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 20, 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 20, 2009

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PRESENTATION BY:

Shaw Communications Inc.   1076 / 6017

Association des producteurs de films et de télévision du Québec   1211 / 6879

Canadian Media Guild    1253 / 7112

Bragg Communications Inc.   1289 / 7275

FreeHD Canada Inc.   1331 / 7497

   Gatineau, Quebec

--- Upon resuming on Friday, November 20, 2009 at 0900

6008   THE SECRETARY: Order, please. À l'ordre, s'il vous plaît.

6009   THE CHAIRPERSON: Good morning. Bonjour.

6010   Madame la Secrétaire, commençons.

6011   LA SECRÉTAIRE: Bonjour et merci, Monsieur le Président. Good morning and welcome to everyone.

6012   Before we start, please note that Commission Members may ask questions in either English or French. Simultaneous interpretation is available during the hearing and the English interpretation is on channel 7. You can also obtain an interpretation receiver from the commissionaire at the entrance of the Conference Centre.

6013   We would like to remind participants that during their oral presentations they should provide a reasonable delay for the interpretation while respecting their allocated presentation time.

6014   I would also like to remind you to please turn off your cell phones and BlackBerrys as they cause interference in our interpretation system. Thank you for your cooperation in that matter.

6015   Mr. Chairman, I would now invite Shaw Communications Inc. to make its presentation and appearing for Shaw is Mr. Ken Stein.

6016   Please introduce your colleagues and proceed with your 20-minute presentation.

PRESENTATION

6017   MR. STEIN: Thank you.

6018   Good morning, Mr. Chairman and Commissioners. I am Ken Stein.

6019   I am pleased to introduce our panel, led by Jim Shaw, Chief Executive Officer and Vice-Chair of Shaw Communications.

6020   To Jim's right is our President, Peter Bissonnette, and to his right, Michael D'Avella.

6021   To my left is Jean Brazeau.

6022   And behind, starting at my left, Michael Ferras, Cynthia Rathwell, Alex Park, Dean Shaikh -- no, he is over there -- and Greg Kane, our legal counsel.

6023   Jim Shaw will start our presentation.

6024   MR. SHAW: Mr. Chairman, our message today is very simple: Don't tax my TV. Don't tax the future. It is unacceptable to impose a new TV tax on Canadians and let me tell you why.

6025   We have invested $6.5 billion since 2000. We pay for distribution. Broadcasters get the advertising dollars. They are already fully compensated. They picked the model of dependence on U.S. programming. Now, they want to penalize customers with new charges and threats to take away U.S. signals.

6026   The broadcasters have made some bad decisions but they have to be responsible for their own decisions. We have also made business decisions-- some good, some bad. We live with them. We do not come to Ottawa asking for a bailout if we have made a bad decision.

6027   The communications environment has become increasingly intensively competitive. We figure out creative ways to compete. We do not come to the Commission to ask you to fix our business model.

6028   Shaw Direct lost over $1 billion in our first 10 years-- or Star Choice, whatever you want to call it. We eventually became cash-flow positive through creativity and investing. We never asked for a bailout, a tax, a subsidy or a fee-for-distribution. We built our own satellite business because we worked hard to innovate and serve our customers.

6029   There are so many opportunities for broadcasters to be innovative. Where is their creativity? Why aren't they focusing on the customers? All they want to do is talk about a new tax and then why we can't negotiate.

6030   MR. BISSONNETTE: Our behaviour and investments are driven by our relationship with our customers. We have said that before and it continues to be a driver. We are a successful company because we listen to them and we deliver exceptional value, quality, and customer service.

6031   Shaw has made tremendous contributions to the strength of the system.

6032   We have invested $6.5 billion since the year 2000 to build and expand our networks to be able to reach more customers and distribute new programming services. We have also built a satellite business from scratch, with no CRTC or government handouts.

6033   These substantial capital investments provide enormous value to the broadcasting system and provide broadcasters with over 90 percent of their audience. But these investments are financed exclusively by distributors. Broadcasters keep all the advertising revenue. It's a great deal for them.

6034   Our investments also reflect that we are an integrated and diversified communications company. Consistent with the directions of government, we are much more than a cable company. We are in the business of providing a range of services to customers across several communications platforms.

6035   This is illustrated in the diagram taken from the CRTC's 2008 Communications Monitoring Report which we have attached to our presentation.

6036   Cable and satellite companies also provide broadcasters with direct and indirect financial support through the Canada Media Fund, the Local Programming Improvement Fund, simultaneous substitution, mandatory priority carriage as part of the basic service, and compensation payments for time-shifted and distant signals.

6037   Since 1997, distributors have provided broadcasters with more than $1.5 billion in direct financial support.

6038   Shaw has contributed over $375 million to the Canada Media Fund, over $60 million to the Shaw Rocket Fund and over $14 million to the Small Market Local Programming Fund. In fact, each week Shaw contributes over $2 million to support the production of Canadian programming.

6039   There is no need to negotiate value for signal because there is no uncompensated value to broadcasters.

6040   As long as the debate remains focused on the value-for-signal negotiations, with no consideration of consumer interests, a true partnership between broadcasters and distributors is simply not possible.

6041   And stuck in the middle will be the consumers who are being threatened by broadcasters' demands for a new tax. They face the prospect of either losing signals or bearing the burden of higher subscription costs with no corresponding increase in the value of services being received.

6042   In short, Mr. Chairman, as long as a negotiated fee for local signals is on the table, it will monopolize the discussion and will prevent the industry from arriving at the mutually acceptable, consumer-friendly, forward-looking solutions that you referred to in your opening remarks.

6043   Before considering negotiations for value, we need to identify whether there is any problem that requires such heavy-handed regulatory intervention.

6044   First, the financial situation facing over-the-air broadcasters is not a revenue problem, it is a spending problem. We have identified the nature of this problem in our submissions and this was clearly confirmed by Peter Miller in his report prepared for the Commission.

6045   We object to the fact that the broadcasters' financial situation has never been examined in a transparent manner. Peter Miller described how broadcasters have certain incentives to manipulate their allocation of revenues between specialty and conventional and among markets.

6046   It makes no sense that we received a request for disclosure of financial information as part of the December proceeding, while the Commission simply accepted the broadcasters' claims of financial distress-- even though it is the broadcasters who are asking for a handout. Such a lack of fairness, predictability and transparency, frankly, is unacceptable.

6047   The over-the-air broadcasters have increased their spending on U.S. programming to levels that are uneconomic and unsustainable. Evidence of this is clear and unequivocal. They have engaged in a pitched battle with each other for dominance in the rebroadcasting of U.S. programming. CTV will now be entrenched as the viable purchaser of U.S. programming, which will ensure its position of dominance in the industry.

6048   Throwing more money at the problem will simply add fuel to the fire. We believe that broadcasters have to take responsibility for their own expenditures and, like all other businesses, live within their means.

6049   Second, the current economic downturn is a cyclical problem. CTV and Canwest still earn 50percent of the revenues from private conventional, pay and specialty services. To help the broadcasters, the Commission has already established the Local Programming Improvement Fund.

6050   Our contributions to the LPIF were raised from 1 per cent to 1.5 per cent of revenues and the requirement for incremental spending has been suspended. Hopefully, this is a short-term solution and, with creative new business models, it can be eliminated.

6051   Third, there are new potential sources of revenue for the broadcasting system that could benefit broadcasters. Some of those have been mentioned this week, including VOD advertising, local avails and online and wireless distribution. The industry should explore these and other possibilities to increase the revenue in the system and, more importantly, expand the number of choices available to consumers.

6052   Fourth, the broadcasters have suggested that a group-based approach to licensing will provide them with a measure of flexibility by allocating their regulatory obligations --

6053   THE SECRETARY: Sir, I am sorry to interrupt. We are going to have to take a short break, we have a problem with the system.

6054   MR. BISSONNETTE: Okay.

6055   THE SECRETARY: Mr. Chair, we are going to have to take a short break.

6056   THE CHAIRPERSON: You understand the--

--- Technical difficulties

--- Upon recessing at 0911

--- Upon resuming at 0920

6057   THE SECRETARY: Order, please. A l'ordre, s'il vous plaît.

6058   So, Mr. Stein, I guess we can continue now and you can start from where you were.

6059   MR. STEIN: Thank you very much. That certainly goes to the value of distribution. Without distribution, there is no content.

--- Laughter

6060   MR. STEIN: So let me just start off with my third point, which was that there are new potential sources of revenue for the broadcasting system that could actually benefit subscribers, broadcasters and the whole system.

6061   Some of those have been mentioned this week, including VOD advertising, local avails and online and wireless distribution. The industry should explore these and other possibilities to increase the revenue in the system and, more importantly, expand the number of choices available to consumers.

6062   Finally, the broadcasters have suggested that a group-based approach to licensing will provide them with a measure of flexibility by allocating their regulatory obligations between their over-the-air stations and their specialty services.

6063   Shaw has always believed that the profitable specialty services operated by the over-the-air broadcasters have to be factored into an examination of the overall health of the broadcasting industry.

6064   We would support measures to provide broadcasters with greater flexibility. These measures, taken in combination, could significantly strengthen the industry as a whole and can be implemented without disrupting the foundations of the Canadian broadcast system and, more importantly, without further taxing consumers with a fee that creates no value.

6065   MR. BISSONNETTE: Introducing a fee-for-carriage or signal compensation would be a fundamental disruptive change to the regulatory framework. It is not a simple, incremental addition.

6066   It would impact consumers, the price they pay to be part of the Canadian broadcasting system, their perception of the value and legitimacy of the system, and the attractiveness of viewing substitutes.

6067   It would reduce the resources available to cable and satellite companies to invest in their networks and attract capital going forward.

6068   It would create a trade irritant that would motivate U.S. broadcasters to demand a fee-for-carriage from Canadian distributors, raising the prospect of significantly higher fees for cable and satellite customers.

6069   At the same time, it is unclear whether this tax would create any benefits for the system whatsoever. We do know this: two large private companies, CTV and Canwest, would disproportionately benefit. This would further skew their competitive advantage over other broadcasters, augmenting their buying power and advertising sales.

6070   A new tax will also lead consumers to drop discretionary services, reducing the revenues of specialty services.

6071   Our frustration with this entire process is that neither the Canadian broadcasting system nor broadcasters are on the verge of collapse. The advent of competition and digital technology has brought positive changes in the Canadian broadcasting industry.

6072   Based on a regulatory framework that has supported investment and flexibility, Canadians across the country, in rural and remote areas as well as large urban centres, have access to over 460 television channels, including:

6073   - 7 major Canadian over-the-air broadcast network brands in two official languages;

6074   - over 160 Canadian-owned and -operated discretionary services and the best non-Canadian programming services from around the world; and

6075   - approximately 60 high-definition services.

6076   There is healthy competition within the system, particularly among distribution undertakings and discretionary programming services, where consumers have a wide array of choice and packaging options.

6077   Cable and satellite companies have made huge investments in their networks to improve efficiency, expand capacity, increase signal reliability, offer high-definition and interactive services, and make digital service available everywhere. This investment has created boundless opportunities for Canadian broadcasting licensees and producers.

6078   Broadcasters' natural competitive advantage in reaching mass audiences is reinforced by a long list of government support. These include:

6079   - free radio spectrum that can be valued at between $5 to $6 billion;

6080   - protection of broadcaster advertising markets through tax measures that discourage advertising on U.S. stations; and

6081   - almost $1 billion each year in tax credits and subsidies.

6082   And then there is the CBC's annual over $1 billion parliamentary appropriation.

6083   The CRTC has also fortified broadcasters' natural advantages by:

6084   - limiting new entrants in each market;

6085   - guaranteeing broadcasters mandatory and priority carriage;

6086   - recently reducing their local programming obligations; and

6087   - eliminating restrictions on advertising minutes.

6088   Canada's broadcasters are well-supported and successful. Last year, CTV and Canwest earned almost $2.5 billion in revenue on a consolidated basis and had a pre-tax profit margin of 11 percent.

6089   Canwest has had creditor issues, but one day after filing for protection, Leonard Asper told staff, and I quote:

"Canwest had too much debt. However, you should not confuse operational excellence with our balance sheet issues. Our underlying operations are strong and our brands continue to dominate in their markets."

6090   The words of Canwest's CEO speak volumes. Canadian broadcasters are not on the verge of collapse. Broadcasters have tremendous protections, the largest audiences, profitable specialty services, and massive subsidies.

6091   Michael.

6092   MR. D'AVELLA: Global and CTV are strong businesses that have experienced some market challenges such as the impact of the economic downturn on advertising. They are also hampered by the strategic decisions of their owners.

6093   The decisions of Canwest have put it in a position where its strategic direction is no longer under its control.

6094   The decisions of CTV, coupled with Canwest's challenges, have made CTV the dominant private broadcaster in English Canada.

6095   Both CTV and Canwest have spent billions of dollars expanding their businesses and acquiring national programming rights and both are experiencing, for better or worse, the results of that spending.

6096   For the purpose of this proceeding, Canwest and CTV want us to ignore their ownership of highly profitable specialty services, which provides many benefits, including bargaining power and significant synergies.

6097   However, when buying these specialties, they relied on the Commission's previously stated view that:

"In assessing the economic strength of one broadcasting group relative to another, all of the various broadcast platforms, program windows and voices must be taken into account." (As read)

6098   Regarding broadcasters' commitment to Canadian programming, the numbers speak for themselves. They show that Canadian broadcasting is focused on rebroadcasting U.S. content.

6099   In 2008, broadcasters spent $88 million on Canadian drama, compared to $524 million on foreign drama.

6100   By contrast, in 2008, Shaw's affiliation payments to Canadian services, the most popular and successful of which are owned by CTV and Canwest, exceeded payments to foreign services by a ratio of 5:1, representing over $500 million in payments to these programming services.

6101   Broadcaster claims that they are champions of, and exclusive producers and providers of, local content are not sustainable.

6102   For example, Shaw TV provided live, in-depth coverage of the October municipal elections in Saskatoon, while CTV and Canwest aired U.S. programming at the same time.

6103   Obviously, Canadians receive local news and programming from many sources. Shaw TV provides attractive, informative, entertaining and diverse local programming that is highly viewed. On average, Shaw TV generates approximately 1.9 million cumulative viewers each week across Canada, placing it in the top 10 percent of all channels distributed.

6104   Over 3.5 million viewers tuned into our WHL Hockey season in 2008, including over 1 million viewers for the playoffs. And we had over 400,000 viewers to our coverage of the Vancouver municipal elections. This translated into a share of 6.5. The only program to draw more viewers that night was Hockey Night in Canada with a share of 7.4 and that is because the Leafs had yet to win a game.

6105   There are many ways to strengthen the system, serve consumers in the digital world and to support broadcasters. In partnership with broadcasters, we need to fully exploit and expand the video-on-demand opportunity, develop the broadband video opportunity, facilitate the development of targeted advertising, and permit cable and satellite providers to sell local avails on U.S. specialty services.

6106   As an integrated communications company, we believe that we have done more than our fair share to support and bring value to the Canadian broadcasting system through our contribution to the network, our contributions to support broadcasters and the production of Canadian programming.

6107   We are eager to do more, to explore new digital opportunities and to be part of this exciting business.

6108   MR. BRAZEAU: Mr. Chairman, we would also like to raise two important procedural issues.

6109   On September 16th, the Government issued an Order in Council requiring the Commission to hold hearings on the implications and the advisability of implementing a compensation regime for the value of local television signals and issue a report providing recommendations.

6110   The Commission has been asked to focus on the impact of a signal compensation regime on consumers and the ability of the industry to adapt to a digital environment.

6111   The Commission should not make any decision on the issue of signal value negotiation before it has delivered its report to the Government and the Government has had an opportunity to respond to the Commission's report and recommendations. This is the only way the Commission and interested parties can respect and respond to the Government's Order in Council.

6112   The second issue is that, in August, the Commission amended its original notice and announced that it will proceed with an examination de novo of the question of whether or not it should put in place a compensation regime.

6113   However, during this hearing, other cable and satellite companies have been told that there has to be a negotiation. Unless we discuss the framework for negotiation, we are told that our responses are not very helpful.

6114   Because the Commission stated that it will first consider the threshold question of whether a compensation regime is appropriate, it is entirely justifiable for us to focus on the threshold question.

6115   We share the views expressed by other distributors that there is no uncompensated signal value. The demands for signal compensation are unacceptable. Therefore, we do not think it is useful or appropriate to discuss a hypothetical negotiation framework.

6116   Jim?

6117   MR. SHAW: I guess demands for new taxes stand in the way of the new digital regime and opportunities to serve all of Canadians. It is time to stop this debate and move forward.

6118   We have spent a lot of money and a lot of time. I think this is the fourth hearing I have been at on this issue and, you know, I think that it hasn't done anything for the system and it's time for us to move forward in a progressive way and develop the system the way we want -- not the way we want, the way you guys want.

6119   But you know, I can tell you just personally I'm getting tired of coming to these hearings about dealing with this issue and it continues to come up and I don't understand why because I thought you guys made a decision and you should stick to it. And yet it still comes up.

6120   And so I don't know if you want to revisit it again. I guess I will probably have to show up like everybody else shows up. I don't know. We will see. Maybe I won't. I don't know. I will have to think about that.

6121   But you know, I do think it's time. We have got to come to a conclusion on this stuff and move forward. So let's, you know, stop this debate and move forward.

6122   Anyway, thank you for your time and we are glad to chat with you.

6123   THE CHAIRPERSON: Okay. Thank you for the submission.

6124   Like you, I'm sick of the debate but I'm also sick of not being able to find a resolution.

6125   Part of the point is, I would like to understand -- as you know, we have heard from the broadcasters. We heard from you and you are taking a diametrically-opposite position which is fine. That's what a debate is all about.

6126   But as I quoted at the outset CTV, et cetera, has been around since '71 and we stated then -- stated simply the fundamental relationship of the television stations are the suppliers and the cable televisions are the users. That's the basic principle involved, is one should pay for what he uses to operate his business.

6127   I mean your position is that you are paying for it and end of story. I have heard it loud and clear.

6128   Yesterday, CanWest was here for instance and they raised it from a different point of view. They talked about signal integrity. They talked about that they feel they are not being properly compensated for their signal. They buy the rights to an American show. They show it on their network. You will simulcast it if a U.S. station shows it as well but it doesn't get -- they don't get it -- it doesn't get simulcast on discretionary TV and it also doesn't get on non-simulcast.

6129   So in effect their signal for which they paid there is not respecting -- the integrity is not respected, only partially through the simultaneous substitution.

6130   What's your position on that?

6131   MR. BISSONNETTE: Well, we don't agree, clearly. You know --

6132   THE CHAIRPERSON: Surprise me and say you would agree.

6133   MR. BISSONNETTE: I know it would be surprising, but we don't agree. We think that there is -- you know there is no uncompensated value that they derive from what we have done.

6134   We have invested millions of dollars in building networks. The benefactors of those investments clearly are Canadian broadcasters and are consumers.

6135   They derive great value out of the -- the networks we build, for example, in the distribution of high definition signals which are very appealing to our customers.

6136   They develop value from the extra subscribers that we have our networks to provide services.

6137   They derive value from the almost million customers that we provide direct-to-home satellite reception that before that could receive one over-the-air signal and they are now receiving the same level of services that customers receive in major markets like Toronto and Vancouver.

6138   So we have expanded their rates. We have expanded their opportunity. We have expanded their ability to derive more advertising dollars.

6139   And they have had a free ride on our distribution. We recognize that our role is to distribute; their role is to provide content.

6140   THE CHAIRPERSON: Well, just even if I accept all of that, you still haven't told me how you are compensating them for showing a signal which they have bought the Canadian rights for on either discretionary or 4 + 1.

6141   MR. SHAW: I think we are compensating them by -- they get a free carry on the whole network that -- you know this year we will spend $800 and some million just keeping the network running.

6142   So I think they get a free ride on the network and, you know, they get substitution; they get this, they get this --

6143   MR. BISSONNETTE: Priority carriage.

6144   MR. SHAW: Yeah.

6145   MR. BISSONNETTE: They get contributions to the Canada Media Fund, simultaneous substitution. We have given you that list and you have gone over it and we have talked about the list.

6146   THE CHAIRPERSON: And I have a list equally long from CanWest saying what you have gotten --

6147   MR. BISSONNETTE: Well, why don't we do this? Why don't we not substitute --

6148   THE CHAIRPERSON: I don't care about comparing this list. I mean first -- just to give you an example.

6149   MR. BISSONNETTE: Yeah.

6150   THE CHAIRPERSON: This morning either you or Mr. Shaw said they got the spectrum for free. Well, you got your satellite spectrum for free too is going to be the answer, et cetera.

6151   Now, this is --

6152   MR. SHAW: No, we didn't get -- we didn't get it for free. We spent a billion dollars to get that satellite up and operating in Canada and you want --

6153   THE CHAIRPERSON: The spectrum, I said -- the spectrum.

6154   MR.SHAW: We took --

6155   THE CHAIRPERSON: We are talking about the spectrum. You paid for your satellite. You didn't pay for the spectrum.

6156   MR. SHAW: You know what, we took all the risk and everything and, you know what, we didn't make any money for a long, long time.

6157   And you know, did we come down here and whine to you guys? Now, maybe we -- you know I mean I just can't remember but I don't think we did.

6158   THE CHAIRPERSON: So let's go back to this for --

6159   MR. SHAW: No, no, don't change the subject.

6160   THE CHAIRPERSON: No, no, I am not changing the subject. We are on the same subject. I'm saying on the subject of signal integrity you come here and you complain, for instance, about piracy, which you should, you know, when people are using your signal and retransmit or don't pay you and take it out of the air, et cetera. That's --

6161   MR. SHAW: That's a totally --

6162   THE CHAIRPERSON: No, no, I'm just --

6163   MR. SHAW: That's a totally different thing.

6164   THE CHAIRPERSON: No, all I'm saying it's an impairment on your signal integrity. Why is this not an impairment on CanWest's signal integrity? That's what ---

6165   MR. SHAW: Ken?

6166   MR. STEIN: Well, I listened to CanWest carefully in terms of their outline of cable policy and I think that they -- the first thing I would say is that the 1971 policy is not a policy on compensation. In fact, we all visited this again, and I hate to go back, but 1993 and the CRTC ruled that -- and I quote:

"Explicit recognition of a right to compensation for the retransmission of local service signals is essentially a copyright issue and would most appropriately be dealt with by bodies other than itself."

6167   MR. STEIN: So if they are looking in terms of protecting the integrity of their signal and the copyright implicit in that claim, then there is appropriate ways of dealing with it through legislative procedures or other kinds of measures. That's number one.

6168   Number two is we do have --

6169   THE CHAIRPERSON: Why do you exclude regulatory measures?

6170   MR. STEIN: Other -- through copyright --

6171   THE CHAIRPERSON: Why do you exclude --

6172   MR. STEIN: Through the copyright procedures. That's the proper way to deal with it.

6173   THE CHAIRPERSON: Well, couldn't we, just hypothetically speaking, saying, fine, you have to simulcast every year -- you have to simsub or else you have to delete because it's not your signal?

6174   MR. STEIN: We right now -- we do simultaneous substitution and the only cases where we are in a different situation, with respect -- is in respect to distant signals and we have taken measures through the CRTC-approved processes to deal with distant signals.

6175   So we believe that we have taken the steps that are necessary, consistent with CRTC policy and the legislative framework to protect the broadcaster's purchase of those programs and their availability to Canadians.

6176   THE CHAIRPERSON: How do you do that in terms of the --

6177   MR. SHAW: But you know -- and then if you want to start deleting --

6178   THE CHAIRPERSON: No, I'm just asking. I'm just asking because you are making an assertion --

6179   MR. SHAW: I'm talking --

6180   THE CHAIRPERSON: I'm just asking.

6181   MR. SHAW: I'm just talking back to you.

6182   THE CHAIRPERSON: Yeah.

6183   MR. SHAW: And you know if you want to start deleting channels the heat will be so severe you won't even know what happened. Man, you know, start deleting programs and this and that.

6184   And we can do it and you know we will be glad to do it if you guys order us to do it because you are our controlling body but, you know, I -- boy, that wouldn't be something I would go to.

6185   THE CHAIRPERSON: You are now talking about something totally different, which is the public reaction. I was talking about the --

6186   MR. SHAW: No, you just asked me about that.

6187   THE CHAIRPERSON: -- of the signal and talking about signal integrity. And I said, you know for instance discretionary channels how do -- you are not doing it right now. That's my whole point.

6188   MR. SHAW: No, there is no policy.

6189   MR. D'AVELLA: But bear in mind that simultaneous substitution protects their rights entirely and understand that in our cable systems we perform three levels of simultaneous substitution. We still have analog signals. Those signals are also available in digital and now we are doing it at high definition television. In those markets they are totally protected.

6190   Now, in an over-the-air scenario there is no simultaneous substitution. They can choose to watch the Buffalo ABC station or they can choose to watch Global Toronto.

6191   MR. STEIN: Mr. Chairman, I do have to comment on the fact that you refer to the CanWest description of the evolution of cable television policy because it missed out on a number of very, very important factors and, as you yourself said, it's the first time you saw it described that way.

6192   The fact of the matter is that the cable television policy that was evolved starting in the early seventies was based on the fact of trying to deal with the problem of over-the-air signals across Canada in major markets.

6193   We had problems with KVOS in Vancouver who was the leading station in Vancouver. David Mintz, who later took over CanWest Global -- it was probably the largest sale of advertising in the Vancouver market. When we were doing Bill C-58 -- when I worked with the Minister on Bill C-58 I met David Mintz in the House of Commons lobby and I said, "How are you doing, David?" and David said, "How do you think I'm doing? You are killing my business."

6194   When we had KCND in North Dakota serving the Winnipeg market the CRTC and cable helped shut that down and that became the starting point, actually, for Mr. Asper's broadcasting business.

6195   In Ontario, in southern Ontario we dealt with the broadcasting of over-the-air services of Buffalo and their intrusions into the southern Ontario market. We did all those things. And Mr. Beatty, in the early nineties as Minister of Communications, said at a CCTA convention, cable has become the saviour of the Canadian broadcasting system.

6196   And the reason we became the saviour was because we were doing all the things that we listed here. Those are why we did it. We invested in the distribution.

6197   You know in Vancouver, as a kid when I used to visit my grandparents, you couldn't get a signal in Burnaby. As Canadians you couldn't get CHAN. You couldn't get a signal.

6198   In Ontario you couldn't get Global signals in urban areas like Toronto or Ottawa very well, and so cable did. And it had a tremendous advantage as well of providing Canadians with Canadian signals and mixed in with the U.S. signals so that if they join the system they could get all those opportunities and choices. And simultaneous substitution evolved from that to protect the signal rights and that evolved through the seventies.

6199   So the whole description of the policy as being one of supporting the development of cable was not that. It was a symbiotic relationship between the Canadian -- in the Canadian broadcasting system between distributors and the broadcasters. That's how the system was developed.

6200   The second thing they didn't point out was in 1995 the convergence policy which told the cable industry directly from the government of the day: Time's up. You are no longer the preferred distributor. You are now going to have to be competitive. You are going to have to be competitive with telephone companies and satellite companies.

6201   And so that led to these huge investments that we made and the billions of dollars since that time period to compete against all across all of the platforms.

6202   So the description of this as being an adversarial relationship for all of these years is wrong and it's not correct. It's been adversarial over the last two years.

6203   THE CHAIRPERSON: Well, I'm delighted to hear that and, please, don't read into my comments that I don't appreciate cable's contribution to the Canadian broadcasting. It is enormous and, as you quite rightly put, it was the answer to the intrusion of over-the-air U.S. signals into Canada.

6204   What I'm trying -- I am posing you the question because I am sitting here and I am hearing very different questions --a very different representation of why we are here, how we got here, et cetera, et cetera.

6205   You basically say there is no problem in the conventional system. You have heard Mr. Fecan, et cetera saying we won't be around anymore. You see that he has closed some stations. He is clearly contemplating closing more if there is no resolution. You say it's because he doesn't know how to run his business. It's not that there is an underlying --

6206   MR. SHAW: Okay, let me ask you one question, okay? This is something that came up at the Shaw board meeting and we talked about it.

6207   And I said, you know what? Okay. So, you're CEO of CTV. You're owned by the richest family in Canada, okay, and yet you have never ever come and seen me for anything -- ever. Never ever come to Calgary. Now, what, do I have to fly to see you or how does that work?

6208   We are the largest video provider in Canada so we have 3.5 million customers and you can't even get your arse on a plane and come out and see me? I mean, come on!

6209   So, now you want to just, what, negotiate here with the regulator but you have made zero effort and now you are going to blame me?

6210   THE CHAIRPERSON: I'm not blaming anybody.

6211   MR. SHAW: No, no, I'm not talking about you. I'm saying to Ivan.

6212   I said, so you know what, do not come and blame me. I mean you made no effort to come and see me, no effort to do anything with Shaw. So, what?

6213   The only thing he wanted to do was just -- forced us to carry TSN2. And you forced that in and we had to do it because it had a football game in Edmonton or something. I don't know when we did it. Anyway, we got that done.

6214   But you know, basically, they have made zero effort.

6215   MR. BISSONNETTE: And the perception they left with you last Monday was that he is sitting alone at a table waiting for Jim Shaw or somebody from Shaw to talk to him about opportunities. Michael D'Avella has met with CTV. He has met with CanWest. He has made proposals to them on VOD advertising. He has made similar proposals that Mr. Purdy talked about from Rogers.

6216   They have essentially said to us we are not interested in talking to you about distant signals or compensation for distant signals. We are sitting here empowered by the CRTC because of the three times no now rules, empowered by the CRTC. We have no -- there is no way that we are going to discuss anything other than fee for carriage. And that's what they call it. That's how they refer to it.

6217   They are empowered by what you have done --

6218   THE CHAIRPERSON: Just let me stop you right there just so we understand what you are talking about. Fee for carriage is off the table, okay, let me get -- fee for carriage would mean me or the CRTC imposing on you saying you have to pay X to the --

6219   MR. BISSONNETTE: Well, we are not saying that, but they haven't heard that yet.

6220   THE CHAIRPERSON: No, they are hearing it now.

6221   What I'm talking about is value for signal, which is I don't know what their signal is first. I haven't got the foggiest idea. But I'm not in the business. You are. They are. And you should sit down and figure out how much it is. Whether it's worth one penny or a hundred pennies I don't know, but surely you are much better to work it out than us.

6222   MR. BISSONETTE: We don't --

6223   THE CHAIRPERSON: And that's why we rejected fee for carriage, because fee for carriage would be us telling you how to run your business.

6224   MR. BISSONNETTE: And we respect that you don't know how to run the business like we do and we appreciate that.

6225   But the fact is they aren't running the business appropriately and how they found themselves today is of their own self doing. We are prepared to talk to them about all sorts of opportunities for them to generate more advertising dollars. We have supported them in some of the regulations that you have recently opened. We have continued to contribute. We are now contributing to the LPIF to help small broadcasters to do what they have to do.

6226   We have always been there to provide our role, to distribute, to invest. They have to do something as well. It's not just sticking their hand out.

6227   THE CHAIRPERSON: But Mr. Bissonnette, tell me, and that's what -- you are prepared to sit down with them. You obviously have lots of negotiating leverage. Why then do you say, I won't sit down with you if you put value for signal on the table? That's what I don't understand because --

6228   MR. SHAW: Why would they not come out? Just tell me that. Let's just ask that question, why wouldn't they even fly out to Calgary and see us?

6229   THE CHAIRPERSON: I can't answer that. I didn't --

6230   MR. SHAW: Okay. Well, so you don't ask me --

6231   THE CHAIRPERSON: You are --

6232   MR. SHAW: -- to negotiate with a guy that I have got to go -- and I have to go hunt down to negotiate. Like forget it.

6233   THE CHAIRPERSON: Are you -- if he comes down to Calgary you are willing to negotiate with him -- no?

6234   MR. BISSONNETTE: I think we have said clearly if we are negotiating about a value for signal there is no negotiation because our position is that they are -- there is no uncompensated value for the signal that we distribute.

6235   They get all the advertising. They get the benefit of all of our investments and there is nothing to negotiate.

6236   THE CHAIRPERSON: Well, that's my whole point. Why are you setting pre-conditions? Why are you not negotiating about --

6237   MR. BISSONNETTE: The pre-condition that they have said is essentially if you don't talk to us about -- and I am going to use the word again -- fee for carriage -- we are not talking to you about anything.

6238   We have asked for instance to do something really creative in our video-on-demand. Let's take some of those programming services that you have the rights to and let's put them on video-on-demand and show them a second or a third showing and we will pay you the revenue that's derived from that.

6239   They say: We are not interested in talking to you about anything. The only thing we are talking about to you is our $450 million and we are going to make it very tough for you because we are going to start calling you what you are, pirates.

6240   So that's the good will that exists between our companies.

6241   THE CHAIRPERSON: On page 12 of this morning's presentation you say:

"In partnership with broadcasters we need to fully exploit and expand the video-on-demand opportunities, develop broadband video opportunities, facilitate development of targeted advertising and permit cable and satellite providers to sell local avails on U.S. specialty services."

6242   THE CHAIRPERSON: I am delighted to hear that.

6243   MR. SHAW: You know what? Listen, we are open to look at a lot of things. But, you know what? We are not open to look at -- just like closing the door. And that's all they are trying to do. Let's just close the door, give us a little fee from the Canadians and then go from there.

6244   But we are willing to work on developing stuff. Like where is the creativity in Canada? No different than when we talk about the Canadian Production Fund, right?

6245   THE CHAIRPERSON: Help me out here because I'm -- Mr. Bissonnette tells me they are not willing to come to the table to talk about anything except value for signal. You are telling me you are willing to talk about everything except value for signal.

6246   MR. SHAW: Yes.

6247   THE CHAIRPERSON: I don't know whether they have taken that position or not. I take your word for it.

6248   Why can't you -- all the issues which you outline on page 12 of --

6249   MR. BISSONNETTE: Well, I will have Michael talk to you, Mr. Chairman --

6250   THE CHAIRPERSON: Why can't --

6251   MR. BISSONETTE: -- you know what we have done to date in terms of the meeting.

6252   MR. D'AVELLA: But let's be practical. They -- you know there is a prize out there. You don't want to call it fee for carriage. You want to call it value for signal.

6253   They are focused entirely on the prize. So no discussion with us is going to make any sense until they can extract this prize. And the problem is we keep putting it on the table every six months.

6254   So until we say, you know, this is off the table; there will be no discussion about value for signal, they are not interested in exploring VOD. They are not interested in exploring broadband video.

6255   All the things that was talked about with Rogers are great opportunities for both of us and broadcasters and programmers in the United States they are not waiting. They are not sitting back. I mean, they are developing these opportunities. But you can't have a discussion with them if the only item on their agenda is how much are you going to pay me for the local signal?

6256   I mean we have put proposals to them. We have said, look, we are developing our broadband portal. We will encode, we will serve, we will store, we will do all this stuff in terms of providing your content to our customers. Let's figure out a model.

6257   And there is going to be more than one model --

6258   THE CHAIRPERSON: Sure.

6259   MR. D'AVELLA: -- that says we can both monetize this opportunity. Whether it's an advertising model or a transactional model depends on the approach. They don't want to talk about that.

6260   And they are the ones who are in the best position to acquire both VOD rights and broadband rights and they hold them right now. You know we have done some deals but they have been done very much on the fringe and they are all deals for which we have paid for.

6261   So there is a lot of things that we can talk about in terms of growing the business, adding value to both of us and adding value to our customers. But there is this 800-pound gorilla in the room and it's called fee for carriage.

6262   THE CHAIRPERSON: Okay. You were undoubtedly listening online on Monday when I was questioning Mr. Fecan. And you heard my exhortation to him saying, for God's sake, why do the cable industry and the broadcasting industry fight each other and sensitize Canadians to the cost of broadcasting rather than jointly exploring these things and avoid pushing Canadians into the internet or the wireless network which is unregulated?

6263   And he said -- and I don't know if we have the exact words -- he said, I can't negotiate with myself. I would love to talk about these things but they won't talk with me.

6264   So you are telling me that's --

6265   MR. BISSONNETTE: Mr. Chairman, one of the -- if you created a background which was your last "no" and is your last "no" and there is no more reconsideration of that, then that opens up the opportunity to talk about really positive things. That's what we are saying and we are prepared to meet with them to talk about positive things.

6266   THE CHAIRPERSON: And all I'm saying is that since you say "no" and he says "yes" --

6267   MR. SHAW: Okay, so let's be honest here. So last week or two weeks ago I called Jeff Beatty who runs the Thompson family group. I called David Thompson; not one call back. And you know what? I mean I'm tired. I'm tired.

6268   You know, I'm not saying I'm not -- I'm willing to do some things, not fee for carriage. But you know there is lots of other stuff we could do, you know, if you are so desperate for money and figure things out. Let's figure some stuff out, like what -- we are creative. We are Canadian. We can figure things out. It's not that hard. Like you know, let's come up with some stuff, you know, rather than just whine and complain and come to another hearing and that kind of stuff, okay.

6269   THE CHAIRPERSON: Okay --

6270   MR. SHAW: I think we have just got to kind of start moving forward.

6271   THE CHAIRPERSON: Okay. Let me try for a third time to get my question out before you interrupt me.

6272   Why can you not enter into negotiation without pre-conditions both of you? That's what my point is.

6273   You have -- are both very skilled negotiators. You have got lots of leverage on your side, et cetera. Why is this such -- go in without pre-condition and cut whatever deal you want.

6274   And you basically -- what I said to Mr. Fecan this morning with all of these open issues why don't you cut a deal and basically come to us and say here, this is how -- we need -- probably there are some things you need our help, you know, but do give us a regulatory framework which allows us to do it because we have found a way to make money and make this thing work.

6275   MR. BISSONNETTE: The problem is the premise for the meeting is a premise that we can't embrace. And the premise is that there is value in the signal that we are not compensating them for. We don't agree with that.

6276   So if the premise is wrong why would you negotiate, like are they going to pound us into submission?

6277   THE CHAIRPERSON: Or you pound them into submission -- whatever. I don't predict the outcome. I just don't understand why -- but anyway, I think --

6278   MR. STEIN: I think the difficulty here is that in terms of any kind of negotiation is that the Commission twice has rejected fee for carriage. We then had the debate in front of the Standing Committee. The Standing Committee didn't come to a recommendation and the government members on it said it was not a good idea.

6279   So then that all ended but that didn't end the broadcasters' campaign to do this. They first -- even though, you know, people got it wrong, they launched the campaign again in the fall. We had a campaign last spring because we sent an op ed piece to all the papers across Canada and no one would care to publish it. So we bought ad time to make sure that Jim's point of view got across last spring.

6280   Then in the fall they start this campaign. They are not trying to establish a -- what we would call a negotiating framework. It was all insults and threats. They insulted our community programmers. They insulted our management. They insulted our -- you know our whole approach to the business -- and then they come back and they have threats, "Oh, if we don't get this we are going to remove U.S. signals". Well, how is that good for the business? How is that a consumer friendly negotiating tactic? It's not.

6281   So we are basically saying we are not willing to sit down and talk about something that regulator and government have rejected. We are willing to sit down and talk about how we can work together to take advantages of the great opportunities, the tremendous opportunities that exist in television. That's what we are willing to sit down and talk about.

6282   THE CHAIRPERSON: Okay, I repeat we rejected fee for carriage. We did not in any way reject negotiation for value. But it's becoming a very sterile exchange so I don't think we need to explore it any further.

6283   MR. CANE: Mr. Chairman?

6284   THE CHAIRPERSON: Yes.

6285   MR. CANE: Could I add a comment, please?

6286   It is an important point to us in terms of process, as Mr. Brazeau talked about. And if you look at the Notice of Consultation 411-3 that was the amendment to the Notice of Consultation, the Commission has now said very clearly that it is a question in this proceeding whether or not -- and I emphasize not -- a negotiated solution for compensation for the fair value of local conventional television signals is appropriate.

6287   We say it's not, and that's the decision we are looking for in this proceeding. And if we have that decision then we have got the ability to sit down at the table with that off as a negotiating point.

6288   THE CHAIRPERSON: I understand that and I am exploring whether there is such a thing as desirable or feasible or not. And that's my question. And I am asking the same question to both sides and I'm getting the same answers -- the opposite answers from both sides and obviously at the end of the day we will have to make a decision on it.

6289   That is why we specifically said then we will explore whether it is desirable or necessary to institute a value-for-signal system. So I don't see anything inconsistent. What I have done is what you just stated.

6290   MR. BISSONNETTE: But there is nothing inconsistent with hearing what we have also said. I mean, we have told you --

6291   THE CHAIRPERSON: No, absolutely not. I heard you, I heard CanWest, I heard CTV, et cetera, and at the end of the day we have to -- but I am testing sort of how entrenched your views are because in order to make a decision at the end of the day I may have to make a judgement of what is feasible and what is not.

6292   Now, if I understood Rogers, and I may have -- and you heard them, they are like you, they don't believe there should be any value-for-signal negotiations or anything like that. But they will go one step further, to say if there is and if you adopt the issue that CTV put forward, basically they are putting the mandatory carriage on the table and saying we have the right to withdraw, you have the right ¬¬-- and they're not too -- et cetera.

6293   And if there should be negotiation and if they can't be resolved and at the end we don't want arbitration, we want -- like Rogers said, you should do the same thing as the U.S. said, basically you can complain to the CRTC whether there has been negotiation in good faith and the CRTC will rule on the good faith, but it will not rule on the substantive part.

6294   In effect, if there is a deadlock, so be it. As long as you are negotiating in good faith, we only would make sure that the procedural fairness in the negotiation process is being observed.

6295   MR. SHAW: Or we can just take them off, right?

6296   THE CHAIRPERSON: I beg your pardon?

6297   MR. SHAW: Can we just taken them off?

6298   THE CHAIRPERSON: On the CTV model, yes, I think you can.

6299   MR. BISSONNETTE: No, no, I think Jim was being facetious.

--- Laughter

6300   THE CHAIRPERSON: I am sorry, I do appreciate the joke.

6301   MR. BISSONNETTE: We heard what Rogers had to say and we think that, you know, in a very broad context, that we would agree, you know, with what they have said and we would agree also that there are certain results from unsuccessful negotiations and there are options that become available to those. If you can't negotiate successfully, then there are -- just as there are in labour negotiations.

6302   THE CHAIRPERSON: Yes.

6303   MR. BISSONNETTE: When we negotiate with our labourer we know that there is a consequence to not being able to do a deal. The consequence to us is we might have to find, you know, other ways of running our business. And the consequences to the other party is that they may not be working. And so those are real legitimate consequences. And so the consequences in ours would not to be have something then overshadowing us, that somebody is going to impart upon us an unfair resolution to those agreements.

6304   So I think what Mr. Fecan said was that he would basically have the right to remove his signal.

6305   THE CHAIRPERSON: Yes. But I know the point I got from Rogers was basically, look, if you order us to negotiate value-for-signal, fine, but you can't have binding arbitration. In that case, you going to have to buy the whole U.S. model. Which basically, at the end of the day, you can just make sure there are fair negotiations, but you can't impose a solution.

6306   MR. BISSONNETTE: There can't be binding arbitration or that goes right into the whole tax discussion.

6307   THE CHAIRPERSON: Yes, right, right, right, I am asking you what you think of the Rogers' sort of fallback option.

6308   MR. BISSONNETTE: We think it has merits.

6309   MR. BRAZEAU: Just to add, I think the only proviso here would be on what authorities would the CTV have in order to block or remove the American programming from the network. And I think Rogers suggested that the four plus ones would still be available and there could be substitution of the ads. And I think that, under those circumstances, we could probably endorse their model.

6310   THE CHAIRPERSON: I am not quite sure whether you actually can do that. I think you cannot simsub without the consent of the owner. And you know, if the owner, in this case CTV, would withdraw its signal, you cannot use it for simsub. But we didn't explore that. But that is obviously something -- I believe, quite clearly, that you can only simsub with the consent of the owner.

6311   MR. SHAW: I think that, you know, we could certainly remove all their signals pretty quickly.

6312   THE CHAIRPERSON: I am sure you could do that. I mean, this was a new variant that Rogers put on the table --

6313   MR. SHAW: Yes. No, no.

6314   THE CHAIRPERSON: -- so I wanted to know what your position was on that.

6315   MR. SHAW: No, you know, I think that -- you know what, listen, I think, you know, we got some flex in here and some stuff to work about. And I think we can, you know, work with the parties. We say that, you know, CanWest has been the most vocal and he has called me a few times, so I have talked to Len a little bit more and Vaughn never.

6316   And they are certainly the most grumpiest one, and I am just saying that to be honest. And certainly, I know, I have had to call the Chairman a few times, some on good issues, some on bad and some to say I am sorry. So, you know, I am just kind of running around the gamut.

6317   THE CHAIRPERSON: Okay, there are all sorts of other issues we want to discuss, this is after all a group licensing. And so Elizabeth, I believe you have a whole bunch of questions for Shaw?

6318   COMMISSIONER DUNCAN: I do have more questions and possibly they will be less argumentative. But at any rate, I am not trying to be argumentative. So not that I am suggesting the Chairman was, but maybe everybody can relax. Maybe everyone can relax and --

--- Laughter

6319   MR. SHAW: Really really, oh okay, okay, okay. Well, I didn't find him very argumentative, because he was way better this time than last time I saw him.

--- Laughter

6320   COMMISSIONER DUNCAN: Everybody is happy, we will continue then.

6321   So I think I am going to, first of all, start a little out of order with what I had originally planned but, first of all, to do with signal substitution. And some of the broadcasters have suggested that certain terrestrial BDUs do not honour requests to perform their simultaneous substitution on distant Canadian signals and some broadcaster have noted that Shaw has improved their performance in that regard since 2008-234.

6322   I am just wondering, are all of your systems now doing requested substitutions or are you aware of any problems?

6323   MR. BISSONNETTE: They are all doing them and -- I mean, we have always supported the notion of protecting rights through simultaneous substitutions. I think there was a period when we brought in those distant signals initially where we had to, you know, wrestle with some technical issues. We made a commitment to have those resolved by a certain time, that is two years ago, and we are in fact in full compliance.

6324   COMMISSIONER DUNCAN: Thank you. And CTV and CanWest submitted that there is a need to improve simultaneous substitution on the DTH BTUs. And I think it is more directed at Bell TV, but I am just going to ask the question because it was a general statement. Are you aware of any simultaneous substitution problems with Shaw Direct?

6325   MR. BISSONNETTE: No, we actually, again, fully complied, we have technical capabilities that Bell don't have on their satellite and we have implemented those.

6326   COMMISSIONER DUNCAN: Okay, thank you. And the DTH BDUs, as I understand it, are required today to do simultaneous substitution at the request of speciality services. And I am wondering what the volume -- how many of those requests you actually get?

6327   MS RATHWELL: To my knowledge, we haven't received any requests nor am I aware of the requirement for us to perform simultaneous substitution on specialties.

6328   COMMISSIONER DUNCAN: Okay. I think that is the rule and my understanding was that there were no requests, so I just wanted to confirm that because, as you know, there is a suggestion that the terrestrial BDUs should be required to do simultaneous substitution as well of specialty services. So I am just wondering how urgent a matter it is, if they are allowed on the DTH BDUs and there are no requests.

6329   MS RATHWELL: Yes, as I think you are indicating, it is permissive on DTH, and I am aware of no requests that have been made. Thank you.

6330   COMMISSIONER DUNCAN: Thank you. So continuing on then with substitution, and it is a follow-up actually as well on what Konrad was asking, and this is on the issue of non-simultaneous substitution.

6331   Now, I know that you are doing today what the regulations require you to do, so what we are entertaining is what other things you might be able to do to maintain the integrity of the broadcast rights that the broadcasters have acquired.

6332   So the CAB recommended that BDUs be mandated to block out a program broadcast on a U.S. signal in a market where a local Canadian broadcaster holds the exclusive right, rights to exhibit that program, and broadcasts that program within the same week. Could you describe what would be involved in doing those non-simultaneous substitutions both from the point of view of the terrestrial BDU and Shaw Direct?

6333   MR. STEIN: We have heard a lot of discussion about this issue in terms of local broadcasters, et cetera, and we thought it would be useful to go back and maybe also do this with the broadcasters that, you know, the whole basis for satellite DTH policy in Canada was developed as a national policy. That when we received our first licence back in, you know, whenever, 10 years ago, the whole policy evolved from the Ritchie Report that became an order that became a direction to the Commission and set out in the Regulations, of being a national service.

6334   Those are the satellites we have built. The satellites we have built in Canada, unlike the satellites in the United States, are essentially regional beams. We do not have the same capability as the Americans because of the policy choices that the Canadian Government made and issued a direction on.

6335   So for people to come in now and say, oh, now, after 10 years and after you have lost a billion dollars, ourselves, and probably Bell the same, we now want to change it all around. Well, you just can't do that unless you have a billion dollars to give us to build more satellites that do that task.

6336   What we have tried to do over the past number of years is accommodate local stations. And, I can't recall his name, the President of Pattison Group, the last time he appeared in front of the Commission said that the signal compensation program in place in regards to local small signals was a homerun. So that is what we have tried to do in terms of trying to help local stations.

6337   But for our system to adapt, to be able to carry and totally deal with local signals and to do something as consumer unfriendly as blackouts, it just isn't acceptable. And if people want to revisit the national policy that was set out, fine, but somebody is going to have to find the money to be able to do it.

6338   COMMISSIONER DUNCAN: Now, I do have a few other questions as we follow along. I just don't want to miss anything. Let me just ask you this then I will move a head though, because I noticed -- and I am coming back though -- that you did mention that you have invested hundreds of millions of dollars in a new what you referred to as extended Ku-band satellite to ensure you can satisfy CTR requirements -- and I acknowledge you are not currently asked to do this but -- and meet the expectations of Shaw Direct customers.

6339   So I presume then, I am asking, the time frame for the introduction of that satellite, when it will be available, and if there will be different abilities on that satellite, I understand spot beams might be a solution to reaching local markets. And if you could maybe just expand on that and whether there might be some solution in that.

6340   MR. D'AVELLA: The new satellite that we have talked about is subject to a change in spectrum policy that Industry Canada hasn't made yet. So if we are successful in getting that, we have signed a contract to actually build and launch a satellite that should be in service with, you know, assuming it doesn't blow-up on the pad, between 24 and 30 months.

6341   We have purchased 16 transponders on that satellite right now. The transponders are all national transponders. We probably have some flexibility to not do spot beams per se, I mean that is kind of the Direct TV model in the U.S., but perhaps you would have more of a regional beam and you can focus your resources and provide services in Quebec, for example, more Francophone services for that particular market.

6342   But that is the current plan. It should be in service, if all goes well in terms of the public process with Industry, within 30 months.

6343   COMMISSIONER DUNCAN: So that could possibly allow a little more flexibility in delivering these local into local, that is what you are getting into?

6344   MR. D'AVELLA: Not local into local, I mean that is a different scenario and it requires, you know, a level of channel mapping and authorization that we are not organized to do. It will certainly give us the ability to launch more services, but trying to restrict those to specific markets is still going to be a challenge.

6345   MR. SHAW: And we would also ask, you know, depending on how many new services you licence.

6346   COMMISSIONER DUNCAN: Right, sure, of course.

6347   MR. SHAW: So a little of responsibility on our side.

6348   COMMISSIONER DUNCAN: Okay, right. We have an insatiable appetite for new services.

--- Laughter

6349   MR. STEIN: Can I just also indicate one other problem in terms of satellite? Is that, you know, if you are a satellite subscriber, you will notice the tremendous amount of duplication that exists. So if you are sitting there and you have, you know, from Star Choice my numbers are from 300 up, and it's Tutors, Tutors, Tutors, Tutors, Tutors, right?

6350   COMMISSIONER DUNCAN: Yes.

6351   MR. STEIN: And so this is a phenomenal waste of transponder capacity.

6352   MR. SHAW: How many National CBC News can you watch?

6353   MR. STEIN: Well, that is another issue.

6354   The other issue as well that relates to this is the whole issue of the CBC affiliates. And that is that one of the things that we found disturbing in our negotiations with the CBC in the last time around was that they said -- we said, "Well, we are carrying the CBCs in British Columbia." And they said, "Oh, no no, they are not CBCs, you know, the one at Kamloops, we are dropping that one."

6355   And we are going like, "What?" "That is not a CBC affiliate." And I said, "No, we are dropping those, we are only going to go to O&Os." So why are they loading on the satellite companies the responsibility to meet their local obligations to provide their signal, the CBC signal, to all Canadians wherever they may live? So I didn't think that was a very reasonable approach.

6356   And you heard the person from Kamloops in terms of talking about the problem about losing her CBC signal. Well, I mean, I totally agree with her, she is paying for it, she should get it.

6357   COMMISSIONER DUNCAN: I can see that my questions are giving you an opportunity to get a lot of points on the record, and that is fine, because I think it is important that we have a full record, so that is fine.

6358   But to go back to my question about then non-simultaneous substitution, you are maintaining it would not work on the satellite service, on the DTH. But on the terrestrial what would be involved, from your point of view, with non-simultaneous substitution in the week? So if CTV had a program on Monday and it was going to air again on NBC on Thursday, what would be the problem with substituting that on the Thursday?

6359   That's problems, reliability, cost --

6360   MR. BISSONNETTE: There are some technical logistical kinds of issues we would have to deal with. But the biggest one, we would have to double our call centre because our customers would be calling complaining about why a certain service is blacked out when they haven't seen a program. There is no simultaneous availability then.

6361   COMMISSIONER DUNCAN: No, but what they are suggesting is that you would substitute that signal on Thursday. I am not talking about a blackout, I am asking you what would be possible, technically and reliably, to do if you did non-simultaneous substitution?

6362   MR. D'AVELLA: I don't think we would be able to build data centres big enough to be able to store all the content that they would want us to reserve at some point in the future. It is an unworkable scenario. I mean, simultaneous substitution is relatively straightforward, everybody understands it. But trying to figure out how we are going to make non-simultaneous substitution work, you know, our data centres are big enough now, I don't know what size they would have to be to deal with this.

6363   MR. BISSONNETTE: There is another way, and we have suggested that, which is to go VOD and to provide that programming to us so that we can put it on the server and customers can watch it anytime they want and the rights of those programs are still held by the broadcaster.

6364   COMMISSIONER DUNCAN: Okay, so I am going to come back to VOD then. I will as you some more about that then in a minute.

6365   MR. BISSONNETTE: Yes.

6366   COMMISSIONER DUNCAN: The other alternative they gave, and maybe I can anticipate your answer, because they said as an alternative to that you could substitute the advertising from the broadcaster, from the Canadian broadcaster, onto the U.S. signals in that week. How would you see that working?

6367   MR. BISSONNETTE: Like this.

--- Laughter

6368   COMMISSIONER DUNCAN: I don't know how to record that on the record.

6369   MR. BISSONNETTE: It would be a Chinese puzzle that we would have difficulty coming to grips with and it would again cause, you know, some disruption amongst our customers.

6370   MR. SHAW: Yes, you know, our biggest worry is just the customers' side and creating confusion there and them not understanding and, you know, and then we are trying to do this and then it doesn't work and the, you know what, we will have multiple programs, multiple requests.

6371   And right now they program towards the U.S. network anyway, so why wouldn't you just leave it like that, because it kind of works now and --

6372   COMMISSIONER DUNCAN: I think their argument is that they want to drive the schedule, not the other way around. But can I ask you, are either of these --

6373   MR. BISSONNETTE: Sorry to interrupt. They could drive the schedule if they just didn't just rely on U.S. programming rebroads.

6374   MR. SHAW: Yeah, why don't they make some Canadian programming, then they can drive the schedule?

6375   COMMISSIONER DUNCAN: Okay, thank you.

6376   So are either of these forms of substitution done successfully anywhere that you are aware of?

6377   MR. BISSONNETTE: No, nowhere.

6378   COMMISSIONER DUNCAN: Not that you are aware of? Okay.

6379   MR. BISSONNETTE: No.

6380   COMMISSIONER DUNCAN: So then let me ask you a question on the extended Ku-band satellite. Would you mind or are you able to give us the cost of that? You can submit it later in confidence.

6381   MR. BISSONNETTE: It is $300 million.

6382   COMMISSIONER DUNCAN: Three hundred million, okay, thank you.

6383   Then I will go to the VOD, I had some questions on that. And I was debating about getting into it, because I don't really fully understand it. So explain to us, if you would, how you would see the mutual benefit -- let me ask you first then, are you offering SVOD and VOD at this point?

6384   MR. BISSONNETTE: We are for some.

6385   COMMISSIONER DUNCAN: For some?

6386   MR. BISSONNETTE: And we would welcome anybody who wants to engage in an SVOD or VOD relationship with us, any of the existing broadcasters or specialties. We would be, and we have expressed it to them, delighted to have -- the more programming that we can offer on VOD the more array of services, the better and the more quality our customers see in the relationship with us.

6387   COMMISSIONER DUNCAN: So could you summarize then for me so I will understand what is offered on SVOD, for example, or take your pick, it doesn't matter.

6388   MR. BISSONNETTE: Michael.

6389   MR. D'AVELLA: Well SVOD, at this point, it is primarily a movie service, whether it is Movie Central or Superchannel or other services that have offered other content for SVOD.

6390   COMMISSIONER DUNCAN: Is this the one, Mr. D'Avella, where you buy the movie, you buy from a list of movies?

6391   MR. D'AVELLA: Well, you have to be a subscriber to the linear service and then --

6392   COMMISSIONER DUNCAN: Yes, so I understand that one then, okay.

6393   MR. D'AVELLA: -- you can choose from that programming and that particular schedule in that window is now available on a subscription video-on-demand basis. In most cases we don't charge for it, it is a value-added service, in some cases we have. You know, the models vary depending on what the rights holders are able to actually provide.

6394   The real opportunity in VOD is, as the Rogers folks certainly identified, is it is primetime U.S. network programming. CTV and Global control virtually all of it. And that is where we think the opportunity exists either in terms of refreshing ads, creating new ads and selling those ads or providing it on a transactional basis.

6395   I mean we offered, you know, before Global bought the rights, we offered Survivor on a transactional basis and people were buying it for a dollar an episode and it was very very successful. So there are various models we can discuss.

6396   COMMISSIONER DUNCAN: We are interested I think in making Canadian content available to Canadians when they're watching. But I understand you to say what the plus of this is, that you could watch a U.S. program anytime?

6397   MR. BISSONNETTE: Anytime.

6398   MR. D'AVELLA: Well, you know, that is what we have talked about. But certainly, we have also licensed a lot of Canadian content as well and we are happy to licence even more. I mean, the beauty of VOD is that the deeper the library and the deeper the selection, the better the offering. The issue for us as an operator is you have to get a lot of capacity in order to provide the service.

6399   And we are continually updating our VOD interface, we have now launched essentially a broadband VOD interface where somebody can order, you can go to your Shaw video-on-demand site, you can order an episode of the Tutors, Ken's favourite show, and then have that delivered to your digital set-top. That is a real great innovation in terms of getting consumers access to content.

6400   And on the digital set-top itself it is very difficult to wade through 1,000 titles, I mean, we have a lot of titles, so we have got to be intelligent about how we actually present the content.

6401   COMMISSIONER DUNCAN: So is that service, are you sort of offering it now like a pilot in the bigger cities or more broadly?

6402   MR. BISSONNETTE: No, it is available to -- we have a substantially interconnected network and we also have local regional service as well that we can actually deploy the content from a central location to these regional servers.

6403   The great thing is we also carry children's programming, we have free programming, we are developing if you will viewing habits amongst our customers through the use of free programming and we see that opportunity as an opportunity that as broadcasters we would be prepared to share with them. You know, we have made proposals to them.

6404   They have said, well, we will charge you $3 million, but you can't charge anybody for the programming. That is a one-way relationship again, we are not interested in one-way relationships.

6405   COMMISSIONER DUNCAN: So that is obviously going to evolve and there is not much point --

6406   MR. BISSONNETTE: Yes.

6407   COMMISSIONER DUNCAN: -- in asking more questions on that I don't think right now.

6408   But as far as the uptake then, you are finding that it is a very popular service, you think that it is --

6409   MR. BISSONNETTE: You know, we used to have 50 channels of pay-per-view and we have continued to diminish those and we have made the more convenient video-on-demand available and we are seeing a substantial growth in video-on-demand orders everyday. The other day we had a video-on-demand event that was the highest single night order ever in the history of our relationship with VOD, so it is a growing business.

6410   COMMISSIONER DUNCAN: So how do you make money, by charging the subscription fee or per transaction?

6411   MR. BISSONNETTE: On a per event, per movie basis, and so customers will buy the lollipop for $3.95 and the programmer -- the distributor gets some of the money, we get a third of the money, you know, so there is those kinds of relationships.

6412   COMMISSIONER DUNCAN: So that is one of these innovative things that are on the drawing board and a potential alternative to different forms of substitution that would benefit the broadcasters?

6413   MR. BISSONNETTE: Yes. I know that you, as the Commission, have met with some of the technology people who have shown you the power of being able to, in real time, provide interactive advertising based on a demographic. Those are the kinds of opportunities that we think the broadcaster and ourselves could really expand upon to the benefit of them, to the benefit of our customers and to our benefit.

6414   COMMISSIONER DUNCAN: Just to continue on with that, in this area. Right now, I understand that the VOD services contribute 5 per cent of gross revenue to production funds.

6415   MR. FERRAS: That is true.

6416   COMMISSIONER DUNCAN: Yes. And so I am just wondering if the Commission decides to include VOD in a CPE calculation for broadcasters at say 35 per cent of revenue, should the VOD contributions require that BDUs be increased to the same level?

6417   MR. BISSONNETTE: That is an interesting question. I mean, we have a library of content and the more the merrier frankly. And so, I mean, if we can get more programming sitting on our library, we would be delighted. So you know, we don't think of that as a constraint.

6418   COMMISSIONER DUNCAN: Okay.

6419   MR. FERRAS: I think just one thing about VOD though, as successful as it is and as successful as it can become, it still very much needs to have a flexible and innovative regulatory framework. It does compete with the internet and DVD and video stores, so it really is an important too for us to have, to have greater flexibility.

6420   And from a revenue perspective, Michael and Peter of course will speak greater to it, it is not a big revenue generator at this point. So I think just bear in mind that when you are thinking about CPEs and things like that, VOD is important to the system and it needs to continue to have regulatory flexibility and room for innovation.

6421   MR. BISSONNETTE: Sorry to interrupt. We have also developed an ordering mechanism that allows our customers to order either using remote control and we provide them with a -- I will call it a reasonable list of programming, but also order over the internet.

6422   COMMISSIONER DUNCAN: Okay, thank you very much. And I think that is a useful observation that you make as far as the flexibility.

6423   Going to the DTH then I am just going to ask you another question on the substitution with respect to distant signals. So now as a result of 2008-100 you are going to get consent, you are going to ask for consent to carry the distant signals. So I am just wondering if program deletion is reintroduced should consent requirement be eliminated or altered. But I gather your position would be you shouldn't be deleting it?

6424   MR. BISSONNETTE: Correct.

6425   COMMISSIONER DUNCAN: That is the same argument, okay.

6426   So on the local to local, first of all, I want to talk about, in the CAB submission at page 10, they say that carriage on both DTH service providers is vital to large and small. I know you know that. And especially now, they are saying, because these local broadcasters are going to have to invest what they say is a million dollars per transmitter to upgrade, and so it is important that they get all the revenue they can.

6427   And they identify 38 local stations that are not carried on Shaw Direct. And then they go on to say in their submission, I don't know if you have had a chance to look at all the submissions, but they go on to identify 27 channels on Shaw Direct that are duplicate of existing U.S. channels. And to make up the shortfall, the difference between 27 and the 38, they suggest that you could just reduce the number of adult pay-per-view services.

6428   And I am just wondering if you would like to comment on their observation?

6429   MR. BISSONNETTE: Well, the adult pay-per-view services are now minimal and those channels are actually shared between contemporary movies as well as some adult movies. And, you know, we know that there are some customers that have an affinity for those movies and we make it available to them like we do, you know, children's programming, et cetera.

6430   You know, I watched the Bell presentation and I was actually surprised that they were almost being castigated for carrying 75 local programming services and, you know, they are fully in compliance.

6431   We carry, I think, 76 local programming services. We have tried to choose the local programming services that really are reflected in, if you will, the makeup of our customers. We carry services in all provinces.

6432   I think Ken has already talked to you about the fact that local-to-local was not contemplated when we licensed our services. We built our infrastructure, our satellite infrastructure, our mapping and IT infrastructure to provide the services in the way that we do today, and if we get approval for a Ku-band we are looking at adding more local services because, frankly, if we can offer services that our customers are asking for, we have a better relationship again. So it just makes good business.

6433   But in terms of confining local to local in a community, we are not opposed to that. The richness of our satellite offering and the competitiveness of our satellite offering is in the diversity of the services we offer nationally.

6434   MR. SHAW: I think, you know, also, if you look at our satellite capacity and the reason we want Ku and the reason we are at Industry Canada to get a new satellite is because we are full loaded.

6435   I mean you guys have approved a lot of channels across the board. We have mandatory carriage on CBC and a whole bunch of things that we don't really even want.

6436   So, you know, if we want to make some space, let's make it and we will do the best we can and try to manage it. But you know what? A lot of it comes right from here and so, you know, everybody wants to add it on, and, you know what, we just don't really have any room.

6437   MR. BISSONNETTE: And, you know, in the last two years, through APSK, through technological wizardry that I won't even explain, we have been able to expand the capacity of a resource and add more high-definition programming. We have 60 high-definition programs on satellite. Two years ago, we had about 10.

6438   And so we are using all of the innovation that is available in satellite technology, box technology, to offer more services but we are, frankly -- we just got a new transponder the other day, which we are going to use to add more services. But we are just as enlightened as our customers. We want to provide local services and the richness of our service becomes even more apparent.

6439   COMMISSIONER DUNCAN: But to go back to my question, which was: Would you be prepared to replace those 27 duplicate U.S. channels?

6440   MR. BISSONNETTE: No, we wouldn't, but thank you for asking.

--- Laughter

6441   COMMISSIONER DUNCAN: Thank you for giving me a clear answer.

6442   MR. BISSONNETTE: Our customers like those U.S. services as well.

6443   COMMISSIONER DUNCAN: They are duplicates though?

6444   MR. BISSONNETTE: Yes.

6445   COMMISSIONER DUNCAN: But they like them --

6446   MR. BISSONNETTE: Yes.

6447   MR. SHAW: Thanks for asking.

6448   MR. D'AVELLA: But just to be clear, we have actually rationalized -- I think we took down the Buffalo broadcasters in favour of Detroit. So we are already going through the process of rationalizing these channel line-ups. So it is not like, you know, we don't think about how to conserve capacity.

6449   MR. STEIN: Can I just make the point that we have -- the satellite business is probably the most competitive business and I can understand people like Rogers and Vidéotron saying, well, they have to do this, because that would put us at even more of a competitive disadvantage against them in urban markets.

6450   It is enough of a disadvantage now. We aren't able to bundle satellite services with internet and telephony, so it is a one-off product. So it has to be as attractive.

6451   Also, we compete with the black market and, as the Chairman alluded to earlier, we spent, you know, years trying to convince the government to take some steps that would make us able to deal with the black market. We have given up on that, right, it just didn't work.

6452   So when Winnipeg and -- for example, we have to compete with Shaw itself, with Manitoba Telephone System, with Bell ExpressVu, with Skycable and with illegal dishes. So if we don't offer the range of things that people can get on those services, we aren't going to grow.

6453   And if you look at the Shaw Direct numbers it's not growing that fast, it's pretty stable. So the people at Shaw Direct face real challenges in just trying to keep up. And we have no contracts, right. People just say, I'm gone, right.

6454   So it is a very competitive business and people can walk away in a day if they don't get the services that they want to get on their satellite services.

6455   MR. BISSONNETTE: And we did actually have what we thought was a really good use of transponder. We called it the Omnibus channel and the Omnibus channel was a channel that allowed us -- because what Jim alluded to was we have 10 CBCs taking up 10 channels of very, very scarce spectrum. We were able to take the same programming, put it onto one channel and then take the new services, which are really the distinct programming from each of those CBCs, and run those on an Omnibus channel.

6456   And we think that still, you know, as spectrum becomes more and more scarce that we have to start revisiting those kinds of really creative ways of providing the local/local programming through the Omnibus channel.

6457   COMMISSIONER DUNCAN: So what I hear you saying -- well, you have said a lot of things but for certain then you are saying that competition is forcing you to make the best decisions in the interests of consumers?

6458   MR. BISSONNETTE: Yes.

6459   COMMISSIONER DUNCAN: Okay. So just one other question to go back to --

6460   MR. SHAW: Can we use that in an ad?

6461   COMMISSIONER DUNCAN: Pardon?

6462   MR. SHAW: Can we use that in an ad?

--- Laughter

6463   COMMISSIONER DUNCAN: The CAB was concerned about the broadcasters that might be adversely affected because of 2008-100, the rule where only one local per province.

6464   Is it your intention to drop any of those that you are currently carrying as a result of the added flexibility in that decision?

6465   MR. BISSONETTE: We haven't made a decision, no.

6466   MR. SHAW: No. No.

6467   MR. BISSONNETTE: Again, to the extent that we can meet our customers' demands we are going to do that and to the extent that we can maintain -- because nobody likes to drop services. We dropped some recently and, unfortunately -- it was in order to use our scarce spectrum but even 10 customers that might be watching something out of 800,000, it can create, you know, dissatisfaction, which we don't like.

6468   COMMISSIONER DUNCAN: Thank you.

6469   I am just wondering, the LPIF right now is not charged to the specialty services and yet specialty services have contributed to fragmentation in the market.

6470   Would you be opposed or support the application of the LPIF to specialty services?

6471   MR. SHAW: Yes.

6472   COMMISSIONER DUNCAN: Thank you.

6473   MR. BISSONNETTE: Yes, we would be opposed.

6474   COMMISSIONER DUNCAN: Oh! Did you mean yes, you would be opposed?

6475   MR. SHAW: Yes.

6476   COMMISSIONER DUNCAN: That was what I asked. Yes, okay. So you don't think they should contribute based on the fact that they have contributed --

6477   MR. SHAW: Yes, they should. Yes.

6478   COMMISSIONER DUNCAN: They should contribute?

6479   MR. SHAW: Yes.

6480   MR. BISSONNETTE: Yes.

6481   COMMISSIONER DUNCAN: Yes. Okay. You are not opposed?

6482   MR. SHAW: No.

6483   COMMISSIONER DUNCAN: Okay. Thank you.

6484   MR. SHAW: We support it.

6485   COMMISSIONER DUNCAN: Thank you. Okay. Thank you very much.

6486   I noted in your comments you made a comment about being prepared to support the group licensing, which is what we are here for, the main purpose of these proceedings, but you didn't make any suggestions on any of the measures that we were proposing, or at least I don't believe you did, in imposing Canadian programming expenditure requirements.

6487   MR. SHAW: Oh, no! We would support getting a licence.

--- Laughter

6488   COMMISSIONER DUNCAN: We are not giving out licences.

--- Laughter

6489   COMMISSIONER DUNCAN: Are you interested in filing perhaps on the -- if you haven't already?

6490   MR. STEIN: Well, I think what we said is that flexibility would be extremely important at this time for the broadcasters and I think that many of their issues, many of the challenges they are facing today could be resolved by providing them with more flexibility.

6491   We didn't go into any specifics but that is the general theme that we propose, is flexibility and fewer rules. I think you have heard from specific broadcasters about the flexibility that they would like and the fewer rules that they are supporting and I think we would generally support those.

6492   COMMISSIONER DUNCAN: Okay. So you are prepared to defer to them, they are the ones that are running the business side of things?

6493   MR. STEIN: They run their businesses, yes, indeed.

6494   COMMISSIONER DUNCAN: Okay.

6495   Now, I do have other questions but -- I have many others.

6496   What about skinny basic? What is your position on offering a skinny basic?

6497   MR. BISSONNETTE: We don't support it. We don't think there is a demand for it. Frankly, all it does is corral the horses so it makes it easier for the broadcasters to find where they are.

6498   But, you know, all of the rules around basic that exist today have evolved over time to make it a much more compelling service. So the inclusion of American services, the inclusion of some of the specialty services, Canadian specialty services, the local off-airs, it is a positive and attractive service.

6499   Practically speaking, in order to create a skinny basic we would have two things we would have to do. One is we would have to create another trap regime and each trap -- you know, we have traps now. One of the benefits in 2011 will be that all of our customers who want services that they can pick and pay from won't rely on traps. They can rely on the boxes that we have been deploying.

6500   And remember, it is 60 percent of our customers now -- two years ago it was 40 percent -- 60 percent now have digital boxes. We have subsidized the deployment of those boxes. I think we spent $80 million in the last two years to deploy digital and the benefactors of those digital boxes, in addition to our customers, are the broadcasters, who get more exposure. We carry all of their signals now in digital. So we have analog as well as digital. And the propensity for ordering services when you have a digital regime which is interactive goes up. So the broadcasters have benefited from that initiative as well.

6501   COMMISSIONER DUNCAN: What I would like to do is -- I would like to know what your recommendation or suggestion would be to assist us in deciding what we could offer those OTA customers in markets where they wouldn't have access to a digital signal.

6502   MR. BISSONNETTE: Well, we have said, on the cable side that where there is a broadcaster that chooses not to invest in a digital transmitter that we would be prepared for a -- I will call it a cost recovery to provide that service, including a digital box, a low-cost digital box to customers who wanted to receive those over-the-air signals that couldn't receive them because they are no longer available over the air. We would expect that the broadcasters would extend their signals to our head end so that we could make those signals available.

6503   COMMISSIONER DUNCAN: And who would past the cost of the box then, are you saying?

6504   MR. BISSONNETTE: Either the customer or --

6505   COMMISSIONER DUNCAN: The government or --

6506   MR. BISSONNETTE: Yes. They are not expensive boxes. I know that they are not free but -- so we are prepared to do that.

6507   COMMISSIONER DUNCAN: So what would be the range for the box?

6508   MR. BISSONNETTE: Well, you can rent a box right now. We thought that an appropriate rental for that would be in the $4.95 a month --

6509   COMMISSIONER DUNCAN: Okay.

6510   MR. BISSONNETTE: -- or you can buy one for around $50 a month -- sorry, $50 one time.

6511   MR. SHAW: Yes.

6512   COMMISSIONER DUNCAN: Okay. So then just one other quick question because I know the other members of the Panel have questions.

6513   Do you have a problem having the must-carry and simultaneous-substitution requirements apply to those signals that are directly fed?

6514   MR. BISSONNETTE: I am trying to understand the implications of that.

6515   COMMISSIONER DUNCAN: Well, right now the simsub and the must-carry apply to digital over-the-air transmitter.

6516   MR. BISSONNETTE: Yes.

6517   COMMISSIONER DUNCAN: But if it was direct-fed, are you willing to do the substitution?

6518   MR. BISSONNETTE: Yes. We are essentially replicating the transmitters by carrying it ourselves.

6519   COMMISSIONER DUNCAN: Yes. So it is not a problem?

--- Off-record discussion

6520   COMMISSIONER DUNCAN: Right now there is --

6521   MR. BISSONNETTE: Yes. There would be no simultaneous substitution because essentially we are just replicating free air.

6522   COMMISSIONER DUNCAN: But the broadcaster's only right --

6523   MR. SHAW: If we go -- if they take more than just over the air, then it would be replicated. But if they just take over the air, it would just be the regular channel.

6524   MR. BISSONNETTE: There would be no U.S. programming that that customer would receive to simultaneously substitute. That is the point. So if a customer just takes two services, two over-the-air services --

6525   COMMISSIONER DUNCAN: Oh, I am sorry.

6526   MR. BISSONNETTE: -- you wouldn't substitute them.

6527   COMMISSIONER DUNCAN: I moved on to something else.

6528   MR. BISSONNETTE: Okay.

6529   COMMISSIONER DUNCAN: Sorry. I wanted to get my last question in.

6530   MR. BISSONNETTE: Okay.

6531   COMMISSIONER DUNCAN: Sorry, I moved on to something else. You can't read my mind. Sorry about that.

6532   Right now, simultaneous substitution is based on the fact that there is an over-the-air transmitter. And so if there was no over-the-air transmitter and it was fed directly to your head end from the broadcaster, would you have any problem doing that substitution?

6533   MR. BISSONNETTE: Yes.

6534   COMMISSIONER DUNCAN: No. Okay.

6535   MR. SHAW: We would do it.

6536   MR. BISSONNETTE: Yes, we would do that.

6537   COMMISSIONER DUNCAN: Okay, that is fine. Those are my questions, Mr. Chairman. Thank you very much.

6538   THE CHAIRPERSON: Mr. Bissonnette, can you just clarify what you just said about those stations which are now over the air and they will not be over the air after 2011? You are willing to carry them on something that sounds suspiciously like Freesat. Explain exactly what you would be doing.

6539   MR. BISSONNETTE: Yes. So if there is a -- just take a city in Saskatchewan and the broadcaster chooses --

6540   THE CHAIRPERSON: Prince Albert, okay. There is no more -- Prince Albert. Let's take Prince Albert.

6541   MR. BISSONNETTE: Okay, Prince Albert. So there is no over-the-air.

6542   THE CHAIRPERSON: Yes.

6543   MR. BISSONNETTE: The broadcaster chooses not to do the digital transition.

6544   THE CHAIRPERSON: Right.

6545   MR. BISSONNETTE: As long as they provide us with a direct feed into our head end so we can distribute it, we will distribute that signal, we will provide a box, a low-cost box to our customers, which they will purchase --

6546   THE CHAIRPERSON: M'hmm.

6547   MR. BISSONNETTE: -- and for a cost recovery we will make that signal available to our customers.

6548   THE CHAIRPERSON: Okay. Now, what is cost recovery? What range are we talking? I am a satellite customer right now, so I know what your basic rate is.

6549   MR. SHAW: What we end up having to pay for. We are not looking to make more money.

6550   THE CHAIRPERSON: I understand. I just want to know for illustration what --

6551   MR. SHAW: Like that box would be --

6552   MR. BISSONNETTE: So the rental on the box would be $4.95.

6553   THE CHAIRPERSON: Yes.

6554   MR. BISSONNETTE: The cost of one signal might be in that sort of $5 range. So we are looking at like $9.95-$10 for that signal.

6555   THE CHAIRPERSON: Okay. If it is a pricey box on eBay or whatever, so then you --

6556   MR. BISSONNETTE: They don't sell our boxes on eBay because they have to be --

6557   MR. SHAW: But our box is --

6558   MR. BISSONNETTE: They can buy it for $50. So for around $5 for a digital signal --

6559   THE CHAIRPERSON: Five dollars a month --

6560   MR. BISSONNETTE: Yes. I am not locking us into that, I am just saying that would be the --

6561   THE CHAIRPERSON: No, no, no, but just basically --

6562   MR. BISSONNETTE: Yes.

6563   THE CHAIRPERSON: -- the customer in Prince Albert who no longer receives the signal over the air --

6564   MR. BISSONNETTE: That is right.

6565   THE CHAIRPERSON: -- can go to you and for $5 a month he gets a signal?

6566   MR. BISSONNETTE: Yes, exactly.

6567   THE CHAIRPERSON: Okay, thank you.

6568   Let's take a five-minute break before I go to my colleagues.

--- Upon recessing at 1045

--- Upon resuming at 1058

6569   THE CHAIRPERSON: Mr. Bissonnette, let me just follow up on that last point. I want to make sure I didn't misunderstand you.

6570   Were you speaking as Shaw Cable or were you also speaking as Shaw Direct?

6571   MR. BISSONNETTE: Well, I was actually speaking as Shaw Cable.

6572   THE CHAIRPERSON: I see, okay.

6573   MR. BISSONNETTE: We were talking about local --

6574   THE CHAIRPERSON: Yes, terrestrial-based.

6575   MR. BISSONNETTE: Yes.

6576   THE CHAIRPERSON: What about on Shaw Direct? Because there are obviously some customers right now who receive their signal OTA who are not in any cable territory and who then will have no choice, in order to get the signal, to subscribe to satellite but that doesn't necessarily mean they will get the local signal if you don't carry the local station.

6577   MR. BISSONNETTE: So to the extent that we can augment what we already have, we said that on certain conditions we would be prepared to offer a similar kind of carriage for those small local television stations over our Shaw Direct service.

6578   THE CHAIRPERSON: Yes.

6579   MR. BISSONNETTE: In terms of how we pay for that, that is slightly different than the local programming model.

6580   Michael, I don't know if you would like to chat about that.

6581   THE CHAIRPERSON: What are those conditions? I am not aware of them.

6582   MR. BISSONNETTE: Well, one of them was not to have -- I hate to use the term -- fee for carriage.

6583   THE CHAIRPERSON: Yes. M'hmm. Say value for signal.

6584   MR. BISSONNETTE: Yes.

6585   MR. SHAW: Television tax.

--- Laughter

6586   THE CHAIRPERSON: Why don't we agree, for the purpose of this hearing, we call it value for signal.

6587   MR. BISSONNETTE: Yes.

6588   THE CHAIRPERSON: Think of it whatever you want, just --

6589   MR. BISSONNETTE: Yes. So not to have that --

6590   MR. CHAIRPERSON: Yes.

6591   MR. BISSONNETTE: -- because we are not prepared, as you clearly understand now, to do that.

6592   THE CHAIRPERSON: I understand that.

6593   MR. BISSONNETTE: Do you want to describe the whole scenario? It is pretty simple.

6594   MR. D'AVELLA: Sure. So no incremental cost for distant signals. There would have to be some cost recovery on the -- let's call it the operating the capital recovery on the transponder itself, similar to the Bell model, and how we fund that is really a separate issue. And the customer would have to buy and pay for the installation of the satellite dish.

6595   THE CHAIRPERSON: So it is basically the Freesat model of Bell, if I understand?

6596   MR. D'AVELLA: It is. It is essentially the same proposal.

6597   THE CHAIRPERSON: And would you feel, for competitive reasons, if Bell does a Freesat, you have to do one too?

6598   MR. BISSONNETTE: Well, no. We feel that there are probably 10 percent of customers or even a larger proportion in areas that, you know, that we currently serve nationally that if they were under-served; that is, that the broadcaster was no longer transmitting and they wanted that service, that they should have choices in terms of where they get that service.

6599   THE CHAIRPERSON: No, my point is you both have capacity restraints and there are -- I don't know how many stations there will be -- will no longer be over-the-air available but it would make sense.

6600   It's sort of you would split them between them. So those people that have an ability to get their signal by a satellite, but it would be a Bell here and it would be a Shaw over there rather than -- because the total is so small I can't see it if it would make sense for you competitively to offer it. But I don't know.

6601   MR. BISSONNETTE: Yeah, so you know we are giving you a -- I call it a general approach to what we think can work. Because there will also be the local cable operator in that particular community who might also be doing the same thing that we are doing.

6602   THE CHAIRPERSON: Yeah.

6603   MR. BISSONNETTE: And so that customer would have the choice of, you know where to go to get that service. The numbers might be infinitesimal though.

6604   THE CHAIRPERSON: You know I am primarily concerned with those who don't have a cable alternative.

6605   Okay, thank you.

6606   Len, you had some questions?

6607   COMMISSIONER KATZ: Thank you, Mr. Chairman.

6608   Good morning. I have got two quick questions for you.

6609   You have referenced a number of times this morning the fact that it's not healthy for people to not be able to watch programs; program deletion, blackouts. It's not good for people, for the consumers. But yet we are seeing television stations going dark and that's the dilemma that we find.

6610   So on the one hand you are saying people shouldn't do blackouts, channels shouldn't be blacked out, consumers aren't happy. On the other hand, the reality is, and one of the reasons why we are here is because we are seeing stations closing down and people not having any local programming at all.

6611   How do you square that?

6612   MR. STEIN: Well, we don't think that should happen. We think that there are solutions out there to deal with local broadcasting alternatives. We think that even as we go to a digital world. As the individual from Kamloops pointed out, there are alternatives in order to provide signals on a local basis. We think there are successful models out there that work and we --

6613   COMMISSIONER KATZ: But yet I understand that people aren't even prepared to pay a dollar for certain channels, for certain stations because there is no market for it.

6614   MR. STEIN: Well, that's a different question. The question we have is why there cannot be services in local areas serving local communities whether it's through the cable channel. If there is cable services available then we can do lots of things with a community channel that provide -- I mean, the mayor of Saskatoon says to me, you know, that Shaw TV is the local station. That's a pretty major market.

6615   Now, we serve a lot of smaller market. That's one of the great things about Shaw is, we serve a lot of smaller markets. We have cable systems in those areas and we think that local television is part of what we offer to people.

6616   So either we are over-the-air broadcasters or however they become virtual over-the-air broadcasters in the future we think that there is lots of potential for them. We don't think that there is a financial issue out there that can't be dealt with. Maybe the national networks can't but certainly a lot of local television stations can certainly --

6617   MR. SHAW: You know a lot of the networks have gone totally national and, you know, though we have seen over the years guys like the Craigs in Brandon, Manitoba build that business into a great big business and do a lot of stuff.

6618   And, you know what? Maybe it's time to let some other entrepreneurs into the market and not have just one signal that goes all across Canada and try and run it like a satellite company.

6619   COMMISSIONER KATZ: And if there were people stepping forward to buy those businesses I don't think anybody would have a concern necessarily. The issue is they are going dark and unfortunately they are not --

6620   MR. SHAW: That's not true, though. So I saw a couple of deals the other day.

6621   You know, we just decided that for us to -- you know whether we are going to buy them or not was really just we didn't want to defray from -- we have so many cable customers and so much other work to do that we felt -- you know we don't have a big management team and we felt it would take away from us.

6622   And so it was basically not a decision that the business wasn't a good business. It's basically a decision that we had to keep our team focused on our main game. And you know when --

6623   COMMISSIONER KATZ: And I'm not trying -- I'm not trying to isolate your particular situation.

6624   MR. SHAW: I know. I'm just --

6625   COMMISSIONER KATZ: But there are other people as well who came forward in Brandon and looked at the Brandon market and walked away from it, and they weren't conglomerates. They weren't multinationals. They were basically small entrepreneurs who basically said, "We can't make a go of this".

6626   MR. SHAW: You know what I always say? You know -- and this is something my father said to me for a long time. He said, "You know, sometimes you know a door shuts and a window opens". And so don't get scared of the future, like just let her roll.

6627   And you know what, if there is no market there then there is no market there. But if there is a market there, someone will show up.

6628   COMMISSIONER KATZ: But one of the roles that this Commission has to play is to protect the Canadians and the role that the Broadcasting Act has bestowed upon us as well and we --

6629   MR. SHAW: We can't hurt all Canadians to protect Brandon, Manitoba, right, and that's my point you know. So you know what, if it should go dark it probably should go dark.

6630   And if it goes dark -- and I thought that the last -- you know at the Commission you said, "You know if a specialty service doesn't make it, it doesn't make it".

6631   You know, and that's kind of the role. You can't guard everything. You are not like guarders of the world. Like you have got to -- you have got to -- you have just got to let her flow.

6632   MR. BISSONNETTE: You know the market forces as well have -- in Brandon, 55 percent of the customers there had an opportunity to subscribe to or to watch that station. They chose not to watch it on the cable system. They watched it on various satellite feeds, either ourselves or somebody else's. And they have made that choice.

6633   People make choices to do certain things that have either opportunities for businesses or not opportunities. Right now there is probably no opportunity for a local over-the-air broadcaster in Brandon unless he comes up with a creative way of doing things.

6634   One of the things, you know, that the CHCH boys are doing, they are doing all news 24 hours a day. Is that a format that would work in Brandon? Probably not, we thought.

6635   COMMISSIONER KATZ: I guess we will agree to disagree. I think the Commission does have a role to play in this regard. And if, at the end of the day, the DTH sector is successful in garnering a bigger and bigger share of the audience out there as well, that doesn't mean that we don't have a role to play in making sure that local programming is available in those communities and those towns.

6636   MR. STEIN: I just -- there is nothing in the Broadcasting Act that says there has to be a guarantee that stations are always there. There is nothing in the Act that says that.

6637   There is also a responsibility on the CBC. I think one of the issues in Brandon, for example, was the fact that CBC wanted to change the program supply arrangements in that area. So that means the people of south-western Manitoba, a very beautiful part of the country, don't have an over-the-air CBC service. And there is lots of areas like that.

6638   So there is a responsibility on the public broadcaster as well. I mean that would seem to me to be the definition of why we have public broadcasters as opposed to loading up on the private sector.

6639   So I think that -- you know in terms of the private sector they have to make investments. They have to run businesses and have to operate in that particular area.

6640   There is no guarantee for a newspaper or anything else in those local areas so if people choose to find their information material other ways than those areas then that's it. There is no guarantees in the Broadcasting Act. There are obligations on the CBC, though, that I would think aren't being fulfilled.

6641   COMMISSIONER KATZ: Okay, let me --

6642   MR. STEIN: Including cutting off the Calgary Flames hockey games.

6643   COMMISSIONER KATZ: On page 7 of your remarks this morning, Mr. Stein -- actually you were reading it -- but it's obviously your company's position that any type of additional charges to the consumer would create an imbalance in other areas as well.

6644   And one of them in your first bullet talks about "impacting the attractiveness of viewing substitutes" which I guess means that there will be less of a take-up of other substitutable services or specialty programs as well.

6645   And I guess it begs the question. Commissioner Denton earlier this week raised a chart that had a number of indices of growth over a period of time; telephony, internet, cable. And as an industry cable was growing and far faster than any other industry. And I don't know whether that applies to Shaw as well so I can't comment on your particular case.

6646   But to the extent that cable rates have been growing to that extent, there doesn't seem to have been a melt, if I can call it that, or a decrease in the take-up of specialty programming given the financial situation that we have seen from specialty as well.

6647   So again, the question of you are going to face a real concern on the specialty side if rates go up on the basic side, because people are going to drop the specialty, doesn't seem to be happening.

6648   Can you comment on that?

6649   MR. STEIN: Yeah. I guess, first of all, of course, rates have been going up because our CAPEX is going up like crazy partially because of regulatory burden, partially because of new channels licensed by the group here. I mean, I will bring up Allarco for one example, just you know there is six channels there.

6650   Peter, something like that -- six?

6651   MR. BISSONNETTE: Yeah.

6652   MR. SHAW: And you know, I mean you try and roll those out over -- you know, what do we have, 100 head-ins?

6653   MR. BISSONNETTE: Yes.

6654   MR. SHAW: Yeah, right in that range. So you know, I mean, we have got a heavy, heavy regulatory burden. Our data traffic is going up. It just about doubles every year.

6655   So we have got like a huge burden and then we have got the Telco or the telephone burden. And then we have got, you know all the network --

6656   COMMISSIONER KATZ: Have you seen a decline in the penetration of the specialty?

6657   MR. SHAW: I don't --

6658   MR. BISSONNETTE: Let me just give you another view as well.

6659   There is a myth out there that, you know, that we are fat cats and we just keep raising our rates. Five years ago a bundle of internet, telephone and video services cost more than it does today. We are in a very, very competitive business and the market dictates to us the kind of pricing that we put on our services. Whereas basic services may have gone up in price, when a basic customer joins a tier customer and also takes the internet; whether it be high speed, light speed, fast and a telephone product they actually get bundle discounts.

6660   Most of our customers now bundle their products because they enjoy the -- first of all, they enjoy the services but they also enjoy the value that comes with those services.

6661   So the myth that -- you know that we are fat cats, we just keep raising our rates, is not correct. The bundle of services is lower today than it was five years ago. What we are seeing in penetration because it's a much more competitive business is our penetrations are going down.

6662   Our programming costs are going up but they are spread across and our operating costs are going up.

6663   We still have customer service representatives to pay. We have expanded a level of service that we offer, 24/7 customer service. We have technicians that need to get paid. We have got vehicles that take gas to run. So our operating costs are going up as well.

6664   COMMISSIONER KATZ: Are you saying --

6665   MR. BISSONNETTE: But they are being spread across a lower base because we have lower penetration on the basic cable services.

6666   COMMISSIONER KATZ: Are you saying that if we looked at your tier penetration over the last five years it's been going down?

6667   MR. BISSONNETTE: The basic penetration is going down.

6668   MR. D'AVELLA: Well, but bear in mind the tier penetration -- given it's essentially an analog world. I mean these tiers were created years ago -- it's relatively stable. I mean it hasn't grown. It's been what it has been really for the past three to five years.

6669   COMMISSIONER KATZ: But basic cable rights have been going up by whatever the percent is --

6670   MR. D'AVELLA: But we are continuing --

6671   COMMISSIONER KATZ: And there hasn't been a drop-off on the tier side, is what I'm saying. I haven't seen the data and I --

6672   MR. D'AVELLA: No, but it hasn't grown either. It has remained relatively stable.

6673   And remember that in our particular offerings any of the additional services that we provide as either Category 1 or Category 2 are purely discretionary. Customers choose 1, 2, 3, 5; whatever they want.

6674   So there has not been as much growth in that particular area as you might think there was.

6675   MR. STEIN: Can I just point out one other thing in terms of rates? And that is that when Mr. Asper appeared at CanWest and he talked about, well, they always find other ways to do things like access fees and uplink fees and service charges and connection fees, we don't -- that's wrong. We don't have any of those charges. What people pay on basic cable includes installation, free service calls, et cetera. There are no hidden charges in those costs.

6676   THE CHAIRPERSON: Okay.

6677   Candice, over to you.

6678   COMMISSIONER MOLNAR: Thank you. Good morning.

6679   Let me say that while there are some things you said this morning that I don't agree with and that includes your comments on Brandon, there are some things that you were talking about this morning that I thought were important points and contribute to solutions here.

6680   That regards your discussion on the future and future platforms; new and emerging platforms and how they can help solve the problem. And I want to put this question in the context of local signal integrity.

6681   Local signal integrity is something that the broadcasters said was very important. Distant signals is one of the issues that I think is serving to degrade the value of the local signal.

6682   And I wonder if you could tell me if you see these new platforms as being a solution for any of that local signal integrity?

6683   MR. SHAW: Well, I will start and the other guys will probably jump in.

6684   But when we look at it I would first ask the question, "How much effort have they put into local signals?" That's number one, right, other than news. And you know we put a lot of effort into local community programming because that's what we do. And we feel that makes us special, right? And so we put a lot of effort into there.

6685   But, you know, when I look at all these guys they are all cut back. There is nobody, no staff in any towns, and you know where we have at Shaw 11,000 employees. You know we probably have 100 operating locations and we focus on it. We focus on it. We try and change it.

6686   Alex is here right now and he can talk about it a little bit. But, you know, I mean we spend a lot of time focusing on local, local, local.

6687   So Alex, why don't you just come and speak up here?

6688   MR. PARK: Yes, thanks, Jim.

6689   There is a couple of things about local television that we are finding very interesting over the last four or five years.

6690   The first thing is that in terms of the local broadcaster the phrase "local television" in most cases refers to local news. When we look at what they actually produce on a day-by-day basis the vast majority of the programming is local news. Yes, it's supplemented by odd local programming. There could be telethons or something at a local level. But ostensibly, it's local news.

6691   COMMISSIONER MOLNAR: Excuse me. I'm sorry. I think perhaps you have misunderstood my question.

6692   When I'm talking about local signal integrity I'm not just talking about the local programming provided in that market. I'm talking about -- and just so that we have a frame of reference, let's talk about Saskatoon. We have used Saskatoon as an example, the Saskatoon market.

6693   CTV in the Saskatoon market has a station. It runs local advertising over both local programming and national programming and, frankly, U.S. programming. So they are talking. They need to -- they need to ensure the integrity of the local signal, ensure that they have the right to have their local advertising shown within their local market; be it on the local programming, national programming, U.S. programming. So that's what I was talking about.

6694   Part of that is degraded by multiple signals in the market, and I wondered if you have seen things like VOD being an opportunity to help protect the integrity of the local marketplace and local signal and advertising.

6695   MR. D'AVELLA: Well, the answer is "yes" and we would be more than happy to take any local CTV signal or Global signal or anybody else's signal for that matter and make it entirely available on demand if they are prepared to licence the content to us.

6696   And we could add even greater value by saying, "You know what? The ad that you showed at this particular time is no longer relevant to the audience that's going to be watching it, say at 10 o'clock."

6697   So there is a tremendous amount of work that can be done in the form of targeted advertising, in the form of you know, value-added advertising, if you will. But they have to be willing to licence the content and to this point they haven't.

6698   So we would be more than prepared to say -- I mean I'm from Calgary so I will just take CFCN as an example and say, "Yeah, we would love to be able to provide CFCN on demand".

6699   COMMISSIONER MOLNAR: Okay. And can I ask, if they were to come to the table and make that available would you see taking the distant signals off of your systems potentially to replace it with the VOD type of application?

6700   MR. BISSONNETTE: Well, on the satellite side of course not, because we don't have --

6701   COMMISSIONER MOLNAR: I was going to ask satellite separate, yes.

6702   MR. BISSONNETTE: So satellite, no.

6703   And I know that there is -- I guess it goes to the extensive of the program that is licensed and the attractiveness of that programming because that's -- essentially, most of the distant signal time shifting -- you know the value to our customers is to be able to watch those U.S. programs three hours in advance of when it actually occurs, you know, in the local broadcast.

6704   So if you actually were able to provide those services it's for convenience, so if you provide those services on a VOD basis and you were able to do it across the entire programming schedule, it could replace it because you are just basically making those same programs available in a very convenient way to our customers.

6705   COMMISSIONER MOLNAR: Yes.

6706   MR. BISSONNETTE: That's the only value of --

6707   COMMISSIONER MOLNAR: I appreciate. You know I also am from the west and so I do appreciate the value of time shifting and being able to use it to see programs in advance versus as catch-up.

6708   MR. BISSONNETTE: Yes.

6709   COMMISSIONER MOLNAR: But I also appreciate, as I'm through this hearing, that that does serious harm to a local market and the integrity and their rights to that program. So what's the solution? You know you hold the technology and the distribution. What's the solution to that?

6710   MR. SHAW: But don't -- you know, currently they get compensated for that, right, and so --

6711   COMMISSIONER MOLNAR: I'm sorry. How do they get compensated for that?

6712   MR. D'AVELLA: Well, in our cable systems the distant signals are generally a discretionary package so people have to choose to buy them and the broadcasters are compensated whenever a customer chooses to buy that particular package. So there is a compensation regime in place already.

6713   MR. SHAW: Yeah.

6714   COMMISSIONER MOLNAR: Okay. I am going to leave that alone, I think.

6715   We have heard here that the integrity of the local signal is very important and that perhaps compensation isn't sufficient to offset that. But I also heard you say that you are willing to sit down on many issues and so I'm going to leave this alone for right now.

6716   MR. BISSONNETTE: And we have sat down on this very issue.

6717   COMMISSIONER MOLNAR: I want to move to this same issue of protecting the integrity of the local signal and the local market from a satellite perspective.

6718   What are possible solutions to that?

6719   MR. STEIN: Well, I think I will start on this as we --

6720   COMMISSIONER MOLNAR: If you can't think of any right now you have about a month.

--- Laughter

6721   COMMISSIONER MOLNAR: Until our final comments to come up with some solutions.

6722   MR. STEIN: Well, I think, first of all, as we indicated earlier, the satellite policy in Canada was based on national policy. The government wanted to have two competitors, at least two more competitors so it chose to move and have approximately --

6723   COMMISSIONER MOLNAR: I'm sorry, Mr. Stein. You know, we are five days into this hearing and so I'm really interested in talking about today and tomorrow versus what happened from 1971 or otherwise.

6724   MR. STEIN: But that's the policy.

6725   COMMISSIONER MOLNAR: You know, today what do we do about local signal integrity on DTH?

6726   MR. STEIN: What we do is that, the way in which we offer the packages to our customers, they are available and we are willing to sit down with the broadcasters and talk about the implications of that in their markets.

6727   MR. SHAW: And I think you know we also have to take in a comment here, you know, consumer demand, like you know what do people really want?

6728   You know when we look at it, out of our 3.5 million customers, 50,000 are in Saskatoon. That's it.

6729   So let's get to the facts. Like you know what? There is a lot of --

6730   COMMISSIONER MOLNAR: I consider every one of those 50,000 very important, Mr. Shaw, being --

6731   MR. SHAW: I know. You know, I'm not saying that. I'm just saying we have got to go and we can't be using up all the national policy to do that.

6732   They can all subscribe to cable. They can all get what they want or they can all get the national feed. And, last I looked CTV and Global just give you national feeds.

6733   Or we can have 9 million CBCs that we have to carry. So that's by regulation. You guys regulate it. We have got to put on every CBC in every province.

6734   So I think they are on, aren't they?

6735   MR. STEIN: Yeah.

6736   MR. SHAW: Yeah, okay. And they all look identical. And now one might be an hour different than the other one but they are all identical.

6737   So if you want to protect local programming give us some flex to put on stuff because you are not -- you don't give us any flex to put on anything and we are all out of capacity.

6738   Industry Canada told us it's two years to get a new satellite -- like we are trying. Like we are trying but we are not -- we are just not getting any flex.

6739   So if you want local --

6740   COMMISSIONER MOLNAR: Let me say I would really --

6741   MR. SHAW: If you want local --

6742   COMMISSIONER MOLNAR: I would really appreciate if you would expand on this in your final remarks as to what is that flexibility, what do you need from us?

6743   MR. SHAW: Okay.

6744   COMMISSIONER MOLNAR: But when we are talking about protecting the local market --

6745   MR. SHAW: You are asking for carriage.

6746   COMMISSIONER MOLNAR: I'm asking for carriage, yes.

6747   MR. SHAW: Okay. So I'm offering carriage --

6748   COMMISSIONER MOLNAR: I mean, I heard about the omnibus, and that's interesting, but that does not give the local market the opportunity to show their advertising to the local community.

6749   MR. BISSONNETTE: Yeah, so there is two situations.

6750   COMMISSIONER MOLNAR: Yes.

6751   MR. BISSONNETTE: One is -- in Saskatoon, for instance, we carry the Saskatoon station on Star Choice. We do the virtual cable or, sorry, the virtual overrides. We do simultaneous substitutions. So the rights of that broadcaster on Star Choice are all protected.

6752   On the local channel on cable when we carry that same station, we do all the simultaneous substitutions that we are required to do by regulation so that local broadcaster, his advertising is protected in our market.

6753   In terms of dealing with fragmentation that's a totally different story. We can't eliminate fragmentation within that market. If people choose to watch that service they will but if they choose to watch something else they will.

6754   But to the extent that they have the rights to those programs, we preserve those through simultaneous substitution of our cable.

6755   MS RATHWELL: Commissioner Molnar, if I may add to that a bit on the satellite side?

6756   The rules that were set out in 2008-100 restrict the transmission of distant signals into provincial markets essentially. So as Peter was saying, within Star Choice we have virtual channel override which enables us within the same time zone even if those are distant signals coming into a market, to do an override that preserves the integrity of the local signal rights.

6757   Now, with respect to distant signals the re-transmission negotiation framework was proposed there and, as Michael was speaking earlier, he said we are interested in sitting down and having that kind of a negotiation. There have been some obstructions to that but there is no unwillingness to talk about it and we believe that the framework set out in 2008-100 remains appropriate for the protection of signal right -- of local programming rights on the satellite side.

6758   So we are a little bit unclear as to why that isn't sufficient. It hasn't even been tested yet because the broadcasters have not been willing to you know fully sit down with us and have a negotiation.

6759   MR. BISSONNETTE: As we have said in previous hearings, if capacity was unlimited every broadcaster in Canada would be carried on our services. That's not the reality and so we have to balance interests. And we do our best to balance the interests of everybody, including the broadcasters, including our customers and including our shareholders.

6760   MR. FERRAS: Commissioner Molnar, I was just going to add a comment as well.

6761   We are all very concerned of course for the broadcasting system being as healthy as it can. But when you look at policies like the distant Canadian signal policy there is a lot of benefits to that as well. I mean the Commission is constantly weaving a web of policies to strengthen the system and distant Canadian signals in a cable context. The Commission allowed those signals to come in on a discretionary basis. And that really -- on a digital discretionary basis.

6762   And that really helped drive digital penetration of cable up. It was very powerful because cable was an analog subscriber base and we are trying to help it along. So it does play a role in the balance of things. I just want to make that point.

6763   COMMISSIONER MOLNAR: Yeah, I understand. I believe that every regulation put in place served an important purpose at its time and what we have had is an evolution of technologies, consumer viewing habits and so on.

6764   And so looking at things today what is the right thing for today? And there have been benefits and there have been consequences.

6765   One of the realities we have today is we have local markets with significant numbers of customers choosing satellite which degrades the size of the audience pool for that local market and is putting some of those local markets at risk.

6766   That's our today. It's not what happened five or 10 or 20 or 30 years ago when regulations were put in place. That's today.

6767   And so you know that's what we are trying to create solutions for.

6768   MR. STEIN: But there was a direction.

6769   COMMISSIONER MOLNAR: Understood.

6770   MR. STEIN: And directions still exist.

6771   COMMISSIONER MOLNAR: I just have a question of clarification regarding what you were talking to the Chairman about regarding the Shaw Direct Freesat model or whatever. Do you have a name for yours?

6772   MR. STEIN: No, we don't like to call anything free.

--- Laughter

6773   COMMISSIONER MOLNAR: All right. All right.

6774   I think I heard you state that in the non-mandatory markets under certain conditions you would be willing to carry all of the local stations -- in the non-mandatory markets under certain conditions.

6775   MR. BISSONNETTE: We said we would give our best efforts as long as there were conditions. You know, certain conditions applied that the value for service was not even on the table.

6776   And we were able to get an extended Ku-band satellite which we are doing with Industry Canada as recently as yesterday to try and get their approval. So we have a capacity that's available that we would give our best efforts to provide carriage for those broadcast -- local broadcast signals that were not converged to digital.

6777   COMMISSIONER MOLNAR: Okay. And so two questions out of that; subject to additional satellite capacity and if I heard right that's 30 months or so away. Is that correct?

6778   MR. BISSONNETTE: Correct.

6779   COMMISSIONER MOLNAR: Okay.

6780   And the other thing I wondered is in the Bell situation they are putting it on a separate satellite and therefore it's not available to your existing customer base. It's only available to new customers. Would that be the situation with yours?

6781   MR. D'AVELLA: No, it will be available to everybody. It's essentially in the same satellite neighbourhood and it's essentially the same frequency as extended Ku. They are doing it on a Ku-band satellite which is completely different.

6782   MR. SHAW: But they haven't approved -- like they have told us like we are years away. That's what Industry Canada tells us and we are going, "Come on, got to pick it up, boys, because we are ready to go now".

6783   COMMISSIONER MOLNAR: So you are not 30 months away?

6784   MR. SHAW: Well, we don't know.

6785   COMMISSIONER MOLNAR: When are you going to know this?

6786   MR. SHAW: Whenever they tell us.

6787   COMMISSIONER MOLNAR: Do you have a sense? I mean I have no sense so --

6788   MR. SHAW: Call Minister Clement.

6789   THE CHAIRPERSON: Well, as you know, we support you.

6790   MR. SHAW: I know.

6791   THE CHAIRPERSON: For once, we are on the same wavelength.

6792   MR. SHAW: Yeah.

--- Laughter

6793   MR. SHAW: We have our pedal on the gas, right? Okay? So we are hitting the gas and we are not hitting the brakes. So we are just waiting and when we get told and we have got to launch it and up we go.

6794   COMMISSIONER MOLNAR: Sorry, just to help me, you know, as you know there is a number of decision points along the way here. Is it possible you will know -- like, just give me a sense, is it --

6795   MR. BISSONNETTE: We met yesterday with Industry. Frankly, the day before that our answer was going to be no, you cannot have that extended Ku-band. Through the good arguments of John and Michael, we were able to convince them this is a very very important competitive reason that that should be licensed. And the reasons that you weren't licensing, which were microwave transmissions by wireless providers that frankly are just a red herring to prevent us from coordinating those frequencies.

6796   We believe now that Industry Canada has heard what we have had to say and that they will rule on it and we hope that they rule on it within the next couple of months and then we can get onto the business of actually building satellite.

6797   COMMISSIONER MOLNAR: Okay, thank you. Those are my questions.

6798   THE CHAIRPERSON: Tim.

6799   COMMISSIONER DENTON: Gentlemen, I feel that I have wandered into some kind of dispute between members of the family compact, each of whom have several billion dollars more than I do. And I want to thank Mr. Shaw for explaining the nature of that to me in the sense of would someone get on a plane and come and talk to you and, no, they haven't, and pointing out that CTV is owned by Canada's richest family.

6800   I feel that the basic message you are saying here is this is a shakedown between two really large forces with access to lots of capital and political pull and each is trying to persuade the hapless regulator, who is caused by law to have concern for the fate of your industry, to stay out, whereas the other guys are saying get in and do something. So I thank you for that enlightenment.

6801   And supposing then that we decide on the basis of the advice coming to us from one arm of the industry, the distribution arm, to say, okay, supposing we do decide that we should not call for negotiations on value-for-service, what then are we left to do with the industry all of which we are supposed to protect, in the interest of the Canadian consumer of course?

6802   MR. SHAW: Well, I guess that one, I would feel as -- if I was on that side of the table and not on this side, I would feel that I am being threatened, that I am being challenged by people that have done little work to protect their environment, made poor decisions and have all the ability and creative ability to fix all this stuff.

6803   And so now it is like -- I call it when you come, say you are at my office, and I call it a dumping thing, where you come and just dump your junk in the trunk, right, you just dump it. Okay, so we are just going to dump that load on the Commission. And while you guys are there to protect the broadcasting system, which we support, then I feel that you are getting quite a bit of dumping on you guys. You know, they are just dumping out; here is a problem, here is a problem, here is a problem, and I feel that.

6804   And I am only here to say, you know what, that we don't think it is that bad and the system seems to be working okay. And this is the third hearing I have been at on this or fourth, I can't remember.

6805   MR. BISSONNETTE: Fourth.

6806   MR. SHAW: Fourth, okay, fourth hearing. So you know what, this is costing us a lot of money too, to come here, to talk to you guys, which we are glad to do but, you know, we are just going, you know, come on, like what's up, like you know.

6807   And if you can't fix your own bed and you can't make your own bed, then you can't make it.

6808   COMMISSIONER DENTON: So are you saying really if the people who can't make it, presumably the over-the-air broadcasters, without -- that is correct, right? The people who can't make it in this view is the over-the-air broadcasters?

6809   MR. SHAW: Yes. That is what they are saying.

6810   COMMISSIONER DENTON: That is what they are saying.

6811   And supposing this, however, were true, do you see then that this is really an extended public negotiation between two arms of the broadcasting industry to buy each other out and this is just happening before us?

6812   MR. SHAW: No, no, no, no I don't see that at all.

6813   COMMISSIONER DENTON: Why not?

6814   MR. SHAW: Well, why not --

6815   MR. BISSONNETTE: Because we are not Machiavellian enough to think that way.

6816   I am shocked, I am appalled.

6817   MR. SHAW: I am shocked, I am appalled, oh my God.

6818   MR. BISSONNETTE: What are you doing if you are not that smart?

--- Laughter

6819   MR. BISSONNETTE: This is a money grab and, you know, without being delicate, this is a money grab. When they bought -- and let's take Brandon as an example, when they took those stations they did not want those stations. They had been trying for a fee-for-carriage for the last five or six years.

6820   This was now an opportunity to show that with the sacrificial disposition of Brandon, they said kill Brandon, which they didn't care about anyway, because if you look at the programming that they were offering in Brandon, it was really substandard poor programming. They didn't have something attractive enough for the local residents to actually endorse it, so they went somewhere else.

6821   So they used that to their advantage once again to show that --

6822   COMMISSIONER DENTON: Let's assume everything you are saying is true. Okay, we are talking about one half of one quarter of 10 per cent of the problem. The basic problem is the big big guys in downtown Toronto who make a lot of money and is it really what is going on before us is some kind of discussion happening before us, well publicized, that you the distribution arm are just going to squeeze their price down and buy them out because they have property and legal rights that you need?

6823   MR. SHAW: No, no, not true, not true, not true, not a chance.

6824   MR. BRAZEAU: And Commissioner Denton, as we elaborated on earlier, once you get rid of this elephant in the room, then we can start talking about real negotiations and about really improving the system. And Michael mentioned a number of areas that we would be more than happy to explore with them. But until this elephant or this free lunch is take off the table, those negotiations and moving forward will not happen.

6825   COMMISSIONER DENTON: And if it doesn't happen and the situation of the over-the-air broadcasters worsens, I think you will acknowledge that a great deal of the programming, the Canadian programming requirements, falls on their shoulders to complete. What sort of situation are you leaving the regulator to fix up, if that is possible?

6826   MR. SHAW: You know, I don't know about you, but when I sign the mortgage I agree to pay it. And I think that, you know, while we certainly have, you know, we have so many operations the odd time we might get out of compliance a little bit here and do the wrong thing here and there because, you know, we just can't keep control of everything, but we fix it up best we can.

6827   But I think that, you know what, listen, they signed the deal eyes wide open, that's the deal. You know, they agreed to the commitment and they agreed to the programming, they agreed to do this stuff and now, you know, the economy has changed a little bit, so maybe there is a little adjustment there. But, you know, I mean to come back and ask all the Canadians to pay for it is just so so wrong for us.

6828   MR. BRAZEAU: And I think even your study that was sanctioned by the Commission certainly indicates that there is a tremendous amount of opportunity for creativeness, as Jim pointed out, on the part of the OTAs. Maybe they need to refocus --

6829   THE CHAIRPERSON: We don't sanction studies, we commission studies, the studies speak for themselves, it is not the CRTC who speaks.

6830   MR. BRAZEAU: Sanction in the sense of commissioned.

6831   THE CHAIRPERSON: Good, thank you.

--- Laughter

6832   MR. BISSONNETTE: But isn't there an obvious one step that you don't pay $800 million a year for U.S. programming? Wouldn't that be an obvious to say we are obviously working out of our means and so one of the things that we should do is we should be a little bit more prudent in the way we pay for programming.

6833   COMMISSIONER DENTON: And would you say that the CRTC has some role in changing their incentives so that they are not incented to overspend on U.S. programming?

6834   MR. BISSONNETTE: You are doing it, you are talking about doing that.

6835   MR. SHAW: Yeah. But I think, you know what, their business plan will force them to do that. They will go, oh man, we are paying way too much. You know, I mean, we can't go and pay that much. I mean, that is why we are trying to drive box costs and trying to do creative things and stuff like that and that is why we are better at what we do.

6836   I mean, isn't it time that they go and have a look at that?

6837   COMMISSIONER DENTON: So what you are really telling us actually, I think I am hearing you, is they have made some bad deals, they have to correct it, and we may assist in some of that, but basically chill out public, chill out CRTC, let this perturbation in the system continue for a while until it sorts itself out?

6838   MR. SHAW: Yes, you are hearing a good big woosa.

--- Laughter

6839   MR. BISSONNETTE: That is chill out, I think that is what he is saying.

--- Laughter

6840   COMMISSIONER DENTON: All right then, thank you very much.

6841   THE CHAIRPERSON: Okay, Suzanne.

6842   COMMISSIONER LAMARRE: Merci le Président.

6843   I don't have a question, I have a request and Mr. Brazeau probably won't be surprised, because I think I saw him in the room when I asked the same thing of Bell TV. On the satellite site capacity is at the heart of a lot of discussion and debate. And the reason why that debate is difficult -- there are several reasons for that debate to be difficult. One of them is that the information you filed with us on the capacity, some of it is confidential for good reasons, because there are strategic aspects to it.

6844   But also what you filed with us is mainly what I would call text format. And to really see what is going on in the capacity, I think it would be easier if we had some comprehensive graphics. So I am going to leave you to speak with our hearing manager.

6845   Basically, what I would like to have is additional information to show the capacity that, you know, really the raw capacity that right now you do have and that you plan to have in the future if you are successful with the launch of a satellite so that it can help us, you know, make a better decision on that front.

6846   MR. BISSONNETTE: Yes, we can do that, we have that information.

6847   COMMISSIONER LAMARRE: Well, thank you very much.

6848   THE CHAIRPERSON: Okay, Steve.

6849   COMMISSIONER SIMPSON: A follow-on to Tim's question but from a little bit different angle. I hear you very clearly about the issue of is this just an attempt for one to consume the other?

6850   The direction I want to go, I hope it is a quick answer because I know we are running out of time, is that going back to a comment I have heard repeatedly throughout the week is that the broadcasters and the distributors need each other. And if you were to take a worst case scenario where the broadcast industry in its present form keeps shuttering stations to the point where they essentially become another distributor of content, a purchaser of content and distributor, it starts to bring to mind that there is one too many distributors in the game.

6851   And the question I have for you is slightly different from Tim's, is that if the broadcasting industry, for whatever reasons, cannot survive without some form of help from the collective industry, does it put the BDUs in a position where sometime down the road they have to start taking up the mantle of the broadcaster?

6852   You know, we have seen this with Rogers in trying to essentially own the local television mantle. But I am just wondering, in the larger scheme of things, if this something you are thinking about?

6853   MR. SHAW: You know, I think that when you look at the industry across the board that the BDUs want the broadcasting industry, okay. So let's go with that premise, they want that. And you know, the only time that you would see anything happen is if there was a major collapse, they will start to backfill because we need product, and that is all we are asking for, that is why we are talking about VOD, that is why we are talking about SVOD, all these kind of products, we need product and that is what makes us go.

6854   If we don't have product, we can't go. And you know what, we want to have lots of product, lots of different ways to get it, lots of different products and all that kind of stuff, so we need the product. So you know, that is why we are so supportive, we are not -- you know, I mean that is why the specialty services have done so well, right, because they provide new different kinds of product, right? Whereas the over-the-air guys provide news.

6855   So it's okay but, you know, what other products do they provide? Really just copies of U.S. -- you know, I mean I look at CBC now going and having -- you know, now they are running all U.S. movies and everything, you know, whatever, Jeopardy, you know, whatever, all that kind of stuff. So it is all changing, right? And I think that is okay and I think there is a really good role for them and I think there is good money.

6856   And the market is a little down now, but it will come back, you know, it is a long game. You know, you don't kill it overnight, you don't make it overnight, it is the same thing. So I really really think that the cable guys, when I look at it, you really want those products, and if they can provide them, that is great. And the odd one goes dark I think, you know what, it probably should have gone dark anyway and they probably weren't doing a good enough job managing it anyway, right?

6857   COMMISSIONER SIMPSON: But what about the Canadian side of the product?

6858   MR. SHAW: Well, you know, also I have a few comments on the Production Fund.

--- Laughter

6859   THE CHAIRPERSON: Let's stick to the agenda.

--- Laughter

6860   MR. SHAW: So anyway, listen, we want good Canadian products and I talked to the Chairman about this too, you know, I mean why in Canada can't we have great products? And there should be no reason why, no reason.

6861   MR. BRAZEAU: I think one of the challenges we have had as a sector is we do not encourage innovation sufficiently. And I think because of a number of rules and trying to achieve different objectives we have lost a little bit of this creativity and that is what we need to get back.

6862   And it comes back to the group licensing, you have to allow for this innovation and this creativity and you have to do it by removing layers of regulation. Here is the little red book that you live by. I mean, this is the problem we think.

6863   COMMISSIONER SIMPSON: In other words, let creativity prevail.

6864   THE CHAIRPERSON: Thank you very much. Just one quick snippet. Did I understand you correctly, Mr. Bissonnette, non-simultaneous substitution, you can do it both on cable and satellite?

6865   MR. BISSONNETTE: Simultaneous substitution we can, not non-simultaneous.

6866   THE CHAIRPERSON: Not now or is it a technical question or is it a financial question?

6867   MR. SHAW: Yes, you know, the amount of data and stuff we would have to store and everything, I mean, you are going to drive the costs up like -- well, you are talking like right to the moon.

6868   THE CHAIRPERSON: Okay, thank you very much.

6869   MR. BISSONNETTE: Thank you.

6870   THE CHAIRPERSON: But unfortunately, now we are out of time. Thank you for coming.

6871   And we still have one more, Madam Secretary? We have one more.

6872   You wanted to take a short break?

6873   THE SECRETARY: Can we take a five-minute break? Yes.

6874   THE CHAIRPERSON: Yes, okay.

--- Upon recessing at 1145

--- Upon resuming at 1154

6875   LE PRÉSIDENT : Bon, commençons, Madame la Secrétaire.

6876   LA SECRÉTAIRE : Oui. Merci, Monsieur le Président.

6877   J'inviterais maintenant l'Association des producteurs de films et de télévision du Québec, l'APTFQ, à faire sa présentation. Alors, madame Claire Samson comparaît pour l'APTFQ.

6878   S'il vous plaît, présentez vos collègues et vous disposerez ensuite de 20 minutes pour faire votre présentation.

PRESENTATION

6879   MME SAMSON : Merci beaucoup.

6880   Monsieur le Président, Monsieur le Vice-Président, Mesdames, Messieurs les Conseillers, mon nom est Claire Samson, présidente/directrice générale de l'Association des producteurs de films et de télévision du Québec.

6881   M'accompagnent, aujourd'hui, monsieur André Provencher, à ma droite, président de la Presse Télé et président du conseil d'administration de l'APFTQ; ainsi que madame Suzanne D'Amours, consultante au dossier.

6882   Nous n'avons pas l'intention de répéter entièrement ce que nous avons énoncé dans notre mémoire. Nous sommes convaincus que vous en avez pris connaissance, et nous serons ravis de répondre à vos questions concernant son contenu.

6883   Rappelons, cependant, que si nous sommes ici devant vous, c'est d'abord et avant tout pour discuter des modalités et conditions entourant l'octroi de licence au groupe de propriété, et, bien sûr, de certaines questions relatives à la télévision traditionnelle, dont l'accès à des redevances provenant des EDR.

6884   Cependant, nous sommes inquiets de constater que l'attention a été portée essentiellement sur la question des redevances aux télévisions conventionnelles au cours des dernières semaines. Vous avez, comme nous, été à même de voir et d'entendre les publicités payées par les EDR et les télévisions conventionnelles concernant la pertinence pour les consommateurs de payer ou non une taxe additionnelle pour aider les télévisions locales.

6885   Dans l'Avis de consultation de radiodiffusion 2009-411, le Conseil a amorcé une instance afin de résoudre des questions de politique qui doivent être traitées préalablement au processus de renouvellement des licences par groupe de propriété.

6886   Parmi ces questions, comme énoncé au paragraphe 39 de cet avis, figure le choix du mécanisme utilisé afin d'établir, par le biais de négociations, une valeur marchande équitable pour les signaux de télévision traditionnelle, ainsi que de la méthode à suivre jusqu'à la résolution en cas d'arbitrage exécutoire.

6887   Donc, nous comprenons que cette question est importante et qu'elle doit être abordée dans cette audience.

6888   Cependant, le Conseil a aussi émis un appel aux observations, sur une demande de la gouverneure en conseil, en vue de faire rapport sur les conséquences et la pertinence d'adopter un système de compensation pour la valeur des signaux de télévision locaux. Le dépôt des observations a été fixé au 2 novembre, et le Conseil tiendra une audience publique sur ce sujet à compter du 7 décembre prochain.

6889   Il y a de quoi être confondu. Doit-on comprendre que la présente instance abordera les mêmes sujets que celle prévue en décembre prochain?

6890   Cela dit, nous sommes très conscients que le Conseil doit établir un mécanisme pour établir une valeur marchande équitable pour les signaux des stations de télévision traditionnelle avant l'octroi de licence au groupe de propriété.

6891   Cependant, nous souhaitons également discuter aujourd'hui des modalités et des conditions d'une nouvelle approche par le groupe de propriété, car ces questions seront tout aussi fondamentales pour l'octroi des licences dans les prochains mois et les prochaines années.

6892   Au cours des dernières années, les radiodiffuseurs conventionnels, particulièrement ceux du Canada anglais, ont demandé au Conseil d'apporter des assouplissements à leurs conditions de licence pour faire face aux difficultés financières qu'ils éprouvent actuellement.

6893   Une des réponses du Conseil est l'approche par groupe de propriété à l'égard de l'attribution de licence et des services de télévision.

6894   En procédant au renouvellement des licences par groupe de propriété, le Conseil a exprimé l'intention de s'éloigner d'un cadre où le renouvellement des licences des services de télévision traditionnelle serait examiné indépendamment du renouvellement des licences des services de télévision spécialisée et payante, et d'harmoniser les règles gouvernant ces services en adoptant une approche neutre d'un point de vue technologique.

6895   Ce genre d'approche permettrait au Conseil d'étudier des facteurs incluant, sans toutefois se limiter à, l'auditoire global d'un groupe de radiodiffuseur, l'ensemble de ses revenus, ainsi que la totalité de ses engagements et de ses obligations en matière de programmation.

6896   Au point 10 du présent Avis d'audience, le Conseil expose ses attentes, et je cite :

« Même si une plus grande latitude peut avoir une incidence positive sur la viabilité de l'industrie canadienne de la télévision, il convient que cette latitude ait aussi pour effet de mieux soutenir la programmation canadienne, en particulier la programmation originale, et surtout les catégories de programmation constamment sous-représentées au sein du système canadien de radiodiffusion, comme les dramatiques et les documentaires. »

6897   L'APFTQ adhère totalement à cette approche et l'a exprimé dans son mémoire.

6898   Nous sommes conscients que la conjoncture économique actuelle est inquiétante et peut avoir un impact négatif sur les résultats financiers des différentes entreprises qui évoluent dans le système de radiodiffusion canadien, incluant les producteurs indépendants.

6899   Personne n'est à l'abri des dégâts pour pourrait causer cette conjoncture économique difficile. Cependant, nous ne sommes pas prêts à reconnaître que l'industrie de la radiodiffusion est en péril et qu'il faille retirer toutes les réglementations pour permettre au marché seul de dicter les règles d'affaires de notre industrie.

6900   D'ailleurs, il n'y a pas si longtemps, le CRTC a refusé aux entreprises de radiodiffusion conventionnelles d'accéder à une redevance de distribution, une des raisons étant que ces entreprises ont été incapables de démontrer au Conseil leur engagement ferme à utiliser les redevances pour améliorer le système canadien de radiodiffusion, et particulièrement la programmation locale.

6901   Lorsque nous avons pris connaissances des dernières demandes de renouvellement de licence et écouté les arguments des radiodiffuseurs conventionnels, force est de constater qu'ils réclament plus de souplesse, plus de droits sur les émissions afin d'exploiter toutes les plates-formes, et moins de réglementation pour atteindre leurs objectifs.

6902   Devons-nous rappeler à ces entreprises qu'elles évoluent dans une industrie réglementée, que cette réglementation les a très bien servies et leur sert encore, ne serait-ce que par leur droit à une distribution obligatoire et prioritaire, ainsi qu'à la substitution simultanée?

6903   Nous nous attendons à ce que le Conseil les rappelle à l'ordre et exige qu'elles s'engagent minimalement envers la production canadienne originale, les émissions prioritaires et la production indépendante.

6904   M. PROVENCHER : L'objectif de cette instance publique est d'établir un cadre de réglementation générale qui donnera à tous les groupes de radiodiffusion la latitude nécessaire pour s'adapter à l'évolution rapide du milieu des communications, tout en s'assurant que le contenu présenté par le système canadien de radiodiffusion a un caractère distinctement canadien.

6905   L'objectif implique que le Conseil et les parties intéressées tiennent compte des facteurs suivants :

6906   - le rôle capital des créateurs et des producteurs canadiens dans le système de radiodiffusion;

6907   - les différentes conditions d'exploitation dans lesquelles fonctionnent les radiodiffuseurs de langue française et anglaise, ainsi que leurs besoins différents qui existent malgré des points communs;

6908   - le rôle du diffuseur public dans un univers de communication en constante évolution.

6909   D'entrée de jeu, mentionnons que l'APFTQ acquiesce à la proposition du Conseil qui envisage de revoir le cadre de réglementation pour permettre aux différentes entreprises de radiodiffusion d'évoluer dans un système en transformation, tout ça à la condition expresse que ces entreprises de radiodiffusion s'engagent à proposer un contenu canadien qui confirme le rôle capital des créateurs et des producteurs canadiens dans ce système.

6910   L'APFTQ tient aussi à mentionner que le rôle du diffuseur public est primordial dans le système de radiodiffusion canadien. La CBC/SRC fait face aux mêmes problèmes que rencontrent actuellement les télédiffuseurs conventionnels.

6911   À notre avis, si le Conseil devait implanter un mécanisme qui permet d'établir, par le biais de la négociation, une valeur marchande équitable pour les signaux de télévision traditionnelle distribués par des entreprises de distribution de radiodiffusion, ce mécanisme devrait aussi s'appliquer aux diffuseurs publics que sont la CBC/SRC, Télé-Québec, TFO et TVO.

6912   L'APFTQ a déjà dans le passé proposé une méthode de répartition d'éventuelles redevances de distribution entre les télédiffuseurs conventionnels, incluant les télédiffuseurs publics.

6913   Nous proposions alors une répartition inversement proportionnelle aux revenus publicitaires de chacun des télédiffuseurs. Ainsi, les télévisions éducatives et les télédiffuseurs publics, ayant des mandats culturels et éducatifs qui souvent restreignent leur accès aux revenus publicitaires, seraient favorisés ou certainement moins pénalisés.

6914   Par contre, ces revenus additionnels devraient obligatoirement être réinvestis dans la production canadienne faisant appel à des créateurs et des producteurs canadiens.

6915   Nous pensons que cette proposition mérite d'être discutée lors de cette audience.

6916   L'APFTQ s'attend aussi à ce que le Conseil s'assure que les revenus publicitaires déclarés par les détenteurs de licence seront adéquatement répartis entre leurs activités réglementées et non réglementées.

6917   Par exemple, le système ne devrait pas permettre aux détenteurs de licence d'appliquer des revenus publicitaires à des activités non réglementées comme l'internet au détriment de la radiodiffusion réglementée.

6918   Dans le présent Avis de consultation, le Conseil propose en annexe un modèle visant à s'assurer que les services de télévision contribuent à la programmation canadienne. Le Conseil a dit s'attendre à ce que les intervenants précisent si leurs interventions concernent les services de langue française ou de langue anglaise.

6919   La présente intervention de l'APFTQ porte sur les services de télévision de langue française, non pas que notre association ne se sente pas concernée par les services de télévision de langue anglaise, mais plutôt parce que nous préférons laisser à nos confrères de CFTPA présenter leur mémoire, sur lequel nous pourrions apporter nos commentaires.

6920   Le modèle proposé devrait pouvoir s'adapter afin de reconnaître les conditions particulières qui caractérisent les marchés francophones et anglophones et en tenir compte.

6921   Par exemple, les difficultés qu'éprouvent les télédiffuseurs traditionnels sont beaucoup plus aiguës chez les télédiffuseurs anglophones que francophones.

6922   Cela dit, nous ne pouvons pas nier que les télédiffuseurs traditionnels francophones éprouvent certaines difficultés dues, entre autres, à la crise économique et une évolution du marché de la radiodiffusion qui fragmente les auditoires et affecte les revenus publicitaires.

6923   À notre avis, si le Conseil accepte d'assouplir le modèle actuel pour permettre d'atteindre les objectifs de la Loi de façon plus efficace, les entreprises de radiodiffusion devraient être tenues de contribuer plus significativement à la programmation canadienne.

6924   C'est dans cette optique que nous avons analysé la proposition présentée en annexe de l'Avis public, et pour laquelle nous avons apporté nos suggestions. Il nous fera plaisir d'en discuter avec vous après notre présentation.

6925   En résumé, nous souhaitons que le Conseil fasse la distinction entre les groupes d'entreprises qui détiennent des licences de télévision traditionnelle et les services facultatifs et les groupes d'entreprises qui détiennent des services facultatifs uniquement.

6926   À notre avis, ces groupes d'entreprises devraient être entendus séparément puisque leur besoin d'assouplissement et leurs attentes ne sont pas les mêmes.

6927   À notre avis, pour tenir compte des réalités spécifiques à chacun des groupes de services, il serait plus pertinent de regrouper les renouvellements de licence en trois groupes.

6928   Dans la première ronde d'attribution de licence figurent les groupes d'entreprises publiques et privées qui possèdent des licences de télévision traditionnelle et de services facultatifs de langue anglaise.

6929   Dans la seconde ronde d'attribution de licence, les groupes d'entreprises publiques et privées qui possèdent des licences de télévision traditionnelle et des services facultatifs de langue française.

6930   Dans la troisième ronde d'attribution de licence, les groupes d'entreprises qui détiennent des licences de services facultatifs uniquement, ainsi que les services indépendants et les autres services publics comme Télé-Québec, TFO et TVO.

6931   C'est en fonction de ce regroupement d'attribution de licence que nous avons fait l'analyse des propositions du Conseil.

6932   MME SAMSON : Sans reprendre tous les arguments présentés dans notre mémoire, rappelons que toute mesure visant à accorder une plus grande latitude aux radiodiffuseurs doit avoir une incidence positive sur la viabilité de l'industrie canadienne de la radiodiffusion et doit avoir aussi pour effet de mieux soutenir la programmation canadienne originale dans les catégories prioritaires.

6933   Ainsi, nous nous attendons à ce que ces grands groupes s'engagent à dépenser un minimum de leurs revenus pour la production canadienne, ainsi que pour la production indépendante. La production indépendante, un mal nécessaire selon certains radiodiffuseurs conventionnels qui voudraient bien un assouplissement de leurs obligations à cet égard, quand ce n'est pas l'abolition totale de réglementation.

6934   Toutefois, nous avons fait, je crois, un plaidoyer que nous pensons convaincant lorsque nous nous sommes présentés devant vous lors du renouvellement de la licence de TVA. Nous n'avons pas l'intention de nous répéter, mais nous maintenons notre position.

6935   Cependant, il est important de se rappeler que, dans un univers où les modèles de production et d'exploitation évoluent, le processus de diversification des lieux de création et de production doit se poursuivre. Cet objectif transcende les intérêts propres du milieu de la production indépendante.

6936   Son atteinte est essentielle au maintien du dynamisme de la compétitivité du système de la radiodiffusion dans son ensemble, de sa capacité de faire appel à tous les talents créateurs d'ici, et de jouer adéquatement son rôle d'intermédiaire entre l'expression créatrice de nos auteurs, réalisateurs et artistes, et les attentes des téléspectateurs d'ici et d'ailleurs.

6937   Si les pouvoirs publics jugent toujours essentiel, comme nous, de promouvoir l'existence d'une diversité des lieux de création, ils doivent être conséquents avec eux-mêmes et ne pas encourager le retour à la production interne et à la concentration des décisions de création aux mains de quelques grands joueurs, avec les conséquences négatives en termes de productivité, de compétitivité, de dynamisme, d'innovation et d'ouverture aux nouveaux talents qui ont déjà été constatés, analysés et fait leur preuve par le passé.

6938   L'APFTQ a supporté la proposition du Conseil d'évaluer les demandes de renouvellement de licence en fonction des groupes de propriété dès l'année prochaine. Peut-être que, de cette façon, le Conseil trouvera une solution structurale systémique pour assurer la viabilité de l'ensemble de l'industrie canadienne de la télévision à long terme.

6939   Dans le cas où le Conseil ne pourrait pas s'assurer que la production canadienne originale soit favorisée par l'octroi des licences par grand groupe, nous lui demandons alors de ne pas poursuivre dans sa démarche et de maintenir la procédure de renouvellement de licence qui prévaut actuellement.

6940   Je vous remercie de votre attention, et nous sommes maintenant disposés à répondre à vos questions.

6941   LE PRÉSIDENT : Je ne suis pas absolument clair, Madame Samson.

6942   Quelle est votre proposition vis-à-vis la production canadienne originale et l'exhibition de ça? Est-ce que vous voulez que le Conseil établisse un minimum pour les radiodiffuseur traditionnels?

6943   MME SAMSON : Dans le cadre d'un renouvellement par groupe, oui, c'est ce que nous souhaitons.

6944   LE PRÉSIDENT : Et c'est la même si c'est un groupe qui contient des diffuseurs conventionnels et des diffuseurs spécialisés? Est-ce que c'est la même pour eux ou c'est différent?

6945   MME SAMSON : Lorsqu'un diffuseur détient des licences de diffusion traditionnelle et des stations spécialisées, ce serait la même.

6946   LE PRÉSIDENT : Oui.

6947   MME SAMSON : Et lorsqu'il s'agit de groupes... nous distinguons les groupes. Lorsqu'il s'agit de détenteurs de licence de stations spécialisées uniquement, il y aurait dans leur cas également un pourcentage minimum.

6948   LE PRÉSIDENT : Oui, mais si on parle d'un groupe qui contient les deux...

6949   MME SAMSON : Oui.

6950   LE PRÉSIDENT : ...les conventionnelles et les spécialisées, est-ce que vous voyez qu'on peut faire un peu... les partager ou si on n'atteint pas le niveau « mandatoire » dans un groupe spécialisé, on peut les récompenser avec les...

6951   MME SAMSON : Je vous donne un exemple. Parlons d'un groupe qui détient à la fois des stations généralistes et des stations spécialisées. Alors, on dit, à ce moment-là... Suzanne, dans notre proposition...

6952   On propose, à ce moment-là... le CRTC proposait une moyenne minimale de 55 pour cent pour tous les services, avec un minimum de 35 pour cent pour chacun des services.

6953   LE PRÉSIDENT : Ah! Bon. O.K.

6954   MME SAMSON : Nous supportons cette proposition.

--- Off-record discussion

6955   MME SAMSON : Mais en émissions prioritaires, dans le cas des émissions prioritaires, Suzanne pourrait vous donner plus spécifiquement le point sur les stations spécialisées.

6956   MME D'AMOURS : Alors, pour ce qui est des émissions prioritaires, puisque c'est de ce genre d'émissions là dont on parle, alors, le CRTC proposait un minimum d'heures de programmation pour les émissions prioritaires, pour certaines catégories comme les dramatiques et les documentaires, par exemple.

6957   Alors, l'APFTQ fait une différence entre la télévision conventionnelle et la télévision des services facultatifs, puisque... il n'y aurait pas d'obligation par grand groupe de services facultatifs puisque chacun des services a des genres et qu'on ne peut pas les appliquer aux services prioritaires.

6958   Par exemple, si on a une télévision comme Canal Vie, qui programme particulièrement des émissions de variétés... ou des magazines, plutôt, évidemment qu'on ne peut pas penser qu'il y aurait des émissions prioritaires dans ce genre-là.

6959   Alors, on a essayé de trouver des possibilités d'avoir des programmations canadiennes prioritaires dans les groupes de services facultatifs, et c'était difficile d'avoir une proposition. C'est pourquoi on pensait que chaque chaîne doit être analysée indépendamment.

6960   Est-ce que j'ai répondu à votre question?

6961   LE PRÉSIDENT : Oui, oui. Merci.

6962   MME SAMSON : Pour ce qui est des stations traditionnelles, nous souhaitions 10 heures par semaine d'émissions prioritaires, mais nous souhaitions que le Conseil inclue dans la catégorie des émissions prioritaires les émissions jeunesse.

6963   LE PRÉSIDENT : O.K. Et si je regarde les trois rondes que vous envisagez, est-ce que c'est correct qu'Astral, par exemple, appartient à la troisième ronde? Parce que c'est un groupe d'entreprises qui détiennent des licences de services facultatifs uniquement. Ils ont deux petites stations traditionnelles. Mais vous les mettriez dans cette ronde-là?

6964   MME SAMSON : Dans le deuxième groupe.

6965   LE PRÉSIDENT : Le deuxième. O.K.

6966   Michel.

6967   CONSEILLER ARPIN : Pour fins de clarification, Astral a deux stations de télévision, une à Terrace et une à Dawson Creek, et les deux sont de langue anglaise, et vous les classez quand même dans le deuxième groupe?

6968   MME SAMSON : J'avoue, Monsieur Arpin, c'est une question. Nous parlions ici des groupes et des licences francophones.

6969   CONSEILLER ARPIN : D'accord. Donc, il tombe dans le troisième groupe, selon votre modèle.

6970   Or, si je prends votre modèle, parce que, comme il n'y a pas beaucoup... Premièrement, où placez-vous V?

6971   M. PROVENCHER : Dans les indépendants.

6972   MME SAMSON : Dans les indépendants.

6973   CONSEILLER ARPIN : Mais c'est quand même un groupe de stations, ce n'est pas...

6974   MME SAMSON : Ce n'est pas un réseau.

6975   CONSEILLER ARPIN : Ce n'est pas RNC, ce n'est pas Télé Inter-rives là, qui sont, eux, des véritables indépendants. V, c'est un groupe par lui-même.

6976   MME SAMSON : Il détient une licence réseau, mais comme il ne détient pas de services spécialisés, nous l'avions placé dans le troisième groupe.

6977   CONSEILLER ARPIN : Maintenant, je vais continuer avec V, parce que vous avez parlé d'un minimum de 10 heures d'émissions prioritaires. C'est ce que vous viseriez pour V?

6978   MME SAMSON : Dans notre document, dans le cas des indépendants, je pense que ce serait le maintien, que ses exigences actuelles soient respectées.

6979   CONSEILLER ARPIN : D'accord. Parce que quand on prend votre premier groupe là, c'est facile, vous parlez de Radio-Canada et de TVA?

6980   MME SAMSON : Nous parlons de...

6981   M. PROVENCHER : Oui, c'est ça.

6982   MME SAMSON : Oui.

6983   CONSEILLER ARPIN : Dans le deuxième groupe... C'est-à-dire dans le premier groupe, on ne parle pas de personne.

6984   M. PROVENCHER : Non.

6985   COMMISSIONER ARPIN: C'est dans le deuxième groupe qu'on parle de Radio-Canada et de TVA?

6986   M. PROVENCHER : Exact.

6987   COMMISSIONER ARPIN: Qui concerne l'APFTQ là, j'entends, parce que c'est sûr que dans la première ronde, ça concerne bien du monde, mais ça concerne moins l'APFTQ.

6988   MME SAMSON : Je dois vous assurer, Monsieur Arpin, qu'à ce sujet, dans le premier groupe, l'APFTQ interviendra sûrement puisque plusieurs producteurs du Québec produisent des émissions...

6989   CONSEILLER ARPIN : Oui, oui. Ça, je peux comprendre.

6990   MME SAMSON : Mais de façon plus proche, oui, le deuxième groupe nous...

6991   CONSEILLER ARPIN : Qui est votre préoccupation première...

6992   MME SAMSON : Oui.

6993   CONSEILLER ARPIN : ...puisque que, pour le troisième groupe, essentiellement, ce que vous dites, c'est le système actuellement en place?

6994   MME SAMSON : Oui.

6995   CONSEILLER ARPIN : D'accord.

6996   Je me suis pris quelques notes aussi. Au paragraphe 27, vous dites que :

« Nous nous attendons à ce que ces groupes s'engagent à dépenser un minimum de leurs revenus... »

6997   Mais vous parlez de... Ce minimum-là est de combien en terme de pourcentage, là? Je ne parle pas en terme de dollars, on parle en terme de pourcentage, là.

6998   Mme SAMSON: C'était 15 pour cent, monsieur le vice-président, pour les conventionnels.

6999   CONSEILLER ARPIN: Oui.

7000   Mme D'AMOURS: Et c'était un pourcentage de 35 et 40 pour cent pour les télévisions de services facultatifs, ce qui est actuellement la moyenne.

7001   Mme SAMSON: Ce qui est actuellement la moyenne pour les services facultatifs, c'est entre 35 et 40 pour cent.

7002   CONSEILLER ARPIN: Oui, ça, et qui sont les dépenses en émissions canadiennes.

7003   Mme SAMSON: Oui.

7004   CONSEILLER ARPIN: Et vous dites pour les stations traditionnelles, vous avez dit 15 pour cent?

7005   Mme D'AMOURS: Quinze pour cent des revenus pour la télévision traditionnelle, oui.

7006   CONSEILLER ARPIN: En émissions canadiennes?

7007   Mme D'AMOURS: Non. En émissions destinées à la production indépendante.

7008   CONSEILLER ARPIN: O.k. Parfait, d'accord. Oui.

7009   Mme D'AMOURS: Parce qu'en émissions canadiennes l'APFTQ appuie la proposition du CRTC.

7010   CONSEILLER ARPIN: À 55 pour cent.

7011   Mme D'AMOURS: Qui était à 55 pour cent.

7012   Mme SAMSON: À 55 pour cent.

7013   CONSEILLER ARPIN: D'accord. Maintenant, et hier et où on a entendu V faire ses représentations ainsi qu'au moment où Quebecor a comparu, les deux entreprises nous ont proposé une approche pas basée sur les revenus, mais une approche basée sur les dépenses de programmation.

7014   Et ils nous ont donné une série de motifs, là, pour... c'est-à-dire Québecor nous a donné une série de motifs pour appuyer sa démarche. Cependant, V nous a dit hier que c'était une approche qui lui convenait bien. Je ne sais pas si vous les avez entendus, je ne sais pas si...

7015   Est-ce que vous auriez des observations à nous faire sur cette approche parce que la position de Groupe TVA dans la discussion est à l'effet que la politique actuelle, elle est structurée... n'a d'effet que pour les stations de langue anglaise. Elle n'est pas structurée pour les stations de langue française et la méthodologie basée sur les dépenses de programmation serait, quant à elle, mieux appropriée pour les stations de langue française.

7016   M. PROVENCHER: Monsieur le vice-président, nous partons, là, d'abord... puis je pense que les deux groupes que vous venez d'évoquer en se présentant devant vous ont fait référence à une situation déséquilibrée et tous les deux ont plaidé pour un rééquilibrage du système.

7017   Et nous faisons l'hypothèse que, et nous partageons à certains égards ce constat de déséquilibre, et nous faisons l'hypothèse que vos décisions vont contribuer à créer un nouvel ordre, un nouvel équilibre dans le système.

7018   À partir de ce que ces conditions-là existent, nous croyons que des dépenses en programmation basées sur les revenus en terme de pourcentage des revenus va permettre au système davantage d'atteindre ses objectifs.

7019   CONSEILLER ARPIN: Parce que l'argument de Groupe TVA est essentiellement un argument qui dit que, basé sur les revenus, c'est toujours sur les revenus de l'année précédente. Quand dans une année où on... comme l'année dernière et la présente année l'a démontré, c'est que les chutes de revenus se sont avérées extrêmement rapides et à telle enseigne que des engagements qui auraient pu être pris pour, effectivement, basé sur les revenus de l'année précédente, ont fait en sorte qu'il a fallu couper davantage, parce qu'on n'avait pas de flexibilité alors que la méthodologie basée sur les dépenses, par analogie, ça ressemble beaucoup dans le domaine de la radio, à la musique francophone ou à la musique où on module en fonction puis on fait le calcul au quotidien et puis on a des... C'est la meilleure analogie que je peux faire.

7020   Mme SAMSON: Mais, monsieur le vice-président, l'APFTQ n'est pas contre l'idée de rééquilibrer les choses. Nous sommes inquiets de corriger un déséquilibre pour en créer un autre.

7021   CONSEILLER ARPIN: Ça, je peux...

7022   Mme SAMSON: Dans sa sagesse, le Conseil pourrait très bien déterminer que les dépenses en programmation seraient un pourcentage des revenus de la moyenne des deux dernières années, dans l'éventualité où un diffuseur avait une année catastrophique ou un plan d'affaires qui le force à prioriser d'autres activités dans son secteur.

7023   On ne s'oppose pas à ce que ça soit sur plus d'une année, mais quand même il devrait y avoir une historique qui est respectée dans la façon dont les diffuseurs...

7024   CONSEILLER ARPIN: Dans son Avis Public, le Conseil a parlé d'émissions d'intérêt national plutôt que d'émissions dites prioritaires et la question que le Conseil s'est posée, c'est: Est-ce que les catégories devraient être davantage ouvertes?

7025   Vous, vous venez d'ajouter les émissions jeunesse, parce que dans les heures prioritaires aussi, c'est des heures de grande écoute. Alors les émissions jeunesse ne sont pas nécessairement diffusées dans les heures de grande écoute.

7026   Mme SAMSON: Nous croyons que les émissions jeunesse devraient faire partie des émissions prioritaires, quelle que soit leur heure de diffusion, effectivement.

7027   CONSEILLER ARPIN: Bon. Maintenant, dans les émissions dites d'intérêt national, certains plutôt nous ont parlé de certains types d'émissions de type magazine qui pourraient être qualifiés d'intérêt national.

7028   Mme SAMSON: Je cherche l'exemple. Excusez-moi, monsieur le vice-président, là, je cherche l'exemple, là.

7029   Nous croyons que les catégories telles qu'elles ont été établies au fil des ans représentent, effectivement, un type de programmation qui mérite d'occuper une place importante sur les antennes canadiennes. Ce sont les dramatiques, les documentaires.

7030   Nous ajoutons les émissions jeunesse, peu importe leur heure de diffusion et les variétés.

7031   Je pense que ce sont là les vitrines du talent canadien essentiellement.

7032   CONSEILLER ARPIN: Mais les variétés, elles étaient déjà là.

7033   Mme SAMSON: Oui.

7034   CONSEILLER ARPIN: Certains nous disent les émissions de télé-réalité. Vous voulez...

7035   Mme SAMSON: Ce sont des émissions populaires. Je ne les qualifierai peut-être pas d'émissions d'intérêt national, mais je reconnais leur caractère populaire et certainement rentable, mais je ne les qualifierai pas d'intérêt national. C'est la distinction que nous faisons.

7036   CONSEILLER ARPIN: Que vous faites.

7037   Mme SAMSON: De par le fait, essentiellement, monsieur le vice-président, que ces émissions-là ne font pas appel au talent créatif canadien.

7038   CONSEILLER ARPIN: Star Académie?

7039   M. PROVENCHER: Monsieur le vice-président, et nous ne nous opposons pas à cette réalité-là, mais il faut constater que tout de même le système francophone, le système de radiodiffusion francophone s'est toujours enorgueilli, avec raison, que les émissions les plus populaires auprès des téléspectateurs francophones étaient des émissions qui étaient conçues, produites à l'intérieur du système francophone.

7040   On a toujours utilisé des expressions: 23 des 25 émissions les plus regardées, 47 des 50 émissions les plus regardées. Si on en fait l'analyse aujourd'hui, monsieur le vice-président, je vous surprendrai peut-être en vous disant que quatre des dix émissions les plus regardées sont des émissions qui sont conçues ailleurs et qui sont basées sur des formats étrangers.

7041   Je pense que nous pouvons participer, accepter de participer avec beaucoup de grâce à ce nouveau marché-là.

7042   Ceci étant dit, on pense aussi que notre système doit encourager le maintien d'une force créative importante et encourager les concepteurs, les auteurs, les artistes à continuer à exprimer l'ensemble de leurs talents et favoriser cette dimension-là.

7043   CONSEILLER ARPIN: Mais, cependant, la majorité de ces émissions-là sont produites par des membres de l'APFTQ.

7044   M. PROVENCHER: Tout à fait, mais on ne s'objecte pas à ça. On dit simplement qu'il y a des enjeux de faire passer notre industrie de la télévision francophone d'un milieu de création à strictement un milieu, progressivement un milieu de production.

7045   Donc, on veut continuer de pouvoir faire valoir les deux dimensions fondamentales de la réalité; c'est-à-dire que nous concevons et nous produisons.

7046   CONSEILLER ARPIN: Le Conseil l'a d'ailleurs noté dans la décision renouvelant la licence de TVA pour jusqu'à l'année prochaine. J'apprécie que vous le soulignez, là, mais c'est... le Conseil en avait débattu d'ailleurs déjà au moment du renouvellement.

7047   Maintenant, qu'est-ce qu'on fait avec les Fonds du média canadien et les Fonds d'amélioration de la programmation locale si le Conseil consent aux compensations qui viendraient d'une valeur du signal local?

7048   Est-ce que ces fonds-là s'ajoutent aux revenus ou est-ce qu'ils font partie ou comment est-ce qu'on les traite aux fins des dépenses en émissions canadiennes?

7049   Mme SAMSON: Votre question, monsieur le vice-président, si les diffuseurs conventionnels reçoivent une juste valeur pour leur signal...

7050   CONSEILLER ARPIN: Oui.

7051   Mme SAMSON: ... ces gens-là vont être calculés comment? Ces sommes-là seraient calculées comment? C'est un revenu.

7052   CONSEILLER ARPIN: C'est un revenu.

7053   Mme SAMSON: C'est un revenu de la même façon que les stations spécialisées l'incluent dans le calcul de leurs revenus pour établir leur niveau d'investissement en programmation l'année suivante.

7054   CONSEILLER ARPIN: Maintenant, un des reproches qu'on entend fréquemment des associations de producteurs et des associations représentant les interprètes, c'est que le Conseil traite les contributions du Fonds canadien de télévision et maintenant le Fonds des médias canadiens comme faisant partie d'un élément des dépenses de programmation.

7055   Est-ce que l'APFTQ a des vues particulières sur cette...

7056   Mme SAMSON: Bien, je pense, essentiellement, que cette revendication-là vient essentiellement du marché anglophone.

7057   CONSEILLER ARPIN: Oui, effectivement.

7058   Mme SAMSON: Et c'est probablement quelque chose qui irradie de toute la problématique des acquisitions, du volume d'acquisition des émissions américaines versus les acquisitions des productions canadiennes. Il y a peut-être un déséquilibre, là, qui est propre au marché anglophone et qui est certainement moins observé du côté du marché francophone.

7059   CONSEILLER ARPIN: Donc, encore là, vous reconnaissez que le traitement pourrait être différent.

7060   Mme SAMSON: Tout à fait.

7061   CONSEILLER ARPIN: Entre le marché francophone et le marché anglophone.

7062   Mme SAMSON: Tout à fait.

7063   CONSEILLER ARPIN: Sur ces questions-là.

7064   Vous avez répondu à beaucoup de mes questions dans votre présentation orale, là, mais même vous soutenez que les télévisions publiques devraient avoir accès à une compensation. Or, depuis le début de la semaine, on a entendu beaucoup d'arguments pour les exclure.

7065   Alors, quels arguments l'APFTQ a-t-elle à proposer au Conseil pour justifier qu'ils aient accès à ce type de compensation?

7066   M. PROVENCHER: Je pense que le premier argument, monsieur le vice-président, c'est que le signal de Radio-Canada ou le signal de Téléquébec, par exemple, ont également une valeur marchande et à partir de là, un système qui les distribue, c'est... à partir du moment où on reconnaît le principe de la valeur marchande pour établir de nouvelles compensations pour l'utilisation des signaux, il n'y a pas de raison pour les exclure.

7067   Et les diffuseurs publics sont chargés de missions ou de mandats qui leur sont spécifiques, leur cahier de charge est généralement plus considérable, et je pense qu'une partie des fonds qu'ils obtiennent de leurs actionnaires est attribuée en fonction de ces obligations particulières qui leur sont conférées.

7068   CONSEILLER ARPIN: Parce que l'argument fondamental qu'on entend des gens qui sont contre l'accès, c'est que c'est au gouvernement de déterminer de l'enveloppe qu'il veut donner à ces sociétés.

7069   On tient le même discours par rapport à Téléquébec et en extension je dirais TVO et TFO, là, mais j'ai entendu par rapport à Téléquébec tout comme par rapport à... Donc, que c'est au gouvernement de déterminer des priorités que ces entreprises-là doivent avoir. Donc, ce n'est pas l'argent des consommateurs qui devrait servir à venir... à se substituer au gouvernement, à la vision du gouvernement.

7070   M. PROVENCHER: Mais tout l'argent qui est utilisé et qui roule dans le système, qu'il provienne des consommateurs ou qu'il provienne de l'argent des Canadiens, il provient des consommateurs et il transite à travers les gouvernements.

7071   Je pense que l'ensemble des radiodiffuseurs, d'une façon ou de l'autre, utilisent de l'argent public, que ce soit pour financer leurs programmes, à travers des programmes de crédit d'impôt, à travers le Fonds des médias, il y a une certaine part de leur... ça vient en escompte de leurs coûts d'acquisition de programmes ou d'une autre manière.

7072   Je pense que ce principe-là n'est pas valable. Quand on fait l'analyse des devis et des cahiers de charge de chacun des radiodiffuseurs, il est vrai que l'actionnaire de Radio-Canada ou l'actionnaire de Téléquébec leur donnent des responsabilités particulières et leur assurent une base de financement pour pouvoir s'en acquitter.

7073   Ceci dit, les deux ont accès à des sources complémentaires de financement qui sont semblables à celles des autres joueurs dans le système et on ne voit pas véritablement de raison de les exclure.

7074   Mme SAMSON: Monsieur le vice-président, si vous me permettez, quel serait ultimement, et avec raison, c'est les gouvernements qui déterminent les crédits que détiennent les diffuseurs publics, mais quel serait l'intérêt des Canadiens d'avoir des diffuseurs publics qui sont fragilisés parce qu'on a voulu corriger une situation de déséquilibre?

7075   Pourquoi devraient-ils être affaiblis par rapport aux autres dans le système et, de plus, je vous dirais, monsieur le vice-président, dans la proposition de l'APFTQ où, effectivement, ladite redevance ou valeur du signal serait attribuée de façon inversement proportionnelle aux revenus publicitaires, peut-être cela inciterait-il Radio-Canada à déserter un peu le champ de la publicité puisqu'il y aurait possiblement un manque à gagner récupérable via une redevance, ce qui redonnerait aux diffuseurs privés un inventaire qui prendrait de la valeur.

7076   CONSEILLER ARPIN: Ce à quoi V nous a dit hier que le risque que ce sont des canaux spécialisés qui accapareraient ces fonds-là.

7077   Mme SAMSON: Il y a un risque certainement et ils sont en compétition, et c'est pour ça, monsieur le vice-président, que nous disons que le Conseil dans un tel système de redevance doit s'assurer, et monsieur Rémillard l'a soulevé hier et avec raison, que les diffuseurs qui auraient accès à une telle redevance devraient respecter des conditions de marché minimales qui fait en sorte que peut-être que le coût par point au Québec cesserait d'être dévalué, ce qui est le cas depuis 20 ans, parce que les gens vendent la publicité à rabais, alors que si un diffuseur maintenait un tarif raisonnable et acceptable pour le marché du Québec, il pourrait bénéficier d'une partie de la redevance.

7078   CONSEILLER ARPIN: Qu'est-ce que vous répondez et à TVA et à V qui ont adhéré à la même... qui ont tenu le même discours et ça revient à votre proposition qui dit que la répartition devrait se faire à l'inverse des revenus publicitaires du système alors que TVA et V disent que ça devrait se faire en fonction du niveau de l'écoute et du budget de programmation et le pourcentage qui va à la programmation canadienne et, donc, ça devrait être les critères absolus qui devraient être utilisés pour établir le niveau de rémunération?

7079   M. PROVENCHER: Notre crainte est à l'effet que la situation... si on appliquait ce système ou ces critères pour déterminer les redevances, on remplacerait une situation de déséquilibre par une autre situation de déséquilibre peut-être plus importante encore; c'est-à-dire qu'il faut reconnaître aussi que la situation de TVA et de V diffère passablement.

7080   Je pense qu'au niveau de la rentabilité de l'une et l'autre des entreprises, il y en a une qui, de façon chronique depuis 20 ans, n'a pas réussi à démontrer sa rentabilité alors que TVA, même dans des conditions difficiles maintient un niveau de rentabilité relativement acceptable. Peut-être pas suffisamment acceptable pour leurs actionnaires, mais quand on le regarde objectivement, ça paraît acceptable.

7081   Alors, donc, l'application de ce système-là, on craint qu'il finirait par enrichir davantage... on déplacerait dans le fond le rendement entre les chaînes conventionnelles, les diffuseurs publics et les chaînes thématiques.

7082   Le paysage change. Le paysage change. Vous avez pris des décisions récemment pour introduire plus de concurrence dans le paysage des chaînes thématiques, alors on ne peut pas présumer que ces mesures-là qu'on souhaite ne créent pas d'effet sur la rentabilité des chaînes thématiques dans l'avenir.

7083   Donc, je pense qu'il faut s'assurer minimalement, d'une part, que l'équilibre persiste et aussi on doit s'assurer que l'argent des Canadiens... l'argent des Canadiens, qu'il provienne de leurs contributions, de leurs achats de service de distribution ou qu'il provienne des gouvernements publics serve principalement à améliorer l'offre de contenu canadien qui est offert à travers l'ensemble du système.

7084   CONSEILLER ARPIN: Lors de sa comparution, Rogers Media nous a dit que le tarif devrait être le même pour tous les joueurs, de façon à éviter cet élément d'iniquité parce que dans l'explication que Rogers donne, c'est qu'on fait de CTV à tout jamais le groupe qui est dominant au Canada.

7085   Mais, vous, vous dites que c'est à l'inverse des revenus publicitaires qu'on devrait le faire et, eux, ils disent que ça devrait être le même tarif.

7086   Mme SAMSON: Mais nous sommes partis du concept de inversement proportionnel aux revenus publicitaires puisque le motif allégué par les diffuseurs pour avoir une redevance, c'était la fragmentation de l'auditoire et l'impact dramatique que ça avait sur le revenu publicitaire.

7087   Donc, s'il y a un problème, on va prendre le bon remède pour un problème. Mais vous savez, monsieur Arpin, à partir du moment, et je comprends l'argumentaire des diffuseurs privés, à partir du moment où on élimine Téléquébec, prenons le marché francophone, on dit Téléquébec n'en a pas, Radio-Canada n'en a pas. On est deux. On est deux.

7088   Moi, monsieur Arpin, si vous me demandez comment je pense que les dirigeants de l'Association devraient être rémunérés, je vous dirais directement proportionnel à leur taille, c'est moi la plus grande. Mais je ne suis pas sûre que ça serait au bénéfice de l'ensemble de l'industrie nécessairement.

7089   CONSEILLER ARPIN: Maintenant, le rééquilibrage dont nous parlent les deux diffuseurs francophones, mais surtout... surtout Quebecor et sa filiale Videotron, c'est que le rééquilibrage, ça devrait se faire... ne devrait pas affecter le consommateur et devrait donc se faire par une révision fondamentale de l'ensemble des redevances et, donc, en somme, pris à même les redevances actuellement versées aux exploitants de canaux spécialisés.

7090   Est-ce que vous avez une opinion là-dessus?

7091   Mme SAMSON: Bien, oui.

7092   M. PROVENCHER: Bien, c'est difficile de porter un jugement sur l'élasticité de la capacité du consommateur de contribuer davantage à ces... Mais je pense que, encore là, il y a des nuances importantes à établir peut-être entre le système francophone et le système anglophone.

7093   Au sein du système francophone, on croit qu'il y a un tel attachement aux émissions qui sont issues du marché que peut-être que le consommateur accepterait davantage de contribuer à l'amélioration de la programmation et des services offerts, pour autant que ces coûts additionnels soient raisonnables.

7094   CONSEILLER ARPIN: Parce que c'est sûr que les exploitants de canaux spécialisés nous disent que c'est déshabiller Pierre pour habiller Jean, là.

7095   Mme SAMSON: Tout à fait. Mais, est-ce que la solution ne résiderait pas dans la combinaison des deux? Peut-être un peu d'une redevance ou d'une valeur de système qui proviendrait du système actuel ou de l'économie actuelle du système et peut-être une partie qui proviendrait du consommateur. Il n'est pas interdit d'avoir une combinaison des deux.

7096   CONSEILLER ARPIN: En fait, ça serait certainement un élément de la négociation parce que le Conseil ne dispose pas de l'information puisque la tarification n'est pas un secteur qu'on réglemente, donc on ne sait pas qui paie quoi, qui fait combien puis à qui il en reste, s'il y en a un qu'il en reste plus que d'autre.

7097   Dernière question; le Ministère des communications et de la culture, dans son Mémoire, nous dit que, compte tenu qu'on a introduit le Fonds d'amélioration de la production locale l'année dernière, enfin qui a réellement commencé le 1er septembre, que le Conseil ne devrait pas penser à un mécanisme de compensation tant et aussi longtemps qu'on n'aura pas pu évaluer les bénéfices qui viennent, qui découlent du Fonds d'amélioration de la programmation locale.

7098   Ce à quoi Quebecor dit que le Fonds d'amélioration et de la programmation locale résout un problème dans les régions, mais il ne résout pas le problème de la télévision nationale.

7099   Je ne sais pas si vous avez une vue là-dessus?

7100   M. PROVENCHYER: La question centrale demeure l'équilibre et je pense que l'instauration du Fonds de programmation locale est plutôt récente. On n'en a pas encore l'expérience pour voir si elle corrige les situations de déséquilibre, là, qui ont été présentées devant vous depuis le début de cette semaine ou antérieurement.

7101   Alors, donc, je pense que... et de façon générale, c'est vrai que certainement ça facilite le travail des radiodiffuseurs conventionnels qui doivent assumer des obligations de productions locales mais je ne suis pas tout à fait convaincu non plus que ça viendra régler l'ensemble des...

7102   Je prends V, par exemple. V, je ne crois pas que le Fonds de productions locales va corriger leur situation ou leur capacité d'assumer un plus grand rôle au sein du système de radiodiffusion. Alors, dans ce cas-là, très clairement je pense qu'un système de compensation ou accès à de nouvelles sources de financement pourrait être fort pertinente et utile.

7103   CONSEILLER ARPIN: Merci, monsieur le président.

7104   LE PRÉSIDENT: Merci. Je crois que ce sont nos questions pour vous. Merci beaucoup.

7105   Mme SAMSON: Merci.

7106   LE PRÉSIDENT: On va arrêter maintenant.

7107   We can get back at two o'clock. Thank you.

--- Upon recessing at 1242

--- Upon resuming at 1401

7108   LE PRÉSIDENT : O.K. Commençons, Madame.

7109   LA SECRÉTAIRE : Merci, Monsieur le Président.

7110   I would now invite the Canadian Media Guild to make its presentation.

7111   Appearing for the Canadian Media Guild is Ms Lise Laureau. Please introduce your colleagues and then you will have 15 minutes for your presentation.

PRESENTATION

7112   MS LAUREAU: Thank you very much.

7113   Mr. Chair, Vice-Chairs, Commission, Commissioners and Commission Staff, thank you. I know it has been a long week of hearings and I appreciate we are on Friday afternoon, so thanks for taking the time.

7114   I am Lise Laureau, I am the President of the Canadian Media Guild. We are union representing 6,000 media workers across the country, including those at CBC/Radio-Canada, TV Ontario, TFO, APTN and others.

7115   I am joined today by Karen Wirsig who is our Communications Coordinator and prepares all our briefs to the Commission.

7116   As you may recall my union, the Canadian Media Guild, has developed a keen interest in the transition to digital TV. We originally started looking into it because of the impact on our members in transmission at the CBC.

7117   But then we realized we were the only group paying close attention to an issue that will fundamentally change how Canadians get their TV. We have become the voice for the people who don't know this is going to happen to them and probably couldn't afford to be here anyway.

7118   We are very concerned that the digital transition, as it is currently planned, will leave some 11 million Canadians without the option of tuning to free over-the-air channels. It is our view that OTA is crucial to the future of local TV as well.

7119   We do realize that in this room we are swimming upstream on that point. In fact, we may have given up the whole idea a long time ago, except that we constantly meet and talk to people who agree with us and who have found no voice in proceedings such as these.

7120   At the same time, we are also amazed at how many people don't know or have forgotten that free TV signals are still available over the air. The conventional broadcasting industry has done a very poor job in educating people about the various ways to access programming and, most especially, how to get it for free over the air.

7121   In fact, I talked to a member of Parliament from Alberta not that long ago who regretted the fact that he couldn't get his local station on the satellite package. When I mentioned he should try and hook-up his TV to rabbit ears he had no idea that was still possible and, unfortunately, it may soon not be.

7122   I often tell people that the fact you can get TV for free in this country is one of the best kept secrets and that it may well disappear for a large group of Canadians is a bigger secret still. That is why we urged the Commission in our written submission to work with the government and broadcasters to come up with a communications strategy about all this, about OTA and the transition to digital.

7123   We get one call or an email a week from people who have found our website and want information on whether and how they can hook-up to OTA TV.

7124   About three weeks ago a woman called saying she had always used rabbit ears in Montreal, but didn't know it was still possible after she moved to Ottawa until she saw it at a friend's house. People like her don't sign up to cable packages, they just use their TVs as door stops or something else and spend their free time online. She was really happy to know she could get a few channels over the air in our capital city.

7125   This week somebody wrote in from Aurora, just north of Toronto, saying they dropped their cable subscription because of the cost and wanted to know about over-the-air options. A little research suggested that they should be able to get CKVR in Barrie with a simple set of rabbit ears. And if they do that, CKVR is in for some dedicated viewing from that household.

7126   People in the business of television broadcasting, people who constantly lament the effects of fragmentation on their bottom line, they should pay more attention to the fact that OTA delivers them less fragmented audiences.

7127   OTA is directly linked to the survival of local TV and we can't understand why so few people make that link. Instead, we are apparently one of the only sources in Canada of plain-language information about OTA and the coming changes. Perhaps that is because we are one of the few organizations involved in this proceeding without a business interest in the outcome. We don't stand to make or lose money from any decision.

7128   I should note here that a phone survey we commissioned in Kamloops, which we appended to our intervention, indicated that 76 per cent of people in that city know little or nothing about the transition to digital. And Kamloops is ahead of most, given that the local daily paper there has actually covered the issue several times over the last few years since Kamloops lost CBC over-the-air. And I know you heard from that group earlier this week.

7129   In that poll 84 per cent said it is unfair if their city loses all free TV service while people in big cities will continue to get it. For now, viewers across the country, like the ones in Kamloops and the family from Aurora I mentioned a moment ago, have options other than BDUs to receive at least one channel for free. After 2011, as you know, it is quite possible that 11 million Canadians won't. They will then be utterly at the mercy of a limited number of BDUs, probably one cable company at most and two or three DTH providers and at whatever rates those BDUs want to charge.

7130   As we pointed out in our written submission, we do not believe that a "free satellite service" or a "skinny cable package" for that matter will survive very long in this environment. People simply don't trust cable and satellite to hold the line on their fees for very long and for good reason, even Shaw's skinny cable package that you heard about this morning sounds like it is going to cost $10 a month for just one channel.

7131   And to quote from an email we received a few years ago, from a woman in Salmon Arm, B.C. and I will start quoting here:

"We are unable to get CBC TV without cable, we are unable to get CBC News World even with cable. For four or five years we were able to get CHBC, Family Channel, CNN and Knowledge Network for about $10 a month. We must now pay $30 for the above plus a lot of U.S. junk that we don't want. We have cancelled cable and lost everything." (As Read)

7132   So it is clear to us that keeping what we are now calling a skinny over-the-air option is the best measure you have to keep BDU rates in check short of reregulating them entirely.

7133   In our view, the Commission and the government must keep these Salmon Arm and Aurora households in mind as you move ahead. Consumers who can afford it will always be able to get 200 channels of some kind, whether there is regulation or public support or not.

7134   Yes, one question is whether the 200-channel universe people will be able to find quality Canadian content somewhere on the dial. But perhaps more important is whether the citizens of this country will have continuing and long-term access to their local stations and community broadcasters and their public broadcasters. These are the major contributors to important local, regional and national conversations.

7135   MS WIRSIG: We get the sense you are frustrated by a lack of consensus on the way forward for the clearly troubled broadcast industry. Because so many of our members lives depend on the health of this industry, we are anxious about this too quite obviously.

7136   We therefore have two initial proposals to make about a way forward. We have elaborated on them before, but feel we should repeat them again today. Number one, foster the establishment of digital multiplexes in communities where over-the-air local TV is currently marginal. In part, due to lack of choice and also lack of DTH carriage.

7137   Again, we propose Kamloops as a test site for such a project, where up to six broadcasters could share a single digital transmitter and test the viability. The market research we appended to our submission in this proceeding suggests that one-third of people in Kamloops, including one-third of cable subscribers, would prefer a six-channel over-the-air package to what they are receiving now. That is a significant group.

7138   The cost per broadcaster to participate would not be prohibitive. In fact, for the national networks, it would represent a fraction of what they spend annually on wardrobe allowances, for example. The government and the CRTC could perhaps provide an incentive to this by covering the cost of communicating the project to viewers in Kamloops.

7139   In addition, as you have seen in our written submission, we have asked that you expand your list of communities where digital over-the-air transmission is mandatory.

7140   Number two, maintain the LPIF at its current 1.5 per cent of BDU revenues. We appreciated that you listened to concerns from us and other groups about local news when you created the program in the first place. We are all beginning to see the fruits of that investment at CBC as well as at stations in Victoria, Windsor and Hamilton that probably owe their survival to it.

7141   The newly independent smaller market stations are an inspiration for local TV. In our written submission, we said we were opposed to LPIF money being used for the digital transition. This was primarily in response to the Freesat proposal that involved diverting contributions from the LPIF toward the cost of that program.

7142   We have seen the request made by the independent and small-market stations to use one-third of LPIF money to ease their digital transition. If such an allowance were time limited and if that one-third reverted back to supporting incremental programming after a set time, we would support that request.

7143   And finally, the antics of the last few weeks and months have perhaps distracted us from the fact that these proceedings are about a framework for group-based licence renewal of the big private networks. When those networks were in the process of becoming big groups they told the Commission and Canadians that getting bigger would mean synergies and economies of scale and that they would be in a better position to contribute to the Canadian broadcasting system. We suggest it is time to call them on that fact.

7144   Adding specialty stations was partly a risk-management strategy. The income on those is much less vulnerable to fluctuation precisely because of the steady stream of cable and satellite fee revenues. And of course we can see why the big private networks want to get more from that pot.

7145   But as you examine the individual private groups next year it may well become evident that if the local aspect of their business truly does matter, they will find new ways of financing and promoting it from the many benefits that broadcasting groups already enjoy in the system. On the other hand, you may be persuaded that they do need further help to make their local stations viable. Frankly, we don't have enough information to judge.

7146   MS LAUREAU: What we can tell you is that from our perspective the CBC and Radio-Canada do need access to further financing to fulfil their mandate as the main public components of the system. CBC suffered very large cutbacks this year, not so that they could provide a boost to their share price, but simply to cope with the effects of a commercial revenue drop on an already very precarious funding situation.

7147   As you know, the CBC uses commercial revenues to make up for the lack of inflation protection in its parliamentary appropriation and to finance new initiatives which are not covered in the appropriation, such as online services.

7148   The cuts mean that although we understand the new LPIF has been very timely and helpful, our members are scrambling to preserve local TV and radio service across the country with fewer resources. The cuts also mean that they can produce less documentary and current affairs programming.

7149   And if there were to be any cut to the parliamentary appropriation, which we know is possible in this economic time, we could very well see local station closures. We realize that the public broadcaster is not central to this proceeding, but we get the sense you are open to ideas here and we wanted to dust off a proposal we put before the Commission a number of years ago, one that could help the CBC and other conventional broadcasters produce quality Canadian programming for primetime.

7150   In 2006 we proposed that the Commission create Canadian broadcaster programming fund, accessible to both private and public broadcasters to pay for Canadian programming aired in primetime and made available on other platforms. Such a fund would serve as a compliment to the new Canada Media Fund and the LPIF, but would be different in two key ways.

7151   First, it would support local and regional programming, including and beyond news and current affairs, in markets of all sizes. Second, it would support local and national current affairs programming in addition to drama and other priority programming currently funded by the CTF.

7152   The new fund would be a mechanism to ensure that any new money from cable and satellite revenues be directed to spending on Canadian programming in prime time.

7153   In 2006 we recognized it would be difficult to prevent cable and satellite companies from passing the cost of the fund onto their subscribers, after all these companies raise their rates at anytime and for any reason anyway. All the better if they have the opportunity to blame someone else on the bill they send out to consumers, as they have this year with the LPIF.

7154   We therefore propose that it would be clearly identified as a one to two monthly contribution by cable and satellite subscribers to the production of quality Canadian programming that they could watch on their TV screens at the most convenient time of day and also find on other platforms.

7155   We urge you to examine this idea in light of the current debate over value for signal. What worries us about private negotiations over this value between broadcasters and BDUs is that those services that are commercially marginal, but important to public policy, will get totally marginalized.

7156   MS WIRSIG: In conclusion, we don't believe there is a silver bullet to save the broadcasting industry in Canada or anywhere else for that matter.

7157   In this country we have a specific set of circumstances, and I know you are aware of them, that make our challenges more significant than elsewhere; such as a large geographic expanse with a relatively sparse population, a chronically underfunded national public broadcaster, an neighbour whose cultural output vastly overshadows ours and a domestic industry that knows it is easier to make money by exploiting our neighbour's readymade and well-promoted product than by exploring its own home-grown product possibilities.

7158   So with these challenges in mind, our three modest proposal; that is digital over-the-air multiplexing in smaller markets, maintaining the LPIF at its current level, and exploring the creation of a Canadian broadcaster programming fund, they are all prongs of a potential renaissance of a single tier of universally accessible quality Canadian television.

7159   Thank you for listening to us today, and we would be happy to answer any of your questions.

7160   THE CHAIRPERSON: Thank you very much for your presentation. Where does your figure of 11 million come from? I presume those are the people who are receiving the signal only by way of OTA right now?

7161   MS WIRSIG: No, the 11 million figure we derived from or a consultant that we paid derived from coming up with the list of 29 cities that are currently mandated for OTA and figuring out what their contours were and then deducting that from the population of Canada. And so that leaves likely 11 million people outside of the range of your mandated conversion list. And so that is 11 million people, the majority of which we know currently subscribe to a BDU service, but that would lose the option of over-the-air service.

7162   THE CHAIRPERSON: And if you would deduct from the 11 million those who receive BDU service right now, what is the number you are left with?

7163   MS WIRSIG: Well, we don't know and we don't know if anyone has done good research on this. Our Kamloops survey suggests that six per cent of household have TVs hooked up to rabbit ears, in Kamloops. I think based on other research I have seen that is frankly older, this is from the summer, Kamloops is among the low end of OTA viewership in the country.

7164   So it is probably not a great number, it is probably not a good number for us. But let us say, it is six per cent of those 11 million, that would be about 660,000 who would be cut off -- like whose screens would (ssshhh) go like that in 2011.

7165   THE CHAIRPERSON: Your whole presentation is sort of based as binary issue here; you can either have OTA or you can have BDU as applied service. But there is also the internet and wireless. And how do you factor that into your calculation? I mean, you say quite eloquently that we need OTA and that it is vital.

7166   But just for argument's sake, couldn't one say that is really yesterday's views? Today everybody is hooked up or just about everybody is hooked up. Surely there is an alternative, which is the internet, et cetera. And so, therefore, the need to have OTA is considerably diminished if not abolished?

7167   MS WIRSIG: That is the view, of course, and it is propagated by the cable and satellite industry that make a lot of money off making you believe that is the view.

7168   We are talking about people that may not be spending their entire, you know, hours and hours in front of TV sets. And what we found from the Kamloops survey is that a lot more people than you or I would even predict would be quite happy with six channels that were good channels delivered to them for free. A lot of people don't rely a lot on television. And the numbers are vague, because not a lot of -- we found out that not a lot of people have examined it from that end. So I would say it is quite the opposite.

7169   And the interesting thing about our Kamloops figure is that the folks under 35, the ones who are relying on the internet, are really much more interested in the over-the-air option than their older counterparts. And I think that that -- if you are looking at the future of television I think that is an important point to make.

7170   THE CHAIRPERSON: Okay, Steve, you have some questions?

7171   COMMISSIONER SIMPSON: Thank you very much, Mr. Chairman.

7172   Thank you very much for presenting your views to us today. I was going to commend you earlier on having a singular focus to your view, which was digital transition. And I see from your oral position you have widened out your view a bit and I am finding myself a little less prepared that I would like to be, but I will do my best.

7173   I want to go back to the Chairman's first question, which was the assertion that up to a third of the population was in jeopardy because of the negative consequence of digital transition.

7174   And I did pull some numbers and I just want to put them back to you. Right now, we are looking at a Canadian expanse that is pretty wired up and we are looking at anywhere from 6 per cent in Kamloops who have chosen to not use direct-to-home or cable all the way up to the Windsor market which is at 18 per cent. And I presume that that is because they are sitting in a pretty congested market with the ability to get a lot of signals over the air.

7175   So when I look at the Kamloops market and I listen to your point, I get a bit of a feeling that -- I hear the sky is falling, but I don't see it. And I would like you to tell me why you are so convinced with your argument that once digital transition occurs and if the CRTC doesn't widen its mandate, that there is immediately going to be a problem with the marketplace, for example, in Kamloops not being able to receive OTA signals when those channels will continue on with analogue for the foreseeable future and the ability to access these signals for free would prevail?

7176   MS WIRSIG: If the existing broadcasters in Kamloops are able to maintain their analogue signals past 2011 -- and it is not clear to me what exactly has to be cut off in 2011 due to relationships with the United States -- if they can keep that, we are not opposed to that. I don't think we have ever said the sky is falling.

7177   What I think we have said is this is the way television has always been delivered in the country, we are foreseeing a change here that very few people are talking about, but there is also an opportunity that nobody's talking about that might serve one-third of the population of Kamloops very well, and serve them very well with a great choice of Canadian programming, Canadian-focused programming.

7178   That includes CBC, Radio-Canada, potentially Knowledge Network, maybe Global. They have talked there in that community about APTN because they have such a large First Nations community and we know APTN does transmit over-the-air, not for much longer, but in the far north it may be something they would be interested in.

7179   I mean, this would be a service that a lot of people are interested in that digital transmission offers us. So I don't want to give the impression that we are saying the sky is falling. We are just saying, this is a big change and everybody's looking at it as a negative change in someway and how can Shaw help us, save us from this problem? Well, I heard it this morning, I am not sure they can.

7180   So there are lots of other ways if we want to be truly Canadian and creative. We think there is just other things to look at. And we are a little disappointed that the broadcasters, so far, have kind of -- they are the ones saying the sky is falling, the sky is falling and this can't be done and that is what we are kind of questioning.

7181   COMMISSIONER SIMPSON: Well, I apologize, I think I misspoke when I said, you know, the sky is falling. I think what you are saying is the sky could fall and it is up to us to be aware of the consequences of that. So my apologies.

7182   But I want to go back to trying to establish a framework of understanding between the Commission and your point of view with respect what is I think the fulcrum of your point, which is digital transition.

7183   In taking a market like Kamloops, which currently is not mandated to be part of digital transition, a good portion of that from my understanding as a layperson is that it doesn't have an implication with respect to signal overlap with the United States because Canada's conversion to digital is a question of harmonizing with our neighbour.

7184   And in seeking counsel from those who know better than I, including my fellow Commissioner Lamarre who is a broadcast engineer, it is our general understanding because it is not mandated as such that a broadcaster who is not required by us to go to digital has the continuance option to stay analogue for let's say the duty cycle of their transmitter, which could be two years, five years, 10 years. And so one would then question the wisdom of shutting it off and impeding, you know, that 6 per cent of the audience.

7185   So again, unless I have missed something, I am trying to understand the urgency of your argument.

7186   MS WIRSIG: I agree, that if they can keep their analogue going and they are willing to do so for the rest of its useful life, that would be great. And part of our worry was that there would be some mandatory cut-off in places like Kamloops. I believe Kingston and Peterborough fall within that though, so let's use them as examples, Kingston and Peterborough right off the air, right?

7187   But if we are sticking to Kamloops, we are not saying this has to happen in 2011 if the analogue can stay on. But that transmitter will reach the end of its useful life at some point and our guess is that there won't be a lot of enthusiasm to replace the analogue transmitter.

7188   And what we are worried about is that you are contemplating changing the regulatory environment to make OTA optional for these communities and that you will lose an opportunity by doing that. Because if you get rid of the requirements for a transmitter to get priority carriage and simultaneous substitution, that is a big regulatory change in our view.

7189   COMMISSIONER SIMPSON: Okay.

7190   MS WIRSIG: And so I think -- we don't see any magic with 2011. In fact, we understand that there is no way the broadcasters can do even your list by 2011, and so I know you probably have a bit of a problem with that given the deals with the U.S.

7191   But we don't think there is any magic to 2011 and it will take a long time for all this to happen. And frankly, the longer it takes the more likely Canadians will be already equipped with digital TVs and we won't have to worry about converter boxes and all that other kind of jazz, right? So you know, the longer this can stretch out the longer we will have to communicate change and all that kind of stuff with Canadians which will be helpful I think.

7192   COMMISSIONER SIMPSON: I think that was a very helpful interchange, because I do think we have our wires straight.

7193   MS LAUREAU: I just want to add one other thing and along the lines of the sky isn't falling, but something we would like to point out and where we became concerned is the public policy implications of one approach for urban Canada and the other for non-urban Canada. And whether the politics of the country are, you know, the politicians, Parliament, is aware of this, I don't think so, and whether Canadians at large are aware of this.

7194   But there are huge public policy implications when you say to Toronto and Vancouver, you have this, I can have 20 channels free over the air in Toronto and do but, you know, a friend in Regina won't. Well, that is not a good example, get back to Kamloops, Kamloops won't. So that is a political problem that is on no one's agenda right now and we think it should be.

7195   COMMISSIONER SIMPSON: Argument taken. I looked at the United States conversion with, admittedly, some amazement and the bombarding of the marketplace down there with the message of the imminence of digital transition and was astounded at the percentage of people who claimed no knowledge of this transition, which is a whole other sociological issue onto itself but I don't really think it is something we can deal with.

7196   But I want to move onto the economic part of your argument now because I think we have the technical issue pretty well beaten to death. I want to go to -- the substance abuse survey had a definition of the term "free." And the concern that you are raising that goodly portion of the populous will want to be able to exercise, if they choose, the free choice of some type of a basic service.

7197   And again I went back to our wonderful staff and I asked an anecdotal question and I have a -- and this is a rough number, but my question was, you know, out of the universe of people across Canada, and let's say for sake of argument it is 90 per cent, who do subscribe to some form or cable or DTH service, my question was, what percentage of them have only basic service or inversely what percentage have more than basic service.

7198   And the answer was, approximately 80 per cent have more than basic service, of the 90 per cent in this country that are paying some form of subscriber fee to cable service.

7199   So with that on the table, explain to me again your argument that if we go to digital and the cost to 90 per cent of the marketplace will be nil, because they are already equipped with a cable box, how does the one-third figure and the costs of this conversion enter into your argument again, because I am not seeing it.

7200   MS WIRSIG: You mean, why would it be worth spending the money?

7201   COMMISSIONER WILLIAMS: No, I am asking you if the 90 per cent of Canadian households are spending money on cable or DTH service and 80 per cent of them are spending more money than just for basic service, how does digital conversion put a third of the population under duress because they can't get access to free television?

7202   MS WIRSIG: What we are saying is that you are denying them the choice, and one of the things we are finding is, even though you can hardly find any information about it, people in places like Toronto and Ottawa, like where the calls I got from are starting to figure out -- Aurora -- "Wait a minute, I don't need to pay all this for cable."

7203   I don't have any of the market research about those --

7204   COMMISSIONER SIMPSON: But they have that choice now. They have choice now.

7205   MS WIRSIG: Well, but as our example from Alberta suggests, I think people forget and then they think, oh, it's too complicated. I don't know how to do it.

7206   I have helped -- to be honest I have helped three of my neighbours. I gave one neighbour an old set of rabbit ears. I helped buy two sets for two other neighbours and if I had not done that they probably would have gone on paying cable or in the one case of a younger guy using his TV to watch DVDs. Literally, that's what he did. He watched DVDs and it held a plant for him.

7207   And so I basically turned that guy onto OTA TV and he watches "Téléjournal" and "Tout le monde en parle", every week "Tout le monde en parle" and almost every night "Téléjournal." Without me, that guy would not be watching Canadian television today.

7208   So all I'm saying is, I think that the OTA is very poorly marketed. Cable and satellite very well marketed.

7209   So give OTA -- our view is --

7210   COMMISSIONER SIMPSON: But that's not what we are talking about. We are not talking about the marketing and awareness problem.

7211   We are talking about the fact that they do have a choice now and 90 percent of the households choose to not receive signal over-the-air.

7212   MS WIRSIG: But what we are saying is they don't -- may not know they have the choice.

7213   Like if you look at the data that we have from Kamloops 6 percent currently have TVs hooked up to cable. If you said -- and we said, "If you could get three channels over-the-air what would you do?" 20 percent of people said they would watch those three channels over-the-air. Well, guess what? They have three channels right now and I think a lot of them either don't know that or don't know how they go about hooking up to it and can't be bothered.

7214   COMMISSIONER SIMPSON: Well, okay.

7215   MS WIRSIG: So I just don't know what to do with those numbers. I can just tell you that for us part of the problem is awareness.

7216   COMMISSIONER SIMPSON: Let's move on because I don't -- I think we are talking at cross-purposes here in that there is nothing quantifiable here that we can look at as a Commission.

7217   MS LAUREAU: If I could, you are right. There is nothing quantifiable because nobody has tried to quantify it. We are a little group. We have no money to spend.

7218   Everybody appearing before you all week has two tiers of people and staff. We don't have that. So have we done -- we did a little bit of research in one town that's been affected by the loss of the CBC so we thought that was relevant.

7219   I think if you asked Canadians at large and did a survey across the country, "If you had an option to get three or six channels would you drop your cable and/or satellite?" you would be surprised. But do I know that categorically? No, because no one is doing that kind of survey.

7220   COMMISSIONER SIMPSON: Okay. I take your point.

7221   I'm going to try and get into some of the areas you introduced today. And I go back first to a presentation that was made by Ms Astbury of the "Save Our CBC" Kamloops group who presented a very articulate presentation to us and had brought about something that you brought up in your presentation, which is the whole idea of multiplexing.

7222   And although she wouldn't or couldn't at that time quote the information source, she indicated in her presentation -- and I think you are alluding to it in yours -- that an independent engineering study of the Kamloops transmitter -- we are not really sure which one they are referring to -- indicated that:

"A conversion cost from the current analog transmitter to digital would be less than $90,000". (As read)

7223   COMMISSIONER SIMPSON: And her thesis went on to say that:

"Divided six ways it would be less than $15,000 per channel." (As read)

7224   COMMISSIONER SIMPSON: And this is completely incongruous to the information we are getting from broadcasters who are looking at upwards of a million dollars for transmitter services. And I'm wondering do you have any additional information to share on this cost in terms of where it came from?

7225   MS WIRSIG: The study that Ms Astbury was referring to is a study we appended to our last -- to our intervention from the spring to the Commission. It was performed by Brian Olson of Olson Enterprises. You have it. It's on the public record.

7226   COMMISSIONER SIMPSON: Yeah.

7227   MS WIRSIG: We obviously shared it with Kamloops because what they did in that study was look at four communities, and Kamloops was one of them, and they actually got -- they actually got quotes from suppliers which I don't believe the broadcasters did when they told you it would be a million dollars per, just to start there.

7228   Your spectrum expert report that the Commission commissioned and put on the public record for the last one, comes in much closer to our estimate than the broadcasters' one million.

7229   And so I think what we said was -- Kamloops for some reason came in a bit cheaper than our average which was $156,000 and that I think is due to local factors, that when they figured out and when they actually talked to suppliers, this is what the suppliers told them it would cost for the equipment.

7230   We didn't include every single cost in that, like for example we didn't include the cost of upgrading the studio which Kamloops will need to do. It's digital, right? No matter what they will need to do that.

7231   The spectrum expert report, I don't have the number in front of me but I think it was like 247,000 on average, right, for replacing a transmitter? So again about a quarter of what the broadcasters are telling you.

7232   Somewhere in the middle -- and what we found with their study is that they put in a little bit more cushion room in their budgeting than our report did.

7233   So you know we could cut it up the middle and call it 200 grand a transmitter divided -- even divided by six -- that's what we were saying, even divided by six in those national networks, this is a few lunches out, frankly, for them to try -- to go on a fly and try something. This is not --

7234   COMMISSIONER SIMPSON: May I ask you because it was a submission on a previous hearing, if you would go back and dig that information up and submit it as a supplementary to us, please, so that we can examine it.

7235   MS WIRSIG: Sure, yes.

7236   COMMISSIONER SIMPSON: We are very interested obviously in --

7237   MR. SIMPSON: Yeah, absolutely, sure.

7238   COMMISSIONER SIMPSON: -- the cost alternatives.

7239   MS WIRSIG: Yeah.

7240   COMMISSIONER SIMPSON: I'm going to have to go back to a technical question I missed earlier. And it's with respect to choices and options.

7241   The notion of the concept of Freesat is before us in various forms and, from the consumer's side, it seems to have a price tag of the consumer ad that won't go away, which is around 400 bucks.

7242   And my question to you is given that the statistics that we do have before us, the quantifiable statistics that tell us that 90 percent of the marketplace is spending minimum of $80 to $100 a month on your cable bills because they are -- as I said, 80 percent are buying more than basic. But let's say -- let's be fair and say even $60.

7243   Do you not feel that the consumers have a viable choice with Freesat to get rid of that $60 or $800 a year bill that's recurring in favour of a $400 one-time charge that gives them the services that you feel they need?

7244   MS LAUREAU: Well, the problem with the Freesat one is besides this pretty mammoth one-time "cost" which is significant for anybody, 400 to 500 bucks, right, there is no guarantee that I can see in there that the free will not turn into something other than free in one, two, three, five whatever years. Canadians have gone down that route. We quoted from some of them today.

7245   In fact, one of the main reasons why we believe our proposal makes a lot of sense is it keeps the BDUs in check. We recognize that the majority of Canadians will likely always be on some kind of BDU. What we are looking at is providing the minority with better service than they have now and to naturally keep the BDUs in check by ensuring there is an option out there.

7246   Otherwise, those rates when will they end?

7247   COMMISSIONER SIMPSON: But you are onto an entirely different subject. What we are talking about is ensuring the provision of basic television service in a marketplace and you are talking now about the bonds or the shackles of a relationship with a BDU and the Freesat model is -- $400 is a lot of money. I totally agree with you.

7248   But if it's a one-time cost or even if it's amortized over a 12-month period, which is also a possibility, it does reduce that hit and in effect removes those shackles of that $600 to $800 a year cable bill. So I don't understand your argument.

7249   MS LAUREAU: That is if you believe that Freesat continues to be free in X years. What guarantees would you have for that?

7250   COMMISSIONER SIMPSON: Well, I don't know. Life doesn't come with guarantees but I think the job of the Commission is to make sure that the interests of the consumer are upheld.

7251   My last question is to do with the issue that you did bring up in your verbal presentation today, and that is the -- is that of assurance of Canadian content in the broadcasting system, which is a concern of us all and I take your points to heart.

7252   Point number two is the one I want to focus on where you indicate that you uphold the notion of the local programming improvement fee and lobby for its continuation at the 1.5 percent level.

7253   But you are implying that the funding regime right now for Canadian content is not enough, that we need yet one more fund which I am looking for here. But essentially you are indicating that one more funding regime is necessary to add on to the LPIF and the Canadian Media Fund and the Canadian Television Fund.

7254   Could you please in a very brief answer explain to me once again in the context of all the other subsidy formulas why this fund is uniquely qualified to be looked at?

7255   MS WIRSIG: So it's called the Canadian Broadcaster Programming Fund.

7256   COMMISSIONER SIMPSON: Thank you. I didn't highlight it, my mistake.

7257   MS WIRSIG: Lovely title. That will certainly be very popular over the years to come.

7258   It is different from the LPIF in that it would not be only for small markets and different from the Canada Media Fund which we are not sure of the new rules yet. So we are not quite sure how different it could be. It could be different in a couple of ways.

7259   When we originally promoted it in 2006 one of the things that we knew about the Canadian Television Fund is that broadcasters couldn't use the CTF to produce their own in-house programming. So one of the things this would do is to say if it's cheaper for you and more effective for you to produce certain programming in-house, use this money; go ahead.

7260   I'm not sure that would be a factor anymore because certainly under some previous rules when we heard about the announcement of the Canada Media Fund that rule -- the broadcasters might be able to tap some of that money for their own in-house productions. I'm not sure where that is now.

7261   The other main difference between the Canada Media Fund and this new thing would be that it would fund some news and current affairs, again national, big market included, and would potentially be more friendly to funders -- to broadcasters like TVO and Télé-Québec who, as we understand it, have been getting the short end of the stick on the CTF because they can't -- their audience measurement doesn't work. Their viewership numbers don't come out in national figures very well because they are limited. They have limited range.

7262   So this might be a place where TVO, Télé-Québec, Knowledge Network could also tap funding that they can't currently get from either the LPIF or the Canada Media Fund or the CTF, actually.

7263   So those are the main differences.

7264   COMMISSIONER SIMPSON: Thank you very much. Those are my questions.

7265   THE CHAIRPERSON: Thank you very much.

7266   I believe those are all the questions we have for you. Thank you for taking the trouble to coming and sharing your views with us.

7267   MS WIRSIG: Thank you very much.

7268   THE CHAIRPERSON: Thank you.

7269   MS LAUREAU: Thank you.

7270   LE PRÉSIDENT : Madame la Secrétaire, est-ce qu'on peut procéder avec le prochain, s'il vous plaît.

7271   THE SECRETARY: Yes.

7272   I would now invite Bragg Communications Inc. to the presentation table, please.

--- Pause

7273   THE SECRETARY: So, Mr. Chair, appearing for Bragg Communications Inc. is Ms Natalie MacDonald.

7274   Please introduce your colleague and you will then have 15 minutes for your presentation.

PRESENTATION

7275   MS MACDONALD: Good afternoon, Mr. Chairman, Commissioners and staff.

7276   With me here today is Lee Bragg, Chief Executive Officer and Vice-Chair for Bragg Communications.

7277   We are pleased to have the opportunity to provide input regarding the issues in this proceeding. Bragg and its affiliates provide communication services throughout nine provinces in Canada. We operate under the business name EastLink and Persona.

7278   The Bragg group of companies operates 512 cable systems in the country. While we are the fifth-largest cable company, we serve less than 5 percent of the more than 10.6 million households that subscribe to a cable or a satellite television service. Of our total number of systems 347 serve fewer than 300 subscribers and 232 serve fewer than 100 subscribers. Only five systems will remain licensed as a result of the recent exemption order.

7279   Many of these systems operate in geographically dispersed areas, making full interconnection difficult or in some cases impossible. In many of these communities Bragg's Persona systems are the third choice in the market behind Bell TV or Shaw's satellite service.

7280   In addition to competition from satellite more recently we have also faced competition from other cable BDUs in some systems as several independent telephone companies in Ontario are over wiring us.

7281   Notwithstanding these challenges, we accept this as part of operating a competitive business and we welcome the opportunity to meet and overcome these challenges. We contribute to the Canadian broadcasting system by investing millions of dollars into the expansion of our network.

7282   Through our capital investments, Bragg has been able to improve our cable television services, including expanding to add digital and high definition content.

7283   Our network expansion has also enabled us to provide high-speed internet services and competitive local telephone services to Canadians in a number of our serving areas.

7284   Bragg also contributes financially to Canadian and local expression and we provide contributions by way of simultaneous substitution.

7285   We believe that changes to the current regime should place greater reliance on market forces. Times are changing. Markets for both content and distribution are competitive and companies need to be responsive to these changes.

7286   A solution that relies on subsidies will be detrimental to the entire system. The more you subsidize a business the less incentive there is to run it efficiently.

7287   On the other hand, establishing an appropriate framework that provides participants with the flexibility to operate their business and to respond to consumer demand is the most viable long term solution.

7288   Bragg is not supportive of a fee for carriage regime. During these proceedings the Commission has noted a number of times that surely there must be a solution. We believe that the solution is to look closely at the other issues in this proceeding.

7289   CTVglobemedia agreed during its oral presentation that the LPIF is already providing benefits to them by keeping stations running that would not otherwise be running and it has only been two months -- just over two months since the LPIF has been in place.

7290   The Commission has not yet had the opportunity to assess the value that the lifted advertising restrictions have had on OTA broadcasters since this change has only been in place since September of this year.

7291   A review of the group licensing regime in this proceeding is surely to include a framework that recognizes the synergies and addresses the changes to the competitive environment that the OTA services operate within today.

7292   Addressing these other issues will lead to a solution. Combined with some responsibility on the part of the broadcasters to innovate and adapt there is every reason to believe that a fee for carriage regime is not necessary.

7293   The economic model for OTA broadcasting in Canada is centred on the ability to buy American programming, monetize that programming and to use a portion of that profitability to support the production of Canadian programming.

7294   The broadcasters have consistently claimed that distant Canadian signals negatively impact their ability to monetize the American programming they have purchased. For instance, in CanWest's submission they quoted a report by Armstrong Consulting, which states that in 2006 and 2007 DTH was responsible for 85 percent of the negative impact caused by distant signals.

7295   BDUs vary considerably in their carriage of distant signals and therefore have significantly different impacts on the ability for local broadcasters to monetize their American programming.

7296   In Halifax, for instance, Bragg provides 10 distant Canadian signals to our subscribers and Bell TV provides a minimum of 51 distant Canadian signals to its subscribers as part of its digital basic package. Clearly, in this market Bell TV has a much greater impact on the ability of OTA broadcasters to monetize their American programming.

7297   As of August 2011 BDUs will be required to obtain the consent of OTA stations prior to distributing their local stations in a distant market. BDUs and broadcasters will be expected to negotiate the appropriate level of compensation relating to the distribution of distant signals.

7298   Bragg submits that to the extent that distant signal carriage is a key impact to the OTA broadcaster's viability, appropriate negotiations for carriage may serve to remedy some of those impacts.

7299   In Bragg's view, any negotiations regarding the compensation for distant signals must scale according to the number of distant signals distributed by a given BDU.

7300   The economic impact to the over-the-air broadcasters of carrying more or less Canadian distant signals is not addressed with a fee for carriage regime. BDUs that carry more signals should pay more as they have more economic impact on the over-the-air broadcasters. A fee for carriage regime would be inequitable as it would have some BDUs paying for the damage caused by other BDUs.

7301   Currently, BDUs pay a fee of 25 cents for each subscriber receiving a second set of distant U.S. signals in lieu of non-simultaneous deletion. This rate should be driven by market forces so that BDUs will make appropriate carriage decisions that result in over-the-air broadcasters being compensated for the impact these stations have on their ability to monetize their American programming assets.

7302   If market forces increase this charge, BDUs will make appropriate decisions regarding carriage or to recover this expense from their customers. BDUs vary widely in their carriage of these signals. Bragg in Halifax provides a second set of U.S. 4 + 1 signals to approximately 5.2 percent of our subscribers while Bell TV provides a second set of U.S. 4 + 1 signals to 100 percent of its customers.

7303   Over-the-air broadcasters must adjust to changing market conditions. Otherwise, we will have one component of the system stuck in time as all other components adjust to modify themselves.

7304   Today's over-the-air broadcasters are large, vertically integrated organizations that own a large number of the analog in Category 1 specialty channels.

7305   The rapid development of specialty channels was important to ensure that Canadians remain within the Canadian broadcasting system rather than opting to access U.S. satellite services and completely bypass the system.

7306   Over-the-air broadcasters generate viewers and revenue from their specialty services and the advantages of this cross-ownership must be recognized.

7307   A licensing approach that recognizes the synergies and the financial benefits that can be achieved through group licensing will further enhance the OTA broadcaster's ability to remain competitive.

7308   The most significant threat that the over-the-air broadcasters have made in the public forum is that local TV will disappear if the broadcasters are not subsidized. There are numerous flaws with this claim, not the least of which is to mislead consumers into supporting a fee for carriage regime.

7309   We simply do not believe that local will be lost forever if over-the-air broadcasters do not get a fee for carriage.

7310   We also need to consider what the local is that we are trying to protect. An environment that provides regulatory flexibility and some existing measures to maintain its signal integrity is all that is required. With the right regulatory framework and with market demand for services, if the OTA broadcasters do not choose to fill this void then others will.

7311   The concept of negotiation of a fee has been discussed in this proceeding or, we should clarify as well, the concept of negotiating a value for signal has been discussed. All BDUs do not have the ability to negotiate with these much larger networks.

7312   For a negotiated model to work, a lot of other regulatory issues would need to be addressed including priority carriage, channel placement and signal substitution. We must have the right to negotiate these issues. Smaller systems operators should also be granted some assurances that the rates they would pay are on comparable terms and conditions and are not higher than those provided to larger BDUs.

7313   Bragg submits that any fee for carriage regime should only apply in licensed systems. If exempt systems were subject to such a regime they would be severely disadvantaged in any resulting negotiations.

7314   Exempt systems generally serve small, rural communities where distribution of conventional signals might not be particularly valuable to the broadcasters. As a result, the broadcasters would hold all of the bargaining power in such negotiations and, accordingly, exempt systems would be vulnerable to unreasonably high carriage rates and tied selling of the conventional pay and specialty services.

7315   Exempt systems provide valuable competition in the markets they serve and they face many challenges. Accordingly, such systems simply cannot absorb the increased costs that would be associated with a fee for carriage regime.

7316   There are a number of concrete steps the Commission can take to address the over-the-air broadcasters' declining revenues and we have outlined a number of those steps. We believe this approach is preferable to adopting measures like fee for carriage and embarking down an endless road of subsidization.

7317   MR. BRAGG: I would just like to add a couple of points that aren't in our written submission, but we have heard a lot of arguments and there are many issues at play.

7318   I'm a pretty simple guy and I don't know what the right solution is, but after all the things we have heard to me it just doesn't make sense for one party to pay for the issues of another. And we have been trying to argue about what the value is, but it's been very difficult to determine what that value is when there is no freedom of choice and it's when people do not have the option to choose whether they want a product or not. It is very difficult to determine that value and that's just basic economics.

7319   Natalie has already mentioned we have invested a lot of money in small rural systems and we have been able to do that as regulations and subsidies have actually decreased. And that is because we can accept the risk in the normal economic marketplace.

7320   If we start down the path of more subsidies or more regulation with no basis for it other than how much money somebody needs or how much money somebody loses given their economic situation, I fear that further investing in those small rural areas will disappear.

7321   So that's our comments, and I thank you for listening to us and we would be happy to answer any questions.

7322   THE CHAIRPERSON: Thank you for your submission.

7323   First of all, can we -- I'm not harping on vocabulary here but fee for carriage and value for signal in my mind are two totally different things. Fee for carriage is a uniform fee imposed by us which you pay as a cost of doing business; value for signal means that you pay for the input that you get -- whatever it is.

7324   You are a distributor. You have a signal that you sell to your customers. And obviously that signal has a value. Now, you compensate it. It's in some form right now such as simultaneous substitution, the fact that you carry the signal and therefore reach a wider audience, et cetera, et cetera.

7325   The question is whether that is -- whether you are paying the full value for that signal or not. The broadcasters maintain you don't. You obviously feel you do or certainly the other BDUs from which we have -- why do you find it so difficult to negotiate that value? It's a value like any other value, an input value that you negotiate with your supplier.

7326   MR. BRAGG: I think it's difficult to -- I mean it's difficult for us to sit down and negotiate given the existing structure. I mean we do -- there is a set of guidelines and a set of regulations but it's hard to have normal negotiations and a sort of normal economic discussion when there are these other issues at play.

7327   And we are -- you know, nobody has approached us about negotiating them and nobody has offered to say, well, we will give up this if you give us that.

7328   But you know the fact that nobody has talked to us or we have not talked to anybody that's not really the issue, but we feel that because of the existing structure that's in place it's difficult for us to negotiate.

7329   It's difficult for the over-the-air folks to negotiate when they offer it now. They can't really take it off the air. I mean we pick it up for free. It's hard for us to drop it. I mean we are mandated to carry it.

7330   THE CHAIRPERSON: But this is a policy hearing. What we are looking at is what is the proper model and to what extent we should or could exchange the existing regime.

7331   I mean you were here on Monday or you listened when CTV came here and they basically suggested, look, let's us negotiate and, in effect, we can refuse to supply the signal, you can refuse to carry it. And at the end of the day, you know, we the broadcaster, according to them, will suffer much more than the BDU because the BDU has other signals to distribute, but they have only one and most likely there will never be this sort of standoff. But they quite clearly put on the table a scheme whereby they would have the option of negotiating with you or saying I opt for mandatory carriage, in which case there is absolutely no compensation.

7332   If they say, I want to be compensated for the value, they risk the fact that they run into Mr. Lee Bragg who says, there is no value to this, I am not negotiating, and there is a standoff, and at some point in time you either refuse to carry their signal or they refuse to supply it.

7333   MS MACDONALD: So if I could go back to the question of the value of signal, it has been our position in our submissions, and I think it is safe to say, we feel very strongly that when you are looking at the value, our position has been that these signals have been available over the air as well as through distribution, and something that is available free over the air to one subset of Canadians -- well, to all Canadians but there are 90 percent that choose a distributor, we don't see that we are actually -- that is a value to those specific signals.

7334   I know it has been a bit of a debate in these proceedings, but, you know, our value is the proposition of offering something more to consumers. So if a consumer can pick up those signals over the air, we would say that we are not getting extra value from carrying those signals. We think that to the extent that there is a value, it is already being compensated through mandatory carriage signal, simultaneous substitution.

7335   And as well the big issue is, if I am thinking about the value of the signal, I am not really thinking about the value of it to us in terms of carrying it. I would like to say that there is a value perhaps that the broadcasters place on their signal and that has to do with the integrity of the signal, and that is where, I think, we need to look at the issues in this proceeding and focus on the question of how to maintain the integrity of the signal.

7336   So, you know, when we looked at these issues, I think that there are a number of issues before the Commission here today and all of them do tie into the challenges that the broadcasters are facing financially, but my perception of these proceedings is that there has been a lot of discussion around value for signal, how to we negotiate a value for signal.

7337   But I think we need to take a closer look at some of the other issues that are before the Commission in this proceeding such as the group-licensing regime. What is the framework that exists today? Does it make sense today?

7338   You know, the framework for the licensing of the over-the-air broadcasters has been in place for decades. Times are changing. Consumers are going to multiple platforms. Consumers are accessing Canadian content in multiple areas, including on the internet.

7339   So I guess we are saying it is time to really look at the framework. You know, to suggest that a business can survive simply on what we would call a subsidy in this case, I don't think there is a long-term viable solution for that, but if we look at opportunities to say, okay, let's look at the regulatory framework.

7340   You know, the broadcasters are before the Commission talking about ways licensing can become more flexible. Let's look at their obligations. Do they need to have the same obligations as they did 30 or 40 years ago?

7341   THE CHAIRPERSON: Just a second. I mean let's stay with one thing at a time.

7342   You say a subsidy. I am not talking about subsidy. I am talking about a value that you negotiate. By definition, it is not a subsidy, it is something that you pay because you think you get something for it. I don't know what it is. So let's not talk about subsidy.

7343   What I am trying to -- and you say integrity of signal. It is a different way of looking at the same thing.

7344   Broadcasters say they have the signals. They have obviously the Canadian signal and they buy rights to American programs that they buy in the States. They pay full value for those but they don't get the full value out of it because it is also shown in Canada on the 4 + 1 or the second set of 4 + 1.

7345   If it happens to be simultaneous, yes, their signal gets superimposed and therefore they get an increased audience, but if it is on specialty or non-simultaneous, it doesn't, in effect. So therefore, the signal for which they paid and for which they have the exclusive rights is shown in Canada, according to them, without adequate compensation. That's it.

7346   Again, at the end of the day, you come to the question of how much is this worth and are they being compensated appropriately through the various measures that you have or not.

7347   I have no idea where this will come out but I am sort of sitting here now five days in a row and I hear from every BDU, including you, basically saying, I don't even want to negotiate this, which I don't understand.

7348   I have no idea where it will come out but one side thinks there is a value and there are all sorts of other things which are of mutual interest to you and the broadcasters, which, of course, once you have a negotiation, you won't negotiate just one little set, you will negotiate all the other issues that concern you.

7349   Why is it so difficult to get to the table and negotiate these issues?

7350   MS MACDONALD: I think, you know, again, going back to the issue you had described, the broadcasters were here before the Commission this week speaking about the challenges they face because their programming rights that they have purchased are being viewed on distant signals, on a second set of U.S. 4 + 1s, and I think then the real issue is about how to address the fragmentation of their audiences to these distant signals.

7351   So that is really the crux of our position. We are saying, you know, there are opportunities; 2008-100 has established that the BDUs will be negotiating carriage of distant signals, including compensation for those distant signals. So what we are saying is that seems to be the biggest problem that the broadcasters are raising here in terms of their financial position.

7352   The most common issue we have heard all week has been the challenge of viewers watching other programs that they have already paid for the rights to. So what we are saying is there is already an opportunity to address those issues.

7353   So the distant signal negotiations -- if 85 percent of the broadcasters' financial challenges are caused by distant signals, there should be negotiations to discuss what the value is or what the loss of their programming rights is because of the additional distant signals.

7354   THE CHAIRPERSON: That's right. If distant signal was the only thing that would cause the loss, that is fine. The question is, for instance, does non-simultaneous transmission of the signal cause loss or not. That is one of the issues they want to address.

7355   I mean, you say they have to be resolved. I agree. How do you resolve them short of negotiation? I certainly don't want to impose a solution on anyone.

7356   MR. BRAGG: I am not opposed to sitting and negotiating with them. I mean I think -- to be honest, I think we are too small to have much impact and nobody is going to want to negotiate with us, first.

7357   I also think that it will go around in a circle pretty fast, where we try to determine what the value is or what should be the price tag to carry them and we don't know because they have been offered for free now. And we will say, well, it is going to be X number of cents a sub a month or so many dollars. We will say, well then the customer should have an option. And then we will say, but how can they have an option if they don't to take it if they can get it for free over the air.

7358   I mean it just -- it doesn't seem like it would go anywhere.

7359   THE CHAIRPERSON: No, but, Mr. Bragg, you are exactly addressing some of the issues that will come up. You say, consumers should have an option and how do you provide them the option? For instance, one of the ways to do it is what is called a skinny basic, you know, something that consumers actually decide whether they want it or not.

7360   MR. BRAGG: I mean I have heard a lot about the skinny basic and I don't -- I mean historically we had lower-priced basic packages and we kept more -- the customers wanted more and more and we were required to carry more and more and we passed through the rates and we built the cost up.

7361   And now we have -- a basic channel in Halifax is $20 or $22, something like that, with 20-odd channels in it. Nobody takes it. I mean 90 percent of our customers take more.

7362   THE CHAIRPERSON: You have a skinny basic now?

7363   MR. BRAGG: Well, that is just our basic.

7364   THE CHAIRPERSON: What does it contain?

7365   MS MACDONALD: We have got 29 channels in our basic service in Halifax and it is offered at $22.42.

7366   THE CHAIRPERSON: Surely, 29 is much more than OTA and 9(1)(h) mandated?

7367   MR. BRAGG: It must be.

7368   MS MACDONALD: Well, there's 29 channels. We have got --

7369   MR. BRAGG: I mean some of them are our own advertising channels. We have the impaired channels.

7370   MS MACDONALD: The 9(1)(h) and the over the air would be about 14 channels.

7371   THE CHAIRPERSON: Right.

7372   MS MACDONALD: But I think the point that we are making is skinny basic doesn't make sense for our systems. We have got 512 cable systems with 250 head ends, and to reengineer our entire group of cable systems to recreate a smaller basic service, many of those systems are analog, we would have too many challenges to reengineer those. The cost of them wouldn't be of any value.

7373   THE CHAIRPERSON: But how many of those systems will convert to digital in 2011 or are they mostly outside the areas?

7374   MR. BRAGG: How many of our cable systems will be converted to all digital?

7375   THE CHAIRPERSON: Yes.

7376   MR. BRAGG: That is a good question. I am not sure I know that right now. I mean it will depend on our capital plan and what ones we decide we can do, and the others we --

7377   THE CHAIRPERSON: Yes. We are obviously concerned mostly with digital systems here, you know. What your partner says about reengineering and building traps, et cetera, for analog, nobody is contemplating that. I think the discussion of skinny basic is done in the context of digital.

7378   MR. BRAGG: I just -- nobody buys our basic now. I mean I struggle with the argument -- when I say buys our basic, buys it on a standalone. I mean less than 10 percent of our customers buy basic only. They buy the additional tier, so they get basic and digital. They all want more.

7379   So there doesn't seem to be any economic validation for sort of less programming for a cheaper price when all our customers want more and more. We still have hundreds of systems that are 330-megahertz or 450-megahertz systems with 30 to 40 analog channels, and the customers just call and they want more and more and more. And they absolutely know that there is a cost to that.

7380   THE CHAIRPERSON: Yes.

7381   MR. BRAGG: We bought a system -- when we bought Island Cable in Charlottetown we had over 3,000 customers that were over-the-air broadcast. They had a UHF broadcast, we had eight channels, it was $12 a month. And I don't have any of those anymore. They all went to satellite because nobody -- in my experience nobody wants it. I mean they want more rather than want less.

7382   THE CHAIRPERSON: I can't lay my finder on it but somewhere -- when Ms MacDonald made her presentation, she basically suggested that in any negotiation of value for signal, you would be the loser. I don't quite understand why you go from that assumption.

7383   Wouldn't the broadcasters want the exposure that they get through your signal?

7384   MS MACDONALD: In our experience, our company is not seen as one of the companies that can negotiate with these bigger networks. We are usually, you know, pretty far down the list of companies that the networks want to deal with. Typically the larger BDUs will negotiate and that is where the broadcasters want to, you know, get their services out there. That is where most of the Canadians are watching TV.

7385   We represent, as I said, less than 5 percent of the entire Canadian households subscribing to a BDU service. So I don't think the broadcasters see us as, you know, in the big scheme of things that important in terms of negotiating. We certainly don't have the negotiating power even today.

7386   I mean most of our systems are so small, we are already being, you know, served draft agreements with rates and tied services that, you know, we just simply don't have the ability to negotiate the kinds of terms that the larger BDUs do.

7387   THE CHAIRPERSON: I guess I don't know enough about your industry. So what you are suggesting, if I understand you correctly, is the rates are negotiated with the big players, let's say Rogers or Shaw or something, and then they are just imposed on you on a take-it-or-leave-it basis?

7388   MS MACDONALD: I might even say that we probably don't benefit from the rates that they may be able to negotiate. I would expect that we are probably not getting, you know, the preferred rates. Our systems are really quite small and I don't think we would have that kind of leverage in negotiating with those larger networks.

7389   THE CHAIRPERSON: And switching gears somewhat, what about the digital transition, where are you in terms of 2011?

7390   MR. BRAGG: We would have -- I am not sure what percentage of our systems. Less than 40 percent of our subscribers are -- no, that is not true -- 60 percent of our subscribers have digital availability now, and we have, through our capital plan over the next few years, been working hard to try to get digital available to the rest of our subscribers in our other systems.

7391   But some of those systems we don't -- we may not have a solution for and we will be analog for as long as we can or some system --

7392   THE CHAIRPERSON: And if the broadcaster converts to digital, you will dumb it down to analog?

7393   MR. BRAGG: Yes, we would have no choice.

7394   THE CHAIRPERSON: When you say digital, do mean HD too or is it just SD?

7395   MR. BRAGG: Our HD availability is less than our standard definition digital availability but we are growing that as we increase capacity on our networks. I don't know what the percentage is. I could easily provide those details.

7396   THE CHAIRPERSON: But do you envision that eventually you will be all HD?

7397   MR. BRAGG: I think -- my vision of the future is yes, it will be all HD at some point in time and we will. I don't know when and that has a lot to do with the capacity we have in certain networks.

7398   And we do see now economic challenges with some of the smaller systems that we have had. We don't know how we are going to move them to the future and it may be the case, as we have done with some small systems, we shut them off eventually. We lose the customers. I mean it is --

7399   THE CHAIRPERSON: Well, this is where I was going, to the customers. It seems to me, except for the very small ones, but eventually the customers all will want to have HD. And they are actually getting something better. It is a better signal, no question about it.

7400   When I was talking to you before about value for signal, your basic argument is that it is something that they have for free now and why should we pay more. Well, the HD signal actually is something more.

7401   Would it make sense to restrict the value for signal negotiations to the HD portion only because there you actually have a better product for which you can also charge the customer more?

7402   MR. BRAGG: I think we have a window where we can charge a premium for -- I call it the technology.

7403   THE CHAIRPERSON: Yes.

7404   MR. BRAGG: That may change. I mean I think we are looking at a transition that was similar to from black and white to colour. I mean at some point in time nobody will be willing to pay for the same content in HD. As there is more and more HD, there will be no standard definition. I don't know when, five, 10 years from now.

7405   But I think there is a possibility to negotiate around that because it is new, it is something different, it is something that customers are not getting now. And that is the biggest issue I find with this whole challenge, is it's -- right or wrong, it's free right now. So it's hard to get that through to the customers.

7406   THE CHAIRPERSON: I was stunned when I saw the numbers. You said that 347 of your systems serve fewer than 300 subscribers and 232 serve fewer than 100 subscribers?

7407   MR. BRAGG: Yes.

7408   THE CHAIRPERSON: How are they viable in the long run, I mean given the technological investment that you have to make?

7409   MR. BRAGG: Lots of people ask me that.

--- Laughter

7410   MR. BRAGG: We take advantage of -- through the success we have had in more and more products and services, high-speed internet, our telephone offering, as we see how we can drive more revenue from one customer, the economics get better to invest in those small systems and interconnect them with fibre back to a main head-end system where we can deliver more products and services.

7411   We work hard on our business services which drive fibre into different areas and if we have a large commercial client who has a fibre requirement, that helps carry the cost to get fibre to a small community sometimes and then tips over the point where the economics makes sense to rebuild that community and offer more and more products and services.

7412   I mean we grew up running small rural systems, so we think we know it better than others, but that doesn't mean that we can make them all survive. But we always try to innovate and think of new ways to run them.

7413   THE CHAIRPERSON: And fibre will be -- "fibring" them is basically your principal means of survival?

7414   MR. BRAGG: That is basically correct. I mean most of these small systems, the cable plant, the cable network itself, you can justify rebuilding it, or at least we can, but the 100 kilometres of fibre you have to build to actually interconnect it to a main head end is the big challenge.

7415   THE CHAIRPERSON: Okay. Those are my questions.

7416   Len?

7417   COMMISSIONER KATZ: Thank you.

7418   Good afternoon. I picked up on a statement that I think one of you or both of you made earlier and that is -- and I wrote it down as a quote:

"We pick it up for free, so how can there be any value?"

7419   I just watched the World Series three weeks ago. At the end of every single broadcast the announcer came on and said:

"Any rebroadcast, reproduction or any other way of taking this off the air is illegal without the express written consent of Major League Baseball."

7420   Why do they say that?

7421   MR. BRAGG: I don't know. They must feel they have rights for it, I guess. I don't know.

7422   COMMISSIONER KATZ: Do you not think there is a value there and they are afraid that someone else will extract that value and that is why they are saying that, to protect their rights?

7423   MR. BRAGG: That is the content provider's value. I guess that is right. But we are -- I don't think we are prohibited from picking it up over the air.

7424   COMMISSIONER KATZ: Because I am picking it up for free --

7425   MS MACDONALD: I think the point though with the over-the-air services is that they are available for free to all Canadians and we are mandated to carry them. And the benefit to the broadcasters for us having been carrying them for the last, you know, number of decades has been additional viewership so they can sell their advertising.

7426   So, you know, there are benefits to the broadcasters. We are all aware of those benefits over the years of carriage through a BDU. So --

7427   COMMISSIONER KATZ: Is there not a distinction between what is free for personal consumption and what may not be free for reuse at a profit? Is there not a distinction there that you see?

7428   MR. BRAGG: Yes, but I mean I am not suggesting we reuse it for a profit. I mean we are told to put them on the air. We put them on the air. I think that is reasonable. It is more convenient for customers than getting our cable service without the over the airs and having a set of rabbit ears and switching back and forth. So they are on the network. It makes sense for everybody.

7429   I mean I am not suggesting the whole regime shouldn't change but it is hard for me to justify to one set of customers why they have to pay a fee for it or pay a dollar amount for value when the other customers do not.

7430   I mean it's -- and I wasn't suggesting it's easy to pick it up for free. The value today is the mass distribution that the over-the-air guys get and their ability to sell advertising. That is their value. I don't dispute that.

7431   It is just that the environment today is -- it's there, it's in the air, it's on the network, it's over the air for free. I guess I don't see a distinction whether it gets to a customer over the air or gets to the customer over our cable network.

7432   MS MACDONALD: And I think, you know, our point is that in an environment where we are mandated to carry these services, where we simulcast the simultaneous signal and where we carry the distant signal, I think that there is a solution in there somewhere.

7433   I mean the broadcasters have been, you know, speaking about the fact that distant signals are their core problem, and so, what we are trying to present is a solution, to say, look, there will be negotiations and maybe it is up to the broadcasters to say, okay, what is the loss for this distant signal carriage?

7434   They have quantified it. They have stated in numerous reports what the damage has been because of these distant signals. So what I am saying is rather than all BDUs subsidize those losses, maybe the solution is in negotiating properly what the value of those distant signals is.

7435   And so that is what we are suggesting and that is why we use the example of in Halifax, you know, EastLink is carrying 10 distant Canadian signals, while Bell TV is carrying 51. Now, we understand they have a different platform but what we are saying is when the broadcasters are here before the Commission saying that 85 percent of the damage caused to them is because of distant signals, I don't think the solution is every BDU paying them.

7436   I think the solution is, first, okay, let's take a step-by-step analysis and first look at the cause, and if the cause is distant, then maybe there is a solution in trying to negotiate what the value of distant is.

7437   So when we say that, there is a value in maintaining the integrity of the signal and we are willing to go to the table on that point. We are not willing to pay more for damage caused by other BDUs.

7438   COMMISSIONER KATZ: Okay. So I think I have now found a partner in causality. You now like the idea of cause of effect, so let me ask you this question.

7439   To the extent that specialty programming may be part of the cause of the erosion of revenue in advertising for OTA, should that not be one of the focuses of how to recapture some of that lost contribution?

7440   MS MACDONALD: I fully agree that to the extent that specialty services have eroded some of that revenue for the over-the-air broadcasters, it should be looked at.

7441   But what I am saying is that that is another of the reasons we are here today and that this proceeding is taking place, group-licensing regime and added flexibility for the services. So in a group ownership model, the over-the-air broadcasters that have very, very successful specialty services need to be looked at as a whole.

7442   There's all kinds of synergies, I am assuming. I mean we are not in the content business per se but there's all kinds of synergies that can be established through the group-licensing model and by enabling more flexibility for their regulatory regime.

7443   We think that there is recognition there for either the value that their specialty services can provide to them or some of the losses to their own revenues because of their specialty services. We shouldn't have to be responsible for that.

7444   That is a reality, just like the over-the-air broadcasters are placing more content of streaming video on the internet. That is happening. That is a reality. That is a change in the market. That is something that everyone needs to deal with, but BDUs, all BDUs as a group should not have to be responsible to address that problem.

7445   COMMISSIONER KATZ: Okay. So let me see if I can get you to the next level.

7446   So you agreed to the notion of perhaps to the extent that specialty may be one of the contributors to the loss in contribution on the OTA side, we should look at it as a group.

7447   If you take it to the next step, the BDUs distribute those specialty programs and presumably they are marking up the cost of those as well and benefiting by the fact that there is more specialty out there as well.

7448   So should they also be brought into this umbrella?

7449   MS MACDONALD: I don't actually agree with taking that line of logic to the next step.

7450   What I say is that we are mandated to carry a lot of those specialty services and part of the reason for that is because the Commission recognized that with grey market and black market satellite, a solution was necessary.

7451   So those specialty services, while they may erode a little bit of their affiliate OTA broadcasters' revenues, those same specialty services do provide a value to the Canadian broadcasting system in that they avoid a lot of churn out of the system in favour of foreign satellite services.

7452   So I think that we have to recognize that -- you know, with changing times, we have to recognize that there will be some erosion of a business model. We face it. As a BDU, we face it. As we said in our submission, we are third behind the two satellite companies in many of our systems.

7453   But the reality is that where there is a cause that can be addressed, we think that that is where we need to look. And so, if an over-the-air broadcaster chooses to have a very successful specialty service and that specialty service is resulting in a bit of its fragmentation of its audience, then that might be just a reality that is has to accept if it is going to, you know -- but it also has the benefit of the ownership of that service.

7454   COMMISSIONER KATZ: Okay, thank you.

7455   THE CHAIRPERSON: Elizabeth?

7456   COMMISSIONER DUNCAN: Good afternoon. I do have just a couple of questions.

7457   Relating to signal integrity, we were discussing this morning -- I don't know if you were here when the Shaws appeared but we were talking about signal integrity and I am just wondering, in your view, if it is possible to do non-simultaneous substitution, as suggested by the CAB, either in the same week substituting the same show or substituting the ads that are on the Canadian show into the American show.

7458   MS MACDONALD: I think from -- I am no technical person but it has always been my understanding and I would tend to agree with what Shaw did say this morning, which is simultaneous substitution technically makes sense because we have both feeds and we place the Canadian feed over the American feed. So that makes sense.

7459   When it is non-simultaneous, that would mean that we would have to have a system in place that stored the local feeds, as I understand it, to then place over the American feed at a different time slot, and my understanding is that that would take a lot more capacity in order to do that.

7460   So it does present, I would say, significant technical challenges and costs. I can't speak to the extent of that but I know it has always been a challenge, and hence, the reason for proper negotiations for a rate for carriage of distant signals.

7461   COMMISSIONER DUNCAN: Okay. So the carriage for distant signals, that's just not referring to the second set of 4 + 1?

7462   MS MACDONALD: No, that is right. It is -- yes.

7463   COMMISSIONER DUNCAN: Okay. So then the understanding I came away with from our discussion with Shaw then was that developing the VOD would be an opportunity to negotiate compensation for the value of the rights that the local broadcasters have and I am just wondering if you could comment on that.

7464   MS MACDONALD: I did hear a lot of the comments that Rogers made and also Shaw this morning with regard to developing VOD.

7465   For us, VOD is a fairly new service and I think it is developing across the country in that way. I think it is an excellent opportunity to look at in terms of opportunities for second viewing or second windows or third windows for the Canadian content or the content that the Canadian over-the-air broadcasters have obtained the rights for.

7466   Unfortunately, at this time, we haven't been able to access some of that. I think it is perhaps in testing stages right now. But certainly, I would say that we are probably very open to expanding those opportunities.

7467   I might add, as a VOD provider, that we also face additional challenges in comparison to the larger BDUs in that we simply don't have the size to negotiate a lot of the content and there are some challenges in accessing content.

7468   So we are not there yet but we are definitely looking at VOD as a growing business model and I think that there is room for discussions with over-the-air broadcasters in relation to that.

7469   MR. BRAGG: Yes, the VOD and/or the HD that was proposed, those are new services and new business opportunities, so it is much easier to negotiate or come to some structure that sort of fairly benefits, you know, however we determine fair, each party and there is less disruption with sort of the status quo or customer disruption than some of the other ideas that have been put forth. I mean so we are very much in favour of sort of new opportunities to look at how we can solve some of these issues.

7470   COMMISSIONER DUNCAN: It would certainly benefit the customer or the consumer in terms of more choice as well, the VOD?

7471   MR. BRAGG: Absolutely.

7472   COMMISSIONER LAMARRE: Thank you very much, Mr. Chairman. Those are my questions.

7473   THE CHAIRPERSON: Suzanne?

7474   CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.

7475   I want to pick up a little bit on the discussion you had with Mr. Katz because I too picked up on your comments when you said, how can you assess the value of something that is otherwise available for free over the air for the same customer.

7476   Well, let's talk about post-2011. We have mandated a number of markets where transition to digital over the air should take place.

7477   MR. BRAGG: M'hmm.

7478   COMMISSIONER LAMARRE: Now, in Ontario that would be Toronto, London, Kitchener, Windsor and Ottawa. I suspect that a lot of your small BDU systems that you are operating in Ontario will be outside the covering range of those transmitters. So over the air will not be there.

7479   So then what's -- don't you then get the value of the signal?

7480   MR. BRAGG: I think so but then we have to pass that value -- we have to pass that choice -- it comes down to choice. We have to pass that on to the customer too, I think. I mean where they are used to getting something that had no fee or no charge associated with it, if there is, which -- if there is, there is.

7481   But I mean what I don't like as well is not only charging customer for it when another customer gets it for free but charging the customer for it when they are forced to take it as well.

7482   I mean, if the over the air want $3 for the over-the-air tier, well, we should test the market and that can test the value to the customer to a certain standpoint as well, and that's fine but there has to be some element of choice for the customer.

7483   COMMISSIONER LAMARRE: Another issue, the issue of negotiating with bigger markets, you did mention that -- with bigger players, sorry about that, you did mention that for you, you seem to see it as a difficulty because you don't have the same bargaining power that CTV may have.

7484   If it came to a point where the decision from the Commission was that value for signal should be negotiated, do you find any value to the establishment of arbitration at the end of negotiations if you have difficulty with those?

7485   MS MACDONALD: I think, you know, in our written submission that was filed we addressed a little bit the issue of arbitration. I would say that there's definitely challenges if that is the solution.

7486   I think the key for us is that if we are left with a situation where we are required to negotiate, we absolutely require the flexibility to make decisions about where we carry a signal, if we carry the signal, whether we simulcast that signal.

7487   All of those issues, although today the broadcasters have the benefit of those things, in an environment where we are left with the only option is to negotiate a value for signal, we simply won't be able to negotiate unless we have something to negotiate with and I think that that is the critical point for us. There is no negotiation if we are mandated to do all of these other things.

7488   COMMISSIONER LAMARRE: Thank you.

7489   THE CHAIRPERSON: Okay, thank you very much. Those are all our questions. I appreciate your coming, and your frank answers, I think, made a good discussion.

7490   Let's take a 10-minute break.

7491   MR. BRAGG: Thank you.

7492   MS MACDONALD: Thank you.

--- Upon recessing at 1535

--- Upon resuming at 1547

7493   THE CHAIRPERSON: Good afternoon.

7494   Madam la secrétaire.

7495   THE SECRETARY: Yes, I would now invite FreeHD Canada Inc. to make its presentation.

7496   Appearing for FreeHD Canada Inc. is Mr. David Lewis. Please introduce your colleagues and you will then have 15 minutes for your presentation.

PRESENTATION

7497   MR. LEWIS: Thank you, Madam Secretary.

7498   I would be pleased to start by introducing the panel from FreeHD Canada. On your far left is Patt Keefe our Vice-President in Engineering, and next to Patt, on my right, is Brian Olsen our Vice-President of Operations. On your far right is Doug Harvey our Vice-President of Sales and Marketing, and next to Doug, on my left, is Linda Rankin our Vice-President of Corporate Development.

7499   Good afternoon, Mr. Chairman, Vice-Chairs, Commissioners, and CRTC Staff. My name is David Lewis and I am the Founder and CEO of FreeHD Canada.

7500   You see sitting before you today a proposed new entrant, direct-to-home BDU and SRDU company, a company that we believe can offer the solution to many of the distribution issues affecting the Canadian broadcast industry and consumers, particularly the issues that are central to this hearing. We hope that through our input solutions to the challenges that face the Canadian broadcast industry today might be found.

7501   The key issues addressed at this hearing can be, in the resolution, major change agents for the Canadian broadcast system. Our solutions have been crafted to make that change as smooth as possible and in a timely fashion all to meet the Commission's digital transition deadline of August 31, 2011.

7502   In response to your call for comments for this hearing FreeHD Canada filed comments and included sections of our applications before being gazetted. We provided this information in order to start an open dialogue and a debate on our proposed solutions. It prompted many calls and discussions and we were largely pleased by the supportive reactions from throughout the industry.

7503   Our comments filed in this hearing responded primarily to two of the four main areas that you identified at the outset of this hearing, particularly the negotiated value-for-signals and the satellite delivery model.

7504   We believe that local programmer value lies in local programming, not in the transmission technology used. So current mechanisms ensuring integrity of Canadian broadcaster signals should continue regardless of the technology they use to get to households. For example, simultaneous substitution and sole access to local advertising.

7505   We have listened to the differing sides of the value-for-signal debate. We do not envy you and your staff and the prospect of having to make what could be a very difficult decision. FreeHD Canada would support a negotiated value-for-signal rate rather than a regulated rate should you decide that value-for-signal will be the future regime.

7506   The main point we wish to emphasize in this debate is that both sides of the value equation must be considered. Both the undisputed value of the conventional over-the-air signal for consumers and the considerable cost and significant value of distribution by BDUs. Should the Commission choose to adapt some form of value for signal, we are confident that our value of carrying all of the conventional over-the-airs in the HD, as they are available, would allow for a mutually acceptable agreement to be reached. Our only caution is that signal access is not allowed to be withheld as negotiations are finalized.

7507   In our case, withholding of signals would be potentially too damaging to a new entrant trying to build an attractive and compelling programming offer. Our proposal for carriage of all local over-the-air signals into their local markets was based on the simple principal of freely offered, freely given. The signals would be provided to the consumers for free, we would distribute them for free and the broadcasters would provide them to us for free.

7508   We see three possible outcomes, depending on the determination of value-for-signal discussions. Firstly, if a value-for-signal for local into local is not approved and implemented, then the FreeHD proposal remains intact. Secondly, if a value-for-signal that includes some monetary compensation for local into local is approved and implemented and the broadcasters decline to charge for the FreeHD distribution of local into local, then the FreeHD proposal remains intact.

7509   And thirdly, if broadcasters do not waive their rights to monetary compensation for our local program package, then the FreeHD offer of free distribution of these signals would be withdrawn.

7510   The negotiations between FreeHD and the broadcasters for the local signal fees would then become bilateral and we would seek to recover the FreeHD satellite distribution costs.

7511   Our final comment on this topic is that after reviewing the numerous comments made by consumers in response to your notice or consultations 2009-411 and 614, it is evident that if any fee is charged and passed onto consumers it will likely create a serious backlash. FreeHD Canada would not pass on these charges to consumers and we would maintain our free local program package.

7512   FreeHD Canada requested offsets to our initial contributions to the LPIF in order to offset some of the substantive capacity and distribution costs. We requested our small offsets to the LPIF in order to provide some assistance for the significant benefits of distribution and the capacity burdened to the satellite for the over-the-air local program package.

7513   An LPIF offset would be specifically used to assist FreeHD with the costs of carrying approximately 100 conventional over-the-air stations in HD while not receiving any compensation from consumers, programmers or other BDUs. If the programmers were to provide compensation for distribution, as we noted above, then our request to be relieved of the LPIF contribution is no longer required and we would remove it.

7514   Our filed comments noted an estimated distribution cost of $400,00 per HD signal per year. The week following our comment submissions we issued an RFI for the design and pricing of satellite facilities. We have since received responses from several satellite manufacturers and both Canadian satellite operators.

7515   The satellite design approaches all show that our plan is realistic and achievable. While the final satellite design tradeoffs may result in some minor changes in costs, our previous cost estimates per signal remain similar to those filed.

7516   FreeHD Canada strongly believes that the transition to HD must be an urgent business imperative for Canadian broadcasters or they risk further loss of market share to grey-market systems and internet-based streaming, neither of which currently contribute to the Canadian broadcasting system.

7517   Any slippage to the August, 2011 transition date will only exacerbate this. Having recently received Industry Canada authority to utilize an interim satellite further ensures that the FreeHD Canada service could be in place to mitigate some of that slippage.

7518   FreeHD Canada proposes a technology and supplier neutral digital decoder coupon program for consumers, which would be sponsored by Heritage Canada, to assist in the cost of the digital and HD migration. We are encouraged that a few other parties are now actively promoting this type of technology and supplier neutral program.

7519   In conclusion, FreeHD Canada could be the partner that solves many of the issues facing the Canadian broadcast industry and consumers. And just in case there was any doubt, FreeHD Canada is strongly in favour of the satellite delivery model as the best solution for consumers and the Canadian broadcast system.

7520   And now, Mr. Chairman, we would be pleased to answer any questions that you and the commissioners may have, all recognizing that we stand between you and a well-deserved weekend break before these hearings resume again next week.

7521   We thank you for the opportunity to appear today. Thank you.

7522   THE CHAIRPERSON: Thank you. Tell me, I am at somewhat of a loss here, you say freely offered, freely given. That obviously applies to OTA. So your business case rests on specialty and VOD that you are also going to sell or how do you make money out of this scheme?

7523   MR. LEWIS: Our business case actually would rely on two things; a large proportion of the consumers, of course, would buy up into a package that has all the pay and specialty channels. We view the offer of the free package almost as a public benefit package that we are putting together.

7524   THE CHAIRPERSON: And we now have two satellite providers, one of which is profitable, the other one is nearly profitable. What makes you think there is a home for a third one?

7525   MR. LEWIS: We have done a lot of research as to where our target consumers would come from. And if you look at the make-up of the Canadian marketplace today, you see that there is about 10 million HD sets sold into Canada to date. And if you look at the penetration of HD services, it is somewhere around 3 million. So there is a large gap there, there is a lot of people that have HD sets that currently aren't getting any HD programming.

7526   Some of those that aren't counted of course would be perhaps getting it off air. But we think there is a very large market that is there of early adopters. And our package that we are putting together is going to be quite a bit different from what you see today. It is primarily all HD, provided that the programmers have HD feeds available. But we could be certainly more than 350 channels of HD and we will also not compress the signals as much as everybody else does today, so it would be a superior picture quality.

7527   So if we got nothing more than 10 per cent of the marketplace that is early adopters and want to see the best HD possible, we will have quite a viable market already and be able to be profitable.

7528   THE CHAIRPERSON: And there is enough programming available in HD or would you also do SD programming when the HD is not available?

7529   MR. LEWIS: Part of our market is going to be transitional I think. You are exactly right, not everybody will have HD feeds, some for quite sometime. Mr. Olsen probably should answer this question, he has been putting together the transition plans that we have timing, so Brian.

7530   MR. OLSON: Thanks, Dave.

7531   We expect at launch in 2010 about 30 per cent of our program line-up would be in HD and that is going to gradually transition where we would likely, at the end of a 10-year period, be in the 90 per cent range of the line-up in HD. So yes, at the start it is going to be a little slow, the Canadian industry has been slow to move to HD. But as they transition we will be ready and we will move their standard definition signals up to HD whenever they are available.

7532   MR. LEWIS: I would like to just clarify one thing that Mr. Olsen just said, he said launch in 2010 and we would actually launch in 2011, approximately 12 to 15 months after the licensing is completed.

7533   THE CHAIRPERSON: In paragraph 15 you suggest that if the local broadcaster is not willing to give you freely his program for free distribution then you withdraw your offer and then you say:

"The negotiation between FreeHD and the broadcaster for the local signal would then become bilateral."

7534   I don't quite understand what you are trying to say here.

7535   MR. LEWIS: Well, if they were not able to give their programming to us for free we would enter into negotiation that is a two-way negotiation basically where we would be talking about the value that we deliver, as you have happily described all week long. And our value would be in the distribution and transmission and that is where it would be come a bilateral negotiation and we would enter into a free negotiation on each one's value.

7536   THE CHAIRPERSON: But given that you set this out as a sort of option I gather it is your expectation this would be the exception to the rule?

7537   MR. LEWIS: I can't prejudge any outcome at this point in time. We have had some very encouraging conversations with the broadcasters so far, so it all depends on where things go. On the free basis, of course, they are on the opposite side of the equation, but there are lots of things on the table for discussion, including the transmission, they like the fact that we are bringing them out to other BDUs.

7538   You, a moment ago, had a discussion where the small cable operators are also going to be disenfranchised when the over-the-air transmitters go off the air. And our impact that we have modelled is actually perhaps several million households that could be affected by exactly that, that there will be a lot of small cable systems that today rely on an over the air that are going to have to make some other form of accommodation to get those signals, even if the small cable guys wanted to continue.

7539   So there is a significant value that we are bringing to those broadcasters and they recognize that value already in the discussions.

7540   THE CHAIRPERSON: And who pays for the transport of the signal from the point of origin to your head end?

7541   MR. LEWIS: We are relying on the programmer to provide us the signal to our head end. And currently, we are finalizing designs where that might be. But there probably will be regional uplink facilities in several of the regions, so they won't be across country. But currently, it is the broadcasters' responsibilities to get us the signal to our head end and then we would distribute it for free out to all the other BDUs for free.

7542   THE CHAIRPERSON: And in paragraph 21 you are talking about supply of neutral digital decoder coupon program. Have you talked to Heritage Canada? Are they prepared to set up a system like that?

7543   MR. LEWIS: We have not yet. We started and made this proposal in our comments and wanted to see if anybody else thought it was a good idea at the same time. I don't think us, as a new entrant, we would have much sway getting in to see Heritage and convince them to do a program like this. I think in the press it has been reported that the Heritage Minister is against such a program even though I think it is a great idea.

7544   THE CHAIRPERSON: Okay. Len, over to you.

7545   COMMISSIONER KATZ: Thank you, Mr. Chairman. Good afternoon.

7546   I am going to pick-up on this last comment because it was one of the comments I wanted to raise since, but it is top of mind. In your actual submission you actually quoted a value for this program and you were suggesting that there would be two coupons at $75 each and you said that there may be a requirement for as many as 5 or 6 million which, when I do the math, is close to a billion dollar program, is that correct?

7547   MR. LEWIS: That is correct math, yes. It is basically -- in a way, it is taken off of what happened in the U.S. where they did a similar coupon program that was administered by the NTIA. And our proposal on this coupon program is to take some of the funds that are taken back from the spectrum once we vacate the channel 52 to 69 and it gets sold in some form of an auction and be used to help Canadians get digital.

7548   Our main premise behind all of this of course, as we mentioned in our remarks a few minutes ago, we are quite worried about the state of the Canadian broadcast industry, and particularly the grey market that continues to thrive in Canada. And if we don't have a competitive response to that grey market we will continue to lose market share to people going to alternative means.

7549   COMMISSIONER KATZ: I just want you to understand that my math was correct and that if this Commission does see the value in a FreeHD program, that there is a charge to this as well. And although you are brave enough use the word "free", and I learned in business many years ago, never call anything free, say No Charge Canada Inc. or whatever, but the minute you say "free" and one day you want to charge a cent, you are not going from zero to one cent, you are going from free to one cent, and in the mind of some people it is an issue.

7550   But anyways, the issue here is if in fact we see some value in this, your next hurdle is convincing the government to come up with some funding for this and, if they don't my question is, is this program still viable in any other way or is this program no long viable?

7551   MR. LEWIS: If you are talking about by the program, you mean our service?

7552   COMMISSION KATZ: I don't want to get into your licence, I am talking about this service, the FreeHD service, is there any other way of making this FreeHD service viable?

7553   MR. LEWIS: We are not relying on the decoder coupon program at all.

7554   COMMISSIONER KATZ: You are not?

7555   MR. LEWIS: No. No, sir.

7556   COMMISSIONER KATZ: So if there was no decoder coupon program who pays for all the infrastructure, the equipment, the installation, the cost?

7557   MR. LEWIS: Our proposal is very similar to what you heard from both the Freesat offering by Bell TV and by Shaw Direct. Our system cost would be slightly less, we are relying on newer technology and a more open market technology that would have multiple suppliers working and a more competitive marketplace. So currently our suggested retail price is going to be either somewhere between $199 and $249 for the system.

7558   And consumers would have the ability to self-install or have it installed for $100. It is a Next Generation Satellite, so it is a little higher powered, little easier to find, so it is going to be slightly cheaper than what you have heard from the other proponents of Freesat type services, but not significantly cheaper. They are still in a consumer's -- somewhere between $200 and $450 in total, sorry $200 and $350 in total.

7559   COMMISSIONER KATZ: Does the math work equally if this Commission believes that a free program is in Canada's best interest but not on a singular basis, and that is anybody can enter into this type of program, whether it be terrestrial or satellite-based including perhaps yourself?

7560   MR. LEWIS: I guess you may have misread what we were suggesting, and that is exactly what it is, it is a technology and supplier neutral program, so it would apply to any digital decoder, whether it is an ATSC off-air decoder to encourage people to get off air, whether it was a cable set-top box, it could be used for anything as long as it was to get HD. Our competitors' satellite services as well I presume.

7561   COMMISSIONER KATZ: You mentioned that you have recently receive Industry Canada authority to use interim satellite, which obviously is a non-Canadian satellite, if I read your preliminary material. Are you at liberty or if you are not at liberty to release it to us now on a confidential basis you can file something that tells us what the terms and conditions are of Industry Canada's approval for you to use a non-Canadian satellite?

7562   MR. LEWIS: We would file that information in confidence, Vice-Chair Katz, sure, we could do that.

7563   COMMISSIONER KATZ: Okay. I think those are all my questions, Mr. Chairman, on the program.

7564   THE CHAIRPERSON: Michel.

7565   COMMISSIONER ARPIN: Yes. Thank you, Mr. Chairman.

7566   I am referring to your paragraph 17 in your oral presentation. And you are asking to be relieved of LPIF. But is there a time limit say for the first two three years or if the LPIF was to have a longer life than that or at the time you reach a certain threshold of subscribers and what that threshold of subscribers will be?

7567   MR. LEWIS: Well, Mr. Vice-Chair, in our applications we have asked for the first five years of our licence term to be relieved of the LPIF contribution. And I would like Mr. Olsen perhaps to very quickly walk us through if there is any positive math or, if so, when.

7568   But I guess the bottom line is at $400,000 a signal x 100 local channels we are talking about a $40 million cost to us and we are asking for something that might bring back 10 per cent of that or less at the end of the five-year term. So we are certainly not asking for anything that is even near compensatory.

7569   But Brian, I don't know if you have anything to add on that front?

7570   MR OLSEN: No, I would agree, it actually never breaks even over the five years with any subscriber forecast we are looking at at the moment, not with the cost of the satellite, as Dave has just mentioned at $400,000 per HD signal. So as he had mentioned earlier, that portion of it is I guess a public benefit -- the difference is a public benefit package we are proposing.

7571   COMMISSIONER ARPIN: Have you made public your financial forecast with your application?

7572   MR. LEWIS: No, there is no longer a requirement to do that, so --

7573   COMMISSIONER ARPIN: No, I know that.

7574   MR. LEWIS: -- no, we haven't filed any financial information to date.

7575   COMMISSIONER ARPIN: So I will refrain to ask.

--- Laughter

7576   MR. LEWIS: Thank you.

7577   COMMISSIONER ARPIN: Now, you are saying that your signal will be less compressed than the others. I guess it is because you are not using the same technology as the MPEG-2 technology that Bell TV is using or the Motorola one of Shaw Direct I will guess?

7578   MR. LEWIS: That is somewhat the premise. We are starting off with a new greenfield opportunity here, so we have designed everything from the ground up to use the latest and greatest technology and one of the big benefits is MPEG-4 today, which is twice as efficient as its predecessor MPEG-2 was.

7579   There is also, as you heard earlier in the day perhaps, higher order modulation satellites that are being envisioned by some people and being used and that is exactly we would do, 8PSK, that Shaw Direct described this morning as how they are getting more bandwidth on the satellite which is another thing that doubles the efficiency on the satellite.

7580   On top of all of that, we are using spot beam technology on the satellites which allow you to do local into local finally and not put a service up across the nation and waste that valuable satellite capacity and transmission power and especially be an irritant into the broadcasters. So we are proposing to do local into local and use spot beam technology in that regard.

7581   The Next Generation Satellite that we are talking about and where we just completed all the RFI process, would have all those advantages to it.

7582   COMMISSIONER ARPIN: So the satellite that you will be using has already had that type of technology in place or it will be introduced on the ground and the satellite is only a mirror?

7583   MR. LEWIS: Well, technology-wise I think you are exactly right, Mr. Vice-Chair, satellites generally act as a mirror. However, in this case we are relying on an existing satellite that is in orbit for our interim use. So it may or may not have the same efficiencies on it and likely not.

7584   There are a few different options that we are still trying to finalize as to which one would be the preferred one to go that would minimize re-point of consumers, et cetera, and some of the interim choice is based on where the final choice might be and we are still negotiating for the final at the same time.

7585   So there is a lot in play, but today we would have some ability to do local into local still by doing things like geocoding and restricting the rights as to where they go as opposed to in the longer term, once we get the final satellite facility, which satellites are almost always a three-year construction program.

7586   So we would be looking to pull the trigger in the first quarter on the new construction and in the meantime we would start the construction of the transmission facilities to access the interim facility in a year's time and launch the service, all in second quarter of 2011 so that we would be up before the digital transition to help.

7587   COMMISSIONER ARPIN: Thank you.

7588   Thank you very much, Mr. Chair.

7589   THE CHAIRPERSON: Suzanne.

7590   COMMISSIONER LAMARRE: Merci, Monsieur le Président.

7591   Still on that satellite business, the U.S. satellite you would be using in the interim period, just how far north does it cover?

7592   MR. LEWIS: We are actually intending to tip it so that it would cover Canada in a much better fashion than it currently does. And we are also --

7593   COMMISSIONER LAMARRE: Let me be specific, Whitehorse and Yellowknife.

7594   MR. LEWIS: Whitehorse and Yellowknife --

7595   COMMISSIONER LAMARRE: I didn't say Alert Bay, so you are getting off easy.

--- Laughter

7596   MR. LEWIS: Yes. Whitehorse and Yellowknife would require a larger dish, for sure.

7597   COMMISSIONER LAMARRE: Okay.

7598   MR. LEWIS: We are basically looking at two areas of coverage, probably halfway to two-thirds of the way up the provincial boundaries in the west, for instance, which is further north than Ontario and Quebec and everything north of that would require a larger dish.

7599   COMMISSIONER LAMARRE: Okay. And that satellite that would be available, if you were licensed, starting end of 2011 and during that period a new satellite would be in the process of being built and scheduled to launch in 2012-2013?

7600   MR. LEWIS: As I said earlier, it's about a three-year construction program. So if we started the construction in the first quarter of 2010 it would be first quarter 2013 that that service would come online, which when Mr. Olsen was talking earlier about when we think and our discussions with all the broadcasters as to when they are going to have more of their migration to HD, it all times quite nicely for us.

7601   COMMISSIONER LAMARRE: And have you completed the specifications of that new satellite?

7602   MR. LEWIS: Yeah, in order to get pricing on an RFI we had to complete the specifications and issue that RFI out to the industry. We actually had about a dozen bidders in total that were provided with the RFI and we have several responses back from both manufacturers and operators on exactly that.

7603   So we are -- we haven't made a selection at this point in time. It's a little premature but, again, we did that so that we could make sure that what we wanted to do was doable, that we could get the payload on every transponder to match the number of channels that we are talking about and do all the link budgets and all of that.

7604   So we started with a spec and got to a preliminary design that we are happy with several manufacturers. So there are options from a nice competitive marketplace.

7605   COMMISSIONER LAMARRE: And have frequency coordination been cleared by Industry Canada?

7606   MR. LEWIS: Boy -- our preference, although we haven't 100 percent settled -- our preference is to use the 17 KBSs band, so-called reverse band and --

7607   COMMISSIONER LAMARRE: Has it been cleared by Industry Canada?

7608   MR. LEWIS: Has what been cleared?

7609   COMMISSIONER LAMARRE: Has it been approved for your use by Industry Canada?

7610   MR. LEWIS: No. Our final use approval by Industry Canada of that spectrum won't be for us. It will come from one of the two satellite operators so it would be licences were awarded, approximately a dozen in the 2006 licensing decision to both CL and Telesat.

7611   COMMISSIONER LAMARRE: Okay.

7612   MR. LEWIS: And there are probably seven of those dozen that are in the 17 KBSs band that we are talking about, and they fall --

7613   COMMISSIONER LAMARRE: Okay. So basically it's been cleared.

7614   MR. LEWIS: It's been cleared, yes.

7615   COMMISSIONER LAMARRE: Okay, okay. Thank you. That was my question.

7616   Thank you, Mr. President.

7617   THE CHAIRPERSON: A couple of questions as follow up. You have -- local-into-local is obviously the key. Will you be able to do this on this interim satellite?

7618   MR. LEWIS: Yes, Mr. Chairman, we can do local-into-local as opposed -- it would be possibly on a national beam basis delivered but we are still telling the local broadcasters that we would do local-into-local. So basically what we are doing is we will be blacking out the rest of the country. They would never even see that signal.

7619   We are taking the technology a bit of a step further than anybody has today in terms of what is available on the program guide and what consumers see. And you heard earlier today about a million CBCs, Mr. Shaw said. We would take those down into a local environment.

7620   So the consumer would only get on his guide perhaps either what he subscribed to -- could be one option which is a constant source of irritation from people that say, "Man, I thought I could watch this but I tried to go there on the guide and it wouldn't take me". So we can go down to where we show what is subscribed for or what is available in a local market.

7621   So if we only had rights for one of the CTV affiliates in that local market that the broadcaster has asked us to be, that's all that that subscriber would see on his guide.

7622   THE CHAIRPERSON: Okay. And in 2011 there are some stations who will choose not to change to digital but rather want to become sort of local but not over-the-air stations, just being there being distributed by BDUs. Would you distribute those?

7623   Let's say Prince Albert for argument's sake, they don't convert their existing transmitter but they make the signal available to the BDU and to the existing satellite. Would you also pick that up or would you consider that a local signal?

7624   MR. LEWIS: Hmm.

7625   THE CHAIRPERSON: It's not an OTA system signal at that point in time. It's just a local signal.

7626   MR. LEWIS: We are planning to carry all the over-the-air broadcasters that originate local content. So everybody that would qualify under your current regime for LPIF --

7627   THE CHAIRPERSON: Yeah.

7628   MR. LEWIS: -- is on our list to carry today. So that number is plus or minus two stations of 100, and we intend to carry all of those.

7629   As far as we said we would carry them SD until they are ready in HD and then we would transition them to HD. So we intend -- our service in some respects relies on an HD feed. You know, we would like to have everybody up on HD but if the programmers aren't ready we will put them up in SD until they are ready. And if they stay in SD --

7630   THE CHAIRPERSON: Now, what --

7631   MR. LEWIS: -- we will put them up forever.

7632   THE CHAIRPERSON: -- if it is a local but he is not over-the-air you would still be prepared to carry him?

7633   MR. LEWIS: Absolutely, yes.

7634   THE CHAIRPERSON: Okay.

7635   MR. LEWIS: Yeah.

7636   THE CHAIRPERSON: What happens to the existing satellite customers, customers of Shaw Direct or Bell ExpressVu? Can they switch over to your system or do they have to buy themselves a new dish and a new set-top box?

7637   MR. LEWIS: They certainly would have to buy a new set-top box. As I said earlier, we are in a slightly different technology that's a little more advanced than what they typically would have, even if they were in MPEG-4 which some of them are starting to transition to.

7638   So the reality of the set-top box is they can't talk to somebody else's system. There is different conditional access, the security and scrambling in any set-top box.

7639   So we couldn't have a Shaw Direct or Bell TV subscriber swing over to where our satellite was and pickup our signal. That just wouldn't work.

7640   But if they wanted to use the dish that's on the house and change the feedhorn, LNBF it's called, the local block down converter -- the low-noise block down-converter -- if you wanted to swap that out on the dish, the feed arm, and use the existing dish that's likely to be possible.

7641   THE CHAIRPERSON: And if I'm a customer in an area with a local signal and there is -- 2011 comes and I want to become your customer. So if I understand it correctly I buy myself a set-top box, I buy myself a dish, install it. You tell me I can install it myself for free. And I phone you up and, bingo, I have the service for free?

7642   MR. LEWIS: If you went and bought a free HD system, and you will have options of, you know, quartering it online or going to a large retailer.

7643   THE CHAIRPERSON: Right, right.

7644   MR. LEWIS: If you have that system, it comes with a dish, you can elect to either try and install it yourself and, as I said earlier, it's a BSS technology so it's a little easier to do than somebody like Shaw Direct is today. So it's a relatively high-powered satellite. And we are planning to put some indicators on for consumers so as they swing by with their dish it will beep right away when it gets on our satellite and you can lock it down. You know you are on our satellite only.

7645   So those things are more consumer-friendly than the way some of the way things are done today. You can do it yourself or you can pay -- when you buy at retail usually they are married with a local installer and they would say, "Bob will come and install it next Friday".

7646   THE CHAIRPERSON: Okay.

7647   And then it's installed. At that point in time do you have to activate it? Do I have to phone you? Do I have to give you a deposit or something like this or how does it work?

7648   MR. LEWIS: If you are taking the local program package.

7649   THE CHAIRPERSON: Yes.

7650   MR. LEWIS: You would still have to call us and get on the system and we would activate you for free.

7651   THE CHAIRPERSON: Yes.

7652   MR. LEWIS: For the local program package only if you wanted to.

7653   THE CHAIRPERSON: Okay, and then if my system breaks down or so on and I make a service call to you, what happens?

7654   MR. LEWIS: You would probably call us to see what's going on, typically.

7655   THE CHAIRPERSON: Yeah.

7656   MR. LEWIS: Maybe Doug can walk us through with a customer care --

7657   THE CHAIRPERSON: The reason I am asking you is when we examined Bell and at one point in time Shaw about their Freesat version, they told me that one of the biggest expenses is customer service.

7658   Their system it doesn't work for some reason. It may be the customer's own equipment. It may that, but still, I have an operator, he's got obligations, and that costs time and money. So how are you going to handle this aspect?

7659   MR. HARVEY: With our free customers as well as our regular subscriber customers is the hardware comes with a warranty and our customer service team would establish a process of troubleshooting that and if that is within the warranty period then that would be replaced to the customer. If it's beyond the warranty period then there would be a fee for that and possibly a service charge.

7660   THE CHAIRPERSON: That's the equipment, but I mean usually it's the installation or the dish isn't properly aligned or whatever, et cetera. So you would treat those as service calls and charge for them?

7661   MR. HARVEY: Right. If it's a self-install it may not have been peaked properly.

7662   THE CHAIRPERSON: Yeah.

7663   MR. HARVEY: Typically, we can help them remotely over the phone to be able to kind of peak it and fine tune that, so that should be a fairly simple adjustment.

7664   THE CHAIRPERSON: Okay, well, it's fascinating. I didn't appreciate how wide-ranging your proposal was. Thank you for coming and explaining to us.

7665   Sure, absolutely.

7666   COMMISSIONER KATZ: I have got one more question.

7667   Your submission this afternoon and your evidence also talked about carrying approximately 120 conventional OTAs in HD. There are many more than that in SDs and analogs.

7668   Are you prepared to carry all of them or just you are limiting it to this 100 that you have put on here?

7669   MR OLSEN: We have -- as Dave mentioned earlier we have identified a threshold in terms of the amount of local content that would need to be on the channel before we carried it. So any local over-the-air station that had the minimum level of content, i.e. the current LPIF threshold that the Commission has set, we would carry.

7670   COMMISSIONER KATZ: So it's the same as what Bell has offered with 120, one channel I think it is?

7671   MR OLSEN: Yeah. We found this -- this has been for us a bit of a moving target with all the hearings and stations closing, being sold, status changes, level of local programming. So we said we are in the 100 range and if there is that many when all is said and done, that's how many we will carry.

7672   COMMISSIONER KATZ: Thank you.

7673   COMMISSIONER ARPIN: Just a point of clarification, obviously not all the over-the-air TV stations are getting LPIF and it doesn't mean that they are not doing local programming. I'm thinking here about the two, TFO, TVO, Télé-Québec. You have Crossroads. You have the Miracle Channel. You have the Christian channels, whatsoever.

7674   Are you planning to carry them as well, because according to our own count there is up to 164 over-the-air TV stations in this country?

7675   MR OLSEN: Oh, I will have to get that count. I mean we have -- I think you have mentioned some of the educationals.

7676   COMMISSIONER ARPIN: Yeah.

7677   MR OLSEN: We are carrying them. I don't count them in the OTA bundle per se. I know they are over-the-air in some provinces.

7678   No, we have just used the LPIF level of programming as our programming threshold. It's not that they get LPIF.

7679   COMMISSIONER ARPIN: Yeah, the major market stations are not --

7680   MR OLSEN: Yeah.

7681   COMMISSIONER ARPIN: -- say Montreal, Toronto, Vancouver, Calgary, Edmonton are not a part in LPIF.

7682   MR OLSEN: No, and their programming levels are much higher than that.

7683   COMMISSIONER ARPIN: Yeah.

7684   MR OLSEN: So we just wanted to set a threshold that said, "Anybody that has more than, let's say seven hours, we will carry."

7685   COMMISSIONER ARPIN: Okay, thank you.

7686   MR. LEWIS: I just wanted to add one quick follow-up comment. You heard today about all the capacity issues that people have on satellite. You know, we were talking just a few minutes ago about all our advance technologies.

7687   It's still not possible to -- 100 is about the limit that we are starting to run out of capacity and eating into significant amounts into what today would be our national beam capacity. So if in the event that many of the local channels didn't transition to HD and remained in SD we would have the ability to add even more than the 100 channels that we are currently talking about in SD.

7688   So there is a possibility that we could carry every -- all local over-the-air stations in Canada. It's just we set the threshold at 100 and it was, again, the people that would under the current regime qualify for LPIF, not people that actually asked for it.

7689   So we would -- in that case our counts were about 100 HDs. If you took five to one for every HD that didn't go on the air for an SD, we could certain carry a lot of them and in all likelihood all of them.

7690   THE CHAIRPERSON: Okay. Thank you very much. I think that those are all our questions.

7691   So Madam Secretary, what time do we start on Monday, nine o'clock?

7692   THE SECRETARY: Nine a.m., Mr. Chair.

7693   THE CHAIRPERSON: Thank you.

--- Whereupon the hearing adjourned at 1630, to resume on Monday, November 23, 2009 at 0900

   REPORTERS

____________________      ____________________

Lynda Johansson         Jennifer Cheslock

____________________      ____________________

Monique Mahoney         Madeleine Matte

Date modified:

2009-11-23