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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TRANSCRIPTION DES AUDIENCES DEVANT
LE CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services /
Révision des cadres de réglementation des entreprises de
distribution de radiodiffusion et des services de
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)
April 23, 2008 Le 23 avril 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
Conseil de la radiodiffusion et des
Transcript / Transcription
Review of the regulatory frameworks for broadcasting distribution undertakings and discretionary programming services /
Révision des cadres de réglementation des entreprises de
distribution de radiodiffusion et des services de
BEFORE / DEVANT:
Konrad von Finckenstein Chairperson / Président
Michel Arpin Commissioner / Conseiller
Leonard Katz Commissioner / Conseiller
Rita Cugini Commissioner / Conseillère
Michel Morin Commissioner / Conseiller
Ronald Williams Commissioner / Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Cindy Ventura Secretary / Secretaire
Cynthia Stockley Hearing Manager /
Gérante de l'audience
Martine Vallée Director, English-Language
Pay, Specialty TV and
Social Policy / Directrice,
TV payante et spécialisée
de langue française
Annie Laflamme Director, French Language
TV Policy and Applications/
Directrice, Politiques et
demandes télévision langue
Shari Fisher Legal Counsel /
Raj Shoan 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)
April 23, 2008 Le 23 avril 2008
- iv -
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PRESENTATION BY / PRÉSENTATION PAR:
Shaw Communications Inc. 2398 /13836
Channel Zero Inc. 2597 /15115
The Fight Network 2610 /15184
High Fidelity HDTV Inc. 2622 /15241
Maple Leaf Sports & Entertainment Ltd. 2636 /15307
Canadians Concerned about Violence in 2680 /15546
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon commencing on Wednesday, April 23, 2008
at 0900 / L'audience débute le mercredi
23 avril 2008 à 0900
13830 THE CHAIRPERSON: Good morning.
13831 Madam Secretary...?
13832 LA SECRÉTAIRE : Merci, Monsieur le Président, et bonjour à tous.
13833 I would now invite Shaw Communications Inc. to make a presentation. Appearing for Shaw is Mr. Peter Bissonnette.
13834 Please introduce your colleagues, after which you will have 15 minutes for your presentation.
13835 Mr. Bissonnette...?
PRESENTATION / PRÉSENTATION
13836 MR. BISSONNETTE: Good morning, Mr. Chairman and Commissioners. My name is Peter Bissonnette. I am the President of Shaw Communications Inc.
13837 With me today are Ken Stein, our Senior Vice‑President of Corporate and Regulatory Affairs; Michael D'Avella, Senior Vice‑President, Planning; Michael Ferras, our Vice‑President of Regulatory Affairs; Cynthia Rathwell, the Vice‑President of Regulatory Affairs and Programming for Star Choice; Jean Brazeau, Vice‑President, Telecommunications Regulatory Affairs; Dean Shaikh, Director of Regulatory Affairs; and Chris Johnston, the Senior Adviser to Shaw.
13838 Shaw was very encouraged last July when reviewed the Notice of Public Hearing that initiated this proceeding. It was clear from the Notice that the Commission planned to consider a simplified and sustainable approach to achieving broadcasting policy objectives in a digital era and that the approach would be based on putting the consumer first. We were very optimistic about the proceeding because the focus of Shaw's business is on maximizing innovation, choice, value and service for our customers.
13839 As we consider how to modernize the regulatory framework for broadcast distribution, two essential points about consumers must be kept front of mind.
13840 First, they can easily leave our broadcasting system if it does not offer them the choice, value and service that they want; and second, consumers today do not purchase television service in isolation. In most cases they purchase it as a part of a broader package that can include telephone and Internet. In fact, only 6 per cent of our customers now take basic cable service alone.
13841 It is significant, given overall government policy, that over the last seven years the prices for a basket of telephony, Internet and basic cable services have actually dropped 25 per cent. At the same time, the penetration of our bundles due to their value has risen well over 70 per cent of our customers.
13842 Over 15 years ago in a structural hearing the Commission updated its regulatory framework to serve consumers, drive digital and promote effective competition in broadcast distribution, while continuing to ensure that the Broadcasting Act objectives were met. BDUs accepted the challenge.
13843 Shaw, for its part, helped to create intensely competitive broadcast distribution, Internet and telephony markets. Shaw has done all of this through risk‑taking, innovation and investment. As a result, Shaw now serves over 3.3 million customers with high quality broadcasting and broadband telecommunications services and has nearly 10,000 employees serving our customers.
13844 Since 2000 our capital expenditures have exceeded $5 billion.This year alone we will spend another $750 million, and we will do that to expand our programming offerings by increasing capacity, introducing advanced compression and modulation technologies, consolidating headends and segmenting customer nodes into smaller, more reliable serving areas.
13845 We will continue to provide award‑winning customer service through the introduction of back office systems. We will make our distribution systems even more reliable.We will develop new consumer applications and technologies that will enrich the viewing experiences, such as advanced interactive capabilities and set‑top boxes, and finally we will increase consumer access to high definition television by offering a low‑cost, high definition set‑top box.
13846 Risks and investments can take time to show a return.For example, it took seven years before Star Choice became profitable. Creating a high‑quality, high‑value service for customers got us there. Ultimately, Shaw's investment in the provision of both broadcasting and telecommunications services has contributed significantly to the realization of broadcasting policy.
13847 Our investments have provided Canadian specialty services, including independent digital niche services like Game TV, WOW TV and The Fight Network with access to millions of customers. We have offered customers in remote communities across Canada a breadth of television and other broadband services that rivals that of consumers in Vancouver and Toronto.
13848 We have helped to increase the revenue of Canadian specialty and pay services from $1.3 billion in 2000 to $2.7 billion in 2007. We have increased the available customer base for specialty services by close to one million customers. We have boosted the capacity of small cable systems, our own and those of others, through our satellite technology HITS QT. We have driven dynamic competition in the provision of DTH service, as well as increased competition between DTH and cable service. We have kept hundreds of thousands within the legal broadcasting system and used secure technology that cannot be diverted to illegal use.
13849 On the matter of fighting the black market and strengthening the broadcasting system generally, our role out of telephony and Internet service and the sale of service bundles is helping to increase basic cable penetration, particularly in smaller communities. By embracing risk and competition, Shaw contributes to the government's objectives of driving innovation, investment and fair competition to foster a strong knowledge‑based economy.
13850 MR. STEIN: We believe that this proceeding is the logical culmination of a number of CRTC and government reviews that should ultimately lead to the streamlined regulation of the broadcasting industry: specifically, the Telecommunications Policy Review Panel which suggested that broadband's full potential will not be realized in Canada with asymmetrical broadcasting and telecommunications regulatory frameworks; the CRTC's 2006 report on the impact of new technologies and the future broadcasting environment, prepared in response to a Governor in Council request, which concluded that Canadians are increasingly likely to use unregulated technologies for programming content; and then recently the government's Competition Policy Review Panel, to which Shaw recommended the development of a broadband regulatory framework that would drive business growth and productivity, support a strong knowledge‑based economy and maximize Canada's global competitiveness.
13851 As Peter said, we were very positive about this proceeding when the Commission first initiated it. We agreed with the focus on keeping our broadcasting system relevant by allowing cable and satellite to respond more flexibly to customer demands for service, innovation, quality and value.
13852 For example, the Commission expressed its desire to increase reliance on market forces. Specifically, your notice concluded, and I quote:
"It is time to move away from the current detailed regulation and to take a revitalized approach to both distribution and discretionary programming undertakings that aims at reducing regulation to the minimum essential to achieve the objectives of the Act, relying instead on market forces wherever possible."
13853 Notably, the Commission's Notice also spoke directly to the need to regulate with a view to satisfying consumers, saying that:
"In particular, the Commission seeks to recognize the increasing autonomy of audiences and consumers, providing them with the greatest possible choice of services at affordable prices."
13854 Following that Notice, the Dunbar‑Leblanc Report was released on September 12th, raising a number of important and forward‑looking issues to be addressed. But somewhere along the line we became concerned with the overall process of this hearing and, in particular, the shift in focus from distribution issues to local broadcasting issues. Let's consider what happened.
13855 Following the publication of the Dunbar‑Leblanc Report on November 5, the CRTC moved to expand the scope of the proceeding to include fee for carriage.
13856 On November 30 the Commission confirmed this expansion and added distant signal issues to the hearing.
13857 Three weeks before the hearing, on March 14, the Commission announced an assumed distribution model to guide discussion at the hearing.
13858 And, on the first day of the hearing, the Commission announced a new approach yet again, specifically the five key questions that it intended to focus upon with interveners. The Chairman indicated that all other questions are secondary or tertiary.
13859 The Commission's decision to reconsider broadcasters' demands for fee for carriage and consent to distant signal carriage is totally inappropriate. Broadcasters have been calling for both of these measures for years. You dismissed their most recent demands less than six months before this process began, and there is no new evidence or circumstances to justify any reconsideration.
13860 The profits of the large private broadcasters pushing hardest for these measures, CTV Globemedia and Canwest, actually increased following last year's dismissal of their demands. As well, they have taken steps to address fragmentation by acquiring a long list of Canada's most popular specialty services. CTV Globemedia acquired 17 new specialty services when it purchased CHUM and Canwest acquired 18 additional specialty services with its purchase of Alliance Atlantis. Together they now control 53 operating specialty services.
13861 On distant signal carriage BDUs offered to negotiate the matter and the Commission accepted that proposal in its May 2007 TV Policy Decision less than a year ago. Now new broadcaster proposals for retransmission consent are being entertained before negotiations have even had a chance to take place.
13862 The Broadcasting Act requires the CRTC to streamline regulation and focus on Canadians' needs and interests as it supervises the achievement of Canadian broadcasting policy in the competitive digital age. The Act tells us that the broadcasting system should strengthen the cultural and economic fabric of Canada and it should be readily adaptable to scientific and technological change.
13863 We firmly believe in the Broadcasting Act and its objectives.The Act makes it clear that Canada has one integrated system in which every element of the system plays a role with no one role being more important than another. As such, the diversion of this hearing to focus on the issues of local broadcasters is completely unacceptable.
13865 MR. D'AVELLA: So where do we go from here?
13866 Shaw encourages the Commission to implement a streamlined regulatory framework. Our broadcasting system is now strong enough to introduce more competition and customer choice. Cable and satellite companies need to be able to make competitive offerings that respond to consumers and are supported by new technologies.
13867 Shaw's plan for streamlining consists of three basic principles: specifically, cable and satellite services would continue to provide the current basic service and retain the flexibility to add services to basic in response to customer demands; provide a preponderance of Canadian services in each package subject to a customer's ability to add whatever services she chooses on a pick and pay basis, on digital pick and pay basis; and adhere to the existing undue preference rules.
13868 We believe that this proposal, while appropriately simple and straightforward, supports the ongoing achievement of broadcasting policy in the context of the business and technological realities of the 21st century.
13869 We would now like to address the Commission's five key questions.
13870 First, regarding the composition of the basic package, we agree that basic should include core services and the U.S. four‑plus‑one, but that beyond those BDUs should have the flexibility to determine its composition. Only 6 per cent of our customers purchase basic cable alone and we see no demand for a reduced basic service. Removing popular services from basic would be completely unacceptable to our customers.
13871 Second, we do not believe that any specialty or pay service should have guaranteed access to cable and satellite systems. Providing a preponderance of Canadian services in each package will ensure that the vast majority are carried. Introducing a measure of competition will improve the quality of programming services as access will not be taken for granted.Removing entitlements will also allow BDUs to ensure that limited capacity can be allocated to services that deliver the greatest value to our customers. Only in this way will the system remain relevant to Canadians.
13872 Let us emphasize that capacity will always be limited.While we invest constantly in expanding it, demand will always exceed supply.
13873 For example, we have recently reduced the number of channels allocated to our own cable pay‑per‑view service from 50 to about 30 because our system needs the capacity for new standard definition and high definition programming services.
13874 On the Star Choice side, pay‑per‑view channels have been reduced from 50 to 21 for the same reason.
13875 Third, we do not believe that genre exclusivity should be maintained to protect specialty services from competition with other Canadian or non‑Canadian services. The only requirement for the admission of non‑Canadian services should be that they hold non‑exclusive Canadian programming rights. This will give Canadian programmers ample opportunity to access programming while giving consumers the choice they want.
13876 In our experience, customers want Canadian services. They do not want to be denied choice and they will look beyond the broadcasting system if necessary.
13877 If BDUs provide basic service and a preponderance of Canadian services in each package, there is no need to maintain genre exclusivity and access protections for Canadian programmers.
13878 On the question of BDU access to advertising revenue for on‑demand services and local avails, in our view, permitting such access will maximize revenue within the system and facilitate more investments in capacity, technology and the development of new services. At the same time, allowing cable and satellite companies to access advertising opportunities will not harm broadcasters or programmers.
13879 The value of local avails on the U.S. services is less than 2 per cent, approximately $54 million of the total television advertising pie of $3.3 billion.
13880 With respect to advertising within VOD programming, we believe distributors and program owners should have the flexibility to develop business models that maximize new revenue opportunities.
13882 MR. BISSONNETTE: And finally, Mr. Chairman and Commissioners, our answer to the question of whether a fee for carriage should be introduced is: absolutely not.
13883 The CBC already receives $1 billion from Canadians in annual Parliamentary appropriations. It also enjoys nearly another $100 million from Canadians every year from the CTF and it still wants more. For the large private broadcasters, they have made it absolutely clear during this hearing that the demand for a fee is about only one thing: increasing their profitability.They have strongly resisted making any commitments to incremental spending on local programming or drama.
13884 It is unacceptable for these large, well‑financed and profitable conglomerates to demand a fee from consumers that will subsidize their own costs of doing business, their increasing expenditures on U.S. programming and their recent multi billion dollar acquisitions.
13885 And let's be clear, if the CRTC grants broadcasters a fee for carriage, broadcasters will keep coming back year after year asking for increases to keep fixing more alleged cracks in their businesses as they arise.
13886 Let's revisit briefly the entitlements that broadcasters currently enjoy, which include free spectrum that is a public resource. They enjoy improved signal reach and quality through the delivery on cable and DTH; over $250 million a year in Canadian programming licence fee subsidies through the CTF; federal and provincial tax credits that support Canadian productions and ultimately subsidize broadcast licence fees; freedom from Canadian programming expenditures granted as part of the 1999 TV Policy Review; controlled entry by new broadcast competitors into local television markets; exclusive access to local television advertising; income tax measures that shield broadcasters from competition from U.S. border broadcasters; simultaneous substitution of local Canadian television stations over U.S. television stations; mandatory and priority carriage on cable; and extensive specific carriage entitlements on DTH.
13887 Beyond saddling customers with new costs for broadcasting services that are free over the air, fee for carriage would lead to calls by U.S. broadcasters and trade officials for equivalent consent and payment rights.This could lead to additional annual outflows of up to $570 million to U.S. broadcasters from Canadian cable and satellite customers.
13888 This exposure, the breadth of existing protections, and the fact that CTV Globemedia and Canwest have been clear that this is really about profits are reasons that fee for carriage must be resoundingly rejected once and for all.
13889 Aside from any issue of CRTC jurisdiction over fee for carriage, it would simply be bad public policy to introduce a measure that would have significant costs for millions of Canadians, including the costs of claims by U.S. broadcasters, for the benefit of a few private companies and the CBC.A decision with this kind of impact on the system and consumers should, in our view, only be considered by Parliament.This consideration should be undertaken in consultation with the CRTC and other departments of government, including those responsible for copyright and trade policy.
13890 Local broadcasting is not what this hearing was intended to be about. While it is one of the many important elements of our broadcasting system, nothing in the Broadcasting Act identifies it as a cornerstone, nor do over the air broadcasters have a monopoly on local content.
13891 Shaw TV productions, for example, produces thousands of hours of local programming every year. This programming is considered a critical source of local news, information and entertainment in the communities that Shaw serves.
13892 In closing, this hearing was initiated to review the framework for broadcast distribution and discretionary programming services. We commend the Commission for the understanding it has exhibited in the initial Notice of Public Hearing that consumer market and technological forces create a need for more streamlined and flexible regulation of broadcast distribution and discretionary services.
13893 We hope the consumer focus of the original Notice of this proceeding can be regained. Looking to the past will leave us unprepared for the digital future. We encourage the Commission to accept the reality that continuing to provide Canadians with strong Canadian programming choices is best achieved through competition, innovation, not through protection, subsidy and entitlement.
13894 Thank you, Mr. Chairman.
13895 THE CHAIRPERSON: Thank you very much for your submission.
13896 At the outset, let me say that I am somewhat disappointed in not seeing Mr. Shaw here. Given his vociferous views on this hearing, his correspondence, et cetera, I thought he would have done us the courtesy of showing up personally.Sending you, which in his terminology I would characterize as a "B Team", I don't think adds to the process.
13897 That being said, let's deal with ‑‑ this is not meant in any way meant as disrespect to you. I very much appreciate your submission and I like the way you orderly went through the points. But since we have been subject to his criticisms, I would have appreciated the opportunity to deal with him on some of these issues one on one, or at least personally in this context.
13898 Now, let's go through. You have sort of undertaken a reading of the tea leaves in suggesting where we are going and what we are doing. Let me assure you, this hearing is exactly what we stated in the PN.When I asked five questions at the outset and said these are primary, it is because my mind works logically and from one issue to another, et cetera.
13899 It seemed to me until we make a decision on those issues, we can't deal with the other ones because they are all interconnected.That does not presuppose any outcome of those. I wanted to know the views of people on those five issues.
13900 You have heard them over the last two and a half weeks and now I have yours and let me go through those with you one by one.
13901 First of all, basic package.
13902 If I understand it, you are suggesting basically yes, there should be a basic package that should be a buy‑through. You, Commission, dictate what is the minimum that should be in there. We will then, in our commercial judgment, compose the basic package as large as we think is in the interests of consumers, consumer interest being your driving motivation.
13903 Is that correct?
13904 MR. BISSONNETTE: Absolutely. It's about consumer choice and our consumers have expressed to us through the way they buy our services what they like about our services. They see value in our services and we believe that the constitution of the basic cable package is satisfying the needs of our customers.And to change it by either skinnying it down or moving maybe higher content Canadian services but less attractive Canadian services such as news, you know, which has been suggested, would be not well accepted by our customers and it would be technically impractical as well.
13905 THE CHAIRPERSON: Okay.We have heard sort of three basic views here and I would like you to tell me why one is the one that you put forward.
13906 Another one is saying there should be a basic minimum package.It should be all Canadian, no foreign, and basically the emphasis being on affordable. There are lots of Canadians who want to have cable or satellite access, but in effect they are asked to by this package when all they can afford is this little one. That's one.
13907 Another one is saying that no, there should be a basic package but it should include at least one fourth of four‑plus‑one.And then yes, you can add on it, but a least you should offer it to give in effect consumers the choice: buy the basic or buy the extended basic. And of course you will make the extended basic as commercially attractive as possible.This is obviously your interest and you will do it in such a way.
13908 You have chosen the third option, which we just discussed.
13909 Explain to me why either one of the other two options, from your view, is not in the interest of either the system or the Canadian consumer.
13910 MR. STEIN: Well, there has been a lot of blood, sweat and tears that has gone into the definition of "basic" ever since 1959, and I would just make a few comments about it.
13911 The first is that the basic has always included the U.S. ‑‑ well, in Edmonton starting with U.S. one‑plus‑one, and that wasn't very acceptable. And then that was expanded into the U.S. four‑plus‑one.The whole basis for the basic entry point into the provision of cable services, that first contact is with the consumer is on basic. So it is important.
13912 As Peter pointed out, only 6 per cent of our subscribers only take basic, but it still remains is the fundamental access point to the system.
13913 THE CHAIRPERSON: That is in effect the enhanced basic. Right?
13914 MR. STEIN: No.
13915 THE CHAIRPERSON: The one you offer.
13916 MR. STEIN: Basic basic.The basic, not the enhanced basic; the basic. The basic which ‑‑
13917 MR. BISSONNETTE: The basic we currently offer our customers.
13918 THE CHAIRPERSON: Okay, let's make sure we know what you are talking about.
13919 MR. BISSONNETTE: Yes.
13920 THE CHAIRPERSON: What is your basic basic, as you call it? What does that include?
13921 MR. D'AVELLA: Just to provide you with one example ‑‑ we are just looking at the Calgary channel lineup ‑‑ it consists of about I think about 35 basic services, but only 6 per cent of our customers only take that package. So the vast majority of our customers take a combination of packages that would include the tiers, which are not part of the basic service ‑‑
13922 THE CHAIRPERSON: Yes, sure.
13923 MR. D'AVELLA: ‑‑ and other services.It could be telephony, it could be Internet, it could be something else.
13924 THE CHAIRPERSON: Walk me through the Calgary basic basic of 35. What is included in that?
13925 MR. BISSONNETTE: Okay. We have the local broadcaster CFCN. We have KX ‑‑ we have the four‑plus‑one services. We have our French CBC service, the local broadcaster. We have Shaw Television, Shaw TV. We have CMT, Country Music Television. We have KREM, a Spokane service. We have Access Alberta. We have the PBS from Spokane; CBC Newsworld/Voiceprint. We have Treehouse TV. We have E!, the local broadcaster. We have The Weather Network. We have YTV and TSN; KAYU, the U.S. of the four‑plus‑four.We have Score; Home and Garden Television, We have Crossroads, which is a mandated carriage service. We have CTV Newsnet; Business News Network; MuchMusic; MTV; MuchMoreMusic; Canadian Learning Television; APTN; Vision TV; CPAC; CFTM TVA Montréal; and RDI.
13926 THE CHAIRPERSON: Okay. But if I understand, it is a very small basic but it is more than what is sort of normally referred to as basic basic, which is over the air mandatory analog and Cat 1s plus 9(1)(h).
13927 You have a few in there which don't fall into that category, not many but ‑‑
13928 MR. BISSONNETTE: Yes.
13929 THE CHAIRPERSON: If I understood that correctly.
13930 MR. BISSONNETTE: Absolutely.We have what we consider to be a fulsome basic service.
13931 And I think, as we have said to the Commission in previous consultations, our view is for the foreseeable future that we will offer our customers an analog package, a compelling analog package. Even though we are fully digital in many of our systems, customers have three and four outlets, so they still have their analog television sets and we believe that the value of our services to our customers in terms of the video services they receive from us is also captured in that analog offering, which would be available in children's rooms, in dens, in workout rooms and will be still available on analog television.
13932 In fact, once we have fully converted to digital, it is still our intention to convert digital over the air signals to analog signals so our customers continue to enjoy analog reception on their TVs. We think that is a competitive advantage.
13933 The fulsomeness, if you will, of our basic cable service is something that has evolved over time and our customers have asked for that type of the basic service. We believe that they see the value in that service and it is, if you will, a cornerstone to our cable services, because from there more attractive but discretionary analog services are available to our customers.
13934 THE CHAIRPERSON: Okay. Now help me out on this. This is your basic basic.
13935 MR. BISSONNETTE: That's our basic service.
13936 THE CHAIRPERSON: It is a very modest package. It is what you consider sort of ‑‑ it is probably affordable to most Canadians.
13937 Now there are some others, and I'm sorry if I picked the example because it is the only one that comes to mind, but Rogers in Toronto I'm told the basic package is $65. $65 is not $35 obviously.
13938 I don't know what the prices are, et cetera, and I don't want to pick on Rogers, but there are others who have larger packages.
13939 What is our role here? You are offering a basic basic which seems to sort of address both consumers' choice and affordability; others do not.
13940 So what should we do? Would you just let the market decide or should we, as the CBC has suggested, mandate an absolute minimum basic that people have to offer?
13941 If they don't want to take it, that's fine. If they think the enhanced basic is better value for bucks, et cetera, let them, but at least provide this sort of outlet, so that the least well‑off in society have access to decent television by having this basic mandatory package.
13942 MR. STEIN: We wouldn't really want to comment on the Rogers' model, because we have always taken the approach of trying to offer a basic that is basic, and then offering choice beyond that.
13943 We have, in fact, been criticized more for not having a bigger basic.
13944 Essentially, I think the rule that we would suggest for the Commission is that the Broadcasting Act specifies what services or priority services should be carried. It specifies certain considerations for the Commission, in terms of coming to mandatory decisions.
13945 And we think that, beyond that, people should be able to respond in the marketplace.
13946 The marketplaces are not uniform across the country. The ability to respond in Calgary and to deal with consumers in Calgary may be very different from the situation in Toronto.
13947 It is also very different between Calgary and Lloydminster, and small communities.
13948 There is a variation there.
13949 I think that the main consideration we would say is, if consumers aren't complaining about it, then why change it?
13950 MR. BISSONNETTE: And what is the cost of change? And what is the benefit of change, as well?
13951 We don't see, frankly, Mr. Chairman, that by removing some of these services, that would really impact the cost of the services that we offer on basic, just because of some of the costs associated with providing that service.
13952 THE CHAIRPERSON: Let me put it differently, because I want to be sure that we understand.
13953 What if we said, "Fine, price it however you want, but, at the very minimum, you have to offer one package which consists of OTA, one set of four‑plus‑one, mandatory analog and Cat 1, and 91H"?
13954 Price it at whatever you want, offer whatever extended ‑‑ 1, 2, 3 ‑‑ you want, et cetera, but at least that should be there, and at the price that you, obviously, set.
13955 So that customers know, "I want nothing else but the absolute bare‑bone basis. That's what I get for this price."
13956 Would that be terribly objectionable to you?
13957 MR. BISSONNETTE: We don't think it would be appealing to our customers.
13958 We agree that there are core services that should be in basic, but we also suggest that we have the flexibility within our packaging to address what our customers are saying is meaningful to them as part of a basic, over and above the core services that are proposed by the Commission.
13959 THE CHAIRPERSON: You didn't answer my question.
13960 If I asked you to offer ‑‑
13961 MR. BISSONNETTE: That was my (b) answer.
‑‑‑ Laughter / Rires
13962 THE CHAIRPERSON: What I am trying to get at is, you say that customers are not interested.They won't buy it.
13963 That's fine. In that case, there is no harm for you in offering it on that basis.
13964 On the other hand, if there is indeed a segment of the population that is interested in that basic package, regardless of whether it is 2 percent or 10 percent, they would have access to it.
13965 And I, frankly, fail to see where the hurt is to you.
13966 MR. BISSONNETTE: It is just the practical reality of skinning down the basic. The method of doing that in an analog environment is to use traps, and in order to put traps into customers' homes ‑‑ the cost of that would be prohibitive, and the intrusion, if you will, to what customers are already enjoying ‑‑
13967 Customers actually take basic cable, primarily, for the over‑the‑airs and for the four‑plus‑one services.
13968 Our customers in Victoria love PBS. In order to make that a discretionary service, we would have to trap those customers out.
13969 THE CHAIRPERSON: I fully understand that.
13970 Let's move to 2011. We are now in an all‑digital world. What is your answer then?
13971 I know you told me that you are still going to offer analog as part of good marketing, et cetera.
13972 By the way, when you were down in the States, I understand that the Americans are going to do that for a period of three years after 2009, as well.
13973 MR. BISSONNETTE: Yes.
13974 THE CHAIRPERSON: But we both know that analog ‑‑ one of these days it is going to be out of the picture. So, since we are looking forward and we are talking prospective, I am positing that, with an environment where everything is digital, what would be your answer in that environment?
13975 MR. BISSONNETTE: Obviously, if we are fully digital, which we won't be for a long time, for the foreseeable future, but when we are fully digital and our customers are able to enjoy digital services on all of their outlets, we would have more flexibility in making that kind of package offering.
13976 We could offer a core service, and then we could, again, make any services beyond the core service a discretionary service.
13977 However, Mr. Chairman, for the foreseeable future, we will have an analog offering, and in order to make that kind of package shift, we would have to trap.
13978 MS RATHWELL: If I may, Mr. Chairman, just from the DTH perspective, Star Choice is already an all‑digital service, so the introduction of a basic basic, if you will, would still have a lot of negative impact for us, even currently. It would be disruptive to our operations. It would cause a lot of customer confusion and complaints, and the volume of interaction with our customer service people, even at that first level, let alone changes that would be necessary to our billing and provisioning systems, would be very, very costly and very disruptive.
13979 It's a highly competitive environment for us, and we are trying to focus all of the resources we have on increasing our capacity and innovating to meet different kinds of challenges.
13980 Unfortunately, for us, this wouldn't be a very useful, or efficient use of our resources.
13981 We have received no complaints in the last two years, that we know of, concerning the price of basic, for example. So we are confident that we are in tune with our customers and provide them with the value they are looking for on basic.
13982 THE CHAIRPERSON: You made a dangerous statement, you opened up Star Choice. I happen to be a Star Choice customer, so let me just probe what you said a bit.
13983 I don't know whether there is demand for it. I certainly don't want a basic basic service.I am not speaking for myself.
13984 But, surely, when I signed up with you, you told me, "Here is our basic package. We call it Bronze, and there is Silver and Gold, and you can add to it."
13985 There is wonderful flexibility, and everything is differently priced, et cetera.
13986 For the life of me, I don't understand why, when you say that it would make your life more complicated to offer in that menu, which is very complex ‑‑ there are all sorts of combinations possible ‑‑ that you put in there a combination, "Here is our basic basic," which is actually less than what you call Bronze.
13987 MS RATHWELL: I think the difficulty would be twofold.
13988 In the first instance, as I noted, it would confuse the market. They are used to getting Essentials. They think it's a good package. They seem to be responsive to the price.
13989 So, suddenly, they are presented with a choice, and that is going to drive a lot of activity at our service levels.
13990 Beyond that, in terms of systems, our current systems have sort of limited capabilities. We have a certain number of packages. It is very flexible, you are correct, and we would like to continue to try to work on that, but adding another layer of basic would just add extra complexity to the backroom systems, which we are not sure we could cope with.
13991 THE CHAIRPERSON: Okay. Let's go to the next subject, access.
13992 You, I am sure, have listened to the proceedings over the last two and a half weeks. As you say, there are an awful lot of people who are arguing for one sort of access or another to be mandatory, or retained, or to increase the present access, et cetera.
13993 Other than you, I don't think there is anybody ‑‑ there is absolutely nobody who has advocated this sort of radical ‑‑ basically doing away with mandatory access.
13994 How do you explain you being such an outlier on this?
13995 MR. STEIN: I will start, and I am sure that others will want to join in on this, in terms of access.
13996 We feel that now, when you look at the structure of the industry, you have, primarily, the specialty services ‑‑ and there are other major organizations ‑‑ CTV, Globemedia, Global Canwest, Corus, Astral, et cetera ‑‑ they have enough clout to be able to negotiate access arrangements.
13997 There have been certain corporations that we have had a lot of success with, and with certain others maybe a little less success. But, generally, we have been able to work out commercial negotiations and come to arrangements about what services we carry and what we don't carry.
13998 It is a very tricky issue. The thing is, when you put a service on, as J.R. always says to us, the hardest thing is taking a service off.
13999 If you only have ten subscribers to a service, it is difficult, so you have to make a really conscious judgment about what services are going to be on, and how that works out.
14000 But for the major players, it is a game of equals, in terms of negotiating that, looking at what is attractive and what to put on. So we don't see the necessity for access.
14001 Now, the independents do make a good point; that is, they don't have ‑‑ we think they have a lot of clout, but they may not because they don't have tie‑ins and "I'll carry this, and not carry this" type of arrangements.
14002 On the other hand, they have a number of distributors that they can go to.
14003 What we found was, for example, one service, Wild TV, goes to Bell and they get carried by Bell, and then we get our customers clamouring for it.
14004 It seems to me that the opportunities for the services are very strong. They can go to at least seven strong distributors out there ‑‑ there aren't two, there are seven out there ‑‑ MTS, SaskTel, now TELUS, Bell, Shaw, Videotron, Bragg Systems, Cogeco ‑‑ and if they get on one of those, that's a breakthrough in terms of them saying, "Okay. I can now go to Shaw and I can demonstrate that I have been getting this customer response and it's a good service."
14005 If you look at any other cultural activity, the shelf life is the most attractive thing you can go for, but you have to put forward a case for it.
14006 We are staying at The Chateau Laurier, and when we walk by the Art Gallery, it is very significant. How do artists get into the gallery? Nobody regulates that. Nobody protects them as artists. They probably should be, but they aren't.
14007 They have to get that shelf life, but they have to argue with the galleries. They have to make commercial arrangements with the galleries. They have to be able to drive themselves to do that.
14008 We feel that programmers should be able to do the same thing.
14009 The final point I would make is that Jay Switzer, in an article in The Broadcaster magazine, said that we need more failures.
14010 That is part of the problem. The system gets so clogged up with a whole bunch of services, that just aren't going anywhere, that you can't take off. Therefore, it doesn't allow for the entry of new services, because they just clog the whole system up.
14011 We feel: Look, why don't we do it this way. Why don't we just say that there is no guaranteed access, but the Commission has in place rules for undue preference, for making sure that commercial negotiations are carried on in an appropriate manner, and we don't disagree with that.
14012 We think that would work quite well, but there would be no guaranteed access.
14013 I think that André Bureau made the point ‑‑ we don't always agree with André, but he did make the point that, a lot of people, once they get on, they put their feet up and it's like, "Okay. We're fine. We don't have to do anything any more."
14014 That's the problem we see. We think that if people had to fight to keep on the system, they would do a better job, and they would, in particular, do a better job on Canadian content.
14015 THE CHAIRPERSON: I am glad that you mentioned André Bureau ‑‑
14016 MR. STEIN: Maybe I shouldn't have.
‑‑‑ Laughter / Rires
14017 THE CHAIRPERSON: We have heard from all sorts of people. We have heard from the independents, whose basic claim is "We have no clout."
14018 We have heard from Allarco, who actually has mandatory carriage, who says "We can't get on. A year later, we still don't have a deal" ‑‑ with you, among others.
14019 We have heard from Astral, one of the largest specialty owners in this country, who is saying, "Notwithstanding our clout, we have huge difficulty getting carriage."
14020 And they also make the further argument that ‑‑
14021 Essentially there are five ‑‑ IPTV is not ‑‑
14022 How many are there?
14023 Three large terrestrial and two satellite, so that's five.There are smaller terrestrials, obviously, and IPTV, but those are the big ones.
14024 If you don't get carried by one of them, that would put the viability of some of these channels, right away, into jeopardy.
14025 If you don't get carried by two, you probably don't have a market case any more.
14026 I find it somewhat difficult for you to say that.
14027 And then you say, once you have carriage, it is hard to turn them off; and in the next sentence you say, "I don't have the ability to turn somebody off, it's mandatory carriage."
14028 Frankly, I am hearing an awful lot of dissonant noise here, and I am having trouble sorting it out.
14029 I hear somebody like Astral, who has been in the business for many years, who is successful, saying that getting access is a huge issue, and then you come along and say, "Well, it's no problem. We should have a free‑reigning system. And, yes, there are five of us, but we will put people on, because if one of us carries it, the other one has to carry it."
14030 And, yet, that's not the case, you don't have identical offerings.
14031 MR. STEIN: First of all, I don't want to be confusing about this. Let me be very clear. We don't believe in access rights. Right?Let's be clear about that.
14032 Secondly, the reason that the negotiations are tough and difficult for people is that, when we do put something on, we realize that it is difficult to then take it off. So we want to make sure that, when we put it on, we have some assurances that this is going to be successful going in.
14033 The third point is that when you say there's, like, three large terrestrial distributors, well, you know, MTS and Sasktel are horrendous competitors as far as we're concerned.
14034 I mean we lost in Winnipeg 25,000 or more subscribers to MTS and in Saskatoon we have a huge battle going on with SaskTel and I'm sure Access is having the same thing in Regina.
14035 So, there is lots of opportunities for people to go to competitors and say, look, I can differentiate you. I can make ‑‑ you know, if I give you my package, you put me on your system, then you can sell against Shaw.
14036 I remember sitting down with the Premier of Manitoba saying, well, I'm recommending ‑‑ you know, I'm recommending, you know, this kind of a package because, you know, that will help you beat the other guys, whether it's Bell or whatever.
14037 So, there's lots of opportunities out there. I think that people are just presuming protection and it gives them a different mindset about going in.
14038 And I think that the more you're able to respond to consumers and the more that we're able to emphasize Canadian content as an advantage, then I think the better the system will be.
14039 MR. D'AVELLA: The only other thing we might want to add here is, you know, with respect to the two that you mention in particular, the Allarco and Astral, these are business negotiations. We got a deal done with Allarco. It's a tough deal.
14040 There are four standard definition channels they want launched and two HDs. It's a big package. It took us time to work it out, but we finally got it done.
14041 With respect to the other one, I'm not sure specifically what Astral was referring to but, you know, a lot of these guys come to us and say, carry this service and, by the way, we want digital basic carriage.
14042 And we're saying, well, wait a minute. We offer a discretionary digital service here. If you're prepared to take the chance, if you think you've got a good enough service and you think customers are going to buy it, we'll offer it the way we offer everything else. But we're not going to give you digital basic carriage, it's too expensive for us, customers don't want it in that fashion.
14043 So, these are all business negotiations. It's all part of, you know, the dynamic process of actually negotiating with these programmers who do have a certain amount of clout.
14044 THE CHAIRPERSON: Well, I understand that. I mean, I have no problem with business negotiation and each party looking out after their own.
14045 But the argument that is being presented to me and that is, No. 1, it is very unequal a negotiation, you have all the trump cards, the others have none, if they don't get on they're dead.
14046 Secondly, in terms of economic size, other than Astral, the others are really pygmies compared to the BDUs and certainly that even once getting on, on what terms and how do you get treated.
14047 Yesterday for instance we had APTN here talking here about not being treated contiguously, notwithstanding that they are mandatory carriage, get bounced up all over the schedule and are hard to find, et cetera.
14048 So, I hear a litany of complaints from everybody about the BDUs' power being totally disproportionate to that of the broadcasters, basically running the roost and pushing broadcasters around.
14049 The two things that are protecting them they say, and they are minimal protection according to them ‑‑ and that is what I wanted to hear from you ‑‑ access is one, genre is the other ‑‑ we'll come to genre in a moment, let's stay with access, so...
14050 And, as I say, you are the only one who basically says preponderance and that is all. We can carry anybody, Canadian or foreign as long as, I presume, and you say an offering of performance, most of the others say a subscription of performance, that means at least they have to buy 50 plus one.
14051 So, I would like ‑‑
14052 MR. BISSONNETTE: Mr. Chairman, we ‑‑
14053 THE CHAIRPERSON: So, I would like to understand why you feel this extreme position in your field?
14054 MR. BISSONNETTE: Well, Mr. Chairman, we have said that the packages that we will provide in a digital realm will be preponderance packages.
14055 So, these would be delivered to a customer. So, a package that is delivered to a customer will have a preponderance of Canadian services and that's why we take the position that having those kinds of preponderance rules provides programmers with an opportunity to be made ‑‑ to be put in front of our customers.
14056 And then I guess the factor that differentiates them is the quality of their programming.
14057 THE CHAIRPERSON: Okay. Let me just understand that.
14058 Because I read your submission last night again ‑‑
14059 MR. BISSONNETTE: Yes.
14060 THE CHAIRPERSON: ‑‑ the February 28th.And you are telling me, which you say in your February 28th, that it is a preponderance of offering, but you say by way you offer it, so packaging it in effect, de facto, will be a preponderance of subscriptions.
14061 MR. BISSONNETTE: Exactly. The services that customers will receive when they receive a package will be a preponderance of Canadian services.
14062 THE CHAIRPERSON: Okay.
14063 MR. D'AVELLA: Provided we don't restrict their ability to buy a single service after they've purchased the basic tier.
14064 MR. BISSONNETTE: Which still is a ‑‑
14065 THE CHAIRPERSON: Explain that to me, please.
14066 MR. BISSONNETTE: I think what Michael is saying is that the basic tier has Canadian services on it and where a customer is subscribing to our basic tier, that they also have the flexibility through the technology to order a pick‑and‑pay service in a digital realm.
14067 THE CHAIRPERSON: So, can I through pick‑and‑pay service wind up with more American channels than Canadian?
14068 MR. BISSONNETTE: No.
14069 MR. D'AVELLA: No.
14070 MR. BISSONNETTE: It would be impossible.
14071 THE CHAIRPERSON: Why?
14072 MR. STEIN: It would be impossible to ‑‑
14073 THE CHAIRPERSON: I thought I just heard that pick‑and‑pay is not subject to preponderance.
14074 MR. D'AVELLA: No, but ‑‑ I mean, the objective of pick‑and‑pay is to allow them to buy one or two channels, it's not to allow them to buy 15 channels on a pick‑and‑pay basis.
14075 Any package we create in a digital world will be preponderantly ‑‑ is that a word?
14076 MR. BISSONNETTE: Yes.
14077 MR. D'AVELLA: Canadian.So, we just can't restrict their ability to say, look, I've bought the basic package which consists primarily of Canadian services, but I do want to buy Fox News on a stand‑alone basis as one service, but overall he is predominantly Canadian.
14078 THE CHAIRPERSON: So, if as a regulator I buy into the Shaw scheme, at the end of the day there won't be a single Canadian who will have a preponderance of foreign channels over Canadian channels buying from Shaw?
14079 MR. BISSONNETTE: That's correct.
14080 MR. FERRAS: They would have to buy our basic service and then in our basic digital basic there are so many Canadian services in there and you need to have that pieces of equipment in order to get the digital and with the digital, our digital service there's already Canadians bundled in there.
14081 And we're also making the commitment that any digital package that we offer will have a preponderance of Canadian services in it.
14082 So, on top of that a Canadian can buy a pick‑and‑pay Canadian or U.S. service, but there's just not enough U.S. services to buy on that basis to ever get to that situation you're describing.
14083 THE CHAIRPERSON: Okay. This was an elaboration of what Mr. Bissonnette says, but it doesn't take away from his clearcut answer which was no.
14084 MR. BISSONNETTE: Yeah. That's exactly the answer.
14085 THE CHAIRPERSON: Okay.
14086 MR. STEIN: Can I just make a point because you raised the issue about people finding it very difficult to talk to us and not liking us and all this type of thing.
14087 But, you know, we have 3.3‑million customers who love us and they love us because we give them choice and that is something that the programmers never liked from the beginning.
14088 I mean, most of the battles and disputes we've had with the Commission are people say, oh, we want to be on this package, we want to be on that package, and we've always said no. We want our customers to have a choice.
14089 We've been having this battle with programmers ever since ‑‑ in the late 70s. And, you know, J.R. and Peter and I went, when the negative option disaster took place, we went across and met every Minister of Consumer Affairs in the provinces we served and we said, we have two conditions in terms of how we offer our services.
14090 One is, we never take anything away from anybody that they don't want taken away; and, No. 2 is, we never force them to take something they don't want. So, those are the two rules we had going in when we launched digital.
14091 And we also launched digital on the basis that we gave ‑‑ and maybe it wasn't from our point of view, even our point of view the best thing to do ‑‑ was a pick‑and‑pay environment where you could pick five services and people loved that.
14092 We didn't just complicate them with all kinds of packages, et cetera, et cetera, it was a pick.
14093 Now, the programmers didn't like it and some of them have argued at this proceeding, they compare our penetration rates for their services on Shaw as opposed to ‑‑ or Star Choice as opposed to other services.
14094 But we give consumers a choice and if the programmers don't like us because we give people a choice, that's their problem because we have 3.3‑million customers out there who like it.
14095 And the preponderance model ‑‑ just to finish ‑‑ the preponderance model actually guarantees them more access because we have to be able to offer the Canadian services.
14096 Those are the ones we really want to have are good, Canadian services.
14097 THE CHAIRPERSON: Nobody has said that Shaw doesn't treat its customers well, but the complaints are that Shaw doesn't play by the rules.
14098 MR. STEIN: J.R. ‑‑
14099 THE CHAIRPERSON: That is quite a different rule, that is quite a different issue.
14100 MR. STEIN: Yes.
14101 THE CHAIRPERSON: Whether it is justified or not, I am not commenting on it. I am just saying, all these things we have heard here in two and a half weeks, nobody says Shaw treats its customers badly, that was never the issue.
14102 The issue was, what are the rules, do they favour them?Does Shaw abide by them? Do they play it fast and loose or do they interpret them extremely?
14103 That is the issue.
14104 MR. BISSONNETTE: And we say we do follow the rules. We're in compliance on all carriage obligations. We have independent and large specialty conglomerates represented on our cable network.
14105 One of the challenges that we explained to you when we were chatting with you a couple of months ago was that we have capacity constraints and our energies are very, very much focused on expanding the capacity of our systems in order to accommodate more services.
14106 The issue with the pay television ‑‑ the Allarco application was a commercial issue. We met with them. We offered, in fact, to carry them prior to December on the basis that we would give them a launch of their standard definition channel, but they said, no, you know, we think that's an undue preference, we don't think you're being representative of our services.
14107 So, we were able to, through the course of negotiations, add four standard definition, one hi‑definition in an environment where we have constrained capacity. We've had to do things in order to continue to add services, and we will.
14108 Wild TV was one we didn't frankly think would be attractive to our customers. We had hundreds and hundreds of calls from customers wanting Wild TV, a small, little independent that thought he had no bargaining power, but his bargaining power was in the content that he offered our customers, and so he's now on.
14109 THE CHAIRPERSON: Okay. Now, you said in your access model the only thing that protects people is the undue preference rules, is what you are suggesting.
14110 As you know, there have been suggestions that we strengthen those and build in a reverse onus so that if anybody complains about access or ability to add that, in effect, the BDU has to demonstrate that they have abided by the rules, et cetera.
14111 MR. BISSONNETTE: Yes.
14112 THE CHAIRPERSON: What is your view on those?
14113 MS RATHWELL: If I may, we'd like to respond to your question and we will on the undue preference.
14114 But just a final point on access that probably bears mentioning is that, as we've emphasized throughout our submission, our focus really is customers and there's customer choice and customer value.
14115 And one of the problems that we find with the access rules is that the value proposition often slides as a result of the guaranteed access.
14116 And, so, we have a situation where, for example, several Category 1 services that have had guaranteed access and a presence on our system for seven years now are still failing to attract any significant number of subscribers which leads to the question, who is the access ultimately benefitting? Is it benefitting the Canadian broadcasting system if nobody's watching it? Is it benefitting our customers if they're not watching it?
14117 You know, we have to ask those questions and we submit, you know, with respect, that it's not beneficial for either the system or for our customers.
14118 And then with respect to your question on the reverse onus, in our experience, the current undue preference rules and the process that accompanies that is more than satisfactory. We don't recall a situation at Shaw where we haven't felt compelled to put on the record in response to an undue preference or an undue disadvantage complaint all of the information that was relevant to the dispute.
14119 These don't always enure to our benefit ultimately and, you know, sometimes we're successful and sometimes we're not.
14120 But we're not aware of any significant flaws with the current process and we'd recommend the maintenance of the current approach.
14121 THE CHAIRPERSON: Okay. So, just to terminate on access. If I understand it, if I accept the Shaw proposal, the only people who have access are OTAs and 9(1)(h)?
14122 MR. BISSONNETTE: That have guaranteed access.
14123 THE CHAIRPERSON: Yes.
14124 MR. BISSONNETTE: That's correct.
14125 THE CHAIRPERSON: Yes.
14126 MR. BISSONNETTE: Yes.
14127 MR. STEIN: Yes.
14128 MR. BISSONNETTE: The other ones ‑‑
14129 THE CHAIRPERSON: On guaranteed access means just that, or are they automatically part of the basic?
14130 MR. BISSONNETTE: Those are automatically part of the basic.
14131 MR. STEIN: 9(1)(h).
14132 MR. BISSONNETTE: Yes.
14133 THE CHAIRPERSON: And it is a contiguous basic?
14134 MR. BISSONNETTE: Did you say a contiguous basic? We're talking in terms of our basic, that those 9(1)(h) services ‑‑
14135 THE CHAIRPERSON: No, I mean that the channels are one next to the other.
14136 MR. BISSONNETTE: Oh, I see.
14137 THE CHAIRPERSON: That 9(1)(h) doesn't find himself up in the 600s while all your basic packages are ‑‑
14138 MR. BISSONNETTE: No, that ‑‑ so, that's not in our view.
14139 THE CHAIRPERSON: So, they are part of your basic package, but they may be anywhere where you think they are best positioned in terms of marketability?
14140 MR. BISSONNETTE: That's correct.
14141 THE CHAIRPERSON: Okay. Sorry, Mr. Stein, did you want to say something else?
14142 MR. FERRAS: I was just going to follow up with what Cynthia was saying.
14143 We just think that whenever we have to respond to a complaint from the industry we really have to do a full and detailed response to the Commission to make our case.
14144 So, there really is a big onus on us now to respond to a complaint and explain exactly what we've done and why we've done it and there's no short cuts.
14145 We've done a few of these, to say the least, and there really are no shortcuts. You really have to explain to the Commission in policy terms and in market terms and to the complainant what we have done.
14146 That's why we feel that the process is working.
14147 And we really think there should be an onus on the person making the complaint as well to make their case, otherwise we're going to end up with a lot of frivolous complaints with unsupported evidence that, you know, every time we make a small change are we going to be in a situation where just the letter comes into the Commission saying Shaw just moved a channel ‑‑ it might not even be their channel ‑‑ and then we have to do a huge response.
14148 We think there should be an onus on the complainant as well, but we think the process is working.
14149 THE CHAIRPERSON: I have some trouble accepting that because, as you know, programmers are very reluctant to take on BDUs and drag them before the CRTC. So I don't think you want to face an avalanche of complaints. It is certainly not the experience that we have seen so far.
14150 But on your last answer, Mr. Bissonnette, why not contiguous? It is the basic package. It is the buy‑through; you are offering it as one and yet some of the people, especially the 9(1)(h)s, are complaining bitterly because they are not being placed contiguously.
14151 MR. BISSONNETTE: In the analog world, it is not contiguous. If there was a digital, a pure digital world, we could see where contiguous would work.
14152 THE CHAIRPERSON: Educate me. Why is it difficult in the analog world?
14153 MR. D'AVELLA: In the analog world, I mean these lineups have evolved over time. Services were launched at different times. But it would be virtually impossible for us to move the tiers. The tiers are kind of fixed in place.
14154 I mean, we would have to go out and start changing traps.It is just not a practical way to run the business. In a digital world we could do that.
14155 THE CHAIRPERSON: Okay, let's go on to genre then.
14156 You have heard everything under the sun on genre here in the last two weeks from people saying the system is fine, don't touch us.Rogers is saying streamline it; keep genre but keep buckets of genre, sports, lifestyle, music, dah‑dah‑dah‑dah. Others saying the system doesn't work, strengthen it, et cetera. Some people are saying you don't need it for domestic, but you certainly need it to keep the foreigners out. Certainly some of the independents and certainly the creators have said that the genre is absolutely the essence; it is part of the Canadian system. The Act mandates diversity; it demands access for everybody. Given the small market, given the small returns, the only way that you can have a specialty channel and make it exist is if you at least know you own this genre. You still have a battle to get carriage, to get advertising, but at least nobody can come and take this genre away from you if you own this slice at least.
14157 I would like to understand why you are coming basically saying with the key argument that I have heard several times: it has been a great success. Why tinker with success? Why abolish it, et cetera, and throw it into the unknown and all you're going to have is a morphing towards the middle. Everybody is going to chase the biggest audience and essentially, you know, you are going to lose what you achieved through regulation, which is diversity.
14158 Now I appreciate, like Mr. LaRose said, everybody who appears before me makes self‑serving arguments, so I take all of this with a grain of salt but I would like to hear from one of you.
14159 MR. BISSONNETTE: So we won't be self‑serving.
‑‑‑ Laughter / Rires
14160 THE CHAIRPERSON: That would be refreshing.
14161 MR. BISSONNETTE: We will just tell you what our customers tell us.
14162 We would like to have more programming services and we would like to have the flexibility to choose which programming services we have.As a recent example, I think the Commission received our application for the USA Network and on the basis of a conflict in genre which was, in our view, minimalistic at most, that service was denied.Here is a service that is one of the more popular non‑Canadian services available to us and only conflicted on I think some strip programming with one of the Canadian ‑‑ is it Category 1 or 2?
14163 MR. STEIN: Two.
14164 MR. BISSONNETTE: A Category 2 service. Other than that, you know, we were denied access to that service and our customers feel disadvantaged because they can't get that service.
14165 I think what we are suggesting on genre exclusivity is that as long as the non‑Canadian, whether it be an American or other foreign service, doesn't have exclusive rights to that programming, that they should be able to be carried on our cable, our distribution systems.
14167 MR. STEIN: With respect to the Canadian services, we think the genre rules should be eliminated entirely. We don't agree with Rogers about five broad categories. We think that that would probably start to become more complicated in terms of making judgments.
14168 We feel that if people want to change the nature of their service, they would presumably discuss that with distributors to see exactly how that would unfold. But we feel that people who are creative and business people should be able to have the ability to say: You know what, I'm not making it as a book channel, I want to be a sports network.And if they can go out and try to find programming that fits that kind of situation, then they should be free to do that.
14169 THE CHAIRPERSON: You keep coming back to your central theme, which is customer satisfaction and what the customer wants, et cetera. The problem is, we are administering the Broadcasting Act which doesn't say do what the customer wants, customer satisfaction is your number one priority. It sets a huge number of objectives, which you are much more familiar with than I, but I usually say that there are basically three basic themes ‑‑ two basic themes. One is make sure there is Canadian content; the other is to make sure there is access to the Canadian system both by Canadians as producers or as participants or as viewers.
14170 You know, there are all sorts of other sub‑issues, very important ones, like 75 per cent independent production, and so forth.
14171 So saying that is what my customer wants is not the only answer.I mean, we have to look at everything through the prism of the objective that Parliament prescribed and how do we marry those?
14172 If I adopt your scheme of absolutely no genre protection, what guarantee do I have that this is exactly what the people predict will happen; that you will have a morphing towards the middle, you will have in effect two, three, five, what do I know, general categories where everybody is chasing the biggest and these very valuable, very appreciated small, discrete genres that we have created and that Canadians watch will no longer be viable and will disappear?
14173 MR. STEIN: Well, we agree with you on the Broadcasting Act objectives. It's a matter of the means of achieving those objectives.
14174 We feel that the best way to achieve the objectives set out in the Act is by giving Canadians what they want. We find that with kids, with children, they are the strongest viewers of Canadian content and somehow we beat it out of them by the time they become adults. I think that if we were able to have a system that put more emphasis on having Canadian content that would achieve it by meeting customers' needs, we would have that kind of diversity.
14175 I find it really interesting that the broadcasters keep arguing about local broadcasting as being the cornerstone and local broadcasting, you know, being the central and needing more support, when in fact it is the most popular part of the programming and it is protected from foreign competition, not by the fact that it is protected. I mean, I can watch the Detroit news if I want to, but who would want to?
14176 So I think there is a mindset here that we don't agree with, and we believe that a competitive system will achieve more diversity and that ‑‑
14177 MR. BISSONNETTE: And sustainable.
14178 MR. STEIN: Yes, exactly ‑‑ and that will achieve the objectives set out in the Act.
14179 There is no ‑‑ the rules are eliminated ‑‑
14180 THE CHAIRPERSON: And the risk is worth taking?
14181 MR. STEIN: Pardon?
14182 THE CHAIRPERSON: The risk is worth taking. I mean, the CAB says don't do that, you are going to destroy the Canadian system, you are never going to be able to re‑created.
14183 MR. STEIN: They didn't argue that on radio. They argued the opposite on radio.
14184 THE CHAIRPERSON: I'm talking about TV. We are talking about TV here. You heard them. They were here. You listened to them on the Internet I'm sure, so you know exactly what they said.
14185 MR. STEIN: I was rolling around.
14186 THE CHAIRPERSON: Okay. Now, there are several variations. You don't like the Rogers approach, I gather that.
14187 Canwest suggested keep the present one, but allow more or less a 10 per cent deviation. You know, have everybody stay in their genre but, you know, don't make it too tight.As long as their programming is 90 per cent in that genre, 10 per cent they can in effect transgress and have programming that belongs to another genre.
14188 I know you don't like genre, but get over that first of all for the purposes of the argument.
14189 MR. BISSONNETTE: I have to eat my peas.
‑‑‑ Laughter / Rires
14190 THE CHAIRPERSON: For the purpose of the discussion, what do you think of that suggestion?
14191 MR. BISSONNETTE: Ken...?
14192 MR. STEIN: Well, it's hard to get over the first hurdle.
14193 THE CHAIRPERSON: I said for the purpose of discussion, Mr. Stein.
14194 MR. STEIN: Well, I take it from what you are saying that you're not going to go away from genre protection.
14195 THE CHAIRPERSON: No. Please, you know, we are having a very serious discussion here and I have to look at all the options.
14196 MR. STEIN: Okay, I appreciate that.
14197 THE CHAIRPERSON: I understand what you are saying. You are saying get rid of genre. I said okay, but for argument sake if I don't accept that argument, there are other things that are being put forward and I would like to know where Shaw stands on these things.
14198 One of them is a relaxation by allowing this sort of 10 per cent deviation. That was a new idea that was put on the table and you as one of the main criticizers of the very rigid genre system now, I was wondering whether you thought this would be helpful or not or if this basically makes no difference, whatever your position is.
14199 MR. STEIN: Well, I think that if you aren't going to go ‑‑ I mean, we would prefer no genre protection, but of course any kind of variation would be better than what we now have.
14200 THE CHAIRPERSON: Okay. Astral came forward with a different thing. It essentially suggested that in each ‑‑ they made the parallel, if I understood them correctly, to Allarco. We allowed Allarco in, notwithstanding that in effect that genre was occupied, because we felt there was enough room for a third player in pay‑TV.
14201 So could we do the same principle on genre and say look at the various genres; some of them are more successful than others, and where they are and give a sort of five‑point criteria. You hold a hearing and say ‑‑ let's say for argument's sake, Home and Garden. There is really room for maybe a second player or third, et cetera, as long as that player would present a new aspect or a different aspect and in effect contribute to the diversity, and on that basis we might allow some of these genres to grow or be double occupied or triple occupied.
14202 What is your feeling on that?
14203 MR. STEIN: Well, we can always go for the option that would maximize consumer choice.
14204 MR. BISSONNETTE: Choice. You have done it with sports, essentially with Sportsnet and TSN and Score. I know they squabble amongst themselves as well; we are not the only ones they squabble with. On genre you certainly will see more of that.
14205 Again, we think that the more the merrier, and to the extent that they can sustain themselves by attracting customers that that is the best of all worlds.
14206 THE CHAIRPERSON: And what do you say to the argument that most people who defend genre protection say it is really an issue of market?
14207 Most of these genres exist foreign and if we don't have genre protection, then bringing in a foreign channel is going to be cheaper for them; selling into Canada is just icing on the cake. They make their money in their home market, et cetera, while we produce the Canadian version. Yes, we have a Canadian content, but whether Canadians are willing to pay for that extra to the extent of the cost is very much open and, in effect ‑‑ Home and Garden is a perfect example ‑‑ you will wind up with an American Home and Garden and ours will die on the vine if you take away the genre protection.
14208 MR. STEIN: Well, Home and Garden is probably a good example. I mean, I don't think that Home and Garden ‑‑
14209 THE CHAIRPERSON: I didn't want to pick on them. I just picked one that came to my mind.
14210 MR. STEIN: No, no, it is easier to deal with specific programming issues rather than broad generic terms.
14211 If you had a Home and Garden that was telling you how to grow vegetables in southern Georgia, it wouldn't be of much relevance to somebody in Alberta who is trying to shovel snow out of their driveway. So I think that most areas, a lot of areas ‑‑ we find in our surveys that Canadians want Canadian programming.It's just a matter of how you get there.
14212 You know, our surveys indicate 85, 90 per cent of people want there to be Canadian programming services, want there to be Canadian programming. We feel that Canadian programming, to the extent that it is suffering difficulties, would be better if it had to be more competitive with the U.S. programming and differentiate itself and make itself more relevant to Canadians.
14213 So I think that is the view we have in terms of this.
14214 If we're looking at genre protection, getting more flexibility within that is fine.
14215 And if the American services can't have exclusive rights to the programming that they do have, then we feel that they should be able to come in.
14216 THE CHAIRPERSON: You keep harping on this exclusive rights, but isn't that a bit of an empty right?
14217 First of all, especially when we are talking foreign, but even on domestic, is the rights also owned by somebody else? Then first of all it is a question, yes, you as a Canadian channel can get them, but you are directly competing with somebody who has the same program, et cetera, who probably gets it on better terms because he is buying it for a bigger market, et cetera, and is now competing with you.
14218 And third, how do we enforce it? How do we enforce program rights from ‑‑ do we go to each one of them and say show us that your program rights are non‑exclusive; that you have negotiated open terms?
14219 A lot of these folks who hold the program rights are not part of our jurisdiction.
14220 MR. STEIN: Well, I think the first problem we have is that if you look at the current situation ‑‑ and we were quite concerned about, as you know, the rejection of the USA Network.
14221 What was fascinating to us is that when people look at the Broadcasting Act, the reason that we were rejected was because we overlapped on series that were American. So we say okay, that is strange. So we were rejected on that basis for, you know, a minimum overlap, but also an overlap not on anything other than the U.S. programming that they had.
14222 So our view is that we would prefer there to be ‑‑ we understand the issue if a service is trying to come in and it says, you know ‑‑ I don't want to use specific names, but it comes in but comes and says to the programmer in Canada: We are not going to allow you to have the rights because we are going to come in on our own.
14223 So we don't think that would be appropriate.
14224 But let's also look at the reality of it. ESPN is not going to come into Canada. ESPN owns a good chunk of TSN. You know, there are similarities in the programming that are apparent to anybody who goes to the U.S. and comes back to Canada.
14225 Canadians aren't interested in basketball to the same extent.We want to make sure there is lots of hockey ‑‑ unfortunately, the Flames got knocked out.
14226 So when it comes down to it, I think that the reaction of "oh, the Americans will come in and they will take over the whole system" is really an over‑reaction. We are talking about just having the ability to pick and bring in specific ones, making sure that they are appropriate within the Canadian system.
14227 And the preponderance rule will ensure that the system remains Canadian.
14228 THE CHAIRPERSON: As you know, this issue really came to the fore with the whole issue of RAI, et cetera. The net result of our decision now is that you can get RAI here; you can also get Italian football on Telelatino, and it's non‑exclusive. But I bet you anything what Telelatino pays is a different price than what RAI pays in Italy.
14229 Therefore, you know, giving them this rate of non‑exclusivity may very well be a very empty right. It just does not commercially make much sense.
14230 MR. BISSONNETTE: Any comment?
14231 MR. D'AVELLA: Well, in that particular instance I mean you are addressing ‑‑
14232 THE CHAIRPERSON: I'm just using this as an example of what was the issue. I'm not trying to revisit that decision.
14233 MR. D'AVELLA: I mean, Corus will come up and talk about the success of Telelatino. I think Telelatino has been able to do very well despite the entry of RAI. RAI is a discretionary service. I mean we offer it in some markets where there are, you know, enough Italians to kind of justify the service.
14234 But I don't think it has fundamentally changed their economic model or changed anything from their perspective.
14235 Just to add to Ken's point, I mean clearly you're not going to see an ESPN in this country because they are a significant owner of TSN.But even things like first‑run movies, I mean the relationships between companies like HBO and the Canadian pay licensees are so strong, are so embedded, they have developed economic models over the past 20 years where HBO probably wouldn't want to change that.
14236 So we are really talking about services that are really on the margin, on the fringe, services like USA which do try to be distinctive.
14237 And there will always be a variety of venues for strip programming, for movies. I think I have seen The Matrix on APTN, on American Movie Classics, on Lonestar ‑‑ I'm not sure how that is a western movie, but it was on Lonestar.I have seen it on Action. So everyone is buying movies.
14238 We are buying movies in VOD. We are buying them in different windows. We are buying old movies; we are buying new movies.
14239 It is really about providing customers with here is a variety of ways to get this programming. How do you want it? We can provide it to you in this particular format, in another format. We don't see any harm to the Canadians as a result of it.
14240 THE CHAIRPERSON: Our whole system of access and genre is really meant to leave our Canadian content the way it was and contributions to Canadian programming, et cetera.
14241 If we adopted the Shaw approach, isn't the net result that every programmer will say what is the minimum that I can do to keep my Canadian audience and, on the other hand, increase my returns to my shareholders?
14242 I no longer have genre protection. I don't have access. I have to compete with these guys. Does it make sense to have 50 per cent Canadian content, and so on, or can I live at 35 or can I live at 25, et cetera?
14243 Isn't that inevitably the net result of your ‑‑ that the contributions to the Canadian system, whatever form they are, are going to be driven down?
14244 MR. STEIN: We don't agree with that, and I think that it's ‑‑ it's a model.We can use different models of policy approaches, but we think that the model of protectionism is a bad policy approach and it doesn't work in many sectors.
14245 We, in our western Canadian roots, use the transportation as an example. I mean, we heard stories ten years ago about the Canadian railroad system was collapsing and we had to, you know, continue to protect it and subsidize it, et cetera.And we transformed it by privatizing it and going to a deregulated competitive approach.
14246 Now, people say well, culture is not like transportation.Well, culture, you look at the strong Canadian cultural contributions to the world and they aren't protected, whether it is artists, Jeff Wall from Vancouver, writers, authors, Margaret Atwood, they aren't protected and they do extremely well around the world.
14247 Musicians. I subscribe to Rolling Stone. Every week there is a lot more in Rolling Stone about Canadian musicians than there is in Variety about Canadian television.
14248 So I sit there and I look at it and I say, you know, maybe the model is wrong. Maybe going to a model which is more competitive, which encourages people to be ‑‑ you know, look at films, "Little Miss Sunshine", $10.5 million, made a huge amount of money; "My Big Fat Greek Wedding", whatever. Lots of examples that are outside the Hollywood ambit.
14249 I think we get too focused on the fact that, you know, we are a small country and we can't compete. We have said this time and time again, that we don't agree with that. We think that there would be lots of room for dealing with the American situation, which we recognize is strong, by trying to develop a more competitive situation here in Canada.
14250 We believe that eliminating the access rules and not having guaranteed access, but sticking with preponderance, you know, we think that would be a better approach and would help ‑‑ would be stronger in terms of developing support for the objectives laid out in the Act.
14251 THE CHAIRPERSON: You are dealing with a former free trader, a former Commissioner of Competition. I am not used to being called protectionist and I don't have a protectionist viewpoint.
14252 MR. STEIN: I wasn't calling you protectionist, but certainly the CAB is protectionist. You are being asked to protect.
14253 THE CHAIRPERSON: But I am also aware that the requirements under the Broadcasting Act are not market‑driven. They are cultural, they are social, and a whole bunch of them which you cannot achieve by free market alone. That is why I am on record as saying we will always have regulation in the broadcasting.The question is let's make sure that it is smart, it is targeted to achieve the objectives without interfering more than is necessary with free market.
14254 But to suggest that culture is like transportation and both of them will benefit if you just let the viewers ‑‑ you cannot demonstrate to me in any convincing way that some of the objectives of the Broadcasting Act can be achieved by pure market forces alone.Surely you are not saying that.
14255 MR. STEIN: By free market forces alone?
14256 THE CHAIRPERSON: Yes.
14257 MR. STEIN: No, I'm not saying it's strictly by free market forces, but we are saying that the balance has gone way, way, way over to the one side of it, which is the protectionist side of it, and that you need to have certain rules in place.
14258 You know, getting back to ‑‑
14259 THE CHAIRPERSON: Okay, but what are the rules then? Preponderance, period?
14260 MR. STEIN: Yes.Period, yes. Preponderance and ‑‑ yes, and having a basic cable service, and preponderance would be exactly the way to go.
14261 THE CHAIRPERSON: Okay.
14262 MR. BISSONNETTE: It's very simple.
14263 THE CHAIRPERSON: Yes. But, I mean, my question was: If I buy your model, do I not automatically drive down the contributions to Canadian content, to Canadian distribution, et cetera, because the market forces ‑‑ I mean, if you want to talk market forces, you have the reality that this is a smaller market. You earn your bucks on a smaller base than you do in the States, et cetera. So there are different economies of scale here.You have to take this into account.
14264 You are not going to ‑‑ everybody is going to try to get the biggest market possible and you are not going to do that by being differentiated in having small separate niches as we have right now.You are going to have a morphing towards the middle.
14265 We can argue whether the morphing will be towards five channels, 10 or 12, but to suggest it is going to stay the way it is right now with the number of specialty channels we have, I think it is basically illusory.
14266 MR. STEIN: Let me go to another example, is going to the Internet and looking at what ‑‑ I mean, it's interesting, we met with one group of government officials who said to us you know ‑‑ we said we are concerned about this kind of protectionism ‑‑ not of your view, Mr. Chairman, but of others who have expressed ‑‑ and they said why are you worried about it?The CRTC is irrelevant to anybody under 30.
14267 Now, what you are saying is that ‑‑ so does that mean that all those people who are under 30 are less Canadian? In fact, they are more Canadian. They watch more Canadian TV.
14268 You know, as part of the Shaw Rocket Fund board, we meet with people who are involved in youth and youth studies, et cetera, and they say the number one most important thing to kids is their cell phone and most important application is message texting. The next most important application is the Internet and YouTube and Facebook and all those kinds of things. And then number three, and probably a distant number three, is television.They love it, they like it, but it is certainly number three.
14269 So what we feel is that if you want to build cultural industries, you have to be in to respond to those kinds of expressions and need that are out there by Canadians. And as that generation grows up and also has more influence over the older generation, then we are going to have to make sure that we have an industry that is able to satisfy that. And that is what Canadians want. That's what we want.
14270 THE CHAIRPERSON: That's what we want. We are right on the same wavelength. I'm concerned about the media. You know we are going to have a big hearing on this issue. I'm concerned about being relevant. I am concerned about having something that Canadians want. There is no question about it.
14271 The question is you are going from one extreme to the next.Part of this hearing is to determine, as we said at the outset, what we can take off you basically saying, unless I misread you, is let her rip. The only protection is going to be consumer preferences and preponderance. And I say fine, if I buy that I still ‑‑ you tell me what assurance or what likelihood is there that the broadcasters' contribution to hold Canadian content will stay where they are.
14272 I guess you are telling me you hope that it will be in the self‑interest to do that, but that's about the only assurance you can give me
14273 MR. STEIN: Well, right now I would say let's judge it by the experience we are having. If you look at the analog services, the Cat 1s and the Cat 2s, the services that have to be the most responsive to the marketplace, to dealing with distributors and consumers, are the Category 2s.
14274 So what we are suggesting ‑‑ you know, you are saying we are suggesting a total abandonment of the rules. We are not. We are saying as we move into a digital environment, everybody becomes a Category 2. Right?Fine.
14275 THE CHAIRPERSON: Yes.
14276 MR. STEIN: And what's wrong with that? They are great services. They are doing well and they will continue to do well, and they will meet the expectations.
14277 Again, Canadians want Canadian services.
14278 THE CHAIRPERSON: Okay. As you know, Cat 2s have a lower Canadian content and they have no CPE, so you are making exactly my point of all coming down to the Cat 2 level.
14279 MR. STEIN: Well, to us it's not a question of coming down. It may well be a question of coming up as well.
14280 You know, we just firmly believe that in competitive markets we have to respond to the demands of our customers and having content providers also in this world that we are facing over the next number of years have to respond as well to that.
14281 It's interesting, when you did your Technology Review there was one common view that everybody expressed and that is that the world is changing. Right?
14282 But then there was two very distinctly different approaches to dealing with that change. There was a whole group of people who said oh, my goodness, the world is changing.We have to come in off all these regulations and all these protections and all these subsidies to ensure that the world we have is sustainable through that time period, and a whole group of other people, of which we were one, who said no, if you are going to deal with this new world, you have to mirror it. You have to become deeply immersed in it and involved in it and have to be able to respond that way.
14283 So that is the view that we have: that by being able to respond to that kind of environment ‑‑ I mean, I see more in the programming side from looking at it from the perspective of the Rocket Fund, and it is amazing what Canadians are able to do on that side. It's amazing the kind of reputation we have around the world for what Canadian creative people are able to do with children's programming and link it into the web, et cetera. And unleashing that to me would be the most important thing we could do.
14284 My view is that the current system does not allow that to happen.
14285 In fact, children's programming is a perfect demonstration because the amount of money being invested in Canadian programming by broadcasters and others has absolutely declined over the last number of years.
14286 THE CHAIRPERSON: Okay, I think we have beaten this subject to death.
14287 By the way, don't read anything into my question. All I'm doing is testing the ideas that are put forward against yours, which are different. Where we come out is to be decided by us and the entire Commission.
14288 So as you have done until now, as I say, don't read the tea leaves. I am giving everybody a hard time, asking everybody the same question from the other side.
14289 Let's go to fee for carriage.
14290 Your position is very clear. You are against it. Essentially your basic argument is they don't need it. Both the two largest services in Canada have just made massive acquisition and they clearly, you know ‑‑ if they were suffering financially, they wouldn't have been able to buy either Alliance Atlantis or CHUM.
14291 Second, I mean I heard their submissions; you heard them, as everybody, it was somewhat self‑serving, you know. I don't for one second believe that they went to their bankers and said we have this flat over the air business, it is not going, it is not going anywhere, but please finance us for $1 million to buy all these specialty channels.Yes, there will be some synergies, but they are minor.
14292 That is how it was presented to us. Clearly that is not the case. It was a sober business decision and they saw great potential in cross‑marketing, in joining their OTA with the specialty channels to convince their bankers and their investors that this was a good deal.
14293 We approved them and I wish them all the success.
14294 With that being said, they are in the OTA business and the OTA business is our prime vehicle for local content. All the figures show it is flat. It has now been flat for two years, and I don't see any indication that it is going to grow.
14295 You say well yes, but this is corporate family and they can cross‑subsidize, et cetera. We both know cross‑subsidization is economically irrational behaviour. If you have a business and you have several divisions, one of them works and one of them doesn't work, one is fruitful, et cetera, yes, you will maintain them but you will try to cut down the costs and you are going to try to turn the unprofitable one profitable rather than support it with the proceeds from the other.
14296 If you do that, what is going to suffer is the local content, yet that is one of our key considerations. This is our prime vehicle for local content.
14297 You in your submission this morning say they have violently rejected any tying of the fee for carriage to local content. You have heard something differently than we. I heard sort of a lukewarm response, but I didn't hear violent response. But be that as it may, I thought we made it quite clear that we said if there is a fee for carriage, we are asking the question: Should there be one? What should be the amount and what should be the obligations?
14298 It is not sort of an ongoing free operating subsidy for OTA.That is not anybody's suggestion.
14299 So in that context, is there any form of fee for carriage that to you would be acceptable if it is tied, let's say, to incrementality or specifically to local content or if it is time‑limited; you say yes, this is the cornerstone of part of our local content, there is no question, but we want to make sure that this is really ‑‑ that you are also taking some steps to fix it, et cetera.
14300 So rather than taking the position that you are saying a flat no, are there variations on the theme?
14301 MR. BISSONNETTE: Absolutely not. I mean, I think we have given you 50 reasons why fee for carriage shouldn't be considered by the Commission.
14302 In terms of the enterprise, you are absolutely correct that the enterprise comprises of specialty services and over the air broadcasters and they have it within their purview to make decisions to bolster the over the air side of the business if they choose to. They are now in a better position to do that by virtue of the synergies that they are going to benefit from from the acquisition of those specialty services.
14303 They are now a much stronger conglomerate, with much more moving parts, with much more creative groups that they can call upon.There is nobody restricting them in terms of making their over the air broadcast services more attractive than themselves. If they chose to do more local programming, it is absolutely within their discretion to do so.
14304 So we think that there is not one iota of an argument that there should be a fee for carriage. You know, they have discretion to change their advertising rates if they want.They can be more appealing to advertising. They can do things within their own operating structure in terms of becoming more efficient.We know that that is one of the drives that they have.
14305 But we don't see one iota of an argument that they should be passing on their costs to our customers.
14306 THE CHAIRPERSON: What would you do without OTA?
14307 MR. BISSONNETTE: Well, you know it's ‑‑
14308 THE CHAIRPERSON: Isn't OTA something that Canadians really do want to watch? It's one of the prime things. You put it in your basic package. You would put it in there even if we didn't force you to.
14309 I mean, when I say it is a cornerstone of the system, let them do what they want.
14310 MR. BISSONNETTE: Well, we are not saying that. We say that they have a role within the broadcasting system. They have a responsibility within the broadcasting system to program with each of their "B" contour locations and they do a very, very good job of that. We just don't buy the argument that they for some reason have overnight become unprofitable based on their behaviour.
14311 They have priority carriage. We have given them all of the ‑‑ you know, we work very closely with broadcasters. We actually work very collaboratively with them in our local regions where they have ‑‑ you know, where in the past they have had technical issues and we have worked together with them. We recognize their importance. But we also recognize they are just one small portion of what we provide to our customers.
14312 They have control over the viability, economic viability of those over the air transmitters.
14313 MR. STEIN: In terms of the over the air, I mean it is interesting in the Bell submission they filed evidence in terms of the viewing of Canadian broadcasters and pay and specialty, and the most fascinating probably about that is the success of the combination of broadcasting and now they own those services.
14314 So we are not saying the over the air is not important.It's just that with that kind of a combination, the corporations are strengthened. That was the whole basis of their submissions when they appeared before you, is that they are strengthened.
14315 So their ability as over the air services to meet the responsibilities is still there.
14316 So we think that to go to Canadians and say to them well, you know, the world has changed and you are now going to have to pay for it ‑‑ and, by the way, we are not asking the people who have over the air receivers and aren't using cable to do this; we are asking just cable and satellite subscribers to pay for this.
14317 So it seems to us to be a bit ironic, if not contradictory, to be able to tax cable and satellite subscribers to fund over the air services.
14318 THE CHAIRPERSON: Oh, come on, 90 per cent of Canadians, or somewhere in that neighbourhood, receive their over the air via cable or satellite. So I mean that is a little bit of a facetious argument to say you are asking the cable subscribers. They are the very ones who receive the service.
14319 MR. STEIN: Well, we don't ‑‑ our penetration rates are 50 per cent; they are not 90 per cent.
14320 THE CHAIRPERSON: Not yours, but ‑‑
14321 MR. BISSONNETTE: In terms of the overall conglomerate of BDUs, you are saying 90 per cent get it through that; that's correct.
14322 MR. STEIN: Well, if you have a black‑market dish, you don't have to pay.
14323 I think the thing is that to go to people, to go to 9 million, 10 million Canadian households, and say to them that you are going to pay $5‑$10 a month to support three or four companies, this seems to us to be not a good policy and that that is something that we think is inappropriate.
14324 THE CHAIRPERSON: Okay. But three or four companies, you say. First of all, we talk about a local broadcaster and then more than three, but there are three big ones, I agree with you.
14325 But secondly, what we talked about is it being incremental and it going to the actual local station, not going to the network, right, so that the fee for carriage would actually ‑‑ so that is one of the questions my colleague Michel Arpin posed: Shouldn't it go to that local station in Moose Jaw who are putting on the content for Moose Jaw? They should get the money so that it is incremental over what they get presently from ‑‑ let's take CTV or whatever ‑‑ from their parent.
14326 MR. STEIN: They are already getting money through Star Choice and Bell. I mean at the last hearing the small broadcasters from those areas said that they had a home run. So their PBITs have improved significantly.
14327 So I don't think it is appropriate to use those small systems as an example.
14328 But to say to the people of Toronto that you have to pay, or the people in Calgary, that you have to pay extra because CFCN requires that money to do their local programming, we just don't think that is going to fly with Canadians.
14329 THE CHAIRPERSON: I am being reminded by my colleagues of the call of nature here.
14330 I am not finished with you, but let's take a 10‑minute break.
‑‑‑ Upon recessing at 1042 / Suspension à 1042
‑‑‑ Upon resuming at 1102 / Reprise à 1102
14331 THE CHAIRPERSON: We were on fee for carriage, your favourite subject.
14332 As I mentioned, tying it to local content, incremental, and putting a period of time on it ‑‑ let's take a period, five or seven years or something, and then to revisit or review.
14333 That does not make the concept any more acceptable to you, I gather. You still think it is, basically, wrong.
14334 MR. BISSONNETTE: Mr. Chairman, you have ascribed a kind of cornerstone positioning for local broadcasters, and I think that Alex Park, who is our Vice‑President of Programming, would be rolling his eyes right now, because in Calgary alone we produce over 8,000 hours of local programming, local relevant programming, that is intended to be attractive and meaningful to those in each of the communities that we serve, and we have no exclusivity, if you will, on local programming.
14335 The broadcasters, as an example, have created certain voids within local programming that we are quite happy to fulfil, because our customers really appreciate what we do in terms of animating the local communities that we serve.
14336 As an example, last year and the year before, and this year, we had the blessing of being able to carry Western Hockey League hockey games, which are taking place right in our communities, whether it is in Saskatchewan, Saskatoon, or Vancouver, or Calgary, or Prince George, and our customers really appreciate the fact that we have taken the time and made the effort to make those games available to them.
14337 The broadcasters could easily do that. Instead of spending money buying U.S. programming, they could do more, and focus more on the local communities with those resources.They could do, we are sure, a tremendously good job.
14338 We do that good job. So, in terms of a being a cornerstone, local, over‑the‑air provider, we are a cornerstone cable‑casting local provider of community programming, and it is greatly appreciated by our customers.
14339 There are more than just the over‑the‑airs that are doing that kind of programming.
14340 But they have a choice to make, and they made the choice to spend more of their dollars on acquiring U.S. programming, in competition with each other, driving up the prices of that programming, as opposed to doing more local programming.
14341 THE CHAIRPERSON: That kind of goes back to what I said, that the OTA is the cornerstone of the system, and that has been so historically.
14342 We started off with having OTA ‑‑ we imposed upon them obligations on Canadian content, on exhibition, prime time, et cetera.At one point in time they had CPE, et cetera.
14343 Then we developed the whole specialty system, and then along came the BDUs, of course, which added great, enhanced distribution, et cetera.
14344 This all started with the OTAs, so that's why I talk about the OTA as being the cornerstone.
14345 And, yes, you are saying that they are spending far more money than they should on foreign programming, and that is really what their problem is, rather than ‑‑
14346 That may be right.
14347 And, of course, they say: That's how we get the viewers, who then stay for the Canadian programming.
14348 I am not going to get into that, but what I clearly see is that the local programming, which is not exclusive, you are absolutely right ‑‑ their community channels vary ‑‑ their specialty channels ‑‑ but, by and large, local programming is delivered by them, and it has been progressively reduced, cut back, et cetera, yet it is a very key part of the system.
14349 One way to address this issue, which they have come forward with, is fee for carriage.
14350 In fact, I went one step further and said, "Well, if that's how you justify it, then let's tie you to it. I want to see some bang for the buck."
14351 Rogers was here and said: Why are they getting fee for carriage? They will get exactly the same after the fee as before.
14352 I said: Well, that can easily be changed. If you specifically tie it, you provide an incremental, et cetera. If you provide it, it goes to the local ‑‑
14353 By the way, as a parenthesis, Rogers, I owe you an apology.Your basic package is not 65 in Toronto, but 38. CBC misrepresented you, so my apologies, panel.
‑‑‑ Laughter / Rires
14354 THE CHAIRPERSON: Back to OTA.
14355 MR. BISSONNETTE: I know that you are being provocative ‑‑
14356 THE CHAIRPERSON: No, I am trying to say, "Here, look ‑‑ "
14357 MR. BISSONNETTE: ‑‑ but what evidence have they given us ‑‑ what evidence have they shown you that they have the need?
14358 We haven't seen that.
14359 And in terms of the purpose of fee for carriage, what did they tell you with their own voices? They told you that it is, in fact, to increase their profitability.
14360 And even cajoling them, as you did, to try to get some commitment on increasing their Canadian content, they resisted that by saying:No, this is just to fix the cracks .
14361 They haven't shown any evidence that they have the need.They have the resources and they have the wherewithal to do more local programming, if they choose to do it, and they have chosen not to do it. They have said: We just need this to improve our PBIT.
14362 THE CHAIRPERSON: I thought it was CBC who said that it was to fix the cracks, but there have been so many representatives ‑‑
14363 MR. BISSONNETTE: There have been too many cracks here, haven't there?
‑‑‑ Laughter / Rires
14364 THE CHAIRPERSON: Let's go to the related subject of distant signal. We spent a lot of time on it here. First of all, Rogers was saying: We are not the problem, it's the DTH.
14365 And the DTH was saying: No, we're not the problem. We pay, too ‑‑ et cetera.
14366 Then, when CTV and Canwest were here, they said: Yes, well, they pay something, but this isn't the value for it, and this is our signal ‑‑ the position of CTV basically being that sim‑sub is the second best anyway.
14367 We pay for the Canadian rights, so we should have exclusivity.If you want to protect us, that's fine, but then make it ‑‑
14368 And when you do time delay, or station shifting, we lose the value of those programs that we paid for. So the only way to do it ‑‑ and it's very simple ‑‑ give us the right to ‑‑ that they have to negotiate consent from us for a distant signal.
14369 What do you say to that?
14370 You say in your submission that you offered to renegotiate, which, by the way, was news to me. But, even so, obviously those negotiations have not been taking place.
14371 MR. BISSONNETTE: Yes. We are able, willing and ready to negotiate, as we committed at the last hearing, and that hasn't taken place. Essentially, they have no interest in talking about that.
14372 We have a package of distant signals, and we have it because, once again, our customers have really made it clear to us that they enjoy having those distant signals.
14373 I don't think there is any lack of recognition by the broadcasters that that is the case. In fact, when we were constituting our packages of distant signals, they were very clear that they wanted to be included in that package, because they saw value in it.
14374 So it's not just a take, if you will, which is being characterized as us just taking these signals and willy‑nilly putting them somewhere, they wanted to be included in those distant signals.
14375 And to the extent that they can monetize the benefit of those, again, we think that they have the full capability to monetize those distant signals.
14376 And to the extent that you would give them an easier path, or a path of least resistance to getting money for those, that is the approach they are going to take.
14377 But sitting down and collaboratively talking about what is the benefit to our customers, what is the value to our company to have those services, and how do we do that, we haven't had those discussions.
14378 THE CHAIRPERSON: From that, I take it that if we accede to Canwest and CTV and say yes, they cannot retransmit without your consent, so then negotiations will ensue, you will negotiate and you will cut a deal, because customers want it.
14379 I have heard for the last two and a half hours that the customer is king. Shaw wants to please its customers. So, if the customers want time shifting, you will offer it. In order to do that, you have to cut a deal with CTV.
14380 So what is the problem with us acceding to Canwest ‑‑
14381 MR. BISSONNETTE: You are characterizing them as apostles, that they are very enlightened, and that they are easy to deal with, and they are not.
14382 THE CHAIRPERSON: That's your word, it's not mine.
14383 MR. BISSONNETTE: The reality is, it's not that simple.
14384 We have commercial negotiations with broadcasters all the time.
14385 We would love, for instance, to move TSN to basic. They don't want that. We say that you get more eyeballs if you are on basic. They say: No, the rates of those services are greatly differentiated. The economics don't make any sense to us.
14386 It is not as simple as just saying: They will give you your consent because they are enlightened. It doesn't work that way.
14387 THE CHAIRPERSON: Let's stay with this. Why would CTV not ‑‑
14388 I mean, you say that there is customer demand; they say that there is a value in it, which you don't recover right now.
14389 Now, obviously, you would have to strike a deal, but why would it be not in their interest to negotiate with you?
14390 MR. STEIN: The background on the distant signals ‑‑
14391 Let me start on the satellite side first, because there were a number of negotiations with respect to that.
14392 Distant signals have been part of a satellite subscriber's package for years, because of Cancom and picking up Detroit signals and making them available.
14393 When there were first proposals to come to a satellite system in Canada, the government rejected the Commission's approach, which was to be a controlled, regulated kind of approach, and said: No, we want a dynamically competitive one.
14394 So we went to a dynamically competitive model, which also has to be competitive with cable, and we tried to balance it, and I think we did succeed in balancing it by saying: Okay, we are going to carry a lot of different signals across the country, but in order to be able to do that, we have to make them available to our customers across the country.
14395 Because they have advocated a local kind of approach, it just won't work. We don't have the capacity. You couldn't have a competitive market for satellite in Canada if you forced that on the satellite business in this country. Geography, et cetera, wouldn't allow you to do that.
14396 The signals are up there, and we carry them. We probably have more up there than we actually want, but that was part of the negotiation.
14397 So they are up there. Are we willing to compensate for that? On cable we do.
14398 On the satellite side ‑‑ and Cynthia can go into this more ‑‑ we already pay the uplink. We pay to put them up there. We pay to deliver them into their local market. We pay into the Small Market Fund at the CAB, as well.
14399 We also pay for the transponders.
14400 So there are a number of costs to the satellite side in providing those signals, and the benefit of that is that we are able to offer them to our customers.
14401 We are able to do two things. We are able to offer them in the local market, and we are able to offer time shifting to our customers.
14402 If we went to CTV and they said, "No, we don't want you to carry that any more," then we would say, "Okay. Does that mean we don't have to carry it into your local market?"
14403 It would be very difficult for us to have to carry it, put it on the satellite, and then not be able to deliver it to people.
14404 So that's where it is.
14405 And then, when you get into the negotiation, the retransmission consent becomes difficult.
14406 We feel that if we are required to carry the service, then we shouldn't require their consent to be able to offer that into another market, but we are willing to sit down and negotiate a commercial arrangement.
14407 THE CHAIRPERSON: I'm sorry, I don't follow at all. I don't see why the negotiations between you and CTV regarding distant signals would be any more problematic than any other negotiations between you and the broadcaster.
14408 They are problematic. They are difficult. I am sure that both sides struggle with them, et cetera, but why is the distant signal a special case? I don't follow.
14409 MR. STEIN: We are willing to negotiate; it's the consent that is the issue.
14410 THE CHAIRPERSON: But you have to do that now. You do that when you negotiate with, for instance, a Cat 2. Right?
14411 You can't distribute them unless they consent.
14412 On the other hand, they want to be carried by you, so there is an obvious meeting of interests somewhere in the middle.
14413 It's the same here. If CTV's distant signals are carried by you, it is more money for them.They can monetize. They can charge more for their advertising. It's a cost to you. You have to come together, but why are these negotiations in any way different from any other negotiations between broadcasters and BDUs?
14414 MR. STEIN: Because the consent ‑‑ they still require us to carry it.
14415 So the consent isn't to carry it, the consent is to carry it into a different market.
14416 THE CHAIRPERSON: The distant signal you wouldn't have to carry.
14417 MR. STEIN: No, but I have to put it up there.
14418 THE CHAIRPERSON: Why?
14419 MR. STEIN: Because you people ‑‑ because I am told that I have to.
14420 THE CHAIRPERSON: On cable?
14421 MR. STEIN: No, on Star Choice.
14422 THE CHAIRPERSON: I am talking about cable.
14423 What requirement do you have to put on, in Toronto, a distant signal from Halifax? None.
14424 MR. D'AVELLA: On cable, they are already compensated. There is no issue on cable, they are getting paid.
14425 The issue in satellite is, we haven't even begun negotiations. They don't want to talk about it because they are waiting for the consent hammer.
14426 If they get the consent hammer, then it shifts to them.They have the ability to say: You are not going to carry any of them.
14427 That is contrary to what they actually want. They want them all carried.
14428 THE CHAIRPERSON: And you want them.
14429 You want it because of the customers, and they want it because they will make more money.
14430 I still don't see how ‑‑
14431 MR. D'AVELLA: That's our point. Let's have a discussion. Let's have a negotiation.
14432 If the negotiation doesn't work, then the Commission could take another step.
14433 MR. STEIN: I think it is important to distinguish between the DTH and the cable situation.
14434 With the DTH situation, it's a requirement that the signals be up there, and if the signals are going to be up there, and we aren't able to time shift those signals, the whole economics of the competitive marketplace in Canada will fall apart.
14435 THE CHAIRPERSON: Okay. Let's assume, for argument's sake, that I will accede to that argument. That still doesn't mean that we couldn't say: Fine, we will have one rule for DTH, but another one for cable.
14436 And, on cable, you can't do time shifting without consent.Logically, from everything you have said, DTH does not apply to cable.
14437 MR. STEIN: We are not in Geneva, I guess, but Canada doesn't recognize retransmission consent, as you know. So what we are saying is: Why would we apply in Canada what we refuse to apply internationally?
14438 MR. FERRAS: I think there is a big problem, too, with that idea. Those signals are already up there, and they are serving the broadcasting system very well. They are very popular with customers.
14439 And, suddenly, if there was a consent requirement, and we couldn't get it, and they took them down as a condition of the negotiations ‑‑
14440 We have to think about consumers. Those signals are up there. It's not like it's a Cat 2 that is trying to get access, or any other service that is trying to get access; we have a situation where the Commission approved cable to carry these services in 2000, for a very good reason, and we are distributing those signals.
14441 Just to be clear, there is no impasse in terms of the discussions, there just haven't been any. The plan, as presented to us by the broadcasters, was, "Let's wait for the Commission's decision on TV Policy." And then this hearing happened, and they said, "Let's wait for that decision, and then we will sit down and discuss."
14442 So, just to be clear, there is no impasse in terms of negotiations.
14443 THE CHAIRPERSON: I see.
14444 There is a sort of flavour to all of this. You are not against negotiation as long as you have the hammer, but if the other side has the hammer, you don't like it.
14445 MR. BISSONNETTE: No. Actually, nobody has the hammer now, but you are going to actually hand the hammer to them.
14446 In terms of real, legitimate, good‑faith bargaining, negotiations, discussions, between ourselves and the broadcasters, giving a hammer to either one of the parties, in fact, creates an imbalance in those discussions.
14447 That is all we are saying, that the consent is a hammer. Do not consent; there are other ways of dealing with that, and they are good, commercial negotiations.
14448 And we are prepared to pay for those signals. So it is only a matter of degree. And if the degree doesn't work, then we come to you.
14449 MS RATHWELL: Mr. Chairman, just to build a bit on something that both Ken and Mike alluded to, Ken noted that there are proceedings currently going on in Geneva ‑‑ or, he said that we are not in Geneva.
14450 What is happening in Geneva, albeit it is a very long process, is movement toward an international signal rights treaty.
14451 This is a copyright matter that is under consideration in that forum. Progress toward a draft has been slow, but this is a slow process that BDUs and broadcasters have been engaged in with the Department of Canadian Heritage and the Department of Industry, to talk about potential ramifications on an international level of the introduction of retransmission consent.
14452 It has been the position of the BDUs, as a group, that this could result in two scenarios that are not necessarily in the best interests of cable and satellite consumers in Canada.
14453 What Michael was speaking of, in the context of, I think, narrowly Canadian signals, but which is equally problematic, is the notion that this could lead, and reasonably could be assumed to lead to demands by U.S. broadcasters for retransmission consent.
14454 That could lead to denials of service that would be simply unacceptable to our customers.
14455 Secondly, it could lead, plausibly, to demands for remuneration.
14456 A study was prepared, which we tabled with the government a couple of years ago ‑‑ and I believe it was tabled by Bell in the TV Policy Hearing last year ‑‑ where the value of lost revenue ‑‑ or lost value to our system going to U.S. broadcasters could range anywhere from $350 million a year to $570 million a year for the carriage of distant U.S. broadcasters in Canada. That model was built on conservative estimates of what U.S. broadcasters are currently charging within their own retransmission consent regime in the United States.
14457 So I think that this issue goes far beyond what is necessary to produce local programming, or whatever, and we have to look broadly at the issue.
14458 THE CHAIRPERSON: I'm sorry, I don't buy that at all. I am very familiar with retransmission. I know what is going on in Geneva. It has no implication on this.
14459 And by the time Geneva comes around, we will all be retired.
‑‑‑ Laughter / Rires
14460 THE CHAIRPERSON: Let's stay with the issue before us.
14461 And we are not talking about U.S. signals here, we are talking about Canadian signals, retransmission with Canada, a regime that is here.
14462 As far as the retransmission of U.S. signals, we dealt with that in the FTA and NAFTA.
14463 But let's not go there, we are not talking about the FTA and we are not talking about trade issues.
14464 What about the related issue of station shifting, which Canwest and CTV raised?
14465 You do simultaneous sub for stations in the same market for the first set of four‑plus‑one's, which I understand, but not for the second set.
14466 Let's say, if a program is seen in Toronto at the same time as in Buffalo, there is simultaneous substitution. But if that same program is also on a second set of four‑plus‑one, let's say, from Syracuse or something, then the sim‑sub doesn't apply and people, in effect, can shift stations and watch it, et cetera.
14467 If I understood them correctly, they felt that it should be across the board. You should do the simultaneous substitution on everything that you offer in the same time period, so that a CTV program ‑‑ let's say "Desperate Housewives", which seems to be everybody's favourite. If it appears on another U.S. station, regardless of whether it is the first four‑plus‑one or the second or the third, it should be all simultaneous substitution.
14468 MS RATHWELL: I believe that if it is the same time zone we do simultaneous substitution.
14469 At Star Choice, we have an original channel override capability that does that across our system.
14470 And what's more, both on the cable and on the satellite side, we do pay 25 cents per sub per month to the broadcasters for the carriage of the second U.S. four‑plus‑one.
14471 Just to set the record straight, I know there has been some implication before that Star Choice pays nothing currently for the retransmission of Canadian distant signals, but we have calculated the value of money and in‑kind costs of carrying local broadcasters, and it works out to about 96 cents a month for the distant Canadian ‑‑
14472 THE CHAIRPERSON: I know. I appreciate that. But in the CTV and Canwest submissions, they talk about the distant signal, the time shifting and the station shifting. They said that there are two related issues.
14473 Let's say that you are in Winnipeg. You can watch the news of one of the Toronto stations, thanks to time shifting.
14474 But they also were worried about station shifting, in terms of simultaneous substitution.
14475 You are in Winnipeg, yes, but there is no simultaneous substitution because it is a different time period, yet the program is being shown on a four‑plus‑one, presumably coming out of Minnesota or something, and it would have the American ads.
14476 Am I talking rubbish here, or are you following me?
14477 MS RATHWELL: No, I think perhaps what we are talking about is same time zone/same network viewing.
14478 So if you are in Toronto, you would have the option of watching another Eastern Time Zone signal of the same network.
14479 That would be not time shifting, but ‑‑ I guess one could call it station shifting.
14480 For Star Choice, within the small markets ‑‑ and we recognize the challenges of those markets ‑‑ our system is technically capable of effecting simulcast over same network/same time zone signals, and we have been very good at doing that.
14481 Our system cannot sustain doing substitutions in the larger markets. It is technically impossible for us to make that many substitutions, because they occur at the set‑top box level.
14482 We do our best, and we do it very well, compared to other DTH companies on that count, but we think it's a substantial contribution as it is.
14483 THE CHAIRPERSON: There will be an opportunity to make further submissions, and I would ask you to look at the CTV/Canwest submission on station shifting and what they ask for ‑‑ whether you can accede to it or not, or what problems it would cause.
14484 At first glance, it sounded like a very reasonable request.
14485 The last issue is BDU advertising on VOD, SVOD and local avails.
14486 You are clearly asking for it, and so ‑‑ surprise, surprise ‑‑ is every other BDU.
14487 We have heard an awful lot of submissions here about the danger of VOD ‑‑ and let's deal with the first issue first ‑‑ of VOD and SVOD ‑‑ because it's controlled by you and you have acquired the rights, it has a danger of becoming ‑‑ there is a fear of bypassing regulation, in effect, offering linear programming at any time in another guise of VOD or SVOD.
14488 I have asked others, and I am asking you the same thing.Where is the golden thread? Where is the logical dividing line between VOD and SVOD showing again from a linear program and regular linear program ‑‑
14489 How should we approach this?
14490 This is turning out to be a major issue of concern to most broadcasters.
14491 MR. D'AVELLA: Mr. Chairman, I will start.
14492 The VOD part of our business is still a very small part.It is really in its infancy, and it is going to be driven, obviously, by the growth of digital set‑tops.
14493 Most of what we buy we buy directly from program owners, as opposed to broadcasters, because most broadcasters don't really own any VOD rights for the programming they buy. Some do. Some are buying more rights.
14494 And the models right now are entirely pay‑per‑views. If you have decided that you want to watch the Rocky movie on VOD, you are going to pay whatever the price is, $4.95 or $5.95, and that is always a revenue share with the program owner.
14495 We offer very little free‑on‑demand. Free‑on‑demand is something that Comcast has done extraordinarily well with, because they have a lot of it. They can get a lot of programming, and they have a means of paying for it by, essentially, inserting advertising.
14496 It is clearly an opportunity for the Canadian broadcasting system, and we think that, as broadcasters and programmers actually get their minds around the VOD opportunity and actually start acquiring some of those rights, we are quite happy to do these deals.
14497 There are deals where, if CTV wants to make "Corner Gas" available on VOD, we are happy to do that.
14498 You can do it on an episodic basis, you can buy the entire series, you can do whatever you want. And, typically, the model would be: Let's make it a free‑on‑demand service, but we are going to figure out how we split the advertising, or share the advertising.
14499 Or, some of the proposals we have seen are: Why don't you pay us a few hundred thousand dollars, and then you can make it available any way you want.
14500 We have no ability to recover that, if we make it a free‑on‑demand service.
14501 We do some subscription video‑on‑demand.It is not free, it's pay, and it is largely from the premium movie services. They are the ones providing the content for that.
14502 Apart from the Hollywood studios, which, essentially, own all of this product, there are very few other companies that are licensing VOD content, let's say, in sort of the North American market, if you will.
14503 The real opportunity here, for both us and the broadcasters, is, once they get their minds around acquiring VOD rights for U.S. network programming, that's where we think the opportunity really begins to make some sense.
14504 THE CHAIRPERSON: Thank you for that description.
14505 But I was looking forward. I mean, what the broadcasters are worried about is that you somehow disintermediate them, that is really what it boils down to.
14506 And what they are wanting to ‑‑ and what has been suggested to us, that everything that goes on, VOD or SVOD, you should be obligated to buy it from the Canadian rights holder and can't go directly to, let's say if it is a foreign rights holder or something like that; and, secondly, so that clearly you have to do a deal with them, and also, if there is any advertising on those or if there is any dynamic advertising substitution or something, that should be subject to a sharing basis with the rights holder, the Canadian rights holder.
14507 That is what was put to us by various people in different formats.
14508 What is your position on that?
14509 MR. D'AVELLA: Well, with respect to buying the rights, I mean, that's clearly their prerogative.They have the ability to do that and they're probably in the best position to do that since they're paying the most money for the first run rights in any event.
14510 And what we do know from reality is, you know, you can't buy a program from NBC for VOD because they're basically saying, look, I've already sold this program to CTV or Global and I'm not going to jeopardize that business by selling you a VOD right.
14511 So, they're already No. 1.
14512 THE CHAIRPERSON: Just on that point ‑‑ I'm sorry to interrupt you ‑‑ but I heard exactly the same opposite from somebody and he's saying, every time you want something different, a different right you have to pay for it, just because CTV has a linear program does not mean they have the VOD right and if you want SVOD there is another right, et cetera, but, in effect, each time the counter runs again.
14513 So, that is the experience of the broadcasters. Is that not true?
14514 MR. D'AVELLA: Yeah, absolutely. They don't necessarily buy the VOD rights and they don't buy the rights because they probably don't see a means of monetizing them.
14515 THE CHAIRPERSON: But does that prevent you then from buying the VOD rights?
14516 MR. D'AVELLA: It typically does because the U.S. programmer, the guy that actually owns these rights, is not going to sell them to us because he's saying, wait a minute, I've got this great business with CTV, I'm not going to jeopardize it by selling VOD rights to a company that's got 800,000 VOD customers. It just doesn't make any sense for them.
14517 And the only ‑‑ you know, this is going to evolve and it would be in their interest and the broadcasters' interest to become, obviously, much more active in this. And they know all about it, I mean, there's no news here.
14518 And, again, a lot of the models we've seen from them are, you do what you want with it, but you pay me $3‑million for this particular series of program and then you can decide whether you want to charge for it or whatever.
14519 Advertising within VOD programming, targeted advertising or whatever, is a good concept, it's an interesting idea, there are ways of doing this, it's another way of generating revenue.
14520 It's not necessarily something that we would want to push because not every model's going to be the same. I mean, if they come to us and say, I've got "Desperate Housewives", I've got the VOD rights to it but here's how we're going to work out the revenue share. We've sold this advertising, we're going to pay ‑‑ you know, we're going to share that with you guys if you make it available free, or they'll say, charge whatever you want for it but I'm already compensated because I've already sold the advertising on it.
14521 So, it's not ‑‑ none of this is cast in stone, it's still very much evolving.
14522 THE CHAIRPERSON: But two different points here.
14523 On your first point that they don't want to jeopardize the right, I would have thought the Hollywood ‑‑ let's say a Hollywood rights holder says, here, I've got this relationship with CTV, I sold them the linear program, maybe they'll give them the right of first refusal to the VOD, but if CTV doesn't buy it, why not sell it to Shaw and get an extra dollar and you don't jeopardize the rights by giving CTV the right of first refusal.
14524 I don't see that that necessarily means that you don't have access to those rights.
14525 MR. D'AVELLA: That's correct, but that's not where the discussions have been to date.
14526 THE CHAIRPERSON: I see.
14527 MR. D'AVELLA: And look, I mean, if they don't want them, then obviously somebody else is going to buy them.
14528 THE CHAIRPERSON: Okay. The second point, we have heard a lot about this dynamic ad insertion and tailoring ads to the customer.
14529 And you as a BDU are in an unique position of knowing who's watching, when, what, et cetera.
14530 As this outfit Invidi, I'm sure you have heard of them, who made a big presentation to us that they actually can identify the viewer by terms of gender, age, income, region, locality, et cetera.
14531 I don't know, let's assume they can do it. Mr. Rogers thinks there are all sorts of piracy issues, there may be, maybe they can be solved, maybe they can't, but potentially this is an area where I would have thought where you can make advertising much more targeted, therefore, more lucrative and you also can prevent migration of advertising from the broadcasting system to the Internet where one of the great advantages is that you really know who's clicking on and you can tailor it.
14532 And the example that we have heard, and I'm sure you have heard it, you could sell the ad to GM and say, look, we'll do five, we'll do a truck, we'll do a sports car, we'll do a sedan, we'll do a family van, et cetera, and we'll make sure that the women who watch it see the family van, the 20‑year‑old males watch the sports car, et cetera, and you could change.
14533 Combine that with SVOD or VOD, you know, and even more the customer pays, so you really have a good database of who's watching what.
14534 And I sense people are on one hand excited about it, on the other hand scared and I don't know. Do you see this as (a) a gross opportunity; (b) a way of preventing the migration to the Internet; and, (c) if you are going on that, would you do that on a shared basis with the broadcasters as they demand or not?
14535 MR. D'AVELLA: Well, maybe Peter will want to talk about the privacy issues.
14536 But we see it as an opportunity, we don't know how big the opportunity is. Obviously, any time you can actually target advertising and make it buy more effective, advertisers are going to be very interested in paying for that.
14537 Is it going to divert anything from the Internet? We don't think so. I mean, the Internet is a completely different space from an advertiser perspective, different type of usage patterns, different consumption.
14538 You know, it will be something that you could present to an advertiser and say, rather than spending $50‑million on Google, why don't you spend five per cent of that on our system because we can provide you with this kind of targeted advertising?
14539 So, it is an opportunity. We think the best way to approach it is, it's going to be some sort of a model that we develop with the broadcasters if they own the rights; if they don't own the rights, then we'll deal with the rights holders, whoever they may be.
14540 MR. BISSONNETTE: And on the privacy, as you know, Mr. Chairman, from your previous life that PIPEDA and privacy are sacrosanct to us and our customers and that continues to be. We don't share information with respect to our customers to any third party and we would continue to take that approach.
14541 THE CHAIRPERSON: But you wouldn't have to share it, you could ‑‑
14542 MR. BISSONNETTE: Yeah, we're very reluctant ‑‑
14543 THE CHAIRPERSON: It would still be your information, you would just make sure, in my example, that that ad goes to that customer.
14544 MR. BISSONNETTE: Well, first of all, we don't have the sophistication at this time to do what you just described, but if we had that capability, sharing information still creates problems for us internally in terms of our own value systems and integrity.
14545 And our customers appreciate the fact that their information is held by us as very, very sacrosanct and we'll continue to do that.
14546 THE CHAIRPERSON: So, what is your position then on BDU advertising? You want advertising on local avails, I know that.
14547 MR. BISSONNETTE: Yes, absolutely.
14548 THE CHAIRPERSON: And on the rest of VOD and SVOD?
14549 MR. BISSONNETTE: Yeah, we think so, yeah.
14550 THE CHAIRPERSON: On a shared basis, or on a ‑‑
14551 MR. BISSONNETTE: Well, Michael described the commercial relationships which are ‑‑ you know, they are on a sharing basis right now.
14552 THE CHAIRPERSON: But that wouldn't apply to local avails?
14553 MR. BISSONNETTE: No, local avails we think provides us with an opportunity to earn something from those avails which, you know, have come to us through a series of negotiations with those U.S. programmers and we don't think that it's inviolate that we would have the ability to generate some advertising from those and we will put those funds to good use as most of our funds do go in terms of re‑investing in our own infrastructure.
14554 THE CHAIRPERSON: But right now local avails are being used as a promotion vehicle; right?
14555 MR. BISSONNETTE: That's right.
14556 THE CHAIRPERSON: It's either you own both those or ‑‑
14557 MR. BISSONNETTE: That's correct, both our own as well as broadcasters.
14558 THE CHAIRPERSON: Yes.
14559 MR. BISSONNETTE: Yeah.
14560 THE CHAIRPERSON: So, that would discontinue, they would be sold, in effect, in competition with broadcasters?
14561 MR. BISSONNETTE: No, I think they would be ‑‑ you know, I guess if you take everything to the farthest extent that ultimately could happen.
14562 But, you know, there are ways and means of us ensuring that broadcasters still have access to those avails at market rates, that we still have them and we still value them in terms of promoting our own products and we would see that as still very, very important.
14563 But we believe that there should also be the opportunity to sell those local avails to others that see them also as valuable.
14564 THE CHAIRPERSON: You were here or you heard on the Net the presentation by Telus who talked about NPVR?
14565 MR. BISSONNETTE: Yes, we actually designed the network PVR five years ago.
14566 THE CHAIRPERSON: Wonderful, and welcome, the first person who has appeared before me who actually knows something about it. So, tell me how it works?
14567 MR. BISSONNETTE: Well, we actually have a trademark on it and the network PVR very simply is a process where we would be able to store programming in a central repository and that that programming would be available to customers who don't have a PVR but do have a digital box and they would essentially have, no different than an Internet customer has a mailbox, they would have a box that essentially stores things that are available to them when it's more convenient to them.
14568 So, technically it works that way.
14569 THE CHAIRPERSON: You don't offer it right now?
14570 MR. BISSONNETTE: No, we don't. We've chosen not to for two reasons. One is because of contention, contention on the network. Two ‑‑ the second reason is an extension of a technical reason which is, what programs do you store? So, do you confine our customers to, say, 10 channels that they could store, or do you confine them to broadcast services, do you confine them to sports programming?
14571 So, where the programming actually comes from, because that creates obviously mass storage kind of complications.
14572 And third, of course, is the whole issue of copyright.
14573 THE CHAIRPERSON: What about the access? Would the access be on a sort of program basis. Like I'm a Star Choice customer, I could run back for one week or two weeks and pick out, or would it be on the amount, or how would you do it?
14574 MR. BISSONNETTE: So, first of all, it technically couldn't be available to Star Choice customers because they don't have a bi‑directional infrastructure.
14575 THE CHAIRPERSON: Okay, cable. Let's go with cable.
14576 MR. BISSONNETTE: So, it would just be cable and that's the other challenges; do you keep it for a year or do you keep it for a week? And clearly, you know, that's a consideration.
14577 But the fact is we've had the capability to do this for a long time and we haven't done anything with it. In the mean time our customers with their own PVRs continue to grow and that I think kind of meets their needs.
14578 Some of the older boxes as well, you know, in our generation over the last five years, you know, we've seen higher and more sophisticated boxes with more and more storage capability and the real benefit to the network PVR was that you could take your whole system, customers that have none‑PVR boxes and all of a sudden provide them with that feature.
14579 But PVRs are becoming now the dominant box that customers are buying and they like to control it themselves and they like the fact that the storage capacity on those is growing every year.
14580 And, so, we've chosen not to do anything in that area.
14581 THE CHAIRPERSON: Would that access be on demand or just on the linear programming that you are offering right now, going backwards?
14582 MR. BISSONNETTE: I didn't understand that.
14583 THE CHAIRPERSON: Assume I'm a Shaw Cable customer, I missed "Desperate Housewives" three weeks ago. Can I just push in "Desperate Housewives" and all of a sudden ‑‑
14584 MR. BISSONNETTE: Well, right now they can with their PVRs.
14585 THE CHAIRPERSON: No, no, in the end PVR, when it's ‑‑
14586 MR. BISSONNETTE: So, I don't want to give too much weight to the NPVR because, frankly, it's not ready for prime time because there are a whole host of things that have to be dealt with and we're saying, maybe it was a great invention at the time and maybe it was one ‑‑ it was like Nabu, it was a great invention but it had no practical applications.
‑‑‑ Laughter / Rires
14587 THE CHAIRPERSON: Some of us were involved in Nabu, so...
14588 MR. STEIN: Somebody always has to be first, right?
14589 MR. BISSONNETTE: That's right.
14590 THE CHAIRPERSON: But before we leave this NPVR, I appreciate there's a rights issue, but of course the great advantage is you don't have to think beforehand about what you want to ‑‑ you can just go and visit backwards.
14591 And my colleague Mr. Katz pointed out last time, it doesn't take a genius to figure out that if you marry this with dynamic advertising, et cetera, you could ‑‑ actually here is, take my example, somebody wants to watch "Desperate Housewives" from one month ago, et cetera and he can watch it, but you put in a different ad now than there was a month ago, et cetera. So, there's a tremendous revenue opportunity there, assuming you can overcome the rights issue.
14592 MR. BISSONNETTE: Well, technically the answer is you could do that.
14593 THE CHAIRPERSON: But this is not something where you are working on ‑‑
14594 MR. BISSONNETTE: No.
14595 THE CHAIRPERSON: Is anybody else, that you know of?
14596 MR. BISSONNETTE: Well, Comcast has NPVR capability and, as you know, that's something that's before the courts. Am I right?
14597 MR. D'AVELLA: Cable Vision.
14598 MR. BISSONNETTE: Sorry, Cable Vision.
14599 MR. D'AVELLA: Cable Vision on Long Island are being sued, so...
14600 THE CHAIRPERSON: Okay. Well, as I mentioned before there is an opportunity to make some further submissions.
14601 The sole issue of VOD, SVOD and NPVR, which is slightly different but, and the distinction between a linear program, their programming, the rights of the BDUs and the broadcasters' concerns are quite a bit and we would ask you, like everybody else, to share with us your knowledge, your experience and where you think this is going.
14602 MR. BISSONNETTE: Yeah, we'd be pleased to.
14603 THE CHAIRPERSON: Okay, thank you.
14604 I think I have given you enough of a rough time, I will now pass it over to my colleagues.
14606 COMMISSIONER ARPIN: Thank you, Mr. Chairman.
14607 I think I am going to take the issues in the reverse order.So, I will start with advertising.
14608 And in your oral presentation this morning on page 14 regarding local avails, you have set them to be for a value of $50‑million.Is that amount gross or net, first?That's on page 14, that's your middle paragraph where you say:
"The value of local avails on the U.S. service is less than two per cent..." (As read)
14609 MS RATHWELL: It's a net figure.
14610 COMMISSIONER ARPIN: It's a net figure. And obviously it's not only for Shaw, it's for the whole avails across the country, or is it the value for Shaw?
14611 MS RATHWELL: It's for all of the avails.
14612 COMMISSIONER ARPIN: It's all the avails in the country.
14613 And in your mind is it made up of national advertising or local advertising or a mix of the two?
14614 MR. BISSONNETTE: A mix.
14615 MS RATHWELL: Yeah.
14616 MR. BISSONNETTE: It's a mix.
14617 MS RATHWELL: I believe it's a mix, yeah.
14618 COMMISSIONER ARPIN: It's a mix of the two. And in your submission in paragraph 40 you are also talking about advertising on the community channel.
14619 And again my question, is it made up of national advertising, local advertising or a mix of the two?
14620 MR. FERRAS: I think ‑‑ I can start on that.
14621 We'd like very much to get into that field. I think our assumptions would be it would be mostly local because of the nature of the content itself and because of the nature of our relationships with our communities.
14622 When you look at some of the programming we do right now that's limited to sponsors' messages, it's all very local and our real problem there is just being able to exploit that opportunity fully, so, that when we have an advertiser and we say to him, well, we can give you a 15‑second spot ‑‑ or, sorry, a 30‑second spot with a little bit of video, but we can't promote a favourable image of you. And they go, what do you mean?
14623 So, all we're trying to do is improve that relationship with the existing way we run the system and the existing advertisers that we have and it would be mostly local.
14624 COMMISSIONER ARPIN: Now, in the same paragraph you're dealing with about two ‑‑
14625 MR. STEIN: Can I just make a comment?
14626 COMMISSIONER ARPIN: Yes.
14627 MR. STEIN: Because your paragraph you referred to, 40, also talks about DTH.
14628 COMMISSIONER ARPIN: I'm coming to that, that was my sub‑question.
14629 MR. STEIN: Okay.Sorry, sir. Okay.
14630 COMMISSIONER ARPIN: I was there.
14631 MR. STEIN: Okay.
14632 COMMISSIONER ARPIN: Because I was saying, in the same paragraph, exactly, you are talking about your wish to have a DTH community channel.
14633 And, again, which community are you thinking of and will it be supported by advertising, and obviously in that instance the likelihood that you have local advertising is probably dim.
14634 MR. BISSONNETTE: So, first of all it would be available nationally and, but it would be a consolidation, if you will, of small vignettes from small communities or large communities across the country.
14635 So, we would try to make it relevant to Star Choice customers and that would be through having local productions taking place throughout communities, having mobile ‑‑ small mobile units travelling from community to community and packaging programming that is of interest of Canadians.
14636 And, so, the notion of a community channel is a yes and I think we're looking forward to making that presentation to the Commission in the future.
14637 And then in terms of how we support it, it would be through sponsorships and advertising.
14638 COMMISSIONER ARPIN: Now, are you contemplating having a French community channel and an English community channel, or only one community channel?
14639 MR. BISSONNETTE: Well ‑‑ sorry. You know, the options are open. You know, we have a very loyal French Canadian subscriber base in Quebec and the Maritime provinces and they love our programming and we think, you know, that by doing something that is absolutely unique to them or for them, that that would make sense.
14640 COMMISSIONER ARPIN: And you have the capacity to offer one or two new channels?
14641 MR. BISSONNETTE: Well, that would be ‑‑ that would have to be a part of the consideration as well. And as we mentioned in our notes, that we're looking at many different ways of creating additional capacity.
14642 And maybe this is a bit ‑‑ maybe not the right time to talk about this, but I think there's never the right time ‑‑ but, you know, we're looking at some of the redundant broadcast services that we currently carry, that would mean we would have to look at doing something there to free up capacity for services that may not be redundant but be unique in terms of their programming nature.
14643 You know, as the Commission knows from our last presentation, that we've introduced 8‑PSK, which is phase‑shift keying, which allows us to carry more services within our transponders.
14644 And, so, through those kinds of modulation and compression techniques, you know, we would be challenged to find that capacity.
14645 But we think it would be a really compelling national kind of a channel that gives us great excitement when we think about the nature of that program whether it's, you know, talking to customers in Fort Alberni or in New Brunswick or way up in Inukshuk, that programming on that channel would have some relevance to them.
14646 COMMISSIONER ARPIN: Talking about capacity on Star Choice, I don't know if you had a chance to hear the presentation that Telesat made regarding ‑‑
14647 MR. BISSONNETTE: Yes, sir. Yes, we did.
14648 COMMISSIONER ARPIN: And are you concluding anything from what they said, or...
14649 MR. BISSONNETTE: I conclude they're trying to sell us satellite space.
‑‑‑ Laughter / Rires
14650 MR. BISSONNETTE: You know, before we get to those kind of steps, there are a lot of things that we can do in advance to that.
14651 I mean, as you know, there's no satellite up there right now, so if this thing came down in a flaming ball, there's no other option.
14652 MS RATHWELL: There is one point of clarification I think we should make on the Telesat submission because they did address it, but just in case there was any confusion about it, we'd just like to emphasize that the availability of C‑band capacity is not of assistance to Star Choice, it's not compatible with our network, it's not a small dish application.
14653 So, you know, I know they started by saying there's lots of capacity for HD on C‑band but that's not going to work.
14654 MR. BISSONNETTE: Yes. So, it doesn't work. It would be like having Mickey Mouse ears trying to receive signals. You know, they used to do just fine but, you know, we're DTH.
14655 But, you know, we're creative, we're working with them, we're working with CL, we're looking at other long‑term options.They're much more expensive than the kind of things we're doing.
14656 We've been able to re‑purpose some transponder space in order for us to launch HDs, we're launching new HDs next week for our customers and we've done that through either harvesting new compression technologies.We're looking at MPEG‑4 which will allow us to even add more services and, in order to do that, of course, customers that want those services have to have an MPEG‑4 compatible box.
14657 So, our engineering staff are doing a lot of work to try and maximize the capacity that we have right now because there is no satellite up there right now.
14658 COMMISSIONER ARPIN: One question that we've asked of BDUs after we heard Allarco, and the question that we asked them was, while you were having negotiation with Allarco regarding Super Channel, did you launch any other services of any kind?
14659 MR. BISSONNETTE: Well, they've given you a litany of services that they say we launched and that we knowingly launched those somehow to pre‑empt them from being carried, but that's not the case.
14660 Their attribution of motives ‑‑ they're absolutely erroneous.
14661 You know, with Allarco the first thing we thought was that they were actually licensed for one service and one channel, and through the course of our discussions they made it very clear that that wasn't the way they were going to program their service.
14662 They initially told us they would have a prime service which would be the best of all of the others and, so, we attempted to provide them with access on that one standard definition channel.
14663 They indicated their real desire to have an HD channel, which we ultimately agreed that we would carry.
14664 In the mean time we were, in fact, going through an 8‑PSK on our satellite transponders to accommodate what we already have.
14665 We've now come to an agreement, as you know, and we're launching those services I think within the month.
14666 And we offered ‑‑ frankly, Mr. Arpin, we offered to launch them at Christmas time where they could take advantage of the, I'll call it the national launch, the national preview and because we weren't launching all of the services at one time, they chose not to take advantage of that.
14667 So, to the extent that we've tried to be as helpful as possible by getting it launched, they wanted to ‑‑ they said basically it's all or nothing.
14668 COMMISSIONER ARPIN: Now, when did you launch Yes TV, the shopping service ‑‑ the Corus shopping service?
14669 We have heard Torstar here.
14670 MR. BISSONNETTE: Yes TV?
14671 COMMISSIONER ARPIN: Yes.
14672 MR. BISSONNETTE: I would ‑‑ what's that?
14673 COMMISSIONER ARPIN: Was it Yes TV or ‑‑
14674 MR. D'AVELLA: It's Eyes On TV and we're just trying to remember the timing. It probably launched in the past six months.
14675 COMMISSIONER ARPIN: In the past six months?
14676 MR. D'AVELLA: Yeah.
14677 COMMISSIONER ARPIN: But prior. Now, we also heard Torstar, and if you don't have their reply you could always answer at the end of ‑‑ in the next couple of weeks, but we heard Torstar arguing that they've approached Shaw for their own shopping service and they were told that you didn't have enough capacity to offer their exempted service.
14678 And they made to us some request regarding the exemption rules saying that even if the Commission was looking at removing some access rules for existing services, they should keep them regarding exempted services, particularly shopping services.
14679 MR. BISSONNETTE: So, are you asking whether or not we said no, we don't need another shopping channel?
14680 COMMISSIONER ARPIN: No. Well ‑‑
14681 MR. BISSONNETTE: Because we ‑‑ you know, in our view we don't. You know, customers haven't said they'd love to have another shopping channel and to the extent that, you know, the Shopping Channel's been there for a long, long time and it seems to have a following, but in terms of, we have no obligations to carry it and, therefore, no desire to carry it.
14682 COMMISSIONER ARPIN: There's a rule that says if you have, or one of your affiliate has a shopping network, you must offer to anyone ‑‑
14683 MR. BISSONNETTE: Yeah.
14684 COMMISSIONER ARPIN: ‑‑ well, to at least one non‑affiliate or non‑owned a shopping network, and that's the exemption order that the Commission has issued years ago.
14685 Anyhow, in the transcript you will find the Torstar presentation, and I will invite you to look at it and if you have any comments to make I would suggest you make them in the reply ‑‑ at the reply stage because when they came they specifically talked about Shaw.
14686 MR. BISSONNETTE: Well, I guess the first thing ‑‑ thank you, Mr. Arpin.
14687 The first thing is when they approached us I wasn't even aware of the Yes Channel or Eyes On TV Channel. No. 2 is, we do carry Rogers Shopping Channel so, you know, I would think that that meets our requirements.
14688 COMMISSIONER ARPIN: No. That's what the rules says. If it also a BDU owned, even if it's not a ‑‑ it is perceived by the Commission as undue preference. So, anyhow ‑‑
14689 MR. BISSONNETTE: Yeah, we'll look at ‑‑ we'll respond to you.
14690 COMMISSIONER ARPIN: Yes, please.
14691 MR. BISSONNETTE: Thank you.
14692 COMMISSIONER ARPIN: Please.
14693 Now, we'll get to VOD questions. You said that you are acquiring VOD rights for feature film directly from the studios or through their Canadian distributors?
14694 MR. D'AVELLA: Some of them are represented by Canadian branches but most of them actually do it directly out of their Hollywood studios or offices.
14695 COMMISSIONER ARPIN: Okay, thank you.
14696 I want to give them some kind of an order. Well, distance signal. In some of the other jurisdictions, I'm thinking most European countries, Australia, the over‑the‑air signals are not on satellite and are not even on cable, and only for the sake of discussion, what will be your views if the Commission was to come to the conclusion that the best way to resolve the issue of the over‑the‑air broadcasting was to forbid the carriage by cable or DTH of the Canadian over‑the‑air and all over‑the‑air services, including the U.S. services?
14697 MR. STEIN: We will let you handle our customers.
14698 MR. BISSONNETTE: Are you saying though, just so we understand the question, so you would say from now on we can't carry CFTO or BCTV in Vancouver; it only is available with bunny ears?
14699 COMMISSIONER ARPIN: Yes.
14700 MR. BISSONNETTE: Yes. Well, it would give us more capacity, but I don't know if our customers really appreciate the inconvenience of having to go to the bunny ear reception, particularly given propagation issues of all the inconveniences of dialling and twisting knobs and interconnecting boxes.
14701 COMMISSIONER ARPIN: So what you are telling me is that the over the air broadcasters are important for you.
14702 MR. BISSONNETTE: You know, I watch Global news every night in Calgary. That's all I watch on Global is their news, because it is relevant to me in Calgary. I don't think anybody has ever said that they aren't important and they aren't important to our customers and to not have them would be an inconvenience.
14703 But I don't know if that goes to the value.
14704 COMMISSIONER ARPIN: The thing is that it will remove you of the obligation of having to do programming substitution, simultaneous substitution. It will give you more capacity. And on the other hand, they will have the benefit of having to monetize the full value of their signal so that they ‑‑ because they will not have to compete with distant signals, they will not have to compete with, in most instances, say take Calgary or Edmonton, with the U.S. stations that you are carrying.
14705 MR. STEIN: Well, the first thing is that in terms of the carriage where there are signals, I mean the Broadcasting Act requires the carriage. I mean it is clear in the Act under 3(t) that carriage of local over the air signals is a requirement.
14706 Our point is that we don't question the carriage of the over the air signals. What we are saying is only in reference to fee for carriage. That is the only issue we have.
14707 We feel, as we pointed out in our opening statement, that the advantages that over the air broadcasters have with respect to priority carriage, simultaneous substitution, they don't have to pay for the spectrum, that all of the advantages that Peter enunciated are sufficient advantages.
14708 The other part of this is that one of the things that gets lost in all of this is the fact that cable became, through the '70s and '80s, the essential means by which Canadians received their local signals. So that to go into the city of Vancouver and, with the mountains, et cetera, and then say okay, you are not going to carry this on cable any more, people would just go to their own systems to do it.
14709 I mean, the over the air reception of those services is difficult. We did studies ‑‑
14710 COMMISSIONER ARPIN: In analog, but in digital they have to get it or they won't get anything.
14711 MR. STEIN: But they will go off the system then. Basically what they will do ‑‑ yes, there is going to be ‑‑ because when the Americans go to digital there will be an improvement in over the air signals, but you will be driving people from the system because they will be able to get the ‑‑ if you don't have the U.S. four‑plus‑one on your cable in Vancouver, then people will find means to get it in other ways.
14712 So I don't see what the advantage would be.
14713 But going back to the cable, cable became the means of distribution of those signals. I remember at the hearing in 1993 Ray Peters, who is the President of BCTV ‑‑ and you can look it up ‑‑ said: "Commissioner, I remember the bad old days before cable when we had to compete directly with the U.S. broadcasters over the air."
14714 I remember Mr. Perrin Beatty in 1992 said, you know, cable, which was once thought of as a cancer on the broadcasting system, became its saviour. That is because we were able, through cable, to provide Canadians with wonderful colour signals, with no shadowing. You know, we forget all of those kind of over the air issues.
14715 Now, those issues go away to some extent when we move to a digital environment, as the Americans are now moving to, but that is only going to increase the capability of Canadians to receive those signals.
14716 So why would you drive them off the cable or the satellite system? And they will say okay, well, they are not on my cable or satellite so I will go over the air. By the way, if I go over the air, why do I need my cable and satellite service to begin with?
14717 So I don't see what the objective would be in terms of moving that way.
14718 We think that the over the air signals, we are not denying their importance. What we are saying is that we feel that they receive sufficient advantages now through simultaneous substitution, priority carriage, all those things that Peter listed, now, and that they do not require a fee for carriage in addition to those.
14719 COMMISSIONER ARPIN: Regarding fee for carriage, I heard your argument in specific regarding CTV and Canwest. At the same table we also heard Quebecor agreeing with fee for carriage and obviously this afternoon we were supposed to hear TQS, but for some obvious reason they won't be here today, at least that is what they have notified us.
14720 Star Choice is offering a service to the French market.
14721 I have been looking on page 16 of your oral submission and I have gone through the list of your objections regarding fee for carriage.
14722 Do you have the same objections regarding the French over the air broadcasters?
14723 MR. STEIN: Well, they were the ones who pressed us to carry. They were the ones who basically said that if the satellite didn't carry them, particularly in the smaller markets where there is a much higher penetration of satellite, that if we didn't carry them that they would go under. So that carriage on satellite services was essential.
14724 So we came up with this whole balanced approach, which the Commission reaffirmed, to carry those services and to make them available on the satellite.
14725 I would be hard pressed to imagine why they would want us to take them down.
14726 COMMISSIONER ARPIN: I am not looking at ‑‑ I have moved towards fee for carriage specifically and fee for carriage for the French.
14727 Are the French broadcasters having a different situation than their counterparts in English Canada?
14728 I am seeking your views because you are serving the French community. I could read your argument on page 16 which is clearly aimed at CTV and Global and I'm asking you: What are your arguments regarding TVA and TQS? Are they the same?
14729 MR. STEIN: Well, as Quebecor points out, there is a different situation in Québec.
14730 Cynthia will probably comment on this one, as well, in terms of our Star Choice situation.
14731 We feel that our carriage of the TVA and TQS signals, that we pay for the uplink, that we pay for the transponders, that we ensure that they are there to provide service in the area, that that is ‑‑ you know, that that is what we should be doing and that that is the proper policy.
14732 We carry their signals. We make them available in the communities they serve. We give them a real advantage to do that and that that is sufficient.
14733 MS RATHWELL: Just to add briefly to that, yes, there are two strands to our opening remarks. One is there is a whole list of benefits that all over the air broadcasters receive, and that would apply equally to English and French language over the air broadcasters.
14734 Then there are the particular circumstances of CTV and Canwest that we addressed in terms of, you know, their own business situations and their need for this and all that.
14735 But primarily I think our point across the board for both cable and satellite is that there is already a regulatory bargain in place, you know, and there is free spectrum and a host of other things and that should be sufficient without fee for carriage.
14736 COMMISSIONER ARPIN: Somehow I could say that the list that I have on page 16 is written in a certain priority order so that you are putting simultaneous substitution and mandatory and priority carriage on cable towards the last benefit?
14737 MS RATHWELL: I don't think they rank hierarchically. It is just a list.
14738 COMMISSIONER ARPIN: It is just a list.
14739 MR. STEIN: We have more, actually.
14740 COMMISSIONER ARPIN: You have more.
14741 But do you have anything specific for the French market, because surely the simultaneous substitution ‑‑ well, you are not in the cable business in Québec, but it doesn't work because obviously they are substituting amongst themselves. There is no time shifting, there is only station shifting.
14742 MR. STEIN: Well, essentially I would say that clearly when we were going through these discussions our view was that we need not carry, because of the explanation you just gave, we need not carry all the TVA and TQS services in Québec in the French language market. We did need to do that. We could have one Montréal TVA and we would have one TQS. The programming is pretty much the same.
14743 It was the TVA and the TQS people, supported by the CAB, who said no, no, no, we want you to carry all of the services. So we are carrying a whole range.
14744 How many TVAs do we have?
14745 MS RATHWELL: I believe we have six.
14746 MR. STEIN: Six TVAs and a range of ‑‑ we can deal with the numbers.
14747 MS RATHWELL: Yes, we can get the numbers.
14748 MR. STEIN: But we carry all of those services not because they offer overly significant advantages to our Star Choice subscribers in those markets, but basically to meet the obligations that ‑‑ to meet their point that they could not survive if satellite subscribers in Trois‑Rivières or in the Saguenay did not have those signals, because we made up such a high degree of penetration in those areas.
14749 So that was the argument. The argument was from their side to convince us to carry them. It would be kind of ridiculous to add that we should pay fee for carriage on top of that.
14750 MS RATHWELL: With respect to numbers, yes, we carried eight TVAs, and two of them are small market, and five TQSs
14751 COMMISSIONER ARPIN: Ms Rathwell, in reply to one of the Chairman's questions, you said a certain number of the services that claim access and have been granted access by CRTC policies are getting minor results.
14752 Were you referring to the French services that you have to carry out west?
14753 MS RATHWELL: No.Actually, I was referring to Category 1 services that we have to carry, English language.
14754 COMMISSIONER ARPIN: English language, okay.
14755 MS RATHWELL: Yes.
14756 COMMISSIONER ARPIN: Are those Category 1 services on a stand‑alone basis or are they included in packages?
14757 MS RATHWELL: As required by the regulations, we offer them both in packages as well as on a stand‑alone basis.
14758 COMMISSIONER ARPIN: So you were not referring to Pride TV?
14759 MS RATHWELL: Well, no.There are others besides Pride.
14760 COMMISSIONER ARPIN: So there are others?
14761 MS RATHWELL: Yes.
14762 MR. BISSONNETTE: And we don't carry Pride. We carry OUTtv.
14763 COMMISSIONER ARPIN: OUTtv. They have changed names.
14764 MR. BISSONNETTE: Yes.
14765 COMMISSIONER ARPIN: It's the same ‑‑ it's the same service?
14766 MR. BISSONNETTE: Yes.
14767 COMMISSIONER ARPIN: I'm not saying it is the same programming.
14768 MR. STEIN: I think Pride turned into ‑‑
14769 COMMISSIONER ARPIN: It is the same licence who has over time changed names; but, yes.
14770 MR. STEIN: Yes.Although we did have a dispute on it.
‑‑‑ Laughter / Rires
14771 COMMISSIONER ARPIN: During the exchange with the Chairman, you stated that you are contemplating down‑converting into analog digital services, including the U.S. four‑plus‑one at the time they will turn out to be only a digital.
14772 Could you tell us under which authority you could tamper with the broadcasting signal, because it is currently forbidden by section 7 of the Regulations.
14773 MR. BISSONNETTE: Well, we are going to ‑‑ they will be converted ‑‑
14774 COMMISSIONER ARPIN: In the case of the U.S. obviously ‑‑ well, I'm listening to what you have to say.
14775 MR. BISSONNETTE: Well, we had not considered that we were actually forbidden from doing that. We were going to take the signal and make it available in its entirety, in its context.It would be essentially transparent to any conversion from digital to analog. So the entire programming will be maintained in its context.
14776 I guess it is no different than what we do right now when we convert analog signals to digital.
14777 MR. D'AVELLA: Just to be clear, this is the standard definition signal. The HD signal is carried in HD.
14778 COMMISSIONER ARPIN: So you are talking it's the standard definition signal, the digital signal that you are contemplating down‑converting.
14779 MR. D'AVELLA: There is no loss of quality here. This will be as good a signal in analog as it is in digital. The only difference is HD and the HD is carried on a completely separate ‑‑
14780 COMMISSIONER ARPIN: In doing that, aren't you creating for yourself a capacity problem?
14781 Is it not for you a much better business case pushing your subscribers towards digital?
14782 MR. BISSONNETTE: Well, sometimes people don't recognize that when you make a change to a customer and you all of a sudden remove the entire basic service that they have been enjoying for the last 45 years or 40 years and you force them on every outlet that they want to enjoy that outlet to go and get a digital box, it creates really negative relations with ourselves and our customers.
14783 Yes, we will have to look at the extent of our analog offerings and we would think that one of the first elements of the analog tiers would be one of the tiers moving into a digital domain from which we will harvest and make available more digital and high definition services.
14784 But the basic service we think is still really important to our customers, and it will be available on all of their outlets. And to make a change to digital by basically turning them all off one day and saying if you don't have a digital box, you can't get them, is not consumer friendly.
14785 That's why we say in the foreseeable future there will be an analog offering.
14786 As you know, HD signals take a lot more capacity. In time we are going to have to look to the three tiers in the space that they occupy as being probably the first to move to provide the kind of capacity we need to accommodate more high definitions.
14787 So yes, there is a capacity consideration.
14788 COMMISSIONER ARPIN: Finally, my last question is, we have heard some interveners here that came dealing with the satellite eligibility list saying that the Commission should initiate a review of the list and remove some foreign services from that list which have had the opportunity for many years to be carried and during that period of time could have been in a position to make arrangements with Canadian broadcasters to turn up to be Canadianized and contribute to the Canadian system.
14789 And names that were mentioned among the list were A&E and CNN; that the Commission should contemplate removing them from the eligibility list because in the meantime ‑‑ the argument was used as saying with Food Network, which was carried as an American service and became a Canadian one, so A&E and CNN have found a partner like ‑‑ well, it came later on, but ESPN joined with TSN.
14790 I don't know if you have any views on that.
14791 MR. STEIN: Obviously, we wouldn't want to remove any services.
14792 We think that as Canadian services become stronger, then you can look at down the way of saying, well, the subscriber ‑‑ or the popularity of particular U.S. services may be at issue, but I wouldn't want to venture forth to remove U.S. services that are still popular with our subscribers.
14793 COMMISSIONER ARPIN: Well, Mr. Chairman, those ‑‑
14794 MR. STEIN: Particularly if we meet the preponderance rule.
14795 COMMISSIONER ARPIN: Mr. Chairman, those were my questions. Thank you.
14796 THE CHAIRPERSON: Len...?
14797 COMMISSIONER KATZ: Thank you, Mr. Chairman.
14798 I'm going to turn back to access and genre matters for a couple of minutes.
14799 When I look at the system I see three basic pillars: the customer, the retailer or the distributor in your case, and the broadcaster, which in business terms would be called the manufacturer or the wholesaler.
14800 Your focus has consistently been the relationship between the distributor, yourselves and the customer. If I can use the analogy, you are following the money basically. You are saying you can't go wrong if you follow the money principle.
14801 Virtually all the concerns, or the majority of the concerns that have come before us in the last three weeks now, have been the relationship between the distributor and the manufacturer, and it has been exacerbated by the claims that the larger distributors are vertically integrated and as a result of that it makes it that much more difficult for the independent manufacturers, broadcasters, wholesalers, to get a foothold.
14802 Have you got any comment as to how this Commission should deal with that relationship between the manufacturer, the broadcaster and yourselves in light of the fact that there is vertical integration taking place?
14803 MR. STEIN: Well, there seems to be a number of issues with respect to the relationship between distributors and broadcasters and programming services. I think that from our point of view, what we attempt to do is ensure that we treat all the same.
14804 In other words, I know sometimes people raise the situation with respect to Corus, but we feel that that relationship from a regulatory point of view would be more of a disadvantage when we couldn't launch Scream, for example, because it was Corus affiliated, even though it was a very popular service.
14805 So let me be clear about the relationship between Shaw and Corus.We are both separate companies.We are both run by totally different individuals. They are both listed separately on the Toronto and New York Stock Exchanges.There are clear rules and regulations about how we deal with each other because they are affiliated companies, which we have to ensure that we do not benefit one or the other because of the implications that has for shareholder rights.
14806 So we are covered by a whole range of rules in terms of the situation between the two.
14807 In terms of carriage arrangements, we don't deal with John Cassidy and his people any differently. In fact, I think sometimes they feel we deal with them more harshly than we deal with others, with anybody else.
14808 So I think in terms of the relationship that is there, yes, programming costs are our highest costs. We do have other suppliers. There is a relationship issues there that needs to be dealt with. We had really very positive relationships with some suppliers. I'm not going to mention names because some of them have emerged or whatever.
14809 But, you know, we always found that where we were able to sit down with people and talk about our relationship with our customers and have that discussion with the distributors, with the broadcasters, that that always ended up in a positive solution.
14810 And where broadcasters came in and basically said well, we have a right to do this and this is what we are going to do, that tended not to go as well.
14811 So we try to manage it on a week by week basis and in terms of particular negotiations.
14812 Could the relationship be improved? Yes, absolutely it could be improved.
14813 But we feel that the more that we are able to do it between the two entities, the better we will be going on into the future.
14814 Michael may want to have something to that.
14815 MR. BISSONNETTE: So the answer is no, we don't feel disadvantaged and we are not vertically integrated.
14816 MR. STEIN: No.
14817 COMMISSIONER KATZ: With regard to the smaller programming entities that appeared before us yesterday as well, you feel that it is much more difficult for them to come before you on a balanced basis, if I can call it that, from a negotiating perspective.
14818 We have had various proposals put to us. I think the Commission actually floated an idea in our PN with regard to a reverse onus. I see on page 11, I think it is, of your submission this morning you want to adhere to the existing undue preference rules, which leads me to believe you don't support the notion of the reverse onus that we ‑‑
14819 MR. BISSONNETTE: We think the reverse onus will actually take more of your time and we don't think that it would be any more effective.
14820 As Michael Ferras indicated, we think there will be more frivolous kinds of complaints and we think that the process right now works very well for both parties.
14821 COMMISSIONER KATZ: They feel it doesn't work well for them. I gather you are saying it works well for you.
14822 MR. BISSONNETTE: Well, no. I think it works well for both.
14823 You know, the number of times that we are able to resolve these things before it even comes to you or it is in the process with you is reflected I guess in the public file with respect to any complaints that have come to you, that we have been able to resolve them.
14824 MR. STEIN: I mean, the contrast over the past number of years has been quite amazing. I remember three years sitting in the back yard at my house in Toronto, bailiffs at the door trying to subpoena me with papers being served by a particular network on a Sunday because they wanted to take us to court on Monday. And fortunately we were able to sort of ensure that we understood the CRTC had jurisdiction over this issue, or the question that was at issue.
14825 Basically what it has come down to, I think that it is not that either of us has won; it is that the CRTC dispute process, although sometimes slow ‑‑ and Mr. Brazeau has some comments about applying some of the things from the telecom side to it. So sometimes being a bit slow, but I think a lot of it has been because the dispute group within the Commission has absolutely tried to make sure that they come to a solution that is consistent with the Act and the objectives of the Act and sometimes that takes a little bit longer to sort out.
14826 We have always come to a solution, and I think that is what is most important in terms of this.
14827 I think that trying to come up with other kinds of rules is not the way to go.
14828 In terms of the independents, we are very conscious of the fact that they are smaller players. We have the same situation in the cable industry and the CCSA stepped in to address that in terms of dealing with people and has done it very successfully.You know, maybe that is something the independent programmers want to do as well.
14829 But essentially they have a number of distributor ‑‑ I think the key point here is they have a number of distributors they can go to. We are not talking about ‑‑ you know, people say there are three large terrestrials, but you know we compete locally. I mean, in Winnipeg it is battle time with MTS and in Saskatoon it is battle time with SaskTel. And, you know, TELUS isn't going to lie back when they start launching their product.
14830 So it seems to me that as an independent distributor, they can go to these people and they can say look, here is what we can do. We are not on Shaw but that will give you a huge advantage. And that has happened in certain circumstances.
14831 THE CHAIRPERSON: Come on, Mr. Stein, please. With all due respect, that's not ‑‑
14832 MR. STEIN: It's happened.
14833 THE CHAIRPERSON: It may happen in Winnipeg, but how much is Winnipeg worth to the national audience?
14834 If I'm not on Shaw, then I'm losing 30 per cent of my income, or whatever it happens to be. So to equate the difference of MTS and Shaw is really not ‑‑
14835 MR. BISSONNETTE: Let me just ask, and I'm asking this maybe a little naively. Let's take an independent provider that is not being carried right now. So you license them as a Category 2 service provider.They came to you in the full light of day saying we would like to have a licence to provide this service, and you have said to them in the full light of day that, you know, having a licence doesn't necessarily translate into carriage.
14836 So will that person with the reverse onus then be able to come to you and say for some reason, you know, that the rules have changed and that there is an obligation now for Shaw to carry them where there is no market demand for them and there is no customer demand for them, and that somehow because they have now used this reverse onus argument that we have done something wrong because we haven't?
14837 If we can't accommodate them or if our customers don't want them, we are not going to put them on just to put them on to occupy space where space is so short a resource.
14838 So I don't understand. You are going to have complaints from some of the Category 2 people or to the licensees that aren't being carried, but having a reverse process isn't going to change the fact that our customers don't want those services; and if they did, they would express the desire to us.
14839 Setanta is a perfect example of a small provider of soccer programming. We heard that Setanta was going to be available on ExpressVu and our customers let us know that they weren't going to be able to get their soccer somewhere else, and we carried them and they have done very, very well.
14840 We respond to our customers' demands. Is the complaint process going to change the actual rules?
14841 COMMISSIONER KATZ: How does your customer let you know, say Setanta was ‑‑
14842 MR. STEIN: They write to us, they phone us.
14843 COMMISSIONER KATZ: But it's not being broadcast initially in Shaw's territory, so it is a brand‑new entry. How do your customers even know it exists?
14844 MR. BISSONNETTE: Well, let's just give you ‑‑ I will just give you ‑‑
14845 MR. STEIN: Wait a minute.
14846 MR. BISSONNETTE: Let's just give you ‑‑ all three of us.
14847 MR. STEIN: We have general managers in each of the areas that we serve whose job it is day by day, you know, minute by minute, is to listen to what people in that community and that area you are serving. If you don't think we don't hear from Calgary or Medicine Hat or Prince George what services people want, we hear it all the time. They phone, they call. You know, our call centers get call centers all the time: Do you have this? Don't you have that?
14848 So that is all tracked, right, because we are a service company, and first and foremost we have to know what our customers want and we have to be able to deliver it to them.
14849 So we depend very much on our employees, on our management.We spend millions of dollars on leadership training and management training and the whole focus of the company is on listen to the customer.
14850 So when I go to Saskatoon and I go to the Premier's dinner and I'm sitting with the Mayor of Saskatoon and he says you know what, you are the best local company around. You focus entirely on what we need in Saskatoon and he says as the Mayor of Saskatoon I am willing to go to Ottawa and tell them that. Right?
14851 So that is how we know what our customers want, and we do focus groups and we do surveys and all that type of thing.
14852 But we depend on our 10,000 employees to also have a relationship with our customers, to say here is the kind of stuff that people need out there and we have to be able to respond to that.
14853 We feel that we have a very close relationship with our customers and that we feel that we know what they want and if people come to us and say will you offer this to our ‑‑ can we offer this?Then we are willing to go with that.And we do things like with Wild and Fight ‑‑
14854 MR. BISSONNETTE: And you asked how our customers actually know about these services.They know through advertising on local avails, through the print media, through advertising on broadcast television.They know that a service has been launched in our area irrespective of who the BDU is.
14855 And if it is not available to them ‑‑ and many times the local programmer will actually say only available on ExpressVU, and customers hear that in the public domain.
14856 COMMISSIONER KATZ: Okay. I want to come back to I guess something that the Chairman just asked now and you responded to, and I will ask it in a different way.
14857 What per cent of the market for BDUs does Shaw have in Alberta and British Columbia, in those two provinces? Between Star Choice and Shaw, what per cent of the customer homes do you actually reach?
14858 MR. D'AVELLA: Well, as a measure of our homes passed, we would probably be in the 65 per cent range, but in terms ‑‑
14859 COMMISSIONER KATZ: Who has the other 35 per cent?
14860 MR. D'AVELLA: Well, they are either ‑‑ they could be Star Choice, they could be ‑‑ well, some of them may have nothing. They could be ExpressVu, they could be TELUS.
14861 COMMISSIONER KATZ: I'm putting Star Choice in there as well, because obviously Shaw has both terrestrial as well as satellite.
14862 MR. D'AVELLA: Yes.
14863 COMMISSIONER KATZ: If we put both of those two in there, what does that number amount to?Is it 75, is at 80, is at 85?
14864 MR. STEIN: No, no, no.Under 75.
14865 COMMISSIONER KATZ: It's under 75 per cent.
14866 MR. STEIN: Yes, it's below 70.
14867 COMMISSIONER KATZ: Some folks have come to us in the last two weeks suggesting that the BDU business is a protected business in Canada as well. You were talking about the fact that we should be letting go on the broadcasting side. Folks have come to us saying that the cable business is protected as well right now.You don't allow the Direct TVs into the country.
14868 How do you respond to that?
14869 MR. STEIN: That's a surprise. I was driving down the street the other day in Toronto and my wife and I were stopped at a stop light and we were on Dufferin Street, and right along one side there was 12 dishes. One of them was Bell, one of them was Star Choice and the 10 others were all illegal dishes.
14870 So the thing is, when people say, you know, let the foreigners in, okay, let them in; they are here. But by the way, why don't you hit them with the CTF tax and the GST and all the other taxes that we pay as well.
14871 So these are services that are here. We are willing to compete with those services, but, you know, it's always the case of the obligations that people carry in terms of the services.
14872 We feel a huge privilege in having the licences that we have, and with that goes the responsibilities that we have to deliver to the Canadian broadcasting system. We may disagree on the means to achieve those objectives, but we very strongly believe in those objectives.
14873 For people to come in here ‑‑ I think Mr. Audet said it well. I mean, listen in on the analyst calls. If people don't think this is a competitive business, listen to the conference calls that we have to hold every quarter in terms of our results, what we have to do to justify the investments that our shareholders make.
14874 So we believe that we are in a very competitive business.We don't think that ‑‑ we think that people who come forward and say well, they are protected, are just being disingenuous. We don't feel protected at all and every day we have to deliver results for our shareholders and our investors.
14875 As Peter pointed out before, people don't just buy the television product any more. They buy the telephone, the Internet and the cable package and it is government policy that we be competitive in all of those areas. It has been to a huge advantage of our consumers. The services are better and the price they pay for the package is less. And that is all because of competition.
14876 COMMISSIONER KATZ: Mr. Stein, I want to take you up on that comment you just made.
14877 On page 2 of your submission this morning you say that:
"Over the last seven years prices for a basket of telephony, Internet and basic cable services have dropped by 25 per cent."
14878 I imagine that is the basket. Can you tell us what your basic cable service rates have done in that period of time?
14879 MR. BISSONNETTE: Yes, we can. The cable rates have gone from approximately $20 to $32, but again offsetting those increases in basic cable have been the reductions in the prices of Internet and telephony.
14880 So in a basket of services the overall cost of those services has actually come down by 25 per cent.
14881 As Ken alluded to, it is a very, very competitive market we are in. When we launched our Internet service, we launched it at a $55 price point. It is now available in the $29 price point but also with much more speed. We offer a light speed Internet service which wasn't available previously.
14882 On our telephone service, as you know, we have 500,000 telephone customers. The price of telephone service has come down substantially since we entered the market.Even our own pricing has diminished to the point where we have now three different tiers of telephone services available to our customers, whether it is the all‑in like product and a basic telephone product.
14883 So customers have the ability now to get each of those products at a significantly lower price than they were available seven or eight years ago.
14884 THE CHAIRPERSON: But surely you are not suggesting that you cross‑subsidize between services?
14885 MR. STEIN: No.
14886 THE CHAIRPERSON: Each one of them is profitable on their own?
14887 MR. STEIN: Yes, that's right.
14888 COMMISSIONER KATZ: My last question is tied to fee for carriage and we will start with a hypothetical.
14889 Let's assume that the Commission, in their wisdom, decides that there shall be some degree of fee for carriage for whatever reason, we will start with the hypothesis: Do you think that the CBC should be included in that equation?
14890 MR. D'AVELLA: No. We always find ourselves reluctant to get into hypothetical situations because all we are doing is enabling the kind of thought processes that go into the way that these things kind of evolve. Well, we talked to Shaw and they didn't think CBC should be in there. You know, they gave a little bit here.
14891 We have absolutely the strongest feelings ‑‑ and we have expressed those to you today ‑‑ why there shouldn't be fee for carriage. So to get into hypothetical discussions doesn't really feel like it is a proper process to do this. We have made our thoughts known on that.
14892 So to give a little bit for the CBC who, frankly, for all the reasons we have said are doing quite fine, leads us down a path that we really don't want to go down. We just don't want to talk about fee for carriage in terms of giving it some kind of endorsement. We don't endorse it.
14893 COMMISSIONER KATZ: Those are my questions.
14894 THE CHAIRPERSON: Just on that last point, fee for carriage or not, is the CBC in your view a different category than the commercial broadcasters?
14895 MR. D'AVELLA: Well, yes, they are subsidized.
14896 THE CHAIRPERSON: I mean, you are suggesting we don't give a fee for service. I appreciate that.
14897 But if there is a fee for service, would we have any reason to treat them differently or would we have to treat them as everybody else?That is really what my colleague is after.
14898 MR. BISSONNETTE: It is. It's like I am a Catholic, it's hard to talk about other ‑‑ you know, it's the notion of what you are talking about just doesn't feel comfortable with us.
14899 The CBC has a fee for carriage right now. They get paid. You know, Canadians pay taxes to support the CBC. That is the fee.
14900 THE CHAIRPERSON: It doesn't come through the ‑‑ I mean, whether you feel that because CBC is publicly, whether we should have a different regulatory approach to them than the commercial broadcasters. That is really what the nub of the question is.
14901 MR. BISSONNETTE: Is it warranted?
14902 MR. STEIN: I think what Peter is trying to say is that ‑‑
14903 THE CHAIRPERSON: I don't want to answer it. I got that.
‑‑‑ Laughter / Rires
14904 MR. STEIN: Well, I was going to say that Canwest's newspaper The National Post is running a series on Canada's big mistakes, and I think if we went to a fee for carriage, whether it is for the private broadcaster or the CBC, that hopefully in a couple of years they would be running that article as well.
14905 We just don't feel over ‑‑ you know, I think we felt very strongly overall that fee for carriage was not a good idea 15 years ago. It wasn't a good idea last year and it's not a good idea now.
14906 THE CHAIRPERSON: You have the disadvantage of being on the second‑last day so everybody else's ideas are being run past you. On the other hand, you have the advantage of commenting.
14907 We will break for an hour for lunch and I will continue with you after lunch.
14908 Thank you.
14909 MR. BISSONNETTE: Thank you.
‑‑‑ Upon recessing at 1240 / Suspension à 1240
‑‑‑ Upon resuming at 1341 / Reprise à 1341
14910 THE CHAIRPERSON: First of all, I guess it's my day to apologize.
14911 First, I do apologize to Rogers, but I gather in our exchange with you, Mr. Bissonnette, I referred to smaller cable companies as pygmies and I want to just make clear there was no disparagement of them as I was purely talking in terms of comparison of market size. I realize their importance and their contribution to the Canadian broadcasting system.
14912 So I apologize and hope nobody took offence.
14913 Rita, you had some questions?
14914 COMMISSIONER CUGINI: Yes, thank you, Mr. Chairman.
14915 Just a couple of follow‑up questions.
14916 Mr. Stein, I believe it was you who almost in the first exchange with the Chair this morning you said that the independents made a good point to substantiate your claim that the large broadcasting groups have quite a bit of clout when it comes to negotiating with distributors.
14917 But the independents made a number of other points as well, and I won't qualify them at this point. One of them was that because they have no clout, because they have no leverage with BDUs, they should be granted special status.
14918 They asked for mandatory carriage on basic, but I will ask you for your reaction to just the issue of mandatory carriage, period.
14919 MR. STEIN: No. I think that when I said that they had a point, I think the point that they have is that they aren't able to tie together proposals because they are independent. So they can't come and say we have this and this and let's do this.So they don't have that advantage in the negotiations.
14920 I do think, as well, that in terms of trying to, you know ‑‑ in order to gain access, I think there are ways of dealing with it other than giving them mandatory carriage, certainly not giving them mandatory carriage on basic.
14921 But I don't think you have to give them special status. I think you have to take them into account.
14922 I think what you have to do is impose on the distributors a requirement that is not a regulatory requirement as such, maybe almost a competitive or a consumer focused requirement that says look at their situations and listen to what they have to say and really look at the product that they have in terms of ‑‑
14923 COMMISSIONER CUGINI: But don't you do that already?
14924 MR. BISSONNETTE: Don't they get that already?
14925 COMMISSIONER CUGINI: Don't you do that already?
14926 MR. BISSONNETTE: We do, yes.
14927 MR. STEIN: Yes.
14928 MR. BISSONNETTE: Yes, we do.
14929 MR. STEIN: That's why we have said, Peter has said that we launched them, like Wild and Fight, et cetera. So we don't think they need anything extra.
14930 I think the thing is we just have to continue to be conscious of that.
14931 COMMISSIONER CUGINI: Okay.
14932 On the issue of genre exclusivity when it comes to foreign services, you said this morning that the only requirement for the admission of non‑Canadian services should be that they hold non‑exclusive Canadian programming rights.
14933 Well, that is a no‑brainer. I mean, we already require that of foreign services who want to be on the eligible list.
14934 So my question is: By removing the competitive test, what program variety are you offering your consumers?
14935 And I will take U.S.A. Network as an example, because you have raised it a number of times, and I don't want to argue why we decided that it would be competitive or not.
14936 When I look at their schedule, "Law & Order SVU" and "Law & Order Criminal Intent" are stripped across Monday to Friday. "Monk" is on and "JAG" is on. These are all titles that are available from Canadian broadcasters today, so what kind of additional choice or variety, in terms of program diversity, would you be offering your customers if we removed all competitive tests when it comes to foreign services?
14937 MR. STEIN: With respect to U.S.A. ‑‑ and I think that Michael and Cynthia may want to jump in on this, as well ‑‑ I think that there are differences.There are certain things that they carry that are different. People are exposed to them. People go down south, they see the networks that are there. They see what they have, and then they come back and ‑‑
14938 We are responding to a demand. People come back and they say, "Geez, we should have the U.S.A. Network."
14939 Maybe it's the timing of when they do the strips. Maybe it's the other kind of programming they have, as well, in terms of certain sports, et cetera. People say, "I would like to be able to see that."
14940 That is what we are responding to, the demands from our customers.
14941 COMMISSIONER CUGINI: But it just one example, obviously.
14942 If we were to open this up to all other U.S. services which currently aren't on the eligible list, again, aren't we just bringing more of the same, or more of what is currently available ‑‑ unless it's a really unique service.
14943 MR. D'AVELLA: Not necessarily. You are obviously going to get some overlap, because they are all buying the same programs, but there are dozens of unique services in the U.S. It is the most open and competitive market in the world.
14944 Just thinking of one offhand is the Tennis Network. The Tennis Network doesn't exist in Canada.
14945 I don't think that anyone would be able to put one together.There probably isn't enough programming to justify it, but they can make it work.
14946 Or the Sundance Film Channel.
14947 You might argue that some of those movies are being bought, but if you look at their schedule, a lot of it is not seen.
14948 I mean, you travel to the U.S., we all do, you look at channels and you say, "I have never seen that program before."
14949 There is going to be plenty of diversity.
14950 COMMISSIONER CUGINI: All right. In terms of what is available, or what will be available, according to your model, to the customers, the first point of contact between a BDU and the customer is the CSR. I am curious as to what kind of training your CSRs receive today to enable your customers to make informed choices.
14951 MR. BISSONNETTE: First of all, I think it is great that you are acknowledging the CSR and their role in representing our customers' best interests to ourselves.
14952 I think one of the toughest jobs that we have in our company is that of a CSR, because they have to be fully knowledgeable on all of the products we offer. They have to be knowledgeable about packages. They have to be knowledgeable about content with respect to the services we offer.
14953 And in order to make that available to them, first of all, there is probably an eight‑week training period for our customer service representatives, and then the tool that we provide them with ‑‑ Oasis in our case ‑‑ is one that, in fact, allows them to drill down into all of the products that we offer, into a description of the programming services that are available to them, the combination of programming services that they can make available to them, the price points of those services, and not just in programming, but internet services, what are the different speeds, et cetera.
14954 So they have a vast database of information that is readily available to them, and they do it in the most skilful way. While they are talking to a customer, and they determine what the customer's interests are, they are able to put something together that makes sense to the customer.
14955 And many times they do it in response to a customer: I would like to get the Discovery Network, or the Planet service, or whatever.
14956 So there is extensive training that our CSRs initially go through, and then it is constant training. They are constantly updating, because our world changes dramatically from month to month, as we add new services.
14957 For instance, this week they will be learning about some of the new HD services that we are launching, whether it is a movie service, or TLC, et cetera.
14958 They have a knowledge base, and as real‑time changes to the business occur, we make sure they are aware of those.
14959 COMMISSIONER CUGINI: And Shaw provides the training?
14960 MR. BISSONNETTE: Yes, we do.
14961 COMMISSIONER CUGINI: How do you work with the broadcasters to ensure that the content is constantly updated, and that it is the content they want you to promote?
14962 Or, do you work with the broadcasters to get that information from them?
14963 MR. BISSONNETTE: Yes, that's a good point.
14964 We work with programmers, whether they are specialty service providers ‑‑ whether it is TSN telling us that the Nascar races are going to be available next weekend, and to draw attention to them ‑‑
14965 If a customer calls in and says, "I want to have auto racing," our CSR is aware that this weekend ‑‑
14966 They have all of the schedules, as well, available to them.
14967 As you can see, it is a broad, broad database of information that our CSRs have to have at their fingertips.
14968 We have the programming services ‑‑ The Movie Network people coming in and training our CSRs on the movies they offer.
14969 In the case of Vancouver, we work with Fairchild, in terms of differentiating their services for those customers who may be interested in Chinese programming.
14970 We work with B4, you know, APTN ‑‑ or ATN, sorry ‑‑ to give our customer service reps a better understanding of programming.
14971 Sometimes it is basically taking that information, putting it into a database and saying: If you want information about The Golf Network ‑‑
14972 It could be describing a change, and the rationale for a change.
14973 We do all of that in‑house.
14974 COMMISSIONER CUGINI: Let me ask you this point blank. I do, obviously, recognize, Mr. Stein, what you said about the separation between Shaw and Corus; however, the Corus services are considered BDU affiliated.
14975 What is stopping a CSR from saying to a customer: You want a premium movie service? Pick Movie Central. Don't bother with Super Channel.
14976 MR. STEIN: They probably wouldn't know about that relationship, or we wouldn't emphasize that relationship. We would want to make sure that they chose the service on a neutral basis.
14977 I mean, if somebody said to me ‑‑ if you want to see the difference between Shaw and Corus, read our submissions.They don't stand the test of comparison.
14978 THE CHAIRPERSON: Are you suggesting that your CSRs don't know what channels are owned by Corus?
14979 I find that somewhat difficult ‑‑
14980 MR. BISSONNETTE: No, they don't.
14981 We don't make a point of letting them know that. We don't think it is material.
14982 They are there to sell products and packages, and if they can sell Super Channel when Super Channel launches, more power to them.
14983 COMMISSIONER CUGINI: I have one other question, and it is out of pure curiosity. The Setanta Sports package, that is an international sports package?
14984 MR. BISSONNETTE: Yes.
14985 COMMISSIONER CUGINI: And you offer it as a subscription VOD?
14986 MR. BISSONNETTE: No, we offer it as ‑‑
14987 It's a VOD service.
14988 We actually have a channel right now, which is Setanta, which covers soccer 24 hours a day.
14989 COMMISSIONER CUGINI: And customers pay on a monthly basis or on a weekly basis for access to that service?
14990 MR. D'AVELLA: They pay on a monthly basis, but it is essentially a monthly pay‑per‑view‑type service.
14991 I think they are trying to flip it into a channel.
14992 COMMISSIONER CUGINI: And you negotiated those rights?
14993 Shaw negotiated for the VOD or pay‑per‑view rights directly with Setanta?
14994 MR. BISSONNETTE: They own the rights.
14995 MR. D'AVELLA: They own the rights.
14996 Rogers represents them, I believe, so they own the rights.
14997 COMMISSIONER CUGINI: And it's purely international programming.
14998 MR. D'AVELLA: Yes.
14999 COMMISSIONER CUGINI: Okay. Thank you.
15000 Thank you, Mr. Chairman, those are my questions.
15001 THE CHAIRPERSON: On this point of the CSR, wouldn't they have to know what is owned by Corus, so that they can make sure that they don't violate the self‑dealing rules?
15002 MR. BISSONNETTE: They can't self‑deal if they don't know what they are dealing, and we don't make a point ‑‑
15003 THE CHAIRPERSON: No, no, but ‑‑
15004 MR. BISSONNETTE: I am being very genuine here. We do not ‑‑
15005 THE CHAIRPERSON: ‑‑ you don't want the CSR to sell a package that is in violation of the rules, surely.
15006 MR. BISSONNETTE: I don't know if you have been to our website, but you could go onto our website right now, without the aid of a CSR, and you could go through all of the Category 1 and specialty services, and you could hit a button that says that you are going to have "Discovery Kids", you are going to have "BBC Canada", and you are going to have The Golf Network ‑‑
15007 THE CHAIRPERSON: That's not the question I asked you. I asked you whether your CSR knows ‑‑
15008 MR. BISSONNETTE: No, we do not make a point of telling them what is or what is not Corus.
15009 THE CHAIRPERSON: Okay.
15010 Ron, you had a question?
15011 COMMISSIONER WILLIAMS: I have a few.
15012 I have another question on the CSRs.
15013 Are your CSRs commission compensated in any way for selling programming service packages?
15014 MR. BISSONNETTE: The CSRs have a base salary, which is probably 90 percent of what they can make, and they are commissioned on selling a product, such as the internet or telephone. They are not commissioned on any specific packages.
15015 COMMISSIONER WILLIAMS: It is broken into the categories of internet, telephone and television services.
15016 MR. BISSONNETTE: Yes.
15017 COMMISSIONER WILLIAMS: Thank you.
15018 This morning, during an exchange with our Chair on the issue of the community channel, you were talking about how the community channel was funded.
15019 What percentage of community channel costs are derived from the sponsorship revenues?
15020 MR. BISSONNETTE: Are you asking how much sponsorship revenue do we derive that goes back into programming?
15021 COMMISSIONER WILLIAMS: Exactly, into local programming. I think that was what you were speaking of.
15022 MR. STEIN: It would be quite minimal. It is more a target on the kind of programming.
15023 The importance of the WHL is, that is out‑of‑studio programming that has its own costs, in terms of mobile, et cetera. It is a higher cost. Therefore, the corporate sponsorship would deal with those costs.
15024 COMMISSIONER WILLIAMS: Would cover those costs.
15025 MR. STEIN: It is more the incremental costs for a particular project that are important in terms of corporate sponsorship, because we already have a lot of sunk costs and operating costs in terms of running the community channel, both in terms of the studio and the people, and that type of thing.
15026 COMMISSIONER WILLIAMS: Your community channel, I guess, is funded through ‑‑
15027 MR. BISSONNETTE: Through contributions.
15028 COMMISSIONER WILLIAMS: ‑‑ your regulated contributions, the 4 percent or the 5 percent or ‑‑
15029 MR. BISSONNETTE: Two percent, yes.
15030 COMMISSIONER WILLIAMS: I guess we are to understand in that case, then, that Shaw's customers are paying a fee for the local content through the payment of their basic cable bills.
15031 MR. BISSONNETTE: Yes. Some of our revenue is used ‑‑ in accordance with the CRTC's contributions, a portion of our contributions go to the community programming channel.
15032 COMMISSIONER WILLIAMS: Is the community channel going to be totally funded with that 2 percent, or do you have to inject additional moneys, other than what we talked about with sponsorship and special projects?
15033 MR. BISSONNETTE: We have to inject additional money.
15034 COMMISSIONER WILLIAMS: Approximately how much is regulated funding and how much comes from Shaw's contribution?
15035 MR. BISSONNETTE: We will have to get back to you on that. I don't want to give you an answer that isn't accurate.
15036 COMMISSIONER WILLIAMS: Okay. That's no problem.
15037 Those are my questions, Mr. Chair.
15038 THE CHAIRPERSON: Just as a conclusion to Mr. Williams' question, to some extent the local content or the community channel is paid by fee for carriage.
15039 MR. BISSONNETTE: No.
15040 THE CHAIRPERSON: It is a different fee for carriage, but it is still ‑‑
15041 Your main argument against fee for carriage is that it shouldn't be coming from subscribers, so subscribers should not have to pay for local content.
15042 It seems to me that you just, in answer to my colleague, made it clear that your community channel, local content, is funded by subscriber fees indirectly.
15043 MR. BISSONNETTE: Everything we do is.
15044 Our installation personnel are funded through the revenues that we derive from our customers.
15045 Our cable plant, which we build, is funded through the revenues that we derive from our cable customers.
15046 The whole enterprise is.
15047 THE CHAIRPERSON: But your principal argument this morning was that there should be no fee for carriage for broadcasters, that they should not be paid for by subscribers, and yet here we have a broadcaster, albeit the community broadcaster, who is getting a fee from subscribers.
15048 There is a certain inconsistency here.
15049 MR. STEIN: Yes, but every hour of programming produced on the community channel is produced by the community channel. That is number one.
15050 Number two, they don't have access to the $3 billion in advertising that Canadian broadcasters have.
15051 Fee for carriage fundamentally changes the over‑the‑air broadcasting model.
15052 The community channel model has been based, since the fifties and sixties, on a model set out in the regulations, so that is the model that is there. It happens to be a model that works, but it is a model that is set out in regulation, and it is set out and has to be done in particular ways, which are not commercially focused.
15053 So it is a totally different situation.
15054 It would be a hard sell to sell three hours of city council meetings in Moose Jaw to an advertiser.
15055 THE CHAIRPERSON: Well, let's agree to disagree.
15056 Mr. Morin?
15057 COMMISSIONER MORIN: Thank you, Mr. Chair.
15058 If, by hypothesis, the Commission gets rid of access rules, as you suggest, would the French channels be in jeopardy?
15059 TVA West or RDI are currently on your basic tier, I think; right?
15060 MR. BISSONNETTE: That's correct.
15061 Would they be in jeopardy?
15062 COMMISSIONER MORIN: Yes.
15063 MR. STEIN: The situation in French‑language broadcasting is that many of them ‑‑ I wouldn't say they would be in jeopardy. Many of them have very, very low subscriber numbers, in some cases 10 or 15, but some of them are very popular, so there would still be ‑‑
15064 With TVA being a mandatory situation, and with Radio‑Canada, and with a range of others that are popular services in French‑language communities, or that are just generally popular, we would see those continuing.
15065 I think what we would do, as with all of the services, is that we would look at the subscriber numbers and try to focus on ‑‑ consistent with the Broadcasting Act, focus on making sure that the minority language individuals in our areas are well served.
15066 Whether we would want to carry the whole range of them, probably not, but we certainly would want to make sure that we did carry a range that would satisfy the interests of our customers.
15067 MR. BISSONNETTE: And, of course, on satellite, that wouldn't be the case, because we have a large subscriber base that really enjoys those services in Quebec and in Ontario, et cetera.
15068 MR. STEIN: Especially if you are a Montreal Canadiens' fan.
‑‑‑ Laughter / Rires
15069 COMMISSIONER MORIN: I understand.
15070 This morning you repeated that you are in favour of the preponderance rule, 50 percent plus 1, at the consumer level, instead of at the entry of the system.
15071 I am wondering why, with your consumer focus, you made the choice to put this preponderance rule at the consumer level instead of at the entry of the system.
15072 Some people here, since the beginning, have said that they are in favour of a double preponderance rule, and some of them a double‑double preponderance rule, but with your focus, I am wondering why it is at the consumer level, because, of course, the consumer will have less choice.
15073 MR. STEIN: We actually changed our position.
15074 Our position going in was that there would be a preponderance rule only on our obligation. In other words ‑‑
15075 MR. BISSONNETTE: We would offer it.
15076 MR. STEIN: ‑‑ we would offer it, but we wouldn't require consumers to take it on a preponderance basis.
15077 What we did today in our ‑‑
15078 COMMISSIONER MORIN: You changed your position today.
15079 MR. STEIN: Yes.Today we changed it by saying:Okay, beyond the basic package, to which the preponderance rule absolutely applies ‑‑ beyond the basic package, any package we offer would have a preponderance of Canadian services.
15080 The issue that we would adhere to is that, if somebody had the basic package, or perhaps basic digital or an Essentials package, beyond that they could select ‑‑
15081 MR. BISSONNETTE: ‑‑ à la carte.
15082 MR. STEIN: If they took a standalone service, they could pick out whatever they wanted.
15083 So the preponderance rule would not apply to the standalone or à la carte purchases, but it would apply to a package.
15084 That was a change in our position.
15085 COMMISSIONER MORIN: To a package and to the basic, of course.
15086 MR. STEIN: Yes.
15087 MR. BISSONNETTE: We also acknowledge that, even with the à la carte flexibility, there still would be a preponderance of all services received by that customer.
15088 MR. STEIN: Just in the nature of the way the system was structured.
15089 But we certainly don't want to be in the position of telling consumers that ‑‑ we don't want to affect their ability to make the choices they want to make.
15090 COMMISSIONER MORIN: Thank you very much.
15091 THE CHAIRPERSON: I have one last question, and then I will let you go.
15092 Just before lunch, when Commissioner Katz was asking you about the various lines of business that you follow, et cetera, I asked you, Mr. Bissonnette, whether you cross‑subsidize, and you said no, you don't, that each of your divisions is profitable on its own feet.
15093 Isn't that exactly what you are asking the OTAs to do?Aren't you asking CTV and Canwest to cross‑subsidize from their profitable specialties to their OTAs, which are not making money?
15094 Why is it a rule that you don't follow yourself, but you advocate it for them?
15095 MR. STEIN: We are not suggesting that they cross‑subsidize at all. What we are saying is that they are strong corporations, that their over‑the‑air ‑‑
15096 We haven't seen any evidence to indicate that their over‑the‑air services require any kind of subsidy. We think that the over‑the‑airs, on their own, are quite profitable.
15097 And there was no evidence filed that indicates that their local programming is suffering.
15098 We are not suggesting cross‑subsidizing, I think what we are saying is that they obviously believe in the system in totality, because they have made the investments they have made to buy further services and to make those acquisitions.
15099 THE CHAIRPERSON: I guess we would have to take apart the financing of the various divisions of, let's say, CTV, to see whether local content is running at a deficit or not.
15100 MR. STEIN: I presume that they would be running it the same way that we run our company. Every person responsible for a division in our company has to make money. There is no cross ‑‑
15101 I guess the best example of that is Star Choice. It is probably the only satellite distributor in the world that actually makes a profit, and the basic view of that is that they are required to do that. That is the measurement by which people who run divisions are measured, and I would presume that it would be the same for CTVglobemedia and the same for Canwest.
15102 THE CHAIRPERSON: Thank you very much for your appearance.
15103 Just before you leave, I want to announce that it seems to be in vogue these days to write to the Prime Minister and copy the CRTC on these proceedings.
15104 Today we got a letter from CTVglobemedia commenting on Mr. Shaw's letter, again written to the Prime Minister and copied to us.
15105 So, in the interests of consistency, we will place this on the record as well.
15106 Thank you very much.
15107 MR. BISSONNETTE: Thank you. We appreciated the time with you, and we look forward to your decisions.
15108 THE CHAIRPERSON: Thanks very much.
15109 We will take a five‑minute break while the next panel gets set up.
‑‑‑ Upon recessing at 1407 / Suspension à 1407
‑‑‑ Upon resuming at 1412 / Reprise à 1412
15110 THE CHAIRPERSON: Madam Secretary.
15111 THE SECRETARY: Thank you, Mr. Chairman.
15112 We will now proceed with the next four intervenors:Channel Zero Inc., The Fight Network, High Fidelity HDTV Inc., and Maple Leaf Sports & Entertainment Ltd.
15113 We will hear each presentation, which will then be followed by questions by Commissioners to all intervenors.
15114 I would now invite Channel Zero to begin their presentation.
PRESENTATION / PRÉSENTATION
15115 MR. PODZYHUN: Mr. Chairman, Vice‑Chairs, Commissioners and Commission Staff, my name is Roman Podzyhun, and I am President of Channel Zero. We are licensees of the Silver Screen Classics and Movieola Category 2 services.
15116 Today I have brought my A Team. With me is Cal Millar, our Vice‑President and General Manager of Channel Zero, who will be giving our presentation; and behind me is Paul Brown, our consultant on Regulatory Matters.
15117 Silver Screen Classics exhibits films from the 1930s to the sixties. We launched the service in 2003.
15118 Movieola, the short film channel, was the world's first channel dedicated to short movies when licensed in 2001.
15119 In 2006 we launched What Media, which is now the second‑largest short film distribution company in the world.
15120 As entrepreneurs, we are supporting Canadian, French and English‑language films and filmmakers by distributing their films around the world to broadcasters and to audiences on Hulu, Joost and Verizon Wireless, among others.
15121 As an international distributor, we know that audiences around the world choose and embrace Canadian programming, yet, as a Canadian broadcaster, we know that Canadians have their choice of such programming restricted by market‑dominant BDUs.
15122 Channel Zero is a Canadian independent programmer ‑‑ independent because we are not affiliated with any BDU, nor are we a part of any of the large Canadian broadcasting conglomerates.
15123 MR. MILLAR: This hearing is really about Canadian programming and how to achieve the objectives of the Broadcasting Act.
15124 We don't believe Canadians say to themselves, I want to spend money on cable and satellite, they say, I want to watch TV. Without programming services, cable and satellite have no television to sell to Canadians.
15125 BDUs are an oligopoly operating in a regulated market that legally prohibits foreign competition. Today most Canadian households receive television services from one of three regionally dominant cable operators or from one of two national DTH distributors.
15126 As this chart you'll see now dramatically shows, Canadians don't have much choice among BDUs. In virtually every province, one cable operator dominates the market.
15127 In Western Canada, Shaw has 85 per cent market share in B.C., 85 per cent in Alberta, 56 per cent in Manitoba. In Ontario, Rogers has 73 per cent of the market and in Quebec, Videotron has 68 per cent. In Atlantic Canada, Rogers has 100 per cent of New Brunswick and 49 per cent of the market in Newfoundland.
15128 We have two national DTH BDUs, Bell ExpressVu has 67 per cent market share and Star Choice, who you just heard, is owned by Shaw.The red line indicates 45 per cent market share.
15129 Let me give you an example of how market forces operated in this concentrated situation where Category 2 services are not guaranteed access and have to negotiate access with these dominant BDUs.
15130 In 2002, Channel Zero called Shaw Cable and Star Choice to offer them our proposed old movies channel, Silver Screen Classics, which we told them was kind of like Turner Classic Movies. They wouldn't even let us pitch the concept, claiming they had no channel capacity.
15131 In 2003, after we launched the service to better than expected market success on other BDUs, including Rogers and Bell ExpressVu, we were again told by Shaw and Star Choice that "We don't want an old movies channel, nobody will watch just old movies and, besides, we have no channel capacity."
15132 In 2004 I actually showed up on Shaw's doorstep and was told the same thing again, we have no channel capacity. They're nothing if not consistent.
15133 In 2005, imagine my surprise to learn that Shaw Cable and Star Choice launched not one but two foreign‑owned old movie channels:Turner Classic Movies and American Movie Classics.
15134 Not only that, the cable division launched them in analog packages to millions of subscribers and taking up the very same channel capacity that might have accommodated up to 12 digital channels.
15135 Not only was the licensed Canadian service shut out, but we also now faced unfair competition from a competitor with no costs of operations in Canada, who makes no contribution to the Canadian broadcasting system.
15136 This foreign competitor charges BDUs two and a half times what we would charge to make our programming available for comparable distribution. Those fees are equal to more than $20‑million annually that flow south of the border.
15137 The addition of TCM and AMC to the analog service of cable BDUs is a perfect example of the outdated nature of the current rules.
15138 At a time when the Commission and BDUs themselves are encouraging digital conversion and HD migration, the addition of U.S. services to the analog band is, to say the least, counter productive.
15139 We agree BDUs must be able to respond effectively and creatively to the demands of their subscribers and, in that sense, market forces should be able to operate with a minimum of constraints.
15140 However, BDUs are merely delivering mechanisms in a broadcasting system that Parliament has directed must create and exhibit Canadian content.
15141 When BDUs tell you they want to allow market forces to operate what they're really saying is that they want to exercise their dominant market power in negotiations with the programming services. Their objective is not to offer more programming but to maximize their own profitability.
15142 This experience has led us to create and propose a new licensing model. We believe that Canadian programming services that make significant contribution to Canadian content and substantial expenditures on Canadian programming should be guaranteed access to the BDUs.
15143 We're not saying that they must be guaranteed access to the basic package, but they must be available on the digital shelf for Canadians to select. I believe this is called choice.
15144 To accomplish this we propose two categories of licence programming: Category A and Category B.
15145 Our proposed Category A services would have high levels of contribution and, as a result, would qualify for guaranteed access. These services would be subject to a minimum Canadian content requirement of 50 per cent and subject to an annual Canadian programming expenditure requirement of at least 50 per cent of the previous year's gross revenues. BDUs would be required to carry all Category A services.
15146 The Category B services in contrast would have minimum Canadian content requirement of 25 per cent and in lieu of any CPE requirements would still contribute 10 per cent of gross revenues to a production fund. At this level of contribution to the creation of Canadian programming, Category B services would not be entitled to mandatory carriage on any BDUs.
15147 In our written submissions we have proposed transitional arrangements from the current framework to the proposed model.
15148 Category A services would be licensed by you, the Commission, and we have proposed a competitive licensing process. We would be pleased to discuss those arrangements with you further during questioning.
15149 We think that our proposal for guaranteed access for services that have high contributions to Canadian content is consistent with recommendation 7(1) of the Dunbar Leblanc Report. It is forward looking, strategic, straight forward, flexible and equitable.
15150 We believe that there should be a complete moratorium on the addition of any new foreign satellite services to the eligible lists.We also believe that a substantial change in the format of a foreign service should make it subject to being removed from the lists upon the application by any interested party.
15151 Non‑Canadian satellite services no longer play a supportive role in the Canadian broadcasting system. If foreign programmers wish to participate in the Canadian broadcasting system in the future, they should only be permitted to do so by holding minority investments in licensed Category A or B services.
15152 After access, the most important component of a balanced system is effective dispute resolution. More effective and timely dispute resolution is very important to independent players, both program services and, I believe you heard, independent BDUs. The current process is not even available to Category 2 services in any circumstance.
15153 In our written submissions we have outlined four important components under an effective dispute resolution process. Dispute resolution should be available in all circumstances.
15154 We have reviewed and fully support the proposed process set out in the report prepared for Astral Media by Hank Intven.
15155 Some programmer BDU disputes could be avoided altogether we believe. In one of our last renewal negotiations a BDU began the discussion by tabling our detailed financial return to the Commission. The BDU then said, "We see from the CRTC reports that you earned "x" amount last year. We want that money, you will reduce your wholesale fees or we'll take your service down."
15156 We propose that all broadcasting licensees should be treated equitably with respect to the public disclosure of financial information.The Commission should either disclose publicly the detailed information of BDUs, or cease disclosing publicly the detailed financial information of the discretionary services.
15157 Section 3(1)(f) of the Broadcasting Act provides that:
"Each broadcasting undertaking shall make maximum use and, in no case, less than predominant use of Canadian creative and other resources in the creation and presentation of programming." (As read)
15158 MR. MILLAR: The objective here is maximum use. Predominant is supposed to be the minimum.
15159 Channel Zero therefore proposes, like many interveners in this proceeding, that there should be a two‑thirds Canadian preponderance requirement for BDUs and that the requirement should apply both to services offered to and to services received by subscribers.
15160 With a true preponderance requirement replacing the current preponderance requirement and with reverse onus undue preference provisions, BDUs should be allowed considerably more flexibility in the packaging of services.
15161 In particular, most of the complicated and outdated distribution and linkage requirements that currently apply to BDUs should be eliminated.However, we do propose that the 5‑to‑1 linkage rule between BDU affiliated and non‑affiliated services should remain.
15162 In addition, we believe it should be extended to services owned by these large broadcasting conglomerates that we've been discussing.Such a rule would help ensure that independent services receive access in addition to those owned by the BDUs and conglomerates; that is, if you want diversity of ownership.
15163 We agree with BDUs on another point, that on‑demand services are important to allow the regulated broadcasting system to compete with unregulated alternatives, but on‑demand is just a delivery mechanism employed by the BDUs.
15164 We do not believe that BDUs should be allowed to serve as their own programming undertakings. The Commission is aware of BDUs offering channels on an on‑demand basis that are not authorized for distribution in Canada.
15165 On‑demand programming should be acquired exclusively from licensed Canadian programming undertakings. We believe that changes are required to the regulatory framework to address the increasingly likely prospect that on‑demand services owned by BDUs will become substitutes for licensed linear programming services.
15166 At this point we're going to just deviate, if you could turn the page, we'll be referring to the five questions asked by the Chair.
15167 The first question was: What should be the size of the basic package? We take no position on the minimum size of the basic package.The basic must, by definition, include 9(1)(h) services, could also include local and regional OTA services provided that there is no fee‑for‑carriage. We're not advocating that core specialty services, the proposed Category A services, must be in basic.
15168 While we want BDUs to have flexibility in packaging, including in deciding what to offer in the basic, no specialty services we believe in which the BDU has an interest, other than a 9(1)(h) service, and no foreign services other than one set of four‑plus‑one should be included.
15169 All other practices relating to the basic package can be addressed using a reverse onus no undue preference provision.
15170 Should there be guaranteed access for certain Canadian specialty services, which ones and on what terms? We believe that BDUs should be required to distribute what we've called the Category A services in the digital service.
15171 I touched on that earlier. We only ask that they be guaranteed a spot on the digital shelf available for selection by Canadian consumers.
15172 Should there be any type of genre protection for guaranteed services; and if so, should they be protected from Canadian services or only from foreign services?
15173 To paraphrase, even further than what's in the script, we suggest that the genre protection rules have provided us with in fact the diverse system and selection of programming that we have today and that is a hallmark of Canadian programming.
15174 We believe that there should be a complete moratorium, as we discussed in our presentation.
15175 We believe that certain core services, again our Category A services, that are in genres that can support only one Canadian provider or a few Canadian providers in the economic production of Canadian content, should receive genre protection from both Canadian and non‑Canadian services.
15176 To question four: Should there be fee‑for‑carriage for over‑the‑air broadcasters; if so, how much and on what terms? Fee‑for‑carriage would only increase the cost of television services to consumers and reduce the money available to support the distribution of Canadian pay and specialty services that, unlike the over‑the‑air broadcasters, can only be provided to Canadian via BDUs.
15177 And to question five: Should BDUs have access to advertising revenues from on‑demand services or from local avails? We believe in a nutshell that on‑demand programming should be acquired exclusively from licensed Canadian programming undertakings that we believe would deal with the issue of them selling programming.
15178 Roman to conclude.
15179 MR. PODZYHUN: Channel Zero's approach will not only increase the creation of Canadian content and also the distribution of such content to Canadians, but it also allows the regulatory framework to be streamlined.
15180 We'll be pleased to respond to your questions after the others have spoken as well.
15181 Thank you.
15182 THE SECRETARY: Thank you.
15183 I would now invite the Fight Network to begin their presentation.
PRESENTATION / PRÉSENTATION
15184 MR. BURGER: Mr. Chairman, Commissioners, as President and Chief Executive Officer of TFN Global Inc., the parent company of the Fight Network, and on its behalf, I would like to thank the Commission for providing us with the opportunity to present our views in this proceeding.
15185 We believe this proceeding is both timely and critical and may, depending on the outcome, be remembered as the key inflection point in the development of Canadian broadcasting in the wireless and broadband era.
15186 It is also our view that the presence of the Fight Network is particularly appropriate and important. This is because the Fight Network's business model is very different from the typical Canadian broadcasting business model, be it OTA and specialty and can be regarded as what might become more prevalent if, indeed, these proceedings represent that inflection point.
15187 What makes the Fight Network so different is this: It is the first unique specialty channel, genre, developed solely in Canada which has the potential to become a truly global sports media brand on the scale of the Golf Channel and Speed Vision.
15188 To our knowledge, we are the only channel in the world that provides wall‑to‑wall 24‑7 coverage of the fight game in all of its popular forms, including mixed martial arts, boxing, wrestling and kick boxing.
15189 We deliver original news content and live events with an equal strategic focus on television, mobile and broadband.
15190 The credit for this ground‑breaking concept belongs to Mike Garrow, the founder of the company who had no previous broadcasting industry experience whatsoever. He just knew a good idea when he got one and ran with it. He hunkered down and completed a Category 2 licence application, submitted it and was in business. He asked for no hand‑outs, no guarantees, no protection. He believed in the concept and that it would prove itself.
15191 In fact, that is exactly what we see happening. Today the Fight Network, despite a limited subscriber base due to its placement on less widely distributed packages by some BDUs, is consistently at or near the top ranks in ratings among the dozen Category 2 sports channels. Indeed, it ranks in the low 20s among the 70 or so digital channels in both categories regularly beating many channels with four, five or more times as many subscribers.
15192 While we continue to work tirelessly to persuade the BDUs to place us on more widely subscribed packages, many of which have sports channels which we regularly deck in the ratings, we cannot depend on being rewarded for our excellence and exceedingly disproportionate popularity among consumers as other decisions appear to drive the decisions of some BDUs.
15193 Instead, we have put an equal focus on exporting the brand around the world, taking advantage of the fact that it is as unique a concept outside of our borders as it is within them.
15194 We are moving opportunistically and quickly, seeking to plant our flag in at least 10 additional territories within the next 18 months and developing a dedicated community of 100‑million television households and online and mobile users who look forward to our content every day.
15195 In fact, we recently launched the Fight Network in the U.K. where we are carried on BSkyB and seen in nearly 9‑million homes and we are currently negotiating carriage or joint ventures in four other territories.
15196 We believe that all of this unique potential has developed because we effectively operate in a totally unregulated market.
15197 Yes, we are based in Canada, but derive few of the benefits that most broadcasters in Canada have and have made forceful submissions during these proceedings not only to maintain, but expand.
15198 Had this market been less regulated, had the entrepreneurs who obtain valuable broadcasting licences in this country been less protective and less secure in the belief that those protections would assure them of all the growth that they could ever aspire to, I doubt that the Fight Network would be the first original genre developed in Canada to be exported to the U.K. and other markets.
15199 After all, the Golf Channel, Speed Vision, Discovery and many other channel genres could have just as easily been conceived here. The strength of those ideas with our proximity to the U.S., which is seldom seen as a benefit, could have been sold and developed just as easily by Canadians and major Canadian broadcasters at that.
15200 No one can say what could have been, but that could at least have been one probable outcome of a less regulated market.
15201 And had that taken place, and had a handful of global brands been launched out of Canada, broadcasters would not be here today justifiably threatened by a fragmented possibly borderless future.
15202 At least that is our view, and that view serves as an introduction to our additional submissions to the Commission on several of the five questions to which the Commission has requested responses.
15203 In our written submission which we provided last fall, we focus primarily on the issue of genre protection. Today we would like to address that a bit more and also speak to the issues of guaranteed access and carriage fees for OTA broadcasters.
15204 The policy of genre protection stems from the size of our TV market. The basis for awarding licences has always been to provide some form of benefit to Canadian culture and, in particular, to help finance the development and production of Canadian TV content.
15205 For this reason, it was always held to be important that a licensee survive and prosper, and in a market this small the belief had been, and may continue to be, that competition would lay waste to all competitors, as was almost the case in the early days of pay TV.
15206 Protecting licensees from competition to enable them to survive and prosper may have been a good idea at the time, however, we believe the times they have changed and those with protected licences have prospered well beyond the expectations of the Commission and, indeed, themselves.
15207 Channels like Discovery (Canada), TSN, SportsNet, History Television, Space and Bravo are huge cash generating machines, so powerful that they are stealing business from their OTA siblings.
15208 As such, questions have to be asked why they still merit protection today, whether protection has had its day and, indeed, whether protection actually undermines market growth of specialty channels as a whole.
15209 And, in any event, based on their own strength, not to mention that of their parent companies, they have such market dominance that ongoing regulatory protection would be superfluous. In fact, any new competitor would most likely be entitled to protection from them.
15210 But on the policy point, in terms of creating a player that will prosper and be able to support Canadian content, how much prosperity is enough? At what point does growth outstrip the wildest expectations of the licensees themselves?
15211 I can provide a first‑hand illustration of this.In 1995 when I was an executive at Alliance Communications we came up with the idea of the History and Entertainment Network, or then. We thought it was a pretty cute name, but marketers persuaded us to change it to History Television.
15212 In developing the model for the first seven years of operation we came up with growth that led to an operating income of approximately $1.4‑million in year seven.
15213 Now, I know everyone sandbags the models they submit with their licence applications to the Commission, but even so I remember fantasizing about building a channel that would one day be worth $35‑million and would serve as a platform for our content.
15214 That year seven in real time was 2002. In that year, History Television's operating income was in fact nearly $11‑million. That translated into a value of between 100 and $150‑million. Today I expect it is at least twice that much.
15215 So, they hit their marks and then some. What if a competitor were allowed? What if History on TV offered more than World War II news reels, endless repeats of "JAG" and, of course, that historical chronical "CSI: NY"?
15216 It may mean that the incumbent's expansion would slow or its operating income might fall, but the CRTC is not in the business of ensuring growth for its own sake. So, if a new, well financed competitor came on the scene, the incumbent might be adversely affected, but the History genre pie would grow, offering consumers a choice and making more TV time and more money available for Canadian content.
15217 Virtually all the protected services enjoy financial performance far beyond what was ever anticipated when they were granted protection.There is no longer any justification, in our view, to continue to extend that protection and keep consumers from enjoying the choice in genres enjoyed by those in the U.S.
15218 In fact, it is most likely the market would not be swamped with competing genres. BDUs and the market, as seen in the U.S., effectively limit most genres to one service, but that does not mean new entrants should be kept out. We do, however, feel strongly that the new entrants in any genre should be Canadian, not direct U.S. feeds or subsidiaries controlled by U.S. parents.
15219 Diversity can be achieved without any cost and most likely with benefit to Canadian content, only if ownership remains a level playing field and CPEs and exposure requirements in the long term remain the same across the board.
15220 We would, however, recommend some short to medium‑term allowances to be made to new entrants. The Commission in the past has had a propensity for allowing new entrants only if they assumed greater CanCon obligations and obtain fewer privileges than incumbents. This hinders, rather than enhances competition.
15221 This brings us to the issue of guaranteed access. I guess the simple honest comment would be, we don't have it, why should anyone else?
15222 But to some extent whatever success the Fight Network has achieved may be the result of not having guaranteed access. We have to market, program, design and build our brand as if our life depended on it because it does.
15223 The same can't be said for channels who are in the black the minute they turn the lights on. But guaranteed access enjoyed by many others does affect us adversely because those with such a licence benefit take a valuable channel in packet slots, whether their popularity merits it or not. It becomes very difficult for a new popular channel to get on a viable package if the BDU can switch non‑performing services out.
15224 However, there is the danger of deserving channels being pushed out anyway to make way for BDU‑owned specialty services.
15225 We believe access rules in that regard need to be maintained and BDU strategies diligently monitored to ensure their roles as gatekeepers do not keep deserving brands out.
15226 So, we recommend that no specialty service have guaranteed access, but that access rules limiting BDUs be maintained and strengthened, if needed.
15227 Finally, we have a couple of brief comments to make about carriage fees.
15228 First of all, we think commenting on this is very much our business, though it has been suggested otherwise. We do not believe the market is infinitely elastic. We acknowledge that RPUs have skyrocketed to levels no one ever dreamed of even a decade ago and the capacity for TV content and new TV technology consumption among Canadian consumers is, to say the least, robust.
15229 However, when you are a channel in the margins in some BDU package structures where that last package or a la carte buy might be stretching things a bit for a consumer who worry about the impact of additional fees added to their bills which by some estimates might be as high as $300‑million per year, that is a lot of money to drain from the pool, especially when the consumer is not getting anything new.
15230 If we lose one potential or existing subscriber so that the OTA services can make even more money while we fight for every dollar, then the system will once and for all choke off any new concepts, ideas, initiatives and players.
15231 Secondly, we agree with other comments that the OTA business cannot be looked at in isolation. Diversification into specialty services by OTAs was undertaken precisely to protect against market erosion. As specialties grow, OTAs might contract. The result is at worst zero sum, but most likely specialty growth will well exceed OTA erosion.
15232 We understand the argument that OTAs cannot continue to fund news and other local content at the same levels, but that argument only makes sense if there was some economic justification for viewing the specialties as distinct profit silos.
15233 Cross‑subsidization happens in all businesses every day. If for some reason that is unacceptable, we would recommend a different approach be taken to specialty CanCon expenditures, perhaps allowing the specialties to get credit if the related OTAs spend those monies on news and local.
15234 After all, there are just so many cooking shows on the Food Network that are essential to Canadian culture.
15235 In summary, we believe that how these three issues will be resolved will have a direct impact on how broadcasters approach innovation, risk and the development of brands that will withstand technology and the accompanying erosion of borders.
15236 Continued protection, benefits and subsidies not only erode competition within Canada, but the competitiveness of Canadian broadcasters in the world.
15237 We believe a new approach to these issues is needed before it is too late.
15238 Thank you.
15239 THE SECRETARY: Thank you.
15240 I would now invite High Fidelity HDTV Inc. to begin their presentation.
PRESENTATION / PRÉSENTATION
15241 MR. PATTERSON: Thank you.
15242 My name is David Patterson and with me today is John Panikkar.We are High Fidelity HD TV.
15243 We are Canada's leading HD broadcaster. We operate four 24‑7 true HD Category 2 specialty channels offering premium programming to Canadians.
15244 We also produce top quality Canadian HD content for exhibition on our channels and for export to foreign broadcasters.
15245 We are 100 per cent Canadian owned and operated. We are a new entrant in the Canadian broadcasting system. We are free market driven, consumer focused and international in perspective.
15246 We've been granted other licences, Cat 2 as well, and we would like launch those services soon.
15247 We are not members of the CAB and we are not members of the Alliance of Independent Specialties. We are, if you will, an independent independent.
15248 MR. PANIKKAR: We're here today to give you some insight into our operating reality and we will, of course, be doing that over the next few minutes.
15249 We're also here to urge the CRTC not to fall prey to the kind of scare mongering we've heard over the past two and a half weeks from the likes of Shaw and Cogeco.
15250 They claim that in the foreseeable future Canadians en masse will abandon the regulated system unless such BDUs are given everything that they've demanded. Although Hi‑Fi is pleased to be 100 per cent customer focused, it's the CRTC that is and must remain in charge of the Canadian broadcasting system, not the consumer and the big cable BDUs as Shaw and Cogeco would have it.
15251 We think there are many areas in which the Commission is remarkably in the dark and we think your current rule book for the Canadian broadcasting system needs a complete re‑write to make it simpler, more streamlined and more market focused.
15252 We also think that you're often stated goal of ensuring a meaningful Canadian presence in the Canadian broadcasting landscape is in serious jeopardy and we believe you don't really know all of the reasons why.
15253 However, before we get to some of those reasons, we should start by answering your five essential questions.
15254 MR. PATTERSON: As to the size of the basic package, we believe it should include those services that are considered essential by the CRTC to achieve the broadcasting policy for Canada as set out in the Broadcasting Act.
15255 More specifically, the basic package should include local OTA services, the applicable Canadian educational service, mandatory services and any local BDU Community Channel, and it should be made available to Canadians at the lowest possible price.
15256 In addition, each BDU should have limited reasonable flexibility to enhance its specific version of the basic package through innovative additions that are consumer friendly and, most importantly, affordable.
15257 As to your second question, there should be no guaranteed access for Canadian specialty and pay services. We at High Fidelity want to serve Canadian audiences and we believe this is best done in a competitive marketplace. We think that the time has passed for the CRTC to effectively be picking the winners and losers between Canadian services.
15258 With respect to your third question, we believe there should be no genre protection as between Canadian services but that there should be protection vis‑à‑vis foreign satellite services. These days the current genre protection rules are more often than not effective only as a fundamental barrier to entry for new Canadian entrants and innovators like High Fidelity.
15259 As to the proposal for a fee for carriage for the OTA broadcasters, the simple answer is no. We do hope that the CRTC sees through the audacity of this request.
15260 Finally, as to your fifth question, BDUs should have, in our view, access to advertising revenues from on‑demand services and from local avails.
15261 MR. PANIKKAR: Throughout our comments today we urge you to remember that Hi Fi occupies a unique place in the Canadian broadcasting landscape. We are Canada's only 24/7 true HD independent broadcaster. Nobody else is innovating and taking the risks that we are, and since our start‑up more than two years ago nobody has had the courage, some might say foolhardiness, to try to follow in our footsteps.
15262 We have spent about $30 million and counting so far building up our business, creating top‑quality Canadian HD content, as well as bringing to Canadian viewers the world's best HD programming, almost all of it never before seen in Canada. Every dollar ever invested by our shareholders and every dollar of revenue ever earned by our company has been plowed back into our business.
15263 From a personal financial perspective, I can certainly tell you that my family and David's and our partner Ken's families, have bet almost everything we have that Hi Fi will continue to grow and prosper.
15264 And where has that gotten us, at least so far?
15265 We are delighted to be carried nationally by Bell ExpressVu, which was the first BDU to step up and recognize the tremendous consumer value in offering our channels. We are also happy to have launched our channels on a handful of the smaller BDUs in Canada and we were thrilled to hear on the first day of this very Panel hearing that Rogers spoke very glowingly of us and our channels and to state publicly what they have told us privately, and that is that they intend to launch our channels very soon.
15266 The other big BDUs have so far expressed little or no interest in launching our channels. In light of the successful international sales of our in‑house production service unit, it is indeed a great irony of your current rules that more viewers in places like the United States and Asia have been permitted to enjoy our programming, while customers in the areas controlled by Shaw, Vidéotron and Cogeco have not.
15267 It is an irony that Shaw can launch TLC HD very shortly, if not tomorrow ‑‑ I think I saw a press release to that effect ‑‑ while Canadian services such as ours fall by the wayside.
15268 The Shaw folk told you this morning Canadian programming would be better if it had to compete more. Well, our programming can compete with anybody's in the world and is seen around the world, yet you, Mr. Chairman, are unable to see it because you have Shaw Choice.
15269 They also told you that you should let market forces decide.I wonder whether that view would extend to allowing another cable company to overbuild in Shaw's area. I suspect the answer to that would be an emphatic no, and indeed we heard them on that very question earlier.
15270 MR. PATTERSON: To be perfectly clear, the number one issue in this hearing for independent new entrant HD broadcasters like Hi Fi is access to and profile on the systems of the Canadian BDUs.
15271 The number two issue is ensuring that there is a level and fair playing field on which broadcasters like us can compete.
15272 We need you to understand that we are more than willing to compete against any broadcaster, big or small, Canadian or non‑Canadian, regulated or non‑regulated, provided that the playing field is level and fair. But at this time, and for many years now, the playing field has been tilted against Hi Fi and other new entrant Canadian broadcasters.
15273 With respect to our number one issue, which is the absence of access and profile, the simple sad fact is that BDUs like Cogeco will only very reluctantly provide access and launch Canadian services like ours.Sometimes we are told by them that our channels are not on the dial because of their bandwidth constraints, and sometimes we are told it's because our programming and brands are not known to the consumer.
15274 Well, I worked for TSN and our partner Ken Murphy and John also worked for TSN. And Ken, if he was here, would tell you that TSN was an unknown brand in 1984 and John would tell you that Discovery Channel was an unknown brand in 1994. We know because we were there.
15275 For our part, we think it is probably a simple margin analysis for the BDUs such as Shaw and Cogeco who, as you must know from Shaw's appearance this morning, want you to get completely out of the way so that they can do what they want to do, which is to launch low‑cost high‑margin foreign satellite services like TLC HD which John mentioned.
15276 This is of course on their part a perfectly rational thing to do.They are in the business to make money and they are taking advantage of the rules that exist.
15277 Whatever the case, in the end all we know for sure is that our channels are not being made available to the millions of Canadians who we know would choose to purchase them if they could see them. Our growth rate, for example, on SaskTel has never been below double figures each and every month that we have launched them, since our channels were launched by them in 2006.
15278 I mention SaskTel in particular because it did come up in the Shaw presentation. They said that they were fighting for market share against SaskTel and we know how successful our channels have been with SaskTel. So I suppose we should be expecting a call from Shaw soon wanting to get our channels for those areas that are served by SaskTel.
15279 MR. PANIKKAR: We mentioned a few moments ago that we think you are more or less unaware about our operating realities. For example, the Commission appears to have little or no idea about how foreign satellite services actually operate in Canada.
15280 We have heard in this hearing an estimate that those services are sucking $250 million out of Canada each year. That number could be $250 trillion. The point is, the real number is unknown. It is absurd that for this entire hearing we Canadians are going to beat each other up about how to regulate ourselves when there is at the same time no meaningful regulation whatsoever on the foreign satellite services.
15281 Why isn't there anyone present at this hearing from Spike or TLC or any of the other foreign services?
15282 Simply put, they know that they don't need to be here.And that is a pity.
15283 Simply put, they know they have carte blanche to operate as they see fit and leave it to the sucker Canadians to make the only meaningful contributions to the system.
15284 Does anyone in this room seriously believe that anybody at The Nashville Network worried for one second about what the CRTC might think or might do when TNN morphed into Spike?
15285 Here is another example. For months now you have been aware that HDNet programs a separate Canadian feed with approximately half of its program schedule for Canada being completely different from its U.S. feeds, and there are many of them. In other words, you have been unaware that HDNet, the one that you approved, is not the one that is being dumped into Canada and yet nothing has been done about it.
15286 In the meantime, HDNet is using up bandwidth that could be allocated to a Canadian channel, such as one of ours. We believe it will not be long before HDNet begins to sell Canada targeted advertising in its Canada‑specific feed in the same manner that CNBC has been doing for some time now with its Canada‑specific feed.
15287 Is that really what the CRTC intended when it created the foreign satellite services list?
15288 We don't think so, but that is what the system has come to.
15289 One more example. Apparently you are unaware that foreign satellite services demand and receive preferential carriage terms from Canadian BDUs. Obviously this creates an anti‑competitive playing field and eliminates access and shelf space for Canadian services such as ours. For high fidelity, channels like HDNet represent at least a triple whammy.They use up precious bandwidth, they get preferential carriage terms and they compete with us for program rights, advertisers and audiences.
15290 MR. PATTERSON: Unfortunately, the current rules have created an oligopoly of the large and coddled Canadian broadcasting entities. It is ironic to hear the Commission indicate publicly and often that it would like more new entrants to the Canadian broadcasting system well at least so far leaving the rules in place which tilt the playing field unfairly away from such new entrants like ourselves.
15291 We asked the question, as Mr. Burger did: Does History Channel still need protection, Discovery Channel? What about Astral, do they need protection from High Fidelity HDTV? We think not.
15292 Another recent example that has confounded us has to do with the CBC, who within the last couple of weeks have recently transformed the service previously known as Country Canada into a service called Bold.This was done apparently without asking your permission, even though they are required to get that.
15293 In some respects we applaud the CBC, because we think that they are finally doing what foreign satellite services do, which is to say act rationally and be market focused.
15294 On the other hand, we point out to you that our licence would prohibit us from making a genre change like that that has been made by the CBC.
15295 MR. PANIKKAR: Mr. Chairman, you have asked a number of interveners: So what would you have us do?
15296 We say, simply put, that things should be simple. We won't pretend to have all of the answers to the complex questions at hand in this hearing, and there are many of them.So we can only focus on the unique story that is high fidelity and say that in the spirit of keeping things simple, you should simply stop regulating new entrant, independent HD specialty broadcasters such as us, except to ensure a reasonable contribution to the Canadian broadcasting system.
15297 What is reasonable? Well, in 2008 and beyond we say you need to level the playing field to encourage new entrants to the Canadian broadcasting system, particularly those who are independent and leading the way into high definition, as we are. That means declaring a complete moratorium on the approval of any new foreign satellite services in Canada until the Commission better understands, perhaps through a public hearing, what the benefits and costs are permitting such services to operate in Canada.
15298 You can make that simpler still by exempting from regulation any new entrant like Hi Fi who meets the following criteria, and there are only four: the new entrant must be Canadian owned and controlled; the new entrant must not be effectively owned and controlled by a big BDU or a big broadcaster; the new entrant must be all HD 24/7; and the new entrant must certify to the CRTC each and every year that it has met a minimum 20 per cent CPE requirement.
15299 In fact, on that last point, we say that the CRTC should consider eliminating licence conditions altogether, such as Canadian content, heresy I know in Canada. But why not bring in place in replace of that a system that requires everybody ‑‑ and we do mean everybody, broadcasters, Canadian and foreign ‑‑ that they must meet a minimum spend on Canadian content as a percentage of the previous year's revenue earned in Canada.
15300 Now, that would level the playing field.
15301 MR. PATTERSON: We urge you to see that if Hi Fi and others that would try to follow in our footsteps are not encouraged to grow and prosper, the dominance of the big BDUs and big domestic and foreign broadcasters in Canada will only become further strengthened and entrenched. This will not allow the CRTC to fulfil its mandate.
15302 We also urge you to see that the current rules are fundamentally broken and in need of significant change. If the only choice was between tinkering with the current system or simply blowing it up, we would prefer the latter solution.
15303 Frankly, the existing rules are doing nothing for us and other would‑be new entrants. They are simply there to serve the interests of others and we have nothing, or virtually nothing, to lose if you should scrap those rules.
15304 We do appreciate the opportunity to provide our thoughts to you and would be delighted to answer any questions.
15305 THE SECRETARY: Thank you.
15306 I would now invite Maple Leaf Sports & Entertainment Ltd. to begin their presentation.
PRESENTATION / PRÉSENTATION
15307 MR. ANSELMI: Thank you, and good afternoon, Mr. Chairman, Commissioners and staff.
15308 My name is Tom Anselmi. I am the Chief Operating Officer of Maple Leaf Sports & Entertainment Ltd.
15309 To my left is Chris Hebb, MLSE's Senior Vice‑President, Broadcast and Content; Astrid Zimmer, MLSE's Associate Counsel; and Aaron Lafontaine, MLSE's Director of Business Development.
15310 To begin, we would like to thank the Commission for the opportunity to appear before you today. Maple Leaf Sports is relatively new to the broadcast industry and so we appreciate the privilege to offer our perspective in these proceedings, the same proceedings as seasoned veterans like Rogers, CTV and Global, Shaw and others.
15311 Although MLSE is fairly well‑known in Toronto, we recognize that some people might not know exactly who we are or what we do, so we thought a little bit of information about our company might be helpful for the Commission.
15312 MLSE is a 100 per cent Canadian owned privately held company, a global leader in sports and entertainment. So we are large in the sports industry, but small and new to the broadcast industry.
15313 MLSE owns the Toronto Maple Leafs of the NHL, the Toronto Raptors of the NBA, the Toronto Marlies of the AHL and Toronto FC of major league soccer.
15314 Our facilities business includes the Air Canada Centre, home of the Leafs and the Raptors, BMO Field, the home of Toronto FC; Ricoh Coliseum, the home of the Marlies; and Maple Leaf Square, a 1.6 million square‑foot mixed‑use entertainment development.
15315 Finally, as you probably do know, in 2001 MLSE stepped into the broadcast and content business with the launch of two Category 2 specialty services, Leafs TV and Raptors NBA TV.
15316 MLSE employs 515 fulltime people, 1,850 part‑time people.Of those employees, about 142 fulltime equivalents, or about 25 per cent, are employed as part of our broadcast business now.
15317 Our business is about bringing sports to the Canadian public.We believe that sports makes a unique and important contribution to our Canadian identity, to our culture, to our society as a whole. As an organization, we work hard every day to compete on the ice, on the court, on the field and in the market to strengthen our contribution to the sports industry.
15318 As broadcasters we are looking for a fair opportunity to compete and contribute just as significantly to the Canadian broadcast industry.
15319 To tell you more about how this is relevant to these hearings, I am going to turn it over to Chris Hebb.
15320 MR. HEBB: Thank you, Tom. Thank you, Mr. Chairman, Commissioners.
15321 In 2000 when the Commission issued two Category 2 licences to MLSE to operate Leafs TV and Raptors NBA TV, we intended to be contributing players in the broadcast industry. We secured carriage, we built a facility and, in September 2001, we launched both services.
15322 Since then, we have continuously invested time, resources and innovation in trying to create compelling services that could compete in and contribute to a vibrant and healthy Canadian sports broadcast industry.In fact, we would assert that we have been model Category 2 licence operators.
15323 Together our two services, Leafs TV and Raptors NBA TV, have spent close to $34 million on programming; represent almost 17 per cent of all Canadian programming expenditures by Category 2 services in 2006; launched an HD version of Raptors NBA TV and produced all the regular season games broadcast on Leafs TV in high definition as well; entered into carriage agreements that have ensured broad distribution; have met or exceeded all CRTC mandated guidelines, including closed captioning.
15324 However, despite all our efforts, instead of seeing growth in our businesses, we are experiencing the exact opposite. We have been stalled in our quest to be relevant to the Canadian sports viewer and to contribute to the broadcast industry in general.
15325 There are many reasons for this, but the main reason, as you have heard from others in these proceedings, is the Internet. Since 2001 when we launched, the availability of sports information and content on the Internet has exploded. More striking is the availability of sports video on the Internet, which was almost completely non‑existent in 2001. Through the Internet, with just a few keystrokes, users can access any and all sports information, statistics and even video when they want it and how they want it.
15326 Since 2001 the Internet has caused a significant change in the sports content landscape. The Internet is the ultimate niche programmer and has rendered our services slightly redundant to sports content consumers.
15327 And we don't see that getting better, as newspapers, magazines and even user generated content continue to compete in our niches. The singular nature of our services makes the impact of the Internet particularly acute.
15328 We want the ability to compete, to invest and to contribute more. However, the Commission's application of the genre exclusivity policy leaves us with such a narrowly defined niche it gives us no options for growth within the sports broadcast industry. We have been left scratching our heads asking: Where do we go from here?
15329 Then, when the Dunbar‑Leblanc Report was released recommending the elimination of genre exclusivity among Canadian services, we thought we had found an answer. As evident in our first written submission, we thought that a wholesale elimination of genre exclusivity would be the vehicle to allow broadcasters such as MLSE to amend the licences of our existing services and explore different licensing possibilities with the Commission, different ways to expand our services to strengthen and enhance the Canadian broadcast landscape.
15330 However, during the course of these hearings and different party submissions, we have been educated as to the practical complexity of applying such a recommendation and this has made us rethink our position.
15331 As a result, our recommendation to the Commission today is a simple one: to give parties the opportunity to persuade the Commission to make exceptions to the one‑to‑a‑genre rule for sports, whether through allowing a new general interest sports service, allowing amendments to existing licences or a combination of both.
15332 We cannot and do not purport to know whether our suggestion with respect to the sports genre would have any applicability to other genres, but with respect to sports we think the evidence is clear. Since 2001 there has been proof that Canadian viewers and the Canadian market are ready for more sports services, more Canadian sports programming and more investment in Canadian sports production.