ARCHIVED - Transcript, Hearing 4 April 2011

Volume 1, 4 April 2011

TRANSCRIPT OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION

SUBJECT:

To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3

HELD AT:

Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

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

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

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

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Canadian Radio-television and

Telecommunications Commission

Transcript

To consider the broadcasting applications for the group-based licence renewals for English-language television groups listed in Broadcasting Notice of Consultation CRTC 2010-952, 2010-952-1, 2010-952-2 and 2010-952-3

BEFORE:

Konrad von Finckenstein   Chairperson

Leonard Katz   Commissioner

Rita Cugini   Commissioner

Suzanne Lamarre   Commissioner

Peter Menzies   Commissioner

Tom Pentefountas   Commissioner

Stephen Simpson   Commissioner

ALSO PRESENT:

Jade Roy   Secretary

Joshua Dougherty   Legal Counsel
Valérie Dionne

Sheehan Carter   Hearing Manager

HELD AT:

Outaouais Room

Conference Centre

140 Promenade du Portage

Gatineau, Quebec

April 4, 2011

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TABLE OF CONTENTS

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PHASE I

PRESENTATION BY:

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   Gatineau, Quebec

--- Upon commencing on Monday, April 4, 2011 at 0904

1   THE CHAIRPERSON: Good morning. Bonjour, Mesdames et Messieurs, et bienvenue à cette audience publique.

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

3   - Tom Pentefountas, notre nouveau vice-président de Radiodiffusion;

4   - Len Katz, vice-président des Télécommunications;

5   - Rita Cugini, conseillère régionale de l'Ontario;

6   - Peter Menzies, conseiller régional de l'Alberta et des Territoires du Nord-Ouest;

7   - Suzanne Lamarre, conseillère régionale du Québec;

8   - Steve Simpson, conseiller régional de la Colombie-Britannique et Yukon;

9   - et moi-même, Konrad von Finckenstein, président du CRTC. Je présiderai, d'ailleurs, l'audience.

10   L'équipe du Conseil qui nous assiste comprend :

11   - Sheehan Carter, coordonnateur de l'audience;

12   - Valérie Dionne et Joshua Dougherty, conseillers juridiques;

13   - et Jade Roy, notre secrétaire de l'audience.

14   At this hearing, we will examine the applications submitted by Bell Media, Shaw Media, Rogers Broadcasting and Corus Entertainment.

15   These ownership groups are seeking to renew the licences of their various conventional television stations and specialty pay television stations.

16   As previously announced, the Bell Media and Rogers applications will be examined under the Commission's new group-based framework.

17   The Panel will also consider whether and in what manner the new framework should be applied to Shaw and Corus given that they are controlled by the same owner.

18   L'industrie de la radiodiffusion canadienne a amorcé un virage meilleur au cours des dernières années. Les services spécialisés sont devenus des décisions populaires auprès des téléspectateurs, ce qui entraîne la fragmentation de l'auditoire traditionnel de la télévision conventionnelle.

19   Parallèlement, Internet et des autres technologies numériques ont créé des nouvelles possibilités pour la distribution des contenus de radiodiffusion et ont donné aux consommateurs plus de choix.

20   En réponse à ces nouveautés, l'industrie s'est regroupée en petits membres de conglomérats de communication qui gèrent une variété des services de télévision.

21   The Commission's new group-based licensing framework is designed to provide these groups with more operational flexibility.

22   We have also introduced expenditure requirements to ensure viewers have access to a variety of Canadian programmings, including those made by independent producers.

23   The Commission previously stated its preliminary view, which is that each group should reach a spending level of at least 30 percent of its gross revenues during the next licence term.

24   The methodology for calculating the spending level for each group was clearly set out in paragraphs 51 and 52 of our March 2010 Policy Statement. All that remains to be discussed are the modalities of translating these paragraphs into practical reality.

25   The Panel will therefore want to discuss with each ownership group a number of key issues, including:

26   - the amount it proposes to spend on Canadian programming, including programs of national interest, over the next licence term;

27   - at what point during the licence term should the minimum level of expenditure on Canadian programming be reached;

28   - the progress it has made in concluding the terms of trade with independent Canadian television producers -- and I am aware of the document that you sent us on Friday;

29   - the proposed changes to the nature of service definitions that apply to several specialty and pay services and the impact they may have on the Commission's genre protection policy;

30   - and other requests to modify the licence conditions of specific television services.

31   The hearing will start today and give us an opportunity to set a cost that will guide the private English-language sector of the broadcasting system for the next few years.

32   We expect the large ownership groups to explain how they plan to make use of the new flexibility granted under the group-based policy framework.

33   As always, the Commission's main goal is to ensure that the television services can contribute to the greatest extent possible to the achievement of the Broadcasting Act and its objectives.

34   Now, we told you last week that we would make part of the hearing confidential because there are numbers involved and we really can't have a discussion on CPE and PNI unless we go into the numbers.

35   I'm sorry, this is sort of a last-minute readjustment after we all have got our head around it, but each party -- what we would like to do this morning generally is listen to you and ask you about everything except CPE and PNI and do that after lunch.

36   Between now and lunch I would like you to prepare some numbers for us according to this sheet that I have here.

37   Madam Secretary, would you please hand that out to the parties?

38   It is basically each party appearing is being asked for some modifications to the methodology for calculating CPE and CPI so that the Commission can understand the financial implication of these modifications.

39   Could I ask that each of you file, in confidence if you prefer, the following:

40   - What your CPE would be over the next five years based on your forecast filed with the Commission in this proceeding, assuming the following:

41   (a) a fixed conventional spend as described in the Commission's policy, using the revenues of the previous years;

42   (b) including all revenues such as Olympics, LPIF and other revenues generated by the broadcasting business.

43   That is basically how we worked it.

44   And then, two, provide the impact of your CPE that would result from each of the following:

45   - the use of your three-year proposal for year one;

46   - the application of floating with a fixed conventional CPE spend;

47   - the individual impact of the Olympics, LPIF and any other adjustment that you are proposing; and

48   - in addition, in the case of Corus, the impact of removing pay services on the CPE spending.

49   I think that will allow us to have -- and I believe you have all these numbers, it is just a question of generating them.

50   I hope CTV, you can do that -- somebody can do that between now and after lunch. If it gives you any problems, tell us now.

51   I realize it is last minute, but we have realized unless we do it this week, we just will talk past each other or we will use data that we have generated based on assumptions that we made, which may not be the same assumptions that you have made.

52   MR. BIBIC: Mr. Chairman, would you be prepared to give us a couple of minutes?

53   THE CHAIRPERSON: Sure, absolutely.

54   MR. BIBIC: I just want to talk to a potential member of the panel who might need to step away in the morning to do this for us.

55   THE CHAIRPERSON: Okay. Let me just have Madam Secretary announce the rules and then we will take a five-minute break and you can do that.

56   MR. BIBIC: Okay, thank you.

57   THE CHAIRPERSON: Okay. So I will now ask the Hearing Secretary, Madame Roy, to explain the rules of procedure.

58   Madame Roy.

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

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

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

62   We expect the hearing to take two weeks. We will begin each morning at 9:00 a.m. We will take a break for lunch and a break in the morning and in the afternoon.

63   We will let you know of any schedule changes as they may occur.

64   Please note that the Commission Members may ask questions in either English or French.

65   Simultaneous interpretation is available during the hearing; the English interpretation is on channel 1.

66   You can obtain an interpretation receiver from the commissionaire at the entrance of the Conference Centre.

67   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.

68   Veuillez noter que les membres du Conseil peuvent poser des questions en français et en anglais.

69   Le service d'interprétation simultanée est disponible durant l'audience. L'interprétation en français se trouve au canal 2.

70   Vous pouvez vous procurer les récepteurs d'interprétation auprès du commissionnaire à l'entrée du Centre.

71   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 leurs présentations.

72   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.

73   If you have any questions on how to obtain all or part of this transcript, please approach the court reporter during a break.

74   Please note that there will be an in camera session for each applicant to review confidential financial information.

75   The in camera session for Bell Media will be right after lunch today.

76   An abridged version of the discussions being held in camera will be placed on the public record as soon as possible.

77   For the record, please note that the following documents are being added on the public record and are available in the examination room:

78   1. A chart prepared by the Commission outlining possible Cancon compliance issues for CTV, Shaw and Corus.

79   2. A revised PNI reporting template.

80   3. And finally, CMPA estimated a preliminary terms of trade agreement with each of the applicants.

81   Now, Mr. Chairman, we are ready to begin Phase I.

82   THE CHAIRPERSON: Mr. Crull, we will give you 10 minutes so you can figure out what to do about this, okay?

83   MR. BIBIC: Okay. Thank you, Mr. Chairman.

--- Upon recessing at 0915

--- Upon resuming at 0925

84   THE CHAIRPERSON: I think, Mr. Bibic or Mr. Crull, you may proceed now.

85   First of all, is it possible to do this between now and this afternoon?

86   MR. BIBIC: Mr. Chairman, we are working on it now. Hopefully we will get done for when we come back after lunch.

87   So there's two things. One is we have let Ms Brown, Senior Vice-President of Finance for Television, go to do this work. So if there are any questions that you ask in the morning that we need her help on, we will have to defer until she gets back.

88   We will play this by ear, but right before lunch we may ask you for a little bit of a longer lunch period judging on where we are at at that point.

89   THE CHAIRPERSON: Okay, no problem. I apologize for the last minute, but really, when we met and discovered -- I don't think we can have a meaningful discussion unless we have that data. We will discuss it in confidence with you and then we will go on the public record afterwards.

90   So with that, please go ahead.

PRESENTATION

91   MR. CRULL: Very good. Thank you.

92   Mr. Chairman von Finckenstein, Vice-Chairs and Members of the Commission, my name is Kevin Crull and I am President of Bell Media.

93   Before beginning our presentation, I would like to introduce the members of our panel this morning.

94   Beginning to my immediate left is:

95   - Rick Brace, he is President of Specialty Channels and CTV Production;

96   - Phil King, President of CTV Programming and Sports; and

97   - Corrie Coe, SVP of Independent Production.

98   To my immediate right is:

99   - Mirko Bibic, Senior Vice-President of Regulatory and Government Affairs for BCE;

100   - Kevin Goldstein, Vice-President of Regulatory Affairs for Bell Media.

101   And, as you know, we let Clare Brown be dismissed for this morning's session.

102   In the row behind me:

103   - Bart Yabsley, to my far left, is the Executive Vice-President of Content Sales and Distribution;

104   - Brook Peters, Director of Programming for Much and MTV Group;

105   - Neil Staite is the Director of Operations for the Much and MTV Group;

106   - Richard Gray is Vice-President and General Manager of /A\ Ottawa, Ottawa Radio, and he is also the National Head of our /A\ News;

107   - Elaine Ali is the Senior Vice-President of Owned and Operated Stations;

108   - Lloyd Lewis is here with us, Vice-President and General Manager of CTV Edmonton and ACCESS Television; and finally,

109   - Bob McLaughlin, he is Senior Vice-President of CP24 and CTV Production.

110   We are pleased to be here today to celebrate what our television properties have achieved over the last licence term and also to discuss our vision for the future.

111   This is truly an exciting, and occasionally unsettling, time for our industry, for Canadian viewers and also for our company.

112   Following your expeditious approval of Bell's acquisition of CTV, we were able to formally close the transaction just this past Friday. So we appear before you today for the first time as a Bell business unit and under our new banner of Bell Media.

113   At Bell, we are eager to play an expanded role in the Canadian broadcasting system. We are re-entering the media business at a time of considerable uncertainty, but we look forward to seizing the opportunities and also navigating the many challenges.

114   Much has changed since the services that we operate last went through a full licence renewal. Some of these services have gone through multiple ownership changes, while others have, in fact, never been through a renewal.

115   Therefore, before we get started, we would like to do what we do best and share a short and, I might say, inspiring video that highlights the Bell Media properties that you are going to be hearing more about today.

--- Video presentation

116   MR. CRULL: Thank you for indulging us with that and also thank you for holding your applause this morning in proper decorum.

--- Laughter

117   MR. CRULL: As I hope that this video conveyed, we are exceptionally proud of the programming that we have brought Canadians over the last license term. In fact, the vast majority of what you just saw on that video, in fact more than 95 percent, is world-class Canadian-created content!

118   In my short time at Bell Media it has become clear to me that the entire CTV team has worked very hard not only to satisfy our conditions of the last license, but also to deliver on the vision and the spirit of the Broadcasting Act in a way that I respectfully believe no other broadcast group has done!

119   When we appeared before you in February, we spoke about the changes in the marketplace which were driving Bell's decision to reacquire CTV. It's worth reviewing these drivers in the context of our group license renewal application.

120   In recent years, the Commission has announced and implemented numerous changes to the regulatory framework. Specialty service genres have been opened to competition, new distribution and packaging rules will come into effect this fall which could have a profound impact on specialty services, and the Commission has established a value-for-signal framework, to name just a few. All of these changes are designed to give viewers greater choice and to provide stakeholders with the flexibility needed to be successful in the face of unprecedented change and to ensure we can continue to deliver compelling content to Canadians.

121   At the same time as the regulatory system is changing, technology is progressing at a staggering pace. Just a few years ago, content on mobile phones was slow and clunky, and wireline download speeds limited the availability of broadcast quality content on the Internet. Today, consumers can watch a high-quality video of their favourite sport on a smartphone and they can wirelessly stream HD movies from their iPad to their big screen TV with a single click.

122   The four-screen universe -- television, online, mobile and now the tablet -- has clearly arrived, and it affords viewers incredible opportunities to consume all manner of content from around the world. What is, however, uncertain is whether the technology capability and the viewer enthusiasm for these technologies will translate into acceptable business models and financial returns.

123   The market is unquestionably responding to these developments. With Bell's acquisition of CTV, the four largest Canadian BDUs and broadcasters are now vertically integrated. We all offer phone, Internet, wireless and broadcast distribution services, as well as programming content. In our view, this type of ownership structure is a logical outcome of the industry's evolution and it supports the long-term viability of the Canadian broadcasting system.

124   Over the next license term we look forward to building on CTV's history as the number one destination for Canadian viewers and being the top choice for advertisers and distributors. How will we do this?

125   First, we will continue to create and acquire the best programming, including local and national news, programs of national interest and top-tier international fare. We have absolutely raised the bar in recent years with high quality Canadian programming like "Corner Gas", "Canadian Idol", "So You Think You Can Dance Canada" and "Flashpoint", and we are here presenting a framework that is intended to maintain this exceptional track record.

126   At the same time, we will be focused on responsibly serving all of our constituents -- viewers, advertisers, employees and shareholders. For Bell Media, this means finding new ways for blockbuster Canadian content to make business sense. That is why we are pleased to announce that after extensive negotiations between the major broadcast groups and the CMPA, we reached a Terms of Trade Agreement late last week. The written agreement is being finalized and we expect to file a copy with the Commission no later than five days before the final written reply in this hearing.

127   We were pleased to be able to play a leadership role in these negotiations and I would like to briefly recognize Corrie Coe, to my far left, for her amazing talent and perseverance in this process.

128   Second, we need to capitalize on Bell's long-standing commitment to technological innovation and investment by upgrading our digital infrastructure and our production facilities. Investment of this nature is critical as video plays an ever-expanding role in the communications industry, as well as in Bell's own business plans.

129   Third, we need to make our programming available on all four screens and we need to leverage the investments that Bell and others have made in expanding Canada's high speed networks. The multi-screen environment presents an opportunity to engage Canadian audiences much more deeply than ever before. And Canadians increasingly expect to access entertainment and information whenever and wherever they want.

130   As two separate companies, both Bell and CTV, had each begun to embrace the opportunity for deeper viewer engagement, but together we will really capture the imagination of Canadian audiences through a variety of creative and innovative viewing options.

131   A great example of this was just last Friday's announcement of a compelling new package of mobile content from Bell Media featuring the most popular news, entertainment and sports programming in Canada. We are hopeful that wireless providers all across the country will take advantage of the availability of this content and the exciting new offer.

132   Tempering our enthusiasm for the many opportunities ahead is a profound realization that there are serious challenges facing the Canadian broadcasting industry.

133   Even though Canada appears to be on the road to economic recovery, the fundamental and profound changes from technology disruption, viewer behaviour, audience fragmentation, and non-regulated broadcast options is truly threatening the very foundation of this business and, as a broadcaster that relies heavily on advertising revenue -- in fact, the services for which we are seeking license renewal in this hearing get over 80 percent of their revenue solely from advertising -- we are particularly concerned with how quickly the bottom can fall out of that market.

134   It's well documented that there is a profound shift in advertising allocation to new media from legacy media -- and I say that lovingly -- and in fact away from media altogether and into social network customer engagement.

135   There have been significant structural shifts in the entire Canadian broadcast sector. Viewer fragmentation continues at a pace never before experienced. Not only do we compete with regulated competitors like local television stations and pay and specialty services, we now also compete with strong unregulated entities. And increasingly, Canadians are embracing these unregulated options over the Internet.

136   Make no mistake, so-called over-the-top services, or OTT, they are indeed formidable competitors. For example, Netflix recently announced that in less than a year of operations in Canada it had amassed over one million subscribers in this country. Of course, this is impressive by any standard, but if you add that to the more than 20 million customers they have south of the border, Netflix has achieved unbelievable scale in just a couple of years. This massive scale, and an advantaged cost structure, allows Netflix to outbid Canadian broadcasters for exclusive program rights, both online and on television.

137   At Bell Media, we are willing and able to compete for viewers, provided that our key competitors, both regulated and unregulated alike, are subject to the same rules. The problem lies with the fact that OTT competitors can offer massive libraries of first-run programming, but they have none of the regulatory obligations that Canadian broadcasters and BDUs have and they make no financial contribution to the Canadian broadcasting system.

138   These developments have had an acute impact on all regulated players, but most profoundly on the vitally important sector of conventional television. Once the foundation of Canadian broadcasting industry, the over-the-air television sector has come under significant financial stress. While we believe the Commission has put in place the right policy framework, all signs point toward the conventional television sector continuing to struggle. Even in recovery, margins remain at absolutely unacceptable levels.

139   Adding to these challenges is the rising cost of producing Canadian programming, including local news. The Commission has heard how much Canadians value their local news. Bell Media will, at a minimum, meet our regulatory requirements in this area, but much more than that we want to continue our commitment to programming excellence and local reflection. However, in light of the challenges that I have just highlighted we absolutely need a level playing field, regulatory symmetry, and we need a sufficient amount of flexibility to adapt to the rapidly changing environment.

140   Specifically, we ask the Commission to approve the requests that we have made in our renewal applications and to ensure that all designated large ownership groups are subject to the same spending requirements.

141   Bell Media has stepped up to the plate today and we have proposed both CPE and PNI levels that are consistent with the Commission's directed policy. However, I believe others have not. Subjecting one broadcaster to higher spending requirements than its key competitors would not only be inconsistent with past practice, it's unfair and it undermines the very objectives that the Commission is trying to achieve. In short, good public policy dictates regulatory symmetry among the specifically designated large ownership groups.

142   Now I would like to hand it to Mirko.

143   MR. BIBIC: Good morning, Commissioners.

144   Thank you, Kevin.

145   Over the last three years the Commission has held extensive consultations with a view to establishing a modern regulatory framework adapted to the industry's evolving needs. As a result, as Kevin mentioned, we now have new BDU rules, a value-for-signal regime and a new group licensing policy.

146   In order to maximize the opportunities and navigate the challenges that Kevin described, it is of course incumbent on us to execute in the marketplace. However, in a regulated industry like ours, the Commission's regulatory framework also plays a key role in guiding our business decisions and determining our performance. So given the importance of regulation to our business, we consider it essential that you maintain the following key principles on which the GLR policy is based and with which we agree.

147   First, the new framework was designed to give licensees enough regulatory flexibility to adapt to the changing environment. It emphasizes program creation over program exhibition; quality over quantity. This flexibility is necessary if broadcasters are to maximize their contribution to the system and fulfil the framework's objectives. Given the uncertainty facing the system, now is not the time to revert to micro-regulation which would undermine the flexibility that the Commission's policy is intended to foster.

148   Two, the framework is also intended to give broadcasters regulatory stability so they are able to organize their operations in a way to respond to new challenges. As we can attest at Bell, industry participants make billion dollar decisions within the context of the Commission's regulations and policies. Frequent or unpredictable changes in these regulations only harm the industry.

149   Three, the framework was structured to apply the same rules to the large ownership groups, namely Bell Media, Shaw Media and Rogers Media. We are all part of large, vertically integrated companies. We all compete for the same programming, viewers and advertisers. Therefore, we should all be regulated in a symmetrical manner, which, in turn, will benefit the system.

150   These principles remain relevant and appropriate, and are very, very important to us.

151   Commissioners, Bell Media has now been under BC ownership for all of three days, entering Day 4. In preparing for this hearing, we obviously took a fresh look at the GLR policy. We actually took a look at it from the perspective now of an operator, rather than an industry stakeholder, which is the way I approached it before, and we looked at what CTV applied for, and we assessed whether or not it would suit our purposes, in terms of how we intended to run this business over the next five years.

152   The urge to tinker is always there, and we certainly could have used the fact that Bell Media is under, so to speak, new ownership to come forward and ask for changes to your policy or change what CTV had applied for, or Bell Media had applied for. We didn't.

153   We are prepared to live up to the specific obligations outlined in the GLR policy decisions for the privilege of having our licences renewed for five years. But that comes under the expectation -- and I think you have the theme by now -- that other Large Ownership Groups, as they have been defined in the GLR policy, will be treated in exactly the same way as Bell Media.

154   With that, I turn it over to Kevin Goldstein to highlight the key aspects of our licence application.

155   MR. GOLDSTEIN: Thanks, Mirko.

156   Our licence renewal application, which flows from the principles just outlined, was developed to be fully consistent with the Commission's group licensing policy. The key elements of our application include:

157   Adopting the Commission's proposed spending requirements on Canadian programming and programs of national interest at the 30 percent and 5 percent levels;

158   Adjusting the Nature of Service definitions for a few of our specialty services to allow these services to evolve, while ensuring they remain true to their licensed genre;

159   Expanding the categories from which some of our specialty services can draw programming in line with the flexibility already granted in the BDU Discretionary Services policy; and

160   Bringing Canadian programming exhibition requirements for certain specialty services in line with the new levels that apply to conventional television stations.

161   I would now like to briefly note the changes we have proposed for three of our services -- MuchMusic, MuchMore and ACCESS -- and the reasons behind these requests.

162   A generation of Canadians grew up with MuchMusic, and for more than a quarter century the service has represented an entry point to the Canadian broadcasting system for young viewers. It is an iconic Canadian brand and has played a significant role in launching the careers of numerous prominent Canadian artists.

163   Unfortunately, due to the proliferation of new music entertainment options, our programming does not resonate with viewers the way it once did. As a result, the service has been experiencing audience and revenue declines for a number of years. In fact, we have seen a 70 percent decline in the viewership of music videos, which make up one-half of our schedule.

164   These declines are largely attributable to the fact that music videos are more widely available than ever before, and viewers no longer look to television as the primary source for such content.

165   For example, MuchMusic was once the go-to place for premieres of new videos, but young Canadians now look to online destinations like YouTube and VEVO to get this content. To remain relevant, we need to evolve the services along with their audiences.

166   The requirement that at least half of MuchMusic and MuchMore's program schedules must consist of non-exclusive music video content is detrimentally impacting these two services. That is why we have asked to lower the amount of music video programming these two services must broadcast.

167   In addition, we have requested the ability to broadcast a limited amount of programming that, while complementary, is not strictly music related. We firmly believe that these changes -- changes that no other licensee has opposed -- will allow us to serve our viewers better and position these services for success throughout the next licence term.

168   I would now like to turn to our licence renewal application for ACCESS, Alberta's educational broadcaster.

169   The nature of educational television itself has evolved since ACCESS' last licence renewal in 2003, as have the Alberta government's educational priorities. To be able to continue to meet the educational needs of Albertans, ACCESS must also evolve.

170   Let me outline what I mean by this. First, people are using online resources as a primary source for learning, and Alberta is extremely proud to be one of the most wired jurisdictions in North America. As a consequence, with the exception of pre-school programming, the traditional broadcast delivery of formal educational programming is no longer necessary or, indeed, wanted.

171   Second, ACCESS no longer receives government funding. Given the evolving nature of educational programming, the government determined that it would focus on the online delivery of educational programming instead of on traditional educational broadcasters like ACCESS. Consequently, ACCESS lost over $4.3 million in annual funding as of March 2008. This financial loss has had a significant impact on the service.

172   So after numerous discussions with Alberta's two educational ministries, it became clear that ACCESS could play a more valuable role by helping educate Albertans about education, about life-long learning, about retention in schools, about accessibility and programs for our First Nations, about Alberta in the 21st Century, and how the province can fit into a global community. In other words, by modifying the types and amount of educational programming the service officers, but not its overall mandate, ACCESS can help to inform hundreds of thousands of Albertans about trends in education and connect them to educational opportunities.

173   MR. CRULL: We are very proud of what our television services have achieved over the last licence term and we are extremely excited about their future as part of Bell.

174   The licence proposals that we have advanced were designed to provide the flexibility needed to respond quickly to both the opportunities and the challenges that present themselves in our industry, yet remain within the four corners of the Commission's new policy framework, and especially the Broadcasting Act itself.

175   They also will ensure regulatory symmetry between key players, to the net benefit of the system as a whole.

176   Therefore, we respectfully request that the Commission approve our proposals and renew our licences for the full five-year term.

177   Thank you very much. We look forward to your questions this morning.

178   THE CHAIRPERSON: Thank you for your presentation. I am glad you have realized the principle behind what we are trying to do here, giving you maximum flexibility so that you can compete in an environment, I think, that none of us expected to have arrived at at this point in time. Your reaction of creating vertical integration is obviously a logical reaction to the challenges that you have, the implications of which we will discuss in June in our vertical integration hearing.

179   I also want to commend you and the CMPA for having reached an agreement on the Terms of Trade. I think that is wonderful. I really am very pleased about that. I think it is one issue off the table, and if you can live with it, and the CMPA, who are we to tell you how to run your business.

180   That is exactly the sort of thing that is in line with our principle. It sets the scene, but lets the industry find the best way to do it.

181   But I have the feeling that it's one step forward, two steps backwards. While you have the Terms of Trade -- and, as I say, I am very delighted -- when you look at what you have done in terms of CPE and PNI, et cetera, it seems to me that you have taken every flexibility we have given you, like no priority programming, your reduced exhibition requirements, but then, when it comes to what is really the heart of our regulatory function, to make sure that you produce Canadian content, et cetera, you are nickelling-and-diming us. There is no other way to describe it.

182   We said minima. We said minima for CPE and minima for PNI, and we set out very clearly how to calculate it. But the first thing you want to do is, you want to change the way we calculate it.

183   Secondly, you take advantage of an obvious mistake we made, by having the paragraphs up front, not being in accordance with the illustrative appendix.

184   All of this is an attempt to drive down the CPE.

185   And when it comes to PNI, that, surely, is the heart of it. This is where you are going to produce Canadian programming, et cetera, and we set 5 percent as a minimum, and you had more than that last year, and yet you want to bring it down.

186   I don't understand the overall approach. I don't know why this nickel-and-diming on CPE and PNI, and yet you do appreciate what we are trying to do, we are trying to give you flexibility, but it comes at a price.

187   As you and everybody else before us has told me time and time again: We make the money on foreign programming, and on Canadian programming, we try to break even. Sometimes we succeed, sometimes not, but we see it as a cost of doing business.

188   That's fine, that's the reality of the business, and you are under great pressure from the unregulated business, and we will have to address that.

189   But we set a very clear threshold: This is the minima. Let's talk of licensing approval for the best you can do, and yet you want to go, essentially, below the minima.

190   Explain to me this approach. I just don't understand it. I mean, business works on a quid pro quo. We gave you the quid, which was: Reduce exhibition and no priority programming. We changed the whole policy. You can shift things around for your Canadian content, et cetera, just focusing on PNI, and yet you have taken advantage of all of that, but I don't see that you have given me anything on the other side.

191   MR. CRULL: Mr. Chairman, first, I would like to commend the Commission in the policy framework that was reached through lengthy deliberation and opportunities for comments from all interested parties. It established a framework, and we appreciate the flexibility. So the quid is recognized and appreciated.

192   We also think that the pro quo has, in fact, been delivered through our submission.

193   Mr. Chairman, we had to increase our baseline spending on PNI. That will be increased to meet the 30 percent minimum that the Commission has outlined. That is something that we do look forward to, and I think it was wise to set an in camera session so that we can walk through those numbers.

194   But I submit to you that we will illustrate that we spent less than that in our baseline period over the last six years. So, as a matter of fact, the pro quo, for us, is increasing.

195   As it speaks to CPE overall, you are absolutely right that the business is a complicated rubric of managing the various segments of our business to both serve the many constituents that I have talked about, but also achieve acceptable financial returns.

196   At a minimum, we do try to break even on our overall CPE.

197   The PNI portion of CPE tends to be the programs that are the most financially challenged. When we have breakthrough opportunities, our PNI will, at times, bounce into the 6 percent, 7 percent range, but historically our PNI, also, as a percent of revenue, has averaged just barely over 5 percent. We think that that, as a floor, gives us the flexibility to never go below that, but when opportunities present themselves, to go above.

198   The last point I will make on this is, the Commission outlined in the Public Notice for the hearing and for the licence renewals that it was really focused on maintaining in the system a substantial flow of funds to independent producers and Canadian producers for PNI. We believe that the combination of our licence obligations with the 5 percent floor, with the unprecedented -- over this licence term that we have coming up -- the unprecedented amounts of benefits spending, which undeniably -- and I am not trying to mix and match percentages, but I am saying that we actually believe that the capacity of the system to absorb and produce high-quality work will be strained should it go any further.

199   We think that the vitality and the viability of the independent production community producing programs of national interest is in great shape over the licence term.

200   THE CHAIRPERSON: We will go into the details in the in camera session, but let me raise a few issues which are not confidential.

201   You don't want to include LPIF funding in the calculation. Why not?

202   LPIF funding is something we made available to you from the distributors. It is clearly a source of revenue. As far as I am concerned, it is in the same category as the subscription you get for your specialty channels from viewers. Why would that not be part of the calculations?

203   MR. CRULL: I understand, Mr. Chairman. I think that our view on that is, in the extensive deliberations that the Commission made, it was found that conventional broadcasting, particularly in small markets, was so financially troubled that when the decision was made that it wouldn't be incremental, we interpreted -- and I will pass it to Mr. Goldstein to speak on this further -- but we interpreted that to be inconsistent with including further obligations and burdens associated with that revenue.

204   MR. GOLDSTEIN: I will start, and perhaps my colleague Ms Brown, this afternoon, perhaps either in camera or after, could walk through the mechanics of what I am about to say.

205   The LPIF, in terms of once the Commission made its determination that it would no longer be incremental, as Kevin indicated, was very much welcomed by the industry, but it also became, effectively, a subsidy to conventional television stations in small to medium markets.

206   And what would happen if you included in the base for CPE is that that subsidy you would, essentially, if you get $100 of LPIF you can put $100 towards local programming, but then it will require you to spend an additional $30 on local programming on top of that.

207   So essentially what it does is it devalues the subsidy overall, somewhat of a mathematics issue. So I would prefer to defer in terms of the actual walking through an example with my colleague when she is back.

208   But that's our rationale behind it, as opposed to other revenue where essentially you can choose where you want to put that revenue.

209   You also, in terms of LPIF, can only apply LPIF revenues against local programming expenditures on a conventional television station. If you have excess LPIF revenues to your local programming expenditures you are not actually allowed to use them. So it's not revenue that we would normally consider because we are not free to use it as we want.

210   THE CHAIRPERSON: I have full confidence that you will find ways to use that money if available. If you have excess that you cannot use, I find hard to believe.

211   But staying with LPIF you then go for it and you again nitpick and try to get a little advantage. We made it absolutely clear. LPIF is seven hours per week per station. Now, you say, "Yes, seven hours per week but average over the broadcasting year". Where does this come from?

212   I mean it was always -- we made it a rule. We were absolutely clear we are talking here about the application. What are you trying to do? You are trying to change the rules in order to your favour.

213   And it's a little tiny little change. We can discuss later on what the difference is but obviously it works to your advantage, you know. So why do these things? I just don't get it.

214   MR. GOLDSTEIN: I think perhaps I will start and then maybe I will ask Ms Ali or Mr. Gray or Mr. Lewis to talk about what we are actually doing in our individual markets.

215   But the concept of averaging your local programming requirements is not a novel one. It actually pre-2009 applied to all CTV services in terms of their commitments relating to local programming, which in many instances were more significant than what they are now, but we have tried to maintain those numbers at their historical numbers.

216   So essentially, from the perspective of why we have asked to average it, it's simply a technical mechanism that allows us to recognize that in most weeks we are offering 15, 16, 17 hours of local programming even in markets where we are only required to do seven, but that in some weeks you have a holiday and, you know, you have a long weekend and you have less staff present and you are maybe perhaps doing one hour less newscasts. So it doesn't necessarily, you know, put you in a situation where you are having to staff up for that situation.

217   So perhaps I will pass it to Ms Ali or Mr. Gray and they can add further.

218   MS ALI: Thank you, Kevin.

219   Yes, the requirement, as you stated, is seven hours and in all of our stations that are eligible for LPIF funds we exceed that to quite some extent, for example in the CTV station group we do an average of 15.5 hours at each station in the "A" group, and Mr. Gray can go into a little more detail in terms of how we accomplish this.

220   But certainly in all of the LPIF-eligible stations Vancouver Island, Barrie, London and Windsor we exceed that seven hours a week.

221   But there are situations -- and in Windsor, for example, it's 7.8 hours. But there are situations week to week or month to month that dictate that we may not be able to do a regular newscast. And that is what our -- for the most part that is what our local programming is comprised of, is our local and community reflection.

222   So there are instances where we can't produce that seven hours or 7.8 hours and it's just that little bit of flexibility. For the most part, if you take a look at all of our commitments in what we are doing, you know, at each station, we certainly exceed that on an annual basis and certainly on a monthly basis.

223   MR. GRAY: Really, perhaps I can add something to that. It really boils down to a simple question of economics.

224   As Mr. Goldstein said, what we are talking about largely is the reduction of local programming on statutory holidays 10 days a year. It costs two and a half times what it costs on a normal day to produce a newscast on a stat holiday, a time of the week, a time of the year when there are far, far fewer viewers tuning in to local news.

225   Let me walk you through one specific example. At "A" Vancouver Island, the normal cost of a newscast on a regular day is $11,500. To produce that same level of news coverage on a statutory holiday costs us $29,000.

226   So that's really what this boils down to. It boils down to us seeking to utilize the funds that are available to service viewers in the best fashion possible.

227   THE CHAIRPERSON: If, as you suggested, statutory holidays are driving this, why wouldn't you average it over the months, why over the year? I mean this is -- again, you know, I buy that. I can see what you are -- I just don't understand why you have to average it over the year.

228   MR. GOLDSTEIN: I think we are fine with that. We were going back to the manner in which it was calculated pre '09, but I think we are fine with that restriction.

229   THE CHAIRPERSON: Okay. Well, that's why we have this hearing to understand it.

230   Because at first it looks like you know you want to show this in the summertime when nobody watches anyway and that obviously is the whole purpose of the policy, is designed to make sure that local news viewers get local hours -- seven hours of local programming.

231   MR. BIBIC: Mr. Chairman, if I -- and not to get into the details because I am not familiar enough with any of them yet, but I have heard three concerns, and if I could just wrap them up from our perspective.

232   One relates to the CPE and PNI minima and we look forward to discussing that in more detail with you in an in-camera session because I think we can shed a lot of light.

233   But from a policy point of view, we weren't trying to say that we will never do more than the minima. What we are saying is a question of flexibility back to first principles.

234   We spent a certain amount on both of those categories, CPE and PNI under an old framework, the old rules. And to lock us into what we spent, you know, in the past and I will think you will see the numbers and we are going to be going up, but as a matter of principle somebody would be slightly ahead -- just to lock us into what was done in the past without recognizing that there is a new framework going forward and saying as well we may very well exceed those minima but it's about setting a floor for five years, it's a question of flexibility. It wasn't a question of trying to short change the system in any way.

235   The second point that you raised about including LPIF revenues in CPE, I think we will have to huddle and come back to you on that one.

236   And I think the third point about averaging LPIF over -- sorry -- averaging over the broadcast year and we have reached --

237   THE CHAIRPERSON: We are going to go into this into detail, but I mean for part of the public record I just wanted to basically explain what our approach of it is.

238   I thought we had given you a lot of flexibility. I see what you talk about, micro-managing it's various things and trying to get away with it, but at the same time I want to make sure that the audience, the consumer, the viewer, gets what is really at the end as a goal of all of this. Obviously, in terms of LPIF it is to make sure that there are seven hours of local programming; in small communities of 14 hours at a minimum, as you say, as a floor.

239   MR. BIBIC: Okay. Thank you.

240   THE CHAIRPERSON: Then on PNI you accepted a 75 percent purchase from independents of the 5 percent of PNI.

241   What about the rest of your programming? That's all going to be governed by the terms of trade, I guess. But to what extent you buy it from independents, what extent you buy it -- produce it in house will be decided by you on a case by case basis, I guess?

242   MR. CRULL: That's right, Mr. Chairman.

243   I don't see -- I don't see strategic reasons in our plans going forward that the ratio from recent history would change. I think, as we said, as we were before you in our acquisition hearing, we don't anticipate in-house production to expand beyond the types of special interest shows, news, sports production and special interest shows like Marilyn Denis and E-Talk. We don't anticipate doing dramas and documentaries in house and would always work with our independent partners.

244   THE CHAIRPERSON: Okay. I had assumed that. I just wanted to hear you say that.

245   Now, the "A" stations, you treat them slightly different. Isn't it now that you are -- and we all know they have been struggling, et cetera, and CTV purchased them, more or less against their will. They wanted to spread it by city and we made them switch them, et cetera. But you have now incorporated them.

246   Isn't it time to treat the "A" stations just like an ordinary CTV station and sort of harmonize them as the rest? Why are we having this special provision for "A" stations?

247   MR. CRULL: I would like to pass the question in one moment.

248   But I would say we were appreciative in the tangible benefits policy that we will be applying some of those benefits to really giving the A channels a survivability, a longevity chance and we are spending a lot of time on our programming choices, on the cost structure of the "A"s and even on branding and marketing in order to do that.

249   We have a three-year period, in my mind, to get them to acceptable levels and because, if you accept from all of the work that the Commission has done in understanding the conventional system and the drivers of financial performance and conventional television, and you accept that that is a very challenged segment of our industry, the "A"s are really at the blunt end of that.

250   So we do believe that to give them the best chance for long term survivability that there is some unique needs they may have and --

251   THE CHAIRPERSON: Hence my question. I appreciate you made your submission before we approved the Bell purchase, but we have now done that. And we gave you $30 million for them, et cetera.

252   For me, that means that's the end of special "A"s, doesn't it? I mean, that's why we allowed you to use $30 million of benefits to essentially sanitize the "A" station and put them on a healthy footing.

253   So I would expect and maybe you want to redo your submission in light of that, but essentially that after three years the "A" stations are just like any other conventional CTV station.

254   MR. CRULL: Right. Well, I do appreciate that. When we apply the programming support from the $30 million it doesn't nearly offset the cash losses of those channels right now. So I think that's why we said that is a very welcome and appreciated start towards the road that we are on but it's not enough.

255   We are -- we have stepped up with that commitment from the Commission and we are upgrading our control, master control, to high definition because we know that that's important for the viability of these stations. And we also have some geographic coverage submissions that we will be working with you on to ensure.

256   But in this three-year period where we are trying to get them up, the $30 million doesn't bring them to financial viability alone. We have more work to do.

257   Kevin...?

258   MR. GOLDSTEIN: Yes. If I could just add just to clarify, I don't think we are asking for, in terms of the "A"s, any special treatment. I think there is one incidence involved in a restriction relating to crossover in one market that we have applied for.

259   But in terms of the "A"s overall, they have the same local programming requirements as any other conventional television station in their circumstances. Their revenue will form part of the overall CPE and PNI model that the Commission has outlined.

260   I know in our application we made some statements relating to the digital transition in the "A"s. We have committed it at this point now, because of the benefits package and knowing that they will be around for at least another three years flowing out of that, that we will do the transmitters and on time for August 31st.

261   So in terms of the "A"s, I think you know we are looking to ensure that they can benefit from the flexibility of the overall policy. But we haven't really applied for any sort of special treatment relating to them other than to highlight their struggles and how going forward conventional television as a whole, and specifically the "A"s, you know, are still dealing with some rocky waters.

262   THE CHAIRPERSON: What does that mean? In three years you are going to come back here and say, "I need more help for the "A" stations or I will close them?" Well, surely not.

263   I mean, this is -- if I understood it, as you say, if they are being treated the same as every other CTV station and there are no special provisions for them once we look at the conditions of licence and we harmonize them all, then essentially you have three years to make them profitable, if I understand, Mr. Crull. You are working on it and you are going to -- but what happens in three years then?

264   MR. CRULL: Well, Mr. Chairman, we would hope that we are not back with any further requests on the "A"s. I will tell you that I think that for a long time into the future and I think certainly through my hopefully long tenure in this role we are going to be talking about the conventional business, I believe.

265   I would say that value for signal is a welcome help. A dual revenue stream is vitally important and you have our submitted projections on record for where that business is going.

266   THE CHAIRPERSON: Are you internally going to integrate them? Are you going to treat them like an OTA station or are you still going to have sort of the two types of stations, the CTV stations and the 'A' stations?

267   Are you just going -- I mean, I don't care what you brand them, but I terms of your internal organization and treatment.

268   MR. CRULL: Well, I would say certainly in the new organization we have obligations for a separate infrastructure and we will respect those. I think everywhere else we will seek to have cost synergies where we can and we would not want to duplicate costs as best we can in order to get them.

269   THE CHAIRPERSON: What do you mean you have separate obligations for infrastructure?

270   MR. CRULL: For news leadership and new coverage -- and I might ask Kevin to bail me out.

271   MR. GOLDSTEIN: No bailing required.

272   Flowing out of the CTV/CHUM transaction we agreed to maintain, and these requirements are already in place between the 'A's -- and Citytv and Global and CH used to have these requirements as well -- to ensure that the news management and news presentation structures for the 'A' stations and the broader CTV group were maintained separately.

273   Richard is head of 'A' news and monitors it and ensures that it's managed on a separate basis. And those commitments will not change going forward and we haven't asked for them to be removed.

274   THE CHAIRPERSON: But that is the news part. What about the rest of the programming?

275   MR. CRULL: No, I think you are correct. I think your instinct, Mr. Chairman, is right that from a programming standpoint -- and I might ask Mr. King, Phil, to comment a little bit about how we think about the 'A's going forward in the overall programming strategy.

276   MR. KING: Thanks, Kevin.

277   We will program the 'A's like they are an extension of CTV. They are not going to be an outlier. We will look at them after the fact. We very much think of them and all programming we buy, whether it's commissioned for Canadian, foreign shows, documentaries, specials, things like that.

278   So I do believe you will see a much more integrated approach we will take to the 'A's and CTV. We have some ideas. We would be happy perhaps to discuss them with you in camera. But I think what you are getting at is exactly where we intend to go.

279   THE CHAIRPERSON: Well, I still have in my mind the statement from Mr. Fecan that you need, in effect, two distribution chains, you know, one for your very big hits and one for the sort of secondary hits which, unfortunately, Hollywood makes you buy, and so rather than putting them on the shelf you put them on your secondary chain.

280   Unfortunately, that, of course, becomes a little bit of a self-fulfilling prophecy because if it's secondary programming you are also going to get secondary audiences.

281   That is why I am pushing on this, I wanted to see to what extent you are going to integrate them so as to raise your audiences.

282   MR. KING: Yes, we intend to do that, but the challenge with that, of course, is you will be forced to pay premium prices for that just because you are going to buy a show A from the Hollywood studios, they are going to want the same price because our competitors will be bidding on that same show that would be a hit.

283   The obvious way to make the 'A's work would be to populate them with more hits and invest more money into that. That is not as easy as you think it is, but we will do so and we have a budget for it and even a promotional plan, which I think it has perhaps lacked in the past, that you will see a significant increase. So this fall that is our goal, is to give them a much more -- a fighting chance, I guess I would say.

284   THE CHAIRPERSON: My colleague Rita Cugini and I went down to Hollywood and met up with six major studios, and I appreciate how difficult your life is dealing with those people and also it was interesting, for us at least, to find out how important you are in their lives. They certainly know about the Canadian system, the Canadian rules and what they can do and can't do. It was really quite nice.

285   But back to here. So you, if I understand it, as much as possible, as much as economics allow it, you will integrate the 'A' stations into the -- have the same programming for them as CTV's?

286   MR. KING: Yes, not -- what I mean by that, not repeat programming. It will be fresh programming and we will buy the best shows that that economic structure can withstand and then we will promote them like crazy.

287   That is the magic of CTV and we are going to try to replicate that on the 'A's this fall. So we are bullish on it. We actually think it can be done.

288   There are different ways to do it. You can spend a lot on foreign programming, and the advertising market probably would not be there to support it, or you can put lower-cost programming on it and take your chances there, and that hasn't been received particularly well.

289   So we are thinking probably a hybrid model of some hits and some perhaps smaller shows is the way to go and we will find out this fall if we are successful.

290   THE CHAIRPERSON: Now, on terms of trade, if I understand, the deal is done, you are literally doing just editing. I can expect a fully signed agreement before the end of the hearing?

291   MR. CRULL: Yes, that is correct.

292   THE CHAIRPERSON: Okay. And on digital transition, I understand you are sort of our poster child, you will be there, all your stations will be converted as of August 31st?

293   MR. GOLDSTEIN: That is the plan right now. We expect to be ready for operation as of actually July 31st and we are going to be testing throughout the month of August.

294   The only market where there is some -- not concern but a bit of flex, and it doesn't actually relate to the August 31st deadline, but there has been some debate amongst industry players about moving one market first as a trial market, and I think the Winnipeg market was identified by the Commission.

295   THE CHAIRPERSON: Yes.

296   MR. GOLDSTEIN: Where our transmitter is located is affected potentially by flooding due to the Red River in the spring. So we may --

297   THE CHAIRPERSON: Sorry, no control over that.

--- Laughter

298   MR. GOLDSTEIN: So they are going to work on doing both the transmitter and antenna install in June and we are aiming for a July 1st date on that, assuming that the parties agree to go there, because I think our position has been we will endeavour to be there assuming everyone is prepared to do that. Otherwise, it is not a true trial.

299   But other than that we expect to be ready to go.

300   THE CHAIRPERSON: Yes, and I hope you and the others will do your utmost in terms of public service announcements, especially in terms of alerting most Canadians that it will not affect them.

301   As we know, it's over 90 percent of Canadians who get their programs via cable or satellite, so it will not affect them, but once they hear about the date, and they have seen the ads in the States and they know of the coupon program, et cetera, there will be massive confusion.

302   So I am counting on you and the other broadcasters to get ahead of the curve and say if you are a cable and satellite viewer, this will not affect you.

303   MR. BIBIC: Mr. Chairman, we are definitely going to do that. We are working with the industry and with Heritage and with the CRTC and we are working on an integrated plan across all the BCE business units and websites and advising Bell TV customers and product in the source stores that we own.

304   So we are working on an integrated plan at BCE and I think there has been a lot of cooperation and coordination amongst the industry.

305   THE CHAIRPERSON: And the specialty channels. My colleague Ms Cugini will have lots of questions for you on it, but sort of looking at it from a high level, especially the specialty A, they all depend on mandatory carriage, which, of course, is tied to the specialty transmitting a certain genre and having specific programming, et cetera.

306   This is turning out to be a very difficult subject. I mean we all know that this genre, this definition is difficult. The genres swap into each other. It is very hard to say where one starts and the other one ends.

307   Where do you see us going with all of this, especially now in this new world where the customer is in command? He will demand what he wants and where he wants it, and you also are competing against the unregulated industry. The OTT is obviously the most prominent but other forms too, and you made mention to that.

308   So as our largest player in the broadcasting field, what are your views on genre and genre protection? Is this something whose time has come and we have to rethink this or for the next five years are we sort of -- do you think we should carry on or what?

309   I would like to sort of have a little bit of an overview from you before we delve down into these are the specific forms of MuchMoreMusic or something like that.

310   MR. CRULL: I will pass it to Mr. Bibic in just a minute, but I think the specialty sector, as we have seen, and you talked in your opening remarks about viewer fragmentation and actually migration of viewers away from conventional into specialty, Canadians have enjoyed a tremendous abundance of programming introduced over the last decade, much of it on specialty channels.

311   I would comment that for the -- I think that your question is a good one and I think that there are many factors that are influencing specialty as such an important part of the overall portfolio, but the packaging changes and as we see the trend in the industry up and down the value chain, in many cases, those much more successful programs, either individual hits or channels, have often carried the ones that were struggling or in start-up and developing.

312   So I think that there are many factors on this part of the industry that are of interest as we go forward.

313   I will ask Mirko to comment on genre.

314   Rick?

315   MR. BRACE: Actually, I'm not Mirko, I'm Rick, but I will do the best I can.

--- Laughter

316   MR. BRACE: I think it really is a situation where over the next five years it's going to be a discussion that we are going to want to look at as we see how it all unfolds.

317   You are absolutely correct that the world of specialty has changed significantly. It is very muddied. We are starting to see people, and actually thankfully so, by virtue of the flexibility, cross over into each other's niche genres.

318   But having said that, when you look at the economics of some of the stations, although generally speaking specialty is very healthy, there are some that are actually still struggling, even in the Category A area and certainly even in the analog.

319   We are going to talk about Much a little later, so we can deal with that if you like.

320   But I think that it really is a situation of we need to look at each genre, we need to understand what the health of that specific genre is and over time determine whether or not it can become mainstream the way we have done with news and the way we have done with sports.

321   But I am not sure that that is kind of a blanket statement or a policy at this point in time. In fact, I am certain that at this point in time it is probably premature.

322   THE CHAIRPERSON: But I mean it strikes me it is becoming much more an issue of branding, isn't it, rather than genre and not exactly what you -- but what the viewer associates with your name, what you bring forward, et cetera.

323   I mean you are the owners of HGTV -- or Shaw? I forget which one. Anyway, it is a household name. But there are lots of other channels on which you can see it. But yet, you know, the brand has been created and if you think of housing or remodelling or something like that, that is the first channel you think of.

324   I mean don't we have to readjust our thinking on this one? We are going here with genre protection and specifying. I realize we are doing it right now, but I am trying to place it into context, where are we going with this, what is this going to do?

325   As you say, we have to rethink if, but should we not have an idea of where we are going even when we are doing your renewals now?

326   MR. BRACE: I think we do, but I really do think it depends on the relative health of specific services and specific genres. There are some that may be more ready to be looked at in terms of going more mainstream and others that aren't. It's just not a one-off solution.

327   You know, I think that we have seen a situation, as I said, where you can find the same programs or the same types of programs on different specialty services, but fortunately, what we have done is relied on the nature of service and the licence conditions for specialty to make sure that predominantly we stick to the intent of that particular licence.

328   So, you know, once again, I think that, you know, we try to create destinations. I think that we have been very successful in this country in doing that. Sports is probably the prime example. Discovery would be another one. There are lots of others, whether it is MuchMusic or The Comedy Network, for example.

329   And, you know, I think that for the time being, other than what we have done with news and what we have done with sports, we should probably just hold the line and discuss it and just see how it all unfolds. I just don't think the time is now.

330   MR. BIBIC: Mr. Chairman, I see two issues here.

331   One is the broader question of should genre protection continue to exist. I know one intervener -- I think it's Rogers -- asked for the Category A genre protection to be removed, I believe.

332   I think on that issue it strikes me that the Commission has already put forward a policy that says these are the criteria we will look at to determine whether, for a specific genre, the protection ought to be removed. So I think you have the framework in place to deal with that.

333   Now, you have heard Mr. Brace say that some categories aren't quite ready for that for all the reasons that he mentioned. So in those areas where the protection remains, then there is make-work, detailed work, but I think it is manageable, is to say, okay, within a specific nature of service definition, should there be modifications just to make sure that the flexibility is provided to the particular services in those genres.

334   We have come forward for some of the services to ask for some adjustments to the nature of service definition. It is to some degree work, but I think it is work that can be tackled and done effectively in the spirit of flexibility.

335   So I see the two issues in that manner.

336   MR. BRACE: I would agree with Mr. Bibic, that right now the flexibility is probably the answer. It is the kind of path to sustainability.

337   It's funny, and I wasn't going to use the MuchMusic example, but I will because I think it is indicative of what we are trying to say.

338   At face value I think that, you know, people would recognize MuchMusic as a very successful service. It is certainly recognized as a destination for music.

339   Yet, if we look at the financials of that service, since 2006 the PBIT has declined from just over $16 million down to just over $6 million.

340   So that, you know, in anybody's modelling would not be a successful business that you would look at. You would say there is something wrong there. Something needs work.

341   And so -- and we will talk about MuchMusic, so I won't dwell on it.

342   But in asking for flexibility, I think, within the genres at this point of time will, across the board, give us some of that opportunity to improve the position and get it back into a healthy state.

343   Then I think as we evolve we start talking about can we move away from genre protection into more mainstream models.

344   THE CHAIRPERSON: Yes, but genre protection, as you know, is coupled with exclusivity, and that puts a restraint on others to produce in that area and there is a cost for that.

345   Why I am asking this so ineloquently is because I really don't know where we are going here and I want to know to what extent -- what should be our overall approach.

346   You say give us maximum flexibility, but if you see this as basically, in your mindset, this is the last time we talk genre, the next time we talk about renewal we will be talking about something else, et cetera.

347   It is one approach. Do you think this is the absolute fundamental, to sort of have Canadian specialties which are different from foreign and we have to maintain it, and you would then approach it quite differently and you would try to tighten the definition and be much more careful?

348   That is why I wanted to hear from you, and the others obviously after you, what you see as your general approach. As I see it, I think it is something that is probably -- and I want to find out from you whether you agree with me.

349   This is probably the last time we will have a major hearing dealing with genres. This is something that as far as I can see in the long term is not sustainable. But I may be wrong, I may be right. I wanted to see how you see this.

350   MR. CRULL: It strikes me, Mr. Chairman, and this is -- again, you will forgive, at times it's my observations of just initially being exposed to some of these issues.

351   In genre protection what you are caring for is if there is Canadian content in particular that is trying to find its way onto channels and particular genres, and maybe there is not enough shelf space because we are protected.

352   The flip side of that is if we open protection too soon on the channels, the market from a viewer standpoint may not be sufficient to support more than one channel or two channels in the space.

353   As Mr. Brace described, that is why really the financials, the trends, the projection, and even I would submit the operation of the owners of those licences has to be explored and you could very well wind up if you open it too early that you actually eliminate the capacity that the industry has to show it, because you would have two weak players instead of one survivable player.

354   MR. BRACE: When I think about the competition we are facing -- and we all talk about online, we all talk about the over-the-tops, we talk about all of those things which are just fact -- there is another one that has been there since day one, which has been a tremendous competitor to what we have been doing here in Canada and that's the services on the eligibility list, which have the ability to morph, to change, to do whatever they want, obviously not contributing to Canadian content in any way, some of them extremely popular no doubt and helpful when it came to packaging in distribution tiers and platforms.

355   But to kind of throw open the genres now, I think we added a level of competition which is significantly greater than what we are facing at this point in time, and I still think it is a little fragile.

356   Mr. Chairman, I think that you pointed out maybe this is the last time we talk about genre protection, and we will see when we meet again in five years that could very well be the case. My cautionary note is just that I am not sure that this is the moment in time that we kind of get into that in a meaningful way. I still think we need protection for the majority of our services that now enjoy it.

357   THE CHAIRPERSON: Mr. Brace, you mentioned music and several interveners suggest it's time to open up the music service like we did sports and news and make it a competitive genre given the success of the channels and also that in effect genre stipulations are also limiting in terms of what you can do and what you can't do.

358   Any thinking of yours that The Music Channel is really the logical next area to be opened up?

359   MR. BRACE: It may very well be, but when I just -- and I already put on the record the numbers of the PBIT over the last several years, and when you see that kind of decline you have to say, okay, something needs to be done.

360   We are here today to talk about the flexibility that will hopefully get us back on the rails. I mean sitting behind me are two of the most prominent experts in this country on music television, Neil Staite and Brook Peters, and hopefully we will get a chance to hear from them.

361   But I think that we need to set the wheels in motion to be able to reprogram and do some of the things we need to do, and we have ideas that we are happy to talk about with the Commission and get that going.

362   Because to say that it's a healthy genre, that it's very successful, I think based on the numbers that we have seen, you know, it doesn't bear out.

363   THE CHAIRPERSON: Okay. Let's take a 10-minute break and then my colleague Ms Cugini will talk to you and walk you through specialty by specialty on the terms of service. Thanks.

--- Upon recessing at 1036

--- Upon resuming at 1057

364   THE CHAIRPERSON: Okay. Before I pass you on to my colleague there are two questions that staff pointed out that I didn't quite clarify.

365   Vancouver and Victoria, there is now a prohibition on simultaneous programming or similar programming, you can only have a 10 percent overlap.

366   If I understood you correctly -- Mr. Brace, who is the man beside you?

367   MR. BRACE: Mr. King.

368   THE CHAIRPERSON: Mr. King, you were trying to make sure that the programming is more similar, so in effect that's why you want to remove the 10 percent overlap prohibition; right, so that in effect the Victoria station, which is an 'A' station, can have content which is more or less the same as what is on the Vancouver station, which is a CTV station.

369   That's part of the integration that you were talking about?

370   MR. KING: Yes. I think Kevin Goldstein would be better off answering that.

371   Thank you.

372   MR. GOLDSTEIN: Yes. I think what we are trying to do with that is to allow the 'A's to fully -- 'A' channels overall to fully benefit from the new CPE sharing model because it doesn't -- unfortunately, just to backtrack for a second, what the restriction in Vancouver and Victoria does is it doesn't just impact the 'A' stations on Vancouver Island, it actually impacts all the 'A' stations because we are forced to essentially buy a common schedule of programming otherwise it would be an inefficient program buy, so by doing that and not being able to realize any efficiencies it actually impacts all of the stations.

373   THE CHAIRPERSON: Right.

374   MR. GOLDSTEIN: We would like the 'A's to be able to participate and contribute to bigger budget, higher quality, you know, productions that is the hallmark of pooling resources --

375   THE CHAIRPERSON: Okay.

376   MR. GOLDSTEIN: -- under the new policy and by maintaining this restriction essentially we are putting the 'A's on an island in terms of that new policy. So I think that is the rationale behind it.

377   THE CHAIRPERSON: Just so I understand, the net impact is to some extent, some cynics might say -- let's take Victoria and Vancouver -- Victoria becomes a rebroadcaster of Vancouver except for 7 hours of local programming.

378   MR. GOLDSTEIN: I'm not sure that's our strategy. You know, simply having duplicative programming I don't think helps the 'A' stations overall.

379   THE CHAIRPERSON: Yes. You can receive them in each other's market; right?

380   MR. GOLDSTEIN: Yes. As can the 'A' station and CTV in Ottawa and the 'A' -- you know, Barrie in Toronto which services don't have that restriction.

381   THE CHAIRPERSON: So essentially you would overlap to the extent that it makes economic sense.

382   MR. GOLDSTEIN: I think we are looking to essentially maintain the 'A's a unique voice and find some certain efficiencies in terms of program creation and acquisition.

383   THE CHAIRPERSON: And ASN, which is a funny beast out east which, as far as I can see, it's a community of communities channels. It doesn't have any over-the-air, it gets by satellite to the local communities and then distributed by the cable companies, but it reflects what happens in the various local communities.

384   So, as I say, it strikes me (a) you want to maintain it, if I understand it correctly?

385   MR. GOLDSTEIN: Yes.

386   THE CHAIRPERSON: But you would like to advertise on it, and you especially want to advertise in Halifax?

387   MR. GOLDSTEIN: The only amendment we are seeking to the ASN licence is to remove the restriction that currently limits our ability to solicit advertising in the Halifax market. We have the ability to solicit advertising in all other local markets --

388   THE CHAIRPERSON: Yes.

389   MR. GOLDSTEIN: -- that ASN serves. The rationale behind this request is that in 2009 ASN was given an additional requirement to provide 7 hours of local programming, similar to other local television stations and consistent with the Commission's existing policy in that regard is if you offer local programming you have access to local advertising. That is the rationale behind it.

390   I will pass to Ms Ali who perhaps can talk about the impact of that.

391   THE CHAIRPERSON: But wouldn't you in effect compete with your local Halifax CTV station?

392   MS ALI: Thank you.

393   Yes, there is a competition, but we need to understand the impact here and maybe a little background on the market.

394   As Kevin pointed out, we have the ability to sell locally in some of the other markets in the Atlantic. So for instance, you can have a car dealer, a local car dealer in Moncton who can actually purchase advertising on ASN, but a car dealer, a local car dealer in Halifax is unable to.

395   Now, to put it in perspective, the impact would be minuscule because for the most part -- and I won't throw a number out here, but if you look at the local advertising revenue performance of ASN it is so very small and what we are talking about for the most part in this local advertising complement of ASN is regional advertising, because that is how our rate card is set, that is our service. We are servicing the Atlantic provinces and so that is how we sell for the most part.

396   So these small amounts that contribute to the advertising budgets for ASN out of Fredericton or out of Moncton or out of Saint John are minuscule, but we do have opportunities for some of these local clients who would not be able to look at a prime time spot for example, but they look at fringe spots. They want to air on ASN and they certainly want to do in Halifax what their counterpart in Moncton can do.

397   So when you look at it and really boil it down, the demand isn't there today because there is lots of inventory available, however, at the most, you know, we are talking about a couple of hundred thousand dollars.

398   In direct answer to your question, yes, CTV would probably absorb about 50 percent of that. So we are really talking very limited opportunity here. It's not a big win, it's --

399   THE CHAIRPERSON: Excuse my ignorance. Explain to me exactly how ASN works.

400   It's satellite delivered by satellite to the local cable company and distributed.

401   MS ALI: Correct.

402   THE CHAIRPERSON: What does the programming consist of?

403   MS ALI: The programming consists of, for the most part, the 'A' programming lineup. We do 12.5 hours of local as part of -- well, 7 hours is required, but we do 12.5 which is 2 hours in the morning of breakfast television, then a noon news.

404   The other I guess difference from the other 'A' services is the fact that we do 25 hours of educational programming on ASN.

405   And our local news is a regional cast produced out of Halifax, but with stories from around the Atlantic. So we have bureaus in Moncton, in Saint John, in Fredericton, in New Glasgow and so we utilize the contributions and the input and the stories from all of those local communities and produce our newscasts, which run at 5 o'clock, which is a Live at 5 -- I'm sorry, to produce our newscasts.

406   I'm sorry, I'm kind of confusing CTV and ASN here now.

407   So ASN, back to the question, does breakfast television and noon and 25 hours of educational programming and the remainder is the 'A' programming lineup as we see in Ontario, with those exceptions.

408   THE CHAIRPERSON: Okay. The advantage if we grant you this would be, as you say, to take your example, a car dealer outside Halifax, let's say in Truro, could advertise and make sales into Halifax.

409   That's really what you want?

410   MS ALI: That's correct, yes. So they too can purchase a spot in breakfast television or in a late movie. Like I say, we are not going to change the rate card, the rate card is a regional rate card because that is what the service is.

411   THE CHAIRPERSON: But take that very example of that Truro car dealer --

412   MS ALI: Right.

413   THE CHAIRPERSON: -- he right now can advertise anywhere except in Halifax, is that the idea, on the ASN if he wanted to?

414   MS ALI: It is one service.

415   THE CHAIRPERSON: Yes. Yes, that's what I mean.

416   MS ALI: It is one service.

417   THE CHAIRPERSON: So if he buys on your ASN it will be seen in Saint John's also. It's unlikely somebody goes from Saint John's --

418   MS ALI: Absolutely.

419   THE CHAIRPERSON: -- to Truro to buy a new car.

420   MS ALI: Absolutely.

421   THE CHAIRPERSON: I see.

422   MS ALI: Yes. Yes.

423   MR. BIBIC: Mr. Chairman, that would be --

424   MS ALI: We are not allowed right now to solicit local advertising from that particular car dealer, but if that car dealer has an outlet in Moncton, we can.

425   THE CHAIRPERSON: Yes.

426   MR. BIBIC: Mr. Chairman, one of the key principles here that has changed and that led to this request in part is that now there are local programming obligations in Halifax and, as we understand the regulatory principle, if there are local programming obligations there ought to be local advertising possibilities.

427   THE CHAIRPERSON: Okay. I see.

428   MR. GOLDSTEIN: If I could just add in this example, this is not dramatically different than what the former Canwest stations that used to be Global Quebec and Global Ontario did at their last renewal where they opted to become Toronto and Montreal stations, moving from regional programming requirements to local programming requirements and being given access to the Montreal and Toronto markets for local advertising purposes.

429   THE CHAIRPERSON: Okay. Thank you.

430   Rita...?

431   COMMISSIONER CUGINI: Thank you, and good morning.

432   Before we move into the specific requests that you have made to alter your various specialty services I, too, have a couple of general questions that deal with the whole concept of nature of service because, as you know, it is a regulatory tool imposed as a condition of license to define a genre in an attempt to provide program diversity in the system, ensure that each service remains distinct and determine whether one service is competitive with another.

433   It's within this context that I want to discuss the changes that you have requested to your nature of service.

434   Sure, taken individually it could appear that you are simply refining -- or you called it "adjusting" in your oral presentation this morning -- what you want to do with each of those specialty services, but when taken as a whole it could be argued that it's more than just tweaking. In fact, intervenors in these proceedings have said as much.

435   I understand that you believe that these amendments will allow your specialty services to grow and attract a wider audience and remain competitive in an increasingly fragmented broadcast landscape, you want flexibility, I get all that.

436   But why should the Commission entertain amendments that could potentially lead to more broadly defined specialty services?

437   MR. BRACE: I think, Madam Commissioner, you know, kind of simply stated, it's because we are seeing exclusivities kind of being attacked anyway. What is happening here is, with the abundance of programming available on many programs the ability to go, for example, to the Internet and watch many of the programs that we carry on our specialty services and others for that matter, has meant that we are competing on a broader base.

438   In order to meet that head-on what we are endeavouring to do here is to stick with our nature of service -- albeit we were calling it tweaking, it may be perceived as something greater elsewhere, but we are calling a tweaking -- in order to give us a broader ability to do a couple of things.

439   Number one, to increase our audiences and doing that by actually appealing still the core demographic that we appeal to with the service that we have in there by preaching to the unconverted, if you will, and hopefully bringing them to our service to give them the ability of -- you know, let them enjoy the genre that we deliver.

440   "Much" is a great example of that, where we appeal to a young adult audience whose interests are broad, who can find much of our programming, particularly with the music videos, as we have pointed out, virtually all of the music videos, on other sources. As the system evolved they are evolving away from watching television.

441   I'm concerned that, you know, the Canadian broadcast system is in a bit of peril here if we don't kind of create the flexibility -- and I know that the Commission has been very much in favour of flexibility to allow us to both repatriate and also bring in the unconverted back into the system. As I say, "Much" is a great example of that as we have seen significant audience decline and significant migration to other platforms. They are leaving the broadcast system and they are young adults. Once they are gone, they are gone. How do we get them back? How do we keep them?

442   COMMISSIONER CUGINI: Mr. Brace, you said "broadly", which doesn't mean "niche" any more and could potentially morph into general interest --

443   MR. BRACE: Perhaps "broadly" --

444   COMMISSIONER CUGINI: -- and we will end up with a -- we may end up with a specialty television sector that is mainstream and not specialty any more.

445   MR. BRACE: And perhaps --

446   COMMISSIONER CUGINI: It's not just semantics.

447   MR. BRACE: Perhaps "broadly" is too broad, but I think that it is -- that is why we are referring to it as tweaking, to just adjusting it a certain extent, which is consistent with what has happened with a lot of services.

448   As you say, there is kind of an evolution to kind of a more muddied water out there. But I still think we need to kind of protect what we have created so far.

449   Just in thinking about the Chair's question before the break on are we moving to a mainstream environment, you know, further to that, I guess when you look at the very fragile situation, I would suggest, with our digital services, which fight on a daily basis to gain carriage -- and they are not guaranteed carriage -- obviously they battle for subscription fees; they rely very much on -- if they are going to grow, on gaining greater subscription. Because of their small audiences they are not able to do anything from an advertising standpoint, their audiences are extremely low, yet they are fully competitive. They are kind of the other end of the mainstream, I mean they are mainstream in a different way by virtue of what they are able to do.

450   What we are suggesting is that "broadly" is too strong a word -- thank you for pointing that out to me, Commissioner -- but we do need to kind of meet what's happening head-on in order to keep people within the system, because we are seeing them leaving the system.

451   MR. GOLDSTEIN: If I could just add two comments --

452   COMMISSIONER CUGINI: Sure.

453   MR. GOLDSTEIN: -- just to step back for a second.

454   First, I think historically when the Commission has looked at these matters in terms of when services are looking to make changes or tweaks to their requirements and their nature of service definitions, what the Commission looked at was whether or not those services were becoming directly competitive with another service. And I think in the case of what we have asked for specifically in the case of MuchMusic and MuchMore, I think it's quite clear that no other licensee has actually identified any competition there.

455   Then the other thing, too, just to go back to your specific question about broad-based services, I think at present and throughout the history of the licensing of specialty services nature of service definitions have kind of been all over the map.

456   I think there are certain services, for example like a "W" or a TVTropolis that have very, very broad natures of service and access to a very broad range of programming, whereas other services have more niche oriented genres and then there are some in the middle. I think what should be guiding, I guess the policy guidance here, is: Is what we are asking for going to ensure that our services, you know, still operate within their license genre overall and are they going to become directly competitive with someone else who has genre protection at this point in time?

457   I think as we get into the discussion it will become evident that the answer is that what we are doing is totally within the policy that's set forward.

458   MR. BRACE: I think, Commissioner, that what we want to make sure of in everything we do is that there are safeguards in place to make sure that happens. That's when we discuss the music --

459   COMMISSIONER CUGINI: I know you guys are chomping at the bit to talk about Much and MuchMoreMusic.

--- Laughter

460   MR. BRACE: You know what, and I know you are a music lover, Commissioner.

461   COMMISSIONER CUGINI: We will get there. We will get there.

462   MR. BRACE: I know you are a music lover and I'm kind of new to this portfolio so I'm learning some of these bands now and understanding a little more.

463   COMMISSIONER CUGINI: Maybe I will see you at a radio hearing.

464   MR. BRACE: Which is why I brought the experts.

465   COMMISSIONER CUGINI: All right.

466   I have one more general question before we get to Much and MuchMore and that is, again taken as a whole some of your requests, drama seems to be playing -- or you want drama to play a much bigger role going forward in Bell Media's programming strategy.

467   Can you explain -- you know, I have examples here. Book you want to increase from 35 to 50 percent and no restriction on when that drama can be aired; you are asking for the 25 percent restriction on U.S. programming to be deleted; MuchMusic, you want it to increase from 15 to 20 percent.

468   So how is that going to contribute to program diversity in the broadcasting system?

469   MR. BRACE: Once again, it's very difficult to talk about it in totality because each of those has an answer, a different answer to it.

470   What I would say that in some cases we have shelf programming that's not available -- and we can talk about that -- that would be very popular, it would at least help some of our services.

471   In the case of the increase you mentioned from 15 to 20 percent, really that's tweaking based on the fact that we have gone from a 24-hour day to an 18 hour day. When you do the math it's exactly the same amount, so it's not incremental in effect, it's getting us back to where we were.

472   So I don't know that I can answer the question of "in totality". Each of them has to be looked at individually, I believe, to really have a discussion and determine why we are doing it and, by the way, making sure that everything we are talking about either is a slight change from the nature of service, as with the Much that we are going to talk about with the 15 percent difference, or that it actually, in the case of Book conforms to the Book nature of service and we have lots of examples we can give on that.

473   COMMISSIONER CUGINI: Okay. I didn't want to pick on one show over another, but it's just going to serve as an example when it comes to program diversity.

474   CTV Network airs Grey's Anatomy. Does this mean that last week's episode of Grey's Anatomy might show up on Much and on MuchMoreMusic followed by a Snow Patrol video?

--- Laughter

475   MR. BRACE: I will start it off, but I --

--- Laughter

476   MR. BRACE: I'm sorry, what was the second example, I missed that?

477   COMMISSION CUGINI: Snow Patrol.

478   MR. BRACE: Snow Patrol.

479   COMMISSIONER CUGINI: It's a group.

480   MR. BRACE: I'm going to pass it to Phil King on --

481   COMMISSIONER CUGINI: There's a music question for you.

482   MR. BRACE: -- because we were talking about conventional and specialty here.

483   What I would say is that particular example we can talk about. It's not to suggest that nothing that CTV might do might not show up on Much, but generally speaking to the tune of 85 percent it's got to relate to music if it does.

484   But I will just talk -- you asked about Grey's Anatomy so let's talk about that.

485   MR. KING: Yes. That particular show would not because it wouldn't fit the age demographics and the branding we are trying to accomplish for Much.

486   I don't have a show at the top of my head, but if there was a show that -- boy, if you want to go back to the '70s, like "The Partridge Family" or something where it was kind of a comedy show, it featured music and a band, that type of show -- I'm really aging myself here -- perhaps that show would make some sense out of MuchMusic going forward.

487   And no, we are not in negotiations for "The Partridge Family".

--- Laughter

488   MR. BRACE: And Snow Patrol could conceivably show up on CTV.

489   COMMISSIONER CUGINI: Okay.

490   MR. KING: In their own bus.

491   COMMISSIONER CUGINI: All right. Here's your opportunity, we are going to talk about Much and we are going to talk about MuchMoreMusic at the same time because your asks are very, very similar.

492   As you know, intervenors have said that the changes you have requested really are not justified and it alters, in their words:

"...the station's initial raison d'être and it appears that the music genre has been weakened because of the move away from music related programming and the drift towards teen oriented lifestyle programming." (As read)

493   How do you respond?

494   MR. BRACE: I would suggest that what we have seen -- first of all I would say that industry, broadcast industry intervenors were not opposed to this, it's music industry most specifically, just to make sure that that is on the record.

495   But what I would say is that we have no intention of evolving away from our nature of service and becoming a music service. We are putting the safeguard in there, suggesting the safeguard of 85 percent in order to achieve that. So lifestyle programming may become a component and I'm going to turn to Mr. Peters here in a moment to kind of give you some examples so that we get some colour as to what we are doing.

496   But what we are attempting to do is say: All right, our young adult audience, 70 percent has gone somewhere else. They are not watching music videos with us. Yes, they may be coming back for other programming, but 50 percent of our schedule is made up of music videos and we have had a 70 percent decline in audience. That's clearly not working. We have to acknowledge that. That's just a fact of life.

497   What we want to be able to do is then say: Okay, what is working? We know that programs that we do from our $5 million investment that we made on the corner of Queen and John, a brand-new HD studio, 5-to-1 audio-ready, bringing bands in, letting them perform, giving them national exposure, a crowd in the studio, people on the street, that's the kind -- that's the kind of thing that's really giving passion to our service and it's working.

498   It's shows like "disBAND", which has now become "Discovered", where we bring a professional mentor from the industry and put them with a new band, let them understand the recording industry, develop them and hopefully get them signed. We have had success there, it has actually happened. It has actually seen positive results.

499   Those are the types of things that we want to do predominantly in our schedule for the 85 percent, with the remaining 15 percent being shows that relate to that young adult audience, lifestyle shows -- sorry, social interest shows, that type of thing.

500   But I really want to turn it over to Brook Peters here who programs the networks and maybe have Neil Staite, who has been with the service for 22 years and has seen the evolution, to really describe that what we are doing is not evolving away, we are evolving with our audience, making sure that we can keep that young adult audience directly involved in the music industry and specifically the Canadian music industry.

501   So I will turn to Mr. Peters first. Brook...?

502   MR. PETERS: Thank you, Mr. Brace.

503   Yes, we are going to be looking to some non-music related programming that does appeal to a young adult audience. We are very passionate about speaking to that audience and giving them meaningful product on our network and to bring them to music as well.

504   We will be looking to the production community to bring us new ideas in this area. A great example would be a new young adult scripted serious in the vein of our number one rated Canadian series Degrassi, but in this case it may not have a direct music relation, however it will speak to the experience of being a young adult in Canada today.

505   Additionally, we will be looking to our robust and nimble in-house production team to be producing series and specials, as Mr. Brace mentioned, about social issues of the day. We could be -- we could be doing specials about mental health or the impact of bullying or exploring the ins and outs of social media which has become such a relevant topic to young adults today.

506   Additionally, we see pop culture as being intrinsically linked to the music industry so you could perhaps see a show on our network focused on fashion which, while not directly music related, is certainly ancillary to music trends over all.

507   COMMISSIONER CUGINI: What's the difference between what you have just described being on MuchMusic as opposed to what would be on MuchMoreMusic?

508   MR. PETERS: Specifically we would be talking about the demographic of who we are talking to. We would be targeting the shows to an older audience on MuchMore. You could see the same types of programming as I have outlined here in terms of examples, but it would be skewed older for MuchMore.

509   MR. BRACE: Here is an interesting point because I have talked about the 70 percent decline in audience on Much for music videos. We have seen much less of a decline on MuchMore for music videos thus far because it's an older demographic, there is still that culture there. But obviously what's going to happen is people are going to take their habits with them as they grow older and we see, certainly within the terms of this license, that those that are young adults watching MuchMusic are going to hopefully move to MuchMore and we have to be able to respond to that in a proactive way in order to make sure that we can keep them in the system and keep them watching our service.

510   COMMISSIONER CUGINI: So if I understand your proposal correctly, if we were to approve the amendments that you have requested on Much and on MuchMoreMusic, your audience may see fewer traditional music videos, but they may see more live bands that have -- that have been recorded live in your studio, more interviews with bands, more background material about the bands and about the music.

511   Do I have that correct?

512   MR. BRACE: That's absolutely correct.

513   And I don't want to give the appearance that we are abandoning music videos, we are obviously keeping a certain percentage on the services. But what I would point out is that we have evolved and we have reacted to what has happened with the music video industry, it's online. I mean that's where people go.

514   Vivo, which is one of the biggest music videos sites -- and I'm sure you are aware of it, Commissioner Cugini, a conglomeration really of the music labels -- they are really the source for videos. That's now were videos are premiered. They used to be on MuchMusic, not any more, it's moved there.

515   In response to that, to just make sure we put a fine point on not abandoning the music video portion of our schedule, on much.ca we have over 14,000 videos available. So we are still supporting that portion of the industry, you know, through that kind of a process and clearly that's working for us. People can go, they can watch, they can set up their own playlists, it's obviously when they want it, and so we have evolved with our audience and I think that's what we are really trying to -- if we haven't made that clear I will have felt that I haven't achieved my objective today.

516   MR. STAITE: I think if I could just add something, Mr. Brace.

517   You know, in the past few years I think we would all acknowledge that there are concerns with our music industry partners, they have seen a tremendous shift away from the purchasing of music to piracy and things like that. That has also affected their bottom line and their ability to partner with us to be able to support some Canadian artists. We are out there now we are doing a lot of the door-knocking ourselves to find these emerging artists.

518   Mr. Brace's example of "disBAND", which is now called "Discovered", we are very happy to say that we were instrumental in the launch of three to four Canadian bands over the past two years, including the band Stereos, which within 24 hours of airing the Stereos episode of "disBAND" was top 10 on iTunes, ended up selling a gold album and just shy of 300,000 digital singles. Those are the types of partnerships that we are entering into now.

519   In my 22 years I have seen tremendous, tremendous change, from bags of letters arriving on the desk every morning, where you would open them and people would request a video to be played, to a sneak review show where people would run home and set their VCRs so they could see the latest Duran Duran video.

520   And one I think really important note I would like to mention, and it really supports the intervention from John Brunton at Insight where the Internet has now surpassed television to be the place to watch videos. In 1991 we aired the premiere of the Michael Jackson video Black or White. This was a global event, it was seen in over 27 countries and had over 500 million viewers. You won't see that now, but you will see 500 million views of the Justin Bieber video "Baby" on Vivo.

521   MR. BRACE: When I juxtapose that, Commissioner, to the type of programming that really works for us, we look at the MuchMusic Video Awards. You know, it was informative and instructive to understand that more than seven million people watched that in aggregate on all of the plays and the fact that the impact it had on the industry.

522   Adam Lambert, his album sales were up 22 percent only a few days after the airing of that; digital track sales, Down with Webster up 36 percent. I mean there is a laundry list of achievements that those kinds of shows can drive where MuchMusic, you know, the videos clearly are not having that kind of an impact. It's that type of success that --

523   COMMISSIONER CUGINI: Let me ask you this, though: You also operate MTV and MTV2, so taking those four services as a whole, how are they going to be distinct one from the other with the programming that you have just described?

524   MR. BRACE: Probably the best way once again is to talk about the programming, so I will pass to Brook Peters here in a moment.

525   But just in general terms, Much and MuchMore are predominantly music and of course on the MTV and MTV2 side it's about talk.

526   So, Brook, if you want to take it away.

527   MR. PETERS: Thank you, Mr. Brace.

528   Yes, exactly as Mr. Brace has stated, the programming and the programming strategies that we have in place now are not going to change over time. We are going to be looking at focusing completely on music on Much and MuchMore and we are going to be looking at talk programming in terms of MTV. We don't see any reason to bring music programming over to the MTV services in any way.

529   MR. BRACE: And on reflection, just to once again put a fine point on it, to this point in time we have not crossed programmed those services. While it's true that some MTV programming, MTV Live for example does, air on MTV2, we have not really cross programmed. It's not to say there might not be a show that's in that 15 percent and relates to social issues that might not make sense on both and relate to both, but that has not been our kind of method of operation thus far for sure.

530   COMMISSIONER CUGINI: We will talk about overlap once we have finished with also the asks on MTV.

531   Just a couple of smaller points that don't go to your overall programming strategy, but you also want to eliminate the requirement that 5 percent of the total number of music videos distributed shall be in French. And you know l'ADISQ has opposed this request.

532   Why don't French-language music videos make sense on MuchMusic any more?

533   MR. BRACE: I think that, you know, that requirement is probably as old as the station is, from September of 1984, when it was launched with TSN as the first two specialty services.

534   Once again, the environment has changed vastly since then. We now have French music stations. We have MusiquePlus, which is available, particularly now, on digital, nationally, across the country. Therefore, the relevance -- with all respect, by the way, to the francophone music industry -- is not there.

535   Our viewing to the French music videos, as with all videos -- if it's down 70 percent for all videos, of course, it is virtually non-existent for the French music videos.

536   So, really, the place for the French music videos, especially at the level of 5 percent, we think has now been eclipsed by the fact that there are French services available.

537   COMMISSIONER CUGINI: You also want to cut in half your contribution to MuchFACT.

538   MR. BRACE: That goes, once again, back to the whole music video question. I think we have some interesting concepts there.

539   While music videos are still -- and I don't want to downplay the importance of music videos, I really don't. They are still very important to the music industry, but several changes have happened.

540   First of all, the cost of producing a music video has vastly declined over the years, mainly because they are targeted for the internet. It's a smaller screen, it's a different application. You can do a music video, at the very low end, for a couple of thousand dollars now, if you want, where they were high-end productions -- and still some are. That is Point No. 1.

541   I think that the other thing, in terms of MuchFACT, is that we think we can still, by investing 3.5 percent of the 7 percent that we are obligated to do, do music videos. With the remaining 3.5 percent, what we want to do is commit that to the independent production community to go out and produce programs like Disband and Discovered. That is where the relevance is. That is where we are able to grow interest in the music industry. That is what is resonating.

542   What we would like to do, especially from a broadcast standpoint -- because, really, when I look at what MuchMusic is, we want to attract people to our service, to viewing our linear service at this point in time.

543   We acknowledge the benefit and the value of online, but at the end of the day, it is really driving the ratings and driving the interests, particularly in Canadian music, with MuchMusic and MuchMoreMusic that is vitally important.

544   So we thought that by reshaping that -- we would spend the same amount, just use it a little bit differently -- it would have a greater impact than what it is achieving now.

545   COMMISSIONER CUGINI: If we could translate that commitment to a Condition of Licence, you would accept that?

546   MR. BRACE: Absolutely.

547   COMMISSIONER CUGINI: Okay. Let's move on to MTV Canada. As we know, it was originally licensed as Talk TV. It has been re-branded to MTV Canada, and we don't take issue with re-branding, but, as you know, intervenors have suggested that there has been a significant move away from the original licensing intent of MTV with the inclusion of reality shows.

548   I said I wouldn't do this, but let's do this. An example that was given was Jersey Shore, and I think that Pimp My Ride was given as an example as well.

549   How do you respond, and why do those shows fit within the mandate of MTV Canada?

550   MR. BRACE: Once again, I am going to turn to Mr. Peters and Mr. Staite to discuss this.

551   We should call them, I guess, Brook and Neil. Being that we are in the music industry here, there are no misters, are there.

552   We actually dealt with this in a letter that was addressed to Mr. Scott Hutton, on August 27, 2010, who asked these very questions. I think there is some information in here that is valuable.

553   We have established our own criteria for what determines whether it's talk or not. There are really three points, and I will read them very quickly, because they are short: shows that feature unscripted forms of conversation; shows that feature direct address to the audience; and finally, shows that are organized principally around talk.

554   We, in our own determination, say that if we meet one of those points, then we consider it to be talk television.

555   But I will turn to my folks back here for a more fulsome discussion.

556   MR. PETERS: Another area that we like to look at when looking at MTV and the talk genre is, we like to say that we are celebrating on the network the art of conversation, and the shows that you have pointed out do exactly that and meet the mandates, as Mr. Brace pointed out.

557   Jersey Shore, obviously, is nothing but conversations between young people, whether that is a direct address to the audience or candidly captured on camera to one another.

558   And, of course, your other example was Pimp My Ride, and it's the same example, with the direct address being to the audience. They are the actual interviewer. There are just implied questions of what they are overseeing on the show.

559   COMMISSIONER CUGINI: So unscripted forms of conversation equals reality?

560   MR. PETERS: I think we are saying that unscripted forms of conversation equals talk.

561   COMMISSIONER CUGINI: And talk can take the form of reality shows.

562   MR. PETERS: Yes.

563   COMMISSIONER CUGINI: CP24. You want to change from "with a focus on southern Ontario" to "of interest to regional viewers, with a primary focus on southern Ontario."

564   Quite bluntly, what is the difference?

565   MR. BRACE: It is really that we are coming to you with an abundance of caution on this one.

566   There are certain types of shows that we are contemplating doing that we want to make sure the Commission is comfortable with.

567   I have my colleague here, Bob McLaughlin, who actually runs CP24, and he is going to give us a couple of examples of just what we mean, but just in broad terms, what we want to be able to do, and make sure that we are capable of doing -- and have the blessing of the Commission -- is to have programs on CP24 that may be produced outside of Toronto, and may have content that is from outside of Toronto -- and I should say southern Ontario to be more correct, actually -- but that actually relate to southern Ontario.

568   It is that nuance that we are really talking about. We are not trying to pull a fast one in any way, we are really trying to just kind of refine what we want to be able to do, with an understanding that it does have to relate, and it does have to be relevant to a southern Ontario audience, but it may also be an issue that is very relevant to another area of Ontario.

569   COMMISSIONER CUGINI: You talked about programming from outside Toronto, and it prompted me with the question -- today, when I watch CP24, its tag line is "Toronto's Breaking News". So could it not be argued that you have already strayed from your focus on southern Ontario?

570   MR. BRACE: No, I think what we are talking about is something a little bit different, and maybe by giving you an example --

571   Bob, with your permission, maybe I will give the example, if you are okay with that.

572   MR. McLAUGHLIN: Sure, go ahead.

573   MR. BRACE: For example, Native land rights or Native fishing rights in northern Ontario. For people who have cottages in southern Ontario, the Toronto area, who travel up the 400 on a weekly basis, the real estate value, the availability -- any issues that are in that area. Even local politics in that area, whether federal, municipal or provincial, are of interest to the people of southern Ontario.

574   That could be determined if we were to have, for example, a panel discussion that came from Sudbury and talked about issues in that region. If they have relevance to southern Ontario, we want to be able to do that.

575   That is really what we are asking for.

576   COMMISSIONER CUGINI: Why can't you do that today?

577   Because it says, "with a focus on southern Ontario."

578   MR. BRACE: I think that the initial concern came from an example that we looked at some time ago, the example being eTalk, where we had talked about -- or the Commission, in its determination, had said that we could have that category of licence, which was Category 11 -- I don't want to mix terms here, but Category 11 -- we would be able to have that, but we would not be able to show programs like eTalk, which are national in scope.

579   We sat there and looked at it and said: But wait, we didn't really do enough due diligence on this with the Commission because --

580   COMMISSIONER CUGINI: Mr. Brace, stick to your example of the real estate prices in cottage country. Why can't you do that today on CP24 with the Nature of Service, as described?

581   MR. BRACE: It is because we are concerned that the Commission would view that as producing programming that is of interest and relevant to northern Ontario, in that example.

582   We would be in the situation where we would be consistently coming back and saying: Well, no, here is why it is relevant to southern Ontario.

583   It is just to get that little nuance.

584   COMMISSIONER CUGINI: So regional viewers are defined as viewers in all of Ontario?

585   Do you understand? You are asking us to change --

586   I will repeat it. Currently your Nature of Service says, "with a focus on southern Ontario." You want to change it to say, "of interest to regional viewers, with a primary focus on southern Ontario."

587   MR. BRACE: Because there would, in my example, be an interest in an area outside of southern Ontario, but it would still have relevance, I think, to southern Ontario as well.

588   That is what we are trying to achieve.

589   COMMISSIONER CUGINI: Okay. It's not because you are requesting -- you want to be in a position to provide regional feeds.

590   MR. BRACE: What we are not looking to do is provide programming that is specific and only relevant to an area outside of southern Ontario. We are not trying to achieve that.

591   COMMISSIONER CUGINI: All right, but let's work with this regional feeds concept that you have.

592   Of course, when I read this change that you are requesting, I was going to ask you whether or not you believe that that one change in your Nature of Service would allow you to provide these regional feeds on a market-by-market basis, which you have also requested.

593   MR. BRACE: Oh, no, no. That is something completely different.

594   COMMISSIONER CUGINI: They are two separate requests.

595   MR. BRACE: Yes. I am sorry for the confusion there. They are two very separate things.

596   What I am referring to, for those of you who are familiar -- and I am sure that all of you are -- with CP24, is the television portion of the screen. It's what is on television, not the surround, which is the other issue that I think you are referring to.

597   COMMISSIONER CUGINI: All right. So we are going to have to unpack this.

598   Pick a market in which you would want to provide a regional feed. What am I going to see on the screen?

599   MR. BRACE: With that, I am going to turn to Bob McLaughlin for a couple of examples.

600   MR. McLAUGHLIN: I want to be careful when we talk about regional feeds. What we are talking about is -- our main programming would remain the same throughout our entire broadcast area of southern Ontario.

601   What we are talking about is the information, the text or graphic information, that borders our main programming.

602   Let me give you a couple of examples that would enhance our main programming. And these are examples -- I get a lot of phone calls from viewers saying: Why can't you, in your text information on the bottom of the screen, be a little bit more relevant to my local community?

603   And that might be the Eid celebration in Mississauga -- that was one call I received, saying: Can't you tell us what time it is going to start in Mississauga and where it is going to be located?

604   Or, just this morning I made a phone call back to the office, and we received the call: Why can't you put text on that the canal bridge near Brantford may be under water and I may have to go another 20 kilometres out of my way?

605   That local piece of information is really local for that specific area, and it is not something that we would generally now put on the text or graphic information.

606   We want the ability to have specific text information for the various communities we serve, to enhance the information we give them.

607   COMMISSIONER CUGINI: What do you need from us to accomplish that?

608   MR. BRACE: That is the point. I will turn to our regulatory experts, particularly Mr. Goldstein, on this particular point, but we believe that, because it is alphanumeric in nature, it is unregulated, so we would have the ability to do it now. We just wanted to bring it to the Commission for their information.

609   Kevin, if you would like to add something, by all means.

610   MR. GOLDSTEIN: I get worried when Mr. Brace is very eloquent in his regulatory explanations. That is exactly right. The digital content that is surrounding, whether it's the enhanced screen on CP24 or TSN or The Score or The Weather Network, has never been regulated content. We just, at our licence renewal, wanted to indicate to the Commission what our plans are going forward, potentially. That was the only reason it was referenced. It's not an approval that we feel we require.

611   THE CHAIRPERSON: I don't understand this at all. My colleague said that instead of "devoted to news and information, with a focus on southern Ontario," you want to say, "devoted to news and information of interest to regional viewers, with a primary focus on southern Ontario."

612   That's a mile wide. I'm sorry, the Calgary Stampede deals with horses. There are lots of horse people in southern Ontario, so it's of interest to people in southern Ontario.

613   Don't tell me this is just a minor modification. This completely changes what you can put forward.

614   And every time we would have a debate with you as to whether or not this is of interest to the viewers.

615   MR. BRACE: Mr. Chair, it is not the biggest issue on our plate, and based on the concern and the debate that we have had today, and the discussions, we are prepared to withdraw that request.

616   COMMISSIONER CUGINI: I think the Chair should intervene more often.

--- Laughter

617   MR. BIBIC: We kind of got there before he intervened, though.

618   COMMISSIONER CUGINI: Thank you.

619   I just need to go back for a second to the issue of regional feeds. Again, intervenors have put forward that this is not something that you can just do and it doesn't require Commission approval; in fact, you need to file an amendment to your licence in order to accomplish this.

620   You don't agree, obviously.

621   MR. GOLDSTEIN: I think you are referring to the Pelmorex intervention?

622   COMMISSIONER CUGINI: I am.

623   MR. GOLDSTEIN: We reviewed the decision that Pelmorex cited in their intervention, and that decision, I think, is distinguishable on its facts. I think in that decision what was at issue was the program listing service that was on Shaw, available from a cable provider, and the debate was whether or not the entire service was a programming service because of the mix of video and alphanumeric text.

624   In our instance, we have never, at any point, argued that CP24 is not a programming service. It is. Essentially, what we are saying is that the enhanced surrounding screen is not something that is regulated content, just like, as I indicated, for other specialty services -- and there are many of them -- as well as conventional television channels that offer digital content layered over, whether on a ticker or bottom third of the screen -- the Commission has never looked at that as regulated area. That is our point here.

625   We are at no point saying that CP24 is not a programming service. Obviously, in the main window, which occupies the majority of the screen, the content will remain unchanged from feed to feed.

626   COMMISSIONER CUGINI: Let me move on to The Comedy Network. You are requesting that Category 7(c) and (d) no longer be 100 percent Canadian.

627   When we included these two categories in 2006, we stated fairly categorically that the change would allow The Comedy Network to play a greater role in the creation and broadcast of Canadian drama, without increasing competition for the acquisition of foreign programming.

628   So why this change? Why this change now? And could this not mean, potentially, that The Comedy Network will be populated with just more American sitcoms?

629   MR. BRACE: No, not at all, Madam Commissioner. That is not the intent.

630   Once again, this goes back to flexibility. We are, I think, in the situation where, based on the amount of available Canadian programming, we are into a situation with more repeats than we really think is beneficial to the system, and we would like a little bit of flexibility in this particular issue, and particularly with the animation portion of our request.

631   I think what has happened there is, we are seeing an abundance of animation programming being produced now that would be of interest to our audience. It is targeted to an older demographic. When I say older, I mean adults, I don't mean children -- shows like -- well, The Simpsons has been around forever, South Park, Bob's Burgers -- Odd Job Jack is one that we produced here in Canada -- and American Dad!

632   We believe that this would be beneficial to our audience and kind of add value to our service. So we are asking for some flexibility there.

633   COMMISSIONER CUGINI: But, again, as you know, when this was first approved, it was in the hope that it would stimulate that sector of the industry, as far as Canadian broadcasting is concerned. Have we failed in stimulating that?

634   MR. BRACE: I don't think so at all, with the amount of programming that we have delivered, whether it's stand-up, whether it's many of the programs that we have done on the comedy channel. I think that we have really supported the Canadian comedy industry.

635   I think that when you have programs with the profile that we have talked about, the ones we acquire, it brings people to our service and it does give a lot of exposure to the Canadian performances and programs, like Odd Job Jack, which we have had in the schedule historically.

636   So, no, I think that what you want is a robust schedule that appeals to the demo that is looking for comedy and can really drive promotion to the Canadian content that we are putting on there.

637   We obviously meet our conditions of licence. That is certainly not an issue. We will obviously continue to do that, that's a guarantee.

638   This just gives us a little bit of ability to make our service more robust.

639   MR. GOLDSTEIN: If I could just add a couple of additional points, I think that one of the unique aspects of the comedy channel is that, while it has genre exclusivity and it is a comedy specialty service, almost all specialty services have the ability to air comedy, because comedy, in and of itself, is scripted programming, and a lot of conventional television competes for comedy. TVtropolis competes for comedy, W competes for comedy -- many, many, many services air comedy.

640   The Commission recently approved a request by Bite TV, a Category 2 digital service -- a Category B service -- to air an additional amount of comedy programming. That is sort of a move they have made, in terms of what they are doing.

641   In addition, under the BDU Specialty Services Review Policy, all category specialty services can now source at least 10 percent of their programming from these categories, and have no such restriction relating to U.S. programming.

642   So I think what we are looking to do, just as Mr. Brace said, is gain a little bit of flexibility, to try to improve the schedule for the channel.

643   COMMISSIONER CUGINI: The other side of the coin, though, is that we will end up with more of the same. We will end up with more of what everybody else is doing, as opposed to comedy providing that niche service, in terms of Canadian produced --

644   MR. BRACE: I think it is the opposite, quite honestly, Madam Commissioner, in that we are now doing a lot of repeats. We want to eliminate the number of repeats we are doing and get fresher programming into the schedule. So a greater variety is really the ambition here.

645   That is going to drive audience, repeats aren't.

646   They are available online. Once again, they are available on other services. That is not going to do what we need to do.

647   COMMISSIONER CUGINI: I am going to move on to ESPN Classic and ESPN Classic 2. Here you want to redefine classic sports from events that occurred 18 months ago to 6 months ago, and you are asking for the ability to air up to 5 percent of all programming to be coverage of live and tape-delayed sporting events.

648   Now, those two taken together, how do ESPN Classic and ESPN Classic 2 maintain their distinctiveness, especially the latter?

649   MR. KING: We don't have an ESPN Classic 2 service.

650   COMMISSIONER CUGINI: I thought you did; sorry.

651   MR. KING: No. Perhaps we should --

652   COMMISSIONER CUGINI: Okay, just ESPN Classic.

653   MR. KING: We could think of one.

654   COMMISSIONER CUGINI: No, that's okay.

--- Laughter

655   MR. KING: You might have to give us until after lunch, though.

656   Thank you for the question. First, we don't think that these changes are going to change the nature of the service. What they really are -- they are requested simply to serve the viewers. The best way to explain it would be with some examples of why we need this and why we feel --

657   Sports fans have been asking for this, frankly, for as long as I have been with the network, and that has been over 20 years.

658   Let me address the live portion first. The live portion will be used -- and I would note that, at 5 percent, I believe it's the lowest percentage of almost any network. Many networks that don't even have sports as a genre or service are allowed to air some sports. So we have taken the request down, basically, as low as it can go.

659   That's when we have what I call triple conflicts. When we purchase programs -- I will give you an example. On a particular Sunday afternoon, we can have a CFL game, a NASCAR auto race, and perhaps a golf event. You don't buy each show individually, you have to buy 72 CFL games, 20 car races, and perhaps the U.S. Open golf championship; and Canadian networks, and TSN specifically, do not have the ability to adjust the times or the end times, they just come to us when the Americans schedule them.

660   From time to time -- about 5 percent of the time -- we run into a problem: All right, which sport needs to be underserved?

661   What I mean by that is: Which sport can we not air live.

662   We have TSN. TSN2 has been a tremendous help in alleviating a lot of these complaints, and it's easily the biggest complaint that we get at TSN: Why is my car race live, but I have to watch tennis at midnight?

663   There is nothing more annoying to people than when that happens.

664   So we do have these extremely rare occasions where we have three events, and add on top of that the unpredictable nature of sports. You may think that you have a golf tournament at one o'clock. It has been raining in the morning and they have delayed it by three hours. Now you have created a conflict on a moment's notice, and nowhere to deal with it.

665   So Classic was allowed to air a very minimum amount of sports. I think it averages less than one hour, which means that we are not going after an event today. We are not trying to morph it into TSN3. If that's what we wanted, we would do so.

666   COMMISSIONER CUGINI: You would kind of need our permission to do that, but go ahead.

667   MR. KING: The other issue that you asked about, I believe, was: Why change the definition of classic sports from 18 months to 6 months.

668   There are two reasons. I will use the Grey Cup as an example. Often, during the week of a Grey Cup -- that is on TSN, and we do lots of fresh programming around it -- we air a historical look back at Grey Cups. Our viewers can't understand why we wouldn't air last year's Grey Cup, since that is the most relevant one. We are not allowed to. We have to basically say: I know that was a great game, and classic in your mind, but we have to air that game the following year.

669   When you get a year out from an event, people kind of expect to be able to see that, because it's kind of in the news, and we are promoting it, and they kind of want to relive that moment before this year's Grey Cup.

670   I would also mention that when you ask people what their definition of classic sports is, everyone has a different idea. Some people will think of it as black-and-white footage from the sixties. Some people will think of it as a game a week ago that was just a classic game: Did you see that game? It was great.

671   So if we are able to change -- that would fall under live portion. Often TSN1 and 2 are jam-packed with new live events.

672   Again, if I use the Grey Cup last year, which was a terrific game, normally, if we had these conditions of licence, we would repeat that Grey Cup perhaps on the Monday night -- it happens on a Sunday night -- for anyone that missed the game, or heard the game was great, maybe they were out of town and couldn't catch it, or they just want to relive the memories because their team won.

673   We are prevented from doing that, predominantly because TSN1 and 2 already have schedules that day, and we just can't do it.

674   I would also mention that there have been an awful lot of sports events that migrate over to YouTube and the internet -- instantaneously.

675   So, by the time the 18-month wheel rolls around, if I use the Grey Cup as an example, it has probably been up on YouTube for 18 months, and anyone who cared has kind of gone outside the system to watch it.

676   So we are trying to get people in the system and not get used to watching sports -- as opposed to creating a kind of piracy-type problem. This would alleviate that, as well.

677   COMMISSIONER CUGINI: The next one --

678   THE CHAIRPERSON: Before you leave this one, you are telling me that a live game is classic?

679   MR. KING: No, a live game is not classic.

680   THE CHAIRPERSON: You want a 5 percent --

681   MR. KING: Yes, the 5 percent -- the reason we are asking for that is to alleviate viewer concerns.

682   If we are not able to get that, what happens is, we have to tell sports fans that the golf match they wanted to watch at three o'clock on a Sunday, that got in the way of a CFL game and a car race -- they have to be happy with that at midnight, because we don't have a third outlet to air it on.

683   There is just no solution to that, outside of a very minor change --

684   THE CHAIRPERSON: Don't you think you are going a bit over the top to say that a live game is classic?

685   I mean, this is a channel dedicated to classics. By definition, it has taken place.

686   I am willing to do some mental gymnastics, but to suggest that live coverage is a classic game is pushing the limit a bit.

687   MR. BIBIC: Mr. Chair, I think there are two issues. One is to redefine classic from 18 months to 6 months --

688   THE CHAIRPERSON: Yes, I understand that.

689   MR. BIBIC: The other one is not to suggest that a live game is classic, it's just to allow this service, ESPN Classic, to air 5 percent of live sports; not because it falls within the definition of classic, it's just 5 percent, a little amount, to allow for alleviating programming -- triple conflicts.

690   It's not to tie it to some definition of classic.

691   THE CHAIRPERSON: This is something that you have paid for already, and you don't have a place to show it?

692   MR. BIBIC: If there is a triple conflict.

693   THE CHAIRPERSON: You can't show it on your OTA, and you can't show it on TS1 and TS2 and --

694   MR. KING: No, that's the issue. If we could, we would do that, because we would maximize audience and revenues.

695   The only time this comes up is when the other two networks already have existing sports, or those sports have gone long, or there has been a rain delay, or -- anything else can happen in sports.

696   And looking at the over-the-air, often that wouldn't be available as well. They could be in the middle of showing a psychodrama or a movie. You can't crash into it to air the last 30 minutes of a car race. That would be very awkward for viewers.

697   This really just speaks to, frankly, taking care of something that is very annoying to sports fans.

698   What is even more annoying, frankly, is, with all the sports networks that are out there, there is no solution for this. It's not like we can call our competitors up and say: Hey, on 10 minutes' notice, would you like to air the last 30 minutes of a car race? I have tennis starting up.

699   Those conversations don't go well.

700   THE CHAIRPERSON: The last 10 minutes? Not the entire game?

701   It doesn't say anything here about your 5 percent being reserved for, in effect --

702   MR. KING: My example was when a car race has gone long because there have been lots of accidents and --

703   THE CHAIRPERSON: I understand the example, I am just looking at your Terms of Condition of Licence. You said 5 percent, you didn't say 5 percent for overtime games --

704   MR. KING: No, it is not just overtime games.

705   THE CHAIRPERSON: -- or unexpected --

706   MR. KING: No, some of these could be scheduled a year out, and there is still no solution for it.

707   THE CHAIRPERSON: You bought something that you don't have time to show, and now you want to squeeze it in on the classic.

708   MR. KING: No. It's that you have done a three-year deal for NASCAR races, and you don't know what day and time they are going to be scheduled for the next three years -- and the same with tennis, and the same with golf, and the same with CFL football.

709   THE CHAIRPERSON: You are switching horses on me. I can understand the NASCAR race that goes longer than expected. If you know that you are going to have a schedule months ahead, then you can resell it to somebody else. I don't know why you have to show it on ESPN Classic.

710   MR. KING: You can't resell one car race out of an 18-race package. We wouldn't have the sub-licensing rights, necessarily, to do so, and our competitors aren't going to be interested in a one-off car race if they air no car racing, just like we wouldn't be.

711   THE CHAIRPERSON: No, but, then you have programming choices to make as to what you are going to show on that day, et cetera. I mean, I don't see why we should accommodate you. This is a channel dedicated to classics. It's in the A category, I presume. Right?

712   MR. KING: It's a B Category. It's a B Category. It's a B.

713   But, again, if we are denied this request, we will simply be in the same boat we have been in for 20 years.

714   THE CHAIRPERSON: Yeah, I want to understand the consequences of the denial. How is the viewer going to suffer?

715   MR. KING: They will suffer because they will have to -- one of the three sports will have to be picked on and will have to be not shown live because we have two sports networks and that third sport will have to be tape-delayed into the later evening or late night at midnight.

716   And what it will do, it will drive those viewers off the television system and onto the internet and figure a way to see it anyway.

717   THE CHAIRPERSON: That's clear. Now, I understand that. Thank you.

718   MR. KING: Yeah.

719   THE CHAIRPERSON: Rita, back to you.

720   COMMISSIONER CUGINI: Discovery Science, which as we know was originally licensed as Civilization, you are requesting -- I'm going to characterize it as a substantial change to your nature of service. The exercise I went through was trying to figure out what the difference is going to be between this service and Discovery.

721   MR. BRACE: Mr. Goldstein is going to take this.

722   MR. GOLDSTEIN: I think I will try from the regulatory perspective and then maybe Mr. Brace or others who deal with Discovery group can add it.

723   I think this is actually -- is best characterized as a very minor change. I think obviously the Discovery group of services have sort of a science focus overall. This one is Discovery Civilization, was its original license. This is simply really a re-branding exercise.

724   You know it's airing programming that, you know, is both consistent from a Civilization perspective but also you know that deals with sort of scientific developments from the past and consistent with the Civilization.

725   So it's not -- it's a very, very minor change that I think just is intended to sort of better reflect the programming overall in the service but it doesn't in any way change the overall focus.

726   COMMISSIONER CUGINI: All right.

727   Let me ask you this. If somebody comes forward with a Category B application using this nature of service will the Discovery channel intervene against it?

728   MR. GOLDSTEIN: Category B services have no genre protection.

729   COMMISSIONER CUGINI: I understand that but what I'm saying is if somebody comes forward with this nature of service will Discovery main channel intervene against it?

730   MR. GOLDSTEIN: Kevin, do you want to take that?

731   MR. BRACE: The answer is no.

732   COMMISSIONER CUGINI: Okay.

733   Fashion Television, you want to reduce the Canadian content from 50 to 35 percent and this is a Category A service. I understand your rationale that this type of programming has very short shelf life, but you have to give me a little bit more to justify the reduction in Cancon from 50 to 35.

734   MR. BRACE: Thank you for the opportunity, Madam Commissioner.

735   Yes, we are looking for a reduction. The issue we are facing with Fashion TV is a tremendous lack of available programming with respect to fashion from the Canadian market.

736   Despite the efforts that we have made in kind of looking for concepts, over the last four or five years we have only been able to acquire 127.5 hours of programming.

737   This is not unlike what happened with Discovery Health where the Commission, you know, looked and based on its policy of treating each service differently to understand just what might be available in terms of programming relevant to the service, established a level of Canadian content. So that's the precedent that we are relying on.

738   You are right. It has a very short shelf life. There is very little programming of this nature available in Canada.

739   We need to look to foreign markets in order to more -- better reflect what this service is intended to do. That is why -- you know that is really at the foundation of what we are looking to do here and why the ask is present.

740   We have got a service that is appealing to very few viewers. We have got a service that obviously has very low distribution and I think that where we are going with this is we need to somehow embellish the service in order to get it to a point of sustainability.

741   Because, quite frankly, now it's existing and, I'm embarrassed to say, existing on subscriber revenue and I don't think that that, you know, is in the interest of either the service or the system and this would give us the opportunity to do that.

742   COMMISSIONER CUGINI: And since we have changed our policy in terms of the program categories from which you can draw programming you don't feel confident -- and therefore we have expanded, as you know, the number of categories from which you can draw programming and you cannot fulfill that 50 percent Cancon with all 14 program categories available to you?

743   MR. BRACE: No, and our concern here goes back to the fundamental concern that you raised in earlier discussions on does that mean it -- you used the word "morphed". Is it going to morph into something that's competitive with another service?

744   And I believe that based on the nature of service we have and sticking to the fashion objectives that we are trying to achieve, that really even with the flexibility that you have given us, and the fact that they have to be fashion-related, that we really do need some -- we really do need, you know, the ability to program more foreign programming in order to make this service sustainable.

745   COMMISSIONER CUGINI: What if we don't approve your request?

746   MR. BRACE: Then my concern is that, you know, we are in this situation where -- and I hate to use this term and especially on the record, but we are more or less harvesting.

747   Because our inability to program it effectively, to drive you know a schedule that is based on repeats -- and I'm talking four or five or six times -- you know, four or five times a day the same show is repeated and we see that. That is a very old style-specialty format that's put out, you know, some kind of a wheel that was three or four hours. It just was repeated.

748   It has very little relevant or resonance with audiences and I think that would put us into that kind of a situation. We want to be able to grow these services and we are asking for relief in order to do that.

749   COMMISSIONER CUGINI: Okay. The last service I'm going to talk about is ACCESS and I'm going to start with a follow-up question.

750   Mr. Goldstein, in response to the Chairman's questions regarding digital conversion you said that you would -- that you guys are going to meet all the deadlines but I believe I read in response to deficiencies perhaps that you will not be converting the digital transmitters for ACCESS is that correct?

751   MR. GOLDSTEIN: Yes. ACCESS is one of those interesting anomalies like ASN that the Chairman indicated earlier as a satellite-to-cable undertaking.

752   It's unique in that, unlike a local television station, which without a transmitter doesn't have a license effectively, the transmitters that ACCESS has currently are rebroad transmitters in Edmonton and Calgary. They are not core to the service overall, nor are they core to actually the service's carriage rights under the regs.

753   So when we looked at it overall, especially given the challenges ACCESS is facing, whether or not you know we should make the investment to digital transmitters. At this point we had to indicate that the answer was "no", especially because the service will continue overall as a satellite to cable undertaking.

754   Is that something in the future we might look at? I think it would depend on the fortunes of the service at the time and whether or not we are granted the relief that we are offered in this --

755   COMMISSIONER CUGINI: Do you know how many households in Alberta receive ACCESS over the year and will therefore lose the service if you do not?

756   MR. GOLDSTEIN: I can get that information. I don't want to say go from memory but we can get that.

UNDERTAKING

757   MR. GOLDSTEIN: I don't know, Lloyd, do you...?

758   MR. LEWIS: Not exactly. I think it would be consistent with a lot of over-the-air viewing. But I don't know the exact number, no.

759   COMMISSIONER CUGINI: Now, we understand that it's been since 2008 that the Alberta government no longer funds ACCESS, correct? But you still have the provincial designation as the educational service. Correct?

760   MR. GOLDSTEIN: That's correct.

761   COMMISSIONER CUGINI: All right.

762   Do you have current documentation confirming that designation from the Alberta government? Do you have -- like is that updated on a yearly basis?

763   MR. GOLDSTEIN: The documentation is essentially -- was an Order in Council from either '95 or '96 and it is something that does not need to be renewed. It would have to be withdrawn.

764   COMMISSIONER CUGINI: It would have to be withdrawn?

765   MR. GOLDSTEIN: Yes.

766   COMMISSIONER CUGINI: And that can be withdrawn on your initiative and/or the Alberta Government's?

767   MR. GOLDSTEIN: No, I think the Alberta Government would be the one who would --

768   COMMISSIONER CUGINI: To have to withdraw, all right.

769   Again, you are proposing changes which some of the interveners in these proceedings don't support.

770   So let's talk about the first one which is at the core of ACCESS and that is the amount of educational programming.

771   You want it reduced from its current level of 60 percent or 75 hours approximately per week to 42 hours a week. And as you know, at least one intervener has said potentially that just means a programming block, a morning programming block, and then you could do anything you want for the rest of the day.

772   So how do you plan on fulfilling the educational mandate with such a reduction in the number of hours of educational programming?

773   MR. GOLDSTEIN: I think I will ask Mr. Lewis to talk about that.

774   MR. LEWIS: Thank you.

775   I think that we have found with our discussions with the Alberta Government, and I think what is consistent with other educational broadcasters, is that preschool programming is really the most relevant forum of educational programming. Alberta, as we have suggested, is one of the most wired jurisdictions in North America.

776   The reason that they privatized, I would suggest, ACCESS, back in the mid-nineties and have subsequently cut all funding, is because they don't see that as really a very valuable mechanism with which to distribute curriculum-based programming.

777   They do, however, recognize the value of preschool programming. It supports Success by Six which is one of the Alberta Government's key mandates and is a very safe place for a parent to put a young child in the morning and have them develop any number of good skills.

778   As far as the rest of the service goes, we certainly see educational programming in the afternoon. We continue to carry Question Period which is -- and to be very honest, the Alberta Government does give us some money for that.

779   They pay us a certain amount of money to carry Question Period which is roughly 80 days out of the year. But that is strictly a pay-as-you-go kind of scenario. It shouldn't be considered funding.

780   We also have a number of other -- I think what we really see happening, in my view, is that we need to evolve what is educational television. I mean, we have lost $4 million. So in order to replace that, we need to do some things to give us some flexibility.

781   But I think more than that, you know, the notion of using that valuable medium, again to try to deliver programming, formal education programming that is available through broadband into every school system in the province, really doesn't have a lot of relevance.

782   I think that we can take this service and evolve it dramatically to bring educational messaging in the form of educational interstitials which we talked about in our application, if you will, connectors that will connect an audience to all kinds of educational opportunities moving forward.

783   We are going to see our province move from a resource-based economy into a knowledge-based economy over the next two decades.

784   We need to find ways to prepare that workforce and to educate that workforce and I think that ACCESS in discussions that we have had with the Alberta Government and both Ministries of Education, they are very excited about trying to find ways to engage our population more on what types of educational opportunities are out there, what is going to be needed and not to deliver formal education programming.

785   So I guess that's it. We see 42 hours primarily of 25 hours of preschool which is a very important key component to early childhood development and is a great way to use television and then K to 12 in the afternoons and on weekends.

786   The rest of it, you know, Alberta Primetime has been a significant addition, I believe, to the -- if you want to call it the educational system in Alberta. It is touted by any number of politicians, stakeholders, movers and shakers in the province. It has a very unique mechanism by which to have public discourse, which is unique.

787   It is provincial in nature and is not available anywhere else. In fact, to my knowledge I don't believe it's available anywhere in Canada.

788   So that's been a significant contribution. It's been an expensive contribution and one that we would like to see enshrined in a licence moving forward over the next five years.

789   To do all of that we need some flexibility, we need to make some money and I believe that that's one of the best ways that we can go ahead.

790   COMMISSIONER CUGINI: Now I do acknowledge in response to deficiency questions that you have committed further that the educational programming would come from Categories 5A and B, which is formal and informal education.

791   MR. LEWIS: Yes.

792   COMMISSIONER CUGINI: And you will accept that as conditions of licence?

793   MR. LEWIS: Yes.

794   COMMISSIONER CUGINI: Of the 42 hours how much will be preschool?

795   MR. LEWIS: 25 hours.

796   COMMISSIONER CUGINI: 25?

797   MR. LEWIS: Yes.

798   COMMISSIONER CUGINI: And to go further along in your response, you did talk about the definition of educational programming and you were asking for removal of the condition of licence that requires the programming fit the definition of educational programming as it is stated in the direction.

799   So I guess the question is why should you still continue to be the provincially-designated educational service with mandatory carriage?

800   MR. LEWIS: Kevin, do you want to take a round at that and I can follow up?

801   MR. GOLDSTEIN: Sure, sure.

802   If I could just offer two comments on that, our plans and Lloyd can go into more detail about it, were developed in conjunction with the Alberta Government in terms of the way they see this service, you know, fulfilling its mandate and the educational goals of the Province of Alberta.

803   COMMISSIONER CUGINI: I don't want to interrupt you, but just to be clear, the plans as you have presented them in this renewal have been discussed and approved by the Alberta Government?

804   MR. GOLDSTEIN: They have been discussed by the Alberta Government. They have endorsed them informally.

805   I don't believe that it requires any kind of formal approval on behalf of government to do so. But they have definitely been involved in our discussions and we have worked with them to develop -- to structure the service in a way that meets their objectives.

806   COMMISSIONER CUGINI: So in no way did they indicate that should these changes be approved, that you could potentially lose the designation?

807   MR. GOLDSTEIN: Absolutely not.

808   The second reason is that, I think, if you looked specifically at the SCN decision, I think the Commission has recognized that there are, you know, situations in which educational broadcasters can look to source programming from a range of programming and their restriction and their licence is very different from the one that we have in ours in terms of being a source of that programming consistent with the definition in the direction.

809   So I think that's the rationale.

810   I don't know. Lloyd, would you like to speak a little bit more about our relationship with the Alberta Government?

811   MR. LEWIS: Well, we have worked -- we have discussed our plans with government fairly extensively and the one thing that we have found a great deal of excitement about is around the concept of educational interstitials. They see that as a real opportunity to engage our entire province.

812   You know, another -- I'm trying to think of the best way to describe it but I guess the notion of formal education programming, as I have already said, I don't think it really has a lot of relevance on television anymore. It is being delivered in many, many different ways.

813   So I guess that's why we are suggesting to remain as an educational broadcaster and have relevance to our educational system we need to evolve and this would allow us to do that.

814   COMMISSIONER CUGINI: Another restriction that you currently have is the type of drama that ACCESS can broadcast and you want that COL to be deleted as well.

815   So can you tell me, give me a couple of examples of what type of drama you see complying with the mandate of ACCESS?

816   MR. LEWIS: Sure.

817   COMMISSIONER CUGINI: And making sense for your viewers?

818   MR. LEWIS: Well, I think that what you would find is that our schedule wouldn't dramatically change this year to next year.

819   Right now we are able to classify dramatic programming as educational if we can connect it to a formal course study, a formal piece of curriculum through a post-secondary institution.

820   COMMISSIONER CUGINI: And that is the part you want eliminated.

821   MR. LEWIS: That is what we would like to eliminate because really, if you think about it, a student who is perhaps studying a forensic sciences program at MacEwen University, there is maybe 35 of those students.

822   But if we wanted to try to engage our audience on what the concept of a global economy is, and how Albertans will need to re-educate themselves or further educate themselves moving forward to fit into that global economy, we can reach a far greater group of people and a far greater group of stakeholders than just that small group that might be trying to get into a course at NAIT, or the Northern Alberta Institute of Technology.

823   So I just think it's a way to use the service in a much more valuable way to support education.

824   COMMISSIONER CUGINI: It still doesn't tell me what kind of drama you would like to -- you would --

825   MR. LEWIS: Okay. Let's use -- as I say, I don't think our schedule would change dramatically from what you are seeing today.

826   We run drama now. We just don't want to -- I want to do away, I guess, with the exercise of connecting it to a course of study and use those resources and invest more in those resources to produce connectors, connective programming that will have more relevance to our audience.

827   COMMISSIONER CUGINI: So that could be anything.

828   MR. LEWIS: So it could be anything, yes.

829   COMMISSIONER CUGINI: Okay.

830   MR. GOLDSTEIN: And just to be clear, that's no different than the flexibility that was granted to SCN late last year.

831   COMMISSIONER CUGINI: Right.

832   French-language educational programming, you air an average of 2.5 hours a week of such programming currently. Will this continue --

833   MR. LEWIS: Yes.

834   COMMISSIONER CUGINI: -- going forward?

835   And you will accept that as a condition of licence?

836   MR. LEWIS: Yes, I think that we would.

837   COMMISSIONER CUGINI: Another restriction you would like to have removed is the restriction on advertising.

838   MR. LEWIS: Yes.

839   COMMISSIONER CUGINI: CTV has a huge presence in Alberta --

840   MR. LEWIS: Yes.

841   COMMISSIONER CUGINI: -- between conventional television, even radio. What impact is this going to have on the incumbents?

842   MR. LEWIS: Very, very small. And I will maybe get Elaine Ali to speak a little bit on this.

843   But I can tell you that the valuable inventory that we are trying to -- is in primetime. Again, we have lost $4 million. We need to replace some of that money in order to remain valuable in any way, shape or form. CTV obviously would be probably the primary loser in that migration of dollars.

844   And, again, this is a very, very small, small piece that we are talking about.

845   Elaine, do you have anything further you would like to...?

846   MS ALI: Yes, just to provide a little bit of background, as Lloyd said, we lost the government funding of $4.3 million in 2008. We bought service in 2007, so just put it in perspective.

847   Then you know when you look at some of the funding and support ACCESS is not eligible for LPIF funds. ACCESS will not be eligible to participate in the value-for-signal potential dollars. And ACCESS was also not included in the Bell benefit package proposal.

848   So the only form of revenue that ACCESS has is advertising revenue. We have a restriction right now going from 12 to 14 minutes for example in that limited number of hours that are actually valuable and, in terms of the advertising clients, we are looking at an impact to the market of less than $800,000 in a $250 million advertising market, so 0.3 percent if you boil it down.

849   Given that CTV in Edmonton and Calgary are a major player, as you point out, Commissioner Cugini, you know, we would absorb a good portion of that, at least 50 percent of that.

850   COMMISSIONER CUGINI: You have talked about the 14 minutes. You have offered 14 minutes in response to deficiencies as a limit on the per hour number of commercial advertising.

851   Will you accept that as a condition of licence?

852   MR. GOLDSTEIN: Yes.

853   COMMISSIONER CUGINI: One final question -- and I can say it's final because it's not an open-ended question. It will be a yes or no answer.

854   Our staff, at that table, have been going crazy on search engines looking for the Alberta Order in Council designating ACCESS as the provincial educational service. Can you file that with us?

855   MR. GOLDSTEIN: I am sure I can dig it out in some old CHUM email from way, way back.

UNDERTAKING

856   COMMISSIONER CUGINI: Excellent, thank you very much.

857   Those are my questions, Mr. Chair.

858   THE CHAIRPERSON: Thank you.

859   Just one clarification, you said when we were talking about MuchMusic you love the show disBAND and it's been great, et cetera. You can produce it now. Why do you need a change to your COL now to do it in the future?

860   MR. BRACE: No, we don't want to change that program. In fact, we are very proud of it.

861   THE CHAIRPERSON: Yes.

862   MR. BRACE: What we are talking about is doing shows like that but with the independent production community through the use of the MuchFACT money that was the --

863   THE CHAIRPERSON: But you are doing it now. So what's stopping you? Why do you need any permission from us? I didn't --

864   MR. BRACE: No, just because we would be using the MuchFACT money which is designated only to music videos. The shows like disBAND Discovered are not music video shows. They are more documentaries on the development of bands. So it's a different type of program.

865   MR. GOLDSTEIN: I think -- sorry, just to add to that, we are actually trying -- I think Mr. Brace was indicating earlier was half of our schedule is music videos.

866   I think what we are looking to do is if we are successful in our request to lower the amount of music videos, how we are going to fill that space. I think, as we indicated, part of it will come with complementary programming that is not specifically music related.

867   The other part of it will come with programming like disBAND Discovered and more live shows from the Much environment and things like that.

868   THE CHAIRPERSON: Okay, thank you.

869   Steve...?

870   COMMISSIONER SIMPSON: Thank you very much, Mr. Chair. I have about 40 minutes or so of questions. How would you like to do this? Would you like me to ask a few now or what --

871   THE CHAIRPERSON: Okay. And then of course my other colleagues may have some questions on everything Rita went through.

872   Steve was going to deal with primarily production and you were going to let me know before we break for lunch where you are in terms of numbers.

--- Pause

873   MR. BIBIC: I think we would need -- the team who is working on this will need until about, I would say quarter to 1:00 to be able to produce something for the panel to -- this, our witness panel, to review and then we will review it over the lunch.

874   THE CHAIRPERSON: Okay. Why don't we then just do it after on what Rita and I covered so far?

875   I will let my other colleagues have a couple of questions. Let's go through that and after lunch we will start with Steve who wants to deal with production issues and then we will go into camera on the numbers.

876   So that should give you enough time. Okay?

877   MR. BIBIC: That is fair. Thank you.

878   THE CHAIRPERSON: So Len, you had a general question?

879   COMMISSIONER KATZ: Thank you, Mr. Chairman. Good afternoon.

880   Mr. Crull, I guess, I would ask you this question. Bell Media is all of four days old. The Board of Directors of BCE have entrusted you with a three-plus billion dollar asset and it's been about eight weeks since we met in this same room where BCE asked to purchase the assets of CTV and we went through and evaluation and, I guess, PWC was your evaluator and actually identified a value to over-the-air assets that you purchased, the quantifiable value worth hundreds of millions of dollars.

881   I read a submission that you filed as part of your application called "The Uncertain Future of English-Language Private Television in Canada" and it basically talks to a never-increasing loss of value on conventional television and it basically says in an executive summary:

"English-language private conventional television is projected to sustain losses throughout the term of the renewed licences which is five years."

882   And then if I direct you to Figure 14 on page 18 of that same Armstrong Consulting Document, there is a picture there of the next five years of revenue expenses with increasing losses year over year for five years, painting a terrible picture.

883   And I guess my question to you is, as CEO of this company, surely you don't subscribe to that and I don't think the Board of Directors of BCE suggested that you were buying something that had no hope for the next five years of turnaround.

884   Yet, why did you file this? What was the significance of filing this document that basically said this thing doesn't float?

885   MR. CRULL: Yeah, thank you, Mr. Vice Chair.

886   Well, certainly, there are many sources of numbers and management projections for the business would differ from the numbers that you see in the Armstrong report.

887   I think that the Commission is well advised to look at the assumptions in the Armstrong report and to appreciate, I guess, the financial impact and the operational impact of many of the developments in the industry that we all acknowledge.

888   What the Armstrong report does is tries to quantify the cumulative effect of each of these playing themselves out. And I think that it is, while a dire picture, I think that it is a very reasonable picture of a potential industry evolution.

889   As management it's our obligation and it's our job to intervene in trends and to make operating changes and to try and offset those pressures. So management's forecast for the business; in fact, what was submitted to you, would differ from this and that relies on management interventions to what is happening.

890   However, Mr. Vice-Chair Katz, I would submit that -- and we will probably go into this in a little bit more depth in camera -- that the conventional business among the many things that I have become appreciative in my new job and had really my eyes opened to, is this is a very, very significantly-sized business both in terms of viewing in contribution to the broadcast system and, yet, it is a business that remains in financial dire straits, whether you accept it's as bad as the Armstrong report shows or even management projections.

891   COMMISSIONER KATZ: But as an executive in BCE and running this, do you support the forecasts that are in here?

892   MR. CRULL: I support that the drivers in the business are very real drivers which are fundamental -- that viewer fragmentation that advertising shifts to new media, that the potential for loss of viewers to unregulated OTT services -- I absolutely do support that those are facts in the business that we have to deal with.

893   You have had an opportunity to see Mr. Cope. I don't think that I would submit a view of a business plan to Mr. Cope that would have all that played out and not have management interventions to support that $3 billion asset that we got him to kindly purchase for us.

894   COMMISSIONER KATZ: Okay, thank you.

895   I want to talk about the unintended consequences that may exist as the result of group-based licensing over five years. We are looking at hypothetically a five-year term for all your assets to fit into the definition that we have defined, Category A, Category B over a million, et cetera.

896   What happens if during the term of the agreement you or anybody else falls out of compliance? How would you see the CRTC dealing with issues like that?

897   I will give you an example. I mean you suggested your position is that all the licensees have the same CPE. Hypothetically we all agree with that and someone in year two or year three does not meet that requirement.

898   How would you see us dealing with those types of issues?

899   MR. BIBIC: The way they have been dealt with traditionally. You have a show cause hearing and you --

900   THE CHAIRPERSON: Come on, you know what this is, he wants to hear the word "AMPs".

--- Laughter

901   MR. BIBIC: I know, but he doesn't have AMPs and I'm not a parliamentarian or a legislator, so I can't give him AMPs.

902   So within the construct of the Broadcasting Act you have the tools you have.

903   COMMISSIONER KATZ: But do you think there is value if in fact the Commission does support your view that everybody should be treated the same and for whatever reason someone does not, that there needs to be something done other than having a show cause hearing where they come in and basically say mea culpa and off they go?

904   MR. BIBIC: It is clear that if there were AMPs, the Commission would have a more effective tool to deal with these kinds of things, but I don't think we throw up our hands because there's no AMPs and say, therefore, there will be no rules or one group gets a lower threshold than another.

905   I don't see the connection there that the issue --

906   COMMISSIONER KATZ: It is a matter of someone being in breach of the rules, whatever the rules are.

907   MR. BIBIC: We are not approaching you here today, sitting here, asking you for a five-year licence with a contemplation that we will be in breach.

908   I can't argue with the principle that AMPs would be more effective for the Commission to deal with non-compliance, but I also wouldn't say that our request that everyone be treated the same be contingent on the existence of AMPs.

909   COMMISSIONER KATZ: Okay. So here is a typical example. I have in front of me here some statistics that indicate that during the last licence term, I guess, particularly the last couple of years, CTV has not met their Cancon requirements for two of their programs, MTV Canada and The Comedy Network.

910   First of all, I guess the question is why have you not met them?

911   MR. GOLDSTEIN: We actually have met all our conditions of licence obligations relating to our specialty services. This analysis was sent to us last Thursday. We maintain a fairly robust program obligations department who tracks all Cancon exhibition requirements for all of our services.

912   The issue as we understand it is a common one as it relates to both specialty services and conventional television ones and relates to missing "C" numbers in the logs.

913   And essentially we track all those missing "C" numbers and update them as they come in, but as I understand it, essentially the logging system that the Commission employs does not allow us to input that as an issue. So when it runs it through the system and spits it out, it shows us in non-compliance.

914   I can actually tell you that against your chart, because we did our own.

915   So the CRTC calculations have for MTV Canada during the broadcast day at 66 and a half, the COL is 68, and according to our calculations based on our knowledge of the programs it's 68.74.

916   In terms of MTV Canada in the evening period, the CRTC calculations have 69.26, the COL is 71, we are at 72.35.

917   In the case of The Comedy Network, the issue related reportedly to the broadcast day, where the Commission's numbers have us at 55.95 percent, the COL is 60 percent, we are at 60.96 percent.

918   And with respect to SPACE, where the issue was the broadcast day and the Commission's numbers had us at 48.27 percent, the COL is 50 and our actuals are 50.46.

919   So we're actually in full compliance with our licence. And over time those "C" numbers as they get certified and come in get updated in the logs and the logs get resubmitted. So it is not actually an issue of non-compliance, it is simply a logging one.

920   COMMISSIONER KATZ: Okay. But this is an example of situations that aren't overly material in the overall five-year licence term, but there are going to be situations like this or others that may come before the CRTC and that is why I was propositioning that maybe there are other things to do other than a black and white show cause hearing to deal with these issues as well and that is where the reference to perhaps there is something that is more appropriate for the cause, like AMPs.

921   MR. BIBIC: You have my answer on the AMPs.

922   THE CHAIRPERSON: Okay. I gather your answer is Bell Media advocates AMPs if the Parliament sits --

--- Laughter

923   MR. BIBIC: There is a proviso to Bell Media's support of AMPs and I don't know if this is the place to --

924   THE CHAIRPERSON: No, no, but seriously, my colleague poses a question. It is a very cumbersome process to go with show cause hearings, and for some of these minor things an AMP system, however, structure would be a more efficient way to deal with them.

925   MR. BIBIC: In principle it's clear the answer is yes, and the question of support from Bell Media for something like that depends on the scope of the AMPs, does it apply in broadcasting only or telecom, what are -- you know, the due diligence defence, what is the extent of the AMPs and does it come with a quid pro quo in the sense that, you know, to have very heavy-handed micro-regulation on top of it, afterwards AMPs or is it, okay, there is more of a reliance on -- or more flexibility in the case of the Broadcasting Act and more of a reliance on market forces in the Telecom Act and that comes with AMPs.

926   It's all those considerations --

927   THE CHAIRPERSON: I take it that in principle you support it, but the details need to be worked out?

928   MR. BIBIC: Correct.

929   THE CHAIRPERSON: Thank you.

930   Peter?

931   COMMISSIONER KATZ: One more question.

932   THE CHAIRPERSON: I'm sorry.

933   COMMISSIONER KATZ: Just to clarify that as well, I mean obviously as we move towards an ex post regime providing all the operators, whether it's telecom or broadcasting, with more flexibility, that is a tool that can be used to deal with it after the fact as opposed to an ex ante where there's higher-handed regulation obviously, as you can appreciate?

934   MR. BIBIC: That is a fundamental trade-off from BCE's perspective.

935   COMMISSIONER KATZ: My last question has to do with accessibility.

936   If I can direct you to a submission that you made, I think, as part of all the responses to interrogatories, December 6th. It was with regard to captioning overnight programming and there was a question about would you provide overnight captioning of your programming. I will just read you the sentence which is on page 10 of your response.

937   It says:

"However, for a limited amount of programming that airs overnight that is not captioned, CTV is not in a position to ensure that all this programming will be captioned." (As read)

938   What does that statement mean?

939   MR. GOLDSTEIN: I think what we are doing is relying on the Commission's overall closed-captioning policy in the first instance, which essentially says that captioning is required during the broadcast day and licensees should provide captioning overnight where available.

940   Obviously, significant amounts of our programming that air overnight are either repeat programming or programming provided to us that is already captioned. So obviously we pass through that captioning.

941   For a limited amount of programming that would be provided to us in a non-captioned format, to actually caption that would require additional staff, additional resources and additional expenses in a period where there is very limited viewing.

942   So we are not in a position at this time to commit to 100 percent captioning of that period. It is a small amount that isn't. So that is what that answer is intended to --

943   COMMISSIONER KATZ: But you are prepared to comply with the accessibility policy that comes into force presumably with the five-year renewal?

944   MR. GOLDSTEIN: Absolutely.

945   COMMISSIONER KATZ: Okay. Last time was it was PNI, and we are not going to get into PNI specifically other than there have been a number of participants who have asked us to clarify what would be reported on the template that we talked about.

946   So I am going to ask the Secretariat to file on the public record a revised template and ask you to take a look at it over the hearing process and perhaps come back in Phase III with your comments as to whether you are prepared to accept the revised template. Okay?

947   MR. GOLDSTEIN: Okay.

UNDERTAKING

948   THE CHAIRPERSON: Thank you.

949   Madam Secretary, you want to take this document?

950   Peter, you have some questions?

951   COMMISSIONER MENZIES: Yes. I just have some questions on ACCESS.

952   You know, I don't get it, in terms of what you mean by redefining educational. It seems to me that the Alberta Government made a choice a few years ago that educational services had moved to the Internet and got out of the business of doing it in television, and what we have here is an educational licence without really a mandate to do educational work from anybody.

953   I mean I know what you say about redefining education, but, you know, I have been looking at your website here and the only thing I can find in terms of what you are promoting heavily to do with the education is the fact that the cheerleaders and Hellcats go to college. There is nothing else there from a practical basis.

954   So what I would like to have is really a response. Shouldn't we just be having a grownup conversation here and talking about what sort of licence this really should be?

955   Because it is unlikely, if it is today, to evolve into an educational network. You know it and we know it. That is my point. Shouldn't we be talking about what sort of licence this really should be?

956   MR. GOLDSTEIN: Thank you, Commissioner Menzies.

957   I think we are here to renew the licence that we have, and under the circumstances in which it currently finds itself, it is currently licensed as an educational broad satellite-to-cable undertaking and the rules that apply to that are established essentially on a case-specific basis. So that is what we are here to renew. That is, I think, all we can do as part of this process.

958   With respect to the specific educational focus of the channel currently and what it will become, I will have to ask Mr. Lewis to comment on that.

959   MR. LEWIS: Thank you, Commissioner Menzies, for this discussion and I know that you are familiar with the channel because you live in Alberta and have probably watched it for many years.

960   I guess the only way that I can answer that is that we have been involved in education for 40 years. The staff that I get to work with are passionate about education. We really do see an opportunity to make a difference in the kind of value that we bring to the educational station in partnership with the Alberta Government and bring a greater value to what we do.

961   In order to do that, we do need to drive some revenue and that -- even if you were to look, I believe, at TVO who receives $40 million in taxpayer money or Knowledge Network who receives over $7 million in taxpayer money, they also run drama in the evenings and they don't accredit it like we currently do.

962   So I don't know that what we are doing here is at all nefarious in any way. What I want to see us do is take the activity that we currently do and invest a little bit more into our own production resources so that we can really start to drive messaging out to our population to help educate them about education.

963   I don't see changing our mandate as much as our focus.

964   COMMISSIONER MENZIES: Well, just my point being that sometimes you have to go with what people do, not what they say, and when I see what is being promoted on your website, it is not what you are saying.

965   I mean you do do some interesting work in terms of the educational or public television style work between 7:00 a.m. and 3:00 p.m. "Primetime Alberta" is an interesting program. I am not saying you don't do these things, but what you are promoting what your future is doesn't really go there, right?

966   As for Mr. Goldstein, I mean yes, we are here to renew a licence and we have to decide whether we do that or not in terms of how far that goes.

967   So I think I have made my point and I will leave it at that. Thank you.

968   MR. LEWIS: If I could make one final comment to that.

969   I would submit that the programming that we are promoting on our website is primarily drama -- I think is what you are getting at -- or comedy potentially, and those are the programs that are the most highly watched and those are the programs that we drive to that website so that viewers who are interested in those courses of study that are accrediting those programs can find more information about.

970   COMMISSIONER MENZIES: Sure. You know, and I would accept that if it was pealing me to them, and at the very end of the scroll there is a pitch for "Alberta Primetime," you know, Monday to Friday each night, but what the list promotes from beginning to end is:

971   - there's two promos for Monday night, "Two and a Half Men" and "Mad Love";

972   - Tuesday is "Sanctuary," which is Canadian, and "Sci-Fi";

973   - Wednesday is "Hellcats," which is U.S. college cheerleaders, which is a CW program, also on Wednesdays, "America's Top Model;

974   - Thursday is "Nikita," which is U.S.;

975   - Friday "Shark Tank";

976   - Sundays -- I missed Saturday somehow -- Sundays is "American's Next Great Restaurant";

977   - and then at the end of all that "Alberta Primetime" weeknights.

978   So I am just going by what you are advertising, right?

979   MR. LEWIS: We need to drive audience. We need to have popular programming to make money and that is one of the ways that we do that.

980   COMMISSIONER MENZIES: I have made my point.

981   MR. LEWIS: Yes. Very good, thank you.

982   THE CHAIRPERSON: This discussion illustrates where we started off with, saying that genre doesn't make sense anymore. You yourself say the whole educational field has moved, that the delivery by Internet is probably much more effective and it is what kids are interested in.

983   So it really begs the question: Should we impose on BDUs of any kind the obligation to carry ACCESS, which is dedicated as an educational channel, yet, its genre just doesn't reflect education?

984   And you yourself don't want to say that you are not doing it, you want to change it to be a more sort of a lifestyle educator.

985   MR. GOLDSTEIN: I think ACCESS, you know, assuming these amendments are approved, will play a valuable role in the system, will fund the production of valuable Canadian content, specifically regional content in the area.

986   The licence is what it is. It is an educational satellite-to-cable undertaking. That differs from, for example, ASN, which you indicated earlier, which is simply a satellite-to-cable undertaking, you know, which has much greater flexibility in terms of the programming it airs. It also has guaranteed carriage on BDUs. It doesn't have over-the-air transmitters.

987   So this is the licence we have and we are trying to adjust to the circumstances that we are faced with.

988   THE CHAIRPERSON: I hope you got from the general tenor of the questions that we are not overly impressed with what you put forward, certainly in terms of making ACCESS an educationally relevant channel, but you have time to rethink that.

989   So right now it is a quarter to 1:00. Let's break.

990   We will resume at 2:00. We will start with Mr. Simpson talking about production and then we will go -- if you are ready, Mr. Bibic, we will go into confidential hearing on CPE and PNI.

991   MR. BIBIC: Okay, we will try our best to be ready at 2:00 for --

992   THE CHAIRPERSON: No, it should be about -- Steve says he has about 40 minutes, so about 2:40 or 3:00.

993   MR. BIBIC: Okay, so we will have 2:40 to have all the materials ready. That's very helpful. Thank you.

994   THE CHAIRPERSON: Okay. Thank you. Let's break.

--- Upon recessing at 1246

--- Upon resuming at 1413

995   THE CHAIRPERSON: Thank you.

996   I understand, Mr. Bibic, you have done the calculations and have the numbers ready now?

997   MR. BIBIC: We have done them. We have --

998   THE CHAIRPERSON: Would you mind giving them to my staff so they can have a look at it while we are dealing with some other issues?

999   MR. BIBIC: The documents are being printed. So if you would --

1000   THE CHAIRPERSON: Okay.

1001   MR. BIBIC: Maybe we should start and then in progress we will file the documents.

1002   We will need, Mr. Chairman, probably maybe another 10 minutes before we go in camera just to look at them one more time because some changes were being made.

1003   THE CHAIRPERSON: Excellent! Okay.

1004   Steve Simpson, you have the floor.

1005   COMMISSIONER SIMPSON: Thank you, Mr. Chair.

1006   I would like to go back to -- everything is going to be production-related, but sometimes I may start off on the programming side of things because of the interrelationship with the question.

1007   I would like to go back to a question that was brought up earlier concerning the high cost of news production on stat holidays and get into that a little more, simply because audience is more available when they are not working and they are not commuting in the car in the morning and the like.

1008   Retailers and even telephone companies have learned that their long distance call usage will peak in holiday times, and the consumption of media in general over holidays and long weekends seems to go up, you know, people watching movies and the like.

1009   I am curious as to why the numbers don't work, even if they are two times or two and a half times higher on stat holiday, given that I would -- my mind is trying to make up a narrative here that audience availability would be higher when people are not commuting and going to work and I am just curious about that first.

1010   MR. GRAY: It really has to do with the very nature of news. News on a weekday basis tends to be very much appointment-based tuning.

1011   On stat holidays there is, what we have found, less likelihood for people to be able to make that same kind of appointment. They have family obligations, they are having special dinners, they have travelled for family get-togethers. They may have made different programming choices with respect to the television that they consume on those days.

1012   It is an interesting theory that you raise, but in practice it just doesn't hold weight. Quite the opposite is true.

1013   COMMISSIONER SIMPSON: Oh, I totally accept that. I understand your answer and accept it.

1014   The next part of my question is through: Is this not in a majority of the markets you serve that are a million or less a case for using LPIF to supplement your incremental increase in news?

1015   MR. GRAY: Well, the dollars only go so far and I guess the point that I was making this morning was that it is really best for us to concentrate the dollars that we have available at the times of day and at the times of week where the audience is the largest. That way we are getting double bang for our buck.

1016   We are able to make a bigger investment in our news programming during that time period as a result of the LPIF funding that we receive, and at the same time as a result of aggregating a larger audience we are receiving higher advertising revenue in those shows.

1017   COMMISSIONER SIMPSON: M'hmm. You may not be at this point yet, but the question still merits asking.

1018   Given that broadcasting is not a nine-to-five business and news most certainly isn't a nine-to-five industry, given the synergies and the opportunities of cross-platforming content, and I am thinking again particularly of news, is this going to be an opportunity or a further drain on your budgets when you are going to be having the digital warriors in the other part of the building wanting more content from the newsrooms both on a local and regional basis as well as national? How do you think that is all going to play out?

1019   MR. GRAY: It is a great question. It is a very interesting question. I think it is something that, you now, we are going to have to definitely be mindful of moving forward.

1020   You know, I think a big part of the challenge for us is going to be reconditioning the thought process of our journalists and making them much more cognizant that their day does not end with the filing of a story at 6:00 p.m.

1021   Their day is a much more involved process now, very similar to the way a journalist would function if they were part of Mr. McLaughlin's 24-hour news channel service where you are filing constant updates throughout the entirety of your day and not to just the conventional television platform any longer. It could be via social media, it could be to your website, it could be to a blog, it might be to some of our radio services.

1022   COMMISSIONER SIMPSON: Thank you.

1023   Continuing with some broader generalized questions, in your presentation this morning Mr. Crull had referenced that the cost of content is continuing to rise and I was wondering if anyone wants to answer my question as to what part of content is rising to the point where it is becoming problematic. Is it the talent side, is it the origination side, is it the post-production side?

1024   This question is asked in two follow-on questions.

1025   One, I am going to ask you about your role as a purchaser of independent productions, but also at some point is there going to be a necessity for Bell Media -- I have to get used to that -- Bell Media to take a leadership role and perhaps a greater participation to help ease some of the class problems.

1026   And the second part of the question -- and I will raise them again in case we get lost in this narrative. The second part of it is: When you talk to producers and production houses and post-production houses, they are saying repeatedly that there is no money in television production anymore, they are getting squeezed too hard. So if your costs are going up and their revenues are going down, where is the money going?

1027   MR. CRULL: Commissioner Simpson, it is a good question. I have looked up and down the value chain and I would like to -- when I go negotiate with a lot of our program suppliers, I would like to be able to point to their margins being exorbitant and I am the poor waif that is not making any money in this business, and it is not like that.

1028   The margins up and down the value chain are pretty tight, I think, I would say in some cases until you get to cable distribution.

1029   But the costs are increasing. I would say that we experience sort of normal inflationary cost increase on some of our news production and things of that sort. I don't think that you have talent costs increasing or origination or collection of news.

1030   The profitability of news is really, really suffering because of all of the pressures that are on overall conventional business and also because news -- you know, one of the things --

1031   We are talking a lot with Lisa Laflamme about launching her brand and her impact in the market, which is really an iconic change in talent for us on The National News, and by the time she comes on at 11:00 all of the big news is known. There is very little that she is going to break that her viewers aren't aware of, given the Internet and given all the sources.

1032   I thought Richard did a good job saying that our onscreen talent as well as a lot of our reporters need to be in contact and develop that relationship with viewers throughout the day. So Lisa does tweet quite regularly as she is developing stories throughout the day.

1033   So, you know, that is how the news business is trying to morph, but the cost pressures exist probably more in -- whenever you have programming that is in high demand, it is more from competitive interest in the strong programming and that is bidding up the prices.

1034   COMMISSIONER SIMPSON: Which is going back to your argument that everyone is a competitor in purchasing programming and everyone should be at a level playing field; is that correct?

1035   MR. CRULL: Yes.

1036   COMMISSIONER SIMPSON: Okay.

1037   Konrad already did a pretty good job in his opening remarks concerning some of the incrementalism that we were not happy at seeing, given that we thought we were on the right track with respect to most of what group licensing was all about and in particular the ability, you know, the flex of being able to move your spending around to be able to accommodate the individual needs of some of the stations, particularly on the specialty side.

1038   But the request of the broadcasters in general to widen out or change some of the requirements of particularly the specialty licences concerns me a bit in that I understand the need to widen out the genres, but can you tell me what you think that is going to do with respect to the production industry in that it seems that it would -- if it follows your request, that productions would become more mainstream and less production would be happening in a sense by the niche markets for the specialty stations you operate?

1039   MR. CRULL: Well, I think -- I might need to pass it to my colleague Mr. Brace, but I think that to the extent that you are hearing from the production community that there is no money in it, that all of the requests that we are making are trying to make us more -- trying to make our channels -- the places that we buy that content, trying to make them more market-competitive and more marketable and serving viewers so that they are more financially successful for us, which allows us to pay more for that content.

1040   That was actually the spirit with which we reached the terms of trade with the CMPA and I would say it is very much in anticipation that we can work together to continue to make these channels more viable, and then that benefit would flow downstream.

1041   So I don't see that those two are at all in opposition of each other.

1042   COMMISSIONER SIMPSON: Is there not the risk that it would help promote what we are seeing, which is -- I hate to use the term "recycling" a programming? But if the genres or the obligations -- if the genres increase or the obligations are reduced, doesn't it potentially increase the probability that you can bicycle content around your different properties because of their ability to fit into genres as well as conventional?

1043   MR. CRULL: I will pass it to Mr. Brace.

1044   But the market just doesn't allow that. I think that Rick did a nice job earlier talking about that no longer works with viewers.

1045   MR. BRACE: I think the wonderful thing about what the Commission has given us an opportunity to do here with the CPE and the ability to move it around, combined with what we have seen with the flexibility that services are being provided, has offered a tremendous opportunity to take some of the services -- and we talked about some of ours that are struggling this morning -- a wonderful opportunity to really focus expenditures and production dollars on the services that really do need the support, without, you know, being offside when it comes to the end of the day and we calculate what has been spent where and you are offside with another service because you focused over here.

1046   So when you look at kind of our bundle of services or suite of services, the ability to manage that money across those services, whether it is from an acquisition standpoint or whether it is from a production standpoint, is a tremendous opportunity for us and we sincerely thank the Commission for that.

1047   It also does -- I mean by broadening the flexibility in terms of the categories, it does create some more competition for that. So there is a bit of an offset to that, but I think that by far and away the advantage that you provided us with greatly offsets any disadvantage.

1048   COMMISSIONER SIMPSON: Flattery will get you everywhere, Mr. Brace. I said, flattery will get you everywhere. Thank you very much for those kind comments. We certainly did our best on that.

1049   Going back to the second part of the question that Mr. Crull answered, and this had to do with the economics of production and the rising costs, you have said in your submissions that you see yourself as essentially a net purchaser of drama. I don't know if -- I can't recall if that also extends to long form documentaries as well, but my question goes to this.

1050   If episodic-type television is getting to the point where it is difficult to produce, do you see yourself getting more into that business to help the cost of production because you have the overheads to be able to assimilate -- let's say the post-production costs?

1051   I am sorry, I will have to qualify this question.

1052   A lot of the post-houses in Vancouver are finding that the cost of producing specialty television content, particular episodic specialty reality shows, is getting so commoditized that it is less than a zero sum game for them.

1053   And I am wondering if you have already assessed that because you have a need for that type of programming, you may have to step in at some point and this becomes part of what you alluded to earlier with respect to your facilities commitment.

1054   Do you see yourself getting into -- being a larger player in that role with the independents?

1055   MS COE: Maybe I can answer that for you. The short answer is no. Certainly for any dramatic series or movie or mini-series, the kind of infrastructure involved would be far beyond anything that we have currently available and I certainly haven't heard of any plans to enlarge what we have.

1056   Our in-house production is centred on much smaller sort of shows, whether it is "The Marilyn Denis Show," so daily shows like "Daily Planet" or "Marilyn Denis" or "Canada AM" or sort of obviously the news, "eTalk," which is entertainment news, those kind of things that are basically volume-based have a very manageable crew and post requirement. They are -- you know, it is a modest operation. No offence to Bob, of course.

1057   Certainly what you need for a drama or any kind of scripted show or even the large-scale reality shows or large-scale sort of competitions or things like "Canadian Idol," it is much, much larger, which is why we don't do the Junos, for instance, in-house. The scale of that crew is enormous. It is a tremendous resource drain on anybody who was trying to incorporate that into their day-to-day functions as a broadcaster. I can't imagine how we would do it.

1058   I do agree with you that the costs for those types of independent productions are increasing. Some of that is natural year-to-year increases. If you have a series there is usually talented step-ups and other sort of union step-ups that go with that each year.

1059   But also just, you know, locations. People are looking for more and more locations to be worked into a production because that makes the quality of the show and the creative that much more compelling and more realistic and viewers like it, it's great, but now more and more places are charging for locations and so that adds an extra increase. Your transport cost increase. Often your union and crew then have to stay a little longer because you are travelling and all that gets worked in and it just creates just a bigger budget than they used to have.

1060   For instance, right now a drama series for an hour is around -- for us anyhow, the ones that we are commissioning -- is around the low end of $1.6 million up to about $2.1 million and you can imagine when you have 13 episodes or 18 episodes how big that suddenly gets and it's expensive.

1061   COMMISSIONER SIMPSON: Okay. Then would it be safe to say that your role -- and again I'm just curious -- your role as a potential partner in some productions would not be at the hardware facilities provision end, but would this and then lend your participation to more development of scripts and productions?

1062   MS COE: Yes. I think our facilities role is minute. I think Dome Productions, which we own a bit of, I am a bit fuzzy on the -- 50 percent -- does sometimes rent trucks to productions, but I don't -- they are not necessarily our productions at all.

1063   Somebody else who is probably more informed on the actual ins and outs of that could speak to it, but basically our role is we invest in the development of Canadian independent productions, so we will work with them on the scripts or on doing a demo tape or on the research if it's a documentary or those kind of things and that's a long process. That's often a year or more.

1064   Then if the show once developed looks like it's something that's going to suit the lineup for one of our channels, we will commission it and provide a license fee. Sometimes we also provide equity if they are having trouble closing the gap and really financing it at the budget level it needs to be financed at.

1065   COMMISSIONER SIMPSON: Is there any kind of an upward limit that on a national level your facilities and your appetite can handle, would it be 10 productions a year that might be in development, 5, 20?

1066   MS COE: That our facilities --

1067   COMMISSIONER SIMPSON: No, no. I'm out of facilities.

1068   MS COE: Okay.

1069   COMMISSIONER SIMPSON: You know, we moved from that into -- I said so if you are not in the facilities end of the game --

1070   MS COE: Right.

1071   COMMISSIONER SIMPSON: -- but we get into the development side of the game, how many scripts or project would you have under development for national use, whether it's a specialty or conventional?

1072   MS COE: Oh, dozens. We probably have -- we probably have about 60 projects right now in active development and a few more that are grinding very slowly along --

1073   COMMISSIONER SIMPSON: Yes.

1074   MS COE: -- which is natural. And then production-wise, I mean we are only limited by our programming budgets which get set for us every year and those of us in programming and on the creative side are always pushing for those to go up and those on the other side of the table are always trying to keep a limit on those.

1075   So probably -- oh, I would say probably 30 -- 30 productions, 40 productions.

1076   I could give you the exact number in our reply.

1077   COMMISSIONER SIMPSON: Okay. Again, I was just trying to get a frame of reference, because our view over this next two weeks is to try to see how much is in the pipeline.

1078   MS COE: Yes.

1079   COMMISSIONER SIMPSON: The next question is on the production -- the client, purchaser and production partner role on a regional level.

1080   Now, you have a production office in Vancouver; is that correct?

1081   MS COE: We did have. Recently Rob Hardy, who was our Development Officer there, has left and joined a production company. We had not refilled that position and I think our feeling was that we were not going to do so. We were kind of waiting to see what happens with group CPE and that kind of shared decision-making has to kind of happen on a more consolidated basis now. We were trying to rethink how we best coordinate our creative activities in development and production with the various parts of Canada that we are working in vis-à-vis where you make decisions.

1082   COMMISSIONER SIMPSON: Do you have a production facility or a production office in Montreal?

1083   MS COE: We have a station in Montreal, but we do not have a production facility.

1084   COMMISSIONER SIMPSON: Okay. Okay.

1085   Then the next question is: With respect to engaging regional producers, what do you have planned in terms of how you are going to do this, because there is an expectation that you will be beating the bushes to find producers outside of Toronto.

1086   How are you going to do that?

1087   MS COE: Well, we have -- first off, I want to be really clear that it's really important to us to have good relationships with the producers outside of Toronto. We can't afford to not be finding the best ideas and not be in touch with as many ideas as might be floating around, whether it's a producer in Vancouver or one in Halifax or a writer in Montreal or one in Calgary, so we have taken very seriously those relationships and we take very seriously any pitches we get from anybody, whether it's in person, whether through our travels out or their travels to Toronto or meeting at various markets and festivals, like the Vancouver Film Festival or strategic partners or Banff or Realscreen, wherever, also by e-mails, by phone.

1088   It's important. We really want to make sure that people feel comfortable calling us if we are not seeing them in person and not having that inhibition about thinking that, you know, if you are not based in Toronto your ideas aren't welcome or you don't have a relationship.

1089   So all that said, we take it very seriously and we are trying very hard to make sure that people feel like they are seeing enough of us and we are seeing enough of them. We have to because we need their good ideas.

1090   I do think it's true in the last couple of years, during that recessionary period our travel budgets were cut to the bone and it was really hard because producers naturally, their travel budgets, too. were cut to the bone and so I think there was a period of time where I don't think anybody was happy with the amount of face-to-face contact there was outside of Toronto, but thankfully that has eased and we are back in.

1091   COMMISSIONER SIMPSON: So, I'm not sure. I will tell you what I thought I heard you say and you can correct me.

1092   So you are committed to working with regional producers, but I'm not sure I heard how you were going to do it.

1093   When someone is looking for a source of something it's usually the company goes to the market and finds the supplier. Are you expecting the suppliers to come to Toronto?

1094   MS COE: No, I'm not. I'm not expecting the suppliers to come to Toronto always. We did go out to the regions.

1095   Trish Williams, who is one of our key drama development creative officers was just recently out in Vancouver and spent several days there working and talking to writers and various producers. We do travel out on that kind of basis -- that's just an example -- on a regular basis and it's important and we need to.

1096   Fortunately, I think most of us in our creative group have been working in the independent production industry for a number of years and over that time have built up some strong relationships with producers and talent across the country and we regularly interact. Even if I'm not seeing them in person I will often hear from, whether it's Tom Cox or it's Arnie Gulbard(ph) or it's Julie Keatley(ph) across the country, and thankfully producers being the entrepreneurs that they are also not necessarily shy about phoning and saying "I have a great idea, I want to talk to you about it. Can I tell you now or are you coming out or what's going on?"

1097   So we actively look for it.

1098   COMMISSIONER SIMPSON: Okay. I have just a few more questions.

1099   THE CHAIRPERSON: I would just like to pick up on that point.

1100   I have had two hearings here, one when you, CTV, bought, as it turned out, to be CHUM and the 'A' station and the second one when Canwest bought Alliance Atlantis, both times there was a wonderful representation made how important regional production is, how you have close links where you go in, et cetera, et cetera, and both times you said please do not put any requirements on it, it's in our self-interest to do it.

1101   We took you by your word. Now, in this hearing, every single one of the regions says you do not have somebody there, you don't come to visit us, we are starving and it's the face-to-face contact that counts. That's the history.

1102   So all the good words I just heard from you I have heard them before, but it hasn't been followed up and we are being pushed very much by the various regions to insist that you have a regional office or at least have a fixed timetable that each year you will go twice to Manitoba, to Saskatchewan to talk to locals, et cetera.

1103   So I think the time has come to address this point completely. General assurances won't cut it.

1104   MR. CRULL: I would ask, Mr. Chairman, let us take this away and have some discussion on this, because I appreciate the sensitivity and I do believe that there was -- it was in all earnestness that it is in our self-interest, but I don't think building regional locations for the face-to-face meeting is the way to go, because it all -- the decision-making and the management still comes back to a central team.

1105   So I think I would like to spend some time with my team on how we deliver that vision.

UNDERTAKING

1106   THE CHAIRPERSON: Okay, and that's fine. I'm not married to any particular modality --

1107   MR. CRULL: Right.

1108   THE CHAIRPERSON: -- but I think we sort of have to concretely and systematically address it.

1109   I'm sorry, Stephen, back to you.

1110   COMMISSIONER SIMPSON: Thank you.

1111   Again, I echo the Chairman's statement that I don't think that's what we are looking for, but we are trying to figure out whether the mountain comes to Mohammed or Mohammed comes to the mountain and I think that in the independent production community there is some expectations, that at least I have for sure, that you get out there. That's all I will say about that.

1112   I have some cleanup questions, my grocery list from staff so I won't try and pretend they are coming from me because half the time I'm not that smart.

1113   But I would like to ask a question in particular about non-PNI expenditures with independent producers.

1114   What is your intention with respect to non-PNI expenditures? Do you have any kind of a model at this point in terms of, you know, you have a fairly good chunk of money that you are obligated to spend with independent producers, do you have any sense that you can share with us at this point as to what percentage or some kind of a metric might go to non-PNI-type programming?

1115   MR. KING: Hi, I will answer that on behalf of the group.

1116   COMMISSIONER SIMPSON: Yes.

1117   MR. KING: The metric will be simple, if it's a great show whether it's a PNI or Canadian we are going to be interested.

1118   I guess the best example I can think of is reality shows do not count now. They were priority and now they are PNI's and we are fully committed to do "So You Want to Dance Canada" this summer.

1119   So I would suggest that we will always be on the lookout for those type of shows, but I'm not so sure there is a metric or there is a formula. If it's going to be a hit, it's going to be hit and we will fund it and we will promote it and we will do it for the benefit of the system and for the benefit of ourselves, too.

1120   COMMISSIONER SIMPSON: Okay.

1121   On the whole concept of group licensing, is there any merit to having a discussion about there being an allocation of a percentage of CPE that goes to the independent producers as opposed to having to, you know, carve that out of the independent obligations of your operations?

1122   I will ask it as it's written: What is your intention with respect to non-PNI expenditures? Would you be favourable to an allocation of a percentage of CPE to independent production instead of individual requirements?

1123   MR. KING: I think we would need to take that off-line. I'm not sure we discussed it as a group.

1124   COMMISSIONER SIMPSON: Okay.

1125   MR. KING: So if that's okay?

1126   COMMISSIONER SIMPSON: Okay.

1127   MR. BIBIC: We will come back to you on that. To me it comes back to first principles with respect to the flexibility afforded by the group licensing renewal policy. Certainly the opening statement we referenced trying as best we could not to rewrite the policy and we are going to have a debate in camera on the 30 percent and the interpretations of how you calculate that, which is a different issue than rewriting it, it's figuring out how to calculate something.

1128   So the Commission decided that obviously Canadian content is important to meet the objectives of the Broadcasting Act, and that's fairly intuitive and a percentage will be allocated there, and then to Commission also indicated that it's important to allocate a meaningful amount to PNI and we will debate that number, the minimum of 5 percent, and within that there is an allocation to independent production. So already there we have some benchmarks.

1129   We would like to operate to meet that vision and to meet those criteria, but do it in a flexible manner. So if we start layering on, you know, metric upon metric upon metric, you are taking away from that flexibility which we think is the very essence of the decision.

1130   So we will come back with a specific answer, but it will be within the spirit of what I have just expressed in terms of flexibility.

UNDERTAKING

1131   COMMISSIONER SIMPSON: Great.

1132   With respect to OMLC, what is your commitment? What is your sense of how you are going to approach development of content for this particular area? I'm thinking official language minority markets?

1133   Would that be something you would like to also put in a written submission or is it going to be relatively the same as what I heard about regional productions?

1134   MR. BIBIC: We will come back to you on that one, too.

UNDERTAKING

1135   COMMISSIONER SIMPSON: Okay.

1136   LPIF. We had been hoping to get some indicators while we are on the subject of written submissions -- these two I think will fit into the same bill -- with respect to LPIF, would you indicate in a written submission how you are planning to integrate the indicators of success with LPIF?

1137   You know, we are looking for metrics with LPIF with respect to how it's being spent and examples the of success of that money, because we are going to be looking at it in 2012 and nothing beats having data.

1138   MR. GOLDSTEIN: Maybe I will start and either Elaine or Richard can comment further. We are sensitive to that the Commission obviously wants information to indicate it was a success. I think the flip side to that point, though, is that we have changed the overall criteria, or at least going in criteria as to how the monies are spent, recognizing the dire situation of local stations specifically in those markets and their need for sustainability.

1139   As a first principle I think in terms of an indicator of success they are still there and they are still offering the same level of programming they were offering before. You know, obviously we are hopeful that those situations will turn around, that the health of those stations will improve and that we will be able to build, but right now LPIF has been a real lifeblood for those stations and help sustain their level of programming.

1140   Maybe Richard or Elaine could give some sort of direct examples.

1141   MR. GRAY: If you were looking for probably the most significant and substantive example it would be the maintenance of our station in Windsor. 'A' Windsor has been kept alive as a direct result of LPIF.

1142   We as a company announced that that station was going to have to be closed until the Commission came to the decision, the very appropriate decision, that LPIF funds be allocated to help stations in smaller markets and as a result of that station staying alive, you know, we continue to serve the residents of Windsor with a newscast that is number one in the market and enjoys an audience of 23 percent from 6 o'clock to 7 o'clock each evening.

1143   Jim Crichton, the anchor of the Windsor newscast, is very well regarded, very well known in the Windsor market. We are doing a 6 o'clock and 11 o'clock newscast in Windsor and providing, I think, a really good strong level of local service in that community that wouldn't exist apart for the existence of LPIF.

1144   COMMISSIONER SIMPSON: I don't doubt that at all. We hear it all the time.

1145   I think to reinforce the importance of the question, if access to the funding was the only measurement of success, obviously it's a huge hit as a fund, but to its detractors and to those who depend on it, we really do need to see documentation -- not just the anecdotal stories you have just given me, which are wonderful, I think having them compiled is extremely helpful to the Commission -- but in terms of the metric of how much new content has been produced to satisfy the needs of the local market.

1146   It's a fairly easy thing to do just by going to the logs, but all of that helps and we are going to be asking that question of everyone.

1147   MR. GRAY: I think we definitely understand where you are coming from and that is that's a great question, but I think there is another consideration that you might want to add to the mix and that is the qualitative consideration. Because this is not just about the continued provision of a newscast or additional incremental hours, it also is about the quality of local news coverage that you are providing in a community.

1148   THE CHAIRPERSON: Why isn't there third-party evidence to that effect? I mean if you want to go do it on quality rather than quantity, then show us evidence, you know, of service of whatever you do -- not by you, by others, showing that in effect there has been improvement in the local newscast of Windsor or whatever. But as my colleague said, we need some evidence.

1149   MR. GRAY: And I'm suggesting that we could do that, but the measure needs to be qualitative as well as quantitative.

1150   COMMISSIONER SIMPSON: Accepted and I would like to move on. But thank you, anything will be helpful.

1151   MR. BIBIC: Commissioner Simpson, just so I understand the question, so the request is for the large ownership broadcasting groups to come forward and give their thoughts on how the Commission might approach measuring the success of the LPIF program. Is that it?

1152   COMMISSIONER SIMPSON: Yes.

1153   MR. BIBIC: Okay. So recognizing that there was no incremental requirement to the fund, we certainly will put our thought to that.

UNDERTAKING

1154   COMMISSIONER SIMPSON: That's right.

1155   MR. BIBIC: Thank you.

1156   COMMISSIONER SIMPSON: That's exactly right. It's a way of gauging how well it's doing in your eyes as a broadcaster.

1157   Four more quick questions and then I'm done.

1158   Accessibility. I know that you have been working long and hard with the working group, which I think has been in existence now on closed captioned since 2007, if my memory serves me correct, and I know that we are getting close, but I'm very happy either oral or written submission with respect to what you take away from that working group participation has done in terms of the go-forward on what measures you are going to implement with respect to monitoring and enhancing the quality of captioning?

1159   I think we are still at a point where standards are almost there but, you know, it takes two to make it work.

1160   MR. GOLDSTEIN: I think on that issue you are right, we have been an active participant in the working group and I think the working group is making real progress. It's pan industry, it has representation both from the broadcast side and from representatives from the accessibility community.

1161   I think in terms of the standards and in terms of dealing with errors and things like that, I think that issue still does need to be resolved. I think the working group got a bit stalled but is now getting forward. I think that everyone has, you know, a common goal in that so I don't think anyone is trying to stall on that issue.

1162   I think in addition, we have funded research into the area as well flowing out of CTV/CHUM benefits with Media Access Canada in this area relating to closed captioning and a report that is in the finalization stage right now is also going to shed some light on that issue and make some recommendations.

1163   So we are actually I hope -- I think it's an issue that is moving forward and one where it's going to be resolved in the near future.

1164   COMMISSIONER SIMPSON: Thank you, Mr. Goldstein.

1165   I'm going to qualify that. I'm really not looking for commitments but comments, you know, as a participant in the working group and from what you have learned or what you think you can add to the party in terms of getting there with respect to quality.

1166   You know, I'm aware of the fact that some of the problems are technological not just operator-oriented and getting rid of some of the lag in transmission might be something that can be mutually worked on, but we are really interested in your comments as to what you think you can do.

1167   The other is on described video. This has been something that I have been fascinated with, having spent thousands of hours in post-production facilities over my life, and I want to ask the question but I will bet you you don't have the answer with respect to the costs of production of a one-hour described video.

1168   I know what you pay, because it's usually the result of buying a described video from a service that will provide it to you, but I'm really trying to scratch below the surface on whether there is a better way to do things and whether it's internalizing it and seeking some offsets from a fund or whether it should be a condition of production for a Canadian airing where the Canadian producers -- you know, if they are exporting the programs or producing programs in Canada it has to come pre-built.

1169   You know, I'm fascinated by this whole subject, but right now we are trying to still get to the point where we have a better idea of what the cost for a running hour of described video is costing you.

1170   Again, if you would like to do that is a written submission I have no problem with that.

1171   MR. KING: Yes, I can answer that.

1172   We don't have the numbers top of our head, so we will submit it.

UNDERTAKING

1173   COMMISSIONER SIMPSON: Yes. Great.

1174   MR. KING: But it does -- it is part of a requirement that we get it from our Canadian producers so we are trying to kind of source it from all places.

1175   COMMISSIONER SIMPSON: Great.

1176   Two more and then I'm done.

1177   Again, way to go on terms of trade. I think that that is just super. I think it's -- I commend the whole broadcasting industry and the creative community because, you know, it really is important that we get there and I have great hopes in the next five days that we are going to see a document everybody can live with.

1178   If that document arrives, would you comment, please, on whether you think that a ratified terms of trade should be part of a condition of license?

--- Pause

1179   THE CHAIRPERSON: Could you repeat the question?

1180   COMMISSIONER SIMPSON: Should terms of trade as an agreement be part of a condition of license?

1181   MR. BIBIC: I think we subscribe to -- I think, I hope I'm not putting words in the Chairman's mouth, but at the beginning of this morning's session an indication, along with the kudos for having reached a deal, that if the industry has satisfied the creative community and the broadcasters are satisfied that this sets kind of the framework for operating and negotiating with each other then that should not you matter of regulation beyond that and certainly putting it in a condition of license I think takes it that one step further, which we don't think it's appropriate.

1182   COMMISSIONER SIMPSON: So it's no?

1183   MR. BIBIC: No.

1184   COMMISSIONER SIMPSON: Okay. That's what I wanted.

1185   Lastly -- and this is a bit of a zinger, it goes back to access -- I have had quite a bit of experience in working with educational networks in this country and one of the things -- and this is a question of mine -- but if we were to consider and approve your request for a change in the condition of license of access, would you -- I know what the answer is going to be, but would you comment on the possibility that the decision we come up with, if it's in favour of your request, might also cause the license to actually change it's status to non-carriage?

1186   MR. BIBIC: So now you are picking up a theme that we heard this morning --

1187   COMMISSIONER SIMPSON: Yes.

1188   MR. BIBIC: -- from Commissioner Menzies and the Chair.

1189   COMMISSIONER SIMPSON: I am indeed.

1190   MR. BIBIC: We started thinking about some of your questions during the lunch break. We would like to come back -- give this more thought. I don't think we are ready to kind of answer that quite specifically just yet.

1191   COMMISSIONER SIMPSON: Okay. I am done. Thank you very much for your time.

1192   THE CHAIRPERSON: Thank you.

1193   So you wanted some more time you said before we go into the CPA?

1194   MR. BIBIC: I think we will need about 10 minutes.

1195   THE CHAIRPERSON: Okay. Let's take a break and then we will continue after that in camera.

1196   I think I will take the balance of the afternoon. If there is anything left as a result of the in camera, we will turn the Internet back on and we will announce it publicly, but essentially there will be no further public hearing today as soon as we are finished with the in camera, just for the people online and the people in the room.

1197   So I would ask, Madam Secretary, if you want to do the necessary things for in camera and we will resume in 10 minutes.

1198   Thank you.

1199   THE SECRETARY: Okay. I just want to make the announcement.

1200   So we will now take a 10-minute break. All broadcasting live feeds to be shut down and to be cleared. We will clear the hearing room and the examination room.

1201   Everyone except CRTC staff, the translators, court reporters and representatives of Bell Media are asked to leave the room and to take all of their personal belongings with them, including all electronic devices such as laptops and BlackBerrys.

1202   S'il vous plaît, avant de quitter la salle, veuillez vous assurer d'apporter avec vous tous vos effets personnels, incluant tous les appareils électroniques tels qu'ordinateur personnel et BlackBerry. Merci.

--- Upon recessing at 1458

--- Upon resuming at 1649

1203   THE SECRETARY: Mr. Chairman, we are now ready to resume the public session of the hearing.

1204   THE CHAIRPERSON: Mr. Bibic, as a result of today's discussion, what are you going to file tomorrow?

1205   MR. BIBIC: Tomorrow, Mr. Chairman, we will file, confidentially, a revised chart, calculating the CPE methodology, clarifying certain issues, for example, with respect to the years to which CPE would apply and the inclusion of things like the impact of the Olympics and adjustments as a result of other revenues.

1206   It is essentially re-submitting the answer to Questions 2(a) and (b) from this morning's document filed by the Commission, making some clarifications as a result of the in camera session questioning.

UNDERTAKING

1207   THE CHAIRPERSON: And it will include the projections for 2011 on the basis of calculations. Right?

1208   MR. BIBIC: Correct, and it will include Olympics revenue, adjustments for other sundry revenues, and not include LPIF.

1209   THE CHAIRPERSON: And LPIF on a forward-going basis.

1210   MR. BIBIC: Correct.

1211   THE CHAIRPERSON: Thank you.

1212   Maître Dionne?

1213   MS DIONNE: Thank you, Mr. Chairman.

1214   In addition to this undertaking, I have seven more undertakings and two questions for which you can provide answers with your responses to undertakings.

1215   I would ask that you provide the information prior to Bell Media's reply, scheduled for Thursday, April 14th.

1216   Please provide the number of households in Alberta that receive ACCESS over the air.

1217   Second, the Order in Council from the Government of Alberta designating ACCESS as the provincial authority to broadcast educational programming.

1218   Third, commitments with respect to the allocation of a percentage of the group's CPE to non-PNI independent productions, instead of individual requirements.

1219   Fourth, commitments with respect to regional programming productions, including in official language minority communities.

1220   Fifth, ways of measuring the success of the LPIF from a broadcaster's point of view.

1221   Sixth, the cost of producing one hour of described video.

1222   Seventh, comments on the possibility of ACCESS losing mandatory carriage if the Commission found that it was no longer an educational programming service.

1223   The two questions that I would like to add on the record relating to described video are:

1224   Please provide the impact of incrementally increasing the amount of described video for each year of the licence term; for example, by one hour per week per year.

1225   And, lastly, the impact of increasing the percentage of original programming described to 75 percent from 50 percent.

1226   Thank you, Mr. Chairman.

UNDERTAKING

1227   THE CHAIRPERSON: You have a list that you can give Bell, presumably, of what you just read out?

1228   MS DIONNE: Yes.

1229   THE CHAIRPERSON: Those are the issues that came up during the questioning, which she just announced by way of undertakings.

1230   I think that wraps it up for today. Thank you very much.

1231   Madam Secretary, what time are we resuming tomorrow morning?

1232   THE SECRETARY: Nine o'clock tomorrow morning.

1233   THE CHAIRPERSON: Thank you.

--- Whereupon the hearing adjourned at 1655, to resume on Tuesday, April 5, 2011 at 0900

REPORTERS

Johanne Morin

Jean Desaulniers

Monique Mahoney

Sue Villeneuve

Date modified:

2011-04-04