ARCHIVED -  Transcript of Proceeding

TRANSCRIPT OF PROCEEDINGS BEFORE

THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

SUBJECT:

Licence Renewals for Private Conventional

Television Stations /

HELD AT:

Conference Centre

Outaouais Room

140 Promenade du Portage

Gatineau, Quebec

April 28, 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

Licence Renewals for Private Conventional

Television Stations /

BEFORE:

Konrad von Finckenstein   Chairperson

Michel Arpin   Commissioner

Len Katz   Commissioner

Peter Menzies   Commissioner

Rita Cugini   Commissioner

Candice Molnar   Commissioner

Louise Poirier   Commissioner

ALSO PRESENT:

Lynda Roy   Secretary

Stephen Millington   Legal Counsel

Valérie Dionne

Nanao Kachi   Hearing Manager

HELD AT:

Conference Centre

Outaouais Room

140 Promenade du Portage

Gatineau, Quebec

April 28, 2009

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PRESENTATION BY:

RNC MEDIA Inc. et Télé Inter-Rives ltée   258 / 1443

Rogers Broadcasting Limited and Rogers Communications Inc.   332 / 1813

Canwest Television Limited Partnership   433 / 2365

   Gatineau, Québec

--- Upon resuming on Tuesday, April 28, 2009 at 0901

1434   LE PRÉSIDENT : Bonjour, tout le monde.

1435   Madame la Secrétaire, voulez-vous commencer, s'il vous plaît.

1436   LA SECRÉTAIRE : Merci, Monsieur le Président.

1437   Alors, j'inviterais RNC MEDIA Inc. et Télé Inter-Rives ltée à faire leur présentation conjointe.

1438   Pour les fins du dossier, j'aimerais préciser que la présentation sera donc conjointe et non en panel, tel qu'indiqué dans l'Agenda.

1439   Alors, nous avons monsieur Marc Simard qui comparaît pour RNC MEDIA et Télé Inter-Rives. Monsieur Simard, s'il vous plaît, présenter vos collègues et vous disposez de 30 minutes pour faire votre présentation.

1440   MR. SIMARD: Mr. President, the last time that I had the chance to talk with you, it was at the last CAB Convention. At that time, my three daughters were not with me and everybody knows today that it's because they were having three babies at the same time but later this week they will be here and I hope that you will take care of them.

1441   THE CHAIRPERSON: Please present them to us, I would love to meet them.

1442   MR. SIMARD: Thank you.

PRESENTATION

1443   M. SIMARD : Monsieur le Président, mesdames et messieurs les conseillers et membres du Conseil, mon nom est Marc Simard et je suis le président et le chef de la direction de Télé Inter-Rives.

1444   Aujourd'hui, je suis accompagné, à ma gauche, de Pierre Harvey, directeur général de la station CHAU-TV de Carleton, et à ma droite, de Raynald Brière, président et chef de la direction de RNC MEDIA et de Pierre Brosseau, président exécutif du Conseil de RNC MEDIA.

1445   Télé Inter-Rives et RNC MEDIA sont les deux seuls radiodiffuseurs indépendants qui desservent les petits marchés francophones au Québec, au Nouveau-Brunswick et à l'Est ontarien, puisque les grands réseaux de télévision desservent principalement les plus grandes agglomérations du Québec.

1446   Les stations de télévision de RNC MEDIA et de Télé Inter-Rives sont affiliées aux trois grands réseaux de télévision francophone -- TVA, Radio-Canada et TQS -- et fournissent leur programmation en région en plus de diffuser des nouvelles locales et de soutenir les activités communautaires.

1447   RNC MEDIA est une entreprise de radiodiffusion bien implantée dans le marché francophone depuis plus de 60 ans. Elle exploite 16 entreprises de radio et cinq entreprises de programmation de télévision, et, à ce titre, elle est la titulaire de CHOT-TV Gatineau et de CFEM-TV Rouyn-Noranda, affiliées au réseau TVA, de CFGS-TV à Gatineau et CFVS-TV à Val d'Or, affiliées au réseau TQS, ainsi que de CKRN-TV Rouyn-Noranda, affiliée à Radio-Canada.

1448   Pour sa part, Télé Inter-Rives possède quatre stations de télévision dans le Bas Saint-Laurent et en Gaspésie : CIMT-TV à Rivière-du-Loup opère la station TVA; CFTF-TV également à Rivière-du-Loup, la station TQS; CKRT-TV, la station affiliée au réseau français de Radio-Canada; et CHAU-TV à Carleton, le réseau TVA.

1449   D'ailleurs, Télé Inter-Rives possède six émetteurs qui desservent la grande majorité des 224 000 francophones du Nouveau-Brunswick.

1450   Actuellement, Télé Inter-Rives et RNC MEDIA exploitent 53 des 65 émetteurs de la télévision généraliste privée francophone, comprenant l'ensemble des émetteurs du réseau TVA et de TQS, ce qui représente 82 pour cent du parc d'émetteurs francophones privés au Québec et au Nouveau-Brunswick.

1451   Avec cette importante infrastructure d'émetteurs de télévision, RNC MEDIA et Télé Inter-Rives desservent environ un million de personnes au Québec, au Nouveau-Brunswick et dans l'Est ontarien, soit 14 pour cent de la population francophone.

1452   Dans cette présentation, Monsieur le Président, nous aborderons les grands enjeux horizontaux identifiés dans la lettre du CRTC du 15 avril dernier.

1453   Cependant, nous répondrons uniquement aux questions qui nous concernent directement, soit celles sur:

1454   - le Fonds pour l'amélioration de la programmation locale;

1455   - la contribution à la programmation canadienne et locale;

1456   - les signaux éloignés;

1457   - la conversion au numérique; et

1458   - la durée de la période de licence provisoire.

1459   Raynald.

1460   M. BRIÈRE : Nous désirons saluer une fois de plus l'importante initiative du CRTC que représente le Fonds pour l'amélioration de la programmation locale, qui devrait apporter, selon nous, une aide précieuse aux stations de télévision locale desservant les régions du Canada hors des grands centres.

1461   Le Fonds est un instrument de premier ordre, croyons-nous, pour continuer à produire et à améliorer la qualité de la programmation locale canadienne, dont les bulletins de nouvelles locales, ainsi que pour diversifier la programmation en produisant de nouvelles émissions locales qui reflèteront et intéresseront nos collectivités.

1462   Cependant, nous tenons à signaler au Conseil que s'il advenait que nos stations de télévision locale actuellement distribuées sur les SRD cessaient de l'être, la survie même de ces stations serait compromise parce qu'elles ne seraient plus en mesure financièrement de desservir leurs marchés et d'utiliser, par conséquent, les ressources du Fonds, établi pourtant dans le but d'améliorer la programmation locale.

1463   Plus du tiers des foyers de nos marchés sont abonnés à des services de distribution par satellite.

1464   Pour CIMT et CHAU, deux stations de Télé Inter-Rives distribuées sur SRD, l'écoute provenant des satellites représente près de 1.1 million d'heures par semaine, soit 35 pour cent des heures totales au printemps 2008.

1465   Pour CHOT et CFEM, deux stations de RNC MEDIA, l'écoute provenant des satellites représente aussi près de 1.1 million d'heures, soit un pourcentage de 36 pour cent de ses heures totales.

1466   La perte éventuelle des heures d'écoute de nos stations provenant des entreprises de distribution par satellite au profit des têtes de réseau auxquelles nous sommes affiliés auraient des conséquences très graves sur nos revenus.

1467   Autant dans le cas de RNC MEDIA que dans celui de Télé Inter-Rives, le retrait des signaux de nos stations affiliées à TVA entraînerait des pertes annuelles de trois millions de dollars chacune en quote-part des ventes réseau au profit de la station-mère de Montréal, sans compter, bien sûr, une baisse importante des revenus de ventes sélectives et locales, en raison des importantes pertes de parts de marché qui en découleraient.

1468   RNC MEDIA et Télé Inter-Rives estiment que les critères d'admissibilité au Fonds que propose le Conseil sont, dans l'ensemble, appropriés.

1469   D'abord, comme le Conseil le propose, le Fonds devrait être exclusivement destiné aux stations de télévision desservant des marchés de moins d'un million de personnes.

1470   Pour être admissible au Fonds, une station devrait aussi, évidemment, diffuser des nouvelles locales.

1471   Les activités des stations publiques et privées sont très différentes. Les stations publiques utilisent des sommes beaucoup plus considérables pour produire des émissions, comparativement au secteur privé. S'il n'y a pas de distinction entre les stations privées et publiques, ces dernières pourront s'accaparer de la plus grande partie du Fonds.

1472   Selon une estimation provisoire de l'Association canadienne des radiodiffuseurs, il y a 19 stations privées et 14 stations publiques admissibles.

1473   Afin d'assurer un plancher équitable à chaque station, en particulier celles desservant les plus petits marchés, Télé Inter-Rives et RNC MEDIA proposent donc l'approche suivante pour la répartition du montant total de 20 millions de dollars provenant du Fonds et destiné aux stations francophones.

1474   Comme première étape, les 20 millions de dollars seraient divisés entre les 14 stations publiques et les 19 stations privées selon le nombre de stations. Cela représenterait une somme de 8 millions et demi de dollars pour les stations publiques et 11 millions et demi de dollars pour les stations privées.

1475   Comme deuxième étape, un tiers de la somme de 11 millions et demi de dollars destinée aux stations privées francophones serait donc distribué également entre elles et les deux tiers le seraient selon l'approche proposée dans l'avis de consultation CRTC 2009-113-1. Cette deuxième étape aurait l'avantage d'assurer un revenu annuel minimal de 200 000 dollars pour chacune des stations de télévision privées admissibles.

1476   La somme de 7.7 millions de dollars, représentant les deux tiers de l'allocation versée aux stations privées, serait distribuée selon la proposition du CRTC contenue dans l'avis de consultation dont on a fait mention tout à l'heure, soit en utilisant la moyenne des dépenses de programmation locale sur trois ans des stations de télévision admissibles.

1477   Dans la proposition du Conseil, nous comprenons que les stations de télévision admissibles au Fonds ne seront pas obligées d'atteindre le montant de dépenses de base en programmation locale déterminé par une moyenne de trois ans, afin d'obtenir les contributions de ce Fonds. Toutefois, elles seraient pénalisées si leur moyenne des dépenses des trois dernières années devait baisser, ce qui, d'après nous, représenterait une solution équitable.

1478   Finalement, nous sommes d'avis que les montants du Fonds devraient pouvoir être appliqués à diverses activités permettant de produire davantage d'émissions ou d'améliorer les émissions de programmation locale, comme, par exemple :

1479   - du personnel en ondes ou technique qui participe à la programmation;

1480   - des dépenses d'exploitation reliées à la programmation locale, incluant la location d'équipements ou de locaux;

1481   - des dépenses d'investissements directement reliées à la production de programmation locale, comme des caméras ou régies de studio de productions numériques/HD, des liens de fibre optique, micro-ondes ou camions servant à faire le lien entre les sources de nouvelles et les studios; et

1482   - la promotion des émissions locales, telle que la publicité dans les journaux, sur Internet ou diffusée dans des stations de radio ou de télévision n'appartenant pas à la titulaire, incluant la création de campagnes de promotion.

1483   Tous ces éléments contribuent directement à l'amélioration de la qualité des émissions locales ainsi qu'à l'accroissement de leur succès d'écoute. C'est l'objectif poursuivi, nous semble-t-il, par le Conseil en créant ce Fonds.

1484   RNC MEDIA et Télé Inter-Rives proposent aussi que jusqu'à 50 pour cent de l'allocation d'une station provenant du Fonds puisse être utilisé pour acheter de l'équipement de production numérique, ce qui respecterait l'un des objectifs du Fonds, soit l'amélioration des émissions locales.

1485   Par exemple, cette mesure pourrait s'appliquer durant une période de trois ans et représenterait une aide considérable pour les stations privées canadiennes dans la conversion de leurs équipements de production analogique vers le numérique.

1486   Si le Conseil le souhaitait, le pourcentage de 50 pour cent pourrait diminuer de 10 pour cent par année sur une période de trois ans, évidemment, 50 pour cent la première année, 40 pour cent et 30 pour cent, à titre d'exemple, bien sûr.

1487   Le Conseil pourrait déterminer s'il importe de maintenir cette mesure particulière lorsqu'il procédera par voie de processus public au terme de trois années d'exploitation à une évaluation complète du Fonds.

1488   Les stations régionales ont un rôle important à jouer pour enrichir la diversité de l'information et des voix éditoriales au Canada, et, comme nous l'avons dit, RNC MEDIA et Télé Inter-Rives considèrent que la création du Fonds constitue un geste nécessaire quant au redressement de la situation financière des stations dans les marchés régionaux. Grâce à cette initiative, nous pourrons investir davantage dans les nouvelles locales au sein de l'ensemble de nos stations.

1489   Ceci dit, nous sommes convaincus qu'une somme de 20 millions de dollars sera insuffisante pour atteindre tous les objectifs du Fonds si nos stations ne sont pas distribuées par les SRD après le 31 août 2011. Pour nous, c'est la distribution de nos stations qui prime sur toute autre question de politique.

1490   Même si nous considérons que la question de la contribution des stations à la programmation locale s'applique surtout aux grands réseaux, Télé Inter-Rives et RNC MEDIA désirent souligner que leurs stations ont rempli et, dans plusieurs cas, dépassé leurs engagements en matière de programmation locale au cours de la dernière application de leurs licences respectives.

1491   Grâce, entre autre, au Fonds SRD, maintenant appelé le Fonds pour la programmation locale dans les petits marchés, utilisé par nos stations depuis sa création en 2003, nous pouvons affirmer que la contribution de nos différentes stations à la programmation canadienne s'est accrue de façon significative.

1492   Le succès qu'a connu le Fonds en termes de retombées positives pour la programmation locale canadienne dans nos régions est la preuve que le Fonds d'amélioration de la programmation locale pourrait aussi avoir un impact majeur sur la qualité des services locaux de télévision au cours des prochaines années.

1493   Enfin, nous estimons que, à l'heure actuelle, les obligations de programmation locale basées sur des engagements historiques et conjoncturels continuent à constituer la meilleure approche réglementaire.

1494   L'environnement socio-économique variant considérablement de marché en marché à travers le Québec et le Canada, une approche universelle ne pourrait pas, il nous semble, offrir le même genre de souplesse dont nous avons besoin aujourd'hui. Il est toujours difficile d'établir une approche globale considérant la grande variété de stations locales.

1495   Marc.

1496   M. SIMARD : Dans l'avis public de radiodiffusion CRTC 2008-100, Cadres réglementaires des entreprises de distribution de radiodiffusion et des services de programmation facultatifs, le Conseil a annoncé qu'il modifiera le Règlement sur la distribution et qu'il supprimera l'obligation pour les entreprises de SRD de distribuer 13 stations indépendantes de petits marchés.

1497   Les entreprises de SRD seront désormais tenues de distribuer à leur service de base au moins une station de propriété indépendante dans chaque province, sous réserve d'une décision ultérieure du Conseil concernant la région de l'Atlantique.

1498   Dans ce nouveau régime, les stations spécifiques devant être distribuées seront choisies par les entreprises de SRD. Or, cela voudrait dire que des stations comme CHOT Gatineau, CFEM Rouyn-Noranda, CIMT Rivière-du-Loup ou CHAU Carleton, qui sont actuellement distribuées par les SRD, ne le seraient plus nécessairement à l'avenir.

1499   Si ces stations n'étaient plus distribuées par les SRD, comme nous l'avons déjà mentionné, Monsieur le Président, il en résulterait une érosion importante de l'écoute et une baisse importante des revenus, mettant en péril l'avenir de ces stations, sinon leur existence.

1500   Dans le milieu francophone, RNC MEDIA et Télé Inter-Rives estiment que la politique du Conseil concernant les signaux éloignés répond davantage aux intérêts des grands groupes, titulaires de stations de télévision, qui seront autorisés à négocier un tarif auprès des EDR pour la retransmission de leurs stations locales en tant que signal éloigné. Ce désir de négocier les modalités d'une retransmission de leurs signaux constitue une revendication des grands groupes de propriété et non pas celle des petits groupes comme les nôtres qui possèdent des stations régionales.

1501   Selon l'avis de consultation de radiodiffusion du CRTC 2009-70-1, le Conseil estime qu'il pourrait être avantageux d'avancer la date d'entrée en vigueur du nouveau régime des signaux éloignés, à la lumière de la détérioration de la situation économique des radiodiffuseurs traditionnels, et que cette question devrait être traitée dans le cadre de l'audience sur les renouvellements de licences des stations privées de télévision traditionnelle.

1502   RNC MEDIA et Télé Inter-Rives seraient d'accord avec la mise en oeuvre de la politique du Conseil sur les signaux éloignés avant le 31 août 2011, à condition, bien sûr, que la distribution des 13 stations indépendantes des petits marchés soit maintenue.

1503   De plus, selon le Règlement de la distribution de radiodiffusion, si une entente intervient entre un réseau de télévision, incluant les stations qu'il possède, et une EDR terrestre, l'EDR terrestre doit obtenir le consentement de la station locale affiliée au même réseau lorsque le signal éloigné sera distribué dans le marché de la station indépendante. Sinon, la substitution simultanée s'impose sur demande des stations locales.

1504   Or, selon l'avis public 2008-100, le CRTC a décidé d'exempter toutes les EDR terrestres qui desservent moins de 20 000 abonnés, y compris les entreprises par câble, par LAN et les systèmes de distribution multipoint.

1505   Cette exemption proposée est une préoccupation majeure pour Télé Inter-Rives et RNC MEDIA car les câblodistributeurs de moins de 20 000 abonnés se retrouvent majoritairement en dehors des grands centres urbains. II est absolument crucial de protéger les stations de télévision locales des petits marchés en prévoyant des mécanismes de protection adéquats dans la totalité des zones de rayonnement A et B des stations locales et régionales.

1506   Les marchés desservis par Télé Inter-Rives et RNC MEDIA, par exemple, comptent très majoritairement des EDR terrestres de moins de 20 000 abonnés.

1507   Dans l'avis de consultation de radiodiffusion CRTC 2009-173, Appel aux observations sur une proposition d'ordonnance d'exemption visant les entreprises de distribution de radiodiffusion terrestres desservant moins de 20 000 abonnés, le Conseil propose d'obliger les systèmes desservant entre 2 000 et 20 000 abonnés de procéder à la substitution simultanée de signaux identiques, et ce, uniquement pour les stations de télévision locales.

1508   Or, la proposition d'ordonnance d'exemption dans l'avis de consultation CRTC 2009-173 propose de permettre la substitution d'un signal seulement si le studio principal de la station de télévision locale est situé dans la zone desservie par l'entreprise et est utilisé pour produire de la programmation d'origine locale.

1509   Ceci représente un recul par rapport à l'actuel Règlement sur la distribution. Télé Inter-Rives et RNC MEDIA ont donc l'intention de répondre à l'avis 2009-173 dans les prochains jours.

1510   Le 20 avril dernier, le Conseil a publié le rapport intitulé, " Rapport du groupe de travail sur la télévision numérique : Questions soulevées par la transition numérique ", déposé par un groupe de travail de l'industrie.

1511   Malgré ses qualités, ce rapport n'arrive à aucun consensus sur la mise en oeuvre d'un modèle hybride précis pour remplacer les politiques et l'échéancier du Conseil relatifs à la transition au numérique dans les régions éloignées, tels qu'élaborés dans l'avis public de radiodiffusion CRTC 2007-53.

1512   Par conséquent, les stations de télévision de RNC MEDIA et de Télé Inter-Rives entendent respecter les politiques et l'échéancier du CRTC relatifs à la transition au numérique tels qu'élaborés dans l'avis public 2007-53.

1513   Pour nos stations, les préparatifs s'effectuent selon l'échéancier que nous nous sommes donnés et les investissements se feront sur une période de trois ans afin de respecter la date butoir du 31 août 2011 dans la plupart des cas.

1514   Par exemple, pour les stations CHOT et CFGS, les préparatifs vont selon l'échéancier que RNC MEDIA s'est donnée et les investissements se feront sur une période de trois ans. Télé Inter-Rives compte, pour sa part, convertir l'ensemble de ses 14 émetteurs à haute puissance couvrant entièrement les rayonnements A et B de son territoire actuel.

1515   Dans l'avis public 2007-53, le Conseil note aussi qu'il faudra peut-être conserver certains émetteurs analogiques en régions éloignées et dans le grand Nord pour des raisons économiques et financières.

1516   Avec l'accord du CRTC et Industrie Canada, RNC MEDIA a donc l'intention de poursuivre l'exploitation des émetteurs analogiques dans les marchés de CFEM-TV Rouyn-Noranda et CFVS-TV à Val d'Or jusqu'à ce qu'ils cessent de fonctionner ou jusqu'à ce que les téléspectateurs les abandonnent pour d'autres technologies de distribution.

1517   En ce qui concerne CKRN-TV Rouyn-Noranda, une affiliée de Radio-Canada, RNC MEDIA compte avoir des discussions avec Radio-Canada afin de connaître son plan de déploiement de la technologie numérique ainsi que la contribution qu'elle entend faire à CKRN.

1518   Raynald.

1519   M. BRIÈRE : Dans l'avis de consultation de radiodiffusion CRTC 2009-70, le Conseil indique qu'il est disposé à attribuer des licences d'un an, qui lui permettront de se pencher au printemps 2010 sur les renouvellements par groupe des réseaux traditionnels et facultatifs. Il note cependant qu'il pourrait envisager des périodes d'application de licence plus longues pour certains titulaires, selon les circonstances et les positions propres à ceux-ci.

1520   Bien que Télé Inter-Rives et RNC MEDIA partagent les préoccupations du Conseil concernant l'incertitude économique actuelle à laquelle fait face l'industrie de la radiodiffusion, nous croyons que le raisonnement qui sous-tend l'idée d'attribuer des licences de courte durée aux réseaux nationaux de télévision ne s'applique pas dans notre cas.

1521   À notre avis, le Conseil devrait continuer à faire une distinction entre les grands groupes, propriétaires de réseaux, et les groupes comme les nôtres qui possèdent des stations régionales en nous octroyant des licences de sept années. Dans cette période d'incertitude économique, nous ressentons le besoin d'une grande stabilité en ce qui concerne nos relations avec nos partenaires, nos fournisseurs et nos employés.

1522   Télé Inter-Rives et RNC MEDIA comptent non seulement convertir en numérique leurs émetteurs, mais aussi procéder à la numérisation de l'ensemble de leurs équipements pour permettre la livraison d'un signal numérique, HD inclus, aux entreprises de distribution par satellite.

1523   À un moment où nous avons besoin d'une crédibilité soutenue auprès des institutions financières pour pouvoir faire les investissements nécessaires dans la technologie numérique, des licences à long terme pour l'ensemble de nos stations de télévision nous apparaissent essentielles.

1524   Nous vous remercions de l'intérêt que vous avez accordé à nos commentaires, ainsi qu'à l'opportunité que vous nous offrez de comparaître devant vous aujourd'hui, et nous sommes disposés à répondre à toutes vos questions. Merci beaucoup.

1525   LE PRÉSIDENT : Merci pour votre présentation. Je suis heureux d'entendre vos plans de conversion numérique. Je crois que vous êtes le premier groupe devant nous qui a un plan avec une date fixée et qui n'a pas de problème avec ce concept.

1526   Maintenant, vous étiez ici hier, je crois, ou sinon, vous avez entendu la séance par Internet et vous savez que CTV était devant nous. Ils ont vraiment parlé la majorité du temps sur la nécessité de changer complètement le concept des télévisions conventionnelles.

1527   Essentiellement, ils disent : Traitez-nous comme un canal spécial, avec les genres des télévisions conventionnelles et donnez-nous deux sources de revenus, une souscription et la publicité, et sans ça, nous ne pouvons pas exister. C'était essentiellement leur message.

1528   Quelle est votre opinion sur ça? Est-ce que ça s'applique à vos deux réseaux? Est-ce que vous partagez la nécessité des commentaires énoncés par CTV de vraiment faire un changement majeur à la télévision conventionnelle?

1529   M. BRIÈRE : Je me permettrais peut-être de commencer, puis demander à mon collègue Marc de poursuivre, parce qu'on va essayer de faire ça ensemble aujourd'hui parce qu'on partage pas mal de points de vue. Il se peut qu'on ait aussi certaines, évidemment, différences au niveau de certains autres points de vue.

1530   Mais c'est clair que la télévision conventionnelle ne peut pas continuer à faire ce qu'elle faisait parce qu'elle n'évolue pas dans le même environnement. Ça, je pense que c'est clair. Personne ne va...

1531   Maintenant, les solutions peuvent, évidemment, varier.

1532   En ce qui me concerne, je pense, néanmoins, qu'il y a dans le système une certaine iniquité. C'est clair qu'on a un système à deux vitesses, un peu comme dans le domaine de la santé. On a, d'un côté, des services qui obtiennent accès à la publicité et accès à des fonds qui viennent de la distribution, puis de l'autre côté, un système qui contribue de façon tout aussi importante.

1533   Moi, je ne fais pas de distinction entre les contributions. Je pense que les deux systèmes vivent, les deux systèmes sont en parallèle, puis les deux systèmes contribuent de façon importante à la diversité au pays.

1534   Mais c'est clair que nos moyens diminuent, et tôt ou tard, cette question de la redevance, parce que c'est de ça qu'on parle...

1535   LE PRÉSIDENT : Oui.

1536   M. BRIÈRE : ...devra être réglée, et il m'apparaît personnellement qu'on ne pourra pas échapper à une forme de contribution à la télévision généraliste. Me semble-t-il que ça tombe sous le sens qu'un jour, si on veut garder les deux systèmes en santé, si on veut que leurs contributions soient égales ou aussi fortes, je pense qu'on n'aura pas le choix.

1537   Entre-temps, il y a des initiatives extrêmement louables. C'est pour ça que nous, on appuie le Fonds, parce qu'on se dit qu'on ne peut pas changer le système probablement instantanément, on ne peut pas tout faire, c'est une étape.

1538   Mais, à terme, cette question-là, me semble-t-il, devra revenir et devra faire l'objet encore une fois d'un nouvel examen, et à terme, je pense qu'on devrait en arriver à cette conclusion-là.

1539   M. SIMARD : Bien, je pense, Monsieur le Président, que si on a bien compris votre question, je pense qu'on est rendu à un moment où la télévision conventionnelle a vraiment atteint, si vous voulez, une capacité qu'elle ne sera plus capable de continuer si, à cause des changements extrêmement importants de la quantité, puis c'est extraordinaire qu'au Canada on puisse, pour une si petite population, avoir tous les services qu'on a. Je pense que c'est quelque chose d'exceptionnel, mais, par contre, la télévision conventionnelle, avec tous les services qui se sont ajoutés puis on n'est pas contre, je pense que c'est extraordinaire qu'au Canada on ait tous ces services-là.

1540   Mais la télévision conventionnelle qui dessert à tous les jours les Canadiens, je pense qu'elle va avoir besoin, à un moment où à un autre, d'une forme quelconque de changement dans la façon dont ses revenus sont... Alors, c'est notre point de vue.

1541   LE PRÉSIDENT: Oui. Et je crois que nous partageons tous la même idée que la télévision conventionnelle est nécessaire, que c'est là où l'on trouve la programmation locale, c'est là qu'on rejoint toutes les idées nationales pour l'unité nationale, tout ça.

1542   Où nous avons des problèmes et la solution avancée par CTV et Canwest et caetera, une redevance nationale et caetera, en effet va avoir le résultat que sous pression, les grands centres où ils sont profitables et, selon nous, le problème est vraiment dans les petits centres.

1543   Pour cette raison, nous avons créé cette amélioration locale.

1544   M. SIMARD: Oui.

1545   LE PRÉSIDENT: Parce que, selon nous, voilà, c'est le problème et vous êtes une... où vous appuyez notre effort. Mais, comme je dis, est-ce que c'est quelque chose de permanent ou est-ce que nous devons réaliser qu'on peut, pour le moment, faire ce qu'on appelle un «bandaid» en anglais pour les marchés locaux. Mais, vraiment, ce n'est pas une solution. On doit aller où CTV veut que nous allions et sincèrement créer un canal spécial qui s'appelle la télévision conventionnelle et avoir des obligations pour eux ou est-ce que la solution est fondée amélioration locale peut-être, un fonds plus expansif, plus riche et, comme vous êtes spécialiste dans les marchés plus petits, je suis très intéressé dans votre point de vue.

1546   M. BRIÈRE: O.k. Si vous me permettez de poursuivre, c'est une discussion intéressante parce que c'est, au fond, notre survie là puis vous avez d'autant raison que quand on regarde les chiffres de... les chiffres de rentabilité, on voit que c'est les plus petites stations qui sont les moins... qui ont été plus affectées par la rentabilité dans... On le voit, là, dans les rapports que vous proposez.

1547   Au-dessus de tout ça, il y a le problème de la distribution, au-dessus de tout là, parce que, au fond, si on crée un fonds, on investit 60, 80 ou $100 millions, éventuellement parce que, hier, on prétendait... on disait, bon, bien, c'est peut-être trois pour cent puis ça devrait être deux puis ça devrait être... bon.

1548   Nous, juste en préalable, on vous dit que c'est une initiative que nous encourageons parce qu'on ne peut pas tout régler probablement la première semaine là, on essaie de faire...

1549   Nous, on apprécie ce geste-là, on trouve que c'est significatif, on ne pense pas que ça règle tout, on ne pense pas que c'est parfait, on ne pense pas que c'est une affaire qui règle tous les problèmes, mais à un moment donné il faut aussi partir à quelque part et ça, on pense que c'est un geste à court terme qui nous aide à avancer puis dans trois ans, on s'assoit puis on dit, bon, ça a du bon sens, ça n'a pas de bon sens, est-ce qu'on a fait une bonne job? Est-ce qu'on a investi là où il fallait qu'on mette l'argent?

1550   Et des petites stations comme nous, dans un système où les jours sont immenses, les joueurs sont gros, on aura toujours besoin d'un support puis on aura toujours besoin d'une réglementation. Nous, là, on n'est pas dans le même environnement puis on n'est pas dans le même univers que les autres joueurs.

1551   Cela dit, une forme de redevance ou d'investissements, quelque forme que ça prendra là, ça paraît clair qu'on ne pourra pas, je le répète, échapper à ça.

1552   M. SIMARD: Mais, monsieur le président, écoutez, si vous me permettez de rajouter. C'est-à-dire que, écoutez, nous, c'est certain que l'on trouve que les sommes d'argent qui pourront provenir du nouveau fonds, elles vont nous être extrêmement utiles. Nous, disons que ça nous satisfait ces sommes d'argent-là.

1553   Maintenant, écoutez, pour essayer de répondre à votre question, nous, évidemment, on ne connaît pas les opérations exactes des grands réseaux télévision, autant du côté francophone que du côté anglophone, quels sont les rapports les charges, les sommes publicitaires, les sommes de redevances de vente réseau qui peuvent être utilisées dans chaque station locale, ce que le réseau, par exemple, peut faire.

1554   Alors, tout ça, ces relations-là, nous, on ne les connaît pas tellement comment les grands réseaux opèrent leurs petites stations, les revenus qu'ils leur allouent selon la publicité nationale alors que c'est pour ça que c'est un peu difficile pour nous de...

1555   Mais c'est certain que le fonds pour la programmation locale, soit-il attribué à nos petites stations à nous ou à plusieurs autres stations des grands réseaux dans chacune des parties du Canada, c'est impossible que ce fonds-là ne puisse pas les aider, à notre avis.

1556   LE PRÉSIDENT: Merci beaucoup. Louise, tu as des questions?

1557   CONSEILLÈRE POIRIER: Oui. Merci beaucoup, monsieur le président. Merci beaucoup, messieurs. Vous avez présenté un rapport qui vient jeter vraiment plus de lumière sur l'ensemble des documents que vous avez présentés, que j'ai eu le plaisir de lire aussi.

1558   Et dans un premier temps, je pense que je n'hésiterais pas à prendre la parole au nom du Conseil pour vous féliciter pour la programmation locale que vous faites, le nombre d'heures que vous diffusez qui est largement supérieur aux attentes qu'on a à votre endroit et qui, semble-t-il, sont appréciées par l'ensemble des intervenants puisqu'on a reçu beaucoup de commentaires positifs à votre égard.

1559   On en a reçu quelques-uns de négatifs, mais on pourrait en reparler aussi et il y a toujours place à amélioration, comme on dit, mais on sent que, vraiment, la programmation locale, pour vous, est au coeur, bien sûr, de votre présence dans les régions, que vous répondez à un service public aux attentes de la population et que vous le faites au-delà des attentes du CRTC. Alors, dans ce sens-là, je pense qu'il faut vous envoyer des fleurs, tout comme on en a envoyées à TVA hier pour les prix qu'ils ont remportés avec Artis.

1560   Première demande; vous savez qu'hier le président a remis des documents justement sur les redevances de distribution. Je ne sais pas si vous en avez pris connaissance, mais sinon, on vous demanderait de les regarder et de nous revenir avec des commentaires sur ce qui a été déposé par le Conseil hier et on apprécierait, bien sûr, avoir vos remarques, entre autres, sur le Fonds parce qu'on a des allocations qui sont estimées dans le Fonds qui sont présentées dans la dernière page et je pense que c'est quand même assez différent de ce que vous présentez et il serait intéressant de voir vos réactions par rapport au découpage qu'on en fait de notre côté.

1561   J'aimerais après, bien sûr, avoir entendu vos commentaires, il me reste quelques questions. J'aimerais savoir, et on va parler beaucoup du Fonds parce que vous l'appuyez et il serait important qu'on voit un petit peu plus en détail des conditions que vous y souhaitez là, mais en supposant qu'il n'y aurait pas de Fonds, est-ce que vous allez être capable de maintenir la production locale telle quelle et est-ce que vous allez être capable de l'améliorer s'il n'y a pas ce fameux Fonds qu'on vous propose?

1562   M. BRIÈRE: La réponse est non, sans aucune hésitation. Ce n'est pas possible si on n'a pas cette aide-là parce que nous autres aussi on fait face à la même situation économique, qui n'est pas juste une situation à court terme. C'est évident qu'il y a une crise économique, c'est évident qu'il y a une situation ponctuelle, espérons qui va se régler.

1563   Mais la transformation, elle, elle continue puis c'est clair que si on n'a pas ce fonds-là, on ne sera pas en mesure de poursuivre avec autant de force que nous faisons actuellement.

1564   M. SIMARD: Bien, écoutez, je veux dire, peut-être aussi pour nuancer un peu la réponse à Raynald c'est que, écoutez, actuellement, nos stations reçoivent le Fond pour les petits marchés, bon. Ce fonds-là, actuellement, c'est fondamental... ce fonds-là est fondamental aux productions et au niveau de production que l'on fait maintenant. Ça, c'est absolument sans aucun doute.

1565   Maintenant, écoutez, avec les années plus difficiles qui s'en viennent, avec la conversion à la télévision haute définition, si on veut essayer de garder le même niveau et la même quantité d'émission locale, de nouvelle locale, de production locale qu'on fait, effectivement, ce nouveau fonds-là est un appui extraordinaire et je pense que pour pouvoir continuer ce dont on fait là, il va nous être nécessaire dans l'avenir.

1566   CONSEILLÈRE POIRIER: J'ai pu constater que vous avez, en tout cas, monsieur Simard, je ne sais pas pour monsieur Brière si de votre côté vous avez un plan, est-ce que vous avez un plan d'investissement? Est-ce que vous avez commencé à élaborer un plan pour investir les argents qui pourraient vous être remis?

1567   M. BRIÈRE. Oui, en tout cas, absolument. On a même déposé dans le renouvellement de licence, une série d'exemples dont nous discuterons probablement dans les prochains jours. Donc, on a commencé à voir qu'est-ce qu'on pourrait faire avec ce fonds dans l'éventualité où le fonds existerait.

1568   CONSEILLÈRE POIRIER: Pouvez-vous nous donner quelques exemples tout de suite?

1569   M. BRIÈRE: Honnêtement, je préférerais faire la liste à partir de notre présentation de vendredi.

1570   M. SIMARD: Madame Poirier, moi, ma réponse est très simple. On a évalué chaque... bien, écoutez, il a fallu d'abord essayer d'évaluer quel pourrait être le nouveau fonds. Alors, on l'a fait selon certains critères avec lesquels le CRTC nous avait donnés à cette époque-là. Donc, à partir d'une première évaluation de la somme d'argent qu'on pouvait estimer qu'on aurait, on a dans notre demande de renouvellement de licence, on vous a indiqué pour chaque dollar de quelle façon on pourrait dépenser cet argent-là.

1571   Exemple, on pourrait vous en donner un, on projette de faire une série télévisée de plusieurs épisodes pour développer les talents de chansonniers qu'on a dans notre région. Alors, ça en est un exemple, là, qu'on a inscrit dans notre plan.

1572   CONSEILLÈRE POIRIER: Est-ce que, outre la production d'un service de nouvelles locales, est-ce qu'il y a des projets de productions indépendantes?

1573   M. SIMARD: Vous voulez dire d'utiliser des producteurs indépendants?

1574   CONSEILLÈRE POIRIER: Oui.

1575   M. SIMARD: Écoutez, madame Poirier, toutes les productions que Télé-Inter-Rives a fait puis, là, Raynald pourra compléter pour cette station, toutes les productions que Télé-Inter-Rives a fait avec le Fonds pour les petits marchés, la partie du Fonds qu'on a utilisée pour faire des nouvelles productions ont été faites avec des petits producteurs indépendants de nos régions, que ce soit dans la région de Rivière-du-Loup, que ce soit dans la région du Nouveau-Brunswick où il y a des producteurs qui ont... à Caracket qui a un studio extraordinaire, je veux dire vous n'en reviendriez pas de voir le studio. Alors, toutes nos émissions ont été produites avec ces gens-là.

1576   M. BRIÈRE: Et nous envisageons de faire la même chose parce qu'on constate que... évidemment, encore une fois là, compte tenu de notre taille, on a de petites unités puis on l'a dit hier, on n'a pas le monopole de la créativité personne, il se développe en région des petites unités de production parce que ce qu'on note, c'est contrairement à ce qu'on vivait avant, les régions se renforcent.

1577   Il y a de plus en plus de gens qui choisissent de ne plus vivre dans les grands centres, pour toutes sortes de bonnes raisons, et qui décident de retourner en région. Le sol migratoire des régions dans le marché francophone du Canada, au Québec particulièrement donc, ce sol migratoire-là est plus positif qu'il ne l'était il y a quelques années.

1578   Puis on signale particulièrement dans des régions comme l'Outaouais, des régions comme l'Abitibi, où les gens retournent parce qu'il n'y a plus nécessairement d'emploi intéressant pour eux ou la qualité de vie les intéresse. Et on constate qu'il se crée de petites unités de production et notre intention, c'est de travailler avec eux, travailler avec elles ces unités-là et c'est ce que nous entendons faire.

1579   M. SIMARD: Bien, écoutez, aussi, je pense que, madame Poirier, les raisons d'abord... voici les principales raisons. D'abord, non nécessairement parce que le Conseil peut nous le demander ou le Conseil le désire, ce n'est pas seulement ça.

1580   C'est que comme Raynald l'a dit, c'est qu'on s'est aperçu que, évidemment, on dit souvent des fois là, il y a plus d'idées dans deux têtes que dans une. Vous savez, c'est une espèce de proverbe qu'on utilise en français, alors, écoutez, effectivement, définitivement on s'est aperçu que, à un moment donné, nos gens dans nos stations deviennent limités un peu.

1581   Alors, lorsqu'on peut utiliser des ressources extérieures, c'est indéniable qu'on découvre des nouvelles idées, on découvre des nouvelles façons ou des nouvelles façons de présenter nos émissions.

1582   Évidemment, aussi, on a une souplesse plus grande si vous voulez avec les producteurs indépendants. Évidemment, on a des entreprises qui font affaires avec des conventions collectives, alors c'est plus facile d'avoir de la flexibilité aussi pour produire des émissions comme en fin de semaine, par exemple, où on a des tournages à faire. Alors, ce sont des raisons pour lesquelles on aime travailler avec ces gens-là.

1583   CONSEILLÈRE POIRIER: O.k. Et quand vous travaillez avec des producteurs indépendants, vous avez sûrement comme l'ensemble des radiodiffuseurs l'intention d'utiliser la production sur d'autres plate-formes, est-ce que... comment vous négociez? Comment ça va les ententes avec les producteurs?

1584   M. SIMARD: Bien, Raynald, peut-être... écoutez, nous là, je vais vous dire franchement, vous savez, dans des petits marchés comme les nôtres, les droits de nos émissions nous appartiennent.

1585   D'abord, il faut vous dire que lorsqu'on travaille avec un producteur indépendant, nous, chaque émission qu'on a fait, écoutez... disons que c'est un travail de collaboration. Peut-être qu'à l'occasion de notre renouvellement vendredi, mes filles auront l'occasion de vous l'expliquer plus en détail, mais disons que... y participent activement à la réalisation, au choix des idées, au choix des images avec les producteurs. Donc, on a un travail d'inter-dépendance.

1586   Donc, pour toutes ces raisons-là, nous, dans les cas avec lesquels... les émissions qu'on produit, les droits appartiennent à la station, on pense que c'est fondamental et on n'a jamais eu de problème de ce côté-là.

1587   M. BRIÈRE: Si vous me permettez un commentaire additionnel. Je pense que, de manière plus générale, on est un peu condamné à s'entendre dans le fond, parce qu'on vit dans des petits marchés, tout le monde se connaît, tout le monde participe à la communauté et ça ne doit pas devenir une question uniquement de rapport de force.

1588   Est-ce que, oui ou non, on veut que le système avance? Est-ce que, oui ou non, on veut que le système fonctionne? Est-ce qu'il y a de la place pour tout le monde dans ce système-là? Moi, je pense que oui.

1589   Et je me dis que de bonne foi, on s'assoit puis on essaie de négocier un partage. D'abord, évidemment, ce n'est pas des sommes astronomiques dans notre cas, on n'est pas un grand groupe. C'est tout petit, c'est des petits modèles. Mais chacun a le droit de vivre, on s'assoit puis on dit: regardez, peut-on s'entendre sur une répartition si on va sur internet, si on produit un DVD, si on fait un CD ou si on fait... on fait autre chose.

1590   Je pense qu'il faut partir avec cette volonté-là et trouver les solutions. C'est des partenaires ça fait que je ne vois pas pourquoi on ne réussirait pas à s'entendre avec eux.

1591   M. SIMARD: Madame Poirier, permettez-moi d'ajouter quelque chose à ma réponse; c'est-à-dire que, par exemple, lorsqu'on a fait affaires avec des producteurs du Nouveau-Brunswick, et Pierre pourrait peut-être prendre juste quelques secondes pour expliquer et dire avec qui on a fait affaires puis compte tenu du fait que ces producteurs indépendants là faisaient affaires avec le Fonds canadien.

1592   Pourrais-tu peut-être l'expliquer juste quelques secondes?

1593   M. HARVEY: En fait à Show-TV, nous avons réalisé au cours des dernières années deux projets d'assez grande envergure avec une entreprise qui s'appelle Kojak Productions qui opère un studio complètement numérisé actuellement et, d'ailleurs, ils sont équipés en HD, à Tracadie Shyland dans le nord du Nouveau-Brunswick.

1594   Alors, ce producteur indépendant-là, évidemment, a accès au Fonds canadien de la télévision et, également, à des fonds de Téléfilm Canada. Alors, l'argent qu'on a investi là-dedans, ça leur a permis d'acquérir une licence pour produire ces émissions-là.

1595   M. SIMARD: Alors, Pierre, à titre d'exemple, on a fait avec Kojak parce que, évidemment, la différence, madame Poirier, c'est que lorsqu'on fait affaires avec un producteur indépendant qui dans certains cas peut obtenir des fonds de Téléfilm Canada, là, à ce moment-là, on négocie avec eux des droits de passe et on n'a pas, si vous voulez, l'exclusivité partout.

1596   On négocie des quantités de repasses, ce qu'on veut faire et c'est ce qu'on a fait avec Kojak.

1597   M. HARVEY: Pour vous remettre une idée, un investissement pour une licence pour la station Télé-Inter-Rives de 115 000 $, ça a permis de réaliser une production d'un demi-million. Alors, une série de dix émissions qui est justement... qui figure dans notre licence, la première comédie dramatique qui a été réalisée dans l'est du Québec, incluant le Nouveau-Brunswick francophone.

1598   CONSEILLÈRE POIRIER: Et vous aviez les droits pour aller sur d'autres plate-formes, comme internet, ou pas du tout, ou...

1599   M. SIMARD: Écoutez, je dois vous dire que nous, là, pour le moment, là, on n'était pas rendu là, mais c'est indéniable que, nous... écoutez, je vous dirais que la relation qui existe, par exemple, avec un producteur comme Pierre vient de mentionner, on prend l'exemple de Kojak qui était vraiment une entreprise des Acadiens, si vous voulez.

1600   Écoutez, je pense que nous, à partir du moment où on a eu des argents pour faire de la production locale, eux... je dois vous dire que dans certains cas, ça a été vraiment une... si vous voulez, une brise fraîche qui est arrivée parce que, à certains moments, ces gens-là n'avaient pratiquement plus de production. Alors, je pense que c'est plus facile, à ce moment-là, de coopérer, de s'entendre pour obtenir les droits.

1601   D'ailleurs, un exemple, on a obtenu plusieurs choses dont on avait demandées, c'est-à-dire des repasses, plusieurs repasses pour pouvoir repasser ces émissions-là chez nous, utiliser pour des promotions. Alors, en tout cas, à venir jusqu'à date, nous, dans nos petits marchés, on a... ce n'était pas un problème.

1602   CONSEILLÈRE POIRIER: Parfait. On va revenir au Fonds d'amélioration de programmation locale parce que vous en parlez abondamment. Vous nous donnez beaucoup de détails et d'information, mais je pense qu'il serait utile d'aller encore un petit peu plus loin. Vous prenez position pour une formule qui est la vôtre qui est différente de celle qui est proposée.

1603   J'aimerais quand même avoir vos commentaires sur celle que nous avons proposée dans notre Avis Public qui a été... l'Avis Public 2009-70-1.

1604   Est-ce que vous avez regardé la formule proposée et vous avez des réactions sur cette formule-là que nous vous avons fait part?

1605   M. SIMARD: Raynald?

1606   M. BRIÈRE: Oui. On a regardé ça et on a essayé d'apporter non pas des améliorations, mais des changements et on a essayé de trouver une façon qui, selon nous, répondrait mieux aux besoins de marché de notre taille.

1607   Là, on parle de nos marchés parce que c'est à l'intérieur de ce qu'on vit et c'est pour ça qu'on a proposé... D'abord, on reconnaît les marchés d'un million et moins, ça fait que là-dessus on est absolument d'accord. Ensuite, on reconnaît la place des services publics. On dit, O.k., nous, on... sauf qu'on divise ça.

1608   On dit: les montants devraient être divisés entre les stations privées et publiques parce que, sinon, il y a un danger que leur levier étant beaucoup plus grand, ils accaparent beaucoup d'argent.

1609   M. SIMARD: Parce que, effectivement, Raynald... c'est-à-dire que ce qu'on a compris, madame Poirier, ce qu'on a compris de la formule, c'est que le CRTC prenait en considération uniquement toutes les dépenses de programmation autant des réseaux privés que des réseaux publics et on a vraiment une crainte que Radio-Canada, évidemment, qui dépense des sommes assez faramineuses, peut-être s'accapare d'une bonne partie du montant.

1610   Alors, c'est la raison pour laquelle on avait pensé diviser par nombre entre les stations publiques et les stations privées, d'abord faire une première division par nombre de stations. Par la suite, dans la deuxième hypothèse, on reconnaît la proposition du Conseil qui, d'après nous, est extrêmement équitable et bonne.

1611   M. BRIÈRE: Ensuite on dit... alors, une fois qu'on a dit ça, on divise ça par, bon, ça, c'est assez simple, ensuite on dit, il devrait y avoir un pourcentage statutaire. Il devrait y avoir un montant fixe parce que... une stabilité.

1612   On a proposé 33 1/3 pour cent, c'est arbitraire, on le reconnaît, on n'a pas fait une étude scientifique, cependant, on est parti du fonds SRD, le Fonds des petits marchés, qui utilise ce pourcentage-là. Donc, on n'est pas totalement sorti de notre affaire.

1613   On a dit, tiens, ça, ça correspond à 33 pour cent, ça donne une stabilité, ça permet une continuité, ensuite le reste, on le soumet, on trouve ça intéressant là, la position du Conseil qui dit, bon, bien, ça va être selon le volume de dépenses, c'est assez juste. Si on dépense plus, on va être favorisé; si on dépense moins, bien, ça sera notre problème.

1614   Et là, il y a une certaine équité aussi parce que ça va nous forcer à dépenser plus, ça va nous forcer à avoir des initiatives, à être créatif parce qu'on veut toujours plus d'argent et pour avoir plus d'argent, il va falloir répondre à ce critère-là, c'est-à-dire dépenser plus.

1615   Ce qu'on ajoute aussi, qui nous apparaît extrêmement important, c'est que l'argent doit aussi servir à des éléments qui sont intimement liés aux productions, aux contenus puis à la programmation locale. On a émis, là, un certain nombre d'exemples, notamment les équipements, la promotion, et caetera parce que je sais que sur la promotion, il y a des gens qui disent, oui, mais mettre de l'argent de la promotion, ça n'a pas de bon sens. Ça a du bon sens.

1616   Pourquoi ça a du bon sens? Parce que si on fait la promotion de notre produit, on va générer plus d'écoute, on va générer plus de monde, on va créer plus d'intérêt. Et nous, contrairement aux grands groupes, on n'est pas dans des situations de promotion de propriété croisée de façon importante à tout le moins, c'est évident qu'on n'a pas accès aux mêmes sources de promotions.

1617   Je peux comprendre que des gens puissent dire, non, nous, ça ne nous intéresse pas parce que... mais nous, là, on ne peut pas. Il faut absolument qu'on ait ces moyens-là pour faire la promotion de nos propres activités. Donc, on se dit, il y a une partie de l'argent.

1618   Et on a fait une autre caractéristique un peu particulière, on a dit: on aimerait ça que pour les trois prochaines années à tout le moins, il y a 50 pour cent de l'argent qui soit pour la conversion au numérique. Nous autres, là, ça représente un enjeu majeur. On n'a pas le choix là, je veux dire il faut qu'on le fasse, puis ce n'est pas juste qu'on n'a pas le choix, on croit que... on croit que ça va être utile.

1619   M. SIMARD: Oui.

1620   M. BRIÈRE: On croit ça, nous, on pense et on ne doit pas faire trop de citoyens de première classe ou de deuxième classe, les gens ont le droit d'avoir ce type de télévision-là.

1621   Mais nous, on est... c'est plus petit, ce n'est pas les mêmes ordres de grandeur que les grands groupes, donc on dit: si on avait ce coup de pouce-là pour nous aider à faire les investissements, parce qu'il n'y a pas seulement la transition au numérique à la transmission, il y a la transmission au numérique aux équipements, aux caméras, aux switchers, bon je vous faire grâce de tous ces types d'équipements-là, mais on a besoin de ça pour aller à HD.

1622   Ça fait que... regardez, là ici, par exemple, dans le marché de Gatineau, en HD actuellement, il n'y a pas la substitution, donc les gens comme vous qui écoutez peut-être la télévision en HD, on n'a pas accès aux commerciaux locaux. Nos clients ne sont pas distribués.

1623   Évidemment, nos partenaires de TVA nous disent à bon droit puis avec raison: arrangez-vous puis quand vous aurez la distribution à HD, vous aurez la substitution. On dit, O.k., on comprend le message, mais ça prend de l'argent.

1624   Nous autres, on va moins vite que les gros joueurs, on a moins de moyens. On va le faire. On va le faire parce que c'est essentiel qu'on le fasse. Les gens d'ici doivent avoir ce type de télévision-là aussi et on va... on est en train, tranquillement, d'équiper nos stations avec des caméras numériques.

1625   On arrive d'un congrès où on a été voir les nouveaux outils, les petites caméras. On travaille fort avec les syndicats pour qu'on ait des journalistes vidéastes. On transforme notre infrastructure. On transforme notre organisation pour répondre à ça.

1626   Donc, ce coup de pouce-là est nécessaire, selon nous, pour nous aider sur une période de trois ans à tout le moins à réaliser le plan puis ça peut être 50 pour cent, 50 pour cent, on est ouvert à toutes sortes de formules. On a juste voulu, à titre indicatif, offrir une formule.

1627   M. SIMARD: Je pourrais peut-être juste rajouter, madame Poirier, à titre d'exemple là, comme Raynald nous dit, dans le plan de développement du nouveau Fonds FAPL, dans une prévision qu'on a fait pour utiliser l'argent, vous me demandiez tout à l'heure des exemples, on a prévu de mettre en permanence un journaliste à Edmunston, dans le milieu francophone des Acadiens où il y a 45 000 personnes.

1628   Alors, si on veut... si on ne veut pas être obligé de faire voyager les reportages en autobus comme on le faisait encore entre Caracket et notre station de Carleton il y a à peine deux ans pour être capable de présenter les reportages de nos téléspectateurs, des Acadiens du Nouveau-Brunswick dans nos nouvelles locales, on a été capable d'utiliser, d'installer des liens micro-ondes pour avoir instantanément la nouvelle immédiate à chaque jour.

1629   Alors, dans le cas du nouveau fonds, vous comprendrez que ça prend un lien entre... si on a un nouvelliste pour desservir les 45 000 Acadiens du Nouveau-Brunswick dans la région d'Edmunston, avec le nouveau fonds on voudrait être capable d'utiliser, un exemple, pour pouvoir disons utiliser une fibre optique, pour avoir les nouvelles constantes à tous les jours.

1630   C'est la raison pour laquelle on vous demande de pouvoir utiliser une partie du Fonds.

1631   Comme, d'ailleurs, madame Poirier puis j'espère que... je ne voudrais pas trop en rajouter parce que, de toute façon... comme d'ailleurs, avec le petits fonds, exemple, on a fait une salle de production, la salle principale, ce qu'on appelle la «salle de production» nous, c'est la salle principale dans une petite station comme nous autres où on produit nos nouvelles.

1632   Tout ce qu'on fait de local, on a une seule salle de production. Bien, on l'a fait. Actuellement, notre station à TQS, une station complètement numérisée, prête pour la haute définition, à notre station de Rivière-du-Loup, pour desservir tout l'est du Québec puis le Nouveau-Brunswick, avec notre station à TQS, grâce au petit Fonds pour les petits marchés.

1633   CONSEILLÈRE POIRIER: Oui. Et on sait que dans le Fonds des petits marchés qui a été établi en 2004 et qui provient des ODRS, il y a à peu près pas d'obligation et de critère d'évaluation. Certains présentent des rapports, d'autres ne le font pas.

1634   Hier, on demandait à TVA ce qu'ils souhaitaient avoir comme critères et ils nous parlaient de performance pour évaluer si le Fonds est bien utilisé, les performances en terme d'audience, de vente publicitaire.

1635   De votre côté, ce que j'ai lu dans vos documents, vous parlez plutôt d'un rapport, d'un simple rapport. Est-ce que vous avez des critères plus précis à nous proposer pour que le CRTC soit à même d'évaluer la pertinence et les résultats de ce Fonds?

1636   M. BRIÈRE: Nous, on a suggéré des critères de rapports. On a écarté, nous, les critères de performance d'écoute. C'était ça hier, en tout respect pour nos collègues qui soumettent ça parce qu'on vit dans des univers totalement différents. Nous autres, on est dans des endroits touristique, on se compétitionne nous autres même. Je veux dire, c'est un peu difficile de comparer l'écoute par rapport à d'autres joueurs.

1637   Donc, ce n'est pas un critère et on pense que... en tout cas, moi, je pense que le critère de performance, on le rejoint en bout de ligne parce que si on investit plus, on va avoir plus d'argent. C'est un incitatif extrêmement intéressant. Je trouve que le Conseil a trouvé une formule intéressante en nous forçant probablement indirectement à faire mieux notre job. Ce n'est pas mauvais de temps en temps de se le faire dire.

1638   M. SIMARD: Je m'excuse, mais, madame Poirier, écoutez, c'est parce que je voudrais juste bien comprendre exactement votre question. C'est-à-dire que, est-ce que les critères dont vous parlez, est-ce que ce sont les critères --

1639   M. BRIERE: D'évaluation.

1640   M. SIMARD: -- d'évaluation, c'est-à-dire à chaque année, les critères pour répartir le fonds?

1641   CONSEILLERE POIRIER: Non, pour --

1642   M. BRIERE: D'évaluation.

1643   CONSEILLERE POIRIER: -- pour évaluer --

1644   M. BRIERE: C'est ça. Vous parlez --

1645   M. SIMARD: Pour évaluer. Parfait.

1646   CONSEILLERE POIRIER: -- les résultats --

1647   M. SIMARD: Uniquement pour évaluer?

1648   CONSEILLERE POIRIER: Oui.

1649   M. BRIERE: C'est exactement ça que j'étais en train de répondre.

1650   M. SIMARD: Oui, parfait.

1651   M. BRIERE: Donc, critères de cette évaluation-là, c'est... Donc, nous, on pense que de soumettre un rapport à l'approbation du Conseil pour voir quelle utilisation on a fait des fonds. A partir des critères qu'on va avoir établis de toute façon, ça devrait être suffisant pour que le Conseil puisse voir ce que nous avons accompli.

1652   Puis un rapport à chaque année, fait qu'on va être en mesure de le voir.

1653   CONSEILLERE POIRIER: Est-ce qu'il y a un pourcentage qui devrait être attitré aux frais d'administration de façon séparée, par rapport à la qualité ou à la quantité de la production?

1654   Est-ce que vous distingueriez un pourcentage pour les frais d'administration de ce fonds-là pour... Par exemple, vous l'avez fait entre autres en parlant d'un certain pourcentage pour la numérisation, mais est-ce que vous seriez prêts à mettre d'autres pourcentages pour d'autres types de frais?

1655   M. SIMARD: Vous voulez dire... J'ai un peu de misère, peut-être Raynald si tu le sais...

1656   C'est-à-dire que je ne vois pas dans les dépenses du fonds que nous, on ait besoin de vous dire: Bien, il a fallu dépenser un petit peu d'argent du fonds pour l'administrer...

1657   M. BRIERE: Non, non. La réponse est non.

1658   M. SIMARD: Bien non, on n'a pas besoin de ça, nous autres, les petites stations.

1659   CONSEILLERE POIRIER: Parfait.

1660   M. BRIERE: On veut que l'argent aille au fonds.

1661   M. SIMARD: Oui.

1662   CONSEILLERE POIRIER: Tout simplement?

1663   M. SIMARD: Oui.

1664   CONSEILLERE POIRIER: Pas de pourcentage d'attitré à --

1665   M. BRIERE: Non, on veut que...

1666   CONSEILLERE POIRIER: -- des secteurs particuliers?

1667   M. BRIERE: ...tout l'argent (c'est déjà pas tant que ça. C'est important, mais ce n'est pas tant que ça)...

1668   Puis, je pense que tout l'argent devrait aller dans le fonds. C'est notre responsabilité.

1669   CONSEILLERE POIRIER: Est-ce que vous seriez prêt à utiliser une partie de l'argent pour permettre le sous-titrage de vos émissions locales à 100 pour-cent?

1670   M. SIMARD: Bien, écoutez. Si ça fait partie du fonds, je vous dirais que oui, absolument.

1671   M. BRIERE: Oui, oui. C'est intéressant comme approche. On n'avait pas vu ça sous cet angle-là, mais c'est intéressant parce que je sais qu'il y a une obligation de le faire et on sait que c'est coûteux, c'est complexe et...

1672   M. SIMARD: Oui.

1673   M. BRIERE: C'est une bonne question.

1674   M. SIMARD: Le seul point qu'il faut préciser, madame Poirier, qui est très important, c'est que nous par contre, oui, lorsqu'on fait des émissions enregistrées, lorsqu'on fait des émissions « Live », en direct, comme ça nous arrive quand même d'en faire, là, c'est problématique parce qu'on n'a pas les ressources, on n'a pas la technologie...

1675   CONSEILLERE POIRIER: Oui.

1676   M. SIMARD: D'ailleurs, je ne sais même pas si elle existe. Je veux dire, là...

1677   CONSEILLERE POIRIER: Mais on pourra peut-être en parler vendredi --

1678   M. SIMARD: Oui.

1679   CONSEILLERE POIRIER: -- un petit peu plus en profondeur de ce volet-là, mais l'important, c'est de constater votre ouverture à atteindre --

1680   M. BRIERE: Absolument!

1681   CONSEILLERE POIRIER: -- cette obligation-là et en y mettant --

1682   M. BRIERE: Parce que ce c'est essentiel que ça soit fait de toute façon. Et pourquoi pas une contribution qui nous permettrait de le faire. Absolument.

1683   CONSEILLERE POIRIER: Et peut-être une dernière question concernant le fonds. Vous n'avez pas parlé de pourcentage, sauf à un moment donné, je pense, à RNC. Vous souhaitez doubler le fonds, que ce soit un deux pour-cent? Est-ce que c'est bien ça?

1684   Dans votre rapport, en tout cas, c'est comme ça que je l'ai...

1685   M. BRIERE: Oui...

1686   En fait, nous autres, notre position, elle est simple, simple, simple. Si... pour-cent c'est viable, si on est distribué, si...

1687   Parce que le cour de tout ça, de tout ce dont on parle depuis ce matin, puis depuis des mois (j'allais dire « des années »), c'est la distribution. On comprend la problématique, on n'est pas totalement déconnecté de tout ça...

1688   Évidemment, on n'a pas tous les enjeux, on n'a pas toutes les... On n'est pas non plus au fait de... Mais on sait très bien la problématique des BDU, mais c'est un choix de société : Est-ce oui ou non on veut que les stations locales, régionales vivent la distribution?

1689   Dans des marchés, actuellement, il y a jusqu'à 40 pour-cent de la distribution qui est... de pénétration qui n'est pas faite. Donc, demain matin, ça va être 50 pour-cent? Demain matin ça va être 60 pour-cent? Aussi bien abandonner le système, me semble-t-il.

1690   Alors, ce n'est pas ça qu'on veut. On veut que ça subsiste et la distribution est au cour. Et moi, je pense que c'est un choix de société, encore une fois : est-ce que oui ou non...?

1691   Puis, je comprends que peut-être qu'il y a des étapes, puis il faut... il y a des décisions dures à prendre, des décisions « tough », comme dirait l'autre, mais pas de distribution, pas d'avenir, me semble-t-il.

1692   Et le fonds y perdrait de son efficacité. Si demain matin on parle à la moitié du monde, on ne sera pas en business trop, trop longtemps.

1693   M. SIMARD: Bien, écoutez... Absolument Raynald.

1694   Puis, de toute façon, madame Poirier, écoutez. La non-distribution veut dire que le fonds pour les petits marchés actuellement que l'on reçoit, plus le nouveau fonds que l'on recevrait ne comblerait même pas les pertes... les pertes énormes que l'on subirait si demain matin nos deux principales stations --

1695   Parce qu'évidemment, vous comprendrez que le cour des activités de RNC et de Télé Inter-Rives sont leurs deux stations TVA qui représentent probablement 70 pour-cent de leurs affaires. Alors, fondamentalement du moins...

1696   On ne dit pas que les autres stations ne sont pas importantes, mais qu'on pense que nos stations de base, nos stations qui vraiment nous permettent de produire toute la qualité de l'information puis la quantité que l'on fait là, la base, c'est vraiment de maintenir une distribution minimum de nos stations les plus importantes.

1697   M. BRIERE: Est-ce que je taxerais votre patience si j'ajoutais un petit, petit commentaire? Je ne voudrais vraiment pas faire ça, mais c'est tellement important pour nous que je voudrais insister sur quelque chose.

1698   D'abord, le Conseil l'a bien compris et nous a beaucoup supportés. Non, on tient à le dire parce que c'est vrai. Le Conseil l'a compris, à partir de 2003 puis même avant, le Conseil a toujours été conscient de ça et les décisions qui ont été prises ont été bonnes et nous ont aidés et nous aident encore. Il n'y a pas de problème avec ça, puis on l'apprécie. Puis nous autres, on essaie de contribuer à notre façon au système.

1699   Mais sur un long horizon de plusieurs années... C'est la politique de la terre brûlée, au fond. C'est-à-dire que si on ne règle pas ça, on ne pourra pas éternellement... on va finir par être subventionné, là (tu sais, si ça continue) et...

1700   Mais ce n'est pas ça qui est l'objectif, au fond. Nous, notre objectif, c'est de rejoindre notre monde. On veut leur parler, on veut que les gens, les citoyens d'une région aient accès à leur contenu. Et pour avoir accès, il n'y a pas 50 solutions, c'est la distribution. Et tout le monde devra comprendre ça, me semble-t-il, un jour. Et on devra faire les choix qui s'imposent, en sachant que ces choix-là ne sont pas simples.

1701   M. SIMARD: Je rajouterais, madame Poirier, qu'écoutez, j'espère que mon ami Raynald partage les mêmes idées que moi de temps en temps, mais en tout cas (rire)...

1702   C'est que la distribution est tellement essentielle, mais si on a la distribution... On comprend que le Conseil, au Canada, a créé -- parce que le système qui existe au Canada, il a aussi été créé par le Conseil. C'est sûr qu'on a des joueurs importants, on a des gens qui ont des idées, on a des gens qui sont créatif, mais à la fin de tout ça, c'est le Conseil qui a octroyé des licences, c'est le Conseil qui a permis que le système canadien soit comme il soit là.

1703   Donc nous, si le point fondamental de la distribution est respecté, on est capable d'essayer de faire face à tous les services spécialisés qui peuvent donner... parce qu'on va baser nos émissions locales sur nos gens. On n'a pas peur de ça, mais fondamentalement, fondamentalement, il faut au moins que nos stations soient distribuées.

1704   CONSEILLERE POIRIER: Votre point est bien compris, je pense.

1705   J'aimerais, juste sur le fond, une dernière question.

1706   M. SIMARD: Oui.

1707   CONSEILLERE POIRIER: J'aimerais quand même avoir un pourcentage que vous recommandez qu'on demande. Est-ce que c'est zéro pour-cent, un pour-cent, deux pour-cent, trois pour-cent? Parce que, vous savez, on a eu toutes sortes de propositions, à la base, pour le Fonds d'amélioration de la programmation locale. On a proposé un pour-cent, mais on a ouvert la possibilité d'augmenter à deux pour-cent.

1708   TVA, hier, nous a dit « On préfère zéro pour-cent. C'est autre chose qu'on veut. »

1709   Alors, d'autres nous ont dit trois pour-cent. De votre côté, quelle est la position que vous préconisez?

1710   M. SIMARD: Bien écoutez, madame, moi, je ne voudrais pas contredire ce que j'ai dit dans ma demande sur laquelle on va discuter vendredi, mais nous, on a dit: Dans les conditions actuelles, si la distribution de nos stations demeure et que le petit fonds, qui est essentiel pour nous aider à faire de la programmation puis à compenser aussi pour nos stations qui ne sont pas distribuées, un pour-cent est un montant que l'on juge suffisant pour faire la programmation qu'on peut faire, puis qu'on est capable de faire, puis qu'on a le temps de faire.

1711   Parce qu'il faut bien comprendre, aussi, que lorsqu'on fait de la programmation locale, il faut aussi l'insérer. Il faut aussi enlever une émission du réseau. Donc, il faut négocier avec le réseau pour avoir le droit de passer notre émission locale.

1712   Évidemment, on ne peut pas... Comme on est affilié à un réseau (particulièrement le réseau TVA, qui est quand même un réseau extraordinaire) on comprend qu'on veut diffuser la très grande majorité des émissions. Mais on doit quand même, lorsqu'on fait une production locale, enlever une émission du réseau, et on ne peut pas le faire à un rythme...

1713   Alors, je pense que c'est suffisant.

1714   CONSEILLERE POIRIER: Parfait.

1715   Un dernier sujet, c'est celui de la durée de la licence. Vous demandez tous les deux que la licence soit de sept ans. Les autres organisations qui sont venues devant nous acceptent un an ou deux. Quel serait l'impact de faire un renouvellement de deux ans pour vous, à RNC et à Télé Inter-Rives?

1716   M. BRIERE: C'est un problème. C'est un problème parce que d'abord, on n'a pas les mêmes enjeux que les grands groupes, et cetera. On n'est pas...

1717   Bon, partir de là, on se dit qu'on ne devrait pas être traité comme les grands groupes. On veut être respecté comme les grands groupes, mais pas nécessairement être traités comme eux.

1718   Mais c'est un impact parce que nous autres, les investissements qu'on devra faire en numérique, sur une période de trois ans, c'est des investissements qui sont importants. Et on a besoin d'une certaine stabilité financière aussi. On a besoin d'une stabilité... pendant que nos partenaires financiers...

1719   Demain matin, on va se présenter, on va numériser des tours à un million de dollars chacune, des transmetteurs... On parle des investissements de plusieurs millions de dollars. On s'assoit avec nos financiers, puis on dit: Regardez, on voudrait faire ces investissements-là. O.K., mais on a une licence d'un an ou deux ans... une licence de deux ans.

1720   On comprend que les gens pourraient dire « Oui, mais ça se renouvelle » et puis tout ça. Mais quand on l'a, on l'a, puis quand on l'a pas, on l'a pas. Donc, pour nous autres, ça nous apparaît important à plus long terme.

1721   Autre chose: on peut toujours intervenir dans les débats, les discussions. Il va toujours y en avoir. Moi, je fais ce métier-là depuis 40 ans. Bon, les choses ont changé. Je comprends qu'aujourd'hui il paraît que les choses changent beaucoup plus vite (c'est ce qu'on dit).

1722   C'est vrai, mais il y en a eu des changements, avant. Puis avant, on avait des renouvellements à plus long terme, à moins de circonstances particulières qui étaient liées à notre travail, ce n'était pas lié à d'autres raisons.

1723   La situation économique, oui, est difficile, c'est vrai. Elle l'a déjà été. Elle est plus dure aujourd'hui, j'en conviens, on est conscient de ça, mais on a déjà passé à travers beaucoup de difficultés. Puis nous, on pense qu'on devrait avoir, pour les raisons de stabilité, pour les raisons de mieux nous organiser, on a des conventions de travail, on négocie des conventions avec nos partenaires réseau.

1724   C'est quelque chose d'extrêmement important pour nous. On vise des conventions à long terme, on ne veut pas de choses à court terme. Évidemment...

1725   Puis s'il arrive un changement, si le système tombe en morceau, on sera là. Tu sais ce que je veux dire? Je ne pense pas que c'est ça qui va se passer.

1726   M. SIMARD: Bien, écoutez, de toute façon, vous comprenez... Dans le fond, nous, les petits, on suit un peu la parade. Je veux dire écoutez, ce qui va arriver aux grands réseaux... C'est sûr que si les grands réseaux n'existent plus, je veux dire, on n'existera plus.

1727   Par contre, écoutez, je ne sais pas si vous pouvez vous imaginer, par exemple, pour des petites entreprises comme nous autres, par exemple, juste de répondre, de suivre toute l'évolution des dossiers du Conseil, de répondre à tous les avis publics, parce que je pense que le Conseil désire, il veut qu'on essaie de répondre le plus possible, quand ça nous concerne principalement.

1728   Puis bien souvent, il y a des dossiers qui nous concernent indirectement (prenons un dossier de la câblodistribution). S'il y a des changements qui nous affectent, même si ce n'est pas directement en télévision, on se doit d'y répondre.

1729   Alors, vous comprenez que c'est un temps énorme, pour nous autres. Alors, écoutez, je prenais juste l'exemple, par exemple... On sait par exemple qu'au réseau TQS, vous leur avez donné une licence de sept ans, mais peut-être les revoir après trois ans. Peut-être que ça pourrait être une solution qui serait intéressante.

1730   CONSEILLERE POIRIER: Alors, sur ce, Monsieur le Président, moi, j'aurais terminé.

1731   LE PRÉSIDENT: Merci.

1732   CONSEILLERE POIRIER: Je laisse les autres commissaires procéder.

1733   LE PRÉSIDENT: Michel?

1734   CONSEILLER ARPIN: Merci, Monsieur le Président.

1735   Monsieur Brière, monsieur Simard, quand vous avez décrit les différents critères que le Conseil devrait considérer pour l'octroi des sommes reliées au fonds, vous y mettez une certaine partie des argents, du moins pendant les trois premières années, à la transition numérique.

1736   Et vous l'avez, tantôt, cerné aux équipements de production dans les stations, mais ça peut aller très loin, les équipements de production dans les stations. Est-ce que ça comprend la régie centrale? Est-ce que ça comprend le lien micro-ondes entre l'antenne et le studio? Ou est-ce qu'on parle des équipements directement reliés à un studio et donc de caméras, d'équipement de production, d'équipement de diffusion.

1737   M. BRIERE: Dans la réflexion qu'on a faite à ce jour, on ne s'est pas limité à ça. On s'est plutôt dit « tous les équipements liés à la transformation (de près ou de loin) au numérique HD inclus. »

1738   Donc, ça comprendrait ce que vous avez mentionné au début, c'est-à-dire le studio, la régie... Absolument, ça pourrait être ça. On ne s'est pas limité à ça.

1739   M. SIMARD: Non, écoutez, la régie... la régie centrale, si on s'entend bien, monsieur Arpin, la régie centrale étant le principal endroit dans une petite station de télévision où on produit toutes nos productions locales, nos nouvelles...

1740   CONSEILLER ARPIN: Mais c'est aussi l'endroit où vous recevez le signal --

1741   M. BRIERE: Absolument... absolument...

1742   CONSEILLER ARPIN: -- de votre station maîtresse et où vous y faites les insertions commerciales?

1743   M. BRIERE: Absolument.

1744   M. SIMARD: Ah! Bien, c'est-à-dire que la régie... Vous voulez dire la régie... Vous voulez dire « la mise en ondes »?

1745   CONSEILLER ARPIN: Oui, la régie de mise en ondes.

1746   M. SIMARD: Oui. Ça, la mise en ondes, c'est une autre pièce, si vous voulez.

1747   Alors nous... Moi, je faisais allusion plutôt à la salle de production, vraiment, où l'on produit les nouvelles.

1748   Dans notre esprit, je pense que la salle de mise en ondes n'était pas nécessairement incluse dans cette somme-là. C'est la salle de production qui est importante.

1749   CONSEILLER ARPIN: Mais ce n'est pas la vision de votre collègue?

1750   M. BRIERE: Non. Moi, je pense que... Et j'ai beaucoup de respect envers mon collègue, vous le savez...

--- Laughter

1751   M. BRIERE: ... et j'ai une très grande estime pour lui, puis ça fait très longtemps que j'ai de l'estime pour lui, mais je ne suis pas d'accord avec ça.

1752   Je pense sincèrement qu'on ne devrait pas cataloguer tout ça. Ça devient un petit peu compliqué parce que le bout de fil qui passe à travers la régie, lui, est-ce qu'il est comptabilisé ou pas? Puis vous savez, on est toujours dans des petits environnements, Monsieur le Vice-président, et moi, je pense qu'on devrait faire les choses simplement.

1753   Simplement, c'est que oui ou non, est-ce qu'on accepte le principe que ça soit, dans les équipements de transformation, une règle? Si j'achète une automobile... peut-être que ça ne fait pas de bons sens, si j'achète une voiture. Je comprends ça, mais c'est parce que là, ça ne sera pas lié.

1754   On connaît, on sait ce qu'il faut faire pour numériser nos propres stations et moi, je pense qu'on ne devrait pas avoir de limitation, sinon ça va devenir un exercice de comptabilité qui est complexe et on ne devrait pas s'embarquer là-dedans.

1755   CONSEILLER ARPIN: Maintenant, cette réflexion-là, est-ce qu'elle s'applique à vous en particulier et aux stations qui seraient membres du regroupement des petites stations qui ont accès au fonds des petites stations ou c'est l'ensemble des stations qui bénéficierait du fonds, qui devrait bénéficier des mêmes critères?

1756   M. SIMARD: Bien écoutez, nous, c'est certain que l'ensemble des autres petites stations qui font partie du groupe des petites stations indépendantes au Canada (si c'est votre question), c'est certain qu'on voit les choses de la même façon.

1757   CONSEILLER ARPIN: Mais les stations qui sont carrément la propriété des grands groupes, est-ce qu'elles devraient avoir...?

1758   Est-ce que ça devrait être les mêmes critères pour tout le monde ou est-ce que le Conseil devrait considérer des critères en fonction des caractéristiques qui sont propres. Il y a les grands groupes corporatifs d'une part, avec leurs opérations, que le Conseil a déjà traités d'une façon différente des stations qui sont purement des affiliées et qui, en général, ne sont présentes que dans des petits marchés?

1759   M. BRIERE: Je pense que le Conseil a déjà identifié -- vous en avez parlé hier, vous-même, Monsieur le Vice-président, et je pense que lors de l'entrevue avec CTV ça a été question aussi que « Pourquoi on a créé ce fonds-là? » D'abord et avant tout, parce qu'il y a une problématique de production puis de contenu local.

1760   Et je serais tenté de vous dire aujourd'hui... sans paraître « self-serving », c'est absolument le but, mais je serais tenté de dire qu'on devrait avoir ce genre de critère. Il pourrait y avoir un ou deux critères, dont celui-là, uniquement réservés aux joueurs qui sont des joueurs indépendants.

1761   On n'a pas les mêmes ressources, on n'a pas les mêmes moyens et c'est sûr que la conversion au numérique, pour nous autres, ça représente un défi autrement plus grand (me semble-t-il). Non pas que les... Je ne veux pas du tout minimiser l'impact des gros joueurs. Ils sont capables de se défendre tout seuls et puis je pense qu'ils le font bien. Mais nous, c'est clair que...

1762   Je serais porté à croire, aujourd'hui... spontanément, là, je vous répondrais en vous disant que je pense que ça devrait être appliqué, ce critère-là particulièrement, aux petites stations indépendantes.

1763   M. SIMARD: Oui, mais monsieur Arpin, j'aimerais peut-être ajouter aussi, vous savez... Parce que je pense qu'il faut aussi avoir une certaine logique, c'est-à-dire que oui, absolument, Raynald a raison.

1764   Je pense que vous pouvez, si vous le désirez, peut-être accommoder les petites stations indépendantes d'une façon différente, mais je pense aussi sincèrement...

1765   Puis là, sans vouloir appuyer les grands groupes, parce que comme Raynald dit, c'est tout un autre domaine, alors...

1766   Mais il est certain qu'un grand groupe qui opère une petite station régionale (je veux dire que ça peut-être, un exemple, à Rimouski), bien, je pense que sensiblement, les opérations ressemblent, dans une certaine mesure (il y a des différences).

1767   Et je pense que dans certains cas, aussi, dans le cas des petites stations des grands groupes (parce qu'on pense aussi que c'est important). Là, nous, lorsqu'on parle de nos stations, Monsieur le Président, évidemment, on est dans nos petits marchés, mais on est conscient qu'il y a aussi au Canada des petits marchés qui appartiennent aux grands groupes et qui, certainement, ont besoin aussi d'un appui du Conseil.

1768   CONSEILLER ARPIN: Mais il y a des bons marchés qui appartiennent aux grands groupes également. C'est parce qu'à ce moment-là, vous... je pensais qu'il y avait dans votre vision une distinction (je pense que monsieur Brière la voit différemment de vous, monsieur Simard), mais...

1769   Parce que les critères que le Conseil a proposés déjà, dans son avis public de 2008-100, évidemment, étaient des critères communs pour tout le monde, sans nécessairement avoir de spécificité. Or là, ce que j'entends ce matin, c'est que monsieur Brière nous dit, lui « Il devrait y avoir une spécificité pour les plus petits » et vous, monsieur Simard...

1770   Et puis, je peux reconnaître que dans les grands groupes il y a des petites opérations. J'ai déjà travaillé pour un grand groupe...

--- Laughter

1771   CONSEILLER ARPIN: ... puis je suis déjà allé à la station de radio de Val-D'Or, puis je trouvais que ce n'était pas à parité avec la station de Montréal, et ça donc...

1772   Mais donc, je peux comprendre ce que vous dites, monsieur Simard, mais c'est qu'à un moment donné, c'est un fonds d'aide à la production et si 50 pour-cent de l'argent (en déclinant, comme vous le proposez... malgré tout, c'est des sommes importantes) vont à la technologie, bien, quand on va venir pour évaluer dans trois ans, on ne verra probablement pas davantage de programmation parce qu'une partie importante de l'argent sera passée dans la technologie.

1773   M. SIMARD: Bien, je pense, Monsieur le Président, écoutez... Si demain matin, dans les petites stations comme les nôtres, on veut produire des émissions de qualité...

1774   Vous savez, on peut s'imaginer que lorsque par exemple vous transmettez, vous émettez des émissions qui arrivent du réseau puis qui coûtent des sommes faramineuses à produire (des centaines et des centaines de mille dollars), vous comprendrez que lorsqu'on arrive puis qu'on se détache du réseau, aujourd'hui, de la façon dont les gens voient les choses, de la façon dont les gens sont difficiles, sont habitués à avoir des choses de qualité, il faut absolument avoir des équipements nécessaires pour produire ces émissions-là, locales, avec de la très haute qualité.

1775   Alors, c'est un peu la raison pour laquelle on semble insister sur ce point-là.

1776   CONSEILLER ARPIN: D'accord. Merci beaucoup.

1777   THE CHAIRPERSON: Len, you have a question?

1778   COMMISSIONER KATZ: I have one question.

1779   Good morning, gentlemen.

1780   You touched upon, in your opening remarks, the small market program fund. And I understand clearly the rationale for it is very different than how it got arrived at in the LPIF.

1781   But just from your perspective, has your focus in your investment in local programming increased as a result of your access to this fund of money and, if so, how has it materialized in terms of the audience? Has your audience increased because you have had more money to put into local programming if, in fact, that is where the money went?

1782   M. SIMARD: Écoutez, monsieur Katz, vous savez... Oui. Ma réponse est définitivement oui.

1783   D'abord, les émissions locales qu'on a produites avec le petit fonds pour les petits marchés, vous comprendrez que lorsqu'on les a diffusées (puis la plupart on été diffusées en période de grande écoute, ça veut dire après six heures le soir), évidemment...

1784   D'abord, premièrement, il fallait s'entendre avec notre réseau pour qu'il accepte qu'on puisse nous libérer une période pour diffuser ces émissions-là. Dans le cas des émissions qu'on a produites, c'est certain que...

1785   Écoutez, si vous me demandez « Vous avez enlevé une émission du réseau de 6 h 00 à 6 h 30 et vous l'avez remplacée par votre émission », ce qu'on a constaté, c'est que les émissions qu'on a produites localement, la plupart des émissions qu'on a produites (à l'extérieur des nouvelles) ont atteint des niveaux d'écoute exceptionnels, c'est-à-dire qu'elles se sont classées dans les dix premières émissions de tous les réseaux dans notre marché.

1786   Alors quelle aurait été l'écoute du réseau, si elle avait été là, c'est un peu difficile à dire, mais compte tenu de l'écoute qu'on a obtenue avec nos nouvelles émissions, l'écoute étant tellement extraordinaire, c'est qu'on a sûrement égalé et surpassé l'écoute du réseau.

1787   Alors maintenant, est-ce qu'on l'a surpassée de cinq pour-cent, de dix pour-cent? Mais l'important, c'était de faire une émission locale.

1788   Ces émissions-là, locales, qu'on a diffusées, il ne faut pas... On l'a vu, nous, non seulement comme l'augmentation ou le maintien d'une cote d'écoute à une heure précise, mais on l'a vu comme l'image globale qu'on a pu donner de notre station auprès de nos gens comme étant une station régionale qui s'occupe de ses gens.

1789   Donc, l'impact s'est fait sentir sur toute la programmation, de telle sorte qu'on pense qu'on a réussi à augmenter légèrement globalement les heures écoute totales chaque semaine. Exemple, les stations de Radio-Nord et nos stations obtiennent... les deux stations TVA, on obtient près de 3 millions d'heures écoute par semaine pour nos deux stations.

1790   Alors on pense que c'est important et qu'on... les émissions du fonds nous ont aidés à augmenter légèrement ce volume total d'heures écoute, évidemment, qui se traduit par revenus publicitaires.

1791   M. BRIERE: Même chose. Je n'ai pas d'autre commentaire à ajouter, sinon que... Exactement la même chose : on obtient les mêmes résultats.

1792   Cela dit, il faut convenir que c'est difficile de demander au réseau un détachement de leurs émissions prioritaires, ou leurs émissions en heure de grande écoute. Donc, c'est une négociation qu'on doit faire. On le fait occasionnellement, mais ça ne se fait pas sur une base régulière, c'est clair. Parce qu'aussi, les gens veulent avoir accès à leurs émissions de base et on comprend ça.

1793   M. SIMARD: Exemple, monsieur Katz, de ce que vous me demandiez tout à l'heure... Je prends l'exemple du bulletin de nouvelles de notre station TVA à Rivière-du-Loup qui est passé, pour plusieurs raisons (dont une entre autres archi-importante, c'est la distribution)... est passé de 25 000 auditeurs à 44 000 auditeurs depuis que nos stations sont distribuées et depuis qu'on a pu améliorer de beaucoup la présentation de nos nouvelles, le nombre de reportages, les caméras, et cetera, pour produire nos nouvelles locales.

1794   Alors, notre bulletin de nouvelles locales se classe, si je ne me trompe pas, le quatrième parmi toutes les émissions de tous les réseaux confondus dans notre marché.

1795   Alors, effectivement, ça a été un succès très important.

1796   COMMISSIONER KATZ: Thank you.

1797   Merci.

1798   LE PRÉSIDENT: O.K. Merci beaucoup. Ce sont nos questions.

1799   Maître Dionne, voulez-vous résumer les engagements?

1800   Me DIONNE: Oui.

1801   Je voulais simplement confirmer que vous allez nous fournir des commentaires par rapport aux trois documents déposés hier au dossier public, concernant les redevances de distribution et est-ce que vous allez être en mesure de le faire lors des discussions vendredi?

1802   M. BRIERE: Oui, nous allons être en mesure de le faire vendredi.

1803   M. SIMARD: Oui.

1804   Me DIONNE: Merci.

1805   LE PRÉSIDENT: O.K. Merci.

1806   On va prendre une courte pause de 10 minutes.

1807   M. SIMARD: Merci.

1808   M. BRIERE: Merci.

--- Upon recessing at 1028

--- Upon resuming at 1044

1809   LE PRÉSIDENT: Madame le secrétaire.

1810   LE SECRÉTAIRE: Merci, Monsieur le Président.

1811   I would now invite Rogers Broadcasting Limited and Rogers Communications Inc. to make its presentation.

1812   Appearing for them is Ken Englehart. Please introduce your colleagues, and you will then have 20 minutes to make your presentation.

PRESENTATION

1813   MR. ENGLEHART: Mr. Chair, members of the Commission and Commission staff, we are pleased to appear before you today to speak to the policy issues the Commission has outlined in its public notices.

1814   My name is Ken Englehart and I am the Senior Vice-President, Regulatory for Rogers Communications Inc.

1815   To my immediate left is Phil Lind, the Vice-Chairman of RCI. Beside Phil is Tony Viner, President and CEO of Rogers Media, and Leslie Sole, CEO of Rogers Media Television.

1816   To my far right is Pam Dinsmore, Vice-President and Regulatory Rogers Cable, and next to Pam is David Purdy, Vice-President, Video Product Management, Rogers Cable.

1817   In the back row, from your right to left, are: Kirk Nesbitt, Vice-President Engineering, Rogers Media; Alain Strati, Vice-President of the OMNI Station Group; Navaid Mansuri, Vice-President, Finance Administration, Rogers Media Television; Jamie Haggarty, Executive Vice-President, TV Operations, Rogers Media Television; Susan Wheeler, Vice-President, Regulatory, Rogers Media; and David Watt, Vice-President, Regulatory Economics, RCI.

1818   Mr. Chair and Commissioners, Rogers welcomes this opportunity to discuss the sectoral policy issues that the Commission has determined must be addressed prior to commencing the licence renewals of the private conventional over-the-air broadcasters.

1819   Taken together, these issues are relevant to both our media company and our cable division and we will be addressing them from both perspectives. In our remarks today, Rogers will make the following points.

1820   One, the 1 per cent contribution to the Local Programming Improvement Fund is sufficient. Two, small market stations that compete with large market stations should not be eligible for LPIF funding.

1821   Three, to meet the challenges faced by our Citytv stations, while operating more consistently with our local programming mandate, relief from our priority programming requirements is necessary. Four, any measure to correlate Canadian to foreign program spending should only be considered once the economy has stabilized.

1822   Five, the distant signal regime should not be moved forward unless all the policy reforms from the 2008 Regulatory Review are moved up as well. Six, the appropriate licence term for our OMNI stations should be 6 years, ending August 31, 2015. For our Citytv stations, the licence term should be for 2 years, ending August 31, 2011.

1823   Rogers is committed to local programming. We believe local programming is the core mandate of over-the-air broadcasters. This belief is reflected in our licence renewal applications for the Citytv and OMNI television stations. Local is also the defining characteristic of our community channels which program 14,000 hours of local programming each and every year. As well, our 52 radio stations and our Sportsnet television service are uniquely local in their focus.

1824   Rogers has committed to rolling out both Citytv's and OMNI's DTV facilities in all licensed markets by the Commission-imposed deadline of August 31, 2011. Rogers believes it is essential for over-the-air broadcasters to exploit and retain DTV spectrum in Canada, particularly in urban markets.

1825   There remains a critical mass of Canadians in urban markets who continue to receive television over-the-air. While we have yet to fully appreciate all of DTV's commercial opportunities, we believe it is in our competitive interest to retain a direct relationship with OTA viewers by offering them premium quality, high definition local television service.

1826   However, the significant capital investments we will need to make in order to meet the August 31, 2011 deadline have become even more onerous in the current economic climate.

1827   Phil.

1828   MR. LIND: A central issue in this proceeding is whether the Commission should restructure the Local Programming Improvement Fund which was announced in October 2008, just a mere six months ago. The Fund was originally set up to provide monies to small market broadcasters in exchange for more and better local programming.

1829   The Commission has now proposed that small market broadcasters should be able to access the fund simply to maintain existing levels of local programming, rather than doing anymore.

1830   There is also the question of whether the existing 1 per cent levy on cable and satellite company revenues is sufficient. Rogers submits that the LPIF should be used for more and better local programming. However, for the next one or two years, the incrementality requirement can be waived to help small market broadcasters through the recession. We oppose any increase to the LPIF for a number of reasons.

1831   There is a lack of information about the state of local news on the public record. No information was placed on the record of the 2008 Regulatory Review about the state of local news offered by small market stations or the costs, revenues and resources associated with offering newscasts in non-metropolitan areas.

1832   There has been very little additional information placed on the record in this proceeding. Given this lack of information, it is hard for us to assess whether the 1 per cent contribution is required, let alone whether an increase is warranted.

1833   It is no longer clear to us what the purpose of the LPIF is. Originally, it was to fund more local news in smaller markets. It appears now that the intention is for the Fund to become a simple cross-subsidy from BDUs to small market broadcasters in order to enhance their viability.

1834   In other words, neither Canadians nor the broadcasting system will get any added benefit from this subsidy. This type of subsidy should be short term, because viability will improve once the recession is over.

1835   Whether or not the incrementality requirement is retained, many Rogers Cable customers will see no benefits from Rogers' contributions. For example, under the current rules, the $16 million we will start paying in September of this year will not benefit any of our 1.5 million customers in Toronto. For this reason alone, we believe the size of the transfer should be limited.

1836   However, there are other good reasons not to increase the current LPIF contribution. On April 9, the Commission filed a letter with the Chair of the House of Commons Standing Committee on Canadian Heritage. In the letter, you confirmed that the 1 per cent contribution represents at least 30 per cent of the annual local programming budgets of the eligible small market stations.

1837   There is no good public policy reason for cable operators to pay more than 30 per cent of the cost of local programming for those stations in small markets.

1838   The main problem that small market broadcasters have is that their signals are not carried by DTH. Since 30 or 40 per cent of households in those markets subscribe to satellite and are unable to receive their signals, small market TV stations experience reduced revenue.

1839   The solution is to require DTH companies to carry all local television stations. It is unfair and it is inappropriate to require cable companies to bail out small market broadcasters when it is DTH, not cable, that is the problem.

1840   Mr. Chairman, Commissioners, if the purpose of the LPIF is to deal with the perceived problems of the broadcasters in the long term, changing it would be premature. A whole range of possible solutions will be looked at as part of the group-based renewals next year. It would not make sense to implement any long-term solutions before that proceeding takes place.

1841   If, on the other hand, the LPIF's purpose is to help small market broadcasters manage their way through a recession, then a 1 per cent contribution, which will pay for at least 30 per cent of their existing local programming budgets is more than enough.

1842   And let's not forget, any increase to the LPIF will have a real impact on cable TV service in Canada. It will be passed on to our customers in the form of higher rates. This will hurt customers and cause many to downgrade their cable packages. In the current downturn, we are already implementing staff and cost reductions. No increase to the LPIF can be made without requiring us to cancel services, defer network upgrades and implement further staff and cost reductions.

1843   This, in turn, will make it difficult for cable operators to make the massive investments necessary to modernize the cable infrastructure. Without these massive investments we are making in HD, VOD, interactivity and increased capacity, customers will leave the cable system and, thus, the regulated broadcasting system for the Internet and other unregulated platforms. There is already a massive leakage from the system in the form of black market theft. The LPIF will drive more customers to bypass the regulated system.

1844   Tony.

1845   MR. TONY VINER: I would like to turn now to the eligibility for LPIF funding.

1846   The LPIF is designed to assist stations in smaller Canadian markets. For this reason, we believe that stations located in Hamilton, Barrie and Victoria should not qualify for LPIF funding. These stations are part of the Toronto and Vancouver television markets and are not small market stations.

1847   One only has to look at the prime time schedules of these stations to understand that their owners have spent heavily in licensing U.S. studio and network programming exclusively to serve the Toronto and Vancouver markets. Under any definition of the market, they compete directly with Toronto and Vancouver-based stations for programming, viewers and advertising.

1848   In our view, allowing these stations to receive a direct subsidy for local programming, with no requirement for incrementality, creates a competitive inequity with stations licensed to serve Toronto and Vancouver because they compete largely for the same advertising dollars. This inequity has a disproportionate impact on smaller station groups like SUN-TV, Citytv and OMNI.

1849   We believe that allowing these "rim" stations to receive a local programming subsidy will divert funds unnecessarily from stations that truly operate in small markets, where it is much more difficult to support local programming.

1850   In our view, limiting access to LPIF funding to stations serving small markets represents a more effective and targeted use of the LPIF's resources and would be more in keeping with the Commission's objective.

1851   We also submit that if the fund is used to maintain, rather than to increase, local programming, then any programming group that receives monies from the fund should have to commit to not closing any stations or canceling any local programming over their entire station group. Canadian cable customers will be paying directly for the maintenance of local news and information programming. It would not be appropriate for them to do so only to have stations close and newscasts discontinued.

1852   I would like to turn now to the subject of contribution to Canadian programming.

1853   While Rogers does not believe the model for over-the-air television is broken, we do believe that adjustments to the model are required. Viewers today have access to a wider choice of television and new media and this had led to the fragmentation of audiences. This, combined with undisciplined U.S. program spending practices and the economic recession, has taken its toll on the health of the conventional television sector.

1854   We believe that, given the diminished role of the over-the-air television sector in serving a wide range of programming interests, it is better public policy to allow over-the-air broadcasters to focus on doing a few things well rather than a lot of things just okay.

1855   To this end, we believe the obligations of OTA broadcasters must be re-calibrated to provide maximum flexibility to respond to audience tastes and habits. This involves giving over-the-air broadcasters the flexibility to prioritize their Canadian program spending on the type of programming that works best with their overall programming strategy and brand. For Citytv, local programming is our priority.

1856   As we have outlined in our licence renewal application, we plan to focus our spending priority on the gathering and dissemination of local news, information and entertainment programming in each of the markets we serve. We need to invest in local programming as our core mandate, as we believe we can, over time, build loyal local audiences and distinguish ourselves from our competitors.

1857   However, we wish to point out that this heightened focus on local programming is not without its own unique challenges. High quality local programming is expensive to produce. At the same time, its ability to generate incremental revenues over and above advertising revenues from the original broadcast is limited, since local content is targeted at small audiences and generally has a short shelf-life.

1858   Notwithstanding, we are committed to making this investment and recapturing Citytv's local voice in the communities we serve.

1859   Citytv has historically not produced a lot of priority programming. The Citytv group of stations currently has a baseline spending requirement of $4.1 million per year; the equivalent of one 13-part one-hour Canadian drama series. This same amount of money could produce a daily one-hour newscast in Vancouver for close to a year.

1860   In our view, a mandated investment in priority programming does not represent an effective use of our Canadian program spending as it limits our ability to invest in local programming which we believe is more in line with our mandate and programming focus.

1861   We wish to clarify, however, that our request to be relieved from priority programming obligations does not mean we will no longer continue to develop and licence priority programming from the independent production sector.

1862   For example, Citytv will uphold the terms and conditions of our tangible benefits funding of which the majority is dedicated to on-screen initiatives in support of priority programming. We also note that 85 percent of this benefits package is reserved exclusively for the independent production sector.

1863   As we stated in our response to the Commission questions, Rogers is not opposed to the concept of some correlation between Canadian and non-Canadian programming expenditures or a correlation on spending that involves other factors or variables.

1864   Revenues from U.S. programming continue to subsidize Canadian programming, including local programming. Imposing a one to one spending ratio, or imposing additional restrictions on over-the-air broadcasters at this time will distort the business model for financing Canadian programming and limit our ability to maximize revenue opportunities and deliver on our commitments to local programming. We believe that a ratio should only be considered once the economic environment has stabilized.

1865   We agree with a number of the parties and interveners to this proceeding that an in-depth discussion of prospective spending ratios is more appropriately dealt with during the Commission's corporate group renewal hearings scheduled to take place in the next year or so.

1866   Pam.

1867   MS DINSMORE: Turning to distant signals, the Commission has asked whether it should implement its proposals for a new distant signal regime now, rather than wait until August 31, 2011. The new regime will require that BDUs negotiate the broadcasters' consent prior to distributing their signals.

1868   In Rogers' view, if any of the policy changes slated to take effect on August 31st, 2011 are to be moved forward, then they should all be moved forward together. A large number of changes were announced at the conclusion of the 2008 Regulatory Review. These changes are a collective package of regulatory reforms and are designed to help all segments of the broadcasting industry. We do not think it would be appropriate or fair to advance one policy proposal without advancing them all.

1869   Whether or not the new distant signal regime is moved forward, Rogers believes that the regime needs to address the long-standing inequity that exists between cable and satellite in terms of negotiating distant signal rates. We would note that the cable operators are already required to make payments for the distant signals. If we do not pay, we have to blackout much of the programming.

1870   While cable operators currently pay 50 cents per digital subscriber per month to carry the distant Canadian signals, satellite providers pay nothing. They simply redirect to small market broadcasters a small percentage of the 5 percent contribution they otherwise must make to Canadian production funds. This happens despite the fact that the vast amount of distant signal viewing and, therefore, of the economic impact on broadcasters, can be attributed to distant signals carried by satellite companies. The end result is that cable companies are paying far in excess of any actual economic impact we cause to local broadcasters through our carriage of local signals.

1871   In our view, this inequity must end. It is undue discrimination to require cable operators to pay for distant signals while not requiring satellite to pay. And the argument that satellite companies "pay" for the distant signals by uplinking local stations is fallacious.

1872   Since cable is required to give priority carriage to all local signals, this is not a "payment' we can make. Rogers requests that whether the Commission advances the new distant signal regime or not, it should make it clear that its undue preference rules require cable and satellite providers to be treated similarly.

1873   Finally, Rogers Cable is in discussions with the private broadcasters to arrive at a creative solution that would eliminate the distribution of distant signals on our cable systems and eradicate any economic impact on the broadcasters. Instead, we would arrange with the broadcasters to put their programming on our video-on-demand platform. This would allow our customers to continue to watch time-shifted programming in a much more efficient and cost effective way than through distant signals. It will also create a new ad-based revenue stream for both broadcasters and distributors.

1874   Leslie.

1875   MR. SOLE: I would like to talk about the appropriate licence term for City and OMNI Television.

1876   Rogers has applied for a six year licence term for our OMNI stations given that our primary focus over the next licence term will be the integration of these stations into the OMNI Television group.

1877   Many of these stations are new to the OMNI Television group and as such we require time to achieve a reasonable degree of operational stability. We have outlined our plans for the OMNI stations over the next six years in our licence renewal application and look forward to discussing them with the Commission later on in this proceeding.

1878   With respect to Citytv, we originally requested a full licence term for these stations based on exactly the same principles. We are very new to these stations and require, above all, operational stability. Accordingly, we would support a longer provisional licence term that will allow us to gain a better understanding of these stations' operational requirements and the needs of the communities they serve.

1879   We understand and support the Commission's decision to hold corporate group renewal hearings and believe this can still be done after a two-year period with little impact to the system. At that point, we hope the economic environment will have stabilized and we will be in a better position to assess the appropriate contributions and obligations of our broadcasting properties.

1880   Mr. Chairman, members of the Commission, we remain optimistic about the future of over-the-air television. We believe there is a solid and fundamental role for over-the-air television in serving and reflecting local communities across Canada.

1881   Thank you very much for allowing us to have this opportunity this morning and we would be happy to take any and all questions.

1882   THE CHAIRPERSON: Thank you very much for your presentation. As always, I'm impressed by the logic and care with which you make your presentations.

1883   I assume you listened to the proceedings yesterday. Mr. Lind, I want to give you the opportunity to set the record straight. You were quoted several times advocating a U.S.-type system. Is that the case or not?

1884   MR. LIND: No -- sorry.

1885   The question of the U.S. system, you know, it's fee-for-carriage or mandatory carriage but not both. So in other words, both the -- in our opinion both the broadcaster and the Commission would have to accept, for example, that a Canadian station could be dropped. Is that possible? I don't think so.

1886   Secondly, I think it requires an acceptance of the fact that, say for example, in Toronto that the Buffalo stations would continue to exist, and CTV doesn't accept that. So they don't accept what would be the prerequisite for a negotiation.

1887   THE CHAIRPERSON: Well, that's -- I'm glad you mentioned Toronto and Buffalo, et cetera.

1888   I mean the U.S. system, as far as I'm concerned, you just can't import it into Canada, but you were quoted and since you are one of the leading figures in Canadian broadcasting I wanted to hear whether you were misquoted or not.

1889   MR. LIND: I was misquoted -- overquoted.

1890   THE CHAIRPERSON: Overquoted, okay, thank you. So basically, you like the principle of either being mandatory carriage or fee-for-carriage but not both.

1891   MR. LIND: But not both.

1892   THE CHAIRPERSON: Yeah, okay.

1893   Now, you heard my discussion yesterday with Mr. Fecan and what he had in mind, well, first of all, a 3 percent local improvement fee, but on top of that it is clear that his long term aim is the fee-for-carriage.

1894   And as I pushed him on it and I tried to clarify I said, "Basically at the end of the day what you are talking about is a specialty channel that has a genre of conventional TV" and would he be prepared to accept -- but the thing with specialty channels of course is that they have very specific conditions, one of them being CPE, Canadian program expenditures and would he be prepared to accept that, and he said yes.

1895   So do you see us going that way in the long run, not today, not in -- but do you see that's how in effect the future of conventional TV is going, that rather than as we have now local stations over-the-air which are 90 percent received over cable and satellite anyway and only 10 percent over-the-air, that in the long run that in effect that's what we should be looking at as a specialty conventional channel?

1896   MR. LIND: Okay. Tony too.

1897   MR. ENGELHART: Yeah, it wasn't clear to me whether they were still going to distribute over-the-air or not. If they are still distributing over-the-air it's very problematic for us to give them a fee because, you know, the reason that people signup for cable is typically not to get the things that they can get free over-the-air.

1898   So I think that if the proposal makes any sense they would have to stop broadcasting and then, you know, there would be a whole bunch of things we would have to look at -- whether to have simultaneous substitution anymore; does that still make sense -- priority carriage, channel placement, all of these things. So it would be a radically different model and you know would take a bit of thinking.

1899   THE CHAIRPERSON: My whole point of the question is because you have been quoted, and we all know that the conventional TV as it is right now has severe problems, isn't working. And it's because we are thinking always from the starting point of over-the-air, et cetera, and I was wondering in effect should we look at it the other way around? Should we look at it, saying that really the future is a conventional specialty TV? There may be exceptions in some areas, especially in large metropolitan areas where you broadcast but, really, you have to take conventional TV and fit it into the existing model of distribution by cable and satellite and review, as you suggest, all other obligations and privileges in that light.

1900   Is that a logical starting point or not? As I say, you know, it came up yesterday for the first time and I haven't thought about it or elaborated. So I just wanted to hear your views on it.

1901   MR. ENGELHART: I'm going to let Tony jump in too, but the premise of your question is essentially the over-the-air model is broken. We are not as gloomy as others are on this subject.

1902   We shelled out a lot of money for the Citytv stations two years ago, never thinking that we would ever get fee-for-carriage and although we probably over -- well, we did overpay for those stations -- we still think they are good stations to have. We still think the OTA model works.

1903   And I will let Tony explain why.

1904   MR. TONY VINER: Well, I think that Mr. Fecan actually did allude to this yesterday, which is we continue to believe that there is a place in the system for a free over-the-air mass audience platform and there are plenty of advertisers. There is plenty of reason to want to expose Canadian cultural products to those mass audiences.

1905   You know, far be it from me, but as you enumerate the privileges that some have asked for; it's LPIF, it's fee-for-carriage, it's mandatory carriage, it's simultaneous substitution and low channel position. Good deal.

1906   MR. LIND: My God, it's ridiculous.

1907   Also, I think we should remember that the Global stations -- the Global network and the CTV network combined are profitable, not unprofitable. Their over-the-air are having problems right now but they are -- overall they are profitable, both groups.

1908   THE CHAIRPERSON: Okay. Before I pass you on one other question -- a comment that you made this morning that caught my attention, Mr. Lind. You said the solution is DTH -- the problem is DTH and that especially for the small markets, you know, that they should be carried by -- all of them should be on DTH. That would solve largely their problem rather than trying to -- a cross-subsidy, et cetera.

1909   Is that technically feasible? Isn't that a little bit of a facile comment? I understand that if you wanted to put all of them on DTH there is just not enough capacity.

1910   MR. LIND: Well, do you want to answer that, Ken?

1911   Certainly, we noticed from our viewing of the options that are offered by DTH there are a lot of channels that aren't local that aren't necessarily necessary either. So that in our view there is lots of space that could be made available for additional local station carriage.

1912   THE CHAIRPERSON: Yeah, but presumably they carry those stations because there is a bigger demand for them by viewers, whatever they may be, and it also means that an income stream for them while carrying small local over-the-air stations -- does not necessarily convert into income.

1913   MR. ENGELHART: Well, it's very expensive for them to carry them all. It's very expensive for us to carry them all. I mean we are spending $700-800 million a year on the network. Right now we have all of the mandatory carriage services that we have to carry in analog and standard definition and high definition. We are spending a fortune on switch video to make all this possible.

1914   So if you look at the cost of cable networks across the country it's -- I don't know, $20 billion to carry all the stations. Satellite it's probably $2 billion or $3 billion to carry all the stations. It's actually easier for satellite but they are saying, "Well, we don't want to do it. It's too expensive". We know that.

1915   We know how expensive it is, but I think, as the previous panel said if you don't have local distribution it's very hard to have a local television station. It's just a real problem for them.

1916   THE CHAIRPERSON: Okay, thank you.

1917   Candice, you have some questions?

1918   COMMISSIONER MOLNAR: Yes, thank you, and welcome everyone.

1919   Should I address my questions to Mr. Engelhart? Okay. And you can readdress. I'm going --

1920   THE CHAIRPERSON: Can you speak closer to your microphone?

1921   COMMISSIONER MOLNAR: Okay. You can tell me if you can't hear me.

1922   I would like to begin just with a couple of housekeeping matters.

1923   Yesterday -- and I believe some of you were in the room when the Chair presented an analysis of the fee-for-carriage and a calculation. Would you agree with that calculation as it has been submitted?

1924   MR. ENGELHART: No, we have some issues with it, and let me explain.

1925   The first thing that occurs to us is that the PBIT number that you are showing for cable is actually the PBIT number for our cable television business, our telephone business and our internet business. So you have got all three services in that PBIT.

1926   And I suppose the thinking behind the analysis is, well, those are three services that are run off the one platform, and that's quite true. But if you are going to combine our telephone and internet profits in here we think it would be fair to look at the over-the-air and the specialty services that Global and CTV in effect operate on one platform. So you can't just look at OTA television for them and look at internet and telephone for us.

1927   The second thing that occurs to us is that you are looking at PBIT, profit before interest and taxes. Now, that's a little bit of an unfair comparison between a cable company and a broadcaster because of the "I", the interest. We spend a lot of money on infrastructure. We spend billions on the network. That causes us to have huge interest expenses. Broadcasters, you know, they buy a couple of cars every year and an antenna once every 25 years. They don't have the same infrastructure spend. So if you subtract the interest you get pre-tax margin which we think is a more realistic measure.

1928   If you look at pre-tax margin, cable is at 9.9 percent, over-the-air is at -4.5 percent and specialties are at 20.8 percent; so not too dissimilar in terms of profitability before the fee-for-carriage. If you then add the fee-for-carriage it drives our pre-tax margin -- cable's pre-tax margin down to 5.6 percent. Over-the-air's pre-tax margin goes up to 7.7 percent and of course specialty is still at 20.8 percent.

1929   So we think if the analysis is looked at correctly, the impact of fee-for-carriage would be to make cable far, far less profitable than broadcasting and we don't think obviously that would be right.

1930   COMMISSIONER MOLNAR: Thank you. That was a lot of numbers and I would expect that you will --

1931   MR. LIND: We will file those.

1932   COMMISSIONER MOLNAR: -- will file those, yes, thanks.

1933   MR. LIND: Sure.

1934   THE CHAIRPERSON: If I can just intervene for one second? The reason I filed is exactly as I said yesterday. This fee-for-carriage is in everybody's mind in the background and everybody has a different understanding.

1935   So the explanation Mr. Engelhart just gave is very useful for us because I want to make sure that we all understand what it is when we come around to address it and get some clarity.

1936   So to the extent that our numbers are incorrect or wrong, please let us have your views.

1937   COMMISSIONER MOLNAR: I want to follow up on something else you have touched on here, and that's the correct group we should be looking at. You mentioned that the PBITs looked at here were the combined cable, internet and telecom and if we do that we should be looking at the combined specialty and OTA of the other broadcasting groups.

1938   If we take this further or maybe settle it down further, at the end we could arguably look at the profitability of each undertaking and particularly in the small markets to see can small markets be profitable of themselves. We could look at the profitability of a broadcasting group, be it specialty or conventional or we could look at a corporate group. All of them give you different senses of what is the profitability and where there is or is not a problem.

1939   So I would like your views on what you believe should be the appropriate entity to be examining as we look at these different policies.

1940   MR. ENGELHART: Well, let me read for you something which I think bears directly on your question, which is what Alliance -- what Canwest said on November 19th, 2007 when they were before you to purchase the Alliance Atlantis properties. And this is a statement of Ms Williams:

"Commissioners, this transaction represents for us an exciting opportunity to combine the well-defined and powerful specialty brands of Alliance Atlantis with the wide reach and mass appeal of our Global and E! conventional television networks. Bringing together distinct yet complementary television services under one roof will allow us to maximize our ability to commission, acquire, promote and broadcast quality Canadian programming across multiple platforms, including our print and web assets in order to increase our audiences.
Simply put, it will help us to build hits." (As read)

1941   MR. ENGELHART: So the thought there -- and it's one that I believe -- is they buy programming for both platforms. Corner Gas is also shown on Comedy. Corner Gas, I think, was created for Comedy and then shown on CTV. And Global does the same thing.

1942   So if they are buying those programs for both conventional and over-the-air, if they are creating programming for both, if they are marketing for both, if they are designing a strategy for both it's really a portfolio of products, portfolio of services and some economic conditions. OTA will do better in some economic conditions. Specialty will do better, but to us it only makes sense to look at their television group together.

1943   COMMISSIONER MOLNAR: So it's the television group. And if they were to come forward and argue, in the case of Rogers, we should be looking at all of their broadcasting operations including what profitabilities or issues, perhaps not synergies, but advantages that would come by being aligned with a BDU, we should or shouldn't consider that?

1944   MR. ENGELHART: I think it's synergies. I think if there are synergies then you should look at those groups together. I don't think there are a lot of synergies between our cable group and our broadcasting group but if someone could convince me that there were then you could consider that.

1945   So I would look at the groups that are doing things synergistically and collectively.

1946   COMMISSIONER MOLNAR: Just one more thing on that -- Why not do that through cost accounting, frankly. You know, you can allocate your costs to account for synergies and still then look at each undertaking individually if you appropriately allocate, you know, the value of those synergies across your network and in an appropriate manner.

1947   Alternately, if you are looking at a corporate group every time a corporate group changes you end up changing the regulatory model. You know, if you got rid of one station or two stations all of a sudden the full regulatory model needs to change.

1948   MR. ENGELHART: Well, Commissioner, both you and I spend too much time doing cost allocation in the telecom world.

1949   COMMISSIONER MOLNAR: I'm not saying that because I'm excited about that outcome.

--- Laughter

1950   MR. ENGELHART: I don't share your confidence that cost allocation is a science. I don't really think you can. In fact, we heard in the exchange with CTV that they produce some local programming and provide that free of charge to Newsnet.

1951   I don't think cost allocation really is a useful tool for a regulator. There are so many different ways to do it, all of them perfectly legitimate. They can lead to such radically different results. It's a mugs game. You have to really look at that synergistic entity together. And although I know a lot about cost allocation and I think I'm pretty good at it, I don't recommend it as an approach for this Commission.

1952   COMMISSIONER MOLNAR: I want to move on to the issue of the Local Programming Improvement Fund. You have been clear in your comments and in your opening statements that you believe 1 percent is sufficient.

1953   If there is a need based upon the evidence that has been filed in this proceeding, including the evidence that we will be examining in camera later with the network groups, if there is a need to increase the amount of the Local Programming Improvement Fund, at least for an interim period of this recession, you have said that it would -- well, actually, I'm a bit confused because I noted in the comments that you provided on the item you did not comment on the potential -- that it would be passed onto customers in the form of higher rates.

1954   And I have seen that in your opening statement here today. What is your position on that?

1955   MR. ENGELHART: Well, I mean, all of our costs get passed onto our customers sooner or later. Every business does that.

1956   So you are going to have an impact on the cable systems and you are going to diminish our ability to upgrade our networks. You are going to raise prices for our customers and that is going to cause a lot of problems.

1957   You know, we are in a business that has had positive cash flow in 2007 in cable. Every other year we have negative cash flow. We spend more than we bring in. We are spending $700-800 million a year in the network. We are trying. We are working very hard to keep people watching cable instead of going to the internet or black market or over-the-air and it's not easy because people have a huge range of electronic options available to them.

1958   They want to watch what they want when they want. They want beautiful pictures. And it costs us a lot of money to deliver that HD, deliver the interactivity, video-on-demand, et cetera. It's a high risk expenditure for us, and we think we are doing a pretty good job keeping people on the system.

1959   So LPIF is going to raise prices for customers without giving them added benefits. It's going to cause some people to downgrade some of their cable packages. We think it's a problem if it goes above the 1 percent.

1960   COMMISSIONER MOLNAR: Okay. Just to be clear I understood that, LPIF will cause price increases for customers. Even if any increase over 1 percent is an interim measure to get through these recessionary impacts, it's going to be passed on directly to customers or it's going to be passed on as you said in the form of delaying network upgrades.

1961   You had mentioned in your earlier comments cost reductions and operational efficiencies at Rogers which was a way of absorbing some of this interim -- you know, over this interim period. There is quite a distinct difference between customer impacts of operational efficiency and customer impacts of direct price increases.

1962   MR. ENGELHART: Right. I mean, we're going to raise the prices sooner or later as a result of the LPIF increase.

1963   If we were convinced it was only going to be a one or two-year thing and then go away, obviously management would make a decision about that.

1964   I would note though that in Broadcasting Public Notice 2008-100, the Commission said:

"In light of the performance levels of the BDU sector and the benefits accruing to BDUs as a result of other changes being made to the regulatory framework, the Commission is of the view that there is no justification for BDUs to pass along any increased costs related to the LPIF estimated to be, on average, approximately 50-cents per month to their subscribers." (As read)

1965   MR. ENGELHART: So, the idea there was, look, you're going to get some benefits from ad avail sales, you're going to get some benefit from video-on-demand sales. We're still waiting for those benefits.

1966   But an increase in one percent of the LPIF, there would not be any offsetting benefits.

1967   So, we would raise rates.

1968   But the trouble is, you raise rates and then some people say, well, I'm going to cancel this package or cancel that package and then you have to bring in those cost reductions that I talked about.

1969   COMMISSIONER MOLNAR: I'm going to come back to the issue you just commented on regarding sort of package of reforms in BDU, but I just want to stay on the LPIF for a few minutes here.

1970   As it regards the eligibility, you mentioned that Barrie, Hamilton and Victoria should be excluded because they compete directly with your Vancouver and Toronto stations.

1971   Are these the only markets outside of what's been defined within the system today that you propose need to be excluded?

1972   MR. TONY VINER: Yes, Commissioner, those are the only ones, they -- I'll be happy to elaborate on our position, should you require it.

1973   COMMISSIONER MOLNAR: So, there's nothing else and you had given BBM statistics, but you're comfortable with the $1-million -- or, dollar -- 1-million population cut-off for markets that would be eligible with the exception of just these three cities?

1974   MR. TONY VINER: Yes, we've only got one market that will be affected in any event.

1975   COMMISSIONER MOLNAR: As it relates to commitments to access the Fund, you said in your opening remarks that if you access the Fund your commitment should be you don't close any stations within your entire station group, which I truthfully hadn't understood in reading your earlier documents that to access monies -- for example, to access monies in Winnipeg, you can't close Brandon.

1976   What would be the rationale for linking the entire station group to a commitment to access monies within any individual small market?

1977   MR. ENGELHART: Well, quite frankly, we think that the broadcasters are engaged in a bit of a government relations/public relations exercise, that one of the reasons they're threatening to close stations down and closing newscasts down is so that hearings like this will be held, and I think it's working.

1978   So, if we are going to subsidize them from cable customers I think we should, you know, stop the threat of closures because, you know, that's why they're threatening the closures, to get some money. So, we shouldn't have both.

1979   COMMISSIONER MOLNAR: Would you view there should be any other commitments on their part?

1980   MR. ENGELHART: Well --

1981   COMMISSIONER MOLNAR: Simply don't close your stations and...

1982   MR. ENGELHART: You know, after a year or two when we come out of this recession I think you should go back to the incrementality idea, the money should be for having better programming.

1983   For a year or two it's really a bail-out. So, if it's a bail-out then typically there's no strings attached.

1984   COMMISSIONER MOLNAR: Do you have a view as it regards the proposed distribution mechanism?

1985   The CRTC had filed on the public record a proposal to basically allocate the funds based on average historical spending.

1986   MR. TONY VINER: Commissioner, we don't really have any problem with the proposal that the Commission advanced.

1987   We have one station only. It's likely to get the amount of money it's likely to get whether or not you use the allocation formula proposed by the Commission or another one.

1988   I think -- in trying to be helpful, we suggested a model that was, I think, a little more akin to the DTH small market Fund which said, you know, half of it should be distributed on sort of a flat rate taking into consideration that it costs a certain amount of money just to mount local programming and the balance should be directed on some sort of a prior spending history.

1989   This is -- we're trying to be helpful. We think the allocation formula the Commission has proposed is fine. We haven't examined the proposal that CTV made with respect to population, but my guess is that would be fine too.

1990   COMMISSIONER MOLNAR: Thank you.

1991   Assuming that the LPIF is a long-term sustainable part of the mechanism at any percentage, be it one percent or otherwise, I wanted to go through with you some of the issues related to its governance and so on.

1992   I just want to make sure I get here. I know that you had concerns with the CAB's proposal that the board of directors be fully broadcasters. You felt that BDUs needed to have an equal representation on the board.

1993   Could I get your views as well on whether or not you view it would be appropriate to have any sort of consumer interest groups part of that board as well?

1994   MR. ENGELHART: I mean, if it -- if the idea is incrementality and you're looking at someone providing incremental programming, then I think you're going to want some rules to make sure that what you're getting is truly incremental.

1995   And so I think it would be useful to have different people supervising it who understood the broadcasting system and, yes, it might be helpful to have viewers on there too to talk about which incremental benefits they think are helpful.

1996   If there's no incrementality and it's a bail-out, there will be a simple formula and the board of directors or the governance doesn't really matter very much.

1997   COMMISSIONER MOLNAR: M'hmm.

1998   MS DINSMORE: It was really -- the spirit of having a BDU presence on the board was really inspired by what's happened over at Heritage with the Canadian Media Fund.

1999   There the board is being replaced by those who provide the funding. We're working through that new model. That was the inspiration for the notion of having funders on the board.

2000   Having said that, again, as Ken said, if it's going to be a simple allocation model and no key decisions are going to be made by the board, then it's probably immaterial.

2001   COMMISSIONER MOLNAR: I understand that. At the end, the LPIF was not established to be a simple bail-out, as you put it, and, you know, there's a current recession and there's a long-term sustainable funding mechanism that was established through the BDU proceeding.

2002   As part of that long-term sustainable funding mechanism, with a BDU presence on the board and some requirements for incrementality for quality, for improving local programming isn't initially intended; would you see that to be a role that the Board could fulfil in identifying what are the appropriate criteria for access to the Fund?

2003   MR. ENGELHART: Yes. I mean, the danger from our perspective is, you know, as we look at the numbers over the last few years the broadcasters have been spending more and more and more in Hollywood and that appears to us to be a big part of the predicament they find themselves in.

2004   So, if the LPIF money just isn't truly incremental, if it just provides more funds to engage in a bidding war in Hollywood, that's a bad thing.

2005   So, I think you'd want to really make sure that it was incremental. First of all, so that the contributors were getting their money's worth; and, secondly, so that you weren't exacerbating the problem that you're trying to fix.

2006   COMMISSIONER MOLNAR: M'hmm.

2007   MR. LIND: And another problem is, you know, if you take the LPIF from one percent to, say, three percent for two or three years and then say, well, we'll cut it back to one, you can excuse us for being sceptical of that because no one ever cuts it back, they just -- it just goes on at three percent.

2008   COMMISSIONER MOLNAR: M'hmm. I want to move to one of the issues you spoke about earlier about the one percent or any additional amounts that might be there, and what impact that would have on your company, given initially there was a package of reforms in the BDU review that were to be timed somewhat concurrently.

2009   Could you tell me, in that package of reforms, if everything cannot be implemented immediately, are there certain priorities you would have that would assist you in dealing with this issue?

2010   MR. PURDY: Thank you, Commissioner.

2011   I think if -- as the cable guy, one of the things that we would most like to see is dynamic ad insertion. So, for us, dynamic ad insertion on video-on-demand.

2012   When we look at the distant market signal issue, one of the things we'd like to do is turn off the distant market signals. For us it seems a rather inefficient way of meeting the customer need for time shifting.

2013   We can only turn off the distant market signals when we have the full participation of the over-the-air broadcasters on the VOD platform and the complaint from the over-the-air broadcasters to date has been that they're not able to fully monetize VOD impressions the way they would traditional linear viewing of their television shows.

2014   So, if we could put their prime time main network series on demand and dynamically insert their ads, the problem of advertising cannibalization goes away.

2015   So, we think that that would be great for the broadcasters and great for our customers and add real value to the system.

2016   And we're always trying to make sure the customers don't defect and leave us for over-the-air or over-the-top disruption like Lime Wire, Bit torn and these peer-to-peer file sharing sites that a lot of young kids go to to watch the programming today,

2017   I think the second thing that we'd like to see is access to the local ad avails. And the reason we want access to the local ad avails is so that we can build out this advanced targeted advertising capability. We are having trouble absorbing those capital costs without an advertising revenue stream of our own.

2018   In the U.S., cable companies have access to local advertising and they use that to fund ventures like Canoe, which is targeted advanced advertising.

2019   And we believe ultimately the advanced or targeted advertising capabilities are going to be very helpful to the over-the-air broadcasters because it will allow them to more effectively monetize their advertising inventory.

2020   So, while it may not help them in 2009 or early 2010, we need to get going on these initiatives.

2021   Thank you.

2022   COMMISSIONER MOLNAR: Just for purposes of my understanding, as it relates to putting the distant signals onto VOD with dynamic ad insertions, is there something you need from us?

2023   There is?

2024   MR. PURDY: There is. Thank you, Commissioner.

2025   So, currently you allow for us to put programming up on the video-on-demand service with the actual ads that ran in the initial broadcast.

2026   The challenge with that is if the shows stay up for a week or two weeks or four weeks, the talent cycles of the advertising in it, so if a woman's getting paid to be in a Snickers ad, she's only getting paid to such a date. If the asset, or the show is on the video-on-demand platform --

2027   COMMISSIONER MOLNAR: M'hmm.

2028   MR. PURDY: -- beyond that talent cycle, it creates havoc with the advertising fees that are paid to the actors, et cetera.

2029   So, we need the ability to dynamically insert new advertising in order to get around this talent cycle.

2030   COMMISSIONER MOLNAR: In old programming?

2031   MR. PURDY: Pardon me, sorry?

2032   COMMISSIONER MOLNAR: So, in old programming.

2033   MR. PURDY: Exactly.

2034   COMMISSIONER MOLNAR: So, the point of VOD is that you're not going to be refreshing that content?

2035   MR. PURDY: Well --

2036   COMMISSIONER MOLNAR: You know, I mean, I'm thinking of distant signal where you have a schedule every day.

2037   MR. PURDY: Right. So, I would put "Heroes" from Canwest up on the on-demand platform. So, let's say "Heroes" broadcasts Sunday night.

2038   COMMISSIONER MOLNAR: M'hmm.

2039   MR. PURDY: We would then -- we may leave "Heroes" up there for two weeks, three weeks, four weeks. During that time it may be necessary to insert new ads in order to get around this talent cycle issue.

2040   There's also a secondary benefit to the broadcasters, which means that eventually when we have this advanced advertising platform in place we could actually serve targeted ads which would have a higher value to advertisers.

2041   So, there's two reasons we need dynamic ad insertion.

2042   COMMISSIONER MOLNAR: Okay.

2043   MR. PURDY: Thank you.

2044   COMMISSIONER MOLNAR: Thank you.

2045   MR. ENGELHART: Just to clarify, because the word dynamic is a bit confusing perhaps.

2046   When Dave talks about the VOD, it's fairly old technology just to put fresh ads in and, so, we can do that today if we have your permission to do it, which we don't have right now.

2047   And although Dave's the real expert, in addition to the talent cycle thing, you know, an ad for winter tires is not so helpful in the summer.

2048   So, there's other advantages to putting in fresh ads.

2049   THE CHAIRPERSON: But, I mean, this is somewhat misleading, the answer your colleague just gave.

2050   Commissioner Molnar asked about distant signals, you know, doing it at the same time. You're talking about what you are trying to do as your VOD, leaving it on the air and for long cycles. That's a totally different scenario.

2051   In order to do distant signal negotiations and then compensate, what do you require?

2052   I know what you want and that's for your VOD scheme, but that's not what the question was asked.

2053   What is it in the package of reforms that we announced that you feel have to be there right now so to make distant signal compensation work with other disadvantages for you; that was the question?

2054   MR. PURDY: Mr. Chairman, sorry, my only point would be that Rogers' commitment in terms of carrying distant market signals, we expect to turn them off. So, we believe that carrying the distant market signals is not a smart way to meet the time shifting requirements of our customers.

2055   So, we are in negotiations right now with both Canwest, with City, with CTV in terms of when we could turn off the distant market signals.

2056   So, in terms of us paying or negotiating a fee for incremental revenue attached to the distant market signals, our response would be, there is no more money, we intend to turn off the distant market signals and meet the customer desire by having that content available on the on-demand platform.

2057   THE CHAIRPERSON: Mr. Purdy, glad for that clarification, but that's a totally different scenario under which we made our ruling on distant signal.

2058   MR. PURDY: Understood. But if part of our negotiation would be, what would Rogers like to see in terms of distant market signals, then our -- when we talk to the broadcasters, they say, the distant market signals hurt us because it cannibalizes viewing and we're not able to get our full value for advertising.

2059   Our response is, well then, we'll be happy to turn them off for you and we'll meet the customer need by having that content available on demand.

2060   So, we don't see cable paying anything incrementally for the distant market signals, it's just a question of when do we turn them off.

2061   COMMISSIONER MOLNAR: Thank you.

2062   I want to move on to the issue of the digital transition.

2063   I'm aware that both the City and the Omni stations are all planning to meet the date. And you said in your opening remarks:

"...over-the-air broadcasters..." (As read)

2064   COMMISSIONER MOLNAR: Or:

"Rogers' believes it is essential for over-the-air broadcasters to exploit and retain DTV and spectrum in Canada, particularly in urban markets." (As read)

2065   COMMISSIONER MOLNAR: Could you explain to me the value that you're wanting to exploit here? And then I'd also like as a follow up to understand what it means in smaller markets, this is in urban markets, you know, we're also looking at the challenges of the transition into small and rural areas, small markets.

2066   MR. TONY VINER: Well, I'll try to be helpful, Commissioner.

2067   The value proposition is I think two-fold in urban markets. The first is a fairly obvious one, there's -- depending on the market, nine to 11 percent of our viewing takes place over-the-air, so it is important to us that we capture all of that viewing, especially given some audience declines that OTA is facing.

2068   I think there's sort of a secondary issue to that, which is, in Toronto and Vancouver at least, and those markets that are close to the U.S. border, the U.S. stations are now broadcasting over-the-air in perfect HD. They can -- you can buy a receiver that enables you to get perfect HD from over-the-air from U.S. signals. So, it's important for us that we have a competitive set.

2069   So, for those two reasons, known reasons, we believe that we can -- there's real value there to us.

2070   There's an unknown. What is the value of that spectrum over time?

2071   I've been in this business more years than I would care to admit to you, but I would never have contemplated that spectrum would be auctioned for four or $5-billion. You know, I couldn't possibly have imagined the uses to which various portions of the spectrum have been put to use.

2072   And I think it's important for Canadians and I think it's important for Canadian broadcasters to protect and defend spectrum that's allocated.

2073   I think our great friends to the south will be more than happy to try to exploit that spectrum should it be somehow not used by Canadians.

2074   So, part of the value is known, those viewers who watch us over-the-air, and part of it is unknown, part of it's competitive and with the Americans.

2075   I'm not qualified to talk about the smaller markets. We're -- our smallest market is Winnipeg, it's 750 to 800,000 people. So, you know, I'd look to others to offer comment, but it's really not in our area of expertise.

2076   MR. LIND: You know, excuse me, in the digital transition I think there is a role for the government here.

2077   The government has signalled that it's anxious to help this current situation with rumours of their $150-million bail-outs, et cetera.

2078   I think if the spectrum is auctioned off for four or $5-billion there is -- certain portions of that should be -- or could be dedicated to digital transition so that the sticks, for example, of private and public broadcasters could be paid for, at least in part, by the government shelling out some of that four or $5-billion to the broadcasters.

2079   And it doesn't get -- this is a different kind of assistance because you don't get into making value judgments and, you know, you're just -- there is a broadcaster, he's got to have his broadcast converted to digital, help him on that score. You don't get into the problems of giving money for news broadcasts or, you know, things like that.

2080   So, I think that's a thing that should be looked at and probably will be looked at by the government.

2081   COMMISSIONER MOLNAR: Thank you.

2082   Certainly I'm not able to project whether or not government money will go towards this problem, but there is an obvious problem.

2083   You've come before us and talked about making your large urban markets transition and spoke about the value of the spectrum.

2084   I'm from Regina and I don't hear a lot of people talking about the value of transitioning in Regina and the smaller markets to digital. I don't know if there is a value to the spectrum, that potential value that you talked about in the urban markets, if that value is different or otherwise.

2085   I note that you did say that you were in favour of the digital working group's hybrid solution for the transition, which would have the smaller markets move to a non-over-the-air solution.

2086   MR. LIND: Virtual contours.

2087   COMMISSIONER MOLNAR: And yet I also read in your documents, for example, in Rogers Media -- and I'll give you the date here just so you know I'm not making this up -- Rogers Media on April 14th stated:

"Access to free over-the-air television..." (As read)

2088   COMMISSIONER MOLNAR: And 'free' was underlined.

"Access to free over-the-air television remains a priority for all communities, including Canada's ethnic and third language communities." (As read)

2089   COMMISSIONER MOLNAR: So, I'm struggling that, you know, if access to free over-the-air is a priority for all communities, then how do we endorse a hybrid solution that keeps a certain number of customers, and we're hearing numbers between seven, nine, 10 percentage of customers unserved.

2090   MR. ENGELHART: Well, I listened to the questioning by Commissioner Arpin yesterday and we thought it was very telling because you might have, say, 10 percent of the customers over-the-air, but over-the-air is all those people have, they don't have any specialty services.

2091   In a place like Regina, they can't get U.S. services over-the-air.

2092   So, on the one hand they're probably not households that are avid TV watchers, but all of the TV they're watching is those local over-the-air stations.

2093   So, I thought out of Commissioner Arpin's questions came sort of a -- to me, a compelling sort of an argument that a wise broadcaster, a prudent broadcaster would do what we're doing and put up the digital transmitters.

2094   I suspect that in the fullness of time many of them will in places like Regina, but right now I think they're -- because of the recession, they're just -- and because of their public relations/government relations campaign, they're not spending and they're going to see who comes forward with various subsidies.

2095   And, as Phil said, it sort of makes sense for the Federal Government to help out a bit because the broadcasters have had their spectrum taken away so that it can be auctioned off for cell phones.

2096   So, why is it wrong for the government to give them a portion, just a small portion of that cell phone money back?

2097   But I don't think it makes sense for a broadcaster not to build Regina but, you know, they have their arguments.

2098   COMMISSIONER MOLNAR: And I appreciate that you are neither a conventional broadcaster nor a cable distributor within this market, so we should move to discussing markets where you are active.

2099   Just one other thing. Assuming that the hybrid model was to continue and, therefore, some of the smaller markets would essentially go dark and their option would be cable or so on, your position has been that the cost of any transition are not costs of Rogers.

2100   Do I understand that you would not be looking at any kind of basic service packages or, let me say, a skinny basic package or anything to address the affordability of this percentage?

2101   MR. ENGELHART: I think you're right that it was sort of on that issue that the working group didn't do much work.

2102   I don't think we're against a smaller package, but I'll turn that one over to David.

2103   MR. PURDY: Thank you, Commissioner.

2104   When we calculated our costs, even a skinny package, which was basically made up of over-the-air broadcasters in that market, we were looking at a monthly cost of about $13.60 in order to provision this service and that -- included in those costs would be training, sales centre, call centre support, installation recovery, invoicing, provisioning the guide, because presumably it's going to require a programming guide, production fund, bad debt, IT recovery costs, product management costs.

2105   So, I wouldn't say it was a bloated cost structure, it was basically bare bones in terms of what it would cost to actually service these homes and it was $13.60 a month per household, and that's without any fee for carriage on top of that.

2106   COMMISSIONER MOLNAR: I just have one more question and then I'm going to transfer this over to Commissioner Cugini.

2107   If you are to get some of these customers on a skinny basic, a $13.00 package, have you looked at your potential uptake? Have you looked at how you may be able to out sell and what benefit that would be and has that been factored into that $13.00 cost to customers?

2108   MR. PURDY: It has not been factored into the $13 cost. What we did look at was the downside risk of customers actually downgrading. So we have rolled out a VIP package and we are now rolling out a package called Digital Plus. And when we modelled the impact of Digital Plus relative to the VIP package, it's essentially a wash.

2109   Whenever you introduce a lower price point, I think we run a greater risk in terms of customers downgrading than we do in terms of being able to upsell a lot of these customers to a higher basic package.

2110   We have direct-mailed these homes for years trying to win them over to cable and I think the notion that they are free-to-air homes or over-the-air broadcast homes is also a bit of a misnomer.

2111   There is a new report out from CAST, Canadians Against Signal Theft, and Susan Blackwell's report, which would indicate that a great number of these homes actually have left the legitimate broadcasting system and are now using free-to-air set-top boxes in order to receive their television signal. So we are quite sceptical about our...

2112   COMMISSIONER MOLNAR: But they are still receiving their local television over-the-air --

2113   MR. PURDY: Exactly.

2114   COMMISSIONER MOLNAR: -- and that is what they would need to lose and replace --

2115   MR. PURDY: Exactly.

2116   COMMISSIONER MOLNAR: -- even though you may have a black market or something else or Internet, but local programming.

2117   MR. PURDY: But if they are getting the discretionary specialty channels and pay services via free-to-air set-top box, the upsell potential is much less.

2118   So in fact, the combination of theft with a skinny basic, you could see a scenario where a number of customers downgrade to the skinny basic and then get this black market free-to-air set-top box in order to get all their discretionary services. So that is something when we model we get a little nervous about.

2119   That having been said, you know, we will do whatever we need to do to survive in the market.

2120   THE CHAIRPERSON: Surely there is nothing preventing them from doing it now?

2121   MR. PURDY: There is nothing preventing them from getting free-to-air set-top boxes now.

2122   THE CHAIRPERSON: There is nothing preventing getting free over-the-air. To suggest that free over-the-air cable will increase the likelihood of theft is not a logical connection.

2123   MR. PURDY: The notion is that by offering a skinny basic, we would be able to win people back to the system and I am saying I am sceptical about whether or not we would be able to win people back to the system and then upsell them. I think they are going to use the free-to-air set-top boxes for theft.

2124   COMMISSIONER MOLNAR: Those are my questions, thank you.

2125   THE CHAIRPERSON: Okay, Rita, you can go.

2126   COMMISSIONER CUGINI: Thank you.

2127   We have covered a lot of ground this morning but I would like to focus our attention on the policy implications, if any, that the changes as proposed by Rogers Media will have on the Canadian broadcasting system. So, Mr. Viner in particular, you are on.

2128   In your discussion with the Chair earlier, I didn't hear an answer to whether or not a CPE is something that is doable or acceptable for over-the-air broadcasters or if you have even had the opportunity to look at it, look at the issue.

2129   MR. TONY VINER: I think, as far as I know, it was first raised yesterday. I am not sure that I could enumerate as many of the caveats that Mr. Fecan had but if I were able to do so, I would and then say that we could consider it if indeed -- as a range of options should priority programming obligations be removed. I think it could be considered.

2130   COMMISSIONER CUGINI: And, of course, I ask it in the context of the 1:1 ratio because both in your oral presentation and in your application you said that although 1:1 might not be appropriate, it may be appropriate to look at some correlation between foreign and Canadian spending.

2131   Is this an alternative -- could this be an alternative to that?

2132   MR. TONY VINER: Right. Well, look, 1:1 in the ratios are tough ones for us. We understand the motivation and we said under certain circumstances we would even consider it.

2133   The particular problem that City has is that we have only owned it for about 18 months. It had the benefit under prior ownership of being able to leverage its costs and program acquisition strategies over a considerable number of specialty services, a privilege we no longer have.

2134   Based on our financial performance, we have holes in our schedule. U.S. programming, as you know and have heard, is important across subsidized Canadian programming. So in fact we might have to more aggressively spend in that area in order to improve the overall performance of the City television stations.

2135   So our position -- and finally, I guess, we are scarcely price leaders when it comes to the costs in Hollywood.

2136   So we only would say that we require some time to improve our operational stability and our competitive market position before we would like to see any regime introduced, which we think is a reasonable position for us to take.

2137   COMMISSIONER CUGINI: So don't do anything until the group licence renewal proceeding?

2138   MR. TONY VINER: That is correct.

2139   COMMISSIONER CUGINI: Okay, thank you.

2140   Local programming. Now, you have chosen to harmonize your commitment to local programming across the five markets in which City is licensed to serve and, as you know, CTV and Canwest have differing proposals.

2141   So the question is: Why do you believe that public policy is best served by a licensee-by-licensee approach to obligations to local programming?

2142   MR. TONY VINER: Well, we believe that each broadcaster should find its niche and make its case to the regulator as to how it could best and most effectively discharge its obligations under the Act without going too far.

2143   I mean you are aware that Citytv was originally licensed as a local Toronto station and we see ourselves now as a collection of local stations serving the markets to which we are licensed.

2144   So I am not suggesting this but observers have said CTV has national scope and national aspirations, Global was originally licensed as a regional service and we were originally licensed as a local service. So one might argue that the objectives of the Act can be served differently by different station groups.

2145   COMMISSIONER CUGINI: And so market size, for example, shouldn't be a factor because of the five markets you are licensed to serve, as you said earlier, of course, Winnipeg is the smallest and yet you have chosen to provide the same level of local programming in that market as you have to the other markets?

2146   MR. TONY VINER: That is correct. There is an element of efficiency, which Mr. Sole could describe if you wished, just related to the management of five different stations in five different markets and a baseline amount of programming that needs to be done.

2147   COMMISSIONER CUGINI: Well, I would never want to cut off Mr. Sole. I think that that conversation will be more appropriate on Friday. Thank you.

2148   You mentioned briefly the term that you are now applying for for Citytv and that is two years. And this commitment would apply regardless of the term that we agreed to?

2149   MR. TONY VINER: Yes. Yes. The only caveat that I would propose, Commissioner Cugini, is that our request is premised on the fact that you would grant us the relief that we have proposed.

2150   COMMISSIONER CUGINI: Immediately or as of the new term, obviously?

2151   MR. TONY VINER: Yes. Yes.

2152   COMMISSIONER CUGINI: As of the start of the new licence term?

2153   MR. TONY VINER: That is correct.

2154   COMMISSIONER CUGINI: Is that true for priority programming and the change you have proposed there?

2155   MR. TONY VINER: Yes.

2156   COMMISSIONER CUGINI: Again, same question: Do you believe that the commitment to priority programming should be regulated on a licensee-by-licensee basis or on an over-the-air broadcasting system? In other words, should we mandate that a minimum number of hours of priority programming be provided by each over-the-air broadcaster or should it be zero for everybody?

2157   MR. TONY VINER: I think it was imposed on an industry-wide basis, Commissioner Cugini. So logic would dictate that if it is removed, it should be removed on the same basis.

2158   COMMISSIONER CUGINI: Do you feel the same way about the commitment to independent producers, the 75 percent? Should that be removed on an industry-wide basis?

2159   MR. TONY VINER: Yes.

2160   COMMISSIONER CUGINI: And in that regard, for example, Canwest has proposed that 50 percent of all Canadian programming be produced by independent producers without the obligation that that 50 percent should also apply to prime time. Is that a position that is acceptable to Citytv?

2161   MR. TONY VINER: I haven't thought about it. I haven't thought about it. We haven't considered it. We make extensive use, as you know, of independent producers at OMNI.

2162   I think my immediate reaction, and the Chair is familiar with me changing --

2163   COMMISSIONER CUGINI: Be careful with that, Mr. Viner.

2164   MR. TONY VINER: -- my mind throughout the course of the --

2165   THE CHAIRPERSON: Yes means no.

2166   MR. TONY VINER: Yes, the very famous yes means no.

2167   I would be reluctant, to be honest, without thoroughly thinking about it, to accept anything that would reduce our flexibility given our current financial situation.

2168   COMMISSIONER CUGINI: Do you want to take time to think about it and give us your definitive opinion in reply?

2169   MR. TONY VINER: Certainly, I will be glad to.

2170   COMMISSIONER CUGINI: All right.

2171   MR. TONY VINER: And I didn't say yes.

2172   COMMISSIONER CUGINI: You said maybe.

2173   MR. TONY VINER: So I can come back and say no.

2174   COMMISSIONER CUGINI: As you know, we are bound by the Broadcasting Act -- that certainly is an understatement -- and one of the sections in the Act says that the Canadian broadcasting system should include a significant contribution from the Canadian independent production sector.

2175   So as a Commission, if we are to eliminate any commitment to the Canadian production sector, how will we fulfill that section of the Act?

2176   MR. TONY VINER: Well, I would just say a couple of things. You know, if we quickly do the math, there will be priority programming on City television and on the other over-the-air broadcasters. It is the way in which the math works. It may not be eight hours but there will, in our view, be priority programming on the schedules.

2177   I think the other thing, it is important for us to note that there have recently been three large transactions: our acquisition of City, CTV's acquisition of CHUM and Global's acquisition of Alliance Atlantis.

2178   All of those transactions created benefits, the vast majority of which -- and I actually think I have the numbers here and I will cite them if you wish -- the vast majority of which were directed at the independent production sector.

2179   The independent production sector has exclusive access to tax credits, it has exclusive access to most of the funds, the Shaw Rocket, the CMF and our Rogers very own Telefund. So we expect that the independent production sector will continue to be a robust part of the Canadian broadcasting system whether or not priority programming obligations are reduced.

2180   The other point, I guess, is that there would be a significant -- we believe there is still a significant amount of priority programming that will be done through the mechanism of the Canadian programming expenditures by specialty services.

2181   MR. SOLE: Commissioner Cugini, before you do try to cut me off, there are parts of the system that are just not compatible with independent production. When a channel or a station makes a statement of what its motivation or its focus is, weather networks, sports networks, news networks don't lend themselves to using independent producers because of the nature of the service.

2182   I think in our case where we have found a broad range of independent producers in the multilingual area, not in the traditional way you would think of Insight or Halifax Film but smaller industrious people, there is a use for independent production.

2183   On the other hand, stations like City, the Lombardi family have been independently producing, it is not in the traditional grand sense but if you take five channels like City that are committed to serving five local markets, the burden of trying to find independent people to meet those very specific mandates, I think that the system should allow that some channels are more suited to third-party contribution and other channels have an intent where it isn't as -- it doesn't fit as well.

2184   COMMISSIONER CUGINI: But to that point, and I don't have the page number here but I remember reading in your application that the local focus of the five Citytv stations will also mean that you will use local independent producers.

2185   MR. TONY VINER: We certainly didn't rule out the use of local independent producers. Absolutely not.

2186   COMMISSIONER CUGINI: But my problem with that is typically, independent producers aren't very interested in producing local programming: short shelf life, no afterlife, no backend deals can be had with local programming. Am I wrong?

2187   MR. TONY VINER: No, I don't think you are wrong. I don't know if Alain would care to add anything on this subject.

2188   MR. STRATI: No, you are quite right, Commissioner Cugini, for all the reasons you highlighted.

2189   However, I can tell you that we are currently in development for a pilot for our local program in Toronto and are doing the same thing in Vancouver. So there are opportunities to do certain things. Producers have their priorities or their projects, if you will, and their proposals.

2190   However, we have found and are working with producers who may work out a local program in some of our markets. So it is more difficult for everything you mentioned in terms of the -- it is more risky, the licence fees, et cetera, other elements.

2191   But, however, we are working with producers now. We are trying to find a way to do that and we have communicated that whether it is at the Gimli Film Festival with On Screen Manitoba and at Banff and have had discussions about broadly, not just about dramas and documentaries for our benefit but also about the opportunities for local programs.

2192   COMMISSIONER CUGINI: Mr. Viner, earlier you did refer to the tangible benefits and how they do provide commitments to the independent producers.

2193   Two issues there.

2194   Of course, tangible benefits are finite. We don't know when the next transaction is going to happen and so when we will have a new supply of tangible benefits.

2195   And then the other issue there, of course, is that tangible benefits are established on a not normal cost of doing business basis. In other words, tangible benefits are established on an incremental basis.

2196   So if we remove the baseline of both hours of priority programming and expenditure on -- and a percentage of those priority programmings being produced by independent producers and the costs associated with that, how are we going to determine, again, from a policy perspective, tangible benefits down the road?

2197   MR. TONY VINER: Listen, I think it is a very good question, Commissioner Cugini. I am not sure I have an instant answer.

2198   I think you would try to apply the same tests that you now apply, whether or not the expenditure proposed was incremental to the ongoing requirement to operate the business in normal day-to-day.

2199   I understand that will be a challenge with respect to priority programming or independent production and I would only suggest that the broadcasters engaged in the transaction will engage in some creative proposals that will try to pass the test, knowing where the Commission's interests lie.

2200   MR. SOLE: When you licensed CFMT or CJMT OMNI.2, there were tangible benefits in that decision that were not obligations to broadcast but were clearly at that time priority programming. That licence had an obligation to drama, documentaries, various linguistic endeavours.

2201   They weren't tied to the actual licence and they weren't tied to the ethnic broadcast category but there still was an opportunity for the regulator to say: In this transaction there are things you should do for Canadian culture that may or may not directly relate to your COLs. I still think that opportunity is there.

2202   COMMISSIONER CUGINI: So use that as a precedent to create a new toolbox to establish tangible benefits?

2203   MR. SOLE: For example.

2204   COMMISSIONER CUGINI: Okay. Thank you.

2205   Licence term. You are supporters of group licence renewals. You talk about a two-year term for City and a six-year renewal term for OMNI and I understand the six years for OMNI, why you want to do that to coincide with the tangible benefits commitments in relation to the OMNI Alberta and OMNI BC television stations.

2206   I can only come to the conclusion that from a policy perspective you obviously see a benefit in having one term for one group of licences and another for another group of licences.

2207   MR. TONY VINER: That is correct, Commissioner.

2208   COMMISSIONER CUGINI: But the question therefore is: Why shouldn't we consider the OMNI stations as part of your group licence renewals? Because presumably there are efficiencies and synergies between City and OMNI and perhaps even with your specialty services. So why shouldn't we consider those three entities at one time whether it is a year from now or two years from now?

2209   MR. TONY VINER: Well, if I could just restate the case, I guess, for the renewal of the OMNIs, which is that, as you are aware, the OMNIs are governed under the Ethnic Broadcasting Policy, which is different from the conventional OTAs.

2210   We have agreed that there is no issue related to the digital transition. We will have all of our transmitters in place by the deadline. Our conditions of licence, we have moved to standardize and simplify them but I don't think that -- we believe that there are no contentious issues related to that. We do not do priority programming on the OMNIs. The issue of American spending is not an issue as it relates to the OMNIs.

2211   So we believe for all of those reasons -- and I guess the final one is three out of the five OMNI stations in the OMNI station group have been with us for less than a year.

2212   So what we are only trying to do is to say, can we have the operational stability of knowing and looking ahead, we are not really involved in many of the issues that are before the Commission today, that the Commission is concerned about, and that we need to start to work as quickly as we can on having a common business model for the OMNI stations.

2213   The Commission could consider -- could both give us a six-year licence renewal and consider us in terms of the group renewals if it wished but we believe that the purpose of the group renewals is to look at the issues that are the subject of this hearing and as we go forward and we believe that OMNIs should be treated differently.

2214   There are not many synergies between the OMNI group and City television. In many ways, neither the Commission nor ourselves want there to be. So the synergies are, you know, Leslie's salary -- and you can argue about the efficiencies there -- and some selling even though the selling is a lot different in many ways.

2215   So we think it is a completely different animal. We think it would benefit the Commission and ourselves not to be distracted from the important elements that they are addressing in this hearing and, as they have suggested, they would address going forward.

2216   COMMISSIONER CUGINI: Thank you. Just one final question only because I feel I have to ask you about terms of trade because at the Rogers Citytv hearing I believe we did specifically ask you to take the lead in those negotiations.

2217   We heard CTV's response yesterday and I just wanted to give you the opportunity if you had anything to add to what CTV's response was.

2218   MR. TONY VINER: The guy who agreed to that is no longer with us. That is just coincidental.

--- Laughter

2219   MR. TONY VINER: I will ask Mr. Strati to respond. He has been our representative in these discussions.

2220   MR. STRATI: I would echo many of the comments that Mr. Goldstein mentioned yesterday. We have been co-leaders, I guess, in terms of us, Canwest and CTV have all met with the CFTPA and others on a consistent basis and I think there is a fundamental issue at play in terms of what the terms of trade should be.

2221   We have discussed and looked at a number of business practices and those business practices do involve significant issues. They are not just principles or itemization of ideas. I mean there really are important issues in terms of the commissioning, the development, the submission and review of proposals as well as the licensing elements.

2222   The critical component really comes down to some specific commercial terms and that is where the fundamental difference lies and has been from the beginning.

2223   COMMISSIONER CUGINI: Okay. Well, thank you very much.

2224   Those are all my questions, Mr. Chairman.

2225   THE CHAIRPERSON: Thank you.

2226   Peter, do you have any questions?

2227   COMMISSIONER MENZIES: Just a couple of quick questions.

2228   You described, I guess, the piracy of signals as massive. Can you put a number on that for us?

2229   MR. PURDY: Thank you, Commissioner. The Susan Blackwell report that was recently commissioned for CAST suggests that there are 1 million Canadians stealing television through black market satellite or free-to-air set-top boxes and that the damage to the system overall, the cumulative damage, is $1.2 billion.

2230   We would be happy to forward a copy of the Blackwell report to you.

2231   COMMISSIONER MENZIES: Thank you.

2232   I know this is speculative but I need to ask it anyway. What do you think the chances are that stations that currently benefit from mandatory carriage would not be able to successfully negotiate a fee for carriage should mandatory carriage go away in exchange?

2233   Let me try again. If mandatory carriage was dropped, what do you think the chances are that those stations that currently enjoy mandatory carriage would not be able to successfully negotiate a fee for carriage on cable providers?

2234   MR. ENGELHART: So your question is if we more or less went to the U.S. system where you could either have a mandatory or a negotiated fee but not both? Is that the question?

2235   COMMISSIONER MENZIES: Yes. I wouldn't use the word "U.S. system" as coming from my mouth but more or less, yes.

2236   MR. ENGELHART: Okay. David?

2237   MR. PURDY: Thank you, Commissioner. I believe that most of them, the vast majority would actually end up with carriage but what I believe would happen if there was no must carry is there would be a true fruitful negotiation and there would be a real exchange. It would be fee for value as opposed to fee for over-the-air broadcast signals.

2238   One of the challenges we have within the distribution side of the business is we are looking at the customer value proposition and comparing that against over-the-top disruption theft and we have to get to a point where our customers are able to access over-the-air broadcast content across multiple platforms.

2239   So our negotiation with CTV or Canwest shouldn't be about the carriage of a linear channel. That ultimately is not going to save the system.

2240   What it should be about is the carriage of that content on a linear basis, on demand, on line and on mobile, and the faster the industry and the over-the-air broadcasters and the BDUs start having those conversations, I think, the healthier the industry will be.

2241   And I think once we have that type of discussion it is unlikely that we would be dropping many of our signals. I think we would end up with most of what you see today being carried.

2242   COMMISSIONER MENZIES: Okay. So just to be clear, I understand most would but some wouldn't?

2243   MR. PURDY: I personally can't think of us dropping a lot of channels. I believe based on the relationships we have with the broadcasters and the players in the market that, at least within our footprint, we would end up striking a deal.

2244   MR. LIND: I think a number of them would opt for mandatory carriage --

2245   COMMISSIONER MENZIES: If they were given a choice.

2246   MR. LIND: -- if they were able to get mandatory carriage and no fee.

2247   COMMISSIONER MENZIES: Okay, thank you.

2248   COMMISSIONER KATZ: I have got a couple of questions.

2249   One, I want to go back to a statement that was made earlier, I think by Mr. Engelhart, with regard to the implications on your infrastructure costs if you had to incur additional costs as a result of an LPIF or some other cost component.

2250   I think you said there would be some implications on network upgrades and what I wanted to get clarification is in what sense would there be implications. Obviously, they would be negative but your network is an integrated network which carries Internet and telephony services as well. How would you effect this type of impact?

2251   MR. ENGELHART: Yes, and I am going to let David add a bit.

2252   But despite the optimistic statements of our friends in the broadcast sector, we have negative free cash flow every year in the cable business. In 2007 we had positive free cash flow but every other year since '98, it has been negative.

2253   In fact, over those 10 years we had had a cash flow deficit of $2 billion and the reason is you take the operating profit, you take off the interest, you take off the money we have put into the network and it is a problem.

2254   David will explain to you that every year he and his colleagues are before their peers saying, I would like to build this, I would like to do that, we are falling behind on this, and those are a range of projects dealing with Internet, telephone and television, all three.

2255   We can only do so much and we can only incur negative cash flow for so long. So we have to make choices and the painful thing is if we fall behind, people will desert us for alternatives.

2256   So David can explain to you a bit about the capital choices we are making.

2257   MR. PURDY: Thanks, Ken.

2258   Vice-Chairman, the capital budget in 2008 for Rogers Cable was $828 million. And while it sounds like a lot of money and we should have been able to easily absorb all the projects within that capital budget, the reality is a number of things got deferred to 2009. So we are deploying switch digital video right now.

2259   And back to the earlier conversation we had about how do we provision all of the local signals and how do we carry all of the channels, switch digital video is allowing for us to reclaim significant portions of our spectrum in order for us to be able to offer HD and video-on-demand. We believe that if we don't keep pace with the HD requirement and have a robust video-on-demand service, we will lose customers to over-the-top disruption.

2260   So we have deferred some capital investments in 2008 to 2009 for both HD, VOD, we have phased our switch digital video deployment in order to keep the capital down to an acceptable level. We have also deferred channel launches, and you may have read about some of them, but there is a number of people that still want to get carriage. So when you look at the overall health of the cable company or compare broadcaster results to cable results I think you have to look at free cash, because we are largely judged on free cash.

2261   So our ability to launch channels, deploy switch digital and even have some of these advanced advertising solutions that I think ultimately will be a lot more beneficial for the broadcasters than a bailout, these are all --

2262   COMMISSIONER KATZ: Well, but what I have heard is that the implications would be on the cable, so it would be on telephony or internet. That was my question basically.

2263   MR. PURDY: Sorry, Vice-Chairman.

2264   The DOCSIS 3.0 deployment -- so we are looking at deploying DOCSIS 3.0 and higher internet speeds, and some of those have also been deferred and done in phased approach. So if you take money away from the --

2265   COMMISSIONER KATZ: Yes, I understand that part of it.

2266   MR. PURDY: Yes.

2267   COMMISSIONER KATZ: Before you came in here this morning I was going to ask the question, what value do OTA broadcasters realize from BDU carriage? But then Mr. Viner, in responding to an earlier question, said low channel position, mandatory carriage, simultaneous substitution, the LPIF as well was mentioned.

2268   Are there anything else that are deemed to be tangible or intangible benefits associated with OTA carriage?

2269   MR. ENGELHART: Well, it may not be something that we give them, but they also -- you know, they are not specialty services. They can program any genre, anything they want and they are not constrained by their conditions of licence to a niche format.

2270   COMMISSIONER KATZ: But in terms of what they get in value, those are the three or four big ones basically?

2271   MR. LIND: From us, yes.

2272   COMMISSIONER KATZ: From you guys.

2273   MR. LIND: Yes.

2274   COMMISSIONER KATZ: And what is the cost to you of providing those benefits to them? Is it basically opportunity cost, if they couldn't get a low channel position, you could make it available to somebody else presumably?

2275   MR. PURDY: Yes, Vice-Chairman. We have had multiple specialty channels ask us for channel placement lower down the dial. So I have had at least half a dozen different specialty channels ask for broader base carriage, i.e. sub-channel 20, be available on every set-top box. And they have offered to waive their wholesale fee in exchange for broader based carriage and the advertising revenue that would come from that.

2276   MR. LIND: But, Mr. Vice-Chairman, it doesn't cost, say for the $300 million that we estimate is the value of program substitution, doesn't cost us $300 million. It costs us something, but it doesn't cost us $300 million. But they couldn't get it any other way. It has to come from the cable companies and the satellite companies. It can't come any other way.

2277   COMMISSIONER KATZ: But I guess the point I was trying to make is it is an opportunity cost. And if you follow my logic through to the completion, the real loser here is the consumer, because if in fact Canwest or CTV closed down radio stations that are OTA, you can then reuse that channel placement for positioning for, as you said, Mr. Purdy, some programming that has got value to other parties, and you will leverage that for value for you.

2278   So the real loser here at the end of the day is the consumer who doesn't get the local programming anymore.

2279   And I guess my comment or my question would be obviously you wouldn't lower the price of cable services to the consumers in Windsor if they lost the Windsor channel. But the reality is, they lose the Windsor channel, they are getting is part of a value proposition right now in Windsor, you would redeploy that channel for financial gain for Rogers or pick another example out west, it doesn't matter, and the consumer is out at the end of the day.

2280   I guess the question is, is that right for you to benefit at the end of the day by redeployment that low channel placement for something that was a public good?

2281   MR. ENGELHART: Well, I guess I would sort of, a little bit, come back to the regulatory bargain. These stations were available free over-the-air, always have been. Cable did not get started by delivering people what they could already get free over-the-air. Cable got started by delivering people something they couldn't get free over-the-air; a station from another market or the specialty channels really lead to a big takeoff in the penetration of cable and satellite.

2282   So people, when they quit our cable service, it is in part so that they can get free services over-the-air. So I guess I disagree with the notion that, as some of the broadcasters have put it, we are using their signals or they are the cornerstone of our offering because they available free over-the-air.

2283   Now, the scenario that you are presenting, if stations close down is it a bad thing? Of course, it is a terrible thing if a local station closes down. But I don't think in any way that the plight of the over-the-air broadcasters has anything to do with cable. The plight of the over-the-air broadcasters, which we have analyzed here is, among other things, they have been spending too much in the U.S. and we have got a recession.

2284   COMMISSIONER ARPIN: Only a short one. I think it is in CART that I read lately that the Buffalo CBS affiliate had been dropped off the cable I guess through negotiation, and for about a year. And now they have resumed the carriage of that CBS station.

2285   So I will make the assumption that they didn't agree for mandatory carriage, but they wanted to have a fee for carriage, now they are back. First, do you know why they are back? Because the story doesn't tell if it was because they have changed their own mind. Because, I think in the U.S. you make up your mind once and that is for all. So it means that local pressure from viewers probably forced the local BDU to put --

2286   MR. LIND: Yes, it was two months, not a year. But yes, there was local pressure to get CBS back on. But there was also pressure from CBS management to be on, to sell advertising, because they couldn't sell advertising if they weren't on cable, or they couldn't sell it as readily anyway. So there was a balance there.

2287   But the thing is, and this is what Mr. Menzies had said earlier, I mean the point is, under that scenario, these stations can be dropped, dropped, no more. So I don't think anybody in the Canadian system is willing to part with a station, that is the issue.

2288   And so, sure, it came back on the air at some point in time and no one knows really, except the controller of the CBS station in Buffalo, whether or not anything was paid or whether they just said, uncle, and said put us back on, we will do whatever you want. So you just don't know that.

2289   COMMISSIONER ARPIN: So we can draw from that experience that a similar thing will happen here because we don't know all the facts?

2290   MR. LIND: Yes. But I don't think anybody here is willing to go through that, but I don't know.

2291   THE CHAIRPERSON: Well, that is not --

2292   MR. LIND: But anyway, Mr. Chairman, you know --

2293   THE CHAIRPERSON: Hang on, hang on, we are not finished with your questioning.

2294   MR. LIND: Oh, all right.

2295   THE CHAIRPERSON: I want to take on Mr. Purdy, because he said two things which really upset me.

2296   First of all, you said you want to play hard ball with the broadcasters. And you are going to say, if you want your distant signal transmitted either we do it by VOD or we won't do it any other way. Doesn't that presuppose that we give you consent to do it by VOD and we will give you consent for ad insertion? If we do not do that, what happens then?

2297   The VOD is not part of the question or the distant signal at all. We said, there is a market value, broadcasters claim it is more than the compensation they get right now. I don't know whether that is right or wrong, but go ahead, negotiate.

2298   Do I understand now that you are not going to negotiate with them?

2299   MR. PURDY: Quite the contrary, Mr. Chairman. We have already began negotiations with the broadcasters around distant market signals.

2300   And I can tell you that obviously with our own broadcasters it is an easier conversation, but with another major group we are very close to having an agreement that would see us taking the money that we currently earmark towards the CAB and putting it towards access to on-demand programming.

2301   But I think, historically, I should give you some context. So Rogers didn't carry distant marketing signals on every set-top box until such time as satellite put competitive pressure on us and said, you need to get these distant marketing signals. So it has never been a core part of our value proposition.

2302   THE CHAIRPERSON: This is what I am missing here. I thought time shifting came on with HD, became very popular with DTH, sorry. You as a cable broadcaster felt, to be competitive, we have to offer the same thing. And you are offering it and there is a compensation formula, which people claim is not (inaudible)

2303   Now, we said let's negotiate what the market value is. You keep bringing on the VOD, that is where you are losing me. How does that become part of the equation?

2304   MR. PURDY: I think two things. One, the way we structure our channel line-ups, we never replicated what DTH did. So DTH currently has all five Canwests or all eight CTVs side by each. At the behest of the programmers and, quite frankly, with their interest in mind, we kept our channel line-up the same. So our first 100 channels look and feel the same way they always have prior to us launching the distant marketing signals.

2305   Ergo, we don't have the same customer usage of the distant market signals that the satellite guys do. We also don't have the same damage being done to the advertising model that the satellite guys are inflicting on the broadcasters. So we are in a different place than satellite.

2306   THE CHAIRPERSON: Well, how do you deliver then? Just give me an example; Toronto, CTV. I am not a Rogers' customer, so obviously if I want to watch Winnipeg CTV one hour later, it is not right next door to Toronto, it is way up on the schedule.

2307   MR. PURDY: That is correct.

2308   THE CHAIRPERSON: But it is still there in its entirety, is it not?

2309   MR. PURDY: It is. Winnipeg is up in the 100s, where the local CTV affiliate is on channel 8 I believe.

2310   THE CHAIRPERSON: Right. And now, he comes and says pay me for the compensation for carrying Winnipeg. And you suddenly throw in VOD, that is where you lose me.

2311   MR. PURDY: Well, it is not we are forcing in VOD. We have had ongoing discussions with the broadcasters and they are friendly, at least some of them, are friendly to the notion that we would have on-demand as a way more efficient way of allowing for time shifting.

2312   What they don't like is people going to Vancouver or going to Winnipeg to watch programming that is available on a Toronto station. They would much rather keep the local branding and have the time shifting served off of Canwest or Global on-demand service. So in the end, there is going to be way more advertising revenue with the model we are proposing.

2313   I am not brow-beating or forcing --

2314   THE CHAIRPERSON: Okay, but I just don't understand what you said, because if CTV says, sorry, I am not interested in that, then what?

2315   MR. PURDY: So then we will have to figure out a way to come to an agreement. We will negotiate. I mean, if you got the impression from my colleagues --

2316   THE CHAIRPERSON: I understood from you, you know, you are just going to stop time shifting.

2317   MR. PURDY: No.

2318   THE CHAIRPERSON: At least that is what you said. If it is not what you meant, that is fine, I am glad we have --

2319   MR. PURDY: It is not what I meant. We will negotiate with them on good faith, as we always have. But we are very confident that this on-demand solution will be better for everybody, including CTV and including --

2320   THE CHAIRPERSON: And on that you are going to refresh the advertising and you are going to split the income from that advertising?

2321   MR. PURDY: The advertising revenue stream is theirs and this is what they find attractive, is that we are not trying to split the revenue, it will be their ads running on their on-demand programming. We will give them the data and analytics that they need in order to collect on the advertisers' revenue. And we will step out of the way. We will do this on behalf of our customers and on behalf of them.

2322   THE CHAIRPERSON: So the net effect is, in the example that we are talking; I am in Toronto, I can watch CTV Winnipeg one our later through this on-demand and CTV can put a local Toronto ad on it?

2323   MR. PURDY: Well, I think really what you will be able to do is watch Oprah on-demand at a time of your choosing with the local advertising inserted into Oprah.

2324   THE CHAIRPERSON: Yes, or whatever CTV offers?

2325   MR. PURDY: Yes.

2326   THE CHAIRPERSON: Okay, the second thing you said on skinny packages. The report we got basically ruled out skinny packages. For argument, that is a term Commissioner Molnar used totally, and said all he wanted is in effect a subsidized initial one.

2327   And then you came up and said, well the reason why we did that is because we think skinny packages will lead to cannibalization of our existing service, and I just don't follow this at all.

2328   Because if I am a customer, even if I just have a basic package from you, and I got 20 or 35 channels, now suddenly your skinny package will only give me the local over-the-air, which is four or five at most. And that is going to be more attractive for me than what I have and I will drop that and go for $11.40?

2329   MR. PURDY: I think what I should do is explain to you the challenges we face within a cable company.

2330   Whenever we have introduced a lower price point there is a certain number of your customer service reps or your Rogers retail reps or your door to door sales reps that will naturally gravitate to selling the lowest price point possible.

2331   So if we have $13.60 of recurring costs associated with provisioning this signal, and I assume that we would be allowed to charge $13.60 or whatever the retail rate ends up being, it is going to be significantly lower than what the current lowest price point is to get Rogers cable. And there will be a portion of our sales reps, customer service reps, retail reps that naturally sell that price point.

2332   So Commissioner Molnar's comments were, isn't there up-sell potential? There absolutely is, there is up-sell potential. But there is also greater potential of downgrading because this price point will now be in our website, our retail and within our call centres, so that is the risk.

2333   THE CHAIRPERSON: But are they really comparable? You are talking about four local channels versus your basic, which is bilingual, which has all the 9(1)(h), such as weather channel, which has all whatever you package into it. I mean, I can see your argument if you are talking about roughly comparable packages. But here, you are talking of quite different packages. There are no American channels in there, for one thing.

2334   MR. PURDY: And for the educated customer and the fantastic sales rep, they will convey that. But, unfortunately, not all of our customers spend a lot of time thinking about TV and not all of our customers sales reps are going to be excellent at selling, so there will be some downgrading as a result of this That was the only point I was trying to make.

2335   THE CHAIRPERSON: And so that lead you to the decision no skinny package?

2336   MR PURDY: Well, I don't believe we said no skinny package. I think what we said was, here is the recurring costs associated with the skinny package.

2337   THE CHAIRPERSON: I know, but the report by the working group, of which you are an integral member, says no packages will be offered.

2338   MR. PURDY: I think what I would probably do at this point is pass it to Ms Dinsmore to comment. I wasn't part of the working group.

2339   MS DINSMORE: I was part of the working group and we did look at these various options. And I have to say the BDUs were split as to which option they would prefer. And the BDUs were equally split on which options they were technically capable of doing.

2340   The replacement package was certainly something that the satellite people were very keen on looking at, because they had already put forward the free-set model, and this is a derivation of that. For they cable people, there were concerns about cannibalization, both with the notation of a replacement package, but also even on introducing a low-cost basic for a time period.

2341   The concern there was whether you could gate that to only the customers who were currently over-the-air Canadian viewers, and not have that spill out to your existing base.

2342   So I think we did have long discussions about this. For Rogers, you know, I know the Commission wanted a replacement package that would come in somewhere around $10. We had a very difficult time arriving at that number. So these options are all on the table and I think that they are still under consideration.

2343   THE CHAIRPERSON: Well, not quite. I mean, the report that you shared basically does not put it on the table. Aren't you effectively driving us to a free-set model? That is the only way to connect the 9 per cent over any areas where there will be no digital over-the-air free-set has become the only one because the report, the way it says, there will be some subsidized free entry for people to become cable customers.

2344   Now, some people can't become cable customers because you don't serve them to begin with. And those who are actually in your service area may not want to become a full cable customer. And since you are not giving a skinny package or a minimal package, whatever you want to call it, essentially the only way for us from a public policy point of view to ensure that they are served and receive that local signal is to adopt a free-set model?

2345   MS DINSMORE: We have discussed it, at the end of the day, if that ends up being --

2346   THE CHAIRPERSON: I mean, tell me if I am wrong --

2347   MS DINSMORE: No, no. At the end of the day, if that ends up being the easiest solution, then that would be a model that we could live with.

2348   THE CHAIRPERSON: Okay, thank you.

2349   Mr. Purdy, I am sorry, I misunderstood you originally. I am very glad for your clarification.

2350   MR. PURDY: Thank you, Mr. Chairman.

2351   Are we good now?

2352   THE CHAIRPERSON: We are good now.

--- Laughter

2353   THE CHAIRPERSON: Mr. Lind, you wanted to say something as well?

2354   MR. LIND: Mr. Chairman, I just wanted to say thank you for letting us appear before you today, and tell you that we still remain very concerned about subsidies and bailouts. And how much does the subsidizing industry have to give before itself becomes fatally flawed? And where does it all end for the paying subscriber?

2355   THE CHAIRPERSON: Good question. I guess our job is to find the right balance in all our decisions. And right now, we are obviously concentrating on the survival of conventional television. We are looking for a model and we appreciate your contribution.

2356   I think those were all our questions for you. Thank you very much. We will break.

2357   MR. MILLINGTON: Mr. Chairman, I have a couple of undertakings.

2358   THE CHAIRPERSON: Undertakings?

2359   MR. MILLINGTON: I just have two; the first one being that Rogers is to file its numbers on the fee for carriage impact analysis, and the second one would be to file the Blackwell report on signal piracy.

2360   THE CHAIRPERSON: Okay. Let's resume at 2:00.

--- Upon recessing at 1251

--- Upon resuming at 1404

2361   LE PRÉSIDENT: Madame le secrétaire, nous sommes prêts.

2362   LE SECRÉTAIRE: Merci, monsieur le président.

2363   We will now invite Canwest Television Limited Partnership to make its presentation. Appearing for Canwest is Leonard Asper.

2364   Please introduce your colleagues, and you will have 20 minutes to make your presentation.

PRESENTATION

2365   MR. ASPER: Thank you and good afternoon, Chairman and Vice-Chairs, Commissioners and Commission staff.

2366   I will begin by introducing our panel for today's presentation.

2367   My name is Leonard Asper and I am President and CEO of Canwest Global Communications Corp., two seats down to my right is Peter Viner, President of our Canadian Television Operations, and next to him is Barb Williams, our head of Programming. To my immediate right is someone you know quite well, Charlotte Bell, our head of Regulatory Affairs, and to my left is Chris McGinley, who oversees our TV Operations. And next to Chris is Carol Darling, our head of Engineering.

2368   In the back row, starting at the far left, your right, is Troy Reeb, our head of News, and next to him is Andrew Akman, our head of Planning. Next to Andrew, is Jon Medline, also with Regulatory Affairs, and next to him, Ken Goldstein, President of Communications Management. Seated next to Ken is Errol Da-Re, our head of Sales, and finally next to Errol is Kathy Gardner, who oversees our Audience Research.

2369   We are pleased to appear before you today to discuss certain policy issues related to the renewal of our local stations. Later this week, we look forward to discussing with you the details of our license renewal applications.

2370   The conventional television business model is broken. This was inevitable and it was predicted by almost all industry commentators including us, and now the crisis in local television is here.

2371   Chairman, you have now acknowledged now that the problem, is structural and together we need to find solutions. We are pleased to discuss with you the proposals you have put forward for discussion. At the same time, we believe that a comprehensive approach is needed to deal with those structural issues, and the time to act is now.

At the end of this hearing, we need concrete measures in place to stop the continued erosion of local television and a plan to move forward quickly on the other solutions we are proposing and advocating, like fee for carriage. The survival of local television is at stake.

2372   Much has been said about how we got here in the last weeks and months. But I would like to start by outlining what are not the causes of this crisis. The current economic downturn did not cause our structural problems. The operating results for all broadcasters began to decline during a healthy economy. The profitability for the sector as a whole reached an all-time low of less than half a percent last August, before the recession.

2373   The economic downturn is now exacerbating a downward trend that began sometime ago, but it did not cause it. If the economy was to blame, the BDUs, that is the cable and satellite carriers, would also be struggling. And, you know, it is quite the opposite, subscribers are up and profits are growing. When the recession ends, local broadcasters will still face the same structural problems we have been talking about for more than a decade.

2374   Some are suggesting that the debt incurred by broadcasters as a result of consolidation is the cause. Debt is a separate and distinct issue and it is not the cause of structural problems. If you look at the financial records you will see at that at the operating level more than half of our stations are showing losses before making any interest payments. Debt is reflected after operating income through interest charges.

2375   Debt also has nothing to do with the fact that all major broadcast groups have had to take massive write-downs on their local TV operations in the last year, including Rogers and CTV. The financial markets take a dim view of this sector in part because our only source of revenue, advertising, is in decline, and we operate in an unfavorable regulatory environment.

2376   In fact, both auditors and stock market analysts now attribute little or no value to our conventional operations. Short-term fixes will not turn the tides. If we had no debt, we would still be before you today advocating the same necessary changes.

2377   So how did things get so bad? Well, quite simply, we have gone from a handful of stations competing for viewers and advertisers to literally hundreds of channels competing for those same viewers and advertisers. The structure of the market has been fundamentally altered as a result of years of over-licensing and authorizing too many foreign signals into Canada.

2378   And the result was what was bound to happen, our only source of revenue is advertising and the market is now saturated. And now cable companies want a piece of our dwindling ad revenues by selling ads in U.S. cable channels. Viewing is fragmented and the program rights we buy are de-valued because U.S. TV channels enter our mark freely and siphon viewers away from Canadian stations.

2379   The problem is not caused by our spending on foreign programming. Our business model depends on using profits from U.S. prime-time programming to subsidize Canadian programming, which doesn't make money. Fragmentation makes it impossible for us to maintain the profit margins we once had from our prime-time schedule to off-set the cost of our Canadian local and prime-time obligations.

2380   U.S. channels have been authorized for distribution in our market, siphoning revenues and viewing and collecting subscriber fees, despite years of opposition from broadcasters. As a result of all of this, most local stations now lose money.

2381   Aside from shareholder expectations, companies need to be profitable in order to invest in capital and keep up with technological change, especially in a fast-paced media world. We have done our part and we are doing our part to cut costs and invest for the future. We acknowledge the initiatives you are trying to put into place to help mitigate costs, like the Local Programming Improvement Fund.

2382   But still, something has to be done to address the on ongoing decline of advertising due to fragmentation. We have continued to advocate the need for BDUs to compensate us for the carriage of our local signals as a matter of fairness, but it has now become a matter of survival.

2383   We are now losing money on all our local programming in all but two markets, Vancouver and Edmonton. So the reliance on U.S. programming to subsidize Canadian shows is even greater now. At the same time, our ability to fully exploit our program rights is hampered by the direct competition we face from U.S. networks carrying identical programming in all time-zones.

2384   In other countries, including the U.S., this is unheard of. In fact, when Americans learn that this happens in Canada, they can't believe it. The U.S. is arguably the most market-driven country in the world, but they would never allow the piracy of their program rights. In Canada, this is supported by our regulatory system and the result has been a massive wealth transfer from broadcasters to cable and satellite companies.

2385   Ironically, every consumer survey on the topic confirms that Canadians value local television above all other services, including foreign networks.

2386   We also keep hearing that simultaneous substitution is a privilege for us. With due respect, we wouldn't need substitution if U.S. programs, for which we hold the exclusive Canadian rights, were simply not available in this country. Substitution acts only as a partial solution for a growing problem caused by the widespread distribution of identical programming for which we buy the exclusive program rights.

2387   As I said earlier, this is unique to Canada because other countries do not allow this to happen.

2388   Commissioners, we are not asking you to take responsibility for decades of policies and licensing decisions that got us here. But we need to work together to put appropriate measures in place to restore the financial health of local television and correct the imbalances that currently exist within the broadcasting system.

2389   In recent times, the Commission has stated that our system needs to rely more on market forces. We have witnessed sweeping regulatory reform for the BDUs over time, relaxing rules, allowing them to own programming services and now compete for U.S. program rights.

2390   They are also exempt from the 10 per cent benefits tax imposed on broadcasters in transfer of ownership transactions. Meanwhile, the same policy has added hundreds of millions of dollars to the costs of broadcasters.

2391   Cable companies can use up to 2 per cent of their revenues from subscriber fees to subsidize community channels that compete directly with our local stations. They have also been allowed to add a second set of U.S. networks in different time zones that fragment viewing and further dilute our program rights.

2392   DTH, the satellite operators, are not even obligated to carry all of our local stations, but when they do, they can import these stations into distant markets, so now we are competing with ourselves. We have long advocated that all of our local signals should be carried, but not distributed in distant markets. While BDUs have argued that they need all this flexibility in order to compete, they continue to be sheltered from foreign competition, but we are not.

2393   Subscriber numbers continue to grow, revenues continue to grow and profitability has never been higher. Good for them, but their success should not come at our expense. They take our signals, they resell them for profit and they give us nothing. This is not a free market.

2394   We are highly regulated and subject to complex and numerous competitive forces unlike any other sector in the broadcasting system. If we want local television to survive then we need to take concrete steps now to address the inequities within the system. We are not averse to competition, but it has to be fair competition.

2395   Currently, the system favours one sector over all others. Basic public policy principles would dictate that once you decide to regulate, it should be fair regulation.

2396   Now, I would like to ask Peter Viner to begin our discussion on the specific policy issues for discussion at this hearing.

2397   Thank you.

2398   Peter.

2399   MR. PETER VINER: Thanks, Leonard.

2400   Commissioners, we're pleased to discuss the proposals you've put before us but there are no solutions on the table that resolve the major problem facing conventional broadcasting. Revenue is a problem that needs a solution.

2401   Consider that in our last renewal in 2001, we provided you with a seven-year projection for our stations. If you review our annual returns for the period, you will see that our expense projections were very close to actual results but we estimated much higher revenues and profits than projected. This happened because our competitive environment radically changed over the license term, making it impossible to meet our targets.

2402   The share of specialty and pay television continued to grow as it did in the previous decade. In fact there was a virtual explosion of new Canadian and foreign specialty services. We also had to deal with the mounting impact of fragmentation caused by distant Canadian and foreign signals.

2403   The result is that tuning to local stations over the last license period fell in all local markets. In Edmonton, the market experienced a 34 percent drop and in Moncton the loss was 30 percent of tuning.

2404   If you look at any other English-language market in the country, you'll find similar trends. All of this resulted from changes to the regulatory environment, licensing of new services, permission for the BDUs to market distant signal packages and the addition of a second set of U.S. four plus one services. Over that period we opposed most of these changes.

2405   We have also done everything possible to lower costs and increase revenues. Our Digital News Project, for example, allowed us to lower our operational costs and at the same time invest in digital technology to provide viewers with state-of-the-art quality news at a reduced cost.

2406   We have put a number of other measures in place to cut our operating costs, which unfortunately includes hundreds of job lay-offs and we continue to look for ways to run our business more efficiently. But the reality is that there aren't many more rabbits to pull out of this hat. Containing costs is one way of dealing with a declining business, but something has to be done about the revenue side. As Leonard said earlier, we don't operate in a free market.

2407   Charlotte.

2408   MS BELL: Thank you, Peter.

2409   Commissioners, the outcome of the issues being discussed is key in determining the context in which our stations will operate during the next licence term.

2410   Fair con1pensation that takes into account the profits made by BDUs in offering distant signals and the damages they cause should be a top priority.

2411   The policy and regulatory framework to resolve this issue is already in place but it requires some clarification. At this time, three issues need to be addressed.

2412   Number one, an early date for resolution: There is no incentive for BDUs to conclude fair deals unless timelines are set. We have already begun discussions and we believe that September 1st, 2009 is an appropriate deadline to put new agreements into place.

2413   Secondly, the right to withhold our signals: If we can't take our signals down, absent fair compensation then we have no leverage to reach reasonable agreements.

2414   Time-shifting caused by distant signals is costing us more than $30 million each year and the impact will only continue to grow as digital penetration continues to grow. We need to resolve this now.

2415   The BDU regulations already provide for deletion of identical programming from distant signals and we are asking you to confirm that you will enforce those rules after September 1st if agreements are not reached.

2416   In order to provide a good quality signal to our viewers we need to provide a digital signal to them, whether through a BDU or off air. But at the same time, this is another expense with little or no incremental revenue.

2417   We continue to refine our plans and find ways to lower costs to meet our mutual objectives. However, the cost of digital transition will remain significant at a time when the industry can least afford it. We have committed to install digital transmitters at all of our full-service stations by the digital conversion date of September 2011.

2418   Local programming is a net loss for our stations taken as a group. In our application we propose a commitment of 10 hours per week for local programs in markets with populations greater than one million people and five hours in smaller markets. As we said in our application, where there is consumer and advertiser demand for more, we will continue to do more.

2419   We are pleased that the Commission has recognized the difficult financial situation in which we all find ourselves and that incrementality is no longer part of your consideration.

2420   The introduction of the LPIF can help mitigate the cost of local programming for our smaller stations, and in our written comments we proposed a simplified approach to the issue based upon population breakdown and equal splits between the private conventional stations serving a market.

2421   Chairman, the final issue you raised in your public notice was the appropriateness of a one-year license term. We continue to believe that a one-year term is appropriate at this time in light of the continued decline of local television and the economic climate.

2422   We also believe that the time to address the structural problems facing local television is now. We do not want to find ourselves in six months shifting all of our programming and business plans for an extended license period with no structural relief.

2423   We are willing to move quickly on these issues and we urge you to conduct a policy proceeding immediately following this hearing to consider structural issues, including fee-for-carriage.

2424   There are a number of other public policy changes that we believe would be helpful in setting business plans. Many are not in your purview like Part II fees and pharmaceutical advertising and we do appreciate your continued support on these.

2425   Barb.

2426   MS WILLIAMS: Thanks, Charlotte.

2427   The case for Canadian priority programming continues to be a challenge. The costs of primetime Canadian programs continue to rise while at the same time the margin from our foreign content, which traditionally has subsidized those Canadian shows, is falling. And, maybe, most importantly, our viewing audience continues to be more demanding; looking for higher production values, and a range of styles and genres of shows to suit many different, and ever-changing tastes.

2428   We believe in the value of great Canadian television in primetime, and indeed across our entire program schedule. We also believe in making shows that Canadians really want to watch, and that advertisers want to support.

2429   And so we absolutely stand behind our Canadian content requirements of 50 percent in primetime and 60 percent overall. We know, however, it is increasingly important for us to have the flexibility to make the shows that people want, to find the right mix of drama, comedy, documentary; reality and the many blurred genres in between, and the flexibility to change that mix as tastes change.

2430   We will continue to air traditional priority programs that make sense to us; for example, we just launched an animated version of SCTV's Mackenzie Brothers, entitled "Bob and Doug" as part of our very popular Sunday night line up. And we just announced the green lighting of "Copper", a primetime drama that will air not only on Global, but also on ABC. But we do not believe that a mandated amount is appropriate.

2431   In fact, if the goal is to have Canadians watching Canadian programs on Canadian television, public policy cannot ignore the success of many other forms of programming.

2432   We have requested a modest adjustment to our commitment to independent producers, because we know we need, on select projects, to be able to manage the risk of upfront costs by owning the back end ourselves. And yet we also clearly know that a healthy, successful independent production community is important to our system overall.

2433   And so, we have entered into progressive and informative discussions on terms of trade.

2434   But, frankly, we are hitting an impasse because of a fundamental difference in approach. As a group, the private broadcasters are willing to establish an important set of principles that will provide a framework for best practices. But we are not willing to turn this into the price setting exercises that the producers seem to want. This would not allow for a fair market environment for our continuing and evolving business.

2435   And turning to your proposal on a Canadian/foreign spend ratio of one to one, we are very concerned about the development of a new rule that could have unintended consequences, not to mention the fact that our programming plans are already in place for next year. It would simply not be possible to put a policy as this into place for the coming year.

2436   Leonard.

2437   MR. ASPER: Commissioners, we have built this business piece by piece over four decades and we are proud of the contributions we have made in the local communities we serve and the millions of dollars we've donated in airtime and fundraising initiatives across the country and the quality Canadian programming we have brought to the airwaves.

2438   We continue to believe there is a good business case for conventional television if we address the structural problems we face. And right now we need certainty going forward. We need to make business decisions, programming plans and provide our staff and our investors with some certainty, a firm plan for our future. We look forward to discussing this with you over the course of this proceeding.

2439   Thank you. And we will be pleased to answer your questions.

2440   THE CHAIRPERSON: Thank you for your presentation.

2441   I'm sure you followed the proceedings and you saw me ask your colleague, Mr. Fecan, at the beginning to tell me why conventional TV is important and what he thought was the essence of conventional TV.

2442   Why don't you answer the same question?

2443   MR. ASPER: Pardon me. I just missed the last part of your question.

2444   THE CHAIRPERSON: Why don't you answer the same question, why does conventional TV matter and what is really the essence of conventional TV?

2445   MR. ASPER: Well, I think the essence of conventional TV is the provision of local information to people in those markets. Specialty does not provide that. And it's also -- it's a question of the diversity of voices that do provide that information.

2446   It's not just having one conventional TV channel and one local TV station. It's having several of them in a market. And it provides the support and the underpinning of the democracy we live in.

2447   It's the way information is disseminated to people so they can make informed decisions about their elected officials and it's also where they get to know about their community. When a school is going to close, when a hospital -- when a road is going to be paved, when a hospital is going to be open or closed.

2448   And the other part of it is it is the underpinning of the rights market. The programming that conventional purchases, ends up on specialty channels and funds their schedules and creates the dollars that are in the Canadian program expenditure requirements. So that specialty channels would -- if there was no conventional market; there was no local TV market that is buttressed by a conventional network, there would be a lot less spending on Canadian production and there would be a lot less jobs and a lot less dollars in this industry.

2449   I think the other important thing is this is what draws the largest audiences still in the country. This is where Canadians come together. And Mr. Fecan cited some of the programs that CTV does -- the Juno Awards. Well, we do the Genie Awards that support the Canadian movie industry. We do the Gemini Awards that celebrate the best in Canadian television; the Aboriginal Achievement Awards. That kind of funding necessary for those kinds of programming; that kind of programming is not going to be financed by specialty.

2450   THE CHAIRPERSON: Can you have a Canadian television system without conventional TV? Could you just have a bunch of specialty channels, national news channel and local community channels?

2451   MR. ASPER: I think if you had a local community channel -- and remember that's owned by the cable company and there is only one of them because cable is a monopoly in each of its markets -- so I think you can always have a system. It just wouldn't be this system.

2452   MR. VINER: Can I add?

2453   MR. ASPER: Sure.

2454   MR. VINER: I think what would be different in that system, Mr. Chairman, is we are forgetting that this is also an advertising medium vitally important for local advertisers. You would be cancelling one of their best options in terms of generating retail sales, not to mention the added dividend of telethons, the millions of dollars. All local television stations contribute to charities in terms of promotion.

2455   Every management team that I have ever come in contact with for local television is heavily involved in the community. That is a very big plus.

2456   And on the national sense it is the only medium capable of generating big audiences, whether that's big audiences for the Geminis, whether it's big audiences for national news. Essentially, specialty cable audiences are quite small. They are big in the aggregate but on an individual basis they don't have the punch or the reach of a national --

2457   MR. ASPER: Chairman, I think what you would end up with is you would have Canadians watching the same American shows they watch now but they wouldn't get local news.

2458   THE CHAIRPERSON: Does it have to be delivered over the air? I mean 90 percent of Canadians roughly watch it right now by satellite or by cable.

2459   And I have asked Mr. Fecan. I said, you know, you want fee-for-carriage. You want to do income, et cetera. Can't we go whole hog and have a specialty channel whose genre is conventional TV and you get it delivered that way and as soon as -- as long as we provide the system by which the 10 percent which right now are not cables or satellites, receive the signal in one way or another, could we do it that way?

2460   And then I'm going to add, my second question was; in that scenario would you be prepared to assume what Canadian program expenditures, which specialities all have and which conventional now doesn't have?

2461   MR. ASPER: I think that would have to be part of a larger discussion on that. It's hard to answer that question alone without knowing what the other plugs in the system are because if we are asked to be -- if we are going to be a specialty channel, if that's what you mean, the question is what else do you mean by that?

2462   THE CHAIRPERSON: No, I meant -- the way I put it to him and he was quite (inaudible). He said he could live with the CPE, first of all. So that's -- but I mean I said I'm not too sure whether given the high costs involved in digital transmission, we are not going to have it in all centres.

2463   Now, you say you will do it. Others -- he said he wouldn't do it. He will do it in major markets. And he also made, like you have made in many other fora, the plea for fee-for-carriage.

2464   So I said, well, maybe this is the time to think that the other way around should be seeing conventional in effect as a genre that, you know, you become -- you deliver your signal by cable and BDUs and you assume the kind of obligations that are normally associated with specialty channels; one of them -- a key one being CPE.

2465   MR. ASPER: Well, I think the difference is we have -- and I don't think we are opposed in principle, provided the rest of the -- you know, we know the rest of the facts around this to a spending requirement.

2466   But remember, we have all the infrastructure costs of having local TV stations. So I don't think you can compare us to being a specialty channel in that sense. They have one little building probably 5,000 square feet that provides a national network. We have $100 million of cost to create a national network, to create the same coverage.

2467   So I mean could we live without -- you know there may be a system. I would like to hear the rest of the details of the system before we say we could live without transmitting to -- disseminating to our population.

2468   THE CHAIRPERSON: I'm not advancing a system. I was just following the logical consequence of what you were saying you know, which is in effect we cannot survive without fee-for-carriage, is what you said. We need it.

2469   He made the same plea for conventional that you did, et cetera, and so I'm looking at fee -- the idea for fee-for-carriage comes from -- obviously from specialty, you know. So could we now go once -- is that part of the sort of structural solution that you are all looking for?

2470   MR. ASPER: Well, I think we can -- we can certainly look at it. I don't see -- it's not -- we don't necessarily say we have to transmit to that 7 percent of the population, but when you say specialty channel that has a lot of other implications. If you just say -- if the question is limited to, "Do you have to transmit to 7 percent of the population that don't currently receive signals by cable or satellite?" the answer is we probably could.

2471   I want to make sure somebody else doesn't disagree with me on our team, but I don't see why we couldn't if that's the only part of the question.

2472   MR. VINER: Excuse me, Len, if I can get in?

2473   Mr. Chairman, I think in part, in principal, if I heard Mr. Fecan correctly, he was suggesting that conventional television has to become more like a specialty network inasmuch as it has to have more than one revenue stream. It has to move into more of a subscriber base or in part of a subscriber base. So in that part it does look more like a specialty network.

2474   THE CHAIRPERSON: Let's leave Mr. Fecan out of this --

2475   MR. VINER: Yeah, I would like to leave him out of --

2476   THE CHAIRPERSON: -- it was what he had just said or something. We are talking -- we are all struggling over a model for --

2477   MR. VINER: Yeah.

2478   THE CHAIRPERSON: -- viable, conventional TV.

2479   Just one of the basic questions is does that automatically mean it has to be delivered over-the-air or could you have conventional TV without the over-the-air component?

2480   MR. VINER: I think we have proposed a hybrid in terms of HD. I don't think we have addressed it quite as, does it -- you know, would you abandon the over-the-air entirely?

2481   But I think your basic thrust is, does conventional start to look a little bit more like specialty? I think the answer is yes.

2482   THE CHAIRPERSON: Okay.

2483   Leonard, I believe you have a lot of questions including this document?

2484   COMMISSIONER KATZ: Yeah. Thank you very much, Mr. Chairman.

2485   I'm going to try and pickup on the Chairman's comments in terms of the structure is broken of the system today. I want this to be more than a philosophical discussion of what is structure but to me a structural problem is one that needs re-engineering, a total change in how things are done.

2486   What I have heard from many people coming before us here is looking for regulatory obligation relief and changes which we understand, and a financial fix. And I guess from my perspective, I don't understand how that is structural. I don't know why if we go down that path, in two years from now there isn't another need to do the same thing one more time. It doesn't change the underlying structure of the industry.

2487   And that's why I think what I heard the Chairman say is, "Is there some way of changing the structure permanently?" as opposed to looking at what some people may think is long term relief, but what I look as just a band-aid that may have to be reapplied again in a short period of time.

2488   MR. ASPER: I think we are splitting hairs a little bit when we try to say something is structural versus financial because it's the financial structure of the industry that's the problem.

2489   One party has access to revenues and a certain set of regulatory obligations, and that's cable and satellite. Another has access to or limited access to revenues and has certain costs on it. So that is the structure of the industry, so to speak -- is a financial imbalance and the opportunities to earn a living.

2490   So I don't know why -- I don't see why a financial fix isn't structural. And I do think that we have tried -- we have had many discussions with the Commission about what are the potential fixes and we keep coming back to the one that we know works and we think should work for the rest of the system, and we don't agree with the position of cable and satellite that it is so onerous. We can try them and, you know, fix it around the edges.

2491   I think the band-aids are in fact things like -- you know, distant signal relief is good and the elimination of Part II fees which is not a CRTC issue. Those things do help but the structural -- you know, the epicentre of the structural problem is the lack of a second revenue stream and that's what we are proposing to this Commission. I know that's not specifically part of this discussion although it is, in some way. But that's the structural problem.

2492   COMMISSIONER KATZ: So you don't see a structural solution that would change dramatically what an OTA conventional broadcaster is today?

2493   MR. ASPER: The one thing that we keep saying is we wouldn't need a fee if the structure was different in the sense that, like the U.S. and like England and like Australia and every other industrialized country in the world, foreign signals were not allowed into the market to compete directly against local broadcasters. And as I have said many times in this forum, if you live in England and you want to watch a show on NBC you watch it on the English -- the local broadcaster. You don't get NBC.

2494   That's the structural fix. And that's what should have happened in 1952 when people left NBC to come into this country and violated our program rights. I mean it was later when Canadian broadcasters developed but our program rights -- the exclusive rights we own are violated.

2495   COMMISSIONER KATZ: So if that is a fundamental issue, and I have heard it from you and from other people as well, why wouldn't a solution be developed by the industry, by the OTA industry that would envelop, create an envelope around that type of structural solution and come forward with something that would say, "Here is the issue; the issue is a rights issue and this is how it can be solved for the next many years ahead of us", rather than simply saying, "This is the problem. The fix is, let's throw money at the problem".

2496   MR. ASPER: Well, if you would so direct the cable group to come forward with that, to even come to that meeting -- we have zero leverage with them.

2497   Because in the United States which has a retransmission consent regime, as you know -- because if I'm CBS New York and I own the exclusive rights to Survivor in that market, I'm the only place you can watch Survivor in that market. Then when CBC says to cable, "If you don't compensate me or if you don't -- if you don't carry me, I will -- I will take my signal down. If you don't agree to compensate me, if you want to bring in another signal, then I will take my signal away".

2498   In Canada we don't have that right because you can watch Survivor on 20 channels in Canada. So that's the issue.

2499   The issue is we are holding zero cards because of the bleeding of the American signals into this market. If we have cards I think we can have a negotiation. But you can see even in the distant signal negotiations now we weren't given enough cards even there and we are not getting very far.

2500   COMMISSIONER KATZ: Okay.

2501   Yesterday, when CTV appeared before us, Mr. Fecan, I believe, said that specialty channel profitability should not be weighed when considering the financial returns of the OTAs.

2502   Do you have a comment on that? Do you agree with that?

2503   MR. ASPER: I think it's partly complicated by the fact that there are lots of partnerships. So I don't think whether it's Scripps or Fox or anybody they wouldn't feel that because the company with whom they are a partner happens to own other channels, conventional networks, that they should be penalized on their asset. That's one thing.

2504   The second thing is we were -- we tried to apply. We applied for many speciality licenses over the years. We didn't get them because the Commission took out what I would call an unwritten policy, but the facts support this, that new entrants should come into the business and they should get licences. And who are those new entrants? Well, many of them aren't left. They sold. They made a huge profit. They didn't pay for their licences. They just got given the licences and they sold and they made a big profit and they left the industry.

2505   We, in order to survive, had to buy specialty channels in order to buy into the growth part of the industry and in doing so we paid benefits tax. We paid $150 million of benefits for the right to own the Alliance Atlantis channels. CTV paid -- I can't remember how much -- $80 million for the right to own TSN and Discovery and whatever they bought in that group. And they paid yet another -- I don't know -- $100 million for the right to own CHUM and the stations they bought from CHUM.

2506   So as far as I'm concerned we paid for the right to be in the specialty business and we shouldn't be asked to pay twice.

2507   COMMISSIONER KATZ: But you do recognize that there are synergies? I mean one of the structural fixes, I would imagine, that went through your mind and your board's mind several years ago was in order to try and address the issue of fragmentation was to consolidate, which we heard quite a lot about two, three years ago. The solution to fragmentation is consolidation.

2508   And now what we are hearing is part of the consolidation worked but the other part of the consolidation didn't work.

2509   MR. ASPER: Well, first of all, as we have consolidated there has been yet even more competition. So when we bought WIC for example in 2000, the WIC television stations, the industry looked a certain way.

2510   A year later 40 new digital channels were licensed and I think second sets and third sets of four plus ones came in, the U.S. networks and time-shifting became more prominent and prevalent. A whole bunch of things changed. And so, yes, it's true that we by -- consolidation was a solution. It was a partial solution and not a full solution.

2511   I think it's important to realize that we look at -- and like any business we look at each of our business units as single units and whether it's Proctor and Gamble or McDonald's looking at the McRib versus the Big Mac versus the milkshakes versus whatever, if the milkshakes aren't selling and they are making money, they take milkshakes off the menu and they stop that product line. And it's the same thing like Procter and Gamble does with Tide and Cheer. And sometimes, yes, they try to grow and try to save their product lines through growth and an increased market share, but ultimately if they can't they shut them down, or they either fix or they shut them down. They get out of it.

2512   So yes, you know, there were synergies in the Alliance Atlantis transaction. I'm sure CTV had theirs too. But it's not going to be enough to save the overall business.

2513   If anything, by the way, it does make those channels more attractive to own, the specialty channels.

2514   COMMISSIONER KATZ: Let me jump to that opportunity then.

2515   A number of parties have asked a question and I think you have heard it many times as well and, in fact, Rogers this morning actually made the same case, and that is -- and I will just read you the words if you haven't got them. I just want your comment:

"If the fund..."

2516   COMMISSIONER KATZ: And they are referring to the LPIF fund:

"...is used to maintain rather than to increase local programming, then any programming group that receives money from the fund should have to commit to not closing any stations or cancelling any local programming over their entire station group."

2517   COMMISSIONER KATZ: Can you provide some comment as to your views if in fact there is a solution found for this that is monetary in nature, how that will translate into retaining the programming that's already there?

2518   MR. ASPER: Can I just ask Charlotte and Peter to talk to that, please?

2519   MR. VINER: I'm sure Rogers put that forward because that makes the comments almost an unpalatable proposition.

2520   The fact of the matter is that some of these stations will have to be -- some of the local programming will have to be curtailed because we simply can't afford to do it.

2521   To say -- to handcuff yourself to say there will be no program cancellations or no reduction in service or no closures as long as you touch this fund is simply unacceptable. And I assume that that's why it was put forward.

2522   The fact of the matter is we need the money for smaller markets in order to preserve local service, not to add to but to preserve it. Those are markets where audiences are declining, where advertising support is declining. If we want to keep up what we think is a worthwhile service we need access to additional funds.

2523   COMMISSIONER KATZ: But under an LPIF regime that compensation would be tied to the marketplace, basically, as well. You are getting it based on --

2524   MR. PETER VINER: I understand that and we're willing to -- you know, that's what it should be for, it should be to support local programming in those markets.

2525   COMMISSIONER KATZ: Okay. The Chairman yesterday handed out a document, I'm sure you've seen it by now as well, with regard to a high level allocation of how the funds would be distributed based on a fee for carriage model.

2526   Have you had a chance to take a look at it and provide, perhaps either now or later on, some insight as to whether that is representative of what your views would be as well?

2527   MR. PETER VINER: Sorry, I'm going to ask Ken Goldstein to respond.

2528   MR. KEN GOLDSTEIN: Thank you.

2529   Mr. Commissioner, we have had these data since yesterday and I had an opportunity to have a quick discussion with Staff about them as well.

2530   I would say this is a good first step in terms of calculating the numbers and putting some reality to this idea.

2531   I think that some refinements would be in order, I think some definitions would be in order in terms of understanding exactly how these numbers were put together.

2532   For example, the numbers of stations listed for commercial stations and for CBC stations do not necessarily match other data. That might not change the total very much, but it would have to be checked.

2533   So, the first thing I would say is that I think that it would -- again, the Commission has made a very good first step. I think it would be useful to bring some of the economic technocrats, if you will, into the room with your Staff.

2534   If you guys will pay for the lunch, I think we can, in about a day, refine these numbers and then we'll all be able to say, if you do this -- again, not making any assumption -- but, if you do this, this is how much it would be, so...

2535   COMMISSIONER KATZ: In the interest of transparency, can I suggest that you actually file something as part of the undertaking and other parties will have an opportunity to see it as well and we'll try and come up with something that is fairly accurate for each of the players through that model.

2536   MR. KEN GOLDSTEIN: Well, I would be happy, I'm sure Canwest would be happy doing it and I would be happy doing it, the problem is, is we need some definitions from you.

2537   For example, you've got 95 commercial television stations listed on the first page and then you've got 94 CBC stations. If you go to the CBC website, they say they have 28 stations.

2538   So, you know, did you include re-broadcasters? But if you included re-broadcasters for the CBC, why didn't you include them for the private stations?

2539   So, these are -- I call those technocratic questions. They don't go to the philosophy, but they are questions that have to be answered.

2540   So, I will happily file something, or someone will happily file something, but we need to know your parameters a little better.

2541   THE CHAIRPERSON: Well, we'll take up your offer of filing something. And I'm delighted to hear what you say, because we can clearly put a technocratic working group together to make sure we're all working on the same assumption.

2542   The reason why we filed this document was for the simple reason, you are all telling me -- or most of you, that the LPIF is not good enough, and you all have a mental image of fee for carriage.

2543   So, I want to know what does this fee for carriage actually mean, what would it generate, how much per station, per network, et cetera. So, we put in what would be the burden on the BDUs.

2544   So, my Staff did this impact analysis, they filed it. We found out this morning from Rogers, for instance, that apparently the way we calculated the PBIT is wrong and PBIT is not, in their view, the right measure anyway to use.

2545   That's fine. You can have that technocratic -- we just want to have you all understand if there is a fee for carriage which you want and which we have never said that we would grant, but if, just for intellectual discussion argument, we know what we're comparing things against.

2546   And, so, please file your idea of what is wrong with it. We want to have your paper and that from everybody else so we can confirm a convenient technocratic group to make sure we all work from the same assumptions.

2547   COMMISSIONER KATZ: Okay. Before I get into the more specific questions that flow from the Chairman's opening remarks yesterday, the seven or eight items, I've just got one other question, and it has to do with the comment that was made this morning by the Rogers group and the study that was done about the vast gray market or black market that exists today.

2548   And I guess the question is: As local reflection is reduced, be it through reduced obligations, hours or whatever, or gone completely, would that not cause a greater risk of further gray marketing, black marketing in the industry?

2549   MR. PETER VINER: I'm not sure how -- I don't follow that rationale.

2550   COMMISSIONER KATZ: Well, if people don't get local programming because it's been reduced through either reduced obligations or priority programming, for example, Canadian programming is gone completely, people may look at alternatives.

2551   And I guess there are people out there right now that use gray market dishes and services from abroad in order to provide their entertainment services.

2552   And I guess the view that I'm proposing is, as there's less and less Canadian programming on the air there is a greater propensity of people to find it outside of Canada.

2553   MR. PETER VINER: You know, I don't follow that logic. It seems to me that people who are in the gray market are doing it because they don't want to pay a BDU fee or they want access to even more porn.

2554   I can't understand that.

--- Laughter

2555   MR. PETER VINER: I don't believe it's because there's too much Canadian content on local services.

2556   COMMISSIONER KATZ: Okay.

2557   Let's take a look at some of the more specific issues here.

2558   One of the things that you've talked about, and I guess we'll get into some of the specifics of your licence application later on, but in terms of longer term you're looking for changes to the number of hours that are displayed for priority programming and Canadian programming as well.

2559   And one of the things that you've forwarded -- if I can find it -- was the suggestion, it was a 10 and 5 I guess for revised commitments, 10 hours in the million dollar plus populated cities and five hours below that.

2560   Yesterday we heard Canwest I guess talk about nine and a half and 14 hours for the same type of degradation.

2561   First of all, do you believe in having common regulations for all players in the field, or should they be different depending on who the players are?

2562   MS BELL: I'll just start and others may want to add to this.

2563   I think -- fundamentally I think they should be fair and probably to some extent equitable, but not all companies are structured the same.

2564   For instance, as you know, Rogers has stations mostly in large markets with the exception of Winnipeg. So, it's a little bit different than for companies like CTV and Canwest who have to subsidize a number of small market stations and, in CTV's case, they have numerous other small market stations in different areas than we do.

2565   So, we're structured a little bit differently.

2566   Having said that, I think our view is that we should be standardized within a corporation in terms of trying to have the same commitment across the board for small and large markets. That's the first thing.

2567   And then I think you have to sort of look at each group and what their own strategies are.

2568   Citytv does news very, very differently than CTV and Canwest do. I think the cost structure's a little different, the presentation is different, and that's a good thing because that adds diversity.

2569   So, not sure again that a standardized approach is the best one.

2570   And then, finally, on the nine and 14, to be honest, I think it's a little bit -- it was a little bit confusing to us. I think what they were talking about was within the under one million it was split based on a population level.

2571   We just felt that it was needlessly confusing and just adds another layer of complexity to the whole thing. So, our preference I guess is to stay with your original definition of one million plus and less than a million.

2572   The only other caveat, since you haven't stopped me from talking, is that on the who qualifies for that, I think that we are very disappointed that Montreal English market doesn't qualify as under one million because there are actually around 700,000 English-speaking Quebecers in Montreal, and I think it's just a matter of the definition the Commission's used. I think they've used knowledge of the language in determining the number, which brings it sky high and well over a million.

2573   So, I'll stop there.

2574   COMMISSIONER KATZ: So, what I hear you saying is within an ownership group it should be standardized, but between ownership groups it doesn't necessarily have to be standardized?

2575   MS BELL: That's correct.

2576   COMMISSIONER KATZ: And we would make that decision based on what factors?

2577   MS BELL: I think as you've always done, is that you look at all of our different plans. You know, even if we're all looking at -- actually, we're not all looking at a hybrid model for transmitters.

2578   My understanding is Rogers is going to put up all their transmitters because they only have 15 or 16. We have 104, CTV's got more than that.

2579   So, you know, sometimes there are certain things that are particular one group that are not -- that don't apply to the other and I think we have to take those types of things into account.

2580   I think it's the same thing in local television. I'm not saying that we should be wildly apart, but I think that if there are some differences I think it's reasonable.

2581   MR. PETER VINER: If I can just add, Commissioner Katz, this is in part program strategy.

2582   To be the fourth newscast at six o'clock probably makes no sense, does not add to diversity, it just adds to expense and, in fact, that money could be better deployed in other forms of local reflection.

2583   So, I think what you would do as you normally do is listen to the program and the strategic plans of all of the players and say, this makes sense for you, this cut of the cloth makes sense for you.

2584   So, one size doesn't fit all, they should be very different and I think if you want to foster diversity, having a standardized quota does not make any sense.

2585   COMMISSIONER KATZ: Okay. Looking at the broader issue of contribution to Canadian programming, we have the various obligations of priority programming, the CPE, independent production.

2586   Can you prioritize them for us so that we know how you would go about getting the biggest bang for your buck, so to speak?

2587   Obviously we've got to look at the social implications of each one of these. But from your perspective, from an operator perspective, from a broadcasting perspective, where do you get the biggest relief, the biggest flexibility, the biggest opportunity to effect your finances from amongst all of these obligations that are there today?

2588   MS BELL: You're just talking about the current obligations of conventional stations?

2589   COMMISSIONER KATZ: Yes.

2590   MS BELL: Okay. Sorry, you said CPE that's why I was confused.

2591   COMMISSIONER KATZ: Oh, sorry.

2592   MS BELL: Sorry.

2593   MS WILLIAMS: I think to the point that our greatest opportunity is to use our Canadian content hours to be most successful with viewers and with advertisers, then the most important flexibility is to remove the tight definition around priority programming and let us do the most inventive and successful shows that we can with the Canadian hours on our schedule.

2594   I think that really is ultimately the flexibility that makes most sense.

2595   COMMISSIONER KATZ: Okay. I asked this question yesterday of CTV as well and maybe I'll try to put a package around it.

2596   One of the issues that some of us believe need to be addressed is the recognition that you are independent, you are in a competitive market while, at the same time, providing a social good and providing a service to all Canadians as well.

2597   And how, as we go forward, do we recognize the successes that you would have relative to your competitors in evaluating a solution to what is structurally not working today and, that is, is it a one shot fits all as well, or one size fits all as well, where we decide that whatever we do for LPIF or fee for carriage or whatever, some other solution comes up to be is a one size fits all, you all are sort of painted with the same brush regardless of the success that each one of you have.

2598   And I heard you, Mr. Viner, say that it doesn't make sense to have a fourth news station, for example, at six o'clock having news if no one's watching it anyways.

2599   It's sort of the same thing. Are we rewarding people for failure as opposed to rewarding them for success, or helping them succeed?

2600   MR. PETER VINER: Well, I think first of all I don't think you want to put yourself in the position where you're judging effort or content, I would hope.

2601   The fact of the matter is that all of the participants in the over-the-air business suffer from the same kind of issues and, that is, the result of too many licences and the shift of viewing to specialty networks and, on the younger side, the shift to online viewing.

2602   So, this is not a question of who's more successful than someone else, this is a fundamental shift in the industry which we are all impacted on.

2603   It would seem to me that if we want to continue local service, which we believe we should and we believe is worthwhile, in order to have a reasonable amount of local reflection and local news, we believe, particularly in small markets, we need a second revenue stream.

2604   But the reason we believe fee for carriage is a better long-term structural fix is the small markets are just at the vanguard of this movement. This is migrating quickly to big markets and big conventional television markets are also feeling this effect and they are also going to be in trouble in the very near future.

2605   So, something like fee for carriage, which would affect all over-the-air private broadcasters, is a much better fix.

2606   I don't think you want to be in the business to say your newscast is better than "X's" or your coverage of local reflection is better than "Y's".

2607   So, I just don't think that makes any sense.

2608   MR. ASPER: I'd also just add, Mr. Commissioner Katz, you know, the market will speak to some extent because the advertising revenues will be lower on the party that is not successful at attracting viewers. But in for -- and that happen in the specialty market because they all have a fee and no one judges what the fee should be, based on their success anyway, it just is what it is based on the original wholesale amount granted and any raises they've been able to generate on an discretionary basis or through application to the Commission.

2609   So, the market still works. In the sense of the other half of the revenue pie, the advertising revenue is affected by our success or failure.

2610   COMMISSIONER KATZ: Yes. There was discussion yesterday of quality versus quantity in terms of Canadian production as well. I think the Chairman had a discussion with Mr. Fecan about, how do you measure quality and is there any way of measuring quality.

2611   Do you have any thoughts about that as well? Obviously all of our obligations today are quantitative in nature and that may be easy to measure, but not necessarily the right measure.

2612   MR. PETER VINER: You know, I'll ask Barb to add to this, but essentially we use quality essentially based on the audience and the advertising it attracts because that's the world we live in and there are...

2613   But, Barb, do you want to add to that?

2614   MS WILLIAMS: Yeah. I think it goes for us, it goes to the flexibility that we're looking for because we do -- each company I'm sure measures their success a little bit differently, but for us it's a pretty straight line of ratings and, hence, revenue and we're looking to continue to find ways to be more successful with our viewers every single night, and that means on our Canadian shows finding programs for them that they want to watch and bigger and bigger numbers that our advertisers have more and more confidence in to support on a going forward basis.

2615   So, it's a clear measure for us to have the opportunity to be as flexible as possible, and then we are successful when the quality of our show demonstrates that with a high audience rating.

2616   MR. PETER VINER: I mean, the incentive for us to be -- create shows that attract bigger audiences, presumably more quality programming, is so much in our interest that I don't -- and, you know, that's really the nature of our business.

2617   So, the incentive is very great for us to do that as it is.

2618   MS McGINLEY: In our smaller markets, we have hours of local programming that go from nine to 36 and in some markets we don't have consistency in terms of what the markets need in terms of their local programming. So, in some markets we have hours that the market cannot bear.

2619   So, what we need to do is come up with a formula, come up with hours that meet the demands of the advertisers and the viewers in the markets and we don't have that right now across our local stations.

2620   COMMISSIONER KATZ: Thank you.

2621   One of the things that you asked consideration of is relief on independent production, 75 percent over the long term. I think you've proposed 50 percent, if I remember correctly.

2622   What economies or efficiencies do you realize by having more control over independent -- over production?

2623   MR. PETER VINER: It's not -- I'll take a stab at this, Barb, and then you can.

2624   It's not economies or efficiencies, it's a question of a reflection who's got the most in this, who's got the most at risk.

2625   And, generally speaking, it's the licensee has the most at risk and in order to reduce that risk or make our investment more palatable, we need access to the back end rights, the ancillary rights.

2626   Barb?

2627   MS WILLIAMS; Yeah. I think as the financing of the bigger Canadian productions becomes more and more complicated and we're looking for more inventive ways to, you know. launch bigger and bigger shows and different kinds of production, we are taking more and more risk with those projects all the time.

2628   And what we're looking for is, on occasion, and maybe a little bit more than we're currently able, to do a different kind of deal where we'll take a much bigger risk on something that we think that makes sense to our larger strategy, but we need to be able to take the back end on that to be sure that we can recover.

2629   Many -- you know, more and more the secondary platforms are becoming the recovery mechanism for the up front cost, and I think what we're looking for, as we continue to bear a larger and larger piece of that up front cost as it continues to grow, we need to be able to find a way to recover that on the secondary platforms, whereas at the moment we're very much restricted to just the one shot at recovering our cost.

2630   And, as we've said many times, for the most part, in that one shot your Canadian loses too much money.

2631   We want to be encouraged here to try some bigger stuff, but that means we need some back end opportunities that we can't do at the moment.

2632   COMMISSIONER KATZ: Okay. You mentioned early on in your opening remarks I think, Mr. Asper, that there are some tangible benefits that have accrued to the industry as a result of one of your acquisitions, as have the same thing happened to others as well.

2633   Under your scenario request for elimination of various obligations, how would those tangible benefits which were based on incrementality continue to be realized, or are you suggesting that even those be deferred as well or removed as part of your request for relief of some of these obligations?

2634   MR. ASPER: If you're talking about the Alliance Atlantis related benefits --

2635   COMMISSIONER KATZ: Yeah.

2636   MR. ASPER: -- they were not on the table as part of this discussion, so they wouldn't be affected.

2637   COMMISSIONER KATZ: But they're based on incrementality, and if you think --

2638   MR. ASPER: Sorry.

2639   COMMISSIONER KATZ: -- your obligations today, the priority programming for example, whatever obligations you had were gone, how do you assess incrementality on something that's zero?

2640   MR. ASPER: Well, I just want to say a couple of things.

2641   I think the -- first of all, it's based on the specialty channels today, so we're not talking -- when we talk about priority programming we're talking about on conventional TV.

2642   And remember, this whole discussion is not about the desire necessarily to not do our eight hours or whatever the number of it is, or to not do 23 hours of local programming in Victoria, it's the right not to do it, it's the ability, the flexibility to decide based on the market and the consumers' desires, consumers' tastes what we're going to do.

2643   So, we're going to fulfil those benefits and whether -- and there may be drama in those benefits and it may be incremental and it may end up on Global TV.

2644   We're just asking the Commission to allow us to make those choices about where those programs end up.

2645   Charlotte, do you want to -- you seem to be chomping at the bit here, so...

2646   MS BELL: I'm sorry, I usually am chomping at the bit when somebody else is talking.

2647   MR. ASPER: That's why she's beside me.

2648   MS BELL: Sorry, Leonard.

2649   Just to be very, very clear, the benefits that are attached to Alliance Atlantis especially the programming benefits are tied, especially the drama ones in particular, are tied to incrementality on our spending on specialty channels. So, that's the first part.

2650   And, as Leonard said, so just to be clear, they're not tied to Canwest or the conventional stations. Although they may end up there, we would have never counted them as part of the priority commitment anyhow.

2651   So, I don't think that would be affected.

2652   And then the second part I guess is, as Leonard said, whether or not we eliminated priority programming, we had not asked for elimination of those benefits and would have continued to meet those --

2653   COMMISSIONER KATZ: So, there were no benefits accruing to the OTA side by virtue of the E Channel acquisition?

2654   MS BELL: There were the news, which is not part of priority programming, so there was a public affairs program. There was very little accruing to the conventional side. There's a public affairs program, news bureaus and then the Red Carpet series I believe, the Star System programming which doesn't count necessarily as priority programming.

2655   But that's it, yeah.

2656   COMMISSIONER KATZ: Okay. Moving to the LPIF. I believe you suggested three percent as being a replacement for the one percent, I guess.

2657   Can you tell us how you arrived at that number and what it contained or didn't contain?

2658   MS BELL: What I'd like to do is ask John Medline to walk you through how we calculated it and then Chris McGinley can put more meat on that answer.

2659   Thanks.

2660   MR. MEDLINE; Sure. When the Commission announced that it would be looking not just at the quantum of the LPIF but also on the eligibility of the LPIF, we did basically a two-step process.

2661   And the first step was, what would the LPIF provide each of our eligible stations under our allocation -- proposed allocation formula.

2662   And then we did that under four different scenarios: If CBC gets none of that Fund, if CBC is capped at 10 percent, if CBC is capped at 25 percent or if CBC is in at 35 percent.

2663   And the 35 percent number coincidentally is the number that on your work sheets that I guess you handed out yesterday, our numbers match up with that. So, it's 16-million of the 45 now with the most recent BDU.

2664   We then -- so then we were able to --

2665   THE CHAIRPERSON: Let me just interrupt you.

2666   We never for one day suggested a different treatment for CBC than for the commercial ones. The LPIF, the way it's devised and set out in the BDU says if you are a local station, private or public, you have access to it.

2667   MR. MEDLINE: Oh, and that's fair. We just did the scenario analysis what it would look like, that's all.

2668   So, and that 35 percent would be what your current I guess proposal for LPIF would be.

2669   At that point, so we were able to model out under our proposal using all public information on a market-to-market basis where there are stations, where there are private stations we've already carved out the CBCs, we're able to do on a market-by-market basis what each station -- what each market would get, because we were using population to do that.

2670   And at that point if there were two or more eligible stations in a market, part three of our allocation formula is to divide those equally.

2671   So, that gives us on a per station, for each of our stations, what we would get at one percent LPIF.

2672   We then took that -- so that's part one of the process to come up with three percent. That just gave us part of the input.

2673   We then looked at what our local news profitability is in each one of those eligible markets, and you have that -- we filed it confidentially as Exhibit 1. We looked at our fiscal 2009.

2674   We compared the results from what our formula -- our allocation formula created and we compared them against the actual profitability or, in this case, all losses for all of the eligible stations and that came up with a percentage on aggregate, not just for all of Canwest stations, but also if you only looked at Global stations of three percent.

2675   So, that would be the break-even mark at that specific point in time, did not take into account capital or anything, that gave us three percent.

2676   And some markets will be a little bit higher than that, you'd need -- Global Maritimes would need a higher percentage than that.

2677   But, overall, that's where you get the three percent from.

2678   COMMISSIONER KATZ: Okay. Can I ask you to file that. I don't know if there's anything confidential in there, but if you can file it with the Commission, we'd certainly appreciate it and then we could take a better look at it as well and see the assumptions that you've made.

2679   MR. MEDLINE: Yeah, we can do that.

2680   COMMISSIONER KATZ: Thank you.

2681   MR. MEDLINE: And Chris?

2682   COMMISSIONER KATZ: In your April 23rd filing you raised some concerns about the Commission's role in dispute resolution, and I guess you talked a bit about having the ability to take the programs off the air as well without necessarily the CRTC involvement in this.

2683   I think we heard the same thing yesterday from CTV.

2684   Can you explain. At some point in time, if there is an impasse, would there not be an issue that has to be dealt with by a third party?

2685   And I guess the question is: The CRTC has made itself available for dispute resolution on a relatively quick basis with a relatively quick turnaround as well.

2686   And yet, in reading your submission, you seem to say you don't need anybody's help. And I guess at some point in time usually parties that disagree need someone to step in there.

2687   MS BELL: I think it's fair to say that what we're asking really is, give us the leverage that we need to negotiate and we think that maybe we can arrive more quickly at a settlement, as opposed to dragging it along and then having to go through dispute resolution.

2688   I think -- I won't repeat all the things that CTV explained to you yesterday, but suffice it to say we're experiencing much the same thing.

2689   COMMISSIONER KATZ: Having all the hammers and everything else that you need, at the end of the day if there's still an impasse --

2690   MS BELL: Then we promise to call you, if there is, but we'd like the hammer first.

2691   I mean, we don't have the tools and I guess what we're saying to you is, if -- at least we have a deadline. You know, it's like filing submissions with you, if there's no deadline, you know, I'm going to take the weekend off; but if there's a deadline, I'm going to get it in.

2692   So, I think it's important to have a deadline and say, this has to be in place by this date and, if it isn't, then we're going to do this.

2693   So, I think if we had those tools, I'm going to bet that things would move along a lot quicker.

2694   COMMISSIONER KATZ: Okay.

2695   MR. PETER VINER: If I can just add, the distant signal negotiations are being blurred by the leverage BDUs have and we feel very naked in this game and we want the right to say, no, take the signals down.

2696   We're a little concerned about getting into a forum where compromise is the desired outcome because we don't think that gives us the leverage we need.

2697   COMMISSIONER KATZ: On that issue, the Commission talked about modifying the implementation date from 2011 and we heard parties say if you are going to change one thing in advance, change a lot of other things as well.

2698   Is there anything else from your perspective that is integral to looking at the implementation date earlier for distant signalling at the exclusion of everything else or are there other things that are integrated with that one decision or one issue?

2699   MS BELL: Well, I think the two other items that I mentioned earlier, which is to make sure that it is confirmed that we can withhold our signals and also I would add to that that, you know, you already have the rules in place, they are in the regulations, whereby deletion is there. So if there are no deals in place, then we would ask you to confirm that you would enforce deletion.

2700   Leonard, do you want to add something to this? Leonard wants to add something.

2701   MR. ASPER: I am not sure how the latest notice read but the other idea was if we were able to cause cable to take down the second set of 4+1s if we didn't have an agreement. That is important to them and that is another lever that we would have. So that is the note I was making to Charlotte and I have now said it publicly.

--- Laughter

2702   MR. ASPER: She couldn't read my writing is what happened there.

2703   THE CHAIRPERSON: I don't understand your questions.

2704   MR. ASPER: We were just saying when we were describing what the levers are --

2705   THE CHAIRPERSON: I understand but we said in the BDU one of the pre-conditions for a second class is that you have an agreement with the broadcaster on distant signalling. Why are you asking now whether we meant what we said?

2706   MR. ASPER: Well, as I understand it, there was another notice right after that that watered that down and then there was yet a third notice and I am going to turn it over to Charlotte here in terms of what that third notice said. It was hard for me to follow. Certainly, I can tell you from the way the negotiations are going it is not feeling like we have very many cards in this game.

2707   MS BELL: No, it is not. I think over time we have sought out clarification from staff, from Commission staff, in terms of what does this mean and do we actually have the right to withhold our signals and I think we have not necessarily had a firm commitment that yes, in fact, you do have that right. I think the message we have received is well, we would prefer that you not do that.

2708   We want to make sure that we are very solid on our negotiating ground, that it is very clear what the rules are and what we are entitled to do, what our leverage is, and also if it doesn't get resolved that you will enforce the rule and that you will honour deletion requests if we can't come to an agreement. We don't want it to get there, that is not our goal at all, but we just need the hammer.

2709   COMMISSIONER KATZ: On the issue of digital transition, there was a report issued by the industry and I at least, myself, speaking on behalf of myself, I was surprised to hear that CTV didn't wholeheartedly buy into what I thought they had bought into.

2710   Are you a signatory to that document or do you believe there are some errors and inaccuracies in that document as well with regard to the cost associated with the transition?

2711   MS BELL: I was part of that committee and also our head of engineering, who is here, Carol Darling, also looked at the report and I think she may have some different views on the facts and figures. So, Carol, could you take them through that?

2712   MS DARLING: Yes. Perhaps I could speak directly to the spectrum expert report that was commissioned by the CRTC. Our internal transmission expert team has reviewed the report and I have to say we think they did an excellent job.

2713   We have revisited our costs. We had initially estimated costs of $65 million to $100 million to transition our 104 transmitters across the country and certainly we are seeing some lessons that were learned from our friends in the United States in terms of how to find some efficiencies in implementation and suppliers are coming up with some rather interesting solutions.

2714   So we are certainly seeing some savings that could be realized if we had the money to spend without return but I would say $65 million would be on the high side of an estimate. The figures they presented of $31 million to $55 million based on some of the assumptions they made, I think are pretty realistic.

2715   They have noted that they didn't include distribution costs to transmitters from master control, which we, of course, have to add in. And they note also that they couldn't predict any surprises we might encounter in terms of tower infrastructure reinforcements but I think it is a very good benchmark.

2716   COMMISSIONER KATZ: Okay.

2717   MS DARLING: I don't know whether you want me to speak to this now or later but there are certainly some assumptions in the report that I think are pretty important to understand.

2718   COMMISSIONER KATZ: Why don't you go ahead now.

2719   MS DARLING: Sure. They have assumed what they call flash-cutting and certainly that is very much what we are thinking in terms of the proposal we have put forward. This means that we are not looking at dual illuminating both analog and digital signals at the same time as was originally envisioned and certainly we have done for the first transmitters we have implemented. We see some considerable cost savings with doing that.

2720   Secondly, they have suggested that in many cases the channel allotments that were provided by Industry Canada could be revisited to achieve some savings and we are certainly very much looking forward to doing that with some of the remaining transmitters that we are proposing.

2721   And finally, they make reference to savings that could be achieved in looking at contours and we certainly see the opportunity in several of our major centres where we would have to fully replace transmitters to implement some low-cost lower-power UHF solutions that would reduce our power requirements by as much as 30 times, which is environmentally friendly, and reduce our costs by as much as half, and although we would be reducing the contour, we see the impact on the over-the-air audience of being less than 1 percent.

2722   So certainly as we are looking at our fulsome plan for implementation, these kinds of considerations are key.

2723   COMMISSIONER KATZ: But the concept of the Freesat and how they get divvied up in the hybrid solution is one that you support and subscribe to?

2724   MS DARLING: From a technical perspective, the Freesat solution is very attractive. I understand we haven't got very far in building out the model due to the fact that discussions have linked discussions to distant signals and to fee for carriage.

2725   I could speak to the percentage of the audience that we believe would be addressed by that kind of solution but it sort of backs into describing what our plan is.

2726   First of all, let me just tell you that we have conducted a comprehensive market-by-market assessment to come up with our plan.

2727   We have looked at each transmitter and each contour with an objective to determine how best to reach our local audiences in the most cost-effective manner. We have looked at the revenue associated within each contour. We have examined BBM sweeps data to determine what portion of our audience is viewing us over the air by transmitter. And we have also looked at the costs for individual up-conversion of those transmitters to digital.

2728   Based on this analysis, we have concluded that it would make fine sense for a plan that implements one transmitter per full service licence. This translates into 10 Global stations and 5 E stations across the country.

2729   The important thing to note is that -- you know, everybody has been talking about an 8 percent or 9 percent challenge in terms of the over-the-air audience -- by implementing these 15 transmitters, we reach an additional 5 percent of the Canadian population.

2730   So with our estimates, looking at 8 percent of our audience watching over-the-air, we have addressed 5 percent of the audience. So we are really only talking about an additional 3 percent to be reached by an additional solution.

2731   I think most importantly, it is important to also consider what happens to delivery of our signals to cable head-ends across the country that fall into the contour areas of the vast transmitter network that would not continue to be operational.

2732   COMMISSIONER KATZ: You said that your solution, your proposal reaches far more people --

2733   MS DARLING: Yes.

2734   COMMISSIONER KATZ: -- that are without cable service. Was that considered as part of the broader study and disregarded or decided that it wasn't something that was going to be put forward on behalf of the entire industry, and if so, why?

2735   MS BELL: No, it simply wasn't. We were doing our own internal survey in terms of reaching our audience but it was not part of the group discussion.

2736   COMMISSIONER KATZ: Okay. You said in your remarks this afternoon here on page 16 that you have reached an impasse -- I think were the words you used -- on a fundamental approach with regard to terms of trade.

2737   MS WILLIAMS: Yes. You know, we have had some really useful conversations and ongoing negotiations/discussions with the CFTPA and I think they have been very genuine and I think they have been really helpful.

2738   We have brought forward a number of the issues. We have all listened and learned and heard a lot from each other and I think, from our point of view, we have come out of all those conversations to date with what is a very evolved and I think a very useful framework that would outline best practices for negotiations between producers and broadcasters and has cleared up, I think, a lot of the concerns, whether they be about rights being held up or whether they be how long, you know, development things might be held by broadcasters, turnaround times and decision-making, a lot of really useful, practical best practices.

2739   So the discussions have been good. The challenge now is we have hit this impasse around this document that we have filed with you that we believe as broadcasters is a very useful, helpful document but it is a framework, it is a guideline, it is a set of best practices. It is not price-setting, it is not rate-setting, it is not a contract in the end.

2740   We believe this framework document is important and is the right way to go. And actually we think that is what the Commission intended and we don't think that it is valuable or appropriate, frankly, to have a rate-setting document and we don't think that is what the intention was of the Commission either.

2741   So I guess at this point we are feeling good about what we have accomplished. We are looking for a little bit of direction, I think, and clarity from the Commission in terms of what that overall direction should be but we really feel there is a document there that is in good shape.

2742   THE CHAIRPERSON: Could you file that with us in confidence just so we can have an assessment of how far you have gotten?

2743   MS WILLIAMS: Yes, it has been filed, you have it.

2744   THE CHAIRPERSON: Okay. It has been a long afternoon, we have a lot more questions for you, so let's take a 10-minute break now.

--- Upon recessing at 1527

--- Upon resuming at 1541

2745   THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.

2746   MR. PETER VINER: This is a more difficult process than might be imagined, Mr. Chairman.

2747   THE CHAIRPERSON: I am just sending somebody to the men's washroom.

--- Laughter

2748   MS BELL: Actually this is a great opportunity to ask us questions that we don't want him to hear the answers.

2749   THE CHAIRPERSON: This is Viner day. You realize that you are the second Viner before us today.

2750   MR. PETER VINER: Well, I was preceded by Goldstein --

--- Laughter

--- Pause

2751   MR. ASPER: Well, that is not a good start, is it?

2752   COMMISSIONER KATZ: A few more questions and then I think some of my fellow commissioners have got questions as well.

2753   Just to follow up, Barb, with regard to the impasse, was the word "impasse" misunderstood by me in terms of we have reached a brick wall and we can't go any further and we have got a problem or we have reached the end and we are comfortable that from her on end we can do bilateral negotiations and complete everything that has got to be done?

2754   MS WILLIAMS: I think we feel comfortable with the document that we have ended with. I think the CFTPA might feel differently, and hence, there is a brick wall.

2755   COMMISSIONER KATZ: Okay. I want to deal with two other issues.

2756   One was the spending ratio that was proposed as well and I know you were opposed to the spending ratio, particularly in the short term. I just want to get a sense for your views on the longer term in terms of the group licensing process and whether you think there are any benefits or risks associated with pursuing a spending ratio on a longer term on a group basis.

2757   MS BELL: Vice-Chairman Katz, we do have concerns even in the long term.

2758   What I am going to do is ask Barb Williams to start talking to you about the reality, I guess, in terms of programming and the business reality of the ratio and then I would ask Ken Goldstein to come in at the end and give you the perspective from an economic perspective.

2759   COMMISSIONER KATZ: Long-term group is what I was referring to, right?

2760   MS BELL: Absolutely, yes.

2761   MS WILLIAMS: I think it is hard to separate the larger group from the single conventional business. The risks, I think, are the same whichever way you look at it.

2762   I think from our point of view it is an interesting idea but one that is absolutely impossible to judge as to what the heck might happen if you actually tried it.

2763   The behaviour of the studios is a huge, huge question mark in this and whether or not we would be able to continue to negotiate successfully with them or whether they would start to move their product to other places or what might actually fall out of this rule, I think, puts enormous risk on the decision.

2764   And I think, from our point of view, so much of our business is tied up in this content and the margin of our business is so dependent on our ability to be successful with this content that it just feels like a huge, huge risk to take to start to play around with a new rule like this when we have no idea how it might play out, and that risk is there whether you are looking at it just as a rule applying to conventional or whether you are looking at it as a rule that applies to the entire group.

2765   So we certainly have looked at how -- we have done the modelling, done the math on how our business looks when you look at it as a whole and how it looks when you look at it just independently.

2766   So we can see where those opportunities are to spread that rule across a whole larger group and, yes, there is no doubt that Canadian spend is very high in specialty at the moment, and so that ratio comes much more naturally into range when you look at the whole group.

2767   But nonetheless, the risks associated with it are the same either way and I think that is where the real concern is.

2768   COMMISSIONER KATZ: But I think it was probably you personally, the hearing we had two years ago on the acquisition that talked about the benefits of buying on behalf of all your assets and using the inventory across the specialty as well as the OTA.

2769   So if you are doing that anyways, why wouldn't it make sense to look at the entire picture that way?

2770   MS WILLIAMS: We are doing that, you are absolutely right, and there are benefits to our ability to volume buy and to manage product back and forth across platforms. There are advantages there, synergies there we are trying to take advantage of.

2771   But nonetheless, if there suddenly was an imposed ratio of spend that, you know, essentially can try to control in someway or another the amount of spending that went to foreign programming, knowing the huge amount of our business that is tied up in a handful of those foreign deals and the dependency we have on the success of those deals and the wildcard of how that might play out, I think we are all very concerned about the unintended consequences of a rule like that.

2772   COMMISSIONER KATZ: Okay.

2773   MR. PETER VINER: I think if I can add, Commissioner, you are quite right, we are moving product to its best advantage, both between the speciality and the conventional. We are also using our leverage to buy I think more effectively. But we just don't see the need for anymore regulation.

2774   COMMISSIONER KATZ: Okay. My last series of questions or topic is with regard to the licence term. And you were talking about one year and you identified some interim things you wanted relief from, even in the one year.

2775   But if the Commission decided that one year, for whatever reason, is too short a period of time, whether it is regard to the current economic situation, whether there is no date available, whether the transition cannot be effected in one year and we move from that as well, are there any issues that you would like to see dealt with addition to what you have already asked for relief in the way of this one-year request?

2776   MS BELL: Well I think, as we mentioned earlier, we would certainly want you to reconsider the issue of fee for carriage. And I think if you did have to extend the term beyond the one year -- you look surprised. If you did have --

2777   THE CHAIRPERSON: I said, surprise me, you say something else --

--- Laughter

2778   MS BELL: Oh no, I am sorry, I missed that, I could have made something up.

2779   And I think that if you had to extend it beyond one year, I think what we really need is to know that now, so that we could make our plans, because it is very very difficult for us to plan programming and make business decisions if all of a sudden we think it is one year but, you know, six months down the road we find out it is actually going to be two, and that there has not been other consideration of the structural issues.

2780   There is still structural issues and we feel they are very important and they have to be dealt with very very soon, before it is too late.

2781   COMMISSIONER KATZ: Thank you.

2782   Those are my questions, Mr. Chairman.

2783   THE CHAIRPERSON: Michel.

2784   COMMISSIONER ARPIN: I only have one, and it is a quick one. I don't know if you were here earlier this morning, particularly when RNC MEDIA and Télé Inter-Rives appeared, but while discussing criteria regarding the LPIF they suggested that, for the first three years, a portion of the money goes to the plant and to help upgrade to the HD level the studio facilities.

2785   They clearly said not the transmitters. And they said first year, 50 per cent, second year 40 per cent, third year 30 per cent. Then all the money goes to programming.

2786   I don't know if you have views on such an approach?

2787   MR. PETER VINER: I think, Vice-Chairman, that is particular to every broadcast company. And there is no question that capital is an important part of providing local service and, particularly, trying to make the studios and the cameras digital in order to prepare for HD. So we wouldn't have any problem with that being included in the definition of improvement for local service.

2788   COMMISSIONER ARPIN: Thank you. That is my only question, Mr. Chair.

2789   MS McGINLEY: I just wanted to add, if I could, that we have been very innovative at the Global stations in the fact that we have implemented the digital news project and master control, which is added -- we have spent about $45 million getting ready for digital and, you know, to be HD ready.

2790   We are digital, we are HD ready, and so we are ahead of the curve in that regard and so we just want to ensure, yes, we have our capital costs. But we are ahead of the curve and want to ensure we can allocate the money towards the local programming that we are currently doing.

2791   COMMISSIONER ARPIN: Thank you.

2792   THE CHAIRPERSON: Candice.

2793   COMMISSIONER MOLNAR: Thank you. I have a few questions.

2794   I would like to start on the issue of distant signal. Rogers was here this morning and they spoke to us about using the VOD platform as an alternative for distant signal, and mentioned that they were in discussions with the broadcasters regarding that proposal.

2795   Have they been in discussions with you, and how are those proceeding?

2796   MS BELL: I think you will find that we are having the same sort of discussions as CTV mentioned yesterday, and that is certainly part of the discussion, yes.

2797   MR. PETER VINER: If I can add, distant signals and the damage they cause in the amount that we have quantified is, in our case, roughly $30 million a year. To someway think that VOD will replace that when it is kind of like in the zone of a million dollars a year is just not any kind of a compensation in anyway, and I just want to make sure that that's not lost in the generous offer of Rogers.

2798   COMMISSIONER MOLNAR: And I do understand that the DTH issue is particularly harmful. But as it relates to the cable companies, Rogers suggested that this was really a win-win, and it was a win for the broadcasters because you would get the opportunity for dynamic ad insertion. For example, you know, with the distant signals or in exchange for distant signals.

2799   MR. PETER VINER: It could be and, in fairness, Rogers has been very cooperative in terms of trying to find a solution to distant signals. It is the satellite carriers who find distant signals much more attractive. And they have attempted on a number of occasions to try to find a solution.

2800   So our problem with distant signals is really with the satellite guys much more than it is with the cable guys. And Rogers wants to promote video-on-demand as part of that solution and, in fairness, they have been quite innovative and straightforward with that.

2801   COMMISSIONER MOLNAR: Okay, thank you.

2802   I want to move onto the issue of LPIF. And I want to ensure that I understand the proposal you have put forward. As I understand, you are proposing to harmonize your local commitments at five and 10 hours, between small markets and major markets. So within the small markets where the LPIF would apply you would propose five hours of programming and, with that, a 3 per cent LPIF, is that correct?

2803   MS BELL: Well, I guess there were two separate proposals. There is the eligibility for the LPIF, how you qualify for it and then, of course, the quantum. And depending on what the quantum is, the hours could be affected.

2804   Our initial renewal application actually didn't contemplate any funds from the LPIF because we simply didn't qualify based on the criteria. Then at 1 per cent we would qualify.

2805   And Chris McGinley could walk you through. We have done the calculation in detail actually, what happens at 1 per cent, at 2 per cent and at 3 per cent in terms of trying to recover some of the costs and some of the losses on our local programming.

2806   So maybe Chris could walk you through and --

2807   COMMISSIONER MOLNAR: Perhaps it would be better to file that, because --

2808   MS BELL: We will.

2809   COMMISSIONER MOLNAR: -- I have learned it is very difficult for me to follow math while we are here.

2810   MS BELL: All right.

2811   COMMISSIONER MOLNAR: But if you could file that, that would be excellent.

2812   MS McGINLEY: Absolutely, terrific.

2813   COMMISSIONER MOLNAR: So what then is your proposal when you proposed a 3 per cent LPIF? Would that include an increase in the amount of local programming?

2814   MS BELL: Again, if it was based on our proposal and the way that we have proposed to allocate those funds within each market, by our calculations we could increase our small markets' hourly weekly hour for local news to 10 hours. And, in fact, if we did have access to the full 3 per cent, according to what we have proposed, we would also increase the amount in our large market stations, even though they don't have access to the fund, to 15 hours a week.

2815   COMMISSIONER MOLNER: Okay. And that would still be a reduction for some from what your commitments are today? You mentioned they are from nine to 36 hours, so it would still be a reduction from today?

2816   MR. REEB: Yes, in our Global stations it would be a reduction in three of the Global stations in the small markets, there would be a slight increase to 10 hours in the other three Global stations in the small markets.

2817   MS BELL: And to be clear, and I think Mr. Viner or Mr. Asper may want to add to this, but I think the situation we find ourselves in now, as we said earlier, is that we are losing money on our local news in every market except two.

2818   So the point is the status quo just can't work. I mean, we have tried every which way, we have cut the costs, we have gone to the digital news project to try to find innovative ways to meet those hours, but we just can't continue to do it. So I think it is a matter of, for us, we don't want to go down to zero. I think it is a matter of this is much better than not having any local news at all.

2819   Chris.

2820   MS McGINLEY: I would just like to mention that, yes, our current hours are going between nine and 36 hours per week in our small markets. Our revenues continue to decline as they relate to our local programming.

2821   What we have tried to do is we understand we have to do everything we can to reduce our costs. In 2006 we did an extensive review of all of our stations looking at our local cost of operations. In our 10 small market conventional stations producing local news we lose money in every single market and have for many many years.

2822   What we have done is we implemented the digital news project which has helped our loss situation, in that we have reduced our losses, but we still continue to lose significant dollars in everyone of our markets.

2823   We really believe at every local station the absolute importance of local news and what it provides for the community and our role as community leaders and reporting on the activities of our local markets. And it is something we take very very seriously and we are very proud of it.

2824   We think at 10 hours, if we achieve the maximum that we are asking for and they are linked, we will be able to provide news seven days a week, which is extremely important to our viewers.

2825   MR. ASPER: Commissioner, if I can just try to supplement this and weigh in on this part of the debate. I think the word you used is the most important word that is has been used today, and that is the question of incrementality.

2826   And if you go back to the Heritage Committee hearings that were held last week, there were some questions saying, well, what are you going to do? And the question there was the fee for carriage.

2827   And I think the important thing here is to realize that the benchmark for determining incrementality is zero. It is not 36 hours, it is not 29 hours, it is not 22 hours. And Mr. Fecan said it as well as could be said yesterday. He said, we don't have to be in this business.

2828   We don't think it is good for Canada if we are not in this business, because the other people who have come to be in this business, and I will cite two; take U.S., came and said, if we are going to be in this business we are going to produce two hours a week of -- actually, they said zero and the Commission required two. I think Mr. Bitove came forward with was it two hours per week as his offer to start new local television licences.

2829   So most people are saying, if they were gong to be in this business they would not want any requirements to do local television. In the United States, CBS New York, CBS Providence, CBS Miami, whatever, they don't have any requirements to do local. Almost nowhere in the world do TV stations have requirements to do local programming. In Canada, we do.

2830   We are the most highly regulated television business in the world, both in terms of Canadian content at 60 per cent, in terms of local requirements, the drama hours and all the other things we have, and we are the only ones who have, of course, our program rights. We are the only ones competing against NBC.

2831   So when we say we are going down from 36 or 29, I don't think that is the choice we have anymore. I think we are going up from zero to 5 or 10 or whatever we are saying. Now, that is the choices I think that are facing the regulator today.

2832   COMMISSIONER MOLNAR: I heard what you said. And in my mind, I just keep thinking about how any of us would explain this to consumers, that there is now a 3 per cent charge and there is less local programming.

2833   And I also am somewhat confused, because the Chair asked you why is there still a place for conventional and what is the role of conventional. And the first thing you brought up, Mr. Asper, was the provision of local information and the diversity of voices, you know, is the single most important draw card for conventional.

2834   MR. ASPER: Right. No, I agree, but that is what is important to the consumer. What is important to the company providing that is that they have the right regulation to allow them to do that. Because the others who have come forward and offered to run local TV have not offered to do five hours even. There is no business case for it. And, in fact, that is why our local television stations are valued at zero by our auditors.

2835   The auditors actually use a formula to value local television. They do a formula and they say, well, the revenues generated by local television would not meet the costs and the capital needed to operate local television. That is why all the broadcasters have had to actually write down their TV networks to whatever they are.

2836   In our case it is zero. When CTV took a $1.7 billion write-down maybe they are at zero, maybe they are a little higher. But I think the point is it is good for the consumer to have local television, it is good for the consumer to not get their only information on television in their market from Rogers or Shaw on their local cable thing. And it is good for democracy, it is good for politics to have ways to disseminate information.

2837   It is not good for companies to own local TV stations. The only benefit we can think of, the only reason we would think of to want to be in the business of local television is, taking off our Canada hat and putting our business hat on, is to be able to afford to buy a show like House and put it onto Showcase and do well with Showcase, do better with Showcase.

2838   And you can see, you know, we have been public saying, well, one of the reasons Alliance Atlantis channels, the ones we own, TVTropolis the ones we used to own, are doing better than some of the other people we compete against like Corus or Astral, we think it is because we have been able to use the shows from Global to get higher ratings on those channels.

2839   But the flipside of that is Corus or Astral didn't come to the table when we put our TV stations up for sale. They do not want to own conventional TV. Nobody that is in the industry came forward when we put TV channels up for sale, and same thing with CTV, to buy them.

2840   There are few, a smattering of people, that are looking at the E! stations that we put up for sale, but they are looking at a very different model, they are not from the industry and they are not promising likely to do 36 hours of local programming.

2841   So I just think the businesses -- that was fine in 1975 when we were an oligopoly. But when there are 500 channels, there is just no business case to do local programming, it has to be subsidized from somewhere. And we are willing to do that if the regulatory model does provide that subsidy somewhere. It could be in a fee for carriage, it could be a combination of that and local programming fund.

2842   But everybody in the system is getting paid to do programming. The cable channels are, the U.S. cable channels are, the BDUs are, broadcasters aren't, and that is what will make the business survive.

2843   COMMISSIONER MOLNAR: I am going to move to the issue of digital transition.

2844   You were speaking, and I am sorry, I have lost the nametags here.

2845   MS DARLING: Carol Darling.

2846   COMMISSIONER MOLNAR: Ms Darling, thank you.

2847   You were speaking of an analysis that you did that determined it was economically the right decision to put a transmitter in each one of your stations, both the Global and the E! channel, correct?

2848   MS DARLING: I think we have determined that it is a good position for us to be in, to place transmitters in those markets.

2849   COMMISSIONER MOLNAR: Is there any information you would be able to file with us that would help us understand that, because it is different than, for example, what we heard from CTV?

2850   MS DARLING: Yes, we can do that.

2851   COMMISSIONER MOLNAR: Okay, thank you.

2852   And you said that with one transmitter in each of your markets it would reduce the number of customers, subscribers or the audience that would not have access to over-the-air to 3 per cent, is that what I heard?

2853   MS DARLING: That is correct. Yes, that is correct.

2854   COMMISSIONER MOLNAR: Okay.

2855   MS DARLING: I do think it is important to not forget that with the elimination of the broad transmitter infrastructure across the country, we also need to address the issue of how best to get our HD signals into local markets to cable head-ends. And it is very important for us to look at satellite and direct-to-home solutions to bring high definition television into those markets.

2856   So I just want to make sure that that is not forgotten.

2857   COMMISSIONER MOLNAR: I am not sure I understand what point you are raising there. Are you saying that the transmitter you are putting up is an SD transmitter?

2858   MS DARLING: No, no. I am just referring to the discussion that has been around reaching the over-the-air audience. And we have a solution, a plan we are proposing that takes the 8 per cent problem down to a 3 per cent problem. We also cannot forget that there is an additional requirement to think about getting our HD signals in local markets to cable head-ends.

2859   In our contours of the transmitters that we will not be continuing, there are 550 cable head-ends. And certainly, as part of this national solution, having satellite delivery and direct-to-home delivery that provides signals in high definition television so we can compete as a nation with our friends south of the border in terms of HDTV, we need to have that issue addressed.

2860   COMMISSIONER MOLNAR: And you don't deliver your signal to those cable systems today?

2861   MS DARLING: We deliver them currently in standard definition, in analogue formats, either by over-the-air transmitter or, in some cases, by fibre or satellite. But certainly, the world is changing and we have to make sure we don't lose that piece of the puzzle in this discussion.

2862   COMMISSIONER MOLNAR: Okay. As I understand, the obligation to take the local channel to the cable company's head-end is an obligation on the over-the-air broadcaster, correct? So that is your obligation today under the regulations

2863   MS DARLING: Correct.

2864   COMMISSIONER MOLNAR: Okay, thanks.

2865   The fact that the number ends up being 3 is very interesting to us, because we have been talking about numbers much greater.

2866   MS DARLING: M'hmm, I think it is a very important part. Certainly, in our plan it was a key consideration.

2867   COMMISSIONER MOLNAR: Right. I have an interest, and I am going to use Regina, again, as the example, because we spoke of it with CTV.

2868   MS DARLING: Yes.

2869   COMMISSIONER MOLNAR: And you would propose under your proposal to serve or put up an over-the-air transmitter in that market?

2870   MS DARLING: Yes.

2871   COMMISSIONER MOLNAR: Whereas the --

2872   MS DARLING: Absolutely.

2873   COMMISSIONER MOLNAR: -- CTV proposal was "no," or at this point, at least didn't appear that it would be part of their plan.

2874   And so one of the things I wondered, as we looked at some of the ways of reaching the unserved customers, what is your thought if, for example, there was something like a Freesat or I used the term "skinny basic" before that was offered to customer, what would be your thought about if one of the over-the-air providers, and in this instance, for example, if Global places a transmitter into Regina, that then Regina is served by over-the-air and, therefore Freesat, skinny basic, whatever kind of transitional measure is put in place is not needed in that market because you have served it with over-the-air?

2875   MS DARLING: Well, perhaps we have a captive market for our over-the-air audience in Regina.

2876   COMMISSIONER MOLNAR: Yes, or there is an incentive for others to go over-the-air as well?

2877   MS DARLING: Perhaps, yes.

2878   COMMISSIONER MOLNAR: So philosophically you agree with that approach?

2879   MS DARLING: Certainly, it is part of our commitment.

2880   MS BELL: I am not sure. Maybe we have missed something in the nuance, but it seems to me like we would have a competitive approach. So I don't think that we would be in a competitive position if we were the only ones in the market. So I don't think we would oppose that.

2881   On the issue of Freesat, just wanted to add something, because it was a little bit of a discussion earlier. And just to add to what Carol was saying earlier, Freesat has been discussed with Bell TV and DTH operators and there is certainly some merit to that proposal.

2882   The issue I think we are running into and I think you are going to speaking to them later during this hearing, so you may want to clarify, but we have unfortunately run into the same situation as we run into in all other types of negotiations. They start to link other things like compensation to distant signals, possible fee for carriage.

2883   So we will do this as long as we don't have to do any of these other things. But frankly, those other things are not really related to that issue. So I think you were questioning yesterday why it hadn't seemed to take on. And I think the problem there, again, is maybe we have reached a bit of an impasse. So I thought I should point that out.

2884   COMMISSIONER MOLNAR: Thank you.

2885   I am not sure if I have asked you or not, if you have information, as part of the information you were going to file related to the economics of putting these transmitters in each market. Would that also give us information as to how you got to a 3 per cent unserved?

2886   MS DARLING: Yes.

2887   COMMISSIONER MOLNAR: Yes, it would.

2888   MS DARLING: Yes, sure.

2889   COMMISSIONER MOLNAR: Okay, thank you.

2890   Those are my questions.

2891   THE CHAIRPERSON: Okay, this questioning raised also some issues in my mind and I can use this as an opportunity to wrap up.

2892   First of all, at what point, one to one, Ms Williams, you mentioned there is a great deal of risk. And frankly, I couldn't see it when you talk of next year. When you talk after next year, on a group licensing basis, of your one-to-one obligation to meet, it acts as a bit of discipline of how much you can spend.

2893   But I do not see -- where that risk that you see? You say the risks, how Hollywood would react?

2894   MS WILLIAMS: Yes. I think the risks that we are concerned about is -- I guess step back one step. We are not at all sure exactly what you think the intended outcome could or should be from this. So there is a little bit of vagueness around what the hope would be out of the ratio.

2895   But when we just look at it practically and we think of going out into the marketplace with that kind of a ratio or management or cap or whatever you would want to think of it as on our foreign spending, and we go out into the marketplace to try and do the deals that ultimately drive our business and from which all the margin comes that ultimately, you know, allows us the opportunity to do all the Canadian, it feels very very unnerving to think about how that might hamper or change our ability to be successful at grabbing the top 10 shows ultimately that drive the business.

2896   We don't know whether the studios would continue to sell the same amount of product I the market if it meant they couldn't get the same prices for it which, you know, one might say is a good thing. But we don't know if that would happen. It might be just as likely that what they would is instead go and sell that product, if they couldn't get the prices from us that they wanted, sell it directly to Rogers or to Shaw or they might just decide to have it unsold at all, rather than set a new fee.

2897   We just don't know. Any number of things could happen. And the risk for us of putting a bunch of new regulation around the one piece of our business that we are mostly dependent on without having any clarity of sort of what the point is or what the consequence might be, it feels very uncertain.

2898   THE CHAIRPERSON: Take the group, the whole group, Canwest group, use all your specialty channels, you are a huge buying power, okay. And basically, all we are saying is you deploy it however you do it. And nobody knows what that quantity is that is at your disposal except you.

2899   So I don't see how it can be competitively used against you. If I understand it, you think Hollywood may react in saying I know you are under constraints and so is CTV, so is City, so I am not going to sell to you at all, I will go and sell directly to Astral. Is that what you are worried about?

2900   MS WILLIAMS: Well, it is one of the potential outcomes. It might be the case. And we just don't know. I mean, it is true, that when you put together our whole company at the moment as a whole group, at this very moment in time, if one does the math, the ratio between Canadian and foreign is about equal.

2901   But that is not to say that that is the magic number that will work for us next year. It depends on so man other things that are going to play out in the marketplace. And we need the flexibility and the control ultimately over our business.

2902   THE CHAIRPERSON: And nobody wants to take it away from you. On the other hand, the idea is to put sort of a restraint on it to the extent that your system doesn't go totally out of disequilibrium that you spend, you know, 80 percent of your buy on American programming and 20 percent on Canadian.

2903   MR. KEN GOLDSTEIN: Mr. Chairman --

2904   THE CHAIRPERSON: And we have been sort of struggling -- let me just finish -- trying to find a formula which is flexible without interrupt -- disturbing your business but, yet, make it quite clear, "Look, let's there a limit to how far you can push us".

2905   MR. KEN GOLDSTEIN: Mr. Chairman, we understand where you are coming from when you looked at the numbers that you looked at and you saw spending in one area going up, although spending in other areas have also gone up. I mean, the private broadcasters have spent -- the rate of increase is 49 percent over the last two years with the independent producers. But the spending on non-Canadian has gone up faster than that.

2906   But that's a symptom. And I think that public policy made on trying to deal with a symptom rather than an underlying cause -- and we have documented that it is in fact the extra revenue streams that go to the competitors for advertising that are on an almost exact parallel line with the spending on non-Canadian. So I think there is a great public policy danger in dealing with a symptom instead of the underlying cause.

2907   The second thing is I'm not sure that defining this only on the basis of programs telecast represents really what is going on in the business, whether you are doing that for specialty or conventional or a group because you buy a program and that's what is reflected in programs telecast. It doesn't get telecast unless a number of other costs and a number of other inputs actually come into play like a transmitter, like selling ads in the show, and so on and so forth.

2908   So I think given what Barb Williams has said, given what Mr. Fecan said yesterday in terms of the opportunity to bypass all of this on the internet, in terms of just dropping the geo-blocking or asking any teenager for the latest program on a DVD, which you can do today, I think there is great danger here in putting this kind of a rule in place.

2909   I would much rather -- looking at the macroeconomics of the industry, I would much rather see the structural reform involving fee-for-carriage and dealing with the broader questions that Commissioner Katz raised as well, and then say, okay, if we have put in place economic forces that are going to re-level this playing field, do we need the other rules which are essentially only aimed at the symptoms that showed up because the playing field wasn't level before?

2910   THE CHAIRPERSON: Well, this is all very nice from a philosophical point but misses the point.

2911   We have a duty to look not only after the whole -- broadcasting as a whole and a specific one of Canadian programming and Canadian production, et cetera. If this formula doesn't work come up with another formula or something but don't always come up with the negatives -- this doesn't work.

2912   What we are desperately trying to do -- you didn't like CPE. We lifted CPE. You put in priority programming. You are now telling me priority programming restricts you too much, et cetera; take that off.

2913   But yet, you know, our only concern is not only conventional television with all the various players in it and, you know, by putting it on a group level, et cetera, it's certain and I said at first blush -- I mean, you are the guys who live with it. I don't want to impose anything that hurts you more. I want to help you as long as it's within the confines of the Act.

2914   Having this course of use of American programs rising exponentially all the time, it's very hard to justify that as being good as overall for the Canadian system. And we thought that the one-to-one rule might be something that you could live with.

2915   As you said, Ms Williams, when you look at your overall that's roughly where you are. That basically says, you know, we are not interfering with the way you decide inside how you do it. Now, if you see it, it does present unintended consequences, unintended restraints, et cetera.

2916   Then I would ask you to put on your creative hats to find us something. We can't just let this thing augment from year to year and not do anything about it. I mean it would just be irresponsible for us as regulators to do that, I think.

2917   MS WILLIAMS: Oh, sorry. Go ahead.

2918   MR. ASPER: I was just going to say, Mr. Chairman, can I just be clear on what we are trying to address in this whole idea of a ratio coming up to begin with?

2919   Because as I can see, it was a response to figures indicating what the spending was on U.S. programming, but as we have discussed today and there have been many other times before you, we have said the spending on U.S. programming in large part drives and subsidizes the creation of the local programming and the specialty programming and the CPE on specialty programs.

2920   So there is -- I think you have to look at it on a more complete basis before you decide it's an ill that has to be addressed.

2921   THE CHAIRPERSON: Precisely, and that's why I asked you to file those figures in confidence, which you did, and we will do this in camera. We obviously can't do it with your competitors in the room. Maybe in the light of that we can come up with something more meaningful.

2922   I just wanted to say, you know, what you -- policies that you do not (inaudible) where this one to one is coming from -- that is quite clear. I think I made it quite clear where it's coming from and I am looking for a solution. Obviously, you think one to one doesn't work so then let's find something else that does work.

2923   MR. PETER VINER: If I can just add, Mr. Chairman, we are very appreciative of the fact that you want to help us find a solution. Believe me we want to find a solution. At this stage we don't think that's it but we are not rejecting everything out of hand.

2924   We want some time to think about it and perhaps work with you to come up -- and with our colleagues in the industry. This is something -- I mean the financial health and the health of the industry is something that we are all very concerned, and we are appreciative of your support.

2925   THE CHAIRPERSON: Okay. Let us go to distant signal.

2926   There, Mr. Fecan yesterday said, you know, it was a good idea but you created all sorts of unintended consequences, the biggest one being by establishing a minimum for DTH you actually established a de facto maximum. And therefore, our negotiations for the DTH are not going anywhere.

2927   Are you finding those same things?

2928   MS BELL: Yes. It is going to be a problem. It's a local -- the carriage of the local stations.

2929   And I would say also carriage of specialty channels also is at stake in these negotiations.

2930   THE CHAIRPERSON: So they are linking the carriage --

2931   MS BELL: You name it. That's what negotiations are like. That's why we are asking for some leverage.

2932   THE CHAIRPERSON: Okay. Then, you asked me some questions and I was -- I'm sorry, but I was just so surprised, Mr. Asper. I said you really -- why are you questioning me whether we mean what we stated? We thought it was quite clear that you are getting the right to discontinue -- to prohibit the retransmission of your signal unless you get fairly compensated.

2933   That was the whole idea, to level the playing field between you and the BDUs and to negotiate that. Obviously, you can't do that overnight. You have to give them notice, whatever, 30 days or whatever is required.

2934   Once you do that, presumably if you cannot reach a negotiation settlement then the BDU can invoke dispute settlement. And if they do that then in effect, you know, you will get an arbitrated rate rather than a negotiated rate, but the issue will be resolved and hopefully the arbitration will reflect the market value of the distant signal.

2935   I mean, what is the part that -- you have mentioned some discussion with our staff. I hope that the message has not been somehow misinterpreted or misstated.

2936   MS BELL: And you have been quite clear and that is very helpful. And I think all we were saying was we just wanted to make sure we all understand what it is that it means and what the tools are.

2937   But I think a deadline would be extremely helpful also. You were talking about the implementation date, moving it up.

2938   THE CHAIRPERSON: I understood from Mr. Fecan yesterday that September 1 alone won't do it because of the DTH problem. He basically says you have to fix the DTH and otherwise we have no negotiating leverage here.

2939   MS BELL: In terms of the carriage of the local stations, I don't think that we have considered whether or not that couldn't --

2940   THE CHAIRPERSON: Well, he made the link. I don't know whether the link --

2941   MS BELL: Oh, it's a definite problem; absolutely. I'm not sure that I would relate that to the deadline. I guess what he is asking is for you to amend the -- is to amend the policy whereby they would only have to carry one signal per province. So if that couldn't be done fairly quickly then it might push that deadline.

2942   But in any event, I think that a deadline in the next few months is critical.

2943   THE CHAIRPERSON: Okay, but let me understand this correctly. Let's say for argument several parties including you, I think, have said September 1 would be the logical date. And we said, fine, Ms Bell, I accede to your wishes. We will set September 1. I understand that that alone will not do the trick.

2944   That will not mean that by September 1 you will have negotiated an outcome or, as Mr. Fecan said, there may be one but it may be one that actually costs me rather than helps me because it will result in less carriage than I have right now.

2945   MS BELL: Well, he is referring -- and maybe what we can do is clarify. We can talk to the folks at CTV and make sure that we are both on the same page so that we are not creating confusion. So why don't we speak to them and then --

2946   THE CHAIRPERSON: Why don't you come back because I want to know whether --

2947   MS BELL: Yes.

2948   THE CHAIRPERSON: -- setting a date itself is enough or whether you feel that, no, we cannot -- setting a date actually -- unless I misunderstood him he suggested it might be actually have an undercurrent of being harmful rather than helpful.

2949   MS BELL: We will definitely speak to them.

2950   MR. PETER VINER: Sorry, Charlotte. If I could just add, I think what he is -- if I heard this correctly, Mr. Chairman, I think what he was saying is that the BDUs have so much leverage that a win on distant signals will be taken out of their hide in some other way, and that's what we are talking about. And that may be where your help as an arbitrator or as a fair -- may make -- you know, your earlier offer may make some sense.

2951   THE CHAIRPERSON: Okay, but never mind what Mr. Fecan wanted for CTV. For you, you are telling me setting September 1 or some earlier date would be helpful?

2952   MS BELL: Yes, setting a deadline and also confirming that you would enforce deletion if there were no agreements at that point, yes.

2953   THE CHAIRPERSON: Okay. And then the LPIF, as you know, the originally structured was based on incrementality and was meant to address local markets. Then, as the economy turned sour in a way that none of us anticipated, et cetera, we to some extent changed direction and we suggested a different formula and also suggested non-incrementality.

2954   For the year that's coming up until we sort of rethink the system we were -- it is obvious that you need some help in small markets, therefore. And you have made some comments on the distribution formula and suggesting we do it by population rather than by spending, three years spending or whatever. We can -- the merits, we can discuss that.

2955   But the key -- there are two things. You say 1 percent is not enough. It needs to be 3.

2956   And then, secondly, for the three years, Mr. Asper, have I understood you; essentially it means it's the status quo with one change. There will be harmonization in terms of local programming costs that costs your network because right now it makes no sense. Just when you historically acquired certain stations some had huge requirements, some small.

2957   So you are willing to do it across the board, five hours under one million and 10 hours over one million, if I understood the markets -- if I understand that?

2958   MR. ASPER: No, I think we said that that was based on either zero or 1 percent. We said if it were 3 we would do 10 and 15.

2959   THE CHAIRPERSON: 10 and 15, okay. Okay, if there is 3. So that begs the logical question, what about 2?

2960   MR. ASPER: Well, someone did some -- I think we do have some numbers but our view was that that wasn't going to be sufficient. I don't think we had a 7.5 and 12.5 solution on that, but maybe I will turn it over to Chris.

2961   MS McGINLEY: Well, I just want to add that, you know, you refer to the economy as being part of the problem and we have been losing money servicing our local news commitments for many, many years. So that has not been our problem. And we have worked very hard to reduce our costs and we have had to unfortunately layoff staff.

2962   So from our perspective we want to maintain a sustainable number of hours in these markets to provide this service that we are very proud of. And so from our perspective 3 percent is very much needed, not to put us in a breakeven but to help offset our losses.

2963   MR. REEB: And Chris, if I can just add to that? This takes us back to Commissioner Molnar's question earlier about the number of hours.

2964   If you look at one of the stations where we have a lower number of hours -- a nine hour commitment is actually in Regina where we are very proud that we offer more newscast choices on any weeknight than our competition -- we have news at 6:00, at 10:00 and at 11:00 and we offer news on the weekend in that market, whereas if we were required to do twice as many hours for instance we might not look at doing high quality, well-edited news programs. We could look at doing local programming with, you know, a question and answer program or something that was of lower quality and we certainly know that that's the choice that some of our competitors make.

2965   But the way we have decided is to do a high level of community service and newscasts in the market, and we believe that a 10 hour commitment at 3 percent would be what most of our smaller markets could maintain.

2966   THE CHAIRPERSON: 3 percent according to my math is $212 million which if you use the figures that were handed out yesterday means you get $13 million under that scenario. I still haven't heard an answer for 2 percent.

--- Pause

2967   THE CHAIRPERSON: If you want --

2968   MS BELL: Can we get back to you on Thursday?

2969   THE CHAIRPERSON: Fine.

2970   And secondly, you might -- the other thing is Rogers raised this very interesting idea which I think is quite -- now, the main concern is of course stations closing. And if you commit, as you have suggested for 3 percent or 2 or whatever it is to the rules -- to the hours that you just mentioned, would that be coupled with an undertaking not to close any stations for that interim year, because this is really a crisis here. I mean we wouldn't be doing this LPIF if it wasn't, in order to gain time for everybody.

2971   MR. ASPER: Honestly I can't commit to that, Chairman. I think the station closing discussion is tied into the fee-for-carriage discussion as opposed to the LPIF discussion. It's not necessarily the fix. This was a partial solution and there are other pressures on our company in particular and I can't commit to that.

2972   THE CHAIRPERSON: But even under the best scenario you want us to open discussions on LPIF. Assuming we do that and assuming we reach a conclusion and assuming you get -- we agree on LPIF it still wouldn't be effective until sometime next year at this time.

2973   So I'm not quite sure why you have to -- aren't we essentially saying we are doing this one year licensing in order to take a deep breath, figure out what is really a temporary downturn and consequences attributable to the economy and what is really structural and what has to be fixed, and then fix it and fix it on a proper basis? And so to maintain the status quo, that's what the LPIF really is, is turning out to be at least for the next year.

2974   So therefore, what is the quid pro quo from Canwest?

2975   MR. ASPER: Mr. Chairman, I think the quid pro quo has been the last 15 years of degradation of our -- I'm sorry, sir --

2976   THE CHAIRPERSON: I'm looking at today. I'm not looking at the last 15 years. You know, I'm left to look at where we are today and forward.

2977   MR. ASPER: Well, certainly the quid pro quo can't be -- I can't promise not to close stations. I mean it will be -- certainly, it will improve the odds that they don't close and I'm sure CTV if they were here would say the same thing. It would certainly -- we are saying that would help but I can't sit here and give you that undertaking. I'm sorry.

2978   THE CHAIRPERSON: No, I don't want you to do -- give me an undertaking that you can't live up to. That's useless, you know.

2979   MR. PETER VINER: If I can add, I think in part we are confusing a couple of things here.

2980   Our second smaller second-tier network doesn't fit our corporate strategy. So whether there is a funding mechanism or, in fact, maybe even fee-for-carriage that doesn't necessarily mean that we want to continue to operate those stations.

2981   What it does mean is that -- I think it makes it easier and feasible for other groups, local groups, to keep those stations and operate them with a different format in a less corporate environment. So I think it could well provide a lifeline to those stations.

2982   But it doesn't necessarily mean it will be ours. It may be different owners with a new format and it may enable them to provide local service in a different way. It doesn't necessarily mean that it fits for us.

2983   THE CHAIRPERSON: So we should consider Canwest without the E! chain?

2984   MR. PETER VINER: Well, we have set -- as you know, we set a process in motion for that.

2985   THE CHAIRPERSON: Oh, I know that, but that was before we had this hearing and before you know the outcome of our decision, et cetera. So I wanted --

2986   MR. PETER VINER: I know that but --

2987   THE CHAIRPERSON: That will not influence it, is what you are telling me?

2988   MR. PETER VINER: Pardon me. I'm sorry.

2989   THE CHAIRPERSON: Regardless of what the outcome of this hearing is, you are telling me I really should get used to the idea of a Canwest without an E! chain?

2990   MR. PETER VINER: Well, certainly, that was the direction we were going in, yes.

2991   MR. ASPER: It's not, Mr. Chairman -- and I know you want some more complete answers. It's just not certain at this point because we have sought buyers for those stations. We haven't -- we are in the middle of that process right now. Clearly, there hasn't been one that stepped forward right now that -- there hasn't been any transaction contemplated.

2992   If there is no -- if there are no buyers, if there is no transaction we will then have to make some choices that we haven't really -- and we really just haven't crossed that bridge yet.

2993   I think again, just as Mr. Viner said, the LPIF does change the dynamic of that decision and it may make it easier for a buyer to step forward and it may make it easier for us to maybe hold onto one or two and somehow reprogram them and sell two or three others. So I'm not sure. There are still a number of combinations of things that could be done. But it would certainly be a serious improvement to the outlook.

2994   THE CHAIRPERSON: Okay. And my last question -- this hearing is not on fee-for-carriage, but it's sort of like the ghost in the room. Everybody knows but nobody speaks about it, and that's why I tabled this document at the beginning of the week.

2995   But one of the parts of the fee-for-carriage that really is very difficult itself from the public policy point of view is that you have, and certainly your competitors have some stations in large markets where you have traditionally been profitable. You may not be profitable right now because of the economy but Toronto is obviously a larger market.

2996   Do you see the fee-for-carriage as being the same for all signals or are you envisioning different rates for different cities or something like that?

2997   MR. ASPER: I think we applied the same rate to all markets in our past submissions on this subject, and I think it's important to say that the station -- there is a difference between the station being profitable and the local programming on that station being profitable.

2998   In the case of Toronto, for example, the station may be profitable but the local programming is not profitable.

2999   And I think we just for simplicity's sake, came up with an across-the- board fee and it would be very complicated, I think, to try to start differentiating between markets. So we have taken a standard fee.

3000   THE CHAIRPERSON: And your concept is the fee-for-carriage is compensation for the local programming component of your network?

3001   MR. ASPER: I think that is only part of it. I think it's for the breach of our program rights, the fact that NBC is competing against us directly in our market with our programs and then NBC from some other market; again, a different time zone.

3002   It's like sort of the combination of all the economic pressures that are on our business that other competitors don't face, whether it's the U.S. specialty channels, the U.S. networks, the Canadian specialty channels or cable.

3003   THE CHAIRPERSON: Okay, thank you very much. I think we will -- sorry. Somebody has a question?

3004   COMMISSIONER ARPIN: Well, a --

3005   THE CHAIRPERSON: Go ahead.

3006   COMMISSIONER ARPIN: You just said that -- answering to the question to the Chair that the fee-for-carriage is in compensation for having NBC here in Canada.

3007   My immediate reaction, and that's what I wrote to him, when the first people who applied for Global -- they knew at the time -- and when Canwest came and salvaged Global in the seventies, NBC was already there. So sure -- and I understand we are almost 40 years or at least 30 years after that but that surely was factored by those who made the initial investment and those who purchased Global at some point in time.

3008   MR. PETER VINER: If I can answer that because I was there?

--- Laughter

3009   MR. PETER VINER: I think Len was still in high school.

3010   The fact of the matter is there was only three or four stations licensed as well. There wasn't 175 specialty stations. There wasn't BDUs competing against us. There wasn't 91 percent of the households that were cabled. I mean, yes, there is -- some things change but there is a whole bunch of other things and some things didn't change and a whole bunch of other things that did change.

3011   COMMISSIONER ARPIN: I will agree with that criteria because those ones came after.

3012   MR. PETER VINER: That's right.

3013   COMMISSIONER ARPIN: But NBC was -- the policy to allow the U.S. stations to come to this country was made --

3014   MR. PETER VINER: In the fifties.

3015   COMMISSIONER ARPIN: -- in the fifties. So everybody who came after that knew that they were there.

3016   MR. PETER VINER: Yeah.

3017   MS BELL: You know what, Vice- Chairman Arpin? I get where you are going and I don't want to belabour this. I just want to say something.

3018   Again, there is one thing that bothers me about this whole debate about, well, you knew that and, well, it's the way it is and it's always been that way and we are not going to change it. But you changed everything else. You changed radio in the nineties when it was falling apart. You changed specialty in the nineties.

3019   But that is the reality.

3020   THE CHAIRPERSON: Okay, let's concentrate on the present and the future. We can't change the past. It's there.

3021   MS BELL: You can change the past.

3022   COMMISSIONER ARPIN: No, but it is an option that we should be looking at, forbidding the carriage of the U.S. stations in this country. There surely will be a major outcry.

3023   MR. PETER VINER: We are not holding our breath for that one.

3024   COMMISSIONER ARPIN: Exactly, but that also is an option.

3025   MR. PETER VINER: I think if I can just sort of add briefly, and in conclusion --

3026   THE CHAIRPERSON: I reserve the right as Chairman to end the meeting, okay, just so we are clear.

--- Laughter

3027   COMMISSIONER ARPIN: I closed the microphone.

3028   MR. PETER VINER: I just meant this is also, you know, an issue of equity. I mean every other program enterprise receives a fee-for-carriage. We don't. The system is out of balance and that's in part what we are trying to do, all of us, and we would ask you to look at it in that vein.

3029   THE CHAIRPERSON: Well, okay. Thank you, Mr. Viner.

3030   Let's look at the future and the present, not the past because I can't -- I believe there is some undertakings that counsel wants to reiterate.

3031   MR. MILLINGTON: Thank you, Mr. Chairman. There is three.

3032   The first one Canwest is to file their numbers on the fee-for-carriage impact analysis document. That's the one we put on the record yesterday.

3033   Number two is to file your calculations regarding the impact of LPIF at the various 1, 2 and 3 percent scenarios and its impact on local programming.

3034   And, finally, number three is you are to file the study that sets out the viability of installing digital transmitters broken down by market and by transmitter.

3035   That's it.

3036   THE CHAIRPERSON: We look forward to seeing you on Thursday.

3037   MR. ASPER: Thank you, Mr. Chairman.

3038   THE CHAIRPERSON: All right.

3039   THE SECRETARY: Thank you, Mr. Chair.

3040   We will be adjourning and we will reconvene tomorrow at nine a.m.

--- Whereupon the hearing adjourned at 1643, to resume on Wednesday, April 29, 2009 at 0900

REPORTERS

____________________      ____________________

Johanne Morin         Monique Mahoney

____________________      ____________________

Beverley Dillabough      Madeleine Matte

Date modified:

2009-04-29