ARCHIVED -  Transcript of Proceeding

TRANSCRIPT OF PROCEEDINGS BEFORE

THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

SUBJECT:

Canadian broadcasting in new media

HELD AT:

Conference Centre

Outaouais Room

140 Promenade du Portage

Gatineau, Quebec

March 9, 2009

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Canadian Radio-television and

Telecommunications Commission

Transcript

Canadian broadcasting in new media

BEFORE:

Konrad von Finckenstein   Chairperson

Michel Arpin   Commissioner

Len Katz   Commissioner

Rita Cugini   Commissioner

Michel Morin   Commissioner

Timothy Denton   Commissioner

Louise Poirier   Commissioner

Stephen Simpson   Commissioner

ALSO PRESENT:

Sylvie Bouffard   Secretary

Chris Seidl   Hearing Managers

Steven Harroun   

Regan Morris   Legal Counsel

HELD AT:

Conference Centre

Outaouais Room

140 Promenade du Portage

Gatineau, Quebec

March 9, 2009

- iv -

TABLE DES MATIÈRES

   PAGE / PARA

PRESENTATION BY:

Ontario Ministry of Culture   1482 / 8199

Ontario Media Development Corporation   1491 / 8259

Association of Canadian Advertisers   1545 / 8561

Pelmorex Media Inc.   1568 / 8713

Stornoway Communications   1612 / 8927

Score Media Inc.   1645 / 9125

National Hockey League   1656 / 9175

   Ottawa, Ontario

--- Upon resuming on Monday, March 9, 2009 at 0904

8190   THE CHAIRPERSON: Good morning everybody.

8191   Madam Secretary, why don't we start?

8192   LA SECRÉTAIRE : Merci, Monsieur le Président.

8193   Thank you, Mr. Chairman.

8194   We will begin Day 8 of the hearing with Items 38 and 39 on our agenda.

8195   I would now like to invite the next participants, the Ontario Ministry of Culture and Ontario Media Development Corporation, as a panel.

8196   We will hear each presentation, which will then be followed by questions by the Commissioners to all participants.

8197   We will begin with the presentation of the Ontario Ministry of Culture.

8198   Please introduce yourselves, after which you will have 10 minutes for your presentation.

PRESENTATION

8199   HON. AILEEN CARROLL: Good morning. Bonjour.

8200   Je m'appelle Aileen Carroll. I am Aileen Carroll, Minister of Culture for the province of Ontario.

8201   Je vous remercie de l'occasion qui m'est donnée de participer à l'examen du système canadien de radiodiffusion par les nouveaux médias.

8202   I am presenting today with the Ontario Media Development Corporation, the OMDC.

8203   The OMDC is an agency of the Ministry of Culture and is dedicated to supporting the outstanding work of Ontario's cultural media cultural industries.

8204   Joining me today: to my right, Kevin Shea, Chair of the Board of the OMDC; to my left is Steven Davidson, Assistant Deputy Minister of the Ministry of Culture; and to Keven Shea's right is Karen Thorne-Stone, President and Chief Executive Officer of the OMDC.

8205   This hearing presents a vital opportunity for us. A vital opportunity to chart a new course for the future of Canada's growing new media broadcasting sector, a course that hopefully will exploit the full economic and creative potential of Ontario's cultural industries.

8206   I want to address: the growing demand for high-quality, professional, creative content on new media platforms; Ontario's significant investment in our creative economy; and my recommendations on how to ensure its long-term viability.

8207   We are in an increasingly uncertain economic climate.

8208   As policymakers, our decisions have the potential to successfully meet the challenges before us.

8209   More than that, these same decisions can support our goal of building a sustainable future.

8210   Nous avons été les témoins d'un changement radical dans le paysage culturel au cours de la dernière décennie.

8211   Pendant cette période, les industries culturelles sont devenues d'incroyables forces dans les économies des pays développés, qui favorisent l'innovation et créent des emplois hautement spécialisés.

8212   Globally, the entertainment and media sector is expected to be worth approximately 2.2 trillion dollars U.S. by the year 2012, with the fastest area of growth expected to be generated by the digital delivery of creative content to fixed and mobile devices.

8213   Ontario is home to 40 per cent of Canada's cultural industries.

8214   The growth of these industries will have a significant impact on the future prosperity of our province and of our country.

8215   Between 1999 and the year 2007, Ontario's "Entertainment and Creative Cluster" created over 80,000 new jobs in Ontario.

8216   That is an increase of almost 40 per cent, compared with a 17 per cent increase on the overall Ontario economy.

8217   In 2006 alone, the last year for which we have stats, the cluster contributed 12.2 billion dollars to our provincial economy.

8218   Ontario is a leader in independent, screen-based production and sound recording in Canada.

8219   The Ontario government recognizes that continuous innovation, research and development are essential to the success of the industry.

8220   In support of this, over the past four years, we have invested more than 700 million dollars in our Entertainment and Creative Cluster.

8221   Last year, our government made significant enhancements to the tax credits for Ontario's film, television and interactive digital media industries.

8222   Last month, we announced our intention to make the film and television tax credits permanent -- providing the stable incentives that productions need to succeed.

8223   The private sector requires certainty from government to be able to plan and invest.

8224   In support of a vibrant future for the cluster, we have invested 19 million dollars in digital media skills development and research capacity at Ontario universities.

8225   In addition to these investments, we are committed to investing an additional 7 million dollars over the next four years to expand the OMDC's Interactive Digital Media Fund.

8226   These are just some of the many ways we are supporting well-capitalized, creative companies that will thrive and produce globally-marketable, quality content.

8227   Fostering an innovative, new media broadcasting sector requires collaboration across all levels of government and industry.

8228   There are two key hurdles that inhibit cluster companies from maximizing their contribution to the Canadian broadcasting system and to the Ontario economy.

8229   The first hurdle affects the production and promotion of creative content.

8230   At present, many Ontario firms lack the scale and capital to compete effectively with large, multinational corporations.

8231   Attracting private sector capital investment, particularly in the early stages of the creative development process, can be particularly challenging for independent companies.

8232   Total funds available, including investments from the federal government, are not enough to drive innovation and increased commercial activity within the new media broadcasting system.

8233   The second hurdle relates to access and visibility.

8234   Content producers often lack the bargaining power vis-à-vis broadcasters to ensure that their new media rights are fully exploited.

8235   Content providers can also find it difficult to get their content onto closed new media platforms such as mobile, where the access or hardware provider controls the services and content available to users.

8236   These barriers can result in a net loss for Canada's new media broadcasting system.

8237   They obstruct revenue streams for content producers, providers, and other creative workers, and they limit users' access to Canadian new media content.

8238   But access alone cannot ensure the visibility of Canadian content.

8239   Content also needs to be visible and well promoted on new media platforms to generate audiences, or indeed it risks getting lost on the worldwide web.

8240   Overcoming these challenges requires concerted action across government and industry.

8241   Countries that invest significantly in their digital media and new media industries will reap the economic and cultural rewards of the growing demand for digital content.

8242   Le Canada doit saisir l'occasion qui lui est donnée de renforcer sa position compétitive et de solidifier son avenir sur le marché culturel mondial.

8243   Your decisions can play an integral role in achieving these objectives and in building a strong and vibrant new media broadcasting sector.

8244   Our chief recommendation is for enhanced investment in the creation and promotion of professional Canadian new media broadcasting content.

8245   It is critical that investment keep pace with the rapidly growing global demand for new media broadcasting content.

8246   However, we also recognize the importance of traditional broadcasting and its role in continuing to serve Canadian viewers.

8247   In light of recent challenges faced by Canada's over-the-air broadcasting sector, we believe that investment in new media broadcasting content should not come at the expense of existing financial support for traditional broadcasting content production and promotion.

8248   We support the principle that each element of our broadcasting system should contribute appropriately to the creation and presentation of Canadian content.

8249   Clearly, there is a debate about whether and how each element of the new media broadcasting system should contribute.

8250   We suggest that the Commission, in its review of new media broadcasting, consider treating like functions in a like way.

8251   We need to account for technological differences while at the same time upholding the fundamental policy principles of the Broadcasting Act.

8252   This approach involves examining the functions of various players in the new media broadcasting system and comparing them to the functions of players in the traditional broadcasting system.

8253   Equitable access to distribution platforms, services, and content is another key principle that must be protected within our new media broadcasting system. Without access, economic and cultural investment in Canadian content production is wasted.

8254   In this regard we support fair terms of trade for Canada's independent producers to ensure the successful exploitation of new media rights. We also recognize the need for fair and transparent procedures for independent Canadian content providers who seek to make content available on new media platforms.

8255   The idea of openness and user choice, that which makes the Internet a transformative and powerful platform is one that we fully support but we believe it is equally important to ensure and preserve access to Canadian content on all new media platforms, which is why the Government of Ontario does not support the regulation of Canadian content on the open Internet.

8256   Alternatively, we suggest keeping a watchful brief on whether Canadian content requirements may be required on closed new media platforms, such as mobile, where the individual user's choice is limited by the access or hardware provider.

8257   À titre de responsables de l'élaboration des politiques, il nous appartient conjointement de trouver, dans l'intérêt général, un équilibre entre les objectifs de politiques qui s'opposent.

8258   Now, Mr. Chair and your colleagues, I would like to turn the presentation over to Karen Thorne-Stone, President and Chief Executive Officer of the OMDC. Merci.

PRESENTATION

8259   MS THORNE-STONE: Thank you, Minister. And good morning, Mr. Chair and Commissioners.

8260   The Ontario Media Development Corporation invests in the creation and promotion of Canadian broadcasting content for both traditional and new media through a variety of tools, including our music, film and interactive digital media funds and, of course, as the administrator of the province's cultural media tax credits. As such, our purpose today is to highlight for you some of the current challenges and opportunities facing Ontario's content creators.

8261   Ontario, as I'm sure you know, is home to a vibrant and industry-leading screen-based sector and Ontario's sound recording industry is the largest in Canada.

8262   The 2009 Juno award nominees include acts and albums produced by a long list of Ontario labels, including Arts & Crafts, MapleMusic and Last Gang Records. Our interactive digital media sector includes many industry leaders such as Zenophile Media, Smiley Guy Studios and Marblemedia, and of course our world-renowned film and television companies include Shaftesbury, Epitome Pictures and Rhombus Media.

8263   But despite these successes, Ontario companies still struggle to compete in the ever-changing and growing global marketplace. Decisions made in this proceeding will have a direct impact on the future business models for Ontario's content creators in the new media broadcasting environment.

8264   While the competitive issues are many, I would like to focus my comments today on three key issues from our written submission: first, the continued appropriateness of the exemption orders; second, support for broadcasting content in new media; and finally, the contribution that each element of the broadcasting system should be making to Canadian broadcasting in new media.

8265   First, let me speak to the appropriateness of the new media and mobile television broadcasting exemption orders.

8266   As stated in our written submission, OMDC recognizes that an attempt to license the many broadcasters and distributors in the new media world would be administratively onerous for the Commission and would not provide significant benefit to the Canadian broadcasting system.

8267   That being said, we must acknowledge that while new broadcasting technologies and platforms have provided many opportunities for Ontario's content creators, they have also created some significant challenges.

8268   The Commission has already heard from CIRPA, among others, that content creators face an incredible challenge in protecting their content from illegal and unauthorized distribution. While we certainly understand that copyright protection and enforcement are outside of the Commission's jurisdiction, we hope that you will join us in acknowledging that this illegal activity has a detrimental impact on the music industry and on the Canadian broadcasting system as a whole.

8269   It also continues to be a challenge for creators to finance high-quality content as the demand for content grows across all platforms. Creators must produce for a number of screens and the cost of doing so is high. More funding is needed in the system to ensure the creation of quality, multiplatform, broadcast-related content and direct-to-online digital media content.

8270   Given these realities, we encourage the Commission to maintain the existing exemption orders but to introduce some conditions to those exemptions that begin to address these challenges.

8271   That leads me to my second point on the issue of support for broadcasting content in new media.

8272   OMDC would like to see a mechanism introduced to provide increased financial support for the creation of content by Canadian producers in the new media broadcasting system.

8273   Perhaps we can highlight "Degrassi: The Next Generation" as an example of how Canadian producers can achieve worldwide audience and critical success with a quality niche product. The content on Degrassi's Canadian portal includes streaming of full-length episodes, short-form video content, podcasts, feature news and entertainment stories, games and streamed music from the series.

8274   The website is operated through licence agreements with CTV.ca in Canada and The N in the U.S. The limited advertising revenue is shared and it's a fixed licence fee from The N that covers the majority of the site's production costs.

8275   All of which is to say two important things about producing popular Canadian content in the new media environment. First is that it is just as difficult to put together a financing structure for new media content as it is for traditional broadcasting content. Second, none of these partnerships are even possible if producers are required to hand over their digital media rights in exchange for a television licence fee for the original programming.

8276   The Commission has heard many suggestions for how Canadian content for new media could be supported, many of which we outlined in our written submission. OMDC believes that the adoption of one or more of the proposed mechanisms is important to support and promote Canadian content in the new media environment.

8277   While the development of the exact support model is outside of our expertise, we applaud the Commission's willingness to explore the alternatives and to determine which precise tools would be most effective.

8278   Whatever type of support mechanisms are introduced, OMDC believes that this support should go towards professionally produced content, which continues to be the most difficult type of content to finance. Any new funding mechanisms should be incremental and should not come at the expense of the funds available for traditional broadcasting content.

8279   Finally, support for content creation is optimized when all the intellectual property rights associated with that content are exploited.

8280   OMDC supports the Commission in its efforts to ensure that independent producers and Canadian broadcasters are able to come to a fair terms of trade agreement. In order to secure new media broadcasting rights, it is imperative that broadcasters compensate producers for that intellectual property.

8281   We also support the suggestion put forward by the CFTPA and others that terms of trade should include a "use it or lose it" provision. If digital rights are demanded by broadcasters who then do nothing with them, it is a loss to the system as a whole. Taxpayer money that has been invested in the content is wasted if that content is not available to Canadians on the new media platforms of their choice. A "use it or lose it" provision would help ensure the maximum exploitation of valuable IP.

8282   Lastly, I would like to address the issue of who should be providing support to Canadian broadcasting in new media.

8283   OMDC believes that as broadcasting content is spread across a growing number of online and mobile platforms, it should be acknowledged that the companies that provide these services are elements of the broadcasting system and therefore have an obligation to contribute to that system.

8284   In today's world, consumers can access content through a variety of traditional broadcasting as well as new media broadcasting channels. Often, many of these services are provided to the customer by the same company.

8285   Canada's largest cable and satellite providers are also the largest Internet and mobile service providers and they may even have a specialty in conventional broadcast interest. These large integrated companies have a major influence over how Canadians access all kinds of creative media content, including local news, recorded music and television programs.

8286   For this reason, OMDC encourages the Commission to look at the system as a whole rather than as a series of isolated parts. Conventional broadcasters and distributors are rightly required to make contributions to Canadian content and the ISPs and mobile service providers that also benefit from delivering audiovisual content to consumers should be required to do the same.

8287   In spite of the challenges we have outlined for you today, the Canadian independent screen-based and music producers are making a significant contribution to the creation of content for new media broadcasting. Any financial and/or regulatory incentives that are introduced to support the creation, promotion and visibility of Canadian content must be accessible to the independent production sector.

8288   MR. SHEA: In conclusion, Mr. Chairman, Members of the Commission, OMDC would like to reiterate that while the new media and mobile television broadcasting exemption orders continue to remain relevant, it is time to impose some conditions on those exemptions in order to ensure that increased funding is available for Canadian content.

8289   Support for the creation and promotion of Canadian content is important across all broadcasting platforms, including new media platforms. More money is needed in the system so that Ontario producers continue to be in a position to compete both at home and internationally with their content. This support should be directed toward professionally produced, high-quality creative content. It should be incremental to existing funding mechanisms and should not come at the expense of the funds available for traditional broadcasting content.

8290   We would also like to restate our support for the Commission in its ongoing efforts to see that the terms of trade agreements are put in place between broadcasters and independent producers. A "use it or lose it" provision for intellectual property rights is important in these terms of trade to ensure that content is made available for Canadian audiences on the platform of their choice.

8291   Finally, as Canadian audiences continue to turn to a widening array of platforms for the consumption of content, we feel that it is time to acknowledge that the companies that provide access to these platforms are elements of the broadcasting system and therefore should have an obligation to contribute to the creation and promotion of Canadian content on that system.

8292   We would like to thank the Commission for the opportunity to appear today and hand our presentation back to the Minister for closure.

8293   HON. AILEEN CARROLL: Thank you, Kevin and Karen. We are at a critical juncture in the evolution of our new media broadcasting system.

8294   L'histoire a montré que des investissements intelligents dans ce secteur ont donné des résultats remarquables.

8295   Constant innovation and steady investment will help us capture and sustain the interest of audiences here at home and around the world.

8296   So today I have made three recommendations to you:

8297   - first, enhance investment in new media broadcasting content production and promotion;

8298   - second, ensure fair terms of trade for independent producers;

8299   - finally, keep a watchful brief on whether Canadian content requirements may be required on closed new media broadcasting platforms.

8300   We have a unique and pressing opportunity today to forge a new path for Canada's new media broadcasting system and by striking the right balance we will achieve a strong and vibrant broadcasting sector that champions Canada's cultural industries, contributes to our economic prosperity and positions Ontario as a serious global player.

8301   Thank you, Mr. Chair and Commissioners. We will be very happy to answer your questions to the best of our ability. Merci.

8302   THE CHAIRPERSON: Thank you for your submission, and thank you, Minister, for appearing. All our decisions have obviously political ramifications, et cetera, and so we do appreciate hearing from our elected officials. We try to make sure that our policy decisions and our views are in sync with what you are suggesting.

8303   So let me start off with the big picture. Before us appeared Tom Perlmutter -- do you have problems understanding me?

8304   HON. AILEEN CARROLL: I'm just having a little difficulty hearing you.

8305   THE CHAIRPERSON: Yes, okay. Is this better?

8306   HON. AILEEN CARROLL: Yes, thank you. I will get this working too.

8307   THE CHAIRPERSON: Okay. Let me repeat from the beginning then.

8308   HON. AILEEN CARROLL: Thank you, Mr. Chair.

8309   THE CHAIRPERSON: First of all, I appreciate you coming. I always appreciate hearing from elected officials because while we make the decisions, you have to implement them and you have to live with them and there is a neutrality between our decisions. So I really appreciate hearing how they look from our elected officials.

8310   Now, I wanted to start with the big picture. Tom Perlmutter of the Canadian National Film Board appeared before us and made a relatively impassioned plea that new media is really just one part of the whole picture and the picture is a digital revolution and has many aspects, you know, broadcasting, telecom, copyright, culture, et cetera, and really what we need is a digital strategy rather than approaching this piecemeal.

8311   Now, we, of course, are restricted by our legislation to look at it either as broadcasting or telecom. But do you support Mr. Perlmutter's approach that really what is needed here is a national digital strategy like Britain has adopted, like Australia has adopted, New Zealand and other countries?

8312   HON. AILEEN CARROLL: Well, Chair, I would be less than honest if I didn't acknowledge that I hadn't looked at it with that lens.

8313   I think there is much to recommend that. I know we are restricted -- or you are here in Canada by the two separate pieces of legislation but I think we are at such an incredibly important time and it is a time to invest in this rapidly growing sector. Cultural industries are a key economic driver in Ontario. I have elaborated that for you, so I don't need to repeat that.

8314   The need to attract private sector capital investment is vital and I think there is much we need to take into account. Whether the answer rests with an overall digital policy, as you have suggested, I don't know. I would ask just an opportunity to think about that. At first blush, it makes a lot of sense.

8315   THE CHAIRPERSON: Yes. You know, we, like everybody else, avoid unintended consequences and when you just look at things through one lens, like in this case the broadcasting, you may have produced some consequence you didn't want to because you didn't look at the overall picture or you didn't have jurisdiction for it.

8316   So when Mr. Perlmutter appeared before us, we were very receptive to his idea and I just wondered how you as the Minister of Culture felt about those issues.

8317   HON. AILEEN CARROLL: Well, piecemeal rarely works, although you are obligated sometimes in your work to respond that way and I can understand that.

8318   THE CHAIRPERSON: Yes.

8319   HON. AILEEN CARROLL: Just to step back and to say that we are at a time where we are very much investing in the future economy in Ontario and we recognize well we are in a state of transition where we are moving away from more traditional industries and investments of the past and moving into a knowledge-based, incredibly changed economy.

8320   The whole world of communications and the cultural industries are a big piece of that. I say that not just because a large piece of that falls within my purview but indeed in Ontario we recognize that we have tremendous talent at home, we have invested in it, we need to continue to invest in it because it is the future.

8321   And we are also very cognizant of the fact that it is highly competitive and that we are competing with the countries you made reference to, Chair, who are approaching this in a very holistic manner. So if by your approaching it in a holistic manner better enables us to compete and be successful, then I would recommend that's exactly where we need to go.

8322   MR. SHEA: Mr. Chairman, if I may, I would also like to supplement.

8323   I suggest we watch two aspects of behaviour: consumer behaviour and advertising results.

8324   To consumers all content is digital and I think to come at this in a piecemeal fashion we are really missing the boat.

8325   Secondly, when you look at advertising, which is a key stimulus of both our broadcast sector and the online sector, it has been reported that upwards of 70 percent today of ad revenues are heading south. When you look at the top 20 websites in Canada there is really only one on the list. That tells me that it is time to actually look at the entire sector. If 70 percent of our broadcast revenues were heading south I think there would be a Royal Commission.

8326   So I honestly do think it is time that we step back and say where is this digital revolution headed and I would simply say look at two behaviours: consumer behaviour where they are watching content on numerous types of devices and then follow the money.

8327   THE CHAIRPERSON: Okay. Now, coming to what is before us, our exemption order, when we issued the original order we gave two reasons. We said, one, it was evident to us that licensing and regulation of new media would not result in significantly greater contribution to the Canadian broadcasting system, and secondly, that in our view the new media undertakings did not have an undue impact on the ability of licensed undertakings to fulfill the regulatory requirements.

8328   If I understand you, you still believe that the first finding is correct, that licensing will not result in significant greater contribution to the system, but you have been noticeably silent on the second point, whether new media will have an undue impact on the ability of license undertakings to fulfill their regulatory requirements. What is your view on that point?

8329   Basically that is a fancy way of saying whether new media is becoming a major competitor to traditional media and it is really undermining or competing with traditional media.

8330   MS THORNE-STONE: Kevin, do you want to go?

8331   MR. SHEA: No.

8332   HON. AILEEN CARROLL: We are both going to answer that one, Chair.

8333   Well, if I understand your question correctly, certainly the traditional broadcasters are feeling the impact of the new digital media. I would not for a moment suggest to you that in your support or investing in the manner in which I have requested in the new media, that that in any way diminish what you do for the traditional broadcasters.

8334   I would want to be very clear that I think any contributions that you make and that we encourage you to make be in addition to. So that would be very important to state at the outset.

8335   Kevin, I should let you --

8336   MR. SHEA: Karen...?

8337   MS THORNE-STONE: Perhaps just to supplement what the Minister has said, I think we would suggest that the new media requirements on content creators are above and beyond the traditional requirements. So our content creators are now being required to produce for a greater number of platforms, to modify their content, either to create new original content that is specifically for online or to repurpose and modify their traditional content for new media purposes.

8338   So the cost to them for doing that and for ensuring that there is enough quantity of content in the pipe and that it's a high enough quality means that the costs are growing. That is, I think, where our message about needing more money in the system is rooted.

8339   THE CHAIRPERSON: Both of you make a plea for in effect new funding for new media by a fund or by whatever other means so as to make sure that the new media world has its appropriate share of Canadian content. There is a school of thought that says that you have really missed the boat. I'm not saying it's mine. I mean I have heard from many people. So let me sort of summarize this.

8340   The way it goes, it says basically the essence of new media is no longer nationally bound. The groups form themselves by interests, whatever their interests happen to be. You can do them worldwide, whatever niche it is, et cetera. If you are good you are going to find an audience because you suddenly can draw on the whole pool, you're not just restricted to Canada. If your product doesn't sell, government funding won't make it sell.

8341   So thinking of Canadian content and Canadian production and funding of Canadian content, it is really traditional media which was basically bound by Canadian audience. Now that you have the world as an audience you appeal by virtue of your expertise, by virtue of defining the interests, your niche and serving it in a way that niche wants to.

8342   Therefore, funding Canadian content is really missing the boat of what the issue is. For there to be Canadian content or Canadians to be successful in the new media, it depends on their talent and what they do, not on whether they are being funded in Canada.

8343   I have heard this now from several people and I would appreciate, since you are in the funding business, how you feel, whether that's a legitimate way of looking at it or not.

8344   MR. SHEA: Part of me believes that if we look at our television system today we could say that merely because of the number of channels that we really have content from around the world. We have, you know, hundreds and hundreds of channels available and still -- and most of the markets around the world have similar distribution opportunities but still we need a mechanism to fund Canadian choices, Canadian voices.

8345   I think if we were to stand back and say well, the world is now the audience from an economic standpoint, Canadian producers should be able to find their way to be able to generate that. I guess I come back to if you cannot generate the funds necessary within your own country à la advertising and/or subscription, then you will never even have a chance to get on the world stage.

8346   Historically that has been the case with all aspects of Canadian media. You know, we just don't have the population, we don't have the economics here to build and sustain a phenomenal content machine. As the world becomes even more exploited in terms of choices and voices online, that reality will become more profound in Canada. So I don't think the need is ever going to go away, just as it has not gone away in television.

8347   HON. AILEEN CARROLL: Mr. Chair, I agree with my colleague, with Kevin.

8348   Just to elaborate further or just to reinforce what he said, we are small but we are talented, extremely talented. Just as the industry here in Ontario requires the Ontario government to invest and to support with the variety of programs that I have described, so we need you to do similar -- to take similar initiatives.

8349   I think that we do very much require investment in content but then very much in order to compete with that world that you have described in the promotion, otherwise we are born to blush unseen. So all of the money that goes into supporting small companies to work in clusters to produce excellent content with the talent we already have and that increases with the training and investment of universities in creating that talent, if there is no mechanism in place or support structure to see it be able to compete in that global setting, then it is a waste of good money.

8350   I do think we have to acknowledge -- at least my understanding is that we are competing in jurisdictions who do receive support. Whether that support comes from major private players, as in perhaps the American market, or whether we are running against the Brits, we are running against competition that is receiving support from its government or a mix of the two.

8351   I ask for that, for a mix of the two, of public and private. I think that it is the future and we recognize that. We are ready to go with that and so we need you to apply the same kind of thinking that you have applied to more traditional broadcasting.

8352   THE CHAIRPERSON: I take from your answer you feel about it -- so while that may -- this sort of international and having the world as the audience may apply to such phenomena as social interplay such as Facebook or something like that, from what we hear, but really it's talking about broadcasting and broadcasting is still exactly as the Minister just said, you know, you need a national base and that's why you need support.

8353   MR. SHEA: I think perhaps it comes back to where you started and that is it is now called digital content whether it be distributed on iPods or whatever. I think the reality is that we are going to continue to need some form of economic support, not just to compete but to ensure that we have share of voice on our systems.

8354   THE CHAIRPERSON: Now, we talked about professional product. You, OMDC, I must commend you, you are the only one who actually came forward with a working definition of what is professional product. You suggest that the way you do it, OMDC, you say the person has to be incorporated and they have to produce, in effect, the product for a living for commercial purposes.

8355   How does this work in practice? Have you had any problems applying it? Do you have some -- because the boundary between professional and "nonprofessional" is not that easy to draw, especially in the new media context.

8356   MS THORNE-STONE: Yes. We certainly respect that that is going to be a challenge for the Commission but we think it is an important distinction to draw.

8357   To answer the question about OMDC's experience, I think we have found that our definition has been fairly successful so far. We have not run into any major difficulties in interpreting it.

8358   In order for companies -- for any of our funds, but particularly, I suppose, for the Interactive Digital Media Fund, to be eligible for funding, they must be incorporated, they must be making the product for commercial purposes, they must demonstrate that they are in business for this purpose, and that they have a track record of doing so.

8359   That has worked well for us to date.

8360   THE CHAIRPERSON: Now, if we do establish a fund on your basis, et cetera, one problem I have is, who has access to the fund?

8361   I have heard two schools of thought. I have heard people like you saying make it separate for new media, and I have heard the traditional ones -- but you say: But not at the expense of traditional media.

8362   And we have traditional media saying: Look, content is content and, actually, new media is about 95 percent traditional media re-purposed, and re-purposing things is expensive. So cutting us off from the New Media Fund, you are not achieving the goal that you want. You want Canadian content, and it so happens that Canadian content on the web or on the wireless is actually traditional broadcasting re-purposed for either the web or wireless. So cutting us off, you won't achieve what you want, to have greater Canadian content.

8363   Now, I am interested to see that you have opted for a separate New Media Fund. Can you explain your reasoning to me for that?

8364   HON. AILEEN CARROLL: I am not proposing that it be separate or new, that would be presumptuous on my part. That is a decision for you to render insofar as what type of vehicle you choose.

8365   We have existing funds, and you may choose to go that route, or you may choose a new vehicle altogether.

8366   What I am saying is, we must not decrease what is already in place to support the traditional broadcaster. We need to enhance, considerably, the opportunities for our Canadian content producers to access this new technology.

8367   Maybe I will leave to Kevin the argument that the traditional broadcasters feel they need to have access, if I am clear, as well, to any new funding that is available to the new media. That one may be, again, for you to ponder, or us as well.

8368   I would like to ask Kevin to join me in that response.

8369   MR. SHEA: I think the reality is that we need to generate a funding mechanism to ensure that we have professional and better content online.

8370   As to the management of that fund, the rules and regulations as to who can apply, I think that in order to avoid the duplication of administration costs, then put it in the CTF, and then let the various associations determine what the rules and regulations are, because, believe me, history proves that once there is money, the various organizations determine an expedient way to do it.

8371   I don't think we would have any caveats on "Old media players shouldn't be able to play in the New Media Fund," because I think we are, then, missing the point.

8372   I think, Mr. Chair, that you hit it well, that if 95 percent of today's content is really a lift of content produced by other agencies or other entities -- and that will continue -- the most important objective at the end of the day is to find a funding mechanism, with rules and regs around it -- and I don't think it's up to the Commission to do -- that ensures that we now have a go-forward position for producers to access it.

8373   And I think that we are trying to simplify the answer for you more directionally than specifically.

8374   THE CHAIRPERSON: Let's not get into the details, I am just talking about the concept. Should it be a separate fund for new media to which broadcasters have no access?

8375   Because the new media people say: Otherwise it is going to be sucked up by the broadcasters and there will be nothing for us.

8376   The broadcasters say: Sorry, it's our content, which we have to re-purpose. If we don't re-purpose it, you won't have content, so let us have access to the fund.

8377   That's as simple as I can put it, and both sides are adamant, needless to say.

8378   MR. SHEA: I think, for starters, that collectively we agree that the fund should be open to all players, and it should not have any limits on it.

8379   The reality, I guess, is that we have a set of business practices today that organize how content for conventional television gets made. There are licence fees. There are all sorts of tax credits. There are mechanisms in place.

8380   When it comes to online, there really isn't the licence fee from a distributor that then begins to match all sorts of other elements of funding.

8381   So that's why I suggest: Set the fund up. Yes, it is separate, in that it's called the New Media Fund, managed by whomever the Commission, in its wisdom, thinks it should be, but leave it open.

8382   THE CHAIRPERSON: Okay. Now, you are suggesting that we need to do more for promotion and visibility, and I hear the concept, but I am not quite sure what you have in mind in terms of promotion.

8383   Are you suggesting more funding for promotion? Are you suggesting that a portion of the fund -- have you said anything about being eligible for promotion?

8384   Are you talking about regulatory measures?

8385   What do you really have in mind when you say "promotion of the visibility of Canadian content in new media"?

8386   MR. DAVIDSON: I will speak to that, if I may, Mr. Chair.

8387   Our priority remains content production, but we do note that content that is produced that isn't visible and accessible is not going to achieve its objective.

8388   What we do identify is a need for promotion to be considered if the Commission considers adding incremental funding for new media content production.

8389   We would see the proportion to be less for promotion than for content production, but we do see promotion as an important ingredient.

8390   THE CHAIRPERSON: You suggest that we don't regulate the internet, but you say: Well, wireless is slightly different, and in wireless you should reserve certain shelf space for Canadian content.

8391   That's both in your submission and you said that this morning, too.

8392   Frankly, I don't quite understand that. Isn't wireless just another means of accessing new media? A lot of it is actually internet-based and you just access it through wireless.

8393   Why the distinction? Why reserve shelf space on wireless but not on the internet?

8394   I'm sorry, there is a disconnect here that I don't understand.

8395   MR. DAVIDSON: I'm sorry for any confusion on that point.

8396   We would draw a distinction between the open internet and closed platforms. So what we are proposing is -- certainly, there isn't evidence, currently, to suggest that there is a need for intervention on closed platforms, but in circumstances where a user's access to content is limited in some way by the access or the hardware provider, we would just note that it's important that we maintain a watching brief on that, in the event, as the market evolves, that those circumstances become more pervasive.

8397   There may be an interest that we would have in looking at ensuring a minimum level of Canadian content on those closed platforms only.

8398   THE CHAIRPERSON: Can you give me an example of what you have in mind?

8399   MR. DAVIDSON: A mobile cell phone, where the access provider has predetermined the suite of services that are available when you get the phone.

8400   If you are able to override that and go to the open internet, then there is absolutely no --

8401   THE CHAIRPERSON: That's my point.

8402   I will give you an example, and you tell me whether I'm wrong.

8403   Let's talk about the iPhone. On the iPhone there is an application where I can get on Bloomberg and get all of the market information.

8404   You are saying: No, you should have a Canadian access there, too, and if whoever sells me the iPhone only allows me to access Bloomberg, then that's not acceptable, there should be, at least, access to BNN or some other Canadian equivalent, so that I can get both the Canadian and the foreign access.

8405   Is that what you have in mind?

8406   MR. DAVIDSON: Yes. I would just want to emphasize that if there is an ability for the user to overcome any barrier that is established by the hardware and the service provider to get to the open internet, then we would have no interest in interfering with that model. It's only in the circumstance where the barrier cannot be overcome.

8407   THE CHAIRPERSON: So in my example there would not be one, because you, obviously, can access BNN through the internet on your mobile phone.

8408   MR. DAVIDSON: That's right.

8409   THE CHAIRPERSON: It's only if something was restricted to that apparatus and there was no Canadian counterpart or equivalent offered.

8410   MR. DAVIDSON: And no opportunity to pursue through the open internet.

8411   I would just emphasize that this is a circumstance that we are certainly not identifying as at all pervasive right now, we would simply want to identify it as something that we would want to keep an eye on in case the market evolves in a direction where that becomes more common than it is.

8412   THE CHAIRPERSON: You also talk about rights, and you feel that independent producers are deprived of their rights through the negotiation practice by broadcasters, who then hoard these rights and don't use them fully, and therefore deprive independent users of the ability to market those rights and reap the rewards.

8413   You propose something called "Use it or lose it".

8414   First of all, do you have any evidence of this hoarding by broadcasters?

8415   MR. SHEA: Mr. Chairman, I think the only evidence -- you have had a number of producer organizations appear before you where they have mentioned this, that when they negotiate their licence fees, there is a trend where there is the consumption of all other peripheral rights, whether they be mobile rights, or mobisode rights, or online rights.

8416   I think you have a few of them appearing before you in the next couple of days. Perhaps it might be appropriate to ask them if that is their business practice.

8417   My second question would be: Is it the same practice you have with other foreign distributors?

8418   In other words, when you are buying programs from ABC Network, does it come with all of these other peripheral rights that you can arbitrarily do something with or hoard?

8419   I think we know the answer to that question, they don't come with any other rights.

8420   Then, I think, thirdly, as the producers and broadcasters work toward their terms of trade, probably it is best for them to contractually try to work their way through this.

8421   But I don't think there is any doubt, Mr. Chairman, that in the last number of years a number of producers have had to forgo rights, and therefore forgo an opportunity, when it pertains to these external opportunities.

8422   THE CHAIRPERSON: Assuming that your first suppositions are right, that (a) there is hoarding, and (b) that when they acquire foreign rights they do not acquire all of the rights, what is the solution?

8423   Obviously, terms of trade is one, but as you yourself said, the independent producers do not have the bargaining power to really achieve something significant. At least that's the experience so far.

8424   In the recent CFTPA convention, that was sort of the comment -- they admitted themselves that their biggest problem is market power.

8425   We have insisted on terms of trade, et cetera, but if that is not as successful as we suspect, what then?

8426   MR. SHEA: Perhaps the other way to come at this is, if you look at the funding -- and OMDC is a participant -- if you look at the funding of existing television programs, they were specifically financed for the broadcast rights, and only the budget with respect to broadcast was looked at, and so on and so forth.

8427   And maybe the funding agencies could be a bit more adamant by saying that any negotiation with a broadcaster excludes all of these other peripheral things.

8428   Because, in fairness, the bulk of that money came from cable subscribers and CTF for television. It wasn't there, from a funding perspective, for external opportunities.

8429   I think that we also know -- you said it earlier -- that even re-purposing content has costs and has revenue opportunities. To me, they are two different businesses.

8430   THE CHAIRPERSON: You are a funding entity, do you insist on these conditions?

8431   MR. SHEA: We haven't up until I just thought of it now.

--- Laughter

8432   THE CHAIRPERSON: Maybe you should lead by example.

8433   How do you implement "Use it or lose it"?

8434   Operationalize that for me. As a concept it's easy to understand; in actual practice, what is the period of time, what is the definition of "Use it", what does "Lose it" mean?

8435   MS THORNE-STONE: I think that one has fallen to me, and, to be frank, I am not sure that we know the answer to that. I expect that it will need to be on a case-by-case basis.

8436   The principle that we were trying to establish was that, if a broadcaster wants to have the digital media rights, they should (a) pay for them, and they should be required to use them.

8437   I expect that, on a practical application basis, what would happen is, that would have to be negotiated for each case, individually, between the content creator and the broadcaster, whether it's a six-month period or a one-year period, and it would probably depend on which particular rights the broadcaster was requesting.

8438   I would also, while I have the microphone, like to go back to one of your other questions as to whether or not there is evidence of this. I think I can comfortably say that there are a number of producers who have come to us to let us know that they are not able to apply for our Interactive Digital Media Fund because they don't have the right to use their content, or adapt their content for an interactive product, because those rights are retained by the broadcaster.

8439   So, although I suppose that I shouldn't name them today, there is evidence of that.

8440   THE CHAIRPERSON: But, really, this "Use it or lose it" is negotiated between producers and broadcasters. It is at the edge of our mandate, if at all part of it.

8441   It really is part of the funding mechanism, that, as your colleague put it, you could insist on it.

8442   But if you do it on a case-by-case basis, as you have just suggested, you are back to square one. You have to establish, at least, some parameters for what is acceptable or not. Otherwise, again, the producers have no -- relatively no bargaining power, while the broadcasters have it all, and they will argue: In order to use those rights -- anyway, it has to be re-purposed, so we have to be part of the equation.

8443   MS THORNE-STONE: We agree.

--- Laughter

8444   THE CHAIRPERSON: I was hoping for a solution here.

8445   MS THORNE-STONE: I think we can see that we agree, and we would be happy to work with you and work with the producers to try to think through some of those answers.

8446   THE CHAIRPERSON: You said in your submission this morning, and in your written submission earlier, that the ISPs and the WSPs, since they are in the broadcast distribution business, should contribute the same way as the BDUs do.

8447   Of course, that requires two things. First of all, you have to measure how much they distribute; and secondly, you have to decide what is the amount of the contribution.

8448   As you know, for the BDU, it's 5 percent of their gross revenue, of which 3 percent goes into the Fund, and 2 percent they can use for their own community broadcasting.

8449   Bearing in mind both of those issues, do you have any suggestions on (a) how we ascertain how much Canadian content they do distribute; and (b) what should be the rate that we should charge them?

8450   MR. SHEA: On measurement, I think we have a couple of suggestions. One is that we have some of the finest IT companies both in Ontario and across Canada, and I think that if we were to put an RFP out -- I don't know who the "we" is yet, but if we were to put an RFP out on "How would you measure Canadian content," I am sure we could come up with some solutions very quickly.

8451   Secondly, and I think more importantly, I come back to "Follow the money," which is how, historically, we have regulated Canadian television. If we follow the money today, it doesn't look very promising.

8452   So I would start by saying: Where are the advertising revenues, and where are they going, and what are they being attributed to?

8453   That's very trackable today.

8454   Secondly, the ISPs who are appearing before you in the next couple of days, I am sure they have all sorts of techniques in terms of monitoring today the use of Canadian content, and so on.

8455   I think -- and this is probably more Kevin's observation that it, necessarily, is that of the OMDC and certainly the Minister's. We have a bit of a preoccupation, it seems, with measurement with respect to how that can then lend itself to the support of Canadian content.

8456   With all due respect, Mr. Chairman, I would say that if we were focused purely on measurement of Cancon in the last 30-some-odd years as a byproduct of whether or not it should be funded, we would not have the system we have today.

8457   I think it is more about the assurance that there is the opportunity for content on screens, opportunity for content creators to get there, than it necessarily is about being hung up with measurement.

8458   I will conclude by saying this -- start with where I started; that is, today everything is measurable on the internet, and I wouldn't be at all surprised if there were immediate ways for us to ascertain the full extent of Canadian content and its usage. Maybe where we would be a little shy is what the actual answer is to that question, because it is probably very, very low.

8459   THE CHAIRPERSON: I'm sorry, I can't accept that. Surely, in order to ask them to contribute their appropriate share, you have to isolate what their distribution activity is.

8460   Let's take the internet providers. They do an awful lot of things besides distributing broadcast content, and surely --

8461   I am not talking about consumption, I am talking about distribution.

8462   Surely you have to isolate what is your distribution activity.

8463   Or, to take your tack, what is the advertising that you get from the distribution activity.

8464   But you have to make it relevant to put a percentage on the ISPs, given that they do an awful lot of other things besides distributing broadcasting, and it would be manifestly unfair.

8465   We have to focus on measurement. We have to decide what is the denominator, which percentage goes --

8466   MR. SHEA: I think we respect that, but I think that what we do know, also, is that whatever that number is today -- and when the Commission regulates, it regulates for a period of go-forward years -- that number is only going to become significantly higher in the years ahead because of the changing distribution mechanism.

8467   But I come back to, if the answers aren't necessarily here today from a technology standpoint, I think what the Commission then has to do is figure out what are the questions it needs to answer, and put and RFP out, and they will get answered pretty quickly.

8468   The way in which to measure it will come forward pretty quickly.

8469   MR. DAVIDSON: If I might, Mr. Chair, add to that; it is for precisely the reason around measurement that the Ministry has suggested that the Commission adopt a functional lens in looking at the new media space, and looking at the activities that are being undertaken, and considering equitable treatment of those activities where they also appear in the traditional media space.

8470   It's certainly not within our technical expertise to do that assessment, but we feel that there is value in undertaking the functional analysis approach, rather than immediately going to identification of the elements and trying to determine, as you say, the measure of their contribution.

8471   THE CHAIRPERSON: The purpose of this public hearing is, obviously, to get people's ideas, and I had hoped that you would have some, at least, conceptual ideas of what portion it is that we should measure.

8472   And the technical means of measuring -- as the OMC says, you can obviously measure anything if you want to, it's a question of the costs and the benefits. First of all, let's see, conceptually, what would be fair to assess, and what should they pay.

8473   I am sure that other people will have lots of ideas on this point, so thank you for your answers.

8474   Those are my questions.

8475   Michel?

8476   COMMISSIONER ARPIN: Thank you, Mr. Chair.

8477   At the end of your oral presentation, Minister, you were talking about a watching brief. I noted that the Ministry of Communication and Culture of Quebec and many francophone intervenors talk about an observatoire des nouveaux médias.

8478   Are you talking about the same thing or are you only talking about monitoring what is going on?

8479   HON. AILEEN CARROLL: Mr. Arpin, I would define my position as one of monitoring, rather than going as far along that path as my Quebec colleague, Madam St-Pierre, has put forward.

8480   It's a watching brief, which, I think, is perhaps a little less directive in its intent.

8481   COMMISSIONER ARPIN: Yes, because an observatoire will require funding. Monitoring -- the Commission is already doing monitoring on a continuous basis, and, obviously, we publish annually our Communications Report, which contains a lot of data that we accumulate through various sources.

8482   What you are saying to us this morning is: Keep doing that.

8483   HON. AILEEN CARROLL: Yes, that would be my recommendation, for one of the reasons that you have clarified, and to which the Chair referred earlier, that the cost is constantly a factor, and how sefficacious it is must relate to the ratio of the cost.

8484   At this point, I don't think the argument has been made to invest that kind of money, nor has the argument been made to say that what you are doing isn't effective enough.

8485   That would be our recommendation or advice to you, to continue in that manner.

8486   COMMISSIONER ARPIN: Thank you, Minister.

8487   THE CHAIRPERSON: Len?

8488   COMMISSIONER KATZ: Thank you, Mr. Chairman.

8489   I want to come back to the notion of "Follow the money" for a minute. There is a line in your submission of this morning that talks about who should be contributing to the Canadian broadcasting new media environment, and you basically say that ISPs and mobile service providers that also benefit from delivering audio-visual content to consumers should be required to do the same.

8490   The notion of benefit there -- I just want to know whether, from your perspective, that goes beyond financial benefit, or are you looking here solely at the financial benefits that accrue to the ISPs and the mobile providers as a result of being in the so-called space?

8491   MR. SHEA: I think it's really a combination of two things: one is the money, and then, secondly, back to the notion of what can they do to help in terms of assisting the promotion of various available Canadian websites, and so on and so forth.

8492   So I think it really is two things.

8493   COMMISSIONER KATZ: That second one, though, is of a non-financial nature.

8494   MR. SHEA: That's correct.

8495   COMMISSIONER KATZ: You are talking about shelf space, availability and access --

8496   MR. SHEA: That's correct.

8497   COMMISSIONER KATZ: -- which may not take the form of money, but may take the form of a cost perhaps to the system, as opposed to purely a levy of some sort.

8498   MR. SHEA: That's correct.

8499   COMMISSIONER KATZ: In the notion of "Following the money," there are two competing forces here, and I guess we will hear from the advertisers later on this morning, actually, but we are seeing a shift of advertising revenue away from traditional broadcasting, for a number of reasons, and we can get into it at a different time, and I am sure the advertisers will anyways.

8500   When you look at, strictly, the BDU side of the business, the distribution side, we are not seeing people leaving the classical broadcasting distribution system. People aren't turning back in their digital boxes, be they cable or satellite. Therefore, the contribution, or the support that is coming right now from traditional broadcasting, through this 5 percent or 3 percent, isn't going down at all.

8501   So the notion of adding additional support to the broadcasting system would, in fact, be additive as opposed to a substitution.

8502   I just want to make sure that that's your position, that there should be more money going into the system, notwithstanding the fact that the current system, as it is today, isn't losing any money by virtue of this new media environment that we are facing.

8503   MR. SHEA: That's correct, it's not losing subscription revenues, but there is clearly a shift of ad revenues, which, at the end of the day, is perhaps the most important ingredient for broadcasters to actually make content.

8504   That is changing.

8505   COMMISSIONER KATZ: One of the notions that I have been reading about lately -- and I think it was in the paper again this weekend -- Zillion TV is coming on board, and everybody is talking about these new forms of internet broadcasting that are taking place, and the presumption is that, at some point in time, there will be a migration of some consumers, moving from classical cable TV into the internet world, no different than the youth today don't have, necessarily, a wireline phone in their house. They are living with wireless because they don't see the value of that.

8506   Presumably, at some point in time, there will be a constituency out there of Canadians who won't see the value of cable as it is, and they will just use the internet for whatever form of information or broadcasting content they are looking for, as well.

8507   At that point in time, there may, in fact, be a migration. In fact, there will be a decrease in the contribution coming from broadcasting, as people return their sets and deactivate from the classical cable network, as well.

8508   That is a different issue, from my perspective, because that is a substitution effect, and there is money being lost in the system for support, as opposed to the additive nature of it.

8509   MR. DAVIDSON: Yes, we would agree with that observation.

8510   Our point right now is that the traditional broadcaster remains very, very important. So as we move -- as the market moves and consumer expectations evolve to consume content across multiple platforms, increasingly, on mobile and fixed net access, we see the need for incremental investment, while we maintain our current investment in traditional, due to all of the reasons that, I think, were identified earlier. It's a competitive global marketplace. The Ontario -- the Canadian market is small. Our companies tend to be, predominantly, SMEs, which are very, very challenged in terms of their capitalization and their access to capital.

8511   For those reasons, we want to maintain our strength, and build upon it through incremental investments in new media content.

8512   COMMISSIONER KATZ: So if, hypothetically, the Commission decides that there is a need to create a levy system for new media today and the current broadcasting system as it is today continues to contribute to production through the traditional sense, and if at some point in time that starts to slide, will your position be that we've now got to continue to beef up the contribution coming from the ISP or the new media side because it's now being lost in the other side as well, so all we're going to see as this thing shifts more and more of a burden being placed on the new media carriage, if I can call it that, side of the equation?

8513   MR. DAVIDSON: I think it's fair to say that the market has evolved and business models and revenue models have evolved in ways that many of us could not have anticipated a while ago and that if that circumstance does change we would want to reassess our position at that time, but not until then.

8514   COMMISSIONER KATZ: Okay.

8515   Those are my questions.

8516   THE CHAIRPERSON: Louise?

8517   COMMISSIONER POIRIER: Yes, I have two questions, Mr. Chair.

8518   The first, I address it to Ms Karen Thorne-Stone.

8519   In your document, page 3, you mention that the Commission should maintain the existing exemption orders but to introduce some conditions.

8520   Could you give us more information on the conditions you'd wish us to apply?

8521   MS THORNE-STONE: I think the conditions are many of the things that we've been discussing already this morning.

8522   It's a recognition of the fact that more money and more support is needed in the system to support new media content.

8523   So, whether that's a levy or whether that's shelf space or whether that's one of many other tools that other presenters have put before you, we're not trying to conclude on that, but simply to encourage the Commission to recognize that some sort of additional support for Canadian content in the new media context is necessary.

8524   COMMISSIONER POIRIER: Okay. Nothing more than that.

8525   And my second question, to whoever can answer this question. You say we need to invest more new money in the new media, ISPs should contribute, but you know there are small and big ISPs and, for example, if I think of rural Ontario some small ISPs there offer services to subscribers but they still offer only the dial-up to some clients and those clients then don't have access to videos, don't have access to the general broadcasting we always refer to.

8526   So, I wonder, if ever there is a levy that is put on the ISPs, do you think we should exempt those smaller ISPs who don't offer the same services as the big ones and who don't profit as much as the other ones?

8527   HON. AILEEN CARROLL: You make an excellent point and -- but I guess contributions can be, you know, from a variety of forms and certainly I wouldn't want to see something in place that is onerous and, therefore, penalizing a new and growing initiative.

8528   But, at the same time, to get into the world of exempting as to which ISPs would pay and which would not I think might make it quite a difficult task as well.

8529   So, I think quite honestly, Ms Poirier, I would need to think on that. I don't know if, Karen, you wish to comment.

8530   COMMISSIONER POIRIER: Well, you know, you can come back to us later on on this matter because some smaller ISPs, for example, said if you have twenty -- hundred thousand subscribers or less maybe you should exempt us. It's very easy for them to show us how many subscribers they have, so...

8531   HON. AILEEN CARROLL: In which case you would establish a threshold --

8532   COMMISSIONER POIRIER: Yes.

8533   HON. AILEEN CARROLL: -- at which point it triggers...

8534   COMMISSIONER POIRIER: Yes. And it comes from companies that work in Ontario. So, I wonder, you are an entrepreneur in Ontario, so I'd love to have your viewpoint on that.

8535   HON. AILEEN CARROLL: Well, it certainly makes sense, I mean, that there be a certain threshold before one, you know, begins to charge.

8536   So, you know, I would think we would be very open to that position.

8537   COMMISSIONER POIRIER: Thank you. If you can give us your viewpoint before the 17th of March I would appreciate, thank you.

8538   HON. AILEEN CARROLL: We will indeed. We look forward to that. Thank you for the opportunity.

8539   COMMISSIONER POIRIER: Okay. Tim, last question.

8540   COMMISSIONER DENTON: Good morning, ladies and gentlemen.

8541   In your presentation you state that:

"Conventional broadcasters and distributors are rightly required to make contributions to Canadian content. The ISPs and mobile service providers that also benefit from delivering audio/visual content to consumers should be required to do the same." (As read)

8542   COMMISSIONER DENTON: Now, I presume -- am I correct in understanding that what you mean is that they benefit from delivering Canadian audio/visual content?

8543   MR. SHEA: Yes, and in addition to numerous other channels, but yes.

8544   COMMISSIONER DENTON: And, so, is their proportion -- is their requirement or obligation to contribute, in your view, dependent upon the extent to which they benefit from distributing Canadian audio/visual content?

8545   MR. SHEA: I much prefer the way the Chairman said it this morning and, that is, perhaps should we be standing way back and analysing the flow of digital content through licensed Canadian digital distribution companies in the country.

8546   And maybe that's the best way to come at that question, because I think if we just begin to isolate certain distribution entities and try and look at, you know, the exposition of Canadian content and so on, it's going to be very, very difficult.

8547   COMMISSIONER DENTON: So, you think there is a measurement problem in determining how much they should contribute here?

8548   MR. SHEA: I think there's a measurement issue, you know, in addition to all the other services that they're providing as ISPs, but the reality is if the shift of viewing of Canadian consumers begins to move, as it's certainly looking like more and more and more in that direction, if it looks like broadcasting it is broadcasting and we have historically had cultural incentives to be able to make sure we have more choice on that show.

8549   COMMISSIONER DENTON: But you are not at the moment able to give us the kinds of figures that would show the extent of that benefit?

8550   MR. SHEA: Commissioner Denton, no, we're not.

8551   COMMISSIONER DENTON: Thank you.

8552   COMMISSIONER POIRIER: Okay. Thank you very much. We very much appreciate your taking the time and coming and, as my colleague pointed out, you have time to make additional submissions if you want to.

8553   Thank you.

8554   HON. AILEEN CARROLL: Thank you, Mr. Chair.

8555   THE CHAIRPERSON: Madam Secretary, I think we should take a ten-minute break.

--- Upon recessing at 1021

--- Upon resuming at 1036

8556   LA SECRÉTAIRE : À l'ordre, s'il vous plaît.

8557   Order, please.

8558   LE PRÉSIDENT : O.K. Madame la Secrétaire, nous sommes prêts.

8559   THE SECRETARY: I would now invite the Association of Canadian Advertisers/l'Association canadienne des annonceurs, to make its presentation.

8560   Appearing for the Association of Canadian Advertisers is Mr. Reaume. Please introduce your colleagues and proceed with your presentation.

PRESENTATION

8561   MR. REAUME: Thank you so much.

8562   Mr. Chairman, Commissioners, Commission Staff, good morning.

8563   My name is Bob Reaume, Vice-President, Policy and Research with the Association of Canadian Advertisers.

8564   With me today is Ron Lund, President and CEO of our association and Judy Davey, Vice-President, Marketing Assets Molson Canada, appearing today in her capacity as the Chair of ACA's Broadcast Committee.

8565   We are very pleased to have this opportunity to participate in the Commission's call for comments on new media broadcasting in Canada.

8566   Most of you will have heard this description of our organization before, but for those we have not yet met, please permit us a few introductory comments.

8567   The Association of Canadian Advertisers is the only association solely representing the interests of advertisers in this country. Our members, over 200 companies and divisions, represent a wide range of industry sectors including manufacturing, retail, package goods, financial services and communications. They are the top advertisers in Canada with estimated annual sales of close $350-billion.

8568   Advertising is a significant economic force in the world. In virtually all developed countries advertising is considered an important and necessary component of the communications infrastructure. It is estimated that total world wide disposable advertising expenditure approached $2-trillion U.S. dollars last year.

8569   As we have pointed out before, advertising in Canada is a primary resource sustaining the Canadian broadcasting system. In all its forms advertising is estimated to represent an annual $13.7-billion investment in the Canadian economy.

8570   Of this total amount, approximately $3.2-billion is invested annually in television advertising. Obviously advertising is a substantial contributor of funds to the Canadian broadcasting system, helping to keep the final costs to consumers manageable.

8571   Considering these significant revenues, the role of advertising is critical to a healthy and robust broadcasting system in Canada. It is advertising that substantially pays for the programs that entertain, inform and educate Canadians. In short, advertising is the essential economic underpinning to the system.

8572   MS DAVEY: Advertisers have always played an instrumental role in media content creation. From the early days of newspapers to radio, then television and now today we look forward to our involvement in new media.

8573   As consumers' attentions move steadily to digital new media, advertisers will continue to provide the needed financial support to make these emerging media successful and as consumers' attentions are most definitely migrating to the Internet, advertisers must follow them.

8574   By the Broadcasting Act definition, professionally produced video content for the Internet or mobile would certainly be considered broadcasting.

8575   We do, however, understand that you are not focusing on user-generated content in these hearings but on commercial content. It would be our hope that this commercial content will continue to carry some of the content that we call commercials.

8576   We agree with the Commission's assessment that globally the pace of video content creation for the Internet is accelerating, but that in this area Canada lags.

8577   Until recently one key barrier that existed in Canada was the reluctance of advertisers to support new media video due to high talent performer costs. Consequently, very little Canadian advertising video to date has run on the Internet.

8578   As it has been mentioned already at these hearings, video advertising on the Internet represents less than one percent of all online advertising or approximately $9-million per year.

8579   We believe that is about to change, however. A new commercial agreement with talent unions was negotiated this past year taking effect early in 2009 which now makes it reasonable for advertisers to contemplate exploring the use of video advertising online.

8580   These reasonable talent fee rates apply to both "move over" and "made for" online video spots and should fuel significant experimentation.

8581   Online video in the U.S. has been developing nicely for a few years, but in Canada, even though we expect substantial experimentation to take place this year, these are still very early days.

8582   And because we are still very much in the early days, we would suggest that a further period of regulatory exemption is warranted in order to encourage experimentation, innovation and creativity. A period of experimentation during these early days is vital to allow program and advertising content producers to work together.

8583   If, however, the Commission decides that special measures are warranted at this time, we would strongly encourage the use of positive incentives.

8584   As an example, one of these might be tax incentives for commercial advertising productions for new media. Currently program producers can avail themselves of several tax breaks for the creation of content, but advertising content creation is shut out. This is in spite of the fact that it is the advertising production industry that continues to provide the day-in/day-out activity that makes it possible for a video production infrastructure to be maintained in this country.

8585   We fully understand the tax law is outside the Commission's jurisdiction, but we expect that an endorsement from the Commission in this regard would not go unnoticed.

8586   MR. REAUME: Finally, we note that many parties have concluded, including the Commission's Report last year, that the Internet is having an undo economic impact on the advertising revenues of traditional broadcasters. However, with very little ad support online for comparable substitutable video, how can this be so?

8587   There is no doubt that online advertising revenues have increased dramatically over the past several years, but the real online ad growth has been with search and display advertising, the digital equivalent in fact of classified or print ads.

8588   Commissioners, as with all media, without advertising support new media content creators cannot afford to produce and new media content carriers cannot afford to exhibit. If you wish to enable a strong Canadian participation in this future digital environment, you will need the support of advertisers and the best way to ensure that is to foster an open environment that encourages experimentation, innovation and creativity.

8589   We thank you again for the opportunity to participate in this important consultation and we wish the Commission well in your deliberations.

8590   Thank you.

8591   THE CHAIRPERSON: Thank you for your presentation.

8592   First of all, educate me a bit. When I watch something on TV -- on the Internet, a movie or a television show and there is an ad in there, is that the same ad that was in the television version, or does something have to be done with it so that you can show it on the Internet?

8593   MR. REAUME: I believe it is a different ad and it is a different sales arrangement with the broadcaster.

8594   Judy perhaps knows --

8595   THE CHAIRPERSON: But that is for commercial reasons, not for technical reasons; is it?

8596   MR. REAUME: I believe it's for commercial reasons, for sales reasons, yeah.

8597   MS DAVEY: Yes. If an advertiser's going to place their advertising online they have to pay ACTRA fees and talent, so you need to make sure that those fees are up to date and paid in order to do it.

8598   THE CHAIRPERSON: And what is "move over" and "made for"? I'm sorry if I don't see. You throw those terms out, since I'm not in the advertising world I don't know what you are talking about.

8599   MR. LUND: Yeah. "Move over" is just simply the same commercial that you would play on television, you would play on the Internet, and that's early days sort of thing because, you know, nobody knows how to really -- what the creative process is ultimately going to be on the Internet.

8600   "Made for" is when a commercial is made to best utilize the medium on the Internet, and that's what Bob was referring to. "Move over", there is some "move over" that does go on air -- sorry, on the Internet, but "made for", it's almost non-existent in Canada because it's too expensive.

8601   THE CHAIRPERSON: "Made for" is the one percent you are talking about; is it?

8602   MR. LUND: Pardon me?

8603   THE CHAIRPERSON: That is the one percent you are talking about?

8604   MR. LUND: Yes.

8605   THE CHAIRPERSON: I see. Okay.

8606   Rita, you have some questions. You are the expert on this.

8607   COMMISSIONER CUGINI: Thank you, Mr. Reaume and your colleagues for your presentation this morning, and I'm going to follow some of the questions that the Chair has just asked and more so for clarification than anything else.

8608   So, the one percent, the $9-million per year that you have just talked about is only for "made for" advertising, that doesn't include this "move over" advertising?

8609   Your microphone.

8610   MR. LUND: It's both, sorry.

8611   COMMISSIONER CUGINI: It's for both?

8612   MR. LUND: It is for both, yes. And of that 9-million, the "made for" is almost non-existent.

8613   COMMISSIONER CUGINI: Okay. So, the "made for" is in its infancy --

8614   MR. LUND: Yes.

8615   COMMISSIONER CUGINI: -- essentially at this point?

8616   MR. LUND: Absolutely.

8617   COMMISSIONER CUGINI: And you talked about it both in your written presentation and again this morning, about the costs that are associated with "move over" advertising as well. So, could we equate this with the terms of trade agreements that -- or the negotiation of the terms of trade agreement that the producers are conducting right now with broadcasters, for example. Is this --

8618   MR. LUND: No, it was more with the performers. It was very expensive for even "made for" to go over. In fact at one point in time it was, you know, twice -- you had to pay the performers twice over to get onto the Internet.

8619   We now have a deal that makes that much more accommodating, and on "made for" we have very good rates to start to stimulate the "made for" side. But it was very prohibitive.

8620   MR. REAUME: I just might add that this agreement is called the National Commercials Agreement. It's a negotiated agreement with the performers unions. It's different from the negotiated agreements for programs and other agreements with the unions.

8621   COMMISSIONER CUGINI: Okay. Thank you.

8622   Is it with all of the guilds, or who are the parties to the agreement?

8623   MR. REAUME: In English Canada we have ACTRA and on the west coast there is a sub-agreement in Vancouver, Ron, you can help me out on the exact name of that.

8624   MR. LUND: Yeah, sorry, that question. So, basically there is commercial agreements and then there is long format agreements.

8625   We negotiate the commercial agreements, so that's the kind of the highest level.

8626   In Quebec it's with Union des artistes, it's also with Gilde des musiciens and in English Canada it's with ACTRA and with the Federation, AF of M, American Federation of Musicians, so, yeah.

8627   COMMISSIONER CUGINI: Okay. Thank you.

8628   MR. LUND: But the key ones for actually making it are UDA and ACTRA.

8629   COMMISSIONER CUGINI: Okay. And now that you have this agreement in place, are you able to in any way quantify by how much online advertising will grow in the next five years, let's say?

8630   MR. LUND: Well, we have no projections but we're working very hard with ACTRA with quarterly meetings to actually monitor how much is being made, so we understand what kind of effect it could have on performers, what kind of effect it has on a production community.

8631   It's still a very highly kept secret, so we're trying to get it out there more and more because people just ran away from it because it was just far, far too expensive and, you know, Judy could probably speak to that, or anybody in terms of how expensive it was to advertise on the net.

8632   COMMISSIONER CUGINI: And when you come to an advertising agreement, are there two separate agreements, one for traditional broadcasting and one for online if that same show is streamed online on the broadcaster's website?

8633   MR. LUND: No, that's included.

8634   COMMISSIONER CUGINI: It's all included. So, it's a package deal?

8635   MS DAVEY: It's included from a talent perspective, but it would be a separate negotiation from a media perspective.

8636   COMMISSIONER CUGINI: I'm talking about from a media perspective.

8637   MS DAVEY: Yes.

8638   COMMISSIONER CUGINI: You enter into two agreements, two separate agreements with the broadcaster?

8639   MS DAVEY: Yes.

8640   COMMISSIONER CUGINI: Okay. Thank you.

8641   MS DAVEY: Well, it's part of the same negotiation, but it would have --

8642   COMMISSIONER CUGINI: I understand, but two separate agreements. Okay.

8643   In paragraph 4 of your oral presentation you say:

"New media advertising expenditures have grown dramatically and are now estimated to be about $1.5-billion in 2008." (As read)

8644   COMMISSIONER CUGINI: Are those new dollars?

8645   MR. REAUME: Are they new advertising dollars created out of nothing; is that what you're asking?

8646   COMMISSIONER CUGINI: Essentially, has the advertising pie grown as a result of the opportunity to advertise online?

8647   MR. REAUME: It has grown a bit, it hasn't grown by $1.5-billion. There I would suggest to you that many of the other media have seen reductions in their revenues that have been directed to the Internet.

8648   COMMISSIONER CUGINI: And you would combine print, radio and television in that?

8649   MR. REAUME: Yes, and outdoor and directories and, I mean, there's lots.

8650   COMMISSIONER CUGINI: Are you able to tell me of the 1.5-billion how much of that is in fact new? No?

8651   MR. REAUME: The short answer's no.

8652   COMMISSIONER CUGINI: Okay. Thank you.

8653   Paragraph 7 you say:

"By the Broadcasting Act definition, professionally produced video content for the Internet or mobile would certainly be considered broadcasting." (As read)

8654   COMMISSIONER CUGINI: And that's it, that's the end of the paragraph.

8655   So, my question to you is, is the end of that sentence, "and, therefore, should be regulated", in your opinion?

8656   MR. REAUME: That is a decision that we don't discuss internally or with advertisers, it's simply not something that is part of our discussion. It's obviously very important for an organization like yours, but I would suggest that we take no position on that.

8657   COMMISSIONER CUGINI: Okay.

8658   MR. REAUME: The point we were making is that that Broadcasting Act definition is quite broad and, so, in our opinion, in our reading of it, there's just -- there's absolutely no question that professional video on the Internet is captured under that definition, that's all.

8659   COMMISSIONER CUGINI: You make a point of distinguishing between professionally produced and user-generated content and you repeated that this morning.

8660   Is there an appetite on the part of advertisers to advertise on sites that use predominantly user-generated content?

8661   MS DAVEY: Absolutely. I mean, it certainly depends on the advertiser and who they're targeting, but if advertisers can enter into an engagement with the consumer and it does something, gives back to the consumer and gives back to the advertiser, absolutely.

8662   COMMISSIONER CUGINI: This morning the OMDC really made a pitch to follow the money, to use their phrase, and they suggested that 70 percent of advertising dollars are going south for the most part on search engine sites.

8663   Would you agree with that?

8664   MR. REAUME: By south, you mean the United States?

8665   COMMISSIONER CUGINI: Yes.

8666   MR. REAUME: It's something we don't have research on, but it's certainly a substantial piece. I don't know if the 70 is right or what the right number is.

8667   The fact is, is that Canadians now have access -- this is an international medium -- they have access to great content everywhere and, like the intelligent people they are, they want to access quality content wherever they find it and then when somebody produces that content and an advertiser wants to pay for that audience, quite naturally a portion of that payment must go to the content producers and, in our case, a lot of that is U.S., but some is Britain, some is Germany, France, wherever in the world good content is produced.

8668   COMMISSIONER CUGINI: Just one final question. Another aspect of course of online broadcasting is radio. Many radio stations in this country stream, so I'm just talking about purely streaming, not Internet radio but the streaming of an Ottawa radio station online and, of course, the streaming involves playing of ads as well.

8669   Is there a premium paid by advertisers when a radio station streams their station online?

8670   MR. REAUME: Not that we're aware of.

8671   COMMISSIONER CUGINI: So, it's just an added bonus to the advertisers?

8672   MR. REAUME: Yeah.

8673   COMMISSIONER CUGINI: Well, thank you.

8674   Thank you, Mr. Chairman.

8675   THE CHAIRPERSON: Len?

8676   COMMISSIONER KATZ: I just have one question.

8677   Currently do advertisers get support for ad creation for traditional broadcasting? They don't?

8678   MR. LUND: No.

8679   COMMISSIONER KATZ: Because I thought on page 5 here you are asking for the Commission to come out in favour of a tax incentive but a program that would incent additional advertising.

8680   Advertising is a commercial undertaking, people advertise for commercial gain. Why would the government or the CRTC look at incentives in a commercial environment where if it makes sense to advertise you do and, if not, you don't?

8681   MR. LUND: We actually agree with you 100 percent. We put that in there only as a way of saying, don't disincentivize the media by putting parameters around it. If you're going to do anything, give an incentive, and one of the only incentives we could think of about is give us some money, give us a tax break and maybe we'll produce more for that.

8682   But other than that, sir, I agree with you.

8683   COMMISSIONER KATZ: Thank you.

8684   THE CHAIRPERSON: Steve?

8685   COMMISSIONER SIMPSON: Good morning.

8686   I'm very, very pleased that you're here because I believe that the advertising component of what has been traditionally called the broadcast model has to weigh in on this issue because I'm extremely interested in how this industry is going to involve itself in the future.

8687   My first question is, advertising in Canada, by your own submission, has been slow to adopt and to adapt -- let me rephrase that, slow to adopt its advertising to the Internet. Why is that?

8688   MR. REAUME: One of the barriers that we've outlined in our comments today was the talent fee barrier that has been -- keep holding advertisers back from using video on the Internet.

8689   On the other two types of ads, search advertising and display advertising, I don't believe that we have been reluctant to embrace this new media.

8690   In 2008 the amount advertisers spend on -- will have spent on the Internet will be about $1.5-billion. This is now an amount that exceeds all the advertising that is spent on both outdoor advertising and magazines and this is a mainstream media now for us.

8691   But in terms of using it as a video medium, that has not caught on, but I think this is the year that advertisers will dip their toe in the water.

8692   MR. LUND: Bob, to give scale, you might want to give one of our analytical examples on how much it costs to "move over" net in Canada versus the United States at a point in time.

8693   MR. REAUME: Yeah. I believe that in our written submission to this hearing the figures were outlined that for a number of the early years it would have been extremely cost prohibitive for an advertiser to use a video commercial on the Internet, something in the order of $50,000 for "an average campaign" and those parameters are in our submission, versus the equivalent in the United States for about $7,800. It was just literally prohibitive.

8694   So, with this new negotiated agreement we think that a number of advertisers will begin experimentation.

8695   COMMISSIONER SIMPSON: History has a habit of repeating itself and if you go back and look at conventional broadcasting as it evolved, first radio and then television, advertising played a tremendously important role in the development of not just advertising within the spectrums of television and radio, but actually were content creators, I think back to the 20s and 30s with the Lux Radio Hour and into very strong associations of advertisers with television shows because they were essentially content creators.

8696   Is this a model that you think might evolve or might continue on into the Internet and, if so, could you see yourself as content producers in the foreseeable future?

8697   MR. REAUME: I have an answer, you may wish to -- okay.

8698   I would suggest the answer is definitely yes, you in fact do see now some advertisers working with different websites and advertising agencies to do just that, to produce content.

8699   A lot of the social media sites, for instance, the old model of interruptive advertising simply does not work in these networking and social media sites and so, in fact, content creation is the way that an advertiser can get their message across.

8700   So, I would suggest that that model could indeed be very successful going forward.

8701   COMMISSIONER SIMPSON: The last question has to do with measurable results.

8702   The advertising industry is all about performance in terms of dollar investment getting a return. Could you give me a very quick observation as to your level of satisfaction with respect to today's present measurement methodologies and where -- what needs to be improved before the advertiser can competently invest in the Internet?

8703   MR. REAUME: Certainly. Currently, we have two methods of assessing measurability on the internet. One is server data which is just a by-product of the technology and the other is a syndicated commercial service called comScore.

8704   The comScore approach is a panel approach. So you take a sample, a national sample, and you watch their behaviour, where they visit and how long they spend, et cetera. The server side is strictly the technology counting the data as it transpires.

8705   Both of those methods have their challenges and difficulties. The server data can sometimes -- not sometimes -- almost always be distorted. I think the latest figures that I have read is one-quarter of internet users delete their cookies at least once a month. When this happens, the server technology cannot remember if you have been there or not so unique visitors are quite distorted by the server data. This has implications for advertisers in terms of what we like to calculate, which is reach in frequency.

8706   On the panel's side there are so many smaller sites that people visit in order to get a very robust representative sample you would need dozens and dozens of thousands of participants in the panel. It becomes cost prohibitive.

8707   So both of those methods have their challenges however it is under scrutiny and discussion right now in the industry internally. And I think that some improvements and some decisions will be made and we will improve that as the years go. We will have to improve it for advertisers.

8708   COMMISSIONER SIMPSON: Thank you.

8709   THE CHAIRPERSON: Okay. Thank you very much. Those are our questions. I appreciate your coming.

8710   Madame la Secrétaire, qui est la prochaine personne?

8711   THE SECRETARY: I would now invite Pelmorex to come to the presentation table.

--- Pause

8712   THE SECRETARY: Appearing for Pelmorex is Gaston Germain. Please introduce your colleagues and proceed with your presentation.

PRESENTATION

8713   MR. GERMAIN: Thank you. Good morning.

8714   My name is Gaston Germain. I am the President and Chief Operating Officer of Pelmorex Communications, the parent company of The Weather Network and MétéoMédia.

8715   With me today, sitting on my right, is Paul Temple, Senior Vice President, Regulatory and Strategic Affairs.

8716   And next to Paul is Luc Perreault, our Vice President, Affiliate and Government Relations; and on my left, Taylor Emerson, Vice President and General Manager of our Interactive Services Division.

8717   Mr. Chairman, Commissioners, we believe there is a real opportunity in this proceeding to ensure that Canadian broadcasting thrives on new media platforms and that Canadian programming services become important players in the delivery of new media content to Canadian consumers.

8718   À titre de pionnier dans le domaine des nouveaux médias, Pelmorex a développé et exploite maintenant des sites Internet et des applications bureau parmi les plus populaires au Canada. Theweathernetwork.com et météomédia.com sont les chefs de file dans le domaine des services de nouvelles et d'information au Canada, tant en anglais qu'en français.

8719   Nous désirons, lors de cette audience, partager notre expérience à titre d'innovateur dans le domaine des plateformes mobiles, incluant la distribution du contenu via les téléphones cellulaires et autres appareils mobiles évolués.

8720   Nous fournissons tous nos services, ainsi que tout notre contenu, à tous les Canadiens, sur toutes les plateformes, et réglementées et nouveaux médias, dans les deux langues officielles.

8721   We are proud of our accomplishments and grateful for the ability to use our specialty services as a springboard into new media. The Weather Network and MétéoMédia have created trusted brands, a reputation for great content and have provided invaluable cross-promotion to drive consumers to test and use our new media products.

8722   As we look ahead it's clear that the next five years of new media offer a completely different landscape from the one we work in today and we see two massive and inevitable changes.

8723   First, there will be exponential growth of broadcasting accessed over the internet. We are on the threshold of a revolution in unregulated VOD websites and through the same distributor consumers will increasingly download professionally-produced programming to the screen of their choice over regulated, unregulated and mobile platforms.

8724   The threat to the Canadian broadcasting system is not that teenagers will stream two-minute videos from YouTube or even bootleg movies to their iPods or laptops, it's that consumers of all ages will download all kinds of traditional television programs for on demand viewing on internet-compatible TV sets or monitors, including PlayStation and X-Box consoles. They will completely bypass the regulated broadcasting system.

8725   The second massive shift in media consumption will be exponential growth in the use of mobile devices to access media-rich content on the internet. Wireless platforms are the emerging next new frontier -- next new media frontier and they may eventually outstrip landline access in popularity.

8726   Today we tell you what Pelmorex is doing in new media in response to these challenges. We will also describe the essential role we recommend for the Commission in ensuring that Canadian programming is sought after and accessible online.

8727   First, traditional broadcasters must be supported in the regulated broadcasting system to ensure they remain strong with great programming and popular brands that can be extended into new media.

8728   And, second, all internet users and new media undertakings must have unobstructed access to new media platforms.

8729   MR. EMERSON: At Pelmorex we are working hard to increase our online video content from short local news slips to animated radar imagery, regional forecasts to ensure the consumers who want weather video online will come to us. We know that online video will be essential to our survival tomorrow. Consumers want media-rich content and competition is fierce to serve them.

8730   Our company is also working incredibly hard and making substantial investments to be leaders in providing mobile services. Our weather and safety information has to be configured into products for each mobile device across multiple operating systems and reconfigured again for each new product or upgrade.

8731   We have mobile websites with weather and traffic information that are accessible on any mobile device with a web browser. Canadians can even watch The Weather Network and MétéoMédia television services on some mobile devices from major wireless carriers.

8732   All of our new media products are being created and offered in English and French. We are making this investment because we know we have to be there. Like broadcasting online, our mobile services are not money makers in English, let alone French, but we see a great opportunity and we also have to keep reinventing ourselves or risk watching our consumers gravitate to more innovative competitors.

8733   M. PERREAULT : Les titulaires de licence de radiodiffusion canadiens sont les fournisseurs prédominants de contenu canadien, produit par des professionnels, disponible en ligne. Nous croyons qu'avec votre appui, ces mêmes radiodiffuseurs continueront d'être, dans l'avenir, le moteur qui supporte la distribution de contenu canadien de haute qualité dans le domaine des nouveaux médias.

8734   En effet, l'appui aux titulaires de licence de radiodiffusion canadiens est le meilleur moyen de s'assurer que le contenu canadien soit offert via l'Internet. Les marques de commerce de ces radiodiffuseurs profitent d'une grande notoriété et sont reconnues pour offrir un contenu de haute qualité et sont par le fait même des occasions de promotion croisée.

8735   Le Conseil souligne avec justesse dans sa lettre aux intervenants comparaissant dans cette instance que le manque de capacité n'est plus une variable déterminante, mais, qu'au contraire, la tendance pointe vers une capacité illimitée. Ironiquement, cette abondance est à la source d'un challenge réglementaire important. Comment l'expression canadienne émergera-t-elle de cette mer de contenu? Serons-nous submergés par des contenus alternatifs en provenance des États-Unis et de par le monde? Quels rôles joueront l'organisme réglementaire et les titulaires de licence?

8736   We can't stop foreign alternatives but we can be proactive in promoting Canadian content.

8737   Programmers are already motivated to expand into new media. There isn't a broadcasting licensee operating today that doesn't understand that they must extend their businesses into the new media environment. What we do need is a regime that provides for the broad distribution of Canadian licence services in the regulated broadcasting system.

8738   The Commission must keep Canadian services strong and viable and well equipped to compete in the new media. This will ensure Canadian brands are desirable, well known and sought after by consumers in both traditional and new media.

8739   At the same time, the Commission must ensure that no regulatory measures are applied to Canadian programming services that would inadvertently vantage unregulated and predominantly foreign content producers.

8740   MR. TEMPLE: The Commission must also ensure Canadians have the ability to access new media platforms and broadcasting content online without interference by ISPs or mobile carriers. This includes not just the ability to access programming but to make it available to be accessed.

8741   In the future we expect the access issues faced on new media platforms will relate to the exercise of market power, not to scarce capacity. To date, we have not experienced any issues relating to access with respect to wireline internet.

8742   Unfortunately, that is not the case with wireless operators. Under the rules as they exist today, mobile carriers can decide which programming gets preferential packaging and they can ask programmers to pay a fee for it. And if we say no to the fee or we aren't even given the opportunity to be packaged, they may require customers to pay more to access our content. This raises concerns about fair and equitable access on the mobile platform for Canadian services, a platform that is poised to become extremely important for the delivery of programming.

8743   Consumers and programmers don't have the same free and open access on mobile platforms that is given to them by landline ISPs. The forbearance of mobile carriers from section 27(2) of the Telecommunications Act, coupled with the light-handed treatment they receive in the Mobile Exemption Order, has empowered them to control access over their network. There is no technology constraints and no public policy rationale for this difference in treatment between mobile carriers and landline ISPs.

8744   We believe that if access issues are not acted upon now they will limit the participation of Canadian broadcasters in this mobile platform. Since a mobile carrier can offer packages of programming as part of a walled garden or bundled offer, it should not also be permitted to unjustly discriminate or give itself an undue preference.

8745   If the Commission continues to allow mobile carriers to control access to programming, then regulatory measures appropriate to BDUs should be added to the Mobile Exemption Order. Our written filings include additional criteria that could be attached to the Mobile Television Exemption Order to ensure that these undertakings are contributing in an appropriate manner to the objectives of the Broadcasting Act.

8746   MR. GERMAIN: Commissioners, you have heard about the coming changes in the media landscape and how Pelmorex is changing its business to deal with online demand or with on demand video online -- I'm sorry -- and growing mobile internet access.

8747   We strongly urge the Commission to take measures that will ensure Canadian programming services have broad distribution and strong business cases in the cable and satellite world if they are to compete successfully in a world of new media. Ensuring unrestricted access to mobile carriers is also key.

8748   These two measures are critical not just for the programmers. They are critical to ensuring the objectives of the Broadcasting Act are met in the changing media landscape of the future.

8749   Monsieur le Président, mesdames, messieurs les conseillers, nous vous remercions de cette opportunité de comparaître devant vous aujourd'hui.

8750   We will be glad to answer any questions you may have for our panel.

8751   Thank you.

8752   THE CHAIRPERSON: Thank you for your submissions.

8753   Maybe you can explain this access issue to me. I'm not so sure I follow you when you say that wireless providers can discriminate against you and, obviously in your view, do. I understand further that if any ISP or any wireless carrier offers you as part of a bundle that the cost is preferential and is subject to a negotiation which you have.

8754   If he doesn't do that doesn't the customer have the ability to use the internet access off his mobile phone and go to your site? And your side actually produces, well, let's call it some downloaded features which you can put on that mobile device so that it is there as an application. I have done that with you so I know of what I speak. I won't mention the carrier I used but it can be done.

8755   So are you telling me that some carriers block that ability to download whatever it is called, an applet or application, and to put it on their wireless apparatus?

8756   MR. TEMPLE: What they will do is, if you are not in that walled garden or preferred package, then you are quite right. Customers can still access our content but they pay a premium to access that content. The data charges that they incur are higher to visit our site as an example than some other competitive site that they have decided to put in their package.

8757   So therefore, unlike wireline websites where whether you go to our site or anyone else's, the cost to access those sites are the same, in the mobile environment whoever isn't in the preferred package, the consumer is charged extra.

8758   THE CHAIRPERSON: Now, I can understand if you say that the walled garden is part of the access provider, but if it's not then surely it's just a question of commercial negotiations of what you will view as compared to your competitor, negotiate as a deal to be in part of that walled garden.

8759   And I mean, you are -- I have heard from your president many times that you are practically in every place in Canada with 20,000 people or more and so therefore you have a unique coverage and what you are selling is an information service

8760   Why is an intervention necessary for us? If it is self-preference for an access provider having its own weather service and preferring it, I understand that, but other than that I really don't understand why you are asking for us to intervene here.

8761   MR. TEMPLE: I think we are trying to raise an issue and not make it an issue necessarily about us. In some cases we are fortunate enough to be in the preferred package.

8762   THE CHAIRPERSON: Yes.

8763   MR. TEMPLE: So that's not the issue. We are trying to raise a policy issue here that the ISP is not acting as a common carrier. They are steering, influencing, directing to which sites people will go to by creating economic incentives or disincentives. And the analogy on the wireline would be if they had -- whether it's their site or not I think that people would be quite upset if they had to pay extra to visit one Canadian site.

8764   And we are trying not to make this about weather or information. It's a policy issue if you pay extra to go to one site; then you pay less to go at another, based on the decisions made by the ISP.

8765   We don't think that's appropriate policy because programming, why would they decide? I mean, perhaps the Commission through regulation may decide that, but in terms of public policy the ISP shouldn't be deciding. And in the mobile environment they have the right to decide because they are not -- because they are forborne from section 27(2). They can unjustly discriminate.

8766   THE CHAIRPERSON: The walled garden if you translate it to the internet -- some people have tried it, not very successfully -- there is no reason why they couldn't combine that with their pricing strategy and charge you differently for accessing the walled garden and accessing the web generally. They don't do it, is the commercial rationale, but I don't believe there is anything that is prohibiting them.

8767   MR. TEMPLE: If a wireline distributor tried to do -- if a wireline ISP tried to do the same thing they would be unjustly discriminating and people could bring a complaint under the Telecom Act against them. You can't do that in mobile.

8768   Wireline ISPs are subject to 27(2). They cannot unjustly discriminate. That's why everyone can access any content, any programming content; any broadcasting content they want on any site and there is no direction or manipulation by the ISP. And that's our concern.

8769   THE CHAIRPERSON: You assume that a walled garden on the internet with differential pricing amounts to unjust enrichment -- unjust discrimination -- sorry.

8770   Now, I get the point and that's the concept you want to -- assuming your assumption is correct, do you want that concept to transfer?

8771   MR. TEMPLE: If mobile carriers were subject to 27(2) then we think most -- hopefully all these issues would go away.

8772   THE CHAIRPERSON: Okay, thank you.

8773   Steve, I believe you have some questions?

8774   COMMISSIONER SIMPSON: I do, thank you.

8775   Just to put a finer point on the Chair's questioning, line of questioning, you would regard an ISP then as more of a common carrier and a wireless as more of a walled garden or closed network. Is that correct?

8776   MR. TEMPLE: We view an ISP as a common carrier and, sorry, the second?

8777   COMMISSIONER SIMPSON: And a wireless network being a closed network; as you say, that's forborne and therefore not subject to the same regulatory pressures as a common carrier would be?

8778   MR. TEMPLE: No, we think it should be. If you are accessing the network why does it matter whether you are accessing the internet to get programming on a wire device or a wireless device? The rules should be -- the rules be the same.

8779   M. GERMAIN: I think that is the key point, Commissioner Simpson, that there may have been more of a technology reason at some point to treat them differently but that day has passed and as we get into G3 platforms and G4 platforms that we really don't see the reason that there should be a differentiation between the two approaches.

8780   COMMISSIONER SIMPSON: Okay. To go back to the conventional broadcasting space, where I am going with this questioning is to try and understand commercial agreements between broadcasters and content producers.

8781   I somewhat look at you as a content producer even though you are a channel within the BDU space, but you have a product that migrates very nicely into a variety of applications. So the content focus of your presentation I find intriguing.

8782   But going back to the conventional OTA world where we have a situation where a broadcaster does a news package and chooses to do their own weather, in that world if the internet didn't exist how would you, if you chose to -- how would you have marketed the service you have to that OTA in a way that would have been compelling enough for them to take your branded weather product over their own?

8783   I'm trying to draw a parallel here to the wireless community so I can understand what some of the impediments that you feel you are facing commercially are.

8784   MR. GERMAIN: I am not sure if I fully understand the question. Are you saying in an entirely regulated licence broadcasting world, and you are asking the question of us as a media player?

8785   COMMISSIONER SIMPSON: You have an area of speciality that you have managed to develop an array of products for. How does an OTA differ from a wireless network in terms of your ability to sell your service to them should you choose to do that, you know, either selling to a network or to -- and pretending you weren't a broadcaster in your own right because I think what we are facing here is -- what you are facing is the potential in future of closed networks becoming a threat to the ability to sell your product. Is that correct?

8786   MR. TEMPLE: It is not so much that it is a closed network. It is -- in fact can be an open network. When you go on a mobile device to go on the internet that is an open network; you are going anywhere you want to go to any site. So it isn't a closed network. It's wide open.

8787   The concern is -- and I don't want to over dwell on this but the concern is that the wireless carrier can just charge people different amounts or include them in packages or not include them. They have those extra abilities and there is no recourse to that decision, whereas at least on the wireline environment there is recourse if you feel that you are being unjustly discriminated against.

8788   MR. GERMAIN: And mobile is becoming -- if it is not already -- just another onramp to the internet. Yet, it's treated differently than the wireline.

8789   COMMISSIONER SIMPSON: In what respect?

8790   MR. GERMAIN: In that respect.

8791   COMMISSIONER SIMPSON: And what adds strength to that recourse is regulation, but from a content standpoint or from a genre protection standpoint?

8792   MR. GERMAIN: No. I think more from a content standpoint. We are not specifically tying this to our genre.

8793   COMMISSIONER SIMPSON: Okay.

8794   MR. GERMAIN: That's not the intent of --

8795   MR. TEMPLE: It could apply to sports headline clips. You could be, say, an independent broadcaster who does sports information and your clips of the game last night or whatever may -- people may have to pay more to see the same clip than if it was provided by another website that a mobile carrier has decided that they want to partner with.

8796   So unlike wireline where you just go to any old site and you don't pay a premium to go to one or the other, on the wireline or on the wireless you can be in a situation where you pay a premium and it has nothing to do with the content. It just has to do with what the carrier decides they want to do.

8797   COMMISSIONER SIMPSON: So in a perfect world, if there was to be some regulatory pressure to the wireless industry that would be for the purpose of levelling the playing field so that you are only competing with other Canadian producers of weather content?

8798   MR. TEMPLE: No. It would be so that the wireless internet is exactly the same as the wireline. We compete with every weather provider in the world on internet, on wireline internet, and we play by the same rules. But in wireless it's not the same rules and we just want the same rules for everyone.

8799   We don't want special treatment for Canadian sites or for regulated broadcasters or anything. We just want the same rules for everyone and not have the carrier make the rules. And that's the situation we have on wireless.

8800   COMMISSIONER SIMPSON: Okay. Going back to your request for the Commission to consider ensuring that the conventional broadcast industry remains protected -- that's my word -- but we keep our focus clearly on the present state as well as the future state, could you expand on that for me in terms of what you feel are the most important ingredients to that focus?

8801   MR. GERMAIN: I am not sure that we are suggesting that it be the protected environment. We are simply thinking that new media environment in which we have been competing for a long time.

8802   So we are not really -- so we are not asking for any additional or special treatment. In fact, I think as you have seen in our brief, we don't really believe that it will be possible to regulate it and there are probably as many or more unintended consequences of trying to do that than anything else.

8803   So we see if Canadian programming is to flourish in that environment. We see the strength that has been built up in the licensed environment, in the regulated environment. We see us needing to leverage that and continuing to leverage it if we are going to achieve success in the new media site.

8804   We have done it. It has been the critical element to our early success and we continue to leverage on it and we think going forward, the Commission needs to keep that in mind, various ways of maintaining that support and that strength.

8805   COMMISSIONER SIMPSON: I'm going back to your comment on page 3 where you said:

"First, traditional broadcasters must be supported in the regulated broadcasting system to ensure that they remain strong, with great programming of popular brands that can be extended into the new media." (As read)

8806   So I was simply reflecting on, you know, what aspects of those strengths needed to be supported and obviously you're saying that we need to contemplate, from your position, a transitional strategy so that all those strings transfer into new media through some form of intervention.

8807   MR. TEMPLE: Not so much transitional perhaps. We think that every programmer obviously wants to be able to be successful in new media, so our point is, to the extent that we can use the regulated broadcasting system to ensure that we are financially healthy, I guess we can do the rest.

8808   We want to be on the new media but if the cornerstone of our services, which are typically the regulated services -- and I'm talking not just about us but any programming service. Look at the Corus group, they said much the same thing. I mean the regulated system has helped them create fabulous brands and that is going to help them get into new media, and the same is happening to us.

8809   But if we are -- if the regulated environment is not supporting us, it makes it harder for us to be in new media. If we don't have the ability to promote and create awareness of our brands -- I mean the regulated media is a fabulous way to popularize Canadian content. That's how people -- it's a great way for people to understand and learn about Canadian content.

8810   So if we have a healthy regulated system, I think you will see good Canadian content on the Internet. But if programmers and broadcasters are weakened in the regulated medium, it makes it harder to get that content on new media. That is our -- I guess one of our main points is that tie.

8811   COMMISSIONER SIMPSON: Okay. I will leave it at that. I'm still having difficulty understanding how regulation is -- well, I'm having trouble with the aspect that this isn't a commercial problem, you know, that if you have a compelling enough product and a compelling enough price point that you would get carriage on a wireless network because you have a recognized brand. I just don't understand.

8812   MR. PERREAULT: Commissioner Simpson, let me give you a live example of what is happening in other countries. Let's transport ourselves for a minute to Europe and let's look at France Telecom and what they are doing.

8813   They have obviously a more advanced wireless network than we do but in terms of Internet connectivity the speeds are much the same. They have understood that for their cultural system to jump to this new media frontier, content will need to be place shifted. So you can start watching a soccer game at home and then move to the subway or the tram or the bus and view the same program on your mobile device and get to where you are going and connect to the Internet and to a broadband connection, get to the programming you were watching on your mobile device.

8814   So what they have done basically is open the access to content so that content becomes platform agnostic. If you have a strong brand as a broadcaster and you have compelling content as a broadcaster, and such conditions do exist, then you are able to meet the challenge of the new media frontier.

8815   COMMISSIONER SIMPSON: Okay. On the subject of another portion of your presentation, you were talking about the challenges initially that you were undertaking in looking at how to migrate your product to Internet platforms and your concerns over whether in the course of doing that you were going to be cannibalizing your own broadcasting undertaking.

8816   Could you give me a bit more of a revelation as to what you learned over this last while? You have obviously been very highly successful in making that shift. Are you producing the eyeballs and the revenue that you hoped you would?

8817   MR. GERMAIN: Let me give it a start and Taylor can perhaps expand on it.

8818   Pelmorex saw early on that as that new media space developed, news and information would be a leader in terms of the type of content that would attract traffic, that if it didn't occupy that space there would be other players, both Canadian but primarily probably American players that would occupy it and that there would be a cannibalizing of the license platform. Certainly, it was a matter of whether we got there first or we let it happen somewhere else. So we did get there first and we were very successful in doing that.

8819   So there is a degree of cannibalization, yes. On the other hand, I think we would argue, I think convincingly, that we are reaching more people through all those platforms than we otherwise ever would have staying with the licence television platform.

8820   So yes, we have benefited from that and we have been successful certainly in terms of traffic. The overall business model is progressing but I think we are a long way from being there. The new media space continues to evolve. You have heard, I think, from other people who have appeared before you the cost of the effort that goes into refreshing and upgrading the web platform, creating laterally for us a mobile web platform.

8821   A project we are about to enter into next year is a rebuild of our web platform. In order to remain competitive, the ability to customize and personalize content becomes integral to the consumer experience. And so we have to go there. The effort and the money invested is still not catching up to the -- so I can't say that we are in a cash flow positive mode but the business case is evolving well.

8822   And now mobile comes along and we really do believe it is the new frontier and perhaps will be the frontier ultimately. To play in that space -- and I think that is what Taylor talked about -- it's not just -- it is every device that is out there is a different product, a different configuration, a different development roadmap and they need to keep updated as often as they update their devices.

8823   So it is an expensive proposition and so certainly in the mobile space we are a long way from reaching the objective but we believe we are doing well in terms of occupying the space at the moment in Canada. Monetizing it is another issue but we think it will come.

8824   Do you have anything...?

8825   MR. EMERSON: Well, I think Gaston said most of it. Mobile is not a stage where we are recognizing any measurable cannibalization.

8826   Recently in some studies we have done, web has been -- what we measure is we ask people what their primary source of weather -- their primary platform to access weather on. In the 2008 study, it became evident there is large growth in Web as a primary platform, 20 percent. So that is impacting some of the television audience. But the demographics are different. Web is skewing to a younger audience. So there's, as Gaston said, a highly complementary nature and overall there is growth there.

8827   The other thing to note, though, is a lot of people who are using our Web platform are large users of our television station. So, as we have sort of indicated, a lot of that growth comes from your existing platform. The same thing is happening on mobile. The best way for us to get mobile audiences is through the Web platform where people can learn and access these applications and sign up for mobile products.

8828   COMMISSIONER SIMPSON: A final question with respect to commercial versus user content, the old axiom of everyone talks about the weather but the question is: Will they make movies about it and put it on YouTube?

8829   Your model, if I'm looking at it correctly, relies on a certain amount of user input; is that correct?

8830   MR. EMERSON: Yes. User-generated is something we have worked on over the last year a lot. It has been a recent initiative but it is becoming significantly important to us. We are looking at it more and more.

8831   The reason we think it has great potential for our business is because users can actually help us tell a story. It is not necessarily recreational. They can actually add and contribute directly to news content, active weather content in cases, safety-related information that is helping -- that they are sharing with other Canadians. So we see great value there.

8832   We are more and more integrating it into our programming, right into our Web and our television products. We are making investments right now actually to greatly expand what we need in our content management systems to really do this on any kind of mass volume, which have really limited us in the past. So it's something we are looking to grow greatly to help improve our programming effectively.

8833   Our great challenge is being local across Canada. Weather it is an entirely local business. With people on the street, with Canadians contributing, we can make our product much richer, much more specific and hopefully meaningful and valuable.

8834   COMMISSIONER SIMPSON: Thank you very much.

8835   THE CHAIRPERSON: Len...?

8836   MR. GERMAIN: If I can add, what has been uploaded to Facebook and other websites quite extensively, there are some -- at last count, I think, some 6500 uploads of people who are finding different ways of getting together in their kitchens and their living rooms to play our local background music and getting an amazing amount of traffic to it. So there is a bit of a sort of a cult following in that sense.

8837   COMMISSIONER KATZ: I'm going to go back to the dry world of regulation.

8838   Mr. Temple, you mentioned earlier, I think, that Pelmorex views ISPs as common carriers. Do you believe that a common carrier and a BDU can coexist or are they mutually exclusive?

8839   MR. TEMPLE: They can coexist in the sense that an ISP could create a portal of programming that it can package and sell -- presumably of course having the rights, you know, getting the appropriate rights -- and that portion of their activity, I guess, you could call -- they are acting like a BDU. If we are just talking about people accessing the Internet, then they are, I think, acting like a carrier. There is no interference.

8840   I mean if you think about a cable network now, it is just one -- it is just one wire with a bunch of spectrum and they have decided that from this megahertz to that megahertz it is going to be cable and from this part to that part it is going to be, you know, an Internet access. So I guess they can coexist on the same piece of -- on the same network.

8841   COMMISSIONER KATZ: So you are saying it is how they use it that would define --

8842   MR. TEMPLE: Right.

8843   COMMISSIONER KATZ: -- how you deal with them?

8844   MR. TEMPLE: I think so. I mean that is our concern on the wireless. I know you are trying to focus on the wireline.

8845   COMMISSIONER KATZ: I'm trying to come back to wireless as well because I want to see if there is a distinction in your mind between what you just said now for the wireline side vis-à-vis how it would be interpreted on the wireless side.

8846   MR. TEMPLE: On the wireline now, anyone -- anyone -- could decide to try and aggregate content and package it and promote packages of programming. Now, there may not be a business case yet but there is nothing that prevents them from doing that. The Commission has exempt those activities. So if you can get the rights, you can create a BDU-like aggregation of content, package and promote it as you wish. That's separate from the ISP function.

8847   COMMISSIONER KATZ: So why wouldn't someone who is vertically integrated not already have done that because they own the rights?

8848   MR. TEMPLE: They may. Right now, it may just be a matter of the business case. I mean I think that's one of our points, is I think you will find in the future in our opening comments the system will be bypassed. People will -- you know, whether it's a Hulu or a Canadian-based company, if you aggregate the same content and download it to basically the same devices, a TV that can take an Internet connection, you are just providing programming through an unregulated pipe. You are bypassing the regulated system.

8849   If we streamed our service on the Internet now, there is no regulation, we could do whatever we want.

8850   THE CHAIRPERSON: Hence these hearings.

8851   MR. TEMPLE: I beg your pardon?

8852   THE CHAIRPERSON: Hence these hearings.

8853   MR. TEMPLE: Yes. And that's the point. That's why we keep tying it back -- I'm getting off topic a little bit but that's why we tie it back to the regulated system because we want to make sure that Canadian services are on. But that's not --

8854   COMMISSIONER KATZ: Your concern that you raised when you talked with the Chairman about the issue of access had to do with discrimination, I guess, but it was also if you are vertically integrated it's unjust treatment, I guess?

8855   MR. TEMPLE: Well, yes. Because the issue is on wireline -- let's say the wireline carrier puts together a package and someone else puts together a package, the consumer doesn't pay extra to be able to access. In terms of the ISP they are not paying more to access one or the other. In the wireless environment, the carrier can say: If you go to that other package, you will be paying much higher data fees.

8856   COMMISSIONER KATZ: As long as it's not self-serving.

8857   MR. TEMPLE: Well, of course they will be --

8858   COMMISSIONER KATZ: There are two independent parties that are out there, The Weather Network and A Weather Network, for argument's sake, none of which are owned or controlled by the BDU. Why wouldn't they be allowed to negotiate a package deal for their consumers in the public interest?

8859   I think the concern that may be in issue is when they are vertically integrated and they in fact own the rights and the service themselves that there is a self-dealing issue here, an undue preference issue.

8860   MR. TEMPLE: Or I think that is probably the main focus. If there were just two weather services, I guess I would have to understand the nature of the agreement that was being made.

8861   COMMISSIONER KATZ: It's a competitive bid, RFP out there, which one of you two have the best deal to offer my customer, and one of you wins and one of you loses. No different than rights for NHL or anybody else being broadcast on any of the channels out there.

8862   MR. TEMPLE: So I guess we take that concept and then we apply it to wireline. So if a wireline supplier said: Okay, I'm going to do an RFP now to see who can have preferential access to the programming of news sites, and CNN wins, so now you pay less when you go to CNN's site to watch their video programming and you pay more to watch CBC's because CNN won the bid on that carrier.

8863   I don't think that is good policy. I think the carrier, if they are going to act as a common carrier, should just say: Look it, you use this much bits and bytes, you pay this much, and I really don't care which site you are going to. But once you start picking sites based on who is --

8864   COMMISSIONER KATZ: What if they are both Canadian sites? What if it is not CNN and CBC, but CBC and --

8865   MR. TEMPLE: Then they are kind of -- I don't know, it's starting to sound like a BDU to me.

8866   COMMISSIONER KATZ: Okay. Okay.

8867   THE CHAIRPERSON: You realize you gave a different answer to my colleague than you gave to me on exactly the same question. That is exactly what I asked you and you said it would be a violation of section 27(2). Now you're saying it's not good policy. It is a slightly different answer.

8868   MR. TEMPLE: No, I think that 27(2) is great policy and that's why our preference is to have that applied because then you can't have interference. You can't have this kind of situation. Whether they are advantaging themselves or -- I mean just the fact of picking one over the other, there is some advantage there obviously. They are going to be compensated, so they are advantaging themselves. Who is going to pay me more to let the consumer get your content?

8869   THE CHAIRPERSON: Well, anyway, we have your views on record.

8870   Michel...?

8871   CONSEILLER ARPIN : Merci, Monsieur le Président.

8872   Je vais poser ma question en français, avec votre permission, parce que ça va traiter de MétéoMédia plutôt que du Weather Channel.

8873   Un, vous avez parlé longuement de votre expérience comme fournisseur de contenu aux gens du sans-fil. Est-ce que vous avez la même expérience avec les services francophones, avec le service MétéoMédia, qui est celui du Weather Channel?

8874   La raison pour laquelle je soulève la question, c'est que je suis, évidemment, un usager d'un service sans fil. Je ne suis pas capable d'avoir MétéoMédia. J'ai The Weather Channel.

8875   M. PERREAULT : Les deux versions sont disponibles sur le sans-fil, tant en vidéo et tant en service bureau que vous avez en icône sur votre BlackBerry ou votre appareil évolué. Les deux services sont disponibles.

8876   CONSEILLER ARPIN : Pourtant, le fournisseur... et puis tous mes programmes sont en français, mais pourtant, le fournisseur, il me branche toujours sur le Weather Channel.

8877   M. PERREAULT : On aura peut-être un petit échange après l'audience, Monsieur Arpin, mais c'est certain que le service existe, et on va faire notre possible pour...

8878   CONSEILLER ARPIN : Je pose la question parce que, effectivement, dans tous ces services évolués là, tout ce qu'on a entendu... évidemment, ici, on parle de l'expérience canadienne, on parle peu des services francophones, et j'essayais de voir avec vous s'il y avait des difficultés particulières pour offrir des services francophones sur les services non-filaires. Mais vous me dites que...

8879   M. PERREAULT : Tous nos contenus sont disponibles dans les deux langues, tant les services vidéos linéaires que les services vidéo-clips, que les services que vous pouvez télécharger, comme icône bureau, sur votre appareil mobile. Il n'y a aucune distinction quant à la disponibilité de nos services dans les deux langues officielles.

8880   CONSEILLER ARPIN : D'accord.

8881   Merci, c'était ma question, Monsieur le Président.

8882   LE PRÉSIDENT : Michel...?

8883   CONSEILLER MORIN : Oui, bonjour.

8884   Je ne sais pas si vous avez beaucoup de choses à ajouter, compte tenu de la conversation que vous avez eue avec le vice-président Katz, mais il y a une seule phrase que vous avez bien soulignée en page 2, dans toute votre présentation orale, ce matin. C'est :

« They will completely bypass the regulated broadcasting system. » (tel que lu)

8885   Je ne sais pas si vous avez quelque chose à ajouter, mais ma question est la suivante : En ce qui concerne le contenu périssable, les nouvelles, la météo, par exemple, est-ce que le défi est le même?

8886   Je connais des jeunes qui n'ont plus maintenant d'écran de télévision et qui disent : Nous, la télévision, c'est terminé. C'est terminé parce qu'on est branché sur l'Internet, parce qu'on peut aller chercher les documentaires gratuits sur l'Internet, parce qu'on peut aller chercher quantité de programmation télévisée sur l'Internet. Mais notre problème, c'est les nouvelles et, enfin, la météo.

8887   Est-ce que c'est vrai? Est-ce que le défi est vraiment le même? Est-ce que vous êtes aussi menacé que la programmation conventionnelle?

8888   M. GERMAIN : Je dirais même qu'on est peut-être plus menacé que... bien, je ne dirais pas plus menacé. On est extrêmement menacé parce que, pour nous -- je parle seulement de la programmation météo dans le moment -- ça été le driver, en effet. C'est ce qui nous a poussés de se diriger, de s'étendre sur le new media, sur l'Internet aussi tôt que nous l'avons fait, parce que ce que nous pouvions voir, c'est la possibilité d'Américains qui prendraient le... occuperaient le terrain. C'est notre plus grosse source de concurrence.

8889   CONSEILLER MORIN : Mais les Américains, ils n'ont pas... je ne sais pas combien de villes à travers le Canada qu'on peut consulter sur votre site, mais c'est des centaines et des centaines. Est-ce qu'il y a un site américain qui donne le même service?

8890   M. GERMAIN: Je suis entièrement d'accord, mais, Monsieur Morin, pour nous, le péril est celui-ci. S'il y a un joueur canadien ou américain qui arrive sur le terrain et qui choisit de faire -- je ne sais pas comment le dire en français -- mais fait du cherry-picking et veut se concentrer sur... avec des applications new media et se concentre sur les grands centres urbains, qui va continuer, alors... et puis, vous avez entendu, je pense, des gens du domaine advertising, de la publicité, il y a quelques minutes, qui vous ont donné un exemple du volume d'investissement qui a transitionné du média traditionnel au new media déjà.

8891   Alors, ce joueur-là va aller en chercher une portion de cette tarte, mais n'aura pas les responsabilités d'aller servir les petites communautés au Canada. On en dessert environ 1100. Alors, c'est là le risque.

8892   Alors, ça voudrait dire qu'on est tard à arriver sur le terrain. Quelqu'un prend la place, fait du cherry-picking. Nos recettes chez The Weather Network et MétéoMédia descendent. On est encore... notre mandat, c'est de desservir le Canada en entier et autant de communautés qu'on peut le faire, et dans le moment, c'est environ 100.

8893   Alors, la concurrence est quand même importante à ce niveau-là, je pense, principalement à ce niveau-là.

8894   CONSEILLER MORIN : Est-ce que vous avez réfléchi ou vous avez des informations... Il existe des techniques qui pourraient être utiles avec le numéro ISAN, par exemple, pour prioriser le contenu canadien en terme de livraison. Je pense, par exemple, au flow management et au DPI. Est-ce que vous avez une réflexion là-dessus?

8895   M. GERMAIN : Je vais demander peut-être à monsieur Temple d'élaborer aussi.

8896   Mais vraiment, ce n'est pas quelque chose avec lequel nous avons... dans l'opération d'un service comme le nôtre, ce n'est pas quelque chose auquel nous avons eu à nous occuper vraiment, et nous ne sommes pas experts du tout dans le domaine. Alors, au risque de vous répondre avec quelque chose qu'on ne connaît pas très, très bien...

8897   Je reconnais le dilemme que le Conseil a au niveau de la quantification du broadcasting canadien qui existe sur le new media. Je suis sûr qu'il y a une réponse quelque part. Je crois ISAN en est peut-être une.

8898   Nous, on pense que ça va être extrêmement complexe et extrêmement coûteux, et là, j'arrive à un point que j'ai fait tout à l'heure. C'est la question de réglementation.

8899   Il y a un danger qu'on s'impose des coûts qui pourraient avoir des conséquences non anticipées, et ça se jouerait plutôt au niveau de la concurrence, parce qu'au niveau de la new media, c'est un monde illimité. C'est un Wal-Mart, où il y a des tablettes infinies, et puis la concurrence est extrême. Alors, si on ne fait pas attention, on se donne peut-être un fardeau qui va nous positionner à un désavantage concurrentiel.

8900   M. PERREAULT : Monsieur Morin, j'aimerais juste peut-être changer de chapeau, si vous me permettez 30 secondes.

8901   Au niveau de la lutte au piratage, un outil comme celui-là pourrait devenir intéressant s'il est bien appliqué. Si on regarde certaines autres juridictions, les sondages qui ont été faits l'an dernier en Grande-Bretagne parlent d'à peu près 126 millions de téléchargements illégaux de programmation, film et autre, complètement en contretemps du respect du droit d'auteur.

8902   Alors, des éléments comme celui-là qui pourraient permettre une certaine mesure et même d'arrêter le piratage -- il y a des juridictions, comme vous le savez, qui le regardent -- pourraient avoir un côté positif, non seulement juste à mesurer la programmation canadienne, mais à arrêter aussi le flot illégal.

8903   CONSEILLER MORIN : Dernière question. Dans votre présentation écrite, vous parliez quelque part... je pense c'était des chiffres de Cisco. Vous parliez, si j'ai bien lu, qu'en 2012, je pense, 50 pour cent de la circulation, si vous voulez, dans les tuyaux de l'Internet, ce serait du contenu vidéo.

8904   Actuellement, quel chiffre vous avez pour ça et comment vous voyez l'évolution autour de cette question-là? Parce que, évidemment, ça risque d'amener peut-être... enfin, il y a des possibilités, ça dépendra des opérateurs, mais ça risque d'amener une certaine congestion dans les tuyaux de l'Internet.

8905   M. GERMAIN : Vous posez la question : Quelle est le pourcentage chez nous?

8906   CONSEILLER MORIN : Quel est le pourcentage actuellement? J'ai vu différents chiffres. Comme vous avez déjà cité un chiffre dans votre...

8907   M. GERMAIN : Ah, oui!

8908   CONSEILLER MORIN : ...je me dis peut-être qu'ils ont un meilleur chiffre actuellement. Moi, j'en ai un, mais...

8909   M. GERMAIN : Non. En fait, c'est le seul chiffre que nous avons. C'est une estimation quand même de la part de Cisco, parce qu'il n'y a rien là qui vraiment mesure le contenu.

8910   Alors, où on voit les choses aller, si, en fait... faisons l'hypothèse que Cisco a peut-être une assez bonne connaissance de ça et ses estimations ne sont pas complètement en erreur. Si c'est 50 pour cent en 2012, je pense qu'à notre avis, ça va être 75 et 80 pour cent en 2015 et en 2016. Alors, c'est la tendance que ça...

8911   Il y a quand même une énorme demande. La demande au niveau du consommateur pour la vidéo sur l'Internet est grande. La façon de la commercialiser, c'est une difficulté encore, le business case n'est pas évident, mais la demande est grande.

8912   CONSEILLER MORIN : Merci.

8913   COMMISSIONER DENTON: Gentlemen, I have been going through your written presentation and what has been said and I understand your position on the Telecommunications Act side perfectly clearly but I think there is an ambiguity in what you are saying because you are saying, as I have heard you say, no special treatment for Canadian sites, use the regulated system to ensure that broadcasters are healthy, we will do the rest, keep broadcasting strong and viable, and yet, you are very clear that you think that the long-term threat to the broadcasting system is it will just be an eroding island as people move their eyeballs off to pay attention to the Internet.

8914   So am I correct in understanding that you are saying don't change the exemption orders, defend and protect the broadcasting system to the extent you can but recognize that this is not finally a winning proposition?

8915   MR. TEMPLE: I would say that is a pretty good summary of what we are trying to get across. There is a short-term strategy which is to make sure that Canadian broadcasters can get that content onto the new media but we have a real difficulty in understanding, looking way down the line, how new media can be effectively regulated.

8916   So I think the summary you made is the key points we are trying to get across. Short term, let's make sure programmers are strong, let's help bootstrap content onto new media, let's make sure Canadian brands and programs are well established and well known and regulated so that they will be accessed in the unregulated.

8917   But ultimately it's just one system. You make a program, do you really care how it ended up on the TV as long as it ends up on the TV and if it's easier to get it through the Internet, let's put it through the Internet. You just want your program watched so you can make some money and that's what's going to happen.

8918   COMMISSIONER DENTON: Thank you very much, I appreciate that clarification.

8919   THE CHAIRPERSON: Thank you very much. Those are all our questions. If you have any further clarifications or additions you want to make, you can do it in written form -- until when, Madam Secretary? When is the last day for submissions?

8920   THE SECRETARY: We will reconvene at 1:15.

8921   THE CHAIRPERSON: No, when is the last day for submissions?

8922   THE SECRETARY: Oh! 27 March.

8923   THE CHAIRPERSON: Until the 27th.

8924   Okay. So then we will adjourn now. Thank you.

--- Upon recessing at 1204

--- Upon resuming at 1334

8925   LE PRÉSIDENT : O.K. Commençons.

8926   THE SECRETARY: I would now invite Stornoway Communications to make its presentation. Please introduce yourself and proceed with your 15-minute presentation.

PRESENTATION

8927   MS FUSCA: Thank you. Good afternoon, Mr. Chair, Commissioners and Commission staff.

8928   I am Martha Fusca, President and CEO of Stornoway Communications, owners and operators of ichannel, a Category 1 social and political issues channel; two Category 2 channels, bpm.tv, a dance culture and dance music channel, and The Pet Network, a channel devoted to pets and all the people who love them.

8929   We at Stornoway very much appreciate the opportunity to participate in this hearing.

8930   You have already heard a great deal from the different parties who have made their presentations about their various expectations and concerns. We believe that as independent participants in the industry we bring some additional perspectives for your consideration.

8931   It has become more than clear over the course of the last two years, and particularly over the last six months, that the entire creative industry in Canada is in desperate need of funds if each of the sectors is to make its expected contribution to the goals of the Broadcasting Act.

8932   The creative sectors include the broadcasters, producers, directors, actors, writers, technicians and other crafts. You have heard it before and you're likely to hear it again: Without a healthy broadcasting sector, there is little, if any opportunity for the success of the other creative sectors.

8933   As Peter Grant observed:

"If you want to support national content on new media, start supporting national content on the traditional media." (As read)

8934   GlassBOX also noted that:

"It is accurate therefore to look at the Internet as simply a new pipe for television programming rather than as a platform for new media specific content, particularly when we are talking about the Broadcasting Act and the CRTC's role." (As read)

8935   Lastly, Jean LaRose from APTN states:

"I think we need to give as much support as we can to the traditional regulated broadcasting system and the productions that that system makes possible to ensure that the highest value content and those that support this content make it in the online world." (As read)

8936   I read the Honourable Bernard Lord's presentation. In it he tells us that the spectrum that was recently auctioned cost the various players $4.3 billion and while there is still more that needs to be invested -- we are not specifically told where those investments would go -- we do not question that further investments may be required.

8937   What struck me, however, was that if anyone were to take the time to do the math, it is quite likely that given the cell phone take-up and what Canadian consumers are charged for those services, the various players would recover that $4.3 billion in less than one year.

8938   Since it is clear from their joint submission that the major BDUs are not in favour of assisting the creative industry -- even though without the creative industry there would be no need for the hardware -- by making a contribution from their gross revenues, there is a need for another solution to ensure that broadcasters have the financial wherewithal to invest in both Canadian television broadcast and online content.

8939   Moreover, it is also clear that it is in every broadcaster's interest and their television licence obligation to invest in Canadian programming content for both television and the Internet. It stands to reason that what is needed is the funding to support this broadcaster investment in Canadian programming.

8940   In our proposal this would come from several sources. We, along with others, believe that strong broadcasters will have the wherewithal to contribute to the investment of new media.

8941   When the OTA broadcasters applied for a fee for carriage, the BDUs argued that they would lose subscribers if the fees got too high. Indeed, it was stated that there would be an accounting on the bill to tell consumers that they would be paying for something that they had traditionally gotten for free.

8942   I think that any BDU who would outline what consumers are paying for on any of their bills would actually be providing a new and important public service. The truth is that broadcasters get so very little of the money that is paid by consumers that I suspect there would be a public outcry.

8943   In their presentation the CFTPA stated:

"If we are to fully achieve the objectives of the Broadcasting Act, we need strong, well capitalized Canadian companies, able to develop, produce and promote a critical mass of Canadian new media content. This simply makes a good deal of sense." (As read)

8944   And we would add that we not only need strong Canadian program producers but Canadian broadcasters as well.

8945   Some of you may know that prior to launching Stornoway Communications in 2001, I was president of Stornoway Productions, which was established in 1983. I know all too well what life is like as an independent producer, working with talented and devoted writers, directors, actors, musicians and production crews, but often wondering if there would be any money left to pay the rent.

8946   It is in light of my experience as both an independent producer and now a small independent broadcaster that we believe that producers as well as talent should be compensated for granting Internet rights to broadcasters. Broadcasters can either acquire these rights at the same time that they are commissioning the television rights or upon completion of the production.

8947   It is important to keep in mind, however, that it is not always well understood by producers that broadcasters may actually not be able to afford to acquire the rights but may still need those rights in order to continue to develop their online presence, which in turn will allow them to invest further funding into production. However, in these instances, broadcasters and producers should develop a revenue-sharing model if indeed any revenue is expected.

8948   We also agree that if broadcasters acquire Internet rights and then do not use them within a reasonable period of time, they should lose them. Unfortunately, since there are so many variables involved in developing terms of trade, without more specifics it is not possible for us to support, comment or be of any further assistance at this time.

8949   But one thing is abundantly clear, the creative sectors, broadcasters, producers, actors, writers, directors and crews, with broadcasters at the top of this value chain, need to be working within a regulatory environment that allows them access to the means to flourish and the entire communications system in Canada should be using its very best efforts to promote Canadian content, both on and off-line, something that is clearly not happening today.

8950   Given this background and given the clear need to support one of the very important primary sources of new media, that is Canadian broadcasters, we propose three sources of funding for the creation of new media.

8951   The first involves new fees and spending consideration for broadcasters.

8952   For OTA, we highly recommend that the Commission set a fee for carriage for unaffiliated OTA broadcasters which keep in mind funds required for two objectives, production of Canadian content for their network and incremental funding for local programming, both of which, we believe, should result in their ability to fund new media.

8953   For analog specialty channels, it may be that for the time being these channels do not require any assistance in making new media investments. However, we concur with APTN's statement that:

"New media activities will be reflected in and supported by a regulated wholesale rate." (As read)

8954   For unaffiliated specialty digital services, if these channels are unable to negotiate a fair fee and are prepared to make significant Canadian content investments on their linear channels, which would result in a significant commitment to new media, they should be able to come to the Commission for fee arbitration.

8955   Secondly, while we appreciate that the Commission may not have the jurisdiction to implement a tax credit regime for new media similar to that which exists federally and provincially for program production, we believe that it can support such an initiative with the federal government.

8956   Lastly but not least, since the BDU ISPs are so vehemently opposed to funding suggestions made by, among others, Peter Grant and Eli M. Noam, perhaps the BDU ISPs would, of their own accord, put forth a funding solution that would benefit the entire system. But in any case, we strongly believe that they should make a contribution for the funding of production for new media, particularly in light of the benefits that they enjoy from the distribution of this content.

8957   In conclusion, I would like to say that years ago when Stornoway was producing "Caught in the Crossfire," a four-part series on conflict resolution and the role of Canadian peacekeepers, I had the good fortune to spend a good deal of time at the United Nations in New York and to spend several hours with Sir Brian Urquhart, the then scholar in residence at the Ford Foundation. There was one very critical lesson that I learned during the course of the two-year production, that a great deal can happen or not when people with differing and often conflicting interests find the will to act in accordance with what is ultimately best for everyone.

8958   In Canada we are very fortunate in that if we fail to will the right thing to happen, we have the Broadcasting Act to guide us.

8959   As Dickens once wrote:

"These are the best of times and the worst of times."

8960   Despite the very real and for some life-threatening challenges, as Canadians, we have every opportunity to move forward in a proactive and positive direction for the benefit of the entire industry and for our country.

8961   Every sector within the communications industry, that is broadcasters, producers, writers, actors, directors, technicians, BDUs and ISPs can choose to work together to materially enhance the presence of Canadian content on the Internet and further the objectives of the Broadcasting Act. It is in everyone's business interest to do so and we will need the Commission to take a leadership role in providing the framework within which we, along with all Canadians, now and into the future, will benefit.

8962   The current global economic crisis provides us with abundant evidence that we cannot simply rely on market forces. It is our industry that should also take a leadership role in encouraging governments at all levels, as well as colleges and universities, to work with us in making a significant contribution within the global network we call the Internet.

8963   Thank you very much for your attention and I would be happy to answer any questions you may have.

8964   THE CHAIRPERSON: Thank you very much, Ms Fusca.

8965   MS FUSCA: You're welcome.

8966   THE CHAIRPERSON: Turn to page 8, bullet 1. To my eyes, that looks like a fee for carriage for unaffiliated OTAs.

8967   Is that right?

8968   MS FUSCA: I beg your pardon?

8969   THE CHAIRPERSON: To my eyes, what you are advocating is a fee for carriage for unaffiliated over-the-air broadcasters.

8970   MS FUSCA: Yes, sir, I am.

8971   THE CHAIRPERSON: Why unaffiliated?

8972   MS FUSCA: In part because during the course of the BDU specialty hearings, we often heard the BDUs, in particular, say that the specialty channels were making a lot of money, and that money could then be shifted over for the main networks.

8973   So I have taken that principle to say that if you take a look at the financial well-being of the BDU and their affiliated companies, they are all doing very, very well, and where I see the problem is in the unaffiliated sector, and that was really --

8974   THE CHAIRPERSON: But you just said that the whole system should benefit. Surely the affiliated broadcasters are part of the system.

8975   Let's take the example of Rogers. They own the Citytv network. If they have to pay a fee for carriage, why shouldn't City benefit from it as well?

8976   MS FUSCA: I am only taking the argument that they put forth. However, if the Commission saw fit to --

8977   THE CHAIRPERSON: No, I am seeking your views. You are putting this forward, and you said unaffiliated.

8978   MS FUSCA: Yes.

8979   THE CHAIRPERSON: That means that affiliated would automatically be disqualified. I am trying to understand the logic of your proposal.

8980   MS FUSCA: The logic that I am using is the logic that they used in the first place, which is to say that if a company, as a whole, has the wherewithal in other parts of that company to shift money into that area, they should.

8981   Having said that, I am actually not suggesting to completely preclude, I am only suggesting that the unaffiliated over-the-air broadcasters currently are the ones that are in desperate need. But if the Commission should choose to have all over-the-air broadcasters have a fee, which includes the affiliated ones, I would have no objection to that.

8982   THE CHAIRPERSON: An unaffiliated OTA, in your dictionary, includes the CBC?

8983   MS FUSCA: Yes.

8984   THE CHAIRPERSON: Okay. Thank you.

8985   Louise, I believe you have some questions.

8986   COMMISSIONER POIRIER: Yes, I do. Thank you, Mr. Chair.

8987   Hello, Ms Fusca. The Chair asked you a question on the first solution you present. The second one, to create a fund, is related to a tax credit from the federal government. And the third one -- you say that the BDUs and the ISPs would, of their own accord, put forth a funding solution that would benefit the entire system.

8988   In your view, how should that be done?

8989   MS FUSCA: I am afraid that I really can't speak for them, primarily because I don't know all of the ins and outs of their own business, as well as how they see themselves moving into the future. I just concluded that, since everything that I have read indicates that they are really not happy with this solution, perhaps the solution would be to simply ask them.

8990   If the Act, or if, in general, the direction of policy has been that every part of the system should make a contribution, that it's very important to our cultural initiatives, and this isn't a solution that they find very appetizing, then perhaps they could come forward with something.

8991   But I do stress that it would have to be for the benefit of the entire system.

8992   Barring that, I think that some of the suggestions that have been put forth by Mr. Grant and the piece that the Commission commissioned from Mr. Noam -- there was a similar suggestion in there.

8993   So I would give them the first sort of right to come forth with some solution, which might be more in keeping with what might be more appetizing to them.

8994   COMMISSIONER POIRIER: If they come with a solution, and the BDUs and the ISPs are willing to invest in broadcasting on the internet, how should we spend the money? To whom should it be dedicated, only to the commercial broadcasters, or, also, to the producers who produce only for the internet?

8995   To whom should we dedicate that new money?

8996   MS FUSCA: That's a really good question, and I think there are probably three parties. I think that the broadcasters should be able to access those funds. I also, just because of my background, and because of everything we have heard -- and I think there is a lot of truth in the difficulties that producers are experiencing, which then trickle down to the rest of the creative community.

8997   As the broadcasters have indicated to you, we have certain of our own problems.

8998   So I think that the fund could be dedicated to the broadcasters and producers.

8999   Also, I think that it is very important for Canada to keep an open mind to new initiatives. There might be some kid down the street who comes up with the Canadian version of YouTube or MySpace, and that kind of stuff. I would hate to preclude that.

9000   It should always be directed to, however, something that is professionally produced and in keeping with the notion of broadcasting material.

9001   COMMISSIONER POIRIER: If I understood well your presentation, you are a former producer who became a broadcaster --

9002   MS FUSCA: Yes.

9003   COMMISSIONER POIRIER: -- and you still have some in-house production, do you?

9004   MS FUSCA: Stornoway Productions still exists. They produce some material for us, but they produce -- actually, the nature of the content that they produce is very expensive. It's long-term, in-depth, investigative -- often documentaries. ichannel can't afford to finance that, so we sometimes get a second window.

9005   They continue to produce for CBC or CTV or Global, and, in fact, internationally, as we always have -- Discovery in the U.S., and with the Japanese or the British. It depends on the project.

9006   COMMISSIONER POIRIER: And you also deal with independent producers, don't you?

9007   MS FUSCA: Yes, we do. We are very happy to say that this year was the first time that The Pet Network actually commissioned six-hour documentaries on horses from Newfoundland, as well as a children's pet series out of Newfoundland.

9008   COMMISSIONER POIRIER: Okay. So when you negotiate terms of trade with creators, if it's from in-house or elsewhere -- private producers -- do you negotiate the rights for all platforms, including the internet?

9009   MS FUSCA: No, because we understand that that really isn't fair. We only negotiate those rights that we can actually use.

9010   We have had discussions, and we do have contracts in place where we spoke to the producers and said exactly what I told you in my submission, which is: Look, we don't really have the money. We want to try to build this platform. Would you partner with us? If we generate any revenue, we will share that revenue with you. If we don't generate any revenue, then you don't get any revenue either.

9011   It's a bit of a risk, but it's a bit of a partnership.

9012   Only in one instance were we turned down, actually, by a producer, and we said, "Okay, fine, we can't afford to do this," so we didn't.

9013   I think that it's very important for the broadcast community to understand that the time really has come to play fair. The same way that we are asking, as broadcasters, for the BDUs to play fair, we also have to play fair. That basically means that, if you have the money, then you have an obligation to spread that money over.

9014   If you don't, then you have to try to come to some sort of agreement, whereby --

9015   If it's a building process -- for example, let's say that I speak to a producer and I say: Look, there isn't going to be any money on this, but I would still like the internet rights. You can distribute on other windows around the world, but we would like it.

9016   In most instances, our experience has been that they will do that. You don't have to choke it out of them, they will actually do it anyway, because they understand.

9017   In some instances they don't.

9018   COMMISSIONER POIRIER: So it happens, you buy the rights for the internet?

9019   MS FUSCA: Yes.

9020   COMMISSIONER POIRIER: When you do so, is there a timeframe?

9021   Is it a "Use it or lose it" condition that you have, also, with the independent producers?

9022   MS FUSCA: We haven't. That actually, interestingly enough, hasn't really cropped up in our situation. None of our producers have said --

9023   And it's so early anyway. I mean, we are just finishing these productions, so they are not actually on the internet just yet. They will be over the course of the next year.

9024   I would suggest that if ichannel or any of our channels commissioned and acquired those rights -- and I use the word "acquired" loosely -- if we acquired those rights and we didn't do anything with those rights for a period of -- I thought they were very generous -- for a whole year, I don't think that would be right. It would actually hurt them.

9025   They may be able to sell those rights to somebody else, so why not allow them to sell those rights.

9026   COMMISSIONER POIRIER: Let's talk a bit about the mobile platform -- wireless. Can you be seen on the mobile platform?

9027   MS FUSCA: We have just finished negotiating a deal -- I don't do this directly, one of my colleagues does -- with Bell ExpressVu for BPM TV on their phone system, and I know that there are other issues with other broadcasters. We may not be as far ahead as they are.

9028   So it's very hard for me to comment in a general sense, I can only tell you about this one little experience that we have had. It was a long time coming, but it's there.

9029   We would like to see more of our material on telephones, certainly. But I can't tell you that I have had any real difficulty with it yet.

9030   COMMISSIONER POIRIER: Pelmorex told us this morning that, with the mobile platform, they have to negotiate the access. They have to pay to be accessible.

9031   What do you think about that? Would you pay to be on the mobile --

9032   MS FUSCA: No.

9033   COMMISSIONER POIRIER: What is your general view on this matter?

9034   MS FUSCA: No, as it is, I wouldn't pay, unless -- unless, I should say --

9035   I wouldn't pay unless there was a very clear-cut business case where there was serious mutual benefit.

9036   In other words, if we got together with a BDU and we both discovered that we were actually going to make a very good return on the investment that each of us was making, fair enough. Typically that's not the case.

9037   As you know -- or maybe you don't know, because you are new, but I have been here before saying that we deliver our television signals down to Bell ExpressVu, and yet I still have to cough up $250,000 a year, for each of my channels, to be on the service.

9038   When you are making this much money, and you are paying that much money, there is no business case whatsoever for it.

9039   And I hope that the CRTC addresses that issue, by the way.

9040   If we see that happening on the internet, or if we see that happening within the telephony system, that is going to be another added burden.

9041   But I am in this very positive and proactive mood these days -- and I should thank Bell for this, even though I pick on them a lot. They had a party and their president said that they really wanted to partner with everybody, so I took them up on it, and slowly it seems to be working. It may not be working tomorrow, and it doesn't seem to work with some of the others, so we do have to keep an eye on this.

9042   There is a certain point beyond which you can't squeeze the producer, and you can't squeeze the broadcaster either.

9043   And I am not suggesting that you squeeze the BDU or the ISP either.

9044   There seems to be an awful lot of concern about building the infrastructure in Canada, but there is little understanding about or appreciation for what it takes for a company like Stornoway --

9045   I had to move. It took millions of dollars to move, right -- or what happens to your production company?

9046   I think we have to be sensitive about each of the sectors in what I call the communications industry.

9047   COMMISSIONER POIRIER: In your December report you admit -- and I will quote you: "The new media already has a significant impact on the Canadian broadcasting system, but this impact is still in its early stages."

9048   And you add: "It seems assured that the impact is going to grow at breakneck speed."

9049   Should we continue to support the exemption order, or should we change our attitude at the CRTC and get involved?

9050   MS FUSCA: I happen to agree with what you have already heard. I don't really see a need to be getting into regulation or more rules. I think that there is still so much happening that it's a little too early.

9051   I don't know where I have read -- perhaps it was the Chair, but someone said something to the effect of: We don't want to get caught, either.

9052   One of the expressions that I have really come to hate is, "The horse has left the barn." My view is, if the horse has left the barn, let's go get the horse and put him back in the barn, and I haven't heard anybody say that.

9053   But I do think it's a little bit too early. I think it's incredibly wise that we are having this hearing. There are other people who have more experience, and who, maybe, are even far more intelligent than I, who have given you some very sage advice.

9054   I wouldn't get into regulating. I think that we have to be cautious, because people's business interests -- just their sheer business interests are such that they are going to embark on something that may, in fact, be either harmful to somebody else or not in keeping with our national cultural objectives.

9055   So I think that we have to be somewhat cautious.

9056   I do agree with Pelmorex, and I think that they know a good deal more than I on the subject of the telephony platform.

9057   We were talking about this at lunch, actually.

9058   There, I think, we also have to be incredibly careful. Just ensure that Canadians have a place. You know, we are Canadians. I think we would be incredibly remiss to who we are as a people, and also the contribution that we can make on a global level --

9059   We don't seem to want to take pride in that collectively. I think that individually we do. I think that's why I quoted Dickens. As horrible as the time is right now for so many of us, I think that there are some incredible opportunities that we can seize, and I think that, in this hearing in particular, we may actually start going down that road.

9060   I am convinced that somewhere in Canada somebody is going to come up with some really incredible, inspiring, and, from a business perspective, hugely successful pieces to this incredible internet that we are talking about today. It's just a matter of time.

9061   COMMISSIONER POIRIER: You say that it's too early to lift the exemption order, but while the horse might leave the barn, he might get killed in the meantime, or he might get lost, who knows.

9062   MS FUSCA: It's usually not those horses that we worry about getting killed, right? They are the ones we want to try to rein in usually.

9063   COMMISSIONER POIRIER: Yes, that's why I want to know what we should do in the meantime.

9064   MS FUSCA: The only thing I can say is, I think you are doing the right thing by having this hearing. I think you are doing the right thing by keeping an eye on it. I think you are doing the right thing by not rushing into developing all kinds of rules, when it is still shifting.

9065   I am afraid that I don't have any problem with a horse that has left the barn and saying: Excuse me, back up. This is not in keeping with what we need to do on a national basis.

9066   I don't have that problem.

9067   It seems that we have had that problem in the past. In other words, I hear the expression, "Once the horse leaves this barn, there is nothing you can do." I don't agree with that. I really, fundamentally, don't.

9068   I think that if we see that something untoward is happening, the Commission has every opportunity to say: Wait. That doesn't look like that's where we really want to go. Let's sit down and see what we should be doing about this.

9069   COMMISSIONER POIRIER: You are very supportive of Canadian content on the traditional broadcasting system. Are you as supportive of Canadian content on the internet?

9070   MS FUSCA: Oh, I think that's where we totally need to be.

9071   The reason why I am so supportive of the broadcasting industry is because, as you have heard from others, this is the content that actually is making -- apart from the other, it is also making a very significant impact on the internet.

9072   I think that a very strong Canadian broadcasting and creative sector -- I call it the creative sector, because it isn't simply broadcasters. Everybody has a role to play in this.

9073   I think that if we are strong and we provide that content on the internet, not only are we actually providing it for Canadians, which is obviously our first goal, but I think that we also have a second goal, which is to share with the rest of the world what it is that we have to offer.

9074   As we know as a nation, we have an enormous amount to offer, on so many levels, so why not communicate that out there?

9075   I guess what I am proposing is the way that we might manage that, and I would suggest that the broadcaster is in the first position, working along with producers and the rest of the creative community, to be able to take that material --

9076   There are two different types of material that I would argue, too -- and you have heard about some of this already. There is the material that is directed to television broadcast, which can also be directed to the internet, but there is also the material that is a derivative of, or a repackaging of, that is specifically made for the other platforms. We are specifically talking about the internet here, but we could be talking about the telephone and any other kind of communication technology that comes our way.

9077   COMMISSIONER POIRIER: Is it enough to make Canadian content available on the internet, or do we need to find a way to promote it and make it more easily available to Canadians?

9078   MS FUSCA: Yes, I, too, along with the Chair, and I am sure the rest of the Commission -- I didn't see their presentation -- I wasn't able to see it, but I did read the NFB's presentation. A few years ago, when we were doing a biography on the Right Honourable John Turner, I discovered that Mr. Turner had actually -- there was nothing in the National Archives on Mr. Turner, other than news footage. It became clear to me that there was just so much that was out there, lying in bits and pieces, or there wasn't enough of it, so the idea --

9079   I understand that the Commission can't deal with all of this, it's so massive and it's so big, but I think it's a very good thing that the National Film Board was actually able to make it, in whatever way, public.

9080   I think that the promotion of Canadian content is critical, and I will give you a very small anecdote.

9081   At ichannel, apart from the material that we produce, there are very limited amounts that we can buy of what we call a first window op, simply because we are still small. For other reasons, but that is one of the fundamental reasons.

9082   But we buy a lot of what we would say are second or third window productions.

9083   I have Canadians from all across this country who e-mail or phone -- in fact, we even get letters, handwritten letters, which always surprises me in today's age -- that talk about the importance of this program, and this is a third program.

9084   So you have to ask yourself: Why didn't Canadians hear about this?

9085   I mean, I'm grateful because they have seen it for the first time on my network. But you do have to ask yourself: Why wasn't this so promoted that --

9086   You know, you want to watch one of the digital specialty channels because you loved it so much that you want to see it again, as opposed to the first time.

9087   I think you had before you, in the other proceedings that we had, the VOD and the ad avails -- again, those are other platforms and other means of promoting the material.

9088   You have heard from the actors, and I quite agree with them on this other front, too.

9089   I think that we probably do a much better job in Quebec than we do in English Canada. I don't know why it is, but we just don't promote our own.

9090   I know why Stornoway -- and I won't get into that, because it is also in my other submission -- why it is that we can't tell the rest of Canada. We simply can't afford it. I can't afford hundreds of thousands of dollars a year to make my content accessible to Canadians when my competition owns the other platform. So what small, little pieces we are supposed to have access to, we still don't.

9091   But that's not the issue. The issue is really about: Are we doing a good job. And the answer, quite frankly, is no, and it's shame on us, all of us.

9092   COMMISSIONER POIRIER: This is my last question, Mr. Chair.

9093   We always see benefits for ISPs with them selling advertisements, but they also profit from the fact that broadcasters are there on the internet, and because of that they probably, I hope, sell more subscriptions, and probably, also, sell higher speed packages.

9094   Do you think that is the main reason why they should contribute to the broadcasting system, because they take advantage of what you put on the internet?

9095   MS FUSCA: My sort of gut, human being response to that is, really, that you would like to think that they would simply do it because it's the right thing to do for their country, and once in a while it's kind of good to give something back.

9096   And I know that they do. They do in many other ways.

9097   Their business is to run a business. So, from a business perspective, they are always going to be looking, and so they should, and so should we all be looking to do what is really, first and foremost, I guess, best for the business, but completely.

9098   From a business perspective, absolutely, they are definitely benefiting from this.

9099   You know, despite what you hear from those folks who want to make out that Canadian content is really not that attractive, and people don't want to see it, and all of that -- yes, we have a certain amount of that, but the Americans have a certain amount of that, too. I bet that there is a lot of American stuff that Americans aren't interested in seeing.

9100   There is enough content in Canada -- and we need more of it -- that Canadians genuinely do want to see.

9101   Before you, at another hearing, I mentioned that I have had a number of people say, "Martha, you know what? We want to see more Canadian content on The Pet Network," which now means that we have to try to find the investment, within our company, to produce more of it. Why? Because I want to keep those consumers. I don't want to lose them, right?

9102   The long and the short of it is, yes, they are benefiting.

9103   And there used to be the notion of the public airwaves, and they got the spectrum, and they paid good money for it. I understand that. But, you know, hey, who wouldn't have loved to have had that kind of money for that kind of privilege?

9104   It's a privilege, and I think we forget this, too.

9105   And for the privilege to put a little money back, in an effort to do something that isn't always just simply about business, I think is critically important.

9106   COMMISSIONER POIRIER: I'm done, Mr. Chair.

9107   THE CHAIRPERSON: I have one last question for you.

9108   While you were talking I went on your website. You don't stream. Why not?

9109   Why can I not see your productions on --

9110   MS FUSCA: For two reasons. Right now I am in the process of moving. Last year Sony United decided that the top floor of the Sony building that I am on had to be vacated, so I have spent an entire year moving, and an entire year trying to figure out how to pay for the millions of dollars it takes to move. So you will be seeing it --

9111   And I embarrassed. I mean, maybe there was something else I could do and I didn't.

9112   But you will be seeing it in very short order.

9113   We have had orders from India, actually; people who are willing to pay for our content e-mailing us from India, so that's a good thing.

9114   THE CHAIRPERSON: Good.

9115   MS FUSCA: You will shortly.

9116   THE CHAIRPERSON: Okay, thank you.

9117   MS FUSCA: You're welcome.

9118   THE CHAIRPERSON: Those are our questions for you.

9119   MS FUSCA: Thank you.

9120   THE CHAIRPERSON: I think we will move on to the next intervenor, Madam Secretary.

9121   THE SECRETARY: I would now invite the next participants, Score Media and the National Hockey League, to come to the presentation table as a panel.

9122   We will hear each presentation, which will then be followed by questions by the Commissioners to all participants.

9123   We will begin with the presentation by Score Media.

9124   Please introduce yourselves, after which you will have 10 minutes for your presentation.

PRESENTATION

9125   MR. LEVY: Thank you.

9126   Good afternoon, Mr. Chairman, Members of the Commission, and Commission Staff. My name is Benjie Levy, and I am the Executive Vice-President and Co-Chief Operating Officer of Score Media.

9127   With me today, on my left, is Jonathan Savage, Score Media's Vice-President of Digital Media. As his title implies, Jonathan is responsible for the design and implementation of our new media initiatives.

9128   On my right is Asha Daniere, our Vice-President and General Counsel.

9129   On Asha's right is Grant Buchanan of McCarthy Tétrault, our outside counsel.

9130   Score Media is the parent company to the Score Television Network, a national sports news and information specialty service; Hardcore Sports Radio, a sports talk radio channel distributed across North America on satellite radio; and SCORE! Media Ventures, our digital media division.

9131   We have invested heavily in making sure that we are present on every important media platform, because that is where our, largely male, 18 to 34 year-old fan community lives.

9132   Our new media operations currently have four components: a website, mobile applications, a mobile video service, and interactive television applications.

9133   We are particularly proud of our new iPhone application, which has generated nearly 400,000 downloads since its launch in July, with over 50 percent emanating from the United States.

9134   The Score Mobile iPhone Edition is currently the number one sports application in Apple's App Store in Canada, and in the top 10 in the United States.

9135   Our new media platforms are an integral part of our operations and growth strategy. Not only do they serve to enhance our existing television business through interactivity and the provision of complementary content, but they are platforms for growth in their own right, both inside and outside Canada.

9136   As our recent experience with the Score Mobile iPhone Edition has demonstrated, we are capable of successfully competing on a global stage.

9137   From a financial perspective, new media is equally meaningful to us. Nearly 10 percent of our advertising revenue is currently generated through our new media platforms, and we expect this to grow exponentially in the years ahead.

9138   Our new media platforms are also positive contributors to our operating profit.

9139   As a small independent Canadian sports player, we have learned how to be nimble in a business where our competitors are sports media giants and vertically integrated distributors, and a business where sports leagues often hold most of the bargaining power and operate their own media platforms.

9140   In this environment, our success has come from respecting our audience, tapping into communities, and providing honest, authentic content. But we would have had no opportunity to succeed without access.

9141   When life began for the Score over 10 years ago as a specialty service, it was the Commission's access and must-carry rules which ensured that an upstart sports network had a chance to find its voice.

9142   If our right to carriage 10 years ago had been left to the discretion of BDUs, this independent voice would not be here participating in today's hearing.

9143   In the new media world, the organic and explosive growth of the Internet has created an environment where a small company like Score Media can, with a little creativity, create a global business. Anyone anywhere with access to the Internet is a potential fan.

9144   However, in recent years the power to grant access to the Internet has become increasingly consolidated in the hands of a select few. These ISPs have the power of life or death over every content creator who relies on the Internet to access their users. Many of these ISPs are integrated with content providers and they have every incentive to use the power they have.

9145   This is the single most important issue before the CRTC in this proceeding. As we and others have demonstrated, Canadian content creators can compete to win, but this can only happen when they can compete on an even playing field.

9146   So, our recommendation to you is simple. Please keep the Internet open. We are very concerned about the ability of ISPs or WSPs to act as gate keepers, either because they are vertically integrated and have an incentive to prioritize their own content, or because they are partnering with major media players and providing preferred access.

9147   If we seek a diversity of Canadian voices in new media, the Internet cannot become a pay-to-play zone.

9148   We are aware that the issue of net neutrality is the subject of a separate proceeding under the Telecommunications Act, we have intervened in that proceeding. However, from an independent broadcaster's point of view, net neutrality is not just some telecom issue, it is the life line that makes sure we can continue to compete.

9149   Moreover, the Telecommunications Act does not apply to broadcasting by broadcasting undertakings and in the situations we are talking about ISPs are broadcasting undertakings.

9150   If the Commission does not address this issue under the Broadcasting Act, Canadian new media broadcasters will not have access to the remedies they need against those with the incentive and opportunity to choke off that life line.

9151   Please consider the following. ISPs can take advantage of their ownership of the pipes to benefit affiliated services and disadvantage unaffiliated services.

9152   For example, a February 20th news story about a proposed new service from Comcast called On Demand Online noted the following:

"Comcast and Time Warner could also give consumers other incentives to watch their online video services instead of rivals by taking advantage of the fact that they own and operate their own broad band pipes. For instance, they could hypothetically open up more band width for their web video streams, even if you pay for lower band width cable Internet service. That might mean that you could watch HD video online from Comcast, whereas you might only be able to watch lower quality video from Hulu. The cable operators might, again hypothetically, exclude their own and their partner's web services from band width caps and overage charges while capping and charging extra for video from Hulu, Netflix or Apples Itunes." (As read)

9153   MR. LEVY: In response to this very specific article, Comcast has assured its customers that it will not engage in these types of behaviours.

9154   While that is indeed reassuring, in the absence of regulation nothing would prevent Comcast from changing its mind, nor would it prevent another ISP from reaching a different conclusion.

9155   In addition, new media broadcasters are partnering with ISPs to provide branded content only to the subscribers of that ISP. ESPN360, an online video service from U.S. sports giant ESPN, is already doing just that. They approach ISPs and ask them to pay ESPN to grant that ISP's subscribers access to ESPN360 content.

9156   Zillion TV, as set top box provider that will use the Internet as a delivery mechanism is planning to do the same thing. They are partnering with ISPs so that their set top boxes work only for subscribers to those ISPs.

9157   Both ESPN360 and Zillion TV are components of an emerging pay-to-play Internet.

9158   While this hearing was adjourned last week, Wired Magazine's blog network ran a story on ESPN360 and Zillion TV. The following is a brief excerpt:

"The big difference here is Zillion TV's plan to partner with ISPs. This means that, ESPN360, you won't be able to receive the service unless your ISP pays for your right to do so. If the trend continues and ISPs start having more financial incentives to favour one service over another, sanctioned offerings like this could become the best or only way to receive high quality video content over the Internet. However, Zillion's main competitive advantage, that its partner ISPs ensure smooth HD streaming at the expense of other unaffiliated video distributors, could draw criticism from net neutrality advocates, including Obama's new head of the FCC. If ISPs start clamping down on competing video services while encouraging users to switch to this one, regulators will have a field day."

9159   MR. LEVY: To be clear, we are not opposed to ISPs owning or partnering with content businesses. However, there is the potential for wide-spread abuses and safeguards must be put in place to ensure that the Internet remains open.

9160   We are, therefore, asking the Commission to ensure that ISPs and WSPs be subject to the same sort of undo preference rules as BDUs and telecommunications common carriers.

9161   This should apply not only to the obvious case of entities affiliated with the ISPs and WSPs, but also to cases where unaffiliated entities use financial incentives to undermine the openness of the Internet.

9162   In the case of closed devices, we agree with the previous interveners who have suggested that a condition of exemption relating to Canadian content be applied to these devices. By closed devices, we mean hardware devices on which the audio/visual content available to users is chosen by the service provider. Users are free to select from the pre-set content menu, but users are not able to easily access an alternative content provider using that device in the way that you can on a computer by simply changing websites or downloading a different application.

9163   These closed devices introduce issues that are very similar to the ones the Commission faces in terms of the relationship between BDUs and specialty services like ours in terms of bargaining power and fair access.

9164   But there is a key difference. The BDU relationship is governed by rules that address the unequal bargaining power of the two parties. The closed new media relationship does not have those kind of rules.

9165   Closed devices that are fed by the Internet, like set top boxes, including Apple TV and Zillion TV, are not yet a developed market in Canada. However, the same is not true of mobile broadcasting. All wireless carriers currently offer a suite of mobile broadcasting options and these offerings are posed to expand with new market entry and the adoption of 3G and YMAX wireless standards.

9166   The current mobile exemption order does not oblige wireless providers to include a minimum proportion of Canadian services or Canadian content.

9167   We believe that it would be appropriate for the Commission to ensure through exemption order amendments that closed new media devices provide a minimum amount of Canadian content just as BDUs are required to do under the broadcasting distribution regulations.

9168   To conclude, I'd like to reiterate three key points.

9169   First, we are excited by the opportunities for growth which new media presents. We have in a very short period of time invested considerably in our new media platforms and are capitalizing on opportunities for growth in Canada and abroad.

9170   Second, keep the Internet open. Don't regulate the Internet and don't let ISPs or WSPs do it either. The Commission should ensure that ISPs and WSPs do not grant undo preferences or create undo disadvantages. The Internet cannot become a pay-to-play zone.

9171   Finally, closed new media devices share many of the policy characteristics of traditional gate keeper driven media like BDUs. We have thus recommended that a condition of exemption be established relating to minimum amount of Canadian content.

9172   Thank you, and we'd be happy to respond to your questions.

9173   THE SECRETARY: I would now invite the second presenter, the National Hockey League.

9174   Please introduce yourselves and begin your presentation.

PRESENTATION

9175   MR. TORTORA: Thank you.

9176   Good afternoon, Mr. Chairman, Vice-Chairs, Commissioners and CRTC Staff.

9177   I am Jon Tortora, Vice-President of Media of the National Hockey League. With me today is Robert Hawkins, Group Vice-President, General Counsel, NHL Media.

9178   The NHL thanks the Commission for the opportunity to participate in this hearing and to allow us to provide you with our views on television and new media. We are here on behalf of the League's 30 member clubs, including of course our six Canadian based clubs.

9179   The NHL and its clubs obviously embrace and will continue to embrace traditional television. Nearly every one of this season's 1,230 regular season games is televised either locally through telecasters such as Rogers SportsNet or nationally through telecasters such as CBC, TSN, RDS and the NHL Network.

9180   These relationships are valuable and long standing for all involved and we look to supplement these relationships, in particular through new media.

9181   This season alone the NHL relaunched NHL.com with more video content than ever and the NHL completed an agreement with Bell Mobility for the distribution of NHL mobile to Bell Mobility subscribers in Canada.

9182   The NHL is excited about these and other new media opportunities and believe they will continue to be well received by our Canadian fans as well as a recognizable supplement to their traditional television viewing.

9183   We are convinced that the new media exemption orders for both Internet and mobile are working and should be maintained for new media growth to continue as this industry matures.

9184   The NHL has been extensively involved in the growth of the relatively infant new media industry. The Commission was right in 1999 when it exempted from regulation new media services to support this growth. The current regime is functioning well, fuelled by the ability of industry participants including traditional telecasters to experiment and launch new services fluidly in order to meet increasing and changing market demands, all without governmental regulation.

9185   The following statistics illustrate the growth of new media in the NHL and show it as a natural compliment to traditional television.

9186   Monthly unique visitors accessing NHL.com have been on the rise over the last 10 years and are up 15 percent over last year, translating into 10-million unique visitors per month.

9187   NHL.com traffic around the 2009 All Star weekend in Montreal increased by 10 percent over last season, with the video coverage of the break-away challenge being the fourth most watched video segment in the history of NHL.com, all while the All Star weekend resulted in tremendous television ratings for both CBC and RDS.

9188   And, more generally, the NHL's increased involvement with new media has coincided with increases in local television ratings for two-thirds of our member clubs for the 2008-2009 season.

9189   Without substantial regulatory involvement, the form and breadth of new media services has changed considerably since 1999. No longer is the industry restricted to offering static web pages or linear television programming. With broad band, the NHL and its partners can offer fans access to an ever growing range of services, including the streaming of live games and the availability of real-time statistics online. Similar content can be distributed over wireless devices.

9190   This fact is not lost on traditional telecasters who now routinely ask for new media rights in any telecast contract negotiation with the NHL as new media services supplement traditional television offerings and do not replace them.

9191   New media services are designed to create a two-screen experience, to provide a more compelling and complete experience for the consumer. The continuation of the new media exemption orders is appropriate as content providers need to be fluid in this phase and regulation is counter productive to this objective.

9192   The NHL has been and will continue to be an active participant in new media, not simply through the granting of new media rights to traditional telecasters, but also through the creation and operation of a number of new media services.

9193   The following are some of the new media initiatives the NHL has undertaken over the last few seasons.

9194   The club websites have existed for well over a decade. During the last couple of years the clubs have transformed their respective websites into video rich platforms.

9195   Each club website has an enhanced video player which allows the club to distribute content such as game highlights, ancillary programming, interviews, off-ice features and more to a demanding world-wide consumer base on a 24/7 basis. The clubs offer this content to supplement and to cross promote the live game telecasts.

9196   For example, due to programming time constraints, a telecaster may not have the ability to televise a coach's post-game press conference; whereas a club website can offer that content live as well as archived for later viewing.

9197   As such, the club website offers a timely two-screen experience for the consumer. This two-screen experience is not limited to the club websites. NHL.com has robust real-time statistics and a live game package through its Game Centre and Game Centre live offerings. Game Centre, a free offering, allows a user to track real-time statistics such as shots on goal and ice time per player, listen to audio play-by-play, view select highlights and study an illustrative ice rink showing where each shot on goal was taken during the game, all while the game is in progress.

9198   This allows the user to watch the game on television and supplement the experience on NHL.com with real-time content, content that may be impractical for a linear telecaster to distribute.

9199   Again, this creates the valuable two-screen experience, all without replacing the television for the Internet.

9200   Game Centre live operates in a similar manner. In addition to the bells and whistles of Game Centre, Game Centre live also streams live games that are not otherwise available on television in the user's area. As an example, this allows a user to watch his local club on traditional television while also viewing an out-of-market game via broad band on Game Centre live. Another facet of the two-screen experience.

9201   The two-screen experience also is not limited to the NHL or club platforms. Our telecast partners all ask for new media rights in rights negotiations. For example, CBC negotiated for the right to stream its games on CBC.ca. Thus, a viewer simultaneously can watch Hockey Night in Canada on television and on CBC.ca.

9202   This becomes invaluable when CBC regionalizes two seven o'clock games on a Saturday night. The viewer can watch one on CBC and the other on CBC.ca.

9203   Further, TSN, CBC and RDS all negotiated for the right to distribute NHL game highlights on a daily basis on their respective websites.

9204   The NHL also uses its new media platforms to cross promote game telecasts. NHL Live is an example. NHL Live is a daily two-hour hockey talk show from noon to two o'clock. The NHL simulcasts a show on XM Radio, NHL.com and on television via the NHL Network.

9205   The show regularly features interviews with the top Canadian on-air talent from TSN and CBC, Bob Mckenzie, Pierre McGuire, Scott Morrison and Mike Milbury, to name a few.

9206   In addition to news from around the NHL, these interviews also focus on the upcoming games on these networks that the networks will be covering as a way to cross promote the networks.

9207   The above examples illustrate that new media provides for new and innovative opportunities to supplement and cross promote traditional game telecasts while satisfying the content demands of our fans and generating supplemental revenue streams for the NHL, our clubs and our partners.

9208   In conclusion, we submit that the new media exemption orders have been successful and Canadians have benefitted from that success. The absence of regulation has been a catalyst to contribute greater diversity, choice and efficiency to new media services as the industry grows and matures.

9209   New media is working and the new media exemption orders are an important reason for this. We submit that the new media exemption orders should continue to apply.

9210   Thank you for your consideration of our remarks and we would be pleased to answer questions.

9211   THE CHAIRPERSON: Okay. Thank you for your submissions.

9212   First of all, Mr. Levy, part of your submission as you yourself said really dealt with net neutrality and not with this issue, so for the purpose of questioning today, we'll give you a free ride, we won't ask you questions on that part. You will have your chance at the next hearing.

9213   You mentioned on page 2 that you have something called the iPhone edition of The Score. I, as a BlackBerry user, can I download that one too, or is it restricted to iPhones?

9214   MR. LEVY: That particular application you cannot download as a BlackBerry user, but we do have a BlackBerry version of the application which I'd be -- and I'd be very happy to send you the link for that at the conclusion of the hearing.

--- Laughter

9215   THE CHAIRPERSON: No, I ask first for interest but also because it appears as a point about being restricted to...

9216   MR. LEVY: M'hmm.

9217   THE CHAIRPERSON: So, is anybody -- there is a closed new media device, is really what you are talking about.

9218   MR. LEVY: M'hmm.

9219   THE CHAIRPERSON: And I guess iPhone is a perfect example, you are lucky enough to be on it, but you are saying if you weren't on it, it would --

9220   MR. LEVY: Well, I think the Iphone is an interesting example, Mr. Chairman, because although Apple does conduct -- you know, you do need to submit your software to Apple for them to review it, for the most part they're not making content or editorial decisions about who gets into the applications store. They're reviewing it to make sure that it's compatible with the device, that you're not going to cause viruses or what not, but after that you get into the store and really it's -- so, yes, there is some element of it being closed, but we're more concerned about a situation where an ISP or a WSP or a third party, a hardware creator, is actually making content or editorial decisions and saying the following 15 pieces of content or applications are being made available on the device and that's it, that's all, the consumers are free to choose from among that list but not from anything else.

9221   THE CHAIRPERSON: How do they enforce that? I mean, if you have a downloadable application, couldn't I just download that and put it on that device? Do they actually design the devices so that as to block that?

9222   MR. LEVY: In some cases yes. In some cases with your wireless phone you might not be able to download our application, it might be blocked, or -- and that might be one extreme example.

9223   Another example might be you may be able to download it to your phone, but your data charges might not be zero rated as they would be with something that sort of was a carrier endorsed application and, therefore, you're really dealing in a situation where there's substantial unequal treatment.

9224   THE CHAIRPERSON: Then your principal recommendation is, in effect, especially with wireless devices, in effect, we import an undo preference rule and we also import a rule suggesting a minimum amount of Canadian content.

9225   Now you, NHL, as a content provider, what do you say to that? As far as I can see, you are saying the present rules are fine and don't do that.

9226   Wouldn't what Mr. Levy just said actually benefit you, especially the no undo preference rule? Wouldn't that for you, as a provider of content, assume for argument's sake there is another hockey league, I gather there's talk of one, et cetera.

9227   MR. TORTORA: M'hmm.

9228   THE CHAIRPERSON: And they compete, so an undo preference rule would presumably be to your benefit.

9229   MR. TORTORA: Yes.

9230   THE CHAIRPERSON: But you don't advocate we go that way?

9231   MR. TORTORA: Excuse me?

9232   THE CHAIRPERSON: You don't advocate that we go that way. If I read your submission correctly, you're saying leave things as they are.

9233   MR. TORTORA: Well, I think what we need to see is have the industry mature a little bit more to see where the needs are.

9234   We're still in the infancy of the industry, 10 years in is not a particularly long time and I think we need to have more water under the bridge, if you will, to see where there might be an appropriate need for regulation in the future.

9235   So, until we get to that point where there are more people engaged in new media, we'll have a better sense of where the regulation may make sense.

9236   THE CHAIRPERSON: Okay. Thank you.

9237   Len, I believe you have also questions.

9238   COMMISSIONER KATZ: Thank you, Mr. Chairman.

9239   It's actually nice to see both a sports broadcaster and a sports producer on the same panel, so when we ask a question now if one of you wants to comment on it, it will be interesting to see the other view.

9240   Let me start with a hypothesis that I think both parties have actually confirmed, that sports on non-traditional platforms can and is being monetized today.

9241   Is that true?

9242   MR. LEVY: Yes, absolutely, it can and is being monetized on new media platforms, both online and on mobile.

9243   And I would add that there's been some discussion at this hearing about new media cannibalizing traditional broadcasting. In our experience we find that new media actually reinforces our audience -- our traditional broadcasting audience.

9244   When we have an NBA game on and we have a live blog going on at the same time, we're inviting the viewers in to really participate in the game, to comment on the game and it sort of reinforces sort of the simultaneous two-screen experience.

9245   COMMISSIONER KATZ: Do you want to comment at all?

9246   MR. TORTORA: Yes. We can monetize the new media and have monetized the new media experience. Traditional television by comparison though is still by far the larger driver from a revenue standpoint.

9247   COMMISSIONER KATZ: It's interesting, because we have heard over the last several weeks that it is difficult to monetize in certain genres and obviously sports is not one of those genres from what I can see.

9248   And there's two aspects of it. The one aspect is the promotional aspect where you have got the interviews and everything else promoting the games, the other is being able to have multiple games going on at the same time, one on traditional and one on new media.

9249   How do you go about monetizing -- I'm thinking of both of you -- how do you go about putting a price on your programming on a non-traditional media like the Internet when you sit down with somebody?

9250   MR. TORTORA: Well, the approach we're taking is we want the content available on the Internet. Most of the content we have available on NHL.com and on our club sites is free. The reason is, is that we want the consumer to come into the NHL.com house, if you will, and that house can lead to the 30 club websites, it can lead to viewing highlights, it can lead to listening to audio of games for free, it could lead to buying merchandise on our shops.com shops stores, it can lead to playing Fantasy Hockey, it could lead to other websites of other minor leagues.

9251   So, we feel -- our approach is, get the consumer into the store, let them look around and let them activate through what appeals to them.

9252   So, the approach isn't so much to sell the content, there is some content that's behind the pay wall, it's more to get them into the store.

9253   And where we're trying to monetize is the sale of advertising and the digital space.

9254   MR. LEVY: Yeah. I would add our approach is very similar. The content that we offer on our website is almost exclusively free and we monetize that, you know, with support from our advertising partners who are increasingly interested in new media advertising and also in integrated cross platform advertising.

9255   COMMISSIONER KATZ: Mr. Tortora, when you said earlier in your presentation that you've actually completed an agreement with Bell Mobility for distribution of NHL mobile to Bell Mobility subscribers in Canada, was there a value proposition put in there? Did Bell Mobility pay for that right?

9256   MR. TORTORA: Yes.

9257   COMMISSIONER KATZ: And it was done through open negotiation with whomever came to you or whoever you approached?

9258   MR. TORTORA: Correct.

9259   COMMISSIONER KATZ: Mr. Levy, you were saying, I think if I read your submission properly, that you want the Commission to be involved where -- and I'm standing aside from the undo preference issue of self dealing.

9260   MR. LEVY: M'hmm.

9261   COMMISSIONER KATZ: But outside of self dealing, you are saying there is a role for someone like the CRTC to get involved in order to make sure that parties like Mr. Tortora who make a deal --

9262   MR. LEVY: Hmm...

9263   COMMISSIONER KATZ: -- aren't necessarily making a deal in your best interest and we should intervene and be involved in this.

9264   MR. LEVY: I think there's a couple of different layers that need to be addressed there.

9265   I think first I would say at the outset that we have a very good relationship with our carrier partners in Canada, we have mobile video deals with Bell, Rogers and Telus to distribute, you know, our content on a clip space, two or three-minute clips, sometimes even shorter.

9266   I think what we're expressing first and foremost is that on closed devices where someone's making an editorial decision, I think it's appropriate because the relationship is very similar to that of the BDU relationship that there be some shelf space set aside for Canadian voices and Canadian content.

9267   So, you know, in our particular case, you know, we've been able to negotiate that access, but I'm just sort of putting forward a policy principle that says there should be that shelf space, that that's there and that's set aside.

9268   To the broader point about, you know, we're talking about undo preference with respect to, you know, affiliated services, there is also a growing issue and concern about undo preference on both the Internet and the mobile platform with respect to unaffiliated services.

9269   A couple of the examples we outlined in our submission today deal, you know, with broadcasting content, they deal with video content being transmitted over the Internet and they deal with the potential for ISPs or wireless providers to grant preferred access to certain types of broadcasting content and disadvantage other types of broadcasting content that ultimately is in the best interest of the Internet service provider or the wireless service provider.

9270   So, that while I agree with the Chairman that there's going to be a future proceeding with respect to net neutrality and there are a whole host of issues that have to be considered as part of that proceeding, whether it's, you know, telephony and e-mail and sort of non-broadcasting content, you know, there is very much a concern on our part that these guys who control the pipes, you know, have an opportunity to prioritize video content and that ultimately could be, you know, to the substantial detriment of the Canadian broadcasting system.

9271   COMMISSIONER KATZ: But the reality is that notwithstanding the issue of self dealing or undo preference, there is a business transaction taking place and two parties have got a right to enter into whatever negotiation they want, again, subject to the laws of the land and the issue of undo preference.

9272   MR. LEVY: Oh, certainly they do, Mr. Vice-Chairman, and we tried to outline as clearly as we could that we don't have any issue with ISPs or wireless providers entering into those content relationships or owning content providers.

9273   But where our concern is, and it goes to sort of the fundamental core of the Internet, where if I'm a user of the Internet and the whole openness of the Internet, I want to be able to go to the Score.com or to NHL.com and to choose what video I want to access and I want to be able to access that video, you know, at the band width speed that I'm paying for.

9274   And there is ample opportunity for, you know, notwithstanding these commercial relationships, for these ISPs and WSPs to disadvantage certain parties to the benefit of others and, you know, we think that is not good policy.

9275   And I would maybe invite, you know, our counsel Grant Buchanan to comment on this because, as I understand it, I'm not a lawyer, there is some confusion or -- about how -- where this falls, about whether, you know, if that behaviour was taking place is it -- you know, is there a remedy under the Telecom Act today, is there not, or is it -- you know, can it be addressed or does it need to be addressed under the Broadcasting Act.

9276   MR. BUCHANAN: I think that goes a little bit farther than your question, but I think what the fundamental answer to can you split, can two parties enter into a deal where one person's content goes faster, clearer, sharper, better than someone else's, if it doesn't raise any policy issues for you fair enough but if it's Canadian content that gets slowed down or if it's an independent it's not just related parties. It's who it is and what it is exactly that's going on.

9277   The principal that was mentioned earlier is open. Not everybody goes at the same speed and the consumer chooses. What is happening here is the gatekeeper in the middle is starting to choose again. And that is the problem that we have already dealt with the BDUs and you have got a bunch of rules in place. Now, the ISPs are getting involved in a bunch of these articles, all of which by the way have come out since this hearing started; a number of them in the last week while we have been off.

9278   So it's happening very quickly and very recently, that these techniques are coming to the fore and we are getting concerned as we read them that this kind of activity is taking place without the oversight of the regulator.

9279   COMMISSIONER KATZ: But I mean, I can only assume that if Bell Mobility paid an amount of money to the NHL for the distribution of NHL Mobile there is value there, and if there is value there, there is differentiation there. Bell Mobility believes that it can do something sooner, faster, better for its customers than any of the other distributors, wireless distributors; in this case TELUS or Rogers, I guess, or any of the newer players could in the absence of having this relationship. If not, they wouldn't have paid for it.

9280   MR. BUCHANAN: I would use a different example. If they enter into an agreement with the National Football League who has a lot more money than the Canadian Football League to make the National Football League's video go a lot faster, clearer; sharper than the Canadian Football League's even though it's the Canadian subscribers, is that something you have a problem with?

9281   If it is Canadian content that is being squeezed off into the slow lane and into the degraded lane we would have thought that you would have a concern with that. And that's the kind of technique that we are starting to see come here, is somebody is getting marginalized when somebody else gets prioritized. And it may not be a related party. It may just be somebody with a lot of money to throw at the problem.

9282   COMMISSIONER KATZ: Okay. So the example that you are talking about now is one that we talked about earlier this morning, and that is the CNN versus the CBC being prioritized. And now we are talking about a foreign entity versus a Canadian entity.

9283   I was looking at it from a Canadian versus Canadian entity where you have got two Canadian companies that are out there bidding for the right to distribute something and the question is, "Is there a need for a third party, CRTC or someone else to intervene in that if there is no undue preference or non arms-length relationship?"

9284   MR. LEVY: I would add in that context our view that the very fundamental nature of the internet and the growth that has been permitted by the internet has suggested that it's the consumer that should make that decision and not a gatekeeper acting as an intermediary, you know, and purportedly on the consumer's behalf.

9285   COMMISSIONER KATZ: But then you are saying that the NHL should not have the right to enter into a deal with Bell Mobility either.

9286   MR. LEVY: No, not at all. The NHL is free to enter into a deal with Bell Mobility just as we are free to enter into a deal with Bell Mobility so long as, you know, when the NHL video content is being distributed by Bell Mobility, you know, it doesn't force the user who wants to come to my video content to get slowed down. That's all we are saying.

9287   COMMISSIONER KATZ: Okay. That's the Internet neutrality issue and I will stay away from that one before I am kicked under the table.

--- Laughter

9288   COMMISSIONER KATZ: Online streaming. I think, Mr. Tortora, you indicated that there are some games that are streamed as well, concurrent with other games that are going on as well. Do you differentiate when you put a price on these things for the rights between promotional activity being used?

9289   Obviously, anybody who gives -- who you sell the rights to, to promote their service is in both your best interest. However, when you are selling the right to broadcast the game there probably is a bit more advertising opportunity there as well. So how do you monetize that?

9290   Do you sort of look at the potential revenue that might accrue from someone taking advertising over a stream and figuring out what the cost of that would be and what the value is?

9291   MR. TORTORA: Well, we have a couple of things. When we go into the marketplace to sell TV rights to a traditional telecaster we sell those games on an exclusive basis to that telecaster. So a game that TSN will televise on a Wednesday night is exclusive to TSN in the marketplace.

9292   When we sell games online to the game centre live property it is a package of games that is not otherwise available on TV in your marketplace. So by definition the TSN game will not be there. As a result, you maintain the integrity of the TSN package and the value of that advertiser relationship that TSN is engaging into, based upon that exclusivity. In the meantime, the remainder of the games become a package of games that you then sell as a package, not so much as an advertising opportunity but more as a subscription opportunity.

9293   COMMISSIONER KATZ: But do you take a percent of the revenues that are generated by that advertising generated through streaming or do you sell it based on a certain value and let the purchaser monetize it and either win or lose as the case may be, as opposed to partnering with them?

9294   MR. HAWKINS: I think I can answer that. We would approach it both ways or there are three ways, really; a subscription model, an ad model in which we are selling the ads and an ad model in which the partner is selling the ads. And in those last two we might partner on the ad selling venture.

9295   COMMISSIONER KATZ: So it depends on the relationship, it depends on the venue; it depends on what it is as well.

9296   MR. HAWKINS: Correct.

9297   COMMISSIONER KATZ: Okay.

9298   Those are all my questions, Mr. Chairman.

9299   THE CHAIRPERSON: Thank you.

9300   Michel.

9301   COMMISSIONER MORIN: Yes, thank you. Thanks, Mr. President.

9302   You said many times and you have written in your oral presentation, and you have written in bold characters, "Please keep the internet open". I don't know if we will succeed. It's a matter, as you know, of another hearing.

9303   But if it's not possible what can we do to make sure, as you have written that the new media devices provide a minimum amount of Canadian content? Do we have to tag the Canadian content with an ISAN number? Will we have to recognize certain technologies as the FCC in the United States has recognized on the purpose to manage the traffic in the pipes of the internet we have to recognize that those technologies exist?

9304   So I'm talking here about the DPI and flow management. Do you think that if we don't get the ideal world we have to concede that the system keeping the internet open is perhaps not the only solution?

9305   MR. LEVY: With respect to ISAN we are familiar with that. We have reviewed that. You know, we think it's an interesting way to tag and keep track of Canadian content.

9306   In terms of implementing a technological solution like packet inspection and using that to route traffic I'm not a technology expert. So you know we can certainly comment on that in reply if you like.

9307   But I think, you know, to the point about your not being able to keep the internet open, I think that a general policy statement and some undue preference rules would go a very long way to ensuring that this level playing field sort of exists and continues to exist on the internet.

9308   As I have said, we have not had a situation where there has been a great deal of problems so far with traffic being, you know, prioritized or degraded or rerouted. There has been some examples in the United States and obviously that has brought the issue to the forefront, and we are very happy that the Commission is having the proceeding this summer to deal with that.

9309   But we think that, you know, some clear policy direction and some principles and some undue preference regulations to address that, I think, will go a long way to addressing this before it becomes a problem. If not, Commissioner Morin, we can certainly look at down the road technological solutions.

9310   COMMISSIONER MORIN: So if the Canadian content is prioritized it won't be an issue?

9311   MR. LEVY: Well, I think that the idea of prioritizing and degrading certain content, it kind of runs a bit counter to the principle that we are trying to express. We think that Canadian content is very capable of succeeding on its own merits if it's given the chance. What we -- you know if users can access it and they can see it and it's not being shuffled to the bottom of the list or the pipe isn't being squeezed, you know, we think that Canadian content can thrive in new media.

9312   COMMISSIONER MORIN: Thank you very much.

9313   THE CHAIRPERSON: Michel Arpin?

9314   COMMISSIONER ARPIN: Yes, thank you very much, Mr. Chairman.

9315   Mr. Levy, on page 6 you have a long quote, but where is that quote coming?

9316   MR. LEVY: The quote on page 6 comes from -- and we have it here, actually, and we can give copies to the Secretary. It's a website called the Silicone Alley Insider that regularly reports on new media content and devices.

9317   So we have copies of those articles that we can put on the public record.

9318   COMMISSIONER ARPIN: My second question is addressed to Mr. Tortora or Mr Hawkins. We have heard Mr. Levy being concerned about ESPN360 and Zillion TV and we heard you saying don't regulate the internet.

9319   What will prevent the NHL to move from their current platform and go and do business with ESPN360 and Zillion TV if they were to ever come to Canada?

9320   MR. TORTORA: That is a good question. At this point there would be nothing to prevent us from doing a deal with them although we hope if and when that time comes we would have established enough of a track record with our current partners in Canada, both on the TV side and the new media side, to figure out what works and hopefully that relationship with those partners will continue. There may not be a need to go anywhere else.

9321   So in short, it's sort of speculative to say what would happen when they are here other than the fact that we are happy with our current partnerships and we want to see these partnerships that we have now continuing to grow and we want to spend some time in the space with our current partners.

9322   COMMISSIONER ARPIN: But obviously, my question is only if, and I can understand that you are not replying to iffy questions but --

9323   MR. TORTORA: The other point is that the content the NHL.com and our clubs provide is content very valuable and in demand by the Canadian public obviously. 65 percent of our players are Canadian. That's been the case for a very long time. Six of our clubs are in Canada.

9324   So the content we provide is very high quality content that endears to Canadians and that Canadians are interested in. Regardless of what platform we are on, that will continue to be the case.

9325   COMMISSIONER ARPIN: Okay. Mr. Chair, that was my question.

9326   THE CHAIRPERSON: Thank you. My colleague, Len Katz, asked a lot of questions about monetizing. Can we just sort of to complete the picture, you and NHL -- some teams have something which in baseball you call the Red Sox Nation. They have not only have the local markets they have the following throughout the nation. So I presume in hockey it's the same. Presumably the Canadiens are probably the closest equivalent.

9327   Do you monetize them differently than other teams who really are restricted basically to one known market?

9328   MR. TORTORA: No, we don't monetize them differently. In fact, that becomes a club ending initiative on the local level and it becomes more of a national picture or a worldwide picture for that club because the internet is worldwide.

9329   So the Toronto Maple Leafs, for example who are strong advocates of their brand "Leafs Nation", will try to access their fans and try to get content to their fans on a world wide basis and have them join Leafs Nation. The internet allows that to happen because it's a borderless.

9330   From a monetizing standpoint, to the extent the Leafs are putting anything behind a pay wall or selling digital space that could be a way to monetize that, much the same way that we try to monetize our content on our video players in a worldwide basis.

9331   THE CHAIRPERSON: Thank you.

9332   Okay, Len.

9333   COMMISSIONER KATZ: Can I just follow up on that?

9334   The Bell Mobility deal that you have, when you have entered that relationship do you get any preferential treatment at all over any other sites that deal with the NHL from Bell Mobility?

9335   MR. TORTORA: None.

9336   COMMISSIONER KATZ: None at all?

9337   Okay, thank you.

9338   THE CHAIRPERSON: Okay, thank you.

9339   Those are our questions.

9340   MR. TORTORA: Thank you.

9341   THE CHAIRPERSON: I think, Madam Secretary, that's it for today, right?

9342   THE SECRETARY: For today.

9343   THE CHAIRPERSON: What time do we start tomorrow morning?

9344   THE SECRETARY: We will reconvene tomorrow morning at nine a.m.

9345   THE CHAIRPERSON: Okay, thank you.

--- Whereupon the hearing adjourned at 1500, to resume on Tuesday, March 10, 2009 at 0900

   REPORTERS

____________________      ____________________

Johanne Morin         Jean Desaulniers

____________________      ____________________

Sue Villeneuve         Beverley Dillabough

____________________

Monique Mahoney

Date modified:

2009-03-10