ARCHIVED -  Transcript of Proceeding

TRANSCRIPT OF PROCEEDINGS BEFORE

THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

SUBJECT:

Policy proceeding on a group-based approach to the licensing of television services and on certain issues relating to conventional television

HELD AT:

Outaouais Room

140 Promenade du Portage

Gatineau, Quebec

November 17, 2009

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Canadian Radio-television and

Telecommunications Commission

Transcript

Policy proceeding on a group-based approach to the licensing of television services and on certain issues relating to conventional television

BEFORE:

Konrad von Finckenstein   Chairperson

Michel Arpin   Commissioner

Len Katz   Commissioner

Rita Cugini   Commissioner

Elizabeth Duncan   Commissioner

Suzanne Lamarre   Commissioner

Timothy Denton   Commissioner

Candice Molnar   Commissioner

Stephen Simpson   Commissioner

ALSO PRESENT:

Jade Roy   Secretary

Stephen Millington   Legal Counsel

Valérie Dionne

Jeff Conrad   Hearing Manager /

HELD AT:

Outaouais Room

140 Promenade du Portage

Gatineau, Quebec

November 17, 2009

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PRESENTATION BY:

CBC/Radio-Canada   295 / 1766

Bell Aliant & Bell Canada   424 / 2476

Edgar A. Cowan   548 / 3174

Pam Astbury   553 / 3193

Wendell Wilks   560 / 3231

   Gatineau, Quebec

--- Upon resuming on Tuesday, November 17, 2009 at 0902

1756   THE CHAIRPERSON: Good morning. Bonjour. Madame la Secrétaire, commençons.

1757   THE SECRETARY: Thank you, Mr. Chairman.

1758   I would like to go over a few housekeeping matters to ensure the proper conduct of the hearing.

1759   When you are in the hearing room we would ask that you please turn off, and not only put on vibration mode, your cell phones and BlackBerrys as they cause interference in the internal communication systems used by our translators and interpreters. We would appreciate your cooperation in this regard.

1760   Please note that Commission Members may ask questions in either English or French. Simultaneous interpretation is available during the hearing. The English interpretation is on channel 7. You can obtain an interpretation receiver from the commissionaire at the entrance of the Conference Centre.

1761   We would like to remind participants that during their oral presentation they should provide a reasonable delay for the interpretation, while respecting their allocated presentation time.

1762   Veuillez noter que les membres du Conseil peuvent poser des questions en français et en anglais. Le service d'interprétation simultanée est disponible durant l'audience. L'interprétation française se trouve au canal 8. Vous pouvez vous procurer les récepteurs d'interprétation auprès du commissionnaire à l'entrée du centre.

1763   Nous désirons rappeler aux participants d'allouer un délai raisonnable pour la traduction lors de leur présentation à vive voix, tout en respectant leur temps alloué pour leur présentation.

1764   I would now invite CBC/Radio-Canada to make its presentation.

1765   Appearing for CBC/Radio-Canada is Mr. Hubert Lacroix. Please introduce your colleagues and you will then have 20 minutes to make your presentation. Merci.

PRESENTATION

1766   M. LACROIX : Monsieur le Président, mesdames et messieurs, bon matin.

1767   LE PRÉSIDENT : Bon matin.

1768   M. LACROIX : Je m'appelle Hubert Lacroix. Je suis le président et directeur général de CBC/Radio-Canada.

1769   C'est la première fois, comme vous le savez, que je me présente devant le Conseil. Il sera donc un grand plaisir pour moi de vous donner notre point de vue sur les enjeux importants qui font l'objet de cette instance.

1770   Nous avons remis, il y a quelques instants, une série de tableaux auxquels je me rapporterai durant mon intervention. J'espère que vous les avez entre vos mains.

1771   Tout d'abord, laissez-moi vous présenter mes collègues, vous les connaissez bien. Je vais commencer par la droite :

1772   - Steven Guiton, chef des Affaires réglementaires;

1773   - toujours à ma droite, Sylvain Lafrance, notre vice-président principal des Services français;

1774   - Richard Stursberg, le principal vice-président des Services anglais;

1775   - et Bev Kirshenblatt, la première directrice des Affaires réglementaires de CBC/Radio-Canada.

1776   Il y a quatre enjeux dans cette présente instance, et nous reconnaissons l'importance de chacun.

1777   Mais soyons francs. La négociation de la juste valeur marchande des signaux conventionnels, VFS, est l'enjeu qui domine tous les autres, et c'est sûrement celui qui intéresse le plus les Canadiens. C'est donc sur cet enjeu que porteront principalement mes commentaires d'ouverture.

1778   Dans le cadre de l'Avis de consultation 2009-614, dont la partie orale de l'audience se déroulera au mois de décembre, plus de 114 000 Canadiens ont contacté directement le Conseil pour vous faire part de l'importance qu'ils attachent à la télévision locale.

1779   Cette situation est sans précédent. Jamais les Canadiens ne se sont autant mobilisés pour une question débattue devant vous.

1780   Les Canadiens nous observent. Ils veulent que la télévision locale survive, mais ne veulent pas que les entreprises de distribution de radiodiffusion, les EDR, augmentent encore leurs frais d'abonnement.

1781   Les mémoires que nous avons déposés dans cette instance et l'instance 614 sont destinés à aider le Conseil à trouver une solution à cet enjeu, une solution qui rétablisse l'équilibre, qui protège les consommateurs, qui donne une assise financière solide aux stations de télévision locale, et qui renforce le système canadien de radiodiffusion dans son ensemble.

1782   A lot of activity has occurred since we filed our evidence two months ago. Today I want to cut through the noise and get to the heart of our matter.

1783   The issue facing the Commission is pretty straightforward. It comes basically down to two questions: Is there an imbalance in the system, and if so, how can it be fixed?

1784   In our view there is no doubt that there is a very serious imbalance in the Canadian broadcasting system. Conventional television broadcasters have had to deal with the reality that their regulated business model can no longer cope with today's fragmented media environment. This is neither a recessionary nor a transitory phenomenon.

1785   Please turn to your slide package and let's look at Figure number 1.

1786   You will see there the historic decline of the financial health of Canadian conventional broadcasters and this decline has long predated the recession. Its origin is clearly associated with the start of the growth of multi-channels in Canada and the resulting fragmentation of television audiences.

1787   In passing, I noted with great interest yesterday what Rogers said when they were in front of you and said that there was no broken model for OTA and that this was a good business to be in.

1788   Well, last year Rogers presented for their conventional TV services a profit before interest and taxes, a negative number of 18 percent and that was prior to the recession, and in their licence renewal filings to you they wanted to be relieved of any requirement to do drama and other programming of national interest.

1789   On top of that, again, with 2008 PBIT numbers, the whole of the private conventionals, their number was about $8 million. Compare this to the $2 billion PBIT number made by cable companies.

1790   For us, the model is definitely broken and the weakness has come to light due to the growth in multi-channel TV. Fragmentation has revealed the underlying problem, it is not the problem.

1791   Again in your deck, Figures 2 and 3, please.

1792   They show the audience share of conventional broadcasters' local television stations as compared to the most popular specialty channels in English and French Canada. As you can see there is no contest there.

1793   Conventional broadcasters' channels are far and away the most popular television channels in Canada. Clearly, Canadians love their local TV.

1794   What is peculiar is that unlike the specialty channels in this Figure, the popular conventional channels receive no direct compensation for the value of what they bring to the system.

1795   There is thus a complete disconnect between what people watch and who gets a share of what Canadians pay to access those channels. This makes no sense to us.

1796   CBC/Radio-Canada has on a number of occasions provided the Commission with studies on the source of and viewership to original Canadian programming. In this proceeding, we once again undertook these studies.

1797   Please look to Figure 4 of your package and you will see the results.

1798   Once again, we can confirm that viewing to original Canadian entertainment programming makes up the vast majority of viewing to conventional broadcasters' schedules. Indeed, when we look at viewing to all original Canadian entertainment programming shown on any service in Canada, conventional broadcasters account for over 90 percent of this original viewing.

1799   The cost of providing this cornerstone role combined with a lack of direct compensation for the value we bring to the system has had a predictable effect on conventional broadcasters' financial performance vis-à-vis their specialty channel competitors.

1800   Again, in the deck, please look at Figures 5 and 6 and you will see the result.

1801   Despite their lower popularity, specialty channels' financials have continued to improve as the more popular conventional sector has suffered a financial nosedive.

1802   This is the first part of the imbalance, the failure of the system to flow moneys through to the programming services that people value and to the services making the greatest contribution.

1803   The second part of the imbalance relates to the relationship between BDUs and local television stations.

1804   Figure 7 shows the PBIT margins as compared to several other industries. As you can see, cable BDUs are doing really, really well.

1805   Looking back at Figure 1, you can see that it is a very different story for local television broadcasters.

1806   So why is there this "Tale of Two Cities"? The answer is really simple.

1807   First, BDUs are not paying for local television. They take the OTA signals, sell them to subscribers and give none of that back to the OTA broadcasters. Well, you know all of this and that is why we are here today.

1808   Second, the BDU market is not competitive. Look at Figure 8. It shows the BDU basic rates since 1998. As you can see, from the time when cable rates were deregulated, their direction has been steadily going up. Actually over the last five years the basic cable bill has gone up more than four times the cost of living.

1809   And just to be clear on this point, Figure 9 compares with Canadian with U.S. rates. It is pretty obvious that the Canadian BDUs are winning this race to the top and it is the Canadian consumer who is paying.

1810   Alors, comment devrait-on corriger ce déséquilibre?

1811   Un système équilibré nécessite une démarche cohérente et raisonnable pour ce qui est des revenus. Les joueurs devraient réussir ou échouer en fonction de leurs talents, de leurs compétences et de leurs efforts, et non pas en fonction de contraintes artificielles qui interdisent l'accès à des sources de revenu.

1812   Tout d'abord, rappelons-nous qu'il n'existe aucune justification de politique réglementaire pour laquelle une entreprise de radiodiffusion se verrait refuser des revenus provenant de la publicité ou d'abonnements.

1813   Au contraire, restreindre l'accès à une source de revenu risquerait de fausser le système en avantageant certains et en désavantageant d'autres. C'est précisément ce qui se passe dans le cas qui nous occupe.

1814   La solution est fort simple. Les stations de télévision locale devraient avoir accès aux revenus d'abonnements. Autrement dit, les EDR devraient compenser les télédiffuseurs locaux.

1815   Et comment procéder à ce changement?

1816   Eh bien, à notre avis, la publication par le Conseil d'une ordonnance de distribution qui s'inspire du projet d'ordonnance qui accompagne notre mémoire du 14 septembre 2009 constituerait la manière la plus simple d'apporter ce changement.

1817   Les EDR et les télédiffuseurs locaux pourraient alors s'asseoir pour négocier un niveau acceptable de compensation, et si les parties ne réussissent pas à s'entendre dans un délai raisonnable, elles pourraient alors recourir à l'arbitrage du Conseil.

1818   On this last point I would like to comment on an argument made by many BDUs in their writing filings and emphasized again by Rogers yesterday in its presentation.

1819   The argument is that there can be no negotiations because there is no way to value local television.

1820   This is nonsense. All BDUs and specialty services have negotiated compensation arrangements for years. It is not that difficult. And as you heard yesterday, in the States cable and satellite companies have no trouble valuing OTA signals. So the idea that there is no value to over-the-air signals is very hard to accept.

1821   And by the way, Rogers clearly values over-the-air signals. In 2007 it paid nearly $400 million for the Citytv stations and they now own a total of 10 OTA stations.

1822   Rogers has even gone to court to defend the value of its OTA signals. In 2000 Rogers was one of several OTA broadcasters that sought an injunction and damages against the principals of iCrave TV. As you may recall, iCrave TV proposed to take OTA television signals from Toronto and retransmit them over the internet.

1823   Here is what Rogers had to say to the court about the iCrave TV business:

"This business, the iCrave TV business model, is to trade on the value of the broadcasters' signals, programming and compilations without doing anything to develop or legitimately license television content." (As read)

1824   Rogers claimed that this retransmission devalued its signals. It asked for damages comprising either statutory damages of $70 million to date of their application plus $1.1 million per day thereafter or $100 million plus an accounting from profits and other relief.

1825   So in 2000 when someone wanted to take the OTA signals of Rogers and others and distribute them to the public without paying anything to the broadcasters, Rogers had no difficulty finding a value in those signals.

1826   We are confident that with a bit of reflection Rogers could do the same again today. If required to negotiate compensation with the OTA broadcasters, Rogers and the other BDUs should have no difficulty coming up with reasonable proposals for the value of local TV signals. To begin, they need only to look at the popularity of local TV with their subscribers.

1827   Negotiation is a reasonable, efficient and familiar approach. It is doable and in our draft distribution order we have identified six criteria that could be used to guide those negotiations.

1828   Finally, we come to the real bottom line question: What about the Canadian consumer?

1829   The whole point of having a healthy, balanced Canadian broadcasting system is so that Canadians can have affordable access to a wide range of broadcasting services, including the local television stations they love to watch.

1830   So how could a compensation regime impact consumers?

1831   Given the past behaviour and recent statements of the BDUs, we believe that the Commission needs to take concrete steps to protect consumers.

1832   In our view, the simplest and most consumer-friendly approach would be to establish a small all-Canadian basic service which would include all local television stations and a very limited set of other programming services. No other service could be added to basic.

1833   We think a number of options are available to the Commission to ensure that this small basic service would be significantly lower priced than the larger basic packages currently offered. This would provide an affordable entry point into the system for all Canadians.

1834   Beyond basic, consumers could buy what they wanted and only what they wanted. BDUs could of course offer a bundle of the small basic and other services, for example, to mirror what they do now, but they could not force customers to buy that bundled package.

1835   The end result would be an affordable basic package, a sustainable financial future for local television and more choices for consumers. Affordability, sustainability and choice, we believe that these are worthy goals and attainable ones.

1836   Thank you for the opportunity to present these comments this morning.

1837   Il nous fera plaisir de répondre à vos questions.

1838   THE CHAIRPERSON: Thank you very much for your presentation. You went right to the heart of the matter, which is, according to you, the value for signal. But, of course, you know there are three other issues before us and we will talk about them. Let me just, before we do that, talk about something, which is your role here.

1839   I am sure you have read the submissions of others, especially the BDUs, who clearly do not want a value for signal but they say if there is one, it definitely should not include CBC because CBC is a separate case, it is financed by the government, it is there because the government thinks this is desirable, and if they need money, it should come from the general coffers of the government and not through a fee paid by subscribers.

1840   How do you answer to that?

1841   MR. LACROIX: Well, to answer that question, Mr. Chairman, we have got to go back to the way CBC/Radio-Canada is financed. As you know, a significant portion of our model comes from commercial revenue, including advertising revenue, and the reason why it has been like this for years is that the government and the CRTC policies have said, we will fund you to a certain extent and then we strongly encourage you to create all sorts of opportunities to generate more revenues to continue to deliver services to Canadians.

1842   So when we are in front of you today, it is because about 50 percent, 40 or 50 percent, of the financial model for CBC Television and Radio-Canada's Television is financed through ad revenues, and we are, when we come to ad revenues, Mr. Chairman, in the same exact position that any other private broadcaster is and has been when they are in front of you in this hearing.

1843   THE CHAIRPERSON: Just to explore that line, and I am asking this question, I am not -- When you say you are 50 percent ad-dependent, wouldn't then the logic that the BDUs advance mean if there is a value for signal, then you should only get 50 percent?

1844   MR. LACROIX: No, absolutely not. The way we look at this, the impact on us is about $300 to $350 million a year. That is the amount for the total revenues going to television at CBC/Radio-Canada. So when you take the ad revenue out of our model, we are looking to make up $350 to $360 million. That is the amount. We don't look at it as half of something.

1845   MR. GUITON: If I could just add.

1846   THE CHAIRPERSON: I am sorry, I don't follow that. I mean you just told me -- let me compare you to CTV.

1847   MR. LACROIX: Yes.

1848   THE CHAIRPERSON: It is the simplest way. They live on the ads. That is what they live on.

1849   MR. LACROIX: M'hmm.

1850   THE CHAIRPERSON: You live -- as you told me just now, 50 percent of your revenue comes from ads, the other 50 percent comes, I presume, from government appropriations.

1851   So if there is a value for their signal, to put you in a comparable status with CTV, wouldn't it mean logically that you should get 50 percent of the value assessed rather than 100 percent?

1852   MR. LACROIX: So let me -- I will bring you back to the financing model to make sure that my point was clearly made.

1853   The way we are financed, our financing model is about $1.7 billion a year. Out of that there is about $1.1 that comes out of government, $1.1 billion. The $600 million that we are missing comes out of commercial revenues. Commercial revenues include ad revenues.

1854   When you look at the impact on us of the ad revenue model going south and the impact year over year of that on us, our financing model, to be able to deliver the services we deliver, is impacted like everybody else.

1855   But what I would like to bring you back to is why are we here? It is about the value of our signal. The value of our signal is not 50 percent less than anybody else. The value of our signal is what in a clear and smart negotiation the outcome of that negotiation would be. So that is why we are here today.

1856   MR. STURSBERG: Can I just add one point to this? There is a certain kind of -- it is curious that we think that somehow or another that there is a kind of wholly public side and a wholly private side and the truth of the matter is that it is for both sides a mix.

1857   CTV or any of the others, Global, they are surely recipients of public funding to support their programming by way of the Canadian Television Fund or the tax credits, as we are recipients of public funding.

1858   The issue before us, as the President was saying, is what the proposal is is to enter into a negotiation for value of service. It really has nothing to do with what the funding sources are. It has to do with the value that is brought to the consumers and to the BDUs by the nature of the service that is offered.

1859   THE CHAIRPERSON: You heard me yesterday speaking to Rogers and to CTV and basically they to a large extent are echoing what you are saying, this is something to be settled by negotiation. For the CRTC to impose it would be sort of the least desirable option.

1860   I heard CTV saying, we would love to sit down but they don't want to sit down. And I heard Rogers categorically and somewhat arrogantly saying, there is nothing to negotiate because there is no value.

1861   So given that is the position, what would you do if you were in my shoes?

1862   MR. LACROIX: Well, you have in our -- first off, Mr. Chairman, we believe in a negotiation. We believe in a smart negotiation.

1863   When we heard yesterday that people don't think that negotiation would work because of the unbalanced playing field, we, on the contrary, think that just the threat of having to come back to the CRTC for final offer arbitration should be enough for two smart parties to come to a conclusion. We believe in that.

1864   MR. GUITON: We have also, Mr. Chairman, provided you with a draft distribution order that sets out exactly how the system could work for negotiations and the only requirement is that basically the distribution order would be establishing that negotiations have to happen. That is all the Commission would be required to do.

1865   THE CHAIRPERSON: Now, on digital transition, you --

1866   MR. STURSBERG: Sorry, just could I make one last point?

1867   THE CHAIRPERSON: Yes.

1868   MR. STURSBERG: We are not breaking any new ground here. This is exactly the same situation that has existed for many, many years with respect to the specialty channels. If there is a negotiation between the channel and the cable companies and if at the end of the day they can't come to a reasonable understanding, then they have always the opportunity to come back to the Commission and ask for a remedy.

1869   So this is completely consistent with the way in which the system has been regulated for the course of the last 20 years.

1870   THE CHAIRPERSON: Okay. Just very quickly, on digital transition, you take a very robust position. You basically say it is not a government issue, it is a viewer issue. Let the viewer decide how he gets the signal, whether he needs a new antenna or new apparatus, or if he happens to be an OTA customer who is outside cable reach, he has to become a satellite customer.

1871   There is no role for us, unless I misread you, but that is what it seems to me is what you are suggesting.

1872   MR. GUITON: Well, I think what we are suggesting is that we are trying to take stock of where we are today in terms of the penetration of the multi-channel offer vis-à-vis what is available on over-the-air and it has been clear for some time now through Commission policies as well as government policy that we are in a situation where over 90 percent of Canadians receive their service through the multi-channel means.

1873   Given that, consumers do have a choice for the most part of how they are going to take their services and they are currently taking their services through the multi-channel platform that you have promoted.

1874   What we are saying is therefore it is a question of choice, correct. There may be some transitional issues that the government and the Commission want to get involved in. The government for their part has not indicated that they are coming forward with a subsidy system or any other kind of means to handle the transition.

1875   So in our view, what we are proposing to the Commission, as you know, to help with the transition is the small basic. We believe the small basic proposal will help those Canadians who might be affected by the transition to keep them within the system.

1876   THE CHAIRPERSON: Yes, but I am talking about the percentage of Canadians -- nobody knows the exact answer -- who receive their signal by OTA and who do not have a cable in their district. So if there is no freesat solution, they will be basically out of luck once their system goes digital.

1877   Or if it is in one of the non-major areas and you don't convert but you choose to deliver what was formerly OTA conventional just becomes in effect conventional via BDU, be it terrestrial or satellite.

1878   And those -- unless I misunderstand your submission, that is why I am asking you -- you basically say tough luck, go and get a satellite.

1879   MR. GUITON: Mr. Chairman, today --

1880   THE CHAIRPERSON: Did I misread you or that is what you are saying?

1881   MR. GUITON: We are certainly not saying tough luck. We have some proposals. Today we have 650 transmitters in operation of television and there is still 1 percent of the population that we don't cover. That exists today.

1882   THE CHAIRPERSON: And it's different for people who are not covered than people who are presently covered and you are taking it away.

1883   MR. GUITON: So under our plan, as you know, we have a hybrid proposal. We have tried to put forward a proposal that allows digital transmitters to exist in all of the markets where we originate programming. That would involve approximately 27 transmitters.

1884   And once we get to that roll-out, granted it's going to take some time because financially we are challenged right now -- once we get to that point there will be -- the change between today and that model will be 1 percent. That's the net impact of going to the hybrid model of 27 transmitters.

1885   THE CHAIRPERSON: There will be 1 percent of your viewership, is what you are saying?

1886   MR. GUITON: There will be 1 percent of Canadians --

1887   THE CHAIRPERSON: Put that into numbers.

1888   MR. GUITON: There will be 1 percent of Canadians impacted negatively vis-à-vis those that exist already today of 1 percent.

1889   So an additional 1 percent of Canadians will be negatively impacted once we get to the 27 transmitters.

1890   THE CHAIRPERSON: Mr. Guitton, don't compare apples to oranges. If they don't have service right now, I'm not interested now. I am interested for the people who have service right now who will be, because of transition, be deprived of service.

1891   First of all, you know how much -- what the number is?

1892   And secondly, you have no solution for them, if I understand it.

1893   MR. GUITTON: We do not have a solution beyond getting to the 27 transmitters, that's correct.

1894   THE CHAIRPERSON: Okay, thank you.

1895   MR. LACROIX: Mr. Chairman, if I can add a comment here? You have to understand where we come from in terms of how we got to the 27 transmitters because that is really a key.

1896   When this challenge of transitioning to HD started to be more real, CBC/Radio-Canada looked at how it was going to connect with Canadians because that's the role we play. 44 transmitters were what we thought we were going to be able to put up then -- on a hybrid model. Then we decided that the 44 we couldn't afford anymore, because of the financial situation in which we were.

1897   So we said, all right. How many Canadians can we now connect to? The most number of Canadians -- because that's always the challenge. I mean where are you going to put your dollars, the dollars that are decreasing every year?

1898   We decided to protect every single originating station. We have 27 transmitters going up, and that's what Steven said a second ago.

1899   We believe that a combination of that, a realization of the number of people that actually do still take our signals off air, a combination of perhaps even continuing 350 or 360 kilometres north of the border, as we talked about -- as I heard you talk about to CTV yesterday -- continuing OTA for a while with our analog signals; a combination of all that in the context of our financial situation is, frankly, the combination of solutions that we are presenting.

1900   THE CHAIRPERSON: Don't get me wrong. I am not criticizing your solution. I understand it, and that's perfectly rational, et cetera. But I just wanted to make sure I didn't misunderstand your solution.

1901   In effect, there is 1 percent who will be deprived of --

1902   MR. LACROIX: You did not read that wrong.

1903   THE CHAIRPERSON: Okay.

1904   And Tim, you have some questions, okay.

1905   COMMISSIONER DENTON: Good morning, gentlemen.

1906   First, I just want to say that's a really powerful presentation with what I would call the large obvious numbers that tell a story, and they tell the story well.

1907   They tell a story that conventional, advertising-dependent broadcasters are in a particularly perilous situation. They tell us the story that it's not cyclical or related to the recession but it has got to do with the expansion of the number of specialities, and that the revenue sources for over-the-air are therefore in not good shape and, yet, it is they who bear most of the burden of producing the Canadian programming in which we are interested from a policy perspective.

1908   I am going to ask you -- please forgive me. I do not understand the significance to your storyline of Figure 4. Could just someone unpack that for me, please, as to where that -- this is the "Contribution percentage of original and repeat programming".

1909   How does that tie into the story you are telling? Yes, anyone.

1910   MR. GUITON: That graph is actually from our evidence and it's not the first time we have filed that information with you.

1911   What it is showing is -- what it is showing is that in primetime we are just looking at the contribution of original programming; in other words, who is creating the original programming in the marketplace and where do Canadians go to watch it? That's the intention of that graph.

1912   And what it shows here -- this graph shows if you are looking at the conventionals' programming what are people viewing on their schedules. And they are viewing in this case over 80 percent -- over 90 percent in Montreal original programming.

1913   Then, in addition, in our evidence, we pointed out that if you look at all of the programming of all the services, specialty as well as conventional, that viewing to original programming, over 90 percent of it occurs on the conventionals.

1914   So our point really is that -- well, actually, some years ago we also looked at airing; who is airing the stuff, but we are just sticking with viewing at this point.

1915   We are saying if Canadians want to view original programming, Canadian programming, and it's drama/comedy programming, then over 80 percent of the time the viewing is on conventional broadcasters.

1916   MR. STURSBERG: Okay. I think it's really to the issue of who does the heavy lifting with respect to the creation of original Canadian programming? And the heavy lifting is done by the conventionals. This is just drama and comedy but it's also the conventionals who do all of the heavy lifting with respect to news whether it's network or local.

1917   So the point is that when the conventionals fall into financial difficulty, all the heavy lifting within the broadcasting system is compromised.

1918   COMMISSIONER DENTON: So in terms of the burden on the over-the-air, you know, people have written in vast numbers to support over-the-air.

1919   Is it just an accident of history and policy that they alone are deprived? Are we just dealing with an obsolete industrial model here and, if so, is the solution you are proposing going to fix it?

1920   MR. GUITON: We are dealing with an economic aberration. We are dealing with a model that was created sometime ago that doesn't apply to anyone else, and we are dealing with a model that applies uniquely to us and we are, as we have just talked to you about, the heavy lifters in the system.

1921   So all we are saying in our submission is, we need to establish an economic level playing field and allowing negotiation for value to occur as it occurs for our competitors, the specialty services.

1922   And the fact that we, the conventional broadcasters are in trouble, or it's evident that because of the fragmentation in the marketplace that there is an economic issue, the fragmentation itself is not the issue. The fragmentation is demonstrating the problem. The problem is that the economic model is broken.

1923   Everyone in this system now is able to get subscription revenues in some form except for the conventional broadcasters. The fragmentation has not caused the specialty business to go into trouble. As we showed you in our presentation, the specialty business is doing fine, despite the fragmentation.

1924   What is happening is that there is only one sector in this entire industry that does not have access to some revenues, and it's an aberration. We are not asking for special treatment. We are asking to be put on a level playing field that exists for everyone else.

1925   COMMISSIONER DENTON: So it's with that theme that I would like to do a little exploration because there is a sense in which it could be argued -- well, first of all, as we all know when it comes down to serious bucks, minds much sharper than mine get involved and you get into some very severe points of discussion.

1926   But it seems kind of obvious to me that the CBC is in a particularly important public role which has certain kinds of legal obligations and certain kinds of legal protections. And these obligations and the protections go with each other.

1927   That would suggest to me that though we might well be headed in theory for a system of negotiation, if that came to pass, that there might be certain qualifications or certain traps or certain procedures that would distinguish how CBC might negotiate compared to those who are wholly dependent on advertising for their revenues.

1928   Would you please care to comment?

1929   MR. LACROIX: Yes. I'm -- obviously, you will realize that I don't agree with the conclusion or the direction in which this question is going.

1930   It's like -- I don't know -- in the semiconductor industry if a chipmaker benefits from a program of some kind because of Canadian content and gets dollars that another chipmaker doesn't, if I'm the person buying that chip to put it in my device, am I going to pay you less or you more because of the funding that you would get through a government program or a subsidy of some kind? To me, that makes absolutely no sense.

1931   This is about the value of the signal. It's not about how we get there.

1932   And when you choose to put CBC/Radio-Canada in a position where, for its delivery of the services that it has to Canadians and to meet the mandate that it has in the Broadcasting Act, when policy pushes it to go out and compete for advertising revenues and advertising revenues have the picture that you are looking at right now, we are exactly in the same position as all the other private broadcasters that are in front of you and that's why we should be treated equally.

1933   We are not asking for preferred status here; negotiation, value of our signal, the signal that we create in the same way that the other CTV, TVAs and Canwests of the world.

1934   COMMISSIONER DENTON: Well, one of the things that happen in a negotiation of course is that the value is the creation of the agreement between the parties.

1935   MR. LACROIX: Yeah.

1936   COMMISSIONER DENTON: And one could imagine a situation in which the cable company sitting down with you has a quite different notion of the source of value to them from your signal than you do, which is why negotiation exists.

1937   MR. LACROIX: Absolutely.

1938   COMMISSIONER DENTON: Okay. So then, when you propose that we, the CRTC, might issue some criteria for these negotiations, which was in the section two of your --

1939   MR. LACROIX: Draft order.

1940   COMMISSIONER DENTON: -- draft order.

1941   MR. LACROIX: Yeah.

1942   COMMISSIONER DENTON: Is it the slightest chance that your negotiating party would care for them at all, would value them in any way?

1943   I mean would the CRTC not be regulating in vain here to suggest to the cable company any criteria whereby it's supposed to value your signal? Isn't that something purely created between negotiations between the parties?

1944   MR. GUITON: Absolutely, and it happens today through the specialty services negotiating with the BDUs. They are commercial negotiations and they arrive at a value.

1945   We were only trying to point out to the Commission that there are some factors that could be used as guidelines. The other thing we are trying to point out to Commission that it would be helpful in the case of a dispute resolution for the Commission to have these things in mind as well.

1946   We are not trying to suggest that commercial negotiations would necessarily have to rely on these. We were trying to demonstrate to the Commission that there are factors that could be considered.

1947   COMMISSIONER DENTON: Yeah, they might, okay, and my point of course is they might be considered by you and high-minded policy types but the commercial imperatives might be quite different.

1948   MR. GUITTON: Well, that's absolutely true and the BDUs might arrive at the table with a different list and they might have other values that they would like to talk about as well but we are not even at the point of being able to talk yet.

1949   COMMISSIONER DENTON: I get that.

1950   MR. STURSBERG: But I would just add one thing, having had the pleasure of working for the cable companies for many years, and having run a satellite company.

1951   Typically, value in this area is really a function of the extent to which the particular channel or signal can make the service offer of the cable company or the satellite company more attractive. What drives attractiveness is the extent to which they can actually attract audiences.

1952   So what you would expect them to say is if these are services that attract significant audiences -- and this we have shown you in our charts. They attract significantly more audiences than any of the specialty services including the most popular -- then I think it would be very strange for the cable and satellite companies to say that they could not see value.

1953   COMMISSIONER DENTON: Agreed.

1954   The other thing that sort of comes back in the back of my mind -- and you are not obliged to agree. It's just one of the things that concern me, in relation to the public role of the CBC, as a special kind of Canadian broadcaster.

1955   Eventually, in any kind of negotiation, just basically the right to walk away from negotiations and to pull your signal, is such an outcome conceivable to you in relation to the obligations you have as Canadian's national broadcaster?

1956   MR. LACROIX: The answer is "no". We don't believe in that aspect of either us saying, "If you don't agree with a number" -- and that's what we said in paragraph 36 of our submission, by the way -- if we come to a table and we negotiate for the signal of CBC/Radio-Canada, we think that the conventional broadcasters are like us; that our value and our contribution under the Broadcasting Act and the role that we play is so important that we are not going to play with threatening to pull our signal or having our signal not negotiated or not carried by the BDU.

1957   And that's why we think that; again, the final offer concept, the baseball arbitration concept, is one that we believe in.

1958   COMMISSIONER DENTON: So you have made perfectly clear that if negotiations don't work, send it to Ottawa where final offer negotiation would take place under the aegis of the CRTC.

1959   MR. LACROIX: That's the model, sir, yes.

1960   COMMISSIONER DENTON: And the cable industry is not going to be too happy about that, I take it.

1961   MR. LACROIX: Well, that was my hint a few minutes ago. The concept or just a threat of having to go in front of the CRTC, knowing that you are not going to be happy about the fact that you have to play arbitrator in a negotiating environment between two grown-ups having a conversation around a real model, should be incentive enough.

1962   And, on top of that, we have -- we think we have value in our signal. We hope that because of the audiences that we bring and the quality of the programming that we bring, BDUs will see that also so there is no -- there is no incentive to not agree. They want our signal and we want to give it to them. So it's a concept of a smart negotiation.

1963   MR. GUITON: The other thing, Commissioner Denton, is that we are not proposing anything that doesn't already exist. The same circumstances apply to specialties. They are not able to withdraw their services. They have mandatory carriage status and negotiations seem to occur.

1964   And it's very interesting, but for some reason with the conventionals it just can't happen.

1965   COMMISSIONER DENTON: So there is nothing -- forgive my ignorance. I come from telecom.

1966   But is there no instance in which there has been a failure to agree that has resulted in the pulling of signal on the specialty side?

1967   MR. STURSBERG: No, not that I know of, at any event.

1968   The only thing I was going to add is that the way that we are approaching it we think is, frankly, also just going to be more consumer-friendly. I find it very hard to imagine a circumstance in which it would be attractive or acceptable to Canadians whether it's pulling our signal or, frankly, even pulling CTV's signal out.

1969   I just think that as we approach this thing one of the things that has to be in the back of our minds, is to do it in a way that is going to be friendly to consumers.

1970   So we don't want to pull the signal. We don't want to pull it for the reasons the president was mentioning, but also because it's unfriendly, and that at the end of the day we are proposing essentially a model which is identical to the model that the Commission has worked with over the course of the last 20 or 25 years for the specialities.

1971   COMMISSIONER DENTON: Point taken.

1972   I'm going to switch to group licensing. And I saw in your presentation that you were sort of, kind of favourable to it and not perhaps quite as enthusiastic as you might have been.

1973   Can you just elucidate for me the basic points you want to make about the benefits and disadvantages of group licensing?

1974   MR. LACROIX: Before I pass this on to Steven for the details, let me just tell you, you are quite right. We are sort of, kind of.

1975   We don't object to the concept of group licensing, but we just want to remind everybody in our submission that it is a regulatory tool. It doesn't have any economic benefit. It's not -- it doesn't solve any other problems that we are faced with right now.

1976   For CBC/Radio-Canada it doesn't do much for us. Perhaps it's more convenient and we will save a few dollars in terms of the efficiency of the processes in coming in front of the CRTC and you with us. That's fine.

1977   But at the end of the day, and that's why we say we don't oppose it, we just want to make sure that people understand its limits and that's what we have in here.

1978   And I will allow Steven to continue on that one.

1979   MR. GUITON: Yes. So yes, we have proposed a model for the Commission's consideration. We haven't gone into detail, in great detail on this issue partly because, as the president was saying, we have a very small stable of specialty services and we don't really see how the model necessarily would provide a lot of regulatory flexibility for us.

1980   We have proposed a two-tier type system where there would be exhibition and spending requirements at the service level and then in our case, French/English, we would see these as being separate for conventional French, conventional English. Those could be separate requirements, distinct requirements, and then overriding that would be a group CPE.

1981   Again in our case, the idea of a group CPE, we thought would be along the lines of perhaps new media services that could be brought together for the company as a whole but our businesses, our conventional businesses are quite distinct, English/French. We were just trying to give an example. For others, perhaps, who have greater ability to take advantage of that flexibility the group CPE would be valuable.

1982   So that, basically, we are not disagreeing with the Commission's model and the Commission's model seems interesting. We are just pointing out that for us it doesn't seem to have that much utility.

1983   COMMISSIONER DENTON: One of the things that interests me, is if you have a Canadian programming expenditure that you are required to make is your flexibility to assign that among various categories. It interests me to know what your reaction would be to the notion that money spent on programming that would be primarily directed through internet-based transmission might be accounted for as spending on Canadian programming.

1984   Does that idea appeal or repel? I would be interested in your reactions to it.

1985   MR. GUITON: The model we thought about is one where there would be -- and I'm going to get to the internet aspect of it -- but starting off we thought there would be a spending requirement for conventional, for example, a minimum spending requirement for conventional as well as specialty. And then the group -- the overriding group amount would allow you to go beyond that. You would still have to live up to your conventional minimum but if you wanted to take advantage and promote some of your internet spending the group level would allow you.

1986   And that's consistent with where the CMF is going right now, with trying to encourage new media activities to go on. So we thought that would be the right way to encourage it.

1987   If the Commission was of the view that there might be too much of that going on, you could adjust that by adjusting the conventional spending limit or you could set a minimum on the amount of new media spending that would be approved in that way.

1988   There is lots of ways doing it, but the idea of the group limit was to allow that kind of flexibility that you are talking about.

1989   MR. STURSBERG: Can I just add one thing on expenditure requirements to the CBC and Radio-Canada?

1990   Our expenditures are overwhelmingly on Canadian programming. When we were preparing to come down here we tried to have a little look to see what we spent on foreign programming and it's about 5 percent or less in French and about 6 percent in English.

1991   If we had the financing to be able to do it, we would be thrilled to have 100 percent of our programming being Canadian. The reason we don't go there is because we can't.

1992   So expenditure requirements with respect to Canadian programming for the CBC is a little bit kind of irrelevant, if I can put it that way, because we are overwhelmingly about one thing and one thing only, which is Canadian programming.

1993   COMMISSIONER DENTON: Point taken.

1994   Would you consider video-on-demand as a kind of new media platform? Is that an acceptable characterization?

1995   MR. GUITON: Actually, we -- it's a fair question.

1996   We have identified video-on-demand as a separate issue all together that should be accounted for on its own and a class of service that should have minimum requirements. But it's an interesting point you are raising whether it should be included in some sort of media, new media idea.

1997   Can we think about that?

1998   COMMISSIONER DENTON: Yeah, absolutely. I would be interested in your views on that.

1999   Have you had any experience in video-on-demand of your products over video-on-demand and can you speak to that?

2000   MR. STURSBERG: Okay, do you want me to start?

2001   COMMISSIONER DENTON: You are all lining up to speak. Let's go.

2002   MR. STURSBERG: Well, there is a number of different forms of video-on-demand.

2003   Right now we have an arrangement with iTunes for video sell-through of our shows and in fact we have a very good relation with iTunes. It's an excellent relationship and we are the sort of lead Canadian partner of, well, Apple generally in Canada but iTunes in particular, and the leading Canadian shows that are bought off iTunes are in fact our shows, the most popular being in America. So we have that relationship.

2004   We recently have put up on our website a video player so that when the shows are done, the next morning the show goes up. So if you missed last night's battle of the blades final and you would like to catch it, you can go to the website and you can call it down.

2005   And then we keep them up there for a period of time while the -- so people can catch up on their viewing if they have missed an episode or whatever they would like.

2006   And the third area where we have been working is with the cable companies on video-on-demand. We would obviously love to have a relationship with the cable companies because where we are going generally is we are moving in the direction more and more of thinking of ourselves as being a content company. We want our content to set out all the platforms and we want it to be available to Canadians in whatever way is most convenient.

2007   But I have to tell you that the conversation so far with Rogers has been very difficult. The terms that they have proposed, we think, are basically confiscatory. And so we have not at this point been able to conclude an arrangement with them, although obviously we would very much like to.

2008   M. LAFRANCE : La même chose du côté français, on a eu, effectivement, des expériences. Je pense aux " Boys ", que plusieurs personnes connaissent, qui ont été diffusés en vidéo sur demande.

2009   C'est sûr qu'on veut que nos émissions se retrouvent sur l'ensemble des plates-formes actuellement, sur internet, sur... Il faut que les émissions trouvent plusieurs plates-formes parce que les Canadiens cherchent plusieurs plates-formes.

2010   Les expériences en vidéo sur demande, toutefois, démontrent qu'il n'y a pas encore de modèle économique clair pour un producteur de contenu sur la vidéo sur demande. Même les " Boys ", qui est un énorme succès pour nous autant que pour Illico, rapportent une fraction du coût de cette émission-là. Donc, il n'y a pas là un modèle économique clair.

2011   Cela dit, on sent bien l'obligation de partir sur plusieurs plates-formes et d'être présents, nous, en vidéo sur demande. Mais pour l'instant, le modèle économique est très, très, très loin d'être attaché.

2012   COMMISSIONER DENTON: And why is this so, sir?

2013   MR. LAFRANCE: I don't know. We have some negotiations with Vidéotron at the time. I don't know their model exactly. We know their model, but I don't know how we should share --

2014   COMMISSIONER DENTON: You are saying there is an issue of negotiation with those who --

2015   MR. LAFRANCE: There is a big issue of negotiation if we want again to recognize the value of it for the content producers.

2016   COMMISSIONER DENTON: Okay, all right.

2017   Again, I would just like to come back to the notion -- I would like to make a statement and see whether you agree with the characterization that I put on it.

2018   As I see it, you are saying that there needs to be a negotiated value for signal and the backstop needs to be either the threat of -- well, the threat that the CRTC would hold a final offer in negotiation. And is that sufficient to account for the fact that the CBC has particular obligations as the product broadcaster? Is that simply sufficient to handle all the contingencies, obligations that the CBC has?

2019   Is it simply enough to have a negotiation for signal and a backstop? Is that sufficient to account for the special status of the CBC in such negotiations?

2020   MR. LACROIX: In the context of these negotiations for value for signal?

2021   COMMISSIONER DENTON: Yes.

2022   MR. LACROIX: In the context of the broadcast -- the draft broadcasting order that we have in Appendix B, I think it is, with the model that's there, the answer is, yes, that's the suggestion we are making. Because what you are doing there, is you are allowing all the privates plus CBC/Radio-Canada to be in a position where it is a level playing field and everybody negotiates in the same way for the value of their signal.

2023   COMMISSIONER DENTON: And you are prepared to go into a negotiation -- are you prepared to go into a negotiation without the CRTC having directed in any way how that valuation should take place, in other words a free negotiation between the parties?

2024   MR. LACROIX: We believe in negotiation. We believe it's a simple way of doing things. We think that the six criteria that we have suggested as the framework, because we believe in the value -- in trying to give the parties a framework to work from -- you can add to that. You can delete some of them.

2025   These will be criteria as a reference to facilitate the negotiation; not to force the parties, to put a number beside each of these criteria, add them up and then put a value on the signal.

2026   COMMISSIONER DENTON: Well, that's just sort of -- I'm sorry. I'm just imagining going up against Phil Lind to negotiate something with a government back list of things that Phil Lind is supposed to take care of. And I can see him ripping up the paper and saying, "Now, let's talk". And this is my concern in any kind of government telling the cable industry how it should negotiate.

2027   MR. LACROIX: Well, again, and I will allow my colleagues to jump in -- we have great respect for Phil Lind, by the way.

2028   COMMISSIONER DENTON: You had better.

--- Laughter

2029   MR. LACROIX: We would be happy to have a conversation with Phil Lind and negotiate. You have never negotiated with Richard Stursberg.

2030   COMMISSIONER DENTON: Oh, once or twice.

--- Laughter

2031   MR. LACROIX: Yes, actually, you have.

2032   So the bottom line here is we believe in the negotiation. We think that the suggestions we have made to kind of frame the conversation in the negotiation are helpful to the parties.

2033   But, at the end of the day, it's going to be about the value of our signal and whether they think that they bring value to the Canadian subscriber that they want to attract; whether if our signal has value they will find a way to negotiate with us. We will find the same way.

2034   M. LAFRANCE : Peut-être que la seule exception quand on parle de politique publique réelle qui me semble importante à mentionner ici, c'est, par exemple, la question de la francophonie hors Québec.

2035   Je n'ai aucun problème à négocier la valeur du signal sur Québec, sur Montréal, sur Ottawa ou sur Rimouski.

2036   C'est sûr que quand j'arrive à Winnipeg, quand j'arrive à Vancouver en français, quand j'arrive dans les marchés francophones hors Québec, il y a là une défaillance de marché qui est très claire, et là, effectivement, la négociation, la valeur du marché n'est peut-être pas suffisante. Il va falloir trouver des façons de financer la présence des télévisions locales dans ces marchés-là.

2037   La question de la francophonie hors Québec, à mon avis -- et je veux tout simplement le mentionner -- est une question qui est importante pour nous. C'est fondamental dans notre rôle, fondamental aussi dans l'esprit du service public, et ça m'apparaît une chose importante, où là, il y aurait sûrement des choses... il va falloir continuer d'aider parce qu'il s'agit vraiment d'une question de politique publique.

2038   CONSEILLER DENTON : Oui, mais je pense qu'il faut considérer le demi-billion que le gouvernement vous donne pour accomplir ces tâches dans ce cas-là.

2039   M. LAFRANCE : Oui, mais encore une fois, le problème financier se pose pareil. Le problème de la télévision locale se pose autant, et les coûts continuent d'augmenter. Le problème structurel de l'industrie et du financement est toujours là, et il est causé par le problème de la valeur des signaux.

2040   COMMISSIONER DENTON: Thank you.

2041   THE CHAIRPERSON: You can't do this, Mr. Lafrance. With all due respect, you can't negotiate subsidies. Subsidies is not based on a commercial principle.

2042   M. LAFRANCE : On dit exactement la même chose. Ce que je dis, c'est que, effectivement, la valeur des signaux hors Québec est plus difficile à négocier et que là, il faut voir autre chose.

2043   COMMISSIONER DENTON: Mr. Chairman, these complete the questions I would like to ask.

2044   THE CHAIRPERSON: Thank you.

2045   Michel.

2046   CONSEILLER ARPIN : Merci.

2047   Écoutez, sur la discussion que vous venez d'avoir avec monsieur Lafrance, j'aurais peut-être une première sous-question qui irait vers monsieur Stursberg.

2048   Est-ce que la réponse que monsieur Lafrance nous donne pour les signaux hors Québec s'appliquerait de la même manière pour CBC dans le territoire du Québec?

2049   MR. STURSBERG: It depends a little bit on where you are in Quebec, of course. Obviously in places like Montreal where there is a large English population, you know, there is going to be considerable value.

2050   In other places where there is no -- you know, if we go to the Saguenay and there are essentially no English speakers, then I won't be surprised if the cable company says, I don't think it is of much value here in the Saguenay. And that is fine and that is exactly, I think, as it should be.

2051   COMMISSIONER ARPIN: Yes. And it is an area where you don't do any local programming?

2052   MR. STURSBERG: We don't, no, because there are no English speakers.

2053   COMMISSIONER ARPIN: Exactly.

2054   MR. STURSBERG: So the general value of the signal will be exactly the same.

2055   COMMISSIONER ARPIN: However, in its submission Quebecor has written that, first, they don't agree that the CBC should get any financial -- well, should be allowed to negotiate for the value of the signal for the discussion that you already had and doesn't want to reopen it.

2056   But they also are stating that if the Commission was to come to the conclusion that the CBC is allowed, then it should be only applied for the stations in the majority language of the market, so in a way, that none of the English broadcasters will be allowed to negotiate with Vidéotron in Montreal and in Gatineau for the sake of --

2057   M. LAFRANCE : Ils disent, autrement dit, qu'on devrait négocier à la valeur du marché seulement là où il n'y a pas de marché. C'est intéressant comme concept, mais il faut comprendre qu'il y a deux problèmes différents, à mon avis.

2058   Le problème de la télévision conventionnelle, des télévisions généralistes qui ont un problème de financement, qui est un problème extrêmement important, et celui des télévisions locales est un autre type de problème, particulièrement dans la francophonie hors Québec.

2059   C'est un problème totalement différent. L'un ne règle pas le problème de l'autre. Ce n'est pas en finançant la télévision de Regina qu'on va réussir à continuer de fabriquer des dramatiques au Québec. À mon avis, c'est deux problèmes complètement différents. Il y a deux problèmes structurels absolument différents.

2060   Ce qu'on dit, c'est que dans les marchés principaux, effectivement, la négociation de la valeur du signal est la façon juste de régler le problème.

2061   M. STURSBERG : Juste une autre observation en ce qui concerne la proposition de Vidéotron.

2062   C'est bizarre parce que, un, on est un pays, effectivement, bilingue. On a des villes importantes, y compris Ottawa-Gatineau et Montréal, qui ont des populations anglophones ou francophones importantes, et de nier à ces populations, effectivement, une opportunité... ou à nous, effectivement, de servir ces populations me semble un peu bizarre.

2063   CONSEILLER ARPIN : Dans un autre ordre d'idée, tout en demeurant sur la question du financement de la télévision par un régime de compensation négociée, le ministère de la Communication, de la Culture et de la Condition féminine du Québec dans son mémoire dit que c'est prématuré, en somme, parce qu'on vient d'introduire le Fonds d'amélioration de la production locale et on n'a pas encore mesuré les bénéfices, et que le Conseil devrait s'astreindre à ne pas, à ce stade-ci, considérer la valeur d'un signal, mais plutôt de laisser le Fonds d'amélioration de la programmation locale se développer et voir quels en seront ses bénéfices.

2064   M. LAFRANCE : C'est une position étonnante parce qu'il y a deux problèmes différents : le problème du financement structurel des télévisions généralistes et le problème des marchés locaux. C'est deux choses. C'est deux problèmes extrêmement différents.

2065   Celui de la télévision généraliste, si on le regarde, et le danger... je vais prendre l'exemple francophone particulièrement parce que, à certains endroits, il est très spécifique.

2066   Qu'est-ce qui se passe depuis quelques années dans le marché francophone?

2067   Il y a énormément de difficultés, on l'a vu : fermeture de stations régionales, baisse des dramatiques. Il y a tout le débat autour de ce qu'on a appelé les séries lourdes.

2068   On fabriquait des dramatiques, il y a cinq ou 10 ans, qui coûtaient 1 million l'heure. Dans plusieurs pays du monde, on appellerait ça des séries légères. Au Québec, on appelle ça des séries lourdes.

2069   Aujourd'hui, on n'est plus capable de fabriquer ça. Tout le monde a arrêté d'en faire ou à peu près parce qu'on n'a plus les moyens.

2070   Alors, ce qui se passe avec le problème structurel de financement, au-delà des chiffres et au-delà des enjeux économiques, il y a l'enjeu culturel qui est extrêmement important. La vérité, c'est qu'on affaiblit depuis quelques années la qualité de notre télévision, et ça, c'est extrêmement dangereux à long terme.

2071   Parce que là, on ne fabrique plus de séries lourdes, et dans cinq ans, on ne fabriquera plus de séries mi-lourdes. Puis dans 10 ans, on se demandera pourquoi même le marché francophone écoute des télévisions américaines ou des télévisions d'ailleurs.

2072   Parce qu'on affaiblit continuellement les chaînes généralistes qui fabriquent les grandes dramatiques, qui ont des salles de nouvelles, qui fabriquent les grandes émissions d'affaires publiques et qui nourrissent le système.

2073   Ça, c'est un premier problème, qui ne peut être réglé, à notre avis, que par la juste reconnaissance de la valeur des signaux.

2074   Le deuxième problème, celui de la télévision locale, pour lequel le CRTC a trouvé une réponse avec le Fonds de production locale, est un problème qui va demeurer. Les télévisions locales... le Canada est un pays de régions. Les télévisions locales devront exister, devront continuer d'exister.

2075   Que ce soit dans notre cas de la francophonie, que ce soit au Québec parce que les régions veulent se voir à la télé ou que ce soit à l'extérieur du Québec parce qu'il y a effectivement pénurie de programmation en français, et particulièrement de programmation locale, ce problème-là va continuer d'exister.

2076   Mais ce n'est pas en finançant les régions qu'on va sauver les grandes dramatiques, et ce n'est pas en finançant les grandes dramatiques qu'on va sauver les régions. Ça me semble être deux problèmes complètement différents.

2077   CONSEILLER ARPIN : Et, pour vous, donc, c'est... effectivement, vous ne seriez pas en accord avec l'affirmation que Vidéotron fait que la création du Fonds d'amélioration de la programmation locale est une mauvaise appréciation de l'industrie et du marché de la part du Conseil et qu'il faut viser une juste compensation, une juste valeur marchande des signaux, et que c'est suffisant pour même remettre en état de santé les stations locales?

2078   M. LAFRANCE : Personnellement, je trouve que la création du Fonds local est une juste appréciation de la valeur des marchés, mais surtout une juste appréciation du rôle culturel que la Loi de la radiodiffusion veut jouer et de l'importance que représente la télévision locale au Canada.

2079   C'est fondamental de sauver les télévisions locales au Canada, et le Fonds local de production répond à ça, et ça me semble une décision très éclairée.

2080   CONSEILLER ARPIN : Maintenant, dans son Avis public, le Conseil, en parlant du Fonds d'amélioration de la programmation locale, se pose la question, à savoir s'il devrait le ramener à 1 pour cent, ce qui était l'objectif original.

2081   Évidemment, le Conseil n'a aucune donné au moment où on se parle sur l'effet du Fonds lui-même puisqu'on est dans la première année, on est dans le premier même quart de son existence, mais pour Radio-Canada, qu'est-ce qu'il signifie, le Fonds, et, à votre avis, est-ce qu'il devrait être ramené à la valeur originale?

2082   M. LACROIX : Je vais demander à mes collègues dans chacun des médias de vous répondre une fois que j'aurai fait un commentaire d'ouverture.

2083   Vous savez, ce Fonds-là, le Fonds d'amélioration de la programmation locale, a été très important pour CBC/Radio-Canada. Ça nous a permis de faire des choses qui auraient été impossibles de faire, de continuer à faire des choses à CBC et de faire des nouvelles choses à Radio-Canada que mes collègues vont vous raconter.

2084   Choisir d'en changer les données dans le moment, Monsieur Arpin, serait... c'est trop tôt. On n'est pas du tout d'accord avec les économistes de ce monde qui disent qu'on est sorti de la récession. Nos chiffres ne nous montrent pas ça. Au contraire, il n'y a pas d'augmentation importante des revenus.

2085   Si vous regardez les revenus de toutes les personnes -- on vous en donne certains exemples dans notre mémoire, à partir, je pense, des paragraphes 40 et suivants -- les données sont absolument unanimes. Il n'y a pas de reprise dans le moment dans notre environnement.

2086   Donc, changer ce chiffre-là, passer du 1,5 à 1 pour cent, ou changer la teneur du Fonds dans le moment serait prématuré. C'est pour ça que dans notre mémoire, on vous a suggéré d'attendre, de ne rien changer in the upcoming broadcast year dans ce qui s'en vient, et, dans l'année suivante, de regarder qu'est-ce qui se passe pour l'année suivante.

2087   Maintenant, je vais demander à Sylvain et à Richard de vous dire ce qu'on fait avec ça.

2088   M. LAFRANCE : Vous comprendrez, comme vice-président des Services français, je suis hautement préoccupé par la question de la capacité des régions de se voir dans notre télé parce que c'est une question fondamentale.

2089   Que ce soit dans la région de Québec, où le débat sur la production d'émissions locales est toujours extrêmement présent, ce qu'on appelle la montréalisation des ondes, ou que ce soit dans la francophonie hors Québec ou que ce soit dans n'importe quelle région du pays, il est important que les gens continuent de se voir à la télé, parce que le problème actuellement avec l'ensemble des signaux qui arrivent dans les régions, les gens ont de plus en plus de chaînes de télé, mais se voient de moins en moins dedans.

2090   C'est un problème énorme. Les gens veulent se voir à la télé, c'est normal, parce que leur identité passe par ça.

2091   Donc, c'est extrêmement important, et nous, le Fonds local de production a permis de faire des choses qui sont déjà extrêmement apparentes.

2092   On va, dans les prochaines semaines, si ce n'est déjà fait dans certaines régions, passer aux nouvelles sept jours/semaine, à titre d'exemple. Ce n'était pas le cas partout. Ça va devenir de plus en plus la norme chez nous.

2093   On va augmenter le reflet régional dans nos réseaux. Ça nous a permis aussi de maintenir des choses qu'on n'aurait pas pu maintenir sans ça.

2094   Ça nous permet de corriger un problème structurel de financement qu'on avait sur les régions de puis longtemps, et sur ce plan-là, c'est un apport pour nous qui est extrêmement utile pour vraiment augmenter la présence régionale.

2095   Alors, c'est extrêmement utile, et, à mon avis, il va falloir trouver une façon de continuer de supporter cette défaillance réelle de notre marché télévisuel, qui existe pour l'ensemble des régions du pays.

2096   MR. STURSBERG: Well, I would just say, as you may have noticed, we relaunched all of our news properties in the last little while, including our local news properties. We have grown them out from 60 minutes to 90 minutes between 5:00 and 6:30 and put in a 10:00 local news service between 10:55 and 11:05.

2097   I can tell you quite categorically that if we had not had that, if we had not had the money from the LPIF, not only would it have been impossible to do that, we would have found ourselves in a situation of cutting the local news.

2098   CONSEILLER ARPIN : On va prendre une pause d'une dizaine de minutes.

2099   THE CHAIRPERSON: Yes. Some of my colleagues need a health break and I am sure so do you. So we will get back in 10 minutes.

--- Upon recessing at 1013

--- Upon resuming at 1031

2100   THE SECRETARY: Please take your seats.

2101   THE CHAIRPERSON: Michel, you still have the floor.

2102   CONSEILLER ARPIN: Merci, monsieur le président.

2103   Dans la vie publique, on traitait aussi de ce qu'on appelle les * émissions prioritaires + pour l'instant et dont on a trouvé un nouveau nom sous les * Émissions d'intérêt national +. On a des règles actuelles, il y en a certain qui font des invitations de dire qu'il faut soit abolir, essentiellement, la notion des émissions prioritaires.

2104   Dans d'autres instances, on parle plutôt d'élargir les catégories qui se qualifient aux émissions prioritaires. D'autres parlent même d'élargir aussi les heures de disponibilité, des heures prioritaires pour y inclure les émissions pour enfants.

2105   Est-ce que Radio-Canada une position sur cette question-là?

2106   M. GUITON: Bien, effectivement, la façon dont on travaille maintenant avec nos conditions de licence, ce n'est pas la programmation prioritaire qui existe pour nous. C'est plus détaillé que ça et on n'a pas de problème avec l'idée de faire le niveau que le CRTC décide pour nous, c'est important, parce que comme monsieur Lafrance vient de dire et aussi monsieur Stursberg, les dramatiques, les séries Gold sont très importantes pour nous et on va les faire quand même, c'est sûr.

2107   L'idée d'augmenter les heures de prime time, d'élargir les heures de prime time, on a, et je pense que Richard va expliquer un peu the prime time qu'il utilise comme importance où le plus de Canadiens regardent la télévision.

2108   Mais, effectivement, le niveau de contenu canadien et le niveau de service dramatiques en démontre et en diffuse, on a aucun problème avec la proposition, si le CRTC veut être plus spécifique avec les définitions des services.

2109   La seule chose que je veux ajouter avant de juste passer aux autres, l'idée de group licensing, c'est très bien de faire un peu de stream lining et, si je peux dire en anglais, standardizing et, effectivement, ça va marcher très bien si on est capable le plus possible un standardizing pour tout le monde parce que, comme ça, ça va être plus efficace.

2110   Et si on commence à faire des changements pour différents groupes et détailler très raffiné, selon nous, ça enlève l'utilité de tout l'effort de group licensing.

2111   Mais avec ça, je vais juste passer à mes collègues.

2112   M. STURSBERG: Bien, effectivement, si j'ai bien compris la proposition des autres, c'est pour donner plus de flexibilité, plus de souplesse à eux, en ce qui concerne le contenu canadien.

2113   We don't want any more flexibility on Canadian content because that's all we do. And so, for us, it's -- to be perfectly honest, it's neither here nor there. As I was saying earlier on, if we could do more Canadian content, if we had the financing to do it, we would do it. We would like to be a hundred per cent Canadian.

2114   And so, we are not, unlike the others, seeking ways of limiting or reducing our Canadian content obligations. That is exactly what we don't want to do.

2115   COMMISSIONER ARPIN: But if I was to ask you your comments regarding the others having more flexibility than the one they currently have. Do you have a comment on that?

2116   MR. STURSBERG: Do you want to -- yes, maybe just a general comment. I don't really think it's fair in some ways to sort of speak to their situation, but I just would make one general comment, which is, certainly in English Canada -- et je sais très bien que c'est totalement différent pour le marché francophone -- le problème que nous avons eu pendant 50 ans, 60 ans, n'importe quand, c'était un problème d'une certaine catégorie, si je peux le dire, des émissions, surtout dans les dramatiques.

2117   So, if we're going to solve this problem, then I think because it's a category problem, it's useful for everybody to participate in the solution. When CTV's Flashpoint does very well and wins the Gemini for best drama, we at the CBC are not dismayed by that. We actually think it's good for Canadian content in the overall and it's good for us.

2118   M. LAFRANCE: Moi, j'ajouterais simplement une chose. C'est que la force du système canadien de radiodiffusion, puis si je parle particulièrement du marché francophone qui diffère au moins sur une chose, c'est que les francophones au Canada écoutent leur télévision d'abord et avant tout. Disons que c'est une grosse, grosse différence.

2119   La force du système canadien de radiodiffusion actuellement c'est de créer de la diversité. Il crée de la diversité et il fait une large place à la production indépendante, qui ajoute encore de la diversité et cette diversité-là est de la force. Puis je trouverais dommage qu'à long terme des genres disparaissent de notre télévision.

2120   Donc, je pense qu'il faut s'assurer qu'il y a des gens qui sont toujours représentés sur l'ensemble de nos chaînes pour qu'on crée toujours une masse critique de production et pas seulement dans le service public. Cela dit, effectivement, comme on n'est pas à l'intérieur de ce système-là comme tel, c'est difficile pour nous de commenter.

2121   CONSEILLER ARPIN: D'accord. Je vais revenir, parce que j'ai fait une couple de questions au tout début de mon intervention sur la valeur des signaux, pour enchaîner avec la discussion que vous veniez d'avoir, mais j'ai quand même des questions un peu plus spécifiques et qui concernent peut-être au départ le marché francophone, là.

2122   Parce que, bon, vous avez fait l'analyse, monsieur Lacroix, avec des tableaux qui sont très percutants, mais qui montrent dans le cas... surtout dans le cas du Tableau numéro 1 qui font état de la performance financière nationale.

2123   Mais si on regarde la performance financière du marché francophone, elle n'est pas aussi dramatique que celle du marché anglophone et, donc, est-ce que les problèmes structurels que vous avez identifiés sont moins aigus peut-être, mais sont existants dans le marché francophone ou si le marché francophone est... pour l'instant survit et peut anticiper que la situation se corrige?

2124   M. LAFRANCE: Bien, vous avez employé le verbe * survit +. À mon avis, c'est le verbe juste. Mais ce qui se cache derrière, encore là, c'est qu'il faut faire attention de ne pas regarder ça qu'avec des résultats économiques, quoiqu'encore là, les résultats économiques ne sont pas très très joyeux sur le marché québécois, mais il faut regarder les deux angles.

2125   Qu'est-ce qui s'est passé dans le marché de notre télévision? La télévision qui est un immense succès comme instrument culturel au Canada français, parce que les Canadiens demeurent extrêmement attachés à leur télévision. Chaque soir il y a la grande majorité des francophones regardent leur propre télévision.

2126   Qu'est-ce qui s'est passé depuis quelques années? Fin des séries lourdes, je le répète. C'est grave, ça, dans le monde de la télé parce qu'on ne fait plus de grandes émissions capables de concurrencer.

2127   On fait encore de très bonnes émissions parce qu'il y a beaucoup d'ingéniosité dans la façon de les faire parce qu'appeler une série lourde... ce qu'on appelle une * série lourde +, disons que c'est au-dessus de 800 000,00 $ l'heure; dans la plupart des pays comparables, on appellerais ça une * série légère +.

2128   C'est des coûts qui sont très bas parce qu'il y a eu beaucoup d'ingéniosité dans la façon de produire de la télé, mais il y a une limite à ça.

2129   On ne pourra pas continuellement réduire la qualité de notre télé ou réduire l'investissement dans des émissions dramatiques, par exemple, particulièrement au moment où se produit la mondialisation et, éventuellement, la mondialisation des marchés et des fréquences et un jour, on ne sera plus capable de concurrencer avec les émissions d'autres pays.

2130   Donc, ce que je veux dire avec ça, c'est qu'il y a l'angle économique, mais il y a l'angle culturel.

2131   Pour que le marché se porte bien, il a fallu réduire les investissements dans les grandes émissions de qualité et à long terme c'est très grave ce qui peut se produire avec ça parce qu'on peut tuer un marché qui est pourtant un immense succès sur le plan culturel au Canada français.

2132   Et il y a un vrai danger parce que les générer, ce sont celles qui produisent les grandes dramatiques encore une fois, ce sont celles qui produisent les grandes émissions d'affaires publiques, ce sont celles qui ont les stations régionales. L'affaiblissement de ça, c'est l'affaiblissement du coeur de notre télévision et, ça, ça peut être grès grave à long terme, pas seulement sur le plan économique, mais encore pire, sur le plan culturel.

2133   CONSEILLER ARPIN: Donc, si je comprends bien ce que vous dites, c'est que, finalement, bien peut-être pas pour les mêmes motifs, mais la problématique, elle est peut-être même jusqu'à un certain point plus sévère pour le marché francophone, compte tenu, effectivement, de l'impact culturel qu'a la télévision de langue française.

2134   M. LAFRANCE: Il y a une décroissance, par exemple, du financement de nos télévisions. Il faut comprendre que pour les francophones, compte tenu du contexte nord américain, il est extrêmement important pour les francophones de pouvoir se retrouver dans les grandes télévisions, de pouvoir créer des communautés, ce qui est un grand danger du vingt et unième siècle. Ces communautés-là, aujourd'hui, elles existent par la télévision et elles existent beaucoup par la télévision généraliste.

2135   Quand un million et demi de personnes regardent * Tout le monde en parle + ou quand un million et demi de personnes regardent * Star Académie +, on crée des communautés qui sont importantes. Les francophones ont besoin de ces grands lieux de rassemblement-là, c'est absolument fondamental.

2136   L'affaiblissement de ces grands lieux de rassemblement-là, c'est à long terme extrêmement dangereux. Et depuis cinq ans, dix ans, quinze ans, les télévisions généralistes sont devenues les grands lieux de rassemblement des francophones, que ce soit sur le plan de l'information ou que ce soit sur le plan de la culture. Alors, affaiblir ça, ce serait, à long terme, extrêmement dangereux.

2137   Est-ce que ce serait plus grave? Moi, je pense que sur le plan culturel en tout cas, ce serait extrêmement grave.

2138   MR. STURSBERG: Can I just add one little thing to the English market? Because I think the point that Sylvain makes is, if anything, even truer for the English markets because there are so limited and so few of these experiences.

2139   When we have two million people watching "Battle of the Blades", it's like one and a half million people in French Canada watching "Tout le monde en parle". It builds community, it builds a sense of who we are. It celebrates our culture, our sense of humour and our way of doing things.

2140   And that's why at the end of the day it's original and it's hit shows that really matter in terms of building the culture.

2141   CONSEILLER ARPIN: Monsieur Lacroix, dans les dix derniers jours on a reçu une copie du Rapport Annuel de Radio-Canada et quand je regarde l'état consolidé des résultats puis quand je regarde les explications qui sont données dans les notes aux États Financiers, j'ai de la difficulté à voir que Radio-Canada a... à trouver que Radio-Canada a les difficultés que vous exprimez.

2142   Vos revenus publicitaires se sont accrus entre 2008 et 2009, du moins c'est ce que les chiffres que je peux voir au tableau. Le financement public s'est aussi accru dans la même période et au niveau des résultats nets, votre perte de fin d'année se retrouve à être inférieure à celle de l'année 2008.

2143   Mais j'entends et j'ai entendu de nombreuses déclarations que vous avez faites à divers moments, pour dire que Radio-Canada, finalement, a des difficultés financières quasi insolubles.

2144   Qu'est-ce qui manque dans vos États Financiers pour maintenir votre... pour que ce discours-là soit authentique?

2145   M. LACROIX: Il ne manque rien dans nos États Financiers, monsieur Arpin, ça, je vous le promets.

2146   Revenons à l'arrière, 2008, c'est l'année des Olympiques, alors les revenus sont, je dirais, artificiellement gonflés, mais reflètent cette réalité-là de notre ligne de revenu.

2147   Dans les trois ou quatre derniers mois de l'année de notre exercice financier 2008-2009, on a vu une chute précipitée de nos revenus publicitaires d'à peu près $60 millions de dollars et on s'est retrouvé au milieu du mois de mars à essayer de regarder notre budget pour 2009-2010 et vous en connaissez, parce que vous avez été dans plusieurs des endroits où j'ai parlé de nos difficultés financières, on a fait face à un déficit budgétaire d'à peu près $171 millions de dollars.

2148   Si vous ajoutez le $50 millions de dollars qui viennent avec les coupures pour payer les indemnités de départ, nous avons sorti $221 millions de dollars dans notre entreprise en 2009-2010, 800 emplois ont été éliminés, donc $133 millions de dollars représentent des coupures permanentes.

2149   Quand vous regardez l'impact des derniers mois sur CBC Radio-Canada, c'est vraiment catastrophique.

2150   Alors, si un jour Radio-Canada pouvait vous donner des résultats trimestriels avec des analyses dans la direction des états financiers comme le font toutes les entreprises publiques, vous verriez aujourd'hui un portrait qui est bien différent que celui au 31 mars 2009.

2151   En plus de ça, juste pour vous donner une idée, on n'est pas les seuls qui reflétons comme ça dans le marché. Tantôt, Sylvain vous a expliqué l'importance sur la programmation et comment on a réussi en réduisant certains des choix qu'on fait à équilibrer notre budget au 31 mars puis à continuer à équilibrer le budget pour l'année qui vient.

2152   Mais si vous regardez les résultats de TVA, parce que c'est intéressant. Ce sont des gens qui sont très importants dans le marché du Québec puis vous regardez leurs neuf derniers mois, TVA vous dit la même chose.

2153   Et simplement à partir de l'information publique, vous savez leur dernier trimestre présente une baisse de 16 pour cent dans leurs bénéfices d'exploitation. Vous regardez les neuf mois qui viennent de terminer, ils ont, oui, une augmentation d'à peu près 3,8 pour cent dans leurs revenus, la ligne de revenus, mais lorsque vous comprenez puis vous lisez ensuite leur analyse par la direction, ça, c'est parce que leurs canaux spécialisés sont en hausse au niveau des revenus d'abonnements par près de 20 pour cent et les revenus publicitaires sur ces canaux spécialisés en hausse de 11 pour cent.

2154   Alors, vous imaginez que, également, pour une entreprise aussi importante au Québec que TVA, ils ont le même genre d'impact dans leurs revenus, monsieur Arpin, que, nous, on a été obligés d'affronter.

2155   M. LAFRANCE: Si je peux seulement ajouter, monsieur Arpin, une chose. Encore une fois, c'est très dangereux de regarder un bilan financier pour se demander si la télévision va bien parce que dans la dernière année, aux services français seulement, on a augmenté le nombre de reprises, on a éliminé des émissions régionales, on a fermé le * Match des étoiles + qui marchait très bien puis on a retiré $18 millions de la grille, plusieurs millions de notre service d'information.

2156   Si vous me demandez si ça va bien, je vais vous dire, moyen, ça ne va pas très bien. Ça ne va pas très bien, monsieur Arpin.

2157   CONSEILLER ARPIN: D'accord. Le message est clair et puis...

2158   MR. STURSBERG: I just want to add one little thing, which is, you know, because sometimes I think it's hard for people who have not actually lived through what we've lived through to appreciate it. I mean, the president's remarks are right that what happened is if you look in the 2008-2009 numbers, they are completely different from the experience that we have been living the last little while.

2159   I tell a story to people, but it's a true story. Not this summer, but the summer past when I went away for summer holidays, I thought we were looking at a $20 million problem. I came back two weeks later, it had turned into a $38 million problem, a week and a half after that, it had turned to a $50 million problem.

2160   And so, my only point is that when the revenues fell off, they didn't fall off slowly like we have seen in the past. They fell like right off a cliff and the problem was we could not build a boat fast enough to keep ourselves afloat. And I think it's fair to say certainly it was my experience, I have never seen as catastrophic a drop in revenue as what we saw in this crisis.

2161   CONSEILLER ARPIN: Si on autorise Radio-Canada à négocier pour la juste valeur marchande de son signal, est-ce que, à votre avis, cette négociation que vous entreprendriez avec les distributeurs devrait donner un résultat un peu identique d'un bout à l'autre du pays ou s'il y a des considérations de marché qui viendraient faire en sorte que dans un marché, ça vaudrait plus ou ça vaudrait moins, parce que vous allez négocier avec différents distributeurs?

2162   M. GUITON: Absolument, monsieur Arpin. Ça va être différent pour chaque distributeur et pour chaque radiodiffuseurs ça va être une négociation commerciale. Puis dans chaque cas ils font réaliser la valeur que ça représente nos signaux dans leur marché et chaque distributeur peut-être va venir aux négociations avec les différentes circonstances. Alors, on voit ça comme chaque cas et c'est un cas par cas.

2163   CONSEILLER ARPIN: Et donc, vous agréez avec la vision de Québecor que, finalement, parmi les critères, il y a des critères de succès qui devraient générer davantage de revenus.

2164   Hier, on a entendu Rogers nous dire que les taux devraient être les mêmes. Dans un marché, les taux devraient être les mêmes pour tous les diffuseurs de ce marché parce que, autrement, ça donnerait un avantage concurrentiel permanent aux diffuseurs qui obtiendraient le meilleur tarif.

2165   Donc, dans le cas de Rogers, Citytv serait pour toujours en marge de CTV parce que CTV aurait des meilleurs moyens financiers pour les concurrencer.

2166   M. GUITON: Je n'avais pas vu cette instance. Excusez-moi, monsieur Arpin, mais je n'ai pas entendu Rogers qui a expliqué ça, mais je ne vois pas la logique de tout ça pour les chaînes spécialisées.

2167   On a tous les différents niveaux de tarifs, c'est développé avec des négociations et c'est en fonction de popularité de chaque service cas par cas. Je ne peux pas ajouter plus parce que je n'ai vraiment pas entendu les discussions.

2168   CONSEILLER ARPIN: Mais c'est dans la transcription. C'est monsieur Viner qui en a fait la déclaration.

2169   Je veux passer maintenant à la transition au numérique. Un, vous avez déposé auprès du Conseil un projet qui, vous l'avez dit un peu plus tôt, qui concerne 27 marchés où vous voudriez procéder au passage au numérique. Cependant, vous n'avez pas rendu publique votre grille de marché et les stations que vous entendez d'ici le 31 août 2011 faire transiter au numérique.

2170   Quand est-ce que vous entendez rendre public ce document-là parce que ça serait, effectivement, très utile qu'il soit rendu public pour les fins des énoncés que nous aurons à faire?

2171   M. GUITON: Je ne pense pas qu'on veut cacher des choses, monsieur Arpin. On a indiqué que ça va être dans chaque marché où on offre un service local et c'est comme ça qu'on est arrivé à 27.

2172   Je ne sais pas pourquoi ça a été discuté dans le working group, comme vous savez, de TV et c'est clair maintenant, chaque place où on a un signal local, on va avoir un émetteur.

2173   CONSEILLER ARPIN: Donc, vous consentiriez à ce que le Conseil rende public le document?

2174   M. GUITON: On a aucun problème.

2175   CONSEILLER ARPIN: Donc, d'accord. Merci. Ça, c'est...

2176   Maintenant, vous possédez aussi 51 autres émetteurs qui couvrent les territoires dans lesquels le Conseil a dit qu'il serait... les territoires prioritaires à desservir au niveau de la transition numérique. Un certain nombre de ces territoires-là sont inclus dans les communautés de minorités de langues officielles où vous ne prévoyez pas offrir de service numérique.

2177   Notamment, je pense dans le marché anglophone, vous ne prévoyez pas couvrir Moncton ou la ville de Québec. Dans le marché francophone, vous ne prévoyez pas desservir Calgary ou Saskatoon.

2178   Est-ce que si le... quelles seraient les conditions pour que vous considériez... qu'est-ce qui va arriver, effectivement, si vous ne passez pas au numérique dans ces marchés-là alors que les autres diffuseurs sont aussi sur la même liste puisque c'est des marchés de 300 000 de population et plus et des marchés où il y a au moins deux services en concurrence, c'est les marchés qui sont dans les capitales provinciales ou territoriales.

2179   Dans certains cas, les diffuseurs privés prévoient passer au numérique dans certains de ces marchés-là.

2180   Qu'est-ce qui va arriver dans le cas de CBC et de Radio-Canada au moment où cette transition-là se fait et que ces stations-là sont à l'intérieur de la zone de protection de 360 kilomètres?

2181   M. GUITON: Mais premièrement, pour les marchés, mandatory markets, que vous avez établis, on regarde ça, c'est un peu plus vaste que les 27 qu'on a proposés et on sait que va être un défi pour nous de faire les 27 par septembre 2011. Et puis pour faire le mandatory markets, ça va être aussi un autre défi après ça et c'est ça.

2182   Pour la question de 350 kilomètres, je pense que vous avez fait ça hier, le document?

2183   CONSEILLER ARPIN: Oui, oui.

2184   M. GUITON: On a regardé ça et, effectivement, il y a certains ici. Ça, c'est les réémetteurs, si je comprends bien, qui sont sur les listes et, effectivement, par septembre 2011 on va avoir un problème dans chacune des places que vous avez indiquées, dans le sens qu'on ne va plus être capable de continuer le service analogique. Et dans ces territoires, ça va être quelque part où on arrête nos émissions.

2185   Par contre, dans chacune des places que vous avez identifiées, on trouve que c'est des places où on trouve la plus haute pénétration de câblodistribution parce qu'ils sont proches de la frontière américaine.

2186   Mais, oui, exactement, on a le problème que vous avez identifié.

2187   CONSEILLER ARPIN: Parce que le premier problème, évidemment, c'est celui des stations qui sont... qui diffusent présentement sur les canaux 52 à 69 et, là, je vois quand même... je vois Chatham, je vois Barrie, je vois Foymount, Kitchener, Saguenay, Dick Bay, Through Road, donc... Speely Machine. Donc, c'est certainement des situations qui sont... pour lesquelles vous devrez trouver.

2188   Est-ce que vous vous êtes déjà penché sur cette première problématique-là des canaux... des stations sur les canaux 52 à 59?

2189   M. GUITON: Mais, on a espéré que le plus possible on puisse continuer le service analogique. Comme vous avez discuté, si on continue avec la décision du gouvernement d'arrêter les signaux en septembre 2011, effectivement durant la période du territoire de 360 kilomètres on va avoir le problème avec les marchés que vous avez indiqués.

2190   Jusqu'à date, ça, c'est des réémetteurs et ce n'est pas les stations.

2191   CONSEILLER ARPIN: Non, non.

2192   M. GUITON: Et c'est pour cette raison qu'on n'a pas encore développé un plan. Nos priorités maintenant c'est de faire les marchés ou des stations, des marchés où on a du service local.

2193   CONSEILLER ARPIN: Mais il y en a quand même une, là, une station, je la vois, Windsor, c'est une station qui fait de la production locale?

2194   M. GUITON: Oui, exactement, et puis on est au courant avec ça avec Windsor puis, ça, c'est une de nos priorités.

2195   CONSEILLER ARPIN: Parce que c'est... on a déjà, évidemment Industries Canada a déjà indiqué clairement qu'ils voulaient récupérer les canaux 52 à 69 et il y a, évidemment, des problèmes de coordination, il y a des engagements de coordination avec la FCC. Il y a des stations américaines qui diffusent à plus faible puissance parce que leur signal entrerait en interférence avec le Canada, mais il y a un engagement de libérer au moins les canaux 52 à 69.

2196   Mais c'est une priorité, mais c'est quelle sorte de priorité?

2197   M. GUITON: Mais comme j'ai dit, les réémetteurs, c'est moins priorité. On a même pour les 27, c'est un défi énorme pour Radio-Canada CBC surtout que maintenant avec nos conditions de financement on trouve cette initiative très, très, très dure et c'est sûr que pour les réémetteurs, on n'a pas une solution claire et, effectivement, surtout comme vous avez dit, les 360 kilomètres.

2198   À l'extérieur de ça, on va essayer de continuer notre service analogique et en espérant que ça va continuer à marcher comme ça.

2199   CONSEILLER ARPIN: Mais est-ce que vous avez des plans qui vont au-delà du 31 août 2011? Certains diffuseurs déjà... dès hier, CTV nous a indiqué qu'ils avaient des plans qui les menaient à peu près jusqu'en mars 2013 pour faire certaines transitions? Et je sais que dans d'autres entreprises qu'on entendra au cours de la semaine ont des plans un peu semblables.

2200   Est-ce que Radio-Canada a des plans qui vont au-delà du 31 août 2011?

2201   M. GUITON: Ce qu'on a, c'est notre plan de faire le plus par 2011 et après ça on va développer une priorité pour les émetteurs chaque année après, mais on n'a pas avancé quelque chose après le 2011 jusqu'à date, non.

2202   CONSEILLER ARPIN: Donc, vous ne seriez pas en mesure de déposer un plan qui irait au-delà du 31 août 2011?

2203   M. LACROIX: Je m'excuse. Juste ajouter une précision. Vous savez dans le moment on est rendu à huit émetteurs. On a à peu près 45, 47 pour cent de notre géographie de couverte. On est prêt pour trois autres. Donc, on est rendu à 11. On est le radiodiffuseur qui a le plus grand nombre d'émetteurs, dans le moment, en place. Notre plan corporatif est certainement d'essayer d'en ajouter.

2204   Mais, évidemment, dans un environnement comme le nôtre, Monsieur Arpin, vous savez que le financement de CBC/Radio-Canada vient sur une base annuelle. Donc, c'est difficile pour nous de faire des plans qui vont jusqu'en 2013, sauf que, comme dit Steven depuis plusieurs minutes, dans les plans corporatifs de l'entreprise, les 27 régions, originating stations, où on fait de la programmation locale, ce sont la priorité de l'entreprise, et dans tous les plans de Cap-X, les plans d'immobilisation, ça revient constamment.

2205   CONSEILLER ARPIN : Si le Conseil vous autorisait à négocier la valeur marchande de votre signal, est-ce que ça changerait votre politique par rapport au passage au numérique ou si c'est des budgets totalement indépendants?

2206   Parce que je vois bien que dans les états financiers, toutes les entreprises font une ségrégation entre les immobilisations et les dépenses d'opération, mais que vous avez des appropriations spécifiques pour les immobilisations qui sont distinctes des budgets d'opération.

2207   M. GUITON : Oui. Mais dans le cas que vous approuvez les négociations pour la valeur, ce que ça va faire pour nous, c'est établir un niveau de base pour notre financement, et comme Sylvain vient de dire, puis Richard aussi, on a déjà coupé beaucoup de services, coupé la programmation, et caetera, et ce que ça nous aide à faire, c'est regarder nos financements, regarder nos opérations, et, en même temps, regarder les 27 émetteurs aussi. C'est comme tout un plan de financement qu'on doit regarder ensemble, incluant la programmation.

2208   CONSEILLER ARPIN : C'était mes dernières questions, Monsieur le Président. Merci.

2209   LE PRÉSIDENT : Merci.

2210   Len.

2211   COMMISSIONER KATZ: Thank you, Mr. Chairman.

2212   Good morning. Two questions and it relates to your opening two questions that you asked: Is there an imbalance in the system and should the imbalance be corrected?

2213   I want to go back one step and say: Are there unique causes to some of the imbalance that stand out that need to be looked at first? And it comes from the perspective of DTH and the carriage of local.

2214   Is CBC being carried everywhere -- your signal -- everywhere on DTH or there are some markets where the DTH providers do not carry the CBC signal today?

2215   M. LAFRANCE : Il y a encore un certain nombre de marchés satellitaires où on n'est pas distribué, effectivement, parce que... particulièrement, je peux parler pour les marchés francophones. Il y a un problème assez spécifique parce que même la nouvelle règle d'une station par province dans le marché francophone crée une espèce de drôle de situation où le marché québécois pourrait être satisfait par une seule station, alors qu'il y aurait des stations partout au pays.

2216   Mais je pense que Bev a les... Est-ce que vous avez, Bev, les listes de stations?

2217   COMMISSIONER KATZ: I would be interested in actually --

2218   MR. STURSBERG: We could send -- you know what we could do? The short answer is yes, there are markets where we are not being carried, both in French and in English. It varies a little bit between ExpressVu and Star Choice.

2219   If you like, we will be happy just to send you a list of them.

2220   COMMISSIONER KATZ: Could you do that and put it on the record?

2221   MR. STURSBERG: Yes, absolutely.

2222   COMMISSIONER KATZ: But in addition to that, what I was actually focusing on was one of the markets, Brandon, that, as you know, closed down. CBC pulled the signal in Brandon as well --

2223   MR. STURSBERG: Yes.

2224   COMMISSIONER KATZ: -- and I am just wondering whether DTH was carrying or is carrying CBC in Brandon.

2225   MR. STURSBERG: To my recollection, no, but we will verify that.

2226   But the Brandon situation -- you know, the Brandon situation was a funny situation. It was not a CBC station, it was a CBC affiliate. It was picked up in a transaction by CTV and then CTV decided that they didn't want to carry on with it, so they approached us to buy it and they said, would you like to buy it? We declined in part because it was simply non viable. All we would have done in buying Brandon was dig ourselves in a deeper financial hole.

2227   The President was just saying -- I think this is correct -- that part and parcel of the reason why it was not viable, aside from its size, was that it wasn't getting any carriage and so people in southern Manitoba couldn't get it off the satellite, where they are particularly dependent on satellite.

2228   THE CHAIRPERSON: If I recall, the potential purchaser, Bluepoint, pulled out because there wasn't a satellite for carriage.

2229   MR. LACROIX: That is exactly right and that was the second purchaser or second interested party that looked at the books and actually walked out.

2230   MR. STURSBERG: There were actually three, as I recall, who -- I mean we were approached and we declined. The Shaws, I believe, said that they were going to buy it and then looked at it and walked away. And then there was a third party.

2231   M. LAFRANCE : Si je peux, une précision pour le marché francophone, parce que la question est très importante, cette question-là de la non-distribution des signaux par les satellites dans les marchés francophones.

2232   À titre d'exemple, Radio-Canada n'est pas distribuée par Bell à Trois-Rivières, Saguenay, Rouyn-Noranda, Rivière-du-Loup et Rimouski, et Radio-Canada n'est pas distribuée par Shaw à Québec, Trois-Rivières, Saguenay, Rouyn-Noranda, Rivière-du-Loup et Rimouski.

2233   Alors, ça crée, naturellement, une drôle de situation, où, d'une main, on encourage... avec le Fonds local de production, on encourage la production d'émissions locales, mais de l'autre main, on ne force pas la distribution des stations locales.

2234   Et la règle, naturellement, du un par province ne viendra pas régler ça. La règle du un par province a été créée pour le marché anglophone, mais visiblement a créé un non-sens total dans le marché francophone.

2235   COMMISSIONER KATZ: So we have a situation where broadcasters can't distribute their signal to some markets and as a by-product of that you have the loss of revenue as well because there is no revenue in there as well.

2236   And I guess to the extent that we are looking at a revenue issue here and a costing issue here as well, the question I ask is: Is there an obligation for those people that are causing some of that revenue loss to make it whole as opposed to asking a bigger part of the industry to underwrite that cost as well?

2237   I mean if there was $1 of revenue, for example, that CBC, CTV, Canwest lost because of distribution not making it to some local markets, is it incumbent upon everybody to find a solution to this problem or is it incumbent upon that sector that has caused that shortfall to 'fess up as well?

2238   MR. STURSBERG: You mean just the satellite sector?

2239   COMMISSIONER KATZ: Yeah.

2240   MR. GUITON: Yes, and we definitely support the idea of the local into local proposition. It makes sense to us.

2241   Originally we had -- you know, in previous proceedings before you, we like everyone else were under the impression there was serious satellite capacity and so we weren't proposing that kind of arrangement. Our engineers now tell us that Bell is able to do much more than it could have done before and that in a very short amount of time, Shaw Direct will be in a position to do the same as well.

2242   So we think the local into local is a big issue. You are absolutely right that it could have been determinative for Brandon. But at the same time it doesn't address necessarily the economics which are related to the value for signal.

2243   So both items are very important and we do propose that -- we do support the idea of the local into local.

2244   COMMISSIONER KATZ: There was discussion yesterday about one of the U.S. components of its Regulation, carry one, carry all. What are your views on that?

2245   MR. GUITON: I don't even know what that is, to be honest with you, Mr. Katz. So we are going to have to get back to you on that.

2246   COMMISSIONER KATZ: Okay. My last question deals with the issue that I raised yesterday with one of the parties and that is the notion of vertical integration.

2247   If I look at the next licence term for most of the broadcasters, which may be as much as seven years, it is likely that during that term there will be much more of an alignment between the content providers and the carriage providers.

2248   We saw many years ago, 10 years ago, I guess, roughly, Bell and CTV had a strategic relationship. Rogers is now involved with City obviously as well. Canwest is in a state of evolution as well.

2249   If I sort of look downstream a couple of years and say most of these private broadcasters have aligned themselves with a carriage provider as well, what does that say or do to the public broadcaster, who obviously is non aligned? What are the implications for CBC? What would they be, I guess?

2250   MR. STURSBERG: Well, I think the issue of alignment is a little bit variable.

2251   Bell obviously, you know, is aligned since it owns ExpressVu but the nature of its relationship with CTVglobemedia has been significantly reduced over the course of the last little while.

2252   The issue of Global is different again, where they, as far as I know, don't have any alignment with a major carrier group.

2253   As far as TELUS is concerned they have only very -- to the extent that they have any, I can't actually recall what they are, any significant content holdings. I don't think they have any.

2254   Rogers appear to be the only group that actually finds itself in a situation where it has both significant content and significant carriage holdings aside from -- I notice the Vice-Chairman is looking at me -- TVA and Quebecor.

2255   So I am not entirely clear about all that but I do think that there is a big issue about the relative size of the different content groups and their ability to be able to operate on different platforms.

2256   I think it unfortunate, for whatever reasons that happened in the past, that CBC and Radio-Canada find themselves in a situation where group licensing is of less interest to them than it would be to others. I think we would be much better off as a country if the CBC, which is the premier producer of Canadian content, had more content assets, by which I mean if it had more specialty channels.

2257   And to find ourselves in this circumstance, I think, is not just disadvantageous to the economics of the company, I think it is unfortunate because the plain fact of the matter is that every dime that we make goes back into content, it doesn't go into margin.

2258   M. LAFRANCE : Je pourrais juste ajouter une chose sur l'intégration verticale.

2259   L'un des dangers à long terme, en tout cas, je pense que le Canada a un problème à financer les contenus. À cause du nombre de Canadiens et tout ça, il y a un plus grand problème ici à financer les contenus que dans d'autres pays, et c'est un problème majeur.

2260   L'intégration verticale est peut-être, à long terme, un danger pour la diversité, parce que si ceux qui possèdent les moyens de distribuer, qui possèdent les tuyaux et les satellites, ont les moyens de produire, ça va bien, mais ça fait de moins en moins de gens qui peuvent produire du contenu.

2261   Alors, il y a peut-être un enjeu de diversité, et il faut absolument le regarder. Il faut être sûr que notre système, dans cinq ans, dans 10 ans, va continuer d'offrir une très grande diversité des voix, et je dirais qu'à long terme, je verrais un danger.

2262   En tout cas, il va falloir surveiller comme il faut qu'il reste des producteurs de contenu capables de produire des grands contenus et de les distribuer.

2263   MR. LACROIX: So it all comes back again to putting everyone in an environment where bigger groups are created and vertically integrated on a level playing field because I mean if they find synergies in the groups that they put together to fight the environment in which they are, so be it, more power to them.

2264   But when we come to the Canadian broadcasting system and the relationship between the players, then it becomes very important that everybody be given the same opportunity in every single source of revenue to tap it according to criteria that are available to all. Hence, the conversation of today.

2265   COMMISSIONER KATZ: Thank you. Those are my questions.

2266   THE CHAIRPERSON: Thank you.

2267   Elizabeth.

2268   COMMISSIONER DUNCAN: I have just two quick questions and they start from your presentation this morning.

2269   You show in your Figure 1 the PBIT margins, a graph depicting those margins from 1976 to 2008, but I am sure, as you know, the Commission, the purpose in licensing the specialties was to increase diversity and the Commission said that they would consider from that point on, or at least from, I think, the 1999 policy onward, that they would consider the companies as a group.

2270   So to look at a chart like this, although it is interesting, I am not sure that it shows the total picture. I think it would have been a good idea to have a combined --

2271   MR. GUITON: Well, with all due respect, I don't think that is right.

2272   I think that, first of all, there are independent conventional broadcasters like ourselves that don't have a large stable of specialty services, and so to add our specialties to the picture wouldn't change anything.

2273   Secondly, the conventional business needs to be looked at, I think, as a standalone business. It operates under distinct rules and distinct operating conditions. It is the heavy lifter in this industry, as we know, and to, I think, mask the financials for that industry by including other corporate groups, I don't think it is correct.

2274   We could add specialties to it, we could add other business to it, but the fundamental logic of it is that it is a standalone business. It is a bricks and mortar business. You are in the local market, you are providing national programming at the same time. It is simply not, I don't think, accurate to add other things to it to make the profitability look different.

2275   COMMISSIONER DUNCAN: Just to clarify, I wasn't suggesting we add CBC specialty services to it. I was suggesting that conventional specialty services should be looked at as a group because when we started licensing these specialty services years ago, we knew that the audience was not going to double. I mean the population wasn't going to double.

2276   We knew the audience was going to have to decrease for conventional services but in the interest of providing more diversity, we licensed the services and I am quite sure, if we can find the reference, that we did say that we would look at it as a group.

2277   That is why I am saying that this picture, although interesting, is not necessarily the total story.

2278   MR. GUITON: It may not be the total story for some companies that are integrated, but there are independent broadcasters, conventional broadcasters. The Commission itself recognized back in the 1970 policy that this is going to have an impact and that it is appropriate for multi-channel providers to compensate the value of the signal.

2279   The whole notion of looking at conventional broadcasters as a standalone business is logical, it makes sense and it makes sense that they be put on a level playing field with specialties. I don't think it is the case that the Commission wants to create a new category of service called speciality/conventional that is a group and that only half of that group is eligible for subscription revenues and the other is not. It doesn't make any sense.

2280   They are both contributing, they are both competing. And in order I think for the efficiency of the broadcast system, they both should be eligible to the same sources of revenues.

2281   And, in passing, it is not the first time that we have been saying this to the Commission. A couple of years ago we said the same thing with regard to the BDUs. We talked about the community channel advertising, we talked about VOD advertising, we said that is all fair and well because it does establish a level playing field. If those parties are eligible for that type of revenue, then so should we eligible for the other revenues that are out there.

2282   The Commission should approach this as a level playing field. Everyone should be eligible unless there are good policy reasons to exclude them from certain areas. And there is certainly no good policy reason to exclude conventionals who are the heavy lifters, they are the most popular services, from a source of revenue which is now taken for granted to be part of a multi-channel universe.

2283   MR. STURSBERG: If I could just add one thing.

2284   When we split out the conventional revenues in the way that it does on chart 1, I think the other thing is you have to see it as well in the context of the collection of the rest of the tables that we put in front of you. Because really, we find ourselves in a situation that is, I think it is fair to say, completely anomalous. Those services that are drawing the smallest audiences are the ones that are making the most money.

2285   And somehow, you have to say to yourself there is something very odd about that very matter. The services that Canadians clearly value the most, the ones that they watch the most, are the ones that are most profoundly in financial difficulty, and the ones that they watch the least are doing very well.

2286   COMMISSIONER DUNCAN: I think you misunderstand what I am saying. I am not saying that there shouldn't be value-for-signal. I am saying that that chart doesn't present the total picture, and I think it would be useful to see the total chart. And so I will have to agree to disagree I guess.

2287   MR. GUITON: Okay.

2288   COMMISSIONER DUNCAN: So if we go on then to figure 2 and 3, I think it shows that we have introduced diversity in the system, and I think this probably was the intention at the beginning. I don't think that we intended to see -- we still felt the mass audience, which of course is larger than -- the potential for the over-the-airs was significantly larger. You know, not everybody subscribes to all the services.

2289   So I think we have accomplished diversity. And I can see, you know, that you are making your point there, but I don't think it is a demerit to what has happened.

2290   MR. GUITON: And certainly it is not our intention to suggest that this, the licensing of specialties, was a bad idea.

2291   MR. LACROIX: No.

2292   MR. GUITON: As we said in our opening remarks, it is not the fragmentation that is the problem, Canadians have more choice, that is a good thing. What is happening is that with all this fragmentation one sector is now eligible for the entire package of revenues. The fragmentation is only a symptom of the problem.

2293   COMMISSIONER DUNCAN: I take your point. I think I am just trying to make the point that, in my view at any rate, you would want to look at both, not that you shouldn't be able to be considered for fee-for-carriage.

2294   MR. LACROIX: Okay, point taken.

2295   COMMISSIONER DUNCAN: The other point that I just wanted to touch on was on page 15 where, you know, you are talking about the introduction of a consumer-friendly solution, a small package. And I think the context that this is presented in is to address what might be a rate increase because of value-for-signal. Am I correct in that?

2296   MR. LACROIX: I would be happy to answer your question, even though you broke my heart yesterday.

2297   COMMISSIONER DUNCAN: I did? Oh.

2298   MR. LACROIX: When you said that your go-to station was a CTV station.

--- Laughter

2299   MR. LACROIX: Yes, that is the context in which --

2300   COMMISSIONER DUNCAN: I do watch CBC though too.

--- Laughter

2301   MR. LACROIX: So I am not going to comment on that.

2302   Affordability of service, that is the concept behind what we have called the skinny package. We think it works, it is an interesting solution. And Steven will give you a few details perhaps if you want them.

2303   COMMISSIONER DUNCAN: I think I will just make one quick point, because it is not necessary. I just wanted to say that I didn't know that that would be a -- and it is not a reason we shouldn't have value-for-signal, so let me say that upfront -- but I don't think that this is a realistic solution or a reasonable solution to satisfy consumers, because people want the services they have, some of them just don't want to pay or can't afford to pay more money.

2304   So saying, well, you don't have to buy all that, buy this I don't think goes a long way to satisfying --

2305   MR. GUITON: But, in our view, the small basic does a lot of things, it does a lot of important things. It makes sure that for those consumers who need an affordable solution that there is one.

2306   It also makes sure that BDU rate increases on the regular basic are tempered. Because if consumers start to find that rates are going up, they will have an option. Its existence is important, because it will temper the marketplace and give consumers an option that they don't have today.

2307   The other thing it does, of course, is that in the context of the digital transition, it enables people to have something to go to in the event that they are impacted negatively by the digital transition.

2308   So it serves a lot of important things and we are not saying that it has to be accepted by everyone. It is not saying that everyone has to suddenly go over and get the small basic. Its existence alone will provide affordability for consumers should they need it and will help temper pricing in all of the other services.

2309   MR. STURSBERG: And it is also nice too because it is a very low-cost solution for the BDUs. You know, all the boxes in satellite are individually addressable and all the digital boxes for the cable companies are individually addressable. So the cost to the cable companies to implement this very small basic tier is basically negligible.

2310   And so it t is very nice, as Steve was saying, it does temper the market, it does give a safeguard if there is an issue, and it does so at a price that is minimal for the cable and satellite companies.

2311   COMMISSIONER DUNCAN: Thank you.

2312   Those are my questions, Mr. Chairman.

2313   THE CHAIRPERSON: Thank you.

2314   Candice.

2315   COMMISSIONER MOLNAR: Thank you.

2316   Just before I go on with my question, I just want to follow-up with what you said, that the skinny basic is a low-cost solution for cable. Because I think we heard Rogers yesterday tell us, in fact, it was not a low cost.

2317   In an environment perhaps where you have all digital subscription and you can simply, you know, send new programming requirements to a set-top box, potentially that is low cost. In an environment where analogue exists, it is a potentially high-cost solution.

2318   MR. STURSBERG: I heard them say that as well. And they were talking about how they would have to re-trap all the signals in an analogue environment, I think that is what you are referring to?

2319   COMMISSIONER MOLNAR: M'hmm.

2320   MR. STURSBERG: The fact of the matter is by the transition at 2011 there won't be anymore analogue left, and so all of it will be digital and all the boxes will be addressable and so the problem kind of goes away.

2321   MR. GUITON: But to the extent that it doesn't, it is a business decision for the cable companies if they want to continue to offer that. Today, if you buy a basic service, small basic, you get access to the analogue channels, that is correct. Today, if you spend $200 and you get the full supreme, you get access to the same things. They are there because the cable companies have decided to make them available, it is a commercial decision.

2322   The fact that there will be a small basic may or may not create some costs for them. As I was saying earlier, it is not that every consumer is going to go out and choose the small basic.

2323   It is important that the small basic be there as an option, so that if there are affordability issues it can be addressed, so if there are massive rate increases it can be addressed. It is there as a safeguard. And so to the extent that the cable companies decide for commercial reasons to continue to offer analogue, in some instances they are going to have to roll a truck, that is correct.

2324   COMMISSIONER MOLNAR: Okay. I want to continue on something that is related to this issue. And your view is the small basic is a safeguard for consumers. And you have said that the Canadian consumer is at the heart of this matter.

2325   So within that context and within some of what I have heard from you here today, I heard you clearly state that you should be treated similar to the private commercial that, without question, your signal holds value for consumers. And you also want to be put on a level playing field with specialty.

2326   Specialty, and particularly going forward, because this is a policy for the future and not for the past, and we have just talked about the transition to digital, specialty, while they may be carried, the consumer who is at the heart of this matter is not required to subscribe. And so where there is a fee, consumers will have a choice as to whether or not they want to undertake that fee, pay that fee for the value of the signal they receive. That is not what you have proposed here.

2327   What are your thoughts on if there is a value-for-signal that consumers actually get the opportunity to elect that signal or not?

2328   MR. GUITON: The first point I would make is that there are specialty services that are on basic, so those speciality services are included in the consumers' buy and there is no choice about it.

2329   The second --

2330   COMMISSIONER MOLNAR: Excuse me though, I am talking about, as we pointed out, going into the future and the digital transition --

2331   MR. GUITON: Right. As of today, I am just saying the concept is not without merit, the concept exists today.

2332   Secondly, the reason those services are services, are priority services, is because it is written in the Broadcasting Act, it is something that Parliament in its wisdom decided that those are important things for Canadians to receive.

2333   In the same way, as the Commission has noted in the past, it has engaged a study by Dunbar and Leblanc and the study found that it is important that all Canadians get access to a minimum set of services; the priority services that the Broadcasting Act establishes that are very important. And having that minimum set of services available to all Canadians is important for the system.

2334   So it is on that logic, plus the principle that exists today, that some specialties are included in basic that we are basing our proposal.

2335   COMMISSIONER MOLNAR: Okay. And I am not here to argue your logic. It is available, you make it available over-the-air, you know, consistent with the Broadcasting Act there is, without question, an important element to ensuring that local and regional and programming of national interest is available to Canadians. Over-the-air television works to achieve that in some part.

2336   But what if it was a value-for-signal, if imposed, consumers have the choice as to whether or not they will subscribe? Are you comfortable -- not are you comfortable, would you proceed with negotiations under that sort of a criterion where you could in fact have a number of -- a large number, potentially, of Canadians elect not to receive the CBC signal?

2337   MR. GUITON: We think that would be a bad proposal for three reasons. We think it is consumer-friendly to continue the mandatory carriage. The worst thing I think the Commission could do is establish a system where some Canadians get access to some services that are priority and some Canadians don't get access to the same services. That wouldn't be consumer-friendly we don't think.

2338   Secondly, as I indicated earlier, it is part of the Broadcasting Act's priority. And I think the other thing to remember is it is consistent with the Commission's own policy on diversity of voices. A situation where there wouldn't be a choice of conventional broadcasters in a marketplace we don't think is in interest of Canada.

2339   So in our view, this is the right way, given where we are, given that the principle itself, what we are proposing is no different than the Commission does today, and the given the priorities of the Broadcasting Act, we think that our proposal is the right way to go.

2340   COMMISSIONER MOLNAR: I just want to make sure that I understand what you said to me. It is consumer-friendly -- could you give me your three points again?

2341   MR. GUITON: If negotiations involve withholding signals, then we don't think that would be consumer-friendly.

2342   COMMISSIONER MOLNAR: Fair enough. And sorry, that wasn't what I was asking you about. I wasn't asking you whether or not either you or a BDU could choose to withhold it, I was simply asking whether or not Canadians should be provided the choice as to --

2343   MR. GUITON: Right.

2344   COMMISSIONER MOLNAR: --- whether or not they want to incur the cost to receive it.

2345   MR. GUITON: And my other two points would then apply.

2346   COMMISSIONER MOLNAR: Because it is consumer-friendly?

2347   MR. GUITON: No, because it is in the priorities of the Broadcasting Act and because, in the context of diversity of voices, we think that those services should be made available to Canadians. Principally, the system is made up of certain priority services, ours are included in them, we think that is the right way to go.

2348   COMMISSIONER MOLNAR: That is all my questions.

2349   THE CHAIRPERSON: Thank you.

2350   Suzanne.

2351   CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.

2352   En réponse à une question de monsieur Katz, monsieur Guiton a fait référence à une opinion d'ingénierie au sujet de la capacité de distribution de Star Choice et de Bell TV.

2353   Est-ce que vous pouvez déposer ces opinions d'ingénierie au dossier de l'instance?

2354   M. GUITON : Absolument.

2355   CONSEILLÈRE LAMARRE : Merci.

2356   C'est tout.

2357   THE CHAIRPERSON: Steve, did you have a question?

2358   COMMISSIONER SIMPSON: Yes, I do.

2359   Mr. Stursberg, you mentioned that with the recession you saw ad spend just fall off the table like a rock. Do you have knowledge of whether that was a similar condition with specialties, those who enjoyed advertising support? Was it proportionate?

2360   MR. STURSBERG: I can't tell you whether it is proportionate. My impression is, however, that the specialty numbers held up somewhat better than the conventional numbers.

2361   What I can tell you is that the overall decline, if you look at the April to September period, for the market as a whole compared to the previous year was about 15 per cent, so it was really a kind of calamitous drop. But what we could do is, to the extent that we are able, we will file with you what light we can shed on that.

2362   COMMISSIONER SIMPSON: I would appreciate that.

2363   On another chart that was provided this morning with respect to subscription TV price growth, Canada versus U.S., what are the conditions that you feel are affecting the cable price increases in Canada versus the United States? Are they the regulatory differences between the two countries alone or is it a combination of things?

2364   MR. GUITON: It is my understanding, looking at this chart, the price tempering, shall we call it, that was going on in the United States was a result of the review by the FCC of the cable industry and the understanding that cable rates were getting out of hand. In addition, I am tempted to say that there were some new competitive offerings in the American market, but I hesitate to say that because I am not familiar with it.

2365   But I do know that the FCC during that period of the 2004, 2005, 2006 period was looking at competition in the U.S. cable industry.

2366   COMMISSIONER SIMPSON: Going back to figure 2, which was illustrating that conventional OTA television is still enjoying a lion's share of viewership by contrast to the other mixes in the market, I couldn't really help but notice that when you aggregate the no-compensation conventionals against the specialty and, you know, let's call them the rest, you are looking at conventional having about a third of the share of the eyeball market in television.

2367   MR. STURSBERG: This is not exhaustive, this is just illustrative. So, for example, on the conventional side we didn't put the A Channels, we didn't put down City, et cetera. And the same thing would be true on the specialty side, many many many of the specialities are not there.

2368   If I am not mistaken, I think the specialties takes around 50 per cent or slightly over 50 per cent of the total viewing at this point.

2369   MR. GUITON: Yes, it is about 50.

2370   COMMISSIONER SIMPSON: Yes, that is consistent with my understanding. I was just wanting to make a point about that, you know, OTAs are really still, you know, holding their own.

2371   But it brings me to another question, which is the issue of the dominance or the predominance of conventional television. Do you presuppose -- this is a totally subjective question, I am just throwing it out there -- but in the discourse we have been having about value-for-signal, within the confines of our industry this is a discussion that is predominantly being held between the broadcasters and the cable companies and the satellite companies in trying to determine whether there is a value for that signal and, if so, how much and the debate over whether it should be passed onto the consumer.

2372   But my question is this, that in the consumers' awakening of their value notion of what conventional television is worth, have you gone down the road of looking at the potential that they are coming to the realization that what they saw as a essentially free television is actually not free, in that they have been, to the argument of the conventional broadcasters, they have been paying for conventional television and there is the prospect that they will be paying more?

2373   So this is sort of tantamount to General Motors arguing with their dealerships over the high cost of cars and it awakens the consumer to the fact that perhaps they shouldn't be driving.

2374   MR. GUITON: We filed with the Commission a year or two ago a survey that we did and the consumers thought that, in fact, they were already paying for it. We knew that. And the interesting thing that has happened in the past couple of years since that survey and since the discussions in front of the Commission and since this most recent period is that what consumers didn't know -- they thought they were paying.

2375   What they didn't know -- they knew they were paying, they are paying for that thing, what they didn't know is that we don't get any money. And that is the realization that is happening, I think the last 12 months has shown consumers don't understand the issue, because they don't understand when they pay for something that it is not actually covering the costs of what it is they are consuming.

2376   And so it is a strange notion from them, that is their confusion, but they have always thought they were paying for it.

2377   MR. STURSBERG: There is a particular parallel, the automobile manufacturer had been supplying cars to the dealership, the dealership had been selling the cars, and giving no money back to the manufacturer.

2378   COMMISSIONER SIMPSON: Okay. So this brings me right back to how these hearings began, which is that, you know, why are we doing this, what is the scenario then that if the consumer has an understanding that they are paying for conventional television and there is no option other than a regulatory intervention or an arbitration process that goes into the mix?

2379   What happens, in your mind, if the broadcasting industry is faced with the inevitability that the cost is going to get passed onto the consumer? Do you feel that this will cause the broadcasting industry to reconsider and find some other mechanisms by which to get back to the table with the cable industry?

2380   MR. GUITON: What we are proposing is that the small basic, the cap on small basic, the limited price of small basic will provide a tempering effect, as I mentioned earlier. And we think that that proposal, plus commercial negotiations between the parties, will enable this whole thing to happen without a negative impact on consumers. And we think that the money is there already.

2381   Clearly, amongst the parties, there is a lot of profit out there, that is clear, we are not debating that part of it. We just think that there is a rebalancing that needs to go on in the system and that through the use of the small basic we can all be assured that there is not going to be a huge negative impact on consumers.

2382   MR. STURSBERG: Just one last thought on it. There is really two ways through the issue, one of which is we have a negotiation, then the cable companies conclude our signal is worth a certain value, they may conclude at the same time that certain of the signals they are currently carrying are of less value in the circumstance.

2383   And I think, and CTV made the point yesterday, that there is roughly $300 million that goes to American services that really contribute very little, well actually nothing, to the Canadian system.

2384   And as Steve points out, you know, the cable companies are right now making a great deal of money, as we have noted in our tables here, their profits are supernormal.

2385   So that is one set of things. But if it comes to it that, you know, we continue to be concerned about the impact on consumers, then that is when we go to the very small basic, which we think is a very good thing for the reasons that we mentioned earlier on and the cost to the cable company in a fully digital environment should be negligible.

2386   THE CHAIRPERSON: Thank you for your presentation. As always, I am impressed by the clarity and logic of your presentation. I may not agree with the results, but I certainly find that you put some of the best presentations before us.

2387   Let me clean up on a couple of points which came up. Number one, you heard the BDUs yesterday, and their concern largely is, Rogers at least, and we will hear from the other BDUs, if you get a value-for-signal it is just going to be used to spend more in the U.S. on U.S. programming.

2388   Now, it obviously doesn't apply to the CBC, but the system that you suggest, that you advocate to us using 9(1)(h) and in effect using the system that we have established for speciality channels and also transfer it to conventional, I don't see anything in there what you suggest that would address this fear of the BDUs.

2389   MR. GUITON: Actually, we looked at it a little differently, in the sense that the negotiation value-for-signal, the purpose of it is to establish a level playing field, as we said, to get the financial health of the conventionals back on track and then, through their licence renewal process with you, to ensure that they are living up to the obligation to provide Canadian programming.

2390   And to the extent that the negotiations are successful, then those conventional broadcasters will walk into a licence renewal hearing and if you want to set the conditions either through group licensing or other ways and tell them, well, now that you are looking pretty healthy, we want you to do a lot more of Canadian programming in certain areas, I think that is a logical model.

2391   THE CHAIRPERSON: Okay. Secondly, you talked today on your main tempering device you suggest is a skinny basic. Number one, can you send me a template of what you actually think on the skinny basis, rather than generality, giving me exactly --

2392   MR. GUITON: Yes.

2393   THE CHAIRPERSON: -- item by item what you think, in your view, should be in the skinny basic and what should not?

2394   MR. GUITON: Yes.

2395   THE CHAIRPERSON: And secondly, your written presentation for today also doesn't talk about skinny basic, it actually talks about rate regulation and starting a hearing to look into the cost of cable rates.

2396   Have you abandoned that part or not?

2397   MR. GUITON: I am sorry, what are you --

2398   THE CHAIRPERSON: The submission that you put forward to us earlier, which you filed with that.

2399   MR GUITON: The September submission?

2400   THE CHAIRPERSON: Yeah.

2401   MR. GUITON: The September submission talks about a small basic.

2402   THE CHAIRPERSON: On page 160, in paragraph 165 and 168 you are talking about:

"To resume rate regulation of the BDUs' basic package."

2403   And in 168 you say:

"This Commission may wish to initiate a proceeding to investigate the state of competition in the BDU market and to consider where it may be necessary to resume regulation of BDU rates in order to protect Canadian consumers."

2404   MR. GUITON: Yes.

2405   THE CHAIRPERSON: It is a clear recommendation of yours. I didn't hear it reiterated this morning, so I wanted to know whether you had abandoned it in favour of the skinny basic or whether you consider both?

2406   MR. GUITON: No, we are putting forward the notion of a skinny basic that has a cap, that has a rate that is set by the Commission, something that will enable that to be out there in the marketplace to ensure that the price is reasonable.

2407   We had put forward something like this earlier to you and we had said let's let the cable companies, through competition, develop a small basic price for that skinny basic. But now we have come of the view that the Commission needs to either establish a cap for it, establish some rate regulation for that skinny basic only, we are not talking about the rest of their services.

2408   THE CHAIRPERSON: So I have to read 168 in that context --

2409   MR. GUITON: Yes.

2410   THE CHAIRPERSON: -- in the context of only a skinny basic?

2411   MR. GUITON: Yes, please.

2412   THE CHAIRPERSON: So assuming I buy your argument, we establish skinny basic, we would also establish a price or a formula for a skinny basic?

2413   MR. GUITON: Or a cap.

2414   THE CHAIRPERSON: Or cap.

2415   MR. STURSBERG: Yeah, I think it could be actually, in regulatory terms, extremely simple. You would tell them, here is what needs to go into the skinny basic service, you must offer that. Two, here is the maximum price you can charge unless, if you want to charge more, you come down and see us and justify the increase. That is all.

2416   So long as they fall within the cap then -- so it could be it is a reregulation only of the skinny basic service, but it can be an extremely light-handed regulation.

2417   THE CHAIRPERSON: And you suggest that we adopt the same approach to conventional as we have to basic. But in specialty, you start a negotiation with in fact a fee that has been put forward to us and which we say, yes, and that is the basis for the negotiations. That skinny would be the equivalent of that basic fee?

2418   MR. GUITON: I am sorry, I am not following you.

2419   THE CHAIRPERSON: Specialty negotiations, assuming you are Category A, et cetera --

2420   MR. GUITON: Yes.

2421   THE CHAIRPERSON: -- you sit down as a specialty with a BDU and you negotiate the price. You don't start from zero, you start on the basis of something that a specialty filed with us --

2422   MR. GUITON: Originally.

2423   THE CHAIRPERSON: -- which we approved. Yeah, exactly.

2424   MR. GUITON: Yes, yes.

2425   THE CHAIRPERSON: Now, there is no such originating price, let's call it that --

2426   MR. GUITON: Correct.

2427   THE CHAIRPERSON: -- in conventional.

2428   MR. GUITON: Correct.

2429   THE CHAIRPERSON: So what would -- when you sit down to negotiate your value-for-signal with let's Rogers for argument's sake or Shaw, whoever --

2430   MR. GUITON: Yes.

2431   THE CHAIRPERSON: -- what do you take as that originating basic price?

2432   MR. GUITON: How would the price be determined?

2433   THE CHAIRPERSON: Yes. I mean, where is your starting point?

2434   MR. GUITON: I suppose we sit down first, where we start, and then I presume we are going to get into commercial negotiations. I have no idea where we would start on the price.

2435   MR. STURSBERG: I think the Chairman's questions say different, see if I can reformulate it. Where is the starting point to establish the price of the skinny basic service? Is that correct?

2436   THE CHAIRPERSON: Yes.

2437   MR. STURSBERG: Because if you don't actually have -- because typically what might happen is you say we know the prices of the specialty services, we bump them up by, you know, we double that to get to the retail price and there you are. But if you don't have a stepping off point, then how do you find the price?

2438   MR. GUITON: Is that the question?

2439   THE CHAIRPERSON: Yes, that is the question, but the same thing would apply if you sit down and negotiate for the value of signal for your conventional. What is your stepping off point?

2440   MS KIRSHENBLATT: Well, I think to a certain extent the same issue is going to apply to specialty services post-2011 because they will no longer -- while they will have access, BDUs will have a lot more flexibility. So they will be faced with the same type of issue as to come up with a commercially-reasonable rate.

2441   MR. STURSBERG: I daresay the stepping off point will be what the stepping off point has always been, which is what we were talking about earlier on.

2442   When the cable companies sit down or the satellite companies, for that matter, and negotiate a price for the specialty the price is based in large measure on what they perceive the value to be to their subscribers. And the proxy for the value is what is the size of the audience that is being delivered.

2443   And so you know, not surprisingly, people in these businesses, what they do is they actually run correlations and they try to look at the extent to which the amount that they are paying to a particular service correlates with the size of the audience that they are delivering to the BDU.

2444   So if you ask what the stepping off point would be, I think inevitably the stepping off point is going to be around the issue of value.

2445   MR. GUITON: I'm sorry, Mr. Chairman, I feel we are not answering your question properly.

2446   THE CHAIRPERSON: No, I --

2447   MR. GUITON: But with respect to the basic, the small basic, you have out there examples from Vidéotron. Vidéotron has a small basic. It used to be that it was tied in other buys and you couldn't actually get to it. We think you might be able to get to it now and it's on the order of -- it's less than $20 for approximately 20 channels, something like that.

2448   I'm not sure we are getting to your question.

2449   THE CHAIRPERSON: No, the question applies both to small basic or to conventional. And I'm glad you pointed out that we actually do have one indication with what Vidéotron offered --

2450   MR. GUITON: Yeah, and it's for that reason we know it can work. We know on a cost basis that it can be done by cable companies because we see an example out there already.

2451   So that's partly why we think our proposal is very realistic.

2452   THE CHAIRPERSON: And if I understand it, your model purely contemplates compensation in money. You are not talking of in-kind because we heard earlier on, for instance we were talking about distribution, we talked about DTH.

2453   MR. GUITON: Yeah.

2454   THE CHAIRPERSON: And I mean if you really could --

2455   MR. GUITON: Mr. Chairman, we actually have had long discussions about this and the problem is -- the problem is that if there is an opportunity for a BDU to bring a lot of stuff to the table that may be stuff that's difficult to demonstrate our costs that can't be covered off somewhere else, then we are at a disadvantage, a significant disadvantage. And we raised this argument earlier in our submission, I believe, in the September submission, in the context of Freesat.

2456   Freesat, as you know, Bell TV has proposed that they be allowed to apply some of their Freesat costs to the whole compensation regime and so that they are not -- they are not actually engaging in investing in costs that other people aren't investing in.

2457   Well, the problem is that sounds interesting and I understand the logic for their arguments, but if they are bringing costs and benefits to the table and saying, you know, these are the things that we are bringing to the table, and those are things that they should actually be assigning to somewhere else in their business, that's what we are not really fond of.

2458   THE CHAIRPERSON: I just want to understand. So you would reject any kind of attempt if, let's say, Shaw sits down with you and say, well, I will carry five of your -- I will carry five extra stations that I haven't carried before, but I'm not willing to pay you any money. That you would not contemplate as part of the value for signal negotiations?

2459   MR. STURSBERG: Let me try this a little bit differently.

2460   It's not unimaginable that you could have a conversation in which you might say something like this, we think that the value of signal is X and you can compensate us one of two ways. You can either pay cash directly to that signal or, if you wanted, you could take for example the documentary channel and give it a bigger placement and pay us more cash for that, the net of which would be to get to where we want to go.

2461   So you would still end up in a situation where the full value of the signal was recognized in cash terms but it might be recognized in ways that were a little bit different and that might be more attractive to the cable companies, and to ourselves for whatever reasons.

2462   THE CHAIRPERSON: And, lastly, obviously what we all want to make sure is protect the consumer and see that the consumer -- Mr. Lind described it in the paper this morning that we don't want to have a hand in it. I think that's a very unkind way of putting it. What it is, we are all striving for finding a solution by which Canadians don't have a higher bill or if they have a higher bill it is because they get a better product.

2463   And I asked both CTV and Rogers, would it make sense to somehow, if there is an increase in rates and because of this negotiation, to only tie it to HD, because clearly that's where the future is going. At some point in time in the future everything will be HD. And when the consumer gets an HD signal he actually gets a better product than he gets right now.

2464   And so is there a logic to somehow, if there is a valuation for signal to establish a tie-in or link between HD, because of course right now the cable -- certainly, the terrestrial ones when they deliver you HD they charge you more for it. So it would be logical: Different product, different price.

2465   MR. GUITON: Right. Mr. Chairman there is either value in the signal or there isn't. Today, the cable companies are selling our signals whether it's HD or analog and they are selling those for some amount of money to consumers. So there is value in both of those signals.

2466   I don't think that it would be fair to say that there is only value in the HD and there is no value in the analog, because I don't think that's the case.

2467   THE CHAIRPERSON: Okay.

2468   Okay. I think we have thoroughly discussed this and it's obviously a difficult issue.

2469   I will repeat to you what I repeated yesterday to both Rogers and CTV that I would very much prefer to sanction a negotiated solution rather than having to impose a solution and have to impose a negotiating process which leads to a solution. And we will see where we can come out with.

2470   Thank you very much.

2471   We will break now and we will resume at one o'clock. Thank you.

--- Upon recessing at 1152

--- Upon resuming at 1404

2472   LA SECRÉTAIRE : A l'ordre, s'il vous plaît. Order, please.

2473   I would now invite Bell Canada to make its presentation.

2474   Appearing for Bell Canada is Mr. Mirko Bibic.

2475   Please introduce your colleagues and you will then have 20 minutes to make your presentation. Thank you.

PRESENTATION

2476   MR. BIBIC: Thank you, Madam Secretary.

2477   Good afternoon, Mr. Chairman and Commissioners.

2478   I am Mirko Bibic, Senior Vice-President of Regulatory and Government Affairs representing today Bell Canada and Bell Aliant.

2479   I am pleased to introduce our panel. Joining me to my immediate left; Kevin Crull, President of Residential Services, and to his left, Chris Frank, Vice-President, Programming; to my right, Tim Dinesen, Vice-President of Operations and Technology.

2480   Thank you for this opportunity to share our views on the important issues under consideration in this proceeding.

2481   Bell Canada continues to oppose a value for signal regime for the various reasons set out in our written submissions and our public comments prior to this hearing.

2482   But we see a path to a win-win solution without causing consumers to pay more for TV, without receiving any value in return. This path forward, however, does not include a value for signal regime.

2483   Mr. Chairman, yesterday you asked in frustration why sophisticated experienced BDUs and broadcasters cannot solve the problem. There are a number of reasons for this.

2484   First, there are questions in our view that have not been asked and which must be answered before considering regulatory remedies which would turn the regulatory bargain upside down.

2485   What is the appropriate amount of local content to meet the Act's objectives?

2486   How much content, local content is there today?

2487   What counts as local programming?

2488   Is local news the only concern or are other forms of local programming relevant?

2489   How do Canadians access local content now and how will they do so in the future?

2490   And Commissioner Denton, I was here this morning and I think one could ask the same questions about the production of national programming.

2491   Because OTAs have traditionally done the so-called heavy lifting, as CBC put it, does it mean that it must always be so?

2492   Should the traditional industrial model be supported through value for signal or will another model evolve to deliver this national Canadian programming?

2493   The July 6th Notice downplays these fundamental policy questions and instead focuses on -- and I quote. It's from paragraph one providing:

"...revenue support for conventional broadcasters..."

2494   MR. BIBIC: Yesterday's debate also skipped the foundational steps in determining if there is a problem and was dominated by the value for signal discussion.

2495   Second, we believe that the single biggest cause of the stalemate between BDUs and broadcasters is the uncertainty from successive regulatory proceedings on the same issue. These proceedings are highly polarizing. They go beyond bilateral issues. They raise significant policy issues.

2496   Value for signal assumes that there is a value in a conventional signal over and above the significant value BDUs already provide to broadcasters. This despite the fact that conventional broadcasting is, and has always been, an advertising-supported model.

2497   The broadcasters offer their signals for free and are in fact today reinforcing that model online even though they have an opportunity to breakaway from the traditional mould.

2498   CTV insists that the additional value inherent in a local signal must be paid for in cash and that the negotiations must be divorced from all other issues germane to our overall relationships. We cannot be expected to willingly enter into negotiations which by design will worsen our already poor financial situation.

2499   For a negotiation to be successful there has to be a win-win. We gave it our best shot last April by tabling Freesat and offering to reduce the distance signals we carry. This has been rejected by the broadcasters. They prefer to hold out for the big prize.

2500   If the Commission were to reject the broadcasters' value for signal demands, as you have twice before, the path would be cleared for constructive discussions on the totality of our commercial relationships.

2501   Third, if the problem the Commission really wants to solve is the supposed worsening financial situation of the conventional broadcasters, then much of that work has already been done. The Commission and the federal government have recently approved a number of significant concessions to support the finances of OTA broadcasters, principally the LPIF fee which was raised to 1.5 percent with no incrementality and the Part II fee settlement.

2502   Local programming requirements have been slashed for most OTA stations for many by over 50 percent. So have the broadcasters' obligations for a comprehensive transition to digital transmission. The Commission has also ended the limitation on per hour advertising minutes.

2503   Yet, in spite of these concessions which yield hundreds of millions in financial benefits, broadcaster demands continue; value for signal, program deletion, further reductions in digital transmission obligations, DTH delivery of all local signals and increased distance signal compensation.

2504   Under CTV's proposals, OTAs can choose not to be carried by BDUs but if they are carried then consumers must take the service. Their only other option is to cancel their BDU service and receive local TV off air while sacrificing every other service. This is no choice at all.

2505   The OTA broadcasters claim that they want to save local TV because it matters. Let us be perfectly clear. All stakeholders in this industry support local TV. Broadcasters hold no monopoly in that regard.

2506   However, for companies who have waged a lengthy campaign on the future of local TV, broadcasters have a curious way of demonstrating their concern. They shutter local stations. They argue that the new status quo which requires them to deliver less programming is the most that can be expected of them. Yet, they seek new revenue sources to fund these reduced local content obligations.

2507   They resist the Commission's consistent calls for concrete Canadian and local programming commitments. No commitments after being rejected twice on fee for carriage, after the Chairman's Langdon Hall speech and despite the clear indication in the public Notice.

2508   I have to say that from an advocacy point of view the failure to come forward and make any commitment was a surprise, to put it mildly.

2509   They insist that they cannot meet even the reduced expectations for digital OTH transmission, yet reject Bell TV's Freesat model and the cost relief it promises. They argue for more from others and less of themselves.

2510   In contrast, BDUs provide a number of benefits to broadcasters. We contribute millions of dollars to local expression. Fair compensation is also provided in cash and kind to broadcasters for distance signals and Bell TV has offered to limit the number of distant signals that a subscriber can receive.

2511   With regards to distant signal compensation, specifically, there is simply no compelling evidence to support the broadcasters' assertions of monetary loss.

2512   On the contrary, the August 2009 Harris/Decima survey we filed found that the most important feature of time shifting to viewers is the ability to watch shows that they would otherwise have missed because they were unavailable. Therefore, through time shifting, the broadcaster is able to capture viewers for the benefit of its advertisers and itself where it otherwise would not have captured that viewer at all.

2513   We were heartened yesterday to hear Mr. Fecan tell of the principal virtue of his online service at ctv.ca as allowing viewers to engage in what he called "catch up viewing" which is of course the principal benefit of distance signal viewing as well.

2514   In the end, value for signal in our view offers nothing to consumers and BDUs. We therefore question the public policy rational for such an arrangement. What is required is a different way forward and we have a bit more to say on this at the end of these remarks.

2515   Kevin.

2516   MR. CRULL: Thank you, Mirko, Mr. Chairman, Mr. Vice-Chairs and Commissioners.

2517   Conventional broadcasters have already received significant financial and public policy benefits, yet they ask for more based on the following three arguments:

2518   Number one, to save local TV;

2519   Number two, that they need financial assistance;

2520   And number three, that their business model is broken.

2521   As I will point out on each, these arguments are fatally flawed.

2522   The first -- to save local TV is the first argument. The broadcasters claim that Canadian programming and local programming in particular are money losers. They say that U.S. programming subsidizes Canadian programming and they only air the latter because they have to.

2523   When considering the threats of local TV closures or decreases in local programming, the Commission should keep in mind that broadcasters have made no commitments. This is the fourth hearing to consider either fee for carriage or value for signal, yet there is still no broadcaster commitment for more or better local programming. No commitment either to keep local TV stations open.

2524   Without such commitments, how exactly will local TV be saved?

2525   While the slogan may be catchy to some, the local TV that a value for signal is supposed to save is just not widely understood. So what is the nature of this local programming?

2526   A review of last week's schedules for CTV Ottawa which is attached as Appendix 1, and Global Toronto, indicate that local programming consists almost entirely of news. It can therefore be argued that saving local TV will only preserve an hour or so of daily news programming. But even this overstates the situation.

2527   In a typical one-hour news program, about 25 percent of its time is devoted to advertising and roughly 30 percent is devoted to national or international news. This means that less than one-half of the local news hour is actually local. We confirmed this by analyzing the six p.m. news broadcast during this past week of CTV's CJOH station in Ottawa and our analysis is attached as Appendix 2.

2528   Spending hundreds of millions of dollars of consumers' money to subsidize a half-hour or an hour of daily local news just makes no sense, especially considering that most of this news in question is readily available through specialty channels, through community channels, AM and FM radio, newspapers and of course readily available on the internet.

2529   The second justification of a value for signal is to improve the financial situation of conventional broadcasters. Underpinning this argument is the notion that broadcasting licences come with a profit guarantee. This is clearly unfounded. At Bell TV we know that firsthand; that there are no profit guarantees.

2530   When the two DTH providers had combined pre-tax losses of $416 million in 2000 and $368 million in 2001, there were no calls for a mandated bailout. When we lost another $423 million in '02 and $212 million in '03 we didn't launch a save DTH campaign. And when we lost another $162 million in '04 and $156 million in '05 the Commission didn't soften our conditions of licence or create the DTH equivalent of the LPIF.

2531   In fact, since 1997 DTH has accumulated $2.2 billion in pre-tax losses and Bell TV is still losing money today while conventional broadcasting has generated pre-tax profits of $1.2 billion.

2532   This disparity has caused barely a ripple in the public policy discourse, despite the fact that DTH is the cornerstone of BDU competition in Canada. DTH has added hundreds of millions in net new revenue to Canadian broadcasting. It has created massive public policy benefits and it is the main reason that the conversion of the BDU industry from analog to digital is now taking flight.

2533   Claims that the sky is falling because conventional broadcasters didn't generate their usual profit, just ring hollow. Given the recession that has dragged down nearly every sector of the economy, the Bank of Canada, TD Bank Financial Group, Bank of Montreal and other experts report that the economy has now hit bottom and is beginning to rebound. So too is advertising spending. The evidence and the data are clear on this.

2534   Imposing a permanent value for signal and therefore turning the regulatory model on its head to address a short-lived and now arguably historical issue, would be very poor public policy.

2535   The third justification for a value for signal is that the broadcasting business model is broken. This is a puzzling argument for the broadcasters to make because they are in fact trying to duplicate their current business model on the internet.

2536   CTV, Global and the others provide many of their most popular TV shows to viewers for free on their websites. They do so to attract online advertising revenue and to bolster their conventional TV business. This advertising-based business model -- if the advertising-based business model is broken then why would the broadcasters today seek to extend it to a new platform like the internet?

2537   The answer is that the model is not broken. In fact, advertising-based business models remain widespread and they are aggressively expanding everyday. This is why we are already working with these very broadcasters to find innovative ways to use the internet and VOD to each of our mutual benefits.

2538   Supporters of this broken business model argument often point to the slow pace of conventional broadcasting's revenue growth and declining profits. If slow revenue growth was a trigger for government intervention, then every Canadian company affected by the recession or in a slow growth industry would be lining up for government subsidies.

2539   Conventional TV is part of a larger sector that includes specialty and Pay TV services. Viewers have clearly shifted some of their viewing from conventional television to other forms of broadcasting but this is to be expected in light of the growth in television viewing options.

2540   If advertising revenues had not shifted to some extent from conventional TV to specialty and Pay TV, the Commission would be investigating the failure of its licensing policies for these very signals.

2541   Conventional broadcasters have taken advantage of TV's evolution by building large, specialty broadcasting businesses. In fact, more than half of all specialty TV revenues and profits find their way to conventional broadcasters' income statements. Combined pre-tax profit for conventional and specialty broadcasting was more than $2.2 billion in the last five years including $387 million in '08 alone.

2542   Even looking at conventional broadcasting in isolation, the most pressing management issue is escalating costs rather than depressed revenues. In the last five years conventional broadcasting revenues have actually increased by an enviable 3.5 percent. However, operating expenses over this same period have increased almost five times as fast. And this is the cost of falling profit margins. But this need not be the case.

2543   Bell Canada has wrestled with a dramatic decline in the performance of our traditional telephone business due to changes in technology, competitive intensity and consumer behaviour. Between 2005 and 2008 Bell's local and long distance revenues declined by 27 percent. This was largely responsible for a $1.2 billion or a 56 percent drop in operating income in Bell's Wireline business during the same period. This is a severe contraction by any measure and it is a secular change, not a cyclical change like the advertising business.

2544   In the face of this challenge Bell divested non-core assets and has invested billions of dollars in new businesses, like wireless, broadband and professional services for enterprise customers.

2545   Rather than allow costs to increase we have cut our costs to match the new business reality. Since 2004 we have reduced our workforce by more than 10,000 employees including a reduction of 2,500 management positions in 2008 alone. This resulted in more than $2.5 billion of annual cost savings.

2546   During this time all we asked from the Commission was the removal of our regulatory shackles so that we could compete on a level footing with the cable companies and other competitors.

2547   The public policy rational for value for signal just doesn't add up. Canadians have more sources of local news and information today than they have had at anytime in history.

2548   As expected, the broadcasting model has been evolving but conventional broadcasters have secured their future in this new landscape.

2549   Profit pressures in conventional TV are moderated by profit gains in specialty TV, just as profit gains in internet and wireless are offsetting declines in traditional Wireline voice.

2550   And as Bell's TV example shows, there are no profit guarantees in business but cost reduction initiatives and investing in new ways of doing things are appropriately and they are minimally what is expected of competent management.

2551   Mirko.

2552   MR. BIBIC: The government and the Commission have already made extensive accommodations to provide financial relief to conventional broadcasting. These initiatives have only recently been implemented but are already working, as CTV and Rogers indicated yesterday in reference to the LPIF.

2553   The prudent next step is to pause and observe the impact of this financial relief over the coming months and to take value for signal off the table.

2554   However, our position does not preclude the meaningful negotiation of other issues of importance to BDUs and broadcasters or the additional regulatory initiatives contemplated in the Notice. To that end we recommend the following measures; adopting Freesat, implementing group-based licence renewals, providing broadcasters with additional programming flexibility and exploring new revenue opportunities by monetizing the local avails and VOD distribution.

2555   Let's start with Freesat.

2556   We continue to stand behind our Freesat proposal as a way for broadcasters to avoid much of the costs of their digital upgrade. The proposal has yet to gain traction among broadcasters clearly because they hope to win further concessions from the Commission. But we believe that Freesat is a win for all concerned, especially consumers. There has been no alternative proposal that even comes close to Freesat.

2557   While we are on the subject of Freesat, CTV concluded yesterday that because we can deliver Freesat we are able to implement a local into local solution. This is wrong.

2558   To carry what is now an incremental 40-plus conventional signal, as required by Freesat, would require us to use capacity on different satellites located in different orbital slots. The antenna and set-top box purchased by a Freesat customer would be designed to receive signals from these satellites. In contrast, the majority of our current customer base lacks the antenna and set-top box equipment necessary to receive signals from both satellites.

2559   There is a difference, Commissioners, between lifting a signal and being able to deliver that signal to each and every individual subscriber. To require the majority of our customers to upgrade their equipment to receive the local signals they do not currently have would be highly disruptive to them and expensive for Bell TV.

2560   Moreover, it is highly provocative and irresponsible to suggest that DTH's inability to deliver all local signals to our subscribers in their respective local communities is the cause of the demise of some local TV stations.

2561   Group licensing and flexibility in scheduling: Broadcasters would benefit from group-based licence renewals for their conventional and specialty services and greater flexibility with respect to their scheduling, the definition of primetime and the range of program categories considered priority content. Added administrative and operational flexibility is always desirable and we can certainly speak to that firsthand as an incumbent Telco whose regulatory rules on the retail side were recently relaxed.

2562   As part of a larger discussion on broadcaster compensation by BDUs, the Commission could seriously consider authorizing OTA broadcasters to advertise in local avails and in VOD programming.

2563   Bell would be prepared to reconsider its previously expressed interest in establishing a new revenue source for itself that would be realized from advertising in the local avails. Access to avails' advertising could be restricted to OTA broadcasters as another way of bolstering their bottom lines.

2564   As for video-on-demand, it clearly holds significant promise although, unfortunately, the DTH platform will not allow us to harness its full potential. Nevertheless, the broadcasters and other BDUs should explore win-win, video-on-demand models and we hope to engage on this issue in the future as well.

2565   In conclusion, Commissioners, the broadcasters have tried to frame the debate to their own advantage, saying that local programming is in imminent danger if it does not continue to be delivered as it always has by them.

2566   Government, consumers and the rest of the industry have made more than enough accommodations for conventional broadcasting already. Allowing these accommodations to take hold and yield results gives the Commission the time needed to address the underlying policy question faced by the industry. That is the future of local programming.

2567   Mr. Chairman, we take every regulatory proceeding rather seriously so we approach each and every one with the sincere objective of trying to be constructive, trying to come forward with analytical frameworks and solutions which advance the public interest generally, promote good regulatory practices specifically, understandably all the while trying to advance our own business interests which we obviously have to do.

2568   But when it comes to the narrow issue of value for signal and fee for carriage before it, the only conclusion we have been able to reach so far is that it will damage our financial situation which isn't very good to begin with, and harm consumers.

2569   We don't see its public policy merits and that's why we ask that value for signal be rejected. We really do believe that that will pave the way for meaningful negotiation between BDUs and broadcasters on a number of issues, leading to a win-win resolution. And this is what we would do if we were in the Commission's shoes.

2570   We now welcome any questions you may have. Thank you.

2571   THE CHAIRPERSON: Thank you for your submission and, by the way, I echo your last comments. I know you take our hearings very seriously and you always come forward with well thought-out submissions, trying to advance the cause. Whether we agree or not agree it doesn't mean that I don't recognize the expertise that you devote to your submissions.

2572   We have a fundamental difference here and I don't know whether we are talking about words or concepts. You equate value for signal with fee for carriage. Forget about the terminologies. To me they are totally different concepts.

2573   Fee for carriage is basically something that we would impose and say that's what we at the Commission feel the signal is worth. BDUs, you are distributing and that's what you should pay for it. It's sort of I look at it a little bit like when we do in 9(1)(h), you know. We say this is a program. We feel it is of value, Canadians should receive it and this is a prize that they should get. And you sell it, BDUs and obviously you prepare your customers.

2574   Value for signal for me is a totally different category. I'm just saying, look, you two are in a symbiotic relationship. There are all sorts of things you do for each other. You need each other. You depend on each other and you should have a negotiation for the whole ball of wax. I don't understand why the conventional system isn't part of it.

2575   That's why -- you heard me speak yesterday. I am sure you listened to it and make it as broad or as narrow as possible.

2576   I just do not understand why there is any intervention for us really required, why you cannot negotiate this and in effect work out something that makes sense both for you and the broadcasters from a business sense, whether you throw in VOD, whether you throw in local avails or Freesat or whatever. I live that up to your fertile imagination.

2577   And at the end of the day we actually -- you come to us and we will just look at it and say, yes, this makes sense from a public policy or not. Most likely -- I can't imagine why it wouldn't unless you know there is something that would -- is directed at harming consumers or something.

2578   So why have we -- so you are saying you were revisiting the fee for carriage. For me it's not at all. This is a completely different hearing.

2579   MR. BIBIC: Mr. Chairman, in this opening statement when we use value for signal we use it in a way that you understand it.

2580   THE CHAIRPERSON: Yeah.

2581   MR. BIBIC: When we use fee for carriage in this opening statement, which we do in two or three cases, we use fee for carriage in the way it was understood prior to this debate.

2582   THE CHAIRPERSON: Yeah.

2583   MR. BIBIC: I do have a disagreement with you in the sense that I think that at the end of the day it's the same thing reached through a different process. But rather than get into that debate with you, the fundamental problem that we have with either model -- but let's focus now on value for signal as this is what this is about.

2584   Here is the issue. The issue is that if the Commission comes out with a decision that says value for signal is appropriate, go negotiate, what the Commission has in effect done is that it has declared that there is an additional right for compensation that the broadcasters have for their conventional signals.

2585   Now, you may not say it's got to be a cash payment. You may say go figure out what the payment is going to be. It can be in kind. It can be zero. It can be something. But ultimately what the decision is that there is a right.

2586   Once that is declared, broadcasters will come forward and say give us compensation for that value. That will put us in a position where we are having -- you know, it's going to put us in a more difficult financial position than we already are and we are going to have to pass that onto consumers so they will lose for exactly the same value.

2587   So at the end of the day we come forward and we say, there is no value in these signals beyond that which we are already compensating the broadcasters for. And the reason we say that is not to be pigheaded, it is simply that we look and we say, okay, the cash payments we have made for these signals in the past over and above what we already provide is zero.

2588   So let's look at other comparables. You look at comparables to establish value. How much do they charge through their other distribution outlets? They charge precisely zero when they distribute over-the-air or on the internet. Then we ask, okay, what is another comparable? How much do we pay for similar foreign programming, U.S. local signals? The answer is zero.

2589   A fourth comparable might be, well, what do other jurisdictions do? And apart from the U.S. they, local signals, charge zero. So we don't think there is an additional value over and above what we pay.

2590   THE CHAIRPERSON: Yes, but how can you say apart from the U.S.? We live in North America, we live in their shadow, their program enters our air space. So, I mean, looking at what they do in Australia is of relative irrelevance. I mean, the governing example for us is the U.S. I mean and therefore, as you know, part of the whole difficulty in dividing a Canadian program is that we have the availability of the U.S. signal and we have done all sorts of very creative things such as simsub, et cetera, in order to benefit from it without letting it dominate our landscape.

2591   So it seems to me you are right, when we say there should be value-for-signal negotiation we say there is a value. We don't say what the value is, but value can be anywhere from one cent to whatever it is. And you, as a BDU, have all sorts of options at your whim and can structure it.

2592   And we had this interesting discussion with Mr. Engelhart yesterday from Rogers, you know, and I think I understood him correctly. His final submission well, he said if there has to be a negotiation it should be like the U.S. on the process only, it should not be on substance. He said, I don't want baseball arbitration at the end of the day where you pick, et cetera. No, you all should be restricted to ensuring they are good-faith negotiations.

2593   Now, we will have to look into what that means, et cetera, but it is a different way of looking at it. And maximizing, obviously the freedom of negotiation for both sides. And that is exactly -- we certainly have no intention of limiting the negotiation and your ideas of applying it.

2594   But I don't understand why you have a problem with me saying you are using an input, which happens to be a conventional signal, which you distribute. And you are telling me this is for free just because they choose for whatever reason to offer it for free over-the-air? I mean, there are all sorts of products that are being sold for free in one form and sold in another.

2595   MR. BIBIC: Mr. Chairman, they use, you know, distribution platforms that we have invested billions of dollars to construct, so perhaps there should be payment for the distribution. I guess at the end of the day I say to what end? We have had a model that has been built up over, you know, 40 years which has worked well and has allowed the broadcasters to make significant sums of money. We have heard --

2596   THE CHAIRPERSON: The model was built on the basis -- was built before we had specialty channels, that is really part of the -- it was built when this was the only product to be distributed. But we have -- since then, we have the whole specialty market and we also have this free distribution system called the internet and we are seeing a third one called wireless.

2597   You know, so it worked very well in its time. But there has been a paradigm shift in the underlying assumptions, hasn't there?

2598   MR. BIBIC: Well, I mean, have there really been in the sense that specialties are owned, in large part, by the conventional broadcasters? They have a brand new -- and if they have wireless options for distribution, internet options for distribution, as we say a couple of times in this paper, given an opportunity to start from scratch they are perpetuating the same models.

2599   So on wireless and on the internet, it is not like we are going around and saying, okay, we have invested $2 billion in FTTN, now start charging us -- start paying us because we are distributing your online content to our internet subscribers. If we did, then I think we would be before you and have another hearing.

2600   I guess what I am saying is there is, to the extent there is value we are compensating for, and I don't really -- let's get down to practicalities. If you decide that there is a value for signal, we have heard quite clearly what CTV has said.

2601   CTV has said, whether or not you put any parameters on the kind of compensation and the issues that can be built into the negotiations, CTV has been clear, it's cash, cash only and don't talk to us about anything else. Let's deal with this and terms of the discussions about everything else, well of course we will have those, but it will be separate. You can't reach a win/win solution that way, it is impossible.

2602   THE CHAIRPERSON: But that is their wish list, that doesn't necessarily mean they get it. I am talking about you creating a new system.

2603   Now, dealing with this issue, the same way as I put it to them, you know, I said, why does it have to be cash? I am sure you heard me, if not, you read it, I really didn't -- you should make a bargain on all the things that pertain between you. It shouldn't have to be restricted to value-for-signal.

2604   And nobody has yet told me why it can't be done. And it seems to me there seems to be an ideological barrier on the BDU side to accept the fact that value-for-signal should be part of the negotiations.

2605   MR. CRULL: Mr. Chairman, I have watched yesterday and today as you have wrestled with this symbiotic relationship and why, as Mirko said in the opening statements, why can't experienced industry participants figure this out, given the symbiotic relationship?

2606   And I think that the crux of what we are saying is that we do believe, at least on behalf of Bell TV and Bell and Bell Alliant, that the relationship is in balance today. We have invested billions of dollars to distribute their signals. And in fact, we have brought great value to them and to the speciality channels that some of them have bought and invested in. Over 90 per cent of conventional broadcasting revenue comes from eyeballs that are delivered via BDU distribution investments.

2607   And so given the financial investments and the difficulty that we have bringing our DTH platform to profitability, I absolutely look at them and I say the relationship is in balance; they are benefitting from a number of things that we have laid out, and we are benefitting from the interest in their programming and it is in balance.

2608   On the point of the changes in the industry, industries change and evolve and that is, you know, that is no secret. And I would say they have had a lot of time to see the impact of the internet and to see specialty and, in fact, we are probably still in the early stages. These are very lengthy shifts that, frankly, business people have to anticipate and deal with and not get regulatory handouts in order to adapt.

2609   THE CHAIRPERSON: I guess we are not going to come to a conclusion on this issue. I hear you clearly, you hear me and that is -- let me just -- one other point on Freesat.

2610   The proposal Freesat you are talking about here, that is the Freesat you set out in your written submissions that you filed in September, is it?

2611   MR. BIBIC: That is correct, the one which is based on the April opening statement that we delivered during the last hearing.

2612   THE CHAIRPERSON: And you say two things, notwithstanding Freesat, you can't do local into local, it won't accept -- you don't have the capacity. And your second part that was new to me is on Freesat, the local stations that are being received by Freesat customers will not be able to be received by local Bell customers unless they change both their dish and the set-up.

2613   I was under the impression that all they needed do was change the dish.

2614   MR. DINESEN: On the issue of Freesat, we did make the statement in our opening statement that there is a difference between lifting stations and distributing them generally. I don't recall specifically how we positioned it with respect to making those services available to existing subscribers.

2615   But specifically, if they currently have high definition MPEG-4 set-top boxes, then it will just be a question of upgrading the dish. If they are currently only subscribing to standard definition services with MPEG-2 set-top boxes and dishes that only see 91 degrees, they will need both a dish and new set-top boxes.

2616   THE CHAIRPERSON: And are you not in the process of converting all your customers to MPEG-4s?

2617   MR. DINESEN: We are no longer selling MPEG-2 high definition set-top boxes, they are MPEG-4, that is not the case for standard definition.

2618   THE CHAIRPERSON: So what is the distribution in your existing customer base between MPEG-4 and MPEG-2?

2619   MR. DINESEN: Approximately 40 per cent of our existing subscriber base has access to 82 degrees, and that is a rough approximation of the number of subscribers that have high definition services.

2620   THE CHAIRPERSON: So half of your customers. If they live in an area where the local stations are on Freesat will be able to convert just by getting a new dish and presumably that number will increase over time as people upgrade?

2621   MR. DINESEN: Yeah, I think by extrapolation, you have to look at it market by market, depending on what the disposition is.

2622   THE CHAIRPERSON: Sure.

2623   MR. DINESEN: I think out west we got a higher penetration of high definition services for various reasons, but it is a fair extrapolation to make.

2624   THE CHAIRPERSON: And your Freesat proposal is still conditional on that the cost of it will be an offset against LPIF, if I understand it?

2625   MR. BIBIC: Well, it is conditional on a number of things, in terms of it needs to be delivered on a cost recovery basis. Except one caveat is the satellite capacity that we would be providing to deliver Freesat is actually worth tens of millions of dollars a year and we would only be asking for an offset of $2 million now because -- it was $1 in April, now we would be asking for $2 million given that there are more local stations that we would have to lift as a result of the July decisions.

2626   The rest of it would be done on a cost-recovery basis. And the other components or conditionalities would be acceptable outcomes on distant signals and value-for-signal, in other words compensation for local signals.

2627   THE CHAIRPERSON: When you cost-recovery basis, cost recovering from whom?

2628   MR. BIBIC: From the LPIF, it is the same model we proposed.

2629   THE CHAIRPERSON: Okay, the LPIF.

2630   MR. BIBIC: Yes, same model.

2631   THE CHAIRPERSON: Okay. Can you, just so we are absolutely clear on this point, in your subsequent filing, exactly specify on Freesat, what we just discussed, how many MPEG-4, MPEG-2 customers you have and also the condtionality so that we are very clear what would be involved going down a Freesat road?

2632   And I gather, from your submission, you would only launch Freesat if those conditions are there, otherwise you see no interest in doing it on your own in order to increase your customer base?

2633   MR. BIBIC: That is correct, we will not do it on our own.

2634   THE CHAIRPERSON: Okay.

2635   MR. BIBIC: And, Mr. Chairman, just before you pass it onto a colleague, and at the risk of -- the initial discussion we had is so important and --

2636   THE CHAIRPERSON: Yes, absolutely.

2637   MR. BIBIC: -- so I am just going to give it another shot. But this time rather than talking about, you know, philosophical underpinnings, just the business interest, our business concern.

2638   We have the status quo today, there is exchange of value back and forth. If the Commission a value-for-signal is appropriate, as I mention, I think you agreed, it means that there is a new right on the broadcasters. So all I can do is sit here as best I can and assess what the business outcome of those negotiations would be.

2639   I doubt the outcome at the end of the of the negotiations, with every single broadcasters in every single market for every single local signal will be the status quo. So the outcome is either it will be better for Bell TV or it will be worse financially for Bell TV. And our assessment is that, on balance, it is going to be worse because the broadcaster will say I have a new right that I didn't have before, you have to give additional value whether or not it is cash or something else.

2640   But from the narrow business perspective of Bell, we are going to be worse off and that is a problem given the amount of money we are losing in this business. So there is just a --

2641   THE CHAIRPERSON: Yes, but just on that front just -- you yourself mentioned local avails for instance. I have no idea what you would negotiate on local avails. But it doesn't necessarily mean that if you -- you couldn't find a way of local avails that could be used either to partially or wholly offset the value-for-signal or you, in effect, grow the pie by sharing the local avails or whatever.

2642   I mean, this is your business, you can figure out how to do these things. And as I mentioned in my questioning to CTV, I mean, the two that are right on the table is local avails and VOD, VOD is for technical reasons, it is not -- but there is also community here. And you, for instance, forever have been saying that you wanted to create a community of community channels, you know, and that you feel that HD you are really being short-changed by not being able to have a community channel.

2643   And I don't see why it is beyond you and the broadcasters to negotiate something until we think we can solve it this way.

2644   MR. BIBIC: We are quite prepared to solve every problem.

2645   THE CHAIRPERSON: Then it is through a negotiation. Unless you endorse negotiations -- as I say, you put it all together and you would include value-for-signal as well. That is what I have been saying now for two days, but I think you are the first one who at least grasps the idea. Whether you run with it is a different story, but that is where I am at.

2646   MR. BIBIC: No, I understand the concept. We don't agree with it, but I do understand what you are saying.

2647   THE CHAIRPERSON: Perfect, thank you.

2648   Len, over to you.

2649   COMMISSIONER KATZ: Thank you, Mr. Chairman, and good afternoon.

2650   I am going to jump into this foray for a minute even though I got a different train of thought there, and that is, Mr. Bibic, you have mentioned that you look at the whole issue of negotiating value for signal that comes about as being something that is detrimental to Bell simply because you can't see it any other way.

2651   Let me remind you, you actually operate in a competitive marketplace, not in a static marketplace, where your market share is contingent on how well you do against your competitor as well, and against a market that may have as much as 8 per cent or 10 per cent with nobody offering any BDU type application as well.

2652   So there is market there as well and an opportunity to negotiate in a competitive environment to your benefit as well. So what may be, from your perspective, a cost exposure, there is also the other side of it, depending on what you strike and how you strike it as well, an upside as well, so I just remind you of that.

2653   MR. BIBIC: Okay, well just keep in mind, Vice-Chairman Katz, that -- and I guess, I mean I understand that what CTV put forward was a wish list and what CBC put forward was a wish list, but under both the models put forward by both those entities there are very important escape hatches that both of them would have and that BDUs would not have. So that is not a free market negotiation in any manner, shape or form.

2654   COMMISSIONER KATZ: It is the customers though that operate I the free market, they get to choose.

2655   MR. BIBIC: Precisely. But under the CTV model and under the CBC model consumers have no choice. I recognize this is their wish list, but I just put forward -- we are reacting to what has been put forward to us by our industry partners. They have an escape hatch, we don't. It is not a free-market negotiation.

2656   COMMISSIONER KATZ: Let me take you to page 4 of your remarks this afternoon. And the notion of save local where you go through basically your analysis and you come out on paragraph 21 saying:

"We are only talking about a half an hour of programming and spending hundreds of millions of dollars of consumers' money makes no sense, especially considering that most of the news in question is already available.."

2657   -- from whatever sources you quote there as well.

2658   So are you saying that it is okay for Canadians to start to lose their local stations across Canada, that there is an alternative out there and Canada shouldn't be concerned, the CRTC shouldn't be concerned, the government shouldn't be concerned?

2659   MR. BIBIC: No, Mr. Katz, I actually wanted to go to certain lengths in the opening part to say we are very concerned about that. We do think --

2660   COMMISSIONER KATZ: But that is not what paragraph 21 says.

2661   MR. BIBIC: No, what paragraph 21 says is -- well, let me start with our basic premise. Our basic premise is that local programming, local content, local expression is important, so too is national Canadian content.

2662   I think we are all hung-up in this hearing on making sure that it keeps getting delivered by the same people in the same way. Personally, and I say this with all due respect, I don't think it is anybody's job but the over-the-air broadcasters to ensure that they are successful. What the Commission needs to put in place is a framework that ensures that local expression keeps getting delivered into local communities, and that is what we are trying to say here.

2663   Now, of course, 21 is not drafted to criticize anything the Commission has put forward. What it is actually doing is saying the broadcasters' demands, up until this hearing, has been for fee-for-carriage, $1.00 at one time, .50 cents at another.

2664   Now, what the broadcasters are saying -- just read CanWest Global's submission -- is, you know, to figure out what the value of the signal is you have to look at a comparable and a comparable is what specialties get paid. A lot of specialties get paid .50 cents per subscriber per month. Over-the-airs provide much more value than specialties, so we should actually get paid more than 50 cents. So if they get paid more than .50 cents it will be in the hundreds of millions of dollars.

2665   All we did is we took a look at the schedule. What local programming is being provided? It is very little. And actually, we should all be concerned that there is so little local programming being provided it is basically --

2666   COMMISSIONER KATZ: But you are also saying in here there is alternatives as well, so not to be concerned, that if it does go away it is not the end of the world. The way I read it, maybe I am misreading it.

2667   MR. BIBIC: No, no, but -- correct, news will be delivered. Now, whether or not it is through speciality, community, AM/FM radio, in fact, it could be a great model like in Hamilton, CHCH, and the investors there should be applauded, I hope they succeed. There is a different model for delivering local expression to community; take an over-the-air broadcaster and go all news, all local, all day long, except in the evening. I hope they do well. Now, that is providing more local programming, not less.

2668   COMMISSIONER KATZ: Okay.

2669   MR. BIBIC: That is all we are saying.

2670   COMMISSIONER KATZ: Okay, so maybe I misunderstood.

2671   Getting back to the source of the revenues that are achieved by the conventionals today, I guess we all recognize that what they are asking for is the equivalent that you just mentioned on specialty; they want two sources of revenue rather than one.

2672   I want to focus on the one that currently exists out there today, the advertising revenue that is generated today. And it goes back to the conversation that I had with CBC this morning and with some of the folks yesterday as well, and that is in the DTH world there is a subset of Canadians that are not getting their local broadcasting.

2673   Now, if they are not getting any local broadcasting, there is no local advertising, there is no local advertising therefore there is no economic model for the business to sustain itself and there is no programming at all, local or otherwise in those communities.

2674   And Brandon was a good example that came up yesterday, came up again this morning as well where roughly 55 per cent of the people in Brandon had DTH and weren't getting local to start with and the airwaves went down on the other 45 per cent and now it is not there at all.

2675   So I guess the question I put to you is what percent of Canadians today do not get their local signal and how does one translate that into foregone revenues that would be there if in fact the signal was 100 per cent available across all markets in Canada so that the advertising revenue could be generated?

2676   Because, to me, that is one of the concerns here that we have to face. And it is a DTH concern, not an industry-wide concern, it is not a BDU concern. And notwithstanding the fact that you have got allies and you have got adversaries out there and all your marketing campaigns, both of them came forward yesterday, both the BDUs, Rogers and CTV saying there is a problem here with the DTH sector.

2677   MR. BIBIC: So I will put forward a few general comments and perhaps turn it over to Chris.

2678   I don't have the exact data at my fingertips, I don't even know if we know how many consumers don't have access to their local stations as a result of not being carried on DTH.

2679   The proposition you put to CBC actually I found, well we found, very very troubling. The fact that we don't carry every station isn't because we are trying to be nefarious. I mean, there are capacity and technical limitations to that. So you know, the industry made the best of that situation when Bell TV sat down, and I imagine Shaw did as well, with the broadcasters and come out to reasonable accommodations as to how many stations from each station group would be carried and in which areas.

2680   If you are putting forward the principle that there is damage here from not carrying all location stations and that gap in the inability to monetize, advertising revenues should be made up by DTH only then, you know, I mean it is a public interest discussion as well as a financial discussion for Bell. It is going to hobble DTH more than it already is. So do we want, in the public interest and for consumer choice, a robust competitive option to cable? I think the answer is yes.

2681   As far as how much money is lost this way, let's not forget that, you know, the broadcasters are monetizing a good portion of the advertising by being able -- you know, if we don't carry a station in Brandon, doesn't mean that people in Brandon don't get access to CTV programming. And CTV, you can better believe it, is monetizing much of that advertising and saying there are eyeballs, you know, in Brandon that are watching these ads as well, so they are taking advantage of that.

2682   And back to your first question to me, which was about free market and consumer choice. Subscribers in communities who can't get their local station off DTH have a choice and the choice is cable. And despite that choice, they have decided to subscribe to DTH. So it speaks a little bit to the value that those particular customers are making, vis à vis access to local programming.

2683   Chris.

2684   MR. FRANK: Thank you, Mirko.

2685   I think to answer your question from 10,000 feet and then work our way down in a more granular fashion, I would like to start with the plusses and minuses of DTH.

2686   Obviously, when history tells us when we started the service both Bell TV and Shaw Direct, we were all operating on one satellite, common satellite, and there was a shortage of bandwidth, and we launched a certain number of local TV services. Over the years, more capacity has been added to the point in the turn of the century. We started our own satellite service and homonymic series of satellites and Shaw Direct stayed with Telesat's satellites.

2687   The point I am making is that over time more and more local TV signals have been launched.

2688   I think it is generally understood that, as Mirko said, DTH is the cornerstone of BDU competition. We can't be competitive unless we have a full array of services, a representative sample right across the country of local TV, all the popular specialities and all the more granular specialities, as well as Pay TV and Pay-Per-View. As has been discussed today, we don't have VOD.

2689   So we only have so much band width to go around and we have to apportion in such a way that that we have a competitive service so we can be appealing to Canadians of all tastes and walks of life.

2690   So have we been successful? I think, yes, we have. And when you look at the plusses and minuses of DTH -- and if I look at the year 2006, in that particular year we launched enough net new customers, I am talking about both companies now, net new customers to add $340 million of net new subscription revenue to the industry and $190 million of net new advertising revenue.

2691   And if you look at 2006 in a cumulative sense, since 1997 when both services launched, $1.6 billion of net new revenue and $820 million of net new advertising revenue, revenue that would not have come to the industry without the advancement of DTH.

2692   So in the plusses and minuses, I think you would agree that we have added significantly to -- we have grown the subscriber pie and we have provided for, particularly specialities and pay, a huge amount of additional new subscription revenue and for conventional and for speciality lots of new advertising revenue.

2693   COMMISSIONER KATZ: But what you are telling me, Mr. Frank, is you have been successful in the competitive marketplace over the last several years and have grown the pie, which I commend you for. But at the end of the day, those consumers who don't have access to your service, to your local service, you have chosen -- you have made a conscious decision to favour certain genres of programming to go on there to be competitive or whatever. And I won't question what you have put on there.

2694   But it has been at the expense of not meeting certain obligations that are inherent in the Broadcasting Act that we are all here asked to uphold, and that is providing Canadians with local service.

2695   MR. FRANK: Well, let's address that.

2696   Certainly, we don't carry every local station from every local market, that is a fact. We do carry 75 local TV services now and we have a proposal on the table to carry an additional 45 more, which would basically enfranchise all of the markets where there is a meaningful amount, according to your rules, a meaningful amount of local programming.

2697   The question is one of balance. How do we maintain a competitive service within our cost structure? And Mirko and Kevin have told you, that we have accumulated considerable losses over the years, we are still in a negative position. So we can't just acquire brand new satellites at brand new locations, there are significant budgetary concerns.

2698   We do carry local TV and regional TV from every region and from every province and every time zone in this country. And, as I said, we have an offer on the table to carry more. How much is enough? How much is enough to maintain a competitive balance in our services and maintain a competitive position in the marketplace?

2699   The Commission, over the years, has agreed with the negotiations that we have had with the Canadian Association of Broadcasters, all the private broadcasters and implicitly with the CBC because they get the same number of local services, as does Global and CTV. And we have --

2700   COMMISSIONER KATZ: But your question of how much is enough is probably a correct one but I can tell you emphatically it wasn't enough to save Brandon. That, we know for a fact.

2701   MR. FRANK: Well, sir, let's deal with Brandon because I have been around this company for a while and we did have a discussion back when Craig owned the Brandon signal.

2702   We did a deal with the Canadian Association of Broadcasters in 2003 and 2004, and Craig as a result of that agreement got four local TV channels, four out of five local TV channels.

2703   We pledged to the CRTC in our application that we would work with the local broadcasters to choose the signals, the additional signals that would be launched. Craig chose four services, none of which were Brandon, unfortunately.

2704   Since Craig, since ownership changed from Craig, we haven't been approached to carry Brandon. We stuck with the original deal.

2705   In the proposal we have in front of you, services like Brandon would, in fact, get carried. So there has been an evolution towards more local TV.

2706   COMMISSIONER KATZ: So out of the 120, I guess, or whatever number you have quoted in your freesat model and your proposal, how many other local stations still would not be covered? And your rationale, I guess, is because they don't mean the minimum threshold that CRTC has imposed. But how many are there, do you know?

2707   MR. FRANK: I can get that number for you but the number we are focused on is the number of local TV channels that have a meaningful amount of local programming, which I understand that you have decided is 7 and 14, respectively, small versus large market services.

2708   COMMISSIONER KATZ: But we didn't take the next step that you are alleging in saying the rest of those other markets should be dark.

2709   MR. FRANK: Well, I think it comes to, sir, how we allocate scarce bandwidth resources and I think everybody at this table, and hopefully at the table in front of me, is interested in a healthy, vibrant and growing DTH business, especially in light of our financial performance to date.

2710   We think that we have done a good job with local TV. I mean these numbers I have quoted you in terms of incremental advertising and subscription revenue, these go to the very companies we are talking about. So I think on any reasonable balance DTH has been a tremendous success in the public interest sector.

2711   MR. BIBIC: Vice-Chairman Katz, I think yesterday both parties who appeared before you made what I say in the opening statement to be rather provocative statements. Where is the evidence that Brandon would have survived had DTH carried the station there?

2712   It is easy to just throw out these allegations and then not back them up. I mean if it is really true, perhaps the broadcaster --

2713   THE CHAIRPERSON: The prospective purchaser Bluepoint pulled out because he couldn't promise DTH carriage. He was willing to launch but whether he would have succeeded is a different story.

2714   MR. BIBIC: In one case, if CTV or the other broadcasters believe that there are a couple of stations or a few stations that will survive and that they will commit to keeping open if they are carried on DTH and are not carried today, then perhaps there can be a discussion around that. But to make a general allegation based on one situation, based on one new purchaser, that is not evidence.

2715   COMMISSIONER KATZ: But it is a start. And the question is: Do we want to learn from reality or do we want to make the same mistake, if that is a mistake, again and again and again?

2716   MR. BIBIC: Well, it is a question of balance, Vice-Chairman Katz. I think we do uphold the objectives of the Broadcasting Act, we just don't uphold them in exactly the same manner that cable does. And again, there is a reason for it and it is a perfectly justifiable reason for it.

2717   So we do meet the objectives of the Act. We do need to be competitive. If we have to put 40 additional local stations on the one satellite that everybody single one of our customers can receive signals from today, that means that there are 40 services that have to come off.

2718   So now you have harmed the competitive position of DTH vis-à-vis cable, plus you have harmed the position of the specialty services who have to come off because now they are no longer able to be viewed by the base of 1.9 million customers that we have. So that is the balance that we all have to wrestle with.

2719   At the end of the day in these communities, again, I remind you, the customer has the choice. If that particular local channel and the half-hour of news that it provides that is distinct from what is otherwise available elsewhere is of value, unfortunately for us, that customer is going to go to the cable option.

2720   COMMISSIONER KATZ: So if there was a market out there, hypothetically, that you were even more successful than Brandon and generated 95 percent market share in that local area and it made it totally uneconomical for a local broadcaster to broadcast in there because there is no local that you are carrying, Canadians in that city should not have a local station? They will start to close them down. The more successful you become in those markets, the less likely it is for Canadians to have local broadcasting in those markets.

2721   Now, we are not here to regulate you and tell you what you should and shouldn't be doing. The more success you have, the better off you are and, as you said, Mr. Frank, the more successful the industry is as well, except that one our roles here on this Panel is to make sure that Canadians have access to Canadian content and Canadian programming, however limited you may define it to be, and all I am saying is your success will result in our failure to execute under the Broadcasting Act.

2722   MR. BIBIC: You have got to deal with fact. The fact is we don't have market share anywhere near 95 percent anywhere.

2723   COMMISSIONER KATZ: Well, you had it in Brandon.

2724   MR. BIBIC: The market share in Brandon was 5-6 to 1 in favour of the cable company. So those are the facts.

2725   If there are isolated instances -- and they will be isolated -- where we are even above 50 percent, let alone 90, then we are not saying we are going to be, you know, willfully blind to this. Let's have a discussion.

2726   MR. FRANK: I think it is worthwhile pointing out that of the 200 new channels we have launched since 2001, fully 50 have been local TV services.

2727   I also think that if you look at the percentage of bandwidth that we dedicate to local TV and the percentage that our cable friends devote to cable TV, because we are a national carrier ours is considerably higher.

2728   I also think -- I hope this doesn't sound like a shot -- but it is very convenient for Rogers to sit here and tell you that the woes of small market local TV services are because of DTH.

2729   If we have to remove, as Mirko said, 40 channels from our satellites at 91 degrees, those inevitably would be specialty and pay services and that would damage our competitive position significantly.

2730   So it is a question of puts and takes here and I think if you look at the public policy and the financial benefits that DTH has brought to the table over the years, it is a compelling story.

2731   Yes, we don't carry all of the local TV signals in every market across the country but we do have a proposal to increase the number from 75 to beyond 100 and provide carriage of all local TV stations with a meaningful amount of local TV. That is not a trivial offer.

2732   COMMISSIONER KATZ: As your network gets upgraded and as you move -- I think 40 percent of your customers now are on MPEG4 -- as you move more customers from MPEG2 to MPEG4, do you see the ability for you to become more efficient allowing for more local stations to be introduced or are you going to use that capacity for other competitive services?

2733   MR. DINESEN: I think the balance will need to continue to be struck. As we stand right now, what both Mr. Bibic and Mr. Frank have said is true. For every additional service we put up, local service, into 91 degrees, one service has to come down.

2734   You asked the question: As technology evolves, will the distribution network become more efficient? Possibly. We will be in a position -- we will have new capacity as a result of new technology made available either through improved compression. Yes, likely. Over what time frame? I can't commit to that specifically.

2735   But I think that how we decide to allocate any new capacity that does come on is going to continue to be in a balanced manner.

2736   MR. CRULL: I just want to also clarify. Mr. Vice-Chairman, 40 percent of our subscribers are not MPEG4 today. Forty percent are high definition but not all of those are MPEG4.

2737   Over time it is in Tim's capacity plans to move them to MPEG4 but not the rest of -- not the standard def base that would remain.

2738   COMMISSIONER KATZ: But there is a plan to move them up and you have a forecast of capacity --

2739   MR. CRULL: Yes.

2740   COMMISSIONER KATZ: -- surplus, if I can call it that, as well that can be used for redeploying spectrum for other services?

2741   MR. DINESEN: Well, let me be clear, 40 percent of our customers have the ability to see both orbital slots. Only some of those customers that take high definition services have MPEG4 receivers.

2742   In order for us to take advantage of advanced MPEG4 compression, we will require a swap-out of the existing high definition MPEG2 receivers. That is several hundreds of thousands of receivers and dozens of millions of dollars.

2743   Is that one option that is available to us in our technology strategy? Yes.

2744   Is there a specific funded plan to do so in the next couple of years? No.

2745   MR. FRANK: Commissioner Katz, if I can just add a few thoughts to complete our answer to your question of a few minutes ago, do we plan to add more.

2746   Yes, we absolutely do plan to add more. The lion's share of those will be at high definition.

2747   As you know, high definition is very bandwidth-intensive, and as the Chairman has pointed out at least once today, perhaps yesterday as well, high definition is the future of television in Canada.

2748   We have just passed the 100HD-channel level and many of those services are local TV stations and we plan to add more.

2749   COMMISSIONER KATZ: Can I ask you to undertake to provide the Commission with the new channels you have put on your system in the last 24 months, just so that we know, as you became more capacity-unconstrained, if I can call it that, what you actually put onto your system?

2750   MR. FRANK: Certainly, we can do that, sir, and we will. I believe our evidence -- well, perhaps it is in my backup book -- goes back to 2000. We will refine it for the last two years.

2751   COMMISSIONER KATZ: Okay, thank you.

2752   I want to move on -- sorry.

2753   THE CHAIRPERSON: Since you gave me the opening, let me pose this question.

2754   You mentioned HD and I have now put it several times and I have never heard an answer from anybody, Mr. Bibic. HD is the future. I think we all believe that. It is actually something new and additional over and above.

2755   If you had the VFS negotiation restricted purely to HD -- because this is a new cost for you, to provide the HD capacity. It is also a new cost to the broadcaster to bear, to film the stuff in HD, to buy the equipment and to produce it, et cetera.

2756   You say, I don't want to start a negotiation because I see it as a net loss, you are just imposing a new cost for me. We said from here on end, but for HD, you should negotiate.

2757   Would that not solve your sort of -- the problem that you pose, that you feel you are paying for something that you already have and there is no additional value? Here, there actually is additional value.

2758   MR. CRULL: We have thought about that, Mr. Chairman, as you introduced the idea yesterday and I think that the relevant aspects of it are, one, that the high definition signal is available over the air for free, and so the argument that we and others have put forth about the value and that it is available for free remains in a high definition world.

2759   The second is that we do see, again, the -- I think that the spirit of our willingness to explore this is that we want to find ways to make it a win-win-win situation, and if there is the opportunity where we can provide that extra value and consumers will pay for it and then there is a value for signal to the OTAs, then I think the exploration of that is possible.

2760   But it would require then the option for the customer to choose not to receive those local signals, and today the high definition local signals are included without any extra charge in our entry-level $35 package.

2761   THE CHAIRPERSON: Yes, but that is a marketing decision you have made?

2762   MR. CRULL: No, I believe that they are required to be carried.

2763   MR. FRANK: It is my understanding, sir, that the priority broadcasting signals in high definition are to be included in our basic package. They are there even if you are not a high definition customer.

2764   THE CHAIRPERSON: But don't you require a different set-top box to receive your high definition and you sell your customer a more expensive box to get his HD signal, right?

2765   MR. FRANK: It does require an additional box --

2766   THE CHAIRPERSON: Right.

2767   MR. FRANK: -- and the high definition box is somewhat more expensive than the standard definition box but all of our boxes are subsidized.

2768   THE CHAIRPERSON: But the customers are paying for the higher box because they feel they are getting a better signal, exactly the point on which --

2769   MR. CRULL: But we are subsidizing both of those boxes. We are not making money on the set-top box in either event. So that is not -- that basic signal, high definition, is not being monetized and is not being charged to the customer. It is available as part of their basic today.

2770   I think the premise also extends that as we do anticipate most of our customers moving it just gets us into a quandary, Mr. Chairman, where we are just accepting the inevitable that as most of our customers do move to high definition that they are going to go to where value for signal applies to the majority of them over time, and for that reason we resisted, for the same reason that we resist the broader concept.

2771   THE CHAIRPERSON: I hear you. I mean depending how fast the transfer is to HD and how many boxes you sell, how much you subsidize, et cetera, I think, you know, this is an area you might want to explore and comment on in your written comments later on rather than sort of wipe it off the table right away because I think it would break the sort of dilemma that Mr. Bibic posed earlier.

2772   Anyway, back to you.

2773   COMMISSIONER KATZ: Thank you, Mr. Chairman.

2774   There was a term that we talked about yesterday and again this morning, I guess, which is one that is prevalent in the U.S., the "carry one, carry all."

2775   What are your views of a "carry one, carry all" philosophy, where you have a restriction on capacity rather than the relationship that exists today where there is, I guess, some sort of agreement between yourselves and the broadcasters as to what you are going to carry because there is a limited amount of capacity?

2776   If we went to a model that was "carry one, carry all," and when you run out of capacity, you run out of capacity, and in those markets that is what happens. It is a different model obviously. I am just wondering what your views would be on that model.

2777   MR. FRANK: The impact in a large country like Canada of "carry one, carry all" could lead to a situation where certain communities have all of their local channels up and other communities have none of their channels up.

2778   In the Quebec marketplace in the last negotiation, the Quebec French-language broadcasters were very clear that they wanted that particular rule to apply, and, in fact, that is what we have done in the major and major/minor markets in Quebec.

2779   That rule doesn't necessarily apply in the rest of Canada and we do have communities that have different signals.

2780   So it is a question of balancing community interest and corporate interest and we will continue to negotiate with the broadcasters on distant signals and that may well -- that rule may well come about or, in fact, you may choose to apply it.

2781   COMMISSIONER KATZ: I guess I am asking you, would you like us to apply it? That is the question I am asking.

2782   MR. FRANK: We have accepted it in the Quebec market. Outside of Quebec, I think what will happen is that there could be a shortage of local TV channels in certain communities, although I must catch myself and say that if our freesat proposal is approved, then all of the local channels with a meaningful amount of local programming will be lifted in any case.

2783   COMMISSIONER KATZ: When you say all, are you saying all up to the 120 channels that you have interpreted the CRTC to say local programming meets our minimum number of hours or are you saying all being all channels, including those that may only have a couple of hours of local programming?

2784   MR. FRANK: It is the former, sir.

2785   COMMISSIONER KATZ: So we still have the same problem with the latter?

2786   MR. FRANK: That is correct but I think --

2787   COMMISSIONER KATZ: Is that the case in Quebec as well?

2788   MR. FRANK: I am sorry?

2789   COMMISSIONER KATZ: Is that the case in Quebec as well?

2790   MR. FRANK: Yes, it is. Currently in Quebec or prospectively in Quebec with freesat?

2791   COMMISSIONER KATZ: You were saying that you currently have a "carry one, carry all" model in Quebec.

2792   MR. FRANK: We do.

2793   COMMISSIONER KATZ: And in Quebec the number of hours that are required by some of the broadcasters are below the thresholds that I believe we have in English Canada.

2794   So my question is: What is your "carry one, carry all" floor --

2795   MR. FRANK: I should also say -- I am sorry for interrupting.

2796   COMMISSIONER KATZ: What was the floor in Quebec?

2797   MR. FRANK: It is "carry one, carry all" for all markets where the larger broadcasters are operating and it is two per market for the small independents at the present time.

2798   COMMISSIONER KATZ: Okay.

2799   MR. FRANK: But as I said, if the freesat proposal is accepted, then that will change things dramatically.

2800   COMMISSIONER KATZ: That leads us into the freesat. Let me start with a general question.

2801   If the freesat proposal is not accepted, if you have the capacity for the extra channels, for the 45 channels for the freesat, why wouldn't they be or could they be deployed in the broadest sense without the freesat model but to everybody else as well so those people can still get access to local programming in those cities? The capacity is there.

2802   MR. DINESEN: Again, it goes back to the notion, Mr. Commissioner, of the difference between lifting a channel and distributing it broadly to a number of households.

2803   We have submitted previously that the additional channels that we would lift in order to support freesat would be on Ka, to which precisely zero households have access.

2804   The model works in a freesat model because the households that subscribe to freesat would get the latest antenna and set-top box technology.

2805   The distribution of those services to 100 percent of households becomes a much larger challenge when you are talking about having to retrofit the 60 percent of households that don't see both 91 and 82 and the 100 percent of households that don't have any access to Ka.

2806   COMMISSIONER KATZ: Maybe I don't understand. Is this because -- you are saying it can't be done because once a consumer has got this Ka-band access to the five channels you are proposing to put on there as the minimum requirement, if they wanted to upgrade and go into basic or whatever, the equipment would not be fungible, you would have to go back in there again and get a new box and a new antenna and new everything else? Is that the issue?

2807   MR. DINESEN: If an existing subscriber wanted to get access to services that we lifted into Ka --

2808   COMMISSIONER KATZ: Right.

2809   MR. DINESEN: -- then every one of those households, somebody would need to make an investment in set-top box and antenna.

2810   The only other alternative for broad distribution of those local services is to put it into 91 degrees Ku, to which currently 100 percent of our households have access, which would mean that we would need to take down an equivalent number of services in order to find accommodation in the spacecraft.

2811   COMMISSIONER KATZ: Okay. Well, I have opened the door. There are far better people to ask these questions than myself. I am not the engineer.

2812   MR. FRANK: Vice-Chairman Katz, we are talking about standard definition signals with these numbers.

2813   COMMISSIONER KATZ: Okay. Great.

2814   I want to go on to something that I guess you said in your remarks here and in your evidence and others have said as well, and that is the problem is not a BDU problem. It just goes back to the financial situation the broadcasters find themselves in. It is because the number of specialty programs that have come on the air have diluted the audience as well.

2815   And so the notion is why don't you the Commission look at the group as a whole because notwithstanding the fact the conventional TV broadcasters had an $8 million PBIT last year, there was $550 million of PBIT in the specialty side. So look at it together, which is a valid point and that is why we are looking at group licensing as well.

2816   But my question is: A byproduct of the success of the specialty players in the game is that the distributors have been equally successful as well. Notwithstanding the fact you have got infrastructure costs and capacity costs, I believe that the economics will prove me right that you are not losing money on every new programming undertaking that comes online, that you have got an affiliate agreement with them and you are paying them X amount of money, you have got your costs and you are charging the consumer Y amount, and in there somewhere is a profit margin as well. Is that the case?

2817   MR. CRULL: The revenue minus the cost of goods, the programming costs as well as variable regulatory costs would be our gross margin and yes, the gross margin is absolutely profitable, is positive before you have customer support costs, billing, bad debt, and then in the satellite case especially very, very large capital depreciation and amortization on the satellites, and then the subsidy --

2818   COMMISSIONER KATZ: But there is a margin there. Every new customer coming -- every new --

2819   MR. CRULL: There is a gross margin, not an income margin, and I don't think, Mr. Vice-Chair, that we could attribute -- if the business on 1.9 million subscribers is a negative net income today, I don't think that I could attribute and take the last signal that we launched and look at that signal and say, is that profitable. I would say that in aggregate, no, it is not, on a net income basis.

2820   The example you were saying is on a gross margin basis. We do charge in the specialty case and we cover our programming costs for those. So we have a positive gross margin.

2821   COMMISSIONER KATZ: Okay. So when you sit down and work on a wholesale cost with a new program that comes on board, I don't know, some new program that comes on, knocks on your door and you want to carry it, you obviously work out a cost to the programmer and a cost to the consumer that creates a value for your shareholder.

2822   MR. CRULL: Yes. I will let Chris speak to that process.

2823   MR. FRANK: That is certainly one element of the process. I think we have to understand that we are in a competitive, in a very competitive industry, the BDU industry, and rates are set relative to other BDUs as well.

2824   You are generally presented with a rate card and if we are talking about a popular, commercially must-have service, it is driven by the relative rates that the broadcaster is getting from other BDUs in addition to the value we may perceive that the service has.

2825   For new services, my comments would be not unlike the ones made by Rogers yesterday and that is that we are a large competitive BDU, we need to have a wide variety of services. This goes back to my comment about having a reasonable amount of local, specialty and pay services and we want to offer as much variety and choice.

2826   That is how we want our brand to be known in the marketplace and we don't always optimize in terms of profitability, especially in the early years, but obviously, we expect these services to bring value to our platform overall.

2827   COMMISSIONER KATZ: But surely you are not telling me that you are being held ransom by the broadcasters and the programmers as to how much you can charge in the marketplace and how much you could make?

2828   MR. FRANK: No, I am not suggesting anyone is holding anybody ransom, sir. You asked for the factors that go into a decision and I am saying that rate relativity is -- I mean it is a bilateral process, sir. It is not just what we want to pay, it is what the broadcaster wants to charge.

2829   MR. BIBIC: Vice-Chairman Katz, you have opened up a line of questioning which boiled down to its essence comes to this. If you have a new input cost, you charge a price which covers that input cost. If your existing input cost goes up, you charge a price to cover that increase.

2830   And that is why at the end of day we are saying, for value for signal, the customer, the consumer would end up paying more for exactly the same product. I mean you have kind of basically hit the nail right on the head because you are going to charge a price to cover the cost, make a gross margin.

2831   In the unfortunate case of DTH, once you take it on a net income basis, we are negative but the principle that you are putting forward is the one we have expressed publicly, which is why we have to pass the cost on in the case of a value for signal, which would result in an extra payment to broadcasters.

2832   COMMISSIONER KATZ: But I think what the broadcasters are saying is you already have the costs and the revenues, and, in fact, your costs are not as high as they should be because you are retaining some of those costs. That is what they are saying, I think.

2833   MR. CRULL: No. I would say that we are not -- I think what I heard you say, Mr. Vice-Chair, is that we are already charging for these services and making money on these services.

2834   COMMISSIONER KATZ: No. I was starting with the premise that you have a brand-new service out there that someone has conceived of, knocked on your door and said, I want you to carry my program, and you say, yes, I do and all I can afford to give you is X cents for the per customer that comes on board and we will put it into package X, we will do some marketing for you, some promotion for you, we will value it at so much money and it will go into a package and it is going to be chargeable at Y.

2835   When you do that, you have done the economics to validate the fact that you are not losing money on that. You have set a wholesale price for it that you are buying it at, you have put a retail price on it that you are selling it at, you know what your costs are, whether they are fixed costs or they are variable costs, and in there somewhere is the economics to make sure you are making money.

2836   All I am saying is over the last 20 years that specialty programming have come onboard and have created a successful sector, it's clear that the advertising revenues of the sector that was left behind, the conventional sector, has lost eyeballs. There are only so many eyeballs in Canada and, as we heard this morning, we haven't doubled the capacity of the population in this country.

2837   So the same people distribute their eyeballs in different places, resulting in less revenue in the conventional and more revenue in the specialty.

2838   And all I'm saying is the success of the specialty, if in fact we are saying the specialty sector should contribute to the situation we are finding ourselves in, I'm saying, yes, absolutely, the Bravos of the world and all these specialty folks should be included in the package of value so we don't just look at OTA and say, "You guys in OTA are suffering and we will throw a bag of money at you".

2839   But at the end of the day, the other component of this is the BDUs, whether they are terrestrial or they are satellite, who have benefited by the success of this new sector of the industry.

2840   MR. CRULL: There is a very simple answer to that. If you look at our net income it's negative. So no, we do not.

2841   I would say that the demands of the marketplace and actually the enhancements of the product, the ongoing very rapid addition of new programming to both remain competitive and to support the growing fragmentation and the growing availability of diverse choice have left us in a position that the clear -- the math would show we are not charging enough to cover the costs on that programming that is being put into those packages or we would be positive.

2842   COMMISSIONER KATZ: You are in a competitive market. If you want to charge more for the product in order to make money that's your prerogative, I guess.

2843   MR. CRULL: Yes.

2844   COMMISSIONER KATZ: I am going to move on.

2845   I want to talk about Freesat and get a better understanding of the economics that you have put forward in the way of the Freesat balancing as well. And there has been a number of items you talked about in terms of the offsets.

2846   And maybe we can start by you, Mr. Bibic, or somebody just giving us the components that you see being offset against your current obligations, if I can call it that.

2847   MR. BIBIC: The first is satellite bandwidth costs, including uplink costs. We would ask for $2 million each year. We asked in April for a million dollars each year but now there are twice as many stations that we believe we would have to lift by a Freesat, so that's one.

2848   COMMISSIONER KATZ: Do you think that there is a bigger value for that as well and you are saying that you have spread it out over a number of years? Is that what you have done?

2849   MR. BIBIC: The annual bandwidth cost in terms of value that we would be providing, it's in a confidential filing with this Commission. Some time ago the Commission asked this question. It's multiples of the $2 million.

2850   We are going to be asking for a fraction of -- we would be asking for recovery of a fraction of the bandwidth costs at $2 million. I don't want to say what the number is but it's multiples.

2851   COMMISSIONER KATZ: Yeah, okay.

2852   But what you have done is -- I have seen that number. I know what the number is.

2853   MR. BIBIC: Right.

2854   COMMISSIONER KATZ: What I don't know is how you got from that number to the $2 million you are quoting now. Have you amortized it over 10 years, 20 years, 50 years, like how did you get there? It's probably confidential because once you disclose that to me now someone can back into that number as well.

2855   So I am suggesting that you may want to start to put that on the confidential submission somewhere.

2856   MR. DINESEN: It's approximately a straight line cost allocation for the bandwidth you are allocating to support the 40-odd channels.

2857   COMMISSIONER KATZ: So you are taking the life of the bird that's up there and the channels that are going to be on that bird and distribute it across X-number of years to get to the $2 million?

2858   MR. DINESEN: No, it's not that sophisticated. We are paying for our capacity on a per annual basis, per monthly in fact, and the fraction of those monthly payments that we make for that capacity that would be used, allocated towards Freesat, is approximately $2 million per year.

2859   COMMISSIONER KATZ: Okay.

2860   MR. BIBIC: There is initial set-up costs which would be in the year prior to launch. There is a one-time offset from LPIF there. You have the confidential number.

2861   There are customer-care costs. The offset would be at $50 per year, per Freesat subscriber and those in a sense are the offsets to LPIF. Of course as we have discussed a few times, the customer under the model would purchase the antenna and set-top box. And there, in a nutshell, you have it.

2862   In exchange we would carry every local signal in each respective local community, plus the regionally-relevant signals. So the customer could take advantage of a more attractive offer of local signals than they would otherwise receive in their communities today by receiving those, you know, off air.

2863   That's a summary of Freesat.

2864   COMMISSIONER KATZ: Are there any other costs that you are asking the broadcasters to carry that they haven't been carrying today?

2865   There was some reference in reading the material of a backhaul cost that would be transferred over from what was historically, I guess, as a Bell Canada cost to presumably a broadcasting cost, unless I misunderstood the material.

2866   MR. BIBIC: Well, we would be asking broadcasters to pay for the backhaul to our uplink facility and Tim or Chris can speak to how that's managed today in the normal course.

2867   MR. FRANK: We are not looking for a transfer. One of the elements here is that in seeking a distance -- a satisfactory distance signal resolution, we are pledging to continue with the current compensation and the current signals that we carry. We pay for the backhaul.

2868   So in a Freesat scenario those backhaul costs would not revert to the broadcaster. However, for the incremental 45 signals, we are asking the broadcasters to bring those to our uplink centre in North York.

2869   COMMISSIONER KATZ: Can you provide to us an estimate of what that cost would be if you had to do it?

2870   MR. BIBIC: Well, there are so many. There is 40 stations and the cost would be variable to the function of how they would get it to us, the distance.

2871   Isn't that the case?

2872   COMMISSIONER KATZ: I guess I just don't know what the costs that we are burdening someone to pay for, whether it's the broadcasters, the the consumer or somebody. So I need to have some idea what those costs would be.

2873   MR. DINESEN: We don't know offhand. It would be on a station-by-station basis.

2874   COMMISSIONER KATZ: You know what the stations are, do you not?

2875   MR. DINESEN: We do, but we haven't undertaken the analysis to understand what local facilities are, the availability of backhaul circuits. We could do, but it would be a guess. It would be an estimate.

2876   COMMISSIONER KATZ: Well, you guys are in the phone business. You know what circuits cost. You know how to price them.

2877   At a minimum I wouldn't mind having an estimate anyway, if you can't give us something more refined and it doesn't have to be now.

2878   MR. FRANK: Commissioner Katz, if you can give us a little bit of time I'm sure we can come up with that information for you.

2879   COMMISSIONER KATZ: Great, I appreciate it.

2880   My last set of questions revolves around group licensing and CPE. There was nothing that you said in your remarks today in that regard, but in your evidence in reviewing it, there was some discussion about, I guess, VOD and I guess SVOD. And you went to some level of detail as to four different classes of SVOD and got very sophisticated.

2881   I guess, first of all, has your views changed at all? And perhaps you can just for the record give us a summary of those views as well.

2882   MR. FRANK: No, they are as submitted for all to read, sir.

2883   The main issue that we have in the VOD marketplace is the issue of exclusivity of product and we are asking the Commission to apply the same rule on VOD as they do in pay-per-view. And that is that it's an undue preference on its face if there is an exclusive arrangement between a rights holder and one or more VOD companies at the exclusion of one or more VOD companies and that the rationale for this is that typically each BDU has one VOD, just like they have one pay-per-view service.

2884   And if exclusive deals are done, that denies access to the pay-per-view and VOD subscribers of one or more VOD undertakings, and we don't think that's fair. And we don't think that it's reasonable.

2885   COMMISSIONER KATZ: So let me try and understand this. Back a few weeks ago, I read somewhere that Rogers has entered into a deal with Disney with Eisner, ex of Disney, for some content. I'm not sure if it was going on wireless or Wireline or VOD or whatever.

2886   Are you saying that that arrangement that they have had, that they have entered into, to the extent that it's exclusive, should not be permitted as being put on a broadcast system?

2887   MR. FRANK: Not necessarily, if it's in an unregulated forum, although if it's online we could have a discussion about that.

2888   But we are only focused in this discussion -- you asked about VOD -- we are only focused on VOD product.

2889   If a BDU/VOD licensee enters into an exclusive arrangement for programming which precludes access by another VOD and BDU undertaking, then we believe that should be deemed an undue preference, just like it is in the pay-per-view marketplace. And if we go back as far as 1995, the government order on DTH pay-per-view made it very, very clear that exclusives were not allowed.

2890   COMMISSIONER KATZ: Okay.

2891   My last question -- and I apologize if there is one more -- I would be remiss if I didn't bring up the issue of the skinny basic, only because I believe we talked about it during the BDU hearing as well. And I think I'm correct Bell had said they had tested it at one point in time and tried it as well and there was no uptake.

2892   Am I correct in that recollection?

2893   MR. BIBIC: Yes, you are, and the fact is that with our basic service today which is not skinny, less than 10 percent of our subscribers take that only, so number one.

2894   And when we had years ago a very thin basic there was very, very little take-up.

2895   MR. CRULL: I would just add, that it's not skinny in terms of the programming available but it is skinny in terms of the price and the value that it offers to consumers. So even despite that, it gets less than a 10 percent take rate.

2896   The price in English is $35 and $29 for our French basic service and both of these are bundle-eligible. An important aspect of the pricing is to make sure the Commission is always considering other discounts for bundling in our new world today.

2897   So the skinny basic idea that has been proffered, I don't see any value that it creates because there is -- if you look at the price of entry into this category, the price of entry is well less than the -- less than half of the average amount that consumers spend. And I think that we would say, okay, for the price of entry to get into this category of Pay TV it's actually very reasonable at a point that is well under half of the average price.

2898   The second thing is, if we were forced to make available at a lower price point, it would be absolutely detrimental; in fact, destructive to our business because we already lose money.

2899   We disproportionately lose money at this entry-level package if you think about the subscriber acquisition costs, the CPE for the set-top box that we subsidize that is very similar in many circumstances; so the subsidy to acquire the customer, the cost to support in our call centres, the billing costs. In fact, bad debt can tend to be higher with the lower-paying subscribers.

2900   So we would resist that.

2901   COMMISSIONER KATZ: Okay. Your basic price right now is how much?

2902   MR. CRULL: $35.00.

2903   COMMISSIONER KATZ: What was the price for the skinny basic, just so I know what the comparison was.

2904   MR. BIBIC: $7.95.

2905   MR. CRULL: And this was quite some time ago. I believe it was removed in 2003.

2906   COMMISSIONER KATZ: Can you just file with us what was included at that time in the 2003, $7.95 package as well?

2907   MR. CRULL: Yeah, sure.

2908   COMMISSIONER KATZ: Okay. And can you also provide us with what changes took place from then till now to get at the $35.00? There is probably more programming or whatever? I wouldn't mind seeing the evolution of the --

2909   MR. BIBIC: That's already been filed. On August 26th we filed or recently filed all that information. We could file it again but what we have not given is what the skinny basic package for $7.95 looked like that back then.

2910   THE CHAIRPERSON: I'm just questioning whether it is still as unpopular as you say it was now that you and the broadcasters have successfully sensitized the public to the cost of television. So it may be that user reaction will be different.

2911   MR. BIBIC: Mr. Chairman, I find -- you know, the proponents of skinny basic, I find their position rather self-serving and curious.

2912   And you just listen to CBC this morning. It was a big proponent of skinny basic, and it was, okay, there is a value to the CBC signal. If BDUs don't agree that there is a value, well, too bad. You have to carry it anyway because we are the CBC and ultimately the consumer is not going to have the choice. They should pay for, you know, for the local signals without a choice and there is no risk to them of course because they are going to be on the skinny basic.

2913   If you want to explore this, which we don't think you should because it would be harmful to our business and well, we don't think that -- we think the customer is well served today, why not a model where skinny basic has X number of stations and the customer chooses?

2914   THE CHAIRPERSON: I'm sure my colleagues will want to explore that after a break. Let's take a 10-minute break.

--- Upon recessing at 1445

--- Upon resuming at 1455

2915   MR. DINESEN: Mr. Chairman, while we are waiting for our captain to return my colleagues have informed me that I might have confused the issue with respect to the $2 million bandwidth costs, so I think we should take an undertaking to clarify the point, if that's okay?

2916   THE CHAIRPERSON: Maybe we can start and if -- I'm sure you can handle those questions of my colleagues as well as Mirko.

2917   So Michel, why don't you start?

2918   COMMISSIONER ARPIN: Okay, thank you, Mr. Chairman.

2919   I have two -- only two questions, I think. The first one I'm sure you could deal with it; the second one probably preferably with -- Mirko will want to handle it.

2920   But in the discussion that you had with Vice-Chairman Katz, you dealt with the notion of carry one, carry all in the Quebec market and saying that you have an understanding with the Quebec broadcasters regarding that carry one, carry all notion.

2921   Which market are we really talking about? Do you have a list for --

2922   MR. FRANK: I think I can do it by heart, Vice-Chairman Arpin; Montreal, Quebec City, Sherbrooke, the Saguenay. I think that's inclusive.

2923   I will review my notes when I get -- I will update that if I have forgotten one. And it was definitely related to the large broadcasters, the networks.

2924   COMMISSIONER ARPIN: The networks. So what we are talking here, we are talking TVA, Radio-Canada and V, which is formerly TQS?

2925   MR. FRANK: Correct.

2926   COMMISSIONER ARPIN: And they are all on Bell TV or are they one on Shaw Direct and the other ones on Bell TV?

2927   MR. FRANK: No, I was talking in respect of Bell TV.

2928   COMMISSIONER ARPIN: So it means that all the major networks, the local stations in those four markets are all available on Bell TV?

2929   MR. FRANK: Correct, in standard definition.

2930   COMMISSIONER ARPIN: In standard definition.

2931   Now, some of them are already broadcasting in HD. CBC is -- Radio-Canada, well, not to mix up with CBC, is broadcasting an HD signal in Montreal and in Quebec City. TVA has an HD and V has HD signal in Montreal.

2932   Are they available?

2933   MR. FRANK: All of the Montreal signals you mentioned are available on Bell TV, sir.

2934   COMMISSIONER ARPIN: In HD?

2935   MR. FRANK: Correct.

2936   COMMISSIONER ARPIN: Okay. My second question --

2937   MR. FRANK: Oh, I should add too -- I'm sorry to interrupt, sir. I should also add that we have a Radio-Canada in HD from the Outaouis as well.

2938   COMMISSIONER ARPIN: Here, from Ottawa, fine.

2939   But you don't have -- the TVA affiliate is not in HD and the V affiliate, are not in HD and they are not on Bell TV?

2940   MR. FRANK: Correct.

2941   COMMISSIONER ARPIN: Okay, from the Ottawa region.

2942   My second question relates to the remarks that the Chairman read yesterday morning and it has to do with the policy announcement that the Commission made in 1971 called, "A Single System: Policy Statement on Cable Television" where the Commission in these days:

"Stated simply, the fundamental relationship is: television stations are the suppliers, cable television systems are the users."

2943   COMMISSIONER ARPIN: Because at the time there was only Cable. Thus, the basic principle involved is one shall pay for what he uses to operate his business.

2944   Now, Bell came into the business of offering services much after 1971. So, I presume Bell knew or should have known that that was already the standing position of the Commission on that matter.

2945   MR. BIBIC: Vice-chairman Arpin, we operate under the same -- subject to the local into local issue, we operate under the same parameters and rules as do the Cable Company. So, we came in and we respected every single regulatory rule that applied to us when we entered and the world has changed significantly since 1971 or whatever the date was, in particular the reference in 1971.

2946   COMMISSIONER ARPIN: Of July 16, if you need me to be more specific. But the one thing is that Rogers did exist at the time. They were not having the size that they have today, but Rogers was already in operation, Videotron was already in operation, Shaw was already in operation by 1971.

2947   So, for them at least, certainly that they took note of that statement and we surely will come back to it over the course of the next couple of days.

2948   But I presume that Bell was aware or should have been aware of that statement from the Commission.

2949   MR. BIBIC: I am not sure what the statement adds to any of this debate. It simply says, you know, well, is a philosophical idea of payment for services rendered and for use made and I don't think there should be any suggestion that Bell has not provided value in return to the broadcasters for the signals we've distributed over 11 years. I would object to that statement.

2950   I don't think that's where you're going, but I would say that, to the extent of the philosophy that there is an exchange of value, there has been an exchange of value and Bell has provided the same exchange of value that the Cable companies have.

2951   And, in any event, I would say that the very statement may have been proven wrong because the over-the-air broadcasters have generated billions in profits since 1971.

2952   COMMISSIONER ARPIN: But so far, Bell, like the other BDUs, have refused to sit down with the television operators to discuss these matters. And the purpose of this hearing is to develop, if we conclude in that way, a framework for negotiation.

2953   MR. BIBIC: Mr. Arpin, if I can. If there is one message I can leave you with before I step away from this table today is that if there is a view on that side of the table that people are being pigheaded, then please come away with the view that we are both being pigheaded. Because at the end of the day it comes down to this: We want to negotiate, but not on value for signal.

2954   They don't want to negotiate on anything but value for signal. That's what it comes down to. We are not opposed to negotiating. We are just saying, in terms of the debate I had with the chairman at the beginning, we do not believe that there is an incremental value to the local signals, over and above the value we already compensate them for today and have since 1997 when we launched service.

2955   THE CHAIRPERSON: You've just said something. They don't want to negotiate anything except value for signal? Where did you get that from because I did not hear that Mr. Fecan or any of the broadcasters say that?

2956   MR. BIBIC: Everything is on hold because we, of course, will not have a negotiation in isolation. We want to talk about exploiting online rights. We want to have a discussion about carriage of more signals. We want to have a discussion over freesat. We want to have a discussion over many things, but we can't reach any resolution on any of those because hanging over everyone is this issue of whether or not there will be -- in the past fee for carriage, today value for signal. So, nothing can get done.

2957   We can't be expected to negotiate these things in silos. That's what's going on.

2958   THE CHAIRPERSON: But you are categorically telling me you're willing to negotiate it as part of a larger package?

2959   MR. BIBIC: We're willing to negotiate a larger package that does not include value for signal and we can have --

2960   THE CHAIRPERSON: This is circular. You've just told me a moment ago they only want to negotiate that, you don't want. Now, I say, well, if they want to negotiate a larger package, including VFS, you say no?

2961   MR. BIBIC: Well, we could put it another way. We came forward in April and we've said we'll provide freesat and freesat will compensate for the value of compensation for conventional signals, be it local or distant.

2962   How is that not an offer to provide value in return for receiving the conventional signal?

2963   So, I don't think it can be said that Bell has not been willing to negotiate or provide value.

2964   THE CHAIRPERSON: I am not talking about April today. What are you saying today?

2965   MR. BIBIC: What we are saying today is that we believe that the value is zero of the local signal.

2966   COMMISSIONER ARPIN: Well, but that's already a starting point.

2967   MR. BIBIC: It's also the end point.

2968   COMMISSIONER ARPIN: Who knows. If you were to initiate negotiations, they may start to at a higher number or they may even start at the same number?

2969   MR. BIBIC: I am not answering your question because I don't really understand. The Commission, I think, should probably do everyone a favour and be a little bit more clear about where you see this going; where does this end?

2970   So, we have a negotiation, let's say the negotiation is not successful, what then? I mean, we can't sit down and negotiate a value for signal, quite apart from the philosophical position that we have, until we know what's on the table and the outcomes. So, what happens then?

2971   COMMISSIONER ARPIN: Well, that's one of the purposes of the hearing. We did say in the Public Notice that we want to -- and there are some submissions suggesting that we develop some criteria.

2972   The CBC, this morning, came with a few of them. I know that we're going to hear tomorrow Quebecor and I know that they have set some criteria for that -- to be taken into consideration to develop a negotiating framework and I guess there will be others from today till the end of this proceeding that will have some suggestions. That's also part of the process.

2973   MR. BIBIC: Okay. It comes down to this. There is commercial relationships we have to continue and, of course, we will. We can talk about local avails, we can talk about distribution of further specialty services, further local signals in particular cases. We can talk about freesat, how freesat falls into distant signal compensation because we know from the Decision 2008 that we have to come to some resolution on distant signal compensation.

2974   We are not opposed to resolving those issues. We do not believe that there is a legal right in the broadcasters over and above the compensation they get today through the ability to access our distribution network. I mean, that's our position and I guess it hasn't changed from two hours ago.

2975   COMMISSIONER ARPIN: But that was a decision for us to make and we've already made it.

2976   MR. BIBIC: Which one, distant signal compensation?

2977   COMMISSIONER ARPIN: No. I am talking that the Commission had the right to move the parties towards a negotiation.

2978   MR. BIBIC: And you have our views on the legal issues, which I don't think we need to debate, but we disagree.

2979   COMMISSIONER ARPIN: Okay. We will surely have a record.

2980   Mr. Frank, I want to get back to your previous -- Now, currently, you're having the Montreal, Quebec City, Sherbrooke and Saguenay for three network stations. After August 31st, 2011, where you are required by regulation to carry only one network per region, per province, will you keep all the ones that -- is it the agreement that you have with the broadcaster or that agreement stays valid only up and until August 31st, 2011?

2981   MR. FRANK: Actually the agreement has expired and we are going from month to month. But as to your question, sir, we view that as the minimum, that's the regulatory number, the minimum number of stations we carry per province.

2982   To Mirko's point about negotiating with the broadcasters, we have a lot of things we can bring to the table. That could well be one of them. I am sure the broadcasters are interested in additional HD distribution, not only in Quebec, but in other provinces across the country.

2983   So, when we talk about the totality of minus value for signal, that could be one of the elements. It could, in fact, be a very key element. It has been in the past.

2984   COMMISSIONER ARPIN: Okay. Well, I'm taking note that at least you have, if the other party sits before you, you have something to say, which is much better than before the hearing started.

2985   MR. FRANK: Well, actually, we have already broached those issues with all of the major broadcasters and they have a pretty good idea of what we're prepared to do.

2986   Just on your question of a few minutes ago to Mirko about the 1971 document, I think I can join you in the alarming revelation that I was around in 1971, too.

2987   COMMISSIONER ARPIN: Working in the same group.

2988   MR. FRANK: We may be the only two people in the room who were around.

2989   COMMISSIONER ARPIN: Even working for that unit.

2990   MR. FRANK: Mr. Denton has his hand up. In any case, the point I wanted to make was, we are now some 35, 39 years, I guess, or 38 years on -- my math isn't very good -- and one could assume a course of conduct. And in the course of conduct a balance has been struck between the value for the signal, if that's what you want to call it, and the value that the BDUs bring to the table in terms of distribution.

2991   And in the seventies, I am sure you will recall that the Global Television Network started and many of their transmitters were UHF because of the licensing restrictions. And I think the original management team on Global would be the first to say that they owed their success to the fact that Rogers distributed them because very, very, very few people had UHF transmitters.

2992   So, surely, when the Global family reflects on their history and on the value of the service they're bringing now, they owe their place in history to Cable Television.

2993   COMMISSIONER ARPIN: Well, thank you very much, Mr. Chairman.

2994   THE CHAIRPERSON: We'll hear from Global in due course, no doubt.

2995   Candice?

2996   COMMISSIONER MOLNAR: Thank you. I have a number of questions and none of them are value for signal, so you can sit back, but they are about revenue compensation for conventional and I want to start with the issue of local into local.

2997   You talked with Commissioner Katz about some of the issues of carrying all local signals, but the other issue that was brought before us by the broadcasters is the issue of carrying local signals into the local markets and containing that local market.

2998   Do you have any comments as to the viability for Bell-TV to carry local into local?

2999   MR. FRANK: Currently, as we've said, we carry 75 local TV stations from across Canada and we have a freesat proposal on the table which would augment that by some 45 local TV signals.

3000   The issue of local into local has not been imposed on us by the CRTC, I think for good reasons, because of capacity issues and our ability to create a balanced offering value, a good customer proposition in terms of conventional, specialty, and pay services.

3001   The issue of distant signals has been negotiated twice. This company is being in the lead in both instances and has struck successful deals with the Canadian Association of Broadcasters. There has been compensation in cash and in-kind for distant signals.

3002   So, with freesat and the lifting of the additional 45 signals, we will augment our local signal offering considerably and hopefully with a distant signal arrangement, we will be able to arrive at a way that we can continue to carry distant signals.

3003   My comment on distant signals would be that as we grew our business and as that created a greater urgency around the whole analog to digital conversion, distant signals has been an important part, an important element, in the customer's mind, to move to a digital environment.

3004   So, there is an expectation, I believe, in the consuming public's mind that distant signals are a rightful part of today's broadcasting environment and it would be, I think, consumer disruptive and disappointing if we moved to a local -- into local regime. And I think it would impact our ability to continue to offer the kind of value proposition that we currently offer.

3005   COMMISSIONER MOLNAR: I agree with you that consumer's enjoy distant signals.

3006   The issue of how distant signals are managed on a cable company's network versus a satellite company's network is different. It is -- you know, there is an additional charge for an additional value for distant signals. You get your local signals for free. You pay, in addition, to get distant signals.

3007   That's not the case with DTH. And, as I understand it, it is a technology issue that you don't have the capacity to restrict local into local; is that correct?

3008   I'm sorry, did I say capacity? The technical capability to do that.

3009   MR. FRANK: It wouldn't -- it's not an easy situation from a technical -- a technological perspective. It's not an easy situation from a consumer value proposition perspective, either.

3010   I think if you want to explore the technology issues, I'll pass it over to my colleague Tim.

3011   But, I just leave you with the thought that we do currently offer a fairly negotiated distant signal compensation.

3012   We've talked just a few minutes ago with Vice-chair Arpin about additional value that we might be able to bring to the table in terms of distant signal compensation. Freesat's on the table. And, I would note that because of the DTH experience in distant signals, we have been able to increase the viewing of Canadian networks by some twenty-five percent over the decade or so that we've been in business -- twenty-five percent in relation to analog cable.

3013   COMMISSIONER MOLNAR: Fair enough. Just maybe so we proceed -- because I know it is getting late in the day.

3014   MR. FRANK: Yes, certainly.

3015   COMMISSIONER MOLNAR: We had the broadcasters come before us saying we require local into local. So that there might be value to distant signals; that consumers may desire distant signals, is not really my question at this point.

3016   My point is, if there was a requirement to deliver local into local, what would be the implications on Bell.

3017   And before we move it to the engineer, I will tell you I'm not technical, so if it needs to be a technical response, if it's cost-related, perhaps you want to give this to us later, and that would be fine, as well.

3018   MR. BIBIC: I will take a high level summary stab at the answer. I'm not a technical expert either, so we won't get into any of that.

3019   So, to do local into local, first you need the capacity to lift all the stations. We explored that through various of the answers already.

3020   Then you need the technological ability, or technical ability to make those signals, each local signal, available to each subscriber in their local community.

3021   You've heard from Tim the challenges we have with respect to that, given that, you know, sixty percent of our base isn't equipped to receive the signals from the satellite we would have to use for these incremental stations. So, that's the second problem.

3022   Then, it's less of a technical issue but it is a DTH commercial attractiveness and customer disruption issue. You need to reach a deal with the broadcasters on distant signals because even though we had local into local, we would want to make distant signals available. But that's not a technical issue, it's a commercial issue.

3023   And the fourth, to get local into local in the true sense of the word, is, you need to simultaneously substitute the signal from each local community over a US network, and that would pose a particularly big challenge for Bell given that we substitute over one eastern feed and one western feed, not, you know, over thirty US signals.

3024   So, those are the challenges, and they're rather daunting if you add them all up.

3025   I hope that helped.

3026   COMMISSIONER MOLNAR: It did help, and if you want to expand on that, in your final comments, I think that would be useful.

3027   MR. BIBIC: Okay, we will.

3028   COMMISSIONER MOLNAR: Thank you.

3029   I want to move on to the issue of Freesat, and I'm trying to understand Freesat and the value your Freesat provides.

3030   As I understand, Freesat sits on the table whether or not there's a decision to make value for signal negotiations a requirement; correct?

3031   MR. BIBIC: I'm not sure that's the case. I think our ability to do Freesat is dependent on an acceptable outcome for Bell TV on the value for signal debate, because we simply can't afford to pay additional monies for distant signals, pay additional money for value for signal, pay the -- contribute to the --

3032   COMMISSIONER MOLNAR: Okay, let me make it an easier question. If there is no negotiated value for signal, you would still propose to do Freesat?

3033   MR. BIBIC: Freesat is -- Of course, Freesat actually now becomes clearly feasible.

3034   COMMISSIONER MOLNAR: Okay.

3035   I have looked at this a couple of times and I'm trying to understand the value of this. And I'm going to use Saskatchewan as the example. I'm the Commissioner from Saskatchewan, I know the market. So, you have proposed in Freesat to offset your costs of carrying additional stations against LPIF.

3036   So, just to put this in context, in Saskatchewan, and you may know this, you carry two of the seven stations available in the province. So, seventy percent of the stations in our province are not carried by Bell TV. They are all small-market stations. They're all eligible for LPIF. They, under this scenario, where you're proposing that the costs of adding capacity to carry additional stations, the cost of customer care, are going to be offset against LPIF. It will reduce the amount of money available to all seven of those stations, including the five you don't carry.

3037   MR. BIBIC: So, under the Freesat model we would be carrying, provided that those stations did meet the Commission's imposed minima in local programming, and let's assume they all do, we would carry all seven.

3038   COMMISSIONER MOLNAR: Well, for example, at CBC Saskatchewan.

3039   MR. BIBIC: We'd carry all seven. And the offsets we're talking about globally to provide Freesat, we were -- and if my memory serves me correctly, from April we were talking a sum between 5 and 10 million dollars a year. It was somewhere closer to 5 million. It was about 5 or 6 million dollars a year in offsets.

3040   When you're talking about an LPIF --

3041   COMMISSIONER MOLNAR: I think it's 7 million, with the numbers you've given us -- 7 million a year.

3042   MR. BIBIC: Okay, so 7 million, because we've increased the band width contribution by a million, so it's 7 million now. 7 million deducted from 102 million dollars is not that big a sum, and it comes with the value of -- it's not for nothing. It's a credit that delivers Freesat. So, in other words, every local community will now have access to every local station, including the five additional stations in Saskatchewan, so there's a significant consumer value to that.

3043   COMMISSIONER MOLNAR: Okay, but that's were I am trying to understand this. Because, as I understand this, it is 7 million dollars a year to serve approximately one hundred thousand customers across the country.

3044   MR. BIBIC: Well, that hundred thousand is --

3045   COMMISSIONER MOLNAR: That customer care is based on one hundred thousand dollars or less.

3046   MR. CRULL: Correct.

3047   COMMISSIONER MOLNAR: Or fewer customers.

3048   So that's who will benefit from Freesat.

3049   And while you may put on your bird the five stations today that you don't carry, the customers in those markets would still have to buy both an antenna and a new set-top box if they wanted to access them.

3050   So, I think that's what I heard. For the five markets that are not carried today, although you're going to put them on the bird, it's not available to those customers unless they buy both a new set-top box and a new antenna.

3051   MR. CRULL: That's correct.

3052   COMMISSIONER MOLNAR: But the money will come out of the LPIF that otherwise goes to support the stations in those markets.

3053   MR. BIBIC: No, for a subscriber -- the money would come out of the -- the set-up costs would come out of LPIF, that's a one time cost. But in terms of the customer care costs, it's a function of how many customers sign up to Freesat.

3054   COMMISSIONER MOLNAR: Right. Which you have estimated to be about one hundred thousand?

3055   MR. BIBIC: Correct.

3056   COMMISSIONER MOLNAR: Right. So the customers that you have within those five markets today are not part of that hundred thousand.

3057   So I'm just trying to understand, if you are a citizen in Saskatchewan and you care about local TV, this LPIF as it has been proposed takes money away from the Local Programming Improvement Fund, and I don't see what it gives back.

3058   MR. BIBIC: Well, it gives back the ability of the consumer to get a local signal which, based on all the broadcaster's plan, some of those communities may go dark.

3059   I guess we'd have to look at which five signals you're talking about, but are any of those five signals -- are we guaranteed that any of those communities, those local communities will be able to receive TV off air? Will the broadcasters convert from analog to digital transmission facilities in those five communities?

3060   If those five communities are not in the broadcaster's conversion plans and we don't do Freesat, those customers will get no local programming, because the broadcasters are not willing to step up to their regulatory obligations and convert.

3061   COMMISSIONER MOLNAR: Okay.

3062   MR. BIBIC: That's the benefit.

3063   COMMISSIONER MOLNAR: Well, let me ask it another way. In that community that may go dark, today the cable company -- in fact, in these communities there's two competing cable companies both providing the local signal today -- if OTA goes dark, they will continue to provide them. They are obligated to. You are not. If you put it on your bird you're going to do it at the cost of the Local Programming Improvement Fund, and that's where I have a problem understanding from an equity perspective with cable companies who are -- who will continue to carry those and don't -- aren't able to offset their costs against LPIF --

3064   MR. BIBIC: Well, the difference --

3065   COMMISSIONER MOLNAR: -- and from a customer perspective, from a citizen perspective, how citizens are better off when you are offsetting 7 million dollars a year to serve one hundred thousand. And if other customers -- if your existing customers in those markets want this, they are required to upgrade both their antenna and their set-top box to enjoy it.

3066   MR. BIBIC: so, let me summerize it this way, and you have to come to your value judgment if you think it's important enough to make sure that customers who receive TV over the air get a free TV option, so-to-speak. You have to make that judgment call.

3067   But here are the differences and the value comparisons: Cable will, in those community you've given an example. There are two -- you know, customers will have the cable option. That's fine. That's good for the customer. So, if they want local TV they can get it but they're going to have to pay thirty to thirty-five dollars a month for that. So, that's good, that customer is willing to pay and will get access to TV.

3068   The difference with Freesat is, of course there's the setup costs. But, with cable to have to buy a set-top box anyway. The difference with Freesat is it's going to be free every single month; that's one.

3069   So the cable bears a cost but it is paying --

3070   COMMISSIONER MOLNAR: But, can I -- sorry, could I just insert at that time --

3071   MR. BIBIC: Yes.

3072   COMMISSIONER MOLNAR: Because I do understand for those that do not have a cable option today, it offers them this.

3073   If you have a cable option today, it does not.

3074   If you are a Bell TV customer today; if you are a cable customer today, it is not free for you, right?

3075   MR. BIBIC: But it is. It is.

3076   If you are a Bell TV paying subscriber and you are in a community where we don't currently carry the local signal.

3077   COMMISSIONER MOLNAR: You can use Regina.

3078   MR. BIBIC: Regina. We will lift Regina as a result of Freesat.

3079   If you want to upgrade your satellite equipment, you will be able to get Regina off Freesat for free, while continuing to pay a subscription for every other service you want.

3080   So, Freesat will be available to everybody who wants to receive their local signals for free. They will have to pay for the dish and the set-top box, but as a Freesat customer, you could say, "I want the seven local signals in my community for free, and I want to pay one hundred and twenty-five dollars to Bell TV for all the great stuff that they offer me in the five hundred channel universe." You could do both.

3081   Or, you could say, "I do not want those seven local signals because frankly I do not even care, so I will continue with my old set-top box equipment and get the other great five hundred channels that Bell provides me, or I can disconnect my -- unfortunately you do not want this to happen -- I can disconnect my hundred dollar package and I am going to buy a new set-top box and go with the free seven signals."

3082   You can have -- you can do all those things under Freesat, all of it.

3083   MR. FRANK: Plus, I'd add, Commissioner, that we are prepared to provide the applicable Freesat signals to the local cable TV companies. So there is a backhaul transport issue as well benefit.

3084   COMMISSIONER MOLNAR: I don't understand that. The local companies will take it directly from the OTA provider?

3085   MR. BIBIC: Not if the OTAs don't build transmission facilities, they won't.

3086   COMMISSIONER MOLNAR: Okay, I will have to take that away. I just have one more question.

3087   Once again, I am trying to understand the rationale for taking freesat costs out of the Local Programming Improvement Fund. The Local Programming Improvement Fund is there to support conventional television in small markets and I am trying to understand why it makes sense to strip money from that to support these potential 100,000 OTA viewers.

3088   MR. BIBIC: Okay. So we take --

3089   COMMISSIONER MOLNAR: But I just have one more question.

3090   Can you tell me if you did flow through the LPIF to Bell customers?

3091   MR. BIBIC: We did.

3092   COMMISSIONER MOLNAR: You did?

3093   MR. BIBIC: Yes, we did. So the answer to that one is we did.

3094   And why use LPIF as an offset? When we developed freesat, we sat back and we said, okay, it is not our regulatory obligation to -- it is not our obligation to fund the transition costs of the broadcasters, it is their obligation.

3095   And by the way, they are willfully blind -- seem to be willfully blind to the fact that they have an obligation and it has been known for years and years, and now we heard various plans, none of which get us to digital transition by 2011.

3096   So it is not our obligation. We wanted to step forward but in stepping forward to help out, I think it is fair for Bell to say, you know, we shouldn't absorb their costs of transition.

3097   So we will make available our facilities largely on a cost-recovery basis. We are funding more of the satellite bandwidth costs than we would be recovering under our model. So all we want here is cost recovery, not to make a fast buck.

3098   So where do you get cost recovery from? We can get it directly from the broadcasters. If the broadcasters paid us for this directly, frankly, it would still be cheaper than for them to transition to digital everywhere. So we could have put forward that model. We kind of guessed what the reaction would have been.

3099   LPIF had just been set up and we said, well, here is a good place where we could offset the cost because it will be a portion that we are offsetting compared to the total value or we could find some other fund. We could take it out of the Production Fund we contribute to out of our 5 percent BDU contribution or the government could pay for it.

3100   We are agnostic with respect to this. We just put forward LPIF because it was new and it was this revenue stream that hadn't yet been put in place. So we thought that it would be easier to absorb. That is the only reason. That is the logic behind it.

3101   COMMISSIONER MOLNAR: Those are all my questions.

3102   THE CHAIRPERSON: Suzanne.

3103   CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.

3104   Bonjour, messieurs. J'ai quelques questions.

3105   La première découle de la discussion que vous avez eue avec monsieur Katz, et au cours de laquelle, si j'ai bien compris, si j'ai bien noté, vous vous êtes engagés à fournir une estimation des coûts de backhaul, que je traduirais en français comme les coûts de raccordement -- je ne sais pas si votre terminologie est la même là -- pour les 45 programmes locaux qui feraient partie de freesat.

3106   Est-ce que, par la même occasion, ça serait possible pour vous de nous fournir les coûts de backhaul des signaux qui sont présentement transportés et de nous préciser qui les assument?

3107   M. BIBIC : Je crois que ça serait possible, mais je vais confirmer avec Chris.

3108   MR. FRANK: Yes. If I understood correctly, you would like us to provide you with a confidential undertaking giving you the cost of the signals in the last CAB deal, the backhaul cost associated with each one of those signals?

3109   CONSEILLÈRE LAMARRE : En fait, oui, pour tous les signaux.

3110   MR. FRANK: For all of the signals?

3111   CONSEILLÈRE LAMARRE : Oui. Est-ce que c'est possible?

3112   MR. BIBIC: For all seven, Chris.

3113   MR. FRANK: Okay, got it.

3114   CONSEILLÈRE LAMARRE : C'est possible. Merci.

3115   Je reviens sur votre présentation. Aux paragraphes 19 et 20, vous nous fournissez votre propre définition de ce que vous considérez être de la télévision locale, avec laquelle on peut être en accord ou pas, et pour illustrer votre propos, vous avez utilisé la grille horaire de CTV Ottawa.

3116   Avez-vous fait le même exercice avec la grille horaire de TVA Montréal ou TVA Québec?

3117   M. BIBIC : Non. On l'a fait avec la télévision conventionnelle anglaise. Donc, on a pris quelques horaires à Winnipeg, à Toronto, à Ottawa, et c'est plus ou moins la même chose.

3118   CONSEILLÈRE LAMARRE : O.K. Donc, est-ce que ça signifie que vous n'avez pas de position, vous avez une position différente en ce qui concerne la valeur des signaux de télévision en français?

3119   M. BIBIC : Notre position demeure la même, qu'il n'y a pas de valeur additionnelle pour les signaux conventionnels français qui sont aussi offerts gratuitement, mais j'avouerais, sans avoir fait l'analyse, que... je n'ai pas fait l'analyse, mais ça ne me surprendrait pas s'il y a un plus gros ou plus haut contenu local au Québec français qu'au Canada anglais.

3120   CONSEILLÈRE LAMARRE : Et je me permets de souligner parce que, justement, dans votre présentation, vous restreignez la question de la programmation locale et même de nouvelles locales à ce qui est purement de la nouvelle des événements locaux. En tout cas, c'est ce que je comprends de votre présentation.

3121   Je pense qu'il y a beaucoup de citoyens canadiens qui estiment que de l'information locale, ça inclut aussi des analyses des événements nationaux et internationaux de leur point de vue et l'impact que ça l'a chez eux.

3122   M. BIBIC : Il demeure quand même que même si on considère que la totalité des nouvelles à 6 h 00 est locale, même si c'est une perspective locale d'un événement international ou national, le fait demeure qu'on n'a qu'une heure entre 6 h 00 et 7 h 00 et une demi-heure entre 11 h 30 et minuit et une demi-heure à midi.

3123   CONSEILLÈRE LAMARRE : Pour l'horaire de CTV?

3124   M. BIBIC : Et c'est toutes des nouvelles, il n'y a pas grand-chose.

3125   CONSEILLÈRE LAMARRE : Pour l'horaire de CTV à Ottawa?

3126   M. BIBIC : Pour l'horaire à...

3127   CONSEILLÈRE LAMARRE : Pour ce que vous nous avez présenté ici?

3128   M. BIBIC : Pour Global, c'est la même chose.

3129   CONSEILLÈRE LAMARRE : Pour ce que vous nous avez présenté ici. Bon.

3130   M. BIBIC : Et c'est plus ou moins la même chose pour les grosses chaînes de radiodiffusion anglaise.

3131   CONSEILLÈRE LAMARRE : Maintenant, en ce qui concerne la capacité de transport de vos satellites, c'est une question qui est souvent posée, c'est une question qui est souvent débattue. En fait, je me permettrais même de dire qu'à certains égards, parfois, c'est plus de la spéculation que de la discussion.

3132   Je crois qu'une des raisons qui nous amène face à cette difficulté-là, c'est que vous nous fournissez, du moins au Conseil, de l'information sous pli confidentiel parce qu'il y a des éléments stratégiques à ça, et je le comprends. Donc, il y a une partie de l'information qui n'est pas publique.

3133   Mais même l'information confidentielle que vous nous fournissez, vous le faites dans un format texte, si je peux me permettre l'expression, alors que j'estime qu'une information graphique plus conviviale aiderait beaucoup à comprendre les enjeux.

3134   Alors, j'ai une demande spéciale, et la demande spéciale, c'est la suivante. Je ne vous donnerai pas tous les détails. Vous pourrez allez voir monsieur Jeff Conrad après ça parce que je lui ai déjà parlé de mon beau projet.

3135   Si on pouvait avoir pour chacun des satellites qui sont utilisés par Bell, sous une forme graphique, la capacité brute de tous les transpondeurs que vous utilisez et l'utilisation que vous en faites présentement, que vous en feriez en 2011 si freesat était mis en ondes, et que vous en feriez en 2011 si freesat n'est pas mis en ondes.

3136   Je comprends qu'il va avoir des hypothèses, qu'il va avoir des notes qui vont rester, il va encore avoir du format texte qui va rester, mais déjà, si on avait ça sous forme graphique, je pense que ça aiderait beaucoup à nos discussions.

3137   MR. DINESEN: If I understand your request correctly, I think you are asking for me to work with your staff to present to the Commission in maybe a more accessible manner what our capacity abilities are and will be?

3138   COMMISSIONER LAMARRE: Quite frankly, I think, Mr. Dinesen, that I want those nice graphs that you have somewhere in your files.

3139   MR. DINESEN: Okay, we can do so and I think I owe it to the Commission to provide some more sufficient description as well. And if Jeff is the one to do so, I would be happy to work with Jeff.

3140   COMMISSIONER LAMARRE: Yes.

3141   MR. CRULL: I can assure you, Commissioner, that he is capable of doing that because he has to do it for me frequently.

3142   And I think the other thing that we may offer is a working session. Sometimes we need to sit live in front of a whiteboard and do it and ask questions interactively and I think that that can be very helpful because these are difficult issues.

3143   COMMISSIONER LAMARRE: I know but in the case of this proceeding, I think we are going to have to stick with the undertaking and the graphs.

3144   MR. CRULL: Understood. Okay.

3145   COMMISSIONER LAMARRE: Those are my questions. Merci.

3146   M. BIBIC : Merci.

3147   THE CHAIRPERSON: Elizabeth.

3148   COMMISSIONER DUNCAN: Thank you. I have one question and it is actually one of clarification.

3149   I am trying to understand the efficiency of adding all of these channels to your service.

3150   With respect to the local into local, if I am understanding what local into local is, if I lived in a small community, say I lived in Yarmouth, Nova Scotia, for example, my signal would be available off satellite -- if there was a broadcaster in Yarmouth, it would be available off satellite in Yarmouth but it wouldn't be available anywhere else in the country; is that correct?

3151   And that is, hence, your comment about having to negotiate the distant signal?

3152   MR. FRANK: Correct. That is correct.

3153   COMMISSIONER DUNCAN: Okay. Is that an efficient use of satellite capacity? I just --

3154   MR. FRANK: Well, you make a very good point, Commissioner Duncan.

3155   We use national beams and if we are covering the grade B contour of Yarmouth, the signal might go as far as Little River but that would be about the extent of it. So it would be locked out -- unless we had a distant signal arrangement, it would be locked out for the rest of the country. So you could characterize it as quite inefficient.

3156   COMMISSIONER DUNCAN: And so that capacity couldn't be used?

3157   MR. FRANK: No.

3158   COMMISSIONER DUNCAN: It is done, it is used.

3159   MR. FRANK: It is used.

3160   COMMISSIONER DUNCAN: Okay, thank you. That was it.

3161   Thanks very much, Mr. Chairman.

3162   THE CHAIRPERSON: Thank you.

3163   Tim, did you have a question?

3164   COMMISSIONER DENTON: No, thank you.

3165   THE CHAIRPERSON: Okay. I think that completes our questions.

3166   Mr. Bibic, I am unhappy with our exchange. I have the feeling we didn't quite come to grips with the issue. So upon reflection, in your written submission if you can try to address the issue that I suggested of how to overcome what I see as a bit of an ideological problem that you were not willing to discuss. We we have asked and they are only willing, as you put it -- but you say you are willing to negotiate, so surely there must be a way we can resolve it.

3167   I look forward to seeing an inspirational submission from you. Thank you.

3168   We are running out of time, we still have one more panel to go. So Madame Roy, let's go without any break.

3169   THE SECRETARY: Thank you.

3170   I would now invite the next participants, Edgar A. Cowan, Pam Astbury and Wendell Wilks, to come to the presentation table.

--- Pause

3171   THE SECRETARY: We will hear each presentation, which will then be followed by questions by the Commissioners to all participants.

3172   We will begin by the presentation of Edgar Cowan. Mr. Cowan, you have five minutes for your presentation. Thank you.

3173   Can you please open your mike? Thank you.

PRESENTATION

3174   MR. COWAN: Commissioners, I wish to concentrate my few minutes today on the whipping boy which is local television.

3175   During the past five decades, I have been a newspaper reporter, an advertising executive, a national magazine publisher, a television producer, a co-owner of a conventional television system, a pay TV network, a CEO, a senior operating executive of the Broadcast Centre at the '88 Calgary Games and was very instrumental in the launch of the Sympatico Internet system in 1995.

3176   So I have seen and heard and experienced almost everything and from a television and especially a local television perspective, it is not a very pretty story.

3177   It is a story that has ended in a humiliating insolvency proceedings of a national network, has resulted in the premature fire sales and closings of regional television stations, has nurtured the creation of opaque and oftimes conflicted TV media conglomerates, has witnessed the destruction of the boundary between content and carriage, has encouraged the almost politically instigated takeover of what and how we watch television by what I consider avaricious and insensitive BDUs, and all resulting in the decimation of anything that even resembles local television.

3178   And with all due respect, this devastation has occurred under your watch and the watch of former Commissions. Luckily, our current ill-timed economic agony has brought to the surface most of the underlying crises of issues today, issues that have finally erupted in the most unseemly cable/network TV war we have ever experienced, a war perpetrated by mean-spirited, public-be-damned, greed-obsessed, bending-of-the-truth licensed broadcasters, your licensed broadcasters and your licensed BDUs.

3179   As Peter Gilgan's(ph) letter in the Globe and Mail in October so aptly put it:

"Networks and cable outfits duking it out is like watching a bad divorce between two very rich people." (As read)

3180   Oddly, this openly divisive current war has fortuitously given us all a unique opportunity to possibly begin a process of restoration to finally fix what is clearly a serious fracture in the Canadian television system, a system that if we are not diligent could easily expire quite soon in the perilous wake of the exponential growth of the digital media universe, which has already resulted in the evolution of new media platforms unheard of decades ago.

3181   I have several suggestions which I have given more time to in my written submission.

3182   Number one, let's get network television -- and most of these stations are networked -- out of local television completely. Let's get cable out of local television completely, especially out of local access, which local access is probably 30 years by their sell by date anyways, and that the CRTC create a new category of must-carry local television licences, licences that would be supported by local and regional advertising, appropriate BDU access fees, and these newly licensed local TV licences would have sole access to what you are calling Canadian local programming improvement funds. All right.

3183   These recommendations go some distance in levelling the network television/BDU financial playing field by substantially lowering the operating costs for both the network and the BDU operators.

3184   On a win-win side it would establish an innovative regulatory device to resolve the local television conundrum and to provide a whole new role and a financial foundation for the potential of a revival of real local television.

3185   In closing, I have to be a little difficult. As a Canadian taxpayer, I have not paid to have you people act as marriage and divorce counsellors. I have paid you to act as a regulator and I want you to act as a regulator. You have taken the role of Nero, throwing all us Christians to the lions, and make no mistake about it, BDUs are ferocious lions, as you got a good dose of yesterday and a little bit of today with the head of the lion pride, my friend Phil Lind. Wait until you get a hold of poppa, Jim from out West.

3186   One of the worst times of my own broadcast life occurred when I was forced by the CRTC to negotiate with Rogers and Mr. Lind over pay TV revenues back in the pay TV days. They played a good cop, bad cop game with me and then they lied to both the Commission and to my directors at C-Channel -- and I could go into that if you want to -- and caused us within four months to bankrupt ourselves, and to put iodine on the wound bought the name from the Receiver for nothing.

3187   These people do not seem to act in good faith, so expecting them to do so now is both naïve and destructive to the system.

3188   With all due respect to you, Commissioner Finckenstein, and especially to you, Commissioner Arpin, it is time to step in and regulate from the very beginning. That way maybe we just might hold some hope for sanity and a return to a well-programmed, well-financed and well-viewed local television.

3189   We want you to set access fees, regulate them and review them on a regular basis.

3190   Thank you.

3191   THE SECRETARY: Thank you, Mr. Cowan.

3192   I would now invite the second presenter, Pam Astbury. Ms Astbury, you have five minutes for your presentation.

PRESENTATION

3193   MS ASTBURY: My name is Pam Astbury. I am a professional civil engineer in the Province of British Columbia and I am president of Save our CBC Kamloops. I also represent a large demographic of viewers who will ultimately be affected by the decisions made following this hearing.

3194   Before I get started, I would like to point out a couple of things.

3195   I do not stand to gain anything personally, financially or professionally by appearing here today. Unlike most attendees, I am not paid to be here. I have, in fact, rearranged my busy schedule as a consulting engineer and taken holiday time and travelled across the country to be here before you.

3196   I am without an entourage of accounting staff, lawyers, strategists and marketers. My presentation has been authored only by me. I am a Canadian citizen that speaks for my community on the grounds of access to high-quality broadcast television.

3197   My reason for attending this hearing is to see the CBC restored as an over-the-air service to those communities that have already lost it. To communicate my concern of losing our local broadcasting following the digital transition in 2011, CFJC is our only access to local news and stories and may shut down like Brandon and Red Deer broadcasters if the over-the-air transmission signal is not converted to digital.

3198   I remind the CRTC that the nation's public broadcaster is a critical public service which should not be left in the care of private sector distributors regardless of market size.

3199   Our group formed in 2006 following the termination of over-the-air carriage of the CBC in our city. In Kamloops, the CRTC allowed the local broadcaster, CFJC, to disaffiliate with the CBC --

3200   THE CHAIRPERSON: Excuse me, you have slow down a bit because you are translated into French and the translators can't keep pace with you.

3201   MS ASTBURY: Okay, I am a bit nervous.

3202   In Kamloops, the CRTC allowed the local broadcaster, CFJC, to disaffiliate with the CBC on the grounds of cost savings, by all appearances violating both the Broadcasting Act and CBC's mandate.

3203   To replace the CBC content, CFJC picked up a trivial E network as a substitute. The reduction in programming quality has been horrific. Instead of enjoying programs such as "The National" and "The Nature of Things," Kamloops was left with various American entertainment magazines and renovation dramas such as "Extreme Makeover."

3204   Our group took these concerns to our city council and received unanimous support from all councillors and mayor. In a few short days we collected over 2,000 signatures of support for the restoration of over-the-air CBC.

3205   Our group then presented our concerns to the Heritage Committee in Vancouver in 2007 as part of the public hearing to review CBC's mandate. We reviewed technical research funded by the Canadian Media Guild specifically regarding the feasibility of multiplexing.

3206   We have lobbied both the CBC and the CRTC to establish Kamloops as the pilot city for demonstrating the cost effectiveness of multiplexing for smaller market areas. We believe that the future of television will be constructed upon a digital foundation and that digital technology is the answer to both large and small market areas across Canada.

3207   2011 ebbs even closer for towns like ours that have been left off of the list of mandatory digital transition areas. Inevitably, the current analog transmitters will soon reach the end of their useful lives, leaving over-the-air broadcast in jeopardy. In addition to already losing CBC over-the-air, Kamloops may no longer have a local broadcaster, period.

3208   If this doesn't seem like a big concern to the CRTC, let me illustrate the role of local programming in a city like ours.

3209   This summer was incredibly dry. The forest area around our region was either on fire or at extreme risk of being ignited. We had been through this before in 2003 and concern for lives and property was very, very real.

3210   Accurate information regarding evacuation orders, travel routes and area closures was best available via local radio and television. Without this level of coverage, we would be without vital information as well as lose sight of the human picture.

3211   Our station covered the stories of those who rescued livestock, built firebreaks and cared for evacuees. These are stories that cannot be truly understood when covered from big cities of Vancouver or Toronto, should they be covered at all.

3212   A lot of communities share our situation. We have already discussed Brandon and Red Deer, similarly sized communities no longer serviced by a local broadcast and CBC.

3213   What is to be done for those small markets currently serviced by over-the-air analog transmitters?

3214   Since day one our group has been dedicated to being part of the solution to this problem. Technology is changing fast and is the answer to both large and small over-the-air markets.

3215   Multiplexing is a form of digital broadcast that emits a high definition signal that can be separated into six standard digital sub-channels. This is not at all like free satellite technology.

3216   An independent engineering study of the Kamloops transmitter revealed that the conversion costs from the current analog transmitter to digital would be less than $90,000. Divided six ways, that is less than $15,000 per channel, quite simply a cost-effective option for small market areas.

3217   Such ownership can be held by local stations, resulting in the broadcast being maintained by broadcasters, leaving cable providers to do what they do best, providing comprehensive entertainment packages for those who want more.

3218   There is, of course, the issue of the set-top box. For those viewers without a digital television set, boxes are available for purchase for approximately $50. The payback period for such a purchase would be just a couple of months.

3219   Contrary, the free satellite model would require the purchase of a box over $500, which would see much longer and less desirable payback period.

3220   During this hearing we have been discussing viewer choice when it comes to television viewing. We have never experienced a time where so many options were possible.

3221   The City of Kamloops has a population of approximately 87,000 people. It is, like many smaller British Columbian cities, made up of very active and involved people.

3222   My peer group is largely young professionals with a decent disposable income. Most of these people can afford but are not interested in large cable packages. As savvy consumers, they are seeking something proportional to the limited amount of time they have for viewing. This group has been hugely supportive of the six-channel multiplexing.

3223   As a representative of the community of Kamloops, I am looking to the CRTC for the following:

3224   - include Kamloops with its originating station CFJC on your list of cities where broadcasters must provide a digital signal;

3225   - encourage CFJC to multiplex this signal;

3226   - urge the CBC to join the multiplex so that the public broadcasting service we already pay through our tax dollars is actually available to us without further cost.

3227   I appreciate the tough position that the Commission is in and the problems facing broadcasters. However, I think it is imperative that we find a way forward that protects local channels and over-the-air broadcasting even in smaller cities like mine.

3228   As a professional engineer, I am trained to resolve problems objectively and cost effectively with input from stakeholders, large and small. The most rewarding solutions are never easily obtained. This is why I am compelled to be here today as a citizen presenter.

3229   THE SECRETARY: Thank you.

3230   I would now invite the third presenter, Wendell Wilks. Mr. Wilks, you have five minutes for your presentation. Thank you.

PRESENTATION

3231   MR. WILKS: Mr. Chairman, Commissioners, I have had the agony and the ecstasy of appearing in front of every CRTC Chair and Commission Panel since the Broadcast Act of 1968 was passed by Parliament.

3232   I have won approval for three broadcast licences for over-the-air television. Two of the three included new licences in Toronto and Edmonton and the third being an ownership change for a Calgary station rendered by Dr. Andrew Stewart and the BBG in 1967.

3233   That 1967 hearing was held at Hotel Château Frontenac and we had another guest there. President Charles De Gaulle of France was there. He was not treated so kindly that day as he was ushered out of Canada for uttering the phrase "Vive le Québec libre" in Montreal the previous night.

3234   My CRTC batting average is similar to that of the Toronto Blue Jays and ironically is a startling 100 percent better than the Toronto Maple Leafs, who haven't won a thing since 1967.

3235   I have lived through this Commission's history. I have at one point wanted to lambaste this Commission by addressing the 36 major mistakes solely committed by past CRTC panels since its inception that have resulted in the collapse of the privately owned Canadian TV industry.

3236   I have elected to follow the Chair's lead, though, upon learning yesterday that this hearing was about the future and not the past.

3237   I have subsequently put away my five-minute recipe to microwave the 42 years of mistakes by the CRTC as originally intended in my five-minute allotment, and I decided to go ahead with this one.

3238   I'm a hybrid broadcaster. I started to manage television stations in Calgary, Edmonton, Toronto, Red Deer and Kingston.

3239   I have produced thousands of hours of independent television production, and some of these have been seen around the world. And I did a considerable amount of production in Quebec. I have sold productions to every network in Canada and sold the first Canada-made weekly television series to NBC.

3240   Although it's true the CRTC made huge errors in allowing cable BDUs to also be conflicted broadcasters and Pay TV channel owners and specialty channel owners, creating really terrible conflicts of interest.

3241   You are right, Mr. Chairman, to ask how do we clean up this mess together?

3242   Simply put, we have too many straws sucking the dollars out of the national ad pool. Dozens of specialties and pay stations consistently double-dip to take the cash from broadcasters that was previously only available to the broadcasters, and now they take cash from the consumers. The pond, unfortunately, is going dry as the costs of our business continue to soar.

3243   The CRTC convergence fiasco has forced diminishing Canadian expenditures and massive layoffs nationwide. It has failed.

3244   The giant companies that dominate ownership of all media in Canada with under-capitalized businesses, has caused a collapse and the shrapnel we as Canadians have to live with are shattered and tattered companies that we now witness in peril and indeed in break-up.

3245   We are in the midst of a dire and perilous dilemma unlike never before. $2 billion profit in 2008 for the BDUs with only $400 million for Canadian producers. Banks have made more than us creators.

3246   My heart sang when Commissioner Lamarre asked Rogers, "How does spending $700 million U.S.A producers strengthen and enrich and enlighten the social, cultural, political and economic fibre of Canada?" Bingo.

3247   Mr. Chairman, you said the system must be predominantly Canadian. Well, it clearly is not. Our so-called Canadian broadcast system is now dominated by foreign programming and foreign interests. If you cannot correct this imbalance, then I believe that you will have failed Canada.

3248   We do see solutions. We believe none of the giants actually produce true, local programming in English Canada, especially in our large cities.

3249   We think the model that's currently not delivering HDTV is a national disgrace. The CRTC turned down applications for all HDTV Canada signals as early as -- and protected from competition by the CRTC -- as early as 2003. Now, the giants are telling us that they are not going to complete their rollout until 2013.

3250   The truth is, the only way to increase local TV now is to do something new. We call it narrowcasting; TV stations with small signals serving small, distinct communities. We are ready to launch new television stations.

3251   And Canada's underserved cities in southern Ontario is a start; cities like 700,000 people in Mississauga, Oakville, Burlington; Milton with 500,000 viewers; Brampton with just under a half a million viewers with no local service all; Niagara with half a million people, no service at all; Hamilton which is underserved and you need to watch tonight, for instance in Hamilton, to see what is available to watch in Hamilton. I can tell you the amount of Canadian content appearing tonight -- zero, nothing at all. Not a thing.

3252   Now, the problem we have now is that we are raising -- we are going to raise -- we are in the middle of raising hundreds of millions of dollars for all HDTV stations now that can employ thousands of Canadians whilst enriching the heritage to which the CRTC was founded over 40 years ago.

3253   We speak to and have to listen to a great lie, specifically referencing the sorry statement that emerged yesterday during the Rogers' testimony. They said at best Canadian programming breaks even. Well, we are ready to prove them wrong. We will not spend $88 million on U.S.A producers. We will spend it on Canadians. We will tell how at a later date, at another hearing.

3254   But let me just say emphatically on behalf of the writers, directors, producers, artists, techs and the actors, the reporters, the creators of Canadian television, I believe we are the best in the world.

3255   Let me say that the thousands of graduates of TV colleges and universities nationwide who cannot find work in their chosen profession, this CRTC panel before me can change our system and create a Canadian system re-evolution by boldly staring down those ugly goliaths that the CRTC has allowed to swallow us up and enslave the industry.

3256   My final point, Commissioners, is that the print media, those giant national newspaper columnists, do not even comment and discuss these urgent national matters now because their owners are the same culprits that own and control TV in Canada. These conflicts of interest caused by concentration of ownership, has diminished the freedom of expression in my country and our national media.

3257   TV can never be controlled by hedge funds and bankers. A breakthrough will never come from lawyers and accountants. It can only come from enlightened leaders like you who have the power and the authority to unleash Canadian program producers and embrace the strength and prosperity waiting in the wings.

3258   The key question is whether you, this august CRTC panel, have the character and the will to change the system and give new competitors a chance to fail or succeed.

3259   Please stop protecting these failed behemoths from allowing Canada to experience and enjoy the best in production. Freedom of the press and other media is a constitutional right in Canada. We would like to have those rights back, starting now.

3260   Thank you for your courtesy.

3261   THE CHAIRPERSON: Thank you, all three, for your comments and thank you for coming here at personal expense. It's always good for us to put things in perspective. The best way to do it is not only to talk to the giants of the industry but also to you, informed citizens like you.

3262   Mr. Cowan, when I read through your presentation, if I understand your request, you want to carry a new category of must carry local television licences. What happens to the existing licensees, the CTVs or Globals?

3263   MR. COWAN: I'm suggesting that, in this country when you look across the country most of the stations are networked already. Now, that has been built up over the last several decades. And I am suggesting let them be networks and let them thrive as networks. Relieve them of the responsibility for local television because they are marginalizing that material.

3264   I mean, I grew up with local television. I grew up on wonderful local programming at CFTO in Toronto. I don't get that anymore and I will never get it anymore because of what -- the nature of that station is CTV now. It's a CTV mother station. And that happens across the country.

3265   So I'm saying, why don't we just take that away from them, all right, let them alone but give Toronto, give Mississauga, give them real local television and not cable access because that's amateur land.

3266   THE CHAIRPERSON: But okay, so taking your words; CTV is relieved of local programming. What about -- is it relieved of other obligations that we impose on it right now in terms that the majority of the program has to be Canadian?

3267   MR. COWAN: Oh, yes.

3268   THE CHAIRPERSON: And the exhibition hours and all of that? It's only the local you are talking about?

3269   MR. COWAN: Only the local aspect of it.

3270   THE CHAIRPERSON: Okay.

3271   MR. COWAN: In some cases, I think somebody mentioned this afternoon the half-hour, the little half-hour that was sitting there.

3272   I mean Mr. Wilks mentioned Hamilton. I was shocked the other day when I looked in the paper and I saw a whole week of the new CH, all right, that they bought for $12.00 or whatever it was, there is not one second of Canadian television in primetime, not one second all week.

3273   THE CHAIRPERSON: Okay.

3274   And Ms Astbury, you talked about Kamloops. How many OTA customers are there in the Kamloops area? You spoke -- your comments are primarily addressed to over-the-air customers.

3275   MS ASTBURY: Currently, there is -- 6 percent of the population is on over-the-air and that is the result of an over-the-air or over-the-telephone poll that was professionally conducted. So there is a reasonable amount of accuracy to this.

3276   When those polls were asked would they go to over-the-air in the event of a six-channel multiplex over-the-air when six stations were suggested; CBC, CTV, et cetera, the result was as high as 33 percent of 87,000 said that they would drop their cable package for such a service.

3277   THE CHAIRPERSON: And what is stopping the local broadcaster from multiplexing right now? As far as I know there is no regulatory impediment.

3278   MS ASTBURY: We don't know. They have never answered our questions, never responded to a phone call. They are not interested in discussing that as an option.

3279   THE CHAIRPERSON: I see.

3280   Okay. And Mr. Wilks, I'm not -- I listened to you and you obviously have a lot of experience but what exactly are you asking us to do, in a nutshell?

3281   MR. WILKS: The world of HDTV has been with us now since 2002 and you have heard that now we have got -- really 40 percent of the DTH subscribers are tuning to satellite television or cable television and HDTV.

3282   But you have not allowed licensees, applicants who have come forward with 100 percent HDTV licence applications -- not your panel, I might add -- but you have turned them down because you didn't want to compete with these other fellows who have now the current control and, in effect, quasi-monopolies. You didn't allow competition.

3283   We think that the future is competition. The best way we think to make anybody better is to create some competitors in the broadcast marketplace, if you encourage them and make the process a little bit easier.

3284   For instance, the last application I did at the Radio and Television Commission cost a million dollars and we had to come up with independent market surveys. We had to do enormous engineering. We had to prove the support. We had to prove the support of the advertisers in the marketplace.

3285   We spent a million dollars. It took two years to get passed, to file with the Commission and two years before we were even heard and then another six months before we got a decision.

3286   That kind of rollout is not business. That's not good regulation. That's not good for the country and it's not good for the CRTC. It's just not good for Canada. It just doesn't make any sense.

3287   So we see the need for a streamlined service for applicants and we believe that it should be a more simple process.

3288   THE CHAIRPERSON: Create a new class of HD-only licences; is what you are trying to say?

3289   MR. WILKS: No, I don't think they are new in the sense --

3290   THE CHAIRPERSON: We don't have one right now. That's my point.

3291   MR. WILKS: No, but -- yes, we indeed do.

3292   If you put a single transmitter serving 700,000 people in Mississauga -- which by the way is not part of Toronto -- CTV Toronto runs this right now, a campaign. They say, "CTV is our Toronto". That's their big national thing.

3293   THE CHAIRPERSON: Yeah.

3294   MR. WILKS: Well, the problem with that is, is that 700,000 people in Mississauga are not in Toronto. Brampton is not from Toronto.

3295   THE CHAIRPERSON: No, that's not what I'm talking about. I said we do not right now license anybody to be just an HD provider. You suggest we should, if I understand you.

3296   MR. WILKS: I'm suggesting, indeed, that narrowcasting smaller single areas serving specific communities. The 700,000 people of Mississauga deserve their own local service.

3297   THE CHAIRPERSON: Okay, thank you.

3298   Elizabeth, do you have some questions?

3299   COMMISSIONER DUNCAN: Like the Chairman I would like to thank you for your thoughtful presentations -- I read them -- and also for making the effort to come here. It helps in the process.

3300   I thought maybe what I might do is start, Ms Astbury, with you first because the other two gentlemen their approach is somewhat similar. So we will start with yours.

3301   And I understand your concern.

3302   First of all, is Kamloops within the 360 kilometres of the U.S. border?

3303   MS ASTBURY: Yes, I would say it is.

3304   COMMISSIONER DUNCAN: It's not showing up on our list of stations that would have to be converted, that market.

3305   MS ASTBURY: Correct.

3306   COMMISSIONER DUNCAN: So it doesn't have to convert to comply?

3307   MS ASTBURY: It has not made your list, no.

3308   COMMISSIONER DUNCAN: No, okay.

3309   And so I suppose it is possible that it may not end up being an issue or at least for some time. That remains to be seen. So in other words, the status quo would be maintained.

3310   But from reading your paper, I thought it was -- I didn't realize you were focused solely on having lost the CBC.

3311   MS ASTBURY: Well, there is, I guess, a two-part comment in my submission.

3312   The first is losing the public broadcaster over-the-air in our community.

3313   The second is when our community which has not made your list, when 2011 rolls around, should -- when that transmitter is no longer serviceable and it is not sensible to replace it with an analog transmitter it will not be replaced.

3314   I'm not in the business of broadcasting but I would say there is a revenue loss, substantial to the point where the station may say, "This is no longer profitable. Thank you, but we are done".

3315   So there is two items there.

3316   COMMISSIONER DUNCAN: Okay. Now, in your suggestion of what would be the channels you would like to see, you list CBC English and French Knowledge Network, Aboriginal Peoples Television Network and the local broadcasting from Kamloops and Vancouver. But the Knowledge Network and APTN wouldn't have broadcasting -- they are not currently broadcasting in Kamloops, are they?

3317   MS ASTBURY: No, not broadcasting. They are probably available on cable which I don't have.

3318   COMMISSIONER DUNCAN: So how would they -- I don't know how they would be part of this multiplexing scenario that you are suggesting.

3319   MS ASTBURY: Well, again, I'm not in the broadcast business, but one might think that a local broadcaster would pay the capital for this multiplexing technology and have six slots with which it could fill for advertising revenue as the revenue stream. And those were several quality signals that we thought, as an example only --

3320   COMMISSIONER DUNCAN: Okay.

3321   MS ASTBURY: -- could be -- we have a significant First Nations population in our community that may be quite interested in having APTN as a broadcast, as an example.

3322   COMMISSIONER DUNCAN: Have you read or been following some of the discussion on the Freesat?

3323   MS ASTBURY: I have been following it. My sense is it's very expensive, much more expensive to first buy into with the converter box to join. And then ultimately this service, if you will call it that, is being held by the digital providers who will no doubt bombard your home with phone calls to up sell you to a more higher revenue tier.

3324   I don't believe that they are really of interest in doing this because they may actually lose people at a higher revenue tier to this lower tier because people are only buying what they want and they may essentially lose money in that respect.

3325   COMMISSIONER DUNCAN: The Vancouver station that you would like to see, is it a -- I printed off the Shaw channel line-up for Kamloops. Is that Global Vancouver that you were thinking of there? You said local broadcasting from Vancouver.

3326   MS ASTBURY: As an example to Global?

3327   COMMISSIONER DUNCAN: Just as an example.

3328   MS ASTBURY: It could be CBC Vancouver, just something.

3329   COMMISSIONER DUNCAN: Okay. But you know that the -- I don't really have any good answer for you. That's a dilemma. So we will just have to take your comments into consideration and review. The CBC licence renewal will be coming up in -- I think it's probably 2011, so you want to watch for that, or late 2010. I wouldn't want you to miss it, their licence renewal.

3330   Mr. Chairman, I don't know if you would like to have the -- give the other panel members a chance to --

3331   THE CHAIRPERSON: Why don't you finish, first of all? You are the principal questioner.

3332   COMMISSIONER DUNCAN: Okay. Those are all my questions for you. Thank you very much again, though.

3333   Now, Mr. Cowan and Mr. Wilks, is that fine with you if I do your presentations together? Because I notice that they are very similar and --

3334   MR. COWAN: We are friends.

3335   COMMISSIONER DUNCAN: I gathered that was similar, perhaps, and you have been in the business.

3336   So you have obviously given a lot of thought to it and the purpose here is, as you know, to deal with the current -- what the format should be or the structure should be for group licensing for the broadcasters as we go forward.

3337   But, first of all, just to ask a few questions on the model that you are suggesting, because I think you are both suggesting dropping the community channels and dropping, as you mentioned earlier, the local programming on the over-the-air channels now.

3338   And so I'm just wondering because we are concerned about a diversity of voices; my question is wouldn't we then be losing some degree of diversity?

3339   MR. COWAN: We are suggesting exactly what you said. But we are also suggesting, simultaneously; to add a whole series of what I call very local television, all right, that is, that where in fact the diversity of voices would have a much greater platform.

3340   And this is -- we are talking about professional local television, professionally-produced with all the range that we used to have in the old days.

3341   COMMISSIONER DUNCAN: It would be ---

3342   MR. COWAN: So it would be simultaneous.

3343   COMMISSIONER DUNCAN: But one station or are you thinking there would be more than one in a market?

3344   MR. COWAN: Well, it depends on what you are calling a market. Is Mississauga a market; yes. Is Brampton a market; absolutely. Is Markham/Thornhill/Richmond Hill a market; absolutely.

3345   All right. We are saying that in the old days Toronto was a market. But Toronto now goes across the lake into New York. It goes as far north as Barrie and whatever.

3346   So you can't have local television that way. It's not. It's a regional -- anything that large is regional. So you go back to the original notion of a local television station serving huge numbers of people.

3347   Interestingly enough you know, I am doing a little job for a friend of mine in Mississauga who runs the Mississauga Living Arts Centre and he said to me -- this is a very interesting story. He said, "You know, we have a problem". And I said, "What's that?" He said, "We cannot reach our people in Mississauga". And I said, "What do you mean?" He said, "We don't have a radio station, we don't have a television station. Very few people watch Rogers although there are" --

3348   And I said, "What do you mean you don't. You don't have a radio station?" He said, "No, we don't have a radio station and we have a newspaper that comes out twice a week reaching about 25 percent of the homes and the Friday that it comes out is really an advertising bundle, all right, so we have one paper once a week reaching a few people. If I want to reach my people I have to buy the network station of CFTO or I have to buy where maybe I'm losing 90 percent when I want to reach my 10 percent of that audience". That doesn't seem right to me.

3349   And so that's all I'm suggesting. I said, "Well, maybe what we have to think about" -- and frankly, that's where the notion came from after having that discussion. And maybe it's time we got back to local television and really servicing, because when you start thinking about the word "local" there is a ton of things and it's not just news.

3350   COMMISSIONER DUNCAN: Mr. Wilks, now I am going to ask you about that.

3351   MR. WILKS: Commissioner Duncan, I would suggest that Ed and I do differ on some things. I don't think that we are much interested really. I don't think it's in our interests to tell other broadcasters to produce less Canadian programming ever.

3352   So I differ with him on that one, in the sense that they can never produce enough. We are 60/40, 60 percent Canadian; but that's not a problem 60 percent Canadian, 40 foreign which is primarily American. The problem is we are spending $700 million on 40 percent and $400 million on the 60 percent. Whose country is this?

3353   So you can't produce enough local programming and the decline at the CTV network stations and the decline in the content, quantity and qualitative, Global television stations and Rogers' stations across the country is pitiful -- pitiful.

3354   COMMISSIONER DUNCAN: Well, that point actually touches on one of the questions that we have asked in the PN for this hearing. What do you think should be the requirement? Do you think we should have a program expenditure requirement, one-to-one Canadian/U.S., a percent of revenue?

3355   How do you think we should approach or impose if at all a requirement with respect to U.S. programming versus Canadian?

3356   MR. WILKS: At the very least, it needs to be proportional. 60 percent in your programming requires 60 percent of the money. You can't -- this is our country. It's not Americans.

3357   When Americans are the biggest benefactor of our system we have lost the purpose of the broadcast system. Commissioner Lamarre yesterday hit it, nailed it right on the head. I don't actually see why they should be running American programming at all.

3358   Look, there are four major sources of revenue that are not even talked about here at this hearing; four major sources.

3359   Ed talked about it briefly. These are the local advertising -- on the weekend they can't use television. They can't use television, the most powerful advertising medium known to mankind, because it's not available for a local marketplace throughout southern Ontario. So we are missing hundreds of millions of dollars of revenue in that source.

3360   The second part is you have already got applicants who have come forward to you and said, "Look, can we take advantage of all of those CNN fees with all of those commercial avails and sell them and then we will give a portion of it back to the industry?" Well, you turned that one down but I think that the problem with that one was that who received the money was the wrong proposition.

3361   I'm not at all thinking that the NBC/ABC/CBS/Fox -- their commercial revenue I really do think that it belongs to the Canadian people. The unsold avails if we can get the money to the American producers and give them the value -- but the money that comes back should be reallocated to make sure that it goes into Canadian programming.

3362   And so I'm not sure that the Canadian broadcasting should be handling that one.

3363   And then there are other forms of revenue that the Radio and Television Commission in my opinion has not taken any leadership to get this kind of revenue -- the patent drugs, the prescription drug regime where when we watch the American television networks we see them -- well, the NBC and CBS and ABC news is totally sponsored by drug companies. We don't get any. We carry Viagra commercials but --

3364   THE CHAIRPERSON: I have to take exception to what you are saying. I am on record. If we are testifying before a parliamentary committee we should allow it. Unfortunately, it's not within our jurisdiction but our view is eminently known on this point.

3365   MR. WILKS: Well, it's the number one advertiser in America today is prescription drugs.

3366   The difference with Viagra, as I was about to point out, is that in America they have got 30 seconds commercial and then 30 seconds dealing with the effects of the drug on your body. In Canada we don't do that. We don't have to worry in Canada about telling anybody what to do with their three-hour erection at the end of the process. Only in America they tell us that.

3367   So but I'm just saying it's not -- we need to balance it. Why aren't we carrying any of the American commercials of prescription drugs when we can't do it ourselves? It's just -- it's nonsense.

3368   And then, of course, the big one is retail. See, we came from western Canada and in western Canada when we started our television stations they became extremely profitable right out of the gate. We knew right away that we were not going to get the national advertisers.

3369   So what we did is we got the retail advertisers so that they were the majority of our revenue. That's not the model that you are dealing with, with the networks. They only live off the national revenue pool. They don't have retail commercials, period. It's not part of their game.

3370   But it was with us. When we started ITV Edmonton we took little companies that were just strictly local. One of them was The Brick. One of them was Boston Pizza. There was one store in Edmonton -- one store in Edmonton. They are now national brands with hundreds of stores and they credit completely local television with their start-up.

3371   And you see, no other businesses now have that available in most of the cities across the country because their signals are too big and you have got to buy a half the province in order to get the three or four hundred thousand people that you are trying to target to service your particular product.

3372   So it's not efficient, and it can be. We are missing -- we are leaving it really to the print guys. We are leaving all the money on the table.

3373   COMMISSIONER DUNCAN: What I'm wondering about, and looking at what you are talking about, sources of revenue and this scenario that you proposed is the elimination of the community channel. Were you proposing that these companies would then get the 2 percent that now goes to the community channels?

3374   MR. WILKS: No, again, I differ on the community channel.

3375   I believe that there is an essential purity to the soapbox that's offered by the local channel. It's free and it does use volunteers, and volunteerism is really one of the fundamental things that make us Canadian. And I believe that it's valuable. I believe that it's less valuable today than it was when it started, when we started cable television in the early seventies but, as we pointed out, there is only 7,000 persons watching which used to have 70 to 80,000.

3376   But the problem is this. They haven't kept pace with technology. They are using equipment that's not even suitable for boat anchors, that's so worn out and so out of date it's just not right.

3377   When you can look at 1,000 channels on our system and you can see national and international -- and I can see Germany, I can see Russian, I can see China, but I can't find in any of those 1,000 channels us. I can't find us. It's not right and we need to do something about it. We need --

3378   COMMISSIONER DUNCAN: Well, that --

3379   MR. WILKS: I just think if you think the BDUs and the satellite providers are going to be the guys who negotiate with us, then you also believe that Santa Claus and the tooth fairy are going to look after us too.

3380   COMMISSIONER DUNCAN: What do you see what would be the local type of program -- first of all, let me ask you this.

3381   How many -- and you mentioned -- Mississauga, you said, had a population of 700,000. And how many of these new channels that you are talking about do you think would be licensed, would apply that there is a business case for in that market?

3382   MR. WILKS: Well, it takes more than just local programming. You need to have some programming. You need a mini-network in our opinion. Well, now, that's for another hearing.

3383   But the point really is, is that we believe that an all-Canadian system would work and there has never been a time like now to do an all-Canadian system.

3384   I happen to have some wealthy Canadian friends and they happen to agree with me, and we hope that when this thing opens up and there really is going to be legitimate competition that we do it soon. You know, waiting until 2013 for the HDTV transmitters is just not right.

3385   Look, I watch HDTV every day and I have the analogue on my television set and I have the HDTV. If anyone looks at a Blue Jays baseball game or a Maple Leafs, even the Maple Leafs look good on HDTV.

3386   And you switch over to the analogue feed, it's garbage. You just can't watch it. You can't bear it, it's so inferior.

3387   We should not be inferior with our major domestic services -- ever. And, we are. And we have been retarded for some time, and there are people who are ready to go and have been for some time, but we knew that the system was not going to allow us to get in, that they were going to protect; they were not going to allow competition.

3388   COMMISSIONER DUNCAN: Just to go back then, because we are running out of time --

3389   MR. WILKS: Yes.

3390   COMMISSIONER DUNCAN: But just because of the purpose of this hearing -- and obviously you couldn't just stop what we're doing today and move into something else, so --

3391   MR. WILKS: Yes.

3392   COMMISSIONER DUNCAN: So, just for the purpose of addressing what the Commission has set out --

3393   MR. WILKS: Yes.

3394   COMMISSIONER DUNCAN: -- do you have comments that you would like to make with respect to, for example, independent production?

3395   Right now the requirement is seventy-five percent of priority programming must be spent on independent production; I think I have that correctly.

3396   MR. WILKS: Well, I believe that the independent producers are extremely important. And, in fact, when production goes in-house in places like the CBC they simply are not as efficient as the independent producers. And we make a dollar go far farther than anybody does, as independent producers.

3397   The networks have fixed costs and multiple layers of guilds and unions that independents don't have. But, more importantly, they are independent voices. They have independent thoughts. They have independent creative processes. And to eliminate them would be just horrendous, a stupid thing to do.

3398   In fact, they are the ones that are currently unharnessed. They don't have access to the system.

3399   If you talk about it, we're so concentrated into becoming the Toronto Broadcasting Corporation, and everything is so concentrated into that one central core, that we've just lost the focus of the rest of the country.

3400   We used to have enormous programming coming out Vancouver, or Edmonton, or Calgary, or Winnipeg. Not anymore, it's all centralized. It's all become homogenized. We don't' even produce original stuff, we just get formats from Great Britain and United States, and if they work down there then we'll do our version of it here. And, we're better that than, we've got original things to say.

3401   COMMISSIONER DUNCAN: Thank you very much.

3402   Mr. Chairman, I'll let the others have a chance.

3403   THE CHAIRPERSON: Thank you. Suzanne?

3404   COMMISSIONER LAMARRE: Oui, just one question, Ms Astbury -- did I get that right?

3405   MS ASTBURY: You got it.

3406   COMMISSIONER LAMARRE: In your presentation you mentioned an independent engineering study of the E Kamloops transmitter. Would you be able to file that with the Commission?

3407   MS ASTBURY: Sure. Yeah, we'll make sure it comes.

3408   COMMISSIONER LAMARRE: Thank you.

3409   THE CHAIRPERSON: Michel?

3410   COMMISSIONER ARPIN: Thank you Mr. Chairman.

3411   My question again is to you Mrs. Astbury. Obviously, the CFJC TV7 local station in Kamloops belongs to the Jim Pattison Broadcasting Group. Mr. Arnish, who is the general manager and I think he's even the president of the company, will appear here next week, so we'll draw to his attention your remarks, and because your proposal is surely something that is very -- is interesting. And I understand that Kamloops used to have CBC programming and then, as you said, it went to the E network, and now it has moved to some programming coming from Citytv. So, we'll draw the attention of Mr. Arnish to your --

3412   MS ASTBURY: You've made my day, thank you.

3413   COMMISSIONER ARPIN: Thank you. So you didn't travel all that time to --

3414   MS ASTBURY: His office is across the street, so I --

3415   COMMISSIONER ARPIN: Yes, absolutely, because --

3416   MS ASTBURY: It's embarrassing that I have to come all the way to Ottawa to get the message to him.

3417   COMMISSIONER ARPIN: -- I could read on their website the Jim Patterson Broadcast Group, Headquarters are in Kamloops. Thank you.

3418   MS ASTBURY; Thank you.

3419   THE CHAIRPERSON: Steve?

3420   COMMISSIONER SIMPSON: Thank you very much, Mr. Chairman. I have a question to both Mr. Wilks and Mr. Cowan. It's a two-part question, so if you will bear with me.

3421   Mr. Cowan, you led by alluding to a type of television station that I'll call a super local station -- or perhaps you did and I just forgot that. But, the idea behind the super local station is that you see it being unbundled from its network affiliation, so what it has is an ability to live off a dedicated access to the local programming improvement fund, and some form of subscription regime by carriage on cable; is that correct?

3422   MR. COWAN: No.

3423   COMMISSIONER SIMPSON: Oh, I'm sorry.

3424   MR. COWAN: I see it, the revenue comming from the fund -- a piece. I see it coming, because I believe, yes, that there should be an access fund -- or I wouldn't be here, and because this is the reason this was called -- like -- I guess like, you know, the speciality channels, some -- and the great amount of money that's sitting in retail, all right. And I believe the combination of all three should be quite enough to run a very decent super local, all right.

3425   COMMISSIONER SIMPSON: That is the other part of my question. It would seem to me that to be able to generate the volume of content required to be a local station is going to be a significant effort, but there will be economic realities.

3426   And, I guess, Mr. Wilks, if you could chime in here, please. Assuming that there is a retail market, and from your experience, you know, you've been there and done that -- assuming that there is still a retail market out there to support his type of television station, what is the level of programming that you see a station being able to achieve both in daytime day part, but also in the prime time, given your experience with the kind of retail revenue that you've seen coming in the past to a local TV station that doesn't seem to be there today?

3427   MR. WILKS: Well, you know, in essence the rate card for a national advertiser or a retail advertiser relates to the same thing: How many viewers do you have? And, the only thing is, is, we haven't been able to tap in to receive the retail money that's there.

3428   We've done the surveys. They've told us exactly how much they'd spend. And we did a little Niagra survey. We spent eighty thousand dollars on the survey, and we asked them the question: In retail advertising what is your budget? And of the three thousand businesses that were cancelled, how much money would you spend on retail television if it was available? And the answer was a stunning 18 million dollars plus, a year, in a small market like that. Whereas, our business projection only said we'd make ten. So, it's huge money.

3429   Look, even right now, Atlantic Canada, Saskatchewan, and Alberta get far more per capita retail expenditures on television than does Ontario, the biggest province of all. I mean, Alberta equals Ontario in retail sales right now.

3430   So, why is it? How could that be; there's eleven million people in Ontario? Well, the fact of the matter is, there's nobody except in Sudbury, North Bay, Timmins, and the smaller markets around Ontario, and Kingston which I was general manager. These television stations live off of national advertising.

3431   Now, they also are, in many instances, CTV or CBC affiliates. If they are CBC affiliates -- and there's no CTV affiliates -- such things, anymore. But if they are CBC affiliates then, in fact, they get a small portion of revenue from the network. But, more importantly, they are carrying the national service in places like Kingston. And there's still twenty-some of these television stations in this nation.

3432   COMMISSIONER SIMPSON: But --

3433   MR. WILKS: But, I'm just saying that this is a massive pool of revenue that we're just not even touching. And --

3434   COMMISSIONER SIMPSON: And I understand what you're saying. I think, you know, there's a school of thought that retail advertising has been largely ignored because the past successes of media where newspapers -- well, haven't been going after it -- just at that business, but --

3435   MR. WILKS: I think here's the reason why retail is not here: You, for some reason, or your predecessors, not you -- you licensed stations like City TV and CH-TV with re-broadcasting transmitters all over the province, in effect, so that instead of reaching just Hamilton, they reach now six million people.

3436   Well, how can you do local programming for six million people? In a sense, they are also national. They are received on satellite. CH is received nationally.

3437   You can't do local programming for six million people.

3438   They did very effective, powerful, profitable programming when they had a small signal looking after just CHCH Hamilton. It's a service that had fifty-five years of remarkable achievement. And when you allowed them to become equal to Global TV so that they compete with Global TV which had a bigger signal and reached more national advertisers, then they dumped their retail sales department and went nation. They got so many.

3439   Again, we know there's so many people supping at the national trough there's just not enough to feed them all -- sorry about that.

3440   And, so allowing a really fiercely local television station like City TV to put re-broadcast transmitters in London and Ottawa is plain silly. It's plain sill. You ruined a remarkable television station, City TV Toronto, by making it a provincial television station.

3441   When Global television was licensed -- I mean I was there and I was part of the management system. When Global television was licensed they were forbad by the Radio-Television Commission ever, ever to do Toronto local programming.

3442   What do they do? The only program they produce out of Toronto is local news in Toronto.

3443   Now, what does that mean to the other seven million people in the province that get Global television? There's no local television coming out of Global television -- only those little people in the GTA.

3444   The problem is, is, that the GTA is not even close to covering the huge population in the 905 area of southern Ontario. They get nothing. They get nothing.

3445   COMMISSIONER SIMPSON: Thank you.

3446   THE CHAIRPERSON: Okay, thank you very much. Those are our questions for you today. Thank you for coming.

3447   Madame la secrétaire, est-ce qu'on peut commencer demain matin à 9 h 00 ?

3448   THE SECRETARY: Absolutely. The hearing will start at nine o'clock tomorrow.

3449   L'audience commencera à 9 h 00.

3450   THE CHAIRPERSON: Okay, thank you.

--- Whereupon the hearing adjourned at 1641, to resume on Wednesday, November 18, 2009 at 0900

   REPORTERS

____________________      ____________________

Lynda Johansson         Jennifer Cheslock

____________________      ____________________

Monique Mahoney         Madeleine Matte

Date modified:

2009-11-18