ARCHIVED -  Transcript / Transcription - Gatineau, Quebec - 2003-10-22

VARIOUS BROADCASTING APPLICATIONS /

PLUSIEURS DEMANDES EN RADIODIFFUSION

HELD AT: TENUE À:

Conference Centre Centre de Conférences

Portage IV Portage IV

Outaouais Room Salle Outaouais

Gatineau, Quebec Gatineau (Québec)

October 22, 2003 Le 22 octobre 2003

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

BEFORE / DEVANT:

Charles Dalfen Chairperson / Présidente

Andrée Wylie Commissioner / Conseillère

Andrée Noël Commissioner / Conseillère

Ronald Williams Commissioner / Conseiller

Joan Pennefather Commissioner / Conseillère

ALSO PRESENT / AUSSI PRÉSENTS:

James Wilson Legal Counsel /

Conseiller juridique

Cynthia Stockley Acting Director of

Broacasting and Competition

Policy / Directrice

intérimaire des politiques

sur la distribution et la

concurrence

Coordonnateur de l'audience

Pierre LeBel Secretary / Secrétaire

HELD AT: TENUE À:

Conference Centre Centre de Conférences

Portage IV Portage IV

Outaouais Room Salle Outaouais

Gatineau, Quebec Gatineau (Québec)

October 22, 2003 Le 22 octobre 2003

PAGE / PARA

PHASE I

PRESENTATION BY / PRÉSENTATION PAR:

Look Communications Inc. (Continued) 726 / 4112

Craig Wireless International Inc. 776 / 4563

PHASE II

INTERVENTION BY / INTERVENTION PAR:

ARTV 749 / 4337

PHASE III

REPLY BY / RÉPLIQUE PAR:

Look Communications Inc. 762 / 4421

Craig Wireless International Inc. 845 / 5113

Gatineau, Québec / Gatineau (Québec)

--- Upon commencing on Wednesday, October 22, 2003

at 0930 / L'audience débute le mercredi 22 octobre

2003 à 0930

4101 THE CHAIRPERSON: Good morning, and welcome to this hearing. .

4102 Bonjour à tout le monde et bienvenue à cette audience.

4103 Mr. Secretary.

4104 MR. LeBEL: Thank you, Mr. Chairman.

4105 Before we begin, I believe Mr. Koch has some clarifications that he wants to make at this point.

4106 THE CHAIRPERSON: Keep it simple, Mr. Koch.

4107 MR. KOCH: We are trying to.

4108 MR. CYTRYNBAUM: I will eventually figure that out.

--- Laughter / Rires

4109 We would appreciate some of your indulgence to clarify some of the answers we gave yesterday.

4110 I promise it won't be too long.

4111 THE CHAIRPERSON: It is not length, it is complexity.

4112 MR. CYTRYNBAUM: The main thrust of our Application is flexibility to deal with our capacity constraints.

4113 We are not the first BDU this week to describe the precious nature of capacity in a fiercely competitive market.

4114 The simple fact is that MDS technology has not advanced to increase our capacity.

4115 We remain with a niche technology which is why we are targeting a niche market.

4116 We have to provide both television and Internet. It is fundamental to our business.

4117 Mr. Vocelle yesterday explained that it costs the same for all intents and purposes to install both, but you virtually double your ARPU, which makes our business a viable, and we expect ultimately a vibrant business.

4118 As such, we can be a niche player where other people cannot go or are not going. When I am referring to "other people", I am referring to competitors.

4119 As for the 70/30 split that was discussed yesterday, we would obviously prefer not to put a number on it, because we believe in this market you need the flexibility to go forward. If we do a rigid split, it defeats the very purpose of our flexibility.

4120 We are in a different situation than our competitors. None of our competitors -- I have never seen a Rogers' application, or a Cogeco, come to ask you for permission to do Internet.

4121 Although we do not have to ask you for permission, fundamentally we do, because we have to use some of our capacity. We are the only one who has come before you to ask for that permission.

4122 The 70 number is roughly the number of services in terms of channels. That is where we started. That was the technology that was available at the time. It was 16 QUAM and that is what we used in our original licence.

4123 So, if we can go back to where we started, in terms of what we are delivering to the market, that would give us a bare minimum.

4124 Whatever mix we come up with on our MDS, it won't be enough of either, which is why in response to the question of: How much we would like for Internet? Somewhat jokingly I said, "180". We would also like 180 for the broadcasting. So, we need to make the best with what we have.

4125 That is why we have asked for the flexibility as well, and we plan to seek out other technologies. But, it is difficult to seek them out unless we have the flexibility. It is back to the chicken and egg.

4126 We appreciate that this request is novel.

4127 The purpose of it is so that we can react quickly to what is out there in the marketplace. We all know how rapidly technology in this field is advancing.

4128 This request is consistent with the policy under the Act, namely Section 3(t)(ii) which states:

"Distribution undertakings should provide efficient delivery of programming at affordable rates, using the most effective technologies available at a reasonable cost."

4129 We also wanted to provide you with greater visibility as to what we propose as the core services that all our subscribers would receive. So, all our subscribers would receive the following stations and broadcasts.

4130 This is also briefly covered in our April 28th response to the Commission's deficiency questions, but we thought we could provide you with greater detail.

4131 First, we would continue to carry the same number of off air signals we are currently carrying, which is consistent with our licence condition.

4132 Secondly, we would continue to carry mandatory basic services, such as: TVA, APTN, and CPAC. We also recognize that these were made mandatory by the Commission because they are important to achieving the policy.

4133 Adding these 3 with the other 14, 13 to 14 of off airs, gives us 17.

4134 Thirdly, as we said in our deficiency response, we would carry popular Canadian speciality and pay services. Under our Québec licence, there are a number of specific services that we are required to carry under our licenced conditions.

4135 To determine a minimum, we looked in a number of places.

4136 First, our Look Chinese package, we carry eight Canadian pay and speciality programs in addition to Fairchild.

4137 Second, we also looked at it at our competitors basic packages; Videotron has 25; Rogers has 30; Cogeco has 31. Those generally include the 4 plus 1.

4138 We settled on a minimum of 8 Canadian pay and speciality. When added to the 17 off air, this makes 25 Canadian services, and puts us in the range of --

4139 THE CHAIRPERSON: Excuse me, Mr. Cytrynbaum.

4140 You just said 25 Canadian services. I thought you had included the 4 plus 1.

4141 MR. CYTRYNBAUM: No.

4142 The 14 --

4143 THE CHAIRPERSON: Did you say 3 --

4144 MR. CYTRYNBAUM: 14 --

4145 THE CHAIRPERSON: 14 plus 3 plus 8 is 25.

4146 MR. CYTRYNBAUM: Plus 8 Canadian.

4147 THE CHAIRPERSON: But, I thought you said on the 14 that it included the 4 plus 1.

4148 MR. CYTRYNBAUM: Sorry.

4149 Where I made reference to the 4 plus 1, I am sorry if I was not clear on it. I was referring to our competitors. Their basic has 25 for Videotron. Rogers 30, and Cogeco 31.

4150 THE CHAIRPERSON: What about yours? What are you asking for?

4151 MR. CYTRYNBAUM: Sorry.

4152 What I am explaining is that there will be 25 Canadian channels in our core offering.

4153 THE CHAIRPERSON: Okay. So, working back.

4154 8 speciality in your Chinese package. 4 of what you call the important, the 9(1)(h)services, let's call them, and then the balance, 17 Canadian off air. Is that it?

4155 MR. CYTRYNBAUM: I'm sorry. I missed part of it.

4156 THE CHAIRPERSON: 13 off air, beyond that?

4157 MR. CYTRYNBAUM: Yes.

4158 THE CHAIRPERSON: Canadian.

4159 MR. CYTRYNBAUM: Canadian.

4160 THE CHAIRPERSON: Okay.

4161 So, the 13 off air are all Canadian?

4162 MR. CYTRYNBAUM: Are all Canadian.

4163 THE CHAIRPERSON: I thought you had said the 4 plus 1 were in the 13. Maybe I misunderstood --

4164 MR. CYTRYNBAUM: No.

4165 THE CHAIRPERSON: No.

4166 MR. CYTRYNBAUM: The 25 does not include the 4 plus 1.

4167 THE CHAIRPERSON: Okay.

4168 MR. CYTRYNBAUM: I'm sorry.

4169 The intention was to clarify, and I did not mean to confuse.

4170 MR. VOCELLE: Just adding, Mr. Chairman, it would mean that our core offering would be 30 channels all together. 25 Canadian channels, and the 4 plus 1 U.S.

4171 THE CHAIRPERSON: Thank you.

4172 MR. CYTRYNBAUM: That was essentially what I wanted to convey.

4173 René, did you have something to add?

4174 MR. VOCELLE: No. That is what we wanted to clarify with the Commission.

4175 One more clarification.

4176 In our original application in 1997 of our licence, the Commission itself recognized the limitation of the MDS technology. That is one of the reason we were not imposed a French language in Ontario.

4177 The Commission itself accepted the fact that they would review these circumstances at renewal time in the light of MDS technology advancement.

4178 Unfortunately today, MDS technology advancement really did not advance.

4179 MR. KOCH: Yes. I think Mr. Vocelle may have misspoken slightly.

4180 What he is referencing and we wanted to make clear obviously, is the carriage of French language signals, especially signals in Ontario, is an issue that is important to the Commission.

4181 I think this is one area where the Commission, when it came out with its policy in that regard, so it was not at the initially licensing -- but, when the policy was brought out, specifically recognized the limitations on MDS, and there was a statement that it would revisit this issue at renewal time.

4182 I think what we are pointing to is the fact that the Commission itself stated that it would renew it in light of the fact that it anticipated advancements in technology.

4183 I think our point is that we have not had those advancements in technology, and that is really what is driving our proposal, and not a lack of appreciation for the importance of the policy itself.

4184 THE CHAIRPERSON: Are those your clarifications?

4185 MR. KOCH: Yes.

4186 THE CHAIRPERSON: Thank you.

4187 Madame Noël.

4188 COMMISSIONER NOEL: Just maybe a little detail.

4189 In the National Capital Region, do you carry some of the French speciality services?

4190 MR. KOCH: Yes. I think in our response as we indicated that in the National Capital Region ...

4191 COMMISSIONER NOEL: So, when you are mentioning Ontario, ...

4192 MR. KOCH: ... we are meeting the 1 to 10 requirements.

4193 COMMISSIONER NOEL: ... it is excluding Ottawa?

4194 MR. KOCH: That is correct. That is correct.

4195 COMMISSIONER NOEL: Thank you.

4196 THE CHAIRPERSON: Madame Wylie.

4197 COMMISSIONER WYLIE: I am a bit intrigued, Mr. Cytrynbaum, by your comment about cable not asking for permission to do Internet and you are.

4198 I think that the system -- and your lawyer may have a different view -- but, the system is that you get an infrastructure, and then there are requirements as to how you are to use it for broadcasting purposes, because you have a broadcasting licence.

4199 If your infrastructure has additional capacity, then you use it for Internet or data processing, and you may indeed fall under the Telecom Act at that time.

4200 But, the system is not, I have a broadcasting licence and I am asking you to use a portion of it for transmission of other than broadcasting services.

4201 That is why we have these questions.

4202 You have a broadcasting licence to supply broadcasting services, as required by the Commission, using the infrastructure that you applied for and are using.

4203 Cable does not have to ask us to use  -- it is part of their infrastructure, if they supply to subscribers, all the services that are required by regulation, by condition of licence, by 9(1)(h), by whatever means.

4204 I don't know if that is your view, Mr. Koch.

4205 It is turning it upside down a bit to say, "we are asking you to use our broadcasting licences to supply other than broadcasting services, and cable does supply other than broadcasting services," I don't think that gets you very far.

4206 MR. KOCH: I don't disagree necessarily with your characterization of why cable was -- I think our point is exactly that. That cable, just given its sheer capacity was in a position to meet both.

4207 We are coming here to try and deal with -- I think quite head on, we have been very upfront with the Commission to try and deal with the very fact that we do have obligations under the Broadcasting Act, and to try and balance those in the environment which requires us to carry both, you are quite correct.

4208 I think that is our point, that the reason cable -- and we were not trying to get into the reason for which cable was not required to come and apply to you, but just underline the fact again that in a competitive environment, we are competing with someone who was not required because of their sheer capacity.

4209 So, I am not sure that we are disagreeing --

4210 COMMISSIONER WYLIE: Yes.

4211 But, you are still required to convince us that the panoply of broadcasting services that you are supplying to subscribers, what the spectrum you were given, is in the public interest, and fits the legislation we are under.

4212 I suppose your comparison would be more the class 3 cable systems, saying we can do all of the things.

4213 The difference, however, is usually those services are in small rural areas, not in large cities.

4214 So, it is a question of persuading the Commission that with your broadcasting licences, it is your broadcasting obligations that you are trying to reduce for the purpose of doing something else, with the spectrum that you are allowed.

4215 So, there is not a very good comparison to be made, other than to market. But, it is the infrastructure that you have and you were granted.

4216 We have to be persuaded that this fits the Broadcasting Act, to reduce the number of services to use the spectrum for something else.

4217 MR. KOCH: I would like Mr. Cytrynbaum to respond.

4218 I think we agree with that. We would like to persuade you. We hope we have persuaded you, that we are still going to offer a package that meets the policies. We have not shirked our responsibilities in terms of the mandatory basic.

4219 We have still proposed a whole list of distribution and linkage requirements that will make sure that non Canadian services do not get packaged in a way that short changes the Canadian services.

4220 So, that is the focus of the application, I tend to agree with you.

4221 Whether you are persuaded or not, of course, is the issue.

4222 COMMISSIONER WYLIE: Because down the line when we get the speciality services and we have 8 Cancon services, 8 speciality services when we have a number of analogue services plus some digital services, and I am intrigued by the -- if I understood you well, the request to be relieved of Section 3 of the distribution regulations.

4223 If that is correct, there is a problem there. Perhaps that is not what you intended. Am I right?

4224 MR. KOCH: I would like to consider it, because --

4225 COMMISSIONER WYLIE: Because that would mean I can do what I want.

4226 MR. KOCH: Yes. I don't think that that is what we were intending to say.

4227 COMMISSIONER WYLIE: No.

4228 The flexibility would be let me choose as I go along.

4229 MR. KOCH: Yes.

4230 COMMISSIONER WYLIE: So, you would accept conditions of licence, at least with regard to the off air signals, ...

4231 MR. KOCH: Yes.

4232 COMMISSIONER WYLIE: ... and etcetera.

4233 MR. KOCH: Absolutely.

4234 COMMISSIONER WYLIE: But, once you get to the 8 specialities, that is where you would keep the sole discretion of what you carry.

4235 MR. KOCH: Of not what is carried. How we package.

4236 I mean, I think you have to --

4237 COMMISSIONER WYLIE: Oh.

4238 MR. KOCH: I think there is a distinction between how much we carry.

4239 COMMISSIONER WYLIE: Okay.

4240 MR. KOCH: Because the Commission asked, "what will everyone get?"

4241 I think we can appreciate why the Commission was concerned that people were not all of a sudden be creating packages with 3 services total in them.

4242 I am sure Mr. Cytrynbaum would like to --

4243 COMMISSIONER WYLIE: Did I misunderstand then that with your discussion with the Chair, that the must carry would amount to 25?

4244 And among those 8, of course, with the off air signals, they are what they are. So, there would be no discussion there, and TVA, APTN, CPAC.

4245 Then the 8 specialities, I understood you to say, some subscribers would get as few as 8.

4246 Is that correct?

4247 MR. KOCH: In fairness, I think we are mixing apples and oranges here.

4248 I think that what we are saying is no subscriber will get fewer than 8.

4249 I don't know whether --

4250 COMMISSIONER WYLIE: Yes.

4251 So, that amounts to saying, even lawyers, that some people get as few as 8.

4252 MR. KOCH: Well, I think it is appropriate for the business people to speak, because they have the challenge of trying to sell these packages to customers.

4253 But, it is one thing to say --

4254 COMMISSIONER WYLIE: I am not sure that that is the exercise.

4255 The exercise here is for us to know what it is that -- you know, to be relived from Section 3 is a lot of flexibility.

4256 It says, neither --

4257 MR. KOCH: We keep coming back to 3, and I do expect I am probably going to write a letter...

4258 COMMISSIONER WYLIE: No, no. But, if --

4259 MR. KOCH: ... saying that may have been a mistake.

4260 COMMISSIONER WYLIE: What is the principle? We have to know. That is in your application.

4261 So, Section 3 says you cannot provide anything except what is authorized by a condition of a licence by regulations, which the principle is, up to now you will agree, we, by condition of licence, or through the regs, or 9(1)(h) decide what one must carry.

4262 So, by condition of licence, I suspect, since it would be difficult under this scheme to bind you to 17 and 18 in the Act. So, that is what we have to know, is what would those conditions of licence be.

4263 I may not have understood your exchange with the Chair, but I thought you said off air signals, and --

4264 MR. KOCH: No.

4265 I think you have correctly understood that.

4266 COMMISSIONER WYLIE: Then the problem is when we get to the specialities, what is it that you would be bound to carry, and how many?

4267 Because you can imagine, unless it is made quite clear, we would have a lot of dispute resolution if among the very large number of specialities, you were left to decide, and competing with those, you would have to carry them all.

4268 So, we have to be a little more clear.

4269 I may have misunderstood, but I thought you said a minimum of 8 Canadian, over and above the 14.

4270 MR. KOCH: I still think there is some confusion between must carry and the notion of packaging.

4271 What we are saying on the, as I under -- there are a whole lot of different concepts here. The must carry is typically thought of as the over the air. There is mandatory basic.

4272 In terms of --

4273 COMMISSIONER WYLIE: And all the specialities.

4274 MR. KOCH: Yes. No. I am getting to that, with respect, Madame Commissioner.

4275 Under the Regulations, there is Section 18 which imposes some requirements.

4276 We have been subject to an access, the access policy, and that, in my way of thinking, and I hope the Commission agrees with me, it deals with the overall carriage of the Canadian pay and speciality signals.

4277 We are trying to deal with that when we talk about that being subject to reasonable use for Internet.

4278 The 8 minimum that we are talking about is not to suggest that we are only going to be carrying on the overall system 8 Canadian pay and speciality.

4279 What it is to suggest is in the packaging of services, and there will be more than 8 Canadian pay and speciality, that no subscriber will get less than that core.

4280 I think it is a valid distinction.

4281 I would just like to make sure we are clear on it.

4282 THE CHAIRPERSON: Thank you.

4283 Counsel.

4284 MR. WILSON: Just two points of clarification.

4285 With respect to the outstanding questions relating to Section 3 and Section 16 exemptions, I just want to see if we can set a time frame within which you would be able to provide a written response to those questions.

4286 MR. KOCH: Right.

4287 I would propose to provide by the end of the week.

4288 MR. WILSON: By the end week?

4289 MR. KOCH: Yes.

4290 MR. WILSON: That is fine.

4291 Then my other question then, and I do not want to sort of belabour it, because we have sort of had extensive discussions, but just to touch again on this issue of the common core, and to come back to the issue of the 8 speciality channels, just to clarify it in my own mind.

4292 When we talk about a common core and sort of 8 speciality channels, would that always be the same 8 for every subscriber, or would that potentially change sort of depending on the subscriber, or where they lived, or whatever?

4293 MR. VOCELLE: It would be the same 8 channels in Québec, but different in Ontario, and different in Ottawa.

4294 But, once you have packaged it, that would be your core offering. You could not have the same 8 in Québec and in Ontario. You will have to play with the demographics.

4295 MR. WILSON: Again, this is to sort of clarify it in my own mind.

4296 The 14 over the air signals would presumably differ depending on, you know, from Ontario to Québec, or depending on the location.

4297 MR. VOCELLE: Yes.

4298 Today, they are the same channel all over the place, except for our local insertion, like CBC London, or Kitchener.

4299 But, the bottom line is they are all the same except for the local ones.

4300 MR. WILSON: I have no further questions, Mr. Chairman.

4301 THE CHAIRPERSON: Thank you, very much.

4302 Madame Wylie.

4303 COMMISSIONER WYLIE: I want to understand better, which I do not seem to, what is possible in one area.

4304 For example, in Ottawa, I live in the west end.

4305 Can your, if I call it your "head" end, distribute and uplink everything, and then distribute a different package to each house, or is there a limitation?

4306 When we talk about limitation of spectrum, is it a limitation at the transmitting end as well?

4307 MR. SCHULTZ: Yes.

4308 It is limited at the transmitting end, because we receive the signals and we compress them to put them on to the transmitter.

4309 Within the allocation of bandwidth that we have, we can only put so many digital channels.

4310 If we were running an analogue system, we would be limited to 15 analogue signals. In fact, we are carrying 105 digital signals today. So, we have done that by compressing.

4311 Then through data we send to your set top box, we authorize the channels you can see, but they are packaged in pre-defined packages.

4312 COMMISSIONER WYLIE: I understand that.

4313 But, is it correct that at the transmitting end, you can -- what the problem is, you cannot lift them all, or transmit, let's say, all the specialities and still have spectrum left for Internet.

4314 MR. SCHULTZ: No.

4315 COMMISSIONER WYLIE: So that there are some services that no matter what package the customer wants, will not be available.

4316 MR. SCHULTZ: That is correct.

4317 COMMISSIONER WYLIE: So, how many, again, can you actually transmit from the antenna?

4318 All told, how many channels will the compression that you are projecting will be possible?

4319 MR. SCHULTZ: Are we talking about the future?

4320 COMMISSIONER WYLIE: I think you told us yesterday, but I do not remember.

4321 How many will you be able to actually make available in these packages, as a customer, if I go to you and I say I want "X"?

4322 MR. SCHULTZ: This question depends on knowing how much spectrum we have available for broadcasting.

4323 If, as we had discussed yesterday, we would have 60 megahertz of spectrum, we would have a total ability to transmit about 70 channels. It may be 68, and it may be 74. I am not sure. We would have to do the actually math.

4324 COMMISSIONER WYLIE: So, 68 to ...

4325 MR. SCHULTZ: To 74. Somewhere in that ...

4326 COMMISSIONER WYLIE: ... 74. Depending on which ones.

4327 MR. SCHULTZ: ... range.

4328 We have already talked about having a core package of 25 plus 4 plus 1. So, there is 30 out of the 70. So, that would leave about 40 channels available for other programming.

4329 COMMISSIONER WYLIE: Thank you. That is very helpful.

4330 MR. SCHULTZ: Okay.

4331 COMMISSIONER NOEL: That is exactly what I wanted to know.

4332 What is left for more programming services.

4333 THE CHAIRPERSON: Thank you, very much, gentlemen.

4334 Mr. Secretary.

4335 MR. LeBEL: Thank you, Mr. Chairman.

4336 L'intervention comparante qui demeure sera déposée par ARTV.

INTERVENTION

4337 M. DESJARDINS: Monsieur le président, mesdames et messieurs les membres du Conseil, bonjour.

4338 Mon nom est Gilles Desjardins. Je suis Directeur du développement des affaires d'ARTV.

4339 Le problème qui m'amène devant vous aujourd'hui a eu et continue toujours d'avoir un impact financier négatif sur le développement d'ARTV, qui vient de compléter le 1er septembre dernier, ses deux premières années d'existence.

4340 Ce problème touche aussi un grand nombre d'abonnés de Look TV au Québec et dans la région de la Capitale nationale qui n'ont toujours pas accès à ce service auquel ils ont droit.

4341 Les nombreuses démarches que ARTV a menées jusqu'à ce jour auprès de Look TV pour obtenir une distribution adéquate de son service n'ont pas permis de régler le problème de façon pleinement satisfaisante.

4342 Après avoir épuisé tous les recours possibles, nous en sommes venus à la conclusion qu'une modification des conditions de licence de Look TV dans le cadre du présent renouvellement de sa licence est la seule avenue qu'il nous reste pour obtenir et assurer à long terme une distribution adéquate d'ARTV.

4343 En autorisant la création d'ARTV, le 14 septembre 2000, le Conseil avait pris soin de mettre en place des règles de distribution spécifiques à chaque type d'entreprise de distribution de radiodiffusion.

4344 Look TV se trouvait soumis à la règle suivante pour les systèmes de distribution multipoint, et je cite:

4345 « Les abonnées d'un système de distribution multipoint (SDM) dans le marché francophone, qui choisissent au moins trois services spécialisés de langue française, en plus du service de base, doivent également recevoir sur une base obligatoire le service de la Télé des Arts (i.e ARTV). »

(Décision CRTC 2000-386, paragraphe 41).

4346 Le même jour, dans l'avis public 2000-129 (paragraphe 5d), le CRTC avait revu ses règles sur la distribution et l'assemblage des services spécialisés et payants dans lequel il exigeait dorénavant des systèmes de distribution multipoint dans un marché francophone d'offrir ARTV à tout abonné qui reçoit au service facultatif au moins trois services de télévision spécialisés de langue française.

4347 Dans les mois qui ont précédé le lancement d'ARTV le 1er septembre 2001, des démarches ont été entreprises auprès de Look TV en vue d'obtenir la distribution de ce service conformément aux règles établies par le Conseil.

4348 Dès le début des négociations, les dirigeants de Look TV ont pris la position qu'ils n'avaient pas à se conformer ni aux règles prévues dans la décision d'ARTV, ni aux dispositions du règlement sur la distribution des services de radiodiffusion.

4349 Il a fallu de nombreuses tractions pour obtenir un avis du Conseil à ce sujet.

4350 Une lettre datée du 15 février 2002, signée par le Directeur exécutif de la radiodiffusion, est venue expliquer que les conditions de licence de Look TV exemptaient ce distributeur des règles stipulées à l'avis public 2000-129 concernant la distribution d'ARTV.

4351 Le Directeur exécutif de la radiodiffusion terminait sa lettre en invitant Look TV à prendre note que ces exemptions feraient l'objet d'une révision au moment de l'examen du renouvellement de sa licence.

4352 Il soulignait également que cet avis représentait les vues du personnel mais pas nécessairement celles du Conseil.

4353 Pour nous, il apparaît clair que le Conseil n'avait pas prévu et n'avait pas l'intention d'accorder une telle exemption à Look TV lorsqu'il a autorisé la création d'ARTV.

4354 Au contraire, le Conseil avait pris soin d'expliquer pourquoi il jugeait nécessaire de mettre en place des règles de distribution précises qui tenaient à la nature particulière d'un service national de langue française axé sur les arts.

4355 Le Conseil tenait à ce que la distribution réussie du service lui permette de disposer des ressources nécessaires pour offrir une qualité d'émissions qui assurerait son succès.

4356 Il s'attendait à ce que ARTV puisse faire une contribution significative à l'atteinte des objectifs de la Loi sur la radiodiffusion.

4357 Pour ces raisons, nous demandons au Conseil de profiter de la présente instance pour s'assurer que les conditions de licence de Look TV soient dorénavant en conformité avec les dispositions contenues dans la décision du Conseil autorisant ARTV ainsi qu'avec les Règles du CRTC relatives à la distribution des services de radiodiffusion.

4358 Ceci ne sera que juste et équitable envers toutes les autres entreprises de distribution de radiodiffusion qui, elles, respectent les dispositions du règlement sur la distribution et les modalités prévues dans la licence d'ARTV.

4359 Les changements qui doivent être apportés aux conditions de licence de Look TV sont importantes pour le développement d'ARTV, parce qu'ils lui permettront d'atteindre les objectifs fixés par le Conseil.

4360 Nous sommes reconnaissants au Conseil d'être réceptif à notre requête et nous demeurons confiants qu'il saura y répondre favorablement.

4361 Mesdames et messieurs, je vous remercie et je suis maintenant prêt à répondre à vos questions.

4362 LE PRÉSIDENT: Je vous remercie. Madame Wylie.

4363 CONSEILLERE WYLIE: Bonjour monsieur Desjardins.

4364 M. DESJARDINS: Bonjour.

4365 CONSEILLERE WYLIE: Monsieur Desjardins, est-ce que ARTV n'est pas offert au Québec non plus dans Look TV?

4366 M. DESJARDINS: ARTV est offert maintenant, il est offert au Québec, partout, et est maintenant offert dans la région de la Capitale Nationale depuis le mois de juin.

4367 CONSEILLERE WYLIE: Mais alors, il reste le reste de Look TV qui n'est pas offert.

4368 M. DESJARDINS: Non. ARTV est offert maintenant partout dans la province de Québec et dans la région de la Capitale Nationale.

4369 Seulement il...

4370 CONSEILLERE WYLIE: C'est le reste de l'Ontario qui n'est pas...

4371 M. DESJARDINS: Qui n'est pas offert dans l'Ontario.

4372 Mais la situation, c'est que Look TV n'est pas offert de la façon qui a été convenue dans la décision d'ARTV selon les règles du CRTC. C'est-à-dire qu'il n'est pas offert à tous les abonnés qui reçoivent trois services de langue française. C'est cela la problématique qui existe.

4373 CONSEILLERE WYLIE: Et c'est là, dans votre intervention écrite que vous parlez d'obligation de choisir une promotion et un nouveau forfait, au lieu de l'avoir...

4374 M. DESJARDINS: Ce qu'on demande...

4375 CONSEILLERE WYLIE: Mais, attendez une minute.

4376 Comment lisez-vous cette condition?

4377 Quand on dit dans un marché francophone qu'ils choisissent au moins trois services spécialisés. Alors?

4378 M. DESJARDINS: Qu'est-ce qui est arrivé, c'est qu'au début, Look TV, quand il a commencé à opérer au Québec ou ailleurs, leur façon de fonctionner, c'était de permettre aux gens de faire leur propre volet ou leur propre bouquet. C'est-à-dire de choisir les services qu'ils voulaient.

4379 Alors, quand ARTV est arrivé, Look TV, à cause des exemptions qu'ils ont dans leurs conditions existantes, c'est-à-dire, ils n'ont pas l'obligation de distribuer tous les services spécialisés, eux, ils ont décidé que cela ne leur était pas nécessaire d'offrir... ils n'étaient pas obligés d'offrir ARTV.

4380 Alors, et finalement, il y a un an, quand ils ont cessé de laisser aux gens de choisir leur propre service, ils ont créé un « package » qui comprend presque tous les services dont ils vous ont parlés, qui s'appelle Look Plus.

4381 Ils ont aussi continué à distribuer le service qu'ils appellent le Franco-4, et qui est devenu le Franco-5 parce que sur ces deux « packages », il y a un an à peu près, ils ont, à ce moment-là, décidé d'offrir ARTV au Québec, partout dans la province de Québec, excepté la région de l'Outaouais. Et ils ont offert ARTV dans le package Look Plus et aussi dans le « package » Franco-5.

4382 Et, au printemps dernier, ils ont fait la même chose ici dans la région de l'Outaouais. C'est-à-dire du côté du Québec et du côté d'Ottawa. Ils ont aussi offert, ils ont à ce moment-là offert ARTV dans le « package » Look Plus et aussi dans le Franco-4 qui est devenu le Franco-5.

4383 Seulement, quand ces « packages », ces volets-là ont été introduits, ils n'ont pas forcé les abonnés qui eux avaient déjà fait leur propre volet, leur propre bouquet à prendre ARTV.

4384 Ils ont seulement incité, ils ont, à leurs nouveaux abonnés, seulement ces volets-là étaient offerts. Et à leurs anciens abonnés, ils les ont incités, dorénavant à prendre ces volets-là, parce que, soit-disant qu'ils étaient plus intéressants.

4385 Et c'est vrai, je pense qu'ils sont plus intéressants.

4386 Et à ce moment-là, il y en a beaucoup qui ont profité de l'offre.

4387 Ce qui a fait que ARTV est devenu disponible à tous les gens qui avaient ces nouveaux volets-là. Mais les gens qui avaient fait, qui avaient fabriqué leur propre volet avant, eux, ils n'ont pas été forcés de venir au nouveau volet.

4388 Et eux, comme au moment du choix de leur propre service, ARTV n'existait pas. Ces gens-là n'ont toujours pas ARTV. Et parmi ces gens-là, il y en a plusieurs qui avaient au moins trois services de langue française selon la règle, et qui auraient dû avoir ARTV, mais qui ne l'ont pas toujours.

4389 Et le but de notre présence ici aujourd'hui, ce n'est pas pour vous dire que ARTV n'est pas distribué au Québec et dans la région de l'Outaouais.

4390 ARTV est distribué à ces deux endroits-là. Il n'est pas distribué en Ontario, mais cela, c'est autre chose. Cela a affaire avec la politique sur la distribution des services de langue française.

4391 Mais, qu'est-ce que nous voulons ici aujourd'hui?

4392 On veut être sûrs que les règles, surtout, on veut être sûrs que les conditions de licence d'ARTV font en sorte qu'ils sont obligés de respecter les règles du CRTC concernant la distribution d'ARTV, de sorte que, surtout quand je les entendais tout à l'heure, de sorte qu'ils pourraient dire dans un an ou dans six mois d'ici, ils pourraient dire, « bien, on décide de ne plus distribuer ARTV. »

4393 Et il n'y a rien qu'on pourrait faire étant donné que les conditions, en tout cas, les conditions qui existent actuellement, et possiblement les conditions qui pourraient exister plus tard, leur permettrait de ne plus distribuer ARTV.

4394 Alors ce qu'on vous demande, c'est que les conditions que vous allez imposer à ARTV dans leur renouvellement de licence, soit conforme et donne à Look, dans la Capitale Nationale et au Québec, l'obligation de distribuer ARTV tel que stipulé dans la licence d'ARTV et tel que stipulé dans le règlement du CRTC, les exigences relatives à la distribution des services spécialisés payants.

4395 CONSEILLERE WYLIE: Si je comprends bien votre problème, c'est qu'il y a des abonnés qui choisissent au moins trois services spécialisés de langue française et qui quand-même ne reçoivent pas ARTV, contrairement à l'exigence qui avaient été formulée.

4396 Savez-vous quel est le nombre de ces abonnés-là?

4397 M. DESJARDINS: On n'a pas les chiffres précis, parce que c'est seulement les gens de Look TV qui ont ces chiffres.

4398 Mais à partir d'une évaluation que j'ai faite actuellement, il y aurait à peu près 3,800 abonnés qui ne recevraient pas ARTV et qui devraient le recevoir.

4399 Cela c'est...

4400 CONSEILLERE WYLIE: Trois services.

4401 M. DESJARDINS: Oui, mais moi, je n'ai pas évaluer le chiffre à partir des abonnés qui reçoivent ou qui ne reçoivent pas ARTV, parce que je ne dispose pas de ces informations-là.

4402 Mais l'hypothèse que j'ai faite, c'est que j'ai fait l'hypothèse que les gens qui reçoivent au moins trois services de langue française représenteraient à peu près 70 p. cent des abonnés de Look TV.

4403 Actuellement, Look TV a à peu près 25,000 abonnés au Québec et dans la région de la Capitale Nationale.

4404 Alors 70 p. cent de ces abonnés-là, normalement, cela devrait être 17,500 abonnés.

4405 70 p. cent, j'ai pris ce chiffre-là, parce que c'est le genre de pénétration qui existe au niveau du câble. Et au niveau du câble, c'est un peu plus élevé. C'est plus près de 80 p. cent.

4406 Au niveau des satellites, c'est un peu plus près de 60 p. cent.

4407 Alors je me suis dit, normalement, leur distribution devrait être à peu près de 70 p. cent.

4408 Et à ce moment-ci, la pénétration d'ARTV sur Look est de l'ordre de 50 p. cent.

4409 Donc, on peut dire qu'il nous manque 20 p. cent. Et 20 p. cent du nombre d'abonnés qu'ils ont actuellement, 19,000, 20 p. cent cela représente 3,800 à environ 4,000 abonnés.

4410 CONSEILLERE WYLIE: Vous avez aussi une inquiétude que dans le futur, par exemple, si Franco-5 ne contenait plus ARTV ou Look Plus, possiblement le problème serait accentué.

4411 M. DESJARDINS: Oui, parce qu'à ce moment-là, tout simplement on pourrait arriver au fait que... je ne dis pas que c'est l'intention de Look TV de faire cela. Je pense qu'ils nous ont dit qu'ils ont l'intention de continuer de distribuer ARTV.

4412 Mais dans l'avenir, on ne le sait pas.

4413 S'il y a des changements, on veut s'assurer que l'obligation pour Look est claire de distribuer ARTV.

4414 Et aussi, ce que je voudrais mentionner, c'est que, normalement Look TV, c'était prévu qu'ils distribuent ARTV depuis le début. Et à partir des calculs que j'ai faits, c'est que dû au fait qu'ils ont, pendant un certain temps, ils n'ont pas distribué ARTV, et que maintenant ils ne distribuent pas de façon adéquatement, on a perdu à peu près 150,000$ avec cette histoire-là, de revenus.

4415 CONSEILLERE WYLIE: Je vous remercie, monsieur Desjardins.

4416 Merci, monsieur le Président.

4417 LE PRÉSIDENT: Merci beaucoup monsieur Desjardins.

4418 Monsieur le secrétaire.

4419 MR. LeBEL: Thank you, Mr. Chairman. This completes Phase II.

4420 We have now reached Phase III and I will ask the Applicant to respond to the Intervention at this time.

REPLY / RÉPLIQUE

4421 M. VOCELLE: Présentement, notre intention, c'est qu'on respecte la loi.

4422 LE PRÉSIDENT: Vous avez 10 minutes. Vous le savez bien. Allez-y.

4423 M. VOCELLE: Je m'excuse, monsieur le commissaire.

4424 Nous, on pense présentement qu'on respecte les conditions de notre licence.

4425 Ce qu'on a fait le premier avril 2002 lorsqu'on est sorti de notre situation financière et qu'on a tout changé les offres à nos abonnés, on a créé Look Plus et on a automatiquement mis ARTV automatiquement dans Look Plus, ce qui fait que tous les nouveaux abonnés aujourd'hui reçoivent ARTV.

4426 Ce qu'on a fait en plus de cela, c'est que conformément à notre licence ou l'abonné qui avait choisi trois programmes de langue française, nous on avait un « package » qui s'appelait Franco-4.

4427 Donc, tous ceux qui avaient pris Franco ont automatiquement eu ARTV. On a changé le nom pour Franco-5. Que ce soit à Québec ou à Ottawa.

4428 Et ce qui reste aujourd'hui, c'est environ 3,000 clients qui n'ont pas choisi trois programmes de spécialités de langue française.

4429 Donc, on n'a pas l'obligation de leur imposer ARTV.

4430 En plus de cela, ce qu'on a fait, une des décisions stratégiques qu'on a prises le premier avril 2002, c'est de ne pas imposer nos nouveaux « packages », excusez le mot anglais, aux anciens clients qui étaient à l'époque. Ils pouvaient choisir les « packages » qu'ils voulaient.

4431 Donc, on a, en anglais on appelle cela, un « Grandfather Clause ».

4432 Donc, tous les clients qui avaient l'ancien basic avec plus dix plus vingt, on les a laissé comme cela.

4433 Et notre intention c'était d'émigrer tranquillement vers les « packages » qui généraient plus d'argent. Mais on ne voulait pas brusquer cette clientèle-là.

4434 MR. KOCH: I think that the main point is that these customers who still have the old package, have not chosen on a discretionary basis the three Francophone services.

4435 As we have read the requirement, it is to offer ARTV, where there is a choice on a discretionary basis of three Francophone services.

4436 But, I think Mr. Vocelle wanted to deal also with going forward.

4437 MR. VOCELLE: Dans le futur, si la Commission nous accorde nos demandes, nous ce qu'on serait prêt à faire, c'est de garantir ARTV dans les, que ce soit un des 8 « specialty channel » au Québec. Qu'on le mettrait automatiquement sur tout le monde. On serait prêts à faire cela.

4438 CONSEILLERE NOEL: Au Québec et dans l'Outaouais?

4439 M. VOCELLE: Pour nous, le Québec et Ontario, et Ottawa, c'est la même licence. C'est la même région.

4440 MR. KOCH: That actually advances them from where they are in the distribution and linkage rules, but because again, it is our proposal to do away with the distinction between discretionary and basic, it is necessary to do that in order to accommodate them while still pursuing that discretionary basic neutrality.

4441 THE CHAIRPERSON: Those are your remarks. We have your written reply.

4442 Just one point.

4443 I guess you are asking us to provide an interpretation of the word "provide", because your interpretation of 4(d) of the Public Notice 2001-90 is "provide" means offer, whereas I think the ARTV people are saying "provide" means provide means supply them with a service, and charge them for the service as part of the package.

4444 So, that where there is a package, you cannot say well we will take the new ones and grandfather the old ones in without it.

4445 They are saying there is no distinction between -- as I am understanding them -- there is no distinction between new and old customers. It says provide everybody who gets three discretionary French language services with that service, and it quotes a price of 0.55 cents.

4446 So, you are asking us, I guess, to rule on what the correct interpretation of that is.

4447 MR. KOCH: In part, although I have to confess, I never read "provide" as offer.

4448 Our contention is "provide" means actually provide.

4449 I think that the key is that those basic subscribers who are not currently receiving it, are only those who have not chosen the three discretionary French language services.

4450 THE CHAIRPERSON: No. I understand that.

4451 MR. KOCH: Maybe I am missing the subtilty.

4452 THE CHAIRPERSON: No, no.

4453 MR. KOCH: Yes.

4454 THE CHAIRPERSON: Well, the subtilty is the difference between provide and offer, ...

4455 MR. KOCH: And --

4456 THE CHAIRPERSON: ... and provide and make available.

4457 It is asking us to ...

4458 MR. KOCH: Right. Yes. We would say "provide" is the active --

4459 THE CHAIRPERSON: If "provide" means supply it to them and bill them for it ...

4460 MR. KOCH: Yes.

4461 THE CHAIRPERSON: ... as part of a package, then there is not the discretion that you have exercised to distinguish between new and old customers.

4462 It just means make those available to anybody who chose a package of discretionary services.

4463 MR. KOCH: No.

4464 THE CHAIRPERSON: That had to be included in that package.

4465 MR. KOCH: But, with respect, I disagree.

4466 I think we are agreeing that provide means supply.

4467 But, what we are saying is, the requirement is to supply ARTV where someone has chosen a discretionary package with three Francophone services.

4468 What I think Mr. Vocelle said is he had a Franco-4 package, which was the discretionary Francophone signals. He now has a Franco-5. So, he is providing them.

4469 THE CHAIRPERSON: Yes. I think we have an interpretation issue here as to how we want to look at that.

4470 MR. KOCH: I am not certain.

4471 I think we comply even if you take the interpretation that it means supply.

4472 I have to confess, I am --

4473 THE CHAIRPERSON: Explain that to me.

4474 MR. KOCH: The requirement, as we read it, is that when a subscriber receives on a discretionary basis three or more French language services, we should supply them with ARTV.

4475 THE CHAIRPERSON: Right.

4476 MR. KOCH: The old basic subscribers are not receiving, on a discretionary basis, three French language services.

4477 Any French language services they are receiving is on a basic basis and not a discretionary basis.

4478 That is why I am confused by your interpretation.

4479 THE CHAIRPERSON: I see.

4480 You are saying that the Franco-4 is not a discretionary service?

4481 MR. KOCH: No. All those who received Franco-4 now receive Franco-5, which is called Franco-5 because it has got ARTV in it.

4482 Those who had never chosen to receive three French language, on a discretionary basis, ...

4483 THE CHAIRPERSON: Okay. I understand that. I understand that.

4484 MR. KOCH: ... are not getting it.

4485 So, I do not think it is a --

4486 THE CHAIRPERSON: Now, is that plus a discretionary service?

4487 MR. KOCH: No.

4488 So, in that case, one could argue we are exceeding it, but in any event, we are providing it.

4489 THE CHAIRPERSON: I see. Okay.

4490 MR. KOCH: Okay.

4491 THE CHAIRPERSON: So, what you are saying is that Look Plus is itself is a basic service.

4492 MR. KOCH: That is right. And we packaged it in.

4493 THE CHAIRPERSON: I see.

4494 So, therefore in the statutory interpretation sense, you are saying that it does not fall within 4(d) because these customers are not receiving ...

4495 MR. KOCH: That is correct.

4496 THE CHAIRPERSON: ... three Francophone services.

4497 MR. KOCH: That is correct.

4498 Those who are not receiving it are only those who have not chosen to receive on a discretionary basis, three French language services.

4499 THE CHAIRPERSON: So, the Franco-4 customers are now receiving Franco-5. So, you have satisfied them because they were on a discretionary basis.

4500 MR. KOCH: Absolutely.

4501 THE CHAIRPERSON: The Look Plus package -- what I did not realize was  --

4502 MR. KOCH: Look Plus subscribers get it. It is just those who Mr. Vocelle, as he explained, Look did not force its customers to move when it introduced a broader package.

4503 THE CHAIRPERSON: Right.

4504 MR. KOCH: So, those are still in a basic package. If they get French language services, it is in a basic package. They do not receive any French language on a discretionary basis.

4505 THE CHAIRPERSON: That is a helpful clarification.

4506 MR. KOCH: Yes.

4507 THE CHAIRPERSON: What I did not realize was that Look Plus was a basic package.

4508 MR. KOCH: It is again one of these all inclusive basic packages.

4509 COMMISSIONER WYLIE: So, the conclusion is it is not the interpretation of "provide" that matters. It is the interpretation of "choose" or the requirement. Right?

4510 Because I read what Mr. Desjardins put forward, I assume that it is correct, from the decision, which in French says "those who choose three speciality services in French, must also receive on a required basis the service of ARTV."

4511 So, I would agree with you, but not on the basis of "provide", no on the basis of choice.

4512 I am sure Mr. Desjardins does not like this.

4513 But, if it is the service de base, and you look at it very strictly speaking, they did not choose it because you gave them that service. Therefore, you could actually take ARTV right out of that --

4514 MR. KOCH: Absolutely.

4515 THE CHAIRPERSON: You are saying in the earlier notice, and the tiering and linkage regs, included the notion of discretion in respect of those three.

4516 MR. KOCH: That is the key. It is the discretion element.

4517 It is interesting the distribution linkage rules does not have the word "choose" anywhere. It is "receives".

4518 COMMISSIONER WYLIE: I am sure Mr. Desjardins is probably even less comfortable now, because you could, but for the market demand, remove ARTV from that big package.

4519 According to this, you would say "well, they are not choosing this because it just happens."

4520 What are your intentions with regard to the big package?

4521 MR. VOCELLE: We have no intention of taking it out.

4522 Furthermore, as we said before, if the Commission grants us what we are demanding, we are ready to put ARTV in the 8 speciality channels that we would carry in Québec and the National Capital.

4523 MR. KOCH: So, we are advancing Mr. Desjardins from where he is today even.

4524 We are saying, of the 8 core, it is going to be included as if it was a mandatory basic package.

4525 So, there is nothing more we can do.

4526 THE CHAIRPERSON: I take that point. But, to follow up on that point.

4527 In the 8 specialities that will form part of what you are calling the basic service, are you saying that in Francophone markets there will be a different make-up of those 8 than in anglophone?

4528 MR. KOCH: Precisely.

4529 THE CHAIRPERSON: Okay.

4530 MR. KOCH: It would include ARTV.

4531 THE CHAIRPERSON: Thank you.

4532 Counsel.

4533 MR. WILSON: I think your response on ARTV has been quite clear, and I do not mean to belabour the point, but I just want to make sure that we are 100 percent clear in terms of this common core. I want to come back to the 14 over the air signals.

4534 I think I had understood from the previous questions on that, that those 14 will potentially vary from market to market.

4535 Would it be possible for you to file with us by the end of the week, a sort of just sample, or a sort of proposed channel line-ups as to what those line-ups, for this core, would look in sort of the various markets?

4536 MR. KOCH: Yes.

4537 There is a very easy way to do this.

4538 What we are proposing is that -- because at the time of licensing, I think the reason there are these references and the conditions of licence to letters with lists, is because it was very specifically configured.

4539 So, what we are proposing, it is the same.

4540 It is what are currently being carried off air.

4541 So, I don't know if there is any need for filing.

4542 Because in a deficiency response, we provided a list of what the channel line-ups are.

4543 So, I think the key is that it is the same. I think we indicated sometimes it is 13, sometimes it is 14. But, it is in that range of number. That is why we focused on the 8 speciality and pay.

4544 MR. WILSON: That is fine. That clarifies it for me.

4545 Thank you, Mr. Chairman. I have no further questions.

4546 THE CHAIRPERSON: Okay. Thank you very much, gentlemen.

4547 MR. KOCH: Thank you.

4548 THE CHAIRPERSON: We will take a brief break and resume at 10:40 with -- I take it that ends this application.

4549 MR. LeBEL: It does, Mr. Chairman.

4550 THE CHAIRPERSON: Right.

4551 We will resume at 10:40 with the next application.

--- Upon recessing at 1030 / Suspension à 1030

--- Upon resuming at 1040 / Reprise à 1040

4552 THE CHAIRPERSON: Mr. Secretary.

4553 MR. LeBEL: Thank you, Mr. Chairman.

4554 Before I call the last item on the agenda, I believe that Commission Counsel has one matter.

4555 MR. WILSON: Thank you, Mr. Secretary.

4556 I would just like to note for the Record, during its presentation StarChoice was asked by the Commission to file a schedule of production and fund payments done in accordance with its contribution requirements.

4557 StarChoice has filed that document, and has requested confidentiality.

4558 The Commission has decided to grant confidentiality for that document, except for the following information.

4559 That the recipients of the contributions made by StarChoice were the Canadian Television Fund, the CIFVF, the Harold Greenberg Foundation, the Shaw Television Broadcast Fund and APTN, and that the Canadian Television Fund received 80 percent of the total contribution.

4560 MR. LeBEL: Mr. Chairman, the last appearing item on the agenda is an application by Craig Wireless International Incorporated to renew the licence of its radio - communication distribution undertaking, Multi-point Distribution System expiring 29 February 2004.

4561 Appearing for the Applicant, Mr. Boyd Craig, Paul East, and Grant Buchanan.

4562 Gentlemen, you have 20 minutes to make your presentation.

PRESENTATION / PRÉSENTATION

4563 MR. CRAIG: Thank you.

4564 Mr. Chair, Members of the Commission, and Staff,

4565 My name is Boyd Craig and I am the Chief Executive Officer of Craig Wireless. With me today are our Regulatory Counsel, Grant Buchanan of McCarthy Tétrault, and Paul East, President of SBL Engineering.

4566 We are here today to seek a seven year licence renewal for Skycable's Multi-point Distribution System that serves most of Manitoba.

4567 This is by no means a standard licence renewal hearing.

4568 The outcome of this hearing will determine in large part whether our sector of the Canadian communications landscape will continue exist.

4569 As we discuss in our proposal, and as we will highlight in further detail today, we think that the Canadian MDS sector has a great deal to offer Canadians.

4570 It is a new and developing technology that is working to find its niche.

4571 However, in order for MDS to continue to develop and to make its highest and best contribution, continued regulatory flexibility is required, and I will outline later our view of how our service should be regulated.

4572 In order to set the stage for that discussion, I would like to start by going back in time before discussing our current recommendations.

4573 We began this MDS adventure in the early 1990's before the advent of DTH, and before the idea of competition to cable was confirmed as Commission policy.

4574 As it turned out, it was not until late 1995 and 1996 that the regulatory framework was established and licences were issued for cable competitors.

4575 Our Manitoba licence, the one under discussion in this proceeding, was issued at Christmas 1995, along with various DTH and DTH/PPV licences.

4576 The Commission's licensing framework required us to adhere to the same rules as Canada's largest BDU's even though we had not yet launched and had no subscribers. There was no asymmetric regulation to spur competition.

4577 Given the limitations of our technology and the sparsely populated area that we were licenced to serve, it is understandable that this has resulted in an uphill struggle.

4578 Our problems were compounded by the penetration success of DTH.

4579 While our service reached a pinnacle of 10,000 subscribers in late 1999, it has been downhill ever since to the point where we are now at about half of that, or 5,000 subscribers.

4580 In fact, and this might be worth remembering in our discussions regarding flexibility today, we really operate two independent systems of fewer than 3,000 subscribers each, one in Eastern Manitoba and one in Western Manitoba.

4581 DTH, like MDS, is completely digital. However, unlike MDS, DTH has very deep pockets, has hundreds of channels of capacity, and is not hampered by terrestrial line of sight transmission issues.

4582 As DTH has become more and more successful in Manitoba, we have lost subscribers. As Look indicated, this pattern has been echoed across Canada.

4583 Yet there are certain areas where MDS has been successful. For example, for a number of subscribers, MDS is the best choice for high speed Internet service.

4584 The Internet is fast becoming a requirement in Canadian homes and MDS is capable of a very competitive service.

4585 Where we have not been able to better our rivals is in the delivery of video signals, and that is what we are here to talk to you about today as the central theme of our renewal.

4586 As you know, I am a third generation broadcaster, and there are not many of us in Canada.

4587 I have spent most of my professional life working in the wireless field and believe that MDS has an exciting future.

4588 However, the idea that we should be expected to behave like a Class 1 system, and particularly, that we must carry all of the same services that Canada's big operators do, will doom us.

4589 We have agreed to do many, but not all, of the same things they do.

4590 We will have a basic service. We will carry all the local and regional off air signals, we will carry an appropriate number of French language services, we will perform simulcast, we will carry APTN, CPAC, VoicePrint, TVA and any other signals the Commission orders under section 9(1)(h).

4591 We will adhere to the preponderance rule whereby a majority of the services received by any subscriber must be Canadian and so on and so on. In other words, it is not as if we are looking for total flexibility.

4592 There is one area where we will need to be very specific with you, and that is with respect to French language services.

4593 We boldly offered to move up to 1 French language service for every 10 English language services, a somewhat surprising offer for a small service in our financial circumstances.

4594 This is a huge commitment for us, and we have asked that we be allowed to count the French language signals we currently carry, namely TVA, Radio-Canada and TV5, in the calculation.

4595 As our Manitoba MDS system has only 90 megahertz of capacity, and consists of two separate systems, each under 3,000 subscribers, that are not interconnected, the Commission could choose to exempt us altogether from its minority language policy.

4596 For example, in Public Notice CRTC 2001-23, the Commission stated:

"The Commission notes that, in the case of most Canadians who want access to all French language services, but who are served by a cable system having a capacity of less than 550 megahertz, subscribing to a DTH distribution undertaking remains an alternative."

4597 The same is true of our service.

4598 In fact, in Brandon and in Winnipeg, they could also subscribe to Class 1 cable systems.

4599 The point is that we have public policy imperatives to consider. One is the delivery of French language services to subscribers outside of Québec. The other is to have a viable alternative to cable and DTH in Manitoba. In our view, they can live in harmony if our proposal is accepted.

4600 It is a legitimate question to ask why we do not just request that you regulate our entire class of undertaking by way of exemption order the way the majority of our competitors now are. We would be very comfortable with that approach, and indeed, we suggested that idea in our response to Commission deficiencies.

4601 The problem for us is one of timing.

4602 We cannot afford the delay inherent in the process of creating an exemption order and putting it out for public comment.

4603 We have also asked that we be allowed to make our financial contributions in respect of Canadian content over the licence term as opposed to annually. This is a way of staying afloat financially by deferring these payments. We understand that this is unusual. So was having to pay 6 percent over the last seven years rather than the 5 percent that was paid by all of our competitors. We hope the Commission can find its way to allowing us this leeway.

4604 We continue to see MDS as a viable business proposition. We pioneered it in North America and currently run a profitable system in Honolulu. The trick is in figuring out the appropriate mix of products to be carried. Thus, the more flexibility we have in deploying our precious bandwidth, the better we are able to try and attract customers.

4605 We may not have the biggest pathway to the home, but we hope that with a judicious balance of video, audio, data and Internet capacity utilization, we will provide an attractive bundle at a reasonable price.

4606 For that to occur, we need the type of regulation called for in our application.

4607 We will do our fair share of the lifting.

4608 But the idea that we must have identical rules as those that govern Canada's biggest BDU just because we have 919 subscribers in Shaw territory, has to be overcome.

4609 I want to make clear that we have a view of where we are going.

4610 We want to create a low priced bundle of services that will appeal to a certain type of subscriber. It will not, and cannot, be all things to all people.

4611 Let me give you an example.

4612 We recently introduced a campaign called "Everyday is seniors day at Skycable" which allows anyone 55 years of age or older to subscribe to digital basic for $14.95 per month, and the response has been terrific.

4613 For many people, a smaller range of video services at a lower price, especially if bundled with an attractive Internet service, is a value proposition they can appreciate.

4614 However, for our vision to work, we need to be able to maximize the value of every bit of our bandwidth. This requires creativity on our part and flexibility on your part.

4615 We hope we have been clear in our submission, our response to deficiencies, and in our reply to interventions.

4616 We think there is a place, admittedly a relatively small one, for MDS on the Canadian communications landscape.

4617 We hope that you agree with that premise and that, if so, you will provide us with the necessary regulatory tools to enable us to get the job done.

4618 We would be pleased to respond to any questions that you may have.

4619 THE CHAIRPERSON: Thank you.

4620 Madame Pennefather.

4621 COMMISSIONER PENNEFATHER: Thank you, Mr. Chairman.

4622 Good morning, gentlemen.

4623 I would like to begin with actually the structure of your presentation this morning is very much the structure of my questions.

4624 That means, I would like to start with your point about the future of MDS in Canada.

4625 You said in your deficiency responses and in your application, in fact, that MDS as a technology, is at a cross roads.

4626 Could you elaborate for us on that point, just to set the scene for our discussion on flexibility?

4627 You note the history, the 93 regulatory policy for MDS. You saw MDS as complimentary. Moving to your licence decision, MDS is seen as competitive.

4628 I take it that you are now proposing that we are now looking at MDS as a complimentary service.

4629 Could you give us just a little more detail about how you see the viability of MDS going forward, and what exactly you see as its role in Canadian broadcasting?

4630 MR. CRAIG: I think early on at the very beginning when we got into this industry, we were under the notion, and we were not alone in our belief, that MDS would be a very, very robust competitor to the incumbent cable operators.

4631 We built these vast networks.

4632 Throughout Manitoba, the network covers 70,000 kilometres of coverage, or provides 70,000 square kilometres of coverage.

4633 Expecting that we were going to sign up tens of thousands of customers, we built the infrastructure to support what we hoped would be that huge customer base, and subsequently lost a lot of money operating those systems when the subscribers did not come as fast as we had hoped.

4634 Over the course of the seven years that we have been operating as an MDS system, we have discovered that we probably were a little bit over ambitious, and over zealous in our projections of subscriber growth, and rather than give up entirely on the industry -- because it is a wonderful technology. I am still amazed every time I turn on the TV set, and realize that it is coming through the air. There is all these digital channels, and now two way Internet, which is another interesting thing.

4635 When we started in the MDS industry, it was always a one way delivery system, and no one had contemplated at the time there would be two way.

4636 When we came and applied for our first licence, in fact, there was little or no discussion about using MDS as an Internet delivery vehicle.

4637 But, when our subscribers in the video side did not sign up the way we had hoped, and I think one of the biggest reasons that they did not was because the line of sight issue was a lot more of a hindrance than anyone ever imagined.

4638 While there was a common belief that when you built a digital system, that the line of sight issues that were inherent in the analogue systems that were built before the digital systems, that somehow, the line of sight issue would be overcome. Not completely. But, there was a belief that it would be less of an obstruction for us.

4639 That was not the case. And the business model obviously was not sustainable.

4640 We have since re-engineered our entire infrastructure, and we have gone from losing hundreds of thousands of dollars each month. We now have our Manitoba system to the point where it is just about break even.

4641 Through the acquisition of another MDS system in Honolulu, we have been able to defray the costs of our operation.

4642 We have one central call centre in Winnipeg that handles all the calls coming in from Honolulu, for example. We have a common management team.

4643 Over all, we are approaching the point where we are getting closer to breaking even.

4644 Part of the reason we were able to do that is because of the extra revenue we have garnered through the delivery of high speed Internet.

4645 So, I think that, all in all, I think that although it has not been as pleasant an experience as we had anticipated seven years ago, still I have no regrets that we have entered this industry. I think that with the advances in technology, I believe someday that the line of sight issues will be overcome.

4646 So, I see a bright future for MDS.

4647 But, we are never going to have the capacity of the incumbent cable systems. We are not going to have the capacity of satellite systems. We are going to be a niche player. But, I think we will be a viable niche player.

4648 COMMISSIONER PENNEFATHER: What do you mean by "niche player"?

4649 MR. CRAIG: What I mean by that is that I do not expect to achieve these subscription levels of the big cable companies.

4650 I think that we have to moderate our expectations, and create a business model that is sustainable, and that is predicated upon us having in the tens of thousands of customers, not the hundreds of thousands of customers.

4651 COMMISSIONER PENNEFATHER: That is a big change from the past, and this is the crossroads point, to go from what appears to be on paper a losing technology, to a situation where you seem very optimistic and you are talking about ten thousand subscribers, not 3,000 and 3,000. I think it is totally 9 at the moment or something. 5,000 at the moment.

4652 What is going to make that difference?

4653 MR. CRAIG: Well, I think our marketing strategy for one thing. I think I spoke about us lowering our operating costs.

4654 I think that, first of all, was the first thing that had to be achieved.

4655 The next thing is the way we market our product. Rather than trying to be everything to everybody, I think that with the introduction of our senior's package in Manitoba, we have proven that if you target a certain market, that it is possible to actually increase your subscriber base.

4656 COMMISSIONER PENNEFATHER: So, when you say "niche" you are talking about specific markets that, for example, with the senior's creates a package and a price. The price and packaging niche marketing as such.

4657 When you market, what is it that you are marketing?

4658 Are you marketing an Internet service?

4659 You say here that MDS is the best choice for high speed Internet service, or are you marketing a broadcasting distribution service?

4660 MR. CRAIG: I think in this day and age you have to actually market both.

4661 When I mentioned that it is the best delivery for high speed Internet, in some cases, it is the only access to a broadband connection that people have.

4662 We have Internet service set up in rural parts of our province, that the households that we provide Internet access to, we are the only provider of broadband access.

4663 Because we spent so much money building our network, and remember that it is 100 percent digital. The picture quality is excellent. It is very, very reliable.

4664 So, when we market to senior,s, we are predominantly using our video service as the -- it is the predominant push, and then after that, we attempt to sell them a high speed Internet connection.

4665 COMMISSIONER PENNEFATHER: Yes.

4666 In fact, I went to the website. I tried to go to Skycable, but ended up at Skyweb. I do not think Skycable exists, does it, as a website?

4667 MR. CRAIG: It is one common site.

4668 COMMISSIONER PENNEFATHER: Right.

4669 In looking up basic services, at the very bottom of the list of services available as your basic package, the $18.95 package, is the comment that:

"In order to get this package, you have to subscribe to the Internet service."

4670 Is that the case?

4671 MR. CRAIG: No. That is not the case.

4672 COMMISSIONER PENNEFATHER: But, that is what it says in black and white on the screen.

4673 Can you explain that to us?

4674 Actually, it is blue and white.

4675 MR. CRAIG: It is simply not the case.

4676 I think that we have done many, many hook ups in the last 30 days to senior's, 50 to specific, and we have not forced anybody to take Internet.

4677 COMMISSIONER PENNEFATHER: Well, let me just check. I quote:

"Installation of Skycables basic service west of the perimeter is only available in conjunction with our Skyweb High Speed Internet service. This includes all the necessary equipment, ..."

4678 Wouldn't that mean that I would have to subscribe to Internet in order to get basic television services?

4679 MR. CRAIG: It sounds to me like it would, but I know that that is not our practice.

4680 COMMISSIONER PENNEFATHER: You might want to check into that.

4681 MR. CRAIG: Yes.

4682 COMMISSIONER PENNEFATHER: One of the reasons I raise it is you mentioned, and you have been present for the previous discussion, so obviously the point here is coming.

4683 In your supplementary brief you say you have a dual strategy, and that dual strategy includes your Internet service, high speed.

4684 What I am interested in is the balance between that one strategy and the programming services strategy.

4685 How do you see the balance between those two strategies?

4686 If you take the example that I just gave you from your site, it would appear that Internet is driving the business plan.

4687 In fact, what you are discussing with us this morning, is the change from 5,000 subscribers to 10,000, would be driven by the Internet service that you offer.

4688 MR. CRAIG: Well, it is --

4689 COMMISSIONER PENNEFATHER: Have I misunderstood?

4690 MR. CRAIG: No.

4691 It is increasingly important, I think, to offer both services.

4692 I know that in the absence of an Internet service, it is very, very hard to compete with the incumbent cable companies.

4693 Just as an example of that, in Honolulu, when we were licenced for that system there, we had to go back and apply for a two way approval. The two way approval came a year and a half after the approval for us to take ownership of that system.

4694 We have a hard time there keeping customers, our television customers, without a broadband product.

4695 So, we are going to introduce one there, and our expectation there is that we will start to see our video sub-base grow again.

4696 In Manitoba, we were the first MDS company to introduce two way high speed Internet, and we have signed up about 1,200 Internet customers so far.

4697 I think that it is going to help us get video subscribers, and I think that vice versa, video subscribers are going to help us get Internet subscribers.

4698 COMMISSIONER PENNEFATHER: Well, I take that point.

4699 I think that what we are after, as I believe Vice-Chair Wylie said earlier, is looking at what your licence is, and your licence is to provide broadcasting services. As you know, those broadcasting services should predominate in your offering.

4700 On the technical side of this in your deficiency response, page 1, you say that Skycable currently uses about 84 megahertz of MDS spectrum for programming.

4701 What are you doing with the other 6 megahertz? Is that the Internet services?

4702 MR. CRAIG: Yes.

4703 COMMISSIONER PENNEFATHER: Do you intend to continue with that proportion, or considering your business plan, and the importance of the Internet services, do you see that increasing?

4704 MR. CRAIG: I see us needing more spectrum for Internet.

4705 When you construct a system like ours, and you have a supercell, if you will, each 6 megahertz of spectrum will only support so many Internet customers. It is a shared access system. So the more Internet customers you hook up, you need to use more spectrum.

4706 Our idea would be to use the majority of our spectrum for broadcast services, and the rest of it for Internet services.

4707 COMMISSIONER PENNEFATHER: What do you mean by "majority"?

4708 MR. CRAIG: I mean the majority of the spectrum.

4709 So, we have 90 megahertz of spectrum, we would use over 50 percent of the 90 megahertz of spectrum for the delivery of broadcast services.

4710 COMMISSIONER PENNEFATHER: So, you are saying that you would continue to use, for your MDS spectrum, up to 50 percent for Internet?

4711 MR. CRAIG: Under 50 percent.

4712 COMMISSIONER PENNEFATHER: Under 50 percent.

4713 But, your MDS licence is for broadcasting services. Do you feel that that is a fair proportion of MDS spectrum allocated to programming services?

4714 MR. CRAIG: In my opinion it is.

4715 I think too that if we do not have an Internet strategy, chances are that our video strategy may fail.

4716 I think in the absence of an Internet offering, our whole business could be in jeopardy.

4717 COMMISSIONER PENNEFATHER: What do you propose would be the impact of this increased use of spectrum, which is allocated to you for broadcasting services, on the number of programming services that you will be able to offer on a going forward basis?

4718 MR. CRAIG: Currently, we are offering 70 channels of video programming.

4719 Our expectation is that our video offering would decrease by about 20 channels.

4720 COMMISSIONER PENNEFATHER: Well, lets keep that then.

4721 If your video offering is going decrease by 20 channels, let's get back to that when we are talking about flexibility on a going forward basis. Because you talk in your opening remarks about being under the same rules as DTH.

4722 I think you would agree with me that while that you are regulated as a Class 1 licensee, there have been reflections on the differences of the MDS technology.

4723 In Decision 2001-25, for example, we were very clear that there is a different technological milieu, and we would discuss that very point at this hearing in terms of French language services.

4724 I would say that there have been certain changes and adjustments over the course of the last little while, inclusive of your own licence, which would indicate a somewhat more flexible approach already.

4725 But, to the extent that it would change your service from one that was less of a broadcasting service providing programming, which of course is our interest here, then we have some concerns.

4726 It is in that context I think we should discuss the regulatory flexibility that you are asking for.

4727 I have another question on the technology.

4728 At the same time on page 5 of your supplementary brief, and I think again in deficiencies, you talk about a pilot project for a new wireless broadcast distribution service, video on closed computer network.

4729 There is some detail on that in the supplementary brief, but more detail would be appreciated on that.

4730 Could you talk to us a little bit about that pilot project?

4731 MR. CRAIG: In fact, we have built a network as we described in there, a closed computer network. It is a video over IP base network that some may describe as a MPEG 4 system, that delivers broadcast services securely over our wireless spectrum to a high speed modem, and from the high speed modem, the signal is available to a computer, and out of a computer, if the viewer so chooses, he can take a VHS output on the computer, and plug the two RCA jacks into a television and watch it on a regular TV.

4732 COMMISSIONER PENNEFATHER: How much of your spectrum would this be using? Is it related to that?

4733 MR. CRAIG: It is more spectrally efficient than MPEG 2 system that we have operating now in Manitoba.

4734 COMMISSIONER PENNEFATHER: What kind of programming services?

4735 What types of services would you provide on this closed computer network approach?

4736 MR. CRAIG: Our idea is to provide exactly the same services that we are providing on our MPEG 2 service.

4737 COMMISSIONER PENNEFATHER: Exactly the same, or --

4738 MR. CRAIG: Well, very similar.

4739 There has been some suggestion that it may be difficult for us to sign program contracts with programmers using this type of infrastructure. But, it has not been a problem, and in fact, we have signed at least 50 of them.

4740 COMMISSIONER PENNEFATHER: Is this pilot project then going ahead in Manitoba? It seemed to me from your deficiency response it was not? Is it proceeding?

4741 MR. CRAIG: It is not at this time.

4742 COMMISSIONER PENNEFATHER: Not at this time.

4743 But, are you still planning it down the road?

4744 MR. CRAIG: Our expectation is that during the next licence term we would build this.

4745 COMMISSIONER PENNEFATHER: Now, radio distribution undertakings like Skycable, and other MDS undertakings are defined under the Regs; the Broadcasting Distribution Regulations as distribution undertakings that make predominant use of radio waves in the distribution of programming services.

4746 How do your plans to distribute services via computer network align with this definition?

4747 Would we require any regulatory change to accommodate such plans, should you go forward?

4748 MR. EAST: The network being referred to is in fact the wireless network.

4749 So, it is not a migration from radio communication to wired communication. It is still radio communication using radio waves.

4750 COMMISSIONER PENNEFATHER: I think you said something about programming services.

4751 Here we are talking about copyright, intellectual property rights.

4752 What would be the impact should you proceed with such a pilot service, on your ability to carry the services you were already offer considering property rights, considering copyright, etcetera, which would obviously be only for the current use on your MDS system.

4753 Would that be changed? Would you negotiate new rights?

4754 MR. CRAIG: It is a system that we are talking about that is not unlike the system that telephone companies have recently been licenced for to provide video over DSL. It is the same type of concept.

4755 I think that the programmers, obviously, have a major interest in knowing that the system that their programs are on are secure. The system that we are talking about is as secure as our present MPEG 2 network.

4756 COMMISSIONER PENNEFATHER: Let's then go to the proposals that you have regarding the regulatory regime.

4757 I propose that we look at this perhaps on a going forward basis to get clearly on the table as precisely as we can, what you are proposing.

4758 I recognize that in your deficiency response, you noted the possibility of an exemption régime.

4759 But, this morning you say that that may be interesting, but it would take too long. So, you are proposing an approach here.

4760 That is what I think we should go through as clearly as we can.

4761 So, let's take it one step at a time. Generally speaking, would I be right to say that the régime that you are proposing, going from your current licence, which as we know lists very specific services that you are required and authorized to carry.

4762 What generally speaking you are looking at is a régime where there are no new requirements, authorization to carry just about everything. Exemption from access rules.

4763 In terms of distribution and linkage requests, you request removal of specific foreign services listed in your licence so that you can link any foreign service with Canadian and speciality.

4764 So, basically very few requirements, more flexibility, limited distribution and linkage, and no access.

4765 In your reply, you confirm the only two pieces of the régime you are proposing that would remain, would be the rule of predominance of Canadian programming, and that no package could be just non Canadian programming.

4766 That was my sense of the package coming out.

4767 As we go through it in detail, you can correct me if I am wrong, if that is where we are going.

4768 If we look at the specific service that you want authorization for.

4769 Currently, I have a list of the services that under your current licence you are required to carry, and authorized to carry, services you are carrying, and the difference it would make with your proposal.

4770 In terms of the service that you are required to carry, currently these services to a great extent appear in Section 17 of the BDU Regs.

4771 What would be the impact, instead of an approach such as you are proposing here, to simply have you come under Section 17 of the Distribution Regulations?

4772 What would be the impact on the service?

4773 MR. BUCHANAN: Well, we have not been under it up until now, when we were ...

4774 COMMISSIONER PENNEFATHER: Exactly.

4775 MR. BUCHANAN: ... exempted of course from the analogue -- or from the old cable, ...

4776 COMMISSIONER PENNEFATHER: Yes. I have this.

4777 MR. BUCHANAN: ... from the old cable regs.

4778 COMMISSIONER PENNEFATHER: I have the licence here.

4779 MR. BUCHANAN: You would have to carry extra regionals which we had not proposed to carry. There don't happen to be in any in Manitoba, so it is not a particular concern.

4780 COMMISSIONER PENNEFATHER: So, would you have any concern, instead of your approach, to authorize you to carry all the services that -- and/or requiring of certain of those services.

4781 Would you have any objection to a condition of licence that in fact you not be exempted from Section 17?

4782 MR. BUCHANAN: Probably not. It is Section 18 that creates the difficulty.

4783 COMMISSIONER PENNEFATHER: I am just coming to it.

4784 MR. BUCHANAN: Yes. No. I would expect that.

4785 But, no looking at this, there is not --

4786 COMMISSIONER PENNEFATHER: All right.

4787 MR. BUCHANAN: There is the educational mention. There isn't an educational one in Manitoba. There are not extra regionals, so a lot of it is simply -- we did the same as the previous applicants.

4788 We tried to build off what you said the last time, and just update it through the BDU Regs which were not in place at the time. So, we exempted ourselves from the same provisions that we had been exempted from previously in the old one.

4789 I think in light of your question specifically, no, I do not think Section 17 is a big problem in this ...

4790 COMMISSIONER PENNEFATHER: Okay.

4791 MR. BUCHANAN: ... licence this time.

4792 COMMISSIONER PENNEFATHER: Let's move on to Section 18 then.

4793 In your current licence, you are exempted. But again, that is under the cable television regulations. That is not the same.

4794 So, what we are looking at here is your request to be exempted from Section 18 under the current Broadcast Distribution Regs.

4795 Your current licence, however, does expect you to carry all Canadian under -- the licence expects Skycable Inc. to distribute all licenced Canadian speciality and program undertakings subject to availability of MDS channel capacity.

4796 Moving forward, what is your proposal regarding the carriage of pay and speciality services?

4797 MR. BUCHANAN: Well, we had outlined in the application that we wanted to be able to pick and choose once you get beyond the basic ones that we agreed to, which were the ones that you have just identified under 17, plus the mandatories; the APTN's, CPAC, and so on, plus the French to English offer, which would of course require that you add French language specialities in order to get the ratio to work.

4798 So, there are a number of mandatories that you would use building up.

4799 After that, noting that what you just read was an expectation, and noting the words "available channel capacity", that is really what we are here to talk about.

4800 Because we are trying to figure out how to allocate 90 megs of capacity, and the lowest you have dealt with before is 550, and you always had special rules for the people who did not have capacity there.

4801 We are dealing with an extreme shortage of capacity, and the question is: How do we collectively deal with that?

4802 We want to have enough spectrum to be able to be a niche player in the Internet and in the Broadband -- in the video market. We wanted to be able to pick among all of the various specialities that are out there and create packages that worked.

4803 So, that was the proposal. You have it correct.

4804 COMMISSIONER PENNEFATHER: Well, that is why I was concerned, to discuss with you your plans for the use of spectrum.

4805 Because I would propose to you that my concern right now is to say fine, Internet service, go ahead. Do that. It is interesting. It is an important part of your business plan.

4806 But, from our point of view, in the public interest, as a source of Canadian programming for the public, the maximum use of the spectrum possible to do that is what we should be looking at.

4807 So, to go from 90 to less than that, let's say take 40 off of that and go to 60 for programming services, once again squeezes our capacity and our ability to offer programming services to the public.

4808 So, as you say, as MDS capacity is available, it is important for us to know that you are using that capacity to the maximum in terms of programming services.

4809 So, that being said, let's just try to work this through in very concrete examples.

4810 Later on in your deficiency response, you speak to clarify what would be your basic service offering.

4811 Could we start there on a going forward basis?

4812 MR. BUCHANAN: Sure.

4813 COMMISSIONER PENNEFATHER: You have responses in your deficiencies on page 4 and 11, where you say to us that you would carry a basic service even though you request to be exempted from Section 3.

4814 Can you tell us exactly what this basic service would be comprised of?

4815 MR. BUCHANAN: Well, our starting position was we did not feel we needed to be instructed to carry a basic -- that without any such instruction, we would be doing it anyway. So, in asking to be exempted from it, it was not that you were never thinking you would offer one.

4816 When the Commission asked in deficiencies, "well would you accept that? Well, we are planning to offer it anyways, so yes, we would."

4817 Now, I do not recall a question that said build us your basic. Show us what you want on basic, but if we did --

4818 COMMISSIONER PENNEFATHER: No. That is what I am asking you now.

4819 MR. BUCHANAN: If we did --

4820 COMMISSIONER PENNEFATHER: We have a list of services attached.

4821 But, just for the sake of clarity, could you go through what the basic service would be?

4822 MR. BUCHANAN: Certainly.

4823 The starting point, of course, would be the four must carry, the off airs that are available, and the four or the three 9(1)(h) services, APTN, CPAC and TVA.

4824 I guess beyond that, Boyd what do you think you would see on basic?

4825 COMMISSIONER PENNEFATHER: What about the pay and speciality services?

4826 Just to go back so I do not get confused.

4827 How many services are we up to now to the Canadian public in the basic package that you have just mentioned?

4828 MR. CRAIG: In Winnipeg, there are five off air stations.

4829 In Brandon, or the western part of the province, there is four.

4830 I think with the mandatory channels that we have carried, that would take us up to 8 in Winnipeg.

4831 COMMISSIONER PENNEFATHER: Before we get to specialities, there would be 8, going forward?

4832 MR. CRAIG: I think in basic.

4833 Yes. 8 in Winnipeg, and there is one less local TV station in the west.

4834 COMMISSIONER PENNEFATHER: Again, you are requesting us to authorize you to carry all services so that you would basically choose which would be those 8.

4835 But, can we understand that if you were agreed to Section 17, we could at least have some, shall I say, overview on what those 8 would be?

4836 MR. CRAIG: Yes.

4837 COMMISSIONER PENNEFATHER: Now, if we move into pay and speciality, what can we assume the Canadian public in Winnipeg and Brandon would have available to them in pay and speciality, considering that under the access rules, and the BDU regulations, you are supposed to distribute all.

4838 MR. BUCHANAN: Maybe we can stand back a moment and finish the landscape discussion, because I am getting the feeling that we are building up, thinking that there is something wrong with carving out some of the broadcast spectrum to be carrying Internet.

4839 Where I wanted to go with that was there is all kinds of examples in the Canadian Broadcasting System.

4840 For example, an over the air guy can do 40 percent U.S. programming, and still have it be a Canadian programming service.

4841 The ethnic folk can have 40 percent sitcoms from Hollywood, and still have it called an ethnic service.

4842 I am not sure why we are having so much trouble with the idea that a service like this, which is proposing to carry a majority of Canadian services, is somehow less a broadcasting service because it does not carry 100 percent.

4843 COMMISSIONER PENNEFATHER: Well, I guess that is a good part of the discussion.

4844 In effect, if you look at the original regulatory for MDS, it certainly was seen as a complimentary service for broadcasting distribution services. Again, in your licence, as a complementary line to provide programming services.

4845 I take your point about that balance.

4846 I guess that is what we are trying to achieve here is to look at the reality of going forward as you see the future of MDS, and for us to look at it as a vehicle for programming services.

4847 In fairness, I think we can look at it that way.

4848 So, if we could come back to your point at the end, and get a good sense of how in effect going forward the MDS service you are proposing would offer programming services to the Canadian public, and how the regulatory framework suitable to that would work through.

4849 So, if we could continue to look at that, I would appreciate it.

4850 On the pay and speciality then, could we get a sense of what you propose going forward as what would be available through your service?

4851 MR. CRAIG: Presently, I think we have 6 pay channels, and our proposal would be to go to fewer than 6. I know I am skipping over the Canadian speciality channels for a minute. But, we also have 7 channels allocated presently to pay-per-view. Our experience with pay-per-view has been that it has not been the big attraction that we had hoped it would be.

4852 Everyone on our system whether they are a basic subscriber or take the whole package, everybody has access to pay-per-view. Few actually use it.

4853 So, I think that we can certainly live without the number of pay-per-view channels that we presently carry.

4854 The exercise we would go through would be to identify 20 channels that we presently carry, that we would over time in a measured fashion without upsetting our customers, we would pair away until we got down to about 50 channels.

4855 COMMISSIONER PENNEFATHER: What about high definition services in the future?

4856 MR. CRAIG: Well, a high definition channel uses a full 6 megahertz of spectrum, which is one carrier.

4857 If we were to carry high definition TV, it takes us right back to the analogue days where one analogue channel takes 6 megahertz of spectrum.

4858 At that point in time, if we were analogue, we would have 15 channels.

4859 If we carried high definition, we would have to give up an entire carrier, and get rid of five digital channels.

4860 So, I think that our ability to carry high definition is very, very limited.

4861 COMMISSIONER PENNEFATHER: Do you not see though a greater demand out there in the public for high definition services?

4862 MR. CRAIG: Obviously, there is an increasing demand for high definition.

4863 It does not mean that everybody in our universe of coverage is going to want high definition, or perhaps even be able to afford high definition.

4864 We have discovered recently that by offering fewer programming services, such as in our Seniors' package, and keeping the cost down, and given the fact that it is 100 percent digital, it is a very very attractive package to people that do not want 300 channels, or 500 channels, and that frankly cannot afford to have it.

4865 So, while some people will want high definition, other won't, that is where we fit in.

4866 COMMISSIONER PENNEFATHER: So, just for the Record then, if the Commission were to take the approach that you should not be exempted from Section 18 of the Distribution Regulations, what would be the impact on your service in summary?

4867 MR. CRAIG: We would be bankrupt.

4868 COMMISSIONER PENNEFATHER: You would be bankrupt.

4869 Let's get to that.

4870 In your application on several points, you say that you have a precarious financial situation. Obviously, that is related to this discussion on your COL's.

4871 Can you provide us, if not immediately, then in writing, the projections for your revenues and expenses, under the scenario where all your changes to your COL's are approved, and where all the changes to your current COL's are denied to your point.

4872 MR. CRAIG: Yes. Yes.

4873 COMMISSIONER PENNEFATHER: When do you think you could supply that?

4874 I guess, I will leave that to Counsel actually.

4875 Mr. Craig, my last question, I think you have answered it actually, on the financial side, was the flexibility that you are requiring, which in fact is perhaps a little more detailed than we had gone through. We have taken some broad strokes.

4876 But, throughout your application and reply to deficiencies, you have laid out the specifics inclusive of a new condition of licence, in which it is clear where you want to be exempted.

4877 Again, if this flexibility, and I have to say too that a number of commentators have said that your régime is already fairly flexible.

4878 Can you explain then how this greater flexibility will effect your bottom line going forward?

4879 MR. CRAIG: Well, I think, the point that we have tried to underscore is that we need a broadband offering to keep the video customers we have.

4880 If we have any intention of growing our video subscriber base, we need a broadband offering.

4881 Without it, I think that, we have demonstrated -- I am going to say unequivocally, that this has not been an easy road. It has not been for a lack of trying.

4882 We have invested well over $30 million into our Manitoba network, and have little to show for it in terms of return on investment. In fact, we have nothing to show for it.

4883 We have, however, built a state of the art digital network that I think Manitoba can be proud of.

4884 If we are allowed to maximize this technology by maximizing the fact that our networks are becoming two way, and that people do need and want a low cost digital service, I think that we will be very viable, and eventually recoup our investment.

4885 COMMISSIONER PENNEFATHER: Well, in light of that, let me ask you this.

4886 If in fact, to Mr. Buchanan's earlier point, although your licence is very clearly one of a broadcast distribution undertaking for programming services, assuming the business plan, I think, is largely -- perhaps the wrong word -- is to a great extent based on a provisions of the two way Internet high speed service.

4887 Do you not think it appropriate that rather than what you say as a régime of great flexibility, that the Commission would not be advised to, in terms of your program undertakings, to take a somewhat more regulatory approach.

4888 In other words, to in fact bring you more under the Broadcast Distribution Regulations, because in the quid pro quo of this, our concern would be to ensure that this MDS service was actually functioning as a program delivery service, as well as an Internet service.

4889 The pressure seems to be coming to provide more Internet service, to use more spectrum for Internet service.

4890 Is it not fair to say that on the return side, we would want to have more regulation rather than less to ensure programming services remain part of the mix?

4891 MR. BUCHANAN: I am not sure where we get to the idea that programming service won't be part of the mix.

4892 The proposal is that no subscriber, at the subscriber level, will get less than a majority of Canadian services.

4893 The proposal is that not less than a majority of the services offered on the system will be Canadian.

4894 The proposal is that not less than a majority of a spectrum being licenced will be for Canadian.

4895 To me, you have got lots of protection already.

4896 If you are building up from the basic tier, the real question is who is going to pick the specialities that are going to be carried, because there is not enough available channel capacity if we want to have a robust Internet service to carry them all.

4897 So, that is really where the rubber is hitting the road here.

4898 Either we can go service by service and try and guess, or you can trust us to do the right thing, and figure it out ourselves in the Manitoba marketplace. I mean I think that is really where we are.

4899 COMMISSIONER PENNEFATHER: On the trust us side, yes.

4900 MR. BUCHANAN: Subject to all those preponderances. I mean, they are going to be there. We just don't know which ones as we sit here.

4901 COMMISSIONER PENNEFATHER: Yes. I take your point. I guess it is up to us to look at that balance.

4902 But again, I think there is an argument to be said that this was licenced, and also your spectrum is in your hands for the delivery of broadcast services, programming services.

4903 When you talk about channel capacity, and the inability to carry certain channels, or certain program services to the Canadian public because you are using it for Internet, obviously, we have to take a look at that.

4904 Correct?

4905 MR. BUCHANAN: Correct.

4906 But, remembering as well that we are talking about two 3,000 sub-systems where you have made great strides in deregulating other players.

4907 We do not have anybody quite like us, obviously. We are a hybrid, and we are trying to come up with something fair. We thought we had come up with a regulatory bargain that made sense. Obviously, you have to go away and decide whether we did or not.

4908 COMMISSIONER PENNEFATHER: That is why I think putting a very practical picture, to coin a phrase, seeing what is really on the screen as a result of various approaches to the regulations is important.

4909 Could I turn to the contribution to Canadian programming.

4910 Again, the specifics of your licence, as the starting point, you are under your current licence, committed to contribute 6 percent of your revenues to community programming, in fact, if I take the condition of licence as it is written. You are now proposing 5 percent, but to Canadian programming.

4911 Have I understood that correctly?

4912 MR. BUCHANAN: Yes.

4913 COMMISSIONER PENNEFATHER: The current COL also refers to an amount of $360,000 to Canadian programming.

4914 I assume that that is no longer part of the package, or is it? To clarify the change that you are proposing.

4915 MR. CRAIG: No.

4916 COMMISSIONER PENNEFATHER: It would be 5 percent to Canadian programming?

4917 MR. CRAIG: Yes.

4918 COMMISSIONER PENNEFATHER: If we grant this request, how do you see it impacting on your performance going forward?

4919 What is effect of granting you this request on your revenues, for example, on your bottom line going forward?

4920 MR. CRAIG: The 5 percent would --

4921 COMMISSIONER PENNEFATHER: The 5 percent as opposed to 6 percent.

4922 MR. CRAIG: Right.

4923 Well, in absolute terms, it is about $10,000 a month at 5 percent, given the present revenue we have today from our video subscribers. So, it would be 1 percent of -- it would be about $2,000 a month.

4924 COMMISSIONER PENNEFATHER: Have you made this calculation on the basis of your revenue plan going forward, assuming if you could perhaps add that to your report to us on revenues, if granted, the flexibility request ...

4925 MR. CRAIG: Sure.

4926 COMMISSIONER PENNEFATHER: ... or denied, what the difference would be.

4927 MR. CRAIG: Sure. We could do that.

4928 COMMISSIONER PENNEFATHER: Again, also in contributions to Canadian programming, you asked for an exemption for the rule to contribute on a yearly basis, and request that you contribution be over the licenced term.

4929 Could you clarify your rationale for this request?

4930 MR. CRAIG: The rationale for that is simply our present precarious financial state. That is as simple as it gets.

4931 COMMISSIONER PENNEFATHER: What do you think the impact would be on the Canadian Television Fund, for example, if we granted you this request?

4932 MR. CRAIG: Well, I think that the request that we are asking for would have a minimal impact, and just keep in mind that we are going to contribute the money. We are not saying we are not. It is just going to take us longer to make the payment than we would like.

4933 COMMISSIONER PENNEFATHER: But, that is as far as the effect on you.

4934 What about the comments made by the CFPTA that this is not acceptable?

4935 Do you have any comment there on that point?

4936 MR. CRAIG: Well, I guess my comment is that on the overall scheme of things, our contributions to the fund are probably minimal compared to what the big BDU's are contributing. So, I do not think that it is going to have a material impact on anyone.

4937 Again, we are not saying we do not want to contribute. We do want to contribute. It is just going to take us a bit longer to write the cheque.

4938 COMMISSIONER PENNEFATHER: Well, looking at your table which you sent with your deficiency on your contributions to Canadian programming in the past licence term, to do you justice, it is not minimal. $200,000 counts.

4939 However, I did want to ask you concerning the year 2002, there appears to be a shortfall of $91,508 in your contribution.

4940 Have you an explanation for that?

4941 You have the table I am referring to?

4942 MR. BUCHANAN: I see the number you are referring to, Commissioner.

4943 But, our understanding was that we were within $4,000 of the required amount, and that we would be brought up at the end.

4944 So, I see the number you are talking about, the $91,000.

4945 COMMISSIONER PENNEFATHER: Do you want to get back to us with a clarification, because --

4946 MR. BUCHANAN: Perhaps we could do that at the same time as we file the others.

4947 Because we concluded by saying that this represents a small under contribution to August 31st, 2002 of $3,843.

4948 Certainly we would be caught up, you know, to that number by the end of the licence term. We have got now until February.

4949 COMMISSIONER PENNEFATHER: Thank you.

4950 You can clarify that then in the next response.

4951 Connected with your contribution scheme in the last licence was not only that the 6 percent was to go to community programming, and now we are changing that to Canadian. But, you were to supposed to launch a community channel and an educational channel.

4952 I realize you responded in deficiencies on this point.

4953 You did not launch a community channel or an educational channel, nor take on the mobile production unit that was required under condition of licence. These were conditions of licence.

4954 On the community channel, could you clarify for us what were the factors that lead you to not launch a community channel, despite the fact that it was a condition of licence?

4955 MR. CRAIG: Well, it was an oversight on our part.

4956 My belief was that by contributing 6 percent of our revenues, that we had in fact met our obligations for a community channel. That may not have been the case.

4957 COMMISSIONER PENNEFATHER: Yes. I read you met your obligations sensing that you did not have to and that you should have come for a change for your condition of licence.

4958 But, what I was more interested in was you proposed a community channel to get this licence in the first place.

4959 What lead you to not launch a community channel?

4960 MR. CRAIG: When we applied for the licence, the expectation was that we would be making money not losing money.

4961 So, we lost a lot more money that we had expected, and we did not have the funds to launch a community channel.

4962 Second of all, we cover such a vast area that --

4963 It was basically a money thing. It is all related back to the financial performance of the network.

4964 COMMISSIONER PENNEFATHER: I think that is clear.

4965 I am sorry, Mr. Buchanan, did you want to offer something?

4966 MR. BUCHANAN: I was simply going to say as an outside observer, trying to figure out what a community channel would carry when you are covering a province, is sort of like why the DTH guys do not have one.

4967 There really isn't, in many cases, the same community of interest, and when the sub-revenues or the subscribership did not pan out, you are looking at what kind of community channel could you run for $10,000 a month.

4968 If you are going to rent a truck, you are going to have a person presumably to do it.

4969 So, both on the financial side and on the community of interest side, you can understand why it did not make sense.

4970 COMMISSIONER PENNEFATHER: Well, you proposed it. It is your licence.

4971 MR. BUCHANAN: I understand. No. I understand that. I appreciate it.

4972 COMMISSIONER PENNEFATHER: That is why I am concerned.

4973 I also was concerned to get a sense of where you thought such a concept fit in an MDS future, because it is a very important part of the whole regulatory spectrum, if you will, and it was just sort of dismissed.

4974 Not only that, your 6 percent contribution was supposed to go to community programming. So, one sensed that you had a vision for community programming. I guess it was not really feasible.

4975 Is that what you are saying? Just financially it was not feasible?

4976 MR. CRAIG: Yes.

4977 COMMISSIONER PENNEFATHER: Back to capacity and to French language programming.

4978 You confirmed today and in your deficiency response in June, you accept to carry one Canadian speciality service in the minority official language for every 10 programming services. And I repeat, one Canadian speciality service in the minority language.

4979 As I understand in your reply, you have changed that slightly, and I think it is more than a slightly. You have changed that. You have said that it would be one Canadian service in the minority language for every 10 English.

4980 Can you explain clearly your commitment?

4981 I agree with you this is a commitment over and above what is required. As per the Regulations, MDS is exempted from that requirement. I appreciate that. I think that is an important contribution.

4982 But, I think the difference is that you have now asked that the three you currently carry; Radio-Canada, TVA and TV5, all can apply to this approach. Is that correct?

4983 MR. CRAIG: That is correct. Yes.

4984 COMMISSIONER PENNEFATHER: Can you explain the rationale since only one of them in fact is a speciality service?

4985 MR. BUCHANAN: Well, I may be mistaken, but I think TVA gets counted in some cases for small systems as well.

4986 COMMISSIONER PENNEFATHER: If it is carried as optional, yes.

4987 MR. BUCHANAN: Yes. So, in certain cases, it would not be precedent setting to have it count as part of it.

4988 The other one is simply a capacity issue. These are going to be services that are not necessarily going to be popular, or taken at a time when we are trying to create the most attractive package.

4989 This would come under the category of we will do what is necessary to provide the minority language services to the minority language viewers in the province.

4990 But, I do not think anyone has got high expectations that it will attract huge viewership.

4991 So, what we are trying to do is say we will carry over and above what we are currently doing, a certain number to try and reach up, but we do it with your help in the sense that you would let us count some things that otherwise would not count in order to get up to that bar.

4992 COMMISSIONER PENNEFATHER: That is understood.

4993 So, let me ask you if in the first instance, if the Commission agreed to your proposal to count the three as part of the count of 1 to 10, would you accept a condition of licence to that effect of carrying one service, a Canadian service, in the language of the minority for every 10 services in the language of the majority?

4994 MR. CRAIG: Yes, we would.

4995 COMMISSIONER PENNEFATHER: If the Commission did not agree with your proposal to accept that all three that you currently carry would count in that 1 to 10 ratio, what is your comment on a condition to that effect?

4996 MR. BUCHANAN: It pales by comparison to a Section 18 issue ...

4997 COMMISSIONER PENNEFATHER: Yes.

4998 MR. BUCHANAN: ... the capacity issue.

4999 I mean, if we're done, we're done.

5000 COMMISSIONER PENNEFATHER: Okay.

5001 MR. BUCHANAN: But, clearly it would not be helpful in our view, in trying to come up with a creative package of video services that would be attractive to our group.

5002 We understand the policy. We tried to reach out and do something with it. It is not a huge percentage of the subscribership in Manitoba.

5003 I know we all think there is a huge -- we all know St. Boniface, and all that stuff. We all think this mammoth French community.

5004 In fact, the census shows far more German speakers, Slavic. We are dealing with a different group. So, I don't --

5005 COMMISSIONER PENNEFATHER: Well, I do not want you to change your commitment, Mr. --

5006 MR. BUCHANAN: I am not suggesting. In terms of how we were reaching to get ...

5007 COMMISSIONER PENNEFATHER: Yes.

5008 MR. BUCHANAN: ... to the bar.

5009 COMMISSIONER PENNEFATHER: Well, I understand.

5010 MR. BUCHANAN: We thought we could get your help.

5011 COMMISSIONER PENNEFATHER: It is important, because in the deficiency letter you actually accept that condition of licence for one Canadian speciality. So, I think it is important that we update the Record in that regard.

5012 What are your plans in terms of the carriage of ARTV?

5013 MR. BUCHANAN: ARTV?

5014 COMMISSIONER PENNEFATHER: Yes.

5015 MR. BUCHANAN: We are not carrying it, we are not in a French language environment.

5016 COMMISSIONER PENNEFATHER: I understand.

5017 I read the decision, but do you have any plans to carry that service?

5018 MR. BUCHANAN: No.

5019 COMMISSIONER PENNEFATHER: That completes my questions, Mr. Chairman.

5020 THE CHAIRPERSON: Vice-Chair Wylie.

5021 COMMISSIONER WYLIE: Mr. Buchanan, you asked a question, what is wrong with using 51 percent or the preponderance of the infrastructure.

5022 For us, I guess, you would have to agree, the question is it acceptable that 51 percent of the infrastructure of a broadcasting undertaking only -- only 51 percent would be used for broadcasting services.

5023 It is from a legal and a policy perspective, the question is for us, slightly different.

5024 The majority of the infrastructure is used for the distribution of broadcasting is a low bar, possibly for the regulator who has given a broadcasting undertaking licence.

5025 Would you agree? It is a legal and a policy question. Whether 51 percent is as easily acceptable as you make it sound, it is a difficult question for us.

5026 MR. BUCHANAN: Well, we don't know of anything that has come before you that is in this same genre, and it would be wonderful if we had 200 or 300 megs and we could just simply say let's carry everything, and once we have done that, we could use far more capacity for Internet if we only had the capacity.

5027 So, it is the limitations of the technology that has caused us to be asking you, and caused you to have to grapple with it.

5028 But, is it the 50 plus 1?

5029 Is it the idea that it's a sheer tippy toeing over the bar that --

5030 COMMISSIONER WYLIE: I understood it as your position.

5031 You did not say why are you worried. But, it sounded like we will use 51 percent or 50, or at least the preponderance of the infrastructure to deliver broadcasting services. So, there should not be a worry.

5032 Well, for us the question is different.

5033 I am repeating myself. But is it acceptable legally and from a policy perspective to allow a broadcasting undertaking, a broadcasting licensee to use only 51 percent of its infrastructure to deliver programming, and therefore requiring a whittling away of what its regulation require.

5034 So, one point of departure for us may well be look at what Class 3's are allowed, or where we obviously have allowed flexibility. But often on the basis of the infrastructure not being up to the infrastructure of other broadcasting undertakings.

5035 But, anyway, I am sure you understand ...

5036 MR. BUCHANAN: I do.

5037 COMMISSIONER WYLIE: ... our perspective.

5038 MR. BUCHANAN: Well, it is very important.

5039 But, you have dealt with 750 as a Class, 550 as a Class.

5040 We are saying now we need to talk about 90, which is off the bottom of the scale so far. How much ratcheting down can we be allowed to do to survive.

5041 Is it, you know --

5042 COMMISSIONER WYLIE: The question then becomes, those who have Class 3, are they offering Internet on 50 percent of the infrastructure they have. I don't know if you have any answer to that. But, that would have to be put into the mix as well if we want to make a comparison.

5043 MR. BUCHANAN: Sure. As I said earlier, you have got your examples of other genres of broadcasting undertakings, programming undertakings where they are allowed 40 percent.

5044 There is a difference between 51 and 60. I don't know if that is a problem, but there are a lot of the examples I was using were the ethnic policy allows complete cross subsidization of the ethnic service by a 40 percent non ethnic component.

5045 The conventional broadcasters have 40 percent U.S. to cross subsidize the Canadian programming component. It still works.

5046 What we are saying is something in that ballpark. I did not mean to be fixated on 50 plus 1. That was sort of a minimum.

5047 Remembering as well that there are contracts. There is programming contracts. Any of this would take a while to deal with. But, it is a seven year licence term.

5048 THE CHAIRPERSON: We will take a brief five minute break and resume the questioning at that point.

5049 Nous reprendrons dans cinq minutes.

--- Upon recessing at 1200 / Suspension à 1200

--- Upon resuming at 1205 / Reprise à 1205

5050 THE CHAIRPERSON: We will continue the questioning with Commissioner Williams.

5051 COMMISSIONER WILLIAMS: Good morning, Mr. Craig and Panel.

5052 MR. CRAIG: Good morning.

5053 COMMISSIONER WILLIAMS: There is an old Kenny Rogers song called "The Gambler" that you might be familiar with, in dealing with knowing when to hold them, when to fold them, when to walk away, and when to run, I think is the theme of his song.

5054 So, assuming that you receive some or all of your requests for licence amendments, and these do not significantly change your financial situation, at what point do you abandon this business proposition?

5055 Please answer in both time and in the financial terms.

5056 Do you have a time limit that you are prepared to pursue this opportunity, or a financial limit?

5057 Is bankruptcy the only exit strategy, or is there a possible sale opportunity for your network to another party?

5058 Then lastly, coming back to the amendments, will these amendments be sufficient to make this business viable and attractive?

5059 I guess it is kind of a commitment question.

5060 MR. CRAIG: Well, first of all, we are not quitters. I think if we were, we would not be sitting in front of you today. This has not been easy. It is not something that I have been used to dealing with a business that gobbles up as much money as the wireless industry has.

5061 Remember, I left a pretty good position in the radio industry to jump into the wireless business.

5062 But, I said earlier I have no regrets, and I don't. It has been a very exciting seven years.

5063 I think that we have worked very hard over the last year in particular, in ensuring that we stop the bleeding, and we have not given up on the MDS business. In fact, within the last two years, we have bought a major system in the United States.

5064 We would not have done that if we did not see a clear and bright future for this industry.

5065 Our business on an overall basis is close to being cashflow positive. We made a major investment in Look Communications very recently.

5066 We, in my mind, we are not going to go bankrupt. We are going to do everything we can to avoid that situation. But, I suppose it is always a reality.

5067 I think that if we get some flexibility on our new licence term, we are able to increase the number of people that access the Internet through our networks, we are able to grow modestly our video subscriber base, we will have a viable business.

5068 COMMISSIONER WILLIAMS: In the part of my question that dealt with time and financial limits, have you drawn any boxes around how far you are prepared to go?

5069 MR. CRAIG: I guess we are prepared to go almost as far as long as it takes.

5070 I think that the mood has somewhat changed in the telecom sector and broadcast sector in the past six months or a year.

5071 We went through a very, very difficult time that really compounded our problems, with the collapse of the Internet, or the bursting of the Internet bubble, if you will. A lot of capital left the marketplace.

5072 There is renewed optimism for what we are doing as wireless operators.

5073 Very recently, we were able to line up a major investment banker that is excited about this project. They learned about us when we just completed a major finance deal on the broadcast side. They have agreed to represent us, and that is the first time since I have been in this industry for seven years, that a major investment banker is actually interested and confident that we can raise money.

5074 COMMISSIONER WILLIAMS: Okay. I hear you are in for the long haul.

5075 You need some changes so you can focus on the niche, and provide a low cost television - Internet opportunity for financially challenged or older people. Is that what you are saying?

5076 MR. CRAIG: That is our intent.

5077 I think that what we have now that we did not have seven years ago, we now have a lot of experience under our belt, both from an operational standpoint, a marketing standpoint, and I think very importantly from a technical standpoint.

5078 COMMISSIONER WILLIAMS: Okay. Thank you very much, Mr. Craig.

5079 Those are my questions, Mr. Chair.

5080 THE CHAIRPERSON: Thank you.

5081 Counsel.

5082 MR. WILSON: Just a few questions.

5083 First, to clarify with respect to the information that Commissioner Pennefather had requested in questioning for filing, would it be possible to file that by the end of this week?

5084 MR. BUCHANAN: Let me ask whether they have financial projections already available for seven years that we could update and use.

5085 Because if you have to create financial projections under two scenarios from scratch in 48 hours.

5086 Can we do it sometime next week as opposed to this week?

5087 MR. WILSON: Sure. How about say ...

5088 MR. BUCHANAN: Wednesday?

5089 MR. WILSON: ... next Wednesday?

5090 MR. BUCHANAN: Does that make sense?

5091 MR. WILSON: That is fine.

5092 Then just one point of clarification.

5093 In the discussion with respect to the basic service, and the discussion of the 9(1)(h) services, I believe you mentioned three; APTN, CPAC, and TVA.

5094 So, I think you are probably aware, but the VoicePrint service is also subject to a 9(1)(h) Order.

5095 Would you be distributing that also as part of the basic service?

5096 MR. BUCHANAN: Yes.

5097 MR. WILSON: Then just one final question.

5098 In your deficiency response, and I believe it was at page 15, you made reference to the Commission's Exemption Order dealing with the 2,000 to 6,000 subscribers. Again, you have referred to sort of the possibility of exemption orders today.

5099 Is that, in sort of in terms of a regulatory framework, if you will, in terms of regulating on a going forward basis, does that exemption or the one dealing with the 2,000 to 6,000 subscribers, does that represent a model that you think is appropriate for your service on a going forward basis?

5100 Is that the kind of model if the Commission were looking at an exemption order at a regulatory framework that you think is appropriate?

5101 MR. BUCHANAN: Well, of course, there only are a couple MDS operators, and you have got to exempt the class. So, to the extent it is a tool in that particular case for a blizzard of small cable operators, it may work for them.

5102 We had a good look through it.

5103 The problem for us is, as we said the one of timing, that would have to be tweaked. There is a number of things in there that refer to matters that would not be appropriate for a digital service, including things like the baseband, and things that we do not have. But, it could be made to work.

5104 But, if we have not convinced you to go this regulatory route, whether it is done by exemption order or licence does not matter. The only thing you are saving is the 1.8 percent that we pay to the CRTC.

5105 So, we would rather have the quicker decision. It is not worth waiting for the saving.

5106 MR. WILSON: Okay. No further questions, Mr. Chairman.

5107 THE CHAIRPERSON: Thank you, very much.

5108 Mr. Secretary.

5109 MR. LeBEL: Thank you, Mr. Chairman.

5110 All of the appearing intervenors have already appeared.

5111 We are now left with Phase III.

5112 Mr. Craig do you have any reply?

REPLY / RÉPLIQUE

5113 MR. CRAIG: We have nothing more to add.

5114 Thank you.

5115 MR. LeBEL: In that case, Mr. Chairman, this completes the agenda for the appearing items.

5116 I would add that there are a number of non-appearing applications on the agenda of this public hearing.

5117 Interventions were received on some of these applications and they will also be considered by the Panel, and decisions will be rendered at a later date.

5118 Thank you, Mr. Chairman. This does complete the agenda for this Public Hearing.

5119 THE CHAIRPERSON: Thank you. We are adjourned.

--- Whereupon the hearing concluded at 1217 /

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