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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.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.




















                      SUBJECT / SUJET:




To consider the broadcasting application by BCE Inc. (BCE), on

its behalf and on behalf of certain of its affiliates, licensees

of broadcasting and distribution undertakings /

Afin d'étudier la demande en radiodiffusion présentée par

BCE Inc. (BCE), en son nom et au nom de certaines de ses filiales,

titulaires d'entreprises de radiodiffusion et de distribution













HELD AT:                              TENUE À:


Conference Centre                     Centre de conférences

Outaouais Room                        Salle Outaouais

140 Promenade du Portage              140, Promenade du Portage

Gatineau, Quebec                      Gatineau (Québec)


February 26, 2008                     Le 26 février 2008








In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of



However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.







Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

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

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.


Toutefois, la publication susmentionnée est un compte rendu

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

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

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

               Canadian Radio‑television and

               Telecommunications Commission


            Conseil de la radiodiffusion et des

               télécommunications canadiennes



                 Transcript / Transcription




To consider the broadcasting application by BCE Inc. (BCE), on

its behalf and on behalf of certain of its affiliates, licensees

of broadcasting and distribution undertakings /

Afin d'étudier la demande en radiodiffusion présentée par

BCE Inc. (BCE), en son nom et au nom de certaines de ses filiales,

titulaires d'entreprises de radiodiffusion et de distribution







Konrad von Finckenstein           Chairperson / Président

Michel Arpin                      Commissioner / Conseiller

Leonard Katz                      Commissioner / Conseiller







Cindy Ventura                     Secretary / Secretaire

Claude Rousseau                   Hearing Manager /

                                  Gérant de l'audience

Steve Millington                  Legal Counsel /

Anthony McIntyre                  Conseillers juridiques





HELD AT:                          TENUE À:


Conference Centre                 Centre de conférences

Outaouais Room                    Salle Outaouais

140 Promenade du Portage          140, Promenade du Portage

Gatineau, Quebec                  Gatineau (Québec)


February 26, 2008                 Le 26 février 2008


- iv -





                                                 PAGE / PARA







BCE Inc.                                          181 / 1089








Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Tuesday, February 26, 2008

    at 0929 / L'audience débute le mardi 26 février

    2008 à 0929

 LISTNUM  "WP List 3" \l 1 \s 1087 1087             THE CHAIRPERSON:  Good morning.

listnum "WP List 3" \l 11088             Back to you, Mr. Leech.

‑‑‑ Laughter / Rires


listnum "WP List 3" \l 11089             MR. LEECH:  Thank you, Mr. Chairman and Members of the Panel, Commission Staff.

listnum "WP List 3" \l 11090             We're pleased to appear again before you this morning to present our response to your questions and remarks.

listnum "WP List 3" \l 11091             Before I begin, I would like to take the opportunity to thank the many interveners who wrote letters and those who appeared before you in support of our application.  These interveners recognize the benefits that this transaction will bring to BCE, its customers and the Canadian broadcasting system.

listnum "WP List 3" \l 11092             Our comments in this phase will address the specific issues raised by the Commission and, in the course of doing so, we will also address any additional relevant issues raised by Catalyst in its intervention.

listnum "WP List 3" \l 11093             As I said in my opening remarks, we are keenly aware that you must reach a determination that BCE's Broadcasting Services will be Canadian owned and controlled.  We have heard your concerns and believe we have addressed them.

listnum "WP List 3" \l 11094             Where the Commission has requested a definition or specific change to the language of an agreement, if it is acceptable to the Commission, we would propose to file the definition or revision by the end of next week.

listnum "WP List 3" \l 11095             The first issue I would like to address is the Morcague structure.  We are very comfortable with the structure proposed under which Morcague, a qualified Canadian corporation, will hold two thirds of the voting shares and will enter into an agreement in respect of the voting of those shares.

listnum "WP List 3" \l 11096             In our view, this clearly places the beneficial ownership and control of the voting shares in the hands of Morcague and Teachers', thereby meeting the Canadian ownership requirements.

listnum "WP List 3" \l 11097             Morcague will be entitled to a dividend on its investment, an indicator of beneficial ownership Morcague will not be reimbursed for the purchase of its shares.

listnum "WP List 3" \l 11098             We appreciate the Commission's desire for comfort regarding compliance of this structure with the regime regulating the investment of Teachers' funds administered by the Financial Services Commission of Ontario.  I can assure the Commission that FSCO is aware of the use of this structure by Teachers' and other large pension plans over the years, as well as its use in this specific instance.  We will be working with Commission counsel to provide such comfort as may be available from FSCO.

listnum "WP List 3" \l 11099             Second, we'd like to address issues raised by the Commissioners regarding the Board of Directors.  As we indicated yesterday, the Board structure we put before you was borne out of a concern for both good corporate governance and compliance with the Canadian ownership rules.

listnum "WP List 3" \l 11100             Accordingly, the Board being proposed includes at least two independent members.  The Board is Canadian controlled.  It is comprised of a majority of individual Canadians, the CEO, who is a Canadian shareholder himself, five individuals who are designated by the Canadian shareholder, plus at least one Canadian independent director.

listnum "WP List 3" \l 11101             Under the arrangement originally proposed the independent directors would have been appointed by a committee composed of two Canadian shareholders ‑‑ that's Teachers' and George Cope ‑‑ as well as a non‑Canadian designee.  This committee of three was structured to ensure that at all times a non‑Canadian cannot, on its own, designate the independent directors.

listnum "WP List 3" \l 11102             However, we have taken into consideration your request that we enhance the Canadianness of the Board and of this selection process. This can be accomplished while still maintaining the important role of independent directors on the BCE Holdco Board.

listnum "WP List 3" \l 11103             We are proposing that the designation of one of the independent directors, who will be a Canadian individual, will require the approval of Teachers'.  To be clear, although this independent director will be selected by the committee as originally contemplated, there will be the additional requirement that Teachers' must approve this independent director.

listnum "WP List 3" \l 11104             In other words, although it is our expectation that selection of independent directors will proceed on the basis of consensus, if unanimity cannot be achieved in respect of this independent director, Teachers' can never be outvoted.  Therefore, Teachers', as the largest shareholder, will always have approved the Canadian independent director.

listnum "WP List 3" \l 11105             We also propose to address the question raised regarding the Chairman of the Board.  Given that there is no specific requirement under the ownership restrictions for the Chairman to be Canadian, and given that the Chairman of the Board will not have a deciding vote, we are proposing to stipulate that, in any event, the person who serves as Chairman will not be a member of the Board who is a designee of a non‑Canadian shareholder.

listnum "WP List 3" \l 11106             We are also proposing the following additional changes to the Principal Investors' Agreement in respect of the Board in response to your concerns:

listnum "WP List 3" \l 11107             First, the agreement will specify that the Board will always include at least two independent Board members;

listnum "WP List 3" \l 11108             Second, the agreement will include a definition of "independent director", generally consistent with the definition utilized at CTVglobemedia, to be filed with the Commission; and

listnum "WP List 3" \l 11109             Third, the qualification regarding the use of "best efforts" will be deleted from sections 2.6 and 2.7 of the agreement.

listnum "WP List 3" \l 11110             Now, you further asked us to revisit the composition of the Executive Committee.  As we described, in practice, we see the role of the Executive Committee as a means by which the CEO can provide informational updates to Board members on a timely basis.

listnum "WP List 3" \l 11111             The Executive Committee is not delegated any decision‑making powers of the Board and its role is very limited in scope.  However, to ensure that this Committee more closely parallels Teachers' representation on the Board, the Principal Investors' Agreement will be amended to add a second Teachers' designee to the Executive Committee.  Thus, the Executive Committee will be comprised of five members:  two Teachers' designees, the CEO of BCE and one designee from each of Providence and Madison Dearborn.  This will ensure that the majority Canadian requirement of this Committee is comprised of Canadians who are not nominated by non‑Canadians.

listnum "WP List 3" \l 11112             With respect to the Requisite Investor approvals over incurring indebtedness, voluntary pre‑payment of debt, acquisition of assets, sale of assets, loans and joint ventures, we understand the Commission has suggested that the threshold level be established at $106‑million.

listnum "WP List 3" \l 11113             To reflect this, we will revise the Principal Investors' Agreement to increase the requisite approval thresholds for these matters to $110‑million.  We believe that, based on our business experience and on discussions with management, an absolute number rather than a percentage is essential to ensure certainty and predictability going forward.

listnum "WP List 3" \l 11114             Also, as requested by the Commissioners, we will be incorporating into the Principal Investor Agreement a definition of "ordinary course of business", which will be consistent with the established and disciplined approach that is already in place at BCE as outlined by Ms Turcotte.

listnum "WP List 3" \l 11115             We also have re‑considered the question as to whether the requisite investor approval rights should be held by such investors themselves or by their designees on the Board.

listnum "WP List 3" \l 11116             As a general matter of good governance, it is recognized that certain matters of significance should be considered not only by the directors, but also by shareholders.  The shareholders are, at the end of the day, the owners of the enterprise and can focus most clearly on the implications of such proposals to their investment.  In broadly‑held, public companies these matters include those that require approval by special resolution.

listnum "WP List 3" \l 11117             In the context of private or closely‑held companies, corporate law and accepted governance models contemplate that shareholders may have incremental approval rights because, among other things, investors in closely‑held companies have limited ability to protect their investment by voting with their feet.  Corporate statutes expressly provide for unanimous shareholder agreements through which powers, that otherwise might be exercised solely by directors, can be exercised by shareholders.

listnum "WP List 3" \l 11118             In this context, the shareholder agreements for all of the private companies in which Teachers' has invested contemplate that significant corporate initiatives would be subject to investor approval in addition to Board approval.  This is, from our perspective, a necessary protection as we invest the pension funds of Ontario teachers.

listnum "WP List 3" \l 11119             The requirement to obtain requisite investor approval of these matters affords us the opportunity to provide input on matters that could reasonably be expected to be of real financial consequence to us as the owners of the company.  We are investing $4‑billion of pension funds in BCE.  We believe that we could not properly discharge our responsibility to our plan members, and that Providence, Madison Dearborn and Merrill Lynch could not do so in respect of those for whom they invest, if the requisite investor approval rights were vested solely in their Board designees who may be subject to conflicting duties.

listnum "WP List 3" \l 11120             The Commission raised a concern with respect to Teachers' potential loss of one or more Board seats should it sell down its interest in the Company below the levels specified in section 2.4.6 of the Principal Investors' Agreement.

listnum "WP List 3" \l 11121             Although raised in the context of a reduction in Teachers' ownership level, a similar issue could arise in the event of a sell‑down by other principal investors with Board designation rights.

listnum "WP List 3" \l 11122             To address the Commission's concern, we propose to implement a procedure designed to further enhance our objective of good governance by electing additional independent directors.

listnum "WP List 3" \l 11123             In the event that the number of directors that Teachers' may designate is reduced, we propose that the resulting vacancy be filled by an additional independent director who is a Canadian individual and is selected by the committee but always approved by either Teachers' or a Canadian transferee that has an investment at the level of the principal investor.

listnum "WP List 3" \l 11124             In essence, the director would be selected in the same manner as the Teachers'‑approved independent director that I outlined before.

listnum "WP List 3" \l 11125             Similarly, if a principal investor other than Teachers' lost its right to designate a director pursuant to the provisions of the Principal Investor Agreement, we can anticipate that such vacancy would be similarly filled.

listnum "WP List 3" \l 11126             Teachers' and Providence of course would lose its approval rights with respect to such independent directors in the event it ceased to be a principal investor.

listnum "WP List 3" \l 11127             In addition to promoting good governance, this procedure assures that unless Teachers' reduced its investment to less than $225 million, no fewer than six of the company's directors will at all times be Canadians designated or approved by Teachers' or a significant Canadian investor.

listnum "WP List 3" \l 11128             With respect to the Advisory Services Agreement, while the agreement does currently state that management is responsible for the day‑to‑day operations of the company, including all programming decisions, we will amend this agreement to explicitly state that the services contemplated therein do not relate to programming.

listnum "WP List 3" \l 11129             Finally, as the Commission is aware, the draft by‑law we filed establishing the Programming Committee makes it clear that 100 per cent of its members will be Canadian and, further, that no member of the Committee shall be a member of the Board of Directors of any non‑Canadian shareholder or a director, an employee, or an officer of BCE Holdco.

listnum "WP List 3" \l 11130             However, the question was asked whether it was our intent that employees of BCE would serve as members of the Programming Committee.

listnum "WP List 3" \l 11131             As there is considerable in‑house programming expertise at BCE, this indeed is our intent.  However, we wish to make this opportunity to clarify that no member of the Programming Committee will be a director, officer or employee of any non‑Canadian shareholder and we will file a revised draft by‑law with his explicitly included.

listnum "WP List 3" \l 11132             In summary, the Commission raised 12 issues.  With the exception of one that raises some fundamental corporate governance concerns, we have proposed measures to address each one of them.

listnum "WP List 3" \l 11133             Teachers', Providence, Madison Dearborn and Merrill Lynch are committed to realizing the full potential of the BCE broadcasting services over a long‑term horizon.  With your approval, the proposed transaction will bring significant benefits, both tangible and intangible to BCE, its customers and the Canadian broadcasting system.

listnum "WP List 3" \l 11134             We appreciate all of the hard work the Commission and its staff have undertaken in consideration of our application and thank you very much.

listnum "WP List 3" \l 11135             THE CHAIRPERSON:  Thank you very much for that comprehensive reply.  I can see you have taken our issues on board and you have tried to address them.  We obviously will have to reflect on these and see whether you have moved far enough to satisfy us about the Canadian control.

listnum "WP List 3" \l 11136             I seem to recall yesterday that my colleague, Mr. Katz, also raises issues on valuation and issues regarding the Advisory Services Agreement.

listnum "WP List 3" \l 11137             Len, do you want to refresh us on what they were?

listnum "WP List 3" \l 11138             COMMISSIONER KATZ:  Yes.  There were a couple of questions on valuation that need some follow‑up.  What I would like to suggest is, later on today staff provide your counsel with a couple of questions on the evaluation rather than get into the detail, if that's okay with you, and we will give you several days to respond to them.

listnum "WP List 3" \l 11139             Also, I see there was no proposed changes to the role of Teachers' as it relates to the strategic and business analysis performed under the Advisory Services Agreement.

listnum "WP List 3" \l 11140             I want and make it clear that I have no concern regarding the financial aspects of the agreement.  My concern is that the functions being performed by the U.S. investors, and only the U.S. investors, are equivalent to those that would be performed by a Chief Financial Officer, namely ‑‑ and I will read from the agreement:

                      "... future Service Corporation financing, financial advice in connection with the Service Corporation's businesses, including, without limitation, advice with respect to the development and implementation of strategies for improving the financial performance of the Service Corporation and financial and business planning and analysis."  (As read)

listnum "WP List 3" \l 11141             Without Teachers' active involvement I come to the conclusion the role of CFO has been ceded to U.S. investors.

listnum "WP List 3" \l 11142             Is that a correct assumption?

listnum "WP List 3" \l 11143             MR. LEECH:  No, I don't believe it is a correct assumption, Mr. Vice Chair, for several reasons reason.

listnum "WP List 3" \l 11144             One is, as my colleague Mr. Silvestri pointed out yesterday, Teachers' will be actively involved in providing such counsel.  Our compensation for that will be through the investing in a special class of shares that provides a dividend, number one.

listnum "WP List 3" \l 11145             Number two ‑‑

listnum "WP List 3" \l 11146             COMMISSIONER KATZ:   But those special class of shares have no reference to any involvement by you in strategic planning or anything.  I mean, I read those other agreements as well.

listnum "WP List 3" \l 11147             MR. LEECH:  Yes.

listnum "WP List 3" \l 11148             COMMISSIONER KATZ:  If they were in there, I wouldn't have that concern.

listnum "WP List 3" \l 11149             MR. LEECH:  I understand and we will take a look at trying to put some wording around that to make sure that is clear.

listnum "WP List 3" \l 11150             Second, again, the advice is again to be sought by the CEO and it's up to him whether he takes the advice or not.  There is the aspect that is up to Mr. Cope to in fact commission any of the studies he wants and, I believe as he explained yesterday, he would be doing that in place of getting the advice from some other third party.

listnum "WP List 3" \l 11151             COMMISSIONER KATZ:  All right.  Thank you.

listnum "WP List 3" \l 11152             MR. KOCH:  Mr. Vice Chairman, I would just point to the reference in the agreement which is at the end of section 1 which specifically articulates the notion that management is not ‑‑ that management rests with the management of the corporation and management are not obligated to act upon the advice of the advisor.

listnum "WP List 3" \l 11153             COMMISSIONER KATZ:  No, and I appreciate that.  I have seen that, thank you.

listnum "WP List 3" \l 11154             MR. KOCH:  Thank you, sir.

listnum "WP List 3" \l 11155             THE CHAIRPERSON:  All right.  That is obviously one point that needs to be clarified.

listnum "WP List 3" \l 11156             There were also several undertakings that you have given throughout and counsel will read out the list later on so that you know exactly what.

listnum "WP List 3" \l 11157             You mentioned in your submission here that there is certain wording that you want to file with us.

listnum "WP List 3" \l 11158             MR. LEECH:  Yes, sir.

listnum "WP List 3" \l 11159             THE CHAIRPERSON:  That of course leaves the whole issue of the pension commission and compliance.

listnum "WP List 3" \l 11160             We made it clear to you yesterday we consider this issue very seriously and we want to make sure that ‑‑ we want to hear from the Commission, not from you, not from counsel but from the Commission.  So what I would propose is that we will suspend this hearing and we will resume on March 11th, at which time hopefully you can satisfy me on that point.

listnum "WP List 3" \l 11161             In the interim you will have had an opportunity to file all the stuff that you were going to file with us, we can absorb it, and should there be any subsequent questions we can then pose them to you at that point in time.

listnum "WP List 3" \l 11162             I think that's about as far as we can go today.

listnum "WP List 3" \l 11163             There are also some cleanup matters regarding Mr. McCague's funding and how it is ‑‑ which we can all do that by interrogatory.

listnum "WP List 3" \l 11164             Also, yesterday I mentioned the Bruce Allen and Hribar and you said they were only giving you oral advice, there is no written advice or anything like that.  Just as a cleanup so we all know, I would like to know what the terms of reference of their retainer are and a summary of all advice so that we can make sure it had nothing to do with control in fact, which I gather is the case, it was mostly financial advice, but just basically closing that loop.

listnum "WP List 3" \l 11165             MR. COLE:  Just for the record, Mr. Chairman ‑‑

listnum "WP List 3" \l 11166             THE CHAIRPERSON:  Yes...?

listnum "WP List 3" \l 11167             MR. COLE:  ‑‑ I believe you are referring to the Barry Allen and Herb Hribar reports ‑‑

listnum "WP List 3" \l 11168             THE CHAIRPERSON:  Yes.

listnum "WP List 3" \l 11169             MR. COLE:  ‑‑ as opposed to Bruce Allen, which I think was ‑‑

listnum "WP List 3" \l 11170             THE CHAIRPERSON:  Sorry.  Absolutely.

listnum "WP List 3" \l 11171             Is that not the same Allen?  Is that a different Allen?

listnum "WP List 3" \l 11172             MR. COLE:  Two different Allens.

‑‑‑ Laughter / Rires

listnum "WP List 3" \l 11173             THE CHAIRPERSON:  All right.

listnum "WP List 3" \l 11174             Then on the one point on which you are not willing to move, Mr. Leech, just before we close this, what perturbed me when you said at the bottom of page 12:

                      "If the investor approval rights were vested solely in the board designee who may be subject to conflicting duties..."  (As read)

listnum "WP List 3" \l 11175             Isn't that the exactly the very point that we are trying to address here?

listnum "WP List 3" \l 11176             MR. LEECH:  The point we are trying to get at, Mr. Chair, is as a director the fiduciary responsibility is towards the company and we don't want to jeopardize the individual's ability to act in the best interests of the company.

listnum "WP List 3" \l 11177             However, with regard to a $4 billion investment there may be some other considerations that the shareholder has and we believe, in the models we have always used, and we think it is in accordance with governance, that those be separated so that we don't put people into an awkward situation in the eventuality that that happened.

listnum "WP List 3" \l 11178             THE CHAIRPERSON:  All right.  We will reflect on what you submitted ‑‑

listnum "WP List 3" \l 11179             MR. LEECH:  Thank you.

listnum "WP List 3" \l 11180             THE CHAIRPERSON:  ‑‑ especially on this additional independent director, the domination and the sort of second approval rights, the way we build it, whether we can live with that or not.  That's obviously going to be a major point of concern.

listnum "WP List 3" \l 11181             But I think the best thing right now for you and for us is, you have a fair appreciation of where we come from, we where you have come from, you reflect, you get the Ontario approval and we meet again on March 11th, either here or at another locale.  If this is not good, the Secretary will inform you.

listnum "WP List 3" \l 11182             Counsel, do you want to read out the list of undertakings or do you want to do that in written form?

listnum "WP List 3" \l 11183             MR. MILLINGTON:  We can do it orally, they are not that complicated.

listnum "WP List 3" \l 11184             THE CHAIRPERSON: All right.  Go ahead.

listnum "WP List 3" \l 11185             MR. MILLINGTON:  The first one is at page 25 of the transcript at paragraph 132 which deals with the closing agenda relating to the funding of and the other arrangements of the Morcague shares.

listnum "WP List 3" \l 11186             The second one is at page 89 and relates to the operating leases and the value of the operating leases and the undertaking as set out at paragraph 509.

listnum "WP List 3" \l 11187             The third one is a page 102 and it deals with the rerunning of some of the models by Mr. Melo.  The undertaking is at paragraph 600.

listnum "WP List 3" \l 11188             Then there was ‑‑ and I'm not sure where it is in the transcript ‑‑ to provide different wording or definition for "ordinary course".

listnum "WP List 3" \l 11189             THE CHAIRPERSON:  All right.  Thank you very much.

listnum "WP List 3" \l 11190             I very much appreciate your submission and those of the intervenors helping us with this relatively difficult decision which has wide‑ranging effects.

listnum "WP List 3" \l 11191             We will see you all on the 11th.  Thank you.

‑‑‑ Whereupon the hearing adjourned at 0952, to

    resume on Tuesday, March 11, 2008 / L'audience

    est ajournée à 0952, pour reprendre le mardi

    11 mars 2008






____________________      ____________________

Johanne Morin             Jean Desaulniers





Beverley Dillabough

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