ARCHIVED - Transcript / Transcription - 1 November / novembre 2004 - Gatineau, Quebec
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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES AVANT
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
VARIOUS BROADCAST APPLICATIONS /
PLUSIEURS DEMANDES EN RADIODIFFUSION
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Portage IV Portage IV
140 Promenade du Portage 140, promenade du Portage
Gatineau, Quebec Gatineau (Québec)
November 1, 2004 Le 1er novembre 2004
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.Canadian Radio-television and
Conseil de la radiodiffusion et des
Transcript / Transcription
VARIOUS BROADCAST APPLICATIONS /
PLUSIEURS DEMANDES EN RADIODIFFUSION
BEFORE / DEVANT:
Charles Dalfen Chairperson of the CRTC /
Le président du CRTC
Andrée Wylie Vice-chairperson /
Ronald Williams Commissioner / Conseillier
Joan Pennefather Commissioner / Conseillère
Stuart Langford Commissioner / Conseillier
ALSO PRESENT / AUSSI PRÉSENTS:
Pierre Lebel Secretary / Secrétaire
James Wilson Legal Counsel /
Lynn Renaud Commission Staff /
Peter Foster Gestionnaires
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Portage IV Portage IV
140 Promenade du Portage 140, promenade du Portage
Gatineau, Quebec Gatineau (Québec)
November 1, 2004 Le 1er novembre 2004
TABLE DES MATIÈRES / TABLE OF CONTENTS
PRESENTATION BY / PRÉSENTATION PAR:
Groupe TVA et Sun Media Corporation 7 / 37
Satellite Radio Inc. 107 / 565
INTERVENTION BY / INTERVENTION PAR:
City of Hamilton 72 / 420
REPLY BY / RÉPLIQUE PAR:
Groupe TVA et Sun Media Corporation 104 / 546
Gatineau, Quebec / Gatineau (Québec)
--- Upon commencing on Monday, November 1, 2004
at 0930 / L'audience débute le lundi 1 novembre
2004 à 0930
1 THE CHAIRPERSON: Order, please.
2 À l'ordre, s'il vous plaît.
3 I see the clock hasn't caught up with us yet, but it is just 9:30 this morning.
4 Good morning, ladies and gentlemen, and welcome to this public hearing.
5 My name is Charles Dalfen and I am chairman of the CRTC.
6 I will be chairing this hearing with my colleagues, to my right, Andrée Wylie, vice-chair, Broadcasting; to her right, Ronald Williams, commissioner for Alberta and the Northwest Territories; to my immediate left, Commissioner Joan Pennefather, and, to her left, Commissioner Stuart Langford.
7 The Commission team assisting us includes hearing managers Lynn Renaud, acquisitions and ownership manager; and Peter Foster, English language radio and television manager.
8 Our legal counsel will be James Wilson and James Murdock and the hearing secretary will be Pierre Lebel.
9 Please see Mr. Lebel if you have any questions about hearing procedures.
10 Au cours de cette audience, nous étudierons d'abord la demande de Groupe TVA et de Sun Media Corporation pour acquérir le contrôle effectif de CKXT-TV, appelé Toronto 1, son émetteur de Hamilton et son entreprise de télévision numérique transitoire.
11 Ensuite, nous entendrons les demandes de Canadian Satellite Radio Inc., de SIRIUS Canada et enfin une présentation conjointement par CHUM limited et Astral Media Radio Inc. en vue d'obtenir une licence d'exploitation d'une service de radio nationale à canaux multiples par abonnement.
12 Une deuxième panel entendrait la demande de Newcap inc. en vue d'acquérir les actifs de la station de radio CJUK-FM Thunder Bay.
13 We will begin this hearing by studying the application by TVA Group and Sun Media to acquire effective control of CKXT-TV, known as Toronto 1, its Hamilton transmitter and its transitional digital television station.
14 We will then move on to the applications from Canadian Satellite Radio Inc., Sirius Canada Inc. and the joint application by CHUM and Astral Media Radio for broadcasting licences to carry on national multi-channel subscription radio services.
15 TVA Group and Sun Media are requesting an amendment to Toronto 1's conditions of license to add a safeguard addressing editorial independence. The proposed condition would be similar to that imposed on the conventional television stations of the CTV and Global networks.
16 The first two satellite radio applications would be delivered by a combination of satellite and terrestrial transmitters. In both cases, the satellites used would be American. The CHUM Astral application is based upon terrestrial delivery only.
17 Neither type of subscription radio undertaking is currently licensed in Canada and the Commission will, accordingly, wish to discuss how the approval of each application would further the objectives of the Broadcasting Act.
18 It has been the policy of the government since 1995 that broadcasting undertakings should use Canadian satellites to carry Canadian services and that, under no circumstances, should an undertaking make use exclusively of foreign satellites for distributing its services to Canadians.
19 When the applications for satellite-based subscription radio were received, the Commission wrote to Industry Canada and Canadian Heritage to seek clarification of their satellite policy.
20 The Commission was recently informed that the two departments wish to initiate a public process on this question and a notice has now been published to that effect in the Canada Gazette.
21 In that notice, entitled "Proposed Clarification to the Government's Satellite Use Policy for the Delivery of Broadcasting Services", the departments propose to amend their policy in order to permit the use of foreign satellite facilities to distribute Canadian programming services in exceptional circumstances when no Canadian satellite facilities are available. Comments are to be filed by November 29th.
22 We will first hear the application presented by Canadian Satellite Radio, a corporation wholly-owned by John Bitove. The proposed service would offer 101 channels, four of which would be produced in Canada by the applicant. The proposed basic monthly fee would be $12.99.
23 Next, we will hear the application from Sirius Canada, in which 40 per cent of the voting shares are owned by each of the Canadian Broadcasting Corporation and Standard Radio Inc. and 20 per cent by Sirius Satellite Radio Inc. The service would offer 75 channels, of which five would be produced in Canada. The proposed basic monthly fee would be $12.95.
24 The third application will be presented by CHUM and Astral Radio and Media Radio. The proposed service would offer 50 channels, all of which are to be produced in Canada by the applicant. The proposed basic monthly fee will be $9.95.
25 Following the conclusion of the above items, the second panel will hear the application presented by Newcap, which is seeking to acquire the assets of the low-power radio programming undertaking CJUK-FM, Thunder Bay.
26 This hearing should last about one week. We will begin each day at 9:30 a.m. and finish around 6 p.m. You will be informed of any changes in the schedule that may arise.
27 While you are in the hearing room, we would ask you to, please, turn off your cell phones and beepers, as they tend to be disruptive for both participants and panel members. We are counting on your cooperation in this regard.
28 I will now invite the hearing secretary, Mr. Pierre Lebel, to explain the hearing procedures that we will be following.
29 THE SECRETARY: Thank you, Mr. Chairman.
30 Before we begin, just a few housekeeping matters.
31 First, I would like to indicate that the Commission's examination room is located in the Papineau Room, adjacent to the hearing room. Public files of the applications being considered at this hearing can be examined there. The telephone number, as indicated in the agenda, is, area code 819, 953-3168.
32 Secondly, there is a verbatim transcript of this hearing being taken by the court report at the table to my left, in the centre. If you have any questions on how to obtain all or parts of this transcript, please, approach the court reporter during a break.
33 I would also like to indicate that we will adopt a modified three-phase process for the considerations of Items 2, 3 and 4. We will hear the three applicants before we hear the appearing intervenors. In the third phase, we will ask the applicants, in reverse order, to respond to the interventions.
34 We will now hear the first item on the agenda, which is an application by TVA Group Incorporate and Sun Media Corporation, on behalf of a corporation to be incorporated, seeking authority to transfer the effective control of Newco, the proposed licensee of the television programming undertaking, Toronto 1.
35 Mr. Serge Gouin will be introducing his colleagues.
36 You have 20 minutes to make your presentation.
37 MR. GOUIN: Good morning, Mr. Chairman, members of the panel, Commission staff, ladies and gentlemen.
38 My name is Serge Gouin. I'm president and CEO of TVA and president and CEO of Quebecor Media.
39 This morning I have the pleasure of presenting TVA Group and Sun Media's application seeking authority from the CRTC to acquire Toronto 1 from CHUM Limited.
40 With me today, on my left, is Pierre Francoeur, president and CEO, Sun Media and on my right are Serge Bellerose, senior vice-president, specialty services and business development at TVA and Barbara Williams, vice-president and general manager of Toronto 1.
41 On the table behind me, from my left to right, are James Nelles, general sales manager, Toronto 1; Renault Poliquin, senior vice-president of sales, TVA; Paul Buron, senior vice-president and chief financial officer of TVA; and Karen King, executive director, New Voices Fund and Independent Production, Toronto 1.
42 At the side table are Kin-Man Lee vice-president, corporate comptroller, Sun Media; Édouard Trépanier, vice-president, regulatory affairs, Quebecor Media; and Peter Miller, vice-president, planning and regulatory affairs, CHUM Limited.
43 In the audience today are Jay Switzer, president and CEO of CHUM Limited; Drew Craig, president and CEO, Craig Media; and Franklin Delaney, chairman of the board of the Vidéotron Fund.
44 TVA is an integrated communications company involved in television broadcasting, the production and distribution of audio-visual products and magazine publishing and is North America's largest private-sector producer and distributor of French-language entertainment, information and public affairs programming.
45 Sun Media Corporation is the second-largest daily newspaper and publishing group in Canada and, among other activities, publishes urban dailies in eight of the top 10 markets in Canada.
46 Mr. Chairman and fellow panel members, TVA and Sun Media are very excited about the opportunity to extend our television programming expertise and media experience to English-speaking viewers in Canada's largest urban television market. We recognize that this initiative represents a tremendous challenge; however, we are convinced that we can make a success of Toronto 1 by working with the current management team, who are already in the process of turning the station around.
47 In all modesty, we are confident that we can build on the foundations of Toronto 1 currently in place and create a healthy and dynamic television station that will flourish in its own niche.
48 As you know, in its own market TVA has extensive experience in creating a full 18-hour program schedule based on innovative ideas and concepts that are popular and tailored to the needs of local audiences.
49 As the owner of the Toronto Sun and the free metro daily, 24 Hours, Sun Media has in-depth experience with the Toronto media market and can provide original programming ideas, as well as widespread promotion and cross-promotion.
50 Various other Quebecor Media subsidiaries, such as Netgraphe, and its Internet site Canoe, can also play an important promotional role in Toronto 1's future.
51 In the application before you, TVA and Sun Media are seeking authority from the Commission to acquire all the shares of Toronto 1 from CHUM for $46 million. The supplementary brief accompanying our application identified certain basic realities and advantages that Toronto 1 strategy must address in order to accomplish our objectives.
52 Under TVA and Sun Media's ownership, Toronto 1 will be stand-alone station, unlike the situation under Craig's ownership. Toronto 1's overall operational and programming strategy must be sufficiently cost-effective to reflect this reality, while, at the same time, fostering the creation of a program schedule that will attract audiences and advertising revenues in competition with the Toronto affiliates of major players, such as CTV, Global, CHUM and the CBC.
53 Toronto 1 will not attempt to compete directly with the major Canadian networks who wish to dominate viewing so that their network affiliate will become the number one rated station in the metro Toronto market. Rather, Toronto 1 will seek to occupy its own particular niche, with the intention of increasing its viewing levels over time. We intend to build on what Toronto 1 is already doing.
54 Toronto 1's programming will be different from that of the major Canadian networks because, in most instances, the station will be unable to compete in the acquisition of national program rights to U.S. programs for simulcast purposes. Toronto 1's local programming strategy will be resolutely oriented towards local events, activities and issues, in keeping with the audience reach and program-buying capacity.
55 Toronto 1's primary audience will consist of adults and young adults, with special attention to second- and third-generation Canadians whose ancestors were recently born abroad but whose first language is English.
56 Toronto 1 has a special role to play in the area of cultural diversity and its programming will reflect this reality. The Greater Toronto Area is the urban agglomeration with the most culturally diverse population in Canada. In keeping with this, the station's condition of license include obligations that require ethnic programming to contribute at least 20 per cent of Canadian-acquired programming broadcast by the licensee and provide for considerable spending on the New Voices Fund for ethnic programs.
57 You can rest assured that on-screen talent at Toronto 1 will continue to reflect the station's role in providing ethnic diversity to mainstream television in the Greater Toronto Area.
58 We intend to fulfil all of the current conditions of licence, subject to a small expenditure rescheduling issue that we will outline in a few minutes. These conditions of licence include, among others, an obligation for Toronto 1 to broadcast an average of eight hours of priority programming per week, a condition normally reserved for the larger multi-stations group.
59 MS WILLIAMS: TVA and Sun Media intend to position Toronto 1 in the Greater Toronto Area market as an independent station and focus its programming on popular entertainment, such as movies, local programming, including English-language ethnic programming, news commentary, programs related to current trends and lifestyles in Toronto and the coverage of local events and cultural activities.
60 Toronto 1 has been successful in programming popular entertainment, such as movies, and this will continue, particularly in prime time. At the same time, Toronto 1's local programming will reflect the particular needs and interests of Toronto residents and include at least 10 hours per week of local programming other than news. There will also be a place on Toronto 1 for news commentary and programs that reflect local attitudes about current events.
61 Toronto has an incredibly rich, diverse and vibrant cultural life that compares favourably to the great cities of North American. As a stand-alone station, Toronto 1 will cover a variety of exciting events, and particularly cultural events, activities and locations.
62 Toronto 1's other special area of interest will be programs related to current trends and lifestyles. Both TVA, a general-interest service and Canadian specialty channels have demonstrated that it is possible to pursue a variety of strategies and acquire highly desirable programming at reasonable cost.
63 For example, with the help of the independent production community, Toronto 1 will develop adaptations of certain original concepts that have worked well for TVA. What is more, TVA and the television broadcasting sector and Sun Media in the print media have laboured for years to build a star system in Quebec that promotes indigenous culture, while reinforcing and celebrating the entertainment milieu.
64 We will endeavour to transfer this experience to Canada's largest metropolitan market.
66 MR. BELLEROSE: TVA and Sun Media are proposing a package of tangible benefits, that is advantages to television viewers in the metropolitan Toronto region and to the Canadian broadcasting system as a whole.
67 CRTC policy with regard to ownership transfers requires us to make commitments to tangible benefits for the Canadian broadcasting system, representing a financial contribution of 10 per cent of the value of the current transaction or $4.6 million.
68 A part of our benefits relate to commitments previously undertaken by the current owner of Toronto 1 and endorsed by the Commission in Decision 2002-81 that authorized the creation of the station.
69 TVA and Sun Media's proposal is intended to stabilize and enhance the existing New Voices Fund and the Priority Program Fund.
70 Our other benefits will serve to reinforce and strengthen human resource training in the television sector and further understanding of the needs of ethnic communities in the Toronto area.
71 In all, there are four elements to our proposal: first, the Priority Program Fund, $3 million; second, the New Voices Fund, $1 million; third, the Quebecor Fund, $500,000; and four, market studies, $100,000.
72 According to Toronto 1's current licence, the station is required to spend at least $7,325,000 on priority programs over the term of the licence, that expires August 31st, 2008. TVA and Sun Media have committed to undertaking all of the expenditures required to fulfil this commitment.
73 In addition to this, we propose to contribute another $3 million to this Priority Program Fund as a tangible benefit related to the present transaction.
74 Toronto 1's current licence also requires the station to spend at least $7,375,000 on independently produced ethnic programs in English over the term of its licence.
75 TVA and Sun Media have committed to undertaking all of the expenditures required to fulfil this commitment. However, to do this, and assuming the current application is approved by August 31, 2005, we would be required to spend the entire balance of more than $6.8 million on ethnic programs over the three years ending August 31, 2008.
76 We believe that spreading the spending on ethnic programming over a longer period of time would result in stronger development, higher quality productions and more stable support of Toronto 1's schedule.
77 TVA and Sun Media therefore propose to fulfil Craig Media's commitment with regard to the New Voices Fund while extending the period over which this condition of licence may be fulfilled to seven years.
78 What is more, we propose to add another $1 million to the New Voices Fund as a tangible benefit related to the present transaction. The schedule of spending by the New Voices Fund would therefore be more than a million dollars per year over the first seven years of TVA and Sun Media ownership of Toronto 1.
79 This is a substantial commitment for ethnic programming in English that would serve to stabilize and enhance the current New Voices Fund over a longer period. It would also reinforce and strengthen an important element of Toronto 1's programming commitments, as previously approved by the Commission, and further assist local producers of ethnic programming.
81 MR. BURON: The third element, the Quebecor Fund.
82 TVA and Sun Media also propose to contribute $500,000 over seven years to the Quebecor Fund for the financing of independent projects involving human resource training in the television sector in the metropolitan Toronto area.
83 The Quebecor Fund is the new name that will be given to the Vidéotron Fund that is already in operation.
84 The board of directors of the Quebecor Fund will be comprised of six representatives from the communications industry. The number of board members who are from Quebecor Media companies will be limited to a maximum of one-third of the total number of directors to ensure the fund's independence.
85 With TVA and Sun Media's $500,000 contribution, the Quebecor Fund will create a new and separate envelope for projects originating with recognized organizations and associations who wish to finance projects involving human resource training. Funding will be available for specific projects but not for ongoing operational expenses.
86 The intention is to encourage human resource training of all types, including internship and mentoring, with the aim of increasing the pool of talent available to work in the television production and broadcasting sector. Particular attention will be given to applications related to the training of Canadian women, aboriginal peoples, persons with disabilities and members of visible minorities.
87 The fourth element, market studies.
88 Finally, TVA and Sun Media proposed to commission studies on which no less than $100,000 will be expended over the next four years in regard to the behaviour, expectations and needs of the ethnic communities in the Toronto area. These studies will follow up on the terms of reference of the report to the task force for cultural diversity on television entitled "Reflecting Canadians' Best Practices for Cultural Diversity in Private Television", sponsored by the Canadian Association of Broadcasters.
89 The report included the recommendation to continue the research undertaken by the task force. The market studies financed by TVA and Sun Media as a result of this initiative will be forwarded to the Commission.
90 Now, I will turn it to Pierre, who will cover potential cross-media ownership concerns.
91 MR. FRANCOEUR: TVA and Sun Media do not believe that our application seeking authority to acquire Toronto 1 from CHUM raises any cross-ownership concerns.
92 Neither Quebecor Media nor TVA is involved in the day-to-day operational aspects of any English-language television broadcasting services at the present time.
93 In the daily newspaper sector, Sun Media owns the Toronto Sun. In the competitive Toronto daily newspaper business, the Toronto Sun faces off against the Toronto Star, the Globe and Mail and National Post. The latter two newspapers are corporately linked to CTV and Global respectively.
94 Considering the limited role that traditional news and news broadcasts will play in Toronto 1's program schedule, we do not think the issue of editorial independence in the diversity of voices applies to Toronto 1 in our case.
95 This said, to allay any concerns we have committed to respect all of the requirements regarding cross-ownership imposed by the Commission on CTV and Global.
96 In renewing CTV and Global's licences for a full seven year term in 2001, the CRTC imposed a requirement to adhere to a statement of principles and practices concerning the cross-ownership of television stations and newspapers. TVA and Sun Media have committed to all of these requirements, as well as the principles and practices of the cross-ownership monitoring committee required by the CTV and Global licence renewal decisions.
98 MR. GOUIN: The acquisition of Toronto 1 constitutes an exciting new opportunity for TVA and Sun Media to apply their knowledge and expertise in building a television service that will be popular and relevant to viewers in the greater Toronto area.
99 In spite of the significant losses experienced by Toronto 1 to date, we are proposing tangible benefits representing a financial contribution of 10 per cent of the value of the transaction or $4.6 million in keeping with the CRTC policy for the acquisition of profitable television undertakings.
100 Among the many tangible benefits, TVA and Sun Media will turn Toronto 1's fortunes around while respecting all of the conditions attached to its current licence, including the requirement to broadcast an average of eight hours of priority programs in prime time. Our goal is that Toronto 1 become metro Toronto's premiere entertainment and lifestyle television station while according particular attention to the region's multicultural composition.
101 Mr. Chairman and panel members, we would be happy to answer of your questions. Thank you.
102 THE CHAIRPERSON: Thank you very much, Mr. Gouin and your team.
103 The deficiency process was an unusually, I thought, effective one this time. It clarified a lot of issues that the Commission had so I am going to follow-up with a number of questions of clarification and elaboration across the range of issues that the Commission normally canvasses with applicants.
104 Let's begin with the revenues that you are projecting. You have based your calculations on a $600 million revenue base for '03 for the extended Toronto market. That's correct.
105 In 03-04, Toronto 1's revenues were some $14.3 million. You are projecting for the first year, which is 05-06, I take it, $21.4 million. How do you account for that jump from the current year or the year just ended to that first year?
106 MR. GOUIN: Mr. Chairman, I will let Paul Buron and Renaud Poliquin answer the question. There is another year in between as well and the station has progressed in between, but they will give you the particulars.
107 THE CHAIRPERSON: Is this a straight-line calculation or does it come from another source?
108 MR. POLIQUIN: Mr. Commissioner, if I can answer the question based on two assumptions.
109 First of all, we did achieve, yes, in 2003-04 revenues a little less than $15 million. This year's revenue projection is anywhere between $18 million and $19 million, and $21 million in 2005-2006. This is based on the accrual first of all of our share of viewership and second of all the inflation rate applied to the cost of advertising, so we are coming with those numbers at $21 million in 2005-2006.
110 THE CHAIRPERSON: The eighteen to nineteen is what you are using as a base and then building inflation on top of that?
111 MR. POLIQUIN: Exactly.
112 THE CHAIRPERSON: Now, in terms of the market on the whole, I have your calculations in your deficiency responses, Appendix B of the September 23rd letter, where you set out all the assumptions. We have them there. I wanted to ask you one or two questions arising from that.
113 You are taking a straight market share calculation based on the total market of $660 million, dividing it by the share of listening hours of 38.7, coming out with a $17 million market share point. Correct?
114 MR. POLIQUIN: That's correct.
115 THE CHAIRPERSON: Then multiplying it by your --
116 MR. POLIQUIN: Power ratio.
117 THE CHAIRPERSON: -- proposed market share and using a power ratio.
118 Now, the power ratio, nowhere do you explain exactly how the formula works for the power ratio. It's an interesting concept, but how does it work?
119 MR. POLIQUIN: How does that work?
120 THE CHAIRPERSON: I see the result of the number that you have filed, 60 per cent, increasing then year by year. How do you derive that number?
121 MR. POLIQUIN: Well, the power ratio is an indicator measuring the advertising of revenue dollars against the share of the viewership. In an ideal concept, if you get a 10 per cent share of viewership and if you are getting a 10 per cent share of the advertising dollars, then your power ratio comes at 100 per cent or one which is the ideal situation.
122 You can come in a higher power ratio if for example you are in the top stations, such as for example in English Canada CTV, Global could command a power ratio. It is the same situation --
123 THE CHAIRPERSON: Above one.
124 MR. POLIQUIN: Above one. That's right, yes.
125 But since Toronto 1 is ranked eighth in an environment of nine stations, it is unable at this point to command, first of all, a premium of the advertising. Second of all, it is unable to command a higher share of the volume of dollars. With our estimation of the market at $17 million and the share of the viewership that we got in the target group 25-54, we have achieved a power ratio of 55 per cent. We have been unable to convert the full potential of our share of the viewership.
126 THE CHAIRPERSON: I see. Am I correct in deriving from that that you derive that by simply your actual performance based on your market share and you say: our batting average is only 55 in that case and we anticipate in '06 to raise it to 60 and so on, 61 --
127 MR. POLIQUIN: Exactly.
128 THE CHAIRPERSON: So it is derived that way.
129 MR. GOUIN: Mr. Chairman, I would not like to leave the impression that 100 is ideal.
130 THE CHAIRPERSON: That's right. Only above one.
131 MR. GOUIN: TVA has achieved 134, so that is ideal.
132 THE CHAIRPERSON: So this is going to be an interesting task for those who --
133 MR. GOUIN: As for the precision sales.
134 THE CHAIRPERSON: Thank you. That explains that.
135 There is one further item that I want to just raise with you. You say in your assumptions that your ratio of national:local sales is 60:40, which is below the national:total ratio of other stations. Does that have an impact on your calculation?
136 Put another way, should you be doing other than simply dividing the market shares into the total revenues in the market? Should that ratio affect your projections downward, the fact that --
137 MR. POLIQUIN: I don't think at this point in time. I think it's just a matter of being a new station in the market so you have to prove yourself and deliver the ratings for the advertisers at this point, advance your bill on that.
138 THE CHAIRPERSON: But isn't it also, as I think you have said in your brief, a function of the fact that this would be a buy for Toronto rather than having to buy well beyond, either province-wide or Canada-wide, and so in a sense from a local advertiser's point of view you made the point in the brief that this was a selling advantage.
139 But I am asking from a revenue projection point of view, what is your power ratio on local sales as distinct from national sales?
140 MR. POLIQUIN: Actually, I don't have the answer for that in terms of local sales.
141 I don't know if, Jim, you do have an answer on that.
142 MR. NELLES: I'm not sure if I have a specific answer, because I don't think local sales are tracked in the overall marketplace to the extent that they were before and I am using the Television Bureau of Canada's numbers, but perhaps to expand upon it, the revenue numbers that we have used, the $600 million plus, are all revenue numbers attributed to the Toronto extended marketplace. If it was Ontario it would be $1.2 billion.
143 So I think that supports the notion that the power ratio directed at Toronto is --
144 THE CHAIRPERSON: Yes. I guess since you derive it on your total revenues in any case, if the local is down it may be that the national is above the 55 per cent number in any case.
145 But you haven't used that ratio to in anyway effect that calculation is what I am hearing. You simply took it on your total sales.
146 MR. NELLES: That's right.
147 THE CHAIRPERSON: Okay. Thank you.
148 Looking at your expenditures on programming, I note that year one contemplates a 20 per cent to 30 per cent reduction in programming expenditures over 03-04. I am looking at the exact numbers, $20 million in 03-04 and you are projecting some $13.7 million for the first year. Can you explain why that decline?
149 MR. POLIQUIN: Maybe I could start and Paul will add to what I will say. We took into consideration, obviously, the historical data from Toronto 1. Obviously in year number one, they did invest a lot on several programs and in addition to that, after the launch, there has been a huge about of employees laid off, so expenditures went down so we took that into consideration. And in addition to the actual situation, we obviously add tangible benefits and monies coming from the funds. Because, this year in particular, the expenditures in relation with the fund will be quite minimal. Paul.
150 MR. BURON: Well, I think your answer is accurate, Serge.
151 THE CHAIRPERSON: Do you have the ballpark for the current year, the year in between for programming expenditures?
152 MS WILLIAMS: Yes, in the current year, the 04/05 year, we would be spending less than that $13 million, we would be down probably around $9 million about.
153 THE CHAIRPERSON: I see. So that is more than a 50 percent cut from the previous year. Okay, I think I have that.
154 On local programming, as you know under the television policy licensees are required to demonstrate how they will meet the demands and reflect the concerns of their local audiences, whether it is your local news or other local programming. And I don't see that you have a specific plan to produce local news programming. How do you expect to discharge that obligation that I just read you?
155 MR. BELLEROSE: Well, we intend to build on a foundation put in place by Craig and we believe that the initial assumptions and the observations under which the application was based on are still relevant in the market. If you recall in 2001, part of the application was that Toronto 1 would not be a news station because it was clear at the time, and it is still the situation in Toronto, that traditional news were well reflected with the existing players in the market, with Global, CTV, Citytv CP24. So, we believe that this observation is still relevant, so we intend to continue on that way. In addition to that, when the Commission issued its decisions in 2002, this fact has been noted that it has been taken into consideration for giving Craig Media a license in a Toronto market. So, what we intend to do is to have local shows that will certainly focus on social issues, on trends, on news, but on a different way with in-depth stories. And this is actually what Toronto 1 is doing with Toronto Tonight. Barbara.
156 MS WILLIAMS: Right from the beginning we have really built this station's local programming with the idea that there is an audience for programming beyond the headlines, that there is an opportunity to discuss the current events of the day more from the perspective of lifestyle of trends from entertainment, from the social issues' perspective rather than the hard news 30 second clip that covers the accident on the 401.
157 So, we have already established a base in our main program, Toronto Tonight, to cover the local and current events of the day from that perspective and we would hope to grow and expand and involve that approach to current events information programming.
158 THE CHAIRPERSON: In quantitative terms, Toronto 1 is required to broadcast 10 hours a week of local programming other than news and four and a half ours of news. Now, as I read your list of programs that are non-news I get a total of some 13 hours a week. Is that correct? I can run through it for you like.
159 MS WILLIAMS: Yes, we interpreted the license to give us the opportunity to do those four hours of news should we choose to, as opposed to.. with the main requirement really being to do 10 and a half yours of non-news. We have actually, you know, chosen to do all of our local programming in the non-news category and, at the moment, all of the programs that we locally produce are non-news.
160 THE CHAIRPERSON: Well, I think as we understand the commitment, it is 10 hours of local programming other than news, between 6:00 p.m. and midnight, and then there was an additional commitment of four and a half hours of local news. Commitment is an opportunity, but it is also an obligation as we see it.
161 MS WILLIAMS: We saw the opportunity and the obligation, if you will, to do 14 and a half hours of local original programming, of which four hours could be news should we choose to do it. We do live up to our commitment from that perspective to do 14 and a half hours of local original programming, we just haven't chosen to take advantage of the opportunity to make a few of those hours news.
162 THE CHAIRPERSON: I get you, but I can only add up 13 hours, that is I guess the issue. We can perhaps run through it.
163 MS WILLIAMS: Sorry, are you looking at the draft schedule at the moment?
164 THE CHAIRPERSON: Yes.
165 MS WILLIAMS: Yes, and what I would suggest there is that, as I know you know, a schedule is a dynamic thing,--
166 THE CHAIRPERSON: Right.
167 MS WILLIAMS: --it is a work in progress, it is a state of constant evolution. The draft that is on the air right now actually shows the full commitment. Although, the draft that you have in front of you I recognize is an hour short. It also, as you well know, is something that ultimately gets averaged.
168 THE CHAIRPERSON: So your commitment remains 14 and a half hours, is that correct?
169 MR. BELLEROSE: Well, I shall say that we will fully respect the condition of license, which means that we should air 10 hours a week of local programs which are not news programs and we will certainly attempt to achieve a higher level of local programming. But this station is trailing actually, losing a lot of money and we intend, in time, to increase the volume of production. It is already 13 hours, Barb?
170 MS WILLIAMS: Um-hum.
171 MR. BELLEROSE: We expect to maintain such a level and we hope that we will be able to add additional hours in time. But we will really need time to make sure that everything is alright in this station and that we will build on solid foundations.
172 THE CHAIRPERSON: I think I have your point, we may come back to it later, but I think I understand you.
173 How much of that programming is original, that you have currently on the schedule and how much of it is repeat?
174 MS WILLIAMS: I have to do some math here quickly. We do two and a half hours original of Toronto Tonight every week, we do three hours original of the A-list every week, and we have been producing a half hour weekly original of Toronto Life every week.
175 THE CHAIRPERSON: So the math is six?
176 MS WILLIAMS: That is what I get, I was going to let you go first though.
177 THE CHAIRPERSON: Thank you. Can you give me an example of some of the priority program initiatives that you have in mind?
178 MR. BELLEROSE: Well, we have to take into account, obviously, that Toronto 1 will be a standalone station. So, it will require to consider partnerships with other stations in some cases if we want to be able to commission and put on air shows such as dramas, sitcoms, which are high budget. Otherwise, we think that we can benefit from the TVA's experience and we are closely looking at the possibility of adapting in the English market some of the big successes that we have had in the past and we are still having actually.
179 So, this is one of the areas where we will take a close look at. We intend to work very closely with Toronto 1's management and to make our team work together and to share views to see if there is some elements of our programming actually in the French market that should be relevant to the Toronto 1's grid, so this is a part of the things that might be done. In addition to that, there is a different project that has been submitted to the Toronto 1's management already and we are committed to take a close look at that as soon as the Commission approves, if it wishes to do so, the transaction so we could commission initiatives in show terms.
180 THE CHAIRPERSON: But, at this point, do you have an idea of the ratio between original and repeat programs among the priority?
181 MR. BELLEROSE: Well, you know, in the first year my understanding that mostly the monies coming from the fund.. the financing, the priority programs were for the Toronto Show and mainly for the Toronto Show, that has been a very costly show aired five days a week for.. somewhere around that, very costly but not very efficient. So, we obviously have to revise the strategy based on year number one's experience. So, we want to take a close look at that just to make sure that we will commission and finance appropriate shows that will work in the market.
182 MR. GOUIN: Mr. Chairman, it has been a short period of time since we made the deal with CHUM, so we had not much opportunity to discuss the situation with the management of Toronto 1. We intend to sit down with them and people from Sun to look at what the opportunities are and to iron out some of the issues that you have been talking about. But certainly, if you look at TVA's record, in Quebec we have done an awful lot of innovative programming, a lot of local content, popular programming and that is the direction we want to go into, but we can't be more specific today that what we have said so far.
183 THE CHAIRPERSON: Currently on your schedule, Ms Williams, what would you have as priority programming?
184 MS WILLIAMS: There is a variety of programs that live up to that condition. We do run Canadian movies as part of our movie schedule, we do run a couple of Canadian dramas which are acquired dramas, Just Cause, and Body & Soul, move and off the schedule. We also run the Toronto Show and some of its repeats, which helps to live up to that commitment and is an opportunity frankly to make that program a little more efficient over time by repeating it. And we also produce the A-List, which is an entertainment magazine and falls under the priority definition.
185 THE CHAIRPERSON: You are pretty confident it falls within the definition, are you?
186 MS WILLIAMS: Yes.
187 THE CHAIRPERSON: Okay, thank you. On your youth programming, you carry or have carried select and verses which you have indicated CHUM has the rights to. Do you have any update on whether you will have access to be able to broadcast those programs going forward, the youth oriented, MTV Select and MTV Verses?
188 MR. BELLEROSE: Well, those programs are actually on the schedule, but we do not intend necessarily to maintain programs targeting youth and children in the future. It will depend on opportunities. You know, in the case of MTV and those shows, these are Craig shows coming from their diginets I guess, from the arrangement, and this is part of the deal with CHUM, so we will not have access to those shows after the closing of the transactions.
189 THE CHAIRPERSON: Do you have other--?
190 MR. BELLEROSE: Well, for a transition period you could, it is going to be part of the negotiations with CHUM, but after that, for the season 2005 and 2006, we should not have access to such programming. So, with regards to youth programming we have no specific projects, but we will take any opportunities that could be in front of us.
191 THE CHAIRPERSON: Thank you. On your ethnic programming, you have a condition of licenses, I'm sure you know that you have to broadcast 20 percent each week of acquired ethnic programming. Could you give us some examples of the programs that you intend to produce and..?
192 MR. BELLEROSE: Well actually, there is an agreement with Asian Television Network providing almost four hours during the weekend and, in addition to that, five more hours I guess during weekdays. The show is called Asian Horizons. And there is an agreement ending on August 31st, 2005. We did have discussions with Asian Television in the last weeks. We agreed with Asian Television to have further discussions in the coming weeks to take a look at what has been done since the beginning of Toronto 1, is there anything that could be improved and if there could be potentially a renewal of the agreement. So, Asian Television is very comfortable with this approach and this is what we intend to do in the coming weeks.
193 In addition to that, I understand that Toronto 1 is commissioning also other shows coming from other providers such as Channel M in Vancouver, I guess, and we intend to take a close look at that. It makes sense to diversify under providers of such programming. But we intend to respect fully the condition of license of providing 20 percent of our Canadian programs on ethnic programs.
194 THE CHAIRPERSON: Thank you. Anything else other than "Asian Horizons" that you would care to mention?
195 MS WILLIAMS: Specifically "Tai Chi" -- the program "Tai Chi" -- which runs in the morning counts towards our ethnic count, as does "Living Yoga with Padma", as does "Lord Have Mercy".
196 THE CHAIRPERSON: Thank you.
197 Your commitment on half hour aboriginal program and to the hiring of aboriginal reporters, can you update us on that?
198 MR. BELLEROSE: I understand that Toronto 1 has been airing "Sharing Circle" in year number one, is not currently airing "Sharing Circle." You might say that "Sharing Circle" was an initiative taken by Craig Media initially in its western stations and then the show has been commissioned to Toronto 1 and is not currently commissioned.
199 We have no intention of having a specific show in the next year, in 2005 and 2006. We believe that issues concerning aboriginals could be raised and developed on the local programming as part of the mandate of those shows and this is what we intend to do.
200 THE CHAIRPERSON: Do you intend to hire aboriginal reporters for your local programming?
201 MR. BELLEROSE: There is none actually as we have been informed. This is a situation we have to take into consideration. We will certainly see what can be done over the time when there will be some replacement to be made.
202 THE CHAIRPERSON: I have your answer. Thank you.
203 On a similar theme of multiculturalism, currently Toronto 1 -- and you have highlighted it in your opening remarks -- intend to address a multicultural audience in Toronto. There was a senior executive to be accountable for diversity practices at Toronto 1.
204 Is there going to be one under your regime?
205 MR. BELLEROSE: Are you talking about the executive producer of the "New Voices Fund"?
206 THE CHAIRPERSON: No, I was talking about a senior executive accountable for diversity practices emerging from the last decision.
207 MS WILLIAMS: I think maybe what you are referring to is, Jennifer Strain at the head office of Craig, oversaw the responsibilities Craig had as a system to live up to its diversity mandate as filed with the CRTC. So she undertook that role for us previously.
208 THE CHAIRPERSON: I see. What will --
209 MR. BELLEROSE: Frankly, what we intend to do is, we believe that Toronto 1 should be under the cultural diversity plan that TVA already had submitted to the Commission. So I think that it would make sense that we could extend the application of our diversity plan to Toronto 1 and, if required, to adapt it just to make sure that the situation of Toronto 1 will be well reflected in a plan.
210 But I don't believe that we could require any changement in our plan. It should be fine.
211 I must say that there is actually, I guess, 30 per cent of the employees of Toronto 1 which are from visible minorities. That is a high level of employees coming from visible minorities.
212 In addition to that, we do know that there is an advisory committee on cultural diversity that has been put in place by Craig initially that has been disbanded due to --
213 THE CHAIRPERSON: This is the Multicultural Advisory Board?
214 MR. BELLEROSE: Yes, exactly. So we intend to reactive this committee for a year or two, just to make sure that we will be able to get council from such a committee that would have a steering role. Then, after that, we will see if this is the better approach to maintain in the future. But in the short term we really intend to reactivate this committee that will help us to enter into the Toronto market and to reflect adequately the communities.
215 THE CHAIRPERSON: Would you be prepared to file your plans in that regard? It doesn't have to be elaborate, but when you are going to establish it, the composition of the board, and so on?
216 How quickly do you think you can come up with --
217 MR. BELLEROSE: Absolutely. Well, first of all, we will take a look at what was the board. I have been told by Barbara that it was a tremendous board with high level people really helping Toronto 1. So I would say that first of all we will certainly take a look at the existing board which was recently disbanded and maybe add some other people if there are a few of them that are not willing to continuing on the advisory board.
218 But if you want us to file an update on our intention and the composition of the committee, we would be fine with that and we will do so.
219 THE CHAIRPERSON: Right. Should the Commission approve this decision, if we were to raise that issue, what date would you be able to satisfy as to the filing?
220 MR. BELLEROSE: I guess probably 30 days after the decision we would be able to do so.
221 THE CHAIRPERSON: Thank you. I have the answer there.
222 Described video. You know that the Commission expects licensees generally to acquire in-broadcast versions of programs that include described video whenever possible. Will you continue to provide that?
223 What is Craig's current practice with Toronto 1 on that?
224 MR. BELLEROSE: I understand that all the shows commissioned by the two existing funds should be described video. This is a condition of license so we will fully respect that.
225 THE CHAIRPERSON: Okay. CTV and Global are required to broadcast an average of two hours per week of described video between 7:00 and 11:00 p.m. during the first two years, rising to three hours in year three and four hours in year five, including 50 per cent original broadcasts.
226 If this application is approved, would you be prepared to accept described video at that level?
227 MR. BELLEROSE: No, certainly not. Not at this moment, considering the situation of Toronto 1. We really need to take a look at the situation before taking any commitment with regards to described video.
228 But, you know, in addition to that, with the movie strategy, if there are movies for which there is described video available, certainly we would take a close look at that and make sure that we could get access to copies with described video, but otherwise I think that the actual situation of Toronto 1 does not allow us to take higher commitments that has been already taken.
229 THE CHAIRPERSON: Okay. So your position, then, is that you are prepared to do it for the priority programs and what else did you say?
230 MR. BELLEROSE: Priority programs and make sure that if described video is available on movies that are put on air, that we will make the best efforts to get access to the copies.
231 MS WILLIAMS: Just for clarity, the condition is that those original programs produced from the Priority Program Fund and The New Voices Fund will be video described, not all priority programs.
232 THE CHAIRPERSON: What would be the quantity of that? You do the math this time.
233 MR. BELLEROSE: Frankly, it depends on the choices that we have. You could choose to have many hours with low budget programs or a few hours with higher budget, so it depends on the choices and the opportunities that will be raised before us.
234 It is a matter of being able, in some cases, to partner with other broadcasters to make sure that we could finance the project. So this is very difficult to have a specific idea of the volume of hours of programming that could be described video through those funds. It will depend on the moves and the choices that will be taken.
235 THE CHAIRPERSON: Okay. Again, I have your position. We may want to come back and discuss that a little bit further, but I think I understand where you are on that.
236 Turning to the funds. You have provided us in Appendix C of your September 23rd letter with a recap of the funds as at August 31st of this year. We will do a little math here.
237 So you have committed to an additional $3 million of funding for the Priority Programming Fund.
238 Is that correct?
239 MR. BELLEROSE: Yes, you are.
240 THE CHAIRPERSON: You indicated that it would be incremental to the remaining funds to be expended from the original commitment and from the amount that Craig has spent on priority programming outside the fund for the year end. Right?
241 MR. BELLEROSE: Exact.
242 THE CHAIRPERSON: The latter amount was reported as $777,000.
243 MR. BELLEROSE: Yes.
244 THE CHAIRPERSON: That is the amount spend by Craig on priority outside the fund?
245 MR. BELLEROSE: In year one, yes.
246 THE CHAIRPERSON: In year one.
247 Can you indicate the type of program that was acquired using the $777,000 expended outside of the fund?
248 MR. BELLEROSE: Barbara could probably provide you with more details, but I understand that this is the entertainment show, it may be movies, Canadian feature films.
249 MS WILLIAMS: Yes, it would be the other programs on the list that we mentioned earlier that are the priority programs that fulfil our commitment, so the Canadian dramas, "Just Cause", "Body and Soul", some Canadian films, as Serge mentioned, as well as the production of "The A-List".
250 THE CHAIRPERSON: Okay. Thank you.
251 So I can look at that list that we discussed, the priority programs, The A-List", Body and Soul", "Just Cause", "Prime Ticket Movie", and you are saying that all of those would have been acquired under the $777,000 outside the fund.
252 Would that be correct?
253 MR. BELLEROSE: Yes. And that would be the floor, the reference to consider that expenditures are incremental.
254 THE CHAIRPERSON: Thank you.
255 The "New Voices Fund", you are proposing that because of the relatively small amount that has been expended to date that you want to have an extension of the period of expenditure to seven years and have committed to an additional $1 million in funding.
256 Is that correct?
257 MR. BELLEROSE: That is correct.
258 THE CHAIRPERSON: So the total there is about $7.9 million.
259 Is that correct?
260 MR. BELLEROSE: Yes, I guess so. You are correct, yes. The idea is to stabilize also the financing of such shows over a longer period of time. It means that there will be around $1 million a year for shows financed and commissioned by the New Voices Fund.
261 THE CHAIRPERSON: But yet Craig has had difficulty doing that.
262 MR. BELLEROSE: Well, it has been difficult for several reasons. I had extensive discussions with Karen King, who is the Executive Producer of the New Voices Fund.
263 The key point is that at the starting point they had to develop projects with the independent production sector initially.
264 In addition to that, there is a huge challenge to finance that, because the New Voices Fund in most cases is only part of the complete financing. There should be other partners, other broadcasters, and there is actually, I would say, several projects under analysis that would need other broadcasters to be part of them. It is long negotiations.
265 That is the reason why we believe that we have to extend the program genre that we were initially looking at, just to make sure that we will be able in a very short period of time to put on air shows commissioned by the New Voices Fund.
266 You know, there is a very short window. If you have a project which might be partly financed by Téléfilm or CTF -- it is March -- and if you miss this window it means that you won't have the show in the 2005-2006 season. That is a challenge.
267 Maybe Karen could add to what I have said.
268 MS KING: Hi. Essentially what we did for the first year was we decided to focus on drama coming out of the New Voices Fund. The Priority Programming Fund did variety and reality, and we did drama coming out of the New Voices Fund.
269 Some of the projects we were able to get involved with were already in development and those had other broadcast partners, but most of the items that we were looking at were projects that had never been financed before or look at before by financing agencies. So we were starting from ground zero and we had just a few months before we were put on hold.
270 THE CHAIRPERSON: Thank you. I think you are right, Mr. Bellerose, that you would want to be -- if you spread it out evenly and if we extended the period you would be expecting to spend 12 or 13 per cent per year, wouldn't you, to meet your target.
271 I know that is what you are saying you would like to do, but how can you give us an assurance that we are going to not find that five years down the line again there has been a positive expenditure and we have a big balloon coming up at the end?
272 MR. BELLEROSE: Absolutely. I understand what you mean.
273 We will file an annual report and, as we did in the past in the case of TVA with the tangible benefits, in year number one the Commission raised concerns because the Commission thought at the time that we didn't spend enough money on the priority programs at the time.
274 There was a reason why we did so at the time, because we had to develop projects and that was the main reason, but the Commission expressed its concerns at the time.
275 In year number two the Commission told us that they were fine at the time with the level of expenditures that we had in year number two.
276 So, I believe that the Commission could do the same in such a case, express its own concerns when it will receive our Annual Report and say if they are fine with the way we are turning things around.
277 THE CHAIRPERSON: So, would it be fair, based on what you're undertaking to say, I am not talking about a condition of licence here, but just if we were to express the view should this be approved, the expectation that you would base on what you're committing to spread the amounts roughly equally out over the period. Is that a fair expectation?
278 MR. BELLEROSE: Yes, an expectation would be fine, not a condition of licence, because there are too many reasons for which it could not be possible to do so.
279 THE CHAIRPERSON: Right. But that is your intent to try and do that?
280 MR. BELLEROSE: Absolutely.
281 THE CHAIRPERSON: Okay. Thank you. In the 2002 Decision, Craig Media had a condition of licence that I have mentioned, about 20 per cent of ethnic programming. That would be outside the New Voices Fund, right?
282 MR. BELLEROSE: Absolutely. These are two distinct things.
283 THE CHAIRPERSON: Two distinct things. Do you have the information on what was extended in the last year ending 31 August 2004 that was expended on ethnic programming under that C.O.L.?
284 MR. BELLEROSE: From the fund?
285 THE CHAIRPERSON: Separate from the fund. Under the C.O.L.?
286 MR. BELLEROSE: Spending, frankly, I don't know.
287 THE CHAIRPERSON: On ethnic programming?
288 MR. BELLEROSE: On ethnic programming, I don't know. There is an agreement with Asian Television Network already, so there is a part of expenditures in relation with such an agreement, but this is the only information that I actually have.
289 MS WILLIAMS: Yes, and the condition really speaks to the number of hours broadcast.
290 THE CHAIRPERSON: Correct.
291 MS WILLIAMS: Not to the spending, so we haven't made that calculation in that way.
292 THE CHAIRPERSON: Okay. And was that condition fulfilled, in your view?
293 MS WILLIAMS: Absolutely.
294 THE CHAIRPERSON: Okay. Thank you. Now, you say in your letter of September 23rd, that you do not feel it's necessary to fulfil Craig's commitment to have separate executive directors for the two funds, the New Voices and the Priority Programming Fund, because the need to separate these funds from the Alberta Funds no longer exists. Is that correct?
295 MR. BELLEROSE: Exact.
296 THE CHAIRPERSON: Given that you stand alone?
297 MR. BELLEROSE: Absolutely.
298 THE CHAIRPERSON: What is the approach that you are going to take to managing these funds?
299 MR. BELLEROSE: Well, there is actually someone in whose care and who is managing that, both funds. So, we believe that we intend to maintain a structure, a Toronto 1, to appropriately manage those issues.
300 THE CHAIRPERSON: Right. So, that gives you, what, a $700,000.00 saving, which, of course can apply back into the fund?
301 MR. BELLEROSE: No, that's on savings, investments, because this person will be on the payroll, so these are really expenditures because the mandate of this person is to analyze all the projects that are submitted to Toronto 1. So, my understanding is it's part of managing the fund.
302 THE CHAIRPERSON: Right, but I hear one job less.
303 MR. BELLEROSE: Well, no, because the other job is under CHUM now. I understand that at the time it was... there was Craig Media's operational activities in the Western Stations and the Priority Program Fund was managed over there and the New Voices Fund was managed in Toronto 1.
304 But Craig Media will be integrated in CHUM if the Commission approves the transaction. So, it's a new structure. That's why we believe that it should be fully managed from Toronto 1.
305 THE CHAIRPERSON: But I am just following the money though. I understand that the...
306 MR. GOUIN: Well, we are following it too.
307 THE CHAIRPERSON: I'm sure you are. I understand that the salary and benefits of that particular person was part of the amount pledged to the fund.
308 MR. BELLEROSE: Probably; I don't know. Hope so, hope they did so.
309 THE CHAIRPERSON: So, assuming that is the case and you've saved.
310 MR. BELLEROSE: Yes.
311 THE CHAIRPERSON: You've saved one job, what would you be expecting to do with that money which, by the calculation I have here, is roughly half of $700,000.00, let's say?
312 MR. BELLEROSE: Well, frankly, to be honest, I don't know what we are going to do.
313 MR. GOUIN: Well, we are going to spend the money. If we have committed to spend it, whether it's salaries or on air, it's going to be spent.
314 THE CHAIRPERSON: Right. So, you are going to reduce the administrative costs?
315 MR. BELLEROSE: Sure.
316 MR. BELLEROSE: Yes, absolutely.
317 THE CHAIRPERSON: Okay. Now, I know you went back and forth with staff and the deficiencies on your proposed Market Studies and you indicated that if the Commission didn't feel that they were after, I won't go over the dialogue, but that if it were not an appropriate tangible benefit, that you would re-direct it to the Quebecor Fund, raising that commitment to $600,000.00. Is that correct?
318 MR. BELLEROSE: That's correct, but at the same time, we strongly believe that this market series is a good thing that would be beneficial to the industry overall. This is not only for the benefit of Toronto 1.
319 We strongly believe that such studies could be quite valuable and helpful in defining more clearly what are the needs of, the needs and the behaviour of ethnic communities and these are the reasons why we still believe that it would be relevant to accept it as a tangible benefit.
320 MR. GOUIN: We don't mind, you know, if the Commission thinks that we should shift this money to some other purpose that would be fine, but we think it's important. We are trying to reach a certain segment of the market, we have to be able to have a reading every year to see how we are doing and where we are going right and where we are going wrong.
321 THE CHAIRPERSON: Well, I guess the difficulty turns on fitting it into the benefit definition. Normal business operating expenditures are not normally considered benefits and so, it's a...
322 MR. GOUIN: No, but it's to make sure that the funds that we are allocating to, I think, programming are really effective in achieving their purposes rather than just throwing money away. That's the point.
323 MS WILLIAMS: I think there is may be a larger perspective to it beyond just Toronto 1, as Serge was alluding to. The industry as a whole is starting to do some really important and valuable studies around the multiculturalism, not only in the Toronto market, but of Canada as a whole and the Diversity Report that the C.A.B. undertook, studies that W.I.F.T. has undertaken, and smaller studies by other organizations, by aboriginal groups, Native Affairs is involved in some of that now, are all contributing to the country's understanding of our multicultural society, and viewers are a part of that.
324 I think we can contribute with this market study, frankly to that list of studies that's going on and contribute a piece of understanding to the whole story that the entire industry would benefit from, that I think would encourage all broadcasters to make sure that as we program to the realities of the Toronto market, we are putting programs out there that people really want to see and that truly do reflect their needs, their stories, their communities.
325 MR. BELLEROSE: And just in comparison with the Quebecor and TVA deals several years ago, there was a part of tangible benefits allocated to develop software for close captioning at the time because we had a need at TVA. It was $500,000.00 that has been invested to develop a software.
326 So, it was for the benefit of TVA initially, but at the same time, we were developing something that could be beneficial for all the industry and that will be RDS, TQS or actually looking at using such a software.
327 So, I think it is not so much different, the market studies that we are proposing to Commission.
328 THE CHAIRPERSON: And I hear you. I guess it's a judgment call at the end of the day as to, I mean, whether this could be expected to be something you would do anyway, given your mandate or not, and I hear you and if you have anything to add we will take it into consideration.
329 And so, I didn't want to preempt that and I'm glad you've made those arguments. If you have others, as I say, let us know.
330 Under the Quebecor Fund, can you give us examples of the organizations in the Toronto area that would be able to take, that would be eligible and take advantage of the projects you envision being funded under the Quebecor Fund?
331 MR. BELLEROSE: In the case of the Quebecor Fund, what we intend to do is that we had a very short period of time to deal with the tangible benefits.
332 We have received several proposals from several groups intending to be financed by us for several programs with regards to internships and mentorship. And the fact is that it could have been quite easy for us to take out two or three of those proposals, commission that and get their support for Toronto 1 and we didn't want to do that.
333 Some of them wanted to customize their own proposal, so we thought that it would be quite more appropriate to take this money out, put it into an independent fund so it could be dealt with this fund more efficiently.
334 In addition to that, we did experience some problems with the tangible benefits with regards to the TVA acquisitions in the past.
335 When you have to deal with different projects, at the beginning for a very long period of time, in some ways, very often, there are certain projects that cannot be achieved, for several reasons because the organization is not able to launch the project, is not even still alive, so we have to come back to the Commission and ask for a reallocation.
336 So, we thought that it would be... it would be less a burden on both sides to take this money out and provide it to an independent fund that could receive projects and what we intend to do is to submit the guidelines to the Commission, just to make sure that the Commission is fine with that.
337 THE CHAIRPERSON: Have you established a criteria for the fund?
338 MR. BELLEROSE: Not yet. Maybe Edouard could explain how he foresees the future with regards to such guidelines.
339 MR. BOEHME: Merci, Serge. This would be a separate envelope for what the fund is doing right now and we feel that any organizations like two of those who have actually filed an intervention, like the Centre of Community Study or the Documentary Organization of CAD would, for example, submit a project and the fund, which is independent and would administrate these contributions to the best of the projects, up to an amount of, well, it's $500,000.00 over seven years, which would be spread evenly.
340 THE CHAIRPERSON: Or six.
341 MR. BOEHME: Or six.
342 THE CHAIRPERSON: Right. Okay. Similarly to our earlier discussion, I assume you would be able to file with us the terms of reference and criteria for distribution?
343 MR. BOEHME: Yes. The same way it has been done in the past for that kind of funds which are authorized by the Commission, the guidelines would be filed with the Commission.
344 THE CHAIRPERSON: Right. Okay. I would like to discuss briefly the conditions of closing and, of course, you had to obviously make a number of assumptions and a number of scenarios.
345 You have a five-business day time frame after the last of the commissions of closing and that's required for what purpose? Just to finalize it?
346 MR. BELLEROSE: Well, CHUM must first close with Craig and then, we would require maybe a few more days to close our own deal with CHUM, but this is what has been put into the agreement actually, five days, which is not quite a long period of time.
347 But at the same time, I must say that if the Commission approves both transactions, obviously we will be negotiating on both sides the closing. Either CHUM will negotiate with Craig and CHUM will negotiate with TVA at the same time.
348 So, would it be possible to close at the same time both transactions? Probably, yes.
349 THE CHAIRPERSON: And so, in which case, you wouldn't need a trustee?
350 MR. BELLEROSE: Yes.
351 MR. GOUIN: That's what we would like to avoid.
352 THE CHAIRPERSON: I beg your pardon?
353 MR. GOUIN: We would like to avoid that, if we could.
354 THE CHAIRPERSON: Okay. I think I have your answer to that.
355 On the assumption that you might need a trustee though, I guess... would you comment on whether it should be the purchasers rather than the vendor that should set up the trust arrangement in that event?
356 MR. BELLEROSE: Well, for the vendor? Peter?
357 MR. STRAIN: The Commission's practice in the past has been the vendor. Obviously it's a choice made in cooperation and you recall that when we made the suggestion of a trustee, we named an individual that is known to the Commission and known to the purchaser.
358 So, we believe if we go that route, we have a very appropriate candidate in mind.
359 THE CHAIRPERSON: Are you of the same mind as Mr. Gouin in terms of preference for not having a trustee?
360 MR. STRAIN: No. We are in essence neutral on whether or not there is a trustee. Our view, and I think we expressed it when we appeared before you before, is we would like this to proceed as quickly as possible. A trust is one way to achieve that. Your own processes, if you are in control of obviously is another way of achieving it, so we are in essense neutral as to which is preferred.
361 THE CHAIRPERSON: Thank you very much. Commissioner Pennefather.
362 COMMISSIONER PENNEFATHER: Thank you, Mr. Chairman.
363 Just a quick question on the ethnic programming. Twenty per cent acquired programming is to be ethnic. I believe you are maintaining that commitment.
364 But just in terms of the current schedule and going forward, the programming that you mentioned occurs at 6:00 or 6:30 a.m. and at 10:00 a.m. Could you explain if you plan to have any of this ethnic programming actually aired at any other time other than early in the morning? What about noon; what about prime time?
365 MS WILLIAMS: We have in fact aired some in prime time. "Lord have mercy", which is a half hour sitcom is a Canadian acquired program that falls under the ethnic category and it has aired at prime time.
366 We would be delighted to continue to find Canadian acquisitions that fulfil this commitment and reach viewers across all parts of the schedule.
367 COMMISSIONER PENNEFATHER: Thank you.
368 Thank you, Mr. Chairman.
369 THE CHAIRPERSON: Thank you.
370 Commissioner Langford.
371 COMMISSIONER LANGFORD: Thank you very much, Mr. Chairman.
372 My question is pretty general. The Chairman has taken you through the nuts and bolts of this and the figures, but I have kind of -- it's a perception problem I have with this whole deal. I am just not quite sure how to get around it. I suppose it is because I am a regulator rather than a businessman and that is where I am hitting a brick wall.
373 In my own mind, I characterize what is before us here as one experienced broadcaster has tried something and it hasn't worked enough to make it financially viable. We could count on whether it has worked as a wonderful idea and a notion and a fresh new look. Those are different ways of looking at it, but financially it hasn't worked.
374 So another experienced broadcaster comes to us and says: we are an experienced broadcaster; essentially, we are going to do the same thing; we are not going to change it.
375 Not only are you not going to change it but you are going to be carrying some form of debt or some sort of financial strain from the purchase price. However it is done, even if it is money you can pull out of your hip pocket, it is not money you can pull out of your hip pocket twice.
376 Not only that, we are going to stack on top of that commitments to CTD that will make it even a heavier burden to carry.
377 I suppose the short answer, and I have to let you get away with it, if that is what you give me, is: we are just great and we will do it. But is there a longer answer?
378 How precisely are you going to take on this challenge, essentially selling pretty much the same product, at least for the first little while, and make it work where the other experienced broadcaster didn't seem to be able to do it? What's the secret?
379 MR. GOUIN: Your answer was right. We are great.
380 COMMISSIONER LANGFORD: So are we. So now that we have something in common, flesh it out a little for me, if you can.
381 MR. GOUIN: Yes. I can't comment on the past. I don't know exactly what was the business plan that Craig adopted and the actual results, but I can tell you that, from our standpoint, you are starting with a shareholder in TVA that does not have debt so its own business is very healthy and produces a very significant cash flow.
382 You mentioned a couple of times that we are not going to change anything. I think what we have said is that we are going to build on what is there.
383 Instead of saying we are going to clean house and start from scratch, there are some good things that have been done including: the cost reductions that have been made, that were significant, and that brought the company back to close to a break even point financially; and some good programming decisions. We want to build on those.
384 We think with the Sun we have a pretty good understanding -- between the Sun management and the management of Toronto 1 there should be a good understanding of the Toronto marketplace and what should be done.
385 With the expertise that we have in TVA and programming and in systems and in sales, I think we have resources there to apply to the situation. It is not an easy one because it is a very tough marketplace, but on the other hand we think that the scope of changes to make is limited.
386 We don't have to reinvent the wheel. We are looking at this as incremental changes. We are going to make small changes over time to try to improve the situation.
387 We have talked about the power ratio, about the $17 million worth for each point in the marketplace. We figured if we reached a 3 per cent market share we will be a profitable operation.
388 So we are not stretching out and hoping for the world to change around us so that we will be successful. We are not going to get the ball outside of the ballpark. You know, a nice little hit will do a good job here.
389 All I am trying to say is that there are good resources that will apply to the existing resources who have shown improvements in the situation and we think we can be successful. It is a great challenge for us.
390 COMMISSIONER LANGFORD: No doubt it is. I am sure the people of Toronto are grateful that somebody wants to take it on. Yet in your application you are so specific about power ratios and exactly how much money you can attribute to one more percentage point of success, so it seems to me there really are defining characteristics here of how a television station can be successful. It is different, in a sense, it seems to me than kind of coming up with a new idea like the Sun and a new format and a whole new way of looking at newspapers, and either you grab the attention of a certain section of the public or you don't.
391 It seems to me that not very long ago we had the Craigs in front of us who came up with what sounded like a very exciting new format. It perhaps is but it hasn't caught on yet. You are a standalone station that has to go to Hollywood and New York and all these places and try to buy TV rights against the big boys.
392 MR. GOUIN: No. We are not going to do that. We are going to let the big boys battle out to buy the rights and then what is left we will look at.
393 I mean, we are not going to compete with these guys, with CBC, CTV and Global. They have different budgets and they are there for national purposes. We are looking at a local station so we are going to look at fulfilling our needs with less expensive programming and hopefully --
394 COMMISSIONER LANGFORD: But that hasn't worked so far.
395 MR. GOUIN: I'm sorry?
396 COMMISSIONER LANGFORD: That sort has been the Craig approach, hasn't it --
397 MR. GOUIN: No.
398 COMMISSIONER LANGFORD: -- films and less expensive --
399 MR. GOUIN: I can't speak for Craig, but Craig was part of a network. Toronto 1 was part of a network. I assume some of the purchases were done as part of a network.
400 We are not going to be in this situation. From day one, if you approve the transaction, we will be a standalone station, so immediately our frame of mind will be different.
401 COMMISSIONER LANGFORD: But arguably, you even have a tougher battle ahead of you because you don't have anyone else to help prop you up, to spread the costs out.
402 I just wonder how you program something like that. In a sense you are left with the leftovers. I don't say that in a derogatory sense. It is the financial world you have just discussed.
403 MR. GOUIN: I think you talk about leftovers, but some of the leftovers are pretty meaningful and are very good in terms of viewership possibilities.
404 You have to look at two things. One is the programming you buy. The second side is: how do you promote it; how do you make it available; how do you make it visible to people?
405 We have the advantage here of being associated with Sun who is publishing the Toronto Sun, publishing other newspapers in Ontario plus 24 hours in Toronto. Just in Toronto alone you have a million readers a day that we can make sure know what is going on on Toronto 1. That we are going to use.
406 We also have the third most frequently used Internet site in Canada in CANOE. Again, a lot of people are going on CANOE and we are going to make sure that we use this platform to provide visibility to Toronto 1.
407 On the one hand we are going to try to be creative and also to be able to control our expenses on the programming side; on the other side, we are going to try to make it as visible as possible so that we can create awareness and viewership.
408 COMMISSIONER LANGFORD: The synergies are a fair point. Thank you very much.
409 Those are my questions, Mr. Chair.
410 THE CHAIRPERSON: Thank you.
411 Thank you very much. We will pause now for 15 minutes and resume with the interventions.
--- Short recess at 1102 / Courte suspension à 1102
--- Upon resuming at 11:12 a.m. / Reprise à 11h12
412 THE CHAIRPERSON: Order, please.
413 À l'ordre, s'il vous plaît.
414 Mr. Secretary.
415 THE SECRETARY: Thank you, Mr. Chairman.
416 For the record, I would like to indicate that two of the appearing intervenors will not be appearing. That is Asian Television Network International Limited and the Canadian Diversity Producers Association.
417 Those two interventions will remain on the record as non-appearing.
418 We will now hear the first appearing intervenors, from the City of Hamilton, Sonja Macdonald and Paul Shaker.
419 You have 10 minutes to make your presentation.
420 MS MACDONALD: Good morning, my name is Sonja Macdonald, and this is my colleague, Paul Shaker. We are here today on behalf of the City of Hamilton.
421 We requested to appear at this public hearing because the City of Hamilton understands the importance of local television diversity as a necessary component of our city's ability to thrive as a vibrant urban centre. We feel that this application will have a direct impact on our community.
422 As you know, the city opposes certain aspects of the application by TVA and Sun Media seeking control of the television programming undertaking known as Toronto 1, which includes a transmitter in Hamilton.
We feel that the applicants have not fully considered Hamilton, one of the primary communities this undertaking was licensed to serve.
423 Our presentation today will review some of the central concerns we have about this application and we will provide some recommendations that we feel will address our concerns, leading to the city's support for the proposed undertaking.
424 The City of Hamilton is the municipal body that serves an estimated 503,000 citizens. Hamilton is the core of a larger census metropolitan area, which includes Burlington and Grimsby, that has a total population of close to 703,000. It is the eighth largest CMA in Canada, larger than Winnipeg and on par with Quebec City.
425 As detailed in Figure 1, on page 3, of the handouts before you, you will see that, despite its size, Hamilton has only one local television station, where similarly sized cities like Winnipeg and Quebec City are both served by four times as many.
426 Why is Hamilton underserved? There are two key reasons for this. First is the proximity to Toronto; the second is the industry classification of what is considered the extended market.
427 First, let us look at the issue of the proximity to Toronto.
428 It is often suggested that Hamilton's location beside Toronto is akin to Canada's place next to the United States. In the context of the latter relationship, the CRTC and Canada's public and private broadcasters play a crucial role in ensuring Canadian stories and voices appear on the TV dial. Unfortunately, the same cannot be said for the Toronto/Hamilton relationship. It is often mistakenly assumed that Hamilton's issues and voices are the same as Toronto's.
429 Another reason that Hamilton is underserved is that the leading TV rating companies, BBM and Nielsen, do not recognize a separate Hamilton market, although others, such as the Commission and CanWest Global do.
430 Instead, from the perspective of BBM and Nielsen, Hamilton is included as part of Toronto's extended market. The ratings companies have combined the market because they presuppose a significant level of integration between the regions. However, this presupposition is not based on fact.
431 If one looks at Statistics Canada's definitions for "integrated urban areas", which analyze commuting patterns, a different picture of how Hamilton relates to Toronto emerges.
432 As Figure 2, on page 5 of the handouts, will demonstrate, in 2001 only 4 per cent of Hamiltonians commuted to Toronto, far below the 50 per cent threshold that is the determinant for StatsCan CMAs.
433 Further, Hamilton is not considered part of the widely use definition of the "GTA" or the "Greater Toronto Area", which only adds to the reality that Hamilton is a separate urban region from Toronto.
434 The consequence of this extended market definition is that there is little incentive for Toronto broadcasters to provide local content for Hamiltonians. Conversely, Toronto broadcasters gain an inflated audience size for their Toronto-focused content.
435 Essentially, this rating structure amounts to a subsidy for Toronto broadcasters at the expense of the local Hamilton audience.
436 This was recognized, actually, by Commissioner Langford, himself, in the public hearing leading to the initial licensing of this very undertaking, when he suggested that certain applicants at the time wanted to have access to the million-or-so people of the Hamilton-St. Catharines region without offering them anything truly local.
437 If we now focus on Hamilton, alone, it needs to be stressed that there is a distinct Hamilton television market. This was recognized by CanWest Communication when it purchased the single local Hamilton station in 2001, by the CRTC and by media research groups.
438 The late Israel Asper, former CEO of CanWest Global Communications, recognized that Hamilton's extended market is, quote, "twice the size of Winnipeg, almost the size of Metro Vancouver"; and he stated to the Commission that the Hamilton region is, quote, "a market in its own right".
439 Additionally, a CanWest Global official astutely observed that, quote:
"The entire Niagara escarpment area is horrendously underserved in news and local programming."
440 This is something that Hamiltonians are well aware of. As market studies have demonstrated, there is demand for more local content beyond what is currently available.
441 Additionally, Hamilton city council has passed unanimously a motion on August 12th, 2004, calling on the Commission to remedy the lack of media diversity in Hamilton through its subsequent broadcast decisions.
442 Also, our written intervention and our presence before you today reinforces the city's desire to have the city address the lack of media diversity in our region.
443 We would also like to identify relevant CRTC policies that present the opportunity for the Commission to remedy the lack of TV diversity in Hamilton.
444 The CRTC television policy requires diversity and competition in a market. It also requires that licence holders meet the demand and reflect the interests of their local audiences. Currently, Toronto 1 does not comply with this in the context of Hamilton.
445 Additionally, the television policy clearly states that, quote:
"...if the Commission determines that licensees have failed to respond to legitimate community needs, appropriate action including imposition of specific conditions of licence may be taken on a case-by-case basis".
446 Another relevant policy is the Benefits Test for Transfer of Ownership, which requires "measurable improvements to the communities served by the broadcasting undertaking".
447 Thus, from a policy perspective, there are substantial tools the Commission can look to in order to address the concerns we have raised.
448 I would like to turn now to our specific concerns about the application.
449 The CRTC originally approved this undertaking as a station to, quote:
"...serve Toronto and Hamilton by offering a variety of local programs".
However, "local programming" was then defined as, quote:
"a station production or programming produced by Toronto-based independent producers that reflect the particular needs and interests of Toronto residents".
450 The current applicants are essentially proposing to continue operations based on the same model. The City of Hamilton has concerns about this, as the current structure clearly does not address the needs of our community, one of the two primary markets the station purported serves.
451 Another area of concern arises from the applicant's statement in their supplementary brief that they have considerable experience in the Toronto-Hamilton market through their publishing properties. Perhaps this may be the case for Toronto, but it does not extend to Hamilton, where the Toronto Sun has an estimated weekday circulation of a little over 6,500, which represents only 3 per cent of their total weekday circulation and far below the circulation of other newspapers in the Hamilton CMA, for example the Hamilton Spectator, which has a week day circulation of 106,000.
452 Additionally, the applicants have not presented any planned local programming for the Hamilton region. In their supplementary brief, the applicant details a lengthy list of Toronto events and activities they intend to cover. Yet, nowhere do they mention any Hamilton events or activities. Thus, the assumption that the applicants, through their current activities, have sufficient understanding and/or ability to serve the Hamilton market from their present Toronto location is tenuous.
453 So how can we improve on this? The City of Hamilton requests that the Commission incorporate the following changes into this application: first, that the definition of "local programming" be amended to read:
"a station production or programming produced by Hamilton- and Toronto-based independent producers that reflect the particular needs and interests of Hamilton and Toronto residents.
Secondly, the applicant should establish a Hamilton bureau, which would produce local content that would be broadcast to the Hamilton audience over the Hamilton transmitter. The content could be regional breakaway programming from Toronto 1's regular broadcast schedule.
454 In terms of the nature of the content, we request that the applicants provide one daily news-related broadcast produced in and relevant to the Hamilton region that is aired in peak hours, between 6 p.m. and midnight. For example, in reviewing the Toronto 1 schedule, this could be broadcast in place of the program Toronto Tonight.
455 Similarly, we also request that the applicant should be required to produce local programming, other than a news-related broadcast, in and about Hamilton. For example, this could be broadcast in place of the program Toronto Life. These examples of programming substitutions would present only an estimated 8 per cent change to the current schedule.
456 While this is relatively small change to the overall broadcast schedule, it would have a tremendous impact on expanding TV diversity in the Hamilton region.
457 In addition to programming changes, we request that the applicants ensure that Hamilton-oriented programming receives a percentage from the New Voices and Priority Program Funds. Also, the applicant should ensure that proposed funding for market studies include research on communities in the Hamilton market.
458 In conclusion, while achieving the levels of television diversity, comparable urban centres remains a long-term goal. There are several options available to the CRTC to remedy Hamilton's situation in the short term without issuing new licences.
459 What we are asking, or what we are seeking, is equitable treatment for our community, commiserate to cities of similar size across the country, which can be achieved by the fulfilment of the original mandate of Toronto 1, which was to serve Toronto and Hamilton.
460 This means more than the status quo, where the occasional story about our city appears on a Toronto newscast. Rather, we need a substantial made-in-Hamilton solution, where we can see our community reflected from our town, telling our stories.
461 The City of Hamilton feels that the recommendations we have offered are a fair compromise between the rights and the obligations of the broadcaster to conduct business in the lucrative Toronto and Hamilton markets and the right of the citizens of Hamilton to be adequately served by the Canadian television broadcast system.
462 We thank the Commission for hearing us today and we would be happy to answer any questions you might have.
463 Thank you.
464 THE CHAIRPERSON: Thank you.
465 Commissioner Langford.
466 COMMISSIONER LANGFORD: Thank you very much.
467 It's an interesting submission and very detailed. Thankfully, I can leave the response to some of the details to the people upon whose shoulders it will fall and we will hear from them in response to you.
468 But I do have some general questions, which is not, in a way, to question the validity of what you are saying, but it's kind of to discuss with you just the way the world is.
469 I just wonder how much of a burden, financial burden, to swim against the tide of what's going on. Cities are coming together, communities are coming together, urban sprawl, whatever you want to call it. The Mike Harris "Commonsense Revolution", which some of us saw as "common" and we are still seeking for the "sense", it brought a lot of municipalities together, some of whom didn't want to come together.
470 Here in Ottawa it happened and in other places, as well. You weren't forced into that new configuration, but maybe it's happening.
471 I just wonder how hard you can swim against the tide, in the sense, and how much of a burden you expect to put on an applicant, like the one before us today, by saying to them, "Look, you are having a terrible time competing now in the Toronto and Hamilton market and we want to make it tougher for you. We want to add added expense. We want you to take away your popular Toronto Life program in Hamilton and put on something else".
472 Without questioning why you are doing it--you are very clear why you are doing it--and without questioning the validity and sincerity of your ambitions here, how do you do that, in a sense? How do you ask us to lay that burden on one stand-alone station, when CTV and Global and CHUM have double the impact in Toronto and the benefits of big sprawling networks behind them, and themselves probably aren't fulfilling that kind of a role, either?
473 Is that too tough a question, too big a question?
474 MR. SHAKER: No, it's a very valid point.
475 Just regarding the first part of your question and amalgamation, we did undergo an amalgamation in Hamilton, and there was a debate about that, but, ultimately, it merged together the relevant communities that are part of the Hamilton CMA, which make up a distinct urban region at the western end of Lake Ontario.
476 Regarding seeing this as some kind of burden to the applicants, we don't see that at all. In fact, perhaps, if we could suggest, one of the reasons it maybe hasn't been as successful as it did, because it didn't actually serve the markets it intended.
477 If you remember the original proceedings that led to the undertaking, the process started with the intent, at least by some applicants, to create stations in more than one city--in Toronto, but also in Hamilton and Kitchener--but there were studies done to show that there was markets beyond just a Toronto-centric station.
478 Specific to this application, though, we don't feel we are being unrealistic in our suggestions of substitutions for programming. First of all, we have asked for the Toronto-centric and -focused programming to be substituted, which wouldn't have a high relevance level in the Hamilton region. Then, for the rest of the 90 per cent of the schedule, the applicants will still have the combined Toronto-Hamilton market, which is the largest in Canada and the fifth largest in North America. They will have that combined audience to gain ratings for all of their regionally, I guess, relevant programming, you might say, imported. They have currently NFL football and imported movies and things of that nature. So we don't think it's being unrealistic.
479 We are not so much running against the tide. We are trying to actually correct a misrepresentation of the Hamilton region. It is distinct. It has grown and it actually has -- it's the centre of a larger extended market that wasn't defined by us, it was defined by you, the Commission, and CanWest, which makes up over a million people, which is far larger than a lot of the other television markets in Canada. So we don't think we are being unrealistic.
480 COMMISSIONER LANGFORD: I want to you know I have nothing against running against the tide. I do it all the time, myself, much to the chagrin of our beloved chairman.
481 Well, I think I will thank you for your comments and we will eager wait to hear what the applicant have to say in reply.
482 Thank you, Mr. Chairman.
483 THE CHAIRPERSON: Thank you very much.
484 Mr. Secretary.
485 THE SECRETARY: Thank you, Mr. Chairman.
486 The next appearing interventions will be presented by the Canadian Film and Television Production Association, Mr. Guy Mayson and Mr. Stephen Ellis.
487 I'm advised that Mr. Mayson is on his way here. He should be here momentarily.
488 THE CHAIRPERSON: I'm informed that there are a few people, for whom the Commission is working at breathtaking speed, and they are on various means of transportation trying to get here. But rather than wait and delay you, I think what we will do is take an early lunch. The next intervenor is on their way and resume--it's 11:30 now--say, at one o'clock and carry on at that point.
489 For those of you who I know were trying to exit by lunch, I regret this, but these are factors beyond our control.
490 Nous reprendrons à 13 h
--- Upon recessing at 1130 / Suspension à 1130
--- Upon resuming at 1300 / Reprise à 1300
491 THE CHAIRPERSON: Order please. À l'ordre, s'il vous plait.
492 Mr. Secretary.
493 THE SECRETARY: Thank you, Mr. Chairman, the next appearing intervention will be presented by the Canadian Film and Television Production Association. Mr. Guy Mayson will introduce his colleagues. You have 10 minutes to make your presentation.
494 MR. MAYSON: Good afternoon, Mr. Chair and Members of the Commission. I want to apologize for not being here before lunch. We actually just about made it, so I apologize for that. Thank you for your indulgence.
495 My name is Guy Mayson and I am the President and CEO of the Canadian Film and Television Production Association. With me today are two prominent Toronto producers, Laszlo Barna, President of Barna-Alper Productions and executive producer of such well-known Canadian dramas as Da Vinci's Inquest, Milgaard and Shania. Laszlo's chair of the CFTPA. And, Stephen Ellis, to my right, President of Ellis Entertainment, veteran Canadian independent producer and distributor currently celebrating 40 years in the business. Stephen is a past chair of the Association, current director and broadcast relations committee member.
496 The CFTPA represents over 400 companies that finance, produce, distribute and market films, television programs and multi-media products in English in every region of Canada. Our membership has a vital interest in the program practices and commitments of our major customers, Canada's conventional television and specialty broadcasters, whether they are applying for new undertakings through new existing licences or as in the present instance, ownership transactions.
497 From our written submission it is clear that the CFTPA has serious reservations about the application before you to acquire the Toronto 1 television service which was licensed to Craig Media in April, 2002. The purchasers are TVA, the largest private French language broadcaster in Quebec, which is also actively involved in the production and distribution of programming and its sister company Sun Media, which already plays an active role in print media in the Toronto/Hamilton market.
498 This should be a powerhouse combination. Unfortunately, the application before you today is deficient in many respects. While we recognize this application was prepared and filed with the Commission in great haste, the lack of specific detail does raise many questions. Mr. Ellis.
499 MR. ELLIS: Thank you, Guy. The value of the transaction is $46 million. The purchasers offered a package of tangible benefits totally $4.6 million for 10 percent of the value of the transaction, the minimum under CRTC policy. This also promised to uphold Craig's outstanding Canadian priority and ethnic programming and expenditure commitments and to provide eight hours per week of priority programming.
500 CFTPA recommends that the Commission require by condition of licence that the purchaser ensure that, at a minimum, 75 percent of the priority programming it broadcasts is obtained from independent producers. As benefits, TVA and Sun Media have proposed to add $3 million over seven years for priority programming and a $1 million top-up to Toronto 1's New Voices Fund for independently produced ethnic programming. Craig had originally committed $6.65 million in licence fees over the first licence term to each of these initiatives as well as $1.4 million in script and concept development funding for these important programming streams.
501 While the station has only been in operation for little more than a year, information on file indicates a significant discrepancy in expenditures on these two fronts. As of 31 August, Toronto 1 had already committed fully 83 percent of the licence fees intended for priority programming over seven years, but less than 6 percent of the total earmarked for ethnic programming.
502 The application provides no indication of how TVA and Sun Media intend to address this apparent imbalance in spending on these two initiatives, other than to request that expenditures on ethnic programming be extended over a longer period of time and for flexibility to allocate the incremental amounts between script and concept development and licence fees as the needed arises.
503 As the applicants stated this morning, Toronto/Hamilton is Canada's most cosmopolitan market. Yet TVA and Sun Media have given us little information at all on how they intend to serve this community. A cursory look at the program schedule provided with the application raises questions in our mind as to what extent the key ethnic programming qualifies as independently produced or ethnic Canadian.
504 The remaining benefits include half a million dollars to the Quebecor fund for human resource training in the television sector and $100,000 for market studies on the behaviour, expectation and needs of the ethnic communities in the Toronto/Hamilton area. The Commission has questioned whether both of these proposals don't more appropriately fit within the parameters of normal business operating expenditures. In response, the applicant has offered to include the $100,000 intended for market studies to promote a fair and consistent reflection of cultural diversity as part of its human resource training initiative if the Commission finds this more appropriate.
505 In our written intervention CFTPA pointed out that our organization operates a number of Canadian and international mentorship programs that offer hands-on training in the production sector. We would welcome an opportunity to work with Quebecor, to design and implement a mentoring program that would be fully compliant with acceptable benefits proposals. The Association has recommended that if the CRTC deems both these proposed benefits to be unacceptable the funds allocated to them should be added to the purchaser's priority programming commitment.
506 MR. BARNA: Canadian and priority programming expenditures, as stated in our written intervention, the financial projections provide no indication of how much programming by genre will be produced in-house or acquired from independent producers. We note that based on last year's expenditure only 85 percent of Toronto 1's Canadian program expenditures could be allocated to station production. This is considerably higher than the 2003 industry average of 71 percent.
507 In terms of priority programming, the application provides no information at all about which program genres the purchaser would expect to broadcast nor does it give any indication or commitment about original versus repeat programming or on the proportion of funds to be allocated for licence fees and for program development. Again, a glance at the fall 2004 program schedule indicates that in the 8:00 to 11:00 time period a portion of prime time movie and three Canadian drama series; Body & Soul, Just Cause, MTV Presents Undressed, will meet the station's priority programming requirements. If indeed Canadian movies are to be a key component of the applicant's programming strategy why are there no specific allocations for investment in Canadian theatrical films and made for television movies?
508 We also have serious reservations as to whether the purchaser has allocated sufficient financial resources to sustain eight hours of priority programming over a seven year licence term. By the end of its first year of operation Craig had already committed $5.5 million of the projected $6.65 million in licence fees for priority programming. TVA and Sun Media had committed to add just $3 million to the outstanding balance. Yet the financial projections set out as Appendix B to the supplementary brief indicate no priority programming licence fee expenditures at all in year six and seven of the new licence term. We find this of great concern for obvious reasons.
509 In our recent appearance before you in connection with CHUM's application to acquire Craig's broadcasting assets in Manitoba and Alberta CFTPA recommended that the CRTC should encourage broadcasters to invest 75 percent for the benefits in television and ownership transactions in priority programming. We note that in this particular transaction the proposed benefits to priority programming represents 65 percent of the total amount. Yet even if almost the $4.6 million in benefits were to be allocated to priority programming this would still not match Craig's original commitment of more than $6.65 million in licence fees.
510 Consistent with our approach in response to other applications CFTPA has recommended that the CRTC question TVA and Sun Media in detail about their Canadian and priority programming plans and that the Commission require the purchaser to file comprehensive programming and financial information prior to the CRTC concluding its deliberations on this application.
511 CFTPA has also recommended that if the application is approved this broadcaster be required to report annually regarding the hearing of drama and Canadian feature films, original and repeat broadcasts and provide details about incremental program expenditures, except its benefits and above projects receiving development funding. Similar reporting requirements have been imposed on TVA in the past in connection with the transfer of TVA to Quebecor and the renewal of the TVA licence.
512 MR. MAYSON: In terms of trade there can be an unfair imbalance in the broadcaster/producer relationship, particularly as in the present instance where the broadcaster has existing interests in production and distribution and publishing as well as programming. This is why CFTPA considers it important to establish terms in trade agreements with our broadcast partners. We have found this to be the best way of establishing clarity, transparency and equitability in our members' business dealings with broadcasters.
513 We remain committed to the fundamental principal of fair remuneration for broadcast rights, the multitude of broadcast windows and platforms now available means that broadcasters are constantly seeking new ways of providing their viewers with affordable content and of getting the most for their programming dollars. Our job is to ensure that program creators are appropriately compensated.
514 To this end, CFTPA recommends that the CRTC ensure that the purchaser is aware of our concerns in this regard and require it to commit to entering into terms of trade discussions with us at the earliest opportunity.
515 So in conclusion, the CRTC has developed a clear process for considering applications for ownership transactions. The applicant must satisfy the commission that approval would not result in a reduction in the existing level of service, that the application is in the public interest and that the purchaser has sufficient resources to improve the undertaking and enhance the Canadian broadcasting system. Literally, the onus is on the purchaser to prove that it has put forward the best possible application.
516 We're not convinced that the application before the Commission today is the best possible. In spite of this, a substantial number of regulatory filings that we have reviewed, we remain at a loss as to how TVA and Sun Media will program a fledgling television station in the most competitive television market in the country. While the TVA/Sun Media team will be a new player in the English conventional television market, they are not inexperienced. We strongly urge this broadcaster to put sufficient resources into the creation of new original Canadian programming, including a strong commitment to priority Canadian programming in prime time.
517 Thank you for your attention today and we would be pleased to answer any questions that you may have.
518 THE CHAIRPERSON: Thank you. Vice-Chair Wylie.
519 MS WYLIE: Good afternoon, gentlemen. Mr. Mayson, we know you weren't here this morning, but were either of you here? You seem to have wanted, at least in your intervention and again in your presentation, to have us question the purchaser, which the Chairman did about the plans they have to improve, I guess, the performance of the station, but along the same pattern as what was first applied for and granted. And you refer to the 23rd of September deficiency filing in your intervention and this is what the discussion was about this morning. So, there's nothing new there.
520 What perhaps is different is the purchaser's emphasis on the fact that they will be a standalone station and I wonder to what extent your expectations are based on priority programming of what we loosely refer to as networks. As a standalone station in the English language in Toronto they don't have, according to the policy, they don't even have to do eight hours of priority programming normally and this was imposed as a result of the extension of a broadcaster with existing stations.
521 Do you have any comment about whether that mitigates what can be expected of them?
522 MR MAYSON: Thank you. I would only say that certainly we would want any conditions to be fair in terms of realistic terms. It is a very competitive market and it will be having to do its best I think to compete in that market. We think it is important though that priority programming is an important principle, we have raised it many times in terms of an objective of the Commission, an objective of policy. I think it is an opportunity for the Commission to underline the importance in all of its rulings and decisions in these areas. We want those conditions to be realistic, but priority programming is addressed in the actual application and we feel it was an important principle to underline and encourage.
523 MS WYLIE: Yes, well our understanding and perhaps yours as well, if you had heard them this morning is that they were going to pick-up the station that is there, including the eight hours of programming, they did give us numbers about original as opposed to repeats and repeated their request to extend to I guess 20-11 the expenditures related to New Voices Fund to which $1 million was added. But my understanding is with regard to priority programming the $3 million I think would be expended in five years and the rest would be according to the acquiesce of Craig Media. So, there is nothing new there.
524 The terms of trade, maybe we will hear form them at reply, but that is not in a written reply as far as I can see and it wasn't raised this morning.
525 With regard to reporting, that was also discussed. My understanding is they are quite agreeable to reporting and we did discuss the concern we have about ballooning expenditures at the end of a licence period. So the reporting would allow us to keep track of what is happening.
526 Well, if you weren't here, you can't be any more comforted than you were reading the application. Yes?
527 MR. BARNA: You know, I know the difficulty. I can imagine the difficulties of being a single-station owner.
528 One of the things that I would like to point out to the Commission that I think doesn't take a lot of effort, but, clearly, the application reflects a little bit of a lack of imagination.
529 I remember--I'm just talking from personal experience--when I started out, it meant a lot to me to be on-air. It meant a lot to me to even have to travel and sometimes a small licence fee to be able to do documentaries about the community that I lived.
530 I think Toronto 1, if it looked at itself and it took itself seriously in the market, rather than just going after lifestyle and entertainment and covering the Air Show and the Science Centre and the CNE and all the tourist-brochure attractions, would find that there is plenty of creative material and there is plenty of independent producers who would be quite willing to work within the framework of the licence fees that a single station could provide. They didn't go there.
531 One of the cornerstones of the proposal here is about diversity. It is really strange that a Tai Chi show or a yoga show would be claimed as a show on diversity. You could find that anywhere. It doesn't reflect anything, other a yoga class.
532 I'm Hungarian and I would not deem a show called Cooking with Paprika to be a show about Hungarians. It would be a show about paprika, and not necessarily Hungarians.
533 I think if they spent the time and they looked at the resources that they have and they looked at the needs of the community and the communities in Toronto and they looked at this cosmopolitan centre and made some decisions that were substantial, I think that they could add a great deal to both the entire city, but also to the independent community. We have a lot of schools. We are putting out a lot of young film makers, a lot of talented people and I just don't see the support that I think is necessary coming from this.
534 COMMISSIONER WYLIE: I don't think it's a very big stretch to ascribe innovation and entrepreneurship to TVA and to its owner, Quebecor, so perhaps it won't be difficult for you to speak to them and get some of your projects forward. Because, obviously, what you are talking about is the past, what Toronto 1 has done, which, obviously, hasn't worked, at least in the time frame. But it's difficult to not recognize the innovation and entrepreneurship of Quebecor and, hopefully, with your help it can work to bring some of that to Toronto.
535 You would agree that TVA has shown this type of innovation?
536 MR. BARNA: Absolutely. I think they are a wonderful group. I was just a little bit taken aback that their magic was not on the page in this application. Maybe it's because they were looking at Toronto at a distance.
537 I take pride in the fact that Da Vinci's Inquest, for instance, looks at all of Vancouver. We made from the very beginning a commitment to not look at colourful, pastoral side of Vancouver, but to include the very many diverse communities.
538 I think that there is a strangeness in the application right now, as if TVA is bidding is time, trying to make up its mind which Toronto they are going to play it to and which one they will incorporate into the real Toronto one. We encourage them to work both with the independent community, because they know Toronto, and we encourage them to actually give us diversity of substance.
539 COMMISSIONER WYLIE: We appreciate your participation. Of course, if this application were to be approved, we will hear further from them at reply. You can get involved and prod them to bring their innovation in and entrepreneurship to Toronto should we feel that, on the basis of what we have before us, and your interventions approval is in the public interest.
540 Thank you very much. I hope you have an easier time getting to the office than you had coming here.
541 MR. MAYSON: Thank you.
542 THE CHAIRPERSON: Thank you.
543 Mr. Secretary.
544 THE SECRETARY: Thank you, Mr. Chairman.
545 I will now ask the applicant to respond to the intervention at this point.
546 MR. GOUIN: Thank you, Mr. Chairman.
547 I, first, want to thank Madam Wylie for keeping the reputation of TVA intact on the level of innovation and entrepreneurship. We appreciate that.
548 I'm going to talk about the two interventions, the first one from the people from the City of Hamilton.
549 Their presentation was very interesting. I think this is something that we should look at. I think, in the short term, we don't need to have more obligations taken on by the station. We have a big enough challenge, as was pointed out this morning, and we have to make a success of what we hope we will get from the Commission.
550 But I have indicated to the people who made the intervention during the recess that I was very pleased with their presentation and would like to take it up with them after we have taken the time required to turn the station around, that we would look at Hamilton, not as an obligation, but as a business opportunity.
551 If the numbers are what they say they are, I think there might very well be a business opportunity there. If the community is not well served by existing broadcasters, maybe this is something we should look at and build a business on the basis of the needs of that local population. We certainly intend to look at it as a business opportunity when we have dealt with the priority issues.
552 The second one is the CFTPA intervention. We had a long discussion at lunch and we agreed to subsidize the purchase of a watch for them so that they could be on time next time! In the interests of time, I don't want to repeat everything that was said this morning.
553 I think one of the things we said is we need to spend more time with management to look at the situation as it is in Toronto and come out with more specific action plans, which we obviously have not had the liberty to do up to now.
554 We are committed to spending about eight-and-a-half million dollars with independent producers for the New Voices Fund. We think that is very significant and we think that we need flexibility on the way that we will spend the balance of the limited funds that we have allocated to the programming budget.
555 We will, indeed, work with the independent producers. We are doing so in Montreal at TVA. We have had some very successful ventures with independent producers. In fact, our most popular programs are produced by independent producers in Quebec. So, certainly, we are open to doing business with them, but there is a difference between looking at a business opportunity and having an obligation dumped on us. So we are looking at it from a positive standpoint and hope that we can do here what we did in Montreal is create a constructive relationship.
556 In any case, for the Commission, I think you have to look at two broadcasting years from now we will be in front of you again for a licence renewal. So we are not talking about a long time span before we readdress these issues which might be of interest to you.
557 That concludes my reply to the interventions. I will be glad to answer any questions you might have.
558 THE CHAIRPERSON: Thank you.
559 No, those are our questions. Thank you very kindly.
560 MR. GOUIN: Thank you very much.
561 THE CHAIRPERSON: Mr. Secretary.
562 THE SECRETARY: Thank you, Mr. Chairman.
563 We will now hear item 2 on the agenda, which is an application by Canadian Satellite Radio Incorporation for a broadcasting licence to carry on a national multi-channel subscription radio service, to be delivered by satellite, and terrestrial transmitters for direct reception by subscribers.
564 Mr. John Bitove will introduce his colleagues.
565 MR. BITOVE: Thank you.
566 Mr. Chairman, Madam vice-chair, members of the Commission, Commission staff. It is my privilege to be here before you today, but before we begin I would like to take a moment to introduce the Canadian Satellite Radio team. There is a few of us up here.
567 I will start with my left: Melissa Clark, who is in charge of our distribution; Stewart Lyons, who has been with me from day one; Steve Tapp, our president and CEO; Bob Mackowyzc, English programming; and Andre DiCesare, French programming.
568 In the back row, a guy I think you have seen before, John Cassaday; Brandon Alexandroff, who is part of CSR staff on finance; a man who needs no introduction in the Ottawa Valley, Bob Buchan; Mark Lewis, who is also a co-counsel on this venture; Gary Parsons, one of the founders and chairman of XM, from the States; and Michael Grimaldi, who is the president and CEO of General Motors Canada Limited.
569 And on our side panel, starting on the right-hand side is John Healey, with General Motors; Jim Miller, with Honda; Mark Breslin, who is programming our Comedy Channel; Elmer Hildebrand, from Golden West; Gord Rawlinson, from Rawlco; and Paul Bush, Telesat.
570 If I can start, Mr. Chair, I'm very excited to be here today. Although my interest in satellite radio started four years ago, I spent a considerable amount of time throughout the last decade working in broadcast and media.
571 At the Toronto Raptors we negotiated landmark broadcast television rights with Canadian broadcasters where we produced our own telecast in games.
572 This started the careers of several young broadcasters who have since flourished. Our productions were seen not only at home, but also on television screens across the continent.
573 In one of my current companies, Priszm, we have a subsidiary that purchases and redistributes and originates radio programming. One of them is the "Live from Wayne Gretzky's" radio phone-in show which is on 16 radio stations.
574 Through these experiences I have developed a strong interest in broadcasting and have seen the positive impact the exposure can have on our talent inside our country, but also across our borders.
575 About four years ago something very special caught my eye and, after conversations with people who seemed to know more about technology than I do, I saw the benefit of providing new listening choices to Canadian consumers and, in particular, exporting our culture to the U.S.A. and elsewhere.
576 Almost four years ago we met with Telesat, as our initial goal was to look into the possibility of launching our own satellite. Telesat informed us that this would not be possible for the following reasons:
577 first, there are no orbital slots available until 2010;
578 second, the cost to launch dedicated satellites is prohibitive; and
579 third, our best option would be to align our interest with an existing American provider who could share their advanced technologies with us.
580 We chose to partner with XM because of their commitment to technology, distribution, programming and, most importantly, how they serve the listener.
581 However, our agreement with XM had to meet the following qualifications to be acceptable:
582 first, it had to be a Canadian-owned venture and controlled by Canadians and XM could, at most, hold a minority interest;
583 second, XM would have to provide capacity for Canadian channels to be broadcast across the continent and provide unprecedented access for Canadian music, comedy, news and current affairs; and
584 third, I personally wanted to control this venture, to shape the effort moving forward and try to make our company unique and distinctly Canadian.
585 XM already has a unique Canadian stamp on it. Much of the technology used to create and launch XM was developed right here in Canada.
586 For example, Telesat flies and manages the XM satellites; the ground repeaters were designed and built in Mississauga by UBS; the customer call centre is located in Toronto; and the encryption technology was developed by Calian, a company right here in Ottawa. The list goes on and on.
587 Our proposal represents a technology transfer between our two countries and Canada will continue to benefit from the lengthy and extensive research and development conducted by our partner.
588 With respect to our programming proposal, we will vigorously protect, defend and promote our unique Canadian culture. We will create new opportunities for French and English Canadian musicians and comedians.
589 Over the 7-year licence term we will invest over $50 million or 8 per cent of our revenues in Canadian programming, including $20 million for Canadian Talent Development, which Bob will go into.
590 Many Canadians, especially those in rural areas, have limited choices available to them. CSR will increase the amount and diversity of Canadian radio available to these very important markets.
591 We like to use the example of: What happens to the rap fan in Fort Nelson? We believe we provide the answer to that question.
592 As a Canadian businessman I have successfully worked at shaping and educating American businesses' understanding of our marketplace. My message has always been that there is a difference between our two countries. Canada is unique in the world. Our cities are different, our political system, justice, education, and all the way down to the volunteerism levels in our two countries. They are all different.
593 From my first meeting with XM they began to earn my respect when they said, "Hey, this is your country. You tell us what you need and we will work with you to get licensed." I can honestly say on everything we have worked with since there has been a willingness to understand and respond to the Canadian way.
594 Our relationship will allow us to take Canadian programming to the next level. Our culture will be celebrated and exposed to millions of Canadians and North Americans alike.
595 As a potential new entrant into the broadcasting system, I believe that the right partners are important in order to enhance our contribution to the system. We are proud and fortunate to benefit from the expertise of three respected Canadian broadcasters who are part of our team, Corus, Rawlco an Golden West. Their addition to the CSR team illustrates our commitment to deliver a new, different and complementary service to what exists today. Thank you.
597 MR. TAPP: Thanks, John.
598 Canadians want this product. In fact, our research shows that 49 per cent of Canadians are interested in satellite radio. When we conducted a national survey two years ago, only 13 per cent of the Canadians that we polled were aware of satellite radio. By January of this year that figure had increased five times to 65 per cent. Today it is undoubtedly higher, due to all the recent media exposure satellite radio has received.
599 We are ready to deliver this product today. Canadians are well covered by the footprint of the XM satellites. In fact, 92 per cent of the country receives a strong, clear signal.
600 So whether you are driving down Rue Décarie à Montréal, Robson Street in Vancouver or Yonge Street in Toronto, you will receive XM clearly, with or without repeaters.
601 Regrettably, this provides fertile ground for a grey market to flourish. It exists today and it is poised to grow and rob our artists and our system.
602 Over the past two years we have built a team that is focused, dedicated and ready to launch a superior service tailored for Canadians.
603 Our manufacturers are ready: known, reliable names such as Delphi, Pioneer, Sony and Alpine have award-winning products designed, produced and ready for Canadian store shelves.
604 Our retailers are ready: leading companies such as Radio Shack, Future Shop and Canadian Tire are prepared and enthused to take delivery of satellite radio.
605 Finally, our automakers are ready: General Motors, Honda and our other partners. They have built satellite radio into their manufacturing plans for the coming year.
606 One of the key elements integral to a successful product launch is to have the benefit of a partner who has been there before us. In just three years XM has grown from zero to over 2.5 million subscribers. In doing so, satellite radio has become the fastest technology to reach one million users -- faster than television, satellite TV or CD players. XM has become the market leader by focusing on technical innovation, distribution, programming and, most importantly, on their customers.
607 They have invested significant capital perfecting their coverage pattern, refining their chip design and working with their radio manufacturers in order to develop a superior product that is consumer friendly, reliable and affordable.
608 Like XM, our model recognizes the importance of distribution. We understand this business and we know what it takes to get high quality and affordable radios into cars and onto store shelves.
609 XM's greatest passion, however, has always been programming. It has a thoughtful, well-developed programming philosophy engineered to be responsive to listener tastes.
610 The combination of our music, news, comedy and entertainment offerings will provide our customers will unparalleled value and choice.
612 M. DICESARE : Bonjour. Quand CSR m'a parlé la première fois de deux chaînes de radio par satellite au Canada, Lumière Nordique, dédiée à la musique francophone et, à propos, pour favoriser la diffusion de la parole francophone partout en Amérique, j'ai dit « wow ». Pour une fois que nous prenions notre place en tant que francophone dans l'introduction d'une nouvelle technologie avant qu'elle soit prise par une autre entité francophone, pour une fois qu'on y sera avant la France.
613 Je suis connu au CRTC pour y avoir, par le passé, à titre de président de l'ADISQ, défendu l'importance des cotas de contenu francophone pour protéger et surtout encourager l'émergence de l'industrie musicale francophone. J'y crois toujours, et je ne vois aucune contradiction avec ma position favorable à l'implantation de la radio par satellite au Canada. Il va sans dire que les stations canadiennes de CSR dépasseront les cotas qui ont été fixés par le CRTC et sur le contenu canadien autant que le contenu francophone.
614 Lumière Nordique, chaîne musicale francophone, fera la promotion de nouveaux artistes canadiens dans des genres aussi variés que le pop, le country, le classique, du rock alternatif au métal. L'objectif est de favoriser l'émergence de nouveaux talents canadiens qui, le plus souvent, sont négligés par la radio conventionnelle.
615 Afin de nous assurer de faire connaître tous les talents francophones à travers le Canada, nous allons envoyer dans toutes les régions canadiennes un talentueux dépisteur reporter qui aura pour mission d'aller trouver et mettre en valeur les talents d'expression française. Il sera partout, Du Festival de la chanson française à Saint-Boniface, à Moncton pour rencontrer un artiste francophone du blues. CSR prévoit injecter quelque neuf millions de dollars pour le développement des talents francophones. MusicAction recevra 6,3 millions de dollars. Il faut noter que c'est la première fois qu'un diffuseur donne un montant aussi élevé à cet organisme si essentiel. Nous avons des artistes qui méritent un rayonnement sur toute l'Amérique et, dans un avenir pas trop loin j'espère, l'Europe et le monde.
616 Un premier indice de l'ouverture de XM envers nos artistes est le concert de Wilfred LeBoutillier récemment réalisé dans leurs studios et diffusé par XM. Notre station satellite créera un lien privilégié avec XM radio aux Etats-Unis, pour ouvrir cette fenêtre à notre musique, aux divers publics des diverses stations de XM radio. Je suis convaincu que les retombées de l'implantation des chaînes canadiennes de CSR seront très positives pour l'industrie canadienne du disque et du spectacle.
618 MR. MACKOWYZC: Thank you, Andre.
619 I had the opportunity to be the only Canadian programmer at XM at the launch of the service. John brought me back to Canada because we believe that satellite radio would present many significant benefits to Canadian artists through the following commitments:
620 One, four new channels with a continental reach, thereby providing a dynamic new platform for our talent, both musical and spoken word.
621 Two, almost 2,000 hours of lateral programming, that is special Canadian programming woven into XM's U.S. based channels.
622 Three, 7 per cent of all new weekly song additions to XM's channel playlists will be Canadian songs.
623 Our English-language music channel, "Northern Lights", will be 100 per cent Canadian content with a focus on new and independent music. Canada is experiencing currently an unprecedented talent boom across many diverse musical genres and 70 per cent of the music on this channel will have been released in the past 18 months, and 75 per cent of that in the past 6 months, thus providing independent artists significant airplay.
624 Our other English-language channel "Laugh Canada" is also similarly groundbreaking. It will be the first ever dedicated radio comedy outlet in Canada. The focus of this channel will be emerging comedic talent. Programming will include recorded comedy, live standup, as well as TV audio of Canadian shows such as "Corner Gas" provided in descriptive audio by the voiceprint service.
625 The channel will be programmed by Mark Breslin, one of the architects of modern Canadian comedy, and Mark is on our panel today.
626 We have also committed $20 million over the license term to Canadian Talent Development. The initiatives include a Canadian talent ambassador whose sole responsibility will be the promotion of Canadian talent in the United States.
627 One million dollars will benefit independent artists directly where they need it most, for example the encoding of their CDs for legal downloads.
628 We also commit over $1 million for other initiatives, including a national comedy talent search.
629 Now, with Canada actually sitting at the satellite radio programming table, much more can be accomplished for our talent. We have already seen the benefits of that kind of relationship. For example, XM has begun broadcasting our Northern Exposure music series, our first example of lateral programming. This initial instalment featured the best of our new alternative country musicians.
631 MR. BITOVE: Thank you, Bob.
632 I would now like to introduce you to Mr. Michael Grimaldi, President of General Motors of Canada. GM has been an enthusiastic supporter of ours for some time and we have been working almost two years on this. We are pleased that he is here to share his company's thoughts about our application.
634 MR. GRIMALDI: Mr. Chairman, Madam Vice-Chair and Commissioners, General Motors Canada and our 795 dealerships and retailers across Canada are strongly supportive of the Canadian Satellite Radio application and the opportunities that it presents for Canadians, our customers, our dealers and our suppliers.
635 Providing Canadian automotive customers the option to receive satellite radio subscription service through a proven integrated factory-activated in-vehicle digital system will enhance the value of and the satisfaction with GM products from coast-to-coast.
636 As the industry leader, with vehicle sales in 2003 exceeding 455,000 units and market share averaging 30 per cent over the past five years, GM continues to look for innovative, new exciting features and services for our Canadian customers.
637 In the U.S., where satellite radio has been available since 2001, XM radio and General Motors Corporation have a very successful and a growing partnership with over 1.8 million GM vehicles enabled to receive satellite radio. Customer satisfaction levels with XM radio are exceeding 80 per cent.
638 With this market success in the U.S., it is not surprising that there is growing customer interest in this new technology here in Canada. In fact, when I speak with dealers from across Canada, they tell me that customers are already starting to ask about availability of XM radio in Canada.
639 One of the most appealing benefits of satellite radio is the coast-to-coast access.
640 For GM, the ability to provide this option to all customers, whether you live in rural or urban Canada, is absolutely critical. It is the key reason we were not able to offer digital audio broadcast technology in our vehicles back in 2002. Now our technology plan for our entire North American product portfolio for the next 7 to 10 years excludes DAB. We are, however, prepared to offer XM radio on over 50 GM vehicles during the 2006 model year, next year.
641 You may also hear from some of our competitors about their plans to offer satellite radio in their vehicles. Due to specific and exclusive in-vehicle technology partnerships between automotive manufacturers and satellite radio providers, we support an open marketplace for these products, with competition not being restricted nor certain auto manufacturers disadvantaged by limiting the number of licences approved.
642 We also believe that the marketplace for this new technology should be addressed in an appropriate regulated manner rather than through the increasing grey market that has been reported. Thank you.
643 Now John Cassaday, of course.
644 MR. CASSADAY: Thanks, Michael.
645 Good afternoon. I am pleased to be participating in this historic panel before the Commission today. Corus will speak more fully on this application at the intervention stage, but my role today is really to make two points.
646 First, that Corus recognizes that the broadcast world is evolving quickly.
647 Second, that the people who move our industry forward are an important part of this evolution.
648 Recognizing the latter point, I am pleased that John has asked me today to speak to his appropriateness as a potential licence-holder in our system.
649 John Bitove is a person who I have known for some time who knows about new ideas and about managing change. In fact, I am pleased to say that I have known him for almost 15 years. John is someone who gets things done, both as a business person and as a civic leader.
650 For example, at the age of 33 he was the youngest owner and president in professional sport when he founded the Toronto Raptors in the National Basketball Association.
651 After launching the Raptors, John took Scott's Restaurants, well-known Canadian company, private. We all remember the Scott's Chicken Villas.
652 In less than five years his new company, Priszm, which he controls, had become the largest restaurant operator in Canada.
653 At the same time, he was asked by the federal, provincial and municipal governments to lead the olympic bid effort for Toronto for 2008.
654 As part of Toronto's olympic bid legacy, John successfully negotiated a tripartite agreement with the governments to commit $1.5 billion to rejuvenate Toronto's waterfront. Getting all three governments to agree was a tremendous accomplishment.
655 As the CRTC deals with satellite or subscription radio, we need leaders who can strengthen our industry and, in turn, our country. I can think of no one better suited for this than John Bitove.
656 MR. BITOVE: Thank you very much, John.
657 Mr. Chairman, Madam Vice-Chair and Members of the Commission, you have had an opportunity to hear our proposed benefits and contributions to the Canadian broadcasting system should we have the privilege of being licensed.
658 In summary, these benefits are as follows:
659 four unprecedented channels in English and French;
660 a truly national service for both urban and rural Canadians;
661 a direct and indirect economic benefit of over a half billion dollars;
662 new and incremental funding of $50 million to Canadian programming;
663 unprecedented access for Canadian talent to audiences at home and across the entire continent; and
664 finally, a Canadian alternative to the emerging grey market.
665 But we also offer an accountable licensee who, regardless of what is occurring in the courts, will respect the principles of the Broadcasting Act and provide benefits to the proud broadcasting system it has developed. We are ready and eager to contribute in a significant way.
666 Thank you for this opportunity to present our dream to you. We will be pleased to answer any questions that you may have. Thank you.
667 THE CHAIRPERSON: Thank you very much, Mr. Bitove and your team.
668 I will begin the questioning with Commissioner Pennefather.
669 COMMISSIONER PENNEFATHER: Thank you, Mr. Chairman.
670 Good afternoon, Madam Clark, good afternoon, gentlemen.
671 I will be focusing on questions dealing with Canadian channels, Canadian content, Canadian talent development.
672 Mr. Bitove, I will address my questions, but I assume that perhaps Mr. Mackowyzc will be answering -- if I said your name correctly -- but I leave it to you to direct the questions.
673 MR. BITOVE: You can direct them at me, Commissioner, and we will decide the appropriate level of response.
674 COMMISSIONER PENNEFATHER: As Mr. Cassaday just said, Raptors, restaurants, rejuvenation and now radio.
675 MR. BITOVE: I never thought of it that way, but that is a good point.
676 COMMISSIONER LANGFORD: Radical.
677 MR. BITOVE: Radical, not Renegade.
678 COMMISSIONER PENNEFATHER: You shouldn't get Commissioner Langford started.
679 Let's start with looking at the numbers of Canadian channels. I'm going to go right into that. I take your point, you have stated in many parts of your submissions and certainly today that you feel that this approach is a contribution to Canadian broadcasting, Canadian artists and to the Canadian broadcasting system as a whole.
680 Let's talk, then, about the number of Canadian channels, which I think in your summary you indicate four new channels. But the service that will be offered to Canadian and American subscribers will be more than four channels. In other words, this total service will be closer to 100 if not 101 channels.
681 My first question is really a factual one, just to clarify how many channels we are talking about. In looking at the website for XM Service, I think there are approximately 112 channels up there now. You came in with 101, of which originally two and now four will be Canadian.
682 So this leaves us with -- what is the composition precisely?
683 MR. BITOVE: If I could just take time and explain the current line-up we are proposing, some of the other benefits, as well as the XM program offering I think it will be helpful because it does get confusing.
684 COMMISSIONER PENNEFATHER: I will get to that at each step of the way.
685 MR. BITOVE: I'm sorry.
686 COMMISSIONER PENNEFATHER: I don't mean to cut you off, but just if we could take it step-by-step.
687 Just if you could tell us exactly, because there were some discrepancies in the various submissions, how many channels will be up there for U.S. and for Canadian subscribers through you?
688 MR. BITOVE: Okay, I'm sorry. There are 122 channels that are offered on the satellite, of which 21 are approximately weather and traffic in U.S. cities. We are not intending on offering those in our Canadian cities.
689 That leaves 101 channels, of which there is about 30 spoken word, roughly, 30-31 spoken word like BBC World Service, and 70 that are music of all genres. What we are proposing is to have four channels of that 101 channels.
690 COMMISSIONER PENNEFATHER: So it is still 101?
691 MR. BITOVE: It is 101 in total, but it is across various formats that traditionally aren't on terrestrial radio today.
692 COMMISSIONER PENNEFATHER: I understand. We will get to that. Obviously that is one of your main points.
693 But just for the record if you could submit to us a complete list of all the channels to be offered, describing the contents of each for music and music categories, just to make sure we have it absolutely clear.
694 MR. BITOVE: I would be pleased to do that.
695 COMMISSIONER PENNEFATHER: Now, in your revised application or the submission -- I will call it the May submission, if I may --
696 MR. BITOVE: Yes, please.
697 COMMISSIONER PENNEFATHER: -- you added two Canadian channels to the original two and now it is four Canadian in amongst the 101.
698 In section 1 of this revised application, I'm sorry the May application, you say:
"CSR will have four channels on the North America-wide XM system." (As read)
699 This is the understanding I got from reading the reply at paragraph 59.
700 So to be clear, all four Canadian channels will be available to Canadian subscribers and to U.S. subscribers.
701 Is that correct?
702 MR. BITOVE: That is correct.
703 COMMISSIONER PENNEFATHER: In reading your memorandum of agreement and the licensing agreement and programming agreement there is reference to the two Canadian channels, not to the four.
704 Has there been an update in your agreement with XM Service?
705 MR. BITOVE: There has been a correspondence between the two companies on increasing the channel capacity.
706 I think, Commissioner, it is important for you and the Commission to understand, we hope that we are not stopping at four. We continually work with XM to try to increase the channel capacity for our Canadian programming, but right now because of lots of issues, like we don't have any subscribers and the technology issues and we don't have a licence, right now we are proposing four.
707 COMMISSIONER PENNEFATHER: But for the purposes of our discussion, then, you will see where I am going and obviously you wanted to get there too, in positioning four out of 101 as an appropriate Canadian content number, at this stage of the game in any case, it is important we understand how at least the four is guaranteed as part of the U.S. package.
708 MR. BITOVE: I would like to answer this in two phases.
709 First I will ask Gary Parson, who is the Chairman of XM, what his understanding is of the channels that will be allocated to us.
711 MR. PARSONS: Thank you, John, and thank you, Commissioner.
712 Certainly there is a commitment for the four and John is correct in the answer that we will in fact be broadcasting those to our entire subscriber base. So we would be both -- and no segmentation between those two. We would have that to our entire customer base, Canadian and American.
713 MR. BITOVE: The second part, Commissioner, is what Bob alluded to. It is really important to understand how satellite radio works.
714 In the niche formats there will be Canadian programming that we will be producing and putting on. For instance, in folk music there won't be a Canadian folk channel and an American folk channel, there will be a folk music channel which will have Canadian programming on it. So for the true listener of folk music, they can dial into the one channel and get both nationalities' best productions.
715 COMMISSIONER PENNEFATHER: Thank you, Mr. Bitove, because that was not really my understanding. My understanding was that reading the descriptions of the four Canadian channels -- let's start with that -- "Northern Lights", "Lumières Nordiques", "Laugh Canada" and "À propos" are your Canadian channels and they will be 100 per cent Canadian. We will get to a little more detail on them shortly.
716 Here today you say as well that:
"...2,000 hours a year of lateral programming -- that is, special Canadian programming, woven into XM's U.S. based channels."
717 First, the four Canadian channels are 100 per cent Canadian and they will be part of what Canadian subscribers and American subscribers hear.
718 You are saying as well that there will be Canadian components within the U.S. services?
719 MR. BITOVE: Yes, Commissioner.
720 COMMISSIONER PENNEFATHER: I have a list of your U.S. services from the website. Can you indicate to us which of the channels currently there will have Canadian music and, if so, is that guaranteed and, if so, how much?
721 MR. BITOVE: I think it is appropriate to turn it over to Steve.
722 MR. TAPP: Sure. And I of course am just going to turn it over to Bob, our programmer, our programming guru, and Bob will get into sort of the details on a channel-by-channel-basis.
723 But what we mentioned in our oral presentation was that we have had the great fortune of being able to negotiate with our own partner, a partner who does understand the importance of Canadian programming, not just in the four channels that we have allocated on the service at this time, but across the whole XM service as a whole.
724 So in the case of the four channels, these will be destination orientations for people who want to hear a wide range of different music, let's say on the Northern Lights channel.
725 But when we refer to lateral programming, we are talking about programming or specials and music that will run across the other 70 XM channels. Obviously, depending on the genre, some channels will definitely have more Canadian product than others.
726 Bob can probably get into that a little bit better, but it is very important to note that this lateral programming initiative is something that will give Canadian programming massive exposure, up to 2,000 hours a year across the entire XM service, whether it be on a folk genre or whether it be on an urban genre, whether it be in a country genre.
727 We have many examples of where Canadian programming at this moment has been playing on XM over the last three years. They have been a huge supporter of Canadian programming. So what we have been able to do is not only negotiate the four channels, but negotiate the lateral programming hours that will consist of Canadian specials and, as Bob also mentioned, we have been able to negotiate with our partner 7 per cent of the new additions of new plays will be Canadian, which is a massive, massive commitment on the part of XM.
728 I would like Bob perhaps to fill in a little bit on the answer.
729 MR. MACKOWYZC: Thank you, Steve.
730 I could go through the entire list and I feel a collective groan coming on in the room, especially the people who know me. My nickname is "Jaws", so we will take it from there.
731 MR. TAPP: You got that right, Bob.
732 MR. MACKOWYZC: Steve mentioned something that is critical, the 1,872 hours, which is a firm, tangible benefit. It is not only meaningful, it is also measurable in terms of what the Starmaker fund itself called sometimes that impenetrable wall that seems to separate our talent from the lucrative American market.
733 In terms of the specifics of your question, it might be easiest if I talk about a program that aired earlier today, at 11 o'clock, right across the XM system. You may say this was fortuitous timing in terms of the hearing, I will say it was part of the collaborative effort, because that is what this is going to be between the two sides.
734 It was on a channel called "Cross Country". This is alternative country. So this is sort of more rough-and-ready, if you will, has a different aspect of musical sound than traditional Nashville country. It happens to be that Canadians really excel in this style of music. That particular channel plays close to three dozen Canadian artists that don't get a lot of widespread mainstream radio airplay here in Canada.
735 So Colin Linden, who is one of our more prominent musicians and producers of note, hosted a show where he took the American audience, as it were, and took them on a cross country tour. So he played the Corb Lund Band from Edmonton, Matt Mays from the east coast, Luther Wright and the Wrongs from Kingston, Ontario, and so forth. So that show will air three times during the course of this week.
736 There are probably -- we have discussed 20 t0 25 channels that are very, very comfortable -- don't forget, this is their real estate in terms of their channel. What they really like is Canadian content because of the quality of it. He said, "Aw shucks, they like the programming people as well." So we have a firm foundation for a collaborative relationship.
737 The East Coast Music Awards will air on the Fine Tuning channel. They already play a bunch of artists from that area. Or the Urban Music Awards. It will be a cross-promotional dynamic between the two worlds.
738 I hope that answers it.
739 COMMISSIONER PENNEFATHER: That is very helpful. From a programmer's sense it gives us a look at that from getting it to a clear picture as we go through this discussion on what you call the benefits of this in terms of Canadian artists and Canadian listeners. It is important to get as precise as we can at this point.
740 Let's say, then, that you are saying that on the U.S. services there would be this -- I think you said 1,872 hours on the U.S. at this time.
741 MR. MACKOWYZC: Yes, it will be 36 hours a week.
742 COMMISSIONER PENNEFATHER: That is something that is there. If there are no Canadian channels, would that still be the approach?
743 MR. BITOVE: It is tough to speculate. It is part of -- I think as satellite or subscription radio goes global part of what happens, if you get to the table early and you have an aggressive management team, is to keep fighting for more and more Canadian exposure. So I can't answer it any other way than you could probably ask Mr. Parsons if we are continually pestering him for more and more real estate.
744 MR. TAPP: Can I just add to that for a second?
745 It really reflects the kind of relationship that we have with our partner. I think that is really important for us to talk about because, as I said earlier, this is a partner that understands Canada, understands our unique position in the world of entertainment music, understands our unique situation with respect to how important it is to promote Canadian talent, both at home and abroad, and they understand the importance of the U.S. market for a lot of Canadian artists.
746 In your question you asked whether or not this kind of lateral programming would there in the absence of Canadian channels, I think it is all part and parcel of the kind of collaborative relationship that we have with them.
747 And this is just the start. I think it is important to note that we have been able to get a number of very creative deals done with our partner, because they do recognize the importance that we play here in Canada, and they also realize the importance that we can serve as a cultural megaphone into the United States.
748 I think this is just the start, whether it is the 2,000 hours, whether it is the 7 per cent ads, whether it is the four channels, or whether it is a commitment which we have from them to cross promote our Canadian channels and our Canadian programming across all of the other channels.
749 That is one of the trademarks of XM's programming philosophy and marketing philosophy, is that they promote the heck out of stuff across their channels.
750 MR. BITOVE: Sorry, Steve.
751 And, Commissioner, it is not just music, because our news -- we partnered with CTV -- our news and current affairs and Canadian views on the world are going to be heard beyond our borders, which is why just focusing on the music is only part of it, because the comedy channel, the news and current affairs, all the rest of these things are an important piece of what we think has to be heard by Canadians as well as people beyond our borders about Canada.
752 COMMISSIONER PENNEFATHER: Let's look at the deal, then, what we have in front of us today in terms of the four Canadian channels, the four out of 100. That is a ratio of 1 to 25.
753 Looking at this more generally, I'm sure you are aware that from our point of view and certainly from the point of view of many who have commented on this proposal, that is to some an unacceptable proportion of Canadian channels versus non-Canadian channels.
754 Generally speaking, looking at it, too, from some of the balance act we have to undertake, how should the Commission approach this issue of changes in the type of channels offered? In other words, I understand the programming, I can hear the benefits that you are laying out, but we have to look at things concretely.
755 What we have in front of us now is four channels Canadian out of 100. Can that change?
756 Should there be a difference in the way we look at changes to the Canadian-produced channels as opposed to changes to the non-Canadian channels in terms of the mix?
757 What would be a reasonable way for us to look at looking at this balance going forward?
758 In other words, we could come into this looking at the deal in front of us and say: That is just not enough. Four out of 100 is not enough.
759 Would it be reasonable to establish some kind of formula where the ratio would change, perhaps change to an appropriate level? What could that level be under the circumstances? How could we approach that?
760 MR. BITOVE: I will hand it over to Steve in a minute, but I think the one thing to keep in mind, particularly from the automobile manufacturers as well as the manufacturers of the product throughout the world, is ultimately as it has become global and more countries become involved, things continue to change. That is the wonderful thing about technology. The important thing is, for our country and our Broadcasting Act we have to make sure that our piece of the turf is defended.
761 So as we sit here today and we currently offer four channels and we know that we are going to continue to grow and be able to get more as technology or great quality programming from Canada that just wants to be heard, I don't envy your position in terms of trying to figure out an exact formula on how things have been done in the past, because this is changing so fast.
762 But we are here over the next few days to deliberate and go through what exactly is the right way to do it, because we understand that there are certain minimums that have to be protected as part of our society.
764 MR. TAPP: This is something obviously that we have thought of, we have discussed quite extensively over the last couple of years, quite frankly, but more so over the last couple of months.
765 I would reflect what John said. This is a new technology, this is a new class of undertaking that we are proposing, and just because it is new doesn't mean it has to have different rules. But we are suggesting that it should have different rules because there are a lot of other benefits we feel that we bring to the table outside of simply channel numbers and ratios.
766 But as a new service and as a new technology, obviously technology is changing all the time. At this point in time we have four channels available to us on XM, and that is what the technology allows. That is what the capacity allows.
767 I'm not going to say we are fortunate to have those four, but in a way we are. We have negotiated our way into an existing system, and a system that has great costs and a great obligation to serve listeners effectively and efficiently?
768 So we feel very good about the fact that we were able to get these four channels negotiated with XM. As technology changes and as capacity allows, certainly it is something that we have talked about, it is something that we can get into in more detail, but it is something that we obviously have an interest in doing.
769 But there are a couple of other features of our application we think that are of a benefit.
770 COMMISSIONER PENNEFATHER: Okay. Could I just stop you, though, at one point there because I think it is an important one. Let's just stay on what we have to look at in various components of your application and later submissions do reflect, yes, at length on this point.
771 You say that is what the technology will allow at this point. But again, you started with two, you were able to negotiate four, so I could return the comment and say the technology allows as much as you are able to negotiate. In other words, it is a question of what you are able to put on the table in terms of the deal.
772 Why wouldn't you come to us with more Canadian channels as the first salvo, even if we accept the notion, as has been argued by many players and yourself at great lengths too, on the nature of the Act, the nature of the Regulations, the flexibility versus the maximum use possible of creative talent?
773 Considering your very own submission and considering your comment this morning on the abundance of Canadian talent in this country in all genres -- which is celebrated again when we are speaking to a programmer, it is wonderful to hear -- but considering that, don't you think that four channels -- and actually it is only two music channels -- is too low, considering this level of talent.
774 Wasn't there enough on the plate to ask for more channels at the start?
775 MR. BITOVE: I think it is fair to assume that when somebody has a product that is being wildly received and is almost at a break-even point on their current financial plan, and for someone else to come in and say, "We would like to get a piece of some of that too" and start working with you in a different country, I think it is reasonable for them to start with a smaller number and build from there. I really do.
776 A year and a half ago when we submitted our application we were at two. We have continued to work away with them and got it to four by the May refile.
777 I have complete confidence that we are going to not only wow them with our programming, but wow them with our management team in terms of the subs and the auto relationships we are going to have here, and the retail relationships we are going to have here, that getting more channels out of them is going to become easier as this relationship develops.
778 I think it is a little bit dating, you just have to start slow and see where it goes from there.
779 MR. TAPP: Can I just add to that?
780 COMMISSIONER PENNEFATHER: Do you want me to down that road, gentlemen?
--- Laughter / Rires
781 MR. TAPP: Channels are obviously very important and they are easy for us to look at in terms of quantifying what the contribution is, but we really believe -- and I hope this is an appropriate time to table it -- that the nature of what we are offering into the U.S. market is very significant in terms of from an export perspective.
782 We have the privilege of taking this Canadian talent, whether it is comedic talent, whether it is our musicians, whether it is our news in both French and English, and taking this product and beaming it into the U.S. in really an unprecedented and unparalleled way in terms of opportunity.
783 I have been in the business for 20 years. I have had the privilege of working with great Canadian broadcasters, like TSN and Astral and, most recently, my good friends at CHUM and I have lived in this system of Canadian content.
784 When I was at CHUM, if I might just take a minute, I worked in the international division for a while. I was working to export product, Canadian product, into foreign markets and this was a major, major advantage for Canadian product and Canadian talent. This is the same kind of an opportunity. It's an unprecedented opportunity to hit our biggest market and I think that we need to look at channels and the export benefits in the Canadian CTD out west.
785 COMMISSIONER PENNEFATHER: I think you have made that point, Mr. Tapp. Maybe we could just keep things a little shorter because we have a number of issues--
786 MR. TAPP: Okay.
787 COMMISSIONER PENNEFATHER: --to go through and that point has been made very clearly.
788 I have one or two questions on that.
789 MR. BITOVE: Madam Commissioner, I have a great team member, who is passing me notes saying she has a few more facts on this.
790 Melissa, please.
791 MS CLARK: Hello.
792 Sometimes I think we get buried in our own story and I just want to make a couple of points very clear here.
793 You had noted that it would be wonderful if we had our choice of the offering and if we could offer a limitless number of Canadian channels. I just want to make very clear that the spectrum is limited, ergo, every time we add a channel to this offering with our partners, something else has to be removed.
794 When we allude to the technology improving, what we are really talking about is how it impacts that spectrum availability and that the compression technology may, in the near or distant future, avail us of more opportunities to put more music stations on the same amount of spectrum, but currently, today, the spectrum does not have the compression technology that allows us to just add limitlessly as we would obviously like to do.
795 COMMISSIONER PENNEFATHER: I take your point, but I was taking it on the basis as a starting point you chose to take 101 channels and to take four, if you will, technically four American away, and replace them with Canadian. So as a starting point, the spectrum being limited--and I accept that point--this is where I was going.
796 Let me ask you to comment on a couple of proposals in this regard. Again, I'm looking at it from the regulatory point of view and also from the point of view of the return to the Canadian broadcast system, less the American market, rather the Canadian.
797 In its intervention, Sirius Canada proposes that all licensed satellite radio services should be required to carry the same minimum number of Canadian programming services or channels. Thus, if the Commission were to require Sirius Canada to carry at least five Canadian services, CSR could also be required to carry a minimum of five.
798 Would you care to comment on this kind of approach and, in so doing, if this should be a fixed number? Or should there be a mechanism to increase this number over time?
799 MR. BITOVE: I have read in the May refiling--I believe that's where it was--what Sirius put forward. I believe they talked about adding channels as technology and kind of best efforts with their partner permitted and they put a number in there of subscribers that they projected to try and get there.
800 If you are going to go down the formula road, we would obviously like to work with you. On the formula road, there is a couple of things to keep in mind. One is we do have a different financial plan than Sirius Canada because of the way some of our arrangements are restructured with retailers, OEMs and the like--and I'm sure when someone can ask his questions to me, it's all going to be understood a little bit clear--so we have a tougher nut to crack and more subs that are required to make this work than Sirius Canada does.
801 The other thing, Commissioner, is all of a sudden, I don't know why I didn't think of it earlier, but the channels that we offer--the great thing about what we did is that the channels that we offered came about from what the Canadian research told us. The formats that Canadians wanted to hear more of on radio were more Canadian music, live concerts and interviews, comedy, including stand-up, and the balance of what they wanted were already provided on both of the satellite providers.
802 So what we did is we have gone to get more lateral programming in those channels. Because, let's say, something like the seventies decades channels, you don't want two seventies decades channels, you want one really good one, with as much Canadian content on it as you can get.
803 I wanted to reflect that in here because I think it was important that research is what kind of guided us to the channel line-up, not let's just get four channels.
804 COMMISSIONER PENNEFATHER: Have you any comment on the possibility, though, that the Commission would set a minimum number of Canadian channels for all of the services going forward?
805 MR. BITOVE: Yes. We would be willing to work with you on that, yes.
806 COMMISSIONER PENNEFATHER: Meaning you think it's feasible, it's something we should do? And what should this number be?
807 MR. BITOVE: I think that, given time, we could work towards a higher number than we currently have, based on a certain amount of subscribers. I would have to caucus with the team at some point and get a better understanding.
808 COMMISSIONER PENNEFATHER: Perhaps you would like to get back to us on that and base this on revenues, perhaps on subscribers, a formula which would--
809 MR. BITOVE: I think that's more than reasonable.
810 COMMISSIONER PENNEFATHER: Perhaps you would want to comment on a formula which would say that for every new non-Canadian service added there would be a Canadian service added, so much on the linkage rules, pay audio. You might want to comment on that formula.
811 MR. BITOVE: You know, that's where I get concerned, because we are not pay audio and we are not terrestrial radio. We are a different kind of service. As my counsel would like to say, we are a subscription satellite distribution undertaking. I think we are probably going to draw up our own rules on how this should be done.
812 MR. BUCHAN: Commissioner Pennefather, far be it for me to get into engineering issues, but just to clarify what may be a misapprehension.
813 From you question, with regard to the replacement of a channel, if the decision were taken to remove an American comedy channel because there's going to be a Canadian comedy channel, it doesn't mean that the American comedy channel would be removed from the XM satellite.
814 It's a matter of removing the ability of Canadian subscribers to receive that channel in Canada by electronically blocking out the reception in the Canadian radios. But by blocking out that channel in Canada doesn't create more bandwidth.
815 So what Mr. Bitove has had to do with XM, and why the dynamic is there, is to negotiate as much spectrum as he could get: initially two channels on the side, and they have expanded it out to four channels on the side. But it doesn't mean that there is going to be any channels deleted in the United States off the XM satellite.
816 I just wanted to clarify that because, when I got into these discussions with them a few weeks ago, I was saying, "Couldn't you get a bit more, black a few out and put in some more Canadian channels?".
817 COMMISSIONER PENNEFATHER: Thank you, Mr. Buchan.
818 I recognize that technical part of it, having gone through all of these. I think it's really trying to look at: what options are there to consider going forward and looking at this right now, in terms of the balance of Canadian/non-Canadian.
819 One of the programming philosophy points that you make, Mr. Bitove, at tab 8 of your original application, what is called--I don't know whether Mr. Tapp coined the phrase--laser-focused psycho-graphics.
820 MR. BITOVE: It sounds like Steve, or Bob, one of the two.
821 COMMISSIONER PENNEFATHER: You say that the value, the interest, what makes the subscription radio sell is niche targeting and not general mainstream appeal, hence the different channels for the different types of music, comedy, news, entertainment, and that's what makes it unique.
822 Yet, when we put the four Canadian channels into the mix, these four Canadian channels are, if you want, omnibus channels. They carry a variety. Northern Lights, if I look at the programming, Laugh Canada, if I look at the programming, it's Canadian.
823 Why would I, as a Canadian subscriber, or an American subscriber, for that matter, choose the omnibus Canadian channel over the very focused jazz channel? Because that's the whole point of this exercise is niche targeting, getting people to the point--the kind of music they are interested in. Why would anybody choose to watch the Canadian channels in such a mix?
824 MR. BITOVE: I will answer that in two parts. First of all, our outstanding programming will get people to listen to us, because I have confidence that we will be able to do it.
825 But more importantly, Commissioner, if you are a user of the service, it's rare that you stay on one channel forever. You like to go around. My personal preference is the eclectic channels that alternate between niche formats continually. Maybe it's part of my jumpiness, or whatever, but it keeps me in tune longer.
826 Now, having said that, when I feel like going to classical jazz, I know where to find it, but it's rare that I will stay on that channel for more than a half hour, an hour, if I was driving or something like that.
827 But I think it's more appropriate even for Bob to expand on this.
828 MR. MACKOWYZC: Thank you, John.
829 The nature of the satellite radio experience, in terms of at least the initial adopters of this service, finds that they are much more eclectic in their tastes. They have just paid for a service. They don't want to just get the mainstream formats. There's lots of adult contemporary and there's lots of mainstream country. But, again, it might be something like the alternative country, so it is those micro-niches.
830 In fact, one of the most successful channels on XM is a channel called Fine Tuning, which is genre-hopping in the sense of the old progressive FM model of the late-sixties, where one moved from Mozart to the Beatles quite freely because there was this eclectic nature.
831 It's also, if I might say, an eclectic age, in general. I look no further than my own household, where my daughter is an opera singer and my son was in a band that was far too heavy-metal for the neighbourhood's taste.
832 So it is an eclectic age and we, as a national broadcaster, also feel that it is incumbent upon us to the be the conduit for the full expression of the Canadian voice, therefore, the 30 diverse genres in the channel.
833 But, specifically, two things. Targeted marketing. Targeted marketing, for example, in the dance -- in the dance genre, there is not a lot of dance music stations across Canada and yet we are in the midst of a dance music era. Targeted marketing means we will hit that niche audience and let them know that they have a Canadian dance show.
834 We are going through an exceptionally nationalistic cultural period where people see that not only can Canadians compete on any level, we are superseding, we are creating world-class music in everything from kids music to electronica.
835 The other aspect of the answer to your question is cross-promotion. Cross-promotion is a little bit unique in the satellite world, when you compare it to the insular world of terrestrial radio. By that I mean when you are executing a channel, you are actively encouraged to cross-promote. And we do have an agreement with XM.
836 So in other words, if you are listening, let's say, to Watercolours and a Canadian talent like Diana Krall comes on, you are encouraged to take the audience to somewhere else within the XM self-contained universe, to say, "You know what, you like that, well, there are three or four, five, six other artists from the Canadian side of the fence that you would enjoy".
837 So cross-promotion is intrinsic to the answer to that question, as is targeted marketing.
838 COMMISSIONER PENNEFATHER: So it is cross-promotion which saves the day. But, strictly speaking, you would agree with me that Northern Light channel grid, as an example, is a microcosm of what satellite subscription radio is supposed to be?
839 MR. MACKOWYZC: It could be seen as the seeds for something in the future. But, really, it's anchored in a genuine belief in the full expression of the Canadian voice.
840 COMMISSIONER PENNEFATHER: Taken on its own, it is all the different genre of music. It is, in fact, counter-programming to what is the niche marketing of the many other channels on the XM service. Correct?
841 MR. MACKOWYZC: No, not exactly, in the sense that the Canadian Vocal Jazz Show, for example, there is no equivalent, in terms of the XM system. There is vocal jazz woven into various jazz offerings, but we happen to be going through--again, we are going through an explosive growth period, in terms of vocal jazz artists in this country, so that particular show is unique.
842 But again, I would underscore how our artists can benefit by this memorandum of agreement, understanding, about cross-promotion, that we don't exist in this ghetto off to the side, we are an active partner at the table.
843 That's underscored by the lateral programming in the ads, but--
844 COMMISSIONER PENNEFATHER: I have your answer on that.
845 MR. MACKOWYZC: Thank you.
846 COMMISSIONER PENNEFATHER: It's, again, important to keep in mind that what I'm also looking at here is the actual Canadian channels and what they, themselves, are doing for Canadian talent, Canadian talent development.
847 Yes, there is the component of what the American channels can do, in terms of promotion, as you stated today, 7 per cent weekly song additions and 2,000 hours, but it remains to look at the Canadian channels, as such, not only in their number, but in their content.
848 MR. BITOVE: Commissioner, part of that content, 70 per cent of it, is new music within the last 18 months.
849 COMMISSIONER PENNEFATHER: All right, I'm just getting to that.
850 Northern Lights will consist of 90 per cent music now that you have Laugh Canada. Am I correct?
851 MR. BITOVE: Correct.
852 COMMISSIONER PENNEFATHER: Would you comment on the possibility of that level of music being required as a condition of licence?
853 MR. BITOVE: Yes. I don't think we particularly have an issue on that. I will turn it over to Bob, but the other 10 per cent is predominantly CTV News updates for Canadians who, not only are listening in Canada, but live or work or are vacationing across North America.
854 MR. MACKOWYZC: Yes, that's correct. As John pointed out, this is a channel that was designed to serve several functions. One of them, being part of a North American system, was to address that continental reach, hence the Lloyd Robertson, CTV News package, which we negotiated.
855 Because, as John pointed out earlier, in terms of the Canadian/American dialogue, we think it's important. We think it's important that the dialogue be enhanced and our American friends and partners know what we are thinking and doing. So, yes, that component is central.
856 COMMISSIONER PENNEFATHER: On Laugh Canada, now, you say in your May submission that, and I quote:
"There will be a majority focus on Canadian talent, but this will also include comedy stars, newcomers from around the English-speaking world". (As read)
857 Can you tell me what percentage of weekly programming would come from Canadian talent on Laugh Canada?
858 MR. BITOVE: Yes. It's almost two-thirds.
859 But, most appropriately, Mr. Breslin, who will be responsible for that channel, should answer this, Commissioner.
860 MR. BRESLIN: Thank you. It's an honour to be here in front of this Commission, today, and also an honour to be part of this proposal.
861 Seventy per cent of the comedy on Laugh Canada will be Canadian and, of that, 50 per cent, more than 50 per cent, will be original Canadian comedy programming.
862 COMMISSIONER PENNEFATHER: Would you comment on the possibility of that being a minimum level as a condition of licence?
863 MR. BRESLIN: I would have to defer to--
864 MR. BITOVE: We would accept that. That's our intention.
865 COMMISSIONER PENNEFATHER: It's just I note that there are three comedy channels currently running on the XM service. Would the Canadian channel be different? How do you see it surviving against the three?
866 MR. BITOVE: We will put our comedians up against theirs any day, Commissioner.
867 COMMISSIONER PENNEFATHER: Probably most of them are Canadian.
868 MR. BITOVE: You are right. That's one of the reasons why we are doing it.
869 MR. BRESLIN: As you go across the country, you cannot underestimate the amount of nationalism and national fervour that the audiences have in this country for Canadian comedy. Plus, our reputation worldwide and in the United States for the best comedy is superlative. When you make a list of all the great comedy that's now so important worldwide, so many of those people are Canadians.
870 COMMISSIONER PENNEFATHER: We have been discussing the level of Canadian content. We looked at the number of Canadian channels proposed today as four out of 104. As you know, Mr. Bitove, there certainly is concern that is insufficient.
871 Apart from the various options we have talked about, formally, to increase that number, a minimum number of Canadian and a realistic look at some form of ramp-up--you may want to get back to that point later--there is also the level of Canadian talent development. It has been suggested that applicants could demonstrate that attaining higher levels of Canadian talent development would be appropriate, under those circumstances.
872 If one accepts this as a regional approach, would it be reasonable to expect a service that is offering Canadian content at the level that you are offering it to contribute more than, for example the 4 per cent of revenues to Canadian talent development required for pay audio services? In fact, in the circumstances where a service is offering even less than that, would an increased amount of Canadian talent development not be more appropriate? I wondered if you would care to comment on that.
873 MR. BITOVE: Yes. Again, I feel that slotting us with terrestrial radio or with pay audio isn't appropriate because we are a different kind of service. Unlike pay audio, we have a lot more live programming and DJs and the like that go into our programs that pay audio doesn't.
874 Our programming costs, as I said at the beginning, are roughly 8 per cent, almost $50 million of our revenue. And we are talking about Canadian programming costs. That doesn't include any international rights acquired. That's the staffing--
875 COMMISSIONER PENNEFATHER: I realize that. I'm talking about the Canadian talent development initiatives, specifically.
876 MR. BITOVE: Yes, which is the number of $20 million. Again, I have seen one of the applications, in particular, where it's very different. They have a higher CTD and a smaller programming. We have a higher programming and a smaller CTD. But I think, again, we are willing to work with what you think is the appropriate way to do this.
877 COMMISSIONER PENNEFATHER: Well, let me ask you--really, it's up to you to tell us what you think is appropriate at this point--as I understand your formula, you have $20 million, actually $19,775,000. Basically, it's an amount per year that you have given us, broken down amongst the initiatives, not as a percentage amount, if I understand. But looking at it, it works out to being top-heavy loaded at the beginning, in terms of proportion of revenues, and works its way down to about 2 per cent in year seven.
878 Now, what would be your comment on a regulatory approach, considering the nature of what we are talking about here and considering this from the point of view of the balancing act we have vis-à-vis Canadian content, vis-à-vis the important contribution that such enterprises should make to Canadian broadcasting, Canadian artists?
879 What would be your comment on establishing a regulatory approach which would have a similar percentage amongst all players, in terms of Canadian talent development? And if so, what should that percentage be?
880 MR. BITOVE: I think that is reasonable. We chose a different way of doing it. We, basically, went with a dollar amount per year.
881 The downside of going with a percentage in the early years is it means there is going to be less money available, significantly less. But I think that we would be amenable to agreeing to some kind of percentage.
882 I think, though, again, Commissioner, if I could state, that we are a little different because we have a lot more programming costs. We are at about 8 per cent on programming in CTD. Our CTD, itself, if you took our total amount, the $20 million over our revenues, is around 3 per cent. So I think that if you said: would we be willing to alter this to make it better for your policy by agreeing on a percentage, of course, we would agree to it.
883 COMMISSIONER PENNEFATHER: Can you give me any indication of what you think would be a fair percentage?
884 MR. BITOVE: As I said, our current model is 3 per cent, just the CTD, and 8 per cent total programming. I guess, once you hear the balance of the applications, you have to decide what's the best way to do this for your policy. We would be willing to live with either percentage.
885 COMMISSIONER PENNEFATHER: Sorry, I didn't hear you.
886 MR. BITOVE: We would be willing to live with a total Canadian programming percentage or just a CTD percentage.
887 COMMISSIONER PENNEFATHER: I was discussing CTD with you. I think we should keep to that.
888 MR. BITOVE: Okay.
889 COMMISSIONER PENNEFATHER: Let me ask you about--and you might want to consider this, as well, getting back to us on the possibility of a ramp-up formula--you made the point about early revenues, yet, looking at your revenues, there may be a possibility of ramp-up starting in year three, something of that nature.
890 MR. BITOVE: So just to be clear, Commissioner, you are saying, like, certain minimal amounts until a percentage would kick in, or something like that?
891 COMMISSIONER PENNEFATHER: Various formula--
892 MR. BITOVE: Okay.
893 COMMISSIONER PENNEFATHER: --if you could consider that and get back to us on that. And look at it from the point of view of a regulatory approach, which would allow for equity across the various players.
894 MR. BITOVE: That's reasonable.
895 COMMISSIONER PENNEFATHER: Let me ask you about your specific initiatives, now, just a few questions on that. Again, I'm going with the May submission, where we went from four to 20, I think.
896 The CSR-produced theatre and spoken-word events, what precisely will the $20,000 per year allocated to this be spent on? Who will actually receive the money? And will you broadcast the showcases on your service?
897 MR. BITOVE: The particulars of the CTD, Bob has been working on for the last two years, so I think I should turn it over to him, Commissioner.
898 MR. MACKOWYZC: Thank you, John.
899 To take the last part, yes, they will be broadcast, and they will be broadcast across North America.
900 We targeted some of those dollars towards the aboriginal theatre scene, which is, again, taken the lead, in terms of aboriginal theatre across North America.
901 We will record. It could be the Theatre Passe Muraille in Toronto, a production. We have had discussions with Harbour Front and working with their extensive theatre program. So, yes, it will involve recording Canadian theatre productions, and then broadcasting them across North America.
902 COMMISSIONER PENNEFATHER: Did you say you would have a focus on aboriginal Canadian talent or aboriginal North American?
903 MR. MACKOWYZC: It would be Canadian aboriginal theatre, which is taking American aboriginal theatre by storm. They are just leading the parade in that particular genre and we think that's a worthwhile aspect or dimension to support.
904 COMMISSIONER PENNEFATHER: You state you will spend $180,000 per year on four comedy initiatives. That's page 7 of your May submission. However, in the table on page 10 of the May submission, you show a breakdown of the money allocated to each individual project and the amounts there add up to $160,000.
905 Perhaps you could get back to us on this discrepancy and just explain the difference.
906 MR. BITOVE: We will.
907 COMMISSIONER PENNEFATHER: Now, some of the CTD initiatives support artists by paying them for their artistic work. Why should this be considered at CTD expenditure and not simply the cost of running your service?
908 MR. MACKOWYZC: Specifically, the talent contests, we view that as seed money. We have anchored all of our talent contests within the specific genre shows. Our feeling is we have gone out and we have talked to and will hire some of the pre-eminent experts in their various areas and they will distribute the dollars.
909 In an odd way, it's kind of putting money behind the old pick-to-click idea. Perhaps we are of an age that we remember the DJs when they actually had picks to click. In this sense, with that genre-specific material, we think that helping somebody record a demo tape is worthwhile.
910 COMMISSIONER PENNEFATHER: Thank you. I have that answer.
911 There is another clarification I would like, too, if you could provide for us. In your response to 7.2 of your application--and this is your original application form--you commit to spending, at that point, $4 million on CTD initiatives. But what is not clear is the comment that you say:
"This amount is in addition to the amount set out in the 1995-196 CAB Plan". (As read)
912 Perhaps you could clarify that for us? It would appear that it is still in the works and it is not clear how much this is and to whom the eligible parties will be under this plan. You seem to have both there.
913 MR. MACKOWYZC: Okay. Yes, we will.
914 COMMISSIONER PENNEFATHER: My final area of questioning is cultural diversity. As you understand, it is a very important objective of the Broadcasting Act and it has been a priority for the Commission.
915 In looking at your proposal, there are a couple of areas which I would like to clarify. In your deficiency letter of November 4th, you talked about designated groups for on-air positions. I think this afternoon, in your oral presentation, you spoke about Voice Print and an arrangement with them.
916 MR. MACKOWYZC: Yes.
917 COMMISSIONER PENNEFATHER: But you also spoke in this deficiency letter about Aboriginal Voices Network.
918 Have you begun discussions with them? Can you clarify or give us any more detail on that proposal?
919 MR. MACKOWYZC: We have not come to any arrangement with them. As you know from the programming grid, we have plans to do aboriginal programming in both English and French, and these discussions will continue. But we have spoken and you will hear from them in the intervention stage, the individuals who will be hosting the aboriginal show.
920 COMMISSIONER PENNEFATHER: On the Employment Equity area, you do refer to staffing and other areas of your business. Have you set equity hiring objectives to assist senior management in hiring from the designated groups?
921 MR. TAPP: That will be part of our undertaking, you know, in the coming months, but we certainly recognize the importance of this and we will reflect, you know, the communities that we serve adequately and appropriately.
922 COMMISSIONER PENNEFATHER: Will you have a Employment Equity Plan?
923 MR. TAPP: Yes, we will.
924 COMMISSIONER PENNEFATHER: In general, cultural diversity and your programming, can you tell us how in a specific way cultural diversity will influence your programming choices on the Canadian channels, on just the Canadian channels?
925 MR. MACKOWYCS: Yes. That will be anchored in the hiring of the talent with the 53 different shows between the English and the French, that is a vast canvass in terms of individuals that we could access.
926 And again, we are anchored in a firm belief, in the full expression, our job is to articulate and be the conduit for the full expression of our country.
927 MR. BITOVE: And Commissioner, I know you don't know me, but anyone who does, know that diversity is very important to be in anything I am associated with, whether it was an Olympic bid that celebrated the cultures and diversity of our country and the people who were involved in the message giver.
928 So, I certainly understand the point and from my perspective will ensure that we will be leaders in the industry in these questions.
929 COMMISSIONER PENNEFATHER: Thank you, Mr. Bitove. We look for as well some, as you know, with the intention with the opportunity to promote artists, which I believe is part of your proposal, that concrete plans in this regard, as you well know, are extremely important.
930 Those are my questions for the moment. Mr. Chairman, there are a couple of areas we might want to come back to, but I'll leave it to my colleagues to do that.
931 THE CHAIRPERSON: Thank you. I'll ask my colleagues if they have any follow-up to the areas that Commissioner Pennefather has just covered before moving on to Commissioner Wylie.
932 Commissioner Langford?
933 COMMISSIONER LANGFORD: Thank you very much, Mr. Chairman. Thank you, folks, I am going to designate you as "folks" because there are so many of you.
934 I would like to go to page 17 of your Opening Statement just to follow up on a little uncertainty I have on the question of lateral programs and Canadian southern and drift of programming in kind of less than a structured... in a less structured way and I would like to look at the bullets 2 and 3.
935 You talk about the four channels in bullet 1 and then, in bullet 2, you say the almost 2,000 hours a year of lateral programming. And then, you say finally, seven per cent of all new weekly song editions. What I am trying to figure out is whether 2 and 3 are the same thing or different?
936 MR. TAPP: They are indeed different items. The 2,000 hours a year or 36 hours a week are special programming and that special programming might be an hour long, a special called "Northern Exposure", for instance, this stuff that Bob was talking about earlier.
937 The seven per cent relates to the edition of new tracks, new titles that are Canadian and that get put into the rotation and so, they are two different things.
938 COMMISSIONER LANGFORD: And I see your American cousin shaking his head, so that's good. I was going to make sure he had the same understanding and let the record show that he appears to.
939 I want to then talk about, I have a problem when, you know, we start with four channels, I can figure that out, but any number much bigger than that I start to fade badly. Then, we have 2,000 hours and then, we have seven per cent.
940 Is there any way o put either the 2,000 hours into per cent or the seven per cent into hours so that I have an idea of what the cumulative number is here? Can that be done?
941 MR. BITOVE: We have committed to the other Commissioner to come back in a couple points. If we could maybe have some time on that one too.
942 COMMISSIONER LANGFORD: You can leave that one too. I think that would help because we are trying to get a sense here of how much Canadian is going south.
943 MR. BITOVE: Understood.
944 COMMISSIONER LANGFORD: And we know all our comedians have gone, but we would now like to find out how.
945 MR. BITOVE: Yes, but Marks wants to keep them all here, that's the whole point of it.
946 COMMISSIONER LANGFORD: Well, thank you for that. That was just my follow-up question, to get a sense of the whole package.
947 MR. TAPP: I guess my only comment on that, and we will agree to undertake to do that, is that obviously songs have different lengths and, you know, obviously, it's a little bit difficult in trying to figure out what that seven per cent represents because these are... these represent new songs, new editions to play less and, obviously, they are drained in different lengths.
948 COMMISSIONER LANGFORD: Well, if you want to, you know, put a little footnote that we have given every song a limit of two minutes or something. It doesn't have to be exact, but it is difficult.
949 I mean, for example, if you look at just the number 2 bullet, the 2,000 hours and then you have to ask yourself, would that be enough for a whole channel or half a channel. Do you know what I mean?
950 MR. TAPP: We see the point.
951 COMMISSIONER LANGFORD: How does that rate with four channels? Is that an eighth of a channel or does it figure in a bread-box, smaller than a Lincoln navigator?
952 MR. BITOVE: Probably, but I think I should...
953 COMMISSIONER LANGFORD: I shouldn't have said Lincoln navigator. That was a mistake.
954 MR. BITOVE: No, but I think it's a Cadillac escalator.
955 COMMISSIONER LANGFORD: I am not a Cadillac. Did I say Lincoln? Oh God! I'm sorry. Anyway, if you could give me something like that, I would be happy.
956 MR. BITOVE: We will.
957 COMMISSIONER LANGFORD: Thank you very much.
958 THE CHAIRPERSON: Commissioner Pennefather.
959 COMMISSIONER PENNEFATHER: Earlier I asked for a list of the channels. This would be an opportunity just when I ask for a description of each channel, to bring in this information at the same time.
960 MR. BITOVE: Good point.
961 THE CHAIRPERSON: And again, Mr. Bitove, not to give you much more work, but my follow-up question, based on what Mr. Mackowycs said was, how much in numbers 2 and 3 on page 16 is XM currently doing on which you are going to build the base that.
962 I know you gave three or four examples, Mr. Mackowycs, that were all currently running. So, I wonder whether you could quantify and cannot be unreasonable, go back a month or something and to know ask for...
963 MR. BITOVE: We will.
964 THE CHAIRPERSON: ... 18, say, 36 a week would be times four or something, you could tell us what that amount is. And similarly, how many of the songs currently running on XM going back over the last month would be Canadian under our general understanding.
965 MR. BITOVE: We will do that.
966 THE CHAIRPERSON: Thank you. Commissioner Williams, do you have a follow-up?
967 COMMISSIONER WILLIAMS: Yes, for Mr. Bitove. In your opening remarks you stated as a potential new entrance to the broadcasting system you believe the right partners are important and you are proud to benefit from the expertise of three respected Canadian broadcasters. What specific contributions do Corus, Rawlco and Golden West bring to CSR?
968 MR. BITOVE: Thank you. Each is unique, but I think I'll explain what caused the relationship.
969 Partners is not something I have sought in this venture unless they can bring out at value to make sure that this venture is that much better because I believe in this service and this business.
970 In the case of Corus, John Cassidy and I have talked over the last number of months about Corus providing some content in French and English because they are Canada's leading dual official language broadcaster as well as marketing potential in terms of a launch of the business because John also controls television and other outlets and some of them are right on our demographics in terms of who we want to get as early adapters of the product.
971 So, Corus is involved for those two reasons: programming and promotional launch.
972 In the case of Mr. Hildebrand and Mr. Rawlinson, I -- how can I put this best -- it's great to get out of Toronto and listen to views on how we should do this service and these are two very respected broadcasters who are not based in Toronto, who have launched channels particularly in small and urban markets, which is a very... sorry, small and rural markets, which is a very important part of our business plan and we have had a great relationship in terms of not only shaping some of, you now, the particulars of the issues, but more importantly, giving an understanding on the rural markets and the kind of things we should do.
973 In addition, they are going to also be providing promotional support when we are ready to launch this business.
974 COMMISSIONER WILLIAMS: So, these broadcasters are consultants?
975 MR. BITOVE: Well, they are providing services in the case of the launch of the business, as well as in Corus, this case particularly also providing some programming.
976 COMMISSIONER WILLIAMS: Programming. Thank you very much.
977 MR. BITOVE: Thank you.
978 THE CHAIRPERSON: Thank you. Commissioner Wylie.
979 COMMISSIONER WYLIE: Thank you, Mr. Chairman. It's interesting, Mr. Bitove, that you raised your relationship with an American partner as so an easy dating. Your view of dating is a bit like my dad in the fifties: neat and great and sit on the porch for the next three years and get to know each other.
980 MR. BITOVE: I guess I'm old fashioned, I don't know.
981 COMMISSIONER WYLIE: I think that regulatory courtship is a little bit more like this millennium or this decade's courtship. It's pretty brutal.
982 You put forward an application with your proposals, you go through a public process before us and then you'll get a seven-year licence or you don't. So, we have to look at your proposals as they are framed or as you're prepared to alter them.
983 MR. BITOVE: And I guess on top of that, Commissioner, I have to keep paying the bills during that courtship, so it's fun.
984 COMMISSIONER WYLIE: The filing for the French language portion of your proposal was in French, so my questions will be largely in French. I say "largely" since some of the material I may be referring to and your responses to deficiency questions were sometimes in English, although related to the French component.
985 You are, of course, welcomed to answer my questions even formulated in French, in English or ask me as you wish to reformulate my questions in English or even to go through a certain aspect of your proposal in the English language. Feel quite comfortable to do either.
986 Je vais commencer par discuter avec vous de votre Canal À propos et, ensuite, de votre Canal Lumière Nordique, tel que déposé.
987 Vous l'avez décrit dans la mise à jour or the update, à la page 23 comme étant un canal omnibus et la moitié de la programmation proviendrait de CKAC. Alors, vous auriez les nouvelles de CKAC aux heures de pointe et le reste de la programmation serait créé par CSR.
988 Est-ce que vous avez en ce moment, est-ce que les bulletins de nouvelles qui seront diffusés sur le Canal, est-ce qu'elles proviendront toutes de CKAC?
989 MR. BITOVE: I'll turn it over to André, madame Vice-Chair, but À propos is one of the more exciting things in our program line-up. It's on the boss news talk, so there is a... it's not a music channel. I just wanted to clarify that, but André can speak to the specifics of the program.
990 M. DiCESARE: Bonjour. Concernant les nouvelles, il y aura des nouvelles qui vont nous parvenir de chez Corus, mais il y aura aussi le show du matin, l'émission du matin sera pan-canadienne.
991 Donc, on va avoir des reporters à travers le Canada qui vont nous donner des nouvelles qui seront plus locales, si vous voulez, afin qu'on puisse comparer entre l'ouest et l'est et le centre, les francophones, ce qu'ils pensent de l'actualité.
992 Donc, il y aura beaucoup, pendant l'émission du matin et l'émission de fin d'après-midi, de nouvelles qui vont parvenir de nous, de CSR.
993 COMMISSAIRE WYLIE: Maintenant, où en êtes-vous avec vos négociations avec CKAC et est-ce que votre projet dépend du format actuel ou du format prévu de CKAC?
994 M. DiCESARE: Excusez-moi; j'ai mal compris la question. Si le format?
995 COMMISSAIRE WYLIE: Oui, puisqu'il y a une bonne partie de votre programmation qui est beaucoup plus que les nouvelles. Si je comprends bien, c'est plusieurs heures de programmation, selon la grille, proviendront de CKAC?
996 M. DiCESARE: Bon, il faut comprendre que ça va provenir de Corus puis, présentement, bon, on attend la décision de CKAC-Corus, mais dans le cas de... si CKAC existe chez Corus, il y a une partie de la programmation qui va être la programmation plus d'après-midi et de soir qui va venir de chez Corus, de CKAC.
997 COMMISSAIRE WYLIE: Alors, vos négociations avec CKAC nous assurent que ce sera la programmation que vous recevrez?
998 M. DICESARE : Les négociations avec Corus, monsieur Pierre Arcand, le vice-président de chez Corus au Québec, m'a assuré...
999 COMMISSAIRE WYLIE : Et sinon, de chez CKAC, ce serait d'une station de chez Corus.
1000 M. DICESARE : Oui. Sinon, il y a des trucs qui pourraient venir d'info, sinon de la nouvelle station pour parler de Corus.
1001 MR. BITOVE: Maybe Mr. Cassaday can answer, Madam Vice-Chair.
1002 MR. CASSADAY: The provision that we have made is that we will provide them with news talk or music from Quebec stations and it obviously depends on what we end up owning. But certainly CHMP, even in its current format, has the capability of providing the type of news talk programming that CSR is interested in having on their service.
1003 CONSEILLÈRE WYLIE : Parce que si je regarde la grille maintenant, il s'agit de plusieurs heures, qui proviendraient de CKAC plus des reprises pendant les week-ends. Il y aurait la programmation du matin...
1004 M. DICESARE : Non. La programmation du matin ne vient pas d'eux.
1005 CONSEILLÈRE WYLIE : Non, la programmation... Oui?
1006 M. DICESARE : C'est CSR qui produit le matin et les après-midi.
1007 CONSEILLÈRE WYLIE : Et vous auriez le...
1008 M. DICESARE : Il y a d'autres émissions qu'on va produire qui est une émission qui s'adresse plus aux jeunes, et qui est en fin d'après-midi, début de soirée. Il y a beaucoup plus de programmation qu'il puisse sembler. On peut passer à travers ensemble.
1009 Je pense que, sur la grille horaire que vous avez, la nuit va être faite par CKAC, mais à partir du matin, c'est CSR à partir de 5h30 qui va produire, jusqu'à midi trente, finalement. CKAC va embarquer du lundi au vendredi. CKAC va embarquer à partir d'une heure avec le Doc Mailloux, puis à partir de 4 heures jusqu'à 20 heures, c'est de la programmation faite par CSR.
1010 CONSEILLÈRE WYLIE : Et le soir?
1011 M. DICESARE : Donc dans les heures les plus importantes d'écoute, c'est CSR qui programme.
1012 CONSEILLÈRE WYLIE : Maintenant, en fin de semaine, il y aura aussi des émissions qui présenteront les meilleurs moments d'émissions qui ont été présentées pendant la semaine. Alors il s'agit, à ce moment-là, de reprises de la programmation, les samedis et les dimanches?
1013 M. DICESARE : Oui. Oui. Effectivement.
1014 CONSEILLÈRE WYLIE : Combien de programmations par semaine seraient des reprises?
1015 M. DICESARE : Les reprises viennent seulement que dans la fin de semaine. Si c'est en termes d'heures, je ne peux pas vous dire, mais je dirais au plus 20 heures, 20-25 heures entre les deux.
1016 CONSEILLÈRE WYLIE : De reprises.
1017 M. DICESARE : De reprises.
1018 CONSEILLÈRE WYLIE : Dans votre mise à jour, ce qu'on pourrait appeler un « update » en anglais, vous parlez, à la page 4, je crois, de programmations qui seraient effectuées à Montréal. Et à d'autres endroits, vous parlez de programmations qui auraient des studios. Par exemple, dans votre demande initiale, à la page 32, vous parlez de studios à Toronto.
1019 Est-ce qu'il y aura enfin un studio à Montréal dédié aux chaînes de langue française?
1020 M. BITOVE : Yes.
1021 CONSEILLÈRE WYLIE : Et c'est là que sera produite la programmation du Canal À propos.
1022 M. DICESARE : Oui.
1023 CONSEILLÈRE WYLIE : Vous parlez justement aussi dans la mise à jour, à la page 5, que votre programmation Phare, celle du matin, et qui sera créée par vous, aura des reportages des régions, des intervenants des provinces, d'interactions avec les auditeurs, des préoccupations du jour de régions, et qu'une région sera mise en valeur une à la fois.
1024 Comment allez-vous effectuer l'assemblage de cette programmation-là?
1025 M. DICESARE : À partir de Montréal, et la plupart des choses vont être faites en direct.
1026 Je dois dire que je vois le Canal À propos comme donnant la possibilité à tout le Canada d'avoir sa voix. Pour tous les francophones à travers le Canada, pouvoir avoir sa voix nationalement. Je pense que l'émission du matin va être un de ces grands exemples là, puis l'émission de fin d'après-midi.
1027 CONSEILLÈRE WYLIE : Vous allez avoir des gens qui vont faire la cueillette des nouvelles dans les régions et qui vont...
1028 M. DICESARE : Non, qui vont commenter. Comme le matin, il y a des gens qui, à travers le Canada, vont commenter les premières pages des journaux, qui vont parler d'actualités locales, et comment ça affecte, cette actualité-là, comment est-ce qu'elle peut affecter nationalement tout le monde.
1029 CONSEILLÈRE WYLIE : Mais comment allez-vous assembler ça? Ça va être par ligne ouverte avec ces gens-là? Ou est-ce qu'il y aura une certaine production et assemblage de cette programmation-là à Montréal?
1030 MR. TAPP: If I may, Madam Vice-Chair, we contemplate production coming out of Montreal, but it's... I think André was talking about how important it is to get the full expression of the French Canadian perspective across the entire country. And to that end, we contemplate in our plan having stringers and reporters reporting in from all of the regions across Canada and/or from various regions across Canada to provide perspective from a French Canadian perspective that will--
1031 CONSEILLÈRE WYLIE : Oui, mais je ne comprends pas très bien. How are these streamers? I mean if you're going to have regional input every day to the point of giving emphasis to one region one day, and another region another day, how will that work? Is it going to be by telephone lines, like an open line concept, or is this going to be...
1032 M. DICESARE : Ça va se faire --
1033 CONSEILLÈRE WYLIE : Ça va être acheminé à Montréal et mis ensemble?
1034 M. DICESARE : Ça va être acheminé à Montréal par téléphone. Ça va se faire « live » ailleurs. Directement « live ».
1035 CONSEILLÈRE WYLIE : Ah, bon. Ça va être plutôt comme lignes ouvertes.
1036 M. DICESARE : Ce n'est pas enregistré, ça. C'est des trucs qui sont fait « live ». Je m'excuse.
1037 CONSEILLÈRE WYLIE : Qui va être plutôt par lignes ouvertes.
1038 M. DICESARE : Pardon. J'aurais dû vous le dire dès le départ. Excusez-moi.
1039 CONSEILLÈRE WYLIE : Oui, oui. Alors ça va être lignes ouvertes.
1040 M. DICESARE : Oui, oui.
1041 CONSEILLÈRE WYLIE : Ça ne sera pas un assemblage qui va être fait avant la transmission.
1042 Maintenant, est-ce que vous allez avoir aussi des tribunes téléphoniques simplement où il y aurait des discussions par lignes téléphoniques comme on les connaît, des tribunes téléphoniques comme on les connaît?
1043 M. DICESARE : Oui, oui. Il va y en avoir des tribunes téléphoniques qui vont venir de tous les Canada, sur des sujets donnés. À tous les matins il y aura une discussion à l'intérieur de l'émission du matin.
1044 CONSEILLÈRE WYLIE : Et l'émission du soir, est-ce que ce sera des reprises ou ce sera une autre...
1045 M. DICESARE : Ça va être de la nouvelle programmation, sauf pour certaines choses très spécifiques, comme la lecture des premières pages des journaux, ce qui affecte l'Ouest par rapport à l'Est, politiquement ou socialement.
1046 CONSEILLÈRE WYLIE : Mais le soir, ce sera surtout sportif.
1047 M. DICESARE : Après, oui. Dans la soirée, oui.
1048 CONSEILLÈRE WYLIE : Alors vous n'aurez pas vraiment d'émission semblable à l'émission du matin pour la fin de l'après-midi.
1049 M. DICESARE : Non.
1050 CONSEILLÈRE WYLIE : Parce qu'après le Doc Mailloux -- ah oui, vous allez avoir...
1051 M. DICESARE : Non, non. Il y a une émission qui... Oui, oui, c'est ça.
1052 CONSEILLÈRE WYLIE : Oui, oui. Je comprends. Je comprends.
1053 M. DICESARE : En après-midi. Je m'excuse.
1054 CONSEILLÈRE WYLIE : Quelle proportion de reprises est-ce qu'il y aura dans cette émission-là?
1055 M. DICESARE : C'est ce que je viens de dire. Il y aura principalement les reprises sur les premières pages des journaux à travers le Canada puis l'incidence de certaines politiques ou de certains événements sociaux, comment ça influe tout le reste du Canada.
1056 CONSEILLÈRE WYLIE : Dans votre mise à jour, vous parlez aussi, à la page 5, d'auditeurs internationaux qui pourraient intervenir. Est-ce que vous aurez aussi des interventions genre lignes ouvertes, dans ce cas, internationaux?
1057 M. DICESARE : Il y aura moyen de communiquer avec des gens qui sont... Quand on parle « internationaux », on parle principalement --
1058 CONSEILLÈRE WYLIE : D'Américains.
1059 M. DICESARE : -- d'Américains, des francophones qui sont en Amérique, soit parce qu'ils passent six mois par année en Floride ou autre raison, qui vont participer quelquefois à nos discussions, en Floride ou ailleurs.
1060 CONSEILLÈRE WYLIE : Alors ce Canal À propos aura comme programmation qui n'est pas produite par vous le Doc Mailloux et aussi, pendant la nuit, le sport.
1061 M. DICESARE : Et à compter de 20 heures, une émission qui vient de...
1062 CONSEILLÈRE WYLIE : Et en fin de semaine, samedi et dimanche, il y a beaucoup de programmation qui provient de CKAC.
1063 M. DICESARE : Oui.
1064 CONSEILLÈRE WYLIE : Vous avez fait un décompte des heures dont il s'agit?
1065 M. DICESARE : En heures, c'est à compter de 20h30 jusqu'à 5 heures du matin dans la semaine, qui vient de CKAC, plus le Doc Mailloux pour trois heures.
1066 CONSEILLÈRE WYLIE : Pendant le...
1067 M. DICESARE : La semaine.
1068 CONSEILLÈRE WYLIE : Non, je veux dire en fin de semaine.
1069 M. DICESARE : Ah, en fin de semaine, c'est principalement les meilleurs moments de la semaine, donc à peu près 70 pour cent seraient... 60 ou 70 pour cent viendraient de Corus ou CKAC.
1070 CONSEILLÈRE WYLIE : Oui. Alors voilà à peu près ce que le Canal À propos aura l'air. Il y aura de la programmation créée par vous, incluant des intérêts des Franco-Ontariens, des Franco-Manitobains, des francophiles à travers le pays. Et votre autres chaîne sera Lumières Nordiques qui, elle, sera surtout musicale.
1071 Vous nous dites que les créations orales occuperont à peu près le quart de l'émission du matin.
1072 M. DICESARE : Oui. C'est-à-dire que l'émission du matin, ça va être une émission du matin avec un peu de nouvelles, un peu de correspondants à travers le Canada, pour alimenter une émission du matin.
1073 CONSEILLÈRE WYLIE : Est-ce qu'il s'agira de la même programmation qui sera offerte à la chaîne À propos?
1074 M. DICESARE : Non.
1075 CONSEILLÈRE WYLIE : Ce sera différent. Et comment cette programmation sera-t-elle assemblée?
1076 M. DICESARE : De la même façon. C'est-à-dire que le show du matin est « live », il est en ondes « live ».
1077 CONSEILLÈRE WYLIE : Le canal lui-même en entier, là, nous parlons en ce moment de l'émission du matin. La chaîne elle-même, elle aura quelle proportion de création orale?
1078 M. DICESARE : Dans l'ensemble?
1079 CONSEILLÈRE WYLIE : Oui.
1080 M. DICESARE : Moi, je pense que la création orale, ça va être à peu près 15 pour cent.
1081 CONSEILLÈRE WYLIE : Quinze pour cent de création orale.
1082 Où sera le reste des créations orales? Nous parlons ici qu'un quart de l'émission du matin
1083 M. DICESARE : Bien, il y a la poésie.
1084 CONSEILLÈRE WYLIE : Pardon?
1085 M. DICESARE : Il y a une émission de poésie. Il y a une émission de théâtre, puis le restant c'est de la musique, dans différents genres musicaux. D'ailleurs, ce qui est drôle c'est qu'hier, même le président de l'ADISQ nous disait à tous qu'il y avait un besoin de diversité de plus en plus à la radio. Je pense que notre canal musical va offrir cette diversité-là. Je peux dire, sur 1 700 chansons, l'année passée, qu'on a offert à la radio conventionnelle, il n'y en a que 80 qui ont pu se rendre à la radio.
1086 Donc, nous, c'est complètement l'inverse. C'est complètement la diversité. C'est complètement la musique qui date de deux ans au plus. La plus vieille musique sera de deux ans.
1087 CONSEILLÈRE WYLIE : Est-ce que cette musique-là sera... Je vois dans la grille que... Vous nous dites dans la mise à jour, à la page 17, qu'il y aura 20 genres musicaux. Quand je regarde la grille, ça semble être des blocs d'une heure.
1088 M. DICESARE : Oui.
1089 CONSEILLÈRE WYLIE : Est-ce que cette programmation-là sera introduite avec des créations orales, ou s'agira-t-il simplement de musique.
1090 M. DICESARE : Non. Il y a de l'animation.
1091 CONSEILLÈRE WYLIE : Et l'animation sera seulement au début ou à travers l'heure?
1092 M. DICESARE : À travers l'émission.
1093 CONSEILLÈRE WYLIE : Est-ce que c'est la formule que XM utilise aux Etats-Unis?
1094 Is that the formula that XM uses in the States?
1095 MR. BITOVE: Madame Chair, each Channel is programmed a little bit differently and it's up to the programmer what they want to do.
1096 COMMISSIONER WYLIE: How many are there where there is spoken word introduction or use during the music?
1097 MR. BITOVE: This is a hard question to answer because some programmers... it is very different from terrestrial radio. There isn't as much talk in the introduction of music. So you could go 20 minutes with, you know, five different songs played before they come back on and say a few words, you could go an hour with no talk. You could go where there is five minutes of talk before it is introduced. I think the point that... what we are trying to make with both Northern Lights and Lumière Nord is these channels will celebrate new Canadian music.
1098 Seventy per cent will be music that has come out in the last 18 months and that is where we get our energy, that is what we want to expose, that is part of our mission is to take these artists that aren't normally heard, as he said, of the 1,500 only 80 were new last year on Quebec terrestrial radio. So, our job is to get them out there and it's... I apologize from the perspective of you have to understand how the various channels are programmed to say it is not standard DJ introduction of music onto next song.
1099 One of the great things about satellite radio is, because it is subscription based, we can do different things, we can format it all different, we are not forced into a cookie cutter adaptation for the listener, so it is just all very different.
1100 MR. TAPP: And if I must just add one point, excuse me. What is important is that the artist's name and the title of the song will be displayed on the radio. So, if there isn't a DJ saying who this is in terms of an introduction or an extra, there is that information as part of the satellite radio. So, that is a very very important fact to lay on the table, that at least artist's name and title will be known.
1101 CONSEILLÈRE WYLIE : Est-ce qu'il y aura des nouvelles aussi, des créations orales genre nouvelles ou seulement d'introduction à la musique, sur la chaîne Lumières Nordiques?
1102 M. DICESARE : Les nouvelles, il va y avoir des nouvelles principalement le matin.
1103 CONSEILLÈRE WYLIE : Pas pendant les périodes de musique.
1104 M. DICESARE : Pas pendant les émissions.
1105 COMMISSIONER WYLIE: Mr. Bitove, my understanding is that in the United States the XM service would have -- I understand the idea about the new music, we have seen that throughout the application -- you would have an entire channel of hip-hop or an entire channel of electronica or an entire channel... According to the programming schedule that I look at it is a new just technology... it will be an hour per genre with some introduction as well and so on. Given when I look at the studies that you have done and the interest people have in satellite radio as opposed to any other form of radio, that it is continuous, that they know the channels or channel they like and that is what is appealing. How appealing do you think a channel with one hour of very definite type or genre of music changing from hour to hour will be to the listener? Given the surveys that you have conducted and the reason why people think satellite radio is a great idea.
1106 MR. BITOVE: Most of the research, and Stewart can chime in on any of this, but most of the research identified airplay gaps that listeners felt they were not getting enough of a certain form of music. It didn't mean that they had to get that on one station or one channel, it could be through multiple channels. So, it wasn't focused particularly on the channel as much as what kind of music would you like to hear more of. And so, you know, as Bob said, whether it is a fine tuning channel which is eclectic or something specific as liquid metal, you could get liquid metal on the eclectic channel or our Northern Lights channel or on the liquid metal channel. I think that in today's world where you are competing against iPods and downloading and everything else, it is just giving that variety to the listener which is what makes these kinds of services so popular.
1107 COMMISSIONER WYLIE: But when I look at your list of channels and what they address in the XM, what you file... not yours, but the XM, they are channels that are found by their genre or that genre unless you go to the eclectic channel, because that's what you happen to like. But isn't the great majority of the channels identifiable as a particular type of music one likes and may not be available on radio? We agree with that part that many of them are devoted to music that is not easily found on ordinary... over the radio in Canada. I am aware of all the calculations the ADISQ has done, etc. What I am addressing is the appeal of this service when it is going to change from hour to hour, if I--
1108 MR. BITOVE: I think one of the important things Steve said, and I have with me the XM to go which is the latest product they just brought out and it is a wearable walkman device... I know in my kids' case they are not looking for a particular channel as much as scrolling through and finding the artist and the song and then flipping to the channel. So, this is also again another concept that we don't particularly have right now, in that you can scroll through the various stations and you don't know whether you are on the Heart or XMU. If it is an artist and a song you want to hear or if it is a type of music that you want to hear, you are going to flip to the channel.
1109 So, it is a different technology with a different use than we have seen before. Maybe if I could just turn it over to Gary for a moment.
1110 COMMISSIONER WYLIE: You are aware of the specialty channels we have in Canada, we have a few jazz stations, for example. How different is it going to be from tuning into the jazz station because you like jazz? You mean, it is not going to be identifiable which channel is devoted to what music?
1111 MR. BITOVE: It is, but all... I was trying to make the point was that might not be the only reason you end up on that channel.
1112 COMMISSIONER WYLIE: And then of course one of the questions that the application raises with regard to the Canadian channels, and I am looking at Lumière Nordique in particular, is how appealing is it going to be when it changes from hour to hour?
1113 MR. BITOVE: All I can say, Madam Vice-Chair, is we are all different and we all have different tastes, and some are going to want to go to the opera channel and stay there, some are going to want to continue to change around.
1114 COMMISSIONER WYLIE: There will not be an opera channel, there will be a Lumière Nordique channel. I'm just trying to see whether this is workable and appealing as a French language component of--
1115 MR. BITOVE: Okay.
1116 COMMISSIONER WYLIE: --and whether you have thought of, you know, you do it yourself, you say you go to the opera channel... there won't be, there will be one channel.
1117 MR. BITOVE: Gary.
1118 MR. PARSONS: Madam Vice-Chair, let me address a little bit from the American experience. When we began programming these we certainly set out to establish these specialty channels, as you noted, because those were under-utilized or under-available and we found that aficionados of each of those styles would migrate to them. We also took the decades channels by a year or era, but it was very clear that there were very different styles within those years, and so when you are on that channel you will be getting everything from hip-hop to disco to country to smooth jazz, all that happened to be in that timeframe. We found that to be very appealing to listeners.
1119 And now, as we have migrated and matured a little bit more as a system, what we found during the last year is we have moved much more heavily to original programming, concerts and specials and very specialized programming. Even within one of these individual channels there will be a specialty program for an hour scheduled on a Tuesday afternoon with a particular artist or a particular artist interview or very small slices rockabilly, not many people are familiar with rockabilly, or skaw. In that genre we will find destination appointment listening. People who in fact seek out and know by cross promotion from these various channels that at 9:00 p.m. eastern time on Saturday there will be a special and in fact that is a unique block.
1120 But the listeners in fact seek out that particular genre because they know it is unique and it falls back to the quality of the programming to make it desirable and appealing, as John noted, with the new walkman device that actually has a recordability so that you can time shift. If you are not available at a time, you can set it up to in fact record that particular feature or that particular special that you are looking for and people seek that out. So we do in fact believe that this sort of omnibus programming people will find it quite appealing to schedule those particular times.
1121 COMMISSIONER WYLIE: But the francophone who is looking to have the links, whatever they are, the verbal link as well as the local content of the music in French, there will be nothing else. They won't be able to push the button and get something that will be brought to them in French on another channel, there won't be any other, there will be just that channel. I'm trying to see just how--
1122 MR. BITOVE: That is where the lateral programming comes in, because on Lumière Nord we can say you can, you know, tune into our classics channel and we have a great Quebecer or French Canadian performance that is coming on in a half hour. I mean, this where it is a little bit different because not only are we the technology and not only are we the programming, we are all the programming. So, cross-promotion amongst the channels is one of the strengths of what we bring.
1123 M. DICESARE : Un exemple frappant, ça a été le concert de Wilfred LeBoutillier, qui a passé sur des émissions américaines. Ça n'existe pas encore au Canada, puis c'est déjà là.
1124 Je pense que c'est une opportunité pour essayer de présenter des grands talents. Il ne faut pas être gênés puis il ne faut pas avoir peur au Québec, parce que le talent existe. On a des tonnes d'exemples, que ce soit Céline Dion. Le grand exemple de tous, c'est le Cirque du Soleil. Mais il y a Benoît Charest aussi, qui a composé de la musique pour un film qui s'est rendu aux Oscars.
1125 Je pense qu'on a assez de talents pour pouvoir les amener sur les stations dites américaines, avec les efforts qu'on va faire pour les amener et les faire connaître par ces gens-là, aux Etats-Unis, le canal privilégié qu'on a, de leur parler, qu'on va avoir à leur parler à tous les jours va nous permettre de leur présenter des beaux produits qu'ils peuvent faire beaucoup.
1126 Il y a aussi une station qui s'appelle World Zone, qui programme du français aux Etats-Unis.
1127 CONSEILLÈRE WYLIE : Parlons de contenu canadien. Dans vos réponses aux lacunes, je regarde la deuxième. À la page 18, on parle de 100 pour cent de contenu, c'est en anglais, et je cite :
"In each broadcast week, 100 per cent of programs broadcast on the Northern Lights and Lumières Nordiques channels shall be Canadian." (Tel que lu)
1128 Dans la mise à jour, à la page 19, nous parlons de 80 pour cent de contenu canadien dans Lumières Nordiques. Quel est votre engagement à cet effet-là? Est-ce que c'est 80 pour cent de contenu canadien ou 100 pour cent?
1129 M. DICESARE : C'est 80 pour cent. Principalement pour donner la possibilité de pouvoir jouer à quelques reprises des chansons françaises qui viennent d'ailleurs, qui ne sont pas canadiennes, et aussi la possibilité de quelquefois comparer des produits anglophones par rapport à... Supposons, sur une émission de Blues, il y a quelqu'un qui est en entrevue et qui dit : « Ça a été quoi mon influence », bien, on va pouvoir jouer ça, plus donner le matériel de cet artiste-là en ondes.
1130 Donc ça nous donne une marge de manouvre pour rendre notre programmation d'autant plus intéressante pour garder notre auditoire.
1131 CONSEILLÈRE WYLIE : Alors le 80 pour cent, ça s'appliquerait à toute la programmation musicale, pas seulement à certains genre de programmation.
1132 M. DICESARE : Non, dans l'ensemble.
1133 CONSEILLÈRE WYLIE : Dans l'ensemble. Est-ce que ça s'appliquerait au cours de la semaine, ou aussi samedi et dimanche. Ce serait 80 pour cent de la musique pour la semaine entière, incluant le week-end.
1134 M. DICESARE : Il faut comprendre que les émissions reviennent en reprise quelquefois en week-end. Donc c'est sur la grille horaire, en général.
1135 CONSEILLÈRE WYLIE : Est-ce que vous seriez prêt à accepter une condition de licence à vous en tenir à un engagement de 80 pour cent de contenu canadien?
1136 M. BITOVE : Oui.
1137 CONSEILLÈRE WYLIE : Maintenant, la musique de langue française, dans la mise à jour, à la page --
1138 THE CHAIRPERSON: I think we will break now for 15 minutes. Nous reprendrons dans 15 minutes.
--- Upon recessing at 1530 / Suspension à 1530
--- Upon resuming at 1545 / Reprise à 1545
1139 THE CHAIRPERSON: Order please. À l'ordre, s'il vous plait. We will proceed now. I guess Commissioner Wylie was in the midst of questioning, so I will ask her to please continue.
1140 COMMISSIONER WYLIE: Thank you Mr. Chairman.
1141 Parlons maintenant de la musique de langue française. À la page 16 de votre mise à jour, vous parlez de 65 pour cent de contenu vocal francophone sur Lumière Nordique et vous nous demandez dans votre demande initiale, à la partie 7.7, vous nous indiquez que vous voulez être régis sous le format spécialisé de radio. D'accord?
1142 M. DICESARE: Oui.
1143 CONSEILLÈRE WYLIE: Donc, ça voudrait dire que selon nos définitions à nous qu'il y aurait moins de 70 pour cent de la musique qui proviendrait de la catégorie 2.
1144 M. DICESARE: Oui.
1145 CONSEILLÈRE WYLIE: Dans la lettre de lacunes du 5 novembre 2003 à la question 16, vous nous parlez aussi de... you undertake by condition of license to operate within the specialty format. À ce moment-là, est-ce que ce 65 pour cent là s'appliquerait...
1146 MR. BITOVE: Madam Vice-Chair, can I please ask where you are... specific reference so I can follow?
1147 COMMISSIONER WYLIE: Yes, in your update at page 16, you talk about 65 percent of vocal music will be in French and you also, in your application at Part 7.7, ask to be... you say you are going to operate that channel along the lines of a specialty format radio which, for us, means less than 70 percent of category two music, which is popular music.
1148 MR. DICESARE: We were talking about category three, not category two I think.
1149 COMMISSIONER WYLIE: Well, there is specialty format... one of the criteria that make you a specialty format is to have less than 70 percent category two music.
1150 M. BITOVE: Oui, je comprends.
1151 COMMISSIONER WYLIE: The reason why I am asking this question is because I want to see what your 65 percent vocal music that will be francophone, will it apply only to category two or to all your music?
1152 M. DICESARE: À toute la musique.
1153 CONSEILLÈRE WYLIE: À toute la musique.
1154 M. DICESARE: À toute la musique. Et on va excéder ce pourcentage-là, c'est sûr.
1155 CONSEILLÈRE WYLIE: Et ce sera toute la musique pendant la semaine et le samedi et dimanche aussi?
1156 M. DICESARE: Oui. Complètement.
1157 CONSEILLÈRE WYLIE: Quand c'est vocal, ce sera au moins 65 pour cent.
1158 M. DICESARE: Minimum 65.
1159 CONSEILLÈRE WYLIE: Francophone. Et cet engagement-là, comme le font ceux qui sont régis sous la formule spécialisée... you are ready to accept this, Mr. Bitove, as a condition of licence? What we are discussing, 65 percent of the music that is vocal will be in French.
1160 M. BITOVE: Oui.
1161 CONSEILLÈRE WYLIE: On vous a demandé de remplir la partie 7.7 de la demande et ça n'a pas été fait. Est-ce que vous seriez prêts à nous donner ça en document?
1162 Il s'agit de nous dire quels genres de musique. Le total. Est-ce que vous avez avec vous le formulaire de demande?
1163 M. DICESARE: Non, je ne l'ai pas avec moi mais...
1164 CONSEILLÈRE WYLIE: Alors, à 7.7... when you were asked when there is less than 70 percent music broadcast from category two, popular music, you were asked to give us subcategories and you were asked to fill this, yes?
1165 MR. BITOVE: I am just trying to make sure I can find the document, Madam Vice-Chair.
1166 COMMISSIONER WYLIE: Okay. It is 7.7 of the application, and normally we ask that that be filled, what the percentage of that music will be.
1167 MR. BITOVE: We have a lot of lawyers, but we are trying to find the documents.
1168 CONSEILLÈRE WYLIE: Okay.
1169 Monsieur DiCesare, ça vous est familier?
1170 M. DICESARE: Oui. Je ne suis pas familier avec le document, mais on va le remplir sans problème.
1171 CONSEILLÈRE WYLIE: O.K. On vous a demandé dans la lettre de lacunes de le faire, mais ça n'a pas été fait. Alors normalement....
1172 M. DICESARE: On s'excuse, on va le faire tout de suite.
1173 CONSEILLÈRE WYLIE: Alors, vous allez nous déposer...
1175 MR. BITOVE: Madam Vice-Chair, I think the answer to that question is yes as well, if I could find the document and maybe later if it is incorrect I will try and let you know and correct the record, but I believe from the nods I am getting that everything is okay.
1176 COMMISSION WYLIE: Yes, there is not much magic to it.
1177 MR. BITOVE: Okay.
1178 COMMISSIONER WYLIE: It is just a portion of the application that has not been filled, since you are saying that you will abide by the specialty format and 65 percent. If you just look at the formula and lawyers can determine with you when we want this, it is just filling in the rest of that form. So then, that will be all the music that is vocal.
1179 Nous parlons beaucoup dans votre demande, et en anglais et en français, de créer une vitrine pour la nouvelle musique. Et dans votre mise à jour à la page 23, vous parlez de 70 pour cent d'oeuvres musicales datant d'au plus 18 mois, et 75 pour cent d'oeuvres lancées au cours des derniers 6 mois.
1180 This is for you a definition of nouvelle musique, I guess?
1181 M. DICESARE: Oui. C'est-à-dire que ce qu'on essaie de dire, c'est que la musique qui a été enregistrée présentement, c'est celle-là qu'on veut diffuser le plus.
1182 Ce qui arrive, c'est que la radio traditionnelle présentement a surtout des formats qui sont gold qui s'adressent aux baby boomers ou des formats tellement serrés que, comme disait l'ADISQ hier, ils ne peuvent pas amener des nouveaux joueurs, des nouveaux artistes à la radio.
1183 Nous, on veut essayer par deux moyens la diversité de notre format plus la musique récente, faire connaître des nouveaux artistes le plus possible.
1184 CONSEILLÈRE WYLIE: Justement dans votre mise à jour à la page 2, vous dites, et je cite:
« CSR s'est donnée pour mission d'être la voix de la musique méconnue au Canada. »
1185 Dans la grille, je vois de 2h00 à 3h00 de l'après-midi un créneau qui s'appelle « Nouvelle musique ».
1186 Est-ce que ce 70 pour cent...
1187 M. DICESARE: Je m'excuse. Nouvelle musique, c'est la traduction de new age qui est un format musical différent, ce n'est pas de la nouvelle musique en tant que telle, mais c'est du new age.
1188 André Gagnon est considéré du new age au Japon. Pour vous dire.
1189 CONSEILLÈRE WYLIE: Ce que vous nous dites à la page 23, justement, de la mise à jour, 70 pour cent des oeuvres musicales dateront d'au plus de 18 mois et 75 pour cent seront des oeuvres musicales lancées au cours des derniers 6 mois, s'applique à tous les créneaux.
1190 M. DICESARE: Exactement. Oui.
1191 M. BITOVE: Oui.
1192 CONSEILLÈRE WYLIE: Même si vous avez le créneau classique qui a de la nouvelle musique là aussi.
1193 M. DICESARE: Oui. Je connais deux distributeurs de musique classique qui originent de Montréal qui ont beaucoup de nouvelle musique à nous faire jouer.
1194 CONSEILLÈRE WYLIE: Cet engagement-là qui est très précis, est-ce que vous vous attendiez qu'on vous l'impose comme condition de licence?
1195 MR. BITOVE: Whether you imposed it on us or not, we intended on living by it. And I think, you know what, Madam Vice-Chair... and I should have brought this up earlier, one of the most popular channels on XM is a channel called Unsigned, which basically any developing artist anywhere in the world can send in a CD or a tape and it gets played. And part of the reason why you tune into it is it is an eclectic mix of new music that you don't get on radio.
1196 COMMISSIONER WYLIE: It is not going to be on the laugh channel?
1197 MR. BITOVE: No, no. Steve gets to do that.
1198 MR. TAPP: Well, maybe some of it.
1199 CONSEILLÈRE WYLIE: Maintenant, parlons des développements de talents canadiens pour la section francophone.
1200 Il s'agit de 515 000 $ la première année et de 9,2 millions sur sept ans, c'est correct?
1201 M. DICESARE: Oui.
1202 CONSEILLÈRE WYLIE: Vous avez entendu madame Pennefather discuter ce matin d'autres formules possibles pour calculer, justement, le développement des talents canadiens.
1203 Est-ce que vous avez des commentaires à faire au sujet de ces sommes-là en ce qui concerne la partie francophone?
1204 Disons que si vous nous revenez avec des propositions différentes pour le canal anglophone, peut-être que vous pouvez aussi nous en apporter pour le canal francophone.
1205 Mr. Bitove, if you think there are better ways after the discussion with Commissioner Pennefather to calculate the contribution to Canadian talent development, you will speak as well to the French?
1206 MR. BITOVE: We are going to undertake to come back with something that might be a little bit simpler and also recognized in the early years. Because part of what makes us is developing those new artists, we don't want those CTV dollars to not be there in the early years, so we are going to come back with something that hopefully is a little bit more appropriate.
1207 CONSEILLÈRE WYLIE: J'ai quelques questions à vous poser, justement, sur les propositions que vous nous faites, surtout au niveau de quatre endroits ou de quatre propositions.
1208 La première, c'est les concerts de nouvelle musique dont vous parlez à la mise à jour à la page 2. Vous nous parlez de séries de concerts et vous avez eu des discussions avec le Club Soda à Montréal.
1209 Où en êtes-vous avec ces discussions-là?
1210 M. DICESARE: Avec le Club soda?
1211 CONSEILLÈRE WYLIE: Hum, hum.
1212 M. DICESARE: On est avancé, ils sont d'accord, on va travailler en collaboration à partir du Club Soda pour faire des concerts.
1213 Mais aussi nos plans, on insiste aussi pour faire venir des artistes de l'extérieur d Québec, on a insisté pour faire venir des artistes de l'extérieur aussi du Québec pour venir faire des concerts qui vont être diffusés sur XFM. Pas seulement des artistes francophones du Québec, mais des artistes francophones à travers le Canada.
1214 CONSEILLÈRE WYLIE: Cette somme-là serait utilisée en partie justement pour ces dépenses-là pour faire venir...
1215 M. DICESARE: Oui, pour les coûts de production de faire venir ces gens-là.
1216 CONSEILLÈRE WYLIE: Des artistes, par exemple, du Nouveau-Brunswick ou du Manitoba.
1217 M. DICESARE: Oui, c'est ça. Les dépenses que ça occasionne.
1218 CONSEILLÈRE WYLIE: Maintenant, à la rubrique « Théâtre et création orale ».
1219 M. DICESARE: Oui.
1220 CONSEILLÈRE WYLIE: Vous nous parlez, par exemple, de capter et de diffuser des événements comme le Festival international de la poésie de Trois-Rivières, et caetera.
1221 Est-ce que vous avez eu des discussions avec ces entreprises?
1222 M. DICESARE: Oui, principalement avec le Festival de la poésie de Trois-Rivières, on a déjà amorcé des discussions, ils sont d'accord à participer puis à commenter aussi la poésie et tout ça.
1223 CONSEILLÈRE WYLIE: Avez-vous seulement la poésie ou est-ce qu'il s'agira aussi, dans certains cas, de théâtre?
1224 M. DICESARE: Principalement la poésie pour l'instant.
1225 CONSEILLÈRE WYLIE: Pour avoir des courtes émissions.
1226 M. DICESARE: Oui. À cause du temps qu'on va avoir puis les sommes d'argent, on est principalement dans la poésie.
1227 CONSEILLÈRE WYLIE: Maintenant, ça, ça serait des émissions qui seraient plutôt sur le canal À-propos.
1228 M. DICESARE: Non, ce serait sur le canal Lumière Nordique.
1229 CONSEILLÈRE WYLIE: Lumière Nordique. Donc, ce ne serait jamais très long.
1230 M. DICESARE: C'est ça la partie que je vous disais parlée, entre autres.
1231 CONSEILLÈRE WYLIE: Il ne s'agirait pas, à ce moment-là, par exemple, d'une pièce de théâtre entière.
1232 M. DICESARE: Non. Non.
1233 CONSEILLÈRE WYLIE: Ce serait plutôt des...
1234 M. DICESARE: Des extraits, des discussions.
1235 CONSEILLÈRE WYLIE: Des liens.
1236 M. DICESARE: Oui, c'est ça, pour faire connaître la pièce de théâtre, en diffuser une partie puis amener les gens à aller la voir plus qu'à l'écouter à la radio. C'est d'en faire la promotion.
1237 CONSEILLÈRE WYLIE: D'accord. Outre cet organisme-là qui est le Festival international de la poésie de Trois-Rivières, est-ce que vous avez eu des discussions avec d'autres organismes pour vous assurer que vous pouvez mettre en marche cette proposition?
1238 M. DICESARE: Pas présentement.
1239 CONSEILLÈRE WYLIE: Pas encore.
1240 M. DICESARE: Pas présentement. Il y a un festival de théâtre pour...
1241 CONSEILLÈRE WYLIE: Avez-vous des espoirs?
1242 M. DICESARE: Oui. Il y a un festival de théâtre pour enfants avec qui on veut discuter qui nous paraît très intéressant.
1243 CONSEILLÈRE WYLIE: Maintenant, est-ce que ce sera fréquent? Combien de fois par année ou par semaine ou par mois ou est-ce que ce sera fréquent ces reproductions-là?
1244 J'essaie de voir comment et à quoi vous allez dépenser cette somme-là.
1245 M. DICESARE: Pourriez-vous répéter la question, s'il vous plaît?
1246 CONSEILLÈRE WYLIE: Est-ce que ça va être assez souvent, dans un créneau spécial ou quand ce sera possible ou...
1247 M. DICESARE: Dans le théâtre vous parlez?
1248 CONSEILLÈRE WYLIE: Hum, hum.
1249 M. DICESARE: Non, non, ça va être régulier, ça va être...
1250 CONSEILLÈRE WYLIE: Ça va être régulier.
1251 M. DICESARE: Oui, oui, oui, très régulier.
1252 CONSEILLÈRE WYLIE: Combien de fois?
1253 M. DICESARE: Une fois par semaine.
1254 CONSEILLÈRE WYLIE: Une fois par semaine régulièrement.
1255 M. DICESARE: Oui.
1256 CONSEILLÈRE WYLIE: Maintenant, une autre partie de vos contributions aux talents canadiens, il s'agit de l'encodage d'un CD.
1257 Qui est-ce qui sera éligible à recevoir ces sommes-là?
1258 M. DICESARE: Premiers arrivés, premiers servis. C'est-à-dire qu'avec ces sommes d'argent là, on peut en faire vraiment beaucoup. Je suis déjà en discussion avec des gens pour ça avec, entre autres, Archambaultzic qui font de ça.
1259 Donc, 20 000 $, ça va contribuer pour beaucoup, mais c'est premiers arrivés, premiers servis.
1260 CONSEILLÈRE WYLIE: Alors, ce sera simplement d'encoder une production quelconque que quelqu'un vous apporte.
1261 M. DICESARE: Oui, d'encoder la production pour qu'elle puisse légalement se faire...
1262 CONSEILLÈRE WYLIE: En CD.
1263 M. DICESARE: ... distribuer par l'Internet, sur l'Internet.
1264 CONSEILLÈRE WYLIE: Maintenant, vous allouez un montant annuel de 50 000 $ pour une initiative que vous appelez « Vitrine aux États-Unis » qui vise à créer une vitrine pour les artistes francophones au XFM Performance Studio de Washington. Monsieur Bouthillier, oui.
1265 M. DICESARE: C'est l'exemple frappant.
1266 CONSEILLÈRE WYLIE: Oui. Donnez-m'en d'autres.
1267 M. DICESARE: Donc, c'est dans le même genre.
1268 CONSEILLÈRE WYLIE: Comment ça va fonctionner, ça, et qui est-ce qui va être éligible, comment vous allez choisir les artistes?
1269 Parce que si vous voulez une licence de sept ans puis que TVA abandonne Star Académie, il faut que vous ayez autre chose.
1270 M. DICESARE: Non, non.
1271 COMMISSIONER WYLIE: We are going back to your dating. Slow and easy doesn't work. We have got to know what is happening.
1272 MR. BITOVE: Okay.
1273 M. DICESARE: Non, mais dans la même veine qu'on fait pour l'ensemble de la programmation puis l'ensemble de nos choses, c'est qu'on va viser principalement des jeunes artistes, des nouveaux artistes pour leur donner une chance d'émerger sur d'autres territoires.
1274 CONSEILLÈRE WYLIE: Est-ce que vous avez d'autres commentaires à nous donner à propos de vos projets ou vos initiatives de contenu canadien?
1275 M. DICESARE: Je pense que la chose la plus importante, c'est le 6,3 millions à MusiqueAction qui, je considère, est un besoin pour l'industrie du disque au Québec pour y travailler.
1276 COMMISSIONER WYLIE: I would like now to try to get a better fix on this plan of having a francophone component to this project and just how appealing it will be.
1277 Let me start by saying, I don't know if you are aware, but the latest numbers we see is francophones in Canada listen to radio in French 91 per cent of the time; in Montreal, 86 per cent of time, although only 63 per cent of radio station broadcast in French, despite all this choice; and in Ottawa-Gatineau, the francophones listen to radio in French 70 per cent of the time--these are the latest numbers we have--despite the availability of many stations in English. Interestingly, that has been growing in Montreal, and in Ottawa slightly.
1278 I see that you are going to serve Montreal and Quebec City, for example, whether or not this is what's going to happen eventually. In part of your application, 27 rebroadcasters around Montreal are projected--I know that there may be fewer, but that is in the application as a possibility--and in Quebec City, 14. So one would expect that you are trying to reach those populations. And Montreal is francophone to 67.3 per cent.
1279 So it raises the question of just how this can be considered by us a proper francophone component or segment of your proposal. I'm wondering whether your market research, for example, what it has told you about what have you--I see you have filed a deficiency response on November 5th, 2003, some results from the surveys. Have you attempted to see what appeal this service would have to francophones, as proposed?
1280 MR. BITOVE: Yes. The percentage of tuning to satellite radio in Quebec, relative to AM and FM, will be relatively small at 78 per cent.
1281 COMMISSIONE WYLIE: How many subscribers, francophone subscribers, are you expecting?
1282 MR. BITOVE: Well, in total, we expect 6 per cent of Canadian households by the end of the term to be subscribers, but we expect the number be to smaller in Quebec.
1283 COMMISSIONER WYLIE: And do you have any particular numbers that are more precise? Was this based on the knowledge that there would be two channels in French?
1284 MR. LYONS: Sorry, Madam Vice-Chair, we actually did specifically ask Quebeckers and francophones across the country if they were interested in this service. Actually, our results for Canada, as a whole, were about 49-and-a-half per cent, but in Quebec it was actually 56 per cent, which was seven points above the national average interested in satellite radio.
1285 COMMISSIONER WYLIE: But what I mean, was this based on the actual proposal you are putting forward or simply asking satellite radio? Did they know that there would be two--
1286 MR. BIVOTE: In fairness, this was two-and-a-half years ago, before we formalized our application. It was more satellite radio and more--the questions were along more choices of music: what formats would you like to hear? It would not be tailored to the specific application we have before you today.
1287 MR. LYONS: Also, Ma'am, one other point. In terms of the actual subscriber numbers, it does take into account both services. When we converted the market research into the actual subscriber growth model, that did account for two services. So we did at the time, prior to another application being filed. But we did look it as being two services.
1288 And in the context of what percentage of those listeners would actually listen to exclusively satellite radio, as opposed to the local radio, that number, actually, was quite small. We asked that question, as well, and only 18 per cent of respondents--78 per cent of respondents said they would continue to listen to both satellite radio and conventional radio, but only 18 per cent said just satellite radio.
1289 So when you extrapolate that across the entire country and look at the Quebec component, or even the francophone component of that, it's quite small.
1290 MR. BIVOTE: And I think three other points on the francophone component, Madam Vice-Chair. One is we are a service beyond Quebec and to the rest of francophone Canada. In some cases, that's where channels like Lumière Nord have an even greater impact, because the diversity of programming within these formats gives these people some choices that they don't currently have in their rural markets.
1291 Secondly, if there is no satellite radio service offered through us in Quebec, we have drive-tested a good chunk of the province and the service is almost flawless through most of Quebec. I'm speaking to the gray market.
1292 COMMISSIONER WYLIE: You are talking technically?
1293 MR. BITOVE: Yes, I'm speaking to the gray market. So I'm saying that the service exists there in one form or another.
1294 You know, Quebeckers have access to hundreds of unregulated English-language audio services over the Internet and various other forms right now, so we would merely be just one more service, although in this case they have to elect to subscribe and pay the service to get it.
1295 COMMISSIONER WYLIE: Yes.
1296 MR. BITOVE: Pay the fee, sorry.
1297 COMMISSIONER WYLIE: And the numbers that I have give you, of course, are about over-the-air stations, but nevertheless they certainly indicate a preference for listening in English.
1298 Monsieur DiCesare sourcille.
1299 Vous n'êtes pas d'accord? Ce sont les chiffres que nous avons.
1300 M. DICESARE: Ce que je pense, c'est que vos chiffres parlent pour nous parce que quand un francophone va écouter CSR, il va aller voir au poste français en premier.
1301 CONSEILLÈRE WYLIE: Oui, mais nous avons parlé plus tôt du fait qu'il y a des créneaux, là, d'une heure seulement. Alors, si on écoute du jazz pendant une heure puis il y a autre chose après, on va aller au canal jazz qui est totalement XFM, on n'écoutera pas le canal canadien puisqu'on est obligé de changer.
1302 Maintenant, expliquez-moi, monsieur Bitove. You have said that there is some spoken-word content on channels. Is there spoken-word content on all the channels no matter what the music, instrumental or otherwise?
1303 MR. BITOVE: I do not believe so.
1305 MR. PARSONS: There are certainly announcers on virtually every channel. Even a classical music channel, which may be totally instrumental, there will be an announcer that announces. It may be with very long passages and very long movements, it may be one interruption per hour, but, yes, there will be some spoken word.
1306 COMMISSIONER WYLIE: Are you familiar with CBC Radio 2 or, en français, la chaîne culturelle. Je sais qu'elle a changé maintenant son espace musique, mais est-ce que c'est ce genre de proportion vocale qui aurait des explications ou simplement nous allons maintenant jouer telle et telle pièce?
1307 M. DICESARE: Il y aura des émissions qu'il y aura plus de vocal, c'est-à-dire plus de présentations pour faire connaître des artistes parce que le but de CSR, c'est de les faire connaître. Donc, ce n'est pas seulement par la musique, mais aussi par ce qu'ils font puis ils vont...
1308 CONSEILLÈRE WYLIE: Oui, mais le but de CSR, finalement, c'est de vendre des abonnements.
1309 M. DICESARE: Oui.
1310 CONSEILLÈRE WYLIE: C'est ça.
1311 M. DICESARE: Non, mais le but de la radio, c'est d'être écoutée et on va leur parler aussi de temps en temps.
1312 COMMISSIONER WYLIE: In the XM channels, for example a jazz channel, how much vocal content or spoken-word content would there be on the XM jazz channel?
1313 MR. BITOVE: In fairness, I would like to get back to you on that because I do not believe it's that high. I listen to the jazz channel from time to time.
1314 COMMISSIONER WYLIE: Yes, because I was a bit surprised to hear that there was vocal content on all the channels.
1315 MR. BITOVE: How about when we produce a schedule for Commissioner Pennefather we try and approximate spoken-word content?
1316 COMMISSIONER WYLIE: We are abviously trying to look at this French component--in this country it's going to be a national service--and see just whether it's just an expense of doing business or a viable proposition for francophones.
1317 MR. BITOVE: And remember the other great thing, if we were ever licensed, is that francophone Canadians who are living or working or vacationing in the U.S. will also have the service, as well.
1318 COMMISSIONER WYLIE: They shouldn't be there anyway!
--- Laughter / Rires
1319 COMMISSIONER WILLIAMS: While she's tuning that in, are these pieces of equipment compatible with other service providers?
1320 MS CLARK: This has an AM-FM component, and when you flip it over it actually has a CD component to it, as well. So it's a multi-service unit.
1321 COMMISSIONER WILLIAMS: Oh, good.
1322 MS CLARK: The others, some of them, are specifically risk-adverse with satellite service. But, as I say, it's not limited to one model, there are a multitude of choices. Most of these can either adapt to a home adaptor unit or to your car or to the portable, but in-place scenarios.
1323 MR. PARSONS: Excuse me, in the automobiles--and I'm sure our automobile manufacturer partners would say--all of those radios are AM-FM-XM, so they are a combination. Seamlessly, just pressing between the band button or the satellite button, you move from AM or FM over to XM and back.
1324 MS CLARK: One of the functionalities that's addictive about satellite radio receivers is that they actually have a digital display. And to John's point previously, you can actually be listening to a song and you can be scrolling the other assortment on the other music stations and you can select where you want to go next without interrupting what you are currently listening to. So if you find a song that you like better, off you go, you enter the channel number and send yourself onto the next station.
1325 COMMISSIONER WILLIAMS: The receivers that are put into the higher end cars--perhaps this is a GM question--they are obviously designed by the manufacturer and they fit in, they are not so much just an add-on receive. Could you describe them a bit?
1326 MR. GRIMALDI: Sure.
1327 Commissioner, in terms of the hardware that we have today, the supplier is Delphi. They have worked both with us, as well as with XM, to make sure that the technology was integrated with our vehicle systems, the electrical systems in the vehicle, as well as an adaptable, as just explained.
1328 At this point in time, we have worked closely to make sure that this entertainment system could fit into both existing vehicles, as well as new vehicles.
1329 COMMISSIONER WILLIAMS: For both OEM-installed receivers for your proposed service and receivers purchased at retail outlets, how much would prospective subscribers pay for receivers in each case?
1330 MR. BITOVE: Go ahead, Melissa.
1331 MS CLARK: In the case of after-market retail units, they range, currently--I will quote you in U.S. figures--$99 for a receiver unit and a car adaptor kit, to approximately $350 U.S. for the iPod-variety unit that I think is up on the desk. And there are combinations, as I have mentioned, in terms of the number of associated accessory products you would have.
1332 But they are reasonable, they are affordable. The basic units are well under what a typical CD Walkman would cost.
1333 COMMISSIONER WILLIAMS: Would the sale of these receivers be subsidized in any manner?
1334 MR. BITOVE: Yes. We think that is one of the most important aspects of this business plan. To get a technology like this adapted in a big way requires subsidies and marketing support and training and a big part of our early years is assisting in getting these receivers into as many hands as possible.
1335 Quite frankly, today, I think introducing any product without some kind of global platform and lots of dollars being thrown at it to subsidize it and bring the costs down to get it into the end-users hands is flawed.
1336 COMMISSIONER WILLIAMS: So how much would the subsidy be and how do you fund it?
1337 MR. BITOVE: Well, it depends on the outlet for us. It's as low as $5--it happens in two forms. In some cases, like with the automobile manufacturers, it could be a percentage of the sale, the subscription fee. In other cases, it could be a per-unit cost, with a particular retailer, whether you want to call that buying shelf space or just subsidizing to keep the cost down.
1338 COMMISSIONER WILLIAMS: Who would pay the subsidy?
1339 MR. BITOVE: We do.
1340 COMMISSIONER WILLIAMS: Do you expect the price of receivers will decline over time?
1341 MR. BITOVE: Yes. I'm happy to hand this off to General Motors, as well, but I think they have seen significant improvements in the costs of the receivers in the cars and it could be down to less than $50.
1342 My personal feeling is it's going to be like a CD in a car today. You are going to have AM, FM and CD and you are going to have AM, FM and satellite and CD because the cost is coming down so drastically.
1343 MR. PARSONS: John, let me actually address that, from the retail perspective, and then Michael can address it from the OEM or new-car perspective.
1344 John's absolutely right, there has been a subsidization process that has occurred. The important thing to view is, over the last three years in operation, we have seen the cost of radio, a comparable radio, for example, falling from the $400 retail price to the consumer down to $99. But in that same time frame, our subsidies have fallen, as well. In order to even achieve that $400 price point, many times the subsidies were multiple hundreds of dollars. So it was very important to build up a very, very large volume, which then allowed the subsidies to fall to a more useful rate. So now we have very attractive pricing and fairly moderate subsidies on the retail environment, and we expect that to continue to fall in the future.
1345 MR. GRIMALDI: I might also add, from the auto manufacturers' perspective, today's auto industry is very competitive. I think most consumers would agree this is about the best time to be out looking for a new car or truck, based on the high level of incentives.
1346 Supporting John's earlier comment, this type of technology, General Motors and the other auto companies feel, is the next wave, in terms of entertainment. So we definitely want to integrate this into our vehicles.
1347 We believe it is a features that consumers will want to buy. So as we look at promoting our vehicles, we'll highlight many of the new features, the engines, the other comfort/convenient features, as well as this entertainment system and, as appropriate, working with our partners, will determine how best to price it, as well as how best to get people into it to try it.
1348 The response from those individuals who have tried it in the United States, 90 per cent would recommend it to a friend, and our dealers and retailers in the U.S. indicate it's one of the features that, once you try it, there's very few people who are not interested.
1349 The second point I would like to make, as we go forward, and without a doubt we are looking for cost reduction, in terms of this technology, but probably even more important, General Motors, by example, we have an OnStar safety feature, we have navigation, we have additional entertainment and other devices we are looking at integrating into the telematics of our vehicles. As we do that, we are going to be looking for component integration, component savings, et cetera. So we are going to be aggressively looking for ways to reduce the cost and actually give the consumer, tomorrow's consumer, even more features, based on this platform.
1350 COMMISSIONER WILLIAMS: Could you, please, describe the results of any research you have conducted on the question as to the extent to which potential subscription radio subscribers are price-sensitive to the amount they would pay for a receiver?
1351 MR. BITOVE: Yes. We have done a lot of that research. Basically, when we went to the field, we asked questions varying from: would you be willing to pay mor than $12 a month, $11 a month, $10 and $9? So the interest went from, over $12 of, around 20 per cent, if the charge was over $12 a month, to about 70 per cent if it was $9 a month.
1352 COMMISSIONER WILLIAMS: Yes, so that's on your subscription fee, and that's interesting information, thank you--
1353 MR. BITOVE: Yes.
1354 COMMISSIONER WILLIAMS: --but if you follow up a bit on the equipment costs, price-sensitivity to the equipment costs.
1355 MR. BITOVE: For example, here's a question: would you pay $9.99 or more and pay $300 for the satellite unit, itself, the interest was 27 per cent. Would you pay $9.99 or more and $200, the interest was 38 per cent. So people are price sensitive to the product.
1356 But Melissa, if you could pass me the Roti 2, when we did the research, we had no idea that there would be a product that would be less than $150 that could be installed in a vehicle. I'm sure had we known this, the numbers would have been significantly higher. Because at that point in time, where XM was with the technology, everything was north of $300.
1357 COMMISSIONER WILLIAMS: Okay. Thank you.
1358 Moving to an area, OEM-installed in-car receivers, with regard to the contractual arrangements that have been reached by XM and the auto manufacturers in the U.S. concerning the OEM installation of satellite receivers, do these contracts stipulate that these car makers must install only XM-approved receivers in cars which are sold in Canada?
1359 MR. BITOVE: Well, I will let Gary comment on the nature of his relationship in the States, if he even wants to, but I think it's so important to understand the technology exchanges between Honda and XM, GM and XM. I mean, these companies have spent millions, if not tens-of-millions of dollars trying to figure out how they integrate it to their component board and circuitry, et cetera. So whether it exists in contract or not, the reality is when you have shared that much technology to all of a sudden try to have a different application for it is very difficult.
1360 But I will go to Gary, and then maybe Michael might have a comment.
1361 MR. PARSONS: Yes, I think we will both probably have a comment on it. Michael can certainly speak to the length of time that it takes to have it engineered in on a factory-installed basis, which is quite significant in the auto industry.
1362 We have different agreements with different automakers. Some, in fact, are exclusive arrangements. Others are not exclusive, from a contractual basis, but, from the standpoint that John indicated, exclusive from a practice basis, in the sense that we have spent many years and many tens-of-millions of dollars designing it into the system and there is not real intention to add other alternate and that, in fact, we do have arrangements with certain car companies, who have other providers that they provide a choice.
1363 COMMISSIONER WILLIAMS: I was going to ask that next. So your product can be supplied to other car manufacturers that aren't on your list or that you have contractual arrangements with already?
1364 MR. PARSONS: Some are exclusive with Sirius, as well, some are jointly with both of us and then some are exclusive to XM or de facto exclusive.
1365 MR. GRIMALDI: I might also comment. The issue, really, is the technology that has been developed, in terms of this product, as well as the integration with the vehicles. For example, in terms of General Motors global vehicle development process, we, literally, need a seven- to 10-year time horizon to basically get three key elements of bringing a new product to market.
1366 We are embarking on a global vehicle architecture which, basically, is a set of components for a whole portfolio of vehicles, for example small cars. We will have another vehicle architecture for mid-cars. This is going to drive tremendous cost efficiencies for the corporation, et cetera. Those type of architectures probably have a lifespan of six to maybe 12 years.
1367 Then, we also have electrical architectures. The electrical components in our vehicles today are increasingly more sophisticated and we are constantly looking for ways to increase the capabilities of our vehicles. The electrical architectures also have similar types of time horizons.
1368 The third element is for each new product, which have an average age of about six years, the task that companies like General Motors and the other OEMs have is to basically put into cadence the vehicles architectures, the electrical architectures and the new vehicle programs.
1369 And so we have, for example, in the case of General Motors, laid out a product plan that has these architectures, vehicle, electrical, system-integrated, for the next seven to 10 years. And we have vehicles that will be coming to the market over that similar period of time.
1370 The other OEMs also have similar vehicle development processes. In this particular case, the technologies are not interchangeable. They are not interchangeable. And I think it's extremely important to realize that, because of the way the industry has developed, there's roughly about half of the industry here in Canada that would be aligned with XM and then the other half with a potential competitor and you cannot, literally, just interchange that technology.
1371 So one of the points I made in my prepared remarks was to indicate I think it's extremely important that the Commission understand that, in order not in any way to disadvantage any Canadian customer or OEM, you are going to probably have to look at approving all applications for a licence because the length of time to develop an appropriate integrated plan, as I have just described, takes you out seven to 10 years. If you miss that window, you basically will not be able to integrate this technology into your products. So that's why the OEMs have aligned with the satellite providers and they have integrated them into their technology plans.
1372 I hope people have a good appreciation for the level of complexity to put this type of product into our vehicles. It is not just interchange one type of product for another.
1373 MR. BITOVE: Maybe Jim, from Honda.
1374 MR. MILLER: I would basically be echoing what Michael just said, because it is an integral part of the product. It is designed specifically for the Honda product, in our particular case. It is going to become standard equipment in many of the products, as we go forward.
1375 So it's very important that there is no penalty to any one manufacturer because they happen to be on one side or the other. It's important that we look at all the applications in a fair and equitable basis and look at granting them all, if you are going to grant them, or none, if you are going to grant them.
1376 But it is an integral part of not only entertainment, but also other benefits that you can offer to the consumer, as we go forward, which have a great safety impact to the consumer, too.
1377 COMMISSIONER WILLIAMS: Thank you.
1378 The receivers, do they have a parental control features, all the models, and can you briefly describe how it would work?
1379 MR. BITOVE: Yes. I know in the case of the CSR products we will be offering, there is a parental control.
1380 We can block channels by three ways. Each unit is ascribed a serial numbers, so that it's coded and it's embedded into the receiver. We can align the product codes that the receivers purchased in Canada are blocked out from day one on certain channels. And we will probably do that with the traffic and weather channels from the U.S. cities, as an example.
1381 The second way they can be blocked--and, by the way, you have to be over 18 to be able to subscribed to this, and, as Melissa told, because she comes from the wireless industry, that's not unlike a lot of other product offerings--you can call the customer care centre in Toronto and say, "I have this. I don't want this certain rap channel to be allowed for my children, or for myself, I guess", so it will be blocked out on that basis.
1382 The third thing that we can do is, if we so desire, or if you instruct us to delete a channel, we can send a signal up--basically it's a band-width issue--but each day we can block 50 to 100,000 receivers from getting a certain channel.
1383 So let's say we have issued these radios. Let's say there's a certain channel that is violating either the codes that we put in place or you put in place. We can send the signal out to start delisting this channel. If we have 300,000 subs, it will take three days, four days, to be able to block them all out.
1384 So there's three ways we control the channel line-up that will be offered.
1385 COMMISSIONER WILLIAMS: So that's good, I guess, if there's a broad group of people that want it blocked out. How about if one particular family just wanted one particular service?
1386 MR. BITOVE: Yes, you just call the customer care, you give your serial code and the number will be deleted almost the next time you turn the radio on.
1387 COMMISSIONER WILLIAMS: Will there be advisories before and during the presentation of some programs warning that this may be mature content?
1388 MR. BITOVE: Yes. In fact, some of the channels have a designation called XL, which is almost equivalent to saying, "For Mature Audiences", some of the comedy channels and some of the rap channels. These warnings are on the digital display, in addition to the regular warnings through the broadcast.
1389 COMMISSIONER WILLIAMS: And your customers will get a "Welcome to CSR" package and it will give them clear instruction on to--
1390 MR. BITOVE: Absolutely.
1391 COMMISSIONER WILLIAMS: --manage the process?
1392 MR. BITOVE: Yes, sir.
1393 COMMISSIONER WILLIAMS: You talked about an emergency channel for civil authorities. This would be an addition to the four channels that you are already promising? Or would one of them be deleted during time of emergency?
1394 MR. BITOVE: Deleted.
1395 COMMISSIONER WILLIAMS: How would it be promoted? How would people know that's the one to go to?
1396 MR. BITOVE: It would be promoted to let them know when they subscribe to the service.
1397 One of the things we talked about is, obviously, since some of the emergency warnings are provincial jurisdiction, we would have to sit down with the various provinces and work out how they best want to use it.
1398 Funny enough, this came to us during the blackout in Toronto, where so much of the city--some of the stations had generators, some of them didn't on terrestrial radio and we were all kind of saying, "Boy, wouldn't it have been nice if we were broadcasting by now because we would have been able to tell everyone what to do and how to prepare".
1399 COMMISSIONER WILLIAMS: You might have been the only information source.
1400 MR. BITOVE: We could have been.
1401 COMMISSIONER WILLIAMS: The grey market, what security measures are in place to prevent black and grey market activities? How easy or difficult is it to crack XM's decoding equipment?
1402 MR. BITOVE: I will answer that in two parts and I will let Gary handle the decoding.
1403 I can tell you, both contractually and how I know XM has operated, they do not commence the service to anyone who gives a Canadian address. But I want to qualify that. If someone has a Canadian credit card and a U.S. address, they can't discriminate because they don't know whether it's a vacation property--
1404 COMMISSIONER WILLIAMS: It may be just a snow bird or somebody.
1405 MR. BITOVE: Exactly.
1406 But in terms of the encryption, Gary.
1407 MR. PARSONS: Yes, we hope it's very hard to crack. We went to great extents, obviously, to ensure when we put the thing together that, in fact, it would have a number of different levels of encryption and conditional access.
1408 In fact, in the early stages, one of our strategic partners was DirectTV, who had some difficulty with cracking of that. You will notice that there are no cards or authentication cards that are used with this system because that was one of the primary ways, in fact, of taking advantage of the DTH systems that were out there.
1409 We feel quite comfortable and have seen no evidence, at least thus far, that any one has made a serious attempt at cracking the system. So we feel comfortable there.
1410 Also, to a certain extent, because the monthly subscription price is nominal compared to many other products, the economic incentive to go to elaborate lengths to try to crack the system is not the same as if it were a $70-, $80-, $100-per-month bill.
1411 COMMISSIONER WILLIAMS: Can you describe if there is a satellite radio black market in the U.S.?
1412 MR. PARSONS: None, to my knowledge, as far as a black market of people advertising to crack or break the system. We have seen no evidence of that whatsoever.
1413 Clearly, we do understand, on a grey market basis, as I indicated, we do not market in Canada, we have no overt efforts along that, but our call-in shows regularly get people who are travelling in Canada calling in and, obviously, they are using the service there, whether they bought it in the United States and drove across the border, whether they are a cross-country trucker or whether, as you say, when you can stick it in your pocket or your purse and carry it in, it's difficult to stop.
1414 MR. BITOVE: And we do have evidence of retailers in Canada, as well as advertising in Canada, to purchase either of the satellite products, which is not being undertaken by the satellite companies, it's an aggressive retailer.
1415 COMMISSIONER WILLIAMS: Let us talk a bit about the use of terrestrial transmitters.
1416 What percentage of your potential subscribers do you estimate would receive the service via your terrestrial transmitter?
1417 MR. BITOVE: Well, as we said, the coverage is somewhere between 95 per cent and 98 per cent on the satellite.
1418 All, really, the terrestrial repeater does is, if you are driving in a city and a building is immediately south of you, that shadow of coverage for one or two seconds--
1419 COMMISSIONER WILLIAMS: Covers you through the shadow.
1420 MR. BITOVE: --it just fills that blip. You are basically on the satellite service the whole time.
1421 MR. LYONS: Just to add, it's not like a terrestrial radio, where it broadcasts in a 360-degree fashion over an entire area. They are just focus beams that really cover shadow spots. And because of the ubiquity of the radio, the ubiquitiveness and the fact that it's mobile, it's very difficult to say a certain percentage of the population will be covered by repeaters. In fact, I would say almost 100 per cent of our subscribers will get the satellite coverage most of the time.
1422 Just, for example, if you are in a downtown core and you are right next to a building, then that little area will require a repeater. You would even see that in some of the coverage maps that you will find in the application. There's a coverage map, I believe, of Ottawa. So just really the downtown area, by the downtown core there, that requires repeaters because of the coverage area. But the vast majority of this city is covered right now by the satellite.
1423 COMMISSIONER WILLIAMS: If there are channels that contain information for specific markets, i.e., New York or L.A. traffic, weather or news, could these satellite channels be blocked and the corresponding terrestrial ones used for Canadian programming?
1424 MR. BITOVE: Yes, they can be blocked.
1425 Can they be used for terrestrial programming? We don't know because the way the radio and the chip sets are designed, it receives a signal from two satellites and the terrestrial repeater. So whether it can sort it out--we have tried to understand this more with XM, but at the current point in time, we have to say we don't know. But, yes, they can be blocked out.
1426 COMMISSIONER WILLIAMS: Okay.
1427 Given that the capacity available on the U.S. satellites for the distribution of Canadian channels is somewhat limited, did you consider the possibility of providing a split feed to the terrestrial networks to increase your offering of Canadian programming?
1428 MR. BITOVE: We have looked at it. It's a lot more complicated than we initial intended.
1429 COMMISSIONER WILLIAMS: What would the technical constraints be, for example?
1430 MR. BITOVE: It's just the way the receiver is designed to read either of the two satellites or the ground repeater to get its signal. Then, you run into the issues of if the receiver only receives a ground repeater, is that fair to the rural market person, who won't be getting the service because the satellite will be shut off, et cetera, et cetera?
1431 So I can tell you that it is something we are going to continue to study and monitor and understand, but it's not something that is a focus of our attention right now.
1432 I don't know, Gary, if there's anything--
1433 MR. PARSONS: Yes, I can simply attest we have spent a significant amount of engineering efforts looking at exactly that question because there was some view that may be an attractive combination offer if it were done that way. There was, unfortunately, the disparity between the satellite on the rural customer and the urban customer. But more problematic was it was not clear in the process that by doing that you would be able to achieve and sustain the seamlessness and quality of the listening experience that our customers have come to understand.
1434 Since it is looking for all three signals and all of the logic inside the software is operating in that manner, it can be modified to an extent to not look at it in that manner to achieve the configuration you just noted, but it's doubtful that you would be able to achieve the seamlessness of the service that we think is one of the extremely desirable aspects of the quality of the service.
1435 MR. BITOVE: Thanks, Gary.
1436 I think there's an important component here of the OEMs were really pushing us hard to say that they want equality between rural and urban, that it's very difficult to segregate their dealers and says, "You know, you can have a radio that only works with half the channels in Moose Jaw and gets the full channels in Toronto". So that is something that we continually are trying to figure out how to deal with, is to maintain the universality of the system in the 10 provinces and three territories.
1437 COMMISSIONER WILLIAMS: CSR has to spend a lot of money getting their network up and running. You have a technical services agreement between yourselves and XM. How did you establish the pricing on the components that you are buying, the expertise that they are providing, the project management, if I can use that word?
1438 MR. BITOVE: Those are three separate questions, so why don't I ask Melissa to speak to the pricing of the components.
1439 MS CLARK: We are speaking to the pricing of the actual units?
1440 MR. BITOVE: Yes.
1441 MS CLARK: For clarity?
1442 COMMISSIONER WILLIAMS: No. I was actually speaking more of the pricing of the terrestrial repeater system.
1443 MR. BITOVE: Oh. The repeaters, they are passing along the cost that, basically, UBS was charging them for the cost of the repeaters and manufacturing them out of Mississauga. Yes, they are already built and ready to go, no mark-up.
1444 The rest of the stuff, that's really in there in case we need any other technical advice or assistance. Quite frankly, we haven't identified anything.
1445 COMMISSIONER WILLIAMS: So there's no mark-up or--
1446 MR. BITOVE: No, sir.
1447 COMMISSIONER WILLIAMS: --percentage fee or anything on any of the service or--
1448 MR. BITOVE: No, sir. They get a royalty and an economic interest in the venture.
1449 COMMISSIONER WILLIAMS: Okay.
1450 What are the main provisions of the licence agreement and the main reasons for putting in place the agreement between the parties?
1451 MR. BITOVE: This is something from the very beginning, in discussions with XM, I wanted us to be clear of. I know the MOA deals with all four, but, really, at the end of the day, we have to have a shareholders' agreement, which is separate from a programming agreement, which is separate from a licence agreement, which is separate from a trademark agreement.
1452 And I will explain why. If you were to give us a licence and XM, at some point in time, were to execute option, could I assure you that over the next 20, 50, whatever amount of years, XM could be providing us the infrastructure for a royalty, but they may not be an economic shareholder of the venture? Yes.
1453 Could there be a way where XM and ourselves have no association on programming but we are licensing the technology, the ground repeaters, whatever else? Yes.
1454 Could there be a world 30 years from now where all we are doing is using their satellite and infrastructure to up-link 50 Canadian channels? Yes.
So we wanted to make sure that each one kind of was a living document on its own, to allow for the future and, really, where these four services that they bring to us now could become separate.
1455 COMMISSIONER WILLIAMS: You got me excited there with up-linking 50 Canadian services.
1456 MR. BITOVE: Well, Gary keeps telling me, "Don't worry about compression. One day we will solve everything".
1457 COMMISSIONER WILLIAMS: So there's compression.
1458 The satellites, themselves, they have a limited life, as I understand. Are there plans for more Canadian capacity on the new satellites?
1459 MR. BITOVE: Well, the latest, from what I understand, satellites three and four, Gary, have no additional capacity, but who knows down the road? Anything else? That's it?
1460 MR. PARSONS: No, they may have some increased power, but we are still having the same amount of bandwidth, bit speed and capability, as far as spectrum.
1461 MR. BITOVE: But the lifespan of these, Gary, is roughly...?
1462 MR. PARSONS: They will, roughly, 15-year satellites.
1463 COMMISSIONER WILLIAMS: Yes. So the opportunity for more services may lie in the compression area, then?
1464 MR. BITOVE: Exactly.
1465 COMMISSIONER WILLIAMS: Could you please provide a draft of your Technical Services Agreement, if you haven't already done so? Would you undertake to do that?
1466 MR. BITOVE: Yes, we will.
1467 COMMISSIONER WILLIAMS: Okay.
1468 Do you foresee any problems in meeting the technical requirements, as set out by Industry Canada, in Annex 1, of their 21 September letter?
1469 MR. BITOVE: No. I will let Stewart comment.
1470 I wouldn't mind stating that, over the three-plus years we have been working on this, Industry Canada has been very accommodating and professional in identifying all the issues that we have to face. I think we have a great working relationship with them.
1471 MR. LYONS: Yes, as John said, Industry Canada is quite familiar with the architecture of the repeaters and the satellites and everything else. We have been working with them for a couple of years now. We have done some testing with them, as well, and they have indicated to us that everything is sufficient thus far.
1472 I'm not sure, Mr. Bush, if you have anything to comment on, from Telesat's perspective, because Telesat is really our engineering partner in this venture and they are going to be the ones managing the repeaters. They already are, as you heard, involved in flying the XM satellite, so they are, really, very familiar with the technical areas.
1473 MR. LAWSON: I will just add that, over the last 35 years, we have a fair amount of experience in Canada, in terms of operating transmitters. We have had a test transmitter running, we have been very actively involved, in terms of testing the signal strength, looking at how we use the terrestrial repeaters and, certainly, meeting the radio licence conditions. We have no concerns, in terms of doing that.
1474 COMMISSIONER WILLIAMS: Will CSR be able to fully meet its coverage and service objectives, in light of these requirements?
1475 MR. BITOVE: Yes.
1476 COMMISSIONER WILLIAMS: Are there cost implications to these technical requirements?
1477 MR. BITOVE: Yes.
1478 COMMISSIONER WILLIAMS: Increased costs over and above what you might have expected?
1479 MR. BITOVE: Nothing that we haven't allocated in our budgets.
1480 COMMISSIONER WILLIAMS: Okay.
1481 MR. BITOVE: In fact, on the repeaters, the numbers have come down.
1482 COMMISSIONER WILLIAMS: Okay. So in some cases it has come down.
1483 MR. BITOVE: Yes, fewer repeaters. Telesat, through their drive-thrus, everything has had--the news keeps getting better and better. The coverage in the cities is a lot higher than initially anticipated and in some cities we are down to one repeater.
1484 COMMISSIONER WILLIAMS: Like Ottawa.
1485 MR. BITOVE: Like Ottawa.
1486 COMMISSIONER WILLIAMS: Would you please describe how the production and the assembly of the Canadian programming channels would be accomplished, that is what existing facilities would be used and what new facilities will be needed, and maybe talk a bit about the capital and operating expenditures related to these facilities?
1487 MR. BITOVE: Sure.
1488 I have done a lot of talking, so I think I will turn it over to Steve.
1489 MR. TAPP: Give a bit of a break. And I will also ask Bob to fill in, from a programming production perspective, as the kind of chief executive producer of our programming.
1490 We will be building facilities, as you heard earlier, in both Montreal and in Toronto. Those will include regular production and assembly facilities, and, obviously, in transmission facilities, as well.
1491 For our English channels, we will be producing out of Toronto and for our French channels we will be producing out of Montreal. So it will be a standard operating set-up for radio production.
1492 Bob, do you have anything to add? And don't be negotiating for more facilities.
1493 MR. MACKOWYZC: One of the points to make, that the XM experience begins with the physical plant, which often is described in Star Trekian terms. It is another dimension, if you will, in terms of physical facilities.
1494 In the case of Montreal and Toronto, which will be the nexus points for the streams of information coming in from across the country, in terms of the English Canada dynamic, but, again, it does apply on the French side. We will have, say, a host who is in Red Deer. We don't expect him to come into Toronto to do his weekly show, but there's a studio in Red Deer and we will pay for the connectivity between that studio, ISDNT one line. It happens in many instances, in terms of the XM universe. They are in Nashville, New York City and it's getting decentralized, if you will.
1495 Secondly, with our Student Initiative Program and Canadian talent development, we have already established a network of quite a few schools across the country: the University of Moncton, Canador College in Sudbury, Simon Fraser, so those studios will be part of the network.
1496 Lastly, at the end of the day, it's the old telephone. Think about the B.C. forest fires. The reports that came in in private radio right across the country, I think, showed us what we can do with the simple phone when news was breaking virtually minute by minute.
1497 So they are the nexus points that collect the streams of content from across the country.
1498 MR. BITOVE: And we have in our capital budget, $5 million allocated for production facilities.
1499 COMMISSIONER WILLIAMS: Can you describe how your call centre would function: customer sign-up, billing complaints, inquiries, how and where will it be performed?
1500 MR. BITOVE: Very well, but I will turn it over to Melissa to give you a little bit more detail.
1501 MS CLARK: Mr. Commissioner, currently our call centres, the XM call centres, are located in Toronto. They utilize a firm, and have since the origination of their service, and seem satisfied with the performance of that service.
1502 They perform the customer interface, the activation role and any customer care that takes place after the fact. They are also proactively involved in touching our OEM customers.
1503 When a GM car rolls off the lot, a GM customer has the service active in their car for a test period. The call centres touch base with those customers to make sure that they are aware, familiar and comfortable with the service that they receive, and then follow up with them to perpetuate their service, to see if they choose to be one of the 80 per cent that want to maintain their service.
1504 COMMISSIONER WILLIAMS: So that's the only call centre for XM satellite radio?
1505 MR. BITOVE: That's the only one we will be using, and Steve pointed out we control the authorization of the subscribers and the billing.
1506 COMMISSIONER WILLIAMS: I guess back to more audio services. Do you see the possibility of adding more audio services at some future date through the compression, like we spoke about earlier? And if so, what's the formula for allocating these channels between the partners? Would it be the 4 per cent Canadian, as it is now?
1507 MR. BITOVE: We have no formula right now. I think I committed to the Commission to try and come back and see if we can think of something, and we will undertake to do so.
1508 COMMISSIONER WILLIAMS: Yes, there is some overlap in our questions, obviously.
1509 MR. BITOVE: Yes, sir. Hopefully the same answer will work on both people!
--- Laughter / Rires
1510 COMMISSIONER WILLIAMS: Yes, will work on both.
1511 MR. BITOVE: That's my worry.
1512 COMMISSIONER WILLIAMS: You noted that your terrestrial transmitters could be individually programmed. What kind of trade-off do you foresee, in terms of the number of local channels versus the number of national channels?
1513 MR. BITOVE: We are national programming only. There's no trade-off for local. We have told the local radio partners, and anyone else, that we have no interest in local programming.
1514 COMMISSIONER WILLIAMS: So there would be no opportunity for local Canadian channels to replace the 20-or-so channels that are providing a local weather and traffic service in major U.S. cities, then?
1515 MR. BITOVE: It's not our intention to have local programming.
1516 COMMISSIONER WILLIAMS: How do you see your new subscription service affecting the rollout of the DAB radio services or digital audio broadcasting services?
1517 MR. BITOVE: Well, I think I will turn the question over to Mr. Grimaldi, given that GM was one of the parties that funded a lot of the DAB work.
1518 The only thing I can say, from my personal experience, is we came along after most of the DAB the steam had left on the DAB efforts in Canada, so, you know--however, to work with technology, whatever, wherever this goes, we would be happy there. But we are set out on our satellite radio venture and I think it's--Mr. Grimaldi can speak to DAB.
1519 MR. GRIMALDI: As everyone is aware, General Motors did lead the effort, working with the Canadian broadcast industry in the development of DAB during the 1990s. In fact, we were ready to introduce DAB technology into our vehicles in the 2002 calendar year. We had specific hardware that had been developed, specific hardware that had been validated, et cetera.
1520 However, as we are all aware, the rollout of DAB, the infrastructure, none of that developed, and we had to make a decision that this was not a commercially viable venture.
1521 At that point in time, we then have moved on. And as I described earlier, in terms of our technology development, our radio systems, et cetera, we have gone beyond where we were several years ago. Now, in terms of our technology, at least for our vehicles, we have no plans, no capability, to introduce DAB into our vehicles over the next seven to 10 years, for the reasons I introduced.
1522 We had an opportunity, as I described. Unfortunately, that opportunity was missed here in Canada. In our business, we needed to move on and, as indicated, the new technology has advanced beyond DAB.
1523 So speaking from an OEM manufacturer, and I think I'm speaking for, also, the other manufacturers, there's currently no plans for DAB in our vehicles in the near future. If there was, it would have to be integrated, as I described, into the vehicle development process, which would take it out seven-plus years.
1524 MR. BITOVE: Jim, I don't know if you have a different view, at all.
1525 MR. MILLER: No, we weren't involved in DAB, but we have committed to the satellite, and that's the route we are following and plan to continue following.
1526 COMMISSIONER WILLIAMS: The FCC has put together an interoperability requirement for the provisioning of an all-band, all-service receiver. What steps have been taken to achieve this?
1527 MR. BITOVE: Maybe it's best I turn that over to Gary Parsons, from XM.
1528 MR. PARSONS: Both Sirius and XM joined into a Joint Development Agreement several years ago, in response to the FCC request that radios in the future be made available that would operate with both systems.
1529 It is a fairly complex technology effort. We have been under way on it for at least two years very heavily. I think that there will eventually be interoperable radios that are made and created. Whether these radios have the same cost performance characteristics as the individual radios do is, in fact, a question because you are, in fact, adding far more--you are essentially putting the two technologies together, which are, at this time, disparate technologies.
1530 COMMISSIONER WILLIAMS: So you would view it as just the two technologies, XM and Sirius, the AM-FM, L-band DAB, L-band CRTC, CSRC and the new America--
1531 MR. BITOVE No. I will speak from a CSR perspective. We would be happy to work with whatever efforts are being made for DAB or any other device that the CRTC licenses and thinks is important for Canadians.
1532 I think the only point that you kind of have to read between the lines for Gary is that there is hundred-of-millions of dollars in technology development in these products--
1533 COMMISSIONER WILLIAMS: That has been deployed.
1534 MR. BITOVE: --between the two of them that they can sit there across the table and figure out how to make it work together. But I don't think that they would be willing to subsidize a third technology to come along.
1535 COMMISSIONER WILLIAMS: So if Industry Canada imposed a receiver standard, that wouldn't be helpful at all, in your view?
1536 MR. BITOVE: Knowing the way Industry Canada has acted with us on this thing--they view this as a continental system--I think that if they jointly developed, with their counterparts in the U.S., some kind of code or sharing or interoperability arrangement, of course, we would live by that, too.
1537 MR. PARSONS: But, John, I think he was also addressing the issue of an interoperability with DAB and other standards, as well, too. From a technology perspective, we have our hands full integrating the two dissimilar satellite technologies and I think it would not be helpful to have a mandate that you try to absorb other technologies into it at the same time.
1538 COMMISSIONER WILLIAMS: Okay, that's helpful.
1539 Given that a technical brief will be required for every transmitter site, could you please provide your views on the licensing model for terrestrial repeaters?
1540 MR. BITOVE: What we have done is filed with Industry Canada the locations of our proposed repeaters.
1541 MR. MILLER: And each one will have to meet a technical test.
1542 MR. BITOVE: They are all the same.
1543 MR. MILLER: They also have to each meet a licensing test or a more streamlined approach?
1544 MR. BITOVE: No, I don't believe so. You know, Industry Canada have been fantastic in working out the type of wattage and the issues. In fact, some of the subsequent spectrum that they have licensed, they have worked with us on the codes and the bands widths that should be made available so that this all is harmonious. So, I don't believe they are going to require each one to be licensed. I believe they are going to require the terrestrial repeater network itself to be licensed.
1545 MR. TAPP: And the programming obviously will be consistent with the programming to load off satellite, so there won't be separate programming on those repeaters.
1546 COMMISSIONER WILLIAMS: Okay, thank you. Now we will move into the area of local programming. I just have a few questions here.
1547 MR. BITOVE: Just a few?
1548 COMMISSIONER WILLIAMS: Yes honestly, just a few.
1549 There has been some controversy in the U.S. recently over decisions by XM and Sirius provide local weather traffic information to some 15 to 20 of the largest markets in the country by offering this information on channels that are available across the U.S. Is this an issue that the Commission needs to be concerned about in Canada should your service be licensed?
1550 MR. BITOVE: We have no intention of offering the service in Canada at the present time... at all.
1551 COMMISSIONER WILLIAMS: Okay, I promised you there would be very few questions, that is the only question I had.
1552 MR. BITOVE: No, I said we have no intention offering the service, period.
1553 COMMISSIONER WILLIAMS: Okay thank you, Mr. Chair, that concludes my series of questions.
1554 THE CHAIRPERSON: Thank you, Commissioner Williams. I have a few follow-up questions from the line of questioning that Commissioner Williams went through with you, Mr. Bitove. Starting with the receivers, is perhaps a good place to start. Ms. Clark mentioned AM, FM, XM. So, those are installed in... do you have any numbers of cars in Canada that those will be installed in next year?
1555 MR. BITOVE: We announced last week the culmination of our almost two years of negotiations with General Motors for two reasons, one is we wanted them to appear on the Panel and they wanted to have a deal done, and within that, ourselves, there is a target goal, not a hard number, but a target goal of 230,000 vehicles in the first three years with General Motors. We haven't gotten to that stage of the discussions with Honda. And, as Gary said, there is some, like Porsche, that are aligned with both Sirius and XM where we haven't even talked to them yet.
1556 THE CHAIRPERSON: Right. So, if I buy one of those GM models part of the options is... it is an optional device I assume?
1557 MR. BITOVE: I will let Mr. Grimaldi answer, but I think it is basically depending on the pricing of the car. Michael.
1558 MR. GRIMALDI: As indicated, for the 2006 model year currently, if there is approval for a licence sometime say by the first quarter of next calendar year, we would like to go into production for our 2006 models in the summer of next year. We have identified 50 models from our small car, Chevrolets, to our luxury car, Cadillacs, cars and trucks, and that is almost our entire portfolio.
1559 As you indicated, we are looking at how best to package that particular feature into our vehicles. It varies by market segment, it varies by customer sort of reluctance to pay that initial hardware cost. That is why I made the earlier comment, working with our partners will decide what is the best way to promote the new technology, potentially subsidize it initially. Actually, we are not interested in sharing a lot of volume projections publicly, obviously that is confidential information. However, as indicated, we are working to a distribution arrangement and we believe this feature has similar potential as we have already seen in the United States.
1560 So, from my perspective, I think the volume is definitely potentially much larger based on the early customer research we have done as well as the reaction in the United States. So, in summary, the pricing will vary by vehicle line, by segment, how we package it as well. It will be part of our overall marketing for our vehicles. But we think this is the type of new exciting features which definitely add value to GM cars and also to some of our competitors' products. And, as I said earlier, in today's market that is so very competitive, brining these types of new technologies to the market is absolutely critical for us in the auto industry.
1561 MR. BITOVE: Thanks, Michael. Can I turn it over to Jim, Mr. Chair?
1562 MR. MILLER: I thought you would share all that information, Mike.
1563 With our product line-up, it is basically our intention if and when the licence is granted to make it standard equipment in the Acura products, some of which are the higher end of the Honda line, and it would be optional in the rest of the Honda line.
1564 THE CHAIRPERSON: In terms of the percentage of sales that you are looking at for your service, what do you think that would account for automobile..?
1565 MR. BITOVE: Are you talking split between OEM and retail?
1566 THE CHAIRPERSON: Right, and retail.
1567 MR. BITOVE: We are using 50/50.
1568 THE CHAIRPERSON: Using 50/50?
1569 MR. BITOVE: The numbers... yes, sir.
1570 THE CHAIRPERONS: Your competitors have a different ratio, as you know.
1571 MR. BITOVE: I can't speak to our competitor's numbers.
1572 THE CHAIRPERSON: Well, you can read their applications.
1573 MR. BITOVE: Yes but, we are following predominantly what the OEMs have accomplished in the U.S. and some of the great technologies XM has developed.
1574 THE CHAIRPERSON: In respect of XM.
1575 MR. BITOVE: Yes, sir.
1576 THE CHAIRPERSON: So, if I do buy a GM car that has one of those... that has your service, that is the service I can get, that is the satellite service I will get?
1577 MR. BITOVE: Yes, sir.
1578 THE CHAIRPERSON: I won't be able to get Sirius--
1579 MR. BITOVE: No, sir.
1580 THE CHAIRPERSON: --on that machine. And, if I want it I will have to retrofit the vehicle?
1581 MR. BITOVE: A plug & play, an after market product is what you would have to do.
1582 THE CHAIRPERSON: Okay.
1583 MR. GRIMALDI: Mr. Chair, if I might also comment. We would highly recommend our customers not doing that for the reasons I stated. In terms of the vehicle, electrical architecture, the way our devices communication systems now work together. We have introduced what we called GM LAN, where basically all the computers, all the systems in the vehicle work together and it is amazing that if you violate some of the basic system integrity by introducing a different component which has not been integrated, validated, etc. you can get, appropriately, some funny things happening with your vehicle.
1584 So, we would highly, highly, highly, recommend that the particular device that has been engineered, integrated into the vehicle architecture is the type of product, either the OEM or an aftermarket, and our competitors would probably make the very same statement.
1585 MR. BITOVE: And I think, Michael, your staff have told us that it could even violate the warranty on the product, on the new car, by putting in an after market that isn't approved... void the warranty if it isn't aftermarket approved by the OEM.
1586 THE CHAIRPERSON: The warranty on what, on the--
1587 MR. BITOVE: On the new vehicle.
1588 THE CHAIRPERSON: The entire vehicle?
1589 MR. BITOVE: Well, on the circuitry of the new vehicle.
1590 MR. GRIMALDI: One of the things we do state in terms of any after--
1591 THE CHAIRPERSON: These boys play hardball.
1592 MR. BITOVE: No, no, you know what, it is four years of work and asking the questions and trying to understand what we have to deal with, it is something that was pointed out to us a few months ago, was just as he said, this LAN system, it is stuff that we keep finding out. This LAN system and the architecture of how the electronic circuitry is developed, that the manufacturer is concerned about tampering with.
1593 THE CHAIRPERSON: So basically what you are saying to the customer is you may not want this option, but if you don't want the option you are not going to have satellite radio service pretty well? You would be ill-advised to have satellite service?
1594 MR. PARSONS: I think I would express there that what we experience... they would be ill-advised to try to integrate it in to where is the seamless part of the system. The after market products that you were seeing earlier are designed to stay away from those electronics with a wireless FM modulator broadcast to your FM radio, for example, without electrically interconnecting with it. Therefore, you do have the ability to add after market products, but one of the great appeals that we certainly find is with these very custom designed factory installed in-dash units, it is very appealing to the customer not to have extra pieces of equipment in the car.
1595 THE CHAIRPERSON: Now, that is understood. When I asked the first question somebody said plug & play.
1596 MR. BITOVE: Yes, there is three ways to put the radio in your car. There is a factory installed route, which means it is integrated into the radio, so you get AM, FM, XM, cassette, CD, whatever. The second is an after market, you go to like a Kromer Radio or Canadian Tire or someone and they put it in and it usually sits on the dash. The third is a plug & play which both... I think all product lines, Sirius offers as well, which basically just plugs into your lighter and, as Melissa said, either there is an adapter to go into the cassette deck or there is an FM modulator that allows you to go to a station, 87.9 or whatever, in your car and your car audio system picks it up. So any of those three.
1597 And what I was really speaking to on the warranty issue, is the second one where someone goes into the hood, into the circuitry to connect the car. The lighter version, the one that plugs into the lighter, that is--
1598 THE CHAIRPERSON: Would not have an effect.
1599 MR. BITOVE: --no issue.
1600 THE CHAIRPERSON: I see, okay, thank you. So, I assume the same would obtain in respect of terrestrial DAB, as we just spoke of for the competitor satellite service, is that correct?
1601 MR. BITOVE: I don't understand the question, Mr. Chair.
1602 THE CHAIRPERSON: Well, the question is does one have the same three choices that you just went through for a terrestrial DAB?
1603 MR. BITOVE: I don't know. We have never seen that device.
1604 THE CHAIRPERSON: Mr. Grimaldi, can you help?
1605 MR. GRIMALDI: Well, speaking from the auto OEMs, as previously indicated, the technology is completely different. At this point we are not, for example speaking on behalf of General Motors, aware of what the subscription DAB proposal might be. But if we did understand the technical requirements, we would have to go through the same process I described earlier. Validating that it could be integrated and, if we wanted to integrate it, then work through the multiple year process. At this point in time, our vehicles are not capable of utilizing a DAB receiver.
1606 THE CHAIRPERSON: I see, unlike a Sirius satellite receiver? This is the line I am trying to draw, I am trying to see whether there is a parallel between your competitor's service in terrestrial DAB in respect of the three choices that Mr. Bitove ran through. Namely, I assume plugging into the lighter would be the same.
1607 MR. BITOVE: Melissa would like to answer.
1608 MS CLARK: I think the issue here, Mr. Chairman, is that we have not seen an equivalent DAB device.
1609 THE CHAIRPERSON: Okay.
1610 MS CLARK: We don't know if one exists, we haven't seen it, we don't know what its architecture is, we have no way to speak to its inner operability or a plug & play capability. We haven't seen it in the North American market period.
1611 THE CHAIRPERSON: Are there no DAB terrestrial services in operation in the United States?
1612 MR. BITOVE: No.
1613 MS CLARK: No.
1614 THE CHAIRPERSON: Thank you. So that is the difference... one is, as far as you are concerned, something you haven't experienced. So you don't know about whether the same range of options would exist?
1615 MS. CLARK: Absolutely, we have just--
1616 MR. PARSONS: I can go a little further than that as well too though, because the I mean the particular application that you are looking at here, and I am sure you will have an opportunity to inquire on their technology, but there are no current radios that operate under that technology. So, what designs of what type of radios they may eventually come out with in the future... I mean, they may decide to build a plug & play type device but, I mean, they don't exist today and won't for several years.
1617 MR. BITOVE: And I think, Mr. Chair, where I just got a little confused is when you raised inter-operability. We usually assume that means the factory installed, you know, AM, FM, XM, DAD, whatever, that can some with the car. The plug & play, anyone can develop on their own, it is just not integrated into the car.
1618 THE CHAIRPERSON: Fair enough.
1619 MR. GRIMALDI: Mr. Chair, I probably should clarify. There are DAB receivers in the auto industry. For example, there is a receiver used in England, because that is a DAB system. In our particular case, the General Motors, that is a completely different vehicle architecture, vehicle electrical system, etc. The points being raised by my partners here is that there is no DAB system here in North America.
1620 THE CHAIRPERSON: Right. The terrestrial transmitters that you are seeking licensing from Industry Canada on, are these L-Band transmitters?
1621 MR. BITOVE: No, they are S-Band.
1622 THE CHAIRPERSON: They are S-Band transmitters?
1623 MR. BITOVE: Yes, sir.
1624 THE CHAIRPERSON: And, will they occupy the same adjacent bands to the ones you are using for the satellite?
1625 MR. PARSONS: They actually operate within the existing band. There is a 12 and a half megahertz, one satellite is at one end of that band, the other satellite is at the other end and the terrestrial repeater is in the middle so that it does not interfere outside of the bands, it only interferes with its own satellites.
1626 THE CHAIRPERSON: Right. And DAB terrestrial will be an L-Band, presumably?
1627 MR. BITOVE: We understand that Industry Canada has been discussing that.
1628 THE CHAIRPERSON: Right. Okay, so now I understand your point on the answer to the other question as well. So, in terms of the impact then on DAB, your answer previously to Commissioner Williams was, if I took it correctly was, you didn't think there would be an impact on DAB or you didn't know what the impact on DAB would be?
1629 MR. BITOVE: Well, what I was speaking specifically is when I got involved in this process and started meeting with the CRTC, from what I understood, the wind had left the sails of the DAB process in Canada for the most part. When we had our first meeting with General Motors they had indicated that they had basically given up on DAB and they were onto satellite radio. But, you know, from what I understand of another application, it is not using existing DAB, it is a completely different application.
1630 THE CHAIRPERSON: Right. But we do have licensees in DAB in Canada.
1631 MR. BITOVE: I understand there are radios and some stations. But, Mr. Chair, it is not a subscription service, which requires a whole different technology.
1632 THE CHAIRPERSON: I understand that.
1633 So your answer is, you don't think you will impact the roll-out of DAB for the reasons that you have set out, the differences, one is a subscription service, one is not?
1634 MR. BITOVE: Yes, sir. But what I also indicated was, if you, or Industry Canada or whatever, wanted us to work with whatever organizations or groups or government agencies were trying to implement DAB, of course as Canadians we would be happy to do something like that, because we don't view it as competing with us. It is a different service.
1635 THE CHAIRPERSON: Right. But I guess I'm circling back to the receiver's discussion
1636 I took from Mr. Grimaldi's comments that this was a long process involving a considerable investment of time.
1637 MR. BITOVE: The factory-installed radio is a long process.
1638 THE CHAIRPERSON: So when you say "work with", what did you mean?
1639 MR. BITOVE: The plug and play or some other design or something else that you might have in mind, or 10 years from now when the OEMs in particular are on their next cycle of radios, we would be happy to have discussions.
1640 THE CHAIRPERSON: But I hear you say you are not -- and certainly the car makers are, they will correct me if I'm wrong -- are not looking for the all-purpose box that can basically tune into all of the services, including satellite and terrestrial AM and FM. They have chosen the course of AM/FM/XM and that is what they are going with for the foreseeable future. So the terrestrial DAB and serious satellite have to find other ways of getting to the customer.
1641 Is that fair, sir?
1642 MR. BITOVE: I think you have to ask them, but from what I --
1643 MR. GRIMALDI: Mr. Chairman, that is exactly correct. Our technology plans currently exclude DAB. If there was a commercially viable proposition to introduce DAB, we as well as everyone else would be willing to look at it.
1644 As indicated, General Motors was ready to introduce DAB. We had validated into our vehicles. Unfortunately, for all the reasons we understand, we missed that window. Technology has advanced, we have moved on to the next generation, we have integrated satellite and, very importantly what I referenced earlier, we are going even beyond satellite radio in terms of some of the features we are going to be offering.
1645 So this is truly an integrated electronic system and if we were to be asked, or if there was a business proposition, yes, we would look at it, but it would have to be commercially viable and it would have to fall into the product development cadence that I outlined earlier.
1646 THE CHAIRPERSON: Right. I guess what you are telling us as a broad matter is that among the -- call it policy compromises that you are asking us to make in terms of reaching a decision favourable to you, we discussed the Canadian content channels and the like, another one is the regulator's -- call it bias towards open network architecture, broad accessibility to product for services.
1647 You are basically telling us, for the reasons you outlined, that the way this industry has developed, it has chosen its technology, chosen its service and it is based on exclusivity, which is why you advocate a non-competitive licensing process, license them all and let the market decide which exclusive relationship the customer should have.
1648 MR. BITOVE: Right, for the foreseeable future, which in GM's particular case they have said is 7 to 10 years.
1649 MR. GRIMALDI: But I do believe you have heard from everyone this afternoon, no one is excluding that. There is a lot of technology development, there are a lot of things that would have to happen, and in the interests of trying to provide the Canadian customer the best entertainment feature, yes, we would be willing to look at it, but what we laid out for you this afternoon is how technologically and from a vehicle development process it isn't something that we could just integrate overnight.
1650 THE CHAIRPERSON: I understand.
1651 MR. GRIMALDI: It would have to be a viable business proposition.
1652 Because our business just continues to evolve and, as we know, there is a lot of conversation about the advancements in terms of the compression and things like that, there are a lot of additional features we are looking at.
1653 So this is a moving target and that is why I wanted to make sure the Commission understood how, from an auto industry, we are not entertainment or radio manufacturers or satellite distributors, et cetera; we are interested in putting a vehicle on the road that has these types of features. So we will work with the appropriate partners as well as anyone else, but at this point in time we have laid out a plan and we would have to get outside of that currently planned horizon to consider new proposals.
1654 THE CHAIRPERSON: Thank you. I think I have your position on that.
1655 Mr. Bitove, what evidence do you have, if any, of figures on impact on radio in the United States of the existing satellite radio services?
1656 MR. BITOVE: Well, it depends on what you read, Mr. Chair, but what I can tell you is that even by the end of our seventh year we will have less than 1 per cent, I believe, of the radio listeners.
1658 MR. LYONS: Yes. (Off microphone) for the U.S. experience.
1659 MR. BITOVE: I am just speaking to our own forecast in terms of where we are going.
1660 The U.S. is -- I have read quotes from CEOs of major radio companies who have said satellite radio will have no impact. We have some broadcasters with us that you can even ask the question to if you would like.
1661 THE CHAIRPERSON: Right. I don't know, Mr. Rawlinson, do you have experience in the U.S. with this phenomenon?
1662 MR. LYONS: Not in the U.S., no.
1663 THE CHAIRPERSON: If any of your broadcasting parties feel like commenting on that, by all means.
1664 Just interesting, I guess of the three applicants before us you are the only one proposing advertising. It is kind of a fraction of your total revenues, isn't it.
1665 Your U.S. experience, is it the same fraction of your revenues in the U.S., without disclosing anything you don't --
1666 MR. PARSONS: Yes, it is. It is fairly nominal. Obviously all of our music channels are commercial-free. There are certain of the spoken word, news and information channels that do have advertising on it, but it is a very much secondary portion of the business plan.
1667 THE CHAIRPERSON: One of your competitors. I believe, has suggested that we ought to impose a condition of license on all licensees to not permit advertising.
1668 How would you react to that?
1669 MR. BITOVE: Well, we would like to sell national advertising. In a way it is international advertising because the signal goes beyond our borders. We think that growing the revenue and the CTD and other dollars that flow from that are important to our system.
1670 We have undertaken not to sell any local advertising. It is not our intention to have any local advertising on our airwaves. I think, Mr. Chairman, if you took our $9.7 million at the end of year seven, it is less than 1 per cent of what the broadcasting industry -- sorry, what private radio is at today in terms of the total gross and where they will be seven years from now I'm sure it will be even less.
1671 So the number is so di minimis and the commitment is there that we are not getting into the local business, including local advertising, that we would prefer to keep it.
1672 MR. PARSONS: John, I would mention one other element too. The news and information channels that come over the overall XM system, in many cases we rely upon third party programmings, discovery networks, e-entertainment, things of this nature, CNBC, to provide that.
1673 In order to attract those programmers, quite often they share and the advertising revenue is their only motivation is to provide the programming or brand extension.
1674 Quite often if it is the simulcast of a television program and the audio track from that, you are going to take a break in that programming anyway. If we do not have commercial advertising to run during that break, we often will substitute public service announcements of various sorts, consumer reports. So there is something that is going to have to be filled in that timeframe.
1675 To eliminate advertising overall for any of the services, you very well may restrict the number of third party programmers who may be interested in, frankly, creating attractive or innovative programming to put on the network.
1676 THE CHAIRPERSON: And you get no subscriber pushback on the fact that it is a subscription service that carries ads?
1677 MR. PARSONS: Candidly, we were getting very little subscriber pushback even on the limited ads on the music channels, because it was so limited that in fact it wasn't a very strong consumer pushback.
1678 I think when you get into talk or news and information programming, consumers are much more expecting of a break at certain points during their programming. That is what they experience on television when they are viewing that sort of news and information. Once again, it is a good way of attracting niche market programmers or third party programmers who have old radio classics or things of this nature they would like to put on the air.
1679 THE CHAIRPERSON: Thank you.
1680 In your view, the number of services that the Canadian market can support is both satellite services and the terrestrial applicant in this proceeding?
1681 You have no problem with that?
1682 MR. BITOVE: Yes. I believe that -- and we have modeled it both ways -- the more providers in the category, the more subscribers there will be. I think that -- so we welcome the competition, because it means more marketing dollars are going to be spent on awareness and more Canadians are going to want to get the services.
1683 THE CHAIRPERSON: Right. You didn't adjust your projections based on reading your proposed competitors' application?
1684 MR. BITOVE: We have an internal set of projections which is in kind of the -- we are assuming that if the third service started up, to get the technology accomplished everything else would be three, four or five years down the road. Of course there would be a dip then compared to -- let's call it our base model, but by the end of the seventh year we would expect to be doing better than what we would be doing if there was only two services, because of the awareness in terms of subscribers.
1685 THE CHAIRPERSON: I see. So you feel that the competition would provide a lift for all the participants?
1686 MR. BITOVE: Yes, we do.
1687 THE CHAIRPERSON: Okay. You say you have internal tables. It's not that I want to have a raft more of paper, but we always have a concern as these things move forward through the different phases of the licensing process that we want to make sure we are dealing with your best estimates of what your projections are rather than --
1688 MR. BITOVE: That is why we didn't really revise it, because over the course of the seven years the numbers averaged out almost to the same because there was a dip in the middle and a little bit of over-penetration at the end. So it was kind of like they weren't materially that different to create a second set of numbers to file.
1689 Mr. Chair, we will provide you whatever you need. If you would like it --
1690 THE CHAIRPERSON: Let us get back to you if we feel we want that.
1691 MR. BITOVE: Sure.
1692 THE CHAIRPERSON: I think I have your answer of non-material change to those projections --
1693 MR. BITOVE: In total.
1694 THE CHAIRPERSON: -- factoring in the competitors.
1695 MR. BITOVE: Correct.
1696 THE CHAIRPERSON: Let me pick up now on the grey market point that you discussed briefly with Commissioner Williams.
1697 Your evidence today, as I heard it, was, Mr. Parsons I believe, that there wasn't, in his view, a black market problem in the United States, that fortunately for you that the system had not been decoded or cracked and that the price point was such that the incentive for doing it might be a lot lower than with regard to television and that it hadn't happened so that you don't really experience a black market in the United States.
1698 Grey market. Your information on what you think the grey market currently in Canada might be? What would that be?
1699 MR. BITOVE: I will turn it over to Melissa, Mr. Chair.
1700 MS CLARK: Mr. Chairman, we believe the grey market is alive and growing in Canada. Certainly our statistical evidence bears this out. Our anecdotal information paints and equally vivid picture.
1701 But I think it is worthwhile to differentiate between the previous satellite television experience and the radio scenario that we see today.
1702 These are portable. They are discrete. They are affordable. They are not like putting a 3-foot by 3-foot satellite dish in the back of your car and driving it home from Buffalo. It is a different scenario.
1703 Customers who are buying into the grey market in the United States today, going across the border whether it is on a trip to Florida or driving down to Syracuse from Ottawa, they are buying these in legitimate retail environments, they are paying for the service.
1704 The barriers to entry are significantly less than they were when they were buying them out of the back of an installer's van and feeling like criminals for downloading without paying for the service. So the context and the landscape is a little different.
1705 Add to that the portability and the ease of bringing it back across the border and we have something of a different scenario.
1706 We certainly alluded to some statistics in Steve's introduction with respect to some original research in 2002, we had some updates through our partners at GM in August of 2004. Initially we saw awareness rates that have risen, so 13 per cent in 2002 to some 65 per cent in 2004. Those kind of set context for us. But I think more importantly, GM's study, which was actually an internet study in August of 2004 -- or January of 2004, I'm sorry, it indicated a 2 per cent adoption rate. So 2 per cent of the respondents -- and there were some 2,372 people surveyed across Canada -- 2 per cent of those folks actually indicated that they were already subscribers.
1707 Quite frankly, we were surprised by that figure, because that is really quite a shocking figure. We wrote it off as the high end of any potential projection, given that it was an internet study and it would typically reflect a more technically savvy person, that by virtue of GM's methodology it was skewed to the male and it was skewed to a certain financial bracket.
1708 So we wrote that off as perhaps a high estimate of what we could be seeing in terms of grey market.
1709 That was probably up until this morning when I received some updated data. We ran a survey through a telephone survey last week in order to bring some more relevant statistics to the Commission this week.
1710 A thousand respondents statistically appropriate, what we got was 7 per cent of folks responding that they already subscribed.
1711 So whether you take statistics that we gather through the XM folks in Washington when we look at post office boxes, a similar model to what happened in satellite television where when customers are asked to provide proof of residency in the United States instead of giving a street address they give a post office box, whether we use those as a potential statistical body or whether we use surveys, the numbers are still there and they are growing.
1712 If we use anecdotal evidence, we look at our partnerships with retailers. What they tell us is that the sales figures in retail stores abutting border communities, so a Best Buy in Niagara Falls, New York, or a Circuit City in Syracuse, that the store-by-store sales of satellite radios in those areas are significantly higher than what you would find in Texas or another relevantly sized marketplace.
1713 You go in and you talk to the sales staff in these stores, be it in Seattle or Buffalo or -- I can't even think of any other relevant location at the moment --
1714 COMMISSIONER WILLIAMS: Vancouver.
1715 MS CLARK: Wherever you want to go, they will tell you that Canadians love their satellite radio and that they are coming across the border and buying it.
1716 So our statistics or our best projections range from 50,000 on up to what our internet surveys, or most recently our telephone survey, would indicate to us at 7 per cent.
1717 MR. BITOVE: We are happy to file the most recent research with you too, Mr. Chair.
1718 THE CHAIRPERSON: You have gone to a lot of trouble, Ms Clark. Why don't you just ask Mr. Parsons to count up the Canadian credit card numbers?
1719 MS CLARK: Because that is not really a relevant statistic --
1720 THE CHAIRPERSON: Why is that?
1721 MS CLARK: -- given a previously cited fact that there are a lot of Canadians, in fact hundreds of thousands, who live in the United States and have Canadian credit card numbers. Conversely, there are a lot of Canadians who have American credit card numbers.
1722 THE CHAIRPERSON: Right. But let's say those two offset each other.
1723 MR. BITOVE: Good guess.
1724 THE CHAIRPERSON: Have you done the count? It's a start.
1725 MR. BITOVE: I don't know.
1726 THE CHAIRPERSON: It's a start. You seem to have gone through a lot of statistical survey work.
1727 MR. BITOVE: You asked us for our assumptions and everything other than the Privacy Act we can kind of give you where we are at.
1728 THE CHAIRPERSON: This is aggregated data so you wouldn't run into the Privacy Act.
1729 MR. BITOVE: Maybe Mr. Grimaldi would --
1730 MR. GRIMALDI: Without replicating some of the points that were just made -- and we are not in a position to be able to guesstimate the size of the grey market here in Canada -- but we do know that with the rapid increase in terms of the number of vehicles equipped in the United States -- it will be close to two million vehicles by the end of this calendar year -- that there are vehicles that are coming across the border, Canadians who possibly are purchasing vehicles or vacationing down in the U.S. and going north or purchasing some of the other devices.
1731 We don't have a good handle and I think what was attempted to say is there are probably some, but at this point in time I wouldn't want to put a number on it. But I think it does speak to the demand, in the United States but, importantly, what I referenced earlier, we have dealers, retailers and customers here in Canada who say, "This particular feature is available in a GM car on the other side of the border, and we know because other friends have the service and we do not."
1732 We do not here in Canada. Any of our current vehicles are not equipped to receive it, so these are vehicles that have come across the border. They keep asking, "When are you going to introduce it?" They feel disadvantaged that the feature and the option is not available today.
1733 THE CHAIRPERSON: So I guess given that demand, Mr. Bitove, your answer earlier in response to Commissioner Pennefather was that you felt that you wanted to make the service as close, resemble as much I take as the U.S. service, to minimize the temptation to go grey market so that you could sell those customers in Canada for a service that looked, for all intents and purposes, equivalent, fewer weather and local road conditions and a couple of more Canadian channels.
1734 I will put the point to you, because on the grey market point this is part of your case. In the CHUM/Astral intervention, in the light of what we have just been discussing, I will just read to you a paragraph from their intervention and ask you to comment on it. They question the logic of the position and say, on several grounds:
"First, which would do the most damage to the Canadian broadcasting system and music industry is the grey market import of 200 U.S. channels with no Canadian sales or infrastructure support or the licensed import of almost 200 U.S. channels with the full support of a dealer network, terrestrial transmitters and advertising, but with the addition of..." (As read)
1735 They say six new and two existing Canadian channels.
1736 So that is, in effect, the dilemma that you have discussed with Commissioner Pennefather and others, and in light of your take on the grey market I think it is a valid question to put to you.
1737 MR. BITOVE: I guess beyond looking at the source you have to look at the reality of what we are putting forward.
1738 There is over a half a billion dollars that we will be spending in the broadcast industry that we will only spend if we are licensed. There is the Canadian programming costs that are a subset of that and the CTD that are a subset of that.
1739 Beyond that, there is the programming that we will be providing across the country, out of Canada as well as beyond the borders, that you don't get if we aren't licensed. So not only is there a dollar equation here, there is a cultural equation here that I think is part of what has to be taken into consideration when you deliberate.
1740 THE CHAIRPERSON: Thank you for that answer.
1741 I think we will break now and resume at 9:30 tomorrow morning.
1742 Nous reprendrons à 9 h 30 demain matin.
--- Whereupon the hearing adjourned at 1756, to resume
on Tuesday, November 2, 2004 at 09300 / L'audience
est ajournée à 1756, pour reprendre le mardi
2 novembre 2004 à 0930
suite / more
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