ARCHIVED - Transcript, Hearing 16 November 2010

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Volume 1, 16 November 2010





Review of the direct-to-home satellite distribution policy as described in Broadcasting Notice of Consultation CRTC 2010-488


Outaouais Room

Conference Centre

Portage IV

140 Promenade du Portage

Gatineau, Quebec


In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of


However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Canadian Radio-television and

Telecommunications Commission


Review of the direct-to-home satellite distribution policy as described in Broadcasting Notice of Consultation CRTC 2010-488


Konrad von Finckenstein   Chairperson

Rita Cugini   Commissioner

Timothy Denton   Commissioner

Candice Molnar   Commissioner

Louise Poirier   Commissioner


Jade Roy   Secretary

Jean-Sébastien Gagnon   Legal Counsel

Nanao Kachi   Hearing coordinator


Outaouais Room

Conference Centre

Portage IV

140 Promenade du Portage

Gatineau, Quebec

November 16, 2010

- iv -




Bell TV   7 / 44

Shaw Direct   110 / 685

FreeHD Canada Inc.   168 / 1045

- iv -


Undertakings can be found at the following paragraphs:

      251, 255, 255, 296, 459, 626, 744, 874, and 938

   Gatineau, Quebec

--- Upon commencing on Tuesday, November 16, 2010 at 0903

1   LE PRÉSIDENT : Bonjour. Good morning, everybody. Bienvenue à cette audience publique.

2   Je vous présente les membres du comité d'audition :

3   - Rita Cugini, vice-présidente par intérim de la Radiodiffusion et conseillère régionale de l'Ontario;

4   - Tim Denton, conseiller national;

5   - Candice Molnar, conseillère régionale du Manitoba et de la Saskatchewan;

6   - Louise Poirier, conseillère nationale; et

7   - moi-même, Konrad Von Finckenstein, président du CRTC. Je présiderai, d'ailleurs, l'audience.

8   L'équipe du Conseil qui nous assiste comprend :

9   - Nanao Kachi, coordonnateur de l'audience et gestionnaire, Programmation en langue anglaise et en langue tierce;

10   - Jean-Sébastien Gagnon, conseiller juridique; et

11   - Jade Roy, secrétaire de l'audience.

12   At this hearing we will review some of the Commission's policies for direct-to-home satellite distribution.

13   Satellite distributors use a different technology than cable companies, which presents different challenges. Taking this into account, the Commission has imposed different requirements on them over the years.

14   Satellite distributors will see an increase from their current requirements on September 1, 2011, which coincides with the transition to digital television.

15   At a minimum, they will have to distribute:

16   - an affiliate of each nationally licensed television network;

17   - five English- and five French-language CBC stations, including one from each time zone or at least as many English- and French-language CBC stations as it distributes from a particular English- or French-language private broadcasting group;

18   - one television station per province from each major Canadian broadcasting ownership group; and

19   - two stations from each of the other Canadian broadcasting ownership groups.

20   Certaines parties ont suggéré que les entreprises de distribution par satellite soient tenues de distribuer toutes les stations de télévision conventionnelles. Le comité d'audition veut obtenir des points de vue quant au nombre approprié de stations locales que les entreprises de distribution par satellite devraient être tenues d'offrir à leurs abonnés.

21   Substitution simultanée.

22   Le comité d'audience examinera également les enjeux liés à la substitution simultanée.

23   Les entreprises de distribution par satellite sont actuellement tenues, sur demande d'un service de télévision canadien, de remplacer le signal d'une chaîne étrangère par celui d'une chaîne canadienne lorsque la même émission est diffusée en même temps sur les deux chaînes.

24   Le CRTC a reçu plusieurs plaintes relatives à la substitution simultanée tant de la part des radiodiffuseurs que d'abonnés. Le comité d'audition analysera la façon dont les entreprises de distribution par satellite effectue la substitution simultanée.

25   Au cours des trois prochains jours, nous nous pencherons sur ces questions en gardant à l'esprit la conversion numérique imminente, la hausse des émissions en haute définition et l'accroissement par les fournisseurs actuels de leur capacité de distribution par satellite.

26   Before I invite our secretary to give you some procedural points, I just wanted to point out that the response on Thursday will be conducted the way we did our last two telecom hearings, i.e., all intervenors will have a mic and a table and after we hear the reply from somebody, we may ask them to comment on it so we have a bit of a dialogue between the intervenors, not just questions from the panel.

27   You are all familiar with the procedure and you have universally indicated that you like that procedure, so we will apply it here as well.

28   Madame la Secrétaire.

29   LA SECRÉTAIRE : Merci, Monsieur le Président, et bonjour à tous.

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

31   Please note that the Commission members may ask questions in either English or French. Simultaneous interpretation is available during the hearing. The English interpretation is on channel 1. You can obtain an interpretation receiver from the commissionaire at the entrance of the Conference Centre.

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

33   Veuillez noter que les membres du Conseil peuvent poser des questions en français et en anglais. Le service d'interprétation simultanée est disponible durant l'audience. L'interprétation française se trouve au canal 2. Vous pouvez vous procurer les récepteurs d'interprétation auprès du commissionnaire à l'entrée du Centre.

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

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

36   The hearing is expected to last three days. We will begin tomorrow at 8:30 and Thursday at 9:00. We will advise you of any schedule changes as they occur.

37   Pendant toute la durée de l'audience, vous pourrez consulter les documents qui font partie du dossier public pour cette audience dans la salle d'examen qui se trouve dans la salle Papineau, située à l'extérieur de la salle d'audience à votre droite.

38   There is a verbatim transcript of this hearing being taken by the Court Reporter sitting at the table to my right, which will be posted daily on the Commission's website. If you have any questions on how to obtain all or part of this transcript, please approach the Court Reporter during a break.

39   Aux fins du dossier, veuillez noter que la Société de télédiffusion du Québec, Télé-Québec, a avisé le Conseil qu'elle ne comparaîtra pas à l'audience.

40   The Commission also has been advised that Media Access Canada, listed on the Agenda, will not be appearing at the hearing.

41   We will now proceed with the presentations in the order of appearance set out in the Agenda.

42   We will start with the presentation of Bell TV. Appearing for Bell is Mr. Mirko Bibic.

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


44   MR. BIBIC: Good morning, Commissioners.

45   Joining me today on the Bell Satellite TV panel are:

46   - to my immediate right, Heather Tulk, Senior Vice-President of Residential Products;

47   - to her right, Tim Dinesen, Vice-President of Operations and Technology; and

48   - to my left, Chris Frank, Vice-President of Programming.

49   I am going to start this morning, Commissioners, with some brief introductory comments. Then I am going to discuss satellite capacity as it concerns Bell TV. I will then turn it over to Heather who will discuss our carriage of local stations and then simsub.

50   The reason I point this out is that the main purpose of our opening statement from our perspective is to set out what we view as the basic essential facts so we all have a common understanding of Bell TV at least to aid or to assist in the discussion as we go forward in the next three days.

51   So to the introductory comments, paragraph 2.

52   This proceeding will review the conventional television stations that DTH distributors must carry and the manner in which DTH performs simsub.

53   In establishing its policy for carriage of over-the-air or OTA stations, the Commission has always acknowledged the technical constraints of DTH licensees. This is one element of a balancing act that the Commission states it must attempt, along with the importance of DTH distribution to OTA stations and a diversity of programming content for DTH subscribers. That is from the Public Notice which initiated this proceeding.

54   We encourage the Commission to also consider other key facts that must necessarily inform any discussions regarding Bell Satellite TV's distribution of OTA signals and the Commission's balancing of interests.

55   First, we are a national service, competing against numerous incumbent cable BDUs across the country.

56   Second, we are also the most bilingual distributor in Canada.

57   Third, as detailed in Appendix 1 -- which I will turn to with you in a moment -- we already carry many more OTA signals than DTH regulations require, and more than Shaw Direct does.

58   Fourth, we constantly struggle with capacity constraints.

59   Now, before I move on, if I could just turn your attention very briefly to Appendix 1. It is on page 9 of this document.

60   What we have done here to assist in the discussion is we have listed the major ownership groups and the number of stations of theirs, of each of theirs, that we carry.

61   You will see just by eyeballing it very quickly that all the ownership groups are very well represented on our system, and, in fact, the highest proportion of local stations carried are for CBC and City. And then you will see near the bottom that we have an excellent record of carrying small-market independent TV stations, with 20 out of 24.

62   So we will probably be referring to this appendix a few times during the course of this hearing and I thought I would draw your attention to it right away.

63   So back to the text. I am now at paragraph 4.

64   At Bell Satellite TV we balance a number of needs:

65   - to deliver the very best in TV viewing options to our customers;

66   - to meet our regulatory obligations for OTA carriage;

67   - to manage our constrained capacity; and

68   - to manage our capital in order to operate a healthy business.

69   So fundamentally our message on OTA signal carriage is this:

70   (1) continue the symmetrical regulatory rules that apply to all DTH providers;

71   (2) continue the OTA signal distribution rules from Broadcasting Public Notice 2008-100 (BPN 2008-100) and Broadcasting Regulatory Policy 2010-162 (BRP 2010-162); and

72   (3) over time, as our capacity grows, allow broadcaster-DTH negotiations to determine further OTA carriage.

73   Critical to DTH's ability to compete effectively is the need for regulatory certainty, and the Commission's continued acknowledgement that, and I quote, "perfect regulatory symmetry between terrestrial and DTH undertakings is not reasonable."

74   We believed that the Commission had ushered in a period of regulatory certainty with the issuance of BPN 2008-100. You will appreciate therefore that this new review has created considerable regulatory uncertainty.

75   For BCE, Bell Satellite TV continues to be a financial challenge. Except for 2008, DTH providers have not earned a profit. You have these numbers.

76   Now that we are investing significantly in our new Bell Fibe TV service, decisions regarding the balancing of long-term capital allocations must be made. New DTH regulations that place even greater financial burdens on Bell Satellite TV would inevitably spur a shift in our investment away from DTH to IPTV. This is the inescapable reality we face.

77   Moreover, BCE is making capital investments to develop broadcasting distribution opportunities on the Internet and on mobile devices in order to remain competitive with unregulated new media.

78   While we will remain an aggressive competitor in the distribution business over the long term, we must allocate a proportionately greater share of our capital budget to those parts of the business that best serve the ever-evolving demands of our customers while offering, of course, the best financial opportunities. New regulations that require significant new capital investments or exacerbate our operational losses will be difficult to accommodate.

79   So with those introductory comments in place, I would like to turn to satellite capacity.

80   Our capacity to distribute programming services is a function of both physical infrastructure and the throughput on those facilities. Our physical capacity is fixed and limited. Nimiq 6, which will be launched in the near future, is a replacement satellite and does not increase our physical capacity. We have no plans to acquire or make use of costly additional satellites or frequencies.

81   A satellite's capacity is also determined by throughput, which is the amount of information that can be transmitted on a given transponder. The more throughput, the more television channels that can be delivered per transponder.

82   Bell Satellite TV has increased transponder throughput by improving signal compression. Currently, we distribute all of our SD and HD services using MPEG-2. Although investments have been made to upgrade our MPEG-2 infrastructure, MPEG-2 is now approaching its practical limit.

83   Now, before I continue if you could bear with me I'm going to describe this basic schematic of how our signals are distributed to our subscribers. I think it will help in the discussion.

84   So starting a the left of the diagram with the points No. "1", obviously we first have to receive programming signals from programmers before we can distribute them to our subscribers.

85   We receive the feeds from broadcasters either via our Bell fibre network or through the ANIK or U.S. satellite. So programming signals come in to us at the Bell Satellite TV Broadcast Centre, which is labelled No. "2" here on the chart.

86   What we do is we uplink all the programming signals that we receive at the operations centre using MPEG-2 and those are uplinked to our satellites. You will see kind of at the top right of the diagram we have three satellites. We have two satellites Nimiq 1 and Nimiq 2 which are in the 91 degrees orbital slot and it's Nimiq 1 and Nimiq 2 on the left-hand side there that will be replaced in 2012 by Nimiq 6.

87   Another key fact that's not actually described here but I would like to explain is 100 percent of our subscribers -- and we have close to 2 million subscribers -- 100 percent of those subscribers can receive signals that are on Nimiq 1 and Nimiq 2, but only 50 percent of our subscribers can receive signals from Nimiq 4.

88   Then the signals come down from the satellite, again using MPEG-2 technology. That's labelled No. 4, down to the consumer's home, and the signals they receive are of course a function of which ones they subscribe to and, as I just mentioned, what set-top box they have.

89   So that's kind of a basic schematic of how signals are distributed and the number of satellites we have and set-top box technology and compression.

90   So continuing, then, at paragraph 10: MPEG-4 will be the next version of signal compression to expand DTH throughput. In order to exploit the benefits of MPEG-4, all of Bell Satellite TV's installed base of millions of set-top boxes must be capable of decoding MPEG-4 signals received from our Nimiq satellites.

91   However, that is an expensive proposition. Only 25 percent of our set-top boxes can decode MPEG-4 signals. The rest are not compatible with MPEG 4.

92   Upgrading all of the signals to MPEG-4 would require a replacement of 75 percent of our boxes, at a cost approaching $1 billion. This is roughly comparable to the cost of a new satellite. This cost is both operationally and financially impractical.

93   We continue to consider how we might stage an investment in MPEG-4 which would provide for additional capacity in the future. However, before such investments are made, we must be confident of a reasonable business return.

94   I will turn it over to Heather to discuss OTA carriage and simsub.

95   MS TULK: Thank you, Mirko.

96   Bell Satellite TV currently distributes the equivalent of 407 standard definition signals and the equivalent of 109 high definition signals. The mix between these signals is dynamic and depends on many things, including the availability of high definition signals from the various content providers, customer demands, our programming decisions, which are designed to optimize our competitive position, and of course regulatory requirements.

97   There are a total of 116 standard definition over-the-air television stations currently licensed in Canada and by September of 2011, Bell Satellite TV will be distributing 93 of those OTA stations in SD -- 89 full-time and 4 part-time -- and has allocated space for another 39 over-the-airs in high definition.

98   To reach these totals, we will add 24 more over-the-air stations by September 2011, 22 in HD and 2 in SD, those being from Regina and from Fredericton/Saint John.

99   The complete list of these channels is in Appendix 2 of this statement.

100   Despite our capacity challenges, which Mirko explained, we have an exemplary, decade-long track record of adding OTA stations as technology permits. We proudly distribute more OTA stations than required by either regulations or conditions of licence. We believe it is in the interest of OTA broadcasters and consumers, and in fact Bell TV, to do so. However, any new inflexible regulatory obligations would undoubtedly require us to reconsideration the entire universe of OTA signals that we carry.

101   As you can see on the chart at the top of page 5, we carry 91 of 116 OTA stations today. This compares to a regulatory requirement of 55. That 55 will be 47 percent of the stations that are licensed.

102   By September 2011 we will carry 93 OTAs, as I mentioned earlier, which will bring us to 80 percent of licensed standard definition signals in Canada, a full 70 percent higher than our regulatory requirement.

103   So I think this evidence shows that we are committed to continuing to add OTAs as our capacity allows and more than as currently mandated.

104   There are 23 over-the-air stations that we will still not be able to distribute on a full-time basis. These OTAs are, for the most part, duplicate feeds of other stations from their respective broadcast ownership groups, albeit with a modest amount of local content.

105   If required to add these 23 we would have to remove up to 23 standard definition discretionary services because we simply do not have any more capacity at this time.

106   This alternative is neither customer-friendly nor feasible from a competitive perspective.

107   Distributing all available HD over-the-air stations, if they are to start broadcasting in all licensed markets, will be an even greater challenge, as we would have to find capacity for these additional HD over-the-air signals as well. This could only be accomplished in one of two ways: invest, as Mirko mentioned, hundreds of millions of dollars in MPEG-4 set-top box upgrades or, if we were forced to carry them before such an upgrade was done, remove large numbers of other services from our satellites.

108   Again, this is neither customer-friendly nor feasible from a competitive perspective.

109   Now, turning to simultaneous substitution -- and I apologize in advance this gets pretty confusing -- cable BDUs provide simsub in each local market. For example, a cable operator in Calgary substitutes the local Calgary station for the U.S. network when the programs are aired simultaneously. The same substitution happens in all markets across the country. However, where there is no local station in a particular market, cable BDUs perform no substitution at all and those local viewers see the U.S. networks and the U.S. advertising.

110   For our part, Bell Satellite TV uses a simsub method known as Single Substitution by Time Zone, SSTZ.

111   As the graphic at the top of page 6 shows, we carry two sets of U.S. network signals, one from Boston and one from Seattle. We substitute Toronto signals over Boston signals in the east, and Vancouver signals over Seattle signals in the west when simsub is required. Thus, instead of a U.S. feed, all our subscribers across the country see simsub. This exposes all our subscribers to national Canadian local advertising directed to the Toronto and Vancouver market rather than the U.S. feed, but not to unique advertising directed only to their local markets.

112   Shaw Direct uses market-specific simsub known as Virtual Channel Over-ride, VCO. VCO attempts to mimic the cable operators' local substitution, but falls short of our method of SSTZ in an important way. Because Shaw Direct carries fewer local stations than we do, there are many situations in many markets where Shaw Direct does not substitute at all and viewers continue to see U.S. advertising.

113   On the other hand, as I mentioned, we substitute 100 percent of the time to 100 percent of the time to 100 percent of our subscribers in both standard definition and high definition.

114   While both DTH methods have strengths and weaknesses, Shaw Direct's inability to provide 100 percent simsub to 100 percent of their subscribers is a serious shortcoming.

115   With that background, let us compare the impact of these approaches to simsub using the example of a London/Kitchener consumer who is watching CSI: Miami on a U.S. station.

116   The Canadian rights are owned by CTVglobemedia and would be broadcast by the local CTV station. Rogers carries that local station and so local simsub would be put in place in Kitchener/Waterloo.

117   Bell Satellite TV does not carry that local London/Kitchener station and so if the subscriber tunes into the U.S. network he would see the CTV feed, albeit from Toronto.

118   Shaw Direct does not carry the local London/Kitchener CTV station either, but since it does not employ national simsub, the subscribers would watch CSI: Miami on the U.S. channel, seeing the U.S. ads. No simsub would take place.

119   If Bell Satellite TV were required to try to implement full local-into-local substitution using SSTZ -- which is the only way we can do it today -- as shown in the graphic at the bottom of page 7 -- we would have to carry not only every local Canadian TV station, which I have already talked about, but also a complete duplicate set of U.S. stations corresponding to each one of those local markets. We would have to have a U.S. station allocated over which to substitute each individual local market station. So we would have to duplicate the U.S. networks over and over again in our capacity.

120   That would mean 4 signals in standard definition and 4 signals in high definition that we would have to carry corresponding to each local market, because in relative math each HD signal is about 4 HD signals in terms of capacity. That's the equivalent of 20 standard definition signals for each local market we are simsubing for.

121   Therefore, just to tell you how large that problem is, if we were required just to simsub for Canada's 15 largest markets only, we would have to dedicate 300 channels of SD capacity for that purpose alone. We would need to remove an equal number of discretionary services because, as I mentioned, we don't have that capacity available. So we would have to remove more than our entire current discretionary capacity in order to jut do those 15 markets.

122   There are 52 local markets in Canada broadcasting, not 15, so we would need 1,040 channels to house the capacity in order to house those U.S. signals. That's more than our total satellite capacity today.

123   So clearly this is preposterous, as we don't have the capacity to carry that many signals and we certainly can't dedicate more than our total capacity to simply carrying U.S. networks over which to simsub.

124   But in the meantime, I want to reiterate, that we do ensure that all our subscribers in Canada, see Canadian advertising when simsub is warranted.

125   Mirko...?

126   MR. BIBIC: Thank you.

127   To conclude, Commissioners, we encourage the Commission to allow broadcaster-distributor negotiations to continue to dictate the extent and timing of any further OTA signal additions.

128   Even after we meet our September 2011 obligations, we will continue to carry far more OTA signals than required by regulation. As Heather mentioned, 93 will be carried compared to a regulatory obligation of 55.

129   We are prepared to consider ways in which even more OTA signals can be added without compromising our subscriber value proposition or our business. We ask the Commission to rely for the duration of DTH's next licence terms on the determinations regarding OTA distribution made in 2008-100 and 2010-162.

130   Thank you.

131   THE CHAIRPERSON: Thank you for your presentation.

132   First of all, a point of clarification.

133   Appendix 2, the 26 stations at your ending, is this new information or was this filed with us before?

134   MR. BIBIC: This was filed with our capacity report, I believe in the summer. There has been one change because one of the stations we indicated we would carry by September 11, I believe we are now already carrying, so we have removed it. But essentially this is already on the record. It might have been confidential, but it was definitely filed with the Commission.

135   THE CHAIRPERSON: Thank you.

136   Now, you make a very eloquent point here saying we can't have total symmetry because of different technology. I think nobody questions that. We have recognized that and you even quoted our decision to that point, but the question is: You are no longer an upstart, you are now a very big cable company, you have close to 2 million, et cetera, and the rules that we made originally were in order to give you a chance to grow, to expand, which you have done brilliantly, and you are now a great success. So it really isn't a question, as you put it, of achieving complete symmetry, but to see to what extent you can emulate, given your technological differences, the coverage that happens with cable companies.

137   So you are making the point that you are for the first time in your life -- in 2008 you were profitable, until then you were always running at a loss, et cetera.

138   Rogers, in their submission, has a report by Lemay-Yates which suggested you are in exactly the same position as DISHTV in the U.S., et cetera, that if you compare them you know that you are at the level of profitability they are, Also, if one compares you with cable companies, looking purely at the cable activity, not looking at the Internet or phone, you are on the same footing.

139   What do you say to that?

140   MR. BIBIC: Well, first, before I turn to Lemay-Yates, I think you mentioned that we are no longer an upstart and you acknowledge and recognize the different technologies and you are looking at what can be done with respect to OTA carriage.

141   We come to this from the perspective of here is a company, even when it was undeniably an upstart, always meeting more than its regulatory obligations. We exceed and have always exceeded because we understand the issue. I mean, you care about this issue of local signal carriage, so do we, so do our customers.

142   I don't think you have an intervenor in front of you that has a history of simply working to rule when it comes to regulatory obligations, you have a company in front of you, a responsible industry stakeholder that goes above and beyond it's regulatory requirement.

143   We devote more capacity, we believe, to OTA carriage, because we are a national and bilingual service, than cable. It think that's a fairly intuitive point or an obvious point.

144   We have just lifted four additional OTAs in the past month alone and we are willing to do more.

145   So I come at this from the perspective of certainly when it comes to Bell Satellite TV there isn't a problem. It's not like we are coming here and we are saying "We're done, we're closing the shop with OTA signals."

146   As far as Lemay-Yates report is concerned, there is a lot there and we can probe each element if you like, but a couple of points.

147   It's fairly obvious that we have 2 million subscriber, there are multiples of that in New York City alone, so we are talking -- you can't compare us to the DISH Network, given the scale of that business compared to ours.

148   In terms of investments, I'm not quite sure which point you are referring to specifically, Mr. Chairman, but I would have to say that if you combine all the investments we have made in satellite TV and the over $2 billion in losses that we have incurred over the last 12 years or so, which we have talked about in previous proceedings, and you add to that the hundreds of millions of dollars that we have invested in fibre networks in order to deliver Bell Fibe TV -- and we spent a good long week examining that last May -- I think there is a track record of massive investments by Bell in distribution businesses.

149   THE CHAIRPERSON: Lemay-Yates, page 7. If you want a reference, I will give you a reference.

150   In their Summary Report -- they did go into great lengths, details, but I mean it's just the central --

151   Bullet No. 1:

"The margins achieved by Bell TV are the same range as those achieved by DISH Network and DIRECTV in the U.S., while Shaw Direct generates substantial and better EBITDA margins." (As read)

152   And then:

"After certain years in business Canadian DTHs are no longer startups, they are now mature undertakings with reasonable, even good margins when compared to other satellite operators, namely the U.S. DBS operators." (As read)

153   MS TULK: Well, obviously we reviewed the Lemay-Yates report in quite a bit of detail. We struggle to understand where some of the conclusions came from and, of course, we are not privy to the background material behind the report.

154   I think as Mirko mentioned, we have a very different scale than these operators. We work hard to try and make all of our businesses profitable, that's obviously a given. We have accumulated an investment in the satellite TV business that is greater than $2 billion of which we have not started to generate a return and we need to be able to start to generate a return.

155   I think the fundamental issue at work here is the fact that we don't have more capacity available to lift incremental stations.

156   THE CHAIRPERSON: All of that I don't dispute. My question was very simple: They are making a statement here on costs and margins and they say you are no longer a startup, you are comparable to DISH Network and DIRECTV in the U.S.

157   No question DISH Network is three times your size, or whatever, 10 times, whatever it is, but that's not what we are talking about. We are not talking about size here, we are talking about profitability and margins.

158   From what I hear and what I read here I have a complete disconnect and I'm asking you for an explanation.

159   MS TULK: Well...

160   MR. BIBIC: I, for one, don't know what the DISH Network margins are, but we can -- if you want to confidentially, we can go through our EBITDA margins and we can go through our free cash flow. Of course EBITDA comes before the major capital investments in satellite infrastructure.

161   The next point, when it comes to this bald allegation that Rogers or cable has invested 50 percent more in their video distribution networks than DTH, I don't have the backup that allows me to judge that comment. I find it -- I don't believe this comment, because that's the point I was trying to make, I'm positive this excludes the massive investments we have made in wireline infrastructure to better compete with cable in urban markets and at the end of the day I don't think any of this is neither here nor there.

162   We tried to set a context, but we're not saying, "Because we are not profitable we want to work to rule, Commissioners, and leave us alone." That's not what we're saying.

163   THE CHAIRPERSON: No, no. I know that, but I mean you say now your wireline investment. That's what this report did and that's why I'm asking you about it, is it basically just looks at your DTH business compared to other people who are running DTH and saying you are basically in the same boat.

164   MS TULK: I guess, Mr. Chairman, we are just missing, I guess in some way -- first of all, we don't have the backup for their analysis. So we can certainly file with you in confidence -- and we file annually our view of the profitability of our business. I don't know how they came to that conclusion.

165   I guess to Mirko's point, I'm not sure where that bouncing ball leads because I don't understand how it has any impact on our ability to carry or not more over-the-air signals when we simply don't have the capacity to do so.

166   THE CHAIRPERSON: I'm not talking about capacity --

167   MS TULK: We would have to make major go-forward investments --

168   THE CHAIRPERSON: I'm not talking about capacity, I'm talking of financial ability. That's what we are talking about.

169   MR. BIBIC: How about we --

170   THE CHAIRPERSON: I'm making two points, financial ability and capacity. I'm starting with the financial ability here.

171   MS TULK: Right. So I guess the --

172   THE CHAIRPERSON: What struck me when reading your submission and listening to you this morning and reading the Lemay-Yates report -- like you I don't know on what basis they say it, but basically they say if you just look at your DTH business and look at the U.S. you are basically in the same range.

173   MR. BIBIC: Okay. So what we will do is, I don't kind of relish the prospect of trying to guess at what people have done, so how about we come back to you on Thursday and spend a little bit more time comparing our EBITDA margins to DIRECTV because I'm going blind here and I don't kind of enjoy that.

174   THE CHAIRPERSON: Ask Rogers what the basis is. Who tabled this report, you know, maybe they can -- we will ask them when it's their turn whether they can shed any light on this.

175   MR. BIBIC: Okay. That will be helpful and we will come back to you on Thursday.

176   The broader point that we are trying to make in the opening statement is a fairly simple business proposition, we have multiple platforms, as you know, and it's back to discussions we have had before, the next incremental dollar of capital investment, where does it get allocated, it gets allocated to those businesses that generate the best margins.

177   Now we are in this inevitable -- with confined capital budgets we have to make those trade-offs and what we are trying to say is Bell TV hasn't particularly -- satellite TV hasn't been a particularly healthy business over the years and now we are in the position where we are devoting a lot of resources to Bell Fibe TV and those allocations are going -- those trade-offs are going to have to be made and they are very difficult ones.

178   THE CHAIRPERSON: When you talk about Bell TV are you talking only about DTH or are you also talking about your transport business?

179   I understand you also supply signals to a cable company, what is it called, SLDR or whatever it is?

180   MS TULK: SRDU.

181   THE CHAIRPERSON: SRDU. Thank you.

182   MS TULK: Yes. So today when we are talking we are talking specifically to the DTH business. We do have an SRDU business which we would be happy to give you some -- if you need more information on it in confidence. It's very small and, quite honestly, financially not a very meaningful piece of our business.

183   THE CHAIRPERSON: Okay. You operate that as a separate cost centre and separate business, the SRDU or is that part of Bell TV?

184   MS TULK: They are part of Bell TV. Again, we can break that out for you. It's very small.

185   THE CHAIRPERSON: But your figures if you present to me in terms of profitability of EBITDA, et cetera, do they include the SRDU business or not.

186   MS TULK: I believe they would. Yes. Yes, they do.


188   MS TULK: Again, we can give them to you separately. It's very small.

189   THE CHAIRPERSON: Yes. I would appreciate if you would give me a breakdown of those.

190   MS TULK: Yes, it's very small.


192   Now, MPEG-2. You give us this wonderful shot here which, as usual, explains everything much simpler than any words, how it works. But if I understand, it's a bit more complicated than that. Isn't it that you started on MPEG-2, you are trying to transition to MPEG-4, you have transitioned some people to MPEG-4 and some of your MPEG-2 set-top boxes are MPEG-4 capable, right, or can be used for that purpose? Did I get that wrong?

193   MS TULK: There are a small portion of our set-top boxes that we have been selling in the last couple of years that have MPEG-4 capability --


195   MS TULK: -- in the high definition set-top boxes.

196   MR. BIBIC: The only thing I would add is to correct one comment, Mr. Chairman, is we haven't -- we are not in the process of transitioning to MPEG-4, as you might have suggested. We are selling boxes, some boxes or boxes now that are MPEG-4 enabled in the even that one day we do transition to MPEG-4, but right now we only uplink and distribution in MPEG-2.

197   THE CHAIRPERSON: You are not transitioning to MPEG-4?

198   MS TULK: We are evaluating it and we allude to it in our opening statement. We are evaluating methods by which we may be able to stage that migration. Obviously because of the limited number of MPEG-4 boxes that are in our installed base if we were to let natural evolution take place it would be a number of years, potentially decades, before we would have a base able to receive signals in MPEG-4, so we are looking at various ways we might stage an investment to help speed that along, but at this time we don't have any firm plans and we have not started that transition.

199   THE CHAIRPERSON: Why not? Isn't it in your own self-interest in order to have more capacity and also since your customers are always asking for more capacity. They are asking for HD, they are going to ask for 3D very soon, et cetera. So you need to go there.

200   MS TULK: Well, we don't require MPEG-4 to do the things in the plan that we have supplied to you, but obviously -- I mean you are absolutely right, if I could wake up tomorrow and have all my customers able to receive signals in MPEG-4 I would be a very happy person. Unfortunately, between where I stand and that occurrence happening is about $1 billion of investment, which we certainly don't have a return and a business case to do.

201   So what we are currently working on is how we could stage, break that investment down, do various things. All of those options have obviously big pros, but also big drawbacks that we have to evaluate.

202   We made the decision a couple of years ago I believe to start distributing MPEG-4 boxes to help that evolution, but at this time we don't distribute any signals in MPEG-4, as Mirko mentioned, and we don't have any firm plans to do so at this time, but we are evaluating all the options.

203   THE CHAIRPERSON: So you have no present timeframe at all for becoming MPEG-4 -- transitioning to MPEG-4?

204   MS TULK: No, not at this time. We are doing an upgrade in our MPEG-2 encoder base imminently that will allow us to come up with the capacity to do the plan that we have filed with you as it is right now, but the actual migration in any way to MPEG-4 is something we continue to evaluate and we don't have a timeframe for at this time.

205   MR. BIBIC: Let me add something to shed some further light on this, Mr. Chairman.

206   If you turn to page 5 there is a little chart there. It's just this is so important that I want to go through it in detail.

207   So you will see -- let's focus on the "Standard Definition" column just to keep things simple -- we carry today 87 full-time OTAs and 4 part-time OTAs, so 91, as Heather mentioned. We will carry two more OTAs in standard definition next year, and of course as well 22 and you have the full list of 24 in Appendix 2.

208   To do that we need to increase our capacity, and the way we are going to do that is by making a multi-million dollar investment in our MPEG-2 infrastructure. That will allow us to meet this plan.

209   But this does not involve a transition to MPEG-4.

210   But that does not mean that we are not investing in capacity.

211   THE CHAIRPERSON: Obviously you are investing. You are already selling MPEG-4 boxes. It even shows on your picture on page 3. It says, "Some MPEG-4 HD." So, clearly, these are set-top boxes, some MPEG-4.

212   MS TULK: That's correct.

213   THE CHAIRPERSON: It's a logical stage to go -- I mean, if this is confidential, if you don't want to mention it here, I understand that, I just find that I am stunned that you are not contemplating transitioning.

214   MR. BIBIC: It is not funded.

215   The fundamental issue is this. We could lift a signal on MPEG-4 today, but only 25 percent of our subscribers would be able to receive it.

216   So there is not much point unless you have a broader base of subscribers who can actually take advantage of that signal.

217   And to get them all on MPEG-4, as we mention in here, and as Heather mentioned, it's $1 billion.

218   MS TULK: Mr. Chairman, I just want to make sure that my answer was clear in your re-direct. It's not that we are not contemplating it. We are contemplating it and spending quite an amount of time contemplating it, and looking at it, and trying to evaluate how we might get there, but at this time we haven't --

219   The issue is that 25 percent of the boxes -- or the customer base that currently has MPEG-4 is distributed across the country. They are not in an area where we could say, "We can go MPEG-4 for these channels, because it interests this group, or these channels because they interest this group," because they are spread across the country.

220   We are looking at how we might stage that investment, because, clearly, we don't have an investment return to migrate everyone. So we are looking at many different options of how we might do that.

221   So we are certainly contemplating that migration, but what we are saying -- and it's not that it's confidential, it's, in all sincerity, the truth -- is that we do not have an established plan where we have a line of sight as to how we would be able to stage that investment. Therefore, we don't have a timeline and we don't have an approved plan.

222   THE CHAIRPERSON: If you did this, would you have to, then, upload to the satellite in MPEG-4 too, or could you -- on your chart here you are showing throughput going up to the Nimiq on MPEG-2 and then coming down. Could you go up in MPEG-2 and then come down in MPEG-4, or do you have to do it on both sides?

223   MR. DINESEN: No, you have to do them on both sides. You need to broadcast in the same format as you are receiving.

224   The head end investments are significant, but relatively modest to the cost of exchanging all of the millions of residential receivers.

225   THE CHAIRPERSON: So the head end costs are there, but they are modest you say.

226   Now, you don't serve Yorkton right now. Yorkton Television, as a CTV station, should be of interest to you and you are not carrying it right now. Could you not go to the good people of Yorkton and say: You want your station? We will give it to you, but it requires an MPEG-4 set-top box. Then you can have your local station.

227   Surely you could do it as an incentive, sign up for three years and you get a free -- however you do it.

228   Surely there are imaginative ways that you could use the lure of carrying local stations in order to start the wider distribution of MPEG-4 set-top boxes.

229   MS TULK: It is certainly an interesting approach. We would have to be able to get multiple communities to make that agreement at the same time, in order to free up the capacity that would be required.

230   For example, if it was only Yorkton, then those head end investments that Tim would be talking about would have to be made to broadcast that one signal to one community, of which we would have a certain share of penetration.

231   THE CHAIRPERSON: Obviously you would do it in several, but he said that the investments are modest, and presumably you benefit from them through increased subscribers.

232   I just picked Yorkton as an example to illustrate it.

233   MS TULK: They are modest relative to the billion dollars of the total set-top box swap, but they measure in the tens of millions of dollars with respect to those investments.

234   So it's more than $10 million, although certainly that is modest when compared with $1 billion, but not modest when compared with the ability to serve a very small number of customers.

235   THE CHAIRPERSON: I am confused as to who you carry now. As you know, our whole idea is to see as many OTA stations as possible.

236   You are now telling me that you are going to add 26, and if I understand the chart on page 3, that will mean that there will be only 23 that will not be distributed on Bell by September 2011.

237   Which OTA stations are you talking about, all OTA stations, or are you talking about the LPIF eligible ones, or what?

238   MS TULK: It's 116 that are licensed in Canada.

239   If you go to Appendix 1, you will see the breakdown by ownership group. That's on page 9.

240   We could certainly supply the full list that adds up to the 93 to you.

241   And you can see the breakdown by ownership group that we are carrying, so that gets you to the 93.

242   THE CHAIRPERSON: Madam Secretary, would you distribute the chart, please?

243   MR. BIBIC: Mr. Chairman, there has been --

244   THE CHAIRPERSON: I am giving you a chart, and I just want you to comment on it, because what I am trying to focus on are the LPIF stations.

245   Those are obviously available at the Secretariat.

246   This is what my staff did. I don't know whether it's up to date or not.

247   We are trying to see which are the LPIF eligible stations in Canada, and which ones are carried and which ones aren't.

248   I guess this list does not include the 26 that you mentioned today. I don't know, so, for Thursday, if you could look at this, and then --

249   MS TULK: Yes, we will update this chart for you.

250   THE CHAIRPERSON: Give me one that shows how many LPIF stations there are that will not be carried by you.

251   MS TULK: What we can do, Mr. Chairman, is take this exact list and update the Bell column to the plan that we had as of September 20th.


252   THE CHAIRPERSON: I would appreciate that, and I will ask Shaw to do the same for theirs.

253   MS TULK: Yes, we will supply that to you on Thursday.

254   THE CHAIRPERSON: Do you know how many LPIF stations there are that will not be carried by you after September 2011?

255   MR. BIBIC: We will get that for Thursday. We have had some difficulties in reconciling our count of 116 with Staff's count, but we are within a few. But we will get that for Thursday, as well.


256   THE CHAIRPERSON: That would be appreciated. What we hear from those stations, all of them, is that LPIF is wonderful, et cetera, but the key for us is to be on a bird.

257   That makes a huge difference for their financial well-being, et cetera, and since they, under LPIF standards, will have to have 7 or 14 hours of local content of English, or 5 or 10 if it's French, it makes sense to the question that we asked you, what can we do to see that those stations are up on the bird.

258   MR. BIBIC: And we will certainly do that.

259   Again, that is why we put Appendix 1 down, because there is -- I have been at several of these hearings, and there is this kind of general sense that people convey that there is this critical issue with the lifting of OTA stations. I am not undermining its importance, but if you look at Appendix 1, every ownership group -- and we could examine each one, one-by-one, if you like -- each ownership group is very well represented, by Bell Satellite TV at least.

260   That's undeniable.

261   THE CHAIRPERSON: The CBC has put forward a proposal which suggests that you need to be incentivized in order to carry.

262   I am sure you read the proposal and you know how it works, I don't have to reiterate it to you.

263   Could you comment on that?

264   MR. BIBIC: The CBC proposal -- at first glance, it appears that a lot of thought was put into it, but it's highly impractical. It's very complex.

265   It boils down to this. There are seven rules -- and I don't think we should go through each, but it comes down to this. DTH or Bell Satellite TV should not be able to lift any additional HD services of any kind until those remaining 23 stations are carried. That's one rule.

266   Two, once we accomplish that, we would not be permitted to lift any additional HD services of any kind, unless we added an equivalent number of OTA HD stations.

267   And, then, we wouldn't be able to take down an SD version of an OTA station if we already had the HD, unless every single set-top box in a particular community was capable of receiving the HD service.

268   If you add all of those three together, that would put Bell Satellite TV in a very, very big, long-term, HD penalty box. We would have --

269   THE CHAIRPERSON: Yes, there is no question about it. That's overkill, the way they did it.

270   Forget about HD. Put it aside. Just talk about SD. The basic, simple, rule that they are suggesting is: You are not allowed to put a new one on unless you put an OTA on. That's --

271   Where is my --

272   I am looking for my CBC presentation here, so that I have a clear --

273   In effect, some ratio between -- and we can argue about the number or how it works, but I saw --

274   Bell TV would have to add 27 stations.

275   First, DTH should be excluded from adding the HD version to any programming service unless and until required conventional television is being distributed in either SD or HD.

276   MR. BIBIC: And that's the point, that's a big HD penalty box here. That means: Bell, you can't get on the HD train and deliver HD services to your customers until you lift 23.

277   Now, that could be a long time.

278   Or, if we wanted to get out of the HD penalty box under this rule, we would have to take down 23 discretionary services of another kind, which isn't particularly palatable to viewers only.

279   The point is, if you put us in a penalty box like this, we have three options: make millions of dollars of investments in capacity, which will almost all be devoted to OTAs; or two, take down an equivalent number of discretionary services to get out of the penalty box --

280   Those are our options.

281   THE CHAIRPERSON: Mr. Bibic, I agree with you. I am not trying to create a penalty box for carrying HD.

282   Actually, I was referring to the second one: If a DTH distributor adds an SD version of a new programming service to its line-up or drops a conventional local station that closes or that does not meet local programming requirements, then it must, at the same time, add an additional conventional local television station.

283   Let's say, for argument's sake: in SD, until such time as all required stations are being distributed.

284   MR. BIBIC: This is also a significant strain on capacity, and here is why --

285   THE CHAIRPERSON: Why would that be? Can you tell me why that would be?

286   MR. BIBIC: We live in a capacity-constrained environment, so every time we wanted to add an additional SD service -- which may very well be, and in all likelihood would be, a Canadian discretionary service, also adding value to the Canadian broadcasting system, and also desirable from a consumer's point of view -- each one of those additions would count as two channels, because we would have to add an extra OTA SD.

287   Now, if we were carrying 30 today and refused to come before you and say, "We will meet the 55 requirement," or if we were just hovering along at the regulatory obligation, I think we should be having a different discussion. But we have practically doubled our regulatory obligation.

288   So I don't see why we would impose these rules, which are constraining on capacity, on an enterprise which goes well above and beyond what it needs to do.

289   And we want to get there, and we will get there, I think, over time, as capacity grows. But to put us in these kinds of penalty boxes is counterproductive, as far as we are concerned.

290   THE CHAIRPERSON: Is there a variation of the CBC scheme that you could think of that would make sense to bring the 26 --

291   You might want to think about it for Thursday, but I thought the whole idea of trying to cover the dropping of channels and the adding of the OTAs, in some ways, merited examination.

292   MR. BIBIC: I will make three points. The first is, yes, we will think about this further and come back to you.

293   Two, I am encouraged to hear that you are not asking us to comment specifically on this very constraining proposal.

294   And, three, I think that one critical principle for us is that there has to be identical treatment between all DTH providers.

295   So before we get into a discussion about lifting the additional 23, forcing some incentive programs to get Bell to lift an additional 23, we should also be having a discussion about our competitor having to catch up to us, to begin with.

296   But we will come back to you on Thursday.


297   THE CHAIRPERSON: In your formal submission, on page 17, at paragraph 65, before you go into simsub, you say that the company is cognizant that the Commission's public interest concern is that some DTH subscribers are unable to receive local programming. "The Commission has several options that would allow more local programming to be served. For instance, Bell TV has proposed distribution modifications on a partial basis."

298   On that same page, in the very top paragraph, you say that discussions with broadcasters to arrange such partial distribution of signals that are not currently distributed have been of limited success.

299   Explain to me, first of all, what partial distribution is, and why have you had limited success in selling it to broadcasters?

300   MS TULK: Partial distribution -- I will give you the business answer, and if you need more technical detail, Tim can follow up.

301   Basically, it allows us to use a single channel slot of capacity to carry multiple channels, and we would use that today. We were carrying five part-time channels. We now have four, because one of them has since been moved to full-time over the year. But we use that quite extensively with our pay-per-view programming, as an example, where we use one channel slot and put different programming into it, depending on the time of day.

302   The greatest example that everyone would be familiar with would be NFL Sunday Ticket. That is a discretionary service, and all of the games run at different times, so we don't have to have a channel per game, we use the one channel.

303   And it works particularly well with over-the-airs in different time zones, because they have a lot of common programming on the air, you know, the kind of prime time shows and things like that that are on at the same time, and then they do their local news and weather and local programming.

304   So we can rotate that programming in, so that the local programming is visible at the time it is being broadcast.

305   It is not a full solution across the country because, obviously, when there is programming at the same time, it does use two different channel slots. But it allows us to rotate in the channel slots, rather than fully dedicate one for every single over-the-air channel.

306   I am not sure why it has met with the resistance that it has. We certainly believe that it works very well, and for those channels that we do that for, they are able to get their partial -- their local community programming, the 7 or 8 hours, or whatever it might be, that the broadcaster is carrying that is actually locally produced, and have it available to customers.

307   Chris, I don't know if you have anything to add in terms of why we believe that --

308   THE CHAIRPERSON: I'm sorry, it may be clear to you, but it's not to me. I would like to understand how this works.

309   What would that channel be called, for instance?

310   And let's take two. You have partial, and you take one and then take one -- Yorkton, Regina and Trois-Rivières, they are not carried through all of these different time zones, so how would that --

311   MS TULK: How it would work is, for a customer, they would see -- I guess the big "Aha" in it is the difference between the programming guide and our actual channel capacity.

312   The programming guide would show to a customer all three of those channels available. So when those channels are broadcasting the same thing -- as an example, let's say that what they are broadcasting is the Saturday night hockey game, or whatever hockey game. When that is on, they press that number on their channel guide -- so the Trois-Rivières channel, the Yorkton channel, the other channel -- it goes back to the one place in our encoder and feeds out that same thing that everybody is seeing.

313   When they have different programming on, i.e., it's the evening news, and they are showing the local news that is actually produced in their community, it goes back and pulls, at that particular time, off our encoder from three different places.

314   So when they are broadcasting local programming, we are using three slots. So maybe we can swap it in with some of our pay-per-view programming, or swap it in with something else, but for the majority of the time, when they are broadcasting the same thing to all three of those communities, it is only using one slot of our capacity.

315   Now, it is very human-intensive for us. It's very costly for us. But given our understanding of the interest in local programming, and our belief in it, and our customers desire for it, it is something that we are willing to work with the broadcasters on to figure out how we can do it.

316   THE CHAIRPERSON: But I don't understand why this isn't taking off.

317   If I understand it correctly, on the channel guide -- let's stick with the same example, so we can visualize it. Let's say it's Yorkton.

318   And the Yorkton signal is actually not a Yorkton signal, it would probably be the Regina signal or whatever.

319   But to the extent that it is Yorkton programming, they will see the locally produced programs and they will see them there.

320   So, for me, as a customer, as far as I'm concerned, I get my local station.

321   MS TULK: For sure, it doesn't free up the full 7/24 availability of regional advertising, so that is one concern that the broadcasters would have, because they can't sell all of those advertising spaces the same way they could if it was Yorkton all the time, 7/24.

322   THE CHAIRPERSON: Sure. Right.

323   MS TULK: So I would imagine that is their number one concern.

324   Chris, I don't know if there are others that they have, but...

325   MR. FRANK: Yes, you are absolutely right, Heather, it is focused on the advertising issue.

326   THE CHAIRPERSON: But surely it would be better than not being carried at all.

327   MR. FRANK: That's what we think. We have been proposing this concept for a number of years now, and the Commission has approved it.

328   There are a few broadcasters who make use of this, but --

329   THE CHAIRPERSON: But there is no regulatory impediment to you doing it.

330   MR. FRANK: No, sir, you actually have approved this concept.

331   THE CHAIRPERSON: I guess we will find out from the broadcasters why they are not taking it up.

332   You also say in the same paragraph that alternate broadcasters could launch regional Category 2 services that could feature the local news from each station in the region.

333   Explain to me what you have in mind here.

334   MS TULK: I think it's in the footnote, as well, but this would be, for example -- using my roots, Atlantic Canada, as an example, there would be a way that -- we believe that a broadcaster could get together and amalgamate its local content from all parts of that region into a single station that would basically rotate various Atlantic Canada programming.

335   So you would have an Atlantic version, as an example, or potentially a prairie version, or a western version, that would rotate the over-the-air station's local programming that is missing into a single feed. Therefore, rather than having to lift three or four OTAs in that region for that programming group, we could lift one.

336   That is something, as well, that we are willing to discuss with those programmers and broadcasters, and have proposed that they might want to do.

337   Basically, all of the discussions that we have regularly with the broadcasters are how can we work with them to bring local programming, which is important to our customers, and obviously important to the Commission, in a way that we can affordably manage our capacity.

338   Getting back to your point earlier about, if you had to lift one over-the-air -- you know, for every one you lift that is discretionary, you should have to pick an over-the-air, we in fact do that.

339   Next year we are lifting two over-the-airs, and we are only lifting two other standard definition that aren't over-the-air next year. We lifted four over-the-airs this year.

340   We are, in fact, taking down some net next year, because we are actually taking discretionary signals off the air to come up with the capacity to do this.

341   If you look at next year as an example -- and we would be happy to file it with you in confidence -- we are actually net up in over-the-airs and actually net down in standard definition discretionary services.

342   So we are already doing everything we can to try to find a way to free up room to carry as much over-the-air as we can, but we have to make sure that our service remains competitive, because discretionary, unfortunately, in a lot of cases, is why people choose their television subscriber, and we obviously need to be competitive.

343   THE CHAIRPERSON: Basically, what you are talking about here is an omnibus station?

344   MS TULK: Yes, that would be, I guess, a good way to describe it.

345   THE CHAIRPERSON: And why would it be Category 2? Since it's over-the-air broadcasting, just assembled all together, why would it be Category 2, not Category 1?

346   MS TULK: You will have to ask that of my experts, because I don't know.

347   MR. FRANK: I understand that there has been at least one of these channels applied for. I am not sure if it has been approved or not. It's just the way that the broadcasters who are contemplating this type of service are proceeding.

348   THE CHAIRPERSON: I'm sorry, I don't understand that answer.

349   MS TULK: I guess, the ones that we know of that were applied for in the past were licensed as Category 2's. I don't know why they are Category 2's versus something else.

350   THE CHAIRPERSON: Okay. Lastly, you say that DTH operators are exploring means to provide forms of VOD on which some local news programs could be delivered.

351   What is the VOD that you are exploring? I always thought that that was one of the technological challenges for you, that you can't offer VOD.

352   MS TULK: It's a huge technological challenge for us.

353   We have, as you have probably seen, this year found a way to push out a limited number of video-on-demand titles -- 10 actually -- to certain set-top boxes that have a hard drive and the capacity to receive them.

354   Really, again, it would be a fairly significant investment to connect. We would have to use an Ethernet back channel to the set-top boxes, so we would have to internet connect all of our set-top boxes in some way.

355   THE CHAIRPERSON: Yes, and the customer would have to have internet.

356   MS TULK: Yes. So it's a fairly sizeable investment on our part, and for the customer.

357   I think what we are saying here is that, certainly, if we find a way to break into VOD, which obviously is a big competitive concern for us, and we are working hard at it, then we certainly would be willing, at that time, to explore how we could use that to bring news or weather or whatever local programming feeds there are to various other communities that we may at that time be missing.

358   Now, as Mirko said, by that time maybe we won't be missing any. I'm not sure, but it is certainly not something that is imminent.

359   THE CHAIRPERSON: Explain the part about pushing down to me. I am not sure that I understood you.

360   If I have a set-top box, and I also have a VCR, you will push down eight movies, and I can then select from them and view them whenever I want? Is that how it would work?

361   MS TULK: Yes. Certain of our set-top boxes have the ability for part of the hard drive to be used for that purpose, where we can basically push down to you those ten titles. They are stored on your hard drive, and then you can order them up, so it works exactly like video-on-demand.

362   THE CHAIRPERSON: Okay. Now, Mr. Bibic, you said that you are way over your minimum requirements, you are a very good corporate citizen, and you offer a huge number of channels right now, et cetera. Are you willing to commit to continue to do that, or are you saying that this is a flaw, you will only go up, in terms of carriage, to 8 OTA, but you are not going to go down?

363   MR. BIBIC: That is tough to commit to because no one can predict what new services will come on stream in the future.

364   There is no intention -- don't mistake me here -- there is no intention to take any down, but who knows what will come down in the future, in terms of new services and how we are going to have to compete.

365   And I would say, as a matter of principle, that I would find it rather unfortunate that a good corporate citizen, because it goes over and above the threshold, gets the threshold raised, and therefore limits its future flexibility.

366   But there are no intentions to take any down.

367   THE CHAIRPERSON: Now, simsub -- I read very carefully what you wrote and how you do it, and your SSTZ, I think you call it, as opposed to the VCO that is done by Shaw. What I don't understand is, you are basically suggesting that you are superior -- and because there won't be holes there, and there is WCO. But, on the other hand, you are saying that you are exploring VCO. Why are you exploring VCO if (a) you can't do it, I thought; and secondly, it's superior technology?

368   MS TULK: We have been exploring it. Actually, at the time we put in this submission, we thought that maybe we had found a very promising solution. Since then it hasn't panned out the way we wanted, so we are continuing to look for an opportunity to move to that model.

369   That is a great question, Mr. Chairman. I guess it depends on your version of superiority.

370   Our definition in this case is, it's superior because, in the case of Bell TV subscribers, no Canadian subscribers see U.S. advertising when there is a Canadian feed of that program being broadcast.

371   I guess where it might be inferior, and where we would be -- and that's why I said, I think, in the opening statement that both models have pros and cons. Where we would be interested in looking at VCO is -- obviously, the flip side of that coin is, there are many markets in Canada where people who are not subscribers of Bell TV are able to continue to see the U.S. advertising, and in some cases -- and we have talked to you in the past about days like the Super Bowl -- that is actually very attractive to customers.

372   We get questions from customers all the time: How come they have to see the Canadian ads, where their neighbour, subscribing from someone else, is seeing the U.S. ads? Why can't we show them the U.S. ads like their neighbour sees?

373   So if the policy mandate of simsub is to show Canadian advertising to Canadians, then I would say that our method is superior. But, obviously, because of the very loopholes in VCO, and in fact the cable operator's method of doing simultaneous substitution, it means that our customers have less opportunity to see U.S. advertising than do those of our competitors.

374   THE CHAIRPERSON: The nub of your answer being, yes, you are looking into VCO, or, no, you are not?

375   MS TULK: We are always looking at it, but at this point there is nothing active that we think is a solution. We continue to work with our --

376   THE CHAIRPERSON: So paragraph 82 I should disregard.

377   MS TULK: Yes. At that time we thought we had something, but it has since not panned out.

378   THE CHAIRPERSON: Now, on the chart on page 7 of your handout today, when you talk about the local simsub requirement, I understand the part in Canada, I just don't understand why you would have to carry all of the U.S. signals on that chart.

379   I mean, as I understood it, it is mostly on Canadian HD. You get a feed from Buffalo or from Boston or from whatever.

380   MS TULK: Boston -- Boston and Seattle.

381   THE CHAIRPERSON: Boston and Seattle, so why would you suddenly have to carry all the local feeds? That's what I don't understand.

382   MS TULK: So we would have to -- what we would have to do, and we tried to draw on slide 7, and I did say it's a little confusing, is we have basically to take those Boston feeds and those Seattle feeds in some way. We would have to draw, you know, as we do today, so assume Ontario East gets Boston.


384   MS TULK: And Manitoba West gets Seattle.

385   For each of the local OTA markets that we have a local station for, we would have to basically put up a complete duplicate of that U.S. feed in our satellite capacity in order -- so that when we -- you know if you go back to Mirko's chart, when we send that feed up to the satellite we need to broadcast a different version of the Seattle feed to Vancouver. Then we broadcast to Edmonton. Then we broadcast to Calgary --

386   THE CHAIRPERSON: Oh, okay, now I get it.

387   MS TULK: -- because we have to put the Calgary ads on the feed that goes to Calgary and the Edmonton ads on the feed that goes to Edmonton and the Vancouver ads on the feed that goes to Vancouver.


389   MS TULK: And so for every single market that we are doing simultaneous substitution for we have to have an individual slot of capacity carrying the U.S. network.

390   THE CHAIRPERSON: Okay. What about spot beams?

391   MS TULK: Pardon me?

392   THE CHAIRPERSON: Spot beams that you can --

393   MS TULK: Well, Tim...?

394   THE CHAIRPERSON: Is that the word you -- what is it? Sorry, I am using the wrong word.

--- Pause

395   THE CHAIRPERSON: Help me out. What is this technology where you use the same spot --

396   MR. DINESEN: Same frequency, reeves(ph) is that what you are --

397   THE CHAIRPERSON: No, spot beams. That's what -- spot beams --

398   MS TULK: Spot beams, yeah, spot beams.

399   THE CHAIRPERSON: -- that was in your FreeSat proposal. It was all about that. You came before us and said we can do it. We can make sure we can send -- carry every single local single using spot beams which I understand it is the same capacity.

400   But I want you to explain, first of all, how it works, the spot beams.

401   MR. DINESEN: Sure.

402   THE CHAIRPERSON: And secondly, why when you came to us with the FreeSat proposal you offered it and now you say you don't have the capacity to do it.

403   MS TULK: Well, I think maybe Tim can explain how it works and then Mirko can talk to the previous proposal.


405   MR. DINESEN: So if I can refer you to the diagram on page 3, it's true in the context of FreeSat which we proposed during the value-for-signal discussions --


407   MR. DINESEN: -- we proposed to make use of Ka-band spot beam capacity that is currently not being used on Nimiq 4.


409   MR. DINESEN: In the context of FreeSat it worked because every one of those new FreeSat households was a net new installation receiving a very limited amount of local programming.

410   The FreeSat proposal doesn't work for the challenge we are faced with today, which is to achieve the broad distribution of existing OTA services. In order to achieve that we would need to build ground station facilities at the head-end and every household that wants to receive those OTA services, every existing household that wanted to receive those new OTA services would need to have an upgrade to their receive antennas and probably to their set-top boxes as well.

411   So it worked in FreeSat because the numbers were relatively small. It doesn't work for the broad --

412   THE CHAIRPERSON: Why do you need to upgrade the set-top box?

413   MR. BIBIC: There is one fundamental difference with FreeSat.

414   FreeSat we were proposing to lift those stations from those communities who would lose over-the-air viewing and lift those stations on a different satellite in a different frequency at Ka-band. But that satellite is not in use today so none of our customer's antennas in our base of 2 million can receive signals from that satellite in Ka-band. None of the set-top boxes can.

415   So it's not at all a solution for the base. It was a potential solution for that small subset, the closed universe of customers in those communities who would lose their viewing because we would lift those stations on a different satellite, equip those folks with special dishes and special set-top boxes to be able to receive signals from that satellite and we were also proposing to offset all the costs associated with that against LPIF.

416   So there is a number of dimensions, financial but particularly technical.

417   THE CHAIRPERSON: Yes, let's stay with technical.

418   MR. BIBIC: Yes.

419   THE CHAIRPERSON: So it's capacity that is presently not used for DTH?

420   MR. BIBIC: Correct.

421   THE CHAIRPERSON: In order to use it you need a separate dish to receive that signal is what you are telling me.

422   MR. BIBIC: That's right.

423   THE CHAIRPERSON: And the present set-top box does not work?

424   MR. DINESEN: It requires a different configuration of switching technology.

425   Also, in the FreeSat proposal we had proposed that those new services would be launched in MPEG-4 only.

426   THE CHAIRPERSON: Let's go back to your -- okay. So for argument's sake, you are putting Yorkton on the spot beam from the main -- so everyone in Yorkton then needs the new dish. I understand that.

427   The existing Bell set-top boxes cannot be used to receive that signal?

428   MS TULK: Well, in that case some of them may. Some of the later model ones, the same MPEG-4 boxes that we talked about, but none of our MPEG-2 boxes and certain of the older model, MPEG-4, are questionable and would require further testing. We are not sure whether they work. They may and they may not. We are looking at that now.

429   MR. DINESEN: We are faced --

430   THE CHAIRPERSON: I just want to make sure. That's one thing.

431   And, secondly, do you have to do something with your ground station in order to do --

432   MR. DINESEN: Yes, exactly. We would need to build a net, a new ground station -- uplink facilities to support any new Ka capacity. And that doesn't currently exist.

433   THE CHAIRPERSON: Well, what is happening to that capacity right now?

434   MR. DINESEN: It is not in use right now.

435   THE CHAIRPERSON: You are not subleasing it either or something. It's just wasted space on a satellite?

436   MR. DINESEN: Well, I wouldn't say it's wasted. I mean when we built Nimiq 4 on which that Ka capacity resides, we started design work in 2004 without having a very good line of sight to what the requirements were going to be for HD carriage and improved compression technology wasn't available to us at that time. So we thought it was prudent when we launched Nimiq 4 to have supplemental Ka capacity in the event we needed it.

437   It turns out that our preferred avenue, as opposed to expanding into new RF channels, is to use more efficient compression technology to achieve the same goal in terms of carriage.

438   THE CHAIRPERSON: But if I understand it and my knowledge is limited here, so I may be wrong -- so with those qualifications, okay. I have no idea. But not that I suggest it to put anything down too, but just my understanding of it may be -- but I thought that, for instance, is how the U.S. does their local-into-local through those spot beams and, in effect, you as a customer have to pay for that, for that local channel. Presumably you know there is an incentive there to receive that signal.

439   So going back to Yorkton again, if the citizens of Yorkton want that station they would have to in effect pay for the set-top box.

440   MR. BIBIC: Okay. So I will let Tim answer that, but I think it's important to separate the FreeSat issue from the more general discussion of why can't Bell utilize spot beams.

441   And with that caveat as our opening remark, I will just turn it over to Tim to explain the spot beam, in and of itself.


443   MR. DINESEN: So yeah, the way they typically use spot beams in the U.S. is on the principle of frequency reuse where they take down an RF channel that in our case we used to broadcast nationally and split it up into a number of regional beams to service local markets.

444   In order to do that you need to avoid interference. The spot beams need to be regionally separated into geographically-diverse areas and each of those spot beams needs to have its own separate uplink.

445   So it works great in the U.S. where you are talking about serving regional markets.

446   THE CHAIRPERSON: You need a separate uplink for each one of those spot beams?

447   MR. DINESEN: You need separate uplinks that you don't get interference at the satellite on the same frequency.

448   So it works well in the U.S. where you have got regionally diverse dense markets, not so much in Canada where you have got a dispersed market, in our case of around 2 million households. The fixed infrastructure costs are very different.

449   THE CHAIRPERSON: Thank you for that explanation. I didn't appreciate that you needed a separate uplift for each one of those.

450   Now, your basic approach you are saying is, it works well, we are doing as much as we can under given technical and financial constraints and we have the same goal as you, to carry as many stations, local stations as possible. But anything that we do over and above the existing rule is just going to in effect drive you to make investment into other sectors rather than into DTH.

451   That's how I understood your bottom line.

452   MR. BIBIC: With the one caveat of anything you make us do right now, given the capacity profile we have right now.


454   MR. BIBIC: Other than that one exception, yes, that's the position.

455   THE CHAIRPERSON: Our goal obviously, is to get all the LPIF-eligible stations up on a bird. By what time do you think you will be there?

456   MS TULK: Again, we are --

457   THE CHAIRPERSON: Give me your present projection.

458   MS TULK: Sorry.

459   Again, we haven't looked at it with this LPIF-eligible list in the same way. So I need to -- we will need to take that away and on Thursday come back to you. Yeah, so maybe if we could take that away for Thursday we can come back and tell you where we are on that.


460   THE CHAIRPERSON: Lastly, you have just made that point, "We don't have the dense population that the U.S. has, et cetera" and so we are always -- the problem -- we are prisoners of our demography and geography, et cetera. Sometimes we may have to make amendments for that. We have done it in some ways, for instance.

461   But would it make sense to try to come to a policy outcome that basically we make sure that all these stations are at least carried by one satellite carrier, not necessarily by both?

462   So I mean let's do something and by that -- sort of the analog comes to mind. There is obviously pay TV where we split the country into east and west and we say in the east it's Astral, in the west it is -- Corus, sorry -- Corus, yeah.

463   And that we say something here because that then allows -- or whatever basis you want to, just let's make sure that all of these stations are on a bird so that these local stations can benefit from it. But trying to make sure it gets us to a place where everybody is carried on two birds is just not feasible given Canadian geography and demography.

464   MR. BIBIC: So --

465   THE CHAIRPERSON: Have you ever thought along those lines?

466   MR. BIBIC: Well, we have heard -- we have actually heard -- I certainly heard that idea floated before. I can't remember where. So your question doesn't come as a surprise to me.

467   I think the first point is even if we were going to engage in that kind of discussion, let's get Shaw Direct up to par in terms of where Bell Satellite TV is. Because if you take the 23 and you split them in half, 12 on one side and 11 on the other, well again, why should Bell Satellite TV bear a disproportionate burden?

468   But let's take that as a given. Then one has to carry 12, the other one has to carry 11 to get those 23 covered. That's still 12 SD channels that right now we cannot accommodate without taking services down and it's not -- we are not able to accommodate that next year either, although we will accommodate 2 plus 22 in HD.

469   So again, it would be a question of over time that might be able to be accommodated over time. It's the same answer. It might be a shorter period of time because there is less.

470   THE CHAIRPERSON: Mr. Bibic, be a bit more imaginative. You can get there very quickly. You don't have to carry -- if I say, "Do you want to have everyone carried on only one bird?" then obviously you can take some of them on two birds. You could trade, et cetera.

471   I mean this could be worked out between you and Shaw. It doesn't have to be --

472   MR. BIBIC: Well, it's still 12 and 11, right?

473   MS TULK: Well, I think getting to Mirko's point, though, if there has been -- again, I don't see the total on the page of the LPIF stations but if I assume the number 116 is right and each of the 116 has to be carried on one or the other of the satellite providers that would say our obligation is in the range of 58.


475   MS TULK: And we currently plan to carry well in excess of that obligation. So I guess --

476   THE CHAIRPERSON: Obviously, I am talking about a minimum.

477   MS TULK: Yeah -- no. But that's what I mean. So I guess I would be saying so, you know, logically it would be easy for us to say "Yes" to that obligation because we already made it.

478   So if the obligation is to carry half of the 116 we carry --

479   THE CHAIRPERSON: No, no. Let me be clear. I wasn't suggesting you take anybody down. I said let's just make sure that it gets there by making sure that they are at least carried on one of the two satellite providers here.

480   But how -- it would be obviously something that you and Shaw would work out and tell us what would be required, sort of regulatory, to get us there.

481   MS TULK: Well --

482   THE CHAIRPERSON: I'm not making sense?

483   MS TULK: Yeah. No, I am really struggling with 116 channels have to each be carried on one or the other of two providers and I'm -- by the way, just to be clear --

484   THE CHAIRPERSON: At least, at least.

485   MS TULK: Okay, no, and I completely get that.

486   THE CHAIRPERSON: That's what I mean.

487   MS TULK: I am not at all suggesting that we would be taking channels down. I guess I'm just saying that we are already more than compliant with our half of that equation.

488   So I guess I'm just saying it would be difficult for me to sit here, Mr. Chairman, and say "Absolutely not. There is no way I can commit to carrying half the over-the-air channels in Canada" when I'm already carrying more than half of the over-the-air channels in Canada.

489   So my point being, sure, yeah --

490   THE CHAIRPERSON: Okay, let me put it -- rather than us imposing something on you, is what I'm saying, can't the industry come up with a solution to resolve this problem because there is -- as long as the end result is that everyone is carried at least on one bird.

491   MR. BIBIC: That's what we feel we do all the time. We didn't get to 40 or so channels above our regulatory threshold without sitting down with the industry and having those discussions. In fact, you would have seen that last month in October four additional stations went up, two CTV and two CBC.

492   In fact I personally had a discussion with another ownership group about lifting one of theirs. And for reasons that had nothing to do with us or them, that didn't happen just yet.

493   So we do it all the time.

494   THE CHAIRPERSON: Okay, thank you.

495   Rita...?

496   COMMISSIONER CUGINI: Yes, thank you and good morning. Just a couple of follow-up questions.

497   I want to go back to the issue of the partial channel. We have also read from others who have participated in these proceedings about an omnibus channel. Do you provide an omnibus channel as well?

498   MR. FRANK: We do both. The preferred solution of broadcasters is to be on their own individual channel.


500   MR. FRANK: Where we can, we accommodate that. We do have an omnibus channel which carries multiple local programming and the majority of our local programming is carried on individual channels.

501   COMMISSIONER CUGINI: And on the omnibus channel, is it local programming from one ownership group or local programming from a variety of ownership groups?

502   MR. FRANK: It is a bit of both. We have had both models.

503   COMMISSIONER CUGINI: Does Bell TV have a preference in terms of partial versus omnibus?

504   MS TULK: I think our -- I can't say we have a preference vis-à-vis that from a policy perspective. From a practical perspective we have a preference to have an omnibus channel delivered to us rather than us have to program in an omnibus channel.

505   So in practical terms, that tends to mean that it's more efficient if a single ownership group does that programming, rather than multiple ownership groups because we, you know, could see ourselves having to get in the middle of allocation of time on the channel and that's difficult for us.

506   COMMISSIONER CUGINI: And when you were discussing with the Chair why it is that broadcasters are resisting this idea, you did mention advertising, and this ties in with your method of simultaneous substitution --

507   MS TULK: M'hmm.

508   COMMISSIONER CUGINI: -- because if I'm in Winnipeg and I am watching an omnibus channel of local programming I'm getting Vancouver ads, correct?

509   MS TULK: Yes, that's correct.

510   COMMISSIONER CUGINI: Your method of simsub?

511   MS TULK: No, that's absolutely right.

512   COMMISSIONER CUGINI: So broadcasters have no way of monetizing either partial or omnibus channel.

513   MS TULK: Yeah. And clearly -- well, on the partial channel they would have the ability to monetize within the local programming windows because they would be distributing that local programming locally.

514   COMMISSIONER CUGINI: But not be able to sell local advertising on that.

515   MS TULK: They would sell local advertising in the local advertising -- in the local programming window.

516   COMMISSIONER CUGINI: I see, okay.

517   MS TULK: In the local programming window but not in the national programming window.

518   COMMISSIONER CUGINI: So they would still see -- so if I'm in Winnipeg I will still see the local Winnipeg ads.

519   MS TULK: You will see the Winnipeg -- you will see local ads during -- so as an example, the Winnipeg evening news is produced locally. Then they would be able to sell in that because you are actually going to see the Winnipeg evening news.

520   What you won't see is, you know, when primetime TV shows are on in the national programming window. You will see in that case the Vancouver feed.

521   So it is a bit of a compromise situation for sure. Certainly, in a lot of -- you know, as we know in a lot of primetime national programming a lot of the advertising is sold nationally anyway. You know there is definitely -- clearly, I mean, that local advertising is the drawback.

522   The only way -- the sad catch-22 of this from a technical and financial perspective is that the only way we would be able to simsub into all local markets is to carry dramatically fewer local channels. So if all we were carrying was four local channels we probably could carry a version of the U.S. network for each one.

523   The very fact that we carry so many local channels is what makes our ability to simsub impractical. So it's these two -- and I mean that's, you know, the unfortunate catch-22 for us.

524   It's these two policy objectives that we fully understand and fully understand, you know, the desire of broadcasters to have local advertising, the desire of Canadians and broadcasters to have as many local channels as possible broadcast. It's the coexistence of these that puts us in the corner because for every one we want to simsub into, as I mentioned, we have to carry duplicates of all four U.S. network feeds. So that's the box that the technology puts us into.

525   We believe the way we do it -- first of all it's the only way we can technically do it, but also we believe it's the best case because at least it allows the ownership groups for those broadcasters that do have national or wider spread channels to at least sell national advertising into that market versus being left completely with no access to that market.


527   The only area I would like to talk about is something that was raised by the CBC in their submission and that is the issue of DTH penetration in markets where their stations are not carried.

528   So for example, they list Edmonton and I believe Bell TV doesn't carry the local CBC station in Edmonton. The DTH penetration is as high as 32 percent and, of course, their point is that when you don't have access to a third of your audience there is trouble for the station.

529   So my question, therefore, is how much does DTH penetration in a market factor into your decision as to whether or not you are going to carry a local station?

530   MS TULK: Yeah. That is a great question.

531   I should note in some of those viewing charts we had a little bit of trouble figuring out some of the things.

532   So as an example, Edmonton, we actually carry an SD. But if you look at an example of Windsor, neither us nor Shaw Direct carries the CBC Windsor station. There is a satellite penetration in that case of 20 percent and somehow that same 21 percent are watching the CBC local station on satellite even though neither carries it on satellite. So the chart is a little bit hard to follow.

533   But getting to the underlying question that factors in it, but you should know we don't make these decisions on our own and, in fact, this year you know -- and one of the rules that I think actually really helped CBC in particular is the matching rule.

534   So this year when we lifted -- when we found ourselves in a position, because we did have a bit more capacity this year through some of the great work of Tim's team than we had anticipated, and made the decision we would be able to add four more standard definition and, in fact, we might have had the ability for five and we are still working on the fifth -- the ability to lift some of these over-the-air channels earlier -- we looked at where those were.

535   If you looked -- if you kind of back those couple out of the numbers in Appendix 1, the least represented ownership group on a percentage basis was CTV. So that was -- we are there. And then the CBC matching rule, we went to the CBC and talked to them about that we were in a position to launch two incremental stations.

536   We obviously have the rules one per province and, you know, the exception of Atlantic Canada where we have to carry two for the region. So we wanted to make sure we were moving towards a couple of places where we were a bit offside there. And then we also, though, talked to the broadcaster about where they would like to have their signal carried.

537   So we make proposals based on where we have customers. Customers want local channels and if we have a large unserved customer base that's a piece.

538   We discuss with the broadcasters where the best advertising opportunity is for them, so where it's most compelling for them to be broadcasting.

539   We look at the regulatory requirements, one per province; the matching rules. So it's definitely a bit more art than science.

540   We were, in the case of the CBC, also interested and had discussions with them on whether those two channels should be CBC or the French-language stations.

541   So you know all these come to play but, yes, where our customer base is a piece of it but not the only piece and these are all done in discussions with the broadcasters themselves.

542   COMMISSIONER CUGINI: Okay. Well, thank you for your responses. Those are all my questions.

543   THE CHAIRPERSON: Candice?


545   And just following up on the conversation you just had, you said that you talked to the broadcasters to decide when you do have capacity for an additional OTA which station that might be. Because I was wondering -- and if we look at the sheet that our Chairman provided to you, it just shows -- and I am going to use Saskatchewan as an example because it's something I understand.

546   If we look at page 1 on the CanWest example at the bottom, you see Regina and Saskatoon. For Regina neither Bell nor Shaw carries the signal and both carry the signal in Saskatoon.

547   So you are saying that the broadcasters would have been part of that decision to decide to carry Saskatoon?

548   MS TULK: No. Yeah, so let me back up.

549   We first look at -- it's not as scientific as I am going to make it sound but, you know, bear with me. So we first look at the first question -- or I guess we first look at in this case where, if anywhere, are we offside from the one per province per ownership group; two Atlantic Canada rule. So where do we need to carry more.

550   Then we look at where our customers are and then we look at, I guess, the rule on equitable treatment and look at which if any of the broadcasting ownership groups are vis-à-vis the other on a proportion basis less represented on our satellite than the others.

551   And so it's not that we get all the broadcasters in a room and talk to them about, you know, who is going to get the next channel. We kind of go down and then we kind of identify that in this case, CTV most underrepresented, CBC needed to also have a channel and Saskatchewan needed more representation.

552   So you kind of follow down that trail and lead to that decision. Then, of course, as we go into next year we have more channels that we will be lifting and we will have similar types. We also --

553   COMMISSIONER MOLNAR: Can I just maybe --

554   MS TULK: Sorry.

555   COMMISSIONER MOLNAR: -- just ask in this particular, using this as an example, is there some economy for the two of you to be carrying the same signal instead of one provider, you know one of the DTH providers carrying Regina and the other Saskatoon?

556   THE CHAIRPERSON: Finally got --

557   MS TULK: There is no economy I guess, if I understand the question. Obviously, we also do broader negotiations with a lot of these ownership groups and sometimes their desire to be present in a different market comes into some of those broader negotiations for some of their discretionary or other signals as well.

558   But, no, I don't think there is an economy.

559   COMMISSIONER MOLNAR: So there is no benefit?

560   MS TULK: There is no benefit to being the --

561   COMMISSIONER MOLNAR: So the uplink costs are --

562   MS TULK: No.

563   COMMISSIONER MOLNAR: -- the same whether you are taking Regina or Saskatoon?

564   MS TULK: That is right. Yeah, there is no benefit. It's --

565   COMMISSIONER MOLNAR: So in this particular situation -- and I am just going to kind of, I think, in carrying on a discussion with the Chair -- if the desire is for all programming and it is our desire that all these OTA stations with access to LPIF are carried, there would be no additional or significant costs to you to choose between Regina or Saskatoon?

566   MS TULK: I guess no direct with respect to the cost of providing the channel. I can't remember that specific discussion. Well, I guess it's not really a discussion that happened.

567   But in some cases there is economic impact in terms of our negotiation with some of the broadcasters on broader negotiations. And there is economic impact in terms of our ability to be competitive for our customers and so the number of customers we could either add or retain based on the demand for a particular channel.

568   So there is no direct economic impact when you look at the cost of carriage of the channel but there is certainly ramifications in commercial agreements and ramifications with respect to our competitiveness for our customers.

569   MR. BIBIC: So if -- and I got the sense when this case up in the Chair's questioning that, Mr. Chairman, you weren't entirely satisfied with certainly my cut at the answer. But let me try again because I really do think that the math I was trying to put forward does make sense.

570   If you are not talking about taking one down, so if it's not a question of Bell Satellite TV taking down Saskatoon and putting up Regina instead because Shaw has got Saskatoon -- so if we are not talking about taking Saskatoon down and replacing it, we are therefore talking about adding -- one of us adding Regina. And if you accept that there are 23 stations left to be carried by satellite that does mean finding the space on the birds, on one company or the other's satellites, for 23 more. That's what I was trying to say.

571   Right now there is no space for us to absorb even half of that 23.

572   THE CHAIRPERSON: And I said be imaginative and what I meant, to take this example here, why couldn't rather than both of you carrying Saskatoon and none in Regina, you carry Saskatoon and Shaw carries Regina or vice-versa?

573   MR. BIBIC: That's a fair point but that would require one of us to take down Saskatoon.

574   THE CHAIRPERSON: Obviously; obviously.

575   MR. BIBIC: And that will impact the customers we have who may actually want Saskatoon. So those are the tradeoffs.

576   THE CHAIRPERSON: But presumably that's a secondary problem. If there is actually some people who would feel that way then I don't see why both of you couldn't have a program of change, et cetera, fine, you switch over from one to the other. I mean it would be --

577   MR. BIBIC: Okay. So when you said --

578   THE CHAIRPERSON: I mean I am just thinking, can one work out something along those lines rather than imposing additional capacity on you, that you work out a way that you serve all the --

579   MR. BIBIC: Okay. So I misunderstood you then. I thought you said you can't take any down, but you meant as long as that local market remains on at least one or the other, it might come down from one and stay on the other.


581   MR. BIBIC: Okay. Now I understand, thank you.

582   COMMISSIONER MOLNAR: I want to turn to the issue of simsub.

583   If I understand, the way you do simsub is different from Shaw, it is different from what is being proposed by FreeHD and different from how simsub is done in the States. They have more of a virtual channel override type of local into local; correct?

584   MR. DINESEN: Simsub as we know it isn't nearly as pervasive in the U.S. as it is here. In fact, the technology that we use is a near clone of what is used by Dish Network and they don't do any -- they have the same limitations as we do with respect to simsub.

585   COMMISSIONER MOLNAR: Okay, thank you.

586   That is what I wanted to understand because I was thinking that your specifications or requirements would somehow be proprietary and unique to Bell. So no? You are able to utilize equipment and your specifications and so on for your DTH and your requirements for simsub are not unique? They don't require any proprietary development or anything like that?

587   MR. DINESEN: Well, the manner in which we perform simsub is performed manually by an operator in our head-end, and every one of those substitutions therefore is broadcast nationally.

588   What we don't have is the ability to do that on a local set-top box level and that is to say instruct specific set-top boxes to tune to specific -- to do a specific substitution based on their geography. That is the virtual channel override model. We don't do it that way. Our technology is essentially what is employed by Dish Network.

589   So to address your comment about what is done in the States, they don't do it much differently from what we do, but, in fact, they don't have the same requirement to substitute as we do.

590   MS TULK: Yes. I was going to say the part that is proprietary is that we have had to develop a process to be able to comply with much more stringent simsub regulations than what they would face, but we use the exact same technology that they use to do that.

591   COMMISSIONER MOLNAR: Okay, thank you for that. I just wanted to understand that.

592   Finally, I just -- I am going to apologize up front for perhaps not understanding. I did read through your capacity reports and I have listened to you here today as you talk about your limited capacity and essentially being at nearly full capacity right now. I am just trying to understand.

593   You know, we are talking about 23 SD channels here and it is a breaking point. I understand from an -- perhaps, you know, the revenue generated by those channels might be inferior to what you can get with others.

594   But I think I hear you saying that your capacity, you are at the breaking point, and I am not sure I understand that relative to what I see happening in the industry, where there is such a significant transition to HD continuing to occur.

595   I can tell you at the Commission we are licensing Category 2s like crazy. You know, there is a whole slate of additional Category 2s potentially being available.

596   So when you talk about the limited capacity you have today, how is it you are going to continue to provide services into the future as this HD transition occurs?

597   MS TULK: Yes. It is obviously -- it is a great question and one that takes up a lot of our time on a regular basis.

598   So where we are right now, we are fundamentally at capacity. I mean there is very, very limited capacity left in what we currently have.

599   We are embarking on what we believe -- and we have been able to manage the HD explosion to this point by continuing to improve our compression technologies and make a number of upgrades.

600   We are about to embark on what we believe is one of the final steps on that journey vis-à-vis MPEG-2 compression. That is a business case that requires substantive investment and in order to generate a return on investment we need to believe obviously that we can either generate incremental revenues, incremental subscribers and/or retain more of the subscribers we have by ensuring that they don't have to go elsewhere for those services that come to market that they want.

601   It is out of that investment that we are allocating the ability to add some more standard definition channels and some more high definition over-the-air next year.

602   If we don't make that investment that we are embarking on right now, we wouldn't be able to do even this plan that is in front of you.

603   So that being said, our current plan of record -- which, you know, obviously, for obvious reasons, I can't get into in this room, but we have filed with you our current capacity plan of record -- actually uses the entire, more than the entire limit of that investment that we are making. So we still have a small gap to close, which we will continue to work to do so.

604   I did mention that we are taking down some very low penetration discretionary services in order to make that happen.

605   So what we are, as I mentioned earlier, very, very actively doing is trying to figure out how we can embark on the next phase of upgrade, which is really starting to use MPEG-4.

606   It is a much better -- as you know from reading all the reports, capacity investment in this business is not a linear investment, it is step-change investments.

607   The one we are making now, I would say, is a small- to medium-size step. The next one as we move into MPEG-4 is a very big step and how we get up that hill is something we are looking at.

608   And so I mentioned earlier, whether it is looking at partial customer conversion, partial channel conversion, partial geography conversion, I mean we have to look at a number of different ways, because certainly, full conversion is not tenable.

609   COMMISSIONER MOLNAR: Can I just interrupt?

610   MS TULK: Yes

611   COMMISSIONER MOLNAR: Did I hear you say you don't have the plan as to when you are making that step to MPEG-4 for even some of your customers?

612   MS TULK: Well, we have already started shipping --

613   COMMISSIONER MOLNAR: Yes, 25 percent are on it.

614   MS TULK: -- MPEG-4 boxes to all new customers. And any HD customers who are returning boxes because they are broken or they need a new one, we have started that kind of natural refreshment.

615   So that is in play and we are currently working through a time to finalize a plan of how we would go to the next step and whether that would be, you know --

616   And, you know, I guess it is no secret because anybody could guess, I mean, the various options, you know, broadcast new channels only in MPEG-4, broadcast certain geographies in MPEG-4, broadcast certain pieces of the channel line-up in MPEG-4.

617   Certainly, what is definitely not going to be on the table is a full customer conversion to MPEG-4 because it is just too expensive.

618   COMMISSIONER MOLNAR: So is it possible for you to share -- I am not ever quite sure when we hit the line of confidentiality.

619   MS TULK: Yes.

620   COMMISSIONER MOLNAR: But where is the timeline where that breaking point happens?

621   MS TULK: Yes. So we can certainly -- if we haven't already, I can file with you our current view of what capacity we are going to gain next year and where we are going to use it and what that timeline looks like. In confidence, we can file that.

622   COMMISSIONER MOLNAR: Well, I have kind of looked at that, but once again, I -- or I have looked at the plans you have filed and it left me still confused as to, you know, as I said here, hearing about the capacity limits that these, you know, 20, what potentially are SD channels, which I think if we did the math would be equivalent to four HD, is that right, you know, just to put it in sort of some context, is a breaking point?

623   MS TULK: It would be 23 divided by four, yes.

624   COMMISSIONER MOLNAR: Okay. Bad math, but still, I mean within the context of everything coming on board, the four or five additional equivalents.

625   MS TULK: So what we can do for you is -- I always struggle to get it easy, so I'm not --



627   MS TULK: -- I'm not surprised that you did too. But we can try and take another crack at what that timeline looks like and certainly put it in very blank terms for you where and when we think we run out of capacity again.

628   COMMISSIONER MOLNAR: Thank you. Those are my questions.

629   THE CHAIRPERSON: Louise?

630   COMMISSIONER POIRIER: Yes, I have two questions, Mr. Chair. The first one I will ask it in English, the other one in French.

631   The first one is, you know, we get many complaints from citizens and I wonder if you get many complaints too from your clients or potential clients because they consider they are not well served.

632   I am looking at the sheet we gave you, mostly at Trois-Rivières. Look at the City of Trois-Rivières. It is a really good example because on the first page we can see that neither CBC is broadcast by Bell or Shaw, and when you go and look at the second page, TVA is not carried either, okay. It is not by Shaw, neither by Bell.

633   So how can we say we offer a good service to those clients? They get neither CBC nor TVA, the most important broadcasters in Canada in French.

634   MR. BIBIC: So I would -- okay, go ahead.

635   MS TULK: Certainly, we know that there are examples of markets that aren't broadcast, clearly, and Trois-Rivières being one of them. We do get requests from our customers in terms -- and as I mentioned, one of the things we look at when we are able to add any more channels is where we have customer demand and where we have the ability to do so.

636   We also noticed and have had a lot of discussions in the last couple of months since this very proceeding started that there was a number of undertakings from Saguenay, in the Saguenay Region as well, letters that were sent in in support of better coverage in that region.

637   So, you know, we are taking that and looking at how we might be able to improve the coverage.

638   We first felt that the most important thing for us to do is -- it was actually in the Province of Saskatchewan that we were not compliant. So we needed to make sure we addressed that because we felt it was very important to do so.

639   You know, the problem for these last 23 over-the-air stations that we are really facing, which gets back to one of the comments Commissioner Molnar said, is we also -- while we know these are real issues for these communities, I hear certainly from lots of my friends and family who live in one of the communities we don't serve -- but we also are seeing huge and very loud demands from very large groups of our customers to add the over-the-air HD that is coming to market, which is equivalent -- you know, the same math works in the other direction, which is that every one of those is equivalent to four of these.

640   So we are constantly balancing off the clamour for high definition across the national base and in these large markets that are converting to HD against our ability to continue to add more of the smaller markets and that is where the balancing act continues.

641   CONSEILLÈRE POIRIER : O.K. Et ma dernière question, Monsieur le Président, est plus philosophique peut-être, mais, entre autres, hier, on voyait dans le journal "La Presse" qu'il y a une forme de déclin de la consommation des nouvelles à des heures très, très précises.

642   Il y a aussi l'importance pour nous de s'assurer, quand même, que les consommateurs reçoivent leurs nouvelles locales. Mais on se rend compte que les nouvelles locales maintenant, elles sont consommées pas nécessairement à des grands moments dans la journée, mais à n'importe quel moment de la journée et sur toute sorte de plateformes.

643   Alors, je me demandais, vous comme compagnie, quand vous voyez que maintenant les gens veulent de la nouvelle locale mais peuvent l'avoir sur les réseaux sociaux, peuvent l'avoir sur Internet, peuvent l'avoir encore par satellite -- je l'espère et fort longtemps -- par leur câble aussi, mais dans l'avenir, comment vous prévoyez faire vos investissements considérant ces éléments-là?

644   Est-ce que vous pensez que ça vaut la peine de développer le satellite encore de nos jours ou est-ce que pour vous, et vous parlez de plus en plus de Fibe TV, est-ce que ce n'est pas encore plus important d'investir dans un réseau comme celui-ci, de sorte que la problématique des satellites risque de perdurer?

645   I am talking about future investment --

646   MS TULK: Yes.

647   COMMISSIONER POIRIER: -- the way you might think of doing things because --

648   MS TULK: Yes. It is an excellent question and one, I think, Mirko alluded to in parts of his opening statement.

649   In a capital-constrained world, which we are in, we are always looking at how we prioritize our investments across all of our product groups. So that is Satellite TV, Fibe TV, our Internet Network investments, our Mobility Network investments.

650   The thing that is common to all of those product platforms is an explosion in the way we could spend capital if we had it and particularly the whole new area, which spans across all of those platforms, of media over IP, whether that is to mobility devices, to Internet devices or to television screens using Internet Protocol.

651   And so this year we have made significant investments in Bell TV Online, which provides the ability for our Bell Satellite TV customers to view their services over our online product -- obviously, that is subject to the content rights owners allowing us to provision it in that way -- and providing video over our mobility devices.

652   So we believe though -- getting to, I think, the crux of your question, we believe that our Satellite TV business and our Fibe TV business actually are very complementary. As we talked to the Commission about during the Next Generation Networks Hearing, satellite TV historically has not tended to do as well in the very urban and very population-dense markets, particularly those with a lot of multiple dwelling unit penetration, and that is where we are investing to build out our Fibe TV market. So we have launched in Toronto and Montreal and we will continue to grow in those very major markets.

653   COMMISSIONER POIRIER: So could it become more Fibe TV in the cities and more Satellite TV in the rural areas? Could it become that?

654   MS TULK: Yes. I think you will see that kind of split naturally emerge because today -- and I guess, you know, as I always like to point out at least 10 times when I am here, being from Atlantic Canada, it is not rural markets. There is very dense urban and, you know, I don't consider markets like Regina and Winnipeg and Fredericton and Moncton rural.

655   But certainly, the non very big urban core markets is where we think our satellite business will continue to grow and flourish, and we will continue -- and we will build Fibe TV out in the very urban centres and in the very population-dense centres.

656   All that being said, getting back to Mirko's points in the beginning, because we are capital-constrained and because we have so many opportunities to invest and provide return for our shareholders, we have to be sure that the investments we are making have a return and we have to be sure that they either drive incremental revenue, incremental subscribers or help us retain the customers we have.

657   And if they are not doing that in a meaningful way, then we will choose to invest elsewhere because that is the obligation that we owe to our shareholders.

658   I don't know, Mirko, if you have anything to add.

659   I wanted to go back -- I didn't want to say it in the previous answer because I had to check with my colleagues to be sure because I knew we had looked at Trois-Rivières, because Saguenay is the one that keeps me awake at night.

660   And Trois-Rivières, we do carry V in Trois-Rivières and when you say that, that is probably -- you know, when you mention TVA and CBC as major, the other part of the regulation, of course, that we are always bouncing is the one per ownership group per province. So we have to choose which market to do which ownership group in.

661   So we do serve Trois-Rivières, but your point is valid in certain other markets.


663   MR. BIBIC: Just before we close, I have just a housekeeping matter, if I can address.


665   MR. BIBIC: Thank you.

666   This chart that you handed out is extremely important. I want to get it right. Would it be possible for staff to send this electronically?

667   THE CHAIRPERSON: Absolutely.

668   MR. BIBIC: Okay.

669   And the other, if I could end where we began, again with this chart, Mr. Chairman.

670   And I direct staff, if staff refers to our July 2nd capacity report, it was filed totally in confidence.

671   Page 12 of 34, Table 7 lists the stations that we indicated we would plan to lift by September 2011. In that capacity report there are 25. In Appendix 2 today there are 24. The only discrepancy is CBC Regina in SD and it is no longer on the list because we lifted it in October.

672   I would propose that we populate this chart from a Bell TV perspective as of September 2011 because there is no sense having a discussion about a station --

673   THE CHAIRPERSON: Absolutely.

674   MR. BIBIC: Okay. Thank you.

675   THE CHAIRPERSON: I would ask staff to do exactly the same.

676   MR. BIBIC: Thank you.

677   THE CHAIRPERSON: Well, thank you. Please reflect on some of the things that we asked you to do. I mean to what extent you can give us more -- in confidence maybe -- information on your MPEG-4 plans because I mean it is obvious that you are doing a soft transition at the very least, as you said, through replacement, et cetera. So the more you can share with us, the better.

678   Secondly is the point I raised with you, you know, is there an industry solution here that would avoid us having to do something regulatory.

679   And let me just close -- you said in your statement that:

"For policy-makers and the Canadian broadcasting industry overall, DTH service has been an unqualified success in bringing television service to communities where it was not previously available, introducing competition to broadcasting distribution across Canada and providing broadcasters with a massive new source of revenues and profits." (As read)

680   We absolutely agree. It has been an outstanding success. We are not trying to do anything to screw it up. We are just trying to make sure that it extends to all parts of Canada and that all eligible stations can benefit from this outstanding success that you mention.

681   In case our questioning gave the idea that we don't share that view, I wanted to repeat that.

682   So we will take a 15-minute break. Thank you.

--- Upon recessing at 1105

--- Upon resuming at 1121

683   THE SECRETARY: We will now hear the presentation of Shaw Direct.

684   Please introduce yourself and your colleagues and you have 20 minutes to make your presentation.


685   MR. BRAZEAU: Thank you.

686   Mr. Chairman, Commissioners, my name is Jean Brazeau, I am Senior Vice President, Regulatory Affairs for Shaw.

687   I am joined here today by Jim Cummins, on the far right, Group Vice President, Shaw Satellite Operations; Gary Pizante, who is next to him. He is Vice President Corporate; Cynthia Rathwell, Vice President, Regulatory Affairs and Programming at Shaw Direct. She is next to me and on my left is Dean Shaikh, Director, Regulatory Affairs at Shaw.

688   We appreciate the opportunity to participate in this Review of the direct-to-home satellite distribution policy.

689   Canadian DTH service is a tremendous national achievement. This achievement has been made possible by a distribution policy that recognizes DTH's unique technological features and efficiencies. The policy was first directed by the government in 1995, and implemented by the CRTC. Today, we will reflect on the critically important role that DTH has played and continues to play in our system and how DTH's success can only continue if the Commission maintains a flexible and consumer-friendly approach to regulating DTH's signal carriage obligations.

690   Jim...?

691   MR. CUMMINS: Thank you, Jean. Thank you, Mr. Chairman.

692   Today, Shaw Direct provides a high quality, viable national DTH service to almost one million homes. Three quarters of these homes are in rural and remote areas. Shaw Direct makes it possible for Canadians anywhere in the country to receive hundreds of digital channels, including 69 local television stations, HD services, and interactive services. Seventy-six percent of the channels we distribute are Canadian, and 18 percent of them are local television stations, as compared with an average 11 percent of local channels that form part of the offering of Canada's major cable companies.

693   As we evolve, it is our objective to add state-of-the-art features to our service so that customers in remote communities can benefit from the same level of service as a customer in a large served area by major terrestrial BDUs.

694   Shaw Direct faces intense competition, against a major DTH competitor, unregulated content providers, established cable companies, and black market satellite services. Our success is the result of significant satellite infrastructure investment that were based on national DTH policies. These investments must be managed very prudently to sustain our competitiveness.

695   The Canadian DTH business requires detailed planning and a huge long-term investment. Since our launch, we have invested $1.5 billion in Shaw Direct. It will take us over 10 years to recover this investment. Any perception that DTH capacity can easily be built out and operate like a local cable system is simply incorrect.

696   Acquiring and using satellite capacity is very complex, challenging and involves substantial risk-taking. New satellites take years to design, build and launch, with large sums of capital outlay. They must be integrated within our existing system in a way that does not disrupt existing customers or trigger substantial ground equipment costs.

697   Shaw Direct's satellites have been designed with national beams because, for Canada, it is the only efficient way to utilize scarce spectrum. Requiring DTH services to mimic terrestrial BDUs would put us at a serious competitive disadvantage and undermine our ability to provide service to rural and remote areas that is equivalent in quality to cable service to large cities.

698   Jean...?

699   MR. BRAZEAU: Shaw Direct's service has been embraced by customers and continues to provide extensive benefits to the Canadian broadcasting system and communities from coast to coast to coast, fulfilling Broadcasting Act and other public policy objectives.

700   Since its inception, Shaw Direct has made the following invaluable contributions to the Canadian broadcasting system and government objectives:

701   We have added approximately 570,000 net new subscribers to the Canadian broadcasting system and created healthy competition in broadcast distribution;

702   Shaw Direct provides hundreds of high-quality, digital channels to Canadians living in rural and remote areas;

703   We have provided a vanguard digital service and fended off the spread of U.S. black market satellite services;

704   We have increased the subscription and advertising revenue for Canadian specialty and pay services by close to $2 billion and, 10 years ago, effectively created a market for Canadian digital specialty services;

705   We use our satellite network to transport Canadian pay and specialty services to over 2,000 small cable systems across Canada, ensuring that their customers enjoy a wide breadth of Canadian and international services;

706   Shaw Direct has contributed almost $20 million to the Small Market Local Programming Fund;

707   We have also supported local programming through the contribution of over $10 million to the Local Programming Improvement Fund in its first year of operation;

708   We assist the Canadian production industry and Canadian broadcasters through an annual contribution in the order of $30 million to the Canada Media Fund.

709   We are proud of the tenacity, creativity and prudent management that have helped us become a dynamic competitor able to deliver these benefits to the Canadian broadcasting system.

710   MS RATHWELL: The success of Canadian DTH is also a result of a government Direction and Commission regulatory framework that has appropriately recognized the technological differences between DTH and terrestrial providers.

711   Shaw Direct has designed and built its system architecture based on the policy framework for a national DTH service. The government Direction promotes dynamic competition between DTH services and among DTH and terrestrial BDUs. It directed "substantially the same" carriage rules for DTH and other BDUs. However, it does not mandate precise regulatory symmetry.

712   The Broadcasting Act does not require distribution by a BDU of every local signal. Based on the policy set out in section 3 of the Act, the Commission has introduced different kinds of regulation to ensure that local broadcasters receive "priority" across different classes of BDUs.

713   The DTH carriage requirements reflect the fact that DTH operates as a national network and cannot distribute every single television station

714   DTH distribution obligations were increased in the new 2008 BDU distribution framework. We note that the Commission has recognized that carriage of all local signals is not reasonable. Meeting the requirements of Broadcasting Regulatory Policy 2008-100 will be difficult and may cause some customer disruption, but we are committed to meeting the challenges of compliance.

715   MR. PIZANTE: There is simply not enough available satellite capacity to deliver all local signals and still provide a service that Canadians want. Shaw Direct recently entered into an agreement to build and launch a new $300 million satellite, ANIK G1, by the fourth quarter of 2012, we hope.

716   This took over three years of planning and lengthy and difficult efforts to secure a spectrum use policy change to allow us to build the new satellite in a way that would preserve our competitiveness. We would like to express our appreciation of your support for our request for this policy change.

717   ANIK G1 is now being built and it will carry 16 national satellite transponders that can deliver up to 100 new HD services in MPEG-4, as well as other advanced features. Ensuring the availability of capacity for high-definition and advanced digital services is critical to ensuring that Canadians anywhere in this country have access to the same scope of choice available to customers in large urban areas.

718   In addition to investing prudently in a new satellite, Shaw Direct has taken all possible measures to increase the efficiency of existing capacity.

719   We were the first to introduce 8PSK modulation, which we now use on 18 transponders. Our new receivers are being equipped with MPEG-4 capability. This roll-out must be carefully executed to manage costs and ensure that customer experience is not negatively impacted by a need for equipment changes. Only 1 percent of our customers' receivers are currently MPEG-4 capable. However, the cost of immediate conversion of our entire system to MPEG-4 would be $600 million and would overwhelm our business.

720   In addition to unsustainable implementation costs, offering expanded local station distribution would be a significant opportunity cost to DTH providers. We are doing our best to use limited, one-way capacity to compete with two-way digital terrestrial distributors. Our cable competitors are also bolstered by a physical presence in the communities they serve.

721   MR. BRAZEAU: The costs to the system of requiring DTH to allocate a significant part of its finite capacity to the carriage of additional, largely duplicative, over-the-air services far exceed any benefits of increased local carriage requirements to the broadcasting system or local broadcasters. Beyond the small-market independents who are well-supported by the current framework, Canadian broadcasters are large groups that purchase regional and national rights. This provides them with flexibility to allocate and amortize programming costs and adjust revenue models.

722   Broadcasters also retain the ability to ensure ongoing access to local viewers by constructing digital transmitters.

723   A DTH customer can easily access over-the-air signals by antenna with a simple change of the input select on the remote control. It is no more difficult than switching functionality from satellite to a DVD or game system. As a result, in mandatory markets, broadcasters can devote themselves to ensuring that their viewers are able and know how to access the over-the-air signals.

724   Broadcasters can also make the local signals and programming available on the Internet. We hope that our offer to make Shaw Media towers available to other local broadcasters will create an incentive for more local broadcasters to convert to digital in non-mandatory markets.

725   MR. CUMMINS: DTH has been a tremendous success story for Canadians. We congratulate the Commission for supporting and helping to make DTH success possible. Based on a national DTH regulatory framework:

726   Canadians in rural and remote communities, 75 percent of our customers, enjoy the same level of high quality digital television service that is available to urban customers. This includes top quality broadcasting content, high-end digital technology, and excellent customer service and technical support.

727   Seventy-six percent of our services are Canadian. In the last three years, 87 percent of new channel additions have been Canadian services.

728   DTH has led the development of digital distribution in Canada and supported the launch of hundreds of Canadian digital specialty services.

729   Getting to this point has not been easy and there are many challenges ahead. Meeting the new carriage rules set out in 2008-100 alone will require us to drop signals. There is no other way for us to do this in view of capacity constraints, and these constraints will not change with the launch of ANIK G1 in 2012.

730   Capacity will be under increasing pressure as Canadian DTH faces more and more competition from not only licensed terrestrial BDUs, but from unregulated content providers.

731   A reasonable balance between and provision of local television services and other programming services on DTH will be achieved under the current framework. To increase local television distribution requirements will undermine that balance and the ability of DTH to contribute to the system.

732   By recognizing technological differences and maintaining a flexible approach to DTH distribution obligations, the Commission will ensure the continued development of strong and competitive national DTH companies that serve all Canadians, especially in rural and remote areas. Our goal is to continue providing the best service we can for all Canadians, wherever they may live.

733   Thank you, Mr. Chairman.

734   THE CHAIRPERSON: Thank you.

735   You heard me talk to Bell before MPEG-4. Do you have a transition plan?

736   Bell tells me they don't have one, they were with soft transition but we haven't really -- Mr. Bibic took the trouble to correct me when I said you are transitioning. He said, "No, we are not."

737   Are you transitioning to MPEG-4?

738   MR. PIZANTE: Well, we have a plan. It includes ANIK G1.

739   When we made the decision to invest $300 million in ANIK G1 with 16 transponders it was with the thinking that we would be using it for MPEG-4 and that is our expectation. That will be here in 2012.

740   We have spent considerable resources developing MPEG-4-capable receivers. There are two new ones that we introduced in the last half of this year, one in September, one actually just in November. There are plans for other ones as well that I don't want to get into.

741   We had a plan at one point to upgrade some of our existing MPEG-2 HD receivers to MPEG-4 through a module, a slot if you will on the side, and we spent considerable resources to develop that module and it turned out to be infeasible. It didn't provide the level of service that our customers would expect is the short answer.

742   So yes, we have a plan to get there, we have something of vision I suppose, but the exact details of how we will get there, when will we start broadcasting in MPEG-4 is going to be responsive and reactive to market circumstance.

743   THE CHAIRPERSON: To the extent that you have a plan -- obviously it's highly confidential -- can you file it with us?

744   MR. PIZANTE: Yes, it would be confidential beyond what I just said. So absolutely we could share that with you.


745   THE CHAIRPERSON: Now, you must have read -- what is it called -- the Lemay-Yates report. It says:

"In Shaw's case one of the receivers can be field upgradable to MPEG-4 and the newest one introduced on September 1, 2010 is MPEG-4 capable." (As read)

746   So you are now already MPEG-4 capable. Is that correct?

747   MR. PIZANTE: Yes. We have two receivers actually that are MPEG-4 capable, the one in September, one in November.

748   But the Lemay-Yates statement about the field upgradable is I guess incorrect, because although we did make an effort to do that, so it's probably in good faith that they wrote that. And I don't like telling our competitors that they are wrong about something, sometimes I prefer them to be wrong, but in this case the effort to develop that was infeasible.

749   So right now 1 percent of our receivers are MPEG-4 capable.

750   THE CHAIRPERSON: They go on to say:

"Using 5 transponders for the OTA stations, plus replacing and upgrading backhaul and equipment to support MPEG-4 transmission of the missing OTA station in their present format would thus cost in the range of $75 million in present value terms for each of Bell and Shaw." (As read)

751   Do you agree with that?

752   MR. PIZANTE: No, I don't agree with that one.

753   And I do understand -- at least I think I understand how they developed that calculation.

754   The fact is, to change out five transponders to MPEG-4, that's 10 percent of our capacity roughly, it's impossible to do that without affecting the service of virtually every customer. So really what it means is you would have to upgrade the whole network.

755   THE CHAIRPERSON: Explain that to me.

756   MR. PIZANTE: Sure. Because five transponders would occupy in the order of 40, 50 services, depending -- let's just call it SD, 40 services, so there's no way that we can just change 40 channels to MPEG-4 without affecting every single customer.

757   THE CHAIRPERSON: When you say "affecting", they would need a new set-top box?

758   MR. PIZANTE: Yes. They would either need a new set-top to be converted to MPEG-4 or they would lose a service, and neither one of these is an attractive alternative for us.

759   THE CHAIRPERSON: Yes. Obviously not.

760   MR. PIZANTE: So it's a total misnomer to say you could do that.

761   The other thing I would just add, Mr. Chairman, without going too long, is that their calculation of $15 million for a transponder and multiplying that by five, that's how they got the $75 million, I don't understand why that was even a valid computation when really it's the ground equipment cost which is a valid computation and that is $600 million. But a transponder is, you know, it's closer to $20 million these days.

762   THE CHAIRPERSON: The ground costs $600 million?

763   MR. PIZANTE: Yes.

764   THE CHAIRPERSON: That does not include the set-top box or that does include the set-top box?

765   MR. PIZANTE: No. When I say "ground", I meant ground at the customer level, customer premise equipment. I didn't include --

766   THE CHAIRPERSON: That's the customers --

767   MR. PIZANTE: Yes, sorry.


769   On page 12 this morning you say:

"Meeting the new carriage rules set out in 2008-100 alone will require us to drop signals. There is no other way to do this in view of capacity constraints, and these constraints will not change with the launch of ANIK G1 in 2012."

770   I thought I heard you say when I was in Calgary two months ago -- Mr. Brazeau, you were there, two or three months ago -- anyway that once ANIK G1 is up in 2012 that you will be able to meet those.

771   Nobody talked to me about dropping channels. I thought you would say you would not be able to meet the new BDU rules until such time as your new bird is up.

772   MR. BRAZEAU: That's correct. And what we are saying here is that we will certainly be able to meet those rules. The ANIK G1 will provide us with more capacity.

773   But I think the comment here is more that, you know, the future use and new services that will be introduced going forward, that those -- that capacity will be required on ANIK G1 in order to deal and to respond to all these new services.

774   I think that's what this is saying.

775   THE CHAIRPERSON: So you are not dropping it, you may not be able to upload or to carry new services for instance.

776   MR. BRAZEAU: Yes. The investment in G1 was really based on the Commission's framework of 2008-100. That's the framework that we relied on in order to make that investment in ANIK G1.


778   Rita, you have some questions?

779   COMMISSIONER CUGINI: Yes. I just have a follow-up question to this conversation, just so I'm clear.

780   So it isn't until ANIK G1 is fully functional that you will be able to comply with the new carriage rules of 2008-100?

781   MS RATHWELL: No. We will comply with the over-the-air carriage requirements of 2008-100 by the deadline, but I think that there is a lag time between September 1, 2011 and the operability of ANIK G1.

782   In response to the fact that we are going to be complying with the over-the-air requirements, that's going to require, in all likelihood, some signal take or some --

783   COMMISSIONER CUGINI: So as of September 1, 2011 you will go from 69 OTA stations to how many?

784   MR. PIZANTE: I think it would be 76.

785   COMMISSIONER CUGINI: And that will fall short of full compliance by how many?

786   MR. PIZANTE: By none. We will be in full compliance.

787   COMMISSIONER CUGINI: By none. You will be in full compliance as of September 1st?

788   MR. PIZANTE: Yes.

789   So we are clear, we are in full compliance right now, but we will be in compliance with the new rules when they go into effect August 31, 2010. That's part of the plan.

790   THE CHAIRPERSON: To put it this way, you will be offside next year, in 2011?

791   You will be offside for one year. At least that's what I understand.

792   MS RATHWELL: Not with respect to the carriage of over-the-air signals.

793   I think our discussion in Calgary was in the context of 3-to-1 compliance.

794   THE CHAIRPERSON: Thank you.

795   Okay...?

796   MR. PIZANTE: And that's another set of obligations that we have and that we are trying to stick handle as well.

797   COMMISSIONER CUGINI: Based on the conversation again that you have just had with the Chair, you said in paragraph 15 of your written submission that it took four years from the time that you wrote your Letter of Intent to Telesat for the provision of ANIK G1.

798   Are you telling us that no matter what we do today it's going to take you four years to add any new capacity, should we mandate such a rule?

799   If we say to you, "You have to find new capacity", with paragraph 15 are you telling us that even if we say that as a result of these proceedings it's going to take four years to get that capacity, if you could financially?

800   MR. PIZANTE: Well, yes, And I will need time to recover from a heart attack, because --

801   COMMISSIONER CUGINI: You can have four years.

--- Laughter

802   MR. PIZANTE: Yes, I do. Maybe I can make it,

803   Because it is $300 million is the going rate. So that was a significant investment on our part in the belief that satellite technology is going to be relevant all the way to 2028, which is the expected life of that satellite. These days that is considered maybe not the best of risks, but it's something that we believe in.

804   So yes, I guess the quick answer to your question is it does take about that long.

805   About a year and a quarter was added to that process because of the spectrum use change which, you know, was really opposed by some of the other people in this room who were actually complaining that we are under investing.

806   But it does take a long time, these are substantial upfront investments and, you know, if it's not four years as it was for us, it's at least three.


808   And you have said in your oral presentation that ANIK G1 will allow you to add up to 100 HD services.

809   Is any of that capacity being earmarked for the carriage of more OTA stations?

810   MR. BRAZEAU: I will start, and Gary can jump in.

811   As you saw from the list of Canadian services that we have added over the years, I am sure that with more capacity we will be adding more Canadian signals. That is just a given.

812   And as the Commission licenses more specialties, we will certainly examine the demand for those services from our customers, and based on what we think our customers are looking for, we will certainly increase the number of those signals.

813   And it is the same for the over-the-airs. As we think that our customers demand these services, that's what we try to provide them.

814   MR. PIZANTE: That is exactly right. We are looking -- two years from now is still a fairly long time period away. So, really, we don't have much in the way of earmarks at this point, except to say that we know that what our customers are interested in are more high-definition services, Canadian services.

815   Over the last three years we have added 60 services, many of them in HD, and 87 percent of those were Canadian.

816   So that's our general expectation.

817   COMMISSIONER CUGINI: I suppose that we are also talking about prioritizing which HD services you will carry, because when you talk about HD, the first category of services that you talk about is specialty. So are you indirectly saying to us that, with this new capacity of up to 100 HD channels, the priority will be the carriage of specialty, followed by OTA?

818   MR. BRAZEAU: I guess the priority will be -- again, based on our best understanding of what our customers are looking for, it will be based on what we think is the most feasible, given our capacity limits and our customer demands for those services.

819   It is difficult to say that half of them will be OTAs and the other half will be specialities, it is really dependent on what we think the marketplace is looking for and how can we best serve our customers.

820   I think that's really how we are going to make these decisions.

821   COMMISSIONER CUGINI: One of the things that you say in your written submission -- and I am going to quote, so you don't have to go fishing for it. It's paragraph 17. You say:

"Choices must be made in allocating limited satellite transponders to the ever-increasing amounts of available programming, both local and national. The necessity for such choices, their impacts on costs, and the associated importance of consumer demand must all be recognized by DTH regulatory policy."

822   And that, I am going to assume, is sort of a conclusion to what you are telling us right now.

823   But, more directly, if you can share with us, how does Shaw Direct make those choices today, and how do you implement those choices or plan for those choices going forward as you make your plans to increase capacity?

824   MR. PIZANTE: I can understand that we committed $300 million to build a new satellite, a lot of money, and we don't have specific plans, exactly, on how to use it. That is, unfortunately, the nature of our business -- right -- because the planning horizon is so long.

825   So you make a prudent investment, or a bet, call it what you will, that there is going to be a use for that capacity, based on the platform that you have.

826   When we make decisions, in terms of how to use our capacity -- to answer your question -- it really is based on what John said: What do your customers want? Where can we give them the most, in terms of our efforts to reduce churn, which is a killer in our business, and we are facing very able competitors, often with bundled products. What can we do to get new customers?

827   It is all about appealing to the customers -- and, of course, as well, within the regulatory framework that we work.

828   That is why I am hesitant in giving you a response, because it seems that sometimes things change in our business relatively quickly. All of a sudden there is a Sportsnet One, and everybody has to accommodate it, or your customers are going to be disadvantaged, and we can't have that. That's why we look for that flexibility.

829   3D is something that we are all looking at. We are not sure where it is going to be two years from now, but we need to be able to respond to it.

830   COMMISSIONER CUGINI: Really, the crux of the question is, if all you had to do was what you were obligated to do by regulation, it would be a really easy business to run. It's when you go beyond what you are required to do that it becomes a little bit more of a grey area.

831   And, as you know, we are sitting here and we have broadcasters saying, "We must be carried" -- you know, the case that I brought up with Bell, where the CBC says that 32 percent of its audience can't even see the CBC in Edmonton.

832   So, to help us make better decisions, we need to understand how it is that you make those choices to not carry CBC Edmonton, for example.

833   MR. BRAZEAU: Just on that point, 32 percent of customers in Edmonton are watching DTH, I grant that, if that's the number. However, they can still see the CBC. There are alternative ways to see the CBC. There is over-the-air, there is cable, and if people really want to see the CBC, they will not pick our service. They will say, "Sorry, we can't pick Shaw, and we can't pick Bell, because you don't show CBC Edmonton, and that's what we want."

834   So we will not have those people as our customers.

835   There are alternatives out there, and it's always about making sure that the customer has enough choices.

836   COMMISSIONER CUGINI: One of the things, of course, that would send up a red flag -- and you mentioned it, and talked about it with the Chair this morning. In your written submission you say:

"The policy should consider reducing the number of local signals and adopting measures by which duplicative signals could be reduced and satellite capacity used most efficiently to take on the competitive challenges of unregulated applications."

837   So, of course, when you tell us to consider reducing the number of local signals, that sends up a red flag and it is going to cause me to question what it is you are saying here.

838   MR. BRAZEAU: I think it was more in the context of allowing us to do omnibus channels on which you had a discussion with Bell Canada this morning. You talked about the requirement to carry all of the LPIF-receiving stations, and one of the thoughts we had was, if that is the obligation, then maybe the LPIF-receiving stations should be required to allow an omnibus channel, so we can rationalize some of that carriage and make sure that we don't consume too much of a very scarce resource, which is our satellite capacity.

839   COMMISSIONER CUGINI: Do you carry omnibus or partial channels now?

840   MR. PIZANTE: We do carry one news service from the CBC, from Newfoundland, and we put it on what we call our info channel. We have been doing that for a number of years, and we would be happy to do more of that. It's something that customers like.

841   But that's the only service that we do that with.

842   COMMISSIONER CUGINI: Have you engaged in conversations with other broadcasters about duplicating that service?

843   MS RATHWELL: I believe that there have been general conversations, but it is difficult, given the existence of the consent provision. Obviously, that is the biggest barrier, and there are a lot of issues, as you know, up in the air right now about the terms of carriage between broadcasters and distributors, which have, frankly, made that quite difficult and have made it a relatively slow process.

844   If I may go back for a moment to your question about that paragraph in our submission, I think, in general, as well, that it is important to -- what we are getting at, in part, is the fact that the whole system is evolving in a way that a lot more competitive pressures are being brought to bear on it, both from unregulated sources and from customer expectations arising from the desire for anytime, anywhere, flexible content, new applications, whatever you want to call it.

845   And although we, in no way, deny the fact that local broadcasting is accorded priority under the Broadcasting Act, and we believe that we currently confer priority on it, and we take that very seriously, at the same time, the whole DTH policy was constructed on a national basis, and it was done so, at the time, in the context of black market satellite.

846   We have a new sort of external threat, but beyond that it wasn't just black market satellite, it was making sure that every Canadian, anywhere in the country, could get a level of service that was equivalent to that which people could receive from a high-quality cable system in a major urban centre.

847   DTH has been tremendously successful in delivering that. Unfortunately, with capacity, particularly in our case -- I mean, the capacity story that we have provided to you is what it is. We are up against a wall with our current satellites. We are waiting until 2012, and we have to now satisfy customers who are looking to possibilities of Netflix, Apple TV, Google -- whatever.

848   I am not trying to digress, but I think we shouldn't lose sight of the fact that DTH serves very important objectives in addition to the provision of local broadcasting services, and we want to continue to be able to do that well.

849   COMMISSIONER CUGINI: But wouldn't you agree -- and, certainly, you are free to disagree, but wouldn't you agree that the DTH business -- because you cite where the DTH policy started, as a national policy -- that the DTH business has evolved to the point where it is at today because Canadians started missing the local aspect of what they were receiving on DTH?

850   Isn't it true that consumer demand is what has allowed the DTH policy to evolve to such a point where, now, we are looking at: Is there something that we can both do, as the regulator and as the business, so that Canadians -- your subscribers -- can have as much local content as they want?

851   MR. BRAZEAU: I think the answer is yes. I agree --

852   COMMISSIONER CUGINI: All we are saying is, help us get to that point.

853   MR. BRAZEAU: But I think that the earlier point, which we shouldn't lose sight of, is that there are alternatives. Somehow it seems that if the local station is not carried over DTH, that jeopardizes that station. I am not sure that is necessarily the case.

854   Again, the customers who decided to pick us -- and we are not carrying that station -- don't have a demand for that station. Often that station is a national broadcast station and, therefore, local advertising is not really what they do.

855   So I am not sure, if we carried them, whether they could really monetize that carriage. I think that, maybe, there are better ways to deal with those issues and those concerns. Maybe it's through LPIF or the Small Market Fund. I think that is a more targeted approach to dealing with perhaps the concerns that you are expressing on the financial health of the local TV stations.

856   COMMISSIONER CUGINI: Let's take an example in Ontario. Sault Ste. Marie, Timmins and North Bay stations aren't carried by either satellite. What you are saying to me, Mr. Brazeau, is that Shaw Direct is very happy not to have the people living in those three cities as subscribers. That's fine. We will just not go into those markets, and northern Ontario can stay without satellite, because they can get those either over-the-air or with cable.

857   MR. PIZANTE: In this particular case, these are the MCTV stations, right?

858   And we do, of course, carry Sudbury.

859   There is some local news on these other ones, but it's -- you know, we get that.

860   As you heard, we are open to things like omnibus channels, and we would be happy if we could get the distinct local programming from these channels, if they would cooperate, but I understand that the industry has umpteen issues between distributors and broadcasters, and this is at a certain point in that stack, which makes it very difficult.

861   But, other than that, I think it's important to note that there is very similar content from those markets. We would like to be able to serve that market with that local news.

862   The other point we would make is that because the capacity is finite -- and I think this is what we are getting at -- there is always something, to some extent, that has to be left off.

863   Since I have been working at Shaw Direct, for 10 years, our capacity has always been close to that 99, 98 percent number, and we are always creating it just as we need it in order to serve market demand. It is that tight, and market demand is that insatiable, to date. I hope it stays insatiable, because we bought a new satellite.

864   So that is the nature of it, and making those choices.

865   In terms of what we do for local -- I had never computed this number, but I take Bell at their word that 55 is the limit of these stations that we would have to carry, given the various rules. We are well above it, in part because of the reason you just said, we wanted to serve Sudbury. We didn't have to add it. We already had CTVs from Ontario. We have to watch how many CTVs we have relative to CBCs.

866   So we were able to add this one, when we decided to do it, to better penetrate that market, to keep our customers happy and that sort of thing.

867   So there is enough market dynamic here for us to make efforts and to do things in order to handle this balance.

868   COMMISSIONER CUGINI: And have you looked at the suggestion that stations that are LPIF-eligible would have priority carriage?

869   MR. BRAZEAU: The capacity is still an issue for us, for sure. However, if we are prepared to look at omnibus solutions for the carriage of these signals, then maybe that is a possibility. It is certainly a consideration that we could look at.

870   COMMISSIONER CUGINI: Would you be prepared to -- we asked Bell --

871   Have you received a copy of this list?

872   MR. BRAZEAU: Yes, we have.

873   COMMISSIONER CUGINI: Can you, by Thursday, populate this list, as Bell agreed to do this morning?

874   MR. BRAZEAU: Yes, we will.



876   THE CHAIRPERSON: Could you actually do it together with Bell, so it's on one list?

877   MR. BRAZEAU: You mean cooperate with my competitor?

--- Laughter

878   THE CHAIRPERSON: Absolutely. After all, you are all in the same industry and you know each other well. I am sure that you talk enough on other subjects.

879   If you could update this list for both of you, so that it correctly reflects where you are going to be as of September 2011, that would be very helpful.

880   MR. BRAZEAU: We will consult with Mirko.

881   THE CHAIRPERSON: Thanks.

882   COMMISSIONER CUGINI: I have been on your website and I have an Eastern Canada Programming Guide and a Western Canada Programming Guide, and I tried very hard to find the differences between the two.

883   MR. PIZANTE: Movies. The Movie Network. The pay TV networks, Corus and Movie Central and TMN.

884   COMMISSIONER CUGINI: That's it. That's the only difference between the two.

885   MR. PIZANTE: Pretty much, yes.

886   I hate to give definitive answers here, but I think so.

--- Laughter

887   COMMISSIONER CUGINI: I even went into the fine print of all the local stations and --

888   Okay, so that's the only difference. That's it. All right.

889   You talk a lot about duplicative services and how they are an irritant to subscribers. Based on these programming guides, it is obvious that your subscribers can customize certain packages. Is that also possible with the number of OTA services that they receive, beyond what is mandated by regulation?

890   In other words, if I am in Ontario, can I choose to only have Ontario-based OTA services on Shaw Direct Basic?

891   MR. PIZANTE: That's a big change for us. We are not set up for that now.

892   COMMISSIONER CUGINI: What would it take to be set up?

893   MR. PIZANTE: We are working towards that end because of the other requirements for 2008-100, to create basic packages in each province or region, the Atlantic region.

894   So we are working toward that, and that would be, call it provincial, about seven different kinds of packages.

895   After that we start getting into limitations with regards to our current billing systems, and so forth, and the management of it.

896   What are the complexities from a distributor's standpoint? When you have more packages to manage, it's just more things to teach CSRs, TSRs, more things that can potentially go wrong in the system.

897   We have chosen very simple packages -- at least, we try to make them as simple as we can. I know that it can be overwhelming sometimes, still, with all the choice that we offer, but it makes sense for us to simplify it because the operations and services, from end to end, are just that much easier.

898   That is critical, because a lot of what our business is is providing top-quality customer service. We consider it one of our competitive differentiators out there.

899   So that's something that we really work toward. When we create a package, we think about: Okay, what is it going to take to provision that?

900   That is why we prefer not to have umpteen packages. It's just more for people to take on, it's more complexity. Making the change to satellite then becomes that much more of a potential headache to consider.

901   COMMISSIONER CUGINI: But you can understand, when you come before us and talk about consumer choice, and it's all about customization, that certainly if your system was set up to accommodate this, it would minimize this irritant, as you have described it, for your subscribers.

902   MR. PIZANTE: It's a good point. I hear what you are saying. There is a balance between customization, what customers want and choice, and then what they would like from a "not making me work too hard to get there" kind of thing.

903   Everybody who is in this business takes a shot at it, and the guys who get it right, win. People learn and we evolve there.

904   To date, this has been the best way, although for most of our technology, for most of our receivers that are out there, even if you didn't subscribe to the channel, you will still see it on the IPG.

905   Now, some of the technology that we have just introduced, the MPEG-4 boxes that we talked about, they actually have the feature that you can eliminate those from your program guide very quickly, so you don't see unsubscribed services. But the other 2 million-odd receivers that we have out there, they don't have that feature.

906   So even if we came up with packages like that, we aren't going to remove the fact that they will see that there are a dozen Hockey Night in Canadas at the same time.

907   COMMISSIONER CUGINI: The only other area that I am going to question you on -- and my colleagues may have other follow-up questions -- is this whole area of simultaneous substitution.

908   You were in the room this morning, you heard Bell, in terms of how it sees its system being an advantage over yours, and I want to give you the opportunity to make the same claim and tell us why you think that virtual channel override is the superior system.

909   MR. PIZANTE: I think it is superior in that it provides the substitution like-for-like.

910   For instance, the Winnipeg customer who has to see the simultaneous substitution would see the Winnipeg station. They wouldn't see a station from Toronto -- although I don't know if Winnipeg, strictly speaking, on Bell's system, is served from Toronto or from Vancouver.

911   The point being, in that sense, it's superior.

912   It also allows us to support, at the same time, the wholesale business, which is important to us. We don't have to go at the head end, at the source, if you will, and change the service. It allows -- people can still continue to get the U.S. signal unaltered, without injecting in -- at least the way we would have to do it. Maybe Bell has different technology, but we would have to, basically, replace the service with a CTV service, which, I think, would undermine, to some extent, the wholesale business.

913   So that is something that we are not interested in doing, as well.

914   So, on the whole, VCO allows us to meet our simultaneous substitution obligations --

915   COMMISSIONER CUGINI: Albeit in a limited way, as we heard from Bell this morning, because there are markets where they continue to see the U.S. ads.

916   MR. PIZANTE: Yes. I would add, as well, that we can do -- and we do it for the independents that we carry -- we have the added requirement that we have to do Canadian-over-Canadian, and we do that, as well, for them.

917   MS RATHWELL: Just to add to that, with respect to the small market independent stations, given the extent of their simulcast entitlements under the current regime, they actually end up appearing on many, many channels that would otherwise have a distant Canadian signal on it. So it actually, I think, probably is fair to say that it really increases viewing to them and supports their local signal.

918   COMMISSIONER CUGINI: What I am hearing is that there are no plans to change the way in which Shaw Direct does simultaneous substitution. You will stay with virtual channel override.

919   MS RATHWELL: I think that we have made a decision to develop our technology that way, with a view to assisting local broadcasters within the framework, and to try to do as much as we can to respect their local programming rights when we carry them on satellite in a localized manner. We have consistently thought that that was beneficial.

920   There are different technologies, and that is back to the general principles of the conversation about how sometimes we take a slightly different approach, but I think we believe that our system is sound.

921   COMMISSIONER CUGINI: Thank you. Those are my questions.

922   THE CHAIRPERSON: Candice...


924   I want to make sure that I understand exactly how the partial and omnibus -- I am not sure if that is the same thing or two different things, frankly.

925   I heard a little bit from Bell, where they were saying that the TV guide would show the different stations.

926   I am going to use an example. Maybe we could use the example that Commissioner Cugini spoke about, with Timmins and the different northern Ontario stations, where they have a little bit of their local programming.

927   Just so I understand how that works, would they all show up as separate on your program guide, and a subscriber in Timmins could hit that and get, essentially, the CTV content with their local programming when their local programming was available?

928   Would it appear to them to be the full Timmins -- absent the local advertising?

929   MR. PIZANTE: That is not what we do today. What we do today is, I guess, more in the nature of omnibus. It would be on kind of a shared channel, and it would be listed in the IPG as we do today: Here is CBC news from Newfoundland -- "Here and Now", I guess it's called, from Newfoundland -- and it's programmed in this time slot.

930   In our most advanced receivers, you can look that out 14 days.

931   And then it is shown there with all of the advertising related to that.

932   That is the way that we would envision, I think, at this stage, carrying the content.

933   COMMISSIONER MOLNAR: Is the other way possible?

934   MR. PIZANTE: To be honest, I understand what you are saying, and we will have to get back to you on that, so I can discuss it with a few other people.

935   Just so I have it clear, you would like it so that the channel from Timmins appears on the guide, and maybe it's showing Sudbury most of the time, except, for local news, all of a sudden it would be, if you like, VCO'd to the Timmins news.

936   I will give you my quick thought.

937   You know what, I won't give you my quick thought. We will discuss it with the people who are actually responsible for doing it, and we will see if that's possible.

938   I know that the other way is possible, because we do it today.


939   COMMISSIONER MOLNAR: The other thing that I would ask is, if we assume that it is possible, what would you need from us?

940   Because you have spoken about the fact that broadcasters have not been supportive of this notion, so is there something you would need from us to create these virtual channels?

941   I suppose not from the perspective of the Shaw-Global -- whatever you might call it right now, but from other broadcasters. Is there something that would help to make that possible?

942   MS RATHWELL: I think that currently the barrier to it is broadcaster consent. So if there was a desire to have these sorts of channels, and it was feasible with respect to whatever Gary is going to investigate, broadcaster consent is always the point where we trip up, because there is a reluctance to provide -- you know, to have anything up there other than the entire signal.

943   We have always been -- notwithstanding our corporate development, we have always had questions about the need to put the entire signal up in order to make their economic model viable. That has been asserted year after year and, in our view, particularly in the case of O&Os that are part of large networks, they can probably manage with an omnibus solution for local programming, where we are unable to carry the whole one.

944   But consent has always been the issue.


946   I also wanted to validate, will you operate as an SRDU -- and I believe that you also operate as a head end in the sky -- if you do not carry the local signal that would not be available to any of the independents or small cable systems, or those that use your head end in the sky?

947   Is that correct?

948   MR. PIZANTE: You are right, it would not be available from us. But, of course, it could be available from other sources.

949   And sometimes they do mix in -- from the SRDU perspective, especially, they can mix in other services. But, yes, if we don't carry it we can't offer it. That's right.

950   There are some services that we can offer, I should say, through C-band that serves the SRDU market. It doesn't work with the HITS/QT or QT Plus product but we can serve SRDU through C-band which of course does not get used by Shaw Direct.

951   THE CHAIRPERSON: Can you say that in normal English? I didn't understand a word of what you are talking about.

--- Laughter

952   MR. PIZANTE: You know I almost got through without that happening to me.

953   So the answer is if we carry it on Ku-band which is the spectrum that we use to support Shaw direct-to-home, Shaw Direct, then of course it's available to them. If we don't carry it, then that's true.

954   It's not available in the HITS/QT or QT Plus products. These are two separate products sold by the transport business.

955   They have another product that I would call the plain old SRDU product which they could and do sell to cable operators. It's a different kind of product. It's basically plain distribution of the service.

956   And sometimes they will distribute channels to their cable market that we don't carry that is Shaw Direct through C-band which is not a spectrum that we use. C-band requires huge dishes that are infeasible from a DTH perspective.

957   I'm a lonely --

958   THE CHAIRPERSON: What is the answer? What is then the answer you said to what my colleague proposed to you? If a small cable company wants to have -- carry a station that you don't carry, can you transport it to them?

959   MR. PIZANTE: Not through Shaw Direct. Not through Shaw Direct's platform.

960   THE CHAIRPERSON: Not through Shaw Direct, okay. Yeah, but we are talking about SRDU here.

961   MR. PIZANTE: Right. So if the SRDU business wants to distribute channels that Shaw Direct doesn't distribute they can decide to do it through C-band if they want, for instance.

962   THE CHAIRPERSON: And are they doing that actually right now?

963   MR. PIZANTE: They do it for a couple. They do it for a couple.

964   COMMISSIONER MOLNAR: I am going to leave that one alone.

--- Laughter

965   COMMISSIONER MOLNAR: I just wanted to follow up on a discussion with Bell where we were talking about the fact that there is -- on the list provided there are a certain number of stations that are not carried by either and our Chair brought up the notion that is it possible to look at that list and determine, you know, a way of ensuring all of the output stations are on at least one of the DTH providers.

966   Would you like to comment on that at all?

967   MR. BRAZEAU: It would certainly require a level of cooperation in coordination with Bell that, you know, at first blush we would be reluctant to embark on. However, I think we can certainly give it some consideration and look at, you know, what would it require?

968   Just that the caution here is that the selection we have made to carry various signals wasn't really somebody flipping a coin here. You know we try to, as we said earlier, to really understand what our customers are looking for, what our customers want. And that's how we select the various channels that we offer.

969   You know if we have to give up one for another then, you know, we will have to address that through our customer base. There will be a lot of unhappy customers and I'm not sure if the amount of customers we lose in one market will be made up by the customers we gain in the market that we now serve.

970   So those would be all challenges and all considerations that we would have to examine before we could make a determination whether this is viable.

971   THE CHAIRPERSON: But look at the upside. It also means that you don't get regulated. If you produce a solution you and the business, Bell and the business, you can steal a solution so it's to your maximum benefit.

972   MR. BRAZEAU: Mr. Chairman, we are aware of that.

973   COMMISSIONER MOLNAR: Those are my questions. Thank you.

974   COMMISSIONER POIRIER: Yes, okay. I will address the first question in English and then the other one in French.

975   It's about our public broadcaster because we received many complaints and people mentioned that they feel it's not right that their public broadcasters -- it's not possible for them to view their public broadcasters where they live in Canada and they have the feeling they are paying for their public broadcasters.

976   I have been traveling throughout -- I will give you an example. I have been traveling to Saguenay and Three Rivers where CBC has invested a lot of money in their facilities and in the coverage of their news in those two cities because of the help of the LPIF.

977   So considering that CBC had invested a lot of money in those two specific areas and considering that all Canadians pay for CBC, that at least I think 30 to 35 percent of the TV viewers are DTH clients, so some are from Bell and others Shaw, considering that neither Shaw nor Bell carries local CBC in those two cities, and I'm talking about Three Rivers and Saguenay, do you feel you are offering a good client's service to those clients in Trois-Rivières and Saguenay?

978   MR. BRAZEAU: Commissioner Poirier, I will start, and maybe somebody will jump in here. I think we, in essence, are being disadvantaged by not offering those services because we don't have access to that customer base.

979   And so we come again to the same observation which is those customers who have decided to become -- or those viewers who decided to become our customers haven't made a conscious decision that that CBC Trois-Rivières is not something that they are really interested in having. If they were they would not be our customers. They would go over-the-air or they would subscribe to cable.

980   So we are being disadvantaged in the fact that we can't have access to the signing up of those viewers to become our customers. The reason is -- and again we make these hard decisions every day. If we had unlimited capacity would we serve Trois-Rivières? Absolutely. There is nothing more than Gary would like to do and Jim would like to do and signup more customers.

981   There is tremendous pressure every quarter for them to signup more customers. The only way we can do that is to try to respond to, as well as we can to what those customers are looking for, based on the limits that we have which are our capacity limits.

982   So that's why we make those decisions. Unfortunately, there will be some stations that will be left out. I mean that's just the nature of the beast.

983   COMMISSIONER POIRIER: So you are saying your customers are deliberately choosing not to view CBC because they have other means to view it --

984   MR. PIZANTE: That's right.

985   COMMISSIONER POIRIER: -- till 2011.

986   MR. PIZANTE: Well, they do have other means. It's still, you know, available over-the-air of course. I think CBC puts all their -- I'm not sure about SRC, but I know CBC puts all its newscasts on the internet which is available to anybody across the country.


988   MR. PIZANTE: All the local newscasts --

989   COMMISSIONER POIRIER: But not for a long period of time.

990   MR. BRAZEAU: But we would strongly encourage the CBC to make their transition.

991   COMMISSIONER POIRIER: Yeah, oh, yeah.

992   MR. BRAZEAU: And to convert their towers and to make sure that they, in 2011, that that station doesn't go blank.

993   And we are doing it at Shaw and we have committed to making our towers accessible to other players who would like to co-share those towers.

994   COMMISSIONER POIRIER: But the purpose of my question was not to push the -- to move the question to CBC. It was to make sure that your clients get our national broadcasters.

995   Ma deuxième question.

996   Je me suis promenée aussi beaucoup dans l'Est du Québec, dans le coin de Havre-St-Pierre et Natashquan. C'est vraiment l'Est du Québec. J'ai vu beaucoup de camions de Shaw qui faisaient des installations pour de la clientèle, et je me suis demandée qu'est-ce que les gens de Havre-St-Pierre reçoivent comme information, comme canaux francophones, tout comme ceux de Gravelbourg en Saskatchewan, parce que dans le cadre de cette audience, on a reçu aussi beaucoup de plaintes de Fransaskois ou de gens de langue française qui disent, bien sûr, être des gens qui sont des clients de Shaw et de Bell, mais qui ne reçoivent pas assez de canaux francophones.

997   J'aimerais donc, si c'était possible pour vous, en prenant l'exemple d'un client à Havre-St-Pierre et d'un client à Gravelbourg, de me dire quels services ils reçoivent en français quand ils sont avec Shaw et aussi de me dire d'où proviennent les nouvelles qu'ils voient, car on dit souvent qu'il y a une montréalisation des ondes au Québec, et en plus, la télé éducative du Québec n'est pas transportée par Shaw, alors qu'elle l'est par Bell, et Télé-Québec a aussi mentionné ça dans son mémoire.

998   Si vous ne pouvez répondre présentement, j'apprécierais que vous le fassiez pour jeudi, mais de prendre deux clients types, un de l'Est du Québec et un de la Saskatchewan.

999   MR. PIZANTE: Well, we can do it. We do carry Télé-Québec. It's been up there for nine years. I think --

1000   COMMISSIONER POIRIER: How come they say in there --

1001   MR. PIZANTE: I don't know.


1003   MR. PIZANTE: I am going to make a guess. It's because when we did our list of stations we carried, we followed strictly the staff list which was about LPIF stations.

1004   So we didn't -- you know some people wanted to get the number higher, no doubt, in this proceeding and added religious broadcasters and provincial broadcasters, Télé-Québec. We didn't add it but we carry it. So that's good news, I guess.


1006   MR. PIZANTE: And then with respect to the channels that we offer, it's a full slate, a good slate of French channels. They are from all the networks. We carry time-shifted SRC as required.

1007   It is one of the plans to add SRC Saskatchewan as it's mandated from the 2008-100 and that's one of the channels that we are working to get in place before September 1st, 2011. So that's on the plate.

1008   The French market is extremely important to Jim and I. It's a substantial base of our customers. You don't succeed in direct-to-home in Canada unless you embrace that market, and we do.

1009   Our best there it's very competitive, very aggressive cable company there, the wireless offering and so forth, but we don't shy away. And we do have a full plate offering and really we compete -- to be honest, maybe I'm going too long, but through customer service, through installation. I hope that the trucks you saw were clean.

--- Laughter

1010   COMMISSIONER POIRIER: It was raining.

1011   MR. PIZANTE: Okay.

1012   COMMISSIONER POIRIER: Okay, thank you.

1013   MR. CUMMINS: Maybe just to add to that is, you know, we really hang our hat on the experience you get with Shaw. So I'm really glad that you saw trucks out there and --


1015   MR. CUMMINS: -- and yes, we hope they are clean.

1016   But that is also a differentiator than just a channel. You know if we had the capability to add all the local channels and the capacity we would certainly, in a selective way, look at that.

1017   But part of it is the experience as well. We treat people very, very well. We are an honest company. We provide a great service and the field side is really important to us.


1019   THE CHAIRPERSON: Okay. Before I let you go, you and my colleague said there is an eastern and western feed and they couldn't see the difference. You said the only difference are the Movie Channel. All the rest of it is the same.

1020   When we are now talking about putting all the offers up, why couldn't your western feed include all the ones that you have here and delete some of the eastern feed and on the eastern feed have all the eastern ones so that people in the east get all those channels and people in the west get all those? Why couldn't you do this? It wouldn't require any extra capacity at all.

1021   MR. PIZANTE: Well, I think it would. I mean every channel we carry, we carry nationally. That's the transponders.

1022   So there is no way for us to carry -- once it's up, it's up. So if it's up as an eastern feed everybody across the country gets it as an eastern feed. If it's up as a western feed it's up as a western feed. So we don't have --

1023   THE CHAIRPERSON: I'm not sure I understand that.

1024   MR. PIZANTE: Maybe I don't understand your --

1025   THE CHAIRPERSON: You are feeding now from the east and the west, I understand, and it goes on the same transponder. And you are telling me there is no more space on the transponder.

1026   MR. PIZANTE: Right.

1027   THE CHAIRPERSON: So if you add -- it's irrelevant whether it is shown on both feeds or on one feed if it will occupy space on the transponder.

1028   MR. PIZANTE: Right. Every channel is -- east-west is a channel.

1029   THE CHAIRPERSON: Okay. Secondly, as you know, I am a Shaw customer and I heard you say that there is a bay of actually having an unsubscribed channel show up on the program guide?

1030   MR. PIZANTE: Well, you can be whenever MPEG-4 upgrades, because it comes with that technology.

1031   THE CHAIRPERSON: Oh, it's only when you have MPEG-4.

1032   MR. PIZANTE: No, no. No, that receiver has MPEG-4 capability but it also has many other advance features including that. So that is something that is -- you know we put these new features in, a longer look ahead in the guide and so on.

1033   THE CHAIRPERSON: Right.

1034   MR. PIZANTE: To give people other incentives to get our equipment.


1036   MR. PIZANTE: So that would be another reason for you to upgrade, sir.

--- Laughter

1037   THE CHAIRPERSON: Good. Okay.

1038   And if you will please update this list and, as I say, I think you have by now got the drift of the hearing and where we would like to be at the end of day and see these LPIF-eligible stations on the bird. You know, whether it's through regulatory fees or through your own actions or you don't care, that's the result. But I would like your answers so we can sort of contemplate how we get there. Okay?

1039   MR. BRAZEAU: Thank you, Mr. Chairman.

1040   THE CHAIRPERSON: Thank you. We will break for lunch now.

1041   We will resume at two o'clock. Thank you.

--- Upon recessing at 1231

--- Upon resuming at 1403

1042   LE PRÉSIDENT : O.K. Commençons.

1043   THE SECRETARY: We will now hear the presentation of FreeHD Canada Inc.

1044   Please introduce yourself and your colleagues and you have 20 minutes to make your presentation. Thank you.


1045   MR. LEWIS: Thank you, Madam Secretary.

1046   To my right, your left, is Brian Olsen, FreeHD Canada's President and Chief Operating Officer; and to my left, your right, is Linda Rankin, our Vice-President of Corporate Development.

1047   Good afternoon, Mr. Chairman, Vice-Chair, Commissioners and CRTC staff. My name is David Lewis and I am the founder, Chairman and CEO of FreeHD Canada.

1048   FreeHD Canada is pleased to respond to the Commission's request and provide its comments on the issues outlined in the 2010-488 Broadcasting Notice of Consultation, specifically:

1049   - the conventional over-the-air television stations that DTH distributors are required to offer to their subscribers; and

1050   - the manner in which DTH distributors perform simultaneous substitution.

1051   In response to your Notice, FreeHD Canada commented in our filed remarks that:

"Due to the lack of Canadian capacity, FreeHD Canada has no other choice than to seek U.S. capacity on an interim basis to meet the August 31, 2011 timing of the digital transition. FreeHD Canada cannot say at the time of this filing how much satellite capacity it will have to launch the full line-up of over-the-airs, plus pay and specialty channels. However, FreeHD Canada expects it will be able to provide an update during this Hearing." (As read)

1052   Unfortunately, our update is not as rosy as FreeHD Canada had hoped. Largely owing to a growing worldwide shortage of satellite capacity, and specifically capacity that could be useful over Canada and in time for the digital transition, FreeHD reports at this hearing that after extensive discussions with the world's leading satellite operators, insufficient satellite capacity is available for FreeHD Canada to launch in time for the August 31, 2011 digital transition.

1053   Accordingly, FreeHD Canada must delay its planned summer 2011 service launch to an anticipated launch date late in the first quarter of 2012, when we expect additional satellite capacity will be available to FreeHD Canada to serve the Canadian market.

1054   We sincerely regret this turn of events as our proposed technology platform continues to be the only one that can meet the needs of the Canadian television viewers who want to tune to their local programming network and see it in HD or SD.

1055   The current lack of satellite delivery for all the local television markets in Canada has had a significant negative impact on the viability of those stations not carried on satellite, an untenable economic situation that will only be exacerbated by the looming digital transition.

1056   Furthermore, in accordance with the Broadcasting Act policy objectives, we believe that DTH BDUs should be required to minimally carry those Canadian over-the-air stations that qualify for the Commission's previously set standards for LPIF funding before they add additional programming services to their line-up.

1057   To meet this need, FreeHD Canada has adopted a proven delivery approach for Canada that mirrors that in the United States and provides comprehensive and economic satellite delivery into each local market using spot-beam antennas on the satellite.

1058   The spot-beam satellite technology platform chosen by FreeHD Canada is designed to provide local-into-local satellite delivery to all Canadian over-the-air stations minimally carrying seven hours per week in English and five hours per week in French of local production.

1059   As was seen with the campaigns and submissions to the Commission last year in the hearings considering value-for-signal, viewers want their local television services and FreeHD sees this demand as an excellent business opportunity. We see it as a win for Canadian viewers, over-the-air broadcasters and for FreeHD Canada. Delivery of the highest quality HD content remains the other prime objective in the delivery of FreeHD Canada's program line-up.

1060   With respect to simultaneous substitution, FreeHD Canada notes that today's technology should make implementing this uniquely Canadian requirement a simple solution that should not impact consumers, over-the-air broadcasters or BDUs in any negative fashion, and should by now be a universal requirement for all BDUs.

1061   FreeHD Canada has no changes to our plans to manage simultaneous substitution (or simsub) at the set-top box, by postal code, respecting the local area coverage requirements identified by each over-the-air broadcaster.

1062   FreeHD Canada's solution is technically similar to the Shaw Direct solution, such that should the consumer tune to a U.S. channel that is carrying the identical content as that carried by a local Canadian channel, the set-top box will automatically tune to the local Canadian channel for the duration of that program event, with the exception that FreeHD Canada alone may be the only one carrying the local Canadian over-the-air broadcaster in some cases.

1063   To further ease the negative impact of foreign over-the-air programming, FreeHD Canada plans to carry only one set of U.S. signals in each market from the programming time zone of the subscriber household.

1064   If the Commission required all BDUs to adopt this approach, it would provide an additional opportunity to maximize Canadian conventional television viewership and greatly further the Broadcasting Act policy objectives.

1065   In summary, FreeHD Canada is no longer able to assist Canada's over-the-air broadcasters with distribution of local programming in time for the digital transition.

1066   We believe that without carriage on DTH, local over-the-air broadcasters cannot survive and that over-the-air broadcasters that provide a predetermined level of unique local content should be provided mandatory carriage as outlined in the Broadcasting Act and provided with simultaneous substitutions as requested.

1067   Finally, Mr. Chairman, FreeHD Canada will continue to keep the Commission informed as to its success in acquiring interim satellite capacity from the various sources around the world and of any further changes in its launch date.

1068   Now, Mr. Chairman, we would be pleased to answer any questions that you and the Commissioners may have and we thank you for the opportunity to appear before you today.

1069   THE CHAIRPERSON: Great. Thank you for your submission.

1070   What is happening in 2011 that will give you the capacity that you can't find right now? Is someone launching a satellite on which you have purchased space or something like that?

1071   MR. LEWIS: There's actually several different capacity options that we are still reviewing.

1072   In essence, what we are trying to achieve are two things to minimize the impact on subscribers, number one being a single dish that can see several parts in the sky, several orbital position slots in the sky, and also a consumer not having to repoint from where they are.

1073   So we are trying to find capacity. Our primary objective would be to find capacity that is in the part of the arc where we are going to launch the service in the long term on a Canadian facility.

1074   So if we look at --

1075   THE CHAIRPERSON: What do you mean consumers not having to repoint from where they are? You just said that.

1076   MR. LEWIS: Well, what happens sometimes in the migration from an interim facility to a permanent facility is the dish has to be repointed to see a different part of the arc or a different orbital position.

1077   THE CHAIRPERSON: Right.

1078   MR. LEWIS: In the Canadian positions there were a dozen of them granted coming out of the 2006 licensing initiative and there have been no satellites built. Nobody builds a satellite on speculation anymore, so there are no satellites coming on in the Canadian part of the arc or in Canadian slots to do what we want to do. So we have to launch on a foreign American facility.

1079   And yes, there are new launches coming up that we are going to be taking advantage of potentially and also there are some in-orbit satellites. So we may have to have a dual feed on a single dish, but our primary objective is to have a single dish and no repoint and that is what we are trying to accomplish.

1080   THE CHAIRPERSON: If the satellite is inert, why can't you buy it now? Why do you have to wait till 2012?

1081   MR. LEWIS: Well, there are a number of things that need to be built out. I am sure you heard from the other intervenors appearing today that, you know, in order to access satellite capacity you have to build uplink facilities, for instance.

1082   They take roughly a year to put together, so you would need to know kind of which frequency band you are in and what orbital position you are in in order to start all of that coordination effort and construction.

1083   So we need to find out and figure out exactly where we are going to launch, on which satellite facilities, before we could make the commitments to the transmission facilities and start that roughly one-year clock kind of ticking.

1084   THE CHAIRPERSON: I am trying to get my head around what has changed. Last time you were before me, I asked you this very question. I said, do you have capacity? You said, yes, we have a lease. Are you going to be there in time? Yes, we are going to build an uplink, et cetera.

1085   Now you are telling me you are going to be one year later and I am having trouble understanding what it is that intervened that caused this one-year delay.

1086   MR. LEWIS: Well, last spring there was a satellite failure and since then there have actually been two more in the North American part of the arc. So overall, the supply and demand in the North American marketplace has gone down considerably. So there is considerable contention for American satellite capacity.

1087   We had an agreement to launch on a satellite that had a combination of national beams and spot beams, and, unfortunately, that particular satellite had a solar string failure, so it lost roughly one-sixth of its overall capacity.

1088   It wasn't a complete write-off in terms of a complete failure, but the contention became do you serve an existing customer or do you serve a new customer that is coming on. So the capacity on that particular satellite went to serve current customers rather than new customers coming on stream.

1089   We have also had a loss of a C-band facility, a C-band satellite. You have probably read about it in the press. They are calling it Zombie Sat because it is out of control and it is going across the arc interfering with people as it goes by.

1090   But overall when that capacity loss happens, a whole satellite, 24 transponders go off, a very finite supply in the marketplace. So that has caused additional shortages. People have scrambled to get their services restored and they will take capacity wherever they can get it, be it Ku-band or C-band satellites, when something like that happens.

1091   There has been another satellite that was lost on launch recently as well. So it happens in our industry and currently the North American capacity is very tight.

1092   Several of the things that we are considering is actually bringing a satellite from outside of North America back into the North American arc and that is where probably close to half of our discussions have been with the fleet operators around the world.

1093   THE CHAIRPERSON: And sequentially, I guess, you first have to have satellites, then you will build your uplink facilities and then you launch?

1094   MR. LEWIS: Yes. Generally --

1095   THE CHAIRPERSON: You can't build the uplink facility until you know what satellite you are going to use?

1096   MR. LEWIS: You can't -- I mean we could take a risk that we are going to be in Ku-band but we don't know for sure. There are Ka-band satellites. There are extended Ku-band satellites particularly in other parts of the world. Extended Ku-band is used quite extensively in other parts of the world.

1097   So those facilities -- and we would have to know which frequency band we are going to be in before we could actually buy the long lead parts. The amplifiers, the wave guide, the antennas, they are all on a certain frequency band when you are buying them and building them. So we would need to know where we are going to be before we could start.

1098   THE CHAIRPERSON: Once you are up and launching, what will distinguish you from Bell and Shaw?

1099   MR. LEWIS: Several things from a consumer perspective and a marketing perspective, number one being much better picture quality. We intend not to compress the HD pictures as much as our competitors do.

1100   We are a new entrant, so we are not encumbered by legacy technologies. So we don't have any MPEG-2. We don't have to dual feed SD and HD. We can go right to HD on every channel right from the get-go.

1101   So much more HD channels, way better picture quality, some very unique capabilities from the set-top perspective to do video-on-demand and over-the-top video, which would make us look much more like a cable operator than a satellite operator to most people.

1102   So we think we will have quite a number of competitive advantages in the marketplace.

1103   THE CHAIRPERSON: How would you do video-on-demand?

1104   MR. LEWIS: Well, you heard this morning from the Bell evidence that they have the capability to do what is known in the industry as push video-on-demand or push VOD, and basically what you do is you partition part of the hard drive in a PVR and you trickle-stream those movies into the set-top box. So when the customer comes on and the window opens for that movie, it is actually already preloaded into the box.

1105   So you can do video-on-demand for some content, not all of it, but if you are compressing everything in MPEG-4, you already have twice as much capacity in a hard drive.

1106   We will also have a larger hard drive than anybody else has today. So we should have a lot of storage capability to do a lot more movies than what you heard described today by the other intervenors.

1107   THE CHAIRPERSON: But it would be video-on-demand as we know it right now from Rogers or Shaw? Basically there seems to be an unlimited quantity of films that you can download at any one point in time and watch. You would have a small selection presumably of the most current films?

1108   MR. LEWIS: We would probably do a combination of push VOD and pull VOD, and the pull VOD would be delivered over an Ethernet-enabled back channel, so an Internet connection.

1109   The bad news with that is depending on the picture quality that you select and your download speeds, you may have to wait for a while before you can start watching the movie. Otherwise, you are going to have -- you will get to a point where it is going to stop loading and it is going to say buffering again and you will be waiting for the movie to catch up.

1110   So depending on the picture quality that a customer wants, it is possible to do both.

1111   THE CHAIRPERSON: But to gain a new customer, you either have to get them to buy your set-top box or else if they are already a satellite customer, they have to effectively junk their existing one and buy yours in order to --

1112   Isn't there a huge start-up cost that you are facing to lure customers aboard?

1113   MR. LEWIS: Yes. I mean any direct-to-home offering is not cheap to start up. There certainly is quite a large investment in satellite facilities, transmission encoders, set-top boxes, to go into the marketplace.

1114   So yes, there is a very big requirement for financial commitments to the business. But the nice thing is once you are through a breakeven period it is a very good business to be in, good margins and quite possible.

1115   THE CHAIRPERSON: Thank you.

1116   Candice, you have some questions?

1117   COMMISSIONER MOLNAR: Thank you. Good afternoon.

1118   Just to be clear, when you launch in the -- late in the first quarter of 2012, it is still your plan to launch with all over-the-air signals that meet the LPIF requirements; is that correct?

1119   MR. LEWIS: That is correct. We would like to carry all of those. I mean we applied -- originally we were one of the reasons why the free local package became a reality in Canada. We still want to do that kind of offering and we would carry all of the channels -- our count is roughly 100 today -- that would qualify for LPIF funding in our criteria.

1120   COMMISSIONER MOLNAR: So that isn't subject to satellite capacity?

1121   MR. LEWIS: We would all launch them all at the same time. So yes, it is subject to satellite capacity as to when it is going to start, but we are not intending to launch with a smaller package and then grow it upon launch.

1122   COMMISSIONER MOLNAR: Okay, thank you. I just have a few questions related to the spot-beam technology that you are speaking of.

1123   So you know for certain, without access to the satellites that you are going to use, that you are going to deploy spot-beam technology; is that correct?

1124   MR. LEWIS: In the final design satellite, not the interim facility. The interim satellites that are generally available, there's not very many of them. I am only aware of two that might have some capacity that might be available outside of the ones that are being used by people like DIRECTV and the Dish Network in the U.S. So there aren't very many satellites that are available interim-wise with spot beams.

1125   So we would launch with everything all in national beams and then migrate to spot-beam satellite for our own purpose-built satellite.

1126   COMMISSIONER MOLNAR: And there is no time frame as to when you are going to get to your final configuration because you are still sorting that out?

1127   MR. LEWIS: That piece is a lot easier because it is a three-year construction program. So the minute we know that everything else is set and a launch date gets set for the interim, we can also start, in parallel to that, the three-year clock ticking on a new satellite construction program.

1128   COMMISSIONER MOLNAR: Okay. Talking about the spot-beam technology, just so I understand, because I think I heard Bell talking about regional spot beams, so it would be potentially similar to a province.

1129   Are you talking in your final configuration of having local-into-local on a market-by-market basis or would we be talking about something different?

1130   MR. LEWIS: It is kind of a combination of both actually. From the spot-beam perspective, we have spent considerable amount of time with satellite manufacturers over the past few years. In fact, that was my background before we started up this business. I was CEO of one of the Canadian satellite operators.

1131   So we have some experience and expertise with spot-beam satellites already that we sold to the Dish Network for their system.

1132   But the design that we are considering has provincial spots -- you are exactly correct -- and we probably wouldn't make the spot beams on the satellite any smaller than that except in the case of Ontario where we have kind of -- because there is so much in the GTA and the Golden Triangle kind of area and then there is Eastern Ontario where they would actually have different spot beams.

1133   But we would have a spot beam off the satellite that is a very efficient way of frequency re-use and things to get more spectrum out of the satellite and enables us to do what is effectively 100 local channels in about four transponders' worth of capacity, which is quite a significant engineering feat.

1134   But that capacity itself wouldn't -- from a local broadcaster perspective, we would get them to tell us which group of postal codes. So currently when they have regions that they have rights for, they will be able to tell us down to postal code blocks as to where they have their program rights and where they want us to distribute.

1135   So that is kind of done --

1136   COMMISSIONER MOLNAR: So are you talking about simsub now or are you talking about --

1137   MR. LEWIS: Exactly.

1138   COMMISSIONER MOLNAR: I am just talking about --

1139   MR. LEWIS: The two are related in this case, though, from a local rights perspective and which areas that we would actually enable that broadcaster, depending on what they tell us they have rights for and where they want us to go.

1140   If it is provincially, fine. I mean under the Regulations I think we would have the right to distribute them provincially before we trigger any compensation regime.

1141   But in terms of the negotiations I think it would be a nice useful exercise for us to be able to have a dialogue with the broadcasters and say, you give me a list of postal codes in a region and that is all I am going to sell you. I am not going to put you up in Northern Ontario where you have another sister affiliate that has the rights for that programming.

1142   So if it is Kitchener region, they can come, let's say, to Guelph, and then after that it is Toronto again, and then wherever the other affiliates are around.

1143   So even though there may be five or six affiliates of the same programming and having the same content, they would only be distributed wherever they tell us they want to be distributed. So those rights.

1144   And the technology is done by the simsub VCO kind of anyway, but --

1145   COMMISSIONER MOLNAR: Okay, thank you.

1146   MR. LEWIS: -- it is a blackout zone, in other words.

1147   COMMISSIONER MOLNAR: Okay, thanks.

1148   Would it be your plan then to sell other OTA stations in a distant signal sort of a package or just simply not make them available to those consumers?

1149   MR. LEWIS: What do you think, Brian?

1150   MR. OLSEN: No. With the spot-beam configuration, the channels will be in their region and their region only. So we won't have any -- in essence, any distant OTA signals in any particular market. We will be doing true local-into-local only.

1151   COMMISSIONER MOLNAR: And that would be the same with the U.S. four-plus-one?

1152   MR. OLSEN: That is correct.

1153   COMMISSIONER MOLNAR: So there would only be the one set of four-plus-one available to your consumers?

1154   MR. OLSEN: In any market and only one set of OTAs in any market.

1155   COMMISSIONER MOLNAR: Even if your consumers wanted more?

1156   MR. OLSEN: Well, that is the ying and yang --

1157   COMMISSIONER MOLNAR: That is fine.

1158   MR. OLSEN: It is the ying and yang of the spot-beam satellite. If you just put them in one place, that is all they are available.


1160   You were here this morning, I expect?

1161   MR. LEWIS: Yes, we were.

1162   COMMISSIONER MOLNAR: Bell made a comment about the spot-beam technology that I really am not equipped to question but I would like your perspective.

1163   When they said that spot beams work well in the U.S. but not in Canada, what is your thought about that?

1164   MR. LEWIS: It is kind of a surprising statement as to why they wouldn't work well in Canada. I mean we have built our business model and our whole design around the use of spot beams because for us it is all about trying to use spectrum efficiently.

1165   So rather than, you know -- and we heard commentary this morning and questioning about subscribers seeing a list of 10 "Being Erica" on their guide and not being able to watch them all or just the fact that they are duplicated so many times. It is not an efficient way to use a very scarce resource, satellite capacity and spectrum.

1166   So for us it is all about trying to maximize the use of that and spot beams are the way to do it. You know, for a minimal incremental cost in terms of the actual satellite itself, you can get huge efficiencies. I mentioned earlier 100 HD channels in what is effectively four transponders by doing spot beams.

1167   So it is incredibly efficient and it is the way that the U.S. has gone for the last 10 years. They have been designing satellites and deploying them both in Ku-band and Ka-band spots, and, you know, Dish Network and DIRECTV use them exclusively.

1168   It is the only way to do local-into-local efficiently without having myriads of satellites up there and multiple feeds on multiple dishes. So it is the way to go for the future and we are, frankly, quite shocked that neither Bell TV nor Shaw Direct in their recent acquisitions of new facilities chose spot-beam technology, especially when we had already announced that we were going to do that and bring it into Canada. It is quite surprising to us that nobody has taken that route.

1169   COMMISSIONER MOLNAR: Perhaps we will hear from Bell on this in the next stage.

--- Laughter

1170   COMMISSIONER MOLNAR: Thank you.

1171   I just want to turn to the issue of simsub.

1172   In your comments you filed, you said that:

"FreeHD suppliers of system hardware, software, set-top manufacturers, billing system and system integration all have simsub capability as one of their mandatory contractual requirements." (As read)

1173   Was that a difficult requirement to meet for your suppliers?

1174   MR. LEWIS: I wouldn't say it was a difficult requirement for them to meet but it was difficult for them to understand. We went to considerable lengths to educate them on why and how it is done in Canada.

1175   From a technology perspective it is not that complicated. There are basically commands that are done in a conditional access system that get passed through the set-top box and the box says, "Okay, when I'm watching this channel I'm really supposed to tune somewhere else." It's pretty well that's simple. So it kind of gets done seamlessly.

1176   Yes, there is a data flow that has to be sent out in advance to all the boxes to command it when to switch and when to switch back off of the override to where it thought it was really going to be. So it's not complicated.

1177   Yes, it ties into the billing system because you need to know where the subscriber resides. So when he's told somewhere -- just like a blackout today, it's the same kind of thing -- he has to know that he can watch that channel because he's in that area and not something else. So we need to know where the subscriber is.

1178   It's not that difficult a requirement technically, but educationally, to educate our technology providers, because we are taking advantage of basically the worldwide standard -- DVB it's called, Digital Video Broadcast group that started out and extensively used in Europe and not so much in North America, but the DVB guys had to learn about the Canadian market requirements which are quite unique.

1179   COMMISSIONER MOLNAR: Okay. I am kind of trying to understand the extent to which you have ended up or will end up with some proprietary equipment standards or otherwise simply to meet the Canadian requirement and also really how significant.

1180   I mean, it is a nice opportunity when you build new to building in all your requirements and you have no legacy or anything behind you, but how significant was this for you to meet this requirement with your suppliers and so on?

1181   You said it was difficult for them to understand, but not costly -- or not tremendously costly to meet this.

1182   MR. LEWIS: Well, I think on its face -- and I have mentioned the term several times -- it's no more complicated than a blackout request, other than somebody has to be told to tune somewhere else instead of obeying a blackout for a different region.

1183   So when we told them him what it was, you know, the first thing that they said was, "Oh, it's just a blackout". It's not really a blackout because you have to tell a subscriber to go somewhere else.

1184   Some people do it kind of in guide software and things was the way that they described.

1185   So we, in our search for technology vendors and set-top box manufacturers, every time it was an education for them to understand simsub. It was the only thing that they couldn't check the box and say, "Yes, on your product roadmap for the next five years I have it all, I have done it all". Simsub was different.

1186   COMMISSIONER MOLNAR: Okay. Let me, if I could, just ask: As you know, with the DTH providers in operation today there are two different means of simsub which have both to this date been accepted. You are using the virtual channel override, it's quite similar to the Shaw approach.

1187   What caused you to go that way instead of the Bell Canada approach to simsub?

1188   MR. LEWIS: Well, I think, several things.

1189   First, virtual channel override kind of capability is a lot easier for the broadcaster. We have been talking about the consumer and the DTH providers, but the guy who really has been impacted negatively by the technology, the head-end switching, or SSTZ I guess that Bell called it, that's a negative impact on the broadcaster.

1190   If they don't have eyeballs and have their local content -- having the CTV affiliate broadcast nationally doesn't do anything for that local guy in Yorkton, the CTV person, or Calgary. So the broadcaster can only monetize eyeballs if he has the rights in that area.

1191   So if the CTV affiliate is sprayed nationally, that doesn't help the broadcasters. Now, Bell paid a fee basically to compensate the broadcasters for the loss of that revenue for the past few years, but that's all going to be renegotiated now and head-end switching has other technical problems for it as well. VCO was the only way to go.

1192   We have an SRDU licence as well, much the same as Shaw Direct mentioned earlier. We have to be able to ignore that switch in order to be able to sell the local content programming to cable operators. That was one of the reasons why we felt that it was important for us to get all the local channels up, was because when people go digital there are going to be a lot of small cable operators and MDUs that are going to be knocked off the air as well because they are -- in the digital transition not everybody is going to upgrade their transmitters and there are going to be a lot of rural transmitters left shut down in some markets, and cable, small cable and MDUs, are going to be affected.

1193   So the number we believe is quite a bit higher than the numbers that we discussed in the last hearing in terms of overall population possibly affected. So that was why it was important for us to get the SRDU business going and virtual channel overrides would be the only way to do that.

1194   Do you have anything else to add, Brian, on SSTZ or anything? No?

1195   COMMISSIONER MOLNAR: Thank you very much.

1196   Those are my questions.

1197   MS RANKIN: I would just add that it's a question of manual versus electronic and in this day and age we chose electronic rather than a manual system.

1198   THE CHAIRPERSON: Mr. Lewis, you said something about margins. Once you are up and running margins are relatively fat in this business.

1199   You heard Bell this morning testifying they have been in this business now 11 years, they have only had one profitable year, et cetera, and painting quite different picture.

1200   MR. LEWIS: Yes, I did hear them say that.

1201   I can't comment on the validity of information that I can't see and has been filed in confidence with the Commission particularly, but I could say that they seem to have spent a lot of money in satellite facilities, much moreso than we are talking about, and they are already getting into a fleet replacement program, so they are back on a cycle of their initial satellites, and I think you heard there they described three satellites in two orbital positions and there are actually I believe -- or possibly still is, or was, another satellite that was even in there as a backup. So at different times they have had four or five satellites floating in and out of their various orbital positions.

1202   So they have spent a lot of money on satellite facilities and they have had a failure on Nimiq 2, a partial failure as well and lost basically half the capacity from the get-go and it's been declining ever since then. So they have spent a lot of money on satellite facilities, moreso than we are talking about.

1203   They have also got a lot of legacy equipment and it's possible that their margins are slim, but I can't speak to that 100 percent. I have my suspicions, but until I see what was filed in confidence with the Commission...

1204   THE CHAIRPERSON: It was not filed in confidence with the Commission, it was the Lemay-Yates report which stated -- and I read it out this morning:

"The margins achieved by Bell are in the same range as those achieved by DISH Network and DIRECTV in the U.S...." (As read)

1205   Which would suggest those are both viable businesses in the U.S., et cetera.

1206   MR. LEWIS: Yes, I believe that to be the case.

1207   I'm surprised that Bell doesn't have reasonable margins in their business and Shaw Direct just announced their 4th quarter financials and, you know, their $150 million free cash flow. So they are doing quite well on their side of the equation.

1208   So whether there is something else going on in the Bell case that is substantially different...?

1209   THE CHAIRPERSON: Two other things.

1210   Your name is FreeHD or BluSky? My briefing note said "Also known as BluSky". I don't know whether this was a joke or whether you have changed your name.

1211   MR. LEWIS: We have been considering that the brand for the public launch. BluSky would be the consumer offering.

1212   FreeHD Canada confused customers when we did our initial surveys with the name and brand recognition and things and it didn't tell -- so for us, we wanted to -- I mentioned earlier, picture quality, Blu-ray disk quality is our trademark, we want to be up in 1080P, Blu-ray disk quality, so BluSky was kind of brand that we have been talking about for launching the service.

1213   THE CHAIRPERSON: The other thing, your past history is all in satellite. I think you launched the old alpha style, the predecessor to Shaw, et cetera, so as an expert I'm going to ask you first. What struck is last month we had all sorts of hearings about broadband and how to use satellite capacity to serve remote customers, et cetera, and here today you spoke about your enterprise and bringing DTH.

1214   Does anybody combined those two? Can they be combined? Can you have on the same satellite dual-purpose, so to speak, both broadband and DTH or are those two totally separate businesses?

1215   MR. LEWIS: They can be combined, absolutely. Nobody at this point in time is doing that.

1216   A business that you know now as Xplornet was another business that I helped start and launch when I was there with Barrett and I have quite a bit of familiarity. We actually talked to Star Choice early on about 8 or 10 years ago now about exactly that, trying to use -- because they have a facility on ANIK F2 that Star Choice also shares, so it could have used a similar one-dish solution to do both broadband and broadcast. It's possible.

1217   Currently most of the broadband licences aren't in use yet in Canada, so there is 91 right on top of Bell TV is another one. So there are possibilities and absolutely it's capable.

1218   I presume that in some way, shape or form the Bell TV Nimiq 4 capacity on Ka band with their spots could be used for some form of broadband delivery. They would have to design a new dish that did both frequency bands, but there are dish designs that have done that already from the manufacturer that WildBlue uses. It does both Ku and Ka on the same satellite dish.

1219   So everything has already been designed and it's possible to do that and that would be a way to enable the broadband delivery straight on a dish for those rural subscribers that don't have broadband capability today. So it's possible.

1220   THE CHAIRPERSON: But nobody is doing it, to your knowledge?

1221   MR. LEWIS: I'm wracking my brain. I don't think anybody is doing it on a single dish in North America. There are bundled offerings that DISH Network has with WildBlue in the U.S. and I don't know over in Europe or not whether anybody is.

1222   THE CHAIRPERSON: But for a bundled offering their customers would then need to have two dishes on their roof?

1223   MR. LEWIS: Currently that's the way most of them are, yes.


1225   Well, thank you very much. Those were all our questions.

1226   MR. LEWIS: Thank you very much.

1227   THE CHAIRPERSON: Madame la Secrétaire...?

1228   THE SECRETARY: Thank you, Mr. Chairman.

1229   Just for the record, I would like to know if Mr. Gaudet Moise is in the room?

1230   He is not, so the hearing is now adjourned and we will start tomorrow morning at 8:30.

1231   Thank you.

--- Whereupon the hearing adjourned at 1444, to resume on Wednesday, November 17, 2010 at 0830


____________________      ____________________

Johanne Morin         Jean Desaulniers

____________________      ____________________

Monique Mahoney         Sue Villeneuve

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