, Madame la Présidente.

33617 La première présentation sera celle de Cogeco Câble Canada Inc. pour un service régional de vidéo sur demande de langue française et anglaise.

33618 THE CHAIRPERSON: My understanding is it will take about three minutes for the server to quiet down. So we will wait until it does, so that we hear you and you are not disturbed by the noise.

--- Pause / Pause

33619 THE CHAIRPERSON: Go ahead. I believe Madam Secretary has called for the record. Yes. So, go ahead, Mr. Audet, when you are ready.

PRESENTATION / PRÉSENTATION

33620 MR. AUDET: Thank you, Madam Chairman.

33621 Madame la Présidente, Madame la Vice-présidente, Madame et Messieurs du Conseil, bonjour et merci pour cette opportunité. Mon nom est Louis Audet, président et chef de la direction de Cogeco Câble.

33622 Je suis accompagné aujourd'hui de M. Denis Bélanger, vice-président, ingénierie et développement, à sa gauche par M. Robin Lavoie, directeur ingénierie, à ma droite par M. Christian Jolivet, directeur affaires juridiques et à sa droite par Mme Carole Boudreault, présidente de Alex Films inc. qui est consultante pour la requérante.

33623 Nous sommes réunis aujourd'hui pour vous présenter le service régional de vidéo sur demande de langues française et anglaise que nous souhaitons offrir à notre clientèle sur nos réseaux du Québec et de l'Ontario faisant usage de la technologie numérique.

33624 Notre demande s'est méritée l'appui de plusieurs intervenants, incluant les municipalités desservies par Cogeco Câble et le dossier public ne fait état d'aucune opposition à notre demande.

33625 Avant de vous présenter notre demande, j'aimerais vous décrire brièvement la stratégie adoptée par Cogeco Câble pour le déploiement de la technologie numérique.

33626 Over the last years, Cogeco Cable has been laying the foundation of the digital future through the clustering of its cable systems and substantial investment in its hybrid fibre coaxial networks as well as in its digital TV platform.

33627 Beginning in September of 1999, Cogeco Cable launched its digital cable service in most areas that it serves. The launch required a $50 million upfront capital investment. Cogeco Cable undertook to replace all analog set-top boxes with new digital set-top boxes manufactured by Motorola, and this "swap out" program was completed in early May of this year. In fact, an additional $10 million bringing the total up to $60 million was invested to fulfil higher than expected demand. In fact, today there are currently in excess of 80,000 VDC boxes in service in the Cogeco system.

33628 The digital service is now available to approximately 100 per cent of Ontario customers and 60 per cent of Quebec customers. This will rise to 80 per cent in Quebec by next spring and we are currently investigating other means to bring the digital service to the rest of our customers in Quebec.

33629 Cogeco Cable digital service allows customers to have access, through Cogeco Cable's two-way plant, to expanded video services, an interactive program guide, 40 CD-quality specialized music programming formats, with the added opportunity for digital customers to buy further services of their choice, including digital specialty and video on demand services currently under consideration by this Commission.

33630 A fin de stimuler la demande pour rentabiliser le déploiement de la technologie numérique et amortir le coût de remplacement des décodeurs, nous avons cherché, bien sûr, à offrir aux consommateurs canadiens une offre de services nouvelle, attrayante et susceptible de les convaincre de faire le saut au numérique.

33631 Dans ce contexte, la vidéo sur demande est un atout essentiel et irremplaçable pour favoriser une adhésion rapide du plus grand nombre de nos clients à notre service numérique.

33632 Le 1^er novembre 1999 -- il y a donc près d'un an -- Cogeco Câble a déposé au Conseil la présente demande pour une licence visant l'exploitation d'un service régional de vidéo sur demande numérique de langues française et anglaise. Nous avons conçu notre demande de façon à respecter en tous points le cadre réglementaire établi par le Conseil en 1997 pour les services de VSD. Le Conseil a alors établi pour les services de VSD un régime de concurrence ouverte qui mise sur les forces du marché. Il a attribué une licence de vidéo sur demande à chacune des cinq requérantes qui en avaient fait la demande, même si elles entraient en concurrence les unes avec les autres.

33633 Le Conseil a également jugé opportun de préciser que sa décision d'accorder une licence à cinq entreprises de programmation de vidéo sur demande ne l'empêcherait pas de tenir compte d'autres demandes de licences VSD à venir.

33634 Dans notre demande, nous nous sommes engagés à respecter toutes et chacune des conditions de licence et des attentes qui ont été imposées par le Conseil aux titulaires actuels de licences de vidéo sur demande.

33635 Your approval of this application will mark an important new stage in the evolution towards fully interactive broadcasting services that will provide us with the ability to give to our customers increased choice, convenience and value in the highly competitive, consumer-driven digital world. The video on demand service will enable customers to view on demand in the comfort of their home, at their convenience and commercial free, a wide variety of movies and other premium entertainment content in real time while taking advantage of all the features offered by video on demand, which emulate those of home video players.

33636 Available selections would be targeted specifically to the viewing preferences of Cogeco Cable's customers. At launch, available selections will include mainly feature films. Cogeco Cable expects to offer simultaneously at any time a choice of about 600 movies to its customers. Cogeco Cable will also offer to its video on demand clientele special events and other premium programs as dictated by consumer demand.

33637 That is why we think video on demand will be one of the essential leading edge applications in the range of digital services offered to our customers. It is user friendly, instantly accessible and provides an exciting viewing alternative to customers while sparing them the inconvenience of going to the home video store or waiting for an available copy of the desired selection.

33638 Cogeco Cable's video on demand service will contribute in many ways to the growth and development of the Canadian broadcasting system. An interesting aspect of our proposal is that we propose a French and English VOD service that will contribute to the linguistic diversity of this digital offering.

33639 We also believe that our VOD service will stimulate the creation and presentation of Canadian programming. Cogeco Cable's video on demand service will offer new opportunities to Canadian film and television producers, both for the production and the exhibition of their productions.

33640 With regards to contribution to Canadian programming, Cogeco Cable proposes to contribute 5 per cent of the gross annual revenues derived from its video on demand activities to fund Canadian program production through the Cogeco Program Development Fund which is accredited by the Commission as an independent fund.

33641 The video on demand service will capture into the Canadian broadcasting system a significant and growing part of the funds currently spent on video cassette and DVD rentals, a huge industry that is not regulated under the Broadcasting Act and that is not required to contribute anything to Canadian production. If we launched early as planned, the Cogeco Cable video on demand service will offer to its customers in the Cogeco Cable service areas an attractive alternative to video on demand services now emerging on the Internet and will help keep these customers connected to the Canadian broadcasting system to the benefit of all the industry.

33642 Finally, we believe that video on demand is the main driver that will dramatically increase the penetration of digital boxes in cable households and will contribute most significantly to the success of the launch and to the future viability of new digital specialty services that are currently in the licensing process.

33643 In setting the regulatory framework for video in demand services in 1997, the Commission specifically acknowledged that, and I quote:

"The availability of VOD would provide an additional incentive to consumers to purchase digital services".

33644 Nous tenons à souligner au Conseil que le lancement d'un service de vidéo sur demande à grande échelle sur une base commerciale par un intermédiaire non-distributeur n'a pas encore eu lieu en Amérique du Nord. Nous croyons qu'une structure de service intégré, soit un service VSD intégré à l'exploitation d'une entreprise de distribution, est probablement la seule structure qui soit à la fois simple, fonctionnelle et efficace pour offrir ce service à nos clients à des prix qu'ils sont prêts et capables de débourser.

33645 Le service de vidéo sur demande de Cogeco Câble sera par ailleurs considéré, aux termes de l'avis public 2000-6, comme un service numérique de catégorie 2. Tel que requis par le Conseil, nous nous engageons à distribuer au moins cinq services numériques de Catégorie 2 non affiliés partout où nous offrirons note service de vidéo sur demande en plus, bien sûr, d'avoir préalablement satisfait à l'obligation de porter le nombre de services de Catégorie 1 que le Conseil aura choisi.

33646 Il faudra évidemment expérimenter les premières années pour perfectionner le produit de vidéo sur demande et sa commercialisation de façon à plaire au plus grand nombre de clients. Pour cette raison, nous croyons que les titulaires de licences vidéo sur demande devraient avoir toute la latitude d'exploitation nécessaire pour offrir divers plans, forfaits ou escomptes à même l'inventaire de films et autres émissions disponibles. Faut-il rappeler que les magasins de détail offrent, depuis un bon moment déjà, des forfaits pour des films et autres émissions groupés par série ou par thème.

33647 En conclusion, nous estimons que l'approbation de notre demande s'inscrit dans le cadre de concurrence déjà établi pour les services de ce genre, est dans l'intérêt public et favorisera le succès de la nouvelle politique numérique du Conseil et la viabilité des futurs services numériques canadiens qui seront autorisés par le Conseil, en plus de permettre de consolider et d'élargir les assises du système canadien de radiodiffusion.

33648 My colleages and I will be happy to answer your questions.

33649 Thank you.

33650 LA PRÉSIDENTE: Nous vous remercions, Monsieur Audet.

33651 Le Conseiller Demers, s'il vous plaît.

33652 CONSEILLER DEMERS: Merci, Madame la Présidente.

33653 Bonjour, Monsieur Audet. Bonjour, Madame. Bonjour Messieurs.

33654 Peut-être en fonction de ce que vous venez de dire, pouvez-vous expliquer le fait que vous demandez -- juste mettre ça en contexte là -- des licences pour un service régional de vidéo sur demande?

33655 M. AUDET: Certainement.

33656 Nous suivons la question de l'évolution de la vidéo sur demande depuis au moins une dizaine d'années. Nous avons vu au fil de ces dix ans évoluer les technologies et les marchés de longs métrages de sorte que, finalement, ces années-ci, arrive le moment où les équipements existent pour réellement offrir le service et nous avons, au fil de notre cheminement, acquis la conviction profonde que la seule façon de faire fonctionner ce service-là c'est qu'il soit intimement lié à l'exploitation du réseau de câble lui-même. Et comme vous l'avez vu dans la présentation tout à l'heure du regroupement des trois requérants, on parle de serveurs sophistiqués qui sont intégrés dans les réseaux de câbles. On parle de capacités de transmission qui doivent être réservées en quantité suffisante à l'intérieur des aires locales de desserte, de même que entre les aires de desserte elles-mêmes.

33657 On parle de serveurs centraux puissants et on parle de l'habilité d'interconnecter tout ça à un système de comptabilité et à un système de facturation.

33658 Nous avons donc acquis la conviction profonde que ce service doit être offert réseau par réseau, compagnie par compagnie. Alors c'est à la suite de cette conclusion-là que nous avons conclu que nous vous demanderions une licence régionale qui, en fait, s'applique aux réseaux que nous exploitons pour les populations que nous desservons avec notre réseau de câble là où nous pouvons le faire économiquement.

33659 Si certains de nos voisins demandaient accès à ce service-là, il nous ferait plaisir de négocier avec eux, mais de façon immédiate il est clair que la façon économique de le faire c'est auprès de la clientèle que nous desservons déjà.

33660 CONSEILLER DEMERS: Merci, Monsieur Audet.

33661 Et peut-être pour poursuivre. Vous avez fait -- vous vous êtes référé à l'octroi de différentes licences par le Conseil en 1997, et peut-être que je commencerais mes questions par là.

33662 Vous avez aussi indiqué que le CRTC avait établi en quelque sorte des règles uniformes pour les personnes qui avaient reçu des licences à ce moment-là.

33663 La question que je pose, mais qui est peut-être facile à répondre, est-ce que dans le contexte actuel vous croyez que le Conseil devrait faire la même chose, maintenir cette même approche qui consiste à avoir des règles qui vont s'appliquer à tout le monde, à tous ceux qui auraient des licences dans ces demandes d'aujourd'hui et de demain?

33664 M. AUDET: Je vous donnerai l'expression de mon point de vue et peut-être qu'après Christian Jolivet voudra compléter ma réponse au besoin.

33665 C'est un monde concurrentiel. La réalité c'est que les tiers parties ne pourront pas en fait démarrer, selon nous, un service de vidéo sur demande parce que c'est trop complexe, c'est trop intimement lié à l'exploitation des réseaux de câble, du moins pas de façon économique.

33666 Donc il nous apparaît important qu'une licence nous soit attribuée pour que nous puissions enfin satisfaire une demande latente des clients.

33667 Nous croyons, par ailleurs, que tous les détenteurs de licences devraient être assujettis aux mêmes conditions de licence, et nous sommes prêts à le faire. Nous croyons que notre plus grand concurrent à l'heure actuelle, Bell ExpressVu, a déjà sa licence et si nous attendons un peu plus longtemps nous aurons les mains attachées derrière le dos.

33668 Il est donc impératif que nous ayons la liberté d'offrir un service que nos clients demandent.

33669 Aimerais-tu compléter?

33670 M. JOLIVET: Peut-être simplement pour ajouter que quand on a préparé la demande, on l'a préparée de façon telle à respecter toutes les conditions de licence qui avaient été imposées en '97. Donc je pense qu'on s'attend de la même façon à ce que les règles qui soient adoptées, ou les conditions de licence qui soient imposées aux titulaires des licences VSD soient les mêmes pour tous. Donc pour les licences issues de la présente audience, et les licences précédentes.

33671 CONSEILLER DEMERS: Merci.

33672 Maintenant, quelques questions sur la nature de votre service.

33673 Alors en réponse aux questions supplémentaires du Conseil, vous avez écrit que vos programmes seraient vendus en bloc. Un tel projet est peut-être semblable pour ce qui existe pour les services de télé à la carte qui vendent des programmes comme "NFL Sunday Ticket" et de "Racing Network".

33674 D'autre part, la vente de programmes à la pièce c'est une caractéristique des services de vidéo sur demande et de télé à la carte, ce qui les rend différents des autres canaux spécialisés.

33675 Alors la question est: quels sont les avantages ou les désavantages à permettre que les services de vidéo sur demande et les services de télé à la carte soient vendus par l'offre de programmes?

33676 M. AUDET: Permettez-moi de clarifier notre position à ce sujet.

33677 L'objectif premier de notre demande de vidéo sur demande c'est d'offrir des longs métrages à la carte selon la demande et l'expectative des clients. Ce n'est pas de vendre une souscription mensuelle.

33678 A la question supplémentaire à savoir s'il pourrait arriver qu'il soit intéressant de grouper certains films ou certaines émissions ensemble, nous avons répondu oui. Pas aux fins de vendre des souscriptions mensuelles, mais aux fins, par exemple, que si les -- et je cite seulement un exemple et je ne sais même pas s'il y aura une demande des consommateurs pour ça, il faudrait faire plus de recherches, mais par exemple on pourrait dire nos longs métrages, comme vous le savez, avec la carte de tarifs que nous avons déposée, se détaille à quatre dollars.

33679 Si, par exemple, un client disait, "Bien moi je vais acheter la série des James Bond", par exemple, bien à ce moment-là il y aurait peut-être un forfait de groupe, huit longs métrages pour 3,50 $, par exemple. Mais c'est toujours une conception de souscription -- pas de souscription, mais d'achat à l'unité. Il se peut qu'on vende dix unités ensemble à un prix légèrement réduit. Ça devient une question de "marketing" et de "packaging", mais ce n'est pas là une souscription au sens propre.

33680 CONSEILLER DEMERS: Je pense que ça fait le point sur cette question.

33681 J'avais plusieurs autres sous-questions si vous aviez répondu autrement, mais je pense que ça éclairci la situation quant à ce que vous avez voulu dire en répondant à cette question.

33682 Mais il y en a peut-être une et c'est que si le Conseil décidait -- et peut-être que le mot, je vais utiliser les mots "vente en bloc", les assemblages. Alors si le Conseil décidait de prohiber la vente en bloc de vidéo sur demande dans certains cas, ou dans tous les genres de programmation, accepteriez-vous une telle exigence?

33683 M. AUDET: Vous savez, le mot de la clientèle évolue à une vitesse de plus en plus rapide. Les alternatives se multiplient et l'important pour nous c'est de satisfaire la demande.

33684 Alors je vous dirais que l'idéal c'est qu'il y ait le moins de contraintes possibles, mais cela étant dit, nous exploiterons l'entreprise selon les règles du jeu que vous aurez fixées.

33685 CONSEILLER DEMERS: Merci.

33686 Quelques questions sur la nature du service et quant aux catégories de programmes. Alors le Conseil est plutôt flexible sur les catégories de programmes que les services de télé à la carte peuvent offrir.

33687 Sur les services de vidéo sur demande, le Conseil a expressément encouragé l'expérimentation dans plusieurs genres.

33688 Alors afin de décider s'il doit continuer dans cette voie, le Conseil doit-il se préoccuper des chevauchements possibles entre les services de télé à la carte/vidéo sur demande face aux autres services de télé payante et les services spécialisés?

33689 M. AUDET: Je pense que le panel qui a comparu devant vous il y quelques minutes, qui a fait la présentation technique, a bien illustré l'évolution probable de la consommation de produits de films suivant les divers types de services qui sont offerts et j'aimerais passer la parole à Denis Bélanger dans un instant, qui pourra vous faire état des projections que des experts ont établies sur ce sujet-là.

33690 Je pense que, basé sur les chiffres que mon collègue va vous révéler, le Conseil n'a pas à se préoccuper proprement dit à savoir s'il y a des chevauchements. Il y en aura de plus en plus.

33691 A mon avis, ce dont le Conseil doit se préoccuper dans le moment c'est de s'assurer qu'il n'y a pas d'autres formes de distribution comme, par exemple, l'Internet qui ne connaît pas de réglementation et qui en fait, comme vous l'avez déjà décidé, ne peut pas en connaître parce que ça ne serait pas pratique et ça serait limitatif sur le potentiel économique de cet outil d'envergure mondiale.

33692 Donc ici il y a une fenêtre unique pour s'assurer d'arracher les fruits du commerce vidéo pour qu'il passe à travers les licences de vidéo sur demande et qu'il soit capturé par le système canadien de radiodiffusion aux fins d'encourager la production d'émissions canadiennes. Selon nous, ça devrait être là la première préoccupation du Conseil.

33693 Cela étant dit, je vais passer la parole à mon collègue qui pourra vous illustrer les projections qui démontrent qu'en fait il y a de la place pour tout le monde, il y a une place durable pour tous les fournisseurs de services, les nouveaux et ceux qui existent déjà.

33694 Alors je passe la parole à Denis Bélanger.

33695 M. BÉLANGER: Merci, Louis.

33696 Alors les statistiques auxquelles nous voulons référer proviennent de l'organisme Paul Kagan, qui je pense est une autorité mondiale au niveau de ce genre de statistiques. Dans une parution récente qui date de juillet d'un de leurs rapports qui est le "Digital Household Report", Paul Kagan analyse ce chevauchement sur une base très long terme entre le "pay per view" et le "video on demand" et le "home video business", les analyses d'ensemble de ce secteur-là.

33697 Et si on parle, par exemple, de l'an 2000, à ce moment-ci c'est une petite partie de "pay per view" et de quasi-vidéo sur demande et une énorme partie des magasins de location de vidéos, et c'est relatif là, mais l'ensemble de cette industrie-là à ce moment-ci c'est environ dix milliards de dollars U.S. -- je pense que c'est seulement le marché américain, les États-Unis.

33698 Alors la vidéo sur demande en tant que telle va commencer à occuper du terrain vers 2001-2002 et va progressivement augmenter, et la projection Kagan en 2010, par exemple, c'est que ça va présenter quelque chose comme six milliards et le "home video" cinq milliards. Le pont important c'est que la télé à la carte et la télé par abonnement va quand même augmenter et entre 2000 et 2004 va en fait doubler, mais ensuite va plafonner.

33699 Alors eux, dans leurs projections, c'est qu'il y une progression au cours des trois, quatre prochaines années pour le secteur télé à la carte et une diminution progressive de la part des magasins vidéo au profit de la vidéo sur demande qui elle vient prendre beaucoup de place dans le long terme.

33700 Alors je pense que nous on s'est inspirés largement des chiffres de Paul Kagan conçus depuis plusieurs années qu'on utilise beaucoup aussi dans nos projections financières.

33701 Je pense que ça répond à la question.

33702 CONSEILLER DEMERS: Merci beaucoup.

33703 Est-ce qu'il y a nécessité de limiter la proportion de longs métrages sur le service de vidéo sur demande? Pourriez-vous clarifier, limiter les proportions en regard de quels critères?

33704 M. AUDET: Bien en fonction d'autres programmations que vous pourriez offrir, est-ce que vous voulez dire la proportion entre les longs métrages et les émissions qui ne seraient pas des longs métrages peut-être?

33705 CONSEILLER DEMERS: Oui.

33706 M. AUDET: Oui? Dans ce cas-là, comme vous avez pu voir, notre demande entrevoit une proportion assez faible d'émissions qui ne seraient pas des longs métrages qui est de l'ordre de 5 pour cent initialement qui pourrait croître éventuellement à 20 pour cent.

33707 Selon nous ce n'est pas le fer de lance du service, mais par contre ça pourrait l'enrichir. Je vais vous donner un exemple bien simple de ça. Par exemple la série "Survivor". Cette série-là a été vue par le monde entier, mais il se trouve encore des personnes comme moi qui ne savent pas qui est Richard Hatch et qui pourraient très bien dans un deuxième visionnement qui n'intéresserait personne sauf ceux qui ne l'ont pas vue, s'il y a une quantité suffisante de gens qui ne l'ont pas vue mais peut-être qu'ils seront prêts à débourser 4,00 $ pour savoir ce qui faisait que cette série était si fantastique. Je vous donne ça à titre d'exemple.

33708 Donc ce n'est pas vraiment le fer de lance de notre service, mais ça pourrait être d'intérêt et encore là ça devrait être calibré en fonction des intérêts de la clientèle et des limites que vous aurez jugé bon imposer, le cas échéant.

33709 CONSEILLER DEMERS: Merci beaucoup.

33710 Je passe maintenant à la langue de diffusion et les quelques questions que j'ai se rapportent au fait que vous avez indiqué que vous auriez un service en anglais et en français donc c'est je pense dans cette optique-là que sont mes questions.

33711 Dans votre demande mais aussi dans la demande, par exemple, de Rogers Cable, on indique qu'il y aurait des titres qui seront de langue française.

33712 Alors dans votre cas vous écrivez qu'une bonne partie de votre programmation serait disponible en anglais et en français. Anticipez-vous que les proportions en langue française et en langue anglaise seraient les mêmes partout dans vos systèmes?

33713 M. AUDET: Au plan technologique, nous ne croyons pas qu'il y ait de limitations à ce que les deux langues soient offertes et en fait notre secret serait qu'il y ait un bon nombre de langues pour être capables de satisfaire les sous-groupes ethniques des divers réseaux que nous desservons. Alors au plan technologique, il ne devrait pas y avoir de problèmes.

33714 Je vais passer la parole à Mme Boudreault qui pourra vous parler de la disponibilité de longs métrages en anglais et en français.

33715 Mme BOUDREAULT: Premièrement, je vais me présenter pour vous assurer qu'en fait les chiffres que je vais vous donner sont les bons.

33716 Ma société, Alex Films, procure à l'industrie du cinéma toutes les statistiques concernant les recettes au guichet au Québec et au Canada, également les parts de marché par pays producteurs, parts de marché par distributeurs, parts de marché francophone, anglophone, la liste de tous les films qui sortent en salle et la provenance des films doublés.

33717 Alors moi ce que je peux vous assurer c'est qu'il y a de disponible un très grand nombre de films qui lorsqu'ils sortent en salle la majorité des films qui sont en version originale anglaise sont également disponibles en version française.

33718 On retrouve à peu près je dirais entre 325 et 350 films qui sortent par année dans les salles de cinéma. De ce nombre, un bon nombre, je dirais 50 pour cent, sortent dans les deux langues. Par la suite, les films qui sont sortis essentiellement dans la version originale anglaise se trouvent en grande majorité disponibles en version française lors de la sortie vidéo et également on touche le produit francophone qui est disponible en version avec sous-titres anglais.

33719 Donc je dirais, de façon très conservatrice, c'est 80 pour cent minimum des films qui sont disponibles dans les deux langues.

33720 CONSEILLER DEMERS: Alors une question plus pratique. Pouvez-vous apporter ça plus près des systèmes de Cogeco et c'est à savoir si dans tous les systèmes qu'opère Cogeco il y aura la même proportion de films disponibles en langue française et en langue anglaise.

33721 M. AUDET: Oui, c'est qu'en fait à partir du moment où essentiellement tout l'inventaire est disponible dans les deux langues, voire même dans d'autres langues, la question de la langue d'origine devient moins important puisque vous pouvez avoir les longs métrages qui intéressent le plus la population, les avoir au moins en deux langues et, espérons nous, en trois, quatre ou cinq langues.

33722 Alors à ce moment-là, la question de la bande sonore n'est pas un facteur limitatif au plan de l'entreposage des longs métrages. Donc ça nous offre l'entière liberté de faire ce qui est dans le meilleur intérêt de nos clients et d'avoir donc le plus grand nombre possible des longs métrages d'intérêt le plus grand possible dans autant de langue que possible.

33723 CONSEILLER DEMERS: D'accord.

33724 Alors la question est de savoir est-ce que le Conseil devrait avoir un minimum qui serait imposé de films qui devraient être disponibles en langue française?

33725 M. AUDET: Écoutez, je ne crois pas qu'il y ait lieu d'imposer des limites. Je ne sais pas si mon collègue, Christian Jolivet, aimerait ajouter quelque chose.

33726 M. JOLIVET: Je pense qu'à l'heure actuelle on est en mesure de dire qu'en fonction de la technologie on compte que la majorité des films vont être disponibles dans les deux langues, mais ça va être évidement fonction des négociations qu'on va avoir avec les studios qui restent à être entamées. Donc ça serait peut-être prématuré à ce stade-ci de prendre des engagements formels en terme de proportion de films devant être diffusés dans les deux langues.

33727 CONSEILLER DEMERS: Merci.

33728 Alors si on allait plus loin dans ce raisonnement sur la langue française, est-ce que dans votre esprit il y a lieu de faire une distinction entre les productions qui sont canadiennes de langue française et les autres types de productions françaises?

33729 M. AUDET: Comme vous l'avez vu dans nos engagements, une proportion importante de l'inventaire, c'est-à-dire au moins un long métrage sur vingt serait de provenance canadienne, et basé sur le "track record" historique, j'ai bien l'impression que bon nombre d'entre eux seraient des films québécois. Juste pour rencontrer la norme minimale, je pense bien que tous les films québécois, et en fait tous les films canadiens, devront forcément être présents dans la banque.

33730 Donc ça ne m'apparaît pas être une contrainte difficile à rencontrer.

33731 M. JOLIVET: Si je peux me permettre d'ajouter. La condition de licence qu'on a proposée au Conseil est plutôt formulée en terme de contenu canadien, donc canadiana. C'est sous cet angle-là qu'on l'a abordée, mais on est prêts à étudier d'autres options mais c'est sous le ratio, par exemple, des longs métrages, le ratio 1-20 canadiens et non-canadiens.

33732 CONSEILLER DEMERS: Merci.

33733 Et venons-en au contenu canadien. Alors comme vous l'avez dit, Monsieur Audet, moi j'ai un titre canadien par dix titres étrangers. Est-ce que c'est la bonne proportion?

33734 M. JOLIVET: C'est la bonne proportion pour les émissions autres que les films.

33735 CONSEILLER DEMERS: Oui, d'accord.

33736 M. JOLIVET: Pour les films c'est 1-20.

33737 CONSEILLER DEMERS: Alors donc ça fait 9 pour cent de contenu canadien alors c'est un minimum qui est moindre que les niveaux requis des services de télés payantes et de services spécialisés.

33738 Alors la question qui se pose c'est pourquoi le minimum requis sur le contenu canadien, autres que les longs métrages pour les services de vidéo sur demande, ne serait-il pas semblable à ceux de télévision payante ou de services spécialisés?

33739 M. JOLIVET: Ce qu'on a fait quand on a présenté notre licence c'est qu'on a tout simplement reproduit le ratio qui avait été exigé des titulaires de licences en 1997. Ça nous apparaît être un ratio 1-10 qui est raisonnable, puis je crois qu'il faut laisser le service évoluer, pour voir comment il va évoluer.

33740 CONSEILLER DEMERS: Alors votre proposition n'indique pas un manque de ce type de programmations au Canada. Ça n'a pas été basé là-dessus.

33741 M. JOLIVET: Non. C'est uniquement une question de symétrie, si on peut dire, réglementaire, c'est uniquement de reproduire le même ratio qui avait été exigé des autres titulaires de licences. C'est uniquement cette base-là. On a vu qu'en 1997 le Conseil avait exigé un ratio de 1-10. On veut pouvoir présenter des émissions autres que des films. Par ailleurs, on a dit que la majorité de nos émissions vont être des films. Ça va être une partie infime, seulement 5 pour cent au départ. Donc dans ce contexte-là on est allés avec le ratio existant de 1-10.

33742 CONSEILLER DEMERS: Merci.

33743 Sur les dépenses en contenu canadien, vous y avez référé lors de votre présentation, alors la télé à la carte et les vidéos sur demande ont promis jusqu'ici de mettre au moins 5 pour cent de leur revenu brut dans un fonds canadien, tel que vous l'avez proposé ou confirmé aujourd'hui.

33744 Alors une façon simple de calculer le revenu brut des services de vidéos sur demande affiliés à un distributeur pourrait être de fixer le revenu brut du service de vidéos sur demande comme une partie du revenu de l'abonné. Ainsi, mettons que si l'abonné paie six dollars et que le pourcentage était calculé comme étant 50 pour cent, ça serait donc trois dollars.

33745 Avez-vous des commentaires à faire sur une approche comme ça?

33746 M. JOLIVET: Regardez. Ce qu'on a proposé nous autres c'est de remettre à la programmation canadienne 5 pour cent des recettes totales brutes dérivées de nos activités de vidéo sur demande. Donc dans votre exemple du six dollars, on se propose de remettre 5 pour cent -- Cogeco Câble se propose de remettre 5 pour cent du six dollars.

33747 Puis c'est une approche qui m'apparaît similaire à celle -- avant de vous proposer cette condition de licence-là, on a regardé ce qui avait été exigé d'ExpressVu pour son service de télé à la carte. Il n'y a pas longtemps qu'ils se retrouvent, au niveau de l'intégration verticale, dans une situation similaire à la nôtre.

33748 Puis on a reproduit mot pour mot la condition de licence pour la contribution à la programmation canadienne qui avait été demandée pour ExpressVu. Donc c'est 5 pour cent des recettes totales brutes des activités de vidéo sur demande.

33749 CONSEILLER DEMERS: Et selon votre point de vue, ce 5 pour cent se rapproche de la réalité dans le contexte Cogeco d'une intégration de deux entreprises entre les mêmes propriétaires.

33750 M. AUDET: Cela nous apparaîtrait équitable compte tenu des conditions qui ont été imposées à notre principal concurrent.

33751 CONSEILLER DEMERS: D'accord.

33752 Sur les règles de distribution, alors le règlement sur la distribution exige que tous les distributeurs terrestres classe 1 distribuent au moins un service de télé à la carte d'intérêt général dans la langue du marché. On s'entend là-dessus.

33753 Si un distributeur terrestre offre un vidéo sur demande, devrait-il continuer à offrir un service de télé à la carte de nature générale?

33754 M. AUDET: Nous sommes heureux de le faire et de continuer à le faire.

33755 CONSEILLER DEMERS: Est-ce que vous avez une idée du nombre de canaux qu'un tel service exigerait, un service d'intérêt général de télé à la carte?

33756 M. AUDET: La réponse c'est une réponse dynamique. Vous avez vu la démonstration technique tout à l'heure ainsi que son préambule sur l'utilisation efficace de la bande passante.

33757 Donc il faut prévoir qu'à mesure que les noeuds optiques se rétrécissent et tout à l'heure nous avons vu un exemple de comparaison entre des noeuds de 15 000 clients et des noeuds de 800 clients -- et en fait, nous aurions aimé pouvoir ajouter à ce moment-là que c'est vraiment un des rôles clés des compagnies de câble dans le moment de juger à quel moment rétrécir le noeud. C'est une incidente, pour répondre à votre question.

33758 Nous dans le moment la plupart de nos noeuds sont destinés à 2 000 clients mais dès que les souscriptions à Internet deviennent suffisantes les noeuds sont brisés en deux moitiés de 1 000 et éventuellement peuvent être brisés en quatre quarts de 500. Donc c'est vraiment à mesure que le trafic augmente on subdivise les noeuds en plus petites parties.

33759 Alors je ferme l'incidente pour revenir à votre question principale. On va voir évoluer les services dans le temps. A mesure que les noeuds rétrécissent en taille, il devient plus efficace d'offrir le vidéo sur demande tel que nous le proposons et moins efficace d'offrir la quasi-vidéo sur demande ou le "pay per view" tel que nous le connaissons aujourd'hui.

33760 Donc il faut entrevoir dès maintenant quelle est la capacité que nous pouvons mettre à leur disposition aujourd'hui et quelle est la capacité compte tenu des octrois des licences à venir de services de Catégorie 1 et de services de Catégorie 2 que auxquels vous allez octroyer des licences. Il faut entrevoir dès lors la capacité dont nous aurons besoin ou dont l'industrie aura besoin pour les transporter et donc prévoir le nombre de canaux appropriés pour le service de quasi-vidéo sur demande et de "pay per view" dans deux, trois, quatre ou cinq ans.

33761 Forcément, basé sur l'exposé technique que vous avez eu tout à l'heure, le nombre de canaux de vidéo sur demande qui est disponible aujourd'hui ne pourra pas être disponible dans cinq ans. Ça devient donc, selon nous, une question de négociations individuelles entre les parties en fonction de la capacité disponible dans un univers où l'offre de services, suite à cette audience entre autres, aura été complètement chambardée pour le mieux, positivement parlant, mais il va y avoir des réalignements de capacités massifs suite à cette décision et il faut donc l'envisager d'avance.

33762 Alors je ne suis pas capable de vous répondre avec un chiffre précis, mais je pense que la tendance ressort assez bien de ma réponse. Je l'espère.

33763 CONSEILLER DEMERS: Merci, Monsieur Audet. Merci, Madame. Merci, Messieurs.

33764 Merci, Madame la Présidente.

33765 LA PRÉSIDENTE: Madame Bertrand.

33766 LA PRÉSIDENTE DU CONSEIL: Bon après-midi. Bonjour, Madame.

33767 J'aimerais ça justement, Monsieur Audet, j'avoue que la réflexion sur cet avenir concorde avec une réflexion et une action que nous avons tous conjointement dans le système depuis plusieurs mois déjà, mais disons qu'il s'est matérialisé de façon -- en tout cas à l'écran, dans les trois dernières semaines avec l'audience qu'on vient de tenir sur les services numériques.

33768 Je vous avoue que j'ai quelques questions à cet égard-là pour poursuivre un peu les questions que M. Demers avait sur où voyez-vous les distinctions parce que tout en comprenant la nécessité -- ou enfin d'abord qu'un système plus, comment dire donc, plus développé ou plus amélioré aujourd'hui est disponible et rend donc le vrai vidéo sur demande en comparaison ce qu'était l'ancien système. C'est une chose qu'on peut comprendre et donc à tous les trois mois, six mois, il y a toujours des évolutions technologiques qui rendent donc les choses plus intéressantes.

33769 Mais il demeure que la responsabilité du Conseil, telle que confiée en vertu de la Loi sur la radiodiffusion, c'est de garder les équilibres aussi et je vous rappellerai -- et on pourra en discuter une autre fois, mais vous dites que la décision du Conseil par rapport à l'Internet a été de reconnaître qu'on ne pouvait pas réglementer, ce n'est pas ça la décision du Conseil. C'est de choisir d'exempter les contenus. C'est un peu différent parce que sur d'autres éléments, comme vous le savez, il y a quand même des attentes précises en terme d'accès. Donc il y a toujours une préoccupation au Conseil de garder les choses en équilibre.

33770 Or comment, lorsque vous proposez une flexibilité, qui certainement on peut la comprendre, et vous vous inspirez des flexibilités données au moment des licences accordées il y a déjà quelques années, mais aujourd'hui on est quand même plus loin, on sait plus de choses, et cette flexibilité-là est-ce qu'elle n'arrive pas en conflit avec, par exemple, des licences qu'on s'apprête à donner.

33771 Je vais donner un exemple, disons pris au hasard. On a plusieurs demandes, comme vous le savez, d'offrir des services religieux et si on choisit un des services de films religieux et que vous décidez de faire du "packaging" avec des films religieux, est-ce qu'il n'y aurait pas là une concurrence directe avec une offre que vous pourriez faire en "bundling" ou en offres de marché qu'on peut comprendre, mais avec une possible licence qu'on aurait donnée de films religieux.

33772 Je prends un exemple fictif parce que tout exemple que j'aurais donné aurait donné lieu à de l'abord de la part de mes collègues que j'annonce des choses qu'on n'a pas encore décidées -- mais donc vous comprenez le principe de dire, "On peut arriver aux clients même si notre concept de base en est un à la carte par la façon qu'on va le mettre en marché dans un contexte qui ressemble à ce qu'est un canal de niche numérique".

33773 M. AUDET: Je comprends très bien votre question.

33774 Je pense que la réponse à cette question réside essentiellement dans les prix. C'est que le service de vidéo sur demande c'est un service qui coûte quelque chose. On parle d'environ quatre dollars par long métrage. Donc si vous choisissez un long métrage, le consommateur qui choisit un long métrage paie quatre dollars.

33775 Dans l'exemple de la chaîne religieuse que vous avez choisie, on parle de tarif de gros -- là je n'ai pas la mémoire des licences individuelles, mais disons de l'ordre de 30 cents, prix au client 60 cents. C'est clair que ces films-là seront toujours disponibles s'ils font partie de la programmation régulière d'un des canaux numériques spécialisés auxquels vous aurez octroyé une licence. Ils seront disponibles à un prix bien plus abordable comme partie intégrante de ce service numérique qu'ils ne pourraient l'être comme partie d'un service à la carte.

33776 C'est comme 60 cents par mois pour l'usage du canal spécialisé dont vous parlez pour tout le mois versus quatre dollars pour un long métrage chez nous et disons qu'on prendrait un cas extrême où on couperait le prix de 25 pour cent. C'est quand même trois dollars.

33777 Alors c'est pour ça que je vous dis que je pense qu'il n'y a pas de risques aux licences que vous allez octroyer parce qu'il y a une telle différence de prix.

33778 LA PRÉSIDENTE DU CONSEIL: Mais, Monsieur Audet, on l'a vu d'ailleurs dernièrement du côté francophone à la suite de prix qui devraient être les prix de gros, on a vu que par l'exercice de l'offre et de la demande, il y avait eu des prix moindres.

33779 Donc les prix que vous nous donnez ici ne sont pas nécessairement les prix qui vont se transférer à l'abonné. On peut penser que le jour où vous changez votre configuration pour faire en sorte de pouvoir répondre aussi à la demande et à la pression crossante liée à l'Internet, que si vous offrez votre vidéo sur demande et que vous voyez que si vous baissez votre prix vous auriez plus de preneurs, vous pourriez choisir de passer de trois dollars -- j'exagère là -- mais mettons à 30 sous -- j'exagère.

33780 Mais enfin, comment pouvez-vous proposer au Conseil des éléments qui donneraient une distinction très nette qui fait en sorte qu'on n'aurait pas tout le processus qu'on vient de faire pour accorder des licences numériques pour finalement, par le biais du VOD, arriver à créer toutes sortes de bouquets de programmes sur demande, supposément sur demande, mais qui vont finir par être en soi une forme de canaux numériques.

33781 M. AUDET: J'essaie de vous résumer notre perception sur ce sujet-là. S'il est vrai qu'un opérateur de vidéo sur demande pourrait réduire le prix de son film, prenons le cas absurde où un long métrage de quatre dollars serait réduit de 75 pour cent -- et c'est un cas absurde et je vais vous expliquer pourquoi dans deux minutes. Il n'en reste pas moins qu'une chaîne spécialisée sera disponible pour l'ensemble du mois à un client disons pour un ordre de grandeur de 60 cents.

33782 Alors vous vous demandez quel est le risque que vous vendiez un jour le cheval au prix de la souris et je vous réponds, on va peut-être pouvoir vendre le cheval au prix du poney mais jamais au prix de la souris. Ça nous apparaît être une impossibilité.

33783 Maintenant, cela étant dit, j'ajouterai que les studios nous ont déjà manifesté confidentiellement leurs expectatives minimales en terme de ce qu'ils s'attendent à recevoir comme frais de licence pour leurs longs métrages, et essentiellement jouer sur la dimension prix va s'avérer très limité comme possibilité pour nous. Alors je pense que ce sont là des éléments qui devraient mettre les risques en perspective pour nous et pour le Conseil.

33784 J'ajouterais, par ailleurs, que le but de ce service-là ce n'est pas de nuire aux canaux numériques que nous nous proposons d'ailleurs de vendre pour le plus grand bénéfice de nos clients et de nos actionnaires. Donc ce n'est pas ça l'objectif du tout.

33785 Par contre, c'est clair que notre objectif c'est de capturer des revenus qui vont dans le moment aux magasins vidéo. Ça c'est clair. Il n'y a aucun doute là-dessus. Alors c'est comme ça que nous percevons la situation, Madame Bertrand.

33786 LA PRÉSIDENTE DU CONSEIL: Mais dans le 20 pour cent, si je comprends bien sur la question de films, il y a plusieurs intervenants, il y un partage de revenus. Pour ce qui est de non-films où vous dites que vous proposez un 20 pour cent, ou enfin vous demandez, vous seriez prêt à une condition de licence de l'ordre de 20 pour cent, qu'en est-il de l'espèce de mise en garde parce qu'au fond ce 20 pour cent là c'est 20 pour cent sur l'offre mais je peux choisir, par exemple, des cours de décoration ou des cours de cuisine. Est-ce qu'il n'y aurait pas plus dans ce type de catégorie de programmes le danger d'une concurrence plus directe avec des canaux qui peuvent exister déjà ou ceux à qui on pourrait accorder une licence dans les prochains mois.

33787 M. AUDET: Je comprends votre préoccupation. Je pense qu'un service de vidéo sur demande -- je m'excuse d'avoir l'air de me répéter -- ne pourra jamais concurrencer une chaîne "How to" qui se vend à 30 ou 60 cents par mois. Un service de vidéo sur demande ne pourrait jamais aspirer concurrencer à ce niveau-là parce que c'est économiquement impossible.

33788 Par contre, vendre des longs métrages aux prix que nous avons indiqué dans notre demande, ça, c'est tout à fait envisageable.

33789 Maintenant, j'ajouterais, au plan philosophique, purement philosophique -- parce qu'en définitive, nous allons nous conformer aux règles que vous allez établir, comme toujours -- mais au plan purement philosophique, la question que vous posez, selon nous, la réponse est entre les mains du propriétaire de l'émission et elle est entre les mains du consommateur.

33790 Je vous suggère, philosophiquement, que dans un avenir pas trop lointain, le propriétaire va décider à qui il vend son émission, pour quelle fenêtre de décision à son gré, puis l'acheteur va l'acheter s'il pense qu'il a un client. Au plan philosophique, c'est inévitable. C'est comme ça que ça va arriver.

33791 Cela étant dit, si vous nous imposez une condition, nous allons l'observer.

33792 LA PRÉSIDENTE DU CONSEIL: Non, mais il y a quand même, au chapitre des processus de licence, un élément qui est lié à la non-concurrence ou ne pas aller directement...

33793 Alors déjà, au niveau du VOD, je pense que lorsqu'on avait accordé les licences, on avait démontré une ouverture à cet égard-là. Mais j'imagine qu'on ne vient pas de passer les semaines et les mois auxquels vous avez participé vous-même, comme requérante, pour dire, bien là, maintenant qu'on a fait tout ce processus-là, on va donner des licences.

33794 Mais par ailleurs, on ne se préoccupe pas de ce que seront, en fait, les demandes de VOD, si on devait donner des licences, et quelle sorte d'impact ça pourrait avoir sur le nouvel environnement qui est en train de se créer. C'est ce qu'on essaie de comprendre, Monsieur Audet.

33795 M. AUDET: Nous avons compris votre question et nous avons accepté de nous conformer aux règles que vous allez édicter en la matière. La remarque que j'ai faite est une remarque purement philosophique pour enrichir le dossier. On va, bien sûr, se conformer aux exigences du Conseil en la matière, étant conscients que la question d'équilibre est importante si on veut avoir une offre élargie et attrayante pour le consommateur.

33796 LA PRÉSIDENTE DU CONSEIL: Merci.

33797 M. JOLIVET: Si je peux me permettre d'ajouter là-dessus, il est clair que le service qu'on propose n'est pas un service qui se vend en concurrence avec les services spécialisés. Mais compte tenu des préoccupations que le Conseil pourrait avoir relativement à la proportion d'émissions autres que des films puis des films, je ne sais pas sur quelle base on pourrait limiter ça.

33798 Mais une avenue possible de dire que... Puis dans notre cas, ce n'est pas réellement applicable parce qu'on propose cinq pour cent d'émissions autres que des films la première année puis 20 pour cent en l'an sept.

33799 Il pourrait y avoir une attente du Conseil, une condition de licence du Conseil à l'effet que le service, l'inventaire du service de vidéo sur demande soit composé en majorité de films.

33800 Je ne sais pas si ça répond à vos préoccupations, mais ça pourrait être une avenue.

33801 LA PRÉSIDENTE DU CONSEIL: Mais il y a aussi la question de l'offre au consommateur ou à l'abonné dans le regroupement, dans l'offre de bouquets où, si par exemple, on offre une série culte, c'est une chose. Mais si on offre une série de dix émissions "how to" qui, par ailleurs -- et puis qu'on fait ça souvent, c'est là où les distinctions peuvent être plus problématiques.

33802 M. JOLIVET: Il faut dire que la formule de programmation puis l'inventaire du service VSD, c'est complètement différent de l'inventaire pour la formule de programmation de télé à la carte.

33803 LA PRÉSIDENTE DU CONSEIL: Bien sûr.

33804 M. JOLIVET: Elle, elle change à tous les mois alors que nous autres, on n'est pas limité dans le temps, puis en fait, ce ne sont que des titres qui sont emmagasinés sur le serveur et auxquels le consommateur peut avoir accès.

33805 LA PRÉSIDENTE DU CONSEIL: Que vous pouvez aller chercher en tout temps.

33806 M. JOLIVET: Oui.

33807 LA PRÉSIDENTE DU CONSEIL: Merci.

33808 LA PRÉSIDENTE: Alors, sur le même sujet, vous croyez que si -- de fait, vous semblez être d'accord philosophiquement, Monsieur Audet, que c'est un service qui n'a pas l'intention d'entrer en concurrence avec les services spécialisés numériques niches qui pourraient être autorisés, ou même sur les services existants où c'est un peu plus facile de donner des exemples.

33809 Mais si par exemple... Nous avons déjà Discovery Channel en anglais. Si, en Ontario, un service de vidéo sur demande commençait à offrir des regroupements de documentaires intéressants qui sont populaires sur un service qui existe déjà, est-ce que ça ne devient pas une concurrence ça?

33810 Et puis, vous parlez de prix, mais ça pourrait être attaché à, si vous achetez trois films ce mois-ci, gratuitement, vous aurez un certain nombre de documentaires sans qu'on charge un prix pour ces documentaires.

33811 M. AUDET: Notre objectif n'est pas de nuire aux autres, là. Notre objectif, c'est de mettre disponible une banque de longs métrages dans laquelle les clients vont puiser selon leurs goûts, au moment qui leur plaît. C'est le seul objectif qu'on poursuit.

33812 LA PRÉSIDENTE: Oui, je comprends votre objectif philosophique, mais nous, nous sommes ici à essayer de réglementer et d'établir comment vous êtes tenus, et les autres titulaires de ces licences sont tenus au genre de licence qu'ils nous ont demandée et qu'on leur a accordée.

33813 Alors, nous essayons de vous demander comment on pourrait limiter ce problème ou l'éliminer. Quelles seraient les méthodes les meilleures? On parle d'inventaire, pourcentage d'inventaire en tout temps...

33814 M. AUDET: Je pense que peut-être que la façon la plus englobante serait de préciser qu'il ne s'agit pas d'un service de programmation, dans le sens où nous n'allons pas programmer un service. C'est une banque de films et d'émissions qui est disponible dans un serveur, puis les clients vont puiser dedans. Ce n'est pas...

33815 On ne conçoit pas une grille horaire, que ce soit une grille horaire temporelle ou virtuelle, parce qu'on ferait un packaging ultra-sophistiqué dans le genre de celui que vous avez décrit. Peut-être que c'est là que se situe la réponse à votre question.

33816 LA PRÉSIDENTE: Dans votre demande, -- je les ai toutes regardées, alors j'oublie un peu -- il n'y a aucune exclusion de catégorie. Si c'est vraiment votre but d'offrir des films, pourquoi est-ce nécessaire d'avoir toutes les catégories, -- incluant les nouvelles -- ce qui laisse la porte ouverte à n'importe quoi.

33817 M. JOLIVET: Encore là, c'est vraiment, comme j'expliquais tantôt, au moment de la préparation de la demande, on a clairement expliqué au Conseil qu'on veut en priorité diffuser des films. Sauf qu'on voulait bénéficier de la même latitude que celle offerte aux titulaires en 97.

33818 Puis on croit toujours que cette latitude-là est nécessaire, de façon à pouvoir adapter le service au goût de notre clientèle de façon à ce que cette clientèle-là ne se tourne pas éventuellement vers l'Internet pour offrir le même -- pour obtenir, plutôt, le même service VSD qui là, ne sera pas sujet à ce type-là de restriction.

33819 LA PRÉSIDENTE: Si vous me mentionnez les décisions qu'on a déjà prises, il y a toujours des façons. On pourrait vous donner un permis à court terme et revoir le tout quand c'est possible de revoir les décisions qu'on a déjà données.

33820 Le monde a changé depuis 97 et nous venons de passer trois semaines à entendre des demandes qui vont être assez difficiles à mettre en oeuvre. Alors on s'interroge sur comment essayer d'encadrer un peu ces licences pour qu'elles soient, de fait, différentes et non-concurrentielles.

33821 Et lorsque la décision est rendue et que toutes les catégories sont possibles, à ce moment-là, tout est possible.

33822 Alors nous cherchons simplement des méthodes qui nous donneraient un réconfort au niveau réglementaire que ce que vous voulez, c'est bien et ce que les autres compagnies qu'on va entendre dans les prochains jours veulent, c'est bien ce qui va se passer.

33823 M. AUDET: Nous essayons de vous en donner l'assurance de toutes les façons possibles en ce moment. Alors je vous réitère que ce qu'on vous a dit jusqu'ici, nous allons nous y conformer.

33824 Je pense que la raison fondamentale pour laquelle on a épousé les mêmes conditions que celles qui avaient déjà été acceptées, c'est pour ne pas être désavantagés par rapport à nos concurrents. Ce n'est pas pour nuire à des titulaires éventuels de nouveaux services numériques, d'une part et d'autre part, pour être sûr de pouvoir présenter les longs métrages.

33825 Je ne voudrais pas qu'on soit limité, disons, à ne pas pouvoir présenter, par exemple  -- enfin, je ne veux pas prendre d'exemple précis. Mais prenons l'exemple de la religion tout à l'heure. S'il y a un film sur un sujet religieux, il ne faudrait pas qu'on nous empêche de diffuser.

33826 LA PRÉSIDENTE: Monsieur Audet, c'est un film, donc il n'y a pas de problème.

33827 M. AUDET: D'accord. Donc, je pense que c'est ça qui est le plus important pour nous.

33828 LA PRÉSIDENTE: Nous parlons, nous, de choses qui ne sont pas des films et qui -- on a déjà des indices -- qui peuvent être regroupées et vendues en concurrence avec des services niches que nous nous proposons d'autoriser et qui eux auront des exigences de contenu canadien, etc., différents.

33829 Alors c'est un problème qui a été étalé et nous cherchons des solutions qui ne seront pas trop brimantes, mais qui vont tenir les titulaires au genre de licence qu'on leur a accordée.

33830 J'ai pris note que vous avez dit, l'important pour nous c'est de satisfaire la clientèle. Alors si un service de sport trouve que, pour satisfaire la clientèle, il faut diffuser "La Petite Vie", ce n'est pas possible. C'est très bien de vouloir satisfaire la clientèle, mais ce n'est pas le rôle qui leur a été accordé.

33831 J'exagère, mais quand même, si c'est la base philosophique, il y a un tas de choses qui sont permises. Et c'est ça, on essaie de déterminer comment faire pour encadrer ces services.

33832 M. AUDET: J'aimerais consulter mes confrères un moment, s'il vous plaît.

--- Pause / Pause

33833 M. AUDET: Je pense que mon confrère Jolivet aurait peut-être une avenue susceptible de vous intéresser.

33834 M. JOLIVET: Je reviens un peu à la proposition que j'ai faite tantôt. Je pense qu'il pourrait y avoir une attente du Conseil ou une condition de licence à l'effet que l'inventaire du service de vidéo sur demande serait composé, de façon prédominante ou en majorité, de films.

33835 LA PRÉSIDENTE: Cinquante-et-un? Vous disiez 20 pour cent un peu plus tôt.

33836 M. JOLIVET: Vous voudriez avoir un pourcentage établi au-dessus de 51?

33837 LA PRÉSIDENTE: Cinquante-et-un pour cent de films prédominant, ce n'est pas très réconfortant pour créer un encadrement. C'est parce que c'est... L'abonné choisit. Si, dans votre inventaire -- exagérons. Il y a plusieurs films documentaires intéressants ou des séries d'un programme qui peuvent avoir facilement une deuxième fenêtre à la télévision ou dans un service spécialisé. S'il y en a 51 pour cent de ça, parce que vous vous apercevez que ça, ça fonctionne financièrement, de vendre -- et vous savez comme nous qu'on a déjà des indices de début de ce genre de regroupements qui peuvent être facilement concurrentiels avec d'autres titulaires de qui on attend beaucoup au niveau de contenu canadien.

33838 M. JOLIVET: Mais dans mon esprit, il y a deux possibilités: Ou bien de voir ça sous l'angle d'une prédominance de films canadiens, ou bien c'est d'aborder la question du côté de la question de droits.

33839 Pour les émissions autres que les films, vous convenez avec moi que si les droits sont disponibles, si par exemple, pour la série "Les Plouffes" les droits sont disponibles en ce moment pour diffusion, il n'y a aucun service spécialisé, aucun service de programmation qui veut l'utiliser. Alors pourquoi, dans notre service de vidéo sur demande, devrait-on être empêché de diffuser ou de rendre cette série-là disponible sur notre serveur?

33840 LA PRÉSIDENTE: Mais pourquoi est-ce que... Moi, je ne peux pas facilement conclure, malgré que vous vous y connaissez mieux que moi, que la série "Les Plouffes", ça ne serait pas alléchant à quelqu'un.

33841 Cela a déjà été proposé devant le Conseil, un service qui justement, donnerait une fenêtre de plus à des programmes qui ont été très populaires dans le passé et qui seraient du matériel intéressant canadien pour certaines niches. "Série Plus", je suppose, serait... Dire que les droits ne seraient pas intéressants à ces services-là, je ne pense pas que...

33842 Mais nous sommes ouverts à vous entendre là-dessus. Peut-être que nous avons tort que les possibilités sont telles que ça pourrait être une ouverture qui nous causerait des problèmes.

33843 Parce que là, ce qu'on a, c'est qu'on a exigé certaines choses en 97. Le monde bouge. Aujourd'hui, on donne des licences possiblement à certains d'entre vous qui vont être assez difficiles à mettre en oeuvre et que, dans certains cas, vous ne voudriez pas, je suppose, que la viabilité de ces services-là soit mise -- ait un certain préjudice ou désavantage parce qu'un de vos collègues qui a une licence comme la vôtre a le même genre de programmation pour un prix très bas pour attirer la clientèle vers le VOD à qui il va vendre des films subséquemment.

33844 Est-ce que c'est quelque chose qui est possible?

33845 M. AUDET: Nous ne voulons pas, et nous ne ferons pas, sciemment, de gestes pour nuire aux nouveaux canaux auxquels vous -- nouveaux ou existants -- auxquels vous allez octroyé ou avez octroyé des licences.

33846 Cela étant dit, nous vous avons proposé des ratios; pas plus de 20 pour cent d'émissions autres que les films. Moi, ça me semblait offrir une protection plus que suffisante.

33847 Si vous êtes d'avis que ce n'est pas le cas, alors peut-être devriez-vous nous imposer un pourcentage plus élevé. Mais je pense...

33848 LA PRÉSIDENTE: J'ai peut-être mal compris. Je pensais que M. Jolivet disait "prédominant".

33849 M. AUDET: Oui, je comprends, mais là, on vous écoute puis on essaie de répondre à la demande.

33850 Alors on vous a proposé, nous, déjà, des pourcentages. Est-ce à dire que ces pourcentages ne satisferaient pas le Conseil? S'ils ne les satisfont pas, on va les changer. S'ils satisfont, bien on va s'y conformer.

33851 LA PRÉSIDENTE: Vous suggériez 20 pour cent de l'inventaire au lieu de...

33852 M. AUDET: C'est ce que nous avions mis dans notre demande et ça nous apparaissait, nous, être adéquat pour protéger tout le monde.

33853 M. JOLIVET: C'est présenté dans la demande en termes de projection. On projette 20 pour cent en l'an sept pour les émissions télé-films.

33854 LA PRÉSIDENTE: C'est la façon, à votre avis, la meilleure de cerner ce problème.

33855 M. AUDET: Je pense que ça limite les risques.

33856 LA PRÉSIDENTE: Je m'excuse. J'ai peut-être oublié que vous aviez déjà mis le 20 pour cent dans la demande. Je pensais que vous mettiez ça sur la table maintenant.

33857 J'ai seulement une autre question. Quand on a entendu un peu plus tôt la présentation technique, si j'ai bien compris, on nous disait que dans certaines circonstances, avoir "near video on demand" ou presque vidéo sur demande en utilisant plusieurs canaux, ça devenait plus intelligent que d'utiliser le vidéo sur demande.

33858 Est-ce qu'à votre avis, à ce moment-là, est-ce que ça fait quelque chose, à votre avis, qu'un titulaire de vidéo sur demande pourrait, sans licence de télé payante, faire un ou l'autre? Est-ce que j'ai bien compris ce qu'on disait, que dans certains cas, c'était plus efficace de le faire en near video on demand en ayant plusieurs canaux pour un seul film?

33859 M. AUDET: Je pense que ce que mes confrères ont voulu illustrer, c'est la tendance qui fait que d'offrir la véritable vidéo sur demande est celle qui utilise la bande passante de la façon la plus efficace.

33860 Nous, nous n'avons pas demandé de licence de télévision payante ni de pay per view, ce qui donc signifie que les joueurs existants ont la possibilité de continuer à offrir leur service de télévision payante et surtout, ce qui est et deviendra leur grande force, ce sont les événements en direct auxquels nous, nous n'aurons pas accès à titre d'opérateur de vidéo sur demande. Nous le comprenons bien et nous le respectons.

33861 LA PRÉSIDENTE: C'était plutôt une illustration technique que de faire les deux.

33862 Je vous remercie. Je ne sais pas s'il y a d'autres questions.

33863 Madame Bertrand.

33864 LA PRÉSIDENTE DU CONSEIL: Je veux juste soulever que la question de l'inventaire, combien vous aurez de titres dans votre inventaire? Quand on parle de 80 pour cent, c'est... Je veux dire, est-ce qu'on a une population, un inventaire de un million de titres, 1 000 titres?

33865 M. AUDET: Nous parlons à l'heure actuelle d'un inventaire de 600 titres. Pourquoi 600? On aurait pu choisir 1 000. C'est 600 qui semble plus à la portée dans le moment, économiquement. Mon plus cher désir c'est qu'on ait 1 000 titres en banque. Je pense que c'est vraiment les contraintes du moment, mais ça ne sera jamais 10 000. Qui sait ce que ça sera plus tard.

33866 On ne voit pas, dans notre lunette à l'heure actuelle, un univers de 10 000. On voit un univers de 1 000, 1 500. On ne voit pas un univers aussi grand que ce que vous disiez.

33867 LA PRÉSIDENTE DU CONSEIL: Parce que dépendant de la taille de l'inventaire et ce que vous mettez de l'avant comme condition ou attente a plus ou moins d'effet. Si vous aviez un inventaire d'un million, qu'on mette 80 pour cent ou même qu'on mettrait 90 pour cent, ce qui devient finalement le rapport avec l'abonné ou le consommateur va être la façon que vous allez le présenter, donc la mise en marché, la promotion. Si cela est fait surtout dans des bouquets de programmes, c'est là où je pense, et peut-être à tort, compte tenu les prix qui pourraient être offerts, mais c'est là où il peut y avoir une certaine concurrence avec le genre de projets qu'on a examinés depuis trois semaines en audience sur les canaux spécialisés.

33868 M. AUDET: Je comprends votre préoccupation. Si, après mûre réflexion, vous décidez de nous imposer non seulement un plafond pourcentuel mais un plafond en valeur absolue, nous le respecterons.

33869 LA PRÉSIDENTE DU CONSEIL: Merci.

33870 LA PRÉSIDENTE: Monsieur Audet, je m'excuse d'avoir oublié que vous aviez déjà mis de 15 à 20 pour cent sur la table. J'ai oublié que c'était dans votre demande.

33871 M. AUDET: Disons que ça fait plusieurs que vous entendez ces derniers temps.

--- Rires / Laughter

33872 LA PRÉSIDENTE: Oui. Mais celle-là, s'il y en déjà quatre... Toutes mes excuses.

33873 Est-ce qu'une autre façon serait de peut-être -- est-ce que ça vous embêterait beaucoup s'il y avait une exigence que cette programmation-là doit être vendue elle aussi pour s'insérer dans à la carte plutôt qu'offerte comme bonis?

33874 M. AUDET: Ça nous cause aucune difficulté.

33875 LA PRÉSIDENTE: Ça ne serait pas difficile de s'organiser de toute façon, je suppose, en baissant le prix du film et... En tout cas.

33876 M. AUDET: A vrai dire, non,... Excusez-moi, mais c'est parce que ce n'est pas comme ça qu'on voit la chose. Nous, on veut vendre ces émissions-là. Pour nous, c'est une source -- ça devra être, à terme, une source de profits. Donc, on veut vendre des émissions, on veut vendre des choses... On veut vendre. On ne veut pas donner. Ça ne nous intéresse pas de donner.

33877 Notre métier, nous, c'est de bien servir nos clients, mais en même temps, c'est de fournir un rendement à nos actionnaires. On va choisir des émissions à l'intérieur des limites pourcentuelles et en valeur absolue que vous aurez fixées, de choses qui se vendent et qui rapportent un profit au même titre que des longs métrages.

33878 LA PRÉSIDENTE: Je suppose que c'est là l'essence de la télé à la carte, c'est de vendre de la programmation.

33879 M. AUDET: C'est de rendre des longs métrages disponibles à la clientèle. C'est ça l'essentiel du service.

33880 LA PRÉSIDENTE: Monsieur le Conseiller juridique a des questions, et j'espère que lui n'a rien mélangé!

33881 Me McCALLUM: Merci. Parlons juste pour un instant encore une fois des autres catégories d'émissions autres que les longs métrages.

33882 Vous avez proposé une condition de licence à ce que l'inventaire contienne en tout temps un ratio global minimum de un à 10 titres canadiens et non-canadiens pour toutes les autres catégories d'émissions.

33883 Si jamais le Conseil voulait imposer un ratio supérieur à un à 10, comment réagiriez-vous?

33884 M. AUDET: Je pense qu'avant de faire une telle chose, il faudrait s'assurer que c'est équitable pour les concurrents en présence. Je pense que c'est la meilleure réponse que je peux vous donner.

33885 Me McCALLUM: Et est-ce que vous pouvez suggérer un niveau, un ratio qui pourrait être imposé?

33886 M. JOLIVET: Comme j'ai mentionné tantôt, tant qu'on ne lance pas le service puis on ne voit pas l'évolution du service, c'est difficile de proposer à ce moment-ci un ratio exact. Le ratio de un-10 nous apparaît raisonnable, puis de voir comment, ensuite, le service va évoluer.

33887 Me McCALLUM: Mais un à cinq, par exemple, serait difficile, il vous semble? Je prends ça comme exemple.

33888 M. AUDET: Écoutez, ce n'est pas très important dans l'ensemble du portrait. Si ça vous sécurise de faire ça, on va y consentir, bien sûr. Si on a un problème de concurrence, on reviendra vous voir.

33889 Me McCALLUM: Merci.

33890 Juste une brève question. Est-ce que vous pouvez commenter dans quelle mesure un service vidéo sur demande peut coexister avec un service de télévision payante à la carte général sur le même système?

33891 M. BÉLANGER: Effectivement, il peut y avoir une coexistence des deux sur le même réseau. Notre service de vidéo sur demande va s'ajouter au service de télévision à la carte, et essentiellement, on va le déployer dans les endroits où on a la capacité pour le faire au-delà -- après avoir commencé à distribuer les services de Catégories 1 et 2 qu'on distribuera.

33892 Alors c'est là où on a de la capacité et il y aura une coexistence de la pay per view et de la VOD sur les réseaux.

33893 M. AUDET: Je pense, pour ajouter à la réponse, mon collègue ne le fait pas parce qu'il estime l'avoir dit déjà une fois, mais les projections de Paul Kagan nous apparaissent éloquentes sur les perspectives de coexistence de ces services et même de croissance de ces services. Et puis, c'est une source quand même réputée mondialement qui nous le dit. Alors on n'a pas de raison de ne pas y croire.

33894 Me McCALLUM: Merci.

33895 Quand vous avez produit cette demande auprès du Conseil en novembre de l'année dernière, vous avez prévu une mise en vigueur vers juin 2000.

33896 Dans combien de mois est-ce que vous prévoyez mettre en vigueur vos plans après une décision du Conseil?

33897 M. BÉLANGER: On pense qu'un délai de six à huit mois va être requis après une décision du Conseil pour que l'on puisse offrir le service sur une base commerciale dans les premiers réseaux.

33898 Me McCALLUM: Et est-ce qu'il serait échelonné ou mis en vigueur en toutes classes en même temps?

33899 M. BÉLANGER: Ce serait graduel. Donc, disons huit mois après la décision du Conseil, on serait en position de l'offrir à peu près à 20, 25 pour cent de notre clientèle numérique, et dans les quatre ou cinq mois suivants, on pourrait monter ce pourcentage-là autour de 40 à 45 ou 50 pour cent, peut-être, et dans l'année suivante, essentiellement à 75, 80 pour cent de la clientèle numérique.

33900 Il faut comprendre que les réseaux doivent être interconnectés pour pouvoir distribuer l'architecture, les serveurs, distribuer les serveurs régionaux, le serveur central qu'on a décrit précédemment. Donc, il est essentiel qu'on vise les réseaux où on offre la télévision numérique, mais qui sont interconnectés.

33901 Certains réseaux ne sont pas interconnectés, donc on n'atteindra peut-être jamais -- du moins, dans deux ou trois ans, on n'atteindra peut-être pas le 100 pour cent de notre clientèle numérique. Mais essentiellement, 75, 80, peut-être même 90 pour cent de notre base numérique aura accès au service éventuellement.

33902 Me McCALLUM: Merci beaucoup. Merci, madame la Présidente.

33903 LA PRÉSIDENTE: Madame Bertrand a une autre question.

33904 LA PRÉSIDENTE DU CONSEIL: Je m'excuse. Je suis en train de faire mon éducation.

33905 Dans l'étude de Paul Kagan, vous dites que les projections sont à l'effet que, non seulement il n'y pas -- comment dire, on n'enlève pas le marché au pay per view. Au contraire, il y a comme une espèce de stabilisation qui se fait au départ, un certain plafond, puis après ça, ça repart et puis les deux continuent à grandir.

33906 Est-ce que vous avez des explications... J'avais déjà lu quelque chose à l'effet que le pay per view est peut-être plus en lien avec un consommateur plus passif, et même si on est dans un monde numérique avec plus de possibilités, il y a encore... Quelles sont les explications? Je pense que ça pourrait nous aider à notre compréhension.

33907 On veut bien se fier à Paul Kagan, mais si on ne sait pas sur quelle base... Je comprends qu'il a fait des études. Je pense qu'il est connu très bien et il n'y a aucun problème en termes de référence.

33908 Mais je pense que ça serait important de connaître quelles sont ces hypothèses derrière ces chiffres pour avoir un peu de profondeur quant à l'hypothèse dont vous vous servez ici pour demeurer confiants qu'il y a de la place pour tout le monde. Au fond, c'est ce que vous dites.

33909 M. AUDET: Disons que l'expérience jusqu'à date, notre expérience jusqu'à date, dans tous les médias, que ce soit les journaux, la radio, la télévision, la télévision spécialisée, au moment du lancement de ces nouvelles alternatives, tout le monde a cru que c'était la fin du monde pour ceux qui étaient là avant. La réalité s'est avérée tout autre.

33910 La réalité, c'est qu'il y a généralement de la place pour tout le monde pour continuer non seulement à vivre mais à prospérer.

33911 Alors quels sont les éléments détaillés derrière la projection de Kagan? Je ne suis pas capable de répondre à cette question-là. Je ne le sais pas.

33912 Par contre, ce que je sais, c'est que d'expérience, tout le monde craint toujours que ce soit la fin du monde pour celui qui était là avant, et la réalité s'avère qu'il y a de la place pour tout le monde. C'est la meilleure explication que je peux vous donner, basée sur mon expérience.

33913 LA PRÉSIDENTE DU CONSEIL: Alors, on va obtenir l'étude de M. Kagan.

33914 LA PRÉSIDENTE: Monsieur Audet, peut-être que vous ne voulez pas répondre à cette question, mais en vous écoutant et en considérant comment la vidéo sur demande fonctionne, est-ce que l'inquiétude que nous avons étalée -- et pas toujours avec subtilité -- s'adresserait plutôt à la télé payante? Est-ce que vous pouvez commenter sur le fait -- plutôt que la vidéo sur demande où ça devient un plus grand problème de faire des regroupements concurrentiels? Est-ce que le fait que ces vidéos sur demande limitent les capacités ou les possibilités.

33915 M. AUDET: Madame la Présidente, je suis bien embêté de répondre à votre question parce que nous, on est venu ici avec une perspective qui n'était absolument pas de nuire à d'autres joueurs. Même on est étonné de la profondeur de votre préoccupation. Maintenant que vous nous l'avez expliquée, on la comprend et, bien sûr, on l'accepte.

33916 Alors, c'est plus difficile pour moi de spéculer sur ce que ça pourrait être par rapport à d'autres services.

33917 Je pense qu'on a essayé, au fil de cet interrogatoire, de vous fournir les assurances que nous croyons satisfaisantes qu'il ne se produira pas le désastre que vous anticipez face aux nouvelles chaînes et aux chaînes existantes spécialisés auxquelles le Conseil octroie des licences, parce que ce n'est vraiment pas dans cet esprit-là qu'on s'est présenté et qu'on se présente devant vous aujourd'hui.

33918 LA PRÉSIDENTE: C'est simplement parce que, pour nous, tout se chevauche. Nous essayons de comprendre. Alors, en comprenant davantage comment vous entrevoyez le fonctionnement de vidéo sur demande, ça ouvre évidemment des questions. Où réside le problème? Est-ce qu'il est amoindri selon le genre de distribution dans ce deux domaines?

33919 Nous vous remercions. Je crois que ce sont toutes nos questions.

33920 M. AUDET: Merci.

33921 LA PRÉSIDENTE: Nous allons entendre la présentation de la prochaine requérante, ensuite, nous prendrons une pause. Ça leur donnera la chance de préparer leurs réponses aux mêmes questions.

33922 Madame la Secrétaire, s'il vous plaît.

33923 MS BÉNARD: Thank you, Madam Chair.

33924 The next presentation will be by Rogers Cable Incorporated for a national general interest video on demand service.

33925 THE CHAIRPERSON: Good afternoon and proceed when you are ready.

PRESENTATION / PRÉSENTATION

33926 MR. ENGELHART: Thank you very much.

33927 My name is Ken Engelhart. I am the Vice-President, Regulatory at Rogers Communications Inc.

33928 On my right is Pierre Robichaud, Vice-President, Business Development of Rogers Video.

33929 On my left is Mike Lee, Vice-President, Interactive Services of Rogers Cable.

33930 On my far left is Nick Hamilton-Piercy, Vice-President and Chief Technology Officer, Rogers Cable.

33931 On my far right is Missy Goerner. Missy is a consultant who has been active in the development of pay per view and video on demand services in Canada and the U.S. for many years, both for Rogers and for other companies.

33932 In the back row, to my left is Alain Strati, Manager, Regulatory at Rogers Cable. Beside Alain is John Di Mauro, Finance Manager, Interactive Services and Product Development at Rogers Cable. At my right is David Purdy, Director of Industry Development for Interactive Services.

33933 Good afternoon, Madam Chair and Commissioners.

33934 Rogers Video, a division of Rogers Cable Inc. -- Rogers Cable -- is before you today with an application to operate a national video on demand programming undertaking in both English and French and in other languages.

33935 With over 240 stores, Rogers Video is the largest Canadian-owned video retailer in Canada. Over 500,000 Canadian consumers shop in our stores every week. As such, we believe we are uniquely positioned to introduce and promote video on demand to the Canadian consumer marketplace. We see VOD as a new opportunity in the video retail business, as an added electronic distribution element to the success of our existing "bricks and mortar" business.

33936 Rogers Video believes that the approval of this application will result in the delivery of a service that will provide important benefits for the broadcasting system in Canada. In this presentation, we will review how this application will contribute directly to the achievement of the policy objectives of the Broadcasting Act and is consistent with the Commission's regulatory and policy framework for VOD.

33937 We will also show how approval of this application will provide exceptional benefits to the Canadian consumer, to Canadian rights holders and to the canadian production industry. Finally, we will address the reasons why we believe that Rogers Video is ideally positioned to provide Canadian consumers with a viable and superior VOD service.

33938 The Commission established an overall policy and regulatory framework for VOD programming undertakings in Public Notice CRTC 1997-83. That policy and regulatory framework is reflected in Decisions CRTC 97-283 to 97-287 in which the Commission approved five applications for licences to carry on national VOD programming undertakings. To date, none of these services has launched.

33939 In 1997, the Commission adopted a competitive licensing approach for VOD, one that would rely on market forces to help create the strongest possible new Canadian programming services. The Commission noted in the Public Notice that the licensing of the five services in 1997 would not preclude it from considering other VOD applications in the future.

33940 The Commission also concluded that it would be appropriate to provide VOD licensees with maximum flexibility in the operation of their services, including the technology that they employ and the programming that they provide.

33941 We believe that three years later, this policy and regulatory framework is the right one and remains relevant in light of rapid evolutionary changes within the broadcasting environment. Approval of the Rogers Video application would be consistent with this framework.

33942 Pierre.

33943 M. ROBICHAUD: VOD has arrived.

33944 Comme le Conseil le sait déjà très bien, aucun diffuseur au monde n'a jusqu'à maintenant été en mesure d'offrir une programmation de vidéo sur demande, autre que dans le cadre d'essais pilotes ou de déploiement commercial très limité. Il existe indéniablement beaucoup de scepticisme quant à l'imminence de la vidéo sur demande.

33945 Toutefois, nous aimerions souligner que Rogers n'a pas déposé de demande de licence en 1997 parce qu'elle savait pertinemment que la technologie de la vidéo sur demande n'était pas prête.

33946 Nous nous présentons devant vous aujourd'hui parce que la vidéo sur demande est enfin arrivée. La technologie est disponible, et le temps est opportun. Rogers a reconstruit son système de câblodistribution pour présenter une technologie de distribution numérique et offrir des services de programmation interactifs. Ainsi, les abonnés de Rogers ont désormais accès à la télévision numérique par le biais de choix numérique de Rogers. C'est cette même architecture qui permettra d'offrir aux consommateurs une programmation de vidéo sur demande de forme longue, comme pour des longs métrages.

33947 Pour son système de vidéo sur demande, Rogers Video mettra sur pied un forfait de programmation de haute qualité, incluant des longs métrages ainsi que des émissions pour enfants, des émissions éducatives et des programmes didactiques, en plus de divers autres éléments multimédias en anglais, en français et dans d'autres langues.

33948 Le choix de programmation sera rehaussé au fil du temps, en fonction de l'accroissement de la capacité du serveur de média et en réponse à la demande des consommateurs.

33949 Rogers Vidéo conclura des ententes d'affiliation avec les entreprises de distribution de radiodiffusion affiliées. Ces ententes permettront à Rogers Video d'offrir son contenu de programmation sur la tête de ligne des affiliés EDR. Les affiliés seront responsables de la préparation et de la mise en place des programmes pour les clients, des systèmes de facturation et de recouvrement, des systèmes de navigation ainsi que des canaux d'annonces/ présentations respectant les exigences de Rogers Video ainsi que la réglementation en vigueur.

33950 Rogers Video conclura des ententes avec les titulaires des droits pour la distribution de la programmation par le biais de son service de vidéo sur demande.

33951 Ken.

33952 MR. ENGELHART: The Rogers Video VOD service will provide viewers with a proliferation of new and compelling Canadian programming options. Customers will be able to choose from an inventory of approximately 500 different program titles at any given time, with titles changing on a regular basis, thereby greatly increasing the diversity of programming currently available to Canadians. The service will include both English- and French-language programming, as well as some programming in other languages.

33953 Our service will provide consumers with the convenience of ordering a movie of their choice from their own living room, with full VCR capability, at competitive prices.

33954 Rogers Video strongly believes that approval of our application will contribute directly to the objectives of the Broadcasting Act and result in significant benefits for Canadian rights holders, the Canadian film and television program production industry and the Canadian broadcasting system in general.

33955 The broadcasting system will benefit in five different ways.

33956 First, the conditions of license we have agreed to will support Canadian movies.

33957 Second, VOD will help drive digital box penetration.

33958 Third, VOD will repatriate revenues from video stores to the broadcasting system.

33959 Fourth, our application will reduce the migration of VOD to the Internet.

33960 Fifth, VOD will create a new and better window for Canadian films.

33961 Let us explore each of these in turn.

33962 If licensed, Rogers Video will commit to:

33963 Contribute 5 per cent of our gross annual revenues to a Canadian production fund;

33964 Provide a powerful opportunity for all new Canadian English- and French-language feature films;

33965 Maintain, on the VOD servers, at least one Canadian feature film for each 20 non-Canadian feature films and, for other programming, at least one Canadian program for each 10 non-Canadian programs;

33966 Remit to the rights holders of all English- and French-language Canadian films, 100 per cent of the revenues earned by the licensee from the exhibition of these films; and

33967 Use the barker and navigators to promote and present Canadian productions.

33968 In addition, we believe that VOD will be an attractive programming service that will help drive the deployment of digital technology in Canada's cable television market.

33969 The viability of Canadian digital specialty services depends on having the largest possible number of digital boxes deployed. At the same time, customers will only acquire digital boxes if there are quality Canadian programming services.

33970 We feel that video on demand is an important part of the solution. Video on demand will give consumers something they have never had before, a video store in their living room. The service will accelerate the take-up of digital boxes, which will increase the potential audience for the digital services you are licensing in this proceeding.

33971 VOD will also repatriate revenues from video stores to the Canadian broadcasting system. We are very proud of the programs to assist Canadian filmmakers that have been initiated by Rogers Video. As part of the regulated broadcasting system, video on demand will provide additional benefits.

33972 The licensing of a viable Canadian VOD service will also reduce the loss of consumers to Internet-based services. Rogers anticipates that rapid developments in computing and Internet technology, combined with the introduction of digital consumer video equipment, will make it possible for more and more consumers to download or stream television programming, such as popular feature length movies, from the Internet for playback on their TV sets.

33973 When the time comes, Canadian consumers who want to watch movies from home with VCR functionality will have the choice of either renting them from the video store or obtaining them from the Internet.

33974 We would like to provide Canadians with a third choice: video-on-demand programming available through a Canadian broadcaster. We believe that the availability of high quality VOD services will repatriate viewers to the regulated Canadian broadcasting system. This, in turn, will be the only way to ensure the continued flow of resources to Canadian production funds and Canadian rights holders and to guarantee the availability and priority of Canadian programming on navigational systems.

33975 Finally, video on demand will provide another window for the exhibition of Canadian movies. It will likely be a longer window just like a video store. With video on demand, the movies can stay on the server so that customers can continue viewing them. As a result, customers will have access to more Canadian movies from the broadcasting system than they do today.

33976 In addition to these specific benefits, we believe that our application is supportive of the policy objectives contained in section 3 of the Broadcasting Act.

33977 Section 3(d)(iv) requires the broadcasting system to be readily adaptable to scientific and technological change. We believe that the introduction of VOD brings the latest technology to the Canadian system.

33978 Section (e) requires each element of the system to contribute in an appropriate manner to the creation and presentation of Canadian programming. Through the conditions of license identified above, VOD licensees will contribute.

33979 Section 3(k) requires a range of broadcasting services in English and French to be extended to all Canadians as resources become available. Our bilingual video on demand service will provide a French language video store in the living rooms of Canadians that might not otherwise have access to these movies.

33980 The VOD business will have little impact on existing Canadian specialty services, including those that will be licensed following this hearing process. The main competitors of VOD are the retail video market and the Internet. VOD is a very expensive service to deploy. While it provides customers with unparalleled convenience and functionality, it does so at a premium price. As such, it will not be an appropriate delivery mechanism for broadcasting services, which will remain the purview of conventional broadcasters and specialty services. As a result, the Commission can allow VOD licensees to experiment with new types of programming content arrangements. While the impact on specialty services will be low, these experiments will create new revenue streams to improve the viability of VOD.

33981 Rogers Video is convinced that without the efficiencies generated by an integrated VOD/BDU operation, a VOD service will not be viable in Canada. As I mentioned, VOD is an expensive proposition for a BDU to undertake. The BDU affiliate will need to install and operate a considerable amount of two-way plant, deploy video servers and QAMs at our head-ends, provide subscribers with addressable digital set-top boxes, and will need to manage the interface with those devices. All of this gives each VOD customer access to his or her own video channel.

33982 BDUs will legitimately seek to recover these costs.

33983 For their part, rights holders will also want to maximize their returns from the introduction of new programming services.

33984 The result is a very challenging business case.

33985 In order for this business case to be viable, BDUs need a video on demand licensee with low costs. We have designed the VOD service in this fashion.

33986 With our proposed service, Rogers Video will not broadcast a real-time feed to BDU affiliates. Rather, the BDU will be responsible for operation of the digital playback suite and for assembling the content into a broadcasting format. Our business model reflects this by assuming a revenue split of 15 per cent to the VOD licensee, 33 per cent to the rights holder and 52 per cent to the BUD. Integrating the VOD operation with the BUD operation will make such a revenue-sharing arrangement possible by creating the most efficient operating structure.

33987 In our case, integration will be particularly efficient because Rogers Video.

33988 Our BDU division, other BDUs and consumers will all benefit from Rogers Video's extensive experience in the video cassette rental market.

33989 From contractual negotiations with major studios, to effective marketing and promotional campaigns, to promoting Canadian content through our First Rites program and our Canadiana movie section in our stores, we know the video business and we look forward to the challenge of launching a successful VOD service that will make significant contributions to the Canadian broadcasting system.

33990 In summary, Madam Chair, we believe that Canada, once again, has the opportunity to be a forerunner in the development and deployment of new communications technology by launching and operating a successful large-scale commercial VOD broadcasting service.

33991 However, in order to do that, we have to recognize the economics of the business and take advantage of and maximize the efficiencies which are available to us.

33992 Rogers Video seeks to do this through the application that is before you and which we believe will provide a wealth of benefits to our customers and to the Canadian broadcasting system.

33993 Approval of this application will transform the promise of VOD into a Canadian reality.

33994 Madam Chair, that concludes our remarks.

33995 We would be pleased to answer any questions that you may have.

33996 THE CHAIRPERSON: Thank you, Mr. Engelhart, and your colleagues.

33997 We will take a 15-minute break and then, indeed, resume discussion with you.

33998 Nous reprendrons dans 15 minutes.

--- Upon recessing at 1555 / Suspension à 1555

--- Upon resuming at 1615 / Reprise à 1615

33999 THE CHAIRPERSON: Welcome back to our hearing.

34000 We will now pursue with questions to the Rogers panel.

34001 Madam Bertrand, s'il vous plaît.

34002 PRÉSIDENTE DU CONSEIL: Alors, bon après-midi.

34003 I will have somewhat the same questions that we had for Cogeco. And if you will allow, though, I will start with two questions coming from the presentation of this afternoon. It's just in the reflection -- really, take all the questions, like the ones I had for Cogeco, as, you know, --please teach me. That is really what I'm trying to do, to really understand beyond reading the application. And that's why your demonstration this afternoon was helpful, and I'm sure that the dialogue we will have will complete better my understanding.

34004 But you are saying two things. You are saying, "Give us the VOD licence. We know our business. It's mature now and it's going to be running. And it's going to do two things. It's going to help drive the digital box and it will reduce the migration of interested consumers to the Internet."

34005 The driving of the digital box -- as you know, we have heard quite a lot about this in the recent weeks, but we have been hearing that for a long time. And I remember, at the time, you were saying, "We weren't there at the last round", yet I'm sure you were with the CCTA, saying, "Yes, please do license VOD. We need it to drive a good -- you know, the digital box".

34006 So, what is really -- and I know we don't have that much knowledge, but maybe you do have more than we do, in terms of studies.

34007 In the take-up of the digital box, how much can be related to what you think will be like the force of the VOD?

34008 MR. ENGELHART: Thanks very much, and I'm going to ask Mike Lee to jump in, in a sec.

34009 In fact, in the last round, Rogers Cable did make a submission saying that we thought video on demand was premature. We thought, at that time, that it wasn't ready.

34010 We do think it's ready now, and your question really gets to the huge size of the video cassette rental business in Canada. It's a $2 billion-a-year business. And what people really like about video cassette rentals, as opposed to pay per view movies, is the convenience: they can stop; they can pause; they can rewind; they can watch it the next morning.

34011 What video on demand gives you is all that same convenience and more.

34012 In fact, households like mind incur a lot of late charges because we forget to give the cassettes back the next day -- and that's a problem that disappears with video on demand. So we think the power of the video cassette rental market shows how attractive this product can be. But I'm going to let Mike add to that.

34013 MR. LEE: I think you see, with a lot of technology, as its introduced into the marketplace, there's always about, you know, somewhere between 2 and 5 per cent of the people who just buy it because it's new and they want it. And the technology itself, at that level, tends to be fairly crude and rough. It isn't quite marketed and designed to such a level that the mass market can take advantage of it.

34014 I think what you are seeing, with video on demand -- and you could see it every time you show it to someone, or they get a chance to take a look at it -- when they get the opportunity to actually pause, fast forward, they understand it immediately because they have an analog to that experience, which is the VCR, except they don't have to go through the inconvenience.

34015 So it brings the level of convenience and control, for the consumer, which they already are demanding from another device, but is a little bit simpler to use, and we feel that that -- just the demonstration and watching their eyes sort of go wide open when they see the technology is enough to really demonstrate what the value of the digital set-top box is, at that point.

34016 CHAIRPERSON OF THE COMMISSION: I understand that.

34017 What's the percentage of your growth in digital will you -- do you forecast as being related to that type of activity? If you didn't have -- take it, you know, the forecasts you have, in terms of digital subscribers at Rogers. How much less would you have it if you wouldn't have access to a VOD licence?

34018 MR. LEE: Very much similar to the programming services that you are contemplating licensing right now.

34019 Without understanding the specifics details of the programming offering, it's difficult for us to attribute a specific incremental lift associated with the video on demand service, so. But we are fairly confident, at this point, that the technology and the service itself is very appealing to a consumer, because of the attributes I just described. But with regards to how many incremental boxes it will drive in the sales channel, we haven't done that analysis yet.

34020 CHAIRPERSON OF THE COMMISSION: Okay. You are saying that -- you are saying it does so at a premium price. VOD is a very expensive service to deploy. While it provides customers with unparalleled convenience in functionality, it does so at a premium price.

34021 That's what I call the "platinum-type of consumers".

34022 How much of the early adopters of the digital subscriber -- it's another way of looking at it because those are also the ones that all the licence applications -- the applicants we have had in front of us in the last three weeks have been addressing, you know: the projections is first; the penetration will be amongst those early adopters; and then it will move on to a more spread type of basis.

34023 So when I see that, that it does so at a premium price, I think of those early adopters.

34024 And does that mean that you are offering and your way of conceiving will be either the VOD or packages of specialty services? Or will it be bundled with specialty services? Will it be offered in a standalone? Will it be the same consumers that will buy both? You know. Your business plan is built on what kind of hypothesis?

34025 Because we were talking with Cogeco earlier on and trying to understand from a point of view of the type of service and is it in competition -- and that goes into the content categories, but it is also in terms of how you market and how you go and reach your subscriber.

34026 MR. ENGELHART: The pricing and the marketing of video on demand will be very similar to the way that movies are sold at the video store. That will really be the competition. And the video stores will really set the price.

34027 Most of the market research that's been done shows that customers are not willing to pay much of a premium over the video store price. If it's cheaper at the video store, they will jump in the car and drive to the video store and pick up a cassette, because most everybody has a VCR at home. But if it's the same price as the video store and they save themselves that car trip, they are very interested.

34028 So, it will be sold much like the product is at a video store.

34029 And with respect to the issue of the competition with the specialties, I guess -- obviously, we listened with great interest to the discussion with Cogeco -- I guess, from our perspective, I would really pick up on something that Commissioner Wylie said, which is that I think the problem of competition with the specialty services is really one that is particularly unique to pay per view service. Pay per view service is a broad service. You take a single signal, you broadcast it from the head-end, to all the homes. It's the same technological platform, the same economics as any other broadcast channel.

34030 So you could dress up a pay per view channel as a specialty service and your economics are exactly the same. So I think that is a legitimate concern.

34031 I guess from our perspective, the economics of VOD are fundamentally different. You need one of those QAM modulators for each one of those signals. You need a unique digital path. The signal that a customer is getting in their home is their own signal, it is not broadcast everywhere else.

34032 I am going to ask Mike to jump in on this, as well, to explain it, but we would have to charge people a lot if we were trying to offer a lot of broadcast programming on VOD.

34033 The other thing is, it would start to drive our network expenses through the roof. We would be devoting more and more and more channels to video on demand, and more and more QAM modulators. It would get out of hand.

34034 So I guess, from our perspective, there is a natural restraint or constraint in the inherent economics and technology of video on demand which really ameliorate the service migrating into a specialty service.

34035 Mike, would you like to add?

34036 MR. LEE: Yes. I think, fundamentally, we are talking about the difference between narrowcast and broadcast, and when we talk about premium pricing -- the video on demand service will be available to everyone who had a digital set-top box, and the pricing, as Ken was saying, needs to be comparable or competitive with other distribution channels. So it needs to be priced against something like a video rental.

34037 So it is not premium price in the sense that, you know, if you were to buy a movie you would have to pay actually $1 or $2 to get that level of convenience; it would have to be on par with other channels.

34038 Where it is premium priced is in the fact that there is a base cost of delivery for us for all of these streams.

34039 One of the things that you should note when we talk a little bit about the architecture around VOD is that each of those QAMs can only deliver 10 simultaneous streams, which means, similar to the "Titanic" example, that when the 11th person comes on in that area being served from that QAM the answer is: Sorry, you are going to have to wait.

34040 So as we deliver services to our network, the more people who adopt them the more QAMs we are going to have to put into the network to deliver those services to make sure we don't get a lot of calls from people saying: I want to buy video on demand. I can't get it.

34041 So the issue is, that means, as we start to deliver some of these services, that there is going to have to be a base level of cost built into all of the products we deliver. There is no such thing as a 30 cent product any more in video on demand, just because the economics of occupying that stream are going to be expensive and we don't want to have something that is delivered at a low cost compromising the quality of the experience of an individual who wants to buy "Titanic" when it comes out at $3.99.

34042 That is what we mean in terms of the economics around trying to get these services out to a broader audience. They really don't work unless that broader audience is willing to pay a premium over what it would take if it was delivered over the broadcast window, which is a lot cheaper because it is a monthly charge.

34043 CHAIRPERSON OF THE COMMISSION: So if I hear or understand correctly, what you are saying is that the economics and the technology are in themselves limitations for the kind of concerns we are expressing, and there is no need for regulatory limitations because in itself the varying nature of the beast provides for -- it is in the year end type of limitations. Am I understanding correctly?

34044 MR. LEE: Exactly.

34045 CHAIRPERSON OF THE COMMISSION: Okay. Furthermore, did I understand or read well that you have a possibility of 500 titles at any given time? What kind of expectation do you have in terms of pushing that inventory? Because we were talking with Cogeco from 600 to 1,000.

34046 MR. LEE: I think where we are right now, we haven't seen enough experience in any of the trials around the world which have a large enough inventory to measure whether or not 500 is the right number, 600 is the right number, or 1,000 is the right number.

34047 We do know that as you start to introduce more titles the interface becomes more and more cumbersome. So as you introduce titles of different movies that are available, they either get buried lower and lower in the navigation, which makes them harder and harder to find, which at the end of the day serves no one's purpose -- because we are not deriving any revenue off that video and we are not providing as much choice as we perceive to be providing to our customers.

34048 But at the same time, the issue will be not only in total what the number is of the titles that are available at any given time, but how often you are refreshing that. Because if you are going to make this business viable you have to get a certain amount of repeat usage. And if you allow those 500 titles to go stale or 1,000 titles to go stale because you are not paying attention and it is difficult to manage, it is probably better to isolate down to 30 titles and just make sure that you refresh on a very frequent basis so that people have choice every time they come back: "Hey, there is a new movie available. I would like to rent that."

34049 CHAIRPERSON OF THE COMMISSION: And if you have less titles, then you can allow for more takes, too, at the same time, if there is a high demand.

34050 MR. LEE: Exactly.

34051 CHAIRPERSON OF THE COMMISSION: Because you can have more possibilities.

34052 Thank you. That clarifies some things.

34053 I will go back to the script here.

34054 In terms of the idea of packaging, because you are saying that -- and you have said that in your written application, too. You have talked about having films, mainly driven with films, and yet non-feature film type of programming. You are talking about educational types of programs and children's programming.

34055 What would be the proportion you would see between the two?

34056 MR. ENGELHART: I'm sorry. Just a moment.

--- Pause / Pause

34057 MR. ENGELHART: It appears that our forecast is based on about 65 per cent films and 35 per cent other content.

34058 CHAIRPERSON OF THE COMMISSION: And that would be a condition of licence that you would be --

34059 That is in your inventory; right?

34060 MR. ENGELHART: That is what our economic model was based on. I guess, if we had a preference, we would rather not see a condition of licence on a ratio of films to non-films.

34061 I guess, from our perspective, it is a brand new business and we are experimenting and we would like to see where the thing goes before we really live with a firm commitment.

34062 That having been said, we do think it will be predominately a movie business. So if you impose a condition of licence like that, we would obviously take up the licence.

34063 But I guess our recommendation or our urging would be that we think it is better to give the licensees an opportunity to experiment a bit.

34064 Now, I should say that the video stores -- Rogers Video -- has been doing some experimenting of their own, and Pierre will explain that to you in a second. They have tried to rent television shows at the video store and nobody rented them. I will let Pierre explain that to you.

34065 We don't think that we are going to -- it is not that we have a business strategy to move into the non-film business; it is just that since it is such a brand new business and since we think the risks of us turning into a specialty service are so low because of the inherent economics, we think it would be preferable from a policy perspective to give us a little latitude to experiment.

34066 But I will let Pierre talk about the experience at the video store.

34067 MR. ROBICHAUD: At the video store, which is essentially the experience we are trying to replicate with the VOD service, we have tried in past research, trying through the customer -- we have access to HBO movies which haven't been broadcast a lot of the time in Canada, first-run movies on Showtime, which is an American channel. That product has never been available, but it is not a mainstream product. It is fairly good quality. And there is no return on investment on the product. The consumer just doesn't pick it up. They don't know about it. They are not interested.

34068 We have experiments with Biography -- A&E videos. We brought entire series of biographies into the store section of biographies, in certain stores, as well as National Geographic, and the rentals on those titles just doesn't happen.

34069 Our experience is that this service will be similar to the video store, and our experience is that on any given weekend 60 per cent to 70 per cent of our revenue is derived from about 20 titles. And, truly, that is from the movie business.

34070 MR. ENGELHART: If I could just add, I received a clarification from my colleagues and it appears that our forecast was actually based on 85/15 film to non-film. That is the business model that we have projected.

34071 CHAIRPERSON OF THE COMMISSION: So what you would prefer is more flexibility for experimentation and you are really kind of setting your business model, one that would work, but you wouldn't mind kind of indicating a predominately film-based -- and the note could refer to the fact that it's 85 -- the business plan has been built on an 85/15 hypothesis or assumption?

34072 MR. ENGELHART: That's correct.

34073 I guess -- well, I am not usually in the habit of suggesting additional regulatory restrictions.

34074 CHAIRPERSON OF THE COMMISSION: Go for it.

34075 MR. ENGELHART: I think the Commission has legitimate concerns because this is a new business and we don't know how these things evolve. It may be appropriate to consider shortened licence terms, you know a three or four year licence and say, "well, let's have a look at this again and see where it goes because we're pretty confident that when we come back in four years it will still be a film business, but if it's not then you could take action".

34076 CHAIRPERSON OF THE COMMISSION: It's a good suggestion because you had a good crystal ball it seems some years ago when you said that it was not ready, but we have issued and there were many applicants and intervenors saying, yes, it may not be immediately there, but it will be there. It was supposed to drive the digital too at the time. Remember?

34077 Packaging, you are saying that the model we are talking about here, VOD, technically and economically doesn't really lead to a packaging type of approach, but do you think we should have some concern given that one option is to go for a shorter term of licence.

34078 But also to make sure that it doesn't change itself or evolve in something that we wouldn't recognize. Is there, from your point of view, a possibility to talk about nature of service like we have done for the last three weeks, to fence it in such a way that it allows for flexibility, but it gives some comfort to the fact that what you are about to launch and do is exactly, if you don't have all the ingredients yet, but that the philosophy behind will be the one you will be respecting on a going forward basis?

34079 MR. ENGELHART: I will ask Mike to jump in as well, if he has anything to add, but I guess I would echo much the same comments. We think the inherent nature of this business is such that we will have a substantial cost for each viewing and we are going to have to charge a substantial price for each viewing, similar to what Mr. Audet said. The kind of packaging we would be doing is one movie for $4 or a package of 10 for $30, something like that to drive some sales.

34080 The other area I could see us being interested in packaging might be with educational course-ware. If you take these 10 courses as a package it costs --

34081 CHAIRPERSON OF THE COMMISSION: You get an MBA or a law degree.

34082 MR. ENGELHART: That's right.

34083 THE CHAIRPERSON: Madam Chair is not in agreement with that, not with the 10 courses.

34084 CHAIRPERSON OF THE COMMISSION: You'll get that in between later.

34085 MR. ENGELHART: So we think there may be some business reasons to have packages. We would be again reluctant to restrict our experimentation, but we do think that most of the business will be movies bought individually. Mike.

34086 MR. LEE: I think it's fair to say we are interested in experimenting. It's early stages and not understanding a lot of this because the consumer has never experienced access on demand to this type of content. It's difficult to gauge their sense of interest based just purely on a focus group until you actually get a product into market. So we definitely have interest there.

34087 I think definitely there will be packaging in the movie space where you may buy three movies and get one movie free, but the subscription model does pose some problems for us because it introduces a fixed revenue against an uncapped liability. So people can continue to watch the movie and chew up capacity on us and we don't actually receive any more revenue for it. So that the model is somewhat concerning for us.

34088 I think what our real concern is and where we have a certain amount of heartburn is what's going on on the Internet today. To give you a great example, real networks who basically are sort of the de facto standard for streaming on the Internet, two years ago would have used as their marketing pitch for version five the fact that they could stream to you FM quality sound over the Internet, either through a broadband or through a fairly high speed narrowband connection.

34089 Today if you open a magazine their marketing pitch is we can deliver to you full screen VHS quality video, and with all marketing, but particularly in the technology space, there is a certain amount of exaggeration, but they do today deliver FM quality streaming audio. Our expectation is that with the increase in quality of the networks and the increased quality of the compression that they will be able to deliver VHS quality full screen video at some point in the near future.

34090 So what our general concern is is that as we look at restrictions on a business which we don't really understand where it is going at this point, is that there will be quick migration to a lot of these new revenue models and new business models to the Internet. We know at this point there is probably 1.2 million, 1.3 million broadband connections in this country and growing at a fairly significant rate.

34091 What we want to do is make sure that we can repatriate and hang on to some of that revenue because we know that the only thing that we have to compete with is basically the sense of time. We have a product and a system today that potentially could compete and provide a higher-quality experience, and if we don't get out there quickly and find out whether or not there is really a revenue opportunity there we may not have a chance to come in as a quick second.

34092 CHAIRPERSON OF THE COMMISSION: Yes, I understand that, but on the other hand, since you are trying to compete with the video store, with yourself, and the Internet with yourself too in a sense, because of your access to Internet, you are also adding value to what is already your cost for doing better business in Internet in a sense.

34093 So that cost can vary. What you are saying is the model is not what we have in mind, but if you are saying that by lowering your cost to the consumer -- not your cost, but your price to the consumer you will have a better chance of retaining them, then you can become much more competitive with services that we might in our wisdom have granted to Rogers. That's where it's experimentation for everybody in that sense.

34094 So that's why we are trying to see, without cramping entirely the whole system and leaving the flexibility, are there elements we can have there that could give the comfort and although there is always some overlapping it is at the periphery rather than to the core of what could be each other's business.

34095 MR. ENGELHART: I guess I would make a couple of points. I will have Pierre speak in a second about the kind of guarantees that we believe the rights holders are going to require because I think that's another inherent protection or safeguard in the system, which is that the rights holders don't want you to give this stuff away cheaply. They say you can give it away for what you want, but you are going to pay us every time the customer views it and Pierre can talk about some of that.

34096 The other point I guess is to come back to our technical presentation. This video on demand service is really like a telephone model. You have a busy period and if the eleventh person orders "Titanic" they get a busy signal.

34097 Well, this is just like the long distance provider saying unlimited telephone calls for 20 bucks a month. Their networks blows up. I mean, you give the stuff away really cheap in an unlimited sort of way, you either have to build a huge amount of peak demand or everybody is getting a busy signal.

34098 CHAIRPERSON OF THE COMMISSION: You know what people are saying about the long distance business right now?

34099 MR. ENGELHART: That's right. That's right. And so that is -- again, because we have a telephony-type model with this network, it really forces us to use transactional pricing, rather than subscription pricing, but I said that Pierre would talk a bit too about what we are hearing from the studios.

34100 MR. ROBICHAUD: The studios in the past two years have moved literally in the video store environment and the retail environment to a video on demand model by offering revenue-share models. So now we can get as many copies of the titles that we want, but we have to share the revenue.

34101 That comes at a price. That means you can come to the store and not miss on "Titanic" any more because we have plenty of copies, but we have to guarantee that every one goes out for a certain price, which let's say in the transaction that's $4 on average at the retail store. The studio wants $2 every time it goes out.

34102 So whether I give you a freebie, I have to pay the $2. So suddenly the economics -- Mike has talked about the cost of delivering the movie to the home and if we get it for free then suddenly it costs us the entire $4 to give it away. So there is not much flexibility in discounting. From the studio perspective we are really tied up as far as what we could do going forward with it.

34103 CHAIRPERSON OF THE COMMISSION: But on the other hand -- well, there are two things. You can explain "les mystères de la vie" to the studio and you say it's either us at 50 cents or it's nothing with Internet, one element, or also with the other type of programming you don't have that kind of studio weight. You can have I suppose or presume an easier task at negotiating a decent price.

34104 MR. ROBICHAUD: If I may answer this, right now the studios, they are experimenting with this with the Internet and Michael Eisner from Disney a couple of months ago in New York had a digital conference, he was talking about their intention. Their true intention is to go directly to the consumer and get the entire $3 from the consumer, bypass everybody.

34105 What we are proposing here, Rogers Video understands that the business will move into a digital environment going forward and then what we understand here is: Let's repatriate some of that money through the broadcasting system, through a proper regulatory channel, and some of that money will get back to the production fund, it will be better for the consumer, and so on and so forth, instead of simply the Internet, which is the threat that is on the horizon.

34106 The studios, obviously they just want to cut everybody and that would leave nothing in the Canadian marketplace as far as revenue.

34107 MR. LEE: I would also add that one of the reasons why we have a fair amount of comfort that this is probably going to model itself very, very closely to our video store experience, is that when you talk about products like the Titanic and the price point that you will sell it at, it appeals to a very wide audience, while when you talk about the periphery, the amount of people who would be willing to pay a premium price for a very narrow piece of content is going to be very, very small.

34108 So in terms of sheer numbers there is always going to be much wider appeal against that Titanic movie than there ever will be against the periphery business models which we would like to do experimentation in.

34109 THE CHAIRPERSON OF THE COMMISSION: Okay. The ratio of Canadian content, you are proposing one out of 20 in English and one of 12 in French. Any comment?

34110 MR. ENGELHART: Well, there is currently a fairly limited number of Canadian feature films so we think the existing restrictions that the Commission has imposed, the one in 20 ratio, we think it makes sense, simply because there are a fairly limited number of Canadian titles at this point. So we think that number works.

34111 THE CHAIRPERSON OF THE COMMISSION: If we were to think of a higher commitment, you would find that unattainable?

34112 MR. ENGELHART: I think in the Canadian feature film market -- I will ask Pierre to jump in here -- there just aren't that many new Canadian releases that come out each year. So we are going to definitely have them all on the server, absolutely, and we are going to promote them on the navigator and we are going to give them 100 per cent of the revenue as per the licence conditions.

34113 So all of the Canadian product will be there absolutely, but there is just a limited amount of it. But by having a ratio much different from one in 20 I think you run the risk that you would just have to sort of artificially constrain the size of the server.

34114 Pierre.

34115 MR. ROBICHAUD: Yes, our experience in the stores, we carry every Canadian movie that is released, every feature film that is released and we have a Canadian section, Canadiana section. We try to promote them as much as possible. We are a friend of the Canadian production industry.

34116 But, at the same time, there are only 20 to 30 titles a year that are released, feature films, so that means it is only a couple, two to three movies a month. So there is limitation just in the sheer number of titles.

34117 Another program -- and we are committed and we believe we can market this, and video on demand offers some new opportunities to market those Canadians movies by offering longer windows because we can keep them on the server for much longer, keep promoting them in the different ways, by genre, by actors, so they are not as lost as they would be in a video store with 10,000 movies, mostly American movies, and that is what we are trying to do.

34118 We also would give precedence to some new directors, young directors like we are doing in our first rights program in the video store with first-time Canadian directors, their first movie. We release them on an exclusive basis in our stores. We release two to three movies a month that way and we would essentially add that to the server as well. But there is limitation of what is available.

34119 THE CHAIRPERSON OF THE COMMISSION: What about the non-feature type of programming, non-feature film type of programming. Wouldn't there be a possibility there to have a higher level of Canadian content?

34120 MR. ENGELHART: Definitely there is more product available. For children's programming there is, in fact, quite a lot of good Canadian product available.

34121 The one in 10 number for non-feature films is an arbitrary number. Other numbers might be just as good.

34122 I guess our suggestion might be: Let's try the one in 10 and see how we are doing and see if our business is growing. And if we do well, as we hope we will, then you would raise the limit, just as radio recently had their Cancon limits raised from 30 to 35 per cent. You know, move the limit up as we succeed and prosper.

34123 But in the case of the non-feature film you are right, there is more product out there.

34124 THE CHAIRPERSON OF THE COMMISSION: Yes. And if you look at what is the ratio in the specialty channels and in the conventional, there is definitely some -- comment dire, inventaire that could help. Especially that in your model it represents only 15 per cent of your inventory, that wouldn't be, it seems to me, such a burden to carry and it would allow for a kind of balance between films and the non-film a more Canadian presence.

34125 MR. ENGELHART: What you say obviously makes a lot of sense.

34126 THE CHAIRPERSON OF THE COMMISSION: Thank you.

--- Laughter / Rires

34127 MR. ENGELHART: I guess the reason for my reluctance and my sort of hesitation is just that we are talking about experimenting here with non-film content, so we don't know exactly what the good content will be that is non-film. It might be, as I said, course-ware to get that diploma, it might be something else. So because we are not completely sure what it is, we are not completely sure how much Canadian there will be.

34128 But I'm agreeing with you that it doesn't impose the kind of limitations that we see in the feature film side.

34129 THE CHAIRPERSON OF THE COMMISSION: So suppose we are making sense and we want to push the limit a bit higher, and if we want to go higher than 10 per cent, what do you think should be a sensible better limitation to represent that fact that there are more products out there?

34130 MR. ENGELHART: Well, again, we are learning this business as we go forward so it is hard to say what it will be.

34131 I heard you mention -- I heard a figure mentioned in the discussion with Cogeco of one in five. I mean, we could certainly give that a try.

34132 We won't quite know what it looks like until we get there, but the one in five number doesn't strike me as being untoward.

34133 THE CHAIRPERSON OF THE COMMISSION: Thank you.

34134 What about the French presence on your catalogue. Are you thinking of having a percentage? What would it be? Or there again you will want flexibility because it is an experimentation and you don't know -- you see, I'm learning my lessons.

34135 MR. ENGELHART: I'm going to ask Nick to explain how the French-language content will be made available, but I guess we are going to get every title that we can. Obviously all the Canadian French-language movies will be on. For all the other movies, if they have a French-language audio track we will obtain them. So we think there will be quite a number of those.

34136 Nick can explain how the navigator works and the functionality for obtaining the French-language content.

34137 MR. HAMILTON-PIERCY: As with DVDs, as an example, many of the movies today, some time after the initial theatrical release, do have multiple soundtracks in different languages. The digital technology we are using, the MPEG 2 technology, supports multiple soundtracks in there. The server technology and the GUI -- the graphical unit interface or the consumer's interface -- can actually select the right sort of sound, digital channel, from the streamed video.

34138 So let me just explain how this works. When a customer registers to a digital service, the first program guide they have, the electronic program guide, gives the option to that customer to select: Do they want the descriptions of the programs in French or in English. As a setting they have their remote control and they can choose that when they get to the digital service.

34139 This automatically triggers across to the video on demand service and says this customer prefers French language. At that time it says automatically it will pick out the French language track of that movie, if it is available, and present it to the customer, and the description of the movie would be in French on the guide as well. So the customer would automatically have that advantage.

34140 Now, they can override it. They may like their program guide in French, but there may be others in the family who prefer them in English. They can go back to their remote control on a "settings" button and can actually reset it back to the English for that movie.

34141 But the whole consequence, if the soundtrack is available in French, it will be provided to the service and the customer can elect whether to listen in English or French.

34142 THE CHAIRPERSON OF THE COMMISSION: Would you see a percentage, from the studies you have done, that would be available with either -- because you have the experience of the video store and certainly there are some similarities there, but is there a percentage you would accept as a limitation -- as being a floor, not a ceiling -- of offering French services to the francophones?

34143 MR. ENGELHART: Yes. In one of the deficiency responses we estimated that conservatively at least a third of the titles would be available with a French audio track, or in French. So I would think we could accept that as a condition.

34144 THE CHAIRPERSON OF THE COMMISSION: Would that be in both the feature film and non-feature film?

34145 MR. ENGELHART: Just one moment.

--- Pause / Pause

34146 MR. ENGELHART: We were thinking, really, of feature films when we talked about the one-third. But I would imagine, you know, it would be appropriate to make that requirement for all the content.

34147 CHAIRPERSON OF THE COMMISSION: For all the categories?

34148 MR. ENGELHART: For the non-feature film, as well, yes.

34149 CHAIRPERSON OF THE COMMISSION: Okay. Last type of question. It's about carriage of the pay per -- no, that's not my -- another one after that -- but the carriage of a pay per view, what's your view? Will you be still carrying a pay per view service? Or do you see that as a replacement to pay per view? How do you...?

34150 MR. ENGELHART: I will also let Mike jump in, but I think the pay per view will always be there, certainly, for live events and wrestling, sports events, concerts, this kind of -- these kind of live events are something that video on demand can't do and they appear to be a powerful growth area for pay per view. So I see the pay per view industry increasingly migrating more and more of their programming to live events.

34151 In terms of whether a given system will carry both, it's really a function of the arithmetic in the examples that we talked about when we did the technical presentation.

34152 With a sufficiently small node size, you really don't want to have pay per view for movies; you really are better off.

34153 Now, with a somewhat bigger node size, you might have both: you might have the really popular movies on a pay per view and the less popular ones in video on demand.

34154 So, for any individual cable operator, it will be a function of what stage their rebuild is at, what the penetration of their digital boxes is.

34155 So we see the two co-existing, certainly, for live events, for the foreseeable future, on our system.

34156 For movies, we see some co-existence for a while. But, given the relentless drive to smaller and smaller node sizes, we think it's inevitable that VOD will, eventually, replace pay per view on the Rogers' systems, for movies.

34157 CHAIRPERSON OF THE COMMISSION: But suppose -- because, presently, there is a requirement for the BDUs to carry pay per view.

34158 If we were to maintain that approach -- and I hear your arguments that you are not favouring; you would like their flexibility -- and yet if we were to impose it, maintain that, what do you see as being the obligation you would have, in the sense of how many channels would you devote to pay per view if you were to have a VOD and that you would feel that your obligation has been met?

34159 MR. ENGELHART: As I said, I can see us keeping pay per view for some time to -- for live events. So if I indicated that we would like to see that regulatory restriction lifted, I was being unclear.

34160 I think the current rule is that the pay per view service is 10 channels plus a barker and, you know, for live events, I think that would probably be appropriate.

34161 So, if you were going to leave the requirement in, I would say leave the current 10 channels plus a barker in.

34162 And I would just like to add that, for Rogers Cable, the migration path is going to be to introduce VOD where the system is upgraded to 750 mHz. With 750 mHz, you have got a lot of digital capacity, and we could do pay per view and VOD and lots of new digital services, as well.

34163 CHAIRPERSON OF THE COMMISSION: But you are seeing not necessarily immediately, but you would like a migration of the pay per view, in terms of vocation, because, right now, pay per view has access to all categories. You would limit, somehow, the categories and keep the film to the VOD and would change the nature of the service of the pay per view when you are saying it will migrate, or should migrate, to live events?

34164 MR. ENGELHART: That's exactly correct, yes.

34165 CHAIRPERSON OF THE COMMISSION: Last question on the revenues.

34166 You have talked about it, in the films especially, but it's true of all the programs and the distribution of rights, but in the films, there is a kind of equation that exists, 50 per cent for BDUs and 15 per cent for the rights holder and -- but, of course, it all depends what is the gross revenues.

34167 And in order to establish that, if we were to take what's the retail price to the consumer and take 50 per cent of that as being, you know -- the retail price being the gross -- the total retail prices to the consumer being the gross revenues, do you see any problem to that?

34168 MR. ENGELHART: I guess --

34169 CHAIRPERSON OF THE COMMISSION: If I sell you at $6 a film, I take that $6?

34170 MR. ENGELHART: I guess -- my understanding of the way the system works, now, for pay per view, for example, is that if a movie sells for $6, the BDU pays 5 per cent of $6 to the fund. And then, if they remit $4 of that to the VOD, or -- sorry -- the pay per view licensee, then the pay per view licensee remits 5 per cent of the $4 to the fund. So you end up, really, with 8.33 per cent of the retail price being remitted to the fund.

34171 In a similar sort of way, we are saying, here, the VOD licensee does less, so we proposed about 7.4 per cent of the retail price being remitted to the fund -- and that's based on a conceptual breakdown of BDU revenues and VOD licensee revenues, even though it's the same company.

34172 So, I think the suggestion that instead of going through that conceptual exercise, you would just apply a flat percentage to the retail price strikes me as being a sensible approach.

34173 CHAIRPERSON OF THE COMMISSION: But that would be, like, to go from the gross revenue being 50 per cent of the retail price?

34174 MR. ENGELHART: Yes.

34175 CHAIRPERSON OF THE COMMISSION: That's the gross revenue calculation --

34176 MR. ENGELHART: You are saying that --

34177 CHAIRPERSON OF THE COMMISSION:  -- that needs to be established, as well?

34178 MR. ENGELHART: So you are saying -- or the proposal would be that the VOD licensee's gross revenue would be deemed to be 50 per cent of the retail price?

34179 CHAIRPERSON OF THE COMMISSION: Of the retail price.

34180 MR. ENGELHART: Yes, that would be totally consistent with our business plan, and that was --

34181 CHAIRPERSON OF THE COMMISSION: Because what you were saying is 50 cents to the BDU and then you were taking the amount. So that would be an approach that you would be comfortable and that you are favouring yourself?

34182 MR. ENGELHART: That's correct.

34183 CHAIRPERSON OF THE COMMISSION: Okay. And what you are saying is, in the rates given to the fund, you see that as a combination of the two of what was the system for pay per view and you are proposing 7.5 per cent to the rights holder?

34184 MR. ENGELHART: To the fund. Correct.

34185 CHAIRPERSON OF THE COMMISSION: To the fund, rather.

34186 MR. ENGELHART: Yes. Correct.

34187 CHAIRPERSON OF THE COMMISSION: Okay. Well, that covers all my questions.

34188 Thank you very much, and thank you for helping me getting a better understanding.

34189 Thank you.

34190 Monsieur le Conseiller juridique.

34191 MR. McCALLUM: Just a couple quick follow-up areas.

34192 Just on the capital costs, I just wanted to get a sense of what is the, I guess, the marginal cost of actually purchasing a single product?

34193 I'm relating it back to the premium pricing you are talking about, in your presentation, and trying to understand what is the actual cost or marginal cost of the individual purchase when a consumer actually purchases either a film or something else.

34194 MR. ENGELHART: Thank you.

34195 And I'm going to let, I think, both Mike and Nick jump in, but the cost elements are -- there's capital cost elements. In the technical presentation that we made before, you have got servers. So you have got to tie up a server file, for each one of those movies. You have got server ports. You have got the QAM modulators. You need one QAM modulator for each fibre, and you can only have so many digital channels on each QAM modulator.

34196 Then, of course, you need the costs of the -- there's a capital cost associated with having a highly segmented plant so that you can deliver the service. And as Denis mentioned, when we were here for the technical presentation, if you -- you may have to do more segmentation if you are just finding that you are getting too many busy signals. So segmentation is an additional cost that could arise from VOD. And then the software to manage the whole movie experience.

34197 So I may have left some things out, but those are the major kind of cost elements.

34198 And I guess your question is, can we quantify that in some way or put some more specificity on those costs?

34199 MR. McCALLUM: Yes. What is the marginal cost, really. Once you have sunk all of these costs into the system, what is the marginal cost of a transaction?

34200 MR. ENGELHART: I guess, for a lot of those things, like the file servers and the QAM modulators, and for the network itself, an incremental buy in the peak period makes you incur more capital cost.

34201 So if it is a peak movie, none of those costs are really sunk.

34202 I will let Nick and Mike add to that.

34203 MR. HAMILTON-PIERCY: I will start to have a little bit of a go at it, and I will ask my colleague to maybe finish it off.

34204 The cost to establish a digital stream, which is one where we get that unique channel to that customer, is approximately somewhere around about $750, just to establish that stream.

34205 Now, that is obviously shared as different customers use that stream to look at different movies.

34206 If you take the retiring of that capital cost and take in the operating costs associated with it, it is about 2 cents a minute to stream a premium movie. It is something in that order.

34207 I don't know if that helps at all in giving an idea of the cost to stream a movie.

34208 So you can see that if you are giving two hours of streaming of something where you are only getting a dollar for it, that would be a pretty poor proposition. You are losing money.

34209 Mike...?

34210 MR. LEE: Actually, I don't have anything to add to that. Including operating costs, a peak stream would be 2 cents per minute.

34211 MR. McCALLUM: Is it the same cost for non-movies as well?

34212 MR. LEE: It is independent of the actual content. The technology doesn't differentiate, so it really is just -- it's video being streamed.

34213 MR. McCALLUM: Thank you.

34214 Could you just also give a bit more detail on implementation? I think you said that you would implement where you have a 750 mHz system built already. Could you give a bit more detail in terms of implementation?

34215 MR. HAMILTON-PIERCY: I will go through the steps of implementation and then I will give a little bit more detail.

34216 The steps, first of all, have to do with a lot of what I call "back office integration work", before you can even start rolling out this service. This is mating the concurrent business systems, which Rogers or the BDU would be operating under, with the VOD system.

34217 So there is an IT cost, I guess you would call it, straightaway, upfront.

34218 Once that is done, you then start deploying the capital on a location-by-location basis, probably on a hub-by-hub basis, where the hub might be in -- not necessarily an 800-home area, but something in the area of 2,000, 4,000 or 5,000-home areas. So you actually start implementing at that speed.

34219 You don't provision for 15 per cent or 20 per cent box penetration upfront because when you start this service there will be a small penetration of digital boxes. So you might put one QAM for every 800 customers instead of two. That is where you start provisioning there.

34220 You do this at each of the licensed areas, and then you have to interconnect those areas back to the -- we jokingly call it the mother ship -- the main controlling server, which in Rogers' case would be located in Toronto. So you then have that backbone facility also to implement.

34221 Once you have done that, then you can start rolling out the commercial service. Well before you even do that you probably would go into a trial or pilot run to actually test out all of your processes, technologies and everything else, and train your staff so they are ready to do this service.

34222 So the implementation isn't a fast thing. It is quite a long and drawn out process.

34223 MR. LEE: I would just add to that that the early stages of deployment are really to gather the information to build the tools necessary to support it, so call centre support, billing support and those kinds of issues.

34224 There is a fair amount of heavy lifting required to get video on demand operations.

34225 MR. McCALLUM: So what sort of time period are we looking at, roughly?

34226 MR. LEE: Approximately, for us at this point, about a year.

34227 MR. McCALLUM: And how much would be deployed in a year, approximately?

34228 MR. HAMILTON-PIERCY: At least one or two of our major operation centres will be finished with 750 mHz upgrades and implementing. So that may well be somewhere -- as an example, a good part of the Greater Toronto Area and possibly some of the systems in southwestern Ontario.

34229 Some of the other systems are still undergoing an upgrade to 750 mHz, so they will be a little bit later.

34230 MR. McCALLUM: Thank you.

34231 Thank you, Madam Chair.

34232 THE CHAIRPERSON: Thank you very much, Mr. Engelhart and your colleagues.

34233 Many thanks for your openness in educating us and clarifying, with some patience, many of the intricacies of this technology.

34234 Again, thank you for the presentation. We really appreciated your efforts to face all of these questions with as much explanation as possible.

34235 Thank you again.

34236 Madam Secretary, please.

34237 MS BÉNARD: Thank you, Madam Chair.

34238 The next presentation will be by Videon Cablesystems Incorporated for a regional, general interest, video on demand service.

PRESENTATION / PRÉSENTATION

34239 MS KERR: Good afternoon, Madam Chair and Commissioners. Thank you very much for the opportunity to present to you.

34240 I would like to start by introducing our panel.

34241 To my left is Greg McLaren. He is our Director of Programming at Videon CableSystems.

34242 To my immediate right is Tim Smith, our Director of Regulatory Affairs.

34243 And just on the end is probably a familiar face, Laurie Stovel, who has been working with us.

34244 THE CHAIRPERSON: Very courageous. She is back again.

--- Laughter / Rires

34245 MS KERR: This might be the last time you will see her for a while.

34246 THE CHAIRPERSON: That's okay for you, Ms Kerr; this is your first time.

34247 MS KERR: Yes.

34248 We are delighted to be here today to present a proposal that harnesses leading edge digital technology. It will place complete scheduling control for a broad range of entertainment options in the hands of our customers.

34249 Video on demand is essential to enable us to compete effectively in the digital arena and is a catalyst for the roll-out of digital boxes carrying these new Canadian services.

34250 Also important, video on demand is a powerful tool that can draw viewers away from the unregulated entertainment sources -- not taking a shot at Rogers, of course -- into a Canadian service committed to helping achieve the goals of the Broadcasting Act.

34251 We believe that video on demand will compete successfully with video stores and will bring a portion of the current home video rental revenues into the Canadian broadcasting system. Our video on demand service will contribute substantially to the Canadian television and motion picture production industries -- more than $2.8 million over the licence term -- and provide Canadians with more Canadian viewing choices.

34252 It will also provide a critical new exhibition window for Canadian motion picture product, helping to develop a home-grown star system for Canadian actors, directors and producers.

34253 As mentioned in the technical presentation, our video on demand service will have full VCR-type functionality, allowing customers to pause, rewind and choose when to watch within a defined period of time.

34254 We can do all of this through our existing hybrid fibre-coaxial network and digital set-top boxes already in the field. We are confident that exciting new products like video on demand will be the driving force behind the growth of Canadian digital broadcasting services.

34255 Our video on demand service will provide an alternative not just to video stores, but also to Internet video streaming that is now available to anyone with a computer and a modem. Internet streaming services currently fall outside the Canadian broadcast system. They do not contribute to independent production, nor do they necessarily provide Canadian viewing choices to Canadian audiences.

34256 While Internet streaming has some technical limitations today, advancements are rapid and we foresee a time in the not-too-distant future when the picture and sound quality of Internet video streaming will rival that available over cable television networks.

34257 In order to compete effectively and generate increased demand for the digital boxes that will carry Canadian services, we need to offer a home-grown video on demand service. We believe that video on demand will offer our customers what they have been asking for: control, choice and convenience.

34258 Our proposed video on demand service will be priced and packaged to appeal to viewers and draw them in to a Canadian service.

34259 Allow me to highlight what our video on demand service brings to the table.

34260 First, minimum ratios of Canadian to foreign programming of 1:20 for feature films and 1:10 for all other types of programming.

34261 Front-and-centre placement for Canadian programming, with Videon on promoting Canadian fare on an even basis with other programming choices.

34262 A contribution to the Canadian production community of approximately $2.8 million over the seven-year licence term.

34263 An important new exhibition window for the work of Canadian film and television producers, directors and stars.

34264 The key application that will drive penetration of digital boxes into Canadian homes, in turn supporting the roll-out of new Canadian digital specialty channels.

34265 At this point I would like to ask Tim Smith, our Director of Regulatory Affairs for Videon, to tell you more about the types of programs we plan to offer on video on demand. Tim joined us quite recently and brings to us 25 years of broadcasting experience, 17 of them as a programming executive responsible for the acquisition and scheduling of popular Canadian and foreign programming. Given his background, we asked Tim to open discussions with program distributors and to understand what is possible and likely. Tim.

34266 MR. SMITH: Thank you, Charron.

34267 Programming a video on demand service differs from conventional broadcasting by giving the customer control over when they will watch their chosen selections. A subscriber can rent a program for unlimited viewings over a set period of hours. We simply provide a list of titles, and the customers do their own programming. You can think of it as an electronic video store.

34268 As Charron mentioned, this new service will offer an alternative to home video rental and video available over the Internet. Our main demand for VOD will be feature films. We estimate that in the first full year of operation, we will acquire the rights to provide up to 250 video on demand selections, with considerable expansion of this library during the licence term.

34269 Movies -- both new releases and perennial favourites -- will make up the majority of our video on demand selections. We do believe, however, that as public awareness of video on demand grows, there will be opportunities to explore other types of programming.

34270 Customers will be able to choose from amongst documentaries, educational programming, made-for-TV movies, sitcoms, adult programs, dramas, children's programming, plus taped events and concerts. We strongly believe that VOD services can and should be permitted to explore a broad range of programming in order to draw viewers to VOD and, in turn, to other Canadian services available on the digital cable platform.

34271 In terms of actual film and program titles, we've had preliminary discussions with distributors and are confident that we will have the access to the same type of programming as any national VOD service.

34272 We view it as essential that our foreign and Canadian programs be promoted and presented with themes of regional interest to subscribers in Winnipeg and Edmonton. In fact, it's a distinct advantage of a regional service to be able to cater specifically to our local customers, whether showing movies shot on the streets of our communities like the Avro Arrow story in Winnipeg, presenting a selection of favourites that glorify the gold rush and coincides with Edmonton's Klondike Days, or one presenting historical fare such as the Manitoba flood of the century, or documentaries about the impact of Alberta's tornadoes.

34273 Innovative packaging is critical in order to make video on demand attractive and competitive with unregulated Internet video streaming. Our approach will benefit Canadian producers by showcasing Canadian productions, perhaps in conjunction with foreign programming or maybe through thematic offerings. Furthermore, we will remit 100 per cent of rental fees from Canadian feature films to the program's producers or suppliers.

34274 Let me present two ideas that illustrate the potential.

34275 A package of animation might include some of Canada's award-winning productions that viewers seldom have the opportunity to see. The unique nature of video on demand allows us to assemble selections that do not necessarily fit the commercial break format of traditional broadcasters.

34276 For instance, we could package a 12-minute animated short with two 28-minute programs and a four-minute mini feature, and the entire package could be assembled from other nationalities noted for their animation.

34277 While conventional and specialty broadcasters might have difficulty fitting programs of odd lengths into their schedules, it's a perfect fit for VOD.

34278 Thematic examples of VOD offerings could be a showcase from the Local Heroes Festivals in Winnipeg and Edmonton, or highlights from the Banff Television Festival or even the Toronto International Film Festival. These concepts could provide even greater benefit to Canadian programming by drawing attention to the production industry itself.

34279 The opportunities for video on demand are diverse and can be adjusted according to consumer demand. The popularity of programming is simple to measure because buy-rates can be easily tracked, and program lists adjusted accordingly. We're excited about providing our customers with the ability to customize their TV viewing and we believe that VOD will help us to better respond to the expectations of our subscribers.

34280 Now I would like to ask Greg McLaren, Videon's Director of Programming, to discuss plans for our implementation and how VOD fits into our larger strategy for bandwidth utilization in Winnipeg and Edmonton. Greg.

34281 MR. McLAREN: Thank you, Tim.

34282 Video on demand represents a cutting edge new programming service for Videon customers.

34283 We expect to launch within six to eight months of a positive CRTC decision. To that end, we have been talking to a number of technology providers to determine the best server and billing interface for our own network. We are close to finalizing a deal with a provider that will deliver excellent technical service for our VOD customers over the HFC network.

34284 As mentioned in the technical presentation, the impact of VOD on the capacity of our network will be almost insignificant. As buy rates and digital penetration increase, so too will the demand on our network. But it is scalable and we will expand its capacity as necessary. Upgrading our plant has already become a continual process.

34285 Both Winnipeg and Edmonton systems will be at 750 mHz when our VOD service launches. This will allow us to offer all of the new Category 1 digital specialties and as many of the Category 2 specialities as have demonstrable consumer demand. It is in our best interest to provide as many programming choices as we can because we compete with DTH providers, MMDS and video streaming over the Internet. But more importantly, it is essential that we offer our customers the "diversity of choice" that they want.

34286 We are also excited about exploring the possibilities of new interactive links to Web sites that provide background and supplementary information about our various VOD programs. This will become more feasible as the technology develops toward the latter part of the licence period.

34287 Our interactive VOD program guide will allow customers to access trailers and information about the movies. It will be fully integrated with our digital cable guide, and will be an effective marketing tool that will help expose viewers to Canadian programs.

34288 Our VOD service will place current Canadian motion pictures front and centre. We will list current Canadian feature films at the beginning of the screen. A customer navigating the listings will see the Canadian titles first.

34289 Videon is committed to using digital technology to develop and implement new interactive services. Video on demand represents a truly significant step in this direction.

34290 Charron.

34291 MS KERR: Madam Chair, we are ready and eager to keep pace both with the Internet and the telcos, such as Telus, which recently announced its intention to offer its own VOD service. It is our understanding that these services have not committed to either Canadian production or Canadian content. A fully 7.5 per cent on average of Videon's VOD revenues will go to supporting the creation of distinctive Canadian programming. This amounts to approximately $2.8 million over the licence term.

34292 In summary, we believe that VOD exemplifies the promise of digital, and will drive more digital boxes into Canadian homes. It's an important element of bringing Canadian choices in packages and prices in television services. We believe this application meets the objectives set out in the Broadcasting Act, and we ask that you grant us a licence.

34293 This concludes our formal presentation, Madam Chair, and we would be pleased to answer your questions.

34294 THE CHAIRPERSON: Thank you, Ms Kerr and your colleagues.

34295 Commissioner Williams, please.

34296 COMMISSIONER WILLIAMS: Good afternoon, Ms Kerr and Videon panel members. It's my pleasure to lead the questioning on your application for a video on demand licence, or perhaps in your case the "Vide" on demand for a video on demand licence.

34297 MS KERR: It is a coincidence the name is so close, isn't it, yes.

34298 COMMISSIONER WILLIAMS: During your presentation you talked about using your existing hybrid fibre coaxial network in digital set-top boxes that were already deployed. What percentage of your systems have both the hybrid fibre coax network and the digital boxes?

34299 MS KERR: Both of our major systems, Edmonton and Winnipeg, are completely -- well, they both have the hybrid fibre coax network. Winnipeg is currently built out to 625 meg and it's node size, though, is considerably smaller than Edmonton.

34300 The node sizes in Winnipeg range from around an average of 500. We have got a few unique areas where there are 2,000.

34301 In Edmonton we are already built out to 750, but our node sizes are somewhat larger there, in the neighbourhood of 2,000. So over this coming year we will be cutting down the node sizes in Edmonton to an average of 500 and in Winnipeg we will be increasing the capacity to 750.

34302 COMMISSIONER WILLIAMS: Videon has a variety of other smaller systems in --

34303 MS KERR: Yes, we do.

34304 COMMISSIONER WILLIAMS: What is the situation for those systems?

34305 MS KERR: This is probably the single biggest challenge that we are facing right now. In fact, it is a major project we are undertaking.

34306 We are looking at several alternatives, ways to interconnect those systems into one of the Class 1 systems, Edmonton or Winnipeg, and using wireless technology. We already have wireless in some cases.

34307 The cost of fibre has dropped and the cost of construction has dropped, so we are looking at fibre interconnects for systems.

34308 Some small systems because our systems range from 400 subs to 4,000. There are some small systems that it's not -- there clearly isn't a quick answer.

34309 There we are running an experiment jointly with CANCOM right now testing the Cable+ product. It just launched two weeks ago and actually the reception has been very positive.

34310 I have to say though the economic model is not very attractive. We are hoping that this is only a transition technology, until we can find some other alternatives.

34311 COMMISSIONER WILLIAMS: I think ExpressVu is going to bring one up.

34312 MS KERR: We look forward to all alternatives. We believe in the competitive marketplace on the other side too.

34313 COMMISSIONER WILLIAMS: How many subscribers do those small systems represent? You have 350,000?

34314 MS KERR: Yes, approximately 25 per cent of our subscribers are in small systems.

34315 COMMISSIONER WILLIAMS: Okay.

34316 In the 1997 VOD licensing round, the Commission adopted a generally uniform approach to the commitments and requirements for all the VOD services licensed at that time.

34317 Do you think the Commission should adopt the same approach during this round and impose uniform requirements for all of the VOD services it licences?

34318 MS KERR: You know, quite frankly I don't see any risk in applying uniform conditions, with somewhat of a caveat in that I have listened to the questioning of the earlier applicants. I would encourage the Commission to continue with the very flexible structure that they reflected in the 1997 decision, and I am certain we will probably get into some of that questioning as we move along.

34319 COMMISSIONER WILLIAMS: Could you discuss the benefits and disadvantages of permitting pay per view and video on demand services to sell packages of programming?

34320 MS KERR: Yes, and you know this is one of the challenges I know you are facing and we have a great deal of discussion amongst our group. We feel selling packages is a very important tool of marketing our video on demand service.

34321 Keeping in mind that our current competition is really the video store for this particular market, we want to be able to replicate the kind of packaging they might be able to do. At the same time, we are very mindful of the concerns that the Commission has for the possibility of emulating a specialty service.

34322 We, as you know, are also part of the company that has some specialty services and more importantly we have an established business that we don't want to cannibalize through our own video on demand service. But packages, I believe, provide a very interesting option for consumers. We can't estimate what the take rates are. We feel that there are some very clearly defined parameters we can put around it in terms of themed packages and some very time-limited offers.

34323 But packaging we feel is an important competitive tool to ensure that we do make this as attractive as possible for our consumers and so that we can drive as many digital boxes out as possible.

34324 COMMISSIONER WILLIAMS: Did many examples of bundle sports per pay view programming suggest that sports programming is a special case, and are there other genres of programming where selling program packages is particularly valuable?

34325 MS KERR: Well, I am going to turn this question over to Tim because he has so much depth on the programming side.

34326 Tim.

34327 MR. SMITH: Again, you know, the objective is to try to make the service as attractive as it possibly can be to drive the penetration of the digital boxes and, therefore, there are some packages that we think would be attractive and in the area of feature film programming, certainly we think that there are seasonal themes. Christmas themes, we think, could be interesting and to offer a time-limited package of a number of features with a Christmas theme from a library that we have. There could also be opportunities to look at themes of directors' movies, perhaps Norman Jewison or Atom Agoyan, to name two Canadian examples, and also to perhaps offer packages of themes focusing on particular actors.

34328 So those are some of the ideas we have. Again, we do think that packages can be attractive, but for the most part the bulk of our programming will be offered sort of on a single, one by one basis.

34329 COMMISSIONER WILLIAMS: Does the seal of VOD programming in themed packages increase the risk that video on demand services may directly compete with the pay and specialty services? For example, if a video on demand service sells a package of children's programming at a flat rate, what impact would this have on specialty services that specialize in children's programming?

34330 MS KERR: Again, I can certainly understand your concern there and I think that the two previous applicants very eloquently demonstrated that the business model for us to go forward with a highly discounted package -- even in children's programming where I must say the costs are probably going to be lower -- doesn't make a lot of sense from our point of view. But again, we tried to come up with some clearly defined parameters that we could perhaps present to you given a question of this nature. And one might be that we don't go to a subscription service kind of video -- you know, $9.95 a month for all the children's programming you can use.

34331 We don't believe there is a business case there and that would certainly limit it. But at the same time, if the Commission agrees that we have a shared goal in trying to repatriate some of that revenue that's in that $2 million and bring it back into the Canadian broadcasting system -- something that is very attractive for people with young families, which was a long time ago me.

34332 You know, it's very nice to go to the video store and rent three videos for $4.99 for the whole weekend and we wouldn't want to see restrictions that would limit that kind of flexibility and, therefore, make our product less competitive than the video operations.

34333 COMMISSIONER WILLIAMS: Okay, that's fine.

34334 The Commission has been traditionally quite flexible in categories of programming that a pay per view service can offer, and for video on demand services, the Commission has expressed the encouraged experimentation in different programming genres.

34335 In determining whether to continue this approach, should the Commission be concerned about the potential programming overlap between pay per view and video on demand services and the digital pay specialty services?

34336 MS KERR: I believe there are two questions inside that. One is the competition or the overlap with pay per view services and there is no question in my mind that if we continue to run a full pay per view operation similar to what we have in our systems today, there will undoubtedly be overlap, and I believe that will only create customer confusion in that if we are pricing them at the same price point of $3.99 for a movie, and I can select one where I can have full VCR functionality when I want it, or I can have it on a schedule, other than the single example of some of off-loading some of the peak demand, I can see very limited application for that.

34337 So there would be a conflict there. My personal belief is that the pay per view business is still very viable and they can look forward to almost reinventing themselves with the new live events opportunities. That's a growing category as we are seeing with the sports application. That's not something that we can do in the VOD application and we will certainly look to continue to use pay per view in those applications.

34338 The other very important application that no one has spoken about is that video on demand isn't a service that anybody at this point in time but very major large systems could afford to get into. So there is a significant market still out there of small and mid-sized systems that will require the pay per view product.

34339 COMMISSIONER WILLIAMS: Your company as an example.

34340 MS KERR: Exactly. We would continue to look for ways to extend that to the other customers.

34341 In terms of the overlap with the specialties, it goes back to my earlier response in that we would encourage some flexibility here. We believe that the pricing model, first and foremost, makes it unattractive for the customers to purchase the unique genre of programming that we might offer, that might be in competition.

34342 COMMISSIONER WILLIAMS: Should the Commission impose a limit on the proportion of non-feature film titles that the VOD services can offer, and if the Commission does decide to impose such a limit, would you accept such a requirement on your licence? And third, at what level?

34343 MS KERR: Yes. Well, you know, I can't remember whether it was exactly -- I think in our application we said that we expect that we would be offering at least two-thirds of the movies, and certainly as we start up that we would see that as by far the majority.

34344 We would be again reluctant to see it locked down, but at the end of the day, this is going to be a movie business. We would encourage you to continue with as much flexibility as possible, but of course we would abide by any decisions you make in that area.

34345 COMMISSIONER WILLIAMS: French-language services. Rogers said approximately one-third of their titles would be produced in French or would be made available in dubbed French.

34346 In your application, you stated you would make French titles available in accordance with audience demand. Can you expand a bit on that?

34347 MS KERR: Yes. We see French titles -- and other foreign-language titles, by the way -- as an important part of retaining our customer base, keeping in mind that we are competitive with DTH services. So we are very committed to offering both French and some other foreign-language titles.

34348 We are unfamiliar at this point in time as to how much of a demand there will be for these services. In Edmonton, for instance, there is not as large a French community and the portion of the system that we are licensed in in Winnipeg doesn't have that large a French community. So we would like to come up with some sort of sense of what the buy rates would be. If the Commission is looking to put some ratios in there, certainly a third might not make sense, given the French populations in our cities, but something that is relative to the percentage of French population perhaps is something you could consider.

34349 However if the titles, as Nick indicated, come with both an English and French track then it's much easier to offer them.

34350 COMMISSIONER WILLIAMS: Yes. I guess the area I am trying to explore is, should there be a minimum amount of French programming and should we differentiate between "made in Canada French" and "made elsewhere French"? And would you accept such a requirement on your licence?

34351 You talked about demographically represented I think is how I heard you answer --

34352 MS KERR: Yes. And we certainly would accept a condition of licence that would direct us as to what percentage of French programming -- and, that, course, is always the minimum.

34353 As I indicated, we believe that it's important that we offer a product that meets our customers' requirements. We are in a very competitive situation here. As you know, the DTH providers have a full French service -- and we are happy to compete on that grounds.

34354 COMMISSIONER WILLIAMS: Why shouldn't Canadian content requirements for non-feature film programming of video on demand services be more in line with the minimum levels for the pay and specialty services? Given the ratios that you put forward, 1-to-10.

34355 MS KERR: Well, you know, the existing windows that we are going to be working in, I believe, will drive, to a large degree, the content.

34356 At the end of the day, we are not the scheduler. We want to be able to offer product that makes sense to our customers. And given what Ken was saying about the availability of titles, we would be concerned -- if it was on the films -- whether it was more than 1-in-20, in terms of available titles.

34357 So, in order to keep the inventory fresh --

34358 COMMISSIONER WILLIAMS: In your opinion, is there a shortage of Canadian non-feature film programming?

34359 MS KERR: Non-feature?

34360 COMMISSIONER WILLIAMS: Yes.

34361 MS KERR: I'm going to turn to Tim to get some input, because of his programming experience, on this.

34362 MR. SMITH: I think in the non-feature and non-theatrical areas, there's certainly a lot of Canadian programming available, particularly in the area of children's -- and, of course, you have heard that over the past weeks -- and their licensed services. So I don't think that there is shortage.

34363 There are available documentaries, which is one of the areas that we have contemplated. I guess the question, as it relates to us, with documentaries, is, you know, we would want to offer things that are relevant to the people of Manitoba or the people of Edmonton -- and we talked about a couple of those examples in our oral presentation. It's hard to say whether the vast majority of that available programming is really relevant.

34364 And those are just two examples.

34365 COMMISSIONER WILLIAMS: If the Commission decides to impose a higher Canadian content requirement, for the non-feature film programming, than the 1-to-10 ratio you have proposed, what level would you be willing to accept as a requirement?

34366 MS KERR: You know, the 1-in-5 has been mentioned a couple of times today. And, based on the information that Tim has, it doesn't seem to be a problem, at all.

34367 COMMISSIONER WILLIAMS: Okay. Both pay per view and video on demand services have traditionally committed to give at least 5 per cent of the gross revenues to a Canadian production fund.

34368 One way of calculating the gross revenues is for distributor-affiliated VOD services that might be relatively simple in practice would be to set up a VOD gross revenue as a fixed percentage of retail subscriber revenue.

34369 For example, if a subscriber paid $6 for a movie, the video or gross revenue used for the calculation could be set at a fixed 50 per cent of that amount or, in that case, $3.

34370 What do you think of this approach?

34371 MS KERR: Well, certainly in the model that we submitted to the Commission, that's essentially the -- exactly what we did.

34372 The only risk -- and it's a risk we share -- is that, over time, we may -- if the windows were to change our movies, for a new release, you know, it may be 60 per cent is what would go to the VOD service, because we would only retain 40 per cent.

34373 However, the other side of that is that there are some movies where the margin is a bit higher.

34374 So, we sincerely do believe that 50 per cent kind of averages it out -- and if it simplifies the calculation, we are in favour of that.

34375 COMMISSIONER WILLIAMS: Okay. The broadcasting distribution regulations require that all Class 1 terrestrial distributors carry at least one general interest pay per view service in the language of the market they service.

34376 If a terrestrial distributor launches a VOD service, should it still be required to carry a general interest pay per view service? Or would this be redundant?

34377 MS KERR: In terms of the pay per view service, as I said, I can see that their business model is going to change. They are the holder of, I believe, two of the licences that were awarded back in 1997. So they themselves recognized that their business is going to evolve.

34378 However, we will always continue -- even in the Class 1s, because of the live events -- continue to carry a pay per view service. So I wouldn't suggest that we change that.

34379 What I would ask you to consider is your definition of the number of channels.

34380 Unlike Ken, my recollection is that the service is defined as five channels plus a barker. But I would still encourage you to revisit that and recognize that it may come down to no movie product and only sporting events and concerts and that sort of thing, so we won't need to tie up digital slots unnecessarily.

34381 COMMISSIONER WILLIAMS: So you would think that five channels of pay per view would be sufficient to --

34382 MS KERR: And perhaps even less, over time.

34383 But we would encourage the pay per view licensees to have sufficient product to fill five channels. And I think it's out there. There's lots of sports programming that they are not carrying right now, such as the English Soccer League, which, I believe, ExpressVu is carrying.

34384 COMMISSIONER WILLIAMS: Okay. Thank you, Miss Kerr, and Videon panel members, for providing us with a better understanding of your application and plans to bring this electronic video store to the homes of your customers.

34385 I have no further questions.

34386 THE CHAIRPERSON: Thank you.

34387 Madam Bertrand...?

34388 CHAIRPERSON OF THE COMMISSION: I was listening to you -- and I was concerned when Cogeco started. I understood better. I felt better. Then we heard Rogers. I asked questions. I felt better because more explanation. But then you come and the explanations you give kind of bring the concern exactly even higher than I had it at the start, and I will tell you what really gets me concerned, and it's about the non-distinctive offer that can be there, in comparison to channels we might be licensing, and two elements you have set has kind of raised my concern.

34389 The first one is you are proposing one-third of your inventory, or your catalogue, to be non-feature films -- which is quite high. Because for a predominantly film, and the majority of the business being film, when you have one-third, you expect, I suppose, especially we are not talking about an inventory or a catalogue of 1,000 titles to start with --

34390 MS KERR: No.

34391 CHAIRPERSON OF THE COMMISSION:  -- so when you are planning to use one-third for non-feature films, that means you are expecting to sell that and you will package it or you will promote it, market it in such a way to sell it.

34392 So, that's the first thing.

34393 The second thing is you have said, "Well, we could package all the children's programs you want for the month for $9.99". Very close to what could be Treehouse or very close to what could be Family Channel. And if you take that in all the genres, it could be very close to an educational channel, it could be very close to a book channel, to whatever type of channel that we have seen in front of us, in the last three weeks, and that are already on there, in the analog world.

34394 So, it seems to me that it's very different from the kind of conversation we were having with Cogeco that said, "Well, the price will be higher and it's still an offer on a product per product". And that was, like, also the explanation given by Rogers, that the economics and the technology would be driving, like, a product per product. And, all of a sudden, you come with a package that is a real package that is not a package any more, it's almost a channel. You know. If you go in the not prime time for film, suppertime, and, you know, have your children watch television on VOD, all you can for $9.99, for the month, you know -- you see my concern.

34395 MS KERR: And I apologize if I raised your blood pressure. That certainly wasn't the intent. I thought --

34396 CHAIRPERSON OF THE COMMISSION: No, it's the condition of licence --

--- Laughter / Rires

34397 MS KERR: If that was the message you got I apologize, because certainly, in fact, I wanted the opposite message.

34398 In knowing that you were searching for some parameters to put around the fence, which I think is what you have been calling definition of service, I had suggested -- as we were trying to work through what would be the potential abuses that you would have concerns about, and therefore they could become your fence, I was suggesting that you wouldn't want a $9.95 product. And that may be something you might want to consider, limiting a subscription service in fact.

34399 It wasn't that I was suggesting we would do it; in fact, I was suggesting that if you wanted to limit it, it would definitely make good sense from where we sit, because that is not our intent. And the economics don't make sense for us, so we would never do it, so we wouldn't be concerned that you would limit it.

34400 On your question of --

34401 CHAIRPERSON OF THE COMMISSION: How could we word something that would allow for some flexibility, which we might understand is needed, yet avoid the $9.99 package for all you can baby-sit?

34402 MS KERR: Yes. I think that limiting or wording that would not allow monthly subscriptions might be something you would want to consider, because I see that as a direct competitor to existing both premium and specialty services. So that would be my thought on that.

34403 CHAIRPERSON OF THE COMMISSION: And the non-feature film proportion?

34404 MS KERR: Yes. I would like to turn that over to Tim, who is more familiar with it.

34405 Certainly I will say that in our application we did say that the vast majority, when we start out, would be all film inventory, but we thought as it progressed that it would be in around two-thirds.

34406 But we are neophytes at this, I have to admit, so let me turn it over to somebody who is far better informed.

34407 MR. SMITH: Thank you. I would probably want to start by referencing a comment that Pierre Robichaud made on the previous panel, and something that I have heard before, which is that in the video business perhaps 70 per cent of revenue in a week comes from a very small number of titles. I think he said 20.

34408 Certainly we see the feature film business to be the bulk of our business and the main attraction of our business, so any contemplation of non-theatrical is truly experimentation. It is to try to sort of spark the interest and the imagination of potential VOD users.

34409 So it is something that we do need to explore, and we would like to have the flexibility to do so, but we certainly believe that feature film will be the bulk of the business that we will be operating.

34410 CHAIRPERSON OF THE COMMISSION: Could you live with an experimentation that wouldn't be such a high proportion?

34411 MS KERR: Absolutely. You know, it was an arbitrary number, just because we were uncertain as to what the availability of titles would be and what the consumer take-up would be, but we would be comfortable with a limitation. I think you suggested earlier an 80:20 ratio, and that would be fine with us.

34412 CHAIRPERSON OF THE COMMISSION: Thank you.

34413 THE CHAIRPERSON: With regard to the flexibility that you felt was important, we have had suggestions since we started this part of the hearing that one way of alleviating any concern in that regard is to impose a limit of the inventory. Another is to have short-term licences.

34414 Mr. Engelhart, in his regulatory enthusiasm, suggested that perhaps that would be one way of looking at how things develop, and re-looking at them.

34415 Do you have any comment about the downside of either of these mechanisms, should we find that one is needed to fence in or create some level of comfort in that regard?

34416 MS KERR: I think it is important in the early years of this new business -- it is difficult for any of us to predict where it is going to go, or what the competitors are going to do in some of the unregulated environments.

34417 Rogers has a slight edge, in that they have the benefit of the history of the video stores to draw on, and the vast majority of us don't. But I think that consumer expectations are changing dramatically. And if we share in the same vision of the future that wants to bring as much back into the Canadian system, I would encourage you to consider the short-term licence as a way to allow us to experiment as broadly as possible, to demonstrate to you that we can be trusted not to cross into that very grey zone, which I acknowledge is there, and that we sit down again in -- whatever you deem is the appropriate time.

34418 The downside of that is that we have to sit down again, and I am sure you are tired of it.

34419 THE CHAIRPERSON: Yes. One of the downsides that Mr. Engelhart would understand, of course, is that if that is a good way of using video on demand, when the short-term of your licence is over, you are into exactly what we had a concern about, considering the type of licensing that we are looking at.

34420 Anyway, your comments are appreciated.

34421 What I mean by that is, if we see it as a problem in the balance of the service, I suppose it is not very wise, Mr. Engelhart, to wait and see whether it develops in exactly the manner in which we didn't want it to and then try to rein it in.

34422 So I think it will be more a question of to what extent is there a need to fence it in.

34423 Presumably, if your intention is to offer the type of service that is described, which is video on demand, mostly films and events, then nobody should suffer too much from not having the flexibility to morph into something else.

34424 Anyway, this part of the hearing is not over, so further comments may be made.

34425 Go ahead, please; I interrupted you.

34426 MS KERR: I was just going to say -- and, again, I would remind you that we have as much interest in protecting our existing stream of revenue to finance all of these investments we have to make in the future, and seeing the new licensees be successful.

34427 We do have a shared interest there, so I would hope that would --

34428 THE CHAIRPERSON: Yes. Except, as regulators, we don't always just leave it to the boardroom.

34429 MS KERR: No, I understand.

34430 THE CHAIRPERSON: Mr. Engelhart even would agree with that.

--- Laughter / Rires

34431 THE CHAIRPERSON: Thank you.

34432 MS KERR: Thank you.

34433 THE CHAIRPERSON: Counsel, please.

34434 MR. STEWART: Thank you, Madam Chair.

34435 In your oral presentation you referred to the figure of $2.8 million as a contribution to the Canadian television and motion picture production industries, but in your application I see the figure of $1.89 million. Can you explain the difference in those two sums?

34436 MS KERR: Yes. We re-filed our financials. When we initially filed it was our understanding that we would only be required to remit 5 per cent based on the BDU revenues, and with the assistance of some CRTC staff, I will say, we came to the understanding that it would be both on the BDU and on the VOD licence holder. So the numbers changed.

34437 I can tell you the exact date that was re-filed, if you like. It was in response --

34438 MS STOVEL: It was in response to an intervention filed by Bell ExpressVu, and it was our letter dated July 17, addressed to Ms Menke.

34439 MR. STEWART: So that is an aggregate figure, then, both on the distribution side and on the VOD side.

34440 MS KERR: That's correct, yes.

34441 MR. STEWART: Thank you. Just to clarify, your proposed service, essentially, is it a regional service restricted to your cable systems in Alberta and Manitoba?

34442 MS KERR: Yes, that certainly was our intent when we filed the application.

34443 We would be prepared, as we stated in our response to deficiencies -- or in a response to an intervention -- we would be prepared to extend the service to other BDUs if it made financial sense for them. All along, in fact, we have had discussions with Westman Media in Brandon, which is an adjacent town to Winnipeg. They already have a fibre running right into our building, where we feed them PBS and the Manitoba legislature. So if we can work out something that makes sense for them and for us, we are quite happy to do that.

34444 It doesn't make sense for BDUs that can't interconnect into our servers, but that would be our intent, and we would come back to the Commission, if necessary, to get a change in our conditions.

34445 MR. STEWART: Thank you.

34446 Thank you, Madam Chair.

34447 THE CHAIRPERSON: Commissioner Demers, please.

34448 COMMISSIONER DEMERS: Thank you.

34449 I have just one question, maybe to be more precise, on your reference to the French-language availability of films. Do I take it that the people you would get these films from would be the same as the ones that Rogers would purchase from?

34450 MS KERR: Yes. I would be quite certain. I mean, we haven't had those discussions, but there is a limited number of distributors, so I am sure that is the case.

34451 COMMISSIONER DEMERS: We were told by people from Rogers, the Rogers team, that there were a lot of films with French --

34452 The words don't come today.

34453 That they would have soundtracks in French.

34454 MS KERR: Yes.

34455 COMMISSIONER DEMERS: So I imagine that this would be available to you, as well as to Rogers, if you purchase from the same people.

34456 MS KERR: I would expect that it would be.

34457 We have not had those discussions, but we would certainly expect that that should be the case. Not that I doubt the Rogers people, because, in terms of their technical excellence, it is unquestionable.

34458 We would be happy to make it available, if it is available.

34459 COMMISSIONER DEMERS: Thank you.

34460 THE CHAIRPERSON: Commissioner Williams...?

34461 COMMISSIONER WILLIAMS: I have one more question. I have read a lot of files in the last month or so, but I seem to vaguely remember that Videon has some cable systems in the U.S., in Texas and Florida?

34462 MS KERR: Yes, we do.

34463 COMMISSIONER WILLIAMS: Do you still have them?

34464 MS KERR: Oh, yes, we do.

34465 COMMISSIONER WILLIAMS: Do they offer a form of video on demand?

34466 MS KERR: At this point in time they don't.

34467 You know, it's interesting, because the types of systems that we have in the U.S. are smaller, planned communities. They tend to be more affluent communities, but they are in that smaller size, and our U.S. colleagues are searching --

34468 COMMISSIONER WILLIAMS: I was just wondering whether you have drawn that U.S. experience as you rolled out your Canadian version --

34469 MS KERR: No. In fact, they are just launching digital just behind us in fact.

34470 COMMISSIONER WILLIAMS: Thank you.

34471 THE CHAIRPERSON: Those are our questions, Ms Kerr.

34472 MS KERR: Thank you very much.

34473 THE CHAIRPERSON: We thank you for your participation. We may or may not see you at reply stage, or we will? Anyway, you are welcome to come back. We enjoyed this.

34474 MS KERR: We appreciated the opportunity.

34475 THE CHAIRPERSON: We will take a 15-minute break and hear the fourth video on demand application.

34476 Nous prendrons une pause de 15 minutes et entendrons la dernière demande de vidéo sur demande.

--- Upon recessing at 1810 / Suspension à 1810

--- Upon resuming at 1825 / Reprise à 1825

34477 THE CHAIRPERSON: Welcome back to our hearing. This is the last item for the day.

34478 Madam Secretary, please.

34479 MS BÉNARD: Thank you, Madam Chair.

34480 The presentation will be by Corus Entertainment On Demand Inc.

PRESENTATION / PRÉSENTATION

34481 MR. ROBERTSON: Good afternoon, Madam Chairperson and Commissioners. I am Paul Robertson, President of Corus Television and all this conversation by the VOD applicants about flexibility must have rubbed off because we understand you have said we could have gone this evening or we could have gone tomorrow morning, so we do appreciate your flexibility.

34482 THE CHAIRPERSON: We aim to please.

34483 MR. ROBERTSON: In light of the fact that we are going to go ahead tonight, our remarks are brief and to the point and we will start right in.

34484 We are delighted to present to you today our proposal for a next-generation entertainment VOD service, Corus "On Demand". And with me today are on my left Malcolm Knox, Vice-President Operations, Corus Premium Television; Kathleen McNair, Vice-President of Regulatory Affairs, Corus Entertainment; and to her right Jamie Haggarty, Vice-President of Finance, Corus Television.

34485 At Corus, we are eager to play a major role in the evolution of Canada's broadcasting system. Video on demand represents the ultimate in consumer choice -- the movies and programs you want, at the time you want, and in the way you want them -- all with digital quality picture and sound. VOD appeals to Canadian viewers because of the enormous benefit it offers in terms of program selection, timing and convenience.

34486 We are convinced that a compelling, well-marketed video on demand programming service will be a major driver of digital roll-out in Canada. VOD trials in the U.S. have clearly demonstrated the consumer appetite for this service, with movie buy-rates exceeding those of pay per view by three to five times. Research reports by respected companies such as Merrill Lynch and The Kagan Group support these findings.

34487 We believe that consumers will embrace the ability to control their viewing experience, particularly as it pertains to movies and children's programming. This interactive capability is one of the major advantages offered by digital technology.

34488 MS McNAIR: Our application adheres fully to the licensing framework established by the CRTC in 1997 for VOD services. The Commission has endorsed an open, competitive environment and established certain minimum operating standards which have been imposed on the five VOD services authorized to date.

34489 The Corus VOD service will showcase Canadian content for viewers and provide additional revenues to the independent production community.

34490 We will offer a minimum ratio of twenty to one for Canadian versus non-Canadian feature films and a ten to one ratio for non-feature programs.

34491 We have committed to contribute 5 per cent of annual gross revenues to the creation of new Canadian programming, through an independently-administered fund, an amount projected to total more than $10.2 million over the licence term.

34492 Corus will give prominence to Canadian production in all of our promotional efforts. This means that the navigation system and any print material, such as a monthly program guide and even our Internet site, will feature Canadian titles at least as prominently as other offerings.

34493 We have committed to remit to the rights holders of all Canadian feature films 100 per cent of the VOD share of revenues earned from their exhibition.

34494 MR. KNOX: We believe that the ability of existing pay per view providers to migrate to VOD offerings is critical to their future survival. It is notable that in 1997 the Commission authorized all of the existing pay per view operators to operate VOD services. Over the longer term, five to seven years, pay per view services will be negatively affected due to the greater flexibility and control afforded to subscribers by VOD.

34495 While video on demand has not unfolded at the pace that was originally anticipated, today the timing is appropriate. Commercial application of VOD technology is imminent. Two-way digital infrastructure with sufficient bandwidth has been and continues to be deployed. All the components are now being put in place for the successful introduction of VOD.

34496 Corus proposes to offer a national service, across all terrestrial platforms including cable, MDS and telephony. This will enable a cost-efficient service in terms of marketing, program acquisition and overhead infrastructure to enable us to achieve our licence obligations.

34497 The Corus service will be deployed in partnership with a variety of broadcast distribution undertakings and, to this end, we propose a technologically neutral model.

34498 By offering our VOD service on existing platforms we will also help ensure that the Canadian broadcast system is not passed by by unrelated mediums, such as the Internet, which will, in future, be able to offer VOD services.

34499 MR. ROBERTSON: We believe that at Corus we will have the critical skills to make a VOD service a success.

34500 First, we have a history and a corporate culture that encourages achieving and surpassing our conditions of licence, particularly in the areas of contribution to Canadian programming.

34501 Second, we have the expertise to develop and market a compelling consumer product offering.

34502 Third, we have built and nurtured strong relationships with content providers throughout Canada, in the U.s., and around the world.

34503 Fourth, through our Premium Television services, we have had hands-on experience in managing the program aggregation functions, which include things like program purchasing, encoding and rights management, that are a requirement for VOD services.

34504 And, fifth, synergies with Corus Premium Television will allow us to keep overhead to a minimum and help build a cost-efficient service that will offer compelling value to consumers.

34505 For all these reasons we think that Corus is an ideal applicant for VOD.

34506 Thank you for your attention. We would be pleased to answer your questions.

34507 THE CHAIRPERSON: Thank you, Mr. Robertson and your colleagues.

34508 Mr. Haggarty, one more appearance before us and you can be a Commissioner. So if you really value him, don't bring him back.

34509 Commissioner Wilson.

34510 COMMISSIONER WILSON: I should say good evening to all of you and it's nice to see you again, including Mr. Haggarty, who was not here with you the last time we spoke, which was a few days ago. This is the second time that we are meeting after regular working hours.

34511 Mr. Robertson, before I start asking you some of the same questions that we have asked the previous applicants, I just wanted to say that when we last spoke during this hearing I described myself as Pollyanna and considering that we were talking movies I was so very surprised that you didn't acknowledge the fact that I was using a movie metaphor in having our discussion.

34512 MR. ROBERTSON: Clearly, we are just not quick enough on these things.

34513 COMMISSIONER WILSON: I was wondering if I had scared you into silence.

34514 Let me ask you first and I will start by following the lead of the Chair of the Commission, you say that you think that VOD is going to be a key driver of digital roll-out in Canada and Madam Bertrand pursued some questioning with Rogers with respect to how important they felt it was going to be to their ability to roll-out digital. I was wondering if you would comment on that as well, since you have got it right up front on the first page.

34515 MR. ROBERTSON: Yes, we would be pleased to.

34516 I think specifically in our experience we have come to understand that movies in particular are a huge driver of digital deployment and the viewers out there want access to movies in lots of different ways. It has been our experience in deploying pay per view, and now in some services having 48 channels of pay per view, that it is really the movies that are most attractive to the subscriber.

34517 So when you can take movie services and then make them available on a video-on-demand basis -- so there is no waiting, you get them exactly at the time you want them -- it really just enhances that movie offering.

34518 So it is movies, it is very bound up with video on demand, but we certainly do see it as being a really key driver of digital deployment.

34519 To what magnitude? We really wouldn't know how to quantify it, but we know that movies are a huge driver and video on demand makes that experience even better.

34520 COMMISSIONER WILSON: In all of your written submissions with respect to this application you have been quite clear with us that you think we should maintain the approach that was identified in the introductory statement to the VOD licences which were issued in 1997 and I was wondering: You didn't go into a lot of detail about why you had such a definite view, but I was wondering if you would like to explain now why you have such a definite view.

34521 I will just add that, in fact, for someone who had expressed themselves so clearly I was interested because you did suggest a couple of departures from that approach, which I will talk with you about a little bit later, but I wonder if you could just sort of give me your general comments.

34522 MR. ROBERTSON: Yes. We will wait for the second part, because perhaps those were inadvertent departures so we will have to talk about them.

34523 But our real intent was that we felt that the framework had been developed and there had been several licences that had been granted in 1997 and we felt that the most appropriate thing to do was to maintain those same license conditions.

34524 We went through each of the license conditions and said: How much more do we really know about this marketplace than we did when the services were granted?

34525 None of them have come to commercialization. It is almost as if time has stopped a bit and they could have been granted through this process.

34526 So we thought the idea of going with the same framework, which we thought was still appropriate for today, and have the simplicity of all the licence holders dealing -- playing cards with the same deck was most appropriate.

34527 I think perhaps Kathleen may want to add to that.

34528 MS McNAIR: I think in developing this application we did very carefully study the 1999 licensing decisions and, as Paul suggested, we thought that an equitable start gate, because we are all going to be starting at the same time, was most appropriate. That is why we adopted the principal linkage and most of the other fundamental conditions.

34529 COMMISSIONER WILSON: So it was really based on the fact that even though the services had been licensed for some time no one had actually entered the marketplace. Because, of course, we did leave ourselves some wiggle room in the convergence report where we talked about the ability to adjust our approach through specific licensing decisions.

34530 MS McNAIR: Well, my understanding is no licence has actually been issued. There has been an authorization for a licence. It keeps getting extended or renewed. And I know in the case of EDD, which is a licence that we now control, I think it goes an additional 18 months.

34531 So I think what we were thinking is, since this isn't actually an undertaking that is in operation and we can't assess whether the fenceposts that were established in 1997, after a very detailed process similar to this, our right.

34532 I mean, I think that we support the Commission's approach in 1997 where they encouraged experimentation and not overly regulating so that we can get a sense of how VOD is going to roll out and see what works.

34533 COMMISSIONER WILSON: Okay. Speaking of experimentation, that sort of leads into my next area, which is -- I'm sure you have been listening with rapt attention to the discussions about packaging and I'm sure you were particularly interested to hear about all the kids programming you want for $9.95, considering some of the specialty services that are in your stable.

34534 You have actually said in your application that you need the flexibility in the area of packaging and I'm wondering, in view of the previous comments that have been made about packaging, and in view of the concerns -- I mean, you talk about the need for flexibility to experiment with the medium, and I think we have seen some of that experimentation on the pay per view side where large packages of programming, particularly in the sports area have been put together and offered on a pay-per-view package basis by one of the pay per view licensees, and then our discussion here today about the idea that would it be possible with a video on demand licence to somehow bypass the system with much lower Canadian content requirements and offer packages of programming that would compete directly with services that we were going to license through this process.

34535 So sort of in that context if you would give us your comments on packaging and flexibility and just maybe describe a little bit about the kinds of packaging approaches you are thinking of.

34536 MR. ROBERTSON: We would be pleased to.

34537 First of all, I guess the basic tenet that we started with was this idea of maximum flexibility and creativity. New marketplace, one that will benefit from trying new things and seeing whether the subscribers react to them, because you get that immediate feedback on whether they purchased or not. So that is the way we went at this, so that is why we said that creative experimentation in the packaging area was a good idea.

34538 We had considered some of the potential overlap between extended packages sort of morphing into programming-type services and clearly there is a point at which the term of the package is extended enough, and the creativity that is added perhaps between the programs, starts to make that transition from what one would think of pay per view, into a not legitimate programming service. I think that it could be addressed.

34539 Perhaps one thing we may want to consider could be a maximum timeframe for these packages. For example, one could take a figure of 12 hours, say, and say that we will put a maximum 12 hour limit on any package that would be offered. If that was the case, it really restricts -- I mean, it would provide someone the opportunity to watch something all day long, but it really doesn't give someone the opportunity to subscribe to something all month long.

34540 So we thought that perhaps that is one limitation that might be considered.

34541 I guess with respect to answer the part of your question concerning what we had in mind, we thought that the idea of a James Bond package where you could watch five or six movies from the collection, or perhaps movies from the same director, that these would probably be the most likely options.

34542 We also mentioned in our application in children's programming, as you might expect, we thought there might be something there to offer and, frankly, the idea of offering a block of programming that would entertain kids at a birthday party would seem to be a good service that could be applied on a video-on-demand basis. So, frankly, we were less concerned about the impact that that could have on our core kids business, given the nature of the pricing.

34543 I think Mr. Engelhart did a very nice job of explaining how the system was somewhat self-policing as it related to the costs --

34544 COMMISSIONER WILSON: Technical and economic constraints.

34545 MR. ROBERTSON: Yes. I thought that was very well said and I think it seemed very true that you are really not going to be in the position where a block of kids programming would supplant YTV. It is certainly not something in the next few years that we would be -- we are concerned about lots of stuff, but that wouldn't --

34546 COMMISSIONER WILSON: That would not be one of them.

34547 MR. ROBERTSON: That wouldn't be one of them, no. No.

34548 COMMISSIONER WILSON: Well, at 2 cents a minute I guess it would get pretty -- how could you meet the value, for example? This is a question that I asked myself: How could you meet the value of a YTV if you are selling a block of kids programming at 2 cents a minute plus mark-up? That is certainly a question that has gone through my mind.

34549 So, basically, you are looking for the kinds of flexibility that would -- now, when you talk about the 12-hour limit, are you talking about VOD or pay per view? I mean I'm not sure I understand why 12 hours. If you are talking about having maximum flexibility, then why are you suggesting 12 hours? Because that doesn't seem that flexible, to me, but -- and I'm not talking about going all the way to the other end of the spectrum to, you know, having to service -- or having programming blocks available for an entire month. But why 12 hours?

34550 MR. ROBERTSON: Well we felt that 12 hours would give you the opportunity to do half a dozen movies and multiple and it would also give you the opportunity to provide an "all day viewing" package and that if one was --

34551 COMMISSIONER WILSON: You would have to be a very committed viewer to sit there and watch six movies in a row.

--- Laughter / Rires

34552 MR. ROBERTSON: Well, you know, some people --

34553 COMMISSIONER WILSON: It's like --

34554 MR. ROBERTSON: Yes, up to 12. You don't have to watch every movie. It's an all-inclusive price.

34555 But that's why I think that 12 --

34556 COMMISSIONER WILSON: I'm sorry. I'm being facetious. We have been sitting here for almost 12 hours, so I'm think, "My goodness".

--- Laughter / Rires

34557 MR. ROBERTSON: Of course. Of course.

34558 COMMISSIONER WILSON: And this is far more interesting than a movie.

--- Laughter / Rires

34559 MR. ROBERTSON: It unfolds, right as we sit.

--- Laughter / Rires

34560 MR. ROBERTSON: Well, we thought that 12 hours is a long time, as you all well know.

--- Laughter / Rires

34561 MR. ROBERTSON: And getting longer by the minute.

--- Laughter / Rires

34562 COMMISSIONER WILSON: Yes, we know intimately how long 12 hours is.

--- Laughter / Rires

34563 MR. ROBERTSON: So that the 12 hours would provide lots of opportunities for interesting packaging models, but it doesn't get you to the point that you could really think of it as a long-term subscription.

34564 COMMISSIONER WILSON: The 24 hours might do the same thing?

34565 MR. ROBERTSON: Perhaps, yes. Yes. Day and night. Night or day.

--- Laughter / Rires

34566 COMMISSIONER WILSON: I wanted to talk about your content categories. And, again, you have said that we should maintain the flexibility. And the next level that we look at, really, is what percentage of your service is movie-driven versus non-movie-driven.

34567 Now, if I recall correctly, Cogeco said 80-20; Rogers was 85-15; Videon said, basically, two-thirds-one-third; and I think you are suggesting 65-35.

34568 MR. ROBERTSON: That's correct.

34569 COMMISSIONER WILSON: And so, what drove you to that? I mean is VOD, essentially, a movie-driven service?

34570 MR. ROBERTSON: Yes, absolutely. And I think the other applicants were saying similar things.

34571 In the early going, we are not really sure what would occupy the other part of the roster. It's going to be primarily movies, in the early going, but we were encouraged by the Commission's framework to say, "Hey, let's try out some new things. Let's do some experimentation. Let's find new things that might be attractive."

34572 I think the comments also made in the Rogers application concerning what's happening in the video store is that it's, you know, predominantly movies. There's how-to videos in there. There's exercise videos in there. There's lots of different material. But it's probably not rented to the same extent as movies. So we thought 65-35.

34573 Frankly, we are not very concerned with maintaining any kind of 35 per cent maximum because we think -- we really only had a 65-35 to try to encourage experimentation on the 35 per --

34574 COMMISSIONER WILSON: So, you would be flexible on that, if we were to feel that 35 per cent was too much of an overlap, or a potential overlap?

34575 MR. ROBERTSON: Yes. If that raised concerns. We don't think we would use that much on the 35 per cent side.

34576 COMMISSIONER WILSON: Everyone is so agreeable, at a late hour.

--- Laughter / Rires

34577 MR. ROBERTSON: You haven't hit all the questions yet.

--- Laughter / Rires

34578 COMMISSIONER WILSON: That's true.

34579 MR. ROBERTSON: Now, did you want Kathleen to respond to the nature of service -- the programming categories?

34580 COMMISSIONER WILSON: No; I think that I -- I just wanted to verify that you are suggesting that we not sort of limit the categories in which you can experiment.

34581 MR. ROBERTSON: That's right. It was, again, a matter of, "Let's see what works and if it does" -- the first step is to see if anyone will buy it. And if they start to buy it in droves and concern the other broadcasters, then I guess we have got a unique problem on our hands. But it's really not expected that 35 per cent would grow to much.

34582 COMMISSIONER WILSON: I was interested to hear, when the Rogers panel was up and they talked, they compared -- well, I guess, you know, they talked about how they arrived at their 85-15 and sort of how it grew out of their experience in the video store business and they derive 70 or 80 per cent of the revenues from 20 titles. And I guess you don't have video stores so you wouldn't be able to draw on that experience, but -- I guess you would move the service more towards being movie-driven if you discover, after running it, that that's what works, that that's what people want to by?

34583 MR. ROBERTSON: Absolutely. We, as you know, run a pay per view business and, in that business, we run primarily movies. We also, of course, run live events. But, in the non-live portion, it's almost entirely movies. And that's what the people want. And they primarily want the big titles that are newly launched.

34584 COMMISSIONER WILSON: I wonder if I could just ask you, briefly, to help me understand something with respect to your revenue assumptions.

34585 It's page 70 of your application.

34586 And I was just wondering if we could look at the numbers in the chart that you have got at the bottom of the page.

34587 The subscribers that you have got, the basic cable subscribers, these are analog cable subscribers?

34588 MR. ROBERTSON: Let me ask Mr. Haggarty, the new star of the process, to speak to the Commission --

34589 COMMISSIONER WILSON: I'm so glad I asked you this question.

34590 MR. HAGGARTY: And I'm so glad to be here.

--- Laughter / Rires

34591 MR. HAGGARTY: The top line on that chart, on page 70, is -- we tried to define each of these line items in the section above. So we refer to the basic cable subs on affiliated systems as including standalone systems over 50,000 in size. And, generally --

34592 COMMISSIONER WILSON: For interconnected, yes.

34593 MR. HAGGARTY: Yes, we do start with a analog world. But we would view those as where they are digital-ready. So the digital plan --

34594 COMMISSIONER WILSON: So those are --

34595 MR. HAGGARTY:  -- does pass those homes.

34596 COMMISSIONER WILSON:  -- digital-ready analog households?

34597 MR. HAGGARTY: That's right.

34598 COMMISSIONER WILSON: And the next line, the number of digital households on affiliate systems. That's the number of subscribers you are projecting to have set-top boxes?

34599 MR. HAGGARTY: Yes. It's actually a function of the line below it, the 18 -- in Year 1, the 18.9 per cent. Multiply that by the 6.2 million, and that generates the 1.1 million.

34600 COMMISSIONER WILSON: You didn't check these numbers against the numbers that were put on the public file, did you? Because they are quite different.

34601 MR. HAGGARTY: I didn't check the numbers myself. I know our group in affiliated relations was quite diligent in comparing the subscriber levels of the systems, the greater than 50,000 subscriber level systems. And we started with a gross population of 8.8 million homes, to begin with.

34602 And I think on Schedule, I believe it's Schedule 34, in our application, we refer to the 8.8 million households and ratchet that down to the 70 per cent. So that might be the cause of the differences in the numbers. So we kind of start with the global number and ratchet it down as to how many --

34603 COMMISSIONER WILSON: Because what I'm looking at is the numbers that -- CCTA and the DTH operators put some numbers on the file, at this process. And if you look at their mid-range numbers for cable digital households, you are, in Year 1, double in their mid-range projections for cable households with digital boxes.

34604 MR. HAGGARTY: Double that you are referring to is the 1.1 million?

34605 COMMISSIONER WILSON: The 1.18, yes.

34606 So I mean I'm just -- when I looked at the numbers and I thought, "If those are your assumptions" -- I pulled this out of my handy briefing book, and the numbers are quite different. Yours are quite a bit higher, in terms of what you are projecting.

34607 Do you know something that we don't?

34608 MR. HAGGARTY: Well, I think -- and I'm trying to recall the numbers that were in -- because I did read the numbers from the CCTA, the high and the low, and I believe the way that the subscribers that you are looking at here on the schedule, we kind of take the total numbers of all cable and, really, don't really look at the number of digital subscribers, but we tried to ratchet it down to a number that -- for us, the most important number, which I think we would probably come about it if we had a different --

34609 COMMISSIONER WILSON: A different approach?

34610 MR. HAGGARTY: A different approach.

34611 I think we would still come down to a number that would be universally acceptable, which is -- the key number for us is the VOD active households.

34612 COMMISSIONER WILSON: Right. The 26,000 going --

34613 MR. HAGGARTY: Yes. So I think if we started with a different figure, that's the key we would like to draw your attention to is the 26, in Year 1, growing to the 431,000, in Year 7.

34614 COMMISSIONER WILSON: Yes, actually, it does -- it does work pretty well, on that basis. By Year 7, anyway, you are in the same ball park.

34615 MR. HAGGARTY: Okay.

34616 COMMISSIONER WILSON: Your numbers are not, but, as a per cent of the total available, if you are looking at 27 per cent -- per cent of digital households VOD active.

34617 MR. HAGGARTY: Okay.

34618 COMMISSIONER WILSON: Okay. I just wanted to satisfy myself.

34619 MR. HAGGARTY: Don't take this wrong, but I hope I satisfied you.

--- Laughter / Rires

34620 MR. HAGGARTY: In clarifying how we got to the number.

--- Laughter / Rires

34621 COMMISSIONER WILSON: As much as any accountant could.

--- Laughter / Rires

34622 COMMISSIONER WILSON: I'm sorry. I hope you don't misinterpret my joking as not taking this very seriously -- which I did.

34623 Okay. Your exhibition. And here is where you departed from the 1997 framework -- in quotation marks.

34624 You said that the ratio of Canadian-to-non-Canadian feature film would be -- you used the right ratio, 1-to-20, but you added the word "new" Canadian films.

34625 MS McNAIR: We didn't mean to add the word "new" Canadian films.

34626 COMMISSIONER WILSON: Okay. So that includes old Canadian films as well.

34627 MS McNAIR: One to 20 for all Canadian films.

34628 COMMISSIONER WILSON: Okay. Then you added another element that didn't appear in any of the other VOD licences that we authorized in 1997, and that was the non-theatrical -- the 1:20 ratio for non-theatrical.

34629 MS McNAIR: I think there was quite a bit of confusion over our 1:10 ratio for non-theatrical.

34630 What we had intended -- and I think we clarified it in our reply to Astral's intervention -- was that we intended the 1:10 ratio to apply to all other titles.

34631 COMMISSIONER WILSON: Okay. So you are going to go with feature film and non-feature film, and it is 1:20 for feature film and 1:10 for non-feature film.

34632 MS McNAIR: That's correct.

34633 COMMISSIONER WILSON: I was just wondering what your rationale was. When I looked at what you defined as non-theatrical, I was wondering if there was some rationale for suggesting a lower level of Canadian content for those particular categories.

34634 MS McNAIR: No. We redefined or we revised our definition in our reply to an intervention.

34635 COMMISSIONER WILSON: We have talked with some of the other applicants about the possibility -- particularly when you are looking at potentially 35 per cent of your service being non-feature film -- the possibility of requiring a higher level of Canadian content for your non-feature film. What is your view of that?

34636 MR. ROBERTSON: At one point the question was posed as perhaps a balancing act between the length of the term and how much flexibility we had into some of these things. We kind of like the idea of perhaps a shorter term but a maximum period of creativity to establish this marketplace.

34637 So I guess in specific answer to your question, we would propose that we maintain the 1 in 10, and if we want to see how this marketplace unfolds on a more timely basis, perhaps limit the term of the licences to, say, four or five years.

34638 It seems that during that time we don't expect that any major issues could be created with respect to this business cannibalizing any existing pay or specialty services in a huge way and, in light of that, we think that the notion of strict regulation should give way to maximum creativity.

34639 COMMISSIONER WILSON: But if we did feel compelled to require a higher level, what would that level be?

34640 MR. ROBERTSON: If you were that compelled you would probably let us know. I'm just kidding.

34641 We did hear a figure of 1 in 5, but I think that is a lot, you know. Although there is obviously great Canadian content out there in series programming that get us on the new pay and specialty applications up to 60 per cent -- 50 per cent or 60 per cent in the early going -- these aren't necessarily programs that are going to drive single purchases on a video on demand basis. Although, I guess if you applied a 5:1 ratio it would make everyone work really hard to try to find options.

34642 But, again, to your original question, we would be more supportive of maintaining the 10:1 and then limit the term. That would be our point of view.

34643 COMMISSIONER WILSON: Okay. So you are not going to give me an answer. You are going to stick to your answer.

34644 That's okay. I am just looking for a range of options here, because, after sitting down and discussing how we were going to approach it, I would rather have on the record from you what you thought was manageable, rather than saying: No, the 1:10 ratio is what we want, and we want a shorter term. And we say: No, we are not going to do the shorter term, and we think we can go a bit higher here.

34645 As the potential operator of this service, we need you to give us what a good answer could be to that.

34646 MR. ROBERTSON: That is a very clear question and it deserves a fair answer.

34647 One in seven.

34648 COMMISSIONER WILSON: Thank you.

34649 The 5 per cent contribution to the fund -- and, again, I am sure that you have been listening to the various approaches. Cogeco said 5 per cent of the $6, and Rogers has said 7.5 per cent of the retail price. Can you explain to me -- and we are talking now about a service where the BDU and the service provider are integrated -- what is your approach? How do you get to the 5 per cent, and 5 per cent of what, basically?

34650 MR. HAGGARTY: Maybe I can help. Back to page 70, where we refer to our revenue model, the model that we used there -- and it reflects too in our 5 per cent -- is based on the revenue that we actually realize.

34651 So it is 5 per cent on all of our revenue.

34652 COMMISSIONER WILSON: So 5 per cent of the revenue that comes to the BDU and VOD --

34653 MR. HAGGARTY: It's 5 per cent of the revenue that is paid by the BDU to us, the VOD licence holder.

34654 COMMISSIONER WILSON: Okay.

34655 MR. HAGGARTY: They hold their piece -- in our case it's one-third -- and they pay us the two-thirds. That is our revenue.

34656 COMMISSIONER WILSON: Okay.

34657 MS McNAIR: That is the same model that is used in pay per view, where the BDU collects money, and there is 5 per cent on the total revenue payable by the BDU. And we, as the pay per view operator -- if it is a third, a third, a third split -- get two-thirds to us, and we pay 5 per cent on our one-third and also the one-third we have to remit to the rights holder.

34658 So we are proposing the same model under VOD because we will be serving all types of BDUs.

34659 COMMISSIONER WILSON: With respect to French-language films, you said in your response to deficiency questions that, first of all, you didn't apply for a bilingual service. It is an English licence that you have applied for. And you said that you don't intend to run a fully bilingual, English-French service, but that on occasion you would like the flexibility to run a French-language film in its original form.

34660 How does that fit into your plans? If you are not a bilingual service and you are marketing yourself as an English service to BDUs that serve a demographic that is predominately English speaking, why would you run a French-language film in its original form?

34661 MR. ROBERTSON: One approach could be the French-language film in its original form sub-titled, and another approach could be that the same film, as we have heard from other applicants, could have multiple soundtracks and, as such, could make an alternate language version available of the same film, that would presumably be dubbed into different languages.

34662 The great thing about this technology, and just the growing choice that is available in movies, is that while the preponderance of movies will be the big English hit movies, there are also lots of opportunities for experimentation and trying new things, and offering alternate language programming is something that could really add to the variety and diversity that is provided.

34663 So while it is an English-language application, we think that there are intriguing opportunities to provide alternate language as part of the overall service in some measure.

34664 COMMISSIONER WILSON: Do you think that VOD operators should be required to offer minimum amounts of French-language programming?

34665 MR. ROBERTSON: We didn't expect so. But our particular model goes region by region, so we are going to be operating in many different situations, in different partnerships, with different BDUs, and in the region that we are providing a solution and working in partnership, if there is a demand for an alternate language service, whether it is French or Italian or Chinese, we could provide those alternate language elements to the service overall to make them available.

34666 So I think that --

34667 COMMISSIONER WILSON: I don't think you actually -- when you filed your application, you didn't actually include that sort of vision of how the service would operate.

34668 MR. ROBERTSON: No, because we, presumably, would have -- an English-language service is what we applied for. But just in terms of the overall variety of the type of programming we offer, we did, I believe, mention third language programming, and that would extend to French or whatever the secondary language of the area would be.

34669 COMMISSIONER WILSON: You said in your opening remarks that you believe the ability of existing pay per view providers to migrate to VOD offerings is critical to their future survival, and we have been asking other applicants the same thing and they have essentially said that both pay per view and VOD can survive, most likely on a cable system, or a DTH provider, for example. The DTH provider of the technology is a different issue, but let's say we are talking cable, on a cable system that was built out to 750 mHz, where they had lots of capacity, they could still carry both services and both services could survive. Is that not your opinion?

34670 MR. ROBERTSON: There is a short to long-term consideration here. Clearly, over the next, say, five years, we expect that pay per view and video on demand will comfortably co-exist and will find an approach that works together.

34671 I think that once these video on demand systems are deployed liberally they could completely pull the movie business from pay per view into video on demand and leave pay per view with just the live events part and sports part.

34672 Now that is a good business, but basically, in that model, fast forward, half of the revenues that currently exist on pay per view could be migrating to VOD. So it is of concern.

34673 We are certainly here today to make sure that any way we can get involved in this marketplace, we would like to be part of it. Whether that is as a supplier of programming and program services to the BDUs or whether that is providing a turnkey solution for some of the smaller operators, we have skills in this area. We have things that we can bring to bear. If there is going to be a migration of revenue, we would sure like to try to hold on to some of that.

34674 COMMISSIONER WILSON: Sort of like the "if you can't lick `em, join `em" strategy.

34675 MR. ROBERTSON: That's it. And we are not here to stand in the way of progress, but we would like to take part.

34676 COMMISSIONER WILSON: Let me ask you this one final question. This has to do with the argument that has been made by the other three applicants, all of whom are broadcast distribution undertakings. You are not.

34677 Their argument is that only BDUs can do this. Shaw has a licence for VOD already. Who is going to carry you?

34678 MR. ROBERTSON: We have pondered this a lot. We see it in two different ways. One, first of all, in terms of the large BDUs, we believe that there is a valid role for us to play in terms of program aggregation.

34679 This idea of a program aggregator really takes the skills that we have developed through the pay per view side in terms of managing relationships with the rights holders in Canada and the U.S. and managing those rights to be sure that the appropriate number of plays, for example, are taken on a movie and tracking it and monitoring it, the kind of versioning and encrypting that's required on the programming content.

34680 These are the sort of processes and systems that we do every day as part of our pay per view licence.

34681 Certainly, some BDUs will say: Well, we can do these activities ourselves and we don't really require that sort of service, but with others they may find that service of value and the fact that we will handle the relationships with the program distributors as being a benefit. So that's the sort of role that we see as possible with the larger BDUs.

34682 Now, when you get into the smaller or medium perhaps we could do even more and be more involved in terms of the server technology and how it works.

34683 Perhaps I will ask Malcolm to build on this because we really do provide 48-channel servers in some of the existing centres. Maybe, Malcolm, you could build on that.

34684 MR. KNOX: We see VOD, as Paul has described it, as a natural extension of what we do today. For instance, we helped Rogers launch a 48-channel pay per view system in Vancouver. We created the server, developed the software for the system. We schedule it. We do all the encoding of the programming. We send the content to Vancouver. It's a relationship that has worked very well and in many ways is an example of the sort of relationship that would work for VOD.

34685 We have a similar situation occurring with Shaw. They are currently running 34 channels of pay per view in Alberta, soon to move to 50. They have installed a similar system on Vancouver Island and later in the fall in Kelowna will be providing the same sort of service to them. We do the schedule. We look after all the content, contracting, encoding. We send the programming to them via fibre. It goes into the server and out it goes for pay per view.

34686 So, you know, if it's a pay per view server or a VOD server the functions that we are describing are very, very similar.

34687 COMMISSIONER WILSON: But I guess what I am trying to understand is we have four applicants for VOD; Rogers, Cogeco, Videon, they are not going to carry your service. Right? They are going to carry their own service.

34688 MR. ROBERTSON: They are going to be licensed, if they are successful in this process, so they wouldn't require someone else, a licensed service to provide that service. But there may be elements of what they do that we could provide programming services to.

34689 I think, importantly, if you look to the other side of the fence, the BDUs that don't have a licence, there are still a lot of them and then in the context of those that don't have a licence we could be their licence service and provide a service for them.

34690 COMMISSIONER WILSON: But if they are not digital they can't offer this service to their subscribers?

34691 MR. ROBERTSON: That's correct, but if they were desiring of going to a digital platform and were looking for a way to do so on a cost-effective basis that shared the cost with others, that's a role we could play.

34692 I think that while we appreciate that the large BDUs have a huge stake in the evolution of video on demand and no one here really argues with their contention that video on demand is a service that needs to be highly integrated with the BDU's operation. So we agree with all that.

34693 What we are saying is that we believe that we have skills that can be brought to bear on this market and that we have a role to play, particularly among those that don't hold the licence we could be their licensed -- we could provide a licensed service to them.

34694 COMMISSIONER WILSON: Thank you.

34695 Those are all my questions.

34696 THE CHAIRPERSON: Thank you.

34697 Commissioner Williams.

34698 COMMISSIONER WILLIAMS: Good evening, Mr. Robertson, panel members. In your application you discussed the convenience of watching a movie and having the opportunity of buying the sound track half-way through. Do you think significant revenue streams can be developed by selling products or service to VOD subscribers with some sort of impulse shopping capable interactivity? That's one part of it.

34699 Also, are you considering packaging options that would include themed products for sale as part of the VOD feature ordered? You talked about a James Bond movie. Maybe half way through instead of ordering the sound track maybe you order a BMW or whatever he happens to be driving in that particular movie, and given these two questions should the Commission consider changes to the regulations to facilitate this type of opportunity.

34700 MR. ROBERTSON: First of all, we think that there is a valid revenue stream that would come from the e-commerce associated with video on demand service.

34701 We also believe that the uncommercial view of the movie or the program that is being presented is absolutely key. So I believe that the Commission's approach to this has been that all of the video on demand services would be approved as non-commercial entities and we would support that that's the appropriate thing to do.

34702 While you may be interested in buying something from James Bond, you wouldn't really be interested in having a break right in the middle of the movie to tell you about it. These sort of offers, we would expect, would be available on an encrypted basis and be accessed through further data streams at the choice of the viewer.

34703 So they don't interrupt at all the programming. They just are available in other ways.

34704 COMMISSIONER WILLIAMS: Thank you. That's my question.

34705 THE CHAIRPERSON: Mr. Robertson, maybe it's late, but I haven't understood why you are applying for a licence, a VOD licence when Shaw has a licence already and when the other large -- presumably the other large cable operator is in a position to offer VOD we will all have one as well, why we need to issue another one.

34706 Your answer, the part that I understood at least, was that you could as an aggregator with your expertise and experience, et cetera, provide certain functions which you are already providing to Rogers I assume without the need for a licence. So why do you need a licence if the answer is that it's to provide certain functions that you are already providing, presumably because they don't fall within the parameters of what requires a licence? I don't understand.

34707 My understanding to date has been the reason why we should allow cable operators to each hold a VOD licence is because that's really the only commercially viable way to do this because of the infrastructure and the arguments are quite -- and the costs, et cetera, are quite convincing, but suddenly we get a programming company wanting a VOD licence when its parent company already has a licence and it's the distributor. I don't understand.

34708 Does Shaw -- well, I suppose you are not speaking for Shaw is what you are going to tell me, but don't they intend to implement their licence since we're patterning the licences that people want to get now on the licences granted in 1997, including one to Shaw? Perhaps you can expand on why you need this licence in the circumstances.

34709 MR. ROBERTSON: First of all, there are really two different models. The one model that you are suggesting -- that we are suggesting is that we would work with licence holders to provide certain services and you are absolutely correct. In that scenario we would not require a VOD licence.

34710 But we are also suggesting there could be an additional role to us and that is providing an end-to-end video on demand service in association, in partnership with a smaller cable company, BDU. We have just got a short list of BDUs that don't have VOD licences and haven't applied for one. It's quite a long list and we believe that there is an opportunity there for us to be their licensed holder and to provide them with a turnkey VOD solution. So it's those two parts of the puzzle.

34711 THE CHAIRPERSON: The first part I assume you don't think you need any authorization from us to do because my understanding is you are already doing it. Right? Providing these services, so that's one model.

34712 In the other model then, would you be prepared to be limited to providing VOD services only to small cable operators as a turnkey operation?

34713 MR. ROBERTSON: I think by its very nature we are saying that we would be limited to providing VOD to BDUs that don't have a licence.

34714 THE CHAIRPERSON: Well, assuming that Shaw doesn't intend to operationalize or deploy its 1997 licence, which would be -- well, I am just curious about why we have a licence there that hasn't been deployed and a company in the same family in light of what we hear from other operators feels that it has to have a licence. Presumably, if it is not viable to give VOD licences, except to cable companies, how viable is it going to be to offer a turnkey operation to small cable operators as a middle person, so to speak?

34715 MR. ROBERTSON: The straightforward answer to your question with respect to Shaw is that as structured as separate companies we really don't know what their intent would be in this area. We are partners with them on pay per view and we provide an important service to them.

34716 It certainly would be our wish to continue to be partners with them and provide a service on video on demand, but given that this is an evolving marketplace and they have an existing licence arrangement on video on demand that that may not be possible.

34717 THE CHAIRPERSON: Well, to my question would you be prepared to accept a licence that said that you would only offer VOD services to a certain type of distributor and not one that serves a very large part of the country when it already has a licence?

34718 MS McNAIR: If I could maybe jump in here because the other pay per view operator in the east, terrestrial pay per view operator obviously holds a VOD licence that was issued in 1997. Global as part of the WIC transaction holds a VOD licence that was authorized in 1997.

34719 So I think that particularly for us we feel as pay per view operators we have the expertise and the aggregation that we can be a value added and perhaps in even some of the larger systems of MSOs will provide services. They might not be licensed, but as digital technology rolls out we think it's important that we are able to play a role where we can play a role.

34720 I think we would be uncomfortable limiting our scope of licence to certain sizes or types of BDU undertakings because an opportunity may present itself that we would want to be able to respond to.

34721 THE CHAIRPERSON: I don't understand. Eastern Canada, if VOD is implemented in eastern Canada isn't that Shaw territory now with regard to cable?

34722 MS McNAIR: Eastern Canada?

34723 THE CHAIRPERSON: Well, a large part of it. The cable subscribers receive service from Shaw, don't they? Oh, maybe not after -- but then it will be western Canada. It doesn't make much difference.

34724 The result is that we have granted a licence to a large cable operator which is in the same corporate family and now another member of that family is applying for a licence as well, on the same day that we are told by cable operators that the best way to make this a viable proposition is to allow cable operators to hold the licences.

34725 MR. ROBERTSON: We understand your question and really I think we look at this problem from the standpoint of being a structural separate company with a pay per view licence.

34726 In that context we see that what's going to happen over the next few years is all the movie business is going to go from pay per view to VOD and that Astral in the east have a VOD licence and we don't have a VOD licence in the west. We are thinking we are going to find every opportunity we can possibly find to take part in the movie business as it evolves to VOD. That's what we have to do.

34727 THE CHAIRPERSON: Yes. The part of the equation that is difficult is the argument that the industry is making to us that cable operators have to hold licences for VOD and you are saying, no, that this is not an opportunity for you. However, this opportunity is conditional on having the freedom to offer it directly to a cable operator, other than the ones who hold the licence for VOD.

34728 Commissioner Williams.

34729 COMMISSIONER WILLIAMS: Mr. Robertson, in your opinion if the licence that Madam Wylie has been referring to has not been deployed and the service isn't in place, would this present an opportunity to your company, to Corus, to perhaps provide services to that BDU which would tie you directly to a BDU which would make your service -- answer some of the service viability questions that Madam Wylie is raising?

34730 MR. ROBERTSON: We would hope that that would be an important option for us, but we would be misleading you if we said that we have finalized any such arrangement. We just hope as this unfolds that that could be one of the options, yes.

34731 COMMISSIONER WILLIAMS: Thank you.

34732 THE CHAIRPERSON: Commissioner Demers.

34733 COMMISSIONER DEMERS: Thank you.

34734 I don't want you to leave without my question. You have indicated that you have filed an application for an English-language VOD and that you would have the occasional French-language film.

34735 In what sense would some sound tracks in French, where it exists, would be available on your system or your service, would change it from an English-language service?

34736 MR. ROBERTSON: We understand that there is a certain number of feature titles that do have alternate language and many of them in French. We have heard that that number is up in the 25 per cent to 30 per cent range.

34737 If indeed we can deploy the appropriate technology, we would make every effort to give the opportunity for the subscriber to select the alternate language that they would wish to view the title in.

34738 COMMISSIONER DEMERS: Thank you.

34739 I understand that you may be getting your films from the same source as other people who have applied for the same service are getting theirs, I understand. Thank you very much.

34740 THE CHAIRPERSON: Counsel.

34741 MR. McCALLUM: Just a quick question on the revenue splits again. If a subscriber paid, and let's just take an example, $6 for a movie, what would you think of the approach of deeming the VOD gross revenue for the calculation at a fixed 50 per cent of that amount, say $3 of the $6? That's in relation to the calculation of the 5 per cent contribution?

34742 MS McNAIR: Because we are a structurally separate company and not incorporated into a BDU, I think that the monies actually paid to us would be easily discernible. We think that our share of the split, plus the rights holder, as is the normal formula, would be the appropriate condition for us.

34743 MR. McCALLUM: So you are saying that it should be -- I think it's $2.64 that appears on page 70, as opposed to the $3 that I just asked about?

34744 MR. HAGGARTY: If I may just clarify, the $2.64 is a percentage of $4, so in your example it would be $4. So the $6 retail price, the 5 per cent would be based on $4, two-thirds of $6.

34745 MR. McCALLUM: Would your answer be any different between Shaw systems and non-Shaw systems?

34746 MS McNAIR: No.

34747 MR. McCALLUM: Now, where and when would you plan to implement this licence if it is granted to you?

34748 MR. ROBERTSON: We would be prepared to implement it within six months and that would depend, though, on the relationships that we would develop with the BDUs and would be dependent on the technology deployment of our partners.

34749 MR. McCALLUM: I am sorry, I am still a little confused about the page 70 because I see the figure of $2.64 in the column there. What I thought I understood from what I see on Schedule 28 is retail rate of $4, less 33 per cent for revenue split. I just am not clear on what amount you are basing your calculations on.

34750 MR. HAGGARTY: Maybe the confusion surrounding the $6 price that has been cited earlier, in our left-hand column we refer to a retail rate of $4. So we took two-thirds of that, being the $2.64 and we would assess or the 5 per cent would be based on that $2.64.

34751 So if using your $6 example and not the $4 retail price, two-thirds of $6 would be $4. So in your example we would assess the 5 per cent on the $4.

34752 MS McNAIR: But rather than deeming, I mean I guess maybe if we are going to get splits at a third, a third, a third, us adopting the deeming model of 50 per cent would be to our advantage, but I think splits are something that are negotiated between the parties now. I think as a programming licensee it's very easy for you to discern how much money we actually get out of operating the VOD undertaking. We would propose the same model as currently exists, that it would be the payment to us and the payment to the rights holder that we pay our 5 per cent on.

34753 MR. McCALLUM: Thank you.

34754 THE CHAIRPERSON: Thank you very much.

34755 We will call an end to today and resume at 8:30 tomorrow morning to hear the two pay per view applications and the interventions, as well as the replies.

34756 So we may see you again, Mr. Haggarty.

34757 Nous reprendrons demain matin à 8 h 30 et bonsoir à tous.

--- Whereupon the hearing adjourned at 1935, to resume

on Thursday, September 7, 2000 at 0830 / L'audience

est ajournée à 1935, pour reprendre le jeudi

7 septembre 2000 à 0830