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 24, 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 24, 2009

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PRESENTATION BY:

Small Market Independently-Owned Television Stations   1665 / 9402

Télé Inter-Rives Ltée et RNC Média Inc.   1674 / 9453

Astral Media Inc.   1733 / 9785

Cogeco Cable Inc.   1776 /10036

TELUS Communications Company   1833 /10322

Communications, Energy and Paperworkers Union of Canada   1877 /10566

   Gatineau, Quebec

--- Upon resuming on Tuesday, November 24, 2009 at 0903

9396   LE PRÉSIDENT : Bonjour, tout le monde. Madame la Secrétaire, commençons.

9397   THE SECRETARY: Thank you, Mr. Chairman.

9398   We will now start with the Small Market Independently-Owned Television Stations et Télé Inter-Rives ltée et RNC Media Inc.

9399   We will hear each presentation, which will then be followed by questions by the Commissioners to all participants.

9400   We will begin with the presentation of Small Market Independently-Owned Television Stations.

9401   Please introduce yourself and your colleagues and you have 10 minutes for your presentation. Thank you.

PRESENTATION

9402   MR. ARNISH: Thank you, Madam Secretary.

9403   Good morning, Mr. Chairman, Vice-Chairs, Commissioners and Commission staff.

9404   My name is Rick Arnish and I am with the Jim Pattison Broadcast Group in Kamloops, British Columbia.

9405   Together with me this morning are most of the members of our group of Small Market Independently-Owned Television Stations.

9406   They are:

9407   - on my immediate left is Glenda Spenrath of Newcap Inc.;

9408   - beside Glenda is Don Shafer from Astral Media Radio;

9409   - next to him is Don Caron from Thunder Bay Electronics Limited.

9410   You will be hearing shortly, of course, from the two gentlemen to my right, Marc Simard of Télé Inter-Rives and Raynald Brière from RNC Media inc.

9411   Another member of our group, Corus, already appeared before you last week.

9412   Mr. Chairman, given that we have just 10 minutes for this oral presentation and that you will be hearing next from our colleagues in Quebec.

9413   I have been asked to deliver our group's remarks this morning.

9414   All of our group will be available, of course, to respond to questions you or the other members of the panel may have.

9415   We operate 20 television stations in four provinces. Fourteen of these stations are currently carried on DTH.

9416   For your convenience we have attached to these remarks a list of our 20 stations, Appendix A, as well as a simple map which offers you a quick visual of the small markets where each of our independent stations is located, Appendix B.

9417   This map demonstrates that we serve the smallest TV markets in the country from Terrace-Kitimat in northwestern British Columbia to Carleton, Quebec on the Gaspé Peninsula.

9418   In almost all of these markets our television stations are the sole source of local television programming.

9419   Mr. Chairman, in the original Notice of Consultation 2009-411, the Commission stated that:

"The objective of this proceeding is to find solutions that will help OTA television stations adapt to the rapidly changing communications environment."

9420   To that end, the Commission identified some possible changes to the current regulatory framework for consideration, such as group-based licence renewals and negotiated value for conventional signals.

9421   You heard from the larger broadcasters and others on these two matters last week and yesterday as well.

9422   We applaud the Commission for recognizing that solutions are required to address the challenges that lie ahead and for your willingness to explore new and different options.

9423   That being said, we are here today to tell you that we need the CRTC to keep things just the way they are, at least as they relate to the distribution of and compensation paid to small independently owned television stations.

9424   Specifically, it is critical that the CRTC maintain the status quo respecting carriage of our TV stations by the DTH providers.

9425   That critical issue is, of course, the subject of our application already before you and we thank you for initiating that process in a timely manner in advance of this hearing.

9426   In that application we detailed at length the reasons why DTH carriage is critical to our future viability and we would be happy to expand on the points we raised during the question and answer period.

9427   The other current regulatory measure that is critical for our stations and our communities is the Small Market Local Programming Fund.

9428   That Small Market Fund was established in 2003 for the specific purpose of helping to compensate our small market independently owned TV stations for the negative financial impact caused by the DTH importation of out-of-market stations.

9429   The negative impact on our small market stations caused by DTH importation of distant signals continues today.

9430   As we stated in our written submission we are very pleased that the Commission has committed itself to enshrining this important fund into the BDU Regulations and we look forward to seeing those amendments in the near future.

9431   These two crucial regulatory measures, DTH carriage and the Small Market Fund, have paid huge dividends for viewers in our small markets and for the broadcasting system as a whole because they have ensured that Canadians in the smaller and more remote parts of this country receive quality programming that is truly local and reflective of them and their communities.

9432   Indeed, with the help of these two crucial regulatory measures, our group of independently owned stations may very well represent the most local of all television stations in the country. Each week we collectively provide about 137 hours of original local content to our viewers.

9433   On an individual station basis, many of us already exceed significantly the number of weekly local programming hours which the Commission recently established as the minimum requirements for the large multi-station ownership groups in small markets, i.e. seven hours per weeks.

9434   Moreover, our local programming includes not only local newscasts, which in themselves are quite costly to produce, but also other programming reflective of the makeup, interests and concerns of our local communities.

9435   Mr. Chairman, no one has to convince any within our group of the need for and value of local programming in our communities. Frankly, the problem we face is finding a way to ensure we are able to keep producing all of the top-quality local programming we have been doing all these years and to stay relevant in our communities.

9436   The one new measure the Commission raised in the Notice of Consultation, which, in addition to the DTH carriage and the Small Market Fund, will help us do this is the Local Program Improvement Fund.

9437   We completely agree with the Commission's observation last year on Public Notice 2008-100 that:

"The Small Market Fund is not by itself sufficient to ensure that local stations in smaller markets are capable of investing in local programming."

9438   The Commission correctly established the LPIF to be separate and distinct from, and for an entirely different purpose than, the Small Market Fund.

9439   This new fund will provide our small market stations with valuable supplementary funding which, we can assure you, will be put to good use to serve our small communities.

9440   Moreover, we will be able to put the LPIF to even better use if we are given more flexibility in how we can invest its funds in our local operations.

9441   To that end, we propose that while we commit to allocating at least one-third of the funds to new local programming initiatives we should be permitted to invest as much as another third to help maintain our current local programming levels and we submit we should be able to use up to the final third to offset some of the capital costs we will face in the digital transition.

9442   We have also asked that more of our local programming costs be eligible for coverage by the new LPIF, including costs of a more indirect nature such as for promotion and shared staff.

9443   In conclusion, Mr. Chairman, we would like to refer you back to another observation the Commission made in last year's Public Notice 2008-100 when announcing the new LPIF, namely, that:

"...if present trends continue, it is highly likely that local television stations will either close or reduce even further the quality of local programming offered to viewers."

9444   Although some local stations owned by large networks have indeed closed and we ourselves are facing enormous economic challenges, we are still operating and we are still committed to serving our communities.

9445   Whether we can continue to do so, however, is still very much in the Commission's hands.

9446   It all comes down to maintaining three Cs: commitment, carriage and contributions.

9447   The Small Market Independently-Owned TV stations have the first C covered. We are committed to doing our part to continue to serve our local communities, as our track record has proven.

9448   What we need from the Commission is to maintain the two other Cs, carriage on DTH and contributions through the Small Market Local Programming Fund and the new LPIF Fund.

9449   Thank you, Mr. Chairman, Members of the Commission. This completes our presentation and we will welcome your questions later on.

9450   THE SECRETARY: Thank you.

9451   J'inviterais maintenant Télé Inter-Rives et RNC Media à faire sa présentation.

9452   Monsieur Marc Simard comparaît pour Télé Inter-Rives et RNC. Il nous présentera ses collègues, après quoi vous aurez 10 minutes pour votre présentation. Merci.

PRESENTATION

9453   M. SIMARD : Monsieur le Président, Mesdames et Messieurs les Conseillers et membres du personnel, mon nom est Marc Simard et je suis président et chef de la direction de Télé Inter-Rives ltée.

9454   Je suis accompagné de Raynald Brière, président et chef de la direction de RNC Media.

9455   RNC Media et Télé Inter-Rives sont des radiodiffuseurs indépendants exploitant des stations de télévision locales au Québec, principalement dans des petits marchés tels que Rivière-du-Loup, Carleton, dans le Bas-Saint-Laurent et en Gaspésie, Rouyn-Noranda, Val-D'Or en Abitibi-Témiscamingue, et Gatineau en Outaouais.

9456   Il y a au moins deux facteurs fondamentaux qui ont permis notre présence ici devant vous, aujourd'hui.

9457   Le premier est historique. Il y a plus de 50 ans, les familles Gourd et Simard ont répondu à l'appel du Bureau des Gouverneurs de la radiodiffusion pour étendre, à titre d'affiliés de Radio-Canada, les premiers services de télévision en langue française en Abitibi et dans le Bas-Saint-Laurent. À l'époque, Radio-Canada ne possédait pas les ressources financières nécessaires pour étendre son service dans ces régions.

9458   Par la suite, nous avons participé à l'expansion du deuxième service de télévision de langue française au Québec, TVA, et dans nos régions, ainsi qu'à l'implantation du réseau TQS, appelé aujourd'hui V.

9459   Le deuxième facteur, tout aussi important, est l'engagement du CRTC envers les stations de télévision locales, qui représente un élément essentiel de notre système de radiodiffusion. Sans l'appui du CRTC, les bâtisseurs de nos stations de télévision locales n'auraient pu contribuer avec autant de passion et de ténacité à leur création et assurer leur viabilité. Si cet appui n'avait pas eu lieu, nous n'existerions pas aujourd'hui, et la population serait privée d'un service exceptionnel.

9460   RNC Media et Télé Inter-Rives possèdent des stations de télévision affiliées aux trois réseaux de télévision francophone, soit TVA, Radio-Canada et V.

9461   Nous desservons 13,6 pour cent de la population francophone du Québec, soit plus de 800 000 personnes réparties sur d'immenses territoires tels que l'Abitibi-Témiscamingue, l'Outaouais, la Gaspésie, le Bas-Saint-Laurent et la Côte-Nord.

9462   Nos employés ont depuis toujours une grande passion envers la télévision locale, et c'est avec enthousiasme qu'ils désirent continuer à desservir leur région respective.

9463   Le parc d'émetteurs de la télévision en direct privée au Québec comprend au total 65 émetteurs. Quarante de ces émetteurs sont exploités par Télé Inter-Rives, et 13 par RNC Media, pour un total de 53. À elles seules, nos deux compagnies regroupent donc près de 82 pour cent des antennes de la télévision en direct privée au Québec.

9464   Voilà une preuve de notre volonté de déployer les infrastructures techniques, volonté qui a nécessité des investissements considérables afin de desservir adéquatement la population.

9465   Le territoire couvert par nos 53 émetteurs est aussi grand que toutes les régions couvertes par les autres stations de télévision généralistes privées au Québec, lesquelles, cependant, rejoignent, pourtant, plus de 5 millions de francophones.

9466   De plus, nos stations desservent certaines régions du Nord et de l'Est de l'Ontario, ainsi que les 225 000 francophones du Nouveau-Brunswick.

9467   C'est donc plus d'un million de francophones qui peuvent capter nos émissions de télévision chaque jour.

9468   Voici nos commentaires sur les trois sources de revenu proposées dans l'Avis de consultation 2009-411 afin d'appuyer les télédiffuseurs généralistes, suivis de notre perspective sur la télévision numérique.

9469   Cependant, avant toute chose, nous tenons à rappeler au Conseil que la distribution en numérique HD sur les entreprises de distribution EDR par satellite d'un minimum de deux stations pour chacun des radiodiffuseurs indépendants des petits marchés est d'une importance primordiale, et ce, avant toute autre forme de revenu qui pourrait être mise de l'avant par le Conseil.

9470   Raynald.

9471   M. BRIÈRE : Compte tenu de la situation particulière de nos stations de télévision locales indépendantes qui oeuvrent uniquement dans de petits marchés, RNC Media et Télé Inter-Rives croient que le FAPL représente une initiative extrêmement intéressante. À notre avis, il produira des bénéfices considérables auprès des nombreuses petites collectivités que nous desservons.

9472   Plus précisément, le FAPL a été adopté à la suite d'un processus public, et il est en vigueur depuis le 1er septembre 2009. Le Fonds représente une source de revenu stable et prévisible pour nos stations, ce qui facilite grandement la planification de nos projets de développement et de nos activités.

9473   Avec le FAPL, nous n'avons pas l'obligation de renégocier tous les trois ans avec quelques 42 différentes EDR situées dans nos territoires, une tâche qui serait, d'ailleurs, quasi-impossible.

9474   Pour ces motifs, nous croyons que le FAPL représente aujourd'hui la meilleure solution pour assurer le maintien des services locaux des petites stations de télévision indépendantes.

9475   En plus, nous sommes d'avis que la contribution des EDR au FAPL devrait être maintenue à 1,5 pour cent pour les prochaines années et que le Conseil devrait instaurer une plus grande souplesse dans son utilisation par les stations locales.

9476   Après avoir utilisé les sommes nécessaires pour le sous-titrage pour malentendants, nous proposons la formule suivante :

9477   - sont éligibles les stations dans les marchés dont la population est inférieure à 1 million de personnes;

9478   - au moins un tiers des sommes versées servirait pour la production de nouvelles émissions locales originales produites par les stations ou par des producteurs indépendants locaux, et ça, en sus des conditions de licence, évidemment, de chacune de nos stations;

9479   - jusqu'à un tiers pour le maintien et l'amélioration des émissions locales existantes; et

9480   - jusqu'à un tiers pour l'achat d'équipement numérique de production destiné à l'amélioration de la qualité technique des émissions locales, et pour une période de cinq ans afin de permettre l'achat d'équipement de transmission numérique.

9481   Notre approche permettra au Conseil d'atteindre son objectif en rapport avec la production de nouvelles émissions, tout en maintenant une certaine flexibilité introduite pour l'année courante.

9482   Cette approche est identique à celle des autres stations indépendantes des petits marchés canadiens qui proposent aussi une répartition un tiers, un tiers, un tiers.

9483   En ce qui concerne l'intégrité des signaux des radiodiffuseurs canadiens, la vente de nos signaux locaux en tant que signaux éloignés ne représente pas un potentiel de revenu significatif pour les petites stations locales comme les nôtres.

9484   Sauf exception, les EDR ne sont jamais intéressées à redistribuer nos signaux locaux en dehors des territoires que nous desservons, comme elles le font pour les signaux des stations des grands centres urbains canadiens.

9485   À toute fin utile, la valeur marchande des signaux éloignés représente une source de revenu très limitée pour nos stations de télévision locales.

9486   Marc.

9487   M. SIMARD : La télévision généraliste au Canada est celle qui produit le plus d'émissions originales. Elle crée les grands rendez-vous télévisuels du public canadien, avec des succès d'écoute incomparables, et produit des nouvelles et des émissions locales qui sont grandement appréciées par les diverses communautés.

9488   La télévision généraliste canadienne est sans doute celle qui reflète le mieux nos réalités locales, tout en étant un lieu de rassemblement extraordinaire.

9489   RNC Media et Télé Inter-Rives croient qu'il est essentiel que le principe d'une juste valeur marchande pour les signaux de stations de télévision généraliste soit reconnu par l'ensemble des acteurs du système et par le Conseil. Le contraire constituerait un refus de reconnaître le rôle essentiel que joue cette télévision sur les plans économique, social et culturel.

9490   Cela dit, si nous étions obligés de négocier la juste valeur marchande des signaux de nos petites stations de télévision indépendantes, nous aurions d'importantes préoccupations, qui seraient les suivantes.

9491   En premier lieu, nos petites stations de télévision locales n'ont pratiquement aucun pouvoir de négociation face aux grandes EDR terrestres et par satellite. La présente audience témoigne de la taille de certains joueurs, ainsi que de grands enjeux et des moyens qui dépassent largement les nôtres.

9492   Les ressources humaines et financières dont nous disposons ne sont pas assez importantes pour négocier avec 42 différentes EDR à tous les trois ans.

9493   De plus, dans le cas des stations de télévision de Télé Inter-Rives, près de 40 pour cent des foyers sont situés dans le contour B. Les abonnés à des EDR situées dans le rayonnement B de nos stations seraient-ils pris en considération lors d'éventuelles négociations? Les réémetteurs de nos stations le seraient-elles également? Et enfin, qu'arriverait-il si une EDR chevauchait deux marchés de télévision?

9494   Si le Conseil décidait d'appuyer le principe d'une compensation pour la juste valeur marchande des signaux locaux dans tous les marchés, nous suggérons l'approche suivante.

9495   Tout d'abord, que la juste valeur marchande du signal obtenu par chacun des grands réseaux de télévision, TVA, Radio-Canada et V, auprès des EDR soit la même pour toutes les petites stations indépendantes. Il est tout à fait raisonnable de croire que le signal de TVA, de V ou de la SRC en Gaspésie ou en Abitibi possède la même valeur qu'à Montréal ou à Québec.

9496   Lors de sa présentation au Conseil la semaine dernière, Quebecor a mentionné que cette façon de procéder était la plus équitable. Nous sommes du même avis.

9497   De plus, le Conseil accepte déjà ce principe dans le cas des services spécialisés. Actuellement, tous les abonnés des EDR au Québec, petites ou grandes, paient le même prix, par exemple, pour RDS et RDI.

9498   Il convient également que les contours A et B de l'antenne principale, ainsi que ceux de tous les émetteurs, soient pris en compte pour déterminer le nombre d'abonnés éligibles auprès des différentes EDR dans le marché d'une station de télévision.

9499   Il nous apparaît important que les définitions du marché étendu de BBM soient utilisées pour déterminer à quelle station appartient le marché si des abonnés d'EDR se situent dans le chevauchement de deux contours B de stations de télévision affiliées au même réseau de télévision.

9500   M. BRIÈRE : Dans son renouvellement de licence au printemps 2009, Télé Inter-Rives a prévu de convertir au numérique HD tous ses émetteurs analogiques de haute puissance pour assurer la couverture actuelle des régions qu'elle dessert dans l'Est du Québec et au Nouveau-Brunswick.

9501   Pour sa part, RNC Media prévoyait convertir au numérique HD ses émetteurs haute puissance dans la région de Gatineau-Ottawa seulement.

9502   Concernant le vaste territoire éloigné de l'Abitibi-Témiscaminque, RNC Media avait fait part de son intention de se prévaloir de l'exception permise par la politique actuelle et de ne pas numériser ses antennes dans un avenir prévisible.

9503   Or, nous considérons que l'accès à de nouvelles sources permanentes de financement telles le Fonds d'aide à la programmation locale se traduit par des responsabilités additionnelles.

9504   Nous sommes donc disposés à assumer ces responsabilités en élargissant la numérisation de nos émetteurs à l'ensemble de nos territoires si les règles du Fonds nous permettent de financer en partie les investissements requis.

9505   Par ailleurs, l'implantation de la télévision numérique en direct exigera des investissements considérables de la part de Télé Inter-Rives et RNC Media.

9506   C'est pourquoi nous proposons l'approche suivante :

9507   - la distribution en HD de la part des EDR par satellite d'un minimum de deux stations par groupe de propriété;

9508   - la substitution des signaux identiques en provenance des stations éloignées du même réseau sur les EDR par satellite, telle qu'elle existe actuellement, et qui, soit-dit en passant, fonctionne très bien -- à ce sujet, nous tenons à féliciter Bell Télé et Shaw Direct, dont les services de distribution sont efficaces sur 75 pour cent de nos territoires de diffusion;

9509   - le maintien du Fonds de programmation locale pour les petits marchés et le maintien du FAPL, ainsi que la souplesse qui permettrait d'utiliser ces revenus afin de compléter nos plans de numérisation.

9510   Sans pour autant fermer la porte au projet freesat de Bell Télé, Télé Inter-Rives et RNC Media ont une nette préférence pour des émetteurs numériques HD en direct pour diffuser nos signaux à un niveau de grande qualité.

9511   À l'heure actuelle, pour nous, au moins quatre éléments constituent une source de préoccupation concernant le projet freesat.

9512   Premièrement, la distribution des stations locales se ferait dans le format SD et non en format HD.

9513   Deuxièmement, si nous participions au freesat et que nous n'avions pas d'émetteur HD, comment seraient alimentées les 42 EDR terrestres dans nos territoires qui réclameraient un signal de qualité HD, alors que freesat propose de fournir un signal SD. Ces EDR terrestres voudront certainement distribuer un signal éloigné HD, défavorisant ainsi la station locale affiliée au même réseau.

9514   Troisièmement, Bell Télé propose de réduire, voire annuler, sa contribution au FAPL pour réaliser freesat.

9515   Quatrièmement, les coûts de liaison seraient très importants pour transporter nos signaux locaux vers les différents centres ascendants de Bell Télé. Nous ne bénéficions pas de tarif préférentiel comme les EDR par satellite qui font partie de grandes corporations, profitant de réduction de volumes importants.

9516   RNC Media et Télé Inter-Rives demeurent optimistes face à l'avenir de la télévision généraliste locale. Certes, il y a de nombreux défis devant nous, notamment notre capacité à intégrer les nouvelles technologies.

9517   Nous croyons que dans le nouvel environnement numérique, l'ensemble du système canadien de radiodiffusion bénéficiera encore plus des avantages que représente la télévision généraliste. Pour que cela se réalise, il est impérieux de trouver une solution permanente au financement des réseaux.

9518   Aussi, avec des moyens additionnels, nos stations locales continueront à jouer un rôle important dans les communautés qu'elles desservent. Cet enjeu, aussi modeste soit-il, nous en convenons, constitue un des fondements mêmes de notre système de radiodiffusion canadien.

9519   Merci de votre attention, et nous sommes disposés, évidemment, à répondre à vos questions.

9520   THE CHAIRPERSON: Thank you very much for your submissions. Let me first of all say that I appreciate very much the tenor of your submissions. After a week of fairly antagonistic proposals being put to us, it is wonderful to talk to people who are just trying to serve their clients and trying to run a profitable business and have a businesslike discussion with you.

9521   Mr. Arnish, on page 5 of your submission you say that:

"...local programming includes not only local newscasts, which in themselves are quite costly to produce, but also other programming reflective of the makeup, interests and concerns of our local communities."

9522   Until yesterday everybody has told me, local programming means local news and local analysis. What else is included in this local programming? What actually do your stations do?

9523   MR. ARNISH: Well, I can talk -- Mr. Chair, thank you for the question. I can talk about our stations and then others can jump in as well.

9524   When we talk about what other programming our stations provide, with everyone in front of you today, I mean we really are in our communities very well connected, not only from news and information programming but certainly from the factor that we have to be there when there are fire or there are floods or there is a winter snowstorm to let our viewers know how to dress their kids in the morning.

9525   In our particular case, with our three television stations, one in particular, in Kamloops we have a midday noon show that has aired for many, many years, Monday through Friday for an hour between noon and 1:00, and over that period of time it allows groups, charities, organizations in our community to come into our studio and partake and making sure that we get the message out to the community what they are doing.

9526   I am proud to say as well in Kamloops through this show, on average we probably feature at least 30 to 35 Canadian artists every year, and that would be at a minimum, and giving them great exposure not only in our community but obviously through satellite distribution as well to get Canadian content music out across the country.

9527   Others? Glenda?

9528   MS SPENRATH: Yes. In our circumstance we produce some programming in the area of documentaries, sports, human interests. Rodeos are a big thing in our area and so we do follow the rodeo circuit and so some rodeo production. Over the course of the year, you know, we commit that over and above our regular commitment, our condition of licence. So we do produce outside of the news content.

9529   MR. SHAFER: Mr. Chairman, not to take anything away from news but it is interesting to note that our local news actually operates Hockey Night in Canada. So it is a very important part of what we do in Terrace and in Dawson Creek.

9530   Our stations spend a lot of time doing community service work. We broadcast rotary auctions in both of our markets which are, you know, usually 12-hour telethons for all intensive purposes.

9531   We do lots of public affairs programming every week and of course in our regions we have lots of floods, lots of fires and lots of snowstorms.

9532   MR. CARON: Mr. Chair, it's Don Caron from Thunder Bay Television.

9533   We have a number of programs that we produce. One of the most prominent would be our Northwest Newsweek. We have a crew that goes around weekly to all of the communities in the area and they cover approximately 700 miles to bring all the news of the surrounding communities which also receive our signal. We do broadcast that and produce a half-hour program every week with respect to that.

9534   We have community events that we allow the community charitable organizations on a regular daily basis to come in for an interview to promote their programs or special events. We have a number of those types of things that we broadcast on a daily basis.

9535   Thank you.

9536   THE CHAIRPERSON: How vital is the DTH coverage to you? As you know, Brandon closed, Red Deer closed.

9537   In Brandon there was a very live interest in the station and obviously they were going to follow your model of being a local station, et cetera, rather than a network station with homogenized content the way it was run before. But the purchaser was quite adamant and said he could not see a viable business case unless he got satellite carriage.

9538   Is that your view too, that there is no way you could run a viable business in a place like Brandon unless you own a satellite?

9539   MS SPENRATH: I think absolutely that is the case. And I think I can speak on that one quite unequivocally being that Lloydminster has had the highest satellite penetration since inception.

9540   We have led the way. We have been the canary in the mine and we run at 69 percent satellite penetration in our market. So for us to lose 69 percent of our audience is lethal. I mean it's critical to our business plan.

9541   MR. ARNISH: And if I just talk about British Columbia. For example, Mr. Chair, if we didn't have over-the-air or, pardon me, if we didn't have DTH coverage because of the mountainous terrain it has really helped us to maintain our audience in this very fragmenting industry.

9542   As you know, the connection of television in large and small markets has had tremendous fragmentation in the years but with the up-linking of our television stations to DTH it's been a real saviour. And we hope that will continue in the future.

9543   Marc.

9544   M. SIMARD : Merci, Rick.

9545   C'est parce que tout à l'heure, je voulais peut-être ajouter quelque chose à la définition des télévisions locales.

9546   Évidemment, je pense que c'est peut-être une erreur de définir la télévision locale simplement par un bulletin de nouvelles. Évidemment, le bulletin de nouvelles quotidien d'une station de télévision locale est certainement la plus grosse production.

9547   À titre d'exemple, au Québec, la plupart des stations locales, dont celle que nous produisons, remportent des succès d'écoute extrêmement importants avec les nouvelles locales. Chez nous, le bulletin de nouvelles locales se classe en deuxième position après « Le Banquier ». Alors, je pense qu'on peut constater à quel point les nouvelles locales...

9548   Mais une station locale... je pense qu'une station locale, ça débute, en général, à partir de 7 h 00 le matin jusqu'à minuit, toute la journée, à chaque ouverture, parce qu'on sait qu'à coeur, les stations locales bénéficient de 12 minutes.

9549   Dans les petits marchés comme les nôtres, la plupart des espaces publicitaires ne sont pas remplies. Alors, nos stations locales utilisent leurs ressources pour informer la population, participer à des activités communautaires du matin jusqu'au soir.

9550   Alors, l'image d'une station de télévision locale, c'est vraiment une image où, toute la journée, ce qui représente... parce que les périodes que l'on peut utiliser durant une journée représentent 20 pour cent de la journée. Donc, à chaque jour, 20 pour cent du temps est consacré à diffuser des informations locales.

9551   Ce qu'il ne faudrait pas négliger aussi, c'est qu'on est aussi un stimulant économique très important. Chaque petite station locale dans son marché permet à tous les annonceurs d'annoncer leur produit, de telle sorte qu'on fait partie intégrante du stimulant économique de nos petites régions.

9552   Alors, je pense que ça aussi, c'est très important, Monsieur le Président, et je voulais le mentionner.

9553   LE PRÉSIDENT : Monsieur Brière, dans votre présentation, à la page 11, vous dites :

« Le maintien du FAPL, ainsi que la souplesse qui permettrait d'utiliser ces revenus afin de compléter nos plans de numérisation, est essentiel. »

9554   On parle d'utiliser un tiers du FAPL pour la numérisation, j'imagine. Si on permet ça, comme vous demandez, est-ce que ça serait possible pour vous et vos collègues d'atteindre la date limite du 31 août 2011?

9555   M. BRIÈRE : Je ne parlerai pas pour mes collègues. Je vais parler pour notre marché.

9556   D'abord, celui de Gatineau, c'est déjà convenu. On a déjà convenu de ça. On est en ligne pour le mois d'août 2011.

9557   Pour l'Abitibi, je pense que c'est fort probable, fort possible pour les stations de base. Pour les réémetteurs et tout ça, peut-être qu'on aurait besoin d'un délai additionnel qui pourrait se prolonger dans l'année 2012.

9558   Mais pour la majeure partie du marché, nous serions en mesure de le faire dans les délais que vous avez demandés.

9559   LE PRÉSIDENT : O.K.

9560   M. SIMARD : Écoutez, évidemment, Monsieur le Président, dans notre cas, nous avons 40 émetteurs de télévision, et je suppose que la question pourrait se demander, après toutes les réflexions qu'on a entendues la semaine passée : Est-ce que les capacités techniques, je veux dire au point de vue ingénierie, seraient disponibles?

9561   Alors, nous, ce qu'on a prévu, et ce qu'on a ajouté maintenant aujourd'hui, d'abord, nous, on pense être capable... tous nos émetteurs à haute puissance, on croit être capable de les faire d'ici la date de septembre 2011.

9562   On a décidé de faire également tous nos autres émetteurs. Cependant, si, du côté technique, les firmes d'ingénierie ou la commande d'équipement n'était pas prête, on est disposé à maintenir ces émetteurs-là en fonction en mode analogique et de les changer en mode numérique aussitôt que les disponibilités techniques, les permis, les licences, les études techniques et l'équipement seraient disponibles.

9563   LE PRÉSIDENT : O.K. Merci.

9564   Suzanne, over to you.

9565   CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.

9566   Good morning, lady and gentlemen.

9567   First, I will ask questions regarding what I will call the consolidated brief that was presented by all of you.

9568   Ensuite, j'aurai aussi des questions plus spécifiques en ce qui concerne la soumission de RNC et de Télé Inter-Rives.

9569   There is definitely overlap between the two so don't be concerned if I don't touch on an issue with the consolidated brief. I'm going to get to it when I speak with M. Briére and M. Simard.

9570   And I will do my best not to switch from French and English too often. I will start in English and then I will continue in French.

9571   The first point I would like to make, on paragraph 10 of your consolidated brief, you do make the comment -- and it's not a question that I have. It's also a comment. You make the comment that the Commission appears to assume that a solution that may work for large integrated broadcasters will automatically help all broadcasters in the system as well.

9572   Well, let me assure you that we are not assuming anything. I mean we are here to really look into all the issues and conduct a thorough analysis and review so that all players in the system are treated in the fashion that it calls for.

9573   So now to the questions: On paragraph 9 you make the point that the proposed group-based Canadian programming expenditure and exhibition proposal in the Notice of Consultation will do nothing more for your individual stations. Point taken.

9574   That being said, if the Commission were to adopt that proposal would it harm in any way your specific stations?

9575   MR. ARNISH: Could you tell us which page you are on? I'm sorry.

9576   COMMISSIONER LAMARRE: I'm on paragraph 9 of your submission, page 5.

9577   MR. ARNISH: Page 5.

9578   MS SPENRATH: Sorry, again if you could just sort of --

9579   COMMISSIONER LAMARRE: So you are making the point that the group-based expenditure proposal that we put forward in the Notice of Consultation will do nothing more for your different stations, not being part of large groups. But my question is, if we do adopt that proposal will it harm in any way the groups --

9580   MS SPENRATH: The belief of our group is really that that whole issue is not applicable or a non-issue for our group decisions.

9581   COMMISSIONER LAMARRE: Okay, it's a non-issue. That's what I wanted to be sure of.

9582   MS SPENRATH: Yeah.

9583   COMMISSIONER LAMARRE: Now, moving along to the DTH carriage and the Small Market Local Programming Fund, what I gather from your presentation this morning and also both your submissions, is that you are in favour of (a) the status quo for the fund, (b) that for the signals that are currently carried by DTH that simsubs and programming deletion continues and that, (c) the 14 program streams currently carried by DTH continue to be carried post-August 31st, 2011.

9584   Did I get it right?

9585   M. ARNISH: That's correct.

9586   COMMISSIONER LAMARRE: Okay.

9587   In paragraph 37 you make the point, in speaking -- in introducing the issues on the LPIF that most of you do go beyond and above the hours minimum -- the minimum of hours requested for local programming. In order -- so I have two points here.

9588   First, in order for us to really appreciate the work that you are doing would it be possible in the final submission in December for you to provide us with the specific data for each of your stations, you know be it for the last year or the past two years, whatever you find suitable so that we have a true appreciation of what you are doing?

9589   MS SPENRATH: Absolutely, yes, we can compile that for you and submit it.

9590   MR. ARNISH: And I just would like to add to that, Commissioner Lamarre, that the funding as you know, and we have talked about it in our presentation and our submission as well, the funding certainly has gone an awful long way, let alone the carriage of all of our stations, to allow us to not only continue with the status quo of the programming commitments that we currently have on our licences but also to increase that level proportionately.

9591   And I think you will be certainly very pleasantly surprised in our follow-up submission to see and be able to read the fact that all of us here have had the opportunity to increase the amount of hours of local programming on a weekly basis. I think we are all very proud of that.

9592   COMMISSIONER LAMARRE: Well, I think we will be happy to see it, on paper.

9593   Now, still with the LPIF, let me be challenging here for a moment. Despite relaxation of the initial criteria that were set in October 2008 for eligible expenses, you are asking now for more flexibility. So that's what I want to probe a little bit with you here.

9594   At the first look I must say that part of the proposal you are making I did find a little bit surprising. So first let's talk about the request to make a third of the amounts available to purchase equipment for the conversation to digital.

9595   In your presentation, at least in RNC's presentation this morning, it was specified that it would be limited for a five-year period. So at least that's one clarification.

9596   But quite frankly, the conversion to digital is something that has been forecast for over a decade, so some may argue that converting is actually the cost of doing business. So how can we rationalize using a programming fund -- and I use the word programming intentionally -- a programming fund for capital investment that may be seen as required as a cost of doing business?

9597   MR. ARNISH: I will jump in and let my colleagues follow up. That's an excellent question.

9598   We do know that for the last few years that digital transition was coming. There is no doubt about that, and I think all of us in front of you this morning in our --

9599   COMMISSIONER LAMARRE: You are actually well prepared, I must say.

9600   MR. ARNISH: Pardon me.

9601   COMMISSIONER LAMARRE: Considering the schedules we have heard about this morning you seem to be well prepared.

9602   MR. ARNISH: Thank you.

9603   We certainly have, over the last few years, in capital projects that all of us do on an annual basis, have replaced all of our analog equipment from cameras to switchers to automation systems to traffic systems and all that as well to work our way toward going full bore with the digital transition, you know, by 2011 August 31.

9604   We just feel to be able to ramp up to meet the target date -- and I don't know that all of us will be able to achieve that date for over-the-air transmission at this point in time. We just feel that to keep Canadian programming relevant in our marketplaces that to allow us to use some of the funding to move toward a digital platform will be money well spent in these small markets across the country.

9605   CONSEILLÈRE LAMARRE : Monsieur Brière, Monsieur Simard, voulez-vous peut-être ajouter? Immédiatement.

9606   M. BRIÈRE: Oui. J'aimerais faire un point. Le premier, c'est que... Deux choses.

9607   D'abord, il y a une érosion des revenus qui continue. Donc, c'est clair et probablement accentué ces dernières années. Donc, ça nous met une pression additionnelle. Je ne vous parlerai pas de la situation de V, vous la connaissez autant que nous. Donc, ça nous met une pression additionnelle.

9608   On habite, on vit dans des territoires immenses, avec des populations relativement petites puis de très nombreux émetteurs. Ça fait que c'est clair qu'une fois qu'on a fait la conversion de tout l'équipement, de faire cette conversion-là, ça demande un effort monétaire considérable.

9609   Tout ce qu'on demande, tout ce qu'on dit aujourd'hui, c'est permettez-nous, pour une période fixe à l'intérieur d'un cadre, d'utiliser ces montants-là pour une partie... amortir une partie de nos coûts, pour accélérer cette numérisation-là puis être prêt pour 2011. C'est ça qu'on demande.

9610   M. SIMARD : Je pourrais peut-être ajouter, Raynald, puis, je pense que c'est très important, c'est que, d'année en année, du moins les revenus de la télévision généraliste sont à la baisse. Je crois que tout le monde le sait.

9611   Mais aussi, donc, comme 70 pour cent de nos revenus proviennent, au Québec, des grands réseaux de télévision et que ces revenus-là diminuent, on voit diminuer graduellement, tranquillement, nos revenus.

9612   D'ailleurs, monsieur Dion, le président de TVA, a dit ici la semaine passée : Écoutez, les prévisions pour les prochaines années sont à l'effet que les revenus de la télévision généraliste vont continuer de baisser.

9613   Alors, c'est face à cette situation-là et compte tenu de la grande étendue de notre territoire et des infrastructures techniques importantes, c'est pour cette raison-là qu'on a demandé au Conseil si on pouvait utiliser... qu'on a fait la proposition qu'on vous a mentionnée.

9614   CONSEILLÈRE LAMARRE : Merci.

9615   Still with the LPIF, you are also asking that indirect expenses be eligible. Now, two of them -- two of the examples you quoted in your brief in paragraph 45 are of concern to me.

9616   The first one is about technical staff. When you are saying that the expense for technical staff involving local programming, whether or not they do so exclusively -- so would they be -- how would we go about that?

9617   Would it just be a proportion of the staff expense and how would we go about to satisfy for ourselves that it was indeed that portion that was necessary for local programming?

9618   MS SPENRATH: Well, we are not asking, I guess, for very large shifting or, you know, allocation of staff, but in our organization we run it very leanly and on very few people and people wear many hats. Even though they are working in one department they may help out another department, and we are not asking wholesale to move but we are asking for a little flexibility in some of those costs that are attributable to programming because there is a lot more to bringing your programming on air than just the actual newscaster out in front of the mike. You know there is --

9619   COMMISSIONER LAMARRE: I agree.

9620   MS SPENRATH: Yeah. There is all the trappings, you know the battery packs and all the camera equipment and extra things that they need, supplies they need to do their job and promotion of our schedule as well, making sure that the people out there know that we are doing this extra programming and what we have to offer.

9621   So although the lines are grey, most of the costs will be directly related to but there will be some other smaller costs along the way that will bring our programming to the audience.

9622   COMMISSIONER LAMARRE: But if we go along those lines does it mean that at one point whoever is responsible for the fund will have to actually audit the way you have allocated the expenses?

9623   MS SPENRATH: Possibly if they wanted to, but I don't think so. I think when you look at the annual returns you are going to be able to tell whether or not, you know, the rest of your departments are in line with the way they should be. And if they are then you know -- I don't think that we are asking for a lot of flexibility, just some flexibility.

9624   COMMISSIONER LAMARRE: Okay. And what do you mean, because I have no idea what you mean but at the last line in paragraph 45 you say:

"...and the creation of promotional campaigns to advertisers."

9625   What are we talking about here?

9626   MR. ARNISH: Well, I guess, when we are talking about advertising and promotion we spend a lot of money -- I shouldn't say a lot of money. I can't speak for my colleagues. But we spend money promoting certainly our schedule throughout the year externally outside of our television operations and it would certainly be in the newspapers and/or outdoor transit advertising, things like that. And we think to promote our local news and information; to be able to use some of the funding for that and have the allocation for that be part of the funding would be very important to us.

9627   I don't know if others have comments on that.

9628   COMMISSIONER LAMARRE: But you make a distinction here about what you just said, you know advertising and promoting the schedule and obviously you want your programming to be watched. You have to promote it. So far it does. But at the end you talk about creation of promotional campaigns to advertisers. What are we talking about here specifically?

9629   Maybe you want to expand in your final submission on this?

9630   MR. ARNISH: I think we had better reconvene on that.

9631   COMMISSIONER LAMARRE: Okay.

9632   MR. ARNISH: Yes, thank you.

9633   COMMISSIONER LAMARRE: A totally different subject, DTV transition you have already -- Mr. Briére and Mr. Simard have already given a partial answer to the Chairman.

9634   Would it be possible in your submission in December to provide to us a specific schedule for each of you, what you are planning to do, either convert by September 1st, 2011 if that's your current plan? Really, your very -- your most current plan that's specifically what I am looking for, either you are converting and which one of the re-broadcasters do you want and to maybe leave on analog for a certain period of time and why you intend to do it and if you intend to eventually convert.

9635   MR. ARNISH: Yes, we will commit to that. We certainly are -- we are going to be irrelevant if we don't push forward with digital transmission. I think all of us recognize that here at this table.

9636   We are just trying to figure out ways, as Mr. Briére just stated as well, to be able to fund this in a timely manner because he is quite correct in the fact that there has been a serious erosion in small market television in purely national and, to a degree, national advertising across the country over the last 10 years. We could see it starting in early 1998 and it's continued on through '09. And we think it's going to be exacerbated even further.

9637   But having said that, we do understand if the funding is there and we also have capital funds that we have to be relevant in the 21st century and we have to go to the digital transmission.

9638   And I think you will certainly hear from us either today or in a written submission that by 2011 August 31 we will have a virtual digital signal available to the DTH providers that uplink our 14 stations now, and also to the BDU cable providers as well.

9639   And then with the fact that, you know, technically it may be impossible for us to do over-the-air by 2011, I think at the end of the day we have to move in that direction as well and maybe with markets where there is more than one mother station and a number of transmitters.

9640   We may not be able to do the transmitters for a period of time but, certainly, I think, all of us will be looking at putting in transmitters over-the-air. The costs have come down significantly in the main station markets that we are in. I don't know if others have comments on that.

9641   Don?

9642   MR. SHAFER: Commissioner Lamarre, I think the assumption is that the status quo is maintained. For us, if the status quo is not maintained, if we lose the LPIF, if we lose DTH carriage you know I don't know how we would keep our stations on the air so going to digital would be moot.

9643   COMMISSIONER LAMARRE: Well, so in presenting your schedule and your plan, you know, do put forward those assumptions, that it's based on those assumptions. Definitely, I hear you.

9644   Monsieur Brière, Monsieur Simard, en ce qui concerne votre soumission conjointe, je ne reviendrai pas spécifiquement sur ce qui a déjà été traité, mais il y a quand même un petit peu de chevauchement. Alors, je vais sauter tout de suite à une question dont vous traitez plus spécifiquement, la juste valeur marchande des signaux.

9645   Je dois vous avouer que quand j'ai lu initialement votre mémoire, j'étais un peu embêtée parce que vous avez pris le temps de répondre à la question au sujet des mesures réglementaires qu'il faudrait adopter pour favoriser les négociations, mais nulle part, je ne voyais, peut-être que je l'ai manqué, mais je ne voyais pas du tout où était votre position vis-à-vis ce concept-là, le concept lui-même. Ce matin, dans votre présentation, vous avez affirmé que vous étiez en accord avec ce concept-là.

9646   M. SIMARD : Oui. Écoutez, Madame Lamarre, je suis content que vous me posiez la question.

9647   Écoutez, nous, ce qu'on dit, c'est que, d'abord, la négociation de la juste valeur marchande pour les signaux de télévision au Canada est, pour nous, fondamental, et fondamental aussi pour les réseaux avec lesquels nous faisons affaire. Évidemment, si les grands réseaux avec lesquels nous sommes affiliés ne fonctionnent pas bien, les répercussions sur nos petites stations vont être évidentes.

9648   Cependant, nous, ce qu'on vous dit, c'est que la libre négociation -- et comme on a pu la voir cette semaine, avec toutes les discussions que vous avez eues avec les différents intervenants -- vous comprendrez que nous, on pense que le Fonds pour la programmation des petits marchés répondrait beaucoup mieux à nos besoins, et que, par conséquent, la libre négociation de la valeur du marché pourrait s'appliquer seulement aux grands réseaux, et que les petites stations pourraient continuer d'être desservies via le Fonds pour les petits marchés.

9649   CONSEILLÈRE LAMARRE : Très bien.

9650   M. SIMARD : C'est ce qu'on a voulu dire.

9651   CONSEILLÈRE LAMARRE : O.K. J'apprécie votre précision.

9652   Maintenant, je vais me permettre d'être provocante. Au paragraphe 19 de la soumission consolidée... non, au paragraphe... attendez, est-ce que c'est les deux, 19? Non.

9653   Au paragraphe 19 de votre soumission, si je compare ça avec le sommaire exécutif de la soumission consolidée... et ma question est autant pour vous que pour vos collègues des marchés anglophones.

9654   Dans la soumission consolidée, vous dites au sommaire exécutif :

« The Commission needs to be aware that a one-size-fits-all solution will simply not work for small market independently-owned stations. »

9655   Cependant, au paragraphe 19, lorsque vous parlez de la technique de discussion ou négociation pour la valeur des signaux, vous dites que :

« La valeur du signal négociée par les grands réseaux de télévision auprès de leurs EDR respectives soit appliquée à toutes les EDR, qu'elles soient petites ou grandes. »

9656   Alors, je vous pose la question. Si on doit reconnaître le caractère unique des stations indépendantes dans les petits marchés, est-ce que, logiquement, on ne devrait pas étendre cette même reconnaissance pour les EDR indépendantes dans les petits marchés aussi?

9657   M. SIMARD : Bien, écoutez, j'ai peut-être un petit peu de misère à saisir votre question, mais ce qu'on dit, fondamentalement, c'est que, écoutez, nous en tant que petites stations de télévision, on n'a pas la capacité puis les ressources financières pour négocier avec 30, 40 EDR différentes.

9658   Alors, ce qu'on pense, c'est qu'on pense que, donc, si les grands réseaux de télévision au Québec... si le CRTC décidait que la juste valeur marchande était le principe adapté pour tout le monde -- écoutez, on présume ça pour un instant -- alors, on pense qu'à ce moment-là, la valeur du signal de chacun des réseaux, que chacun des grands réseaux aura négociée auprès des principales EDR, on pense que ce signal-là devrait être appliqué partout pour nous éviter d'entrer dans des négociations à plus en finir avec 20, 30, 40 petites EDR, des petites ou des grosses.

9659   Par exemple, je vous donnerais à titre d'exemple que notre station CHAU est desservie à 70 pour cent par Rogers, à titre d'exemple.

9660   Et à ce moment-là, ce qu'on dit, c'est, écoutez... on dit : Appliquons la même chose aux petites EDR. Gardons un prix uniforme qui aura été négocié par les grands réseaux.

9661   Actuellement, les petites EDR -- parce que chez nous dans nos marchés, principalement, c'est beaucoup de petites EDR -- les petites EDR paient le même prix actuellement pour RDS. Partout au Québec, on paie le même prix. Les petites EDR paient le même prix pour RDI.

9662   Alors, on pense que de conserver... que le prix qui serait attribué à chacun des réseaux pourrait être attribué au Québec, ce qui nous éviterait d'entrer, nous les petites stations, dans un processus à tous les trois ans de discussion et de négociation.

9663   CONSEILLÈRE LAMARRE : O.K. Très bien. Sauf que, en même temps -- et je vous demanderais d'y penser et peut-être d'élaborer là-dessus dans votre soumission finale -- le CCSA, qui représente les petites EDR, était devant nous hier et a fait valoir que, justement, pour des petites entreprises de distribution, la marge de manoeuvre, parfois, elle est quasi-inexistante.

9664   Donc, je vous demanderais peut-être de repasser la soumission du CCSA et peut-être de commenter, votre point de vue, à savoir peut-être est-ce que ça serait possible d'exempter certaines entreprises de distribution, si le concept était adopté, évidemment.

9665   M. BRIÈRE : On va réfléchir à votre question, Madame.

9666   CONSEILLÈRE LAMARRE : Merci.

9667   Maintenant, Monsieur Brière, vous n'y échapperez pas, malgré ce que vous avez pu dire ce matin, qui quand même était très rassurant. Il faut que je vous parle du mémoire du ministère de la Culture et de la Condition féminine du Québec.

9668   Le ministère a une demande spéciale, qui, en fait, s'adresse particulièrement à vous, de convertir vos émetteurs en Abitibi. Vous avez mentionné ce matin que si, effectivement, il y a une partie du Fonds d'amélioration de la programmation locale qui était disponible pour la conversion au numérique, ça rendrait la chose d'autant plus possible.

9669   Maintenant, si ce n'était pas le cas, si les fonds du FAPL n'étaient pas disponibles pour la conversion au numérique, est-ce que ça serait quand même possible pour vous de convertir ces émetteurs-là?

9670   M. BRIÈRE : Je savais que je n'y échapperais pas.

--- Laughter

9671   M. BRIÈRE : La réponse est non. Pour être tout à fait transparent et honnête avec vous, pas dans un avenir prévisible et pas dans le contexte de ce marché-là. Ça serait difficile. On l'a mentionné déjà lors de notre comparution en audience.

9672   Et c'est pourquoi, aujourd'hui, on dit la chose suivante. S'il y a des revenus additionnels, il y a des responsabilités additionnelles, on est prêt à les assumer, ces responsabilités-là, en autant qu'il y a une part -- encore une fois, fixée dans le temps -- pour nous permettre de réaliser ça.

9673   Mais on ne voit pas autrement comment on pourrait le faire dans un territoire où on a 13 émetteurs.

9674   CONSEILLÈRE LAMARRE : Finalement, dans votre soumission, vous proposez qu'une partie des fonds générés par le spectre qui sera réinjecté dans le système une fois la conversion numérique, qu'une partie de ces fonds-là soit utilisée, justement, pour convertir au numérique.

9675   Cette demande-là s'adresse à Industrie Canada. Avez-vous fait connaître votre demande au principal intéressé? Et si vous ne l'avez pas fait, je vous encourage à le faire.

9676   M. SIMARD : Bien, écoutez, c'est une très bonne suggestion. Mais, évidemment, écoutez, si... je pense que nous, les petits radiodiffuseurs, on se dit toujours, si, évidemment, il y avait une autre source de fonds, qu'un moment donné, Industrie Canada ou le gouvernement du Canada décidait d'aider le système dans la transition, évidemment, la demande de participation via le FAPL tomberait. Je veux dire, écoutez, ce n'est pas les deux, c'est un ou l'autre.

9677   Mais on croyait que peut-être avec la vente aux enchères des fréquences, ça aurait peut-être pu être une solution au Canada, dans un immense pays de seulement 30 millions d'habitants, d'aider un peu le système, mais c'était tout simplement notre réflexion.

9678   CONSEILLÈRE LAMARRE : J'ai noté votre demande.

9679   Je vous remercie, Monsieur le Président, ce sont toutes mes questions.

9680   LE PRÉSIDENT : O.K.

9681   Michel.

9682   CONSEILLER ARPIN : Merci, Monsieur le Président.

9683   Monsieur Brière, je reviens sur ce que madame Lamarre traitait avec vous concernant les commentaires du ministère des Communications et de la Condition féminine du Québec. Ce qu'ils demandent, c'est que... ils demandent que Rouyn soit mise à parité en transmission HD. Ils sont silencieux au sujet de toutes vos réémettrices et ils sont silencieux aussi au sujet de Val-D'Or.

9684   M. BRIÈRE : Absolument.

9685   CONSEILLER ARPIN : Leur préoccupation, c'est Rouyn, parce qu'à Rouyn, il y a deux... selon la logique de l'Avis public, où on dit qu'où il y a de la concurrence, il devrait y avoir de la transmission HD, à Rouyn, il y a deux stations qui sont en concurrence, qui vous appartiennent mais qui sont en concurrence.

9686   M. BRIÈRE : Tout à fait exact, c'est ce qu'ils demandent. Mais, en même temps, il y a tout un territoire, puis quelqu'un de Val-D'Or ou quelqu'un d'Amos ou de Louvicourt ou d'ailleurs devrait avoir droit au même service. Là, ça devient un choix difficile à faire, comment on tranche entre offrir le système numérique à une partie de la population seulement, alors qu'on est dans un territoire qui est vaste, puis qui regroupe beaucoup de monde.

9687   Donc, je pense que, au fond, la solution qu'on propose aujourd'hui nous apparaît plus équitable dans la mesure où elle permet de l'offrir à tout le monde, et il me semble que ça répondrait mieux à...

9688   CONSEILLER ARPIN : Sans contredit, on accepte votre générosité de couvrir l'ensemble de votre territoire, comme monsieur Simard le propose.

9689   M. BRIÈRE : Absolument. Ça aurait l'avantage d'être une formule, une solution beaucoup plus équitable pour l'ensemble des gens. C'est pour ça qu'on propose cette formule-là, de préférence à une autre qui scinderait le marché en deux et qui ferait des citoyens de différentes catégories, dépendamment si on habite à l'est ou à l'ouest.

9690   CONSEILLER ARPIN : D'accord.

9691   Mr. Arnish, you surely heard about a Kamloops local citizen who came to see us last week, her name is Pam Ashbury, and she was talking about the very fact that -- well, she has put together a program that she calls Save Our CBC Kamloops, obviously the CBC is gone since already three years from Kamloops.

9692   But she has told us that she has undertaken a study to look at a multiplex operation regarding allowing for the carriage of up to six signals and she was thinking Kamloops could be a good test bed to do that test which will cost $90,000 altogether for six signals.

9693   I don't know if you had a chance to read the transcript or her -- Mrs. Ashbury's -- and I know that CART also carried a story about her testimony.

9694   I don't know if you have any comments to make.

9695   MR. ARNISH: Thank you, Mr. Vice-Chair. Yes, I do.

9696   I thought she -- Ms Ashbury made a very eloquent presentation to you last week. We've had no discussions with her organization, the SOCK Society in Kamloops, they have certainly been pressing the CBC for the last three years to put in over-the-air transmitters once our company disaffiliated from the CBC because they made it quite clear to us that they didn't want us as affiliates any more and it's starting to happen right across the country.

9697   They have been working also, my understanding is -- and I haven't had a face-to-face discussion with her, I'd be more than pleased to meet with her -- but she's been working with the Canadian Media Guild as well, or the Society has, is my understanding.

9698   I also understood that in 2008 the Canadian Media Guild had allocated about $111,000 to do a study in Kamloops on the multiplexing idea. We've had no discussions with them about that. I don't believe that the other over-the-air transmitter company -- or the other company that has over-the-air transmitter in Kamloops, GlobalTV has had any discussion with them as well.

9699   I'd like to see the results of that study to see -- I'm not an engineer of course, but I'd like to see how a multiplexing idea would work. Perhaps it's a great solution for a lot of the markets right across the country. But not being an engineer and not knowing what the study results are, I can't have any comment on that.

9700   COMMISSIONER ARPIN: She has committed to file with the Commission a copy of the engineering study that has been done for her organization and the time limit to file the study is December the 14th.

9701   MR. ARNISH: Right.

9702   COMMISSIONER ARPIN: So, it will eventually end up on our website. But I will encourage you to meet with her.

9703   Apparently she works across the street from your CJ -- from your TV station, so...

9704   MR. ARNISH: We'd welcome her any time.

9705   COMMISSIONER ARPIN: So, you could stop by a coffee shop somewhere and --

9706   MR. ARNISH: I'll buy her a coffee, yes.

9707   Mr. Vice-Chair, I certainly would be more than willing to meet with her and talk to her about this idea and the Canadian Media Guild Fund for this, I'd like to find out more about that as well. I think it's of public interest for all of us that are in front of you this morning.

9708   COMMISSIONER ARPIN: Okay.

9709   MR. ARNISH: And Mr. Shafer has a comment.

9710   MR. SHAFER: Vice-Chairman Arpin, her proposal is certainly quite interesting. I think the thing that I find most disturbing is the CBC component of that, where CBC has been very vocal about withdrawing service and transmitters and antennas from small market Canada, and certainly in our markets where we share half of our facilities with CBC and our programming affiliation agreement with CBC, it's likely there will less CBC programming available than more.

9711   So, I wish her luck.

9712   COMMISSIONER ARPIN: Thank you very much. Noted, thank you.

9713   THE CHAIRPERSON: Len?

9714   COMMISSIONER KATZ: Thank you, Mr. Chairman.

9715   And, good morning. Mr. Arnish, I've got a math question I think. You identify on page 2 that you operate 20 stations in the four provinces and then on page -- I'll find it -- page 4 you reference that 20 of you collectively provide 137 hours of original local content which exceeds significantly the number of weekly local programming hours deemed by the Commission, you say it's seven hours.

9716   Twenty stations times seven hours is 140, which is not significantly more than 137 and, unless I'm doing something wrong, I'm trying to understand the math.

9717   MR. ARNISH: Well, I'm not a mathematician. We have a couple of CAs at the table, so I'll let them tackle that as well.

9718   But what our point here is, is that we -- all of us individually, but collectively obviously produce this amount of programming, but in just about all of the cases of all of our independent television stations we produce significantly more on a weekly basis, more than seven hours a week of local programmings in our marketplaces and the average is somewhere around the 10 hour a week mark.

9719   Glenda.

9720   MS SPENRATH: Yeah. And just to help you with the math. On some of our locations where our commitment is actually by market as opposed to by station, so in certain circumstances where you have more than one station in one market they would share, there would be an aggregation of their commitment.

9721   COMMISSIONER KATZ: So, would that mean it would be less than seven in some stations?

9722   MS SPENRATH: They're committed by market. Like, for example, we're committed by market in our market and we produce 50 percent more than our commitment, or close to 50 percent more than our commitment for our market.

9723   COMMISSIONER KATZ: But that would still be less than seven hours then?

9724   MS SPENRATH: Yes, it would on a per station basis.

9725   COMMISSIONER KATZ: Can you just file with us the data, just so I can rationalize this when I sit down and try to understand it.

9726   MS SPENRATH: I think that when we put together our submission to tell you about all the programming that we do do and the programming that falls outside of the news category that, you know, we can for you itemize how we come up with the 137 hours so that you can tie it altogether.

9727   COMMISSIONER KATZ: Please. Thank you.

9728   M. SIMARD : Est-ce que je pourrais rajouter quelque chose peut-être, Monsieur Katz, suite à votre question.

9729   Effectivement, à titre d'exemple, si je prends notre station V dans l'Est du Québec, ses engagements sont, par exemple, de trois heures 30 minutes, et nous faisons quand même quelque chose comme cinq heures de programmation. Mais nous ne faisons pas sept heures. Notre engagement est de trois heures 30, et on fait environ cinq heures.

9730   CONSEILLER KATZ : Merci, Monsieur Simard.

9731   THE CHAIRPERSON: Steve, last question.

9732   COMMISSIONER SIMPSON: Thank you, Mr. Chair.

9733   Yes, two questions.

9734   One is on programming. In looking at the broadcast schedules of your stations there's a remarkable similarity and this is the result of the template approach of the networks that you're affiliated with, you've indicated that in accepting the intent of the LPIF that you'd like to use one third approximately of that fund for the creation of new programming.

9735   I see right now that the programming that is originating from your stations on a local basis is largely in the news categories in the predictable times of noon, six o'clock, 11 o'clock.

9736   Are you seeing this programming happening outside of the spectre of the allocation of news right now into new areas?

9737   MR. ARNISH: Well, I'll start and let our colleagues join in because there's some great initiatives that are being looked at right now or have been cemented with other organizations.

9738   But I would definitely say that there's a couple of elements from my perspective. The fact is that we can use this funding to add back in perhaps local weekend newscasts that we were unable to maintain because of revenue over the last few years.

9739   I know for a fact that a lot of us are discussing possibilities to use the LPIF funding for documentaries that not only necessarily relate to our own local marketplaces, but I'll give you an example, where we've had camera crews and a reporting crew go to Uganda out of Medicine Hat, Alberta and Rwanda and they have been going on coverage of humanitarian missions in those countries and have brought back and done an hour-long documentary that they've aired on their television station well in advance of the LPIF funding.

9740   But we can see that a lot of this funding can be used for things outside of what we would call normal news and information programming, and I know that Thunder Bay Electronics has come up with a great plan.

9741   Don.

9742   MR. CARON: Thank you, Mr. Commissioner.

9743   Part of our -- we are going to expand our news coverage, as Mr. Arnish so aptly noted, we're going to add four and a half hours of additional news covering weekends which we've taken a lot of heat over for the last number of years by cutting it out.

9744   We've formed an alliance with our local Confederation College and in conjunction with us they're going to produce 26 half-hour programs which we will broadcast over the next 26 weeks starting in January.

9745   We're also forming an alliance with our local school boards and a bunch of other groups to increase our local flavour of everything that we're doing, to bring the community more involved with our television station, so, we will have much more local flavour and less external flavour and it's starting in the New Year.

9746   COMMISSIONER SIMPSON: Thank you.

9747   MR. SHAFER: Chairman Simpson, I'd like to point out that it's interesting if you go back 10 years for our stations, we produce three and a half hours a week of programming.

9748   Because of the funding vehicles that the Commission's put in place, we've hired more staff and both of our TV stations are up to about 13 hours a week.

9749   Some of the programs, while news is important, any kind of local reflection is important in our markets. So, the more public affairs programming we can do, the more interview programs we can do, the more we're on the street showing off our community the better.

9750   So, it will be put to good use.

9751   M. SIMARD : Monsieur Simpson, permettez-moi, à titre d'exemple...

9752   D'abord, pour répondre à votre question, avec l'utilisation des fonds du nouveau Fonds ou, par exemple, avec l'utilisation d'une partie des fonds du Fonds pour les petits marchés, définitivement que nous avons ajouté... du moins au Québec, nous, on a ajouté des émissions qui étaient des émissions en dehors des émissions de nouvelles.

9753   Et permettez-moi juste de vous donner un exemple de l'utilisation du nouveau Fonds, avec lequel nous avons commencé à travailler depuis quelques mois.

9754   Nous venons de signer un engagement pour 20 émissions de 30 minutes qui vont être produites par un producteur indépendant du Nouveau-Brunswick, chez les Acadiens, et où nous allons investir 200 000 dollars. Et eux, avec cet argent-là, vont pouvoir avoir de Téléfilm Canada, du Fonds canadien pour la télévision et du NB Film, ils vont pouvoir avoir 800 000 dollars pour produire une série de 20 émissions qui va coûter 1 million.

9755   Nous avons une autre série en marche qui va coûter, en tout, 675 000 dollars. La troisième série, la troisième année consécutive, on va produire une émission qui s'appelle « Tout le monde à bord », où on va investir 125 000 dollars.

9756   Alors, ce sont des exemples comme ça que le Fonds nous permet de produire et nous permettra dans l'avenir de produire.

9757   M. BRIÈRE : Sans abuser de votre temps, nous aussi, on a une série de projets. Mais une chose qu'on veut faire dans le marché francophone, c'est on a élaboré un projet ensemble pour développer un concept d'émission qui pourrait s'appliquer à nos deux grandes régions. Probablement que la thématique serait la nature parce qu'on est dans cet environnement-là.

9758   Et pour le printemps prochain, on a mis en place des discussions pour être capable -- il y a un projet qui se précise à chaque jour -- pour être capable de produire une série d'émissions qu'on pourrait diffuser dans chacun de nos marchés.

9759   Ce sont des initiatives comme ça qui ne seraient pas possibles sans l'apport de ce Fonds-là.

9760   MS SPENRATH: And, if I may, in our markets right now we're still at the stage where we're putting together our lists of the types of programmings we would like to do. Ours would be a combination of news and non-news programming, primarily probably non-news because we have a good complement of news programming.

9761   But there are certain programs in the past that were very popular that we just didn't -- weren't able to continue, programs like The Response which addresses local issues and happenings and other events and items of interest in the community.

9762   We have a program we used to run called AgriFax and that was something that was really popular in the farming community and provided a lot of information to people in both the agriculture and the livestock and grain farming communities.

9763   So, it's some of those types of shows that we will be doing and we are actually meeting, we're looking at hiring staff already for those positions and putting together where are the slots that those will fit into.

9764   MR. ARNISH: Mr. --

9765   THE CHAIRPERSON: Okay. We're running way over time. Can you be very short and precise.

9766   MR. ARNISH: Mr. Chair, I will.

9767   If I could just sum up this, Commissioner Simpson.

9768   That's why on the English side of the table here we're not pushing value of signal compensation, we're saying that the LPIF fund in perpetuity is something that's very important to us and will certainly help us be able to produce this kind of top quality programming in our local marketplaces to keep our small market stations relevant in the 21st Century.

9769   COMMISSIONER SIMPSON: My final question has to do with, the fact that you are affiliates, it seems to me that you're extremely reliant on the cover over conditions of licence of broadcasting from regional and national entities and I'm wondering if you could comment on that, please, in terms of its importance to you.

9770   MR. ARNISH: The cover over and particularly in British Columbia, and it does happen in other markets is my understanding as well, is very, very important for us with certainly Global and CTV and we hope at some time in the future CBC as well.

9771   It allows us to cover over, as you're aware, regional and local commercials coming out of the lower mainland into the interior of British Columbia and it's been a life saver for our stations in Kamloops and Prince George.

9772   And, Don, I'll let you jump in on that for Dawson Creek and --

9773   MR. SHAFER: Yes, certainly our two markets it's had a huge impact.

9774   COMMISSIONER SIMPSON: Thank you very much.

9775   THE CHAIRPERSON: Okay. That cover over only applies to your affiliates, you don't have a cover over like this for the U.S. stations where you don't do simsub; do you?

9776   MR. ARNISH: We'd love to, but no we don't.

9777   THE CHAIRPERSON: Okay. Thank you.

9778   Okay, thank you very much for your submissions and we look forward to your additional material.

9779   We'll take a five-minute break.

9780   Thank you.

9781   MR. ARNISH: Thank you, Mr. Chair.

--- Upon recessing at 1020

--- Upon resuming at 1028

9782   LE PRÉSIDENT: O.K. Commençons.

9783   THE SECRETARY: I would now invite Astral Media Inc. to make its presentation.

9784   Appearing for Astral Media is Mr. Ian Greenberg. Please introduce your colleagues and proceed with your 15 minutes presentation. Thank you.

PRESENTATION

9785   MR. GREENBERG: Mr. Chair, Vice Chairs, Commissioners and Staff Members. I am Ian Greenberg, President and Chief Executive Officer of Astral Media. Here with me today are to my left André Bureau, Chairman of the Board; to his left, Sophie Émond, Vice President, Regulatory and Governmental Affairs and Nathalie Dorval, Senior adviser, Regulatory Affairs and Intellectual Property.

9786   To my right, John Riley, President of National Television Networks and Pierre Roy, President of Les Chaînes Télé Astral.

9787   Behind me, Yves Lagacé, Senior Vice President, Finance, Technology and Operations at Les Chaînes Télé Astral and Don Schaffer, Vice President and Regional Director British Columbia at Astral Media Radio who is responsible for our two over-the-air conventional stations.

9788   Mr. Chair, our presentation will focus mainly on the various questions related to the establishment of a framework for a group approach to television licence renewals, including appropriate Canadian spending on Canadian programming. We will also address the revenue support mechanisms for conventional broadcasters.

9789   Before continuing, I would like to mention that Astral did not get involved in the fierce debate between BDUs and conventional broadcasters on the issue of the fair market value of over-the-air television signals. There are obvious reasons for that.

9790   Astral is not and never was in the business of managing national or regional OTA networks. We don't have concrete knowledge of their day to day operations and we are not in the position to provide in depth analysis of the various causes that contribute to their actual economic difficulties.

9791   We hope that the various measures that the Commission has already adopted and the ones that might result in the present hearing will help them to improve their abilities to face the new and highly competitive environment in which all media now have to operate. But we firmly believe that any measure adopted or undertaken by the Commission should not be at the expense of the pay and specialty sector.

9792   André.

9793   M. BUREAU: Merci, Ian. Nous ne croyons pas qu'une solution juste et équitable puisse résulter de l'imposition par le Conseil d'une obligation faite à un groupe d'entreprises privées de programmation de subventionner un autre groupe d'entreprise privées de programmation.

9794   Par ailleurs et pour contrer une impression créée la semaine dernière, je voudrais souligner que la profitabilité des services, de l'ensemble des services facultatifs de langue française est comparable à celle de Vidéotron comme l'indiquent les données financières publiquement disponibles que nous vous soumettons en Annexe 2.

9795   Tel qu'indiqué dans notre Mémoire, nous appuyons le concept de renouvellement de licence par groupe de propriétés. Cependant, Astral a de sérieuses réserves en ce qui a trait à la proposition du Conseil d'établir un pourcentage unique de dépenses d'émissions canadiennes et/ou de diffusion de contenus canadiens par groupe de propriétés.

9796   En lieu et place, nous vous soumettons un modèle alternatif. Ce modèle offre toute la flexibilité souhaitée en matière de transférabilité des obligations de dépenses d'émissions canadiennes entre services.

9797   Il respecte la nature et les caractéristiques propres à chaque service et évite les écueils, les inégalités et les complexités d'un système d'obligation unique par groupe de propriétés.

9798   M. ROY: Tout d'abord, nous proposons d'intégrer à un groupe de propriétés donné tous les services de télévision en directe et tous les services de télévisions spécialisées et payantes de catégorie A qui sont gérées par ce groupe.

9799   Les services en propriétés partagées qui sont gérées par une entité distincte et autonome devraient être exclus.

9800   Concrètement, cela veut dire que Historia et Série-Plus, par exemple, seraient intégrées au Groupe Astral puisque gérées par les Chaînes Télé Astral, mais pas Télétoon puisque ce service est géré de manière indépendante.

9801   Les renouvellements de licence de ce dernier type de service comme des services appartenant à des entreprises indépendantes devraient continuer d'être traités distinctement des renouvellements par groupe de propriétés.

9802   En se fondant sur la prémisse suggérée par le Conseil, à savoir que tous les services de télévisions en direct et tous les services facultatifs de catégorie A seraient assujettis à des obligations de dépenses d'émissions canadiennes ou D.E.C., le modèle de flexibilité en matière de transférabilité des obligations que nous proposons est le suivant:

9803   Chaque service facultatif et chaque station de télévision en direct d'un groupe donné est assujetti à des obligations de D.E.C. qui respectent la nature du service et qui sont établies en pourcentage des revenus réalisés par le service au cours de l'année précédente.

9804   L'application de ces obligations individuelles par service se traduira par un montant total de dépenses en émissions canadiennes pour le groupe.

9805   Si, par exemple, un groupe doit collectivement consacrer $100 millions à ce D.E.C. au cours de l'année de radiodiffusion de référence, il se verrait accorder la double flexibilité suivante. La flexibilité actuelle, soit cinq pour cent accordée par service individuel s'appliquerait désormais sur le total des D.E.C. du groupe.

9806   Dans notre exemple, le groupe pourrait dépenser jusqu'à $5 millions de moins que le montant global prescrit pourvu que ce montant soit dépensé l'année suivante. Le groupe pourrait ainsi dépenser un montant supérieur à celui prescrit et à réduire les D.E.C. des années suivantes d'un montant équivalent, pourvu qu'au total des sept années de la licence le groupe ait dépensé les montants minimum totaux prescrits.

9807   Une flexibilité additionnelle de 15 pour cent s'appliquerait pour chaque service individuel en autant que la flexibilité maximale de cinq pour cent au niveau du groupe soit respectée.

9808   Cette flexibilité s'inspire de celle actuellement accordée par le Fonds des médias du Canada en matière de transfert entre les enveloppes par genre dont dispose un groupe de radiodiffusion donné.

9809   Lorsqu'une station ou un service se retrouve en difficulté financière, par exemple, cela lui permettrait de réduire jusqu'à 15 pour cent de montant annuel des dépenses en émissions canadiennes qui est exigé par condition de licence pourvu que cette réduction soit compensée par un accroissement des dépenses en émissions canadiennes d'autres services du même groupe.

9810   Le principe s'appliquerait au transfert entre services facultatifs ainsi qu'entre stations de télévision en direct et services facultatifs. Cette flexibilité additionnelle serait significative tout en étant encadrée. Elle éviterait les dérives qu'un système d'obligation unique pourrait être autorité comme de réduire de 25, 35 pour cent, voire 50 pour cent les dépenses en émissions canadiennes d'un service individuel donné pour les transférer à d'autres, ce qui risquerait d'en modifier radicalement la nature et la mission.

9811   À notre avis, ce modèle offre de nombreux avantages par rapport à un pourcentage unique de dépenses en émissions canadiennes applicables à l'ensemble des services d'un groupe. Premièrement, chaque service d'un groupe donné conserve des obligations individuelles qui sont intimement liées à sa nature et à sa mission.

9812   Deuxièmement, les services de genres ouverts à la concurrence, comme les Nouvelles Nationales et les Sports peuvent s'y intégrer sans problème.

9813   Finalement, il n'exige pas que le pourcentage unique du groupe soit revenu lors de chaque transaction d'acquisition, de cession ou d'échange de services.

9814   Pour toutes ces raisons, nous croyons que notre modèle permet d'atteindre les objectifs de flexibilité accrue et de transférabilité des obligations entre services individuels de façon plus efficace et plus respectueuses de la nature particulière de chaque service que le modèle de pourcentage unique de dépenses en émissions canadiennes par groupe de propriétés.

9815   Johnny.

9816   MR. RILEY: We believe our proposed model is more equitable than one in which Canadian programming expenses are required to be 50 per cent of total programming expenses as has been suggested under one of the models put forward by the Commission.

9817   This is because each segment of broadcasters faces different issues with regard to spending on Canadian programming. For example, English language OTA broadcasters have difficulty meeting this 50 per cent threshold. This is not the case with private French language OTA broadcasters who have historically devote well over 50 per cent of their total spending on Canadian programming.

9818   With regard to Category A specialty services, whether English of French language, they too have collectively exceeded 50 per cent of their programming expenditures on Canadian programming, an objective that is not attainable for our pay movie services because of the nature of those services.

9819   Thus, a one-size-fits-all model of this kind cannot be used equitably for the entire industry.

9820   We also do not believe that it would be useful to have a single level of obligation for broadcasting Canadian content per group or a minimal threshold per group coupled with a minimal threshold per service.

9821   Such a model could have an unfortunate effect of allowing a massive transfer of Canadian content obligations from high penetration services to much lower ones.

9822   It's worth mentioning that Category A specialty services are subject to individual obligations for broadcasting Canadian content that vary considerably from 15 per cent all the way up to 100 per cent. There are practical reasons for this linked to the nature of the service and its mission within the Canadian broadcasting system.

9823   Also, it adds a diversity of programming offered to Canadian consumers. This nature and mission would be profoundly transformed if we suddenly forced them to double Canadian program expense obligations or if we offered them the possibility of reducing their obligations by half.

9824   André.

9825   M. BUREAU: Thank you, John. Depuis quelques années, le Conseil a adopté un train de mesures pour aider les diffuseurs conventionnels à faire face à leurs obligations, tout en améliorant leur rentabilité. À titre d'exemple, mentionnons la suppression de toute limite au nombre de minutes de publicité qui est entrée en vigueur le 1er septembre 2009;

9826   Le maintien dans la Décision 2008-100 de leur accès exclusif aux recettes de publicités locales;

9827   La création du Fonds d'aide à la programmation locale dont la première année les subventions seront versées sans obligation de dépenses additionnelles en contenu local

9828   L'adoption d'une nouvelle politique en matière de distribution de signaux éloignés de télévision en direct.

9829   La plupart de ces mesures sont d'implantation récente ou à venir, de sorte qu'il est encore trop tôt pour en mesurer les effets concrets, surtout dans une situation de crise économique conjoncturelle.

9830   Nous croyons que le modèle de flexibilité que nous avons proposé en matière de transférabilité des obligations entre services d'un même groupe, qu'il soit conventionnel ou facultatif, constitue une mesure additionnelle dont tous les groupes pourraient bénéficier.

9831   La prolongation d'un an à trois ans de la période où les diffuseurs en direct pourraient bénéficier du FAPL sans obligation de dépenses additionnelles de programmations locales en serait une autre.

9832   Le Conseil pourrait aussi rendre des décisions dans certains processus en cours qui renforceraient la position des diffuseurs en direct ou éviterait, à tous le moins, d'aggraver leur situation.

9833   Par exemple, en reconnaissant que la vidéo sur demande par abonnement constitue un prolongement naturel de l'activité des diffuseurs linéaires et que ceux-ci doivent être les seuls autorisés par condition de licence à rendre disponibles des blocs de programmation provenant de leurs services linéaires et à y vendre de la publicité ou, encore, en décidant de ne pas autoriser les EDRs à vendre de la publicité commerciale dans les disponibilités locales des services étrangers.

9834   Other interveners have suggested measures such as mandatory carriage by DTH for all stations, proceeds of spectrum auction to help finance digital transition and a temporary Canadian tax credit for local programming and/or digital transition costs.

9835   As for value for signal, it is very difficult for us to assess if it is the right fix to a problem for which we do not have detailed knowledge or if a combination of the measures we previously mentioned is a better fix.

9836   The only thing we know, based on our actual experience is that VFS is not a solution for all OTA. In fact, we own two small CBC affiliated stations in Northern B.C. and as you have heard this morning from the presentation of the group of small independent televisions stations, the solution for small OTA has better chances to be found through LPIF and continued DTH carriage.

9837   Si, toutefois, le Conseil décidait au terme de sa réflexion d'établir un système de compensation pour la valeur des signaux locaux de télévision, nous croyons qu'il ne devrait pas intervenir, comme certains l'ont proposé, pour imposer ou autoriser le transfert d'une partie des paiements d'affiliation actuellement versés aux services spécialisés vers les services de télévision en direct.

9838   À cet égard, je rappelle que, actuellement, dans l'univers numérique, contrairement à ce que le sondage de Léger Marketing soumis par Quebecor déclarait et expliquait aux personnes interrogées, les tarifs de nos services de télévisions spécialisées et payantes ne sont pas réglementés. Ils font l'objet d'une libre négociation entre les parties. Et, malgré d'inévitables heures occasionnelles, ce système fonctionne relativement bien.

9839   Par ailleurs, les services spécialisés ne sont certainement pas responsables de tous les déboires des télévisions généralistes. Certes, le fractionnement des auditoires y contribue. Mais ce fractionnement se fait largement au profit des services spécialisés que ces mêmes diffuseurs en direct possèdent.

9840   Ainsi, comme démontré en annexe aux présentes, près de 70 pour cent de l'écoute totale des services spécialisés canadiens et de langue anglaise et près de 50 pour cent de celles des services spécialisés canadiens de langue française est accaparé par des services qui sont la propriété de l'un ou de l'autre des cinq groupes qui possèdent les grands réseaux de télévision en direct: CBC Radio-Canada, CanWest Global, CTV, Rogers et Quebecor.

9841   En conclusion, Monsieur le Président, je voudrais souligner l'apport exceptionnel que le secteur des services facultatifs en général et que nos services en particulier apportent à l'atteinte des objectifs de la Loi sur la radiodiffusion. Les services facultatifs contribuent très largement à la diversité de la programmation offerte aux consommateurs canadiens dans des formats conçus sur mesure pour répondre à une grande variété de champs d'intérêt.

9842   Collectivement, les services de télévision spécialisée et payante ont consacré plus d'un milliard de dollars aux dépenses d'émissions canadiennes en 2008, comparativement à un peu moins de 620 millions pour les diffuseurs privés en direct.

9843   Notre secteur apporte aussi une contribution de tout premier plan au soutien des émissions prioritaires et de la production indépendante.

9844   Plus de 65 pour cent de l'écoute total des dramatiques canadiennes et plus de 75 pour cent de l'écoute totale des documentaires canadiens se fait auprès de la télévision spécialisée et payante.

9845   Plus de 90 pour cent du financement par la télévision privée des nouveaux longs métrages cinématographiques canadiens est attribuable à TNN, Super Écran et Movie Central.

9846   Chez Astral Media, nous consacrons plus de 85 pour cent de nos dépenses d'émissions canadiennes aux émissions dramatiques, documentaires, jeunesse, variété et musique.

9847   Enfin, nous sommes incontestablement le groupe qui recoure le plus systématiquement à la production indépendante au Canada. Nous n'avons donc aucune raison d'avoir honte de notre succès auprès du public, ni de la réussite financière qui en découle, d'autant que notre réussite contribue aussi à celle des distributeurs.

9848   C'est d'abord pour accéder à des services de télévision de plus en plus variés et nombreux que les Canadiens se sont abonnés massivement, et le demeurent, à la télédistribution, et c'est à cette base étendue d'abonnés, que nous avons largement contribué à bâtir, qu'ils peuvent aujourd'hui offrir des services d'accès Internet ou de téléphonie.

9849   Enfin, soulignons que les diffuseurs conventionnels ne sont pas les seuls à subir la concurrence de l'Internet et des nouveaux médias, à devoir s'adapter aux nouvelles habitudes de consommation des téléspectateurs ou à subir les contrecoups de la crise économique et financière actuelle. Nous sommes tous dans le même bateau à cet égard.

9850   Et nous avons aussi notre part de défis économiques à relever. Nous avons dû engager des investissements importants pour passer à la haute définition. Nous avons, d'ailleurs, été des pionniers en la matière dans le marché de langue française. Nous avons, incidemment, fourni sept des huit premiers services HD dont Vidéotron parlait la semaine dernière, et nous avons offert nos services HD à valeur ajoutée aux EDR sans demander d'augmentation de tarif.

9851   Je pense, Monsieur le Président, que cela démontre que nous nous comportons en diffuseurs responsables et que nous ne méritons pas de voir tous nos efforts compromis aux seules fins d'améliorer la marge bénéficiaire d'un groupe d'entreprises privées moins performantes.

9852   Je vous remercie de votre attention. Nous serons maintenant heureux de répondre à vos questions.

9853   THE CHAIRPERSON: Thank you very much for your presentation, and for bringing a new perspective and a different approach to it, rather than regurgitating the established position. I very much appreciate your effort of trying to find a solution to the problem.

9854   In the model that you propose, on page 7 you suggest that you would integrate news and sports, the so-called Category C. Why is that necessary? Could we not basically say that for the CPE -- or, rather, for the group, that you would not include either news or sports?

9855   To me, now that we have made it open to competition, et cetera, especially given the nature of those two services, I don't know why they would be subject to the CPE requirement. What would it do if we excluded it from your group CPE requirement?

9856   MR. BUREAU: I will ask my colleague Nathalie Dorval to answer your question, Mr. Chairman.

9857   MS DORVAL: Mr. Chairman, we think that one of the advantages of the model we propose is the fact that each type of service, or any kind of service, can maintain its own CPE and be part of our model.

9858   As there was just a new policy implemented to say that these services would be competitive between themselves, for the sports and the news, and they would have the same level of obligation, these specific levels of contribution could be maintained through the model that we propose.

9859   THE CHAIRPERSON: I appreciate that, but my question was what would happen if we said no, that they don't form part of your overall CPE requirements.

9860   Would that be helpful or beneficial to you?

9861   MS DORVAL: Actually, it would be neither beneficial nor detrimental to our model, because our model contemplates that the total amount, or flexibility, is the result of the CPE - of the different services forming the group. So I guess they could be excluded and it wouldn't -

9862   THE CHAIRPERSON: They are neutral, basically.

9863   MS DORVAL: -- have an impact.

9864   THE CHAIRPERSON: The second thing is, last week and this week there has been a lot of talk about skinny basic and making that obligatory.

9865   Skinny basic - the way people have used that expression, it basically means just the over-the-air and the 91H station carriages, I think - or the mandatory ones.

9866   For a group like yours, which is basically all specialty and pay TV, what would be the impact of adopting a skinny basic?

9867   MR. BUREAU: First of all, I am glad you asked the question in English, because I don't know the translation of "skinny" in French.

9868   THE CHAIRPERSON: Nobody else knows it either.

--- Laughter

9869   THE CHAIRPERSON: All the francophones say "skinny basic".

9870   MR. BUREAU: Thank you.

9871   I will ask my colleague Sophie Emond to answer your question, Mr. Chairman.

9872   MS EMOND: Maybe in French I would say, un service de base réduit peut-être.

9873   M. BUREAU : Veux-tu dire mince?

9874   MME EMOND : Mince, oui, mais pas anorexique.

--- Laughter

9875   MS EMOND: First of all, about the impact, I think you have heard many people refer to specialty discretionary services. Obviously, it may imply that - traditionally, I guess, in Canada, when you have bigger packages, the idea is that, per service, the price to the consumer, in effect, decreases. I think that was mentioned by Rogers.

9876   And, if you have a skinny basic, then maybe the price of the rest of the packages will increase, or maybe we will have less subscribers.

9877   Having said that, we understand that consumers, nowadays, should have the most flexibility and choice, and we also heard about it. It's something that at one point, too, in a former process, we said: Maybe, if the consumer doesn't want to take packages, they should have access to a small basic.

9878   We know it's the case that exists with Vidéotron right now, a kind of limited, smaller package.

9879   But, obviously, we were told by BDUs, too, that it is a package that is not that popular, and there are costs associated, we understand, for the BDUs.

9880   For example, on analog, they would have to downsize the basic.

9881   And it's not very popular because, I guess, most people that do subscribe - or that become subscribers of BDUs, it is to have additional discretionary services.

9882   I don't know if I am answering your question -

9883   THE CHAIRPERSON: I don't think you answered it. What I want to know is what would be the impact for, primarily, specialty and pay TV operations, such as yours, if we adopted the idea or made a skinny basic mandatory, which some people have suggested.

9884   Would it, in effect, make your negotiations with BDUs more difficult?

9885   Would it result in you losing subscribers?

9886   As Mr. Bureau noted in the presentation, you are part of the success story of Canadian broadcasting. We have a very healthy specialty sector, which produces a lot of Canadian content.

9887   In adopting such a measure in order to give consumers choice, would that be to the detriment of the system - the variety in Canadian content?

9888   That is really what we are looking at.

9889   MS EMOND: Maybe I will ask Pierre to complete the answer on that point.

9890   M. ROY : Actuellement, pour donner l'exemple de Vidéotron, il existe un petit service de base qui est accessible, et tous nos services spécialisés font partie de Pick 10, Pick 20, Pick 30, donc, sont déjà offerts sur une base discrétionnaire. Le consommateur peut choisir son package, peut choisir les services.

9891   Donc, pour nous, on ne voit pas un grand impact, je crois. On croit toujours à la qualité et à la valeur de nos services, et on ne croit pas que...

9892   LE PRÉSIDENT : Et ça s'applique également au marché anglais, comme le marché français?

9893   M. ROY : Je croirais que oui. Oui.

9894   MR. BUREAU: We don't see any major difference between the two.

9895   M. ROY : Non.

9896   THE CHAIRPERSON: Thank you.

9897   Rita, over to you.

9898   COMMISSIONER CUGINI: Thank you, Mr. Chairman.

9899   Good morning. It may come as no surprise that I will be asking you my questions in English.

9900   One of the advantages, of course, for you to appear the second week is that I get to ask you questions that will elicit, hopefully, a reaction from what other participants have said during these proceedings.

9901   I want to start with your proposed model. If I understand it correctly, it is not too different from what CTV has proposed, in the sense that each specialty service maintains their own CPEs. You have proposed the same.

9902   Where it differs is that CTV has said: Then allow us to pool our money, spend that money on whichever service we want, including our over-the-air.

9903   Your proposal, however, is saying to cap that flexibility at 15 percent.

9904   Do I have that correct?

9905   MR. BUREAU: Yes, you do, and we believe that it is a fundamental difference. It is not just a slight difference -

9906   COMMISSIONER CUGINI: No, I understand that, it is a fundamental difference.

9907   MR. BUREAU: It is a fundamental difference, and it is done in order to protect the nature and mission of every one of those specialty services, in particular. Otherwise there could be such a change by having a move of these percentages from one service to the other, which is, maybe, less popular, and we could end up with a complete new series of services.

9908   COMMISSIONER CUGINI: Would you use any of that money from that 15 percent cap for programs in Dawson Creek and Terrace, or would that strictly be the flexibility across your specialty services?

9909   MR. BUREAU: We have never had to do it in the past, because their own local programming was done there and they had a very specific mission of doing that there, and the rest of their programming was coming from CBC.

9910   With what is happening now, we don't know what will happen with the CBC plans in the future.

9911   And, of course, we will have to look into those possibilities, too.

9912   COMMISSIONER CUGINI: Yesterday the Writers Guild - and Vice-Chairman Arpin did challenge their proposal that there should be a CPE drama imposed on both Astral and Corus.

9913   I don't know if you had a chance to hear them yesterday, and the challenge by Vice-Chairman Arpin.

9914   We will see what they say on December 14, but I would like to get your reaction to such a proposal.

9915   MR. BUREAU: I did not hear the exchange, I'm sorry; we were rehearsing for this meeting today with you.

9916   On the other hand, I think that we will obviously look into it and give our comments on it in our written submission.

9917   COMMISSIONER CUGINI: Thank you.

9918   In your written submission, when you spoke about the conceptual model put forward by the Commission - and, obviously, you repeated it today - you said that the one-size-fits-all model does not work. But you also noted that, if applied, if we choose to apply the group-based model, it may, in fact, do harm to companies like Astral.

9919   Can you elaborate on that for me, please?

9920   MR. BUREAU: Yes, I will ask Nathalie to respond.

9921   COMMISSIONER CUGINI: That you would be at a competitive disadvantage, I think are the words you used in your written submission.

9922   MS DORVAL: One of the problems we have with the proposed model is that we think it doesn't respond well to the specific nature of pay and specialty services.

9923   As you know, Astral has a portfolio that is comprised of pay and specialty services, and it is our belief that we have had so much success with our pay and specialty services because of the fact that they bring diversity to the system and to the consumer with their very distinct and specific nature.

9924   We think that what makes them so specific are different ingredients, I would say, which are the COL of the services, such as the definition of their nature. They are custom made, as per CPE and exhibition requirements.

9925   So if you start taking away one of these ingredients from the recipe, we think the outcome would be a dilution of their specificities and that would be harmful.

9926   MR. BUREAU: Without having had the benefit of the exchange between Vice-Chair Arpin and our colleagues, I think that some of our services might be able to live with something like that, but others, just because of their nature, would not fit and would not easily be adaptable to that sort of CPE.

9927   We will have to look at it, and we will get back to you in our reply submission.

9928   COMMISSIONER CUGINI: And the same applies for the exhibition requirements in the CRTC's conceptual model?

9929   You would have the same reservations?

9930   MS EMOND: When we looked at the exhibition - I guess it is more of a philosophical approach that we have. We understand that the Commission - the basis of it was to look at models where you have OTA and specialty, and look at the groups, and here we come with this portfolio, we are French and English, pay and -

9931   So, for us, when we looked at your model - I guess it is sort of distorting, as Nathalie was trying to explain, the fact that they are very niche, they are programmed individually, there is no sharing.

9932   So, for us, there is no real added value.

9933   And, on the contrary, we thought: It works well now. We each have our personalities of services, and distinct production groups. So it was more a preoccupation: Why change this when our model works?

9934   That was another option, we said, "Maybe it's an opt-in," and we can live with the conditions we have right now, so...

9935   COMMISSIONER CUGINI: Yes, I can see why there would be very little programming, or no programming overlap between your services, as compared to other ownership groups.

9936   MS EMOND: Yes.

9937   And then the issue, maybe, of fairness was: We have to respect some Canadian content. If within a group there is a level of Canadian content of over-the-air, and then suddenly they can go down to, let's say, a minimum of 35 percent, and then ship it to a lower -

9938   We just thought that it raised preoccupations, and we questioned what was the benefit.

9939   COMMISSIONER CUGINI: In paragraph 12 of your written submission you say:

"Astral suggests, should the Commission adopt its conceptual model as is, that it consider making the model an approach which any ownership group could choose to adopt at licence renewal."

9940   So you are suggesting an opt-in or opt-out approach?

9941   MR. BUREAU: Yes. We said that, surely, the Commission, in its wisdom, has thought about this proposal -

9942   COMMISSIONER CUGINI: How many times have you heard that, Mr. Bureau?

--- Laughter

9943   MR. BUREAU: That is one of the key phrases that I heard over the years.

9944   Not when I was with the Commission, of course.

--- Laughter

9945   MR. BUREAU: I used it after.

9946   The fact is that we said: Maybe it is the right approach for other groups.

9947   We don't pretend to have the ultimate solution. We believe that there is probably a need for an approach like the one we proposed, but if the Commission was prepared to accept that you could have an option, either the one that is proposed by the Commission or ours, we believe that we could achieve the ultimate objectives that you had in mind in both cases.

9948   COMMISSIONER CUGINI: You, like Corus earlier, made a point in your oral presentation of saying how specialty services are not immune to the challenges. They are certainly not immune to the challenges we faced in the last year.

9949   But Corus went on further to say, like other specialty services, that 2011, when the new BDU regulations come into effect, they may present the specialty services with a whole new set of challenges.

9950   I am wondering if you could elaborate or comment on that position.

9951   MR. BUREAU: We agree.

9952   We didn't want to raise all of these issues. I think we were trying to deal with the situation that we have to address immediately, for the immediate future and -

9953   COMMISSIONER CUGINI: And I raised it because, like I said, you made a point of outlining in your oral presentation that you are not immune.

9954   MR. BUREAU: We agree.

9955   COMMISSIONER CUGINI: Other parties have suggested that the advertising limit on specialty services should be lifted.

9956   Do you have an opinion on that?

9957   MR. BUREAU: Yes, we do. We didn't ask for it. We are not in a difficult situation, so we didn't feel that it would be appropriate for us to ask for it at this point in time.

9958   We are trying to come to you and show a little bit of reasonability. We could have asked a long list of things; we did not. We are trying to bring some form of solutions for the time being.

9959   THE CHAIRPERSON: And we appreciate that you didn't come with a long list.

--- Laughter

9960   COMMISSIONER CUGINI: On the issue of VOD and SVOD, you say in your written presentation that the programming offered in SVOD mode complies with the same Canadian content rules as those applicable to their linear programming.

9961   Are you suggesting, for example, if I am a Rogers customer, and on Rogers' VOD I see a heading that says "CTV Programming", that all of the shows that CTV provides to the VOD platform, under that heading, should be in keeping with the Canadian content obligations on CTV?

9962   MS EMOND: For SVOD, yes, that was what we were proposing, and that is, for example, what we are doing currently with our SVOD TMN services.

9963   The idea, again, is that, for us, we see the VOD platform as sort of a new distribution, and SVOD creates de facto specialty services.

9964   We were thinking about how it could work for the system, and we thought that there was an easy solution, you have the linear services, and on SVOD you replicate the percentage of Canadian content.

9965   COMMISSIONER CUGINI: And any SVOD or TVOD revenue should be the domain of the broadcaster or the BDU?

9966   MR. RILEY: We see SVOD as a logical extension of an existing service. That is the way we treat it with The Movie Network and Super Écran.

9967   If one accepts that it is a logical extension, then we think, to the extent possible, those same rules should apply.

9968   For example: The Movie Network. Someone subscribes to The Movie Network, and in that subscription comes the access and availability of SVOD. That is all part of the retail rate, so it would be up to the broadcaster and the BDU to negotiate, as between them, as to what bundle of rights comes with what wholesale rate.

9969   COMMISSIONER CUGINI: We will have, and have had, representation here saying that the conventional broadcasters are not doing enough for children's programming, and you are very big players in the world of children's programming, so I am wondering if you have an opinion on whether or not there should be an obligation on conventional broadcasters to provide children's programming.

9970   MR. BUREAU: Historically, when we launched - when Astral came to the Commission to ask for Canal Famille, for example, at the time there was no children's programming in the French language on our conventional televisions in Montreal; not even on Radio-Canada or on Télé-Québec, for example.

9971   We said, "We believe that there is a need for it," and we had faith and hope that it would work, and it does work.

9972   We realized that, over the years, we had to transform Le Canal Famille into VRAK, because the population - the targeted population was changing, so we did change that.

9973   As a matter of fact, we are pretty happy that they don't get too much involved. We are doing, we believe, a good job for the youngsters and the teens, and we are prepared to continue doing that.

9974   So I don't know if we would support an obligation for them to do it. I know that they have a special mandate, particularly the CBC, or -

9975   COMMISSIONER CUGINI: Provincial broadcasters, yes.

9976   MR. BUREAU: -- the educational services, but we are prepared to be there.

9977   Corus is there, too. We share the same kind of passion for that sort of programming, and we will continue to do that.

9978   So if you feel that there is an additional need...

9979   COMMISSIONER CUGINI: Thank you very much, those are my questions.

9980   LE PRÉSIDENT : Michel?

9981   CONSEILLER ARPIN : Merci, Monsieur le Président.

9982   Monsieur Bureau, la semaine dernière quand Quebecor a comparu, ils nous ont demandé de traiter le marché francophone de manière différente du marché anglophone en ayant une mesure de dépenses en émissions canadiennes basée en pourcentage de dépenses plutôt qu'en pourcentage de revenus, et ils invoquaient -- et on le retrouve, d'ailleurs, au point 7.3 de leur mémoire -- huit motifs pour justifier cette approche.

9983   Or, notamment, ils invoquaient la volatilité du secteur; les dépenses fixes; les correctifs industriels qui sont nécessaires au fur et à mesure; les situations difficiles, où, effectivement, il y a une chute dans le placement publicitaire, et donc, il faut faire des ajustements alors qu'on est engagé à des dépenses sur la base de pourcentage sur les années précédentes; la productivité aussi, qu'une réglementation basée sur les revenus encourage peu la productivité; mettre tout le monde sur un même pied d'égalité dans le secteur francophone; la concurrence; et évidemment, le dernier point, c'est la radiodiffusion de langue française qui est différente de la...

9984   Est-ce que vous avez eu l'occasion de prendre connaissance de cette position-là et d'entendre Quebecor présenter son opinion, à savoir, quelles sont les vues d'Astral Media à cet égard, et spécifiquement pour le marché français?

9985   M. BUREAU : D'abord, Monsieur le Vice-Président, on s'entend avec Quebecor sur le dernier point. That's it.

9986   Je vais passer la parole à Pierre Roy, qui va vous expliquer pourquoi on a une philosophie complètement différente et qui ne cache rien derrière les huit points, nous.

9987   M. ROY : Pour nous, calculer les dépenses canadiennes sur les revenus de l'année précédente est une façon beaucoup plus équitable, simple et mesurable par tout le monde, plutôt que de se retourner vers toute sorte de choses, de productivité, de compétition. D'une année à l'autre, un moment donné, on a... et entre des spécialisées qui ne produisent presque rien de leur programmation et des conventionnelles qui produisent une partie, donc, qui ont des coûts directs, des coûts indirects.

9988   Ça devient très difficile de se comparer et d'être équitable entre les services, autant facultatifs que les télévisions conventionnelles.

9989   Donc, pour nous, la mesure des dépenses canadiennes sur les revenus de l'année précédente, couplée à notre modèle de flexibilité, 15 pour cent... Donc, si une année donnée, on sent que les revenus diminuent, on a une certaine flexibilité qu'on peut répartir dans le groupe.

9990   Ça nous donnerait toutes les possibilités de s'ajuster aux réalités du marché, mais en ayant une mesure de dépenses canadiennes beaucoup plus équitable entre les différents groupes et les différents types de diffuseurs qu'on retrouve.

9991   CONSEILLER ARPIN : Merci. C'est tout, Monsieur le Président.

9992   THE CHAIRPERSON: Len...

9993   COMMISSIONER KATZ: Thank you, Mr. Chairman.

9994   Good morning. I want to talk a bit about basic cable price increases, which seem to be an issue, obviously, here as well.

9995   We have talked about skinny basic, but, also, there have been arguments made that any increases in basic cable services would be two things: one is anti-consumer, because they can't afford to pay for it; but, also, it would hurt specialty penetration and take-up as well.

9996   I would like to get your views on the latter part of that. If, in fact, basic cable services went up, would you see an impact on the penetration of your services?

9997   MR. BUREAU: Mr. Vice-Chair, I had the opportunity, the fantastic opportunity, of living through the launch of specialty and pay services at the time when cable was against it and broadcasters were against it, saying that any increase in the cost to the consumers of additional services would kill the broadcasting industry and would kill the distribution industry. That was 20-some years ago.

9998   Over the years, the Commission has licensed new services and deregulated the distribution companies when the competition came in. The price for the service has grown exponentially over the years. Their margins are very high. I haven't seen any reduction in the number of subscribers. In fact, they are growing. And I don't see why an argument like that would shake everybody to say: My God, are we on the verge of creating a monster that could kill the entire system?

9999   I heard the same arguments, word-for-word, when the first specialty and pay services were offered, and at the time the cost was increased, as you know, quite - I wouldn't say dramatically, but quite substantially from the original cost of the basic service on cable, and you have seen the success of these services and the support of the consumers to these services.

10000   I think we have to be careful. There is no question about that. And, in your role, you will have to measure all of those arguments.

10001   But I would caution you, also, not to get too frightened by these comments that are made, or these interventions, because, in fact, if people feel that they have a good service, they will continue to pay for it.

10002   Have you seen any year that there hasn't been an increase in the distribution cost of those services? Any year.

10003   COMMISSIONER KATZ: On that point - I was going to ask my second question, and you came halfway there.

10004   In terms of the cable increases over the last number of years, have you seen an impact on your specialty business at all? Have people deactivated or purchased less of your programming - your specialty programming - because the BDUs in your territories have increased their basic cable rates?

10005   MR. BUREAU: We have such a good relationship with all of the BDUs that we managed to overcome any problem like that.

10006   COMMISSIONER KATZ: And the consumers don't have a problem continuing to subscribe?

10007   MR. BUREAU: No, we look at our penetration and our shares of market, and they keep growing, so we don't have a problem there.

10008   Ian may want to add something. When we talk about BDUs, he is very sensitive.

10009   MR. GREENBERG: All we have to do is look at the results of the subscriber levels, look at the results of the surveys of people watching the channels, and the fact is, as long as people think they are getting value, they will continue to subscribe.

10010   Many subscribers, we must remember, have a lot of choice. Many of the cable operators offer packages - choose 10, choose 20, choose 30.

10011   I think one of the reasons for our success is being in that environment, because our channels have been successful. We have not seen any decrease in penetration.

10012   COMMISSIONER KATZ: I want to come back to something that Commissioner Cugini asked you as my last question, and that is with regard to advertising minutes.

10013   There has been the position stated that perhaps specialty should have the same flexibility in advertising minutes as OTA has.

10014   As you know, we opened it up, effective September of this past year, to 12, 14, 15, and, I guess, 16 minutes at some point, as well.

10015   Arguments have been made that it is too soon to see the impact and the benefit that that may have on the OTA marketplace, because there are additional minutes there, and perhaps additional advertising, as well.

10016   At the same time, we do have a live example of what the benefits could be, because over the last ten years or so specialty minutes have gone up from 8 minutes per hour to 12 minutes per hour, and I guess that you folks have been in the business for long enough to provide us with an overview of what type of benefit that has provided to your financials and to your business by increasing those minutes.

10017   MR. BUREAU: I would ask Pierre Roy to answer your question, Mr. Vice-Chair.

10018   M. ROY : En fait, l'accès additionnel à des revenus publicitaires est venu compenser le fait que tous nos tarifs de toutes nos chaînes n'ont pas évolués au cours des dernières années. Le 65 sous de Canal Famille, 20 ans après, est encore 65 sous. Le 60 sous de Canal D, c'est encore la base de négociation.

10019   Donc, sachant que les coûts augmentent quand même d'une année à l'autre, l'accès à la publicité est venu compenser pour cette stabilité au niveau des revenus d'abonnement et nous permettre de réinvestir, puisqu'on a un pourcentage de ces revenus qui est réinvesti automatiquement dans la programmation dans le contenu canadien. Donc, on a réinvesti dans notre contenu dans notre programmation et on a continué à connaître le succès.

10020   Donc, la publicité, pour nous, est venue nous permettre d'évoluer et d'améliorer notre programmation. Donc, ça été quelque chose qui a été très bénéfique.

10021   CONSEILLER KATZ : Merci. Thank you very much.

10022   THE CHAIRPERSON: Thank you very much.

10023   I have one last question before I let you go. We have had a lot of people come before us who said that the simsub that we have for OTA should be extended to specialty.

10024   "Simsub" - simultaneous substitution regime.

10025   As one of the larger specialty operators, what is your view on that?

10026   MR. BUREAU: I would ask John Riley if he has any comment on that.

10027   We are in a very different situation on speciality, in terms of benefiting from the possibility of simultaneous substitution, but I would ask John if he has any additional comments.

10028   MR. RILEY: I think that it would fall into the previous category that was discussed. Yes, there could be a list of things we could say. Sure, it would be great to have that. We think it is something that, at this point, is not necessary.

10029   THE CHAIRPERSON: I am asking because it was put forward by others. So the question is, would it actually be beneficial to you, or would it just create more clutter and drive down the prices of advertising?

10030   By you having 12 minutes right now, you can demand, I presume, higher prices.

10031   MR. RILEY: I don't think we would see a tremendous amount of upside from something like that.

10032   THE CHAIRPERSON: Thank you very much.

10033   We will take a five-minute break before we deal with our last presentation for the morning.

--- Upon recessing at 1122

--- Upon resuming at 1131

10034   THE SECRETARY: Please take your seats. I will now present from Cogeco Cable, Mr. Louis Audet.

10035   I will now ask you to present your colleagues, and you will have 10 minutes to present your oral remarks.

PRESENTATION

10036   MR. AUDET: Thank you, Madam Secretary.

10037   Mr. Chairman, Commissioners, thank you for giving us the opportunity to present Cogeco Cable's point of view at this hearing.

10038   My name is Louis Audet, President and Chief Executive Officer.

10039   To my right is Yves Mayrand, Vice-President, Corporate Affairs.

10040   To my left is Lori Assheton-Smith and to her left is Suzanne Blackwell. Lori and Suzanne have helped us in preparing for this proceeding.

10041   What is particularly troubling to me personally in this proceeding is that the people on both sides of the barricades, if you will excuse my using that expression, are all personal friends of mine that I have come to know through the years; in the course of the 28 years in fact that I have been in this business, including a period when we were in commercial television first as affiliates of Radio-Canada and later both as affiliates of the public network and owners of the TQS network in partnership with CTVglobemedia.

10042   This also includes years when I had the privilege of acting as Vice-President of the Television Board of the Canadian Association of Broadcasters when the current carriage arrangements were hammered out. This is why I allow myself to say that we are friends.

10043   During those years commercial over-the-air television broadcasters were very eager to be on cable, were very worried that they might be left out and they wanted to take advantage of cable to extend their reach with better signal quality; hence, the current carriage packaging and simultaneous substitution regulations.

10044   Compensation for signals of conventional over-the-air television brings into question the basic construct of the regulatory bargain. It is of course a key issue for us but, most of all it's a key issue for the 865,000 basic service customers we serve in Canada.

10045   I will now pass it on to Yves Mayrand who will explain the first aspects of our position.

10046   MR. MAYRAND: Thank you.

10047   Compensation for signals is a bad fix that does not address the root causes of conventional television's declining financial performance. The real fundamental issues that need to be addressed with respect to conventional TV are in our view the following:

10048   First, what is the role of and market for conventional television networks in the domestic and global digital content system we are now facing?

10049   Is the traditional model of buying Canadian rights to U.S. network programs and packaging them with Canadian programs for free broadcasts in Canada still sustainable?

10050   Is it still necessary or sustainable to package national network programs and local programs on the same general interest linear television network?

10051   Should our national public broadcasters, CBC and Radio-Canada, continue to compete with private broadcasters for U.S. program rights acquisitions and for ad revenue despite being funded by the taxpayer to the tune of $1.1 billion annually?

10052   What should we expect longer term from the advertising market when the current recession ends?

10053   Mr. Chairman, you have urged broadcasters and distributors appearing earlier during the course of this public hearing to work together towards a common understanding on compensation for signal. We thought long and hard on how this could possibly happen and we want to be constructive and we have some initiatives that we will address later in this presentation. Unfortunately, we have come to the conclusion that it is not possible to agree on compensation for signal given the way in which the issue has been framed.

10054   Why is that? First, the straight transfer of money from some players to others within the broadcasting system cannot and will not generate more money for the system overall. Simply put, reallocating portions of the pie will not make the pie any bigger. Reallocating the existing pie can only lead to bitter conflict because it is by definition a win-lose proposition.

10055   Second, the resolution of a problem requires that the parties involved face the hard facts. Traditional advertising-supported mass media, whether in print or electronic form, are all faced around the globe with growing fragmentation, declining economic efficiency and declining profitability. This is why media conglomerates including our own here in Canada have diversified into highly profitable specialty services and why they are now diversifying into the new media, both of which are capturing a growing share of available ad revenue. This structural change simply cannot be reversed through cross-subsidies.

10056   Third, Canadian television broadcasters must come to grips with the hard fact that buying Canadian rights for U.S. network programs, re-broadcasting them here for free, deriving profit margins from Canadian ad sales on these shows and using part of those margins for Canadian program production, is increasingly an ineffective model.

10057   This also cannot be reversed through cross-subsidies. We have attached to this presentation an overview of the U.S. programming broadcast by the big Canadian TV networks based on their current fall schedules to illustrate further the nature of this problem.

10058   Compensation for signals has become the bogey man for the real challenges of conventional general interest over-the-air network television in this country. Two years ago, Cogeco and CTVglobemedia had to face the real challenges. We both came to the conclusion that TQS could no longer continue to operate alone with its existing over-the-air television business model in the Francophone market. Unfortunately, TQS had no specialty television properties unlike all of the other Canadian TV network operators and was third in a much smaller market overall.

10059   Louis.

10060   MR. AUDET: Thank you, Yves.

10061   Compensation for signals has now turned into a very acrimonious and divisive debate and that debate has spawned the following irrational proposals for further regulatory intervention.

10062   Some people say that regulations should be re-imposed in Canada in spite of the fact that there are virtually no countries left in the world where retail rate regulations still exist. As we all know from our basic economics courses, rate regulation breeds inefficiency in markets.

10063   Some say small or skinny basic service should be imposed by regulation in spite of the fact that the market has repeatedly proven this concept to be unattractive both to customers and uneconomical for programmers and distributors alike.

10064   Some say distributors are rich and should not pass onto their customers the compensation for signals that would presumably emerge directly or indirectly from the current proceedings. This is particularly troublesome.

10065   There are no businesses anywhere in the world where the cost to produce or offer a good or service is not ultimately passed on through the price paid to the buyer, the ultimate buyer of that product or service down the line. To think otherwise is sheer folly.

10066   We have attached to our presentation a chart showing the evolution of our net profit after tax, capital expenditures and free cash flow from our Canadian operations over the last 10 years.

10067   It is abundantly clear that our company and other distributors are not much different in that regard, have generally spent roughly four times the amount of our profit after tax and we have done so on capital expenditures to build a network to serve our customers and the overwhelming proportion of the bandwidth thus constructed has been devoted to video services.

10068   By simple inspection of this chart you will see the free cash flow even today continues to be sub-par to what investors would expect.

10069   Hence, the notion that there is unused cash in the kitty to be easily diverted to the over-the-air broadcasters, as is currently suggested in certain television advertisements currently being aired is both false and misleading to the public and to the regulator.

10070   Yves.

10071   MR. MAYRAND: Please allow us to emphasize a few key points that seem to have been lost in all the rhetoric.

10072   First, market value for Canadian over-the-air television signals makes no sense in the absence of a free market for these signals.

10073   A free market would require that there be no mandatory or priority carriage, no mandatory bundling on the basic tier, no buy-through of basic, no program substitution on U.S. network signals, no regulator replacement of over-the-air signals by cable and satellite signals after the digital switchover, no prohibition on discontinuation of carriage during negotiations and last, but not least, no CRTC determination by binding arbitration or otherwise.

10074   All these prerequisites to a free market are squarely incompatible with the Commission's own regulatory framework as reviewed just a year ago.

10075   In any event, are the big Canadian TV networks really prepared to face such a truly free market for their OTA signals? The answer is "No".

10076   Second, putting forward the notion of value for signal without any consideration for value for carriage makes no sense either. Our cable facilities represent in the aggregate $1.3 billion of fixed assets at net book value for an original investment of $2.3 billion before amortization. This fiscal year alone we project an additional capital investment of $266 million in fixed assets for our Canadian cable facilities. The totality of our investment comes from private capital.

10077   Our cable facilities do not belong to the Crown much less to the big Canadian television networks. They belong to our shareholders. Your regulatory framework requires us to provide to Canadian television broadcasters carriage of all their local and regional television signals in analog, digital SD and digital HD for free.

10078   As a result, we currently dedicate 82 MHz of bandwidth on our Burlington-Oakville system or 11 percent of total available capacity on that system for the retransmission of the local and regional OTA television signals of the Canadian television broadcasters absolutely free of charge.

10079   In the circumstances, compensation for signals is like the holder of a free transit pass asking the bus drivers for spending money as well.

10080   Third, the big Canadian TV networks through their own specialty television services already tap into substantial subscription revenue from cable and satellite to pay for Canadian programs shown on both their conventional and specialty networks.

10081   By way of example, we have attached to our presentation an analysis of cross-programming exhibition of news and public affairs programs between the conventional and specialty services of CTV, TVA, Radio-Canada and CBC. The recycling is substantial and as such constitutes an important cross-subsidy. This analysis is based on the current fall 2009 programming schedules.

10082   Fourth, compensation for signals involves a huge hidden cost that nobody seems willing to acknowledge in this proceeding and that would come on top of the bill for any actual compensation for carriage of Canadian over-the-air TV signals. The U.S. network stations whose broadcast signals are available north of the border and carried on Canadian cable and satellite without compensation would certainly prompt the U.S. trade representative and WIPO to take an even more forceful approach to gain compensation for all broadcast signal retransmission in Canada. The result would be that we would all send hundreds of millions of dollars more south of the border.

10083   Fifth, after four hearings and countless pages of submissions and transcripts, we are still completely in the dark on the use of proceeds from compensation for signals by the big Canadian TV networks.

10084   What we do know, however, is that Canadian television broadcasters are presently spending a lot more on U.S. network programs than on Canadian programs. Acquired U.S. program costs have substantially risen from year to year since the Commission eliminated Canadian program expenditure requirements in 1999.

10085   Broadcasters have cut back on local TV programming even before the current recession. They make at least as much money in monopoly local advertising revenue as they actually spend on local TV programming and even if they get compensation for their signals they have no intention of airing more than the minimum amount of local programming currently required so the money would go straight into the pockets of their owners.

10086   These are the plain and simple facts. In spite of these facts, you are now being asked to write a blank cheque to the new Canadian champions of regulatory welfare, the big media conglomerates of this country drawn on the account of Canadian cable and satellite customers. This is plainly wrong and you are responsible and this is why we are drawing a line in the sand.

10087   We are also publicly ringing the alarm bells because in the space of only 12 months cable and satellite distributors have seen the imposition of a previously unannounced $68 million annual charge designed to directly subsidize Canadian television broadcasters for local programming, followed by a 50 percent increase of that charge to $102 million annually, and now a request for a further additional charge on account of compensation for signal in the neighbourhood of $353 million annually for cable and $97 million for satellite, for a grand total of at least $449 million on top of the LPIF.

10088   We are talking here of more than half a billion dollars in 12 short months and the big Canadian TV networks are already saying that this is not enough. No business can or should run as an open bar.

10089   We have attached to our presentation five graphs which in our view clearly demonstrate that this huge windfall for the big Canadian TV networks is simply not justifiable. These graphs highlight the following facts:

10090   First, the main culprit for the deteriorating financial position of conventional TV is the runaway spending of the big conventional TV networks on foreign programs.

10091   Second, the profit margin of the television broadcasters on their specialty service side is comparable to that of the combined broadcasting and telecom operations of cable and far exceeds the profitability of cable on its broadcasting distribution activities alone.

10092   Louis.

10093   MR. MAYRAND: Thank you, Yves.

10094   While we cannot agree to compensation for over-the-air local and regional signals for the Canadian television broadcasters, a number of initiatives can be implemented which will help ease their current difficulties.

10095   The first one is the imposition by this Commission. As we had suggested in our presentation to the Commission, it says here in this paper of April 2009 -- but actually I believe our first proposal to the Commission dates a memorandum of November 2007 -- of a requirement that no more than one dollar be spent on non-Canadian programming for each dollar spent on Canadian programming.

10096   This will go a long way to curb destructive overbidding for the purchase of expensive U.S. TV network and Hollywood studio content rights, including the practice of buying titles only for inventory purposes in order to make them unavailable for other Canadian competitors.

10097   The second solution is one we worked on very hard in February of this year earlier, and it is to offer to carry localized content signals delivered by Canadian over-the-air broadcasters to our local cable head-ins in markets where the broadcaster would deem it uneconomical to build new over-the-air digital high definition transmitters. Of course, in the current shouting match it's very difficult to make progress on this very constructive offer.

10098   The third solution is an offer we have made repeatedly and it is to put in place a local news service as part of our existing local community programming budget in smaller markets where the big conventional television networks would decide that it has become uneconomical to operate a local TV station.

10099   These measures can and will go a long way if given a chance. In fact, the first one of these, had it been implemented earlier, would have helped solve the problem by now.

10100   While we can help conventional over-the-air television broadcasters, we do not think it is reasonable for anyone, including the regulator, to expect the distributors to solve all their challenges.

10101   Mr. Chairman, you stated on the first day of this hearing that this hearing is about the future and not the past, and we agree. Already too much time and money has been spent on trying to figure out how to preserve a model for conventional television that may no longer be appropriate nor sustainable with or without a subsidy.

10102   We believe it's time to move on, or the Canadian television viewers who are the real cornerstone of this system, will decide to move on without us.

10103   Thank you for hearing us out and we will be pleased to answer your questions.

10104   THE CHAIRPERSON: Thank you for your presentation. There are some parts of which I agree with you.

10105   And I also appreciate that you are trying to not continue the shouting match, as you call it, but to sort of have this on a level business-like discussion.

10106   And I agree with you, it's time to move on. Otherwise, the Canadian television viewers will go to the free alternatives rather than staying in the system. I have said that throughout these hearings and I firmly believe that. All we are doing through this current public debate is sensitizing Canadians to the cost of television rather than finding a solution.

10107   That being said, I read your submission yesterday and I do have to take issue with something which you repeated in here. And let me set the record straight.

10108   On page 3 you talk about "our recent fee for carriage" and you object to the issue being raised at the notice in April and the document that I filed, and Mr. Maynard just referred to it just now, about the $357 million.

10109   First of all, I appreciate that you are no longer talking about fee for carriage but you realize that what we are proposing is value for signal.

10110   But, secondly, and I want to make this absolutely clear for you and everybody else, the April licence hearings did not have fee for carriage on the table. But everybody knew that the OTAs were asking for fee for carriage; had asked twice for it and denied it.

10111   So on the opening day I said to the record -- you can check it -- this is on everybody's mind but what exactly does fee for carriage mean?

10112   CTV had asked for 50 or 75 cents per signal. How much does that actually mean? We have -- I asked my staff to do a calculation with 50 cents and I tabled what that would mean in order to show people how very large and very excessive this amount from the OTA was.

10113   At the hearing then everybody said, "Well, you miscalculated this". So I said, "Fine, let's have a working group tell us where we made the mistake".

10114   We had the working group and they issued a document showing essentially we didn't make a mistake. The numbers were as seen.

10115   The whole purpose of that was not in order to introduce fee for carriage through the backdoor or anything, but to share with you and with everybody else what was our assessment of the demands hitherto made by the OTAs for fee for carriage which was about a charge of $350 million.

10116   We then had had at the hearing -- while we had the hearing, there was also the House of Commons hearing on over-the-air at which point I pointed out that -- sorry.

10117   First of all, at the hearing during the in camera part, which later on was made public -- this part certainly was -- I berated both OTAs for beating the dead horse of fee for carriage. I said, "You are not going to get it. It doesn't make sense. Switch gears. What you have is an input cost here which has to be priced and can't you negotiate that?"

10118   I repeated that message before the House of Commons and then we issued our PN. You pointed out that that PN sounded as if you already had taken a position. So I reissued the PN, making it quite clear that we wanted to consider this issue de novo.

10119   The whole idea is that we see value for signal, in effect, as a catch phrase for saying there is an input that the BDUs get which is the over-the-air signal. The over-the-air people claim they are not being fully compensated for it. You claim they are through various devices such as simsub, mandatory carriage, et cetera. You all know the list.

10120   I have no idea whether that's right or wrong. It struck me since you are both members of the industry and you both have this common goal that you expressed, Mr. Audet, to move on and not to drive the wheels of the system, why don't you settle that through negotiation? And we posited the question if so, at the end of it, would it be that desirable that we settle it by arbitration?

10121   Now, we have heard from everybody what their views are, and I don't want to revisit it. I just wanted to set it out. This is how we got to where we are.

10122   Now, coming to your submission, for instance, that's why -- the reason I did it was because Mr. Mayrand on page 10 talks about $357 million. I have no idea what that value for signal is.

10123   And I mentioned -- and this picks up the idea that you expressed at the outset, Mr. Audet -- there are all sorts of issues. It's not only value for signal. It's not the solution.

10124   And I pointed out, and I said now at least four or five times, there are other issues that are floating around; such as local avails, such as VOD, such as community broadcasting and what should be the role of the BDUs and the broadcasters, et cetera.

10125   And what we have -- it's sort of been assumed that out of this you would suggest to us, "Fine, let us negotiate this. Let us come up with a solution and then you, the CRTC, just sanction it".

10126   But so far I haven't heard from either BDUs or from OTAs an acceptance of that idea. Everybody sort of pushes their particular point which is either, "Yet we have already paid for the value for signal" or "No, we are not being compensated and the BDUs are getting a free ride".

10127   And I think -- I appreciate that you don't want to reopen that door and I certainly don't want to reopen it with you. I just wanted to set the record straight.

10128   Now, in terms of your presentation this morning, you point -- at one point you say, "We don't know what the OTAs would do if there was a value for signal".

10129   I said -- I thought our suggestion of first of all having group licensing would take care of the element of cost subsidization as you are talking about between specialty and OTAs and, secondly, there will be a CPE, a very meaningful CPE. So therefore forcing OTAs to spend their money very carefully and account -- spend it all in Hollywood, et cetera.

10130   Are those two things not something that would address to a large extent some of the concerns that you are voicing?

10131   MR. AUDET: First off, thank you for clarifying the sequence of events as well as your position. We appreciate that.

10132   Secondly, I will consult with Yves Mayrand because I have much difficulty understanding the question.

10133   One moment, please.

--- Pause

10134   MR. AUDET: I think one of the difficulties we -- it's a collective "we" because I think it's a difficulty the Commission is faced with first and foremost, is that there has been a shock brought about worldwide to large-scale media all over the world. And we see it everywhere and newspapers are going bankrupt. Other newspapers are generating losses. TV stations are being challenged.

10135   So you have a worldwide phenomenon that is going on right now and it has been further exacerbated by a recession. It's a very meaningful one.

10136   So the difficulty I think we are collectively faced with now is that we are trying to arrive at a one-time decisive fix and I think that that's very difficult to do because there are too many variables in the mix.

10137   Certainly the way we run our businesses is the first thing we would do, is ask ourselves whether what we can do internally is being done appropriately. And that's the essence of our first recommendation; that is, if there was a condition of licence to make sure that the U.S. programming expenditures weren't running away on the broadcasters that would go a long way to restoring order to the balance sheet.

10138   THE CHAIRPERSON: Okay. Stop right there.

10139   Doesn't the CPE do that if -- the over-the-air stations right now don't have CPE obligations. We have said we will -- we posed the question and said, and even CTV is prepared to adopt them.

10140   Wouldn't that CPE act as a discipline measure of how much money you can spend in Hollywood?

10141   MR. MAYRAND: I guess we're talking about two concepts that may look alike but are in fact quite different, because really the CPE is about essentially I think, as I understand it, for the Commission to set conditions respecting certain required expenditures certainly at the group level and then there are different variations, some are saying there should be individual service minimum levels as well.

10142   In any event, we're talking about an envelope for Canadian programs. Now, what we advocated for the last certainly over two years now is that quite irrespective of the envelope for Canadian programs, the Commission ought to be preoccupied about in the end what the ratio, the actual ratio of expenditures for acquisition of U.S. and Hollywood product is compared to Canadian programming.

10143   THE CHAIRPERSON: M'hmm.

10144   MR. MAYRAND: Now, in April we appeared for the discussion of that very issue and the broadcasters said, oh well, we can't implement that right now because all our program buys are already done and it's not relevant.

10145   Well, certainly the program buys are not couched in stone for the upcoming years and we urge the Commission to have specifically a look at a ratio that ensures in fact a preponderance of expenditures on Canadian programming compared to foreign, particularly U.S. programming.

10146   THE CHAIRPERSON: Do you have to do it by way of ratio or can you not -- I mean, after all, you're a businessman, you have "x" number of dollars if you are a broadcaster to buy programming. If it's clear that you have to spend all of the available pot you have to spend, let's say, 50 percent on Canadian programming, that by definition means you have only so much for Hollywood. Why do you have to make it ratio?

10147   MR. AUDET: May I direct Members of the Commission to look at the graph that we have provided on page 2, and this is what it looks like right here, if you take a look at it.

10148   THE CHAIRPERSON: I see.

10149   MR. AUDET; Okay. So, what you can see here is that there's been a runaway on foreign purchases, so -- and they now exceed investments in Canadian programming by, you know, about $225-million.

10150   This is very significant in the debate and the parties are competing with each other furiously to try to -- to corner these programs and that's why we think there has to be a simple tool to work by and a simple tool might be for one dollar of Canadian not more than one dollar of foreign, regardless of other formulas that might have been presented to this Commission.

10151   And the reason for that is -- and if you move to the following graph on page 3 of the graph attachment, you will see the distribution of programming expenditures in the broadcast sector, purchases -- foreign purchases and you'll see how they stack up and this is the heart of the problem.

10152   You have private conventional spending a huge amount on foreign purchases and specialty a bit less and BDUs a very small amount.

10153   So, really this is symptomatic of a need to re-balance the focus of the over-the-air broadcasting system.

10154   And, in our minds, you have to put your own house in order before you say, well, it's not working, so now we're going to tap the neighbour because he seems to have money, you know.

10155   I think that's our position in a nutshell.

10156   THE CHAIRPERSON: Okay. The other thing, Mr. Mayrand, for some reasons, all the points that you raised, on page 4 you're talking about, there's a lot of value for signals, the U.S. networks will ask the same and will push the U.S. Government and WIPO to...

10157   I am absolutely astounded. I cannot think of any basis in international law to make such a claim.

10158   These are U.S. programs which are coming into Canada, they have no right to be -- they're being picked up by BDUs, we have the re-transmission rights because the creators are compensated by copyright, there's a special exemption for broadcasting in both the FTA, the WTO. So, on what basis would this be made, this hidden cost that we are supposedly overlooking?

10159   MR. MAYRAND: Well, sir, I guess that's the crux of the problem. You know, if we are going to collectively end up with a regime that acknowledges in fact a copyright, because we are firmly convinced that it is an issue of creating a copyright in over-the-air unencrypted broadcast signals.

10160   THE CHAIRPERSON: Okay.

10161   MR. MAYRAND: The exception will be under attack. It is already under attack as part of ongoing discussions within the workings of WIPO and I'm sure you're aware of that.

10162   THE CHAIRPERSON: I'm familiar with that. I didn't appreciate that you were saying this is a copyright, I totally disagree with that. There are two legal opinions. You saw the Goodmans opinion, I saw the ones that you furnished. This is something that will be litigated, so we don't need to waste time on this.

10163   I thought you meant outside copyright and I couldn't see how you could make that claim.

10164   Then, lastly, Mr. Audet, you say on page 12 that in the current discussion your offer is for dealing with over-the-air -- who are not converting, is not being heard.

10165   What exactly is your offer?

10166   MR. AUDET: The offer is very simple and it's the one we made at meetings that we had with broadcasters and the Commission as part of a working committee last February.

10167   THE CHAIRPERSON: M'hmm.

10168   MR. AUDET: And basically it's to -- as a service where broadcasters would deem it uneconomical to build high definition over-the-air transmitters, to bring their signal to their head end, we would distribute it as we would had it been taken off air and they would benefit from all the privileges that they would have benefitted of had it been taken off air; i.e., simultaneous substitution.

10169   We think this is -- we, ourselves by the way, we were faced with this very difficulty when we were owners of TV stations in Sherbrooke and Trois-Rivières, where to date only the CBC because it's funded by our taxes and government appropriation have been able to even consider putting a high definition transmitter, the rest of us couldn't make it work because it's just too expensive.

10170   So, this will go a long way to solve that problem.

10171   THE CHAIRPERSON: But it would leave people who receive the signal over-the-air today without any reception unless they become your customers; right?

10172   Over-the-air customers who receive the signal from the air, who are not cable or satellite subscribers, in those markets, they would have to become your customers.

10173   MR. AUDET: Well, either they become our customers or become the satellite's customers. It's -- I agree. I guess your question is, you are concerned about that particular viewer and I understand and respect that concern.

10174   But I think there comes a time that we are -- we are hoping and expecting for the impossible and there may be situations where a TV station can stay alive but it can't afford a transmitter and if it can't, then we can help.

10175   But I'm not saying this is a perfect solution, it's not perfect and I'm afraid in this -- you know, industrial structures and economies the world over are, they're modifying, they're evolving, they're changing and I think there's some things that were possible in the past that will likely not be possible in the future and I wish I had a solution for that problem, but I'm afraid I don't.

10176   THE CHAIRPERSON: Okay. Thank you very much.

10177   Suzanne, you have some questions?

10178   CONSEILLÈRE LAMARRE : Merci, Monsieur le Président.

10179   Bonjour, mesdames et messieurs. Je vais continuer sur la lancée de la question et de votre réponse avec le président, parce que ce que vous avez répondu au président, ce n'est pas exactement ce qu'il y a dans votre mémoire.

10180   Alors, je veux m'assurer que vous avez, effectivement, changé d'idée, ou sinon, vous m'expliquerez pourquoi, parce que, au niveau de la distribution des signaux qui ne seraient plus en ondes, au paragraphe 163 de votre mémoire, vous dites :

"Cogeco is prepared to provide a transition tier of local conventional signals for a limited period of time."

10181   Et ça, c'est une nuance que vous n'avez pas apportée. Est-ce que vous avez décidé que la période de temps serait illimitée?

10182   M. AUDET : Non. Comprenons-nous, peut-être que notre rédaction n'a pas été parfaite là. Non, l'offre... cette proposition-là n'est pas limitée dans le temps.

10183   Ce qui est limité dans le temps, c'est l'idée d'offrir -- pour répondre justement à la préoccupation que monsieur le président exprimait, il y a quelques instants -- c'était d'offrir un package à un tarif plus avantageux pendant une période d'introduction, pour tenir compte du fait que certains consommateurs qui recevaient des stations par voie hertzienne se verraient obliger de s'abonner à un service ou à l'autre. Donc, c'était une offre temporaire au consommateur, dont il est question.

10184   Mais l'offre de porter les signaux par alimentation directe par fibre, c'est une offre permanente.

10185   CONSEILLÈRE LAMARRE : Merci pour cette précision.

10186   Toujours au niveau des précisions... soyez assurés là, j'ai très bien lu votre mémoire. J'ai porté attention à ce que vous avez dit lors de votre présentation, et votre propos était très direct, autant dans votre mémoire que ce matin dans votre présentation, ce qui fait que mes questions vont être d'autant plus ciblées.

10187   Dans le bas de la page 7 de votre présentation ce matin, vous faites référence à vos investissements dans votre réseau, dont vous estimez la valeur. Pouvez-vous nous fournir une estimation de la valeur de ce réseau-là qui est utilisé exclusivement pour la distribution des signaux de radiodiffusion et non pas pour les services Internet et les services de téléphonie, ni de vidéo sur demande? Si vous n'avez pas les chiffres en tête, vous pouvez...

10188   M. AUDET : Alors, je ne crois pas qu'on soit capable de répondre à cette question-là aujourd'hui. Par contre, ce qui est clair, parfaitement clair là, c'est que la part du lion de la bande passante est consacrée aux services vidéo, de toute origine, que ce soit des généralistes, des spécialisées, des Canadiens, des non-Canadiens. La vidéo, ça occupe comme 90 pour cent de la bande passante.

10189   CONSEILLÈRE LAMARRE : Mais la vidéo dans le sens de la radiodiffusion qui est distribuée et non pas dans le sens du téléchargement ou...

10190   M. AUDET : C'est exact.

10191   CONSEILLÈRE LAMARRE : O.K. Bon, parfait.

10192   J'ai été un petit peu déçue par la terminologie que vous avez utilisée à la page 10 de votre présentation.

10193   Dans votre mémoire, vous faites attention -- et je pense que ça vaut la peine de le signaler -- vous faites attention lorsque vous parlez des différents programmes auxquels participe la cablôdistribution, compte tenu de la réglementation, pour soutenir la programmation canadienne. Vous faites presque toujours référence au fait que ce sont les distributeurs et leurs clients qui contribuent au système.

10194   Ici, vous ne le faites pas à la page 10 lorsque vous parlez, entre autres, du Fonds d'amélioration de la programmation locale, alors qu'à la page 6, vous dites clairement que s'il y a une augmentation des coûts quelconque, évidemment, l'augmentation du coût du service va passer à l'acheteur final au détail.

10195   Donc, juste pour qu'on soit certain de ce dont on parle ici, tous ces programmes-là, incluant le Fonds d'amélioration de la programmation locale, ce ne sont pas des montants que vous déduisez de vos bénéfices après impôt, ce sont des montants que vous considérez comme étant une dépense faisant partie de votre exploitation?

10196   M. AUDET : C'est exact.

10197   CONSEILLÈRE LAMARRE : Merci.

10198   Dans votre mémoire, vous faites une comparaison assez exhaustive entre l'établissement du Fonds en 2003, le Fonds de programmation pour les petits marchés de télévision, et je comprends très, très bien que vous n'avez pas du tout apprécié la manière dont le Fonds d'amélioration de la programmation locale de 2008 est apparu dans le portrait.

10199   Ceci dit, par contre, je remarque que vous faites la distinction très, très clair que, initialement, le Fonds de 2003 s'adressait uniquement aux petits marchés, ce qui n'est pas le cas pour le Fonds FALP de 2008 et vous allez jusqu'à soutenir au paragraphe 39 de votre soumission que:

« the purpose of it ... »

10200   -- « it » étant le LPIF --

« ... is to improve the financial viability of small market television stations, most of which are operated by large integrated media conglomerates. »

10201   Je n'ai pas remarqué si vous étiez dans la salle ce matin, mais ce matin, on a eu de très nombreux exploitants de télévision locale qui sont de petits exploitants et qui, eux, sont satisfaits, là, du FAPL.

10202   Est-ce que je dois comprendre de ce que je trouve dans votre présentation et dans votre soumission que si le Fonds d'amélioration de la programmation locale se limitait aux exploitants indépendants dans les petits marchés, que vous seriez plus à l'aise avec ce fonds-là?

10203   M. MAYRAND: Madame Lamarre, c'est une suggestion intéressante et, évidemment, on ne l'a pas considérée parce que le Fonds d'amélioration à la programmation locale, comme vous le savez, a été établi au départ comme un fonds général et, de plus, un fonds qui s'applique aux services publics, à Radio-Canada.

10204   Alors, évidemment, je pense qu'on est tous au courant du fait que le principal bénéficiaire du fonds à l'heure actuelle, c'est la Société Radio-Canada, CBC.

10205   Alors, évidemment, si vous évoquez une hypothèse où il y a une aide supplémentaire, ponctuelle, pour de petites entreprises indépendantes, et je comprends que vous voulez dire par là des entreprises qui ne sont contrôlées ni directement ou indirectement par un des grands réseaux ou un des grands groupes de média au Canada, on parle, évidemment, de quelque chose de complètement différent de ce qui a été établi en octobre 2008 et re-confirmé en avril 2009.

10206   Alors, comment est-ce que le Conseil ferait pour changer les règles, j'imagine qu'il vous appartient de considérer la possibilité de le faire.

10207   CONSEILLÈRE LAMARRE: Là, vous êtes en train de me dire que ce que je lisais entre les lignes, en fait, vous n'y aviez pas vraiment pensé?

10208   M. MAYRAND: On n'y a pas pensé parce que ce n'était tout simplement pas une option qui a été évoqué dans aucun des avis ou décisions pertinents sur le Fonds d'aide à la programmation locale.

10209   CONSEILLÈRE LAMARRE: Maintenant, l'ensemble des graphiques que vous nous avez fournis dans votre présentation, ils ont tous des titres, là, dans lesquels on retrouve le mot *radiodiffuseur+. Est-ce que ça serait radiodiffuseurs anglophones seulement ou c'est consolidé anglophones et francophones dans vos graphiques. Ceux des pages 2 à 5 plus précisément?

10210   M. AUDET: Ce sont des chiffres consolidés pour les radiodiffuseurs de langue française et anglaise.

10211   CONSEILLÈRE LAMARRE: Et anglaise. Au niveau des solutions pour les radiodiffuseurs conventionnels, et vous en avez parlé avec monsieur le président, proposé l'établissement, là, d'un ratio de dépenses entre la programmation canadienne et la programmation étrangère, ça, clairement ça s'adresse au marché anglophone cette proposition-là. Est-ce que je me trompe?

10212   M. AUDET: Oui, effectivement, c'est d'un intérêt plus direct pour le marché anglophone. Le marché francophone, lui, requerrait une discussion séparée et il nous fera plaisir de répondre à vos questions à cet égard.

10213   CONSEILLÈRE LAMARRE: Et justement, j'y viens à mes questions.

10214   Votre présentation aussi ce matin, là, est clairement orientée, selon moi, peut-être que je me trompe puis vous me corrigerez si c'est le cas, mais elle me semble clairement orientée vers la problématique du marché anglophone. Or, un peu plus de 30 pour cent de vos clients sont au Québec.

10215   Est-ce que vous avez des propositions ou des suggestions spécifiques pour le marché francophone?

10216   M. AUDET: Oui, nous en avons, madame. Dans l'esprit d'éviter des débats difficiles, nous nous sommes abstenus de les tabler, mais puisque vous me posez la question, je vais y répondre.

10217   Nous avons été aux premières loges de la tentative de redresser TQS qui a été une entreprise à laquelle nous étions prêts pour le long terme. Lorsque nous avons investi, nous savions que la performance financière laissait à désirer, que ça allait demander beaucoup de travail.

10218   Nous avons été surpris d'une série de gestes qui ont été posés par la Société Radio-Canada de partir des émissions concurrentes dans les sports en fin de soirée, d'acquérir des séries américaines au double du prix du marché et, finalement, de nous désaffilier.

10219   Alors, c'est clair que ce qui a littéralement poussé TQS à se placer sur la protection de la Loi avec les créanciers. Donc, le marché francophone, effectivement, est dans une situation particulière. Le réseau public ne joue plus son rôle de réseau public. Il se comporte comme un réseau privé et il joue selon des règles en fait plus dures même que le secteur privé.

10220   Ce Conseil n'a pas jugé bon intervenir, et puis je vous fais remarquer que je réponds à votre question d'ailleurs, hein! Je ne suis pas venu ici pour me plaindre.

10221   CONSEILLÈRE LAMARRE: Et je vous écoute.

10222   M. AUDET: Je réponds strictement à votre question et, alors, oui, tant que vous ne refrénerez pas les ardeurs du secteur français de Radio-Canada, vous allez avoir des difficultés de viabilité des autres joueurs privés dans le marché francophone.

10223   CONSEILLÈRE LAMARRE: Outre la dynamique secteur privé, secteur public, est-ce que pour le secteur privé, plus particulièrement la télévision francophone, est-ce que vous voyez un modèle au niveau du montant de dépenses et du nombre d'heures aussi de visionnement qui pourrait améliorer la situation actuelle?

10224   M. AUDET: Écoutez; nous ne sommes plus maintenant, comme vous le savez, depuis deux ans dans le secteur de la télédiffusion traditionnelle, mais quand même, après plusieurs années d'observation, j'ai la nette impression que dû au fait que la télévision généraliste francophone génère à peu près 70, si mon souvenir est bon, 70, 75 pour cent de ses heures d'écoute grâce à des émissions canadiennes produites au Canada en langue française, il y a des mécanismes auto-régulant.

10225   C'est que les diffuseurs francophones sont obligés d'être auto-dépendants et à cause de ça sont soumis à une discipline excessivement forte sur ce qu'ils doivent faire pour conquérir l'auditoire, jusqu'où ils vont aller et doivent être excessivement créatifs, et tout ça, ça découle de la longue tradition théâtrale francophone qui a vu le jour dans les années 1950 et, à mon avis, je ne pense pas qu'il y ait besoin de leur imposer une règle particulière.

10226   CONSEILLÈRE LAMARRE: Un autre sujet totalement différent. À la page 28 de votre mémoire vous présentez un tableau, en fait, un tableau, un graphique circulaire qui s'intitule "Basic Câble Bill Allocation".

10227   Est-ce que c'est la répartition des dépenses où vous dites "Basic Câble" en anglais, est-ce que c'est la répartition des dépenses pour le service de base uniquement ou est-e que la terminologie est autre?

10228   M. MAYRAND: Oui. D'abord, ce sont des données pour l'ensemble de l'industrie, là. Ce n'est pas des données propres à nous.

10229   CONSEILLÈRE LAMARRE: Ce ne sont pas les vôtres. Ce sont les données pour l'industrie.

10230   M. MAYRAND: Ce ne sont pas des données de COGECO et Susan Blackwell peut certainement vous expliquer la source des données.

10231   MS BLACKWELL: Thank you, commissioner. What I have done with this chart is take the day that CRTC produced for 2005, which is the last year that we saw basic service break-out and simply reflected the expenses and revenues shown there for all of Canada's basic cable subscribers and service providers.

10232   So, that's what is reflected, English and French, but it's just basic.

10233   COMMISSIONER LAMARRE: So, it reflects the cost of the basic package?

10234   MS. BLACKWELL: That's correct.

10235   CONSEILLÈRE LAMARRE: Merci. Et selon votre appréciation, monsieur Mayrand et monsieur Audet, est-ce que ça reflète pas mal vos opérations à vous aussi?

10236   M. MAYRAND: Je pense que c'est une présentation généralement bonne de ce qui se passe. Comme dit Suzanne, les chiffres datent un peu parce que vous ne publiez plus les statistiques de la même façon qu'auparavant.

10237   Cependant, nous avons produit dans le cadre d'une autre procédure et qui nous amènera sans doute à recomparaître devant vous dans quelques semaines, des données chiffrées en réponse à des questions précises et nous avons mis toutes les données au dossier public. On a demandé aucune confidentialité de ces renseignements-là.

10238   Alors, vous avez... il n'est peut-être pas approprié de rentrer dans le détail de ça, mais c'est au dossier public.

10239   CONSEILLÈRE LAMARRE: Et on en discutera à ce moment-là.

10240   M. MAYRAND: Merci. Ma dernière question. Bon, vous avez fait valoir votre point d'une façon très, très claire que vous estimez que s'il y a une augmentation des coûts au niveau de l'acquisition de signaux de télévision par un mécanisme, un concept de valeur marchande pour les signaux des télévisions conventionnelles, qu'il n'y avait pas de place dans votre calcul d'affaires pour absorber ce coût-là supplémentaire, qu'il devait nécessairement être transmis aux clients.

10241   Vos confrères de chez Videotron ou chez Quebecor je devrais peut-être dire, ne partagent pas cette opinion et ils estiment qu'il y a moyen de rééquilibrer les dépenses.

10242   Avez-vous des commentaires au sujet de leur position?

10243   M. AUDET: À ma connaissance, le modèle de Videotron implique un rééquilibrage des dépenses entre les spécialisés et les généralistes et non pas un rééquilibrage à même les recettes de câblodistribution et de Videotron et c'est une distinction importante qu'il faut établir.

10244   CONSEILLÈRE LAMARRE: Mais vous...

10245   M. AUDET: Mais cela étant, quelle est votre question?

10246   CONSEILLÈRE LAMARRE: J'aimerais savoir quelle est votre position. Est-ce que vous... Videotron ou Québec a un système de câblodistribution dans un marché qui est quand même semblable au vôtre dans une certaine mesure et ils envisagent ça d'une façon différente de la vôtre.

10247   Vous, est-ce que vous êtes en train de me dire que pour vous ce n'est pas acceptable un rééquilibrage entre les conventionnels et les spécialisés?

10248   M. MAYRAND: Écoutez; c'est un petit peu ce qu'on disait dans notre présentation de ce matin. Lorsque vous essayez de contenter une partie en enlevant quelque chose à l'autre partie ici, c'est excessivement difficile parce que vous condamnez celui qui a eu du succès en travaillant fort à avoir moins de succès, alors c'est excessivement difficile d'en arriver là et c'est un peu arbitraire parce que...

10249   Alors, que ce soit des spécialisés ou généralistes ou que ce soit des distributeurs ou généralistes, c'est un peu la même dynamique. C'est d'enlever à une partie qui a réussi à bien gérer son bateau pour le donner à l'autre qui a soit moins bien réussi à le gérer, soit a fait face à des circonstances particulières.

10250   Le vrai rééquilibrage qu'il faut faire dans les circonstances, c'est celui de notre première proposition. C'est de fixer aux télédiffuseurs traditionnels une limite de dépenses sur la programmation étrangère, de sorte qu'il n'y ait pas plus d'un dollar dépensé sur la programmation étrangère qu'il n'y a de dollar dépensé sur la programmation canadienne.

10251   Maintenant, j'aimerais...

10252   CONSEILLÈRE LAMARRE: Ce qui réglerait, selon vous, le cas du marché anglophone, mais qui aurait, à toutes fins pratiques, pas d'impact au niveau du marché francophone.

10253   M. MAYRAND: Mais pour le marché francophone, j'estime avoir largement commenté...

10254   CONSEILLÈRE LAMARRE: Exprimé votre opinion clairement?

10255   M. MAYRAND:... sur cette question. Mais j'aimerais de nouveau porter votre attention sur ce graphique-ci qui est le graphique de la page 1 ici, là. Ici, c'est une graphique très important, hein! Parce que si vous faisiez la somme mentalement, et j'admets avec vous que c'est difficile de la faire mentalement, vous verriez que les dépenses en capital au cours des dix dernières années -- et on parle de notre compagnie au Canada, dans le câble -- vous verriez qu'il y a des dépenses en capital de 1,63 milliards de dollars, alors que le bénéfice net sur ces dix ans ne s'est élevé qu'à 386 millions. Alors, c'est comme quatre fois plus petit, hein! Et les liquidités générées ont été de l'ordre de 48 millions.

10256   Alors, c'est la raison pour laquelle nous vous disons, les distributeurs n'ont aucun autre choix que de passer aux consommateurs le coût des intrants à leur service, sans ça, ils seront arrêtés dans leur marche pour construire des réseaux compétitifs qui donnent des services à des prix compétitifs à leurs clients dont le pays a besoin pour avancer.

10257   CONSEILLÈRE LAMARRE: Merci. Ce sont toutes mes questions, monsieur le président.

10258   LE PRÉSIDENT: Oui. Len?

10259   COMMISIONER KATZ: Thank you, Mr. Chair and good morning.

10260   I have got two themes to my question. The first one, I guess, is on page 12 of your remarks this morning where you suggest or you propose that a one-to-one programming expenditure might do two things: one is that you say to curb destructive overbidding and the other would be to remove the notion of what I'll call "non economic purchases" that you call "inventory purchases".

10261   I am just wondering if there is a better way of achieving the same thing and I guess the question is: Have you thought about putting a cap on the number of hours that are purchased for priority television hours so that the broadcasters can buy what they want at the price they want, but they can only buy so many hours worth of programming during primetime? And that does two things: one, is that it reduces the demand for the programming, which means they would buy less over all; and two, they would buy less so they would pay less as well. So you get two kicks at the can.

10262   And without necessarily trying to put a dollar limit on it, you would put a cap on the number of hours and that might accomplish the same thing. Have you thought through that model at all?

10263   MR. AUDET: Honestly, no, we haven't. Clearly, by virtue of your mission of course, you have considered a number of options. That is possibly one of them.

10264   The difficulty, as I see it, is this is like incentive remuneration. If the outcome you desire is not clear enough or if there are too many detours sometimes you are surprised with the result you get. We thought our formula was simple, it made it clear that it would in effect reduce the expenditure on U.S. programming, which we think is necessary to put the house in order.

10265   That being said, your formula, you know, you have thought about it, I can't really comment on it.

10266   COMMISSIONER KATZ: I have thought about it, but the only reason why is my concern with your formula is it impacts the market, it doesn't allow market forces to take effect. Whereas in my case, the market forces are there, it is an open market, it is a free market, however you want to define free, but it puts a cap on it basically as well that is all.

10267   I am just wondering whether you had thought of it.

10268   MR. MAYRAND: No, maybe there are tools that you can devise that would achieve the same result. Frankly, we are not in a position to model them, probably the Commission is.

10269   But in any event, I think it is a bit awkward by definition to try and replicate a market situation for this particular problem, and the reason quite simply is that you are dealing with an entirely regulated situation. And particularly a requirement in the Broadcasting Act that:

"each broadcasting undertaking shall make maximum use of, and in no case less than predominate use, of Canadian creative and other resources in the creation and presentation of programming."

10270   So that is the sort of statutory guideline. And you could look at various iterations of ways to achieve that. I think our key message to you today is the root cause of our problem with conventional TV financial metrics deteriorating over the last few years is this factor of runaway expenditures and overbidding on, you know, U.S. networks and Hollywood properties.

10271   COMMISSIONER KATZ: Yes, and unfortunately that assumes that there is no profit in it, and unfortunately that data is confidential so we get into that next --

10272   MR. MAYRAND: Yes, we carefully reread the transcripts of the in-camera sessions and, of course, anything that would be meaningful for this discussion has been redacted.

10273   COMMISSIONER KATZ: Okay. Let me go onto my next question. And first of all, let me caveat it by saying in no way do I believe that your industry, the industry, is not investing heavily in infrastructures. Let me start with that.

10274   At the same time, I have heard you and other BDUs indicate that your business on the video side is basically break even at best and you are carrying your business through the internet and telephony businesses as well.

10275   When I take a look at the data that we have in the CRTC, and I will quote from industry data as opposed to your specific data, although I believe your data is public as well in the data that is filed on our database. It appears as though, if I look at it across the board, all the video BDU PBITs, they seem to be in the 20, 25, 30 per cent range.

10276   When I look at the PBITs for operating margin -- when I look at the operating margins for the other businesses, which are then non-regulated telephony and broadband businesses, they are in the 65, 70 per cent range. Now, that is before interest and taxes and depreciation and all those things as well.

10277   But if I draw the assumption that both industries, the broadband industry, the telephony industry, and the entertainment video industry are heavily capital-intensive, I still wonder why one is so much more operating margin higher than the other and whether we have got an allocation problem. I don't want to get into costing, because I come from the telecom side and I know what it is like and it is years and years.

10278   But just apparently, can you comment on the fact that why in Cogeco's case and in other cases the operating margins in the non-regulated, non-broadcasting sector are so much higher than the broadcasting?

10279   MR. MAYRAND: Well, we have Suzanne here as part of our panel and she has really studied the numbers industry-wide quite extensively. I am sure she has some comments to make on that.

10280   But fundamentally, I think we are dealing here with, you know, there has to be some allocation of the overall capex requirements that is required for the whole breadth of our activities to the video portion.

10281   And unfortunately or whichever way you want to slice and dice it, fortunately, depending on the perspective, it is just a fact that the overwhelming part of our bandwidth on these pipelines that we deploy is currently used and will be for years to come on video distribution.

10282   And to dovetail an earlier question by another commissioner, irrespective of the amount of traffic of video content through the internet. That is the hard fact. And, of course, a good part of that spectrum is analogue spectrum, it is very expensive to deploy, it is very inefficient and we have it in place.

10283   Unfortunately, it is an incumbent situation that we are not about to get rid of because for a lot of our customers, a very substantial base of customers, that is the way that they still want to receive their cable offering.

10284   Now I don't know, Suzanne, if you want to add to that?

10285   MS BLACKWELL: I can understand when you are looking at those comparisons at the operating margin level that you might expect some similarities across the industries. But I think, as Yves has pointed out, there is a significant capital expenditure that is associated with the video, not just in the infrastructure but in the set-top boxes that have to be put in people's homes, the extension to every household or the vast majority of households

10286   The cable household past figure is in the 97 per cent range. And as household growth increases, there is line extensions, there is rebuilds that have to happen to support not only the new growth and, in fact, highly risky services such as internet, but also for basic cable and the enhancements to the video services.

10287   So there is actually, trending back when we did see some breakout between basic and non-basic of depreciation costs, traditionally the CRTC numbers have shown the allocation to video at 80 per cent or higher. The analysis that I have done in support of various parties in this proceeding I used a 65 per cent allocation, which is quite conservative, in fact lower than what I saw in some of the public filings that I think that Cogeco used.

10288   So I don't think that we are dealing with an allocation issue but, as you alluded to, cost allocation is a lengthy and complex effort and I am not proposing that we have got the final answer here, but I think the numbers are, if anything, conservative.

10289   COMMISSIONER KATZ: Yes, I am not suggesting we need to get into cost exercises, but I am concerned that if the numbers are correct, then if the broadband margins are that high why are they that high as well and whether there is other -- I won't go into it, because it is a different topic for a different venue.

10290   MS BLACKWELL: But, I mean, it does attract that attention. And if I could just suggest that when you are talking about a new growth industry that is still going from, you know, 20 per cent to 40 per cent to 60 per cent penetration, as broadband is over the recent years, that you are expecting to have in that high-risk investment a return that is what you might see on the internet side.

10291   These are new entry in telephony and growth in internet and broadband internet are the kinds of endeavours that investors are not going to expect a 4 or 5 per cent return on.

10292   COMMISSIONER KATZ: Those are my questions.

10293   THE CHAIRPERSON: Thank you.

10294   Two quick questions before I let you go. Number one, we have heard a lot of talk about non-simultaneous substitution. Are you technically capable of doing it if we would opt for a regime like that, as a BDU?

10295   MR. MAYRAND: The answer to that, sir, right now is no. We are not equipped to do that. And my problem with NSS is that we keep on talking about the concept, but we can't get really a fix on the actual technical solutions to start with. And then what kind of activity we are talking about, because it would have to be a program by itself.

10296   THE CHAIRPERSON: I know, I just want to know technically, technically you are not ready.

10297   The second one, I didn't hear you comment at all on -- sorry.

10298   MR. AUDET: Pardon me, sir. With regards to non-simultaneous substitution, I do want to point out that this, for consumers, is cause for a revolution really literally, believe me. You miss the substitution window by two seconds and your call centre is overcome by all sorts of very angry people. So try to blackout a show. This is cause for a revolution, we all lose our jobs the next day.

10299   THE CHAIRPERSON: Okay. I was, very carefully, only talking about the technical feasibility. I appreciate what you are talking, what is public reaction, which actually brings me to my second point.

10300   CTV, when we opened this hearing, put on the table basically a version of the U.S. model saying, let us negotiate with the BDUs what is the value for our signal. And, if we can't negotiate, then we can withdraw our signal or they can refuse to deliver our signal.

10301   And at the end of the day, if there can only be resort to the CRTC, not for arbitration or the substance, but being the only to complain as to whether there was fair negotiation. If there, you know, in effect you have to put an offer on the table and you have to talk, but if you don't, so be it.

10302   And you obviously could refuse to carry their signal or they could refuse to deliver their signal. And if they say deliver our signal, that also means you cannot -- those U.S. programs that we have bought and which we are now using for simsub, you would have to delete those because we hold the Canadian rights, the simsub is the compensation for the Canadian rights since we don't allow you to use those signals, we withdraw them, we will also withdraw them for the purpose of simsub and, therefore, the U.S. cannot come in.

10303   What is your reaction to this proposal? I mean, it seems to suggest that there is negotiations between equals, you both stand to lose a lot and the logical sense would be that you would determine what, if any, this value is.

10304   MR. MAYRAND: Well, two things, sir. First one, I wish to point out that this is strictly a CTV proposal. So out of the whole group of say of local TV it is only CTV that is taking that approach and, of course, all the other ones are taking a completely different approach.

10305   THE CHAIRPERSON: I only asked you about the CTV.

10306   MR. MAYRAND: So now, with respect to that proposal, of course it is still a proposal that involves, and that is my second point, it involves in fact the recognition of what we feel is a right to the signal, the broadcast signal, as opposed to the underlying content that is put onto that signal and exhibited through the air.

10307   And we have a fundamental problem with that and, hence, the difficulty of, even on that basis, starting some kind of negotiation because that right, in our view, does not exist right now.

10308   And the second aspect of the CTV proposal that causes us some difficulty is the fact that they are still asking for some conditions that are really in the nature of a regulatory intervention involving the Commission, whether it be for blackouts and whether it be for some kind of recourse, as you put it, on the notion that the negotiation might not have been fair.

10309   So I think, unfortunately, that formula does not work. It certainly doesn't work for us.

10310   THE CHAIRPERSON: Okay. The recourse, as I understood it, was not to settle, not at all, just to make sure that both sides played by the rules. That is how I understood that and that is what the expert from the U.S. said as well.

10311   MR. MAYRAND: And if I may add two things to that, Mr. Chairman. First, you know, we would like to know from CTV, as part of that proposal, what it is that they would change or not change or ask you to change or not change in the broadcasting distribution regulations.

10312   I don't know if you can figure that out from their submissions and their appearance, I can't, we don't know that. And it is a critical component.

10313   And second of course, you know, there was the Jack Goodman paper I guess that was attached to a Shaw submission that clearly explains why it is that, you know, the U.S. retransmission consent regime really could not be transposed in Canada, or vice versa, that the U.S. would never have approved the kind of formula that CTV is advocating.

10314   THE CHAIRPERSON: Okay, thank you very much. Those are all our questions, I appreciate you coming. Be ready for the submissions you want to make in writing as a result of our questions here until December 14.

10315   MR. AUDET: Thank you very much.

10316   THE CHAIRPERSON: Thank you.

10317   We had a cancellation for this afternoon, so we will resume at 2 o'clock. Thank you.

--- Upon recessing at 1246

--- Upon resuming at 1403

10318   THE CHAIRPERSON: Madam Secretary, let's begin.

10319   THE SECRETARY: I would now invite TELUS Communications Company to make its presentation.

10320   Please introduce yourself and your colleagues, and proceed with your 15-minute presentation.

10321   Thank you.

PRESENTATION

10322   MR. HENNESSY: Thank you.

10323   Good afternoon, Mr. Chairman, Vice-Chairman and Commissioners. My name is Michael Hennessy and I am the Senior Vice-President of Government and Regulatory Affairs at TELUS.

10324   I am here today with Greg Goodwin, on my right, Vice-President of Marketing Operations, and Ann Mainville-Neeson, TELUS' Director of Broadcast Regulation.

10325   It is urban legend that the American comedian W. C. Fields proposed an epitaph for his gravestone which stated, "All Things Considered, I Would Rather be in Philadelphia." When it comes to appearing here today, I share that sentiment. There are times I would rather be in Philadelphia, as well, or at least somewhere else discussing what we need to do collectively to invest in a national digital strategy, rather than here, in discussions about plugging leaks in dikes.

10326   I have been troubled about our appearance here today because of the lack of context in the current debate about how what we are discussing today connects with the media business of tomorrow, and I believe it is the absence of a bigger picture to wrap discussion around that has led the Commission to express its frustration at times with these proceedings.

10327   Hopefully, we can propose a new solution and add value to the debate.

10328   Let's be clear, local TV is a good thing, but, personally, I don't equate the future of Canadian content solely with how local TV evolves. Local is only one part of an increasingly larger market for digital content that knows no borders, and operates under a very different set of rules.

10329   The debate we are having here leaves us stuck in an old paradigm where the regulator, and we the industry, still develop prescriptions based on what we think is good for the public. That world is on the way out.

10330   At TELUS, we equate the future of Canadian media to be whatever consumers define it to be through the choices they make and the preferences they show, and, increasingly, on the platforms they choose.

10331   I also personally think that what was once recognized as local TV died a long time ago as a result of shifts in audience preference, consolidation to respond to audience fragmentation, and the shift from local to network control with respect to program production and acquisition.

10332   All of this does not mean there is less local content overall. In fact, there is probably more local content available today, when you consider local radio and newspapers, specialty magazines, and the internet, in addition to what is on TV.

10333   That aside, I think the debate about local TV is simply not the right debate to have on the future of entertainment and information in Canada. The local TV debate is unproductive because it is not linked to the big picture. Moreover, it is a debate that has left us trapped somewhere between "stuck" and "reverse", rather than moving forward.

10334   The real debate that we need to have has to be about how our system will build on technology and consumer demand to enable the creation of content that meets the demands of consumers, no matter what that content will be.

10335   In a world where all content is consumed on a discretionary basis, consumers make the call as to what content matters, and maybe local is no longer the top priority when it comes to consumer preference.

10336   Given the shift to consumer sovereignty and control, all elements of the digital value chain, starting with the Heritage and Industry departments, should be debating ways to stimulate investment in a digital on-demand future and create opportunities for Canadian creative talents that truly serve consumer demand.

10337   Instead, we have gathered over a bitter and, at times, manic debate about who pays for dinner on the Titanic. As long as this unproductive debate carries on, there will be no winners in this hearing room -- not broadcasters, not creators, not distributors, and certainly not regulators or the departmental policy-makers who should be encouraging a Canadian stake in a digital future.

10338   But make no mistake, consumers will still be acquiring entertainment and information with or without us.

10339   We make this point not to increase your frustration at the seeming intransigence of BDUs to negotiate for signals, but merely to make clear that it is more important to look forward than to look back. Simply put, we can't change the past, but we can influence the future. We just don't think that the drama around so-called local TV has as much to do with the future of Canadian media as a digital strategy to remodel the system from the consumer up.

10340   Finally, we think it is important to get it straight, on the record, just how much we are investing in that digital future, because without ongoing investment in all digital platforms, not just OTA transmitters, there is less opportunity for digital content creation and distribution and less choice.

10341   I would ask Greg Goodwin to describe the significant investments we are making in our digital platform.

10342   MR. GOODWIN: Over the last decade, TELUS has invested billions of dollars in IP-based platforms for entertainment and information that will benefit broadcasters and producers. That is billions of dollars of investment into the platform of the future, which content providers will need to evolve their businesses to reach consumers in Canada and from around the world, whether via traditional TV, computer screens or wireless devices.

10343   A significant part of TELUS' IP platform investment has been in support of our TELUS TV launch. In 2009 alone, we will spend more than $350 million on our "Fibre to the Neighbourhood Project" to upgrade our access network, enabling a new, all-digital choice of TV service provider for about 1.5 million Alberta and B.C. consumer households. That's just the pipes.

10344   In addition to the access network, we will also invest more than $100 million in our IPTV software, new channel additions, and the digital set-top boxes and installation labour for each new customer.

10345   To give you a feel for the magnitude of these numbers, yesterday we had 575 technicians in the field working to install new TV customers.

10346   The beginning phases of a new entrant BDU are extraordinarily expensive. For all of that investment, our TV businesses today generate well under $100 million in revenue annually. We see negative profits in this early phase of TELUS TV because we haven't yet reached economies of scale in our platforms and, as a new entrant, we pay higher content costs and incur significant acquisition costs to win TV customers from the incumbent provider.

10347   Last year we also spent about $1.5 million on acquiring new local signals to be carried, as mandated by the CRTC.

10348   So the high margins that the Commission has attributed to cable do not apply to new entrant services like TELUS TV. For us, new costs are either absorbed at the expense of less network development or customer service improvements, or they result in fee increases.

10349   We entered the TV business, however, because of the need to evolve our portfolio of products and services to meet the demands of consumers, who, increasingly, prefer to buy all of their entertainment, broadband and telecom services in a bundle from a single provider.

10350   We chose to make investments in the short term which bring us little or no profit to position ourselves for future success. All businesses with longevity evolve in such a way.

10351   At TELUS, we see the future of television as on-demand. We are actively pursuing on-demand content deals with various providers, and many linear stations are negotiating on-demand rights to their content with us. This is a new cost to us, and yet we offer the programming at no charge because consumers are demanding it to break free from appointment television.

10352   It is a new cost with no incremental revenue for the BDU, but, conversely, a lucrative new revenue stream for the broadcasters, as content rights holders.

10353   In closing, I think folks have noticed that Rogers launched their online portal yesterday, and there was a quote from David Purdy, who said: "We are not in the TV business, we are in the video entertainment business."

10354   I would say that TELUS agrees wholeheartedly with his comments yesterday.

10355   MS MAINVILLE-NEESON: We note that the provisioning of programming on demand is changing the economic model between broadcasters and BDUs. It seems then that, to the extent that the Commission is looking at rebalancing the relationship between BDUs and broadcasters, this is already happening on the new platforms, and without regulatory intervention.

10356   The record of this proceeding, and the proceedings that came before, is pretty clear on why BDUs oppose what is currently called "value for signal". We won't revisit those arguments here, we wouldn't want to waste any time when we have more important issues to discuss and proposals to make.

10357   However, there is one issue that we don't think has been adequately addressed, and that is the response of the U.S. border stations.

10358   In their media campaigns, the Canadian broadcasters have misled many into thinking that BDUs pay fees to the U.S. over-the-air broadcasters. That is simply not true. No over-the-air broadcasters, whether Canadian or U.S., are currently paid by BDUs for the right to retransmit their signals. Instead, there is a compulsory licensing regime for retransmission under the Copyright Act.

10359   We are not making an argument here with respect to the Commission's jurisdiction on copyright. Those legal opinions have been filed, and that is not a matter that we would like to discuss here. We submit, however, that if we start paying value-for-signal for the Canadian over-the-air broadcasters, then we will have weakened the position of Canada in the WIPO treaties, and this could lead to an outflow of hundreds of millions of dollars to U.S. over-the-air broadcasters.

10360   This would mean less money in the Canadian system overall, but there would be an increase for Canadians to receive the same stations they have been receiving for over 40 years.

10361   This is a significant risk in moving to a value-for-signal compensation model for Canadian broadcasters. And let's be clear, the current model of offering content for free in exchange for advertising is not dead. Some speciality services, in fact, are willing to forgo any subscriber fees in order to be included on the basic package, and, thus, raise the value for their advertising.

10362   Even the broadcasters who are currently seeking to be paid for their linear over-the-air signals are offering up content for free on their websites.

10363   You might ask: If not value-for-signal, then what?

10364   We would now like to emphasize some opportunities for injecting new money into the Canadian broadcasting system.

10365   For example, advertising on VOD can provide additional revenues to the content providers, and provide additional incentive for making more content available on demand.

10366   TELUS continues to fully expect that the insertion of ads in VOD programming will be beneficial for both the content providers and the VOD operators.

10367   Also, another source of new money into the Canadian broadcasting system, which has been mentioned a few times already, can come from the sale of commercial advertising on the local avails.

10368   In this regard, TELUS would like to pledge its support to the proposal put forward by Media De Novo for the monetization of the local avails.

10369   Under Media De Novo's model, national commercial advertising would be sold in the local avails by an independent third party, which would then redistribute the money to local broadcasters and to BDUs.

10370   TELUS considers that this third party solution is the best means of monetizing the avails without threatening or causing any market or regulatory distortions.

10371   More importantly, monetizing the avails provides a new source of revenue for broadcasters and BDUs without any impact on consumers. It is truly win-win.

10372   TELUS considers the sale of ads on VOD and in the avails to be constructive solutions for the apparent impasse in the debate on how to move forward in a regulatory model which provides incentive to innovate to meet the challenges of the future.

10373   MR. HENNESSY: Thank you, Ann.

10374   One point to note is, in our support for the Media De Novo application, there is an estimation that that could result in as much as $60 million, $70 million a year of new money that could flow back into the broadcasting system to broadcasters, if the Commission so wishes.

10375   I don't know, at the end of the day, what people project the amount of money they think would have flown from fee-for-carriage, and I am not saying that we are talking about fee-for-carriage, but that number was often expressed in the paper as $70 million, $80 million.

10376   This is certainly a way to put money into the system without anybody paying or, potentially, anybody losing anything.

10377   It's a suggestion.

10378   Consumers want more opportunity to choose the channels they want to watch, without paying for a whole lot of stuff they don't.

10379   Top-down proposals like a skinny basic are not the solution because they don't allow for the exercise of choice.

10380   The current debate puts too much emphasis on new fees, subsidies and income transfers, and none on the broader discussion of what our priorities should be.

10381   This is a big problem, because we seem to be locked in a cycle of increased compensation, fees or taxes to support elements of the old system -- the LPIF for example -- without ever engaging in a discussion on whether these elements are still necessary or whether they require assistance, or even if they are priorities.

10382   And I am not alone in suggesting that our focus on local may not be where our priorities lie. In a report done for the CRTC, Peter Miller, a Canadian with a long history in local TV, stated the following:

"The reality is that OTA TV is a 60-year-old business in the midst of an important and entirely necessary transition. In some ways, the current transition is no more important than the earlier ones, such as that from a more locally oriented business to a more nationally oriented one, but in other ways it is a far more profound one, because, unlike at any other time, the questions that really need to be asked today are questions like: Does OTA TV matter? Does it need to exist in its current form? Is it replaceable? Can the things it does be done in other, better, more efficient or cost-effective ways?
Those are questions I don't think we have spent enough time discussing."

10383   It is irrational, in our opinion, to talk about subsidies, compensation, or whatever you want to call income transfer, without first setting priorities. That is Step 1.

10384   The way we are heading now, subsidizing piecemeal, the proverbial well may be dry before we figure out how to invest in the future.

10385   The world of digital media creates a major paradigm shift, and it is time for a new national digital strategy. This strategy has to be based on the principle that consumers and audience dictate our priorities, not policy-makers.

10386   It has to ensure that Canadians have an opportunity to access, communicate, interact, create and transact over not just an old TV space, but on open broadband and digital networks, regardless of the platform.

10387   That requires stimulating more investment in broadband, not increasing the costs of investors.

10388   And only after a holistic vision is in place is it possible to determine how to create the right incentives to move this strategy forward. Technology, the consumer, or the public, if you will, are already shaping markets. Collectively, we need to learn how to follow to succeed.

10389   Government cannot shape markets that don't exist or replace demand if it has gone elsewhere, but it can stimulate investment and creativity by focusing on where consumers and technology are taking us.

10390   We would now be pleased to answer your questions. Thank you.

10391   THE CHAIRPERSON: Thank you, Mr. Hennessy.

10392   I am surprised to see you here after this morning's headline, where you are quoted as saying that this is a waste of time and resources. I wasn't sure whether you would show up, but now that you are here, tell me -- national digital strategy, you heard me speak about it, you heard the Commission announce it in our New Media Decision, et cetera, and we totally share your view, it is a high priority, it is needed, and it should be there.

10393   What do we do in the interim?

10394   First of all, I haven't seen government momentum to establish one. Secondly, even if there is, it's not going to happen tomorrow.

10395   So, in the interim, what do we do? That is the question I have for you.

10396   MR. HENNESSY: All right. And I agree that you are, clearly, a supporter of that, which is why I noted the Industry and Heritage departments as people that are not really moving on the promise they made last summer.

10397   I think, in the interim, we still need to address the fundamental questions: Where is consumer demand going? What is the role of the local broadcaster? What is local programming? How do we define that? And, how do people, in an all-digital, interactive world, increasingly, obtain local news, information and programming?

10398   Those are the questions, and I know that some of the questions are talking about them. I am not trying to be dismissive, but I think that is not the debate that seems to be sucking up so much of the energy of this proceeding.

10399   THE CHAIRPERSON: Yes, but you and I are captives of the existing Broadcasting Act, which was built for yesterday, not for today. We know that, but we have to live with it and make it work, and it doesn't really give us the freedom to look at the issues the way you just stated them.

10400   It sets out all sorts of objectives --

10401   MR. HENNESSY: There are 36 objectives, and sub-objectives.

10402   THE CHAIRPERSON: Yes, some of them aspirational, some of them not, and our job is to marry those with the commercial principles that govern the industry.

10403   MR. HENNESSY: Okay. I think that with 36 objectives, and sub-objectives, there is actually quite a lot of latitude to do what we want, but I will keep it focused on your question, in your zone here.

10404   Let's start with where we were a year and a half ago when people were talking about fee-for-carriage and 50 cents a signal adding up to $70 million.

10405   THE CHAIRPERSON: $350 million, but anyway...

10406   MR. HENNESSY: It was 350?

10407   THE CHAIRPERSON: Yes.

10408   MR. HENNESSY: I don't have $350 million.

--- Laughter

10409   THE CHAIRPERSON: That is part of the reason, as you heard me say this morning, why we did that calculation, just to show how huge that sum is.

10410   MR. HENNESSY: Yes.

10411   THE CHAIRPERSON: The 50 cents sounds like nothing, but when you --

10412   MR. HENNESSY: I could skinny it down to 70 for you. Based on your value --

--- Laughter

10413   MR. HENNESSY: No, no, in a very serious fashion, based on your value-for-system proposal, you would expect that many channels would never opt for negotiation, would be satisfied to be carried, because they don't bring value in the commercial sense of the word.

10414   So it is quite possible that if you are really looking at the conventional commercial broadcasters -- CTV, Global, Citytv, in English Canada; TVA -- and you exclude the CBC -- and we can talk about why that is probably appropriate later -- then it probably is easy to get down to that kind of -- that is the kind of money that that group, which actually contributes to a lot of the program production in this country, is looking for.

10415   Avails are a great place to start, because they are not being monetized today, and to the extent that you can add $70 million or $80 million to whatever the pot is that you decide, that means it doesn't have to come out of subscriber fees, it doesn't have to increase the costs of the system, and you are off to a running start in terms of win-win.

10416   THE CHAIRPERSON: What do you say to the argument that we heard all week long that we don't grow the pie, all you are doing is redistributing, and if you do that, you are basically taking money out of the broadcasters -- from other advertising?

10417   MR. HENNESSY: I don't think the advertisers believe that. I think that is an argument the broadcasters make, and I guess they are kind of stuck for a while having to make that argument to justify --

10418   THE CHAIRPERSON: They make two arguments. They say that us taking off the limits on advertising in conventional TV has, in effect, produced more supply than there is demand, and if you added local avails, all you would do is, in effect, further dilute the rate that can be charged --

10419   MR. HENNESSY: No, because I think -- isn't the advertiser position that if you increase advertising in a particular hour of program beyond a certain point, you devalue the program and there is more likelihood that the consumer will shift?

10420   We are saying, add more advertising to the industry on the American specialty side, without actually adding anything more to the number of minutes within an hour of a program.

10421   I think there is a way to mesh those two views.

10422   MS MAINVILLE-NEESON: If I could add, when you look at monetizing the avails, you are actually adding new advertising on new stations. So, unlike increasing the number of minutes in a program or on any existing service, you are adding new services. So you are catching those viewers who might only be watching Spike, A&E, CNN. So you are adding new eyeballs, and that is very interesting to advertisers, who might then choose to advertise more on TV and less on the internet or on other mediums.

10423   That's why it is incrementally new.

10424   THE CHAIRPERSON: And you also suggest that we should allow advertising on VOD programming, which you see as the future, like many people who have appeared before us.

10425   On what basis should that be shared, in your view?

10426   MR. GOODWIN: I guess our view on that would be, much like the negotiations that are happening today for the content rights on VOD, that is a dimension of negotiation on which we can find mutual benefit with those content rights holders, and it would allow me to pay appropriately for the rights they are providing on the platform.

10427   MS MAINVILLE-NEESON: There can be no doubt that, on VOD, the VOD operator is providing some additional benefit, let's say, than merely a distributor for a linear signal, because on VOD you do have that much more ability to be able to target, and that is a value that I think the content rights holders will very much like.

10428   So when we go in to negotiate with CTV, we fully expect that if advertising is to be included in the programming they are providing to us, they will want to share in that advertising.

10429   But I think they will also realize that they can get more of a share if we are able to assist in providing that technological advantage.

10430   THE CHAIRPERSON: On page 5 of your presentation today, in the middle paragraph, you suggest that we allow a value-for-signal regime, or we establish one, and that we go over to the Americans and to WIPO negotiations and U.S. broadcasters...

10431   You admit that that is pure speculation on your part. I mean, first of all --

10432   MR. HENNESSY: No.

10433   THE CHAIRPERSON: Let me finish my question.

10434   First of all, we would have to agree that it would have to follow WIPO negotiations, and, secondly, we would have to agree to the WIPO treaty and implement it.

10435   There are three assumptions in here. They may be right or they may be wrong, we don't know, but at this point in time there is no such talk, as I understand it, that a value-for-signal system would be considered for retransmission rights which would be caught under WIPO.

10436   MR. HENNESSY: I think the problem is that, really, up until this proceeding, there wasn't -- if you want a legal or regulatory construct called you know a value for signal right, and what drives the WIPO discussions is the concept of a retransmission right.

10437   In my mind you could make an argument that there is a difference between the value of the signal and retransmitting the signal but if the signal isn't retransmitted potentially there isn't much value there at all.

10438   So I think it would certainly be raised by parties. And the majority of parties to the WIPO discussions over the last few years have been supportive of a retransmission right, as evidence that the Canadians have shifted their position with respect to this point.

10439   Can you say, therefore, absolutely? No, of course not. And in fact, I would pray very hard that that wasn't the case and in fact made sure when we wrote this statement that we caveated it with the word "probably".

10440   THE CHAIRPERSON: Okay, thank you.

10441   That's not what came across, but I appreciate that clarification.

10442   Tim, over to you.

10443   COMMISSIONER DENTON: Well, here we are, Mr. Hennessy, once again.

10444   I agree with you that we seem constantly forced by the categories of the Broadcasting Act to think retrospectively about saving certain industrial categories. And I share with you the frustration that the debate hasn't turned around towards the future and what needs to be done.

10445   As usual, the Chairman has stolen all my good questions.

10446   I would like to draw your attention to paragraph 5 of your original submission. You say that:

"Moreover, to encounter the facetious arguments that BDUs are being unjustly enriched..."

10447   COMMISSIONER DENTON: Facetious is a tendency to cause humour. Is not fatuous the word you are looking for?

10448   MR. HENNESSY: I think that's a nice word.

10449   COMMISSIONER DENTON: Don't you think?

10450   MR. HENNESSY: Yeah, I could use fatuous.

10451   COMMISSIONER DENTON: Now, the problem for all of us stuck here in the present --

10452   MR. HENNESSY: Thank you for that, Mr. Denton.

10453   COMMISSIONER DENTON: You are very welcome. Your briefings will be attended to.

10454   I like the idea of the video entertainment business. I like the idea of orienting the thing towards the future. So I hear you say basically in your thing no new taxes. I hear you saying reorient the thing towards a video entertainment business perspective. I hear you saying that if you orient it towards a video entertainment perspective you will seek out to place a consumer in the sovereign role.

10455   All this, I suggest to you and you probably would agree; do you not, is completely contrary to the Broadcasting Act which is a supplier-driven objective and a supplier-driven orientation?

10456   MR. HENNESSY: No, I don't agree.

10457   COMMISSIONER DENTON: Good, let's go.

10458   MR. HENNESSY: Okay. And the reason I don't agree is that I know for a long time that the idea of consumerism has been equated by many under the Broadcasting Act as being contrary to principles like ensuring diversity, ensuring their niche markets, non-commercial voices, et cetera.

10459   But I would suggest that with the new platforms that exist today, with the opportunities to deeply search the libraries of information with the ability of the internet to access papers, ideas and hold discussions so that communications becomes two-way and -- or you know, entertainment information production is shared and produced, that there is actually much more diversity, choice and a sharing of ideas, information, et cetera today than anything that was ever expected to be achieved under the Act.

10460   COMMISSIONER DENTON: That is perfectly true, but is that what the Act intended?

10461   MR. HENNESSY: I would say yes to a point.

10462   I don't think the Act intended to be so static that, you know, if there were better ways to achieve goals of diversity, public expression, the ability to access information, to receive certain public channels, that to have that done in a different technological way would have offended the enactors or the people that wrote the Act. And in fact there is a level of technological neutrality built in there.

10463   So I think the people that have that kind of dream probably would be pretty pleased today in many respects.

10464   COMMISSIONER DENTON: A fair comment.

10465   So you are basically saying we are having the wrong discussion.

10466   MR. HENNESSY: Yes.

10467   COMMISSIONER DENTON: How can we get that discussion moved to where we need it? How can we move the discussion to what we need to be talking about?

10468   MR. HENNESSY: I think in the interim we have to stop talking about finding ways for one element of the system to redistribute wealth to another element of the system to balance out old business models that may not be balanced out after the money has moved around.

10469   And collectively and, as I said, it should be the responsibility of the Department of Heritage and Industry to really push hard on the national digital strategy they promised. The Chair has been very clear about how much he would be willing to put his resources and support behind that.

10470   You know, I'm working with groups of people led by Tom Perlmutter, Norm Bolen, Interactive Ontario and others, to try to craft a common view of a digital vision for Canada that talks about how do we grab hold of new technology and create markets in the creation and production and distribution of entertainment and information; or create market opportunities for people to use the technology whatever the platform, to reach out not just locally or provincially, regionally or nationally but to the world.

10471   Because I do believe that there is an opportunity in the new technology, in the constant feedback you get from a web-taught 2.0 environment, for us to break free of the constant cycle of subsidy and actually create very viable and perhaps very different businesses when it comes to how people consume entertainment information.

10472   And I think that's really the -- we are having -- I know the local broadcasters still have to get their licences. I know, you know, the Commission has to resolve key issues like producers rights versus broadcaster rights when it comes to new platforms and, you know, are we going to move to more of an expenditure-based system.

10473   These are all things you have got to do. And, you know, I am certainly not against that but I am troubled that whenever there seems to be a problem the solution seems to be tax whoever in the system seems at this current time to have a degree of producer surplus. And to me, that never gets you into the more important debate about, what should our future look like?

10474   COMMISSIONER DENTON: Fair call.

10475   I am switching the topic somewhat to a statement you make in paragraph 10 of your submission on page 6 of 12. You state:

"In the case of the larger profitability numbers touted by the Commission most recently, these numbers include finances attributed to internet and telephony businesses, neither of which should be subject to any profit redistribution under the Broadcasting Act."

10476   COMMISSIONER DENTON: Now, it's in a sense all one network. I would like you to, if you want, explicate a bit on that sentence and what you mean by it.

10477   MR. HENNESSY: Okay. And I will let Greg explain how we allocate cost. It's all one network today in the sense that we would like to be able to drive traffic, whether it's voice, data, entertainment, information, money, whatever, over whatever platform is the most opportune for a customer to use as a particular point.

10478   But most of the network that we have today was never built with broadcasting in mind. And therefore, to the extent most of the businesses we have outside of the broadcasting business were built to generate revenues in a fashion that have nothing to do with broadcasting.

10479   Ann is telling me that if I looked at the paragraph I was looking for that would be very helpful.

--- Laughter

10480   MR. HENNESSY: So perhaps I will do that. I will let Greg jump in.

10481   MR. GOODWIN: To expand a little more, I guess sort of how we view it within TELUS is, although some components of the network are shared, sort of the last mile of copper, a great deal of it is sort of separate networks as we get in and with our TV signals riding on different parts in the core network. The $350 million of access upgrades that I referred to earlier was very much to enable our IPTV business.

10482   So you know we do sort of have a view that there are, you know, discrete investments and discrete costs, depending on the service that we are trying to grow in the market.

10483   MR. HENNESSY: There is, Mr Denton -- just to finish, there is no doubt that as we move forward into the future our wireless platform which we just put another billion dollars in and now I think, and rightly claimed to have perhaps one of the -- certainly the largest and one of the most advanced and one of the fastest, if not the fastest networks in the world -- is a platform that is suitable for driving entertainment and information across the spectrum and across the fibre that connects it.

10484   And as we expand our wire line infrastructure, our fibre to the node that is as Greg points out, a significant element of that is all about TV.

10485   So I do really and firmly believe that every platform we will be providing going into the future, is a platform that can allow consumers to share and consume entertainment and information. Of that I have no doubt.

10486   COMMISSIONER DENTON: Thank you, gentleman.

10487   Mr. Chairman, those complete my questions.

10488   THE CHAIRPERSON: Thank you.

10489   Len.

10490   COMMISSIONER KATZ: Thank you, Mr. Chairman.

10491   Good afternoon.

10492   You mentioned the number of $60 to $70 million that might come about from local avails from a Mediadenovo-type model. How -- where did you get that number from?

10493   MR. HENNESSY: The number I was using, was the number that, when I was in the cable industry heading up the cable association that we used to put before the Commission as what we considered the value of local avails to be.

10494   MS MAINVILLE-NEESON: We note, however, that in the Mediadenovo application they refer to $285 million over seven years, so that's probably more of a $40 million per year monetization of the avails.

10495   COMMISSIONER KATZ: And that $40 million or the $285 million is that an incremental number or will it come at the expense of any other advertising that's already generated in the system?

10496   MS MAINVILLE-NEESON: According to this, the research that's been done by Mediadenovo -- and you will have the opportunity to discuss that application with them -- they are of the view that this would be incremental revenues to the system.

10497   COMMISSIONER KATZ: Okay. You also mention an opportunity to create a win-win-win through the sale of ads on VOD.

10498   Have you got any idea of how money that might bring into the system? Have you done any work on that at all?

10499   MR. HENNESSY: I don't think so, not at this time.

10500   MS MAINVILLE-NEESON: Not at this time.

10501   COMMISSIONER KATZ: Okay, well, between now and December 14th when your final comments are due, if you did have some time to do some work on it we would appreciate it.

10502   My next question is on that same page, Mr. Hennessy, page 6, where you say as you come back in again:

"Consumers want more opportunity to choose the channels they want to watch without paying for a whole lot of stuff they don't."

10503   COMMISSIONER KATZ: And then you say:

"Top-down proposals like skinny basic are not the solution because they don't allow for the exercise of choice."

10504   COMMISSIONER KATZ: I would have thought that's exactly what a skinny basic is intended to do, allow people to choose channel by channel what they want to pay for but in value.

10505   MR. HENNESSY: That's not what is being proposed with a skinny basic. All the skinny basics I have heard says these following channels should be at a certain number; local channels, 9(1)(h) channels, or whatever.

10506   So if you will, some channels that are likely very possible and many channels that over time the regulator has decided are good for you. That, in my mind, is not the same as giving consumers baskets of channels that they actually want.

10507   MS MAINVILLE-NEESON: And can we also state for the record that we are of the view that we already are offering a skinny basic?

10508   What is available in our essentials package -- and I will perhaps ask Greg to fill in -- but what we offer in our essentials package at this time are essentially only the mandatory local channels, the 9(1)(h) channels and very, very few other channels, only two of which we actually pay for; the other ones that are actually free to us because they would like to increase their advertising revenue.

10509   So we are not talking about adding all kinds of expensive specialty stations on the basic.

10510   MR. GOODWIN: Yeah, and it really is -- it was a marketing choice that we made and one that allows us to differentiate ourselves from our competitors in that we do have a high degree of flexibility and choice, both with a la carte channel packages and small sort of theme packs, as we call them, with four or five or six channels that are all, you know, quite related and should appeal to a similar demographic.

10511   Now, you know, one thing that we have learned as we gain more experience in the TV business, is that's one area where maybe we are not quite as symbiotic with the broadcasters in that we have chosen to compete on customer choice but our content agreements often have clauses that drive us to say, you know, if you don't achieve certain high penetrations for the channels that you are serving, your price goes up.

10512   So that's really why a lot of BDUs package channels into big buckets so that they can minimize their content costs and, you know, generate that high penetration.

10513   So really it's a trade-off that we all face. Right now, TELUS is choosing to compete on a dimension of providing consumer choice but, you know, the trade-off is that some of our channels have lower penetration and we pay higher prices for them.

10514   COMMISSIONER KATZ: I'm sure we all look at our gas and hydro bills when they come in the door. I looked at mine recently and they have now started to bifurcate the bill between distribution costs and usage costs or content.

10515   Is that a model that could be made to work on the BDU industry where you sign up for BDU service and you have got the insulation costs, the customer service cost; the billing cost. Everything else is a drop charge; this is the cost of entry and then you simply consume what you want and consume and you pay for it?

10516   MR. HENNESSY: Hopefully not. It sounds very much like a model we just abandoned in the wireless business.

10517   I think, at the end of the day, consumers want to see simpler bills. They don't necessarily want to see bills broken out. I think as soon as you do that -- if I come to you and I say, "Okay, I have broken these out. These are my distribution costs" then they would get into all kinds of arguments about what my distribution costs are or, you know, what the cost of each individual program -- I'm not sure -- I mean I know you can always assume that a consumer wants a better deal and that's what drives you in a competitive marketplace.

10518   But I really do believe that, you know, when I look at the anger put against us as distributors or the broadcasters and all this campaign that kind of went over the top, the anger was really not predicated at the type of bill but the fact that we were really talking about sharing a bit pot of money amongst ourselves rather than talking about the fact that there is a whole bunch of stuff they don't want to pay for because they don't want it.

10519   Now, it's simple enough to make, you know, a politically nice statement and say, "It would be great if people got to choose only the channels they wanted". But I think we all know that if that was truly the model, that the construct on which the system is based would be in danger of collapsing.

10520   So there are economic realities that, you know, suggest what we have got today would fall apart if that was the complete model. But surely we can move in that direction.

10521   And I worry that when people come up and say, "Well, this should be the skinny basic or this should be basic" in a world where there is so much choice that we have yet to recognize that consumers today have both the technology, the desire, the know-how and the will to ultimately create their own package.

10522   And maybe that will be on TV and maybe it will be on the internet, maybe it will be on a mix, but they don't need us to tell them what they need to the same extent that we have been doing for the past 30 or 40 years.

10523   MS MAINVILLE-NEESON: I would also like to add that to the extent that we do have a very -- what I would call a skinny basic -- most of the distribution costs are included there and then you can see in our -- you know we do have very clear and transparent billing so that when you are purchasing those packages, those theme packs, that's where your content costs are and you can see that clearly on the bill.

10524   So when you purchase your distribution costs essentially are your costs for essentials and your costs for content. Your usage costs, as you refer to, are all of those packages, though. If you have chosen a premium movie package those are your usage costs.

10525   COMMISSIONER KATZ: I'm sure we will get into it in December at the hearing but, just so it's on the record, what is your basic charge for cable service today?

10526   MR. HENNESSY: Greg.

10527   MR. GOODWIN: So we are at $28 standalone, or $23 if you have another TELUS service, either home phone or internet with it.

10528   COMMISSIONER KATZ: Okay.

10529   Mr. Hennessy, I just heard you moved out of wireless in terms of splitting off between fixed and variable charges. Is that what I heard you say?

10530   MR. HENNESSY: No, I said --

10531   COMMISSIONER KATZ: You just got out of it --

10532   MR. HENNESSY: I said we had we had moved to a much simpler form of pricing. We have taken things like the subscriber access fee and the 9-1-1 charge off the bill because consumers didn't like seeing multiple elements on the bill. They want to essentially know that the price that they are paying or the price they think they are paying is the bill that they are going to receive.

10533   COMMISSIONER KATZ: Is the LPIF separately identified on your bill?

10534   MS MAINVILLE-NEESON: Not on our IPTV service, no.

10535   COMMISSIONER KATZ: Okay.

10536   Those are my questions.

10537   THE CHAIRPERSON: Thank you.

10538   Did I understand you correctly that on your IPTV you are in effect offering a skinny basic plus a pick and play?

10539   MS MAINVILLE-NEESON: We offer theme packages. So we have skinny basic being our essentials package which has only those very few stations, which are either mandatory or 9(1)(h) or other services that we don't have to pay for or we have received at extreme reduced price, and then you have your theme packs.

10540   THE CHAIRPERSON: Why wouldn't you have taken Mr. Hennessy literally and say the consumers command and he only wants to pay for what he wants? Why can't he pick and play?

10541   MS MAINVILLE-NEESON: Well, mostly the problem with pick and pay comes from our content affiliation deals. It would be very difficult for us to be able to negotiate, for example with CTV that you can offer TSN on a standalone basis or Sportsnet or they want to be together.

10542   And so it's because of those deals that we --

10543   THE CHAIRPERSON: So TSN, to take that example, insists that they not be sold by themselves but be sold as part of a theme pack?

10544   MS MAINVILLE-NEESON: They insist that they be sold in highly penetrated packages and we know that in order to do that, to be on the highest penetration you have to include something else. Standalone will never give you the highest penetration. That's the problem and all of -- many agreements will make that stipulation.

10545   THE CHAIRPERSON: So you are telling me it is the program people who drive you to offer theme packs, not your reluctance to offer it?

10546   MS MAINVILLE-NEESON: Well, theme packs or other forms of packaging.

10547   THE CHAIRPERSON: Yeah, packaging, yeah.

10548   MR. HENNESSY: Greg.

10549   MR. GOODWIN: So I think there is another sort of very practical matter as well around just the simplicity of selling and maintaining the service. Sort of individual packages just, you know, add time and costs to both the sales cycle and the sort of ongoing support cycle.

10550   So we try to balance off creating sort of small packages of very similar content. You know they tend to be four to seven channels that people enjoy buying together. But it's that trade-off of our cost equation as well.

10551   MS MAINVILLE-NEESON: And so to be clear, we offer as much choice as we can and so there is some pick and pay in our offering but there is also a lot of theme packs.

10552   MR. HENNESSY: Mr. Chairman, that's why I think it's important because it's not a simple thing to unravel, that we do do --

10553   THE CHAIRPERSON: You yourself are stuck in it to some extent.

10554   MR. HENNESSY: To some extent but it has got to change.

10555   THE CHAIRPERSON: Yeah.

10556   MR. HENNESSY: It has got to change because people are saying -- but the first step to changing that is to move to a video-on-demand environment because to the extent people are going to the TV system and able to get episodes of Flashpoint or Castle or whatever they happen to be watching, whether they missed it the week before or the week before that, to the extent you can start going to libraries, like you can do at Hulu, and replicate much more of the on-demand at the library approach, then people do start to consume in a different way. They may forego the packages for the ability to get the programming.

10557   And the channels then that have the best program, which are often the conventional channels, are the ones that are most likely to succeed by that because there are more windows. There are more -- the more you satisfy the customer, the customer knows that if they miss the show they can come back; they don't have to worry about PVRs or anything else -- the stronger you make the brand.

10558   That's why we are seeing a lot of movement of the TV channels to take their product and putting it on the internet for exactly that reason, to try to meet that shift in consumer behaviour.

10559   And unless, you know, we can find ways to replicate that in the TV world, another world will replicate for us and there won't be very much revenues in anybody for that world.

10560   THE CHAIRPERSON: Okay, thank you very much. Those are our questions.

10561   MR. HENNESSY: Thank you, Mr. Chairman.

10562   THE CHAIRPERSON: We will take a five-minute break before we deal with the last intervenor.

--- Upon recessing at 1457

--- Upon resuming at 1507

10563   LE PRÉSIDENT: O.K. Nous commençons.

10564   THE SECRETARY: We will now hear the presentation of the Communication, Energy and Paperworkers Union of Canada.

10565   Please introduce yourself and you may proceed.

PRESENTATION

10566   MR. MURDOCH: Thank you, Madam Secretary.

10567   For the record, my name is Peter Murdoch, I'm CEP's Vice-President, Media and with me today on my left is Monica Auer our legal counsel in this matter.

10568   CEP is Canada's largest media union. Thousands of our members work in Canadian TV programming services.

10569   Like you, Mr. Chairman, our members support accountability. The public regulatory process should provide Canadians with a way to assess and to help direct our broadcasting system's path.

10570   More specifically, our members also want a strong Canadian broadcasting system with space for well-funded local programming, more original program production and increasing employment opportunities.

10571   But it's important to remember that it is the crisis in local programming that has brought us all to this hearing. So, I'd like to begin by thanking you for creating the LPIF.

10572   We supported this fund. Some broadcasters say they've kept stations open because of it, and for that reason alone the LPIF has worked.

10573   Increasing the LPIF instead of reducing it next year might solve many of private broadcasters current financial challenges.

10574   As well, our original concerns about the fund remain. It does not target local news specifically, it does not require new spending on local content. Under your allocation formula it will help larger stations more than smaller ones. The fund's board does not have the employee representation recommended by the Heritage Committee and we all know BDUs did not take your hint to pay the LPIF but tax their subscribers instead.

10575   But the LPIF was at least an attempt to help some broadcasters and we thank you for that initiative. It certainly did part of the job.

10576   I will now focus on rebalancing revenues and responsibilities to support and strengthen local news in our broadcasting system.

10577   In calling on you to rebalance the system, I want to begin at the beginning with what this hearing has called consumers, I prefer to call them Canadians.

10578   Last week Corus told you that advertisers are the foundation of our broadcasting system. We fundamentally disagree, so does the Minister of Canadian Heritage who told the House last Wednesday that this hearing must put Canadian consumers first.

10579   After all, almost every household in Canada has a TV set. Over 90 percent have access to cable or satellite, making television almost a public utility.

10580   Canadians rely on and should be able to rely on their local TV during emergencies.

10581   On average they watch four hours of TV a night. In fact, on any given day most Canadians are probably spending more time with the TV system than with our health and education systems.

10582   TV is a central thread in our nation's fabric. This thread gives Canadians a social psychological connection to their country, whether it's gossip about their favourite shows or complaints about their city councils.

10583   Local TV stations are still Canadians' primary source of information and entertainment. The Internet has not replaced them, and many Canadians are sitting down every night to watch their favourite local newscast or drama.

10584   Local TV matters because it links Canadians, not because it has made some companies and a few families a great deal of money.

10585   But unless broadcasters running local TV stations obtain more revenues, stations will close, as in Brandon and Red Deer. Canadian's and Parliament are relying on you to find solutions.

10586   The central problem is that revenues and responsibilities in broadcasting are out of balance. Forty years ago, as Chart 1 below shows, cable was the infant industry in our system with just 14 percent of all broadcasting revenues in 1968.

10587   This makes it easier to understand the CRTC's decision that BDUs should wire the nation first instead of paying for the local TV signals they used in their business.

10588   But last year BDUs took in more than half, or 50 percent of all broadcasting revenues. The infant industry has grown up.

10589   In fact, when you only look at revenues from TV programming and distribution, in Chart 2, BDUs' share in the last 10 years has more than doubled. Last year BDUs took in 64 percent of all TV revenues.

10590   BDUs' growing share of the pie has not been matched by a growing share of responsibilities. Chart 3 shows that BDUs' share of total Canadian program expenditures has stayed stuck at less than 20 percent.

10591   Chart 4 shows that while TV programming services now obtain 36 percent of the TV system's revenues, they pay for 82 percent of its Canadian programming.

10592   This imbalance is the problem.

10593   But BDU and TV broadcasters aren't likely to solve this problem without stronger guidance from you.

10594   For instance, we know that the spring hearing and this one were prompted by some broadcasters' business decisions to cut or eliminate their local news. These cuts were perfectly lawful because the CRTC eliminated any regulatory requirement for local news years ago.

10595   It assumed that broadcasters would choose to spend more when they could just as easily spend less. In reality, the marketplace did not protect local content because the business of broadcasting, like any other business, is to produce their content at the lowest cost.

10596   Since good local programming costs money to make, you must mandate both exhibition and expenditures. We saw what happened with local content, the same thing happened with Canadian programming overall when Canwest and CTV applied to renew their licences in 2001.

10597   As Chart 5 shows, although these companies were already forecasting foreign programming spending well beyond their Canadian content levels, the CRTC did not limit foreign programming expenditures and helped to create the current foreign spending problem we now face.

10598   Allowing media consolidation has also created problems. Assuming larger companies would raise Canadian exhibition and expenditures, the CRTC ignored our submission that debt costs would lead broadcasters to cut domestic program spending. As we predicted, the marketplace did not protect local content.

10599   These decisions simply made the problems caused by a structural revenue shift more obvious. The fact is, that since BDUs now dominate our system, it is time for them to meet their financial obligations.

10600   We think that previous successful CRTC policies can be adopted for the future and that the coming analog to digital transition is the ideal time to correct the current imbalance.

10601   One simple way to start is to begin to ensure the requirement that the right to sell local advertising is restricted to those who offer a reasonable level of original local service to a community.

10602   Now, let's get to the heart of this hearing. This Panel has clearly said that it does not want to talk about a fee-for-carriage model in which you would consider public submissions from all parties and make a decision about the fee that BDUs would pay when they carry local TV stations.

10603   We're puzzled by the hostility towards fee-for-carriage. Didn't the CRTC use this approach in 1987 for Canada's highly successful legacy specialty services. Didn't the U.S. actually launch its current retransmission consent model with fees set by an independent third party?

10604   The CRTC used fee-for-carriage successfully before, why not again?

10605   We also think that the CRTC should use the powers Parliament gave it under the Act to regulate basic rates in the public interest. The CRTC should recognize that since BDUs are no longer an infant industry, they should pay their share of the system's programming benefits for Canadians.

10606   After all, BDUs are where they are now because they were monopolies for 50 years. Canadians paid for their expansions and upgrades through rate increases and capital cost allowances.

10607   In 1993 the CRTC let BDUs keep half or more of these rate increases for ever.

10608   Since the CRTC stopped regulating rates, the predictable result is that the rates have simply gone up and up, while Canadians' ability to pay has not. Any competition in our BDU sector is extremely limited by its oligopolistic structure, and also by non-compete contracts that BDUs secretly arrange with each other. How many other non-compete deals exist?

10609   The lack of transparency is why your suggestion of allowing broadcasters and cable companies to make deals behind closed doors simply doesn't make sense. We would have liked to have heard the views and opinions of former FCC Chairman Richard Wiley last Monday, but the one question he received gave us little chance to learn from this potentially invaluable source of expertise.

10610   So, we still don't know. How will back room deals put Canadians' interests first when Canadians aren't even at the table? Can subscribers ask for final offer arbitration too, or will this be reserved for BDUs and TV stations? If BDUs and TV broadcasters don't like final offer arbitration, can they appeal to you, to the courts or to Cabinet? Or is this another ad fight waiting to happen in three years when the first deals might expire?

10611   Last week we learned that BDUs already skim specialty services' subscriber fees and that broadcasters fear that BDUs will punish their specialty services. Different programming services have told you that BDUs treat them with contempt and threats. Why should this evidence be ignored?

10612   Won't back room deals create a new barrier to entry and new uncertainty for new TV applicants?

10613   Last week it was suggested that TV companies should just put the peripheral issues of local avails and VOD in a box along with compensation for value and negotiate everything. Won't this really create a new private regulatory regime that excludes Canadians except when it comes to paying their bills?

10614   Will private compensation contracts lead to a new kind of journalistic chill? This isn't an empty threat. According to the Hill Times, BDUs just fired Nik Nanos from CPAC because they didn't like the work he was doing for TV stations.

10615   Apart from anything else, will BDUs try to influence programming content of the broadcasters they deal with? And then there is this: If you allow BDUs and TV companies to bargain in every market, will we end up with 64 different broadcasting systems and a more complex regulatory regime? Why would different regimes for each city be more efficient than a single set of CRTC regulations?

10616   As for subscribers, if deregulation has not kept rates down, why would even more deregulation through secret agreements be any better? What's the remedy if subscribers don't like the results? To disconnect from the system altogether?

10617   Then last Friday Jim Shaw told you that the solution is for every broadcaster to meet him personally and ask for his help. If that's going to be the system, why would Parliament or Canadians need the CRTC any more, let's just put Jim in charge?

10618   Regulating through private deals is a bad idea. It will transform a system regulated in the interests of Canadians into one run by private contracts signed between six or seven large companies. Back room deals remove Canadians' ability to help guide the development of our system and to challenge CRTC decisions.

10619   Parliament has given you a road map for the requirements you should set down for broadcasters. Instead of waiting for their best offer you can and should set the terms of that deal yourselves.

10620   We've heard that BDUs will go to court or Cabinet whatever you decide here. Well, let them. It's time to find out who's in charge. Canadians deserve to know.

10621   I also want to address your group licensing proposal. I understand that this Panel has scolded some interveners for being too imprecise. This is a policy hearing you've said, and we need details from you.

10622    But none of the six CRTC notices about this hearing tells Canadians how your proposal will generate more original programming, new employment or more resources for Canadian content.

10623   This surprised us, because we thought the CRTC is subject to the Federal Government's directive on streamlining regulation requiring federal agencies to quantify the costs and benefits of proposed regulatory changes.

10624   Is it fair to criticize interveners about insufficient detail when you haven't disclosed any of the information we need to do more?

10625   You've denied our access to information requests for basic financial data about individual stations. You won't release the basic cable rate data you've had from the BDUs since October 26th, even though this Panel asked questions about basic cable rates last week.

10626   Last July you told us that the CRTC hasn't estimated the impact of the group licensing model. And last week we learned that the CRTC has no records about how much the major ownership groups have spent on Canadian content in the past.

10627   If the CRTC doesn't know if or how its own proposal will benefit the broadcasting system, how should Canadians?

10628   Nevertheless, we tried. We estimated that group licensing could reduce Canadian content by up to 45 percent in over-the-air TV. Setting a 50 percent Canadian spending requirement could reduce overall Canadian TV program spending by $85-million, since last year the level was 53 percent.

10629   If expenditures and exhibition go down, employment will go down.

10630   These job losses will be in addition to the thousands of jobs our system has lost so far: almost 8,000 in the last nine years.

10631   Job losses matter. Your enabling statute does not discuss operating profit and EBITDA, but does say that our broadcasting system should give Canadians employment opportunities. Describing concepts that create even more unemployment as flexible doesn't make them any better for our broadcasting system.

10632   We have no problem with flexibility, Mr. Chairman. We're just as pragmatic as you are. But any flexibility you grant must demonstrably benefit our existing system. Flexibility without benefits is deregulation all over again. It's just another way to transfer more money to broadcasters without strengthening our broadcasting system.

10633   We think a better solution is for the CRTC to set CPE levels for over-the-air TV services as a whole based on their overall revenues and whether they are private or public. A similar approach worked for private TV before, CPE still works for our specialty services, although it is more complicated.

10634   CPE will work for local TV too, if combined with a fee-for-carriage or a strengthened LPIF.

10635   To conclude, Mr. Chairman, the problem in our broadcasting system today is very clear: it's that revenues and responsibilities have become completely imbalanced. This is the problem that you can address and clarify going forward.

10636   Tinkering with local avails, VOD and simsub will not solve this central problem. For that, you need the powers that Parliament gave to you, to require distributors to pay local TV station fees that you believe are fair, without raising basic service rates.

10637   Asking TV and BDUs to negotiate these fees for you puts their interests before Canadians' and creates continued uncertainty.

10638   What we know is this: broadcasting is essential to Canadians. It isn't a luxury. Canadians want their local television to be on air and they don't want to be taxed by wealthy and powerful cable companies.

10639   Clearer parameters from the CRTC about what they are supposed to solve, would help BDUs and TV broadcasters to address the problem. Yet Canadians will still need the CRTC to protect their interests in high-quality domestic programming and affordable cable rates.

10640   We are confident that the priorities and principles that Parliament developed 40 years ago remain as clear and important as they were then and that Parliament still supports them.

10641   On behalf of the thousands of Canadians who work in the broadcasting system, the thousands who have already lost their jobs and the millions who not only enjoy but rely on their local nightly news, I sincerely hope the CRTC musters the courage to do what is right, that it rebalances its regulatory approach to put the public interest first, and that it faces the consequences.

10642   We'll be with you and so will Canadians.

10643   Thank you for your time.

10644   THE CHAIRPERSON: Thank you very much for your presentation.

10645   You start off by quoting Corus' Mr. Cassaday in saying that he's wrong when he says advertisers are the foundation of the broadcasting system.

10646   It depends how you interpret foundation obviously. I mean, the broadcasting system is there to serve Canadians, we both agree on that, but there is no money being appropriated for it other than the CBC funding. So, the system is actually paid for by the industry and the industry lives on advertisers.

10647   You don't disagree with that; do you?

10648   MR. MURDOCH: Well, no, but there's two things. There is of course the CTF, but there is also -- we don't have advertisers, as they say, you know, with eyeballs, right.

10649   So, to a larger degree it first of all starts with consumers and once you have the consumers there the advertisers will follow.

10650   THE CHAIRPERSON: Well, I don't know whether this is the chicken and egg.

10651   The point I'm trying to make is you've have to have a source of revenue to pay for the programming that Canadians want and that source of revenue is right now coming from advertisers by and large. There are some...

10652   And the broadcasting system and fee-for-carriage and everything was drawn up at a time and age when we had a closed broadcasting system, where we controlled access to it, either by giving people licence to be over-the-air or by giving them a BDU licence to distribute it.

10653   We don't have that closed system any more, we have an open system parallel to the closed broadcasting system that we regulate and that's what's creating part of the problem, that's why we have to be very careful that by putting on requirements on the closed system we don't drive the industry, the producers into the parallel system, particularly consumers into the parallel system and then, therefore, it's not sufficient income for the broadcasters to produce the stories that Canadians want to see.

10654   And in your submission I see nowhere recognition of that. We're not living any more 40 years ago, we're living in 2009 and the Internet and wireless, parallel systems is a reality.

10655   MS AUER: I think that's true that we have new technology, but I seem to recall that at the International Institute of Communications meeting last week or the week before that new research was presented to show that conventional television -- that is to say television including conventional over-the-air, pay and specialty -- still continues to dominate the attraction and the interest of Canadians and viewers.

10656   So, it's true that we have new technology, it's true that the Internet is here, but just as death stars in the 1990s didn't kill television and VCRs didn't kill television, we are not at the point where the Internet can be said to have killed television.

10657   THE CHAIRPERSON: No, clearly not. And these things are always exaggerated and technology, the famous saying, I don't know who said it, that we always over estimate the immediate impact of technology and under estimate the long-term impact of technology. And I think that applies here as anywhere else, it all takes some time.

10658   But if I accept your suggestion, we order a fee-for-carriage, BDUs have told us very clearly they will pass it on to the consumer in terms of increased bills which undoubtedly now we've just had a campaign of six months where both sides seem to have done their best to sensitize consumers to the cost of TV.

10659   It is not beyond the imaginable that a lot of consumers will say, no, I am not paying any more, I'm going to find the content by myself or on the Internet. I have Internet access already, et cetera.

10660   And isn't that something that we do not want to encourage?

10661   MR. MURDOCH: First of all, I agree with you about, you know, a bit of the chaos that's occurred as a result of competing advertising slogans and messages.

10662   But our view is, and you've seen both in our submission and here and you've seen in other submissions as well, is that we think there's enough money in the BDUs for them to be able to pay it and not pass it on.

10663   And we think that you have the authority to do that and if they want to challenge that authority, we'll find out whether Parliament has that authority.

10664   I mean at some point, are they allowed to keep passing on and keep passing on and keep passing on until -- and you're right, Mr. Chair, maybe they hit a threshold there in which Canadians finally say, a curse on both your houses.

10665   But right now we think there's enough -- we're talking about an imbalance in the system. The imbalance in the system is, when it's like this you end up taking some from here and balancing it. You don't just end up putting weights -- new weights from somewhere else, so...

10666   And not only that, I think it's important for us to remember that the major consumers of cable are not the folks that appear here at the Commission, they're of much smaller means and for them cable and television is often their only source of entertainment and they're sitting around their televisions with a bowl of chili watching their favourite shows and that comes at some cost to them, their cable bills.

10667   So, I think there is an obligation to ensure what is essentially a democratic and required broadcasting system, is an affordable one as well.

10668   And so I think, yeah, no, I think there's going to be an obligation here to tell the cable companies no, no more, we're not passing it through, you are not going to tax consumers.

10669   THE CHAIRPERSON: So besides suggesting that we impose a fee-for-carriage, you are actually also suggesting that we implement rate regulation?

10670   MR. MURDOCH: Yes, absolutely.

10671   MS AUER: Can I just...

10672   MR. MURDOCH: Yeah.

10673   MS AUER: I think, Mr. Chairman, as well, I mean one of the issues that we have, of course, is the U.S. three plus or four plus one.

10674   As you all well know, and your Staff knows well too, the original BDU regulations are based from something that was driven initially in the 1970s trying to get the nation wired, trying to give Canadians access to as much content as possible.

10675   It is possible to revise the regulations and have a stripped down basic. You know, we do have the infinite choice now, but try and perhaps give Canadians a lower cost, more affordable, plus abordable, type of cable.

10676   THE CHAIRPERSON: As you know, skinny basic, we looked at it in our BDU review about what a year and a half ago, you were there, and Videotron actually offers it, but there seems to be no demand in the market for picking it up.

10677   MR. MURDOCH: Go ahead.

10678   MS AUER: Well, I guess, first of all, as you know, CEP has been concerned for some time about the lack of information that we can use to assess any kind of models.

10679   We'd be interested in seeing the Videotron data. If they'd like to put it all on the record, we'd be very pleased to study it.

10680   I think we'd also be interested then in seeing some of the other models put forward by some other BDUs.

10681   If we're to comment on this in an effective way, if we're to challenge the evidence that nobody wants this, then we need to have access for more information than is on the record now.

10682   THE CHAIRPERSON: I appreciate what you say, but I mean the fact is that right now we don't have skinny basics. I have certainly not heard any evidence of consumer complaint or consumer desire for one, et cetera, or uptake and from the two people who offer it, which is I gather you heard Telus and Videotron, they both suggest that it is not very popular and it is a very small percentage of their users who subscribe to it.

10683   MR. MURDOCH: Monica may, but I don't have the evidence, but I would suggest this, is that as the rates keep going up, we mention here you know incomes aren't going up, particularly for those at the lower income and yet they still want their television. So, at some point the more affordable and the most affordable skinny basic, or whatever you'd like to call it, might be their only choice. Let's at least offer it to them.

10684   MS AUER: And, Mr. Chairman, I'm reminded whenever I hear the argument that, well, you know, nobody wants it, it's sort of like Henry Ford. The people can have any colour they want as long as it's black. If you never offer it, you know, how will we ever know?

10685   THE CHAIRPERSON: I mean what you're suggesting is a wholesale retreat. You're suggesting we impose a fee-for-carriage, that we regulate rates and also that we mandate a high level of CPE, if I understand it correctly.

10686   This is basically the system we had before the turn of the century, right or whenever, '96 or whenever it was.

10687   MR. MURDOCH: Well, we do want to advance the system, that's clear, and we do want to correct some imbalances, that's clear, and we do want to ensure Canadian content both in news and information programming as well as dramatic programming, that's clear. And what the requirements are for that is to address an imbalance.

10688   We are not prepared, I think it's in the liturgy that they talk about sola fide, by faith alone, you can get to heaven by faith alone.

10689   Well, we're not prepared to necessarily put our faith into cable and the broadcasters, we think it's going to require some very serious and challenging regulation.

10690   Monica might want to say something.

10691   MS AUER: I guess what --

10692   THE CHAIRPERSON: I mean all of this --

10693   MS AUER: If I could just say, the concept of a wholesale retreat I think is not what we're suggesting at all. We're suggesting that there are clear identifiable problems in the system that only the Commission has the authority to address.

10694   THE CHAIRPERSON: Well, you're ignoring the evidence that you heard same as I from everybody is saying, you know, the world has fundamentally changed, we have consumers who are in control now, they want to see what they see, when they see it and on the platform they want it and everybody is trying to adapt to this paradigm, that's with us, there's no question about it, and they're trying to find different ways of adapting to it.

10695   Like Rogers next week is going to announce a Rogers paradigm which is clearly a way to -- well, Rogers Portal sorry, which is a way to keep the customer with them, et cetera, because the customer is no longer forced to buy linear program. They want to watch it when they want it and how they want it, and VOD may be one answer to it. Obviously the Internet is another one, et cetera.

10696   And in this world, in this consumer empowered world you want me to go back to prescribing rules, a fee you may charge, the fee you have to pay to the programmers and to the signal owners and also the amount of Canadian content that you have to offer and how much you have to spend on it, et cetera.

10697   Don't you see sort of a dichotomy between those positions and the reality of the empowered consumer?

10698   MR. MURDOCH: I don't see a dichotomy, I see a difference in our positions, that's clear.

10699   But it seems to me that to the best of my knowledge in this new paradigm that when Canadians want information about where their children should go to get the H1N1 shots, they go to their local news.

10700   You know, nobody else is providing that. They go to their local news stations to find out about, you know, is their health in danger, their children's health in danger, is their municipality taxes going up, et cetera.

10701   Who else is providing this kind of information and news except local news stations, local programming? Who reflects that community except that?

10702   I don't see that in the new paradigm, I don't see that anywhere in the new paradigm, on the Internet or anywhere else except in local television stations broadcasting.

10703   THE CHAIRPERSON: And we recognize that and we said here, we also recognize there is no business case for local news and local programming, that's why we created the LPIF.

10704   This is an area that is highly desirable, it's mandated effectively by the Broadcasting Act, but the only way you're going to get it is if you pay for it and subsidize it. That's why we set up the LPIF.

10705   And, as you know, basically nobody -- the LPIF has been very grudgingly accepted, it's been billed to Canadians, Canadians have accepted it as part of their bill and even the House of Commons when they looked it thought it was the right approach. The only thing they suggested we were too cautious, it shouldn't have been one percent, it should have been two and a half percent according to them.

10706   But it's the exception to the rule. I mean, that's the one area that we agree on, local TV is important and should be there, but we are of the view that that part we can mandate and have subsidies and that's what we have done.

10707   But the rest of TV is -- a lot of it is entertainment, as you know, it's drama, it's whatever content it is, and to suggest that you should subsidize that at all I don't think anybody -- the idea is that the market pays for it and the market of course is driven by advertising, so...

10708   And if you don't produce what the market wants, then consumers will go somewhere else. That seems to me that's inescapable.

10709   MR. MURDOCH: Well, I guess a couple of things. I'm going to let Monica say a word or two about this.

10710   But with the local news and information, I think this is probably true of entertainment programming as well.

10711   I don't think Canadians are watching their local news every night, but when disaster hits, when there's a federal election coming on or when there's a serious challenge to their lives or a change in their tax system, or whatever, they tend to turn it on. That's when you get the consumers, that's when it becomes market driven.

10712   By the way, you know, we only know in aggregate about local news and in aggregate we see local news paying for itself. It's these individual small market stations such as Red Deer and Brandon and, as you know, A-channel was in jeopardy, you know, the employees themselves had to dig in at Victoria to keep that station on air for the people of Vancouver Island. A station was bought for a few dollars in CH, in Hamilton.

10713   So, that's the concern. And, you know, the LPIF, and we were off the top, you know, we're congratulatory to the CRTC about that, I think that was an excellent decision.

10714   We want to make sure that that kind of funding is probably going to increase and get a commitment from the broadcasters that indeed this funding, we'll see what the number is, it might not be one percent, you might have to go to two percent to ensure that these stations stay open and on air.

10715   Go ahead, Monica.

10716   MS AUER: I'd just also like to make a small point about using the word subsidy. When I go to the local store to buy milk, I'm not subsidizing farmers, I'm paying for the product and I'm paying the money in part to the retailer who sells me the milk, but some of that money does go back to the farmer who's milked the cows.

10717   And I wouldn't want to view independent producers as milking cows, but the fact is, this is a business. The CRTC long ago decided that BDUs were using local channels as part of their business, they should be paying for it.

10718   Now, this isn't a subsidy we're talking about any more.

10719   THE CHAIRPERSON: You picked a particularly bad example because our milk is heavily subsidized, so --

10720   MS AUER: I could talk about Ford too again, but I thought well GM, I don't know, they're all subsidized.

--- Laughter

10721   MS AUER: I think it's an interesting point though.

10722   THE CHAIRPERSON: I happen to have been counsel to agriculture, so I know a little bit about milk pricing and it really is terribly subsidized.

10723   But I understand your point.

10724   MS AUER: Somebody is paying.

10725   THE CHAIRPERSON: You suggest in paragraph 36 here that the non-compete contracts with BDUs are secretly arranged with each other.

10726   Do you have any knowledge of this, or is this your suspicion?

10727   MS AUER: I'm fairly certain we attached the decision to one of our submissions, it was either the November 2nd or the September 14th, but we did attach the actual case. This is I think Shaw and Rogers. Just looking at it now.

10728   THE CHAIRPERSON: Oh, you mean the agreement --

10729   MS AUER: The non-compete, the 2000 --

10730   THE CHAIRPERSON: -- that they entered into when they swapped territories.

10731   MS AUER: Yes. This is in fact attached to our November 2nd submission, it's the 2000 non-compete agreement that, in fact, came to light as a result of a court case rather than any other kind of mechanism.

10732   And, so, I guess our question is: Obviously since there aren't any other court cases, we don't know how many other non-compete agreements there are.

10733   THE CHAIRPERSON: Okay. I thought you were referring to something different than that particular agreement which was based on an exchange of territories.

10734   Then in paragraph 54 you make some assumptions about the -- our conceptual model would permit reduced exhibition expenditures and employment in TV.

10735   I'm absolutely puzzled by you think it would permit -- would result this way. After all, isn't the central piece of it that the over-the-air television would have CPE? Wouldn't that by definition create more Canadian employment rather than reduce it, I mean more Canadian benefits, be it of whatever form?

10736   You say here:

"We estimated that group licensing could reduce Canadian content by up to 45 percent in the over-the-air TV."

10737   THE CHAIRPERSON: Why? If over-the-air TV has a CPE, why would it reduce Canadian content?

10738   MS AUER: Well, one is content, one is exhibition, one is expenditures.

10739   THE CHAIRPERSON: Yes.

10740   MS AUER: It seemed to us from your conceptual model -- and we tried to figure out what the impact was and it seemed to us that depending on the medium a group licensee could reduce the exhibition levels in some of the media and hike it elsewhere to create an overall average.

10741   So, we thought, well what happens if you do that with your over-the-air TV stations, what might the impact be?

10742   We don't know, honestly, we haven't seen a lot of analysis of it. But then when we also looked at the expenditures, it seemed to us that overall in this total system, including pay specialty and conventional, that I think it was just a shade under 53 percent was already going to Canadian content spending. So, if you reduce that somehow to 50 percent, you're cutting spending.

10743   We did the analysis, or we re-presented it in pages 18 to 19 of our submission.

10744   THE CHAIRPERSON: Yeah. So, you -- okay, I see. You're making a worst case scenario analysis.

10745   Everybody who appeared before us suggested if you have one for over-the-air then you have several, then you might have another one for the specialty and you would have minimum et cetera. You assumed all of those, not -- just one overall group, okay.

10746   And I guess you didn't say absolutely anything here this morning about the transition to digital. We are very concerned about that. We have heard lots of people talk about it, we had Free HD here, we had Bell here, et cetera, and our concern is very largely for those people who right now receive over-the-air signal who are not BDU customers either because they don't want to or can't afford to and what happens, who will they be served in the future?

10747   And so far I haven't heard anybody really come up with a solution. Bell has put something on the table called Freesat which would actually give them a service but it wouldn't be free, they wouldn't be paying for it but somebody else would be paying for it, it would basically come out of the LPIF.

10748   What are your views on this? This is clearly coming at us, we have to do it because of our agreement with the States and everybody else is doing it. We have set a date but it looks like that date either will not be met, or even if it is met, it will mean a lot of people will not be receiving over-the-air signal any more and will have to become BDU subscribers.

10749   MR. MURDOCH: Monica might want to comment on this.

10750   But, first of all, you know, I appreciate the Telus comment about giving the government a push on some sort of digital road map that might help us.

10751   And I appreciate the concern that the Commission has expressed both this week and last week and in previous hearings about trying to do everything to ensure that all Canadians get access.

10752   Do I have a magic solution? No, I don't. Monica might have some ideas.

10753   THE CHAIRPERSON: But should we accept what Bell -- what Telus basically put to us in so many words saying, you know, this is part of the change and there just will be a time where people will not be able to have over-the-air free TV any more and they have to decide whether they want to enjoy television or, alternatively, and thereby become a subscriber or else, you know, you're just going to be out of luck.

10754   MR. MURDOCH: You know, when I hear that, and I don't want to mix apples and oranges here, but to sort of focus on VOD as well, we start to really hit away at the core, at the people who can't afford are the ones who are going to pay the price.

10755   And I think that we have a good policy in this country to try and avoid those kinds of decisions and it shouldn't be up on the part of big corporations to eradicate them.

10756   Notwithstanding, Commissioner, that I do -- it's a challenge and I don't have an easy solution.

10757   Monica, you may have...

10758   MS AUER: I guess we have not put a lot of attention in our submissions on that issue. Our concern would be that going forward the demography of Canada is changing. We're going to have an over growing population of somewhat older people who will be retired on fixed incomes and it seems, I think, somewhat unfair to those people on fixed income, some of whom are members, retired members of CEP and who will be relying on their pensions in the future that they should have access to the system that they essentially own.

10759   We all talk about that concept, that they own the system, but that is in fact what Parliament has said, and Parliament has also said that there should continue to be community reflection because that is one of the three elements. We have public, private and community elements.

10760   We have not developed any kind of a proposal with respect to that. I don't think we will.

10761   THE CHAIRPERSON: Okay. Thank --

10762   MS AUER: I would say, however, that the transition clearly marks a period where the Commission can take steps. If you have -- if you choose not to make small incremental changes, that is going to be the period where you can make a fundamental shift.

10763   The fundamental shift may already be having an impact on our specialty services given that policy change and, you know, change is difficult, we agree.

10764   On the other hand, change sometimes has to occur or the marketplace will fail us.

10765   THE CHAIRPERSON: One last question.

10766   This whole -- your idea of fee-for-carriage and rate setting, doesn't that fly contrary to the -- do you think it is driven by the pronouncement that you've heard from both Parliament and the Minister that Canadian users should not bear the cost of any -- what do you call it, rebalancing that you're talking about?

10767   MR. MURDOCH: Well, you know, we'll say again is that I think you -- at the time of the LPIF you instructed the BDUs not to pass it on and, you know, and they paid no attention.

10768   Well, somewhere along the line the regulatory agency, or whether it's through Parliament, has to sort of assess and make a decision about whether or not indeed these companies can afford to bite down, maybe over a period of time, and deal with that rather than passing it on to consumers, many of whom simply can't afford it and you are going to push them out of the system.

10769   We have concern for consumers, I can assure you, and -- but just simply allowing the cable companies to continue to pass this on and on, imbalance probably is created more, at least in the lives of Canadians who are living on fixed incomes or, you know, not a lot of income period.

10770   THE CHAIRPERSON: And if we take your advice and do this, would the CBC also be eligible for the fee-for-carriage?

10771   MR. MURDOCH: It's an interesting question. We've been wrestling with that one.

10772   I mean, we are huge supporters of a public broadcasting system and we're -- you know, it's a tragedy that the Federal Government hasn't seen fit to give it appropriate funding and that's where the problem lies, the problem lies with the Federal Government not here with the fee-for-carriage for public broadcasting.

10773   If we give them the portion of the fee-for-carriage then, indeed, they become more and more and more dependent on a private system, and our view is a public broadcaster should be a public broadcaster.

10774   So, we're going to put the heat on government to do something about public broadcasting.

10775   MS AUER: And we also think it might be appropriate in that context for the Commission to use the same strong language.

10776   It's appropriate for Parliament to properly fund the corporation.

10777   THE CHAIRPERSON: But you have no problem with them being eligible for LPIF?

10778   MR. MURDOCH: No. We need a public broadcaster at this point, we need it properly funded and if Parliament is giving up on its will to support it, someone's got to support it and if it has to be fee-for-carriage, so be it.

10779   THE CHAIRPERSON: Okay. Thank you. Those are my questions.

10780   Do my colleagues have any questions?

10781   I guess you either stunned them or answered all their questions.

--- Laughter

10782   THE CHAIRPERSON: Thank you very much. We're very much appreciative of you coming.

10783   And I think that ends it for today, Madam Secretary.

10784   THE SECRETARY: Yes. I would just like to announce that for the record, CIRPA informed us that they will not be appearing.

10785   And the hearing is now adjourned. We'll start at nine tomorrow morning.

10786   Thank you.

--- Whereupon the hearing adjourned at 1554, to resume on Wednesday, November 25, 2009 at 0900

   REPORTERS

____________________      ____________________

Lynda Johansson         Jennifer Cheslock

____________________      ____________________

Monique Mahoney         Madeleine Matte

Date modified:

2009-11-25