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Please note that the Official Languages Act requires that government publications be available in both official languages.

In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.

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PRIVATE

 

 

 

 

 

 

              TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

 

 

 

 

             TRANSCRIPTION DES AUDIENCES AVANT

                CONSEIL DE LA RADIODIFFUSION

           ET DES TÉLÉCOMMUNICATIONS CANADIENNES

 

 

 

 

 

                          SUBJECT:

 

 

 

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)

 

October 25, 2005                      Le 25 octobre 2005

 


 

 

 

 

Transcripts

 

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

 

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

 

 

 

 

Transcription

 

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

 

Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.


               Canadian Radio‑television and

               Telecommunications Commission

 

            Conseil de la radiodiffusion et des

               télécommunications canadiennes

 

 

                 Transcript / Transcription

 

 

                             

              VARIOUS BROADCAST APPLICATIONS /

            PLUSIEURS DEMANDES EN RADIODIFFUSION

                             

 

 

 

 

BEFORE / DEVANT:

 

Charles Dalfen                    Chairperson / Président

Joan Pennefather                  Commissioner / Conseillère

Richard French                    Commissioner / Conseillier

Helen del Val                     Commissioner / Conseillère

Ronald Williams                   Commissioner / Conseillier

 

 

 

ALSO PRESENT / AUSSI PRÉSENTS:

 

Chantal Boulet                    Secretary / Secrétaire

 

John Keough                       Legal Counsel /

Valérie Lagacé                    Conseillers juridiques

 

Jane Britten                      Hearing Manager /

                                  Gérante de l'audience

 

 

 

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)

 

October 25, 2005                  Le 25 octobre 2005

 


           TABLE DES MATIÈRES / TABLE OF CONTENTS

 

 

                                                 PAGE / PARA

 

PHASE I (Cont.)

 

 

PRESENTATION BY / PRÉSENTATION PAR:

 

Alarco Entertainment Inc.                         290 / 1605

 

Groupe Archambault inc.                           425 / 2402

 


                 Gatineau, Québec / Gatineau (Québec)

‑‑‑ Upon commencing on Tuesday, October 25, 2005

    at 0930 / L'audience débute le mardi

    25 octobre 2005 à 0930

seq level0 \h \r1596 seq level1 \h \r0 seq level2 \h \r0 seq level3 \h \r0 seq level4 \h \r0 seq level5 \h \r0 seq level6 \h \r0 seq level7 \h \r0 1597             THE CHAIRPERSON:  Veuillez vous lever.  A l'ordre, s'il‑vous‑plaît.

1598             Good morning, everyone.

1599             Madame la Secrétaire?

1600             THE SECRETARY:  Merci, Monsieur le Président.

1601             We will now proceed with item 3 on the agenda, which is an application by Allarco Entertainment Inc. for a licence to operate a national English‑language general interest pay television programming undertaking to be known as Allarco Entertainment.

1602             The applicant proposes that the service be distributed on a digital basis with entitlement to access under Section 18(5) of the Broadcasting Distribution Regulations.

1603             Appearing for the applicant is Mr. Charles Allard, and Mr. Allard will introduce his colleagues and will then have 20 minutes for your presentation.

1604             Mr. Allard?

PRESENTATION / PRÉSENTATION

1605             MR. ALLARD:  Thank you.

1606             Mr. Chairman, members of the Commission and staff, my name is Chuck Allard, and I am the president of Allarco Entertainment Inc.

1607             Before we begin our presentation this morning, I would like to introduce our team:

1608             To my immediate left, and your right, Malcolm Knox is a past president of Superchannel, MovieMax and Viewers' Choice.  He is also the former general manager of Access Network Television;

1609             Nic Wry is a consultant and film producer.  He was a vice‑president of creative business and industry affairs for WIC.  Nic will answer your questions on the creative aspects of our application;

1610             Carie Green, a 25‑year veteran, who has produced programming in many diverse communities.  She can field questions on diversity;

1611             Doug Malkie is our technology and innovations specialist, particularly in the area of high definition;

1612             To my immediate right, and your left, Wally Kirk is our programming specialist, with over 40 years experience in TV broadcasting.  Wally will answer any questions you have about programming;

1613             Maureen Levitt is an independent broadcast consultant with many years of film and television experience.  Most recently as a manager of Vision TV, Western and Northern Regions.  She is our senior creative person from BC;

1614             Geoff Le Boutiller is a writer, producer, story editor, and our senior creative person from Nova Scotia.  Both Geoff and Maureen will answer your questions on our initiatives in the provinces;

1615             In the back row, from your left to right, Brian Schecter is our international media analyst.  Kagan Research is one of his clients.  He will answer any questions on the advances of paid services in the U.S.;

1616             Mario Motto from Decima Research is an expert on the Canadian digital TV services market;

1617             Elaine Chow is a chartered accountant, and will answer your financial questions;

1618             Richard Paradis, our broadcasting and regulatory specialist, and former president of the Canadian Association of Film Distributors;

1619             Mark Lewis is our legal counsel, Borden, Ladner, Gervais;

1620             Art Eden is our marketing specialist, with over 20 years in senior marketing positions in the Canadian broadcasting industry;

1621             Dave Proc is the person responsible for our technical programming origination setup;

1622             Brian Thomas is a specialist in the integration of web and TV media who developed a popular website for the program Corner Gas.

1623             Now we will begin our presentation.

1624             We are very pleased to be here today to take part in what we hope will be a new beginning for the pay television industry in Canada.

1625             We strongly believe in our national broadcasting system, which is unique, well‑balanced, providing carriage in Canada of numerous international services and just about all of the American broadcasting services in addition to our own.

1626             Today we are examining the potential of generating new interest in pay television among Canadian consumers.  Ultimately the main reason we are here is to offer consumers a choice.

1627             Why us?  First, we bring experience to the table, hard‑earned experience, since we were one of the first pay television licensees in 1983.  And second, because we think we have put together the best proposal in terms of benefits to the Canadian broadcasting system.

1628             Personally, I have been involved in the broadcasting and entertainment business for more than 20 years, including ten years as president of Allarco Pay Television Limited, spending significant time in developing and making decisions on investments in film and television projects.

1629             In addition, I have been involved in the origination of our signals to satellite, as well as being part of the provision of many signals out of Edmonton, including Superchannel, The Family Channel, Teletoon (French and English), and MovieMax, which is still being uplinked and fibered out of the Edmonton origination centre.

1630             When pay TV was first licenced, the Canadian cable industry was much slower than expected in getting its set‑top boxes on the market.  And the Canadian pay service had to do with much slower take up rates than had been initially promised.

1631             I brought a table.  Pay television available only through the cable industry struggled through the end of the `80s and much of the `90s, generating a meager 10 tp 15 per cent market share.

1632             One should never forget there were probably more grey market customers during the 12 to 14 years of pay television than there were pay subscribers in Canada.  Never mind the black market effect.

1633             No Canadian direct to homes satellite service was available at that time to compete with the American services.

1634             Canadian pay television had to wait for the arrival of DTH services in the late `90s to finally see a dramatic increase in the number of subscribers to pay television.

1635             My team and I know what pay television is all about, and I would like to address right now one of the key issues to be discussed at this hearing:  projection of revenues and expenditures.

1636             The Commission has before it a broad range of proposals, from realistic to exponential.  Our proposal is realistic.

1637             Why?  Because we have been there before and we don't want to promise something we cannot deliver on.

1638             Our business plan is based on offering a competitive service that will develop a new market segment based on new subscribers to digital distribution services.

1639             We prefer the prudent approach, and our numbers reflect this.  Let me be quite clear on this.

1640             We believe our numbers to be achievable.  But should we be so fortunate as to reach the number of subscribers that some of our competitors are projecting, our financial contribution to the Canadian broadcasting system and the Canadian content development will surpass what they are proposing.

1641             We want to go one step further, heeding the lessons of the past in offering Canadians the premium programming services they deserve.

1642             To achieve this, we will be working closely with one of Canada's finest natural resources, the independent production sector, in developing quality programming, premimum programming, Canadians will be willing to pay for.

1643             We will put in place a fully transparent operation to ensure the independent production community, the Commission and other industry partners will be able to closely monitor our commitments, including equity at risk, HD versioning cost above licence fees, et cetera.

1644             We will have senior creative development staff on the ground in each province, from coast to coast, with a clear mandate to develop creative projects with independent producers and facilitate the process for these producers to make their productions available to Canadians.

1645             What we are proposing is unique, a truly national service which will offer television consumers an exciting alternative to what they have known until now.

1646             I would now like to ask Malcolm Knox to highlight a number of firsts that our company established in Canadian pay television industry in the past, and also a number of firsts we are introducing with this new service.

1647             MR. KNOX:  Thank you, Chuck.

1648             As the Commission knows, Allarcom pay television was the first to launch a pay‑per‑view service in Canada in 1990, the firs to invest over 2 million in a Canadian feature film, Bye Bye Blues, a clip of which you will see in a few moments in high definition.

1649             First to create a fully digital barker and first to offer Canadian viewers CFL games, live concerts, Canadian boxing, and NHL hockey on a Canadian pay service.

1650             In our present pay television application, we have also put forward some exciting new firsts.

1651             Virtually all of our programming will be high definition TV.  We will incur the increased cost of HD production over and beyond our licence fees.

1652             We will have a senior creative development representative in each province with a clear mandate to ensure we get the best projects possible for our service.

1653             We will advance the licence fees during production, when producers need it most.  We will invest our profits in bridge financing for independent producers.

1654             We are committed to unprecedented promotion of our Canadian programming on all our multiplex channels.

1655             We will also enhance subscribers' opportunities to access Canadian programming 24 hours a day by programming an exclusively Canadian channel.

1656             In addition, we commit to spend over a million dollars a year on third‑party advertising and promotion of our Canadian programming.

1657             We will work closely with French‑language producers to ensure their productions access our subscribers in the best format possible either through dubbing or subtitles, whichever our survey shows us is the format preferred by our subscribers.

1658             As the Commission knows, we have been successful in the West, and we believe we have the talent and the know‑how to be entrusted by you to launch this exciting new national pay television service.

1659             The extensive market research from Decima filed with our application clearly demonstrates that Canadian digital television subscribers find Allarco's proposal for a new pay television service appealing.

1660             Eighty (80) per cent of current digital television subscribers said that having a choice of pay TV is important, including 89 per cent of existing pay TV subscribers.  Eighty‑eight (88) per cent of HDTV‑ready antenna households also said that having a choice is extremely or very important.

1661             In our research and that of others Canadian television subscribers clearly indicate they want a greater choice in services and programming.

1662             Our new pay television service represents a strong commitment to the Canadian production sector and includes a substantial number of direct benefits for independent producers and the creative community.

1663             We have committed to total expenditures of over 171 million dollars over our first licence period on Canadian productions exclusively from independent producers.  There will be no in‑house production.

1664             By the way, we were delighted by and wish to thank both the independent producers and their regional associations from across the country that responded to our proposal at the intervention stage.

1665             Nic Wry and Maureen Levitt will now speak to some of the more unique aspects of our relationship with independent producers from Victoria to St. John's to Yellowknife.

1666             MR. WRY:  Thank you, Malcolm.

1667             As you have just heard, we are genuinely enthusiastic about this new opportunity, and we have come up with what we think is one of the best program funding approaches that meets both the needs and objectives of the Broadcasting Act and the true financial needs of the independent production sector.

1668             At the outset, I would like to say we consider the independent production sector to be one of the key contributors to the continuing success of the broadcasting system.

1669             Furthermore, we have already started discussions with the national producers' association, the CFTPA, to establish as soon as possible an agreement on the terms of trade, to clearly identify the obligations of both parties working together.

1670             In the first year of our licence, we will be spending over four million dollars for Canadian programming, and 32 per cent of our gross income of the previous year starting in year two.

1671             Over the initial licence period, our total commitment for the development, acquisition, promotion and investment in Canadian programs, added to the investment of our profit in Canadian programming, is more than 209 million dollars.

1672             To be clear, we have proposed a two tier interlocking system of conditions of licence in our application concerning Canadian program acquisition, spending and reinvestment.  Because there is no cap, the greater our financial success, the greater our commensurate investment in Canadian programming.

1673             In preparing our application, went across the country to speak with independent producers, and one of the constant irritants they brought up was their problem with cash flow during productions.

1674             We have listened and we have responded with an innovative approach which will not only benefit the producers, but ultimately the quality of our service.

1675             Maureen?

1676             MS LEVITT:  We heard the complaints of producers about having great difficulties in meeting with programming executives other than in Toronto or Montreal.

1677             We are proposing a new approach to develop programming which at the same time will maximize the opportunity to find and develop new talent across Canada.  By placing a senior creative development representative in each province, we will be responding to the concerns of creators and producers in the diverse regions of Canada.

1678             Each creative development representative will seek out and foster the best production proposals available.  They will work closely with each other as a coordinated cross‑country unit, and individually with producers, unions, suppliers, agencies, minority communities, the full complement of the independent production sector in their region.

1679             We will advance our licence fees as draw downs during production based on producers' cash flow needs.

1680             This has long been a thorn for individual producers who generally don't see the licence fee before a production is finished, which causes unnecessary hardship for small production companies.

1681             We will be investing 100 per cent of our profits almost exclusively on bridge financing to independent producers to help them build up their companies.

1682             This will represent over 24 million dollars over the first licence period above and beyond the 32 per cent of revenue we have committed to Canadian programming.

1683             In addition, we will spend a minimum of two million dollars a year for script and concept development, and one million dollars for third‑party promotion of our Canadian programming, plus another one million dollars a year for our regional outreach to provide us with the creative and innovative ideas we will be needing.

1684             Producers across Canada commended us on these initiatives when we met with them over the last few months.

1685             We want the Commission to know we are committed to reflecting on our new service the diversity of contemporary Canadian society on and off the screen.  We consider diversity in programming and management in the workplace to be an integral part of our proposal.

1686             We will work closely with independent producers at the time of project development to ensure that our diversity objectives are achieved.

1687             We consider our approach to marketing Canadian content to be both unique and effective.  As mentioned above, we will undertake heavy promotion with third parties and on the service itself through a full array of media technologies and our cutting‑edge, interactive website.

1688             But that is not all.  One of our channels, the Proudly Canadian Channel, will be reserved exclusively for Canadian programming.

1689             Of course, we will still offer 30 per cent of Canadian programming on all other channels in prime time.  This is the best approach to increase the public's awareness of Canadian dramatic programming, and we are pleased to report that many of the industry people we spoke to prior to this hearing agreed with us.

1690             Now to talk briefly about our programming mix, here is Wally Kirk.

1691             MR. KIRK:  The key to broadcasting is content, and the pay television universe is no different than the rest of the industry.

1692             However, pay television is fortunate because it can access the best audiovisual productions available throughout the world to offer to its subscribers.  And that is exactly what we will do.

1693             As we mentioned earlier, an important component of our programming schedule will be taken up by our Canadian productions that we will develop exclusively with the independent production sector, whether it is long foreign documentaries, feature films, drama specials or special events, we will be counting on Canada's bourgeoning creative talents and the productions that grow from our ten coordinated regional development offices to develop the programming.

1694             We also plan to work directly with Quebec French‑language producers to provide increased opportunities for their numerous box office successes to reach English Canadian audiences through either dubbing or captioning.

1695             We will aggressively market our Canadian productions from both English‑ and French‑language producers.

1696             We will be shopping throughout the world for the absolute best programming that will reflect the diversity of our country.

1697             Canadians are more and more open to being entertained by the best of world drama, the best of world music, and the best of world documentaries.

1698             Productions will come from any area of the world.  Australia, India, Mexico, Brazil, Italy, Great Britain, China and Korea, to name just a few.

1699             Of course, one other important component of our programming will come from the United States, more precisely from the major studios.

1700             The main issue here is the question of preferential or exclusive programming rights to non‑Canadian programming.  Our business model is based upon a prohibition against a paying service exercising preferential or exclusive programming in the acquisition of non‑Canadian programming.

1701             In our application we reference the prohibition in the pay television regulations for pay‑per‑view networks.  Adopting a similar regulation for pay television would allow consumers to subscribe to either our service, an incumbent service or both and be sure to receive Hollywood blockbuster movies and the best of international programming.

1702             By doing this, both consumers rights and the spirit of competition would benefit.

1703             MR. ALLARD:  Mr. Chairman, members of the Commission, at Allarco Entertainment, we have the expertise, the experience and the capacity to launch our new national pay television service in the coming months.

1704             The following short presentation will give you a brief, exciting glimpse of what Canadians can expect from a total HD experience in pay television.

1705             I will turn it over to Doug Malkie to introduce the HD short.

1706             MR. MALKIE:  Thank you, Chuck.

1707             I am very proud to say that the clips that we played prior to the session beginning were in the format being adopted by the pay industry in high definition transmission.  The clips you are going to see now include one that is a restored feature film that is coming from high def tape in the room.

‑‑‑ Video presentation

1708             MR. MALKIE:  You may have noticed that the Bob and Doug McKenzie clip wasn't in high definition, but we are working on it.

‑‑‑ Laughter

1709             MR. MALKIE:  Mr. Chairman and Commissioners, as I said earlier, we are eager to get going, and to do so we lack only two things.  The first is a broadcasting licence from you, and the second is carriage with the distribution sector.

1710             In calling this public hearing, the

Commission indicated the question of carriage would be addressed.  Let us be very clear on this.  Carriage is essential.

1711             An appropriate access regime will have to be included with your decision on a new pay television service for Canada.

1712             You have approached the issue of accrual access many times before, and all of us in this room know that access of Canada's specialty and pay networks is due in large part to the Commission's clear access policies.

1713             Chairman Dalfen, we enthusiastically share your goal of increasing the amount of Canadian drama on the screens to be viewed by Canadians.  A new competitive pay television service offers a new opportunity to work together towards solving the crisis in Canadian drama.

1714             Access to Canadian subscribers through an even‑handed access policy is a key requirement towards achieving our common goal.

1715             This completes our oral presentation, and we look forward to responding to any questions you may have.  And Mr. Knox will quarter‑back our response to your questions.

1716             Thank you.

1717             THE CHAIRPERSON:  Thank you, very much.

1718             I will turn the mic over to commissioner Williams.

1719             COMMISSIONER WILLIAMS:  Good morning, Mr. Allard and Allarcom panellists.

1720             I am going to try to work my way through a bunch of questions here.  Hopefully, I will be done by noon, and take a break at 10:45, about halfway through.

‑‑‑ Laughter

1721             COMMISSIONER WILLIAMS:  So I am going to start in the programming area.  Or maybe just before I start the programming area, perhaps you could elaborate a bit on the importance of having a Western‑owned broadcaster.  You referred to it a bit in your opening application.

1722             MR. KNOX:  We think it is important to have a Western‑based ‑‑ perhaps it is more important to say a regional‑based national service.

1723             We have all witnessed, and many of us have experienced, the consolidation of broadcasting in Canada today.  We have all seen the migration of senior executive positions to Toronto.  We have seen the regions really left with what we have referred to over the years as kind of a hub‑and‑spoke (9:40‑15:08) approach to broadcasting.

1724             You will find in the regions we don't have the full complement of broadcasting positions to the extent that we used to.  Certainly in conventional.  Most of the stations are simply news and sales.  There is very little else that goes on there, including origination of signals.

1725             I mean, it has really been ‑‑ broadcasting is a mature industry, as you know, and greater efficiencies have distilled the operations down to where the largest ones are centered in Toronto, work out of Toronto.

1726             We have in our former lives worked in the West.  We have worked at Superchannel.  I worked at Access Network for many years.  And we really believe that the regions have a lot to offer.

1727             And we bring a perspective that represents those regions, and we think we can really help foster the production of programming in the regions and be sensitive to them.

1728             And of course, we fully recognize the wonderful attributes that Toronto and Montreal and Vancouver have with their very sophisticated production capabilities and very experiences producers.

1729             But I think what we truly bring is a sensitivity to the regions and the recognition that there really are good quality people there who can produce excellent programming.

1730             So that is why we think the regions are important.

1731             COMMISSIONER WILLIAMS:  Thank you, Mr. Knox.

1732             In the area of programming, I see in your application you didn't provide a program service, so I am going to have to ask you ‑‑ a program schedule for your service.

1733             I am going to ask a few questions to try to flesh out that part of the file.

1734             We know that you have stated 85 per cent of your programming will consist of programming draw from category seven drama.

1735             Could you elaborate on what type of drama is to make up the significant portion of your schedule?

1736             MR. KIRK:  The majority of that would be feature films, but we would also be looking at a considerable number of dramatic productions, hour longs, series, docu‑dramas that would fill that out.

1737             COMMISSIONER WILLIAMS:  Okay. In category seven, there is seven As, ongoing dramatic series, ongoing comedy series, and B.  Seven C is the specials, mini‑series ‑‑

1738             MR. KIRK:  Right.

1739             COMMISSIONER WILLIAMS: ‑‑ made for TV feature films.  Seven D is theatrical feature films aired on television.  Seven E:  animated television programs and films.  Seven F:  programs of comedy sketches, improvisations, unscripted works, and stand‑up comedy.  And seven G:  other drama.

1740             Could you give us rough percentages of each of these specific categories and your program schedule will be developed?

1741             MR. KIRK:  Yes.  I would suggest that 50 per cent, in that area, would be feature films.  I would think another 25 per cent would be dramatic series.

1742             One area that we don't expect any at all would be animation.  There might be once in a while something, but that would be it.

1743             Have I missed a category there?

1744             COMMISSIONER WILLIAMS:  Well, comedy sketches, improv, unscripted stand‑up comedy.

1745             MR. KIRK:  There would be probably up to ten per cent, in that area.

1746             COMMISSIONER WILLIAMS:  Okay. I better stop there. I think we are reaching 100 per cent.

‑‑‑ Laughter

1747             MR. KIRK:  I think we are right there.

1748             COMMISSIONER WILLIAMS:  Wouldn't want to go over.

1749             What kinds of programming do you plan to offer subscribers during the prime time, between six and 11?

1750             MR. KIRK:  That would be the main thrust of our programming.  As I said before, it would be primarily feature films.  Probably we are looking at about a third of the blockbuster kind of programming.

1751             Then we would be looking at library material that would involve those dramas.  And occasional documentaries.

1752             That would make the mix.

1753             COMMISSIONER WILLIAMS:  Thank you.

1754             MR. KIRK:  Primarily category 7.

1755             COMMISSIONER WILLIAMS:  Okay.

1756             Could you please provide a program schedule for your service, say by Thursday, much like some of the other applicants are bringing material forward?

1757             MR. KIRK:  Yes, we could.

1758             COMMISSIONER WILLIAMS:  Okay, thank you.

1759             We will talk a bit about your multiplex channels now.

1760             We note that you have indicated in your reply to deficiencies that you intend to multiplex five or six channels.  Please confirm how many multiplex channels will be available in year one of your service and does this list include the "Proudly Canadian" channel?

1761             MR. KNOX:  It is our intention to launch all six in year one.  Let me just break it out for you.

1762             Think of it as the main service would be channels 1 and 2.  We would provide an east‑west feed, so it is two.

1763             Our "Proudly Canadian" channel, 24 hours of Canadian.  That is three.

1764             Then we would have three multiplexes of the main service.

1765             COMMISSIONER WILLIAMS:  What is your program strategy for each of your multiplex channels?  For example, will they have a particular specific theme?

1766             MR. KNOX:  There are two ways to approach this.

1767             One is to let the marketing guys drive it and say, "This is what you need to look like and this is really a snappy brand" and then you try to fit the programming to it.

1768             The other is to let the programmers drive it and to really do a good, comprehensive study of the programming that is available, that will be available, and then once we have found an appropriate critical mass of programming that is attractive, then we will brand it.

1769             So at this stage of the game we have not tied the hands of the programming people.  We need them to ‑‑ once we get a licence ‑‑ then have sufficient time to craft the programming approach in greater detail, and at that time we will see what makes sense about creating genres or themes and whatnot.

1770             Of course these channels will offer additional viewing opportunities of programming on the main channel, but I think there are some creative ways to package programming and that will be driven by the programmers.

1771             COMMISSIONER WILLIAMS:  Will there be much overlap on these multiplex channels?

1772             MR. KNOX:  Yes.  Sure.  Because these are not stand‑alone channels, so by their very nature what we are trying to do is to provide (a) more viewing opportunities for a large section of programming, and (2) creative ways of presenting it.

1773             COMMISSIONER WILLIAMS:  To what extent will you be relying on repeats to complete the schedules of your multiplexes?

1774             MR. KNOX:  I will ask Wally to ‑‑

1775             MR. KIRK:  We will have a normal repeat factor.  A normal feature film for example would play from 10 to 15 times over a years' period, so that would be an approximate ratio of what the programming would do.

1776             To some degree that depends on supply.  You can adjust that depending on what the supply of the programming is.  The more originals you can get the better it is for us and for our service.

1777             We have been involved in start‑up operations before and we know there is that period of time that it takes.  If we commit to a particular program now it is probably two or three years before it comes to fruition, especially for the start‑up situation like this where you have an incumbent who has under contract a lot of material.

1778             COMMISSIONER WILLIAMS:  In your opinion, is there enough programming to fill all of these proposed channels, given that for example five channels would represent 840 hours a week?

1779             MR. KIRK:  My understanding is that certainly the Canadian channel there is enough material for that.  We looked into that.

1780             The "Proudly Canadian" channel is a programmer's dream really.  It will be our place to showcase the best of Canadian productions that will be available to us and that will only improve as time goes on.  We can see that being a driver for the other channels.

1781             My understanding on the remaining channels at the moment is that they haven't been developed as yet in terms of a theme.  That is to come.

1782             MR. KNOX:  Could I just add?

1783             The main service we said we would have an east‑west feed.  We feel that is very important so that we can promote it properly.  So that if we have something running in central Canada at 8 o'clock, we are able to say the program is running at 8 o'clock in east and western time zones.  So it just gives us a little more consistency in our promotional message.  So that will take up two of the channels.

1784             Then of course the Canadian channel is the third one, so it is really the multiplex channels are the ones that we have to be very creative with the programming, beyond the normal level of creativity that is required for the main.  But that is where the extra repeats would be.

1785             COMMISSIONER WILLIAMS:  When you are programming, where would your original Canadian programming be featured in your schedule?  What time of the day?

1786             MR. KIRK:  As far as the "Proudly Canadian" channel is concerned, it is 24 hours a day Canadian programming so Canadians will be able to tune in to watch Canadian programming at any day part and in all time zones on that channel.

1787             The main channel will be containing, in prime time, 30 percent Canadian between the hours of 6:00 and 11:00 p.m., so there will be ‑‑

1788             COMMISSIONER WILLIAMS:  So 30 percent Canadian in prime time?

1789             MR. KIRK:  Yes, in prime time.

1790             COMMISSIONER WILLIAMS:  Some intervenors have raised concerns of limited public funds.  An example, Téléfilm and CTF funding may not be sufficient to support a significant amount of new original Canadian production.

1791             What is your view on that?

1792             MR. ALLARD:  Let me start on this and then I will hand it over to Nic Wry who has significant experience in this whole area.

1793             Our view is, as you probably know, pay television doesn't trigger the fund in itself.  Pay television typically is one of the players of the funding mix.  Most of these Canadians programs today require a matrix of different broadcasters to purchase different windows, because of course the pay window is in advance of conventional and specialty, so it really presents the opportunity for us to participate in just that pay window part of the matrix of financing.

1794             What we also bring to the table, however, is a very significant script and concept development budget.

1795             Also some of our initiatives such as advancing licence fees while a project is in production, which helps them with their cash flow crunch issues, is very significant.

1796             One of our most exciting aspects of our proposal is the investment of our profits into interim financing once we get the business into the black.

1797             So we are going to position.  I forgot one also very important point, and that is, we have committed to spend $1 million a year with third party promotion opportunities to promote Canadian programs that are running on our service.

1798             In total, when you add all of that up, as you will see on page 12 of our oral presentation, the total contribution that we can bring to Canadian program development, production and then distribution and exhibition, is $209 million.  We feel that is a very substantial contribution to the Canadian system.

1799             With respect to the people who are concerned that we will tax the public funding sources, again I say that is a little difficult because we can't trigger it all by ourselves.  So we will be just providing another opportunity in that pay window matrix of the financing scheme to be a player.

1800             Do you have anything else to add?

1801             MR. WRY:  The key to this is, we are really working to not use the funds to the extent possible, because we know there is already a dramatic over subscription to the fund.

1802             So we have been talking about several things, including working significantly on international co‑productions so we can bring money in from other countries.

1803             We have also seen some wonderful lower‑priced features that are done for half a million or a million and they are just wonderful.

1804             And there will be opportunities when people say "We have a structure but we need your money.  If we had your money we could make this happen" that won't put additional stress on the fund because they were going to happen anyway in one form or another, and that will give us an opportunity to help them and top it up.

1805             So I'm sure that between those things our strategy is to try to find a way to not put pressure on the funds.  That is the whole proposal of what we are doing.

1806             MR. KNOX:  I would like to ask Geoff on our panel to comment.  He has extensive experience in working in the regions in production and I think he will bring an interesting perspective.

1807             MR. Le BOUTILLER:  I think what is interesting about this as well as the integration of the independent production point of view into this group, which is really exciting and unusual, from the point of view of the 10 development officers spread out across the country this is a really great way to address exactly the problem that you are talking about.

1808             Because if you look at the full range of opportunities that are presented to independent producers ‑‑ who are very clever survivors by the way ‑‑ to look for money in strange places.  We will be able to tap into that with our 10 regional officers.

1809             For example, in Halifax, my home town, we have Canada's foremost international co‑production market strategic partners which is addressing exactly that, where we are looking offshore, bartering, sitting down and talking and looking for ways.

1810             But another really neat thing is the coordinated approach of the 10 development officers.  We are connecting in Halifax now with a pool in Calgary a fund which is based in London and Berlin as a result of strategic partners.  So the 10 development officers can help sniff that stuff out and get that money in to replace the ever depleting public funds in Canada.

1811             We can also access other unusual sources, perhaps with looking at new markets, minority and diverse markets in specific places across the country that might now otherwise surface.

1812             Well, that is enough, but there is a really exciting array of possibilities by looking outside of the major centres and looking at Toronto itself as a region and Montreal as a region, a full contributing partner in those 10 regional offices.

1813             COMMISSIONER WILLIAMS:  How much of your original programming will depend on public funds?

1814             MR. WRY:  Our objective is that none of them will.  That is how we are moving forward.

1815             If there is a situation where we are part of something else, where we are not putting pressure on the funds by being involved but there is fund money in that project, we would certainly do that, but our objective is not to go to the fund for the things we need.  That is our strategy and that is what we are going to try to accomplish.

1816             COMMISSIONER WILLIAMS:  You stated in your Appendix 1A of your supplementary brief that:

                      "The premier of Canadian drama that we are part of will be on the `Proudly Canadian' channel which will, with our marketing initiative, draw subscribers to this channel."  (As read)

1817             It is not clear what you mean when you refer to drama that you are part of.

1818             Is this referring to programming you will be commissioning to fulfil your commitment to the 85 hours of original programming?

1819             MR. KIRK:  Yes, that is.  That is projects that we have been involved in from the start.

1820             COMMISSIONER WILLIAMS:  Okay.  The current licensees have the following condition of licence.

                      "In each semester of the licence terms the licensee shall devote to the distribution of Canadian programs not less than 30% of the time from 6:00 p.m. to 11:00 p.m. eastern or western time and 25% of the remainder of the time during which the service is in operation.  For the purpose of this condition 150% credit will be given for time during which the licensee distributes a new Canadian production that commences between 6:00 p.m. and 11:00 p.m. eastern or western time, or in the case of a new Canadian production intended for children at an appropriate viewing hour between 6:00 a.m. to 9:00 p.m. and the licensee will receive credit for each subsequent showing in the specific time periods of such production within a two‑year period from the date of first showing by the licensee."  (As read)

1821             Could you please confirm whether you are all seeking this condition of licence?

1822             MR. KIRK:  Yes.  We would be, yes.

1823             COMMISSIONER WILLIAMS:  Okay.  Thank you.

1824             In your opinion, is there enough programming to ‑‑ I'm sorry, I have asked you that one.

1825             In your reply to APFTQ's intervention we note that you propose to use Canadian independent producers for 100 percent of your Canadian content needs, including your on‑air promotional material.

1826             Could you please describe what your non‑original Canadian programming will consist of?

1827             MR. KIRK:  I'm sorry, I'm not sure I understand what portion of the programming you are referring to.

1828             COMMISSIONER WILLIAMS:  Okay.  It was in your reply.  It was in you reply to the APFTQ intervention.

1829             MR. KIRK:  Right.

1830             COMMISSIONER WILLIAMS:  We note that you propose to use Canadian independent producers for 100 percent of your Canadian content needs, including your on‑air promotional material.

1831             MR. KIRK:  Right.

1832             COMMISSIONER WILLIAMS:  Could you please describe what your non‑original Canadian programming will consist of?  What is this programming?

1833             MR. KIRK:  That would be programming that would be acquired.  That would be Canadian programming that we are not involved in the creation of but would simply purchase.  It would be existing Canadian programming that we would use to round out our schedule.

1834             The ratio of that would obviously be fairly high at the start of the licence period and then taper off as more and more products come through the system.

1835             MR. KNOX:  Could I  ‑‑

1836             COMMISSIONER WILLIAMS:  Sorry, go ahead.

1837             MR. KNOX:  I was just going to add, one of the interesting features that we are able to bring to this new proposal is that while some of this programming may be coming from distributors that we are acquiring or independent producers, it is our intention that it will be exhibited in high definition.

1838             COMMISSIONER WILLIAMS:  Do you have plans to acquire second or third window titles for your non‑original Canadian programming?  If so, what proportion of your programming schedule would these programs represent in a given year?

1839             MR. KIRK:  I'm sorry, once again I'm having trouble with the definition.

1840             COMMISSIONER WILLIAMS:  Yes.

1841             MR. KIRK:  Could you just hit that one again?

1842             COMMISSIONER WILLIAMS:  Sure, not a problem.

1843             Please indicate if you have any plans to acquire second or third window titles for your non‑original Canadian programming.  If so, what proportion of your programming schedule would these programs represent in a given year?

1844             MR. KIRK:  We think we are starting off at about 5 percent would be original programming, so we are talking about 95 percent would be acquired Canadian programming, but we are hoping that when we get into year four that we would be on a 60:40 ratio, with 60 percent being original programming and 40 being acquired.

1845             COMMISSIONER WILLIAMS:  Where do you intend to acquire the foreign programming from?

1846             MR. KIRK:  We hope to get it from all over the world.  We have a portion of the program schedule, approximately a third, that would be Hollywood blockbuster movies, 30 percent of the programming is Canadian, so the remaining non‑Canadian programming would be made up of productions that we would virtually shop the world for, because we know just from our research that there is a tremendous amount of terrific programming in Britain, Australia, India, lots of places around the world.  So we will be shopping for that.

1847             We hope to have the remainder of the programming would be either library material or material that we have obtained from other countries.

1848             COMMISSIONER WILLIAMS:  I am going to continue on in this area a little longer.

1849             According to Astral and Corus, they currently acquire and broadcast virtually all of the top films available from U.S. studios and the best of American made for pay drama series.

1850             Given this, in your view is there enough premium foreign product available for your service to be able to attract audience and differentiate itself from the existing pay services?

1851             MR. KIRK:  Yes.

1852             If I could start off with the Hollywood blockbuster area, there is a lot of material available that has not been contracted.  There are some studios that have not made arrangements with the current incumbent.

1853             I have to couch that because are we talking today or yesterday or tomorrow, because it is a very moving marketplace.

1854             In addition to those top studios, there are a great number of independent film sources.  Some exceptional movies come out of that area, so there is a considerable number of material there.  There also is a great library out there of feature films and we have done our research on that and there is a great library of rerun material.

1855             COMMISSIONER WILLIAMS:  Some interveners have raised concerns with respect to the impact on window acquisition for specialty and conventional services if a new pay TV service is licensed and competes for attractive programming.  Specifically, new pay services would be forced to seek out programming that is not normally considered to be in the first exhibition window for specialty services or conventional services in order to complete their schedules.  Could you comment on that please?

1856             MR. KNOX:  Two points I would like to make.  One is because we are a premium service and people have to pay more for us than they would for a specialty or a conventional, it is absolutely in our best interest to put together a compelling and probably more interesting ‑‑ if that is possible ‑‑ schedule than what the other services would put together.  So, I mean, the onus is on us to put together something really terrific and we are not going to accomplish that by just running the same thing that everyone else is.

1857             Now, another important thing to consider is in the orderly marketplace you are well aware that movies and other programs start in different places and work their way down the food chain.  You know, movies start in the theatres and then go to hospitality and then they go to ‑‑ etc.  If you are interested, I could walk through it.  But my point is with respect to programs that specialty and conventional might be interested in, if we run it on pay first it is in a pay window and it will only go to our subscribers.  If I can draw your attention to a page in our supplementary brief, and I will find it for you, it is on page 14.  What you will find, in our projections you will see that ‑‑ let us pick a year, for instance.  There is an easy one, year four.  So when year four ‑‑ I will give you a chance to ‑‑

1858             COMMISSIONER WILLIAMS:  Thank you.

1859             MR. KNOX:  Yes.  It is on page 14.

1860             COMMISSIONER WILLIAMS:  Okay, go ahead.

1861             MR. KNOX:  Okay.  So if you look towards the right hand side and you look at per cent of digital that we are suggesting we will have as subscribers in year four you will see that our forecast is that we will have 900,000 subscribers.  Given our information and projections for the size of the digital universe, we will only have a digital penetration of 10 per cent of the entire digital universe.  So our programming will run in a window in advance of specialty or conventional and we will only be exhibiting it to a potential of 10 per cent of that market.  So that means 90 per cent of the digital market is still available and still fresh for specialty and pay ‑‑ excuse me ‑‑ specialty and conventional.

1862             I would suggest that, given the experience of the Sopranos running on Movie Central and TMN and then CTV didn't seem to have any difficulty in having a very successful run with it on conventional.  Not only that, there is another aspect that is important to recognize and that is when a high profile program is running on a pay service and it is only available to that small subscriber base in comparison to the entire universe there will be promotion and advertising that entire viewing audience will be seeing, so it will create market awareness and demand before it even reaches the specialty or the conventional guy.  So I would suggest that having it on pay first is actually an enhancement to their promotional message and adds value to the proposition.

1863             COMMISSIONER WILLIAMS:  Okay, let us talk a bit about your revised position regarding exclusive rights.  We note that in your reply you now recommend that a prohibition against exercising preferential or exclusive programming rights to non‑Canadian programming could be limited to a number of Hollywood blockbuster films measured in relation to films released to pay television during a calendar year or broadcast year.  Please elaborate on this position, including how this would be implemented.

1864             MR. ALLARD:  Well, Commissioner Williams, maybe I will start.  The Commission has already crafted a wonderful provision for Express Vu in the Pay‑Per‑View realm and I think it equally applies to pay television, because we are driven by movies and I think they have already renewed Express Vu's last renewal for another seven years, this provision.  So it is simple, it is easy to administer, so from my perspective it is a wonderful provision the Commission has already drafted, but maybe you have some further comments on it.

1865             COMMISSIONER WILLIAMS:  Could competing ‑‑(off mic)‑‑ potentially both acquire and broadcast the same programs during the same timeframe?

1866             MR. KNOX:  Yes.  We are suggesting that all of the pay television services have the opportunity to acquire the large blockbuster movies and here is our rationale on this.  If I can give you the analogy of a bookstore, if you will permit me.  You know, if Chapters is on the corner and Chapters has this huge variety of books, they still have the top bestsellers at the front door for when you walk in.  We are a mom and pop bookstore, we want to open up down the street, we want to have a great Canadian fair, we want to have some specialty lines on books that we think are very attractive.  We are still going to want to have the top bestsellers at the front door of our bookstore and that is to get people into the store.  Once you are in the store, then you can sell them the rest of the fair that you have and that is very important to us.

1867             Because you have to recognize that, for our business, our front door is the call centre of the BDUs where the customer service representative is sitting there on the phone talking to the new digital customer who is acquiring packages and they are sitting there pitching them on the various packages.  And so you can only imagine what it would be like if the customer is saying can you tell me what this movie service offers?  Well, sure.  These guys, who have been around a long time, are going to give Harry Potter, The Matrix, Lord of the Rings.  These guys are going to give you compelling programs from around the world on a bunch of programming that you won't have seen in Canada, so you won't know anything about it.

1868             We need to have the marquee value of that programming in our mix from a marketing and customer acquisition perspective.  We have got to be able to give the BDUs something that they can sell.  You have some person sitting in a call centre and they only know what they watch and what they see and they will be aware of the fair.  Now, there is another angle on this too, and that is from a marketing prospective the studios spend millions of dollars promoting their movies in the theatres, into digital and then into video and the video store.  So by the time these blockbusters get to a pay television there is huge market awareness, there is huge market interest and demand and we need to be on that same playing field.

1869             Now, it is no different than in conventional broadcasting when you see CTV being able to simulcast ER.  They certainly are able to take advantage of and enjoy the benefits of the promotion that occurs on the American channels of ER because they are going to be able to simulcast it.  So what I am saying is there is a huge promotional marketing activity of this programming that helps add some real sizzle, helps add some real marquee value to the service and we need some of that, otherwise we will be at a real disadvantage.

1870             MR. WRY:  But the point is we want to use those to draw the dollars in to be able to do the other things were are doing because, without them, you can't get the dollars in to put in the Canadian productions that we want to do.  That is basically where the thrust is coming from, is how can we do that unless we have something that will drive?  Unfortunately, the only thing that seems to really be a driver is the top films.

1871             MR. KNOX:  One last thought on exclusivity.

1872             COMMISSIONER WILLIAMS:  Sure.

1873             MR. KNOX:  While I appreciate the incumbents are suggesting they have got everything, that the Americans produce, I would suggest that they really have the cream of what the Americans produce.  They have only got so much money to spend.  In the United States they are ‑‑ what are we up to, five ‑‑ five U.S. pay services and these guys are one.  They get the cream, they get the top layer.  There is lots of programming left and Wally has found that.

1874             COMMISSIONER WILLIAMS:  If the Commission were to impose a prohibition on exclusive rights, what would happen to the pre‑existing arrangements of the incumbent pay services for exclusive rights?

1875             MR. ALLARD:  Well, maybe I will answer that.  I guess you have to honour your contracts, so if there is exclusivity rights then you have to honour those.  I think, to my ‑‑ anyway, my experience is the studios don't mind giving you exclusive rights, either you have to pay the price or the premium for it or the other alternative is, in Canada, they are retractable.  Right now, there is really only one layer of pay and they might have exclusive rights, but they might be retractable.

1876             COMMISSIONER WILLIAMS:  Under a scenario that prohibits the acquisition of exclusive rights how would Allarco Entertainment differentiate its programming offering from the incumbent services?

1877             MR. WRY:  What we have done is go through the process of saying ‑‑ it was an exercise.  We went through it first and said is there enough good different programming to make this work, because before we did the research we didn't know.  Then Wally spent time talking to distributors, talking to foreign agents and seeing what there was and he became and then we became excited because there is a lot of product out there that is good programming from Britain or from Australia or other countries that we know people will want to watch.  So what we are really hoping is that the top movies will be available on either service.  So your decision then becomes what is the compelling Canadian programming and foreign programming that is going to make it work?

1878             We are absolutely determined, seeing the success of Corner Gas and even Degrassi and Trailer Park Boys, you know, to find Canadian ‑‑ that people will say did you see that show last night, whatever it is, you know something like Trailer Park Boys that becomes enough talked about that people will say, you know, I want that service because it has that show and it is really funny.  So that is really how we approached it in terms of there is good programming from other genres.  It is not just going to be a bunch of second rate American stuff, it is going to be the best from all over the place and that the Canadian, if we put enough focus on it, can help that process rather than being in the background in terms of drawing subscribers to something they have heard Is exciting.

1879             MR. KIRK:  If I can add to that.  Pay services need to be programmed like all other television services.  I think sometimes you can, even in the case of the Hollywood movies, you can present them in a different way.  I think Chuck said that, you know, if you look at the eastern service and the western service, although they are carrying a lot of the same product, they have a different look to them and very often it is the creativity of the programmer.

1880             The best example of that I can think of is there was a situation in the U.S. where they ran a festival called Before They Were Desperate.  What they did was they ‑‑ the popularity of the show was so high ‑‑ they hunted back and got the last movie that the four female stars had done prior to that series and had a festival of them.  Well, it created new interest in it.  So there is ways of presenting things in a totally different manner, the same basic product.

1881             MR. WRY:  Well, I think it is important too just to bring up that you saw Bye Bye Blues in high‑definition, which is wonderful, and it really is going to be another opportunity for people to see the things like Bye Bye Blues or other feature films that have been made in a high‑definition version with 5.1 audio, because we have committed to make everything 5.1 audio in addition to HD, and I think that they will be impressed and they will look at it and they will really enjoy it, because its theatrical release was, as most Canadian films are, quite limited.  So I think that when it is in high‑def, when you are sitting in your living room going I have this new high‑def television, what am I going to watch, that they in fact will be attractive and people will enjoy them.

1882             COMMISSIONER WILLIAMS:  If the Commission were to impose a period of non‑exclusivity as an interim measure in order to enable a new entrant to become established in a market place, how much time would be appropriate?

1883             MR. ALLARD:  Well, I am not sure if time is the critical element.  I think it would be better to be tied to, you know, if we could have ‑‑ if we have 30 per cent of the other incumbents' base that would be a better measurement than time.  You will remember Express Vu just got renewal of their exclusivity for another seven years, so they went through their first licence term. So I would rather tie it to at least the first term and then you have a chance to look at it and see what you think.

1884             COMMISSIONER WILLIAMS:  So I think you have given me two answers there.  You said 30 per cent of the incumbents' business or first licence term or both?

1885             MR. ALLARD:  Well, a seven‑year licence term would be my preference and, if I had to choose, I would take the second one, the 30 per cent.

1886             COMMISSIONER WILLIAMS: Okay.  That is very cleaver answer.  Let us talk a bit about high‑definition.  What percentage of the programming shown on your proposed service would be high‑definition?

1887             MR. KNOX: It is our intention to, as we said, virtually all.  So, I mean, we are trying to get all of the programming in high‑def.  We recognize we are going to run into some challenges, but the point of the service is to provide something special and we are not going to do that if we water it down by not doing it.

1888             COMMISSIONER WILLIAMS:  Is there enough high‑definition programming to fill all your multiplex channels?

1889             MR. KNOX:  Today, no.  We are going to have to work with others in partnerships to get the programming converted.  However, as demonstrated by the Bye Bye Blues clip, it is certainly possible to convert Canadian films to high‑def.

1890             COMMISSIONER WILLIAMS:  Did you ‑‑

1891             MR. WRY:  Yes.  What I want to say is it is not just a case of ‑‑ a lot of the applicants have said, you know, we will run high‑def, whatever is out there that is already there we will run as high‑def.  I mean, our whole project was in addition to using the material that is already there to take everything, both the Canadian and the other materials that we have found, and put them on a high‑def scanner and clean them, make sure they look good and have them in high‑def.  And if you say I will just run the shows that are in high‑def that are out there you are going to get a very different number than if you say everything that is on film can be recreated by scanning it on a scanner in high‑def, then you are only left with a smaller percentage.  So then things like SCTV that will be up‑res and look a lot better than they did originally.

1892             The other thing we have talked about doing that I think is important is we are talking about putting a small SD bug on all the shows that aren't high‑definition.  So if you are watching a show at home you know instantly that it is, you know, it is not high‑definition, it is standard definition.  For those few programs that we go they are wonderful and we want to run them on our service, but the best we can do is up‑res them and make them look as good as we can.  But the film product really, on a scanner, makes the difference.

1893             MR. MALKIE:  From the technological point of view there is an awful lot of other better ways to do things in the past and one of the things that I have learned about a long time ago is it doesn't pay to be sentimental about technology.  You go as far as you can see and when you get there you can go further.

1894             My background has an awful lot to do with developing the workflows and techniques that improve standard definition content and now carry it forward into high‑definition, be it to up‑res, tilt and scan, do restoration, add 5.1, create ‑‑ synthesize 5.1 from what used to be existing stereo tracks, carrying forward existing closed captioned data, moving it into other workflows that allow descriptive video and so on.  The fundamental basis of our entire architecture assumes that you have to deal with all of this stuff in some form at some point in time.  It is a pump that has an awful lot of material that is appropriate for up‑res and restoration.

1895             If you look at all of the content in the world, for example, as a total aggregate number in standard definition regardless of its original broadcast format and you just simply say take 10 per cent of that that is appropriate either from a content point of view, from an adoption point of view, from a technologically feasible point of view you have still got millions of renewable pieces of content to take advantage of.

1896             MR. KNOX:  So the short answer is ‑‑ (laughter) ‑‑ we are going to be very aggressive in doing what we can to promote the exhibition of high‑definition television.  We are going to work in partnership with others, we are going to help chase the technology and find out how to do it effectively and as inexpensively as possible and one of the legacies that we will leave as we move forward, there will be a greater array of Canadian programming, Canadian films, that are now in high‑definition television and that should give independent producers a little more life to projects that they produced years ago.

1897             MR. WRY:  If I could have the last word.  No, the other thing we have talked about is really important and that is when a producer comes and says here is my budget, I really want to do my show in high‑def, but I can't make that happen, will you help me?  We are going to give them the money in addition to their licence fee that they need to make it in high‑definition.  It is important to know that Super 16 ‑‑ the people like Doug from California have told us that Super 16 is a good medium for high‑definition, so it doesn't have to cost a whole lot more, there are various ways to approach it.  We are going to work with the producer and find a way to get their show made HD which ultimately is really going to help both us and them because they will have something to sell when it becomes ‑‑ if you have a high‑def library I am interested.

1898             COMMISSIONER WILLIAMS:  That is the answer, okay.  Please, can you tell us what other languages you anticipate broadcasting in?  Will the material in French and other languages be subtitled or dubbed for an English audience?

1899             MR. KIRK:  I can answer that.  We will be 95 per cent ‑‑ no, sorry, there will be 5 per cent French language and we have allowed for 3 per cent other, which would be to be determined, depending on the projects that we might get.  We have decided that we will do both, in terms of the French material, will do both dubs and captioning and we will get a response from our audience to determine which one we choose on the long‑term.

1900             MR. MALKIE:  If I could add onto the end of that if you don't mind.  Part of my background has to do with architecting solutions to things such as foreign language versioning, carrying forward captioning and so on.  Part of the processes that I get involved with in my day to day job is simplifying and making more efficient the process of foreign language versioning, the requirements of in‑country foreign language versioning, etc.  That is actually one of the pieces of the architecture that we are proposing.

1901             COMMISSIONER WILLIAMS:  Okay, I think this might be a good time for a break, Mr. Chair.  When I come back I have some questions in the area of economic and distribution issues, but this finishes the programming part and I think it is almost 10:45 anyway.

1902             THE CHAIRPERSON:  Thank you, Commissioner Williams.  We will break now for 15 minutes.  Nous reprendrons dans 15 minutes.

‑‑‑ Upon recessing at 1043 / Suspension à 1043

‑‑‑ Upon resuming at 1103 / Reprise à 1103

1903             THE CHAIRPERSON:  Order, please.

1904             À l'ordre s'il vous plaît.

1905             Commissioner Williams.

1906             COMMISSIONER WILLIAMS:  Thank you, Mr. Chair.  Welcome back, panellists.

1907             Mr. Allard, just as a way of getting us started again, could you maybe outline the main advantages of licensing a private company versus a public company for this type of broadcasting undertaking?

1908             MR. ALLARD:  Well, usually a private company can act faster in connection with authorizing and approving scripts and concept.  They tend to be a little bit more ‑‑ the decision usually resides with one or two people and those decisions can be made very quickly.  They don't have to go to a board for approval.  So I think we would be a little bit more responsive to them then the actual public company.

1909             COMMISSIONER WILLIAMS:  So a more nimble company, I guess, is one of the advantages.

1910             Would you take a longer term in investing view, for example?

1911             MR. ALLARD:  A longer term in investing ‑‑

1912             COMMISSIONER WILLIAMS:  A longer view.  Would you be a more patient investor than an institutional investor?

1913             MR. ALLARD:  Oh, for sure.  We usually were in our companies for 10, 15, 20 years before we got out of them or are forced to get out of them.

‑‑‑ Laughter / Rires

1914             COMMISSIONER WILLIAMS:  What is your estimate of the annual growth rate of digital cable subscribers in Canada over the next seven years?

1915             MR. KNOX:  If you will allow me to return to that chart that was in our Supplementary Brief on page 14?

1916             COMMISSIONER WILLIAMS:  Okay.

1917             MR. KNOX:  You will see that we ‑‑ on the left‑hand side of our chart you will see that we have identified for 2001 to 2004 the growth rate that was experienced at 20 percent, 12 and 14; 2005‑2006 we are expecting it will be a minimum of about 16 percent and then 15 percent in 2006, getting the digital universe up to, in 2006 to 5.8 million.

1918             And then, in our forecast we have suggested that when we did this last spring that it would be reasonable for the sake of our model to have the digital universe grow by 10 percent a year.  Based on what we are now hearing from Decima, which is mostly anecdotal information, the growth rate may be at an accelerated rate over this as we move forward.

1919             Perhaps Mario, our researcher, could give you a little more insight into that because we have really been quite excited about what some of the BDUs are doing.  We understand that as the boxes become cheaper and cheaper they will really promote the rollout.  Some of the cable guys will get to a stage where they will probably give them to their subscribers, to their clients and customers so that they can migrate away from analog that much faster.

1920             We certainly understand with the moves in the United States ‑‑ and I believe it is 2009 where the analog channels are going to go dark and the U.S. world is going to be on digital ‑‑ that will have a profound impact on Canada, particularly with the rollout of digital‑ready boxes.

1921             These television sets that are before you have the space for the new cable cards, the cards that the cable companies will then give you.  I believe in the States it will cost $2 a month or something and that card goes in and the TV is now cable ready, digital cable ready.  These are hitting the markets apparently this year.  So that will have profound impact on it.

1922             Mario, do you have something you can add to this?

1923             MR. MOTA:  Thank you, Malcolm.

1924             I have been told to stand up so people way back here ‑‑ I think it is on.  Yes.

1925             I will just give you an update on what is on the chart here in terms of Decima's perspective.  We are at about 4.8 million digital subscribers at this point, probably edging closer to 4.9.  In fact, the year‑end 2005 number might even be a little bit lower than expected at the end of the year. We are seeing some very strong growth, accelerated growth from the cablecos, in fact.

1926             Just to bring some perspective, we track the growth of the digital TV universe in Canada on a quarterly basis and those are real hard numbers that we are gathering from the public companies, but also the smaller mid‑tier cablecos who are mom and pop shops largely who we seek that information from on a quarterly basis.  So these are real numbers on a quarterly basis.

1927             We don't like to project personally two years out because there is a lot of factors there that change the forecast.  Quite frankly, most of them are going to change upward.

1928             What is happening is we are seeing lower‑cost boxes out there in the field.  In fact, a lot of the distributors are offering these boxes free of charge.  The other point of that is the CableCARD‑ ready TVs that are entering the market.

1929             So we are really robust on the market in terms of growth.  Certainly, Allarco has been prudent in its projections but, certainly, there is some strong growth in the market as the cable industries migrate and ramp up their migration to digital.

1930             COMMISSIONER WILLIAMS:  In a competitive pay television environment could you please explain how you expect that multiple pay television services would be packaged and priced by BDUs?

1931             MR. KNOX:  We are a wholesaler.  We put together a great product.  We work hand in hand with out partners, the retailer, the BDU.  We fully expect the BDUs will want to package our service in a combination with other services that enhances their rollout.  We are in no position to dictate to the BDUs how to package it.  That is their business.  We will certainly have preferences.  We will certainly be interested in being in a package that is the most effective for both of us.

1932             But there is really another partner involved in that discussion and those discussions will happen once we get a licence.

1933             COMMISSIONER WILLIAMS:  What is your view on the impact that competition would have on the monthly subscriber rates, the pay television service providers?  Would new pay television entrants be able to negotiate a monthly wholesale rate of about $7 per subscriber per month?  Do you consider it likely that a second general interest pay television service would be compelled to accept a lower monthly wholesale rate than the incumbent pay services?  What are your views on those wholesale rates?

1934             MR. KNOX:  Well, we have, as you know, assumed a wholesale rate of $8 that is based on our years in the pay television business, knowing that that's a reasonable rate.  We fully recognize that the rate gets affected by volume discounts.  I mean, as we rollout our service if we are achieving subscriber growth at a rate that is in excess of our targets it may make sense to provide some volume discounts.  It may make sense in packaging scenarios with the BDUs to have a lower wholesale rate if it is apparent that the rollout will be dramatically more successful than what we had planned.  So we have some flexibility.

1935             We also recognize the importance of working with BDUs on a cooperative basis and there will be circumstances in which we would probably reward performance and come up with some more promotional dollars and other incentives to help rollout the packages.

1936             COMMISSIONER WILLIAMS:  What would be your estimate of the percentage of subscribers who had subscribed to more than one pay television service if given the choice; that is, what percentage of your subscribers would be dual subscribers?

1937             MR. KNOX:  Let me ask Mario if ‑‑ I believe he has a number for that.

1938             MR. MOTA:  Actually, we didn't particularly test that consumer research.  Malcolm's and Allarco's models are really based on their own view of the market based on the overall digital pie.

1939             So I will just flip it back to Malcolm.

1940             MR. KNOX:  All right, sorry.  I thought you had a number that indicated ‑‑ that I read that there was a certain number of subscribers, it was fairly high, had an interest in more packages.

1941             The cornerstone of our application is not to cannibalize the other services and steal subscribers away from the other services.  If you like, I could walk through our model here and show you how our plans are based on growing our service from the new customers to digital and how the incumbents in our view would continue to grow.

1942             COMMISSIONER WILLIAMS:  Yes, I think that would be very helpful, given that you estimate that 50 percent of the subscribers to your service would be new pay TV subscribers, and maybe just talk about the increasing penetration of HDTV sets into the households and then work your way through your model as you suggest.

1943             MR. KNOX:  Well, as we talked about, we have already identified our forecast for the growth of the digital marketplace.  As you work through our model we have identified the incumbent's performance over the last four years and the growth, the percentage of growth that has been identified there.  We suggest over that period from '01 to '04 it was 8 percent.

1944             So we took the position that we are not trying to cannibalize their service.  They have got fantastic programmers.  These guys know what they are doing.  We say, "Okay, so if they continued their rate of growth at 8 percent over the term of our licence period let us see how we can grow our business".

1945             You will notice that the penetration rates over on the right‑hand side, what we called the percent of digital, those are the penetration rates.  You will see that at the end of 2004 the average ‑‑ we are suggesting the average penetration rate was 42 percent and then as we go forward and we launch in 2007 you will see that we have identified our forecast of subscribers and the growth rate and our percentage of digital rate is identified there.

1946             You will see that by the end of the seven‑year term when we are suggesting we are going to have 1.5 million subscribers our penetration rate of the total digital universe is only 13 percent, yet the total penetration rate for the two incumbent services and ourselves is 42 percent, which is the average of the period from 2001 to 2004.

1947             So you will see that we have launched our service by enticing our customers out of the new entrants.  Sure, there will be people who will take both services.  Sure, there will be people who may have migrated from their service to our service because of something that we are doing.  That would be great.  But our plan is not to kill the other guys.  They have got a great service.  We think there is room for three of us.  This table thinks we have room for three of us.

‑‑‑ Laughter / Rires

1948             MR. KNOX:  So we think we can do this without cannibalizing them, without stealing the subs and offer a great contribution to the Canadian system.

1949             COMMISSIONER WILLIAMS:  Thank you, Mr. Knox.

1950             Your Decima study did not test the demand for your proposed service at the price at which you plan on offering it.  Could you please comment on the demand for your service at your stated price point?

1951             MR. KNOX:  Well, we have just identified our wholesale price point knowing full well that it's totally dependent upon the packaging by the BDUs.  It just depends on the size of the package.  I can't comment on how big that package would be.

1952             MR. MOTA:  If I could just add to that?

1953             MR. KNOX:  Yes.

1954             MR. MOTA:  There was a conscious decision not to test price points here because the reality of the marketplace is that the BDUs set retail rates and there will be a combination across the country from different BDUs, DTH versus cable, urban markets or rural markets.  They price these packages very differently.

1955             So to do a survey and test a hypothetical price point at the end of the day is a useless exercise, because at the end of the day at the retail stage those packages are going to be bundled together with the existing services.  There will be individual price points.

1956             So what we did is we tested relative pricing in the sense that if the service were priced higher than, the same as or lower than the current pay TV service you receive, to kind of get a general level indicator of what the interest will be and the numbers, albeit not overly high there certainly is a segment of the market there that likes the appeal of this particular concept and expresses a likelihood to subscribe to it given those relative price points.

1957             MR. ALLARD:  I would just like to make another comment.

1958             From a history point of view, pay companies came out and tried to establish a retail rate and they did that for 10, probably 15 years.  It was always a contentious issue in negotiation with the cable companies and finally the cable companies just said, "Okay, we are not negotiating with you anymore.  Just give us your best wholesale rate".

1959             So that's how it has evolved.  They basically set the pricing and the packaging.

1960             COMMISSIONER WILLIAMS:  Okay.  Now, moving along to your business plan could you please provide a breakdown of your total revenues into cable subscriber revenues and DTH smart revenues.

1961             MR. KNOX:  We haven't prepared a breakout at this stage but if you want that that is something we could pull together.

1962             COMMISSIONER WILLIAMS:  Sure, it would be very helpful if you could provide one.  I think, like the other applicants, late tomorrow sometime would be fine.

1963             MR. KNOX:  Sure, because we had just looked at the digital universe.

1964             COMMISSIONER WILLIAMS:  Okay.

1965             MR. KNOX:  We hadn't ‑‑

1966             COMMISSIONER WILLIAMS:  Do you agree with Spotlight that in Canada pay television penetration is lower than it is in the U.S. and, if so, do you think that pay television penetration in Canada could reach a level comparable to that in the U.S. if the Commission were to licence new pay services?

1967             MR. KNOX:  I would like to ask Brian Schecter to comment on that.

1968             MR. SCHECTER:  We do agree that with Spotlight's figures ‑‑ I do work for Kagan and the numbers are quite accurate as to what our research has found over the years.

1969             COMMISSIONER WILLIAMS:  Okay.  And do you think that the pay television penetration in Canada could reach a level comparable to that in the U.S.?

1970             MR. SCHECTER:  Well, the market optics are fairly different between the two countries but over time there is a clear indication that the market is growing and growing fairly steadily and rapidly.  Certainly, in the States in the last 10 years it has gone from 46 million, I think, full pay subs to over 80 million this year and the growth projections are fairly robust going forward over time.

1971             COMMISSIONER WILLIAMS:  So that would be what 15‑16 percent growth rate, I guess, over that time period ‑‑

1972             MR. SCHECTER:  Yes.

1973             COMMISSIONER WILLIAMS:  ‑‑ and you are saying Canada's growth is ‑‑

1974             MR. SCHECTER:  And the revenues are matching it as well.  So I mean there is a clear indication that the digital universe has fuelled this growth and will continue to fuel the growth.

1975             COMMISSIONER WILLIAMS:  If the Commission were to licence your proposed service and one or more of the other applicants for new English‑language pay television service, how would this affect your business plan?

1976             MR. KNOX:  Well, it would certainly be a challenge, wouldn't it?  Our model is based on one service.

1977             COMMISSIONER WILLIAMS:  One new service being licensed?

1978             MR. KNOX:  Yes.  However, if Archambault's French channel was licensed that would certainly be complementary to ours.

1979             COMMISSIONER WILLIAMS:  Yes, except I think they won't launch the French unless they get the English.

1980             MR. KNOX:  Okay.

‑‑‑ Laughter / Rires

1981             MR. KNOX:  It is out of my hands.  You asked me what could work for us.

1982             COMMISSIONER WILLIAMS:  With regard to your proposed condition of licence requiring that you reinvest profits of your pay television service of Canadian programming, could you please explain how Allarco's ownership would be compensated for its investment in this proposed service and could you please explain how profit would be calculated for purposes of this proposed COL, and could you please explain how the Commission would determine if your expenses were reasonable for the purposes of this proposed condition of licence?

1983             MR. KNOX:  There is a number of questions there.

1984             COMMISSIONER WILLIAMS:  I could break them down one at a time if that is more helpful?

1985             MR. KNOX:  Sure.

1986             COMMISSIONER WILLIAMS:  How would Allarco's ownership be compensated for its investment in the proposed service where you reinvest the profits of your proposed service in Canadian programming?

1987             MR. KNOX:  The profits, this is a pretty innovative feature that we are proposing and, frankly, it is one of the benefits of having a private sector, a non‑public company, because you can imagine that a public company would not want to do this.

1988             So the answer to your question is the profits get generated.  We then turn around and use them primarily for interim financing which we have been told is a very important piece of the production puzzle for the production community.  Those loans then get paid back and it is once they are paid back that they will then move to the owner of the company.

1989             COMMISSIONER WILLIAMS:  How would profit be calculated for this purpose?

1990             MR. KNOX:  After tax?

1991             COMMISSIONER WILLIAMS:  Yes, after tax profit.

1992             MR. KNOX:  So this is after tax money that then is put into a pool.  It goes out in the loans, comes back and then presumably dividends to the ‑‑

1993             COMMISSIONER WILLIAMS:  Returns.

1994             MR. KNOX:  ‑‑ the owner.

1995             COMMISSIONER WILLIAMS:  How would the Commission be able to determine if your expenses were reasonable?

1996             MR. KNOX:  Which expenses?

1997             COMMISSIONER WILLIAMS:  The expenses for purposes of this proposed projected spending on Canadian programming?

1998             MR. KNOX:  My immediate reaction is all of our finances is as transparent as any other licensee and we would operate our business in accordance with the expectations of the industry and we would just operate the business as we have in the past.

1999             COMMISSIONER WILLIAMS:  Okay, thank you.

2000             With regard to your proposed accelerated production fund initiative your letter of May 13 '05 states that your business plan contemplates that you would payout a portion of licence fees to producers in an accelerated fashion.  Could you please clarify the amounts that would be paid out in an accelerated manner in excess of the amounts that would be paid out in the absence of this initiative?

2001             MR. KNOX:  Sure.  I will ask Nic to take that.

2002             MR. WRY:  The whole concept is that the producer will give you their cash flow for the production and you will then fund your licence in that same percentage as you go through.  So in fact, they wouldn't have to interim finance your licence the way we do now.

2003             We are really hoping that if this works as well as we feel it will that other sectors, other parts of the industry will say, "Why don't we pay producers while the show is going instead of later because we are spending a fortune on interim finance for not a great reason and when we did shows with HBO like SCTV they funded us based on our cash flow".

2004             COMMISSIONER WILLIAMS:  Could you please explain how your proposed accelerated production fund initiative would be funded if you were not able to realize your projected revenues?

2005             MR. WRY:  If you look at it, it is our licence fees that we are going to pay and no matter what we licence we will then pay it out in that way.  It is just an issue of cash flow.  It is not an issue of what we will do because our commitment is to do that process.  So someone comes and gets a licence for us, we will pay it out that way.  But there is no way we can be short of money because if we have licensed it then it is in our expenses.  It is just being speeded  up so that they don't have to interim it.

2006             COMMISSIONER WILLIAMS:  In your application you note your intention to offer five or six multiplex ‑‑ or six ‑‑ I guess we have clarified that, multiplex channels of HD programming but also mentioned that distributors would be able to offer standard definition versions of this program to subscribers that lack the necessary equipment to receive this programming, this HD programming.

2007             Would this mean that you intend for distributors to offer six channels of your programming in standard definition in addition to the six channels in high definition and, if not, how do you intend for subscribers without the necessary equipment to receive HD programming to view your proposed service?

2008             MR. KNOX:  You are correct in saying that we want to offer this service in high def.  We are realistic when we say we know that there are not a heck of a lot of HD sets and homes ready for this.  We are priming the pump.  So for probably the first licence term we would have to broadcast in SD as well.

2009             It would be our choice to migrate to a fully HD offering as soon as possible, but we have to be realistic and we have got to hit our business plans. We are not going to tie our hands so we will, sure, offer an SD version.

2010             COMMISSIONER WILLIAMS:  Thank you.

2011             Do you anticipate increasing or reducing the number of multiplex channels of programming that you will offer over the first licence term?

2012             MR. KNOX:  It is our intention to offer six from the get go and have six for the seven‑year term.

2013             COMMISSIONER WILLIAMS:  Do you intend to offer a programming guide channel and, if so, please describe what this channel would consist of.

2014             MR. KNOX:  No, we will not provide a dedicated channel.  We think there is more interesting technologies that can do the work of a channel.  Certainly, the BDUs have had great success with their navigation systems but I think we have a real opportunity perhaps on the internet side, particularly with the younger viewers to become involved with our service.

2015             Briefly, we would like to give you a little highlight about some of our thoughts on an interactivity website.

2016             MR. THOMAS:  I think one of the real challenges broadcasters have had with the internet is it has been more of a threat than an opportunity for them.  People my age and older, you know, use the internet for information but the younger people use it for entertainment.  So what we have sought to do is to find a way to integrate the experience that people get on television with the internet.

2017             Now, with the Commission's approval, if you would like or will let me, I would like to show you a real quick little clip of a movie we did of the Corner Gas website.  Would that be okay?

2018             COMMISSIONER WILLIAMS:  Oh, very helpful.

2019             MR. THOMAS:  Okay, all right.

‑‑‑ Video presentation / Présentation vidéo

2020             MR. THOMAS:  What happens traditionally is it is just information sent to people on the internet, but as you can see here as this downloads on the screen here is the entire town of Dog River, Saskatchewan, the same one that you see on the TV.

2021             It is terrific because much like you can do on television ‑‑ you can see there is the little police car zipping by and normally you would hear the audio of that.  What happens in this case is you are able to go to anyplace that you actually see on television in Dog River.  There is the hotel and there is certainly where Oscar and Emma live here.  You can see the gas station and the Ruby Café coming up.

2022             The user can really be a part of the same experience that happens on television.  You can see trucks going by.  This is really ‑‑ all of the sets that you see on TV are created.

2023             Now, you can go various places in the town.  You can experience what happens here.  I think we are going to go and pump gas just like Brent and his friends do.

‑‑‑ Laughter / Rires

2024             MR. THOMAS:  And this is a contest.  You have got to beat the other guys who are in the site at the same time as you pumping gas.  You know what happens, is you have got to start it and stop it on time and if you are not good a car blows up on you and a big explosion.  It even gets worse because what happens to you if you are in‑attendant and you don't pump gas to a car it will take off on you and then you have Oscar calling you a jackass just like he does to Brent on the Corner Gas show.

2025             So this gives you an idea.  You can build points, you can win prizes; you can enter contests.  You get to meet characters.

2026             The original vision of the site was also where you would be able to build your own character and live in a 3‑D world.  It is the same world that is created on TV.  The quality of the experience is the same that you get on television and it integrates the two.

2027             So this is the kind of experience we want to bring for TV viewers and internet users.

2028             COMMISSIONER WILLIAMS:  Very creative.  Thank you for that presentation.

2029             MR. KNOX:  Thanks.

2030             COMMISSIONER WILLIAMS:  At different points in your application you suggest that distributors who offer digital service but have a lesser amount of capacity could be excepted from the requirement to distribute your services.  In one example you indicate distributors with less than 750 megahertz of capacity could be excepted and in another example you use a threshold of 500 megahertz.

2031             Do you view one of these thresholds as being more appropriate and please clarify your views as to which distributors you would consider it appropriate to except from the requirement to carry your service should the Commission licence it.

2032             MR. KNOX:  Well, we recognize that the biggest services are most likely to have the capacity to carry our service.

2033             Again, we are trying to launch a six‑channel HD service.  We will certainly be wanting to have carriage with the large systems because they will provide 80‑85 percent of the marketplace.  That's not an exact number.

2034             Our SD offering would accommodate those services that could not carry the HD.  We are hoping that while those smaller systems build up their infrastructure that provides an attractive offer for them and as they rollout more capacity then they could migrate across to the HD offering.

2035             COMMISSIONER WILLIAMS:  The Commission has a number of regulations related to the distribution of certain types of services by affiliated or related BDUs.  Is it necessary for the Commission to introduce any restrictions or conditions with respect to the distribution of any new pay service by related or affiliated BDUs?

2036             MR. KNOX:  Well, we are certainly interested in having access and appropriate carriage and we would think that the BDUs would treat us no less favourably than they treat their own associated companies.

2037             COMMISSIONER WILLIAMS:  Okay.  Mr. Chair, that completes my questions in this file.

2038             THE CHAIRPERSON:  Thank you.

2039             Commissioner Pennefather.

2040             COMMISSIONER PENNEFATHER:  Thank you, Mr. Chairman.  Good morning.

2041             I just wanted to go back to the point on exclusivity.  I wasn't sure I completely understood. I listened to your comment this morning and your conversation with my colleague.

2042             Am I to understand that you were referring to paragraph 21 in your reply in which you say that:

                      "On further reflection we would recommend a prohibition against exercising preferential exclusive programming rights to non‑Canadian program but it could be limited to a certain number of Hollywood blockbuster films..."

2043             COMMISSIONER PENNEFATHER:  Is that your position?  The last phrase is important:

                      "...measured in relation to films released to pay television during a calendar year or broadcast year".

2044             COMMISSIONER PENNEFATHER:  Could you just clarify what precisely your position is and why you have made this adjustment in your thinking?

2045             MR. KNOX:  Well, we thought through the implementation of this and, certainly, in a perfect universe it would be wonderful to have non‑exclusivity on all foreign programming so we would be able to have the best offering possible.

2046             But yes, we did say that and so to be practical about this, certainly, we recognize that that might be a more appropriate way to go.  To that end, we have asked our legal counsel to consider some draft wording that is similar to what was in the pay regs with respect to pay‑per‑view.  We just thought it could be modified and used in this circumstance.

2047             Would you be interested in hearing about it?

2048             COMMISSIONER PENNEFATHER:  Yes, I imagine that you will be tabling that with the Commission.  Just so I understand the meaning, how many Hollywood comedy films, a certain number; how many are you talking about?  What is the gist of it?

2049             MR. KNOX:  Two hundred (200).

2050             COMMISSIONER PENNEFATHER:  Two hundred (200)?

2051             MR. KNOX:  M'hm.

2052             COMMISSIONER PENNEFATHER:  And is that 200 of the top blockbusters as in a typical variety list?

2053             MR. KNOX:  Yes.

2054             COMMISSIONER PENNEFATHER:  So these are directly the films that are being used by the incumbents in the non‑programming foreign category, the U.S. product?

2055             MR. KNOX:  That's correct and that's what I was referring to earlier when I was talking about my bookstore and needing that high profile content.

2056             COMMISSIONER PENNEFATHER:  Okay.  My other question was just back to clarify.  You did say that you would be supporting independent producers to upgrade, if I can use that word, programming to high definition from Super 16 or from 35 or from others, some other broadcast medium.

2057             My question is quite simple.  Where is the money for this going to come from, from the 32 percent programming expenditures?

2058             MR. KNOX:  It is in our programming.

2059             COMMISSIONER PENNEFATHER:  It is in the programming expenditures?

2060             MR. KNOX:  Yes, yes.

2061             COMMISSIONER PENNEFATHER:  So it is part of the 32 percent to Canadian programming?

2062             MR. KNOX:  Yes.

2063             COMMISSIONER PENNEFATHER:  What proportion?  Can you give me a sense of what proportion it would be for this kind of upgrade as opposed to investment in new films?

2064             MR. KNOX:  I have to think about that for a minute.

2065             MR. WRY:  Sorry, you just said what percentage is it versus new films?

2066             COMMISSIONER PENNEFATHER:  Yes.

2067             MR. WRY:  I'm sorry.  I just want to make sure we are not confused in how we are doing this.

2068             As we move forward when a producer comes to us, we are going to take the money that it takes which may be somewhere around between ‑‑ $50,000 to upgrade HD because they don't have it and that's the only way they would be able to go ahead and do it in HD and we think that is really important both for us and for them.  So it is only on new projects that we are doing HD upgrade apart from films being scanned and from the past.  But that's not in that number.

2069             COMMISSIONER PENNEFATHER:  Oh, that's important for me to understand.  So you were talking (a) about taking a current project and increasing the licence over and above the licence fee, giving an amount of money to bring it to HD standard?

2070             MR. WRY:  Yes.

2071             COMMISSIONER PENNEFATHER:  But in terms of the balance of the Canadian programming which would be existing programming, which you have made a point of saying is available to distinguish your service, that the amount of money required to upgrade it, are you also making a contribution there or is it just on the new programming?

2072             MR. WRY:  No, well, what we have said is if you look at Bye Bye Blues we took it and took the original interpositive from Anne and Arvi and laid it down.  So the answer is we will be paying that amount and we will be giving the producer a copy of it.

2073             So I mean it is a huge advantage for the producers if it has been produced on film because they will be able to take that as their library and HD going forward.

2074             COMMISSIONER PENNEFATHER:  Thank you, Mr. Wry.

2075             Thank you, Mr. Chairman.

2076             THE CHAIRPERSON:  Thank you.

2077             Vice‑Chair French.

2078             COMMISSIONER FRENCH:  Mr. Knox, I am not as familiar as you are in the market that you are working in so I want to go back to the exclusivity issue because I am still a little unclear and it may be because I just don't get it and I am hoping you are going to be able to help me.

2079             Instead of asking the Commission to participate and to regulate, to monitor the contractual relationships between the incumbent licensees and pay and the major studios in the United States or production houses in the United States, you are suggesting that the non‑exclusivity requirement should rather be with respect to certain properties which those studios or other studios may produce?

2080             MR. WRY:  Yes.

2081             MR. KNOX:  That's right.

2082             COMMISSIONER FRENCH:  So my problem, conceptual problem is the following, and I am sure it is something that I am very naïve about, but how will you know at the time that the ownership of the property is negotiated whether or not it turns out to be on the variety list?

2083             MR. KNOX:  Well, as studios work through the exhibition chain the first step of the chain is a theatrical release.  So they will know what these blockbusters achieved or these movies achieved in the marketplace before it came to pay.  In fact, that's always part of a negotiation.  I mean, there is certain criteria when a movie is put into an output deal.  It has to achieve certain performance criteria; a number of theatres, a number of audience or box office size.

2084             So the studios have already got this figured out how they identify this because that's how they determine what actually goes into their output deals.

2085             COMMISSIONER FRENCH:  All right.

2086             There is data from box office and you negotiate when, when it goes into DVD or roughly at what stage would you expect to negotiate?

2087             MR. KNOX:  If there is an output deal in place the negotiation will have occurred at some time in advance, whenever the negotiation for that contract.  So a contract could be five years, it could be three years, just depending on the arrangement, and it is in that negotiation.  You lay down the parameters for the output deals.  So you agree on certain performance criteria.  The movie hits that, then the pay service will be entitled to receive it but they will pay x amount of cents per subscriber for that film.

2088             So this is established upfront and then the productions get going.  As the movies come out the food chain if they meet that criteria the price has already been established by virtue of its performance. So it is very clear.

2089             COMMISSIONER FRENCH:  So every pay licensee negotiates output deals with the studios it chooses to deal with and the existing pay licensees cannot have an exclusive output deal?

2090             MR. KNOX:  Typically, the incumbents would have output deals.  It is not unusual for a studio to not come to an agreement.  I believe there is two or three that may not be lined up with one or two of them at the moment.

2091             There always seems to be some studio that is on the outs for whatever reason.  They may have had a dearth of programming and their movies aren't that great and so the pay service isn't that interested in some studio because it doesn't look like they are going to have anything worthwhile.  So then you lean on them and say, well, we are just going to cherry pick.

2092             But for the most part it is in an output scenario for the successful movies.

2093             COMMISSIONER FRENCH:  You must put yourself in my shoes because I am concerned about what it is you are asking the Commission to do.  It is not clear to me yet exactly what you want the Commission to do.

2094             It seems to me that you are saying to me the way the system works, we are going to have to start by saying to the incumbent pay licensees, "Any exclusive arrangements you have with a source of films" ‑‑ because you haven't talked about pay‑for‑pay series here, you are only talking about films ‑‑ "Any exclusive arrangement, ongoing contractual arrangement which has a feature of exclusivity for the incumbent licensee must be null and void at the point at which we licence you".

2095             MR. WRY:  There is one other important point, and that is in our experience when we were doing this ‑‑ I love the way they did it.  They said, "You have exclusive rights unless someone else is licensed as a competitor, at which point your exclusive rights are extinguished".

2096             COMMISSIONER FRENCH:  Who said that?  The studio said that?

2097             MR. WRY:  Yes.

2098             COMMISSIONER FRENCH:  Your assumption is that that clause exists in all of the current agreements.  Fine, that is an empirical question.  We can find that out.

2099             Sorry, Mr. Allard.

2100             MR. ALLARD:  Well, basically, I already responded to Commissioner Williams basically saying that if there are any exclusive contracts in place they will have to be honoured.  I don't expect the Commission to try to terminate those provisions.

2101             COMMISSIONER FRENCH:  So it is a matter of either Mr. Wry is right that there are clauses placed in the existing agreements by the studios which solve my problem as a regulator or there aren't, and you are not asking me to resolve that problem if by chance there are no such clauses?

2102             MR. ALLARD:  Well, there probably are clauses but we have been out of the business for four or five years so I can't tell you what is in those private contracts.

2103             COMMISSIONER FRENCH:  Well, I am concerned for you here, not me.  I mean, if in fact there are six agreements and they are airtight you are dead, n'est pas?  That's what you are telling us at least.  I am trying to understand what your position is, Mr. Allard, and it is very confusing to me.

2104             You are prepared to, it seems, assume that those contracts do not have a property which would prevent either you or the Commission from penetrating them and inducing content to come to you in preference to the existing licensees, or impaired with the existing licensees.

2105             MR. KNOX:  I think what we are going to have to live with is success through evolution.  Our recollection of the industry is that there certainly is ‑‑ we have dealt with the studios for a long time and they always left themselves room to move.

2106             If we are in an environment right now where they have chosen to allow themselves to be completely and 100 per cent tied up, I guess we will just have to ‑‑ we are not expecting you to break contracts.  We fully expect that we will have to deal with those studios that aren't in output deals at the moment and we are going to have to present a compelling offer to the studios and to get other programming as we can.  But ultimately, we believe that we need this high‑end programming as an element of our service.

2107             Remember, we are not trying to duplicate what the other guys are doing.  We need some key stuff that will help that CSR guy sitting in that call centre to be able to give some spin and marquee value to our service.

2108             So we don't expect you to break contracts and we witnessed ‑‑ we lived through with what happened with pay‑per‑view and how that undue preference wording worked in pay‑per‑view and we are suggesting wording that is comparable to that that is already in the pay regs.

2109             COMMISSIONER FRENCH:  So if there were an argument about the nature of the arrangement by which one pay licensee obtained a property in the top 200 and another pay licensee said, "I think this begins to look like an exclusive arrangement" what would you do?  You would complain before the Commission and we would investigate the matter?

2110             MR. KNOX:  You know, I'm not an expert in how the Commission ultimately works.  I think I would like to have our lawyer participate in this because he is just more familiar with the boundaries that the Commission works within, more so than I.

2111             COMMISSIONER FRENCH:  Sounds reasonable to me.

2112             Mr. LEWIS:  Vice‑Chairman ‑‑ my slide now.

2113             Vice‑Chairman, I think what we had proposed originally in the filing was a very simple situation which was an adaptation of the section 6, and I believe that Spotlight and Mr. Grant also suggested that section 6.1 of the pay regs could be adapted to essentially substitute the word "pay licensee".  That is a very simple way of doing things and if there was an exclusive arrangement, as has occurred on a number of times, not very many but I think a half‑dozen times since the mid‑nineties, the party puts a complaint into the Commission, the staff investigates it and over a short period of time the matter is resolved.  Either there is exclusivity or there isn't.

2114             I think there is an additional level unfortunately of complexity if we move to, as Spotlight described yesterday, an alternative proposal involving, I think, a severing of studios or a certain number of studios.  What we are proposing, and this is not our favourite position ‑‑ our favourite proposition is mirror the pay‑per‑view reg that is there now.

2115             In the situation where if you were to use a benchmark involving a certain number of titles and box office gross there are databases that are ongoing.  It is very easy to access that information.  We would come to the Commission with that data and then the Commission could make a determination, I think, on an expedited basis as to whether the provision was ‑‑ the party was in line with the provision or not.

2116             Now, having said that, the only other qualification I will suggest is you approach this in a different way, a rather interesting way.  In the year 2000 when the Commission licensed the Independent Film Channel Canada and the Commission had concerns about IFCC ‑‑ IFFC I believe it is ‑‑ buying too much Hollywood product and so the Commission attached a condition of licence that was related to the output of specific Hollywood studios that were identified as conditions of licence in that decision.  That seems to have worked as well.  So I don't think that this is un‑trodden ground for the Commission.

2117             I will just add one other thing, and that is the Commission has had a long history since the mid‑eighties, for example, in determining what is a hit for a purpose of FM broadcasting and in its circulars and regulations it has actually specified, for example, billboard and other publications in which hits are listed.  Where there is some dispute as to whether a hit is a hit the Commission has been able to resolve this with broadcasters.  So I don't think we are proposing something totally new but we are suggesting that there may have to be Commission involvement in adjudicating disputes on undue preference.

2118             COMMISSIONER FRENCH:  So Mr. Lewis, what you would envisage is that a studio having sold a property to a licensee ‑‑ one of the incumbent licensees or both of them for that matter ‑‑ would then refuse to negotiate with you and you would say, "This must be an exclusive arrangement"?

2119             MR. LEWIS:  Well, we would ‑‑

2120             COMMISSIONER FRENCH:  And this would therefore violate our understanding of what the Commission has decreed?

2121             MR. LEWIS:  That's correct, and I think that is the way it exists now in the pay‑per‑view regulation.  Parties have come forward and said that they are unable to negotiate rights for a particular product and the Commission has determined whether the other licensee has engaged in what I call exclusive dealing.

2122             The current regulation does not relate specifically to the studio engaging in that practice.  It is the licensee.  It is the distribution. It is the programming undertaking.

2123             COMMISSIONER FRENCH:  And the complaints would relate to a single specific property or specific properties and not to an observed practice?

2124             MR. LEWIS:  That's correct.

2125             COMMISSIONER FRENCH:  When would this kind of requirement end or would it end?

2126             MR. LEWIS:  We believe that ‑‑ we used, I think, a number earlier today and that was a 30 percent threshold relative to the incumbent.

2127             COMMISSIONER FRENCH:  Right.

2128             MR. LEWIS:  Or the end of the licence term.

2129             COMMISSIONER FRENCH:  Good, thank you.

2130             You have made an undertaking to provide us with some information about programming and, just in the interests of equity here, the undertaking of Spotlight, I will try to reproduce it and counsel will correct me or add to it; is that you provide us with two weeks of September 2005 programming which would include obviously Canadian programming, the specifics of which we would appreciate but not necessarily expect to be very detailed with some idea of what of the current offerings and what kind of the current offerings of the incumbent licensees, on the presumption that some sort of arrangement as the one we just touched on existed, you would wish to offer; but, most important for us, is what other material you would expect to include in your schedule with reference to the title, the production house, the country of origin, the genre and any other information you could provide us which would permit us to understand what it is that you are bringing new to Canadian screens in addition to the Canadian original programming which you will be developing.  Is that reasonable?

2131             MR. KNOX:  Yes.

2132             COMMISSIONER FRENCH:  And I will just ask counsel what is reasonable in terms of time?

2133             MR. KEOGH:  Would end of the day tomorrow be acceptable?

2134             MR. KNOX:  Yes.

2135             MR. KEOGH:  Okay.

2136             COMMISSIONER FRENCH:  I just have one final set of questions which is more out of curiousity than anything else.  I don't think the Chairman is going to be irritated with me because we still have a little bit of time.

2137             I liked Bye Bye Blues a lot.  I thought it was a nice film, a good film and I am delighted to see the people who had the courage to finance it.  But I have with respect to that film a kind of lingering sense of disappointment, not about the film but about the fact that it seems to be impossible to make money with films of that quality.

2138             Did you make money with that film?

2139             MR. ALLARD:  No, we didn't.

2140             COMMISSIONER FRENCH:  No?

2141             MR. ALLARD:  I think one of the structural problems we have with that is I think with TeleFilm we were allowed to have American on it but it had to be non‑recognizable.

‑‑‑ Laughter / Rires

2142             COMMISSIONER FRENCH:  Yes, and the Commission is not blameless in these matters.

‑‑‑ Laughter / Rires

2143             COMMISSIONER FRENCH:  But just to pursue it because it is a serious point, do you think that was the problem with the marketing of the film or is ‑‑

2144             MR. ALLARD:  I think that was close. I mean, we just about had a distributor on that and we could have been out.  I think we were looking for an advance of $5 or $6 million.  We were that close but those were some of the elements that we didn't get a distribution agreement on.

2145             COMISSIONER FRENCH:  What would you think now being a potential participant in this market once again ‑‑ I guess more active than perhaps you have been in the last few years.  I don't know.  I have been out of the country and you have been out of the business, so I am presuming you haven't repeated that experience but perhaps you have.

2146             What is your going forward sense?  I mean, somebody said in the course of the presentation there will be more and more and better and better and my sense of Canadian English, Canadian programming, and I have lived in Montreal for much of my life and I have watched a lot of French‑Canadian cinema and, you know, I just don't see the same thing happening in English Canada.  I am wondering why you have this sense that things will get better or what you could do to make it better.

2147             Please don't just wave the flag.  Tell me something specific enough so that I can see your hands on the bottom of the pole there and not just the flag.

2148             MR. KNOX:  Let me just start this and then I will hand it off to Nick who is ready to burst to tell you the story.

‑‑‑ Laughter / Rires

2149             MR. KNOX:  We have all been around production and broadcasting for a long time.  One of the things that Chuck has always done is really try to help the independent producer.

2150             If you look closely at our application there is a number of initiatives here that we think are very significant and are in direct response to some real problems that independent producers face.  I am not talking necessarily about the big guys.  I am talking about our regional interests and representation.  But it is that smaller core, that smaller level of producer that really needs some help. We think that this application and what we would do in the future will have a significant impact in resolving a number of things.

2151             So I will let Nick go.

‑‑‑ Laughter / Rires

2152             MR. WRY:  No, I think the important part at least from our experience ‑‑ I produced a $6 million film a couple of years ago with Dave Thomas and Dan Ackroyd that was totally Canadian and Dave wrote.  The real problem is the level of the marketing from what I can tell.  When it was released it had $250,000 of television which was ten spots and we really could tell that people weren't aware of it.  It was in 100 markets and 100 theatres and I called the exhibitors personally and they said, "If 10 or 20 people come to a move it means people know about it and they are not particularly interested.  If only your mother comes to the theatre that means they don't know about it".

2153             So what is happening to Canadian films is ‑‑ if we took the same kind of promotion an American film has for a Canadian film just for Canada I think we have a really good shot.  Then, it will be just whether people like the film or not.  If we don't spend that kind of money on marketing it is going to be ‑‑ it is really just a video title that you put in the theatre and people don't know enough about it, so that's it.  On occasion when we are in the pay business they would occasionally run it for one week at the Cumberland and they would run one at 7:00 and one at 9:00 so they qualify for pay.  But in terms of doing a real release it can be done and I think it will be successful if it is done.

2154             COMMISSIONER FRENCH:  Thank you.

2155             THE CHAIRPERSON:  Thank you.

2156             Commissioner del Val.

2157             COMMISSIONER del VAL:  Thank you.

2158             How much of the Canadian programming do you anticipate will be shown exclusively on your proudly Canadian channel?

2159             MR. KIRK:  All of the programming that is on our regular channel will play on the Canadian channel, but all the rest of the time will be with new material.

2160             COMMISSIONER del VAL:  I'm trying to get at the exclusive arrangements with respect to Canadian programs, so I'm just wondering for the Canadian programs that are on, say just the "Proudly Canadian" channel, how much of that will be shown ‑‑ what exclusive arrangements you intend to make for those.

2161             MR. WRY:  Hi, I'm back.

‑‑‑ Laughter / Rires

2162             MR. WRY:  I talked to a lot of the producers in great depth about it and what we said was we are going to leave it up to the producer, because in some cases it will be advantageous to sell it to both entities and get the most money you can, and in others, if one of them will pay you for something exclusive they are better off.

2163             So we left it to the producer to find the best deal he could within the pay business and we would accept whatever way they decided to go.

2164             COMMISSIONER del VAL:  So basically you don't really have a preference whether the Canadian programming be nonexclusive or exclusive.  Right?

2165             MR. WRY:  We would probably prefer it to be exclusive, but we have left it to the producer.  So if that is not the most beneficial way to do it, then we won't.

2166             MR. KNOX:  It is likely that as we become involved with our development and we put some significant development dollars into a production and perhaps some equity financing, it absolutely makes sense that it would be coming to us on an exclusive basis and that is probably what the producer would want to do.

2167             COMMISSIONER del VAL:  You are referring to the programs that you would commission yourself?

2168             MR. KNOX:  Commission.  Commission is an interesting word in the context of Canadian broadcasting because, you know, as I was talking about earlier, these shows are all made with a matrix of partners who all have to kick in.

2169             Nic can tell you what he had to go through on that movie in lining up all of these different players to do it.

2170             To be clear, Nic was talking about the fund earlier and saying that we are not going to use the fund.  Well, it is not up to us to use the fund.  We are a player.  We don't trigger the fund.  We are part of this matrix of pay conventional specialty groups, broadcasters that all have to licence these things and, you know what, we work in cooperation with the cities.

2171             When I was at SuperChannel we worked in cooperation with TMN in developing these things and it really does take a group effort of broadcasters to get these things licensed and properly financed.

2172             So it is not really fair to say we commission it.  It was very common to say, you know, we would do it, the city would do it, because we all have separate windows, so the orderly marketplace.

2173             COMMISSIONER del VAL:  Looking at, I believe it was Mr. Thomas's presentation on the Internet, I believe it was CFPTA who raised a concern on tying up licence rights across a range of media.

2174             Do you want to comment on that or do you have any plans to do that?

2175             Just comments, please.

2176             MR. KNOX:  Did you say tie up media rights across a range of media platforms?

2177             COMMISSIONER del VAL:  Yes.

2178             MR. WRY:  Do you mean the broadcaster says to the producer, "Here is $10 and we take everything"?

2179             MR. KNOX:  No.  We are not trying to take everything.

2180             MR. Le BOUTILLER:  You are on the side of the agents.

2181             MR. ALLARD:  Yes, absolutely.

2182             MR. KNOX:  Today.  No.

‑‑‑ Laughter / Rires

2183             COMMISSIONER del VAL:  So it is okay for the transcript to show that you don't intend to do that?

2184             MR. KNOX:  That is correct, no.

2185             The problem, we are trying to help the producers, we are trying to come up with ways to put some significant initiatives in place that help them at different stages of the production cycle and no, we are not trying to build our business on their backs.

2186             COMMISSIONER del VAL:  I have a couple of questions on the other applicants' applications.  I don't know whether you are coming back in Phase II and whether you would prefer to deal with those during Phase II or now.  It is your preference.

2187             MR. KNOX:  Why don't we try them now.

‑‑‑ Laughter / Rires

2188             MR. KNOX:  Can I reserve the option to come back ‑‑

2189             COMMISSIONER del VAL:  Yes.

‑‑‑ Laughter / Rires

2190             MR. KNOX:  ‑‑ if we give you the wrong answer?

2191             COMMISSIONER del VAL:  I was actually referring to the Canadian Film channel's proposal of the proposed mandatory 12.9 percent of gross revenues to be contributed to them.

2192             If that were approved, what would that do to your business case?  If you can please sort of give me specifics.

2193             MR. KNOX:  First of all, we would like to re‑emphasize that we have a Canadian channel and in our view theirs might be redundant to ours.

2194             Moreover, our relatively modest business plan projects that we will spend $157.8 million on the acquisition of and investment in Canadian programs, about $16 million on script and concept development, $7 million on our regional outreach to assist producers, $24.4 million of reinvested profits in bridge financing and $7 million in third party promotion of Canadian programs over the course of the licence, a total contribution of over $210 million.

2195             Their application is to spend $115 million on the acquisition and investment in programs over seven years.  That is basically about half of what we are proposing to do.

2196             So we think their impact on us would be negative.  We think it would mitigate our ability to perform the way we are proposing and it doesn't make any sense to us.

2197             COMMISSIONER del VAL:  Would your subscriber rates go up do you think?

2198             MR. KNOX:  If they were in the marketplace ‑‑

2199             COMMISSIONER del VAL:  Yes.

2200             MR. KNOX:  ‑‑ our subscriber rates would go up?

2201             COMMISSIONER del VAL:  Would it?

2202             MR. WRY:  If we had to pay 12.9.  if we had to pay 12.9, what would we ‑‑

2203             MR. KNOX:  No, I don't think that our subscriber rates would go up.  The business model doesn't make any sense to me.

2204             COMMISSIONER del VAL:  I meant fees, subscriber fees.

2205             MR. KNOX:  Oh!

2206             COMMISSIONER del VAL:  Yes, sorry.

2207             MR. KNOX:  Would our fees go up to pay the 12.9?

2208             Well, probably not.  You have to recognize that you can't just add your revenue because your Canadian program expenditure is a function.

2209             You have some fixed costs, but the biggest expenditure in the programming area rises as your revenue does so you would have to raise it more than 12.9 and I think we are going to have a challenge holding our $8.00 wholesale rate as it is.

2210             COMMISSIONER del VAL:  Thank you.

2211             Mr. Lewis, I was just wondering what your view would be on the Canadian Film channel's proposal that by condition of licence the 12.9 percent contribution be compelled?

2212             Astral and Corus have said that their view is that this could be subject to legal challenge.

2213             MR. THOMAS:  Yes.  I happened to be in the room yesterday when Mr. Grant spoke and I concur with his view as well.

2214             I think the difficulty is that the Commission's objective set forth in the Broadcast Policy section of the Broadcasting Act are very clear and this suggests to me to be something more or less of a tax.

2215             I think we have all looked at taxes before in various forms.  I know the government at one point imposed a retail tax on the consumption of broadcasting services, at one point there was an actual line item that was added for cable television ‑‑ this was before GST ‑‑ and it was extremely unpalatable with the Canadian public.

2216             I can't imagine that given the objectives that we have met in this application vis‑à‑vis funding for independent production that under a legal challenge the courts would find a loophole in those objectives that say that there is a taxing power, honestly.

2217             COMMISSIONER del VAL:  Thank you.

2218             Those are my questions, Mr. Chairman.

2219             THE CHAIRPERSON:  Thank you.

2220             Mr. Knox, I have one question emerging from your opening presentation today on page 7 where you mention that one of the exciting new firsts in your application is that you will incur the increased cost of HD production over and above your licence fees.

2221             Do you have a per‑program or per‑production amount that you ascribe to the cost of HD?

2222             MR. KNOX:  Two pieces to the puzzle of course of acquiring the programming, once is the licensee and one is the additional costs.

2223             If we are acquiring something that is in the early years when it is a library title, in other words it already exists and it has been around, we would pay the cost of taking that, as Nic described, I lose the cost of taking that ‑‑ $1,500 is the answer to that.

2224             THE CHAIRPERSON:  Per hour?  Per ‑‑

2225             MR. KNOX:  Sorry.  For a two‑hour movie it is $7.50 an hour ‑‑ sorry.

2226             MR. WRY:  For a two‑hour movie it is $7.50 for an hour, so what I lose at two hours is $1,500.  We just did it.

2227             MR. WRY:

2228             MR. KNOX:  As we move forward we expect that technologies will allow us to do this a little more efficiently.

2229             Perhaps Doug has a quick comment.

2230             MR. MALKIE:  I do.

2231             Regardless of the nature of the original content there are always challenges to deal with.  Most of the credible service providers in the industry now understand pretty much what is going on with high def, at least to be productive in it.

2232             I have been involved in a variety of work flows that allow people to do things exceptionally quickly because it is in data.  They have all moved away from the video tape world, they have all moved away from the physical pots and sliders, as a comparative example, to create a 5.1 surround track from what currently exists, say stereo, you are creating actually a synthesized 5.1 from the original element.  It is an extremely fast process.

2233             If you have a small budget to do that, you actually use the original element, which is a conversion.  If you have the original elements and a significant budget, you can actually go back and remix into original surround.  So there is always a variety of ways to trigger the process, depending upon the nature of the content.

2234             THE CHAIRPERSON:  And the answer is?

‑‑‑ Laughter / Rires

2235             MR. MALKIE:  The answer is ‑‑

2236             COMMISSIONER FRENCH:  $750 an hour?

2237             MR. MALKIE:  Yes.

2238             THE CHAIRPERSON:  Does it change when you are doing it as part of the original mix?  What do you add there?  If there any incremental costs if you count it now?

2239             MR. WRY:  If you are talking about original mix now, all of original mixes are done in a digital methodology.  The actual creation of alternate languages is a fraction.

2240             For example, I will give you a tangible example, creating the French version of something that existed in English where you have all the original materials is basically probably about 10 percent of the original sound creation budget.  If you have all the materials and you need to just remix, it is approximately $2,000.

2241             THE CHAIRPERSON:  I guess I'm trying to get the relative magnitudes of the two bullets that you list as exciting new firsts.

2242             What would be your licence fee typically for that two‑hour production?

2243             MR. MALKIE:  You are talking about what the licence would be to pay on our national pay service?

2244             THE CHAIRPERSON:  I'm asking you about what you are saying here in your second bullet.  You say you will:

                      "... incur the increased cost of HD production over and above our licence fee."  (As read)

2245             So I'm trying to get a sense of the magnitudes.

2246             MR. WRY:  The magnitude is the $1,500 for existing titles that we scan and it is probably more around 50 for the ones that we decide to help move into high def, but we will find a way to make that whatever the most effective way is with the quality to make it happen.  Because it may well be possible to do it for less, occasionally it may cost more.

2247             THE CHAIRPERSON:  What would the licence fee be?

2248             MR. MALKIE:  Do you want to answer what the licence fee would be?

2249             MR. WRY:  Sure.

2250             What we told the producers is that we would pay comparable fees with the existing incumbents, which means about $300,000 a movie, or that is what I got, but we will have to look at it at the time and say what is the ‑‑

2251             THE CHAIRPERSON:  But I guess what I'm saying is that you are making what seemed like a real exciting first and I'm getting the answer that it is $1,500 in addition to $300,000.

2252             MR. WRY:  No, no.  No, no.  It is more like 50 to 100 and we will work with them to do it in the most reasonable way we can.  But for a new show that is the kind of money we are talking about to change the cameras and go out on site.  The $1,500 is just for something that is already done.

2253             THE CHAIRPERSON:  So when you say a new show, an independent producer, does he have the equipment or is this partly the acquisition of his new equipment that you are helping him?

2254             MR. WRY:  Usually it is rented.  Usually it is rented because it is changing so fast that Panovision's thing six months ago is not what you can use now.

2255             THE CHAIRPERSON:  So that HD equipment is changing so fast that in effect if you are an independent producer are you telling me that you are wiser to rent for the project?

2256             MR. WRY:  Absolutely.  Absolutely.

2257             THE CHAIRPERSON:  So that additional rental you estimate is 50 to 100?

2258             MR. WRY:  Fifty to 100.  Well, with all the other elements, because that is not the only element that changes.  But, yes.

2259             THE CHAIRPERSON:  How would you isolate that element though?

2260             MR. WRY:  What you do is, you sit down with their budget and say, "What are you shooting it in?"  If they say, "I'm shooting it in Super 8", pick something real ‑‑ video, but I really want to do it this way and we are going to have to pay for stock.  If we say, "Okay, let's do it on film and Super 8", you have to pay for stock and processing which will be different than using the HD television technology.  So when you go out to set you are going to have to light it better.

2261             There is a list.  I can give you a list in ‑‑

2262             THE CHAIRPERSON:  No.  I'm trying to be as simple as I can.  I had plugged in for myself a figure of around $300,000 for the licence fees.  What I'm asking you to do is think about the productions that you are likely to be doing and give me the value that you are saying is the exciting new first of the increased cost of HD production averaged out between possibly the $1,500 ‑‑

2263             MR. WRY:  it is probably $75,000 a movie is what it would be.

2264             THE CHAIRPERSON:  Do you want to leave that on the record?  You are saying that additional first will make that contribution instead of 300, 375?

2265             MR. WRY:  Yes.

2266             THE CHAIRPERSON:  Can I take that away from this?

2267             MR. WRY:  Yes.

2268             THE CHAIRPERSON:  That's, okay.  Thank you.

2269             If you want to change that in Phase II or another phase, refine it, let me know, but that is what I'm taking away from this.

‑‑‑ Laughter / Rires

2270             THE CHAIRPERSON:  Still on numbers, if we can, I am going to try to ask you similar questions to the ones I put to Spotlight, which is:  We need to come to an assessment of whether the pie is really going to grow as a result of this.

2271             What the incumbents are putting to us is, you are basically going to split what we have and ruin a good thing and possibly to back to a status quo anti the 1984 stabilization decision to chaos.

2272             So I would like to probe some of these figures that you have put on the record, in particular two categories, one your growth in subs and, the second, your revenue per sub figure.  Those are the two areas that I will try to take you through.

2273             If I could, I will start with the growth in subs and I will refer to your page 14, the chart that you were looking at with my colleague, Commissioner Williams.

2274             The two things that I note and would ask for your comments on are your total subscribers are going up at a very high rate, from 175,000 to 1.5 million over the seven‑year period.  Correct?  Then that, together with the incumbent, leads to a figure that goes from 2.3 million in year one up to 4.87 million in year seven.

2275             I take that as a cumulative annual growth rate of something in the neighbourhood of 14‑15 percent.  You may have an exact figure doing it on the back of an envelope.

2276             Is that about right?

2277             MR. KNOX:  Yes, that looks about right.  You can see the ‑‑

2278             THE CHAIRPERSON:  Okay.  So subject to check I think that is the ballpark.

2279             I'm trying to understand how you get that number.

2280             If I look at the incumbent's share, you hold them at an 8 percent growth rate.  Their study that they filed in the interventions of Corus and Astral suggest a much lower growth rate, even without competition, and this doesn't take into effect the fact that they will have competition.  In the Spotlight chart you saw, the incumbent's numbers actually go down as a result of competition, consistent with what the incumbents are telling us.

2281             So I'm not sure how you see them as staying at an annual growth rate of 8 percent, given competition, other windows and some of the other factors that you have no doubt noted.

2282             MR. KNOX:  My first thought is the incumbents are being very modest about their own abilities.

2283             Suggesting that the growth would continue at 8 percent we don't think is unreasonable given the rapid rate of growth in the digital universe.

2284             In fact, we are starting to think that the rate of growth that we have identified here for the digital universe is perhaps a little conservative based on information that we are hearing and some of the success that companies like Rogers is having with their expansion on the digital side.

2285             So we think that the incumbents will be able to still enjoy some real growth because the next growth opportunity is truly on the cable side.  We saw the explosion in DTH and we all enjoyed that and it is my understanding that 30 percent of cable is digital now, so that is the next growth area.

2286             At some point you are going to see a hockey stick‑like spike in the digital world once the analog guys say, "Okay, that's it, let's pick a day when we shut off analog because we want to use that for VoIP or some other service that is going to make them lots of money and it will make sense for them to just make everyone digital and then there is a huge opportunity for us.

2287             With respect to our growth figures ‑‑

2288             THE CHAIRPERSON:  Just before you leave that, if I could ‑‑

2289             MR. KNOX:  Yes?

2290             THE CHAIRPERSON:  ‑‑ I take it that you don't put any weight on the early adopter argument, that the people who want premium service are already digital, and while the world will go digital the pace will slow down because the early adopters already have the pay services.

2291             You don't buy that argument?

2292             MR. KNOX:  No, not at all.  As you look at ‑‑ no, not at all.  I think the offering is going to be pretty exciting in HD, if you look at the programming that we were playing today.

2293             It was also interesting to hear the gentleman who worked at BSkyB and said that he didn't buy that either.  He thought the early adopter theory didn't hold water.

2294             I think our research person probably has a point of view on this.

2295             MR. MOTA:  Thank you, Malcom.

2296             Mr. Chair, I just want to point out a couple of things that our consumer research identified and then I will just give you some real market sort of issues that I think will help flush that out a little bit.

2297             We do not agree with the early adopter market, at least Decima doesn't.

2298             First off, the consumer research study that we conducted, although it shows high satisfaction levels for the incumbent pay services, there is a segment of the market there that is showing a dissatisfaction or a neutrality I guess in the sense of whether they are satisfied with their service.  So they are clearly not getting everything that they want out of the services that exist.

2299             Second, the incumbents in fact filed some research, and there was other research that was filed in this proceeding, that shows a fairly high level of churn in the pay‑tv market, customers who had pay‑tv that no longer have it today.

2300             So it is our firm view that the entry of competition gives the consumer that choice to then come back to the system, to the pay‑tv system.  We think that is a real opportunity for a new player in the market to bring some of those consumers back into the fold.

2301             Another point I would like to make is, in the early days of the pay‑tv subscribers coming on board, there were significant barriers to entry to becoming a pay‑tv subscriber.  In the early, early days, as you know, there was a shortage of analog boxes.  Those boxes were expensive.  So in order to be a pay‑tv subscriber in the early days you had to make a significant investment upfront, and even then you are only looking at one service.  There were no packaging partners, there were no specialty services.

2302             As you know, pay in Canada preceded the specialty explosion that we have seen today, certainly in the digital environment.

2303             So that is one aspect.

2304             The market is very different today.  In the digital tv environment today, and certainly the pay‑tv packages offered today, they are very different beasts all together.

2305             Today, as I mentioned earlier, we have digital distributors that are offering equipment free‑of‑charge, so that cost barrier to get into the market is non‑existent in some cases.  ExpressVu is offering its lowest digital receiver for $2.50 a month on rental.

2306             In fact, it is piloting a program right now out in Atlantic Canada that bundles in the equipment in the cost of packaging, so the consumer isn't really seeing an incremental cost.

2307             So the reality of the market is the costs are coming down for the consumer to get into that market.

2308             The other element of that is the pay packages have changed considerably.  They are far more attractive from the consumer perspective.  They include not one pay service, they include multiplex channels, they include a dedicated HD channel in that mix, they include the "Moviepix" and the "Encore Avenues", depending on the market, which add older titles to the mix, they include four U.S. superstations by and large, and in fact a lot of the distributors have added digital specialty channels that carry a high amount of movies into that mix.

2309             So those packages today for those late adopters coming on board are certainly far more attractive than they were for some of these earlier people coming on board.

2310             So when you put all those elements together we clearly see a market there for a new entrant to capture a portion of the market.

2311             THE CHAIRPERSON:  I realize that Decima isn't the author of the AEI forecast going forward, but do you have a comment on the 10 percent annual growth rate of digital?

2312             MR. MOTA:  We did collaborate on it.

2313             In our study, which I mentioned at the start, is a quarterly tracking study.  We really like to go only two years out in our forecasts.  We don't pretend to know how the future is going to unfold.  We take past experience, what the BDUs are projecting in terms of their guidance, which they in fact are exceedingly exceeding on a quarterly basis, and we take that and we go two years out.

2314             Malcom mentioned a good point with the hockey stick effect.  I don't know when that is going to happen, but in most markets all the factors come together were the penetration takes off.

2315             In this particular market it may be the point where Rogers has been very aggressive in migrating to digital where it may get to 75 percent digital penetration and say, "You know what, as a business it makes no sense for me to offer analog any more."  That is where at some point in the mix it may take off.

2316             But I agree with those projections.

2317             THE CHAIRPERSON:  I will bet there are many people in this room who have made investments waiting for the hockey stick.

‑‑‑ Laughter / Rires

2318             THE CHAIRPERSON:  I think they have been disappointed slightly more times than not.

2319             MR. MOTA:  That is true.

2320             THE CHAIRPERSON:  In any case, getting back to the 10 percent, do you think it is too conservative or do you think it is about right?

2321             MR. MOTA:  I think it is very possible it could be too conservative.  I'm not here to give a definitive answer, I just don't know.  But it is very possible it is too conservative.

2322             Even some of the hard numbers there for the next two years, I am constantly revising upward the estimates on a quarterly basis based on the new numbers that come in.

2323             THE CHAIRPERSON:  Right.  Because what we see is a 10 percent projection of digital and a 15 percent cumulative growth rate in pay on this chart, notwithstanding the earlier adopter argument, whatever weight you may want to give it.  So it seems somewhat of a stretch quite frankly, notwithstanding the packaging and marketing and service offering points that you make.  So I don't know.

2324             When I look at the U.S. material that you filed with your application, and I could be reading it wrong because it is very data‑oriented.

2325             Perhaps Mr. Schecter might want to comment, but I notice growth.

2326             I'm looking at page 2 of the Section 1 "U.S. Premium Market Overview Material" that is attached to Schedule 3, "Research Reports", where the growth in wholesale revenues is about 3 percent per annum.

2327             I appreciate that the American levels are a lot higher at this point and we don't have data going back historically to compare.  I think also we are combining services in this table, namely HBO/Cinemax are combined and Showtime/Flix are combined.  So I don't know that we have apples to apples comparison.

2328             I don't know whether you would like to comment, Mr. Schecter, on that.

2329             Am I correct in saying that the growth appears to be in the low single digits year‑over‑year and yet here we are projecting growth of 15 percent in total premium universe.

2330             Do you have a view on that from the U.S. perspective?

2331             MR. SCHECTER:  I think the growth in the States is really comparing, to some degree, apples to oranges as the market optics are fairly different.  You have a much more mature pay universe down there than we have up here with much more competition.

2332             So I'm not too sure whether you would make the same extrapolations on the growth rates down south to what they would become in Canada going forward.

2333             We do know from our analysis of the American marketplace that it is a growing market.  Adaptation seems to be one of the key elements to fuel the growth in the pay marketplace.

2334             From the mid‑1990s we added multiplexing.  When success of network studio output deals went dry they moved more and more into original series production, now they are moving more and more to SVOD.

2335             One of the points that we have noticed down in the States is that the SVOD side of things, as an example, has reduced the pay churn considerably, anywhere from 10 to 35 percent annually, which is a very significant figure for business models going forward, and that the overall revenues of course are growing at fairly nice clips going forward.

2336             THE CHAIRPERSON:  Mr. Knox, to what extent did you base these numbers on U.S. experience?  If you didn't then we don't have to pursue that.

2337             MR. KNOX:  No, we didn't.  We think our world is the orange and they are the apple.

2338             THE CHAIRPERSON:  Right.

2339             MR. KNOX:  But there is one thing that Brian said that is starting to happen here, and that was the significance of SVOD in reducing churn.

2340             Apparently Mario has been in touch with Rogers and they are experiencing the same thing.  It has caused a dramatic reduction in churn, which has allowed them to be confident about raising their retail fee $2.00, which they have done.

2341             MR. MOTA:  Well, we are very bullish on the factor that SVOD can bring to the market in terms of providing new growth because it really is increasing, as us marketers like to say, the stickiness of the service, in the sense it makes it a far more valuable offering for consumers.

2342             Let me give you some examples, some hard numbers.

2343             Michael Lee, who is Rogers Chief Strategy Officer, spoke recently, a few weeks ago actually, at the CCSA Annual General Meeting and he pointed out of the 60 percent of its digital cable subscriber base they are now using the TMN On Demand service, which it describes as very good penetration.  Of those customers, on average they are watching 11 movies a month on the SVOD offering, which he describes as good numbers.

2344             It has resulted in a 50 to 70 percent reduction in churn for Rogers pay‑tv subscriber base, which is a very significant number, and it is driving new pay‑tv growth.

2345             The fact of the matter is ‑‑ this is information I think most of the BDUs can share with you that are presenting today, or even Astral and Movie Central, whether they are seeing that in the marketplace.

2346             But that is the reality.  It is driving new growth, it is overall improving the value of the service.  So these types of new technologies, the suggestion has been made that they are a threat to pay‑tv, in fact we see them as the opposite.  They increase the value proposition for consumers and they make the whole TV experience better and so makes that service far more valuable to them.

2347             MR. KNOX:  Could I just add one last comment?

2348             THE CHAIRPERSON:  Sure.

2349             MR. KNOX:  That is, the U.S. market is a more mature market in pay television.  Also, I believe their penetration rates, as discussed yesterday, are 50 percent.  Ours are significantly below that and that is why we think there is a much greater potential for the growth.

2350             You will notice the penetration rates that we have identified on the extreme right‑hand side of our chart keeps us basically in the same ranges of penetration that have been experienced during the early years of this decade.

2351             So our point is that the digital universe is growing faster, is providing more subscribers to us than we can grab.

2352             THE CHAIRPERSON:  Okay.  Let's turn to your revenue per subscriber figure.

2353             Again, you use $8.00 flat throughout the period.  I think you maybe offhandedly today at one point said "We will be lucky to keep that number up".

2354             You haven't taken into account the effects of competition it seems to me, or the U.S. experience in respect of the second service getting considerably lower revenues than the first, have you?

2355             MR. KNOX:  We think we have pretty realistic subscriber growth numbers, and they are not huge.  We think that we have built some flexibility into our model, because if we are able to grow at a faster rate, we can do so with a lower figure.

2356             THE CHAIRPERSON:  I'm not talking about subscriber growth, I am talking about revenue percent, the $8.00 rate that is flat throughout the period and doesn't appear to reflect impacts of competition, the fact of the single subscriber/dual subscriber model, the blended.

2357             I think a number of parties have agreed that the impact of competition and the impact of parties subscribing to two services and two services being packaged together will drive the blended rate down somewhat.

2358             Do you disagree with that?

2359             MR. KNOX:  Our model was based on getting new subscribers and we fully expect there may be some that ‑‑ it comes down to how it is packaged.

2360             We could have done a variety of models trying to come up with hypothetical packaging scenarios.

2361             THE CHAIRPERSON:  I appreciate.  I'm looking at your response to June 8th where you do say that existing pay services will subscribe to both.  You estimate it as only 20 percent, Spotlight yesterday indicated they thought that would be 80 percent.  Those are your views.

2362             On what do you base that?

2363             Their logic seemed to me to be that the incumbents have their audience, there seems to be in the surveys a reasonable degree of satisfaction with that, why wouldn't they stay with them and perhaps take you on for an additional "X" amount, the "X" being not double what they are now paying but some incremental amount that would ‑‑ particularly if you divide up the product of the Hollywood studios ‑‑ require them to kind of have two services to get what they got before?

2364             I'm wondering why it is so low.

2365             MR. KNOX:  Our model wasn't to divide up the Hollywood programming the way Spotlight was suggesting.

2366             It strikes me, without making ‑‑

2367             THE CHAIRPERSON:  No, no, I understand that.

2368             MR. KNOX:  Yes.

2369             THE CHAIRPERSON:  I think it is important ‑‑ sorry to interrupt you ‑‑ only to say that whether there is exclusivity or not in a competitive marketplace you are each going to get a few blockbusters.

2370             MR. KNOX:  Sure.

2371             THE CHAIRPERSON:  So, in effect, if I am a subscriber who is getting them all on TMN, I now have to go to both channels if that is my appetite and I still want to see those.  So whether thee is exclusivity or not you are going to have that.

2372             I'm wondering, given that, why you think there will only be 20 percent?

2373             MR. KNOX:  We think the majority will ‑‑ again, it depends on how it is packaged.  If we are in an add‑on or if we are in the ultimate movie package ‑‑ I don't know how the cable guys and the satellite guys are going to package these things.

2374             If we are in an add‑on scenario, yes, we could be in a position where we might have to chase it with a lower subscriber rate, but our model ‑‑ we had to pick a model.  We had to draw a line in the sand and that is what we did.  We picked $8.00 based on our experience.

2375             THE CHAIRPERSON:  I'm not quarrelling with that, I am quarrelling with ‑‑ I'm trying to test out your assumptions and to see whether I agree with them or not.

2376             Obviously you had to pick a model and I guess I'm saying that your failure to take account of these competitive forces and a decline in the rate surprises me a little, given the way commonsense suggests the market will unfold, that's all.

2377             I'm just giving you an opportunity to respond to that.  I understand what you have done here.

2378             Of course going to the bottom line on all this, which is if you have inflated then your promises of Canadian content are inflated, and if that is the case are we really getting a bigger pie at the end of the day, which is what we are trying to look at.  Of course the CMI study, doing an analysis of your application, suggests that the decline in the pie is going to be quite substantial.

2379             Again, as Commissioner del Val said, you can comment on it now or comment on it later, but I would appreciate it if you commented on ‑‑ I think the summary is on Table 7 of the CMI study on the negative impact lost to the system in spending on Canadian content.  They estimate $43 million over the period.

2380             You may want to comment generally now or wait until reply.

2381             MR. KNOX:  We would have to come back with that.

2382             THE CHAIRPERSON:  I beg your pardon?

2383             MR. KNOX:  We would have to come back to comment on that.

2384             THE CHAIRPERSON:  Okay.  I would appreciate it if you would.

2385             Also, as I said to Spotlight, if you could address the assumptions made in this study when you are at reply, that would be very helpful as well.

2386             MR. KNOX:  Certainly.

2387             THE CHAIRPERSON:  Those are my questions.  Thank you very much, ladies and gentlemen.

2388             Do you have a last word you would like to make, Mr. Allard or Mr. Knox?

2389             MR. ALLARD:  I will.

2390             Thank you, Chairman Dalfen, Commissioners and staff for providing us with an opportunity to talk to you about our proposal that is going to generate new interest in pay television among Canadian consumers.

2391             We are proud of our all‑Canadian model, our $1 million exclusively for third party promotion of our Canadian programming, our financial commitment of 32 percent of our revenues to Canadian production, our commitment of $2 million per year in script and concept development above and beyond the 32 percent, our $1 million per year in regional outreach and, in addition, as we have said, we will also be investing our profits for bridge financing and we will be the only pay television service to be virtually 100 percent in high definition from day one.

2392             Once again, on behalf of our whole team we would like to thank you.

2393             THE CHAIRPERSON:  Thank you very much.

2394             We will break for lunch now and resumed at 2:00 p.m.  Nous reprendrons à 14 h 00.

‑‑‑ Upon recessing at 1230 / Suspension à 1230

‑‑‑ Upon resuming at 1402 / Reprise à 1402

2395             LE PRÉSIDENT : À l'ordre, s'il vous plaît.  Bon après‑midi, tout le monde.

2396             Madame la Secrétaire.

2397             LA SECRÉTAIRE : Merci, Monsieur le Président.

2398             Nous entendrons maintenant l'article 4 à l'ordre du jour, qui sont des demandes présentées par Groupe Archambault inc. en vue d'obtenir deux licences visant l'exploitation de services nationaux de télévision payante, un de langue française et un de langue anglaise, qui seront appelés BOOMTV.

2399             La titulaire demande la distribution d'un service de catégorie 1 et propose la distribution obligatoire du service de langue française dans les marchés francophones et la distribution obligatoire du service de langue anglaise dans les marchés anglophones.

2400             Comparant pour la requérante, Monsieur Pierre Karl Péladeau, qui nous présentera ses collègues, et vous disposerez, par la suite, de 30 minutes pour faire votre présentation concernant vos deux demandes.

2401             Monsieur Péladeau.

PRÉSENTATION / PRESENTATION

2402             M. PÉLADEAU : Merci beaucoup.

2403             Bonjour, Monsieur le Président, Monsieur le Vice‑Président, mesdames et messieurs du Conseil.

2404             Je m'appelle Pierre Karl Péladeau.  Je suis le Président et Chef de la Direction de Québecor et de Québecor World.

2405             Notre équipe est composée, aujourd'hui, de :

2406             Richard Soly, Président du conseil de Groupe Archambault et aussi Président du Groupe musique et détails de Québecor Média;

2407             Pierre Lampron, Vice‑Président aux Relations institutionnelles, Québecor Média;

2408             Paul Buron, Vice‑Président principal des Chefs de la Direction financière, Groupe TVA;

2409             Don Gaudette, Directeur général, Programmation, Sun TV;

2410             Lucie Quenneville, Directrice principale, Programmation, Archambault;

2411             Manon Brouillette, Vice‑Présidente, Marketing et Développement des Produits, Vidéotron;

2412             Jacques Dorion, Président et Chef de la Direction de Carat Canada; et

2413             Édouard Trépanier, Vice‑Président aux Affaires réglementaires de Québecor Média.

2414             Mr. Chairman and fellow Panel Members, we are very pleased to be here today to present Archambault application for two pay television service licences, one in French and the other in English.

2415             Archambault is a wholly‑owned subsidiary of Québecor Média and currently operates a video on demand or VOD television service authorized by the CRTC.

2416             Archambault has been distributing the works of Canadian and international artists for 125 years and is the largest independent distributor of record music and videocassettes in Canada.

2417             The Archambault chain of stores is the largest retailer of CDs in eastern Canada and a major retailer of books, CD‑ROMs, DVDs, videos, periodicals, musical instruments and sheet music.

2418             Archambault e‑commerce Web site is the largest online retailer of French‑language products, including music, and the largest French‑language Web site for legal downloading of music in Canada.

2419             Archambault also operates the big box retail outlets offering cultural content on an internet Web site and benefits from the synergies with its sister companies within Québecor Media that are actively involved in broadcasting, distribution, internet services and print media.

 

2420             Monsieur le Président, c'est peu dire combien nous sommes conscients et à l'affût de tous les changements qui affectent les habitudes de consommation des produits culturels d'aujourd'hui.

2421             Québecor Média est parmi les acteurs les plus actifs au Canada pour le développement de nouvelles plate‑formes de diffusion.  Nous favorisons le développement de la numérisation et le déploiement de services haute vitesse, et nous développons et administrons les sites internet les plus performants.

2422             Québecor Média exploite la VSD et voit comme inévitable le développement de la diffusion des productions audiovisuelles par la téléphonie mobile, le iPod et autres dispositifs du même genre.

2423             Nous sommes aussi parmi les plus importants fournisseurs de contenu au Canada, et très certainement, le plus important fournisseur privé de contenu canadien, tous genres confondus.

2424             La télévision généraliste privée telle que nous la connaissons est la plus menacée par tous les changements en cours.  La fragmentation des audiences se fait à ses dépens.  Le changement des habitudes de consommation aussi.

2425             Les revenus publicitaires sont davantage répartis entre les différentes plate‑formes, et il faut composer avec le fait que les consommateurs exigent plus de choix et plus de liberté.

2426             Le système qui se crée exige de tous les intervenants plus de flexibilité, plus de partenariats et plus de complémentarité.

2427             Dans ce contexte, nous avons peine à imaginer comment une situation de monopole puisse être maintenue dans le domaine hautement stratégique de la télévision payante.  Ce monopole est un frein à l'innovation et à l'imagination.

2428             Ailleurs, la télévision payante a joué un rôle majeur dans le développement de la qualité des programmes.  Que n'a‑t‑on pas dit sur l'effet Home Box Office aux États‑Unis et celui de Canal Plus en France?

2429             En présentant la demande de BOOMTV, nous n'avons pas nécessairement l'intention de diffuser davantage de produits HBO au Canada, mais nous voulons vous démontrer que nous pourrions être aussi performants.

2430             La télévision payante est une plate‑forme essentielle à la production et à la diffusion de la production canadienne.  C'est du moins notre conception de son rôle.

2431             C'est à la télévision payante que doivent être initiées des émissions originales, adaptées aux goûts et aux besoins du public.  Il s'agit d'en faire un instrument de première diffusion pour le contenu canadien, qui pourra ensuite décliner sous différentes formes, autant sur les nouvelles fenêtres de diffusion en développement que sur les services plus traditionnelles.

2432             Comme vous le constatez, nous comptons avant tout sur la mise en valeur du contenu canadien pour nous distinguer.  Nous prendrons les engagements requis.

2433             Ce n'est pas nouveau pour notre entreprise.  Nous avons appris par expérience, en consentant les investissements nécessaires, ce qu'est la force d'attraction de la production canadienne originale et les multiples vertus de la multiplication des plate‑formes de diffusion et de distribution qu'elle permet.

2434             Nous voulons que le Conseil nous autorise à lancer deux services de télévision payante qui seront des joueurs‑clés du nouveau paysage audiovisuel qui se dessine.  Tel est notre projet et notre ambition.

 

2435             Premium pay television has existed in Canada for the last 22 years.  Unlike the environment in the U.S. and in France where pay television services such as HBO and Canal Plus have made important contributions to the original production of domestic theatrical features and drama for television, Canadian pay television services have not provided a significant stimulus for the Canadian production industry.

2436             Archambault new pay services are committed to increasing the overall penetration ratio of Canadian pay services and allowing the pay sector to realize its full potential in financing and promoting Canadian production for films and television.

 

2437             Permettez‑moi maintenant de passer la parole à Richard Soly.

2438             M. SOLY : Bonjour.

2439             BOOMTV fournira deux services nationaux de télévision payante d'intérêt général, un de langue française et un autre de langue anglaise, exclusivement en mode numérique.

2440             Les deux services seront offerts sur cinq canaux, deux dans chacune des langues officielles, compatibles avec la technologie haute définition, ainsi qu'un canal bilingue d'auto‑promotion.

2441             Notre vision de la programmation pour les deux services de BOOMTV est basée sur quatre éléments :

2442             1.  Une télévision innovatrice et de qualité;

2443             2.  Une télé résolument généraliste;

2444             3.  Axée sur la mise en valeur du contenu canadien dans les deux langues officielles; et

2445             Finalement, présentée dans deux services distincts mais reliés.

2446             BOOMTV vise à devenir le rendez‑vous des téléspectateurs intéressés à voir le meilleur de la télé avant le grand public.

2447             Pour atteindre ce but, BOOMTV présentera des primeurs de films et de séries dramatiques canadiennes et non‑canadiennes.

 

2448             BOOMTV seeks to accomplish several objectives:

2449             Reduce the number of replays relative to the incumbent services;

2450             Present true counter programming on the two multiplex channels for each of the English‑ and French‑language services and not simply the same movies in a different rotation;

2451             Diversify the kind and origin of programming in the evening viewing hours on a daily basis;

2452             Develop an approach whereby BOOMTV's viewers can rely on regularly scheduled appointments and offer BOOMTV's programming to consumers on a variety of platforms.

2453             Je passe maintenant la parole à Lucie Quenneville, Directrice principale, Programmation.

2454             MME QUENNEVILLE : Quoique les services de télévision payante comme Super Écran aient été autorisés en tant que service d'intérêt général, ils se sont campés presqu'exclusivement dans le cinéma.

2455             BOOMTV a l'intention de devenir un vrai service d'intérêt général en présentant des séries dramatiques, des sports et des événements spéciaux, aussi bien que des longs métrages, autant ceux destinés au grand écran que ceux spécialement dédiés à la télévision.

2456             La chaîne française Canal Plus et la chaîne américaine HBO ont développé une expertise dans la programmation quotidienne autour de quatre axes, dont BOOMTV s'inspire.

2457             Aussi, BOOMTV propose de répartir sa programmation en quatre segments : le long métrage cinématographique; le sport; les émissions dramatiques pour la télévision; et les événements culturels.

2458             Ainsi, environ 36 pour cent de la programmation de BOOMTV sera dans des catégories d'émissions autres que celles des services de Super Écran, The Movie Network et Movie Central.

2459             Pour les quelques 64 pour cent de la grille horaire qui sera consacré au cinéma, il va de soi que BOOMTV cherchera à se distinguer des canaux existants pour pouvoir vendre son service aux foyers canadiens.

2460             Dès sa première année complète de diffusion, BOOMTV offrira autant, sinon plus, de contenu canadien sur chacun de ses services français et anglais que les services de télévision payante existants après 22 ans d'exploitation.

2461             La combinaison de l'ensemble des activités culturelles de Québecor Média et de ses filiales permettra d'exposer un large éventail de production audiovisuelle canadienne.

2462             Grâce à la synergie entre les entreprises de Québecor Média, les producteurs indépendants pourront profiter plus que jamais de financement nouveau mis à leur disposition.

2463             Entre autres, BOOMTV compte présenter en première diffusion toutes les oeuvres dramatiques canadiennes que les grands réseaux de télévision et les producteurs nous permettront de diffuser en avant première.

2464             M. SOLY : Merci, Lucie.

2465             Les deux chaînes de BOOMTV offriront à leurs partenaires un ensemble de services dans plusieurs secteurs, comme le font d'autres grands groupes en télédiffusion comme Astral, Corus, CTV et CHUM.

2466             Notre ambition est d'offrir aux Canadiens un service adapté de qualité équivalente dans les deux langues.

2467             Il est évident que l'acquisition des droits de production canadienne et non‑canadienne pour l'ensemble du territoire canadien et pour une exploitation dans les deux langues officielles est porteuse en soi d'importantes synergies.

2468             De plus, il serait difficilement envisageable d'autoriser un service nationale de télévision payante dans les deux marchés linguistiques sans tenir compte de la possibilité d'importantes économies d'échelle qui pourraient être réalisées et qui se traduiraient nécessairement par une meilleure qualité de la programmation.

2469             Le succès de notre nouveau service de télévision payante reposera sur des relations et des partenariats harmonieux avec l'ensemble des intervenants du milieu.

2470             Québecor Média recourra, évidemment, à toutes les synergies disponibles entre ses différentes filiales.

2471             Sans ce genre de synergies, qui permettra d'amortir les frais d'une partie importante de la programmation et de la promotion, ainsi que les coûts fixes pour un service dans chacun des deux marchés linguistiques canadiens, nous ne croyons pas qu'il soit vraiment possible d'exploiter une licence de télévision payante dans l'un ou l'autre de ces deux marchés.

 

2472             Now, I would like to introduce Don Gaudette, General Manager, Programming for Sun TV.

2473             MR. GAUDETTE:  Thank you, Richard.

2474             Although the major pay television services in Canada have been licensed as general interest services, they have developed essentially into movie showcases specializing in the presentation of U.S. blockbusters.

2475             Archambault seeks to create a truly general interest pay service that will provide a home to dramatic series, sports and special events as well as movies.

2476             Hollywood movies will, of course, have their place on BOOMTV's schedule but considerable attention will also be paid to international, independently produced feature films.

2477             BOOMTV's proposed schedule will therefore be different from the schedules of the incumbent services and less dependent on the U.S. studio product to drive subscriber projections.

2478             Movies will contribute only about 64 or 65 per cent of BOOMTV's schedule and not the 90 to 95 per cent that is the current case with the incumbent services.  As a result, BOOMTV's non‑Canadian program expenditures would be lower than those of the existing services and the other pay television applicants.

2479             Unlike the incumbent pay services, BOOMTV will provide an important window for drama series, miniseries and telefilms of all kinds.  Television drama, particularly first‑run Canadian drama, will occupy another 12 per cent of our schedule.  This is a rarity among Canadian pay television at the present time.

2480             The existing sports services are specialized in the seasonal play of major professional sports leagues with the result that league play is adequately covered.  Therefore, BOOMTV has no desire to include such programming in its schedule.

2481             Occupying roughly 13 per cent of the schedule though, BOOMTV's sports programming would include World Cup or annual championship events such as in such sports as alpine skiing, cycling, soccer, figure skating, horseriding, water sports and extreme sports, as well as tennis, golf, boxing and auto racing.

2482             While the existing sports speciality services may touch on some of these activities at one time or another, there is an enormous variety of sporting events not presently covered that will find a home for Canadian viewers on BOOMTV.

2483             BOOMTV's events programming will contribute the last 11 per cent of our schedule and consist of popular concerts featuring the likes of Céline Dion, Diana Krall and other musical giants, as well as modern dance such as that presented by La La La Human Steps and variety shows showcasing popular performers such as Cirque du Soleil, together with other cultural events suitable for pay television.

2484             Unlike the environment in the U.S. and France where pay television services such as HBO and Canal Plus have made important contributions to the original production of domestic theatrical features and television drama, Canadian pay television services have seriously underperformed in this area.

2485             One of the primary reasons for licensing BOOMTV's new services is to increase the overall penetration ratio of Canadian pay services and allow the pay television sector to realize its full potential in financing and promoting Canadian theatrical feature films and television production.

2486             On top of this, BOOMTV aims to generate additional revenues for television programs and series that have not traditionally benefited from a pay window.

2487             We are thinking of drama series such as "The Eleventh Hour," "This is Wonderland," "Sex Traffic," "Trailer Park Boys" and "Corner Gas."

2488             On the French‑language service, examples of series that might have benefited from a pay television window include "Les Bourgons," "Fortier," "Je vis ta vie" and "Silence, on court."

2489             Now, Manon will fill us in on the marketing plans.

2490             MME BROUILLETTE : La commercialisation de BOOMTV s'appuiera sur trois grands axes, et j'aimerais préciser que les sorties de caisse indiquées dans notre plan d'affaires ne représentent pas la valeur réelle de nos activités prévues.

2491             La valeur réelle de nos dépenses sur le marketing et la promotion comprend :

2492             Un support aux distributeurs dans nos chaînes ‑‑ on parle ici de formation, de matériel de promotion et de représentation;

2493             Des initiatives pour bâtir la notoriété de la marque et stimuler les abonnements, en partenariat avec les distributeurs tels que Chat, Rogers, Cogeco, Bell ExpressVu; et

2494             Des synergies et des contrats d'échange entre BOOMTV et les autres filiales de Québecor Média en ce qui a trait aux placements média et à la production de tout matériel promotionnel.

2495             La vidéo sur demande, ou VSD, a été une source d'apprentissage exceptionnelle, tant pour les programmeurs d'Archambault que pour le secteur de la commercialisation et les gens qui conçoivent les interfaces utilisateurs.

2496             Nous avons, à ce jour, numérisé près de 2 000 émissions de tout genre, émissions qui ont fait l'objet de plus de 12.5 millions de commandes, pour une moyenne de plus de 40 commandes par foyer numérique depuis le lancement de la VSD en mai 2003.

2497             Ces données sont en croissance rapide et constante, ce qui est un indice de l'efficacité de nos stratégies de promotion et de mise en marché et de l'expérience que nous avons acquise dans la programmation de cette nouvelle fenêtre de diffusion.

2498             Notre expérience acquise auprès des utilisateurs de la VSD nous sera précieuse pour faire de BOOMTV le succès que nous anticipons.

2499             Le plan d'affaires de BOOMTV repose sur l'étude de marché de Carat Expert et sur le sondage de Synovate ainsi que d'autres données à la disposition des filiales de Québecor Média.

2500             Selon un sondage effectué auprès de 2 850 foyers, 11 pour cent des foyers numériques ont affirmé qu'ils s'abonneraient à un service comme BOOMTV au tarif mensuel de 10,99 $.

2501             Son positionnement distinctif fait de notre offre une alternative de choix pour les téléspectateurs canadiens.

2502             L'engagement d'Archambault envers la production et la diffusion d'oeuvres canadiennes sera également appuyé par un marketing et une promotion que seul un grand groupe comme Québecor Média peut assurer.

2503             Pierre.

2504             M. LAMPRON : Oui.

2505             Monsieur le Président, il m'incombe de vous présenter les multiples bénéfices pour notre système de radiodiffusion qui résulteraient de l'autorisation des deux services de BOOMTV.

2506             Un grand nombre d'intervenants dans le présent processus du Conseil ont signalé leur appui au principe de la concurrence et de la variété de services qui en découlent.

2507             Ces intervenants comprennent des associations de producteurs comme la CFTPA et l'APFTQ, l'Association des distributeurs de films et d'émissions (le CAFDE), les associations de créateurs comme la Directors Guild, la Writers Guild et ACTRA, les entreprises de distribution comme Bell ExpressVu, et celles qui distribuent par voie téléphonique.

2508             De plus, plusieurs producteurs et distributeurs bien en vue ont appuyé les demandes de BOOMTV pour créer deux nouveaux services de télévision payante.  Ils comprennent des personnalités comme Fabienne Larouche, Jocelyn Deschênes, Claude Veillette, Christian Larouche, Vincent Gabriele.

2509             Par exemple, dans son intervention du 8 septembre dernier, Fabienne Larouche écrivait, et je cite :

                        * Groupe Archambault, filiale de Québecor Média, a depuis longtemps démontré son aptitude à distribuer ses produits dans la rentabilité, mais aussi et surtout dans la qualité. +

                        * Il ne fait aucun doute +, disait‑elle, * que cette entreprise saura offrir à tous les citoyens des produits originaux et marquants susceptibles d'établir les bases d'une saine concurrence sur le marché, la concurrence étant, comme chacun sait, une garantie de bénéfices pour le téléspectateur. + (Tel que lu)

2510             BOOMTV propose de diffuser 275 heures d'émissions canadiennes originales au cours de la première année, avec une croissance de 10 heures par année, pour atteindre 335 heures au cours de la septième année pour chacun des services de langue française et anglaise.  L'accent sera mis sur les séries dramatiques et les téléfilms.

2511             Selon nos prévisions, les dépenses d'acquisition de BOOMTV pour la programmation canadienne s'élèveront à 298 millions de dollars sur sept ans, réparties sur les deux services.

2512             Ainsi, si l'on établissait une répartition budgétaire de 60 pour cent en faveur du service anglais et de 40 pour cent pour le service en français, 179 millions de dollars seraient dépensés pour le service anglophone sur les sept ans, et 119 millions de dollars pour le service francophone.

2513             En plus, nous allons dépenser au moins 1 pour cent de nos revenus bruts sur la conception et la rédaction de scénarios pour les dramatiques canadiennes ou un minimum de 5 millions de dollars sur sept ans si jamais nos prévisions de revenus ne se réalisaient pas.  Cela constitue, nous croyons, un engagement substantiel envers le développement de nouveaux films et de séries dramatiques canadiennes.

2514             Le financement de toutes les émissions prioritaires canadiennes destinées à la télévision est problématique, et plus particulièrement, celui des dramatiques.

2515             Sans de nouvelles mesures, il n'est pas certain que les télévisions généralistes seraient capables de maintenir leur performance encore longtemps, en raison, notamment, d'un tassement de leurs revenus, d'une croissance du coût des programmes et d'un plafonnement dans le financement public disponible.

2516             BOOMTV se propose, donc, comme partenaire et possible alternative pour le financement des dramatiques qui n'auraient pas le support requis.  En certains cas, son apport sera suffisant pour se substituer à celui des fonds publics.

2517             BOOMTV offrira la possibilité d'un appui financier au réseau de télévision généraliste qui trouve les dramatiques télévisuelles canadiennes de plus en plus difficiles à financer.

2518             En autorisant BOOMTV, le CRTC incitera aussi les services payants existant à rechercher une performance améliorée et créera un environnement de marché plus sain dans le domaine de la production et de la distribution des contenus.

2519             Comme l'a bien dit l'Association canadienne de distributeurs et exportateurs de films, CAFDE :

                        "The introduction of competition will by its very nature encourage both existing and new pay TV services to offer the best quality programming and marketing, improving both consumer choice and satisfaction.  The introduction of competition will strengthen the Canadian distributor sector by creating a larger audience for feature films and creating a demand for a wider variety of films."  (Tel que lu)

2520             Pour assurer une concurrence loyale avec les services existants, BOOMTV est prêt à respecter les conditions de licence, ou leurs contreparties, présentement rattachées aux licences de Super Écran, de The Movie Network et de Movie Central.

2521             Maintenant, pour la conclusion, Monsieur Péladeau.

2522             M. PÉLADEAU : Merci, Pierre.

 

2523             Mr. Chairman, in our discussion with our shareholders, we have asked for a strong commitment even in a worst‑case scenario and that commitment is what we are presenting to you today.  We are prepared to invest the funds required and wait the time necessary for our investment to come to fruition.

2524             What is truly striking about the history of Canadian pay television up to now is the low level of its contribution to the financing of Canadian cinema and television production.

2525             Over the last five years, from 1999‑2000 to 2003‑2004, the annual contribution of all Canadian private sector broadcasters, including pay, specialty and off‑air services, have varied between 3.5 million and 14 and a half and never amount to more than 5 per cent of the total theatrical/feature film financing.

 

2526             Nous croyons profondément que la télévision payante canadienne peut jouer un rôle déterminant dans la nouvelle déclinaison des fenêtres d'exploitation des productions canadiennes pour le cinéma, mais aussi pour les émissions de télévision.

2527             Nous voulons investir dans BOOMTV à long terme car nous savons que le système de radiodiffusion canadien fait face à une importante restructuration.

2528             Nous voulons ouvrir au Canada la voie qui assurera en partie la pérennité des stations de télévision généraliste.

2529             Non seulement ces deux services payants ont‑ils réussi à déclencher des productions originales, dont un bon nombre d'oeuvres qui ont marqué la cinématographie et la télévision de leur pays respectif, mais ils sont devenus un phare de l'innovation et de la qualité sur la scène internationale.

2530             Archambault et les autres filiales de Québecor Média possèdent une vaste expérience dans le domaine de la télévision et du cinéma.  La co‑implantation et le partage d'installations et de services de BOOMTV avec les autres filiales de Québecor Média se traduiront par des économies d'échelle et des coûts moindres aux abonnés en considération de la qualité du service proposé.

2531             L'actuelle présence des filiales de Québecor Média dans le domaine du long métrage, des séries dramatiques et des événements culturels permettra de négocier de meilleures ententes avec les studios américains et se traduira par des coûts moindres et une meilleure qualité de services aux abonnés.

2532             L'éventail des filiales de Québecor Média, telles que TVA, Sun TV, le Journal de Montréal, le Toronto Sun, le Winnipeg Sun et le Calgary Sun, entre autres, témoigne de la valeur potentielle énorme de promotion pour BOOMTV et pour son contenu canadien.

2533             Pour renouveler la télévision payante canadienne, il faut la sortir de ses ornières et l'aider à se transformer en une fenêtre pour le meilleur du cinéma mondial et en un déclencheur de la production canadienne originale de grande qualité.

2534             Nous croyons que la concurrence qu'introduirait l'autorisation des deux services de BOOMTV produirait ce résultat dans les deux marchés linguistiques et se traduirait par une meilleure diffusion du contenu canadien dans l'ensemble des plate‑formes actuelles et à venir.

2535             Quoique les autres requérantes proposent aussi d'ajouter un élément de concurrence dans le domaine de la télévision payante, BOOMTV est la seule à vouloir le faire pour tous les Canadiens et les Canadiennes anglophones et francophones.

 

2536             Mr. Chairman and fellow Panel Members, this completes our presentation.

2537             THE CHAIRPERSON:  Thank you.  Merci.

2538             Madame la Conseillère Pennefather.

2539             CONSEILLÈRE PENNEFATHER : Merci, Monsieur le Président.

2540             Monsieur Péladeau, mesdames et messieurs, bon après‑midi.  Not bad, all of you looking, considering it is 125 years.  Looking good.

‑‑‑ Laughter / Rires

2541             COMMISSIONER PENNEFATHER:  Thank you for your presentation.

 

2542             J'aimerais souligner, d'abord, que je vais suivre votre exemple, et on poursuivra le questionnement dans les deux langues.

2543             J'aimerais aussi indiquer les documents que je vais utiliser.

2544             Ça va de soi qu'il y avait des documents qui avaient été révisés de temps en temps.  Alors, j'essaierai, autant que possible, de vous indiquer quels documents j'utilise, et ça va de soi que j'essaierai d'utiliser les documents qui ont été dernièrement soumis.

2545             Ça veut dire que, parmi d'autres, je vais utiliser : le mémoire complémentaire, en anglais et en français ‑‑ et je vous remercie d'avoir fourni les traductions ‑‑ ; les lettres de lacunes du 13 juin, 22 juin, 7 juillet et 14 juillet; la demande, mais surtout l'Annexe 26; les documents de monsieur Dorion et de Synovate; et votre réplique.

2546             J'aimerais aussi souligner le fait, car on est ici pour discuter de deux services, que mes questions seront nécessairement pour l'ensemble de votre concept, mais aussi en termes de chaque service.  Alors, si j'oublie de vous demander et pour l'anglais et pour le français, pouvez‑vous vous assurer que vous nous répondez sur les deux services spécifiquement, pour chaque point de questionnement?

2547             Alors, on saute tout de suite dans le concept de BOOMTV, qui est la programmation, et un élément important dans notre discussion, c'est le fait que vous avez indiqué à plusieurs places, mais surtout dans la lettre de lacunes du 22 juin, que les deux services seront identiques, à l'exception des langues et le sous‑titrage.

2548             Alors, ça, c'est, comme on dit en anglais, mon starting point, et on peut aller voir si, en effet, il y a des différences dans les deux services.

2549             Mais je prends pour acquis que le concept de base pour les deux services est le même.  Ça nous fait arriver aux quatre axes de programmation que vous proposez.  Je pense que c'est la base du concept, et si on peut en discuter plus profondément.

2550             Vous avez dit aussi que ces quatre axes de programmation, et vous le répétez aujourd'hui, viennent du concept HBO/Canal Plus, comme un concept, comme une proposition, et ce concept, au début, quand le concept était... BOOMTV était BOOMTV bilingue, il y avait une répartition des éléments de programmation : 35 long métrage, 35 sports, 20 pour cent émissions dramatiques, et 10 pour cent événements.

2551             Après le 13 juin, dans la lettre de lacunes à la réponse 2.2(d) et à l'Appendice 1E, le concept a changé, et, en effet, vous le proposez encore aujourd'hui, et ça devient long métrage 64 pour cent en diffusion, sports 13 pour cent, émissions dramatiques 12 pour cent, et les événements culturels et sportifs 11 pour cent.

2552             Alors, c'est possible de dire que le concept a changé dès le début, et j'aimerais savoir pourquoi vous avez changé ce concept.  Étant donné que les quatre axes sont toujours là, pourquoi la proportion a changé?  Parce que c'était présenté comme étant une proposition très différente de ce qu'on a dans notre révision payante, mais depuis, ça changé jusqu'au point que les longs métrages, à titre d'exemple, représentent 64 pour cent de la programmation.

2553             Pourriez‑vous nous en parler, pourquoi vous avez fait ce changement?

2554             M. LAMPRON : Si vous me permettez, il y a peut‑être un peu de confusion dans la compréhension des chiffres, et on a admis dans les lettres de lacunes et les réponses qu'on a faites au Conseil que peut‑être que ça avait porté un peu à confusion.

2555             Nous avions établi les pourcentages qui étaient liés au niveau de la programmation, et nous sommes revenus en précisant qu'il y avait une différence entre les pourcentages liés à la programmation et liés à la diffusion.

2556             Sur ça, si vous me permettez, je passe la parole à Édouard Trépanier, qui pourra vous expliquer un peu comment s'est établi la différenciation.

2557             Cela dit, sur le fond, il n'y a pas de différence de concept.  Dès le point de départ, notre intention était de vous proposer le service que vous avez actuellement devant les yeux.

2558             M. TRÉPANIER : Effectivement, vous avez raison, Madame la Conseillère, de soulever le fait qu'il y a eu confusion dans les pourcentages entre la quantité ou le pourcentage des émissions qui sont acquises, qui sont diffusées en première diffusion et qui représentent la grille de programmation.

2559             Tout ça a été clarifié dans la lettre de lacunes du 13 juin, et aujourd'hui, ce dont nous vous parlons, c'est ce qui est clarifié à la réponse 2(d) de la lettre du 13 juin.

2560             CONSEILLÈRE PENNEFATHER : Oui, j'ai la lettre devant moi, et je vois la différence et qu'on parle d'une petite confusion.  Mais moi, je dirais que ça peut aller un peu plus loin qu'une petite confusion, afin de discussion et afin qu'on comprend bien votre grille‑horaire, finalement.

2561             Dans le mémoire narratif, on voit la description de votre concept en termes de :

                        * BOOMTV vise devenir le rendez‑vous du public intéressé à voir le meilleur de la télévision avant le grand public, un endroit pour visionner avec le maximum de qualité les émissions des films, certains sports, des séries dramatiques... + et caetera.  (Tel que lu)

2562             Et ce concept était basé sur les éléments de la division, les proportions que vous proposez, et vous avez souligné que c'était important parce que, dans ce sens‑là, vous n'étiez pas concurrent avec les services payants existant.

2563             Alors, après, c'est changé en termes de la diffusion.  Je peux voir que c'est un peu plus qu'une confusion, mais je vois clairement le résultat, que sur l'écran, les longs métrages seront 64 pour cent de la programmation.

2564             Alors, comme avait dit certains intervenants, l'argument qui dit que vous ne serez pas un service qui est concurrent mais plutôt complémentaire, là, vous êtes maintenant concurrent directement avec les services payants qui se basent surtout sur les longs métrages.

2565             Est‑ce que vous avez un commentaire?

2566             M. TRÉPANIER : Oui.  Sur la question de concurrence, suite à ce qui est indiqué dans la lettre du 13 juin, je vais laisser mes collègues, mon Président et peut‑être Pierre Lampron, en parler.

2567             Mais je dois, effectivement, vous avouer que, entre le 14 avril et le 20 juillet, les questions du personnel du Conseil nous ont permis d'évoluer dans notre pensée et de clarifier des choses qui, pour nous‑mêmes, n'étaient pas claires au départ.

2568             M. PÉLADEAU : Madame la Conseillère...

2569             CONSEILLÈRE PENNEFATHER : Oui.

2570             M. PÉLADEAU : ...il y a peut‑être eu une utilisation inexacte des termes.

2571             Je pense ce à quoi on faisait référence, mon collègue monsieur Lampron faisait... c'était le terme * distinctif +.  Alors, je pense que, dans le fond, ça regroupe...  Ça ne serait pas réaliste de penser qu'il n'y aura pas un certain niveau de concurrence, il y en aura certainement un, mais on essaie de mettre surtout en valeur le caractère complémentaire de notre programmation.

2572             COMMISSIONER PENNEFATHER:  Okay, let us go a little further on that.

2573             Serait‑ce toujours que le concept maintenant est basé jusqu'à 64 pour cent sur les longs métrages?  Est‑ce que j'ai bien raison?  Alors, les longs métrages, c'est vraiment la grande partie de la programmation.

2574             Alors, qu'est‑ce que vous pouvez nous dire qui ferait en sorte que votre présentation de long métrage sera différente?  Qu'est‑ce que vous allez ajouter à la programmation que les Canadiens puissent voir dans le moment à la télévision payante?

2575             M. PÉLADEAU : Vous avez posé également quelques questions précédemment, Madame la Conseillère, concernant HBO et Canal Plus, et peut‑être à cet égard‑là, on pourrait mettre en valeur l'intention de l'entreprise concernant sa programmation.

2576             On constate qu'il y a eu, dans le passé, en tout cas certainement pour ces deux services, au départ une diffusion qui s'est faite probablement davantage sur le créneau du long métrage, mais qui s'est par la suite distingué par de la programmation originale.

2577             Canal+ est probablement un des plus importants participants de l'industrie cinématographique française, participe au financement et comme fenêtre de diffusion permet également à l'industrie française de bénéficier des fenêtres privilégiées de diffusion.

2578             Dans le même esprit, l'objectif est d'investir dans le contenu canadien en matière de longs métrages et de cinéma, également en complémentarité de séries télévisuelles qui seraient soit des téléséries, soit des courts métrages.

2579             Est‑ce que la distinction doit être tranchée au couteau entre longs métrages et téléséries, ça peut prendre des formes diverses, mais c'est l'objectif de la programmation du service.

2580             M. LAMPRON :  Lorsqu'on fait allusion également au pourcentage de programmation, je pense que sur le caractère distinctif que nous présentons lorsqu'on dit qu'on veut être une télévision spécialisée résolument généraliste et qu'on réfère effectivement aux pourcentages de diffusion qui sont là et qu'on compare aux services existants, lorsqu'on dit qu'il y aura avec les principes, si vous voulez, de rotation, 65 ou 64 pour cent de diffusion de longs métrages, il faut quand même le comparer avec ce qui le distingue, il faut quand même le comparer avec les pourcentages actuellement utilisés dans les services existants où on parle de 90 à 95 pour cent de films.

2581             Le deuxième point qui nous apparaît important, c'est que dans le reste du 35 ou 36 pour cent, nous établissons aussi qu'il y a toute une série de différents types de programmes qui vont aussi faire partie du caractère distinctif.

2582             Dans ce caractère distinctif, c'est au‑delà d'une simple chaîne, et le mot * simple + n'est pas péjoratif, mais au‑delà d'une simple chaîne de diffusion axée sur le cinéma, nous voulons la positionner, nous voulons la faire connaître, nous voulons la faire comprendre par ces ajouts que nous vous présentons et qui vont représenter à l'antenne une part significative de ce que les gens vont voir et qui vont servir, encore une fois, à positionner notre chaîne dans l'environnement que vous connaissez.

2583             Mme PENNEFATHER :  Si je reste un peu là‑dessus, est‑ce que je peux vous demander encore une fois, j'ai de la difficulté à saisir vraiment le focus, vraiment qu'est‑ce que c'est BOOMTV.

2584             Je peux aller aussi loin, juste pour la discussion, pour aller peut‑être un peu trop loin, que c'est comme si vous mettiez sur l'écran un peu de tout de l'univers télévisuel.

2585             Qu'est‑ce qu'il y a là qui est différent, qui vraiment va intéresser le public à choisir de regarder in English et en français BOOMTV?

2586             M. LAMPRON :  Nous avons exactement la même vision pour que ce soit en anglais ou en français, elle s'articule, si vous voulez, de la même façon sur les deux marchés linguistiques avec, évidemment, des actions qui seront mises selon les caractéristiques de ces marchés.

2587             Vous voulez savoir ce qu'il y a de différent?  D'abord la différence vient du fait de l'usage que nous voulons faire de cette fenêtre particulière qui est la fenêtre de la télévision payante.

2588             Ce qui nous caractérise, si vous voulez, c'est de savoir que nous voulons que cette chaîne de télévision payante, comme première fenêtre de diffusion sur le créneau, donc, de la télévision payante puisse présenter des oeuvres qui ne s'y retrouvent pas habituellement.

2589             Par exemple, nous savons que nous pouvons présenter sur ce créneau‑là, pour les citoyens qui acceptent d'en payer le prix, des primeurs, des dramatiques, par exemple, qu'ils n'auront pas vues ailleurs et qui serviront à être initiées sur cette chaîne.  C'est ça qui est le caractère, si vous voulez, le plus distinctif.

2590             Maintenant, est‑ce que c'est de tout?  La réponse, c'est non, ce n'est pas de tout.  Par les comparaisons que vous savez, on sait que les citoyens, de façon générale, les spectateurs vont avoir chacun pour soi des motifs particuliers de s'abonner à une chaîne de télévision payante et il y a des amateurs, si vous voulez, de certains sports, il y a des amateurs de certains événements et il y a en particulier cette curiosité qui s'est développée partout ailleurs et qu'on voudrait pouvoir développer au Canada cette curiosité pour les séries, les nouveaux concepts de dramatiques qui vont être vues encore une fois en première fenêtre sur cette télévision‑là avant qu'ils soient ensuite distribués sur les autres fenêtres spécialisées ou conventionnelles.

2591             Mme PENNEFATHER :  La façon que vous parlez, je peux peut‑être vous dire que même si c'est 64 pour cent possiblement de la grille horaire, c'est plutôt un service qui voit son focus sur les séries dramatiques, les films, les nouveaux et les existants.

2592             Est‑ce que j'ai bien raison que c'est vraiment le driver du service?

2593             M. LAMPRON :  Vous avez certainement raison.  Mais la façon pour nous de résumer un peu la pensée que vous venez d'exprimer, c'est que ça va présenter sur cette fenêtre de diffusion, et on dresse toujours, c'est important pour nous, le meilleur de la télé, c'est‑à‑dire ce qui va faire en sorte que les spectateurs vont trouver une raison d'y être abonnés.

2594             Dans la question que vous posez, et encore une fois on a un ensemble de propositions et on est obligé d'insister sur ce caractère distinctif et en insistant sur le caractère distinctif, on insiste que notre objectif de promotion en général et de positionnement de la chaîne effectivement va être fait sur cette capacité que nous avons d'attirer vers des grands événements, vers autre chose que le cinéma, mais aussi avec les films de la cinématographie nationale d'abord et internationale.

2595             COMMISSIONER PENNEFATHER:  Let's get a little more specific then, Mr. Lampron.  I think you have been at the hearing up to this point.  I don't know if your colleagues have as well.

2596             We don't have a schedule in front of us which could really practically and specifically demonstrate what you are talking about in French and in English.  I am wondering, as we have asked the other applicants, if you could provide us, in the next day or so, with a schedule which would demonstrate not only the four basic ‑‑ what is axes in anglais?

2597             MR. LAMPRON:  Drivers.

2598             COMMISSIONER PENNEFATHER:  Elements.

2599             MR. LAMPRON:  In the kind of English this is a very good word.

2600             COMMISSIONER PENNEFATHER:  Elements.  It is a lovely word in French.  We will use it.  "Les axes de programmation".

2601             Perhaps you would like to comment on this right away.  Certainly, as I have just said, one of the elements if your programming concept in both French and English is film.  Corus, amongst other points, has said quite clearly in their intervention that you have not filed any evidence of programming that is currently not seen and which is in demand by Canadians.

2602             That being said, obviously we could perhaps have a look at that by looking at what your programming concept, other than percentages, translates into when it comes to actual programming grids.

2603             MR. LAMPRON:  Yes.

2604             COMMISSIONER PENNEFATHER:  Would you be able to table that with us?

2605             MR. LAMPRON:  The short answer is yes, we are going to try to give you what you are asking for.  We were not prepared to do so because we thought that we will be speaking about the concept in general, et cetera, but Don will be prepared to give you the schedule as you have asked.

2606             COMMISSIONER PENNEFATHER:  You said "the schedule".  I am assuming you mean with an "S", "the schedules".

2607             MR. LAMPRON:  No, it is the same one.

2608             I should have answered in French.

2609             Mme PENNEFATHER :  C'est ça parce que si on retourne en français... My apologies to the translators.  We could at least complete a sentence in one language.  It might be helpful.

‑‑‑ Laughter / Rires

2610             MR. LAMPRON:  I am happy to see that you have also some difficulties.

2611             Mme PENNEFATHER :  Une vraie Québécoise, I am doing both at once.  Dans la lettre du 22 juin, vous avez dit:

                      * Les deux services seront identiques à l'exception des langues et du sous‑titrage. +

2612             Plus loin vous dites :

                      * Il n'en demeure pas moins que les deux programmations auront leur personnalité propre.  Les grilles d'émission... ‑‑  you admitted that you needed them ‑ tiendront évidemment compte des intérêts particuliers des audiences francophones et anglophones. +

2613             Alors en attendant que vous nous déposiez les grilles horaires, pouvez‑vous nous décrire ces identités qui sont identiques mais en même temps qui sont différentes?

2614             M. LAMPRON :  Je pense qu'il y a beaucoup de politiciens qui se sont essayés à faire cette description de ces deux marchés distincts.

2615             Je pense que ce que nous voulions écrire là‑dedans, c'est que nous avons un concept qui est identique pour, encore une fois, les deux chaînes, et vous allez vous apercevoir dans la cédule qu'on va déposer que c'est effectivement la même proportion, la même façon de présenter, et caetera.

2616             A l'intérieur des cases et à l'intérieur des choix qui seront faits, évidemment, et là Québécor, comment je vous dirais, manquerait à sa réputation si nous devions affirmer que nous présenterions exactement les mêmes programmes sur un marché et sur l'autre, pour nous ce serait manquer, si vous voulez, à notre premier devoir d'offrir aux concitoyens ce que les concitoyens veulent bien consommer.

2617             Je pense, d'ailleurs, que c'est une des grandes marques de commerce qui expliquent le succès de TVA et d'autres choses.

2618             En ayant dit ça, évidemment que, par exemple, nous allons présenter, si vous voulez, des produits originaux sur le Canada anglais qui seront inspirés et qui seront acquis sur le marché du Canada anglais, développés avec des partenaires du Canada anglais qui ne seront pas les mêmes qui auront été développés pour le marché du Québec.

2619             Les programmations de films, les programmations des événements spéciaux, et caetera, vont effectivement être teintées de différentes expériences, je dirais, qui sont liées à la nature des deux marchés que nous allons exploiter.

2620             Mme PENNEFATHER :  Vous avez dit qu'une des différences sera le sous‑titrage, est‑ce que vous prévoyez un sous‑titrage plus ou moins en français pour les films anglais ou vice‑versa dans les mêmes proportions ou est‑ce que le service français aura plus de sous‑titrage?

2621             M. LAMPRON :  Peut‑être monsieur Trépanier.

2622             M. TRÉPANIER :  Nous parlions, à ce moment‑là, de sous‑titrage pour malentendants exclusivement.

2623             Mme PENNEFATHER :  Non, je parle de sous‑titrage en termes des films, à titre d'exemple, que vous allez voir, surtout les films dubbed or subtitled sur le service français qui sont les films américains.

2624             M. TRÉPANIER :  Oui, je vais laisser ma collègue, Lucie Quenneville, vous en parler peut‑être de sous‑titrage de films de langues tierces ou autres que la langue du marché.

2625             Mais dans la question, lorsqu'on vous disait que le sous‑titrage serait différent, ce qu'on avait en tête, c'est qu'on ne pourrait pas aller aussi rapidement en sous‑titrage pour malentendants en français qu'en anglais.

2626             Lucie.

2627             Mme PENNEFATHER :  Je m'excuse, je comprends.  Mais Dans les grilles horaires, vous pouvez peut‑être nous indiquer quel sera le pourcentage de programmation française ou anglaise qu'on puisse voir dans les deux services.

2628             Mme QUENNEVILLE :  Oui.  Moi je suis à la programmation de réseaux français depuis plusieurs années.  J'ai travaillé aussi à CBC et SRC et je crois que les différences culturelles sont tout à fait...

2629             Même au niveau des sous‑titrages, par exemple au niveau des émissions françaises, sous‑titrer les films étrangers, c'est beaucoup plus attirant et attrayant pour... je me trompe peut‑être mais en tout cas, les dernières années au niveau de la programmation, donc des films comme Pedro Almodovar, et caetera, pourraient être sous‑titrés, présentés dans leur version originale.

2630             Mais au niveau anglophone, on pourrait soit doubler.  C'est plutôt dans ce sens‑là au niveau des sous‑titrages.

2631             Donc, ce ne sont pas nécessairement les mêmes, on pourra aussi faire des séries qui sont, bien sûr, les séries québécoises qui pourront être soit doublées et présentées au niveau de la chaîne anglaise, ou on pourra décider de les sous‑titrer.  Ça sera vraiment à partir...

2632             Bien sûr, ça dépend aussi tout à fait du genre d'émission.  Par exemple, si on faisait une comédie, et caetera, on pourra difficilement la sous‑titrer, bien sûr, mais ça sera une dramatique, et caetera, bon, là on pourrait, par exemple, décider de sous‑titrer pour garder la saveur de l'interprétation.

2633             Mme PENNEFATHER :  Oui.  Étant donné que c'était originalement un concept bilingue, j'aurais pensé que ça faisait partie vraiment de la base du concept.

2634             M. LAMPRON :  D'ailleurs on a eu des échanges avec les membres du Conseil là‑dessus.  On avait utilisé le terme * bilingue + parce qu'on était dans le cadre, une demande d'une licence nationale, on l'avait identifiée comme bilingue, mais il a toujours été question d'avoir un service en français et d'avoir un service en anglais.  Et dans les suites des questions, on a compris qu'il était préférable, à ce moment‑là, de distinguer en deux licences distinctes pour les raisons de différenciation que nous avons là.

2635             Mais nous n'avions pas l'intention de présenter ue chaîne, si vous voulez, bilingue.  Le concept n'aurait pas tenu la route pensons‑nous.

2636             Cela dit, sur toutes vos questions concernant le doublage et le sous‑titrage, je pense que dans la réponse que nous allons vous faire, nous allons essayer de faire les distinctions, si vous voulez, qui importent là‑dessus parce que, évidemment que nous avons l'intention d'utiliser de la programmation canadienne originale francophone ou anglophone que nous allons offrir sur les autres services qui se retrouveront dans la programmation ou dans notre politique de diffusion selon des termes qui sont peut‑être différents de part et d'autre, mais qui seront ou sous‑titrés ou doublés selon les cas d'opportunité qui se présenteront.

2637             Mme PENNEFATHER :  Merci, monsieur Lampron.

2638             Je pense qu'on va revenir au concept quand on discute l'étude de marché.  Juste une question sur les multiplexes.

2639             Pourriez‑vous nous décrire plus à fond le concept en termes des canaux multiplexes?  Vous avez, je pense, deux anglais, deux français et un cinquième qui est le Promotion.  Est‑ce que vous pouvez nous décrire qu'est‑ce qu'on peut trouver sur les multiplexes anglais et les multiplexes français?

2640             MR. LAMPRON:  The best person in our group to respond to your question is Don.

2641             Did you understand the question?

2642             MR. GAUDET:  Yes, thank you.

2643             With regards to the multiplexing, our intent is that the primary channel in both the French and English will be the destination for the majority of our first run programming and we will offer alternative programming on the multiplex channels.  So if we are running a major sporting event on the main channel, then you would have a comedy or a movie on the multiplex channel so that we are not competing head‑to‑head.

2644             The fifth channel that you mentioned is, yes, the Barker channel, which will be bilingual and will be promoting both the services.

2645             COMMISSIONER PENNEFATHER:  Can you describe in a little bit more detail this last bilingual ‑‑ sorry to use that word, Mr. Lampron.

‑‑‑ Laughter / Rires

2646             COMMISSIONER PENNEFATHER:  The French and English Barker channel, how will that work?  What will it look like?  How will it be of interest to an English audience and a French audience?

2647             Mme QUENNEVILLE :  De multiplexes, il y aura deux chaînes pour la...

2648             Mme PENNEFATHER :  Oui.  Je ne comprends pas.  Je comprends ça, c'est The Barker Channel, ce qui est commun pour les deux.

2649             MR. LAMPRON:  I will ask Manon Brouillette.

2650             Mme PENNEFATHER :  Vous comprenez de quoi je vous parle?

2651             Mme BROUILLETTE :  Oui, le canal autopromotion en fait.

2652             Autopromotion.

2653             Mme BROUILLETTE :  Oui en fait ce sera un canal bilingue, effectivement, il y aura des rotations un peu comme d'autres font sur le marché actuellement, je ne pense pas qu'on va réinventer la stratégie, mais le principe, ça va être une rotation dépendamment, ça peut être un 15 minutes en loupe, un 30 minutes en loupe qui va passer d'une langue à l'autre et qui va préciser le contenu disponible au moment, par exemple, du mois, et caetera.

2654             La particularité de ce canal d'autopromotion là, c'est qu'avec les différents distributeurs, si on a la possibilité d'en faire un interactif, on pourra procéder à des abonnements directement via les plateformes numériques.  Donc ça va être, je pense, un élément distinctif de notre canal d'autopromotion.

2655             Mme PENNEFATHER :  Merci, Madame.

2656             Si on va continuer sur les actes de promotion et on parlerait du sport, si j'ai bien compris, l'intention est d'allouer 13 pour cent de votre programmation au sport. En français et en anglais la même chose?

2657             Plus, pour fins de discussion, le 10% d'événements, est composé d'événements sportifs aussi.  C'est vrai?

2658             Mme QUENNEVILLE :  Non.  Les événements, c'est vraiment au niveau des émissions musicales, les variétés qui sont dans le 8(a), 8(b), 9 au niveau des types de catégories, là.  Et 7(F).

2659             Mme PENNEFATHER :  Oui, je comprends, alors c'est une clarification parce que si on réfère à la ventilation des dépenses de programmation qui a été soumise avec votre demande, ça fait partie de l'Annexe 3 de la demande.

2660             Madame, on voit que les événements sont les événements sportifs et culturels.

2661             J'avais une question sur le budget des sports.  Alors, c'est changé que l'élément événements ne contient plus du sport?

1500

2662             Mme QUENNEVILLE :  Oui, les événements ont été exclus du sport.  Au début on avait écrit * événements culturels et sportifs + et ça a vraiment été divisé aussi par rapport aux types de catégories.  Donc, on a redivisé ça.  C'est exclu, les événements sportifs.

2663             M. TRÉPANIER :  Si vous permettez, Madame la conseillère.  Effectivement, au 14 avril, au moment du dépôt, on a indiqué que dans les événements il y aurait du sport.

2664             Je pense qu'il n'y a pas d'impact sur le plan d'affaires qui a été détaillé dans la lettre du 7 juillet, on a expliqué par la suite que le sport allait être un élément en soi et que ce que l'on appelait * les événements + allait être des événements culturels exclusivement.

2665             Maintenant, si vous avez des questions, évidemment, sur le budget, notre collègue Paul Buron pourra y répondre.

2666             Mme PENNEFATHER :  Parfait.  C'était une clarification aussi, oui je retourne à la description de la programmation sports, mais c'est une question de budget pour le moment.

2667             Ça n'en demeure pas moins que le budget des sports soumis avec votre demande, soit un total de 21 millions, si j'ai bien compris, dans l'année un.

2668             Dans l'année sept, c'est un total de 54 millions à peu près, si j'ai bien compris.

2669             Ça c'était un budget basé sur le concept quand le sport était 35 pour cent.  On revient un peu avec la confusion.

2670             Je pense que vous êtes au courant que ça a été un point soulevé par les intervenants qu'en termes de comprendre qu'est‑ce que ça va être, cette BOOMTV, si on parle des sports à 13 pour cent, et si on voit un budget qui est plus haut que le budget de longs métrages, d'après votre ventilation des coûts, on a de la misère à comprendre d'où vient cet élément que 13 pour cent est plus cher que les longs métrages et en même temps comprendre quels sports vous allez diffuser, parce qu'un budget de cette grandeur peut nous indiquer, en effet, même si vous avez dit le 14 juillet que ce n'est pas league sports, et caetera, que c'est un élément assez important qui peut faire la concurrence avec les services sportifs.

2671             Voilà ma question de A à Z.

2672             M. LAMPRON :  Sur cette question, il y avait deux éléments, si vous voulez, qui nous guidaient.

2673             Je vais d'abord répondre à votre question, ce que nous avons fait tantôt dans notre présentation orale et ce que nous avons dit et écrit, c'est ce que nous souhaitons faire, c'est‑à‑dire que c'est un ensemble, si vous voulez, d'événements sportifs à caractères assez événementiels qui vont créer également un certain nombre de rendez‑vous.

2674             Nous avons exclu dès le départ de pouvoir, si vous voulez, nous payer ou de mettre à l'antenne les sports majeurs, mais on parle de compétitions de tennis, de compétitions de ski, de compétitions de voiture, de boxe.

2675                  On est dans cet univers, si vous voulez, sportif qui nous offre beaucoup de possibilités parce qu'il y a beaucoup d'amateurs, si vous voulez, qui sont disponibles et qui, en même temps, ne créent pas, à notre avis, une concurrence tout à fait déloyale.

2676             Sur la deuxième partie de la question qui est, je pense, également, je dirais très importante, concernant les prix payés par rapport, justement, à ce qui va se retrouver en termes d'heures de diffusion.

2677             C'est là qu'on arrive toujours à certaines contradictions, combien ça coûte, si vous voulez, pour faire quelque chose et à combien de reprises ça va pouvoir se retrouver sur l'antenne.

2678             Mme PENNEFATHER :  Une petite interruption, je m'excuse.  Il y a deux parts de la question.

2679             Premièrement, le chiffre a été soumis quand le concept était 35 pour cent.  Il n'y avait pas question de différence entre diffusion et production régionale à ce moment‑là.

2680             Depuis on n'a pas reçu d'autres chiffres pour 13 pour cent.

2681             M. LAMPRON :  Nous maintenons ces chiffres‑là.  Le 35 pour cent, encore une fois, qui référait, dans notre esprit, à ce qu'il en coûte, si vous voulez, pour la production avant leur mise en antenne.  A l'antenne c'est, si vous voulez, la diffusion avec les répétitions qui peuvent se passer.

2682             Notre évaluation est à l'effet, si vous voulez, que l'heure de production et de programmation du sport nous coûte plus cher, si vous voulez, que le cinéma ou les autres genres qui sont également à notre antenne.

2683             De telle manière que lorsqu'on regarde avec les facteurs, si vous voulez, de répétition qui vont intervenir, on se retrouve à dépenser plus d'argent sur une catégorie et avoir, pour cette catégorie, moins de diffusion à l'antenne, ce qui va se produire encore une fois.

2684             Vous savez, quand un rendez‑vous sportif qui est, par exemple, une finale de tennis, il est difficile d'imaginer, si vous voulez, qu'on va pouvoir la présenter à l'antenne autant de fois dans un mois que nous allons présenter un film.

2685             Mme PENNEFATHER :  Maintenant vous êtes sans doute au courant que les autres services de télévision payante sont limités, cinq pour cent de programmation sport pendant chaque semaine.  C'est avec un maximum de 20 heures dans la semaine.

2686             Quand cette question‑là vous a été demandée sur une limite, parce que si on accepte que vous voulez inclure les sports dans votre grille horaire pour les besoins de programmation, mais quand même il y a les inquiétudes, d'après les autres services sportifs, vous nous proposez une limite de 20 pour cent de l'ensemble de la diffusion hebdomadaire y compris les reprises.

2687             Pourquoi le Conseil devrait accepter votre limite au lieu de la limite qui est imposée sur les services existants?

2688             M. LAMPRON :  Pour une première raison, si vous me permettez, c'est que le concept même que nous vous avons exposé introduit la possibilité de présenter un pourcentage visible à l'écran d'émissions sportives comme étant... et encore une fois ça fait partie du caractère distinctif de l'ensemble de propositions que nous faisons.

2689             Il est vrai qu'il y a ces limites, si vous voulez, sur les autres chaînes qui semblent être peu disposées, si vous voulez, même à aller et à utiliser cette limite du cinq pour cent.

2690             Encore une fois il s'agit de notre concept où on croit vraiment que sur cette fenêtre de télévision payante, comme ça s'est produit ailleurs, le produit sportif peut être un élément d'attrait particulier qui permet à cette fenêtre de diffusion de jouer le rôle qu'on lui demande de jouer.

2691             L'autre élément, nous avons entendu, effectivement, les objections qui ont été faites par certains représentants de canaux spécialisés qui sont particulièrement au niveau du sport et qui affirmaient craindre, en tout cas, l'arrivée d'une sorte de concurrence dans ce domaine.

2692             Nous croyons qu'avec les chiffres, si vous voulez d'abonnements que nous espérons, nous croyons qu'avec les taux de pénétration qui sont les nôtres, nous croyons que le fait que ce soit présenté sur cette fenêtre de diffusion, le fait que ce soit sur un certain nombre de sports que nous vous avons énumérés, le fait, si vous voulez, qu'il y a une offre sportive effectivement qui se produit un peu partout, le fait que lorsque nous comparons entre ce qui se produit au Québec et ce qui se produit au Canada on s'aperçoit que sur un marché donné, l'arrivée de possibles concurrences au niveau du sport n'a pas eu un effet négatif sur les services spécialisés existants, pas un effet tangible, qu'il n'y a pas eu d'impact sur les taux d'abonnements, nous croyons que l'arrivée de BOOMTV va créer, effectivement, davantage d'attrait pour un certain nombre de sports donnés, va nous permettre d'avoir davantage de positionnement dans notre marché, mais n'aura pas d'impact négatif sur les services existants.

2693             Mme PENNEFATHER :  Alors, réponse courte, non au cinq, pourcentage de limite sur la programmation sports.

2694             M. LAMPRON :  Tout à fait.  Je ne croyais que vous nous demandiez d'accepter ou de refuser le cinq pour cent, mais si c'était ça la question, la réponse c'est que nous souhaitons obtenir ces 13 pour cent.

2695             Mme PENNEFATHER :  Si j'ai bien compris, vous aurez de la difficulté à accepter une condition de licence avec une limite de cinq pour cent, est‑ce que ça sera un impact difficile sur votre plan d'affaires d'avoir le même genre de condition?

2696             M. LAMPRON :  Difficile, certainement.  Maintenant, comment qualifier le difficile en question, lorsque le temps arrivera de votre décision, nous devrons, effectivement, analyser l'ensemble de tout ce qui sera positif par rapport à notre concept, par rapport à des éléments qui viendront.

2697             Mme PENNEFATHER :  Accepteriez‑vous une condition de licence pour une limite de 20 pour cent de programmation sports?

2698             M. LAMPRON :  Oui.

2699             Mme PENNEFATHER :  Maintenant, revenons à la programmation avec l'axe, disons, de la programmation canadienne.

2700             Quand vous nous fournirez les grilles horaires, vous avez dit dans votre demande et dans les documents de lacune, que la programmation canadienne sera 275 heures pour chaque service.  Est‑ce que j'ai bien raison?

2701             M. LAMPRON :  Oui, tout à fait, avec une progression de 10 heures par année pour atteindre 335 heures à la fin du terme.

2702             Mme PENNEFATHER :  En nous présentant les grilles horaires, est‑ce que vous pouvez nous indiquer précisément pour chaque service, comment ces heures de programmation canadienne se traduiront en termes de longs métrages, en termes de sports, en termes d'événements culturels, en d'autres mots les quatre axes de programmation?

2703             M. LAMPRON :  Je pense que la réponse simple, c'est oui, mais...

2704             La réponse compliquée, c'est oui aussi.

‑‑‑ Rires

2705             Mme PENNEFATHER :  En effet, j'essaie aussi que le dossier public soit clair sur le concept qui était au début un concept unique, qui est maintenant deux concepts, et qui a les éléments différents qui eux‑mêmes sont en fou, je pense qu'en effet vous avez mentionné dans une de vos lettres de lacunes que même si on propose certains pourcentages, ce n'est pas nécessairement le pourcentage qu'on va voir sur l'écran à la fin.

2706             Vous pouvez comprendre pourquoi il faut saisir avec une grille horaire précise, comment votre engagement envers les émissions canadiennes originales va se poursuivre.

2707             On parle encore une fois de la programmation canadienne originale de langue anglaise et de langue française, vous êtes au courant que quelques intervenants ont soumis leurs craintes sur le fait que la production de ce genre de programmation originale va avoir sur les fonds publics, ça veut dire téléfilms et le fonds de télévision.

2708             Est‑ce que vous avez un commentaire sur ce point?

2709             M. LAMPRON :  Je voudrais, Madame la conseillère, ne pas personnaliser la réponse que je vous fais, mais quand même, nous avons, effectivement, beaucoup discuté de cette question à l'interne, comme vous pouvez l'imaginer.

2710             J'ai la chance de venir dernièrement du monde de la distribution; d'avoir oeuvré pendant quelques années au niveau de services publics, de présider la Société de développement des entreprises culturelles, d'avoir oeuvré longtemps à Téléfilm Canada et donc de m'être confronté à ces questions de financement.  J'en suis particulièrement et personnellement très... je suis très attaché, si vous voulez, à ce genre de questions.

2711             La réponse, c'est que d'abord vous avez vu dans notre présentation qu'effectivement nous allons faire un apport très substantiel d'argent, si vous voulez, pour stimuler la production canadienne en insistant beaucoup que nous voulons être un stimuli pour la partie qui est plus laissée pour contre de la dramatique.

2712             Nous avons, là‑dessus, beaucoup établi que pour pouvoir effectivement devenir un acteur plus substantiel, plus majeur, et en même temps un contributeur net à la préoccupation, je pense, du CRTC qui s'est beaucoup exprimé concernant la dramatique et les moyens de créer des incitatifs pour pouvoir stimuler non seulement sa production, mais sa diffusion sur le maximum de fenêtres de diffusion, je pense que tout le monde comprend qu'il s'agit d'un des problèmes majeurs à résoudre et nous pensons que la proposition que nous faisons est un des éléments de solution, c'est bien sûr que ça ne sauvera pas la dramatique canadienne, mais c'est un des éléments de solution.

2713             La question qui était posée et qui a été analysée par plusieurs, est‑ce que ça va créer une pression supplémentaire au niveau des fonds actuels.

2714             Deux réponses sur ça.  La première, c'est qu'on ne peut pas en même temps vouloir, tous autant que nous sommes, avoir plus de dramatiques à la télévision et en même temps ne pas vouloir en avoir.

2715             C'est une question, si vous voulez, qui est liée aux conditions de financement qui fait en sorte que dans ce pays avoir de la dramatique à la télévision effectivement a conséquence première de créer une pression sur les fonds publics.  Un jour ça changera, mais c'est comme ça.

2716             Dans l'alternative que nous proposons, et c'est la deuxième partie de la réponse, vous voyez que nous allons apporter un apport financier à un certain nombre de productions qui auraient eu de la difficulté ou ne pourront plus, dans le contexte qui s'annonce, être produites et être mises à l'antenne de l'ensemble du réseau de télédiffusion au Canada qui sont au niveau de certains canaux spécialisés, mais en particulier au niveau des généralistes.

2717             En faisant cette intervention au niveau des dramatiques, c'est de rendre possible la production de ces dramatiques et donc, en conséquence, de ne pas avoir un impact, si vous voulez, d'aller chercher et de siphonner davantage les fonds publics présentés un peu comme un apport substantiel supérieur à ce qui existe déjà, ce que Canal+ a joué en France comme rôle majeur, ce que les télévisions ont joué un peu partout et ce qui fait en sorte qu'avec BOOMTV, la pression va plutôt s'alléger.  Il va y avoir un impact, si vous voulez, dans l'ensemble, et de la pression qui va venir au niveau des fonds publics, mais ce ne sera pas BOOMTV qui va être, si vous voulez, la cause de l'augmentation substantielle de pression sur les fonds publics.

2718             Mme PENNEFATHER :  Merci, monsieur Lampron.

2719             Perhaps when you to come to putting together a schedule which will lay out for us your programming, your Canadian programming and what kind of programming that will be in terms of the four axes, that will be a little clearer in terms of precisely and specifically whether and to what extent your original production plan will impact on Téléfilm funding.  For example, if you could give us precise numbers as to how much of that programming plan will depend on access to Téléfilm funding or CFT funding or how much not.

2720             The other point in trying to get a handle on your programming scheme is to what extent you will be using non‑original Canadian programming and how this programming will be different from what is already available on other services.

2721             Could you comment on, in providing us with more detail in the schedule, what kind of non‑Canadian programming will you be having in your schedule in English and your schedule in French?

2722             M. LAMPRON:  About your comment about what you are waiting for our schedule to say and all of the information that you are going to get with the schedule that we are preparing, I think that it will be a very difficult task to make a distinction between the drama that will figure into this schedule those dramas to the ones that will maybe seek some money from the public funding.

2723             We will try but, as I said, it is not an easy task to do so two years before we are going to get this licence.  But we are going to try just to have a valuation of what you are asking.

2724             On the second question, I hope that I did not forget what you were asking, but ‑‑

2725             COMMISSIONER PENNEFATHER:  What I was asking you about is non‑original Canadian programming.

2726             In other words, you are going to be producing 275 going up to 375 hours of Canadian original.  Also as part of your Canadian percentage in prime time, will you be airing non‑Canadian programming and, if so, how much and, if so, will it be different from what we already see on television?

2727             MR. GAUDET:  About the percentage ‑‑

2728             MR. PÉLADEAU:  If I may, Lucie maybe will be able to give details on that, but just a short answer here before Lucie maybe goes into more details.

2729             That is probably also something that you raised earlier as your preliminary comment regarding how are we going to "manage" the French and the English part of it and why those two services are linked together.

2730             Certainly on non‑Canadian content, you know, there would be some leverage, if I say.

2731             You know, our capacity to be able to buy products.  Yes, some will be American no doubt, but others will also ‑‑ are going to be from other countries.  European countries, for instance.

2732             But something, I think, that we should highlight here is our capacity to buy those products and buy the licence that will be ‑‑ that will provide us the capacity to broadcast in both languages by buying the right and being in a more favoured position to do so.

2733             COMMISSIONER PENNEFATHER:  Thank you, Mr. Péladeau.

2734             I certainly will get back to that point, and we will talk about the non‑Canadian programming next.  But just as a piece of the puzzle to understand the balance between original and non‑original on the Canadian side, if you could give us a sense of that as well.

2735             MME QUENNEVILLE:  Vous voulez avoir le percentage exact ? Est‑ce que c'est le pourcentage exact ? Parce que cela, on ‑‑

2736             COMMISSIONER PENNEFATHER:  Are you planning to present non‑Canadian ‑‑ Canadian non‑original programming?

2737             MME QUENNEVILLE:  Oui.  Il va y avoir des productions.

2738             COMMISSIONER PENNEFATHER:  Can you give us some examples?

2739             MS QUENNEVILLE:  For the French channels?

2740             COMMISSIONER PENNEFATHER:  For both.

2741             MS QUENNEVILLE:  Okay.

2742             So Don will be able to answer for the English channel.

2743             Pour les émissions françaises, au niveau international, il y a beaucoup ‑‑

‑‑‑ Remarque hors champ / Off mic comment

2744             MME QUENNEVILLE:  La programmation canadienne?

2745             CONSEILLERE PENNEFATHER:  Canadienne.

2746             MME QUENNEVILLE:  Oh, pardon.

2747             CONSEILLERE PENNEFATHER:  Canadienne, non‑originale.

2748             Vous faites la programmation canadienne.

2749             MME QUENNEVILLE:  Oui.

2750             CONSEILLERE PENNEFATHER:  Vous faites la programmation originale canadienne et la programmation originale ‑‑ non‑originale canadienne.

2751             MME QUENNEVILLE:  Non originale canadienne.  Bien sûr.

2752             Par exemple, on aimerait pouvoir diffuser certaines séries qui ont été déjà diffusées à la télévision. Je vous donne un exemple.  Nous, on a eu plusieurs séries dramatiques très populaires au Québec comme Le coeur a ses raisons, Nos étés.

2753             Donc, ce genre de série‑là pourrait très bien se retrouver à notre grille.

2754             Aussi, au niveau des séries un petit peu, je dirais ‑‑ au niveau des grands spectacles, des choses comme cela, au niveau des événements, que ce soit le Festival du jazz, et cetera.  On pourrait retrouver à ce moment là des éléments qui ont déjà été diffusés et qu'on achèterait en acquisition.

2755             Je peux citer aussi Michel

Brault, par exemple, pour La suite du monde, de grands documentaires comme cela qu'on va refaire au niveau de la thématique. Parce qu'on travaille beaucoup au niveau des thématiques en programmation.

2756             Donc, on va remettre des nouveautés qui peuvent être en acquisition, qu'on a achetées, et qui ont déjà été diffusées, mais qui vont ‑‑ à ce moment là, si on présentait, par exemple, un nouveau documentaire canadien, on pourrait le présenter avec l'ancien documentaire en acquisition.

2757             Donc, c'est un petit peu à ce niveau là. C'est dans ce sens là.

2758             MR. GAUDET:  On the English side, we don't have a finite list of what we would air, although we would start off with primarily Canadian movies to make up the non‑original, Canadian content.

2759             And then obviously, as we develop programming, that 275 hours will be in repeat in a fairly high rotation in order to fulfill our Canadian content commitments.

2760             COMMISSIONER PENNEFATHER:  Thank you.

2761             Just before we go on to a couple of other elements of the programming, on your Canadian programming, we have been talking to this point about what you will be presenting on the screen, I wanted to just check with you on your commitment on expenditures on Canadian programming.

2762             And I just wanted to be clear what that was.  Mind you, we will come back later to other questions about your financial projections, but while we are on the Canadian programming component, I wanted just to ask you, in your reply, on page 17, you indicate that your expenses related to Canadian programming to be telecast outstrip those of the other applicants.

2763             As I read it, you are saying that BOOM TV in English will be spending $17,169,000 on Canadian program expenditures, if I read the reply on page 17 right.

2764             When I go to your presentation of your program expenditures which were submitted with your application, it is 9.2.1, and I look at that and I understand your commitment in the `mémoire narratif' to dedicate 20 per cent of the previous years' revenues to Canadian expenditures, I believe that is your commitment.

2765             But when I look at the program expenditures for Canadian programming in 9.2.1, year one is $28,615,000.  And I think that number was repeated in subsequent corrections.

2766             Year two, there is $32,265,000.  But if we were to take 20 per cent of year one's revenues, we actually come up with $3,000,000.

2767             So what I need to understand is the figure $32,265,000 and subsequently dedicated to programming expenditures when your commitment was to 20 per cent.  And that is where you got your 17.  Because you split 60‑40 in terms of the split.  When we came to split the two financial pictures, we split them 60 ‑‑ you split them 60‑40.

2768                  So I am wondering if you could just explain to us what seems to be a confusion on what your commitment is in terms of financial commitment to Canadian programming.

2769             MR. LAMPRON:  We have prepared the budget, and were going, I think, to discuss afterwards the part of revenues that were presenting.  And on our budget we have stated that we spend $298 millions over set years in Canadian programming, and with this 60‑40 division, it will be 119 millions for the French side and 179 millions for the English side.

2770             It is what we are committed to expense into the Canadian content in order to fulfill what we have said.

2771             When we look at now the obligation made by the CRTC and all of the obligation, we have put this 20 per cent, but saying that we are committed for the first year to make our expense of 28.6 millions for the first year.

2772             So it is our projection.  It is what we want to make.  And it what we were authorized, as a provision, to build our pay TV.

2773             The 20 per cent, we have proposed this 20 per cent figure because we thought that it was the percentage who applied to the incumbents' services, and we have just tried ‑‑ in every aspect of our proposal, we have just tried to translate what has been the obligations for the other pay services.

2774             And if this 20 per cent is not linked to the exact percentage that are given to the incumbents, what we want to say is that we are prepared to be adjusted at the same level than the others.

2775             COMMISSIONER PENNEFATHER:  Well, I think we are going to have to come back to that one, Mr. Lampron, because it is important for us to understand your proposal.  And a proposal that says that all we have discussed in terms of Canadian programming, both original and non original, is going to be based on a commitment of 3 million, and then I look and it is actually based on a commitment of 32 million, it is difficult for us to know what really you are proposing.

2776             So we will ‑‑ certainly I wanted to flag that with you, that you did submit the 28,615,000 would be the year one, 28,615,000.  But then if we take your commitment which is in your `mémoire narratif' at paragraph 12.2 where we are talking 20 per cent, that has got to be a solid commitment.  And that comes out to 3 million dollars.

2777             So how can we accomplish what you are saying, the three million versus ‑‑ I don't understand the difference.  So there is obviously something to look up there.

2778             MR. LAMPRON:  Mr. Trépanier?

2779             MR. TRÉPANIER:  Merci.

2780             I am very glad that you are asking that question because we indeed have created that confusion, and I will explain why, and ...

2781             Simply it is that we used the commitments that were used by the existing services for close to 20 years, and we used that in the first draft of the application as our basis.

2782             COMMISSIONER PENNEFATHER:  But your first draft of your application included those larger numbers.

2783             So what did you base that on?

2784             M. TRÉPANIER:  Internally, we used that as a first draft of our application.  Let me finish and then you will understand, please.

2785             And then this ‑‑ of course, once the regulatory people write an application, it has to go to programming people because it is all about programming, isn't it?

2786             So the programming people looked at what could be a good proposal for premium television in Canada and came with bigger numbers.

2787             And then it went to the finance people, who looked at the business plan because, of course, it has to work financially.

2788             Unfortunately the 20 per cent remained there all along, until the last, I think, deficiency questions.  No one noticed it, and it stayed there.

2789             But what Pierre has just said, I believe, and you will be able to confirm and maybe Paul will be able to mention other things, what is important is that the business plan is what we are proposing.

2790             And what we are saying in our presentation today is what we indeed are proposing, which amounts to a lot more than 20 per cent.

2791             COMMISSIONER PENNEFATHER:  Well, perhaps I should note as well that the same financial projections were not only re‑submitted as late June 22nd, but were re‑submitted as separated between the two services.

2792             So it was an exercise where you did re‑look at it, and then you came back with the two services separated into English and French, which is another issue we will be getting to.

2793             So, to continue our discussion, we will use the financial plan submitted, but I would like to come back to again the point of the programming expenditures to understand your commitment very clearly.

2794             I think we can take a break, Mr. Chairman, and we will come back to continue that discussion.

2795             THE CHAIRPERSON:  We will indeed take a break for 15 minutes.

2796             Nous reprendrons dans 15 minutes.

‑‑‑ Upon recessing at 1533 / Suspension à 1533

‑‑‑ Upon resuming at 1549 / Reprise à 1549

2797             LE PRÉSIDENT : À l'ordre, s'il vous plaît. Order, please.

2798             Commissioner Pennefather.

2799             COMMISSIONER PENNEFATHER:  Thank you, Mr. Chairman.

2800             Rebonjour.  On peut revenir à la question des finances un peu plus tard dans l'ensemble des questions sur les finances.  La programmation canadienne, on vient d'avoir une discussion, alors si vous êtes d'accord, on va revenir sur ce point, si vous avez des questions plus tard.

2801             J'avais juste une couple de questions sur la programmation, et ensuite on se tournera vers d'autres questions financières.

2802             Le secteur indépendant.  M. Lampron, je pense que dans votre section du discours une de vos collègues a mentionné les commentaires de l'APFTQ et CFTPA.  Ma question est très simple, c'est que je pense que dans votre mémoire narratif, au paragraphe 8.12, vous demandez que jusqu'à 30 pour cent du contenu canadien total de BOOMTV puisse provenir d'entreprises de production liées à QME.

2803             Maintenant, vous êtes sûrement au courant des conditions de licence, et je pense qu'en effet dans votre présentation cet après‑midi vous avez dit, vers la fin, que :

                      * Pour assurer une concurrence loyale avec les services existants, BOOMTV est prête à respecter les conditions de licence ou leurs contreparties présentement rattachées aux licences de Super Écran, de Movie Network et Movie Cental. +

2804             Je parle alors de la condition de licence pour ces services ‑‑ à laquelle vous avez référé dans l'intervention de l'APFTQ ‑‑ qui limite la production par les sociétés affiliées à 25 pour cent de la diffusion et du budget.

2805             Est‑ce que vous êtes confortable que vous auriez une condition de licence semblable aux autres joueurs, ce qui veut dire une limite de 25 pour cent des productions avec les associations liées au lieu de 30 pour cent?

2806             M. LAMPRON : Sur cette question spécifique, effectivement, nous ne ferions pas, si vous voulez, une bagarre jusqu'à la fin des jours sur cette question d'un 5 pour cent de différence entre le 25 pour cent et le 30 pour cent.

2807             Cela dit, madame la Commissaire, nous souhaiterions beaucoup que vous mainteniez cette demande de notre part du 30 pour cent.  Nous avons, comme vous l'avez constaté tantôt, beaucoup d'ambition au niveau du contenu canadien, au niveau de la production originale.  Nous souhaitons beaucoup faire une grande différence, encore une fois, dans le développement, la découverte de nouvelles productions, de nouveaux talents, et caetera, et nous voyons ce 30 pour cent là comme une simple marge de manoeuvre pour nous autres, une capacité, dans l'éventualité de ne pas trouver, au niveau de la production indépendante, la collaboration que nous souhaiterions pour la réalisation de nos objectifs.  C'était dans cet esprit‑là qu'on avait mis le 30 pour cent.

2808             Cela dit, c'est davantage, pour nous, et c'est pour ça qu'on ne fera pas, si vous voulez, une bagarre sur cette question du 30 pour cent, parce qu'on a une très, très longue pratique avec les producteurs indépendants.  Vous savez, par exemple, qu'à TVA l'ensemble de notre soirée ‑‑ et pour tout le type d'émissions dont on parle pour BOOMTV ‑‑ est donné à la production indépendante dans une proportion très certainement voisine de 90 pour cent.  Ce n'est donc pas notre intention, si vous voulez, de se mettre à développer davantage ce niveau‑là, mais une saine marge de manoeuvre pour de saines négociations avec l'ensemble des producteurs nous paraissait appropriée.  C'était dans ce sens‑là que nous avons demandé le 30 pour cent.

2809             CONSEILLÈRE PENNEFATHER : Merci, monsieur Lampron, mais je prends pour acquis aussi qu'il est possible que le Conseil décide de maintenir le 25 pour cent qui sera égal avec la condition de licence imposée sur Super Channel et Movie MAX en 2003, 522, suivant l'intervention de l'APFTQ.

2810             M. LAMPRON : Nous laissons à votre sagesse le soin de faire l'arbitrage entre les prétentions de l'APFTQ et la demande légitime que nous vous faisons.

‑‑‑ Laughter / Rires

2811             COMMISSIONER PENNEFATHER:  With pleasure.

2812             Le fonds Quebecor que vous proposez, c'est une clarification, je pense que ce fonds, c'est 1 pour cent des revenus bruts du service.  Il y a une confusion parce que, dans la lettre de lacunes du 13 juin, la réponse 4.1(2) :

* La contribution du fonds Quebecor en développement de concepts et de scénarios pour BOOMTV sera à 50 pour cent pour le service de langue anglaise et 50 pour cent pour le service de langue française. +

2813             Ça me donne l'impression que ce 1 pour cent est divisé entre les deux services.

2814             Est‑ce que j'ai raison ou est‑ce qu'il y aura un 1 pour cent pour un et un 1 pour cent pour l'autre?

2815             M. LAMPRON : C'est un 1 pour cent qui s'applique aux bases d'abonnées que chacun des services a générés et que les revenus qui seront générés par chacun des services.  C'est donc 1 pour cent qui s'applique.

2816             Nous avions évoqué aussi le montant de 5 millions de dollars sur sept ans.  J'espère que nous avons été bien compris et que le 5 millions était, de toute façon, un plancher, peu importe la base de revenu que nous aurons, et que le 1 pour cent s'appliquera à partir de cette base de plancher, si, effectivement, le nombre d'abonnés fait en sorte et les revenus générés faisaient en sorte que ça dépasse donc le 5 millions de dollars, bien, c'est le 1 pour cent qui s'appliquera, évidemment.

2817             CONNSEILLÈRE PENNEFATHER : Si j'ai bien compris, pour le service français, 1 pour cent des revenus bruts de l'année précédente ira au fonds Quebecor français, et 1 percent of the revenues English to an English Fond Quebecor, for the purposes of script development.

2818             Do you have a comment on the ‑‑

2819             M. LAMPRON:  Yes.

2820             COMMISSIONER PENNEFATHER:  ‑‑ your mike.

2821             M. LAMPRON:  I apologize but the first split of this $5 million is 50‑50 between the English side and le service en français.  Donc le plancher, si vous voulez, il est à l'intérieur de 5 millions de dollars, réparti entre les deux services.

2822             COMMISSIONER PENNEFATHER:  Oh, I think then I have misunderstood.  So there is 1 percent of revenues, minimum $5 million?

2823             M. LAMPRON:  Minimum $5 million.

2824             COMMISSIONER PENNEFATHER:  Half to English service, half to French service?

2825             M. LAMPRON:  Yes.

2826             COMMISSIONER PENNEFATHER:  And what would that represent as a percentage of revenue in the English service and a percent of revenue in the French service?

2827             M. LAMPRON:  I have ‑‑

2828             COMMISSIONER PENNEFATHER:  Did you want to get back to me on that?

2829             M. LAMPRON:  Yes.

2830             Okay.  We will come back.

2831             COMMISSIONER PENNEFATHER:  The reason I am asking is there certainly has been a discussion on the amount that applicants are interested in or proposing to support for the support of script and concept development either as an amount or a percentage and, as you know, the Directors Guild, the Writers Guild, thought a 3 percent level would make more sense.

2832             M. LAMPRON:  Yes.

2833             COMMISSIONER PENNEFATHER:  So if we are dividing 1 percent we are considerably lower than that.

2834             M. LAMPRON:  Again, you are not dividing the 1 percent.  We are into this kind of discussion where there is two services with two lists of revenues in general and you are applying for those two services the same percentage.

2835             CONSEILLÈRE PENNEFATHER : J'aimerais revenir à un des points que l'APFTQ a souligné.  Je pense aussi à la discussion durant l'intervention de Super Écran où on a indiqué un élément important de ces demandes.  Je pense que vous avez, en effet, souligné ce point, monsieur Péladeau, tantôt.  Ça veut dire la possibilité de synergie entre les entreprises interentreprises filiales qui sont dans votre thèse un atout et un support pour la production canadienne, mais du côté du secteur des productions indépendantes peut causer, en effet, une perte pour le secteur de production dans le sens de ce qu'on dit en anglais * bundling of rights +, for example, qu'il faut que vous soyez prêt à négocier les droits pour la diffusion dans chaque élément de la diffusion d'une façon qui est juste et raisonnable.

2836             Est‑ce que vous avez un commentaire sur cette question du danger que, étant donné l'intégration verticale de l'entreprise QME qu'en effet il y aura peut‑être moins d'argent disponible pour la production indépendante que plus, à cause du fait que les producteurs seront devant vous en vendant tous leurs droits pour l'utilisation de ce produit.

2837             J'ai peut‑être mis ensemble les commentaires d'une couple d'interventions, mais c'est un élément important sur lequel j'aimerais avoir vos commentaires.

2838             M. PÉLADEAU : La problématique que vous posez, madame la Conseillère, est évidemment un problématique d'actualité.  On est en discussion permanente avec les différentes organisations pour s'assurer, justement, une répartition juste et équitable en fonction des différentes formes de distribution.

2839             J'ai fait référence un peu plus tôt à un certain nombre de nouvelles plates‑formes de distribution.  On peut penser, celle qui a été annoncée la semaine dernière par Apple, par une entente avec Disney, dorénavant par le biais de ce gadget qui s'appelle le iPod, permet le téléchargement d'oeuvres audiovisuelles.  Je fais référence à cet élément‑là parce que les futures plates‑formes de distribution, on fait face aujourd'hui à un défi technologique dont n'est pas en mesure de complètement saisir les tenants et aboutissants.  Notre volonté c'est justement d'avoir un discours ouvert avec les différentes organisations; comme vous le savez, elles sont nombreuses et pas nécessairement toujours parallèles dans leurs intérêts respectifs.  Tout démêler quelquefois l'imbroglio qui naît des droits respectifs est un, pour employer une expression française, un * challenge + permanent, mais, tout compte fait, on est habitué d'évoluer dans ce milieu‑là, et on compte bien pouvoir trouver encore une fois des solutions qui vont être équitables pour chacun des participants des industries correspondantes.

2840             CONSEILLERE PENNEFATHER:  Comme vous le savez, l'APFTQ, dans leurs interventions, mentionnent ce qui suit :

* Nous exhortons le Conseil à la prudence s'il devait accorder une licence et d'assurer que ce télédiffuseur garantisse des droits distincts et de juste valeur marchande pour l'acquisition et la production d'émissions diffusées à la fois par son service conventionnel à ses services spécialisées et de la télévision payante +

...et encore peut‑être d'autres.

2841             Est‑ce que vous avez l'intention de négocier ces droits distincts?  Ou est‑ce que vous avez un commentaire sur cette inquiétude?

2842             M. PÉLADEAU : Vous permettez que je passe la parole à mon collègue Pierre Lampron qui, lui, est justement au fait de ces négociations et qui discute avec ces organisations plus spécifiquement.

2843             M. LAMPRON : Il est évident, le point de départ, si vous voulez, de toutes ces discussions ou de ces négociations avec les producteurs mais également avec les autres associations, c'est un point de départ où chacun des partenaires reconnaît que l'exploitation d'une ouvre sur différentes fenêtres d'exploitation comme on les a évoquées génère pour les partenaires les revenus qui sont correspondants.

2844             Les règles sont relativement connues, simples et s'appliquent, de telle manière que s'il arrive par exemple que, pour une ouvre donnée, il y a une possibilité de retenir, par exemple, les droits pour une diffusion en avant‑première sur notre chaîne de télévision payante, qui serait suivie par une diffusion sur la chaîne TVA, pour prendre un exemple où on reste à l'intérieur du groupe Quebecor Média, et que, ensuite, la même ouvre puisse être exploitée sur notre plate‑forme Interne et ensuite être exploitée sur le marché de la DVD, et caetera, à ce moment‑là, effectivement, lorsque nous sommes en négociation avec ceux qui sont à l'origine de l'idée du projet, et caetera, nous négocions des justes rémunérations pour les exploitations et les retours d'argent qui peuvent venir là‑dessus.  Ce que nous offrons, à ce moment‑là, à un producteur, c'est une capacité, premièrement, ce qui est l'affaire la plus importante, de faire naître l'oeuvre, de lui donner une notoriété, donc de lui donner une valeur.

2845             J'avais déjà appris une leçon à l'époque, si vous voulez, au niveau des différents transits de film.  Un film, dans sa boîte, ça vaut à peu près 2 000 $, le coût d'une copie de film.  Le film, si vous voulez, qui aurait été vu par deux millions de personnes a, tout à coup, une valeur qui est majeure.  C'est un peu, par analogie, la même chose.  Les producteurs savent, lorsque leur oeuvre prend la notoriété qu'elle prend, qu'ensuite les exploitations trouvent de leur facilité.  En ayant dit ça, c'est évident que ça amène avec les artistes, avec l'ensemble, les créateurs, ça amène une négociation qui concerne, comment je vous dirais, cette possibilité d'exploitation là qui n'existait pas, que l'on offre, et qui donne un avantage à tous les producteurs qui acceptent de faire affaire avec nous.

2846             Dernier point là‑dessus, nous sommes sur une fenêtre de télévision payante, et sur cette fenêtre de télévision payante il y a un certain nombre de produits qui vont pouvoir effectivement s'exploiter.  Notre concept, c'est de toujours penser en termes d'exploitation, si vous voulez, multi plates‑formes, multimédias.  Certaines de ces plates‑formes seront à l'intérieur de Quebecor; certaines autres, et plusieurs, seront à l'extérieur, si vous voulez, de Quebecor.

2847             Nous voulons, si vous voulez, le projet, à chaque fois, effectivement, que nous nous servons de la fenêtre de la télévision payante, essayer de voir comment la production canadienne originale, à partir de la notoriété qui aurait été placée sur la fenêtre de télévision payante, va pouvoir se retrouver exploitée sur l'ensemble des fenêtres que nous venons de vous décrire.

2848             CONSEILLERE PENNEFATHER : Je pense que, en effet, c'est au fond de votre concept cette possibilité d'avoir le même produit utilisé dans différents créneaux.  D'après vous, et c'est très bien dit dans votre demande et dans les lettres de lacunes, que vous voyez ça comme un important ajout, comme un important support à la programmation canadienne.

2849             L'autre côté de la médaille, deux points.  Comme vous le savez, des inquiétudes ont été soulevées aussi dans le secteur anglophone dans deux sens : un, que ce genre d'achat pour différents créneaux peut augmenter les coûts de la programmation et avoir un impact sur les concurrents dans leur capacité d'acheter de la programmation.  Là, je parle de, à titre, d'exemple, la télévision conventionnelle.  Deuxièmement, qu'en effet vous serez, suivant votre logique, intéressé à acheter les droits exclusifs ?? là je parle de la programmation canadienne pour le moment ?? les droits exclusifs pour vos créneaux payants et conventionnels.

2850             Est‑ce que vous avez un commentaire là‑dessus?  Parce que ça va de soi, d'après votre logique, que c'est ça que vous allez faire.

2851             M. LAMPRON : Sur la première question, nous comprenons les objections telles qu'elles ont été exprimées.  Elles sont un peu surprenants, cela dit, parce qu'à l'origine de ça et au départ de la problématique que nous partageons, je pense, et que le Conseil, en tout cas, semble beaucoup partager, c'est la difficulté de financer ce type de programmation là à partir d'une source particulière qui, en particulier au Canada anglais, s'appelle la télévision généraliste.

2852             Alors l'arrivée de cette stratégie que nous poursuivons et qui sera probablement imitée, d'ailleurs, parce qu'il n'y a pas beaucoup d'autres solutions que celle que nous proposons, n'aura pas un effet d'augmentation du coût de production, elle aura un effet qui va permettre aux diffuseurs de partager des coûts qu'ils sont de moins en moins en mesure d'assumer, et ensuite va permettre, pour chacune de ces productions‑là, de générer davantage de revenus, donc, pour les producteurs, de peut‑être être à l'origine de prendre un peu plus de risques dans la perspective d'un peu plus de revenus qui pourraient venir.

2853             Je pense que j'ai oublié votre deuxième question.

2854             CONSEILLERE PENNEFATEUR : C'était la possibilité d'acheter.  Un intervenant a suggéré qu'on impose une condition de licence qui prohibiterait, en effet, que vous puissiez acheter les droits exclusifs pour la télévision payante et conventionnelle.

2855             M. LAMPRON : Je comprends que cette objection est venue du Canada, est venue de certains grands groupes déjà fort bien constitués.  Je voudrais simplement faire remarquer, si vous voulez, que, dans le dispositif général, pour pouvoir, justement, retenir, je dirais, les droits exclusifs et empêcher que ces produits‑là se retrouvent dans l'ensemble des antennes, il faut aussi regarder le paysage audiovisuel canadien et le positionnement, qui est celui qui est là.  Il faut voir les possibilités de nature semblable que les grands groupes de communication, qui sont intégrés et qui agissent au Canada anglais et qui ont des possibilités autrement plus importantes, de pouvoir réserver des droits pour un ensemble de plates‑formes que nous venons de décrire.

2856             Donc on n'est pas là‑dessus dans une situation de concurrence, je dirais, même dominante, en particulier sur le marché du Canada anglais.

2857             Le deuxième élément de la réponse, c'est que le nombre de produits qu'on va acheter sur la télévision payante ne pourrait pas se retrouver en nombre significatifs sur une plate‑forme comme, par exemple, Sun TV.  C'est juste une question, si vous voulez, de mathématiques.

2858             Si on se met au niveau du cinéma, comme vous l'avez évoqué, parce que ça a été aussi exprimé, il faut dire, bien, via la fenêtre de télévision payante, on va s'accaparer, par exemple, les droits de toute la production cinématographique américaine, en particulier.  On a entendu que, bientôt, les films américains ne seraient plus disponibles sur les télévisions généralistes privées et sur les autres.

2859             TVA dépense 92 pour cent de son coût de programmation sur du produit canadien.  Il dépense moins de 10 millions par année en termes de films américains, de séries américaines.  D'ailleurs, il ne programme pas à son antenne, en situation d'heures de grande écoute, comme le fait Radio‑Canada, des séries américaines.  Ce n'est pas le choix de TVA.

2860             Dans une perspective comme celle qui est évoquée, comment je vous dirais, ce serait de mauvais choix budgétaires que de décider tout à coup d'acheter plus de films américains que l'antenne ne souhaite en diffuser.

2861             M. PÉLADEAU : Si vous permettez, madame la conseillère, peut‑être ajouter à ce que mon collègue Lampron vous indiquait, et probablement que vous faisiez peut‑être référence également à du contenu canadien, alors que Pierre parlait peut‑être de films américains.  Il faut savoir que c'est la pratique de la télévision d'État de Radio‑Canada qui, effectivement, lorsqu'elle s'engage à financer une production cinématographique, demande l'exclusive diffusion sur ses canaux de distribution.

2862             Donc, si ça devait être le cas, ce n'est certainement pas une exception qui existe aujourd'hui même dans le paysage audiovisuel candien.

2863             CONSEILLERE PENNEFATHER : Merci, monsieur Péladeau.

2864             Let us go to this exclusivity question once again, though.  Let me focus for a moment back to foreign programming.  You are aware of the discussion we have been having over the last couple of days.

2865             In addition to what you just said in terms of what works for the system as a whole, if I were to understand your position on exclusivity, and let's talk about American programming because it will be a component of your BOOMTV in English and BOOMTV in French, correct?  I think in fact in your reply you say:

                      " BOOM sera en très grande partie un service de première fenêtre pour le cinéma canadien et étranger récent.  Hollywood is there."

2866             Your position on exclusivity, then, in terms of the acquisition of distribution arrangements with U.S. studios, if I translate ‑‑ in fact, I use your translation which Mr. Trépanier so kindly provided of most of the documents, you say:

                      "The applicant will not acquire exclusive rights to the programming it carries except during the applicable exhibition window."

2867             COMMISSIONER PENNEFATHER:  So in other words, you will acquire exclusive rights for the American programming which you propose to carry?

2868             M. PELADEAU:  It is not always easy, you know, to give an example in the future.  What we can do is use a current example.  I am sure that it will make a lot of sense for you.

2869             For instance, la télévision d'État, Radio‑Canada, we were considering buying one of the well‑known series that was running recently in the U.S. and being produced by Disney and being broadcast on ABC, a series called "Lost" and the other series was called "Desperate Housewives".  We were not able to bid on this because Radio Canada came in and overbid.  We are a private company and we don't have obviously, as you can imagine the unlimited kinds of funds that the state television is able to provide.

2870             I mean, if we were to have a pay TV licence we probably are going to have more capacity to pay for those kinds of series that will be first broadcast, as Pierre mentioned, as a "première" or a premium and then rebroadcast wherever we think it should be rebroadcast.  It could be rebroadcast on conventional.  It could be rebroadcast on internet.  Obviously, as you can imagine also, it is not always easy to deal with studios.  They are in a position, you know, to call the shots more than we are in Canada.  So it will be a matter of negotiation.

2871             But certainly, we will have more capacity in terms of buying and purchasing those series than we have right now being only on a conventional basis.

2872             COMMISSIONER PENNEFATHER:  I guess there are some players out there who say you already have a certain leg up on the ability to negotiate considering the number of enterprises which are in your basket, so to speak.

2873             So I understand you see exclusivity as an important component of your business plan.  Then, what is your comment on the comments of others that this bidding process drives up the costs and will have a nefarious effect on the specialty and conventional sectors outside of the QME family.

2874             M. LAMPRON : D'abord, nous avons indiqué là‑dessus, au niveau de l'exclusivité, de l'accès exclusif ?? là on est spécifiques sur les programmes américains ?? nous avons indiqué que, là‑dessus, il y a un libre marché.  Parfois, nous ferons l'accès en exclusivité de produits et selon les disponibilités, certaines fois, sur une façon non exclusive, si vous voulez, de pouvoir le distribuer.  Ce sera dépendant de la réponse que nous obtiendrons, par exemple des majors et des autres intervenants quant à leur volonté de vendre à un prix qui est raisonnable, les produits qui sont là.

2875             Contrairement à d'autres intervenants, nous ne demandons pas de protection à ce niveau‑là.  M. Péladeau, M. Soly et d'autres, on a fait nos devoirs, effectivement, avant de nous présenter, avant de prendre la décision de faire cette demande.  Nous avons, pour ce qui nous concerne, confiance que nous pourrons avoir accès aux produits qui nous intéressent, dans un jeu de libre négociation.

2876             Maintenant, s'il y avait des appuis de position dominante qui s'exprimaient, il y aurait, si vous voulez, les moyens d'intervenir.  Mais, encore une fois, nous n'avons pas demandé, et ce n'est pas dans notre plan d'affaires d'être accrochés au concept de l'exclusivité à tout prix, tout dépendant, encore une fois, de la valeur du produit qui nous est offert et de la façon de l'exploiter.

2877             CONSEILLERE PENNEFATHER : Si j'ai bien compris, est‑ce que vous avez un commentaire sur une mesure intérim, transitoire qui a été proposée pendant cette audience en termes de certaines limites imposées par le Conseil sur l'exclusivité pour laisser un peu de temps pour les concurrents à rentrer dans le marché?

2878             M. LAMPRON : Nous n'avons pas de commentaires spécifiques, et nous ne demandons pas ce type de production au CRTC.

2879             CONSEILLERE PENNEFATEUR :  Maintenant, j'aimerais continuer la discussion sur les questions de finance.  I will go to the financial questions.

2880             What I did was take basically the numbers that we find in your application at Annex 26 and in 1(f) which was submitted with the June 13th letter and 9.2.1 submitted with the June 22 letter wherein we split the two budgets.  Ça va?

2881             M. BURON:  Yes. (spoken off mic)

2882             COMMISSIONER PENNEFATHER:  Do I have your attention?

‑‑‑ Laughter / Rires

2883             MR. BURON:  Yes.

2884             COMMISSIONER PENNEFATHER:  All right.

2885             And what I would just like to clarify is that at the end of the day even with splitting the two budgets we basically are ending up with the same numbers as we had in the beginning at Annex 26 which are based on a digital universe of $5,590 million, a take‑up rate of 11 percent and we will get back to the Carat study in a moment, a potential subscription of 50 percent leaving us with 307,450 abonnés but you have taken une moyenne or an average of 153 at that point with revenues.  You went out with a retail rate of 10.99 for your studies and you are looking at a wholesale rate of 75 per cent of that, which, I think, comes to about $8.24 in year one.  So what we are dealing with is basically those numbers which end up with revenues in year one of $15,204,940.

2886             Are we on the same page?

2887             MR. BURON:  Oh, yes.

2888             COMMISSIONER PENNEFATHER:  Great.  Then when we split the two budgets, with the June 22 letter de lacunes, I guess my first question is, the split in terms of subs, revenues and expenses, the subs was the 26/74 split?

2889             MR. BURON:  Yes.  Yes.

2890             COMMISSIONER PENNEFATHER:  But the balance was 60/40:  60 English, 40 French?

2891             MR. BURON:  Mm‑hmm.

2892             COMMISSIONER PENNEFATHER:  So we are together on that?

2893             MR. BURON:  We are together.

2894             COMMISSIONER PENNEFATHER:  Now, let us start back at the beginning then.  The basis of these projects, these financial proposals is the Carat study and Synovate ‑‑ am I saying it correctly?

2895             MR. DORION:  Synovate.

2896             COMMISSIONER PENNEFATHER:  Synovate, Mr. Dorion.

2897             What we have discussed with other applicants as well is the digital universe in Canada and you have come up with a figure of $5,590,000.

2898             I believe what year we are starting ‑‑ you call it year one?

2899             MR. DORION:  Yes.

2900             COMMISSIONER PENNEFATHER:  Your year one is ‑‑

2901             MR. DORION:  Year one would presumably be January '07.

2902             COMMISSIONER PENNEFATHER:  Seven?

2903             MR. DORION:  Yes.

2904             COMMISSIONER PENNEFATHER:  Or six?

2905             MR. DORION:  All right.

2906             COMMISSIONER PENNEFATHER:  Because I think in your report, it is actually six.

2907             MR. DORION:  I don't think at this stage it would be January '06.

2908             COMMISSIONER PENNEFATHER:  Okay.

2909             MR. DORION:  Probably January '07 at best.  I would presume the numbers show 2007, the financial numbers ‑‑

2910             COMMISSIONER PENNEFATHER:  Oh!

2911             MR. DORION:  ‑‑ in ‑‑

2912             COMMISSIONER PENNEFATHER:  Well, what I have in front of me on page 14 is 2006 to 2012.

2913             MR. DORION:  Yes.

2914             COMMISSIONER PENNEFATHER:  Okay.

2915             So basically, I guess, from what I see from other applicants, it is, grosso modo ‑‑ I am looking at the Allarco outline this morning, which Decima came up with a figure of $5 million as well in 2005 and $5.8 in 2006.  So I guess we are talking about basically the same approximate numbers?

2916             MR. DORION:  Right.

2917             COMMISSIONER PENNEFATHER:  But they showed a growth rate of 10 per cent each year going to year 2013 and our calculations had, I guess, from year one to year two, 14 per cent; two to three, 11; three to four, 8; four to five, 7; five to six, 6; and six to seven, 5.

2918             MR. DORION:  Yes.

2919             COMMISSIONER PENNEFATHER:  Can you explain why in your estimate this is a decreasing percentage of growth?

2920             MR. DORION:  We got our ‑‑ nous avons pris les chiffres d'une étude que nous avons eue, Lemay‑Yates Vidéotron, et si vous regardez, pour les années un à sept, from year one to seven, it comes up to about an average of 10 per cent per year.

2921             It is very difficult to predict from year two to year one, year two to year three, year four.  We have worked on ‑‑ you know, it sums up at an average of 10 per cent because from year one to seven is about 65 per cent growth.  So in six years, it is about 10 per cent per year.

 

2922             MME BROUILLETTE : Si vous me permettez, en fait, ce qu'on prétend, c'est que la croissance du numérique est très forte ces années, mais qu'elle va diminuer au fur et à mesure où la base de clients analogiques vont migrer vers un service numérique.  Donc, c'est pourquoi, je vous dirais, la courbe de croissance est élevée et s'en va en diminuant vers la fin du sept ans.

2923             COMMISSIONER PENNEFATHER:  Now, you have also got, if I am right ‑‑ I did some calculations with the help of staff.  It doesn't work as quickly up there anymore.

‑‑‑ Laughter / Rires

2924             COMMISSIONER PENNEFATHER:  The proposal you have for your portion of this universe, if I look at your figure for the number of subscribers by year seven, it is an average number, if I have read the numbers right, of 1,422,725.

2925             That represents about 15 per cent of that universe by year seven; is that ‑‑

2926             M. DORION : C'est exact.

2927             COMMISSIONER PENNEFATHER:  So what, in your view, is your analysis on whether ‑‑ you use that number to say that, as I recall from your report, Monsieur Dorion, that all the new subscribers would come from the new expanding universe.

2928             MR. DORION:  Mm‑hmm.

2929             COMMISSIONER PENNEFATHER:  But I don't quite see how it would be all from the new expanding universe, how it would not also be from subscribers moving from the existing service to your service, a level of 15 per cent, and even if we use the not average number and use the actual number, in your own predictions of 1,500,048, that is 17 per cent.

2930             MR. DORION:  Right.

2931             COMMISSIONER PENNEFATHER:  We are getting into an area where I find it difficult to understand that we are not having an impact on existing players.

2932             MR. DORION:  Existing players means analog moving to digital?

2933     &