TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
MULTIPLE BROADCASTING AND OWNERSHIP APPLICATIONS/
DEMANDES DE SERVICES DE RADIODIFFUSION MULTIPLES
ET DE PROPRIÉTÉ MULTIPLE
Centre de Conférences
September 18, 2000
le 18 septembre 2000
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
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Toutefois, la publication susmentionnée est un compte rendu
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participant à l'audience publique.
Canadian Radio-television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Multiple broadcasting and ownership applications/
Demandes de services de radiodiffusion multiples
et de propriété multiple
BEFORE / DEVANT:
Chairperson of the
Commission / Présidente
Commissioner / Conseillère
Commissioner / Conseiller
Commissioner / Conseillère
Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTES:
Hearing Manager and
Secretary / Gérante de
l'audience et secrétaire
Legal Counsel /
Centre de Conférences
September 18, 2000
le 18 septembre 2000
TABLE OF CONTENTS / TABLE DES MATIÈRES
APPLICATION BY / APPLICATION PAR
1406236 Ontario Inc.
INTERVENTION BY / INTERVENTION PAR
Canadian Cable Television Association (CCTA)
Canadian Cable Systems Alliance Inc.
Hull, Quebec / Hull (Québec)
--- Upon commencing on Monday, September 18, 2000
at 0900 / L'audience débute le lundi 18 septembre
1 LA PRÉSIDENTE DU CONSEIL: Bonjour mesdames et messieurs. Good morning. Welcome to the public hearing to consider an application by BCE Inc. to acquire CTV Inc.
2 This hearing will also consider an application by CanWest Global Communications Corp. to acquire the assets of Montreal television station CJNT-TV, and an application to renew the broadcasting licence of Toronto Campus Radio Station CIUT-FM.
3 Je m'appelle Françoise Bertrand, Présidente du CRTC et je présiderai cette audience.
4 Se joignent à moi pour former le comité d'audition David Colville, Vice-Président, Télécommunications -- je n'ai pas besoin de vous dire qu'il est sur le podium. Vous le reconnaissez immédiatement. Andrée Wylie, Vice-Présidente, Radiodiffusion que vous avez vue pendant quatre semaines lors de l'audience des signaux numériques. Martha Wilson, qui faisait aussi partie du panel, qui est conseillère pour l'Ontario, ainsi que Mme Andrée Noël, conseillère pour le Québec.
5 J'aimerais également vous présenter le personnel du CRTC qui nous assistera pendant l'audience. Lynne Poirier, Gestionnaire de l'audience et Secrétaire; Karen Moore, Conseillère juridique principale; Gino Grondin, Conseiller juridique; Robert Ramsay, Coordonnateur de la demande de BCE; André Campeau, Coordonnateur des demandes concernant CJNT et Steve Parker, Coordonnateur des demandes de CIUT. Diane Richer sera responsable de la salle d'examen. Veuillez vous adresser à eux si vous avez des questions sur la procédure.
6 Nous sommes tous conscients du fait que partout dans le monde, l'industrie des communications subit une restructuration profonde. L'innovation technologique a permis d'abolir les frontières intérieures et inter-sectorielles qui existaient jadis entre les secteurs des télécommunications et de la radiodiffusion. Nous assistons donc à une vague proposée de fusions et d'acquisitions.
7 Nous sommes donc ici aujourd'hui pour examiner le projet d'acquisition de CTV par BCE. Il s'agit d'un jalon important pour l'industrie de la radiodiffusion canadienne puisque c'est la première fois qu'une compagnie de télécommunication canadienne, Bell Canada Entreprise, demande l'autorisation d'acheter un radiodiffuseur conventionnel, CTV.
8 The proposed change in ownership would give Canada's largest telecommunications company withholdings and broadcasting, satellite distribution, a direct-to-home service and a satellite relay distribution undertaking, effective control of one of Canada's largest privately owned English language national television groups with conventional television operations across Canada and a significant presence in the pay and specialty television sector.
9 Approval of this application would result in the consolidation of telecommunications and programming undertakings under the corporate umbrella of BCE.
10 Consequently, this is an important proposal with many ramifications for the communications sector. If approved, it would affect Canadian consumers, viewers, broadcasters, creators and telecommunications companies alike.
11 At this hearing, we will try to determine what the potential impact of this proposed transaction would be on the Canadian broadcasting system. Will the combination of broadcasting and telecommunications under one corporate umbrella support and enhance Canadian broadcasting choices and voices, and if so, how? We have questions concerning the effect of this transaction on CTV itself. How will this transaction affect CTV's conventional television service and specialty services with respect to both programming and transmission? How will the proposed priority programming benefits impact CTV's Canadian programming? What are the implications for Canadian programming as well as national and international distribution?
12 At this hearing, the Commission will also examine the issues of cross-media ownership and vertical integration, and we will consider the advantages and disadvantages of strong, vertically integrated communications companies, their impact with respect to distribution and specialty services and how to best use the benefits to the system from those consolidations.
13 In summary, as could be expected, given the overall context of rapidly changing technologies, a trend toward mergers and conversions, and given the significance of the proposed transaction before us, this panel will have many questions.
14 But as we consider the proposed transaction, our most pressing concern as ever is how to best serve the Canadian public interest now, in the year 2000 and beyond.
15 Le comité d'audition examinera ensuite une demande présentée par une filiale de CanWest Global Communications Corporation en vue d'acheter la station CJNT-TV de Montréal. Canwest Global continuerait d'exploiter cette station de télévision suivant la formule ethnique mais à l'égard des conditions de licence de CJNT, elle propose des modifications et des suppressions.
16 Ces modifications sont énoncées dans l'avis public annonçant la présente audience et portent sur le pourcentage d'heures consacrées à des émissions à caractère ethnique. La diffusion de films étrangers, le nombre de groupes ethniques et linguistiques distincts desservis et les niveaux de contenu canadien.
17 La requérante a aussi demandé que la distribution de CJNT-TV soit obligatoire et soit intégrée au volet numérique des entreprises de radiodiffusion titulaires de Classe 1 et 2 et à celui des entreprises de SRD et de SDM de toute la province de Québec.
18 Le Conseil aura certaines questions à poser à la requérante au sujet des modifications proposées, notamment comment elle prévoit refléter les préoccupations et les questions locales dans la programmation de CJNT, combien d'émissions originales CJNT a-t-elle l'intention de produire et de diffuser et quel sera le niveau de contenu canadien.
19 Le Conseil voudra aussi discuter de l'ensemble des avantages intangibles du projet de distribution obligatoire et du sous-titrage.
20 Finally, this hearing will consider an application to renew the licence of CIUT-FM, a Toronto Campus community radio station. The licence expires on February 28th, 2001.
21 The Commission notes the apparent non-compliance of CIUT-FM with radio regulations concerning the amount of Canadian music content as well as the provision of logger tapes and music lists. The Commission expects the licensee to show cause at this hearing as to why a mandatory order requiring the licensee to comply with the radio regulations 1986 should not be issued.
22 J'aimerais maintenant aborder certains aspects de la procédure. L'audience devrait durer trois jours. Nous commencerons par examiner la demande de BCE puis celle de CJNT-TV et celle de CIUT.
23 Each of these three applications will be heard in the following order. In the first phase, we will hear the applicant's presentation. This will be followed in Phase II by the questions from the panel members. In the third phase, we will hear from the interveners.
24 Finally, in the fourth phase, we will hear the applicants' replies to the interventions. Further questions from the panel may follow.
25 De façon à entendre le plus grand nombre d'intervenants possible, le panel pourra ne pas engager des discussions avec les intervenants favorables ou leur poser des questions. Toutes les interventions sont néanmoins considérées importantes aux yeux du Conseil et seront inscrites et versées au dossier officiel.
26 Now, I would like to go over some housekeeping matters with you. The proceedings will be transcribed and placed on the public record. I ask that you turn off your cell phones and pagers when you are in the hearing room. I have done mine. I got caught twice in the past hearing. They are an unwanted distraction for both applicants, interveners and commissioners also. Your cooperation in this regard would be greatly appreciated at all times. I will do my very best to comply!
27 CPAC will be covering the portion of the hearing concerning the application by BCE to acquire CTV via their web site. We will sit for three days beginning at nine. Today, the hearing hours may be extended to allow to hear more interventions.
28 If we have to make other changes to the hearing schedule to finish on time, I will keep you informed.
29 I will now call upon the Hearing Manager and Secretary, Mme Lynne Poirier, to explain the procedures to be followed.
30 MS POIRIER: Thank you, Madam Chair. I don't think I have much to add. You have covered most of it. Except make sure you use your microphone in front of you when you talk.
31 I would like to introduce the first item, which is an application by 1406236 Ontario Inc., a wholly-owned subsidiary of BCE Inc., on behalf of CTV, to effect a change in the effective control of the licensed broadcasting undertakings currently under CTV.
32 Mr. Monty, if you want to start the presentation.
33 Thank you.
APPLICATION / APPLICATION
34 M. MONTY: Merci, Mme Poirier. Madame la Présidente, mesdames et monsieur les conseillers, je suis Jean Monty, Président du Conseil et Chef de direction de BCE.
35 I am pleased to present our application for a change of ownership of CTV. We believe your approval of this application will allow us to contribute positively to the Canadian broadcasting system and to our country's public and cultural life.
36 Let me first begin by introducing the members of our panel.
37 In the front row, centre, is Ivan Fecan, President and CEO of CTV. I am very pleased also that Ivan has accepted to become President and CEO of BCE's newly created Media Division.
38 A la droite d'Ivan se trouve Alain Gourd, président et chef de la direction pour les médias et Jim Macdonald, Senior Vice-President and Chief Media Services Officer of BCE Media.
39 To Ivan's left are Trina McQueen, Executive Vice-President of CTV, and Sheridan Scott, Chief Regulatory Officer of Bell Canada.
40 In the second row, beginning on your right, are Robin Fillingham, Executive Vice-President and Chief Financial Officer of CTV; Kathy Robinson of Goodman, Phillips and Vineberg, our legal counsel and a member of BCE -- excuse me, of CTV's Board.
--- Laughter / Rires
41 MR. MONTY: And Martine Turcotte, Chef principal du service juridique de BCE.
42 With me here at this table is Allan Beattie, Chairman of the Board of CTV.
43 In the audience with us are Brian Aune, the trustee of this transaction, and two members of BCE's Board, Donna Soble-Kaufman and Judith Maxwell.
44 The need for connecting people, for storytelling and shared experience is as old as humanity itself. It is the very basis of culture and of commerce.
45 So what has changed today? Well, at least two things, speed and control. People want more choice in what they see and how they get it. They all want some room to tell their own stories. Whether they are professional creators or concerned citizens, Canadians need Canadian voices and choices and Canadian windows on the world.
46 For a century, BCE and its predecessors supplied telephone services and manufactured equipment, but with the distribution of our stake in Nortel to our shareholders, BCE is becoming a very different company. We will keep providing Canadians with robust, reliable and innovative communications services, but we will do much more. We will bring the world to Canadians and Canadians to the world through communications. It is that simple and it is ambitious.
47 With this in mind, BCE wishes to contribute to the continuing excellence of CTV as a broadcaster of high quality, compelling Canadian content. We are determined to create a future where English-language Canadian programming is as commercially successful as U.S. programming.
48 Vendredi dernier, nous faisions l'annonce avec Thomson et Woodbridge de la création d'une nouvelle entreprise média. Nous ne pouvions démontrer de façon plus claire notre engagement envers le contenu canadien. Malgré que cela ne change pas le contrôle des entreprises dont il s'agit ici, nous tenions à rendre public nos projets avant le début de cette audience. Nous tenons à vous présenter l'ensemble de notre vision.
49 Today we will set out our vision of the future in which CTV is the cornerstone of our media activities.
50 BCE and CTV have much more to offer each other. The CTV talent pool brings storytelling, programming and marketing skills to leverage their creativity of our own distribution experts, application developers and business strategists.
51 The result will be deeper, richer content in the evolving interactive broadcasting world, a wealth of new choices for Canadian consumers, and empowering new platforms for Canadian creators.
52 I would now like to turn our presentation over to the panel, beginning with Ivan Fecan.
53 MR. FECAN: Thanks, Jean.
54 For CTV and for the future of Canadian content, this application represents the best possible outcome, a stable base from which to remain innovative, nimble and creative, an infrastructure to support and add value to Canadian stories. That enhances immeasurably CTV's chances of making a successful transition to the digital interactive world.
55 Before BCE made its offer to acquire all of CTV's shares, nearly 20 per cent of those shares were in the hands of two competitors. With no controlling shareholder, that effectively puts CTV in play.
56 Many wanted various pieces of the company and so we face a distinct possibility that a prospective buyer would want to break up CTV. It is far from certain that the aspects of CTV that make it a valued national broadcasting institution would have survived that scenario.
57 Instead, the arrival of a strong, committed, controlling shareholder makes it possible to realize our dream and create a wealth of Canadian content. In an age where broadcast players are consolidating with each other, this application actually brings diversity in the form of effectively a new player to broadcasting.
58 This is great news for the system, for Canadian creators and for Canadian viewers.
59 I would like to take a moment to describe our dream.
60 Think of a future where Canadian writers and producers can work on what they do best in an appropriate timeframe, knowing that their work will be properly financed, marketed and showcased.
61 Think of an environment in which their productions can be developed with interactivity from the beginning, not as retrofits and add-ones.
62 Think of audiences deeply loyal to excellence, high resonance Canadian choices, and to Canadian windows in the world from the intensely local to the wider world beyond our borders.
63 This application creates conditions which make a huge difference to the realistic expectation of that dream coming to life.
64 Through a history of Commission work, including the convergence decision, you set out a policy framework which allows telecommunications companies to become major contributors to the broadcasting system. Now the time has come to bring that dream to life.
65 This is a critical moment in the history of the Canadian broadcasting system.
66 Dans le monde multi-médiatique émergeant, il devient indispensable d'avoir des entreprises canadiennes fortes et efficaces dans la diffusion du contenu canadien.
67 Notre force chez BCE, c'est la création de nouveaux services, la gestion de réseaux fiables et avancés, le service à la clientèle. Mais si nous voulons être une entreprise intégrée en information, communication et divertissement, nous avons besoin d'expertise en contenu, à savoir le développement, la programmation et le marketing pour attirer les auditoires.
68 Avec sa marque respectée, ses racines communautaires à travers le Canada, son personnel créateur, sa longue tradition de service aux Canadiens semblable à la nôtre, et bien sûr, sa grande force en programmation canadienne, CTV est le partenaire idéal pour nous.
69 CTV's conventional television stations are crucial to attract audiences and generate revenues in the broadcasting system. They still provide the foundation financing for new Canadian content, especially drama. CTV's specialty channels have been designed and managed with imagination and flare.
70 In the last three years its cross-Canada development team has become a valued resource for independent producers hoping to make it in broadcasting. More than 600 supporting intervention letters came from the creative community alone. They emphasize the importance of dealing with experts in the creative process. We feel this talent pool is critical to our future in a converged environment where Canadian content is key.
71 MS McQUEEN: This application includes a benefits package of $230 million and that is the largest in history. More than 92 per cent of it is for the screen.
72 We set out to do something bold and innovative. We wanted to develop a benefits proposal that would make a profound and lasting difference. That was a tall order, but we are very pleased with the results and with the reaction.
--- Video presentation / Présentation vidéo
73 MS McQUEEN: It's true, in the beginning and in the end it is about the viewer. As the Chairperson said in Vancouver this summer, that is the heart of the system. Viewers, as diverse as DNA and snowflakes, each one unique but all of them sharing humanity and sharing Canada. What do they want from television? All of humanity and plenty of Canada.
--- Video presentation / Présentation vidéo
74 MS McQUEEN: The ambition of this benefits package is also worthwhile and it is clear: We want to make successful Canadian television. We define that as popular television, watched, talked about, sought after and, yes, commercially successful too.
75 Canada has no shortage of talent and no shortage of stories. The only thing against us is the force of the North American marketplace, but that is a powerful force and the best and the most loyal are tempted.
--- Video presentation / Présentation vidéo
76 MS McQUEEN: This is our chance to change that reality, a chance to give our talent the tools that they need and have not had. And, at last, to allow them to connect with viewers through the sheer force of their skill.
77 Connection, it is a fundamental image in our civilization. No man is an island. I am a part of all that I have met, and as the fox told le Petit Prince: c'est une chose trop publiée, ça signifie créer des liens.
78 It is a fundamental theme in this application too. A great company that has connected Canadians for 120 years now comes before you seeking to make a creative connection between the artist and the viewer, the journalist and the citizen, the present and the future.
79 The first connection: the artist and the viewer.
80 We asked program creators across the country how we could help make that connection. Here is the consensus. They appreciate and they depend on the numerous funds that help them make television. They do not want another one. They don't want conflicting deadlines, contradictory guidelines, uncertainty, and a patchwork pylon of small pieces of funding.
81 Here is what they do want, as you see on the screen: one-stop funding with substantial licence fees, development assistance, special attention to drama programs and regional programs and lots of promotion.
82 Here is how the benefit package responds. We are proposing $140 million for priority programs with exceptional one-stop funding, $7 million for development, half of the priority programming money goes to drama, $23 million or 10 per cent of the entire package for specific regional programming, and $10 million for promotion and much more.
83 For the viewer this means 175 new original hours of high quality Canadian programming, movies, series, featured documentaries, ground-breaking regional programs, and every year one terrific Canadian party, a spectacular television showcase of our best stars and music.
84 Now for the second connection: the journalist and the citizen.
85 News has always been one of this country's great television strengths and now it is time to make it stronger.
--- Video presentation / Présentation vidéo
86 MS McQUEEN: BCE sees the need for stronger journalism at every level, more foreign bureaus, essential information for our international activities and an encouragement to open-mindedness, and better local journalism and an unprecedented commitment for 15 new local journalists specializing in health, science and technology with a training budget for each one of $30,000 a year.
87 BCE also sees the need for inclusive journalism that reflects this complex and diverse country.
--- Video presentation / Présentation vidéo
88 MS McQUEEN: Our diversity training benefits will encourage journalists like Sachin in their pursuit to the new Canadian stories. They will support a ground-breaking interactive current affairs program for teenagers and young adults and they will strengthen the Aboriginal Peoples Television Network and its unique voice.
89 MS McQUEEN: Here is the third connection: the present and the future.
90 First, with education, research and development. That connects with a future that could be a generation away. BCE has always been a significant supporter of Canadian research and education. Now, as you will see on the screen, our benefits will create a new knowledge map of Canada.
--- Video presentation / Présentation vidéo
91 MS McQUEEN: And there is another connection between the present and future, and that is making sure that there is lots of Canada in our innovative new media.
--- Video presentation / Présentation vidéo
92 MS McQUEEN: As you can see on the screen in a second, the application does embrace convergence with support at every point, from academia, the first ever chair in convergence, and a centre of excellence in new media, and the historic alliance of the Content Innovation Network, regional ITV specialists who help producers make the transition to interactivity, new resources for the Bell Broadcast and New Media Fund, and with interactivity embedded in every on-screen benefit this application connects with new media.
93 The artist and the viewer, the journalist and the citizen, the present and the future. These are the connections that can transform Canadian television, not just for seven years, but for generations.
--- Video presentation / Présentation vidéo
94 MR. FECAN: The stories and the people. It is always about the content.
95 Our application received more than 3,000 positive interventions, words of encouragement from all across Canada and from every group imaginable. We look forward to many partnerships and connections as CTV, with your approval, joins the BCE family.
96 Canada needs strong, competitive, multi-media companies with national commitments and global capabilities -- BCE and CTV. Together we will offer far more than the sum of the parts of this transaction. And faithful to our long histories of serving the Canadian people, we will build on the dream of transforming Canadian television for many years to come.
97 Madame la Présidente, mesdames et messieurs les conseillers, merci pour cette occasion de présenter notre vision de BCE et de CTV. Nous sommes prêts à répondre à vos questions.
98 LA PRESIDENTE DU CONSEIL: Merci de cette présentation. C'est presqu'un son et images. Merci.
99 Je vais avoir le plaisir d'entamer la discussion avec vous. Je vais adresser mes questions d'abord à M. Monty concernant la stratégie de BCE pour qu'on comprenne un peu mieux. Par la suite, j'aurai des questions concernant l'impact sur le stystème de radiodiffusion et je vous suivrai en termes de qui mieux pourra répondre. C'est à vous de choisir.
100 Par la suite, madame la Vice-Présidente Wylie poursuivra avec des questions concernant l'impact sur CTV lui-même; qu'arrive-t-il et pour bien comprendre tant en termes des stratégies de CTV dans sa diffusion et dans sa production. Par la suite, madame la Conseillère Wilson s'attardera aux questions liées aux canaux spécialisés, aux nouveaux médias et à la télévision interactive.
101 Par la suite, M. Colville parlera avec vous des bénéfices tangibles relatifs à la programmation. Madame Wylie reviendra pour vous parler des questions de propriété croisée et Mme Noël complètera sur les questions de bénéfices liés aux éléments, par exemple, de recherche et d'autres éléments que ceux liés directement à la programmation.
102 Alors c'est notre programme qui, je l'imagine, prendra une partie de la journée.
103 Alors tout d'abord, M. Monty, votre stratégie pour BCE, c'est ce qu'on aimerait comprendre. Evidemment on ne veut pas aller dans les secrets des conseils d'administration, mais c'est important, je pense, si on veut bien comprendre l'impact qu'aura cette acquisition sur le système de radiodiffusion, de comprendre ce qui anime BCE dans cette transaction, et pourquoi le contenu devient si intéressant dans l'an 2000.
104 M. MONTY: Merci, madame la Présidente, Mme Bertrand.
105 I guess where we have to start is -- start with two fundamental precepts or beliefs that we have. The first one is that we want to be a portal. We don't only want to be a connection -- an ISP -- an Internet service provider.
106 You have probably seen in our transaction with Lycos -- and we were criticized for having taken so long to put it together -- that the ISP is not a part of that relationship with Lycos. We created a content portal with Simpatico and Lycos. And that is a very strong belief that connectivity is part and parcel of our core competency. But as we evolve we very much believe that we want to be more than just an ISP.
107 I will give you a few more thoughts about that in a second.
108 The second belief is that a broadcaster is a fundamental critical ingredient for us in our quest to be a full participant in the evolutionary process of the Internet.
109 Let me say a few more things about both of these, if I may; first, on the ISP and the desire for us to be more than just an ISP connectivity element of the structure -- of the communications structure of Canada -- and be a content provider, a portal.
110 There is a shift that is occurring among three fundamental elements: one, connectivity, the other one content, and the third one being commerce. If you look back 20 years, connectivity was way up there, where the functionality of the system for decades and decades has been the capability for us to connect and interconnect, give permutations -- a mesh network for people to communicate with each other, whether around their communities, around the nation or internationally.
111 The value of that connectivity, because it didn't exist before, was such that by itself it was worth significant value.
112 As we moved over time we added to that the capability on that traditional network -- narrow band network -- facts. Some did connections of thousands of bauds, thousands of bytes per second, and it still had that value. But over time, with the shift in the capability -- the price performance capability of technology -- and then you add to that the capability to compete with that basic infrastructure. And we have gone through these manifestations here in this room as a company, and it was very difficult for us to move in that new environment. But the price performance of technology has forced all of us to consider that a competitive infrastructure is probably the best way for all of us to get this new technology to consumers.
113 Now, as this occurs connectivity becomes a lesser value and the balance to shift -- the balance of power, the balance of value -- in favour of content and commerce is moving. You only have to look at the market capitalization of media companies, of .coms, of electronic commerce companies, and you look at that in relationship to the straight connectivity players and you see that shift occurring.
114 Now, that does not mean that connectivity is not important any more. You know from the data that you have at your disposal that this year we will be close to spending $3 billion on continuing to invest in the connectivity system of Bell Canada.
115 In addition, we have just invested over $6 billion to purchase the remaining shares of Teleglobe that we didn't own.
116 We will commit -- and we have committed -- to spend on building that global data broadcasting content connectivity of Teleglobe another $5 billion U.S.
117 This is not to mean -- and some people, when I give those comments, turn immediately and say: Geez, connectivity is not worth anything any more. That is not what we are saying. We are saying that connectivity is shifting in the relationship of its value to content and commerce. And maybe in 10 or 15 years from now content and commerce will be a lot more valuable than connectivity, even though it isn't yet necessarily today.
118 That is the first reason for us; the first precept underlying the strategic framework of the enterprise.
119 Now, why a broadcaster? Once you say that you want to be a portal -- and not all companies in the world in the telecommunications business, by the way -- and I should have said that initially -- have decided to be a portal. A lot of American companies in our connectivity world have not decided to be a portal yet. Many Europeans have decided to be a portal however: France Télécom, Dirtcha Telecom -- many others have decided to be in the portal world as well.
120 But once you make that decision, how do you bring content? What is going to be the element of content that will be so important to you? We believe that broadcasting is at the centre of that, even though not exclusive to broadcasting.
121 Why is that? You look at the data in Canada right now as the Internet starts to evolve. Unfortunately -- and maybe I shouldn't say unfortunately, but I will say unfortunately -- a lot of Canadians -- the majority -- the large majority of Canadians connect directly to the American portals, not to our portal.
122 Now, if you look at our portal, Sympatico, versus other Canadian portals, we are way ahead. But if you put Sympatico in the context of a Yahoo!, an AOL, an MSN and others, we are behind. So the reflection goes this way: What are we going to do to make Sympatico, our portal, more relevant to Canadians? Our answer: Make it more Canadian.
123 Canadians want this international connection. That is the Sympatico-Lycos connection. They want the global applications. They want to have the first -- the most leading applications that they can get on the net. We will give that.
124 But how do you differentiate our offering from a Yahoo!, an AOL or an MSN? We give them local content, we give them national content, as well as the international connection.
125 Now you are starting to see why content media, and then evolving to a broadcaster, becomes so important to the strategy I am outlining.
126 Now, obviously, as you move forward, you know today that a lot of the content of the web is written content. It is information. We believe -- and many others, if not everybody else -- that this will move increasingly toward video. The reason for that is that as we see the capability of technology, it is increasingly going to be capable of providing a very interactive world in the video sense. So from an information data Internet world, we are gradually moving to interactive TV -- to a video component. We will bring the net from the home office, the bedrooms of the kids who do their work -- connect with their friends on their PCs from the bedroom, to the living room. As we do that, the centre is going to be a video interactive world.
127 We are not there yet. But for a company like ours, wanting to position itself, not only in connectivity but also in content, and wanting to be the prime ingredient of the content piece of its own service and not somebody else's content coming from other places in the world, we need tools to bring that content to our portal.
128 But we need something as well. As you build that capability, how do you bring the consumer to associate you with content, thinking that content is going to be video? You have to get them to think that your brand is synonymous with content and video. And that is where the broadcasting aspect -- that is where CTV is really taking all of its meaning for us in our strategy.
129 How can we learn to bring that content to these tools -- these technological platforms -- and at the same time build the broadcasting system and associate our brand with the broadcasting system, so that the consumer associates with us as they would with any other content provider, and at the same time build this Canadian connectivity that the broadcasting system does?
130 I was struck re-reading the Broadcasting Act last night, section 3(1)(d)(ii) --
--- Laugher / Rires
131 CHAIRPERSON OF THE COMMISSION: You really want that licence, eh?
132 MR. MONTY: I will read it for you, so you don't have to go to the Broadcasting Act. It says something that, really, we could have said in describing the sort of thing we are trying to do.
"The Canadian broadcasting system should ..."
and that is where we get to (d)(ii):
"... encourage the development of Canadian expression by providing a wide range of programming that reflects Canadian attitudes, opinions, ideas, values and artistic creativity by displaying Canadian talent and entertainment programming and by offering information and analysis concerning Canada and other countries from a Canadian point of view." (As read)
133 That is what we believe in the end is going to be our differentiation against the U.S. portals, and that is the reason why CTV is so much a part of our strategy.
134 CHAIRPERSON OF THE COMMISSION: Thank you, Mr. Monty, but why do you have to own that content? I guess that is the question that is on everybody's lips today.
135 Certainly the Commission has the authority and the responsibility to carry the objectives of the Act in the broadcasting system to make sure that it does happen.
136 Certainly, we will agree with you that it is important, and certainly, we are there for the Canadian broadcasting system and the Canadian values.
137 But why do you have to be the content owner, the content producer? Why can't you be strictly a distributor, like you were already with Bell ExpressVu, for example?
138 MR. MONTY: I think what I'm going to say applies not only to this sort of relationship, but my business relationships. Alliances are inherently unstable.
139 If you are going to produce a service that, over time, will be part and parcel of the value that you deliver to your customers and you do that through alliance relationships and the next day you wake up and somebody else buys your partner, and you build value, you have created a very interesting offering to your consumers, your customers. You have lost significant value that you spent a lot of money and time to create and you have built in your brand that value, and all of a sudden, you have destabilized your environment by having set up strictly an alliance. This is true of building technology platforms with an alliance partner and somebody else buys it. In this case it is content.
140 So if we really believe that it is not only platforms, it is not only connectivity, it is really going to be content, and we do, you have to be part of that content and be involved in developing that content to really change the offerings that you have for your customers, and at the end of the day, you have to own it in order to be able to really say to your stakeholders that this is something that will be part of your proposition and it justifies the time and energy and money required to develop the offerings and the services.
141 THE CHAIRPERSON OF THE COMMISSION: But Mr. Monty, isn't it that the downside of that approach is whatever content is not owned by BCE will not be well served by the BCE infrastructure and the capacity of reaching the Canadians, better serving in the telecom business?
142 MR. MONTY: As we have done in telecommunications, we are both the retailer and the wholesaler. I will give a first example of pure telecoms.
143 We compete with AT&T on the ground and they are our best customer. We supply them telecom capacity. We do that in Telesat. We own 100 per cent of Telesat. But we don't specifically say to others, you can't use Telesat to manage your barge, you can't use Telesat transponders. Only ExpressVu will use them, so go see somebody else. That is against the interest of the shareholder to maximize the value of the investment that has been put out there in developing that connectivity element.
144 So you spend hundreds and millions of dollars to build a satellite, you need 20 per cent of the capacity, who else is going to get the 80 per cent? Well, hopefully, as many people as possible to have a very good asset.
145 So what I am saying here is the same when you get to owning a piece of the content. We are not saying that only our content is going to go on our network. We are not saying that we will provide connectivity to only our portal to customers. As you know, our portal high capacity capability -- or our connectivity, rather, not our portal, but our high capacity connectivity is available to others. We do offer that capability to AOL.
146 So that is not, in the end, going to exclude the capability of others to connect to our network, but it will permit us, in the minds of the retail market level, in the minds of our customers, to see us as part and parcel of the content and see the value proposition, both in the connectivity and in the content.
147 Let me give you one last example. The genius of AOL and why all of this Internet play has become so predominant, in my opinion, -- and it is not only AOL, but AOL is a very good example -- is to have been able to bundle the connectivity in the experience.
148 What we are doing here, -- and the customer says, I don't want to know the differentiation between all of that. I love the idea of having one, and if I have a problem with one side, I talk to the same person as if I had a problem with the other side of that equation.
149 For us, the connectivity between the media enterprise we are trying to create, with CTV at the centre and Bell and its other connectivity players inside our family, is basically the brand, the Sympatico brand. That does not exclude -- and Sympatico, the NISP is Sympatico, the portal in the mind of the customer. So we are in effect stealing a page in AOL's book when we offer the customer a Sympatico service. It is border portal and NISP. That does not mean that another portal could not connect to our connectivity system.
150 THE CHAIRPERSON OF THE COMMISSION: But in the content that you will be owning and that you will be kind of having a closer relationship with, what kind of elements are you pursuing to make it an added value for BCE? You know, what is the intent...
151 You are talking about interactivity as if it was tomorrow. We have spent four weeks hearing about the digital specialty hearing, and given all the projections we have seen, it doesn't seem it is something that will really be happening tomorrow. It might be any time between the three and seven years of a licence that would be granted out of that hearing. So I suppose that you have about the same kind of crystal ball in terms of seeing when it is going to be coming.
152 But in the meantime, you will be a kind of inspiring, I suppose, the content in the sense of making that interactivity happening.
153 So what kind of change will it bring in the meantime to the screen, to the viewer?
154 MR. MONTY: As I said in my comments, initially, Madame Bertrand, I see this very much as an evolutionary process. This is not an event. We are very much like you and probably most everybody else in the world. We don't really know how all of this is going to end.
155 Hopefully, it never will end and there will always be manifestation of improved services and capability for everybody in the world, whether we are Canadians or others.
156 So for us, the issue is not to say we know today what the end-game is going to be. But how do we position ourselves today to be able to participate in the evolutionary process of the Internet, how it evolves from being a print data inter-exchange system to a new communication systems that we all work with, but it is more for data and print, if you will, information, evolving to something probably more immediate than interactive TV is going to be gaming. Simple games is something that is really very close to being something that a lot of people will use on an interactive basis, using the Net and a TV capability.
157 Moving into full interactivity of shows and content, as members of the panel that will be participating in this in a few minutes will describe, we don't even know how it is going to end. But for us to be able to participate in developing the broadcasting element, associate our brand with it, and over years, if not a couple of decades, really be part and parcel of our reflex as an enterprise and how we deal with our customers is really essential, so that we don't say, well, wait 20 years from now and we will really know what it is, we will go and make an acquisition. I believe it will then be too late.
158 THE CHAIRPERSON OF THE COMMISSION: I understand what you are saying and I guess, probably everybody in this room who is watching relates to what you are saying.
159 But somehow, you are, by this acquisition, considering to buy one of the important group in broadcasting. We have the responsibility, given the objectives of the Broadcasting Act, to have an idea of what will be happening to that undertaking in terms of the screen and the viewer, but also, knowing the importance of that undertaking, what it is going to create in terms of impact on the system itself. You know, competition becoming certainly more actual or more severe than it used to be, there will be an impact in terms of looking alike and competing head to head. So that will have a direct impact on the nature of the system. It might be positive, it might be negative or it might be both at the same time.
160 So we cannot just say, we will consider your suggestion that we will go along because you will be learning and it is going to be evolving every day. You certainly have -- Mr. Fecan talked about a dream. You certainly have one and your shareholders too, but you have ideas of what you want CTV and the relationship with that infrastructure to become, and I guess that is what we are trying to get, a better sense that we know what is going to happen to us when we sit down in our living room, waiting for that one-to-one relationship with our broadcaster. In the meantime, what is going to happen?
161 MR. MONTY: I will give the floor to my colleagues in a minute.
162 But just one more comment from me, if I can. We definitely first have in mind to build the best system -- continue to build the best system we can.
163 This starts with the benefits package we have put in front of you. That is a key ingredient of what we intend to do in the very short term with our participation through CTV in the broadcasting system in this country.
164 We have never been part of the broadcasting system. Definitely the capability that we bring as a group, whether it is with technology, financial resources, support, the capacity that the Thomson organization that is going to be part of our partnership, as a minority, a small minority player, will bring, we believe is going to be very strong support for the CTV broadcasting system to continue.
165 But at the very simple level we would like to think that a local TV station in one of the markets of CTV will improve its programming as it proceeds and participates with us to the point where we build our brand at that local community along with other capabilities that we are providing in developing the Internet world that we want to create, whether it is an Internet connection in Calgary with calgaryplus.ca, and a Calgary TV station.
166 How can we get the consumer to see the value of the programming, however enhanced we can put it together in competition with others? How can we build that capability so that it becomes so appealing and compelling that it is great Canadian content and it differentiates our position in the marketplace?
167 Maybe Ivan could add something to what I have just said.
168 MR. FECAN: You have heard from Jean the visionary, strategic and philosophical framework that he has set this particular transaction in and really, I guess, to just focus us to the more immediate, what we are looking at is the impact of moving control of CTV from the market to a strong controlling shareholder and what benefits come forward to the system and to CTV.
169 The biggest benefit I have to tell you: Stability.
170 CHAIRPERSON OF THE COMMISSION: I don't want to be on the territory of Madame Wylie at this point in time, she will be having an exchange with you on the benefit to CTV. I am still at the systemic approach at this point in time, starting with BCE is kind of really trying to achieve through that acquisition and trying to understand what will be the change to the system as a whole.
171 MR. FECAN: I think the system as the whole benefits by having strong competitive players. I think with what we have all seen and what we have all been part of, the CanWest-Hollinger-WIC group and the Rogers group and the Shaw group, this enables CTV to be a strong contributing player in that system by giving us stability. It is a bit of both and I appreciate the overlap.
172 It puts a lot of resource on the table through a benefits package, which I think we will get into as well -- I take your note -- and it really propels us into cross-media innovation through having the connections with an entity such as BCE.
173 I think the system is a beneficiary of all of those things because it adds a forward-looking visionary, long-term committed player, who hasn't been in broadcasting before in any substantial way, at a time when media players, television and broadcast players are consolidating with each other. I think that is kind of an important point. Effectively it becomes a new voice.
174 I think all of this will benefit viewers. I think it certainly benefits producers with the ability of us to not just continue but further our dream and some of the specific things that we will, I am sure, get into later in terms of how that will really benefit producers.
175 You know, the stability thing I have to keep coming back to because I think the system would have been poor if CTV had not survived.
176 CHAIRPERSON OF THE COMMISSION: Thank you.
177 As you point out, we will come back on those, as we will come back at the time of the renewal. I think I didn't make it clear at the outset that we would be talking about maybe the latest transaction that BCE has achieved much more in the renewal of the licence.
178 Here what we are really trying to focus our attention on is really a drastic change. You are pointing out, a telecom company acquiring a broadcasting company, there has to be reasons for it. It is not out of interest strictly of content per se. It is definitely because it fits in the strategy of the future.
179 I guess that is what we are trying to understand.
180 Mr. Monty, when you go back to your board, either in a year from now, 18 months, three years, what will be the indicators that will make you say -- and that they will all applaud -- that you have made a good decision in acquiring CTV?
181 What are the elements for you that helped you sell it to your board and the shareholders, but also, at the same time, that will allow you every six months to go back and say "See, there is progress and we are moving in the right direction"?
182 MR. MONTY: First, that CTV remains number one in the categories it is number one in now, and hopefully even improves further in the categories where they might not be number one today.
183 So how is the broadcasting system that we are putting together behaving in the marketplace against its competitors? How are the viewers -- which is the test of whether you are number one in certain categories or not -- how do the viewers see CTV by itself?
184 Because if we don't build a good broadcasting system with Ivan and his team, how can you then jump to the conclusion that consumers will see it positively in building the brand that BCE and Bell Canada represent?
185 So the first test is going to be: How successful is CTV with its consumer, its customers? You could call that customer satisfaction. We call it that in the rest of our system.
186 At the same time: Is CTV working well with creators, journalists?
187 Is there embedded in what we are creating something where the forces of play together become a contributor to our evolution as an enterprise here in Canada?
188 The second test is going to be: Are we growing the business?
189 In my view, anything that doesn't grow, dies. So if Ivan and his team are not successful in increasingly becoming a growth enterprise with specialty channels, with other tools to bring in front of the customer, it is to prove that they are not relevant. The customer goes somewhere else. Somebody else is more relevant.
190 So the capability to grow the system, to increase its capability to reach, through content, greater audience and grow the base of its business is going to be a second test.
191 Obviously the third test is whether we have been able to help CTV through all of this becoming an even more profitable enterprise.
192 We all know that CTV is a fine enterprise today, but on a profitability basis there is another one system in Canada that is much more profitable than CTV, and through the first two elements that I have just described, the relationship with its stakeholders, journalists, creators, the customer; and with growth can CTV become a more profitable enterprise in order to deliver on its promise, on its dream?
193 That is basically the way we will assess the success of our operation.
194 Now, I have to add to that that as we see that developing, the other test -- but I think I see that as a subset of growth -- is: How does CTV participate in the other elements of the media enterprise we are putting together in helping them grow their business and how do the others help CTV grow its business?
195 That is the Sympatico/Lycos portal. The 19 Internet sites -- not only the Sympatico/Lycos portal itself, there is actually 19. There is probably -- in a year or two or three years -- I think you used three years as a timeframe, there might be 50. Frankly, at this stage I'm not sure how many that is going to be. But how do they work together to improve each other's capability to serve something in a very differentiated way to consumers?
196 I guess the Globe and Mail capability of how we can work the system together and providing even better products and services to enhance the broadcasting capability and service I think will be an interesting set. But I would use that as a subset of the growth of the system.
197 CHAIRPERSON OF THE COMMISSION: But that approach is one that is in line with also -- I read in your deficiencies, and I was a bit shocked:
"Broadcasters will develop the ability have one-to-one relationships with their viewers using methods such as e-mail to communicate directly with viewers... (As read)
198 For example when their favourite programs are on.
199 I thought, isn't this strategy somehow speeding up the breakdown of what is mass media to get into more narrowcasting and eventually almost bringing back the individuality of a telephone conversation?
200 MR. MONTY: Ivan is a much better spokesperson on that topic than I am. He has convinced me that the conventional broadcasting system is far from death. The numbers prove it.
201 However, at the same time as we grow the conventional broadcasting system, there is no question that there is something else brewing out there called the Internet, where a one-to-one broadcasting capability is in the offing, where each one of us could become a broadcaster. But at the same time that this is developing, we think that all of these things are complementary to each other and there is a significant market out there that will continue to request a conventional broadcaster as a source of information and entertainment, and we are convinced of that.
202 CHAIRPERSON OF THE COMMISSION: What kind of content will you be more interested in, because I suppose it is not all content that is equal in terms of creating the kind of growth and participation you would like with other components of BCE from CTV? I suppose there is some specific content that is more susceptible, at least in the first stages of what you see as your dream.
203 MR. MONTY: There are four or five that we see as critically important: entertainment, drama, movies, number one; sports; news. These are the top three. Then you very quickly come to a group of three or four.
204 Career is very, very important as you move forward, finance. Functionalities such as those to help people handle their daily lives. That is pure functionality. But the first three are the fundamental ingredients that we can see moving forward, and that a broadcasting system does extremely well.
205 CHAIRPERSON OF THE COMMISSION: In order to really make sure that the relationship with the consumer is there or the user or the viewer or the user of the Internet, it seems that local content is very important, and the way we have seen it described many times, it is really around weather, traffic, sports, news.
206 What is the real interest you have in developing what has been difficult to develop in Canada? We have to admit, considering our neighbours and their great talent and their great marketing potential -- what is the commitment and your view on the necessity of the content on drama and variety to be developed? What is the link in terms of what you see as the general business of BCE in regard --
207 MR. MONTY: If we are going to be successful in being a participant in the portal, the content side of the Internet, it is going to be because we have differentiated our product in being a Canadian participant, and that is fundamental. I said that in my introductory remarks at the start of your first question. That is both by being a local participant, a national participant, as well as bringing the interconnectivity to the rest of the globe, applications and content from our partner Lycos and others.
208 So when we look at building this electronic marketplace that we are trying to create -- and we now have eight or nine sites -- we want to connect that to event sites and content sites at the local level. That will involve the connection to the local TV station in the system of CTV.
209 But then at the national level there is something that can be done to bring those communities together, the interest that is broader than just the local interest brings the national interest in play -- that is something that again CTV does extremely well -- then the rest of the connectivity, the rest of the content coming from other sources to make sure that Canadians are open to the world as well as having the world look at what Canada is.
210 CHAIRPERSON OF THE COMMISSION: If I am watching this morning CPAC, I may just be concerned about what you just said because when I think about CTV as a viewer I think of an over-the-air type of station, and it is free. When I think of BCE's strategy of an electronic marketplace, I think: electronic market transaction, I will have to pay.
211 MR. MONTY: Don't forget that the broadcasting system as it is evolving right now is profitable as it is. The platform that they have in generating revenue to support their activities is advertising. That is not going to go away. Quite the opposite.
212 We think we can enhance the capability of advertisers to see that platform as a very capable platform to continue to reach their audiences in their segments of the market. So there will be, in our system, in the media enterprise we are trying to create, some segments where there will be a subscription price, a service, where there is going to be less advertising but much more functionality and the consumer is free to buy it or not to buy it.
213 At the same time, we think the conventional broadcasting system, with the advertising base, if we do our job properly, if Ivan and his team does his job properly, we will be able to convince the advertisers that this is something that is really good for their business and will continue to support the broadcasting system because the product that we will have created will be attractive to audiences.
214 CHAIRPERSON OF THE COMMISSION: So as a viewer that means that I will be transformed from being strictly a viewer on the screen to the potentiality of becoming a consumer and I won't have to go and shop elsewhere. I can kind of make my choices. That is what you are --
215 MR. MONTY: That is exactly right. The choice is going to be the consumer's choice. Some will say, "I would rather not get involved and do all of these things that this company is offering. I would rather just sit and look at what CTV has to offer for me, for my entertainment, and I'm not going to use a lot of functionality and I don't want to interact and participate in an interactive broadcasting environment nor use the functionality of the system to the extent that it is being offered." In that environment, we are quite happy to make sure that CTV is the number one network so that we continue to attract the revenues to support the broadcasting system.
216 CHAIRPERSON OF THE COMMISSION: From what we have seen in the hearing on digital specialties, we have seen that the enhanced set-top box will be in in 18 months, so that would bring an enhanced type of Web site and a start on interactivity. Is that the kind of projections you have yourself in terms of what can be happening in interactivity?
217 MR. MONTY: In that respect our competitors have a significant advantage over us because the capability for us to connect to as a wide a market as they have with these different set-top boxes is going to be greater than what we have, because the limitations we have is a rather -- even though growing, and we are quite pleased with the investment, ExpressVu has limited access through DTH, the Canadian segment. The best forecasts are something like 20-25 per cent penetration. If we get 50-60 per cent of that, we will reach maybe between 10 and 15 per cent of Canadians, and right now it is not at that level. I'm talking about the maturity level of DTH.
218 So in that respect, the conventional television system that CTV represents is going to have access to these set-top boxes but not necessarily. It is going to have to be on the basis of how good the value that they create is going to be.
219 Hopefully, our competitors will have the same view as we have, that they accept being a retailer as well as a wholesaler. So, in that context, we will wholesale to them, if you will, in quotes, "through their distribution networks", the content we will create, and we will have our different means to distribute what they will create.
220 So, in that respect, maybe the set-top boxes will occur or will be on the horizon in the 18-month time frame that you talk about. We are totally convinced that our ExpressVu service today provides a significant value and capability to be enhanced, but I think that is something that we will want to work with with our competitors, as they become partners, given the access that we would like to have to their distribution networks.
221 CHAIRPERSON OF THE COMMISSION: But in terms of interactivity, the plans you are having when I talk about that scenario where you go back to your boardroom, are you counting essentially on the Internet itself to kind of bring that additional component --
222 MR. MONTY: We have to right now, because being realistic on our capability through ExpressVu to go directly on high speed and interactivity, the rest of the system -- we are trialing, for instance, right now a VDSL capability on high-speed interconnect for the MDUs, the multiple dwelling units. That is another aspect of how we can reach another segment of the market. Thirty to 40 per cent of the cable market is in MDUs. How can we participate bringing the satellite connection through a high-rise building, an apartment building, and connect with a VDSL type of capability to the units in that MDU system? That would give us the capability to bring a direct connectivity where we could package our proposals -- not our proposals but our offerings.
223 But there again, this would not be exclusive. This would be, in effect, a cable-like type of system with the interactive set-top box that you are referring to permitting us to reach on the connectivity side, but the economics of that proposition are going to be based on the value of the connectivity. What we build in terms of offering, we certainly hope that even if it is not our connectivity system, that Sympatico, CTV, and the other elements of our media proposals and offerings are going to be reached through other distribution channels and not only ours.
224 CHAIRPERSON OF THE COMMISSION: Tell me, if I was to be looking at this proposal from my living room, I would think of a telecom company acquiring a television -- wouldn't there be a concern about technology driving and finance driving the transaction? What real value will it have for me?
225 Because even when we talk about the electronic marketplace -- and you are kind of reassuring me about the fact that I will not be the one paying, at first, because through advertising we eventually end up paying. But yet, if I think of the other aspect, aren't technology and finance not necessarily taking care of my taste and my needs in terms of what I watch on television?
226 MR. MONTY: I think the key is two things, maybe. First, we provide choice. We believe that we will improve the array of choices to consumers by developing -- having the capability -- Ivan calls it stability -- to create. In the end, stability permits creators to provide more choice. We believe that we will be a capable provider of choices against our competition.
227 But, secondly, something which is fundamental to our company -- we do and we have done a lot of research -- we continuously do market research on how customers see us.
228 Interestingly, you are right, we do provide technology, but customers see us mainly as a trusted supplier. Integrity -- strong integrity -- that is the number one attribute of our company. And I believe that if I were a consumer, I hope -- and I am a consumer in certain respects, but I hope that consumers looking at us today -- they say: I trust these people. That is what they tell us now. Maybe they will be a great contributor to the broadcasting system because of the trust we have in them.
229 We do not want to let that go, because at the end of the process the trust brings us the loyalty, and loyalty means multiple purchases -- repeat purchases. And that is how we are in business. Having that trust permits the consumer to buy our product with safety of mind.
230 CHAIRPERSON OF THE COMMISSION: If this transaction is allowed by the Commission, it is very significant in terms of -- for BCE certainly, but for the system. It is a first. It may be a sign of the times, but it will certainly, given the more ferocious competition we are observing -- and I am sure we have not finished observing -- certainly create, by emulation but competition as well, very important changes to the scene.
231 I would like, with your help, to understand better, and I think the only way to understand is -- what you are intending to do, in a sense. Where is your investment.
232 I would like to come back to content. And certainly the benefits are something and we will come back to this. Will your drive be on some content especially? And will that content be thought about with the sense of creating that loyalty with your consumers, the ones of BCE, where it is more the necessity of creating -- based on that trust, I recognize, but still it is to create additional services and additional transactions.
233 MR. MONTY: Certainly. In the end I come back to what I said before. If we believe that the only way to differentiate ourselves --
234 We are a rather small market. Scale is not part of our capability, compared to the market south of us. And other systems, whether they are broadcasting systems, whether they are Internet systems, provide more capability on a pure economics basis -- economies of scale -- to reach the consumer at a lower cost.
235 We think that at the end of the day, if we are to survive and thrive in this market of providing Canadians services, it is going to be through Canadian differentiation and broader scope, so that consumers come to us and come to respect us and trust us for a much wider array of services than straight telecommunications services. That is what we are trying to create here.
236 So we will have, in order to differentiate, through the Canadian pictures, stories that we are trying to put together to invest in that differentiation. That means investing in a broadcasting system and in content development.
237 CHAIRPERSON OF THE COMMISSION: But couldn't we imagine in the new media environment or the new interactive environment, the new digital one, a world where the best of every world can live together, like it was in the broadcasting system of the 20th century?
238 We have always had the Canadian components as well as foreign components, which are the majority -- the American ones. Can't we imagine that going into the digital universe the value will still be Canadian like it was for the broadcasting system, yet it might not be on every note, that you may have some notes that would be purely Canadian and others will be of another nature?
239 MR. MONTY: Very much so.
240 I certainly believe that over time CTV, as a system, by itself, will continue to create programming and distribute programming that will be from other sources around the world. I certainly believe that we need to have the connectivity on the Internet for other types of products coming from other places in the world. That is why the Lycos relationship has been established.
241 And I think that is true of any media. Canadians want to have a window on the rest of the world, but we also, maybe, want to go the other way. And how do we provide the rest of the world with a window on Canada?
242 That is part of that statement that I made, bringing the world to Canadians and Canadians to the world through communication. How do you do both? How do you position yourself, not strictly with a limited window on a region or strictly the country, but a window on the world?
243 And I totally subscribe to what you just said. That will continue. But in order to be able to do that, if you strictly limit yourself to providing a window on the world without providing a Canadian story, a Canadian picture, a Canadian sense of community, in the way you interact with our system, with our marketplace that we are trying to create, I think we would be limiting content and we would go head on with somebody else's capability, who is a lot better than ours at this stage, in building a product and having the economics to do so very competitively against us.
244 So we want to have that Canadian participation as well to differentiate the product, but we will have both.
245 CHAIRPERSON OF THE COMMISSION: Do you think that regard on the fact that it gives a Canadian presence on the global scene -- it is not, as you can see in the objectives of the Broadcasting Act, very specified. Why do you think it is so important today, in proposing today that we should take that into consideration in the assessment of whether this acquisition is value added to the broadcasting system? Why is that important?
246 MR. MONTY: The Internet has changed the communication systems. I was going to say that it has changed everything, but that is going a little too far. But it has changed the communication systems so much that the world is at the doorstep. It is a connection away. And if we do not provide a connection to the world -- I think those who limit themselves to strictly a Canadian asset, or a Canadian contribution, will find that the consumer wants to have access to the world as well.
247 So I think the winners will be those who own the relationship, but are capable of building a relationship in both directions: a Canadian relationship and a global relationship.
248 CHAIRPERSON OF THE COMMISSION: Is your dream one to kind of have a unique and privileged relationship with your consumer; that you are capable of offering all of the services that the communication world, as we define it, starting this new century, is --
249 Is that what you are proposing to do?
250 MR. MONTY: I don't think that is feasible, but it is certainly part of the dream. We think our competitors are going to try to do that. We think that in the end that is the most efficient way for a smaller market to be served by one supplier, to be able to have a larger scope in order to have a one-stop approach to the supplier. And at the end of the day, we think that others will see the same approach to the Canadian market -- other Canadians -- and I believe that is what our competitors are going to do, and we are trying to position ourselves to be able to be a good competitor.
251 CHAIRPERSON OF THE COMMISSION: But if I go back to l'allégorie du Petit Prince et du renard, c'est bien beau tisser des liens, but too many ties at one point make for a kind of golden cage, in a sense.
252 MR. MONTY: Hopefully Canada will never be a golden cage.
253 CHAIRPERSON OF THE COMMISSION: Is there merit -- if you consider diversity of choice, for the Commission, in the objectives of the Act and the necessity to have, really, a wealth of content -- choices for viewers -- that they can really tune in or tune out, decide on which platform they will go, and be free to do this at a reasonable cost.
254 MR. MONTY: I believe that is not going to change. I think what we bring here is the capability to enhance that.
255 You know that we are not in broadcasting today. Therefore, we are not limiting choice by acquiring CTV. We support CTV in continuing to be a voice. And in that respect we are not limiting choice.
256 Secondly, in an Internet world, it would be naive on our part if we said that we are so powerful that we will limit what consumers can do via the Internet. We all know that that is not possible.
257 Lastly, in a 500 channel environment, there is no way that we can think that we will be so powerful that whatever proportion of those 500 channels we would have in our corporate umbrella, that that 500 channel environment would focus the consumer toward our portion of the 500 channel environment.
258 So for us, in this new technology capability that that environment provides, as well as the Internet, as well as the fact that we don't provide -- we don't represent increased concentration at this stage because we are not in the broadcasting system as it is today. I don't believe we limit choices and we say this gilded cage is going to be part of the BCE system. It is basically going to be a contribution to improve choice that we are making as opposed to limit choice.
259 THE CHAIRPERSON OF THE COMMISSION: Mr. Monty, when you are talking this way, I can follow, but I can also be kind of taking another view.
260 When you are saying you are not limiting choice and you are talking about repurposing content, somehow, it might be limiting choice because if you were putting other contents than the one of CTV there, maybe I would have two choices rather than one that is repurpose.
261 Secondly, when you are saying you are not so powerful in the broadcasting universe, well, you are the largest company in Canada and you are in the communication environment at a time where we have seen how the frontiers are blurred and that vertical integration is occurring everywhere. You are even mentioning it yourself. You are alluding to what is happening elsewhere in Canada and outside of Canada, and that famous universe of 500 channels, that is when we talk about digital capacity.
262 But if we talk about Internet capacity, then you talk about eventually a trillion of possibilities, and sometimes, for the consumer, then, what you need -- and you have recognized it yourself about the necessity of branding, you need like a trust somewhere -- somebody you trust that will take you by the hand and kind of guide you. I guess that is what you are trying to offer to the consumer with the combined strength of BCE-CTV.
263 So, you know, there are some concerns, certainly, of what I am kind of taking as a counter point.
264 MR. MONTY: Well, let me continue the counter point, if I can. In order to repurpose content, you have to own some. If we didn't have content as part of our corporate umbrella, the repurposing of content, I am not going to take somebody else's content to repurpose it on something because I don't offer content.
265 So when you say, wouldn't it be better if I repurposed somebody else's content, well, I'm not going to be in that game if I'm not in content to start with, so I'm not going to repurpose somebody else's content because I have no platform to provide it for. So that, to me, would be a difficult proposition to follow.
266 To say that others who compete with us wouldn't want to repurpose their content on different platforms, that, they would do. In that environment, if we didn't participate in the contents side of the evolution of the communications network -- I call it the Internet communications world -- we would be a wholesaler. We basically say we are going to provide connectivity and others will connect to our system and they provide content.
267 So for us to be repurposing somebody else's content, I make the point one last time, I really don't think we could do it if we didn't have a content platform of our own.
268 Now, when you look at how big we are, Canadians think we are a very large company, and we are in Canada. I just looked at the numbers recently and we barely make the 30 top communications companies, and that doesn't include the pure communications players, like AOL, Vivendi and others, even if we include the size of Teleglobe as part of our -- because that transaction has not closed. If you include that, we may be on the 27th or whatever.
269 So you talk size. How does this globalization world, with immediate access to all sorts of communications content for Canadians, play if we don't have a certain number of players that have a certain size to be able to justify the investment required in producing the content and producing the platforms that Canadians will hook up to? I believe that since, even though we are part of the G-7, the largest communications company, being maybe not in the top 30, makes me reflect on how big we are as a company, even though relatively, in Canada, we are the leading communications company, certainly the leading telecom company at this stage.
270 THE CHAIRPERSON OF THE COMMISSION: I recognize that, but given the Canadian ownership rules in Canada and the communications system, still, the presence and the value of BCE is looked within Canada, and in that respect, you are presenting a very large company.
271 I guess the Commission is considering that transaction in terms of vertical integration and certainly, a degree of consolidation definitely and concentration as well and saying, well, we can certainly consider that, but what's in it for the Canadian broadcasting system? That Canadian broadcasting system has to be able to be strengthened. It cannot only be for a strategy of BCE or even CTV per se. It has to contribute to the necessary evolution that we will have to accomplish together, but also, immediately.
272 So maybe we can transfer our attention to understanding better what are your strategies on what you see. Not necessarily the benefits, because that is very quantitative and we can measure that. But to the system, what will it change? The fact that it's BCE acquiring CTV today instead of another type of company like une compagnie d'aluminium or whatever. A large company that would come and give the financial solidity that CTV needs. What difference will it make?
273 MR. MONTY: Why don't I go ahead and pass it to Ivan.
274 MR. FECAN: I understand your question and I will certainly try to answer your question fully.
275 The aluminum company wasn't interested in acquiring CTV.
--- Laughter / Rires
276 THE CHAIRPERSON OF THE COMMISSION: They didn't want to come to the hearing, I guess!
--- Laughter / Rires
277 MR. FECAN: I think the issue of whether a telecommunications company does have something to give in the broadcasting system, I think, was one that was examined very thoroughly in the conversions report.
278 I would like to turn to Alain, because I think, to a very large degree, this possibility was foreseen before, and I think it's useful to re-visit that and then to bring it to the future in this particular situation.
279 MR. GOURD: Thank you.
280 Indeed, in addition to the conversions report, there was also a change in the Bell Canada Act, which allowed BC, Bell Canada, to become a player in broadcasting.
281 At the time, if we look at the debate in the House of Commons, there was a perception that such presence of a new player from the telecom field could benefit viewers, could benefit the players in the system themselves, both broadcasters and independent producers, particularly by having new technology products, and benefit also the new generation of creators because they would be trained not only in producing content proper, but be trained also with the new technologies.
282 So very rapidly, if I focus first and foremost on the viewers, and you have invited us not to focus too much on the net benefit package, but there will be new Canadian content there. But that Canadian content could be of a different nature or could be complementary to the traditional, conventional broadcasting or specialty services proposal by the interactivity. Interactivity would complement in terms of new different contents, new different angles, new information that can be produced to support a program. It could be complementary in terms also of the form -- la forme et la substance, comme dirait St-Thomas-d'Aquin -- in terms of the form with new camera angles, with new visual additions, for example.
283 Also, it would be positive for the viewers because this enhanced Canadian content would be offered to a greater diversity of platforms. Of course, it will be offered to conventional terrestrial transmission. That will continue. Of course, it will be offered through satellite to cable.
284 But again, the expertise that BCE brings to the interactivity could be useful in terms of the CTV content being offered through these platforms controlled by others. It would be content offered by direct broadcast satellite.
285 And again, as we have said during the digital specialty services hearings, the viewers of both Bell ExpressVu and Star Choice will benefit from interactive boxes, interactive capability. There is already a fair number of them in the market place, there will be new ones.
286 But what is a capability without the ability to use and the ability to put the proper content in the proper format in these capabilities? Again, the synergy will be there for the DS platform. Jean mentioned video cell and Jean mentioned the Internet which has a very important distribution capability mechanism.
287 But if we take also the impact on emulation, -- I think you use that word -- the impact in terms of the competitive nature of the market place, it is absolutely certain that if BCE-CTV improve the product lines, improve the ability to deliver Canadian content to the viewers, there will be a response from the others, from the other groups which have a similar mix of capability at both the content and the technology level, whether those like Shaw who is both in cable and broadcasting, subject to your approval, maybe Vidéotron and Quebecor, Rogers and so and so forth.
288 So the competitive nature of the system will trigger continuing innovation, continuing progress for the viewers.
289 Of course, the Canadian producers will benefit from that, because they will be invited by these competitors to produce additional content and to produce it differently. To support the producers, then you have to train the creators in order for them not only to continue to produce these fine Canadian stories, to produce these great images of our country, but to produce them also with the new tools that are being introduced in the Canadian broadcasting system by companies like ours as well as by other companies.
290 THE CHAIRPERSON OF THE COMMISSION: But Mr. Gourd, if I'm sitting in my living room today, watching CPAC and I listen to you, am I not kind of dragged into a digital world, interactive world by the proposal in a more -- comment dire -- plus vitement than I would have been otherwise? Am I not forced, then, to make some investments in order to get full access to what is the proposal that is offered here? I have to at least have a computer, eventually get to a digital distribution, eventually change my television set. You know, isn't there, in what you are proposing, a factor of acceleration toward digital and interactivity, and what is the benefit for the viewer and the consumer? Am I not then dragged into extra expenses? It will cost me more, it will be more complicated. I had already lots of difficulty getting my VTR programmed.
291 You know, what you are proposing and the dream you are talking about is very -- très séduisant, très intéressant. But you know, on a very practical and pragmatic basis, if you are my mother -- and I'm sure she is watching and I won't tell her age. She has asked me not to say it any more. But she is at an age where a VTR is not really what she likes very much. So anything beyond the VTR is complicated.
292 Isn't what you are proposing challenging in terms of the viewer as we know it today?
293 MR. FECAN: I think anything that enhances the viewer experience is a potentially very good thing.
294 While we have been hearing a lot of visionary futuristic thinking, I think one of the other things that needs to be said is that while BCE may have come to the dream from one particular approach, the dream that I have personally had, and many of those in CTV have had, is for breakthrough distinctive Canadian content. This is a dream that we live every day. This is a company with BCE that shares that dream.
295 I think job one for us is to make compelling television programming in prime time. That doesn't change from what it was before, but it is strengthened because we have a controlling shareholder who says "Yes, that is the first thing you have to do. You have to win in the priority programming area, you have to change the paradigm so that the Canadian programming is the thing that drives the broadcast business and is in the forefront."
296 I think that this particular controlling shareholder, matched with this particular team, that is the first job that we really are getting the tools to approach and to do without distraction.
297 You know, we have tried to make it look easy in the last few years, but waking up every day and reading that somebody else is going carve your company up does find a way of splitting your focus a bit. This allows us to refocus our efforts in really working for that system and for the viewer.
298 So while I think it is incredibly important that there is this visionary perspective that BCE brings, and I think it is refreshing to hear that kind of visionary perspective from a Canadian company, we are not saying "Oh, you know, the world is going to pass us by. Everybody else is doing everything else." Here is a company that says "Look, we can take our place in the world. We can take it, but first we really have to do a good job for Canada".
299 That company sees content, Canadian content as an integral part of that strategy. And yes, there are dreams of the interactivity, which is 18 months or so away, and enhancing the viewer experience through Internet connections and everything else, but all of that rests on successful Canadian priority programming and news, of course, and sports as well. All of that rests on that.
300 If we don't have that and if we don't break through there -- and sure we are having our successes. I would be remiss if I didn't point out that last week was a pretty amazing week for us. We had a large number of shows in the top 10 that were Canadian.
301 What is unfortunate about it is there was a game show or two that was up there and there was a certain golf event that was up there, but it takes the focus away from the fact that there was a dramatic program, the two-part miniseries Nuremberg that was also in the top 10 and that the second episode of that program was the highest rated Canadian dramatic show that we have had as a network since 1996 or something. A tough subject, but the viewers were there.
302 All this stuff rests on working harder for the viewers and distinguishing ourselves with really strong Canadian content.
303 That is why there is this really interesting confluence of intention, of strategy that I think is a real benefit to the system, because none of the other stuff is as good if the basic thing that we are here to do with Canadian content isn't breaking through.
304 There are other companies that are strong as well, of course, and that is a good thing. We welcome the competition. But it all rests on the content.
305 I mean, I think that is what we tried to say in our presentation, it is what we live, it is what we believe, and now we have a committed shareholder, controlling shareholder who, for I think the right reasons, says "Yes, it does. And if you break through there in more significant ways there are all kinds of other good things that can happen for the benefit of the viewers, but first you do your job and you break through there."
306 MR. MONTY: Madame Bertrand, if I could just add one comment.
307 I understand what you are trying to get at, and maybe the word "transition" is important in our vocabulary and in our strategy. We fully understand that we are in a transition mode. It takes generations to move the current behaviour, cultural patterns, adaptation to technology.
308 I also have a mother. I didn't tell her I was going to be on the CPAC, and she doesn't even use voice mail. She refuses to use voice mail and a few years ago she decided she would be on touch tone and I was very pleased about that.
--- Laughter / Rires
309 MR. MONTY: For us, the key element of this is realizing that it is a transition. It is a journey. That is why I emphasize the words "evolution process of the Internet".
310 Connectedness is fine, connectedness is unbelievably important for Canada at the cultural level and at the business level, but we fully realize that not everybody wants to have 1.5 megs to their residence. That is why the old system is still there. That is why we have been used to introducing technologies as we move forward. That is why the conventional broadcasting system will remain for those who really don't care about the ITV system that we all talk about for the future.
311 How does a company like ours position itself in that transition, to evolve with it so that ultimately at the end of the journey -- the journey never ends, but at a stage where the ITV system is reality.
312 We are the key component in that play as a participant in Canada. "Transition" is maybe a word that we should use more often in the way we talk about the evolution of our strategy.
313 CHAIRPERSON OF THE COMMISSION: So transition towards transaction is what --
314 Coming back to the idea of the broadcasting system, the same way I was asking Mr. Monty about 18 months from now or three years from now what would be the elements or the indicators for him to explain what had occurred, for you, Mr. Fecan, I will have another question, given your vast experience in the broadcasting system here and in the U.S. as well and in the public and private sector as well, it might not be to your board, but to yourself.
315 In three years from now, if this transaction was allowed, what would be the elements that you would feel would have occurred in the broadcasting system where you would take great pride?
316 MR. FECAN: Well, you know, when I came back to Canada for my third tour of duty at the CBC, I faced the question of: Did I want to try -- you know, everybody has a solution to fix the CBC and I got my opportunity. The question was: Did I want to fix the system or did I want to put some programs on that might make a difference? I chose to put the programs on that might make a difference. As I look back on it, it is what I value the most.
317 I think I would give you the same answer, that what I would measure accomplishment by the most is whether this transaction, or any transaction, has a realistic opportunity of creating new things, giving rise to compelling programs that touch people, giving other creators an opportunity to step up and say their piece.
318 Whether you accomplish that and whether you accomplish it in a significant way -- and significant for us is reaching as many people as possible, making a real impact, possibly even changing how some people think through those programs.
319 That is my bias. One believes fervently that through that kind of programming and through shifting the system so that that kind of programming can better compete and pay its own way, that it is also good for all of the ancillary things Jean was talking about and that it is also good for our shareholders. That is very much the belief I have.
320 My own personal measuring stick, should you approve this, is going to be, you know, improving the quality of what we put on the screen. I think that is what it's all about for our viewers and our people.
321 You know, the Nuremberg example is a good example about how something that is a very difficult subject was able to reach a lot of people. And, you know, whether people had Internet access in their home or not, whether they had a digital box or not, it still had a terrific impact.
322 If they had Internet access perhaps -- you know, let's pretend Nuremberg happens three years from now, this particular production, Trina I think would have some ideas about how to enhance the experience so that it might actually be more effective than it was, and it was pretty effective for us on any level.
323 If you would permit me to just go sideways for 30 seconds to give you how we would, in three years if we were doing that particular show, maybe make a difference with the kind of skills that being part of the larger BCE family would give us.
324 MS McQUEEN: One of the things that is crucial to the success of the new strategy is in fact that there are very strong, compelling programs that give people the desire to learn. To me, dramatic programming, documentaries, what you have identified as priority programming, are the programs that are best suited to stir your imagination and incite your curiosity.
325 Because a compelling drama like Nuremberg can do that on many levels and in different ways for many people, it then is a perfect example of how you can translate it into a strategy for new media.
326 For instance, if I watch that program, I have a different experience than the rest of my family or than you would. I might be intrigued, for example, if -- some of you, I'm sure, are lawyers. You might be intrigued by the notion of the legal background, how the Nuremberg trials were set up, and in fact what the issues were in the legal system that have now contributed to that.
327 Other people, like me, might have a simpler reaction. I thought Brian Cox was just one heck of a great actor and I would like to find out what other movies he has been in and whether I can rent them.
328 Other people who are historians might like to know where they can buy other books about Nuremberg.
329 All these are not kind of, "We are going to get you out and make you buy something." It is because your curiosity has been stimulated and because your imagination has been stirred that you want to make the experience more satisfactory for yourself and you want to make it personal to yourself.
330 So it seems to us that great drama, compelling documentaries, lead naturally to a strategy where interactivity works. We all want to know the weather, and we all want to know the traffic patterns, but there is more than that. I think as human beings we want to have personal, satisfying experiences which are stimulated by great works of art. That is why I think successful priority programming will be an absolute requirement for this new strategy that we are coming into in the future.
331 CHAIRPERSON OF THE COMMISSION: But from the system point of view, the money we put into developing those interactive components, isn't it money taken away from creating more content, more diversity in the content, offering more choices?
332 If we look at it from a CRTC kind of more general type of approach, isn't there, in that proposition, some concern that could be justified by, you know, a kind of -- money is not elastic and although BCE is the largest company in Canada, not so big, we have heard from Mr. Monty, in comparison to others in the world, I suppose there will be limited access to money and that you will have to generate money by yourselves. So money that will go into the interactivity will not go into something else.
333 MS McQUEEN: I can see how that question can be asked because, you are right, it is very difficult to produce drama and it is very expensive. Nevertheless that is what the whole basis of this strategy rests on: Is there compelling programming to start with? If you don't invest in that, all this stuff about cross-promotion and repurposing and multi-platforms and all these kind of jargony words doesn't work, because when you get to whatever you cross-promoted or cross-purposed, or whatever the words are, there is nothing there.
334 So I think it is only sensible as an investment to make sure that the core of your product is of the very highest quality. Our belief, our commercial belief, is if that is of the highest quality it will stimulate consumers to want to add to their experiences by making other purchases. That in turn will pay for the interactivity down the road -- not immediately but down the road.
335 Again, if you have something that is so valuable to you that you want to enhance the experience, then maybe you will choose to put some of the money you have into enhancing that experience rather than doing something else.
336 CHAIRPERSON OF THE COMMISSION: But can we expect the different players in the system, if we were to allow such a transaction, to kind of duplicate that kind of approach and, thus, kind of changing the different orientations or the order of priority that have been the ones that have prevailed up to the last century?
337 MS McQUEEN: Only if the consumer wants that.
338 You know, whatever happens, and Mr. Monty said that none of us knows, and I certainly don't, what is going to happen, but whatever happens we can be sure that the consumer will make the decision among a variety of experiences that she is offered. Our job is to make sure that we have what we are talking about in the system, that there are large players who can invest in a suite of experiences that the consumer will then choose from.
339 My belief is that the consumer will always, at the bottom, want compelling images and high quality content and then will want to enhance that experience. But I could be wrong. Maybe, in effect, it will be the other way around.
340 CHAIRPERSON OF THE COMMISSION: I guess my question is, what I'm asking is -- if, for example, some years ago I had a black and white screen and all of a sudden CTV comes with a colour screen, then it forces, it seems to me, more rapidly everybody to get into the colour screen.
341 So I'm asking, by that kind of transaction that you are proposing today, there will be an acceleration of going digital, of going interactive, is it to the benefit of the viewing experience for the consumer? I guess that is what we are trying to assess.
342 MS McQUEEN: Why did we all go to colour? We went to colour -- and I can remember as a kid, we just begged our parents to give us colour television -- because we saw that that was an enormous value. Our parents eventually agreed it was an enormous value. But it was a consumer-driven thing. I mean, we all had black and white sets. If we thought that that was wonderful we could have used them.
343 We saw ourselves, and we made the decision to take whatever experiences we had: a choice among would we go camping or would we get colour television. We decided to get colour television. I think that the viewers will decide for themselves, that Canadians will decide for themselves, whether this is valuable enough that they want to invest their own resources in it.
344 If we don't provide an experience that has value they won't change. If we provide an experience that has value, great, it will be accelerated. It will have proven itself and it will become something that everybody has.
345 Like cell phones, for example. We didn't have to have cell phones, but we saw them as value and that accelerated the production and, unfortunately, the use of cell phones in hearings.
--- Laughter / Rires
346 MR. FECAN: If I may just add a couple of things.
347 I think the other proposition we are putting forward is if the viewing experience is enhanced, the foundation programming, the priority programming, and the news and the sports, and to use Trina's example of the Nuremberg miniseries, we fervently believe that maybe more people will take a chance on that kind of Canadian drama the next time because their satisfaction may be higher than what it would have been before. But it doesn't diminish the opportunity for anybody who doesn't want to take part in that to still enjoy it.
348 It is a transition and we want to provide an enhancement to the viewers that are interested in that. Certainly, you know, if you watched the Emmy's or the pre-show to the Emmy's, ABC had an interactive element to it where they polled what the viewers thought, who should win, and all of that kind of thing. Some people took advantage of it, some didn't. We need to do our thing in that space as well.
349 When you look at the players forming in Canada, the CanWest-Hollinger-WIC group has their canada.com portal, and the Quebecor-Sun Media potentially Videotron group has their Canoe portal, Rogers and Shaw have their Excite portal. Everybody has the capability, in one form or another, to at least provide some form of links or interactivities through their own proprietary portal sites. How people choose to, you know, move forward is going to very much depend on what they feel their best proposition is to the viewers.
350 That I thought was the greatest aspect of the new television policy, that we are going to set up a system where the various players each kind of find their own personality and find a way of trying to get the viewers to connect the best.
351 I think this is really something that enhances our ability to play in that space.
352 I think Alain had something...
353 MR. GOURD: Yes. If we take these realities and we transpose them at the systematic level for the Canadian broadcasting system, you are absolutely correct, it will have an effect of acceleration, but not a burden for the consumer. And I will focus on both dimensions.
354 For example, with digitization, if and when Bell ExpressVu introduces high definition TV, followed by Star Choice -- and that will probably arrive before Christmas -- then, of course, we will need product in the high definition TV form and with stories which are attuned to that way of distributing the product.
355 Cable will be under pressure and will consider accelerating, indeed, its digital penetration in order to have a similar product line offered to a sufficient number of subscribers. Therefore, the total viewing experience is enriched, but it's a choice.
356 Some consumers will believe that the regular TV product is the right one for them, and they may choose to watch only news, as opposed to going to drama, like Trina suggested, but others will believe that it is a valid choice and, indeed, the viewing experience should be enriched. Therefore, they will choose to adopt this new product line and the relevant content that will be on it.
357 So the total choice of the system is richer, without a burden on any specific consumer, because it is optional.
358 CHAIRPERSON OF THE COMMISSION: Thank you very much. It has been helpful.
359 We will take a break now before we go to the understanding of the proposal by CTV itself.
360 We will come back in 15 minutes.
--- Upon recessing at 1105 / Suspension à 1105
--- Upon resuming at 1127 / Reprise à 1127
361 LA PRESIDENTE DU CONSEIL: Alors, bonjour. Nous poursuivons notre examen de la requête visant à faire que BCE acquiert CTV. Nous allons poursuivre maintenant l'audience with Vice-Chair Wylie, who will be exploring the impact on CTV itself.
362 Madam Wylie...
363 COMMISSIONER WYLIE: Thank you. Welcome to you all.
364 As Vice-Chair of Broadcasting, I was really comforted, Mr. Monty, to find out that you were indeed reading the Broadcasting Act last night, so you could appreciate all of the niceties of the regulatory landscape in broadcasting. I hope you didn't get as far as the section that talks about suspension and revocation of licences, because that could have given you a nightmare.
--- Laughter / Rires
365 COMMISSIONER WYLIE: I would like to discuss with you the added value for CTV that would flow from the approval of this transaction, and particularly from the perspective of the Canadian viewer, apart from the significant benefits which my colleague will address later.
366 I will have questions regarding the potential impact of this transfer, if it were approved, on (a) the historical role of CTV as a conventional broadcaster, (b) the local programming and the added value to the viewer from Bobcageon, Ontario, or North Battleford, Saskatchewan, where Mr. Monty would own retransmitters if this deal were approved, and (c), what can we see in the near future for the over-the-air coverage and distribution of the group of CTV stations.
367 CTV, as a national broadcaster, has been described, as you have probably been told over the years, as a provider of a varied, balanced mix of programming, comprising many elements, including information, public service, the arts and entertainment programming, and to a very -- almost total -- English-speaking audience in Canada. We are interested, of course, to know whether you think this role is still relevant for CTV; to provide a balanced mix of elements of information, public service, the arts and entertainment programming over the list of transmitters and retransmitters that are in Schedule 1 of your application.
368 MR. MONTY: I definitely believe that it is still relevant. On the one hand, I suspect that some of these aspects of the array of services provided -- not only do I suspect, I am convinced -- are related to what viewers -- Canadians -- want to see, and at the same time that is the capability for us to work with the system.
369 We have been used through the history of our corporation on the telecommunications side of the communications network to working with public service issues, whether it is on who should get access to the system, or how far the system does reach through the different aspects of our business, and we are familiar with the responsibilities of ownership that that entails. So we have, actually, nothing but support for the evolution of the system as it is, at the same time making sure that the system evolves as customers and viewers want the system to evolve.
370 COMMISSIONER WYLIE: I heard you say this morning that Mr. Fecan had convinced you that the conventional broadcasting system is far from dead, and of course our question is: Did he convince you before you consummated this deal or after?
--- Laughter / Rires
371 MR. MONTY: Both.
372 COMMISSIONER WYLIE: Because it is a lengthy list of broadcasters and rebroadcasters which provide programming to some 99 per cent --
373 MR. MONTY: Let me allay your fears. Excuse me for interrupting, but I just said "both" and I should have added a little bit to it.
374 We pay $2.3 billion for the right to own CTV, with your support -- with your approval -- and given the current economics of the system it would be quite foolhardy for us to think that we can convert the system to something new, build a field of dreams, in effect, and hope that customers and viewers will come to it.
375 The current system is quite healthy as it is and we have to make sure that not only do we maintain this health, but improve it even further, as the system transforms itself in the new environment we have described for a couple of hours this morning.
376 COMMISSIONER WYLIE: So we should take some comfort, then, that this is a role that you would see BCE continuing and keeping as one of its objectives.
377 MR. MONTY: Certainly.
378 COMMISSIONER WYLIE: Now, assuming that you were convinced before you consummated the deal that conventional broadcasting is not dead, will the viewer continue to have the same service as before? Or, is there a possibility that with the stability that is brought to the system, as Mr. Fecan discussed, there may be even some improvement to what the viewer gets from the transmitter, even without the future injection of interactivity and connection to other platforms?
379 MR. MONTY: The answer has to be yes.
380 We can't see how, with the capability that the system has today, it can stay static. It has to evolve with the needs of customers and viewers, and in that respect any purchaser who would come before you to take control of CTV and at the same time say that they would like to maintain it as it is today, and strictly as it is today, would never get the benefit of the value of their investment if they didn't continue to improve on it and better the product, because that is what competition is all about.
381 Others will improve it and try to add a better product and develop a better product than ours, and our competitive instincts are going to be to do the same. I believe that is the support that we provide to CTV in the change of control hearing that we are into.
382 COMMISSIONER WYLIE: Now, this improvement, and we heard Ms McQueen this morning in the discussion with the Chair, and of course, if you look at the back of the package of benefits, it has some direction to it.
383 In large part, the type of programming that is more likely to be complementary to new platforms or new ways of providing information or that is more suitable to repurposing may become the type of content that CTV moves toward and away from the type of content that is of great value to the Canadians who only get TV, of which there are between 20 per cent and 25 per cent, from a transmitter and the others who don't want to participate or take as long as your mother to get into the new world.
384 Is there not a danger that the repurposable material will gradually take more importance from the CTV group of stations and away from the service that is still of great value to the Commission in enhancing the achievement of the objectives of the Act that you so gleefully read last night?
385 MR. MONTY: I believe if we did that, we would be at great risk of undermining the massive investment we have made into the system, because the current system's economics and model is very much conditioned on making sure that what we have today remains and continues to thrive.
386 But on that, I would suggest that maybe, Ivan, you could participate in this discussion as well.
387 MR. FECAN: I think what our greatest interest is is in serving our viewers, Ms Wylie, and serving them with what our viewers feel they need.
388 We feel that that mission is such that it is central to the program choices we make and have made. I think that's the essence of what a good broadcaster does.
389 I don't see this additional element available to some people as something that can detract us from our main mission. I see it and believe that it is something that can enhance our main mission for some people.
390 I mean, I appreciate, you know, we may not want to disenfranchise people by moving from one to another too fast. On the other hand, you don't want to disenfranchise the children and the young adults who are already in that new world and want to find a Canadian connection in it. So you have to find that balance.
391 But I think you would very much have our assurance that in terms of our conventional service, our objective is to serve as a conventional mass audience broadcaster. The fundamental nature of our business as a conventional broadcaster is to have universal reach, as close to universal as possible and to provide a value proposition.
392 Interestingly enough, both the viewers and advertisers have a shared experience of a mass nature. That's what conventional does and specialty does a different kind of thing.
393 So our business case and our philosophical case and conventional rest on to continue to provide that shared mass experience in the program categories that you, along with the industry, have determined are in the public interest through the Canadian program hearing, and that represents the kind of balance that you describe when you read that list.
394 So I think it's very much our intention to be there, but not disenfranchise either end of the attitudinal spectrum.
395 MS McQUEEN: The thing that I would add to that, Commissioner, is that as we were talking, I was trying to think of, in my mind, something that we do on Canadian television, on CTV that would be something we would move away from because it isn't repurposable -- if that is a word.
396 What I wanted to convey earlier this morning is that most people who write about this write endlessly about news and sports as being the only kind of content that is important to interactivity or to the Internet. In fact, we don't believe that. We believe that any form of programming that is arresting and compelling to any viewer can also be used in interactive ways.
397 So I think that this too inevitably is an investment in compelling programming of all kinds which can be delivered to people at the end of the spectrum that our mothers are at. You know, some of us probably have mothers who are right now writing furious e-mails saying that...
398 But we will be...
399 COMMISSIONER WYLIE: Saying she doesn't like your outfit.
--- Laughter / Rires
400 MS McQUEEN: That would be what my mother would say, yes.
401 MR. FECAN: My mother has learned voice mail!
--- Laughter / Rires
402 MS McQUEEN: But they will be compelling to people who choose not to participate in all the enhancements that can be found.
403 So again, I think that the funny thing about this is that it will mean that conventional content will be enriched, not only because it is important for us to deliver to the people who actually pay the bills, but also, because that kind of compelling content is the best kind of content to use in other ways.
404 MR. GOURD: If I may, I would like to complement what Trina has said from another perspective.
405 Do we have evidence that the platform other than conventional transmission are demanding different kinds of content than what is popular on conventional broadcasting?
406 Well, what Trina has said has been confirmed by research. As Jean has indicated this morning, research focus groups have shown that whether on DBS or Internet, what is the demand of the viewers are entertainment, including drama, news, sports, both at a national and local level. Of course, these contents have to be formatted in accordance to the characteristics of the distribution mechanism, but at the beginning, the stories are there and the stories are the same.
407 COMMISSIONER WYLIE: My question was more, once you have all these platforms and you move toward a vision of the future which is, of course, important to the Commission, in the meantime, is it not possible that the provision of conventional programming which is not easily re-purposed -- for example, local news rather than national news, more local or regional information as opposed to more easily repurposed, more national information, the local regional may be disadvantaged -- if it proves to not be as rewarding from a business perspective because of the multiple platforms that you have and that, at the end of the day, perhaps only regulatory expectations will require that the local and the local regional in all these areas where Mr. Monty just bought transmitters...
--- Laughter / Rires
408 COMMISSIONER WYLIE: ...where that viewer is.
409 MR. MONTY: I think we are coming at it in a way that I think will allay your fears. We not only want to participate in supporting the CTV broadcasting system as it stands, but we also are investing in local Web sites, event sites that can, in effect, reach the population of these local markets and will require more local content to satisfy this additional platform.
410 So the platforms we are talking about are not only national platforms or interactivity with the rest of the world, they are very much local. The Calgary site that I referred to, the Quebec City sites, the Toronto.com, the Montrealplus.ca, the Edmonton site, and we are going to announce the Vancouver site soon, the match of that capability at the local level we think is going to be a very strong differentiator of our product in our capability to reach customers and viewers.
411 COMMISSIONER WYLIE: It's interesting that you didn't mention Bobcageon or North Battleford.
--- Laughter / Rires
412 COMMISSIONER WYLIE: One thing that intrigued me is, in your supplementary brief, at page 5, there is a paragraph there that says:
"Although CTV can count on BCE for strength and stability in planning and resources, it will also have to meet BCE's standards of financial performance." (As read)
413 In a deficiency question, you were asked to explain what this meant. At page 5 of the response to the large deficiency letter which is dated June 28th, 2000, you answered:
"CTV would be expected to provide a contribution commensurate with its business and regulatory environment." (As read)
414 Do I take it from that that the need to make a contribution will not only take into consideration the business rewards that may come from it, but also the regulatory environment and those lovely sections of the Broadcasting Act you were reading?
415 MR. MONTY: I'm sure Mr. Fillingham would have written that and our CFO would also have written it. By the way, any shareholder would have done the same, whether it's BCE or anybody else or the public shareholders of CTV before, and that's both in the context of what the return would be on the investment as well as whether the CTV system met the regulatory environment.
416 Because in the end, if you build a system in the framework that Canada has allowed the system to be built into, if the management of that system doesn't meet that framework and the regulatory agency's requirements for that framework, we are out of business.
417 So for me the issue is not whether BCE is a shareholder, it is whether management is running it appropriately given the framework given to them, not only by shareholders but also by the regulatory body and the demands of the viewers and customers.
418 COMMISSIONER WYLIE: Then in conclusion, the business and commercial imperatives will be tempered by the regulatory imperatives with regard to -- what the Commission has to be concerned about is the group of CTV stations owned and operated by CTV or connected through some contractual arrangement -- which we have up to now called affiliates but may morph into something different, but nevertheless takes the CTV programming into areas -- we can take some comfort that for the foreseeable future that responsibility is one that BCE accepts.
419 MR. MONTY: Commissioner Wylie, you can rest assured that we do accept it, but I would like to add, if you will allow me, that we have always seen the regulatory process in Canada and this Commission as both a regulator and a partner, and in that partnership we not only look at the type of services, public services and products that we produce and deliver, but we also look at the other side of the equation: How much can be asked of investors if there is not a proper retribution on their capital?
420 I think the Commission has always been conscious of these considerations and we would hope that that will continue irrespective of the ownership of CTV.
421 COMMISSIONER WYLIE: It's unfortunate we can only be your poor cousin partners since we can't hold your shares. We have to get all our thrills from the regulatory side of the partnership.
--- Laughter / Rires
422 COMMISSIONER WYLIE: So that goes for content and what the Canadian viewer in Bobcageon and North Battleford can expect from this transaction.
423 You will discuss later in the "Significant Benefits" the improvement on that side from this transaction if it is approved and what we were talking about now is the perhaps less enticing for the new world content that is still important for the consumer to receive.
424 Also I mentioned earlier that the CTV voice can now reach more than 99 per cent of the population because of numerous transmitters, retransmitters, as well as the contractual arrangements where there is no CTV-owned station and distribution of course.
425 Do you see in the foreseeable future a different way of getting the voice of the transmitter to the consumer or can we expect over-the-air transmission to still be with us for some time yet?
426 MR. MONTY: I would like to pass that to Ivan or a member of his panel to be more specific than I could be on the pure technology aspects of distribution.
427 MR. GOURD: Of course there are new complementary ways of reaching a consumer and some have been mentioned during the course of this morning. However, indeed for the foreseeable future, conventional transmission will continue to be a very important and integral part of the total distribution system.
428 COMMISSIONER WYLIE: You would still see over-the-air transmission, at least for the foreseeable future, as the means to reach those more remote regions we were speaking of?
429 MR. GOURD: Yes, indeed. Many CTV viewers are off-the-air viewers, over-the-air, and for many of them that will continue for quite a long period of time. We have evidence, for example, that there are some viewers, many viewers, who wish to receive a few conventional TV stations by off-the-air transmission and that indeed will continue.
430 MR. FECAN: We will always look at whatever new technological means may exist to continue to serve the public, with the objective of as close to universal reach as possible.
431 COMMISSIONER WYLIE: Are you ready this morning to speak to us about what those alternatives could be, what the timeframe could be, what the costs to the consumer could be?
432 MR. GOURD: If I may, we are aware that in the U.S. there was a timeframe given to conventional broadcasters to go digital. In Canada the federal authorities have not taken such a position pertaining to what timeframe. There is no position either on whether or not dual analog and digital distribution would continue in parallel.
433 So what we are saying to the Commission is that you have our commitment that we intend to service the off-air viewers at each step of the way. We will assess the various technical means to continue to service these viewers, in full consultation with the government which has to develop the framework, indicate which standards, which timeframe and, of course, in full consultation with the rest of the industry, because at the end of the day it is an industry process, an industry challenge and we would interface, for example, with DTV, headed by Mr. Michael McEwen, to adjust to the various industry approaches.
434 What is important is that these viewers will continue to be serviced, most probably for quite a long time, through analog transmission and eventually, probably in a complementary fashion, through additional digital service, whether digital conventional transmission, eventually digital wireless, of course digital cable and digital direct-to-home. But the service will be maintained through the best approach possible each step of the way in consultation with government and industry.
435 COMMISSIONER WYLIE: My question was not so much the type of transmission, whether it is digital or analog, but whether you see a day when the over-the-air transmission won't be the widespread means of reaching the consumer, be it in Sydney, Nova Scotia or Bobcageon, Ontario? That is not where my mother lives.
436 MR. GOURD: Well, already if you put together the various subscribers to cable and direct-to-home, it represents, I believe, a significant percentage of the total all sold. But at the end of the day it is important for us, for the system, that viewers have the option, they have the option of either subscribing to cable, subscribing to direct-to-home or continue to subscribe to conventional transmission, conventional distribution, and that is why we believe it is important for us to continue to offer that mode of distribution.
437 COMMISSIONER WYLIE: Yes?
438 MR. GOURD: So therefore I don't personally -- personally I don't see in the foreseeable future where there would be no conventional transmission.
439 COMMISSIONER WYLIE: There is a paragraph in your response to the deficiencies questions that I am sure was not written by Mr. McEwen, which says, I quote:
"We believe that within the next seven years the technological changes taking place will be significant and that the television industry will be fully digitized, even if it does not migrate to an over-the-air digital system." (As read)
440 Do I take if from that that you are foreseeing the possibility that the signal -- the production and post-production and master control would be digital, but that the signal emitted would be analog and transformed to digital by distribution systems?
441 MR. GOURD: Indeed it is probably what will happen.
442 Actually, many studios are already digital, more and more because there are some cost advantages, there are also some product quality advantages, some flexibility advantages. Gradually indeed the largest studios would go digital, but for the foreseeable future analog conventional transmission terrestrially will continue.
443 So that is -- I believe your comment is a correct one.
444 COMMISSIONER WYLIE: There is a an even more scary sentence for Mr. McEwen, which is:
"We believe it makes a lot more sense for broadcasters to provide cable in DTH with a digital signal while maintaining analog over-the-air capability." (As read)
445 So you would see CTV as transforming its production, its editing, its master control room equipment, but possibly not the signal it emits from its transmitters.
446 MR. GOURD: We have to take it from the perspective of the viewer. For the viewer, if at the beginning of the process there is improved quality, then when it makes its way to the viewer, either through cable, through direct-to-home or through conventional transmission, the system benefits from that.
447 Therefore, as Jean has said, it's a transition, it's an evolution. It won't suddenly be a prairie fire where all the rebroads will become digital and all the studios will become digital. It will be a gradual evolution. Probably the bigger studios first and then moving to regional production centres, and so on and so forth. The same with the digitization of the terrestrial rebroadcasters.
448 Gradually, the studio will become almost totally digitized. And, yes, in terms of analog transmission, partially because the federal government is still assessing the options, analog transmission will continue for quite a number of years.
449 COMMISSIONER WYLIE: Your proposal to digitize the production facilities of CTV are of course of importance to us because if that is the way the future is we certainly want the programming to be able to conform to new platforms, et cetera. What is the time frame or the strategy that CTV is envisaging in moving towards digitization?
450 MR. FECAN: In terms of our actual master controls, is that what you are speaking of in this --
451 COMMISSIONER WYLIE: Is this happening now? Is it going to be accelerated by the push from Mr. Monty or do you have a time frame for moving towards that -- and, I presume, also pressing producers as well to produce in that format?
452 MR. FECAN: The actual backbone of most of our large stations and our network systems have moved from analog to digital or are migrating currently that way.
453 If your specific question has to do with the HDTV part of that, that is not something that we are really looking at all that carefully at this time, in that, you know, there isn't even a North American standard that people can agree to on that. So we are watching that.
454 Certainly, a lot of the major films are done in the aspect ratio that is HDTV, and so the source negatives often are now compatible with that. But until, as Alain described, the standards are settled -- I mean, even in America there is a very large debate about whether in fact the American standard actually works for transmission of HDTV digital or whether the European one is better.
455 So this thing is in flux and we watch it carefully.
456 COMMISSIONER WYLIE: Now Mr. McEwen will really be depressed.
--- Laughter / Rires
457 MR. MACDONALD: Commissioner Wylie, though, if I could just bring you back to the point that you were talking about earlier with concern about the over-the-air.
458 I think what Ivan has referred to is exactly what was referenced in that area, which is a concern that the over-the-air transmission of digital is not going well in the United States. It will cost billions to do it, to service the 20 to 25 per cent of the audience that still gets it over the air.
459 So what we were referring to was a caution. There is no question that we will produce in digital. There is no question that the plant will be digital, but it's only that last step.
460 As Ivan said, and I think it's very, very important, the roll-out of digital over-the-air transmission in the United States has not gone well so far and the Canadian strategy has been to follow behind at a careful distance so that we did not get caught way behind, but by the same token we remember the metric system.
461 COMMISSIONER WYLIE: It still confuses my recipes. You wouldn't believe what we eat at home.
--- Laughter / Rires
462 COMMISSIONER WYLIE: So if we can get, then, a level of comfort, I can conclude that the viewer in the more remote areas and the less than the big cities/areas of the country will still be able to get choices and voices from the CTV group of companies in the foreseeable future, and that is a responsibility that BCE endorses as it applies for this transfer.
463 MR. MONTY: Yes.
464 COMMISSIONER WYLIE: Now, that is from the perspective of the viewer.
465 From the perspective of CTV itself, Commissioner Colville will discuss the significant benefits and the extent to which a lot of it will end up on the screen. But one of the other areas that will presumably be an enhancement or an added value to CTV itself is the capacity to cross-promote across different platforms.
466 Could you expand on how that will be specifically of added value to the CTV group of stations resulting from that ability to cross-promote with additional platforms under your control?
467 MR. FECAN: As you know, we constructed the company you know as CTV with a mix of conventional and specialty channels, and very much a part of the value proposition to what we hope is our viewers and the system is the ability to cross-promote, to tell people on one about something they may find of interest on another. That is something that we have been working for the last few years, and I think we are getting better at it.
468 What this provides is an additional dimension. It provides an additional dimension because we would now have the ability to do so with some of the Internet properties that BCE would bring to this particular new media company, and it allows us to do likewise, to cross-promote areas of interest. We think that is a good thing for us.
469 We worry a lot of the time about the amount of hours, particularly our youth, are spending on the Internet, so I think it is valuable to the system to have on Internet more promotion for the broadcast system. It is a two-way street, but I think strategically that is a useful point to have.
470 So I think clearly that is a benefit, all of these different platforms or vehicles under one roof, the ability to kind of let people know about like content or: if you are interested in this, there might be this. I am glad you pointed to that, because I think that is a benefit of this particular combination.
472 MS McQUEEN: I would also add that it is extraordinarily important to us in promoting Canadian programs.
473 As you have remarked on before, American programs are supported by tidal waves of promotion which inevitably makes its way onto Canadian platforms and the ability, as we are already finding with the NetStar-CTV alliance, to be able to cross-promote Canadian programs is extraordinarily valuable to us when we add the possibility of Internet cross-promotion with the Internet's ability to select viewers and possibly send e-mails and do all the other kinds of personalized promotion that the Internet is capable of. It gives us one more weapon against -- I shouldn't say "against", but one more weapon on the side of making viewers understand that Canadian programs are out there and available.
474 COMMISSIONER WYLIE: Thank you for your co-operation.
475 I thought it would be important to give Mr. Monty a foreshadow of renewal hearings where you really get down to the 3(1)(iii) and a few dollars and a few hours of regulatory commitments.
476 I will now pass you back to the Chairman for the continuation of what I'm sure is one of the most exciting mornings of your career.
--- Laughter / Rires
477 MR. MONTY: Actually, it's not bad.
478 COMMISSIONER WYLIE: Look at Mr. Fecan's hair since he joined the regulatory system.
--- Laughter / Rires
479 MR. MONTY: Don't look at my hair.
--- Laughter / Rires
480 CHAIRPERSON OF THE COMMISSION: Yes. Mr. Monty lost his in telecom.
--- Laughter / Rires
481 CHAIRPERSON OF THE COMMISSION: Now we will pursue, before breaking for lunch, with Commissioner Wilson, who will be exploring specialty channels, its impact on the specialty channels and the new media strategy.
482 COMMISSIONER WILSON: Thank you, Madam Chair.
483 Good morning to all of you. Welcome. Nice to see you again. I have seen you so many times in the last four weeks.
484 I guess what I wanted to do was try to get a little bit more detail from you about the specific benefits of the transaction in terms of the specialty services that CTV already has interest in.
485 There has been a lot of talk this morning about the conventional television network and sort of peripheral mentions of the specialty services, and I am a little bit curious as to why there wasn't more discussion in the material that you filed about the specialty services and what kind of a role they will play in this new broadcast paradigm where we have the largest telecommunications provider owning the largest private conventional network.
486 So I guess, just sort of as a general opening question, I wonder if you could talk about the benefits of the transaction in terms of what could be described as some of the most successful specialties in Canada.
487 MR. FECAN: Before I turn to Trina, I want to say that we look at it from the point of view of Canadian content. We understand that there are good reasons for looking at it at this hearing from a focus on specialty, a focus on conventional, but when we talk about Canadian content we really are platform agnostic in terms of broadcasting.
488 You know, there is Canadian content that we feel is very appropriate and good on conventional, and we feel equally passionately about some of the programming that we have developed and have going on our specialty platforms. In fact, we often use a specialty platform to develop something that can grow and migrate to the conventional. And there are things on the conventional that -- let's use the Bell Canadian Open example, where the very top day of the golf tournament -- the last two days are on CTV, but a lot of the other stuff, the pre-events and the qualifying rounds and the replays, are on specialty. So we have an integrated approach toward Canadian content.
489 It is also how we have structured much of our development of content. I mean, we have people who are experts in and have passion for particular disciplines within Canadian content, and they have various outlets within the family where they can deploy the programming. So if we left you with the impression that we care about one form of the service and not the other, it was a failing on our part, in terms of how we explained our position.
490 We really do see content as the key of what we do, and there are various venues where that content has its best possible exposure and the best possible connection to that audience.
491 So when we look at the benefits of why we think this is good, the benefits are in some cases very similar to what you have heard before, and I just kind of want to touch those bases quickly before we drill down.
492 The benefits are stability -- I think stability and the ability to keep this particular family functioning and growing and together, including the benefits of being able to cross-promote and cross-pollinate programming between specialty and conventional -- I think that is one of the benefits.
493 COMMISSIONER WILSON: More than you would now?
494 MR. FECAN: No, as much or more as we do now. But certainly more than if we had been broken into pieces.
495 COMMISSIONER WILSON: Because we don't need the transaction to cross-promote. You already have CTV conventional and specialty services, so --
496 MR. FECAN: Right. But that's not what we were facing. We were facing, largely, a break-up of the company, where we would have lost that for the system.
497 In this particular transaction, I think you are also facing the wonderful possibility of a controlling shareholder who is committed to the excellence and committed to improving that excellence. And one always has to improve.
498 You have heard a little bit about the cross-media innovation, and I think that some of that may, initially at least, be something that might be more fruitful in the early days with some of our specialty services than some of our conventional offerings.
500 MS McQUEEN: I was thinking, Commissioner, that it is an interesting observation that we have talked mostly about conventional. And Ivan is right, it wasn't from any "Sophie's Choice" kind of consideration. But I think, in many ways, most people see that specialty television is healthy and growing and producing revenue, and that what needs, I guess, stability perhaps most is conventional television, which has probably the biggest challenge. It has been more fragmented, and it has, in some ways, been a mature business.
501 But when you ask me about the specific benefits that come from this transaction to the specialty channels, I guess one of the things -- if you are on a spectrum of how people have experiences, specialty television and interactive or new media are notionally closer together than perhaps big conventional television in attitudes, in experiences and so on. To me, the big benefit is to have actual people who work in new media who will be our colleagues and our creative partners.
502 COMMISSIONER WILSON: You mean on the conventional side.
503 MS McQUEEN: No, I'm talking about with BCE.
504 What BCE brings is a store of creativity. Technological creativity. Technological innovation. People who have a really in-depth understanding of how consumers are getting the new media and what is happening. And that is, I guess, a human resources or a set of people skills and marketing skills that CTV does not have a huge group of. So that, to me, is one of the benefits that you have: technological creativity and innovation -- that can help inform the specialty channels and can help them do a better job of what we are already doing very well on Discovery and TSN, but --
505 COMMISSIONER WILSON: I was going to say, by the same token, I guess what surprised me when I went through your material was that the specialty services, from a broadcasting point of view, have really been very much on the leading edge of developing the interactive elements in the new media, and we heard a lot of talk about that during the digital specialty hearing. I was surprised --
506 I understand what you are saying about the contribution that BCE brings in terms of that mindset and the fact that specialty and ITV, new media, would be closer together in terms of mindset than conventional. What surprised me was that there wasn't more discussion about the synergies between the specialties bringing some of that mindset -- I realize that the acquisition of NetStar and the services that came with that is fairly recent, so maybe, with all of the activity, including this transaction, you haven't had time to explore those synergies. But I would have thought that there would be some talk about the kind of experience you have had on the specialty side, bringing that to conventional television, and then the other side, sort of this two-pronged ability -- the synergies that you can develop among all three areas.
507 I don't know if I am explaining myself --
508 MS McQUEEN: No, I was just thinking that it was too bad you weren't there to help us write the application.
--- Laughter / Rires
509 COMMISSIONER WILSON: Because I know that the Discovery site and the TSN site -- you talk about the popularity of the TSN site in Canada and internationally, and RDS as well, so I was just surprised that there wasn't some discussion of the cross-pollination.
510 MS McQUEEN: You are right that cross-pollination exists, and it can only be improved by the relationship that we now have with BCE, where we are colleagues.
511 I think on TSN and Discovery we have been great at developing content for our sites, but, proud as I am of everything we do on our CTV sites, I have to acknowledge that there is a depth of technological creativity and technological innovation at Sympatico/Lycos that can do nothing but benefit us, and already, in fact, has made some contributions on a kind of informal basis of exchange.
512 I guess that the melding of those two kinds of creative resources and creative ways of thinking is perhaps one of the greatest benefits to the specialty channels that this acquisition -- this transaction brings.
513 COMMISSIONER WILSON: Just out of curiosity, you were talking about the growth in specialty services -- and I know this is probably a really picky question, but in your July 4 deficiency letter you included some assumptions for your specialty services in terms of growth. It was on page 5 of that letter. The reason I am asking you about this is because you talk about the split between conventional and specialty, in terms of revenue generation for the company: 79 per cent or 82 per cent for conventional and 18 per cent for the specialties. You are showing some double-digit growth on that chart. I didn't know if that was a mistake or not. In a couple of years there are some really huge growth numbers.
514 Mr. Fillingham obviously knows what I am talking about. It's like: Do you know something about this environment that no one else knows?
515 MR. FILLINGHAM: No. I think if you go to those assumptions, the double digits are really shifting categories a lot. And I think if you really deal -- and I went right down to total revenues from these NetStar forecasts, and you are back into normalized growth. But at those initial years -- I think you are shifting between basic, discretionary and DTH.
516 COMMISSIONER WILSON: Okay, so that's the notes some services may move from the discretionary tier to basic.
517 MR. FILLINGHAM: Right, but if you come down to the total, you have more of the normalized kind of growth in sub-revenue. Although back to it, certainly the DTH side has been showing higher growth but not, I don't think, those kinds of numbers in year one there.
518 COMMISSIONER WILSON: I just thought, boy, if this is the kind of growth we can expect, then it's all the more surprising that you didn't spend more time talking about the specialty services and the role that they will play in all of this.
519 I want to go back to a comment that you made a little earlier, Mr. Fecan, about programming and content in your approach to programming.
520 You mentioned exactly the point that I had noted in my notes about using the specialities as the farm team or giving birth to something on the specialities, and then when it grows up, you move it to the conventional network.
521 In terms of nurturing talent, I suppose if you are throwing $230 million at something, you don't have to spend quite so much time nurturing. You can just give birth to a fully formed thing on the conventional network and you don't have to nurture it on the specialty channels.
522 But I did want to ask about the programming commitments in this transaction, primarily focus on the conventional network, the 175 incremental hours. Are we going to see anything on the specialities? Any programming benefits? Going back to the comment that you made about you know, you look at content and it's not necessarily just conventional, it's the whole stable of services that you have to offer. Is there a benefit in terms of the programming, what's going to be on-screen? Because again, there is nothing specific that I recall from what I read.
523 MS McQUEEN: One of the things that we have done in the priority programming category which may not be completely obvious to you was to set up a kind of one-stop shopping method that would allow producers to receive a very large percentage of the budget from these benefits. Included in all that is a specialty channel licence fee. So there would be a licence fee for both the conventional and for a specialty in that.
524 Now, it would be the producer's choice whether or not she wanted to take advantage of a specialty channel belonging to us. But certainly, that was a benefit.
525 Our hope is that the producers will all choose to have the appropriate programs licensed to our specialities and the benefits do make provision for that.
526 COMMISSIONER WILSON: Or to other specialties?
527 MS McQUEEN: Well, it would kind of be nice if it were ours because we presented the money as a benefit.
528 COMMISSIONER WILSON: But not absolutely necessary?
529 MS McQUEEN: Not absolutely necessary, no. It's their choice.
530 COMMISSIONER WILSON: In the June 28th deficiency letter, in the discussion about vertical integration, and there was some description of various companies in Canada and the holdings that they have, including BCE, there was a reference to Corus having a virtual dominance in the children's genre and, unless I am mistaken, they only have two services in that genre. CTV has... And I know, this is an issue that was certainly looked at in the transfer of NetStar to CTV.
531 But looking at the licensing of digital specialties, which is the last time we spoke, is that something that we should be concerned about? Considering the number of services that you have that are primarily focused around sports in English and French, is that a concern that we should have on a going forward basis?
532 MS McQUEEN: Well, I'm trying to look for the specific reference to Corus or...
533 COMMISSIONER WILSON: It's on page 17 of the June 28th letter.
534 MS McQUEEN: Right. I think, in our digital applications, one of the things we said is that we thought that was a good thing, that we said that we had refrained from making applications, for example, in the music genre and in the children genre, because we believed that it was a great thing, not a bad thing.
535 COMMISSIONER WILSON: For people to specialize.
536 MS McQUEEN: For people to specialize.
537 So we do have some knowledge and expertise in the sports genre, and that's why we put forward one of our applications as a sports genre. But when we did that, we went far away from traditional mainstream sports into a new kind of sports. I think our expertise in sports allows us to become more innovative in that genre.
538 But we don't think it's a bad thing for Canadian companies to specialize in one or the other genre, as long as there is some competition for that genre, and we acknowledge that CBC and TVO also do children's programming, for example. It's a specialty, of course. They have been very good at it. And I think, when we talk about a dominant position, it's a market dominant position, because YTV is certainly -- I think it's the second, after TSN, most popular Canadian specialty channel.
539 MR. FECAN: And the other part of the value proposition, I think, in the digital hearing was, yes, we thought specialization is a good thing, and we felt that by leveraging what we acknowledged we had and the expertise that we had, we could create better value for the viewer in the system by higher expenditures and content, more content and all of those other things.
540 So part of our approach is that by specializing, there's more in it for the viewer in the system, and that was part of the value proposition that we put forward at that time.
541 MS McQUEEN: In the same context, that informed our choice of digital ideas because we think we are maybe pretty good at science -- I'm trying to be modest, here. I'm not saying we could be terrific...
542 COMMISSIONER WILSON: You don't mean to be modest, basically.
543 MS McQUEEN: We think we have done a credible job in science reporting and we think it's to the benefit of the viewer that if there are other -- that we can make our best contribution to the viewers in areas where we have an expertise and a basis of knowledge. That's what informed our digital applications and, I think, what will inform our going forward position on specialties, that we have something to offer through expertise and specialization.
544 COMMISSIONER WILSON: Do you think that this transaction in particular, that it gives BCE considerable advantages over other distributors? I'm not sure who will want to answer this question, because I'm going to go into just a couple of questions on the notion of distribution and distributor equity with reference to programming services.
545 But does this give BCE too much of an advantage in terms of being a distributor, in terms of having the most valuable Canadian content properties in terms of specialty services, whereas other distributors will end up having equity only in the digital specialty services, which all of us acknowledge are going to take much longer to become successful and to be valuable in the broadcasting system?
546 MR. FECAN: To answer your question, it will be Alain that, I think, will have the pleasure of discussing that section with you.
547 But you know, CTV existed before this transaction. And so, I guess what you are really focusing on is the link within the corporate family, the related link to the ExpressVu digital service. That, I think, would be the focus that Alain would bring to this.
548 MR. GOURD: Indeed, if we take a look at the broadcast universe, we have a certain number of important groups which have a menu of services and activities. Some are in distribution, and we are in broadcast distribution at the digital level with Bell ExpressVu. We have 5 per cent of the total subscriber base, and in the digital world proper, we have less than 50 per cent, in fact, 40 per cent of digital base.
549 Other groups are also very present. For example in radio, I have in mind Rogers and Shaw, for example, or Astral, and we don't have any radio outlet even though radio is a very important part of our system.
550 In conventional television, we are aware that CTV has a very good competitor. Not as good as CTV -- and I'm saying that objectively from the outside, but there is a global...
551 COMMISSIONER WILSON: Their shareholders might disagree.
552 MR. GOURD: There is a global which is very much present, which has a relationship with the printed media.
553 More recently, we have witnessed the emergence of a new group in Québec, subject to CRTC approval, which would wish to have two conventional TV stations, some specialty services, very strong Internet presence, and a very, very significant broadcast distribution base.
554 In terms of broadcast distribution, in fact, we are pretty much the smaller.
555 So what I am trying to say is that it is for the -- it is to the benefit of the system that you have these various groups competing, developing innovative products, developing new ways to reach the consumer, developing cross-promotion, developing marketing, cross-marketing, and to have CTV as a contributor to the emulation is indeed a good thing as opposed to having a CTV which, as Ivan said, might have been balkanized in different pieces.
556 So the transaction in total, because CTV has its integrity and it can expand, that transaction is to the greatest benefit of the system and the various players have advantages and disadvantages, but this group is not a dominant one in the broadcasting system, whether in programming or in distribution. It is simply a group which wants to contribute to the innovation by having its ability to compete and to offer innovation and, of course, relevant Canadian content.
557 COMMISSIONER WILSON: Okay. Well, let me ask you this question. I guess what I think I hear you saying is that for the analog specialties, which are the specialties that I'm asking about, the ones that you have which are some of the most popular in the country, that you don't really think that it is an issue because those services are launched on analog right now and they are going along and that is fine.
558 So let's look at the digital world.
559 You say throughout the material that you filed with the application that you are a non-dominant distribution undertaking through Bell ExpressVu. On page 23 of your June 28 deficiency letter, for example, you say:
"Because of its small subscriber base a new entrant like Bell ExpressVu cannot launch a new programming service on its own." (As read)
560 But, in fact, in the digital universe and in the context of the hearings that we just finished for digital specialty services, you are the dominant distributor and you hold in your hands the ability of those services to make a future and make a contribution to the broadcasting system.
561 So I guess what I'm -- this is my first question, I will go back to the analog specialities in a minute.
562 Should we have any concerns about how you will treat affiliated services versus non-affiliated services? Maybe you are going to come back and make the argument that you are not dominant in digital, but none of those programming services will be able to survive without you, so in my mind that makes you very important at the very least.
563 MR. GOURD: We understand the concern. We appreciate the Commission's point on this issue of a perception that Bell ExpressVu would be quote/unquote "a dominant player". The Commission, in its July 14 Public Notice, has mentioned that it was an issue to be discussed and therefore we are very pleased to provide clarification and reassurances on that front.
564 I would like to focus, if you agree, on indeed whether or not Bell ExpressVu is dominant, because I think it is an important point that has been made by others and that you have underscored.
565 If we take a look at our subscriber base, which is 570,000, it is, as I mentioned, 5 per cent of the total households, but in the digital universe it is around 40 per cent because there are 1.4 million digital subscribers, as we speak, in Canada.
566 Of course, MMDS has some digital subscribers, but the bulk of the digital subscribers who are outside of our 570,000 are in fact directly or indirectly controlled by cable. Star Choice is controlled by a cable operator and they have something like 450,000 subscribers, and of course you have some 350,000 cable subscribers proper. So, therefore, we have in front of us some 800,000 subscribers which are directly or indirectly controlled by cable.
567 But of course your question is still valid, whether we are dominant and important.
568 We are pleased with our growth and we feel we are important but we also feel we are not dominant.
569 But at the end of the day you are saying: Is it problematic? Whether it is 40 or 50 or 30, is it problematic?
570 What we are saying to you is that it is not really problematic, even though we would wish to give you reassurances. It is not problematic because of the inherent characteristics of the digital environment as compared to the analog one.
571 In analog you indeed have scarcity, you have limitations. Therefore, there is a gatekeeper role.
572 In the case of the digital market two things can be said: First, capacity is not really an issue. Not only isn't it an issue now, but the technology has an ability to improve through ever better compression ratios. So the capacity will grow over time and each of us are contemplating moving to higher compression ratios.
573 In addition to the capacity, the competition. Nobody, and certainly not Bell ExpressVu, can make a service -- can alone support an affiliated service. We don't have the subscriber base and, also, we are facing very significant competition, not only from Star Choice and digital cable, but also from the U.S. grey market.
574 So, therefore, out business motivation is to have -- as we have said repetitively to the Commission -- more and more content and more and more Canadian content. Many times we have come to the Commission asking for the licensing of more Canadian specialty services, whether digital or analog, in both official languages.
575 But then you might say "Okay, you will probably indeed offer all the Canadian services that will be licensed."
576 COMMISSIONER WILSON: Regardless of who owns them.
577 MR. GOURD: Exactly.
578 But you might say "Well, you will offer all of them, but maybe through the back door you will treat the affiliated services better, provide them better terms and conditions than you would the non-affiliated services."
579 Therefore, if we take a look at that situation, we wish to refer, of course, to section 9 of the broadcast distribution regulation, which is there. We would wish to refer also to another provision that you have proposed, which has been supported by industry, and supported enthusiastically by us, which is to have a similar provision for the programmers to prevent affiliated programmers to offer undue preference to the affiliated broadcast distribution undertaking.
580 I could focus also on certain specific provisions like relative to the over-the-air broadcaster where these regulations oblige Bell ExpressVu to distribute as part of its basic service all the national networks. We have also the "must carry" regulation for the analog services.
581 However, you might say "Okay. You have a regulatory framework, but if you do nevertheless not respect the regulatory framework what can the programmer which has been mistreated do?" Well, again, you provide this programming with a complaint mechanism that could be used.
582 But then you might say "Well, it's a difficult process. What else could you propose to make certain that in addition to the pressure of the marketplace, the regulatory framework plus the complaint mechanism, we could then be certain that you will provide the similar terms and conditions to the non-affiliated programmers as well as the affiliated programmers.
583 COMMISSIONER WILSON: That would be the code of ethics?
584 MR. GOURD: It is one of the answers indeed. As you know, we have proposed a code of conduct. We have been the only broadcast distribution undertaking to have proposed that. It covers the largest components of distribution, it covers packaging, it covers pricing, it covers respecting the data stream of the various specialty services, and so on and so forth.
585 But again you might say, "Yes, you have a code of ethics. SPTV has recognized that the track record of Bell ExpressVu is impeccable. The CAB has indicated that if the past is an indication of the future the behaviour of Bell ExpressVu will continue to be fair and equitable, but maybe the current managers of ExpressVu, you might be replaced, something might happen to you and we might have other managers who would not behave as well try to go around the code, and so on and so forth."
586 Therefore we have another suggestion to provide additional reassurance.
587 COMMISSIONER WILSON: Structural separation?
588 MR. GOURD: No. No, we believe --
--- Laughter / Rires
589 MR. GOURD: We believe --
590 COMMISSIONER WILSON: Just a suggestion.
591 MR. GOURD: No. We believe that there is merit in allowing a programmer to have not only the regulatory tools but the contractual tools to ensure fairness in the terms of condition.
592 I remember at CANCOM I had introduced the concept of systematic reciprocal most favoured nation provision in the contracts, plus a complementary measure where one of the parties could have also the right to third party audit, to check if there is indeed contractual respect of that clause.
593 We have also tried it at Bell ExpressVu with some programmers. Some affiliated to us like Canal Évasion, some non-affiliated, for example, like some Astral services. It is working well.
594 Therefore, we could propose, in addition to the regulatory framework, in addition to the code of conduct, a systematic, reciprocal, most favoured nation provision plus a systematic, reciprocal periodical right to third party audit to check if indeed the code and if indeed the contractual obligations are met.
595 With all that we feel that we have been, if I may say, the best of class, the only one to have a code, the only one to propose these measures, and that it should indeed reassure the non-affiliated programmers that they will continue to be treated fairly.
596 COMMISSIONER WILSON: Thank you for that.
597 If I could just ask you one final question with respect to specialty services vis-à-vis the distributor equity question, and this has to do with the analog services. I want to come back to TSN and RDS and all of those services.
598 Now, you mentioned having a similar provision for the programmers so that they wouldn't confer an undue preference on certain distributors. Considering that these services now will have this added perspective of a distributor owning them of course -- going into contract renegotiations the services would obviously try to get the best possible deal, get the most money for their services from the distributor -- do you think the fact that a distributor is now going to own these services is going to have any effect on how those contract renegotiations might roll out?
599 MR. GOURD: No, I don't believe -- absolutely, not.
600 First, BCE is now an integrated information, communications and entertainment company, so it is more diverse than only distribution.
601 Secondly, I mentioned the regulatory safeguards, existing and to come.
602 I mentioned code of conduct and I mentioned also the ability of a programmer to check if indeed there is a renegotiation of the affiliation agreements between the affiliated BDUs and programmers which implicitly would tend to favour the affiliated programmers.
603 So for all the reasons I have explained, that will absolutely not take place, and it would not be also -- again, I'm coming back to the marketplace, to the competitive nature of our industry -- it wouldn't be to the best interests of Bell ExpressVu nor the programmers to do that, because it is a small family, it's a small world. At the end of the day, pretty soon everything is known. Therefore, if I am a programmer from -- a non-affiliated programmer, I would become very suspicious about the distribution methods of ExpressVu.
604 Conversely, if I'm a distributor -- and again the specialty services of CTV cannot survive with 570,000 subscribers, they need the other distributors, they need Star Choice, they need digital and analog cable -- these other distributors would react also quite negatively if they were to perceive that the CTV specialty services were providing an undue preference to Bell ExpressVu.
605 So there is an internal in addition to the various safeguards, the regulatory ones and the ones we have proposed. There is a regulatory mechanism or a regulation mechanism inside of the marketplace to also make that more difficult, at least when you are a distributor which has only 5 per cent of the marketplace.
606 COMMISSIONER WILSON: I want to turn now to the issue of ITV. You will forgive me if I sound like I'm struggling with some of this. I guess we all are to some extent because we don't really know exactly how all of the interactivity vis-à-vis television is going to roll out or in what time frame, or how quickly data will turn into video on the Internet. There is a lot of uncertainty, and I perceive that uncertainty in some of the language used to describe these initiatives. It is a little bit nebulous.
607 You say that ITV will help bring Internet users back to television and foster a closer connection between conventional and new media environments. Ms McQueen, this morning you talked about using compelling drama and documentaries and storytelling, essentially, to do that. I guess I'm still a little bit unclear about how exactly you see that happening.
608 MS McQUEEN: I hope I can bring some clarity to it because, as you say, it is based on kind of what you see happening.
609 I guess one of the things that we see about the Internet or interactive experience is that it is personal or intimate and it is specialized to the individual who is using it. People who use that form are presumably people who enjoy and love experiences like that. They want to get what they want, that suits their interests, when they want it.
610 Right now, although conventional television in the main provides experiences that are compelling, stir the imagination and so on -- that's it. You get the same information from television as I do, from conventional television as I do. What we are suggesting is that if we can offer enhanced and interactive elements to conventional television, the people who love the interactivity and that kind of enhancement will be more motivated to watch television than they would if those elements were not present.
611 COMMISSIONER WILSON: I certainly take your point. But if the only information they are going to get by drilling down -- as we all say, it's the new lingo -- is something they could get that is on the Web anyway without watching the program -- I mean, theoretically they could get it directly from the Web without ever having watched the program.
612 What I'm curious about is how do you drive these kids -- the next generation, who are spending all these hours on the Internet -- how do you drive them to conventional television or even to the specialties?
613 MS McQUEEN: I think it's by providing a way for them to do the kinds of things that they like to do in response to something that stirs their imagination and creativity. We know that happens.
614 For instance, as I'm sure you have heard many times from TSN, people who are watching a hockey game will do things, mysterious sports things that they do --
--- Laughter / Rires
615 COMMISSIONER WILSON: I know exactly what you mean.
--- Laughter / Rires
616 MS McQUEEN: So there is the kind of notion that people like to have both experiences at once. A lot of conventional television now does not provide that kind of Web-enhanced experience even, but in the future we will be able to do it not only through the Web but through interactive.
617 I think there is, even among the youngest, savviest Webhead, every one of them watches television, and the research bears that out. But Sheridan can probably help me with --
618 COMMISSIONER WILSON: They are not abandoning television altogether.
619 MS McQUEEN: They haven't abandoned television completely but they look to the Internet to provide them with the intimate, personalized, specialized experience. When television can also provide that, I think it will give both sides of the house a reason to stay with television.
620 MS SCOTT: Commissioner Wilson, maybe I will just add a few observations coming, in part, from the Bell Broadcast and New Media Fund where we are looking at exactly this issue. We are trying to figure out the relationship between broadcast and new media and how people go back and forth. We ask for things like tracking reports: Do you find that after people finish watching a television show they go immediately to the Internet? We actually find very odd traffic patterns. They aren't predictable. So we are looking further into those things.
621 You are wondering about the traffic in the opposite direction, where people come back from the Internet, so to speak. ITV means different things to different people.
622 For now, when we are talking about interactive TV, we are really talking about television and the Internet on separate screens. We find there is some movement back.
623 Now, if I look at some of the sites that have been supported with money from the Bell Broadcast and New Media fund, it's very much as Trina describes. There is interaction, the types of activities that young people like to engage in. So there is chat, there are quizzes. There is a growing use of video. That I find quite interesting. You will have some copyright-cleared material from the main program; it will be available for kids to create their own program. They can insert themselves into the program and e-mail it to someone.
624 But we have found that in some of them, they will actually have a section where they go and describe the programs that are going to be aired later on for the balance of the season, and so the kids will be aware of the development of characters. You know, tune in next week and this is going to happen with such and such a person.
625 So while they are on the Web site enjoying interacting with the characters, the storyline, the personality, however that Web site is created, there is also this cross-promotional thing because many of the producers want to have that traffic back and forth between the two.
626 Now, that is in the area of dramatic programming or some of the information programming.
627 I found it interesting, I was reading a study by Canners In-Stat Group, it was called. They were looking at some of these new models: how do you put new media and broadcast together? This was a report called "Streaming Media Done Right, Internet Broadcasting Systems".
628 I hesitate to bring this up because this is actually CanWest Global strategy and I'm now going to tell you it's working very well. So I hesitate to do that.
629 COMMISSIONER WILSON: So you will be copying.
630 MS SCOTT: Yes. But I did think it was interesting.
631 The report says that the emergence of streaming media on Web sites is an important trend to watch, adding that IBS has a unique business model for the marketplace.
632 This is what they conclude. They say:
"This is an example of the model done right. IBS appears to have put it all together and is well positioned to lead selected prominent local TV stations into the Internet with a streaming media presence that accomplishes two key tasks. First, the IBS Web sites have been shown to draw viewers back to the local TV channel during prime time. Second, the Web sites are designed to become profitable Internet destinations." (As read)
633 Everyone is pursuing that one, of course.
634 But I thought it was interesting that you would find people on the Internet. If you go on their Web sites, and there are many, many of these new sites, they have partnered with a number of local broadcasters.
635 There is news and information. They partner with the radio stations as well. But they are promoting the main channel. They want people back on that main channel, and they are having success.
636 COMMISSIONER WILSON: One of the interesting things that we heard during the digital specialty hearing was the idea that you would use Web cams that would be distributed to your viewers and that way involve them in the programming; that that would be a good way to draw them to your channel.
637 Have you looked at plans like that?
638 MS SCOTT: My imagination is just going crazy here, thinking about what they will do with those Web cams, and whether Trina's violence code might kick in, and you are going to have to have new standards in place.
639 It is interesting, these Web cams. I would say that at the last meeting of the board of the Bell Fund this idea of having young people equipped with these digital cameras, so they can create their own content, and then become --
640 COMMISSIONER WILSON: Become part of the traditional broadcast program.
641 MS SCOTT: Yes, become part of the channel.
642 And I found it fascinating, this issue of copyright-cleared material that they can play with.
643 For example, my son, who engages in that funny sports talk as well, has a number of favourite sites he goes to where he can become part of a sports broadcast. There is footage from sports events and he provides the voice commentary, and then he takes that, creates a file, and he sends it to a friend of his.
644 Now, you can just imagine, once he gets a Web cam in his hands, he can be an on-air personality as well, and he does want to do sports journalism.
645 But it shows that really, in this new area, you are only limited by your imagination, and the combination of your own personalized inserts and the traditional conventional --
646 And I shouldn't just focus on conventional because, quite frankly, we have numerous specialty services that apply to the Bell Fund as well. But this sort of traditional linear programming that you would see on conventional and specialty will be married with this greater sense of personalization that the Web offers.
647 MS McQUEEN: In fact, on Talk Television we are already doing some experimenting with that, where we have given people Web cams -- one of them, just for interest, being one of the Mulroney children; not the one who got married, but Ben, who lives in Quebec City now and has a Web cam in his apartment and is a contributor to Talk TV through the Web cam, which obviously you can also visit on the site. That is just one kind of small example of how these Web cams and specialty television are enhancing each other.
648 COMMISSIONER WILSON: Certainly, it makes a lot of sense in terms of the specialty services, and ZDTV in the States is doing this. They have people who are contributing to their programming through the use of Web cams. I guess I was more interested in whether or not you saw a role for that in conventional television and how that might drive the next generation, the Web generation, to conventional television as part of your strategy.
649 MS SCOTT: If you would like to hear another example -- I find it fascinating to see these cross-overs between conventional and new media. A recent example out of the American market is the Drew Carey show, where they had an episode on television where Drew Carey comes to the office, and then they have a Web cam at his home, his character's home, and you have to go to the Web site to see what is happening at his home. And at his home, Ed McMahon apparently arrives with a million dollar cheque, but Drew Carey is at the office.
650 Now, only if you are looking at the PC screen and the television screen do you see the complete story. Still and yet, you could just tune to the television show if you wanted, and you would hear about this --
651 COMMISSIONER WILSON: You would miss all of that.
652 MS SCOTT: -- but you wouldn't participate. You would have a different viewer experience depending on whether you chose to be a converged person, an ITV person, or not.
653 But, again, if you were at the Drew Carey site, you would then think of tuning in to the main station, and it would take you back to that program on the main station, because that is going to be part of the experience that night, a complete and converged viewer experience.
654 COMMISSIONER WILSON: A comment was made this morning by Mr. Monty about how critical differentiation is on the Internet, and that being Canadian is part of this differentiation, and that the CTV properties, all of them -- the conventional network and the specialty networks -- will assist in defining that differentiation, if you will. And yet you talk in the deficiency letter about the popularity of U.S. sites, and I think that Sympatico is ninth on a list of a number. How do you stem the tide? If people are going to those sites in such great numbers, how do CTV and specialty service brands -- how do those brands really help you drive traffic through the Sympatico site?
655 MS McQUEEN: In some ways that is the essence of this application, to create a media company that will be able to have a strong enough presence, not only in Canada but internationally, that will be able to stimulate the creation and the use of Canadian content, that will be able to market and promote Canadian content in all of its aspects that will stem the tide. It all comes back to the issue of the creation of valuable programming and content.
656 And yes, Canadian content has an edge if it is, first of all, well done, and secondly, marketed and promoted effectively so that people know it is there.
657 Mr. Monty used the words "it's simple", and that's true, that's what you do, but it is also very ambitious, because you are competing against somebody who is stronger and better financed than you.
658 I think of the young man, Mr. Whitfield, who won the Olympic gold yesterday; someone who came from a small country that maybe doesn't finance its athletes as well as other countries, but became the best in the world through the sheer force of his personal talent. That is what we want to be able to do: allow Canadians to use the sheer force of their personal talent to make sure that Canadian content is as compelling as any in the world.
659 COMMISSIONER WILSON: You have to have money to do that too, though.
660 I mean, in sports maybe it is just sheer talent, but in television, as you talked about, the promotion machine south of the border and --
661 MS McQUEEN: Right. But, you know, I think that Gordon Pinsent said it well: You do have to have money. And Mr. Whitfield, presumably, had some investment made in his training and made in his ability to compete in other events. He may not have as much as anywhere else, but it allowed him to use his talent.
662 And that, again, is what having strong, well-resourced media companies will be able to do: give Canadians the opportunity to use their talents.
663 COMMISSIONER WILSON: Vice-Chair Wylie this morning asked the question about whether or not the money that you devote to ITV and new media initiatives takes away from the conventional broadcasting system, and your answer was that you need to find a balance. But what percentage of your benefits are targeted at ITV initiatives?
664 I went through it, but I wasn't able to come up with a big total.
665 MS McQUEEN: That is a piece of math that we would have to get back to you on --
666 COMMISSIONER WILSON: I know you don't like to do math in public --
667 MS McQUEEN: No, but privately I find it very enjoyable.
--- Laughter / Rires
668 MS McQUEEN: We can certainly get back to you. As we said, all of the priority programming has Web enhancement in it. And, as well as that, there are specific benefits directed. So we would try to get back to you, but it is a large percentage of the benefits package that has some relationship to convergence. I think we used the word that we embraced convergence in the benefits package.
669 MR. FECAN: But aside from the -- and we will get back to you after lunch with that number -- but I would also say that the specific stuff for convergence, the ITV specialists and development officers, for instance -- a lot of the rest is an à la carte kind of situation that producers can choose to take advantage of or choose not to take advantage of. So it still, within our way of looking at it, is something that -- we wanted to empower the producer to have a bunch of options. So there are those that are specifically targeted to ITV, the ITV development specialists, and those that are part of this package but not mandatory if some producer says: You know what? I just want to do my documentary and I don't really want to do any of that other stuff.
670 COMMISSIONER WILSON: Thank you. Those are my questions, Madam Chair.
671 CHAIRPERSON OF THE COMMISSION: Thank you very much.
672 We will now break for lunch and we will come back at 2:30 p.m.
--- Upon recessing at 1300 / Suspension à 1300
--- Upon resuming at 1430 / Reprise à 1430
673 LA PRÉSIDENTE DU CONSEIL: Bon après-midi à tous. Nous poursuivons l'audience et nous sommes dans la Phase I concernant la transaction de BCE pour acquérir CTV.
674 Nous étions à l'étape où nous examinerions les bénéfices en matière de programmation.
675 Mais avant, I think Ms McQueen has something to add on the record.
676 MS McQUEEN: Thank you, Madam Chair.
677 This is in answer to Commissioner Wilson's question just before lunch, and I believe it was about the nature of interactive components in the benefits package.
678 Just to make sure we are clear, there are no elements in this package that are exclusively for Web site activity or exclusively for new media activity. There is a grant of $10 million to the Bell Broadcast and New Media Fund, which, as you know, produces broadcast projects with new media related applications.
679 There are also a number of program projects that could have interactive elements to them, but again, are designed for the screen.
680 As well, there are a number of research and education activities aimed at convergence, I guess. I think we used the word "embracing convergence", encouraging convergence. These are the Content Innovation Network, $5 million. ITV specialists in development offices, these will work on broadcast proposals but will work with producers to develop interactive elements.
681 On the educational side, there is Ryerson's Chair in convergence. Creative use of Advanced Technologies is the full title of that Chair. And there is a Centre of Excellence at the British Columbia Institute of Technology which is called the New Media Centre of Excellence.
682 I should have said that the Ryerson Chair is $2.5 million. The New Media Centre of Excellence is $2.5 million. We have included a grant of $500,000 to Mnet as part of this, although we weren't sure where that should go. But since it is in fact a web related activity about broadcast, we thought it fit in the convergence section.
683 Those are the benefits that are exclusively, or I should say that are aimed at educational activities to do with convergence. Thank you.
684 THE CHAIRPERSON OF THE COMMISSION: Thank you very much.
685 Now, to Vice-Chair Colville.
686 COMMISSIONER COLVILLE: Thank you, Madam Chair. Good afternoon, Mr. Fecan, and the rest of the team.
687 I want to go through a few issues related to the priority programming benefit this afternoon. I will start off with a little bit of the philosophy behind, and I think, through some of the questions that the staff had sent to you. You have a sense of a bit of a concern on our part that while this is an unprecedented amount of money being put into the benefits package, and in particular to priority programming, one of the key issues for us is the base against which you would measure this as being incremental and how we, together, would figure this out on a going forward basis to ascertain that it's indeed incremental and how one would measure that.
688 I would like to start by taking one of the last questions that was posed to you first. It was the question related to this issue of why spend the money over seven years as opposed to a fund. In starting out with this, I'm not particularly looking for that precise answer at the outset.
689 But I guess in reading your answer to that and in seeing a couple of statements out of the presentation this morning, and also, the statements in the supplementary brief that you had filed with this, and it may touch a little on some of the discussion you had with the Chair and the Vice-Chair this morning. I would like to get a bit of a sense of this in the context of that question about where this is going to take programming.
690 So perhaps to start with, if I can just throw a few quotes back at you, and then we can get in the discussion.
691 In answer to question 29 that staff imposed, you had started off by saying:
"This question goes to the heart of the ambition of this benefits package. That ambition is to use this extraordinary opportunity to develop commercially successful Canadian television programs. If the wise and creative use of these benefits can accomplish that goal, Canadian programming and the broadcasting system will be enhanced, not for seven or 10 or 15 years, but forever." (As read)
692 And you went on later on in that answer to say:
"It would make no fundamental change in the ongoing complexities of producing Canadian content." (As read)
693 That was if there was a fund set up. Your comment was that.
694 And in the start of the last paragraph there, you said:
"In the end, the opportunity to make a real difference seized our imaginations." (As read)
695 This morning, in presentation, what you were saying, Ms McQueen, they, being producers that you had talked to -- this is at page 6:
"...appreciate and depend on the numerous funds that help make television. They don't want another one, they don't want conflicting deadlines, contradictory guidelines, uncertainty and a patchwork pile-on of small pieces of funding. Here is what they do want: One-stop funding with substantial licence fees, development assistance, attention to drama and regional programs and lots of promotion." (As read)
696 And you said a similar thing on page 17 of your supplementary brief under the heading "Enhancing Canadian Content Now and for the Future":
697 "BCE and CTV reach millions of Canadians every day and in these millions of contact points, it's possible to envisage a unique set of opportunities to ensure that Canadian voices and choices have every possible opportunity for favourable exposure. Executing such a strategic capability meaningfully would take Canadian broadcasting and Canadian content to a completely new level." (As read)
698 I guess I would like to get a sense from you to sort of what that new level is going to be. You know, if you look at the seven years, we put $140 million or $20 million more per year. What is it about that that is going to radically change the system at the end of seven years?
699 MR. FECAN: I would like to start, and then I would turn to Trina, and I will take you up on your invitation of doing the wise shot first.
700 I think I have been in front of you more than probably any other broadcaster for over the last six years, something like 18 major hearings. It's a long journey we have taken together, and in every case, I hope I have been able to convince you that what I really believed in and what our team believes in is quality Canadian content, making a difference with it.
701 We have travelled that road together, moving from a station group to a network of national reach moving to the specialty channels and all of the relationships that back and forth promotion developed with relationships that, I think, we covered with Commissioner Wilson. And in every case, we wanted to push that agenda forward.
702 What this opportunity here represents for us and why we chose the benefits proposal we put forward -- and by the way, there's nothing inherently wrong with the fund. But why we chose a different road is because we really felt there was an opportunity to shift the paradigm. Because despite all of our best efforts, there is still a pretty large amount of difficulty for a producer to get programs made. There is still, for the broadcaster, a fairly large cross-subsidization between foreign and Canadian purchase in airing forward and financing of Canadian programming. I think while we are improving, I think our quality of programming is better.
703 What we are going for is to try and shift this and shift it a bit by, instead of asking our producers to spend -- and this is the reality of the scale of our country -- to spend a long period of time figuring out how to assemble the various little pieces of financing to try and get something going and then hurry up and get it going, we wanted to give them an opportunity to just focus on creating highly popular Canadian programming, to just go for that main big target and by providing the ability to have one-stop financing for various program initiatives in the categories that we have laid out.
704 And that -- you know, so much time is spent assembling the little pieces. And I know they are grateful for the pieces, but it often takes away from the time that they would have in really focusing in on making the difference on the screen and just really putting all of their efforts on the creative aspect and on the marketing of the show and on connecting with that audience. And so, we felt that if we could have that kind of larger audience breakthrough -- which we see now and again, with various shows, but not consistently enough -- then that shifts the business paradigm. It creates a better track record of ratings for priority programs that we can sell to advertisers. It takes us further down the road toward being self-sustaining, much like many other countries that don't have the influence of the U.S. to contend with -- and, of course I'm speaking more specifically of the English Canadian market, that if we can just make that work that it becomes a virtual circle, that we do shift the paradigm. And we think that by demonstrating it, by demonstrating it consistently, a lot more consistently, as an industry, we have been able to, that that's going to make a real difference, and a lasting difference, and that was our ambition in approaching the opportunity this way. Because any way you slice it, I mean, $230 million is a huge amount of money. And, you know, as I said, on the theory of it, on the face of it, you know, we don't have any dispute with the fund except that, you know, that's not what, really, the producers want, they want to be able to make a difference, and we want to be their co-conspirators in making that difference, and that's how we approached it, philosophically, and that's why we came up with this particular approach which, if executed successfully -- and execution is always everything -- we think will make a difference.
706 MS McQUEEN: Well, I would like to go a little further back than Ivan -- and I can because I'm older.
--- Laughter / Rires
707 MS McQUEEN: From the beginning of television, Canadian television has been bedeviled by the fact that the kinds of programs that are the most culturally important to us do not produce an economic return that is high, and there is -- you know there is basically no other problem with Canadian television. There just isn't. We have got talented people. We have got all kinds of fascinating stories, as we always say. But there is an economic problem.
708 In most countries of the world, the most popular genres of programming, like drama, are just commercially successful, and they are done for that reason, because of the business motivation.
709 In this country, because of our accident of geography and because of how few of us there are, that hasn't worked and we have set into place, as Canadians, something quite wonderful which is we have determined that even though it's not economically useful for us to make these cultural programs, we are going to do it anyway, and we are going to do it through a whole bunch of different ways, and there have been public funds and there have been private funds inspired by philanthropic gestures or inspired by benefits, policies. And through it all, we have, in English Canada -- and I am speaking of English Canada because the situation is completely different in French Canada -- through it all, we do have a body of Canadian programming, and I guess our belief is that, through all the investments that have been made and all the funds that have been made and through all the work of the CBC, all of this has led to a wave which is about to crest, and we believe that this benefit money can push that wave to the point where maybe we can make a breakthrough so that popular drama and popular documentaries and variety programming become good business ideas as well as good cultural ideas. And if we do that, it will be a very stunning accomplishment in Canadian broadcasting. And that's what we are trying to do here. It is a big risk and, you know, if you ask us, are we going to be able to do what nobody has been able to do for 50 years, we will say, "Yes, we are going to" but, you know, there's a little voice in the back that says, "Yes, we are going to -- comma -- we hope". But that's the advantage that this package of benefits did to -- gives to us, is the opportunity to really make a profound and fundamental change in the way things happen. And if we did it, it would mean a whole bunch of things.
710 First of all, it would mean popular Canadian programs. But, secondly, it would mean that the kind of higher level of Canadian programming, the arts programming, the risky drama, the money that we have been subsidizing popular drama with maybe could be put into that kind of programming. So we would have the best of all possible worlds.
711 That's the kind of dream. And that's why we wanted to come through with a package that focused on creativity and removed every single barrier that we could think of to pure creative force and gave every advantage, at the beginning of the process, in development money, and, at the end of the process, with promotion and accessibility and that enabled -- and I think this is really important -- the creator of the programs to have a direct relationship with the broadcaster -- and many of the intervenors spoke about: our development team and our programming team and working with together as partners between broadcaster and producer.
712 This gives us the opportunity to do that, rather than to have several different creative voices that are in the mix.
713 We think it fits, responds well, and we wanted it to do this to your emphasis on priority programming and to your Canadian policy framework which, in fact, gave us the flexibility to say, "Here's the way CTV is going to contribute to the system" -- and that's kind of a long-winded explanation of the philosophy.
714 And I want to -- there's one thing that I want to say because we say a lot of negative things about funds, but the dedication and the commitment of the people who work at these funds is absolutely undeniable, whether it's Peter Cadadotis or Gary Toth or Robin Mirsky or Andrew Schaefer, these are heroes of Canadian culture and we don't mean to disparage that in any way; it's just that if you are giving money away, you have to have rules, you have to have guidelines, you have to have deadlines, you have to all the other things which are good fiduciary responsibilities but, in the end, we have got so many of them and they are so cobwebbed and linked and snarled, like Alzheimer's kind of brain nerves, that sometimes they get in the way of the creative process.
715 We support, entirely, the funds and we will depend on them for our eight hours of priority programming. But for this benefits package, our idea was: let's take away every impediment we can to the creative folks.
716 COMMISSIONER COLVILLE: In asking the question I'm not trying to make a case for funds or against funds; I'm really trying to understand how this money -- and because of the nature of our rules and the purchase price -- this amount of money falls out and then you have got to sit back and figure out, "Okay, how are we going to spend this most profitably" -- "most profitably", in the sense of the system.
717 I'm still wrestling with this issue, in my own mind -- and I don't know the answer to this; I didn't look it up. A hundred and forty million dollars is for priority programming.
718 How much would CTV spend on priority programming, say, in this current year?
719 MS McQUEEN: Our projections are $25 million this year.
720 COMMISSIONER COLVILLE: Twenty-five million.
721 So, in answer to one of the questions, you had indicated that if this money had been invested in a fund it would have produced six to eight million, on an annual basis.
722 So, if we are looking at 100 -- I know you would rather do numbers in private --
723 MS McQUEEN: Right.
--- Laughter / Rires
724 COMMISSIONER COLVILLE: -- and the 140 over seven years represents about $20 million a year. So the difference we are looking at is about 12 to 14 million.
725 I guess I'm having trouble, in my own mind, trying to get a sense of how this 12 to 14 million is going to make this profound and fundamental change and take us to the next level; how, all of a sudden, $12 million a year difference between a fund and this way of spending it is going to just so radically change this system and, more importantly, change it such that, at the end of the seven years, presumably, that's going to just still be there and ongoing.
726 In reading through all of this, I had trouble getting my mind around -- what happens at the end of seven years and this money is gone? Are we right back to where we were before? If not, why not?
727 What has changed, in the meantime, that somehow it overcomes the problem that we have been talking about?
728 MS McQUEEN: Well, I think what we are looking to be able to do is create models and, hopefully, have enough time -- have enough research and development that, by the end of the seven years, we will have a model. For instance, on television movies, we have got 14 chances to find a model that works, during the seven years.
729 Fourteen chances of, I guess, putting together a successful modus operandi of doing these things, of the development process, of the funding process, of the promotion process and of the export process, which we haven't included in here because most of that will be part of the producer's responsibility.
730 I would like also to add, however, that even if this doesn't work as a strategy of breaking that bedeviling problem of Canadian programming, it will add $140 million worth of priority programming and it will probably add more.
731 One of the things that we have done is -- plan to do, is take equity investments in these programs and to provide distribution advances. We assume that there will be some overall return on these investments and we have committed to track that money and to commit it to further incremental priority programming in the years after the expiration of the benefit.
732 So it won't all end after seven years. We will have some other chances.
733 But that is entirely -- I'm not exactly an expert on R&D, but my understanding is that is what you do, you build models and you try them out and at the end of it you find something that works and you stick with that. That is the intention.
734 MR. MACDONALD: Commissioner Colville, perhaps I could underscore the nature of CTV's commitment here because it is a commitment that is pretty significant.
735 It is not just a commitment to spend $140 million, it is a commitment to produce 175 original hours of programming, but that original 175 hours is going to mean that 175 hours of U.S. -- in all likelihood U.S. -- programming will come off the screen.
736 As Ivan and Trina both said, the possibility of putting money into a fund is there, it is always there, but it certainly does not carry with it the level of incrementality or commitment that I think is embodied in this particular proposal.
737 COMMISSIONER COLVILLE: Yes, it is certainly a lot of time. I guess it works out, depending on repeat factor, to about an hour a week.
738 MS McQUEEN: It works out actually to a half an hour of extra -- of priority programming per week if you don't repeat any of it at all, and then from there every time you repeat it it's an extra half hour per week.
739 COMMISSIONER COLVILLE: Well, like I say, if I broke down the money and the difference between what a fund would have been and just putting the money in on an annual basis and the time, I just find it --
740 MS McQUEEN: Well, first of all -- okay.
741 COMMISSIONER COLVILLE: Which is great. It's wonderful. Don't get me wrong.
742 I was just trying to see, as a result of that, where was that profound change coming in the system such that at the end of the seven years we would have overcome this problem we have faced for 50 years of television in this country, in English Canada anyway.
743 MS McQUEEN: We don't come to this lightly and saying this is possible, but I think the conditions are present for it to be possible.
744 We really think that just this last week we have seen -- I don't know whether you would call it a change, but we are certainly seeing an evolution in the ability of Canadian broadcasters and programmers to deliver Canadian content that is very, very popular.
745 People can say what they want about Canadian Millionaire in terms of whether it really is Canadian, but in fact it made a difference. It made a huge difference in audience that it was Canadian. The highest American Millionaire, the one with all the celebrities in simulcast, got a million less -- I think approximately a million less than the Canadian Millionaire. That told us that people are willing to see -- many more people are willing to see it just so an ordinary guy from Regina or a librarian from Kitchener and Pam Wallin makes a difference, makes a huge difference, makes a 30 per cent difference in the people who want it.
746 Nuremberg, another Canadian drama with an audience level of two million, which is often better than the biggest audiences that American programs get.
747 We are seeing -- I don't know what the metaphor is, but there are spikes there that are telling us something. They are telling us that the conditions are present for a successful experiment and that if we can push a little harder, if we can push $140 million harder, and if we can develop these models, we may have actually a chance of breaking it.
748 But in the end if it doesn't happen there is $140 million being spent on priority programming, there are increased hours of Canadian content.
749 If we put it into the fund, none of that would necessarily have been true. What you would get is no increase in the system in priority programming hours necessarily, no increase in Canadian content, and certainly no possibility of breaking the paradigm, and even worse crises when inevitably the funds ran out, which they would tend to do at a certain point, and then we would be back to square one.
750 So a fund probably would have been a lot better for us. It would have been very simple, no accusations of self-serving, no responsibility for guaranteeing that the programs will be produced, no increase over and above our commitments for eight hours and, inevitably, some of the cash would have come back to us to finance the eight hours of priority programming.
751 But in the end what you would have had is a system that delivers eight hours of priority programming per station group every year. And that's just great. Some of the programs would have been enhanced by the fund, but we thought that we could do something a little bolder and a little more innovative and that was our choice.
752 COMMISSIONER COLVILLE: When do you think we will know? Sitting here today looking out seven years seems like a long way away, but I remember sitting in this room seven years ago when we thought digital set-top boxes were going to be just around the corner.
--- Laughter / Rires
753 COMMISSIONER COLVILLE: So how far down the road do you think it will be before we have a sense that this experiment is working?
754 MS McQUEEN: Gee, that's an interesting question and it is a very hard one to answer.
755 COMMISSIONER COLVILLE: Because with this much money you think if we find out a few years down the road we should change the mix?
756 MS McQUEEN: You would have the opportunity to do that.
757 Year one I think would be mainly a development year when we were putting a lot of these pieces into place.
758 COMMISSIONER COLVILLE: Is that next year, 2001/2002?
759 MS McQUEEN: Yes. So it would be a development year. You would see some programs on the screen for sure, but you wouldn't see the full range of priority programming on the screen in year one.
760 Year two you would probably see -- by then we would be up to speed, hopefully, let's say 90 per cent up to speed.
761 Year three probably would be the year in which we could say this looks like it is working.
762 But boy, I'm thinking that I hope I am not in front of you in three years with you reading that back to me because it is the kind of question that I feel like saying "I have no idea" to, but that is not a responsive thing.
763 I think by the third year you should be able to say to us, "Well, what did you really do?"
764 COMMISSIONER COLVILLE: What would you want to know to be able to answer that question?
765 MS McQUEEN: What would I want to know?
766 COMMISSIONER COLVILLE: How will you know whether you think it is working or not? What will you look for?
767 MS McQUEEN: Commercial success, by which we mean that we can take a program to an advertiser and have that advertiser willing to spend money on the program that equals or -- well, that gives us a commercial margin, a satisfactory commercial margin.
768 COMMISSIONER COLVILLE: So in about year three we should -- probably by the end of year three we should have a sense of --
769 MS McQUEEN: I think there would be a sense then.
770 COMMISSIONER COLVILLE: -- of that question. Okay.
771 MS McQUEEN: But you can see me perspiring as I answer that question.
772 COMMISSIONER COLVILLE: Well, I'm not trying to trick you in any way --
773 MS McQUEEN: I know.
774 COMMISSIONER COLVILLE: -- it's that, as you noted yourselves, and Mr. Monty noted this morning and has been noted throughout this exercise, this is an extraordinary amount of money. It is unprecedented and it is a new approach to dealing with the issue. We all hope that it could and would be a success, turning, as you pointed out, a system around, taking us to that next level, to use your words.
775 But if it looks like it is not going to do that it comes under the heading of "It seemed like a good idea at the time", one might want to change the approach somewhat to take another approach to try to overcome that.
776 MR. FECAN: But you also don't want to be the Avro Arrow, just on the brink of breaking through and then pulling back. It is really tough on the R&D phase at what point to call it a day, at what point to push the extra mile.
777 COMMISSIONER COLVILLE: I take your point.
778 MS McQUEEN: The fact is that the very least you would get is an unprecedented commitment by a broadcaster. I don't think any broadcaster but the CBC has appeared before you agreeing to increase its Canadian programming commitment, so at the very least you would have that and you would have 170 hours of excellent -- 175 hours of excellent priority programming, plus all the other benefits that --
779 COMMISSIONER COLVILLE: What I was getting at was more the issue -- and I take your point on that, that you are going to get this extra half hour or hour, depending on how you measure it, of programming per week for seven years, and given it is going to start out slow and later on it will be more than that in a given year. But if halfway through the system you got a sense that, well, when the seventh year runs out we are right back to where we were seven years ago, then you might want to say "Well, that experiment didn't work, let's try a different one."
780 But I wouldn't want to do it so soon that -- it's like experimenting with a new TV series or whatever sometimes. Some of the programs don't do well the first year or so, and then all of a sudden they catch on.
781 MS McQUEEN: You are right in the sense that we have no intention of giving up.
782 COMMISSIONER COLVILLE: Switching gears a little bit, then, and figuring out how we are going to measure this, prior to answering Question 23 you said you wanted to provide a bit of an overview of the philosophy.
783 You said:
"CTV believes the Commission's legitimate concern about the incremental nature of the benefits can be satisfied and has provided specific answers to the question presented to us."
784 This was a bit of a preamble before answering Question 23.
"CTV also notes that:
a) It has committed to a defined number of hours over and above the 8-hour priority requirements.
b) The hours noted are all original. No repeats are included. Each program will have a specific title for easy tracking.
c) No `bonusing' will be used in the calculation of drama hours."
785 Then you went on to outline a few others.
786 I guess my problem/our problem in dealing with this issue is there is little doubt that it will be easy to identify the specific programs that the money is spent on and indicate the program, how long it was, the amount of money that was spent on it. The problem becomes: what is the base against which we are going to measure that?
787 As you know, from several of the questions that staff had posed to you, we are wrestling with some different alternatives to be able to figure out how to do that, because it is difficult to know what would be the minimum.
788 I appreciate the answers that you have given in some of the questions. The difficulty we are going to have in dealing with this issue, particularly in light of the new TV policy where we have gone to the eight hours deliberately to provide more flexibility for the broadcaster to be able to satisfy the particular market, and, Mr. Fecan, as you indicated this morning, in order to be able to provide variety across different private broadcasters as well so you could find your own sort of niche in the marketplace -- having said that, it seems to me it is still going to be difficult for us to figure out how we arrive at what is the base now, what would that base have been on a going-forward basis and therefore determine what is really incremental to what CTV would have already been doing in any event.
789 I don't know whether you want to answer that in a general way or we can go through sort of specific scenarios here, but I thought I would just give you the opportunity because the questions have already been put to you, in any event, about looking at alternatives.
790 CTV had in the past this expectation, particularly as it relates to drama, of original-to-repeat of 70 per cent, which the numbers have shown that you haven't quite reached that level over the past number of years. One approach might be to use that as a base, assuming that it was going to be 70 per cent. You can start by commenting on that, but I will give you the opportunity to provide perhaps a more general comment on how we deal with this.
791 MS McQUEEN: Well, first of all, we understand that this is a critical issue and it is our duty to satisfy you that in fact these benefits are incremental. That's the key question.
792 We did note the comments that the staff made before the application was filed. We obviously looked with care at the deficiency questions, and we have also read in the intervention that there is concern about this. So certainly the incrementality of this proposal is something that we have to reassure you.
793 I guess there are a couple of issues that you have identified. First, the 175 hours itself. I think that you have indicated that that is fairly simple in terms of a reporting mechanism, that we can guarantee you and we will guarantee you that we could even use a special code, for example, to log those programs so you can track them by title. And there are no repeats. It's all original. No bonusing. So it should be fairly clear and easy to do that.
794 But the second issue that you have raised is the effect of these benefits on our priority programming commitment and how we might, in some way, I guess, do less priority in the eight hours than we would have because of these benefits.
795 I would like to start by saying that we welcomed and have always welcomed the new policy framework for Canadian programming because it does give us regulatory equity among station groups and, most important, as the decision of the Commission said, it provides flexibility for each station group to keep its own identity, to make its own statement about Canadian broadcasting.
796 I don't know whether the Commissioners appreciate enough the shrewdness of the decision that they made. I'm sure that they do. But by tightening prime time, the two hours of prime time, and making us put our priority programming in that, what you have, in effect, created is about 30 per cent of the schedule that has to be these priority programs, and there is a built-in, huge business incentive to put original high quality programs into those hours. We do believe that that reduces any incentive that we would have had to in any way put more repeats into those hours or cheaper programming, or any of those things, because it is the heart of our prime time and the heart of our ability to earn revenue.
797 However, we do understand that the Commission does need more assurances than that belief, than our belief that it is not in our business interest to do it.
798 We have thought about an expense monitoring mechanism, which we took from the CanWest Global proposal. We would be willing to do that based on priority programs.
799 We have filed -- haven't we Robin? I think we have filed our priority program projections with you, both hours and dollars with you. We would --
--- Pause / Pause
800 MS McQUEEN: Okay. Apparently not hours but dollars. Anyway, we have submitted those expenditure projections to you. We would be willing to be measured against that as the baseline, since this is the first year of priority programming. It's the only year we have. And we would be willing to make annual reports to you that showed you that the expenses on priority programming had not been reduced from the baseline.
801 MR. FECAN: And it's a year in which BCE has had no influence in the setting of our schedule or how we decided to try and create our own unique identity in the market that you have given us.
802 COMMISSIONER COLVILLE: That's the current year.
803 MR. FECAN: Yes, 2000-2001.
804 COMMISSIONER COLVILLE: 2000-2001. Right.
805 MR. FECAN: Yes.
806 COMMISSIONER COLVILLE: You have also filed the hours of priority program for this current year. Would one presume that CTV, on a going-forward basis -- and I'm mindful of the problem we deal with here. This isn't your licence renewal. That will be another opportunity for you, Mr. Fecan, to appear in front of the Commission in another year or so. You just can't get away.
--- Laughter / Rires
807 COMMISSIONER COLVILLE: But I am struggling with this issue about what we use as the base. Even with the eight hours, would one presume -- which was outlined as itself a baseline as sort of a minimum -- that the eight hours would be eight hours for seven years into the future, and that this outline of hours that we have for 2000-2001, that's more or less what it would be for the next seven years?
808 MS McQUEEN: I assume that it would be whatever the license renewal process comes up with. Wouldn't it?
809 COMMISSIONER COLVILLE: I take your point. This is what I'm wrestling with.
810 Absent this deal, what would CTV have been doing on a going-forward basis to be able to know how much of this $140 million for priority programming is incremental to what CTV would have otherwise been doing?
811 On the face of it, what I see is CTV would be doing on a going-forward basis what it is doing this broadcast year and no more any year going on into the future, and/or would do eight hours of priority programming each and every year for the next seven years and would do no more than that.
812 So we will assume that this is all incremental on that.
813 But I have to wonder in my own mind, or we wonder, whether, absent this deal, CTV would have in fact done some more programming than the minimum eight hours or than the schedule here shows.
814 MR. FECAN: It is very hard to predict what the future brings us.
815 But what we do know is -- just to kind of go over some of the ground you have touched on, we do know that the dollars proposed are clearly incremental. The hours are identifiable and clearly incremental. And it is clearly incremental to what we are doing in our first year of priority programming, as we all, as an industry, regulators and broadcasters and producers, try to figure out what our niche is, how successful it becomes --
816 It is kind of hard to judge because we are even new in the priority program policy regime.
817 So I understand your difficulty, I really do. And I am sure you appreciate ours, because we are trying to do something a little different, a little more of what we think might be more interesting for the system, and we felt that this was the best way of accounting for and demonstrating the incremental dollars and the incremental hours. What else could we use but the first year of this new policy? And we will all see where it goes from there.
818 COMMISSIONER COLVILLE: And assume that that would be a flat line.
819 MS McQUEEN: I guess you could -- there is so much imagination involved in this process that it is hard, but let's say this transaction had never taken place. We would have appeared before you for our licence renewal, and at that time there would have been a decision on what our conditions of licence would be. That licence renewal will still take place, those conditions of licence will exist, and this commitment will also exist.
820 So I am not sure where the opportunity for the Commission to talk to us about other things is diminished by this particular application.
821 COMMISSIONER COLVILLE: So would your view be that, depending on how we approach that at licence renewal time, the base could be adjusted at that time?
822 MS McQUEEN: We are not at the licence renewal hearing yet, and we haven't really started to consider it.
823 I am just saying on a kind of theoretical basis that whatever was going to happen at that licence hearing could still --
824 I mean, nothing has happened to stop that process from taking place, whatever it produces. So if you had expectations for that renewal process, that is what we would come before you to discuss still.
825 MR. FECAN: All we can do is try to demonstrate the incrementality now. But if the baseline shifts up or down, depending on whatever takes place at the group licensing hearings, not just what we appear in front of you with, but what CanWest-WIC will appear in front of you for and what TVA will appear in front of you for, it seems to me that that would be a really good time to look at the whole situation with some quality, because everybody is in front of you at the same time.
826 We are trying to isolate this situation with the facts we know today.
827 COMMISSIONER COLVILLE: I understand that, and I understand that there is a number of moving parts here, one of them being this, and the other being the fact that we have a new TV policy, you are at the end of your licence term next year and so on.
828 As was said at the outset, the struggle was trying to figure out whether this was money being spent on things that CTV would have otherwise done anyway, as opposed to being incremental.
829 MS McQUEEN: If we went through the benefits one by one, I think in totality you would see that no broadcaster in the world -- or no broadcaster in Canada -- no broadcaster in English Canada would have come before you with benefits that are remotely like this.
830 And look at the numbers. We are going to spend $25 million on our eight hours of priority programming. We are going to spend $20 million per year on 175 hours. So what we are doing is saying that there is a special category of programming here which we are using to build models and to develop that is far above the normal licensing policies and practices of any private network -- of any English Canadian network. It just is of a magnitude that prima facie -- I think that is the word -- is incremental. Nobody would do this if it weren't for this kind of benefits policy. It just wouldn't be done.
831 Then you want to find out: Is it incremental to the money that we are spending. And we are saying, yes, we will do this expenditure of monitoring mechanism, so you can ensure that the eight hours won't lose by the 175 hours. But the way we funded the 175 hours and the programming that we have chosen and the ads to it, in terms of development, in terms of promotion, are quite simply unprecedented. It is different from anything that has been before you before, and that is recognized in the intervention.
832 People are worried about whether it is incremental. Absolutely. But there is a genuine excitement about these particular 175 hours, as you will hear from intervenors.
833 COMMISSIONER COLVILLE: I have no doubt about being able to identify the 175 hours, the $140 million, by program name and by genre. I think that is going to be relatively easy to do, and you have committed to file a report which will identify all of that. The problem is going to be determining what is the base against which we measure whether or not this is incremental.
834 Staff, for example, had raised the issue with you about this percentage of original to repeats, and particularly in drama, that the last licence expectation had been 70 per cent and in actual it ranged between 50 per cent and 60 per cent, I gather. So then the question becomes: If we had assumed that your base was really going to be what it is at 70 per cent, then instead of the 209 hours that showed up on your schedule, it perhaps would have been 230 hours. So maybe we should be considering that the base is 230 hours and not 209, and therefore the 175 is incremental to that.
835 Do you want to comment on that?
836 MR. FECAN: I think what we filed with you is what we are actually doing.
837 In terms of the 70:30, I think that was many years ago, if I am not mistaken. And I believe that in the Canadian program policy hearing you heard evidence that in most cases the repeat factor is three or four times for dramatic programs. Ours is much lower than our colleagues in competing networks, or station groups. And this is a concern of ours, to try to refresh it as much as possible.
838 But I think you heard from both other broadcasters and other producers that the repeat factor is way higher than that generally.
839 So, in the context of that, I think it was wise all around that it was an expectation. I think we performed well ahead of our peer group.
840 MS McQUEEN: One of the things that we are -- we are happy with the expense monitoring, because we think that is the heart of the matter: How many dollars go out to the production community to spend. We have to do the eight hours anyway.
841 The question is: What will the quality of those eight hours be?
842 In order to make this kind of model work, one of the things that we want to be able to do is to present a schedule that is the best possible schedule that we can present. If we can take one of these 175 hours that is really terrific and repeat it several times, that is better for the viewer than being, I guess, put in a situation where we can't repeat that and we have to repeat something else that maybe hasn't been as attractive.
843 So we are concerned that the repeat factor really is a scheduling issue. In other words, it is looking at how the viewers want things and putting our best foot forward with the viewers. Whereas the expenditure commitment is really a commitment that, I guess, puts money into the system in an incremental way. And if you develop a great program that people want to see two or three times -- and people really are now -- and you have heard this over and over again -- there is so much television that repeats are becoming a service to viewers.
844 So I am just saying that in the creative aspects of this, which is to turn Canadian television into very popular television that viewers want, we would like to be able to have the flexibility to choose the most attractive schedule possible.
845 MR. FECAN: When you look at it as a programmer, what you very much try to do is, the highest quality ten out of ten programs that you can possibly get, you want to repeat. You want people to see as much of it as possible. It's the things that don't work that you don't want to repeat.
846 You know, you don't want to discourage repeating what actually does work.
847 COMMISSIONER COLVILLE: No, and we don't want to undermine the flexibility that we provided in the new policy, either, for the sake of being able to come up with a way to measure the incrementality of the benefits package at the same time. That is what we are struggling with here.
848 MS McQUEEN: If I could just say one more thing about this repeat factor, it goes back to the American model, where they throw out hundreds of more hours than they ever screen. But the ones that they do screen you see over and over and over again: Star Trek, Seinfeld -- if something is a hit, you are going to see it over and over again. But they get rid of their failures fast. They disappear. And that is a luxury that we have never had in the Canadian system. We kind of are stuck with what we have that didn't work. That is why we are concerned, really, about going back into that old mold, where we have to repeat each program in a kind of lock-step way, whether it is a great program or whether it isn't a great program, to make an administrative commitment.
849 As I say, it seems to me that what producers are probably -- and you will hear from them -- are concerned about is whether we are going to be spending the dollars that we would have spent anyway.
850 COMMISSIONER COLVILLE: So I take it that at the end of all of this your position is that we should take the current year's schedule for hours and expenditures and use that as the base, and the 175 and $140 million should be considered to be incremental to that.
851 MR. FECAN: Yes.
852 COMMISSIONER COLVILLE: And depending on what your proposals are for licence renewal, I suppose that one could perhaps rethink some of the incrementality at that time.
853 MR. FECAN: It is not very far away, the licence renewal.
854 COMMISSIONER COLVILLE: Another suggestion that was put forward was, if you think about the 25 hours, and taking your points about repeats, you would perhaps repeat, on average, each hour once, and that might work out to be another hour a week. The CTV commitment would simply be nine hours instead of eight hours with this new --
855 MS McQUEEN: We would be okay with eight and a half hours, but I guess -- I don't want to say the same things about repeating again, but we don't necessarily think it is a great idea, in a research and development model, that we have to repeat every single thing, and some of them won't be capable of being repeated often.
856 For instance, the documentaries that we are doing may be very topical. The Big Canadian Party, the variety special may not stand up to a repeat, depending on what it is, whereas others might be able to be repeated several times.
857 So I guess, as I say, the eight and a half hours, obviously, if it were averaged over the seven years would be no problem. But kind of being ordered to repeat programs...
858 COMMISSIONER COLVILLE: But how would handle the eight hours, then, in that respect?
859 MS McQUEEN: Well, in the eight hours, it would be situation normal. Life would go on as if the BCE transaction hadn't happened. Except if the BCE transaction hadn't happened, CTV probably wouldn't be around in its present form to do any of this stuff.
860 But my understanding is that we would spend our $25 million, do the programs in the priority program genres, repeat them as we thought was great for our schedule and -- normal process.
861 MR. FECAN: And for the hours that are identified, the 175 that are identified as incremental, that does work out to an average of half an hour over, especially if you allow us to average over the seven years.
862 When it merits, we will repeat. And clearly, if it works, we are going to want to repeat. And if it doesn't, we won't, and I guess we are just feeling that it's unnecessary to have a situation where you have to repeat something that is fundamentally R&D.
863 COMMISSIONER COLVILLE: Okay, switching subjects just a bit. On the question of preferential treatment in terms of access to the fund, how do you propose to deal with that question in terms of Landscape Entertainment or Dome Productions or any of the other production companies that are either directly or indirectly affiliated with CTV.
864 MS McQUEEN: We looked at the interventions on this respect and their suggestions, and the suggestions on how we decide what an affiliated production company is range widely. We all heard about those at the digital specialty hearings.
865 Our proposal is that a company is affiliated if we own 34 per cent or more of it. There are other numbers in there. I think Alliance Atlantis was 30. So some number like that that you would mandate would then become the affiliated company level.
866 So that would take care of Landscape and Dome and so on and so forth, about whether they were affiliated or not. And at that level, either 30 or 34, we would have no affiliated production companies.
867 Our suggestion is that there is only one actual percentage. I think the French Producers Association said the number that should be produced by non-affiliated producers was a preponderant number, and the English Producers Association said that there should be a number, and the Directors' Guild said it should be 100 per cent.
868 So our number is, let's say, 80 per cent of the programming should be produced by non-affiliated companies. The reason we are carving out a small bit is because number one, if a production company that we are affiliated with -- if we have one during the period -- has the rights to a wonderful book or some talent or something, we don't want to be absolutely barred from ever doing business with an affiliated company.
869 Secondly, some of these are documentaries over which we might like to extend journalistic control in respect of investigative documentaries or other kinds of subjects.
870 And thirdly, the big variety show, on occasion, might be something that involves coast-to-coast mobiles and would be more effectively -- that we would find it useful and would give us the opportunity to put more money on the screen if we used the Dome Production company.
871 So that's how we came to a sort of 80 per cent non-affiliated level.
872 COMMISSIONER COLVILLE: Non-affiliated would include anything less than the 30?
873 MS McQUEEN: Anything less than 30 or more than 30?
874 MR. FECAN: No, I think what Trina proposes is a definition of at what point are you an affiliate, and the definition that we put forward was 34 per cent is the line. Alliance Atlantis, I think, put forward 30 per cent. At what point a production company is affiliated to the broadcaster, so above that, you are below that, you are not.
875 COMMISSIONER COLVILLE: What company gets caught between 30 and 34?
876 MR. FECAN: Pardon me?
877 MS McQUEEN: It's an actual financial thing in which, if you are at 34 per cent, you have certain protection as an investor. You don't have control, but you can't be squeezed out, and there are some other aspects at 34 that you don't have below 34. So that's why we like 34.
878 MR. FECAN: And at the end of the day, we are not fussed if it's 30. But we have a choice and you are asking us for what our choice might be. It would be 34.
879 COMMISSIONER COLVILLE: So it's 80 per cent of the money would go to companies of less than 34 per cent, affiliated or no affiliation whatsoever.
880 MR. FECAN: Yes, and I think what you have to keep in mind is, certainly in our case, over the years, we have non-controlling portfolio investments in just about every publicly traded Canadian production company. Canwest, I know, through their public disclosure, has 21 per cent of the vote of Alliance Atlantis. You know, you can't possibly make an argument that Canwest controls Alliance Atlantis at that level.
881 So I don't think it would be fair to those companies to prohibit them from accessing on the best ideas basis that part of the funds we are suggesting.
882 COMMISSIONER COLVILLE: And so, as a result of that, I presume you wouldn't want to make a commitment to have a certain proportion of this go to companies where you had absolutely no involvement in.
883 MR. FECAN: If that's what you wished, we would certainly consider it. I think you will hear a lot of consternation from every publicly traded company, and I think Alliance Atlantis would certainly be concerned about whether they could be getting benefits from the Canwest funds, because, you know, production companies need capital and in small ways, we, among other broadcasters have been investing in those companies. We have no control of them, of course.
884 COMMISSIONER COLVILLE: Final point. Part of the money that you have proposed here is for third-party promotion, $10 million. I guess part of the question that arises from that is to what extent should we be considering that normal course of business and that money spent on promotion shouldn't be considered to be incremental. You have $3 million for Movie of the Week, which is a new priority Movie of the Week, and $7 million for general third-party promotion.
885 MS McQUEEN: Commissioner, I think you would have to... As I understand the test, one of the tests is benefits that would not have occurred except for this transaction. There is a council of perfection which says that broadcasters should put huge amounts of money into promotion.
886 The fact is, in the normal course of business, broadcasters have not chosen to do that because of their other commitments and their other expenditures. Although we all know that we should promote our programs and we all want to promote our programs, often that just doesn't last past the budget cutting process.
887 I think you would want to satisfy yourself perhaps by asking interveners whether in fact this kind of promotion budget had, in the normal course of business, ever been attached to a program project. We believe that answer is no, it hasn't been.
888 COMMISSIONER COLVILLE: So could you satisfy us in the benefits report, then, that this money is incremental and being spent to promote the incremental programs that $140 million is funding?
889 MS McQUEEN: Yes, we could.
890 COMMISSIONER COLVILLE: You would be able to do that, okay.
891 All right. Thank you. Those are all my questions, Madam Chair. Thank you very much.
892 THE CHAIRPERSON OF THE COMMISSION: Thank you.
893 Madame Wylie?
894 COMMISSIONER WYLIE: Do I understand, Ms McQueen, that whereas in 2001, you will spend $25 million to produce eight hours of priority programming, you will spend $45 million in 2001-2002 to produce eight and a half hours of programming?
895 MS McQUEEN: Yes.
896 COMMISSIONER WYLIE: So what is your comment to the posit that there is an advantage accruing back to CTV because those hours of programming are likely to be more exportable -- I understand that you would re-invest that money -- but are more likely to draw bigger audiences to Canadian programming, which, of course, is great. But by drawing better audiences and coming closer to making money with Canadian programming, a benefit is accrued to you.
897 Mr. Fecan is very anxious to...
--- Laughter / Rires
898 COMMISSIONER WYLIE: That is maybe a kitchen argument, but there it is.
899 MR. FECAN: And it's an excellent argument. But the other part of it is that the money replaces the money that would have been spent by the public funds. So we do hope that the quality is higher and I think, you know, that's part of the risk reward continuum in the thing.
900 But the largest part of the difference is that what we are doing is we are substituting the money that, you know, in such a program might have normally come from Telefilm and the Canadian Television Fund, and other export distribution guarantees and other kinds of things in one-stop shopping.
901 So it's not entirely to just improve the quality. Yes, we hope it will, but it also substitutes a whole bunch of other funds.
902 That was one of the things that the interveners really said to us. You know, whatever you do, don't screw up the fragile system that there is. If you are going to do stuff, don't make it harder for us by putting more pressure on the existing funds. And so, when we said, "Okay, well, we would like to see more actual priority programming on the air", how do we do it without pushing the other funds into tilt, which would impact negatively on other producers, other broadcasters, a whole bunch of people, and so, part of how we figured out that we are going to design this is so, you know, that it is neutral to the other broadcasters and producers and doesn't hurt by putting more pressure on a very fragile funding situation.
903 MS McQUEEN: And if I may add to your question, which I think concerns, "Well, isn't this self-serving because these programs are going to be so great that advertisers will put more money into them?", and I think the answer to that is what we are going to have to take off to put those programs on. Because if you look at our commitment to Canadian content, the 60-40, and the eight hours of priority programming, our choice is to take off sports -- which is very, very lucrative programming -- or to take off American programming -- again, very lucrative programming.
904 So, the idea that a Canadian program, even though it is well funded and well created, will draw as much revenue as an American programming, in the first couple of years.
905 I mean that's the whole problem with the system that we are trying to solve is that Canadian programs don't have as good an audience margin. Maybe by Year 6 or 7 it will be true. But if it's true, it will mean that we have found the model, and that will be a benefit to every single broadcaster in the system and to every single viewer, because it will mean that we have found the way to produce popular Canadian television as a good business deal.
906 COMMISSIONER WYLIE: But you would agree that to get around this question of incrementality -- which, of course, has a certain artificiality to it -- one has to believe that the quid pro quo will be your success in Year 3, and I can see why you would be perspiring.
--- Laughter / Rires
907 COMMISSIONER WYLIE: Because, otherwise, what we are doing is where you raise the long debates we had when we hammered out a new policy and the fact that one of the goals was to create equity and so, now, we are back to, "To do this, I have to lose a half hour, which is costly, and my competitor doesn't have to" --
908 MS McQUEEN: Well, absolutely.
909 COMMISSIONER WYLIE: There is a simple, at least apparent, equity to -- that the system would be skewed back to possibilities of inequity.
910 Now, is that the price that the Commission and the broadcasting system is prepared to pay for the possibility that you will be very cool in Year 3 because it's worked?
911 MS McQUEEN: Well, you know, I think it's more than that. I think we are kind of saying to ourselves, "We are going to do this", even though it would have been so much simpler to put it into a fund and then we wouldn't have to have these arguments. We think we are stepping back from the kind of regulatory equity because we will be coming -- we are coming before you with extra priority programming and we are taking in expense monitoring mechanism for our priority programming. So, already, we kind of have stepped away from the simplicity, the beautiful, elegant simplicity of the priority programming.
912 But, you know, we want to satisfy you that it is incremental. And we want to do this because we think it's a chance to change the system. But we can't deny that it would have been a whole bunch simpler to put it into a fund and forget about it. You know, there's a joke, "We will pay anything, as long as we don't have to put it on the screen, about the funds". We do want to put it on the screen. We want to guarantee you that this money will be on the screen for viewers. We are taking personal responsibility for that. We are not putting it into a fund where we never have to worry about how many hours of programming it delivers. We are saying, "We are going to deliver this, as incremental funds". Yes, I guess when you do something a little out of the road, we give you problems, and we are trying to solve the problems, and we understand that we have to give you these reassurances.
913 COMMISSIONER WYLIE: Yes, well, lack of regulatory equity doesn't usually stem from this side of the bench.
--- Laughter / Rires
914 MS McQUEEN: I will ponder that.
915 COMMISSIONER WYLIE: No, but it's usually the -- it's usually the licensees who say, "My competitor is allowed to get away with this and look at how little he's doing for it; even though he's not very intelligent, does he do it well --"
--- Laughter / Rires
916 COMMISSIONER WYLIE: " --"there's so much lack of equity.
917 By the way, I can't resist but to warn Mr. Monty that he has to instruct Miss Scott, if this is approved, that she can't be citing from Global studies. Anything Global says, does, is neither relevant, interesting or of any value whatsoever; even if they only commissioned it.
--- Laughter / Rires
918 COMMISSIONER WYLIE: In the reply, I believe -- yes, in the reply, where you commit yourself to putting back into funding additional Canadian priority programming any money that may be generated from export, which may be another advantage if it's better programming because you spend 45 million rather than 25, or additional priority programming that would go to Canadian pay or specialty services would also be used as additional funding.
919 Would that also be true if that programming ends up on one of your specialty services, that there would be an accounting that would consider that additional funding to be reinvested?
920 MS McQUEEN: We have offered a kind of bouquet of licence fees.
921 Let's take the movies, as an example. There's a $500,000 sum that's been set aside for a conventional licence, a specialty licence, and Internet rights. The producer has an option which of those -- well, he has to take the conventional licence fee, of course, but may or may not choose to take the two others. Obviously, if it's a program that's relevant to one of our specialty channels, we would like to take that specialty channel licence for ourselves.
922 Is that the question that --
923 COMMISSIONER WYLIE: Maybe my question wasn't clear.
924 I'm looking at paragraph 19 of the reply -- although it's perhaps a little ahead of the game since we haven't heard intervenors -- but where you say; and I quote:
We will redirect any and all profits derived from the distribution of additional priority programming to foreign broadcasters or to Canadian pay or specialty services into additional Canadian priority programming. (As read)
925 My question was: If such programming ends up, for example, on the Discovery Channel, would you do an accounting that would say that the value of that window also goes back into additional funding?
926 MS McQUEEN: Yes, we would.
927 COMMISSIONER WYLIE: Okay. Because some of them are your own and some other programming would be quite suitable.
928 Thank you.
929 CHAIRPERSON OF THE COMMISSION: Given that I was interested in the impact on the broadcasting system, as a whole, in three years, if we were to grant you the permission to do that acquisition -- or I shouldn't say to Mr. Monty because it's not the other way around yet; although --
--- Laughter / Rires
930 CHAIRPERSON OF THE COMMISSION: -- you are looking for a profitable model, it's not that way yet.
931 So let's say that, in three years, you found the secret of the magic potion and you have it. What does that mean for the other components of the system? Especially your competitors. Does that mean that they have to find another generous company like BCE in order to create that envelope of benefits in order to be capable of making that breakthrough? What does it -- you know, what will be the lessons learned that it will be profitable to CTV, on a short-term basis, but more so in the long run, as you are aiming at, and also for other players into the game?
932 MR. FECAN: If we demonstrate and make the case that we can create popular Canadian programming, pay for it through advertising and through a little bit of export, not rely quite as heavily, or at all, on the funds, that's a model that everybody can use.
933 If we make this work, it is not proprietary, in any sense. It is out there as evidence for everyone to replicate. So I mean that's, you know, the thing we are trying to change is not just for our own little, you know, piece of the world; it's for anybody that plays in this area.
935 MS McQUEEN: I think that says it all.
936 CHAIRPERSON OF THE COMMISSION: But the ingredient you have in order to do that research and modelling is still $140 million -- which is a very significant amount of money.
937 So, can it be said that unless you have that kind of extra money to do the research or to do the exploration and the trial and errors that it cannot be achieved? You know, that's --
938 MS McQUEEN: Well, I think what we have always said to ourselves is that we had better not put this money in, $2.5 million dollars, into a movie because we will never get it back out. No advertiser will ever pay for it. So you don't do it.
939 If any broadcaster has a feeling that they can put $2.5 million in and they will get $3 million out, or $3.5 million out, they will do it.
940 Somebody has to be the first one to line up, to make the investment and to figure out a way to get a return on it. That's what this transaction gives us the opportunity to do. It would be, in other circumstances, wrong for our shareholders to go out and invest this kind of money in a Canadian product.
941 We are treating this benefits transaction money as an R&D that will allow us to invest. And I guess that is how all kinds of inventions and models come to the market, is that somebody figures out how to do it, puts it on the market and a model is born. That is the simple thing.
942 It is not a really big thing. It is how much goes in and how much comes back to you.
943 What our problem is, we have always put very little in because of our belief that none of it will come back to us. Hopefully we will find a way, by working directly with creative people, by putting in the proper development money, by having a real relationship through the whole process, by exquisite promotion, that we will get that money back. But it is who is going to take the first step, and this transaction gives us the opportunity.
944 CHAIRPERSON OF THE COMMISSION: Thank you. Thank you very much.
945 COMMISSIONER WYLIE: I'm just wondering how quickly your competitors are going to look for that mythical aluminum company to buy them, get a fund.
--- Laughter / Rires
946 MR. FECAN: Well, they should hope the aluminum company cares as much about content as BCE.
947 CHAIRPERSON OF THE COMMISSION: Thank you.
948 We will take a break for 15 minutes and then we will come back and complete the questioning of the Phase I by exploring the cross-ownership issues, although we have touched upon it a bit, and then the rest of the benefits.
--- Upon recessing at 1555 / Suspension à 1555
--- Upon resuming at 1610 / Reprise à 1610
949 PRÉSIDENTE DU CONSEIL: A l'ordre, s'il vous plaît.
950 Nous sommes maintenant à la dernière phase de la Phase I.
951 Alors, avant de donner la parole à madame la Vice-Présidente Wylie qui va poursuivre sur le cross-ownership issue.
952 I would like to give the information for many of you who have asked: We will complete this part and then we will take a short break and we will start with intervenors.
953 I am told that there are three intervenors who want to appear tonight. There is the CCTA, the CCSA and the union, the CEP. So those will be the intervenors we will hear today and tomorrow morning we will pursue with that phase at nine o'clock.
954 Madam Wylie.
955 COMMISSIONER WYLIE: Thank you.
956 You have discussed a little bit with Commissioner Wilson the question of undue advantage, et cetera, and I have the responsibility or job here, assigned by the Chair, of discussing with you the level of concentration, cross-ownership and anti-competitive behaviour that may result from this transaction.
957 To set the stage, if I look at page 16 of your deficiency response, and the pages following, you list examples of consolidation outside and within Canada that have created what you described as major spheres of influence combining a variety of content sources with multiple carriage possibilities.
958 Now, could we conclude that approval of this transfer would create such a sphere of influence for BCE?
959 MR. GOURD: If we take a global look, if we take a look at foreign entities -- and Jean has said this morning, these foreign entities, whether AT&T, British Telecom, whether AT&T and Liberty Media, they are of course significantly bigger, significantly more diversified geographically than BCE-CTV would be.
960 Another example would be Seagram Vivendi with very significant diversity by activities. For example, they are in music, they are in film production and also they are diversified geographically as well, servicing many foreign markets and at least two continents.
961 However, we would have one more Canadian player which would have a much smaller size globally but the ability, nevertheless, in Canada to compete against these foreign entities in the Canadian market and provide Canadian voices.
962 Because one of the consequences of the new technologies, whether satellite to cable, which brings a diversity of U.S. programs on our cable systems; whether DBS that does not necessarily follow in their footprint national boundaries, and we know that there is a significant grey market in this country and, as Jean has mentioned, more and more the Internet which will bring hundreds if not thousands of voices from many countries into the Canadian market while facing this massive arrival which is an enrichment in terms of viewer options.
963 As we said in our presentation, we need stronger entities which can compete not only against each other in the Canadian market in innovation, but compete also against the foreign entities which provide services.
964 So, therefore, BCE-CTV would be one of these bigger Canadian entities, more diversified, which would be able to compete indeed and offer Canadian voices.
965 COMMISSIONER WYLIE: I have here a number of pie charts illustrating a BCE-CTV combination in Canada, and I quite understand the other side of the coin, which is competing against the world as technology makes the world a village -- that sounded good, almost as good as paradigm.
--- Laughter / Rires
966 COMMISSIONER WYLIE: But I find that the characterization of sphere of influence quite interesting -- and it is, of course, what raises concern for some regarding the impact of the market power of a BCE-CTV combination could yield, more particularly the undue advantage that could result for BCE or CTV; the impact on the state of competition in the area of communications as a whole; the impact on the diversity of voices and choices from consumers which could flow; and possibly the impact on the independent producers since your sphere of influence or the BCE-CTV combination includes producers of both programming, music, publishing, et cetera.
967 The question I would ask is: Even though when we raised a vertical integration problem, undue advantage, et cetera, you raised the relatively small number of subscribers that BCE has as a distributor of programming now that they would own, if this were approved, compared to the terrestrial operators, the cable companies. But would it not be, nevertheless, a power one-stop shop for the provision of information, communications, entertainment that could have an effect on controlling rights to access and -- to content and access to customers, in that for at least one advantage that would flow, regardless of the number of ExpressVu subscribers, would be the ability to bundle or to create a one-stop provider of a number of services?
968 MR. GOURD: If you agree, I will give a general comment and then focus on the broadcast distribution market and then ask Sheridan to expand to other markets.
969 The general comment I would like to make is that indeed the landscape has changed very significantly since we even started our journey with CTV. For example, Jean has mentioned the divestiture of Nortel, which has changed the size of BCE and indeed has provided an incentive for BCE to be effectively an integration information, communication and entertainment services company offering, hopefully, over time a one-stop shopping approach.
970 What has been noticeable as well is that others have pursued that journey and, for example, subject to your approval, Quebecor/Vidéotron would be of a size that would be closer to BCE than it was before, and would be also more important in broadcasting proper than BCE-CTV would be at least at the level of broadcast distribution.
971 We can refer to Global-Hollinger as another example. We have also Corus, Shaw and Rogers.
972 Then the question is: this entity, BCE-CTV, competing against the other entities I have mentioned, is that entity, BCE-CTV, in a position to exercise market power to stifle competition, to even have abusive behaviour that would not backfire on it from a business perspective because it would be big enough to survive it? The answer is no. The answer is no in the various markets that it operates.
973 Let me focus secondly on the broadcast distribution market.
974 We have a chart, I don't know if we can put it on the screen, which indicates the percentage of subscribers that Bell ExpressVu has as compared to others. You can see that if you take a look at the total market, Bell ExpressVu has 5.3 per cent of the subscribers in Canada. With 5.3 per cent, you cannot exercise, quite frankly, a market dominance of any kind. And we can notice others: Shaw has 19, Rogers 23.8, and Videotron, 16.5. So in the video market we do not exercise dominance.
975 In the programming services market, again CTV, which is a leading broadcaster, is one of many, has very strong competitors, we believe, subjectively speaking, is the best one, but others have their strengths too. So there again, we are not a dominant undertaking.
976 Let me turn to Sheridan for the other markets.
977 MS SCOTT: Thank you, Alain.
978 Maybe I will just come back briefly on what Alain has said, because when we look at this question, Commissioner Wylie, we look at the range of activities that we are involved in and the range of activities our competitors are involved in.
979 I have always seen it kind of as a continuum that could go from content creation through to broadcast per se, specialty services, portals, ISP and some of the telecommunications services. If we look at that continuum which reflects this emerging converged world, the information communications and entertainment communications company, we see that this is absolutely the direction that other large corporations are moving in around the world.
980 If I stay at home for now and look at Global CanWest, I see, going across the list, that they would be in print media, they would be in television production, they would be in broadcast TV, specialty channels, new media, Web portals. They have a presence in all those areas.
981 Quebecor similarly: print media, television production, TV broadcasting, specialty channels, new media, Web portals, and they are also in ISP and engaged in transport through their BDU activities. They will become a CLEC, a competitive local exchange carrier, and an interesting backbone provider.
982 The whole range of activities that we will be offering to customers, they will be involved in as well.
983 As Alain has done, I think it is exactly the right question he has asked, and you have asked Commissioner Wylie, which is: do we have market power in any of these activities?
984 We may be very large, some of these other companies are large in terms of revenue, but when one looks at regulating activities, when one talks about dominance, it is not all being large as a reflection of dominance. It is: are you dominant enough to exercise market power?
985 If I look through some of these marketplaces, and Alain has talked about the distribution market, he has talked about the broadcasting market where there are a number of vibrant competitors -- and I'm not going to mention, Mr. Monty, the name of that other competitors, I have been told not to do that, but there are some.
986 COMMISSIONER WYLIE: As long as you said Global.
--- Laughter / Rires
987 MS SCOTT: Touché!
988 So there is extensive competition in those areas.
989 If I look at new media and the portals, my goodness, that's an area where there is absolute competition.
990 We are very proud of the portal that we have, but if we look at the time spent, the amount of time that Canadians spend on portals, portals both foreign and domestic that have similar content, in the month of July 6 per cent of surfers' time were spent on the Sympatico portal. It's hardly any sort of dominance where we would be able to exercise market power.
991 So, Commissioner Wylie, just to come back on your question, I think it is important to try to analyze each of those separately before one goes to the whole bundle and say, "Okay. So maybe you are not dominant in any of those separate markets that make up the offering to the consumer, but you are awfully big." I must say, that is never a way that economists have come at it, and it's not even the way that the Commission has come at it.
992 If we look at your activities on the telecommunications side of the jurisdiction, you have had to come to grips with this question before with respect to the bundling of our services. You have heard from our competitors over the years that it is unfair because we could bundle services like our local service where we have market power with other services like wireless or long distance. The Commission has had a tradition, since 1994 actually, of figuring out how to regulate this.
993 What you have addressed your mind to is market dominance in each of those markets that made up the aspects of the bundle. You have concluded that it is acceptable for us to bundle without any further regulatory intervention. You have very clear and concise rules, and the rules centre around those aspects of our business where we retain market power, and that would be in the residential and business service to consumers. But nowhere else have you concluded that we would have sufficient market power, such that additional regulatory requirements would be put in place, other than, as I said, the basic bundling rules which I think in a broadcasting hearing you really don't want to hear about.
994 COMMISSIONER WYLIE: You raised Global in comparison, but as far as --
995 MS SCOTT: I'm not allowed to any more.
996 COMMISSIONER WYLIE: As far as I know. But, heaven knows, by the time we go for our break --
--- Laughter / Rires
997 COMMISSIONER WYLIE: Global has no wire, ADSL or otherwise, digital or otherwise, or coaxial cable into anyone's home, so they may have platforms, portals, but they don't have an infrastructure that reaches the home.
998 I understand the ExpressVu argument, but the world doesn't stand still. We have spent four weeks looking at applications for digital services and both the cable operators and you were applicants. So if you are lucky and we give you three licences more than you applied for --
--- Laughter / Rires
999 COMMISSIONER WYLIE: -- added to the possibility of putting the duplication on digital, the analog services you already have, I think there is some clout there as to making your digital distribution system appealing if you can play games as to how you offer the popular programming.
1000 I presume that that is what Global would say -- and I am entitled to say anything -- and that they would also say about cable companies, which they have, is: what games can be played to advantage the services that you own when you have the distribution mechanism or the promise perhaps of one that will be more effective in the future?
1001 And, in Abitibi-Témiscamingue, it may be a small place, my colleague will remind me, but you already own the cable -- BCE does.
1002 MR. MONTY: Subject to --
1003 COMMISSIONER WYLIE: But you have bought it.
1004 MS SCOTT: I would like to go back to Alain, just to explore further this notion of the distribution undertaking, programming undertaking, because I think that is a separate and discrete part of the debate where you can raise issues as to the regulatory framework that the Commission has put in place. But I would just --
1005 COMMISSIONER WYLIE: Oh, yes, but BCE didn't own CTV when we put it in place.
1006 MS SCOTT: No. That's correct. We will look at whether those are rules that address your concerns.
1007 But in terms of the range of our activities, I think it is important to look at each and every one of those markets separately when you try to assess market dominance. The issues that you would look at with respect to specialty services and the broadcast distribution undertaking, those are issues that you have had to grapple with for Shaw, for Rogers, for the other cable companies, and now for the first time with BCE because of this DTH business.
1008 So I know Alain has a number of things to say to you with respect to how that particular aspect of the business is regulated.
1009 COMMISSIONER WYLIE: Those are the rules you would like imposed?
1010 MS SCOTT: Pardon me? Section 9 of the cable regulations, in particular.
1011 COMMISSIONER WYLIE: But there have been other regulatory mechanisms that have been found necessary. Some will raise the possibility that they may be necessary here too with the stable of services that you would have to push digital distribution of the same family of companies.
1012 MR. GOURD: Three comments, if I may, Commissioner Wylie.
1013 Of course we understand the focus the Commission is putting on that issue. It is an important issue. We have to reassure the Commission, as we have now said on another matter, that there will not be an interest an incentive and a possibility of undue preference.
1014 Let's start, if you agree, with the size of ExpressVu as compared to the distribution universe, not only today because we have established with the chart that it was 5.3 per cent of the total subscribers, but what can we project five years from now.
1015 And Jean mentioned this morning that our most optimistic projections are that direct-to-home will capture a maximum of 25 per cent of the households, which doesn't mean that cable would stop growing, because it has grown a bit in recent years, and partly because some subscribers will have some TV sets on cable and a TV set on direct-to-home.
1016 But let's say it is 25 per cent of the market. We may have a bit more subscribers than Star Choice, so it is 15 per cent, let's say, of the market -- 12 per cent to 15 per cent for us.
1017 We have universal coverage, so our subscribers are not concentrated in Ottawa-Hull, they are across the land. They are well distributed. Therefore, that means that in no market would we probably have a dominant position.
1018 Nevertheless, answering a question from Commissioner Wilson, we have tried to give additional reassurance to the Commission, in addition of course to the regulatory requirements.
1019 Sheridan has mentioned section 9 of the Broadcast Distribution Regulations, and I have referred to the other provision, a similar one you would wish to impose on programmers, and all the members of the industry, including us, are extremely supportive.
1020 I have referred to the code of conduct, which is being circulated as we speak in draft form. And if intervenors or other participants, or the Commission, wish us to expand a section or to add a section, that is the purpose of the exercise, to make sure that we have a code which is acceptable and which will indeed reassure the Commission and the programmers that there will be fair, equitable, reciprocal treatment.
1021 And I have also added that despite the fact that two associations, at least, have recognized the impeccable behaviour of Bell ExpressVu, we were willing to go one step further and introduce reciprocal contractual possibilities for the parties to use the tribunals to monitor the situation, in the form of the most favoured nation provision, which we have tested, which works, and which we could generalize, plus the right of the various parties to have third party auditing of the implementation of that provision on a regular basis.
1022 As for cable -- and Jean is perhaps in a better position than me to expand on that -- in certain smaller markets, on an exception basis -- and we have in mind, for example, Northwest Tel, in addition to Télébec -- it may make sense to have an investment in cable, for reasons specific to these smaller markets. And being from Abitibi myself, and having been a broadcaster there, I could see the cable operator and the telephone companies operating and, quite frankly, I think it does make sense. But that is free support for Télébec.
1023 However, in terms of the delivery of entertainment by BCE, the strategic investment has been made in direct-to-home. It has been a massive investment. It is close to $1.5 billion. When the government decided to go for a Canadian solution, after toying with the notion of a U.S.-Canada partnership that didn't work, because the Americans were asking for major concessions in terms of programming, two companies decided to take the risk, and BCE was one of those companies. Two years later, barely two and a half years, the category has reached $1 million, but after a very significant investment, a satellite problem, a technology challenge, BCE is there as the Net, and we have 517,000 subscribers.
1024 But despite that very significant progress, we will never, ever be able to have a dominant position across the country, because we will plateau and we will, as well, be always universal and, therefore, a disperse population of subscribers.
1025 COMMISSIONER WYLIE: I understand that Abitibi-Témiscaming is still before us, but in those situations where it seems to make more sense, like in the north and in certain areas, for you to expect the Commission to accept the integration in that market of the delivery of entertainment and telephone, and I suppose ExpressVu as well, do you think there is any need for additional safeguards?
1026 MR. GOURD: I don't believe --
1027 COMMISSIONER WYLIE: To protect the consumer, if not the competitor.
1028 MR. GOURD: I believe that the safeguards that exist, and which we have mentioned, are sufficient. Because there is in a way a great, great difference between markets like Ottawa, Montreal and Toronto, where there is a very significant level of competition at all levels.
1029 If we take a look, let's say, at Abitibi, or Rimouski, or Yorkton, or Thunder Bay, you would see, for example, that in some cases the market is so small that you have triple stakes in television. You have one undertaking that has three TV stations. And let me tell you, they ain't making a lot of money. If you compare these three stations with one in Ottawa or Montreal, you would rather be operating one station in Ottawa or Montreal.
1030 If you take a look at the ability of small cable to sustain the level of investment which is needed to digitize, you discover, again very easily, that if you had your druthers you would rather operate one cable system in Montreal, as opposed to the telephone system plus the cable in Amos, where I was born, or Rouyn-Noranda.
1031 And it is the same thing with radio stations. The only way to sustain a radio station in these regions is to have a certain degree of competition but clusters of AM and FM stations operated by the same entity.
1032 So in a way it was the genius of the Canadian broadcasting system and the flexibility of the regulator that allowed these special responses to be given for these smaller markets, not only in telephone and cable but in radio and TV broadcasting as well.
1033 But should we try to import these recipes for smaller markets where there is basically very little competition possible into bigger markets where there is fierce competition? I feel that that is not probably the appropriate way to do it. The other approach we have proposed is, in our opinion, more sustainable.
1034 COMMISSIONER WYLIE: To come back to the larger markets, your position would be that BCE would not be in a position to discriminate against unaffiliated programming services with respect to access, packaging, marketing -- in other words, preferring CTV services in the drive toward conversion to digital.
1035 MR. GOURD: It is, indeed, our position that the code -- the other layer over it, the regulatory framework -- the existing one and the proposed one -- and under it the ability of our contractual partners to use additional contractual provisions to make sure that it won't happen -- that will be, indeed, sufficient.
1036 Plus, as well, the realities of the marketplace, because with 5.3 per cent of the subscribers, if we start to discriminate against certain programmers it will be known. Everything is known early enough in our system. And these programmers, they can survive without us, but we cannot survive without them.
1037 So at the level we are --
1038 MR. MONTY: Another point, Alain, to be underlined is, not only would it be known, but we would go broke.
1039 You don't put a billion and a half in an ExpressVu, which is the amount of money that -- before we break even -- even if we go to 10 per cent market share of the Canadian market, and that would be a very good achievement.
1040 You can't get a return on investment by saying that we will privilege CTV in its content and exclude others to the very juicy parts of that programming system and still intend to make a return on that investment of a billion and a half dollars.
1041 So I think that point goes to the point that I was making this morning regarding retail and wholesale. Our network is open. Whether it is the Telesat system, whether it is the terrestrial system, it is open to other providers.
1042 I will give you a very good example. We have a browser system on wireless, and it is not exclusive to the Sympatico system. It has Yahoo! on it. It has other portals. That is, in a way, a way for us to justify the billions of dollars we have invested in infrastructure. You couldn't limit it to our own services and still justify the investments we have made.
1043 And let me add one other point, referring to your first point, Commissioner. When you look at prospects -- you are saying the world changes, and you are quite correct. Do we know the future? No more than anybody in this room, I suspect, and anybody else outside. But it is true that over time we are going to try to get a bigger share of some of the market segments that we are very small in right now, the Internet being one of them.
1044 Let's assume that we were successful with the combinations that we are putting together with CTV and other services that we are trying to put together. And let's assume that we were encouraging more than 5 per cent or 6 per cent of Canadians to come to our system. And, in total, 20 per cent of Canadians come to Canadian portals at this stage. The rest go to U.S. portals directly. Let's assume that we grow that from 20 per cent to 40 per cent or 50 per cent coming to Canadian portals, along with others who are going to do something similar to what we are trying to do.
1045 Wouldn't the result be a positive circumstance for the Canadian system? I would say yes.
1046 So to me, at the end of the day, the fact that we have to be, for self-interest reasons, a retailer and a wholesaler, the fact there are all the rules and systems in place that Alain and Sheridan have mentioned, and on top of that, the fact that we are looking prospectively at a new world out there called the Internet and we are trying to make sure that Canadians have room on that system for Canadians, I think, speaks very highly of the fact that the system is dynamic and it's got all sorts of self-protections in it.
1047 COMMISSIONER WYLIE: What is your answer to someone who expresses concern about the ability to bundle services, the fact that you control Telesat and it's of great importance for the delivery of communication services to existing players, that that's a concern unless there were some safeguards put in place?
1048 MR. GOURD: Let me start with Telesat, if I may.
1049 Telesat would not naturally be part of a bundle of services to consumers because Telesat is basically a business-to-business company.
1050 Nevertheless, let's address maybe some potential concern about Telesat's ability to convey undue preference to an affiliate.
1051 My first response there would be Sections 27 and 28 on the telecom side which covers Telesat, and in Section 28, there is a specific subsection that addresses the situation of satellite and the order list and the fact there cannot be undue preference on that front.
1052 In addition to the regulatory requirements of Sections 27 and 28, I would like to come back to the reality of the market place, the business reality, because all of our non-affiliate clients are on fixed satellite.
1053 As we know, the exclusivity of Telesat on fixed satellite has come to an end, it's behind us. And moreover, the World Organization's new rules allow Canadian satellite services to compete in the U.S. and foreign entities like U.S. Satellite to compete in Canada.
1054 So therefore, the clients of Telesat have a choice. If they believe that Telesat does not treat them well, provides undue preference to Bell ExpressVu as compared to Star Choice, for example, they will vote with their feet. They will transfer their business to other satellite entities, and again, as Jean said, Telesat, as the old sailor, will not be able to survive in the market place.
1055 So you have those two realities: The regulatory requirement and the realities of the market place that, in our opinion, will drive the conduct of Telesat which has been impeccable.
1056 As per Bell ExpressVu, again, I would like to say that first, it's still very much in the broadcast distribution side to the consumer. It's very much an analog world. For quite a number of years, it will remain predominantly delivery on analog cable.
1057 Bell ExpressVu, trying to develop its space in that very competitive environment will be driven by the requirements of the market which is more products from all subscribers and subscriber demand. So again, there will be built-in discipline for Bell ExpressVu as well.
1058 COMMISSIONER WYLIE: And what is your response on the second part of the question, which is, despite the fact that if you look at if from a distribution environment as it exists today and is so significantly analog, that as the future develops, BCE- CTV-ExpressVu combination allows the offering of telephony services along with video distribution services, and that's a concern because not everybody has that opportunity.
1059 MS SCOTT: Again, Commissioner Wylie, if I could go back to the approach that the Commission has taken on the telecommunications side, the question that it's asked itself is, in terms of bundling an offer to the consumer, which part of the bundle can a competitor put together from a variety of sources? These, you might put it into your bundle, because you either have a relationship with the service you created yourself, whatever.
1060 Is it possible for any given competitor to provide the same service bundle? Your rules have been addressed toward making sure that the bundles of services that we offer, others can offer comparable bundles.
1061 And so, to the extent that we have services in our bundle that would be characterized as utility services, the Commission has ordered us to unbundle those essential services so that our competitors can replicate those parts of the bundle.
1062 Now, if you look at the various services that are in this bundle, we can offer wireless. Many others can offer wireless as well. There's Cantel, there's Microcell, there's Clearnet that offer these services. If you look at long distance, there's competition there. If you look at Internet service, there's much competition in that area where we act as both a wholesaler and a retailer.
1063 With respect to broadcast distribution and the provision of programming services, again, there are a number of service providers. There's Star Choice, there's ExpressVu and there's a cable company, generally speaking, in the market place.
1064 So it is possible for people to put together these bundles.
1065 Now, there may not be may competitors. In the wireless world, the Commission decided that the market place was sufficiently competitive when there were just two service suppliers. The question is whether there is a possibility for a competitor to put together these service bundles.
1066 I think that's a good starting point for the Commission when it looks at this question as well; who is involved in the range of activities. It might not be everybody and everybody might not choose to offer up the full service bundle.
1067 But I guess, when we look at what we can offer, I would say to you that there are a number of others who could put together a comparable bundle, either through partnerships or because they have members of their corporate family that have those services.
1068 COMMISSIONER WYLIE: It's not a question of impossible to put the bundle together. It's the facility with which one can do it if this were approved, the question of the strength of the incumbency of cable because of the large number of subscribers that they have in one agglomeration as opposed to ExpressVu subscribers right across the country. People raise the question of incumbency, the fact that Bell Canada's wires are also, in large parts of the country, in the same type of concentration, and to say that bundles can be created by others as easily is perhaps too easy.
1069 MS SCOTT: I would never want to underestimate our competitors. When I look at the other partners that they have, you know, Rogers has strong partners in AT&T and Microsoft. Shaw has strong partners in Liberty. Each and every one of these sort of spheres of influence, I would say, they have different strengths and weaknesses that are present. We may be the incumbent local service provider in Ontario and Québec, we aren't in the balance of Canada. In British Columbia and Alberta, we are not the incumbent.
1070 Everyone brings different things to the table, and I don't think I would want to underestimate the ability of others, like Rogers or Shaw, to put together service bundles that would be equally appealing to consumers, and in fact, we see that they are embarking in exactly that direction.
1071 If one looks at the transactions, this activity in the market place that's emerging, it appears that others are coming to exactly the same conclusion that we are coming to, that a range of these services in the communications sector, in the "I" sector, going from content creation through the telecommunications transport is indeed a market place where people want to be so that they can provide what consumers want.
1072 It's not that we are making this up because we think it's a swell idea. It's that we believe consumers are actually interested in receiving these services on a one-stop shop basis from us, from some of our competitors. Not all consumers. Other consumers may well want to deal with niche providers of these services.
1073 But we believe that we are responding to a real consumer desire and that there are others that will compete with us in these large bundles and that this is very responsive to the market place.
1074 I think the Commission has done a good job, as I said, on the telecommunications side, addressing how you put these service bundles together in a fair and equitable fashion so that you do not allow for any type of abuse of market power.
1075 COMMISSIONER WYLIE: I'm not entirely sure that, despite Mr. Colville's great frameworks, that we are not dealing with something entirely different or partly different, at least, here, where there's a combination of a very large broadcaster with a very large telecommunications services provider.
1076 So you can get some comfort for the safeguards that have been put in place in other so-called spheres of influence, but they will only take you so far because this is -- we are looking at something new and what are the possibilities of diminishing voices and choices by marketing and packaging in a manner that serves your interests, either in the short or medium term. I know in the long term, Mr. Monty won't do anything silly. You get the pockets by being smart. But sometimes, being smart is not exactly what the regulator wants at the beginning of the cycle.
1077 MS SCOTT: Sorry. I would like to keep the difference between the broadcast distribution market and specialty services as a separate debate because the issues there are issues of program suppliers finding their way into consumers' homes.
1078 When I talk about bundling, I'm talking about what consumers want to receive by way of a service bundle, and I think the issues are different.
1079 Clearly, we are not dominant in the broadcast --
1080 COMMISSIONER WYLIE: Yes; they are two questions, yes.
1081 MS SCOTT: Yes. So I would like to keep those very separate and distinct.
1082 And I would say, with respect to this "One-stop shop", "Gee, you are big" and "Gosh, you are in a lot of lines of business", that's true.
1083 So, let's look at it from a consumer perspective and are there adequate safeguards there and let's look at it from the supply side, as well, and see if there's adequate safeguards there. And I would suggest to you, Commissioner Wylie, that, with respect to the consumer and their ability to receive services in a way that doesn't allow us to exercise market power, I believe the Commission has already started down a very positive pathway with respect to the bundling rules and the telecommunication service -- and, by the way, this transaction doesn't really change much on that front because ExpressVu was already one of the services we offered, on a retail basis, to consumers.
1084 So what has changed is that, now, there is a broadcast distribution undertaking and some specialty services. And I would say to you, on that front, that, with respect to consumers, again, there are -- we are not dominant in that area.
1085 And then, with respect to the supply side, I would say to you that, when we are talking about service suppliers trying to get into homes -- the services are largely analog now, to start with; they are going to be analog for a while -- we are not the ones that can guarantee the success of these services.
1086 And with respect to digital, I think Alain has gone over that, in great detail, and I'm not sure that needs to be revisited.
1087 COMMISSIONER WYLIE: On a more immediate basis, if you were a competing broadcaster, over-the-air broadcaster, would you not have some concern that the purchasing clout of BCE, at purchasing program rights, could, on the short term, disadvantage you as a competitor?
1088 MR. FECAN: I think --
1089 COMMISSIONER WYLIE: At least on the short term. Because I know, on the long term, Mr. Monty won't do anything silly, but maybe he would on the short term.
--- Laughter / Rires
1090 MR. FECAN: I think, in the short term, Mr. Monty won't do anything silly either.
--- Laughter / Rires
1091 COMMISSIONER WYLIE: You know what I mean: Being able to pay so much for the rights to programming that you are at a competitive advantage vis-à-vis other broadcasters.
1092 MR. FECAN: Well, I think it's been made very clear to us that we are to operate a responsible business. We have within this entity a minority partner that, also, is very interested in operating a responsible business. And I think that's what we will do: we will operate a responsible business. We have to deliver responsible returns on the capital invested. That was the situation before. That's still the situation now.
1093 In terms of having an advantage, I think you know it is certainly my point of view, and our point of view, that having a lot of shelf space is an advantage, and our competitor is the one that has two streams of shelf space on conventional television -- and conventional rights are different from specialty rights.
1094 So, I really feel that if there is an advantage, it's that which CanWest-WIC has -- and we hope they will behave responsibly. We certainly intend to.
1095 COMMISSIONER WYLIE: So, in your view, you don't think that there is any particular safeguards that have to be put in place? Or, if there were, what would they be?
1096 MR. FECAN: I think the market is the safeguard. I think we must run a responsible business.
1097 I think, in a very key respect, both CTV and CanWest are legitimately concerned about the amount of money we leave in Hollywood every year -- I don't think that particularly is a benefit to the system -- and so, at the same time, we strive to be competitive for audiences. We will find different ways of doing it. We have to. I mean that's part of the great aspect of the program policy. But I think the marketplace will determine that. And I think it is in both of our interests to behave responsibly because both parties have, I think, the ability to push, and I don't think that serves either one of us well, in the short term or the long term.
1098 COMMISSIONER WYLIE: Yes, I hope you remember, Mr. Fecan, that some of these arguments don't come from me.
1099 MR. FECAN: No, and I appreciate that.
1100 COMMISSIONER WYLIE: In other circumstances, they were expanded on, at length, as to the effect purchasing clout one may have when trying to buy the product that, then, you are going to sell to advertisers.
1101 I don't have Alzheimer's yet.
--- Laughter / Rires
1102 COMMISSIONER WYLIE: So, you think, in that case, the market will take care of it.
1103 Now, before I leave distribution, to look at the last area I want to look at, which is the producers not with regard to the priority programming but with your normal broadcasters' activities, Mr. Gourd, you come back to the code that you put forward during the last hearing for digital licences. So that is the type of code of conduct that you would recommend to institute what you call reciprocal good behaviour between the players?
1104 MR. GOURD: It is, indeed, a key tool that we are proposing. We will benefit, as we circulate the code, from the enrichments that will come from various parties but, indeed, it is a key tool in addition to the regulatory requirements and the contractual proposal that we have made.
1105 COMMISSIONER WYLIE: When you speak of reciprocity, who is the other side? When you use that phrase.
1106 MR. GOURD: It was the program suppliers.
1107 We feel that a healthy relationship is one where the distribution undertaking treats fairly, on an equity basis, both affiliated programmers and non-affiliated programmers; and, conversely, that programmers which are affiliated to another distributor treat similarly Bell ExpressVu equitably, as well. And that notion of reciprocity in the fairness of the treatment, I have to say, has been very well received.
1108 COMMISSIONER WYLIE: I asked you, then, and I ask you now, do you think that for that to work you would have to co-opt to other distributors, as well? Or is the relationship with the programmer sufficient to provide an additional safeguard that minimizes the need to come to the Commission and use its regulations to arbitrate disputes or decide whether there was, indeed, a breach of the regs prohibiting undue preference?
1109 MR. GOURD: For the code to apply, it requires the involvement of us, as a distributor, and of a supplier, the supplier of a program service.
1110 So, in order for the code to be applied to Bell ExpressVu's behaviour proper, I don't see, prima facie, the need to involve other distributors.
1111 If other distributors believe that it would be a good thing to have a similar code, well, quite frankly, since we have proposed one we would not object to that, obviously. But it is not a necessity for this code to apply to us.
1112 COMMISSIONER WYLIE: If I recall, the code required that the treatment that a distributor and a programmer arrived at -- another distributor and a programmer arrived at, would be the arrangement that should be arrived at with you, given numbers, I suppose, and obvious differences between the two.
1113 MR. GOURD: Indeed, it requires that similar terms and conditions that similar fairness and equity be present in the relationship between Bell ExpressVu and an affiliate as well as between Bell ExpressVu and a non-affiliate.
1114 COMMISSIONER WYLIE: With regard to producers, you discussed with Commissioner Colville the question of non-arm's-length and arm's-length producers, with regard to the priority programming.
1115 Have you thought about how that would be addressed, with regard to other production of the other eight hours? Because I think your -- isn't your relationship with producers increased?
1116 MR. FECAN: By and large, most of our priority programming for the eight hours comes from independent producers, with a few exceptions. Of course, W5 is produced by our news department. And I think E Now, which is our entertainment magazine show, is produced by our entertainment unit. But, by and large, very little of it has been produced by any kind of affiliated producer -- and I don't see that particularly changing.
1117 MS McQUEEN: I don't see any real difference in this transaction vis-à-vis producers except for the priority program area that we have taken care of already. So I'm not sure what else -- Bell doesn't -- BCE doesn't produce any programs.
1118 COMMISSIONER WYLIE: But it is quite possible that at renewal some questions may be asked. It has been a subject of discussion during the four-week hearing we just went through, and depending on the situation of each broadcaster there may indeed be some discussion, as there may be, of course, about the type of safeguards that may be required with other acquisitions that may not have -- such as newspapers, may not be, but indirectly may be of concern to us.
1119 So you won't be surprised if some of these issues are raised when you come back, if this transaction is approved?
1120 MR. FECAN: We are forewarned.
1121 COMMISSIONER WYLIE: Thank you very much.
1122 CHAIRPERSON OF THE COMMISSION: Merci.
1123 Commissioner Wilson has a question on that subject.
1124 COMMISSIONER WILSON: Just a very quick question on the code.
1125 You presented the code as a distributor at the digital hearing and again here, but if this deal is approved you will be a program supplier.
1126 Commissioner Wylie asked you: Do you think other distributors should be parties to your code? I guess as a program supplier you would be looking for a code from them?
1127 MR. GOURD: Thank you, Ivan.
1128 COMMISSIONER WILSON: Potentially you are wearing two hats.
1129 MR. GOURD: Well, as I said a bit earlier, since we are proud of the code, we believe it is a good thing, we would not object if Ivan and Trina, as programmers, had the benefit of a similar code with other distributors.
1130 COMMISSIONER WILSON: Do you think that a code is required for services that are already launched on analog or just for the new services that are coming out?
1131 It's a competition to answer the question.
1132 MS McQUEEN: Yes, I do think that it would be more peaceful in the valley if a code were instituted that took account of services, both present and future.
1133 Obviously there are contract renewals and other situations in which there are disputes. I'm sure that the distributors as well as the program services would like to have simpler ways of dealing with those and a code seems to be a good idea.
1134 COMMISSIONER WILSON: Thank you.
1135 CHAIRPERSON OF THE COMMISSION: Merci.
1136 Now I will ask Commissioner Noël to complete with the questions concerning benefits.
1137 COMMISSIONER NOËL: Well, you had the benefit of philosophical questions all day and you will have to bear with me because I have been assigned the task of asking you the "la dissection" of your "brochette" of tangible benefits. But don't worry, I will not question every one of them. There are too many.
1138 There are a number of tangible benefits with which we don't have any big questions arising but, on the other hand, we have a number of non-priority programming tangible benefits that do raise some issues. I will just list them so that you know exactly where I am going.
1139 There is the Regional Specialist Journalist of the Future and it is $14 million that you have committed to; there is Diversity in News Initiatives, $3.5 million; there is the Two-Way Hat, $11 million; the New Links, $10 million; APTN, $3 million, and the level of our anxiety is very variable also you will see from the question.
1140 The Content Innovation Network, $5 million; ITV Specialty and Development Offices, $3 million; the Bell Broadcast and New Media Fund, $10 million; Ryerson, the BCE Chair in Convergence and Creative Use of Advanced Technology, $2.5 million; BCE New Media Centre of Excellence in Collaboration with B.C. Institute of Technology, $1.5 million; Community Journalism Initiatives, $2 million; and, finally, the Canadian TV Image Bank for $3.5 million.
1141 I will take them in that order.
1142 So if we go back to Regional Specialists, Journalism of the Future. It seems that in your answer to the deficiency letter of June 28 you seemed to worry that you would lose a number of those highly trained, at a high cost, journalist to competition. Have you thought of some sort of strings to keep them on board. Like let's think of what the military does. I mean, I don't want to get into --
--- Laughter / Rires
1143 COMMISSIONER NOËL: -- muddy grounds here, but they have a tendency to keep their people on board for a number of years after they have paid for their training. So have you given any thoughts to a way of keeping them on board, at least for some time to recover the investment in their training?
1144 MS McQUEEN: I think that our feeling is that if they do leave they will probably go to another news organization, so another journalist organization would get the benefit of the training. Because these are benefits, I don't think that we could resist that and insist that the investment be, so to speak, paid off.
1145 COMMISSIONER NOËL: So far from you the thought of self-serving benefit here.
1146 MS McQUEEN: Right.
1147 COMMISSIONER NOËL: Okay.
1148 Now, will you be able to quantify the improvement in the reporting of coverage of events as opposed to the amount of money that you will put in that initiative?
1149 MS McQUEEN: I think the only way one could do that would be to ask journalistic experts whether to review the programs and see whether there was an enhancement.
1150 I don't know how otherwise the enhancement could be quantified in any particular way. There is an assumption there that there are certain issues in this country that are complicated but very relevant to local interests.
1151 There is an assumption that if we are able to bring journalists into a community and that these journalists really do have expert knowledge that they will produce more informed journalism. But I am unable to think of a way to measure that improvement, except to ask experts in the field to say whether or not these people are performing at a higher level than journalists who haven't had that kind of training.
1152 COMMISSIONER NOËL: Do you think that -- we are talking about 15 new people per year. Do you think that they will be placed in locations where the real issues are happening and that the proper training will be given? You know, you are talking about medicine and other technical trades. Will you have the right person at the right place at the right time or would it better to have them on your national news crew and just dispatch them where events take place?
1153 MS McQUEEN: In fact, I think some of the journalistic intervenors have said to you that in fact it is better to have them in the local newsrooms.
1154 We see often that these issues arise in almost every city where there is a water safety problem, a construction safety problem, environmental issues, hospital issues, care of the aging, issues that relate to technology and the use of technology.
1155 In fact, many of these issues do take place at the local level. Obviously we will have a coterie of people who are informed and if there should be something -- Walkerton is the one we always talk about -- if there should be a Walkerton, we could send two or three people to that area who had training in that background.
1156 But, no, I think that the uniqueness of this benefit is to give local communities the same excellent standard, or even in this case a higher standard of reporting than might be available from the national. It is not a centralist, it is a belief that local communities deserve a high standard of excellence in reporting.
1157 COMMISSIONER NOËL: And local doesn't mean remote all the time.
1158 MS McQUEEN: Well, local, I guess it is the communities where we have stations. Some might call some of them remote, some might not.
1159 COMMISSIONER NOËL: Yes. Well, there is a difference between being local and being located in the bush.
1160 MS McQUEEN: Absolutely.
1161 COMMISSIONER NOËL: Abitibi is remote.
--- Laughter / Rires
1162 COMMISSIONER WYLIE: Mr. Gourd, I see you have already fallen on the floor.
--- Laughter / Rires
1163 COMMISSIONER NOËL: Did you ever try to fly there when there is some fog.
1164 Another initiative is the diversity in news initiatives, and you are going to spend $3.5 million on that.
1165 Our only concern in that respect is whether this is really incremental or if this is something that you would normally do in the course of a business.
1166 Could you elaborate on that particular initiative?
1167 MS McQUEEN: Yes. I think, Commissioner, that one of the things we could do is report to you on what we had spent that money on, and I think you would be satisfied if we fulfilled our intentions.
1168 What our intentions are is to, I guess, do two things. The benefits allow for enhanced news and current affairs programming and they also talk about things that would not happen without a certain transaction.
1169 It is unheard of in broadcast news to be able to give reporters -- I don't know if you would call it the luxury, but the ability to be involved in events without the necessity of making reports and providing air time. These diversity benefits in fact would allow things, for example, reporters to actually go to a community when nothing particular is happening there and live in the community and become much more familiar with the routines, the customs and the ideas of that community.
1170 They would allow reporters, for example, to spend time at conferences and other kinds of events, which general consists of a lot of people talking and debating and having workshops, not considered particularly good television but as an enrichment of the attitudes and the intelligence that will then be directed towards a story when something does happen, extremely valuable.
1171 So what we are looking for in this event is the ability to allow reporters time away from deadlines, to understand -- it's as simple as that, to really understand some of the diversity issues in this country and not always being reporting on crimes or conflicts or headline-type news, but in fact being able to go into a conflict and understand it more thoroughly because they had been there when the conflict was not taking place.
1172 It will also allow a little bit of extra travel to, for instance, home countries where you can understand a little bit more of what Canadians who have just come here have come from. That is valuable to certain communities. You know, if you have a large population in your city and a report has never been to the homeland, this would be a very enriching experience to allow somebody to travel to that homeland.
1173 COMMISSIONER NOËL: The other initiative that I would like to ask you a few questions on is the Two-Way Hat.
1174 MS McQUEEN: Yes.
1175 COMMISSIONER NOËL: That is the teenagers and young adult program.
1176 What we are interested in knowing is what is the schedule that you have in mind for that program. Will it be a weekly program? Where will it be placed on your grille horaire? Will it be at prime time or other?
1177 MS McQUEEN: Yes.
1178 COMMISSIONER NOËL: If it is not popular, if it doesn't work, will you run it still for seven years or do you have alternatives?
1179 MS McQUEEN: To answer the last part of the question first, in all these programming benefits the notion is if it doesn't work it disappears, but then something else like it takes its place.
1180 So if the first idea for a current affairs show directed at young people didn't work, we would take that one off the air and then we would look for new producers and new ideas to have a new program.
1181 So hopefully we will hit it right the first time, but that money will continue to be spent on that general objective, although the name of the program may change and the style of the program may change over the seven years.
1182 It is envisaged as a half hour program and at this point we have not come to a conclusion about how or where to schedule it, perhaps 7:00 p.m., but we would have to look at the nature of the program before we made a final decision on that.
1183 COMMISSIONER NOËL: Or is it like discotheques, after 10:00 only?
--- Laughter / Rires
1184 MS McQUEEN: That's who is staying up late, certainly.
1185 COMMISSIONER NOËL: The other initiative that I want to talk about is the News Link. As well, I forgot to mention the other one is --
--- Off microphone / Sans microphone
1186 COMMISSIONER NOËL: Sorry. I always forget this thing.
1187 The 2-Way Hot was 11 million and the News Link is another 10 million.
1188 Our concern is about the potential conflict of interest with Telesat as the provider of services. Could you tell us how you will -- I guess I'm coming back to Mr. Gourd -- how you will resolve that potential conflict of interest.
1189 I know that in response to deficiencies you said that you would commit to a non-BCE satellite provider but that you think the public interest would be better served by using the best overall provider at the best price regardless of ownership.
1190 MR. GOURD: Indeed the award process or the bid process would be an open process with various providers being able to offer the best bid. Of course, if we talk about international links, it would be perhaps more a Teleglobe than a Telesat, whose mandate is more the Americas, but the principle would apply.
1191 COMMISSIONER NOËL: Thank you.
1192 The next one is APTM and this is not -- we recognize the benefits there, but we would like to know if -- and it is $3 million to open news offices in I guess it's six locations.
1193 Is there a reciprocity? Will you air some of these newscasts that will be produced by EPTN or is it straight money given?
1194 MS McQUEEN: Basically, there is no deal that they have to supply us with news. We do have a good co-operative relationship with APTN. Our hope is that they would provide news reports and that their reporters might, on occasion, help us out in our news programs. That's not an obligation on their part, but it is something that we would very much hope will happen. As I say, we do have a good working relationship with them and we think it can happen.
1195 The money is given to APTN. APTN will control it and will use it in whatever way seems beneficial to them in starting news bureaus in cities across Canada.
1196 COMMISSIONER NOËL: Talking about who controls what, our next area of concern is the Content Innovation Network, for which you are putting in $5 million.
1197 In the answer to deficiencies, you did mention:
"It is anticipated that in the third year of this initiative we will be in a position to invite additional Canadian new media training organizations into the network." (As read)
1198 Who is "we"? Is it "we" Bell, BCE or is it the regal "we", the royal "we"?
1199 MR. MACDONALD: It would be, if approved, the new company.
1200 COMMISSIONER NOËL: If approved it would be...? Sorry?
1201 MR. MACDONALD: It would be the new company.
1202 This is the BCE Content Innovation Network. When we said "we", we are establishing it initially with the Canadian Film Centre, the Banff New Media Institute -- and then it would grow from there.
1203 COMMISSIONER NOËL: But the control would not rest with those people, but with the company. That's the way the funds are spent.
1204 MR. MACDONALD: No. We are providing the funding. This is the group that will really be administering it, the "we" in that particular case. The funding comes from us, but the administration will be with them.
1205 COMMISSIONER NOËL: That's what I wanted to hear. Thank you.
1206 Now, the next one is "ITV Specialist and Development Offices". That is an initiative of $3 million. We are not sure we understand if these people will be incremental staff in your offices or if you will train people in that field that are already on your payroll.
1207 Could you give us a bit more of what you mean by --
1208 MR. MACDONALD: They would be all incremental positions.
1209 As I believe Trina mentioned earlier, what we have experienced from producers is a great interest in ITV but not really an understanding of how it goes together. We certainly identified that it can't be a bolt-on. It has to be developed. The ITV components have to be developed at the same time as the program itself is in development. They are very, very different disciplines. That came directly out of our consultation with the producers. It has certainly been also reflected through the information we got in consultation with the Bell New Media Fund.
1210 So the idea of having three people specifically selected because of their expertise in interactive is what started that process, and they are incremental and they will be co-located with the existing development officers in the CTV development offices which are in Halifax, Toronto and Vancouver.
1211 COMMISSIONER NOËL: But they will not be CTV staff?
1212 MR. MACDONALD: No.
1213 COMMISSIONER NOËL: So the benefits will go to the outside producers eventually when those people, after being trained, go back into their normal environment?
1214 MR. MACDONALD: No. I apologize. They would be CTV staff. My apologies.
1215 COMMISSIONER NOËL: They would be CTV staff?
1216 MR. MACDONALD: Correct. And they would be hired incrementally to the existing staff.
1217 COMMISSIONER NOËL: Wouldn't that be a self-serving benefit in a way?
1218 MS McQUEEN: The specialists are there really to serve producers. An independent producer might come to the development office with a project and in order to get that project going the producer needs some interactive element, but isn't knowledgeable about that. The ITV specialist would take a look at the script and the idea and help that producer get the program ready for an interactive component. The producer would then own that interactive component and would licence it to the respective broadcaster, hopefully us.
1219 So it really is like a training resource in the CTV offices so the producers could have some assistance in, as Jim said, from the beginning, getting the interactive elements.
1220 I believe that this would be really the next logical step. The original development offices themselves came as a result of one of the CTV benefit ideas, benefits packages awhile ago, and this is just adding on to that benefit in a new kind of way. But it really is to work with producers. It is a resource for producers.
1221 COMMISSIONER NOËL: It would not be for the sole benefit of the Internet side of your business?
1222 MS McQUEEN: It would be for the benefit of making a broadcast program able to have an interactive enhancement, but there would be no -- nobody could come and say, "Help me design a Web site" or "Help me put out a CD." It has to be related to a broadcast project.
1223 COMMISSIONER NOËL: Now, let's turn to the Bell Broadcast and New Media Fund.
1224 You do explain in your supplementary brief that this is a one-shot deal, $10 million investment.
1225 Then, not in the letter itself but in the attachment to your Response to Deficiencies where you list -- let me get to that piece of paper -- it's page 60 of the chart there. There is a line which says "Bell Broadcast and New Media Fund" -- it's not the last one, the one before. It is $2 million in each of the first five years with a total of $10 million.
1226 Could you explain the difference, if any, or if that is mathematics that we should do in privacy?
1227 MS SCOTT: I will do my math publicly. I'm ready.
1228 If you look in the Response to Deficiencies, actually, it indicates that the final allocation of the $10 million was going to be subject to discussion with the Board of Directors of the Bell Fund. I can talk to you a little bit about that because I sit on that Board.
1229 Quite frankly, the $10 million was just taken -- it was taken spread over five years as a proforma presentation of the $10 million because there was no final determination by the Board members as to how they would like to receive that money.
1230 I guess there are a couple of models. One could take it and spread it out over many years. One could take it over a shorter period of time, and then be in a position to create something like an endowment, which would generate interest that could be used for the purposes of augmenting some of the activities of the Bell Fund.
1231 So the point was that there would be a total of $10 million in the benefits that would be made available, and that would ultimately be the determination of the board, as to how that money would be best used.
1232 COMMISSIONER NOËL: Talking about an independent board, can you confirm that the board of the fund is independent from the BCE or Bell --
1233 MS SCOTT: Yes, I can. We have been certified by the CRTC to be eligible to receive 1 per cent of the gross revenues of BDUs that make those contributions. We filed our guidelines and our articles of incorporation with the CRTC and we have the clauses in there that indicate that no more than one-third of the members of the board would be representatives of a BDU.
1234 So that is meant to respond to the Commission's concern about independence and, as I have said, we have been certified by the Commission for, I think, over a year now.
1235 COMMISSIONER NOËL: Thank you.
1236 Now let's turn to the Ryerson-BCE chair in convergence and creative views of advanced technology -- $2.5 million.
1237 The only concern we have is, is this related to broadcasting or is this technical, in a larger sense?
1238 MR. MACDONALD: No, it is very much related to broadcasting. Everything that we have tried to develop in this package is related, one way or the other, to broadcasting we think. And we have to be looking not only at today, but tomorrow. And Ryerson, certainly through their radio and television arts program, is producing some of the finest students in the industry, and we feel that by developing a chair in convergence, which is essentially new media related to broadcasting, the school really moved the sticks forward.
1239 So it is very much related to broadcasting.
1240 COMMISSIONER NOËL: Thank you.
1241 What about the BCE New Media Centre of Excellence -- BCIT -- $1.5 million?
1242 MR. MACDONALD: The same thing. We were looking -- one of the other things we have tried to do in this package is to provide a balance. BCIT -- and they may not like me saying this -- but, essentially, it is the Ryerson of the west. They have done an outstanding job in their training. They are moving aggressively into the new media area, so this was a very similar type of program for western Canada.
1243 COMMISSIONER NOËL: You have also an initiative of $2 million for community journalism initiatives. There is a host of scholarships. There is a whole list of them. Some are in journalism; some are somewhat more related to broadcasting. Could you tell us how they would fit in as a benefit to the broadcasting industry?
1244 MS McQUEEN: These proposals were made by the heads of the CTV stations in various communities, and we asked them to look for opportunities to help out institutions that might provide local journalism and local community programming with resources for the future.
1245 So all of the benefits are related to that. We would provide to these institutions, in each locality, funds which would enable them to enrich or strengthen or give scholarships to young people in areas that, again, would hopefully lead to better community and local journalism in the future.
1246 And you are right, there are a host of them, and I think it is one of --
1247 COMMISSIONER NOËL: Yes, there are many. I don't want to go through and mention every one of them.
1248 MS McQUEEN: No.
1249 COMMISSIONER NOËL: But, as I said, some of them are more oriented toward journalism -- a school of journalism -- than to broadcasting studies, per se.
1250 MS McQUEEN: Yes, but in many cases that is where most of the local community journalists come from, from those schools. They go for the basic journalistic training and then they come to the television stations and become journalists there. So they would all be related to the future of the broadcasting system in some way.
1251 And we were very pleased at some of the ideas and the ability that this benefit package gave us to spread resources among so many important institutions in this country, so that so many Canadians will in fact have a chance to improve the broadcasting system.
1252 COMMISSIONER NOËL: The final question that we have is on the Canadian Television Image Bank, and we are talking about $3.5 million to digitize archives, more or less, before they disappear by themselves. Your supplementary brief started with the death of Maurice Richard and the fact that all of the images we had were sort of worn out.
1253 Will these archives -- and let me go back to where I have some little notes here --
1254 Do you consider that this will be available once digitization is made? Do you plan to make this material available to other broadcasters where there is a scarcity of images of Canadian icons or heroes?
1255 MS McQUEEN: We have said that we will make it available to non-profit and community groups for their use, and to preservation societies, museums, and so on and so forth.
1256 What we will also commit to do is to make them available at a standard fee to other broadcasters and to reinvest the profits from that into priority programming. In other words --
1257 I guess there are two issues here. One is that there are a number of rights issues in these digitized archives. Some we control and some we don't. We feel quite comfortable in making them available, where we can, to educational and non-profit institutions. For-profit institutions, I guess -- for profit-making institutions we would have them like any other archives, available at a reasonable price, and we would not make any profit on them. We would reinvest the profit. And, again, we would be happy to provide you with reports on how that occurs.
1258 COMMISSIONER NOËL: Would there be conditions set across the board for access to this material, or would it be on a negotiated basis?
1259 MS McQUEEN: We would have a rate card, if that is what you are asking, and it would be able to be compared to similar rate cards for stock material, yes.
1260 COMMISSIONER NOËL: Thank you. Those were my questions. I will give back the microphone to the Chair.
1261 CHAIRPERSON OF THE COMMISSION: Commissioner Wilson has a few additional questions before I turn your attention to our legal counsel.
1262 COMMISSIONER WILSON: I just wanted to clarify your commitment with respect to the $2 million that goes to NBRS. You have said that you are going to provide descriptions for all of the 175 hours of priority programming that you have proposed to do over the course of your new licence. But in cases where that is an extension, where you are extending a series from 13 to 18, what about the first 13 instalments? Are they described, or are you just going to describe the additional instalments?
1263 You are looking around to try to figure out who is going to answer.
--- Laughter / Rires
1264 COMMISSIONER WILSON: Who was the architect of this commitment?
1265 MR. MACDONALD: I think the intent is to work with NBRS on what is the best way to invest the money overall.
1266 Our intent is certainly to take the 175 hours as a base.
1267 As we have said in our presentation, we wanted to try to make sure that as many hours as possible were generated, and that also we were able to lower the cost.
1268 So I think that, to your point, we would have to review with NBRS what made sense. It would seem to make very little sense just to do the last four episodes. So I think that our position would be to include all of our hours on those extended programs and to take them out of the 400 that we would hope to do as part of this overall benefit.
1269 And if we can open up those programs to the vision impaired from the beginning, I think that is a much better benefit than just doing a few hours at the end.
1270 COMMISSIONER WILSON: Is the 175 hours in addition to the 400 hours that you are committed to? Is it a total of 575 hours?
1271 MR. MACDONALD: No, it would be part of the 400 hours.
1272 But I again indicate to you that we hope that that will be more hours, ultimately, if the cost per hour comes down.
1273 In our consultations with NBRS, they think that this is a quantum of commitment that they can, in fact, get the per hour rate down.
1274 They felt very confident that we could say that a minimum of 400 hours would come from this benefit.
1275 COMMISSIONER WILSON: Okay, thanks.
1276 CHAIRPERSON OF THE COMMISSION: Counsel...
1277 MS MOORE: Thank you, Madame la Présidente.
1278 With respect to incrementality, are you committing that your proposed benefits will not only be incremental to current exhibition and expenditure levels, but that they will also be incremental to all ongoing benefits from all previous transactions relating to CTV?
1279 MR. FECAN: Yes.
1280 MS MOORE: To further clarify, some of the proposed benefits will be incremental to expenditure requirements in relation to specialties. Is that correct?
1281 MR. FECAN: Yes.
1282 MS MOORE: There was a discussion with respect to licence fees, for example, earlier today.
1283 So, in your view, the licence fees that were referred to earlier, there wouldn't be any possibility of double counting for those licence fees?
1284 MR. FECAN: That's correct.
1285 MS MOORE: And you have committed to, if necessary and required, report to the Commission, and it would be possible to break out those licence fees as a reporting item?
1286 MS McQUEEN: Yes. The specialty licence fee would, in fact, be charged to the specialty channel using the program. So they would count it as part of their expenditures. However, the revenue would come back and be added into the priority programming envelope.
1287 MS MOORE: Thank you.
1288 Would you be prepared to file with the Commission, no later than next Monday, your understanding of the current and ongoing benefit requirements from previous transactions affecting CTV, including an itemization of the transactions, the related benefits, and the timing of the roll-out of what remains to be fulfilled?
1289 MR. FECAN: Yes.
1290 MS MOORE: Thank you.
1291 At page 50 of your 28 June response to deficiencies you stated that in the event that any of the proposed benefits are found to be unacceptable, you would propose to file with the Commission, for approval within 90 days of the decision, a revised package for amounts found to be unacceptable.
1292 What if instead the Commission were to require that any disallowed amounts be redirected to specific benefit proposals that are found to be acceptable in the course of this proceeding?
1293 Do you have any comments?
1294 MR. FECAN: We would be pleased to do that.
1295 MS MOORE: The order of magnitude of disallowed benefits wouldn't affect your view? You wouldn't have a preference?
1296 MR. FECAN: These are clearly designed to be incremental benefits, and we have tried to create the best possible menu, but the Commission will rule.
1297 MS MOORE: Could you just state for the record the level of CTV's interest in Landscape Entertainment?
1298 MR. FECAN: At the moment it is about 50 per cent. So at the moment it would not qualify as an independent production company.
1299 MS MOORE: You say "at the moment". Are there any --
1300 MR. FECAN: They are looking for other investors, and it is our intention to be at around the one-third level. But we may stay at the current level. It may go down. It depends on how well their business grows. This was not intended to be our in-house production company. I guess the best example would be Fireworks, with CanWest. This is not intended to be our "Fireworks".
1301 MS MOORE: If the transaction were approved and the Commission were to accept the proposal that BCE report annually on the incremental nature of the benefits, are you prepared to work with Commission staff, with respect to the content and form of that reporting?
1302 MR. FECAN: Of course. We would be pleased to.
1303 MS MOORE: Thank you.
1304 With respect to some of the contractual protections that Monsieur Gourd referred to, is it my understanding that you are committing, now, to include, systematically, an MFN clause in all your contracts with all programmers, as well as a right to third-party audit?
1305 MR. GOURD: We are proposing to offer to every programmer such a contractual obligation; however, it will be their choice to accept it or not -- and we would be pleased to file a model provision with the Commission.
1306 MS MOORE: With respect to the third-party audit, would this include a right to scrutinize not only any renegotiated contracts with affiliates but any existing contracts?
1307 MR. GOURD: Yes. The idea is that that third-party auditor -- normally, the auditor of the programmer -- would come in, would have a question in mind, "Is the contract between my client, the programmer, and Bell ExpressVu such that it benefits from the most favoured nation provision?"; the auditor would look at all the relevant material and we would report back to both Bell ExpressVu and the programmer, but, indeed, the auditor would be allowed to look at all relevant information.
1308 MS MOORE: With respect to the draft code of conduct, are you in a position to file that for the record of this proceeding?
1309 MR. GOURD: Yes. We have already filed a draft during the digital specialty services proceeding, and we would be very pleased to file the current version during this proceeding.
1310 MS MOORE: Would you be in a position to file that for tomorrow morning?
1311 MR. GOURD: Yes.
1312 MS MOORE: Thank you.
1313 With respect to expenditures for party programming for this year, for 2000-2001, there was some confusion as to what had been filed.
1314 It's our understanding that, at this time, we do not have a breakdown, on the basis of categories, for that.
1315 Would you be in a position to file that information for tomorrow?
1316 MR. FILLINGHAM: Yes, we can.
1317 MS MOORE: Thank you.
1318 And, finally, some charts were referred to, this afternoon, and I'm wondering if you are in a position to file those for the record, as well?
1319 MR. FECAN: Yes, of course.
1320 MS MOORE: Thank you.
1321 Those are my questions, Madame la Présidente.
1322 LA PRÉSIDENTE DU CONSEIL: Merci beaucoup.
1323 Alors, nous arrivons au terme de la Phase.
1324 I would invite you to answer any question that we haven't asked because we have really come to the end of our questions for this point in time of the hearing.
1325 MR. FECAN: I would just, in summation of the closing of this section, say, as we have said many times before, and again many times today, we believe this application is about content.
1326 It's about making sure the Canadian broadcasting system of the future can provide Canadian viewers with a high-quality Canadian content we need at home and that we would love to export around the world.
1327 It's about making the transition to the future with the best possible strategy and resource base to make sure we build on what we have and move it to a sustainable new economic paradigm.
1328 It's about making sure that, in a world of multi-media giants, we have strong, effective Canadian competitors. This will ensure that Canadian stories can be told with a degree of excellence that will build loyal audiences and identity.
1329 In other words, share of mind and share of heart for Canada.
1330 In real terms, this application is also about the survival of CTV -- and make no mistake about it, BCE is the white knight here. BCE doesn't just bring us stability; it brings us a future. But it also brings us a commitment to build on more excellent Canadian content married to the will and expertise to help us innovate in a whole new sphere of creativity and cross-media activity.
1331 Instead of CTV being broken up, CTV will be the cornerstone of BCE's media activities. We will be storytellers and the programmers and the marketers and we will be delighted to work with BCE's experts to make sure Canadian viewers have every advantage in getting access to the drama, news, sports, they want and need.
1332 The benefits package we have tabled, the largest in the history of our country, $230 million over seven years, we really feel will help strengthen the system tremendously. One hundred and seventy-five hours of new, original and incremental Canadian priority programming. A whole new range of opportunities for independent producers to respond to what they want and work the way they dream of working and measures to nurture a generation of Canadian creative professionals and Canadian audiences into the future so that, collectively, we are all ahead of the curve rather than being left behind.
1333 I have got to tell you we are really tremendously excited at the promise this transaction holds for us, for CTV, for the Canadian broadcasting system and for Canadian viewers, and we thank you for the opportunity of presenting our case. We hope that you will be able to share our belief in this vision of a healthy future in which both Canadian creators and Canadian viewers find that the whole new world has opened up for them.
1334 Thank you very much.
1335 LA PRÉSIDENTE DU CONSEIL: Merci beaucoup, mesdames et messieurs. Merci infiniment de votre collaboration.
1336 Thank you very much for your patience with all our questions.
1337 Now we will be entering a new phase of this hearing.
1338 Thank you very much.
1339 MS McQUEEN: Thank you.
1340 MR. FECAN: Thank you.
1341 CHAIRPERSON OF THE COMMISSION: We will, first, take a pause before we move into the intervention phase. Fifteen minutes.
--- Upon recessing at 1750 / Suspension à 1750
--- Upon resuming at 1805 / Reprise à 1805
1342 CHAIRPERSON OF THE COMMISSION: Before we introduce the next phase of the hearing, I would like to correct what I said earlier. We will be hearing only two more intervenors. There will be the CCTA, first, and then the CCSA. Union will be coming tomorrow.
1343 Madame la Sécretaire, s'il vous plaît.
1344 LA SÉCRETAIRE: Merci Madame la Présidente.
1345 We are now entering Phase II of this hearing.
1346 Each intervenor is given 10 minutes to present its intervention, and it might be followed by questions from the Panel Members.
1347 The first intervention will be presented by the CCTA, with Janet Yale.
1348 I would like you to introduce your panel for the Court.
INTERVENTION / INTERVENTION
1349 MS YALE: Thank you.
1350 Good afternoon, Madam Chairperson, Commissioners.
1351 My name is Janet Yale and I'm President and CEO of the Canadian Cable Television Association.
1352 Joining me, today, on my immediate left, is Ted Rogers, President and CEO of Rogers Communications inc. On my right is Jim Shaw, President and CEO of Shaw Communications Inc.
1353 In the back row, from left to right, are Ken Englehart, Vice-President, Regulatory Law, with Rogers Communications; Ken Stein -- last I looked -- Senior VP, Corporate and Regulatory, Shaw Communications; Phil Lind, Vice-Chairman, Rogers Communications; and Michael Hennessy, CCTA's Senior Vice-President for Policy and Planning.
1354 Madam Chairperson, let's be clear. This hearing is not just about another corporate transaction. This takeover is the most significant transaction in Canadian broadcasting and communications history, and even before it's approved, comes yet another unprecedented transaction. Together, the CTV and Thomson deals will reshape broadcasting, telecommunications and print media in this country.
1355 Obviously, all of us as Canadians should be concerned about this amount of power being concentrated in a single entity.
1356 En fin de compte, si vous approuvez la stratégie de BCE, il faudra que les autres joueurs bénéficient de cette même occasion de croître, de s'intégrer et de mieux concurrencer. Autrement, nous perdrons au change au niveau de la diversité de l'information et de la concurrence. Donc, si l'on permet à BCE de s'approprier les meilleurs éléments du contenu canadien, on devrait aussi le permettre à l'industrie du câble, si l'on considère le besoin de concurrence et de diversité, ainsi que la nécessité d'assurer l'équité.
1357 MR. SHAW: The key to sustained competition is having more than one strong competitor. It would not be in the public interest to create a single entity that could dominate the broadcasting and communications market across all platforms.
1358 As you know, Shaw strongly believes in the need for strong, competitive broadcasting and communications companies. This Commission has encouraged that.
1359 We have seen great success in the broadcasting system over the past few years, including the introduction of a vast menu of new programming services, the development of alternative distribution means, including MMDS and satellite, and the roll-out of high speed Internet services to all Canadians.
1360 We believe that we have built, over the past number of years, a strong, competitive system that has increased the choice for Canadian consumers and greatly increased the opportunity for Canadian voices.
1361 If this deal is approved without significant changes in CRTC policies and practices, the remarkable growth and competition that has taken place in recent years would be jeopardized. BCE, with the broadcasting, communications and Internet entities it controls, will be in a unique position to offer and market services across a whole range of platforms to the detriment of the competitive environment we have all worked together to build.
1362 Unless the Commission removes all regulatory barriers to cable company ownership and control of programming services, the result of approving BCE's application may well be the creation of a single enterprise with an overwhelming market advantage. Giving BCE a regulated lead would, we believe, work against the long-term prospects for a dynamic, competitive Canadian communications sector, ultimately denying consumers real choice.
1363 MR. ROGERS: Madam Chair, by any measure, BCE will be the predominant player in the market and, of course, the Commission is here for the Canadian market, not the world market, and a number of the comments that were made referred to the share that BCE would have in the world. Of course, most consumers are concerned with the share that one has in Canada and it would be my information that no company in the United States would have anywhere near the dominance that BCE will have if this application is approved.
1364 To state that Bell ExpressVu, the number one digital distributor, is not dominant in analog distribution misses the point. The reason for integration is to maximize opportunities across multiple platforms. That is where competitive advantage accrues in the new economy. That is BCE's advantage. So we need to assess the position of the integrated entity itself.
1365 BCE, as an integrated enterprise, will have significant clout across all sectors. It already controls a massive distribution network, consisting of the largest telecommunications, largest Internet and largest satellite providers in Canada. They subsidize some products, such as high speed Internet service, by pricing other products, such as long distance, at retail prices less than their wholesale charges. It is impossible to compete with that.
1366 For example, Bell offers to drop their existing LD monthly charge of approximately $20 to $5 if the customer drops rogers@home high speed service and buys Bell's high speed Internet service. That is what we face.
1367 As Jean Monty recently stated, BCE is going to package and cross-market all of this content across a national network of 24 million -- 24 million telephone, wireless and broadband access points. All the key sources of content in Canada delivered through 24 million individual accounts. That is super market power! Unheard of in this history of this country. That is three times the total number of all cable customers across Canada.
1368 CTV brings with it the country's largest private television network, reaching 99 per cent of English-speaking Canadians. It also includes one of the strongest stables of specialty and pay channels. Collectively the CTV services accounted for almost 30 per cent of total revenues in the English-language television market in 1999. That is formidable market power.
1369 Add to all of this the Thomson properties, including the Globe and Mail and the 50 per cent ownership in RoBTV and the wealth of the individuals who are in the partnership.
1370 In this context, compared to BCE even the largest cable companies are small. With its market capitalization of almost $30 billion, BCE is more than four times the size of Rogers or Shaw and our market capitalizations. In terms of profitability, of course, there is no comparison.
1371 Even with this unprecedented scale of customer reach and market power, we are not asking the CRTC to stop the deal or force divestiture of assets. We are prepared to compete as long as BCE does not add a regulatory head start to its already formidable war chest.
1372 We ask for a condition of any possible approval be that the cable companies have no higher degree of regulation than Bell.
1373 Thank you.
1374 Mme YALE: Il faut aussi considérer la nécessité de mettre en place des mesures de contrôle appropriées qui feront en sorte que l'entreprise intégrée n'accordera pas de préférence indue à ses sociétés affiliées.
1375 l'ACTC continue à croire que la Section 9 de la réglementation des EDR suffit amplement pour traiter les questions relatives à la préférence indue.
1376 However, CCTA is fully prepared to work with programmers and other distributors on a reciprocal industry code of conduct that would apply to all programmers and distributors in an equitable fashion.
1377 In our view, the Access code tabled by Bell ExpressVu at the digital licensing hearing is a good start, although we need commitment from programmers that this code will be a two-way street.
1378 In conclusion, the CRTC should approve the BCE-CTV transaction only if, at the same time, it issues a clear policy statement that removes any remaining regulatory restrictions on the ability of all others, including cable companies, to proceed immediately with similar integration initiatives.
1379 The key is to encourage integration and ensure that, for regulate sectors like broadcasting and telecommunications, the regulatory framework allows the growth of more than one strong player with the opportunity to compete on a fair and equitable basis.
1380 Thank you.
1381 We would be pleased to answer your questions.
1382 CHAIRPERSON OF THE COMMISSION: Merci.
1383 I would ask Vice-Chair Colville to ask our questions.
1384 COMMISSIONER COLVILLE: Thank you, Madam Chair.
1385 Good afternoon, Ms Yale, gentlemen.
1386 In your written brief, I guess you are implying in it today when you talk about the equitable treatment here -- at paragraph 23 of your written brief you talked about:
"... replacing the current rule of prohibiting increased ownership of analog specialty services with a simple set of a priori rules." (As read)
1387 I think you understand that rule came out of our convergence report and there were a couple of conditions associated with that, putting the rule -- or that is put in place associated with actually doing away with the rule in terms of cable's ownership of specialty channels that would be delivered in an analog mode.
1388 I guess I would ask you to comment on whether or not you think those two criteria have been satisfied?
1389 MS YALE: Well, maybe I can kick it off and I'm sure my other panellists may want to contribute.
1390 In terms of the convergence report, it seems to me that there were two key conditions that were identified in terms of -- preconditions, if you will, that were on the Commission's mind, and they had to do with capacity and access issues. Perhaps they are not unrelated.
1391 From a capacity perspective, the concern at the time related to the fact that there were going to be additional analog services licensing concerns about whether or not all of those services would find a window.
1392 I guess our feeling is that all of the analog services are launched and out there, so from a capacity perspective the issue that underlay concerns about ownership of analog services seems to me to have been addressed purely from a capacity perspective.
1393 I take it you are referring primarily to analog. We can have a separate conversation about digital.
1394 Secondly, with respect to access rules, as we have indicated in our written and our oral comments today, we are very committed to ensuring that any issues with respect to access can be addressed through a code of conduct rather than limits on our ability to own programming services, so that we are past the stage where we need prohibitions or policies that make it very difficult to own services and that behavioural safeguards are more than adequate to deal with the kinds of issues that may be left to deal with.
1395 MR. ROGERS: It is a complex subject and a difficult one when we talk about capacity of analog, of course. We, until our rebuild is finished, are using some of that analog for being digitized so that it is not possible to deal with one without the other.
1396 I think any cable operator who would wish to unduly prefer his own service at the risk of not being able to own the services would be out of his mind. I mean, I searched my mind for what can be said to absolutely guarantee that there cannot be undue discrimination. My only conclusion, and I know it's not a perfect one, is equality. In other words, if you have a service in news that you own and somebody else has another one, you put them both on the same tier, you put them both on basic, and put them either side by side or no more than one away from one another and obviously there can be no undue discrimination.
1397 So I searched my mind but I don't believe anybody wants to endanger convergence, which is really the issue we are talking about. I mean, look at the applicant. I mean, the convergence that they have in absolutely every field if this application is approved. That is where people want to be, and to be denied convergence would be absolutely crazy for any cable operator.
1398 So speaking for Rogers, we are quite happy with almost any rule that people can make. It's not a question of a code. A code is fine, but I mean for this I think there has to be a rule or something to have an absolute guarantee.
1399 COMMISSIONER COLVILLE: Presumably, Mr. Rogers, the analog services that have already been licensed that Ms Yale referred to are already packaged in a way that you would feel is in the best interest of your system, the service provider, and your customers.
1400 MR. ROGERS: No, sir. I wouldn't ever claim that. The packaging was an historical accident, that the Commission in different years licensed a number of new services and they all were launched together. The creator of the tiers, I guess, really was the Commission in licensing those services at that time.
1401 We don't have in Canada theme tiers, you know, like all information and news, or sports, or music, and that sort of thing. It's just because of this. Maybe after the digital results are known there will be theme tiers. But until now there are three separate tiers, at least in our systems, and they are the tiers that the Commission licensed basically on a certain day. There may be some exception to that movement through the years, but I don't think there is much.
1402 MR. SHAW: I would think, Commissioner Colville, that if we could go back and change things we would be glad to go and do it. If we could make digital more of a success, we would be glad to do that.
1403 We are in a situation, though, where we have an analog system out there that is in the process of converging. We are competing against new digital offerings with digital products who have more advantage on the pick-and-pay, yet we are also dealing with a huge programming resistance coming to us saying, "We don't want to offer any pick-and-pay system into the Canadian marketplace because they are worried what that will do to them.
1404 Our role as a distributor and our role as carrying Canadian content, we find it very hard to come back and try and change the system now. Essentially, when you look at it, many companies have adopted a policy that no signals can be dropped. There can never be a dropped signal. They just can't deal with that type of customer reaction or profile any more. Maybe it was a long time coming and maybe we were slow to learn some of these early lessons.
1405 But I think now we are in a situation where if we can realign some of these rules and make equality our theme -- and various competitors are going to have different advantages. I look at a Rogers who are more integrated with a wireless solution. I look at a Shaw with cable distribution and some satellite assets. I look at Quebecor with newspapers, Internet, now some cable, maybe some broadcasting assets. I see BCE with no cable assets but lots of telephone assets and some broadcasting assets. All are going to meld and have different competitive advantages.
1406 If we can just come up with a situation where we weren't hindered, that's all we are asking to do here.
1407 COMMISSIONER COLVILLE: If we were to put a code in place to deal with the Commission's concern about preferential treatment, what would you offer as the key elements of that code?
1408 MR. ROGERS: We would sign it.
--- Laughter / Rires
1409 MS YALE: The Bell ExpressVu code gets at a lot of the basic issues that you would want to cover in any kind of code of conduct, so there are some obvious issues that you would want to deal with from a preference perspective, whether it's issues around preference in terms of packaging or marketing. The code was tabled primarily in the context of the digital proceeding where issues of channel placement aren't obviously a concern.
1410 So there are some issues that come up in terms of analog, even though all the services are launched, that you might want to deal with slightly differently because they are where they are on tiers, and channel placement issues do figure more heavily in the analog world. That is why I say that it seems to me that concerns around those sorts of issues can be addressed through a code that deals with the issue of preferential treatment in those various --
1411 COMMISSIONER COLVILLE: When you say "channel placement", do you mean channel or package placement?
1412 MR. SHAW: I guess it could be a combination in the new world. It depends on whether we are talking the digital side or the analog side.
1413 On the digital side, if you select a certain number of channels, they could be packaged on any number you select and you could probably even pick the number if you wanted. I mean, you could pick your favourite, you give preference where it comes up in the line-up, you could do all sorts of things.
1414 So I see if access is the main issue and access has mainly been dealt with by the Commission over time, and now will be dealt with again one more time when they licence a new round, then I think a lot of that discretionary stuff moves to the consumer as the cable platforms get strong enough. They have to get strong because the satellite platform is strong and expanding all the time.
1415 MR. ROGERS: But I think our vision, at least at Rogers, is that analog is bulk, and it's because of the nature of analog you can't offer it channel by channel or tiers of two or three or four. It's basically bulk. I think that it is a bit hard for the CSRs to describe the composition.
1416 Certainly, in our company, and I think others, there is a trend towards offering basic and expanded basic. It doesn't apply to existing people who want to keep what they have.
1417 I think you will find that particularly with digital coming, that analog will be bulk, you know, all of them, and that digital will be more selective, that they can pick and choose. I think therefore that the program suppliers, their wish and our wish is probably the same now, that on analog we should probably leave it alone. It is working well and it's physically not possible to have a lot of different traps, and it gives the choice on the digital side.
1418 That certainly would be my thought at this point, and I think it is quite similar to most of the program suppliers.
1419 COMMISSIONER COLVILLE: So if we were to take that position, Mr. Rogers, that on analog we were to leave it alone, then would you accept that the cable operator, should you own any analog channel, would in fact leave it alone and leave it where it already was when you bought it?
1420 MR. ROGERS: We would do as directed, sir. We would do as directed.
1421 In our particular interest, one of these services is, in our area, on basic and another is on Tier 1. So under my thesis of equality, we would move one to either the tier or to basic as you wish, as you direct.
1422 MR. SHAW: I don't think that would be any issue at all. I mean, our goal is not to be totally dominant here and to control, it's just to be able to match what's happening in the marketplace. I mean, with the realities of the companies that we run, our role in the system, we just need to match what's happening in the marketplace. To do that, we need to have all the tools in our tool belt.
1423 MR. ROGERS: I guess what is happening is that more and more people are taking the whole package. Therefore, the distinguishment between basic and Tier 1 and Tier 2 and so on is less and less. We have 500,000 customers out of 2.2 million who take V.I.P. cable, which is basic and all the tiers and a second outlet. I think that's the trend. We give them a discount for that because we don't have the truck rolls or any of those things.
1424 COMMISSIONER COLVILLE: What is the penetration of Tier 2 and Tier 3?
1425 MR. ROGERS: You mean individually? Somebody who buys just Tier 2? It would be almost non-existent. I'm going to guess 10,000 out of 2.2 million.
1426 Tier 1 would have more. It might have 145,000. I'm guessing at these numbers. Tier 1 was the first one.
1427 And Tier 3 would be quite big.
1428 MR. SHAW: Are you talking overall or are you talking --
1429 COMMISSIONER COLVILLE: Cumulatively.
1430 MR. SHAW: Overall would be: Tier 1 is going to run in the 90 per cent range, Tier 2 is going to run, I think the last time I looked, in the 66 per cent range, which I mean given its time in the marketplace I think is a great accomplishment, and it came out, you know, under some pretty tough horrendous times in the marketplace. It had some marketing restrictions. No negative option. It had lots of things. We had to call everybody in BCE. We had to call them twice. I mean, you know, it had some things that we just couldn't deal with.
1431 So I think that overall, though, the services have banded together and look well, you know, now as the product gets out there, now that the product starts feeding it, of course, and we are able to package a bit better.
1432 People that take standalone Tier 3, I mean, which would not be our choice at all, just because of the horrendous technical trapping that happens in the network, I mean, I think in our company is maybe 15,000 people, maybe twenty. We offer it but it certainly wouldn't be our preferred mode.
1433 MR. ROGERS: But there seems to be a trend towards them taking the whole package. In other words, Tiers 1 and 2 that are sixty-five used to be fifty-five and used to be forty-five.
1434 So I think you will find analog will be bulk and hopefully they will take pretty well -- maybe we will move them all up to 90 per cent. Who knows? That is certainly our objective, not to confuse them by saying: Tier 1 has this and Tier 2 has this and Tier 3 has that.
1435 COMMISSIONER COLVILLE: So your position is, you would be prepared to work on a code until such time as we get through the migration of analog to digital.
1436 MR. ROGERS: We would be prepared to do that and to give equality, or whatever is fair, so that there is no suggestion by anybody that there is any undue preference. Or any preference, never mind undue.
1437 COMMISSIONER COLVILLE: At the outset of your oral comments this afternoon you indicated that this hearing is not just about another corporate transaction, your point being that it is a big transaction, but in fact the hearing is about that corporate transaction. It is not about this policy issue. And you would appreciate that while you are raising this issue here, there are many parties who are not a party to this proceeding who would have an interest in this issue that you have raised today.
1438 So we wouldn't be in a position to change this policy coming out of this hearing.
1439 MS YALE: Let me kick that one off.
1440 I think the public notice that you issued when you called for a hearing on this transaction does suggest that you recognize yourselves that the transaction is about more than the transaction in isolation, and have asked parties to address the broader implications of the transaction for the broadcasting system overall.
1441 So it was that invitation on the public notice, in fact, that led to the kind of intervention that we put forward, because we do think that it is very important not to look at this transaction in isolation.
1442 Time is passing, and one of the things that we want to be able to do is to be in a position to participate fully in the opportunities in the marketplace as they arise. That is why we have urged the Commission, coincident with whatever decision it makes in this proceeding, to make it clear that the policy that currently restricts our ability to integrate in a similar way to what BCE is doing with CTV should be changed so that we are not waiting for another hearing and dealing with marketplace delays and that kind of head start that they have in the marketplace. We do think it is incumbent on the Commission to move, and to move quickly.
1443 MR. ROGERS: I think that we didn't want to oppose. We didn't want to oppose.
1444 If there were no hope of a change and we couldn't own them, and they are coming here and asking to own eight, then we would obviously oppose, because it is not fair.
1445 That is basically what we are saying, it is just not fair. And they are a distributor, and a massive distributor of all products to Canadians. To suggest for a moment that they should own eight and Rogers should own none, I can't think of anybody who would think that is fair.
1446 MR. SHAW: I was, like many people, a few weeks ago watching the Canadian Open with Tiger Woods and great play by various players around the country, and some great Canadian players, and I noticed that while this is a great event for Canada, Mike was on there a lot -- Mike Bullard from the comedy network -- and we were watching the Cable Land commercial over and over and over again. I couldn't help but wonder how that related to ExpressVu and how that related to CTV and how that wasn't cross-promotion if they are all siloed off and no one has input.
1447 Now, I understand that anybody can buy programming on there. I wasn't fortunate enough to watch The Sopranos last night, and maybe there was nothing on there, on the new CTV special that is out, but it did lead me to believe that you need to have this equality so that the promotion of products is fair for all. And if you decide not to get in it, you are not restricted from coming in, owning part of this and being part of the promotion going forward.
1448 We haven't asked Mike Bullard to produce an anti-satellite commercial yet, but we are thinking about it.
--- Laughter / Rires
1449 MR. SHAW: So that is the kind of equality we are looking for here.
1450 COMMISSIONER COLVILLE: Mr. Shaw, actually, I just became one of your subscribers, and I was struck by seeing that same commercial. But I was also struck by the fact that immediately after that commercial I saw a red bowl of popcorn.
1451 Do you know what I am talking about?
1452 MR. SHAW: I might.
1453 Yes, I do. I do.
1454 COMMISSIONER COLVILLE: It happens to be the Star Choice ad.
1455 MR. SHAW: I do.
1456 COMMISSIONER COLVILLE: Immediately after the ExpressVu ad.
1457 MR. SHAW: Right. And that would have been one we purchased. I was just looking at the frequency in the number and the cross-ownership.
--- Laughter / Rires
1458 MR. SHAW: So, you know, we pay for what others get for free. No, I don't mean that.
1459 I am saying that we need to be careful, and everybody would like to have the same tools, so we are asking for your help in creating some equality here, and we think the safeguards are such that would be in place and the stuff you have and the powers you have in front of you to manage this competition as it gets bigger and broader all the time.
1460 MR. ROGERS: I think that applies to television as well. We are very small in television, but I think that people just want a feeling of some safeguards, because this is a real elephant in the room. I mean, this is a real big guy. If they start bidding for programming, like they bid for CTV, when most people got off the train at $25 and they paid $38 or something -- if they bid for programming the same way, they are going to own it all, put a number of them on the shelf that won't ever be seen, and that is the sort of thing that television broadcasters, as you know, fear; that this massive buying power is used in a way to weaken and ultimately destroy competitors.
1461 It has happened in long distance. I mean, AT&T are gone. They are out of it. Sprint Canada is a walking corpse. Bell utterly dominates that area. It has happened. It can happen in the others as well. And I think it is a legitimate concern for people to come here and express it, and it is a legitimate concern for the federal regulator to take into account.
1462 COMMISSIONER COLVILLE: Of course it is a legitimate concern, and the concerns you have raised here today are legitimate. My only point to Ms Yale was that, notwithstanding the broad wording of the public notice, I am not sure that most people would understand that this hearing was all about bringing in a code of conduct that would apply to the cable industry in an analog world, and if the Commission were to pursue that issue it would be difficult, if not impossible, for us to do it in this proceeding. It may be something appropriate for us to deal with, so that we can get the broader interest public comment in a separate proceeding.
1463 MR. ROGERS: My particular thing was broader, of course, in that my request was that, as a condition of any possible approval, the cable companies have no higher degree of regulation than Bell, just as a general statement.
1464 COMMISSIONER COLVILLE: And do you consider that you have a higher degree of regulation now?
1465 MR. ROGERS: Absolutely. Absolutely. We can't carry programming that they can carry.
1466 I mean, Mr. Lind could go on. He is more knowledgeable than I am. But they have all sorts of opportunities that we don't have, and we don't like that. We don't think it is fair.
1467 MS YALE: I mean, we are very focused, obviously, in the context of this transaction, on the one particular policy, which relates to our ability to vertically integrate. And it has come up, both in the digital proceeding and in this hearing, this issue of behavioural safeguards as an alternative, if you will, to policies that limit opportunities for integration, and, in particular, cable equity in programming services, digital or analog.
1468 So the Commission's framework in the context of the digital hearing has expressly recognized that in the digital environment cable equity is appropriate, subject to certain kinds of safeguards, and there was a lot of discussion as to whether or not, in addition and over and above that, a code of conduct would be appropriate.
1469 And we have indicated that we are prepared to work on one, and in that context we believe it is appropriate that the code be reciprocal, because, as a result, for example, of this transaction, CTV will be in a position to favour its affiliated distributor.
1470 So we are very concerned that whatever we talk about be a two-way set of safeguards.
1471 So if as a result of this proceeding the Commission feels that behavioural safeguards of the sort that are being discussed are appropriate, then it just seems that, since there isn't an outright prohibition on cable companies owning programming, it is more of a policy, that it is more just a question of giving a signal so that we can operate in the marketplace on the same terms as others who are interested in acquiring these undertakings to give a signal that these safeguards are sufficient for all distributors in the marketplace.
1472 COMMISSIONER COLVILLE: Okay. We thank you for the offer and thank you for your presentation.
1473 CHAIRPERSON OF THE COMMISSION: I have one question, and I know it belongs to another proceeding that is still open, in the sense that we are still working on the analysis and making the decisions, but I recall from the previous hearing on digital that your position then was not very encouraging in terms of the possibility of a code of ethics, saying that you had sat down and you had tried to figure out what could be safeguards that could be pragmatic and could really work, and you ended up doing that work with the conclusion that there was really nothing more you could add.
1474 So I would like to understand, other than the discussion you have had with the Vice-Chair Colville, what's your view of a code of ethics this afternoon that could be workable, that could be, you know, sound and a good basis for really establishing rules that could bring the safeguards that would be appropriate?
1475 MS YALE: Since you are referring to an exchange that we had very recently, let me just kick it off, and then I know my colleagues want to jump in as well.
1476 I think I may have given the wrong impression if I suggested that it was not possible. We were struggling to come up with a code that the programming services would find meaningful. But as I say, the Bell ExpressVu code which has been tabled seems to have been met with a fairly positive reaction on the part of the CAB and other programming services. And as I say, we are very supportive of that code. We think it's a very good start.
1477 The only thing we feel is missing from it, in fact, is the reciprocal piece, the commitments back from the programming services to distributors.
1478 So I think I may have left you with an impression I didn't intend.
1479 CHAIRPERSON OF THE COMMISSION: You have. So I will go and correct the record from the other file as well, it seems.
1480 MR. ROGERS: I want to maybe just take it from an altitude of maybe 30,000 feet. I think that what's happening now is that the Commission has been successful in converging the video business from a monopoly business to a competitive business.
1481 If you were to go into any retail store, I think you would just be amazed at what is going on in the market place, particularly in the Maritimes, but all over. I spent a lot of time in those stores.
1482 There's a tremendous active market. And I think what maybe we haven't really thought through is that the power, the regulatory power is moving to the consumers and the consumers are local. They are your alderman or the mayor or people that you meet in the store when you are buying groceries. They have ultimate power.
1483 My perception is that the regulations will tend, over the years, to go to more general regulations, where the Commission and the government wishes us to go in general principle rather than a lot of detailed ones. People in the communities will be able to get satisfaction by phoning us and telling us to change things and provide more services.
1484 So if you have that philosophy, which I have, really it's going to depend on, I think, the consumers. We are not going to take research that, let's say, 65 per cent of our people want certain types of programming. We are not going to take that and ignore it.
1485 So some of our program suppliers may wish us to ignore it if they come out on a short shift of that research as we go forward in the years. But I think that it will be very hard for a federal regulator -- and you know this better than I -- to have the same sort of rules across the whole country. We don't have the same -- francophone and in English. Northern Ontario has problems and interests and demographics and the make-up of the people racially requires a different treatment. We find that even within some of our systems, that you have large proportions of Chinese people in one area and you tend to put something on Basic on Tier 1 that is foreign language because there's a demand for that.
1486 So I don't think you will have any trouble with us on any code of conduct that is centred around the theme that the public will be the boss on those sorts of issues, always subject to the Commission being the boss on the rules that you choose to make.
1487 CHAIRPERSON OF THE COMMISSION: As long as you agree that the Commission is the boss on regulation, we are fine.
1488 Thank you very for your participation this afternoon. Thank you so much.
1489 MS POIRIER: We will now hear the intervention presented by the Canadian Cable Systems Alliance Incorporated. If they want to come forward.
INTERVENTION / INTERVENTION
1490 MS TOWNSEND: Good afternoon, Madam Chair and Commissioners. My name is Alyson Townsend and I am COO and General Counsel to the Canadian Cable Systems Alliance, a company that represents 94 small and medium sized independent broadcasting distributors throughout Canada.
1491 CCSA's primary focus is the conclusion of commercial arrangements for the benefit of its member companies through master contracts with suppliers. CCSA offers its member companies economies of scale purchasing while offering suppliers the business efficiencies of dealing with one corporate body, contract administration as well as billing and collection of amounts owed under these contracts.
1492 CCSA exists to assist smaller independent companies to remain viable and competitive in markets where they serve rural Canadians.
1493 CCSA appears here today to register our opposition to the transfer of CTV to BCE. The Commission has requested public comment concerning the potential market power that BCE would wield should this transfer be approved. CCSA is here today to provide an example of the results of concentration of ownership and the imbalance of power that flows from such concentration.
1494 CCSA appeared before the CRTC 10 short months ago to express to you its concern regarding the transfer of NetStar to CTV. CCSA was very explicit in its address and identified the precise relief it was requesting from CTV: Re-opening of the TSN/CCSA member contracts which CCSA maintains were entered into under duress; and a master contract with CTV which allowed CCSA companies to aggregate subscriber numbers to take advantage of TSN's volume based rate card.
1495 Both CCSA's oral comments and TSN's volume based rate card are attached for your convenience.
1496 CTV made the following commitment at the December 7, 1999 hearing:
"We are definitely sensitive to the difficulties of facing a sole source supplier with a must-have product. That said, we, at CTV have had a positive relationship with the CCSA and we have recognized it as an agent for its members for the purpose of negotiating affiliate agreements and, if this application is approved, TSN will do the same. Prior to the expiry of current agreements, we will be happy to open dialogue with them to resolve any outstanding problems."
1497 CCSA was naively satisfied. As CCSA had master agreements in place with all other CTV programming services, CTV's assertion was accepted as an undertaking to immediately proceed in the same fashion, enter into a master agreement and treat CCSA companies in the aggregate. "Prior to the expiration of TSN contracts" was understood to mean the voidable contracts would be reopened.
1498 It's now apparent that CTV's response was disingenuous. CTV has categorically refused to reopen contracts or treat CCSA companies collectively. The comment in the reply of BCE-CTV before you today, September 11, 2000, that TSN commenced negotiations with CCSA for a master affiliate agreement is completely incorrect. Please see the attached copy of the most recent correspondence of TSN dated August 25th, 2000.
1499 What does CCSA want? History has taught us that we must be extremely specific. We wish immediate reopening of CCSA member contracts with TSN; a commitment to treat CCSA companies in the aggregate for the purposes of the volume based rate card, and in order to address any other issues that might arise to allow the TSN service to once again avoid its commitments, an undertaking to use the agreement entered into with Fundy Cable on January 12th, 1998 as the form of the master contract, as it was intended when it was negotiated.
1500 For the record, CCSA will commit to the terms and conditions of this agreement here and now.
1501 Why are we before the CRTC dealing with what must seem to be minor issues in the grand scheme of the transfer of control between two major powers? Because of the total disregard and cavalier attitude of a critical supplier toward small independent companies. This situation exemplifies the imbalance of power that may result from market consolidation. The imbalance becomes even more complex when the proposed owner of the programming service also owns a competitive distribution mechanism such as DTH.
1502 The fact that TSN and then CTV have consistently refused our requests, which mean nothing to them financially, and have reneged on commitments made before the Commission is an abuse of dominant position. It will be exacerbated by making the large even larger.
1503 What can the Commission do? Of course, the Commission might not approve the transfer of control to BCE. Practically, we doubt CCSA's intervention would have this impact.
1504 An alternate solution is to grant our request as part of a very significant benefits package offered by BCE.
1505 BCE is proposing a tremendous benefits package that assists almost all areas of the Canadian broadcasting industry, except the distribution of programming to smaller urban and rural communities at competitive rates.
1506 Our proposal would increase the proposed benefits package by a minuscule amount and would benefit the broadcasting system, as a whole, by assisting to maintain a competitive market in rural communities served by CCSA companies.
1507 Another solution is to make our requests a condition of transfer. The Commission retains wide jurisdiction over the broadcasting system and the provisioning of programming to Canadian subscribers. This includes commercial arrangements for distribution. We submit our requests are within your wide jurisdiction.
1508 The least favoured option is to ask TSN/CTV the following specific questions:
1509 Is it prepared to reopen the TSN contracts immediately after this hearing?
1510 Is it prepared to aggregate CCSA subscribers for the purposes of its rate card?
1511 Is it prepared to use the Fundy Agreement as the master agreement, without varying other terms?
1512 If TSN's comments are negative, or vague, it will illustrate our thesis and relief will be denied to small independent companies that will be enjoyed by competitive distributors.
1513 As an addendum to this presentation, we should advise the Commission that correspondence was received by CCSA, last Friday, September the 15th, and we were able to review it yesterday.
1514 Ostensibly, this was an offer to do a master contract with CCSA, but offered no accumulated benefits.
1515 In reality, this correspondence appears to have been intended to cure CTV's erroneous position in their reply that they had entered into negotiations with CCSA for a master agreement. More smoke and mirrors. With the deep pockets of CTV or Bell, this behaviour could go on indefinitely.
1516 As a final note, TSN has suggested that CCSA is inappropriately using this hearing to conclude commercial arrangements.
1517 To this we respond: It is a sad fact that the only time TSN responds to CCSA and small independent operators is when it is under direct scrutiny by the Commission. To CCSA, this proves our point. Thank you.
1518 LA PRÉSIDENTE DU CONSEIL: Merci, Madame.
1519 I would ask Vice-Chair Wylie to address our questions.
1520 COMMISSIONER WYLIE: Ms Townsend, your position is clear. I really have no questions.
1521 You have questions of the applicant. There is a Phase III reply, and I'm sure you will keep track of whether they respond to them.
1522 MS TOWNSEND: Thank you.
1523 CHAIRPERSON OF THE COMMISSION: Thank you very much.
1524 That concludes our work for today. To all, thank you, have a good evening and we will see you at nine o'clock tomorrow morning.
1525 Thank you.
--- Whereupon the hearing adjourned at 1855, to resume
on Tuesday, September 19, 2000 at 0900 / L'audience
est adjournée à 1855, pour reprendre le mardi
19 septembre 2000 à 0900