ARCHIVED - Transcript, Hearing 23 September 2010

TRANSCRIPT OF PROCEEDINGS BEFORE

THE CANADIAN RADIO-TELEVISION AND

TELECOMMUNICATIONS COMMISSION

SUBJECT:

To consider the broadcasting applications listed in Broadcasting Notice of Consultation CRTC 2010-498

HELD AT:

Willow Room

Four Points by Sheraton

Calgary Airport

2875 Sunridge Way NE

Calgary, Alberta

September 23, 2010

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

To consider the broadcasting applications listed in Broadcasting Notice of Consultation CRTC 2010-498

BEFORE:

Konrad von Finckenstein   Chairperson

Len Katz   Commissioner

Rita Cugini   Commissioner

Peter Menzies   Commissioner

Marc Patrone   Commissioner

ALSO PRESENT:

Jade Roy   Secretary

Stephen Millington   Legal Counsel

Moïra Létourneau

Rachel Marleau   Hearing Manager

HELD AT:

Willow Room

Four Points by Sheraton

Calgary Airport

2875 Sunridge Way NE

Calgary, Alberta

September 23, 2010

- iv -

TABLE OF CONTENTS

   PAGE / PARA

PHASE II (Cont.)

INTERVENTION BY:

Première Bobine Inc.   391 / 2257

Canadian Media Guild   406 / 2337

PHASE III

REPLY BY:

Shaw Communications Inc.   432 / 2493

- v -

   UNDERTAKINGS

Undertakings can be found at the following paragraphs:

2547 and 2796

   Calgary, Alberta

--- Upon resuming on Thursday, September 23, 2010 at 0906

2251   THE CHAIRPERSON: Good morning, everybody.

2252   Madame la Secrétaire, commençons.

2253   THE SECRETARY: We will hear the intervention of Première Bobine Inc.

2254   Please introduce yourself, after which you will have 10 minutes for your presentation. Thank you.

2255   MR. BERRY: Good morning.

2256   THE SECRETARY: Sorry, please open your mic.

INTERVENTION

2257   MR. BERRY: Good morning, Mr. Chairman and Commissioners. I am Tom Berry, the president, founder and the principal shareholder of Première Bobine, also known as Reel One Entertainment.

2258   I am joined today by Sheridan Scott of the law firm Bennett Jones LLP. Sheridan has helped me to prepare for these hearings.

2259   Let me begin by thanking the Commission very much for the opportunity to address you today here in Calgary. I am always delighted to have the chance to visit Alberta, having been a student at the University of Alberta a number of years ago and more recently I had the pleasure of shooting a movie in Edmonton and another one near Drumheller.

2260   Looking at the agenda for these hearings, I notice that I am the only person appearing on behalf of a production company. Some of you may be wondering why that is and wondering why I have decided to come here today and address the Commission directly, instead of leaving that task to the production industry association, the CMPA.

2261   Let me just say that this issue is simply too important to my company and to the people who depend on it for me to do otherwise. I could not fulfill my responsibilities without coming here today.

2262   Première Bobine is a company headquartered in Montreal with offices in Vancouver and Los Angeles. We are active in the production, distribution and finance of Canadian television programming. Most of this programming has been movies for television.

2263   J'étais aussi le fondateur de la compagnie "Les Films Allegro" à Montréal dans les années '80. Allegro était une des plus actives maisons canadiennes de production et de distribution, ainsi qu'une pionnière dans le domaine de la technologie de post-production. Allegro a été vendue à une compagnie qui fait maintenant partie de Quebecor. Après la vente d'Allegro, j'ai fondé Première Bobine en 2002.

2264   The financial troubles of Canwest and the following bankruptcy under the Companies' Creditors Arrangement Act have resulted in a cash shortage of millions of dollars to my company and to the writers, directors, actors, crew members and numerous suppliers who rely on us.

2265   For a company like mine, for the people and companies that we work with and for all those that rely on them, millions of dollars is a lot of money.

2266   The recent financial crisis struck in the fall of 2008. The governments of Canada, Ontario and the United States moved rapidly to make sure that both General Motors and Chrysler would be able to honour their obligations in bankruptcy. Those companies were bailed out with tens of billions of dollars of taxpayer money. This was done so as not to disrupt the supply chain of the automobile industry and most of all so as to preserve employment.

2267   Well, in 2008, there were five times as many people working in the Canadian film and television production industry as in the Canadian subsidiaries of Ford, Chrysler and General Motors combined, and this does not include the countless people working in the companies that provide services to the film and television production industry and it does not include those people who work in Canadian broadcast and telecommunications companies.

2268   There were two automobile company bankruptcies under the Companies' Creditors Arrangement Act, with those two companies bailed out by governments on both sides of the border.

2269   There were three Canadian broadcasters that entered creditor protection, Canwest, SuperChannel and TQS, but there was no effort to provide taxpayer funding. There was no bailout for the supply chain of our industry and of my company.

2270   We are not asking for government assistance. We are simply asking you to recognize and give significant weight to the considerable intangible benefits that will result from the approval of the Shaw application, benefits such as financial stability, management expertise and a commitment to the Canadian broadcasting system by an all-Canadian company. These advantages will be particularly important in the coming years.

2271   The Commission has decided to move toward a Canadian content expenditure regime which is tied to ownership groups and based on a percentage of gross revenue.

2272   We think that this is a very practical approach, providing both flexibility and transparency, and we applaud the Commission for this decision. However, the ownership group approach also puts a premium on the capacity of the ownership groups to honour their obligations.

2273   I believe that securing this ongoing commitment is essential to the financial health and future of my industry and that the Shaw application offers the stability and reliability that will be necessary.

2274   In addition, for my company the Shaw acquisition would create millions of dollars of additional working capital since the Canwest licence agreements would become bankable. For Première Bobine, this would in fact be a very tangible benefit.

2275   Première Bobine would certainly be happy to see a more extensive tangible benefits package and one which is widely admired by the production community. However, if the choice is to support the Shaw acquisition of Canwest with their final proposal or to refuse it, the choice must clearly be to support the acquisition.

2276   There is no visible and realistic alternative to the acquisition by Shaw, and every week that passes with the current ownership of Canwest is a week of productions foregone, creative opportunities denied and employment lost.

2277   The creation of that content should be at the centre of your deliberations. As Robert Fowler so famously said: "The only thing that really matters in broadcasting is program content; all the rest is housekeeping." There are others who say that the broadcasters are the plumbing and we are the stuff in the pipes, but I prefer Fowler's quote.

2278   The Commission now has an opportunity to assure that Canwest leaves creditor protection under the Companies' Creditors Arrangement Act and that Canwest is purchased by a company that can honour its present and future financial obligations. We are asking the Commission to approve this transaction without delay.

2279   Thank you again for the opportunity to speak with you today and if you have questions, I will do my best to answer them.

2280   THE CHAIRPERSON: Okay. Thank you for your presentation.

2281   You made reference to the CMPA. I presume you are a member of it?

2282   MR. BERRY: Yes, I am.

2283   THE CHAIRPERSON: They were here before us yesterday. They also supported this transaction with some major caveats. Now, you have made no reference to those caveats.

2284   Do you support what the CMPA put before us or do you think that is overkill?

2285   MR. BERRY: Well, I think, to put this very practically, if this were a transaction which my company were making, I would tell my gang to go in there and get the best deal they could but not to come out of the room without a deal.

2286   In other words, I think that if Shaw is prepared to put more on the table, that would be a great thing. It could generate a lot of goodwill, and they will appear later today.

2287   On the other hand, I think, to be frank about this, even if they don't, I think the transaction should go through.

2288   THE CHAIRPERSON: But CMPA didn't talk about benefits. They talked about restrictions on Shaw or disclosure obligations, so in short, transparency and fair play for the production community, of which you are a member.

2289   MR. BERRY: What are you referring to specifically?

2290   THE CHAIRPERSON: They, for instance, said there should be terms of trade agreement, there should be separate management, there should be -- in their submission they talk about the principal expended by the funds and want Shaw to subscribe to those, et cetera.

2291   There's a number of points that were made yesterday by Mr. Bolen and we are just trying to figure out whether this -- he speaks obviously for the Association, but since you came here personally, you have a very pragmatic approach. You said a world with Shaw owning Canwest is better than a world with Shaw not owning Canwest. I understand that.

2292   Obviously, benefits is a question of negotiation but these other things really go to the core of running the business and what limitations can be imposed upon Shaw so they are not tempted to abuse the marketing power and purchasing power that they have.

2293   MR. BERRY: Well, I think we have to address them one at a time, and, unfortunately, they are both enormously complex issues. And also, it is very difficult to predict the consequences of regulation in these areas.

2294   Terms of trade, for example, I note in the -- I wasn't here for the CMPA presentation yesterday. I flew in around noon from Vancouver, and, unfortunately, the Commission was too efficient and you had finished with them by the time I arrived.

2295   I had a chance to scan through a little bit of the transcript this morning, but reading the CMPA presentation, it seemed to me that what they are asking for is a kind of accelerated negotiation process for terms of trade but stopping short of a binding arbitration.

2296   So really, again, I hate to be sounding pragmatic but I am always reminded by legal counsel that an agreement to agree is not an agreement, and it looks like on terms of trade it is kind of an agreement to agree: We will put these people in a room and tell them they have to agree.

2297   Well, without knowing exactly what the terms that are being discussed are, the conversation is pretty hypothetical.

2298   THE CHAIRPERSON: Okay.

2299   MR. BERRY: In terms of market power and industry consolidation, in speaking with Sheridan this morning, I reminded her that the last time my company had been sort of active in public policy issues was on the CTV acquisition of CHUM.

2300   We banded together with a couple of other producers and worked with Sheridan's colleague John Rook and made what I thought was a brilliant presentation to the Competition Bureau, in which we argued that Citytv should not be owned by CTV.

2301   At one point we were asked by some people at the Competition Bureau if a sufficient remedy would be requiring CTV to sell CHUM -- to sell City, rather, and we had to admit yes, that would be a sufficient remedy. And in the end it was passed to the Commission and somehow that was the outcome.

2302   Well, since that day we haven't sold a single movie to Rogers. So be careful what you wish for and beware the law of unintended consequences.

2303   What happened in that case was that we had been selling movies to CHUM, which had been our principal buyer of conventional television rights for Canadian-content movies since approximately 1985. So we had a relationship that went back about 20 years and a very important foundation of our company and a very important part of our business plan.

2304   Well, that purchase by CHUM had been made possible because they combined a couple of specialty services with a conventional service.

2305   They combined City with Bravo! and SPACE and it was kind of a sweet spot because they were able to take advantage of the regulatory requirements for expenditure of SPACE and Bravo! with the necessity to program Canadian content in prime of Citytv and they became a great buyer.

2306   Well, when they split Citytv away from CTV, which if you look at it from a broad policy perspective we had done a great thing, there was no longer a really viable buying group.

2307   This just shows how difficult it is to predict the practical outcome when you look to impose rules in this area.

2308   THE CHAIRPERSON: You are very skilfully avoiding the question I am putting to you, which is, is there -- you are the only producer who appeared before us besides the CMPA, and the question, which may not be accidental, I don't know -- and you are very much in support of the Shaw transaction.

2309   The question that others have raised and which your Association also has raised is that the enormous concentration of purchasing power or marketing power in Shaw once they own Canwest, and they have both the distribution arm, they have the satellite, and the production arm, does this -- can this lead to abuse of dominance and should we put conditions on this purchase in order to avoid any temptation to engage in such behaviour?

2310   MR. BERRY: Well, first, thank you for the compliment about being skilful. My mother always told me to be aware of people who flatter me. I have never really forgotten that.

2311   One of her great expressions was she told me: If you want to make somebody your prisoner, tell them you admire them.

2312   A good lesson. So I would like to tell the Commission that I admire them.

--- Laughter

2313   MR. BERRY: I remember the Chair once being interviewed and thinking to myself that he himself was a master at avoiding unpleasant questions. So I hope I have learned something from him.

2314   But to respond as directly as I can to the question, I think you have to look at the specifics. I think you have to look at exactly what rule you are imposing and to do your best to think through what the practical impact of this rule will be.

2315   On the issue of Shaw owning Corus and Canwest, well, Shaw has said they will function as separate companies. The CMPA has looked for specificity and, however, have themselves then said, well, of course, we must make an exception for Movie Central.

2316   I was glad to note that they mentioned that because about two-thirds of the movies we make are sold to Movie Central and to Canwest.

2317   Now, if today you were to ask me if I would like to sign a licence agreement with Movie Central which included the Canwest rights as opposed to signing two separate licence agreements, I would say absolutely because that Movie Central licence I can take to the bank and that Canwest licence I can't.

2318   So at the risk of being accused of artfully or clumsily avoiding the question, I would like to ask if the Commission could put a more specific question as to what sort of limitations you are thinking of putting on Shaw so as to restrict its market power so we can then try to work through as best we can whether or not this would in fact work, you know, or have a beneficial consequence.

2319   THE CHAIRPERSON: Okay. Let me be specific. You want me to be specific. I will be as specific as possible.

2320   Right now Shaw is the owner of Shaw Cable. It is also the owner of Shaw Direct, the satellite division. There is a provision that they cannot share marketing information. There is a provision that they cannot share customer service information. There is a provision that they have separate legal and administration.

2321   Your association has asked us to impose -- I think that TELUS, for instance, has asked -- I don't which, but somebody has asked us to impose the same restrictions here, so that there would be a difference between Shaw Cable and Shaw Media, Shaw Canwest, whatever the company is going to be called.

2322   So that, in effect, while there is the same ownership and they can form -- pursue in an overall, general sense; in terms of customer relations, in terms of the legal and administrative part, there will be a separate division, so that this cannot be used in any way to unduly harm other competitors in the content field.

2323   Is that something that you think we should impose or not?

2324   MR. BERRY: It's not my area of expertise, as I am primarily a producer, financier and distributor of TV movies.

2325   My initial reaction, again, as one of the people in this room who probably know the least about this part of the business, would be to look at requirements for Shaw Cable to carry different services.

2326   I know, in some areas of the country, there have been complaints that the cable systems are abusing their power and making life difficult for companies which don't own cable systems. I, frankly, haven't heard that about Shaw, but it does seem to me that a cable system should be obligated to treat fairly other content providers.

2327   I would think that's obvious, and I would hope that Shaw would behave that way.

2328   THE CHAIRPERSON: Okay. I guess that's as clear an answer as we will get.

2329   Peter, do you have any questions?

2330   COMMISSIONER MENZIES: Actually, I think you have pretty much covered it. I am not going to make you repeat the same thing all over again. Thanks.

2331   THE CHAIRPERSON: Okay, thank you very much. Those are our questions.

2332   MR. BERRY: Thank you.

2333   THE CHAIRPERSON: Madam Secretary...

2334   THE SECRETARY: Thank you.

2335   We will now hear the intervention of the Canadian Media Guild.

2336   Please introduce yourself. You will have 10 minutes for your presentation.

INTERVENTION

2337   MS WIRSIG: Good morning, and thank you for taking the time to hear from me today. My name is Karen Wirsig, and I am the Communications Coordinator at the Canadian Media Guild. I am also mainly responsible for developing and monitoring policy for the union.

2338   The CMG represents 6,000 media workers across Canada, the majority of whom work at public service broadcasters CBC, Radio-Canada, TVO, TFO, and the Aboriginal Peoples Television Network.

2339   We also represent operations employees at CW Television, which is part of the application before you today.

2340   Our members take their role as providers of an important public service, that is to say, inform, enlighten and entertain Canadians, very seriously. That is our main motivation for appearing before you.

2341   Shaw Communications is a large and, of course, growing communications company. As a major BDU, with specialty and conventional television stations, Shaw will be a very important, in fact, pre-eminent player in Canada's cultural landscape, assuming you approve the application.

2342   The company should have increased obligations to Canadians in exchange for using our public airwaves.

2343   We respectfully recommend the following obligations as part of the current licence hearing.

2344   A requirement to maintain a separation between the operations of Canwest Global and Corus Entertainment. This is important from a diversity of voices perspective.

2345   Shaw's reply to this recommendation in our original written submission simply charges that such a requirement is "unnecessary and inappropriate."

2346   They don't have any information to back up their claim.

2347   We, frankly, don't have enough information to add to the debate on whether Shaw's distribution business be kept separate from the new programming business. We definitely support any regulatory safeguards necessary to protect the interests of so-called non-aligned broadcasters, those who don't have an affiliation with a distribution undertaking.

2348   What concerns us most right now is the potential for joint operation between two different broadcasters that have a corporate affiliation, that is, Shaw/Canwest Global on the one hand and Corus Entertainment on the other.

2349   We recognize that such a relationship is not contemplated in this application, and that is precisely why we believe it needs to be spelled out that no operational merger is allowed in this licence term.

2350   The direct operational involvement of Corus with Canwest would change the context of the application, and that is what, in our view, would be wholly inappropriate.

2351   If the Commission chooses not to impose a rule against the merging of operations, the CMG believes that a new hearing would be necessary if Shaw contemplates merging Canwest Global and Corus operations in the future. The Commission and the public must have an opportunity to examine impacts on the Diversity of Voices Framework, editorial independence, employment and other issues covered by broadcast regulation.

2352   We also have two specific recommendations related to benefits, to ensure that Shaw's commitments are truly public in nature.

2353   As there has been no competitive process at the Commission for taking on the Canwest Global broadcast licences, the CMG is of the view that a full public benefits package is wholly appropriate for this transaction.

2354   What is more, we don't see any good reason to discount the benefits owing in this case. What Shaw is now buying is the second largest conventional TV network in the country, as well as the most lucrative specialty channel group. If full public benefits don't apply for this purchase, when would they ever apply?

2355   We have two further recommendations when it comes to the benefits package. First, we propose that Shaw's investments in scripted drama and new media be administered by the Canada Media Fund. We certainly support the investments proposed by Shaw Communications; however, for the spending to represent a truly public and incremental benefit, we believe that it should be administered by the public agency that exists to finance Canadian programming across the industry, instead of being a private fund for Shaw's use alone.

2356   You may have noted that the vast majority of our members work for public service broadcasters that cannot be bought and sold. That means that these broadcasters are left out when it comes to accessing what is supposed to be public benefits money, if that money is spent only by the private sector applicant.

2357   Broadcast policy in this country says that there should be a balance between public and private interests. Where is the balance in the current scenario?

2358   We urge the Commission to have the programming benefits administered by the Canada Media Fund, and to take this approach in the future when it comes to programming investments in public benefits packages.

2359   We also propose that Shaw be required to offer space to other broadcasters on its digital transmitters in non-mandatory markets. Providing a channel on a digital transmitter to other public and, in some cases, private broadcasters would provide a decent over-the-air choice to viewers in those non-mandatory markets.

2360   This proposal probably requires some additional explanation. In recent years, the Canadian Media Guild has been one of the most consistent intervenors on the digital TV transition, arguing that the hybrid approach to the transition is not good enough because it denies the choice of free over-the-air TV service to Canadians in smaller cities and towns, a choice they now have thanks to analog transmitters.

2361   We understand the financial constraints that broadcasters have been facing, and we sympathize particularly with the public broadcasters, who have the most OTA infrastructure to upgrade.

2362   But there is an economical way to make the transition in smaller markets. A single digital transmitter, equipped with a multiplexer, can provide up to six channels at standard definition or two HD stations.

2363   This approach would make the transition more affordable to broadcasters, since they could share the capital and operating costs in smaller markets.

2364   Unfortunately, until now there has been a disappointing lack of regard by broadcasters outside of Quebec for viewers in the non-mandatory markets. Have a look at attached Map No. 1 to see what I mean. The red dots, which are communities where at least one broadcaster has published its intentions to upgrade to digital, are sparse in western Canada, the prairies, the north, Atlantic Canada, and northern Quebec and Ontario.

2365   Unfortunately, the index got cut off. The red dots are where the CRTC published in 2010-169 the plans of broadcasters, and the green dots represent where Shaw is proposing to upgrade -- in addition, upgrade in non-mandatory markets as part of the public benefits package.

2366   You can compare these plans to what currently exists on the map at the back of the presentation, which is actually a map produced by the CRTC last year, and you will note that there is quite a difference.

2367   The Shaw public benefits package presents the Commission and the industry with a wonderful opportunity to make something happen for the good of the Canadian TV viewing public in smaller cities and rural areas in B.C., Alberta, Ontario, New Brunswick and Nova Scotia. These are the provinces where Global has transmitters in the non-mandatory markets.

2368   But without a push by the Commission and a real effort by Shaw, this opportunity will slip away.

2369   We continue to believe that the only way to make the transmitter upgrade a truly public and incremental benefit is to require the sharing of all of the transmitters included in the benefits package with other broadcasters. Top of the list for sharing would be any other existing broadcaster in the area, and then the national public broadcasters, CBC and Radio-Canada, as well as a provincial broadcaster, if there is one.

2370   A channel should also be reserved for an existing or future community station. That is what we proposed in our written submission.

2371   In its reply, Shaw indicates that it is open to the possibility of sharing transmitters with other broadcasters in certain markets, "subject to consultation with other broadcasters and the need to prioritize HD service."

2372   It looks like there is a compromise to be found in there somewhere. Reaching it requires the will of the Commission, I would submit.

2373   For example, Shaw could be required to provide shared multiplexing in at least two non-mandatory markets in each province where it will upgrade transmitters. The Commission would need to create a licence to make this possible, and could also facilitate the discussions among the broadcasters which are necessary to launch the project.

2374   We should also note that the polling we did in Kamloops last year suggests that viewers are interested in channel choice. In fact, 33 percent of cable viewers in that city said they would choose to watch over-the-air instead if they had six channels.

2375   Choice may, in fact, be more valuable than high definition, and it is worth exploring. After all, those for whom HD is a priority can always subscribe to Shaw Direct or Shaw Cable. What does Shaw have to lose here?

2376   We urge the Commission to pursue discussions with Shaw to create a shared digital/OTA model in communities such as Kamloops, which is on the Global analog list. The model could then be replicated in other communities across the country. Please don't let this opportunity slip away.

2377   I would be happy to take your questions. Thank you very much.

2378   THE CHAIRPERSON: Thank you.

2379   Let's go through your various points. First, you are asking for the separate operation of Canwest Global and Corus.

2380   Shaw has stated that they have no intention of putting those together. But the point that has been raised before us is not Canwest and Corus, but Canwest, or whatever its new name will be, and Shaw Cable; that there should be separate management, or at least separate marketing and customer service. Otherwise, it would give them an unfair advantage.

2381   How do you feel about that?

2382   MS WIRSIG: As I say, that is not my, or our, area of expertise. I have heard the arguments from both TELUS and Pelmorex about more regulation. I can't add anything to that.

2383   THE CHAIRPERSON: Okay.

2384   MS WIRSIG: On the Corus front, Shaw is saying that they are not planning to do that. What I would like to see is a commitment on that in this licence term.

2385   I don't think it's a big issue, if they are saying they are not going to do it, but what I am worried about is a backdoor approach after the fact, and I think it would, actually, change the nature of the licences and the application if it were to happen after the fact.

2386   THE CHAIRPERSON: Corus, right now, is being operated quite distinctly from Shaw. I can attest to that, because when they appear here, very often, they appear separately, and they certainly don't have a common view of things.

2387   I think there is a deliberate corporate policy to serve different markets, with a different approach, and to have healthy competition between their divisions.

2388   MS WIRSIG: Sure, but before their divisions were distribution on the one hand, and programming content on the other. Right?

2389   THE CHAIRPERSON: Yes, right.

2390   MS WIRSIG: And they have now changed tack, I would say, with this application, Shaw saying: We would like to have some programming under our wing.

2391   All I am saying is, the dynamic changes a little bit, and who knows if, in the future, they decide for -- of course, what worries us and our members the most is so-called efficiencies purposes, putting things together, but from a public perspective there is also the diversity of voices issue, and editorial independence, and diversity of non-news content.

2392   From all of these perspectives, I think it's important to at least get the commitment that this will not happen.

2393   THE CHAIRPERSON: Take them by their word.

2394   MS WIRSIG: Yes.

2395   THE CHAIRPERSON: Make them commit to it is what you are saying.

2396   MS WIRSIG: Exactly.

2397   THE CHAIRPERSON: The Canada Media Fund -- you think that the benefits should go to the Canada Media Fund. You have to explain to me why that is.

2398   If these benefits are spent for the purpose of producing Canadian programming, whether it's through the Canada Media Fund or through Shaw, the net result is the same, you are going to have a Canadian product, hopefully Canadians will view it, and, of course, it will be in Shaw's interest not only to show it on their system, but on any other system, in order to get a return for their money.

2399   So why is there a requirement here to put it in the CMF?

2400   MS WIRSIG: It's a proposal to say that -- the public benefits package, as I understand it, is supposed to benefit the industry as a whole. We are now talking about a company that is going to have a pretty strong position across the industry. Having that money -- and I understand that this has been the practice for the last 10 years with benefit spending, that the broadcaster -- the applicant -- tends to set up their own fund and spends the money.

2401   In our discussions with a number of people in the industry, and in our discussions with people who, as I say, don't benefit from these kinds of public benefits, the discussion was: Don't we have a place that is already designed to -- an agency that is designed, with public and BDU money, to create programming, to make sure it represents the regions of the country, et cetera, and the new media element? Why would we set up all of these private funds on top of that?

2402   It's a way of accountability --

2403   THE CHAIRPERSON: But it already exists. Shaw has something called the Rocket Fund, which they use to fund children's programming, for which I have heard nothing but positive feedback.

2404   If this money went to the Rocket Fund and was being spent on that, wouldn't the same purpose be served that you are trying to serve?

2405   MS WIRSIG: Yes, the end result for Canadians may be the same. I think there is just more accountability and more chance for other broadcasters to share in the public benefit if it's done through the Canada Media Fund.

2406   THE CHAIRPERSON: Okay. On multiplexing, you showed us two maps, and you pointed out how many more stations there are on the second map than on the first, but these are all non-mandatory markets. The folks don't have to convert. They don't even have to close down.

2407   If they happen to be in 51-61, they have to move to somewhere else on the spectrum, but they can continue.

2408   So why do you feel that it is so necessary right now to impose this multiplexing?

2409   I am not against multiplexing. I think it's a great idea. I think that people should be doing it, and I assume they will do it if it makes commercial sense. I am trying to figure out why you feel that we should impose this.

2410   MS WIRSIG: The second map, which is your map, is all the high-powered transmitters across the country right now, so it includes mandatory and non-mandatory markets. Right?

2411   THE CHAIRPERSON: Yes.

2412   MS WIRSIG: The red dots on our map also include both mandatory and non-mandatory markets, because broadcasters, especially in Quebec, have decided to upgrade in more than the non-mandatory markets. As you can see, there are a lot of red dots in Quebec and in southern Ontario.

2413   Yes, broadcasters are not required outside of the non-mandatory markets to shut down their analog transmitters, but having spoken to a number of them, they will be doing so in the near future, because they are not -- at the moment they are not putting any money into really making major fixes to the existing analog transmitters, and I understand that they are not planning to replace them once they come to the end of their useful life.

2414   I think it's no secret that the biggest issue for Canadians is the CBC's plans. The CBC, and Radio-Canada, have by far the largest number of transmitters across the country, and because of when they were put up, they are coming very shortly to the end of their useful lives.

2415   We actually have members who work on that, and they are telling us -- I mean, some of these are really coming to the end of their life. They will be shut down.

2416   This is Canada. There are not, necessarily, economic reasons to put transmitters everywhere. That's why we had the accelerated coverage plan in the seventies, with public money, to boost the number of over-the-air transmitters at that time.

2417   Our view is, if Shaw is willing, as part of the public benefits -- we didn't see this plan from Shaw before public benefits came on the table. Right?

2418   If Shaw is willing to do this --

2419   Or, we didn't see this plan from Global before the public benefits came on the table with Shaw.

2420   If Shaw is willing to do this in markets that may or may not make economic sense, if this is a truly public and incremental benefit, they should share this with other broadcasters.

2421   You and I agree that multiplexing is a great idea. I have not really heard that from any other broadcasters, except perhaps via -- the Kamloops people tell us that, in their meeting with the Jim Pattison Group, they are interested, they just -- they say they don't have the money.

2422   I don't know, I can't judge. I'm just saying, if this is a public benefits package, why not use this opportunity -- I don't think it's going to cost much more than Shaw is planning to spend anyway on the upgrades, based on the estimates we have.

2423   If Shaw is willing to do it, why not really create a public benefit out of this by testing the multiplexing in a number of markets?

2424   We would like to see it happen in all of them, but at least test it in a number of markets using this opportunity.

2425   THE CHAIRPERSON: What you are really saying is that we should get Shaw to help the CBC -- subsidize them in their digital conversion, because they don't have the money.

2426   MS WIRSIG: Yes.

2427   THE CHAIRPERSON: And, I mean, Shaw is a private broadcaster and, to some extent, there is competition between them and the CBC.

2428   You are asking us, for the benefit of public policy, to ask them to subsidize their competitor?

2429   That, I must say, I find a very difficult concept to accept. I mean, whether the CBC converts or not, whether they have the money to do that or not, is surely a question of funding of the CBC, which is not the responsibility of Shaw.

2430   MS WIRSIG: But this is a public benefit. The CBC is not just another commercial competitor, the CBC is a public broadcaster, as is TVO, as is Knowledge Network.

2431   So what we are saying is -- there are two points. What we are saying is, if this is a public benefit -- let's forget about the CBC. They currently don't have a transmitter in Kamloops. This is not a money question for them entirely. They don't have a transmitter in Kamloops.

2432   The local affiliate change affiliation and they are now with City.

2433   This is about, for viewers there, bringing the CBC back to them.

2434   THE CHAIRPERSON: If you were to talk about TVO or Knowledge, I could see the logic of your argument. They really are not a competitor to Global. But, with the CBC, there is a large portion of the programming where they are really a competitor, they are not just a public broadcaster.

2435   MS WIRSIG: Well, I think it's still, from the perspective of viewers, more valuable to have access to their public broadcaster and to the kind of coverage they would have during elections and other major Canadian events.

2436   I am looking at this not from the perspective of competing broadcasters, but from the perspective of the public, and the public -- we used Kamloops as an example -- has actually lost access to their public broadcaster over the air.

2437   This would be a way in Kamloops -- and I am not limiting my remarks to Kamloops, but it would be a way of bringing it back for the viewers.

2438   They already pay for the public broadcaster through their tax dollars. Those tax dollars are clearly not enough for the kind of capital plan that the CBC would need to replicate the accelerated coverage plan in digital. We all know that.

2439   Are there other creative ways to do it? We think there are, and multiplexing would be one of them.

2440   By the way, we would assume that the CBC would pay its freight on operating. It wouldn't get this for free. It could probably contribute something on the capital side, if it was necessary.

2441   THE CHAIRPERSON: Exactly for that reason, let them work it out. If Shaw thinks that there is a business case to be made in Kamloops for multiplexing, and having the CBC share the tower and put an antenna on there, et cetera, at a cost, by all means, do it.

2442   But you are going one step further, you are asking me to impose it.

2443   MS WIRSIG: That's right, yes.

2444   THE CHAIRPERSON: Which then leads to the next question: On what terms?

2445   Say that we impose it and the CBC and Shaw cannot come to a deal? Then we wind up arbitrating and, in effect, imposing the costs of it.

2446   MS WIRSIG: No, what we are saying is, impose -- not impose the end effect, impose the idea that a certain number of these non-mandatory markets would be open for multiplexing and help launch the discussions. Play the moderating role that you can play, and play the encouraging role that you can play, to make it happen -- again, from the point of view of not these two competitors, but the viewing public.

2447   And can I say on the other note that this could end up being better for all of the broadcasters who share in this little group, because having Global over the air is one thing, from the perspective, again, of the viewer -- having Global over the air as the only channel available over the air, they will attract a certain number of viewers.

2448   Having more channels available over the air, say, up to three, four, five or six, will attract even more viewers, and may end up attracting more viewing time to each of those individual stations.

2449   So, in the end, our thought is that this could end up being better for all of the over-the-air stations -- the more the better.

2450   THE CHAIRPERSON: I totally share your view. We want diversity of voices, and we want to have as many signals as possible. It's a question of whether this is --

2451   I like your idea of saying encouraging and getting the discussion started. That's quite different from imposition.

2452   And I take your point that it would be of benefit to the public.

2453   Len, I believe you have a question.

2454   COMMISSIONER KATZ: Yes, thank you, Mr. Chairman.

2455   Good morning. I have one question. I want to turn around one of the questions you posed this morning on your second page. Just above the two recommendations you posit: "If full public benefits don't apply for this purchase, when would they ever apply?"

2456   I am going to turn that question around and ask you: If consideration of intangible benefits is not appropriate in this case, when would it be?

2457   The record that we have clearly says that there were some stations shut down prior to the acquisition. Red Deer closed down very quietly. Others were sold, as well.

2458   There was clearly a risk. Even though there were lots of reasons why Canwest Global Communications went into CCAA, it was clear that the OTA stations were in that package, as well, and there was a risk that some of those stations may have been forced to close down, as well, at some point in time. I am not suggesting all of them, but clearly some of them were at risk, as well, with jobs on the line and everything else.

2459   So here comes a good, strong, Canadian company prepared to save this organization and save a good piece of the Canadian broadcasting system.

2460   I ask you, if this is not a situation that should be considered, when would we ever consider a statement that we have in our own policy, which says that there are times when the Commission will assess an application and take into account both tangible and intangible benefits?

2461   Would this not be an obvious case where we would?

2462   MS WIRSIG: Sure, I guess the question is to what degree are you going to -- are the intangible benefits 50 percent? Are they 10 percent?

2463   I mean, I guess that's the question. Right?

2464   COMMISSIONER KATZ: Yes, but what you are saying here is -- you are saying that it should be 100 percent; that if full public benefits don't apply for this purchase, when would they ever apply?

2465   And now what I hear you saying is, maybe there should be some concessions to consider.

2466   If that's your answer, that's fine.

2467   MS WIRSIG: I think that in every deal there are, typically, intangible benefits, because you have a licence holder that no longer wants to have an asset, it's risky, somebody else wants the asset, they take it over, they make promises to you and to the Canadian public.

2468   There is always a risk. Right?

2469   So there will always be intangible benefits.

2470   Here we have an enthusiastic new owner that wants to take over the business that owns this licence. Great.

2471   In this case, the stations that shut down, we don't have access to all of the financials. We did have access to a little window into them that I saw -- I don't have time to look into all of this stuff in great detail every time there is an application, but I did look a little bit at the CHCH application, and what I noted there is that part of the problem with that station seemed to me to be related to the bigger Canwest problems.

2472   Canwest was charging CHCH for all kinds of things that CHCH really didn't have to pay for to run as a successful local station, as we have seen.

2473   And we understand from the people that run that station that they are now making money.

2474   So part of the problem with Canwest was Canwest Global Communications. That problem is now out of the way. Shaw is taking over some very successful stations. That's what we are saying.

2475   There are some local stations that don't make as much money as other stations -- that is our understanding -- and there are some local stations that would make it very difficult to help pay back the debts owned to Goldman Sachs. Yes, that is all true, and that is one of the reasons we opposed that application back in the day -- the Goldman Sachs involvement -- because we knew that would put pressure on those local stations and on Canadian content, which it did.

2476   In this case, what we are saying is, they are getting CW Television, which are wonderful, lucrative assets, and they are getting the second biggest over-the-air conventional network in the country.

2477   If the deal is valued at $2 billion, we don't see a reason why they wouldn't be paying tangible benefits of 10 percent of that deal, or very close to 10 percent of that deal.

2478   COMMISSIONER KATZ: You have now broadened my question. I was looking at that piece of it, the OTA component.

2479   And how they got to CCAA, I don't think, is as important as: They were in CCAA, and there was a risk of further job erosion. There was a risk of further stations being closed down, some of the smaller ones, as well, and they were saved by virtue of the proposal before us right now.

2480   I am saying, if that is not a reason to consider the intangible opportunities here, then I don't know what would be. That is all I am saying.

2481   I was positing that to you, and I think I heard your initial answer, saying: Maybe there should be some latitude, maybe there shouldn't.

2482   But I think you were sort of following on the same position, I guess, that Shaw is taking, that is, leave it up to the Commission to make a final decision.

2483   MS WIRSIG: Yes.

2484   COMMISSIONER KATZ: Thank you.

2485   THE CHAIRPERSON: Okay. Thank you very much. I don't think there are any more questions. Thank you for intervening.

2486   MS WIRSIG: Thank you.

2487   THE CHAIRPERSON: Madam Secretary, I think that finishes all of the intervenors.

2488   THE SECRETARY: Yes, Mr. Chairman.

2489   THE CHAIRPERSON: All right. Let's take a 10-minute break before we hear from Shaw in reply.

--- Upon recessing at 0954

--- Upon resuming at 1014

2490   THE CHAIRPERSON: Okay, Madame la Secrétaire, nous commençons.

2491   THE SECRETARY: We will now proceed to Phase 3, in which the Applicant can reply to all interventions submitted for its item. Please reintroduce yourself for the record, and you have 10 minutes for your reply.

2492   Thank you.

REPLY

2493   MR. JIM SHAW: Thank you, Mr. Chairman and Commissioners.

2494   Good morning.

2495   For the record, my name is Jim Shaw, CEO and Vice-Chair of Shaw.

2496   I'm joined here today by Peter Bissonnette, President; Brad Shaw, Executive Vice-President; Ken Stein, and the rest of our crew, including our CFO, Steve Wilson.

2497   We appreciate the Commission's commitment to approving this important acquisition. Shaw has received overwhelming support for this transaction in 140 interventions from individuals, organizations, independent producers and elected officials.

2498   For example, the Premiers of British Columbia, Alberta and Saskatchewan agree that this transaction is good for the broadcasting system. Not that they would always know a lot about it, but, you know, they did appreciate that we were applying for it and we are going to keep jobs in those territories across western Canada, and expanding into eastern, and then Atlantic Canada.

2499   We would like to express our sincere appreciation for everyone who has supported the Shaw application.

2500   So, Peter, up to you.

2501   MR. BISSONNETTE: Thanks, Jim.

2502   In today's reply comments, we will provide Shaw's response on the matter of benefits and we will also clarify our position on a few ownership issues that were raised by the Commission and the intervenors. And, as Steve Wilson stated during our constructive dialogue with the panel, we have accepted the Commission's $2-billion transaction value. We are pleased that the Commission accepts that the intangible benefits of this transaction are significant.

2503   Shaw's acquisition saves the Global Television Network. That loss would have had profound negative implications for the broadcasting system far beyond any book value of the over-the-air stations. These stations spend over $100 million per year on Canadian programming and all non-news programming is commissioned from independent producers. The jobs of over 1,000 employees have been secured, competition and diversity of voices will be preserved.

2504   It was not easy to navigate the CCAA process and finally negotiate the buyout of two strong non-Canadian parties with competing economic interests. Although these interests are included in the transaction value, the valuable benefit of removing all non-Canadian stakeholders should be taken into consideration in the applications of the benefits policy.

2505   Let there be no mistake failure by Shaw to acquire 100 percent Canadian ownership would have resulted in the breakup of the specialty and over-the-air services, with a significant negative impact on the Canadian broadcasting system and all of its stakeholders.

2506   Therefore, we strongly believe that the Commission should, at the very least, apply its discretion by imposing no more than a 5-percent tangible benefits contribution from the CTLP transaction value.

2507   To further assist the Commission in bringing expeditious closure to this transaction, Shaw is providing a revised $180 million benefits proposal. This commitment is in addition to the $95 million in remaining benefits, and includes the following: first, $23 million for construction of DTV transmitters in non-mandatory markets, as originally proposed in our application; second, consistent with our discussion on the digital transition, we are committing $15 million to provide satellite-delivered local broadcasting services to former over-the-air households in markets without digital broadcast transmissions. Shaw will provide satellite receivers and free programming to qualifying households so that they can receive local and regional over-the-air signals on our satellites; third, $45 million for the production and exhibition of new morning newscasts in Regina, Saskatoon, Winnipeg, Toronto, Montreal and Halifax; fourth, $75 million to develop, create and promote incremental, independently produced programming of national interest, including 8-point drama for over-the-air network and speciality services. We have increased this commitment by $55 million. Within this benefit, $3 million will be allocated to media accessibility, including video description of all national-interest programming funded under our benefits initiatives; and finally, fifth, $18 million to create new media content to complement and reinforce our other benefit initiatives in connection with programming of national interest and news.

2508   Given the size and nature of these benefits, we believe that it would be in the best interest of the broadcasting system to extend these benefits over seven years, and we ask for your approval to do this.

2509   Let us be absolutely clear that, in order to finalize the CCAA process, we must close this transaction as expeditiously as possible.

2510   Ken.

2511   MR. STEIN: We would now like to clarify a few issues concerning ownership and safeguards.

2512   Over the past three years, the Commission has introduced a well considered and forward-looking framework to ensure that the objectives of the act are met in the competitive digital environment.

2513   The BDU and specialty service framework, the Diversity of Voices policy and the new group licensing framework set out clear guidelines and safeguards to ensure the ongoing success of the Canadian broadcasting system. This framework provided a firm basis for Shaw to proceed confidently with this transaction.

2514   In our view, it is totally unacceptable for TELUS and Pelmorex to try to undermine a well-thought-out and, I would point out, recently established regulatory framework by asking the Commission to rewrite it.

2515   The Commission should reject proposals for safeguards that only apply to Shaw, including certain reverse onus provisions. Undue preference provisions now cover all potential broadcast content platforms, including VOD, wireless and online. As the Chairman stated yesterday, if the Commission considers it necessary to expand upon existing safeguards this would require a general policy change. Any other approach, in our view, would be discriminatory and would cause competitive inequity.

2516   Given that exclusivity is not part of our business plan, we have no intention of denying programming to our competitors. As Jim and Brad stated on Tuesday, we are a 100 percent committed to providing access on a non-exclusive basis and subject to negotiated commercial terms to all the content to which we have rights. We hope that other industry players will adopt the same approach. Therefore, we oppose TELUS' request for a Shaw-specific blanket prohibition against exclusive rights.

2517   As observed yesterday, there is clear evident that TELUS claims exclusivity for its own services. TELUS' efforts to unduly disadvantage Shaw through this process should be dismissed as unacceptable regulatory gamesmanship.

2518   On Tuesday, we were asked about the issue of confidential registration of affiliation agreements. To be clear, we do not object to filing confidential affiliation agreements in the context of a specific dispute; however, we do not support the proposals made by Pelmorex and TELUS for, quote, prefiling all our affiliation agreements. This would be burdensome, administratively complex and unnecessary. Agreements are confidential, and also point out they are complex.

2519   All relevant documents would be made available in the event of a dispute on a strictly confidential basis. The Commission's existing processes regarding disputes are well established and they are effective.

2520   A number of intervenors have proposed various levels of structural separation. These requests are inappropriate and unnecessary. Corus is an independently operated, publicly traded company, with unique shareholders, its own management team and a completely separate board of directors. As we said in our earlier remarks, they have separate programming departments due to the nature of their corporate structure, and that will continue.

2521   Finally, there is no need to impose structural separation requirements between Shaw and Canwest. The Commission has set up a comprehensive framework to prevent undue preference. There are already several companies within the broadcasting system which are vertically integrated without any such restrictions.

2522   Onerous recommendations for regulated separation between Shaw and Canwest must be rejected. They would undermine the enormous benefits of this acquisition, namely the strengthening of the Canadian broadcasting system in the face of intensified regulated and unregulated competition.

2523   Finally, we are committed to negotiating, together with other broadcasters, terms of trade with producers as we approach the next licence renewal; however, we strongly oppose any requirement to independently conclude a terms-of-trade agreement.

2524   We look forward to building strong partnerships with producers. The CMPA's attempt to use this transaction to secure hasty closure of a very complex subject matter is completely inappropriate, and, in our view, contrary to the public interest.

2525   Jim.

2526   MR. JIM SHAW: This transaction creates a strong, competitive broadcasting company. We will invest and innovate to meet the demands of our customers and take on powerful, unregulated communication companies.

2527   Our benefits proposal confirms Shaw's strong leadership role in the industry and our commitment to the Canadian broadcasting system.

2528   Most important, this transaction saves Global Television Network.

2529   We filed this application on the basis of current Commission policy. We have not requested any policy changes. The policy framework was developed over the last few years on the basis of extensive public consultation. Most of the parties who appeared before you this week participated in all those hearings.

2530   We request a full and timely approval of our application, and I would like to thank you for your time.

2531   THE CHAIRPERSON: Thank you very much for your presentation.

2532   You have obviously done a lot of thinking in the last three days. You have clearly heard us.

2533   The proposal you just put before us is a major change from your opening position. We are also ahead of time, much more than I expected, so what I would like to do is now take a half-an-hour break and read this through carefully, because it raises all sorts of issues, so we can ask you intelligently about it.

2534   So it's right now 10:30. How about we meet back here at 11? The panel will consult among ourselves, and we will start the questioning then.

2535   Thank you.

--- Upon recessing at 1026

--- Upon resuming at 1110

2536   THE CHAIRPERSON: Okay. We have had a look at your submission. As I said before, you clearly have heard all the interveners and have made large strides in order to meet some of the issues that we have raised and which concern us.

2537   Let me start in reverse order and deal with the points first of all raised by Mr. Stein.

2538   On Tuesday when I raised the issue of program exclusivity, et cetera, you, Mr. Brad Shaw, stated categorically that this was not part of your business and you stated that you will make the content available on commercial terms to anybody who wanted it, et cetera.

2539   I now see a little jab at TELUS here, but I don't know whether your position has changed or not. What is your position there?

2540   MR. BRAD SHAW: Our position hasn't changed, we will still offer all the rights to any competitor on a commercially-termed basis.

2541   THE CHAIRPERSON: And I ask you or your counsel to give us language to that effect. Have you produced anything to that effect or are you going to? How do we enshrine this commitment?

2542   MR. BRAD SHAW: We could certainly provide some language to the Commission.

2543   THE CHAIRPERSON: Let's make sure we don't -- I am talking about approving this deal subject to conditions to that effect. And we obviously have to have the wording of the condition because, as I say, I think your attitude is only a logical one from a commercial point of view, et cetera.

2544   And as I mentioned to you, obviously what we would do with you, we would also ask that of Bell, but I wanted to know -- I will ask you for language because I am acutely aware, I don't want to put you on any competitive disadvantage or screw up your commercial negotiations. That obviously should be in good faith, negotiated on commercial terms.

2545   On the other hand, this is a very important commitment that you made.

2546   MR. BRAD SHAW: We will commit to provide that language.

UNDERTAKING

2547   THE CHAIRPERSON: Okay. Let me just say now -- I was going to say at the end, but today is Thursday, our intention is to give everybody until next Thursday to provide the material that we ask, for the interveners to deal with any issues that come out of your revised response today to you, and to you to clarify anything that we question, as I did just right now.

2548   And if anything was raised by the interveners that you didn't address today -- well, two interveners, for instance who spoke, and you hadn't heard them yet, so obviously couldn't address their comments. So if you want to address anything they raised, you can do that too.

2549   So until close of business next Thursday, the interveners will have a chance to provide whatever we ask them and to comment on what you put forward. You will have a chance to clarify what is in here and comment in response to our questions and also to respond to anything the two interveners this morning issued.

2550   Then secondly, we heard a whole lot from both TELUS and also from I think the CMPA about the use of data and the feeling that you, as a distributor who also owns content, have all the data and, therefore, if there is negotiations it makes life very difficult for them because essentially you hold all the cards. And I remember one, for instance, Pelmorex suggested that set-tops viewer data in respect of programming services to be guarded as confidential data of that programming service.

2551   When I asked them about that they said, well, we should have access to it. So if I am going to sit down with Shaw to negotiate the rate for my specialty channel, any data that you have from your set-top box regarding the usage of my speciality channels, when it is being viewed or how often or whatever should be there so we can negotiate on the basis of...

2552   If I under understand you correctly, Mr. Stein, this morning you basically said no to that and all other suggestions on the use exchange -- on an exchange or making the availability of data.

2553   MR. JIM SHAW: On the Pelmorex submission they came and -- currently, they were saying they don't get the rights to audit, and they are auditing us right now, so we don't understand that. So, you know, there is people at our office auditing all their material and payments and whatever to see if we made a mistake. We didn't, so that is a nonissue.

2554   And that --

2555   THE CHAIRPERSON: I am not talking about Pelmorex specifically, I am talking about the idea, the idea being that a specialty channel has access to the set-top box data that you have regarding the use of that channel.

2556   MR. JIM SHAW: You know, that is an assumption because we don't have data that goes to the usage in those boxes. Like, we can barely track a box.

2557   MR. BISSONNETTE: In terms of knowing what a customer is tuned to on the box, we do not have that kind of information right now.

2558   THE CHAIRPERSON: And Pelmorex doesn't know that?

2559   MR. BISSONNETTE: Well, they should know it, exactly.

2560   THE CHAIRPERSON: Yeah, I mean, you are telling me that you technically don't collect that data or you don't have access to it or you cannot collect it. What is it?

2561   MR. BISSONNETTE: I am telling you, we do not have any access to that data in terms of tuning information. So Pelmorex may be talking about something 20 years from now, but there is no data that we collect or maintain or measure that talks about what customers are tuning to.

2562   THE CHAIRPERSON: What are they talking about?

2563   MR. BISSONNETTE: Well, I think that, you know, they are trying to create an all-inclusive blanket that could touch any kind of machiavellian behaviour that may exist, and it doesn't exist.

2564   THE CHAIRPERSON: I asked Mr. Temple about this yesterday. He suggested that this is data that exists and that it would be useful for him in negotiating with you as to, I presume, the rate or whatever.

2565   MR. BISSONNETTE: Yes. That doesn't exist.

2566   THE CHAIRPERSON: The other issue that came up, there was the VOD and Pay TV. Yes, there is a prohibition against discrimination and self-serving, but we don't have the reverse onus in there as we have regarding other...

2567   And you know, as I explained to you on Tuesday, the reverse onus is basically there because you are the owner of all the data. If somebody comes forward and makes an allegation, you know, you having the data -- if the allegation is unfounded, should be easy for you to rebut it because you are the owner of the data. But if you don't have the reverse onus, then the alleger has to actually establish this without having access to the relevant data.

2568   MR. STEIN: I terms of that, I mean, the Commission did discuss this in 2008 and in the Decision 2008-100 did basically say that allegations of undue preference against programming undertakings, that there wasn't sufficient evidence on the record to introduce that and is, therefore, not prepared to impose it.

2569   So we looked at it over the last day as to why you came to that conclusion on this. And of course, part of the problem is the complexity of the arrangements. So that if somebody wanted to come to you and say we think spice is giving a great deal to Shaw and we want you to investigate that, and then Shaw would have to put evidence on the table to prove that we weren't doing that.

2570   That sounds reasonable, except that agreements are very complicated, they are generally not one-off -- maybe Pelmorex has one-off agreements because they are a single service, but not everybody else operates that way and agreements are quite complicated. So you could have free previews, you could have -- okay, we will carry this channel and that channel and, you know, there is all sorts of arrangements that come into this.

2571   So from a regulatory point of view we just weren't sure how this would work. Now, we are not unwilling to explore how it would work, but we would have to be more comfortable with how it would work before we could accept it.

2572   Secondly, we would not want to be at a competitive disadvantage because there are already other very strong vertically integrated distribution program companies, not just the ones to come like Bell/CTV but that already exist like Quebecor/TVA and also Rogers in terms of the services that it has.

2573   So we were just concerned about the workability of this. And not that we wouldn't want to explore it, but we felt that in this particular circumstance of unique condition in this circumstance for us would not be administratively workable. That was basically --

2574   THE CHAIRPERSON: So my observation on Tuesday, that obviously whatever would apply to you applies to Bell, should there be approval of that deal, doesn't give you enough comfort. You are afraid that you also compete against Rogers?

2575   MR. STEIN: Well, I think we are more afraid of just how complicated it would be to do this properly. Although, we are not trying to ignore the issue, right. I do think that the issue of dealing with independent programmers is important.

2576   I would note though that Pelmorex was the only one of the independent programmers who actually made that an issue. And in our view, a lot of the issues they raised were already addressed in the diversity of voices hearing. So we felt that this was not something that we could -- that this was something that we could agree to on a piecemeal approach, even if you were going to apply it to Bell.

2577   THE CHAIRPERSON: No, but they are not the only one who raised it. I mean, several others raised it. I mean, VOD -- let's face it, we are seeing a complete change in the behaviour of people on on-demand viewing much more than regular scheduled viewing, it is becoming an important source of revenue. And, you know, obviously you as a VOD operator will primarily benefit from it. The whole idea is that you don't benefit twice from it, both as VOD and by favouring your own channels over others.

2578   MR. JIM SHAW: Well, I also think it goes to Brad's point about all these over-the-top services and all the content is just going to be streaming all over the place. And certainly our commitment to provide access to 100 per cent of our content, right Brad, and to, you know, start delivering in new ways that we probably never even thought of before.

2579   So I think that is a huge task for us and I think, you know, it is a huge task for you guys too. But still, you know, I don't see any restrictions that need to be put in place in this area. I mean, you can look at -- you know, if you look at our dealings with what is called Star Choice or Shaw Direct now, I mean, you know, everything has been right upfront, no denial of access. We actually sell signals to all the other cable companies in Canada, including Rogers. We compete with Rogers on lots of levels. And so, you know, I just don't know if we need that kind of thing.

2580   THE CHAIRPERSON: Well, okay. I hear what you are saying, doesn't necessarily mean I accept it, but I hear what you are saying.

2581   Let's move on with the whole issue of -- I think TELUS raised it, they wanted to see structural separation the same way as you have it right now between Shaw Cable and Shaw Satellite.

2582   And when I pushed them for it they felt that, due to your dealing as a content provider, as Canwest with TELUS, you would get a huge amount of data on how the IPTV business of TELUS is actually working, et cetera, which you could then use to the benefit of your competitive business of your IPTV or your cable and TELUS. And so therefore, they felt a structural separation along the lines of what you have between cable and satellite was required in order to protect them.

2583   And if I understand it correctly, here you are saying absolutely no?

2584   MR. BISSONNETTE: We don't agree with what they have said, clearly, because we have said, you know, there are -- the benefits of not being structurally separate are actually what drove this acquisition, is that we have an opportunity to work closely with Canwest and our distribution operations group to make some of these innovative use of contents available on our platforms.

2585   Being structurally separated actually goes against the kind of innovative team-playing, collaborative kind of environment that we are trying to create by working with Canwest and our distribution in that manner.

2586   THE CHAIRPERSON: How would you then address the concerns voiced by TELUS?

2587   MR. BISSONNETTE: They would have those concerns right now; they would have them with Rogers, they would have them with some of the vertically integrated companies in Quebec, they would have those same concerns with Bell and CTV, and I don't think they have been raised in that context before.

2588   THE CHAIRPERSON: Well, I don't think they compete with Rogers, but I can see with Quebecor.

2589   MR. BISSONNETTE: They do -- yes. I thought they competed with Rogers on the wireless side of the business.

2590   THE CHAIRPERSON: On the wireless, yes.

2591   MR. BISSONNETTE: And satellite as well, you know, the Bell satellite alliance with TELUS. We know everyday how many customers we win or we lose with respect to TELUS so, you know, we already know that because they have been our customers.

2592   MR. JIM SHAW: And it also boils back to, you know, there is no denial of service. You know, they are a public company like Shaw, so they continue to report quarterly, so we get to see the numbers every quarter, they get to see our numbers every quarter. So I don't know if there is any reason to have a regulation. You can see Rogers numbers every quarter and Bell's numbers every quarter.

2593   So I don't really see a reason to get worried about -- they got, you know, this many weather channel subs or this many this and that. They already got their sub, so that is their sub, and they just report it.

2594   So you know, whether they are paying us or we are paying them, which we pay a lot to them just over their wireline service and over their fibre network and stuff like that, I don't know if it is really -- so now do we want to track their data and then they go to us?

2595   Like, we were talking last night that, you know, I mean we are denied access to any advertising in all the NHL rinks across Canada because TELUS demands that in their contract, so Shaw is not allowed in. So we can't even put up a billboard or nothing. So to think that, you know, some of these things go exclusive there is lots of ways around the bush -- when you run around the bush, you know, lots of ways to go around.

2596   So I don't think there is really a big difference in, you know, what we do with them. They get to see how much traffic we go with and, you know, whatever. So I don't really think that is a big issue, and they see it with every other provider.

2597   MR. BISSONNETTE: Clearly, you know, what is motivating TELUS may be more competitive in nature and, you know, the more that our arms are tied behind our backs the better off they are going to be. And so quite frankly, you know, a lot of sort of competitive issues have really motivated, you know, some of the things they are asking you to do.

2598   THE CHAIRPERSON: Well, of course, everybody who comes before us asks us to do things that are competitively to their advantage. I mean, I realize that and we discount a lot of that.

2599   MR. BISSONNETTE: So that is what we are saying, is we would be at a competitive disadvantage to have structural separation and economically disadvantaged to have that structural separation, and so that would be our response.

2600   MR. BRAD SHAW: Just to add to that, as we mentioned yesterday, our goal is to grow these Canwest services in over-the-air television network. And we like money, we like it Canadian and green. If TELUS is worried about us stripping out ads or anything, you know, we are in to grow the business and we will take their money as good as anyone.

2601   MR. JIM SHAW: And all our call centres are in Canada.

--- Laughter

2602   THE CHAIRPERSON: I mean, you appreciate our concerns. I mean, on the one hand we want you to succeed, you know, to be a strong Canadian company servicing our -- and we don't want to put any shackles on you to take on the new environment, you know, of unregulated delivery of content.

2603   On the other hand, we don't want to create, by allowing you to go and putting all this together, give you an advantage so that in effect the other players in the industry have no chance to compete with you. This was one of the issues that the Pelmorex put it, so you have wonderful safeguards. Yes, we agree with them, but all those safeguards are ex post facto.

2604   The advantage and the time is always in the hands of the person whom complained. First of all, it takes a courageous person to complain against somebody like the new Shaw, given your extensive holdings in satellite cable and programming, and certainly by the time the remedy comes around, you know, we may not be around.

2605   Hence, their request for certain data upfront so that they can deal with you. You saw the whole list of them, they are talking about the access to information, they are talking about right to audit, they want to have affiliations agreements filed in confidence in advance so they are already there in case they are needed. They want a report in confidence on the number of paid subscriptions for each discretionary service carried, et cetera.

2606   We are in a real quandary here. We see on the one hand their requirement for this to be able to deal with you on an equal basis. On the other hand, you are saying, no, don't impose that on us, you give me a competitive disadvantage and, plus, you impose huge administrative costs that others don't have to...

2607   How do we slice this baby in half? How do we come up with a solution that is acceptable to everybody?

2608   MR. D'AVELLA: Mr. Chairman, if I may add in response to your question, Pelmorex, as we all know, is a 9(1)(h) service. They don't have any other services for which we actually negotiate any deals. They have audit rights, they have affiliation agreements, there is one in negotiations right now. Access to data, they never asked us for any data. We don't have any data to actually share with them that they would want other than then number of basic subscribers on which they are paid. So we don't understand what additional safeguards they need.

2609   And with respect to independent programmers and broadcasters, they haven't raised any of these issues. They are happy to get deals done as Category 2 services or Category B services. They are satisfied with the 3 to 1 rule in terms of access. So we don't see the need for additional safeguards, rules and regulations specific to this transaction that have been raised by Pelmorex because they don't have any of these issues.

2610   MR. BISSONNETTE: You know, this is a public process and a public process is supposed to benefit the public. And I think Michael has not mentioned it, but Pelmorex essentially told us that if you would sign this agreement, we won't be filing this intervention. So it was almost an extortive kind of an approach to that discussion.

2611   And given what Michael said in terms of, you know, that they are protected by virtue of their carriage, we find it very very surprising that this is the process that they have chosen to do.

2612   THE CHAIRPERSON: You don't expect me to comment on that, but I mean this seems behaviour that is fairly common in this industry.

--- Laughter

2613   THE CHAIRPERSON: Let me go now to terms of trade. I mean, you were saying in principle yes, but we want to do it as an industry and we don't want to lead. That is if I understand you correctly, Mr. Stein, that is what you read out this morning?

2614   MR. STEIN: Yes.

2615   THE CHAIRPERSON: Well, don't you think it is now one of the largest companies in Canada, if not the largest -- if you are not first, you are certainly second -- and having such huge assets, both in broadcasting and in distribution, et cetera, it behoves you to be leader of this? Whatever you do, everybody else will follow, you will set the standard.

2616   MR. STEIN: Well, as I said earlier, we think the framework that you put in place and that we depended upon in terms of all the things we did with Goldman Sachs and the bondholders in going through the whole bankruptcy proceeding, we based it on the policies that you had in place.

2617   THE CHAIRPERSON: I am talking about terms of trade.

2618   MR. STEIN: Pardon?

2619   THE CHAIRPERSON: I am talking about terms of trade.

2620   MR. STEIN: I don't understand. I don't know --

2621   THE CHAIRPERSON: I changed the subject and I talked about the requirement of CMPA, for there to be a terms of trade agreement.

2622   MR. STEIN: I am sorry, okay. All right, thank you. I will have to take a moment to think about it.

2623   THE CHAIRPERSON: Okay, let me repeat my question to you.

2624   Terms of trade is an issue that has been kicking around, et cetera.

2625   MR. STEIN: Terms of trade, yes, I understand.

2626   THE CHAIRPERSON: We approved the Rogers acquisition of CHUM. At that point in time we said this is an issue that has to be -- that you, Rogers, should take the lead. They agreed to, it is on the record, it is on the public record. Nothing has happened, everybody has been waiting until we come to program renewal time.

2627   Now, the issue has been raised again and there have been negotiations, albeit very slow, between the CMPA and the various industry groups.

2628   You are now going to be the largest or, if not, the second largest player in the Canadian broadcasting industry. Wouldn't it be up to you to cut the deal, set the pace, whatever, you agree everybody else will mirror you, nobody will get a better deal than you. You are the biggest boy around now if this deal gets approved. So we have to take this issue off the table.

2629   So what if I, instead of you, saying to me this morning I don't want to be singled out, why don't you take the leadership, why don't you cut that deal?

2630   MR. STEIN: Well, I am going to let Paul and perhaps Ms Williams comment on that, Mr. Chairman, but I just wanted to say that we weren't saying we wouldn't take a leadership role. We very much would take a leadership role in moving this forward, but they are complex discussions, and I think we are most concerned about timelines being imposed, rather than...

2631   But we weren't trying to avoid taking a leadership position; in fact, quite the contrary.

2632   I will let Paul and others expand on that.

2633   MS WILLIAMS: Thank you. I think what underlies our position on this is that -- I mean, our understanding is that the Commission is truly interested in a uniform agreement. We need an agreement here that the broadcasters and the producers can all come together and agree on.

2634   And the producers are all working as a group, and we, as broadcasters, also really believe that we need to work as a group, so that we get the uniform agreement that the Commission is after.

2635   So we believe in taking a leadership position, and we are encouraging these negotiations, and we are working cooperatively with our broadcast colleagues to be sure that the conversations continue, but I don't think it is in the best interests of the industry and the overall agreement for one broadcaster to step outside of that uniform goal and cut a separate deal.

2636   So we don't think that that belongs as part of this deal. We think it's an industry process that is well underway and that we want to encourage to continue, but collectively with our other broadcast colleagues.

2637   THE CHAIRPERSON: Collectively with your other broadcast colleagues. That sounds to me not very much like a leadership role.

2638   MS WILLIAMS: I think there is a great leadership role to be had at the table, to be encouraging that people come together, that they find ways to work together as broadcasters, and find a way to find an ultimate solution that the production group, as a collection of producers, can also be comfortable with.

2639   THE CHAIRPERSON: Why is that necessary?

2640   As I say, you are going to be the biggest kid on the block. Whatever deal you cut, everybody else will do it. Nobody will get a better deal.

2641   Why do you need the comfort of collectivity here?

2642   MS WILLIAMS: A few things. I don't think we will be the biggest kid on the block, actually. I think there is a bigger kid still out there.

2643   But I do think that, as broadcast groups, we are all trying to be sure that we understand collectively what the production group is after, and that we end up with an agreement that we all can support on an ongoing basis.

2644   We don't want to see an arrangement where different terms of trade are being cut with different broadcast groups, we want this to be a uniform agreement that the entire industry can support and stand behind on a go-forward basis.

2645   So we think it's really important that all of the broadcasters be at the table together for this conversation, just the way all of the producers are together at the table for the conversation. This isn't a one-off between any broadcast group and any production company, this is a uniform, industry-wide agreement that we are all trying to come to.

2646   THE CHAIRPERSON: What specific steps are you taking to assert your leadership on this issue?

2647   MS WILLIAMS: In fact, just this week we have been in e-mail contact, again, with our colleagues and with the CMPA to get the next set of meetings on the table and keep the conversation going.

2648   As you know, what we are all struggling with is finding an agreeable line between some overriding principles that, I think, we all understand and want to support, and how drilled down into the details this terms of trade agreement potentially becomes.

2649   I think we are all careful about putting in an actual contract here that might duplicate the ongoing individual contracts that actually support the licence agreements that we do on an ongoing basis.

2650   It's a conversation that we have been having and we are making some movement on.

2651   And everyone is committed to getting it done.

2652   THE CHAIRPERSON: If I asked you to look into your crystal ball, when are you going to get it done?

2653   MS WILLIAMS: I think there is no doubt that the renewal process is going to encourage this conversation to become a little more aggressive. I am not sure that I have a crystal ball to suggest an absolute date, but there is no doubt that these next six months, as we work our way through the renewal process and to the hearing, will encourage this conversation.

2654   THE CHAIRPERSON: What comfort am I supposed to take from these words?

2655   MR. STEIN: If I could say, Mr. Chairman, Paul and I met with the CMPA early on in this process, and it was made clear to us in those discussions, as far as I can recall, that the collective approach was the way to go.

2656   I think there was a question about timing, which they made very clear when they appeared here.

2657   But we felt, in terms of dealing with issues, for example, with respect to this application, that their preference was to deal with it collectively as an industry. They did not want to make individual deals or have individual discussions, they wanted to do it more as an association, which we respect.

2658   So that was, basically, how we thought the terms of trade would go.

2659   As well, Canwest has informed us -- although we are not involved in this yet, but, you know, there is a whole renewal process in place where this is going to be an important issue.

2660   So I think the tools are there to drive it ahead, and it is Paul's and our commitment to recognize this as an issue that has to be dealt with over the next year.

2661   THE CHAIRPERSON: Mr. Robertson, your name is being bandied around. Do you have anything to add?

--- Laughter

2662   MR. ROBERTSON: My associates, I think, have done a great job of explaining it.

2663   We said to the CMPA -- CMPDA -- when we met with them that -- clearly, they articulated their interest in completing a terms of trade agreement, and we said that, on the closing of this deal, pending CRTC approval -- we always say that -- that we would, in earnest, talk to them about the substantive issues that are in and around that dialogue.

2664   And, most recently, their organization said: We want to come at this a different way with respect to domestic rights and foreign rights, and we've got a different angle on this.

2665   And we said: We are all ears, in terms of how this might be resolved.

2666   So I think we could just say to you that it is -- you know, the sun is coming up. It's the dawning of a new day. There are opportunities to get back around the table with new discussions, not just sharpen the old saw.

2667   And we will show leadership in the matter, as Barb said, and we will have substantive discussions, and we will seek to move this along so that we can report positively at our hearing for licence renewal, because that, absolutely, sets out a timeframe.

2668   THE CHAIRPERSON: I don't want another positive report, I want a result before we do licence renewal. That's exactly why -- we have made that abundantly clear all the time.

2669   If you come with another positive report in April, that is not going to help at all.

2670   MR. ROBERTSON: We certainly understand your desire to get this one completed. We have a desire to want to make it come to a positive conclusion. We also have a desire to come before you during licence renewal in the most positive way.

2671   So, I mean, we are motivated in the same direction.

2672   THE CHAIRPERSON: Okay. Mr. Stein, on page 5 you say, at the very bottom -- quoting me: "If the Commission considers it necessary to expand on existing safeguards, it should introduce a general policy change. Any other approach would be discriminatory and would cause competitive inequity."

2673   I presume that this is sort of a reference back to when CTV bought CHUM, and there were all sorts of issues of diversity of voices that came up as part of that transaction, and we said: No, it would be unfair to do the transaction on anything but existing rules. But we are seeing great concerns on diversity of voices, so we will hold a separate hearing on diversity of voices.

2674   We did that and we established the Diversity of Voices rules, which you have all cited, and which this transaction complies with.

2675   If I understand you correctly, what you are saying to me is: If you are concerned about vertical integration and the impact it will have, and in light of the unprecedented vertical integration that is happening as a result of your deal and the BCE deal, and any other deal that may follow, then you really should hold a hearing on vertical integration and see to what extent the present safeguards have to be strengthened.

2676   Is that what you are saying here?

2677   MR. STEIN: Not exactly.

2678   What I think we are saying is, when you went through the previous proceedings, you anticipated the kinds of things that were going to happen, because you set a limit -- I mean, to be blunt, some of us disagreed with that and filed interventions opposing it.

2679   Fortunately, you rejected those and you established a bright line of 35 percent. So we thought, okay, well, that's the situation.

2680   So we feel that --

2681   THE CHAIRPERSON: But that was a different issue. That was diversity of voices.

2682   MR. STEIN: Yes.

2683   THE CHAIRPERSON: We are now talking about vertical integration, which is really a code word for market power. Right?

2684   MR. STEIN: Right.

2685   We think that you have section 3(1)(t) of the Broadcasting Act. You do have the undue preference rules. We do have the 3(1) rule that is being put in place. And we feel that the safeguards that have been put in place, which are, as yet, untested, actually, are sufficient.

2686   Now, if the Commission feels over the next two years that they aren't sufficient, then our view would be that there should be a proceeding to deal with that.

2687   What we are concerned about is -- not that we are rejecting safeguards, but we are concerned about a piecemeal approach that will put us at a competitive disadvantage with respect to other players who will have access to information or be able to do things on a vertically integrated basis that we would not be able to do.

2688   THE CHAIRPERSON: Yes, I got the piecemeal point, but that's not what I was talking about. I was trying to understand the sentence that you say there.

2689   I gather why you don't like it -- if we need to do anything about safeguards, we should do it across the board is what you are saying.

2690   MR. STEIN: Which sentence?

2691   THE CHAIRPERSON: The last sentence on page 5.

2692   MR. STEIN: Maybe I will just try to explain it. We think that the safeguards that are in place now are sufficient, and that if, over the next two years -- and perhaps this isn't worded as best as it could be -- if over the next two years you would see concerns, then you could go to a policy hearing to deal with the concerns then.

2693   That is just our view.

2694   THE CHAIRPERSON: Yes, but start with a different presumption. I have concerns right now -- let's just say, for argument's sake, in light of Pelmorex and TELUS, et cetera --

2695   MR. STEIN: Yes.

2696   THE CHAIRPERSON: Therefore, you say: Fine. If you have those concerns, then call a policy hearing on those concerns and apply it to everybody.

2697   MR. STEIN: We feel that the concerns of Pelmorex and TELUS --

2698   THE CHAIRPERSON: Are unjustified, I know that.

2699   My presupposition was -- I said, "If we have concerns."

2700   MR. STEIN: "If we have concerns."

2701   Okay. Well, maybe it was misworded. You shouldn't have concerns.

2702   THE CHAIRPERSON: Okay.

--- Laughter

2703   THE CHAIRPERSON: I think we got the point.

2704   And you got my point. Thank you.

2705   Len, do you have some questions?

2706   COMMISSIONER KATZ: Thank you, Mr. Chairman, just a couple of short snappers.

2707   On page 6 you indicate that during the discussions on Tuesday, you did not object to filing confidential affiliation agreements, but you now caveat that by saying, "in the context of a specific dispute," as opposed to pre-filing all affiliation agreements.

2708   I want to confirm the third item. I thought I had asked whether you would be prepared to file all of the so-called arm's length affiliation agreements that exist today between Canwest and Shaw, and I thought that either Peter or Mr. Brad Shaw said "Not a problem."

2709   MR. STEIN: You mean the existing agreements?

2710   COMMISSIONER KATZ: Yes. The existing ones that were negotiated arm's length, prior to this transaction.

2711   MR. BRAD SHAW: We wouldn't have a problem with that.

2712   COMMISSIONER KATZ: Thank you.

2713   MR. BRAD SHAW: It would be confidential?

2714   COMMISSIONER KATZ: Oh, yes. Absolutely.

2715   My second question: The assets that we are looking at approving in this transaction, will they all be sitting in a wholly-owned subsidiary of Shaw Communications, the publicly traded company?

2716   MR. WILSON: Yes.

2717   COMMISSIONER KATZ: Subject to your confirmation the other day that there would be programming independence between the two programming organizations, do you believe that you would need CRTC approval if you wanted to engage in a share swap between Corus shareholders and Shaw, in order to put Corus as a wholly-owned subsidiary of Shaw, as well?

2718   MR. JIM SHAW: Are you talking about us buying Corus?

2719   COMMISSIONER KATZ: Well, just a share swap and putting it all under one corporate family, as opposed to separate boards, separate minority shareholders.

2720   MR. JIM SHAW: Like I said, it has been -- I can't remember how long ago Corus --

2721   Was it 10 years?

2722   It's in that range.

2723   We decided that it was a good move for Corus to go out and get its own group and start doing its own thing, and they are really, really separate.

2724   So, you know, I am not saying that we wouldn't --

2725   COMMISSIONER KATZ: The question, though, is: Do you think that you would need the Commission's approval to do it, or could you do it --

2726   MR. JIM SHAW: Yes.

2727   COMMISSIONER KATZ: -- without the Commission?

2728   You would need Commission's approval?

2729   MR. JIM SHAW: Yes.

2730   COMMISSIONER KATZ: Okay. That's all I wanted to know.

2731   Thank you, those are my questions.

2732   THE CHAIRPERSON: I want to follow up on that point. Why would you need our approval?

2733   You control Corus right now. You control Shaw. Surely there would be no change in control, so if you are swapping, I don't see why it would come before us.

2734   MR. JIM SHAW: The advice that we got was that it would not be a change in control, but it would be a substantive economic shift, and that it would, therefore, require your approval.

2735   THE CHAIRPERSON: Well, let's go to the heart of the question. Is it your intention to operate --

2736   As I understand it, it is your intention to continue to operate Corus separately, the way it is right now, and not to have any joint programming between the two.

2737   MR. JIM SHAW: Yes would be the answer.

2738   THE CHAIRPERSON: Do you have any problem if we make that a condition of approval?

2739   MR. STEIN: Yes, we would, in the sense that programming -- we believe that there should be opportunity for arrangements between Canwest and any organization, whether it's CBC or CTV or any other organization, in terms of that.

2740   We would think that that would not be a major issue, but we wouldn't want to see a condition that would preclude that kind of effort.

2741   MR. JIM SHAW: That would hurt the Global organization across the board, and, you know, I mean, it could be on Canadian content and a lot of things like that.

2742   THE CHAIRPERSON: You might want to think about this, because you have made the point and several intervenors have raised it with us.

2743   As I understand it, you are running them as separate companies.

2744   Obviously, there may be commercially negotiated deals between them, but that's not what I am talking about. I am talking about you unifying the programming operations of those two organizations.

2745   MR. STEIN: But I think the point that Vice-Chair Cugini made yesterday was an extremely good point, which is, why would we want to weaken the services?

2746   Corus has fantastically strong services that focus on what it is trying to do, and Canwest has strong services that it's trying to do. So there would not be -- in terms of trying to overlap the services or trying to duplicate the services, that would not be to the advantage of either company.

2747   THE CHAIRPERSON: In that case, why the hesitancy to put in writing what you are stating is an obvious commercial benefit?

2748   MR. STEIN: Because we don't see the need for the condition, that's why.

2749   We are not sure how you would word the condition, and we feel that we don't want to put limits on what Canwest can do with any partners.

2750   MR. ROBERTSON: May I just add to that?

2751   Even the producers' association recognized that there are instances where taking various windows and putting them together is to the advantage of the program distributor or the producer, and they particularly cited as one of these areas where you put the pay TV window together with the conventional and specialty window, and I think that is exactly what we are talking about.

2752   To the extent that a one-off programming arrangement could benefit the industry -- and Canwest might do that with CBC or it might do that with CTV -- they might do that with Corus -- it is kind of a one-off helpful thing to get a program produced.

2753   What we are saying is that, in the normal course of business, we are two separate companies. We are going to run two separate programming departments. That is the nature of what we do.

2754   THE CHAIRPERSON: Okay. Mr. Robertson, they say: Prohibit any programming or licensing overlap between Shaw/Canwest and Corus services by condition of licence. Without this safeguard, competition decreases and diversity of voices is reduced, and the producers are left with one less door to knock on.

2755   And then they come to your point: But there is one exception to the safeguards, the Corus pay TV movie service, Movie Central. This service has long been an important financing partner on big budget...

2756   Now, that may be the exception, you may be right, but the central idea, which I understand from Mr. Shaw is your intention anyway, is to have, in effect, two separate programming operations, subject to the exception, obviously, of such things as Movie Central, which makes sense to incorporate.

2757   Surely this is something that you can accept and undertake to do.

2758   You might want to reflect on that. As I told you at the beginning, you have a week...

2759   This is a point which was raised by practically every intervenor.

2760   Rita, do you have any questions?

2761   COMMISSIONER CUGINI: Thank you, yes.

2762   Just further to that, to clarify, it is your position that these kinds of financing arrangements are being done now. Right?

2763   I mean, certainly, with the public broadcaster, Canwest has contributed to financing arrangements with the CBC, and your competitors. Correct?

2764   So there is just an extension of that arrangement, and, therefore, no need to enshrine it in any condition?

2765   MR. ROBERTSON: That is a very important point, that this is the industry practice currently.

2766   We had the program, for example, Falcon Beach, which started on Canwest and ended up on Corus. It was in the best interest of the producer of Falcon Beach, I can tell you.

2767   At the end of the day, we just want to be careful that we don't prohibit things that are good for the industry. That's what we are trying to get at here.

2768   COMMISSIONER CUGINI: I am going to ask you questions that are a bit more specific with regard to your revised benefits package, and much more specifically on the timelines, because, as you know, pending CRTC approval, this will help us to write this section of the decision.

2769   Now, I know that you say in a concluding statement that you want these benefits extended over seven years. Is that for each of the benefits?

2770   And I ask this in the context of, for example, $23 million for the construction of DTV transmitters in non-mandatory markets. Is that to be spread out over seven years?

2771   MR. ROBERTSON: We anticipated that that whole effort would probably take more like five years, but we were uncertain of what the industry demands would be on the engineers involved in the process.

2772   So I think it's appropriate that it would be, at the outside, extended over seven years. Our expectation would be that it would be spent over five.

2773   COMMISSIONER CUGINI: And the same with the new commitment of $15 million to provide satellite-delivered local broadcasting services?

2774   Again, extended over seven years?

2775   MR. ROBERTSON: Yes, that would make sense.

2776   COMMISSIONER CUGINI: Okay. Third, the $45 million for the production and exhibition of new morning newscasts.

2777   MR. ROBERTSON: We will have some start-up on that one. The first year we may not have a ton of expenditures, as we start getting things rolling, but I think we will find that they will have a fairly even allocation once we get into Years 2 to 7.

2778   COMMISSIONER CUGINI: Your new commitment to -- your increased commitment to independently produce programming of national interest. Because you say "independently produce programming of national interest," does that mean that 100 percent of this commitment will be produced by independent producers?

2779   MR. ROBERTSON: Yes, that's correct.

2780   COMMISSIONER CUGINI: And the $3 million to be allocated to media accessibility, will that $3 million be used exclusively to the incremental, independently produced programming that will be borne from this benefit?

2781   MR. ROBERTSON: We would start there, but that amount of budget will provide for more than that. So we would extend that money to continue to describe programming beyond just the programming you mentioned.

2782   COMMISSIONER CUGINI: And the $18 million for new media content, that, too, to be spread out over seven years?

2783   MR. ROBERTSON: Yes.

2784   COMMISSIONER CUGINI: Would you want the decision to read that the total amount of the benefits package would be spent equally in each of the seven years?

2785   MR. ROBERTSON: Well, we would rather -- no, it would be a lot better for us to kind of track against some kind of budget offering, or something like that, so that we could put our minds to how it would best be administered.

2786   But I think it's pretty common practice that we would supply an outlook, in terms of how it would be spread out, and we are happy to do that.

2787   COMMISSIONER CUGINI: And in light of the revised benefits package, yesterday we talked about 90 days to submit a revision. Can we shorten that even further, from the date of the decision?

2788   MR. STEIN: Zero days.

2789   COMMISSIONER CUGINI: Zero days?

2790   MR. BISSONNETTE: We have actually defined it. We have tried to do that so that we don't need 90 days any more. These are our commitments to these benefits.

2791   COMMISSIONER CUGINI: Full stop.

2792   Okay. Thank you very much.

2793   Those are my questions.

2794   THE CHAIRPERSON: On the timing, you are going to give us a timetable of the benefits over the seven years, as I understand it, for each category?

2795   MR. ROBERTSON: Yes, we can do that.

UNDERTAKING

2796   THE CHAIRPERSON: And the amount that you allocate for each year will be, presumably, roughly equivalent each year. It may vary, but what kind of variations do you have in mind?

2797   Because our experience is otherwise everything gets back-loaded to year seven and nothing happens the first few years.

2798   MR. ROBERTSON: It actually might be more forward-spent than never-spent.

2799   THE CHAIRPERSON: Well, okay, but, I mean, I remember in CTV, for instance, we insisted that they give us a table, and then we gave them a 20 percent change from year to year, or whatever, et cetera.

2800   So when you file it, would file, please, exactly how much you spend and how much of a carryover or carryback you need in order to give you the necessary operational flexibility, but at that same time give us assurance that it will be spent?

2801   MR. ROBERTSON: So a percentage variation, understanding, that would be fine.

2802   The only point we would make is that the $79-million benefit, from a programming standpoint, we did anticipate, in our thinking, that the $95 million, which was yet to be spent on the Canwest benefits, would totally occupy our efforts for the next three years. So I just would like the Commission not to be surprised if they find that that programming benefits kicks in in earnest sort of in year four. And that was for reasons that we described well, I think, as we came forward with our application.

2803   THE CHAIRPERSON: I appreciate your forthrightness on this. Thank you.

2804   Marc.

2805   COMMISSIONER PATRONE: Thank you, Mr. Chair.

2806   My colleague already touched on the morning show commitment, up $2 million from what was originally proposed, presumably to pay for the addition of two more markets, right, Halifax and Montreal. You have already committed to supplying a breakdown of which market will get what funds.

2807   I was curious about the $18-million new media commitment, as to how that will apply to the news sector.

2808   Do you know at this point how much of that $18 million is going into the news departments?

2809   MR. ROBERTSON: We have not kind of done a budget on that --

2810   COMMISSIONER PATRONE: Okay.

2811   MR. ROBERTSON: -- basis at this point. And I think what's probably wise on that $18 million, given it's just kind of ideas fund, is that we get led by the creativity of what comes forward and respond to the most exciting ideas. So we are not exactly sure where it will fall.

2812   COMMISSIONER PATRONE: Fair enough.

2813   Thank you.

2814   THE CHAIRPERSON: Peter?

2815   COMMISSIONER MENZIES: Just overall from your presentations what I have taken is a description of a regulated industry that is preparing itself to compete with a very large emerging unregulated sector, in terms of people's media usage and dollars. So my question really simply is: how important is it to your business plan in the years going ahead that you be able to provide consumers with maximum choice and flexibility in their selection of their viewing packages?

2816   MR. BRAD SHAW: It's critically important. We do not want our customers to be disadvantaged at all. We want them to have full choice of all the products available in Canada and any types of programming, so we are committed to our customers, ensuring they have full choice.

2817   COMMISSIONER MENZIES: Okay.

2818   Thank you.

2819   THE CHAIRPERSON: On your benefit package, the second point, I'm delighted to see it.

2820   Can you give me a bit more detail exactly how this would work, the $15 million, to deal with over-the-air households that are without digital broadcast transmission?

2821   MR. BISSONNETTE: Well, Mr. Chairman, you defined an amount of about 31,000 households that could be disadvantaged in the event that a transmitter goes dark and there's no alternative --

2822   THE CHAIRPERSON: Right.

2823   MR. BISSONNETTE: -- and so to the extent that we can qualify those 31,000 households that would be in that situation, we would provide them with a complementary Shaw Direct box, an antenna, the installation of that, and we will replace the programming that they lost, the network programming that's available off satellite, for that particular customer.

2824   So if they lost Global -- well, they won't lose Global because we are going to be doing our other, but if they lost the CBC and CTV, then, through Shaw Direct, we will provide them those same services in that same time zone, not necessarily the same market.

2825   THE CHAIRPERSON: Okay. So, essentially, it's a variation of the free set proposal. The box will be programmed so that they can only receive the local station that they had --

2826   MR. BISSONNETTE: That's correct.

2827   THE CHAIRPERSON: -- they lost over the air.

2828   MR. BISSONNETTE: Yeah. So what you were looking for is a replacement --

2829   THE CHAIRPERSON: Right, right.

2830   MR. BISSONNETTE: -- for what they lost, and we are going to satisfy that. If they want more, it's available for them, of course.

2831   THE CHAIRPERSON: Hopefully, they will do that for you.

2832   MR. BISSONNETTE: Yes, that's right.

2833   THE CHAIRPERSON: Right.

2834   Now, you said subject to the point that we can qualify them. What exactly did you mean by that?

2835   MR. BISSONNETTE: Well, we want to make sure, you know, that -- because, as you know, when you give things away --

2836   THE CHAIRPERSON: Sure.

2837   MR. BISSONNETTE: -- for free, the lineup could back to Chilliwack --

2838   THE CHAIRPERSON: Yeah, absolutely.

2839   MR. BISSONNETTE: -- and so we want to ensure that lineup is in fact representative of those customers or households who, in fact, weren't subscribers to cable or satellite, were off-air customers, and they have lost the ability to receive those signals.

2840   THE CHAIRPERSON: Yes. Program operation is something I'm very familiar with, so how do you disqualify those unwarranted applicants? So there's somebody from the area which is cut off, he applies, how do you determine that, indeed, he falls in that category?

2841   MR. BISSONNETTE: That's what I say, that's one of the challenges we are going to have to do: how do we qualify those customers? We would know if they were cable customers --

2842   THE CHAIRPERSON: Yeah.

2843   MR. BISSONNETTE: -- and we would know if they were Shaw Direct customers previously. I guess we would have to do some kind of industry collaboration with the other satellite provider to ensure that they weren't basically just swapping satellite for satellite.

2844   THE CHAIRPERSON: Right.

2845   MR. BISSONNETTE: So if they had an antenna, that's what their sole method of receiving those signals was, we would replace those signals with a Shaw Direct signal.

2846   THE CHAIRPERSON: And for how long would this program be in place?

2847   MR. BISSONNETTE: You know, as long as there is $15-million worth of funding, and, you know -- and the time frame we think certainly suit -- the seven-year time frame certainly falls within the time frame of any of those analogue transmitters that may go bad by virtue of just their normal life.

2848   THE CHAIRPERSON: Okay.

2849   Now I want this program to succeed. I commend you for putting it out, so if you need assistance from us, in terms of regulatory, in order to ascertain who are qualified recipients and who are unqualified, et cetera, please come forward with an application and we will gladly do whatever is necessary to support it. Because I think your offering this will take a major public policy issue for the government and for us off the table.

2850   MR. BISSONNETTE: We recognize it and we appreciate -- we know that we are going to have to have some collaboration with you to define that.

2851   THE CHAIRPERSON: Okay.

2852   So then, as I say, I think those are all our questions that my colleagues have.

2853   You basically have a week to give us more details than what's here. I would particularly ask you to look again at the issue of terms of trade. I think we had a fairly good discussion on it. You know where we come from.

2854   So look at the Corus/Shaw issue and what you can do. You have talked about the commitment regarding program exclusivity, how you would word that, and also the timetable for the benefits, which is going to be of key importance for us.

2855   I think that concludes everything we have.

2856   Madam Secretary, is there anything else I left out? If not, well, thank you very much.

2857   MR. JIM SHAW: Thank you very much.

2858   THE CHAIRPERSON: Okay. As we said, we will issue a decision within 35 days of the hearing because we realize time is of crucial importance to you and everybody in the industry.

--- Whereupon the hearing concluded at 1208

   REPORTERS

____________________      ____________________

Johanne Morin         Jean Desaulniers

____________________      ____________________

Sharon Millett         Monique Mahoney

Date modified:

2010-09-23