ARCHIVED - Transcript of Proceeding
This page has been archived on the Web
Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.
Providing Content in Canada's Official Languages
Please note that the Official Languages Act requires that government publications be available in both official languages.
In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.
However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.
TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO-TELEVISION AND
Licence Renewals for Private Conventional
Television Stations /
140 Promenade du Portage
April 29, 2009
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Canadian Radio-television and
Licence Renewals for Private Conventional
Television Stations /
Konrad von Finckenstein Chairperson
Michel Arpin Commissioner
Len Katz Commissioner
Peter Menzies Commissioner
Rita Cugini Commissioner
Candice Molnar Commissioner
Louise Poirier Commissioner
Lynda Roy Secretary
Stephen Millington Legal Counsel
Nanao Kachi Hearing Manager
140 Promenade du Portage
April 29, 2009
- iv -
TABLE OF CONTENTS
PAGE / PARA
CBC/Radio-Canada 557 / 3047
TELUS 650 / 3550
Bell Video Group 682 / 3719
Cogeco Cable Inc. 754 / 4170
TVO 784 / 4349
--- Upon resuming on Wednesday, April 29, 2009 at 0901
3041 LE PRÉSIDENT : Madame la Secrétaire, commençons.
3042 LA SECRÉTAIRE : Merci, Monsieur le Président, et bonjour à tous.
3043 Before we begin, for the record I would like to note that S-VOX has been re-added to the Agenda at their request. They will be appearing on Friday, May 8th at the end of the day.
3044 As well, l'Union des artistes et SARTEC have informed the CRTC they will not be appearing at this hearing. They were item 43 on the Agenda and were scheduled on May 7th.
3045 I will now invite the CBC/Radio-Canada to make its presentation.
3046 Monsieur Sylvain Lafrance comparaît pour la CBC/SRC. Monsieur Lafrance nous présentera ses collègues, et vous disposerez de 15 minutes pour votre présentation.
3047 M. LAFRANCE : Merci beaucoup.
3048 Bonjour, Monsieur le Président, messieurs les vice-présidents, mesdames et messieurs les conseillers. Je suis donc Sylvain Lafrance, vice-président principal des Services français.
3049 À mes côtés, mon collègue de Toronto Richard Stursberg; Steven Guiton, chef des Affaires réglementaires de CBC/Radio-Canada.
3050 Avec nous aussi, Louis Lalande, directeur général des Services régionaux aux Services français; François Conway, premier directeur, Stratégie et Planification; et Bev Kirshenblatt, première directrice aux Affaires réglementaires.
3051 Nous sommes convaincus que les grandes questions de politique qui sont au coeur des discussions aujourd'hui doivent être réglées rapidement afin qu'un cadre de réglementation plus équilibré puisse être mis en place avant le dépôt des demandes de renouvellement des licences des télédiffuseurs privés à la fin de cette année et avant celui de nos propres demandes de renouvellement au début de l'an prochain.
3052 Une plus grande certitude sur le plan réglementaire est essentielle si les titulaires de licence veulent pouvoir être en mesure d'élaborer des plans raisonnables pour l'avenir et de préparer des demandes de renouvellement de licences cohérentes et sensées.
3053 Monsieur le Président, cette clarification du point de vue réglementaire est déterminante étant donné le rôle important que joue le système canadien de radiodiffusion, et en particulier la télédiffusion, dans la vitalité culturelle, politique et sociale du Canada.
3054 La télévision a été, est et restera dans un avenir prévisible la grande place publique qui unit les Canadiens. Depuis des décennies, la télévision généraliste est la pierre angulaire de l'industrie de la télévision au Canada, et c'est toujours le cas.
3055 Comme vous l'avez appris dans notre mémoire, plus de 80 pour cent de la programmation canadienne originale de divertissement en heures de grande écoute vient des télédiffuseurs généralistes. Cela se reflète aussi dans l'écoute : plus de 80 pour cent de toute l'écoute de la programmation canadienne de divertissement en heures de grande écoute est attribuable à la programmation des diffuseurs généralistes.
3056 En ce qui concerne la programmation locale, les télédiffuseurs généralistes sont carrément les uniques fournisseurs. On peut donc dire que la télévision généraliste est un élément central de la culture et de la société canadienne, un élément de cohésion sociale et un élément d'expression culturelle fondamental.
3057 Pourtant, la télévision conventionnelle est en crise, et c'est donc tout le secteur de la télévision canadienne qui est en crise. Si une bonne partie des 80 pour cent de la programmation disparaît, le système canadien de radiodiffusion ne deviendra que l'ombre de lui-même, puisque rien ne viendra remplacer la programmation perdue. C'est un problème culturel majeur, et j'ajouterais que c'est un problème culturel urgent.
3058 Nous risquons de perdre un élément critique de notre expression culturelle à l'échelle nationale, régionale et locale si la portée de cette crise n'est pas bien cernée et si l'on ne réagit pas de manière cohérente et globale.
3059 Dans le contexte de cette audience, donc, nous souhaiterions aborder trois aspects de la situation actuelle :
3060 - premièrement, replacer le secteur de la télévision dans une situation économique durable;
3061 - deuxièmement, financer adéquatement la programmation locale; et
3062 - troisièmement, diffuser de la programmation auprès des Canadiens dans un cadre entièrement numérique.
3064 M. GUITON : Merci.
3065 We are all aware of the financial crisis that has gripped the globe over the last year. As our President Hubert Lacroix indicated before the Heritage Committee on Monday:
"The business model on which conventional television, both public and private, is based, is no longer working. It hasn't been working for several years. The current economic crisis has only accelerated what was already a steady decline in the value of television advertising."
3066 The problems with Canadian conventional television are systemic and have two key aspects.
3067 First, there is an imbalance between BDUs and broadcasters. While there are many elements to this imbalance, the central one is simple: BDUs are making hundreds of millions of dollars off of conventional television and paying nothing in return.
3068 Second, there is an imbalance between conventional broadcasters and specialty services. Namely, specialty services have two revenue streams, advertising and subscription revenues, while conventional broadcasters are restricted to the advertising stream only.
3069 These simple systemic imbalances have existed for many years and over that time they have been slowly tipping conventional broadcasters towards financial disaster. The current economic crisis has given that slide toward disaster an additional shove but that is all it has done. It is not the cause. And once it is over, the systemic problems will remain unless they are fixed now.
3070 So what can be done? The starting point must be to establish a level playing field.
3071 Introducing fee for carriage will make BDUs pay for what they use, a requirement that is economically rational and necessary. It will also place conventional broadcasters and specialty services on an even footing in the marketplace. It will level the playing field.
3072 In our view, this simple step may not solve all the problems of the television sector but without taking that step there is absolutely no chance that the Commission will be able to put this sector back on an economically sustainable basis and still fulfill the objectives of the Broadcasting Act.
3073 We believe it is critical that the Commission move swiftly on this issue by establishing the policy that all conventional broadcasters be eligible for subscriber fees as part of the upcoming hearing this summer.
3074 Given the urgency of this situation, the Commission should establish an interim rate for all conventional broadcasters and implement it effective January 2010. This rate could be adjusted at each conventional broadcaster's licence renewal, if appropriate.
3076 MR. STURSBERG: Thank you, Steve.
3077 The second key issue for the television system is the need to sustain and improve local programming. This has been recognized as an important problem by the Commission for many years, a problem that the Commission has finally taken steps to address by establishing the Local Programming Improvement Fund.
3078 The economic reality is that local programming is not profitable anywhere but in some of the largest markets. It must be subsidized one way or another. A properly funded and administered LPIF will go a long way to achieving this goal.
3079 In this regard, we have four points.
3080 First, the LPIF is not a substitute for fee for carriage and is not a short-term fix for the current economic woes. The LPIF addresses a totally different problem, the longstanding and unchanging need to subsidize local programming if the objectives of the Broadcasting Act are to be met.
3081 Second, the LPIF should be focused purely on local programming. It should not be used as a mechanism for funding marketing expenses or capital investments or any non-programming activities. If the LPIF is given this tight focus, then we believe it would be appropriate to keep the fund at 1 percent of BDU revenues for at least the first year. This will enable both the Commission and broadcasters to assess the effectiveness of this level of funding.
3082 Third, we believe it is important that the LPIF encourage local programming commitments. That is why we support the Commission's revised formula for allocating LPIF funding. Using historic spending as a basis for allocating funds provides a proper recognition to broadcasters who have made a commitment to local programming. It also rewards them if they have been able to increase that commitment.
3083 Fourth, as you know, several parties have argued that CBC/Radio-Canada should not be eligible to participate in the LPIF. We find this quite extraordinary since their arguments have no foundation in policy or precedent.
3084 In regard to precedent, CBC/Radio-Canada has always had the right to participate in the Canadian Television Fund. On March 9th the Government announced the formation of the Canadian Media Fund, the successor to the Canadian Television Fund.
3085 CBC/Radio-Canada is a full participant in the CMF in keeping with one of the Government's guiding principles for it: All broadcasters will be put on a level playing field, including CBC/Radio-Canada.
3086 In implementing the LPIF, the Commission's policy focus should be to ensure that the monies are spent effectively. And as the Commission itself has acknowledged in its decision last year in this regard, CBC/Radio-Canada has a significant role to play and its full participation is clearly in the public interest.
3087 The commitment of CBC/Radio-Canada to Canadian programming is beyond doubt. And this is true for both network programming and local programming.
3088 CBC/Radio-Canada has a mandate to produce local programming and has been both committed and successful in pursuing this mandate. The Corporation has an extensive presence in both English and French across Canada.
3089 The Corporation is positioned to build on its past commitment and its past success but it will only be able to do so if it has access to the LPIF on the same terms as all other conventional broadcasters.
3090 As the Commission is aware, the Corporation is facing very difficult financial times, just like everyone else. In its business plans for the coming years, the Corporation has built in the positive support it will receive from the LPIF.
3091 If the Corporation is not given access to the LPIF on the same terms as other broadcasters, then CBC/Radio-Canada will have no choice but to revise these plans. This is a simple statement of economic reality. We cannot produce what we don't have the money to produce.
3092 In our view, the LPIF is an essential support mechanism and will assist with the production of local programming. All conventional broadcasters operating in small markets, including CBC/Radio-Canada, should be entitled to access the LPIF in a way that encourages commitment and rewards success.
3094 M. LAFRANCE : J'aimerais maintenant passer à ce que nous considérons comme un enjeu clé du renouvellement du système de télévision : la distribution.
3095 Il serait vraiment étrange de prendre des mesures réglementaires importantes pour appuyer la création d'une programmation locale, pour ensuite négliger de s'assurer que cette programmation puisse être vue par les populations visées. Pourtant, c'est exactement ce qui se passe dans plusieurs cas aujourd'hui.
3096 À titre d'exemple, ici à Ottawa, le Gala de la Trille d'or, qui salue la vie culturelle en Ontario, a été diffusé sur CBOFT, mais n'était pas disponible sur le satellite d'ExpressVu parce qu'on diffuse Montréal ici. Or, on investit pour une production sur la vie culturelle ontarienne qui n'est pas diffusée ici sur le satellite. Alors, c'est énorme comme problème.
3097 Le fait que de nombreuses stations de télévision locale ne soient pas distribuées par les satellites est déjà un très grand problème, particulièrement pour Radio-Canada. Ce problème prendra des proportions encore plus grandes en 2011 lorsque les télédiffuseurs passeront de l'analogique au numérique, et encore plus à la haute définition. La question évidente à ce moment-là ne sera pas de savoir quelles autres stations seront distribuées, mais lesquelles ne le seront plus.
3098 À notre avis, il est inacceptable de laisser les distributeurs par satellite prendre des décisions en matière de distribution des stations locales. Les objectifs de la Loi sur la radiodiffusion doivent être déterminants.
3099 Par conséquent, le Conseil devrait traiter de cette question dans son instance de cet été et fixer des règles claires, des règles qui cadrent avec l'importance qu'on accorde à la programmation locale dans la Loi sur la radiodiffusion et qui appuient l'initiative du Fonds pour l'amélioration de la programmation locale au lieu de la contredire.
3100 Parlons un instant de ce qui se passe dans les régions où les télédiffuseurs décident de ne pas installer d'émetteurs numériques. Selon nous, les EDR, les distributeurs devraient quand même être obligés de diffuser des signaux locaux, en autant qu'ils sont alimentés directement par les diffuseurs. Le principe ici qu'on doit suivre, c'est celui de protéger la programmation locale.
3101 Nous croyons aussi que les satellites devraient offrir aux personnes qui ne sont toujours pas abonnés à une entreprise satellitaire un service de base réduit à un prix abordable. Nous savons que les EDR par câble ont indiqué que ce serait impossible à appliquer. D'après nous, cette affirmation devrait être soigneusement examinée par le Conseil dans le contexte d'une audience publique.
3102 MR. GUITON: To sum up, Mr. Chairman, CBC/Radio-Canada believes it is essential that the Commission step back and look at the present turbulent situation in the context of the entire broadcasting system and the objectives of the Broadcasting Act.
3103 From that perspective, it is clear that there are serious systemic problems which must be fixed before there can be any realistic hope of restoring the television sector to health.
3104 First, conventional broadcasters should have access to subscription revenues, forcing BDUs to pay for what they use and creating a level playing field in the system.
3105 Second, the LPIF should be implemented in the modified form proposed by the Commission, with funds being available to all local broadcasters.
3106 Third, the Commission should establish clear, detailed rules for DTH distribution of local television services which will promote the objectives of the Broadcasting Act and support, rather than contradict, the LPIF initiative.
3107 These are the key steps we believe the Commission must take to set the stage for future success. We believe it is essential that the Commission act on these points as quickly as possible. Further delay would invite disaster.
3108 Thank you for giving us the opportunity to participate in this proceeding. We would be happy to answer any questions you might have.
3109 THE CHAIRPERSON: Thank you for your presentation. As always, I am impressed by the clarity and logic of your presentation. I think of all the people who have come before us. Whether I agree of disagree with them is a different story but it is the logic, the coherence and the elegance of your submission that I think is without equal.
3110 That being said, let me ask you a couple of questions.
3111 When Mr. Fecan was before us, I asked him what is the essence of conventional television, why is it so important, et cetera. You obviously share his views as important.
3112 He said it is a platform for local content and news. He said it is the glue that brings together all local community elements. It is a key promoter of national unity and lastly it is the best means that we have to bring a large audience of Canadians together to share an event like the Olympics, for instance. That was his definition.
3113 Is this your definition too or do you see it differently or do you have some nuances that he didn't mention?
3114 MR. GUITON: We would absolutely agree with that definition.
3115 As you know, Mr. Chairman, in our evidence in a number of proceedings now we have been filing information in front of the Commission showing the contribution of conventional broadcasters, how much original programming is created by conventional broadcasters in prime time and the importance of conventional broadcasters in the area of local in connecting to audience locally.
3116 We discussed that at the New Media Hearing as well. We think it is fundamental and we would agree 100 percent with that.
3117 I would invite my colleagues to expand on what we do exactly.
3118 M. LAFRANCE : Pour une société, moi, je pense que le rôle des télévisions conventionnelles est absolument fondamental parce que depuis la nuit des temps, les citoyens cherchent à communiquer, puis à se rassembler, et au 21e siècle, ce grand lieu de rassemblement là, ça s'appelle la télévision.
3119 Quand 2 millions et demi de personnes regardent « Star Académie » et partagent une passion pour une musique ou pour un artiste ou quand un million et demi de personnes assistent à un débat de « Tout le monde en parle » le dimanche soir dans le secteur francophone, c'est un événement majeur qui permet d'échanger des expériences majeures, et ce rôle-là de la télévision conventionnelle est fondamental pour créer une cohésion de société.
3120 Je suis convaincu qu'on ne bâtira pas une société en divisant continuellement, en segmentant continuellement l'ensemble des médias qu'on a. On doit travailler à conserver des grands lieux de rassemblement si on veut conserver une cohésion sociale, et c'est encore plus important au 21e siècle pour toute sorte de facteurs, la transformation, notamment, de la société canadienne.
3121 C'est important d'avoir de grands lieux de rassemblement où on échange ensemble, et aujourd'hui au 21e siècle, les télévisions conventionnelles sont celles qui jouent ce rôle-là.
3122 Et c'est vrai aussi pour la programmation locale. Les télévisions conventionnelles sont celles qui permettent le reflet des télévisions locales, et la programmation locale est menacée par plusieurs choses. Elle est menacée par les enjeux de distribution, menacée par des enjeux de financement.
3123 On cherche tous à y apporter des solutions, mais c'est absolument fondamental dans un pays comme le Canada qu'on puisse échanger des expériences régionales sur de grands réseaux conventionnels.
3124 THE CHAIRPERSON: Now, in your written submission you actually say you are also the best vehicle to draw -- the key catalyst for financial development and production.
3125 Why is conventional television more of a catalyst for financial development and production? I mean specialty channels have very high CPEs, as you know, et cetera, and yet you make the statement in your submission that you are, in effect, the key catalyst. Why is that and what is the difference here between you and specialty?
3126 MR. STURSBERG: Approximately 80 percent of all of the Canadian drama and comedy, kids' programming, documentaries, et cetera, are produced by the conventional channels. The reason for that is in very large -- and so what the specialty channels do is in very large measure they buy second, third, fourth windows for the programming that is financed by the conventionals and then they run that on their channels to be able to make up their Canadian content requirements.
3127 The difficulty that they confront is that many of them are simply too small to be able to trigger in a significant way the programs. They just don't have enough money and they are not big enough to be able to trigger them.
3128 So the long and the short of it is that they rely, as I was saying earlier, in very large measure on third and fourth windows of the programming that is financed by the conventionals, to the point that I mean it is -- we did certain kinds of counts as to how many of the old episodes of "22 Minutes" or "The Rick Mercer Report" or whatever are shown on specialties and sometimes it will run into the hundreds of repeats per year.
3129 THE CHAIRPERSON: Well, I guess what you are talking about is the explanation of the shot on page 12 of your original submission, which shows how conventional TV is overwhelmingly original production and how specialty is overwhelmingly repeat.
3130 Let's take the example you took of "Rick Mercer." It happens to be your program but it --
3131 MR. STURSBERG: An excellent program.
3132 THE CHAIRPERSON: I will let the audience judge that.
3133 MR. STURSBERG: They say too that it is excellent.
3134 THE CHAIRPERSON: I know but the point is let's not do special advertising here, let's get to the policy issues.
3135 A program like this, obviously popular, obviously enjoyed by Canadians, you say the specialty channels are too small but they do have a subscription income, they know what is here.
3136 Why couldn't The Comedy Channel, for instance, not produce "Rick Mercer" and you repeat it? Why does it have to be on your channel and then it gets repeated on The Comedy Channel? I just don't understand why --
3137 MR. STURSBERG: Well, "Rick Mercer" is actually a pretty good example and it is a good example of what we were talking about earlier on, why does conventional television matter, and Sylvain and Steven were saying that, you know, it is the one place where you can aggregate very large audiences.
3138 "The Rick Mercer Report" last year typically would -- we put it on twice a week actually. We put it on once at the beginning of the week and then repeat it at the end of the week. "The Rick Mercer Report" would typically do 1.1 million viewers at the beginning of the week and then in the second run on Fridays it would typically do 600,00-700,000 viewers. So almost 2 million people a week were watching "The Rick Mercer Report."
3139 So it has an extraordinarily large audience and it does exactly what it is that you want television to do, which is to provide the kind of glue that holds together disparate parts of the country.
3140 It is very difficult for, if not impossible, for niche channels like The Comedy Network to be able to aggregate those kinds of audiences. They can't, they are just simply too small. So their ability as well to be able to finance under those circumstances is limited and that is why you see the situation which is in the chart, that shows that overwhelmingly the original programming comes from the conventionals and not from the specialties.
3141 And you are right to say this is a curious state of affairs because the specialties now collectively take more than 50 percent of the total audience but the fact of the matter is that they are all extremely niche.
3142 M. LAFRANCE : Simplement ajouter une chose qui est purement arithmétique.
3143 Pour produire une grande série, ce qu'on appelle au Québec des séries moyennes ou des séries lourdes comme « Annie et ses hommes » à TVA ou comme « Les Invincibles » à Radio-Canada, il faut compter, effectivement, sur une somme d'argent assez considérable. Ce sont des productions qui sont coûteuses.
3144 Mais dans le contexte francophone, s'il n'y a pas de ces grandes productions coûteuses et qu'il n'y a que des productions à faible coût, on n'améliorera pas la qualité de notre télévision. Mais pour que ça se fasse, il faut créer une masse critique raisonnable pour pouvoir payer pour ces produits-là.
3145 Alors, les spécialisées atteignent la même audience, mais il faut le diviser en 25 ou 30 stations pour arriver à la même audience. Si on le divise en 25 ou 30 budgets, on va produire 30 petites émissions. On ne produira pas « Les Invincibles », ni « Annie et ses hommes. » On produira ni « Providence », ni ces grandes séries là.
3146 Et à mon avis, cette question-là d'être capable de produire de grandes séries de qualité -- particulièrement, je dirais, ici dans l'environnement francophone du pays, parce qu'il y a moins de francophones, donc, sur le plan économique, il est encore plus difficile de financer les choses -- il faut absolument qu'on conserve des télévisions qui ont des masses critiques capables de soutenir des productions de cette nature-là.
3147 THE CHAIRPERSON: But you go further than that. You say in paragraph 40 on page 13 of your paper:
"There is no way around this problem: either reducing or transposing conventional broadcasters' obligations or contributions would negatively impact the system. The Commission cannot avoid the conclusion that the only way to preserve the integrity of the system is to require conventional broadcasters to maintain their contribution levels."
3148 And then in paragraph 42 you say:
"In the Corporation's submission, the Commission cannot avoid examining the characteristics of the individual types of licensees and setting obligations accordingly. In particular, the Commission must examine the situation of conventional broadcasting as a business and as a major element of the broadcasting system."
3149 I read that as you saying basically our idea of group licensing doesn't make sense.
3150 MR. GUITON: We do have some difficulties with the idea of group licensing. The idea of group licensing, there are several aspects to it, I think, and they are raised in the paragraphs that you have just mentioned.
3151 To the extent that the Commission approaches group licensing as a fix, as an attempt to fix the regulatory dilemma -- economic dilemma facing conventionals, we think it is probably uneconomic. It may not be efficient. There are standalone conventional broadcasters that are not affiliated with specialties who would be left out in that scenario.
3152 It is not necessarily the economic -- the synergies may not be there. They may or they may not be there but to presume that that is an economic structure that should exist, we don't think is the right way to go.
3153 Secondly, what it would amount to, we think, is simply aggregating parties, asking them to do more and the funding is going to have to come from somewhere. The economic basis for the problem is still involved because the conventional is still in that circle. So maybe specialty services are going to have to have an increase in wholesale rates to allow them to do more, which would be the same thing as giving conventionals a subscriber fee.
3154 More fundamentally, Mr. Chairman, if I could say this, if the Commission's notion is that we are going to construct group licensing to solve a problem when the problem really is we don't want to put conventionals on an equal playing field, we see that as simply wrong-minded.
3155 If putting conventionals on an equal playing field can address the problem, the economics itself will indicate whether these parties will integrate or not based on the efficiency of the system and the Commission doesn't need to approach it as a regulatory matter.
3156 THE CHAIRPERSON: Well, let's look at it slightly differently. I mean you are saying the audience has been fragmented. Because of our regulation, we are allowing the various niches, et cetera, and they are cherry-picking, they are taking the most valuable part of your franchise and serving the specialty, they are getting higher publicity costs for them and that is unfair to us.
3157 So we thought -- one of the logic goes if you put them together as a group, you have the critical mass that you talked about, Mr. Lafrance.
3158 You have both the -- and you say, you group here, you have an obligation to use this much original Canadian content, this much priority. Divide it over your group however you want but we want to undo the injustices, which according to you and others we have created by allowed specialty channels, by putting them together so that the obligation will be borne by the total unit rather than as we have right now, that the conventionals bear the whole burden while the specialties networks are very limited and have huge profits while you have losses at the conventionals.
3159 You are telling me this doesn't work and I would like to understand why.
3160 MR. STURSBERG: Let me just come back to a couple of points.
3161 Right now the way in which original Canadian television programming gets financed is, as we have described, that approximately 80 percent of the original programming is financed by conventionals and the other 20 percent is financed by the specialties.
3162 So if the conventionals find themselves in a situation where their revenue is eroding, even if you put them together with the specialties, then the total amount of money that is available hasn't changed.
3163 The only way to change it, as Steven was saying, is then you have to say, well, okay, we need more money now to make up the money that is being lost by the conventionals in terms of financing original Canadian programming.
3164 So the only way you would be able to do that then is to increase the wholesale fees to the specialties but then you might as well just say to the conventionals, we will give you a wholesale fee and we will put you on the same footing as the others so that now we will have a situation which is level and so then you are going to allow to a greater extent to let the market decide.
3165 Now having said all that, there is no question that there are some synergies involved in being able to own specialty channels. That is absolutely true. There are synergies involved in being able to lay off some costs and to be able to share costs across multiple channels. That is true but it is not a big enough thing to be able to solve the structural problem that we find ourselves confronting.
3166 I would make one last point about this, which is that, of course, this is no solution whatsoever for the CBC. The only significant specialty channels that the CBC owns are news channels. We don't own any significant channels with respect to any of the other kinds of programming, whether it is kids' programming or drama or comedy or any of the other categories that are currently under pressure.
3167 M. LAFRANCE: Si je peux ajouter une chose là-dessus, pour « challenger » votre raisonnement...
3168 M. STURSBERG: Oui.
3169 M. LAFRANCE: Je dirais qu'on n'augmente pas la masse critique quand on fait ça. En tout cas, pas dans une logique de service public parce que l'approche de travail en groupe au sein de Radio-Canada ne vise pas à augmenter les profits (on ne fait pas de profit) et ne vise pas non plus à diminuer les coûts, je l'ai toujours dit.
3170 Pour moi, on travaille plus en groupe parce qu'on veut augmenter la valeur de la marque pour les Canadiens, on veut augmenter la valeur de la présence pour les Canadiens. Et chacun de nos services a un rôle très différent à jouer.
3171 En radio, notre Première Chaîne est extrêmement présente en région. En télévision, c'est une télévision nationale qui produit de grandes émissions, des séries lourdes, des choses comme ça, des grandes émissions d'affaires publiques.
3172 Le RDI est purement réseau d'information, ARTV, qu'on possède avec d'autres, d'ailleurs, est une chaîne culturelle. Espace musique sert à l'industrie de la musique au Canada. Ce sont des rôles totalement différents.
3173 Donc, de dire qu'on augmente la masse critique, ce n'est pas tout à fait vrai. Ce qu'on augmente, c'est la largeur, le « scope » et le nombre de Canadiens qu'on rejoint avec des services différents.
3174 Notre but n'est pas de produire les mêmes contenus sur l'ensemble de nos chaînes. Nos buts c'est, par l'ensemble de nos chaînes, rejoindre l'ensemble des Canadiens avec des produits différents. Donc, ça n'augmente pas la masse critique de production de chacune des marques ou de chacune des émissions.
3175 Donc, financièrement, ça ne change rien à l'équation.
3176 THE CHAIRPERSON: Mr. Stursberg, let me go back to what you just said. Look at page 12 of that wonderful chart that you produced, and it shows that all the original burden is carried or the burden of producing originals is by conventional, yet it is all shown largely repeat by specialty, you know. I don't know what the cost accounting is between them and what extent the specialty pays to the conventional for the cost of producing, how you appropriate the value between the original showing and repeat showing, et cetera.
3177 And as you all know, cost accounting is a bit of an art as well as a science, you can never get it exactly right.
3178 By putting them together in a group, you are basically mixing both costs and profits and put it in one and, you know, you figure out among yourselves how you divided it, et cetera. I treat you as a group and I do the obligations and the benefits on a group basis.
3179 I appreciate CBC doesn't own many specialty channels, but as a concept is there anything wrong with that?
3180 MR. STURSBERG: Well, the way it works as a practical matter is that for all these kinds of programs we are talking about, they are produced by independent producers. And so to be able to make the show you have to, you know, pay a licence fee and then the rest of the money is made up from other sources, from the Television Fund from the tax credits and this and that.
3181 So the amount of production that you can trigger for the system as a whole is a function of the total amount of money that is available to pay licence fees. Our earlier point is simply even if you put them together, i.e. the conventionals and the specialties, the total amount of money available to trigger licences hasn't changed. The total quantum within the system is the same.
3182 But what is going on is as the conventional revenues erode, their capacity to be able to afford to trigger continues to diminish. So the problem is really not solved, because the total quantum of money available to trigger has not changed, but has continued to erode.
3183 THE CHAIRPERSON: I don't dispute that. It doesn't solve the problem of lack of money.
3184 MR. STURSBERG: But I thought that the issue that we were trying to address was if we put them all together, would that solve the problem that we are currently confronting? And I am just saying that it doesn't change the financing in any way, because the total amount of money hasn't changed and the biggest contributor still finds itself under financial stress.
3185 THE CHAIRPERSON: It would lead to a better distribution of the cost or the weight of regulation and the profits. You know, they would be shared together rather than, right now, being looked at in separate categories and --
3186 MR. STURSBERG: Oh, if you mean --
3187 THE CHAIRPERSON: -- to avoid the distortions that can --
3188 MR. STURSBERG: I don't disagree at all that there are synergies associated with having these pieces put together. I mean, we would love to have more conventionals because it gives you -- there are at least four advantages to having more specialties.
3189 One, you can layoff back office costs or share regulatory costs, as you are saying. You can share costs associated with buying rights. You have clearly more clout in the market when it comes to being able to make deals with cable companies or satellite companies. And more clout in the market when it comes to advertisers. All those things are true.
3190 And so I wouldn't dispute any of that. I am just saying, the total quantum of money available to deal with the problem in front of us does not change. It only changes if we can find a way of injecting more money into it and the only potential source for doing that, given what is happening to conventional advertising revenues or advertising revenues on television generally, is to inject the money through increases in cable fees, whether they go to the specialties or whether they go to the conventional broadcasters.
3191 THE CHAIRPERSON: Okay, switching texts. And in way of the comments of Mr. Lafrance, you probably heard of your public duty and you are not a commercial outfit.
3192 You were here on Monday when I asked Mr. Fecan and I said, you know, what about the Sarkozy model? You know, should we have a fee for carriage for CBC and basically tell them, you have to get out of advertising and leave the advertising field free for the commercial? Due to the public service, you get it paid for publicly or through a fee which effectively is borne by the television viewers, and you guys make your living on advertising.
3193 I didn't get any uptake at all. I just wanted to float the idea of what you said, because other countries are doing it. And essentially, you said it is not doable because of your sports advertising. What are your views on this?
3194 M. LAFRANCE: Oui. Comme vous savez, le décès de monsieur Sarkozy a créé beaucoup de remous, en France en particulier, dans l'industrie de la télévision parce que c'est une grosse, grosse, grosse question.
3195 Je dirais, première des choses, que c'est une décision, naturellement, qui n'appartient pas à Radio-Canada. C'est une décision qui appartient, ici, carrément au monde politique de décider de quelle façon on structure la radio publique, de quelle façon on finance la télévision publique, de quelle façon on finance le diffuseur public de façon générale.
3196 C'est une décision immense, parce qu'il faut comprendre qu'en France, le système a fait... oui, on impose une taxe sur les ventes de publicité des télévisions privées. C'est tout un système politique et réglementaire, qui échappe au diffuseur public.
3197 Et là-dessus, je pense qu'il faut vraiment laisser ça dans le camp des politiques pour savoir quel est le type de financement qu'on veut pour le diffuseur public. Chaque pays a son type de financement. L'Europe est beaucoup fondée sur un système de redevances qui n'a rien à voir avec notre système de frais d'abonnement, qui est un autre système totalement.
3198 Donc, c'est vrai... C'est une grosse question qui est politique, qui est éminemment politique. Cela dit, nous, on va gérer Radio-Canada dans le contexte qu'on nous dit de le gérer.
3199 THE CHAIRPERSON: I mean, this is not obviously a CBC licensing hearing. I just wondered, you yourself as a public broadcaster, do you see us evolving towards a solution along those lines in the long run?
3200 MR. STURSBERG: Chairman, the last time the CBC's financing was looked at in any kind of a systematic way was I guess by the Heritage Committee when they did their mandate report on the CBC. And what they said at the time was that we think it is very very important to have a public conversation about what the CBC should be doing and how it should be financed and then to have an agreement on that.
3201 The same way as they do, for example, with the BBC in Britain and say, okay fine, this is what we think is right and this is how we think it should be financed, whether advertising is in or advertising is out or whatever it happens to be, and then establish a contract, in Britain, typically it is for 10 years. And then off we go and then the contract gets renewed, you know, they start a conversation on the seventh year and then they renew it and, on a rolling basis, every decade.
3202 We are completely open to that conversation. In fact, the position we have taken is we would like to have that conversation and we think that is an important conversation for us to have with Canadians, with the government, with you as to how the CBC should be financed in the future.
3203 We have never ruled out the notion that at some point it may be appropriate to take us out of advertising. The only caution I would make on it, when we think about it, is right now advertising constitutes somewhere around, depending on how the markets are, call it between $300 million and $350 million of revenue to the CBC. The difficulty is, to take your sports example, if we were to get out of Hockey Night In Canada, that is a substantial chunk of the revenue. But then what we have to do is we have to replace 450 hours of Canadian programming.
3204 So then we face not just the problem of replacing the revenue, but in fact finding the money to fill up 450 hours of Canadian programming which, as you know, is far from inexpensive itself.
3205 So we are completely open to the conversation. In fact, we would love to have this conversation on the financing more generally of the CBC.
3206 M. LAFRANCE: Et l'avantage énorme d'un contrat comme celui-là, comme celui qu'on propose, est qu'effectivement, il est la suite d'une conversation. Il n'est pas imposé sur un système, il n'est pas plaqué sur un système. Il ne vient pas essayer de mettre un « Band-Aid » sur un système qui est compliqué. Il propose vraiment une conversation qui permettrait à long terme de placer le service public.
3207 Là, c'est une idée qui devient vraiment intéressante. Mais c'est suite à une très longue conversation et à un contrat long terme avec les Canadiens.
3208 LE PRÉSIDENT: Est-ce que cette conversation ne peut pas avoir lieu si on... premièrement, décide qu'est-ce que le rôle des diffuseurs publics? Est-ce que ce n'est pas essentiel qu'on définisse qu'est-ce qu'est le rôle des diffuseurs?
3209 M. LAFRANCE: Moi, je pense que le rôle du diffuseur public, dans la tête des Canadiens, est beaucoup mieux compris qu'on le pense, parce que j'entends souvent parler du rôle du diffuseur public comme si Radio-Canada n'était pas si différent des autres, et tout ça.
3210 Je vais vous donner l'exemple du service de Radio-Canada français. Est-ce qu'on est différent des autres? Écoutez, en radio, d'abord, on est absolument unique.
3211 Écoutez la radio de Radio-Canada pendant trois minutes, vous la reconnaissez tout de suite. Écoutez, même, Espace musique, vous le reconnaissez tout de suite. Et je vous dirais que si vous écoutez la télévision de Radio-Canada avec 10 heures d'affaires publiques par semaine, avec des grandes émissions scientifiques, le plus grand déclencheur d'émissions dramatiques canadiennes, douze stations régionales dont huit à l'extérieur du Québec, si ça ce n'est pas une télévision qui est totalement différente, et si ce n'est pas une télévision qui va rien que créer de la diversité au Canada, je ne sais pas ce que c'est.
3212 Alors, je pense que Radio-Canada est une entreprise de création de diversité, de création de démocratie et de création de culture et je pense que les Canadiens le comprennent quand même assez bien et qu'ils reconnaissent ce rôle-là, de Radio-Canada.
3213 Alors moi, je pense que ce qui est fondamental... Le rôle du diffuseur public, on peut toujours, naturellement, en parler, mais quand on en parle objectivement, quand on parle objectivement de notre présence régionale, de notre présence dans la francophonie hors Québec, de notre présence dans des émissions spécialisées, de notre présence dans la création canadienne, on s'aperçoit que Radio-Canada joue un rôle vraiment distinctif, vraiment important et vraiment assez clair pour l'ensemble des Canadiens.
3214 MR. STURSBERG: If I might just add. You know, I think these are major issues of public policy. Sometimes we get so focused on television and I fear sometimes so focused on English television that we forget all the other things.
3215 As Sylvain says, we are the only broadcaster that does, you know, French-language, new services and local programming outside of Quebec. We are the only broadcaster that broadcasts in eight Aboriginal languages. We broadcast in Gwich'in, in Cree. We are the only one that clearly does a television newscast in Inuktutuk. We are the only one that carries on an international service through RCI. We are the only one whose primetime schedule is 100 per cent Canadian.
3216 All of these things are the kinds of questions we should be asking ourselves and saying to ourselves, which of this do we want and how should we finance all this?
3217 THE CHAIRPERSON: Well, that was precisely the question.
3218 MR. STURSBERG: Yes.
3219 THE CHAIRPERSON: I don't dispute anything what Mr. Lafrance said of what you are doing. I said, you know, what is your role, what do we want the public -- is what you are doing right now -- is that it? Should it be more targeted, should it be more expansive or whatever?
3220 I think you have to have that discussion before you talk about the financing.
3221 MR. STURSBERG: We totally welcome that conversation because, of course, there are two sides to the same coin. You have to decide what you want done and then you have to decide what it costs and then how it gets financed.
3222 And we have been saying for sometime now, for a number of years, that we think it is very important to have this conversation, very important to conclude in a kind of completely open and transparent way a contract of this variety.
3223 THE CHAIRPERSON: Okay.
3224 MR. GUITON: If I just might add, Mr. Chairman, I am sorry. But --
3225 THE CHAIRPERSON: I don't want to turn this into a --
3226 MR. GUITON: No, no. I will only just mention one point. That is all very interesting. I just want to point out, of course, even what we are doing today, irrespective of what we do in terms of having the contract discussion, figuring out what we should be doing, we have financial difficulties with what we are doing today. We have a financial crisis now.
3227 THE CHAIRPERSON: Okay. This whole hearing is basically done with the fee for carriage idea in the background, everybody mentions it, including you.
3228 So I tabled a document called "Fee for Carriage Impact Analysis." I believe you have it there. Basically, it shows that a fee at 50 cents, according to our calculation, would generate $350 million. You point out who would be paying it, what would be the impact on PBIT and also how it would be distributed.
3229 And under this one, it is the very last page, CBC would be getting $92 million based on the 94 signals that you are distributing across the country.
3230 Now, everybody who has appeared before me said, this is wonderful, but it is not right. There is some correction. You have got to have the number of stations wrong, the calculations wrong or whatever.
3231 Is this what your own calculations have revealed? And secondly, if not, I would ask you to file with us a revised version pointing out the errors that we have made, if there are any.
3232 MR. GUITON: If I could, Mr. Chairman, just on that point of filing a revised version. We have looked at this in the past couple of days and we have tried to understand it. And I think ourselves, like a number of other parties, we have some questions and we hope to be able to, by speaking to staff, understand those.
3233 And I wasn't aware how that issue has been resolved with others, if there is going to be a joint conversation or we should just --
3234 THE CHAIRPERSON: Okay. Well, for the third time now I will --
3235 MR. GUITON: I am sorry.
3236 THE CHAIRPERSON: -- explain the process.
3237 MR. GUITON: Okay, I am sorry.
3238 THE CHAIRPERSON: I would like everybody to file what they feel needs to be corrected or changed. For instance, let's say we put down here 94 stations --
3239 MR. GUITON: Yes, I understand.
3240 THE CHAIRPERSON: -- if you think 96, tell me or whatever.
3241 MR. GUITON: Perfect.
3242 THE CHAIRPERSON: Then we will have a CISC meeting, the CRTC Interconnection Steering Committee, with all the officials and technicians, and trying to work it out so that we can work from a common database. Because while everybody talks fee for carriage, everybody seems to have a slightly different view how you calculate how much it would generate and how it should be distributed.
3243 MR. GUITON: Right. I apologize for not following and hearing more closely. It was the last part about the CISC that I had missed.
3244 THE CHAIRPERSON: Yes, okay.
3245 MR. GUITON: I think it is a definitional thing, we do not understand some of the line items on page 3 that I think you have just taken me to.
3246 THE CHAIRPERSON: Yes.
3247 MR. GUITON: And we do have some questions about those that we would like to raise with staff. We haven't had a chance to do that yet. But overall, we understand the methodology and we have no difficulty, if I can just say subject to check, at this point with this concept.
3248 THE CHAIRPERSON: Yes. And then this morning you, Mr. Stursberg, made the point very eloquently that really there are two totally different issues here. One is local programming, which has to be paid for which doesn't pay for itself. And the LPIF, if I understand you, at 1 per cent actually will address that problem. But there is the other problem, is the way you see it is the overall health of conventional, and the only way you can fix that is through fee for carriage.
3249 That is essentially your position?
3250 MR. STURSBERG: That is it.
3251 THE CHAIRPERSON: Okay, then let's go through the LPIF. And I think I handed out a document also on Monday which showed that under the LPIF -- I don't seem to have it here right now -- how much you would get.
3252 We rounded off to the nearest million, so just to prevent any reverse engineering, because obviously based on your personal confidential data. But on the latest figure of $68 million BDU gross revenue you would get $16 million this year, right?
3253 MR. GUITON: The numbers that you show on this page are roughly what we calculate as well.
3254 THE CHAIRPERSON: Right, okay. Then the formula, which originally we had incrementality and, given the very unusual nature of 2009 and the economic crisis, the incrementality would disqualify quite a few stations. And we really said, can we simplify it?
3255 And we developed a formula based on the last three years standing. CTV came forward and said, we like the idea of no incrementality, but really, rather than doing it on the basis of spending, you should do it on the population of the markets that are being served.
3256 So you take the total markets, aggregates, and do the division. In effect, comes how much is available for each market and how many broadcasters are there in that market, conventional, and you divide it between them.
3257 What do you think of that approach?
3258 MR. GUITON: We think the Commission's original approach of basing the allocations on expenditures, local expenditures, is the right way to go. And, as we said in our oral remarks this morning, we strongly support your revised model.
3259 THE CHAIRPERSON: Can you just explain to me though why?
3260 MR. GUITON: Well, based on the logic of the original decision that you came out with, the logic is to promote local expenditures and support local expenditures, enhance them and improve them. And using what people are spending today on a three-year moving average, that gives you an accurate reflection of the investment people are making in local expenditures.
3261 It is not necessarily directly related to population, it is based on what they are actually doing in the marketplace. And so that measure, since it is verifiable and directly filed with you, we think that is a perfect measure for going forward on what people are doing in the local area.
3262 THE CHAIRPERSON: Well, I guess the counter-argument is it has really shown that X number of people deserve X number of program dollars. They should not be penalized or rewarded just because their local broadcasters in the past, you know, spend more or less on them. You know, this is a subsidized activity and, therefore, it should be based on numbers rather than on previous records. But that is the counter-argument.
3263 MR. STURSBERG: I just make a couple of points, because I think there are different approaches to this. One is, you know, when people say, well, you should divide it by the number of broadcasters in the area.
3264 Well, of course, just being a broadcaster doesn't determine how much. And if you were to qualify just because you are a local broadcaster, it doesn't determine how much local programming you actually do. You might be doing five minutes of local programming, when somebody else is doing, you know, three hours a day of local programming.
3265 But I think what you would want to say is the person who is doing three hours a day, who is bearing that expenditure, obviously is contributing more by way of local programming than the person who is doing five minutes, and you would want to reflect that.
3266 So when you do it, as Steven says, purely on the basis of what the expenditures actually are, then I think that you get a much closer account of what the commitment of the parties are to local spending.
3267 And the only other thing I would say with respect to populations is, inevitably, I don't think you really have to worry about that, because what tends to happen is that the costs of serving a population vary as the relative size of the population. So if you are serving a very small population, you know, in a very small town, then the number of reports that you need to cover what is going on in the town is obviously smaller than if you were serving a place like Toronto where you are going to have, you know, somewhere close to 8 million people.
3268 And so the number of stories and the number of things going on is inevitably going to require a higher level of expenditure to cover it properly.
3269 M. LAFRANCE: Moi, je pense que... Pour faire simple, quand j'ai vu la première fois la décision du CRTC, j'étais content parce que je me disais « Enfin une proposition qui va financer le contenu ».
3270 Parce qu'actuellement, en ce qui concerne les télévisions régionales, il n'y a pas une pénurie de tuyaux, il n'y a pas une pénurie de camions, il n'y a pas une pénurie de bâtiments, là... il n'y pas une pénurie de nombre de stations. Il y a une pénurie de contenus régionaux destinés à des auditoires régionaux.
3271 Il faut absolument, quel que soit le système que vous allez approuver, que le système serve à financer des contenus. Et comme le disait Richard, si quelqu'un qui produit cinq minutes a le même financement que quelqu'un qui produit trois heures, on n'encouragera pas la production de contenus.
3272 Ce qu'il faut, c'est encourager la production de contenus régionaux destinés à des auditoires régionaux et c'est ce que fait la proposition du CRTC. Et à mon avis, il ne faut pas perdre le sens, dans le fil de la discussion, là-dedans. Il ne faut surtout pas perdre le sens de ce que vous essayez de faire.
3273 THE CHAIRPERSON: Okay, thank you.
3274 And in terms of eligibility, what can you use that money for? You are quite critical of the CAB report, because it basically allows you to do everything, which I share, it obviously should be targeted for local programming. We want to avoid gold-plating, we want to avoid people getting salary raises or whatever.
3275 Have you got a list of criteria that you think the fund should be devoted to or, if not, can you produce one?
3276 MR. GUITON: We provided some initial comments in our submission on this matter, but we would be very happy to give a more detailed list.
3277 THE CHAIRPERSON: I would very much appreciate if you could give me a list saying, these are basically eligible expenditures for the use of LPIF funds.
3278 MR. GUITON: We will do that formally.
3279 But I think Monsieur Lalande would just like to add something.
3280 M. LALANDE: Mais il y a des grands principes, quand même, sur lesquels on a déjà réfléchi lorsqu'on est dans une dynamique, effectivement, de stratégie et d'amélioration de programmation régionale.
3281 Lorsqu'on sait... quand je me promène, que c'est un enjeu que les gens nous redisent tout le temps partout : est-ce qu'on peut améliorer la programmation régionale, que ce soit dans les régions du Québec ou dans les régions hors Québec, donc dans la francophonie canadienne.
3282 Alors, les grands principes :
3283 - Premièrement, au niveau de l'information, s'assurer que le service puisse s'améliorer sur une couverture de sept jours, les endroits où on n'offre pas ce service-là. Il n'y a rien de plus frustrant pour un Franco-Manitobain d'être associé, avoir son information en français du lundi au vendredi et de se retrouver le week-end sans nouvelles régionales. C'est des choses qu'il faut faire. Actuellement on a un bon service, mais on a un service qu'on veut extensionner dans des endroits où on ne peut pas le faire.
3284 - Améliorer la couverture des affaires publiques régionales. L'ensemble des régions du pays vivent des enjeux régionaux qui sont importants. Les enjeux économiques que tout le monde vit, ils les vivent régionalement et il faut améliorer la couverture de ces enjeux-là.
3285 - Troisièmement, la couverture culturelle. La couverture culturelle au niveau de l'ensemble des activités culturelles qui se passent au pays et en région, l'industrie culturelle --
3286 LE PRÉSIDENT: Écoutez... Vous parlez d'autre chose que j'ai demandé. J'ai demandé les critères pour lesquels on peut utiliser l'argent.
3287 M. LALANDE: Oui.
3288 LE PRÉSIDENT: Je ne parle pas de la couverture et la qualité et des choses comme ça.
3289 J'aimerais... Tout le monde va essayer de tricher, pour se... ça, ça va sans dire. Il faut savoir... Donc, j'aimerais avoir une liste : Voilà les 8 $ millions d'argent que la SRC reçoit.
3290 M. LALANDE : O.K.
3291 LE PRÉSIDENT: On peut l'utiliser pour ces raisons : un, deux, trois (les salaires des hommes, des caméras qui font des programmations, ou quelque chose comme ça).
3292 J'aimerais qu'on soit très clair ; qu'est-ce que ce sont, les choses pour lesquelles on peut utiliser l'argent.
3293 M. LALANDE: Oui.
3294 MR. GUITON: And we would be happy to do that.
3295 THE CHAIRPERSON: Okay. Then let's move to distant signal. You feel we should advance this, if I understand that. Like relating to 2.11 there, institute this rule or this retransmission rule earlier. But you are mentioning there is a problem with DTH and so did CTV, so did Canwest.
3296 And basically, if I understood it correct, and please correct me, you feel this doesn't make sense unless everybody is on the satellite? If I understood you correctly, in a nutshell that is what it is, those small stations --
3297 M. LAFRANCE: Okay. Okay, I will talk --
3298 THE CHAIRPERSON: -- giving them retransmission rights or so, that only helps those stations whose distant signals are being time shifted? But there is a whole bunch of stations who are not being carried by cable or satellite and, therefore, there is no time shifting and so this does very little for them.
3299 MR. LAFRANCE: I was lost, because I was not talking about distant signal at the time. I was talking about the fact that some of the original stations are not on the board which is, in my view, a huge problem.
3300 If you look in Quebec we have, on Star Choice for example, Québec, Sherbrooke, Trois-Rivières and Saguenay are not on the board, which is a huge problem for us, both a cultural and an economic problem for us.
3301 Here in Ottawa you are not on the board for Bell, which is a huge problem. So that is what I was talking about.
3302 THE CHAIRPERSON: I know, but there is two aspects to the story. One aspect is distant signal. We heard from people appearing before us that let's deal with time shifting first and then we will deal with carriage. Yes, you can institute this rule and you can withhold signal unless there is a negotiation and an agreement with the cable or satellite, as the case may be.
3303 The problem is that you also announced, in effect, the minimal rule for coverage by DTH. Those minimum rules have now become the maximum. And if I go and say I want to be compensated, the argument says, well yes, fine, but right now I am carrying three Ontario channels. You want to be compensated, I will only carry one Ontario channel. So it is, in effect, an empty weapon that you, the CRTC, gave us.
3304 Have you had negotiations with cable or satellite and have you run into the same problem?
3305 MR. GUITON: I think it would be a stretch to say that we have had negotiations, but we have had initial discussions. And yes, we have had this same type of reaction as that. Just in a nutshell, I would say in a monetary sense there appears to be no willingness to pay for those signals. And then in the DTH context, there is that same phenomenon that is alluded to.
3306 Now, I want to be clear that I haven't heard whether formal negotiations have started with others. I am talking about just discussions that we have started with the BDUs at this point.
3307 THE CHAIRPERSON: And the second problem, the one Mr. Lafrance alluded to, is coverage on DTH. That we have small market funds to compensate those stations who are not being carried on DTH, but that is not sufficient to make up for the loss of income that is suffered because of not being on the DTH.
3308 And essentially, both you and Canwest and CTV can say the only way to do it is insist that all stations be carried on the satellite.
3309 MR. STURSBERG: Mr. Chairman, it is not just a question of money, it is also a question of service to Canadians.
3310 I will just give you an example. Right now, the only English-language television newscast in New Brunswick is ours, it is the only one. And, as you know, New Brunswick is an intensely concentrated market in the sense that -- actually, the only other significant source of news to ourselves is the Irvings, and their Fredericton station is not up on either of the satellites.
3311 So it is not just a question of money, it is also a question of service and a question of diversity of voice.
3312 MR. LAFRANCE: It is the same thing, I was giving the example of this gala.
3313 A few weeks ago there was a gala in Ontario about cultural life in Ontario and this gala was broadcast par Radio-Canada on all the Ontario, and it was not broadcast on Bell ExpressVu, because Bell ExpressVu is actually broadcasting the Montreal signal in Ottawa.
3314 So you don't have a local newscast in Ottawa and you don't have the special production we have for Ontario in Ottawa. So it is kind of ridiculous, because we invest a lot of money to produce that. We are important in the cultural life of Franco-Ontariens and they don't catch the signal. It is quite surprising.
3315 THE CHAIRPERSON: Digital transition, what are your plans in digital transition? Are you going to convert all your existing transistors? I doubt it. I mean, you have more than anybody else, as far as I know.
3316 MR. GUITON: We have currently about 650 TV transmitters across the country. We will not be able to afford to replace or replicate all those in a digital mode.
3317 What we have proposed, as you know, for some years now we have been proposing a hybrid solution. We think the hybrid solution makes sense economically and is appropriate, given the different technologies that now exist in Canada.
3318 Our proposal that we have been discussing in the DTV working group, et cetera, is to makes sure that where we have originating stations, that we will put in digital transmitters in those marketplaces. And in the other cases, we will use the virtual transmitter approach, which is the via BDUs.
3319 THE CHAIRPERSON: Two things. The working report puts a figure on the total amount that the transition will likely cost, publish own study, et cetera, I was quite surprised that one of the interveners here did not agree with the numbers of the working group report.
3320 Do you agree with the total cost of conversion as set out in that report?
3321 MR. GUITON: In the working group report?
3322 THE CHAIRPERSON: Yes, yes.
3323 MR. GUITON: To just give you some background here why the working group report was a little difficult, and it is not a critique. We were under extreme pressure to do this quickly. We would provide our information, others would provide their information and a total number would come back.
3324 It is hard to know what your share is of that number. So we think it is roughly approximate, but I can't guarantee that, because I haven't see the private's numbers.
3325 Just to be clear though, Mr. Chairman, in our hybrid model that we proposed several years ago to both the government and I think we filed it with the CRTC in the context of the over-the-air framework hearing of a couple of years ago, we put forward a number, it was an estimate and it is an estimate we re-evaluate all the time, but it would cost hundreds of millions of dollars, over $200 million, to replace our entire network in digital, just transmitter costs alone.
3326 THE CHAIRPERSON: Yes, but on the basis of a hybrid solution, you would more or less agree with the working group report if I understand that?
3327 MR. GUITON: That is correct.
3328 THE CHAIRPERSON: Now, we were very surprised that the Freesat issue was not at all addressed in the working group report. It seems to me that that is probably the most logical way of going at it, especially for somebody like you who has the biggest coverage across the country, covering a lot of areas that are very remote and sparsely populated. Clearly, if you have to convert -- you might remain analogue, or if you have to convert you will do it on a hybrid basis.
3329 I guess what I am trying to understand is why the Freesat was not explored further and why wouldn't it be, for CBC particularly, the logical solution?
3330 MR. GUITON: I can't speak for the industry as a whole, but certainly one of the reasons why the Freesat proposal may not be discussed more completely is there are a number of issues still outstanding with the Freesat proposal.
3331 And in our view, in order for the Freesat proposal to make sense, there is going to have to be some government money -- the criteria would have to be there has to be government money, there would be no obligation on conventional broadcasters to pick-up the tab, the offer of Freesat shouldn't relieve Bell of any regulatory obligations that would be forthcoming in the near future. And under those types of criteria, we could support Freesat, it could actually work.
3332 But I think the stumbling block perhaps, and I am not going to speak to the industry, those types of issue were not discussed in the context of the industry working group.
3333 THE CHAIRPERSON: Okay. I mean, I understand Freesat's stumbling block is the roughly $500 it would cost for subscribers to put up a dish, given a receiver and install it. If that is picked up by the government as it was, for instance, under the APTN North model then the rest of it I think falls into place relatively logically?
3334 MR. GUITON: Hopefully, and that is assuming no other costs would be borne by conventional broadcasters and that there are no regulatory catches.
3335 For example, the only reason I am saying this, Mr. Chairman, is that during the BDU reg review proceeding there was discussion by Bell that if the Freesat was to be offered they would be exempt from any fee for carriage regime and, to our mind, there is no logic in that at all.
3336 THE CHAIRPERSON: Okay. Terms of trade, where are you in that? I mean, you're the poster child for it, because I mean the whole idea came from Britain where with quite a different situation obviously, but the BBC has terms of trade with the production industry and I think that was the inspiration for the CFPTA to put this on the table.
3337 MR. STURSBERG: Well, I will speak to it. I will just say one last thing about over-the-air and the distribution of signals to people who, you know, currently receive it and who might not, because we can't replicate all the transmitter infrastructure.
3338 The other option that was put on the table was to create a very very small basic service that would be offered by the cable companies. And the idea was, originally, that it would be very inexpensive so that people, you know, could get all the conventional signals they are currently getting now over-the-air for a very small amount of money from the cable companies and take a very very basic basic.
3339 I actually used to work for the cable companies, so I have a little feel for this. When I looked at the size of the costs that they put on the table as to what they thought such a small package would cost, I was a little bit surprised by them, to be honest with you. And it was difficult for me to understand why it was so expensive.
3340 I still think it is a very attractive model. And my only point when we say this in our remarks is we think it would probably be worth having a hearing and looking at these costs in some detail, because it may well be that this is also a good solution to the problem.
3341 As far as terms of trade are concerned, we have had some conversations with the film and television producers about this. And where we are right now is that we are doing a joint study with them that we have commissioned together to be able to understand better the value of the various kinds of rights that are under discussion.
3342 The study is not concluded yet, but once we have that, then we think we are going to have a very good basis for having a sensible conversation.
3343 M. LAFRANCE: Pour répondre pour la partie québécoise, on a eu des discussions très positives avec l'APFTQ qui est le pendant du CPI et l'idée d'un terme de (inaudible) général...
3344 Nous, on est d'accord pour discuter de grands termes généraux, mais on ne pense pas qu'il doit y avoir une réglementation qui régit les rapports complets entre les producteurs et les diffuseurs. Mais je dirais que sur ce plan-là, les négociations -- ou les discussions, je devrais appeler ça plutôt des discussions -- avec l'APFTQ sont plutôt positives.
3345 THE CHAIRPERSON: Okay. And lastly, as you know, we have sort of switched gears in midstream because of the economic crisis and said, let's have a one-year term and then to gather data, make sure that everybody survives and then get to a second-year term.
3346 Is one year the right period or is it too short? I mean, I have heard from some people, saying the sooner you get over the better, because it has a tendency to become permanent and we need certainty. Others are saying just the opposite, you know, you are not going to know more next April than you know now.
3347 So what is your view of this?
3348 MR. GUITON: Our view, Mr. Chairman, is there are a number of policy matters that you are going to be dealing with and clarity on those as quickly as possible would be very helpful.
3349 In terms of the economic situation, whether we are going into -- you know, whether we are in an economic downturn that is going to last two years or three years, no one can tell. But with the clarity on the policy issues, that will be helpful.
3350 The policy issues, though, are fundamental. The fee for carriage issue is not going to be resolved just because we are moving out of recession. We all know that conventional business has been suffering before that and will suffer past that. So those issues are fundamental. If those can be resolved quickly, we think we can work within the one-year timeframe.
3351 M. LAFRANCE: Je voudrais simplement ajouter une chose sur la partie du « fee for carriage » spécifiquement, parce que ce problème-là, moi, je suis convaincu, est structurel. Il n'est pas conjoncturel. Il y a une partie du problème de conjoncturel avec la crise économique.
3352 Il y a un problème structurel avec les généralistes et le problème si on attend trop, si on ne réussit pas à régler le problème des modèles de financement des conventionnels, c'est qu'au Québec, depuis deux ans, il ne se fait à peu près plus de ce qu'on appelle les séries lourdes. Bientôt, il ne se fera plus de séries moyennes et un jour on aura perdu l'expertise pour le faire.
3353 Il faut agir rapidement. Il y a un vrai caractère d'urgence sur le financement des télévisions conventionnelles. Ça fait que pour les audiences, je ne sais pas, mais pour certains des enjeux qui sont soulevés, à mon avis il y a un véritable caractère d'urgence, actuellement, parce qu'on risque d'affaiblir toute l'industrie télévisuelle si on n'agit pas rapidement.
3354 THE CHAIRPERSON: You know, I realize that fee for carriage, we haven't said publicly -- you know, I will be part of the agenda for the summer discussions, clearly.
3355 And as far as the LPIF, Mr. Stursberg, you have spent a lot of time saying you are entitled to the LPIF. As you know, we said the same thing. So I don't know why you felt the need to reinforce it, but we have never said to make a distinction between a local broadcaster who is public and who is private. It seems to me it is local programming for the population, that is what is at issue.
3356 MR. STURSBERG: We agree with you. And it was really more a comment, because of the comments of some of the other parties who said that they thought we should be excluded.
3357 THE CHAIRPERSON: Michel, you have some questions?
3358 CONSEILLER ARPIN: Oui. Merci, Monsieur le Président.
3359 Je vais restreindre mes questions qu'à la transition numérique, mais ma première question est peut-être un peu plus générale. Et je l'ai posée à certains des diffuseurs qui ont comparu devant nous.
3360 On dit qu'il y a à peu près 9 pour-cent de la population canadienne qui ne reçoit pas actuellement les services de télévision par des entreprises de distribution, mais ce 9 pour-cent de population, pour Radio-Canada, il contribue combien d'heures d'écoute, en termes de pourcentage de votre écoute?
3361 Peut-être que vous n'avez pas la donnée, mais je suis sûr que vos services de recherche sont capables de la tabuler puis j'aimerais peut-être, même, la connaître par grand marché, plutôt que de l'avoir globale.
3362 M. GUITON: Oui... Oui, oui, oui.
3363 CONSEILLER ARPIN: Parce qu'on sait, par les mémoires qui ont été déposés que TVO et Télé-Québec, tous les deux disent que le 9 pour-cent de population qui ne reçoit pas le service contribue 22 pour-cent de leur écoute totale.
3364 M. GUITON: Oui.
3365 CONSEILLER ARPIN: Et c'est un peu... c'est pensable que ça soit similaire pour l'ensemble des diffuseurs canadiens que...
3366 M. GUITON: Oui.
3367 CONSEILLER ARPIN: Et on semble ne pas avoir retenu cette écoute-là, dans l'analyse, pour arriver à une solution, en disant... « hybride »... et puis, ceux qui n'en ont pas, bien ils n'en ont pas.
3368 M. GUITON: Oui. Si vous me permettez, monsieur Arpin, il y a plusieurs aspects dans cette discussion.
3369 Premièrement, on sait que le 9 pour-cent qui existe aujourd'hui va être diminué. On sait ça parce qu'avec le modèle hybride qu'on propose, on va avoir dans tous les marchés de la programmation locale, on va continuer d'avoir les émetteurs numériques. Ça va diminuer pas mal. On ne sait pas exactement --
3370 CONSEILLER ARPIN: Les émetteurs analogiques?
3371 M. GUITON: Numériques.
3372 CONSEILLER ARPIN: Mais c'est à ce moment-là que vous faites la transition?
3373 M. GUITON: Exactement. Mais juste pour vous dire... Je veux juste passer un commentaire sur le 9 pour-cent; vous avez dit 9 pour-cent.
3374 Par le temps qu'on arrive en septembre 2011 avec nos émetteurs, le 9 pour-cent ne sont pas les gens qui vont perdre leurs services, parce qu'une grande partie de ce 9 pour-cent va avoir l'accès à --
3375 CONSEILLER ARPIN: Je comprends, mais dans les marchés où vous n'entendez pas procéder à la transition numérique?
3376 M. GUITON: Oui, oui... Oui, je comprends.
3377 CONSEILLER ARPIN: Parce que dans les marchés, vous entendez faire la transition numérique c'est --
3378 M. GUITON: Je veux juste clarifier ce point.
3379 CONSEILLER ARPIN: Le problème...
3380 M. GUITON: Oui... oui.
3381 Et deuxièmement, on va simplement fournir --
3382 CONSEILLER ARPIN: Vous dites en anglais « is moot ».
3383 M. GUITON: On va certainement fournir les indicateurs que vous avez demandés.
3384 Et je passe à monsieur Lafrance.
3385 M. LAFRANCE: Il y a peut-être deux choses que je voudrais ajouter.
3386 La première, c'est qu'il y a, par rapport à...
3387 Puis je suis le premier à penser que sur le plan démocratique, tout le monde doit avoir accès à la télévision publique et tout ça, et donc il faut absolument le faire. En même temps, il y a une vraie difficulté économique majeure... majeure-majeure-majeure, hein?
3388 Encore aujourd'hui, la radio de Radio-Canada n'est pas disponible à 100 pour-cent tout à fait des Canadiens. Elle est disponible, vraiment, à 97 ou 98 pour-cent des Canadiens.
3389 Alors, le 3 pour-cent qui reste ou le 2 pour-cent qui reste est énormément coûteux à rejoindre. Alors, le problème existe en radio, il existe en télévision.
3390 Et pour prendre l'exemple des 9 pour-cent de Canadiens qui ne sont pas touchés (ce qui est un chiffre important), encore là, l'univers numérique ne règle pas tout parce que je vous rappelle juste qu'à Ottawa, c'est quoi, 25 ou 30 pour-cent des gens qui regardent la télé qui sont des abonnés d'ExpressVu n'ont même pas le signal local. Et là, on parle de 25 ou 30 pour-cent; c'est un problème urgent.
3391 Donc, l'univers numérique ne réglera pas tout ça et il y a... Je veux simplement surtout dire qu'il y a une vraie-vraie-vraie incapacité mathématique économique actuellement, dans cette chose-là, qu'il va falloir regarder. Et c'est un problème qui, à mon avis, ne peut pas être le problème d'un seul diffuseur. Ce n'est même pas le problème d'une industrie, c'est un problème de politique publique majeur-majeur-majeur. Et il va falloir le régler tout le monde ensemble.
3392 CONSEILLER ARPIN: On a entendu, dans la journée d'hier, vos affiliés du Québec nous dire que c'était plutôt 40 pour-cent, dans leur cas, de l'écoute, qui était sur les satellites, donc...
3393 M. LAFRANCE: Mais ça ne change pas la situation économique.
3394 CONSEILLER ARPIN: Non, non. C'est sûr. Ça l'empire.
3395 L'autre question que j'ai, quant à...
3396 Est-ce que, dans les territoires où vous n'entendez pas procéder à la transition numérique HD, avez-vous pensé à une solution coopérative de type SD, avec les autres diffuseurs? Et, est-ce qu'il n'y a pas une possibilité...?
3397 On sait que la technologie de type SD permet le multiplex. On le voit... c'est comme ça qu'on l'implante, d'ailleurs, dans certains pays européens.
3398 Est-ce qu'il n'y aurait pas lieu d'avoir des discussions avec les autres télédiffuseurs pour voir s'il n'y a pas moyen de créer des modèles de type multiplex pour offrir la télévision en SD?
3399 Je comprends que ce n'est pas le HD, bien... ça demeure un service hertzien pour une population qui ne souhaite pas, pour toutes sortes de motifs, soit économiques, soit d'intérêts, souscrire à la télévision par câble ou par satellite.
3400 Et donc... c'est une avenue qui n'est pas explorée. Or, c'est une avenue qui est bien connue; premièrement, certains pays l'ont déjà adoptée. Puis le modèle de la radio numérique est celui-là aussi, hein? Donc...
3401 Et les formules sont bien connues, de partage puis de réallocation.
3402 M. GUITON: Merci, monsieur Arpin. On a considéré cette option. Ça ne change pas les économiques de la situation, même si les coûts...
3403 CONSEILLER ARPIN: Mais ça la divise au moins par quatre.
3404 M. GUITON: Ça divise s'il y a toujours un quatrième radiodiffuseur.
3405 CONSEILLER ARPIN: Oui, oui.
3406 M. GUITON: Deuxièmement, il y a toujours les coûts. Et les coûts sont nationals. Ça veut dire, il faut répliquer encore tout notre système. Et peut-être ce n'est pas les 200 ou 300 millions de dollars, peut-être c'est 150, 100 millions de dollars; on n'a pas ces sous.
3407 Alors, la situation économique est toujours là pour une population, comme je l'ai dit avant, qui diminue tout le temps.
3408 Et comme vous avez dit, monsieur Arpin, ça donne deux qualités de services, au Canada. Certaines personnes vont recevoir SD et certaines vont recevoir la télévision numérique HD--
3409 CONSEILLER ARPIN: Oui. Mais dans le modèle que vous avez décrit plus tôt...
3410 M. GUITON: Oui.
3411 CONSEILLER ARPIN: ... certaines personnes vont recevoir HD puis certaines personnes vont recevoir rien. Donc...
3412 M. GUITON: Je ne comprends pas ça, mais... Dans notre modèle hybride?
3413 CONSEILLER ARPIN: Oui. Les gens qui... À partir du rapport qui nous a été remis à ce jour, il n'y a pas d'entente pour offrir un service de radiodiffusion par distribution.
3414 M. GUITON: Notre réseau, monsieur Arpin, est si vaste que les coûts, même si on divise un peu... On n'a pas de partenaire dans tous les cas. Ça va exister des coûts « significants ».
3415 Mais je vais passer à François. Peut-être ajouter les détails techniques. Parce qu'on avait pensé à cette option.
3416 LA SECRÉTAIRE: Excusez-moi. Si vous me permettez d'interrompre deux secondes.
3417 I would like to everyone to please turn off your Blackberries and cell phones, because we are losing some of the interpretation in the front.
3418 Thank you.
3419 M. GUITON: Est-ce que vous parlez à nous autres? C'est nous?
3420 LA SECRÉTAIRE: Tout le monde dans la salle, s'il vous plaît.
3421 Je m'excuse de l'interruption.
3422 M. CONWAY: Bonjour monsieur.
3424 Bon. Pour rajouter à Steve, la première chose, je vais un peu répéter, mais je vais mettre l'emphase.
3425 Pour nous, la conversion au numérique, c'est vraiment la conversion à la haute définition. On investit beaucoup d'argent à produire des émissions à haute définition, puis on veut considérer aussi le même niveau de programmation locale, régionale en haute définition.
3426 Donc, on aimerait que ces programmes-là soient livrés à tous les Canadiens avec la même qualité et le même niveau de granularité au niveau régional.
3427 Dans notre modèle hybride, ce que vous avez dit n'est pas exactement vrai. Notre modèle hybride est basé sur le fait qu'on va mettre des émetteurs numériques dans les grands marchés et on va chercher une solution avec les BDU pour que le restant des Canadiens soient desservis avec les programmes qu'on a produits en haute définition, que ce soit des solutions comme Freesat ou des services de base diminués à frais/coût, c'est ça qui est la base du service hybride.
3428 Pour revenir à votre modèle SD multiplex, les pays qui initialement ont été intéressés à ça en Europe ont changé parce qu'ils se sont aperçus que l'appétit des consommateurs, c'est pour la HD, ce n'est pas pour plusieurs services sur un émetteur.
3429 Donc, l'Europe (comme par exemple la France, l'Angleterre), tout le monde s'en va vers utiliser un émetteur pour la HD. Les seules variations qu'on voit, c'est peut-être un radiodiffuseur va prendre son émetteur pour un HD puis diminuer un petit peu le débit binaire pour mettre un service SD pendant une période de la journée.
3430 L'autre question, c'est que même si on va avec ce modèle-là, le consommateur va devoir quand même s'acheter un convertisseur pour recevoir le signal numérique. Donc, ce n'est pas un service gratuit.
3431 Donc, s'ils ne veulent pas investir pour s'abonner, ils risquent de ne pas vouloir investir pour s'acheter un décodeur pour recevoir le signal numérique. Et dans ce cas-là, on le demanderait d'acheter un décodeur numérique pour recevoir une version SD qui n'est pas ce qu'on voudrait qu'ils reçoivent.
3432 Rajoutez à ça la question des coûts est plus compliquée qu'on pense.
3433 Premièrement, on n'a pas des... quatre partenaires dans toutes les... Dans plusieurs zones où on est... où on ne mettrait pas d'émetteur dans les zones éloignées, on est souvent seul, là. Donc, avec qui on va diviser? Je ne le sais pas.
3434 Deuxièmement, il faut acheminer. On n'est pas nécessairement -- si on prend des sites intermédiaires, on n'est pas nécessairement aux mêmes sites que les privés. Donc là, il faut...
3435 Pour pouvoir partager le même émetteur, la même infrastructure, il faut acheminer tous les signaux, les multiplexer. Ça engendre des coûts. Donc, il faut mettre des émetteurs, il faut investir dans de la distribution à ces émetteurs-là.
3436 Donc, ce n'est pas nécessairement une solution. Puis comme Steve disait, quand on parle des choses de l'ordre 400 millions, qu'on divise par quatre, on est encore dans l'ordre de 100 millions. On a encore le problème. Il n'y a pas l'argent. On a de la difficulté, même, à trouver le financement pour un scénario hybride réduit.
3438 CONSEILLER ARPIN: Merci.
3439 Merci, Monsieur le Président.
3440 LE PRÉSIDENT: Len?
3441 COMMISSIONER KATZ: Good morning.
3442 I just have one question and it is actually related to your submission this morning on page 9, if I can take you there. It is at the last paragraph, where you say, "All conventional broadcasters operating in small markets, including CBC/Radio-Canada, should be entitled to access the LPIF in a way that encourages commitment, rewards success."
3443 My first question is, what is your definition of a small market? There have been different definitions floated around of a small market.
3444 MR. GUITON: We were citing your definition here, which is anything less than --
3445 COMMISSIONER KATZ: Than a million?
3446 MR. GUITON: -- a million, yes. With I think it is the knowledge of the official language.
3447 COMMISSIONER KATZ: Okay. And I am intrigued by the last part of that sentence, talking about rewarding success. How would this be manifested and how would you see success being rewarded?
3448 MR. GUITON: There are two aspects to this I think. And the formula that the Commission has most recently come out with in its amended version, which we support 100 per cent, would result in it going forward, those people that are committing more to local expenditure are rewarded by getting a larger share of the fund.
3449 So when you are moving forward and you are enhancing your expenditures on local, that is reflected in the proportion of the fund that you are able to draw from. You invest more in the programming, you are going to get rewarded for it. So that is a measure of success.
3450 In addition, the second aspect is within the decision yourself that you came out with in October, you had a number of criteria, whether it be new bureaus -- I am trying to think of all the items that you listed off. But some of those we would consider are adequate as well. And we have identified some of them in our March 30 submission.
3451 COMMISSIONER KATZ: So the success is based on spending, not necessarily on audience or --
3452 MR. GUITON: Actually, it is both aspects. What I was trying to say is that the formula itself rewards success automatically. In addition, the criteria that the Commission may want to use to tweak the fund or to look at in the fund itself on its review of the fund, are some of the things that you listed in your decision in October.
3453 In our March 30 submission we examined some of the proposed success factors that the CAB had put forward and we didn't think they were appropriate, such as audiences.
3454 The difficulty with audience, is a good chunk of our French services are outside of Quebec and the audiences there are not going to be large. We are talking about minority markets. So to put that type of criteria onto broadly all of the stations is a bit of a difficulty for us.
3455 The other thing we mentioned was in the CAB document they were mentioning that a success factor should be awards. And that is a great idea if the awards aren't necessarily the CAB awards.
3456 So we just have some comments on the list, but we see there is two aspects to it. There is the automatic functioning of the success via the formula that you have proposed, which we endorse, and then the other criteria that the Commission can use to evaluate whether or not this is really working.
3457 COMMISSIONER KATZ: Thank you.
3458 THE CHAIRPERSON: Peter.
3459 COMMISSIONER MENZIES: Just maybe to follow-up on that.
3460 I am a little confused by that, spending is a definition of success. And I would like to have your response to the idea that maybe LPIF funds would be distributed based on established ratings of success, like ratings.
3461 So in a market that is competitive and in a market that you were the sole OTA broadcaster, you would get 100 per cent of the local audience for that. In one in which you were competitive, it would be divided among -- based on your ratings in the area. And that would not only measure what you were spending, but it would measure the audience's response to that spending and give you some feedback based on how well you were serving that audience.
3462 MR. LAFRANCE: I would start with the French market to say that it is quite difficult, especially outside Quebec. You know, it would be totally impossible to base that on the audiences because, in fact, that is not the way to award success. I think we have to be present at the community, we have to be there, it is important to be there. And I think by success, we mean to be present and to produce quality programming and to be significant for people there.
3463 And it is not easy actually to award success by way of distribution. Here in Ottawa, as far as 25 per cent of people cannot catch the original programmation. It would be difficult to qualify success as audiences, because they cannot catch it anyway.
3464 So I think we will have to find a way to define that, we will really enhance the quality of programs.
3465 COMMISSIONER MENZIES: Okay. One of the other things I just wanted to get at is in terms of -- and just to give you a little background. I mean, we don't actually have any money, we just have the ability to access other people's money for you.
3466 And if we are going to do that, I think we need to be able to justify to other people that the people we are giving the money to have exhausted every possibility in terms of their own efficiencies, and creating their own efficiencies internally to adapt to a new media environment.
3467 And here is where maybe you can help me. Obviously, the media world is changing and has changed a lot over the last number of years. Internet is having a huge and an execrable impact, right, that is not going away. Whether it continues to grow as much, I don't know.
3468 But everybody comes before us and says, the conventional TV business is never going to be the way it was before and that the business model is broken.
3469 Well, if it is never going to be the way it was before, I need to know what you have done to adjust your structure to what has been done before. I know you have issue layoff notices, but that just makes a structure smaller.
3470 I am interested in what you are looking at fundamentally in recreating your structure, doing strategic reviews of whatever aspects you have, looking for synergies among reporters, all those sorts of things. Those are the sorts of things we need to know before we could possibly go to other people and say, we need your money to go to these guys.
3471 MR. STURSBERG: I think that is a completely fair question. You may have noticed, we tried to keep it under wraps because we didn't really want to have our competitors understanding exactly what we were doing.
3472 We have been working on this issue for a long time. But a year and a half ago we decided that what we would do is we would take all of our news resources and we would integrate them into one news department. Previously, we had three, so we had a radio news department, we had a television news department and we had an internet news department.
3473 And over the course of the last little while, we have been figuring out how exactly do we integrate them such that we can have a common editorial policy and a common assignment of resources to be able to feed all of the different platforms from our pool of journalists and cameramen and producers in a way that optimizes the efficiency of the operation so that we can do as much news as we possibly can in as many places as we possibly can.
3474 So that is exactly what it is that we have been doing and that is exactly what we announced internally two weeks ago this coming Thursday. So we have been very very preoccupied with this question. And we think that what it will do is it will allow us to achieve not just some cost savings, but also allows us to produce a more robust newscast so that when we cover a story, we can cover the story in a way where we can extend it across the different platforms. So the internet is very good for certain kinds of things, and radio is better for other kinds of things.
3475 So when you cover the story, you will be able to say, fine, we are going to cover it in a way that maximizes the amount of information that we can get to people across the different platforms, given their different values.
3476 So yes, we are very very conscious of that and we have been pushing very hard on it.
3477 MR. LAFRANCE: If I can add something, because I recognize this is a very important question and we have, in a certain sense, the "fardeau de la preuve" about that, to say that our money is split on programming and on the field.
3478 And if you look at the history of conventional networks, this change due to defragmentation didn't start five years ago, it started about 20 years ago, 25 years ago. In fact, in the last 25 years, the money that Radio-Canada received didn't increase in constant dollars.
3479 But if you look at Radio-Canada 25 years ago, most of the big shows on the primetime was called, "Ma sorcière bien-aimée", le "Docteur Welby", stuff like that coming from the U.S.
3480 We increased the number of (inaudible), we increased the number of regional stations we have. We launched the internet service, we launched new specialized channels, we really increased the service to the public and the quality of the television we produce and we really increased both the quantity and the quality of the Canadian programs we produce.
3481 And I would invite all of you to come in Sherbrooke next September when we will open the new station in Sherbrooke, and you will realize that we changed totally the way we do things. And the money we put on the regional station in Sherbrooke is in the field for journalists, is in the field for announcers and is not on the structure and on the systems.
3482 And I am really proud of how we transformed this corporation in the last 20 years to be sure that we deliver a service which is a great value for Canadians and which is really a service of the 21st Century and I am really convinced we did the job on that.
3483 COMMISSIONER MENZIES: Okay, thank you.
3484 And I am sure you are aware that you are notorious among private news divisions, fairly or unfairly, for having four people from four different of your news divisions at the same press conference and that sort of stuff.
3485 But my point is, I don't want to belabour this this morning, but anymore information you have along those lines about internal restructuring? We do have an in camera --
3486 MR. LAFRANCE: Just a little point, because I often hear that example.
3487 If you go in a French conference and you see one journalist from TVA and one journalist from Le Journal de Montréal, they are both from Quebecor, but it is not the same brand. So really television is two media, so sometimes there are two journalists because it is two media. But we are on the same brand, so it looks like we are more than them.
3488 But if you look at the other Global Media we have in Canada, when they go there they are more than one journalist for each media, and I hope so, because diversity of voice is also an issue there. And I think, again, we really increase our efficiency, but we will continue to cover this country with all the difficulty we have and all the platforms we have and you will continue to see some stuff like that.
3489 COMMISSIONER MENZIES: Sure. I mean, that debate is a good one and it is, you know, for another day and another time.
3490 But I was just going to say, we don't have to discuss it here, but if you have anymore information you can send us or willing to send us and update us about what Mr. Stursberg mentioned about, you know, looking for organizational efficiencies beyond --
3491 MR. STURSBERG: We would be happy. And as to what Sylvain was saying about Sherbrooke, I mean, if Commissioners are interested, we would be happy to actually organize a detailed briefing on the new structures and the new productivity measures and the efficiency measures that are in place and that are being extended across not just within English news services. But what we have done in places like Ottawa and --
3492 THE CHAIRPERSON: Hold it, hold it. This is leading on --
3493 MR. STURSBERG: Okay, I was just -- anyways, we make the offer.
3494 THE CHAIRPERSON: I will take you up on it. I will have my staff set something up.
3495 MR. STURSBERG: We would be thrilled.
3496 COMMISSIONER MENZIES: And then I have just a couple more questions that we can all get through quickly here.
3497 You mentioned an equal playing field. And I just need a bit of clarity on that. I wasn't sure who you want the equal playing field with. If we give you an equal playing field with specialty channels, then you don't get mandatory carriage. If we give you an equal playing field with private networks, then there is the question of your public funding and that sort of stuff.
3498 So I am confused as to who we are trying to level the playing field with.
3499 MR. GUITON: Right. Let me try and take that.
3500 The first one, the specialties, in fact, what you said is not quite right. For decades this Commission has regulated speciality channels by giving them both mandatory carriage and fee for carriage. For decades we have got -- let me give you a list. I will take an undertaking to give you a list of every specialty channel that has mandatory carriage and --
3501 COMMISSIONER MENZIES: Sir, I don't want to argue with you, I just want to understand the what you are looking for.
3502 MR. GUITON: But Commissioner, it is wrong what you are saying. That is the way the Commission regulated for decades. And the reason they did that is for cultural reasons. They wanted to make sure that these services are carried. The business model for specialty services was subscription, that is correct, but the Commission wanted to make sure that those services were seen by Canadians and they granted them mandatory carriage.
3503 COMMISSIONER MENZIES: Yes.
3504 MR. GUITON: And that is the model. So the level playing field that we are talking about is that level playing field.
3505 COMMISSIONER MENZIES: Okay, that is good. That is just what I needed to know, which level playing field we were talking about.
3506 MR. GUITON: Fine. And the second point -- I am sorry if I am agitated on this one.
3507 COMMISSIONER MENZIES: I can agitate you some more if you would like, but I don't think we have the time.
3508 MR. GUITON: The second point -- and I promise to calm down -- is with respect to the differences between ourselves and other private conventional broadcasters in receipt of subscription revenues.
3509 We don't see any distinction between ourselves and the private conventionals. As you know from many documents we have filed with you over the last several policy proceedings, the television services on either side of me are dependant on approximately 50 per cent of their revenues come from commercial revenues, a big chunk of that is advertising.
3510 The Commission and government, historically, have directed us to go into the advertising marketplace. We were directed to do that. So we are equally reliant -- not equally, 50 per cent -- but we are heavily reliant on advertising revenues to the extent that subscription revenues are provided as a solution for private conventional broadcasters. We are just as eligible and obviously our business model is very dependent on a solution to the advertising marketplace.
3511 COMMISSIONER MENZIES: Okay. And my last question then, it is like it was reasonably well -- I am not talking about this year, 2009, in terms of recession, because I don't think everybody has all their numbers in, but it is obviously bad in terms of advertising revenue.
3512 But last year, in terms of advertising revenue, has your share of the conventional television pie been growing, staying stable or shrinking?
3513 MR. STURSBERG: You mean in 2008/2009 fiscal or calendar?
3514 COMMISSIONER MENZIES: 2008.
3515 MR. STURSBERG: Well, in 2008 I think it would be relatively stable in terms of its proportion. Yeah, I think that --
3516 COMMISSIONER MENZIES: If you could file that number with us, that would be great.
3517 MR. STURSBERG: If you like, we will have a look and we will send you the exact number.
3518 COMMISSIONER MENZIES: Okay. Thank you very much.
3519 THE CHAIRPERSON: Okay, thank you.
3520 Before I let you go, there was one contradiction of the staff. You said that you will offer Freesat as long as it doesn't mean any additional cost. But then in the next breath you said you wanted all stations to be carried on DTH, which clearly means additional costs.
3521 So can you reconcile those two statements for me?
3522 MR. GUITON: The cost that I was talking about was that the Freesat proposal should not have any cost to conventional broadcasters. In other words, we should not be required to contribute financially to the Freesat option. That is what I was talking about.
3523 THE CHAIRPERSON: But you appreciate that if your wish is granted and, in effect, all stations are on DTH there will be additional costs, which will have to be absorbed somehow into the system?
3524 MR. GUITON: Understood.
3525 THE CHAIRPERSON: Okay, thank you.
3526 Those are all our questions.
3527 Maître Dionne, do you want to recap the undertakings please?
3528 MS DIONNE: Merci, Monsieur le Président. I have four undertakings.
3529 File comments and what you feel should be corrected on the Fee for Carriage Impact Analysis that was put on the public record on Monday.
3530 Second, file details on where you would spend the monies received on the Local Programming Improvement Fund.
3531 Third, file figures showing what percentage of your viewing audience are represented by the 9 per cent of viewers who rely on over-the-air and who would lose service after the digital transition.
3532 Four, information about efficiencies or cost-saving measures that have been taken or envisaged to be taken.
3533 And if you could please file the information as part of your final submissions to be filed before May 13.
3534 Thank you.
3535 THE CHAIRPERSON: Excuse me, I just see on my computer my colleague, Madam Poirier, had a question.
3536 Go ahead.
3537 CONSEILLÈRE POIRIER: C'est simplement une question de détail.
3538 J'aurais aimé savoir peut-être de monsieur Conway... Quand on a demandé des chiffres suite à la question de monsieur Arpin, à savoir si, dans les fameux marchés où on voudrait obtenir le nombre d'heures d'écoute par grand marché (tantôt on vous a posé la question), est-ce que vous êtes à même, aussi, de nous donner la situation géographique de ces marchés-là et aussi les conditions socio-économiques des gens qui utilisent ces services-là et qui constituent votre clientèle dans les grandeurs d'écoute, en terme de nombre d'heures d'écoute?
3539 MR. LAFRANCE: I think we will have to check with the research department to...
3540 ...et juste pour savoir si on peut, effectivement, faire cette combinaison-là. Mais on va essayer de le faire. On peut essayer.
3541 CONSEILLÈRE POIRIER: Tout à fait.
3542 J'aimerais savoir si les gens, en fait, qui constituent une grande portion de vos heures d'écoute, dans quelles conditions socio-économiques sont-ils? Et aussi, où sont-ils localisés géographiquement (si c'est possible de l'obtenir)?
3543 M. LAFRANCE: O.K.
3544 CONSEILLÈRE POIRIER: Merci beaucoup!
3545 M. LAFRANCE: Merci.
3546 THE CHAIRPERSON: Thank you very much. We will take a 10-minute break.
--- Upon recessing at 1041
--- Upon resuming at 1058
3547 LE PRÉSIDENT: Commençons, Madame la Secrétaire.
3548 LE SECRÉTAIRE: Merci, Monsieur le Président.
3549 I would now invite TELUS to make its presentation. Appearing for TELUS is Michael Hennessy. Please introduce your colleagues, and you will have 15 minutes to make your presentation.
3550 MR. HENNESSY: Thank you.
3551 Good afternoon, Mr. Chair, Commissioners, my name is Michael Hennessy and I am the Senior Vice-President, Regulatory and Government Affairs at TELUS. With me on the panel today, as usual, is Ann Mainville-Neeson, Director, Broadcast Regulation at TELUS.
3552 TELUS is here today because we are concerned that this proceeding for a short-term renewal of the licences of the conventional television sector broadcasters has the potential to result in a significant bailout of the sector at the expense of BDUs, their shareholders and consumers.
3553 We submit there really is no empirical evidence to support that outcome and that any changes to OTA policy which impact other stakeholders should really only be addressed in the longer-term renewal and policy hearings announced for next year.
3554 To the extent that short-term regulatory adjustments are needed to help out broadcasters in this proceeding, we think such adjustments should be limited to reducing the obligations of the broadcasters under their conditions of licence or CRTC policies.
3555 As communications enterprises, we are all being negatively affected by the economic downturn and we would submit that it would be unfair to consider taxing BDUs to aid the businesses of broadcasting conglomerates that continue overall to produce profits despite some parts of their business being challenged.
3556 Simply put, much of what is purported to cause the financial issues for conventional broadcasters is not our fault. And to try to address or remedy these challenges at our expense, with little evidence or facts on the table, is inappropriate. The short-term renewal process was initially supposed to look at relaxing regulatory obligations in the face of the economic downturn; we submit it was not intended to look at a redistribution of income along the lines that Mr. Fecan suggested the other day within the industry.
3557 So we submit, first of all, that TELUS isn't responsible for declines in advertising revenues for the conventional sector. And not only that, we would say that it is almost impossible at this point to separate the impact of the current economic downturn on advertising from systemic declines without some form of detailed analysis.
3558 We are not responsible for what became an over-valuation of assets that broadcasters are now saddled with because it turned out they paid too much for recent consolidations.
3559 In fact, if you think of the write-offs, such as Citytv took, that may improve the economic picture for broadcasters going forward, but it is not clear that those write-offs are reflected in the future views of where the industry is going.
3560 TELUS isn't responsible for bidding wars that increased the cost of U.S. programming, thereby squeezing margins of the broadcasters. Those bidding wars really were a consequence of too many conventional players in the market and some players trying to drive others out. I think everybody realizes that.
3561 And finally, the horizontal integration of conventional and specialty services approved by the Commission only in the last couple of years has really helped broadcasters to remain profitable, even given bad decisions and bad timing.
3562 We are not suggesting there aren't structural issues surrounding local television which the Commission should address, it seems there are. Rather, we are suggesting that before contemplating more contribution on BDUs, the Commission should look at how to rebalance the obligations and costs of the broadcasters.
3563 Threats to close local stations unless we contribute more to broadcaster coffers cannot form the basis of sound public policy, but rather should be viewed for what they are, threats.
3564 In our opinion there is no financial record to support increasing the funding to the newly created, not yet operational Local Programming Improvement Fund. The broadcasters, after all, seem to be looking to using the LPIF as a bailout, pure and simple, all the while banking on more bailout money through fee for carriage in another hearing next year. In fact we calculate that broadcasters are seeking over $500 million in income transfer annually.
3565 In order to even reconsider closing local stations, CTV and Global both advocated a 3 per cent contribution to the LPIF, bringing this pool of subsidy money to up to $180 million dollars. That is more than the federal government contributes to the Canadian Media Fund annually.
3566 And this is just what they state they need for short term. They both clearly indicated in their presentations that this amount would not be enough for long-term sustainability and fee for carriage would also still be needed as an additional revenue stream to face the future.
3567 By the Commission's own estimates tabled at the beginning of the hearing, a 50 cent carriage fee for local over-the-air television broadcasters would transfer an additional $352 million from BDUs to the conventional television sector. Taken together, that would amount to a $532 million dollar tax on distributors and consumers in order to prop up the business models that the private broadcasters have created themselves.
3568 That's a billion dollars every two years and growing audience grows, or another way of looking at it, every year that is double what both the private sector and public sector contribute to the CTF, or now the Canadian Media Fund. All of this subsidy is being considered without any guarantee that the broadcasters have any viable plan to repatriate audiences that have moved to other components of their business.
3569 As the Commission has recognized, conventional television stations are now part of the holdings of large broadcasting conglomerates. These consolidated businesses don't just own and operate conventional television, but also specialty services and many other media properties that they claim are eroding audience. In fact, it is less than two years since the CRTC approved business plans by the broadcasters to consolidate in order to respond to increased competition.
3570 Overall broadcasters remain profitable and overall it is recognized that there are synergies to be had through cross-media ownership and that the financial health of one division of these groups does not tell the whole story.
3571 Next year's group-based renewal process is intended to measure how significant such synergies are. This year's process should not assume that consolidation was bad and some other party has to make up the cost of bad investments, particularly in light of ongoing profitability at the corporate level.
3572 The Commission shouldn't be pressured into simply throwing someone else's money at the problem of local television, especially not in a proceeding looking at short-term renewals. The industry has taken big write-offs and will be better positioned to respond to the marketplace as we come out of the economic crisis.
3573 While the CRTC has suggested the fee for carriage might reduce industry margins by 4.3 per cent, absent pass through to consumers, this reinforces a misconception about the profitability of different elements of the distribution sector. Not all BDUs are making money.
3574 Satellite is only now showing some measure of profit but is still cash-flow negative and we are still in the investment building stage of our TELUS TV service. Any new tax or increase in existing obligations has a disproportionate effect on new entrants such as TELUS and likely on small cable systems. And we submit that this raises a good question as to why broadcaster distributors with no profit must subsidize broadcasters that are already profitable?
3575 The Broadcasting Act provides as an objective that "each element of the Canadian broadcasting system shall contribute in an appropriate manner to the creation and presentation of Canadian programming."
3576 We think it is not appropriate to tax one element of the system that is not making money yet in order to top up a decrease in profits of another element of the system. We submit it is not "appropriate" to tax BDUs to backstop bad business decisions by broadcasters or what may be systemic shifts in demand by audiences. Contribution by BDUs shouldn't be about making broadcasters whole.
3577 Significant contribution is already made by BDUs when one adds up the benefits already provided to conventional television, from mandatory carriage on basic, to simultaneous substitution, to payments to broadcasters in lieu of performing non-simultaneous substitution on time-shifted signals and, of course, 5 per cent financial contribution to the CTF or other eligible funds and a 1 per cent to the soon implemented LPIF.
3578 These are significant contributions to the conventional television sector in addition to the investments we are making in CAPEX. And we submit that if more is contemplated, we have a right to expect any tax is supported by actual evidence not rhetoric.
3579 The Commission has already said fee for carriage is off the table in this proceeding. But we think increasing the contribution charge for the LPIF by another $120 million should also be off the table. We don't see any difference between revenue transfer in the form of fee for carriage or in the form of contribution increase. When you are the payer, it all looks the same on the bottom line.
3580 The fact that broadcasters are feeling the strain of the current economic downturn is not a reason for the Commission to consider a bailout. The downturn is affecting the economy as a whole, not just broadcasters. Bailouts are best left in the hands of government so it can make the broader decision as to which businesses it considers necessary to support through public funds.
3581 This is not the time to consider major structural solutions. The true picture of the future of conventional television is clouded by an unprecedented economic downturn. The Commission has already recognized that this is not a good time to consider the appropriate level of obligations for conventional television in the long-term. That is why it announced short-term renewals for this year.
3582 These are structural issues which require looking at the broader picture, namely the financial state of broadcasting groups, something the Commission has already announced it will do.
3583 Finally, or almost finally, with respect to the early implementation of the new consent regime for distant signals, something on which the Commission has sought comments, we submit that if the Commission wants to speed-up the implementation of the new consent regime, in order to provide another revenue stream to conventional television broadcasters, then it should also implement the rest of the reforms announced in Public Notice 2008-100.
3584 None of these reforms in that decision needed to be tied to or postponed to the August, 2011. Looking at early implementation of only part of the package of reforms announced in Public Notice 2008-100 will not set the proper stage for negotiation of carriage fees. In particular, we would like to see early implementation of the new streamlined packaging rules, because all of that really is part of a much larger puzzle.
3585 So just before I finish, let me end with one thought that I think has been missed or at least little discussed. And that is, you know, let's assume for a second that we are really dealing with a systemic or market failure regardless of the economic downturn. So the question to me is, you know, if it is a market failure, is a subsidy likely to help or compound the cause of the problem?
3586 Perhaps when we look particularly at the failure of the E! channels or the failure of much of the A-Channel, what we are looking at is nothing else but a very normal response of the market as designed by audience preference to channels that overall were not as attractive as many of the other conventional channels, such as CTV or CBC.
3587 And if that is the case, then does a tax really help these channels or, at the end of the day, does a tax sustain something that the market has already decided it doesn't want and does it sustain it at the cost of the strength, diminishing the strength of the broadcasters that have actually proven they can serve the market?
3588 So I think one of the biggest questions to address before we actually talk about tax is, do we have channels that consumers, the audience, have already determined are not successful, then the question is should we continue to support them?
3589 Thank you for your time, Chairman, Commissioners, we are open to your questions.
3590 THE CHAIRPERSON: Thank you for your presentation.
3591 On your last point, surely you know that that is the wrong way to look at it. If you look at it purely from economic points and market failures of broadcasting it doesn't make sense. It is an aspirational statute, it posits all sorts of objectives which the market would not on its own produce. That is why we are here, that is why we are regulating, otherwise we wouldn't need to be.
3592 And the point is that local programming and local news is something that the Act makes sure that is there. Once it is a stated objective, it is something that Canadians want, but it is something that the market will not support on its own. That is why we are having this hearing, that is why we are talking about an LPIF.
3593 So I don't understand why you say "let's determine whether there is a market failure or not." We know the market will not support local programming.
3594 MR. HENNESSY: Chairman, with all due respect, I think it is a critical question. I am not saying the same test need apply to every channel. But let's remember, you know, for many years the Commission felt that the market would not sustain a third national network. And we ended up under the two-stick policy in the English-language market with as much as five national networks.
3595 Many of these channels in trouble today didn't exist until very recently. Clearly, there are markets where you will say if we lose X channel there is nothing left, and that is a significant public policy question, but that is very different from say a market where you may have as many as four or five alternatives after the exit of a channel. And I think you have to look at each market separately to determine what is appropriate.
3596 You know, up until now the Commission has always licensed conventional television channels based on what it felt the market could sustain. So I don't think it's an inappropriate test to apply. You know, if it's clear the market can't sustain it, then you ask the question: Should the market sustain -- or should there be mechanisms to sustain it in any event?
3597 But I think you have to look at the economics first and the impact on all the players before you come to that conclusion.
3598 THE CHAIRPERSON: But, Mr. Hennessy, the LPIF, by definition, only applies to markets under a million, so there -- you can read into it there is, clearly, they feel there's no support needed in markets over a million. They're talking about the small markets.
3599 Now, I grant you there's some which probably are over served and don't need two stations also, but that is part of -- the economics will bring that result.
3600 But the fact is that the time to make markets on the air -- try to make local programming in markets under a million and make a profit on it, the evidence is quite clear that that's next to impossible to do. That's why we created the LPIF.
3601 MR. HENNESSY: Yeah, and you know --
3602 THE CHAIRPERSON: You don't dispute that?
3603 MR. HENNESSY: To be fair, the LPIF has yet to be tested, although we're now talking about increasing the tax on it.
3604 I think, again, you know, one of the big questions that, you know, another elephant in the room, if you wish, is, you know, if there is more funding for the local programming -- which is only a small component of the over-the-air television station in the small market -- is the station itself still viable or will it also need other support mechanisms to exist?
3605 You can't exist simply by making sure that one element of your programming is sustainable if the owner of that station doesn't believe that the station itself is sustainable overall.
3606 And because, if that's the case, then the tax for a fund like that isn't really going to deliver what you need.
3607 THE CHAIRPERSON: And, I mean, I agree with you the LPIF was not meant as a bail-out, it was meant exactly to address what its stated objective is, produce local programming in small markets.
3608 Now I have your other one here, you say you have no business holding a policy hearing now, you should do it next spring.
3609 The whole reason why we're holding it now is so we can get some policy, some input from everybody so that we can frame the whole licence renewal next year on the basis of that.
3610 I don't know why you feel this --
3611 MR. HENNESSY: Yeah. Hopefully I'm not saying something so blatantly offensive, Chairman, and if that's --
3612 THE CHAIRPERSON: No, no, you're not offensive, all I'm trying to understand, if I'm not --
3613 MR. HENNESSY: But I was saying, you know --
3614 THE CHAIRPERSON: I'm just letting you know how it is.
3615 MR. HENNESSY: My point is that clearly we're discussing, we've been discussing policy issues. What I'm really suggesting is it's not appropriate to make broad structural decisions at this point. I think that's the significant difference.
3616 Because when we're dealing with transfers of wealth that can amount to over $500-million a year, you have to have people presenting financial evidence. That's I think, you know, the fundamental point we're making.
3617 Right now it is -- you know, there is a lot of noise, there is a lot of rhetoric and I'm not saying that there aren't problems, one would assume clearly there are problems. But I think just in terms of a public policy process, when you transfer that amount of money you have to have a substantive amount of evidence to support that decision.
3618 THE CHAIRPERSON: I don't disagree with you at all. You have to have evidence.
3619 And one of the reasons why we tabled this documents at the beginning of the week is everybody talks about fee for carriage, people have different views and different expectations of the result, so we at least wanted to have a commonality of if a fee for carriage at 50 percent is asked for would actually mean, who would benefit, who doesn't.
3620 And if you have any comment, please submit them to us.
3621 MR. HENNESSY: Yes. No, we certainly will. And the one issue that, you know, we did note right away is that it may be that the measure of PBIT, as we've often said as distributors in proceedings before the Commission, is not as an appropriate measure of -- as cumulative free cashflow.
3622 But that aside, I mean, we don't really take issue with, you know, the size of the number. I think CBC had a good point, that ultimately, again, to make sure that anything you're doing -- and we're not suggesting that you should do it, to be clear.
3623 THE CHAIRPERSON: Sure.
3624 MR. HENNESSY: But to the extent that it might happen, since it continues to come up, you know, it's worthwhile making sure that you're targeting local broadcasters that are really truly local as opposed to transmitting locally, because those are the ones that are most likely making the programming that you have set as a public policy priority.
3625 And, you know, to spread the money too thin is to, in my mind, potentially waste the money.
3626 THE CHAIRPERSON: Okay. Len, you have some questions.
3627 COMMISSIONER KATZ: Thank you, Mr. Chairman.
3628 Good morning.
3629 I'm going to follow up on that as well, that theme. On page 2 of your opening remarks you reference in the bottom that rather than -- rather you are suggesting:
"Before contemplating more contribution on BDUs, the Commission should look at how to re-balance the obligations and costs of the broadcasters." (As read)
3630 COMMISSIONER KATZ: We certainly are talking about re-balancing the obligations in an open transparent forum here. On the costs of the broadcasters, you're probably aware -- if you're not I'll tell you -- there are times set aside in the next couple of days for in camera discussions on specifically that issue, and there are some people on this Panel and at the Staff level who have got an awful lot of experience on the costing side as well, so, we are going to be looking at that.
3631 But I thought, in a general sense, since you've raised it here, why don't you share with us some of your views as to what types of costs we should be looking at and how we should be looking at it?
3632 MR. HENNESSY: Yeah. Again, I think it's -- you know, I would start with the first point we made is whether or not some of the channels that the broadcasters carry are really necessary or appropriate in the market. That's obviously a test.
3633 The issue of the digital transition is a big test. Do we really need -- and it is probably one of the biggest questions, right -- do we really need to transmit in terms of over-the air to an audience that by 2011 is likely to, you know, be perhaps five percent of the total TV audience?
3634 Should that audience require the broadcasters spend hundreds of millions of dollars in a digital transition in order to serve such a small audience, particularly when, you know -- if those audiences are going to continue to receive, you know, programming through HD -- they are going to have to step out and make, you know, more significant investments in their receivers to begin with.
3635 So, I think that's a critical thing.
3636 One of the reasons perhaps that, you know, the issue of digital transition is complex is a concern that if you stop broadcasting over-the-air, do you give up your rights that you've acquired by free-to-air broadcasting, like simultaneous substitution, those kinds of things?
3637 But I think those are the kind of things that strike me that, you know, should be easily or, you know, perhaps it's complex, but I think they can be addressed.
3638 Certainly the ability to expand, you know, advertising on the assumption that, you know, some of it is going to start coming back. It's worth talking about, you know, advertising in the restricted sectors like health. Obviously that raises, you know, broader public issues that also have to be addressed.
3639 In terms of contributions to programming, I think it would be very difficult, you know, to suggest that the broadcaster should reduce their contributions to programming at the same time they're suggesting that somebody else should be contributing to a fund for programming. It's a little -- you know, that's a little two sided.
3640 So, you know, those are the things that would jump to my mind immediately.
3641 COMMISSIONER KATZ: Okay. I'm going to refer to your submission of April 23rd as well in a general sense, if you have it there or not, but more general topics.
3642 You do talk about the fact that the notion of spreading advertising too thin is a phenomenon that has resulted in where we are today.
3643 And the suggestion that you make in -- it's actually paragraph (e)(iii) in your executive summary:
"The Commission should not attempt to prop up any unsustainable model through increased subsidies." (As read)
3644 COMMISSIONER KATZ: To my knowledge the Commission hasn't done anything to prop up specialty broadcasters or any other licensees that we have authorized, save and except for the issue right now which is conventional and OTA.
3645 Are there cases where the Commission has come along and saved anybody to your knowledge?
3646 MR. HENNESSY: That were failing. I guess, no, you know, except I mean, TQS, but that's probably -- it's a conventional example.
3647 Yeah, I guess it goes back to the point again on advertising. If you have seven people in a market that really can only sustain four, then you have to accept the fact that ultimately some have to exit the market or all will be harmed.
3648 That's probably the simplest way to say it. It's, you know, a little Darwinian, which is why I suggest to the Chairman that there may be other public policy issues depending on, you know, whether or not there are other voices in the market.
3649 But I think you can start at that point.
3650 COMMISSIONER KATZ: Yeah, I think --
3651 MR. HENNESSY: That's the problem, right? That's the fundamental problem is that everybody bet that conventional was a growth market, the broadcasters jumped in there, they spent billions as recently as two years ago to get in there to do two-stick plays and the world changed on them, potentially.
3652 COMMISSIONER KATZ: And I think that the Chairman in his discussions with some of the other both public and private broadcasters raised the issue as if you have fewer broadcasters you may get more advertising on those that are left as well, whether it's a one to one or not is a function of a number of other issues as well.
3653 But he called it the Sarkozy model this morning with regard to the CBC discussion and others as well.
3654 But if you take that to the next step, the issue comes down to: Where you have multiple broadcasters in one market there might be arguments to be made for the fact that diversity of voices will be maintained if one leaves the market; but where you have markets where you're down to the last one or the last one or two, I think I heard you say that there might be some good rational reasons to find ways --
3655 MR. HENNESSY: Yeah, I was agreeing with the Chairman that you do have to -- I think that, you know, that is part of your responsibility, clearly is to look at the market.
3656 I mean, we have tons of markets in this country that, you know, don't have a local conventional broadcaster. They do have radio, they do have newspapers, they do have access to the Internet.
3657 You know, it may be, you know, if you think of solutions, it may be that in many communities a better, more economically efficient way to deliver on local news and community is through, you know, community channels and it may be cheaper and more efficient to remove many of the barriers that restrict, you know, a local distributor from providing more or better news because of advertising restrictions or the amount of, you know, content that has to be produced by the public.
3658 There are hundreds of community channels in some of the small centres in the country that are limited by regulation that could become an alternative in terms of community voices and diversity that would be much lower cost because it's likely that, you know, as somebody said to me, you don't have to pay $200,000 for, you know, a talking head in a small centre, you know, one of the community people may be more than sufficient to talk about their own news in their own community.
3659 COMMISSIONER KATZ: Yeah. I'm going to come back to community programming in one minute. I think there's an issue there as well.
3660 But I want to come back to the last voice, so to speak, in communities as well and the issue of what you said in your opening remarks is:
"Bail-outs are best left to government." (As read)
3661 COMMISSIONER KATZ: But I think I just heard you say that from a public policy perspective the CRTC does have a role to play in cases where we are down to the question of reducing the voice to a point where there is no diversity of voices.
3662 MR. HENNESSY: Yeah, absolutely. I'm not going to have that argument with you.
3663 I would certainly say that, you know, the first thing you want to do in -- you know, if you're seeing shifts, right, is say, you know, is news disappearing? I guess a good question would be, let's say if you take local news for a second, is it disappearing or is it transforming into something else? And it may be both.
3664 And, so, you know, you have to look at newspapers, you have to look at the Internet, community papers, community channels, local TV channels, local broadcast channels, you know, local radio channels.
3665 All of these things have to be added up when you measure what kind of diversity is available to a community. But clearly --
3666 COMMISSIONER KATZ: So, let me ask you something.
3667 MR. HENNESSY: But let me be clear. It is totally reasonable for you to address that and to look for ways to resolve that I think.
3668 But I would also say that what you're really trying to do is -- you know, and what happens in this country in terms of, you know, set taxes and subsidies as we put band-aids on things that systemically may not be working properly any more rather than trying to address both the need and the cause.
3669 COMMISSIONER KATZ: Okay. So, let me take you up on something you said a minute ago and, that is, what is a substitute for local programming in a community, in a region?
3670 If we're down to the last station, so to speak, or last two stations and we question whether there really is diversity of voices, do you believe that the Internet and radio are substitutes for --
3671 MR. HENNESSY: And local newspapers.
3672 COMMISSIONER KATZ: -- and local newspapers, are substitutes -- clear substitutes for television in those communities?
3673 MR. HENNESSY: I think they're clear substitutes for diversity of voices when it comes to local news and public affairs.
3674 MS MAINVILLE-NEESON: Commissioner Katz, if I may also add. I think part of our structural solution that we're proposing is for you also to look at in markets where there are a large diversity of voices, take Ottawa for example, what is the cost of A Channel competing with its sister station owned by the same group, CJOH, CTV here in Ottawa? Could the cost of them competing against each other be better deployed to save a station like Windsor?
3675 That's the broader picture that we would like the Commission to consider, rather than look at trying to continue to look at subsidies for the BDU sector.
3676 COMMISSIONER KATZ: But you wouldn't suggest that we say that because there's local radio in Brandon, Manitoba that there's no need to have a local Brandon TV station; or would you?
3677 MR. HENNESSY: Well, the first thing I'd measure is how much local news did the Brandon station deliver, okay, and are there then alternative ways?
3678 Let's say -- you know, I don't know, you know, in Brandon. But let's say that, you know, every day they deliver two hours of breakfast, one hour of evening local programming, that was really their core local contribution, so three hours a day let's say.
3679 Is it possible that, say, Dave Baxter and the people who run the Westman Collective in Brandon could do that job or even do a better job if you had more flexible rules in terms of what you can do running a community channel?
3680 So, it really -- you know, it does to an extent depend on the channel. I mean, I think everybody hopefully would agree that if the only source of news we ever had was television that we would be ill served.
3681 So, I agree television makes a significant contribution, but it is -- you know, it is all the different types of access to news I think that really, you know --
3682 COMMISSIONER KATZ: All the different types.
3683 MR. HENNESSY: Yeah.
3684 COMMISSIONER KATZ: Including television, including local television?
3685 MR. HENNESSY: M'hmm.
3686 MS MAINVILLE-NEESON: And may I also add that communities change over time. So, established local broadcasters that may find that the business case is no longer there may find new communities in which to deploy services.
3687 Right now not every community in Canada has the benefit of having a local broadcaster. So, new communities that are growing and vibrant unfortunately don't have a local broadcaster.
3688 Perhaps if one were to exit the market in a community that doesn't seem to support that particular station any longer and it was redeployed in another area, I take for example, we serve out west in Fort McMurray, they don't have a local broadcaster right now.
3689 So, there may be -- and this is a new growing vibrant community. Communities change over time and to have a static view that we have to support all the local -- existing local broadcasters may not be the right approach, but to let the ebbs and flows of the marketplace take place with respect to local development and local broadcasting.
3690 COMMISSIONER KATZ: The BDUs all have -- or virtually all have community programming. Do you see that as being a viable channel for broader local programming as opposed to just community programming?
3691 MR. HENNESSY: Yeah. But, again, I wouldn't say -- I think we have to be very careful, you know. There are, I would suspect, few to none in terms of channels, what we call local channels today that do much more than, you know, two, three hours of local programming a day.
3692 So, the question is, can you replicate -- certainly a question, can you replicate two to three hours of local programming through other media, whether that's the Internet or a community channel, as an alternative to the costs of operating a broadcast transmission undertaking that, you know, is 24/7 and is bearing the costs of all the popular programming and everything else that goes around?
3693 Is that a sustainable model in markets where we already know that, you know, the ability to broadcast over-the-air is becoming more and more challenging?
3694 I mean, who cares if the TV station that, you know, in terms of all the national programming disappears so that you're getting, you know, a distant signal of some sort to watch "Bones" or, you know, whatever happens to be on at eight o'clock, who cares where that comes from if you have been able to satisfy yourself that you have found other means to ensure that people in that community have a way to tell their stories to each other.
3695 COMMISSIONER KATZ: Okay. Telus is a BDU. Five percent of your BDU revenues go back into the system, part of that goes to --
3696 MR. HENNESSY: Six.
3697 COMMISSIONER KATZ: -- community programming?
3698 MR. HENNESSY: Six.
3699 COMMISSIONER KATZ: Six percent, that's not the point.
3700 MR. HENNESSY: I think, yeah.
3701 COMMISSIONER KATZ: Will be. Two percent of that goes into community programming.
3702 MR. HENNESSY: M'hmm.
3703 COMMISSIONER KATZ: How do you use that? How do you spend that money? What do you do with that money exactly?
3704 Is it for programming, is it for arts, is it for news?
3705 MS MAINVILLE-NEESON: Currently the Telus community programming, the programming costs, so not the infrastructure costs but just the programming costs because it's all out sourced to independent producers for our community service, that two percent, and up to a certain time we were devoting five percent of our revenues, were entirely going to programming for our community service which, as you know, you approved as an on-demand service which allows our subscribers to have access to the programming that we produce whenever they desire.
3706 And it is promoted, it is well used and well appreciated.
3707 COMMISSIONER KATZ: Those are all my questions.
3708 THE CHAIRPERSON: Thank you.
3709 Thank you very much.
3710 Those are all our questions.
3711 MR. HENNESSY: Thank you, Chairman. Thank you, Commissioners.
3712 THE CHAIRPERSON: Let's proceed with the next intervener, Madam Roy.
3713 THE SECRETARY: Thank you, Mr. Chairman.
3714 I will now invite Bell Video Group to the presentation table.
3715 THE SECRETARY: Thank you.
3716 I will now invite Bell Video Group representing Bell Aliant Regional Communications, Limited Partnership and Bell Canada, collectively the Companies, to make their presentations.
3717 Appearing for Bell Video Group is Mirko Bibic.
3718 Please introduce your colleagues and you'll have 15 minutes to make your presentation.
3719 MR. BIBIC: Thank you, Madam Secretary.
3720 Mr. Chairman, Commissioners, I'm Mirko Bibic, Senior Vice-President of Regulatory and Government Affairs, Bell Canada, and I'm going to introduce my panel now, of course.
3721 Joining me to my left, Kevin Crull, President of Residential Services of Bell Canada. To Kevin's left is Chris Frank, Vice-President of Programming for Bell TV and, to my right, Tim Dinesen, Vice-President of Operations and Technology for Bell TV.
3722 Thank you for this opportunity to share our views on a number of critical issues related to the licence renewals of OTA broadcasters.
3723 In this proceeding, the Commission is overseeing not only applications for licence renewal by OTA broadcasters, but also the very health of the overall industry in a challenging economic context not seen before. The Commission cannot ignore the impact of these challenging circumstances on all industry stakeholders.
3724 In our 15 minutes, we will focus our remarks on:
3725 1) certain broadcasting industry financial issues,
3726 2) the transition to digital transmission,
3727 3) distant signals; and,
3728 4) the LPIF.
3730 MR. CRULL: Thank you, Mirko.
3731 Good afternoon, Mr. Chairman, Mr. Vice-Chairs and Members of the Commission.
3732 Much has been said and written about the current financial plight of Canadian OTA broadcasters. However, what is rarely acknowledged is that DTH service providers face significant financial challenges of our own. DTH's financial health should not be taken for granted and, in fact, we are now just facing the prospect of positive cashflows and we're also operating in the uncertainty and the pressure of an economic downturn.
3733 Since its launch in 1997, Bell TV has invested over $2-billion in its business operation and has yet to generate positive cashflows. That means over $2-billion of cash losses have been sustained, even after Bell TV's 10 years in operation and over 1.8-million subscribers have been acquired.
3734 Using PBIT as the financial measure, DTH's performance sits in stark contrast to the more favourable results of the OTA broadcasters, specialty services and the terrestrial BDUs, as confirmed by the Commission in the chart before you.
3735 It should be noted that this measure excludes the significant capital investment that is also required to deliver a premium satellite service.
3736 Also I would call your attention to the chart in Appendix A which shows a more fulsome length of time and includes the impact of interest charges and shows that the industry as a whole, DTH, has in fact had significant negative cashflows all the way up until 2009.
3737 It's only most recently, and as a result of the recession, that conventional broadcasters' profits have fallen to DTH-like levels. However, as the economy improves advertising will rebound and as will OTA profit levels.
3738 I can say that confidently as one of the biggest advertisers in Canada.
3739 Conventional television is still a very effective way to reach a mass audience and when I'm launching new products or significant new promotions, it is absolutely the first place I go with my advertising dollars.
3740 An OTA licence should not guarantee profitability to broadcasters. In any event, the decline in broadcasters' profitability is significantly offset by their highly profitable specialty services whose PBIT margins consistently exceed 20 percent.
3741 It's, therefore, misleading to look at the performance of OTA broadcasters in isolation when they also provide these successful specialty services.
3742 Bell TV's own inability to generate positive cashflow is largely due to the ever-increasing requirements to add expensive satellite capacity to meet new regulatory obligations and also to accommodate consumer demand for new services which we, in fact, purchase from these very broadcasters.
3743 Bell TV's cash flows are also significantly impacted by the 5 percent BDU tax and the additional 1 percent LPIF contribution, as well as commitments associated with the consent regime for distant signals, which does disproportionately negatively impact DTH providers as compared to cable.
3744 The broadcasters who are before you at this hearing, who are asking for further wealth transfer from Bell TV, already receive $200 million from us for their high-margin specialty TV services.
3745 In addition, DTH has contributed to the explosive growth for these very broadcasters. Our service has added more than 1.7 million net new BDU subscribers since our launch in 1997. We are a key contributor to their success, not the reason for their problems.
3746 If the Commission were to give credence to the proposals of CTV and Canwest which were asking for an LPIF of 3 percent and the imposition of fee for carriage, this would have an incremental annual financial impact to our business of at least $115 million and that assumes a fee for carriage of $3.00 per subscriber in that calculation.
3747 A business which is not yet even cash-flow positive just simply cannot possibly absorb this impact. Our continued investment in broadcasting distribution just cannot and will not come at any cost, although I do submit to you that it is an extremely strategic product for us in our portfolio. Acceding to such demands would surely be unsustainable for that business.
3748 Despite these losses, Bell TV has not sought government or third-party assistance. What we do ask, however, is for rules to be put in place that will encourage continued investment so that we can sustain true competition, choice and diversity in broadcasting distribution.
3749 Let me now turn your attention to the set of proposals before you from Bell TV.
3750 We recognize and we respect that the Commission has made it clear that it is concerned about the immediate health of Canadian OTA broadcasters and, beyond that, their ongoing ability to provide local programming in non-metropolitan markets.
3751 So, in response, we have developed these proposals that we are going to make today based on three criteria:
3752 - first, the remedy must be balanced in that it respects the contributions of all industry stakeholders;
3753 - second, it must neither direct a pure transfer of wealth from one stakeholder to another nor disproportionately impact DTH versus cable; and
3754 - third, it should help broadcasters contain their costs and improve their revenues.
3755 So now, I would like to turn it back to Mirko with the details.
3756 MR. BIBIC: Commissioners, I will first discuss FreeSat, which addresses the issue of cost containment.
3757 The OTA broadcasters have an obligation to transition to digital transmission by September 2011. Bell TV is willing to go further than the DTV Working Group Report and we are prepared to offer FreeSat as one component of a comprehensive solution to the issues under consideration here.
3758 In this manner, the cost to broadcasters can be reduced significantly using satellite transmission, while ensuring that OTA households continue to receive local signals without a monthly charge.
3759 FreeSat would provide viewers a package of local and regionally relevant OTA services without the need to subscribe to Bell TV's DTH service. Consumers would replace their traditional antenna with a compatible satellite dish and digital receiver, which we would authorize to receive FreeSat's OTA signals free of charge.
3760 The result would be an extremely efficient method of solving the broadcasters' digital transition issue, while saving them significant costs, which I note that Mr. Fecan of CTV pegged at several hundreds of millions of dollars. Bell TV could also make the FreeSat signals available to other BDUs provided that they follow the FreeSat model.
3761 So, under our proposal, OTA households would receive at least five signals in standard definition digital format. They would receive any local signal currently available in their community if it offers a meaningful minimum of local programming. This would result in Bell TV making available the capacity for 30-40 additional standard definition channels. This is significant.
3762 Plus, we would make available as a supplement one regionally relevant signal from each of the major broadcasting ownership groups not otherwise represented by a local signal and which has a transmitter in the province where the FreeSat household is located.
3763 So in Quebec, this would be Radio-Canada, TVA, TQS, CBC, CTV and Global. Outside Quebec, the signals would be from CBC, Radio-Canada, CTV, TVA, Global and, in some provinces, City.
3764 We invite the Commission and OTA broadcasters to review examples of Bell TV's proposal in Appendix D to these remarks, and perhaps, Mr. Chairman, we can go through one of the examples in the Q&A.
3765 A number of other considerations about our proposal should be noted:
3766 - broadcasters would assume the cost of delivering their digital FreeSat standard def signals to Bell TV's operations centre in North York, Ontario;
3767 - acquisition of a set-top box and satellite receiving dish would be the responsibility of the consumer, as would the cost of professional installation if requested;
3768 - Bell TV would credit the costs of customer care, warranty, maintenance of the security system, headend equipment, annual software and start-up activities against our contribution to the LPIF;
3769 - we would also credit annually $1 million of bandwidth costs, a sum well short of the total cost of bandwidth required to deliver FreeSat.
3770 Commissioners, these sums have to be credited. I watched Mr. Guiton of CBC this morning and he wants FreeSat at no cost to broadcasters but he conveniently forgets, as do the others, that it is their responsibility to transition to digital, it is not ours. Yet, we are willing to absorb some of the costs because we want to help.
3771 The FreeSat model would also be offered to OTA broadcasters at no profit to Bell TV, in other words, on a cost-recovery basis only for the items to be credited. Bell TV is prepared to be audited by the CRTC in order to confirm this.
3772 Now, we must be clear that provision of our FreeSat service is contingent upon acceptable outcomes on distant signals and LPIF.
3773 Let me pause here for a moment and divert from the text because I heard Ms Bell of Canwest yesterday and Mr. Guiton of CBC today complain that the problem with FreeSat is that we link it, in their view, to unrelated items or issues. But the link, frankly, is rather obvious, it is a commercial link directly related to the health of our business.
3774 Again, as I mentioned, the OTAs conveniently forget that this is their responsibility, and again, as I mentioned, we wish to help but reasonable arrangements on other issues need to be made as well. We have invested real capital and expense for this capacity and all we want is clarity and certainty of the regulatory impact on our business of certain decisions.
3775 As I go on, Commissioners, you will see that we have some constructive ideas on distant signals and LPIF.
3776 So back to FreeSat. It is our belief that it offers significant public interest benefits for the broadcasting system and consumers. It would allow all Canadians to gain access to their local signals and national networks without paying a subscription fee. Broadcasters would realize significant savings by not having to construct new digital infrastructure.
3777 This is a public policy win for all concerned. We are willing to work constructively with the OTA broadcasters and the Commission to the timely implementation of a FreeSat solution by the third quarter of 2010, one year ahead of the digital switchover.
3778 I now turn, Commissioners, to the revenue side of the equation. The Commission has raised two issues, distant signals and LPIF, as possible remedies for the OTA situation.
3779 So starting first with distant signals.
3780 Bell TV has met with and made proposals to all of the major and small-market independently owned OTA broadcasters. However, there has been no resolution of the distant signals issue to date.
3781 It has proven difficult to reach agreement in the current economic climate, with multiple licensing hearings scheduled and the continual consideration of fee for carriage a persistent threat to BDUs. Bell TV has therefore asked the Commission for an extension to the current deadline.
3782 Nevertheless, Bell TV is now offering a wider approach to the key issues in this proceeding. Under our proposal, we would be permitted to deliver one distant signal per major OTA ownership group from each of British Columbia, Alberta, Manitoba or Saskatchewan, Ontario or Quebec, and the Atlantic provinces. This would reduce the number of distant signals available to individual subscribers, while reducing the disruption to consumers.
3783 In exchange, Bell TV would:
3784 - maintain the current level of compensation to broadcasters, which is $0.48 per subscriber per month in cash and dedicated transmission facilities to deliver local TV signals we would not carry absent the need to reach an arrangement with the OTA broadcasters;
3785 - we would provide FreeSat; and
3786 - the LPIF would be modified in the manner to be discussed.
3787 And again, as with the FreeSat model, to provide further clarity, we have at Appendix C highlighted some examples of how the distant signals regime would work in our proposal.
3788 This being said, we note the Commission is contemplating advancing the implementation date of the new distant signals consent regime. We urge the Commission instead to impose the solution we are proposing today.
3789 DTH has a national footprint and therefore must distribute many more OTA signals than does cable, which serves only a local area. Thus, any consent regime has a disproportionately negative impact on DTH.
3790 A resolution to the distant signal issue cannot possibly be based on the exaggerated claims of financial damage set out by the broadcasters in the BDU framework proceeding and in this hearing as well. In fact, an analysis conducted for Bell TV by Canadian Media Research Inc. concluded that distant signals carried by cable and DTH are resulting in little, if any, negative effect on net advertising revenue.
3791 If the Commission advances the date, there is a real risk that Bell TV will have to eliminate distant signals altogether or repackage them. A comprehensive repackaging of our programming line-up and the resulting need to reconfigure each subscriber's service would be highly disruptive to all of our customers.
3792 However, if the date is advanced, then it should be advanced for other regulatory rules as well, most notably:
3793 - the in-province distribution of priority OTA signals without retransmission consent and distant signal compensation;
3794 - the new "must offer" access rule for HD pay and specialty services; and
3795 - the reduction in program packaging requirements.
3796 These rules, together with the distant signal regime, were constructed as a coherent whole by the Commission. It would be inappropriate to move up the implementation date for one component without doing so for the other interrelated components.
3797 Now, to LPIF.
3798 While it is difficult to determine whether 1 percent, or indeed any other amount, is even necessary, Bell TV opposes any increase, permanent or otherwise, to the current contribution level, which would damage our financial situation.
3799 Instead, we propose that up to one-half of our current Canada Media Fund contribution be redirected to the LPIF for a temporary period set by the Commission. This would be 2 percent of the DTH industry's gross revenues or about $40 million annually and would bring DTH's contribution in line with the percentage paid to the CMF by cable BDUs.
3800 As well, should the Commission conclude that it is appropriate to reduce, however temporarily, the local programming obligations of OTA broadcasters, then Bell TV proposes that this redirected 2 percent funding be used to assist broadcasters in meeting these new obligations. No incrementality would be required.
3801 However, under our proposal, the current 1 percent LPIF contribution by BDUs could continue to be incremental to whatever new programming obligation baseline is adopted.
3802 Similarly, under our model, the Commission could determine how cable BDUs could best contribute as well, perhaps by redirecting temporarily the 2 percent contributions they currently make to their community channels to the LPIF instead.
3803 In conclusion, Commissioners, our proposal is constructive, balanced and targeted to the principal issues under consideration:
3804 - it seeks to improve the financial situation of the OTA broadcasters by addressing their costs and revenues;
3805 - it is temporary in regards to LPIF -- this recognizes that the economy will improve and that the financial health of the OTA broadcasters is ultimately their own responsibility;
3806 - by reallocating funds currently in the system to temporarily provide financial assistance to the OTAs, DTH is not required to contribute even more cash, precisely when it can least afford to do so; and
3807 - most importantly, the proposal addresses the fundamental public policy issues at the heart of this proceeding: ensuring that Canadians in smaller markets continue to receive their local television signals at no charge and assisting the continued production of local programming in non-metropolitan markets.
3808 Thank you and we welcome your questions.
3809 THE CHAIRPERSON: Thank you for your proposal. It contains really a very different approach and it is new for us, so I just want to ask you a couple of questions and I think that we will break for lunch and we will try to digest what you have put to us and ask you questions afterwards.
3810 Two very short questions.
3811 On page 5, you say "a meaningful minimum of local programming." What do you have in mind when you say that?
3812 MR. BIBIC: Well, I will give you one example and then what we have in mind.
3813 We were rather quite surprised to see CTV's opening statement reference Timmins as an example. Mr. Fecan raised Timmins as an example of the public policy failures resulting from the carriage obligations of DTH. He said you have Timmins where 44 percent of people who watch TV are on Bell TV or DTH, and lo and behold, they can't even watch their local station.
3814 Well, let's talk about Timmins. The CTV Timmins station is exactly the same as the CTV Sudbury station, exactly the same to the very last second. The only difference is the commercials. And, of course, we carry Sudbury. Hence, the people in Timmins do get their local programming. So Timmins would not have a meaningful level of local programming as distinct for Sudbury. So that would be kind of one extreme example.
3815 What we had in mind is that the Commission -- or perhaps we could reach an accommodation with the OTA broadcasters, we are open to that too -- determine the baseline. I think Mr. Fecan indicated that it is seven to nine hours a week. It could be less. In French-language markets it could be three. You could impose it, we could reach an accommodation and that is what we meant.
3816 THE CHAIRPERSON: On that very same page at the bottom you say:
"Bell TV would credit the costs of customer care, warranty, maintenance of the security system, headend equipment, annual software and start-up activities against our contribution to the LPIF..."
3817 I presume you would have costed this out. What would be the effect on your contribution to the LPIF?
3818 MR. BIBIC: Tim will answer.
3819 MR. DINESEN: We estimate between $1 million and $2 million. This is the direct cost that we would incur to basically set up the business to receive the orders and ship equipment to interested subscribers.
3820 MR. BIBIC: If I could add more detail on that, Mr. Chairman.
3821 We have the $1 million for bandwidth cost, which we explicitly put in the opening statement. That would be an annual amount.
3822 In terms of the initial set-up cost you have the $1 million to $2 million which Tim mentioned. We would also estimate about $50 per household for these other support costs.
3823 So you tally those up and it would, I think, fall short of our overall LPIF contribution.
3824 THE CHAIRPERSON: Okay. As I say, this is all brand new information. Let us read it.
3825 Do you have any clarification question you want to pose?
3826 Okay, then let's break for lunch now and we will come back at 1:30. Thank you.
--- Upon recessing at 1201
--- Upon resuming at 1330
3827 THE CHAIRPERSON: Madame le secrétaire, commençons.
3828 LE SECRÉTAIRE: Merci, Monsieur le Président.
3829 I would just like to confirm that the Bell Video Group presentation, including all appendices, has been placed on the public record and copies are available in the examination room.
3830 Thank you, Mr. Chairman.
3831 THE CHAIRPERSON: Mr. Bibic, thank you for this proposal. It is most interesting and stimulating. It is actually one of the few original ideas we have heard in this hearing. So I have a whole lot of questions and I will start, and my colleague, Mr. Katz, will then do the main work.
3832 First of all, is this proposal -- it applies for markets where the local broadcasters elect not to convert and, therefore, their signal will be available only via BDUs. What about in markets where there are two local broadcasters, one of them decides to convert and the other one doesn't?
3833 MR. BIBIC: We would make available the signal of the broadcaster who hasn't converted and who would supply us with a signal in North York.
3834 THE CHAIRPERSON: But if somebody who has converted does not get the benefit of also having his signal on your FreeSat?
3835 MR. BIBIC: We could make that signal available on FreeSat as well.
3836 THE CHAIRPERSON: I just wondered whether that is mutually exclusive or not.
3837 MR. BIBIC: No, we could do both.
3838 THE CHAIRPERSON: Okay. Now, this FreeSat signal, will one be capable of receiving it by the normal Bell dish or does it require a special a special dish?
3839 MR. BIBIC: Tim.
3840 MR. DINESEN: It will require a special dish that will be tuned to receive Ka band frequencies.
3841 THE CHAIRPERSON: And if I am a FreeSat customer that has a special dish and I decide to upgrade and buy the whole Bell service, would I then have to buy a new dish?
3842 MR. DINESEN: Our intention is to design this new Ka dish so that it will be capable of receiving traditional Bell services as well.
3843 THE CHAIRPERSON: I see.
3844 MR. BIBIC: There is a point I would like to add on that.
3845 Our base of 1.9 or 1.8 million or so customers have receiving equipment tuned to the Ku band.
3846 THE CHAIRPERSON: Yes.
3847 MR. BIBIC: Let's say that currently paying Bell TV customer resides in a market where we are not carrying today the local signal and they want it, they would have to upgrade their equipment to be able to receive both.
3848 And in that case, they could then receive what they pay for as well as the FreeSat signals which they don't currently receive, if it were a market where we are not carrying all the local signals.
3849 THE CHAIRPERSON: Yes. But, I mean, he is already connected, so I am not terribly worried about him.
3850 MR. BIBIC: Correct.
3851 THE CHAIRPERSON: What happens to independent stations? There are some right now which are not carried. Will you try to reconstruct on the basis of your proposal who would be carried and who wouldn't?
3852 Do you have a complete list or can you identify them on your appendices or how do we understand what happens to, for instance, the stations in Quebec? You have RNC and Télé Inter-Rives who between them have six stations. And I understood from them two days ago that only four of them are being carried right now.
3853 MR. BIBIC: If an independent local broadcaster is delivering local signals in a community, we would carry that local signal.
3854 THE CHAIRPERSON: Okay. So if I accept your proposal to use the CTV standard, which I believe was -- what were the hours?
3855 COMMISSIONER KATZ: It was 9.5 and 14 hours by CTV and it was 5 and 10 by Canwest.
3856 THE CHAIRPERSON: Okay. Let's pick any number. I think they said 9.5 for over 300,000 and 7 for under 300,000. If I am correct, those were the numbers, for CTV. If we take that as a standard, could you, on that basis, give me a list of all the stations that would be carried on FreeSat?
3857 MR. BIBIC: Using CTV as an example?
3858 THE CHAIRPERSON: Yes, using the CTV numbers as an example.
3859 MR. BIBIC: Yes, we could do that. May take a couple of days, but we will do that.
3860 THE CHAIRPERSON: I would very much appreciate it.
3861 Now, have you made some calculation of what would be the total annual cost you estimate would be carried against the LPIF contributions? I asked you that before the break, but I am not too sure I got an exact number.
3862 MR. BIBIC: We think that the number would not be more than $5 million annually and would likely be actually potentially far less than that, excluding the first year, because the first year would have the $1 million to $2 million of initial setup costs.
3863 MR. CRULL: Well, the assumption on that is we look at the pay TV market and worked through some of the analysis that I think the Commission has also done.
3864 That is an estimate of 80,000 homes, is sort of at the maximum that we saw using the service and that would, with the $1 million for the transmission and then roughly $50 per year for the services.
3865 THE CHAIRPERSON: And then you say the television station would have to deliver the signal to Bell's North York operation centre at their cost. Any idea what those costs are, either individual, average, ballpark, whatever?
3866 MR. DINESEN: It will depend on the location of the originating service. It will depend also on the availability of the local facilities in their neighbourhood. We guess that it would be of order thousands of dollars a month to get back all services into our Scarsdale operations. But certainly much less than the cost that would take them to put up a digital transmission antenna.
3867 THE CHAIRPERSON: And that will be by satellite presumably?
3868 MR. DINESEN: No, terrestrial back-haul.
3869 THE CHAIRPERSON: Terrestrial back-haul, okay.
3870 And on page 5 of your model you say, "Bell TV could also make FreeSat signals available to other BDUs provided that they follow the FreeSat model. Which I read to say that you -- explain to me that sentence, I don't want to misread it.
3871 MR. BIBIC: The local broadcaster would deliver their signal to us in North York, Ontario, we would deliver it to the FreeSat customer, that is one model. If a local BDU also wanted to make FreeSat available to the community on an at-no-charge basis, just like ourselves, we would deliver those signals as well to the cable head-end.
3872 THE CHAIRPERSON: So give me a graphic example so I can get my head around it.
3873 MR. DINESEN: Can I try, Mr. Chair?
3874 I think once we made the service available over our FreeSat service, any regional BDU could pick-up our over-the-air service from our satellite and insert it into their regional cable head-end.
3875 THE CHAIRPERSON: Okay.
3876 MR. DINESEN: And the terms under which we would provide that service would be conditional upon them providing our FreeSat service on terms that we would provide it, that is to say free.
3877 THE CHAIRPERSON: In paragraph 22 you mention that the number of distant signals available to subscribers will be reduced. Why and do you have any idea how many this will be?
3878 MR. BIBIC: Let's start with why, Mr. Chairman.
3879 If we could go to Appendix C, I think it is the easiest way for me to really describe it.
3880 THE CHAIRPERSON: Okay.
3881 MR. BIBIC: So Appendix C, we will take the first example, which is Ottawa/Gatineau. If you look at -- obviously in the left-hand column we have listed the station groups. In the middle column, this represents the OTA signals we carry today in Ottawa. And it is no big secret that many are distant.
3882 THE CHAIRPERSON: Yes.
3883 MR. BIBIC: And if you take CBC, for example, you will see we carry Halifax all the way down to Vancouver and forget for a moment Regina, Regina we would carry under the new distribution rules. So if you ignore Regina for the moment, you will see that today we carry in Ottawa/Gatineau nine CBC signals.
3884 THE CHAIRPERSON: Yes.
3885 MR. BIBIC: The right-hand side represents the number of distant signals or CBC signals we would carry under our new distant signal model. And the way it works is, because we are in Ottawa, we definitely would have to carry one signal from Ontario, that is the new rule the Commission has put in place. So in Ottawa we would carry CBC-Ottawa.
3886 And because we have carried one in Ontario, our proposal would require us to eliminate any other CBC signal from Ontario and Quebec, so Montreal would come off and Toronto would come off. We would be allowed to carry one CBC signal from the Atlantic provinces, hence Halifax/Moncton. We would be permitted to carry one CBC signal from either Saskatchewan or Manitoba. And just for illustration purposes only, we have just put Winnipeg down. We would not carry Regina.
3887 And then it would be one from Alberta, in this case Calgary, and one from B.C., in this case Vancouver. So we have gone from eight signals to five signals, so that is a reduction. By the way, five signals in Ottawa is the same number as Rogers carries. And so, you know, this would address the criticisms that the OTA broadcasters like to level at us that somehow we cause more damage.
3888 And if you go all the way down the list for all the station groups, we would be reducing the number of distant signals for all the station groups for all the communities. So if you add them all up across the country it would be a fewer number. I must confess that we didn't go through community by community to add up the total, so I can't answer your second question, at this stage anyway.
3889 THE CHAIRPERSON: But this would be, in effect, a change to your present obligation to what, to carry on Bell, is that the idea?
3890 MR. BIBIC: No, we would --
3891 THE CHAIRPERSON: Oh, this is only for FreeSat?
3892 MR. BIBIC: No, this is for distant signal.
3893 THE CHAIRPERSON: This is for distant signal.
3894 MR. BIBIC: So it is separate from FreeSat.
3895 THE CHAIRPERSON: Right, right.
3896 MR. BIBIC: On FreeSat we would be carrying every local signal into every local community.
3897 THE CHAIRPERSON: But the rule that we announced as part of our BDU ruling for HD is not what you have here. This is in effect a variation to the HD rules that we announced as part of our BDU hearing?
3898 MR. BIBIC: Well certainly, this respects fully the new rule on the must-carry obligations for over-the-air, because we would be carrying in each case one per province.
3899 THE CHAIRPERSON: Oh, now I get it. So you are applying as a minimum --
3900 MR. BIBIC: Plus more.
3901 THE CHAIRPERSON: -- with some more, but you are reduced overall. Okay.
3902 MR. BIBIC: Yes, we have met the must-carry obligation, but we have reduced the total number because of the distant signals.
3903 THE CHAIRPERSON: So this is what Mr. Fecan was talking about, saying by us setting a minimum for you we have de facto created a maximum, he says --
3904 MR. BIBIC: Well, we can get into that if you want to.
3905 THE CHAIRPERSON: So that is the way he put it.
3906 MR. BIBIC: We take significant issue with that --
3907 THE CHAIRPERSON: Yes.
3908 MR. BIBIC: -- and we are happy to go into it. But we would be respecting the minimum and by no means have we ever approached the problem or the question of the negotiations as the minimum being some kind of maximum.
3909 THE CHAIRPERSON: Okay. I am sure Mr. Katz has more questions on distant signal.
3910 I just want to understand, for your FreeSat, if I say, Mr. Bibic, I think this is a wonderful new idea, let's grab it, what would you require from us?
3911 MR. BIBIC: We would require this outcome on distant signals and LPIF not to increase beyond 1 per cent. Now, we have come up with -- we could have said don't increase 1 per cent and have this distant signals package and we will provide FreeSat. We went further on LPIF, we tried to come up with something creative as to how we could temporarily reduce funds. You know, our FreeSat proposal doesn't hinge on that, but it does hinge on the cash cost of LPIF not being more than the 1 per cent and this --
3912 THE CHAIRPERSON: A cash cost? The cash cost?
3913 MR. BIBIC: Correct.
3914 THE CHAIRPERSON: But if LPIF is increased, for instance, by an amount right now the BDUs can spend 2 per cent of their fund contribution on community channels. If we would direct 1 per cent of that 2 per cent from community channels to LPIF it would not be a cash cost, it will be the same as before.
3915 MR. BIBIC: That is right.
3916 THE CHAIRPERSON: That would not affect your requirements?
3917 MR. BIBIC: We pay a 5 per cent BDU tax, a 1 per cent LPIF, total of 6 per cent. As long as that doesn't go up and we have this acceptable outcome on distant signals, Bell TV will commit to delivering FreeSat under this model.
3918 THE CHAIRPERSON: Okay. Well I think, as I say, this is all new to us, but I am delighted that you tabled this. We have put it on the map so as to get the comments from others and, undoubtedly, my staff will want to have some more questions for you on that.
3919 But I will pass it over now to Mr. Katz who has -- there is a lot of other questions. But I compliment you on putting this forward.
3920 COMMISSIONER KATZ: Just so you don't get worried, I am not the only commissioner that is going to have a lot of questions for you on this file.
3921 COMMISSIONER KATZ: I want to come back to this distant signaling just because it is fresh in everybody's mind, and refer you to paragraph 22 again.
3922 I thought I heard you tell the Chairman that this is in keeping with our Decision 2007-100 or I thought that was the number of it. But when I look at this, it says "Manitoba or Saskatchewan, Ontario or Quebec." Did we not have an "and" there in our decision?
3923 MR. BIBIC: Keep in mind, Mr. Vice-Chairman, we are talking about Ottawa/Gatineau. This example is Ottawa/Gatineau. So in Ottawa/Gatineau we have no obligation to carry CBC-Regina.
3924 Now, if this example were for Regina, we would carry a CBC-Saskatchewan signal, because that would be our obligation. And then pursuant to the framework we establish for distant signals, we would be allowed to carry in Regina one signal from Atlantic, one signal from either Ontario or Quebec, no signal from Manitoba, because we have already got the Regina signal, one signal from Alberta and one signal from B.C.
3925 COMMISSIONER KATZ: But that is the way you read the existing decision that we rendered?
3926 MR. BIBIC: No, the way we read the existing -- no, hold on.
3927 COMMISSIONER KATZ: So there is a change?
3928 MR. BIBIC: Let's not confuse or minimum must-carry obligations for local stations. We have an obligation under the new rules which would come into effect in 2011 to carry one local signal per province per major station group.
3929 COMMISSIONER KATZ: Yes.
3930 MR. BIBIC: All I am saying is that our distant signal proposal respects that minimum rule, but would also allow us in any local community to deliver distant signals, out-of-market signals, up to a maximum number that we set out pursuant to our framework.
3931 THE CHAIRPERSON: (off microphone) He is talking about distant signals.
3932 COMMISSIONER KATZ: I understand he is talking about distant signals, but what I am concerned about here is -- what I think this proposal says is, and it does say it, is that Montreal-CBC would not be broadcast in Ottawa.
3933 MR. BIBIC: Okay, so let's take Ottawa again. We would have an obligation to carry at least one CBC signal from Ontario, that will be the rule, so we would carry CBC-Ottawa.
3934 Now, Mr. Fecan, to take an example, is really high on local into local. His rule would say, no more CBC signals for Ottawa on Bell TV, because it is pure local into local.
3935 Now, today we carry many more CBC signals into Ottawa than just CBC-Ottawa, in fact, we carry all the ones listed here. So what we said is --
3936 COMMISSIONER KATZ: They are different times zones. I guess the issue is Montreal and Ottawa are in the same time zone. And what you are basically doing under this proposal is saying that people in Ottawa cannot watch Montreal broadcasts, CBC broadcasts, assuming they are different than the Ottawa broadcasts, and I am assuming they are?
3937 MR. BIBIC: Under this rule, the folks in Ottawa would not get CBC-Montreal. We would love to carry CBC-Montreal, we would love to carry all the ones we currently carry, but it appears to be a significant issue for the OTA broadcasters.
3938 So what we said is, okay, let's come up with a model that minimally disrupts our consumers, we still want to deliver distant signals to them, but we are going to distribute fewer than today, because it seems to be such a big problem for the OTA broadcasters. So we will carry fewer, we won't go to just one, which is what they want, local into local. We will carry more than just local into local, less than today, hopefully that will reduce the damage and it will accommodate our customers and not, you know, competitively hobble us vis à vis cable.
3939 COMMISSIONER KATZ: I am not sure their concern is the carriage or the compensation. I think if the compensation was there, they wouldn't be concerned about the carriage.
3940 MR. BIBIC: Okay. So what we have done on the compensation, again, we said if this is so much damage from DTH, we will reduce the number of distant signals to the level carried by cable today, that is one thing.
3941 And in terms of delivering compensation, well, we are willing to continue to provide exactly the same compensation we do today, plus deliver FreeSat which will be savings of costs in the hundreds of millions of dollars. So we are bringing value to the table here as a global package to address the compensation issue.
3942 COMMISSIONER KATZ: Okay.
3943 THE CHAIRPERSON: (off microphone).
3944 COMMISSIONER KATZ: What he is saying on the aura, I think, is the fact that this is different than our decision. You are not looking to modify or amend our decision?
3945 MR. BIBIC: We are not looking to modify or amend your decision. Your decision, the 2008-100 didn't impose a certain number of distant signals. It said, we leave it up to you guys to negotiate.
3946 COMMISSIONER ARPIN: (off microphone) I think it is clear.
3947 THE CHAIRPERSON: (off microphone) Use your microphone.
3948 COMMISSIONER ARPIN: Well, from what I get, I think your list on -- let's take Ottawa/Gatineau as an example. On the left-hand you have the 10 CBC stations that you are planning to carry, depending the markets where they are, so there is one per province, except for the Atlantic, and the Atlantic region you choose to carry Halifax and Newfoundland.
3949 And on the right-hand side, what I understand is that those are the services that you are going to offer here in Ottawa. So in Ottawa they will get the Ottawa signal, but they won't get the Toronto nor the Montreal that they are currently getting.
3950 MR. BIBIC: Correct.
3951 COMMISSIONER ARPIN: And I think that meets the request that the broadcasters have been making regarding at least the local service.
3952 MR. BIBIC: Correct.
3953 COMMISSIONER ARPIN: Obviously, they are also concerned about the fragmentation that they are getting from the other zones they broadcast, but that is another issue that you have also explained.
3954 MR. BIBIC: Correct. We could go pure local into local, but we have capacity issues that don't allow us to do that.
3955 COMMISSIONER ARPIN: Yes.
3956 MR. BIBIC: We could go the full model we have today with all the distant signals, but we appear to be at an impasse in terms of compensation. So what we have decided to do is come up with a compromise; reduce the number of distant signals we will carry, reduce the damage and compensate via the existing arrangements plus FreeSat.
3957 THE CHAIRPERSON: The irony of this model here is that both Rogers and Vidéotron are carrying the Montreal signal and more than likely will keep carrying it. But that is another issue.
3958 MR. BIBIC: And this would be the baseline rule. If we wanted to carry in Ottawa, Montreal and Toronto as additional distant signals, then it would be up to us to reach an arrangement with the broadcasters to do that. But this would be the baseline rule.
3959 THE CHAIRPERSON: Is this a fancy way of saying, I will pay you what I have paid you until now, these are the stations that I am carrying, plus FreeSat? That is what you are --
3960 MR. BIBIC: No, the stations we currently carry are in the middle column.
3961 THE CHAIRPERSON: I know. No, no, under proposed. In future, you say, I will offer you FreeSat and I will carry these stations which are on the right-hand column in return for 48 cents?
3962 MR. BIBIC: Correct.
3963 COMMISSIONER KATZ: Okay. Let me go back to paragraph 14 here. Just to understand your second sentence. "Consumers would replace their traditional antenna." Those are the rabbit ears you are talking about here, the standard antenna that every over-the-air person has?
3964 MR. BIBIC: Correct.
3965 COMMISSIONER KATZ: Okay. With a compatible satellite dish. Now, what if it is one of your existing Bell DTH customers who wants to downgrade? Can they continue to use what they have now or would they actually have to go through a replacement?
3966 MR. DINESEN: If an existing Bell TV subscriber wanted to downgrade, as you say, and receive only FreeSat services, they would need a new antenna that would be capable of receiving Ka band spectrum.
3967 COMMISSIONER KATZ: Okay. And that is obviously not part of this proposal?
3968 MR. DINESEN: It is conceivable, but it is not part of this proposal.
3969 COMMISSIONER KATZ: It is on their own nickel basically, if that is what they want to do?
3970 MR. DINESEN: Yes.
3971 COMMISSIONER KATZ: But they would have to incur the cost of getting the installation and everything else as well?
3972 MR. DINESEN: Yes.
3973 COMMISSIONER KATZ: Okay. Are there technical specifications that exist for this FreeSat engineering design that you already have documented and finalized or is it still in influx?
3974 MR. DINESEN: The technical specifications are underway. I wouldn't say they are finalized, but nor would I say they are influx. I think we understand what it is we need to accomplish and the engineering involved is not straightforward, but it is unique to our solution.
3975 COMMISSIONER KATZ: The reason I asked the question is because I would prefer that you file it so that our engineers look at it themselves as well. I don't know if there is anything confidential within that document or whatever, but if you can make something available we certainly would appreciate it.
3976 MR. BIBIC: We could provide that confidentially.
3977 COMMISSIONER KATZ: Okay. Is there anything at all you can put on the record with that or is the whole document confidential, or can you find someway of redacting certain parts of it so that there is something available?
3978 MR. BIBIC: Tim's team would have to create that document so that, you know, we can put some structure to it in a way that we can work with CRTC staff on it. But let's create the document in a way that we feel is responsive to your request and then we will find a way of trying to make some of it publicly accessible and keeping the really confidential parts private.
3979 COMMISSIONER KATZ: Okay, thank you.
3980 With regard to your discussion with the Chairman earlier about the threshold for which you would carry these OTA stations in the future. If somebody came along who did not meet the threshold today and was offering, I don't know, 1.5 hours of local programming and it was below the threshold for you to carry it but suddenly shot it up to 12 hours or whatever, would they automatically be carried by this FreeSat model?
3981 MR. BIBIC: If they deliver the signal to us, we will carry it.
3982 COMMISSIONER KATZ: Can I take you to paragraph 30? And I need you to take us through virtually line by line how this contribution for FreeSat would actually be affected and what the puts and takes are. And what I would ask you to do is start off with what your current obligations are today under the existing system, and then tell us how it will be impacted by the costs you are looking to have offset here.
3983 MR. BIBIC: So is this the paragraph which starts under the heading "LPIF?"
3984 COMMISSIONER KATZ: Yes.
3985 MR. BIBIC: Okay. So today -- well today, soon we will have a 1 per cent of revenue commitment for LPIF. That would be maintained. Those funds, in our case roughly $15 million, would be deposited in LPIF and under the model described here in this paragraph. That 1 per cent would have to be used by the over-the-air broadcasters for incremental local programming over and above whatever baseline you establish.
3986 And we have no views on what the baseline is. If you want to lower the baseline, we see that as a reasonable accommodation for the OTA broadcasters.
3987 THE CHAIRPERSON: You used the word "incremental," we have basically walked away from incremental. We proposed a ratio based on the last three years of entitlement, but we didn't say it had to be incremental.
3988 MR. BIBIC: That is fine. The FreeSat proposal doesn't hinge on that. That is just what we said in this paragraph. So incrementality is gone, that is okay.
3989 Now, we currently also have a 5 per cent BDU tax is what we call it. And 2 per cent of --
3990 MR. FRANK: Under our present regime 4 points of our 5 per cent goes to the Canadian Television Fund soon to be the Canadian Media Fund. And the remaining 1 per cent is split 0.6 per cent to the Bell Fund and 0.4 per cent to the Small Independently-owned Station Programming Fund.
3991 Under this new proposal the 4 per cent, 4 points, excuse me, that we sent to the CTF would be reduced to 2 per cent, the same as cable, and the remaining 2 per cent would go to, on a temporary basis, LPIF.
3992 MR. BIBIC: And the 0.6 per cent and the 0.4 per cent, in other words the additional 1 per cent, would remain as is, it would go into the Bell Fund and the Small Market Fund.
3993 COMMISSIONER KATZ: So when you say that 2 per cent out of the 4 will go to the LPIF, and then you would draw that down for these costs, is that the way it would work?
3994 MR. BIBIC: So now we have I think in terms of draw-downs the way I have kind of broken it down in my mind is let's just focus on the 1 per cent LPIF contribution, the baseline contribution that wouldn't change, which in our case is $15 million. We would credit against that amount the cost of FreeSat. And the cost of FreeSat as I answered the Chairman before the lunch break, would be far less than that $15 million.
3995 COMMISSIONER KATZ: Okay. But I am just trying to understand the 4 per cent where you have suggested that 2 per cent now go to CTF instead of 4 per cent, and the other 2 per cent would go to LPIF. So you are actually looking to redistribute the 5 per cent in such a way that -- or the 6 per cent I guess, 5 plus 1; that 3 per cent of that would go to LPIF, 2 per cent would go to CTF, 0.6 per cent to the Bell Fund and 0.4 per cent to the Small Market Fund?
3996 MR. BIBIC: Correct.
3997 COMMISSIONER KATZ: Okay.
3998 THE CHAIRPERSON: What is the advantage to you to putting that money into LPIF?
3999 MR. BIBIC: There is no advantage to us. The advantage to us is capping the overall contribution at 6 per cent.
4000 But as we were preparing we were thinking, okay if the problem, at least on a temporary basis, to bridge us from today to the next hearing is this economic crisis, we want to take a deep breath and decide what to do. And we want to funnel funds to the OTA broadcasters. We can't afford to bump up the contribution that we make from six per cent to seven per cent or eight per cent or nine per cent.
4001 So, let's -- we distribute the monies we already contribute over to LPIF temporarily and then put it back.
4002 THE CHAIRMAN: In the anticipation of viable exceed to CTV and say a three per cent helper, you will then have covered the three per cent. Is that the idea?
4003 MR. BIBIC: No. The idea is that you will not exceed to those requests.
4004 THE CHAIRMAN: No, but I just don't understand why you've distribute the contribution to help and take it away from CTF.
4005 MR. BIBIC: It's simply --
4006 THE CHAIRMAN: Because there is no benefit to you.
4007 MR. BIBIC: Our Free Sat -- our Free Sat proposal hinges on our overall contributions remaining at six per cent.
4008 THE CHAIRMAN: Right.
4009 MR. BIBIC: That's really the fundamental issue. We went further and just proposed that you may want to consider redistribution if the real issue is the financial crisis eligibly being faced by OTA broadcasters in small markets for a temporary period of time because then we recognize that next year we will be back here and we'll have a broader structural discussion about seven-year licence renewals.
4010 COMMISSIONER KATZ: But at the end of the day it's a zero some game because what you're doing is taking two per cent away from the CTF, the independent producers who would translate that into programming anyways, so that would be reduced and you're proposing to give it directly to the broadcasters.
4011 MR. BIBIC: And we are quite -- we will be quite happy with keeping the system exactly the way it is, a one per cent help of contribution, five per cent BDU tax not be changed. If that's the outcome, we will -- and the distance signal outcome is acceptable, we will deliver Free Sat.
4012 COMMISSIONER KATZ: Okay. The cost and the availability of the Free Sat equipment, is that available today as well? Do we know what that is going to cost or is it still being developed?
4013 MR. DINESEN: Notwithstanding the engineering required to develop the new residential antenna which we have discussed, it will be using our existing line-up digital sat top boxes.
4014 The cost on a per household basis will vary to some extent, depending on the number of televisions in each individual household.
4015 We estimate that the typical cost per household will be of the order $350 to $400 before installation. The installation will be approximately another incremental $100 at the request of the household.
4016 COMMISSIONER KATZ: And you see this being in place by third quarter 2010?
4017 MR. DINESEN: That's our proposal, yes.
4018 COMMISSIONER KATZ: Back to paragraph 22 for a moment. I think one of the -- I guess the conditions or your proposal includes the notion of maintaining at the current level compensation to broadcasters, which is $0.48 per subscriber for a month in cash and dedicated transmission facilities.
4019 That's what it is today?
4020 MR. BIBIC: Yes.
4021 COMMISSIONER KATZ: And that's still being discussed and negotiated presumably outside of this forum with the broadcasters?
4022 MR. BIBIC: We continue to have distance signals negotiations, yes, or discussions and at some point, hopefully, those discussions --
4023 COMMISSIONER KATZ: I get one of the issues that comes up obviously is by us considering your proposal, are we taking market forces out of the hands of you folks and the broadcasters who are negotiating this and suddenly it becomes a rogatory fiat, as opposed to something that the parties negotiate in good faith and your coming up here with this proposal obviously, but on the other side of the coin, you're also negotiating with those folks as well?
4024 MR. BIBIC: Well, if we could continue to have negotiations and we're quite happy to do that in good faith, we always do, at the end of the day there will be an outcome one way or another. However, during that period of time, there is uncertainty for us and at that point, once the uncertainty is there, we can't necessarily commit to doing Free Sat.
4025 Now, if the outcome of the negotiation results in an acceptable solution on distance signals, we could still deliver Free Sat, but we couldn't sit here right now and guarantee that because it will depend on what the outcome of the negotiations were and if they failed, and it went to dispute resolution, what the outcome of the Commission's ruling on that would be and how we chose to behave in marketplace.
4026 COMMISSIONER KATZ: But one of the conditions of any type of dispute resolution is you have bookings and what you have got is your booking, I guess, your proposal. What we don't know where the other side sits in any of this, obviously.
4027 I mean, they were very very -- they came before us and basically said: there are negotiations going on, some of this is working well, some of this is not working well. We think what might be at some point in time where a line will be drawn in the sand, but they didn't come to us and sort of say, we're both up against two walls on opposite sides and we can't get any closer.
4028 MR. BIBIC: Commissioner Katz, I have done this long enough now to know that I can't assume that the Commission will simply rubber stamp this proposal and we appreciate that we all live in the real world. If that doesn't come to pass, we will sit down and negotiate and then we'll just see where the chips fall and then we'll move on from there.
4029 But in that eventuality, Free Sat may or may not happen and it depends on the outcome.
4030 MR. CRULL: I think, Mr. Vice-chair, I would just add in making the Free Sat capability possible, there was real capital put forth into the launch of a satellite that was successful last year and it is a real opportunity cost for that bandwidth for us and so, what we've tried to propose here is indeed any -- the outcome of any negotiations would have either the effect of a very severe customer disruption.
4031 If there was a dramatic change, we think that this change in the number of distance signals that are available would not be severely disruptive, but if they went down to only one local channel, that it would be disruptive.
4032 The transition to that even for a fee would be incredibly disruptive and, in fact, we've never gone through anything across our entire base of that magnitude and to the extent, I think, of the Chairman's questioning earlier, you know, every time I've started to get quite involved with the negotiations with these broadcasters and there are always -- we do quite a lot of business.
4033 There is $200,000,000, as I've said, spent with just those that are before at this hearing and there are always several elements. We never discuss one sole element of our relationship in the absence of the other relationships.
4034 And so, what we are trying to do is we showed the cost of Bell-TV are such that we are just now approaching profitability after many years of investments. We are trying to prevent that from being deteriorated further, which is unacceptable for us and find a solution where we can help them avoid a very very large cost obligation that they have because of what we did with NEMIC-4.
4035 COMMISSIONER KATZ: Okay. Just one last question that I've got on paragraph 9. I guess I just want to confirm my understanding.
4036 You say broadcasters before you at the hearing, before us at the hearing, are asking for further wealth transfer from Bell-TV. They already received $200,000,000.
4037 That's not a wealth transfer. I mean you are benefiting by that as well; are you not? I mean, you are selling or re-selling these services and making money?
4038 MR. CRULL: That's correct.
4039 COMMISSIONER KATZ: So, it's not -- you are not writing a blank cheque to them as a wealth transfer.
4040 MR. CRULL: I think the reference there would have been to the totality of the six per cent.
4041 MR. BIBIC: Just to defend the drafting Vice-Chairman Katz, we're saying the broadcasters already receive $200,000,000 annually and that's not a wealth transfer, but it's these broadcasters who happen to be before you at this hearing, asking for a wealth transfer.
4042 COMMISSIONER KATZ: Okay. But they're getting $200,000,000 in high margin specialty from you folks and others perhaps as well, but at the same time, you're taking that, packaging it and selling it to the public for a game.
4043 MR. BIBIC: That's right. Correct. The $200,000,000 was not a wealth transfer. It's a business relationship. The point we're making here is that we do deliver a lot of value to the entire system.
4044 The reference to a further wealth transfer is the demands for fee for carriage is the demands for an LP going up from one to three per cent, demand for local into local and I could go on, but you've heard them.
4045 COMMISSIONER KATZ: Those are my questions, Mr. Chairman.
4046 THE CHAIRMAN: Michel?
4047 CONSEILLER ARPIN: Merci, monsieur le président. On m'a demandé de poser des questions sur les services en français, donc je vais... si vous voulez, je vais vous poser des questions en français pour les fins du dossier, mais vous avez toute la liberté de répondre dans la langue de votre choix.
4048 Si je prends dans votre Annexe B le cas de Thunder Bay et je comprends à l'Annexe B, ce que vous nous dites, c'est qu'à Thunder Bay, présentement, les gens qui ne sont pas abonnés à des entreprises de distribution reçoivent les quatre services qui sont CBC, CTV, Radio-Canada et TV Ontario?
4049 M. BIBIC: C'est exact, monsieur Arpin.
4050 CONSEILLER ARPIN: Et si je regarde votre offre de Free Sat, ils bénéficieront de deux services de plus et ils bénéficieront de CTV et de Global et de TVA, mais ils n'auront pas accès ni à TVO ni à TFO qui, pourtant, selon la nouvelle réglementation qui sera en place, devraient être distribués à travers tout l'Ontario.
4051 M. BIBIC: La raison pour cela, vice-président Arpin, c'est que la station de Radio-Canada et de TVO, d'après mes connaissances, n'ont pas de contenu local et donc, on distribuerait les deux stations qui ont du contenu local, donc CBC et CTV.
4052 Et, en passant, je remarquerais les coûts très élevés qui seraient évités pour la construction de tour numérique, le six millions.
4053 Donc, on distribuerait CBC et CTV et donc, au bas de la page on a inclus CBC et CTV et, ensuite, on inclurait aussi City, Global, Radio-Canada et TVA, mais la raison, pour répondre à votre question très directement, la raison pour laisser tomber Radio-Canada et TVO, c'est qu'ils n'ont pas de contenu local.
4054 CONSEILLER ARPIN: Cependant, vous allez transporter quand même... Si je prends CBLFT-18 à Thunder Bay, exactement le même contenu que CBLFT Toronto, parce que s'il porte le numéro 18, c'est parce que c'est une ré-émettrice à 100 pour cent de Toronto, comme CICO-9 est une ré-émettrice de CICO qui est à Toronto.
4055 M. BIBIC: Oui. Ce qu'on essaie de faire ici, c'est de gérer aussi le nombre total de signaux qu'on serait obligé de distribuer parce qu'il y a des limites à la capacité qu'on a.
4056 CONSEILLER ARPIN: Bon. Et si je regarde la page suivante, je regarde le cas de Rimouski, vous faites la même chose avec Télé-Québec; c'est-à-dire que vous n'offririez pas Télé-Québec aux gens de Rimouski alors qu'ils l'ont en mode hertzien présentement.
4057 C'est le même raisonnement si je comprends bien?
4058 M. BIBIC: C'est le même raisonnement, mais en bout de ligne, ils recevront... recevraient plus de signaux sous notre proposition Free Sat qu'ils aujourd'hui.
4059 CONSEILLER ARPIN: Sauf qu'ils recevraient des signaux de langue anglaise pour une population qui ne le parle pas?
4060 M. BIBIC: Bien, là, il y a des... C'est un bon point, c'est un exemple. On pourrait le modifier par rapport aux communautés locales en question. C'était juste des exemples. Ce n'est pas des décisions fermes.
4061 LE PRÉSIDENT: Mais ça -- excusez-moi, monsieur Arpin -- mais ça, ça explique seulement des clients qui sont... qui obtiennent le Free Sat? Si je suis à Thunder Bay, je suis un client régulier de Bell-TV, je vais recevoir TVO, n'est-ce pas?
4062 MR. BIBIC: Dans quel exemple? À Thunder Bay?
4063 LE PRÉSIDENT: À Thunder Bay. TVO, mais...
4064 M. BIBIC: Non, mais aujourd'hui TVO à Thunder Bay...
4065 LE PRÉSIDENT: Et dans le futur, selon les nouvelles règles?
4066 M. BIBIC: Selon les nouvelles règles, oui.
4067 LE PRÉSIDENT: Oui. C'est seulement pour les clients du Free Sat?
4068 M. BIBIC: Oui, oui.
4069 LE PRÉSIDENT: Cet exemple ici
4070 M. BIBIC: Oui, oui.
4071 LE PRÉSIDENT: Okay.
4072 CONSEILLER ARPIN: C'est comme ça que je l'avais compris. Ça, j'avais une autre question, mais vous y avez répondu.
4073 Maintenant, oui, si j'ai bien compris quand vous avez dit tantôt que vous anticipiez que, de manière optimale, c'est à peu près 80 000 foyers qui seraient éligibles à s'abonner aux services de Free Sat. Est-ce que j'ai bien compris quand... Ce n'est pas dans le texte, mais j'ai entendu le chiffre de 80 000 tantôt?
4074 M. BIBIC: On estime, d'après les études, qu'il y a 200 000 foyers qui... il y a un million de foyers qui ne sont pas abonnés à des services payants et d'après les études, il y a un million de foyers, 80 pour cent de ce million devrait être... avoir des services fournis à cause de la transition que les radiodiffuseurs ont l'intention de faire.
4075 Là, ça nous laisse avec 200 000 foyers et on estime que de ces 200 000 foyers-là, environ 80 000 seraient peut-être intéressés à une solution Free Sat.
4076 CONSEILLER ARPIN: Et c'est basé, ce 80 000, ça veut dire qu'il y en a 120 000 qui ne le seraient pas, mais vous avez établi cette donnée-là à partir d'études que vous avez faites ou si c'est un "educated guess", comme on dit?
4077 M. BIBIC; C'est en partie un educated guess et en partie l'analyse du sondage que le working group, les BDUs, les distributeurs ont...
4078 CONSEILLER ARPIN: Ont réalisé.
4079 M. BIBIC: Oui, ont réalisé.
4080 CONSEILLER ARPIN: Donc, qui dit que, effectivement, il y a des gens qui disent qu'ils s'en passeraient tout simplement.
4081 M. BIBIC: Ils s'en passeraient tout simplement. C'est vrai, c'est ça.
4082 CONSEILLER ARPIN: Ou qui s'en passent déjà d'ailleurs parce que c'est clair par le sondage qu'il y a des gens qui n'avaient pas le service puis qui n'avaient pas de... qui n'avaient pas de téléviseur. Il y a eu 1 000 répondants, mais il y en a seulement 864 qui ont répondu et donc, il y en a 136 qui théoriquement, c'est parce qu'ils n'ont pas de TV.
4083 M. BIBIC: C'est ça. Il y en a une partie qui n'ont pas de TV, une partie qui ont une télévision, mais préfèrent regarder des films, DVD, et caetera.
4084 CONSEILLER ARPIN: Exactement.
4085 CONSEILLER ARPIN: Ça répond à mes questions, monsieur le président.
4086 THE CHAIRMAN: Candice?
4087 COMMISSIONER MOLNAR: Thank you. Let me ask first, just to follow up on the question of Vice-Chair Arpin related to this 80,000 potentially that might be subscribers to Free Sat.
4088 If that number was materially different, potentially significantly smaller than that amount, would that change your proposal in any way? And maybe I'll just give you a little base as to why I'm asking this question.
4089 Because we have been talking throughout this week from an unserved base that's ranging between three per cent and ten per cent and so, you know, if you've estimated it at the 10 per cent and it turns out that there is three per cent that have no access to over-the-air, does that change what you would offer.
4090 MR. BIBIC: I will be corrected if I give a wrong answer, but in my mind, it shouldn't. The initial set-up costs are the initial set-up costs whether or not you've got 80,000 or 50,000 potential customers.
4091 The bandwidth costs are the bandwidth costs, because we will be delivering the signals. And in terms of the ongoing costs vis-à-vis warranty and maintenance head and equipment, et cetera, we've kind of put a proxy of, as I've mentioned in the very first question of the Chairman earlier today of $50 per household, per annum. So that just fluctuates as a function of how many households are interested in this service.
4092 MR. CRULL: Now, I think that's right. As I would think about it, we had mentioned that the costs we thought would be somewhere between two and five million dollars and the five million, on an annual recurring basis, the five million would be if the 80,000 I think in the scenarios that you're perceiving, it would be as low as two million.
4093 So, the variable cost would be the one million, would be a million over the bandwidth cost of a million.
4094 COMMISSIONER MOLNAR: I want to pursue with you a little bit the cost of Free Sat. You've made reference to some of the costs to Bell, such as the opportunity cost of the bandwidth and what I'm trying to understand is what ultimately is the cost of Free Sat to Bell. And I say that because you've linked this to distance signals which broadcasters have indicated to us is, in their view, a very important, very valuable negotiation that they feel outstanding.
4095 So, can you tell me, and potentially file something with us that would help to explain what the costs are to Bell of offering this Free Sat? There is a number of costs that have been put out here that are, you know, the customer pays for the receiver and the broadcasters pay for taking the signal to the head-end and so on.
4096 So, how is it that this offering offsets the potential benefits of distance signal negotiations?
4097 MR. CRULL: I think certainly in confidence that we could -- we could convene and make available some of the details on the costs.
4098 We are seeking to only recover sort of the operating variable costs of customer support and warranty replacement and things of that sort for the ongoing relationship.
4099 The million dollars for the actual satellite bandwidth is a fraction, it's a small fraction and we would rather disclose that cost in confidence, but it's a small fraction of what the cost of this particular investment in that satellite actually was.
4100 MR. BIBIC: And if I may add, Commissioner Molnar, we view our package quite clearly as win-win, win-win. What we -- the benefits we get out of this is that we will not be subjected to additional cash costs that we simply cannot afford.
4101 On the over-the-air broadcaster side, the cost savings from not having to build digital infrastructure are massive, is it their own -- their own numbers, massive in fact. The CRTC's independent Expert Report confirms that.
4102 For consumers, well, you've got a customer win in terms of the over-the-air households and you have a customer win for a 1.9 million base of customers who will get minimally disrupted again because we can kind of keep the structure of distance signals package intact, reduced but at least somewhat intact.
4103 And for the Commission, I mean, there is for everyone. There is a public interest win here, which should not be under-estimated.
4104 COMMISSIONER MOLNAR: I appreciate what you are saying in that there is benefits to many groups in this. I am just trying to understand because we've sat here for three days and only the Commission has talked about Free Sat. You know, it's not like my sense is that the broadcasters who came before us suggested this is the win. And so, that's why I would just like if you could help by providing us with some information as to, you know, how those components go together and so, really what is the cost benefit, as it relates to this offering.
4105 MR. BIBIC: We will do that. I mean, of course, every single day a broadcaster, apart from TVA, has come before you and wants to negotiate or wants either to negotiate or wants a regulatory solution on each issue independently and in a silo.
4106 So, fee for carriage, $450,000,000, that would be the number; distance signals, $40,000,000 for Bell, thank you, local into local and they've come -- they've been pretty open actually and we want you to give us a hammer commission. And the other issue they said is: oh! Bell is linking all these issues, it's not fair.
4107 Well, I mean, the most novice of negotiators understands that when you're entering to a broad base relationship, you have a broad base negotiation.
4108 THE CHAIRMAN: Okay. First of all, one clean-up question. I look at your schedule here on what you are going to try and to -- it's Ottawa, Ottawa and Gatineau in Schedule C and I know your wonderful province so you're picking in that example cadre. Of course, Edmonton. So that means Edmonton would not be carried I gather now? As you only say the province is a two million people city, so I guess you would make a marked decision that --
4109 MR. BIBIC: It could be Edmonton, it could be Calgary, but we would pick. We would have the baseline right to one. If we wanted to have both, we would have to discuss and reach an accommodation.
4110 THE CHAIRMAN: Now, if I take a step back from this and so what happened here. The broadcasters came to us in the BDU and said, our distance signal is being reconstructed, we don't get paid for it and we get paid a compensation through the CAB which does not reflect the market value. Please help us, we don't have a hammer, we have no way, we can't negotiate with the BDUs and the DTH. We set you right. That's your signal, you should be entitled to the market value. We don't know what the market value is, we give you the right to negotiate. If you can't come to an agreement, you can be sold.
4111 So, they have tried to negotiate with you, it hasn't come to a conclusion so far and you have basically made a counter proposal and you have said, you guys are all facing a major cost of converting to digital. We will help you with that. You will let markets in which you don't want to migrate, we will offer for free on the street out here and on this example that saves you a huge amount of money to invest.
4112 But in return for that, whatever you are paying by now, is compensation through the CAB becomes the rate for distance signal compensation and, by the way, if we reduce the number of stations that are carrying right now which we are not obligated to carry, establish a minimum here, as the minimum.
4113 Is that essentially what this is all about?
4114 MR. BIBIC: You've got it.
4115 THE CHAIRMAN: Okay. Thank you.
4116 Hold on. Louise?
4117 COMMISSIONER POIRIER: Yes, I have a question.
4118 MR. FRANK: Excuse, Mr. Chair. Could I?
4119 THE CHAIRMAN: Yes.
4120 MR. FRANK: Excuse me. Can I clarify the last -- the last part of your question, please, because I think I've heard that what you see the minimum number of stations will be carried and I just want to clarify that in the current arrangement that we have now, the $0.48, are included a whole range of services. We are not planning to cost those out.
4121 THE CHAIRMAN: Okay. Then, that you will explain to me. The schedule for Ottawa which you have here is an example. In C, I thought I heard Mr. Bibic quite clearly say, this is what you will be offering in the future. This is what you presently offer, this is what you will offer in the future?
4122 MR. BIBIC: That's correct. We will continue to pay $0.48 for a reduced menu of distance signals.
4123 THE CHAIRMAN: Exactly.
4124 MR. FRANK: That's correct, but we'll continue to carry signals in other markets. For instance, you asked about Edmonton. Edmonton would continue to be -- the current Edmonton signals we carry will continue to be carried.
4125 THE CHAIRMAN: Yes, but I, as a resident of Ottawa --
4126 MR. FRANK: That's correct.
4127 THE CHAIRMAN: -- Bell would not receive the signal, it would only --
4128 MR. FRANK: On a distant signal.
4129 THE CHAIRMAN: As distant signal, I would only receive Calgary. That's how I read this.
4130 MR. FRANK: That's correct. I thought you were suggesting that we would be taking signals down that we're currently carrying.
4131 THE CHAIRMAN: Oh! no, no, no.
4132 MR. FRANK: My mistake.
4133 THE CHAIRMAN: All of this is about the signal. So, that's essentially it. Okay. Thank you. Madam Poirier.
4134 COMMISSIONER POIRIER: Yes. Well, at first glance, this whole project could have a negative impact on some of the independent broadcasters, at first glance. So, are you open to change some of the rules to make sure that they survive in this world of broadcasting?
4135 MR. BIBIC: How do you -- in order to answer the question, could you give me an example?
4136 COMMISSIONER POIRIER: Well, when I look at the Rimouski market, okay, we are not sure that, for example, that Télé-Inter-Rive could still keep the market of Rimouski with the kind of offer that we read there. Télé-Inter-Rive is offering TVA, he is an affiliated, okay, and who knows if the contract could go on with TVA with that kind of offer? We don't know yet.
4137 So, I wonder if you have considered the independent producers, the independent broadcasters in this whole project?
4138 MR. FRANK: Yes, we have and the current $0.48 that we are paying would continue and franchise to signals from the Télé Inter-Rives Group.
4139 COMMISSIONER POIRIER: Okay. Then, we'll see what are their reactions and will note them.
4140 I wonder if there is a time frame we have to follow to make sure this whole project is successful? Are there some key dates?
4141 MR. BIBIC: Well, on Free Sat, we could make it available as we indicated by the third quarter of 2010. Now, to do that, we would need some certainty from the Commission as to what the outcomes are from this hearing, so we have to work backwards from there.
4142 COMMISSIONER POIRIER: Okay.
4143 MR. BIBIC: If the decision were to come out, and I don't think it will be this long, but if it were to come out in the second quarter of 2010, we saw the outcome and were an acceptable outcome that allowed us to go ahead with Free Sat, obviously it would take more time to deliver Free Sat.
4144 CONSEILLÈRE POIRIER: Et je suis curieuse. J'aimerais savoir pourquoi vous avez attendu à ce moment-ci pour présenter un projet qui est si important et si novateur?
4145 M. BIBIC: Ce n'est pas la première fois que Bell-TV se présente auprès du CRTC et discute de la solution Free Sat, c'est probablement... c'est définitivement la troisième fois sinon la quatrième fois.
4146 Cette fois-ci, on a beaucoup plus de détails sur la proposition qu'on l'avait fait auparavant. La raison qu'on l'a dévoilé ce matin, c'est que jusqu'à ce matin, hier soir, on déterminait les détails, on écoutait ce que les autres parties avaient à dire et on a réagi. C'est ça qu'on fait.
4147 COMMISSIONER POIRIER: Okay. And maybe a last question, Mr. Chair.
4148 I wonder if you have ever tested this whole idea with some of the broadcasters officially or unofficially?
4149 MR. BIBIC: Well, we have -- again we've put forth Free Sat several times and we brought it forward initially in the DTV working group, it didn't get much attraction. I think that BDUs have their own reasons and the over-the-air broadcasters have their reasons and they were quite open about their reasons yesterday and today. They just don't want their distant signals of $40,000,000 from Bell, they want their hundred of millions in fee for carriage, they want local into local and they don't want -- Mr. Guiton was really quite aggressive on this point -- they want to pay absolutely zero on Free Sat, despite the fact that it's their responsibility and ultimately their cost to build digital transmission towers.
4150 So, that's the real -- so long as there was this linkage, they don't want to talk about it.
4151 CONSEILLÈRE POIRIER: Merci.
4152 THE CHAIRMAN: Your proposal is on record now and --
4153 MR. DINESEN: If I may have a point of clarification. Mr. Bibic suggested that Q-2 next year would be appropriate time if that's what you were indicating, for a decision on Free Sat. There are some long lead items that will need to be put in place.
4154 Certainly from my perspective as the team is going to have to deliver the solution, the sooner, the better and what I propose if that there is kind of a date beyond which we would put the Q-3 2012 time frame at risk we will let the Commission --
4155 COMMISSIONER POIRIER: Yes. Well, if there is an official agenda on this matter, could you provide it to the Commission?
4156 MR. DINESEN: We could do, yes.
4157 COMMISSIONER POIRIER: Yes. I would appreciate. Thank you very much.
4158 THE CHAIRMAN: Anyway, your proposal is now on the record and we will be delighted to the degree of details as to when and the undertaking that you gave will allow, I think, the other parties to comment on it and we will look and see whether there are -- what are their concerns on the proposal as stated right now.
4159 Steve, do you want to go through the undertakings to make sure that we all speak about the same thing?
4160 MR. MILLINGTON: Thank you, Mr. Chairman. I have four. Number one: using CTV's minimal local programming definition, provide a complete list of all the channels that would be available on the Free Sat system.
4161 Number two: file in confidence, the technical specifications in a abridged version of the technical specifications of the Free Sat solution.
4162 File in confidence the costs and benefits of the Free Sat solution to Bell and then again, we would want an abridged version for the public record.
4163 And number four, the one that we just discussed, the implementation timetable for the Free Sat solution.
4164 THE CHAIRMAN: Thank you very much. I think we'll take a ten minute break.
--- Upon recessing at 1432
--- Upon resuming at 1449
4165 LE PRÉSIDENT : Où est votre équipe?
4166 MR. MAYRAND: I am a one-man army, sir.
4167 THE CHAIRPERSON: Okay, Lynda, let's go.
4168 THE SECRETARY: Thank you.
4169 We now have at the presentation table Cogeco Cable Inc. Appearing for Cogeco is Mr. Yves Mayrand. Mr. Mayrand, you have 15 minutes for make your presentation.
4170 M. MAYRAND : Merci, Madame la Secrétaire.
4171 Good afternoon, Mr. Chairman, Vice-Chairman and Commissioners. Thank you for giving us the opportunity to present the point of view of Cogeco Cable as part of this important public hearing.
4172 First, allow me to describe the position of Cogeco Cable within the Canadian broadcasting system and Canadian telecommunications.
4173 We operate a cable telecommunications system serving approximately 868,000 basic cable customers in Canada: 603,000 in the province of Ontario and 265,000 in the province of Quebec.
4174 Our market share of the total broadcasting distribution market in Canada is only 8 percent based on the 2008 cable, DTH and MDS subscriber figures published last week by the Commission. You do not provide DTH and MDS figures by province but our estimated market share for each of Ontario and Quebec is below 15 percent as we do not serve the main metropolitan areas.
4175 It is quite obvious that we are non-dominant in the BDU market and that we do not have market power in broadcasting distribution.
4176 Neither we nor our related companies own any conventional or specialty television broadcasting properties, so we are not vertically integrated. We are therefore free of any real or apparent conflict of interest when carriage of conventional or specialty television services is involved.
4177 On the telecommunications front, we offer Internet access services and telephony services. We are also non-dominant in both these markets whether nationally or in the two provinces where we operate.
4178 We compete directly head-to-head in all our lines of business with Bell. We compete head-to-head in one or more lines of business with Shaw Direct, TELUS, Bell Aliant and Rogers and we will shortly with Videotron when it makes its entry in wireless telephony. We also compete with a variety of smaller or more local competitors in one or more lines of business.
4179 Finally, we are an open capital company with a diversified base of shareholders from the investment community as our shares are listed on the Toronto Stock Exchange.
4180 In order to continue operating successfully in our lines of business, we depend on delighting our customers each and every day of the year with competitive services and on satisfying our shareholders with competitive returns on capital invested.
4181 As you know, cable networks require, on an ongoing basis, huge amounts of private capital. We carry almost $1.3 billion on our balance sheet for fixed assets alone and we expect to spend 300 million in capex and deferred charges just in the current fiscal year.
4182 You may ask yourselves, now, why is this relevant here? This hearing is fundamentally about several concurrent attempts by the Canadian private television broadcasters to have a massive cross-subsidy imposed by regulatory decree for their sole financial benefit without any consideration for the legitimate interests of our customers and our shareholders.
4183 We are not only accountable to the regulator, we are also accountable to our customers and to our shareholders because without their continued support, we will wither and our successful competitive Canadian broadcasting distribution and telecommunications system will also wither, much to the detriment of all Canadians.
4184 Canadian private television broadcasting groups are arguing that each of their individual undertakings must make money and that there should be no cross-subsidization between their own more profitable undertakings and the ones that are less profitable at this juncture. Yet, they have no hesitation whatsoever in asking the Commission to impose a massive and lasting cross-subsidization of several hundred million dollars from BDUs to private television licensees on account of the LPIF alone.
4185 Is there a sound public policy rationale for this cross-subsidy? The answer in our view is a resounding no.
4186 First, we do not believe that Parliament ever intended that the regulator could impose cross-subsidization from some private sector licensees to other private sector licensees, or to impose equalization payments between them, or to have some licensees provide income stability insurance to other licensees, or to provide a bailout for licensees in financial difficulty.
4187 Second, we are seeing, unfortunately, a repetition of last year's framework hearing where the Commission, despite valiant attempts throughout the proceeding, was unable to get a straight answer from the private television broadcasters on the calculation of their alleged financial need, the existing financials on which those calculations should be based, the use of proceeds from any new revenue source and the related commitments on the use of creative and other resources.
4188 We submit that the Commission cannot make sound policy determinations on the proposed increase to the LPIF, given the absence of clarity and transparency on the public record concerning the answers to the following questions. Please bear with me, there are a few.
4189 What is the rationale and calculation supporting a threefold increase in BDU contributions to the LPIF?
4190 What part of the alleged financial problem of private OTA television broadcasters is structural, conjunctural or self-inflicted?
4191 What is the private group broadcasters' chart of accounts, detailed cost structure and allocation of joint and common costs between their various undertakings?
4192 How have these costs and allocations varied over time and how are they projected by the television broadcasters to vary in the future?
4193 What conventional OTA local programming commitments have been cut, will remain cut, will be reinstated or will be increased and for which period of time, market by market?
4194 Which local programming commitments will remain over the next full term of licence and how will they be delivered after the digital transition date of August 31, 20l1?
4195 What will be the deliverables for access to LPIF funding and how will they be measured for regulatory purposes?
4196 What is the cumulative effect of LPIF funding, fee for distant signal, removal of Part II licence fees, direct government assistance, fee for carriage and other measures proposed by the private television broadcasters, and also the end of the current recession?
4197 In our written submission we not only strongly oppose an increase of the LPIF contributions from 1 percent to 3 percent of all BDU revenues derived from broadcasting activities, we also question what we see as serious potential governance and accountability issues with the LPIF, based on the position of the CAB on composition of the board, funding criteria and use of proceeds.
4198 The individual submissions of private television broadcasting groups at this hearing raise in our view the very same concerns. These governance and accountability issues should be resolved and the LPIF should have a credible track record before consideration is given to pouring more money into that fund.
4199 The threefold increase in the LPIF levy proposed by the private television broadcasters is particularly egregious given their steadfast refusal to cap the ratio of their expenditures for non-Canadian programming to their expenditures on Canadian programming.
4200 Your financial and statistical summaries on the television industry demonstrate that expenditures on American programming are continuing to balloon. It is untenable for private television broadcasters to ask for dramatically increased funding sources while they remain free to overspend on American programs and to underspend on Canadian programs at will.
4201 Now, based on the position taken by private English-language television broadcasters at this hearing, it has become quite obvious that no matter what the Commission decides with respect to the LPIF or other funding requests, local programming service will definitely be abandoned in some local television markets located within our Ontario cable footprint.
4202 We would be prepared to step in and provide local news programming in these local markets as part of our local community channel activities. We have already done this very successfully in North Bay when CTV decided to abandon their local programming in that market several years ago. We currently offer eight and a half hours of original local news weekly in addition to our other local community programming there.
4203 TELUS was indeed right in pointing out this morning that alternatives will surface where television broadcasters decide to exit local programming.
4204 Finally, we provided comments on advancing the implementation date for the new distant signal policy. We believe that this has become somewhat of a moot point because the private television broadcasters are apparently unwilling to break the stalemate with Bell TV and Shaw Direct or go to dispute resolution before the Commission and are now questioning the television distribution requirements that should apply to satellite distributors under the Broadcasting Distribution Regulations.
4205 We are concerned by the fact that part of this hearing will be conducted in camera and that important additional information requested by the Commission from private television broadcasters will be filed in such a way that would not allow us the opportunity to comment.
4206 While we understand and respect the need for confidentiality of some detailed financial data of the private television licensees, additional information required to be filed at this late stage is not all confidential.
4207 We feel, therefore, that all complementary information should be filed by the private television broadcasting groups before the end of the oral hearing and that there should be an opportunity for other interested parties to comment in writing within a reasonable time period after the end of the oral hearing.
4208 And I should add that this should apply as well to other parties who have made undertakings, including today and that are not non-broadcasting parties.
4209 So, this completes our oral remarks today and I will be pleased to answer your questions.
4210 THE CHAIRPERSON: Thank you, Mr. Mayrand.
4211 On page 6 of your presentation you say:
"...we see as serious potential governance and accountability issues with the LPIF, based on the position of CAB, on composition of the board, funding criteria and use of proceeds." (As read))
4212 MR. MAYRAND: Yes.
4213 THE CHAIRPERSON: I don't disagree with you. Have you got a better model? Have you got some suggestion for us in terms of all these, in terms of composition of the board, in terms of the funding criteria and the use of proceeds?
4214 MR. MAYRAND: Yeah. The suggestion we made in our written submission was that we didn't see why this new local program funding initiative should not be run as a discrete program by the Canadian Media Fund.
4215 Now, as we're all aware, the Canadian Media Fund is being set with a very comprehensive slate of governance measures that will ensure that the administration of the funds is in all respects transparent and fully independent from any of the contributors or the beneficiaries, for that matter.
4216 So, we think the basic structure is available and we can't quite understand why this initiative could not become just a discrete fund initiative managed under that same structure.
4217 THE CHAIRPERSON: And eligibility, as you know, originally we talked about incrementality that would put forth a formula based on the average of the last three years' spending and then CTV came forward with a formula based on the population on markets.
4218 What's your view, what should we use?
4219 MR. MAYRAND: Thank you for this question.
4220 We didn't express any specific view on the formula that you propose in your Public Notice. We think it's reasonable. We wouldn't pretend to say that, you know, the exact formula as to eligibility should come from us.
4221 In fact, if this program were managed by the Canadian Media Fund, for example, I think the Canadian Media Fund would be well equipped to set criteria in consultation with the Commission and take into account the record of this proceeding in such a way that the criteria will be satisfactory.
4222 THE CHAIRPERSON: And, lastly, what can these funds be spent on? I mean, CAB has a very open-ended definition which allows sort of basically most type of expenditures.
4223 Some people before us and over the last two days have suggested it should be purely programming costs, or maybe programming costs and promotion thereof, et cetera.
4224 Where do you come down on this?
4225 MR. MAYRAND: Well, we totally agree that the whole intended purpose of this initiative is for local content.
4226 It is not about a number of things that the CAB have put in their submission which seem to be really the party line for individual broadcasting groups appearing at this hearing.
4227 And that is, you know, the ability to use proceeds from the Fund for staff, both on-air and technical, other operating expenses such as overhead, and the leasing of equipment and facilities, capital funding such as digital or HD cameras and studios, fibre links and trucks equipped to conduct live broadcasts, et cetera, and promotion, including advertising or non-related ads in other media and other platforms.
4228 I mean, frankly --
4229 THE CHAIRPERSON: What's left?
4230 MR. MAYRAND: Yeah. I mean, that means that you cannot have -- if this is going to be the way the funds can effectively be applied, you cannot have accountability.
4231 THE CHAIRPERSON: Okay. You come from an organization well known for its tight watch on expenditures and great accountability.
4232 Maybe you can furnish us with a list of what you think are eligible expenditures?
4233 MR. MAYRAND: I could certainly provide a list but I think it would be quite short because, in our view, dollar-for-dollar, funding from the Fund should go to direct costs of local programming qualifying as local programming.
4234 THE CHAIRPERSON: Okay. Well, I would be very appreciative if you could file such a list, short as it may be.
4236 COMMISSIONER ARPIN: Thank you, Mr. Chair.
4237 I'll keep going into the same line of questions because in your written submission you listed the CAB type of services that they do, but they have included staff.
4238 If you remove staff from the list, where will they be able to spend the money?
4239 MR. MAYRAND: Well --
4240 COMMISSIONER ARPIN: Because they're not doing business through independent producers, it's money that goes to the station to do local programming. Obviously that will require hosts, that will require artists or whatever, journalists to do that programming. They're going to end up being a member of the staff.
4241 MR. MAYRAND: Well, if I may address that specific point, you are quite right. If we are talking about staff that is actually used and accounted for in the production of local programming, I would agree with you.
4242 The difficulty we have is that the CAB wording is staff, both on-air and technical involved in local programming. What does that precisely mean?
4243 COMMISSIONER ARPIN: The camera man, the sound man, the people who do the lighting of the studios, they are technical people associated to the production of programming.
4244 MR. MAYRAND: Sir, what we're saying is that we think that this is an open door for various types of technical staff, for example, being included in the equation which may be peripherally involved with local programming but not really involved in it.
4245 Now, you've taken that line item, but our comment was really on all four line items on page 4 of the CAB submission which I quoted, and we do have a problem with -- specifically with these other three line items.
4246 COMMISSIONER ARPIN: No, that I understand because they are related to equipment, they are related to digital transition and whatever.
4247 But when they are related to staff and the people who are doing the program, not only both at the technical level, as I said, camera man and everything, those -- the purpose of the LPIF is to help the local stations do more local programming by hiring even new people to do that, to have a better -- a greater territory to cover from a news standpoint or open up bureaus in more remote locations.
4248 MR. MAYRAND: I take your point, sir, and we're not taking an unreasonable position. We're not saying that all staff should disqualify.
4249 What we're saying is that it should be clearly directly related to the local programming production effort.
4250 For example, should a technical person involved in transmitter maintenance have an allocated part of his or her cost and salary passed on to funding for local programming? We don't think so.
4251 COMMISSIONER ARPIN: Well, I think I get your point on that.
4252 And usually in the TV station that I know of the people who do the maintenance are not the operators of the equipment, it's a very specialized field of the technical aspect and they're not the same people there, and I'm sure that by your own experience in cable you know that the guys that do the maintenance of your cable system are not the guys that are operating the community channel.
4253 MR. MAYRAND: I cannot agree more with you, Mr. Arpin. I guess you understand our point that on this particular item, which you've picked on, there is still a concern that general overhead on the technical side be funded through this local programming initiative.
4254 And our key point is to tell you the use of proceeds criteria should be tight enough to ensure that it really goes to what the Commission intended in creating this Fund.
4255 COMMISSIONER ARPIN: Thank you.
4256 At the beginning of the hearing the Chairman made public three documents, I don't know if you had a chance to access them, they were available in our -- at the Secretariat and they've been there since.
4257 And the first one is titled Fee for Carriage Impact Analysis. And I'm asking -- I don't know if you have any comment to make on that document.
4258 MR. MAYRAND: Well, we didn't have much of an opportunity to look at it in detail. I certainly couldn't go through it with our finance people, but I did look over the material and I believe comments were made in this regard by Rogers in a preliminary fashion and we would tend to agree with Rogers.
4259 In particular, the way we understand the figures that you have put in Document 1 on the Fee for Carriage Impact Analysis, you're really looking at the aggregate PBIT figure for the industry, not just for revenues derived from broadcasting, but for all revenues which include, of course, a substantial portion of non-broadcasting activities such as Internet and telephony.
4260 So, we have obviously a concern in any discussion dealing not only with a cross-subsidy between some broadcasting licensees to other broadcasting licensees, but even more so from telecom common carriers to broadcasting licensees which can be a concern, given the fact that you've taken the aggregate figure.
4261 And the other comment I would like to make is -- and I think it's been made by others and I know that this Company has made it to this Commission in other occasions in the past -- our industry is by definition a very capital intensive industry.
4262 So, you know, you have to be careful in the way you look at analyses such as this one that are based strictly on the PBIT line.
4263 COMMISSIONER ARPIN: Well, it's my understanding that this document makes use of the PBIT of the whole sector because you don't provide us with segregated numbers by -- in terms of revenues, we got them, we know how your distribution, your telephony and the Internet, but it's the bottom lines that we only get into in an aggregated manner, so we are totally unable to make the calculation specifically with your distribution aspect --
4264 MR. MAYRAND: And --
4265 COMMISSIONER ARPIN: -- of your business.
4266 MR. MAYRAND: And, Mr. Arpin, to your point, it is very difficult for our finance people as well to come up with sub-line allocations.
4267 Why? Because we are now very, very much into a bundling environment where we offer bundles of services ranging from Internet to telephony to broadcasting distribution.
4268 And it becomes somewhat perilous, or even arbitrary to try and allocate margins and common costs between the components of these bundles which, by the way, vary regularly based on competitive conditions in the marketplace. They constantly vary.
4269 COMMISSIONER ARPIN: Now, there were also two other documents made public also on Monday morning. I don't know if you have comments regarding the two other documents.
4270 No. 2 is purely factual based on the approved rates for some specialty services, and the other one is an assumption based on the actual number for 2008 or what will be the LPIF for distribution.
4271 MR. MAYRAND: You're quite right, we don't think that there's any useful comment that we can make on the other two documents except perhaps to mention that, by sheer mathematical calculation, if your estimation of the LPIF amount for 2008 is $68-million, well, you know, on a one percent contribution basis, well three times that is pretty close to $200-million which is a huge amount.
4272 COMMISSIONER ARPIN: In your written submission you're saying that you have not been approached by any conventional broadcasters regarding potential arrangement regarding distant signals.
4273 But you were a part of the working group on -- no, well, that's another -- on the digital transition.
4274 It's my understanding that there were some discussions also relating to distant signals at the same time.
4275 MR. MAYRAND: Let me clarify this. Indeed we were part of the DTV transition working group.
4276 However, within the process followed by that working group there was never any discussion on distant signal compensation. The subject matter looked at by the DTV working group was how to try and find solutions to the impending transition of over-the-air broadcasters to full digital by August 31st, 2011.
4277 Now, aside from the working group I understand, although I was not made privy to these discussions, that there were indeed some discussions between particularly the DTH satellite distributors and some of the key private broadcasting groups on distant signal compensation, which is a completely different issue.
4278 I think where the confusion arises is where the satellite distributors are telling you and have told the broadcasters that, in fact, the two issues are interrelated.
4279 Certainly as part of the terms of reference for the working group, they are not interrelated. That's a position that the satellite distributors are taking and I suppose it's entirely their right to take it and they're having negotiations on and off with broadcasters, which don't seem to progress very well, but that's a business process on their own.
4280 COMMISSIONER ARPIN: I note in paragraph 7 of your written submission you wrote that:
"The view that distant signals of conventional television broadcasters have a very high value for cable BDUs is quite simply not based on the reality." (As read)
4281 COMMISSIONER ARPIN: So, what is the reality from the perspective of Cogeco on the value of those distant signals?
4282 MR. MAYRAND: Well, Mr. Arpin, as you know -- and I think Rogers has mentioned that in their presentation -- cable distributors currently compensate broadcasters at the rate of 50 cents per month per sub and we certainly feel that that is a very fair compensation.
4283 Now, I'm certainly not going to try and determine today in this public forum what a new set of compensation rules should be.
4284 I think what we said also in our written submission is that the biggest part of the problem is the lack of enforcement of a distant signal compensation regime on the satellite side and that's a much larger part of the equation which obviously, based on depositions at this hearing, is far from settled.
4285 COMMISSIONER ARPIN: Now, my last question to you, Mr. Mayrand -- my colleagues may have some -- but in your submission at paragraph 23 you say that:
"We submit that the eligibility criteria should be reviewed so that they enable all interested parties, including local cable BDUs, to apply for funding from the LPIF for local news programming." (As read)
4286 COMMISSIONER ARPIN: And you alluded in your own presentation to that, in those non-metropolitan...
4287 COMMISSIONER ARPIN: So...
4288 MR. MAYRAND: Perhaps I can explain what we said in this paragraph.
4289 We thought that we should point out to the Commission that there is merit in expanding the eligibility criteria for funding under the LPIF mechanism where local markets are vacated in terms of local programming by local broadcasters.
4290 Why? Very simply, because we can provide an alternative at that stage. We don't propose to replace the broadcasters wherever they are prepared to continue delivering local programming; we propose that we can do that in those markets where the broadcasters, on their on volition, according to their own metrics and their own financial parameters and decision decide to vacate from a local programming perspective.
4291 In that sense, why, for example, should we as an operator of a local community channel in North Bay where we've stepped in and provided local news coverage in addition to a contingent of other local programming, why should we be prevented from doing any advertising, required to contribute to various funds and still be ineligible to provide improvements to local programming under this new initiative?
4292 We don't think that that looks very fair and we don't think that where broadcasters have completely exited the local market that there is really any issue of prejudice to be had in expanding the list of eligible parties for funding.
4293 That's our point.
4294 COMMISSIONER ARPIN: So, if I'm making use of the example that you gave in your oral presentation regarding North Bay where you say that you're providing eight hours and a half of local news a week, so it means that you have hired journalists, you have created a newsroom, or --
4295 MR. MAYRAND: Yes, we have -- we have people working specifically on the local news coverage.
4296 We have an agreement in place with the local newspaper and we put up this programming entirely out of our community programming funds.
4297 And, by the way, I should say that I'm a little flabbergasted to hear a suggestion earlier by the Bell TV people that perhaps the Commission should regulate away part of the minimum allocation that we have currently under the regulatory framework to devote to community programming.
4298 I mean, that to me is totally unacceptable. We offer a service that is unduplicated, that provides an alternate source of local programming, particularly in markets where it is the most sorrily needed, and certainly the way to go is not to impede by regulation our carrying out this valuable function.
4299 COMMISSIONER ARPIN: Have you been able to measure the success of your local news in North Bay?
4300 MR. MAYRAND: I suppose it depends on how you measure success. We have of course feedback from our customers, we have feedback from representative members of the local community, from organizations and we receive feedback at our call centres as well.
4301 Now, whether we track specific ratings for that, I couldn't tell you offhand. We can see what we have in this regard.
4302 COMMISSIONER ARPIN: Thank you very much, Mr. Chair.
4303 COMMISSIONER KATZ: Just a quick question.
4304 Do you offer time shifting, Cogeco?
4305 MR. MAYRAND: We offer some distant signals essentially for time shifting reasons, yes.
4306 COMMISSIONER KATZ: Do you individually charge your customer for time shifting?
4307 MR. MAYRAND: They're -- I don't think we charge a discrete charge for signal, but we have, of course, additional packages, digital signal packages which are added to our DTV offering.
4308 COMMISSIONER KATZ: I'm a Rogers customer. When I get my bill there's a $1.99 charge for time shifting.
4309 Do you not offer a similar charge on your customer's bill for time shifting, discrete line item?
4310 MR. MAYRAND: Frankly, I should know the answer but I'll have to check that and we'll undertake to file the answer.
4311 COMMISSIONER KATZ: Okay. And if you do, the follow-up question is, I think you said you're compensating the broadcasters 50 cents, and I used the analogy in the Rogers territory, they're getting 50 cents, my charge is $1.99, which means the gross margin on that is 75 percent.
4312 MR. MAYRAND: I take your point. I will have to get back to you in writing.
4313 COMMISSIONER KATZ: Can you let us know, please?
4314 MR. MAYRAND: Yes.
4315 COMMISSIONER KATZ: Thank you.
4316 THE CHAIRPERSON: Peter?
4317 COMMISSIONER MENZIES: I've just got hopefully a quick question on -- you mentioned North Bay and your news like that now, you have an arrangement with the newspaper. Does that mean the newspaper people appear on cable and go through the news or -- because it's called Cogeco North Bay News; right?
4318 MR. MAYRAND: Yes, I believe it's the case, sir. I must admit, I don't have really all the detailed workings of that here with me. We can certainly provide you with more detail, if you wish.
4319 COMMISSIONER MENZIES: Yeah. I mean, I'd like to have some idea how much original investment is going into these things and if that's a challenge, where the opportunities that you see are.
4320 I mean, are you getting any revenue from your community cable there or other places at all?
4321 MR. MAYRAND: No, not really. We're entitled only to have sponsorship and I believe that in this case there is no sponsorship revenue for this particular activity.
4322 COMMISSIONER MENZIES: Yeah. Well, if you can just send us some details on it that would be interesting to see in terms of -- I mean, we're talking North Bay just because it came up as a for instance but, you know, how much revenue comes from sponsorship and that sort of stuff and exactly what those structures are.
4323 MR. MAYRAND: Well, I understand that we have no revenue for that programming.
4324 COMMISSIONER MENZIES: Okay. Well, maybe the nature of your agreement with the North Bay News, you know, for instance, are you getting free advertising in the North Bay News in exchange for free air time for North Bay News personnel and that sort of stuff?
4325 Because I can't understand why you'd do it if there wasn't some kind of business imperative, unless it's just free stuff, which is okay too, but it does have value.
4326 MR. MAYRAND: Well, I can certainly look at providing, if possible, details on this particular agreement.
4327 I wouldn't know though if there were confidentiality requirements with our counter party, I would have to be governed by that and ask for confidentiality, if that's the case.
4328 That being said though, the primary reason why we are doing this in North Bay is that we were really asked by the community to provide an alternative and the local channel that we have in North Bay is really the vehicle to do that.
4329 COMMISSIONER MENZIES: Yeah.
4330 MR. MAYRAND: And it is part -- we consider it part of our service mandate to provide what is relevant to each local community in our footprint.
4331 COMMISSIONER MENZIES: Absolutely. Don't misread me, I don't think there's anything wrong with making money or serving the community or profiting from it, anything like that, I'm just trying to get a better idea of what the nature of some of these relationships in these types of communities are.
4332 Thank you.
4333 THE CHAIRPERSON: Those are our questions for you.
4334 Maître Dionne, do you want to recite the undertakings that --
4335 MME DIONNE: Oui. Merci, Monsieur le Président.
4336 Bonjour monsieur Mayrand.
4337 Donc, j'ai quatre engagements. Nous fournir une liste de dépenses qui devrait admissibles avec les argents provenants du fonds pour l'amélioration de la production locale.
4338 The ratings for the local news programming provided on your community channels.
4339 Third, information on whether your invoices include a separate line item for time shifts, similar to Rogers. And how does this relate to the rate paid for distant signals?
4340 Et quatrièmement, la nature de votre entente avec North Bay News.
4341 Nous préferons vos soumissions finales avant le 13 mai 2009.
4342 THE CHAIRPERSON: Thank you very much. Those are all our questions.
4343 Madam Roy, we have one more intervener, I believe?
4344 LE SECRÉTAIRE: Merci, Monsieur Le Président.
4345 I will now invite TVO to the presentation table please.
4346 LE PRÉSIDENT: Est-ce qu'on peut commencer, Madame?
4347 THE SECRETARY: Mr. Chairman, we have appearing for TVO Madam Lise de Wilde.
4348 Madam de Wilde, you have 15 minutes for your presentation.
4349 MS de WILDE: Thank you very much and good afternoon, Mr. Chairman, Members of the Commission, Commission Staff.
4350 Before I start, I would like to express my sincere thanks for the fact that you were able to slot me in this afternoon so that I could appear here today. It wasn't your original schedule, and I do appreciate that.
4351 TVO is the English-language over-the-air educational television service of the Ontario Educational Communications Authority. TVO is available and accessible in all regions and virtually all homes in the province either by the over-the-air signal or through the facilities of BDUs.
4352 For the three and a half million Ontariens we reach each week, TVO is a trusted source of educational programming that inspires and informs. Our vision is to empower people to be engaged citizens of Ontario through our unique educational media. Today, my remarks will be limited to our response to the issues raised by the Commission regarding the Local Programming Improvement Fund.
4353 Simply put, we would like to urge you to conclude that TVO should be eligible for access to the LPIF. We submit to the Commission that the expenditures TVO makes on local programming should be eligible for funding under this new fund.
4354 In Public Notice 2008-100 the Commission expressly stated that public as well as private licensees should be entitled to receive LPIF funding. The Commission determined that the public interest would best be served through BDU contributions aimed at improving the quality of local programming offered by both private and public over-the-air broadcasters. TVO is indeed a public over-the-air broadcaster.
4355 We serve all markets in the province, including smaller markets. The very nature of our mandate is to serve the needs of viewers across the Province of Ontario, including in those markets outside of the larger metropolitan area of Toronto.
4356 A significant portion of our audience falls within the targeted audience of the LPIF. In fact, 42 per cent of the people TVO reaches are living outside of the Greater Toronto Area.
4357 A common definition used by the Commission for local programming is content either produced by the station or by locally-based independent producers. More specifically, this is programming that reflects the particular needs and interests of residents of the area that the television programming undertaking is licensed to serve.
4358 For your reference, we took these definitions from Broadcasting Public Notice 2002-61. We would like the Commission to note that, given our provincial mandate, TVO's programming schedule is designed to reflect the specific needs and interests of residents in the different regions of our province.
4359 In our written intervention, I describe the types of programs that TVO either produces itself or that it finances through independent producers in locals outside of Toronto. These range from children's series and documentaries, to university lectures and current affairs shows such as this season's On The Road series where we took our flagship current affairs show, The Agenda with Steve Paikin, out into five different regional markets.
4360 When we went on the road with The Agenda it included also an open public forum at each stop, which we then integrated into the television broadcast using social media tools. And it all provided unique local content that was then featured on the agenda broadcast.
4361 Also this season TVO's Your Voice program, which is for parents, we produced shows in Thunder Bay and Petawawa, and in six other locations around the province. And our after-school children's block featured live hosted breaks from around the province.
4362 I am pleased to give you further details on these after I conclude my short remarks.
4363 However, I would like to note that a large portion of our broadcast schedule is geared to regionally-produced programs. This reflects our focus on serving the entire Province of Ontario and engaging citizens in both local and provincial issues.
4364 In this light, TVO's eligibility to access the LPIF should extend to those elements of our schedule which fulfil the definition of regional programming. In other words, where principal photography occurs more than 150 kilometres away from Toronto or Anglophone Ottawa/Gatineau.
4365 So to conclude, we urge the Commission to ensure when considering the eligibility requirements for access to the new fund that the expenditures TVO makes on local programming be eligible for the LPIF.
4366 I would like to thank the Commission for the opportunity to appear today and I look forward to your questions.
4367 THE CHAIRPERSON: Thank you.
4368 I don't know what you are asking us to do. Are you asking us to say that regional means local or are you suggesting to us that we take apart your schedule and look at those portions that are shot locally and make them eligible for local?
4369 MS de WILDE: The latter.
4370 THE CHAIRPERSON: And what percentage of your programming is that? Have you done a sort of cursory analysis of your schedule for last year?
4371 MS de WILDE: I did. In fact, the list of the types of programs where there is the kids' documentaries, the university lectures, I added them up and like a ballpark would be about 50 hours a year.
4372 So I think that the purpose of TVO making this submission -- and I know my colleagues at TFO and Télé-Québec have made a similar submission in writing -- is not to suggest that it is hundreds and hundreds of hours, but to bring to your attention really that it is an important piece of what we do and that, in fact, we are able to get out into local communities and reflect the specific interests of smaller communities to those communities as well as, admittedly, to the larger province.
4373 THE CHAIRPERSON: Thank you.
4375 COMMISSIONER CUGINI: Thank you, Mr. Chairman.
4376 Just a couple of questions, Ms de Wilde.
4377 One thing I didn't read in your submission either -- well, I didn't read it in your written submission and I didn't hear it in your oral submission is reflected in Decision 2008-100, specifically we say, "In order to qualify for IF funding stations must be providing a local programming service that as of the date of this Public Notice 2008-100 includes original local news."
4378 Do you provide original local news?
4379 MS de WILDE: No, we don't. And I am not trying to suggest that at all. I am simply trying to suggest that what we do create and what we do shoot out in small markets throughout the province should be considered by you as eligible local programming. So I am not suggesting -- we are not a news operation.
4380 COMMISSIONER CUGINI: So that is where my disconnect is and that is why I am trying to understand how you could be eligible when we specifically said to be eligible you would have to include original local news as of the date of Decision 2008-100?
4381 MS de WILDE: Quite honestly, what we were doing was looking at the opportunity of the fund and saying, you know, there are some things that we do that no one else is doing that perform a specific role within the evolving Canadian broadcasting system. Let's go and explain it to the Commission, describe it, and see as you then come to sort of really make concrete the criteria, if you see a value to it.
4382 I mean, I think everybody in the system these days is trying to figure out how they can make their financial model work. And so when it comes to the educational broadcasters I think it is fair to say that we are an unusual animal. We are, in the case of TVO and Télé-Québec, over-the-air. You know, we have 22 transmitters across the province, so we fit into that bucket for that purpose.
4383 But, you know, then we are regional because we have a provincial mandate. So we thought, you know what, there are things that we do that others aren't doing. We have an air pack that, you know, allows us to go out into the province and create content that is relevant to markets. I mean, when we go to Waterloo or Thunder Bay we are doing something that is inherently local.
4384 When we were in Thunder Bay on the Indian reserve creating content that was relevant to that community, the fact that it is -- you know, we just think that it is important that the Commission understand that there are things that we do that nobody else does and we have a very challenging business model.
4385 And so if there is an opportunity to actually find a small amount of funding, because, you know, I think in terms of sort of sizing what we are up to, it is not going to be a huge piece of the fund that you are creating, but it could be very helpful to us.
4386 COMMISSIONER CUGINI: And that was going to be my next and possibly my last question. I always add "possibly," because I learned a long time ago to never say "last question."
4387 Would TVO be eligible on equal footing to the fund as every other over-the-air broadcaster?
4388 MS de WILDE: Well, we would have to satisfy your criteria. So when I talk about, you know, there were five hours of the agenda on the road shot in the past season. So I am assuming that, you know, for those five hours if we are able to demonstrate to you that those were shot outside of the GTA and all of those criteria. But it would be on an hour by hour basis was, you know, my thinking.
4389 COMMISSIONER CUGINI: Okay. Well, it was my last question, so thank you. And I am glad we were able to accommodate your schedule.
4390 Thank you, Mr. Chairman.
4391 THE CHAIRPERSON: There are no other questions. Thank you for your intervention.
4392 MS de WILDE: Thank you.
4393 THE CHAIRPERSON: Madam Roy, what time do we start tomorrow morning?
4394 THE SECRETARY: We will start tomorrow morning at 9:00 a.m., Mr. Chairman.
4395 Thank you very much.
4396 THE CHAIRPERSON: Okay, thank you.
4397 MS DIONNE: Mr. Chairman, I would simply like to note that interested parties may file final submissions on the policy issues noted in Broadcasting Notices of Consultation 2009-70, 2009-113 and the subsequent associated notices.
4398 As well as on the information and proposal contained in the presentation by the Bell Video Group, these submissions are due by May 13.
4399 Also, I would like to remind you that fee for carriage is not being considered as part of this hearing. Thank you.
4400 THE CHAIRPERSON: Okay, I think that takes care of Phase I. Then tomorrow we start Phase II, right?
4401 Okay, thank you.
--- Whereupon the hearing adjourned at 1543, to resume on Thursday, April 30, 2009 at 0900
Johanne Morin Monique Mahoney
Beverley Dillabough Madeleine Matte
- Date modified: