ARCHIVED - Transcript, Hearing 7 March 2011

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Volume 1, 7 March 2011



To consider the broadcasting applications listed in Broadcasting Notice of Consultation CRTC 2011-6


Outaouais Room

Conference Centre

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 Contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is taped and transcribed in either of the official languages, depending on the language spoken by the participant at the public hearing.

Canadian Radio-television and Telecommunications Commission


To consider the broadcasting applications listed in Broadcasting Notice of Consultation CRTC 2011-6


Konrad von Finckenstein   Chairperson

Len Katz   Commissioner

Rita Cugini   Commissioner

Elizabeth Duncan   Commissioner

Louise Poirier   Commissioner


Lynda Roy   Secretary

Moïra Létourneau   Legal Counsel

Neil Barratt   Hearing Manager


Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

March 7, 2011

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Canadian Satellite Radio Inc. and Sirius Canada Inc.   5 / 33



Ben Miner    125 / 860

Amanda Zelina, The Coppertone   127 / 874

Jonathan Chandler, Amos The Transparent    129 / 882

Franz Schuller, Indica Records    141 / 982

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Undertaking   36 / 226

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Undertaking   45 / 291

Undertaking   55 / 355

Undertaking   67 / 448

Undertaking   69 / 458

Undertaking   75 / 506

Undertaking   77 / 522

Undertaking   88 / 594

Undertaking   92 / 620

Undertaking   118 / 804

   Gatineau, Quebec

--- Upon commencing on Monday, March 7, 2011 at 0914

1   THE CHAIRPERSON: Good morning. Bonjour, mesdames et messieurs, et bienvenue à cette audience publique.

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

3   - Len Katz, vice-président des Télécommunications;

4   - Rita Cugini, vice-présidente intérimaire de la Radiodiffusion et conseillère régionale de l'Ontario;

5   - Elizabeth Duncan, conseillère régionale de l'Atlantique et du Nunavut;

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   - Neil Barratt, coordonnateur de l'audience et analyste corporatif;

10   - Moïra Létourneau, conseillère juridique; et

11   - Lynda Roy, secrétaire de l'audience.

12   At this hearing, we will consider the proposed merger between the only two providers of subscription satellite radio in the country, SIRIUS Canada and XM Canada.

13   Among other things, the panel will review:

14   - the merger's potential impact on the radio industry and various ownership issues;

15   - the licensees' compliance with their conditions of licence relating to contributions to Canadian content development; and

16   - technical details, such as the compatibility of receivers for both satellite radio services and the satellite coverage of the two networks.

17   In keeping with its policy, the Commission will issue a decision within 35 days from the start of this hearing.

18   I would now invite the Hearing Secretary, Lynda Roy, to explain the procedures we will be following.

19   Madame Roy.

20   LA SECRÉTAIRE : Bonjour, Monsieur le Président. Bonjour à tous. Good morning, everyone.

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

22   When you are in the hearing room we would ask that you please turn off your cell phones, beepers and BlackBerrys as they are unwelcome distractions and they cause interference on the internal communication systems used by our translators. We would appreciate your cooperation in this regard throughout the hearing.

23   We expect the entire hearing to take one day and a half. We will take an hour for lunch and a break in the morning and in the afternoon. We will let you know of any schedule changes as they may occur.

24   Please note that the Commission members may ask questions in either French or English. Simultaneous interpretation is available during the hearing. The English interpretation is on channel 2. You can obtain an interpretation receiver from the commissionaire at the entrance of the Conference Centre.

25   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.

26   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 en français se trouve au canal 1. Vous pouvez vous procurer des récepteurs d'interprétation auprès du commissionnaire à l'entrée du Centre.

27   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.

28   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.

29   Please note that the full transcript will be made available on the Commission's website shortly after the conclusion of the hearing.

30   For the record, Mr. Chairman, I would like to indicate that number 1 in Phase II on the Agenda, IndieCan Radio, has indicated that they will not be appearing at the hearing today.

31   We will now proceed with item 1 on the Agenda, which are applications by Canadian Satellite Radio Inc. and SIRIUS Canada Inc, collectively the applicants, for authority to change the effective control of CSR and SIRIUS as part of a merger transaction.

32   Appearing for the applicants is Mr. John Bitove. Please introduce your colleagues and you will then have 20 minutes to make your presentation.


33   MR. BITOVE: Good morning and merci.

34   Mr. Chairman, Commissioners, I am John Bitove, Executive Chairman of Canadian Satellite Radio Holdings Inc., which we will just call CSR for short, and its controlling shareholder.

35   I, together with my fellow panellists, thank you for the opportunity to meet with you to talk about the proposed merger with SIRIUS Canada and the future of the satellite radio business in Canada.

36   Following the completion of this proposed transaction, CSR would then have both XM Canada and SIRIUS Canada as wholly owned subsidiaries.

37   To my immediate right is Mark Redmond, President and CEO of SIRIUS Canada and our proposed President and CEO of CSR.

38   To my left is Michael Washinushi, who is the Chief Financial Officer of CSR and the proposed CFO of the combined company.

39   On Michael's left is Michel Tremblay, Senior VP of Corporate Strategy and Business Partnerships of CBC/Radio-Canada.

40   On Mark's right is Gary Slaight, President and CEO of Slaight Communications.

41   To Gary's right is Andréanne Sasseville, Director, Canadian Content Development and Industry Relations for SIRIUS Canada.

42   Now, in the row behind me, at my right, which is your left, is someone you have never met before, Grant Buchanan of McCarthy Tétrault, who is regulatory counsel to SIRIUS Canada.

43   To Grant's left is David Frear. David is the Executive Vice-President and Chief Financial Officer of SiriusXM Radio Inc.

44   To David's left is Michael Moskowitz, who is the President and CEO currently of CSR.

45   I would now like to begin.

46   Mr. Chairman, I propose to begin with a brief overview of the transaction in order to set the scene for our discussion today.

47   We are proposing that SIRIUS Canada become a wholly owned subsidiary of CSR. It would then be a sister company to XM Canada, which is also a wholly owned subsidiary of CSR.

48   The shareholders of SIRIUS Canada would, in turn, become shareholders of CSR. CSR would remain a publicly traded company on the TSX. The major shareholders would be CBC/Radio-Canada, Slaight Communications, SIRIUS, XM and myself. There will also continue to be a public float of other shareholders.

49   No single shareholder would control CSR. It would be controlled by its nine-member Board of Directors, at least six of whom will always be Canadian and at least three of whom will always be independent.

50   If this merger is approved, the two satellite radio services -- SIRIUS Canada and XM Canada -- will continue to operate as currently licensed by the CRTC, just as they have for the past five and a half years.

51   Now, I would like to turn to the rationale for the proposed merger.

52   First of all, both of our companies have been directly affected by the 2008 merger of SIRIUS and XM satellite radio companies in the United States. As the Commission is aware, both XM Canada and SIRIUS Canada have contracts which outline the details of the relationship, including the delivery to Canadian subscribers of signals from the XM and SIRIUS satellite platforms. They also have contracts with the merged SiriusXM for operational support and for a considerable amount of their programming. The merger in the U.S. has had significant operating implications for the two Canadian services.

53   By contract, SiriusXM is required to provide a wide variety of services to both SIRIUS Canada and XM Canada. As time moves forward, this operational approach becomes much more challenging as the U.S. entities become fully integrated in respect of both operations and programming.

54   For example, SiriusXM has important operational information that it cannot share with both Canadian licensees as a result of confidentiality concerns. This inability of SiriusXM to share such information with both of the Canadian services makes it more difficult for the services to operate and to plan for the future.

55   Consumers in Canada are confused. They hear and see "SiriusXM" branding from American media, on the Internet and elsewhere. You know, many Canadians believe that XM Canada and SIRIUS Canada are already one company and that XM Canada and SIRIUS Canada are in fact the same service today, and we are not.

56   I will return to describe a number of advantages to the public that we see arising from this merger, but right now I would like to emphasize that, as Executive Chairman and majority shareholder of CSR, I am fully in support of this merger. I am pleased to report to you that the shareholders of CSR overwhelmingly approved the merger at our shareholders' meeting this past February 17th.

57   We have attached to our oral presentation copies of some of the slides that we presented at the meeting and that may be of interest to you in considering our proposed transaction.

58   It is also important to note, as I am sure the Commission is aware, that the Competition Bureau issued a "no action" letter under the Competition Act. On February 23rd, the Bureau announced its conclusion that the proposed transaction would not likely give rise to a substantial lessening or prevention of competition.

59   I will now ask Mark Redmond to give us some more historical context and talk about the proposed merger from an operational perspective.

60   Mark.

61   MR. REDMOND: Thank you, John, and good morning.

62   I am going to briefly describe the business environment in which SIRIUS Canada and XM Canada are operating today and how it has evolved since June 2005 when both our services were first licensed by the Commission.

63   There are two primary distribution channels through which we acquire subscribers.

64   The first is our aftermarket business, which includes retailers, trucking and direct-to-consumer. This channel has been important to us in terms of presenting, educating, and selling Canadian consumers on our products and service. In this area, we have established partnerships with retailers such as Canadian Tire, Best Buy, Dumoulin and The Source, to name a few.

65   The other key distribution channel includes the Canadian automobile manufacturers and is often referred to as the "original equipment manufacturers" or the OEM channel. This channel provides an integrated factory-installed solution and has become increasingly important to our business. Now all major automobile manufacturers have signed exclusive agreements with either SIRIUS Canada or XM Canada to install satellite radio receivers in their new automobiles. Today, almost half the vehicles produced in Canada are equipped to receive satellite radio.

66   Now, it is the automobile channel that we rely on most for our new subscribers. The OEM experience offers the benefit of seamless technology fully integrated with the vehicle's control systems.

67   The aftermarket channel that I spoke of a moment ago has experienced a corresponding decline in growth.

68   Since vehicle manufacturers have exclusive agreements with either XM Canada or SIRIUS Canada, there is no direct competition between the two companies in what has become our most important distribution channel, the automobile segment.

69   Instead, the greatest competitors to satellite radio are terrestrial radio, MP3 players, iPods, Internet radio and the world of wireless devices such as smart phones. It is worth noting that most of these sources of competition to satellite radio are essentially unregulated.

70   The satellite radio business is a very expensive one to operate. The retail distribution of receivers was and remains very expensive.

71   Although SIRIUS Canada and XM Canada have exceeded revenue expectations, the costs have been significant. Our shareholders have subsidized our businesses and are now carrying an overall cumulative deficit of more than $400 million. And XM Canada continues to see substantial net losses each year.

72   Virtually all of our revenues are from subscriptions and hardware sales. That should not be surprising. While the total combined subscribership to SIRIUS Canada and XM Canada is currently greater than 1.8 million, satellite radio remains a small player, as can be seen in the Commission's 2010 Communications Monitoring Report.

73   As you can see in the attached slides 14 and 15 from the report, we are part of a group of services that cumulatively attracts about a 2.5 percent share of national tuning. Even then, it is only through being aggregated with entities like pay and specialty audio services, and video services broadcast on cable and the Internet.

74   Nevertheless, while our audience may not register nationally, our customer satisfaction ratings are very high, routinely in the mid-90 percent range. However, as a truly discretionary service, we are impacted by the economy.

75   The recession clearly took a toll on satellite radio. OEM installations are our most important segment, and sales of new cars decreased dramatically in 2008 and 2009. This has had an immediate and lingering adverse impact on both the attraction and retention of subscribers. New car sales are still not back to their pre-recession levels.

76   And as you can see from the attached slide 13, also from your 2010 Report, we continue to face strong and growing competition, primarily from unregulated sources.

77   In this situation, XM Canada and SIRIUS Canada need to take steps to improve their financial situation. The proposed merger will allow both entities to compete and grow in spite of the financial challenges that confront our businesses. We are both confident that if this merger is approved, then satellite radio will have a better chance of survival in the broader entertainment environment in Canada.

78   XM Canada and SIRIUS Canada will continue to provide service to existing and new Canadian subscribers pursuant to the terms and conditions of their respective CRTC licences. The proposed merger will have no effect on the current service coverage. No Canadian subscribers will lose service as a result of your approval of this application.

79   I would like to turn it over to Michel Tremblay who will provide a CBC perspective.

80   MR. TREMBLAY: Thank you, Mark.

81   Monsieur le Président, membres du Conseil, aussi étonnant que cela puisse sembler, cela fait plus de sept ans que CBC/Radio-Canada approchait pour la première fois SIRIUS Satellite Radio dans le but de créer un service de radio par satellite au Canada.

82   Pendant toutes ces années, l'objectif de CBC/Radio-Canada a toujours été d'accroître la portée de son signal afin d'atteindre le plus large auditoire potentiel et de s'assurer que sa programmation est accessible sur le plus grand nombre de plateformes possible.

83   Pour ce faire, CBC/Radio-Canada n'a pas hésité à devenir un actionnaire important de SIRIUS, tout comme elle entend le demeurer, dans la société CSR. Cela a toujours été et continue d'être un investissement stratégique pour CBC/Radio-Canada. Cette approche s'accorde totalement, d'ailleurs, avec notre plan stratégique récemment annoncé : Partout, Pour tous.

84   Il est tout aussi important pour CBC/Radio-Canada de remplir son mandat que de s'assurer que les signaux de ses services sont sans cesse distribués de manière étendue partout en Amérique du Nord.

85   À l'heure actuelle, la programmation de six des 12 chaînes canadiennes de SIRIUS Canada est produite par CBC/Radio-Canada. Tant SIRIUS que XM considèrent la distribution d'émissions canadiennes comme un élément essentiel de la radio par satellite au Canada.

86   À long terme, l'objectif de toutes les parties concernées -- et non seulement le nôtre -- est d'inclure la programmation de CBC/Radio-Canada dans tous les services de radio satellite en Amérique du Nord.

87   Il faudra un certain temps avant que tous les détails soient précisés et mis en ouvre, mais les résultats à long terme de cette transaction s'annoncent prometteurs. C'est pourquoi CBC/Radio-Canada soutient entièrement cette transaction.

88   Monsieur le Président, Gary Slaight vous parlera maintenant de développement de contenu canadien et exposera le point de vue de Slaight Communications.

89   M. SLAIGHT : Merci, Michel. Bonjour.

90   Mr. Chairman, Members of the Commission, as you are aware, my family has had a long history of supporting Canadian cultural groups. It goes without saying that those groups have benefited immensely from satellite radio's presence in Canada.

91   Today, SIRIUS Canada and XM Canada combined contribute almost $9 million annually to Canadian content development. This is much higher than was forecast when the services were licensed.

92   Between 2005 and 2009, the CRTC licensed 251 conventional radio stations and two satellite radio services. Yet, the two satellite radio services contribute more in CCD than all of those radio stations combined.

93   In addition, many of those same recipients of CCD funds have benefited from many millions of dollars in payments in respect of copyright royalties assessed by the Copyright Board of Canada. In total, SIRIUS Canada and XM Canada have contributed more than $27 million in CCD and more than that amount again in copyright royalties by August 2010. A number of the beneficiaries of these payments have written to you in support of this application.

94   As a former conventional radio broadcaster, I find these figures to be astonishing. Clearly, satellite radio has paid its dues.

95   Mr. Chairman and Members of the Commission, your approval of this transaction will, in my view, provide the best chance for Canadian satellite radio to continue to grow, to make contributions to the artistic community and to provide competition to other forms of audio entertainment in Canada.

96   I would now like to ask Andréanne to provide a couple of examples of what our CCD contributions have accomplished.

97   MS SASSEVILLE: Thank you, Gary.

98   Monsieur le Président, membres du Conseil, bon matin.

99   Il y a plus de six ans et demi déjà, j'étais ici, participant aux audiences pour l'obtention de notre licence initiale. Je vous confirme que ces dernières années ont été des plus excitantes et intéressantes pour les services de radio par satellite et pour la communauté artistique. Je tenais à partager avec vous quelques réalisations pour lesquelles notre programme de développement de contenu canadien a certainement joué un rôle important de levier.

100   Dès le départ, et ce pour souligner le lancement de notre compagnie et l'arrivée de la radio satellite au Canada, nous avons présenté un concert, diffusé sur SIRIUS partout en Amérique du Nord, avec des artistes tels que Feist, Ron Sexsmith, The Trews et Anik Jean. Nous avons toujours suivi et appuyé leurs carrières respectives par la suite, avec des outils de promotion et du temps d'antenne sur SIRIUS.

101   Feist est aujourd'hui une artiste de renommée internationale. Ron Sexsmith, un des plus grands auteurs canadiens, sort cette semaine un nouvel album et sera d'ailleurs l'invité de notre entrevue Buzz Musical SIRIUS dans tous les cinémas au pays pour le mois d'avril.

102   Durant les dernières années, SIRIUS et XM Canada ont tous les deux établis des partenariats d'envergure avec de tierces partis tels Canadian Music Week, MusiCounts, Les Rencontres ADISQ, ainsi que l'ADISQ pour Le Gala, ainsi que L'Autre Gala.

103   XM Canada a aussi mis sur pied les Verge Awards pour récompenser un artiste canadien pour un album et pour son accomplissement paru durant l'année. Les Verge Awards font appel au public afin de voter pour leur artiste canadien préféré.

104   Nous avons aussi fait notre marque du côté francophone. En novembre 2006, SIRIUS a été la première radio à ajouter le groupe québécois Malajube à la programmation d'une chaîne anglophone américaine. Malajube a su se démarquer au cours des cinq dernières années avec des tournées aux États-Unis, au Japon et en Europe. Ils ont fait les manchettes de magazines américains et le groupe s'est vu décerner une nomination pour le Prix de Musique Polaris.

105   SIRIUS a diffusé de nombreuses performances de ce groupe sur diverses chaînes de notre service via des commandites de festivals tels que Canadian Music Week, South by Southwest et Les Francofolies de Montréal, pour ne nommer que ceux-là, ainsi que lors de nos productions de nos propres concerts. Le groupe a aussi bénéficié des vitrines d'entrevues de SIRIUS au cinéma, à la télévision et sur notre site Web.

106   Le groupe Karkwa est un autre exemple dont nous avons assidûment suivi la carrière. Comme pour d'autres, SIRIUS les a diffusés sur différentes chaînes de son service et les a reçus en entrevue sur diverses plateformes. Karkwa a été couronné gagnant du Prix de Musique Polaris cette année et a vendu un nombre remarquable d'albums hors Québec. Les tournées européennes sont fréquentes et le groupe est en nomination pour un prix Juno à la fin du mois de mars à Toronto.

107   I will now pass the microphone back to John for our conclusion.

108   M. BITOVE : Merci, Andréanne.

109   Mr. Chairman and members of the Commission, allow me to wrap up our initial remarks by summarizing what we would see as the public benefits of this proposed transaction.

110   First and foremost, your approval of this application will provide Canadian satellite radio with its best chance of survival and of providing continued service to XM Canada and SIRIUS Canada subscribers.

111   Our business will remain Canadian-owned and -controlled, with strong, experienced and knowledgeable Canadian shareholders.

112   The companies will become financially and operationally stronger and therefore more competitive.

113   Eligible Canadian content development initiatives will continue to receive the support of the Canadian satellite radio businesses.

114   World-class CBC/Radio-Canada programming will be distributed over time to a broader North American audience.

115   And Canadian satellite radio consumers will no longer be confused. The combination of SIRIUS Canada and XM Canada that Canadian consumers think has already occurred as a result of the merger in the United States back in 2008 will actually occur in Canada now.

116   My colleagues and I thank you once again for this opportunity to speak with the Commission about the proposed transaction and the future of satellite radio in Canada.

117   We will be happy to answer any questions that you may have. Thank you.

118   THE CHAIRPERSON: Thank you for the presentation.

119   Let's start with the basics, first of all.

120   We have two satellite radios, both being owned, if we approve, by CSR, as you call it, CSR being the holding company. I understand that part of the deal.

121   But what is the actual effect? Is the programming for consumers, be it an XM customer or a SIRIUS customer, going to be identical as a result of this?

122   MR. BITOVE: Mr. Chairman, if you were to pick up the services, most of the programming on the two services is similar today.

123   THE CHAIRPERSON: Post-merger.

124   MR. BITOVE: Post-merger we haven't addressed the programming of the companies in terms of what has to get done. As you could understand, there is a lot that has to get done post merger in terms of staffing, marketing, programming, everything else, and we haven't directed our minds to it yet.

125   THE CHAIRPERSON: Mr. Bitove, you are not planning a merger without addressing your mind to post-merger activities. I don't want to do the details, I want to know the big picture.

126   For instance, I am a SIRIUS customer, my son is an XM customer. Are we going to have the same on each other's radio or not? Is that going to be the net effect?

127   MR. BITOVE: There won't be a lot of difference from what you experience right now, Mr. Chair. You know, channels change all the time in terms of the programming, but essentially it is what you get today on either service today.

128   THE CHAIRPERSON: But where are the synergies for you in doing this?

129   MR. REDMOND: You know, as we look at the synergies, I think the first thing we have to do is really look at both businesses in some detail, which we haven't.

130   From a very high level we've looked at stuff like marketing. You know, we don't necessarily need to be marketing to the same retail customers that we were in the past. I think there will be some savings in the duplication of people.

131   Both organizations are relatively small in size. There are about 80 people and there is a fair amount of duplication in our personnel. Some activities like our call centres, we are both using different call centres. We should be able to find some synergies there.

132   But I really don't see a lot in the way of programming at this point.

133   THE CHAIRPERSON: But you both have asked for an administrative extension of your licence by one year so that you can absorb the merger first. But then a year hence when you come before us, there is CSR, it owns two licences or has two different --

134   Surely, at some point in time you are going to put all of this together and say, here, we have one licence, one programming committee, one program, et cetera, and by the way, the receivers will be interoperable so they can receive from either satellite.

135   That has to be the -- or am I missing something here?

136   MR. BITOVE: We specifically asked for approval on the merger to deal with the licensing issues, knowing that the licence was coming up with the year, in terms of some of the questions that you are raising.

137   Now, having said that, as you well know, we are in the programming business and we have to do what is right for the consumer side of things in terms of any benefits that will be made.

138   There are commitments to the CBC to try and include their CBC programming on the XM system -- which is more than just Canada, it's also the 10 million subscribers in the U.S. on the XM platform -- but we have not delved into how best to do that.

139   There is just an indication by the parties to try and work together and figure it out over the coming future.

140   THE CHAIRPERSON: I am not trying to get a commitment from you, I am trying to understand where you are going. You are being awfully coy here.

141   MR. BITOVE: But I don't mean to be.

142   THE CHAIRPERSON: So give me some straight business answers. Surely, you do a merger in order to have synergies to get money, et cetera. Where are the synergies coming from?

143   I assume it is coming from joint advertising, joint programming, joint customer services. And presumably there is no reason to keep two licences once you are together but have one licence.

144   If I am wrong, tell me why.

145   MR. BITOVE: Programming would probably be the smallest part of the synergies. As Mark said, there is a lot of back of house: call centre, G&A, other kinds of marketing, other kinds of things that are much bigger opportunities.

146   Mr. Chair, quite frankly, the biggest reason is competing with a lot of the unregulated in other audio entertainment options that are out there for Canadian consumers.

147   So, you know, if you said to me today, you are doing this merger to try and save on programming, believe me, that is the furthest thing from where we sit today.

148   THE CHAIRPERSON: I am not saying that at all.

149   MR. BITOVE: No, I am just trying to explain that the programming is not a priority of why we are trying to merge.

150   MR. REDMOND: You know, the number that we did say publicly on the synergies was $20 million. I can tell you that we haven't gone into a lot of detail on every line item, but probably half of it is marketing- and advertising-related of the $20 million.

151   THE CHAIRPERSON: Now, on the technology, if I understand, right now you have two different satellites, one of them stationary, one of them rotating, and your receivers are not interoperable, but in future you will have interoperable receivers.

152   Are they already on the market, are they coming on the market or where do you stand with this?

153   MR. REDMOND: To answer your question, the U.S. did launch an interoperable receiver. They subsequently synergized a lot of their programming. I think there has been very little to no take-up from any customers, both retail or OEM, on the interoperable radio.

154   At this point we have no plans of bringing the interoperable radio into Canada and we are not getting any requests from any customers or automotive partners for it.

155   THE CHAIRPERSON: The interoperable radio is an extra? I assumed that from now on every Toyota, every Ford, would have an interoperable radio so that they can receive either SIRIUS or XM.

156   MR. REDMOND: No. Today all the radios are either specific to SIRIUS or specific to XM and at this point there has been no decision on moving to one platform for all OEM partners or customers in the future.

157   THE CHAIRPERSON: But here in Canada, post-merger, CSR owning both of them, et cetera -- because if I understood Mr. Bitove correctly, a year from now when I buy a brand-new Toyota I will get an XM because that is who they have a deal with, but the difference between that or SIRIUS is going to be minimal?

158   MR. REDMOND: Correct.


160   What about the repeater stations which you have all over the country, are they dual mode, can they work for both of you?

161   MR. BITOVE: They aren't today and we are hoping in the future that there will be the ability to have an interoperable or dual receiver, which would save us obviously some cost as well.

162   THE CHAIRPERSON: Does that exist in the States already?

163   MR. BITOVE: No.

164   THE CHAIRPERSON: So that would have to be developed obviously for the U.S. market first to warrant bringing it into Canada?

165   MR. BITOVE: Yes. Yes, sir.


167   And you are making all sort of allusions to future use of your spectrum such as you use it for multi-city, weather, traffic satellite delivered by a car television service. That's at page 6 of your supplemental group. All of this, where does that stand in sort of technology?

168   Is this feasible right now? Can you do it? Are you waiting for the U.S. to sort of provide the necessary equipment for it or where do we stand on it?

169   MR. REDMOND: Some of it is feasible today and the U.S. is working on continued development around products that would enable us to provide additional data services.

170   What's available today is that if you were to purchase a vehicle that had a navigation system in it, we would have the ability to provide the traffic functionality for at least the key markets in Canada and we are working on getting a deal concluded with the U.S. on that.

171   THE CHAIRPERSON: But again everything is -- you are going to be sort of a follower in terms of the technological advancement that's made down south?

172   MR. BITOVE: I think for the most part. Sometimes we have ideas that we, you know, discuss with them, but the R&D is being led by them at quite a significant cost.


174   Let me just find that.

--- Pause

175   THE CHAIRPERSON: I'm looking for your supplemental brief which is among all these documents here somewhere. My helper will tell me in a second.

--- Pause

176   MR. BITOVE: Do you recall what in particular you are looking for?

177   THE CHAIRPERSON: Paragraph 10 on the supplemental brief. It's just I didn't understand. It starts off with...

178   MR. BITOVE: Sirius XM...?


--- Pause

180   THE CHAIRPERSON: It says:

"These five unrelated Canadian companies will own 27.9% of the voting interest of CSRHI, thus requiring the continued operation of CSRHI's programming committee." (As read)

181   It's the corollary that I don't understand, why does this require the continued operation of the programming committee, because -- so you have non-related companies owning 27.9 percent, thus requiring the continued operation of the programming committee.

182   Explain the logic.

183   MR. BITOVE: Yes. I will seek Mr. Buchanan's comments, but it's my understanding that if there is over a 20 percent voting interest by non-Canadians you have to have a programming committee.

184   Grant...?

185   MR. BUCHANAN: That's right. It has nothing to do with the fact that there is five or that those are the ones, it's just that you are over 20 percent.

186   THE CHAIRPERSON: Oh, okay. Thank you. That's where I couldn't see the connection. Okay.

187   So then you will have -- Sirius will also establish it's own programming committee as outline in the draft by-law, one that's here.

188   But then in that by-law you have this paragraph (e) which says:

"No member of the programming committee shall be a director, officer or current or former employee of Canadian Satellite Radio Holdings Inc." (As read)

189   Why? If you have joint ownership what difference does it make?

190   MR. BUCHANAN: I'm sorry. There were several differences between the two by-laws. This was a paragraph that came out that in the CSR case precludes a director of the Op Co from being a member of the programming committee?


192   MR. BUCHANAN: I'm sorry, I'm having trouble seeing you, Mr. Chair.

193   The issue there is Mark Redmond is going to be on the boards of both of the Op Co's and the desire was that he be able to participate, so in looking back at the CSR by-law sure enough there was a prohibition against the director of the Op Co being on it, but that standard language kind of died around 2003-2004. We haven't seen it in any of the ones since. It wasn't in Alliance Atlantis, it wasn't in BCE/Teachers. We haven't seen it surface since and we really couldn't understand why we had to focus so narrowly that Mr. Redmond, as the CEO of the Op Co's, couldn't participate in the --

194   THE CHAIRPERSON: You are saying exactly the opposite of what the by-law says.

195   MR. BUCHANAN: Pardon me?

196   THE CHAIRPERSON: It's exactly the opposite of what the by-law says, hence my question.

197   The by-law says as part of the governance agreement Sirius has to enact this by-law and the by-law in paragraph (e) specifies that nobody of the holding company can sit on the programming committee and I don't understand why that is there.

198   MR. BUCHANAN: Well, if we have it backwards, and if the reality is that what we want is -- the solution is that a director of the Op Co can indeed sit on the programming committee and if we have it backwards we do want to correct it.

199   THE CHAIRPERSON: I suggest you look at the by-law, Annex No. 1 attached to your governance agreement, which specifies that -- sorry, to your supplementary brief, which specifies just the opposite.

200   MR. BITOVE: I think Grant is right, Mr. Chair. If your interpretation is correct, then we made a mistake in how we worded this.

201   MR. BUCHANAN: Are we talking about the parent?

202   THE CHAIRPERSON: Madam Secretary, would you please show this to Mr. Buchanan. Let's get to the bottom right away. Give him your copy. Here is the supplementary brief.

--- Pause

203   THE CHAIRPERSON: If you look at the piece of paper I gave you, I marked with a red pen the paragraph in question.

204   MR. BUCHANAN: Yes. And I'm looking at which --

205   THE CHAIRPERSON: Paragraph (e).

206   MR. BUCHANAN: Yes...?

207   THE CHAIRPERSON: Why that --

208   MR. BUCHANAN: I'm looking at (e) and where is the --

--- Pause

209   MR. BUCHANAN: I understood we were talking about the director at the Op Co level. You are taking about CHRSI.

210   THE CHAIRPERSON: Okay. Let's look at what we are talking about here.

211   MR. BUCHANAN: You are talking about the parent company.

212   THE CHAIRPERSON: We are talking about the programming committee --

213   MR. BUCHANAN: Yes.

214   THE CHAIRPERSON: -- and it says you may not have on the programming committee an officer, director, current or former employee of the holding company.

215   I saw that and I said why. It didn't make sense to me. But there must be some rationale why you put that in.

216   MR. BUCHANAN: Well, give me a minute to check. May I come back to you on that, Mr. Chairman.


218   Now, your board is two members of Sirius, two members from yourself, Sirius XM, two members from Bitove, one by Slaight, one by CBC and three independents. I understand how the independents are being nominated.

219   Two of them, you nominate one and CBC/Slaight nominate one. What if there is a deadlock, if the two nominate --

220   MR. BITOVE: There is no deadlock, Mr. Chair. We actually have a very good short list of candidates. We would be even willing to share it with you in confidence. We are just trying to make a finalization of who it is.

221   THE CHAIRPERSON: I'm a lawyer, I always have to think worst case scenario.

222   You have three now, one of them resigns, the remaining two nominate new independents, as I understand it. What if there is a deadlock? It doesn't seem --

223   MR. BITOVE: Oh, you are saying in the go-forward after these three?

224   THE CHAIRPERSON: It seems to be you don't have an anti-deadlock position, at least I didn't see one.

225   MR. BITOVE: Mr. Buchanan...?

--- Pause

226   THE CHAIRPERSON: Anyway, you are coming back tomorrow, Mr. Buchanan might take all these points under advisement and then clarify them tomorrow.


227   THE CHAIRPERSON: The third one is that you have defined independent director. You referred to the security documents and that's fine.

228   It just occurred to me that one of the originally nominated directors, nominated by Sirius XM, could fit that definition and therefore do dual duty as both an XM nominate and being independent.

229   That's not the intention?

230   MR. BITOVE: That's not the intention.

231   THE CHAIRPERSON: So we might want to put a provision in there to make it quite clear that the nominee originally appointed by Sirius XM cannot qualify under circumstances.

232   MR. BITOVE: We would be happy to clear that up. Being a public company we have to make sure the independents are independent.


234   And when you come to the veto rights, I notice you don't have a definition of "ordinary course of business" and I really don't quite understand why you don't do that.

235   As you know, in all the other provisions, whether it was a Bell transaction, Globalive, et cetera, we more or less standardized what we think is an independent -- an ordinary course of business. I don't know why you didn't incorporate that definition in yours.

236   MR. BITOVE: Again, I will seek Mr. Buchanan's counsel on this point.

237   MR. BUCHANAN: Mr. Chairman, we did propose a definition of "ordinary course" -- that was in our reply to deficiencies on December 30th -- which was identical to the BCE definition, but for several words which were related to -- which historically have not generally been subject to approval by the person's board of directors. That had to come out because of the number of matters that were the subject of the board of directors in this case.

238   THE CHAIRPERSON: But, Mr. Buchanan --

239   MR. BUCHANAN: Yes...?

240   THE CHAIRPERSON: -- we do this all the time, we have done it on much bigger transactions than yours and we said "ordinary course of business" so that there can be no problem, "this is the definition". Bell has no problem with it; Globalive, they have no problem with it; Shaw had no problems with it, or Canwest when they bought, et cetera.

241   Why on earth are you fiddling with that edition now when we are coming to this relatively small merger? I don't get it.

242   I mean, it is established. The titans of your industry have no problem with adopting it and you want to fiddle with it.

243   MR. BUCHANAN: Well, I think you would have to look at what were the items which were subject to approval by the particular board of directors, but this is really going to be an issue that we will take away with us and come back to you on.


244   THE CHAIRPERSON: As I say, we think this is sort of pretty straightforward stuff and we spent a considerable time developing the precedent, so I look forward to your comments.

--- Pause

245   THE CHAIRPERSON: Now, the other thing is, I have noticed that in the governance agreement when you deal with these veto rights you have the issue that put there -- I don't know. If you look at Schedule A, the special consent right, the seventh bullet you are talking about that you don't want obviously any indebtedness about money over a certain amount, but the way it is worded it says it would not in the -- that the issue of such securities occurring essentially could not exceed $50 million in the aggregate.

246   Where are you standing right now? Does that mean any indebtedness right now would trigger this or not? I mean since it says "in the aggregate" it takes in all previous ones so it doesn't tell me at all what is actually the amount that can be incurred without triggering this clause?

247   MR. BITOVE: Mr. Chairman, I have to give you compliments on your drafting vetting, but the principle that we have agreed to -- and it's somewhat consistent with the current CSR documents where there were special consent rights -- that basically anything in aggregate over $50 million the significant shareholders had a right to approve.

248   By "aggregate" we meant at that point in time if there was more than $50 million in debt. We didn't mean over the lifetime of the business if you have issued more than $50 million in debt.

249   So there is a special consent right that if we are issuing $50 million -- if we are issuing new debt in aggregate amount is over $50 million, then there is a special consent right.

250   THE CHAIRPERSON: In aggregate of what? Let's say you issue new debt of $20 million, do you need consent or not?

251   MR. BITOVE: Only if the total debt is over $50 million at the time.

252   THE CHAIRPERSON: Exactly. That's my point.

253   So I don't know whether this clause means that for any kind of indebtedness you need consent or how close you are, because I don't know when --

254   MR. BITOVE: It's supposed to mean if that total puts us over $50 million then the special consent right kicks in.

255   THE CHAIRPERSON: Okay. Well, where are you standing right now?

256   MR. BITOVE: We are --

257   THE CHAIRPERSON: Both debt or security issues, that's most of the trouble.

258   MR. BITOVE: Okay. Currently XM Canada -- Sirius Canada has no debt; XM Canada, Michael has.

259   MR. WASHINUSHI: XM Canada has approximately $120 million of debt.

260   THE CHAIRPERSON: So this clause means no more further debt without XM Sirius consent?

261   MR. BITOVE: Correct.

262   I will have you know just we are in the market right now refinancing this debt. We have worked out a term sheet which Sirius XM has signed off on it and as part of the proposed transaction we are refinancing the business at better rates than what we have currently as a standalone entity.

263   THE CHAIRPERSON: Yes, but you are not raising -- but whatever it is you are refinancing it.

264   MR. BITOVE: Correct.

265   THE CHAIRPERSON: It still means that there is no further debt without XM Sirius consent and no further issues of security either with XM Sirius.

266   In the future, once you are very healthy, et cetera, that may change.

267   MR. BITOVE: Correct.

268   THE CHAIRPERSON: Okay. Now, you know again that our normal procedure is 5 percent of the enterprise value, which is $26 million.

269   MR. BITOVE: Yes. I think that -- I knew you were going to ask this question because it dealt with the CRTC before on this issue.

270   I think what we tried to do -- and if you apply the 5 percent to the four or five monetary items that are listed in the schedule there is a couple that would go our way and a couple that would not go our way.

271   I think that given the fact that we have negotiated this and, more importantly, Mr. Chairman, given the fact that our shareholders voted in support of the agreement on February 17th, our preference is, if you would allow us, is to live with the deal we negotiated as opposed to applying the 5 percent, which will, on some items, work to our advantage and on some items not work to our advantage.

272   THE CHAIRPERSON: Obviously I'm not concerned about the ones that work to your advantage.

273   What you are basically telling me is the new company, the merged company, cannot raise any debt or issue any security without the foreign shareholders consent. That's what these clauses boil down to?

274   MR. BITOVE: Yes, sir. At the time right off the bat, but if we pay down our debt it's a different story.

275   THE CHAIRPERSON: Everything else in your agreement sort of you have no problem at all in terms of voting rights, et cetera, but then you put this fairly significant restriction on your ability to run the corporation, wouldn't you say?

276   MR. BITOVE: I don't know. I think that we have had a great relationship with them, they understand business. We are hoping that we are in a stronger financial footing that we can start paying down debt instead of incurring more debt.

277   THE CHAIRPERSON: Okay. Let us reflect on it. Anyway, you have confirmed my interpretation of those clauses.

278   Then the other thing is, you are probably going to pass me on to Mr. Buchanan again, but this document is supposed to be executed in counterparts, which is fine, we all know how counterparts work, but I just wanted -- for instance, section 3.3 has in square brackets:

"... this is only applicable to Sirius XM."

279   I understand that, but presumably the three copies that are being signed are all identical, that clause will be in each agreement. You will have three copies that will be signed by each one of them, because you are signing -- five or whatever, you have in counterparts. When all counterparts have signed it becomes effective, I appreciate that, but they will look identical.

280   Staff informed me that actually section 3.3 will only appear in the Sirius agreement, not in the agreement of the others.

281   I trust I was misinformed?

282   MR. BITOVE: Mr. Buchanan, I don't know if there is any comment.

283   I think what you are saying sounds like we would be complying with what is expected, but I just want to make sure that our legal counsel -- and we have a lot of them here --


285   MR. BITOVE: Half of Toronto's law firms are working on this deal so I want to make sure that they understand the question exactly.

286   MR. BUCHANAN: Yes. It would be helpful if the one that drafted this clause were here.

287   THE CHAIRPERSON: Let's go to page 10, okay, of the --

288   MR. BUCHANAN: I have it.

289   THE CHAIRPERSON: You see paragraph 3.3. Clearly it's a paragraph that you put in there which is only to make sure that Sirius adopts the by-law. Fine, I have no problem there -- or sets up the committee.

290   But presumably this section 3.3, the paragraph on top in square brackets is only there for sort of an information item, but each execute a copy of the counterparts of this agreement will continue this clause 3.3?

291   MR. BUCHANAN: That's my understanding, Mr. Chairman. I will confirm it for you as soon as I check.


292   THE CHAIRPERSON: Good. Okay.

293   Lastly, Mr. Bitove -- and this time you can't turn to Mr. Buchanan, this is between you -- when this was approved by the FCC and the DOJ, they imposed all sorts of special conditions. One of them was a price cap for the next three years of whatever the prices were then. One of them was new programming package à la carte, one of them was there should be interoperative radio receivers and then there was one for open access.

294   What about those? Are they automatic flowing through? Are you automatically going to do the same thing here or what?

295   MR. BITOVE: I don't think any of them are applicable in our situation, Mr. Chairman. I think even in the three years from when that merger was approved the audio entertainment world is moving at warp speed.

296   You know Mark, the one thing I really like about working with Mark is he certainly understands the consumer side of things and at the end of the day we are competing significantly against unregulated competition which in a lot of cases people can get for free. So our pricing is really governed by the marketplace and we don't need any special rules in terms of what would happen there.

297   The à la carte, the open access, all that stuff, I mean we are --

298   THE CHAIRPERSON: Let's go sort of one by one.

299   MR. BITOVE: Okay.

300   THE CHAIRPERSON: À la carte, why not? I mean surely if there is anything that is consumer friendly it's à la carte.

301   You know, right now I'm a Sirius customer, I love Sirius, I think you have a great program, don't get me wrong, but I get a lot of stuff that I don't want. If I could pay less and only get the stuff I want, I would love it. I'm sure every consumer would be in exactly the same position.

302   MR. REDMOND: To be honest with you, we haven't even thought about à la carte. I can't even remember the last time I had a discussion with anybody in the U.S. in regards to à la carte.

303   We think offering our subscribers 120 channels at one fixed price is a pretty compelling offer. We have subsequently changed our offer in Québec to try to address some of the market concerns there in regards to the French offer in totality, we have moved it down to $9.99. But we are also operating with a very low RPU so we have to balance the revenue impact versus the consumer impact and, quite frankly, today we have very little -- we offer a music only package if somebody wants to churn out and we have very, very little take-up on it.

304   THE CHAIRPERSON: Have you not raised prices recently?

305   MR. REDMOND: I'm sorry?

306   THE CHAIRPERSON: Have you not raised prices recently?

307   MR. REDMOND: We have not raised our core subscription price since we launched at $14.99. We raised our secondary box price from $7.99 to $9.99 about a year and a half ago.

308   THE CHAIRPERSON: The U.S., from what I have here, it says that:

"À la carte to be offered within 3 months of the mergers." (As read)

309   Are they actually offering à la carte in the U.S. today?

310   MR. REDMOND: I don't know. I believe they are.

311   THE CHAIRPERSON: Please speak up. Identify yourself.

312   MR. FREAR: I'm David Frear, the Executive Vice President and Chief Financial Officer of Sirius XM Radio.

313   We have launched à la carte service in the U.S. We did launch it on the Sirius platform in compliance with the merger order conditions about 3 months after the transaction.

314   We have not made it available on the XM platform due to technical issues, but making it available on both platforms was not a requirement of the voluntary conditions that we set forth in getting the FCC's approval.

315   The consumer uptake for à la carte has been very low. I believe that out of our 20 million subscribers less than 20,000 have chosen à la carte.

316   THE CHAIRPERSON: But you continue to offer it at least on one of the services?

317   MR. FREAR: Yes, we do.

318   THE CHAIRPERSON: All right.

319   MR. BITOVE: Mr. Chair, from an XM Canada perspective -- Michael Moskowitz is here as our CEO -- we continually are in market testing different pricing and packages with the consumer and what we have found is keeping it simple, the one price, one offering is what's easiest to execute, not only in terms of marketing materials explaining it to the consumer, but also the technology of being able to block out channels up to the satellite, into the car receiver, and so forth.

320   So there is a reason why the business model has continued to be the one-price package and that's because the consumer seems to like it because it's easiest.

321   As Mark said, it's not a big RPU, it's not like in cable where you could be at $150 for a triple premium gold package versus $45 for basic.

322   THE CHAIRPERSON: But your U.S. counterpart offered this -- offered in quotation marks I presume. As a former Commissioner of Competition I know how volatile these offers are -- but was being offered the same way as the -- I'm sorry, the gentleman from the U.S., the interoperable radio receivers you were supposed to offer them within 9 months of the confirmation of the merger.

323   Are you offering them in the U.S. right now?

324   MR. FREAR: We do have an interoperable product that is available at retail, it's a radio called The Mirge, M-I-R-G-E. It has seen less commercial interest from consumers than the à la carte offering.

325   Essentially you can get all of the channels of each service but, as Mark has described in these proceedings, that for the most part the channels are largely similar, the differences are around the sports and some of the talk and entertainment content which in the U.S. is available through the "Best Of" package.

326   So you can get, in the U.S., all of the XM platform programming that has historically been available to XM subscribers and you can get a package of channels from the Sirius side for an extra $4 a month or a total price of $16.99 U.S. The interoperable product would allow you to get all of the channels, but it's two subscriptions, $12.95 each.

327   So since the consumer can fundamentally get all of the channels for $16.99 there is really no reason for them to buy the interoperable radio and we have, I believe less than 10,000 subscribers on that product.

328   THE CHAIRPERSON: What about the open access, which I understand basically means it allows -- let's take Sony or somebody -- to produce a radio and you have to make your technology available to them that can receive the satellite signals and then, you know, while I own a Sony radio in my car I can subscribe to XM also?

329   That's how I understood this open access provision to work.

330   MR. FREAR: The technology has always been open access. We pointed that out to the FCC in the course of our work with them.

331   The fact is that satellite radio, while it has been I think a very successful service in North America on a global scale it's not a very big business. So if Sony is going to enter into a new product, they are looking for a billion dollars a year in revenues and there simply isn't enough demand for satellite radio for somebody in the consumer electronics business to take our intellectual property and build it into their product and it's just not a big enough market.

332   You do find many people that do include pieces of the software, it has always been there, I'm not quite sure why the FCC wanted to include it.

333   THE CHAIRPERSON: What about the mobile devices? What about iPods, iPads, Tablets and other things. People seem to use them as a primary interface and also to use as a source for music.

334   Could for instance Apple ask you for the technology and then build it into an iPad so that on my iPad I can listen to XM as well?

335   MR. FREAR: They could. It's very costly of course. In the U.S. business that we provide subsidies for each radio, something we call subscriber acquisition costs that average out to about $60 per unit, so something equivalent to that would have to go into the cost of making an iPad 2 with a satellite radio in it.

336   Most manufacturers are trying to keep their bill of materials costs down and then you have a reception issue on top of it, that if you want the signal from the satellite you have to have an antenna that is actually able to see it. Now, you know, if you are sitting in your living room with your iPad your antenna isn't going to have a clear view of the sky and won't receive the satellite.

337   So in mobile devices the thing that makes a little more sense than incorporating radio satellite technology is manufacturers are incorporating application interfaces for our Internet service, so through your broadband router, your iPad, across its WiFi connection, it goes to the router and simply picks up the service from the internet, if you subscribe to that.

338   THE CHAIRPERSON: Does that exist right now? Is there an iPad application for Sirius, for instance?

339   MR. REDMOND: Yes, we have one for the iPad, one for BlackBerry and one for Android available to our current subscribers.

340   THE CHAIRPERSON: A Canadian one as well as the U.S.?

341   MR. REDMOND: Yes.

342   THE CHAIRPERSON: And the same for XM?

343   MR. BITOVE: The same with XM Canada.

344   THE CHAIRPERSON: Okay. What about the third point, third party access for SDR's capacity?

345   The U.S., obviously, was very concerned with minorities, African Americans, Hispanics, et cetera. In this country the primary concern is, obviously, Aboriginals. Are you willing to make something equivalently available in Canada?

346   MR. BITOVE: We did, on our own, offer up Southeast Asian programming, which was something novel at the time on the XM system.

347   I think we are continually looking at ways where we can find subscriber interest to add subscribers.

348   THE CHAIRPERSON: I am particularly concerned about First Nations, because they live in remote places, so satellite makes a lot of sense, et cetera.

349   I know that right now anything you program has to be original, but let's assume that we gave you permission that it doesn't have to be original, it could be a mélange of existing First Nations stations, to form a consortium, or to put it together somehow. If we said fine, then still they would need capacity on your system, et cetera.

350   I see that you offered something like this up in the States, and I don't see why the same thing couldn't be done here.

351   MR. REDMOND: In the case of Sirius, we have used some of our CCD moneys toward Aboriginal Voices Radio and have helped them with some programming.

352   It hasn't gone up on our service, because the ultimate issue is: How are they going to get the receivers.

353   We have tried to work with them on developing programming that they can put up over their networks, and we will continue to do that.

354   THE CHAIRPERSON: You are not answering my question. You have done it in the States, and I would like to see ---

355   MR. BITOVE: Mr. Chair, can we take it under consideration?


356   THE CHAIRPERSON: Very much so.

357   As I say, think of what I have just said. We are strictly concerned with First Nations, and we would be willing to consider waiving the original requirement, just so it would be available.

358   And, then, obviously they can get it from satellite or from your repeater station, or whatever.

359   MR. BITOVE: Okay.

360   THE CHAIRPERSON: Rita, I think you have a lot of questions for these folks.

361   COMMISSIONER CUGINI: Yes, thank you, Mr. Chairman, I do.

362   Good morning.

363   MR. BITOVE: Good morning.

364   COMMISSIONER CUGINI: I am going to start my questioning with a couple of follow-up questions, based on your conversation with the Chairman, and I am going to go back to the question he asked initially, and that is the issue of having two licences post-merger.

365   What I didn't hear in your answer is: What are the advantages of continuing with that structure going forward?

366   MR. BITOVE: The honest answer is: We have not done a deep dive of everything this company should be doing post-merger. We know that we are up before you in a year with respect to the licence. We know what our conditions of licence are today. We are not asking to modify or change any of those.

367   Mark and his team are going to -- programming is just going to be one more aspect of something they have to look into -- what, if anything, should change.

368   COMMISSIONER CUGINI: Okay. Mr. Bitove, in your closing remarks you said something which struck me. You said that the approval of this application will provide Canadian satellite radio with its best chance of survival. The word "survival" jumped out at me. What is in jeopardy?

369   MR. BITOVE: It's a sensitive word, but it's intended --

370   COMMISSIONER CUGINI: It's a strong word.

371   MR. BITOVE: It's a strong word, but it's also -- and, you know, I don't --

372   Reality is, when you are in the technology game, you are continually changing what it is you have to do to survive.

373   When I first approached XM eight years ago about coming to Canada, there were no iPods, MP3s, iPads -- everything else that is out there. I think what we are seeing -- and we are extremely proud that Sirius/XM has gotten 20 million subscribers in the U.S., but there are people who thought it would be at 40 million or 50 million by now.

374   As David said, one of the things about our business versus terrestrial radio is that there is a huge cost component of getting receivers into consumers' hands. It is almost like the wireless game, the subscriber acquisition cost.

375   And that's one of the reasons why we finally decided to get this thing merged. Five years from now, where are we going to be? To take on all of the audio entertainment competition that's out there, we are better off being together to fight this than being apart.

376   COMMISSIONER CUGINI: Of all of those things that you mentioned in terms of competition, what keeps you up at night?

--- Laughter

377   MR. BITOVE: We may have two different answers, so I will let Mark go first.

378   MR. REDMOND: They all keep me up at night.

379   Just to reiterate what John said, five years ago, when we were licensed, there was no iPhone. Today, the iPhone provides audio entertainment to millions of people.

380   I was meeting with Ford a year ago, and they said to me, "We are going to start integrating Pandora internet radio into our vehicles."

381   I said, "What?"

382   They said, "Yeah, we think that our customers are going to want this moving forward."

383   As John mentioned, the landscape that we are operating in from a competitive standpoint has changed dramatically in the last five years, it has changed a lot in the last year and a half, and my expectation is that it is going to change some more in the next four or five years.

384   All of these products and services are threatening to us, and we just have to continue to try to find our niche and continue to try to find value in what we are bringing to our subscribers, both from a cost standpoint and a content standpoint.

385   COMMISSIONER CUGINI: When will internet radio be available in cars?

386   MR. REDMOND: It is now.


388   MR. REDMOND: Yes.

389   MR. BITOVE: A lot of OEMs -- and, Michael, feel free to jump in -- a lot of auto manufacturers are trying to give access to WiFi or wireless data in their vehicles today.

390   MR. MOSKOWITZ: Just to reiterate, every automotive manufacturer that we deal with has told us numerous times that they want to give consumers choice, and by choice, that means give them a plethora of various technologies that they can choose on the dashboard.

391   One of those is satellite radio, but there is a host of other technologies that they are investing in today to enhance the experience in the car, and those are all competitive environments for us, very, very competitive, and they weren't here five years ago, it was just satellite radio.

392   MR. REDMOND: I think that the other big issue for us is that we are also competing with them on price, and the majority of them are free, or a very low amount if you want to listen to ads.

393   And not only are we competing with terrestrial radio, but now we are competing with tens of thousands of radio stations from around the world being delivered via the internet.

394   So it's the product, the content and the pricing.

395   MR. BITOVE: Just one more anecdote; one of the most shocking things that I found in the business was: Here we are trying to grow our install base, and I thought we would be in a lot more vehicles out of the gate than we were in.

396   I am proud to say that, in five years, half of the vehicles produced in Canada have either Sirius or XM.

397   But the iPod came out, and MP3s, and within two years there were more audio jacks that the OEMs provided in their cars for those guys than there were for us, and we are paying the OEMs to get in their cars.

398   MR. MOSKOWITZ: It's almost 100 percent.

399   MR. BITOVE: So that's what we mean by the competition out there.

400   COMMISSIONER CUGINI: I am also going to continue with another area that was started by the Chairman, and then we will move on to more specific questions -- the technical issues.

401   Currently, XM and Sirius continue to operate on two different satellites. Correct?

402   MR. REDMOND: Correct.

403   COMMISSIONER CUGINI: And that will continue for the foreseeable future?

404   MR. REDMOND: Correct.

405   COMMISSIONER CUGINI: So the result of this merger is not necessarily going to be any additional satellite capacity.

406   MR. REDMOND: Correct.

407   COMMISSIONER CUGINI: In terms of the content itself, because of the merger in the United States there were duplicative channels, and some of those duplicative channels were eliminated.

408   Is that going to be the case in Canada?

409   MR. REDMOND: As it relates to the Canadian channels?


411   MR. REDMOND: Again, we have not made any programming decisions as of yet as they relate to Canadian channels and what and how it will be done after the merger.

412   Again, we have to continue to look at what is, obviously, best for our subscribers. We do research and try to understand what they are asking us for.

413   At the same time, we have contractual obligations today that we have to continue to fulfil, and hopefully we will be back here in front of you a year from now talking about our conditions as they relate to this.

414   COMMISSIONER CUGINI: So, if I understand this all correctly -- and correct me if I am wrong -- all of these programming decisions, all of these issues that deal with the Canadian produced channels, you will sort through these post-merger, but before you file your licence renewal applications.

415   MR. REDMOND: Other than, in the normal course, we are continuing to modify and change our Canadian programming where we see fit, to address current market needs, and we will continue to do that. But any harmonization, additions, et cetera, would clearly be at our licence renewal.

416   COMMISSIONER CUGINI: I am an XM subscriber because it came in my car. So, when I am listening --

417   MR. BITOVE: Not because we are better?

--- Laughter

418   COMMISSIONER CUGINI: It just came in my car.

419   I guess I don't have a choice.

420   MR. REDMOND: There you go. No, you don't have a choice.

421   COMMISSIONER CUGINI: I don't have a choice.

422   When I am listening to the stations on XM between post-merger and licence renewal, will there be any difference?

423   MR. BITOVE: There may be; there may not.

424   As Mark said, we are going to respond to what the consumer -- what is best for the business.

425   We have made an undertaking to the CBC to try and incorporate them, but I can assure you that there is not going to be a wholesale change, where, all of a sudden, one day you will wake up and all the Canadian channels you listen to will be different.

426   I think there would be some tweaking that may take place for the most part, but we know that we are up before you in a year, and we know what our conditions of licence are, in terms of what we have to live by.

427   COMMISSIONER CUGINI: You did speak in your oral presentation about some customer confusion, and I understand that because it is all branded Sirius/XM in my car. How do consumers know they are listening to a Canadian service?

428   MR. REDMOND: The PDF information tells them the channel and what is playing on it, but at the end of the day, unless they have our channel guide in front of them that shows the Canadian listing, whether they have gone online --

429   But we do know, for a fact, that we have Canadians and non-Canadians listening to our Canadian programming all throughout North America.

430   We get e-mails, we get feedback, and they are from all over.

431   I would like to also add that there is a channel change that will take place at some point in the April/May timeframe, which will affect the U.S. and Canadian channels, and some synchronization on some of the work that has been done over the last couple of years.

432   So if you are used to seeing something on Channel 100, it may be on Channel 120.

433   COMMISSIONER CUGINI: I guess your point there is, that would have happened regardless of the merger.

434   MR. REDMOND: Correct. Absolutely.

435   COMMISSIONER CUGINI: Just as an aside, I found it interesting that when Ms Sasseville -- you were talking about The Verge Awards, and I thought: Okay, did I hear that in my car? Or, I think I heard a promo for it on conventional radio.

436   I couldn't quite --

437   Or, are there Verge Awards in the U.S., as well?

438   So I must have heard it on conventional radio.

439   All right. I am going to move on to compliance with conditions of licence questions. Both XM and Sirius have very similar conditions of licence, and both companies appear to be in breach of some of those conditions of licence.

440   My first set of questions will be directed to CSR. It seems that you were in non-compliance with the required CTD contributions in 2009 and 2010, and I know in a letter accompanying your 2009 annual return you stated that CSR needed to pursue a cautious approach to managing, operating and liquidity risk, mainly due to the stagnant or declining automobile sector with which the company is closely aligned.

441   Now, obviously, everyone gets what happened during that period, but, as you know, it's a 5 percent commitment, and the beauty of a percentage commitment is that it can vary as your revenues vary.

442   So why the shortfall in CTD contributions?

443   MR. WASHINUSHI: As we noted in our letter, given the uncertainty with the economic conditions at the time, and currently, we really wanted to take a cautious approach with respect to our cash resources, to make sure that the business had adequate cash resources to fund the business.

444   But going forward, it is our intention to actually be caught up on the CCD spends. In fact, we have specific plans in place that get us caught up for our deficiencies by April of this year.

445   COMMISSIONER CUGINI: By April of this year.

446   MR. WASHINUSHI: Yes.

447   COMMISSIONER CUGINI: Would it be possible for you to file that plan, in confidence if necessary, with the Commission?

448   MR. WASHINUSHI: Yes, it would be.


449   COMMISSIONER CUGINI: And I am sure that our legal counsel will give you the date by which you need to file that.

450   You also seem to be in non-compliance with the 50/50 split between French and English-language initiatives, and that was during the broadcast years of 2006, 2007 and 2009.

451   MR. WASHINUSHI: That is correct, and our expectation is to balance those by the end of the licence period.

452   COMMISSIONER CUGINI: Was there some kind of difficulty in meeting that requirement that we should be aware of?

453   MR. BITOVE: For the most part, it comes down to programming requests by artists, or institutions, or whatever. Some years you get more from one than the other, but as Michael said, over the course of our six and a half year licence, it will be allocated 50/50.

454   COMMISSIONER CUGINI: And will you be in compliance with that requirement by April 1st, as well?

455   MR. BITOVE: Not by April 1st; by the time we come up for renewal we will be.

456   COMMISSIONER CUGINI: By the time you come up for renewal.

457   Again, can you file with the Commission a plan that will outline how you will do that?

458   MR. BITOVE: We can Commissioner, but understand that there will be allocations, and again it comes down to requests, particularly from artists and artistic groups.


459   COMMISSIONER CUGINI: I understand.

460   MR. WASHINUSHI: Again, Commissioner, it will be April 30th, in terms of getting caught up on the CCD spend.

461   COMMISSIONER CUGINI: April 30th, not April 1st?

462   MR. WASHINUSHI: No, April 30th.

463   COMMISSIONER CUGINI: Okay. But you will file that timeline with us.

464   MR. WASHINUSHI: We will.

465   COMMISSIONER CUGINI: All right. Thank you.

466   MR. BITOVE: Just to be clear, you want two plans: caught up by April 30th, and caught up with the French component by the end of the licence.

467   COMMISSIONER CUGINI: That's right.

468   MR. BITOVE: We will.


470   Now, I guess I should have asked this as the very first question, which would have made more logical sense to me --

471   MR. BITOVE: I am waiting for you to ask Gary Slaight a question.

472   COMMISSIONER CUGINI: Oh, that will be happening, don't worry.

--- Laughter

473   COMMISSIONER CUGINI: The 5 percent, of course, is based on gross revenues, so the question is: What are the criteria you use in establishing that base?

474   In other words, what do you include in your calculation of gross revenues?

475   MR. WASHINUSHI: In the calculation of gross revenues, we include the subscriber revenues that we collect from our subscribers on a monthly or annual basis. We also include the activation fees. We include any termination fees that consumers would pay if they disconnected.

476   The only revenues that we exclude would be revenues directly related to the selling of hardware receivers to consumers.

477   COMMISSIONER CUGINI: Sirius, can you tell me what is the basis on which you calculate your gross revenues?

478   MR. REDMOND: Subscription and hardware sales.

479   COMMISSIONER CUGINI: You do not include activation fees?

480   MR. REDMOND: No.

481   And we have been in dialogue with Commission Staff on our interpretation of our condition, and I expect that we will come to some resolution with Staff in due course. We have been in dialogue with them over the last couple of months.

--- Pause

482   MR. REDMOND: Just subscription, sorry.

483   COMMISSIONER CUGINI: Now, your CTD contributions -- you seem to be in non-compliance for the years 2007, 2008 and 2009. In your letter, dated January 26th, you said that you should be permitted to make up shortfalls in CTD expenditures related to any particular broadcast year with special make-up disbursements the following year.

484   Your current COLs do not allow you to do that.

485   MR. REDMOND: I appreciate that and I think -- first of all, putting it in context, we spent over $20 million in CCD contributions at Sirius Canada over the last five and a half years, and the challenge for us -- and we have tried to highlight this to the Commission -- is that, unlike traditional radio broadcasters, ours is based on our revenue, and trying to project what our revenue is going to be, month in and month out, is obviously challenging. We don't know the actual results until the end of the month.

486   What we have tried to do is, by the end of the broadcast year, if there is any shortfall -- and there have been a couple of hundred thousand dollars on amounts in the $5 million to $6 million range -- we make it up in the first three to four months of the next broadcast year.

487   So I wouldn't say -- I guess, technically, we are not in compliance, but we think that we have done a very good job in trying to manage this, given the fact that our business is not based on last year's revenues, it's based on actual revenues, and we don't have the final numbers until the end of a month or a quarter.

488   COMMISSIONER CUGINI: Did you want to add something, Mr. Buchanan?

489   MR. BUCHANAN: I was listening to it, thinking: I think we are the only ones left standing with anything like this.

490   I think you have corrected this problem for all of your television licensees. Radio pays a flat amount.

491   So the only person left trying to go through the gymnastics of figuring out what your revenues are going to be at the same time as figuring out what projects are going to come to fruition, on exactly that day, August 31st, is us. With everybody else --

492   The typical scenario, of course, is that you base it on last year's revenue, not this year's, so we lock in the number we are trying to shoot for.

493   Then, you also give everybody 5 percent over or under, to allow them to recognize that sometimes you think you have a project and it falls apart in August, and then you end up with a shortfall.

494   So everybody has been fixed except us. That's what we are left with, and I would hope that we would correct that at the next licence renewal. I think it's just a legacy issue.

495   But you are quite correct, as we stand here now, that's the way the rule reads. It used to read that way for all of your television, specialty -- everybody had that, and we gradually got rid of it for everybody, because we recognized that it was really a problem every August.

496   COMMISSIONER CUGINI: So you are saying that we can expect, in your licence renewal application, for you to be asking us to change that wording again?

497   Because I think you did ask for it once before, in 2007, and we denied the request.

498   You will ask for that same change in the next condition of licence?

499   MR. BUCHANAN: That was actually a different issue. The earlier one had to do with the hard and fast amount of $1.2 million and so on. That was really a different issue.

500   But we could file this before our licence renewal. We don't have to wait until our licence renewal, I just assumed that you would amalgamate them.

501   THE CHAIRPERSON: Why didn't you make it part of this application?

502   If that is a legacy issue, that should be corrected. Why didn't you make it part of this one?

503   MR. BITOVE: Just priorities, Mr. Chair. It's just something that hasn't come up until --

504   THE CHAIRPERSON: Well, you have until tomorrow morning to throw it in the mix, if that's something you want to do.

505   MR. BITOVE: All right.

506   That list is growing.


507   COMMISSIONER CUGINI: Again, for Sirius, you also seem to be in non-compliance, like CSR, with the 50/50 split between French and English-language initiatives, for the same years.

508   MR. REDMOND: Not that I am aware of, unless it, again, has to do with the hangover from month or quarter.

509   MR. BUCHANAN: Commissioner Cugini, what has happened is, we have an ongoing dialogue with Staff, and there are exchanges of correspondence that are not all on the record of this proceeding.

510   All that happened was, there was one payment to Musique Action that was misfiled as a payment to FACTOR. As soon as that was corrected --

511   The payment actually did go to the right place, it was just logged as having gone to the wrong place. As soon as that was corrected, there never was -- it was just an error. The payment never went -- it was always a 50/50 split. We were in compliance.

512   COMMISSIONER CUGINI: All right, thank you.

513   My final area of questioning, which should go rather quickly, is the independent programming committee. I know that you did discuss some of those points with the Chairman, but is it my understanding that you will continue to have two separate programming committees, one for Sirius and one for XM?

514   MR. BITOVE: If that is your desire, we will. We would prefer to have one, but if you think we should have two, we will consider two.

515   COMMISSIONER CUGINI: That raises a couple of questions. What would be more efficient?

516   MR. BITOVE: I think our preference would be to have one, because they could coordinate better, in terms of, you know, if there were differences between the two services. If there were a "best of" package to be offered for either-or, they could play with it all.

517   We did discuss internally that we would live with two, but we would prefer one.

518   COMMISSIONER CUGINI: There are two bylaws that have been submitted to us, the CSR current bylaw and the Sirius draft bylaw.

519   I am going to give you more homework.

520   MR. BITOVE: Yes, you are.

521   COMMISSIONER CUGINI: Can you file a harmonized --

522   MR. BITOVE: If you would allow us to file: If it was one programming committee, this is how we would comply with it. We would prefer that, because other than the number of who should be on it, there are issues like allowing Mark to participate on it. So we would indulge to do that.


523   COMMISSIONER CUGINI: Okay. That way we could make an informed decision. We would have the two before us, as well as a harmonized version of your bylaws.

524   Thank you, Mr. Chairman, those are my questions.

525   MR. BITOVE: Thank you.

526   THE CHAIRPERSON: Before I ask my other colleagues if they have questions, I suggest that we have a ten-minute nature break. Thank you.

--- Upon recessing at 1040

--- Upon resuming at 1057

527   THE CHAIRPERSON: We are waiting for our secretary. Okay. She is here so let's begin.

528   Rita, I believe you had finished.

529   Len...?

530   MR. BITOVE: Just before we do, Mr. Chair, if I could ask -- sorry, Mr. Katz -- clarification on the debt question that you were probing earlier today. I'd like Mr. Washinushi to explain because I was wrong and I apologize.

531   MR. WASHINUSHI: So Mr. Chair, I'd like to direct you to the section that indicated special consent rights, Roman numeral VII.

--- Pause

532   THE CHAIRPERSON: Roman number VII? Mine has only bullets.

533   MR. WASHINUSHI: Okay.

534   THE CHAIRPERSON: Do you mean Schedule A, the special consent rights?

535   MR. WASHINUSHI: Yes.


537   MR. WASHINUSHI: It might be the seventh bullet.

538   THE CHAIRPERSON: The seventh bullet, okay.

539   MR. WASHINUSHI: Which is starting with, "The incurrence of any debts for borrowed money".

540   THE CHAIRPERSON: Yes, right.

541   MR. WASHINUSHI: And so your comment was the aggregate of $50 million given the company has had some financing the merge entity would not be able to do additional financing.


543   MR. WASHINUSHI: I would like to direct you to the third line which in parentheses says:

"There is a carve-out other than any indebtedness or refinancing of the indebtedness existing at the time of closing and inter-company indebtedness and working capital facilities not to exceed $10 million." (As read)

544   So this specific parenthesis carves out any financing activities that we were planning to do at the time of closing of the merger.

545   MR. BITOVE: So to answer your question --

546   THE CHAIRPERSON: Whoa, whoa.

547   Run that by me again, slowly.

548   MR. WASHINUSHI: Okay. So this parenthesis carves out the fact that we --

549   THE CHAIRPERSON: There are two parentheses. Do you mean the first one or second?

550   MR. WASHINUSHI: I mean the second one.

551   THE CHAIRPERSON: Are we looking at the same text?

552   MR. BUCHANAN: I don't think you are. I think, Michael, you're reading out of the XM notice, aren't you, because the one that is filed with the Commission doesn't have that language in it at the back of --

553   MR. WASHINUSHI: I am referring to our management information circular and I'm also referring to a document that I think is coming out of our share purchase agreement.

554   THE CHAIRPERSON: I can only deal with a document you filed. You filed with me something called the "Governance Agreement" which calls up a Schedule A and the Schedule A sets out the consent rights.

555   MR. BITOVE: Yes, it is the same wording and Michael and I were going to confirm it with our legal counsel in Toronto this afternoon, corporate counsel who is not part of Grant or Steven's teams but our understanding is the $50 million carve-out is additional debt beyond the debt incurred by the company at the time of the merger.

556   THE CHAIRPERSON: Okay. Point me to -- is the wording the same? Read it out and tell me where the carve-out starts.

557   MR. BITOVE: I am sorry, Mr. Chair?

558   THE CHAIRPERSON: Seventh bullet starts:

"Incurrence of any indebtedness from borrowed money including guaranteeing indebtedness of another party or the issuance of any debt or securities by permission or any direct or indirect subsidy of the corporation other than inter-company indebtedness and working capital facilities not exceeding $10 million excluded debt which, when combined with all incurrences or any indebtedness for borrowed money including guarantees of third-party indebtedness or issues of debt as securities by the corporation or any direct or indirect subsidy of the corporation other than included debt that would exceed $50 million." (As read)

559   I don't see any reference to outstanding debt here at all.

560   MR. BITOVE: Can we submit that we believe that somehow -- and I'm sure it's our fault -- you have incorrect wording of what is both in the information circular and what is in the agreement. So we want to file with the secretary the proper wording.

561   THE CHAIRPERSON: I just read you out what I have.

562   MR. BITOVE: Yes.

563   THE CHAIRPERSON: And the one I have it concurs exactly with your conclusion that it means -- it's once you reach $50 million of any kind of debt you need the consent of the shareholders which, by implication means that any action of yours, any budget or whatever you do, needs the consent of the foreign shareholders.

564   If that's not to see it I'd like to see the revised text. Give it to Madam Secretary. She can make photocopies.

565   MR. BITOVE: Right there. It's in our information circular.

566   We apologize. We'll get that cleared up right away.

567   THE CHAIRPERSON: Bring it in there. Have her make a photocopy and bring it here, okay.

568   In the meantime, Len, you do your questioning and I'll come back to it when I get a photocopy.

569   COMMISSIONER KATZ: I may as well just build on it by asking a more general question that will probably contain it.

570   When exactly would Sirius XM have a veto on the annual budget of the company? There are references to when there are certain board members that have not been appointed but if you can be more specific with regard to the veto to the annual budget because, basically from my perspective anyways, debts and borrowing is a fundamental part of a budget process.

571   MR. BITOVE: Mr. Buchanan, are you up to speed on it?

572   MR. BUCHANAN: I am catching up. The special consent -- are you still on the special consent section, Commissioner Katz? What are you reading from?

573   COMMISSIONER KATZ: All right.

574   MR. BUCHANAN: I'm sorry. What...?

575   COMMISSIONER KATZ: The question is under what scenarios would Sirius XM, the U.S. investor, have a veto over the annual budget of the merged company?

576   MR. WASHINUSHI: To answer your question, under the scenario where Sirius XM would have -- we would require approval in terms of the annual budget, would only occur if a number of conditions happened:

577   - One is the shareholder's equity interest is equal to a greater than 22.6 percent. That's Sirius XM's;

578   - Shareholding voting interest is less than its equity interest;

579   - And if either of the shareholder nominees Sirius XM has not elected to the board at any meeting of the shareholders of the corporation, at which the director ought to be or removed from the board of corporations.

580   Under those scenarios that is when that annual budget requirement would kick in.

581   THE CHAIRPERSON: But if all the directors from XM Sirius are onboard, nobody has been removed, then you're telling me they have no say in the -- they have no veto over the budget?

582   MR. WASHINUSHI: That is my understanding of the wording there, yeah.

583   COMMISSIONER KATZ: What if Sirius XM removes their appointees from the Board if there is some dispute and they no longer have a board representative on their own volition? Do they then have a veto over the budget, the annual budget?

584   MR. BITOVE: It is not my understanding, Mr. Commissioner. It's only if we remove them.

585   COMMISSIONER KATZ: Okay. And that's clear in the governance documents?

586   MR. BITOVE: It should be. If it isn't we will clear it up.

587   COMMISSIONER KATZ: Okay. I want to go back to the reference to the word survival that you dealt with in the past because it twigged a concern in my mind as well. There is no guarantee obviously in any business, especially competitive businesses and in some cases competitive businesses that are unregulated even more so.

588   But I read over your MD&A that you issued for this last quarter and I'll just quote a reference in there at the top of page 3. You are referring to the merged operation that you announced. You said:

"The combined company will have a total subscriber base of over $1.7 million." (As read)

589   You subsequently corrected it this morning and said over $1.8 million.

"On a trailing 12-month basis for the year ending August 31st [which was six months ago] the combined company has pro forma revenues of approximately $200 million, pro forma adjusted EBITDA excluding stock compensation expense of positive $3.7 million and expect to have long term debt of at least $150 million." (As read)

590   And then you go to on to talk about synergies which, Mr. Redmond, you referred to as being somewhere in the $20 million range to the extent you can capture it right now on an annualized basis.

591   So it leaves me to believe that somewhere you've got a going concern here as a merged business and, in fact, it looks like based on the trend analysis that I looked at for five years for both XM and Sirius, it looks like you are quickly coming across that magic line anyway, notwithstanding the merger. But that's terrific from that perspective for the companies.

592   My question is, and going back to the Chairman's comments this morning regarding pricing and why in a competitive market where one would assume prices can only go down, not up, are you not prepared to make some sort of recognition to consumers that maybe you can cap their prices for a period of time as you go through this transition, as you realize these synergies, particularly when competition only provides more choice and drives prices down and not up.

593   I recognize you may have some extraneous costs like copyright increases and some others that you passed through recently. But that's the way the U.S. agreement was struck, I guess, or the offer was made. I'm just wondering why you wouldn't be prepared to come up with a similar proposal for consumers in Canada.

594   MR. BITOVE: Look, we will discuss this as a team and come back, but I think at the end of the day the market is more competitive than when the U.S. got -- when the U.S. merger was approved and price regulation in this category doesn't seem logical.


595   COMMISSIONER KATZ: Well, I am not suggesting price regulation. I'm suggesting as what happened in the U.S., an offer was made by the applicant to the FCC, that as part of the agreement they be prepared to unilaterally offer up some degree of support to consumers, saying that in the short term at a minimum, this will not result in increased costs to you as a result of a sector coming together notwithstanding.

596   And I appreciate the fact there is other competition out there and it's an unregulated environment as well, but competition only drives prices down from my perspective, not up, unless you have costs that are uncontrollable that come into play from somewhere else which I can appreciate and understand may have to be passed through.

597   MR. TREMBLAY: But that -- isn't there enough safeguards if you say that prices are likely to go down than up, like what would be the value of a cap in that context?

598   COMMISSIONER KATZ: I guess it would be a comfort from the applicant before us, saying that they recognize the fact that a merger will result in only one provider of satellite radio services in the classical sector sense that we licensed it five years ago and it would be something that obviously would be seen in good light by the public if not by other people as well.

599   MR. TREMBLAY: Okay. We will take this under advisement.

600   COMMISSIONER KATZ: You referenced in your supplementary brief, I think, or in some of the questions that came back about exclusivity of sports and the value of exclusivity of sports and the fact that in a merged corporation there would be less of a need to compete for those rights as well.

601   I'm just wondering, Mr. Bitove, given your other businesses that you operate as well, DAVE Wireless, whether you see those exclusivities being flowed through to the wireless industry as well where if you're a customer, a one year customer or another and you get exclusive rights to these things.

602   I don't want to get into vertical integration because it's a topic, for a different topic, but I'm just wondering whether there is something that you have thought about or whether you entered into any agreements right now in that regard.

603   MR. BITOVE: Mr. Katz, no, there is nothing that's been contemplated and I think, at the end of the day, the leagues make sure that they separate those categories to maximize their revenues.

604   COMMISSIONER KATZ: Okay. Just on the topic of governance, and now that we are on the topic of DAVE and Moblicity, the governance rules for DAVE are slightly different than the governance rules for your proposal here. Can you provide us with some insight as to why given you -- the principle in both of these they are different?

605   MR. BITOVE: Different partners, different negotiations, different arrangements.


607   MR. BITOVE: I think, Mr. Katz, also -- I mean the original deal we struck with XM was six, seven years ago and things change in terms of what are big issues, what are not big issues between partners in terms of, you know, what needs to be preserved.

608   So I think that, you know, if I was starting two new companies today and then come before you, they would probably be very similar on the governance. But given the time lag between the different companies it's kind of to be expected.

609   COMMISSIONER KATZ: Okay. I was looking at your financials for both XM and Sirius and obviously Sirius is a privately-held company right now so the data is not necessarily readily available.

610   And when I look at them I noticed that the programming costs are uniquely different as a percent of revenue in each one of them. Is there something different about the business model in both of them that would result in programming costs in one of the companies being probably two or three times the multiple of revenues that the other one is?

611   MR. WASHINUSHI: Yes. One of the key reasons is the inclusion of the license agreement we have with the NHL where CSR burdens a significant cost of that license and approximately in those financial statements there is about $4 to $4.5 million of licensing costs in the programming line.

612   COMMISSIONER KATZ: Okay. So, if you normalize that and remove that then there is some --

613   MR. WASHINUSHI: Yes.

614   COMMISSIONER KATZ: -- that it makes sense?

615   MR. WASHINUSHI: Yes.

616   COMMISSIONER KATZ: Okay, that is fine, then.

617   Just going back have you got copies of the annual -- the references that you want to talk to the Chairman about?

618   THE CHAIRPERSON: I see where the problem is now. The version that you had given me has the wording "at the time of closing" in it which are not here but which are obscurely referenced through a footnote, et cetera.

619   So I suggest you file with us with a final version of what this --

620   MR. BITOVE: We will, and we apologize for the misunderstanding.


621   THE CHAIRPERSON: But as a result of this you are telling me, in effect you can raise up to $50 million or issue shares up to -- before the special consent right of Sirius XM kicks in.

622   MR. BITOVE: Correct.

623   THE CHAIRPERSON: And that's in the aggregates -- $50 million post-closing.

624   COMMISSIONER KATZ: Over and above the 150 or whatever you are raising now?

625   MR. BITOVE: Correct.

626   COMMISSIONER KATZ: So you can go as high as 200 million before the U.S. shareholder has got any veto?

627   MR. BITOVE: Correct.

628   COMMISSIONER KATZ: And that's for the core business or non-core business?

629   MR. BITOVE: It's for everything. It's for the combined entities.


631   THE CHAIRPERSON: Just to clarify, Mr. Buchanan, you might want to do some drafting clarification here. I presume the 10 million refers to working capital?

632   MR. BITOVE: It does.

633   THE CHAIRPERSON: Yeah, it does so in this version. It doesn't in the one that you filed so that in effect you right now have working capital of 10 million, if I understand it.

634   COMMISSIONER KATZ: Those are my questions, Mr. Chairman.

635   THE CHAIRPERSON: Louise...?

636   COMMISSIONER POIRIER: Oui. I will ask most of my questions in French so I appreciate if you put on your translation device, please.

637   Bonjour, Messieurs. C'est la première fois que j'ai le plaisir de vous rencontrer, et j'aimerais ajouter quelques questions aux questions qui ont été posées par ma consoeur Rita Cugini.

638   La première traite de la diversité, parce que, bon, la plupart des gens supportent, bien sûr, la transaction, mais je note quand même que l'ADISQ, qui est un joueur important du côté de la radio francophone, a certaines restrictions. Entre autres, elle s'inquiète beaucoup sur les répercussions sur la diversité musicale, et c'est ma première question.

639   Est-ce que vous envisagez d'uniformiser votre offre de canaux canadiens anglais et français sur les deux réseaux et quand comptez-vous le faire si vous avez l'intention de le faire?

640   MR. BITOVE: As we have said before, we don't know what our future programming is. Programming is fluid, it is not static. It is usually here by consumer demand.

641   We know we are up before you within a year. We think we will have a better idea by then exactly what the programming should look like going forward.

642   MR. REDMOND: I would like to just add that I hope ADISQ appreciates that we have made significant changes to our French programming as recently as a couple of months ago. We changed on the SIRIUS side two of our French channels to now be 100 percent French music, which we think is an industry first and I hope ADISQ sees the benefit of that.

643   CONSEILLÈRE POIRIER : Je vais donc être encore plus précise. Je suis surprise, d'abord, de voir qu'il n'y a aucun plan précis pour la programmation. Mais actuellement, du côté des canaux canadiens, il y en a 12 qui sont offerts sur SIRIUS et 15 qui sont offerts sur XM.

644   Est-ce que, d'ici le prochain renouvellement de votre licence, vous avez l'intention d'uniformiser les canaux canadiens ou est-ce que votre intention est de garder les 27 canaux différents sur les deux chaînes?

645   MR. REDMOND: As we said earlier as it related to the English as well, we have not made any decisions regarding the harmonization of our channels. We will be addressing that over the next year through our administrative extension and we will continue to operate under our current conditions, which is, as you know, a 9:1 ratio on Canadian to non-Canadian.

646   MR. BITOVE: I think also, Madam Commissioner, let's give the programming committee a chance to look at the full channel line-up, to look at what the research indicates. You know, some of our strongest channels that we have that Canadians listen to are Canadian-produced channels. CBC is a very strong one as well, CBC One.

647   So I think let's get the programming committee going. Let them understand what the listenership is like, what the contractual commitments are like and make decisions in what is in the best interest going forward for the subscribers.

648   CONSEILLÈRE POIRIER : Mais je tiens quand même à préciser que cet organisme-là supporte votre transaction à condition qu'on maintienne la diversité -- une chose qui est importante aussi pour le CRTC, surtout quand il s'agit de diversité canadienne -- et, deuxièmement, que l'ADISQ supporte aussi la transaction à condition que vous gardiez les deux comités de programmation.

649   Et tantôt, vous avez ouvert la porte à dire, bien, peut-être qu'on décidera, et je le comprendrais, pour des raisons d'affaires et de simplicité, d'avoir un seul comité de programmation, mais quand vient le temps de répondre à la diversité, les deux comités de programmation peuvent être très importants.

650   Je soulève donc la question de l'ADISQ, qui a écrit qu'elle était d'accord parce que vous étiez supposés, dans votre mémoire, garder les deux comités de programmation, et voilà que, aujourd'hui, vous nous dites, vous êtes prêts à en garder un seul.

651   Alors, quelle est votre position réelle? Parce que l'ADISQ vous supportait à condition q'il y en ait deux.

652   MR. BITOVE: In answering Commissioner Cugini, what I said was we would like you to consider doing one instead of two because then one can look at the full plethora of programming and decide what is best.

653   Let me give you a contrarian approach to why some may say, well, just combine all the channels into one.

654   Once the programming committee gets going under Mark's direction, they may decide that offering the best of packages on either offering is something where there is a benefit to maintain differences in channels between the two programming line-ups so that we can offer more channels to the consumers on either service.

655   So I think to preclude that we know what we are doing with programming and that there is going to be -- you know, that it is all going to become one or it is all going to be part of the synergistic play off the bat is not correct.

656   At the end of the day we have subscribers to be accountable for, we have a business model to work what is best.

657   In some cases maybe it does make sense because channels are so similar to combine them as one and spend more money on programming whatever content that is. In other cases it may be better to keep them apart and offer them on each other's service as a complementary.

658   So we haven't gone through it and it is very complicated and the programming committee hasn't even considered it.

659   If, Commissioner, you feel that we should keep two separate programming committees, we will. If you think it is best to let one look at all the channels and decide what is best, we would do that too.

660   CONSEILLÈRE POIRIER : C'est une question d'information, celle-ci.

661   Vous semblez jouer un rôle important dans la musique émergente. Pouvez-vous m'expliquer comment vous jouez ce rôle-là dans le développement et le support de la musique émergente?

662   MR. REDMOND: Well, in both French and English we have channels that are designated for independent artists and we think in both cases, both SIRIUS and XM, we are doing a tremendous job in trying to develop and support Canadian independent musicians and artists.

663   This afternoon you are going to hear from a couple, so I will let them tell you directly.

664   But, you know, we will continue to support that initiative and we think we have done a very good job up to this point.

665   MR. BITOVE: Mr. Slaight?

666   MR. SLAIGHT: I was actually going to ask Andréanne to talk about it as she is the person who deals directly from the SIRIUS perspective with the Canadian talent.

667   MME SASSEVILLE : Madame, si vous me permettez, pour poursuivre ce que monsieur Redmond a dit, effectivement, on en a fait une priorité, côté musique émergente, et on a des chaînes, autant sur SIRIUS que sur XM, qui sont dédiées tant à la musique indépendante, mais aussi il y a une très grande place qui est faite à la musique émergente. Ça, c'était une priorité dès le départ, et ça va continuer de l'être aussi.

668   CONSEILLÈRE POIRIER : Donc, il n'y aura aucun changement, suite à la fusion des deux compagnies, du côté de la visibilité de la musique émergente?

669   MME SASSEVILLE : Évidemment, comme l'ont expliqué monsieur Bitove et monsieur Redmond, tout va dépendre de ce qui se fera côté décision au niveau de la programmation, et ça, on n'a pas encore eu la chance de se plonger là-dedans.

670   S'il y a un impact, je ne le connais pas à ce moment-ci. Il va falloir attendre les décisions du côté de la programmation. Mais, effectivement, comme vous l'avez mentionné, ça été une priorité et ça va continuer de l'être jusqu'à ce qu'on renouvelle.

671   M. TREMBLAY : Je voulais peut-être vous faire remarquer aussi que du côté des six canaux qui sont offerts par Radio-Canada sur SIRIUS, deux d'entre eux sont entièrement dédiés à la musique émergente. Radio 3/Bande à part sont des services, effectivement, 100 pour cent reliés à la musique émergente.


673   Et ma dernière question, Monsieur le Président. Je sais que ça n'a pas fait l'objet de discussion jusqu'à présent, mais je veux quand même soulever la position de l'ADISQ, qui trouvait la transaction très, très limite et qui disait qu'on était très serré à l'intérieur de nos règles pour ne pas payer d'avantages tangibles; on était très limite quant aux cinq ans qui s'étaient écoulés depuis le début des licences quant à la date de la demande de la fusion; on était aussi très limite quant à la profitabilité, compte tenu en plus des 20 millions d'avantages qu'on pourrait tirer de la fusion; on contestait un peu le monopole dans un sens aussi très spécifique du terme, en termes de radio satellite.

674   Alors, l'ADISQ demandait une exception à notre règle de bénéfices tangibles et demandait qu'on vous demande de payer 23.9 millions d'avantages tangibles.

675   On n'en a pas parlé ce matin. J'aimerais donc savoir quel est votre point de vue par rapport à ça.

676   MR. BITOVE: I think our financial performance is pretty obvious. We haven't, you know, generated for the last three years profit and we are just following your own rules on how this transaction should be treated.

677   MR. REDMOND: The only thing I would like to add is that regardless of the losses, which we talked about are in excess of $400 million between the two companies, all of our CCD contributions have been based on our revenue and our copyright fees on our revenue, and combined we have put into the system in excess of $50 million even though we have lost over $400 million.

678   CONSEILLÈRE POIRIER : Alors, j'ai terminé, Monsieur le Président.

679   THE CHAIRPERSON: Thank you.

680   Elizabeth...?

681   COMMISSIONER DUNCAN: Yes. Good morning. I have just a few questions.

682   I am kind of interested to know -- I see in looking at the financial information that we have, for example, on CSR, that in 2007 and 2008 there were revenue from non-licensed activities that were deducted.

683   I am just wondering if those activities no longer continue. Like there is nothing in the years subsequent to that.

684   MR. WASHINUSHI: Those activities no longer exist.

685   COMMISSIONER DUNCAN: So I guess this sort of follows along with my next question. I am just wondering what the potential revenues are for the company.

686   For example, I don't know why they no longer exist. And I notice in your opening remarks you talk about your two primary distribution channels and the aftermarket business, direct-to-home consumers. In fact, that is the kind of service that I have, is the direct-to-home consumer -- I am a direct-to-home consumer, I guess.

687   I am just wondering, have you decided that the means doesn't justify the end, that you are not pursuing selling that as actively through Canadian Tire, for example, that you would rather spend it other ways? Is there no hope there?

688   MR. REDMOND: No, that is not the case at all.


690   MR. REDMOND: You know, I think just the natural evolution as more new cars come out with it integrated in, it is going to pose less of an opportunity for the retailers to sell an aftermarket product.

691   I do still believe though, if you look at the total number of vehicles in the marketplace that don't have satellite radio, it is still in the tens of millions, and that is what we continue to tell the retailers, that there still is an opportunity for them to go after those cars that don't have any kind of integrated solution in them.

692   But, you know, the natural evolution of the retail environment, unfortunately, is they tend to go after the latest and greatest shiny metal object of choice.

693   We had our time in the light a couple of years ago and lately it has been flat-screen televisions. But, you know, it is still an important channel to us. And according to the Globe today it's tablets now.


695   I notice as well when you were licensed initially you were allowed six minutes of advertising an hour, and SIRIUS, I realize, doesn't do any advertising. And the advertising really peaked initially -- I mean, peaked -- it was high at one point, quite high.

696   I am just wondering, has it dropped off to nothing and I am just sort of wondering your approach. I know it is --

697   MR. BITOVE: I think advertising is one of the great unknowns about this business. It hasn't been a big part of our revenue to date.

698   Having said that, we do have some channels like Home Ice, the NHL channel, that, you know, you need to take talk breaks, so there should be opportunities in there.

699   I am hoping going forward we can do a better job than we have in the past, but it will never be a big part of the business.

700   COMMISSIONER DUNCAN: So there is some revenue potential there?

701   MR. BITOVE: Minimal, but there is some.

702   COMMISSIONER DUNCAN: Okay. I am just interested, on the NHL channels, for example, do you package those and sell them to Sirius in the States?

703   MR. BITOVE: Is Home Ice on Sirius in the U.S., David? I will go to Mr. Frear.

704   MR. FREAR: So the NHL agreement is actually a contract between SiriusXM in the U.S. and the NHL. At the time the agreement was being entered into, of course, there was no business for Canadian satellite radio. So the NHL wanted XM at the time to be the contracting party, and then, effectively, CSR reimburses SiriusXM for the programming.

705   In terms of how it is packaged to the consumer, Michael, would you like to answer?

706   MR. MOSKOWITZ: Yes. In the United States it is packaged to the consumer as part of the "best of." So if you are a serious subscriber, you can purchase the "best of." Part of that "best of" is our Canadian content, which is NHL Home Ice.


708   As far as your production of the -- and I have both channel line-ups of both services printed off.

709   On the XM side, the Canadian channels, are they produced in-house or are they bought from other companies and sold as a package?

710   MR. MOSKOWITZ: On the XM front all of the Canadian channels, all 13, are produced in Canada in-house.

711   COMMISSIONER DUNCAN: In your studios then?

712   MR. MOSKOWITZ: All with the exception of one, which is ATN. That is done offsite in their studios, but they are all in Canada and Canadian.

713   MR. BITOVE: ATN is our Southeast Asian Channel.

714   COMMISSIONER DUNCAN: Okay, thank you.

715   So the payments that you would make to Sirius in the States, would they show up on the administrative line on your financial statements when you file them with the Commission, or do they show up as programming fees, for example?

716   MR. WASHINUSHI: The payments that we are obligated to make to Sirius/XM are actually on a couple of different lines.

717   The largest fee would actually appear on our costs of revenue. The licence fee that we pay to Sirius/XM appears on our costs of revenue line.

718   There are some technical services or advisory fees that would be fit into our broadcast services. I think, for a call, it's somewhere between $100,000 to $200,000, and there might be some minor costs in G&A. But the bulk of the costs would be in costs of revenue.

719   COMMISSIONER DUNCAN: Are there any services paid for in kind, as opposed to a cheque being issued?



722   I noticed on the governance committee -- is there a set number to appear on the committee? Is it always going to be three?

723   MR. BITOVE: It will probably be the three independents. It will allow any of the shareholders to have observer status, but governance is something that, in today's practice, you want to be independent of the company.

724   COMMISSIONER DUNCAN: Will that be specified in the agreement?

725   MR. BITOVE: I don't know, Commissioner. I know what our practice is. I am happy to specify it, if you require it.

726   COMMISSIONER DUNCAN: I will just leave that with you. I think, if you want to specify it, fine. I just notice it, it's an observation --

727   MR. BITOVE: I think we will probably follow good governance practice, as opposed to specifying it.

728   COMMISSIONER DUNCAN: Okay. I also noticed on the governance agreement that for the program committee bylaw, just while you are looking at it, item (e) on the CSR bylaw is not included on the proposed Sirius bylaw.

729   I just mention that. I don't need an explanation, I just noticed that there was a difference, and you are looking at it, so I just mention it.

730   MR. BITOVE: I think that's part of our homework.

731   COMMISSIONER DUNCAN: Okay, fine.

732   The other question I had written out was -- because in your press release you referred to the opportunity that you were going to provide to CBC for a wider audience throughout North America. But it is clear from your answers, then, that we won't see, as an XM customer, CBC until your licence renewal.

733   Is that what you have said?

734   MR. BITOVE: No, that's not exactly what we said. What we said was, we haven't formed the programming committee, we haven't started making those changes. There may be tweaking, but rest assured that you won't wake up between now and next year and all 6 CBC channels are on the XM platform. I think that's almost impossible.

735   COMMISSIONER DUNCAN: Thank you very much.

736   Mr. Chairman, thank you.

737   THE CHAIRPERSON: I have some follow-up questions. I am now totally confused on the veto rights.

738   Let's go back to Article 4 of the governance agreement. The lead-in suggests that these consent rights only kick in if the shareholders' equity is greater than the voting rights of Sirius/XM.

739   Post-closing, if I understand it correctly, Sirius/XM will have a 25 percent equity interest and a 37 percent voting interest.

740   MR. BITOVE: It's the other way around, 25 voting and 37 equity -- almost 38 equity.

741   THE CHAIRPERSON: Well, in that case my briefing note was wrong.

742   So they will be in a minority position. They will have more equity than voting.

743   MR. BITOVE: They will have more equity than voting is correct, which is why we have the special consent rights, Mr. Chair.

744   THE CHAIRPERSON: Fine. So then you have those.

745   And then we will see your revised Schedule A, which is, in effect, governing, until such time as their equity does not exceed their voting.

746   That's the whole idea.

747   MR. BITOVE: Yes, sir.

748   THE CHAIRPERSON: As long as they have more equity than voting, they have these special rights.

749   MR. BITOVE: Correct.

750   THE CHAIRPERSON: Then, the ordinary cost of business exception, whatever we finally agree on, will apply to the running of the corporation, or will it only be limited, the way you have written it here, as an issue in terms of the making of loans and advances or transferring properties?

751   MR. BITOVE: I am not sure that I understand your question and the implications, so --

752   THE CHAIRPERSON: I assumed -- and maybe wrongfully, and therefore I am asking questions -- that anything in the ordinary course of business would be decided by the Board of Directors. There are no special rights for Sirius/XM.

753   Sirius/XM's right would kick in when we are talking of, essentially --

754   MR. BITOVE: Out of the ordinary course of business.

755   THE CHAIRPERSON: Anything out of the ordinary --

756   MR. BITOVE: I believe you are correct.

757   THE CHAIRPERSON: -- like merger, consolidation, et cetera.

758   And you also consider making loans or transferring property in excess of a certain amount of the ordinary cost of business; you also think it's out of the ordinary if you raise debt over $50 million.

759   MR. BITOVE: Yes, you are correct.

760   THE CHAIRPERSON: So the qualifier of ordinary cost of business should be upfront and cover all of these, not only be buried in the third bullet.

761   MR. BITOVE: We will clarify that.

762   THE CHAIRPERSON: Then, what you are basically -- rather than using the 5 percent of the enterprise value, to be re-valued by the company every two years -- that is sort of the norm that we have -- you feel that the making of loans is so important, or transferring property, that you took it down to $5 million. On the other hand, in the raising of equity, or raising of debt, you put it above 250.

763   Explain to me the rationale for that, why wouldn't you do 26 in both cases?

764   MR. BITOVE: From the Canadian shareholder perspective, I would rather have $50 million than $26 million be the cap.

765   THE CHAIRPERSON: Yes, I can see that, but the limitation of $5 million that you get --

766   MR. BITOVE: They would probably have rights of oppression or something else.

767   You know, it's a negotiation. To stop any self-dealing, give assurances of that stuff.


769   MR. BITOVE: Personally, I didn't have an issue with it, and I don't think my Canadian partners did either.

770   THE CHAIRPERSON: I wanted to hear your business answer, and basically you get maximum flexibility, and this $5 million, you feel, is --

771   MR. BITOVE: Correct.

772   THE CHAIRPERSON: The other follow-up question is on this programming, and I heard you and I just don't understand it at all.

773   You keep saying: We may want to offer different programming.

774   I can see it if you are contractually obliged and you have to wait until it expires. But, other than that, your customers don't have a choice, because most of your customers are people who get satellite because it's built into the car.

775   And when I buy a car, I don't buy it because of XM or Sirius, it's because I like the car. So I get either XM or Sirius, whichever one you contracted with. Therefore, wouldn't it be in your interest to offer all customers the same?

776   Why does the Toyota customer get something that the Ford customer doesn't get, and vice versa?

777   MR. BITOVE: I will let Mark jump in on this, but I will give you my view.

778   For instance, from the XM platform, CBC Radio One is something that -- I was even surprised in the listenership -- comes through with strong numbers. So that may or may not be something we decide to offer on the basic service, or offer it on a "best of" package.

779   We haven't gone through and made those decisions.

780   At the same time, Sirius Canada may be deciding NHL Home Ice, which is one of the top 10 channels as well. Is that something to include on basic, or something to do with a "best of" service?

781   THE CHAIRPERSON: But post-closing you and Mark are one. You are a joint company. You will have joint programming. Let's not kid yourselves, with the joint ownership, and the joint programming committee, you are going to make the programming. I don't understand why you would discriminate against one customer or another on the basis of the car they choose. Surely whether you put something in the basic package or the advanced package will depend on where you make the most, and the demand, and I can understand that. But making the distinction of whether the person drives a Ford or a Toyota, I just don't get it.

782   MR. REDMOND: And I don't think we want to make that distinction or penalize either customer. I think what we have to do is get our arms around what is the channel set that both companies have and how best do we provide that to -- whether it's a Ford customer or a Toyota customer.

783   THE CHAIRPERSON: So at the end you will be like a cable company, you will have a basic package and you will have additional tiers that people can buy at whatever price, regardless of which car they drive.

784   MR. BITOVE: We could be. I guess, Mr. Chair, all I am trying to establish is, to assume that the day after the merger we are going to go to, let's call it, 13 channels which are the exact same is wrong, or to assume that after the merger we are going to stay at 25 is also wrong, because we are in the programming business.

785   THE CHAIRPERSON: No, I assume, after the day of licence renewal -- after the day of merger, because there will be an interim period --

786   A year hence, when you come to us, you are now --

787   MR. BITOVE: We will have a better idea.

788   THE CHAIRPERSON: But, surely, that is how you are going to offer your programming. You are not going to make a difference on what car it is.

789   MR. BITOVE: I don't know. I don't want to prejudge. That's my own personal view. I think you have to let the programming committee and management take a whack at what is best, and probably even do some research with subscribers to see, you know: Would you rather pay a premium and get more channels, or would you --

790   Would you pay more for a basic service, or would you just leave the basic service the way it is?

791   Programming, as we said, is fluid, it's not static, so we have to do our homework.

792   THE CHAIRPERSON: There is no issue about that. But the discrimination on the basis of what car some people own, I just don't get the business rationale for that, and you haven't given me one yet.

793   MR. REDMOND: I agree. The only difference, from a discrimination standpoint, is that today Sirius has an exclusive agreement with Ford, XM has an exclusive agreement with General Motors, and over time we have to get those, obviously, as synergized and as harmonized as we can.

794   THE CHAIRPERSON: Thank you.

795   Rita, do you have any follow-up?

796   COMMISSIONER CUGINI: Yes, just very briefly.

797   The Staff has called to my attention that there seems to be a little bit of a discrepancy when it comes to Sirius and the 50/50 split between English and French-language initiatives, and the discrepancy lies in your response this morning and what we have on the record, in terms of what you have filed in this proceeding.

798   In a December 17 letter you say:

"For the remaining years, all years except 2006, as noted in the schedule, the split between French and English is not precisely 50/50 each. However, when the total is considered across all years in question, the split is exactly 50/50."

799   Now, again, my question will be very similar to the actual CTD contributions question; that is, averaging that 50/50 split over the term is not part of your COL. So how do we reconcile the fact that on a year-to-year basis the split wasn't 50/50 with what you have said here?

800   MR. REDMOND: I would need to look at the numbers specifically, but my belief would be that if the number is out, it's out by a percentage point or two, and it is strictly based on the fact that our revenue projections were not accurate as they relate to the given month or the end of the broadcast year, based on the actual versus the projection.

801   I would need to caucus with Grant and Sherry, but I don't believe that we have been out of sync on our 50/50 commitment, French and English, outside of a small revenue calculation, which is a projection versus an actual.

802   COMMISSIONER CUGINI: I would ask you to look at that response, dated December 17th, because the numbers are there for each year.

803   Perhaps, again, you could take that with you and provide us with your answer.

804   MR. REDMOND: Okay.



806   That's all, Mr. Chairman.

807   MR. BUCHANAN: If I could look at that particular one, it looks like it's 51/49 so far.

808   COMMISSIONER CUGINI: Okay. In 2006 I have 50/50. In 2007, English 56; French 44. In 2008, English 49/French 51. In 2009, English 47; French 53.

809   MR. BUCHANAN: Yes. So, cumulatively, we are at 49 and 51 --

810   COMMISSIONER CUGINI: But, again, that's not your COL.

811   MR. BUCHANAN: It isn't, and I guess it displays, once again, the difficulty you have in ensuring that absolutely the right projects come to fruition on the very day, August 31st, that allows you to be exactly 50/50.

812   We are at 49/51, and it will be at 50/50 by the time the licence term has ended.

813   COMMISSIONER CUGINI: And not sooner, like CSR, for example?

814   MR. BUCHANAN: Say that again?

815   COMMISSIONER CUGINI: Not sooner than licence renewal time, like CSR, which has committed to being there by April 30th?

816   MR. BUCHANAN: We may be there now, I don't know. We are halfway through this year already, I don't know where it is. It may well be already there.

817   But perhaps we should be talking about that one tomorrow morning, as well, because it's extremely difficult to micro manage, and that is why everybody else has the flexibility to be within a certain margin.

818   We all know that the intent was that you split it half-and-half. That's very difficult to do, to the dollar, on --

819   MR. BITOVE: To Grant's point, I guess, in our submissions back to you, we would prefer to go off the previous year, so that we have a baked number, and it's 50/50, and we know exactly what we have to look for in the coming year.

820   COMMISSIONER CUGINI: As the Chairman indicated to you, perhaps that's something you should file, as a result of this proceeding, to make that request.

821   MR. BITOVE: Okay. Thank you.

822   COMMISSIONER CUGINI: Thank you, Mr. Chairman, those are my questions.

823   THE CHAIRPERSON: You are obviously going to have some homework to do. Would it be convenient if, rather than starting with you tomorrow morning at 9:30, we start at a later point in time, or do you think you can do all of this overnight?

824   MR. BITOVE: I don't know what your timing is like, but we may be able to come back to you this afternoon.

825   THE CHAIRPERSON: I don't want you this afternoon.

826   MR. BITOVE: You don't want it this afternoon.

827   THE CHAIRPERSON: No, I'm busy with other things.

828   MR. BITOVE: What time would you like to do it tomorrow morning?

829   THE CHAIRPERSON: Tomorrow morning is scheduled for 9:30. If that's okay with you, then let's leave it at that.

830   MR. BITOVE: Do you want to start later?

831   THE CHAIRPERSON: I was offering to do it later for your convenience. If you don't need it, then --

832   MR. BITOVE: No, I don't think we need it at our end, Mr. Chair. We have all afternoon to deal with it.

833   THE CHAIRPERSON: Okay, perfect. Thanks.

834   COMMISSIONER POIRIER: I have one question.

835   THE CHAIRPERSON: Commissioner Poirier.

836   COMMISSIONER POIRIER: I have a question concerning the $20 million for synergies. Could you provide me with details of what those synergies would be? Are they associated with programming?

837   MR. REDMOND: At this point, we don't know exactly where the synergies will come in. As I think I said earlier today, probably half of the $20 million would be marketing and advertising related, and then a combination of G&A --


839   MR. REDMOND: General and Administrative -- people, head office costs, call centre synergies.

840   And I think that John highlighted the fact that we thought programming would be a very small amount, but, again, we haven't gotten to the details yet.

841   MR. WASHINUSHI: The way to look at it in terms of synergies is, the synergies are going to be realized by where we spend most of our money, which is actually advertising in media, which, between the two companies, is over $80 million.

842   When we did the very high-level assessment, most of the synergies were going to come from advertising in media and, as Mark mentioned, general overhead, G&A, as well as call centre operations.

843   Programming is not a significant -- in the overall expenditures of our P&L is not a significant expenditure for the two companies.

844   COMMISSIONER POIRIER: Okay. Thank you.

845   THE CHAIRPERSON: Thanks very much.

846   I have to do the announcement on BCE this afternoon, that's why I can't see you this afternoon, just so you understand.

847   So we will see you at 9:30 tomorrow morning, and hopefully you will have answers to all of the questions.

848   MR. BITOVE: Mr. Chair, what about the third party intervenors who may be here today, would you like to --

849   THE CHAIRPERSON: Oh, we are dealing with them, I am only talking to you --

850   MR. BITOVE: Yes, sir.

851   THE CHAIRPERSON: -- to the Applicant. I want to see the Applicant tomorrow morning at 9:30.

852   MR. BITOVE: And we will be here.

853   THE CHAIRPERSON: That's it. Thank you.

854   We will take a five-minute break, and then we will see the next party on the list.

--- Upon recessing at 1147

--- Upon resuming at 1154

855   THE CHAIRPERSON: Okay, let's resume, Madam Secretary.

856   THE SECRETARY: Mr. Chairman, as indicated this morning, IndieCan Radio has indicated to the Commission they will not be appearing today.

857   Next on the agenda is Indica Records and Mr. Schuller's flight has been delayed inadvertently this morning due to bad weather in Québec City so we will have Mr. Schuller appear later via teleconference.

858   Right now I will invite our next panel of intervenors, and that is Mr. Ben Miner; The Coppertone; and Amos The Transparent.

859   We will hear each presentation followed by questions by the members and you have 10 minutes each to do your presentation.

860   We will start with Mr. Ben Miner. You may now proceed with your intervention.


861   MR. MINER: Hello. My name is Ben Miner and I'm a stand-up comic. A few years ago I was sitting in this very room talking to you guys about how I thought this was going to be an amazing thing. I was in this very chair -- maybe -- it could have been a different chair -- I'm not going to concern myself with what it was -- but I trusted these guys and they followed through. They are amazing.

862   How many of you own a Kids In The Hall album? Nobody, because it doesn't exist because there is nowhere to play it. There is no infrastructure.

863   XM has lent into the infrastructure of Canadian comedy. There was no standard for albums before. If I was selling an album it was off of audio I took off of a video camera at the back of the room. It was horrible. But now there is a standard.

864   When the comics don't have that standard themselves, XM goes out and records it for them. It's amazing. We just didn't have this before.

865   Mike MacDonald doesn't have a CD because there was nowhere to play it before; Jeremy Hotz. These are people that deserve to be recognized and their words should be in the annals of history, it shouldn't be left to me to remember and recite to my friends and do a hack job on their joke, it should be there for people to hear and now XM is here for comics that feel they get broadcasted on.

866   It's not even the broadcasting, it's uncensored broadcasting. We could go up there and not worry about having our material hacked to bits, because the people who are handling it care about it.

867   That's nice to know because, you know, it's tough doing this. It's not an easy gig. It's not easy at all and XM makes it a lot easier to be able to get your word out there. If you have a show to promote, call them up, boom, it's promoted. You want to get a recording, it's done. Like it's such a wonderful thing.

868   I love to complain. I would love to sit here and be able to complain, that's what I do on stage, but there is nothing to complain about, it's so neat. It makes me happy.

--- Laughter

869   MR. MINER: Yeah. That's basically it. I think it's awesome. They play tons of -- there's, I don't know, like 300-400 cuts a day of Canadian comedy play on XM Radio. Do the math on that. That's almost 2800 tracks a year. That's almost -- or 2800 tracks a week -- sorry, I'm a comedian, math isn't my strong suit -- and in a year that's almost 150,000 times Canadian comics are played throughout North America.

870   That just wasn't there before. And they are here now and I hope that they are still going to be here after this, because I think XM has done a lot for comedy and they have done a lot more for comedy in the last few years than arguably any other broadcaster has, because they have helped raise the bar, and I'm thankful for that.

871   I guess I'm done.

872   THE SECRETARY: Thank you very much for your presentation.

873   THE SECRETARY: Our next presenter will be Mrs. Angelina -- I'm sorry, Ms Amanda Zelina. You may now proceed with your 10-minute presentation.


874   MS ZELINA: Thank you. I thought you were going to say Angelina Jolie and I was going to say "Oh wow, do I really look like her!"

875   Hi, my name is Amanda Zelina, I'm a part of a band called The Coppertone and I am a Toronto musician and I have been a musician seriously for probably about six years and the genre of music that I do is Blues Rock and typically it's a difficult genre to get onto terrestrial radio, it's just -- for me it has been the hardest thing I have had to deal with, amongst other things.

876   XM has been the only source of radio play that I have gotten that has helped my career a lot. They also have done things for me that I don't think a lot of people would do. I mean, I just recently wrapped up recording an album two days ago, before I flew out here for this, and they helped me with -- they basically financed all the post-production for it, which is amazing because I make no money at the end of the day doing what I do really, and they supported that and paid for it all and it helps my career immensely.

877   People come to shows and they hear only about me from, you know, Jeff Leake talking about me on the radio or my song playing or something that they have helped me as a Canadian artist to be able to do, which is a phenomenal thing and I'm so grateful.

878   Like we are saying, it's just such an amazing platform for us as independent Canadian artists and I hope that that continues to happen. Because it's my passion and I wake up every morning and every day and go and I get to do the thing that I love and a lot of that has to do with their support and the radio play that they gave me and the opportunities. And overall in my career I really think that they are a big part of that.

879   That's it.

880   THE SECRETARY: Thank you very much for your presentation.

881   Our last presenter is Mr. Jonathan Chandler. You may now proceed with your 10-minute presentation.


882   MR. CHANDLER: Ten minutes, wow! I don't know if I will fill that.

883   My name is Jonathan Chandler, I am in a band called Amos The Transparent based out of Ottawa just across the pond there.

884   I don't really have anything planned to say other than I do support the merger if it means that the people at XM and the programming and people like Jeff Leake can continue to do what they do.

885   They have been great supporters of us for the last four years. It all started when we went down to Toronto and did a live recording. It's very seldom that a band can go into a radio station and have all five or six members micced up, everything recorded perfectly, broadcasted to air. No other station does that, that I know of anyhow.

886   No other station has played us, I can say that, to such a broad audience as well.

887   Our social media tracking and everything that we do on the web can show that down in the States we don't get listeners like that and XM is the source of that.

888   I can use as an example last March we went down to Austin for a festival and there were a few people who came up to me and said, "Yeah, I came out to check your band, I had heard you on XM." I can't get that from local Ottawa radio stations.

889   Yeah, I don't really know what else to say.

890   THE CHAIRPERSON: Well, tell me, all three of you, I am delighted to hear that you are such supporters of satellite radio, how do you know whether people hear you on satellite radio or on some other radio station? How do you verify that?

891   MR. CHANDLER: I have personally had people tell me that they have heard me on XM.

892   MR. MINER: I don't get played on any other radio stations because there is no comedy being broadcasted anywhere else. So if I don't get heard on XM I'm probably not going to get heard.


894   MS ZELINA: Same.

895   THE CHAIRPERSON: Same, okay.

--- Laughter

896   THE CHAIRPERSON: Elizabeth, you had some questions for these folks?

897   COMMISSIONER DUNCAN: First of all, thank you for coming and your comments are certainly appreciated. I thought when I saw the assignments how unfortunate it was for Mr. Miner because I am an accountant at the core and I have no sense of humour.

--- Laughter

898   COMMISSIONER DUNCAN: At any rate, we will not burden you down with that. At any rate, as I say, are you getting a lot of play in the States? Do these channels then get played in the States?

899   MR. MINER: Yes. I get fan mail. I got fan mail from Oklahoma a couple of months ago that just made me smile because he sounded southern in the e-mail too.

--- Laughter

900   MR. MINER: I mean, I can't stress enough how great it is that this happens because our government doesn't even reward stand-up comics. Every artist in this country can receive a bursary or a grant to do anything artistically inclined except for comedians. Laugh Attack has a contest they do every year, they give away I think it's like $2,500 for Canada's next top comic. Well, guess what, that's $2,500 that just didn't exist before. That's a million times better because there is no grants or subsidies. It's been an amazing thing.

901   Did I answer you question?

902   COMMISSIONER DUNCAN: I think you did, yes.

903   MR. MINER: Okay.

904   COMMISSIONER DUNCAN: Well, I was just concerned whether these channels got played in their entirety on the U.S. --

905   MR. MINER: Yes, we certainly do.


907   MR. MINER: Yeah, yeah. There's tons of Canadian comedy being broadcast all throughout North America and it makes me happy.

908   COMMISSIONER DUNCAN: Ms Zelina what type of music -- oh, you do Blues Rock.

909   Mr. Chandler, I don't think you said what type of music Amos The Transparent --

910   MR. CHANDLER: I did not, sorry. It's Rock music.


912   MR. CHANDLER: Indie Rock music of a genre, yes.

913   COMMISSIONER DUNCAN: I would think there would be lots of opportunity actually for both Blues Rock and Rock.

914   MR. CHANDLER: You know, you would think there would be with the whole hoopla with distribution and labels and stuff like that, there is only so much content that is played of an Indie genre and XM has always reached out and helped out.

915   COMMISSIONER DUNCAN: Ms Zelina, do you live in Ottawa?

916   MS ZELINA: No, I live in Toronto.

917   COMMISSIONER DUNCAN: Oh, yes. Are there Blues stations in the Toronto market?

918   MS ZELINA: No.


920   MS ZELINA: No.


922   Well, I think that's great. I don't have any -- oh, I do actually have one other.

923   None of you mentioned Sirius so I didn't know whether you just stopped because you were well looked after at XM or there is no place for you on Sirius or --

924   MR. CHANDLER: I was actually kind of thinking of that and the only thing I can really think of is as example I like Pepsi and Pepsi is good to me so I don't buy Coke.

--- Laughter

925   COMMISSIONER DUNCAN: I can relate, I like Coke.

926   MR. MINER: I just don't know that there is a Canadian comedy equivalent on the other platform. Although CBC has been traditionally the greatest supporter of comedy in Canada I mean they can only do so much, right.

927   Yeah, I will go on the record and say CBC does great comedy, The Debaters, Laugh Out Loud, there is tons of great stuff, yes. I have not submitted myself to it, no, but it's certainly out there.

928   COMMISSIONER DUNCAN: Okay. Is there anything that you think could be done more? Any more that could be done for you?

929   MR. MINER: Can you be a little more specific in your question?

930   COMMISSIONER DUNCAN: I mean, are you looking for -- you are obviously happy, you are on this channel, 153 I guess, Comedy Uncensored.

931   MR. MINER: Yes.

932   COMMISSIONER DUNCAN: But is there anything else you would like to see XM do for you or your --

933   MR. MINER: No. I mean they play my stuff and they don't mess with it, which is all you can really ask for as a performer.

934   If you watch a comedy special on TV most of the comics that recorded it are horribly angry about what's aired, because it's an editor sitting in a room who has no concept of where your punch line is and they cut it apart. That doesn't happen at XM. It is the most consistent thing you will hear from comedians, how XM does not mess with their stuff, and if somebody doesn't think I'm funny, that's not because of XM.

--- Laughter


936   THE CHAIRPERSON: But surely you wouldn't mind being on Sirius as well.

937   MR. MINER: I would absolutely love to be on Sirius, yeah. This has nothing to do with them and everything to do with my laziness.

--- Laughter


939   MR. CHANDLER: If I could add to that, too? The idea of the two companies merging is very exciting to me because I mean how many listeners do we have just on XM. Let's take the listener base of Sirius as well and add them, I'm one real happy kid.

940   COMMISSIONER DUNCAN: Yes, that's great.

941   Those are my questions. My colleagues will have some.

942   THE CHAIRPERSON: Louise...?

943   COMMISSIONER POIRIER: I just want to make sure I understand you well, Mr. Chandler. You say you are broadcasted on Sirius, are you?

944   MR. CHANDLER: We are not, not that I know of.

945   COMMISSIONER POIRIER: No? On what are you --

946   MR. CHANDLER: On XM.


948   MR. CHANDLER: Yes.

949   COMMISSIONER POIRIER: And what about you?

950   MS ZELINA: The same, XM.


952   And...?

953   MR. MINER: XM aussi.

954   COMMISSIONER POIRIER: Okay. So I asked the company if they could decide to rationalize the number of channels they are broadcasting and they said yes, we could decide to do that, fulfilling naturally their condition of license.

955   Isn't there a possibility that the channel you are broadcast on could be pfft -- could disappears?

956   MR. MINER: I guess, but I mean there is a possibility that anything can happen at any moment. If you are a Canadian entertainer you are braced for the rug to be pulled out from under your feet at any moment.

957   I don't think that Canadian artists are going to be left hanging out to dry, if that's what you're asking. I don't think that is the case.

958   I think that looking at what they have done so far, these people care about the performers and the artists that they broadcast and I can't imagine a scenario which would end up with a bunch of angry performers. Like it won't happen.

959   I had faith in these guys years ago and I maintain that faith today. They have been great and they have exceeded any expectations I had coming into these meetings.

960   MS ZELINA: I actually want to just add something. I completely agree. You have brought up a good point.

961   They care about what we do, to the point where they are out at my shows. Like I don't know of any programmers that will come out and cheer you on and be in the front row. That's just unheard of, for me and I think for anybody.

962   I think what it comes down to is yes, there are obviously risks in anything, in everything. Sure, maybe if they merge my songs will not be played any more, but I would rather look on what I know, and from what I know is that we have gained a trust with one another, we have gained just a friendship with one another and a great business relationship and I can see that fully continuing to flourish and that's what I'm excited about and that's what I think we are all excited about.

963   MR. MINER: If I can add something as well. Laugh Attack has had such a huge impact in the last year there is a comedy record label that started up and as far as I know it's the first in the country and Laugh Attack is a big reason why something like this is able to exist now, because there is a demand for it.

964   THE CHAIRPERSON: You are missing the thrust, frankly. What we are worried about is there have been lots of Canadian offerings, you have great opportunities to do it, what we want to see as a result of this merger is there would be more opportunities, not less. So when I hear a rationalization of Canadian channels it sends the shivers up my spine because it means less opportunity for you.

965   Presumably you, like us, expect that if they are merged, fine there will be two platforms, there will be more opportunity, more greater Canadian offering, not less. That's what Madam Poirier is asking for.

966   So if for instance a comedy channel would be carried not only on XM but also on Sirius it would obviously benefit you, right? Or whatever channel you are being carried on. And that's what we want to see as a result of this merger and I presume that you as performing artists would like to see the same thing.

967   ZELINA: Yes. That would be awesome.

968   THE CHAIRPERSON: Okay. If there are no other questions we will break for lunch and we will deal at 1:30 with the remaining intervenors.

969   Thank you.

970   MR. MINER: Thanks for listening to me.

971   THE CHAIRPERSON: Thank you.

--- Upon recessing at 1211

--- Upon resuming at 1333

972   LE PRÉSIDENT : Madame la Secrétaire, est-ce qu'on peut commencer?

973   LA SECRÉTAIRE : Merci. Oui, Monsieur le Président, on est prêt à recommencer avec, au téléphone cette fois, monsieur Franz Schuller des Disques Indica.

974   Alors, est-ce que monsieur Schuller est en ligne?

975   M. SCHULLER : Je suis là.

976   LA SECRÉTAIRE : Alors, bonjour et bienvenue.

977   M. SCHULLER : Bonjour à vous.

978   LA SECRÉTAIRE : On comprend les inconvénients de mauvaise température d'aujourd'hui. On vous remercie d'avoir essayé d'être venu.

979   M. SCHULLER : Ah, bien, écoute, j'ai fait mon possible. Ce n'est pas terrible dehors aujourd'hui.

980   LA SECRÉTAIRE : Non, on comprend.

981   Alors, le Conseil est prêt à écouter votre présentation. Vous disposez de 10 minutes. Allez-y quand vous serez prêt.


982   M. SCHULLER : O.K. Bien, écoute, je suis Franz Schuller. Je suis président et directeur artistique des Disques Indica à Montréal.

983   On existe depuis 1997. C'est un artist-owned company qui a été commencée par mon groupe de rock GrimSkunk, il y a 13 ans. On travaille avec beaucoup, beaucoup de jeunes artistes indépendants montréalais, québécois, canadiens, francophones, anglophones.

984   J'avais témoigné, il y a quelques années, quand la licence avait été mise sur la table pour la mise en place du système de satellite radio au Canada, quelque chose que je considérais comme étant une étape très importante pour l'avenir de la diversité de la diffusion de la culture puis de la musique canadienne, québécoise, francophone et anglophone.

--- Technical difficulties

985   M. SCHULLER : La radio terrestre commerciale, en général, laissait très, très peu de place à la musique locale, canadienne, et francophone et anglophone, et surtout très peu, sinon pas de place du tout aux artistes émergents, les nouveaux talents, les nouveaux artistes qui commençaient leur carrière.

986   Depuis, ils ont fait de l'excellent travail non seulement au niveau de la diffusion de nos artistes en ondes partout à travers le pays, mais même en Amérique du Nord.

987   J'ai eu des emails d'artistes. Par exemple, une artiste qui s'appellent Caracol, qui est une artiste francophone de Montréal qui chante majoritairement en français, elle reçoit un email par jour en moyenne de gens aux États-Unis qui découvrent sa musique parce que c'est diffusé sur l'ensemble de l'Amérique du Nord, puis qui écrivent en disant, c'est fantastique, on t'a découvert, on a acheté ton album ensuite en ligne, et caetera. Ils se sont déplacés à Londres pour la voir en spectacle, à New York pour la voir en spectacle.

988   Donc, on voit que même au-delà de nos frontières, ça été une très bonne chose pour les artistes qu'on représente.

989   Mais on peut aussi dire qu'il y a eu un énorme travail de soutien au niveau du développement de carrière, que ça soit de manière directe...

990   Par exemple, on a eu la chance de travailler en collaboration avec XM sur le développement de la carrière de DobaCaracol, un groupe québécois majoritairement français, encore une fois, qu'ils ont appuyé avec une bourse d'argent pour leur aider à développer leur carrière internationale.

991   Puis ce qui a suivi, c'est quatre ans de tournées, 450 concerts dans 16 pays, et 100 000 albums vendus à travers le monde. On peut vraiment attribuer l'aide de XM en grande partie, le coup de pouce qu'on a eu au début comme étant, comment dire, important dans le développement de cette carrière-là.

992   Même chose pour les Trois Accord quand ils les ont appuyés pour aller en France. On a sorti l'album là-bas. Ils ont fait trois tournées. On a vendu 15 000 albums là-bas.

993   Puis du côté de SIRIUS, ça été de manière vraiment... une présence presque continue à tous les événements. Que ça soit quand on a fait notre 10e anniversaire Showcase à Canadian Music Week à Toronto, il y a quelques années, ils ont été sponsor de notre événement. Ils nous ont aidés à financer la soirée, à inviter les gens, d'en faire un grand succès, ce qui a aidé plusieurs de nos artistes, en fait, à se faire reconnaître au Canada.

994   On avait Priestess qui, par la suite à cet événement-là, a pu avoir une diffusion radio terrestre, en fait ironiquement, par l'importance de ce spectacle-là, mais aussi des artistes qui se sont fait connaître et signer en Allemagne puis en d'autres endroits, qui étaient venus ce soir-là.

995   Des diffusions... des prises de son et diffusions lors d'événements comme Transmission, et caetera, sans compter l'importance de la présence de SIRIUS à des événements comme Ashiaga(ph) ou peut-être encore plus pertinemment du côté francophone un événement qui s'appelle Les Francouvertes ici à Montréal, qui est un événement pour soutenir et showcaser les jeunes artistes francophones.

996   La présence de XM et SIRIUS, honnêtement, le fait d'être présent puis d'appuyer puis soutenir avec de l'argent, la présence de la diffusion, et caetera, d'être partenaire dans ces événements-là, je pense que sans eux, il y a beaucoup de ces événements-là où la place qu'ils donneraient aux artistes émergents serait beaucoup plus petite.

997   Donc, je pense que le partenariat a été essentiel à la réussite des artistes émergents dans le contexte de toutes les choses auxquelles ils ont participé.

998   Puis c'est certain qu'au niveau de la diffusion, je pourrais juste témoigner du fait que si je trouvais que la radio terrestre était difficile pour les artistes émergents quand on a témoigné pour l'accord de la licence, il y a quelques années, c'est encore pire maintenant, puis on peut dire que si le secteur des nouvelles technologies prend de plus en plus de place dans notre industrie, ce n'est certainement pas eux qui sont en train de nous aider non plus.

999   Donc, le plus qu'on avance, le plus qu'on a besoin de partenaire comme la radio satellite pour soutenir nos artistes émergents ici même puis à l'international.

1000   Si vous avez des questions, if you have any questions, je suis heureux d'y répondre.

1001   LE PRÉSIDENT : Merci, Monsieur Schuller.

1002   Dites-moi, quelles sont vos attentes si la fusion est approuvée par nous? Qu'est-ce que vous voulez voir qui n'est pas là aujourd'hui?

1003   M. SCHULLER : Idéalement, j'aimerais voir que le travail qu'ils ont fait jusqu'à maintenant se poursuive, continue, que, en gros, les mécanismes puis les exigences, je dirais, que le CRTC avait demandés, imposés au niveau du contenu canadien, le contenu francophone et surtout du côté émergent, restent en place, que ces choses-là restent pour qu'ils continuent avec leurs travaux qu'ils ont fait avec ces conditions-là qu'on leur a imposées.

1004   Je ne pense pas qu'on devrait faire quelque chose de différent. Moi, je suis satisfait du travail, du soutien qu'ils ont apporté de leur côté.

1005   Certainement, si on les compare à beaucoup de nouveaux partenaires actuellement, le plus évident étant les nouvelles technologies qui sont prépondérantes dans notre milieu et qui offrent little to no support whatsoever, c'est grandement apprécié d'avoir des gens comme satellite radio... (indiscernable) dans notre network ou dans notre environnement.

1006   LE PRÉSIDENT : Louise, tu as des questions?

1007   CONSEILLÈRE POIRIER : Oui. Encore une fois, merci beaucoup, Monsieur Schuller. Vous êtes à Montréal, je pense, hein?

1008   M. SCHULLER : Oui. J'habite ici à Montréal.

1009   CONSEILLÈRE POIRIER : Et c'est la tempête là aussi, je pense?

1010   M. SCHULLER : C'est ça.

1011   CONSEILLÈRE POIRIER : Bon. Alors, on apprécie l'effort que vous avez fait de tenter de nous rejoindre. Merci beaucoup de cette participation par téléphone.

1012   Moi, j'aimerais juste bien comprendre en quoi la radio satellitaire vous offre quelque chose de plus, et je vais y aller... Par rapport à la radio terrestre, qu'est-ce qu'elle vous offre de plus?

1013   M. SCHULLER : Bien, la plus grosse chose pour nous, c'est le fait que la radio terrestre, malheureusement, c'est des radios commerciales. (Indiscernable). Je suis une personne assez directe.

1014   La radio terrestre is based on advertising. C'est la publicité qui contrôle tout, qui contrôle presque maintenant (indiscernable). Je pense que dans les années '60, '70, à l'époque des DJ, les gens artistiques, les gens à vision artistique écoutaient de la musique pour le plaisir... écoutaient la musique pour la découverte de la musique.

1015   Aujourd'hui, ce qu'on retrouve dans le paysage nord-américain, certainement au Canada, c'est qu'il y a (indiscernable) centralisé à un endroit qui est souvent très, très, très éloigné des marchés où les radios terrestres sont diffusées. Les (indiscernable) sont décidés loin, souvent par ordinateur. C'est basé sur un Top 40. Ils ne veulent que des hits.

1016   Donc, si t'es un artiste qui est déjà très connu du public, on veut jouer ta musique à la radio terrestre. Si on ne te connaît pas, on ne veut rien savoir, on n'est pas intéressé à t'entendre. On n'est pas dans la business de "breaker" les nouveaux artistes à la radio terrestre au Canada.

1017   CONSEILLÈRE POIRIER : Oui, mais Les Trois Accords et DobaCaracol sont assez connus pour être aussi sur les radios commerciales.

1018   M. SCHULLER : Absolument. C'est un bon exemple parce que dans plusieurs cas pour nous, il a eu un espèce d'effet de tremplin. Il a fallu commencer par des réseaux de diffusion plus modestes, indépendants, pourrait-on dire, pour ensuite "springboarder" pour arriver aux plus grosses radios.

1019   Au début, ils n'ont pas voulu faire jouer. Dans le cas de DobaCaracol, c'est un bon exemple, il a fallu qu'il y ait un buzz initialement avec un genre d'atelier à MusiquePlus avant que quelqu'un dans la radio décide de prendre le saut puis de prendre un risque.

1020   CONSEILLÈRE POIRIER : Donc, les artistes émergents sont, entre autres, particulièrement soutenus par la radio satellitaire?

1021   M. SCHULLER : Énormément, parce qu'il y a, évidemment, beaucoup plus de... les playlists sont beaucoup plus grandes. Tu n'as pas, évidemment, une pause publicitaire à tous les 5-10 minutes. Et puis, évidemment, tu n'as pas les gens qui achètent de la publicité qui disent au directeur d'opération, écoutez, nous, c'est très important que pendant que notre spot de pub passe, il n'y a personne qui switche la dial puis s'en va à une autre station de radio parce qu'il n'aime pas la tune qui vient de jouer.

1022   La radio satellitaire, c'est une radio qui a une liberté pour programmer beaucoup plus de choses, et ils le font. Je pense que... Je ne connais pas les statistiques, hein, parce que je ne suis pas un expert de statistiques radio. Tout ce que je peux savoir, c'est l'incidence que ça l'a sur nos artistes.

1023   Mais je suis sûr que si on fait une liste du nombre d'artistes, les noms des artistes qui sont diffusés dans une journée sur une radio terrestre, et on le compare au nombre d'artistes qui sont diffusés dans une journée à la radio satellite, on parle d'une différence absurde. Ça n'a même pas rapport.

1024   CONSEILLÈRE POIRIER : Et si on compare la radio satellitaire avec Internet, le streaming, pour vous, c'est aussi à l'avantage des artistes émergents d'être diffusés sur la radio satellitaire?

1025   M. SCHULLER : Bien, je pense que c'est important parce que la radio satellitaire touche des endroits où les gens... par exemple, tu ne peux pas nécessairement écouter de la radio streaming dans ton char quand tu roules. Tu peux le faire au niveau de la radio satellite.

1026   CONSEILLÈRE POIRIER : Pas encore.

1027   M. SCHULLER : Exactement.

1028   Mais de valeur plus importante, ce que je dirais, c'est que la radio satellitaire, avec les conditions qu'on avait demandées quand vous avez accordé la licence, on avait demandé de réinvestir une partie des revenus dans le soutien, puis c'est là où moi, je veux en venir avec les nouvelles technologies.

1029   C'est ça que les nouvelles technologies ne font pas en ce moment. Il n'y a personne qui leur demande de réinvestir quoi que ce soit. Il n'y a personne qui leur demande de soutenir quoi que ce soit. Don't hold them accountable for anything. Ils font ce qu'ils veulent, l'Internet est gratuit, and they are very happy to keep it free right now, thank you very much, parce qu'ils font des millions et des millions de profit avec le free pendant que les artistes, eux, n'ont aucun retour.

1030   Tandis que la radio satellite, la licence que vous avez accordée a créé un équilibre parce que, de un, il pouvait avoir un sens, il pouvait avoir un produit, mais il y avait une direction au niveau de la programmation qui était imposée et aussi une demande de réinvestissement des reçus, et ça, je pense que c'était quelque chose qui était, selon moi, très sage, mais certainement pour nous, énormément (indiscernable) à la carrière, le développement, le succès de nos artistes ici et à l'étranger.

1031   CONSEILLÈRE POIRIER : Donc, le 10 pour cent de radio canadienne et le 50:50 entre les bénéfices accordés pour la langue française et la langue anglaise sont des conditions de succès pour vous?

1032   M. SCHULLER : Pour nous, ça été un bon succès. Jusqu'à maintenant, je n'ai que des success stories à vous raconter.

1033   Chaque fois que j'ai essayé de faire quelque chose, j'ai senti l'intérêt, l'enthousiasme, et l'appui financier, finalement, de la part de XM et de SIRIUS, alors que quand je soulève la question avec, je ne sais pas, moi, Rogers ou... t'sais, des ISP, et caetera, on parle que, oh, it's not our business, ce n'est pas notre problème, t'sais, (indiscernable) pendant qu'on utilise notre musique pour vendre un produit, mais (indiscernable).

1034   C'est un autre débat. Je ne suis pas là pour parler de ça aujourd'hui.


1036   M. SCHULLER : Je pense que ça rentre quand même dans la même mentalité. Si on commence à comparer l'avenir de la radio satellite à l'avenir du streaming puis de la radio Internet, et caetera, je pense qu'on va revenir à la même question, qui est, si on ne crée pas un système d'équilibre puis d'harmonie puis de co-dépendance entre les gens qui diffusent, que ça soit par l'Internet ou autre, et les gens qui créent la musique, on va avoir un mégalo-problème. Même, on va assister à la mort de l'industrie de la musique très rapidement, puis malheureusement, la mort de notre culture.

1037   CONSEILLÈRE POIRIER : Parfait. J'aimerais savoir si Les Trois Accords et DobaCaracol sont joués autant sur SIRIUS que sur XM.

1038   M. SCHULLER : Oh, boy! Je ne pourrais pas vous donner les chiffres exacts, mais c'est sûr et certain qu'ils ont été joués beaucoup des deux côtés, parce qu'il y a des chaînes spécialisées dans les deux chaînes de radio satellite.

1039   Je sais que, par exemple, si tu prends du côté de XM, les chaînes francophones ont beaucoup tourné les deux artistes. Du côté de SIRIUS aussi, je sais que... Puis ce n'est pas juste DobaCaracol et Les Trois Accords.

1040   C'est aussi les artistes plus émergents, que ça soit un Rock Velours, que ça soit la station Bande à part, un petit peu plus "edgy," un petit peu plus émergent ou rock, il y a eu un soutien across the board.

1041   Puis honnêtement, ce n'est pas juste ma compagnie ou mes artistes. Je pense que si tu parles à des interlocuteurs dans l'industrie, dans le milieu de la musique au Québec, sûrement au Canada, ils vont dire que les stations spécialisées chez XM et SIRIUS, c'est souvent... c'est les seuls endroits où leurs artistes arrivent à se faire passer.

1042   Parce qu'on a même perdu en grande partie notre espace à MusiquePlus ou à MuchMusic parce qu'ils diffusent de moins en moins en moins de clips, parce qu'eux autres se font manger par YouTube. Tout le monde est en train de se faire manger par l'Internet.


1044   Ma prochaine question va demander un peu plus votre concentration parce que j'ai quand même plusieurs chiffres à vous donner.

1045   Vous savez, aux États-Unis, avant la fusion, SIRIUS diffusait 180 canaux et XM en diffusait 180 autres, qui n'étaient pas les mêmes...

1046   M. SCHULLER : Oui.

1047   CONSEILLÈRE POIRIER : ...ce qui fait qu'ils en diffusaient au total 360.

1048   Après la fusion, ça changé. Ils ont décidé de ne pas répéter les mêmes canaux dans la plupart des cas, de sorte qu'on s'est retrouvé avec 136 canaux qui étaient les mêmes pour les deux chaînes et seulement 79 qui étaient vraiment différents. Donc, on est passé de 360 canaux différents à 215.

1049   Ça veut dire que la fusion, ce qu'elle amène, elle amène une réduction du nombre de canaux qui peuvent être diffusés.

1050   Chez nous actuellement, SIRIUS diffuse 108 canaux américains et XM en diffuse 123. Puis au total, ils diffusent 25 canaux canadiens.

1051   Quand on a posé la question ce matin aux propriétaires de cette nouvelle grande fusion là, ils nous ont dit qu'ils pourraient reconfigurer le tout et cela pourrait résulter dans le fait qu'il y ait peut-être moins de stations canadiennes qui seraient diffusées sur le nouveau réseau. C'est-à-dire au lieu d'en avoir 25, on pourrait se retrouver avec le minimum, c'est-à-dire 10 pour cent, et ça peut vouloir dire 12 ou 13.

1052   Est-ce que ça, vous ne considérez pas que ça pourrait avoir un impact délicat pour les nouveaux artistes émergents qui veulent se faire entendre?

1053   M. SCHULLER : Oui. Je pense que oui. Je pense qu'il y a un équilibre à trouver à l'intérieur de ça. Je pense que l'idée de ne pas répéter des stations, c'est logique, mais je pense que le produit, pour rester intéressant au consommateur, doit être dynamique.

1054   Mais, par contre, il faut que si on veut continuer dans... comme je disais, avec la continuité du travail qu'ils ont fait jusqu'à maintenant, il faut garder quand même une certaine base, une certaine présence, un certain contenu canadien francophone et anglophone présent sur les chaînes.

1055   Puis oui, je pense qu'il faut faire attention à leur proposition finale, être certain que... De notre côté, en tout cas, au niveau de ma présence sur les ondes, et caetera, c'est sûr que je ne peux pas me faire écouter par les Américains. Ça, c'est sûr et certain.

1056   Par contre, ceci étant dit, dans l'exemple de Caracol que je vous ai donné tout à l'heure, c'est quand même assez étonnant de voir Caracol (indiscernable) aux États-Unis qui roule au Nebraska dans son char, puis qui écoute, t'sais, la radio satellite, puis il choisit d'écouter le poste canadien francophone.

1057   CONSEILLÈRE POIRIER : Oui, oui.

1058   M. SCHULLER : C'est surprenant. On peut penser non, non, ils ne les écouteront pas, mais ce n'est pas vrai. Les gens les écoutent.

1059   CONSEILLÈRE POIRIER : La musique est universelle, hein!

1060   M. SCHULLER : (Indiscernable).

1061   Puis je pense qu'il faudrait que... Je suis un peu critique des fois sur l'Internet ou sur les (indiscernable) musique que l'Internet a pu apporter dans les dernières années. Ça (indiscernable) de responsabilisation du côté du secteur technologique.

1062   Il faut aussi dire que le fait que l'Internet a ouvert le monde, les gens sont plus ouverts culturellement et linguistiquement qu'ils ne l'étaient. Ça, je l'ai senti immédiatement. C'est une grosse différence.

1063   CONSEILLÈRE POIRIER : Alors, vous nous dites, si je veux résumer votre position, qu'autant il est important pour la compagnie de prendre en compte les besoins de ses consommateurs et les besoins de rationalisation de la nouvelle firme qui sera fusionnée, autant il est important pour nous de s'assurer de protéger l'exposition qu'on veut faire des artistes canadiens?

1064   M. SCHULLER : Oui. Je pense que les grandes chaînes de qualité de contenu canadien francophone et anglophone doivent, en majorité presque... ils peuvent changer des affaires, se repositionner, et caetera, mais je pense que les choses qui sont bonnes et belles, je suis certain que du côté de XM et SIRIUS, ils sont très conscients de quelles chaînes non seulement sont très bonnes, mais sont très populaires, que les gens apprécient. These have to be maintained.

1065   CONSEILLÈRE POIRIER : Alors, merci. Moi, c'est tout, Monsieur Schuller, et je vous souhaite un bon voyage de retour à Québec. Je ne sais pas à quelle heure vous allez arriver, mais bonne chance.

1066   M. SCHULLER : Merci beaucoup.

1067   LE PRÉSIDENT : Merci. Je crois que ce sont toutes nos questions pour vous, Monsieur Schuller.

1068   MR. SCHULLER: Okay. Thank you very much.

1069   THE CHAIRPERSON: Thank you.

1070   Madame la Secrétaire, je crois que c'est tout pour aujourd'hui?

1071   LA SECRÉTAIRE : Oui.

1072   This concludes Phase II of the hearing, Mr. Chairman. We will resume tomorrow at 9:30.

1073   THE CHAIRPERSON: Okay. Thank you.

--- Whereupon the hearing adjourned at 1456, to resume on Tuesday, March 8, 2011 at 0930


Johanne Morin

Jean Desaulniers

Monique Mahoney

Sue Villeneuve

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