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 11, 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   

Carolyn Pinsky   Legal Counsel

HELD AT:

Conference Centre

Outaouais Room

140 Promenade du Portage

Gatineau, Quebec

March 11, 2009

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PRESENTATION BY:

Quebecor Media inc./Groupe TVA inc.   1963 /10830

MTS Allstream Inc.   2035 /11159

Canadian Association of Internet Providers   2085 /11466

RipNET Limited   2094 /11515

Barrett Xplore Inc.   2100 /11552

Bell Alliant Regional Communications,   2120 /11661

Limited Partnership and Bell Canada

   Gatineau, Quebec

--- Upon resuming on Wednesday, March 11, 2009 at 0902

10811   LE PRÉSIDENT : Bonjour. Good morning.

10812   First of all, I would like to introduce a document.

10813   Yesterday, I asked a question to Astral and Rogers about Deep Packet Inspection.

10814   I pointed out that we had information that suggested that Deep Packet Inspection allows you, not only to look at the header, but at the payload.

10815   This is from a report called Heavy Reading, which says, in page 8:

"In sum, DPI equipment inspects the contents of packets traveling across an IP network. It can more or less accurately identify the application or protocol in use by examining the source and destination IP address, the port number, and packet payload. ... The packet payload itself (eg part of a Web page) may be examined to look for strings in the protocol that identify it (eg "ka-zaa", which appears in one of the fields used to handle Kazaa requests)."

10816   THE CHAIRPERSON: That information seems, to me, slightly different than what Rogers told us. But, anyway, Rogers will have an opportunity to reply and so will anybody else.

10817   The report that we commissioned is called Heavy Reading by Graham Finnie.

10818   Madam Secretary, I am putting it on the record so all parties can access it.

10819   Would you give all all panel members, whoever is the techy here in your group, a copy of it please?

--- Pause

10820   THE CHAIRPERSON: I don't expect you to read it right now. I just want you to have that document so you all know.

10821   M. DÉPATIE : (Inaudible.)

10822   THE CHAIRPERSON: Wonderful!

--- Laughter

10823   CONSEILLER ARPIN : Et puis on s'attend que tu nous l'explique.

10824   LE PRÉSIDENT : As you know, measurement is something that we are very, very keen to understand.

10825   So that is why I wanted to put this document on the record.

--- Pause

10826   THE CHAIRPERSON: Okay, Madam Secretary, let us proceed with our first intervener.

--- Pause

10827   LA SECRÉTAIRE : Nous allons débuter notre journée avec la présentation de Quebecor Media Inc. et Groupe TVA Inc.

10828   Monsieur Pierre Karl Péladeau comparaît pour Quebecor/Groupe TVA, et il nous présentera ses collègues.

10829   Vous aurez ensuite 15 minutes pour faire votre présentation.

PRESENTATION

10830   M. PÉLADEAU : Merci, Madame Bouffard.

10831   Monsieur le Président, Messieurs les vice-Présidents, Messieurs et Mesdames les Conseillers, je m'appelle Pierre Karl Péladeau. Je suis président de Quebecor et Quebecor Media.

10832   Je suis accompagné ce matin de mes collègues.

10833   À ma droite : Pierre Dion, président et chef de la direction de TVA; Édouard Trépanier, vice-président, Affaires réglementaires de Quebecor Media.

10834   À ma gauche : Robert Dépatie, président et chef de la direction de Videotron; et Jean Serge Sasseville, président, Affaires corporatives et institutionnelles de Quebecor Media.

10835   Donc, c'est à titre de président d'une société qui est au coeur des bouleversements provoqués par l'émergence des nouveaux médias que je me présente devant vous ce matin.

10836   En effet, comme vous le savez, Quebecor Media, en plus de détenir Vidéotron, est l'un des plus importants fournisseurs d'accès Internet au Canada et également le plus important producteur de contenus canadiens, produits par plus de 260 journaux, un réseau de télévision, près de 50 magazines, 14 maisons d'édition de livres, une douzaine de sites Web regroupés sous la bannière Canoe.ca et une maison de disques.

10837   Nous assistons, depuis plusieurs années, à une révolution sans précédent dans l'univers des médias.

10838   Il s'agit d'une révolution qui a déjà -- et qui continuera -- à bouleverser notre industrie et nos modes de vie.

10839   Ses effets ont été particulièrement percutants chez TVA et dans nos journaux.

10840   Les nouveaux médias ont libéré les citoyens de la contrainte des grilles horaire, en leur permettant d'écouter les émissions de leur choix quand bon leur semble.

10841   Les contenus produits par les salles de rédaction des journaux ont de plus en plus de lecteurs, mais ces contenus sont de plus en plus lus sur Internet ou sur les appareils mobiles et de moins en moins en version papier.

10842   Cette réalité a forcé notre groupe à repenser son modèle d'affaires en profondeur, notamment parce que les frontières entre l'imprimé, la radiodiffusion et les télécommunications disparaissent les unes après les autres.

10843   Il nous faut devenir des concepteurs et des producteurs de contenus destinés à toutes les plateformes, tant les traditionnelles que celles des nouveaux médias.

10844   Il nous faut rejoindre notre public là où il se trouve, en déclinant nos contenus sur plusieurs fenêtres.

10845   Il nous faut réinventer les façons de travailler.

10846   Il est de première importance que les Canadiens puissent continuer à maîtriser et contrôler les nouveaux canaux de distribution.

10847   Ainsi, c'est la meilleure façon de mettre en valeur le contenu canadien et par voie de conséquence une industrie solide de l'information et du divertissement qui, par ailleurs, serait occupée par les entreprises étrangères si nous nous engagions dans une perspective différente.

10848   Les médias canadiens doivent maintenir leur place dans la grande roue de l'information et du divertissement, une roue qui tourne désormais 24 heures par jour.

10849   Le modèle idéal n'est toujours pas encore arrêté -- si tant est qu'il puisse l'être un jour en raison du rythme effréné de l'innovation -- mais nous nous sommes attelés à la tâche de concevoir et développer les médias de l'avenir.

10850   Pour y parvenir, cependant, il est impératif que nous soyons libérés d'un carcan réglementaire qui, à sa face même, est incompatible avec la liberté qui caractérise ce nouvel univers.

10851   C'est pourquoi Quebecor Media soutient devant vous qu'il est essentiel :

10852   1) de maintenir les exemptions de réglementation qui s'appliquent aux nouveaux médias et aux services mobiles;

10853   2) d'accélérer la déréglementation des médias conventionnels;

10854   3) de vous abstenir d'imposer le paiement de redevances pour financer la production de contenus destinés aux nouveaux médias.

10855   Les citoyens canadiens sont suffisamment taxés et il serait indécent, dans le climat de crise économique actuel, d'alourdir encore davantage leur fardeau.

10856   Nous réitérons encore une fois que la Loi sur la radiodiffusion, votée par le Parlement canadien en 1991, soit bien avant l'apparition des nouveaux médias, ne peut constituer une référence crédible pour justifier une quelconque action visant à contrôler le contenu disponible sur Internet.

10857   Au moment de son élaboration dans les années 1980, les rédacteurs de la Loi sur la radiodiffusion ne pouvaient évidemment pas prévoir les transformations radicales que vivrait la société canadienne au cours des deux décennies suivantes avec l'avènement des nouveaux médias.

10858   Cette pièce législative d'envergure comporte plusieurs objectifs, mais la plupart de ceux-ci ne peuvent s'appliquer à l'univers des nouveaux médias.

10859   L'imposition de mesures de contrôle sur Internet n'est, en aucune façon, une solution susceptible de répondre à l'objectif d'assurer une présence plus importante du contenu canadien dans un univers qui met près de deux cents de millions de sites à la disposition de tout citoyen canadien.

10860   Le CRTC ne peut imposer de mesures de contrôle de la radiodiffusion dans les nouveaux médias, car il ne serait pas en mesure d'en sanctionner le non respect.

10861   Comme vous le savez, l'univers des nouveaux médias ne connait pas de frontière géographique.

10862   Le contrôle d'Internet est entre les mains du citoyen et non plus entre celles des entreprises de radiodiffusion ou de quiconque, comme c'est le cas dans l'environnement réglementaire que vous avez été appelé à régir jusqu'à maintenant.

10863   Internet n'est pas un réseau fermé, mais bien une plateforme universelle dont l'accès ne peut être contrôlé sauf à vouloir limiter les libertés individuelles.

10864   Vouloir adopter un concept de réglementation géographiquement limitée, surtout en Amérique du Nord, tend par ailleurs à démontrer l'incapacité de comprendre que l'évolution technologique procure une modification fondamentale de la consommation des médias et des expectatives du citoyen.

10865   Vouloir réglementer les nouveaux médias sur une base géographique est aussi absurde que de penser pouvoir combattre les gaz à effet de serre à l'intérieur de frontières.

10866   De plus, cela se traduirait inévitablement par un sérieux désavantage concurrentiel pour l'économie canadienne et isolerait le Canada en le distinguant de la plupart des pays démocratiques qui se sont abstenus d'imposer un système réglementaire à cet univers.

10867   En fait, le développement des nouveaux médias est si vital pour l'avenir de la société et de l'économie canadiennes que nous croyons que c'est au gouvernement -- et ultimement au Parlement canadien -- qu'il devrait appartenir de développer éventuellement des politiques ou des mécanismes d'intervention appropriés pour relever les défis posés par la révolution numérique en cours.

10868   Nous tenons par ailleurs à vous souligner que les ordonnances d'exemption que le CRTC a émises n'ont pas empêché les entreprises de programmation de radiodiffusion réglementées de remplir les objectifs de la Loi sur la radiodiffusion.

10869   Contrairement à tous ceux qui doutent que la création canadienne puisse trouver sa place dans l'univers des nouveaux médias, nous y voyons plutôt une occasion exceptionnelle de revitalisation et de renouvellement de la création canadienne, une nouvelle vie pour les contenus canadiens avec de multiples possibilités d'exploitation sur les marchés canadiens et extérieurs.

10870   Et c'est dans cette perspective que le Conseil peut jouer un rôle majeur. En accélérant l'assouplissement de la réglementation des médias traditionnels qui favorisera l'exploitation des contenus canadiens pertinents sur Internet et sur toutes les plateformes multimédias.

10871   Le Conseil doit miser sur les forces des médias traditionnels, de la télévision généraliste en particulier, et sur leur capacité à générer des contenus de qualité pour favoriser une présence accrue du contenu canadien sur les plateformes des nouveaux médias.

10872   Depuis les débuts d'Internet au Canada, le gouvernement et le Conseil ont compté presque exclusivement sur les forces du marché et sur le secteur privé pour agir à titre de moteur de développement.

10873   Cette approche de non-intervention et les investissements en capitaux énormes réalisés par des entreprises privées canadiennes ont permis le déploiement d'une infrastructure d'accès à large bande permettant aux citoyens canadiens de bénéficier de services de telecom parmi les meilleurs en Occident.

10874   Internet est un environnement libre et ouvert qui ne présente aucune barrière à l'entrée et dans lequel les consommateurs ne rencontrent aucune limite en termes d'accès à du contenu canadien.

10875   Il n'y a pas de contraintes de capacité qui empêchent les producteurs de contenus nouveaux médias canadiens de rendre leurs contenus disponibles sur le Web.

10876   Pour illustrer la place de la radiodiffusion néo-médiatique et son incidence sur le système canadien de la radiodiffusion, nous vous donnons l'exemple des réalisations de Quebecor Media et son engagement envers le contenu canadien et le développement des meilleures technologies de transmission des nouveaux médias.

10877   Ces réalisations sont amplement décrites dans le mémoire que nous avons déposé en décembre dernier.

10878   Comme vous le savez, la circulation des oeuvres sur Internet est encadrée par la Loi sur le droit d'auteur.

10879   Puisque le Conseil a exempté les nouveaux médias en 1999, ce n'est clairement pas la réglementation qui a ralenti la croissance de la présence de contenus canadiens dans les nouveaux médias.

10880   Ce sont plutôt les difficultés rencontrées lors des négociations avec les détenteurs de droits afin de pouvoir libérer ces droits pour mettre en ligne les contenus.

10881   Nous ne pourrons pas, par des mécanismes réglementaires, régler ce qui est avant tout un problème de gestion de droits et de droits d'auteur, ce qui est la véritable cause d'une présence que certains croient moins forte des contenus canadiens dans les nouveaux médias.

10882   Le 25 février dernier Groupe TVA a annoncé qu'elle avait conclu une entente, une entente collective avec l'Union des artistes. Cette entente représente un jalon important dans l'avenir de la production télévisuelle au Québec puisqu'elle permet pour la première fois de définir précisément les paramètres de la déclinaison des contenus sur l'ensemble des nouvelles fenêtres, que ce soit la diffusion en différé par vidéo sur demande, la web diffusion ou la téléphonie mobile.

10883   L'entente précise non seulement les nouvelles règles d'exploitation des contenus traditionnels, mais vise aussi la production de contenu original destiné spécifiquement aux nouveaux médias. Elle permet de s'adapter à la réalité particulière du marché de l'internet et de la téléphonie mobile où les modèles d'affaires traditionnels ne trouvent plus leur place.

10884   La signature de cette entente démontre sans équivoque que Groupe TVA est en mesure et souhaite conclure des ententes spécifiques avec les différents joueurs de l'industrie afin d'accroître la présence des contenus canadiens dans les nouveaux médias.

10885   Nous n'avons nul besoin pour atteindre cet objectif d'une entente parapluie communément appelée "Terms of trade" avec une association prétendant représenter adéquatement ses partenaires. La négociation dans un contexte de libre marché est une solution gagnante pour toutes les parties.

10886   Dans l'environnement concurrentiel qui est le nôtre, les producteurs sont des partenaires précieux qui contribuent significativement au succès de notre antenne. Le rapport doit être reconnu à sa juste valeur et il est de notre intérêt mutuel que les productions soient correctement financées et les producteurs rémunérés de manière juste et équitable.

10887   Malheureusement, la fragmentation des auditoires et l'érosion des revenus publicitaires de la télévision généraliste au profit de la télévision spécialisée et des autres plate-formes de diffusion s'accentue, de telle sorte que les revenus tirés de l'antenne ne suivent pas.

10888   C'est pourquoi TVA souhaite en contrepartie de sa participation au financement d'une production obtenir les droits de diffusion sur l'ensemble des plate-formes de diffusion pour l'oeuvre elle-même ou pour toute forme d'adaptation qui pourrait être réalisée.

10889   C'est la seule façon d'assurer l'avenir de la production canadienne tant à l'antenne conventionnelle que les nouveaux médias, le financement de la perspective de rentabilité n'étant maintenant disponible que s'il vise l'ensemble des plate-formes.

10890   Nos partenaires producteurs sont conscients des immenses défis à relever et, comme nous, ils sont à la recherche des solutions qui nous permettront de continuer à contribuer significativement au développement des meilleurs concepts et des meilleures productions originales.

10891   Les négociations que TVA a entreprises avec les producteurs pour les déclinaisons de la programmation dans les nouveaux médias se déroulent très bien. Nous avons déjà conclu des ententes avec plusieurs d'entre eux et nous ne prévoyons aucune difficulté majeure pour les dossiers encore en discussion.

10892   TVA accorde une grande importante à la déclinaison de sa programmation dans les nouveaux médias. Les émissions de nouvelles ou d'affaires publiques, les émissions de services, les variétés, les dramatiques, les quiz et les jeux sont disponibles en diffusion simultanée ainsi qu'en clip sur demande, sur canoe.tv et sur TVA.canoe.ca.

10893   Plutôt que de chercher à imposer des règles supplémentaires, le Conseil devrait, au contraire, s'interroger sur les obligations faites aux diffuseurs de recourir à la production indépendante et accepter de considérer les frais de licence payés par les diffuseurs comme étant de réels investissements permettant d'exploiter sur l'ensemble des plate-formes de diffusion les droits des programmes dont ils font un succès.

10894   Le Conseil devrait revoir toute son approche qui vise à intervenir par quota, par choix de programmes dits prioritaires et qui orientent les investissements que consentent les diffuseurs.

10895   En mode survie, les diffuseurs canadiens ont tout intérêt à investir dans le succès de leurs programmes et n'ont aucun intérêt à poursuivre une pratique qui fait en sorte que les investissements dans ce contenu le sont en pure perte et avec pour premier objectif de remplir des obligations réglementaires.

10896   Ce n'est pas la première fois que nous tenons un tel discours devant vous. Nous croyons, cependant, qu'il est plus que jamais nécessaire de le répéter.

10897   Par ailleurs, Québecor Média s'inscrit en faux contre tout projet visant à imposer une taxe sur les revenus des fournisseurs d'accès internet et de service de téléphonie sans fil. L'imposition d'une telle taxe aurait pour effet de forcer les fournisseurs d'accès à détourner une partie de leurs revenus pour participer au financement de contenus qui n'ont pour mission ni de produire ni de diffuser.

10898   Une telle mesure diminuerait leurs capacités de maintenir des réseaux de la plus haute qualité disponible pour les citoyens.

10899   Nous sommes d'avais qu'une telle initiative serait improductive et, de toute façon, illégale. Sur la dimension juridique, nous vous référons à l'opinion de Fasken Martineau qui accompagnait le Mémoire de l'Alliance canadienne des fournisseurs d'accès internet déposé le 11 juillet 2008 et que nous avions co-signé.

10900   Si le Conseil impose aux fournisseurs d'accès internet ou aux entreprises de téléphonie sans fil l'obligation de verser une partie de leurs revenus pour financer la production de contenus destinés aux nouveaux médias, ce sont les citoyens qui en paieront le prix.

10901   Les consommateurs contribuent déjà au financement de la production de contenus canadiens via les factures qu'ils doivent payer pour les services de câblodistribution et de distribution de programmation par satellite. Si le paiement d'une nouvelle taxe est imposé par le Conseil le montant des factures d'accès internet et de téléphonie sans fil pourraient augmenter à un niveau qui ferait en sorte que les Canadiens paieront plus cher pour ces services que les citoyens de la plupart des autres pays et cela aura indéniablement un impact sur les services offerts.

10902   Une telle taxe aurait des effets pervers sur l'industrie de la créativité de plus. Pour les utilisateurs et les créateurs, pour que ceux-ci s'approprient les technologies numériques dans leur vie quotidienne, plus la fiabilité et la vitesse des réseaux prennent de l'importance et deviennent une arme concurrentielle pour les fournisseurs d'accès internet et le service de téléphone sans fil.

10903   De nouveaux consommateurs ainsi que de nouvelles habitudes de création émergent présentement, comme le faisait remarquer le ministre du Patrimoine canadien lundi lors de l'annonce du Fonds des médias du Canada.

10904   Les utilisateurs et les industries de la création sont en train d'intégrer dans leur quotidien les technologies mises à leur disposition par les fournisseurs d'accès internet. Ils saisissent de plus en plus rapidement, deviennent de plus en plus ingénieux lorsqu'il s'agit d'adopter et d'utiliser ces nouvelles technologies. Ils sont aussi de plus en plus exigeants quant aux services et produits qu'ils utilisent. En fait, ils prennent le contrôle.

10905   Dans un tel contexte, si le Conseil s'avisait d'imposer des mesures qui ont pour effet de limiter le choix des consommateurs, de stopper l'innovation ou d'accroître artificiellement le coût des services sans valeur ajoutée, ce sont les citoyens et les créateurs qui en souffriraient en premier lieu.

10906   Les jeunes Canadiens qui ont grandi dans cette ère numérique et se sont abreuvés à ces nouvelles technologies en sont déjà à chercher ailleurs et ils continueront de le faire si le Canada persiste à se cantonner dans un système protectionniste, fermé et sur la défensive qui est en train de faire la preuve de son échec, un système mis en place dans un monde qui n'existe plus.

10907   Les créateurs canadiens et les entreprises culturelles doivent capitaliser sur leurs capacités de concurrencer et bâtir leur succès sur la créativité plutôt que de chercher à survivre dans un système de règles qui n'ont plus leur raison d'être.

10908   C'est en mars 1996 que Vidéotron a commencé à offrir à ses clients l'accès à internet haute vitesse. Nous avons été l'une des premières entreprises à le faire au Canada. Depuis, nous avons investi plus de 1.9 milliard de dollars dans nos infrastructures, ce qui fait de Vidéotron l'un des plus importants investisseurs au Québec.

10909   Grâce à ces investissements considérables, nous avons réussi à offrir le service le plus rapide au Canada au meilleur prix. En juillet 2008, Vidéotron a remporté 17 licences d'exploitation en vue de l'offre de service sans fil évolué. Avec la construction d'un réseau de télécommunications sans fil de troisième génération, les investissements consentis par Vidéotron se chiffreront entre 800 et un milliard de dollars.

10910   Ils permettront aux Canadiens de bénéficier d'une véritable concurrence, de services et de produits à des prix raisonnables, comparables à ce qui est déjà offert dans les pays les plus avancés dans ce domaine.

10911   Nous sommes fiers de contribuer à l'économie canadienne conformément aux objectifs de la Loi sur les télécommunications et de pouvoir offrir jour après jour un nombre croissant de Canadiens le meilleur service de télécommunications qu'ils ont connu depuis la fin de l'ère des monopoles. Il ne faudrait surtout pas que l'imposition d'une taxe sur nos revenus limite notre capacité à remplir notre mission au bénéfice de l'ensemble de nos clients.

10912   En conclusion, mesdames et messieurs, nous vous demandons de maintenir les ordonnances d'exemption relatives aux nouveaux médias et d'accélérer la déréglementation des médias traditionnels en vue plus particulièrement de libérer les télévisions généralistes d'une réglementation qui met en danger leur survie et restreint leur capacité à exploiter sur internet les programmes qu'elles financent.

10913   Nous vous remercions pour votre attention et nous sommes, évidemment, prêts à répondre à vos questions.

10914   LE PRÉSIDENT: Merci pour votre soumission, mais, premièrement, j'aimerais vous rassurer que nous ne sommes pas dans la voie que vous constatez sur la page 4, c'est-à-dire adopter un concept de réglementation géographique limitée sur l'Amérique du nord. Nous sommes tout à fait d'accord avec vous que ce serait fou d'essayer quelque chose comme ça.

10915   Mais vous savez que, nous, c'est notre obligation de réglementer selon la Loi sur la radiodiffusion et un des concepts principaux qu'il y a une prépondérance de radiodiffusion de contenu canadien sur les ondes. Et on a maintenant beaucoup de radiodiffusion est distribuée par les nouveaux médias et il y a beaucoup de contenu canadien sur les nouveaux médias.

10916   Parlons d'internet, pour être très précis. Mais comment mesurer, comment est-ce que, et c'est la question, personne ne sait qu'est la qualité ni sur internet ni qu'est-ce qui est la partie canadienne.

10917   Vous avez posé ça comme une question principale et j'ai interrogé hier Astral et Rogers; les deux m'ont dit que, franchement, ce n'est pas possible, on n'a pas les moyens que la technologie et le Deep Packet Inspection, et caetera, ne marchent pas et ce n'est pas... donne la permission d'examiner les pilotes seulement, l'adresse en principe et le message et, deuxièmement, même si on peut identifier les pilotes, on ne sait pas qu'est-ce qui est canadien et qu'est-ce qui n'est pas et utiliser le high sense, ce n'est pas une solution.

10918   Quelle est votre -- premièrement, quel est votre avis? Est-ce que vous êtes d'accord avec eux et, sinon, j'aimerais savoir pourquoi et est-ce qu'il y a d'autres solutions, pour avoir au moins une idée de la quantité qui est là, pas pour imposer des quotas ou quelque chose, mais seulement pour savoir qu'est-ce qui vraiment se passe dans le domaine d'internet?

10919   M. PÉLADEAU: Monsieur le président, malheureusement, je ne suis pas ingénieur et lorsque je les écoute, j'ai beaucoup de difficulté à les comprendre.

10920   LE PRÉSIDENT: Mais vous avez des experts entre vous?

10921   M. PÉLADEAU: Oui, oui, tout à fait, nous avons des experts. Peut-être que Robert va pouvoir intervenir. Et si on demande à des ingénieurs de travailler là-dessus, ils pourraient certainement trouver une solution. Si on a envoyé des hommes sur la lune c'est donc que, éventuellement, il est possible aussi de le déterminer.

10922   Mais est-ce que ça va être utile parce qu'il va peut-être y avoir des centaines de millions, ça va créer une armée encore plus importante de bureaucrates pour déterminer, est-ce que ce site est canadien. Et encore et éventuellement, si le site était canadien, il pourrait aussi être hébergé à l'extérieur du Canada.

10923   Donc, j'ai essayé de mettre en lumière le fait et tout le monde le reconnaît qu'il n'existe pas de frontière géographique en matière d'accès internet ou de ce qui circule sur l'internet et c'est probablement donc la problématique à laquelle on fait face, la plus importante.

10924   LE PRÉSIDENT: Mais pour deux semaines nous avons eu des présentations qui disent qu'il n'y a pas assez de contenu canadien sur... Vous devez imposer une taxe pour fermenter, pour subventionner le contenu canadien, et caetera.

10925   Je n'ai aucune idée si c'est justifié ou non et si, comme vous, les autres radios disent il y a assez et ce n'est pas un problème la créativité et l'innovation des Canadiens. Est-ce assez pour nous représenter sur l'internet?

10926   J'aimerais avoir des preuves de ça. Ça peut être la réponse et nous sommes... nous approchons tout ça avec une tête ouverte, mais j'ai besoin de quelques faits.

10927   M. PÉLADEAU: Notre opinion là-dessus, monsieur le président, et puis on ne doit pas nécessairement être étonné des remarques qui ont été présentées devant vous par les organisations auxquelles vous faisiez référence et je pense, pour simplifier, mais en même temps ce n'est pas simplifier à excès.

10928   Au contraire, je pense que c'est une simplification tout à fait efficace et utile, c'est qu'on demande de taxer les services d'accès internet pour que les organisations qui sont celles qui représentent des artistes ou des créateurs puissent s'abreuver à une espèce de pool qui, malheureusement, on l'a constaté dans le passé, n'a pas nécessairement sorti les talents et la création adéquate.

10929   Alors, on parle de déréglementation ou des réglementations, mais en fait il s'agit de taxation et, encore une fois, j'aimerais insister sur le fait que le pouvoir de taxation appartient au gouvernement et au Parlement et si les représentants du peuple veulent que cette situation existe, bien que le Législateur puisse et doive le faire.

10930   LE PRÉSIDENT: O.k. Avant qu'on parle de taxation, que ce n'est pas quelque chose que nous avons levé; c'était les personnes devant nous. J'aimerais savoir l'idée de vos experts sur les mesures.

10931   M. DÉPATIE: Merci, Pierre Karl. Monsieur le président, écoutez, Deep Packet Inspection, on connaît, ça fait plusieurs années que ça existe. D'après nos experts, évidemment, et je ne suis pas moi non plus un ingénieur, mais ça fait sept ans que je travaille chez Vidéotron, le Deep Packet Inspection permet de mesurer le trafic par protocole, ce qui veut dire que le trafic, tel que bit toren, le peer-to-peer, le trafic tel que le courriel, le HTTP et autres, ne nous permet pas aujourd'hui -- et d'après, encore une fois, les recherches que nous avons fait -- de mesurer par contenu ou quelle sorte de contenu qui est générée.

10932   Donc, on peut savoir le trafic, encore une fois, par protocole, mais non par contenu. Et là, après même analyser ISAN ici qui dit que ça peut se faire, mais nos experts disent le contraire, que c'est impossible parce que ça ne paraît pas dans le header.

10933   Donc, pour nous... évidemment Pierre Karl a dit que ce serait peut-être possible, mais à quel prix, mais pour le moment nos experts sont d'accord pour dire que c'est impossible de le faire pour le moment.

10934   LE PRÉSIDENT: O.k. Vous aurez l'occasion de nous donner plus d'information en forme écrite après l'audience.

10935   M. DÉPATIE: Oui.

10936   LE PRÉSIDENT: Et j'aimerais avoir l'idée spécifique de vos experts.

10937   M. DÉPATIE: D'accord.

10938   LE PRÉSIDENT: Et si vous croyez qu'on devrait former quelque chose comme un groupe de travail sur la question des mesures, comme nous avons fait pour beaucoup d'experts des problèmes, un groupe d'industries sous les auspices du CRTC pour étudier cette question des mesures?

10939   M. DÉPATIE: Bien, la question devient: quel serait l'objectif? Pour nous, on est d'accord pour des groupes de discussion -- en tout cas, Pierre Karl, je ne sais pas si, toi, tu l'es -- mais si l'objectif est de permettre de mieux connaître la provenance et de savoir si c'est du contenu canadien et non dans le but de taxer, c'est une autre histoire. Mais si c'est dans le but de taxer...

10940   LE PRÉSIDENT: Oui. Mais je n'ai pas parlé taxe. Je parle des connaissances.

10941   M. DÉPATIE: Bien, écoutez, ça ne ferait pas de mal d'essayer de comprendre s'il y a une telle énergie qui existe à mon avis, là, pour démontrer l'utilisation du contenu canadien, mais encore une fois faut-il que ça soit productif et...

10942   M. PÉLADEAU: Et en même temps aussi, monsieur le président, on pourrait avoir un site étranger qui diffuse du contenu canadien comme on pourrait avoir un site hébergé au Canada qui pourrait être qualifié de site canadien, qui pourrait diffuser du contenu étranger.

10943   LE PRÉSIDENT: Ce sont toutes les questions que l'on doit étudier.

10944   M. PÉLADEAU: Oui.

10945   LE PRÉSIDENT: O.k., une deuxième question. Hier, Rogers nous a présenté une nouvelle idée et c'est vraiment... monsieur Shaw l'a appelée hier « Jardin fermé » et ce n'était pas du tout ça. Il n'a pas compris et je crois que l'idée c'est de créer quelque chose.

10946   Selon moi, c'est le Câble and PVR que tous les contenus que Rogers a sur son réseau comme EDR, on peut l'obtenir aussi si on souscrit à Rogers et voir tous les épisodes sur le VEP et les derniers épisodes aussi.

10947   Si, disons tout le contenu que Rogers diffuse est disponible sur le VEP aussi ou même toutes les émissions du passé. Ça veut dire que le consommateur ne doit pas relever pour le futur s'il manque un épisode ou un film, il peut le voir sur le VEP sans frais.

10948   Est-ce que vous croyez que c'est une solution? Est-ce que vous avez des idées de poursuivre quelque chose comme ça vous-même?

10949   M. PÉLADEAU: Monsieur le président, nous, comme organisation, nous avons toujours mis en valeur et c'est notre priorité, le client. Et c'est dans cet esprit que... et on l'a indiqué dans notre présentation, mais on investit des sommes considérables pour pouvoir procurer la meilleure infrastructure de distribution. Vous avez parlé donc de PVR, de vidéo sur demande et, également, d'internet.

10950   Donc, aujourd'hui, les clients de Vidéotron bénéficient de cette meilleure infrastructure et notre travail est de toujours leur procurer de la valeur ajoutée et c'est dans cet esprit que nous avons engagé l'entreprise depuis déjà plusieurs années pour procurer en plus du meilleur service, les meilleurs contenus.

10951   Et à cet égard, comme agrégateur, comme antérieurement, effectivement, la câblodistribution avait son statut ou son attribut principal, nous avons travaillé et nous travaillons systématiquement à améliorer l'utilisation et le service que nous procurons à notre client.

10952   Et dans cet esprit-là, nous avons un projet sur lequel nous tablons depuis déjà plusieurs années, de créer cet agrégateur un peu auquel faisait référence monsieur Rogers.

10953   Et j'aimerais en revenir également à ma présentation. Ce n'est pas la taxation, ce n'est pas le contenu canadien, c'est la gestion des droits qui est au coeur de notre capacité de pouvoir offrir un tel service.

10954   Peut-être, Robert, tu as des commentaires à faire là-dessus?

10955   M. DÉPATIE: Oui. On a un projet qu'on travaille depuis, je dirais, oui, tu as raison, quelques années et on le nomme à l'interne le « Projet de télésino » qui est un système de distribution. En fait, c'est le câblodistributeur qui parle, là, et non le fournisseur internet d'accès.

10956   Nous, comme câblodistributeur on croit fondamentalement, un peu comme Rogers l'a présenté hier, que nous devrions offrir à notre clientèle accès à leur chaîne qu'ils ont achetée ou louée sur le système numérique. Et, donc, on va développer une plate-forme, mais pour des raisons de concurrence, je ne vais pas tout dévoiler la stratégie, mais c'est évident que nos clients vont avoir accès à la fois comme ils l'ont eu sur la vidéo sur demande à beaucoup de contenu gratuit en reprise.

10957   On va faire la même chose soit en reprise par le biais d'une VSD ou vidéo sur demande sur le net, mais aussi en continu sur l'internet aussi, s'ils sont abonnés aux chaînes, à la numérique. Donc, un peu le concept de Rogers, la même chose qu'on va offrir à notre clientèle dans un avenir très rapproché.

10958   M. PÉLADEAU: Et comme vous le savez, et Pierre est là pour en témoigner, nous croyons chez Québecor Média et chez TVA fortement au contenu canadien et le fait de pouvoir procurer un canal de distribution supplémentaire va probablement -- en tout cas, c'est notre conviction la plus profonde -- justement améliorer la capacité de pouvoir offrir du contenu canadien aux citoyens.

10959   LE PRÉSIDENT: Merci. Michel tu as des questions?

10960   CONSEILLER ARPIN: Merci, monsieur le président.

10961   Dans la même foulée, là, vous parlez d'un nouveau service, mais vous avez aussi canoe.tv qui, jusqu'à un certain point, découle du même concept, si je comprends bien, et votre mémoire et votre présentation orale de ce matin, sauf qu'il est plus large parce qu'il comprend des émissions de toutes natures et puis il est ouvert. Il n'est pas.... je pourrais être un abonné de COGEGO à Trois-Rivières puis aller consulter canoe.tv.

10962   M. PÉLADEAU: C'est exact et je dirais même que c'est effectivement la nature intrinsèque de l'internet, tel que je l'ai dit.

10963   Ceci étant, oui, c'est une expérience parce qu'il n'y a pas de vérité absolue et déterminée et finale en matière d'internet. Donc, nous avons testé... nous avons mis en ligne et en service un service de cette nature et on regarde et on expérimente sur les avenues et les perspectives qu'un tel service pourrait procurer.

10964   En même temps aussi, ça soulève indéniablement la problématique du financement, comment allons-nous être en mesure d'assurer la pérennité d'un tel service? Est-ce que le marché de la publicité qui est, essentiellement, encore une fois la source principale et presque exclusive du financement d'une telle infrastructure sera suffisante pour le faire dans l'avenir, c'est encore là le sujet d'une expérimentation actuellement.

10965   CONSEILLER ARPIN: Mais au niveau de la publicité sur l'internet, on sait que les données financières les plus récentes montrent que la publicité pure et dure là -- je ne parle pas des engins de recherche et tout, mais des annonces classées et de la publicité que c'était marginal -- sauf qu'on a entendu dans le courant de la semaine les représentants de l'Association canadienne des annonceurs nous dire en être venus à des ententes avec les différents... avec l'UDA, notamment, et la Guilde des musiciens pour la diffusion de messages commerciaux.

10966   Comme je vous entends aussi dire que vous avez des ententes maintenant avec l'UDA aux mêmes fins. Je présume que la Guilde des musiciens doit être en discussion également parce que, autrement, si vous ne pouvez pas passer de la musique, vous demeurez dans un carcan.

10967   Mais est-ce que ces ouvertures-là, pensez-vous que ça va faciliter la venue de la publicité puis permettre davantage d'habilité... en tout cas, d'accroître votre habilité de financement de ces types de services-là ou... Et, ça, est-ce que ça va se faire aux dépens des médias traditionnels?

10968   Comme vous êtes aussi un opérateur de média traditionnel, vous devez être... c'est une question qui doit vous hanter par moment?

10969   M. PÉLADEAU: Nous hanter, non, mais nous interpeller, indéniablement, puisque c'est notre métier de nous assurer que nous pourrons, et à cet égard je pense que nous sommes bien positionnés, donc de maintenir une force sur l'ensemble des médias, je vous ai dit un petit peu plus tôt que nous avions l'obligation de remodeler nos médias traditionnels et nous y sommes attelés depuis déjà plusieurs mois, même plusieurs années et nous allons continuer.

10970   Et nous continuons aussi pour assurer une pérennité dans la mesure où ces médias traditionnels nous procurent la possibilité de pouvoir créer du contenu.

10971   Et encore une fois, je tiens à le répéter parce que c'est extrêmement important, nous croyons au contenu canadien et c'est le contenu canadien qui va faire en sorte, et on l'a prouvé à des nombreuses reprises, créer un auditoire et si l'auditoire est présent, bien, c'est sûr que les sources de revenus, notamment, par le biais de la publicité vont également être présents.

10972   Donc, à cet égard, c'est un pari, c'est un challenge aussi, mais l'expérience nous a prouvé dans le passé que de parier dans cette perspective, c'est un pari qui a de fortes chances d'être réussi.

10973   As-tu quelque chose à ajouter, Pierre?

10974   M. DION: Oui. Peut-être, pour ajouter, que ça soit au niveau des contenus, de la création, production et diffusion des contenus ou au niveau publicitaire, je pense que ce qu'il faut vraiment réaliser maintenant, c'est tout le modèle d'affaire des conventionnels qui doit et qui, dans notre cas, est en train de changer depuis les trois dernières années, c'est-à-dire qu'on doit planifier en amont lorsqu'on crée un contenu où on fait de la vente publicitaire, l'ensemble des plate-formes de diffusion.

10975   Donc, c'est difficile aujourd'hui de dire quels sont les revenus d'une plate-forme au niveau des contenus ou de la publicité. C'est plutôt l'assemblage qu'on offre en exploitation de contenu et l'assemblage qu'on offre aux annonceurs, qui fait que notre modèle est en train de se redéfinir et même est indispensable.

10976   On ne peut plus déclencher une production ou une création de contenu aujourd'hui sans avoir accès à l'ensemble des plate-formes parce qu'on doit suivre le consommateur et on ne peut plus non plus offrir aux annonceurs aujourd'hui seulement une plate-forme parce que lui aussi il suit le consommateur. Donc, on doit lui offrir un buffet.

10977   Donc, oui, l'internet, ce n'est pas toujours facile de vendre aux annonceurs, mais lorsque... pour de la publicité pure et dure, comme vous dites, mais lorsque c'est fait dans un assemblage, c'est là que, nous, on pense que la perspective, c'est là qu'elle s'en va.

10978   M. PÉLADEAU: Et comme vous le savez, monsieur le vice-président, dans l'internet, vous l'avez souligné, nous avons comme concurrence une concurrence mondiale. Donc, que ce soit les U-Tube, les Google, ils sont présents sur le net et, donc, nécessairement en concurrence, également, pour le partage des sources de revenus. Et à cet égard, je pense que la meilleure façon d'assurer la pérennité du contenu canadien, c'est justement d'accélérer et de favoriser la migration du contenu canadien sur les plate-formes traditionnelles vers ces nouvelles plate-formes que la technologie a rendues disponibles aux citoyens.

10979   M. DION: Peut-être juste pour finaliser, oui, effectivement, les ententes récentes avec l'UDA et aussi nos ententes, ce que j'appelle one on one avec les producteurs indépendants vont favoriser au cours des prochaines semaines, parce que l'entente UDA est toute récente, vont favoriser les contenus canadiens.

10980   Et nous, bien, 90 pour cent de notre grille de programmation est en contenu canadien, donc on va, naturellement, je pense qu'on va avoir un volume assez important de contenu canadien et les ententes avec les annonceurs aussi va permettre donc l'intégration de tout ça très bientôt.

10981   CONSEILLER ARPIN: Et là-dessus, on ne vous réprimandera pas.

10982   Cependant, ce que vous avez dit un peu plus tôt, monsieur Dion, vient corroborer un peu ce que plusieurs groupes de représentants des créateurs nous ont dit au début de ce processus que, finalement, il se créait des entreprises parallèles et des services parallèles, qui étaient non réglementés et qui pourraient éventuellement changer la nature et changer la vocation du système.

10983   Et on nous recommandait fortement de réglementer les services internet, pas le fournisseur du service internet, mais les entreprises canadiennes qui offrent des contenus internet et de radiodiffusion et que, donc, par extension, ils devraient détenir des licences au même titre que vos stations de télévision, vos services spécialisés, les stations de radio qui offrent des services internet.

10984   Je ne sais pas si vous avez pensé à cette question-là. Ça a été dit par plusieurs associations dans les premiers jours des audiences et quelles sont vos observations sur cette avenue-là.

10985   Est-ce que c'est une avenue que le Conseil devrait poursuivre?

10986   M. PÉLADEAU: Monsieur le vice-président, vous avez certainement une opinion à cet égard, mais encore une fois, je pense que c'est important de...

10987   CONSEILLER ARPIN: Non. On sollicite des opinions, on s'en fera une après.

10988   M. PÉLADEAU: D'accord. Mais je pense qu'il faut encore une fois insister sur le fait que l'univers dans lequel la réflexion démarre lorsqu'on a un raisonnement de cette nature n'existe plus et il n'y a plus de frontière. La réglementation n'est plus possible.

10989   Et si vous voulez encadrer quelque chose qui n'est pas « encadrable », bien le consommateur ou le citoyen, ça ne lui plaira pas de regarder du contenu canadien et il va aller ailleurs et le ailleurs est disponible, ce qui n'était pas le cas antérieurement parce que nous avions un système fermé. Aujourd'hui, ce système est ouvert et il est ouvert dans une perspective mondiale et globale.

10990   Donc, vouloir limiter l'accès à des sites étrangers en faisant en sorte de dire, bien, on va réglementer les Canadiens, vous ne forcerez pas l'audience ou l'auditoire à y aller. Il n'y a personne qui va être en mesure de pouvoir dire, bien, là, vous allez être obligés d'aller là et non pas là-bas.

10991   C'est ça l'internet, c'est l'affranchissement de... la capacité de réglementer les habitudes et les patterns de consommation.

10992   CONSEILLER ARPIN: Et ceux qui argumentaient devant le Conseil faisaient aussi le lien suivant par après. C'est que le financement public, quel qu'il soit par ce que, vous, vous appelez une taxe sur les fournisseurs internet, d'autres qui s'appellent une contribution ou au système contributif actuel qui sont les fonds privés, les fonds canadiens sur... le Fonds canadien sur les médias que le ministre a annoncé au début de la semaine, que pour pouvoir accès à ces fonds-là, seulement ceux qui seraient titulaires d'une licence pourraient avoir accès à ce financement-là.

10993   M. PÉLADEAU: Vous avez raison, ça complique encore davantage, mais, nous, on ne veut pas faire trop de sémantique. Contribution, il s'agit d'une taxe et puis il faut appeler un chat un chat.

10994   CONSEILLER ARPIN: Enfin, cette question-là, je n'ai pas l'intention d'en re-discuter parce que votre opinion est claire et est la même que celle qu'on a entendue depuis quelques jours, donc... et à partir des mêmes opinions juridiques de toute façon. Donc, on n'est pas... pour l'instant, on est...

10995   J'aimerais parler quand même un instant de la section des firms of trade parce que vous en avez parlé ce matin en disant, bon... Mais vous avez notamment dit à la page 6 de votre présentation orale : « C'est pourquoi TVA souhaite obtenir les droits de diffusion sur l'ensemble des plate-formes de diffusion pour l'oeuvre elle-même et pour toutes les formes d'adaptation qui pourraient être réalisées. »

10996   Les associations de... je pense, notamment, au CFPTA et à d'autres qui sont venus nous dire... mais qui veulent tous avoir une clause qui s'appelle "Use or lose", parce que, effectivement, vous pouvez faire produire des choses, mais finalement, pour toutes sortes de motifs vous ne décidez pas de l'utiliser et, eux, croient être en mesure de l'utiliser de façon différente. Et comme modèle d'entente générale, là, ils souhaitent avoir cette disponibilité-là.

10997   Est-ce que c'est quelque chose à laquelle vous avez déjà commencé à négocier... dans vos négociations avec les producteurs indépendants, est-ce que c'est des choses qui sont soulevées et est-ce que c'est des choses pour lesquelles vous avez des objections?

10998   M. PÉLADEAU: Je vais demander, monsieur le vice-président, à Pierre Dion de répondre à votre question.

10999   M. DION: Je vais peut-être répondre de façon un peu plus générale que votre question... puis qui touche peut-être en partie le commentaire que vous faisiez précédemment.

11000   TVA a une licence de radiodiffusion. Au cours des cinq, six dernières années, on a vu différentes sources venir nous fragmenter. Avant, on avait besoin d'une fenêtre de diffusion pour rejoindre 1.5 deux millions de personnes. Aujourd'hui, on a besoin de 3, 4, 5 fenêtres de diffusion pour rejoindre souvent même pas 1.5 deux millions de personnes, là. Donc, la tarte ne grossit pas; des fois même elle rapetisse.

11001   Ceci dit, les producteurs, au cours des derniers mois, ont compris que pour être capable de faire de la production, il y avait besoin d'un diffuseur qui pouvait au départ en déclencher une production et ce diffuseur-là a besoin d'exploiter son contenu sur plus qu'une fenêtre de diffusion.

11002   Donc, les ententes qu'on fait à l'heure actuelle avec les producteurs indépendants, c'est du cas par cas, a dépend du type de production, ça dépend sur quelle fenêtre qu'on pense de pouvoir l'exploiter, ça dépend du risque que le producteur est prêt à prendre dans cette production-là et, selon toutes ces variables-là, on réussit très bien depuis la dernière année à s'entendre avec les producteurs qui sont heureux de déclencher eux aussi cette production-là et qui comprennent que le diffuseur a besoin maintenant d'exploiter les fenêtres qui sont venues le fragmenter.

11003   Donc, c'est tout simplement... pour nous, c'est d'exploiter une licence de radiodiffusion sur plusieurs fenêtres et d'avoir un producteur qui comprend qu'on a besoin de ces fenêtres-là maintenant pour déclencher une production et c'est le win-win qui se passe. Donc, on ne voit pas de problème dans les prochains mois à s'entendre et plus spécifiquement sur votre point, ça va dépendre.

11004   On fait toutes sortes de tests à l'heure actuelle, à savoir : est-ce qu'on prend cette première fenêtre-là et, ensuite, c'est la deuxième fenêtre et, après, la troisième fenêtre? Est-ce que ça va se faire sur trois mois, six mois, un an? Est-ce que toutes les fenêtres vont être exploitées en même temps?

11005   Mais c'est clair que l'intention de départ du diffuseur, de plus en plus, c'est d'essayer de maximiser l'ensemble des fenêtres et non pas de laisser des contenus sur la tablette qui ne seraient pas exploités sur des fenêtres qui pourraient être profitable ou qui pourraient aller rejoindre le consommateur où lui va vouloir aller.

11006   Donc, on n'aurait pas d'intérêt à laisser sur la tablette des contenus. On veut, au départ, exploiter le maximum de fenêtres possible.

11007   CONSEILLER ARPIN: Évidemment, je comprends très bien que le contexte particulier dans lequel est opéré TVA qui avec ses succès en matière de programmation canadienne, mais... et que certaines préoccupations qui nous sont présentées ne sont pas nécessairement des préoccupations dans une perspective de politique nationale, ne sont pas nécessairement des questions qui ont une application immédiate ou même qui soient une réelle préoccupation par rapport à TVA qui, lui, est un grand exploitant de contenu canadien, donc...

11008   Mais il n'en demeure pas moins quand même que quand je regarde dans l'absolu puis je regarde, par exemple, dans votre mémoire principal, je pense au paragraphe 72 et... particulièrement le paragraphe 72, là, est-ce que ce n'est pas même de votre part un argument qui dirait que... qui m'amène à me poser la question : comment est-ce que le CRTC peut arriver à stimuler la présence de programme canadien sur l'internet s'il ne dispose d'aucun outil réglementaire?

11009   Si on laisse ça aux seules forces du marché, et vous-même vous dites qu'on doit... le Conseil doit favoriser la diffusion du contenu canadien, mais si je n'ai aucun outil réglementaire pour le faire, je m'y prends comment? Je fais des discours?

11010   M. PÉLADEAU: Je pense que mon collègue Pierre Dion veut intervenir, mais en un mot comme en deux, si je peux dire, dérèglementez et faites confiance aux forces du marché puisque le citoyen est le consommateur requérant du côté canadien. En ce qui nous concerne, nous allons leur en procurer et nous allons continuer à mettre en valeur le talent des créateurs et des techniciens de cette industrie qui est extrêmement solide au Québec, autant en matière de divertissement qu'en matière d'information.

11011   CONSEILLER ARPIN: C'est sûr que sur la question de TVA lui-même, on aura l'occasion à la fin du mois d'avril prochain de vous revoir là, mais je ne veux pas rentrer non plus dans rien de spécifique de ce côté-là, mais si monsieur Dion veut ajouter quelque chose, mais je ne veux pas... je ne veux pas faire l'audience du mois d'avril, là.

11012   M. DION: Non, non, je ne veux pas non plus puis je vais aller dans le même sens que Pierre Karl parce que, effectivement, on croit au contenu canadien, on avait besoin d'une entente avec l'UDA, on l'a. On avait besoin d'entente one on one avec les producteurs indépendants, on l'a.

11013   Et, maintenant, notre modèle d'affaires, il est changé depuis trois, quatre ans; c'est-à-dire d'être de plus en plus un créateur producteur et diffuseur de contenu sur l'ensemble des plate-formes. Nos téléspectateur en demandent. Donc, pour nous c'est un naturel d'exploiter au maximum ce contenu canadien-là.

11014   Donc, on ne voit pas de problème à intégrer maintenant de nouvelles fenêtres de diffusion dans notre stratégie globale de nouveaux rôles de diffuseur.

11015   CONSEILLER ARPIN: Une dernière question. Les intervenants du Québec qu'on a entendus au cours de cette audience-ci qui est soit comparant ou non-comparant parce que, notamment, le Ministère des communications et de la culture du Québec avait déposé un mémoire, mais il n'a pas comparu, mais ils ont tous fait un plaidoyer pour la création d'un observatoire sur les nouveaux médias et que cet observatoire aurait deux grands objectifs: un premier de mesurer la présence du contenu canadien dans l'internet et le second, de conduire diverses études qui pourraient être utiles pour mieux encadrer le développement de l'internet.

11016   Or, j'ai deux questions pour vous sur ce sujet.

11017   En fait, que pensez-vous de cette recommandation et je le répète, qui est appuyée par le Ministère des communications et de la culture du Québec, et, deuxièmement, comment cet observatoire va-t-il se financer, le Conseil n'ayant pas les budgets nécessaires pour le faire?

11018   À titre d'exemple et ce qui pourrait se réaliser à partir de droit de licence, de partie 1 sur les services internet, des fournisseurs internet ou... donc, selon vous, là, si on adhère à cette proposition de créer un observatoire, qu'est-ce que c'est qu'on pourrait y trouver et, deuxièmement, qu'est-ce que... comment est-ce qu'il va se financer?

11019   M. PÉLADEAU: On n'est pas en désaccord avec l'observatoire et, évidemment, comme vous pouvez vous en douter, on pense que ce n'est pas aux intervenants de le financer et puis si le Gouvernement du Québec et celui de l'Ontario, le cas échéant, ont la capacité...

11020   CONSEILLER ARPIN: Le Gouvernement de l'Ontario nous a dit qu'il n'y tenait pas.

11021   M. PÉLADEAU: Non? Bon.

11022   CONSEILLER ARPIN: Il nous a dit qu'ils étaient très satisfaits de notre rapport de surveillance.

11023   M. PÉLADEAU: Je ne suis pas un constitutionnaliste, là, je ne pourrais pas vous dire si le Gouvernement du Québec a la capacité de taxer parce que, encore une fois, il s'agirait d'une taxe, un service de télécommunications ou de radiodiffusion.

11024   Ça sera éventuellement aux fonctionnaires de déterminer s'ils ont cette capacité-là de le faire.

11025   CONSEILLER ARPIN: Le Ministère des communications demande au Conseil de créer un observatoire, mais il ne dit pas que, lui, il veut le faire. Il dit au Conseil, vous devriez créer un observatoire et je peux vous dire que l'UDA, L'ACTIS, la Guilde des musiciens, la SODRAC, la SPAAC, l'APFTQ, l'ADISQ sont tous venus nous dire qu'ils appuyaient la création de cet observatoire-là.

11026   M. PÉLADEAU: Bien, alors, à ce moment-là, si le...

11027   CONSEILLER ARPIN: Mais, moi, je leur ai tous posé la question : comment est-ce qu'il va se financer, sauf au MCCQ qu'on n'a pas vu.

11028   M. PÉLADEAU: Bien, peut-être que vous devriez leur demander à eux de le financer, toutes ces associations auxquelles vous avez fait référence.

11029   CONSEILLER ARPIN: Mais ils nous ont dit que... oui, si on faisait un fonds sur les nouveaux médias à partir d'une contribution des entrepreneurs, on pourrait prendre une partie...

11030   M. PÉLADEAU: Effectivement, si...

11031   CONSEILLER ARPIN: On pourrait prendre une partie de ce fonds-là pour financer l'observatoire.

11032   M. PÉLADEAU: C'est un argument... c'est un argument. C'est un argument circulaire, monsieur le vice-président. Effectivement, il s'agit d'une taxe, encore une taxe et toujours d'une taxe. Alors, nous, on est contre les taxes. On pense que les Canadiens sont suffisamment taxés et donc, en conséquence, c'est la raison pour laquelle on est en désaccord.

11033   CONSEILLER ARPIN: Ceci complète mes questions, monsieur le président.

11034   LE PRÉSIDENT: Merci. Tim?

11035   COMMISSIONER DENTON: Thank you, Mr. Chairman. As I listened, my list of questions kept growing. So, to start.

11036   First, you guys build out networks all the time and I didn't see it mentioned here in terms of the burden on your capital requirements to constantly be building out your networks to expand capacity and build them up to the levels that people have come to expect.

11037   Would you like to comment on that issue?

11038   MR. PÉLADEAU: With pleasure, Mr. Commissioner. Obviously, you know, as we all know, this is a telecom infrastructure and it requires a lot of capital. We have been spending through capital expenditure for the last two years. I mentioned and I spent to know for the last ten years roughly two billion dollars, but once we have been seeing the internet penetration going deeper and also, what is now running on the internet network where we need more capacity because we've got more than only using e-mails, then it's an additional burden that we're facing to make sure that our consumers or customers would get the best service and the best quality.

11039   I think again, to make sure that, you know, Canadian content will have the chance to be alive and kicking on the internet since, you know, there is more and more utilization that is now done with the internet and, therefore, investing and continue to invest in our infrastructure would be one of the wisest decision for the organization to continue.

11040   So, we intend to do this and we intend also, as I've mentioned, you know, to invest significantly in another distribution channel which is taking place, which is, you know, the mobility and the third generation services and sometimes even people are calling it the "fourth generation", but then, you know, again, there will be a collapse of the different distribution networks through the internet, through the mobility and through, you know, the wire line and the wireless environment and it will require again significant additional capital expenditure moving forward.

11041   Robert, I don't know if you have any comments on that.

11042   MR. DEPATIE: Yes, just one comment. First of all, in order to maintain our customers' satisfaction level at the level that it is today, which is 96 per cent, which is pretty high, we have invested hundred of millions of dollars for the past three years.

11043   The number one consumption application is streaming. Streaming could cost as high as it depends on the quality that you offer to your customers as high as $10 per hour in terms of capax. So, we have got to be careful of that.

11044   And more importantly we have done some study with CROP, stating that only 15 per cent, not even 15 per cent of our customers are streaming currently and that's why we're really concerned about putting a tax to all our customers when only 15 per cent of them are streaming and not even.

11045   So, it's really important to remember that as well. And the more people are streaming, the more money we're going to have to invest in the infrastructure to offer the best quality, so we have got to keep that in mind as well.

11046   COMMISSIONER DENTON: My next question -- thank you. My next question concerns a point that you have been making as I hear it behind, first of all, you've said one of the biggest problems you have is the problem of getting appropriate treatment of copyright with the rights-holders and coming to commercial agreements.

11047   And another point in your presentation you've said: « Nous croyons que c'est au gouvernement et, ultimement, au Parlement canadien qu'il devrait appartenir de développer éventuellement des politiques et des mécanismes d'intervention. »

11048   And the thing that is concerning me in this is that there seems to be a number of issues that cross-governmental lines of authority, copyright regulation or not, funding of arts and basically caused by the digital revolution appeal -- forgive the cliché -- do you think it's time that government as a whole looked at this set of issues raised by the digital revolution across governmental responsibilities? Something that is not just us, but goes across all of government in terms of getting at these issues?

11049   MR. PÉLADEAU: That's a fairly large question you're asking, Mr. Commissioner.

11050   The government should do this, should, you know, have, I don't know, a Royal Commission on what the new media environment and the infrastructure will be all about. I am certainly not in a position, your know, to make any recommendations to the government.

11051   But I would like to highlight the fact that, you know, through your questions I think you have been highlighting the fact that it's a complex question and it raises a significant amount of pieces of Legislation and those pieces are those pieces now proper to the new environment that we are living in.

11052   Our answer, as you can imagine, is: no, because those pieces of Legislation were made in an environment where the technology, which we are now serving or using and younger generations are now always using and, you know, they are dealing with another type of environment that, you know, further generation had been enjoying.

11053   Then, therefore, no doubt that, you know, we need to go deeper in an analysis about, you know, how this, the different pieces of Legislation should move in the direction of again making sure that the entire infrastructure and the entire industry will remain strong as it is right now or it was, it used to be in a former environment that doesn't exist any more.

11054   COMMISSIONER DENTON: Well, here is an example of what I'm talking about. You know, in the Broadcasting Act, you have a section of it that basically says the Canadian Broadcasting System should be, I don't know, preponderantly Canadian. I may misquote it, but you understand that there is a --

11055   And if for the sake of discussion, just for the sake of discussion, you accept that broadcasting over the internet is legally broadcasting, then it puts you in a situation of having to say that, you know, a great deal of the internet should somehow be preponderantly Canadian, which gets you into an illegal absurdity, or a practical absurdity.

11056   What do you know with Legislation that tells you the things should be preponderantly Canadian?

11057   MR. PÉLADEAU: I think that, you know, there is no such a possibility of making anything preponderant on the internet because the nature of the internet is to be open and then, therefore, if you were to consider this possibility, it means then you should be able to shut websites or any sorts of information that will not allow you to circulate in Canada.

11058   And that brings, you know, obviously, as you can imagine, much bigger political questions than the one that, you know, on Canadian preponderance.

11059   COMMISSIONER DENTON: Now, the next question I have for you really is: one of the themes that we keep hearing is that the internet is a way to extend your product reach to create brand loyalty, to give more snips of information, but it basically extends the value of your existing broadcasting product.

11060   But we have also heard as there doesn't seem to be much money to be made out there, that the more people like stuff over the internet, for example, the more your streaming or other costs are, whereas in broadcasting it's insensitive to your popularity and broadcasting media don't cost you more as you get more people to listen or read.

11061   So, in relation to this matter, have you found a way to make money of your internet services and offerings yet?

11062   MR. PÉLADEAU: Well, again, you know, I have been trying to re-emphasize this, new generation have -- because of the technology availability which was not there previously -- different capacity, you know, to be entertained, to be informed, which you know previous generation didn't have.

11063   So, we have been living in a sort of a protectionist world because, you know, our barriers were there and technology not being there was providing a system that was closed. Now, you know, it's -- the system is not closed any more and then, therefore, everyone needs to think about this new environment and figuring out how they will be able to succeed in this highly competitive global world.

11064   So, it doesn't mean that, you know, we do not have strong content. It doesn't mean that, you know, the routes that we have been building on is not solid, but to make sure that it will live in the future, you need to make sure that you will integrate in your mind set, in your business model, those new assumptions and, therefore, change your business model, according to what technology is bringing and technology is there and certainly helpful because people are using it. If it was not to be helpful then, you know, no one would use it.

11065   So, that's a fact of life. The newspaper cannot only be on newspaper or newsprint any more; you need also to go online, then, therefore, need, you know, for you to change the way that you're managing the information. It's not a deadline any more, it's 24 hours. So, those -- because of the existence of technologies, those new assumptions have been changing dramatically the way that we need to operate.

11066   Are there factors of resistance that, you know, would like to live in the past? Certainly. And I think that's the responsibility of managing a company in the media world today to make sure that, you know, what we've got today will be as strong as it is today in the future by remodelling our business.

11067   COMMISSIONER DENTON: I've heard everything, but the expression that you're making money of your internet properties. Is it profitable for you yet?

11068   MR. PÉLADEAU: It's -- well, basically I would say that it's slightly profitable.

11069   COMMISSIONER DENTON: Thank you.

11070   THE CHAIRMAN: Michel?

11071   CONSEILLER MORIN: Merci, monsieur le président. Si j'ai bien compris dans votre exposé tout à l'heure, vous lorgniez assez lourdement vers un modèle semblable à celui de Rogers, peut-être plus étendu même au niveau du contenu canadien.

11072   On parlait tout à l'heure de la diffusion simultanée. Ai-je bien compris également que les chaînes qui sont actuelles... que vous offrez à vos abonnés actuellement pourraient être également offertes comme Rogers en diffusion simultanée, dans le modèle auquel vous songez?

11073   M. PÉLADEAU: Oui. Robert va vous donner plus de détail. J'aimerais quand même toutefois mettre l'accent sur un élément qui d'ailleurs est un petit peu problématique parce que... et c'est l'élément qui nous amène à discuter aussi avec les chaînes spécialisées, c'est une question de droit. Mais, est-ce que les distributeurs aujourd'hui que sont les chaînes spécialisées détiennent les droits et, éventuellement, si elles les détenaient et c'est là qu'on devra s'interroger, comment allons-nous proposer aux clients, aux citoyens une offre qui va faire en sorte que, puisque, comme vous le savez, les chaînes spécialisées vivent de redevances qui sont uniquement imposées par le canal de distribution conventionnel et que l'existence même du CRTC, d'une certaine façon, en dépend puisque c'est les contributions des services de câblodistribution qui en assurent le financement.

11074   Alors, c'est une question qui n'est pas simple non plus. C'est une question à laquelle nous avons à faire face et à cet égard, c'est certainement utile que nous en parlions et que nous en discutions.

11075   En même temps aussi, pour nous assurer que le citoyen canadien va pouvoir bénéficier de ce que j'ai dit être, donc, la profondeur, la force, la solidité de nos industries culturelles qui ont été développées par le biais des chaînes généralistes et des chaînes spécialisées.

11076   Robert, peut-être que tu as des...

11077   M. DÉPATIE: Oui, monsieur Morin. Ce n'est pas comme Rogers, mais c'est plutôt comme Vidéotron que Rogers fait et donc, j'ai besoin de le mentionner. Non; sérieusement, monsieur Morin, premièrement renforcer le point de Pierre Karl.

11078   On trouve ça inacceptable que des chaînes spécialisées puissent offrir leur contenu sur leur site internet lorsque nous avons à payer des redevances de 0,70 $, 1,50 $ à 2,00 $.

11079   CONSEILLER MORIN: Pardon, mais est-ce qu'il y en a beaucoup qui font de la diffusion en continu sur leur site internet?

11080   M. DÉPATIE: Non, en continu... en continu, il n'y en a pas beaucoup. Il y en a quelques-uns.

11081   CONSEILLER MORIN: Mi, je n'en connais pas.

11082   M. DÉPATIE: Oui. Il y a RDI, entre autres, qui le fait, et il y a...

11083   CONSEILLER MORION: Ah! oui, dans les nouvelles, mais je parle de chaînes spécialisées là?

11084   M. DÉPATIE: Non, mais il y a quand même des segments qu'on va retrouver sur certaines chaînes et donc, pour nous déjà, là, c'est à la limite.

11085   Les gens pourraient arriver puis dire, bien, je vais laisser faire le service de câblodistribution par satellite et m'en aller seulement sur internet pour voir mes meilleures émissions. Mais il y en a qui le font en continu.

11086   Pour nous, ça, un, c'est inacceptable parce que ça remet en question totalement le système de télédistribution.

11087   Oui, on a l'intention d'offrir des chaînes en continu. Évidemment, c'est basé sur, comme Pierre Karl a dit, sur les négociations qu'on est en train de faire avec les chaînes, mais on pense que c'est le meilleur moyen pour protéger le système et offrir ce que la clientèle recherche au bout de la ligne. Donc, pour nous, oui, c'est...

11088   CONSEILLER MORIN: Cette double offre... en fait, là, on parle d'une offre double, hein! On a l'offre qui existe dans le système conventionnel et puis cette offre qui serait au niveau de l'internet.

11089   M. DÉPATIE: Oui. Ça serait un assemblage.

11090   CONSEILLER MORIN: Exactement. Est-ce que vous avez vraiment le choix ce modèle-là, dans le sens que les jeunes aujourd'hui, ils n'ont plus besoin de leur écran de télévision. Ils se branchent sur internet et ils vont chercher Zilian-TV qui s'en vient au Canada. Ils vont aller chercher des documentaires, des films. Sans écran de télévision, ils n'ont plus besoin de ça. Ils vont sur leur ordinateur.

11091   Et si on veut consolider le système canadien actuel sur une autre plate-forme qu'est celle de l'internet, est-ce que, vous, les câblodiffuseurs n'avez pas l'obligation quasiment, pour la suite des choses, est-ce que vous n'êtes pas placés en situation où vous devez composer avec cette offre internet disponible, comme disait monsieur Péladeau, partout à travers le monde?

11092   M. PÉLADEAU: Ah! c'est indéniable, monsieur Morin et c'est d'autant plus, je dirais, indéniable que... vous avez dit « se brancher », bientôt, on n'aura même plus besoin de se brancher. On est en sans fil et puis cette information, ce divertissement est disponible partout et quand vous le voulez.

11093   M. DÉPATIE: Mais ce qu'il est important de retenir, monsieur Morin, c'est que dès que le client le demande, pour nous c'est les forces du marché qui décident. Donc, c'est évident qu'on ne peut pas refuser à notre clientèle ce qu'ils désirent.

11094   Donc, ça va de soi qu'en étant dans un marché concurrentiel et en voulant satisfaire l'ensemble des besoins de notre clientèle, on se doit d'être dans l'internet. Ça a été fait dans cet objectif-là.

11095   Et c'est notre façon à nous de dire, bien, on va tenter de protéger le système de câblodistributeur, le système canadien en l'offrant en alternative à notre clientèle qui le désire, d'avoir leur contenu sur internet.

11096   CONSEILLER MORIN: Vous avez dit tout à l'heure que vous aviez la vitesse la plus rapide au pays, 50 mgbs par seconde. C'est ça?

11097   M. DÉPATIE: Vrai.

11098   CONSEILLER MORIN: Mais vous n'avez pas, et là on parle de contenu, on parle de diffusion en continu, c'est bien beau d'avoir de la vitesse, mais encore faut-il avoir une limite d'usage intéressante. Là-dessus, vous n'êtes pas les premiers.

11099   Le 100 méga octets que vous avez... est-ce que vous avez un autre chiffre plus élevé que celui-là dans votre propre actif?

11100   M. DÉPATIE: Pour ce qui est de ce qu'on appelle le « très grande vitesse », le TGV 50 megabits, c'est 100 giga octets.

11101   CONSEILLER MORIN: Oui, à 80 $ par mois, oui.

11102   M. DÉPATIE: 100 gg octets de capacité.

11103   CONSEILLER MORIN: Alors, Shaw vous devance. Shaw Communications a 150.

11104   M. DÉPATIE: Oui.

11105   CONSEILLER MORIN: Ça m'amène à vous poser une question. Vous êtes partisan du contenu canadien, vous voulez mettre sur pied un nouveau système qui va favoriser son expression sur d'autres plate-formes.

11106   Est-ce qu'offrir à vos abonnés une limite d'usage illimitée pour le contenu canadien exclusivement, est-ce que ça aurait du sens?

11107   M. DÉPATIE: Bien, écoutez, je vais revenir à la question de fond en premier. La raison que nous tenons à avoir des limites, c'est qu'environ la moyenne de consommation par client est environ de 7 gg octets. Pour nous, on veut charger les gens ou faire payer les gens qui consomment le plus. Donc, c'est basé sur le concept de sur demande.

11108   Pourquoi aller taxer tout le monde et pourquoi aller charger un montant d'argent plus cher à des gens qui n'utilisent que 7 ggoctets. Donc, on met un plafond.

11109   Deuxième des choses; en mettant ce plafond, ça garantit que ceux qui en utilisent plus paient des montants extra, pour protéger encore une fois le service que nous donnons à l'ensemble de nos clients.

11110   Et pour répondre à votre question, finalement, c'est impossible actuellement, avec la technologie, de pouvoir, un, ça serait contre le principe de l'internet comme Pierre Karl l'a dit tout à l'heure, mais c'est impossible via les technologies existantes, de pouvoir contrôler le contenu canadien via cette capacité-là.

11111   CONSEILLER MORIN: Je reviens là-dessus parce que c'était une des questions du président Von Finckenstein, on a soulevé tout à l'heure... le président a soulevé la technique de DPI, Deep Packet Inspection, l'inspection prolongée des... ou, enfin approfondie des paquets. Il existe une autre technique qui s'appelle « Flow Management ». Est-ce que vous êtes au courant de cette technique-là?

11112   M. DÉPATIE: Oui.

11113   CONSEILLER MORIN: Bon. Est-ce que cette technique-là, en ce qui concerne le header justement, est-ce que... qui est beaucoup moins, qui va beaucoup moins, qui n'a pas besoin d'ouvrir les paquets, ma compréhension de cette technique est qu'elle est beaucoup moins... elle va beaucoup moins dans le détail, mais elle arrive au même fait.

11114   Est-ce que cette technique-là et j'aimerais, si vous n'avez pas la réponse aujourd'hui, ce n'est pas grave, mais j'aimerais avoir vos commentaires si cette technique-là pourrait être retenue pour identifier le contenu canadien?

11115   M. DÉPATIE: Je n'ai malheureusement pas de réponse aujourd'hui à vous donner là-dessus. L'analyse devra être faite par mes ingénieurs. Ça va me faire plaisir de vous revenir avec une réponse.

11116   CONSEILLER MORIN: En page 8, vous avez parlé tout à l'heure que si on imposait, que si le Conseil imposait des redevances ou des frais sur les fournisseurs de service internet, vous avez dit que ça pourrait faire en sorte que les Canadiens paieront plus cher pour ces services que les citoyens des autres pays.

11117   Évidemment, le chiffre qu'on a en tête actuellement, c'est 100 millions puis 1 $ par abonné par mois. Est-ce que sur la base de ça vous auriez des chiffres à donner au Conseil, puis si ce n'est pas aujourd'hui, parce que...

11118   Est-ce qu'on a vraiment... est-ce qu'on est rendu à la limite des prix au niveau des fournisseurs de l'internet au Canada, par rapport à d'autres pays?

11119   M. PÉLADEAU: Écoutez, vous avez bien vu, il s'agissait ici du conditionnel, alors je pense que c'est indéniable, on ne peut pas prédire ce que l'avenir va procurer et ceci étant, c'est indéniable qu'on vit dans un environnement extrêmement concurrentiel. Des endroits sont plus concurrentiels que d'autres au Canada. Ça dépend également du nombre d'intervenants que vous allez avoir sur un marché.

11120   Au Québec, ça va être probablement plus concurrentiel puisque Vidéotron a l'intention de proposer donc des services additionnels en téléphonie mobile et il faut également aussi comprendre qu'aujourd'hui on travaille dans un univers d'assemblage de services. Le consommateur et le citoyen est appelé à prendre en considération les différentes offres que lui sont proposées des fournisseurs et, à cet égard, on constate et on l'a constaté depuis un certain temps, que la population québécoise, en tout cas les clients de Vidéotron, ont eu le bénéfice d'un environnement extrêmement concurrentiel, tout en ayant aussi le bénéfice d'un service de grande qualité autant au niveau du produit que du service à la clientèle.

11121   Est-ce qu'une taxation additionnelle va avoir un impact? C'est sûr que ça va avoir un impact. Est-ce que ça va ralentir notre capacité d'investir dans notre réseau pour maintenir un haut degré de satisfaction? C'est indéniable. Si on augmente le fardeau fiscal, on ne peut pas penser qu'il n'y aura pas d'impact.

11122   Maintenant, est-ce qu'on est en mesure de déterminer si, de façon complète et absolue, quels vont être ces impacts, c'est sûr qu'on ne peut pas le faire pour l'instant, mais les probabilités sont élevées à cet effet-là toutefois.

11123   CONSEILLER MORIN: Mais l'internet, c'est quelque chose qui est devenu pratiquement essentiel. Est-ce que la demande est inélastique ou élastique? J'ai l'impression, moi, que pour l'internet, c'est assez inélastique, quel que soit le prix. Les gens... 1 $ par mois, les gens vont conserver leur abonnement.

11124   M. PÉLADEAU: Robert pourrait vous donner plus de détail. Mais il n'y a aucun service ou aucun produit qui n'a pas une limite et qui n'est pas assujetti à l'offre de la loi... de la loi sur l'offre et la demande.

11125   Même si on pense qu'on ne peut plus vivre sans internet, on vit dans un environnement concurrentiel et si une organisation augmente ses prix, bien, ça va faire comme... et c'est d'autant plus vrai en matière d'internet qu'il va y en avoir d'autres pour leur procurer une perspective plus intéressante pour les services qui sont recherchés.

11126   M. DÉPATIE: Une des raisons principales d'insatisfaction, la raison principale d'insatisfaction c'est le prix avec nos études internes et la raison principale de débranchement c'est aussi le prix.

11127   CONSEILLER MORIN: Vous parlez de l'internet?

11128   M. DÉPATIE: Je parle de l'internet. On peut vous fournir les études si vous le désirez, c'est nos études internes.

11129   Deuxième des choses, le problème, c'est que la consommation va devoir être taxée. Le système internet n'a pas été bâti pour pouvoir assumer ou offrir à des clientèles une quantité illimitée de bande passante. Il y a des coûts énormes d'infrastructure et on le voit et on commence à le constater, que nos investissements en capital deviennent de plus en plus dispendieux.

11130   Évidemment, si on veut investir pour offrir des meilleurs services possibles, la plus grande capacité possible, les prix vont nécessairement augmenter ou si on décide de mettre une taxe ou autre, on va devoir charger les gens qui utilisent la consommation de façon plus élevée. Une taxe s'applique sur un plus gros montant que la facture.

11131   Donc, pour nous, il va y avoir un impact majeur, que ça soit sur la diminution des investissements, mais on ne veut pas arrêter d'investir. On sait fort bien qu'il faut offrir un service de qualité. Donc, ça pourrait être une augmentation tarifaire plus une taxe ou autres, ça pourrait être une diminution des investissements. Donc, on pense qu'il y a un enjeu majeur et que la facture, plus les gens vont consommer dans l'avenir, et c'est le modèle que les gens prennent à l'échelle nord-américaine en passant, que les gens vont devoir payer au niveau de la quantité de bande passante.

11132   Et je peux vous assurer que les utilisateurs qui vont faire de la lecture en direct ou du streaming, comme on dit en bon français, vont devoir payer une facture plus élevée.

11133   M. PÉLADEAU: Et je pense que j'aimerais insister là-dessus, c'est une des raisons principales du succès de Vidéotron, c'est d'avoir été en mesure de procurer à sa clientèle des services de la plus haute qualité possible et d'intégrer à l'intérieur de son modèle d'affaires, les dernières technologies.

11134   Vous avez parlé du 50 gegabites?

11135   M. DÉPATIE: 50 gegabits seulement.

11136   M. PÉLADEAU: Un autre grand succès et je pense que c'est une belle illustration aussi de cette capacité de mettre en valeur le contenu canadien, c'est l'intégration à l'intérieur de nos services de câblodistribution, de la vidéo sur demande et qui nécessite aussi, comme vous pouvez vous en douter, des montants significatifs au niveau des investissements. Ça nous prend des serveurs, ça nous prend la capacité de livrer par voie de streaming, donc...

11137   C'est quoi les derniers chiffres auxquels on a eu le bénéfice d'assister?

11138   LE PRÉSIDENT: Excusez; je ne veux pas vous interrompre, mais on serait vraiment en retard. Peut-être vous pouvez donner ces chiffres dans votre réponse écrite.

11139   M. DÉPATIE: Quarante-cinq millions de commandes dans la dernière année. C'est tout.

11140   CONSEILLER MORIN: Merci beaucoup.

11141   LE PRÉSIDENT: Louise, une dernière question?

11142   CONSEILLÈRE POIRIER: Oui, j'aurais une question. J'aimerais aborder un des sujets sur lequel vous ne vous êtes pas prononcé. C'est celui que les jeunes maintenant, de plus en plus, il y a des petites compagnies qui se créent pour faire de la production uniquement sur internet. C'est un mouvement qui est là.

11143   À Toronto, entre autres, il y a une jeune femme, Chantal Everett of Live Force Entertainment qui elle-même produit avec une très petite équipe, en respectant toutes les conventions collectives des artistes et qui diffuse uniquement sur internet.

11144   Et dans ce sens-là, bon, vous dites TVA on a une licence avec des obligations, TVA vit la fragmentation aussi avec les chaînes spécialisées et, maintenant, il y a un modèle économique qui va peut-être se développer pour de la production uniquement sur internet, avec des gens qui n'ont pas de licence à obtenir, avec des gens qui vont peut-être pouvoir profiter de fonds pour eux uniquement.

11145   Alors, est-ce que ça ne va pas contribuer davantage à faire de la fragmentation et à la limite une forme de concurrence déloyale par rapport à des producteurs comme vous qui êtes sur internet et qui avez des obligations et ainsi de suite?

11146   M. PÉLADEAU: Vous savez, moi, j'ai tendance à penser que, au contraire, le fait que l'internet existe, ça va créer des opportunités supplémentaires. Antérieurement, on avait la nécessité de passer par un diffuseur et de détenir une licence. Aujourd'hui, bien, tout est ouvert, tout est disponible.

11147   Vous avez parlé de cette dame, je pense que c'est une des plus belles illustrations de succès sur l'internet. On la connaît bien cette émission qui aujourd'hui déborde... déborde d'une part à l'extérieur de l'internet et déborde également à l'extérieur du Canada, ce qui est merveilleux et ce que malheureusement, des fois un grand nombre de productions qui ont été financées par le Fonds canadien de télévision n'a pas réussi à faire, bien, c'est les « Têtes à claque ».

11148   Alors, on constate qu'à partir de talent et à partir de création, à partir aussi de cette expertise qui s'est développée, qu'on est en mesure de réaliser des succès et spécifiquement adressés à un canal de distribution et également élargir sur un environnement plus important que l'univers purement canadien.

11149   CONSEILLÈRE POIRIER: Donc, ce n'est pas une tendance vers laquelle vous pensez que l'internet risque d'aller et risque de venir gruger des revenus à des télédiffuseurs comme vous et, à un moment donné, dans lequel... puisqu'il n'y a pas aucune règle, que ça ne sera pas une concurrence déloyale. Ça ne vous fait pas peur ce mouvement-là?

11150   M. PÉLADEAU: Bien, c'est certain que c'est de la concurrence additionnelle, mais pensez que nous pourrions en faire l'économie ou l'éviter, je pense qu'on est obligé de conclure que c'est irréaliste et il faut faire avec et on va faire en sorte. Et je pense que la meilleure offensive pour assurer le contenu canadien, et c'était le sens de notre intervention, c'est d'investir dans ces nouvelles technologies de donner la possibilité aux joueurs qui sont établis et qui ont développé ces talents-là, d'adopter et d'intégrer à l'intérieur de leur modèle d'affaires les nouvelles technologies qui sont disponibles et particulièrement qui ont une utilisation de plus en plus importante auprès d'une nouvelle génération.

11151   CONSEILLÈRE POIRIER: Merci, monsieur le président.

11152   LE PRÉSIDENT: Merci. Ce sont nos questions. Je vous suggère, en réponse à la question de mon collègue, monsieur Denton, de lire la présentation des promoteurs, des NFB qui serait un plaidoyer pour les stratégies nationales numériques, comment ils ont fait dans les autres pays et je crois que c'est une bonne idée.

11153   On va prendre une pause de 10 minutes maintenant.

--- Upon recessing at 1028

--- Upon resuming at 1042

11154   THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.

11155   THE CHAIRPERSON: Okay, Madam Secretary, let's go.

11156   THE SECRETARY: We will now proceed with the presentation by MTS Allstream Inc.

11157   Appearing for MTS Allstream Inc. is Teresa Griffin-Muir.

11158   Please introduce your colleagues and begin your presentation.

PRESENTATION

11159   MS GRIFFIN-MUIR: Thank you.

11160   Good morning, Mr. Chairman and Commissioners. My name is Teresa Griffin-Muir and I am the Vice President of Regulatory Affairs for MTS Allstream.

11161   With me on the panel today, on my left is Jaron Lanier, our expert witness; and my right, Mr. Kelvin Shepherd, the President of Consumer Markets for Allstream.

11162   In today's oral presentation, we would like to focus on three points.

11163   First, I will explain why, in our view, the Commission has been on the right path and why the New Media and Mobile Exemption orders should be extended.

11164   Second, Jaron will talk about commercializing new media content today and tomorrow and explain why exploiting the creative potential of the Internet will require significant investment in infrastructure.

11165   Finally, Kelvin will explain why we believe that the ISP levy that some parties to the proceeding have proposed is both unwise and counter-productive.

11166   Let me start with the exemption order of 1999. The Commission decided that it would not regulate the provision of broadcasting content over the Internet.

--- Fire Alarm

--- Laughter

11167   UNIDENTIFIED SPEAKER: That was an alarming decision apparently.

--- Laughter

11168   UNIDENTIFIED SPEAKER: You win the prize. You said the magic word.

--- Laughter

11169   MS GRIFFIN-MUIR: Okay. It happens.

--- Pause

11170   THE SECRETARY: We have to leave the room.

11171   THE CHAIRPERSON: Apparently it's a real fire alarm, so let's leave.

--- Upon recessing at 1045

--- Upon resuming at 1108

11172   THE CHAIRPERSON: Let's go on.

11173   MS GRIFFIN-MUIR: Okay. So I'm going to try this again and I will just start with why new media and mobile exemption orders should be extended.

11174   In 1999 the Commission decided that it would not regulate the provision of broadcasting content over the Internet.

11175   Today, despite the fact that there is vastly more content being broadcast over the new media platforms, and despite a lot of hype, we believe the Commission's basis for this decision still holds true.

11176   When we ask whether regulating new media broadcasting undertakings would result in a greater contribution to the system, we are really talking about Canadian programming. And although no one knows definitively how much Canadian content is online, all of the apparent evidence is that there is a lot.

11177   First, much of the programming developed by and for traditional broadcasters is finding a second home on other platforms, mainly the Internet.

11178   Second, and perhaps more importantly, the Internet has become an outlet for a vast range of new voices from across the country. New technologies allow the inexpensive delivery of new forms of information and creative content. Canadians are lively and active participants in the creation and consumption of all forms of online media, from what we think of as traditional broadcasting to games, mashups, and social networking. Given this explosion of expression, we do not believe that any measures are necessary or appropriate to foster the provision of Canadian programming.

11179   Nor is anyone at this hearing claiming that new media broadcasting has detrimentally affected traditional broadcasters. Rather, as you heard yesterday from CTV, Canadian broadcasters are working to exploit the medium themselves, using their websites to drive viewership to their regulated platforms.

11180   Finally, we just don't believe it makes sense for the Commission to wade in and regulate new media. That includes imposing a levy on ISPs to fund online content, which is certainly a form of regulation.

11181   Moreover, because no one has figured out how to measure the amount of broadcasting content available on the Internet today, let alone how much of it is Canadian, it's hard to know the basis on which content would be subsidized by such a levy.

11182   Physical proximity to the United States is no longer an issue, since online we are next door to the entire world -- meaning that our content is also accessible to the entire world. Spectrum is not scarce; scheduling is irrelevant. In fact, new media largely solves many of the problems that traditional broadcasting regulation was designed to counter.

11183   I will now turn to Jaron and he will talk in more detail about the world of content, today and tomorrow.

11184   Jaron...?

11185   MR. LANIER: Thank you, Teresa.

11186   As I explain in my report, there are really two classes of online broadcast-like content right now. One uses the "Open Internet", in other words a user can access content through a generic browser like Internet Explorer or Firefox. The other class is a custom hardware delivery method that receives content from the Internet but provides a gated hardware destination, what I call "commercializing hardware." The iPod is a canonical example of commercializing hardware, but the existing hardware used by broadcasters, for example the cable set-top box, is another.

11187   Over the Open Internet there are currently only three reasons that what we think of as commercial, broadcast-like content, might appear online: promotion, piracy, or as experiments in commerce.

11188   It is important to realize that no successful business model has been found for content over the Open Internet. Despite the constant parade of new chimerical online businesses that look like they are succeeding, virtually none of them are profitable. After a decade of such failures, I believe this should be treated as a persistent negative result.

11189   It's worth spending a moment or two to ask why neither subscription nor advertising revenues have proven to be a viable business model for traditional broadcasting content online.

11190   The first reason is something we all recognize: people don't want to pay for content on the Open Internet, largely because they don't have to. There is no effective impediment to making digital copies of content. Content suffers no scarcity at all, and therefore has no value.

11191   And all too often the response to copy protection is piracy. It's rare to find anyone of college age or younger who thinks of file sharing as an unethical practice. The influential Open Culture movement counsels content producers to treat piracy as promotion.

11192   Nor has advertising earned the revenues producers have hoped for. Most online advertising revenues have not come from broadcasting-style ads, but from text-based search ads, most profitably placed by Google. These tiny text ads are more successful than content-tied ads with higher production values, in part because the results are more easily measurable when a customer clicks through and might actually complete a transaction. The effects of persuasion are indirect and harder to measure.

11193   So lots of ventures have attempted to generate access fees or advertising revenues for professional-seeming content, but despite a parade of high-visibility ventures none have yet succeeded.

11194   Even YouTube loses money, despite huge capital infusions from its parent company, gargantuan viewing audiences, and perpetual and creative rethinking about how to incorporate advertising.

11195   As a result, the activities of online delivery ventures can best be labelled as "experimental" business practices, rather than as business plans that are likely to be profitable in the future.

11196   In contrast, commercializing hardware has often been successful. Thus far, new media broadcasting content can only be commercial if the journey the content makes from provider to consumer is constrained at the consumer end by private, proprietary gadgets. Often these devices act as gated hardware destinations which support other applications, such as closed mobile phones or satellite transmissions. These gadgets conveniently "tune in" to content that would be less convenient to access without them. They can thus become an anchor of a profit centre.

11197   So where is this all going?

11198   In my report I used a scenario-driven approach to envision three potential outcomes, which I will outline briefly here.

11199   First, the status quo could simply continue: what I call "Open Culture Forever." In this scenario, a large amount of content will always be available for free over the Open Internet, but it would serve as a promotional device for the paid versions accessed through commercializing hardware. Thus, the way to support Canadian content developers in this scenario would be to encourage the success of the physical gadgets and venues that deliver paid content.

11200   Second, it is possible -- though I am pessimistic -- that someone will come up with a way to get people to pay for content online using the existing open infrastructure. If such a missing trick appears, it will be new information.

11201   Third, a more hopeful and more challenging scenario is that new forms of content will evolve that change the fundamental value proposition and create opportunities for new revenues for content developers.

11202   It is an illusion that ISPs provide the level of service today that will be needed in the future. The popularity of ventures like YouTube and Facebook has come about as if by magic, but in truth they simply arrived on the network effect rocketship at just the right moment. The attractiveness of this mirage of almost supernatural springs of popularity has obscured the fact that the infrastructure of the Internet is physical, and has required substantial investment over a significant period of time.

11203   There is a danger to this kind of magical thinking. If we only think about the popularity of sites like Facebook, which have taken place on the current infrastructure, we blind ourselves to the much greater possibilities that could exist if we improved that infrastructure.

11204   Whenever capabilities of the network have improved in the past, uses of the Internet have changed fundamentally. A good example of this is the availability of online video.

11205   So what might appear if the network was vastly improved?

11206   In my report I talk about the advent of virtual reality, of which I was a principal inventor. Now, my colleagues and I are thinking about other new, as yet undiscovered forms of media that might be possible if Internet connectivity is significantly upgraded.

11207   I suggested a couple of possibilities in my report. One is 3D movies in the home, which would incorporate at least an element of interactivity and which will likely require some sort of commercializing hardware.

11208   Another is tele-immersive content, a hypothetical technology that would simulate the co-presence of distant people, including actors and dancers, for example, well enough for consumers to effectively forget that a simulation is involved.

11209   But both of these possibilities will require enormously more bandwidth.

11210   These kinds of technologies can change the rules and restart the business of content production in the online space, albeit in highly non-traditional ways. But these advances can only be realized if substantial investments and innovations are made in core technologies and infrastructure. That's why it will be to the benefit of content producers and other players to have infrastructure upgraded as quickly as possible. It will allow new kinds of content businesses to emerge, many of which will require commercializing hardware and thus take place in arenas in which users are inclined to pay for content.

11211   MR. SHEPHERD: We believe an ISP tax would drain resources from ISPs and reduce both incentives and resources for investments that are needed in broadband networks.

11212   Certain parties to this proceeding have taken the attitude that ISPs are making money, they can afford it, so let's tax them. But before I talk about the impact of the tax I should point out that there is a big difference between revenues and profitability.

11213   In the case of high speed Internet services, capital gets expensed very quickly because the technology needs continual upgrading, so profits are not as high as some might think.

11214   Now let's look for a minute at the impact of such a tax on MTS Allstream.

11215   We calculate that a tax of 0.6 percent on our wireless revenues, plus a tax of 3 percent on our ISP revenues, would come to about $5 million per year based on our 2008 results.

11216   What would we do otherwise with that $5 million?

11217   Clearly one use of these funds is to continuously upgrade our network, to the benefit of both our broadband and our IPTV subscribers. As an example, MTS Allstream introduced our industry-leading MTS TV service in Winnipeg in 2003 and has since expanded the network coverage and service offering to capture around a third of the Winnipeg market.

11218   Just recently we have launched a new IPTV product in Portage la Prairie that's qualitatively better than our previous TV service, using a supporting broadband infrastructure that also provides for higher performance Internet services.

11219   This is only possible because we have been able to generate funds from our broadband and TV services to invest in, enhance and expand our network.

11220   So the funding that some parties propose to take from ISPs is the very funding, in part, that we are using to deploy advanced networks and deliver content that we are licensed as a broadcast undertaking to deliver.

11221   Moreover, upgrading our wireless and broadband networks also allows us to enhance our broadband offering for all users; our end customers, content providers and those who are using our networks for other purposes, including businesses.

11222   We believe that a tax on ISPs is unwise because it would slow broadband development and fail to provide additional value to consumers and businesses. To keep pace with our competitors at home and abroad, we need a higher level of investment in our networks, and this requires that we attract new capital. Anything that impedes our ability to access capital for upgrades, such as the ISP levy we are talking about here, is problematic.

11223   Canada used to be a leader, but it is now lagging behind its international counterparts in the OECD with respect to the quality, speed, and pricing of its network and services. We need to become more competitive, not less.

11224   Finally, a tax is unwise because the business models for content are still in such a state of flux. Mobile television is a good example. The business case for mobile TV is still highly experimental: we just don't know what audiences want and don't want; and there is not one business model on which everyone can agree at this stage.

11225   We believe strongly that investment, innovation and growth in Canada's broadband network is the most effective means to support the potential of Canadian content creators and the ability of consumers to enjoy that content. We believe that extending the New Media and Mobile Exemption Orders will not only promote the growth and consumption of Canadian content today, but pave the way for exciting new possibilities for Canadian content tomorrow.

11226   We are happy to take any questions you may have.

11227   THE CHAIRPERSON: Thank you very much for your presentation.

11228   You were here or you must have listened online yesterday when Rogers was here and presented their proposal. Maybe I got it wrong, but it struck me as basically what I would call a cable PVR, that basically everything that they have on cable and that they present they allow people who are subscribers to also access over the Internet past episodes, past films, et cetera, maybe even simultaneously.

11229   So that way their principal business is still traditional television, but to the extent that it's being delivered on another platform the consumer can choose which way they go. It's not an extra. It's part of the experimental and promotion that you were talking about, Mr. Lanier.

11230   Now, when I visited you in Winnipeg a couple of months ago you gave me a preview of what you are doing now in Portage la Prairie and it strikes me, since you are Internet-based to begin with, or wireline based, you deliver signals not over cable but over telephone, this is sort of really made to measure for you. You could very easily do the sort of same thing that Rogers is suggesting.

11231   Is this part of your business plan?

11232   MR. SHEPHERD: I have only read briefly about what Rogers presented, but based on the description I have had I would say no, it's not part of our business plan, and largely because we don't really see how that model really would work.

11233   We do see on our BDU, our licensed undertaking, the need to continue to add content and to support and promote content, and clearly we -- we used things like web advertising and our web portal to promote our content, but to somehow repackage and re-purpose that content into a portal offering, we don't believe portals in that sense have proven to be very successful and certainly wouldn't see that as a core part of our business.

11234   THE CHAIRPERSON: Well, you don't really even need a portal. I mean, since you deliver your stuff over the existing telephone lines, wouldn't it just be a question of making available past episodes to your users?

11235   MR. SHEPHERD: Well, first, no, because all of our licensing agreements would not support putting that content in that format. We would have to negotiate with the content providers.

11236   Second, when you put that model out, we don't see ourselves being in the web portal business per se. We clearly made a decision to be a BDU and to provide licence content through our IPTV infrastructure, but that's an entirely separate undertaking from our internet business, which is really about being a telecom provider and providing broadband access.

11237   THE CHAIRPERSON: No, I understand what you are saying. I thought, the way that Rogers explained it, basically is they don't want to lose a cable customer to the Internet and one way to do that is anything that you get from me you can also get through the portal, plus you can get additional features that you don't get over the cable such as unshown segments of interviews with stars and whatever extra features you want to add onto it.

11238   So that was, in their view, a very clever way of keeping the customers, offering them the internet experience if they want it, but still keeping them as a Roger customers because they are offering it for free as an additional feature.

11239   MR. SHEPHERD: Again, I don't pretend to understand the Rogers strategy, but I would suggest when you look at most of the content that we carry on our licensed BDU undertaking, the content providers have their own strategies to distribute that content over the open internet, whether that is promotional episodes or distribution.

11240   So I'm not quite sure what Rogers plan would be there, but I would suggest that most of that content, or a large part of it. is probably already available to people on the open Internet.

11241   THE CHAIRPERSON: Mr. Lanier, you are one of the few expert witnesses who have appeared before us.

11242   What is your view on measurability of content and of everything that you heard here?

11243   MR. LANIER: Yes, measurability.

11244   Well, you know, measuring phenomena on the Internet is a little different than certain other measuring problems that the technical community is faced with. For instance, if we compare it to attempting to determine the effects of global warming, with global warming we are measuring physical qualities.

11245   In the case of the Internet, we are simply measuring our own codes that we laid down. All of these concepts that have been put forward of the packet, the header, the protocol, the port, one day not very long ago, within the last few decades at the very most, and often more recently, somebody in an office somewhere said well, let's design a code this way, we will call this a port, we will call this a header.

11246   These are simply recent human inventions and the problem that we have in measurement is that these inventions are bound up in social ideas and so there is a social element to what we can do with them. As it happens, for very different reasons that varied with historical circumstances, it just happens that the particular code designs that have been laid down do not lend themselves readily to the type of measurement that is proposed.

11247   Now, that's not to say it's impossible, but simply to say that in order for it to be done in any way that is meaningful, there would have to of necessity be a sort of a social evolution to make that possible.

11248   I would like to explain a bit more about this idea. I have to say that unfortunately it is impossible to address this issue with complete frankness without exceeding the bounds of the scope of this hearing just a little bit and I will attempt to keep that within reason, but here is what I have to point out.

11249   Thus far there has been very little measurement or deep packet sniffing or any of these sorts of things of the kind that is discussed here. Now, it does happen on some basis. It happens, for instance, under the purview of intelligence agencies. It happens quietly. There are things that go on; however, the consumers haven't directly been told "We are going to start sniffing your packets."

11250   When I talk about consumers, I am talking about a social group of people, and they really split apart into different strata, and it's largely by age.

11251   If we talk about people who are of college age or younger, what we might call the Facebook generation, they tend to have, at this point, a rather militant attitude about some principles of openness.

11252   I have to say that, in my view, I shared these when I was younger, and I think that I contributed to the development of this ideology, or this culture, and at this point I think perhaps it was a little extreme, and it would be better for many people, for almost everyone, if it was a bit more moderate.

11253   At any rate, it does exist today.

11254   Because of that, what has happened is that, when a commercial interest attempts to violate the principle of openness, as it is defined by the open culture movement, there tends to be a very dramatic and forceful rebuking.

11255   THE CHAIRPERSON: Yes, but I am asking you, as a technical expert, is it possible to measure or not. That's all I want to know.

11256   MR. LANIER: For human beings, as they exist today, no.

11257   For human beings, as I hope they will evolve in 10 years, perhaps.

11258   Your question, simply, is not a technical question, it is actually a social one, and this is the problem --

11259   THE CHAIRPERSON: I appreciate that it's a social one, but also, as a policy matter, I just wanted to know whether it is technically feasible to do it.

11260   MR. LANIER: Today, no, because the moment you started -- all of the file sharing sites, which is where the action really happens, the heaviest users would start spoofing, and the thing would fall apart instantly.

11261   So the answer is --

11262   THE CHAIRPERSON: Okay, let me just put the question. Is it possible to measure (a) what content on the internet -- or what percentage of the content that is delivered by an ISP is video, and (b) could one measure what percentage of that video content comes from a .ca website?

11263   MR. LANIER: If you win the hearts and minds of young Canadians, the answer is yes, and if you fail, the answer is no.

11264   THE CHAIRPERSON: I am not talking about hearts and minds, I am talking about technology here. I am asking you as a technologist.

11265   MR. LANIER: You see, this is why you get different answers from different technologists, because --

11266   THE CHAIRPERSON: Can I get an answer from a technologist, not from a policy --

11267   MR. LANIER: Strictly speaking, no, because all of these techniques are spoofable.

11268   I think, in practise, potentially yes, but, you know, you are trying to define a very difficult question that involves social, political and cultural overtones.

11269   Purely, in terms of technology, you simply can't, because this is a technology that we invent wholly, it's a cultural expression, it's not given to us --

11270   THE CHAIRPERSON: I understand that it's an issue of having support from the population and not having to enforce it, but relying on, basically, voluntary compliance or acceptance of a law or a function.

11271   MR. LANIER: Yes.

11272   THE CHAIRPERSON: I understand that. I just wanted to know, on the technical side -- you are telling me that it could be done.

11273   MR. LANIER: Well, no, I am saying, effectively --

11274   In the current social climate, no, it wouldn't be, because the moment you started --

11275   You could design a technique that would work today, and then tomorrow young people in places like Sweden would immediately provide protocols all over the world, whether young people in Canada created them or not, that would be immediately adopted globally by young people everywhere, including Canada, that would contravene your technique.

11276   So it would last a day. That is the problem.

11277   THE CHAIRPERSON: Fine. I guess I'm not going to get an answer.

11278   Tim?

11279   MR. LANIER: No, no, no, I have answered you, quite honestly --

11280   THE CHAIRPERSON: But you always put the caveat on, and I am fully aware that anything can be spoofed and people will try to circumvent it. That wasn't the question. I just wanted to know whether we could do the first part.

11281   MR. LANIER: Right. The best technical answer is no. If you completely divorced the human situation, I would say sure.

11282   This is why you will receive contradictory -- you will receive contradictory answers to this question from different parties, because the answers will vary according to how much they take this into account. That is the reason you will not get a single answer.

11283   THE CHAIRPERSON: Okay, I appreciate that. Thank you.

11284   Tim?

11285   COMMISSIONER DENTON: Thank you, MTS, for bringing Mr. Lanier before us. This is interesting.

11286   You used the words "the network effect rocket ship".

11287   MR. LANIER: Yeah.

11288   COMMISSIONER DENTON: Could you explicate that colourful phrase for me?

11289   MR. LANIER: Yes, absolutely.

11290   The network effect is the effect that -- the parts become worth more when they are connected together than they are separately, and the network effect can sometimes create what you could call a natural niche, which becomes, almost, unassailably powerful.

11291   Let me give you a few examples that I think are the most readily understood.

11292   If you take a service like an eBay or a craigslist, which are different, it is rather difficult to compete with these. It is somewhat possible, but it's very hard for a competitor to arise, and the reason why is that there is already a network effect present, so anyone who wishes to place an ad will reach more people, and anyone seeking to buy something will find more available on these particular sites.

11293   Taking into account some issues related to broad geographical regions and language distinctions, these tend to be global, not national. They tend to be these very large things.

11294   Google has one of these, I believe, relating to text referral ads, whether based on search or on web placement, and once you have one of these network effects, you can have extremely rapid growth.

11295   Facebook has recently experienced this. More recently, Twitter, which you might be familiar with, has been experiencing it.

11296   And I am sure that there will be a long series of others.

11297   As soon as one design that has some social component, some component which people connect together, achieves a critical mass on the internet, it suddenly can experience this rocket ship effect and rise to enormous prominence very, very quickly. This is why there is so much energy in internet entrepreneuring, because there can be a sudden, amazing prize.

11298   Now, the caveat is that a lot of these rather easily-won, enormous centres of popularity don't have corresponding profitability. Facebook and Twitter are great examples, where you have these enormously popular services that actually are not true businesses, but sort of illusions of businesses.

11299   It's a very strange phenomenon, but that's what is taking place.

11300   I personally consider -- I am a working artist as well as a technologist, and I consider myself an advocate of content producers.

11301   And I should say that, as an American, I care deeply about having global voices. I want to have access to Canadian voices. I don't want to live in some sort of bland global mush as a result of the rise of the internet, I want to be able to see real diversity and real flavour.

11302   I very strongly want to see new rocket ships of this network effect that actually make money for content producers. That, to me, should be our goal. That's the universal goal that serves all of the interests that have been represented here.

11303   The trick is, we don't have that yet, but this is the future that we should see.

11304   COMMISSIONER DENTON: The interesting thing that I draw from your paper -- and I have seen it in many different ways -- is that there seems to be some sort of view that the internet is some vast untapped forest of wealth; whereas, I think, those who dwell in it tend to see it more as a desert into which water may occasionally pour and dry up.

11305   On the one side you have this place where capital is poured in and, mostly, doesn't make money, you have this high risk, and there seems to be a disconnect between people's expectations that they are going to make lots of money out of it and the surprisingly unprofitable nature of a great deal of it.

11306   MR. LANIER: Yes, and, obviously, there are some exceptions. Nobody would accuse Google of being unprofitable, right?

11307   I think we can all agree that they are a great success, from a business point of view.

11308   The tragedy thus far, which I hope will be short-lived, is the loss of business model for creative content producers when they work solely within the open, online environment.

11309   I have to say that there are persistent illusions created by advocates of open culture that somehow there must be thousands -- tens of thousands of musicians and young filmmakers out there somehow pulling in a living online -- somehow.

11310   The truth is, when you look closely, this is an illusion. It does not exist yet, but I believe that it can exist in the future, although only with technological evolution.

11311   COMMISSIONER DENTON: Yes. The major point that I take away from your report is what you call commercializing hardware. It's only when you control, really, the end, and therefore don't have an open internet -- only when you control the end point through a device can you control the property.

11312   MR. LANIER: And you had The Score company presenting here, which is doing that on the iPhone, as one example, and that is how you can have a business plan these days.

11313   The question is, what will these devices be in the future? Where will they come from? What will they be like?

11314   COMMISSIONER DENTON: I would like you to either compare or contrast the notion of commercializing hardware, which is yours, to walled gardens, of which there has been much experimentation. Why is your idea different from another version of walled gardens?

11315   MR. LANIER: The interesting thing about commercializing hardware is that a number of clever companies, such as Apple, have proven that you don't absolutely need a wall if your commercializing hardware is appealing enough that people choose to use it on the basis of convenience, style, fashion, habit.

11316   People will use commercializing hardware and will pay for content by their own choice.

11317   And this is remarkable. This isn't something that, I think, anyone was predicting, say, 10 years ago.

11318   Let's say that the music available on the iTunes Store for the iPhone is readily available for free to any young person who cares to use the internet all.

11319   And, by the way, so is all of the content that would be available on the Rogers' portal.

11320   It would likely be gathered from a foreign server that does this sort of thing, maybe Pirate Bay or RapidShare, or something like that.

11321   All of this stuff is out there. It's all readily available for free. However, this notion of instant speed and convenience has become such a value for the same generation that believes in file sharing that they are actually ready to pay for those qualities.

11322   So the notion that on the iTunes Store there is this one click, that you have this ready access everywhere, suddenly makes paying for the music worthwhile, even though, technically, you don't have to. What you are paying for is the immediacy, and the sort of coolness and the whole aesthetic experience of how the music is acquired and so forth.

11323   We now know, through practical demonstration, that commercializing hardware can be distinct from a walled garden. That's new information. That wasn't known fairly recently, that's a new development.

11324   COMMISSIONER DENTON: Point made, point taken, which brings us around to your second or third major point, which is that seriously large improvements of bandwidth are going to lead to really new media.

11325   MR. LANIER: Yes.

11326   COMMISSIONER DENTON: What do you envision in that regard?

11327   MR. LANIER: This, obviously, is what I have devoted much of my life to, and I can imagine a future in which you enter into a virtual world in your living room, which is all-encompassing, it's magical, you bring your children with you, it's three dimensional, and it's operated by Cirque du Soleil. Present in it are live performers, other people who you might know, perhaps some you don't, and it's brought to you through extraordinary hardware devices, through holographic screens and that sort of thing.

11328   That future is one that people will pay for, precisely because it goes through commercializing hardware. This becomes like the super iPhone or the super cable box, if you will, that brings to you this extraordinary information.

11329   Now, in this future, it might very well be the case that similar information also flows through the open internet. That's a possibility. Perhaps some form of generic device that isn't commercializing hardware could even give you access to some of that information.

11330   But I think the mere fact that these extraordinary new experiences intrinsically require new kinds of hardware creates a natural business opportunity in which there will be new types of commercializing hardware, natural opportunities to charge for content in a way that people will accept, even if they grew up with the open culture regime.

11331   COMMISSIONER DENTON: Okay. Last question. By a process of holographic transformation, you wake up in the mind and body of Stephen Harper, only it's your mind. You're the Prime Minister and you want to envision and call for and promote a series of policy initiatives that would prepare us for the world that you think we are heading for.

--- Laughter

11332   COMMISSIONER DENTON: Okay?

11333   In this scenario, what is your advice, briefly?

11334   MR. LANIER: The first thing I would do is, I would encourage, by whatever means are appropriate, Canadian researchers, on an academic level, and also on a commercial level, to explore the space of potential commercializing hardware.

11335   And I should point out that Canada has been a leader in this area since it appeared, on every level. I have had many colleagues based in Canada.

11336   I would support that intensely.

11337   If Canada produced the BlackBerry, perhaps some day there will be a Canadian virtuality home device. I don't know.

11338   I mean, but I think that would be -- that's one outcome to be very attentive to, and I realize it's outside of the purview of this Commission, but you've given me a broader purview in this fantasy.

11339   A second issue is, you know, not to beat this point again and again, infrastructure investment. Every single academic investigation into these new potential forms of media, of which there have been many, have required extraordinary infrastructures that have been only available in the research environment. And, so, eventually these will have to reach out to homes and businesses if this future is to come about and how will that happen and when will it happen?

11340   I think any brake placed on infrastructure development is a delay on the time when artists can actually get paid for their work. I mean, this seems to me to be a very clear argument.

11341   And, finally, I mentioned earlier this notion of winning the hearts and minds of the younger generation. Right now the situation with the Internet has evolved through many different phases. We happen to be in a phase that's just really not so good for creative content producers of all kinds, but the situation is evolving.

11342   And what I think is urgent is for governments to be -- to not lose touch with their young people, to stay engaged. There might be cases where it's possible to shepherd attitudes a bit, perhaps not, but it certainly should be possible to be aware of them and, let us say, in five years, in 10 years there's a moment when a configuration comes about that's more favourable to Canadian content, there might be ways to embrace it at that moment.

11343   So, I think this sort of alertness and this engagement with younger people and their attitudes is absolutely crucial. And that's something that, frankly, I think this Commission could be doing a slightly better job at perhaps because the terminology and the way things are phrased is just so at odds with the way the younger generations of online users think that there's a disconnect and I think that that's a crucial disconnect to correct.

11344   COMMISSIONER DENTON: Noted. Thank you.

11345   Thank you.

11346   THE CHAIRPERSON: Okay. Len?

11347   COMMISSIONER KATZ: Thank you, Mr. Chairman.

11348   Good morning.

11349   MR. LANIER: Hello.

11350   COMMISSIONER KATZ: I have one question for you, Mr. Lanier.

11351   Do you watch traditional broadcasting?

11352   MR. LANIER: I do, I do. I love "Flashpoint".

11353   COMMISSIONER KATZ: Good. Why do you watch traditional broadcasting when you can get whatever you want, whenever you want, however you want through new media?

11354   MR. LANIER: I'm old. I'm a middle-aged guy with habits that were developed in an earlier era.

11355   My students and my younger colleagues don't, and I recognize that difference. It's a cultural difference, it's a difference in habit.

11356   COMMISSIONER KATZ: So, when you look into your crystal ball, do you really see the youth not subscribing to traditional broadcasting, to classical cable TV or satellite TV?

11357   MR. LANIER: Well, you know, youth changes constantly because they are always new ones coming up. Also, let's remember that young people soon become not so young people and have to face the realities of working for a living and all these things and sometimes their attitudes change as they mature and they start to get a broader picture of life.

11358   So, this is all in motion, this is not -- none of this is fixed. So, I'm only talking about a freeze frame of this particular moment in history.

11359   But right now I would say the pattern that I've been able to discern from a variety of sources is that, as has been noted earlier, a very small minority of ISP customers tend to be the sort of constant heavy users, but this shouldn't obscure the fact that many of the others still want the performance to be there when they want it, they just don't use it very much. And that's a crucial point to remember.

11360   But let's say of these that are the heavy users, they tend to be the young ones, they tend to be the ones that want to be able to download anything, any time, anywhere, this sort of absolute openness and I do not see them subscribing to cable TV, I see them as potentially lost customers.

11361   But -- but they will pay for music on the iPhone, they will buy video games for Wii or an XBox. They're are not adverse to spending money, it's simply that they have a different culture of what is worth spending money on.

11362   And, so, the key is to not lose them as you think about policies, so...

11363   COMMISSIONER KATZ: Yes. And I tend to agree with you and the analogy that I use is the wireless wire line network as well.

11364   MR. LANIER: M'hmm.

11365   COMMISSIONER KATZ: And the current generation of youth don't need a wire line phone necessarily --

11366   MR. LANIER: Oh, they think it's absurd.

11367   COMMISSIONER KATZ: That's right.

11368   MR. LANIER: Yeah.

11369   COMMISSIONER KATZ: So, the same evolution may in fact take place again, if you look to the past and you say there's no reason why you need to have scheduled broadcasting when you can have unscheduled whenever you want it, subject to HDTV --

11370   MR. LANIER: M'hmm.

11371   COMMISSIONER KATZ: -- and everything else as well that may come down the line on the open net.

11372   In this country, fortunately or not, we've got something called the Broadcasting Act and, fortunately or not, the BDUs, the cable industry and the satellite industry do support Canadian production.

11373   And one of the issues that we need to look at is whether the transformation of people that may in fact move and shift from one to the other will cause an erosion in that support mechanism that's there. I call it a zero sum gain.

11374   MR. LANIER: Hmm...

11375   COMMISSIONER KATZ: Because they are getting something today, and if people all leave the traditional broadcasting system tomorrow and move into this new paradigm, if I can call it that, that support mechanism goes, and...

11376   MR. LANIER: May I point out that that might be the case sometimes, but I think the reverse can also happen, and I'd like to explain how.

11377   Let's suppose you have someone who is looking at a range of services in their home that might include telephone, traditional specialty television programming and Internet access. If their overall bill gets up -- starts to go up, what are they going to cut?

11378   If they're a young person what they're going to keep is their Internet access and they're going to cut their television bill which is, as I understand it, the part of their bill that is leading to the most subsidy to content providers, at least under the current system.

11379   So, I think there could actually be an unintended consequence there where you start to, you know, you raise a little bit of money from one part but you lose more money by dissuading people from the other part of their bill where they're already actually paying a greater percentage.

11380   And I might have this wrong, so please correct me if I have the details wrong of this, it's very possible. I don't pretend to understand the Canadian system in great detail, but I believe that's the case. So, that would be a concern.

11381   COMMISSIONER KATZ: Okay. Thank you.

11382   THE CHAIRPERSON: At the risk of beating a dead horse, let me go back.

11383   MR. LANIER: Pardon?

11384   THE CHAIRPERSON: At the risk of beating a dead horse, can we go back to measurements.

11385   MR. LANIER: Ah-hah, yes, of course.

11386   THE CHAIRPERSON: And I would like you to leave your social biases on the side. I'm purely asking a technical question here.

11387   Don't assume I want my numbers in order to control, to enforce, to subsidize --

11388   MR. LANIER: M'hmm.

11389   THE CHAIRPERSON: -- to tax or something, that's not -- just purely for having a knowledge base so we know what policies we can adopt.

11390   If I understand you, and I just want to make sure that for the record I understood you correctly.

11391   MR. LANIER: Yes.

11392   THE CHAIRPERSON: Technically, there are means available to measure what percentage of the traffic of an ISP is video and one should also be able to measure technically what percentage of that Internet traffic originates from the .ca origin.

11393   If I've got it wrong, please correct me.

11394   MR. LANIER: Yes. On any given day it is technically possible to do that the following day, but not the day after.

11395   And, so, you have to understand that your question is of a different nature than you --

11396   THE CHAIRPERSON: Why not?

11397   MR. LANIER: I mean, well because as soon as you actually engage the younger generations on this level, then you will encourage a great deal of spoofing, for various reasons I can go into, so your data will become nonsense very quickly.

11398   THE CHAIRPERSON: Hang on, hang on. That assumes there's an incentive to spoof. That is why I very carefully prefaced my questions. Leave your social biases outside, and if I can convince people this is a monitoring activity, it's not anything else, it's just to get basic information, then surely there's no incentive to spoof, there's no incentive to -- because it doesn't have any consequence except it appears in my annual report, this is what's happening.

11399   MR. LANIER: Because, look, I want to urge you to conduct a piece of research and if you would consider this, which is to go to any classroom of under graduates in Canada and ask them if they would accept this on the terms you propose it, and then I think you'll get a very, very strong negative reaction which you might find surprising or irrational.

11400   And I might agree with you by the way in many cases, but the point is, you'll be facing not just Canadian youth but world wide youth and very quickly everything will be spoofed and will turn to nonsense.

11401   And, so, all I'm saying is that you can start this cat and mouse game, but you can never win it.

11402   You enter -- you either -- if everybody's happy with it, then you can just ask people to tell you, you don't need to engage in all this snooping, all you do is you ask them and they tell you.

11403   But if you want to start a mechanism like this, you have to do it on a social level first and then the technology is just trivial.

11404   I mean, if people are happy with it, there's no technological problem because we make all this stuff up, you know, it's purely a matter -- it's really -- see, this is why this is a distinct problem for many others. People just made this up. There's no -- there's no intrinsic quality to this. We place the qualities in it.

11405   THE CHAIRPERSON: In other words, you're saying there is an incentive to spoof merely because I measure not because of anything else, just people dislike being measured and therefore...

11406   MR. LANIER: People strongly dislike it, although let me point out -- I want to point out an interesting exception. It is now considered hip, acceptable, fashionable to use Google's e-mail service in which you are inviting them to snoop on your e-mail in order to provide you with topical advertising.

11407   Now, and yet there's a very intense visceral reaction against other instances of snooping, particularly depacket snooping. Now, what's the difference?

11408   Well, this is like the question, why are some people willing to pay for music on an iPhone who would otherwise just get it for free? It's a cultural -- this is why I keep on coming back to the cultural thing, you're trying so hard --

11409   THE CHAIRPERSON: I got the point. I got the point.

11410   MR. LANIER: You're trying so hard to create a technical question where there isn't one, and you have my sympathy and I understand your motivations and I actually -- I think on fundamental motivations, I suspect we agree almost totally, I just think this particular question is framed in a way that --

11411   THE CHAIRPERSON: I find it difficult to accept that you can't measure without producing spoofing or something. The very company for which you work does measurements in order to determine what investments to make for what the need is, et cetera.

11412   So, I mean, all our business, everything is built on trying to get some measure and then from that making extrapolations forward.

11413   MR. LANIER: Just to clarify, I don't work for any company.

11414   THE CHAIRPERSON: No, no, I mean --

11415   MR. LANIER: I have an advisory relationship with --

11416   THE CHAIRPERSON: I'm not trying --

11417   MR. LANIER: I think you're referring to a certain company in Seattle.

11418   THE CHAIRPERSON: No, no, I was talking MTS --

11419   MR. LANIER: Oh I'm sorry, Allstream. Oh, I'm sorry, Allstream.

11420   THE CHAIRPERSON: I'm talking about people like you that want to know where to make their investments.

11421   MR. LANIER: Okay. But let me just point out. Even -- people have tried with enormous effort to say -- determine what content is coming over PC to address a different area of problem, which is copyright, and every attempt has failed because it might work initially and then the following week the spoofing starts and the thing falls apart and there's a very long history of this.

11422   And the reason -- I should just explain for a moment. It would take you -- in order to set up this operation, it would take you -- the very quickest you could do it is a few months and probably a few years. It's a big project.

11423   The spoofer takes an evening of work, or maybe a few weeks, so they can move with such rapidity that even if you have the very best technical people working on it, a little bit -- all you have to do is motivate a small population of opponents on this, which you would, and -- so, there has to be a social contract that buys into the program in order for it to be effective. This is just the nature of it, because this is not --

11424   THE CHAIRPERSON: Okay.

11425   MR. LANIER: We're not talking about engines where there's an intrinsic physics that we have to --

11426   THE CHAIRPERSON: I got the point.

11427   MR. LANIER: Yeah, okay. Okay.

11428   THE CHAIRPERSON: Thank you.

11429   MS GRIFFIN-MUIR: Mr. Chairman, just if I may, just on measurement. When you're suggesting at no cost, like you're now going to monitor it, there is a cost though to us because we're just an ISP in this, we would have to do something to actually be able to measure something inside our network and it would cost us something.

11430   So, it's not at no cost, just for an exercise that runs all the risks Jaron points out. But also we are just measuring content, like, it's truly experimental.

11431   So, for those who provide Internet service, which is really a telecommunications service, we're measuring content not for nothing.

11432   THE CHAIRPERSON: When I said at no cost, I meant no cost to the user. You are absolutely right, measurement is not free, I don't disagree with that at all.

11433   Okay. Thank you very much. Those are our questions for you.

11434   Oh, you have one. I kept looking around, no one was signalling.

11435   COMMISSIONER SIMPSON: Sorry. Clean up man here.

11436   THE CHAIRPERSON: Go ahead.

11437   COMMISSIONER SIMPSON: I've got my watch on, Konrad.

11438   I'm a writer, I'm a musician in my past life, content producer and am deeply passionate about the issue of how the Internet is having a flattening effect on revenues for the production community.

11439   And I think it started long before the Internet, when you look at what specialty television started to do, it didn't line producers' pockets with gold, it created demand for more content, but unfortunately fewer eyeballs, greater number of channels had the beginning of this effect and I think the Internet's finishing it off.

11440   So, with that said, the problem I'm having is that, you know, when I hear an ISP say, look, we're just the operator of a dumb pipe, to me that's like saying, look, I just built this highway and I can't help it if people are getting in their cars and they're crashing into each other and some people are stealing other people's cars, and a lot of them are going over the speed limit.

11441   I'm having -- and I understand that that's not your fault, but it seems that the Internet is bringing about a condition that I don't quite as a regulator understand.

11442   We have the technological capability to counterfeit money, yet most people don't. There's hardly a rule in this world that can't be broken, yet the Internet seems to be creating a pervasiveness to take other people's content, I agree with you, buy it, but then share it.

11443   Now, you know, Mr. Lanier, I know you're not a sociologist, but you said you are an artist. Could you sort of finish off this presentation by giving me your understanding of where this might end, or is this the end for the production community?

--- Laughter

11444   MR. LANIER: Well, first of all, I say that there's tremendous uncertainty and I say that with hope because I'm not pleased with the current situation. So, I find hope in the uncertainty.

11445   I am not pleased that recorded music is earning a 10th of what it used to because I used to earn more money from my recorded music and, so, I'm very, very sympathetic to that problem.

11446   What I am aware of is that technological change does bring radical new opportunities and one possible future we might enter is one in which certain traditional formats, the television show, the piece of recorded music, never recover the commercial status they once had and yet those creators are able to do what they do in an altered way in a new format that does have commercial validity and perhaps even better than it ever was.

11447   And we're starting to see a little bit of this. For instance, many musicians can earn some money by placing their music within a video game, which is a new thing.

11448   Now, I have to say at this point there's not enough of that to compensate for what's been lost, but as we extrapolate this into the future, I can see this becoming a big enough deal that it more than compensates and we enter a new golden era for creative people.

11449   The future that I would like to see come about is one in which creative people earn more money than they ever did before rather than less because this is the direction civilization and the human spirit should take in the long term, this is the gift that technology should give to all of us, this is what -- this is the direction we should be headed.

11450   I just think fundamentally if that's not where we're going, what are we doing all...

11451   So, this is certainly the future we have to seek, but unfortunately the -- or perhaps fortunately, depending on your point of view -- the ways that the technology evolves and the ways that it affects the human community and human culture are really unpredictable and even the very most seasoned people and the very smartest people involved in new media are often surprised and quite profoundly.

11452   And right now the situation is not so good, but we have no where to go but up. I'm very, very hopeful. I think that if we let the system evolve some more by pushing the technologies at the peripheries and the infrastructure that connects them, I think we're bound to come up into a better situation, and I hope that both of us will be selling music again before too long.

11453   THE CHAIRPERSON: Okay. Thank you very much.

11454   Thank you for making this expert witness available and I apologize for butchering your name. I'm used to calling you Theresa, so...

11455   MS GRIFFIN-MUIR: Theresa's great, thank you.

11456   THE CHAIRPERSON: Thank you very much.

11457   In light of the fire drill that we had, et cetera, I think what we'll do, we'll break now and resume at 1:30 and we'll try to squeeze everybody into the afternoon.

11458   Thank you.

--- Upon recessing at 1203

--- Upon resuming at 1331

11459   THE CHAIRPERSON: Okay. Madam Secretary, let's go.

11460   THE SECRETARY: Thank you.

11461   I will now invite as a panel the next participants, Canadian Association of Internet Providers, RipNET Limited and Barrett Xplore Inc.

11462   We will hear each presentation which will then be followed by questions by the Commissioners to all participants.

11463   We will begin with the presentation by the Canadian Association of Internet Providers.

11464   Please introduce yourself and you will have 10 minutes for your presentation.

11465   Thank you.

PRESENTATION

11466   MR. COPELAND: Thank you.

11467   Mr. Chairman and Commissioners, I'd like to thank you for providing us with an opportunity to appear before you today.

11468   My name is Tom Copeland, and I'm the Chair of the CAIP Board and I'm also the owner of Eagle.ca, a small independent ISP in Cobourg, Ontario just off the 401 about an hour east of Toronto.

11469   With me today is Brent Wennekes, CAIP's special project manager and Brent is here in Ottawa.

11470   Let me begin by telling you a little bit about the Canadian Association of Internet Providers and our members.

11471   CAIP was established in 1996. Our mission is to foster the growth of a healthy and competitive Internet service industry in Canada through collective and cooperative action on Canadian and international issues of mutual interest.

11472   CAIP membership comprises independent and independent-minded commercial ISPs and enterprises interested or involved directly or indirectly in the ISP business.

11473   We count as members large and small ILECs, small cable companies, voice-over-Internet providers, web hosting companies and Internet access providers.

11474   In 2004 CAIP became a division of the Canadian Advanced Technology Alliance, or CATA Alliance, which is Canada's largest IT association.

11475   CAIP is a collective voice of ISPs reaching across Canada. Early in our history we established the first code of conduct for ISPs. This became a model for other Internet associations around the world.

11476   In the last 13 years we have had substantial influence on the development of the Government of Canada's Internet policy, particularly in the area of self reliance -- of reliance on self-regulation and the role of ISPs in promoting Internet child safety.

11477   CAIP has participated in the work of the National Broad Band Task Force. We were members of the Federal Anti-Spam Task Force and along with the R.C.M.P. we established a multi-sector coalition to combat online child exploitation.

11478   This group has now evolved into the Canadian Coalition Against Internet Child Exploitation and is comprised of governments, law enforcement, the Internet industry and NGOs working under the auspices of Cybertip.ca, Canada's Internet tip line, all working together to make the Internet a safer place for our families.

11479   CAIP has also played a lead role in the application of the law to the online activity of Internet users. It was CAIP that ultimately convinced the Supreme Court of Canada to rule in 2004 that ISPs do not face copyright liability for the communication of music over the Internet.

11480   Mr. Chairman, I think it's worth noting how CAIP's members contribute to Canadian culture.

11481   While our members are both large and small, the vast majority of them have annual revenues of less than $5-million, many with revenues less than $1-million.

11482   In many markets, CAIP members were the first to bring the Internet to their communities, some as long as 15 or 16 years ago. They provide services to municipalities, charitable groups, small businesses and individuals.

11483   I'm one of those ISPs. I founded Eagle.ca 14 years ago. We were the first ISP in the County of Northumberland and today we remain the only locally owned full-service ISP in the County offering dial-up, broad band and web hosting services.

11484   My wife is my working partner and we employ two more people in our Internet business.

11485   ISPs like Eagle.ca are the epitome of small business in Canada. They are owner managed, often mom and pop operations, with family members as employees. They are often located in rural areas in small towns and they employ people from those communities.

11486   They contribute to the social fabric of those communities through participation in service clubs, sponsoring of sports, the arts, education and other community activities.

11487   In their home towns, they are community leaders, they truly give back to their communities. They are part of the fabric that is Canadian culture.

11488   Many of our members also serve metropolitan areas where they have carved out niche markets serving specific industries, ethnic groups or providing unique and innovative services that the incumbent carriers have yet to bring to market.

11489   CAIP is opposed to and sees no need for broadcasting style regulation of the Internet such as content quotas. Indeed, none of the parties that have appeared before you in the last few weeks has made any credible argument to support that kind of regulation.

11490   This hearing has become about one thing and one thing only and that's funding, whether it's needed and, if so, where should it come from.

11491   I'm not here to debate whether the Commission is the authority to implement that sort of regulation or funding program. There are others you've heard from and will hear from that are far more learned than I in legal, regulatory and legislative matters.

11492   I'm not in a position to debate whether the funding of online content is needed, nor am I an expert on Canadian content.

11493   I will make just two comments about Canadian content however. We feel that to use the definition of commercial quality as the only measure of what is deemed to be Canadian is a huge mistake.

11494   Canadian individuals and businesses are putting as much, if not more information online that is worthy of the handle Canadian content than the multitude of sitcoms, dramas and documentaries that are traditionally supported through government funds.

11495   Furthermore, with some existing Canadian content being impeded through the traffic management practices of incumbent carriers, we cannot really consider questions about the future of such content without seriously considering network management practices at the same time.

11496   My role today is to help you better understand the impact that any potential ISP levy or tax would have on CAIP members. Before I do that, I'll tell you a bit about what CAIP members and our clients do with their broad band accounts.

11497   In the last few weeks you may have been led to believe that the only thing broad band connections are used for is the viewing of a very narrow selection of media rich content that is available online, content which you have been told needs to be supported through ISP levies, broad band taxes or user paid licences. Nothing could really be further from the truth.

11498   We'll readily acknowledge that broadcast quality content is available online, but my clients in my own business tell me that the bulk of their online activity is far less exciting than you might think. Some of them certainly download movies and listen to music, but most use their broad band connections for e-mail, banking, shopping, education, social networking, blogging and Internet telephony.

11499   Our business customers might never use their broad band connections to access the Internet. CAIP members have literally thousands of broad band DSL connections that are used by businesses to create wide area connections for their multi-outlet enterprises.

11500   Other businesses use their broad band connections as extensions to their telephone and computer systems, allowing their employees to work from remote locations. They also use their broad band DSL connections for video conferencing with overseas sales offices and clients.

11501   For some of our business clients, these broad band connections have been configured in a manner that precludes access to the Internet. No movies, no music, no commercial quality broadcast media will travel across those connections.

11502   This type of use of broad band connections is a growing market for many CAIP members.

11503   We've yet to hear what the tangible benefits of an ISP levy would be for Canada's knowledge economy, but I can tell you what the impact such a levy would be on smaller ISPs across this country.

11504   A three percent on revenues of $1-million would equate to the loss of one full-time job at a small or medium size ISP. It's equivalent to the cost of Internet transit purchased by that ISP. It would eliminate the marketing budget of a small ISP. It would mean a small ISP could no longer afford to contribute to the cultural fabric of their community.

11505   And, Mr. Chairman, speaking from experience, a three percent levy would be greater than the net profit of many small ISPs.

11506   Those five tangible outcomes will cripple the Canadian independent ISP market. As a result, Canadians and Canadian businesses will have fewer choices for their Internet services, and whether or not the cost of a levy were to be passed along to consumers, Internet costs will rise.

11507   Canadian innovation online will slow and those who do succeed will see their innovations commercialized by foreign firms.

11508   Mr. Chairman, CAIP members don't want to succeed at someone else's expense, nor should others succeed to the detriment of ISPs across this country.

11509   Shuffling a deck of cards still leaves one with 52 cards; playing the hand you're dealt sometimes means that we aren't always playing a winning hand, but to stack the deck to ensure that one always profits and one always loses, isn't a fair game.

11510   As smaller ISPs in a very marketplace, CAIP's members face challenges every day. Over the years, Canada has seen many small ISPs disappear. Those of us who are still here have met these challenges by being innovative and flexible and by finding ways to meet the needs of our customers in ways that big ISPs can't.

11511   In many ways, we are the sterling example of why the Commission's hands-off approach to new media was the right approach to take in 1999 and why it remains the right approach going forward.

11512   Thank you.

11513   THE SECRETARY: Thank you.

11514   I will now invite the second presenter, RipNET Limited. Please introduce yourself and you have 10 minutes for your presentation.

PRESENTATION

11515   MR. ROTHSCHILD: Thank you.

11516   Mr. Chairman, Commissioners, thank you for inviting us to appear at this important hearing.

11517   My name is Eric Rothschild, I'm the Managing Director of RipNET and with me today are my partners, Kingsley Grant on my right and James Wilson on my left.

11518   Kingsley is the founder and President of RipNET, James oversees sales and marketing.

11519   We are three of the four shareholders in the company. Kings' dad, Hunter Grant, chairs our board and he is the fourth shareholder in the company. He's out of the country, but he's online and monitoring these proceedings.

11520   RipNET is an independent ISP based in Brockville. Kingsley founded RipNET in 1994 as a division of the local newspaper that the Grant family owned for more than a century. The newspaper and RipNET were sold to Sun Media in 1998. In 2002, we bought RipNET back.

11521   RipNET serves a customer base that is almost exclusively rural, using a combination of licensed wireless, DSL and dial-up technology. RipNET is a pioneer in the use of licensed wireless to provide broad band connectivity to rural Canada.

11522   It was independent ISPs like RipNET that brought the Internet to rural Canada. Many forget that until the late 1990s telcos and cablecos didn't offer any services in small communities like Brockville, it was left to independent ISPs to pave the way and we're a vanishing breed.

11523   During the past decade, thousands of independent ISPs have disappeared, some through consolidation, many through bankruptcy.

11524   Independent ISPs became vulnerable as we evolved from dial-up to high-speed. The infrastructure required to provide high-speed was more complicated and expensive than was required for dial-up and high-speed also saw the arrival of the big boys, the telcos and the cablecos in small markets like Brockville. It's hard for a small, local company to compete with competitors like Bell, Rogers, Cogeco who bundle and discount their various services.

11525   I'm proud to say we saw the threat early, we realized RipNET's future lay with customers living beyond the reach of telephone and cable technology. We invested millions to build a wireless network to bring high-speed to rural customers.

11526   We're proud of the role we played in bringing high-speed to rural Canada and Barrett, to our left, has done much the same using wireless and satellite.

11527   However, in spite of all our best efforts, there is still gaps in high-speed coverage across rural Canada. The Eastern Ontario Wardens Caucus represents 13 counties stretching from Haliburton to the Quebec border. It estimates that 25 percent of the million plus people living in eastern Ontario are either unserved or under served, which means they don't have access to reliable high-speed connections.

11528   The Wardens Caucus recognizes that in rural areas download and upload speeds vary greatly depending on technology, network traffic and distance, often so-called rural high-speed connections are a little better than dial-up.

11529   It's expensive to build the infrastructure we need to reach rural customers and our ongoing operating costs are higher than urban players. We pay more for basic telephony than urban markets. We pay more for transport costs to connect to the Internet. Our backbone costs are much higher, yet our customers expect and pay monthly service fees equivalent to people who live in the city.

11530   We've read the submissions filed in these proceedings, and we have been monitoring many of the appearances over the past month. What is disappointing is that none of the people seem to recognize that there is a difference between urban and rural, or the business challenges faced by independent ISPs like RipNET.

11531   The call for a blanket levy on ISPs is overly simplistic. The situation is far more complex than one size fits all.

11532   For the record, RipNET opposes a revenue-based levy on ISPs. In part, it's because we don't need the added business challenge of having to make up the tax. But we also oppose it because it's not the best solution for the online environment.

11533   The challenges faced by ISPs serving rural Canada are significantly different from those of ISPs serving urban Canada. The low density of rural Canada, the vast geography, the difficult topography, combine to make it far more challenging for an ISP to be profitable and sustainable serving a rural area compared to an urban area.

11534   If the Commission decides to amend the exemption order and regulate new media activities, we think it should take into consideration the type of area that an ISP serves, the market size, and the ISP's revenues and profitability.

11535   The Commission has previously determined that market size or level of revenues can influence its approach to regulation. Some of the precedents include small market radio, small market television, independent Class 3 BDUs, and independent telephone companies.

11536   In these precedents the Commission recognized the unique circumstances under which small market players operate, and the important role they play in achieving the policy objectives of the Broadcasting Act and the Telecommunications Act.

11537   In its recent review of the regulatory framework for BDUs, the Commission determined that it was in the public interest to exempt BDUs with fewer than 20,000 subscribers.

11538   Industry Canada has established similar precedents. For example, companies like RipNET that hold licence spectrum are exempted from having to invest in research and development until their annual revenues meet a minimum threshold level.

11539   RipNET believes that it would be in the public interest for the Commission to adopt a similar approach in new media. If it chooses to impose new regulatory obligations on ISPs, or amend the exemption order, it should exempt small ISPs.

11540   How do you define "small"?

11541   In our original submission, we suggested ISPs with fewer than 20,000 subscribers.

11542   Yesterday we heard the CCSA suggest that any player not aligned with one of the major carriers or BDUs should be defined as small.

11543   Nordicity recommended the same definition.

11544   We support this expanded definition.

11545   For rural-based independent ISPs like RipNET, profit margins are small, the risks are high, and many small players have failed.

11546   We believe that the Commission should take this into account when it considers measures to promote Canadian content online. We think it is in the national interest for independent ISPs to continue to provide high-speed connectivity to rural Canada.

11547   Let's not institute measures that make it even more difficult and expensive than it already is.

11548   We thank the Commission for the opportunity to share our views, and we would welcome any questions that you might have.

11549   THE SECRETARY: Thank you.

11550   I would now invite the third presenter, Barrett Xplore Inc., to give their presentation.

11551   Please introduce yourself and proceed with your 10-minute presentation.

PRESENTATION

11552   MS PRUDHAM: Good afternoon, Mr. Chairman and Commissioners. My name is C.J. Prudham, and I am the Vice-President and General Counsel of Barrett Xplore Inc. and Barrett Broadband Networks Inc. We are commonly known as Barrett Xplorer, or Xplorenet is our brand name.

11553   Barrett's interest in this proceeding is a very narrow one, and I agree with everything else that has been said on the panel today, so we will keep this as brief as possible.

11554   Our comments will address a single issue, namely, whether the internet service providers should be required to support the development of Canadian new media content through the imposition of a levy on their internet access services.

11555   As set out in our December 5th submission, Barrett strongly opposes any proposal that would raise the cost of broadband services to Canadians, particularly those who reside in rural and remote parts of Canada.

11556   In our view, an ISP levy, or any other regulatory measure that has the effect of increasing the cost of extending broadband services to these regions, would be counterproductive to achieving the Government of Canada's objective of extending broadband services to all Canadians.

11557   Barrett's business plan is focused on bringing broadband services to rural and remote areas of Canada through a K-a band satellite service and a terrestrial wireless network.

11558   To date, we have invested over $100 million in private capital in extending broadband satellite and fixed wireless services to individual consumers and small businesses across Canada that have not been served by terrestrial cable or fibre networks.

11559   Barrett fills an important gap in the broadband infrastructure of Canada, a gap that traditional telephone and other companies have been unable to meet. The job of bringing broadband services to rural and remote areas of Canada is financially difficult, even without the imposition of a new levy on ISPs, which would increase our administrative costs and the price paid by rural consumers.

11560   The advocates for the ISP levy appear to base their proposal on two propositions: one, that all elements of the Canadian broadcasting system should contribute to the broadcasting policy objectives; and two, that imposing the levy on ISPs, rather than content providers, would be an administratively easier and more stable source of funding.

11561   With respect to the first point, Barrett would note that it is not part of the Canadian broadcasting system, and it should not be required to contribute to the creation of Canadian content for that system. Barrett is not a content provider, and we do not aggregate content on an internet portal for the use of our customers.

11562   The function performed by Barrett is that of a pure ISP. We are a common carriage function only. We do build and operate networks that extend the internet to rural and remote parts of Canada. Once the consumer is connected to the internet, we have no control over how they use it or what content they choose to access.

11563   As section 4(4) of the Broadcasting Act states very clearly, the Act does not apply to any telecommunications common carrier, as defined by the Telecommunications Act, when acting solely in that capacity.

11564   Barrett's sole function is that of a telecommunications common carrier, as defined by section 2(1) of the Telecommunications Act. As a common carrier, we are prohibited by section 36 of the Telecommunications Act from controlling the content or influencing the means or purpose of telecommunications carried by it for the public.

11565   The Telecommunications Act does not provide the requisite powers for the Commission to impose a new levy on common carriers in the manner proposed.

11566   Barrett respectfully submits that for ISPs that do not engage in the provision of programming services through internet portals, section 4(4) of the Broadcasting Act provides a complete answer. In these circumstances, it is respectfully submitted that the Commission has not been given the statutory authority to impose a new media levy on ISPs like Barrett, RipNET and others.

11567   The second rationale for the proposed levy is that it would be administratively easier and a more stable source of funding.

11568   While those may be good reasons for picking one valid funding source over another, they provide no rationale for the selection of a funding source that has no connection to the broadcasting industry.

11569   The internet is a telecommunications network used for the transmission of all forms of communication. What it is used for is up to the individual user.

11570   To date, the predominant use of the network has been for e-mail communications, social networking, research, and online business transactions.

11571   In rural or remote areas, we found that the internet is also used for education, telehealth or medicine, government services and other valuable public interest needs. It is also an engine for regional economic growth, and a vital communications link for economic activity. It brings Canadians in rural and remote parts of Canada into the global economy.

11572   A new media levy on ISPs would affect the price of providing all of these services, which have nothing to do with new media, and would add to the administrative burdens of ISPs, further increasing our costs.

11573   Moreover, because the cost of broadband service is higher in rural and remote areas of Canada than in urban areas, the levy would disproportionately affect Canadians in those rural and remote areas. Cost matters to these potential users of broadband services. A new ISP levy would act as a price barrier to potential users.

11574   It is a tenet of smart regulation that if regulatory intervention is required, a regulatory mechanism should be selected that will adequately fulfil the policy objective identified in the least intrusive manner possible, having regard to the distortionary effects on competition markets, the regulatory burden associated with the mechanism considered, and other unintended impacts of the regulatory intervention.

11575   This principle is to be found in the Government of Canada's External Advisory Committee on Smart Regulation, as well as in numerous other reports and regulatory reforms. It is also a principle in the Governor in Council's policy direction to the CRTC on Canadian telecommunications policy objectives.

11576   It is particularly important that when a regulation is designed to address some subset of an industry it is applied on an industry-wide basis. This is precisely the situation we face with the proposal to impose a new media levy on the ISPs. While it is important to note that some ISPs may be engaged in the provision of broadcasting, those ISPs that are acting purely as common carriers are not.

11577   The Commission, therefore, must be alert to the possibility that by casting the net too broadly, it is undermining very important public policy objectives both of the Commission and the Government of Canada.

11578   These policies include the extension of broadband services to Canadians in all regions of Canada, including rural and remote regions, and the importance of delivering high-quality, reasonably priced broadband services.

11579   The Government of Canada has recently announced a program to spend $225 million to support the expansion of rural broadband. The provinces of Ontario, New Brunswick and Nova Scotia have similar programs. RipNET referred to the EOWC program, for example.

11580   The imposition of a new levy would undermine the effectiveness of these programs, and undermine the announced objectives of improving availability of broadband to Canadians in rural and remote areas of Canada. It would raise the price of broadband services for all consumers, and would force those engaged in education, telehealth, libraries, public response services, and other activities to subsidize new media.

11581   Without broadband access, Canadians are missing out on much more than the ability to watch some Canadian programming, they are missing out on participation in more important social and economic aspects of our society.

11582   Imposing a levy on all ISPs and all internet users, therefore, fails to comply with the principle of smart regulation, and ignores the overarching policy objectives of improving Canada's broadband infrastructure.

11583   For these reasons, Barrett urges the Commission not to impose a new media levy. If the Commission determines that it is in the public interest to subsidize the production of Canadian new media content, we would encourage you to focus your efforts on the entities that are aggregating such content for distribution to the Canadian public and not on the passive telecommunications carriers who are investing their capital in an attempt to reach as many Canadians as possible with this vital infrastructure.

11584   Thank you for giving us this opportunity to present.

11585   THE CHAIRPERSON: Thank you for your presentations.

11586   First of all, you said that this hearing is really about funding, whether it's needed and, if so, where it should come from.

11587   Let me tell you, categorically, that is not the case. This hearing is about the two exemption orders.

11588   We raised six issues, and one of them was whether funding is needed or is desirable. So this is not a hearing about funding.

11589   Secondly, the only funding proposal that I have seen floating around is the Peter Grant opinion, which suggests that we put a levy on ISPs, but only to the extent that they distribute broadcasting. So it would not be on all of you.

11590   Let's assume, for argument's sake, that the Commission accepted that. There would be a levy only to the extent that you distribute broadcasting, not on all of your revenues.

11591   Thirdly, I think what Mr. Grant would say is that, obviously, there has to be an exemption for small ISPs, as we have done in all of our regulatory work.

11592   Just by way of background, I want to say that our focus here is on the two exemption orders -- one is 10 years old and one is 3 years old -- whether they are still appropriate, or whether they should be revised.

11593   All of this really boils down to: We don't know what is going on in new media, and part of the problem is because nobody can measure it.

11594   I have asked everybody else this question, and now I will ask you: Do you have any way of measuring what you are transporting, and what part of it can be considered broadcasting, and whether it is broadcasting that originates from Canadian sources or foreign sources?

11595   MR. COPELAND: With the technology that exists currently today, no, we do not have the capability to determine what type of content is flowing across the network.

11596   THE CHAIRPERSON: I see.

11597   And the same applies to both of you?

11598   MR. ROTHSCHILD: Mr. Chairman, to the best of our knowledge, there is no such technology today.

11599   THE CHAIRPERSON: Barrett?

11600   MS PRUDHAM: We can, over part of our network, identify the types of files that are moving across it but we cannot tell where it originated or what its content may be.

11601   THE CHAIRPERSON: But you could tell me -- could you tell me for instance, what percentage of your traffic is video and what percentage is the rest, whatever it happens to be, emails or --

11602   MS PRUDHAM: We can on part of the network, yes.

11603   THE CHAIRPERSON: Why do you say a part?

11604   MS PRUDHAM: Because of the different technologies we deploy we only have the technology to view what you might call traffic management on the satellite components. So we cannot tell on the terrestrial side of our network.

11605   THE CHAIRPERSON: Oh, I'm sorry. Sorry, I thought you were entirely a satellite provider.

11606   MS PRUDHAM: No, we are actually equally split.

11607   THE CHAIRPERSON: Okay, thank you.

11608   Louise, I believe you had some questions?

11609   COMMISSIONER POIRIER: Yes. Thank you for coming, all of you. We do appreciate.

11610   And you have to understand we do understand what's going on in the rural Canada, and most of us are really aware of the differences between urban and rural areas and the kind of services you offer.

11611   That being said I just want to make sure -- even though the Chair went over it -- I just want to make sure that the statement made by RipNET today in paragraph 30 saying that:

"Yesterday CCSA suggested any player not aligned with the major carriers or BDUs. Nordicity recommended this definition as well in its report. We support this expanded definition for exemption from any ISP levy."

11612   COMMISSIONER POIRIER: I wonder if you all agree with this?

11613   MR. ROTHSCHILD: (Off microphone)

11614   COMMISSIONER POIRIER: Yes. You do all agree with it. Thank you very much.

11615   Second question: Maybe it's more dedicated to Barrett but I would love to have the comments from the others. You do say on page 6 that there would be an administrative burden of ISPs further increasing their costs.

11616   Could you give us some more information about this burden?

11617   MS PRUDHAM: Well, we are assuming in order to apply such a levy that you would need us to identify what percentage of our traffic is video content, for example.

11618   Having recently answered the questions for this Commission on the other hearing that's coming up we can honestly say it is a great deal of work for us to look into our traffic and find out exactly which percentage is what type of content. That did take a fair amount of time and effort and resources that had to be dedicated to do that. If we had to do it on a regular basis that would involve having to hire new people to answer the question. It also requires systems. So for example, if you were to say we had to do it on our fixed wireless side of our business we would actually have to buy equipment and software to do so.

11619   MR. ROTHSCHILD: The question of software and hardware to handle these things is the starting point on this. You know if software existed -- if hardware existed that would allow us to look into the traffic we would have to get it and that's an economic issue for us. And then on an ongoing basis who is going to assemble the data; who is going to file the data, who is going to complete the Commission reports?

11620   I can tell you I found it challenging even to just file using my e-pass. I must be the only person who consistently has to get a new password and phone the administrators at the Commission. I have gotten to know the staff very well with the e-pass system because every time I try to use it it's a problem.

11621   I don't mean to make light of it, Commissioner, but I'm saying there is a real burden even if we could and we had the software and the hardware to do it.

11622   But I would like to take one opportunity to say one thing to what the Chairman said -- and I must say I had not heard till this point, Mr. Chairman. You said at the outset that if the notion of an exemption for small ISPs was obvious.

11623   And I have to tell you heartened I am to hear that because, obviously, we are here and we had never been under that impression till now. And we are delighted with your opening remarks, sir.

11624   THE CHAIRPERSON: Let me just say our regulatory policy for BDUs, et cetera, you know clearly if we did anything about ISPs along those lines it would be to sort of create an equivalency between BDUs and ISPs. As you in your presentation noticed, there is a 20,000 limit to the exemption, and I can't see how we logically could say we do that for BDUs but not for ISPs when they act as distributors, so hence my statement.

11625   MR. ROTHSCHILD: I think -- correct me if I am wrong, sir, but I believe this expanded definition, not aligned BDUs, is also one of the measures. There is 20,000 for a certain exemption order, but I think there is also a category where if it's not aligned with one of the major players as a BDU that it's considered a small player and that was what Nordicity was referring to.

11626   COMMISSIONER POIRIER: Just to add on one of the elements we are talking about, it's broadcasting naturally. And in your statement written you mention -- you state that:

"Media broadcasting is only one small component of network traffic." (As read)

11627   COMMISSIONER POIRIER: How can you evaluate this at this moment, and what do you think is going to happen in the future because the more speed you are going to be able to offer to the rules sector maybe it's going to increase a lot too.

11628   MR. ROTHSCHILD: I'm not sure what you are referring to, Commissioner.

11629   COMMISSIONER POIRIER: To the document you gave us in December.

11630   MR. ROTHSCHILD: Oh, yes.

11631   COMMISSIONER POIRIER: It's paragraph 33 in that document and there you say -- I want to give you the time to find it out, but you say it is only one small component of network traffic.

11632   MR. ROTHSCHILD: What I mean by that is that we see -- what we see going across our network is that there is email, there is web surfing --

11633   COMMISSIONER POIRIER: Yes.

11634   MR. ROTHSCHILD: -- and that sort of traffic going across the network. That's what we see and those do not comply -- conform to the definition of broadcasting.

11635   COMMISSIONER POIRIER: Okay. But there is still some broadcasting?

11636   MR. ROTHSCHILD: I would assume that there must be. We don't look inside the traffic but I would assume there must be. I would assume that people are looking at videos and looking at material that would conform with it, yes.

11637   COMMISSIONER POIRIER: Okay. Increasing the speed, I think, is one of the goals you have probably as ISPs so people can have access more and more to audio and video content.

11638   So don't you think it would be a matter of equity that if the traditional broadcasters subscribe to Canadian content that now that internet is involved into that kind of offering they should also contribute. Isn't it a matter of equity?

11639   MR COPELAND: I think one of the issues that of course we are up against in rural parts of Canada, as both of the other parties have suggested, is that because of the low population density it is incredibly expensive to expand our networks and to get the same return on investment that urban networks would be able to achieve and, as such, our networks tend not to potentially grow as quickly or we are putting a correspondingly larger reinvestment back into those networks because of that. And as a result, the cost of doing business in rural communities is more expensive.

11640   So yes, the bandwidth will increase as technology allows. Those of us using wireless technology though are certainly restricted by the current capacities of that technology which tend not to be as great as fibre. So it's a challenge for us and it does not occur as quickly in rural areas as it does in urban areas.

11641   COMMISSIONER POIRIER: Okay, maybe another question, Mr. Chair.

11642   Would you be against traffic shaping if it were to support and promote Canadian content?

11643   MR COPELAND: I suppose I would want to know what your definition of traffic shaping is before I would answer that, but I wouldn't want to prejudice one type of traffic over another, regardless of its point of origin or its purpose and creation. That's not what the open internet is about. That's not what our customers expect of us.

11644   MR. ROTHSCHILD: Commissioner, I agree with Tom that it's important for us to know. It's an open-ended question of saying would we support traffic shaping, not knowing what you mean by that. But as we said in our written submission, if there was a practicable means to ensure and promote Canadian content we wouldn't oppose it at RipNET.

11645   We think that -- we do not know the practical means, and I think that's what the Chairman has been trying to get at from the outset of this hearing. If you don't know what the traffic is and you cannot measure it how can you promote it? How can you shape it?

11646   But the principle of supporting Canadian content, of course we support Canadian content. We are proud Canadians and we are proud of the entire broadcasting and telecommunications system.

11647   MS PRUDHAM: I think there is a lot of things in your question.

11648   COMMISSIONER POIRIER: Yes.

11649   MS PRUDHAM: And part of it is obviously for another hearing on another day.

11650   I guess our view is that we are the carrier and not really looking at what the content is. As my colleague has just pointed out, and the Chairman's question points out, we can't see inside that pipe right now. It's not technologically possible.

11651   I can tell you that my first priority if I could see in the pipe would not be Canadian content. It would be to deal with the child exploitation issues because to me that's a more pressing concern. That's not to say that we wouldn't support Canadian content. Of course we would but if there were tools we would be using them for greater purposes at this precise moment.

11652   COMMISSIONER POIRIER: Thank you, Mr. Chair. I'm done.

11653   THE CHAIRPERSON: Thank you very much.

11654   Thank you for your submissions. I think those are all our questions for you. Thank you.

11655   Madam la Secrétaire, I think we will proceed right away with Bell, okay?

11656   THE SECRETARY: Thank you, Mr. Chairman.

11657   I will now invite Bell Aliant Regional Communications, Limited Partnership and Bell Canada to make its presentation.

--- Pause

11658   THE CHAIRPERSON: Okay. Let's proceed, Madam Secretary.

11659   THE SECRETARY: Thank you.

11660   Please introduce your colleagues and proceed with your 15 minute presentation.

PRESENTATION

11661   MR. BIBIC: Thank you, Madam Secretary, Mr. Chairman and Commissioners.

11662   I'm Mirko Bibic, Senior Vice President of Regulatory and Government Affairs at Bell Canada. I'm pleased to introduce our panel appearing on behalf of Bell Aliant and Bell Canada.

11663   Joining me today are, to my immediate right, Gary Smith, President of the Bell Video Group at Bell Canada.

11664   To his right is Veronica Holmes, Senior Director, Portal Content and Strategy at Bell Canada.

11665   To my immediate left is Denis Henry, Vice President of Regulatory and Government Affairs and Chief of Privacy for Bell Alliant.

11666   And to his left is Mike MacInnis, Senior Director, Regulatory Affairs at Bell Canada.

11667   We thank you for this opportunity to share our views on the important issues related to Canadian broadcasting and new media.

11668   The companies are active in the provision of internet access and wireless services, broadcasting distribution, both satellite and IPTV, and website services, sympatico.msn and alliant.net.

11669   Our experience in these areas informs our perspective on the issues under consideration at this hearing.

11670   The growth of broadcasting in new media is a potentially fundamental development in the evolution of the broadcasting industry. The opportunity exists to leverage the learnings from this proceeding so that the federal government can comprehensively review its policies and legislation with respect to both traditional and new media broadcasting. The Commission has undertaken this process to get ahead of the issue. We should take advantage of it in this manner.

11671   In large part, this hearing is focused on three questions: One, whether and how new media have impacted the broadcasting system; two, is there sufficient Canadian broadcasting content in the new media environment, and; depending on the answers to the first two questions should the exemption orders be modified and regulatory measures be introduced?

11672   And to be clear, Mr. Chairman, when I say regulatory measures I certainly don't mean to be inflammatory or assign any motives to the CRTC. What we are referring to is regulatory measures or any form of intervention, be it an ISP tax, an undue preference rule, reporting obligations and other measures that certain proponents have put forward during this hearing.

11673   With this as a backdrop, Gary will now discuss the first issue, the impact of new media on the Canadian broadcasting system.

11674   MR. SMITH: The overarching theme from the various stakeholders in this hearing is that new media have all the characteristics of innovations in an early stage of development; experimentation with business models, uncertain consumer demand, frequent technological advancements and a high degree of uncertainty in terms of the speed, scope and magnitude of the potential changes that may take place. But allow me to discuss each stakeholder group in turn.

11675   Many broadcasters have acknowledged that new media are having a positive impact on their business. By making traditional programming available online, broadcasters are extending their brand and building customer loyalty. At the same time, viewership levels for conventional television have remained consistent. According to BBM Nielsen, Canadians' per capita hours spent watching television in 2007-2008 season tied the highest year on record, with 26.7 hours of weekly viewing, or almost one hour more than the prior year.

11676   An oft-repeated theme is that broadcasters see new media as an opportunity rather than a threat. As the CBC, NHL, Score Media and others pointed out, new media are an extension of traditional broadcasting, not a replacement, and can increase traditional viewing audiences by offering a complementary "two-screen" experience. A number of other parties attested to the reality that most new media broadcasting is conventional programming repurposed for online consumption.

11677   The Commission has also heard the views of individual Canadians by their contributions to the online eConsultation and in their written submissions as part of this proceeding. Canadian consumers appreciate that they can now watch or listen to their favourite programs on their computer or mobile device whenever they wish. Consumers overwhelmingly say regulatory intervention in new media is unnecessary and inappropriate.

11678   You have also heard from the cultural and content production community. Many of these parties confirmed that new media is an opportunity rather than a threat, including the CFTPA, which spoke of "a promise of unprecedented economic and cultural dividends" from Canadian new media broadcasting.

11679   However, for the most part, the content production community shied away from acknowledging the positive, tending to characterize major unfunded/self-financed online success stories, such as Têtes à claques and Degrassi, as exceptions or isolated examples.

11680   However, the Commission has also heard of many other new media success stories such as Beowulf & Grendel, Sanctuary, ReGenesisTV, BiteTV, the successful new media efforts of the National Film Board, and the extensive new media initiatives of the CBC. Contrary to the evidence, however, the mantra of the production community has been for a regulatory fix.

11681   Most recently, you heard from broadcasting distributors and until yesterday an important fact had been lost in this debate. That is BDUs face more risks from new media's growth than do other traditional stakeholders.

11682   The traditional BDU platform is being bypassed by web properties. Broadcasters and Canadian content producers are beginning to distribute their programs directly to end users on the internet without needing to make arrangements with traditional BDUs. Such disintermediation poses the risk that new media platforms could begin to erode the value proposition of traditional television distribution services. Indeed, influential broadcasters, such as Scott Moore, head of CBC Sports, and Rick Brace, President of Business and Sports at CTVglobemedia, have publicly questioned the long-term viability of BDUs.

11683   As an example of disintermediation, many broadcasters today provide on an exclusive basis, traditional broadcasting content on their websites for viewing on demand. This includes content that has been carried by BDUs and, in some cases, has been funded by BDU contributions to the CTF. In other cases, this content has been distributed by our BDU businesses as a result of our must-carry obligations.

11684   Yet despite the risk of such disintermediation, we are not here to plead our case for protection through regulatory rules applied to new media, nor should other stakeholders. BDUs will continue to need the flexibility afforded by the exemption orders to innovate and mitigate these risks. Yesterday Rogers provided one model by which it intends to do so and other models will surely develop over time.

11685   However, if the Commission believes that regulatory measures are necessary to address the perceived risks posed by new media to the traditional broadcasting system, then it should ensure that such measures properly consider BDU disintermediation, for example by ensuring appropriate access to content.

11686   In summary, the largely positive submissions of the major broadcasting stakeholders are consistent with the Commission's May 2008 report, "Perspectives on Canadian Broadcasting in New Media". With the slight caveat that there is a risk of BDU disintermediation, the prevailing view is that new media are making a positive impact on the Canadian broadcasting system.

11687   Mirko.

11688   MR. BIBIC: The second key issue in this hearing relates to the availability and accessibility of Canadian broadcasting programs on the Internet. The evidence to date indicates that Canadian content is readily available on the Internet, and there are likely three reasons for this.

11689   First, it is relatively inexpensive and straightforward for content providers and broadcasters to put their content on servers that are connected to the internet.

11690   Second, for those websites that target Canadian audiences, like Sympatico/MSN and Aliant.net, it is in their commercial interests to provide content that is relevant to Canadians. In many cases, this is Canadian content.

11691   Third, in terms of accessing Canadian content, new media are infinitely more searchable than conventional platforms. Searching for Canadian content on television and radio broadcasts is impractical. On new media, however, it is as fast and simple as a Google search. In fact, finding Canadian content has never been easier.

11692   In terms of quantity, we believe there is considerable Canadian content available on the internet. However, it is simply beyond the industry's current measurement capabilities to accurately and reliably estimate the amount of Canadian content available relative to non-Canadian content, and the amount of Canadian content being consumed by Canadians. We appreciate that this lack of measurement capability has preoccupied the Commission. While we cannot solve the measurement problem, we can provide you with our understanding of what is technologically possible from both an ISP and a website perspective.

11693   The final question relates to whether regulatory measures should be introduced. Despite the ready accessibility of Canadian content online, and the absence at this time of mechanisms to measure the quantum of Canadian content, some parties have jumped to the conclusion that regulatory intervention is not only required, but required on an urgent basis. Specifically, the content production sector has argued that more funding is needed for Canadian content for new media platforms.

11694   The Commission should not be guided by the type of facile arguments in so many of the calls for more funding. In ACTRA's words, and I quote, "just give us the money." Frankly, I view this as highhanded and I think it does nothing to advance the public policy debate or ultimately the public interest. In our view, you should ignore calls of this nature. They are not credible; they are not persuasive.

11695   There will never be enough grant money available to satisfy those who pursue it. As ACTRA again so succinctly put it -- and I quote again, "The more money the better, Mr. Chairman".

11696   It's clear that support from the numerous available federal, provincial, municipal and private funds will always be considered insufficient by some. The reality is that with the newly-created Canada Media Fund, which makes available $134.7 million in government funding directly or indirectly to new media production, there have never been more resources available for Canadian new media producers. And this does not even take into account the significant funding available from private sources, such as the Bell Broadcast and New Media Fund.

11697   The production sector's choice of regulatory intervention is the imposition of a tax on internet and wireless service providers. While some would see the ISPs as an easy target for such a tax, frankly we seem to be talking about taxes a lot these days, what with taxing BDUs, taxing ISPs, fee-for-carriage, et cetera. Taxing ISPs in this context is neither legal nor logical.

11698   The legal problems of an ISP tax are well documented in our written comments, so I will focus my remarks on its public policy flaws.

11699   An ISP tax would get passed on to ISP customers. Consumers oppose such a tax, as evidenced by a recent Strategic Counsel survey commissioned by Bell and Rogers, which found 82 percent of Canadians unwilling to pay more for their internet access service to fund Canadian broadcasting content development for the Internet.

11700   An ISP tax would put pressure on investments in Canada's critical network infrastructures which benefit the broader Canadian economy. ISPs and wireless service providers invest hundreds of millions every year on their networks. Draining the supply of available capital via a tax will have negative impacts far beyond ISPs' bottom lines.

11701   An ISP tax would also be inconsistent with the federal government's policies to not raise taxes and to encourage the continued rollout of broadband networks through initiatives announced in Budget 2009.

11702   Even on a standalone basis, the proposed ISP tax does not make sense because it is a particularly inefficient way to achieve its purpose. As set out in a report prepared by University of Calgary, Professor Ken McKenzie, which we filed with our written comments, the economic costs of an ISP tax far outweigh any anticipated economic benefit.

11703   Perhaps the most significant flaw from our point of view is the fact that ISPs are not broadcasters or BDUs. Those who contend otherwise appear to confuse the role of website owners versus that of ISPs. Websites may have broadcasting content available and those websites may generate revenues from that broadcasting content and those websites may be owned by entities who operate ISPs like Bell, but that does not make the ISP undertaking a BDU.

11704   Unlike BDUs, ISPs play no role in developing, selecting or packaging programming content. ISPs compete on the price, quality and speed of their access to the internet, not on the basis of the content to which the user has access. Indeed, users have access to the entire internet with their ISP service. When Global makes episodes of the TV show 24 accessible on its website, it packages that content with advertising and determines the how, when and where of its availability. Global does not consult with ISPs in making such decisions. ISPs do not concern themselves with Global's marketing efforts.

11705   Given this, I'm generally surprised that there is any debate about which entity is a broadcasting undertaking. I can't think of any other situation where a company with no control over product, its availability, its placement and doesn't get paid for selling it would be considered a distributor of that product, as is suggested by some for ISPs.

11706   Another common argument is that ISPs are reaping financial windfalls from the growth in Internet traffic arising from new media broadcasting. In reality, that growth in video traffic has not translated into commensurate growth of either subscribers or average subscriber revenue for ISPs and WSPs. These growth rates have decreased over the same period, and the investments that ISPs and WSPs make in broadband networks every year dwarf any financial benefits from broadcasting on new media to date. In short, there is no correlation between the growth in video traffic and the benefits that are purported to accrue to ISPs and WSPs, and no justification for a tax on such a basis.

11707   In summary, the imposition of an ISP tax would, in our view, be bad public policy.

11708   Broadcasting on new media is at an early stage of development. While there are no concrete measurement methods at this time, the available evidence suggests that Canadian content is thriving and accessible. Measurement is clearly a challenge, but this too is symptomatic of new media's immaturity.

11709   Under the circumstances, it is impossible to conclude that a problem exists or even if it does that regulatory intervention would do more good than harm.

11710   But focusing on what we do not know and what should not be done misses the fundamental point about new media, that it is making a significant contribution to the objectives of the Broadcasting Act today in an unregulated environment. Consider the following. Hundreds of millions of dollars are invested by BCE alone every year to improve wireline and wireless networks. That, in short, is the significant contribution that we make as an ISP and a wireless provider and that we bring to the table.

11711   The internet and mobile networks provide new ways for Canadian content to reach Canadians. Traditional broadcasting distribution channels continue to be available and, in fact, have not even declined in the face of new media's growth. Without a doubt, new media allows broadcasters and content producers to reach Canadians more quickly and directly.

11712   Under the circumstances, the appropriate course of action is to maintain the new media and mobile exemption orders and continue to monitor the situation to ensure that new media develops on a healthy course without regulatory intervention. The Broadcasting Act does not mandate that anything be done to change those exemption orders and, based on what we have heard, we believe nothing should be done.

11713   This concludes our remarks and we, of course, welcome your questions. Thank you.

11714   THE CHAIRPERSON: Thank you for your very succinct presentation.

11715   You mentioned several times the issue of measurement and you said that you can provide us your understanding of what is technologically possible from an ISP and website perspective. I hope you will do that in a follow-up written submission and don't intend to do that here right now. But it will be very interesting to see that from both those perspectives.

11716   What I, however, would like to hear from you is a little bit on what we talked a lot about, as to what extent we can ascertain the traffic that you're carrying, do you know whether it is video, do you know where it comes from?

11717   You have followed the proceedings very closely, there has been a lot of talk about deep packet inspection and ISAN, et cetera, and whether a combination of the two can be used. We have heard from some people saying not at all, deep packet only lets you look at the header, et cetera. Some material which you tabled would suggest the opposite. Today I think it was MTS who suggested that actually you can use deep packet inspection, use it for security purposes to look inside the payload, et cetera.

11718   Can you give some clarification as to what you can't -- first of all, what you are doing right now and what you could do in order for us to have an idea what proportion of your traffic is broadcasting as opposed to whatever else it carries?

11719   MR. BIBIC: Certainly, Mr. Chairman. You have asked every intervener and frankly I have been watching some of it, not all of it, and I don't think you have gotten a straight answer to your questions. I'm going to give it a shot to try to put it all together.

11720   I spent a lot of time internally to come up with this answer and, of course, for more detail I would point you to our February submission in the network management proceeding. If you look at Bell's submission, pages 44 to 47, you will have an exposé of what DPI can do.

11721   But in summary form on the ISP side -- so we have a website, Sympatico/MSN, we can do some things there. But on the ISP side with deep packet inspection what we can identify is the traffic type, and that's through the packet header and protocol header, but we can't identify the specific information in the files, in other words, the payload. So we can distinguish between peer to peer, between file transfers, news, e-mail, Web traffic.

11722   But in that Web traffic, for example, we can't tell whether it is music, video, some other kind of video or text that is being sent. The reason for that is that at the moment the DPI units we have deployed in our network don't have the CPU processing capability and the operating systems to go a layer deeper and actually examine what is going on.

11723   Now, some people have referred to what can be done for intelligence or security, law enforcement purposes. Yes, we can examine the payload in those circumstances because these are one-off circumstances where you are basically capturing the information and you are examining it manually off-line.

11724   THE CHAIRPERSON: So you are being told what to capture and examine?

11725   MR. BIBIC: Correct. And it's very small. But we can't -- because of the processing capabilities of the DPI units, we can't actually in real-time examine anything more than an isolated instance.

11726   THE CHAIRPERSON: Okay. I'm not trying to -- under no circumstances do I want you to divulge anything that is national security, et cetera, but if I understand it, it's not that you look at your traffic and look for something that may come from terrorist sources, no, you are being told to look at the specific traffic emanating from this website or something to see whether it contains security information. Is that the type of thing?

11727   MR. BIBIC: No, that's not what happens. If law enforcement requires us to look at something we will look at it and we can because the processing capability allows us to do it in kind of an isolated instance, and again you are pulling it out manually and looking at it, but other than that we can't process all the packets that are going through.

11728   THE CHAIRPERSON: Okay.

11729   MR. BIBIC: So that's on the ISP side.

11730   Just a word while we're on the website, what we can do is we can track the number of unique visitors to our website, Sympatico/MSN, we can track the number of times specific content has been accessed, we can track the time of day of access, the name of the file accessed, the file type. But we can't track if it is Canadian content unless the supplier demanded Canadian content on our website because it is the content owners who would have to tell us this is Canadian or this isn't.

11731   THE CHAIRPERSON: Okay. The ISAN watermark is really a red herring because you can't -- it will be part of the payload and since you can't look into the payload, you don't know whether the watermark is there or not, if I understand it correctly?

11732   MR. BIBIC: That's on the ISP side, you are correct.

11733   On the website side, even if a content owner put in the ISAN on an Alanis Morissette video and said Alanis Morrissette is Canadian, thus this is Canadian content, we wouldn't be able to measure that on the website side today unless the content provider incorporated the ISAN watermark in the file name and we would have to invest in upgrading our measurement techniques to be able to read the file name.

11734   THE CHAIRPERSON: My second question, and then I will pass you over to my colleague, is you heard about the Rogers proposal which I interpreted as being essentially putting on like a cable PVR. Anything that you can watch on the cable you can also watch on the website free of charge because you are a subscribing member of Rogers.

11735   I asked MTS this morning whether they were looking at something because given that they distribute their BDU service not over cable but over the normal telephone wires, it would be the easiest thing, it seems to me, to also use it as a website, to use past episodes, et cetera.

11736   I know Bell Aliant does the same thing as MTS with different technology, but then I have visited both of you and been impressed by what you do.

11737   Are there any plans by you, Bell Aliant, to follow the footsteps of Rogers and develop something like this?

11738   MR. SMITH: Yes, Mr. Chairman. We have in fact already launched a service back in October 2008, which is called Bell TV Online, which is pretty much exactly what Rogers was describing yesterday but it is very embryonic.

11739   Currently it only contains content which complements our NHL Centre Ice package. So if you were an NHL Centre Ice subscriber you can get extra material just in the way that Rogers described yesterday within this environment. It was designed and has been implemented as a starting point to build more and more content in exactly the same way that Rogers described.

11740   THE CHAIRPERSON: So I have to be a subscriber on Bell ExpressVu and I don't have to buy the NHL package?

11741   MR. SMITH: Bell TV now, Mr. Chairman, but yes.

11742   THE CHAIRPERSON: Bell TV, sorry.

11743   MR. SMITH: Yes, that's correct. It is one of three different models that Bell operates. We have the Sympatico/MSN portal, which Veronica represents, and we also have the Bell Video Store which is a download to own and download to rent model for video downloads. So we have three different commercial models, three different Web properties in this area at the moment and it will be interesting to see which ones succeed over time.

11744   THE CHAIRPERSON: Bell Aliant, are you looking at this?

11745   MR. HENRY: We have not looked, to my knowledge, at the Rogers model and I would echo what I think I heard the MTS Allstream representative say, that one of the major stumbling blocks there, I think, would be the rights issues. It's hard to get those rights and most of those broadcasters have their own Web properties, so it's very difficult, especially for a company of our size.

11746   THE CHAIRPERSON: Okay, thank you.

11747   Len, you have some questions?

11748   COMMISSIONER KATZ: Thank you, Mr. Chairman. Good afternoon.

11749   I have a couple of different topics but maybe I will pick up on the Chairman's comment for a minute and build upon these models that are being floated around now, and the one that you mentioned that Bell TV is introducing as well.

11750   You also mentioned, Mr. Smith, the notion of disintermediation, which obviously is a word that -- it is the first time we have heard it but everything we have been talking about for the last two weeks talks about the perception of migration between traditional broadcasting and the new media, which has an element of disintermediation in it as well.

11751   The question is: How do you avoid being compromised and losing your core business as things move out as well and will someone be there to sort of eat your lunch and cut one part of the business out of the margin?

11752   I think in hearing the views of the creative industry, they have a similar concern and that is that if tomorrow the entire BDU business as it is defined today becomes a different name and a different moniker, the support mechanism that is there today, that they are getting today, won't be there tomorrow. If we just rename BDU something else and suddenly it is an IP-based platform, they lose that as well.

11753   Do you have any views as to -- this comes down to the issue of substitution versus complementary services. We have heard everything that is complementary is complementary but if it does transition into an environment where there is a different moniker to this service and it's no longer attracting the contribution, the creative industry will be disintermediated from that support mechanism that is there today, the 3 percent or the 5 percent or the 6 percent or whatever.

11754   Do you have any views on how to deal with that issue or is it an issue, in fact, from your perspective?

11755   MR. SMITH: Very much so. I think the risk of future disintermediation is there. It is happening today but only at a very small level. We are seeing a lot of broadcasters launch websites which contain content which is accessible to consumers, complete episodes of, for example, "24", popular shows like that. On CTV they have "Flashpoint" that was referred to in a previous intervention.

11756   But it doesn't seem so far that the existence of those properties is causing any material amount of leakage of viewing or revenue or subscribers from traditional BDU platforms. So at the moment it certainly appears to be complementary.

11757   If it does start to erode our business, then there is some risk and we would certainly -- as we said in our opening statement, we would like the Commission to bear that in mind should you feel that intervention is required.

11758   MR. BIBIC: Vice-Chairman Katz, just to fast-forward the tape to the point where if one day we get to that stage -- and I don't think we're there yet -- one has to examine what are the most appropriate public policy tools in order to ensure if we do as a public policy want to ensure that there is continued funding, what are the best tools available to make sure that funding gets into the right hands. To me it's not readily obvious that it should be the continuation of some form of BDU tax on some other stakeholder in the new media world.

11759   I will also point out -- that was my kind of position for down the road but in the here and now Minister Moore's announcement from a couple of days ago seems to me makes far more money available for the new media space than there were before because it effectively ensures that every dollar given from that fund is tied to TV, number one, but also is tied to one of the other screens, whether or not it be mobile or new media. So I think that is kind of an effective use of money, doubles down the money, so to speak, for new media content.

11760   COMMISSIONER KATZ: But surely you recognize that just as you and Rogers and this morning we heard Quebecor Media say the same thing, you are concerned about it and that is why you are looking at this more holistic access to the various screens for one price because the concern is that if you don't do that you may, in fact, start to lose part of your traditional business, if I can call it that, to this new form of business.

11761   MR. BIBIC: Well, we may, but on the other hand it may never become a substitute, in which case the risk that you are putting forward as a hypothesis may never materialize.

11762   Now, I am not quarrelling or criticizing the Commission for looking ahead and getting ahead of the issue because it wouldn't be my place to do that. I have criticized the Commission enough for not looking ahead.

--- Laughter

11763   MR. BIBIC: But based on the evidence that has been put forward in this proceeding, in the written proceeding and the oral part of the proceeding, I don't see any evidence that there is that substitution effect yet and it may never transpire.

11764   COMMISSIONER KATZ: Okay. I have a couple more questions.

11765   I want to go back to discussions I had, I guess it was two days ago, with the NHL and the notion of the NHL Mobile and Bell Mobility. Maybe you can shed some light.

11766   What value does Bell Mobility receive from that type of arrangement?

11767   MR. BIBIC: I don't have the facts available at hand to be able to discuss specifically the value you derive from the NHL content specifically but I can say, not unlike what Mr. Engelhart said on behalf of Rogers Wireless -- I would perhaps be a bit more charitable to my marketing colleagues, but the mobile -- the broadcasting content on our mobile platform is a very, very small component of our overall Bell Mobility business. It is really, really nascent. I don't think Mr. Engelhart overstated that point, I think he was bang on.

11768   COMMISSIONER KATZ: Yes, but I still want to understand it, as small as it might be.

11769   MR. BIBIC: Yes.

11770   COMMISSIONER KATZ: The customers that subscribe to Bell Mobility are part of a walled garden if they are accessing this NHL mobile site. So they can access this site presumably at a different value proposition than a Bell Mobility customer who has not subscribed to NHL Mobile?

11771   MR. BIBIC: No. Putting aside NHL Mobile for a second, let's just talk about the different broadcasting content and the different platforms we offer through Bell Mobility.

11772   So there is a walled garden that one can access where you can go through the walled garden and access the mobile portals of some of our broadcasting content partners. You could do that.

11773   On the other hand, one could easily -- as the Chairman put forward to Pelmorex the other day, one could easily use the mobile browser and bypass Bell content or Bell's preferred partners altogether and go search the contents you want on the wireless Internet, no problem.

11774   We also have two video services. One is called Live TV and another one is Video on Demand TV.

11775   So, for example, if you want to watch HBO content, we have something called Video on Demand, you press the buttons on your phone and you can get yourself, you know, HBO and there is some premium content.

11776   So for Live TV you pay $10 a month, you can access what is equivalent to either streamed TV or looped TV. For $8 a month you can get the video on demand content and on top of that, of course, you would want, as a consumer, to buy a data package, and most likely if you are going to engage in this kind of stuff you're going to want to buy an unlimited data package, so you pay a fee a month for the unlimited data package.

11777   So this brings me to the point of Mr. Temple from Pelmorex. What he said was complete nonsense. He was wrong. Because if you are a user and you have bought an unlimited data package, whether or not you are accessing Pelmorex on your own by bypassing Bell's content and using the mobile browser or you are going on and watching NHL Mobile or any other video service that we offer, your unlimited data plan allows you to access that content. Now, we would charge you an extra fee to get the Live TV or Video on Demand content but you have opted into that. I hope that clarifies things.

11778   COMMISSIONER KATZ: You still didn't answer my question. That is: What value do I as a customer of Bell Mobility receive by subscribing to something in your walled garden as opposed to not if I don't become an all in unlimited all-you-can-eat package customer? If I have to pay for what I consume and I buy so much capacity and so much usage, what is it that I'm not getting when I buy this NHL Mobile package? Am I getting faster speed, am I getting closer caching, am I getting more storage, am I getting faster access?

11779   MR. BIBIC: You are getting the content.

11780   COMMISSIONER KATZ: You are just getting the content.

11781   MR. BIBIC: You are getting the content. So you are paying for the unlimited data plan "X" number of dollars a month and then you subscribe to the NHL Mobile and you're getting the features of that service for that fee.

11782   COMMISSIONER KATZ: Okay. Now If NHL Mobile was readily available and I had to pay for it but it was in your walled garden as well as part of a package, I guess, of some sort, is there anything different that I'm getting as well or is it again just all the same thing?

11783   MR. BIBIC: No.

11784   COMMISSIONER KATZ: In other words, there is nothing that Bell is doing to change the product or the accessibility of the product?

11785   MR. BIBIC: No, there's nothing. So you can access The Weather Network through the walled garden on the Bell Mobility platform or you can bypass the walled garden and go search out ACME Weather, if it existed, and there would be no difference other than you are accessing The Weather Network content on the one hand and ACME Weather content on the other hand.

11786   COMMISSIONER KATZ: Okay. Some folks have come before us telling us that the current forbearance that exists for wireless does not take into consideration the risk of self-dealing which clearly exists in the wireline side. Do you have a view on that at all?

11787   MR. BIBIC: Well, we don't think it's necessary to reopen the forbearance decisions for wireless. There is no evidence that there is any problem. I don't know who on the Bell Mobility side we would self-deal with, by the way, with respect to content but that is a different story.

11788   At the end of the day I would subscribe to the view put forward by Rogers that if the Commission is going to go down the road of thinking about imposing undue preference rules in the new media space, it has to go both ways because, as Mr. Smith pointed out in answers to questions as well as in the opening statement, you know, at the end of the day we want content.

11789   We want content for the mobile platform and it's not always that obvious to get that content, especially if you are Bell Mobility and you're trying to get access to content from certain content owners who are based in Quebec and don't want to give you content because they plan on having their own mobile platform in the not-too-distant future.

11790   COMMISSIONER KATZ: I think it's clear there are some people in the industry that are more vertically integrated than others and so there is a potential of self-dealing that may, in fact, not be self-dealing, may be totally arm's-length, but the reality is the perception out there may be somewhat different. So they have put this proposal back to us to consider as part of this proceeding since we are looking at the exemption orders, whether it made sense for us to take a look at it if, in fact, it wasn't already there.

11791   MR. BIBIC: If you are going to go there, it should cut both ways.

11792   COMMISSIONER KATZ: Okay. One of the things you have said here, and others have said, and you also said in your submission of December 5, I guess it was, that any tax on ISPs would be detrimental to the growth, evolution and investment in the Internet.

11793   How has the current BDU levy impeded the growth, evolution and investment in the infrastructure that you have today? You are paying it today as part of Bell TV. Have you been impeded at all from growing that business, competing in the marketplace, meeting competition in the marketplace by virtue of the fact that you have that obligation?

11794   MR. BIBIC: I will let Gary answer with respect to Bell TV and the investments on the TV side and then I will take a stab at the answer from the broader ISP perspective.

11795   MR. SMITH: The levy that we pay at the moment, the 5 percent, which is shortly to increase to 6 percent, is a very significant draw on our resources. As we have made clear to the Commission on many occasions, the Bell TV business has existed for 12 or so years now and we still haven't created a positive cash flow for our parent company.

11796   The effect of it is that it continues to drain cash from our business and that reduces the amount of cash available for capacity enhancements to carry HD services and to carry new services. Bell has made the commitment to fund the necessary capacity enhancements despite this pressure but it remains a strain to do that. We are not funding our business from profit.

11797   MR. BIBIC: Generally speaking, just from a broader macro BCE perspective, as you know, Mr. Katz, we all operate within well-defined annual capital budgets and within that well-defined capital budget one has to make some hard decisions and some tradeoffs. Being in those rooms, I know how it is and it is more difficult than I think some people imagine.

11798   When you have a 1 percent local programming improvement fund, a 5 percent BDU tax, imagine an ISP tax, wholesale access to fibre to the node networks, all these things have an impact on our investment decisions. They really do. I don't know how more emphatic I can be about that. Tradeoffs would have to be made.

11799   COMMISSIONER KATZ: Okay. You had mentioned earlier, Mr. Bibic, that the impact on broadband video broadcasting has been very, very, very small relatively speaking. ACTRA, I guess when they were here earlier last week or two weeks ago now, asserted that some 50 percent roughly of content delivered over the ISP is broadcasting. You're saying it is very, very small, they are saying it is quite large.

11800   Do you have any comments as to their findings? I guess it is a Cisco study that was filed by ACTRA to support that.

11801   MR. BIBIC: I think what I -- I'm not sure where I said it was very small. I think what we are saying is that the impact of new media on traditional broadcasting, so far they are complementary, new media and traditional broadcasting.

11802   What we, I think, also said is that the broadcasting content -- the revenues we generate from broadcasting content on mobile video is very small and we carry a small amount of broadcasting content on Sympatico.MSN and the fundamental point we were making is that the revenues that we generate from broadcasting content on new media is dwarfed by many, many degrees by the investments we are making in the network. That was the point.

11803   In terms of how much long form professionally produced broadcasting content is travelling our network, I don't know the answer to that. There is the Cisco number out there and Peter Grant latched onto it but I can't verify that.

11804   COMMISSIONER KATZ: Okay. My last question goes to the discussions we have had with some of the people appearing before us and that is the notion of a bit cap and whether Canadian content, however, if ever we can define what Canadian content is, would be removed from the cost to Canadians of accessing ISP traffic. Do you have any views on that?

11805   MR. BIBIC: Is this the notion of prioritizing Canadian --

11806   COMMISSIONER KATZ: Not prioritizing, basically saying anything that -- again, however we define it -- Canadian website, anyone who accessed the Canadian website will not be required to pay as part of the bit cap component of your services. I mean you have -- I don't know what it is here --

11807   MR. BIBIC: I understand. I understand. We don't think it's necessary to do that. By the way, assuming you can answer the threshold question of what is Canadian content.

11808   COMMISSIONER KATZ: Yes.

11809   MR. BIBIC: I don't think that the .ca identifies it. I used to do a little bit of this stuff, it has been five or six years, but I think that anybody can register a .ca top-level domain name even if they are halfway across the world.

11810   But assuming you can identify it, I don't think that is a necessary measure. I think we have to sit back and realize that if you impose measures of that sort in the absence of any evidence that you need it, there will be a distortionary effect on the development of commercial models in the Internet and I'm not sure we need to be at that -- we are not at that stage yet.

11811   COMMISSIONER KATZ: But it is one way of differentiating Canadian traffic from non-Canadian traffic if, in fact, the Commission or this government decides that maybe Canadians should be getting preferred access to Canadian content?

11812   MR. BIBIC: It is a way. I would not support it.

11813   COMMISSIONER KATZ: Okay. Those are my questions.

11814   THE CHAIRPERSON: Thank you.

11815   Michel...?

11816   COMMISSIONER ARPIN: Thank you, Mr. Chairman.

11817   I will take it from where my colleague Mr. Katz just left it. I am currently on the Bell Aliant page that is titled Games and Entertainment, "TV on my PC," on which I see I could subscribe to services for $9.95 a month with the first month free and the services that I could get for $9.95 per month are TSN, MuchMusic, MuchMoreMusic, Space, Tech TV, Outdoor Life Network, The Comedy Network, STAR! and CTV Newsnet -- all those ones are services from an affiliated company -- and finally you could also have CBC Newsworld in the same package.

11818   Isn't that a BDU operation, nonlicensed?

11819   MR. HENRY: Well, I think, as we said, the Web portals are much more in the nature of a broadcasting undertaking than the ISP business. This is a Web portal --

11820   COMMISSIONER ARPIN: Yes, absolutely. I agree with you on that.

11821   MR. HENRY: -- and it does provide what you said.

11822   Just to put a little context around it, it is not a very widely available service, it is only available in two of the Atlantic provinces. One of the reasons it is not all that widespread, frankly, is because of the rights issues I mentioned. We only have 10 channels, it is $9.95 a month and the 10 channels are not the most popular channels necessarily.

11823   COMMISSIONER ARPIN: I apologize, you have TSN, MuchMusic, The Comedy Network, Newsworld and CTV Newsnet are surely -- TSN is the top rated English-speaking specialty service in this country.

11824   MR. HENRY: And I can tell you we do not have that many subscribers on that service. It is not -- I hesitate to describe it this way but I think it is something like the Mobility service that we have heard described by Mr. Rogers and Mr. Bibic.

11825   COMMISSIONER ARPIN: But it's offered through your IPTV network.

11826   MR. HENRY: No, it's offered through the Internet.

11827   COMMISSIONER ARPIN: Through the Internet.

11828   MR. HENRY: Right.

11829   COMMISSIONER ARPIN: I apologize, through the Internet, yes.

11830   MR. HENRY: Right. But if you want to say the Web portal, and particularly that Web portal is operating something in the nature of a broadcasting undertaking, I'm not going to argue with you on that one. The ISP, though, which is --

11831   THE CHAIRPERSON: Can we expect your licence application in the mail?

11832   MR. HENRY: No, it's an exemption. It is subject to the exemption order and it hasn't been terribly successful.

11833   COMMISSIONER ARPIN: Now, similar questions regarding your Pay-Per-View operation and your NHL Online, which I'm currently looking on your Bell TV Online service.

11834   Is it also another operation that is generally speaking regulated? It's also my understanding that you have a Video-On-Demand service well.

11835   MR. SMITH: As I described it in answer to an earlier question, we have three properties. We have the Sympatico/MSN portal but in the context of your question we have the Bell Video Store which is a website which offers videos, Hollywood movies, et cetera, on a download-to-rent basis or a download-to-own basis and we have Bell TV Online which is a website which is made available under password access to Bell TV subscribers and in fact only to Bell TV subscribers that have NHL content -- or subscribe to NHL content, in which case they gain access to complementary and equivalent NHL content on the website.

11836   COMMISSIONER ARPIN: In the long run, if they are successful, could they eventually become a substitution to Bell TV?

11837   MR. SMITH: I think Bell TV Online is very much a service which is in embryonic form at the moment but it could evolve. If the model that the Rogers panel described to you yesterday is taken up by the industry, then Bell TV Online would follow that same model and in which case a customer would --

11838   COMMISSIONER ARPIN: So it would only be available to subscribers that -- what Rogers described is that service will be available only to, in your case, Bell TV subscribers.

11839   MR. SMITH: Yes. We have used the same logic.

11840   COMMISSIONER ARPIN: The same logic.

11841   MR. SMITH: We are trying to add value to our existing subscribers such that they are more loyal to the platform and stay with us for longer. We have other techniques for that. Our investments in HD, for example, are intended to persuade Canadian consumers to continue to be BDU subscribers for longer and not migrate their viewing to the Internet.

11842   COMMISSIONER ARPIN: My last question, Mr. Chairman, is: In describing the wireless walled garden, Mr. Bibic spoke about HBO. Were you talking about HBO Canada or the original HBO based in New York? It is in reply to a question.

11843   MR. BIBIC: The HBO service, if you -- it's a video-on-demand, it's an on-demand service on the mobile platform. If you subscribe to it, there are certain HBO shows available, Entourage, The Sopranos, Curb Your Enthusiasm and a couple of more. So it is not the actual HBO full network, so to speak, feed.

11844   COMMISSIONER ARPIN: Thank you.

11845   THE CHAIRPERSON: Okay.

11846   Louise...?

11847   CONSEILLÈRE POIRIER : Oui. Monsieur Bibic, dans votre document aujourd'hui, à la page 28, vous dites que si jamais -- et on est toujours dans le domaine des possibilités là, on n'est pas dans des affirmations -- si jamais il y avait une taxe qui serait chargée aux fournisseurs de services Internet, elle serait passée aux consommateurs.

11848   Donc, j'assume que vous voulez dire, si jamais il y avait une taxe d'un dollar par mois -- j'invente un chiffre là -- la taxe serait complètement passée aux consommateurs. C'est bien ça que vous voulez dire à ce moment-ci?

11849   M. BIBIC : Oui, sans doute.

11850   CONSEILLÈRE POIRIER : Oui. O.K.

11851   Au paragraphe 29 ensuite -- et c'est là pour moi que j'ai une incompréhension -- vous dites que s'il y avait une taxe, à ce moment-là, ça mettrait de la pression sur les investissements pour développer le réseau. Alors, je veux simplement qu'on m'explique, parce que vous n'êtes pas le premier à dire ça, il y en a plusieurs qui ont dit : S'il y a une taxe, on la passe aux consommateurs.

11852   Mais comment, à ce moment-là, si elle est passée aux consommateurs, peut-elle avoir un impact sur le développement du réseau Internet puisque vous avez des budgets pour ça, et la taxe serait complètement passée aux consommateurs?

11853   M. BIBIC : Je vais répondre de deux façons.

11854   Si on ne passait pas la taxe, évidemment, il y aurait un impact sur nos finances, et il faudrait faire des décisions en ce qui concerne le budget alloué aux investissements. Ça, c'est la première réponse.

11855   Si on passait la taxe, il y aurait peut-être, et il y aurait sans doute d'après moi, un effet où certains consommateurs décideraient de débarquer du système ou de réduire le forfait ou choisir un différent forfait qui est moins rentable pour nous. Donc, ça pourrait avoir un impact sur nos revenus aussi. Et voilà!

11856   CONSEILLÈRE POIRIER : Donc, c'est un effet indirect, ce n'est pas un effet direct, à ce moment-là? Ça pourrait et c'est une probabilité?

11857   M. BIBIC : Je dirais que c'est une probabilité.

11858   CONSEILLÈRE POIRIER : Merci beaucoup.

11859   THE CHAIRPERSON: Michel...?

11860   CONSEILLER MORIN : Oui. Simplement, je voudrais faire suite à la demande du président en ce qui concerne le DPI, le deep packet inspection.

11861   Il existe une autre technique. Je ne sais pas si vous y avez fait allusion dans votre mémoire relativement à l'autre audience. C'est le flow management.

11862   Moi, j'aimerais avoir... je ne sais pas si vous en avez parlé de cette technique-là, parce qu'on nous demande... beaucoup de gens se demandent, et pour nous aussi... vous devez superviser et être bien au fait de ce qui se passe dans l'environnement des nouvelles plateformes, mais si on ne le mesure pas quelque part, je ne sais pas comment on va arriver à le faire. Alors, c'est pour ça que la question sur le DPI est importante, et moi, j'aimerais ajouter la mienne en ce qui concerne le flow management.

11863   Est-ce qu'on pourrait plus facilement simplement identifier le contenu canadien avec un numéro ISAN, par exemple, comme on vous a posé la question en ce qui concerne le DPI?

11864   M. BIBIC : Mais en ce qui concerne l'ISAN et le DPI, j'avais répondu au président, quoique l'ISAN ou le code ISAN serait inclus dans le payload -- je ne connais pas le terme en français --

11865   CONSEILLER MORIN : (inaudible)

11866   M. BIBIC : Le quoi?

11867   CONSEILLER MORIN : (inaudible)

11868   M. BIBIC : O.K. D'accord. Et dans ce cas-là, on ne peut pas le mesurer pour les mêmes raisons que j'ai données au président.

11869   En ce qui concerne le flow management, il faudrait que je m'engage à vous répondre par écrit.

11870   CONSEILLER MORIN: Parce que ma compréhension, le payload en ce qui concerne la technique de flow management, on ne voit pas voir à l'intérieur, comme on doit le faire avec le DPI.

11871   M. BIBIC : Je m'engage à vous revenir par écrit. Je ne sais pas la réponse.

11872   CONSEILLER MORIN : Merci.

11873   THE CHAIRPERSON: Okay, thank you. Bell Aliant, just one last clarifying question.

11874   The website that you described as a BDU, TV on my PC for $9.95, do I have to subscribe to your existing BDU service in order to buy this or do I just have to be a high-speed customer?

11875   MR. HENRY: Just a high-speed Internet customer.

11876   THE CHAIRPERSON: So I don't have any cable or IPTV, I'm your customer for normal Internet access and I can buy this?

11877   MR. HENRY: That is my understanding. If I'm wrong I will get back to you but that is my understanding.

11878   THE CHAIRPERSON: Okay. Thank you very much.

11879   We'll take a 10-minute break and then we will hear from the next one.

--- Upon recessing at 1506

--- Upon resuming at 1517

11880   THE CHAIRPERSON: We save the most difficult ones for the end.

--- Laughter

11881   LE PRÉSIDENT : Madame la Secrétaire, allons-y.

11882   THE SECRETARY: We will now proceed with our last presentation of the day, TELUS Communications Company.

11883   Appearing for TELUS is Michael Hennessy.

11884   Please introduce your colleagues and proceed with your presentation.

PRESENTATION

11885   MR. HENNESSY: Good afternoon, Mr. Chairman, Commissioners.

11886   My name is Michael Hennessy and I am the Senior Vice President, Regulatory and Government Affairs at TELUS.

11887   With me on the panel today, on my right, are Ann Mainville-Neeson, Director Broadcast Regulation at TELUS; and on my left Dr. William Lehr, an industry economist and consultant with over 20 years experience in the Internet and telecommunications industries. He is currently a research associate at MIT.

11888   It has long been the position of TELUS that the Internet and digital media present significant opportunities for Canadian citizens. The significance of the opportunity lies in the ability for Canadians to create and post content on a local, national or global scale at a far lower cost than ever before.

11889   TELUS has also advanced the position that the boundaries of digital content go far beyond the domain of broadcasting. Throughout this hearing the Commission has heard diametrically opposing views on this point. Those in favour of regulatory intervention promote an ill-defined concept of "new media broadcasting" which is so broad at times as to include virtually all audio-visual content distributed online. This is a cause for great concern for TELUS because it is clearly intended to justify regulatory intervention that is unwarranted, improper and illegal.

11890   Clarity around definitions is not the only thing absent from this proceeding. There is a virtual absence of the younger "net" generation that is online today, creating and making available digital media products. Instead, we are confronted primarily by an older generation of creators who talk in vague terms of a need for high value Canadian content online, as if the creations of the net generation have no value or substance.

11891   TELUS supports the development of a vibrant Canadian digital media ecosystem and is investing billions of dollars to construct the networks that will support it. Over We are spending hundreds of millions in our over $2 billion CAPEX in this year alone. However, the ecosystem, including what many may or may not view as broadcasting, has to be based on a holistic industrial strategy that encourages private sector investment in next generation broadband networks and continues to encourage entrepreneurship as the catalyst to drive innovation and creativity.

11892   DR. LEHR: In a joint declaration by myself and my colleague at MIT, Dr. David Clark, which was submitted as part of this proceeding, we explained that the Internet has become the most remarkable platform ever known for the creation and distribution of information, entertainment and communications. By its very nature, the Internet provides more choice and diversity of content than any regulator could ever hope to mandate.

11893   But the Internet is so much more than a content platform. It permeates all aspects of commerce and society and is a critical component of economic, social and regional development and well-being. To suggest, as some do, that the Internet should be regulated as an extension of the broadcasting system misses the fundamentally revolutionary nature of the Internet.

11894   We believe that adopting the proposed ISP tax would be contrary to the best interests of Canada. It would harm Canada's Internet industry, while failing to effectively promote the success of Canadian new media content.

11895   Moreover, we do not believe that it makes any sense to extend a regulatory paradigm that was crafted before the emergence of the Internet.

11896   In our view, the Internet is increasingly, and appropriately, viewed as critical infrastructure for the global economy and society. Substantial investment in Internet infrastructure is needed to continue the improvement in the capabilities and services offered via the Internet.

11897   We agree that the analogy on which the proposed ISP tax rests is fundamentally flawed. ISPs are not like broadcast distributors with respect to where they sit in the value chain/production process for the creation and programming -- selection -- of media content.

11898   Even if one were to ignore the adverse impact on the Internet, ISPs are not structurally in a position to help promote the production and distribution of Canadian-based new media content. Indeed, inducing ISPs to play a more direct role in content management would likely have adverse implications for the Internet as a general platform for open electronic communications.

11899   With respect to traditional media industries, the Internet has given rise to wholly new types of mixed and multimedia -- for example, websites integrating video/audio, images, text and interactivity, virtual reality and multiplayer gaming -- as well as providing new ways to produce, present, and distribute traditional media. This has greatly expanded the range and diversity of sources for new media content, particularly end-user originated content, as well as new opportunities to promote, expand, and redistribute traditional programming.

11900   MS MAINVILLE-NEESON: TELUS believes that the right approach for stimulating Canadian digital media online is to take a hands off approach. It works. But if intervention is required it should be part of a national strategy that looks at the Internet holistically.

11901   In keeping with this holistic approach, TELUS submits that the following should guide the Commission:

11902   First, the future of digital content production is contingent on ongoing investment in the networks through which creators, content providers and digital consumers collaborate and interact. Stimulating investment in critical infrastructure like broadband is now a priority of government in Canada and the United States, as it is for many other countries around the world. Applying taxes or overlaying regulation on the process of innovation is counterproductive and harmful.

11903   Second, the application of the Broadcasting Act to the Internet is neither necessary nor appropriate. While some have argued that the Broadcasting Act is flexible enough to take account of new technologies like the Internet, and therefore can, and should, be applied to content provided over the Internet, we profoundly disagree.

11904   The Internet has fundamentally altered the way people communicate and do business, let alone how they consume and share entertainment and information. We submit that Parliament never intended that the Internet should be regulated under the Broadcasting Act and that no broadcast regulation should be imposed on it without the explicit direction of Parliament.

11905   Third, real change has only begun in terms of where digital content is heading. Most of what parties want to regulate now will have morphed into something completely different even before regulations could be enacted.

11906   The next evolution to a truly democratic and fully interactive Web 2.0 has only begun. TV online is not the end-game. "Broadcasting" is but a small part of the Internet today and one-to-many communications online will be increasingly subsumed by many more immersive personalized experiences which integrate software applications and content over fully interactive platforms to create a unique and often very personalized content experience.

11907   Fourth, there are no barriers to posting broadcast content online and no damage to the regulated broadcasting system for doing so. Any broadcaster or producer can put content online today without any intermediary. Most Canadian broadcasters have done so because they view it as a means of cross-promoting their linear television services and building audience loyalty. And they did not need ISP permission to do it.

11908   Moreover, while Canadian content on the Web cannot be easily measured, there are dozens of examples of new media success stories that have been brought to the Commission's attention in this proceeding. These serve as a mere sampling of the presence of Canadian content online.

11909   Fifth, the most efficient way to broadcast mass media content remains the regulated broadcast distribution system. The underlying economics of broadband do not support massive substitution between the Internet and the broadcasting system.

11910   MR. HENNESSY: Finally, ISPs are not aggregators of broadcast content and should not be improperly described as BDUs. Simply put, ISPs and WSPs, with very limited exceptions like MobiTV, are not engaged in broadcast distribution.

11911   ISPs, in their role as carriers, do not decide what content is distributed online by broadcasters nor receive revenues from the distribution of such content by third parties. Those aggregation and distribution functions rest with companies like YouTube or CBC.ca. But, to be clear, we do not support a tax on any broadcasters and aggregators that are willing to experiment online today. Their presence is simply more proof of the success of the Exemption Orders.

11912   TELUS submits that its time to challenge the very convoluted logic and definitions that threaten to turn the Internet on its head. Proponents of importing the old rules of TV broadcasting into the new online world make unverifiable claims such as up to 70 percent of the traffic online is video and most of that video is broadcasting.

11913   This of course helps support the conclusion that since ISPs provide access to the Internet, which is apparently mostly broadcasting, according to them, then ISPs are akin to broadcast distributors and therefore should pay at least half of the online TV tax. Wrong, wrong, wrong.

11914   Defining ISPs as BDUs simply in order to tax them is complete nonsense and reminds me of the famous Monty Python skit about justifying burning witches because they are just like ducks.

11915   The premise is as follows:

11916   In medieval times -- it's Mr. Denton, okay.

--- Laughter

11917   MR. HENNESSY: In medieval times, in order to --

11918   COMMISSIONER DENTON: I knew you were going to do something, Hennessy, but this is good.

--- Laughter

11919   MR. HENNESSY: In medieval times, in determine if a person was a witch or not they were thrown into a pond and if that person floated just like a duck then it was fair to conclude that that person was made of wood. because both ducks and wood float in water. And since wood burns. just like witches, then that person must be a witch, because witches are made of wood.

11920   While references to Monty Python might seem silly in a regulatory proceeding, is it any less silly than the argument of the creative community that the majority of the traffic online is video and that broadcasting is video and therefore ISPs are distributors of broadcasting and should be regulated as BDUs?

11921   Certainly this is a creative argument, but is it really a true reflection of the Internet?

11922   Video services use up more bandwidth than e-mail, bank transactions, travel searches, et cetera, but that doesn't mean that Internet subscribers value video more than these other services or value the connectivity to a global general purpose communications platform less. Surely just because some transactions take up more bandwidth than others does not mean that ISPs, the ducks, have now become witches to be burned by illegal taxation.

--- Laughter

11923   MR. HENNESSY: TELUS is troubled by the direction this proceeding has taken, at least in terms of the proposals put before the Commission.

11924   With all due respect, what is being proposed by some parties in this proceeding is nothing less than the regulation of the Internet, whether via quotas on online Canadian content, non-net neutral preferences for Canadian content online, or simply the application of a tax. It would be an understatement to say this would be a slippery slope. Broadcast-style regulation is not compatible with an open Internet, no matter how benign the initial intention to regulate.

11925   Let me be clear, you can't apply the old rules to new media without unintended consequences. In my opinion, you can't even properly define broadcasting in the online world without creating great uncertainty. Why? Because there is no bright line distinction between what is referred to in this proceeding as "new media broadcasting" and what sharp young digital content entrepreneurs are already creating in an open environment unfettered by burdensome regulation.

11926   It's easy to say Internet radio is broadcasting, except maybe when it's personalized on a one-to-one basis like Pandora. It's easy to argue downloads from iTunes to store on your iPod are not broadcasting. But what about subscription downloads that allow you to rent a library on a monthly basis? No one would support regulating electronic newspapers simply because these include video clips, no matter how professional, but the old definition could be used to do just that. And we don't want to regulate podcasts given their democratic nature, but many of these also include professional content.

11927   We submit that the lack of clarity that surrounds the definition of broadcasting is proof that the old rules won't work online. Even if the current Commission does not intend to regulate the content, once you assert jurisdiction the next Commission will.

11928   In light of the exponential increase of content online and the lack of any evidence of harm, TELUS urges the Commission to merely reaffirm the validity of its current New Media Exemption Order and Mobile Television Exemption Order. The decision not to regulate the Internet is, after all, viewed as a tremendous success story.

11929   Thank you. We would be pleased to respond to your questions.

11930   THE CHAIRPERSON: Thank you. Let's just go back to basics. This is not about regulating the Internet, it is revisiting the two exemption orders to see whether they are still valid or not.

11931   MR. HENNESSY: Agreed.

11932   THE CHAIRPERSON: The exemption orders originally. We advanced two reasons, saying it's evident to the Commission that the licensing and regulation of the class of undertaking will not result in a significantly greater contribution to the Canadian broadcasting system, and secondly, it is evident that undertakings operating under the exemption order will not have an undue impact on the ability of licensed undertakings to fulfill their regulatory requirements.

11933   I gather the substance of your submission is that both those conditions still apply?

11934   MR. HENNESSY: Yes, exactly.

11935   THE CHAIRPERSON: Okay. Let's look at, for instance, the VAP order. It does not have a reservation regarding section 27(2) or, to the layman, there is no reverse onus or no undue preference provision in there.

11936   Now, we have heard several people coming before us saying, it may not be an issue now but it could very well be one in the future that you self-serve, that an affiliated service or one that you own is there, you include it in your basic package, but that an unaffiliated service would not be an affiliate and therefore would have a disadvantage. The net effect would be the consumer would get a better rate using the affiliated service than the unaffiliated service.

11937   Do you see (a) the likelihood of that happening and (b) if we did adopt the same provisions for the Web as we did for the -- not Web, sorry, for the wireless order, the same as we did for the wireline, would that do any harm?

11938   MR. HENNESSY: I don't think, in principle, that's an issue, although I just make the point, I think that we are talking about the wrong thing because, as you say, we are focusing on broadcasting here --

11939   THE CHAIRPERSON: Yes.

11940   MR. HENNESSY: -- and 27(2) is a telecom rule. So I think the question should really be --

11941   THE CHAIRPERSON: Yes, but --

11942   MR. HENNESSY: -- should you apply -- I'm just getting to your principle.

11943   So section 9 of the Broadcasting Act, section 9, I couldn't think of anybody that, you know, would be particularly fussed, certainly in our wireless business, if section 9 was added to the exemption order.

11944   MS MAINVILLE-NEESON: If I may just add, I think that what I would suggest is that if there is an undue preference to be added to any of the exemption orders that we would have to make sure that it is crafted both ways. There would have to be access both for us to be able to get the content, because it is an issue that content is not readily available to all access providers similarly, and on the reverse side, for us to provide access to the platform.

11945   THE CHAIRPERSON: I don't follow that at all because you are effectively a quasi-monopoly and that's why you have these undue preference provisions. Certainly the provider of the content is not in that position.

11946   MS MAINVILLE-NEESON: In fact, to some degree they are, especially unaffiliated providers such as TELUS. We don't own any content business. In those situations we can very well be disadvantaged versus those who do have such affiliations.

11947   At this point, especially on mobile, it has been very difficult to be able to get access to the content for various rights reasons. Perhaps there is an advantage in giving an exclusive to another provider or perhaps for various reasons they choose not to provide access to a mobile platform and instead decide to go on their own websites. As we have indicated --

11948   THE CHAIRPERSON: But those are commercial decisions. The undue preference provisions are there so that you cannot use your unique position to impose an undue preference or favour yourself basically.

11949   MR. HENNESSY: Chairman, I understand the debate and other parties have made the point Ann makes. I think the reality is, you know, it's always nice to have balance rules but I'm not sure we really care because that is not what we see the future of mobile being about. So we will probably do so little of what you would define as broadcasting in the sense of, say, distributing a MobiTV, that it is kind of irrelevant because we are moving to having the same Internet experience on the mobile as you do online. So to me it's a legal distinction but I don't think we care.

11950   THE CHAIRPERSON: Okay. Now, there was also a lot of talk during the last two weeks about somehow -- this really gets us more into the area of net neutrality, which I will undoubtedly canvass that subject again.

11951   But is there any way in which one could sort of establish a fast lane for Canadian content or also remove the bit cap limitation that you have for people who download when we talk about Canadian content rather than other Canadian content so that given that, according to the proponents of this, Canadian content is not that much a portion of the Internet, this would give them a sort of leg up without imposing an undue cost on you as --

11952   MR. HENNESSY: Yes. I would say net neutrality is obviously an issue but we don't have to discuss that. I am going to give this to Bill but I would say that, you know, the fundamental problem from my perspective is that if you say I'm going to put a cap on things that say .com and I'm going to have unlimited access to anything that says .ca, then anybody that has any business opportunity they want to use unlimited bandwidth for will hide under a .ca thing.

11953   But in terms of whether or not it's even practical to do that, I think Bill is probably in a much better position to answer that.

11954   DR. LEHR: Well, I think you can answer that --

11955   THE CHAIRPERSON: Can you push your button, please?

11956   DR. LEHR: I'm sorry. I think from a practical point of view you can answer that in a couple of ways.

11957   First off, to do something like a fast lane like that where you are specifying a particular traffic management for a category of traffic that is going to be something that is going to be debated back and forth, is going to change over time, would be a very strong form of regulation of the Internet. That would not be in any way construed as light-handed because it would require lots of different sorts of metric capabilities to demonstrate compliance.

11958   The ability to work around something like that by changing the routing so, you know, you're not going through .ca, you are going through .com, or by using other sorts of techniques, there are many of those, and the ability to -- the incentives to do that would be relatively large and it wouldn't be something that end users, the mass public would have to necessarily do, because it would be just -- you know, when they tried to do some traffic management of some of the peer-to-peer programs based on noticing what ports they were using, the people that wrote those programs could change the programs relatively quickly and to the users it looks like an update to the software, so it just sort of happens.

11959   It only takes a few of those sorts of eager beavers out there to sit there and say there is someone that is trying to influence and control through the technology what I get access to and I really don't like that and I am going to play the arms race game. So we have seen this arms race game played out in many different ways.

11960   The dramatic failure to get any general agreement of a digital rights management system that actually works, you know, widely adopted and deployed by hardware vendors and customers and all that sort of stuff, is, I think, a very telling case of how difficult doing something like that would be.

11961   To conflate the question of a fast lane which takes you into the traffic management, just making a -- you are in the business of just moving bits, not worried about who owns those bits or where they came from, just moving bits efficiently. That is hard enough to do in a way that doesn't potentially raise regulatory issues and telecom space. To conflate that with the question of where those bits came from as part of, you know, doing something like a fast lane, I think, would be really problematic.

11962   Economists, I think, would tell you if you wanted to -- if you had an issue of -- you know, make the access, worry about getting the access, be competitive, and then worry about if there are people that can't afford to pay for that access, how to get them the money to help pay for the access or some other sort of subsidy issue and then you are down the path of what are efficient subsidy mechanisms, et cetera.

11963   THE CHAIRPERSON: Would it be an overstatement to say that your answer is similar to Bell's, who said technically -- I'm sorry, not Bell, Rogers, who said it's technically feasible but it isn't really worth the bother because there are too many incentives to circumvent and defeat that?

11964   DR. LEHR: Well, I have very great confidence in engineers if you well define a problem that they can solve the problem. The problem is that the solution that works today creates the technical reasons to do the workarounds and the workarounds happen very, very fast in Internet space.

11965   A couple of the critical levers you are trying to play with right now are traffic management, routing, investment and business models. All three of those are very, very unstable right now on the Internet.

11966   There is a general recognition that as we move to the next generation of infrastructure that the routing infrastructure needs to change and the engineers that are designing this are not really sure as to exactly what that means, but what it means probably is things much more fluid, things cached at different places within the Internet, et cetera.

11967   When you talk about business models, you have already heard testimony about the difficulties of figuring out how to do anything that looks like a traditional broadcasting business model on the Internet and make money. What it looks like is the greatest opportunity of media on the Internet is stuff that exploits what the Internet is really good at, which is interactivity and things that look very different but we haven't yet figured out what the special sauce is in any kind of general way. So that is really changing a lot too.

11968   And even some of the studies that you mentioned earlier about how much is video traffic, people have taken snapshots of ideas and there are two well-known ones, the one by Cisco and one by Eloqua that show there has been a lot of video. One thing that those studies made clear is that is a new phenomenon.

11969   THE CHAIRPERSON: Okay. Please --

11970   DR. LEHR: Sorry.

11971   THE CHAIRPERSON: -- let's stick to the question. I am at the end of 2 1/2 weeks of hearings.

11972   DR. LEHR: I apologize.

11973   MR. HENNESSY: Chairman, can I just finish back on the economics of actually doing that, assuming that you carve it out?

11974   THE CHAIRPERSON: Yes.

11975   MR. HENNESSY: The fundamental problem with having both capped services and then creating an unlimited tier is you actually have to charge more money for the unlimited tier. So if you want the Canadian tier, then the other tier, otherwise usage switches to the one that is cheaper. So it's the pure economic 101 free water thing. So it is kind of a self-defeating thing from a pricing perspective.

11976   THE CHAIRPERSON: Changing gears totally, a lot of interveners before us have said the problem with all of these issues is you segment them, you segment them on the basis of your legislative authority, whether it is in telecom, Internet, copyright, et cetera.

11977   Actually the Internet is a whole new game and you need a concerted cross-jurisdictional approach. Earlier, I think Tom Perlmutter from the NFB said it best. He said you really need a new digital national strategy, et cetera, and look at how these things interrelate and then sort of try to find a solution, which is somewhat similar to the holistic approach that you are advocating.

11978   MR. HENNESSY: Yes. No, I am in total agreement with that and I think that's really our message, is that you have limited tools that force you to look at the Internet through a certain prism and that in our opinion caused impacts beyond the jurisdiction of the CRTC. What we are really seeing in the sense of convergence in the Internet is not only convergence of technology, but a convergence of economics and social and cultural issues, and copyright issues.

11979   It may be -- and I think it's a point that you have often made -- that having a Broadcasting Act or a Telecom Act or a Copyright Act may not be conducive to achieving both the best economic results and the best public policy results, because you are forced to try to squeeze things into boxes that they don't quite fit into any more.

11980   THE CHAIRPERSON: Let's hope that the government listens to you and engages in such a cross-jurisdictional review of the legislation. I think that would be very useful, and actually have a strategy like Britain does or Australia.

11981   This brings me to your fifth point, which is:

"The most efficient way to broadcast mass media content remains the regulated broadcast distribution system."

11982   I think that is understood, from the evidence we have heard here.

11983   Your next sentence is what causes me the problem:

"The underlying economics of broadband do not support massive substitution between the Internet and the broadcasting system."

11984   What happens if they do, if the economics change around?

11985   First of all, how do we know? What is an indicia that that is happening, and once that happens, then, in effect, aren't we possibly in the position of being too late to do something about it, if we don't anticipate now what could happen?

11986   MR. HENNESSY: As you seem to accept as a starting point, today the cost of streaming increases with the consumption of a product. So the more popular you are, the more --

11987   It is cheaper to produce; it is more costly for the producer to distribute.

11988   That gets hidden in unlimited plans today.

11989   Let's assume, as I think you are saying, that we get over that hurdle, because the internet is dynamic, and those costs go down. I would say that where you move to is what we do today with our internet service. We use internet technology in a walled garden, based on the negotiation of rights and the resale of those rights -- collect properties, licences from the CRTC, to provide a broadcasting business.

11990   If you see the costs of transport going way down, and everything can move into a more open platform, the open platform still requires that the rights holders get to recover their cost of production, as much as they can. So there is a natural inclination to build fences around.

11991   If people build fences around rights, and it looks exactly like broadcasting, perhaps it is, and perhaps it is that much easier to regulate.

11992   I don't think the world will ever be that easy again, but I don't know if you --

11993   THE CHAIRPERSON: No, let's stay with where you -- I mean, you heard what Rogers said in their proposal, and, to me, that makes logical sense. They say: We have these BDU customers. If they want to watch it online, by all means, do. I will even give it to you for free, but you have to be a BDU customer first of all. This is basically an extension of my mandate, et cetera, and offering it on diverse screens.

11994   That makes a lot of sense, but the situation that you posit here is, actually, that people watch online rather than on the BDU.

11995   So the whole support system that we have built for the Canadian broadcasting system, in terms of access, content, exposition, et cetera -- everything goes out the window.

11996   MR. HENNESSY: I don't think so.

11997   To start with, what Rogers is proposing sounds very exciting to me. It sounded sort of like -- you will remember last year when you were very excited by our discussions about network PVR.

11998   THE CHAIRPERSON: Yes, this is cable PVR. That is clearly what it is.

11999   MR. HENNESSY: Using IP technology.

12000   So it is kind of the same idea, and the same fundamental problem that has stopped the network PVR will stop this. That problem is, unless the people that own the rights are willing to give the rights to the cable company, so that the cable company can monetize them in some fashion on behalf of the rights holders, they are not going to release it.

12001   Or, if they decide to put things on the internet, they don't necessarily need the cable company as the middle man.

12002   I think that Rogers is toying around with the network PVR idea, can we take it to a managed -- and I would think that they are kind of looking at a managed internet platform.

12003   THE CHAIRPERSON: If you listened to their testimony carefully yesterday, they suggested that this was a problem of the provider.

12004   HGTV, which they provide, you will be able to watch it on the internet, too, if you are a Rogers customer. But HGTV, in my example, would be paying for the streaming rights, not Rogers.

12005   That was quite clear.

12006   So it's a choice, presumably, for each specialty channel to make, or even a conventional channel: Do I want to be seen? Am I willing to pay for that or not?

12007   MR. HENNESSY: And, obviously, some of them are online today and some of them aren't, so that is some indication of the decisions they would make.

12008   If I could, I would like to make an analogy to an experience that we had a couple of years ago in the broadcasting business.

12009   One way we are struggling -- and all of us still do struggle, to some extent, with capacity for high-definition television. Some of the broadcasters, I think, led at the time by Citytv, suggested: Why don't we create an omnibus HD channel, where we can put everybody together on a couple of channels, and all of that sort of best prime time Canadian content will be available over HD.

12010   The majority of broadcasters said: There is no way that I am going to hand over control of my program, how I schedule the program, how I separate it, how I compete, and put it in a collective.

12011   I think what Rogers is trying to do is create a collective that somehow, at the same time, earns them money, and I wish them good luck, but I think that we could probably come back next year and still be discussing some of the problems that have delayed the launch.

12012   THE CHAIRPERSON: Your second sentence, "The underlying economics of broadband do not support massive substitution..." My problem is, what happens if and when? And part of it is knowing what's happening on the net, which takes us to the issue of measurement.

12013   I feel like a broken record asking everybody the same thing.

12014   MR. HENNESSY: We suspected that you would.

--- Laughter

12015   THE CHAIRPERSON: Good.

12016   Well, if you know the question, give me the answer.

12017   MR. HENNESSY: I am going to let Bill answer most of the question, but, as you may be aware, we have never invested in DPI, so we don't even have the tools that a lot of people say wouldn't work anyways.

--- Laughter

12018   MR. HENNESSY: Fundamentally, I think -- and I am going to be very quick on this point, because I don't want to get into Telemics -- in my mind, unless we can clearly define broadcasting, so we can identify what is broadcasting and what is video or audio content online, it becomes very difficult to build tools to measure it.

12019   That is a huge problem in my mind, to begin with, which is why we finished on that, as a kind of lead-in to this answer.

12020   But now I think I will hand it over to the expert from MIT, who knows much more about these things than I do.

12021   DR. LEHR: First of all, DPI is a relatively new technology, in terms of its widespread deployment. There is no general recognition or acceptance in the industry as to who has the right box that does it, and the people who are doing it are continuously having to modify their software to change how they are tracking stuff. There is no general agreement on what constitutes what kind of traffic, and the numbers we are looking at are changing very rapidly over time.

12022   There are certain snapshots that have been taken and made publicly available. The SISCO study is one. Another one is a study by Ellacoya. Both of these -- I have no reason to believe that the numbers are wrong, although both of the people who sponsored those studies have obvious incentives to show that what they are showing is true, which is that video traffic is growing very rapidly.

12023   But they are showing one thing, that the traffic is very dynamic, changing a lot, varies a lot across your network.

12024   To do the kind of thing that it sounds like you need to do, you need to know what is happening at the user, at the individual end user.

12025   And if what you really care about is what is the business model behind the end user, you have to --

12026   For example, there might be a business model that is streaming a bunch of -- 50 movies to a customer's DVR, but the customer is only planning to watch one of those. Do you count all of that traffic as video traffic?

12027   So assuming that you can answer those kinds of problems, which would be significant...

12028   There seems to be quite a bit of instability in the industry in terms of the level of employment of DPI and what they can do with it.

12029   The Bell Alliant answer that you heard earlier about the difficulty of doing Deep Packet Inspection in real time, and the overhead costs associated with that, that is my understanding of -- in fact, even if they wanted to do it, they couldn't do it.

12030   In the U.S. there is a huge amount of pushback, because of the fact that a lot of providers were using DPI at different levels, as to what are the privacy implications of that, so that may be --

12031   THE CHAIRPERSON: Yes, but on the technical side, can it be done?

12032   DR. LEHR: But the question, too, is -- I know, for example, that at least one of the vendors, the DPI technology that they were using, they are in the process now of replacing all of those boxes, because the next upgrade of their modem technology is inconsistent with the DPI boxes they have.

12033   What they are going to do for the next -- this is a big investment -- is all up in the air.

12034   Groups like the standards bodies, like the IETF and such, are in the process of trying to figure out what might be appropriate traffic metrics.

12035   We at MIT, for example, are launching a project now to try to get a better understanding of how to characterize broadband traffic, and this is just to characterize the traffic, not the content.

12036   THE CHAIRPERSON: If I hired you, and gave you access to the traffic from, let's say, for argument's sake, TELUS, could you -- by whatever methodology, I don't care whether it's Deep Packet or not -- could you tell me what percentage of it is video, and could you tell me what percentage of that video originates from Canadian websites and from foreign websites?

12037   DR. LEHR: I might be able to give you a snapshot. It wouldn't be contentious -- I mean, it wouldn't be uncontentious, and you would have well qualified engineers that would quibble with what I had done.

12038   So there would be a fairly large uncertainty associated with it.

12039   Having told you that it came from a Canadian website, that in no way would tell you anything about who owns that content.

12040   THE CHAIRPERSON: That's all I asked. I didn't ask you to draw a conclusion, I said "Could you do that."

12041   DR. LEHR: Yes, I believe that you could measure that, but you probably couldn't get it right now, if you wanted to know the end users. You could do it from certain nodes within a network, and it would be an approximation, which would have about the same validity as --

12042   THE CHAIRPERSON: When you say "approximation", what order of magnitude are we talking about?

12043   DR. LEHR: I honestly don't know that.

12044   THE CHAIRPERSON: Okay. If you have anything more that you want to provide in the written follow-up, please provide it.

12045   DR. LEHR: Okay.

12046   THE CHAIRPERSON: In paragraph 32 of your written submission you say something which really surprised me. You say:

"Much of the regulatory intervention proposed or suggested by some parties, or the CRTC in these proceedings, would be harmful to the overall goal."

12047   What regulatory intervention did the CRTC propose?

--- Pause

12048   MS MAINVILLE-NEESON: Are you looking at our December 5th submission?

12049   THE CHAIRPERSON: Yes.

12050   MS MAINVILLE-NEESON: Paragraph 72?

12051   THE CHAIRPERSON: Paragraph 32.

12052   If it's just a typo, that's fine, I don't mean to --

12053   I didn't think that we had proposed something, but if you read something into it, I would like to --

12054   MR. HENNESSY: No, I think that was in response to a submission or a report done by Eli Noam for the Commission that put forward the proposition of a tax.

12055   You could use, to be fair, the words "that the Commission has proposed for discussion."

12056   THE CHAIRPERSON: Okay. Thank you.

12057   As you know, Eli Noam -- all of these mandates, we don't --

12058   MR. HENNESSY: No, and we are glad to hear that you have taken that off the table.

--- Laughter

12059   THE CHAIRPERSON: Lastly, you heard just before you Bell Alliant pointing out to us that they have a website, and you don't have to be a member of the Bell Alliant cable distribution, you can subscribe to it, and by their own admission it is a video -- it functions like a video. It is a website, and you pay $10 and you get 10 channels, et cetera.

12060   It is extremely small right now, by their own admission.

12061   But if this kind of thing really took off, and you had, in effect, websites which functioned like BDUs, but were totally independent, they were not licensed, et cetera, doesn't there, at some point in time, come the point where we say that this has to be part of the Broadcasting Act?

12062   Because you are doing exactly the same thing as a BDU, except you are using the internet to distribute rather than the cable system or the satellite system, and you are not contributing to the system like the BDUs are doing.

12063   Now, that begs the question of what your contribution would be, and how you could enforce it.

12064   MR. HENNESSY: Yes, we won't go there.

12065   I am assuming that the channels they offer are more like, say, the channels you would see on a similar undertaking, like Joost, where they provide you with all kinds of different channels that you can stream on a more -- it's like an on-demand basis, as opposed to just providing on the web TV channels, Canadian TV channels, because I'm not aware of them getting the rights from TV broadcasters.

12066   THE CHAIRPERSON: Well, I can give them to you. They are TSN, MuchMusic, MuchMoreMusic, Space, TechTV, UltraLife Network, Comedy Network, Star, CBC Newsworld, CTV NewsNet.

12067   I don't know whether that's like truth or not, so I...

12068   MR. HENNESSY: All streamed in real time. So, it's just -- they've just put part of the TV distribution system online.

12069   THE CHAIRPERSON: Yes.

12070   MR. HENNESSY: Well, I don't have any relationship with those guys, so if you want to call them in and have a chat, that's...

--- Laughter

12071   THE CHAIRPERSON: I doubt if -- okay. Thank you.

12072   Because I just don't see the generic difference. If you can do it that way and it works --

12073   MR. HENNESSY: Yeah, I think this is --

12074   THE CHAIRPERSON: -- in this case it's the same as a BDU.

12075   MR. HENNESSY: This is the classic problem. There are things that -- you know, the more something looks like TV online, or radio, then there's a good chance it may well be, right, that it may well be broadcasting.

12076   And I think that was our point at the end. We chose to put our IP television in a managed network to control the quality of the product, ensure we have rights and the full suite of services and the ability to recover revenues for it.

12077   Certainly if -- you know, if you're saying Internet radio, like we are, is a broadcasting service, then it's certainly arguable. I think Dennis said it's under the exemption order, but I would be hard pressed not to say that that certainly sounds like broadcasting to me.

12078   THE CHAIRPERSON: Okay. Thank you.

12079   Len, you had a question?

12080   One second, please.

12081   Michel Morin, sorry.

12082   COMMISSIONER MORIN: My first question is, do you have a price at TELUS for an unlimited bit cap right now?

12083   MR. HENNESSY: Yes. Right now I think the only cap we have on is a reasonable --

12084   COMMISSIONER MORIN: Is 100, the most --

12085   MR. HENNESSY: Most reasonable use, is that...?

12086   COMMISSIONER MORIN: Yes. But --

12087   MR. HENNESSY: Oh. We have the CRTC list here that --

--- Laughter

12088   MR. HENNESSY: That was a trick question. Good answer.

12089   COMMISSIONER MORIN: So, my second one is, I'm wondering why the ISP, the Canadian ISPs many of them are offering 100 gigabytes bit cap. I look, it's not in this list, but Comcast in the United States offers a 200 -- not 200, 250 gigabytes.

12090   So, why this difference?

12091   MR. LEHR: The whole question about bit caps is, in some way it's very much -- people are very uncertain as to how this will play out.

12092   The fact is that the distribution of users is what's called fat tailed and there are very, very few users, although precisely how many users varies, that are going to hit that kind of limit and, even if they do, the carriers, even when they specify in their tariffs, the carriers differ very much as to whether or not they actually enforce it.

12093   So, sometimes they'll say -- some of them have very vague language, like if you're an excessive user we may disconnect you, or they used to say, call it sending a letter. They'd send you a letter saying, you're doing too much traffic and, you know, you're a customer at will and we're not happy with that.

12094   So, there isn't any hard science right now as to why 250 or 100 gigabytes, it's driven by marketing, what they think customers are going to want in the marketing.

12095   And it's not closely linked, especially with the way the technology is changing, to what is really costly or what is really useful for the carriers.

12096   Because if, for example, you send traffic at times when the carrier's not congested, then it's not as costly for them, but they're not necessarily -- they differ very widely as to how to think about that.

12097   So, there's no hard technical or even business understanding yet as to what an appropriate set of limits are, what end customers will want and go for and all of that.

12098   COMMISSIONER MORIN: But with the streaming and the movies, for a movie -- for one movie it's three or two gigabytes, approximately?

12099   MR. LEHR: Yes.

12100   COMMISSIONER MORIN: So, more and more the young people will get more and more movies and streaming a lot of programs bypassing the Canadian system.

12101   So, how do you see the future of the bit caps?

12102   MR. HENNESSY: Could I just -- one of the things that we -- and I agree with you, you know, I'm not going to say that you wouldn't see movies and things.

12103   But Bill and I were talking about this last night and some of the things you're starting to see are also like high definition video conferencing that, you know, he has at MIT and we have at TELUS now and the ability of people to use huge band width for actually person-to-person communications.

12104   Probably the No. 1 application today for very, very high-speed networks because of latency issues, you know, making sure there's no jitter, is multi-player gaming.

12105   So, it is clearly tremendously suitable for many forms of entertainment and information, as well as a lot of brand new services in terms of business communications, health care, that kind of thing.

12106   COMMISSIONER MORIN: In Montreal, for example, you can have an unlimited bit cap right now for $90. So, have you any plan to offer an unlimited bit cap?

12107   MR. HENNESSY: I think that our plans would be moving in the opposite direction, which is actually to cap everything, so that fundamentally we can make sure that what we call the abusers on the network are no longer using an excess amount of capacity for free.

12108   COMMISSIONER MORIN: Thank you very much.

12109   THE CHAIRPERSON: Tim, you've got a last question.

12110   COMMISSIONER DENTON: Mr. Hennessy, since we first started to play in this game a long time ago, I want you -- well, let me first conduct a thought experiment with you for a moment, just a thought experiment. Don't worry.

12111   The thought experiment is that the interpretation offered by other people of what constitutes broadcasting is, in fact, correct and that all full motion video and music sent across the Internet is broadcasting and, therefore, subject to our regulation.

12112   And by my calculation that law was written approximately -- well, since the time that law was written there's been 33,000 doublings of computer power on the net.

12113   Now, what are we as regulators to do with a law that seems rather clear to some that says that this stuff is broadcasting when technologically it was written in an entirely different era with entirely different assumptions?

12114   MR. HENNESSY: Yeah. So, assuming that, as you wish -- and I'm sitting in wonderland or on the other side of the looking glass.

12115   To answer your question, I would say the No. 1 thing you can do is, as you I think wisely said in your public notice, is report back to the government that the tools that they have provided you with to deal with the objectives of the Broadcasting Act -- and I think in some respects Madam Poirier has hit on this during the hearing, you know, there are issues of equity and public policy that extend beyond what you define, like diversity and choice and all these things. It's irrelevant in some respects whether or not they're in a broadcasting box, it's the ability of people to communicate, to create, to share ideas, to build businesses in a digital universe.

12116   And, you know, we believe that very much. And all we've ever said is that you don't have the appropriate tools right now -- or government perhaps is a better way to say it, government has not turned its head and created the right tools to: one, assess whether those public policy goals are still the right public policy goals; two, to assess whether or not they're actually being achieved quite well on the Internet which in many respects I think they are; and, three, to then say, what statutory tools, stimulus or whatever else do we need to apply to ensure that the digital content, digital media, digital production businesses of the 21st century achieve, you know, reasonable objectives in terms of wealth creation, viability, inclusion, regional development, all of these things.

12117   That would be what I'd say to government is, there are potential problems on the horizon -- because I think there's no evidence that anything has blown up yet -- and you should wrap your mind around this because the Internet digital media create value chains not just in the creative element but in terms of licensed applications, research and development, investment in networks, the ability of people to communicate, you know, growth, the list goes on, right. It's a holistic thing, it is mirroring the world we live in.

12118   And if you care about the future of the Canadian economy, this is probably in the long term more critical than the auto sector and something you have to start wrapping your mind around and you need to begin with probably statutory tools or flexibility at a minimum.

12119   COMMISSIONER DENTON: Thank you.

12120   THE CHAIRPERSON: Okay. Thank you very much. Those are our questions for you.

12121   I think this brings a conclusion our hearings.

12122   I want to thank all interveners for coming, it's been a fascinating hearing, we certainly have heard thoughts from all divergent views.

12123   And I want to extend to everybody on staff for having done a phenomenal job and presentation and putting the whole thing to us in a digestible manner so we could ask semi-intelligent questions.

12124   Thank you very much.

12125   I think that's it.

12126   My last word goes to you, Madam Secretary.

12127   THE SECRETARY: Thank you, Mr. Chairman.

12128   This does complete the agenda of this public hearing.

--- Whereupon the hearing concluded at 1611

   REPORTERS

____________________      ____________________

Johanne Morin         Jean Desaulniers

____________________      ____________________

Sue Villeneuve         Beverley Dillabough

____________________      ____________________

Monique Mahoney         Madeleine Matte

Date modified:

2009-03-12