ARCHIVED - Transcript, Hearing 11 September 2014
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Volume 4, 11 September 2014
TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
Let's Talk TV: A Conversation with Canadians
140 Promenade du Portage
11 September 2014
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
Let's Talk TV: A Conversation with Canadians
Joshua DoughertyLegal Counsel
Sheehan CarterHearing Managers
140 Promenade du Portage
11 September 2014
- iv -
TABLE OF CONTENTS
PAGE / PARA
25. Insight Production Company Ltd.1178 / 7133
26. Rogers Communications Inc.1194 / 7219
27. L'Association québécoise de la production médiatique1356 / 8298
28. Shaw Communications Inc.1392 / 8488
29. Cogeco1486 / 9091
31. Writers Guild of Canada1538 / 9375
32. Canadian Cable Systems Alliance Inc. 1566 / 9571
33. Canadian Network Operators Consortium Inc. 1608 / 9890
- v -
PAGE / PARA
Undertaking1217 / 7337
Undertaking1217 / 7345
Undertaking1244 / 7523
Undertaking1250 / 7560
Undertaking1262 / 7632
Undertaking1269 / 7680
Undertaking1303 / 7922
Undertaking1305 / 7934
Undertaking1439 / 8754
Undertaking1465 / 8947
Undertaking1480 / 9037
Undertaking1485 / 9081
Undertaking1532 / 9332
Undertaking1533 / 9339
Undertaking1537 / 9365
- vi -
ERRATA / ADDENDA
Undertakings are to be added at the following paragraphs:
Volume 2 - 2014-09-09
Volume 3 - 2014-09-10
--- Upon resuming on Thursday, September 11, 2014 at 0837
7127 LE PRÉSIDENT : À l'ordre, s'il vous plaît.
7128 Madame la Secrétaire.
7129 THE SECRETARY: Thank you.
7130 Good morning. Before we begin, I would like to announce that TELUS, who was supposed to appear today, will now be appearing first tomorrow morning, and V Media, who was appearing Friday, September 12, will now be appearing last on Friday, September 19.
7131 We will now begin with the presentation of Insight Production Company Ltd., who is appearing by videoconference from Toronto.
7132 Please introduce yourself and you have 5 minutes for your presentation. Thank you.
7133 MR. BRUNTON: Thank you very much.
7134 Mr. Chair, Commissioners, my name is John Brunton. I am the CEO and President of Insight Productions, but first and foremost I am a passionate Canadian producer who has dedicated 35 years of my career to tell great Canadian stories and work really hard to build a Canadian star system.
7135 I don't pretend to be an expert on all the issues being discussed at these hearings but I have never been so worried about the future health of our industry.
7137 I understand the desire of the CRTC to allow consumers to have more choice but, to me, at what cost to our culture? To me, pick-and-pay means less of everything. Less Canadian channels will survive, less ad revenue will go to the broadcasters, and in turn there will be fewer platforms, less money for our programming and fewer channels for Canadian shows to tell Canadian stories.
7138 How can our smaller cable channels survive in an environment where there is a huge tidal wave of powerful American promotion and advertising that just floods across our border 24 hours a day? They have dozens of showbiz magazines and showbiz magazine television shows and huge communication companies and mega studios that wallpaper international media outlets promoting their programs all over the world and particularly here in Canada because of our close proximity to the United States.
7139 You know, to me, less advertising revenue, less subscriber money, fewer platforms in Canada to promote our shows and less production dollars for Canadian programs, to me, the outlook looks very scary.
7140 One example, our show "Big Brother Canada" is launched on the back of all of Shaw Media's channels and platforms, all in an effort to get the word out, and they have done an incredible job. People got to know about the show because they used all of the assets of Shaw, many, many assets, to get the word out and promote our show, advertise our show.
7141 "The Amazing Race Canada" is promoted on all of Bell Media's platforms, it's one of our hit shows and it's just to outstanding effect. It was very difficult to live in Canada and not be driven to watch this television series because when these companies decide to use all their multiple assets and get to so many voices across the country it can just have a powerful and incredible effect on attracting audiences to our Canadian television shows.
7142 Sometimes that same promotion that Shaw and Rogers and Bell use includes sponsorship integration in the promotion process itself and tags on the advertising, which allows us to attract even more advertising to the programs that we're producing, which gives us that much more money to produce our shows. The value to our programs, this point of discovery with all these different platforms, to me, is critical to the success of promoting our Canadian television shows and our Canadian programming in general.
7143 With everything working in unison with these big media companies, Canadian shows can compete and get bigger audiences than the American shows on Canadian television if promoted and funded properly. "The Amazing Race Canada," a show of ours that's on TV right now, is the highest-rated television show on Canadian television right now, beating all of the U.S. shows.
7144 The question is: Will pick-and-pay cause less promotion opportunities for shows of ours and will it cause us to have fewer Canadian stories to be told? Will it give us fewer Canadian voices to be heard across our country? Particularly if you're not big and bold, will you lose your voice on our airways?
7145 Simultaneous substitution is another issue that you're discussing.
7146 The notion of repealing simsub makes no sense at all to me. I don't understand it. I just don't understand any benefit that it brings to our system.
7147 If you want to see the Super Bowl ads, just go online. Anybody can go online and watch all those American Super Bowl ads and that's just about the only thing I have ever heard Canadians ever complain about, with the odd glitch in commercials or when a U.S. show goes long or whatever, and that's a tiny issue in my mind.
7148 The Super Bowl has actually proven to be one of the most effective promotional vehicles for Canadian television shows. When Global had the rights to the Super Bowl, they promoted a show that we produced, "Deal or No Deal Canada," during the game itself and directly after the game they premiered our show and it wound up having the highest ratings of any Canadian-produced television show in the history of Global Television. I think that still stands today.
7149 The CTV group did exactly the same thing on the Super Bowl this year, promoting "MasterChef Canada" during the program itself and led into the program and it helped make "MasterChef Canada" another big Canadian hit. And we need big Canadian hits.
7150 You know, I've had the honour of producing "The JUNO Awards" for 20 years now, and when CTV had the rights to "The Grammy Awards" we used the Grammies as a major launch pad for "The JUNO Awards." You know, it was a massive promotion vehicle for us and we would often announce our hosts and the various other rock stars that were performing on our show and it was being directed to a captive audience, you know, exactly the same audience that we had hoped would watch "The JUNO Awards."
7151 And it worked incredibly effectively to be able to have access to the airwaves of those big American hits to promote our Canadian shows and use those big American hits to be the lead-in to our Canadian shows. It has an enormous effect on launching and successfully promoting our shows.
7152 How much smaller will our audiences be if our Canadian network transmission eliminates simsub? How much revenue will be lost to the Canadian broadcasters and of course in turn to our production industry? Who on earth benefits from seeing more U.S. commercials in Canada? To me, only the U.S. benefits from such a thing, and a handful of people that won't go on the Internet to see the commercials during the Super Bowl. It seems insane to me.
7153 I just wanted to speak briefly about Netflix and the OTTs.
7154 I know regulating the Internet is a very slippery slope but the impact to our cultural industries, as we all know, is huge and will only grow more and more as more OTT services switch on from the United States and around the world.
7155 As I understand it, Netflix has 4 million subscribers in Canada. At $8 dollars a month, that represents $384 million that Netflix is making in Canada and I understand that all money goes to the United States and there's no tax on any of that money.
7156 So I'm looking forward in these hearings to hear what Netflix and the other OTTs are proposing to help us in the Canadian content community and, more importantly, what is their contribution going to be to our culture when they are sucking so much money out of the system and creating so much competition. I wish them well, they're a great service, but I look forward to hearing what they are going to propose and what their plans are to participate in a market they are making so much money in.
7157 We need to find a formula in Canada to encourage our Canadian broadcasters to pivot towards a more export mentality. I think this is an important issue. Our industry is too myopic. We keep cutting Canada into smaller and smaller slices and it's just not a big enough country. We have one of the biggest markets in the world right beside us in the United States and we have a huge worldwide opportunity.
7158 We need to export our content. We need to export our stories. We need to export our Canadian culture around the world. We have the capability of doing it. We need to incent our broadcast partners to see that as a real opportunity and an economic opportunity, a great way to increase their revenue.
7159 You know, my company, Insight, produced a drama series a few years back called "Falcon Beach" and we sold the show in over 100 countries around the world. It was wildly successful. The economics of the show, unfortunately, didn't make the show profitable in Canada alone but we made a significant amount of money around the world.
7160 CMF rules at the time didn't allow us to share that distribution revenue with Global, our partner on that program. If we could have shared some of that revenue with Global, our partners, I believe the show could maybe still be on air. Certainly it would have a much longer run and it would have made the burden on Global and the size of their licence fee and all those things a lot easier for them to swallow on a very expensive program that needed a lot of development and a lot of risk on their part in the first place.
7161 So I think we need to look at changing some of the rules, not to screw our production community at all, but to incent our broadcasters, to make our broadcasters great partners with the independent production community to take more risk and to jump into the global marketplace more aggressively.
7162 I hope with all these complications in our world that the Commission moves slowly and carefully to allow the broadcast and production community to adjust to the dramatic changes in the way we're all consuming content.
7163 For my company, Insight Productions, the current system has never worked better. For all our partners, our Canadian broadcast partners, it's never worked better for us, in terms of promotion, funding and getting big hits on the air.
7164 At any rate, I've taken my time. Thank you, Mr. Chair, Commissioners, for giving me the opportunity to express my feelings today. I welcome any questions you might have.
7166 THE CHAIRPERSON: Thank you very much, Mr. Brunton.
7167 Just to be clear, we can see you. We heard you loud and clear. I understand you may not be able to see us, but we're getting your --
7168 MR. BRUNTON: That's correct. I can't see you today.
7169 THE CHAIRPERSON: Okay, that's fine, but Commissioner Molnar will --
7170 MR. BRUNTON: Thank you.
7171 THE CHAIRPERSON: -- will be asking you some questions.
7172 COMMISSIONER MOLNAR: Good morning, Mr. Brunton.
7173 MR. BRUNTON: Thank you.
7174 COMMISSIONER MOLNAR: It's Candice Molnar here --
7175 MR. BRUNTON: Good morning.
7176 COMMISSIONER MOLNAR: -- can you hear me? Yeah.
7177 MR. BRUNTON: I can certainly hear you, Candice. Thank you.
7178 COMMISSIONER MOLNAR: Okay.
7179 I read your submission, and now your opening remarks today, and your position as it regards simultaneous substitution and pick-and-pay are really quite clear. I just want you to know, or perhaps ask if you did understand that the working document, the framework that went out, was really there to generate discussion. So everything in there is not a proposal of the Commission, it is a point of entry to generate discussion and so on.
7180 Certainly simsub has generated a lot of discussion, so...by you and many, and --
7181 MR. BRUNTON: Yes, I understand that. I'm pretty passionate about that particular issue only in that it's had such a huge impact on the success of my Canadian television shows, promoting on the backs of big American hits and big event programming, whether it be the Grammys or the Super Bowl.
7182 COMMISSIONER MOLNAR: Yes.
7183 One of the elements in the working document, that actually was more than just there to generate discussion, is the fact that the Commission had in the past already expressed the view that we need to make changes that enable the consumers, the broadcast cable subscribers, to have more choice.
7184 You've labelled that pick-and-pay. I mean however that choice and flexibility is provided, while people within the industry are very happy with the system, and based on all of the input, public input on here, people are also very happy with the quality of Canadian content, and the Canadian content delivered by the system, but they're a little less happy with their ability to choose and control their price.
7185 So while I understand that, I think you say, things have never been better for the system --
7186 MR. BRUNTON: Yes.
7187 COMMISSIONER MOLNAR: -- perhaps not for those who are purchasing the content, so...so that's the challenge for us.
7188 MR. BRUNTON: I understand the challenge, but I also understand a person's ability to choose. You know, there are 4 million Netflix subscribers. There are a lot of people that have chosen not to buy into the cable system, and that's their choice. I just am interested in: is there a need to legislate or let the people that own these channels and the cable companies, and the people that bundle these channels, deal in the marketplace where their own survival is at risk right now? Is it their responsibility to sort out the new complications of people viewing on the Internet, how to get their message across, how to turn these people?
7189 If, in fact, there's a lot of consumers that are happy with the situation as it exists right now, yet there are others who would like to pick and choose the channels that are bundled for them, I'm just -- and, trust me, I don't really understand this as much as, obviously, my broadcast partners do, but I wonder at what point -- like, whose responsibility is it to deal with the marketplace? Is it the people whose lives depend on it or is it the CRTC's?
7190 On the other hand, listen, the benefit that I've witnessed in my life of the legislation of the CRTC has changed the culture in Canada. You know, I've had the good fortune of being associated with the Canadian music industry. In an era, you know, before legislation on Canadian content, everyone I knew had to migrate out of this country, with the exception of Anne Murray and Gordon Lightfoot, and look at what that legislation has done.
7191 So I'm not against legislation at all. I'm just trying to wrap my head around where the responsibility lies to the consumer.
7192 COMMISSIONER MOLNAR: Don't we all have a responsibility when we're part of the system?
7193 Anyway, can I go on --
7194 MR. BRUNTON: Umm --
7195 COMMISSIONER MOLNAR: -- and ask you about --
7196 MR. BRUNTON: Yeah.
7197 COMMISSIONER MOLNAR: You spoke about discovery and promotion. That is one of the things that we have also been looking at: whether there's something that can be done within the system to enable promotion or support promotion.
7198 What are your thoughts on that, if --
7199 MR. BRUNTON: You know, in a new world, I mean, it's just -- as I said in my presentation, it's overwhelming the tidal wave of American culture that just pours over our borders on a 24-hour basis, non-stop. So in this world of having, you know, multiple platforms, it certainly has been able to help to kind of reach and get out there.
7200 You know, in Canada, we have, like, you know, sort of one show biz magazine, HELLO! magazine. It's an international edition and, you know, the royal family's on the cover almost every other week. There's two or three pages, maybe five pages, that are allotted to Canadian show business, and that's about it. You know, we have a couple of show biz magazine shows, television shows, in Canada, but, you know, I have a bone to pick with our broadcasters a little bit in that arena.
7201 You know, in the -- you know, I've done many shows for the CBC and Global and CTV and Rogers and City and there tends to be an attitude in Canada that's very different from the United States. On David Letterman's show or Jay Leno's show or Jimmy Fallon's show, the network would never say, "Don't have somebody from CBS on our channel because it's a competitor. Don't have someone from Fox."
7202 Entertainment Tonight, in the United States, is owned by a big American studio, but they celebrate all successes. I would challenge our Canadian broadcasters to get together and have a pow wow, and say, "Hey, if there's a success on the CBC, CBC and Shaw and Rogers should embrace that success." All of the successes on our channels, in terms of Canadian content, lifts the whole industry, lifts everything in terms of Canadian broadcasting. Sometimes there's a tendency for our broadcasters to promote their own content, but shy away from celebrating and promoting the television shows and the hits that are on their competitive channels.
7203 I think that would certainly be help. It's a small step, but it would be a big help.
7204 COMMISSIONER MOLNAR: Okay. Well, thank you for that, Mr. Brunton. Those are my questions.
7205 THE CHAIRPERSON: It looks like those are --
7206 MR. BRUNTON: Thank you.
7207 THE CHAIRPERSON: Thank you, Mr. Brunton. So that concludes our questions for you.
7208 Thank you for participating. I apologize that our video linkup didn't work this time --
7209 MR. BRUNTON: Okay.
7210 THE CHAIRPERSON: -- but these are -- I know that you know technical issues sometimes get in the way of video conferences.
7211 So thank you very much for participating.
7212 MR. BRUNTON: I'm well aware of that.
7213 Thank you very much, Chair, and Commissioners, to give me the opportunity to speak today. I appreciate it.
7214 THE CHAIRPERSON: Thank you very much.
7215 MR. BRUNTON: Thank you.
7216 LE PRÉSIDENT: Madame la Secrétaire.
7217 THE SECRETARY: I will now ask Rogers Communication Inc. to come to the presentation table.
7218 THE SECRETARY: Please introduce yourself and your colleagues and you have 20 minutes for your presentation.
7219 MR. LIND: Thank you, Mr. Chair and Members of the Commission. My name is Phil Lind and I am Vice Chair of Rogers Communications.
7220 Before I introduce the Rogers team, with your indulgence I would like to say a few brief words.
7221 This is one of the most important broadcasting hearings in the history of the Commission. I know that because I've participated in nearly all of them over the years.
7222 MR. LIND: I began my career at Rogers 45 years ago just after the 1968 Broadcasting Act was enacted and this Commission was created. Pierre Juneau, of course, was the Chairman in those early days.
7223 Since that time, Mr. Chairman, I have had the pleasure of appearing before you and all your predecessors in office. I reckon that I have represented Rogers at more than 100 broadcasting hearings over the past four and a half decades.
7224 Although the position of the Rogers organization may not have been the same as the position of the Commission on each and every issue under discussion, I have always been struck by the manner, and very appreciative of the manner in which the stability and the spirit of mutual respect that has governed our exchanges with the Commission on issues both large and small relating to regulation and the supervision of our constantly-evolving broadcasting system. We have always felt free to respectfully present and debate the Rogers' point of view on such issues in the knowledge that our views would always receive a fair hearing.
7225 For that, on behalf of the Rogers organization, I sincerely thank you, Mr. Chairman and your fellow Commissioners and all of your predecessors in office.
7226 And now allow me to introduce our members of our panel:
7227 To my left is Keith Pelley and to his left is Susan Wheeler.
7228 To my right, Ken Engelhart.
7229 To his right is Pam Dinsmore and then David Purdy.
7230 In the back row behind me is Colin Watson -- Colette Watson, not Colin -- and to her left is Bart Yabsley.
7231 To Colette's right is Chris Kelly of The Strategic Counsel.
7232 And to his right is Martin Kon of Oliver Wyman Association or Inc.
7233 Rogers appreciates that our customers want more choice and flexibility, and we want to provide it to them while maintaining the successes achieved in the TV industry to date.
7234 The Canadian system has worked well over the years. The subscriber penetration rates that BDUs achieve in Canada are higher than anywhere else in the world, including the U.S. Even in Toronto, where consumers can access 21 television channels over-the-air, most households subscribe to a BDU.
7235 Because so many Canadians are in the regulated system, they have access to a large amount of Canadian content. This strengthens our country and creates jobs in the cultural sector. If customers leave the regulated system, we will lose many of those benefits.
7236 The system also offers tremendous choice and diversity to consumers. Canadians can access programming from hundreds of Canadian and foreign channels. The English-language TV market supports three private networks as well as the CBC. All of this has enabled a healthy independent production sector in Canada.
7237 There are, however, significant challenges. Advertising revenues continue to shift to digital platforms. This has destabilized the conventional TV sector to the point where its role and obligations must be recalibrated. At the same time, the need to create more attractive Canadian programming that can compete on the global stage has become a business imperative. What's more, unregulated services, like Netflix, are eating away at the subscriber base of BDUs while contributing virtually nothing to the Canadian broadcasting system.
7238 Rogers is making major investments to adjust to these new realities. We recently announced our shomi service which will help us to remain competitive in online viewing. And we will be rolling out our next generation platforms over the next one to two years to provide our customers with a vastly improved and more personalized viewing experience.
7239 Given the successes achieved to date and the challenges that lie ahead, we believe this proceeding should evolve, rather than dismantle, the current regulatory system.
7240 While we support many of the measures proposed by the Commission, we are concerned that some, such as the elimination of simultaneous substitution or the elimination of 4+1 in the small basic would harm the system perhaps irreparably.
7241 Our approach would allow BDUs to offer customers more flexibility and choice while fostering the creation of compelling Canadian programming and protecting jobs in the cultural sector.
7243 MS DINSMORE: We believe that Canadians should be offered a smaller basic service --
7244 MR. LIND: I'm sorry, no -- Pam.
7245 MS DINSMORE: -- and pick packs, as well as pre-assembled packages.
7246 We also support offering a large number of services on an a la carte basis. This approach has some similarities to the model that Videotron has implemented with success in Quebec. We believe it is the best way to empower consumers to choose the services they want to receive while minimizing the adverse impact this model could have on the television system.
7247 The Commission has proposed two options for a small basic service, an all Canadian small basic or a larger basic package that would be rate-capped.
7248 In our view, any small basic service Rogers offers must include ABC, CBS, NBC, FOX and PBS. These signals are freely available over-the-air in most of the markets we serve. The Strategic Counsel survey we provided shows that the vast majority of those surveyed want these signals on basic.
7249 And we do not believe that the price of the basic service should be capped. If the cap is set too low, BDUs will not be able to recoup the costs of their networks, which will make it harder to innovate and improve the system.
7250 If the Commission does not accept our proposal, we believe it should allow BDUs to decide between option A and option B.
7251 In any event, Rogers does not believe that the Commission should mandate how BDUs market and promote the basic service. Instead, BDUs should be required to make the basic package easily available to those consumers who want it. BDUs are in the business of satisfying customer demand and will, therefore, market the offerings that best suit consumer needs. The fact that the services offered by Canada's BDUs have the highest penetration in the world is evidence of how well we market and promote those offerings.
7252 Rogers is also a strong proponent of pick packs. Today, we allow our customers to build their own packages from a selection of more than 70 pay and specialty services. When we launch our next generation distribution platform, we will include all of the discretionary services we offer. We believe small basic and pick packs are the best way for consumers to select the channels they want to watch.
7253 With respect to a la carte, our proposal would require BDUs to offer a minimum of 50 percent of discretionary services on a standalone basis. No BDU in North America offers all of its discretionary channels a la carte.
7254 The Oliver Wyman study demonstrates the negative impact of a pure a la carte regime. It shows that only a small minority of consumers would benefit from such a regime. The vast majority of them would end up paying more for fewer services.
7255 In addition, programming diversity, a hallmark of the Canadian broadcasting system, would be threatened as many niche services would not survive in a pure a la carte environment.
7256 BDUs should also continue to have the ability to offer pre-assembled packages, including the existing basic service. Our research confirms that most customers would prefer to choose a package of programming services that suits their tastes, rather than combing through hundreds of channels looking for the ones they think they may want.
7258 MR. PURDY: Thanks, Pam.
7259 To encourage a healthy and dynamic relationship between BDUs and programmers, Rogers supports the Commission's proposal to amend the Code of Conduct for Commercial Arrangements to prohibit "unreasonable" penetration-based rate cards. While we appreciate that some programming services should receive higher per subscriber wholesale fees if their subscriber numbers decline, rate cards can be a significant obstacle to greater choice and flexibility.
7260 In fact, the wholesale fees charged to BDUs under some PBRCs are so unreasonable that distributors simply cannot afford to offer such services in pick packs.
7261 To address this problem, we believe the Commission should include in the Code of Conduct the principle that any wholesale rate increase contained in a PBRC must be limited solely to the recovery of lost subscriber revenues due to a reduction in penetration.
7262 A PBRC could not recover lost advertising revenue. For example, if a BDU with 1,000 subscribers pays a wholesale fee of $0.75 per subscriber per month for a service distributed to 100 percent of its subscribers, the total monthly fee paid to the service would be $750. If the penetration of that service declines to 75 percent, the wholesale rate paid by the BDU could only increase to a maximum of $1.00 per subscriber, which would equal $750.
7263 By limiting the "make-whole" in this way, a programmer could not impede a BDU's ability to offer that service in a more flexible manner. And it would ensure an equitable sharing between programmers and BDUs of the risks associated with providing consumers greater choice.
7264 MR. PELLEY: A renewed strategy to foster compelling Canadian programming should enhance the ability of licensees to respond to the preferences of consumers. It should not discourage investment by the broadcasting industry or grant additional competitive advantages to OTT services.
7265 We do not support the proposal to include online revenues in the definition of "broadcasting revenues". Taxing new Canadian online services like shomi, while giving Netflix a free pass, would not address concerns about declining contributions to Canadian programming.
7266 Efforts by the Canadian broadcasting industry to provide consumers with a multiplatform viewing experience on "companion" websites and applications should be encouraged, not stifled by additional obligations.
7267 Without regulation, we have developed several new ways for audiences to access content across multiple platforms. For example, shomi will allow consumers to watch television programming online, on their tablet and through their set-top box, and will give consumers over three times the amount of Canadian content that is offered on Netflix.
7268 It would be wrong to require Canadian broadcasters and distributors to contribute more money to fund Canadian programming, while exempting every other Canadian or foreign company that operates an over the top service in Canada. This kind of asymmetrical regulation would substantially increase the costs incurred by Canadian broadcasters and distributors and give a significant competitive cost advantage to unaffiliated online services.
7269 We believe one of the key impediments to the creation of compelling Canadian programming is the lack of financial incentive broadcasters have to invest in big budget Canadian productions.
7270 We just heard it and I applaud the words from Mr. John Brunton and agree with his analysis around Falcon Beach.
7271 Right now, the Terms of Trade Agreement discourages broadcasters from investing more than the minimum amount required to trigger funding from the CMF. There is no incentive to take on greater risk when we are granted limited rights and limited opportunities to share in revenue streams that exist beyond the first broadcast window.
7272 The existing requirement for broadcasters to enter into a terms of trade agreement with independent producers should be eliminated or, at the very least, revised to allow us greater financial incentive to invest in Canadian programming.
7273 Independent producers have almost exclusive access to independent production funds and broadcasters have both expenditure and exhibition requirements for independent production.
7274 We have every incentive to work together to create compelling Canadian programming without the need for an industry agreement that frustrates broadcasters' ability to respond to consumer demands and impedes the development of new business models and programming strategies.
7275 We also propose relaxing the rules for eligible Canadian program expenditures by including marketing and promotion costs for Canadian programming. Allowing marketing and promotion costs to count towards CPE would provide broadcasters with greater incentives to promote and market Canadian programming.
7277 MS WHEELER: Thanks.
7278 With respect to local television, Rogers believes the time has come to recognize that conventional over-the-air TV is no longer the cornerstone of our system. The advertising market is changing at an alarming pace. A significant amount of advertising dollars are migrating from conventional to specialty and online sectors. This has destabilized the television industry.
7279 If local television and local reflection is to survive, a new regulatory model is required, one that allows for maximum program flexibility and focuses our contributions on the creation of local content and the exhibition of Canadian programming that has broad appeal. In our view, that model would consist of a Canadian exhibition requirement of 35 percent throughout the broadcast day and 35 percent during the evening period, and a commitment to broadcast a specific number of hours of original local programming each week. All other regulatory requirements relating to things like CPE and PNI would be eliminated.
7280 We strongly believe that the conventional television sector needs a meaningful relaxation in its regulatory requirements to remain viable. And the proposal to allow TV stations to shut down their transmitters will not solve the problems facing local television.
7282 MR. LIND: Rogers cannot support either of the proposals in the Commission's working document regarding simultaneous substitution. With respect, neither would benefit Canadian consumers, nor support broadcasters' efforts to invest in and create Canadian programming.
7283 On the contrary, either option proposed would devastate the conventional TV sector in Canada. There is no other mechanism that would adequately protect programming rights.
7284 As noted in the Armstrong Report, simultaneous substitution is valued at close to $450 million for the industry. It accounts for almost 30 percent of City's primetime revenue. The only English-language over-the-air broadcaster that can survive in Canada without substitution is the CBC and that is only because it receives a billion dollar annual appropriation from Parliament.
7285 The alternative proposal of prohibiting simulcasting for live event programming would mean that sporting events, award shows and other extremely popular programs would cease to benefit from the substitution regime. Live event programming is "PVR-proof", which makes it more attractive to advertisers who are spending less and less on conventional television. Removing simultaneous substitution for this type of programming would give advertisers another reason not to invest in conventional.
7286 BDUs perform hundreds of substitutions every single day. Last year, fewer than 500 people complained to the Commission about the practice. This shows that simultaneous substitution is not a pressing consumer issue.
7287 The Super Bowl is the only program that elicits significant customer complaints. If the Commission is concerned about the Super Bowl, one option is it could eliminate the substitution for that specific event when the contract of the current rightsholder expires.
7288 Lastly, Rogers is concerned about the proposed implementation date for the new framework. December 2015 is too aggressive. Given all of the numerous complex issues that have been raised in this proceeding, we do not believe that a 12-month window from the date of the decision would provide enough time for the industry to comply with the new obligations. Rogers therefore suggests that the date be revised to December 2016.
7289 Mr. Chairman, that concludes our presentation. We would be pleased to answer any questions and Ken Engelhart is the QB, quarterback.
7290 THE CHAIRPERSON: Well, thank you, and welcome, again, Mr. Lind, to one of our hearings. I guess you regret that we didn't create some sort of frequent flyer or other incentive program in 1968.
7291 THE CHAIRPERSON: We could have upgraded you to a more comfortable seat.
7292 My first question -- and I'll start off the questions and my colleagues, no doubt, have some other questions.
7293 I wanted to get your views specifically. You've been an important player, Mr. Lind. You've pointed out your long and distinguished career in the area of particularly audio-visual content in Canada.
7294 I'd like to have your views on the future of, as you see it, of television. And I always use that term in the largest sense, not traditional television; whether you agree with the assessment in the Commission's notice, Public Notice of Consultation, and perhaps explain to me more why -- how shomi, what you've announced will be rolled out later, forms part of your strategy going forward.
7295 MR. ENGELHART: Yes, you know, it's -- I have been sort of hearing about the death of the television system now for the 25 years that I've been at Rogers and it's -- all of the reports of its death have been greatly exaggerated. So I can remember 25 years ago people saying, well, the phone companies are going to build fibre-to-the-home and there isn't going to be any more appointment television and everything will disappear.
7296 That having been said, I think -- we think that internet delivery of video content is making a big difference and is a big change. We've seen all sorts of analogue and old media cultural products really disappear as a result of the internet. Nobody buys an encyclopaedia anymore. It was replaced by Encarta and Encarta was then replaced by online.
7297 And I think the trend over the next 20 years will be all of the broadcast programming that we see will be delivered over the internet. Does that mean that the TV system that we recognize has two years to go or 19 years to go?
7298 I don't know. I think -- I think we tend to over -- we tend to exaggerate the short term and underestimate the long term. I think we've got another five or 10 years. I'm 59, so I think I'll make it to retirement with the current system.
7299 That having been said, there's a change. There is a change so we have to be careful with what we're doing because the system isn't closed anymore.
7300 You asked about shomi. One of the things that's changing is people want to watch deep library content and they want to watch -- they want to binge watch. They don't want to do appointment television anymore. So that's led to the extraordinary success of Netflix. You know, we tend to -- we tend to focus on the fact that Netflix is internet-delivered but the real secret sauce that accounts for their success is they've discovered a type of programming that people weren't getting. They weren't getting that deep library content. They weren't being allowed to binge watch.
7301 So if we're going to be in the TV business we have to deliver that same experience and that's the idea behind shomi. It's to give people what they want when they want, how they want.
7302 And the other change that's coming is the internet generation does want at least the option of picking the channels they want and not having a pre-packaged set of channels forced on them. And that's why, I think, we are more in line with your vision of a pick-and-pay world than most of the other BDUs because we think it's something that will help to keep people on the system.
7303 So I don't know, David, if you want to add to any of that.
7304 MR. PURDY: I think you did a great job, Ken.
7305 Thank you, Mr. Chairman, for the question.
7306 The notion of value, I think, is the thing that is most challenged by the evolution we are seeing today. The customer's overall perception of value is declining.
7307 At Rogers we have a strategy that is really threefold. First, we want to make the content that we sell to our customers available across multiple devices. We want to have the ability for the customer to watch in any room in their house, and, ultimately, any room outside their house.
7308 We think that vastly improves the utility of the product and, ergo, raises the overall perception of value. That is absolutely necessary if we are going to hold onto these customers.
7309 The second thing we are trying to do is expand what the content offered is. Historically, if you wanted to watch previous seasons of your most popular shows, or even library content, you had to either buy the DVD box set or go and rent it somewhere else. You had to leave the traditional Canadian broadcasting system.
7310 We think that is a mistake, and we think a huge way of adding value for our customers is incorporating that look back and library experience into the current offering.
7311 Shomi is all about doing that, but Shomi will be just one service.
7312 You heard Bell allude to the fact that they are offering, or planning on offering, a similar offer.
7313 So being able to have that look-back content folded into the service, I think, is absolutely necessary, again, if we are going to hold onto the customers.
7314 The third thrust is making it easy and simple to use. Historically, that is where we, as an industry, have been challenged, because of the proprietary nature of our set-top boxes. We have had really challenged user experiences, whereas the online and IP-based services have fantastic, easy to use, customer interfaces.
7315 So we are going to improve all three of those areas, and if we do that well and we promote it well, I think we have a chance of holding onto these customers for years to come, even past Ken's impending retirement.
7316 THE CHAIRPERSON: Which he could have filed in confidence, if he had wanted to.
7317 THE CHAIRPERSON: Getting back, though, to -- and we might disagree as to how fast it occurs, and we will only know afterwards how fast it did occur -- but do you disagree with the broad strokes of the trends that the Commission identified in its Notice of Consultation?
7318 MR. ENGELHART: I think the Commission still views the online video world as complementary, and we think that substitution is happening.
7319 For years I said that no one was ever going to get rid of their home phone and just use their wireless phone, and I was right for quite a number of years.
7320 Eventually, however, I turned out to be quite wrong, and it is happening.
7321 Cable companies build new homes every year and homes passed increases by 1 or 2 percent, and for a long time our subscribers would increase in accordance with those homes passed.
7322 Then, over the last four or five years, the homes passed are increasing, but the number of subscribers, the absolute number, is staying flat. And now we have seen a very small trend where the absolute numbers are declining. So there is a bit of substitution happening.
7323 The trouble that you have -- and I don't envy your job -- is that people are always coming to you with gloom-and-doom stories that turn out to be untrue. They exaggerate the immediate impacts.
7324 On the other hand, when digital --
7325 THE CHAIRPERSON: I should refrain from referring to the Death Star, then.
7326 I think those were your lines at the time.
7327 MR. ENGELHART: I think that's fair, although satellite has a big chunk of the market. I don't completely apologize for my comments.
7328 But the thing when digital technologies replace older technologies is that it happens really fast.
7329 David loves to tell the story about our Rogers video stores. They were hugely successful, and every year, despite video-on-demand, despite the alternatives, in-store sales kept growing, and then one day they levelled off.
7330 And when it started to fall, it was like a rollercoaster.
7331 What makes your job so hard is that, by the time you are sure that the online world is replacing the conventional world, it's too late, and yet you don't want to move too soon. But I do believe it's substitutional.
7332 THE CHAIRPERSON: At the height of the video store business, when would that have been?
7333 MR. PURDY: In sort of the mid-2000s, that was the pinnacle.
7334 THE CHAIRPERSON: At that time -- and I have been asking this, and you probably know -- in an average week, how many hours would a Canadian at that time, at the height of that video market, be watching that source of audiovisual content?
7335 MR. PURDY: I think, if I remember correctly, our active users were ordering two to three movies a week. So the active Rogers video customer was coming in and getting two to three movies per week.
7336 THE CHAIRPERSON: If you were to average that against the general population in the areas that you were active in, was it two hours a week then, per household?
7337 MR. PURDY: I am guessing at this point, and we should probably forward to you -- we can pull our data, but --
7338 THE CHAIRPERSON: If you could do that, I would appreciate it.
7339 In a sense, I think it would be informative. You saw our latest monitoring report, where the online consumption of video content seems to be -- yes, in percentage growth it's enormous, but it seems to be still less than two hours per week, which I suspect might be in the same ballpark of people watching at the height of the home video market, Video 1 and other platforms, as well.
7340 MR. PURDY: Thank you, Mr. Chairman.
7341 I think what we see -- and you heard yesterday about the CTAM research, and I sit on the board of CTAM, so I would be happy to forward you that research, as well.
7342 THE CHAIRPERSON: I think that we probably have that.
7343 Do we have the CTAM research?
7344 Well, in case we don't, could you undertake to forward that to us?
7345 MR. PURDY: I will speak to my fellow board members and --
7346 THE CHAIRPERSON: I am pretty certain that we do, but just in case.
7347 MR. PURDY: What was interesting about that research was, on an aggregate total basis -- I think you are right -- the average was measured in a low number of hours per week. But if you look at specific segments of the population, i.e., millennial youth, you see a really different story.
7348 We are seeing more than 50 percent of total video consumption for youth and young adults as occurring off the television set. It's occurring online, on demand, on mobile devices.
7349 So that is the part that we are focused on from a product management perspective.
7350 When we look at millennial youth and see them moving through the segments of their life, historically the notion was, oh, when they move into their own houses, or when they move into their own apartments, they will get a larger TV set and they will somehow convert to the traditional broadcasting system. I don't think we can count on that.
7351 We are very fixated at Rogers at creating products and services that appeal to youth and young adults. It's a huge uphill battle for us in order to create relevant products. They have a much lower tolerance for large packages that don't offer targeted or segmented content that makes sense for them.
7352 They also have a much lower tolerance for appointment viewing. They want to watch it at a time and a place of their choosing, and they are baffled by the fact that we can offer some channels in the living room or the house, but we can't offer the same channels outside the house.
7353 So we have a huge task to try to create products that make sense for them.
7354 MR. PELLEY: I would say, Mr. Chair, in terms of tailoring to new video habits, that I think what is happening is an unbelievable transformation in the way the millennial youth, as David mentioned, are viewing content.
7355 We conduct informal research groups with our millennials at Rogers and it is astounding the way they are consuming media.
7356 We were telling this story last night. My 11-year-old said to me not long ago -- one night we had a couple of hours and he said: Hey, Dad, do you want to go down and just watch YouTube for an hour and a half?
7357 I tried to convince him to watch FX, or FXX, but...
7358 It is a perfect example of how it is completely changing. What David mentioned in terms of the millennials is happening, and although it may seem that it is only gradual, or it's only two or three hours right now, it will happen like "this". That is what we worry about.
7359 So, as a result, you have to produce Canadian content, you have to produce compelling content that resonates with consumers, and my 11-year-old, across multiple platforms.
7360 Ken mentioned that they want to watch what they want, when they want, how they want, and that has to be what we think about in everything we do now in the broadcasting world.
7361 THE CHAIRPERSON: You mentioned that audiences, particularly younger audiences, don't fully understand why offers can't be available. Is part of the problem a lack of understanding, as well, of the rights market?
7362 One of the things we hear constantly in responding to people on social media platforms, the CRTC itself, is that it's not because we have prevented it, there is a rights market there. But there seems to be a lack of understanding of how that rights market works.
7363 MR. PELLEY: I think that is definitely a challenge. I can cite the complexity right now of the NHL in the regional and the national rights.
7364 Explaining it to even our internal group is very complicated. So to actually explain that to the viewer, or explain it to my 11-year-old son, in terms of authentication and un-authentication, is very tricky.
7365 Like I said, they now, I believe, just don't accept that.
7366 It was mentioned last night -- I think it was from Mr. Cassaday -- and nothing rings more to the truth than this, and it is challenging our industry -- that what we, I think, as a collective group, have to get together and deal with is piracy, because when they can't figure it out, that's where they go. Piracy is a real issue.
7367 But I do concur that, as far as education, David, it is something that we are always challenged with.
7368 MR. PURDY: Thank you, Keith, and thank you for the question, Mr. Chairman.
7369 It is truly baffling for millennial youth to go online and see Game of Thrones available on all of the Torrent sites, but not be able to watch it in sort of a way that makes sense for them.
7370 I think the most stolen piece of content in the world right now is Game of Thrones, but historically it has been challenging for us to secure the live broadcast rights, the full season catch-up rights, and the previous season look-back rights for all of these most popular shows. And so, the challenge we have is sort of breaking the KISS rule. Often times, rightsholders have a KISS rule, which is "keep it separate, sucker", and the intent is to get us to pay for every single individual platform on an additional basis and do those negotiations spread out over multiple years, as opposed to one at a time.
7371 If we're going to be successful in keeping people within the system, we have to secure -- we have to do what we call "super deals". We have to secure live, full-season catch-up rights and previous season look-back rights all at once, in order to offer them in a comprehensive way that makes sense to the young people.
7372 We're working really hard.
7373 The NHL was a good example of a league recognizing the fact that they had to give us, or that it was in their interest to give comprehensive rights to the Canadian marketplace, and I think you're seeing a lot of the broadcasters make breakthroughs. Bell's recent announcement of their being able to secure the library content to HBO, I think, is a good news story, and we're doing the same thing for our special channels and our broadcasting assets.
7374 So, we're making headway.
7375 The question is, can we make headway fast enough to keep these people within the system?
7376 THE CHAIRPERSON: Right. And earlier, you made reference to the perception of value as being, you know, one of the key approaches, and I would like to have your comments.
7377 I assume when you've thought about and, obviously, acting on developing an SVOD, there is a lot of investments on research and development, marketing studies, the technology. There will be ongoing development and maintenance costs.
7378 But would you agree with me that, in the end, the subscriber doesn't really care about how much -- the value they attribute is on the content, not how you deliver it?
7379 MR. PELLEY: I would say twofold: one is that there's no question that the content is very important on a service like Shomi -- and you're right, we have done extensive research, Mr. Chair, on it -- but how we deliver it is also critical.
7380 So, you made reference to, earlier, the video store. Often, we would go into a video store and you'd be in there a lot longer than you anticipated, because you couldn't find something to watch. And then you'd see this little, tiny, little button at the end that said "staff's choice" and, quite often, you would grab that. That was where you would talk to the store manager and say, "which video did you like?"
7381 So, it's very important to have great content.
7382 But how you articulate that is equally as important.
7383 And where Shomi is -- I kind of think of it as the new video-age clerk, where the curated content and how we actually provide selection opportunities. So, we'll use a lot of our celebrities. So, Bob McCown will pick his five favourite sports movies. We'll pick the favourite family night movie, for Friday nights. We'll have a selection of the top five entertainment movies featuring women over 40. There's all kinds of different curation that we will have.
7384 So, the way that we actually deliver the content, I think, is equally as important as the content itself.
7385 THE CHAIRPERSON: Right. I get the content and the experience that comes along with it is perceived as value.
7386 But your fixed costs, nobody cares about that. Right? And that's a bit the same challenge you have --
7387 MR. PELLEY: Right.
7388 THE CHAIRPERSON: -- in basic cable.
7389 We talked, earlier, with some other intervenors, and that's the challenge: it costs money to do that. It actually creates jobs and economic activity and contributes to -- but, in the end --
7390 MR. PELLEY: Correct.
7391 THE CHAIRPERSON: -- it's the on-screen experience --
7392 MR. PELLEY: Right.
7393 THE CHAIRPERSON: -- obviously more interesting with the sort of experience features you're talking about.
7394 MR. PELLEY: Right.
7395 THE CHAIRPERSON: But there is no value, it would seem, on your fixed cost -- perceived value. I'm not saying it doesn't have, but perceived value.
7396 MR. PURDY: Mr. Chairman, the one thing I would say in defence of there being value in the user interfaces, right now, we're carrying a channel called FX. It happens to be owned by the Rogers Media folks and Keith programs it. I think it's probably the best specialty channel, non-pay specialty channel out there. Amazing content on it. Truly unique.
7397 But many of our customers still don't know we have it and aren't aware of the shows that are on it.
7398 So, if we don't have elegant tools that promote and drive the awareness of the individual pieces of content, what we find is that the value creation of that content lags.
7399 So, if you look at "Breaking Bad", "Breaking Bad" didn't really hit its zenith, in terms of popularity, until season 4 or season 5.
7400 So, the investments we make, in terms of the user experience, are recouped by greater awareness of the most compelling content we have.
7401 I agree with you, though, the customers have no interest in our capital expenditures, on an annualized basis. They only care about that which is facing them and that they see direct benefit from.
7402 MR. ENGELHART: I think, Mr. Chair, you have really accurately encapsulated the whole essence of what this proceeding is about. Because that is the challenge that both BDUs and programming services face. You have these big fixed costs --
7403 THE CHAIRPERSON: And unlicensed SVODs, to a degree, as well.
7404 MR. ENGELHART: Absolutely.
7405 So, you build this big network. You build this big platform. You buy all this expensive programming content. That's sunk.
7406 And then you sell it to people on a very different basis, where they're buying an individual package or an individual program or an individual channel.
7407 So, the challenge there is you need a way to cover all those fixed costs -- and that has driven most of the industry towards a fairly big basic and towards fairly big packages, not only in Canada, but all around the world, and it's driven programming services to really, really worry about their penetration. Because if they can get a good enough penetration times their wholesale rate, they can recover their costs.
7408 And as we move to the pick-and-pay world, that whole problem is brought, acutely, into focus.
7409 So, how do you make sure that the BDU can still recover those fixed costs? How does the programming service make sure that it can recover its fixed costs?
7410 It's difficult.
7411 And I think that's one of the reasons why a lot of the people who have appeared before you, and are going to appear before you, are saying, "Don't do this. We can't do this. The whole system will go down the drain."
7412 We're somewhat more optimistic. We think it can be managed. We think it can be done, and we think it has to be done because this new segment of the population demands it.
7413 But that's the problem, and I think you've summarized the whole dilemma of this issue.
7414 THE CHAIRPERSON: Which is a good segue to the questions I have, now, on the whole notion of skinny basic.
7415 Between the two options in the working document, which would you prefer?
7416 MR. ENGELHART: If we had to pick them, we would say don't -- put them both into the regulations unless --
7417 THE CHAIRPERSON: It's not a pick-and-pay world. It's one or the other.
7418 MR. ENGELHART: You could draft the regulations to say each BDU will have either a small basic like this or a larger small basic at a rate cap of X. You could draft the regulations that way.
7419 THE CHAIRPERSON: I realize that, but that's not my question.
7420 MR. ENGELHART: As you know, our preferred option is a modified A that includes the U.S. 4 plus 1s --
7421 THE CHAIRPERSON: Again, you're modifying the options.
7422 MR. ENGELHART: Yes, we are. And let me just say that we think most consumers think that small basic is the over-the-air channels and the 9 1Hs, if they had any questions about that, they'd probably wonder what the 9 1Hs are doing there, not that we're in any way complaining about the 9 1Hs, but most consumers would expect that the over-the-air channels that their neighbours can get with antenna would be available.
7423 If we had to choose between A and B, if you wouldn't put them both into the regs and you wouldn't modify them, I think we'd go for A.
7424 THE CHAIRPERSON: With a 4 plus 1, I understand your argument, that they see value in it, in fact, it gets back, I suggest to you it's not so much that consumers want the 4 plus 1 to go and see the programming -- because I assume you would agree with the evidence Bell gave yesterday, that of the top 200 U.S. programs, the vast majority are available somewhere in the system.
7425 MR. LIND: Yeah, and "somewhere" is the key, because no one knows where "somewhere" is.
7426 THE CHAIRPERSON: Right.
7427 MR. LIND: So, that doesn't really add very much to the equation.
7428 THE CHAIRPERSON: Despite your very useful electronic program guides.
7429 MR. LIND: Yeah, no. Listen, I think that removing 4 plus 1 from the basic service is a major problem and a fundamental flaw in your logic. I can't see it.
7430 If, in Toronto I have to go to subscribers and say, "Sorry, we're not giving you 4 plus 1 here. We can't do it. We're not allowed to do it. The government is telling us to take a basic service" -- which they get on an antenna -- "off the service", we're going to have a lot of problems with that.
7431 Now, Chris Kelley could explain the kind of consumer reaction that we encountered when we floated that idea.
7432 It is a wrong, wrong method.
7433 THE CHAIRPERSON: But, you see -- Commissioner Molnar was asking the same questions to others -- it seems to me that you're suggesting that we would not allow you to offer the 4 plus 1. I think the proposal may not may be overstated, in fact, we're saying if this is -- if there's a basic, this is the basic. Nothing would prevent you from also offering a 4 plus 1 on a discretionary basis, for free.
7434 MR. PURDY: Mr. Chairman, I'll tell you a personal anecdote.
7435 I didn't know Phil's career was going to be as long as it was and so, four or five years ago, I had a massive debate with Phil about whether or not we should move PBS Watertown, in Ottawa, to the Detroit affiliate.
7436 There was a number of efficiencies and synergies if we went to the Detroit signal.
7437 PBS Watertown, I think, only carried an hour and a half to two hours a week that was unique, or different, than the Detroit signal for PBS.
7438 I ploughed ahead with the decision and I learned empirically through painful customer backlash how wrong I was. The people in Ottawa seemed to have an incredibly strong link to the PBS Watertown signal.
7439 THE CHAIRPERSON: Right, and I read that in your evidence and you describe the reaction to that. All I'm saying is you seem to be suggesting -- and I had an exchange as well with the folks from Corus and the folks from the consumer groups that nobody is saying you have to take it away from anyone.
7440 MR. PURDY: I think we would like to see it in the basic offering because our --
7441 THE CHAIRPERSON: Because it gives a perception of greater value.
7442 MR. PURDY: It gives a perception of greater value. And I could see the antenna folks, the gentlemen and ladies who sell antennas in the marketplace -- in Toronto, for example, you can get 22 over-the-air broadcast signals with an antenna. They're one of our competitors now.
7443 THE CHAIRPERSON: Sure.
7444 MR. PURDY: People are running ads saying for a one-time fee get a digital antenna and access 22 signals.
7445 THE CHAIRPERSON: Right.
7446 MR. PURDY: So for us to --
7447 THE CHAIRPERSON: And they also say the digital quality of that video is better than the one you would get on a compressed version.
7448 MR. PURDY: Right. So they are capable of all sorts of lies and misdeeds.
7449 MR. PURDY: But certainly it's easy for customers to understand numeric superiority in terms of channel count and it's only one of the overall things that contributes to perception of value but it's something we think we need to have in order to be competitive.
7450 THE CHAIRPERSON: But, in a sense, there may be an underlying philosophy of the skinny basic that this is a public service offering that you get local news.
7451 MR. LIND: You have a CATV service that doesn't -- that is offering something that doesn't have all the channels that are available. It's not -- it's crazy as a marketing thing. It's just nuts.
7452 THE CHAIRPERSON: And what would prevent you from offering those channels not as the regulated basic but an add-on, we'll throw that in for you as well?
7453 MR. LIND: Oh yeah, sure. So these customers can get the American services for an additional fee, you mean?
7454 THE CHAIRPERSON: No, for free.
7455 MR. LIND: No. On option A they're not available.
7456 THE CHAIRPERSON: They are not part of the regulated basic but somebody who wants to get them, you could offer it to them.
7457 MR. PURDY: So I think the main thing is that we're able to incorporate them in their offering. So as long as we're able to continue to offer the 4+1's as part of our offering, that's what we're most concerned about.
7458 THE CHAIRPERSON: Did you give -- I had some questions about as we move to a more choice and flexibility world, about how we would actually implement that. I saw your point about we have to go perhaps at a more measured pace, but as I asked the consumer groups earlier in the week -- it was Monday -- they perfectly understood that you wouldn't ask the entire subscriber base to proactively go out and reselect, that the status quo could be carried forward. Is that how you envisage a rollout, regardless of where we land on any of these?
7459 MR. ENGELHART: Yes, and I guess the -- just to put the problem into context, the problem that's in the Oliver Wyman Report, the problem that a number of people have talked about, the problem that was really framed by your analysis of the fixed common costs of the industry, you can get into a vicious cycle or I think yesterday someone called it a death spiral.
7460 So what happens is people are choosing less. This drives per unit costs up, BDUs lose subscribers, popular programming services lose subscribers, prices start going up, and you end up in this death spiral in an environment where very few people are saving money and their savings are very modest and the vast majority are spending more for what they've got today.
7461 So we have a kind of equilibrium in the system we've got today. You destabilize that equilibrium with a pick-pack world and you could end up in a very bad place.
7462 So how do we satisfy your requirement and our requirement of getting there without getting into the death spiral? And we think there are two main ways of moderating that pace or avoiding that difficult outcome.
7463 One is marketing. So you have suggested in the straw-person document equivalent marketing. We don't think equivalent marketing is the right test. Our research shows that 66 percent of Canadians want to pick their own channels and then when it's explained to them, "Oh, did you know that the per unit price is going to go up," that number drops to around 15 percent. So we think there's about 15 percent of our subscribers that will want to go down this pick-pack route and 85 percent that will want value packs.
7464 So our marketing would not be equivalent, our marketing would be commensurate with those different customer desires. So we think an equivalent marketing test could push us too quickly into the wrong path.
7465 We think you should -- don't let BDUs bury this in the fine print, we're not saying that. It should be easily available and we are going to make it easily available but not equivalent marketing.
7466 The other element of our plan is we think that small basic and pick-packs does the trick. We think that satisfies the requirement and people can say, "Yay, I got to pick my own channels. I got a small basic, then I picked 10 or picked 20. I got to pick my own channels."
7467 Pure à la carte, we think, might move you too quickly into that destabilized world.
7468 THE CHAIRPERSON: Okay. Well, I'll get to that in a second.
7469 MR. ENGELHART: Right.
7470 THE CHAIRPERSON: I just want to understand how you --
7471 MR. ENGELHART: Sure.
7472 THE CHAIRPERSON: -- envisage the -- it may be that the majority of Canadians are actually quite satisfied with their cable offering and I think the consumer groups even suggested why would you force everybody to proactively reselect. And that is your position as well, that one needn't do that?
7473 MR. ENGELHART: Correct.
7474 THE CHAIRPERSON: -- that they just be carried forward?
7475 MR. ENGELHART: Yes.
7476 THE CHAIRPERSON: Okay. You are suggesting that as part of the skinny basic offering that the OMNI services on the DTH offering should be included; is that correct?
7477 MR. ENGELHART: Yes.
7478 THE CHAIRPERSON: Could you tell me a little bit more why you think that's, I guess, appropriate for the relevant market?
7479 MR. ENGELHART: Susan.
7480 MS WHEELER: Currently, DTH operators aren't required to carry the OMNI stations. They're only required to carry one station per broadcast group per province. We think this was an oversight from the previous regime and so any regulated small basic, we think, should also include the OMNI over-the-air stations by both cable and satellite providers.
7481 THE CHAIRPERSON: And I guess we will hear from those in argument as to why that would not be a good idea.
7482 MS WHEELER: I look forward to hearing that.
7483 THE CHAIRPERSON: Okay. But your argument would be that not only is it symmetry but it has content relevant to us?
7484 MS WHEELER: Symmetry and that they're an over-the-air service providing local content to a community that is very relevant.
7485 MR. LIND: Again, CATV is community antenna TV. It provides as a basic service all of the signals that you get off air. That's what cable starts with. That's where it begins.
7486 THE CHAIRPERSON: It has been suggested that children and youth programming should also be part of some sort of skinny basic offering for a public policy reason, I guess the argument being that CBC and the local educational broadcasters don't provide enough programming. What are your views on that?
7487 MR. ENGELHART: Well, you know, you are going to come out with an announcement, we're going to come out with an announcement, "You get to pick your own channels," and if the skinny basic has got too many channels on it that people didn't pick, they're going to say, "Wait a minute, I thought I got to pick these."
7488 I think even the 9(1)(h)'s are going to give people some questions. I'm not saying you take them out. So if we start adding children's --
7489 THE CHAIRPERSON: And you agree not to take them out because they serve a public interest outcome --
7490 MR. ENGELHART: Absolutely.
7491 THE CHAIRPERSON: -- and that's how we've settled issues in this country. We understand that we have collective obligations.
7492 MR. ENGELHART: Absolutely. You're not getting an argument from me on that. I'm just saying that people are going to say, "Wait a minute, I didn't think -- I thought I got to pick them, look at all these things that I didn't pick."
7493 So we'll have to manage that. But once you start adding more children's programming or other things into the skinny basic, people are going to say, "Wait a minute, this isn't working, I was supposed to be able to pick them."
7494 So I understand why that programming is valuable, I understand why people are arguing that it serves a public interest, but we think most people will still want the tremendous value associated with our basic, and yet, there is a component of our customer base that wants to pick their own channels and if we put too much into skinny basic they'll feel they're not.
7495 THE CHAIRPERSON: Building on this notion of more choice and flexibility, I know you don't operate distribution undertakings in Quebec but nevertheless you've studied the situation in Quebec. To what extent is that Quebec model transferable across the country?
7496 MR. ENGELHART: Well, if you think about the way that I set out the problem before and that you set out the problem before, we've got this big fixed cost and it's going to become destabilized in the new environment. There's three components to that destabilization.
7497 There's the skinny basic. So people are paying less and they're getting less on basic.
7498 There's pick-packs. So people are now buying 10, buying 20, buying 30.
7499 And then there's pure à la carte.
7500 Videotron in the Quebec market really has solved one of those three problems. They have a fairly big basic. In fact, it's a fairly small basic at a fairly big price. So they keep the ARPU fairly high and then they deliver choice after that. So they've solved one of those three problems.
7501 I think their experience is transferable to the rest of Canada. We could all do that same thing without destabilizing the system too much. The challenge is we're going to start by doing two of those things: skinny basic, and then pick packs as well. That will create a lot more risk. As I said before, if we tried to do all three, I think it would be too destabilizing.
7502 So I agree the Videotron experience is transferable, but the Videotron experience, the Quebec experience, is not really the model the Commission's proposed.
7503 THE CHAIRPERSON: Right. But it is when it occurred at that time.
7504 MR. ENGELHART: I beg your pardon?
7505 THE CHAIRPERSON: For what it is --
7506 MR. ENGELHART: Yes.
7507 THE CHAIRPERSON: -- when it occurred at that time.
7508 MR. ENGELHART: Correct.
7509 THE CHAIRPERSON: Fair enough.
7510 Now one of the suggestions -- and you, I guess, agree with others that the Commission shouldn't get at all involved in how you do the pick-and-pack, how many -- the types of bundles -- large, small, all that -- and someone could keep whatever they have now if they're happy with that.
7511 MR. ENGELHART: Right. It's interesting. I went on the Videotron website and pretended that I was selecting a package and there's quite a few interesting things there. So you're picking your own package, yes, but some of the services have a little premium price, so you pay an extra $2 if you buy this one. Presumably, it has a very high wholesale fee. Others I found, if I picked RDS1, I had to get RDS2.
7512 So it's not pure pick packs that they've brought in, but it certainly is customer choice. So we will need that same kind of flexibility.
7513 THE CHAIRPERSON: Now one of your suggestions, which I think is unique in this proceeding, is that only half the discretionary services would be available à la carte.
7514 Maybe you can help me understand why you think that's necessary. Is it a technical issue or a systemic issue -- I need to understand it better -- and then tell me which ones would you choose, and why?
7515 MR. ENGELHART: Right. It's not a technical issue, in that in a year or two we will have our new system, which will allow people to do à la carte for all of our services. We couldn't do it today. As our IT systems have unfolded --
7516 THE CHAIRPERSON: There is a bit of a technical issue, so when would you be ready? You said a year or two. I know IT projects are unpredictable, but 12 months?
7517 MR. ENGELHART: I don't want to tell my competitors, but can I tell you in confidence when --
7518 THE CHAIRPERSON: Yes, you can.
7519 MR. ENGELHART: -- when we'll be ready?
7520 THE CHAIRPERSON: Yes. Yeah.
7521 MR. ENGELHART: Okay.
7522 THE CHAIRPERSON: So that's an undertaking as well.
7523 MR. ENGELHART: Yes, thank you.
7524 MR. ENGELHART: So, yes, currently there's a technical issue, but, really, it's a business model issue that is driving that recommendation. So what we're saying, as I said previously, is we think -- you know, we modelled with the Oliver Wyman report small basic, plus pick packs, plus pure à la carte, and it did destabilize the system and led to the outcome I mentioned. So we think, Let's walk before we run. Let's take à la carte out of the equation and see if we can do small basic and pick packs.
7525 Now since we're already doing about half of our services à la carte, we thought, Well, we'll keep doing that, and that's where we came up with the half.
7526 THE CHAIRPERSON: And what would be the downside once your systems are in place to do 100 per cent.
7527 MR. ENGELHART: It's not a technical issue, it's a business model issue. It's how do we recover those fixed costs that the programming services have, that the BDUs have? Are we going to get ourselves into that death spiral? Maybe we are, maybe we aren't, but let's not change all three things at once. Let's start with pick packs and small basic.
7528 People will think, I get to pick my own package. I don't think they need à la carte to fulfil that vision. Let's see how that works. If it's more destabilizing than we think, you might want to delay that à la carte world. If it turns out it's less destabilizing, you might want to bring it in more quickly. But let's not bring it in right away.
7529 THE CHAIRPERSON: Well, other than 50 per cent.
7530 MR. ENGELHART: Right.
7531 THE CHAIRPERSON: Right. Okay, good. You might have been -- I wouldn't want you to be misquoted as saying that you're against it entirely, just --
7532 MR. ENGELHART: Thank you.
7533 THE CHAIRPERSON: -- against it 50 per cent of the way.
7534 MR. ENGELHART: David.
7535 MR. PURDY: The only other thing I'd mention, Mr. Chairman, is for a number of the compelling U.S. programming services pick packs is an enormous hurdle for them to get their heads around, but à la carte seems to be almost impossible. So we've heard from our U.S. programming partners that à la carte individual selling of their channel is like touching a third rail, it's something --
7536 THE CHAIRPERSON: So in answering the question I asked, which I don't think you addressed, when you decide which of the 50 per cent would be in or out, you're saying that the U.S. services would never be à la carte?
7537 MR. PURDY: It would be very difficult to secure à la carte rights from the U.S. programming services.
7538 THE CHAIRPERSON: It makes it even more difficult if the regulator doesn't require it for 100 per cent.
7539 MR. ENGELHART: Let's not forget they will be in the pick packs, so we're not saying keep them out of the pick packs. All of our old analogue services will be in the pick packs, so you'll be able to pick 5 or pick 10, pick 20, pick 30, but -- I mean, I know what you're saying, but the American services have very strong views about this.
7540 THE CHAIRPERSON: Right, and we'll be hearing from some of them later on.
7541 So is that the issue that sort of you're hinting at paragraph 24 and 56 of your written submission, when you talk about -- well, I'll do the executive summary, it's probably:
"It would also be done, and in unintended consequences BDU customers could lose access to popular U.S. programming services such as AMC and A&E."
7542 Is that the issue?
7543 MR. ENGELHART: That's it exactly.
7544 Our research shows that people really value these services. One of the things we're concerned about is -- and David might want to add to my comments -- but if some of the American services say, "You know what, I don't want to go down this à la carte route, I think I'm going to take my ball and go home," it was suggested yesterday, "Oh, they'll come back into Canada in a partnership."
7545 THE CHAIRPERSON: Right. I was going to ask you why --
7546 MR. ENGELHART: Yeah.
7547 THE CHAIRPERSON: -- do you disagree with Bell, that came to a different conclusion?
7548 MR. ENGELHART: I think they might come back into Canada Over the Top, so why bother partnering with a Canadian? Why not just sell that programming -- the Canadian rights to an Over the Top provider --
7549 THE CHAIRPERSON: Right.
7550 MR. ENGELHART: -- and now we have a real problem.
7551 THE CHAIRPERSON: But don't you find it's an odd result, where the Canadian services -- and I think you've said that even an à la carte creates a risk for the programming services because they really have to connect with audiences -- that we would put our Canadian programming services at risk that way, but we would somehow protect, through your 50-per-cent rule, large, well financed foreign services.
7552 MR. ENGELHART: So our vision of the 50-per-cent à la carte, as I said it's the cat Bs and the ethnic services. Those are the ones that came into this world in a unprotected market-based environment. You pays your money, you takes your chances. The services that have always had a make-whole type of arrangement -- the analogue services, tier 1, tier 2, tier 3, the older American services -- we've got some of the American services that we would put in this pick pack world -- in this à la carte world.
7553 And we have some today. Those are the ones that came in more recently, like the Military Channel. So this is not really drawing a line between Canadians and Americans. We're saying the type of providers who have always had the ability to demand a make-whole and to demand certain packaging are the ones that we would put in pick packs, but not à la carte.
7554 The newer services that entered in a more market-driven world would be the 50-per-cent à la carte.
7555 THE CHAIRPERSON: Is there magic on the 50 per cent? I mean, how did you get 50 per cent, as opposed 60 per cent or 40 per cent?
7556 MR. ENGELHART: There's no magic. It's just we added them up and we realized we were already at 50 per cent.
7557 THE CHAIRPERSON: Okay. Sometimes there isn't any science behind anything.
7558 Would you be willing to file an undertaking explaining how you got to that list? I would think it would be commercially sensitive, that's why I'm proposing that you do it --
7559 MR. ENGELHART: Certainly.
7560 THE CHAIRPERSON: -- through an undertaking.
7561 MR. ENGELHART: Yes.
7562 THE CHAIRPERSON: Okay, thank you. And just you know it's the 19th of September. There should no problem for that?
7563 MR. ENGELHART: Correct.
7564 THE CHAIRPERSON: Okay.
7565 Let me move now to the wholesale market.
7566 You probably heard the intervention from Blue Ant yesterday. They come from the perspective of a independent Canadian programming undertaking. I didn't take it that they were fighting against it and wanting long-term protection. They just wanted the sort of stability, a bit like what you're saying, that there be a more measured transition. So they're not trying -- as I heard it, not trying to ensure viability, but a transitional stability. They've linked it to their licence term.
7567 What are your views on that?
7568 MR. ENGELHART: I mean -- and I'll let David jump in -- the Blue Ant people are marvellous people and great programmers, but they're just asking for protectionism. They're saying, you know, These vertically integrated companies will do this, that and the other thing. And then when you said to them, Well, what about the ones that aren't vertically integrated?, well, they had a problem with those ones, too.
7569 The complaints that they're making are the same complaints they made before this proceeding. They're just -- their complaints have very little to do with the movement to a pick-and-pay regime. If anything, their concerns should be alleviated by a pick-and-pay regime because it means that we're no longer the packager, but consumers are picking their own services. So if anything, this new regime should make things easier for them.
7570 I particularly didn't like the solution they had in place, which is: keep my penetration the same. I'm sorry, if people are picking their own packages, your penetration won't be the same. So I can't wave a magic wand.
7571 You know, our London trial showed a few, not many, but a few services actually saw their penetration go up --
7572 THE CHAIRPERSON: Right.
7573 MR. ENGELHART: -- when customers chose, so --
7574 THE CHAIRPERSON: But they're coming at us not unlike you're saying: that you need a measured transition, and that's the hypothesis of my question: assuming that it's important to have independent players in the system -- I'm not saying how many, just that there would be independent players -- and assuming that there is a transitional risk similar to the one -- you know, if we go too quickly too fast, there may be repercussions.
7575 What would you suggest as a model?
7576 MR. ENGELHART: Well, just, even though we're asking for a transitional approach, make no mistake our pool will go down as we move into this new regime.
7577 Now our hope is people who would otherwise be cord-cutters will stay in the system and our revenue will not go down much. But it will go down. This is not like we're insulating ourselves from risk.
7578 So we can't be insulated from all the risk, the programming services can't be insulated from all the risk, and what I interpreted Blue Ant as saying is: for this transition insulate me from the risk. I'm afraid if we move into this regime, we're all going to have to bear some of the risk.
7579 THE CHAIRPERSON: So the only protection or stabilizing influence they, as a class, would have would be some sort of a ratio, a proportionality ratio?
7580 MR. ENGELHART: Right. They would have an undue preference, and I'll let David jump in from here.
7581 MR. PURDY: Yeah.
7582 I watched Mr. MacMillan yesterday and I was struck by his comments. The cynical side of me said, "Wouldn't it be wonderful if I could guarantee the cable penetration of homes past over this transitional period," you know, but I'm quite sure Fibe's probably not willing to allow me to maintain the same penetration of homes past without a fight.
7583 So we're up for the fight. I think they have to be up for the battle as well.
7584 The interesting thing also is that there seems to be widely varying results for Blue Ant. So, for example, we carry Cottage Life and Travel Channel in our broader packages, so we have them in close to 50 per cent of households now, whereas I'm hearing, based on their comments yesterday, that not every BDU has been as helpful as we have in terms of driving the penetration of their channels.
7585 So I think it's a bit unfair of us to ask us to hold them firm at their current penetration levels when we have no guarantee that the VIP package will continue to be in 1.2 million households.
7586 So I think it's fair of you to ask us to treat them fairly and to promote them and to respect all the undue preference rules --
7587 THE CHAIRPERSON: I wasn't raising the question just for Blue Ant, but as -- you know, the independent broadcasters as a class.
7588 MR. PURDY: Yeah.
7589 I think as a class they have some upside. So one of the things that Ken referenced during our London trial, we'll take, oh -- there was a number of services that actually saw lift in their overall penetration. Now these were digital specialty channels that hadn't enjoyed the benefit of being part of that analogue legacy packaging construct and some of those channels saw lift. I think a number of these independents could see lift with the right promotion and the right, I guess, curation of our content on our websites and in our marketing materials.
7590 THE CHAIRPERSON: Right.
7591 It has been suggested by some that in difficult wholesale negotiations, coupled with the removal of genre protection, and therefore entry barriers being removed, that in difficult negotiations you might be tempted just to launch your own service in that category, is that likely in any category that you don't have?
7592 MR. PURDY: So I think certainly the temptation of vertical integration is to promote your own services more aggressively, but you have a number of rules governing that type of behaviour and we're currently, I think, respecting those rules.
7593 We've launched a number of services that we don't own. We've repackaged, to take Blue Ant just as an example --
7594 THE CHAIRPERSON: But is it a reasonable strategy to create your own service rather than take somebody else's?
7595 MR. PURDY: I don't think it's a reasonable strategy, and being vertically integrated doesn't guarantee carriage, so...
7596 We carry FX, the FX channel, but we've been unable to get national distribution for that channel despite being a vertically integrated company. So all new channels face a challenge in terms of getting broad distribution. Being vertically integrated doesn't guarantee you success, as Mr. Pelley's proven.
7597 MR. PELLEY: Under the new regime and the changing industry, I think launching new channels is going to be difficult regardless if you're an independent or vertically integrated.
7598 The example of FX -- and the reference he's making is to Bell -- Strain is a show that was shot here in Canada and garnered an audience of over 13 million viewers last week in the United States, American Horror Story, despite the fact that we don't have broad distribution, is one of the top specialty programs, but we can't get distribution on Bell. So --
7599 THE CHAIRPERSON: And I've seen aggressive marketing that says quite clearly "Not available on certain providers," like Bell, right?
7600 MR. PELLEY: We're happy to take the word "not" out at any time --
7601 MR. PELLEY: -- but that is -- as far as Mr. Purdy alludes, f you were to launch your own station, your own new network, getting broad distribution in this changing environment, regardless if you're vertically integrated or independent, is very challenging.
7602 THE CHAIRPERSON: Now in your submission you referred to certain -- I think you described them as "unfair" in the negotiation, "unfair" or "inappropriate" asks in those affiliation negotiation agreements. We'll get to exactly what they are, but as at a notion level, would you agree that any restrictions we impose should also be imposed to non-Canadian services?
7603 MR. ENGELHART: Well, obviously, symmetry and commonsense would dictate yes, and it would be hard for us to make an argument basic on logic. The only concern or the only caution or the only caveat I'd put on that is what I said before: if they take they ball and go home, send the content back Over the Top, we may all suffer as a result.
7604 THE CHAIRPERSON: Right. So are you saying that you'd be willing to agree to an "extreme" -- that's quote/unquote -- penetration-based rate card that makes whole advertising revenues just to keep an American service, but you wouldn't a Canadian service?
7605 MR. PURDY: In a commercial negotiation, the answer is yes. I mean we've been through a number of difficult commercial negotiations. One of them resulted in a specialty channel getting broader distribution and a higher wholesale fee. The other resulted in us turning off one of the specialty channels.
7606 So when you get outside of the regulated realm, where networks can withhold signal and BDUs can drop the channels, it's a much more aggressive, combative negotiation, with much tougher results.
7607 THE CHAIRPERSON: Sure, but wouldn't it be better to have the same rule of the road for everyone? That way it doesn't put you at risk of having to make those arrangements.
7608 MR. PURDY: Certainly there's points in various negotiations when I would have loved to have that rule in effect. I think what Ken references is, if it causes wholesale exiting of important U.S. programming services, that would be bad for the system.
7609 THE CHAIRPERSON: I appreciate that, but it's more competitive.
7610 MR. LIND: Remember, these services have been around a long time. They were very, very helpful to us in raising penetration, so we're --you know, just to come along now and say, "Oh, well, just discard them" or "Just put them in another category than they've been before," it's a --
7611 THE CHAIRPERSON: But the world may have changed. I mean I appreciate, in the launch of -- you know, the first launches of specialties they did provide lift, but we now see that Canadian specialties are holding their own.
7612 MR. LIND: I just -- I'm reluctant, frankly, because I think that they've done a lot for the cable systems in Canada and I just don't think that it's a good thing to just treat them now entirely differently than they've been treated before.
7613 THE CHAIRPERSON: Well, we're not treating them entirely differently. We're treating them like every other specialty service that operates in Canada.
7614 MR. LIND: No, you're treating them entirely differently than they've been treated before if you're now --
7615 THE CHAIRPERSON: That's also the case for the Canadian services.
7616 MR. LIND: -- you're posing a new set of regulations on them.
7617 THE CHAIRPERSON: But that's also the case for Canadian services: we'd be treating them differently.
7618 MR. LIND: But we've always has this. We've had two systems. We've had a Canadian regulatory system and we've had these U.S. services.
7619 THE CHAIRPERSON: As part of that system. There's only one regulated system in Canada.
7620 MR. LIND: Yeah, but we've been treating them differently, and that's gone on for a long time.
7621 THE CHAIRPERSON: So in terms of what these extreme penetrate-based rate cards, you've given the example of somebody requesting a make-whole for advertising revenues.
7622 Are you thinking of other for instances of other extreme penetration-based rate cards that you think should be unacceptable?
7623 MR. PURDY: No -- thank you, Mr. Chairman -- the point we were making there was there's a number of services that, as Ken referenced earlier, because of the chronology of when they were launched, have enjoyed a fairly broad distribution, and during this transitional period we'll be negotiating or renewing contracts with them that would allow for the new reality to settle in. We think it's fair for those services to ask to be compensated to a maximum of their current subscriber revenue. We think going beyond that is challenging, punitive and would stifle innovation in terms of packaging.
7624 So we're really focused on that: how do we allow for popular "analogue" specialty channels to make the transition in a reasonable period of time?
7625 We own, say, the Outdoor Life Network. We'd like in our contracts, where we have leverage -- presuming the Outdoor Life Network continues to be a compelling service, we'd like the right to raise our wholesale fee to capture subscriber revenue. But if we double, triple or quadruple our wholesale fee, we think it's being --
7626 THE CHAIRPERSON: But I'm just trying to get: are there any other examples, other than make-wholes on advertising revenue, that you would put in the class of extreme penetration rate cards or unreasonable penetration rate cards?
7627 MR. ENGELHART: Well, make whole in excess of affiliation payments, for whatever reason, that would be extreme. Obviously, anything that said you have to guarantee me so much penetration or keep me in such and such package, that would be extreme.
7628 THE CHAIRPERSON: Right.
7629 Do you want to give some more thought to that? Because unfortunately in the code sometimes words like "unreasonable" doesn't have a lot of meat, and others have suggested that the Commission could provide some guidance and certainty in your negotiations.
7630 MR. PURDY: Right.
7631 MR. ENGELHART: I think, as we've said in our brief, if you say in the code that a make-whole cannot be any greater than -- with respect to affiliation payments, that would go a long way.
7632 THE CHAIRPERSON: And is that the only issue or maybe you want to take it as an undertaking?
7633 MR. ENGELHART: We will, but that's the main issue.
7634 THE CHAIRPERSON: Okay, fair enough.
7635 At paragraph 92 of your submission you said that over time the historic revenue that parties have had to negotiate becomes less relevant. Is this just an observation or are you -- is there a concrete proposal below that?
7636 MR. ENGELHART: It's more of a proposal. So let me just put this in a bit of context that you probably understand.
7637 Obviously when the rate card recovers advertising or something in excess of affiliation payments, we're not just paying more per customer as the penetration falls; we're paying more. So 80 percent of our customers took it. We were paying a million dollars. Now, 50 percent of our customers are taking it and we're paying two million dollars. That doesn't work.
7638 It really amounts to guaranteeing their business case forever and a day.
7639 And I found it chilling that Bell was as candid as they were yesterday: We are going to charge whatever we want on these rate cards and any BDU cannot avail themselves of final offer arbitration because that thing would be so unreasonable we would never win the final offer arbitration. So this is their solution; guarantee our future, no matter what and no sharing of the risks.
7640 So that's the problem we're trying to address. It's going to make this pick-and-pay world impossible if we don't share some of the risk.
7641 Now, the passage that you're referring to, what does it mean if we say that even on affiliation payments there is a "make whole"? So a service has a certain penetration now. Customers get to choose their own services. As time goes by they become less and less popular and we're paying them the same amount of money as they are sort of sinking into irrelevance.
7642 So what we're proposing is that "make whole" would last you through the contract period. Then when the contract is over and a new contract is being negotiated and perhaps arbitrated, there's a recalibration.
7643 So maybe that programming service has doubled their programming expenditures and brought in all kinds of fabulous content. And they say, "Hey, I actually want to go up. I want a higher rate now because I'm doing a good job". Or maybe customers are just saying, "We don't want this thing" and they've sunk to the point of irrelevance. Maybe their payment goes down.
7644 So that's what we were trying to indicate, is that as the contract comes due there's a recalibration and a reanalysis. You don't simply stay with a "make whole".
7645 THE CHAIRPERSON: So the historic situation becomes less and less relevant as you move forward in a new environment?
7646 MR. PURDY: Right, exactly.
7647 THE CHAIRPERSON: Except for American services that were added in the eighties.
7648 MR. ENGELHART: We are absolutely trying to get the lowest possible rates that we can for the American services.
7649 The concern that Phil's raising and the reason we are not jumping up and down with this proposal, because it sounds like a great proposal, is as our market research showed, as Chris Kelly's research showed, some services like AMC "The Walking Dead", you lose that. You lose a whole bunch of your customers.
7650 So at some point it's an ugly situation if the American takes their ball and goes home. I'm not saying it's right. I'm not saying it's fair. I'm understanding your concern. We're just dealing with that real politic of that situation.
7651 MR. LIND: The reality.
7652 MR. PELLEY: I think what we did with recent negotiations with the WWE, WWE couldn't come to an acceptable negotiation with the U.S. broadcasters and decided to take their network over the top. When they came to us they wanted to launch the service. What we ended up doing is preventing them from going over the top, which I think was very beneficial to the ecosystem.
7653 It was something that we worked very closely not only with David, but other BDUs also applauded the fact that we prevented an American service from going over the top which would have been detrimental to the overall system.
7654 THE CHAIRPERSON: Thank you.
7655 I am going to move on to simultaneous substitution if that's okay.
7656 We heard a lot -- there was a lot of discussion about the execution errors earlier in the hearing and Bell suggested that there is a clear need for a working group to constantly try to improve the situation. I take it you wouldn't be opposed to participating in that?
7657 MR. ENGELHART: No, and I'll let David answer.
7658 We agree with Bell. We do a lot right now that is commensurate with the fact that we're a large BDU and we have more resources. So a lot of smaller systems have kind of an automated system. We have an automated system as well but we also have a human being in the room who can override.
7659 THE CHAIRPERSON: Like over time or something?
7660 MR. ENGELHART: Right. So of the --
7661 THE CHAIRPERSON: Or misunderstanding whether there was a penalty flagged or not?
7662 MR. ENGELHART: Right. So of the 500 complaints or whatever you've got, I think about 25 of those are related to Rogers.
7663 So we have already got some techniques that we think can solve some of these problems. And absolutely we'd participate in that group.
7665 MR. PURDY: Nothing much to add, Ken.
7666 Other than, Mr. Chairman, we would also like to apologize for the past inconsistencies in our messaging both in our call centers and online about how important simsub is for the system and why we do it. So we know that we've been offside in the past with some of the remarks made by some of our call centers.
7667 THE CHAIRPERSON: Well, if nothing else, this process at least has given the opportunity for -- if you have -- if you believe it has such great value that perhaps you should speak more publicly about why and why it's beneficial.
7668 MR. PURDY: I think we have recognized that during this process.
7669 MR. LIND: And we are.
7670 MR. PURDY: Yes, we are.
7671 THE CHAIRPERSON: Fair enough.
7672 Now, in your oral presentation here you suggested that if the Commission is concerned about the Super Bowl it should eliminate substitution for that specific event when the contract of the current rightsholder expires.
7673 Obviously, that's no skin off your back because it's somebody else's property right now.
7674 MR. ENGELHART: Right, and we are saying when the contract expires.
7675 I mean there is really only one show that people want to watch the American commercials on. That's the only show. All of us, you know, when we meet with friends from outside of our sector that's the show they're talking about. They're not talking about any other.
7676 So if that's the problem, let's solve that one problem.
7677 THE CHAIRPERSON: So inherent in this suggestion is that there is a fairness about maintaining. So when the contract was made someone, in this case Bell, I guess, assumed that they would be able to do simultaneous substitution and that we should be fair to them and continue to allow them for the duration of the existing contract. That's implicit in your --
7678 MR. LIND: Absolutely.
7679 THE CHAIRPERSON: One of the options on the table in the working document is -- and I know you're against both of those. So this again is hypothetical, just to develop the record -- that maybe we should just focus on live and sporting events because those are the ones that have the highest risk of mistakes because of the liveness of those events.
7680 Would it be possible for you to provide a list of properties, a bit in the spirit of specific events where the contract -- where the current rightsholder exists? So a list in confidence of such agreements for live and sporting events, the date it was executed and when it would terminate so that we could --
7681 MR. ENGELHART: Of course.
7682 THE CHAIRPERSON: -- so that we would be able to use a similar lens should we decide to go down that road?
7683 MR. PELLEY: We could do that.
7684 Our biggest one we do is the Grammys and I would concur with what Mr. Brunton said at Insight Productions in terms of what that allows us to do, is not only garner a large audience but allow for promotion to Canadian programming.
7685 The other thing that -- and the Super Bowl would be included in this -- is live event programming is one of the key buckets right now that advertisers are really seeking. That's because it's obviously PVR-proof.
7686 So simsub on those events like the Grammys would be absolutely critical, going forward.
7687 THE CHAIRPERSON: Right.
7688 Now, at paragraph 113 and 114 again today, you mention that there are very few incidents of these technical glitches but sometimes they occur. So what's your practice when -- in terms of rebates when those occur?
7689 MR. ENGELHART: Let me also say that sometimes when people complain about simultaneous substitution, it wasn't simultaneous substitution that was the problem. So something happens.
7690 THE CHAIRPERSON: Okay.
7691 MR. ENGELHART: An American network stops its game three minutes early. It has nothing to do with us.
7692 THE CHAIRPERSON: Sure.
7693 MR. ENGELHART: And they go, "Whoa! There's that Rogers guy with the button again".
7694 So sometimes the problems are not simultaneous substitution. When they are, we do respond on a complaints-driven basis.
7695 THE CHAIRPERSON: And is that policy transparent on your documents and websites?
7696 MR. PURDY: At this point there is no standardized policy in terms of compensation for simultaneous substitution errors. There is, as Ken mentioned, customers that have been impacted. We do deal with it on an ad hoc basis.
7697 THE CHAIRPERSON: So if somebody, if it is indeed a technical glitch, I take your point that it may not be. It may be a perception, but you will provide some sort of rebate or compensation or something?
7698 MR. PURDY: Yes, and if there is a widespread outage or a widespread issue, then we have an ombudsman and we have a process that we go through at Rogers in terms of providing compensation, not just for people who phoned in to complain, but for everybody affected.
7699 Now, it's difficult to know which individual households in some cases are affected by a simsub error. So there's no standardized policies on the website currently.
7700 THE CHAIRPERSON: So it is on an ad hoc basis -- base, the notifications.
7701 MR. PURDY: Yes, sir.
7702 THE CHAIRPERSON: So as you know, simsub was introduced in the seventies and is not available, with respect; compulsory for the most part. Compulsory simsub is not available in the specialty world which is a growing area.
7703 We are seeing as well the growth of PVRs and other non-linear viewing. So in a sense, the world of conventional television is shrinking. Now, I take your point and you've put evidence and we'll weigh it about you think that it has current value, the simultaneous substitution.
7704 Do you see that at some point that value will decrease over time because of the phenomenons I've just mentioned?
7705 MR. PURDY: Thank you, Mr. Chairman.
7706 Absolutely. We believe that for non-sports or non-live programming that the ongoing trend will be to timeshifted viewing, whether that be on a PVR, video-on-demand server or some sort of online service like Rogers AnyplaceTV or CTVGo.
7707 So the difference on live is that one of the reasons we invested so heavily in sports is we think that live television will continue to -- or sports will continue to be seen live and we've seen empirically that there's not a lot of catch-up viewing done on sporting events and not a lot of catch-up viewing done on award shows. Nor is there a lot of catch-up viewing done on things like music contests and dancing contests, of Dancing with the Stars, et cetera.
7708 So simsub will always have value on that type of programming.
7709 MR. ENGELHART: And if I could just add, the strange thing that the market research people tell us is even when you record a show with your PVR you end up watching some of the commercials. As you're fast-forwarding something grabs your eye and you stop and watch it or the commercial right after the show or just before the show. So even for PVR programming simsub has some value.
7710 THE CHAIRPERSON: Right. So the irony is in a sense, the greatest value of simsub is in live or sporting events and it is in those circumstances that you have probably the greater risk of execution errors.
7711 MR. PURDY: That's exactly right.
7712 THE CHAIRPERSON: Setting aside live because you've made the case, but there is a category that's non live. Do you see a day when the value of simsub will just not be there anymore?
7713 MR. PELLEY: No, I really don't. And, you know, I do want to just reflect for a second on the live events and the sports.
7714 The simsub is critical. I think our reference to the Super Bowl is that the Super Bowl is a unique event. But the importance of simsub on that Super Bowl is very critical.
7715 THE CHAIRPERSON: Actually, it's an advertising festival with a wraparound of --
7716 MR. PELLEY: Some type of concert.
7717 THE CHAIRPERSON: Yes, and a concert halfway through that, yes.
7718 MR. PELLEY: Yeah, the concert seems to be pretty important these days.
7719 But it's a unique event. But it's still very, very critical for CTV to have simsub for the Super Bowl to be viable. So all live sporting events and live events like the Grammys, the Emmys or the Academy Awards is very important.
7720 In terms of, do I see a day when simsub is not important on conventional, I would say not at any time in the near future.
7721 THE CHAIRPERSON: So I'll get to a question dealing with a road map on how we implement all this a little later on. So this is not one where you think that we could, based on our evidence today, have a gradual --
7722 MR. PELLEY: No, I think -- I think the gradual would be a downward spiral very, very quickly. Because I think -- which many people have talked about in terms of simsub.
7723 I make reference to the fact that, yes, it will be a significant decline in revenue on the U.S. programming and that will affect the entire system. But that's just one key component. It will also -- it will take your ratings in almost half which will again be devastation to the lead-in programming, your news and your information programming.
7724 So it's really a spiral that just goes down with the removal of simsub in terms of conventional and expedites its demise.
7725 THE CHAIRPERSON: So I've read and we have seen the evidence on the valuation. I don't want to rehash that.
7726 But one could conclude that if, hypothetically were you to go down this road what you lose is exclusivity in a sense, in a practical sense, right? Because you would have an over-the-air American channel.
7727 MR. PELLEY: Well, what you -- yeah, what you lose is ratings.
7728 THE CHAIRPERSON: Right.
7729 MR. PELLEY: And ratings is nothing more than a form of currency. That's all ratings are. So that's what really what you --
7730 THE CHAIRPERSON: Fair enough, but some might conclude, though, that the factual study did not take into account the potential. Maybe it wouldn't occur.
7731 And this is my question, that because the reality would be you wouldn't have exclusivity that you probably could ask -- pay less for the programming rights or is that not how the market would work?
7732 MR. PELLEY: Yeah, well, you know, I think -- I think, Mr. Chair, that would probably be a realistic scenario 10 years ago. But the world has changed and it's evolving with many different players.
7733 And if you followed what transpired at the May screenings this year, Netflix bid aggressively for first run U.S. programming. So if, in fact, we were out of simsub the revenue would decline significantly. We wouldn't be able to pay as much to those U.S. studios. We wouldn't secure the rights.
7734 It would affect not only the conventional business and all of the revenue that was driven but it would affect shomi and our ability to compete with an over-the-top service like Netflix.
7735 THE CHAIRPERSON: So the downward pressure on the cost of programming, getting rid of simsub, your view is that it would be negligible?
7736 MR. PELLEY: It would be negligible.
7737 MR. ENGELHART: Well, I mean, Keith's point is we might bid less, pay less and then be outbid by Netflix. So they have another place they can sell the Canadian rights to now.
7738 MR. PELLEY: And that is just as I said, Ken, you know last night, that's right now, right? You know, the other players that are just coming. You know, when -- without mentioning them, when are they going to get into the marketplace?
7739 So eliminating -- eliminating the ability for us to compete and to buy the U.S. programming which funds the entire system is tricky. And it's, like I said, it's a downward spiral.
7740 THE CHAIRPERSON: Right.
7741 Let me now move to terms of trade, and I hear you loudly and clearly that you want the elimination of it. And I take it, reading from the written evidence, because you find that it creates a barrier to higher budget, higher impact productions.
7742 Is the problem really that the Commission requires a terms of trade agreement or the content of the terms of trade agreement?
7743 MR. PELLEY: Well, I think -- well, first and foremost, let's say that as a former producer and someone who loves content and any executive, all Canadians or proud Canadians want to produce as much Canadian content as we can, but as business people we also want to run businesses that are financially stable and viable.
7744 The answer to your question is a regulatory trade agreement could very well be viable. The current one, we believe, isn't.
7745 I think we need to incent exactly the way Mr. Brunton said it earlier today, incent Canadian broadcasters to build big budget shows. He alluded to the fact that we are competing with the powerful -- U.S. powerhouses that have gargantuan scale. And the way that terms of trade does it is it really insulates the independent producer while the broadcaster takes all the risk.
7746 And I think, going forward, we need to be able to own the content and be able to monetize that through international distribution, through selling formats. So is there -- is there a way that we alluded to in our in-chief that could evolve to actually give the Commission some type of protection around the independent community or is there a way for us to actually make an agreement that is a little bit more beneficial? Potentially.
7747 At the end of the day, what the independent producers want and what the broadcasters want is to produce as much compelling Canadian content as we can. And right now we're not incentified to do so.
7748 THE CHAIRPERSON: Right. And so in a sense, I think you are agreeing with me that the problem is the terms of the trade and not the fact that it exists. And your partners are not willing at this point to revisit some of that content.
7749 MS WHEELER: Yeah. So I think you are absolutely right, the terms within the terms of trade are right now the problem. But the fact that it is a condition of licence on broadcasters frustrates the negotiation to be able to arrive at what would normally be an equal bargaining power to arrive at an agreement that where both parties may be mutually satisfied or mutually dissatisfied.
7750 So it's that additional layer of regulation that requires us to enter into the agreement that is really the problem because we build in dispute resolution mechanisms in the agreement. There are other ways to resolve when there are, you know, disputes. And I guess our feeling is --
7751 THE CHAIRPERSON: Right. I guess, in the absence of the regulatory requirement, I wonder if there would have been an agreement.
7752 MS WHEELER: I think there will be. I think there is incentive to have some structure and some standardization to how we're exploiting the rights that we're acquiring.
7753 So I actually do think that we probably would for clarity and for competitive equity with our other broadcast competitors, enter into some type of an agreement to be able to have some transparency going forward.
7754 MR. PELLEY: I can't tell you how articulate Mr. Brunton sounded on his example of Falcon Beach that would probably be still on the air right now. We recently cancelled a comedic series that we did everything we possibly can to garner ratings surrounding you with strong U.S. programming and that programming was sold to CW in the U.S., which of course we didn't participate in any of those revenues.
7755 And I think he made reference to a show and it might have been Falcon Beach that was sold in 100 different territories and that's where they made their money.
7756 I just think that the system doesn't allow for broadcasters to be incentified to actually produce strong compelling content that competes with the U.S., U.S. broadcasters. And I think that's problematic for all of us.
7757 THE CHAIRPERSON: Right.
7758 MR. PELLEY: And I should say that I am talking obviously about the scripted programming because when you break down Canadian programming, I always say that it's broken down into the four buckets; you know, your scripted programming, then your third-party documentaries, then your in-house news and information and then your live events.
7759 And if you look at -- you know, we announced on Tuesday of last week the creation of Hometown Hockey. Hometown Hockey is a multimillion dollar festival that will see us every Sunday night go into a community from London to Red Deer to Moncton to St. John's and put together a multimillion dollar carnival hosted by Ron McLean that will culminate with a viewing party prior to the Sunday night hockey game on City. And we are controlling all of the monetary --
7760 THE CHAIRPERSON: Right.
7761 MR. PELLEY: -- advantages and even if we can get the --
7762 THE CHAIRPERSON: And broadcasters have always -- also been content producers in the system for years to come. That's the point you're trying to make, right?
7763 MR. PELLEY: Correct.
7764 THE CHAIRPERSON: And if you keep doing this, I'm going to charge you for the advertising time in my hearing.
7765 MR. PELLEY: That's fair enough. 28 days till puck drop.
7766 MR. LIND: So selling.
7767 THE CHAIRPERSON: I have more questions, as will my colleagues, but I think it would be apt to take a 15-minute break at this point. So we'll be back at 11:05.
7768 Thank you.
--- Upon recessing at 1049
--- Upon resuming at 1105
7769 THE SECRETARY: Please take your seats.
7770 THE CHAIRPERSON: À l'ordre, s'il vous plaît.
7771 I've got some questions dealing with accessibility and the set-top boxes and availability.
7772 As you know there's the -- I love how the Americans name their statutes -- the 21st Century Communication Video Accessibility Act.
7773 I was wondering if you could elaborate on how that statute will impact on the availability and the manufacturing of new set-top boxes that will provide more options for the accessibility community.
7774 MR. PURDY: Thank you, Mr. Chairman.
7775 We currently find ourselves on digital cable in the unenviable position of really only having one or two vendors producing set-top boxes that work on our current networks, Cisco and ARRIS -- ARRIS in Atlantic Canada and Cisco in Ontario -- and the result is we're challenged, both in terms of price and in the level of innovation that occurs on those set-top boxes.
7776 The next-generation video platforms that we're moving towards and building, and that Ken alluded to earlier today, are designed to open-standards and non-proprietary solutions, which will allow for us to get boxes from multiple vendors.
7777 It's very important for two reasons for us that we move to an open-standards-based solution: One, the price of the set-top box comes down, over time; and, two, the ecosystem that evolves around that set-top box allows for better user interfaces, better integration of apps, and better features and functionality baked in.
7778 So, we're very anxious to get to that open standards. Ken alluded to the timeframe earlier, and it's absolutely part of our road map over the next foreseeable future.
7779 THE CHAIRPERSON: And so, you expect with that evolution and the reality in the U.S., because of that statute, that the accessibility features will grow --
7780 MR. PURDY: Yes.
7781 THE CHAIRPERSON: -- for the accessible community?
7782 MR. PURDY: Yes. Absolutely.
7783 MS DINSMORE: Mr. Chair, there are some requirements that come out of that act.
7784 It required that a working group be set up to look at various aspects of accessibility for set-top box, the IPG, and other things.
7785 That working group has come out with recommendations. And, because we look to the U.S. for our technology, we're very hopeful that when changes occur down there, we'll then be able to participate up here in those changes.
7786 THE CHAIRPERSON: Right. Because the Canadian market is quite small and we can't drive the purchase of -- the development of manufacturing options. But the U.S. market often does that. Correct?
7787 So, what timeframes do you think we could see roll-outs?
7788 MR. PURDY: I think the next 12 to 24 months.
7789 THE CHAIRPERSON: Okay. And you'll recall, though, that in 2008, the industry -- you said that a one-button solution for described video was possible, and we haven't seen it yet.
7790 THE CHAIRPERSON: We're working on it.
7791 MR. PURDY: So, do I put the same water in the wine when you tell me 12 to 24 months --
7792 MR. PURDY: Yes. I think that's a reasonable timeframe.
7793 THE CHAIRPERSON: So, it's not going to be six years?
7794 MR. PURDY: No.
7795 THE CHAIRPERSON: What's your business model, with respect to set-top boxes? Do you rent? Or do you require your customers to buy? Is that changing? How does that affect the turn of the boxes?
7796 MR. PURDY: We've, historically, had two types of models: one, we've rented boxes; and, two, we've sold them -- and we've maintained both.
7797 Currently, most of our boxes go out on a rent-to-own basis. So, basically, you rent them for I think it's three years and at the end of three years, you actually own the box.
7798 THE CHAIRPERSON: Okay. Which may not be useful any more, at the end of three years, because of the upgrades.
7799 MR. PURDY: Historically, the boxes always have a much longer lifespan that we anticipated. We have many boxes in the market that are still as old as eight or nine years old. So, it takes a lot longer for customers to migrate than you would initially think.
7800 THE CHAIRPERSON: And just a final question on accessibility.
7801 I know you've probably invested a great deal of time and effort and money in developing the Shomi platform, but I take it accessibility issues were not forgotten in your planning?
7802 MR. PURDY: So, the current online user interface does not allow for -- it doesn't adhere to the same accessibility guidelines that the set-top box experience would.
7803 But it should -- and we'll work on it.
7804 THE CHAIRPERSON: Thank you.
7805 MS DINSMORE: Mr. Chair, I just thought we'd go back over the one-button.
7806 Are you talking about the one-button remote, sort of set and forget, for access to described video?
7807 THE CHAIRPERSON: Yes.
7808 MS DINSMORE: That is something that Rogers was a pioneer in, and we do have that available to our visually-impaired customers.
7809 THE CHAIRPERSON: So, it is in the marketplace?
7810 MS DINSMORE: It is.
7811 THE CHAIRPERSON: My understanding is that it wasn't available.
7812 MS DINSMORE: It's available at Rogers.
7813 THE CHAIRPERSON: And has been available since when?
7814 MS DINSMORE: I think since a number of years. Certainly, we were talking about it in the last couple of hearings.
7815 So, we were one of the first to make it happen.
7816 THE CHAIRPERSON: Okay. Fair enough.
7817 Let me move, now, to another aspect of set-top boxes, and that's the proposal in the working document and the notice of consultation about data collection.
7818 Do you currently collect information on subscribers' viewing habits through your set-top boxes?
7819 MR. ENGELHART: Not on an individual subscriber basis, but aggregated.
7820 THE CHAIRPERSON: And that information is used in the distribution arm?
7821 MR. PURDY: Yes.
7822 Thank you, Mr. Chair.
7823 We currently pull information from literally hundreds of thousands of set-top boxes on an aggregated basis and we use it for two main purposes right now: one, when we decide which networks to broadcast -- i.e., distribute to every home -- and which networks to distribute via a technology we call "switched digital video" -- which is, effectively, streaming on-demand channels, this allows for us to better manage the spectrum requirements of our television service -- we use the set-top box data to help us decide which channels to stream and which channels to broadcast.
7824 It's really important in our planning and each --
7825 THE CHAIRPERSON: So, there's an inefficiency in the distribution of the signals. I get that.
7826 But do you use it otherwise, in terms of, I don't know, negotiations with program suppliers?
7827 MR. PURDY: That was going to be my second point; which is, we absolutely do.
7828 So, quite often, programmers will come in, tell us that they are the most wonderful service under the sun, you'd buy all, et cetera. What we find is the set-top box data can be helpful and compelling, in terms of telling us how broadly a service is watched, for how long. Increasingly, we're trying to figure out the emotional connection to the content on that service.
7829 So, the set-top box data can get very accurate and it can start to tell you how many times somebody switches the channel, when they pause, rewind, if there's a technical service outage, do they call the call centre if a channel goes down.
7830 So, that type of data can --
7831 THE CHAIRPERSON: I noted, though, that you don't have demographic information on that.
7832 MR. PURDY: We don't. So, set-top box data stops short of, say, BBM data, in the sense that you don't know who's in the living room. You know the household, but you don't know whether it's the grandmother, the granddaughter, the mother, the father, or the son.
7833 So, because of that, it's not become the currency of the realm that Keith referenced earlier, in terms of advertising dollars being distributed.
7834 But it is incredibly helpful, in terms of determining the value of a channel. And we use it for, as I said, the spectrum reasons.
7835 THE CHAIRPERSON: Does that information leak over onto the media side of the business?
7836 MR. PURDY: Does that...? Sorry.
7837 MR. PELLEY: Does it link over to the media side.
7838 I'll take that question, David.
7839 The set-top box data, first of all, I believe, is totally a guideline, based on the fact that it doesn't give you the demographics. It doesn't give you who exactly is watching, if in fact anybody's watching, it's just in the house.
7840 But dating back about two years ago, I believe, I was really perplexed at some of the programming that Omni -- and I think I alluded to that in our renewal hearings -- that the ethnic population is not fairly represented in the BBM study. And we were looking at some of the programs, namely, this one being cricket, and I couldn't fathom the fact that, actually, the ratings came out at zero.
7841 So, I did look at the set-top box data, I asked David for it, and it showed that 100 set-top boxes were turned on during the time of the cricket match on Omni in the city of Brampton, alone.
7842 So, I think, as I said at the beginning, set-top box data is a great guideline. It is something that the industry should explore on how it can, not only co-exist, but work with some of the other measurement systems and be beneficial to the industry.
7843 THE CHAIRPERSON: And how do you ensure privacy considerations in that?
7844 More on the collection and use. I guess, there's two aspects to it --
7845 MR. PELLEY: Right.
7846 THE CHAIRPERSON: Mr. Engelhart, you have to dispatch better than you have.
7847 MR. ENGELHART: If it's aggregated, there's no privacy issue. So, it's aggregated. We don't know what Pam watched last night. We just know over a much broader geographic area.
7848 THE CHAIRPERSON: Okay. And based on one those answers, you're actually finding it useful -- starting to be useful. Am I hearing that the what I read in your written submissions about it being premature now overstates your position to go forward with the proposal that the Commission put forward to find, develop a working group, and so forth?
7849 MR. PURDY: Thank you, Mr. Chairman.
7850 We believe that there probably is value in forming that working group. We think that it would make sense.
7851 The one thing we would ask is that we focus, not just on the requirements or the needs of smaller specialty channels or, say, multicultural broadcasters, but the industry, as a whole.
7852 So, one of the challenges that all the broadcast ownership groups are facing right and tell us in the negotiations is they're losing a high share of the ad revenue, the discretionary ad dollars. They're moving online; particularly, to Google. And that migration of ad dollars to Goggle is because the online advertising tends to be more trackable, or transactional, in its nature, and allows for greater targeting.
7853 One of the things we'd love to do is start to use the set-top box inside data and analytics, plus, ultimately, the ability to do targeted and addressable advertising in a way that benefits the entire ecosystem.
7854 I think if the Canadian broadcasting system is to succeed against over-the-top ad migration to Google, it has to develop some of these things.
7855 And so, we'd love to participate in a working group that looked at the advertising issue, at large, and how the set-top box data can be complementary.
7856 I know you're going to be hearing from Rentrak later in this proceeding. I think they'll give you some insight as to how they're working in concert, in the States, with existing ad measuring tools. But to enhance that and to try and get higher CPMs -- the number they've told us that by working together they've been able to raise CPMs, in some cases, 30%.
7857 THE CHAIRPERSON: But you would agree with me that if you do it smart and develop a measurement tool that makes sense and the industry works on together, with others, that it may actually be a very valuable tool for the licensed part of the broadcasting system?
7858 MR. PURDY: Yes, we agree entirely.
7859 MR. ENGELHART: Absolutely.
7860 THE CHAIRPERSON: We will now move to the consumer complaints body.
7861 I appreciate, and I read your submission where, you know, you clearly say you have an ombudsman, you're leaders in this area, and you should be commended for having done that because you're in the spirit of serving your customers.
7862 Well done.
7863 I don't understand, however, why you seem to resist industry-wide oversight, which, presumably, if your in-house ombudsman is doing a good job, wouldn't be an additional burden.
7864 MR. ENGELHART: Two things.
7865 First of all, the wireless code really started because the wireless contracts were too complicated. It was that level of complexity that drove the provincial legislatures to pass legislation and, ultimately, led to us asking the Commission to set a universal national set of standards.
7866 So, it was really issues around the contract that drove that.
7867 Yes, you got into a few other things, but it was primarily the contract.
7868 Cable, for the most part, is sold without contracts. So, you don't like it, you cancel. You like it, you keep going.
7869 That's why we don't think you need a code of conduct enforced by a group like the CCTS, on the cable side.
7870 To answer your specific question, it, oddly enough, does make a difference whether you solve it internally or externally.
7871 What we find from our market research is if the problem is solved internally by the ombudsman, people think, "Well, it took Rogers long enough, but at least they came through for me".
7872 If it's solved by an external body, they don't have the same warm feeling.
7873 So, it is better for us if we solve the problem internally.
7874 THE CHAIRPERSON: I don't disagree. In fact, it makes you responsible for the outcomes.
7875 But my point is that there will be cases where somebody wants another voice, another place to knock on, because they're particularly frustrated and it would be part -- I get the point, as well, there's no contracts, but there is a broad consumer experience.
7876 MR. ENGELHART: I don't think --
7877 THE CHAIRPERSON: There is no written contract. There is a contractual relationship.
7878 MR. ENGELHART: Of course.
7879 But the kind of things that made people a little bit nutty about their wireless contracts don't exist in the cable world. It's not the same level of complexity. It's not, "I get so many minutes on the weekend and so many minutes after five and I get" -- you know. Those were some of the things -- and the cancellation fees and the hardware subsidy. Those were the things that drove the wireless code. That doesn't exist in the cable world.
7880 Is every customer happy with us all the time, in the cable side? No.
7881 Do people call and complain? Yes.
7882 Do I think we need an industry code and an industry ombudsman? I don't think we do, for cable.
7883 THE CHAIRPERSON: Okay. Now, I'm going to move to another subject, which is the daytime exhibition requirements.
7884 Now, you've been supportive of lifting or removing that, I take it? I'm asking my question in the context of over-the-air services, more precisely. And let's set aside the issue of children and youth where the notion of daytime primetime is a special case.
7885 But, in your case, how would you use that added flexibility, if the day part was deregulated?
7886 MR. PELLEY: I would answer that question by quickly looking and giving you an overview of where I believe the conventional broadcasting system is right now.
7887 I was telling this story to Susan, yesterday, that I have a colleague that has a very big house. He has a massive cottage in Muskoka. He's got a place in Florida. And he has two horses for his daughters and sons.
7888 He's completely living beyond his means and his life is not sustainable.
7889 The way that I look at conventional broadcasting right now is we're living beyond our means in an area that's not sustainable with CPE, PNI, local, independent.
7890 Hence, the reason that we have given what I thought was a great -- and, Susan and I believe is a great solution by looking at your study, hearing what consumers have had to say about local, making a significant commitment to local, while reducing some of the other regulatory commitments. So it's really streamlining to local.
7891 So, to answer your question, I think it's more of an overall arching philosophy that we have that the Canadian content in the broadcast day should be at a number, we've given 35%, with maximum flexibility around that; however, with a significant commitment to local original hours.
7892 I can tell you that the original hours, where that came from --
7893 THE CHAIRPERSON: Original first run or original?
7894 MR. PELLEY: Original original.
7895 Where that came from, Mr. Chair, was, when we went through the licence renewal, we were expecting to have a 14-hour exhibition requirement in the market, which was similar to our colleagues at Global and CTV.
7896 At the end of the day, an exhibition requirement is -- you can be very clever in producing a two-hour show on a weekly basis, repeating that seven times, and that's the way you actually get your exhibition requirements.
7897 So you led us to the concept of original hours, and we would come and commit to local programming, which we believe is now going to be the critical voice, based on broad distribution, that the networks will have in a skinny basic, and would commit to a local original-hour commitment.
7898 That is the way, I think, the system would benefit.
7899 THE CHAIRPERSON: So there would still be -- you would still use the day part.
7900 MR. PELLEY: We would still use the day part, yes.
7901 And when you look at the day part, I think, in the day part, one of the most successful shows that we have is Cityline, which is an in-house produced show that we produce every day, and it is something that is very successful for us.
7902 THE CHAIRPERSON: Another subject. At paragraph 158 and following of your written submission, you make some recommendations about changing the terms and conditions of the Canada Media Fund and, as well, the Canadian Audio-Visual Certification Office rules.
7903 You will agree with me that that is a little beyond our authority?
7904 MS WHEELER: Yes, absolutely. We included that in our written brief just to give the Commission a sense of our ideas, on a system-wide basis, of what could be done to create better and more compelling Canadian programming.
7905 THE CHAIRPERSON: And others may take note of that.
7906 MS WHEELER: We hope they do.
7907 THE CHAIRPERSON: You also make the point about big budget, high risk productions. Setting aside the Terms of Trade discussion that we had, are there regulatory barriers, CRTC regulatory barriers, that get in the way of that?
7908 And, what are they?
7909 MR. PELLEY: I think the only two are Terms of Trade, which we have made reference to, and the requirement of 75 percent of the PNI to be used by independent producers.
7910 THE CHAIRPERSON: As opposed to perhaps having a bigger share for the broadcaster or broadcasters involved in the production side.
7911 MR. PELLEY: Correct.
7912 THE CHAIRPERSON: So it is the whole notion of the size and scope of the independent production sector.
7913 MR. PELLEY: Correct.
7914 THE CHAIRPERSON: Which is very nervous, now that we have started down that conversation.
7915 MR. PELLEY: No, I am very happy with that conversation. Let's have it, I would love to have it.
7916 THE CHAIRPERSON: They can speak for themselves.
7917 In your oral remarks and in your written comments, you raised the idea that maybe the implementation schedule would be too aggressive, because you refer to it as an evolution rather than a dismantlement.
7918 You may have heard that I have been asking others some questions about, potentially, lots of changes, all at once, being the subject matter of some concern with some intervenors, and I have been asking them to provide a road map.
7919 Would you be willing to do the same thing?
7920 Keeping in mind that there are some things, for instance, in the Working Document that you may or may not agree with, but assuming that they are coming to pass, how do you stage them, and what are the linkages?
7921 MR. ENGELHART: Absolutely, we can provide you with that.
7922 Just to take one example, if the Commission were to require that rate cards permit flexible packaging and limit unreasonable penetration-based rate cards, we would need to renegotiate a number of those contracts with a number of parties in preparation for the launch of the service.
7923 THE CHAIRPERSON: Right. So there are practicalities associated and time to get that done, and potentially the lifeline to the Commission will help you figure it out and --
7924 Okay. So those are the sorts of practical implementations that, I think, we need to figure out, because, as I said in setting out this question to others, we took 40 years to build a lot of this regulation, and you don't want to be pulling the sticks out of the Kerplunk too quickly, only to hear a crashing sound of marbles because you have done it too quickly.
7925 So your assistance in this would be very useful, including commercial issues that are perhaps less apparent to us.
7926 MR. ENGELHART: We would be absolutely happy to do that.
7927 THE CHAIRPERSON: Perhaps the last question now, before I pass it on to some of my colleagues -- and this is the whole need for a dynamic marketplace.
7928 If I am understanding correctly -- and this is the ability for your subscribers -- despite all your best efforts to keep them, they may want to cross the street and get services from somebody else.
7929 It is my understanding from reading your paragraph 313 that your current policy is a 30-day cancellation notice.
7930 Is that correct?
7931 MR. PURDY: That is correct, but I have some new information for you.
7932 Last week our new CEO called into his office and asked about the policy, and he, like I think yourself, was not pleased with the current policy, and it is under review, which is code for: highly likely to be changed in the near future.
7933 THE CHAIRPERSON: Could you undertake to provide us -- and this may occur after the 19th of September, when, in fact, the careful reflection occurs and you have made a decision -- to inform the Commission whether or not you have changed your policy?
7934 MR. PURDY: Provided I survive the process, I will endeavour to do so.
7935 THE CHAIRPERSON: Perhaps you should have somebody else as a backup.
7936 MR. PURDY: We will absolutely do it.
7937 MR. PELLEY: I will be in the room with him, Mr. Chair.
7938 THE CHAIRPERSON: Understanding that there is some frustration out there that the 30-day policy means that sometimes you have to either pay two bills for a month, or not.
7939 MR. PURDY: He, like you, felt the same concerns.
7940 THE CHAIRPERSON: Tell me the impact, though, from the media side, or do affiliation agreements deal with this sufficiently?
7941 MR. PURDY: I will speak to that.
7942 The reason we implemented the 30-day disconnect policy, Mr. Chairman, was that we have pick packs in the digital space, and we had a certain number of customers -- it wasn't a huge number, but there were a certain number of customers that would, literally, go online and change their pick packs, depending on the broadcast schedule that day.
7943 So if there was a Raptors' game, they would add Raptors TV, and then, presumably, they would pick up Leafs TV when there was a Leafs' game they wanted to watch. So they would alter their programming schedule.
7944 I can assure you that the spirit of our agreements -- I don't know whether contractually in every instance, but the spirit of our agreements doesn't allow for customers to come in and revise their pick packs on a daily basis.
7945 So the reason we implemented the policy was around that.
7946 So we will have to work with our programming partners to allow for this type of change.
7947 THE CHAIRPERSON: And in a dynamic marketplace, some days you will pick up BDU customers and other days you will lose BDU customers and, by ricochet, the programming undertakings will have gains and losses, as well.
7948 MR. PURDY: Right. It is far more dynamic than historically, and we will have to make sure that both our contracts and our systems allow for that.
7949 THE CHAIRPERSON: Excellent. I have a final question for you, but I will leave it to the end. I will let the Vice-Chairman ask you some questions now.
7950 COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.
7951 Our Chair is thorough, among his other qualities, so there is not much left, although I hope he appreciates how difficult it is for me not to tease him about his age when he continues to reference Kerplunk and marbles, when two-year-olds are on iPads.
7952 COMMISSIONER PENTEFOUNTAS: That being said, Mr. Purdy, I feel like it's a confessional today, or some kind of Homeland torture session that you are going through, because there is so much coming out of you. It's a catharsis, it's very nice.
7953 MR. PURDY: I thought we were doing quite well, but --
7954 COMMISSIONER PENTEFOUNTAS: You are. You are rolling.
7955 Mr. Pelley, quickly, you mentioned, and Ms Wheeler did as well, that there is a sense of sort of regulatory leverage that has been granted the CMPA in negotiating Terms of Trade.
7956 That set aside, would the biggest ask for Rogers be that, included in Terms of Trade, is some kind of agreement on shared ownership beyond first window?
7957 Would that be the best thing we could do for the system?
7958 MR. PELLEY: I think that probably the best thing to do for the system is to open up dialogue with the independent producers, and have a goal to come to some type of agreement that works for both sides.
7959 Obviously, some broadcasters have elected not to sign Terms of Trade. We have. It is expiring shortly.
7960 I think, as the independent producers would say, similar to the way that the broadcasters say, we need, in this changing environment, to work closely together.
7961 It is just like a rights negotiation. When you acquire rights for any type of product, anything, if you believe that it is completely one-sided, then you always have a little bit of a chip, and every deal needs to be a win for both sides, and I think that's where we need to get to.
7962 COMMISSIONER PENTEFOUNTAS: I appreciate that you didn't throw in the puck-drop date, but you didn't answer my question.
7963 If there was one element that would help make Terms of Trade a better agreement for all sides, would it be a partnership --
7964 MR. PELLEY: International distribution.
7965 COMMISSIONER PENTEFOUNTAS: Yes. So you agree with the statement before --
7966 MR. PELLEY: Yes. For example, Mr. Vice-Chair, we, along with the independent producers, go hand-in-hand and try to distribute Canadian programming to 100 different countries.
7967 COMMISSIONER PENTEFOUNTAS: Yes, and you could use your heft and leverage and contacts throughout the world to help promote that and make that a reality. Right?
7968 MR. PELLEY: Correct.
7969 COMMISSIONER PENTEFOUNTAS: And you would have a lot more skin in the game --
7970 MR. PELLEY: That's correct.
7971 COMMISSIONER PENTEFOUNTAS: -- and everything else that flows from that.
7972 MR. PELLEY: Absolutely.
7973 COMMISSIONER PENTEFOUNTAS: Thank you so much.
7974 Speaking of regulatory leverage, we talked about the American services, and I don't want to rehash the discussion that the Chair had with Mr. Lind and Mr. Purdy, and even Mr. Engelhart, but one may have thought that regulatory intervention could help to offer a tool to BDUs in their negotiations with these American services.
7975 I gather there is no interest for that kind of regulatory support.
7976 MR. ENGELHART: I think that is putting it too strongly. There is a problem, and it would help, unless they triggered the nuclear option and left.
7977 COMMISSIONER PENTEFOUNTAS: Back to the nuclear option, I get the sense that you are sort of getting beaten like a drum come negotiation time, because there is such fear that they are going to get up and leave.
7978 It obviously puts you in a very difficult position, and if you are telling me that it's crucial to maintaining penetration that you have these services -- and you mentioned the A&Es and the AMCs, which I certainly have seen, and you threw them in there as pretty tough cookies when it came to negotiating.
7979 Is that the bottom line in all of this, and you wouldn't want anything else?
7980 Because, Mr. Lind, your arguments were sort of nostalgic, they have done a lot for us and -- I mean, they may have done a lot for us, but we paid them for what they did for us, and I don't know that we have any more obligations going forward.
7981 MR. LIND: We look at our research -- and Chris Kelly is here if you want further advice on it -- and if you threaten A&E, Turner, AMC, our customers are going to be very, very destabilized if that disappears.
7982 So, yes, it is a very important part of our undertaking that we sell to our customers.
7983 COMMISSIONER PENTEFOUNTAS: Let me ask you this. Besides the fact that you are in a tough spot when you negotiate with them, given your starting position, how do you defend preferential treatment for U.S. services?
7984 MR. ENGELHART: One of the points that one of my colleagues mentioned to me in the break is, when we had this discussion with the Chair, we were really talking about unreasonable penetration-based rate cards, and the fact that some domestic distributors try to recoup ad revenues as well as affiliation payments.
7985 The U.S. services don't have ad revenues in Canada, so that particular problem doesn't really exist.
7986 So a penetration-based rate card from an American distributor wouldn't include advertising losses, because they don't have any.
7987 COMMISSIONER PENTEFOUNTAS: Yes, but the proposition goes beyond that. The proposition speaks to imposing the same conditions that we have imposed in Canada on VIs.
7988 Mr. Purdy...
7989 MR. PURDY: Thank you. The challenge that I think we have is -- and it depends on the level of change that we are going to anticipate or experience in the Canadian marketplace.
7990 In discussions with the U.S. programming services, I think something like pick packs they can get their heads around. I think, being sold à la carte, that becomes such an important point of principle and it triggers a number of most favoured nation clauses that they have in the U.S.
7991 It becomes so problematic that the likelihood of them leaving becomes greater.
7992 So à la carte has a completely different set of implications.
7993 Our fear is -- and AMC has already made reference to the fact that they are talking about creating an online SVOD for their library content.
7994 And this may just be a stalking horse in their negotiations with Netflix, or it may be a real threat, but they have talked about creating an online subscription service for their original series content.
7995 That type of service could come into the Canadian marketplace, and you heard Keith Pelley reference earlier that in Canada we were able to stop something that happened in the U.S., which is that WWE went over the top in the U.S. In Canada, they have actually stayed within the ecosystem. We think it's a good thing for us all.
7996 We just want to make sure that, in these negotiations, the programming services don't leave. We think that AMC, A&E, TLC, these are the types of services that could either come in over the top or do a deal for all their content with Netflix.
7997 If we lose them from the ecosystem, we lose, I think, part of the reason the number of people stay with us today.
7998 COMMISSIONER PENTEFOUNTAS: And that is the way we defend the treatment reserved for them at the end of the day?
7999 MR. PURDY: It is. I guess what we are asking for is that you -- I mean, I could always use some help in my negotiations, but I don't want to lose these folks from the ecosystem. That's what I am trying to tell you.
8000 COMMISSIONER PENTEFOUNTAS: Okay. That was largely one of the motivational factors in your 50 percent ask on discretionary standalone services, to allow you the flexibility to deal with these American services?
8001 MR. PURDY: Yes, sir, partly the U.S. services and partly the Canadian broadcasting ownership groups that have enjoyed broad distribution.
8002 You heard Mr. Crull yesterday say that Discovery Channel's cost structure would not allow for à la carte. I would argue that we might be able to evolve with pick packs in a way that Discovery could still be viable, but the à la carte notion, as I referenced earlier, it is like touching the third rail.
8003 COMMISSIONER PENTEFOUNTAS: That goes a long way to explaining the 50 percent figure that you arrived at, basically.
8004 MR. PURDY: Yes, sir.
8005 COMMISSIONER PENTEFOUNTAS: Okay. I understand that, and I appreciate the honesty.
8006 Yes, certainly AMC wasn't happy when Netflix was trying to steal the Better Call Saul spinoff of Breaking Bad. It drove them bananas. But, anyways, I digress.
8007 MR. PURDY: We live in a world where we are all frenemies now.
8008 COMMISSIONER PENTEFOUNTAS: Your skinny basic today, just briefly looking at it, costs about $40 in most markets, or would that be strictly Toronto?
8009 MR. ENGELHART: Our regular basic service is $38.
8010 COMMISSIONER PENTEFOUNTAS: Under Model A or Model B, as put forward by the Commission in the Working Document, what would happen to that rate?
8011 MR. ENGELHART: It would be something -- and David would do some comprehensive modelling and market research, but somewhere around $25 to $30.
8012 COMMISSIONER PENTEFOUNTAS: You can get it down there?
8013 MR. ENGELHART: Yes.
8014 COMMISSIONER PENTEFOUNTAS: People talk about the system and the network, and maintaining the network, and everything that goes into it.
8015 For a cable network, once it is up and running, maintenance is not that expensive.
8016 Would it be correct to say that the cable subscriber is subsidizing the broadband subscriber, at Rogers or any other BDU?
8017 MR. ENGELHART: No, I wouldn't agree with that. I guess I would say that the cost of that network really needs a three-legged stool to support it. We need the broadband revenues, the cable revenues, and the home phone revenues. If one of those legs is broken, we might have a real problem.
8018 Oddly enough, the Internet service is a higher margin service than the cable service. It, if anything, is subsidizing the cable service.
8019 Think about it. If somebody pays $60 for their cable service, that first $20 we send right out the door to the programming services in cost of goods or cost of programming, leaving us with $40 to try to build the network, manage the network, run the overheads.
8020 Over on the Internet side, the customer pays us $60, and there is no cost of goods sold. That is all margined to drive the network.
8021 So the Internet product is actually the most important product, and both in our wireline business and in our wireless business we have begun to think of ourselves as broadband companies, and our customers think of us as broadband companies.
8022 MR. PURDY: When we do our capital planning, which we were doing yesterday, actually, so I am well prepped for this, there are four main sources or requirements for incremental CAPEX to maintain the cable TV offering.
8023 One is the set-top boxes, the CPE. We spend hundreds of millions of dollars on set-top boxes every year, and it's a huge requirement.
8024 The second CAPEX requirement is provisioning the incremental video-on-demand. There has been a great news story, in the sense that almost all broadcast networks and many specialty channels now offer most of their most compelling programming on demand. So we have to provision spectrum for that, and we are having to do note segmentation and a number of other things, upgrades to our network, in order to allow for that.
8025 The third is the proliferation of HD. We still haven't finished the process of moving from SD to HD, and there are a number of channels that are launching HD in the next three months.
8026 And then the fourth is incremental channels. I think, when I was last before you, we probably had 70 multicultural channels. We are now closing in on 200.
8027 All of these things require capital to upgrade the network.
8028 COMMISSIONER PENTEFOUNTAS: I saw your grid. There are hundreds and hundreds of stations, potentially. It's huge.
8029 MR. PURDY: Yes.
8030 COMMISSIONER PENTEFOUNTAS: HD, how far away are we from getting to 100 percent?
8031 MR. PURDY: I would say 24 to 36 months.
8032 Forty percent of our households still have a standard definition set-top box.
8033 COMMISSIONER PENTEFOUNTAS: Forty per cent.
8034 MR. PURDY: Yes. We are actively migrating them.
8035 I can see the Bell folks behind me salivating.
8036 We are moving very quickly --
8037 COMMISSIONER PENTEFOUNTAS: I am sure they know that information already.
8038 Briefly, Mr. Pelley, I want to get back to 4+1s and getting them out of the basic package.
8039 Given the state of conventional television -- and I understand that there are a lot of different tools that may come to mind in terms of helping it -- would not taking the 4+1 out of basic help the short-term, medium and even long-term viability of conventional television in Canada?
8040 MR. PELLEY: You could actually argue it the other way, in that if you took them out of skinny basic and they went on a model, or they went into another discretionary tier, only a certain amount of people would buy them, and the ratings on those particular networks would go down, so your overall ratings would go down.
8041 As I said, ratings are nothing more than a form of currency.
8042 It would not go down in a significant way, and I am not sure who alluded to it yesterday, that there are a lot of people that flip by and catch something that they like, and when they are on two networks on a skinny basic, even though you have City and CBS both carrying the same program, with simsub, on a skinny basic, that would drive a higher rating than City on a skinny basic and CBS on a discretionary tier.
8043 COMMISSIONER PENTEFOUNTAS: City on a skinny basic wouldn't drive more viewership?
8044 MR. PELLEY: I'm sorry?
8045 COMMISSIONER PENTEFOUNTAS: City on a skinny basic wouldn't drive more viewership?
8046 MR. PELLEY: No, if you had two of them on there, then you'd be more likely to have a higher rating than if, in fact, it was -- because you'd still have the -- I assume that you still have the simsub. So if it was --
8047 COMMISSIONER PENTEFOUNTAS: Supposing you still have the simsub, yeah.
8048 MR. PELLEY: Yeah.
8049 So using CBS as the example, if they were on a discretionary tier, then that wouldn't garner as large an audience. So if they were both on skinny basic, based on people flipping back and forth, you'd have a higher rating point, which then would drive higher revenue.
8050 COMMISSIONER PENTEFOUNTAS: So it'd be night-time TV, or even BTV, you wouldn't get more viewership if the Today Show wasn't available on skinny basic?
8051 MR. PELLEY: No, that's correct. You would not get higher viewership --
8052 COMMISSIONER PENTEFOUNTAS: Even if there's two programs. So forget about simsubbing, if you take the 4+1, three of which have a morning show, as an example --
8053 MR. PELLEY: Oh, I see. Yes.
8054 COMMISSIONER PENTEFOUNTAS: -- you wouldn't be able to --
8055 MR. PELLEY: Yes.
8056 COMMISSIONER PENTEFOUNTAS: -- you wouldn't have more people go to BTV --
8057 MR. PELLEY: If you didn't take that simsub on that particular case, the answer would be yes, you would get a higher rating on -- I mean you would get a higher rating on your own --
8058 COMMISSIONER PENTEFOUNTAS: On a Canadian network.
8059 MR. PELLEY: -- on your own Canadian network.
8060 COMMISSIONER PENTEFOUNTAS: Right.
8061 MR. PELLEY: However, like I said, or like it was alluded to yesterday, more than 90 per cent of it is available on both networks.
8062 COMMISSIONER PENTEFOUNTAS: Okay.
8063 You also spoke about platforms and multiplatforms, and moving in that direction. Monetizing those platforms is still very, very challenging. I mean the money is still on good old-fashion linear television, is it not?
8064 MR. PELLEY: Well, it's moving. It's moving at a rapid pace. The challenge is --
8065 COMMISSIONER PENTEFOUNTAS: If we set Google aside, I mean for everyone else.
8066 MR. PELLEY: Yeah, there's still the actual -- the rate cards and so forth are still considerably higher on linear television, based on the plethora or opportunities there are to advertise digitally; however, that will change over time.
8067 You know, what we've seen is -- you've seen the erosion right now in print. We happen to have a publishing business, and that is under certainly extreme duress and siege, and that's slowly what's happening in the conventional -- in the television market. The CPMs are going down based on that fact that digital is increasing, and they're going up.
8068 At what point will they actually cross? I need Ken's crystal ball.
8069 COMMISSIONER PENTEFOUNTAS: Yeah. Well, the future is ePrint, and you've gone a long of sort of achieving ePrint, as opposed to good old-fashion print, with the services you're offering.
8070 MR. PELLEY: Yeah. You're obviously responding to our decision to launch Next Issue.
8071 COMMISSIONER PENTEFOUNTAS: There you go.
8072 MR. PELLEY: Thank you very much.
8073 COMMISSIONER PENTEFOUNTAS: And just briefly -- and it's my last question -- because you talked about change, and sort of managing change, and that's come up on a number of occasions over this week, and Mr. Hennessy brought it to the fore yesterday, and you've brought it as well to the fore, Mr. Engelhart, I mean if it's a -- if that kind of change -- it's impossible to be -- you know, to be crystal-balling, but if that change is 10 years off -- and I think you alluded to it -- there's a potential that we would be accelerating the decline in revenues in the ecosystem we've set up in this country.
8074 How great is that fear or how big is the potential that we're there?
8075 MR. ENGELHART: Well, I think...it is one of the things that keeps us up at night. So you have a risk that the system is already under some threat from broadband distribution, and this could be the trigger that pushes it over the edge.
8076 That having been said, we are here supporting pick packs. We're here supporting small basic. We think we can make it work.
8077 One of the things that concerned us about the Commission's proposal was this idea that you would, in the straw person document, market small basic and regular basic in an equivalent fashion. We think maybe 15 per cent of the people want the small basic and 85 per cent want the other path, so we wouldn't market them in equivalent fashion. If we were forced to drive people down that pick-pack route, it might be detrimental.
8078 So I think we can manage it. I feel a sense of optimism. I think we can get there, but it's a concern.
8079 COMMISSIONER PENTEFOUNTAS: We appreciate it.
8080 The final point -- I just forgot -- on the 50-per-cent discretionary standalone, you, the BDU, would decide who is in that 50 per cent and who is in the other 50 per cent.
8081 MR. ENGELHART: Yes.
8082 COMMISSIONER PENTEFOUNTAS: Right. Okay.
8083 MR. ENGELHART: But bear in mind, if people have pick packs, they're not going to write you and say, "How come I don't get to choose my channels?" They will consider that choice.
8084 COMMISSIONER PENTEFOUNTAS: Appreciate it. Thank you very much.
8085 Thank you, Mr. Chairman.
8086 THE CHAIRPERSON: Commissioner Simpson has a few quick questions.
8087 COMMISSIONER SIMPSON: Good morning, almost afternoon. I'll be brief.
8088 I've really just got one line of questioning, and it has to do with IPTV.
8089 We've talked a lot about OTT and Netflix and SVOD service like that delivered over the Internet. But my question: as a company that started as a broadcaster, and then a very powerful cable company, are there technological advantages, not as a supplier but as a consumer, in some of the technological capabilities of IPTV that could contribute to some further erosion of conventional cable customers?
8090 MR. ENGELHART: I think it's the opposite. I think IPTV is going to help us. But David will explain.
8091 MR. PURDY: So we believe that open standards, and the interoperability of an open-standards-based solution, is helpful. It doesn't need to be IP; however, most open standards are IP these days.
8092 So the challenge we have -- and I spoke to it a little earlier -- the proprietary nature of the current cable ecosystem is that we've got a conditional access system, created by Cisco, and then we have set-top boxes that are produced by Cisco, and then we have applications that need to be approved by Cisco. So it's ironic that a former monopoly finds itself in a monopoly situation. The challenge with that is that we can't -- we don't have the leverage to push them as quickly as we want, either on cost or on innovation.
8093 Also, the legacy systems that we built, whether it be the IT or billing systems that we've built, are also, you know, in some cases, 20 years old. So the reason we're moving towards a more open standards, all-IP solution, for our customers is that we can innovate, we can create packages that are more nimble. You know, if somebody wants to create a discretionary pick pack, it's much easier for us to do that in the IP world.
8094 The second -- so I think there are advantages to getting there. I, by no means, think our customers are disadvantaged, competing with exiting IPTV providers. I would almost argue that there's sort of three phases of TV in the marketplace. There's the cable system as we know it today, then there's the current gen IPTV providers, which I would call phase two or wave two. They're still somewhat in a proprietary closed solution. They're still somewhat dependent on the likes of media room for their product roadmaps. They don't have true freedom.
8095 COMMISSIONER SIMPSON: M'hmm.
8096 MR. PURDY: The next gen video platform that we're building will be completely open standards. The next set of customer benefits you get comes from the ability to bring in other applications. There's literally a thousand times more innovation occurring in the IP space that could benefit the whole ecosystem, so the ability to bring in program synchronous interactivity.
8097 So you're watching one of Keith's thousand hockey games and you're pulling up stats and scores, you're checking your hockey fantasy pool, you're doing things that are tied to the broadcaster, or you're watching The Strain on FX, and behind the scenes you're in a chat with a bunch of other people watching the same episode, those types of applications, and the seamless integration of those applications into an IP-based solution, are easier to make happen.
8098 And then the third benefit will I think be lower cost set-top boxes, and, ultimately, a lower cost structure, which will show up in pricing.
8099 So hopefully that answers your question.
8100 COMMISSIONER SIMPSON: It does partially.
8101 So you're saying that third wave is going to get here, and it's going to -- but it does require the restructuring of what were traditional monopolies of STBs, and all the equipment that went behind them?
8102 MR. PURDY: Yeah. We call it the IP wedge. You're basically splitting up the conditional access layer --
8103 COMMISSIONER SIMPSON: Yeah.
8104 MR. PURDY: -- from the set-top boxes --
8105 COMMISSIONER SIMPSON: Yeah.
8106 MR. PURDY: -- and that from the software applications that ride on top of those set-top boxes. In the process of splitting that up, you're opening up the marketplace to much greater competition --
8107 COMMISSIONER SIMPSON: Yeah.
8108 MR. PURDY: -- so we will have a dozen different vendors competing for the set-top boxes, we'll have, you know, thousands of people producing applications that could ride on those set-top boxes. It just creates this really fabulous ecosystem that some of the Over-the-Top players have been able to take advantage of or enjoy the benefits of. So --
8109 COMMISSIONER SIMPSON: But it seems to me, though, that, you know, the industry, whether it's the broadcasting system or the hardware side of solutioning for the cable or the BDU industry, was doing a pretty good job of holding off smart appliances at the end, because that could have been a game changer.
8110 But, you know, smart TVs that are able to know what to do with, you know, multiplex signals and packeted signals are upon us. I'm just wondering if their solutions going to get there before middleware and smart TVs --
8111 MR. PURDY: Yeah.
8112 COMMISSIONER SIMPSON: -- start to change the --
8113 MR. PURDY: So both ourselves and --
8114 COMMISSIONER SIMPSON: -- the deal.
8115 MR. PURDY: Thank you for the question.
8116 Both ourselves, Comcast, and most innovative cable companies right now are actively looking at boxless solutions. We have no great love nor addiction to the millions of dollars we spend on capital provisioning set-top boxes, so if we can get to a smart TV and not have to pay for the capital associated with the set-top box, that's a wonderful world for us.
8117 The other thing is, when we talked earlier today about millennial viewers, they don't have TVs in many cases. They're watching on their tablet, their PC, their smartphone.
8118 COMMISSIONER SIMPSON: Yeah.
8119 MR. PURDY: Their viewing is mobile. They truly are not shackled to the living room the way somebody my age is shackled to the living room. So a huge part of that value prop or a huge part of meeting their needs doesn't require a TV. So in the future I don't think you'll see cable companies deploying set-top boxes in the same numbers that they are today.
8120 COMMISSIONER SIMPSON: Okay, two last questions.
8121 I couldn't help but note that TELUS -- have you read the TELUS submission? That's a dumb question, but I have to ask.
8122 I couldn't help but notice one of the trailing comments that they had was they inferenced that the CRTC's BDU regs, I think it's section 7, are an imposition to the IPTV style of delivery because it posits that a BDU has to -- you know has to talk to us first before it alters the format of a signal. That, to me, started to sound like the precursor to what we've just been talking about. I'm wondering if you wanted to comment on that.
8123 MR. PURDY: I'm afraid I don't --
8124 COMMISSIONER SIMPSON: It's like screen within a screen, interactivity.
8125 MR. PURDY: It's an interesting question.
8126 When we rolled out some of our first applications on the set-top box, we would allow for a customer to pull up weather or sports scores. Actually, Mr. Yabsley was the first person to call me -- he was working at another company at the time -- and when he saw the Sportsnet sports app show up on another sports network's channel, he was highly concerned.
8127 It is a fact, I think, going forward, that customers will be doing multiple things on one screen. So the notion that you will have a pop-up -- and potentially two competing networks showing up on the same television screen is a reality.
8128 COMMISSIONER SIMPSON: Is that going to create a problem, in terms of your negotiations, with the programs --
8129 MR. PURDY: Well, it is in the sense that right now our language doesn't allow for that.
8130 COMMISSIONER SIMPSON: Yeah.
8131 MR. PURDY: So, for example, if somebody is watching a CFL game on another sports network, but pulls up their Sportsnet fantasy league app on top of that, then I think, based technically on the way our agreements are structured currently, there would be an issue. Or if somebody pulls up the Pelmorex weather app on another news service, you know, I think we'd be offside with our agreements. So we'll have to work through that.
8132 It's interesting to note, though, that when I first arrived at Rogers 14 years ago to work on interactive TV, I thought everything was going to occur on the set-top box. We talked about program synchronous interactivity, which means basically stats and scores on the same TV screen. What really seems to be happening now is second screen. So most people have a tablet or a smartphone or a PC in their lap and they're doing most of that interactivty on the second screen.
8133 So that probably will get us away from some of the concerns. I really don't think people are going to want to watch Twitter overlaid on top of the Oscars. I think they'll probably want to watch Twitter on their laptop --
8134 COMMISSIONER SIMPSON: My daughter does.
8135 MR. PURDY: Or they'll want to watch Twitter on their --
8136 COMMISSIONER SIMPSON: I mean there's two screens sitting on her lap right now.
8137 MR. PURDY: On two screens, yeah.
8138 COMMISSIONER SIMPSON: Yeah.
8139 MR. PURDY: They'll have their Twittered account going.
8140 I think that'll keep -- you know, I think TELUS may be overstating the situation --
8141 COMMISSIONER SIMPSON: Okay.
8142 MR. PURDY: -- but they're --
8143 COMMISSIONER SIMPSON: Well, I was just curious. It just seemed, like, you know, it was a little flash of light over the horizon.
8144 Last question on Shomi. Right now it's deployed as essentially a cable offering not unlike an SVOD right now.
8145 MR. PELLEY: And Internet.
8146 COMMISSIONER SIMPSON: And it's Internet, isn't it?
8147 MR. PELLEY: Yes. Yeah.
8148 COMMISSIONER SIMPSON: Okay.
8149 MR. PELLEY: It's available to all ISPs.
8150 COMMISSIONER SIMPSON: Okay.
8151 MR. PURDY: So Keith and Rogers Media and Shaw Media created Shomi. We felt within the cable company that it was really important to use Shomi to try and add value to our television offering, but we were focused on these millennial youth that weren't taking our TV offerings. So we ground Keith quite hard in our negotiations saying, "We want to be able to ad Shomi to an ISP account."
8152 COMMISSIONER SIMPSON: M'hmm.
8153 MR. PURDY: Obviously, our desire would be to sell that person television as well, but we felt if we couldn't at least get them Shomi, that we couldn't bring them back to the television offering.
8154 Who knows where the world goes in terms of --
8155 COMMISSIONER SIMPSON: Well, actually, you sort of indicated where it might go, and you're going to be launching this as an android and IOS --
8156 MR. PELLEY: Correct.
8157 COMMISSIONER SIMPSON: -- as well as Xbox --
8158 MR. PELLEY: Right.
8159 COMMISSIONER SIMPSON: -- potentially, and you sort of heralded it as the combination of best of technology with the beating hearts of real people, which is -- yeah, which is --
8160 MR. PELLEY: Well, I think, Commissioner, in terms of the distribution model, we elected to launch it first with television and ISP, but we are in constant dialogue with our partners at Shaw --
8161 COMMISSIONER SIMPSON: M'hmm.
8162 MR. PELLEY: -- in terms of the different distribution models. We're kind of calling this a beta test over the first 6 to 12 months. We will hear more about consumers, we'll learn more, and we'll evaluate all facets of Shomi, from both a content perspective and the distribution side.
8163 So we are not in any means locked and loaded on --
8164 COMMISSIONER SIMPSON: You're still in beta phase, really.
8165 MR. PELLEY: And we're certainly not locked on this being the distribution model in perpetuity.
8166 COMMISSIONER SIMPSON: Be it a regulatory phase.
8167 I'm just curious that, you know, as you go to both deployments, you know one being OTT unregulated service, I presume it's going to operate under the Digital Media Exemption Order.
8169 MR. PELLEY: Right.
8170 COMMISSIONER SIMPSON: But is there the possibility that Shomi splits? Is there going to be one Shomi is there going to be two Shomis, based on --
8171 MR. PELLEY: There will be one Shomi.
8172 COMMISSIONER SIMPSON: Not show me yours and I'll show you mine?
8173 MR. PELLEY: No, there will be --
8174 COMMISSIONER SIMPSON: Okay.
8175 MR. PELLEY: -- there will be one Shomi.
8176 MR. PURDY: The only advantage that a television customer will have is that Shomi will be readily or easily available on the set-top box, so it'll be integrated into our Rogers On Demand offering.
8177 COMMISSIONER SIMPSON: Okay. Thank you.
8178 THE CHAIRPERSON: Commissioner Molnar.
8179 COMMISSIONER MOLNAR: Thank you.
8180 You may know we spent a lot of time with Bell yesterday talking about all these same issues. I'm just really struck by how different every element of your position and strategy are from what we heard yesterday.
8181 MR. PELLEY: Well, Mr. --
8182 COMMISSIONER MOLNAR: Which is not bad, by the way.
8183 MR. PELLEY: No, but --
8184 COMMISSIONER MOLNAR: I mean, I just think it's --
8185 MR. PELLEY: -- but Mr. Engelhart did mention at 10:32, "We agree with Bell."
8186 COMMISSIONER MOLNAR: Pardon?
8187 MR. PELLEY: At 10:32, Mr. Engelhart did mention, "We agree with Bell."
8188 COMMISSIONER MOLNAR: That must have been simsub. As far as I can tell, that's it.
8189 COMMISSIONER MOLNAR: You know, Shomi being one, your strategy for going onto multiplatform independent of subscriptions, and it's just really striking. It's not at all, in my view at least -- I think it's great that we have different strategies and different business being developed, and I think one of the things we want to do here is ensure that however this plays out, we don't restrict different business models, which may innovate in different ways.
8190 So kind of on that point, I see at bottom of page 2 or 3 -- page 3 -- when we were talking about the small basic, you said that maybe you should allow BDUs to choose whether it's a capped service or whether they put in place all-Canadian. After that, on the rest of the flexibility, you said it should be pick pack.
8191 Yesterday, Bell said it should all be à la carte. They didn't propose pick pack at all, it was everything outside of basic would be à la carte.
8192 Would you see that there would be any risk if we were to take an approach that said we want greater choice and flexibility for customers, we want there to be an affordable entry, either at a price-capped amount or by use of the all-Canadian basic, and we want there to be flexibility, either through offering à la carte or pick pack? So you could go along on your strategy of pick pack and Bell could go along on their strategy of à la carte. Customers would have choice, in fact they'd have greater choice, because they could choose amongst you. What would that do to the system?
8193 MR. ENGELHART: I just want to make sure I understand.
8194 In that proposal both models would be required to start with a small basic, and then you could --
8195 COMMISSIONER MOLNAR: Yeah, you choose the type, whether it's an affordable basic -- and, I mean, we should still talk about what that kind of a dollar mean, you know, would be defined affordable, but you could choose. There would be an affordable entry point.
8196 MR. ENGELHART: Right.
8197 There'd be nothing wrong with that, but, in a sense, pick packs are -- à la carte is really just pick packs where you're allowed to have a package of one, so it really is -- yeah, if you said you have to do either pick packs or à la carte, that would be fine. I...
8198 COMMISSIONER MOLNAR: I guess I was --
8199 MR. ENGELHART: Yeah.
8200 COMMISSIONER MOLNAR: -- asking more from the approach of how you will deal with your programming in your affiliation and so on. So that could work? You could negotiate on a pick-pack kind of basis and somebody else could negotiate à la carte, and that will all work out?
8201 MR. ENGELHART: Yeah. With either scenario there would hopefully be a requirement for the programming groups to make their programming available with a rate card that didn't economically prevent that, and so that would be one of our huge concerns.
8202 I don't know, David, if you want to add.
8203 MR. PURDY: I think we're in total agreement, but for clarity I'll outline some of the concerns that we'd want to talk about.
8204 One is we would want the programming services to be incented or encouraged to make their content available under this type of regime.
8205 The second thing is that there couldn't be punitive or penetration-based rate cards that made it impossible for us to roll this out.
8206 So it's one thing to say you're in favour of this type of scenario or model, it's another thing to then structure your rate card in such a way that makes it impossible for us to deliver on that.
8207 So as long as there was some guidance around how the penetration-based rate cards could be created, we think that'd be helpful.
8208 I think the third thing we'd want to make sure happened, in order to envision this world that you're talking about, is we don't believe that people should be able to withhold signal. So I think one of the areas where we differ from some of our vertically integrated peers is we're not in favour of a world whereby vertically integrated Canadian companies can withhold their signal during a negotiation.
8209 That's back to previous hearings, where we articulated our concerns around the Catch-22 nature that a vertically integrated media and distribution business can place their competitors in. For example, if I was in a scenario whereby I could withhold Sportsnet from somebody that I'm actively competing with during these negotiations, I think that gives me an unfair advantage in the marketplace.
8210 COMMISSIONER MOLNAR: Okay. I actually was going to ask about that, because I'm sure you're aware that Bell's proposal is that they would remove the standstill and final offer arbitration for everybody over 500,000 -- every BDU with greater than 500,000 and you believe in that situation you couldn't negotiate fairly, you couldn't horse trade Sportsnet and TSN?
8211 MR. ENGELHART: Right.
8212 It's interesting to note that, you know, Bell said, Well, this would be like in the U.S., and in the U.S. blackouts hardly ever happen. That's quite, quite misleading.
8213 When Comcast bought NBC, the FCC imposed a rule very, very similar to your Final Offer Arbitration Rule. So even in the land of unfettered capitalism and free markets, they realized this just isn't going to work. If Comcast owns NBC then Comcast has a tremendous advantage over its competitors.
8214 Bell said, "Well, here's a really simple solution. Rogers could always get TSN for $25 a la carte and they could sell it for $40. So what's the problem if people don't buy it? That's a huge problem for Bell".
8215 Yeah, but meanwhile over the next three years, every single one of our cable customers would go over to Bell Fibe. And so they would lose a lot of TSN but they would capture the entire video market.
8216 So that is why the FCC just simply wasn't prepared to countenance it. Once you have a BDU that owns valuable programming you need a final offer arbitration system like the Commission has imposed, like the FCC has imposed.
8217 And for Bell to come here and say that they want want that to be gotten rid of, when it was imposed precisely because of the assets they were acquiring, I find that shocking. It also tells me just how bad that rate card of theirs is going to be if they don't want you to look at it in a final offer arbitration.
8218 COMMISSIONER MOLNAR: I do want to talk about the "make whole" rate card. In this environment of greater choice where there is the potential that specialty services could lose advertising, the notion that you can't replace any of that revenue through additional subscription revenue, like what will happen to those services?
8219 I guess you need to convince me that only being able to recover subscription revenue is the proper thing to do to allow the specialty services to continue to exist.
8220 MR. ENGELHART: Right. Great question.
8221 So as you sort of alluded to, we're here in a somewhat middle position. A lot of parties have come to you and said, "If you embark down this road the system will be -- will be finished. There will be -- we'll fall off a cliff and we won't recover". Other groups are coming to you like the consumer group saying, "What's the problem? Just get cracking".
8222 We recognize that this pick-a-pack, small basic regime is going to hurt. Our average revenue-per-user will decline. It will hurt the penetration levels of programming services. Let's not pretend that it won't. There will be losses.
8223 But we think skillful distributors can manage that if the rules are introduced by you in a measured way. We think we can get there and, as I said, there is an added benefit in that we might keep people from cord-cutting.
8224 But if BDUs are required to, in effect, guarantee the outcomes for the programming services they are going to lose advertising revenue and we're going to make them whole for that. They're going to lose affiliate -- subscription revenue. We're going to make them whole for that.
8225 COMMISSIONER MOLNAR: Just help me because this is maybe where I am a bit confused.
8226 MR. ENGELHART: Sure.
8227 COMMISSIONER MOLNAR: Because I would have thought, rather than it be the BDU, it would have been the customer. You know, you have a customer who has an interest in a specific kind of niche, specialty service. Perhaps it's willing to pay more in order to ensure that that service remains with quality programming.
8228 So why is it you believe it's all at your cost?
8229 MR. ENGELHART: Let me -- I'll ask David to jump in, but let me just say this is what our Oliver Wyman modelled. They modelled a world just like that.
8230 And what happens is you get into this sort of vicious cycle. So penetration rates go down, rates go up. And yes, those are passed on to consumers. And then those higher rates mean penetration goes down further and rates go up and, yes, those are passed on to consumers.
8231 So you end up in a world where, as Oliver Wyman modelled it, you have a small group of customers paying 10 percent less and getting a whole lot less and you've got everybody else paying a whole lot more for the same thing. That's the kind of outcome that the gloom and doom parties are saying to you really means the end of the system, because you end up kind of having a bad outcome for consumers and probably wrecking the system. So that's why we feel if it's all passed on to consumers that is not going to work.
8232 We have to have everybody sharing some of the risk, everyone managing this process carefully and then we can end up with a scenario that's better for consumers.
8233 MR. PELLEY: I just want to add one thing.
8234 You know, there's no question that some specialty services will fail as we move into a world of more choice and revenue falls. But what that will do to the media companies, ours included, is to force the secondary networks or the third-tier networks to improve and to go after more compelling content.
8235 If we were to be totally honest and all of the media companies got together, they would say that there are some networks that they definitely invest significantly in and there's others that would be in a harvest mode. And I think that this system prevents that from happening and prohibits it.
8236 So at the end of the day, in this era it's going to be who has the most compelling content that resonates with consumers across multiple channels. It's going to make the media companies avoid harvest modes and produce more content or their services will become non-existent.
8237 MR. PURDY: Thanks, Keith.
8238 And Commissioner Molnar, I just had one scenario.
8239 So I've worked at a number of specialty channels before I came to Rogers and at those specialty channels -- we lived in a -- it was a kinder, gentler time and you were part of a large package. You really didn't sink or swim based on the merits of your own service. You either succeeded or failed based on the package as a whole. And the temptation always was to cut your programming expenditures to reflect whatever your new revenue reality was.
8240 In this type of scenario, whereby a network was able to get a BDU to guarantee both subscription and advertising revenue, there would be a horrible temptation on behalf of the programming service to reduce their operational costs. And why would you not? If your revenue is guaranteed whether you succeed or fail, I would argue that you're doing your shareholders a disservice to not at least look at the option of reducing program expenditures.
8241 So I think in order to maintain the incentive in the marketplace, we need to have at least the advertising revenue to be discretionary and the result will be the programming service invest more heavily.
8242 The second risk is if the network was guaranteeing both subscription and advertising revenue, anything in the realm of innovation whether it be on demand, catch-up rights, interactivity, et cetera, you'd be tempted to put that outside of the existing BDU relationship. You'd be tempted to make that a discretionary or you'd sell that to Apple or somebody else.
8243 So for the good of the ecosystem, I think there has to be shared risk on this new model. There's only shared risk if the networks actually feel some revenue decline if they're not being chosen.
8244 MR. PELLEY: The only other thing I would add is it's impossible to predict what's happening in the advertising market. It is changing at a torrid pace and it's not yearly, monthly. It's almost weekly, daily.
8245 So as I said to my brethren at the -- I don't know how you actually calculate what your advertising fall is when it is going through an unbelievably structural change. This is not a cyclical change that we're having in the advertising market. This is structural.
8246 So what will the advertising market look like in conventional, in specialty, in a year, in two years? Impossible to predict. So it's impossible to actually predict what you're actually going to lose in the advertising market.
8247 COMMISSIONER MOLNAR: I am going to move on.
8248 I just want to ensure I understand your position regarding conventional, the local conventional television. Once again, very different from what we heard yesterday.
8249 So do I understand by reducing exhibition, eliminating CPE and PNI but you would still need to invest in Canadian programming because you will create original local at a minimum. You will have a 35 percent exhibition. So you would still be investing in it.
8250 MR. PELLEY: Correct.
8251 COMMISSIONER MOLNAR: Those initiatives alone will, in your view, allow the local conventional television to remain viable?
8252 MR. PELLEY: Right. Well, the way that we looked at it, Commissioner, is -- and we obviously read the Bell submission and removing the transmitters, we didn't think, was an option obviously. A million homes would not receive the service. We believe the cost was neutral and it would force Canadians to pay for something that they now get for free.
8253 But we believe that the system is viable without removing the transmitters which is a crafty way of getting a second sub-fee. But we need flexibility. And we wanted to make a hard commitment to local because we believe that is the future of conventional.
8254 The PNI and the scripted series, I think, will still be created and still be made, some on conventional but I see us producing more scripted programming for FX than for City down the road.
8255 COMMISSIONER MOLNAR: That's because you're going to be having hockey on City.
8256 MR. PELLEY: You know, the interesting thing with hockey is --
8257 COMMISSIONER MOLNAR: Sorry, I will just let you go back to --
8258 MR. PELLEY: No, no, that's -- you know, a lot of people have said, "Is that where you're getting your Canadian content?"
8259 And when you look at it, you know, City will do hockey on Saturday nights and Sunday nights for three hours which is 26 weeks, times six hours is 156 hours, and that represents 14 percent of our commitment on primetime. With our 3,613 CanCon hours that we have to do, our NHL Hockey live event programming represents only 4 percent. So we're going to have to do a significant amount of Canadian content outside of hockey.
8260 But back to local. You know, when you look at all the research that it came back to, local is something that consumers want, can generate local and national advertising, and that's why we're prepared to make a commitment on original hours.
8261 So if we were to do one hour a day of high-quality programming in each particular region, that, I think, would be better than having to do a little bit of PNI and doing a bit of this and understanding that you have all these different regulatory commitments. So we wanted to streamline conventional on local.
8262 And we believe that if -- we believe, similar to Mr. Crull, if you remove simsub and we still have PNI on City and still have a CPE and still have local original requirements, then we're in big trouble.
8263 But we believe, with even one revenue source, if you have the flexibility and our only real commitment is on 35 percent Canadian content in the broadcast day with a local original hour commitment, we can make conventional viable.
8264 COMMISSIONER MOLNAR: Thank you. Those are my questions.
8265 LE PRÉSIDENT : Ça va? Non? O.K. I thought the Commissioner had a question but apparently it got solved.
8266 Just a few last questions.
8267 On Shomi, I know it's still early days but do you envisage a day where you'll be doing original programming there?
8268 MR. PELLEY: That is a -- and I know Barb Williams is here from Shaw. We've had conversations about that. I envision that will happen. The question is when will that happen. So we are in the infancy stages, you know, and it will evolve over time but I do believe that there will be a time when we produce original programming.
8269 As Barb said, you know, we produce great Canadian content, they produce fabulous Canadian content, and we look forward to debuting original content on Shomi.
8270 THE CHAIRPERSON: But the first step would be repurposing even recent productions you finance for the more traditional --
8271 MR. PELLEY: That's correct. We do have some original content that we have not announced yet but it is not -- that we have not, though, produced ourselves.
8272 THE CHAIRPERSON: Right. But presumably in that environment there may be incentives for you to be perhaps not the producer but owning more the backend?
8273 MR. PELLEY: Potentially.
8274 THE CHAIRPERSON: Potentially, right.
8275 My last question I have asked others, so it won't come as a surprise. Perhaps we need a sticker, you know, "Proposed by staff," like in the old home video stores.
8276 So what's your top priority in the Working Document and which is the one with which you have the most concerns?
8277 MR. ENGELHART: So I want to review something that we talked about earlier which affects my worst choice.
8278 So we talked about a small basic, option A, which was the Canadian OTAs and the 9(1)(h)'s, and we talked about -- and the document talks about option B, which would be anything you want at a capped price.
8279 And I heard you say, Chairman, that you could do option A but that would be a regulated obligation and then you could add the 4+1's in at no extra cost.
8280 THE CHAIRPERSON: I didn't say in it.
8281 MR. ENGELHART: Right. So that's a bit of a problem because then we'd have a weird situation where people would call up and say, "I want that small basic," and we'd say, "Great, it's 20 bucks or would you like to have the one that has the 4+1's in it?" "Oh, yeah. How much is that one?" "Well, it's 20 bucks." "Well, why would you offer me the first one then?"
8282 So I think that's an unwieldy solution for us and it will create complexities. So if --
8283 THE CHAIRPERSON: People love getting things for free. They're happy.
8284 MR. LIND: Well, the 4+1's are free.
8285 MR. ENGELHART: Yeah. So if that understanding is correct, that you were proposing sort of an option C and we would still have to offer option A, I would call that our worst.
8286 And the best thing in the document is clearly the Commission's proposal to curtail unreasonable penetration-based rate cards. That's the thing we think is the best.
8287 THE CHAIRPERSON: And through the undertaking you'll help us put some meat around "unreasonable" --
8288 MR. ENGELHART: Yes.
8289 THE CHAIRPERSON: -- which is not always a bright-line test?
8290 MR. ENGELHART: Yes.
8291 THE CHAIRPERSON: Okay. Thank you very much. Those are our questions. Thank you.
8292 We will ask the other interveners to come and make their presentation please.
8293 LA SECRÉTAIRE : Je demanderais maintenant à l'Association québécoise de la production médiatique à venir en avant.
8294 LE PRÉSIDENT : À l'ordre, s'il vous plait. Order, please.
8295 Quand vous serez prêt, vous pourriez procéder.
8296 M. BUREAU : Merci.
8297 LE PRÉSIDENT : La parole est à vous.
8298 M. BUREAU : Merci.
8299 Monsieur le Président, Monsieur le Vice-président, Madame et Messieurs les Conseillers et membres du personnel, mon nom est Jean Bureau, je suis président du conseil d'administration de l'AQPM.
8300 M'accompagnent aujourd'hui, à ma droite, Marie Collin, présidente et directrice générale de l'AQPM, et, à ma gauche, Michel Houle, consultant auprès de notre association.
8301 Nous sommes ici aujourd'hui pour partager avec vous les très vives inquiétudes du milieu de la production indépendante au Québec face à l'effet combiné et cumulatif des multiples changements que vous avez soumis au débat.
8302 Si la plupart d'entre eux devaient être mis en oeuvre, plusieurs études soumises au cours du présent processus démontrent que ces changements se traduiraient par une réduction importante des revenus des entreprises de programmation et de distribution de radiodiffusion réglementées, et, conséquemment, par une forte réduction des ressources disponibles pour le financement de nouvelles émissions canadiennes. Il y a là comme un paradoxe.
8303 Tous les experts s'accordent en effet pour reconnaître que la question centrale que pose la multiplication des fenêtres et des modes de diffusion, est celle du contenu, précisément celle de la création de nouveaux contenus de radiodiffusion qui soient de qualité, attrayants, compétitifs et en mesure d'alimenter ces multiples plateformes de diffusion.
8304 Or, dans le présent processus, qui vise à adapter le système canadien de radiodiffusion à cette nouvelle réalité, le financement de nouveaux contenus canadiens ne semble pas vraiment au coeur des préoccupations.
8305 En effet, d'un côté, le Conseil soumet au débat toute une série de propositions précises et souvent radicales, qui auront pour effet, selon les études économiques soumises, de restreindre la capacité des services de programmation de contribuer au financement de nouvelles émissions canadiennes, parmi lesquelles :
8306 - la suppression du droit d'accès à la distribution et de la protection par genre des services de catégorie A;
8307 - la suppression totale ou partielle de la substitution simultanée;
8308 - l'élimination des natures de services et la suppression des obligations de distribution de contenu canadien durant la journée.
8309 D'un autre côté, le Conseil ne semble pas vouloir aborder les différentes options visant à assurer une contribution au financement de nouvelles émissions canadiennes de tous les utilisateurs de contenus professionnels de radiodiffusion opérant au Canada.
8310 Pourquoi se limiter à exiger des entreprises canadiennes de radiodiffusion déjà réglementées qu'elles incluent leurs revenus et leurs dépenses d'émissions canadiennes provenant de la diffusion en ligne? Pourquoi pas l'ensemble des entreprises qui offrent des contenus professionnels de radiodiffusion en ligne aux Canadiens moyennant rémunération?
8311 Certes, le Conseil propose d'imposer des obligations de dépenses d'émissions canadiennes (DÉC) à toutes les stations de télévision traditionnelle et à tous les services facultatifs, une approche que nous appuyons, mais force est de constater que ces obligations existent déjà pour les services de programmation qui accaparent une très large part des revenus totaux de la télévision privée au Canada.
8312 Enfin, le Conseil évoque une éventuelle augmentation des DÉC au cours d'une période de licence, sans en préciser la nature, l'ampleur ou les modalités de détermination. Nous aurions souhaité plus de précision et une évaluation des résultats anticipés.
8313 Pour l'instant, tout porte à croire que ces ajustements aux obligations de DÉC ne pourront compenser les pertes substantielles de revenus que le nouveau cadre réglementaire risque d'imposer aux services de programmation canadiens comme aux EDR et que le résultat net sera une baisse appréciable des ressources disponibles pour financer de nouvelles émissions canadiennes.
8314 Nous présumons, bien sûr, que le Conseil a voulu forcer le débat en soumettant des propositions extrêmes et qu'au final, il adoptera un cadre réglementaire qui conciliera les intérêts des Canadiens en tant que consommateurs, citoyens et créateurs, un cadre en mesure de conserver, voire de renforcer, la capacité du système canadien de radiodiffusion de faire appel au maximum aux ressources canadiennes pour la création et la présentation de programmation de toutes les entreprises de radiodiffusion.
8315 Étant donné le temps qui nous est imparti, nous ne commentons ci-après que quelques-unes de ces mesures, mais nous serons évidemment disposés à répondre à toute question abordée dans notre mémoire.
8317 MME COLLIN : Bonjour.
8318 L'AQPM s'oppose fermement à la suppression des obligations de diffusion de contenu canadien durant la journée.
8319 Comme indiqué à l'Annexe 1, une telle mesure réduirait brutalement les obligations de diffusion de contenu canadien des diffuseurs traditionnels et des services facultatifs de plus de 400 000 heures par année, donc des répétitions certes, mais aussi bon nombre d'heures d'émissions originales canadiennes produites spécifiquement pour une diffusion en journée, dont des émissions d'information et de services, des jeux télévisés, des émissions de causeries, des magazines de journée, sans oublier les émissions pour les pré-scolaires, les enfants et les jeunes.
8320 Ce serait particulièrement catastrophique dans ce dernier cas, car si on n'expose plus les enfants à des émissions d'ici, si on les gave d'émissions étrangères dès leur plus jeune âge, ce sera une génération qui, devenue adulte, n'aura guère d'appétit pour le contenu canadien.
8321 Ce sera aussi catastrophique pour les producteurs d'émissions canadiennes qui réalisent des émissions originales destinées au créneau de jour, comme pour les téléspectateurs canadiens qui, de nombreux sondages le confirment, souhaitent majoritairement que les obligations de diffusion de contenu canadien demeurent.
8322 Par ailleurs, comme l'indique l'Annexe 2, une telle approche réduirait les obligations de diffusion d'émissions canadiennes de toutes les obligations de diffuseurs privés à moins de 20 pour cent de la journée complète de radiodiffusion, et dans certains cas à moins de 10 pour cent. Ce qui, à l'évidence, est totalement incompatible avec plusieurs dispositions de l'article 2 de la Loi.
8323 L'AQPM n'est pas opposée à une réduction des obligations de diffusion de contenu canadien, pourvu qu'elle soit raisonnable et pondérée. Nous avons proposé dans notre mémoire de réduire les obligations de diffusion de contenu canadien de 10 pour cent du pourcentage actuel en journée et en soirée. Proposition que nous maintenons. Mais l'abolition complète des obligations de diffusion de contenu canadien durant la journée ne devrait pas être une option retenue.
8324 L'AQPM considère qu'en raison, entre autres, de sa dimension restreinte, le marché francophone doit parfois être traité distinctement. C'est le cas en ce qui a trait à la protection par genre des services de catégorie A de langue française qui devrait demeurer, selon nous, comme selon nombre d'intervenants de tous les secteurs.
8325 En contrepartie, nous avons suggéré que ces services soient assujettis à l'obligation de consacrer au moins 75 pour cent de leurs dépenses d'émissions originales canadiennes à des émissions de langue originale française.
8326 Cette proposition s'inscrit dans la philosophie générale qui fonde notre approche qui est d'associer des privilèges particuliers à des obligations particulières.
8327 C'est cette même philosophie qui nous a motivés a proposer que le droit d'accès à la distribution des services facultatifs soit accordé au mérite, c'est-à-dire en fonction de l'ampleur de la contribution du service à l'atteinte des objectifs de la Loi, mesurée à travers ses engagements en matière de Dépenses d'Émissions Canadiennes, pardon, et de diffusion de contenu canadien.
8328 Cette approche innovatrice vise à tirer le système vers le haut, accroître sa capacité de contribuer au financement de nouvelles émissions canadiennes, en offrant un privilège à ceux qui contribuent le plus.
8329 L'AQPM recommande au Conseil de maintenir le statu quo en ce qui a trait à la substitution simultanée et de continuer de protéger les droits de diffusion acquis par les diffuseurs canadiens.
8330 Son abolition ferait perdre de 400 à 450 millions de revenus aux diffuseurs de langue anglaise. C'est un prix beaucoup trop élevé à payer pour répondre aux attentes d'un petit noyau de Canadiens qui souhaitent voir les publicités américaine diffusées lors du Super Bowl, d'autant qu'ils ont aujourd'hui tout le loisir de le faire et de les visionner sur Internet.
8331 L'AQPM est déçue de constater que le Conseil propose une mesure qui diluerait la protection des services indépendants et renforcerait la concentration des services de programmation aux mains des entreprises intégrées verticalement, particulièrement dans le marché francophone.
8332 Comme l'indique l'Annexe 3, si la nouvelle règle d'un service indépendant pour eux services liés de même langue était adoptée, Vidéotron pourrait distribuer dix nouveaux services facultatifs liés de langue française avant d'avoir à ajouter un seul nouveau service indépendant. Dans le cas de Bell, ce serait neuf nouveaux services facultatifs liés avant d'ajouter un seul nouveau service indépendant.
8333 Nous soumettons qu'au minimum, le ratio devrait être un service facultatif indépendant pour chaque service facultatif lié. Ou, alors, un service indépendant pour chaque groupe de deux services intégrés verticalement, peu importe à qui ils appartiennent.
8334 À notre avis, la suppression des natures de service aura pour effet de réduire la diversité de la programmation offerte aux Canadiens et de susciter de l'insatisfaction à l'endroit des services facultatifs à la programmation constamment changeante selon les tendances de l'heure qui leur seraient proposés.
8335 M. BUREAU: Comme vous l'avez maintes fois souligné, monsieur le Président, le Conseil se doit de trouver un juste et difficile équilibre qui permette de répondre aux intérêts des Canadiens, à la fois en tant que consommateurs, citoyens et créateurs.
8336 Fondamentalement, ce qui sera en jeu au terme du présent processus, c'est la capacité du système canadien de radiodiffusion de demeurer un service essentiel à la valorisation de l'identité nationale et de la souveraineté culturelle du Canada, comme l'exige la Loi sur la radiodiffusion.
8337 Or, nous avons l'intime conviction que si les dispositions les plus radicales envisagées sont mises en oeuvre, leurs effets combinés et cumulatifs seront préjudiciables aux créateurs, aux producteurs et aux consommateurs d'émissions canadiennes. Et que le nouveau cadre réglementaire faillira à atteindre l'équilibre souhaitable, tout comme les deux objectifs essentiels que la Loi lui assigne.
8338 C'est pourquoi nous espérons que le Conseil sera ouvert aux propositions qui visent non pas à restreindre mais, au contraire, à stimuler la capacité du système canadien de radiodiffusion de répondre au défi d'accroître le financement disponible pour créer des émissions canadiennes toujours plus captivantes et compétitives, que les citoyens canadiens auront envie et plaisir à regarder.
8339 Je vous remercie de votre attention. Nous sommes maintenant disposés à répondre à vos questions.
8340 LE PRÉSIDENT: Merci beaucoup. Monsieur le vice-président.
8341 CONSEILLER PENTEFOUNTAS: Merci beaucoup.
8342 D'abord, madame Collin, je veux profiter de votre présence, à moins que je me trompe, c'est votre première fois dans ce rôle?
8343 MME COLLIN: Dans ce rôle.
8344 CONSEILLER PENTEFOUNTAS: Et de vous souhaiter une longue et fructueuse vie en tant que présidente et directrice générale de cette organisation.
8345 C'est assez clair votre document ainsi que votre intervention de plus tôt cette année. Vos inquiétudes sont, en effet, vives et je vais peut-être commencer en vous demandant s'il y a quelque chose dans le document de travail qui vous a plu?
8346 MME COLLIN: En fait, on a été très intéressé et on serait intéressé à entendre le Conseil sur la volonté d'imposer des dépenses canadiennes à tous les services. Le Conseil ne précise pas de quelle façon, à quel rythme ou de quelle manière il va les imposer, mais, évidemment, l'AQPM reçoit cette proposition-là très favorablement.
8347 CONSEILLER PENTEFOUNTAS: Alors, justement, on laisse le champ libre aux intervenants de nous enrichir avec des idées. Alors, si vous avez quelque chose de plus précis à offrir d'ici le 19 septembre, il nous fera plaisir de le regarder.
8348 MME COLLIN: Avec plaisir.
8349 CONSEILLER PENTEFOUNTAS: Merci. Pour retourner sur les dépenses et le calcul des dépenses et les revenus dans le DÉC, je comprends que présentement il y a peut-être un déséquilibre entre les dépenses et les revenus et ça risque de vous déranger, mais l'idée derrière, vous ne la voyez pas comme une manière d'inciter plus de production, plus de programmation qui doit être destinée à une plateforme en ligne?
8350 MME COLLIN: Juste pour m'assurer que je comprends bien votre question, vous parlez de la redéfinition proposée d'inclure les dépenses canadiennes liées...
8351 CONSEILLER PENTEFOUNTAS: C'est exact.
8352 MME COLLIN: ... aux autres plateformes?
8353 CONSEILLER PENTEFOUNTAS: Oui.
8354 MME COLLIN: Bon. La situation actuelle des contenus qui sont faits pour d'autres plateformes par les diffuseurs canadiens, mais uniquement pour les plateformes parce que, en général, le contenu qu'on retrouve en ligne sur leurs sites ou avec les fournisseurs des services EDR sont généralement le contenu qu'on retrouve à leurs antennes de télévision et il y a de petits investissements qui sont faits dans de petites séries web.
8355 Oui, on voit d'un bon oeil l'arrivée de ça, mais on ne pense pas qu'à court terme on retrouve un volume important qui viendrait compenser des pertes qu'on pourrait retrouver à la télévision.
8356 CONSEILLER PENTEFOUNTAS: Je comprends. Vous êtes pour l'idée d'augmenter les DÉC au cours d'une période de licence. Vous reprochez en quelque sorte le Conseil de ne pas mettre la nature, l'ampleur et les modalités qui resteront à déterminer, mais là aussi, le champ est libre à vous, si vous avez des propositions à mettre de l'avant, sentez-vous à l'aise d'ici le 19 septembre, sur une éventuelle augmentation des DÉC, quels seront les pourcentages et peut-être des dates plus précises d'arriver à ce genre de changement?
8357 MME COLLIN: Oui, nous le ferons avec plaisir.
8358 CONSEILLER PENTEFOUNTAS: Merci. L'idée d'un service de base amaigri, je comprends que la réalité est différente au Québec par rapport à ce qui se passe dans le Canada, dans le reste du Canada.
8359 Dans le cadre du modèle québécois, est-ce que vous voyez des difficultés d'imposer ce genre de service de base amaigri ou squelette?
8360 MME COLLIN: Bien, écoutez, vous savez qu'au Québec on est déjà sous un régime assez différent du reste du Canada.
8361 CONSEILLER PENTEFOUNTAS: Oui.
8362 MME COLLIN: On a vu que les volets auto-composés ont été... en tout cas, ont été appréciés des consommateurs, semble-t-il, mais on a aussi vu qu'il y a certaines chaînes qui en ont souffert plus que d'autres, particulièrement les chaînes qui parlent à la jeunesse ou aux jeunes adultes, leurs taux de pénétration ont baissé d'une façon importante.
8363 Nous, notre proposition et notre inquiétude, c'est qu'on pense que... on comprend le Conseil de vouloir offrir aux consommateurs un volet très restreint en présumant qu'il y a des consommateurs qui n'ont pas besoin d'une grande consommation de télévision.
8364 Mais on pense qu'on devrait... le Conseil devrait regarder la possibilité en parallèle, que les EDR, les distributeurs puissent offrir un service de base, mais étendu, qui comprendrait quelques autres services, qui permettraient, croit-on, de faire une meilleure transition à la plupart des services, particulièrement dans le marché de langue anglaise.
8365 CONSEILLER PENTEFOUNTAS: Mais l'un n'empêche pas l'autre. Le Conseil, dans son document de travail, n'interdit pas d'autres genres d'offres, tant et aussi longtemps qu'il y a l'idée d'un service de base restreint, comme vous dites?
8366 MME COLLIN: Oui. Et ce qu'on souhaite, c'est que le... ce que l'on souhaite, c'est que les EDR puissent offrir un service de base réduit comme le souhaite le Conseil, mais un service de base étendu qui comprendrait quelques chaînes supplémentaires.
8367 CONSEILLER PENTEFOUNTAS: Vous soulevez également les défis de la programmation pour enfants et jeunes?
8368 MME COLLIN: Écoutez, on est très concerné par ce qui se passe avec la jeunesse. Évidemment, la proposition du Conseil d'abolir les dépenses d'émissions... pardon, les heures de diffusion canadienne en journée nous inquiètent beaucoup.
8369 On est très concerné par l'offre qui se fait au niveau de la jeunesse. On l'a dit tantôt, des jeunes qui ne consommeront pas la télévision d'ici, ce sera des adultes qui ne la consommeront plus et dans deux générations on n'aura plus besoin de discuter de l'avenir du contenu canadien parce qu'il n'aura pas été offert quand c'était le moment de leur vie où ils pouvaient en prendre l'habitude.
8370 Parce que vous savez que la télévision est souvent pour les jeunes canadiens la première expérience culturelle et souvent celle qui a le plus d'ampleur dans leur vie. Et par la télévision, ils viennent à connaître les comédiens, les auteurs, la forme de télévision qu'on pratique et ils prennent goût à la télévision qu'on fait.
8371 Et on pense que le Conseil doit être très vigilant sur la programmation jeunesse qui est offerte aux jeunes Canadiens.
8372 CONSEILLER PENTEFOUNTAS: Et les diffuseurs d'État éducatifs ne font pas assez?
8373 MME COLLIN: Bien, les diffuseurs publics se sont un peu désengagés, hein! Les diffuseurs d'État de la diffusion jeunesse, pour toutes sortes de raisons.
8374 Vous savez que dans le marché du Québec, en plus, on a une loi qui interdit la publicité destinée aux moins de 13 ans, donc la situation n'est pas facile.
8375 Le financement des émissions jeunesse n'est pas facile, les diffuseurs publics sont aux prises avec des coupures importantes dans leurs budgets, donc ils choisissent où publicitairement c'est plus rentable pour eux, donc ils vont vers une programmation pour adulte.
8376 La production jeunesse n'est pas financièrement rentable rapidement. Elle l'est à long terme et c'est pour ça qu'il faut avoir une vision par rapport à l'offre qu'on fait aux jeunes.
8377 CONSEILLER PENTEFOUNTAS: Seriez-vous d'accord, si je vous comprenais bien, de rajouter les services pour enfants et services pour jeunes dans l'éventualité d'un service de base restreint, ce qui refléterait un petit peu la position que nous avons entendue de CORUS hier et d'autres?
8378 MME COLLIN: Je pense que ce serait une très bonne idée. D'ailleurs, dans le passé, les services jeunesse avaient demandé d'avoir le statut 91H au Conseil et je pense que ce serait une façon, entre autres, d'aider la programmation jeunesse.
8379 CONSEILLER PENTEFOUNTAS: Quant aux dépenses en DÉC la journée, vous prônez une baisse potentielle des DÉC pour toute la journée, jour et nuit confondus.
8380 Dans ce contexte-là, est-ce que l'idée de permettre ou d'augmenter le niveau de DÉC en heure de grande écoute ne nous aidera pas d'aller chercher plus de revenus, et en faisant ainsi, on aura plus de revenus pour en produire du contenu canadien?
8381 MME COLLIN: Moi, je ne pense pas que ça soit l'équation qu'il faille regarder. D'abord, dans le marché francophone, on sait que la production originale de langue française fonctionne très bien et elle assure des succès d'écoute. Dans le marché de langue anglaise ce n'est pas toujours la même réalité.
8382 Est-ce que les diffuseurs... est-ce que les publicitaires vont acheter plus d'émissions parce que ce sont des émissions de contenu canadien? Je serais un peu étonnée.
8383 M. HOULE: Juste pour clarifier, ce qu'on a dit, c'est que les heures de diffusion de contenu canadien devraient être réduites en journée et en soirée, notre proposition, et non pas les dépenses d'émissions canadiennes, juste pour expliquer.
8384 CONSEILLER PENTEFOUNTAS: L'exposition.
8385 M. HOULE: Donc, ce qu'on pense, c'est que si on réduisait pour tout le monde, et les conventionnels et les services spécialisés, leur pourcentage de contenu canadien avec les mêmes dépenses, ça leur permettrait de faire des émissions plus attrayantes ayant une plus grande valeur de production.
8386 Mais on pense que ça doit se faire de façon progressive, donc réduire d'un pourcentage modéré leurs obligations actuelles plutôt que d'y aller d'une mesure radicale comme supprimer le contenu canadien en journée, parce qu'il y a quand même un volume d'émissions originales canadiennes en première diffusion qui est destinée à la journée et ce serait dommage de brutalement cesser ces obligations.
8387 CONSEILLER PENTEFOUNTAS: Également, c'est clair qu'on doit maintenir le cap sur les 4-A et les protections des genres, sûrement pour le marché québécois?
8388 MME COLLIN: Oui. Nous sommes très inquiets dans le marché francophone si la protection des genres disparaissait. On pense que ce n'est pas du tout à l'avantage du consommateur parce que, on le sait, les diffuseurs ont des pressions pour avoir des résultats à court terme, donc ils vont tenter d'aller chercher de l'écoute à court terme.
8389 Et on sait que la télévision, comme bien des endroits dans notre société, n'est pas à l'abri des modes, alors on pourrait se retrouver avec plusieurs diffuseurs qui offrent en même temps le même type de programmation.
8390 En plus, dans le marché du Québec, on parle en moyenne de 1.9 millions d'abonnés par service. Si, par exemple, dans ce petit... dans le marché restreint qui est le marché francophone au Québec on se retrouvait avec plusieurs chaînes du même genre, on peut donc penser que le nombre d'abonnés baisserait.
8391 On peut donc penser que la capacité du diffuseur à proposer des émissions originales en contenu canadien baisserait, sa capacité en tout cas d'offrir des contenus intéressants.
8392 CONSEILLER PENTEFOUNTAS: Oui.
8393 MME COLLIN: Et on a l'exemple qui est assez... qui est très récent sous nos yeux, qui est l'exemple du hockey.
8394 Les droits du hockey du Canadien sont maintenant séparés entre TVA Sports et RDS. Donc, ultimement, pour le consommateur, ça va lui coûter plus cher parce que pour suivre les matchs de hockey pendant la saison, il devra s'abonner à deux services. L'autre chose qu'on a...
8395 CONSEILLER PENTEFOUNTAS: S'ils s'intéressent au hockey.
8396 MME COLLIN: L'autre chose qu'on a constatée, si vous me permettez, monsieur le vice-président, c'est que dans l'histoire récente de la télévision, le cadre réglementaire actuel, ne pas empêcher les diffuseurs de s'adapter aux besoins puis aux demandes des consommateurs.
8397 Regardez la chaîne Mystère qui avait un créneau de fiction bien déterminé au début, qui maintenant est avec TV qui fait une offre beaucoup plus large.
8398 Regardez dans l'histoire tout à fait récente, ZTélé qui a annoncé vouloir un peu se retirer de la science et de la technologie pour aller vers une télévision plus extrême.
8399 Il y a de multiples exemples en ce sens-là et je ne crois pas que le cadre réglementaire actuel prive les diffuseurs de s'adapter aux besoins des consommateurs.
8400 CONSEILLER PENTEFOUNTAS: Je pense qu'on doit être d'accord avec vous sur ce point-là. Il y a un certain élargissement et c'était peut-être une des motivations derrière cette proposition-là parce que ça se faisait de toute façon, mais vous avez très bien expliqué votre position.
8401 Finalement, sur les ratios, et nous on va faire notre calcul également puis peut-être... on va vous donner la chance d'ici le 19 septembre de faire le calcul, le système tel quel, ce qu'on exige, c'est des EDR c'est trois services 4B non liés pour chaque service lié et un de ces 4B non lié doit être indépendant, pour les 4B.
8402 La proposition qu'on a mise de l'avant c'est... en fait, c'est un pour un pour tous les services confondus, A, B. Et si on fait le calcul, l'idée était qu'on avantageait les diffuseurs indépendants, qu'on les protégeait.
8403 Là, vous l'avez calculé autrement. Peut-être re-visiter la question puis faire la distinction entre les 4A et les 4B, parce que dans un modèle où toutes les catégories sont confondues, nous, d'après nos calculs, ce qu'on a mis de l'avant avantagerait et offrirait une protection accrue aux diffuseurs indépendants.
8404 Encore, je vous demande de sortir votre calculatrice, mais regardez ça puis dites-nous d'ici le 19 septembre.
8405 M. HOULE: Peut-être qu'il y a un malentendu, c'est-à-dire qu'on a compris ça que c'était tous les services 4 A, B, C, donc pour chaque service lié de Catégorie A, B ou C donc ou chaque service facultatif il y aurait un service indépendant, pour chaque deux services liés, il y aurait un service indépendant.
8406 Et je pense que c'est la notion de lié. Est-ce que vous l'interprétez comme lié à un titulaire particulier ou si c'est lié à n'importe quel titulaire, autrement dit n'importe quel service IV?
8407 CONSEILLER PENTEFOUNTAS: N'importe quel IV.
8408 M. HOULE: O.k. Dans ce cas-là on est d'accord que c'était notre recommandation que ça s'applique à deux services IV, peu importe qui est... et non pas seulement aux services liés au titulaire.
8409 CONSEILLER PENTEFOUNTAS: Très bien. C'est excellent.
8410 M. HOULE: Si c'était votre perception, on est d'accord.
8411 CONSEILLER PENTEFOUNTAS: Je pense qu'on doit la même chose, mais s'il y a de quoi d'ici le 19, sentez-vous à l'aise de nous corriger s'il le faut. Il n'y a pas de... il n'y a pas de mal à. On peut se tromper tous.
8412 Monsieur le Président, c'est complet pour moi.
8413 LE PRÉSIDENT: Merci. Seulement une... bien, deux ou trois questions, très rapidement.
8414 Dans l'Avis de consultation, on avait établi, le Conseil avait mis de l'avant un sommaire de comment on voyait l'évolution d'un système de radiodiffusion ou de la télévision plutôt, dans les années à venir et bien qu'il peut possiblement y avoir un peu de retard pour des raisons linguistiques apparentes au Québec, ou parfois les changements technologiques ont frappé moins rapidement. On l'a vu dans le domaine de la musique, mais éventuellement ça eut lieu.
8415 Êtes-vous d'accord avec notre constat sur les changements qui s'en viennent, dans la façon que les Canadiens, y compris les Canadiens de langue française, vont consommer leurs produits audiovisuels dans les années à venir?
8416 MME COLLIN: Écoutez, monsieur le Président, oui, effectivement, les Canadiens vont consommer les produits sur de multiples plateformes dans les années à venir.
8417 Ce qui nous préoccupe c'est qu'on soit capable, justement, d'être en mesure de toujours produire des contenus canadiens et que le système et que ceux qui devraient contribuer au système pour produire des contenus canadiens, pour suivre l'évolution justement de la consommation des Canadiens sur des plateformes, on puisse la suivre et on puisse être capable de répondre à la demande.
8418 Notre inquiétude en ce moment c'est de voir qu'au niveau politique il n'y a pas de volonté de suivre les utilisateurs de contenus professionnels qui vendent à des abonnés ou qui tarifent à des abonnés des contenus, pour aller chercher une forme de redevance, de contribution qui reviendrait aux contenus canadiens puisqu'on va clairement voir des baisses de revenus provenant des EDR dans les prochaines années.
8419 Donc, il faut être en mesure de conserver notre capacité à apporter aux Canadiens des produits de contenu canadien.
8420 Michel, veux-tu ajouter?
8421 M. HOULE: Je pense que dans les grandes lignes le portrait que vous tracez, on est d'accord avec ça. Si je le résume, mais corrigez-moi, là, si je le résume mal, mais donc un transfert vers beaucoup la consommation et la demande, la consommation sur de nouvelles plateformes, ça se... c'est vrai qu'au Québec, pour des raisons essentiellement linguistiques, la pénétration de certains des services par Internet, on peut penser à Netflix, mais on peut penser aux services de musique est beaucoup plus faible. Je pense que c'est 29 p. cent au Canada et 7 p. cent au Québec, parce qu'il n'y a pas abondance de matériel de langue française à l'intérieur de ces OTT.
8422 Mais la situation évolue. On sait que Netflix lance son service en France cette semaine, je pense. Il a déjà annoncé qu'il allait produire une série originale de langue française qui s'appelle « Marseille ».
8423 Donc, on peut supposer que le produit de langue française ou les versions françaises qu'il va développer pour les marchés français risquent de se retrouver ici aussi possiblement. On a vu aussi Canal+ Canada venir dans le marché.
8424 Donc, je pense que la tendance doit être quand même le rattrapage comme on a pu le constater aussi dans les phénomènes comme l'accès à l'internet.
8425 Au départ, ça a été plus lent au Québec, aujourd'hui, à partir d'un certain moment, le rattrapage se fait.
8426 Donc, il y a une protection de la langue pour le marché de langue française. Mais, elle n'est pas éternelle et elle va, je pense, s'atténuer avec les années.
8427 L'autre phénomène, c'est que oui, parfois, ça a retardé les innovations technologiques. Parfois, ça a permis de faire des innovations. Je pense que c'est quand même au Québec que le système que vous proposez au niveau du service de base et de l'offre de volets autocomposés a été lancé en 2009. Et c'est le modèle qui semble se développer.
8428 Donc, il y a parfois aussi où le marché permet de tester des innovations différentes. Encore une fois, pour des raisons linguistiques, ce modèle-là fonctionne assez bien au Québec. C'est pas aussi évident qu'il va fonctionner au Canada anglais, compte tenu qu'il y a un plus grand nombre de services. Donc, c'était difficile.
8429 LE PRÉSIDENT : Donc, vous êtes d'accord qu'il y a des nuages noirs à l'horizon. Mais l'impression que j'ai d'entendre votre présentation aujourd'hui, c'est que vous êtes contre toutes les idées qu'on met de l'avant. Et je n'entends pas de proposition constructive pour faire face à ces changements qui nous guettent, autre que de demander une contribution financière de certaines entreprises.
8430 Est-ce que je résume bien?
8431 M. HOULE : Je pense que si on a donné cette impression, on le regrette. Dans notre mémoire écrit, on a quand même appuyé la constitution du petit service de base. On a appuyé.
8432 Également, l'offre auto... le volet autocomposé avec le volet à la carte.
8433 On n'est pas nécessairement opposé. Ce qu'on dit, c'est que les études économiques qui ont été déposées, les études de plusieurs firmes de consultants reconnus et souvent utilisées, y compris par le Conseil.
8434 LE PRÉSIDENT : Je pense qu'il va falloir faire attention. Je pense que ça serait étirer la sauce un peu de décrire toutes ces études que vous avez dans votre...
8435 M. HOULE : Non, non. Je vais pas les écrire. Ces études existent et la plupart indiquent qu'il y aurait réduction substantielle des dépenses d'émissions canadiennes de la suite de l'adoption de l'ensemble des mesures.
8436 Chaque mesure prise isolément, vous avez beaucoup discuté précédemment avec les distributeurs de modifier les contrats, certaines clauses les contrats d'affiliation par rapport ou à d'autre chose.
8437 On n'est pas opposé à ça. On constate simplement que chacun... chacune de ces éléments-là a un effet potentiellement négatif sur les revenus et les services et que leurs effets cumulés fait en sorte qu'il peut y avoir une baisse importante des dépenses d'émissions canadiennes et qu'il ne semble pas y avoir, de l'autre côté, des mesures aussi innovantes ou stimulantes pour accroître les dépenses d'émissions canadiennes ou les ressources disponibles pour financer les émissions canadiennes.
8438 Donc, c'est pas qu'on s'objecte à toute et chacune des mesures. On en a appuyé plusieurs. Mais on constate quand même que même si on les appuie, elles risquent d'avoir des effets négatifs.
8439 LE PRÉSIDENT : Donc, je suis heureux de vous avoir donné l'opportunité de corriger l'impression peut-être que j'avais tiré de votre présentation.
8440 Merci. Ce sont mes...
8441 CONSEILLER DUPRAS : Peut-être une question.
8442 LE PRÉSIDENT : Ah! Oui?
8443 Monsieur le conseiller Dupras.
8444 MME COLLIN : Bonjour.
8445 CONSEILLER DUPRAS : TVA... excusez-moi, Québecor nous a dit qu'il n'y aurait pas de place au Québec vraiment pour de nouveaux canaux. Qu'est-ce que vous pensez de ça?
8446 MME COLLIN : Bien, je pense qu'effectivement on a un marché restreint. Qu'il n'y ait pas de place pour de nouveaux canaux, je dirais qu'il n'y a probablement pas de place pour un grand nombre de nouveaux canaux. Il y a probablement de la place encore pour quelques canaux. Et je vous dirais, il faudrait que ce soit une offre qui soit très complémentaire à l'offre actuelle, une offre qui soit vraiment très, très attrayante et différente.
8447 Mais tous les gens qui ont fait de la télévision spécialisée vous le diront effectivement. Le marché du Québec est restreint. Mais si quelqu'un peut arriver avec une offre qui est vraiment distinctive, il y a probablement de la place, mais peu de place.
8448 CONSEILLER DUPRAS : Et si la protection des genres était éliminée, est-ce que vous voyez des scénarios où il pourrait y avoir des nouveaux canaux qui tenteraient de concurrencer ceux qui sont déjà là?
8449 MME COLLIN : Bien, notre inquiétude, c'est que probablement les nouveaux canaux qu'on voudrait lancer, ce serait pour concurrencer des canaux qui ont déjà une bonne performance.
8450 Et probablement que dans cette situation-là, les entreprises intégrées verticalement auraient un avantage sur les services indépendants.
8451 Et on pourrait penser ultimement aussi qu'on délaisserait des services qui sont peut-être un peu moins performants au niveau des revenus publicitaires et de l'écoute.
8452 C'est vraiment ça qui nous inquiète, et on pourrait se retrouver probablement avec plusieurs chaînes sur des mêmes genres, des programmations qui seraient diffusées à l'intérieur... des choix de programmation sur plusieurs chaînes différentes, une augmentation des coûts d'acquisition, parce que tout le monde souhaiterait avoir le même type d'acquisition.
8453 Et en langue française, ça demeure assez restreint, la disponibilité d'acquisition.
8454 Donc, on est assez septique sur ce que ça pourrait donner davantage aux consommateurs.
8455 CONSEILLER DUPRAS : Merci.
8456 M. HOULE : Si je peux juste ajouter un point. Une des caractéristiques du Québec, c'est le nombre de ménages illimité. Et les services actuels les rejoignent dans une... même spécialisés, les rejoignent dans une très vaste proportion. Il y a 3.4 millions de ménages au Québec, dont 80 p. cent francophones. Ça donne 2.7 millions.
8457 Et les services les plus populaires dans un genre donné rejoignent de 2.3 à 2.5 millions.
8458 C'est déjà exceptionnel que 80 p. cent des gens s'intéressent à une thématique. Que ce soit documentaire ou voyages ou peu importe. On est déjà dans un état de saturation.
8459 Donc, rajouter un autre service directement concurrent et similaire peut pas faire croître le nombre total d'abonnés des deux services dans une grande proportion. On est déjà près du sommet.
8460 Et donc, tout ce qui peut arriver, comme disait Marie, c'est qu'ils se partagent les gens qui s'intéressent à cette thématique.
8461 Et pour nous, du point de vue des producteurs, deux services qui font 800 000 abonnés ou un service qui fait 1.6 million d'abonnés, c'est pas tout à fait la même chose.
8462 La capacité de produire les émissions de grande qualité, si vous avez seulement 800 000 abonnés est beaucoup plus faible que si vous en avez deux millions.
8463 Donc, c'est là qu'est notre inquiétude, qu'en supprimant la protection par genre dans le marché francophone, on arrive à diminuer la qualité générale des émissions qui vont être produites.
8464 Et, il y a aussi le fait qu'effectivement, pour les services indépendants, les entreprises intégrées ont pour elle la puissance financière et le contrôle sur la distribution. Si elles veulent présenter un service concurrent à un service existant indépendant, elles sont en mesure de se surenchérir pour acquérir les meilleures émissions que lui-même acquiert actuellement.
8465 Elles sont dans une situation vraiment très avantageuse.
8466 M. BUREAU : Pour terminer, Monsieur le Président, parce que je voudrais pas laisser la mauvaise impression, comme on l'a dit tout à l'heure. Il y a plusieurs suggestions qui ont été amenées au débat pour lesquelles... sur lesquelles on est d'accord, sur lesquelles ont pense qu'il y a un bien-fondé qui pourrait structurer l'industrie.
8467 On est cependant inquiet que l'ensemble des mesures qui sont suggérées, si elles étaient mises ensemble au même moment, auraient un impact, je dirais, négatif sur la capacité de nos clients, des diffuseurs canadiens, à financer les programmes. Puis on veut faire des programmes canadiens.
8468 Et quand on pense donc à cette possible diminution de ressources financières, et qu'on voit autrement que les ressources financières des annonceurs qui sont une partie prenante de notre écosystème migrent vers les systèmes qui sont autres, qui sont OTT.
8469 Mais on est inquiet de cette situation-là. Et on veut simplement dire que notre intérêt n'est pas simplement à s'assurer d'avoir du financement. Mais également s'assurer qu'on puisse rayonner, qu'on puisse exporter nos programmes. On en parle brièvement.
8470 Puis, il y a de plus en plus de producteurs au Québec, de langue française et de langue anglaise qui exportent leurs programmes à travers le monde, que ce soit en cinéma ou en télévision.
8471 Donc, notre intérêt est vraiment s'assurer que le système qui a bien fonctionné toutes ces années-là continue. Il fonctionne encore mieux dans l'avenir.
8472 Et puis je pense que pour que ça ça se produise, il va falloir que tous ceux qui tirent partie et tirent bénéfice du Canada, qui récoltent des revenus des Canadiens participent également à notre culture canadienne, puis à notre capacité de refléter auprès des Canadiens l'ensemble de notre histoire, de notre culture. Que ce soit en littérature ou ailleurs.
8473 Puis, je pense que le média de la télévision c'est un média privilégié pour faire connaître aux Canadiens leur histoire, leur culture et puis c'est dans ce sens-là qu'on voulait vous mettre... qu'on voulait vous transmettre nos inquiétudes.
8474 LE PRÉSIDENT : D'ailleurs, ça a été très positif, l'expérience, particulièrement dans le marché francophone québécois, ce qu'on a bâti avec les années pour toutes sortes de raisons.
8475 Et, je sentais un genre de défaitisme qui me troublait, parce que je sais qu'il y a des entrepreneurs qui ont su relever le défi par le passé, puis je vois pas pourquoi qu'on pourrait pas le faire.
8476 D'ailleurs, on a des créateurs qui sont sur la scène mondiale et qui gagnent des prix.
8477 Cela dit, je peux comprendre que possiblement le déroulement des changements devra arriver peut-être plus lentement dans le marché francophone, parce que les forces en présence arrivent à un rythme différent.
8478 MME COLLIN : C'est exactement l'une de nos plus grandes préoccupations, Monsieur le Président.
8479 LE PRÉSIDENT : Merci bien. Ce sont nos questions. Merci beaucoup.
8480 M. BUREAU : Merci.
8481 MME COLLIN : Merci.
8482 LE PRÉSIDENT : On va être en pause, donc, ajournement jusqu'à 14 h 15.
8483 So we are adjourned until 2:15. Thank you.
--- Upon recessing at 1311
--- Upon resuming at 1415
8484 LE PRÉSIDENT : Donc, à l'ordre.
8485 Before you start I wanted to, as I did to your colleagues from Corus yesterday, extend on behalf of the Commission our condolences for the loss of Paul Robertson. As I mentioned yesterday, Paul has been someone that often was in our hearings and I've known him for a number of years and he always came to these hearings in a spirit of positive -- as a colleague and a positive contributor to the outcomes we were all looking for and he will be missed. So, our condolences to his colleagues and his friends and our best wishes and prayers to his family.
8486 MR. SHAW: Thank you.
8487 THE CHAIRPERSON: Thank you. Please go ahead.
8488 MR. SHAW: Thank you, Mr. Chairman.
8489 Before we introduce our panel and begin our presentation, we would like to thank the Commission and the Friends of Canadian Broadcasting for accommodating our request to change our appearance date. Last week, we lost Paul Robertson, a leader, a colleague, a friend and a mentor. His wisdom, insight, infectious sense of humour and passion for this industry are missed today and he will be deeply missed for many years to come. Our thoughts and condolences are with his wife Carole, daughter Danielle and his family and friends.
8490 MR. BISSONNETTE: Good afternoon, Mr. Chairman, Mr. Vice-Chairman and Commissioners. I am Peter Bissonnette, President of Shaw Communications.
8491 I am joined by Brad Shaw today, Chief Executive Officer; along with Jay Mehr, who is our Executive Vice-President and Chief Operating Officer; Barb Williams, our Senior Vice-President of Content; Rhonda Bashnick, our Senior Vice-President of Finance; Troy Reeb, Senior Vice-President of Global News; our Regulatory team, Cynthia Rathwell, Michael Ferras and Dean Shaikh; and our regulatory consultant, Ken Stein.
8492 Shaw fully appreciates the importance of this proceeding to Canadians as citizens, creators and consumers. We support the commitment of the Commission and the government to serve the public interest, maximize choice and achieve the objectives of the Broadcasting Act. As an integrated network and content experience company, we have never been more cognizant of the challenges you face in finding the balanced solutions that will best serve the interests of Canadians in a rapidly evolving broadcasting environment. In this light, we have carefully examined each of the Commission's proposals.
8493 Based on our own experiences with our customers and viewers, supported by economic studies and consumer research, we have serious concerns that many of the proposals:
8494 - will not benefit Canadians;
8495 - are inconsistent with the Canadian content objectives of the Act; and
8496 - will undermine the strength of our broadcasting system in an increasingly competitive global marketplace.
8497 We appreciate the Commission's desire to "stimulate discussion and debate" and assurances that it has not "made up its mind on any issue." We concur with the Commission that:
8498 - regulatory intervention is not always necessary to achieve specific outcomes or objectives; and
8499 - measures should be simple, proportionate, easily administered and adaptable to change.
8500 In that spirit of open-mindedness and collaboration we will candidly discuss the Commission's proposals, while suggesting that the Market Guidelines will serve the interest of Canadians.
8501 The Guidelines strike an appropriate balance between regulatory oversight and reliance on market forces to drive choice, while also protecting jobs and Canadian content. To be clear, the Guidelines will have a real and meaningful impact across the entire industry. They will govern all commercial agreements and enable more pick-and-pay and programming choice for Canadians.
8502 MR. SHAW: Thank you, Peter.
8503 Our objective is to work with the Commission to achieve an adaptable and sustainable policy framework to increase choice, while preserving jobs, ensuring continued contributions to Canadian content and strengthening the broadcasting system we have built together over the last four decades.
8504 It is Shaw's belief that we must allow market forces to be the primary driver of customer choice. We are not trying to preserve the status quo: there is no status quo in today's dynamically competitive environment. Therefore, Canadians would be best served by a regulatory framework that allows us to invest and innovate in response to the demands of our customers today and in the future.
8505 We are willing to disrupt our business to seize the opportunities and to answer the challenges of today's digital environment. The challenges are very real: cord-cutting, audience fragmentation, a dramatic shift to targeted online advertising and the global competition for programming rights.
8506 To remain competitive, we have chosen to become a network and content experience company. This year, we will invest over $1 billion to build our leading network infrastructure, deliver next-generation services and respond to the explosive customer demand for variety, choice, control and speed. Our unique WiFi-Plus strategy includes streaming video, streaming music from Rdio, multicultural content and a broad suite of apps like Global Go and History Go. WiFi is about creating a more expansive customer experience than what is possible on traditional wireless networks.
8507 We recently announced with Rogers a launch of Shomi, a made-in-Canada online content experience service with cutting-edge customization and an impressive depth of programming choice. We are also investing in e-commerce with Shop.Ca and in cloud capabilities through ViaWest.
8508 As we transform for the future, we are also strengthening our core business. Shaw's strategy is Focus to Deliver, featuring a relentless commitment to exceptional customer experience, leading technology and operational efficiencies. For more than 40 years, we have been led by JR's guiding principle: Our customers come first.
8509 One of our most important measures of company success and individual performance is the likelihood of our customers to recommend Shaw to others. We are committed to best-in-class customer service, which means more flexibility and choice.
8510 Consistent with this, Shaw provides more than 90 Shaw Cable pick-and-pay channels in addition to 13 value-added theme packs and more than 70 pick-and-pay options on Shaw Direct. We were pleased that in our recent customer survey almost 80 percent of our customers expressed overall satisfaction with Shaw.
8511 Shaw Media has been an industry leader in delivering a diversity of information and entertainment programming, including commissioning over 700 hours of original high-quality Canadian content each year and 240 hours of news each week. In every market we serve across Canada, we have increased the amount of local news. We are extremely proud of our contributions in local markets, as well as the award-winning "Global National," "16x9" and "The West Block."
8512 As an integrated company we have developed a broader and more balanced perspective on the needs of Shaw Media viewers, advertisers and our independent production partners as well as the demands of our cable and satellite customers. This perspective has allowed us to conclude that many of the proposals in the Working Document do not respond to the real challenges facing the system. The proposed Market Guidelines strike the appropriate balance. The Guidelines will have a real impact on choice and market behaviour, while also preserving the strength of the system.
8513 MR. BISSONNETTE: Thank you, Brad.
8514 We acknowledge the Commission's efforts to design what may seem, on its surface, like a balanced approach: Customers have the option to either choose the small basic with mandated pick-and-pay or stay with their existing offers. There may be an expectation that both sets of customers will be satisfied. However, based on our market experience, supported by economic and consumer research, this balance will not be achieved. The proposed regime will have negative consequences for both sets of customers. There will be loss of services and higher prices.
8515 By contrast, the proposed Market Guidelines will provide a path forward for Canadians and the entire industry by increasing choice and flexibility in the following ways:
8516 1. customers will be able to purchase services as part of small and affordable packages;
8517 2. customers will be able to select a basic without high-cost sports services;
8518 3. broadcasters will permit all BDUs to offer their services as pick-and-pay;
8519 4. every BDU customer will have at least a majority of services offered to them as pick-and-pay; and
8520 5. obstacles to pick-and-pay, including punitive penetration-based rate cards, will be eliminated.
8521 The Guidelines will support and incent the delivery of more choice and flexibility. They are also responsive to the Order in Council and Speech from the Throne. The Commission, broadcasters and distributors will together be better positioned to manage the pace of change, while at the same time protecting jobs, ensuring that the economic engine of the Canadian broadcasting system remains strong and safeguarding the system's ability to provide Canadian content.
8522 We recognize the Commission's clear desire to unbundle the basic service. However, as we detailed in our written submission, the Commission should not impose a mandatory small basic through either of the two options in the Working Document.
8523 Option A has serious consequences:
8524 - The removal of U.S. 4+1s from the basic service would create an inequity between Canadians in Toronto who enjoy free over-the-air access of U.S. networks and Canadians in cities like Edmonton, Saskatoon and St. John's. However, simply adding U.S. 4+1s would not solve the problems with a small basic given that the Act requires BDUs to give priority to Canadian services.
8525 - The Act also requires the broadcasting system to "encourage the development of Canadian expression by providing a wide range of programming" that is "varied and comprehensive, providing a balance of information, enlightenment and entertainment for men, women and children of all ages, interests and tastes." This describes Shaw's Personal TV. It does not describe the proposed small basic.
8526 - As explained in our economic studies, a few customers who choose small basic will pay marginally less but for significantly fewer channels. However, the majority of customers will pay more, including small basic customers who add pick-and-pay channels. The price of the existing basic service will necessarily increase and the majority will subsidize the initial benefit of the very few and over time every customer will be worse off.
8527 Option B, the proposal to permit BDUs to add services to basic with a price cap, will reverse the explosion of market-driven investment and innovation by BDUs over the last two decades. Moreover, retail price regulation of the basic service would ignore the Commission's own findings that BDUs recover a significant portion of their capital costs from the basic service, wholesale fees do not represent a significant portion of the basic fee and BDUs would need to recover lost revenues by increasing the prices of other services.
8528 In short, a mandatory small basic -- option A or option B -- will set off cascading negative economic and cultural impacts.
8529 MS WILLIAMS: Thank you, Peter.
8530 As Brad explained, we are transforming our business, while strengthening our core, as a network and a content experience company. Competing with global content experience companies has never been more challenging:
8531 - with an unpredictable mix of "cutters," "shavers," "stackers," "nevers" and "bingers";
8532 - with demands from advertisers to provide the same level of targeting that is available on Google and Facebook; and
8533 - with competition for rights; "Blacklist" and "Gotham" are just the most recent Netflix acquisitions that demonstrate the escalating prices on this battlefront.
8534 But, despite these challenges, we are in a golden age of television in Canada. Frankly, as someone who has dedicated her professional life to Canadian content creation, I'm surprised that in this hearing there hasn't been a stronger recognition, or even a celebration, of our collective achievements as regulators, distributors, broadcasters and producers.
8535 Canadians expect and deserve high-quality Canadian content -- the Act demands it. Against tremendous odds, we've delivered and I'm passionate about both our previous and ongoing successes as well as the potential for an even more exciting future.
8536 With the creativity and dedication of our independent production partners, we have never produced a higher quantity or better quality of popular Canadian shows like "Rookie Blue," "Lost Girl," "Continuum," "Vikings," "Top Chef Canada," "Museum Secrets," "Yukon Gold," "Timber Kings." I could go on. Recently, every top 10 program on HGTV over a 20-week period was Canadian -- a terrific accomplishment.
8537 And we continue to innovate beyond our linear platform by creating a series of digital multiplatform projects, including the "Second City Project," "Dino Hunt Canada," "The HGTV Home Giveaway" and "The Great Canadian Cookbook."
8538 Our opposition to the Commission's proposals is based on our genuine fear that this success and our efforts to remain relevant to Canadians in a digital world will be undermined by the proposed mandatory approach. With a potential loss of services and distribution, we will lose the scale and stability that we need to compete -- compete for viewers, for advertisers and for programming rights -- against massive global providers.
8539 The proposed regime will also limit the content discovery and value proposition that differentiates traditional providers from unlicensed platforms.
8540 To be blunt, we simply do not understand the urgency or rationale for a mandatory pick-and-pay regime that will:
8541 - increase prices for the vast majority;
8542 - threaten the viability of services, resulting in lost jobs and less program diversity; and
8543 - ultimately reduce contributions to Canadian programming, harming independent producers and decreasing both the quantity and the quality of Canadian content.
8544 And make no mistake, every one of our services will be threatened:
8545 - Even our strongest services like Food Network, History and Showcase will be immediately weakened. In competition with targeted online advertising, reach is the most important thing that we have to offer. An audience loss of as little as 10 percent will make some advertisers look elsewhere.
8546 - Nat Geo Wild and H2 will be harmed because they are locked into long-term program and branding deals that were negotiated without any expectation of the uncertainty created by pick-and-pay.
8547 - Services likes BBC Canada, DejaView and IFC may simply become unviable and we should not dismiss or understate this impact on Canadians. Niche channels have loyal audiences and they are a critical source of programming diversity and regulated revenue for independent producers.
8548 Our concerns with mandatory pick-and-pay are magnified by the Commission's other proposals:
8549 - mandatory small basic;
8550 - the proposal to eliminate genre exclusivity; and
8551 - a must-offer preponderance rule, and while this rule is intended to address billing system issues created by pick-and-pay and BYOP, it will further threaten the viability of Canadian programming services.
8552 Significant additional damage to the broadcasting industry would result from the proposal to eliminate simultaneous substitution. The near-unanimous opposition to this proposal is not surprising.
8553 Simsub is absolutely necessary given the presence of U.S. signals. With a value of more than $450 million each year, simsub ensures that there are sufficient financial resources to produce Canadian programming.
8554 The elimination of simsub or the introduction of non-simultaneous substitution would not "free" broadcasters' schedules. To preserve the value of rights that have been freely negotiated and acquired, Canadian broadcasters are compelled to air a program at the same time as the U.S. network.
8555 The issues with simsub, including errors and missed Super Bowl ads, do not justify undermining the entire business model for conventional television. There is no content objective of the Broadcasting Act that would be achieved by providing Canadians with access to U.S. commercials that are widely available on YouTube.
8556 In response to the proposal to permit local stations to shut down transmitters, there are public policy issues that are more significant than any anticipated cost savings. We believe there are other means of fostering local programming through market-based innovations.
8557 As the Commission is aware, we have submitted an application for a new local/national Category C service to be known as Global News 1. We hope to bring this innovative mainstream national news service to viewers across Canada and we will ensure that it complies with the CRTC's criteria.
8558 Finally, I would like to discuss the Commission's proposals for encouraging the creation of compelling and diverse Canadian programming.
8559 We agree with the Commission's proposal to include children's programming within the definition of PNI. We also support the Commission's approach to exhibition requirements. This would add to the flexibility provided by Group-Based Licensing, which supports our ability to commission high-quality Canadian content.
8560 However, we do not understand the proposal that CPE levels would be initially adjusted and then increased over the licence term. We would find it difficult to accept a CPE regime that is not performance-based. If the Commission is concerned that independent producers will be harmed by pick-and-pay, clearly the better solution is to decide not to impose a mandatory pick-and-pay regime.
8561 MR. MEHR: Thank you, Barb.
8562 I would now like to take some time to discuss the remaining proposals in the Working Document.
8563 We support the proposal to prohibit unreasonable penetration-based rate cards, requirements to distribute a service on the same terms as at a prior date and most-favoured-nation provisions.
8564 These are not VI-specific issues. Consideration can be given to implementing these rules through Guidelines rather than the Code. However, we are encouraged by the recognition in this hearing that the Code applies to all parties, VI and non-VI. If VIs are required to abide by the Code as a regulatory requirement and to submit to dispute resolution, all parties should have the same obligation.
8565 We are not opposed to a rule that prohibits all BDUs from imposing "unreasonable conditions on the ability of independent programming services to pursue multiplatform programming strategies." However, this should not be extended to require BDUs to "facilitate" multiplatform access.
8566 We support maintaining the current approach to authorizing non-Canadian services. Under the CRTC's proposal, non-Canadian services would have to agree to abide by the VI Code and submit to the Commission's dispute resolution mechanisms. This underscores our view that this is a code of conduct for commercial arrangements and interactions for all BDUs and programming services, not a VI Code.
8567 We are strongly opposed to including revenues from exempt platforms within the definition of a licensee's broadcasting revenues. The battle has been fought on the internet and the internet has won.
8568 Any proposals to impose new regulations and taxes on internet video would harm consumers, innovation and competition -- and we would strongly oppose any new rules that only apply to Canadian companies. The creation of more disadvantages and uncertainties would make it more difficult to invest, launch new services and compete.
8569 In response to each of the additional proposals:
8570 We support the requirement to establish an audience measurement working group.
8571 We agree that the 10:1 rule should be maintained for terrestrial BDUs and extended to DTH.
8572 We support elimination of the third-language buy-through requirement.
8573 The Commission's proposals for accessibility are consistent with existing industry initiatives.
8574 We will not oppose a new BDU Code that governs customer relationships or the appointment of a BDU ombudsman.
8575 We also support each of the additional streamlining proposals in the working document.
8576 Finally, the suggested implementation date is not realistic, especially if the proposed framework is not modified. It is difficult to discuss a more precise implementation date given both the range and scope of the proposals. However, in consideration of the potential impact on billing, customer care and re-negotiation of all existing agreements, late 2016 provides a more reasonable timeframe for implementation.
8577 One of the many reasons why the guidelines are preferable is that we can do them quicker.
8578 MR. SHAW: Our family and our company are proud and humbled to serve, create and innovate with Canadians. We appreciate the opportunity to participate in this process and we support the objectives of the Commission and the government.
8579 There is a way forward. It is not about protecting the status quo. It's about developing a modernized framework that sets the stage for competition, innovation, choice and exceptional customer experience. We have proposed market guidelines that will provide the right level of regulatory oversight, while allowing our company and the industry to respond to the real challenges facing our system, produce high-quality Canadian content, and maximize choice and flexibility for Canadians.
8580 We are committed to doing just that.
8581 Thank you, and we look forward to answering your questions. Mr. Bissonnette will be our quarterback today even though we don't have a sports channel.
8582 THE CHAIRPERSON: Thank you, Mr. Shaw.
8583 The Vice Chair will start the questioning.
8584 COMMISSIONER PENTEFOUNTAS: Watching Mr. Engelhart this morning play quarterback this morning you have to start wondering what they're doing with this poor channel because they seem to be having a rough time.
8585 COMMISSIONER PENTEFOUNTAS: Thank you all so much.
8586 I was telling our new colleague that it gets easier as the week wears on because sort of themes and people do a better job sort of responding to the issues at hand. So thank you again for coming in and for really a thoughtful presentation today.
8587 Let's maybe start again back to front with an issue that we sort of left off on earlier this afternoon, I guess it was at that point. And that is the code and applying that code to U.S. services.
8588 Much was said this morning as to what those services -- the impact that they have in keeping penetration levels high. I guess it was the distribution wing of the panel, but speak to us a little bit about that experience and what you foresee may happen if that code is applied equally to Canadian and U.S. services.
8589 MR. MEHR: Well, let me say at the outset that our view is that the code needs to be symmetrical to Canadian and American services and we can't get a head around any other way. But I don't know if Brad wants to add some colour.
8590 MR. SHAW: Yeah, just you know, we happen to have a relationship with A&E both on a distribution side and the programming side. And you know, talking to Nancy, the CO of A&E, they are very much looking at ways to offer their content beyond the traditional linear.
8591 They recently did a deal with Dish Network in the U.S. to offer all the A&E content on OTT platform and truly believe that if it wasn't an appetite for them to come into the linear world they'd come in a different way into Canada. And I think they are committed to having their content be shown to consumers. They'll find a way to do that.
8592 COMMISSIONER PENTEFOUNTAS: Right. I understand your position.
8593 Just, in terms of what you foresee the consequences being when you took this position, you must have had some thought as to what potentially may happen.
8594 Will they pick up their ball as we heard earlier and walk away? If so, will the content that is held in high esteem by Canadians find its way onto a Shaw broadcasting service as an example?
8595 MR. MEHR: I'll go first and then you can talk about --
8596 MS WILLIAMS: Sure.
8597 MR. MEHR: -- where the content manned up.
8598 The dynamic here is not that different than the dynamic that exists for the successful high viewership A's in Canada, all of those impactful services like Food and HG TV. And, as you said earlier -- one of the panels said earlier -- you know, we've got our own success stories that are into the same kind of scenario. Those services have -- the Canadian services have a tremendous amount of advertising revenue on them. So it's certainly our hope that where this lands those services will continue to have a lot of eyeballs.
8599 And we accept that customers will have a greater level of choice and they'll be choosing them. But presumably, we will also have the flexibility to build packages and everyone with services like that will be incented to create rates that allow us to put them into packages that customers are going to choose to buy.
8600 So I'm not actually convinced that the dynamic is all that different than it is for the big Canadian services.
8601 COMMISSIONER PENTEFOUNTAS: While we're on the topic of our neighbours and friends south of the border -- unless you wanted to add something, Ms Williams?
8602 MS WILLIAMS: I could just speak to where we think the content might land --
8603 COMMISSIONER PENTEFOUNTAS: Sure, please.
8604 MS WILLIAMS: -- should the negotiation not end where we wanted it to.
8605 And I think, you know, we've always worked really hard as Canadians to obtain that unique Canadian right and we would always prefer to get that content into the country through our own channels rather than channels on the eligible list.
8606 I think the real risk now is what Brad mentioned, is that now in a digital world with so many opportunities to bring services in, I'm afraid we wouldn't get access to that content even if we might like to offer it on our channels and that, rather, the service would come in as unchanged stream of content but over the top.
8607 COMMISSIONER PENTEFOUNTAS: Okay.
8608 Mr. Shaw...?
8609 MR. SHAW: All I would add is I just think that, you know, A&E's brand is pretty important to them and that content and the investments they make and that. I think they would be very sensitive to how that content is sold or how it's resold, for that matter.
8610 COMMISSIONER PENTEFOUNTAS: Appreciate that. Thank you.
8611 Back to my original question, and since we're speaking about our friends and neighbours south of the border, 4+1, I understand your position globally. And you can expand on that if you wish, but given where conventional television finds itself presently would not moving 4+1s into a discretionary tier not help Global, as an example?
8612 MR. BISSONNETTE: Let me just talk about -- you went from back to front and I'm going to go from front to the back.
8613 COMMISSIONER PENTEFOUNTAS: As long as we meet somewhere in the middle.
8614 MR. BISSONNETTE: We will meet in the middle. You know, as you can -- I'm hoping that you can see that there is a collaborative side to our proposal.
8615 It seemed to me as we were watching the proceedings over the last week that there -- the farther we got down these discussions, the more it seemed that there was an assumption that either A or B were going to be the sole choices that we had, coming out of these discussions.
8616 And when we were first engaged in the conversations about television and we looked at what was driving, you know, the events, which was really a desire to provide more choice and to provide customers with a valuable proposition and to deal with the issue of, "I don't want to pay for this when I'm not watching this" which, by the way, since I've been in the industry, when we had 12 channels was a refrain we used to hear in those days as well. So there's always going to be a group of customers that will say that -- what they've just said.
8617 But there is many customers including our own that we've determined through our surveys and through the thousands of calls we have with them every day, that actually really like the system as it exists today where there are high value, highly penetrated, obviously basic services. And the opportunity is to find other combinations of services in smaller niche packages and, as well, garnished with some a la carte services that, you know, are relevant to themselves.
8618 So when we looked at the challenges that you were faced with, we said, "How can we as a vertically-integrated company" -- and we take it very seriously that we are a vertically-integrated company. I remember sitting in front of the Commission and Brad making a commitment to them that we recognize there was a higher level of expectations of behaviour and we committed that that's what we would be.
8619 And to the extent that the proposals that we've put forward to the Commission in our submissions reflects what we think are a balanced approach, they take into consideration our consumers, we've recognized that there is -- there are services within our personal TV that customers would choose not to pay for and primarily the high-priced services would fall into the context of sports.
8620 Our surveys actually indicated that about 50 percent of our customers would not choose to watch sports in basic if they had that choice. And they also demonstrated that the services that we've put into our personal TV -- and by the way, personal TV is a reflection of a very, very competitive environment that we work with and, frankly, is a reflection of the wonderful services that our competitors were providing as to differentiate themselves from ourselves.
8621 And so we hope that the conversation is still a conversation and that it's not a fait accompli, that it's either A or B, because we think that our customers would actually embrace the proposal that we put forward.
8622 And from an implementation point of view, we think that rather than making pretty regulations that are harder to -- they're not as flexible, frankly, but to couch the -- you know, that this proposal whether it's in a code, whether they are guidelines to -- you know, you could augment the code -- and with four very simple kind of guidelines that we could actually achieve significant harmony within the industry.
8623 We would deal with the issue that you raised, which was the U.S. specialties, because they would be treated exactly as all of the other Canadian services are treated.
8624 It would be implementable once you have made your decision, and it would also help to define the risks and the pace of a market that is actually moving very, very quickly.
8625 We have said: In the absence of this hearing, what would we be doing?
8626 What about you be doing, Brad?
8627 We are preoccupied with our customers. When Brad said that the focus is to deliver, that is a mandate within our company. It is all about engaged employees, engaged customers, and providing them with what they want.
8628 So we come to you with a less controversial set of proposals, our guidelines, and we hope that we can discuss those today, and why they are important.
8629 COMMISSIONER PENTEFOUNTAS: A couple things. One, I mentioned in my opening remarks today that I thought it was a thoughtful presentation. It sort of goes to your statement a few minutes ago.
8630 And you kind of did sort of the tour and touched upon almost every question that I wanted to ask you, above and beyond the ones that you have already responded to.
8631 Maybe we will go back sort of one at a time. We have already discussed the U.S. services and equal treatment for all. Let's get back to the 4+1 for a moment, and then we will touch upon the basic package, and everything else that we may want to get to, and you can have a chance to really expand and drill down on those issues, as well.
8632 Back to the 4+1s and the advantage, if there is any, for conventional television, and Global being one of the shining stars of the Canadian conventional television industry.
8633 Would moving the 4+1s into a discretionary service be advantageous to Global?
8634 MR. BISSONNETTE: We don't think that moving 4+1 into discretionary is --
8635 I think this morning we heard the passion about 4+1.
8636 COMMISSIONER PENTEFOUNTAS: Just before you get started, just really concentrate on the broadcasting arm, and then we can see what the impact would be on the distribution arm.
8637 MS WILLIAMS: We actually tried to be really thoughtful about what you might be trying to accomplish with the suggestion of moving the 4+1s into a discretionary package, and we speculated that, really, there was maybe the thought that, if you got them farther away from people and less in their face, and they had to pay for them, and you buried them somewhere else, maybe they wouldn't watch so much, and then maybe their influence wouldn't be so great, and maybe the Canadian schedule could rise up and take over.
8638 We speculated that maybe that's where you were going, and nothing would delight us more, as conventional broadcasters, than to somehow downplay the role that the American networks have played in our lives for so long.
8639 But -- and I think it was spoken of eloquently this morning -- as long as those U.S. services are in this country, we are stuck. We must adhere to their schedules. We must play to their game.
8640 All that happens if you so-call weaken them is that, overall, the opportunity we have to take advantage of them being in the country is lessened, but we haven't really gained anything ourselves in terms of control or effect.
8641 We will still be negotiating for those program rights to bring that U.S. content into Canada. We will still be driven to pay significant prices, and, again, that was spoken of this morning. There are so many other competitors for those rights today that it's not like we can say: You know what, we don't need to pay you so much anymore, guys, because it's not worth so much, because that channel isn't viewed as much and the rating points are 2 down, so our price is going to drop.
8642 We would love to think we could negotiate that view successfully, but we don't believe it would happen because there are too many other competitors interested in those rights now.
8643 So all that happens is, we are still beholden to their schedule, we are still beholden to buying that content and paying handsomely for it, and yet, at the end of the day, we won't even get the full value of them being in a strong position.
8644 So I'm afraid it's a valid attempt, but not one that really takes us anywhere.
8645 COMMISSIONER PENTEFOUNTAS: And having them on basic helps you better monetize the rights you have paid for, because there are two potential simultaneous windows which you can draw on to gain the moneys required to pay for those rights.
8646 MS WILLIAMS: Yes. Not to drag you into the simsub conversation ahead of your plan, but ultimately, if those channels are in Canada, we must simultaneously substitute to their schedules, and we need to make that as effective a win as possible. And, sadly, that requires that they be well watched.
8647 COMMISSIONER PENTEFOUNTAS: Let's get away from prime time for a minute, given the fact that the most popular programming is available on the Canadian networks, first and foremost. For the rest of the viewing day, would not having them on basic help your viewership and your revenues for the rest of the day, on your morning shows, on your afternoon shows?
8648 Would the Global morning show benefit from not having to compete head-to-head with CBS or NBC or ABC?
8649 MS WILLIAMS: At the risk of saying what I am challenged to say, the answer is to take them out of the country. To sort of pick away at them and say: What if we didn't let them in for the morning, would that be better -- if they are in, they're in, and I am challenged to believe that we can squish them significantly in any one day part to truly help our cause.
8650 We have learned to compete, and we have learned to maximize the benefit of simsub, and we have a conventional model that, despite the fragmentation and all the craziness of our world, is staying alive.
8651 And I guess that we are proud of what we have accomplished there, and we are a little sensitive about pulling too many of the pieces.
8652 COMMISSIONER PENTEFOUNTAS: Okay. Let's get to basic and skinny basic. I understand your position, it's quite clear.
8653 I understand that the majority of your customers are happy, according to your polling results, and there are all kinds of other results and reports that are part of the record, and other things that are partially part of the record.
8654 That's not to say that you can make numbers say whatever you want them to say, but let's say, for the sake of argument, that you can, and let's take some of the numbers we have seen, and some of the complaints we have heard.
8655 There is noise out there that there are two principal reasons why people want to cut, shave, beat up, eliminate their cable subscription -- Reason 1, cost; Reason 2, having things on the dial that they don't care about, that they don't want to watch.
8656 So maybe just address those concerns as they regard your option for a non-skinny basic.
8657 And back to what Mr. Bissonnette was saying earlier, in terms of is it A or is it B, they are ideas that are put out there to stimulate thought, reflection, and brainstorming, if you will.
8658 That being said, you are going to probably get that question later on, so you best prepare for it now. I will leave it for the Chair.
8659 Let's get to the global thought about -- I thought you would like the word "global", but let's get back to the idea of skinny basic, and the thinking behind skinny basic, and the pros and cons, and why you are so dead-set against anything that resembles a skinny basic.
8660 And the whole notion of keeping people within the system -- I see that your skinny basic is about 40 bucks a month, and I doubt that includes the set-top box, but --
8661 MR. BISSONNETTE: First of all, skinny basic, when we first looked at it a year ago, when the notion of skinny basic came out --
8662 COMMISSIONER PENTEFOUNTAS: It has been out there for three or four years now. When we did group licensing, that was sort of also there.
8663 MR. BISSONNETTE: Yes, and we have dealt with this since then, and it didn't really catch fire, and the Commission -- I think we had some excellent reasons why they didn't think it was appropriate at the time.
8664 What demand is skinny basic meeting in terms of our customers -- because we have always had, frankly, the ability to offer that type of basic service to our customers.
8665 But in a very competitive environment, what we are trying to do is create value and create services that are attractive to our customers.
8666 There are clear, established rules that say what has to be in basic, and those are in your skinny basic. But beyond that, if we look at our surveys, the services that our customers actually wind up paying for, but they don't really watch, many of those would be in the 9(1)(h) services, and they are there for that reason.
8667 But to the extent that we can augment those with services that our customers truly do see as relevant to them, and attractive, that is really how Personal TV, for us, came to be.
8668 If you look at our survey, the most watched service, you will be pleased to know, and the most attractive, was actually Global. It was No. 1 on our survey, and it was followed closely by the 4+1 services, and CTV was in there.
8669 Sports -- about 50 percent of our customers really like sports. I think that is really -- if you look at some of our competitors who don't carry sports on the basic service, their penetration of sports services is in that 50 percent realm.
8670 So finding --
8671 COMMISSIONER PENTEFOUNTAS: Getting back to skinny basic, if we were to take our proposition, be it A or B, what would skinny basic, under that model, cost your subscribers?
8672 MR. BISSONNETTE: Our cost would be in the $30 range.
8673 COMMISSIONER PENTEFOUNTAS: So it would go from sort of $40 down to $30.
8674 MR. BISSONNETTE: Yes.
8675 COMMISSIONER PENTEFOUNTAS: And nothing would prohibit you from adding the 4+1s for free, as the Chair mentioned earlier.
8676 MR. BISSONNETTE: We have Option A -- and I hate to talk about hypothetical things, but we will talk about that. Option A is skinny basic as it exists. Option B is a capped skinny basic, with other services that we would choose to put on there.
8677 Remember, though -- and I think we even said it in our presentation -- that for us to add the 4+1 services to skinny basic is essentially demonstrating a preference for the U.S. services over Canadian.
8678 We don't deal with that issue in our proposal. They are all there. The services that our customers genuinely embrace are in our Personal TV.
8679 COMMISSIONER PENTEFOUNTAS: All of the conventional television services would be there. The Canadian conventional television services would be there, as well.
8680 MR. BISSONNETTE: Yes, they are.
8681 COMMISSIONER PENTEFOUNTAS: Right. So I don't know where the preference is.
8682 MR. BISSONNETTE: The preferences have been demonstrated by our customers. They like the U.S. 4+1s, so those 4+1 services, to put them into one of your options, it would be Option B, and then you are dealing with a cap, and we don't think that having a cap and going back into kind of a regulated system is really what you are looking for and what we are looking for.
8683 A free market will determine what services our customers want, but they have told us, in our surveys, that they like the services we have in Personal TV.
8684 I am not trying to be obstinate here, I am just saying that that's what they have told us.
8685 COMMISSIONER PENTEFOUNTAS: In terms of picking packs, picking smaller packs, it is pretty clear that you are not that far off from a lot of the proposals that were put forward by the Commission, so some kind of new regime wouldn't affect Shaw to the extent that it may affect some of the other BDUs.
8686 Would you agree with me, Mr. Bissonnette?
8687 MR. BISSONNETTE: We have said that, first of all, we support pick and pay, but not mandatory pick and pay.
8688 One of the things that we have talked about in our guidelines is the pace of change. We believe that, in our guidelines, where we have proposed 50 plus 1 percent, that's a floor.
8689 We know that the world is unfolding, and we know that, as we go into this new world of choice and freedom of selection, things will evolve.
8690 We also know that we can't, any more than you can, define what the risk is associated with your options or the options that we are proposing, because even in our guidelines there are going to be some cost impacts, because we are essentially taking packages -- we are taking sports out of a package. Sports is going to cost more, so things are going to happen to the services with sports.
8691 So there is a degree of risk and the risk for us goes to the content side of our business. What impact will having -- if you take, for instance, the skinny basic, if it has access to every service on an à la carte basis, what does that represent in terms of risk. What is the cause and effect.
8692 If you take what Rogers suggested this morning, that there would be a skinny basic, but you have a build-your-own package as a medium stage determinant, minimum risk, but ultimately working to more à la carte choices, we have to ensure --
8693 What is the event we are rushing to here?
8694 We have met with MPs to say, "How much of an issue is this in your constituency," and they frankly said to us, "It's not a lot. We don't hear a lot of customers telling us that they don't like what is going on," and that has been reflected in the surveys.
8695 So what is the event that we are concerned about that is going to drive all of this, potentially, disruption?
8696 So pace is really important in this, and you have said that. Jay uses it even when we talk internally, about step by step.
8697 At one time we used to say that we are just doing too many things, and we are not doing them well. So let's, as a company, slow down --
8698 And maybe that is something you should talk about. What is the life of a CEO like now in this environment?
8699 MR. SHAW: Scary. It's scary.
8700 I would be happy to -- you know, it is critically important to come here today and really tell you our story, and our story is about serving Canadian customers. It's about providing choice. It's about competing. It's about innovating.
8701 And when you look at Shomi, you look at WiFi, you look at TV Everywhere -- all the things we are doing to add value for our customer.
8702 And we want to compete. We want to be unfettered. We want to have --
8703 In some ways I come here and I feel like there is a little bit of a hand tied behind my back. I feel like there is potentially more tax, more regulation, when we really need to have more free market. We need to allow things to go.
8704 That's where competition, I think, and true customer choice will happen.
8705 So how do we get there, but realizing that we are in an industry, and we are in a pace of change that is incredible.
8706 And me, as the view, you are going to your board saying: Oh, we are going to spend $1 billion here. We are going to pick this technology, or we are going to do that.
8707 It's very difficult, and it's unnerving, but we believe that we can get there. We believe that we can provide more value and more choice and more competition, but as Peter said, in a managed, stepped approach.
8708 We are very concerned with what is proposed here, on the record, and the proposals that the Commission is looking at. In totality, it's darn scary for us.
8709 We have worked so hard to be able to drive choice, and I look at what happens in western Canada: 95 percent IPTV overlap with SaskTel, MTS and TELUS, the most anywhere in North America.
8710 So we understand competition. We have gone through a lot in the last four years to really learn and say: Wow, what do customers really want? How do we best serve them?
8711 Personal TV. Other ways to create value. The WiFi, which fits perfectly into our strategy of allowing consumers to view where they want, when they want, on what type of device.
8712 That's where we want to go. We want to continue to invest and innovate, but it becomes challenging.
8713 Even with Shomi, there is a whole millennium that we want to serve, a whole different customer base.
8714 And there may be some rights issues, too, as you look at that, that we have to deal with.
8715 But that's a market we want to address, and as the CEO I say: Well, in traditional business, boy, you are risking --
8716 You have to protect every dollar, but we have to disrupt ourselves. We truly have to look and say: Wow, what are the things we need to do that will help serve Canadians, but knowing that the traditional business model will have to change.
8717 And it's not very clear. I think we have to work together. We have to find the right steps as a whole industry to get us there.
8718 How can we do that? And we are committed to doing that. We are committed, just as we did when we went out front when we bought Canwest Global. Whatever we said we would do as a VI company we did, and we made sure that we treated everyone fairly, and we always were going to do that, and that was our word, just as we try to work with Global GO to reach back in the industry to help the smaller players out.
8719 We want to work together and find that. Unfortunately, we don't find that some others necessarily want to do that, and I think there are certain things as an industry that we have to do. If it's on audience and other things, I think that makes a lot of sense.
8720 But then there are other things -- we want to compete and we want to serve Canadians.
8721 COMMISSIONER PENTEFOUNTAS: Thank you very much.
8722 Speaking of other things, let's talk about penetration-based rate cards. You brought that up. You are against it.
8723 Going forward, in a world of change -- and we have discussed ideas of genre protection and Category A's and everything else that comes with that.
8724 Rogers spoke to us about maintaining penetration levels for current affiliation agreements.
8725 What is your position on that?
8726 You kind of have the Rogers model and you also have the Bell model, which we heard about yesterday.
8727 MR. MEHR: We are not that dissimilar to Rogers' position on this. We are against unreasonable penetration-based rate cards.
8728 Penetration-based rate cards, themselves, are a good thing, because you want to put carrots and sticks in all the right places, and you want BDUs to be incented to try and sell services.
8729 COMMISSIONER PENTEFOUNTAS: Who is going to decide if they are punitive or not?
8730 MR. MEHR: Yes, we heard the --
8731 COMMISSIONER PENTEFOUNTAS: A clear obstacle for you to pick and pay is punitive penetration-based rate cards.
8732 MR. MEHR: Yes, it's an obstacle to all kinds of things, and value and choice for consumers.
8733 COMMISSIONER PENTEFOUNTAS: You want to keep it there, as long as it's not punitive.
8734 MR. MEHR: Yes, penetration-based rate cards are absolutely reasonable, because you want a BDU -- if you are a broadcaster, you want a BDU to be incented to arrange their packaging, arrange their call centre commissions, in such a way that people will try your service, right?
8735 COMMISSIONER PENTEFOUNTAS: Yes.
8736 MR. MEHR: So they pay a little bit less if they can drive penetration from 30 to 50 percent. That's good business and so forth.
8737 COMMISSIONER PENTEFOUNTAS: Right. Beyond that, if they can't, they make you whole on the sub revenue and the ad revenue?
8738 MR. MEHR: Yes, we heard that conversation this week, and a couple of other people took an undertaking for the 19th. I think we would like to, as well, because all channels are not the same. So I don't know if we are trying to come up with a specific rule, but a simple model that says: Whole on subscriber fees, but not advertising, will be the only situation.
8739 So I think we would like to go back and work a couple of scenarios on what would pass a reasonableness test and submit some suggestions to the Commission, if that's acceptable.
8740 COMMISSIONER PENTEFOUNTAS: That's interesting, it's kind of hard to pass a reasonableness test where some are treated differently than others, and some services may be more reasonable than others.
8741 MR. MEHR: Yes, but there are some services that spend $1 million a year on content, and other services that spend $1 million on a weekend.
8742 COMMISSIONER PENTEFOUNTAS: Spenders can be more punitive than the non-spenders?
8743 MR. MEHR: Our current experience is that the spenders can be more punitive than the non-spenders.
8744 COMMISSIONER PENTEFOUNTAS: So I guess that punitive is okay.
8745 I will let you think about that.
8746 MR. MEHR: Yes, we are not punitive.
8747 We just need to work our way through a couple of the models and think through it.
8748 We had originally contemplated that we would leave it to the dispute resolution process, in determining on the surface does it seem fair, but I hear your points from the week that that is probably not the most effective way to do it.
8749 COMMISSIONER PENTEFOUNTAS: Not necessarily, it is just that your document here is clearer than your answer, so that's kind of where some of the confusion might come in.
8750 So I will let you think about that, and take it back and the two arms can discuss, broadcasting and distribution.
8751 MR. MEHR: Thank you.
8752 THE CHAIRPERSON: So you will do an undertaking for the 19th, sort of setting out what punitive would mean, or what --
8753 COMMISSIONER PENTEFOUNTAS: Or what your final position is on PBRCs.
8754 MR. MEHR: Yes, thank you.
8755 COMMISSIONER PENTEFOUNTAS: The majority of services being offered on pick a pack, how did you arrive at that 50 percent number, and who decides what goes where?
8756 MR. BISSONNETTE: Actually, it was interesting, we looked at what we offer currently, and we were trying to add them all up -- and, by the way, we offer about 46 percent of our services right now à la carte.
8757 We said that it might be simpler to determine what we don't carry as à la carte, and, frankly, it comes down to the U.S. speciality services, Canadian specialities that don't provide for that -- I think we are actually one of the few that have specialties that actually allow for pick and pay à la carte services.
8758 That's why, with the proposed pacing of our guidelines, that would be one of the issues that we could deal with over time. That 50 percent plus 1 is a floor, and ultimately more and more services would fall into the agreement to be distributed as a pick and pay service.
8759 COMMISSIONER PENTEFOUNTAS: On the set-top box return path data -- I think Ms Williams spoke to the issue of targeted advertising. I understand that you are in favour. It is part of the thinking behind that that it will help us better compete with -- I think you mentioned it yourself -- the big digital players, namely, Google and others, who can offer that kind of information to the advertisers, whereas traditional broadcasters cannot.
8760 MR. MEHR: Yes, absolutely. Our work with set-top box data has been around advance advertising, it hasn't been around marketing information for our distribution side. It has been around building advance advertising to maintain and grow our advertising business.
8761 And I think we are on the record as being supportive of the industry working group. We think that is important.
8762 We think it is also important, though, that we try stuff on our own, with our advertisers, with other folks in the community, because I don't know that we are going to get there just through an industry working group.
8763 The challenge with the advance advertising model is that there isn't a clear path forward. There are a number of moving pieces, a number of innovations, a number of experiments that need to be tried.
8764 So I think it's a multi-simultaneous approach, an industry-wide working group that we would love to participate in, along with a bunch of us just trying some stuff to see what sticks.
8765 COMMISSIONER PENTEFOUNTAS: How else are you using this data, currently?
8766 MR. MEHR: We currently are not using set-top box data on the distribution side of our business.
8767 We have a small trial that we're doing with five of our big advertisers -- and the advertisers are also funding the trial -- around experimenting with 100,000 of our home Gateway and viewing data around that.
8768 We're in the early days of that trial, and it's really the only active piece we have on the distribution side.
8769 On the media side, we're looking at doing a test with Cogeco, but it's using their set-top box data.
8770 We think that if we all come at this in whatever way we can come at this, we will learn some stuff and probably be able to figure a business model out that can become a Canadian solution.
8771 COMMISSIONER PENTEFOUNTAS: How quickly can you do that?
8772 MR. MEHR: Pardon me?
8773 COMMISSIONER PENTEFOUNTAS: How quickly would you estimate you'd be able to do that?
8774 MR. MEHR: Do we get it right the first time?
8775 I don't know. I would anticipate that we'd be moving the ball significantly forward in the 12- to 18-month horizon.
8776 COMMISSIONER PENTEFOUNTAS: Okay.
8777 On the broadcasting side, and more on the production side, I understand your position, Ms Williams. I'm not going to get into it. I understand your feeling that most, if not all, that was put forward is detrimental to production, generally speaking.
8778 Briefly, though, on the idea of using CPE in a promotional aspect, what's your feeling on that?
8779 MS WILLIAMS: Sure. We understand the enormous need to promote our Canadian content successfully and every time, you know, we're able to step up and really push a show, we see the results.
8780 The vast majority of our advertising and promotional effort, frankly, is on our own services. It's our on-air promotion that is so critical, and the cross-promo, which is really, you know, to back into the bundling question, one of the most effective ways we have to introduce people to content, is our -- the promo is our recommendation engine. Right?
8781 COMMISSIONER PENTEFOUNTAS: Right.
8782 MS WILLIAMS: And the ability to put a promo on one channel that tells someone about a show on another channel that may be down the line in their bundle that they will then discover, that is a phenomenally important piece of our success.
8783 To tear apart those channels and only be able to talk to that one tiny audience, now, that's on that single channel because they -- the likelihood of them discovering a show and moving with you to discover a show on another channel that they don't have is so challenging.
8784 So, the on-air promotion piece of our business is enormous on our air.
8785 COMMISSIONER PENTEFOUNTAS: Right.
8786 MS WILLIAMS: That said, there is a small budget that we have -- it's relatively small -- that's what we call "third-party advertising", which is those billboards and, you know, subway posters and everything that absolutely excite people and jazz people and they're an important piece of the process. That budget, would we be willing to see it as part of our CPE? Of course. Of course. It can only encourage --
8787 COMMISSIONER PENTEFOUNTAS: You can't be against that.
8788 MS WILLIAMS: Yeah, can't be against that.
8789 COMMISSIONER PENTEFOUNTAS: You are against sort of increasing CPE. We talked about a fixed rate and then we talked about moving it. I mean one of those uses for that supplemental CPE could be promotion.
8790 The other idea, I think, behind the proposal is that given that exhibition requirements would, for all intents and purposes, disappear, that the quid pro quo would be a higher CPE, it just continues in the same vein of what was begun back in 2009 or 2010 when we first started chatting about a group licensing.
8791 MS WILLIAMS: I think that the challenge we have -- and you know there's not been a conversation around how much of an increase or anything --
8792 COMMISSIONER PENTEFOUNTAS: Well, that's part of the question --
8793 MS WILLIAMS: -- the devil's in the details --
8794 COMMISSIONER PENTEFOUNTAS: We're listening to you. We're all ears.
8795 MS WILLIAMS: I think the larger challenge is that, as we potentially do a number of different things to our system here, we know we're going to affect the economics.
8796 I think what we feel we know for sure is that viewership is going to go down. We don't know how much it will go down. We don't know precisely on which channels it will go down the most. But we do know it's going to go down.
8797 And we know that no matter how much of a great effort we make with a penetration-based rate card and all the rest of it the economics of our group of channels will be threatened by that.
8798 And in a world where the economics are shrinking our business, to contemplate, at the same time, putting a forced increased on our one big variable cost in our business, our content, is a really challenging formula.
8799 COMMISSIONER PENTEFOUNTAS: Even if it's for the purpose of promoting that content?
8800 MS WILLIAMS: We feel we need to make the decisions about what needs to be promoted and where and how, and in a world where we were really challenged economically, we might really believe that the power of our on-air marketing was enough to do the trick. And that's not the marketing dollars that we're contemplating being in CPE, I don't think. I think we're talking only about third-party.
8801 So, I think we would feel to have that decision forced on us, to be forced on us, that we need to promote in a third-party way and, to a certain level, I think that's taking control out of our business. In the best of times, we're challenged by that idea but, particularly, when we're facing an uncertain economic time, it would be difficult.
8802 COMMISSIONER PENTEFOUNTAS: I understand your position.
8803 Earlier, you raised the issue of discoverability and the importance of discoverability -- and you do a good job on that, as do your counterparts on CTV, be it Entertainment Tonight or etalk.
8804 There was an issue raised today that there's a lot of self-promotion that goes on --
8805 MS WILLIAMS: I'm so glad you're asking this question --
8806 MS WILLIAMS: -- because my colleagues --
8807 COMMISSIONER PENTEFOUNTAS: I'm here for you.
8808 MS WILLIAMS: But thank you. Thank you, Commissioner.
8809 My colleagues turned to me during that conversation and said, "Do we do that?"
8810 COMMISSIONER PENTEFOUNTAS: Bad, bad person, yes.
8811 MS WILLIAMS: And we were proud to say -- Christine Shipton, my colleague here who oversees this show -- we were proud to say that, actually, we have been very open and supportive of all great Canadian content on all of our competitors' channels. We are the first there to cover the set of a new show of the CBC or CTV of City.
8812 I can acknowledge that ET Canada's number one competitor has not been as generous with their airtime.
8813 But we have really believed that one great Canadian show begets another and that success in the Canadian content would rise us all and so, we have always actively supported our own, of course, and others.
8814 COMMISSIONER PENTEFOUNTAS: I'm going to pass it on to my colleagues. I'm sure they've got some questions.
8815 THE CHAIRPERSON: I'm not sure.
8816 I'm asking, Commissioner Molnar. I'm not forcing you.
8817 COMMISSIONER MOLNAR: Just to clarify something here. I have been trying to find your channel listing and, unfortunately, it will not give me one for any location I've tried. I tried Saskatoon. I tried Calgary. I can't find your channel listing.
8818 But it did show that you have -- it's advertised as over 100 channels, I think it said 23 were in HD, and the price is 39.90.
8819 And if I understand what you're suggesting, you would keep a service like that -- what I wanted to see is what are the sports channels that are in there right now.
8820 MR. BISSONNETTE: We carry both TSN and Sportsnet.
8821 COMMISSIONER MOLNAR: As part of that $40.00 package?
8822 MR. BISSONNETTE: As a part of that package.
8823 And so, we would be selling a skinnied-down Personal TV that did not include sports.
8824 And if you look at the wholesale fees of those sports services in our Personal TV, it amounts to around $8.00. And so, if you look at our 39.95 Personal TV, our skinnied-down Personal TV without sports would be the difference between the sports wholesale fees.
8825 COMMISSIONER MOLNAR: Right. And there is --
8826 MR. BISSONNETTE: So, it gets us into that very --
8827 COMMISSIONER MOLNAR: -- retail mark-up on there. So, we understand $8.00, plus a retail mark-up.
8828 MR. BISSONNETTE: Yes, we're in the realm --
8829 COMMISSIONER MOLNAR: And you don't have to tell me what that mark-up is.
8830 MR. BISSONNETTE: We're in the realm of what the I'll call your option A: skinny basic with cost.
8831 COMMISSIONER MOLNAR: Well, the option B, which says you could have a basic service if it's capped at some price -- and I think there was a range of prices to discuss, whether it's 20, 25, 30 or something like that --
8832 MR. BISSONNETTE: Well, exactly. And so --
8833 COMMISSIONER MOLNAR: So, why are you so concerned about that option?
8834 MR. BISSONNETTE: Why are we concerned about it?
8835 COMMISSIONER MOLNAR: Right.
8836 MR. BISSONNETTE: Well, because it's regulated, for one, which seems to us to create limitations, you know, going into the future, in terms of what you do with it.
8837 Market-driven services are what I think our customers are looking for.
8838 I know that you're trying to help our customers, in terms of creating this cap. But, you know, we don't believe, if you look at the fragility, if you will, of the system, putting another, creating another regulated basic rate, looking at the investments that Brad tells us about, that we live, $1 billion, that has to come from somewhere, and has the Commission has acknowledged --
8839 COMMISSIONER MOLNAR: There is a philosophical issue that many people have as it regards regulation of any type. And if we put that aside, right now and we say, what is the business impact -- because many people have come before us and suggested this will kill the business --
8840 MR. BISSONNETTE: Well, the business --
8841 COMMISSIONER MOLNAR: -- it's taking out jobs, it's taking -- you know.
8842 But it appears that what you've proposed could be achieved within what the working document has proposed. And so, if we take away the philosophical issue that you don't want us to have anything to do with retail pricing, and I'm not sure that we're suggesting we want to either, but --
8843 MR. BISSONNETTE: M'hmm. Yeah. So that if --
8844 COMMISSIONER MOLNAR: -- what's the risk to your business under that option B?
8845 MR. BISSONNETTE: Well, I guess if you were to say, in the absence of the cap, that our Personal TV in fact meets what you've tried to achieve, which is a lower-cost basic and then a bouillabaisse of services, whether it's build-your-own-package or à la carte, for our customers, so you've addressed the concerns on value, affordability, and choice, by endorsing an approach that reflects or that looks like our personal TV.
8846 MR. MEHR: And said another way, Peter, when we built Personal TV, we built Personal TV because we were getting badly beaten in the marketplace. We had a competitor who had finally got their TV product working and we were getting badly beaten in the marketplace and so, we needed to rethink -- and it was to the points Tom made about costs and channels that we don't want to carry and it was very much how we built the small theme packs and a value-based Personal TV at 39.90. And it includes some high-value services who are supported by advertising and we were able to get a reasonable rate on that, and that's sort of how the package was built.
8847 Sports is there because, at that moment, contractually, we couldn't not have sports there. But it's the one thing that's there, even though 50% of our customers say they don't want it there.
8848 So, if we had the flexibility to offer that Personal TV without sports, said another way, that's kind of option B without a cap. Right?
8849 We're not that far, in terms of -- there's maybe a little more on it than you would want, but it's a compelling service and we think the marketplace would be able --
8850 COMMISSIONER MOLNAR: Could I just summarize and you can answer yes or no?
8851 MR. BISSONNETTE: Yes.
8852 COMMISSIONER MOLNAR: You can achieve your business outcomes under option B.
8853 What you want to deliver -- if we are to help on the affiliation agreement side, you could achieve what your customers are asking for under the option B?
8854 COMMISSIONER MOLNAR: It's just yes or no, really.
8855 MR. BISSONNETTE: Well, we can achieve what our customers, we think, are looking for with our guidelines.
8856 COMMISSIONER MOLNAR: Well, I wasn't asking about your guidelines. I was asking about --
8857 MR. BISSONNETTE: You were saying that our guidelines and option B are virtually synonymous?
8858 COMMISSIONER MOLNAR: And they're not, you're saying?
8859 MR. BISSONNETTE: No, they are virtually synonymous, with the exception that they're capped.
8860 COMMISSIONER MOLNAR: Yeah, I know, you don't like the idea that there is a regulatory cap. But that regulatory cap, as it's proposed right now, would allow you to meet your business guidelines without interfering in your --
8861 MR. BISSONNETTE: The one thing that -- and I'm not being difficult here -- the one thing that you have to take into consideration when we look at the price point of Personal TV, as it is right now, the 39.95 model, that as a result of a 50% reduction in penetration of sports, there's going to be some upward pressure on the sports component of our Personal TV, the non-B Personal TV, what we sell right now. That's probably going to go up, both because of the penetration impact, as well as -- I would think we're all waiting for an increase on sports, on Sportsnet, because the hockey deal.
8862 So, there's going to be some upward pressure on that particular package.
8863 COMMISSIONER MOLNAR: Right.
8864 MR. BISSONNETTE: And so, again, I'm not walking into the --
8865 COMMISSIONER MOLNAR: But I don't know --
8866 MR. BISSONNETTE: -- the regulated basic rate is accepted --
8867 COMMISSIONER MOLNAR: Do you see anything that would, within the working document, that would prohibit you from adjusting the price of individual services or packages, such as the sports package offered --
8868 MR. BISSONNETTE: No, they --
8869 COMMISSIONER MOLNAR: No?
8870 MR. BISSONNETTE: No.
8871 COMMISSIONER MOLNAR: Okay.
8872 So, I'm going to take it away that you can achieve your business outcomes under this proposal.
8873 MR. BISSONNETTE: Sorry. Could you just repeat that one more time? Because this is the record.
8874 Could you ask --
8875 COMMISSIONER MOLNAR: I said, in my mind, what I heard is you can achieve your business outcomes under -- within the working document's proposal, as it regards basic -- as it regards choice and flexibility.
8876 MR. BISSONNETTE: I don't agree with that.
8877 COMMISSIONER MOLNAR: No?
8878 MR. BISSONNETTE: No. We don't agree with it. And for that one reason, it's -- you're moving us into a regressive regulatory regime that we don't need to be, in this market. We need to have the flexibility to be able to modify both context content and price, and to do it in a way that is attractive in a very, very competitive environment.
8879 And we don't believe that B gives us that.
8880 We believe that --
8881 COMMISSIONER MOLNAR: You could achieve it today because your price --
8882 MR. BISSONNETTE: Yes.
8883 COMMISSIONER MOLNAR: -- would fit within it, but you're concerned about the evolution and having continued --
8884 MR. BISSONNETTE: We're very concerned about that.
8885 COMMISSIONER MOLNAR: -- marketing and pricing flexibility?
8886 MR. BISSONNETTE: Yes. We're very concerned about that.
8887 COMMISSIONER MOLNAR: Okay. Is there some way that we could come to -- like, is there an option C that would ensure there is affordable type of price point that wouldn't include a price cap?
8888 MR. BISSONNETTE: Yes, there is exactly that, and it's the guideline.
8889 COMMISSIONER MOLNAR: Okay.
8890 Just a couple questions on your Global local television services and what we heard from Bell, their proposal, as it regards local television and a local specialty.
8891 You mentioned that you have a different model entirely looking to provide local and -- a local national sort of news service, and you'll be filing that.
8892 Are you proposing to change, on the Global service, your current commitments, if you will, to local news and information?
8893 MS WILLIAMS: No. We would continue to live up to our current news requirements.
8894 COMMISSIONER MOLNAR: And are you concerned regarding the financial viability of being able to do that within the conventional television network?
8895 MS WILLIAMS: Yes.
8896 Do we embrace, you know, the competitive opportunity that lies ahead? Do we, certainly, desperately need to have simsub? Do we want to continue to have the opportunities to have a collective group of services that can be, you know, working to cross-subsidize and support each other?
8897 Is it critically important that our specialty portfolio be as strong to help support Global, as Global is strong, to help those specialties because they all truly work together?
8898 You know, all of those things are true.
8899 We are enormously challenged by fragmenting audiences, cord cutters, shavers, all of this that we know. This is a fantastically new world that we're trying to run a conventional -- and I use the word with both of its meanings, the conventional business end, so, yes, we're very challenged by it. We think we can continue to do it. We've proven to be wonderfully successful --
8900 COMMISSIONER MOLNAR: You can continue without any changes in the regulatory environment?
8901 MS WILLIAMS: Well, you know, we were encouraged by an idea that I think you actually floated the other day, if I may reference it, which was -- I think there was an encouragement, on your part, to think about whether, if we put an added incentive on spending that was on local programming would that help us all to drive towards producing more local television or making sure that the local programming commitments that we made were upheld in as robust a manner as possible. I mean we're open to those kinds of ideas that just keep us focused on the game.
8902 But I think we really believe that we're an innovative, forward-thinking company and things like our Global News won news idea. We would rather solve our problems with new innovative ideas, and we think those ideas have to play out in the space we're in today, in the linear business, and we think they absolutely have to play out across all of our digital platforms, whether it's Global Go and History Go or whether it's our VOD services or whether it's Shomi. So, you know --
8903 COMMISSIONER MOLNAR: Thank you.
8904 MS WILLIAMS: -- we've got to keep pushing forward. That's why we are so --
8905 COMMISSIONER MOLNAR: Thank you. Thank you.
8906 MS WILLIAMS: I could go on.
8907 COMMISSIONER MOLNAR: Yeah, and I appreciate it's a full ecosystem and you can talk about it all, but on the particulars of local television, we had Bell coming with a proposal that said, you know, we want to -- we're looking, essentially, for some sort of carriage fee. We've just seen Rogers saying, well, we want to be relieved of our obligations as it regards CPE and reduce exhibitions significantly.
8908 But you're saying you're innovative and you can do it under the -- thank you very much.
8909 That's all I have.
8910 THE CHAIRPERSON: Commissioner Dupras...?
8911 COMMISSIONER DUPRAS: Good afternoon.
8912 A fixed cost, you say that there is a significant portion that is recovered from the basic service.
8913 What portion is that?
8914 MR. BISSONNETTE: And just remind me where we are just saying that, because we've -- we've certainly described that the fixed costs of the, I call your option A basic,would be $30.00, and at $30.00, I think we lose 15 cents.
8915 COMMISSIONER DUPRAS: Okay.
8916 MR. BISSONNETTE: And those costs are attributable to all of the infrastructure costs that we bear as a distributor and to provide -- 80% of our distribution network is actually attributed to our video services, that's traditional cable television, video, video on-demand services, and the distribution of those and the maintenance and all those aspects.
8917 I mean, certainly, I prefer not to get into that right now, but we can certainly provide that to you, and it's -- we've gone through a very, very detailed analysis of our basic services costs and what it would cost.
8918 COMMISSIONER DUPRAS: Percentage of the basic service cost, what is it? It is, like, 40%?
8919 MR. BISSONNETTE: I don't understand the question. I'm sorry.
8920 MR. SHAIKH: No, it would be much more than that. I think you're referring to something we said in our written submission.
8921 It's actually kind of simple math. You take the Personal TV, you subtract the wholesale fees and, essentially, the rest of it is fixed costs. So, the wholesale fees are in the neighbourhood of $7.00 to $9.00, and that's where we talked about you get into the kind of -- as a starting point for a basic service -- the low thirties. Which is why, in response to Commissioner Molnar, a price cap, we're already there, kind of just above 30. So, going forward, you know, we've talked about -- under rate deregulation, we've kind of had this explosion of investment that we need to continue to make to build the infrastructure.
8922 That's what we can't tolerate, really, and I don't want to use those languages, but any model that has a price cap. Even today it looks like we're close. We're just kind of at that margin. Going forward, that doesn't sustain our business.
8923 COMMISSIONER DUPRAS: But you don't recover 100% of the fixed costs in basic service. You don't you recover this from the whole business?
8924 MR. SHAIKH: Are you talking about Internet and --
8925 COMMISSIONER DUPRAS: I mean all the broadcasting business. I mean, also, from the discretionary service revenues.
8926 MR. BISSONNETTE: We've attributed this to our distribution business and, specifically, for the services that we provide Personal TV, for instance, and our tiers. Those -- the cost of our distribution network is applied to that. It's not applied -- this does not include broadband. It does not include our media business.
8927 COMMISSIONER DUPRAS: I know. I understand this.
8928 But your BDU offering, you have a basic service and you have packs and pick-and-pay. I mean you have revenues from all these services.
8929 MR. BISSONNETTE: And we haven't included --
8930 COMMISSIONER DUPRAS: -- amortize your fixed costs over all the revenues from this? Or you use mostly -- you amortize this with the basic service?
8931 MR. BISSONNETTE: It's the basic service.
8932 COMMISSIONER DUPRAS: A hundred per cent of the costs of the BDU undertaking are amortized -- I mean are built in the basic service price?
8933 MR. BISSONNETTE: Rather than us getting into that kind of analysis right now, we can certainly give you exactly what it is that we've used to determine the price of that basic.
8934 COMMISSIONER DUPRAS: Okay. Thanks.
8935 THE CHAIRPERSON: That would be good. And so you'll do it as an undertaking. I understand there may be some confidential information in there as well.
8936 But, in a sense, if we were starting from scratch today, and building, you might have chosen a different model. But historically, the Commission regulated basic, and therefore all the capital costs and all that, at the time when there was rate regulation, that's -- I mean, we're living with a historical reality that that's how the cost structures of these businesses were built in the seventies.
8937 MR. BISSONNETTE: Yeah. In fact, if we were in that old regime, our basic rate would be about $48.
8938 THE CHAIRPERSON: M'hmm.
8939 MR. BISSONNETTE: Yeah.
8940 THE CHAIRPERSON: And to answer more precisely -- and I think you've put your finger on it -- to Commissioner Molnar's question, there is a business risk of using option B because you think it would not allow you to have enough flexibility to do new capital investments that you think you need to do.
8941 MR. BISSONNETTE: That's absolutely the case.
8942 THE CHAIRPERSON: Right. I'm not saying I'm agreeing or not, but I'm --
8943 MR. BISSONNETTE: No, but you've actually captured it --
8944 THE CHAIRPERSON: -- I'm trying to --
8945 MR. BISSONNETTE: -- wonderfully. Thank you.
8946 THE CHAIRPERSON: -- to capture what the answer I think you were giving, okay?
8947 Okay. So to Commissioner Dupras' question, you'll do that as an undertaking.
8948 THE CHAIRPERSON: I've a few questions.
8949 As my colleague, Vice-Chair, mentioned, as we go through this process it takes less time because you already know where we're going, so I don't have a lot of questions, but I'm intrigued by the guideline approach.
8950 I understand where you're coming from, and a bit like what I said to Videotron when -- or Quebecor when they appeared, I wouldn't be surprised that one of your mantras would be, "We don't want anymore regulation." I assume that that would have been your starting point. But in a sense, nevertheless, I'm intrigued by the guideline process.
8951 I don't want to debate what might be in the guidelines. You've made a proposal, there are puts and takes and all that, but it certainly is an approach that's consistent, as you said, with an approach where you only regulate where necessary, and I get that.
8952 Where I'm uncomfortable -- and this is the question -- it's based on an underlying and unarticulated premise that you think the Canadian public is ready to trust you, because a regulatory system which is clear, unambiguous, probably has consequences, from a regulatory perspective, creates certainty. So if you go through a guidelines process, it says basically to Canadians, "Trust us."
8953 Do you think the environment we're working in right now leads us to be able to take that risk?
8954 MR. BISSONNETTE: Well, I think you know our company quite well, and I think you know that our founder, J.R., was a man of his word. That permeates everything we do.
8955 I mean Brad talked about 40 years, you know, J.R.'s mantra has been all about our customer, and ensuring that our customers were being -- that we could put smiles on the faces of our customers, and we take that very, very seriously.
8956 When Brad talks about "Focus to deliver," those aren't just words. That's our way of being. And it's in everything we do, whether it's in the way we schedule work, the way we follow up what work has being done, the way that we talk to our customers, our tone of service, our pricing policies.
8957 I mean Jay talked about personal TV. It's something that reflects what our customers asked us to do. I've never worked in a company that I'm more proud of, that I can say we treat our customers with respect. We treat each other respect. We take our mandate as a vertically integrated company seriously. When we work with vendors and when we -- the CCSA has acknowledged us for being as enlightened a vertically integrated company as they would ever expect, and we've made that commitment that's the way we're going to be.
8958 We understand that regulations, you know, provide certainty, but they also provide uncertainty as well. You can be certain that we do everything we can to have our customers actually trust us. They've told us that they love the way we provide our services and they've told us that they value the services that we offer them and they've told us that they represent value to them.
8959 THE CHAIRPERSON: I take that. And I don't want make it personal, but I think it would be fair in the eyes of certainly that, fairly or unfairly, they might be putting all large communication companies in the same light.
8960 I was going to say something about used car salesmen, but that's not fair. I'll say about, you know, lawyers. You know, they're all a bunch of thieves, right? Just because there's one lawyer that's a thief, everybody is.
8961 And I'm not attacking your word or the company's founders and Mr. Shaw's history. I'm saying that there may be a perception that that just doesn't cut it at this particular point in time.
8962 MR. BISSONNETTE: Did you want to say something, Jay?
8963 MR. MEHR: Yeah, I'd love to.
8964 Your conversations about the environment is, I think, instructive because it does certainly feel statistically like there are two environments: there's a western Canadian environment that's been very competitive for a long time --
8965 THE CHAIRPERSON: Fair enough.
8966 MR. MEHR: -- and we have high seventies likelihood to recommend a friends and family to do business with Shaw. By the way, our primary competitor is right there, too.
8967 THE CHAIRPERSON: M'hmm.
8968 MR. MEHR: And neither one of us are even the most compelling brand in the marketplace. SaskTel's the leader in terms of likelihood to recommend in western Canada.
8969 So we have these really high "industry likelihood to recommend" scores, and part of that for sure is the commitment of our founder and the family, but part of that is we're five years further into competition than the central Canadian experience.
8970 When I hear and see the central Canadian competition today, that has started for sure, and I hear the central Canadian folks talk about the priority they're now putting on customer experience and trustworthiness, I'd make the argument that it's just time-lapsed, that as people fight for every customer you're going to have to differentiate on your customer experience.
8971 So I just think that that environment hasn't caught up. I'd hate to see us build a Canada-wide solution with a lens of sort of the customer experience and feelings in just one part of the country.
8972 THE CHAIRPERSON: Right.
8973 And the regional differences can be quite big. Even in a further proceeding we're doing in November, we're looking at the state of competition, and trying to delve down as to where it is -- not at a national level. Even though that's easy, it's actually not as insightful as actually looking at what's happening in a particular market.
8974 So what do we do when you have this uneven regional situation where it may be appropriate to do guidelines in one place and may be appropriate to do something else elsewhere?
8975 MR. BISSONNETTE: Yeah. Well, one of the things that we mentioned in our presentation was that guidelines could be -- and guidelines seem a little soft. You know, when we -- we know what the VI code, and it's not a condition licence yet for Shaw for the code of conduct, but --
8976 THE CHAIRPERSON: You seem to anticipating something --
8977 MR. BISSONNETTE: -- but there's yet that desire to regulate. But, clearly, we understand what the code asks for and expects, and we adhere to it, I would think that the other vertically integrated companies would take this same position.
8978 With respect to the guidelines, we've put them forward as guidelines, but that's not to suggest that they couldn't be included as a part of the code of conduct what your expectations are as a distributor, as a vertically integrated distributor, with respect to the way that we offer services to our customers.
8979 If you were to walk through each element -- which I'm not going to right now -- of our guidelines, and you thought of them in the context of a code, they still aren't fixed in regulation with respect to being somewhat intransigent and hard to move and hard to change. They still will be flexible in terms of what's happening in the market. They still do have an influence on the risk associated with where we're going, mitigating that risk, where you determine that there may be unintended consequences.
8980 So it's how much do you trust that the code actually has an impact on the way that we behave and the way that we conduct ourselves and offer services to our customers. So that may be a solution.
8981 THE CHAIRPERSON: Right, but you would accept that -- because the guidelines, I think you would agree, is a "Trust Us" -- I always thought trust, but verify is also a very good way of going about it -- that it could escalate into something more binding should the trust be breached?
8982 MR. BISSONNETTE: Absolutely, and that's the wonderful thing about them. You know, we take responsibility, as we all do, to adhere to the code of conduct. If we don't, we know that there's an accountability that's going to be -- there's an expectation that there will some consequence to that.
8983 In the context of our guidelines, if they were in fact a part of a code, then we understand that there's going to -- we're setting the tone and the expectations of you, the regulator, with respect to trusting that we will in fact do what we said we're going to do. And you can count on Shaw. We will.
8984 THE CHAIRPERSON: M'hmm.
8985 Were any attempts -- I mean this proceeding's been going on for some time in one way, shape or form. Was there any attempt precisely by the large BDUs to actually come together to figure out a guideline collectively?
8986 And don't answer me that you couldn't because of competition law.
8987 MR. BISSONNETTE: No, I wouldn't answer --
8988 THE CHAIRPERSON: Okay.
8989 MR. BISSONNETTE: -- I wouldn't -- I'm not a lawyer, so...
8990 You know, we thought about that and...what do they say? Birds of a feather flock together? We just felt that our voice would be stronger in the context of what we're proposing, and sometime -- as you know, I mean Commissioner Molnar, this morning, made note of the fact that there's three of now who have very different strategies and very different approaches.
8991 And to the context that if you create -- if we did come together, what would it actually look like at the end of the day? That's always the fun about committees and self-interests and -- I mean, do you think we would have a sports proposal in our guideline if we had actually entertained that kind an approach? I don't think so. I think it would have been a little different.
8992 But we believe that the other vertically integrated companies actually acknowledge that part of the solution is in fact in the way that we provide their services to our customers and that there is a recognition that they are the high-cost component of the basic service.
8993 THE CHAIRPERSON: Right.
8994 In a sense -- and I'm sure you've read and reread TELUS's position because they are a big competitor and you would read everything twice and three times -- they have put some ideas, and I'd like to see what your views are.
8995 Because they're saying that the problem we're experiencing -- and we'll hear it from them tomorrow, but -- and maybe I'm wrongly summarizing their perspective -- is that the problem we're experiencing at the retail level is just the symptom, the real problem is at the wholesale level. It's the relationship between BDUs and programming undertakings. That's where the problem is occurring, and by ricochet it's resulted in larger basics or prices that are otherwise high.
8996 Would you agree with that sort of an analysis?
8997 MR. BISSONNETTE: Well, they are a strictly pure BDU, and they've chosen not to be vertically integrated. That's a strategy that they're following. So I could understand, from that perspective, why they may feel that way, but we don't agree that that's the way we are.
8998 THE CHAIRPERSON: Granted. I wasn't pointing the finger --
8999 MR. BISSONNETTE: Yeah, no --
9000 THE CHAIRPERSON: -- at any particular, but that we should be focusing more of efforts on the wholesale and by ricochet -- I would have thought that that would be your natural argument, saying: the real issue is not the choice for individual consumers. It's the problem at the wholesale level. We fix that and we can have a guideline, therefore, at the retail level.
9001 Wouldn't that be consistent with your perspective?
9002 MR. BISSONNETTE: What was interesting -- Jay --
9003 MR. MEHR: Yeah, go ahead.
9004 MR. BISSONNETTE: Oh, no, go ahead because we're going to talk about -- one of the beauties of our proposal is that, in fact -- and it's actually one of our favourite parts of the working document -- is number six and the proposal to expand the code of conduct to prohibit "unreasonable penetration-based rate cards, requirements to distribute a service on the same terms" and "most favoured nation provisions."
9005 We believe that that strips a lot of what TELUS have suggested are the problems from this process.
9006 There is an amelioration, if you will, of the -- I'll call it the inharmonic kind of relationships. If you cast back to four years ago -- do you remember that? -- when we were talking about value for signal, and the broadcasters and the distributors were, frankly, at odds with each other, we've actually come through a bit of a chrysalis and we are now a vertically integrated -- we call ourselves enlightened -- and we are a vertically integrated company that takes it seriously.
9007 We respect TELUS, we respect what they're all about, we respect all of those that we provide services to, and to the extent that we can do things in a harmonious way, you know what, that's the way things work better for us.
9008 That's why we think, actually, with the U.S. specialties, that reasonable minds, looking at reasonable solutions, with benefits to both, can result in some magnificent types of outcomes.
9009 So we are a vertically integrated company that, in fact, is acting in a way that I think you would expect us to act.
9010 THE CHAIRPERSON: Right.
9011 MR. BISSONNETTE: We've never been -- okay. Anyway, I'll stop at that.
9012 THE CHAIRPERSON: Well, no, I understand.
9013 Now one of the things they do say -- and you, too, think that there are rules that need to be put in place in the wholesale market. You've discussed some with the vice-chair. You've got some in your submission.
9014 One of the ones that TELUS puts forward is that the penetration-based rate card issue, there shouldn't be fluctuating rates or make-wholes for sport properties, it should be a flat rate.
9015 What do you think of that?
9016 MR. MEHR: The...
9017 THE CHAIRPERSON: The thesis being -- and I you don't own any, so it's easy for you to analyze it, but, you know, others will have their chance in the reply phase. But the thesis there -- again it comes back to the unhealthy wholesale market -- is that certain sports properties are driving some of the -- driving away some of the innovation that you might want to do.
9018 MR. MEHR: Yeah.
9019 I think some attention to the wholesale part of the business would certainly be helpful. It wasn't lost on us, as well, that Rogers put number six as their best of the regulations, and we may have similar views. So even the larger players are saying there are some issues on the wholesale side of the business, and specifically around sports.
9020 You know, interesting, one of the byproducts of sports is that TELUS sells sports discretionary and we have sports on basic. I think that does add to competitive choice, that there are options in the market. We offer a much lower entry point for somebody who loves sports; they offer a much lower entry point for someone who doesn't love sports. And so I think that part of it is healthy.
9021 And we will think through in our undertaking that we've committed to for September 19th about what the actual framework could be there, and just that -- because I love to talk about the relationships -- TELUS carries every one of the Shaw Media services on a pick-and-pay basis, standalone, including our A services, and so they've enjoyed great flexibility in their relationship with us.
9022 THE CHAIRPERSON: With respect to your satellite BDU service, what is your reaction to Rogers' perspective on the Omni services? That was discussed earlier today.
9023 MR. MEHR: We have no objection to their proposal.
9024 THE CHAIRPERSON: So you consider them as local and they should be available both on the cabled side and on the satellite side?
9025 MR. MEHR: Yeah. Our view is probably not as strong as their view, but we certainly have no objection to it.
9026 THE CHAIRPERSON: Okay.
9027 I've asked this of others about the roadmap to implement. I know it's difficult. I realize there's a lot of moving pieces. So at this stage the only way we can figure out a roadmap is by working off the working document.
9028 I know you probably don't -- well, I know you don't agree with everything in there, but it's the only way we can make a bit of headway on this, at least at this stage.
9029 So would you be able to give some thought on an implementation through a response to an undertaking on how we might implement these?
9030 MR. BISSONNETTE: Yes, we --
9031 THE CHAIRPERSON: And if you need to put a footnote saying we actually don't agree with this, but, you know --
9032 MR. BISSONNETTE: Yes.
9033 THE CHAIRPERSON: Because I think we need to stage it in way, according to many people --
9034 MR. BISSONNETTE: Yes.
9035 THE CHAIRPERSON: -- and maybe we need to prioritize as well.
9036 MR. BISSONNETTE: Yeah, we'd be delighted to do that.
9037 THE CHAIRPERSON: Okay. We appreciate that.
9038 THE CHAIRPERSON: And, finally, and it won't come as any surprise, so what is your top pick in the working document and your bottom pick?
9039 MR. BISSONNETTE: Actually, you'll be surprised that it's actually option -- the BDUs would no longer be permitted to perform simultaneous substitution, we see that as a real -- it's a serious concern that we have for that.
9040 THE CHAIRPERSON: So that's your worst?
9041 MR. BISSONNETTE: That's the worst.
9042 THE CHAIRPERSON: Okay. So I misunderstood you. I was, like --
9043 MR. BISSONNETTE: Oh, sorry, the best?
9044 THE CHAIRPERSON: I said --
9045 MR. BISSONNETTE: We've already said the best is number six.
9046 THE CHAIRPERSON: -- did I work too hard last night and wasn't understanding --
9047 MR. BISSONNETTE: Yes, my God --
9048 THE CHAIRPERSON: -- what I just read?
9049 MR. BISSONNETTE: -- I must have banged my head!
9050 THE CHAIRPERSON: Yes.
9051 MR. BISSONNETTE: That's the risk of being a quarterback.
9052 But the best, we said, was number six --
9053 THE CHAIRPERSON: Okay. Yes, I heard that.
9054 MR. BISSONNETTE: -- to expand the code of conduct.
9055 THE CHAIRPERSON: I don't think I'm the only one. I was looking at Ms Williams, and she was having the same reaction.
9056 MR. BISSONNETTE: Oh, my gosh, she just disowned me.
9057 THE CHAIRPERSON: She hadn't realized you'd positions that quickly.
9058 MR. BISSONNETTE: Yeah, so was that clear?
9059 THE CHAIRPERSON: Yes.
9060 MR. BISSONNETTE: Yeah? Okay, yeah.
9061 THE CHAIRPERSON: Yes, that is clear.
9062 And, sorry, the Vice-Chair has just pointed out, I should have asked you, the position that -- two things Blue Ant raised in the proceeding yesterday was a mechanism to create, they didn't like my word "buffer," but sort of a transitional model for smaller independents.
9063 Whether it's them, or them as a group, what's your views on that: that you sort of have a standstill of some of the commercial terms, at least for the first licence term for that particular class of undertakings?
9064 MR. SHAIKH: Well, in listening to Blue Ant -- and we did very carefully -- I actually felt that in many ways we were quite aligned with their point of view. I thought they spoke very eloquently and convincingly about the dangers of pick-and-pay. In that way I think we find ourselves really in the camp of independent broadcasters that recognize that there is a threat out there. However, there's a threat for every distributor and there's a threat for every programmer.
9065 We are concerned with any rule that introduces certain protections for some broadcasters at, potentially, the expense of others. We'd prefer that there wasn't a pick-and-pay regime as proposed in the model. We think that's probably the best way to offer some protection to independents. And we don't agree with the proposal to guarantee level penetration for independents.
9066 But another thing Blue Ant said, I think it's important, because they said that Shaw could drop a bunch of independent services. I think that's certainly not an outcome that we want out of this process. I think we spoke today about how the way we're going to compete in the new environment is with a diversity of choice and a diversity of programming, and that means that our objective is have lots of programming services succeed, including Blue Ant's and the independent services.
9067 THE CHAIRPERSON: Now did you feel they spoke as eloquently on the other issue about the additional satellite costs that they said that they're being charged by satellite providers?
9068 MR. SHAIKH: Cynthia should answer that. That's probably more of a Bell issue than a Shaw direct issue.
9069 MS RATHWELL: Yeah, I think there's two issues that came up in their intervention. The first was the case of Bell's --
9070 MR. SHAIKH: You might put the mike a little closer.
9071 MS RATHWELL: Sorry -- Bell's equalization fees --
9072 THE CHAIRPERSON: Right.
9073 MS RATHWELL: -- and I think that we agree that that's a measure that's just geared to competing unfairly with --
9074 THE CHAIRPERSON: And you never get --
9075 MS RATHWELL: -- with our service.
9076 THE CHAIRPERSON: -- involved in asking for a matching amount in any of your relationships?
9077 MS RATHWELL: No, we don't ask for matching amounts, what we -- we are in the market of providing uplink services, in competition with TRDUs, and with Telesat, on C-band, and we think we provide a valuable service in that respect, so...
9078 There were also some allegations in their submission that the rates that we charged were not standardized, didn't carry value. We would disagree. We thing SRD continues to be a valuable service. It delivers important services, both to programmers and the small BDUs. So we disagree on that point.
9079 THE CHAIRPERSON: We're probably due for a break. Would it be an appropriate undertaking for you to provide a fulsome answer to allegations through an undertaking on this particular point?
9080 MS RATHWELL: Sure, absolutely.
9081 THE CHAIRPERSON: Okay, thank you. Appreciate that.
9082 THE CHAIRPERSON: I believe those are our questions. Thank you very much.
9083 We'll take a 10-minute break and be back at 4:10.
9084 Thank you very much.
9085 MR. BISSONNETTE: Great. Thank you.
--- Upon recessing at 1559
--- Upon resuming at 1613
9086 LE PRÉSIDENT : À l'ordre, s'il vous plaît.
9087 Madame la Secrétaire.
9088 LA SECRÉTAIRE : Merci.
9089 Nous entendrons maintenant la présentation de Cogeco.
9090 S'il vous plaît vous présenter et présenter vos collègues et vous avez 15 minutes pour votre présentation.
9091 M. AUDET : Merci, Madame.
9092 Bon après-midi, Monsieur le Président, Monsieur le Vice-président, Madame et Messieurs les Conseillers. Merci de nous donner l'occasion de comparaître aujourd'hui lors de cette importante audience publique sur l'avenir de la télévision canadienne.
9093 Je suis Louis Audet, président and chef de la direction de Cogeco Câble inc., et je vous présente les membres de notre équipe qui comparaissent aujourd'hui.
9094 À ma gauche, Madame Louise St-Pierre, présidente et chef de la direction de Cogeco Câble Canada; à sa gauche, Jean-Pierre Caveen, vice-président, relations avec les affiliés, partenaires et transporteurs de Cogeco Câble Canada.
9095 À ma droite, Nathalie Dorval, vice-présidente, affaires réglementaires et droit d'auteur de Cogeco inc.; à sa droite, Yves Mayrand, consultant; et à la droite d'Yves, madame Suzanne Blackwell, consultante et présidente de Giganomics Consulting, qui a préparé l'étude économique annexée à notre mémoire d'intervention.
9096 We would like to focus our remarks today on a few key elements of our written intervention, more particularly in light of the Working Document you issued on August 21st. You will also find in the Appendix to our presentation a detailed statement on the position of Cogeco Cable on the proposals and options contained in your August 21st Working Document.
9097 The Commission should be commended for taking the lead and initiating this process. As we all know, the Canadian broadcasting system and the broadcasting industry participants are facing unprecedented new challenges in the world of digital video programming on demand, everywhere, anytime, on any delivery platform. We must all adapt sooner rather than later to this new paradigm.
9098 And in considering your proposals, we have taken it for granted that the new packaging options that are being considered would coexist in parallel with the old.
9099 We must, however, do so within the regulatory statutory parameters set out in the Broadcasting Act in its present form even though the broadcasting industry has changed dramatically since the Act was last revised in 1991.
9100 We must therefore find ways to achieve the intended outcomes that you have outlined in your Notice of Consultation without compromising the present requirements of the existing broadcasting policy for Canada in subsection 3(1) of the Act.
9102 MME ST-PIERRE : Je me permets d'ajouter que le nouveau cadre réglementaire qui découlera de la présente instance doit également contribuer en bout de piste à garder les consommateurs canadiens branchés à leur système de radiodiffusion canadien et à en être satisfaits. Autrement dit, le nouveau cadre de réglementation ne devrait pas contenir de mesures qui incitent les consommateurs canadiens à se débrancher du système canadien de radiodiffusion ou à en réduire l'utilisation. Nos observations reflètent également cette préoccupation fondamentale.
9103 Nous avons dit clairement que nous appuyons l'objectif qu'a le Conseil de rendre un petit service de base disponible aux consommateurs canadiens. Nous avons cependant mentionné que l'exclusion des grands réseaux américains de télévision conventionnelle de ce petit service de base serait vraisemblablement perçue comme contraire à l'intérêt des consommateurs par bon nombre des abonnés des EDR et serait en fin de compte néfaste pour le système canadien de radiodiffusion à plusieurs égards.
9104 Nous vous implorons de ne pas oublier que ces services américains sont et demeureront disponibles gratuitement par la voie des ondes pour un grand nombre de foyers canadiens, qu'ils n'ajoutent rien aux coûts d'intrant reliés à la programmation du service de base, et qu'ils font partie du service de base des EDR depuis plus de 60 ans.
9105 Lorsque les consommateurs canadiens réaliseront qu'ils devront s'abonner à un volet de base qui ne contient plus les grands réseaux américains de télévision conventionnelle et devront s'abonner séparément pour y avoir accès par l'entremise de leur EDR, il pourrait s'ensuivre une mauvaise réaction, alors que des consommateurs canadiens blâmeraient le gouvernement et l'autorité de réglementation pour leur avoir donné plus de choix et de flexibilité dans les volets de services facultatifs d'une main, tout en leur enlevant de l'autre main les services des grands réseaux américains de télévision conventionnelle de base.
9106 MR. AUDET: We also made it very clear -- and we have been doing that for three years now and actually have had to bring issues up to arbitration at the Commission -- that we support greater choice and flexibility for Canadian consumers when they subscribe to discretionary television services on top of the basic tier.
9107 We do this already to the extent permitted by our contracts with our television programming service suppliers. The major impediment to providing even more choice is the prohibitions and unduly penalizing terms that some television programming service suppliers, both Canadian and non-Canadian, are imposing on independent BDUs such as Cogeco Cable, with the clear purpose of maximizing penetration of their programming services by limiting the packaging flexibility at the level of the retail sales in the broadcasting distribution market.
9108 Unless you see to it that these terms are no longer allowed by television programming service suppliers, whether Canadian or non-Canadian, the much-heralded new era of greater choice and flexibility will simply not happen for the most popular television programming services available on cable or satellite. Here again, many Canadian consumers would be very unhappy with this outcome and they would blame the government and the regulator for failing to actually deliver the promised goods.
9109 In this regard, although we are not of the view that wholesale rates of programming services that are set on penetration-based rate cards should be completely prohibited in all possible forms, we believe that they must be clearly circumscribed and closely supervised by the Commission when they involve vertically integrated entities that have clearly made abusive use of them in the past. We are still stung by such abuse and we certainly do not want to see them invoked as precedents for future affiliation agreement renewals.
9110 In an environment of freedom of choice for Canadian consumers, it is not for the independent BDUs such as us to take all the risks resulting from the loss of subscribers or of subscription or advertising revenues incurred by television programming services.
9111 That being said, does the implementation of a small basic service need to be tied in any way to a retail price cap regime or does the marketing of flexible packaging options or the composition of build-your-own-package options need to be managed or regulated by the Commission? The answer is absolutely no.
9112 What are the real concerns here from a regulatory policy perspective? Is it that if flexibility to add some programming services to the new small basic service is given to BDUs, the vertically integrated entities will game the system by including their own television programming services in a once again large basic service, thus driving upwards the retail price of basic at the expense of Canadian consumers?
9113 If so, there is a much simpler and cost-effective way to prevent that from happening instead of re-regulating retail rates for cable and satellite services across the whole industry.
9114 For instance, the Commission can specify that the flexibility to add services to the new small basic service will be limited to certain unrelated services such as the major American conventional television networks and that vertically integrated entities may not include their own discretionary programming services in that small basic service unless they are mandated for basic distribution pursuant to section 9(1)(h) of the Act.
9115 Is there a concern that vertically integrated entities will unduly and unfairly bundle and promote their own related programming services under the build-your-own package option?
9116 If so, there is again a much simpler and cost-effective way to prevent that from happening rather than micromanaging the content of packages and their promotion in the marketplace across the entire industry.
9117 The Commission needs only to ensure that the Vertical Integration Code is incorporated into the regulations and precludes vertically integrated entities from stacking their packages only with their own related programming services.
9118 MME ST-PIERRE : Ceci nous amène à aborder un élément fondamental de notre mémoire. Compte tenu du niveau sans précédent d'intégration verticale atteint dans les secteurs de la radiodiffusion et des télécommunications canadiennes, le Conseil doit recentrer son cadre de réglementation sur l'imposition d'une discipline aux groupes intégrés verticalement afin d'atteindre les résultats souhaités dans l'intérêt des consommateurs canadiens, au lieu de faire des règlements d'application générale qui s'appliquent donc également à toutes les entreprises de programmation ou les EDR indépendantes, qui, pour leur part, n'ont aucun pouvoir de marché.
9119 En tant qu'EDR indépendante ayant moins de 7 p. cent du marché de la distribution de radiodiffusion et n'ayant aucun intérêt financier dans quelques entreprises de programmation télévisuelle, Cogeco Câble n'a ni l'occasion ni l'avantage de tirer profit du système aux frais des consommateurs canadiens.
9120 Nous nous préoccupons seulement de ce que souhaitent nos clients d'EDR et cela inclut un petit service de base abordable et des choix de forfaits flexibles pour tous nos clients qu'ils habitent en Ontario ou au Québec.
9121 Les deux options pour le petit service de base que vous avez énoncé dans votre document de travail publié il y a trois semaines n'incluent pas celle que nous privilégions, soit un petit service de base à prépondérance canadienne qui peut continuer à inclure également les services des grands réseaux de télévision américains.
9122 Ceci ne comporterait aucun coût de programmation supplémentaire pour les EDR ou leurs abonnés pour ce petit nouveau service de base.
9123 Si vous êtes disposé à ne considérer aucune autre option que celle que vous avez décrite dans votre document de travail, alors nous privilégions l'option A, soit un petit service de base entièrement canadien, plutôt que l'option B, soit un service de base avec une flexibilité complète pour les EDR, d'y ajouter ce qu'elles veulent moyennant un régime de plafonnement des prix de détail.
9124 La reréglementation des prix de détail, selon l'option B, exigerait que le Conseil établisse un tout nouveau régime de plafonnement des prix assorti de méthodologie, de procédure, d'études de coûts, d'allocation des coûts entre le service de base et les autres services groupés de radiodiffusion et de télécommunication, la surveillance des coûts d'intrants provenant des services de programmation et des mécanismes d'ajustement de prix.
9125 En plus de toute la logistique requise, un tel régime souffrirait des mêmes inefficacités et carences généralement associées à la réglementation par plafonnement des prix. Notamment les délais d'application et l'exploitation des failles du système.
9126 J'ajouterais que, compte tenu du niveau très élevé de l'intégration verticale dans le système canadien de radiodiffusion, il serait impossible en pratique de régir les prix de détail sans régir également les prix de gros pour les services de programmation inclus au service de base.
9127 MR. AUDET: We otherwise agree with the proposals and options outlined by the Commission dealing with the themes of pick-and- pay, build-your-own package, affiliation agreements, dispute resolution and the distribution of non-Canadian programming services.
9128 We are encouraged by the fact that the Commission appears determined to discipline vertically integrated entities and large non-Canadian television programming service buyers with market power so as to ensure the successful implementation of the new proposed regulatory framework.
9129 You have our support for this but, in the end, we absolutely need your support so that you can really make it happen.
9130 On the shutting down of local television station transmitters, an amusing proposal, we note the overwhelming opposition of Canadian consumers to this proposal in the top 100 liked comments published on the CRTC website. And we worry that Canadian consumers seem to believe that this measure has been requested by Canadian BDUs, while in fact the measure has been proposed only by one private over-the-air broadcasting group and by the CBC.
9131 As indicated in our comments, Cogeco does not support the shutting down of local station transmitters. We do, however, appreciate that the Commission in its latest proposal understands the need to ensure that this would not lead to carriage fees which would, of course, make the basic service a lot more expensive for Canadian consumers for no perceived added value and hurt subscription levels as well as revenue for discretionary programming services to better offer it on top of the basic service.
9132 MME ST-PIERRE : Finalement, nous réitérons qu'il nous faudra 18 mois à compter de la date de la décision de politique du Conseil pour mettre en oeuvre le nouveau cadre de réglementation proposé pour l'ensemble de nos réseaux.
9133 Nous vous présentons qu'une date d'entrée en vigueur du 15 décembre 2015 n'est tout simplement pas réaliste, vu l'ampleur des changements prévus et la logistique requise pour les rendre pleinement opérationnels pour l'ensemble du réseau.
9134 MR. AUDET: In conclusion, I would like to reiterate our belief that equal treatment for both Canadian and non-Canadian programming services within this new framework is absolutely indispensable to achieve success.
9135 Thank you again for hearing us today. My colleagues and I would now be pleased to answer your questions.
9136 LE PRÉSIDENT : Merci beaucoup, Monsieur Audet.
9137 Monsieur Dupras aura des questions.
9138 CONSEILLER DUPRAS : Merci, Monsieur le Président.
9139 Bonjour, Monsieur Audet, Messieurs, Dames.
9140 M. AUDET : Bonjour.
9141 CONSEILLER DUPRAS : Alors, vous êtes un pur distributeur et vous oeuvrez à la fois au Québec et au Canada anglais. Alors, vous connaissez et vous avez expérimenté les différences dans chaque marché. Je pense que vous êtes bien placé pour nous informer sur les questions qui nous occupent.
9142 J'aimerais ça, dans un premier temps, au Québec, vous nous disiez si c'est problématique ou si les choses fonctionnent bien.
9143 M. AUDET : Certainement. Je vais faire un commentaire préliminaire. Et bien sûr, si mes associés veulent ajouter quelque chose, ils seront bienvenus de le faire.
9144 Écoutez, ça fait déjà 10 ans, nous, qu'on offre le « pick and pay » dans des variétés de 15 - 20 - 30 canaux au Québec. Nous le faisons avec succès. Cela a posé des défis au début, des défis d'organisation.
9145 Mais la satisfaction de la clientèle est bonne. Et nos revenus nous satisfont. Cela étant dit, je ne sais pas si mes associés veulent ajouter quelque chose?
9146 M. CAVEEN : J'ajouterais que c'est probablement notre forfait le plus populaire. C'est environ 60 p. cent de nos nouveaux clients, ce qu'on appelle nos nouveaux « connects » en mauvais québécois, choisissent un de ces forfaits-là. Généralement, c'est le sélectif 15 qu'on appelle. Donc, la base plus 15 services à leur choix.
9147 Donc, ça va très bien. On a une pénétration d'environ 25 p. cent et les clients semblent satisfaits avec le choix et le plafond ne nous est pas tombé sur la tête.
9148 CONSEILLER DUPRAS : Non, mais avec les services, par exemple, qui appartiennent à Québecor, est-ce que vous avez des problèmes particuliers pour la distribution de ces services-là?
9149 M. CAVEEN : Non, en réalité, au Québec, les services de programmation francophones ont toujours été plus collaboratifs là-dessus.
9150 Quand c'était Astral, Astral donnait les droits d'aller en « pick pack », ce que vous appelez « build your own package »
9151 Et également, on a les droits aussi de Québecor pour ça. On a les droits de ce que vous appelez « pick and pick ». Moi j'appelle « stand alone ». On les a d'à peu près tout le monde, sauf de Bell, je dirais. Mais on a les droits de « pick pack » ou de « build your own package » de Bell aussi. C'est la règle.
9152 Au Québec, c'est presque tous les services. Il y a peut-être quelques exceptions de services américains, puis c'est tout.
9153 CONSEILLER DUPRAS : Et avec Bell, vous dites... excusez-moi!
9154 Avec Bell, vous dites que c'est moins facile.
9155 M. CAVEEN : Non, ce que je dis, je pense, c'est qu'ils nous donnent les droits de « build your own package ». Ils ont pas le choix. C'est comme ça que ça fonctionne au Québec. Tous les distributeurs fonctionnent comme ça. Quand je parle de tous les distributeurs, je parle de Bell télé et de Vidéotron. Mais entendu, ainsi que nous. Donc, ils nous les donnent, ces droits-là.
9156 Par contre, on n'a jamais eu les droits de vendre le service « à la carte », en « stand alone », ce que vous appelez « pick and pay » de Bell. C'est à peu près... alors que tous les... à peu près tous les autres services, je pense que... je dirais que c'est 72 services sur peut-être 85 services qui sont offerts « à la carte » au Québec.
9157 CONSEILLER DUPRAS : Mais, les volets que les abonnés créent eux-mêmes, est-ce que ce sont... les services de Bell peuvent être choisis dans ces volets-là?
9158 M. CAVEEN : Oui, oui.
9159 CONSEILLER DUPRAS : Et à part les volets que les abonnés peuvent créer, est-ce que vous offrez aussi des services « à la carte » pour ce qui est des services spécialisés?
9160 M. CAVEEN : Oui, on offre ceux pour lesquels on a des droits. Ils sont disponibles. Si quelqu'un veut prendre la base plus, je sais pas moi, TVA sport, il peut le faire.
9161 CONSEILLER DUPRAS : O.K. Bon.
9162 Alors, les services américains au Québec, est-ce que vous voyez la même valeur que dans le Canada anglais pour les insérer au service de base?
9163 Est-ce que vous faites une distinction aujourd'hui quand vous nous dites qu'ils sont importants au service de base?
9164 M. CAVEEN : Ça... bien vas-y.
9165 M. AUDET : Tu veux que j'y aille?
9166 Nous n'avons pas fait de distinction, c'est clair. Mais c'est clair, on comprend tous la même chose que ces services-là ont beaucoup plus de valeur au Canada anglais où ils sont le fondement et même la raison première pour laquelle cette industrie a vu le jour il y a 60 ans. C'était l'accès aux canaux américains pour les clients anglo-canadiens.
9167 Mais, il y a quand même une certaine proportion de clients franco-canadiens qui souhaitent avoir accès à ces mêmes canaux.
9168 Alors, effectivement au Québec, la situation serait moins critique par rapport à cette question-là, mais elle ne serait pas inexistante.
9169 CONSEILLER DUPRAS : Et, est-ce qu'aujourd'hui, c'est offert dans votre service de base au Québec? Oui, je vois que c'est offert dans votre service de base.
9170 Pouvez-vous me dire, il est à combien votre service de base au Québec en ce moment?
9171 M. CAVEEN : Oui, je peux vous dire ça si vous me donnez une seconde. Au Québec, notre service de base est à 26,99 $. Il comprend 31 services.
9172 CONSEILLER DUPRAS : Très bien. Et là, vous nous dites qu'un service de base aminci au Québec, ça ne serait pas une formule intéressante, parce que vous avez des coûts d'opération qui sont importants et qu'il y aurait pas vraiment une économie de frais que d'avoir un service aminci.
9173 M. AUDET : Je ne crois pas que nous ayons dit ça, avec respect.
9174 Nous avons déclaré notre pleine collaboration à le faire. Mais ce qu'on a dit, c'est que les coûts de programmation associés aux services qui ne seraient plus au service de base en vertu de la proposition que vous nous avez établie représente des frais de programmation d'entre quatre et cinq dollars.
9175 Donc, le coût du service de base pourrait baisser d'entre quatre et cinq dollars.
9176 CONSEILLER DUPRAS : O.K. Très bien.
9177 Maintenant, encore ici, est-ce que 100 p. cent des frais de réseau sont amortis dans le service de base? Ou si... je comprends historiquement, comme le président l'a mentionné tantôt, que c'est comme ça que ça fonctionnait.
9178 Mais aujourd'hui, il y a pas moyen de répartir ça autrement?
9179 M. AUDET : Écoutez. C'est difficile à dire. Et la raison pour laquelle c'est difficile à dire, c'est que vous avez une infrastructure technologique unique qui transporte tous les services vidéo de base, payants, à la demande, etc., les services internet, les services téléphoniques.
9180 Mais, il n'en reste pas moins, comme le disait... comme l'ont dit les représentants de Shaw tout à l'heure, qu'à peu près 80 p. cent, un peu plus de 80 p. cent de la bande passante totale du réseau de câble est consacrée au service vidéo dans son ensemble.
9181 Alors, disons que leur approximation n'est pas déraisonnable, même si nous, nous n'en faisons pas le calcul comme ça.
9182 CONSEILLER DUPRAS : D'accord. Alors vous dites que le service de base aminci, si on se limitait aux services que le Conseil a mentionnés dans le document de travail, ce serait environ 22 $, dans ces environs-là?
9183 M. AUDET : C'est exact.
9184 CONSEILLER DUPRAS : Et dans Canada anglais, là, c'est une autre histoire. Les services de base sont beaucoup plus élevés. L'offre de volets est moins répandue, de volets que les abonnés peuvent choisir.
9185 Et vous avez toutes sortes de défis à négocier des ententes d'affiliation avec des services spécialisés. Peut-être comme distributeur indépendant, vous pourriez nous faire part un peu des difficultés que vous rencontrez de ce côté-là et dont vous mentionnez beaucoup aujourd'hui dans votre présentation.
9186 M. AUDET : Je vais faire un commentaire d'introduction. Et ensuite, je vais passer la parole à Jean-Pierre Caveen qui a le défi de négocier avec nos fournisseurs, quotidiennement.
9187 Donc, il serait en mesure de vous brosser un tableau juste.
9188 La première chose, je pense, qu'il faudrait dire et qu'on n'a pas encore dite cet après-midi, c'est que vous devez savoir que nos clients ne semblent pas se plaindre de notre service de base dans sa forme actuelle.
9189 Nous n'avons pas de plainte de nos clients à ce sujet-là. Nous en avons à d'autres sujets, mais pas à ce sujet-là.
9190 Mais, cela étant dit, on est prêt, nous, à tenter l'aventure d'un service de base plus réduit et en parallèle avec les offres existantes et de voir ce qui arrivera.
9191 Maintenant, pour ce qui est du Canada anglais, effectivement, obtenir les droits de Bell Média en particulier s'avère problématique.
9192 Avec les autres fournisseurs, nos relations sont des relations de coopération plus, peut-être, dirait-on, plus faciles.
9193 Mais, cela étant dit, peut-être que Jean-Pierre pourrait prendre le relais en commençant par nous dire combien de canaux il y a sur le service de base en Ontario et son prix, et de combien le prix baisserait dans un service de base plus petit.
9194 M. CAVEEN : En Ontario, le service de base est de 33,99 $. Et il comprend 41 services. Donc, 10 de plus qu'au Québec.
9195 Pour ce qui est de la diminution du coût de gros, si on veut, si on retirait les services pour faire... pour le ramener au niveau du skinny basic que le CRTC propose, on parle encore là d'entre quatre et cinq dollars de réduction de coût.
9196 CONSEILLER DUPRAS : Mais là, les différences de coût qui font que c'est plus élevé dans le Canada anglais sont surtout au niveau des coûts pour la programmation des services?
9197 M. CAVEEN : Non, pas nécessairement.
9198 Il y a... c'est quand même deux marchés très différents. Je veux dire, le coût, je dirais que le coût de la vie en général, ou en Ontario où on oeuvre est plus élevé qu'au Québec. Il y a plein de facteurs.
9199 Comme on disait, les coûts de programmation dans un service de base, c'est relativement faible. Il y a beaucoup de... les coûts d'infrastructure qui sont supportés par ça sont... expliquent, je dirais, plus l'écart de 10 $ qu'il y a entre les prix et la capacité aussi des marchés.
9200 C'est qu'on peut, je veux dire, on est en concurrence dans ces marchés-là. Donc, on s'adapte aux différents marchés dans lesquels on est.
9201 CONSEILLER DUPRAS : C'est ça. C'est plus la capacité du marché aussi à prendre...
9202 M. CAVEEN : Aussi.
9203 CONSEILLER DUPRAS : ... des prix.
9204 Et comme les autres compagnies qui offrent des services au Canada anglais, on a tous pas mal des prix qui avoisinent le 30 $ et plus. Je veux dire, ça sert à rien de mettre ça à 25 $. C'est bon pour l'entreprise de...
9205 M. CAVEEN : Bien, on suit le marché. Je veux dire, on s'adapte et on suit le marché. On concurrence. On a tellement, on concurrence Bell TV en Ontario et Bell TV, c'est un concurrent très agressif. Et il y a beaucoup, aussi, je pense qu'il faut aussi dire qu'il y a quand même beaucoup d'acquisitions de clients qui se font à coup de promos, ce qu'on... Je veux dire, des offres spéciales de prix pas tellement sur la base, parce que c'est pas là qu'on veut les amener.
9206 CONSEILLER DUPRAS : Oui. Non, mais c'est vrai. Vous avez aussi un service de base qui est plus étendu. Vous avez davantage de canaux à l'intérieur du service.
9207 M. CAVEEN : Il y a... en effet.
9208 CONSEILLER DUPRAS : Parce que c'est un peu ça que la compétition offre également. Alors, vous êtes dans ce marché-là.
9209 M. CAVEEN : Oui, mais je pense que notre base en Ontario est quand même plus réduite que celle de la concurrence, en terme de nombres de canaux.
9210 CONSEILLER DUPRAS : Bon. Alors peut-être que vous pourriez nous parler un peu plus des difficultés dans la négociation des ententes de distribution des services spécialisés des compagnies canadiennes verticalement intégrées, peut-être d'abord?
9211 M. CAVEEN : Quand vous me parlez de difficulté, vous voulez dire, pour ce qui est d'obtenir les droits de faire du « pick and pay » ou du « build your own package »?
9212 CONSEILLER DUPRAS : Il y a la flexibilité dans l'assemblage. Mais, il y a également les taux, les tarifs.
9213 M. CAVEEN : Bon. Je dirais que de manière générale, so, à une exception près, j'ai pas de problème à le mentionner parce qu'ils l'ont dit eux-mêmes pendant leur présentation tout à l'heure. Il s'agit de Shaw Média qui eux concèdent tous les droits d'assemblage possibles. Que ce soit dans les packages, des paquets... comment on appelle ça? Des bouquets préassemblés ou des bouquets que les clients construisent ou même, en « stand alone » « à la carte ».
9214 Shaw, c'est l'exception, je dirais, au Canada anglais. Les autres, là je parle des services de catégorie A qui étaient autrefois, qu'on disait « analogiques », les principaux.
9215 Et, à part Shaw, que ce soit Rogers, que ce soit Bell, Bell Média ou que ce soit des indépendants, ces droits-là, ils les concèdent pas. Ils veulent pas que les clients puissent bâtir leur propre package. Et ils ne veulent surtout pas qu'il y ait de service « à la carte ».
9216 On a des droits pour les services « à la carte », pour les services numériques qui ont été lancés après 2001. Donc, il y a 71 services en Ontario pour lesquels ont a les droits, les services « à la carte. »
9217 Mais on n'a pas... ces services-là, c'est des services de catégorie B ou des services de catégorie A numériques qui sont venus après et pour laquelle la pénétration n'est pas très élevée de toute façon. Même à ce stade-ci.
9218 Mais pour ce qui est des services qui composent le gros de notre offre, que 80 p. cent de nos clients vont acheter, on n'a pas ces droits-là tout simplement.
9219 CONSEILLER DUPRAS : Et, est-ce que ces ententes-là vous empêchent d'être moins compétitifs avec vos concurrents dans vos marchés?
9220 M. CAVEEN : Bien, ils nous empêchent certainement d'être moins... d'avoir moins de réponses envers nos clients. Parce que les consommateurs veulent plus de flexibilité. Ça limite nos possibilités de leur donner de la flexibilité.
9221 En autant que tous nos concurrents, par exemple Bell, qui est aussi notre concurrent dans la distribution, puis il est un de nos fournisseurs... notre plus gros fournisseur de services. En autant qu'il ne s'arroge pas le droit, lui, d'offrir des services « à la carte » ou en « build your own package », ça nous ne nuit pas vraiment à notre capacité de concurrencer.
9222 M. AUDET : J'aimerais néanmoins ajouter que cela étant, au plan corporatif, il y a plusieurs années que nous tentons d'avoir plus de flexibilité, pas tant simplement en réponse à la concurrence, mais plutôt en réponse à la clientèle.
9223 Ça fait déjà quelques... plusieurs années en fait, que nos clients nous disent qu'ils aimeraient pouvoir choisir ce qu'ils regardent.
9224 Et, nous avons travaillé très fort pour obtenir ce droit. On l'a obtenu de certains, pas de d'autres.
9225 Donc, c'est pas tant une question de concurrence qu'une question de comment pouvons-nous proactivement donner à nos clients ce qu'ils veulent. Parce que notre expérience, c'est que si on ne donne pas à nos clients ce qu'ils veulent, ils vont aller le chercher ailleurs. Et là, on va être excessivement malheureux.
9226 Alors, notre approche a toujours été une approche proactive. Les changements se présentent à nous. Nous les prenons. Nous essayons de les tourner à notre avantage et en faire bénéficier nos clients.
9227 CONSEILLER DUPRAS : C'est sûr que votre compagnie n'a pas les mêmes préoccupations que les sociétés verticalement intégrées qui ont des canaux, qui ont... ils veulent faire de l'argent avec leurs canaux. Et eux, ce qu'ils nous ont dit cette semaine, c'est, pour ce qui est de donner de la flexibilité aux abonnés, on préférerait faire, pour certains, on préférerait faire des « pick and pack ». C'est-à-dire des volets, un peu comme on fait au Québec, plutôt que d'avoir des canaux qui sont « à la carte », parce que là, ça pourrait causer un tort encore plus grand à la santé financière du système.
9228 M. AUDET: Nous comprenons très bien le problème qu'ils vous ont expliqué et que vous soulevez.
9229 Vous savez, dans les premières démarches que nous tentions pour avoir plus de flexibilité auprès des fournisseurs de programmes, ce que nous envisagions c'était le service de base tel qu'il est aujourd'hui et des "build your own package", mais progressivement plus petits et, nous, on envisageait ça comme une solution d'évolution dans le temps qui nous aurait menés un jour à la flexibilité totale.
9230 Mais la démarche réglementaire que vous nous avez proposée en est une qui envisage une implantation immédiate jusqu'à son... jusqu'à son extrême.
9231 Alors, nous, on vous a résumé dans notre présentation que, oui, on peut faire ça. On est capable de le faire, on pense qu'on est capable de faire ça.
9232 On pense qu'on peut bien évoluer dans ce système-là, mais si vous prenez un pas de recul puis si vous me demandez, est-ce que ça aurait été votre premier choix, alors, je vous dirais : Non, ça n'aurait pas été le premier.
9233 Le premier choix c'est plutôt que de tout changer, ce serait de changer les choses petit à petit. Je ne dis pas petit à petit comme dans « perdre notre temps », là, ce n'est pas ça que je veux dire.
9234 Je veux dire, d'une façon intelligente, au fur et à mesure réduire la taille des "packages", jusqu'à ce qu'on arrive à un pur régime de "pick-and-pay".
9235 Maintenant, il faut dire que... et, ça, bien, vous n'y pouvez rien et nous non plus, la question du "pick-and-pay" s'est retrouvée dans le Discours du Trône du gouvernement.
9236 Alors, comment cette question s'est-elle retrouvée dans le Discours du Trône, je n'en sais rien. Je ne suis pas sûr que c'était la plus haute priorité nationale, mais enfin elle s'y est retrouvée, d'où le besoin d'en parler aujourd'hui.
9237 CONSEILLER DUPRAS: Mais il reste qu'il y a quand même pas mal de gens qui trouvent que les services de télédistribution sont dispendieux et qu'il n'y a pas vraiment de choix dans les.. parmi les concurrents pour s'en sortir à meilleur compte, tout le monde a à peu près les mêmes prix.
9238 Les gens contrôlent les signaux, les signaux américains demandent aussi des pénétrations très grandes. Alors, ça fait que le système est rendu... est rendu cher.
9239 M. AUDET: Écoutez, nous, nous sommes entièrement disposés, comme notre présentation le démontre, à collaborer avec le Conseil pour permettre l'émergence de solutions moins coûteuses. Alors, nous y sommes.
9240 Maintenant, il faut quand même mettre les choses en perspective. Les problèmes que nous vivons au Canada sont les problèmes qui se vivent dans le monde entier ou tout au moins là où l'on charge des frais au distributeur pour distribuer sa programmation.
9241 Il y a des modèles, certains modèles européens où, en fait, c'est le programmateur qui paie le câblodistributeur pour être porté, bon, mais, ça, c'est des... ce sont des exceptions. Ça ne correspond pas à la réalité du marché nord-américain.
9242 Mais si vous regardez les représentations du Sénateur McCain ou du Sénateur Rockerfeller aux États-Unis, le Sénateur McCain qui veut forcer les grands propriétaires de programmes à ne plus vendre un gros... un gros bouquet ou le Sénateur Rockerfeller qui se rend compte que l'imposition d'un "fee-for-carriage" a résulté en une inflation débridée du coût des services et qui veut maintenant les rendre à la carte, vous voyez que tout le monde fait face au même problème partout.
9243 Nous, la façon... notre réaction lorsqu'on a été confronté à des inflations de coûts de programmes, ça a été de dire, tôt ou tard, il faut que le consommateur comprenne que, nous, on est un peu la croix de transmission, là. Ce n'est pas parce qu'on choisit de lui charger plus. C'est parce que notre fournisseur nous charge plus.
9244 Et le remède à cela, selon nous, c'était de commencer à cantonner les services dans des "packages" discrétionnaires. Alors, par exemple, le plus problématique, c'est les sports.
9245 Bon, bien, prenons les sports, mettons-les dans un package distinct, c'est clair que le coût de ce "package"-là va s'élever substantiellement. Les sports ont été inter-financés par le service de base depuis leur arrivée. Alors, ça, c'est clair qu'il y aura cette conséquence-là.
9246 Mais il n'y aura pas d'autre façon de discipliner les propriétaires de droits quant à la « déraisonnabilité » de l'accroissement des coûts de programmes que de créer des "packages" où le consommateur va pouvoir avoir une relation directe entre ce qu'il achète et le coût de ce qu'il a choisi et le coût montant, la pénétration va baisser.
9247 Et, là, le propriétaire des droits va commencer à comprendre qu'il ne peut pas simplement ajouter 2 $ ou 3 $ à toutes les négociations. Il faut qu'il commence à faire attention à son taux de pénétration. Alors, c'est un peu ça...
9248 CONSEILLER DUPRAS: Oui.
9249 M. AUDET: ... qui est notre raisonnement.
9250 CONSEILLER DUPRAS: Et le Code de déontologie sur l'IV, est-ce que c'est suffisant pour y parvenir, selon vous?
9251 M. AUDET: Le Code d'intégration verticale, et je présume que c'est à ça que vous faites référence, devrait maintenant faire partie, selon nous, de la réglementation.
9252 Votre Processus de règlements de différents... à ce que je comprends, va être renforcé. Tout ça sont des mesures absolument nécessaires.
9253 Mais, malheureusement, les coûts de programmes vont continuer à monter, pas parce que nous le souhaitons, parce que la dynamique mondiale, elle est comme ça. La dynamique mondiale de négociation de droits de sports ou de négociation de droits d'autres programmes, malheureusement, ça fait partie de la réalité.
9254 Mais cela étant, si on peut relier de façon plus étroite la popularité d'un "package" à son prix pour que le propriétaire de droits se rende compte que s'il continue à surenchérir indéfiniment, il n'aura plus de client. Là, on aura marqué des points.
9255 CONSEILLER DUPRAS: Mais pour ce qui est des tarifs de groupe, qu'est-ce que vous pensez du partage des revenus générés au détail entre le câblodistributeur et le service de Programmation?
9256 Est-ce que ça ne sera pas un moyen efficace, là, de refléter la responsabilité de chacun pour le succès des services?
9257 M. AUDET: Écoutez, ça, c'est un sujet très intéressant. Vous n'étiez pas au Conseil au moment où on s'est présenté pour un arbitrage avec Bell sur leurs canaux nouvellement de l'affiliation à canaux, ça a été un dur combat pour obtenir le droit de faire des plus petits "packages".
9258 Il en a résulté ce que d'aucun appellent le "penetration base trade card" qui est tout à fait raisonnable. Au plan purement mathématique, ça a beaucoup de sens.
9259 Ça ne sera sûrement pas un secret pour vous que nous ne sommes pas satisfaits de l'issue de cela, non pas qu'on n'ait pas obtenu la flexibilité qu'on voulait, nous l'avons obtenue, mais nous percevons que tout le risque repose sur nos épaules.
9260 Alors, là, maintenant, vous me posez la question sur la répartition du risque. Malheureusement, la réponse, je ne l'ai pas, et je pense que personne ne l'a, mais une chose est claire néanmoins, étant donné que le Système canadien de la radiodiffusion est aussi concentré qu'il l'est, c'est-à-dire que si on prend notre cas à nous, là, on paie 40 pour cent de nos frais d'affiliation à notre plus grand concurrent, tu sais.
9261 Sincèrement, c'est une aberration, mais en tout cas, on ne reviendra pas sur le passé, là, c'est ça. C'est ça la situation aujourd'hui.
9262 Étant donné que vous avez cette situation-là, vous allez vous retrouver avec beaucoup de litiges et vous allez vous retrouver dans la non enviable et difficile position d'arbitrer comment le risque a été réparti. Tout ce qu'on est capable de dire, et vous le savez déjà de toute façon, c'est que ça ne peut pas être tout réparti chez eux puis ça ne peut pas être tout réparti chez nous.
9263 Pour qu'il y ait un juste milieu, aucune des deux parties ne doit être isolée du risque de marché. Bon, alors, je pense que tout le monde s'entendrait là-dessus.
9264 Maintenant, comment ça va se jouer, ça, en pratique? Bien franchement, je pense qu'on va le découvrir ensemble.
9265 CONSEILLER DUPRAS: Bon, merci. Et qu'est-ce que vous pensez de la proposition de Rogers un peu plus tôt aujourd'hui, là, qui parle de "make whole" les services spécialisés qui se retrouvent dans des volets avec moins de pénétration, sans qu'ils assument également la perte de revenu de publicité, là? Qu'est-ce que vous pensez?
9266 M. CAVEEN: Moi, ce que j'en pense, mais pour moi c'est sûr qu'un "penetration base straight card" qui compense les pertes de revenus de publicités, pour moi c'est une aberration.
9267 Vous avez entendu monsieur Pelley ce matin qui a été assez clair que, d'un côté, d'un point de vue pratique c'est impossible de prédire c'est quoi ces pertes de revenus-là dans le futur, hein, parce que le marché est changeant, les...
9268 Moi, je dirais, j'ajouterais à son commentaire que, en plus, c'est injuste parce qu'un service qui est pénétré à 85 pour cent aujourd'hui, s'il tombe à 80 pour cent, c'est les gens qui ne le regardent pas. Donc, il n'a pas perdu d'auditoire, lui, là. Il n'a pas perdu de revenu de pub.
9269 CONSEILLER DUPRAS: Mais on ne parle pas de revenu de pub, là, dans ce que je vous demande, juste le revenu de...
9270 M. CAVEEN: Oui, mais j'y arrivais, j'y arrivais. Pour moi, ça, pour parler en terme de base-ball, c'est un... j'appellerais ça c'est un "back-stop", c'est-à-dire qu'un service qui est très populaire, un "Discovery" si on peut prendre un exemple, qui est très très populaire, qui a des bons auditoires, puis qui perd de la pénétration, qui perd donc des... je pense qu'il mérite d'être compensé.
9271 Est-ce qu'un service qui est peu regardé mérite d'être compensé pleinement, jusque pour la perte de revenu, de manière linéaire si on veut, je ne pense pas. Ça, je pense que c'est matière à négociation.
9272 Et, donc, pour moi c'est vraiment ce que Rogers proposait ce matin ou ce qu'il discutait du moins -- je ne suis pas sûr que c'était une proposition -- c'est vraiment, là, c'est comme le "back-stop" pour un service populaire.
9273 CONSEILLER DUPRAS: Ça, c'est que si...
9274 M. AUDET: Autrement dit...
9275 CONSEILLER DUPRAS: C'est un volet de pénétration qui... dans lequel je peux mettre un... dans lequel je peux mettre des services assez populaires, mais que ça me donne 65 pour cent de pénétration au lieu de 80 avant quand le service était sur un plus grand volet.
9276 Mais, finalement, j'ai quoi, j'ai 15 pour cent à compenser pour les revenus d'abonnement ou m'assurer de continuer à avoir des services de programmation qui intéressent mes abonnés.
9277 M. CAVEEN: Oui, mais comme je dis, c'est probablement le... c'est le maximum pour moi. Ce n'est pas... ce n'est pas le... on ne va pas là automatiquement avec n'importe quel service.
9278 Il y a des services qui sont... qui ont déjà été très pertinents et qui sont beaucoup moins pertinents maintenant à cause de l'évolution de la technologie, des réseaux sociaux, et caetera, et caetera.
9279 Ces services-là, s'ils ne sont pas pertinents pour notre clientèle, pour les consommateurs canadiens, je ne vois pas pourquoi on les compenserait à pleine valeur quand les gens décident de se désabonner, là.
9280 CONSEILLER DUPRAS: C'est ça. Il y a des limites, là.
9281 M. AUDET: Puis-je ajouter quelque chose à cet égard? En autant que nous puissions comprendre à la lecture de vos documents et au suivi de la procédure qui s'écoule en ce moment-là, vous cherchez à protéger l'intérêt du consommateur canadien et nous sommes entièrement d'accord.
9282 Donc, c'est plus de flexibilité et il y a plusieurs Canadiens qui s'attendent à payer moins. Mais si vous appliquiez la logique que Rogers a expliquée ce matin, ça, ça veut dire que personne ne souffre. Si personne ne souffre, il n'y a pas de réduction de prix au consommateur.
9283 Il faut qu'on comprenne ça, là.
9284 Alors, il va falloir que tout le monde... pour que les pris baissent, il va falloir que tout le monde souffre un peu et il ne s'opérera pas de miracle.
9285 CONSEILLER DUPRAS: Je vous comprends. Dernière chose.
9286 La plateforme numérique qu'on peut voir avec Bell Télédirect ou le service de Illico TV, c'est comme une extension du Service de distribution en ligne, est-ce que c'est quelque chose que vous envisagez pour, je ne sais pas, moi, donner cette convenance-là de télévision mobile aux abonnés?
9287 Est-ce que vous croyez, premièrement, que c'est important d'avoir... d'avoir ce service-là aujourd'hui dans le monde qu'on est, d'avoir un genre de présence des services télévisuels en ligne pour un peu compétitionner avec des services comme Netflix qui, autrement, occupe le champ parce que... à défaut d'offre en ligne?
9288 M. AUDET: Écoutez, c'est sûr qu'on aimerait, théoriquement, pouvoir créer nous-mêmes un tel service, mais nous n'en avons pas les moyens.
9289 Néanmoins, les gens de Rogers et de Shaw sont venus nous voir pour nous offrir leur service SHOMI et on leur a dit, si on peut s'entendre sur les conditions, nous, on est excessivement intéressés à ça.
9290 Comme vous le savez, nous avons annoncé que d'ici le 28 février nous lancerons le service TVO sur nos réseaux de câble. Or, le service TVO est un service évolué qui permet au consommateur de recevoir sur son téléviseur le contenu où qu'il soit, alors, qu'il soit sur votre compte linéaire, payant, contenu enregistré et "over-the-top".
9291 Donc, ça répond à ce que les clients cherchent. Ils cherchent la simplicité et des choix presque sans limite. Alors, nous, si on peut ajouter SHOMI à ce "line-up" là, on va être ravi.
9292 CONSEILLER DUPRAS: C'est ça. Et, également aussi, les apps, là, qu'on peut avoir sur les téléviseurs intelligents aujourd'hui, là, qui nous donnent accès.
9293 On a vu des services canadiens et même francophones très intéressants aussi ici cette semaine avec Éléphant et l'ONF, c'est beaucoup de contenu disponible en ligne.
9294 M. AUDET: Nous, notre objectif, c'est de rendre le plus de choses disponibles à nos clients pour qu'ils aient le plus de liberté possible et le plus de choix possible et qu'ils nous choisissent nous comme leur intermédiaire préféré.
9295 M. CAVEEN: J'ajouterais seulement, juste pour être clair, qu'on en a déjà décelé. On offre, par exemple, TNM-Go, Super Écran-Go, le Global-Go dont on a entendu parler tout à l'heure. Ce sont tous des services authentifiés, mobiles, qu'on offre, que COGECO offre, a une entente avec ces gens-là pour authentifier les contenus sur les tablettes, sur...
9296 On a aussi un service de... notre propre service "broad band", là, genre la TV Everywhere, Rogers, qui est un COGECO-on-demand, online. Donc, on en offre déjà. On est déjà dans cette sphère-là.
9297 On n'est pas en mesure, parce qu'on n'est pas un fournisseur de contenu, de bâtir notre propre service avec notre contenu, mais on travaille avec des partenaires qui sont dans les contenus pour rendre ça disponible à nos clients.
9298 CONSEILLER DUPRAS: Et puis un service de distribution télé comme le vôtre, dans cinq dix ans, là, si la diffusion des programmes se fait plus en ligne que prendre nos systèmes tels qu'on les connaît, COGECO va devenir un fournisseur d'accès uniquement ou si vous avez des plans d'aller de ce côté au niveau de la distribution aussi?
9299 M. AUDET: C'est difficile de répondre à votre question, mais je peux y répondre par notre approche philosophique.
9300 Nous, notre approche philosophique c'est essayer de s'adapter le plus rapidement possible au changement, tourner le changement à notre avantage et demeurer le choix préféré de nos clients.
9301 Donc, si le scénario se déroule de la façon que vous le décrivez, nous, on va tout faire pour être le premier choix des clients.
9302 S'il reste plus dans la voie où il est actuellement, ce dont je doute, mais si c'était le cas, on va aussi manoeuvrer pour rester le choix préféré de nos clients.
9303 Donc, nous, notre rôle, ce n'est pas d'épouser un modèle. Nous, notre rôle c'est de... c'est de s'adapter pour nos clients.
9304 CONSEILLER DUPRAS: Il y a une question que j'ai oublié de vous demander. La substitution simultanée, vous avez dit être contre le retrait de ça, mais, pourtant, vous n'opérez pas de station de télévision.
9305 Quelle inquiétude avez-vous de ce côté-là?
9306 M. AUDET: Notre inquiétude en est simplement une d'intérêt public. Vous avez eu plusieurs opérateurs de stations vous dire comme la situation était difficile pour eux. Si tel est le cas, leur enlever les revenus qui découlent de la substitution simultanée serait mal à propos. C'est simplement pour cela que nous le mentionnons.
9307 CONSEILLER DUPRAS: Bon, bien, alors, très bien. Ça consiste en mes questions. Merci.
9308 LE PRÉSIDENT: Merci. Monsieur le vice-président.
9309 CONSEILLER PENTEFOUNTAS: Merci. Merci, monsieur Audet et votre équipe, et félicitations pour un document bien réfléchi.
9310 Si on était pour essayer de trouver le meilleur outil réglementaire qui nous permettra de maintenir ce niveau de pénétration dont jouisse le Canada, et ça depuis des années, pour garder les "cord-cutters", les "cord-shavers" et même à la limite aller essayer de chercher les "cord-nevers" et le maintenir à l'intérieur de ce système qui a très bien fonctionné pour nous tous, quel sera cet outil-là?
9311 M. AUDET: Écoutez, je pense que c'est difficile de répondre à votre question, mais il est probable que la direction générale à laquelle le Conseil se dirige est la bonne.
9312 Il faut donner au client ce qu'il veut. Si le client veut plus de flexibilité, il faut lui en donner. S'il faut payer, s'il veut payer moins cher, il faut trouver des façons de l'aider à payer moins cher et c'est, je pense, pour l'essentiel, l'orientation que vous avez prise.
9313 Alors, je pense que c'est la bonne orientation, mais après ça, bien, il peut survenir beaucoup de choses et cette orientation-là n'est pas exempte de risque. Mais je pense que dans les circonstances actuelles le risque, il est assez bien contrôlé.
9314 Pourquoi? Parce que les nouvelles offres que vous contemplez viennent en ajout et en parallèle avec celles qui existent et que vous considérez pourront continuer à exister. Alors, je pense que, ca, ça aide à contrôler le risque.
9315 CONSEILLER PENTEFOUNTAS: Bien. Je vois dans vos services de base et en Ontario et au Québec, en Ontario vous avez TSN dans le service de base et RDS également au Québec. Si j'ai bien compris c'est l'Option 1 qui vous plaît le plus avec l'ajout des 4+1.
9316 Enlevez les services de sports des services de base, d'un petit service de base, ça ne nuira pas au système?
9317 M. AUDET: Évidemment, là, vous entrez dans la définition de qu'est-ce qu'on va considérer être une chose qui nuit au système et je serais bien mal pris de le définir.
9318 Mais une chose est claire, c'est que dans le moment vous avez à peu près 35 pour cent de nos clients du service de base qui inter-financent l'autre 50 pour cent qui, lui, aime beaucoup les sports, alors que le 35 pour cent en question, lui, il ne les aime pas beaucoup.
9319 Alors, quand les coûts sont faibles, bien, tout le monde ferme les yeux et puis on s'en accommode.
9320 Mais quand c'est devenu des coûts substantiels, là, le sujet prend plus d'importance et c'est pour ça que, nous, nous en sommes venus à la conclusion que la bonne façon de régler le problème ce serait de mettre les sports dans un "package" et que les amateurs de sports en paient le plein prix.
9321 CONSEILLER PENTEFOUNTAS: Ce n'est pas le cas présentement, ça fait partie de votre service de base, premièrement. Deuxièmement, je ne pense pas qu'on a peut-être besoin d'être une exceptionnelle « JOJO Savard » pour savoir qu'il va y avoir des pressions qui vont croître les prix de ces services-là, que ça soit TSN ou Sportsnet, et que le client va être directement affecté par ces changements de prix-là.
9322 Et je retourne à un des principes de base de l'audience, c'est-à-dire d'essayer de trouver une façon de garder le monde à l'intérieur du système et au coeur de ces idées-là, ça sera d'offrir un service de base d'entrée le plus abordable possible.
9323 M. AUDET: Nous sommes d'accord avec vous.
9324 CONSEILLER PENTEFOUNTAS : Alors, ça ne dérangera pas Cogeco comme tel si les sports ne faisaient pas partie d'un service de base... d'un petit service de base?
9325 M. AUDET : Si c'était une condition uniforme pour tous les opérateurs à travers le pays, alors, nous nous accommoderons.
9326 CONSEILLER PENTEFOUNTAS : Et si on était pour la regarder objectivement -- on enlève nos chapeaux Cogeco et autres -- pour le bien du système, est-ce une nécessité absolue à ce qu'on trouve une façon d'enlever les services de sports des services de base?
9327 M. AUDET : Bien là, vous me demandez de résoudre la quadrature du cercle. Si vous partez du principe que vous voulez donner la flexibilité aux clients et que c'est -- et nous croyons, nous, que c'est -- la seule façon de les garder, ces clients-là, alors, il s'ensuit que oui, c'est la bonne chose à faire.
9328 CONSEILLER PENTEFOUNTAS : Vous avez également soulevé la question avec mon collègue de votre expérience aux États, monsieur McCain et monsieur Rockefeller et d'autres, monsieur McCain qui a parlé d'offrir des services à la carte, mais il y a une puissance exceptionnelle des diffuseurs aux États, il faut prendre ESP et Disney et tout ce qui vient avec et la EDR est forcée de vivre avec ça, et vous avez de l'expérience personnelle à cet égard.
9329 Je ne veux pas vous amener sur ce terrain-là mais plutôt sur la question d'OTA et la fermeture des émetteurs. Je comprends très bien votre position. Compte tenu du fait que vous avez une perspective exceptionnelle aux États, quel État du dossier des stations conventionnelles est la remise de ces stations-là pour ouvrir le spectre et leur achat, si vous voulez, de ce spectre-là pour des fins autres?
9330 M. AUDET : Honnêtement, je serais incapable de répondre à votre question. Je ne sais pas s'il y a un membre de notre équipe qui est suffisamment familier avec les ventes de spectre qui résultent de la conversion numérique des stations de télévision américaines. Je pense que nous ne sommes pas prêts pour cette question.
9331 CONSEILLER PENTEFOUNTAS : Voilà!
9332 MME DORVAL : On peut, par contre, s'engager à vous fournir des informations, si vous en avez besoin, pour le 19.
9333 CONSEILLER PENTEFOUNTAS : Merci beaucoup.
9334 MME DORVAL : Merci.
9335 CONSEILLER PENTEFOUNTAS : Merci beaucoup. Ça complète, Monsieur le Président.
9336 LE PRÉSIDENT : Donc, pour le 19 septembre, un engagement dans ce sens. Merci.
9337 J'ai quelques petites questions. Déjà, on accélère parce que les enjeux commencent à être clarifiés.
9338 Vous avez traité de toute la question des services en gros, la relation entre les entreprises de distribution et les entreprises de programmation. Si vous voulez, j'aimerais bien que vous preniez comme un engagement aussi pour mettre un peu plus de chair sur le contenu qu'on pourrait mettre autour de ces relations-là, basé sur les conversations qu'on a eues avec d'autres entreprises jusqu'à maintenant et puis pendant le restant de la semaine. Donc, concrètement, qu'est-ce qui seraient les pratiques inappropriées dans les négociations des ententes d'affiliation?
9339 MME DORVAL : Ça va nous faire plaisir de vous déposer l'information demandée.
9340 LE PRÉSIDENT : On pourrait prendre le temps ici, mais je pense que c'est plus efficace de le mettre dans un engagement.
9341 Est-ce que vous chargez des frais d'annulation lorsque quelqu'un décide d'aller chez un de vos compétiteurs?
9342 MME ST-PIERRE : Non, on ne charge pas. Il y a la loi au Québec qu'on ne peut pas, de toute façon. Et en Ontario, on avait une stipulation dans nos contrats qui s'enlève, mais on ne charge pas dans aucun de nos systèmes.
9343 LE PRÉSIDENT : Donc, à un certain niveau, vous ajoutez au dynamisme du marché dans le sens que si quelqu'un est insatisfait de vos services, ils peuvent aller chez un concurrent.
9344 MME ST-PIERRE : Mais on fait tout pour les garder.
9345 LE PRÉSIDENT : Bien, évidemment. Évidemment, et les attirer. Mais est-ce que vous avez un point de vue sur l'opportunité de continuer avec ces frais de... ces avis de 30 jours pour vos compétiteurs?
9346 MME ST-PIERRE : Non. C'est correct d'enlever ces frais-là. Bien, il n'y en a pas là de frais pour...
9347 LE PRÉSIDENT : Non, chez vous, il n'y en a pas, mais il y en a d'autres qui en ont.
9348 MME ST-PIERRE : Oui. Ah, bien, écoutez, j'imagine qu'on veut. Oui, s'il vous plaît.
9349 LE PRÉSIDENT : O.K. Bon, c'est ce que je pensais là.
9350 MME ST-PIERRE : Oui.
9351 LE PRÉSIDENT : Je voulais juste vous donner l'opportunité...
9352 MME ST-PIERRE : Je n'étais pas certaine que je comprenais la question.
9353 LE PRÉSIDENT : ...puis pourquoi vous trouvez que ça empêche un certain dynamisme dans le marché.
9354 MME ST-PIERRE : Oui, tout à fait. Oui, oui.
9355 LE PRÉSIDENT : O.K.
9356 MME ST-PIERRE : C'est un ralentisseur ou un modérateur, oui.
9357 LE PRÉSIDENT : D'accord.
9358 Dans votre présentation vous avez également parlé de la mise en oeuvre. J'ai parlé à d'autres intervenants à propos d'une feuille de route.
9359 Est-ce que vous pourriez nous donner une réponse écrite par engagement -- il y a beaucoup de devoirs, je le sais -- mais comment qu'on pourrait mettre en oeuvre... Je le sais qu'il y a des aspects peut-être du document de travail qui vous créent des difficultés ou pas, mais en présumant qu'on part à partir de ce document de travail là, comment qu'on pourrait organiser la mise en oeuvre pour quand même ne pas créer un trop grand choc au système?
9360 Et j'ai bien entendu que vous avez aussi des préoccupations pratiques parce qu'il faut quand même changer peut-être vos plateformes informatiques et...
9361 MME ST-PIERRE : Oui, effectivement, il y a des ajustements à faire au système, il y a de la formation à faire, il y a des analyses. Il y a pas mal de modifications à faire, effectivement.
9362 LE PRÉSIDENT : Donc, si vous pouvez nous aider à prioriser, mais aussi nous faire part des éléments pratico-pratiques qui parfois nous échappent parce qu'il y a beaucoup d'entreprises, puis chacune a une spécificité.
9363 MME DORVAL : Tout à fait. À l'égard des éléments pratiques, évidemment, nous, on avait préconisé une période de transition qui était plus longue que celle que vous proposez dans votre document de travail, et ça sera donc reflété dans notre document de transition.
9364 LE PRÉSIDENT : Oui. Le document de travail, n'eût été de la date de mise en vigueur. Ça, je comprends bien.
9365 MME DORVAL : Oui. Merci.
9366 LE PRÉSIDENT : Finalement, la dernière question, portant justement sur le document de travail. J'ai posé la question à d'autres intervenants. Quel serait l'élément que vous voyez sous une lumière la plus favorable et la moins favorable?
9367 M. AUDET : Le plus nécessaire, selon nous, c'est l'inclusion du Code d'intégration verticale dans les règlements du Conseil, et ça, pour nous là, c'est ce qui aplanit le terrain concurrentiel pour tout le monde, donc, le plus hautement désirable.
9368 Basé sur notre expérience américaine, le pire qui pourrait survenir, ce serait que, directement ou indirectement, il y ait des droits de retransmission associés aux stations de télévision locales, parce que là, c'est une inflation galopante, et le consommateur ne pourrait pas comprendre pourquoi une chose qui était gratuite est subitement devenue payante et dispendieuse.
9369 LE PRÉSIDENT : Merci pour cette réponse. C'est bien. Ce sont nos questions. Merci beaucoup.
9370 M. AUDET : Merci beaucoup.
9371 LE PRÉSIDENT : Madame la Secrétaire.
9372 THE SECRETARY: I would now ask Writers Guild of Canada to come to the presentation table.
9373 THE CHAIRPERSON: Just hold on for a moment. I turned my back and I lost a member.
9374 THE CHAIRPERSON: All right, welcome and please go ahead.
9375 MS PARKER: Good afternoon. I was almost going to say good evening.
9376 THE CHAIRPERSON: Not quite yet.
9377 MS PARKER: Not quite, yeah. I bet you're tired.
9378 Good afternoon, Chairman Blais and CRTC Commissioners. My name is Maureen Parker and I am the Executive Director of the Writers Guild of Canada. The WGC is a national association representing approximately 2,200 professional English-language screenwriters across Canada.
9379 With me today is Neal McDougall, the Director of Policy at the Writers Guild; and Andrew Wreggitt and Cal Coons, at the end, screenwriters and WGC members.
9380 Our primary message today is to warn of the danger of implementing too many major changes to the system. The Commission's proposed changes in combination could destabilize or even dismantle an industry that has taken us decades to build. Our successes -- quality Canadian content that gets big audiences, wins awards and garners fans at home and abroad -- are founded upon a stable and regulated Canadian broadcasting system that is working pretty well.
9381 I would like to start by letting you hear from Cal and Andrew.
9383 MR. WREGGITT: Thank you.
9384 So I was in a bar last year watching watching the Grey Cup and the guy next to me didn't like a call that the referee made and he said, "effing CBC!" I didn't bother to mention he was watching the game on TSN and that the broadcaster doesn't call the penalties in football.
9385 To me that's kind of like the people who say Canadian TV is no good. They're out of touch and they're wrong but they seem to value their opinions more than the truth. The truth is Canadians watch Canadian TV. They like it a lot. It means something to them and it's really good and not just good in Canada. "Orphan Black" was nominated at the Golden Globes. A movie I wrote called "The Phantoms" won an International Kids Emmy Award in New York in February. "Murdoch Mysteries" has fans all around the world.
9386 Good TV happens in Canada because the talent chooses to live here. They choose to live here because they have opportunities, thanks largely to the CRTC. But if we make less TV, the opportunities diminish and the talent moves away.
9387 I'm still in Canada because there's been enough work for me here and I'd rather tell Canadian stories, stories like the Jack Layton movie, Don Cherry, Mayerthorpe, Conrad Black, One Dead Indian, Borealis. I've been privileged to write shows that couldn't have happened anywhere else.
9388 I got to do all this work because I was trained by some very good people who chose to stay in Canada as well. I came out of North of 60. Tassie Cameron who does Rookie Blue came out of DeGrassi. Graham Manson of Orphan Black started at Nothing Too Good For a Cowboy. Good TV doesn't happen in a vacuum.
9390 MR. COONS: Thanks, Andrew.
9391 I have worked in the Canadian television industry for 30 years writing, directing and showrunning series like Murdoch Mysteries for CBC and CTV's The Listener and by the end of the day, Global's Blue Murder. And in my career the single most important factor has proven to be opportunity.
9392 Writing is a learned craft. The opportunity to apprentice under and work with seasoned writers, directors and producers creates better writers who, in turn, develop new and dynamic television with the potential to capture large audiences. For the Canadian television industry to enjoy long-term success, it is imperative there be opportunity for writers to develop because without them, there is no next great idea.
9393 The famous addage, "Nobody knows anything", was used to describe Hollywood's inability to know whether it had a hit on its hands. It could easily apply to the Canadian television industry. Where our next hit comes from could be anywhere and it is only through more, not less opportunity that these breakthroughs occur.
9394 The series I am most closely associated with is Murdoch Mysteries. Each week it routinely delivers more than a million viewers. When we conceived Murdoch in 2000, the idea of a period television series was unthinkable. Conventional television was convinced no one wanted to watch it. In reality, there was an eager audience awaiting it. Murdoch Mysteries is only on the air because a network took a gamble. We were given the opportunity to try something different.
9395 I firmly believe the more opportunities there are, the more successes there will be.
9397 MS PARKER: Thank you, Cal.
9398 We would now like to talk about what we believe are the key themes in this proceeding.
9399 The first theme is what Andrew and Cal were talking about, the idea of quality and quantity. The Commission has said:
"The broadcasting system should focus primarily on the production and availability of high quality Canadian programming."
9400 We certainly agree with that, but we believe there may be a view that regulation today must privilege quality over quantity, that perhaps in the past Canadian television regulation has focused too much on volume, and that we should now switch our efforts to producing fewer but bigger, better shows.
9401 This could be behind proposals that, by design or by consequence, reduce channels, reduce programming, reduced quantity in the belief that perhaps "less is more". But sometimes less is just less. We need a robust industry, and sufficient quantity, to create the quality everyone wants.
9402 MR. McDOUGALL: The second theme involves the regulation of digital media, in particular over-the-top broadcasters. When talking about the future of television we find the issue impossible to ignore. It keeps leaking in, like when we talk about redefining broadcasting revenues to include online and mobile activities of licensees.
9403 Regulating OTT providers is a large issue, but we will simply say that we believe the time has come to bring OTT into the tent. To us that means both obligations and benefits, just like other regulated entities. As creators, if they want to be here making Canadian content, we want to work with them.
9404 Finally, our biggest concern is the risk of making multiple, major changes to the system. The majority of interveners in this process have warned of significant negative impacts from pick-and-pay, lost viewers, lost revenue, lost channels, lost programming, and lost jobs. If the Commission is committed to pick-and-pay, then we believe that it must act very carefully on other fronts, with a gradual rollout of its plans combined with close monitoring along the way.
9405 Those are our themes.
9406 In addition, we would like to note very briefly our views on three specific policy proposals, contained in the working document.
9407 First, exhibition requirements. We are concerned about the impact on children's programming of eliminating daytime exhibition rules, especially if children's specialty and pay channels suffer due to pick-and-pay or in the absence of genre protection.
9408 Second, simultaneous substitution. We see simsub as a double-edged sword, but we fail to see the logic in either of the Commission's options since they both involve eliminating it, to one degree or another, with no apparent compensatory measure. The negative impacts of that, we believe, would outweigh any benefits, particularly as the Commission concentrates its emphasis on expenditure requirements, as a percentage of revenue, to support Canadian programming.
9409 MS PARKER: This leads to our final point. If the Commission is putting more of its regulatory eggs in the expenditures basket, that basket must be strong enough to hold all the eggs.
9410 If the Commission mandates pick-and-pay and at the same time ends simsub, or relaxes exhibition requirements, or eliminates genre exclusivity, or softens preponderance, all with the intention of relying primarily on expenditure requirements to support Canadian programming, then we submit that the expenditure requirements must be higher and the rules must be ironclad. As such, we support the position of the CMPA to redefine CMPE requirements and we would add PNI to that so that they apply to original programming.
9411 In addition, we believe the data and reporting on these expenditures must be rigorous to ensure transparency, particularly in the lead-up to the 2016 group licence renewals. If we are to rest so much of the CanCon support system on this pillar, then it cannot buckle.
9412 Canadians deserve to have the best Canadian television we can offer them. Let's not make it harder for them to get their money's worth. We now have a short video to show you, following which we would be happy to answer any questions you may have.
--- Video presentation
9413 MS PARKER: Sorry, we didn't want to exceed our 10 minutes so we just cut that right off.
9414 THE CHAIRPERSON: It was a teaser.
9415 THE CHAIRPERSON: No, but I know, and I had seen the full version on the social media. It's readily available. So thank you for your presentation and for that video.
9416 But also thank you. Sometimes when we get talking about all the regulatory rules we keep forgetting about the content we're trying to get. And so both in your presentation and through the video you brought it back to the hearing. We very much appreciate that.
9417 So I'll pass it on to the Vice Chair.
9418 COMMISSIONER PENTEFOUNTAS: Yeah, I think we dropped it off on Murdoch Mysteries. And you know, what's interesting about Murdoch is it actually sort of started on one network and moved to another network. That's pretty rare.
9419 Three -- are we up to three?
9420 MR. COONS: Three networks.
9421 COMMISSIONER PENTEFOUNTAS: Oh, that's got to be a Canadian record.
9422 MS PARKER: It will not die.
9423 COMMISSIONER PENTEFOUNTAS: I see that. That's good.
9424 I think we -- I think everyone in the room over the last week and next week are sort of all -- we're all sort of in the same boat. So I understand that decisions that are made by the Commission could destabilize and dismantle as was just mentioned and, I think, that it's taken us decades to build. I understand that.
9425 The other fear, though, is that actually standing aside when the world is moving all around us, maybe that's what will bring down the system rather than acting. And I gather from what I've read you're not that crazy about most of our proposals, most of the working document. So what would you do differently?
9426 MS PARKER: Well, first of all, I would like to say --
9427 COMMISSIONER PENTEFOUNTAS: I think I know what the answer is. I'm going to listen to it, though.
9428 MS PARKER: Oh, okay?
9429 COMMISSIONER PENTEFOUNTAS: But go ahead.
9430 MS PARKER: Well, do you want to tell me what you think?
9431 COMMISSIONER PENTEFOUNTAS: No, I'll tell you if I had it right.
9432 MS PARKER: Okay.
9433 COMMISSIONER PENTEFOUNTAS: I don't want to spoil it.
9434 MS PARKER: First of all, we are not dinosaurs. You know, creators such as Andrew and Cal and our President, Jill Golick, are working in the online space. We're creating content for every form of distribution platform.
9435 However, we are very cognizant of the money that we need to make those programs come from broadcaster revenue and it's a percentage of that revenue. So when that revenue declines then we are in a position of making less.
9436 And as you heard us talk about, in order to hit that golden nugget and those great shows, you need money, you need a talent pool and you need opportunity.
9437 So you know, I think we've heard a lot in this last week that pick-and-pay which we are not adverse to. And the basic cable package, we understand that there is a federal directive. Consumers want to be able to have a smaller package. You know, that's fine. We can accept that. We can work with that.
9438 What we want to ensure is that all the checks and balances in the system aren't eliminated at the same time. If you're going to put in place a basic package and allow pick-and-pay then, first of all, we would say option B rather than option A.
9439 COMMISSIONER PENTEFOUNTAS: Okay.
9440 MS PARKER: A larger pick -- sorry, basic cable package.
9441 COMMISSIONER PENTEFOUNTAS: A price cap, basically.
9442 MS PARKER: A price cap, absolutely.
9443 COMMISSIONER PENTEFOUNTAS: Okay.
9444 MS PARKER: That seems to be the problem, is addressing the cost.
9445 So with respect to pick-and-pay I think consumers should be educated and informed and know that they may be paying more. I read the Chair's piece in the Globe and Mail on Saturday and he was quoted as saying he never promised pick-and-pay would be cheaper.
9446 But that's what people think. That's what the customers think. And I think we have to stay on that, because that's very important that they understand what choices they are making.
9447 And then preponderance, I think, is absolutely critical when we're looking at implementing changes. We have to ensure that Canadians receive a preponderance of Canadian channels. That's why we're operating a Canadian broadcasting system. And that is -- to do otherwise would be inconsistent with the Broadcasting Act.
9448 So we're not adverse to change. In fact, we'd like you to bring Netflix in. We'd love that change. So you know, we're all about change over here --
9449 COMMISSIONER PENTEFOUNTAS: I was wrong until then about what your answer was going to be until then.
9450 COMMISSIONER PENTEFOUNTAS: Let's talk about -- you know, we talked about CPE briefly and I won't be that long because your position is pretty clear.
9451 We talked about CPE and we talked about CPE online, both revenue and expenses. You're not on board with that idea?
9452 MS PARKER: No, we are totally on board with that idea.
9453 COMMISSIONER PENTEFOUNTAS: Oh, good.
9454 MS PARKER: Yeah, we see the business shifting.
9455 COMMISSIONER PENTEFOUNTAS: Yeah.
9456 MS PARKER: You know, again, our talented writers are working, you know, in the online world and creating web series, et cetera.
9457 And we do see the advertising shifting and we think it has to be part of the tent. It has to be brought into the fold.
9458 COMMISSIONER PENTEFOUNTAS: Okay.
9459 MS PARKER: And with respect to expenditures, though --
9460 COMMISSIONER PENTEFOUNTAS: Yes?
9461 MS PARKER: -- I would say that the devil is in the details. We have to be very careful when we're looking at the expenditures reported that they're not duplicating linear expenditures.
9462 You know, reporting, when we're bringing in new regulations much of it is the reporting. And I'd love to talk to you about PNI reporting because it will not work unless it goes hand-in-glove with proper enforcement and reporting mechanisms.
9463 COMMISSIONER PENTEFOUNTAS: Understanding the importance of original, you made it clear.
9464 MS PARKER: Yes.
9465 COMMISSIONER PENTEFOUNTAS: And I was going to ask you on PNI. I wanted to ask you how you thought PNI as a concept was working thus far?
9466 It might surprisingly be early and that's what Mr. Hennessey told us yesterday. We're still sort of early even though renewals are a couple of years away. But thus far, your experience on PNI?
9467 MS PARKER: I would say, first of all, we like it. We can't give you an overall thumbs up because it is too early.
9468 We are struggling with the reporting data and we have brought this up to the CRTC staff several times. You know, we're getting the data but it's not complete and it's not transparent.
9469 And one of the things, for example, we found out by looking at the data that the Shaw media group in 2013 spent half of their PNI on original and the other half on repeats. That was never what the policy was intended to do.
9470 We were so excited when that policy came in because it meant we would have money to make programs. No. They're now advertising that over their entire library. That's not right. We need to address that and we need to fix all of that before the 2016 hearing.
9471 We need to get a handle on the reporting. We need to understand where we're all going so we can support it. We can tweak it. We can adjust it and --
9472 COMMISSIONER PENTEFOUNTAS: So there's a potential adjustment on PNI going forward? That's interesting --
9473 MS PARKER: Yes, definitely.
9474 COMMISSIONER PENTEFOUNTAS: -- on the original aspects.
9475 MS PARKER: Especially if you bring in changes that are detrimental and, I mean, that are going to lose revenue for the system then we would obviously look for an increase with respect to the PNI.
9476 COMMISSIONER PENTEFOUNTAS: Right, and CPE, of course.
9477 MS PARKER: And CPE, of course, yes. Yes.
9478 COMMISSIONER PENTEFOUNTAS: Okay. And then you would not be adverse, as I have read from your document, to relaxing the rules on exhibition if we were to increase the rules on expenditure?
9479 MS PARKER: Daytime exhibition.
9480 COMMISSIONER PENTEFOUNTAS: I was about to get there, yeah.
9481 MS PARKER: Daytime.
9482 COMMISSIONER PENTEFOUNTAS: English.
9483 MS PARKER: And again we're very concerned about kids.
9484 COMMISSIONER PENTEFOUNTAS: Yes.
9485 MS PARKER: You know, that's when kids watch programming. And if you looked at that and combined it with, you know, removing genre exclusivity then that could be the perfect storm. There could be no children's programming, you know, in our system.
9486 COMMISSIONER PENTEFOUNTAS: A twofold question. Is the public broadcaster and educational broadcaster, are they doing enough enough on the kids and youth front in terms of programming?
9487 MS PARKER: No.
9488 COMMISSIONER PENTEFOUNTAS: I'm sure that was going to be your answer.
9489 Given that answer, is kids programming, Canadian programming for children important enough that it should find a place in the basic package, whatever size that package takes?
9490 MS PARKER: Yes, we support schools, you know, for children. I don't have children but I'm saying I support schools through taxes. We should be supporting children in our programming.
9491 COMMISSIONER PENTEFOUNTAS: Okay.
9492 In terms of trade, and I am just going to close on that and let my clients -- it's late in the day -- let my colleagues speak to you on issues that I may have certainly forgotten.
9493 The terms of trade going in, there again we're three years in. What would you do differently in terms of terms of trade in the context of Let's Talk TV?
9494 MS PARKER: Well, we are not parties to terms of trade. We have our own terms of trade with the producers. It's called collective bargaining. So I see this as their collective bargaining with the broadcasters.
9495 COMMISSIONER PENTEFOUNTAS: It is, but as writers and --
9496 MS PARKER: As writers?
9497 COMMISSIONER PENTEFOUNTAS: Yeah, do you have an --
9498 MS PARKER: Well, I think one of the things that we're concerned about is the length of the term that the broadcaster continues to hold onto their revenue. That's certainly something.
9499 We would like to see some of that revenue back into the system because that money belongs to other people, not just the producers and not just the broadcasters. That belongs to writers and actors and directors in the form of royalties.
9500 So you know, we understand that a licence buys them, you know, basically all of the revenue for a five-year period. We think that's too long and needs to be adjusted.
9501 Neal, do you have anything you would like to add on this?
9502 MR. McDOUGALL: No. No, sorry, it's hard to say because we are not a party to the agreement. We didn't negotiate the agreement. We're not really in the nuts and bolts of it.
9503 We're in the nuts and bolts of the independent production agreement between the producers. So it's tough to get too far into the details of that.
9504 COMMISSIONER PENTEFOUNTAS: Okay.
9505 MS PARKER: But that's --
9506 MR. McDOUGALL: But we support it -- we support terms of --
9507 MS PARKER: -- yes, but that said --
9508 COMMISSIONER PENTEFOUNTAS: You're obviously very tightly tied to production as writers.
9509 MS PARKER: Absolutely. And we totally support terms of trade for our producer colleagues. You know, we think it's essential that there are some standards and some guidelines.
9510 COMMISSIONER PENTEFOUNTAS: But you haven't thought about things that might make it even more -- not profitable, but profitable for all, including writers by creating more work and more -- and the need for more content creation and writing?
9511 MS PARKER: I don't know that that would be through terms of trade.
9512 COMMISSIONER PENTEFOUNTAS: You haven't thought about that yet?
9513 MS PARKER: I don't think that would be the appropriate place to look at increasing production. You know, I think you increase production by having more money in the system and then --
9514 COMMISSIONER PENTEFOUNTAS: Well, you could increase production by enticing other partners to invest more heavily into the system. I think that's part of what a lot of the broadcasters have spoken to us about over the last few days.
9515 MS PARKER: But don't some of the broadcasters not like terms of trade?
9516 COMMISSIONER PENTEFOUNTAS: Exactly.
9517 MS PARKER: M'hmm, okay.
9518 COMMISSIONER PENTEFOUNTAS: At any rate, you had your chance. Thanks so much.
9519 COMMISSIONER PENTEFOUNTAS: Mr. Chairman...?
9520 MS PARKER: Does anyone else want to add?
9521 All right.
9522 THE CHAIRPERSON: Your position is clear and I -- don't take it if we don't have a lot of questions it's because we're not interested. We are actually interested.
9523 But I have a higher level question for you, and it's just one of them. I was looking at your video and it's a very compelling video. And it talks about the program and creating an attachment to that end product.
9524 One of the challenges, I think, we have because we do have a complicated regulatory system, but you are and you represent storytellers. I was wondering if you've ever given some thought about how do you tell the general population the story that links unfortunately things like simultaneous substitution and linkages rules and complicated business models so they fully understand, short of doing a series on the ins and outs of the production industry in Canada, although that might be interesting.
9525 MR. COONS: A miniseries.
9526 THE CHAIRPERSON: A miniseries, yeah.
9527 How do you tell that story to the general population so they understand? I mean, I was even talking to the BDUs earlier today that, you know, the value proposition that people see in their basic bundle is -- they don't see all the fixed costs that are behind bringing that signal to everybody's home.
9528 People take it for granted. So how would you tell that story?
9529 MS PARKER: Well, I'm going to -- sorry. I will just -- I think there are a number of different ways.
9530 You know, this morning I gave an interview for CBC Toronto Metro Morning and the host was saying, you know, for example, "Well, why can't you just go out and make a movie?" And I suggested a movie on the Franklin ships. And he said, "Well, I don't know. I'm not sure anyone is going to see that". And I said, "Well, you know, maybe the Prime Minister would like to see that movie". And he said, "Well, why can't you go out and fund that on your own?"
9531 And then what was really clear to me, and this is the host of a major CBC -- the main Toronto hit morning show, didn't understand the economics of making television. You know, we can't go out and raise $5 million and make a film. You know, that money that's public money. Sure, there'll be licences. There'll be distributors, et cetera. There are a lot of participants in financing a film. And you know, in Canada we need public money in order to make content. And it's not the same in the States.
9532 So I closed with, you know, "In the States they don't need that because they can cover the costs of their production in their own market. There's no gap. They don't need public financing".
9533 And so you know, I think, absolutely we have a huge education campaign to do. You know, people don't understand our business. They don't understand how it's financed. They don't understand how collaborative it is, that it takes time to build quality. You need to make a number of shows before you hit, make a hit. And you need to retain your talent pill.
9534 There are so many different elements that go into our industry and our production, you know. We did jokingly talk about making a video today while we were prepping. We were going to ask you to all pose in a group picture so that we could start telling that story.
9535 But gentlemen, any advice?
9536 MR. COONS: I suspect one thing that, you know, the Canadian public doesn't realize and I certainly found it because I lived in the Niagara region for much of the better part of my schooling years. You know, that we're not unusual in the world, that we seem to have this simplistic view that it's just like America.
9537 And I think that if people were able to understand how some of these complex issues are dealt with in other areas and that there are other answers and there are other alternatives, they might begin to go to the nature of how complex an issue we've got on our hands.
9538 I mean we certainly don't -- we don't envy you what you're trying to do. We understand how complex and difficult this is going to be. But at the same time what we know, certainly, from making a TV show, everybody wants a simple answer with a bow on the end of it and possibly a happy resolution and, you know, everybody saves the day.
9539 And it's not Hollywood that we're dealing with. This is nuts and bolts reality. It's been faced by other countries with different problems. It's unique. It's around the world and it's hard.
9540 And I think that there might be a way to just say -- you know, just if we could find a way to explore the rest of the globe, it might help shed light on the situation we have here in our particularly unique situation of having -- you know, I make a show for $1.4 million. This is the topped out level of Murdoch now of $1.4. You know, a show like Suits which shoots in Toronto if you have ever seen Suits, its budget is around $4 million, you know, almost three times our budget across the street.
9541 And people think that that -- naively think this is how the world works. It doesn't actually. We are in a -- we're in a very interesting and unique situation here and, unfortunately, a complex one. I don't know. That might help part of it.
9542 MR. WREGGITT: If I could just add, Cal?
9543 I had mentioned something earlier today that I thought, you know, when you look at a baseball team and there's nine players out on the field and people watch the game and are having a great time, we think that's wonderful. But behind those nine players are another nine and another nine and another nine who aren't on the field at that moment and there is a business operation and there is a farm team and it goes back and back.
9544 And in the end, what we care about for our audience is that they watch the game, that they're watching the game. I don't need them to understand what the guys in the minor leagues are doing.
9545 But we -- it takes a lot of people to make television. It takes a lot of volume to make a professional baseball team. And to make Canadian television it takes a lot of people and experience and time and talent.
9546 THE CHAIRPERSON: I will leave it at that, other than to say that, you know, the Commission can't always reach its objectives without a social consensus that supports it. And I think the storytellers like that very impactful video is something that helps create the appreciation and development of that social consensus which I do fear might be slipping away.
9547 MS PARKER: Yes, we fear that as well.
9548 And I would just like to add that screenwriters really are at the heart of the creative system. We don't work on shows like Queen or Suits. Like our other colleagues, writers -- or sorry, directors and performers, we create and show run Canadian content.
9549 THE CHAIRPERSON: Right. And that is why I asked you the question. You're great storytellers and I think you need to tell that story.
9550 MS PARKER: We'll get onto that.
9551 THE CHAIRPERSON: But not just here.
9552 MS PARKER: Okay. We'll keep on our video regime.
9553 THE CHAIRPERSON: Yeah, that's right. Good.
9554 Thank you very much.
9555 MS PARKER: Thank you very much. Thank you.
9556 COMMISSIONER PENTEFOUNTAS: Oh, wait, wait. Sorry.
9557 Mr. Valleé has confirmed he is -- Jean-Marc Valleé confirmed he is planning a film on the Franklin expedition.
9558 MS PARKER: See, we knew that would take. One sec. Did he option a book?
9559 COMMISSIONER PENTEFOUNTAS: I have no details.
9560 MS PARKER: M'hmm. Well, he's a great director.
9561 COMMISSIONER PENTEFOUNTAS: But it's in good hands, yeah.
9562 MS PARKER: Well, find out who is writing it.
9563 COMMISSIONER PENTEFOUNTAS: Get on it.
9564 THE CHAIRPERSON: Great, thank you very much.
9565 I think it's best to take a short break before we do the last two interventions. Let's say let's take a 10-minute break and come back at 6:03.
--- Upon recessing at 1752
--- Upon resuming at 1802
9566 THE CHAIRPERSON: We are a minute early but -- à l'ordre, s'il vous plaît.
9567 Madame la Secrétaire.
9568 LA SECRÉTAIRE : Merci.
9569 We will now hear the presentation of the Canadian Cable Systems Alliance.
9570 Please present yourself and your colleagues and you have 15 minutes for your presentation.
9571 MR. BAXTER: Good afternoon. I'm Dave Baxter, President and CEO of Westman Communications Group and CCSA Chair.
9572 With me in the front row are all of the Directors of the CCSA: Keith Stevens, Eric Banville, Stéphane Arseneau, Jim Deane, Donna Robertson, Darren Muloin and Mike Fiorini.
9573 In the second row are senior CCSA staff: Alyson Townsend, Chris Edwards, Jennifer Salmon, and our regulatory consultant Harris Boyd.
9574 We are here today on behalf of all CCSA members, some 117 independent BDUs that serve customers throughout Canada.
9575 We will share our views on how to maximize customer choice at affordable prices, how to manage relationships between broadcasting distribution undertakings and programmers, and ways to foster local programming.
9576 From our point of view, the key elements of improving choice and access to local content for the Canadians we serve include:
9577 - simplified exemption of smaller BDUs;
9578 - elimination of the rule that requires a BDU to become licensed if it enters the territory of another licensed BDU;
9579 - exemption of not-for-profit cooperatives, regardless of size;
9580 - unbundling of channels at the level of wholesale agreements;
9581 - standardized, industry-wide wholesale rates; and
9582 - multiplatform rights as an integral part of a programmer's content offering.
9583 Finally, the VI companies now shape the industry and set the terms upon which most programming is made available to Canadians. You should focus on regulating them.
9584 Westman is a not-for-profit community cooperative based in Brandon, Manitoba. We have about 10,000 customers in Brandon. Almost all of our other 35 systems throughout Western Manitoba count their number of customers in the hundreds.
9585 We invest all of our earnings back into our networks, our operations and our community channel. That enables us to innovate and we are often a leader among independent distributors in introducing new digital products and services.
9586 Our systems use various technologies. Our smaller, analog-only systems are limited as to the flexibility of programming they can provide in the trapped-tier environment.
9587 When you consider whether to mandate a skinny all-Canadian basic service and whether to require BDUs to offer channels on a standalone basis, we ask that you take the capabilities of these small systems into account.
9588 If the Commission decides to implement such measures, it should ensure that small systems and their customers are not penalized by them.
9589 M. ARSENEAU : Bonjour. Je suis Stéphane Arseneau, directeur général à la Coopérative de câblodistribution de l'arrière-pays, ou CCAP pour les intimes, une entreprise qui appartient à ses utilisateurs/membres et qui fête cette année son 30e anniversaire.
9590 La CCAP dessert plus de 16 500 abonnés répartis dans cinq municipalités en banlieue de la ville de Québec. Nous distribuons à nos clients les services de télévision numérique et analogique, l'Internet, la téléphonie par câble, et nous sommes nouvellement revendeur des produits cellulaires de Vidéotron.
9591 Nous nous sommes donnés comme mission d'offrir des produits et services de qualité à des prix compétitifs. Même si le marché québécois est perçu comme celui qui offre le plus de choix aux consommateurs, cela ne peut pas s'appliquer également à tous les joueurs, étant donné les contrats sans latitude avec les différents fournisseurs de services.
9592 La CCAP, à l'automne 2012, a créé CCAP.Tv, notre nouvelle télé locale déjà gagnante de plusieurs prix. Le processus de lancement ne fut pas sans embuche, étant donné le coût élevé des équipements, qui nous laissait peu de manoeuvre pour la production de contenu dans notre premier budget.
9593 Nous sommes quand même fiers d'offrir à nos membres annuellement plus de 80 pour cent de production locale. CCAP.Tv permet à notre entreprise de s'impliquer dans sa communauté et d'en retirer de la visibilité.
9594 La principale contrainte étant le manque de ressources financières, le droit de vendre de la publicité, qui ne nous est pas actuellement possible, nous aiderait à améliorer notre service de bien des façons.
9595 MR. DEANE: Good afternoon. I'm Jim Deane from Access Communications. Access is a not-for-profit community-owned cooperative governed by its members.
9596 We serve just under 70,000 Canadians through 214 systems in Regina and throughout rural Saskatchewan. Like Dave's company, almost all of our systems serve customers numbered in the hundreds.
9597 We employ 250 people, with offices and community programming studios in Regina and seven other smaller communities. Our operations contribute millions of dollars to the local economies of the communities that we are privileged to serve.
9598 One of the things we do best is the creation and delivery of truly local programming to nearly 90 small communities. Our award-winning community channel, Access7, airs over 2,000 hours of first-run local programs, offering unique opportunities for local expression.
9599 For example, this summer we were proud to be a major partner in the presentation of the 2014 North American Indigenous Games held in Regina. We recorded and broadcast live coverage of the opening and closing ceremonies and sporting events and we showcased events from the Cultural Village.
9600 We made more than 50 hours of original, professionally produced games content available at no cost to other CCSA members.
9601 Such content sharing can be a powerful social force, a force that strengthens our nation and reflects Canadians, especially those who live in more remote regions, to one another in exciting new ways.
9602 Community channel rules in the exemption order for small BDUs -- such as local programming thresholds -- should not stand in the way of projects like this.
9603 Access Communications got behind the Indigenous Games because we knew it was important to share the stories of the games and because it was the right thing to do.
9604 One concrete way you can help us continue to do this is by including not-for-profit cooperatives, regardless of size, in the small systems exemption order. That would reallocate significant financial resources for us to invest in our networks and our community channels. Those resources would not leave the Canadian broadcasting system but would simply be put to more effective use.
9605 MS ROBERTSON: Good afternoon. I'm Donna Robertson from Novus Entertainment Inc., a licensed BDU serving customers in Metro Vancouver in competition with former monopoly providers Shaw and TELUS. Novus delivers services over its own fibre-optic network. We're that rarity in Canada, an urban overbuilder.
9606 All BDUs that serve 20,000 or fewer subscribers qualify for exemption. The one exception is that if a small BDU operates in the territory of a licensed BDU, then the smaller BDU must be licensed as well.
9607 The Commission's rationale for that exception was that competitors in the same market should be subject to the same rules so as to "ensure a level playing field." But that exception presumes so long as the same rules apply to all, the playing field is level.
9608 That's just not true. Our economic and operational circumstances are fundamentally different from those faced by these former monopolies.
9609 In this capital-intensive business, our competitors' advantages include, to name a few:
9610 - access to massive corporate marketing and sales resources;
9611 - access to public capital for investment in networks and facilities; and
9612 - substantially lower wholesale programming and transport fees negotiated at the corporate level.
9613 Our exclusion from exemption has helped to ensure that Novus' growth is slow and that our much larger competitors continue to dominate the market.
9614 This exclusion is also an unnecessary barrier to any new entrant that wants to compete as a BDU in any urban area in Canada. That's not good for consumers.
9615 Our company was first formed to offer an innovative service, Ethernet Internet, still one of the best products in the Canadian market. This kind of innovation is necessary for Canada to remain competitive and it is the kind of innovation that often originates with small and nimble companies like ours.
9616 We urge you to support competition and innovation by eliminating this exclusion from the benefits of small system exemption.
9617 MR. STEVENS: I'm Keith Stevens of Execulink Telecom, based in Woodstock, Ontario. We provide video service to just over 3,000 customers through three rural systems.
9618 As a SILEC, Execulink has served small towns in Southwestern Ontario for 110 years. We offer video, local telephone, mobile wireless, long distance and Internet access services, using multiple delivery methods, on our modern networks.
9619 Execulink's owners and staff live, work and play in the communities we serve. We know what our customers want. They want good service and choice. We also know what they don't want. They don't want to be told what to do and when. We completely agree.
9620 However, much of our content comes from the VI companies, our main competitors. The VI companies want to limit and control the products we offer and how we package them.
9621 For example, the most recent Bell Media affiliation agreement requires us to maintain packaging as it was before the contract was made. That goes back to a time when the programming services still enjoyed regulated access rights.
9622 For many of those services, the only way I can change the package is to agree to new highly-punitive rates. If that happens, we can face rates up to 23 times higher than we pay now.
9623 At the penetrations I can realistically achieve, the rates are unaffordable to me and my customers.
9624 So, we're stuck, still dealing with package rules that haven't changed since the 1990s. That's why my customers can't get the choices they want.
9625 You can't give Canadians improved choice at affordable prices until you address that problem.
9626 M. BANVILLE : Bonjour. Je suis Eric Banville, Directeur des opérations chez DERYtelecom, qui est l'un des plus importants câblodistributeurs au Québec avec sa filiale Câble Axion. L'entreprise offre le forfait Trio (télévision, Internet et téléphonie) et dessert plus de 60 000 abonnés télé, répartis dans 11 régions du Québec.
9627 DERYtelecom est en faveur d'un service de chaînes à la carte puisque nous constatons une demande de la part de notre clientèle.
9628 Nous ne rencontrons aucun inconvénient du point de vue technique pour lancer le service. Ce sont les ententes d'affiliation qui posent problème en raison des frais et des pourcentages de pénétration exigés, allant jusqu'à 80 pour cent. Pour cette raison, nous sommes essentiellement forcés de mettre les services à la base.
9629 Dans le contexte actuel, il est impossible pour un petit câblodistributeur d'offrir un service de télé à la carte viable et concurrentiel. Considérant un statu quo dans les ententes d'affiliation, l'abonné devra payer beaucoup plus cher pour le même service.
9631 MR. MULOIN: Good afternoon.
9632 I'm Darren Muloin of Mascon Cable Systems, based in Salmon Arm, B.C.
9633 We serve about 3,000 rural video customers, through seven small systems. All of our systems use HITS-QT technology. This is the only affordable way for us to provide digital TV service to our customers. It means that we can only get our programming from Shaw Broadcast Services via satellite.
9634 As a small BDU, we face many challenges to serve these rural communities; the largest being higher costs per subscriber than the big guys.
9635 We pay more for equipment, route meterage, sign transport, and for programming.
9636 Some of these costs are just a fact of life for a rural provider.
9637 But what I don't get is why we pay more for programming. It costs the programmer nothing more to make his product available to me, especially when I already pay the costs of transport and for all the equipment to receive the signals.
9638 There is no good economic reason for the volume pricing model to apply to TV programming.
9639 Volume-based and penetration-based rate cards give the program suppliers, especially the big VI companies, the opportunity to squeeze my margins and make it difficult for me to package and provide efficient delivery of programming at affordable rates.
9640 So, to remain viable, I have to either charge my customers higher prices for their TV service or limit the channels that I can offer in that service.
9641 The only reason for paying higher program rates is my company's size. For that reason alone, my customers can't get the same product offerings as Canadians who live in major centres.
9642 This proceeding gives the Commission a perfect opportunity to fix that. I can't see any reason why you should not insist that the programmers offer industry-standard rates to all BUDs, regardless of size.
9643 I strongly recommend that the Commission use this unique opportunity to implement industry-standard wholesale rates.
9644 MR. FIORINI: My name is Michael Fiorini. I am vice-president and general manager for Cable Cable Inc., a 32-year-old independent, family-owned BDU. Our systems are located in the Kawartha Lakes region, just northeast of Toronto.
9645 We service approximately 4,000 video subscribers, 5,000 Internet subscribers, and several thousand phone customers, over an area of 3,000 square kilometres.
9646 I wish to address two areas of concern: multi-format/multi-platform rights for video services; and OTT licensing.
9647 Cable Cable and its customers oppose the idea that multi-format varieties of a programmer's service -- SD, HD, SVOD, and IP -- should have additional fees when the content is identical and they have already paid for it once.
9648 While SD remains available to customers once they have a digital service, the HD and SVOD formats are, by far, the preferred choice.
9649 Continued attempts to secure multi-platform distribution rights have been difficult. While we are denied access to these rights, competitors can market complementary online access to customers who subscribe to their programming services.
9650 We ask that the Commission consider the standardization of wholesale rates for multi-format, multi-platform rights on a take-all basis, with more favourable costs than we see today.
9651 I also want to address OTT licensing -- and I'll be brief.
9652 Cable Cable maintains a VOD licence. We follow the rules. But we are forced to compete with the same offerings and titles for on-demand viewership with players who don't have to be licensed and make no contribution to the system. We ask that this inequity be rectified.
9653 MR. BAXTER: We believe the Commission can achieve most of what it needs to do by regulating the players who shape the industry and, today, control packaging and pricing: the VI companies.
9654 In a nutshell, CCSA members want to provide more choice to their customers.
9655 To effectively achieve that goal, we need you to implement the following.
9656 Firstly, we need changes to how wholesale rates are structured: require industry standard wholesale rates that are not dependent on volume; require reasonable rate cards that support offering customers choice. They cannot be punitive and there should be no minimum penetration thresholds.
9657 Second, a more complete exemption for smaller systems. The exemption should include not-for-profit co-operatives, regardless of size. The rule that requires BDUs to become licensed if they enter the territory of a licensed BDU should be eliminated.
9658 Thank you very much for your time and attention. We'd be happy to answer any questions.
9659 THE CHAIRPERSON: Thank you very much for being here.
9660 I know you're a large group, but it shows, because you're small business operators, how important you consider these issues before us. So, that doesn't go unnoticed.
9661 Thank you very much.
9662 Commissioner Molnar...?
9663 COMMISSIONER MOLNAR: Hi, everyone.
9664 It is a large group and you all have a story here.
9665 Is it appropriate if I target my question to the person who told the story?
9666 MR. BAXTER: Sure.
9667 COMMISSIONER MOLNAR: Okay.
9668 Well, Mr. Baxter, you're up first, your point being that the small analog systems have limited flexibility and you have some concerns as it regards how any kind of skinny basic could be implemented.
9669 You saw the working document and what's in there and the proposal in there, as it regards the exemption for the analog systems and how they would be grandfathered?
9670 MR. BAXTER: Yes.
9671 And essentially consistent with that working document, we want analog systems to be exempt from any skinny basic, for technology reasons. It's impossible --
9672 COMMISSIONER MOLNAR: If the working document proposal was implemented, would that relieve your concern?
9673 MR. BAXTER: Yes, it would.
9674 COMMISSIONER MOLNAR: Okay. Thank you.
9675 M. ARSENEAU : Si vous le permettez, j'aimerais ajouter -- I can do it in English.
9676 I just want to make sure --
9677 COMMISSIONER MOLNAR: You can do it in French. I'll just --- it just takes me a minute.
9678 MR. ARSENEAU: It's okay.
9679 I just want to make sure you also understand that even though many of our small systems do offer digital service, they also have an analog service, on an ongoing basis, and this could also be difficult to implement when we talk about skinny basic.
9680 So, those two technologies do still exist, in Canada, today.
9681 COMMISSIONER MOLNAR: And you are speaking of exempt services?
9682 MR. ARSENEAU: Yes, indeed.
9683 COMMISSIONER MOLNAR: Okay. So, the request would be that exempt services don't have a mandated skinny basic?
9684 Is that what you're looking at?
9685 MR. ARSENEAU: I'm just saying that we need to keep in mind that some small cable operators do have both, and having a skinny basic on the analog will be difficult to implement, even though they can do it on the digital side of their business.
9686 MR. BAXTER: So, the answer is, yes.
9687 COMMISSIONER MOLNAR: But separate systems -- I guess, now, I'm a bit confused.
9688 You're using both to serve within a single system? Or you have systems that are analog and systems that are digital?
9689 MR. ARSENEAU: From my perspective, CCAP, we offer both to our customers, at the same time.
9690 So, right now, a customer that takes the digital offer we have automatically gets the analog service, as well -- which is still made of over 40 channels. It's pretty big.
9691 COMMISSIONER MOLNAR: Okay.
9692 Mr. Deane, could you explain to me what your concern was that you identified in paragraph 25?
9693 MR. DEANE: Well, we think the community channel model for our members works, and works well.
9694 One of the things I think that -- a couple of things that may help us would be the ability to share programming based on relevance rather than local, and I think the example of that was the North American Indigenous Games.
9695 And I think the other thing that we would suggest, in terms of helping us improve community programming, would be to allow exempt systems to achieve some modest advertising revenue on their community channels.
9696 COMMISSIONER MOLNAR: Okay. And you're aware that issues related to community channels will be looked at in a different proceeding?
9697 MR. DEANE: Yes, we are.
9698 COMMISSIONER MOLNAR: Okay.
9699 MR. DEANE: We just want to tell you it's not broken, despite what you may have heard yesterday.
9700 COMMISSIONER MOLNAR: Oh, I see. Thank you.
9701 And you are going to appear again tomorrow, are you?
9702 MR. DEANE: Yes, I am, as from Access Communication, yes.
9703 COMMISSIONER MOLNAR: Okay. So, is it okay if I let you do your pitch on number 27 tomorrow?
9704 MR. DEANE: Yes, that'd be fine.
9705 COMMISSIONER MOLNAR: And just to be clear, the issue of exemption co-ops that are higher than the current exemption limit, does that affect any other members?
9706 MR. DEANE: At this point, just Access Communication.
9707 COMMISSIONER MOLNAR: Just you. Okay.
9708 MR. DEANE: Yes.
9709 COMMISSIONER MOLNAR: Okay. Well, you'll have something to talk about tomorrow, then.
9710 MR. DEANE: Thank you.
9711 COMMISSIONER MOLNAR: Ms Robertson, again, the working document does put out a proposal to expand the exemption order. Yes?
9712 MS ROBERTSON: We were very pleased to see that.
9713 COMMISSIONER MOLNAR: And it meets your concerns, as it's proposed?
9714 MS ROBERTSON: It does.
9715 COMMISSIONER MOLNAR: Thank you.
9716 Mr. Stevens, you've got the big one here.
9717 MR. STEVENS: I may need some help answering that, as well.
9718 COMMISSIONER MOLNAR: Yeah, for sure.
9719 Once again, the working document does have a proposal to enhance the protections for affiliation agreements -- I'm just trying to find it here so I get the words right -- but, essentially, would propose to restrict things like grandfathering most favourite stations and reasonable penetration rate cards, which we can speak of separately as what is unreasonable, but --
9720 MR. STEVENS: I think the proposal or the working documents goes a long way towards what we need, but I think we need to -- I think it's such an important topic, I think we would like to elaborate a bit more, if we could, because we have some examples how badly it is broken, and it is more than just the rates. It's also the terms and conditions, and all the others get tied into it as part of the document.
9721 But -- and maybe I'm going to turn it over to Jennifer to answer that, if she could, because we've a lot of examples if we could --
9722 COMMISSIONER MOLNAR: Let me just say that there is quite a bit on the record as to issues with the agreements that have been signed today, you know. A number of different parties have given us examples and so on. So, I'm really quite interested in what you would propose is necessary as a change, versus all that is, you know, a lot of examples of grandfathering or something of that effect.
9723 MS SALMON: Certainly, we can do that.
9724 I think what we would be looking for are, as Darren said, the elimination of volume-based rate tables. An example of that, today, is we have an agreement where if a large vertically-integrated company were to have the same penetration for their services as Access, they would have a 92% discount on their rate, and that is simply due to volume.
9725 So, it's really hard for Access to compete with them. They have a direct offering -- direct competitive offering.
9726 So, first, we want to eliminate volume-based price discrimination.
9727 Second, there's been a lot of talk about "make whole" price --
9728 COMMISSIONER MOLNAR: I'm sorry. Is it okay? I just want to ask a question on this because it also ties into the comments. I have to remember who talked about that on the volume-based rating and the fact that you'd like to see wholesale --
9729 MS SALMON: Absolutely. Darren talked about it, and they all go together.
9730 COMMISSIONER MOLNAR: So, tell me, is the issue of volume-based rate cards something that's new within the industry?
9731 MS SALMON: No.
9732 COMMISSIONER MOLNAR: This has been here forever and in some ways the reason CCSA was created, if I understand.
9733 MS SALMON: Yes. It's becoming outrageous, though. And when our margins are getting squeezed and we are being faced with competition from over the top, we need to be on a level playing field with those who are competing. So, a lot of our customers are being stolen by Bell, being stolen or won over by Shaw, and if our rates are 92% higher for the exact same service, it's going to be hard to compete with them on a retail price for our consumer.
9734 Our consumers should --
9735 COMMISSIONER MOLNAR: Are you talking relative to a VI undertaking?
9736 MS SALMON: Yes.
9737 So, if -- and it's not just VI --
9738 COMMISSIONER MOLNAR: And it isn't your view that the dispute resolution process that's available, if you felt it was an undue preference, that you could have brought something like that forward?
9739 MS SALMON: Well, our hope is that we can get a system in place where we don't have to come to you for every dispute. It's timely and it's costly.
9740 If we had something that was a very clear and definitive rule that you can't be discriminated based on volume, it would be a lot easier for us to say, you can't put that contract in front of us.
9741 We, right now, have a code --
9742 COMMISSIONER MOLNAR: There always has been, though -- just so I understand -- there always has been discriminations relative to volume.
9743 But what you're saying is it has become undue?
9744 MS SALMON: You know what? The volume that we used to see, and we've been doing these agreements for quite a long time, were a penny, two pennies, five cents. Ninety-two per cent is getting unreasonable.
9745 COMMISSIONER MOLNAR: M'hmm.
9746 MS SALMON: And so, we had been living with the fact that, yes, we may pay a couple cents more than them. But, now, it's becoming a very significant impact on our ability to maintain our margins.
9747 So, would you like me to go on with what we're actually looking for, in terms of your initial question?
9748 So, no volume-based rates.
9749 There's been a lot of talk about "make whole" pricing.
9750 We certainly agree that it should not be more than "make whole". But we also question why it should be "make whole".
9751 It seems to be that that would be putting all of the risk on our members to maintain the revenue.
9752 We would like the VI code to be enforceable.
9753 We currently have the VI code with three players that are obligated to live by the rules, Bell, Corus, and Rogers, and we've received an agreement from Rogers that has tied selling, that has minimum penetrations, and that has more than "make whole" programming costs.
9754 So, while these have to live with this --
9755 COMMISSIONER MOLNAR: So, you're telling me that Rogers has --
9756 MS SALMON: Has sent us an agreement.
9757 COMMISSIONER MOLNAR: -- forward a penetration-based rate cause that causes them to receive more than "make whole"?
9758 MS SALMON: Two dollars more than "make whole".
9759 COMMISSIONER MOLNAR: Oh. Perhaps Mr. Engelhart didn't know that when he was speaking --
9760 MS SALMON: We are an appropriate --
9761 MR. BAXTER: We were really encouraged to hear that they think that there should be no more "make whole". So, we were encouraged by that.
9762 MS SALMON: Yeah.
9763 In addition, we would like non-linear rights to be an integral part of our negotiations. They are becoming more and more important and they can't be left to the side and an additional fee at the end.
9764 We also would like to ask for content protection.
9765 If we're going to guarantee them some sort of revenue through these penetration-based rate cards, we want to make sure that the content is also protected, that, as I believe as Jim puts it, that hockey doesn't turn into ping-pong and, all of a sudden, we're stuck with the same rate.
9766 Minimum penetration thresholds, we would like to see gone.
9767 And fair pricing curves.
9768 All of that goes towards the industry standard wholesale rate that we'd be asking for.
9769 COMMISSIONER MOLNAR: Thank you.
9770 I just want to follow up a little bit on the non-linear rates.
9771 They are a separate rate. Do you agree?
9772 MS SALMON: No. We would like them --
9773 COMMISSIONER MOLNAR: They're not? They not?
9774 MS SALMON: We would like them to be included with the price that we're paying.
9775 Our customers expect to be able to watch what they want, where they want, when they want. And right now, we're not able to do that.
9776 COMMISSIONER MOLNAR: But they are in the market today a separate rate. I mean we've seen some companies come forward -- it sounds like Rogers is going to take Shomi over the top. So, it is a separate and distinct rate.
9777 MS SALMON: Well, I believe Shomi is a product that doesn't have a linear service attached to it.
9778 The multi-platform rates we would be talking about are the multi-platform rates that are associated with the linear channel. So, TSN would have TSN GO. We think that the right for TSN should include the rights for TSN GO.
9779 Because what you'll notice is that the people who own these rights and own these channels are very easily able to put that content up on their networks and provide it to their customers. And then they ask for us rates that we can't live with or that we can't afford, and we don't have access to that content.
9780 COMMISSIONER MOLNAR: M'hmm.
9781 If they were not made part of this same right, is there some kind of other protections that could be put in place or that are necessary and don't exist today, to ensure that you do have access to those?
9782 MS SALMON: Well, I think that --
9783 COMMISSIONER MOLNAR: I mean you maybe heard me talking to Bell, saying, how do I see CTV GO?
9784 I don't think -- do you have it, Mr. Deane?
9785 MR. DEANE: At the price they're asking, no, we don't.
9786 COMMISSIONER MOLNAR: M'hmm.
9787 MS SALMON: So, I suspect that the two things that come top of mind for that would be the head start rule. So, we would have to find a way that we would feel comfortable being able to launch it with the idea that we're still having a negotiation for the price. A big, big component of that is retroactive payments for this. Who bears the risk of the retroactive payment? Is it the person who's perhaps started with an unrealistic demand? Which means that we can't have it until they come closer to our level.
9788 We can end up with a significant bill, at the end of the day . And not that it was industry standard practice, but we have actually seen those bills be charged interest -- and that, we're deathly afraid of.
9789 So, we cannot launch services with the uncertainty of who's going to foot the bill for the retroactive period and how much is that bill going to be?
9790 The no head start rule and having them force a no head start rule could be a way that they have to become a little bit more serious about their negotiations with those of us who also want to carry the content before they can start launching it and carrying it.
9791 Because what they're doing is launching it and then advertising that it's launched and should be available and all you have to do is call your cable company and get them to negotiate.
9792 It undermines the whole fact we're sort of trapped in this world where the rates are things we can't agree to. The multi-platform rates that Bell is asking for, for CTV GO, are significantly higher than what we do have deals for these similar type. We have a deal with Global Go, and I can tell you that what Bell is asking for is significantly higher than the deal we have for Global Go.
9793 COMMISSIONER MOLNAR: Thank you for that.
9794 So that's a lot to think about, but we have it and we will think about it. I mean that's essentially extending into what is today exempt, some sorts of regulations, and requires some thought, I suppose, on the part of all of us -- well, it does. It requires a lot of thought.
9795 MR. STEVENS: If I could add -- because the question started with me -- I mean without some of those changes and without --
9796 COMMISSIONER MOLNAR: No, I'm sorry. I was just talking right then about the multi-platform --
9797 MR. STEVENS: Multi-platform. I'm sorry. Okay.
9798 COMMISSIONER MOLNAR: -- the rest of it, you know, I appreciate how very clear and concise you were. Clearly, you're ready for that one. So, we've got that, relative to what's in the working document today.
9799 I want to move away from your speaking notes now, if that's okay, just to ask -- I mean, you seem to indicate that with proper affiliation agreements you are not -- you support the notion of more choice for consumers, choice and flexibility?
9800 MR. BAXTER: Absolutely. We are committed to providing choice to our customers. At the foundation of providing that choice, though, and what has prevented us from providing more choice to our customers is the affiliation agreements.
9801 COMMISSIONER MOLNAR: Right.
9802 MR. BAXTER: So, until the commercial agreements, the way they are structured, is addressed, there isn't going to be that capability to offer more choice.
9803 We offer at Westman about sixty stand alone signals now. Those are the only ones we're allowed to carry, but there's a lot more, especially some very desirable ones that we'd like to. But, due to penetration based rate cards and minimum penetration requirements and all those things --
9804 COMMISSIONER MOLNAR: Understood, yeah.
9805 MR. BAXTER: -- we talked about, it's impossible.
9806 COMMISSIONER MOLNAR: Right. Understood.
9807 And so let me ask, if the changes we make correct some of the inequities you see today in the bargaining and you are able to achieve the flexibility you need within your affiliation agreements, this working document lays out some -- some proposals as it regards additional choice for consumers, and I would like to get your thoughts on that, if I could, both on the basic and on the other flexibility as it regards a la carte or Build Your Own Package.
9808 Where do you guys fit? What's the preferences?
9809 MR. BAXTER: As far as the --
9810 COMMISSIONER MOLNAR: And, hopefully, there is not two, four -- eight different ones.
9811 MR. BAXTER: As far as the Skinny Basic proposals, I understand there's an A and a B. We're one of the few that are actually going to make a selection, and we're going to -- we think that A is something that the Skinny Basic with the 9(1(h) and Canadian signals is something that we favour, again in a digital only environment, not analog.
9812 And, we don't think there should be any sort of rates -- regulated rate setting involved.
9813 As far as the Pick and Pay, we are in favour of it and we're committed to -- to implementing a Pick and Pay, again subject to having the environment with our commercial agreements that allow us to do it.
9814 COMMISSIONER MOLNAR: Okay, thanks.
9815 MR. FIORINI: Sorry, we're also -- we were in the room when Mr. Audet enlightened us on his unique belief about non-9(1)(h) services being excluded from the Skinny Basic, and I think we'd be pretty open to that, as well.
9816 COMMISSIONER MOLNAR: Do you have particular concerns regarding the US 4+1, or you're okay with Option A as it exists?
9817 MR. BAXTER: As I mentioned, we're okay with Option A, which does not have to include the US 4+1.
9818 COMMISSIONER MOLNAR: Right Okay. And now, just between us, are you okay just because you're so deathly afraid of rate regulation, or because you think that that's something that is good for your customers?
9819 MR. BAXTER: We think it is -- we think it is good for our customers. You know, providing the choice of the Skinny Basic will provide a more scaled down choice for our customers. A lot of them will choose to say, and I would say probably the majority will choose to stay with the basic package they have. But, providing that choice is important.
9820 And, the 4+1's, we can still offer in an attractive way as we are today.
9821 COMMISSIONER MOLNAR: Okay
9822 MR. BOYD: And, Dave, I just might add, I think one of the reasons that our members make that distinction is in many of the markets I serve, the 4+1 are not available off-air, so you don't have the situation that Rogers was talking about.
9823 COMMISSIONER MOLNAR: Well, I was actually thinking of Mr. Stevens. I would think you might have some 4+1 in -- around you.
9824 MR. STEVENS: Oh, we do. But we still think it's the customer should have the choice. And we tried to look at it as much as you did, from what the customers want, and for those that want a very, very basic package we think we should offer that to them, not that we wouldn't have tier that's very inexpensive to add on 4+1, but you know that may be an option they'd -- they'd have to make that option for that.
9825 One reason we're a little bit concerned about the rate regulation is that we serve primarily very rural areas, and our costs, our basic underlying costs tend to be a bit higher than the Rogers and the Shaws in those areas. So, if you set a rate that was $30 it may be well below our costs. It may not -- and I just chose that number from the air, not that we've done studies on that. That's what our concern about the rate regulations, and we get caught up in, and the urban areas were dragged in, you know it would lower the average costs that we could charge. That's our concern there.
9826 COMMISSIONER MOLNAR: And we are talking about non-exempt systems?
9827 MR. STEVENS: They are all exempt. Other than the one, they are exempt systems, yes.
9828 So it may be a mute point at this point, I understand that, yes.
9829 COMMISSIONER MOLNAR: Okay. Thank you very much.
9830 Those are my questions. But I do just want to mention that I really enjoyed the format of this. Hearing from all of your board members and a little bit about each company, and bringing forward your issues that way is very good. Thank you.
9831 THE CHAIRPERSON: Thank you.
9832 COMMISSIONER PENTEFOUNTAS: Your Option One choice -- Option A, sorry -- what would you be able to bring that in at, price-wise, if you had to guess? They're pretty educated guesses, though, but --
9833 MR. BAXTER: Well, you know, it -- You know, it really varies. I mean, we have different members here with different size systems. It's all over the map. So, for us to give you a number is very difficult. I think you are aware --
9834 COMMISSIONER PENTEFOUNTAS: Let me ask you a different question. If you're at $40 roughly, your basic package, right now, would you say that would be a fair number?
9835 MR. DEANE: Well, I can tell you what our basic is, it's twenty-seven channels at $34.95, so it's pretty close to Option B as you've got right now, so I think that --
9836 COMMISSIONER PENTEFOUNTAS: Is TSN and Sportsnet in that?
9837 MR. DEANE: TSN is, yes.
9838 COMMISSIONER PENTEFOUNTAS: It is, eh?
9839 MR. DEANE: Yeah.
9840 COMMISSIONER PENTEFOUNTAS: Okay. Well, just taking TSN our of the equation you're --
9841 MR. DEANE: Well, the American 4+1 are in there, as well, but, no, I --
9842 COMMISSIONER PENTEFOUNTAS: They don't cost you anything?
9843 MR. DEANE: Well, they do for delivery, but --
9844 COMMISSIONER PENTEFOUNTAS: Delivery, yeah, but besides that?
9845 MR. DEANE: And equipment and maintenance and the like, but I think Dave is right, our systems are -- we have 117 members, and we have vastly different systems. I mean, if we are talking about the non-exempt system that's mine. And you know, I'm sure it's probably in the mid $20s would be the cost of that.
9846 COMMISSIONER PENTEFOUNTAS: Right. And you've all sensed the pressure of including TSN in that basic package in the past, thus far?
9847 MR. DEANE: Contractually, yes. Yeah.
9848 COMMISSIONER PENTEFOUNTAS: Okay so that would alleviate you of, I'm not going to call it a burden, but a fiscal burden for your clients.
9849 MR. DEANE: Well, I think Option A does that, I mean our Option 1, that provides those customers that perhaps aren't that interested in sports, an opportunity to get the Canadian services at a reasonable price.
9850 COMMISSIONER PENTEFOUNTAS: Great. I always thought the idea behind this organization was that it could sort of use the scale that you acquire by joining, you know strength in numbers to gain some leverage in your negotiations.
9851 MR. DEANE: Well, there's a 117 of us.
9852 COMMISSIONER PENTEFOUNTAS: It sounds like there's sort of a lot of armies of one?
9853 MR. DEANE: Yeah, well, they're very small systems. There's 117 of us, but unfortunately when we aggregate the numbers we're nowhere near the large players.
9854 MR. STEVENS: But I could add, the reason members have joined, including ourselves, this is an awful lot better than by ourselves. We get a lot better -- we can make a lot better deal with 117 together than by ourselves. But, compared to what the VI companies get, it's still --
9855 COMMISSIONER PENTEFOUNTAS: You still don't have the scale that -- you don't feel you have the --
9856 MR. STEVENS: Oh, nowhere near. They don't -- some of them don't even want to talk to us, that's the challenge.
9857 MS TOWNSEND: And when CCSA began, it was twenty years ago -- sorry, it's Allison. It twenty years ago and it was an entirely different landscape. There were no VI companies.
9858 COMMISSIONER PENTEFOUNTAS: Right
9859 MS TOWNSEND: There were more people than we could negotiate with. Volume discount made -- well, it didn't make sense as Candice pointed out. It was just -- it just was a fact of life. It wasn't really based on the fact that it cost more or less to deliver to these companies. It was just something we had to accept at the time.
9860 COMMISSIONER PENTEFOUNTAS: Right.
9861 MS TOWNSEND: But as the landscape has changed and now we have just a handful of VI companies who are also our competitors, the whole volume based pricing makes absolutely no sense.
9862 COMMISSIONER PENTEFOUNTAS: When you talked about at one point you were employing 250, I think it was Mr. Deane.
9863 MR. DEANE: It's Jim Deane.
9864 COMMISSIONER PENTEFOUNTAS: Would that include the people that work on your community channel?
9865 MR. DEANE: Yes, it would.
9866 COMMISSIONER PENTEFOUNTAS: And how many would that constitute out of the 250?
9867 MR. DEANE: Between 15 and 20. I don't know how many.
9868 COMMISSIONER PENTEFOUNTAS: 15 and 20?
9869 MR. DEANE: Between 15 and 20, yes.
9870 COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chair.
9871 THE CHAIRPERSON: M. Dupras?
9872 COMMISSIONER DUPRAS: All your systems are competing with satellite?
9873 MR. BAXTER: Yes, they are.
9874 COMMISSIONER DUPRAS: In terms of channels, you have the same array?
9875 MR. BAXTER: It really varies by the size of the system. So, in the very smallest communities that we have with less than 100 subscribers, we may have 30 analogue channels, sometimes just a basic analogue and sometimes a basic analogue and a tier analogue.
9876 In larger communities for example Brandon, we're completely digital, we offer internet and phone service and we offer a comparable service to DTH.
9877 COMMISSIONER DUPRAS: Okay, so is your competitive edge the fact that you're offering internet and phone also, now, today?
9878 MR. BAXTER: I mean, DTH is a competitor. That's not our primary competitor. It's generally the telephone companies that we're primarily focussed on, and in a lot of cases, and I think all cases they offer all the services we do, plus mobile wireless.
9879 COMMISSIONER DUPRAS: I am just wondering, a system that has only analogue channels for instance, how can it match a satellite offering with -- if there is also internet in the area, high speed internet in the area by a phone company?
9880 MR. BAXTER: We don't compete as well in the smallest communities. You know, we're challenged to offer internet service in those very small communities. As you mentioned, it tends to be the telephone companies that may have a presence there, and direct home satellite has a broader range of services. We make up for it in ways like having a local community channel in some of those very small communities that can make a difference.
9881 MR. BOYD: And you should keep in mind with DTA, it's there are no local staff, there are no local offices, it's all contacted out. And the local presence, even if we don't have a community channel in the very small places, carries a lot of weight. The operators here know all of their customers, and that's where they get their customer loyalty. So, it may not be the same product, but as you recognize in some of your proposals, not everybody wants 300 channels. And we cater to those people.
9882 MR. ARSENEAU: But I'd like to add that it's getting more difficult and we're seeing, as we speak, a co-op a in Quebec, Baie-Trinité, to name it, that's about to close it's doors. Maybe you never hear about it because they're no longer licensed, but it's a fact of life, and I think we'll see some of that happening in the near future.
9883 COMMISSIONER DUPRAS: Thank you.
9884 LE PRÉSIDENT: Merci beaucoup. Those are our questions.
9885 Sorry for the late time of your presentation, but I think it was worth, and thank you for coming in large numbers.
9886 Thank you.
9887 MR. BOYD: Thank you very much.
9888 THE SECRETARY: I will now ask the Canadian Network Operators Consortium to come to the presentation table.
9889 THE SECRETARY: Please introduce yourself for the record, and you have 10 minutes for your presentation.
9890 MR. SANDIFORD: Mr. Chairman, Commissioners, good evening.
9891 My name is Bill Sandiford. I am chair of the board and president of the Canadian Network Operators Consortium. Seated with me is Christian Tacit, counsel to CNOC.
9892 CNOC is an association of 34 competitive telecommunication service providers offering a variety of telecommunication services. We estimate that our members serve approximately three-quarters of end users receiving Internet access service from non-incumbent telephone service providers.
9893 Increasingly, our members are operating, or considering operating, as BDUs enabled by IPTV technology. As such, our members constitute an important element of Canada's single broadcast system, one which has a unique role to play in promoting BDU competition.
9894 In the Notice of Consultation leading to this hearing, the Commission observed that technological innovation has made watching programming more individual and customizable. It also stated that Canadians have access to an increasing number of exempt Internet video service providers offering a significant amount of content, including Canadian programming. We concur.
9895 Given these developments, our central message today is that trusting consumers to choose the programming they receive and the manner in which they receive it is effectively the most effective manner for the Commission to promote the objectives of the Broadcasting Act in the current and evolving environment.
9896 The best way of enabling consumer choice is for the Commission to foster greater competition in the provision of BDU services. The Commission can do this in three ways.
9897 First, it can streamline regulatory requirements that challenge the entry of competitive BDUs, especially smaller ones, to promote entry and diversity in service offerings.
9898 Second, the Commission can be cautious in the exercise of its regulatory powers so as not to impose excessive costs on new entrants that will prevent, delay or diminish their entry.
9899 Finally, it can ensure that incumbents, particularly vertically integrated ones, are not in a position to unduly discriminate against new entrants.
9900 In the balance of my remarks, I will summarize some of our tangible recommendations for giving effect to the three-pronged approach just described. Where applicable, I will tie those recommendations into the items discussed in the working document issued by the Commission prior to the hearing.
9901 Our first and most important recommendation is for the Commission to broaden the exemption order for terrestrial BDUs to allow those with fewer than 20,000 subscribers to enter and compete in markets with licensed BDUs. In other words, we fully endorse item 25 of the working document.
9902 As the Commission itself acknowledge in the "Let's Talk TV" Notice of Consultation, a broadened exemption order would greatly facilitate the entry of new services in the system by eliminating the long delay involved in obtaining a licence. It would also encourage competition among BDUs.
9903 A related key problem facing both new entrants and existing small BDUs is the time that it takes to negotiate affiliation agreements for all of the programming that they are required to carry either before they can start operating as BDUs or to add new programming.
9904 We have two recommendations in this regard.
9905 First, we urge the Commission to establish a reference offer for such programming that includes a price and other terms and conditions that would serve as the default conditions under which such programming could be acquired in the absence of another agreement.
9906 Second, we request that the Commission focus on expediting the resolution of disputes between programmers and BDUs as much as possible using the alternate dispute resolution tools that are at its disposal.
9907 More specifically, we invite the Commission to examine any means by which the timeframes for types of ADR or between different ADR methods could be reduced. Similarly, it would be worth exploring whether final offer arbitrations could be employed for non-financial terms and not just disputes that are exclusively monetary.
9908 Fostering greater competition also means enabling competitors to differentiate their service offerings. Regulations should be flexible enough to enable the delivery of programming to consumers based on their choices. For this reason, we support the Commission's goals regarding the creation of a small basic service package, the adoption of pick-and-pay for discretionary services, and empowering subscribers to create their own custom packages of discretionary programming services.
9909 In other words, based on the marketplace as it exists today, and with what we view as the limited state of competition available to consumers seeking dynamic alternatives, we endorse items 1, option A, 2 and 3 in the Commission's working document. Items 2 on pick and pay and 3 on build-on-your-own packages are especially important because they would help ensure that large programming service providers could not prevent BDUs in the marketplace from deciding to offer their subscribers with more choice.
9910 At the same time, I do want to add what we see as an important consideration regarding item 1, option B, to cap the retail price of small basic package to $20, $25 or $30, as suggested in the working document.
9911 First, we believe that price regulation of the basic package at the retail level is not required or appropriate. If the Commission creates an environment that fosters vigorous competition, leading to a real choice of service providers, any market failure that might otherwise justify retail price regulation will be corrected by the marketplace itself, ensuring that prices for basic service are set at reasonable levels.
9912 More importantly, however, if the Commission does proceed to set a cap, we would ask that it do so in a manner that accounts for the costs incurred by BDUs to deliver the small basic package to their customers.
9913 CNOC members that wish to provide competition in the BDU market in order to be a real alternative to significant numbers of Canadians transport BDU traffic through incumbent networks. They must do so by incurring extremely high-tariffed, capacity-based billing, or CBB charges. While the amount of the charges to be incurred varies according to each member's traffic, engineering and approach, what is true across the broad is that bandwidth costs alone would make it very hard, or even impossible, to provide a skinny basic package at the rates proposed by the Commission.
9914 We recognize that the issue of CBB rates is a telecommunications regulatory matter that is outside the scope of this proceeding, but we urge the Commission not to set a cap for any BDU services without first addressing the underlying cost for any service which the Commission intends to set a cap. The caps proposed by the Commission are not tenable for encouraging BDU competition from innovative IPTV players in light of high incumbent CBB rates.
9915 Another important topic which I wish to address is the regulatory safeguards required to ensure that vertically integrated entities do not have the ability to give effect to the incentives and opportunities that they have to unduly discriminate against their competitors. We applaud the Commission for continuing to attend to this important issue and wholeheartedly endorse items 6, 7 and 8 of the working document.
9916 These items, if implemented, would: one, address affiliation agreement issues that the ability of BDUs to offer more choice; two, improve access for non-vertically integrated services; and three, make the VI code mandatory, and provide for mandatory ADR when an affiliation agreement is not renewed within a specified period of time after expiry.
9917 We also urge the Commission to add a regulatory measure that would prevent BDUs that have online extensions from giving themselves an undue preference in supplying their online extensions to the exclusion of other BDUs.
9918 Finally, with regard to the implementation date of the regulatory framework coming out of this proceeding, which is at item number 29 of the working document, we would ask the Commission to differentiate between those rules that affect existing parties for which implementation time is required and those matters that just facilitate entry by new BDUs.
9919 In the former case, we have no objection to the suggested date of December 15th, 2015; however, in the latter case, such as in the case of the broadening of the BDU exemption order, we would urge the Commission to implement those determinations without delay. After all, new entrants will need some time to enter the market even if they had the regulatory approval to do so today.
9920 In conclusion, we believe that the measures we've described in this submission will make it easier for BDUs to enter and serve the market. This will promote competition and empower consumers to a much greater degree. They will be able to have greater control over what content they can watch, when they can watch it, and the terms under which they receive.
9921 In order for these outcomes to occur, we urge the Commission to trust consumers to be the central means for promoting the objectives of the Broadcasting Act.
9922 This concludes our presentation and we are pleased to respond to your questions.
9923 THE CHAIRPERSON: Well, thank you very much. That was very clear and I believe Commissioner Simpson will have a few questions for you.
9924 COMMISSIONER SIMPSON: Thank you very much, Mr. Sandiford, Mr. Tacit. Mr. Sandiford, I miss the beard. There are so few of us left.
9925 COMMISSIONER SIMPSON: How many of your members are offering IP TV now?
9926 MR. SANDIFORD: That I am aware of, we have one or two members that are operating IP TV now.
9927 COMMISSIONER SIMPSON: Okay. And you have heard the CCSA talking about the difficulties of negotiation. Has there been discussion between CNOC and CCSA with respect to combining forces on establishing terms of reference?
9928 You're talking about reference agreements and I'm wondering if they have made any headway that you could benefit from by going together?
9929 MR. SANDIFORD: Not that I'm aware of.
9930 COMMISSIONER SIMPSON: Okay. Any non-profits in your organization?
9931 MR. SANDIFORD: Not that I'm aware of.
9932 COMMISSIONER SIMPSON: Okay. So jumping right into the exemption -- first off, I have to say that you warned us that your written -- or your oral might be different than your written simply because, you know, there is the benefit of the better part of a week of other testimony, so I see that you pared everything down, but all my notes are on the written document, so if I start to stray or get into any areas you want to take off the table, but I will do my best to try and combine the two.
9933 So essentially your first point was that you really believe that, as a position that the expansion of the exemption order is the first and most important part of your submission?
9934 MR. SANDIFORD: That is correct. We believe it is very key.
9935 COMMISSIONER SIMPSON: Okay. On the simplification part, beyond what I think you had stated in your written submission, which was a lightening of the notification process that's required, is there anything else that you were pointing to in terms of streamlining that goes along with the exemption?
9936 Because, you know, you're talking about the time delays. You know, one of the issues that I think every -- either exempt or not, you know, when you march into somebody else's territory they drag their feet with respect to response to notification.
9937 MR. SANDIFORD: That's correct. And in most cases when we are looking to march into somebody else's territory, those territories are the territories of the entities that we have to negotiate with for services.
9938 COMMISSIONER SIMPSON: Okay. So streamlining functionally rests a lot on the notification burden and your view is make that notification as streamlined as possible; is that correct?
9939 MR. SANDIFORD: That's correct.
9940 COMMISSIONER SIMPSON: Okay. I'm struggling a little bit with your second point in your oral where you say:
"The Commission can be cautious..."
9941 -- or --
"...should be cautious in the exercise of its regulatory powers to not impose excessive costs on new entrants that will prevent delay or diminish their entry."
9942 Can you unpack that because I'm trying to make it correlate to your written submission of earlier?
9943 MR. SANDIFORD: Sure. There are a couple areas and one of them we touched on in the oral presentation, which was that of a capped option being item 1.
9944 We are worried that if it's not fully investigated with some of the costs that we have today --
9945 COMMISSIONER SIMPSON: Yes.
9946 MR. SANDIFORD: -- that a cap could be set that is very well below what the costs are to actually provide services from some of these very innovative companies that want to enter the market.
9947 COMMISSIONER SIMPSON: Yes. We heard that from CCSA and, you know, as conventional cable they are struggling with the same thing.
9948 You had mentioned in your written submission I think, as well as the oral, that part of the extenuating circumstances that you are reliant, in many instances, on carriage over incumbent infrastructure and you wind up potentially getting smacked with CBB, you know, with the issue of --
9949 MR. SANDIFORD: It's not potentially. We absolutely get smacked with CBB by carrying on the incumbent's wholesale access services network, absolutely.
9950 COMMISSIONER SIMPSON: Yes. Now, just out of curiosity, I'm pretty sure I know the answer to this, but is it safe to assume that every one of your members in whole or in part relies on carriage on the incumbents? I mean, are any purely facilities-based?
9951 MR. SANDIFORD: I don't believe we have any that are today purely facilities-based. We do have at least one member that I can think of who was on the panel before us that they started off their life as a facilities-based carrier and have moved into expanding out using the wholesale access regime.
9952 We do have some members who are today, who started off solely by making use of the wholesale regime and are now building facilities-based networks. In fact, just last week I visited one of them when Mr. Pentefountas was challenged to the ice bucket challenge, we were on a jobsite.
9953 COMMISSIONER SIMPSON: Oh, were you?
9954 MR. SANDIFORD: One of them was constructing fibre to the home networks.
9955 COMMISSIONER PENTEFOUNTAS: Thanks for sharing that with me.
9956 MR. SANDIFORD: Yes, no problem.
9957 COMMISSIONER SIMPSON: And it continues.
9958 But let me ask you this, though, and it goes to a question that's on topic but perhaps not, and it has to do with, you know, the whole entry into IP TV by CNOC members.
9959 The business model, when we were rambling around looking at wholesale rates and wholesale access a long time ago -- it doesn't seem that long ago, but we ultimately came to a resolution and, you know, we don't want to go back there, it's a telecom issue and you have indicated that.
9960 MR. SANDIFORD: And we believe you came to the right determination, absolutely.
9961 COMMISSIONER SIMPSON: Gosh, we're glad to hear that.
9962 COMMISSIONER SIMPSON: Tweet.
9963 MR. SANDIFORD: The model is absolutely correct, but the rates we could talk about at a later time.
9964 COMMISSIONER SIMPSON: But what I'm struggling with, though, is that, you know, the business model for a lot of your members was that you were offering a different, more intense, more comprehensive service to some more business-oriented clients and to more individual clients, they found a great attraction to a lot of your CNOC members because you were able to offer them almost all-you-can-eat packages at one point and, you know, there was quite an aggregation of what I would call high-balling users in some of your client base.
9965 Now, as you start getting into IP TV, you know, you have cautioned us that we have to look at -- we have to look before we leap, so if we do get into, in our wisdom, a cap on an entry-level rate, on let's say a skinny basic or a skinny Canadian basic, that there is digital negative consequences because of the rates we have been talking about that you have to pay.
9966 So the question is this: Are you able, or is your relationship with the incumbents able to discriminate between the data moved over the wires from the data moved in IP TV system or are they aggregated or how do you separate them out?
9967 MR. SANDIFORD: Well, when we get them from the incumbent they are already aggregated. A lot of are members have the capabilities in their networks to be able to tell how much of the traffic that comes to them is television traffic and how much of it is Internet traffic.
9968 Unfortunately, when it comes to the rates that we pay to the incumbents for the carriage of that traffic it's irrelevant and it is actually truly a shame because in a lot of cases, where some of our members that are doing IP TV today, those channels are already being carried to those households twice because in the incumbent's own delivery of their TV services they are already delivering the channel to the fibre node in the neighbourhood once, it's already there, and then by virtue of us looking to do it we are paying to bring the channel again to the same location.
9969 COMMISSIONER SIMPSON: Okay. But aside from the cost issue, there's not going to be a potential issue where that aggregated data becomes problematic because you can't sort out wheat from chaff?
9970 MR. SANDIFORD: Yes. We can absolutely take a look at it on our side, we know which is which. I'm not sure if the incumbents are capable. I would imagine they are, they have very complex systems.
9971 COMMISSIONER SIMPSON: Okay. There is not too much more because, you know, you have been, with Mr. Tacit's help I'm sure, been very succinct and, you know, normally we are talking about standing in the way of people's lunch, now we are to dinner and pretty soon by the end of the week it's going to be bed.
9972 I want to get to the reference offer suggestion that you put forward.
9973 MR. SANDIFORD: Sure.
9974 COMMISSIONER SIMPSON: You are talking strictly wholesale rates, or are you talking more than that?
9975 MR. SANDIFORD: Yes, wholesale absolutely.
9976 COMMISSIONER SIMPSON: Okay. Now, your dispute resolution -- sorry, in the notion of having a reference offer, how are you proposing that you get there? I asked you earlier about CCSA and teaming up with them because they seem to be struggling with this as well, but how would you arrive at a reference rate and if that reference rate is there sort of as a price tag, then having it is a backstop for you, but does it really get the provider to sign the contract any quicker just knowing it's there?
9977 MR. SANDIFORD: Well, let me just say one thing and then I will defer a little bit of the question to my colleague.
9978 We don't look at the reference offer as being only relevant to the rate, we look at the reference offer as being relevant to all items that are in section 2 of the VI Code, you know, penetration levels, packaging and services. We are concerned with things other than the rates when it comes to a reference offer.
9979 As for the rest of your question, I will pass that to Mr. Tacit.
9980 MR. TACIT: Well, he actually did a very comprehensive job, that's what I was going to say as well. If you look at the VI Code I think you will get an indication of the kinds of factors that would go into that.
9981 I think there would have to be some follow-up process to deal with that in some structural way. Perhaps some formulas would come out of that that could be applied based on individual circumstances, but some sort of framework.
9982 We are not envisioning a situation where parties would have to be before you every time. That is exactly what we are trying to avoid by having a reference offer.
9983 COMMISSIONER SIMPSON: Okay. And if things go terribly wrong, you're saying that you want to make sure that, whatever comes out of this process, that the VI Code has teeth and they are used.
9984 But I guess where I want to go here next is that when things do go wrong and you find yourself in a scenario with undue preference or disadvantage of some form, you know, you're saying that there are rules in place, but they just have to be used on an ex-post basis to satisfy disputes.
9985 But I'm a little puzzled by your comment when you say that with respect to notorious offenders of anti-competitive behaviour that the Commission consider ex-ante approaches to rules to prevent such conduct. Are you basically saying that if you know that you have a repeat offender that you would automatically go to an ex-ante formula to be able to mitigate what you are about to get into?
9986 MR. TACIT: I think the problem with ex-post remedies, there are a number of them; one is detection sometimes, the other is the time it takes to deal with them and the resources required to deal with them and sometimes the ex-post remedies can become a barrier to entry in and of themselves, that framework.
9987 And that's, for example, very apparent in the wireless world where we have all this wonderful ability to arbitrate and so on, but it hasn't really helped competition.
9988 So in light of these sorts of factors I think what we are saying is that when you -- as a disincentive for people not to breach the rules, and people can differ and sometimes you need ex-post remedies due to legitimate differences of opinion, but you can tell in some cases when it goes beyond that and the behaviour is systematic and has an anti-competitive effect and it would certainly serve as a good deterrent in that case if you kind of move them up the regulatory ladder, at least for some time period.
9989 COMMISSIONER SIMPSON: And all these remedies or proposed remedies or application of arbitration tools, how do they relate to the statement you made where you say:
"A related key problem facing both new entrants and existing small BDUs is the time that it takes to negotiate affiliation agreements."
9990 So walk me through how they apply, how you shorten the timeframes, or does that get back to the other issue of wholesale strike points? How do they tie?
9991 MR. SANDIFORD: I will quickly say that with regards to tying, we have just seen -- we have received feedback from some of the members that we have that are already in this space, and I believe you will hear from one of them next week, that some of the VI entities just drag their feet with regards to timing, getting the affiliation agreements done.
9992 They have no incentive to get them done.
9994 MR. TACIT: Yes, that's right. I mean, we have seen that both in the telecom and broadcasting world where, you know, VI entities typically have much less incentive to cooperate with you than the need that you have for their cooperation.
9995 I think a very good illustration of that was one of the suggestions made at this hearing that if they are big enough that you don't need any arbitration at all because -- and that's reflective of the fact that when you are big VI you have market power.
9996 COMMISSIONER SIMPSON: True enough.
9997 I think I'm pretty close to my last question, maybe just one or two.
9998 On your recommendation -- and again, this goes back to the written proposals so this may not be on the table, but you had a suggestion on one ex-ante rule where you were saying that the -- and this applied to section 5 of the exemption order for digital media undertakings, a.k.a. the VI Code -- where you wanted to add:
"...subject to paragraph 6, the undertaking does not offer television programming on an exclusive or otherwise preferential basis..."
9999 -- this is to do with online extensions --
"...on any platform in a manner that is dependent on the subscription to a distribution undertaking mobile or retail Internet access."
10000 Now, that obviously closes -- you know, it plugs the hole very nicely, but does that suggestion take into consideration the possibility that the program provider doesn't have the rights to allow pass on into other -- I'm thinking here what was recently encountered by us, which was the Olympic Committee, and I think the very strong barking we heard from the National Football League who said that when we sell a turnkey system to a provider it doesn't necessarily mean that they have the obligation or the rights to pass on the online version of that content.
10001 MR. TACIT: Well, I think what we are saying is that if you look at a VI you almost have to treat it like it's two separate entities, like it's a wholesale provider and a retail arm and if the wholesale arm notionally negotiates a deal for its retail arm that has passthrough obligations, then it should make darn sure and it should be a requirement that it does so for any other retail arm that comes before it seeking the same kind of content.
10002 COMMISSIONER SIMPSON: Yes. This is my last question. You had said, and it's not the quantification but the qualification of the statement, you said that there are customers out there who are not happy with the present quality.
10003 I asked this question earlier of Rogers and I will ask it of you. Is there something different about IP TV delivery that either now or in the future adds another value beyond the content that moves through the pipe just simply because of its interactivity capability and, you know, being able to break away from the box that everybody loves to hate, which is the set top box that comes with cable?
10004 This question comes from something we are going to hear from TELUS on Friday with respect to their observation that we kind of at the Commission take a view under section 7 of the BDU regs that says that permission has to be granted before you can substantially alter the content or the presentation of the content.
10005 It got me thinking about IP TV and its capabilities to change the environment of the screen and the relationship with the user.
10006 Is this something that, not perhaps now because you haven't mentioned it, but down the road and, if so, how far, that we should be thinking about with IP TV?
10007 MR. TACIT: I think certainly in terms of fostering innovation. And that goes for us as well as the incumbents, and the VI incumbents for that matter. To the extent that we are talking, for example, you know, being able to put a screen within a screen or have some sort of commentary, if you are talking about those sorts of things, manipulating the content without actually distorting it or negating it, I think would be useful.
10008 I think it's part of the innovation that IP technology can bring generally and I think it's quite plausible to think that even the dominant players will increasingly use IP technology to deliver their content.
10009 To the extent that those capabilities exist, they should be available to all to distinguish themselves in the marketplace and offer innovative new services. So we would be all for that notionally.
10010 COMMISSIONER SIMPSON: I think those are my questions. Mr. Sandiford, you're done?
10011 MR. SANDIFORD: I'm done.
10012 COMMISSIONER PENTEFOUNTAS: Thank you. Briefly, what my colleague, Commissioner Simpson doesn't realize is that once other fellows see his beard they give up hope and shave it off, so that's why they are dropping like flies, because of that.
10013 IP TV, you still get a box with IP TV?
10014 MR. SANDIFORD: In most cases, yes.
10015 COMMISSIONER PENTEFOUNTAS: Yes.
10016 MR. SANDIFORD: There are -- some of the new smart televisions that are coming out are coming out with platforms that allow software to be installed in the television that do the same thing.
10017 COMMISSIONER PENTEFOUNTAS: Okay. But most IP TV in Canada today requires a box?
10018 MR. SANDIFORD: Absolutely.
10019 COMMISSIONER PENTEFOUNTAS: Yes, exactly. How many IP TV subs has the mandated wholesale regime allowed you to get to at this point? Can you give us a number?
10020 MR. SANDIFORD: So from the organization standpoint I don't have those numbers. As I mentioned, we have one or two member organizations that have become IP TV providers today and one of them is before you next week, so that might be a question that's appropriate for them. I don't have their actual subscriber counts.
10021 COMMISSIONER PENTEFOUNTAS: Would you be able to file that for us before the 19th of September? As an organization you should have access to how many subs we are talking about at this point.
10022 MR. TACIT: We probably don't. It would be the individual members. The best we can do is poll them and see what they say and provide whatever they can provide.
10023 COMMISSIONER PENTEFOUNTAS: Would you do that for us as an organization instead of sort of us chasing after each one of them?
10024 MR. TACIT: Sure. We can undertake to do that, sure.
10025 COMMISSIONER PENTEFOUNTAS: If you can that would help us understand what we are talking about.
10026 And, secondly, I understand your affinity for Option A. What would that form of skinny basic come in at pricewise in Toronto, as an example?
10027 MR. SANDIFORD: Similar to the question that you heard from the CCSA before us. It's difficult to say, different members operate their networks in a different fashion.
10028 I can tell you that for our members that use facilities-based services it would be lower; for those that are making use of the wholesale services --
10029 COMMISSIONER PENTEFOUNTAS: The wholesale regime I'm talking about.
10030 MR. SANDIFORD: Sorry?
10031 COMMISSIONER PENTEFOUNTAS: The wholesale regime.
10032 MR. SANDIFORD: Well, I can't tell you the exact price that the service will come in, but I can give you the following numbers that might help you build to see how quickly the costs can go up.
10033 COMMISSIONER PENTEFOUNTAS: Okay.
10034 MR. SANDIFORD: So let's say for example that they are watching a standard definition channel that broadcasts somewhere around 3 Mb per second, all right, 3 Mb per second, if you have -- if you use a typical CBB rate that is coming in, we will take an average between, say some of the ILECs and the cablecos and we will say it's $14 per megabit, you can see very quickly that the cost to carry that traffic could be upwards of $32 for one channel.
10035 COMMISSIONER PENTEFOUNTAS: It gets expensive, yes. You have 22 OTAs in Toronto alone, you add the 9(1)(h)s.
10036 MR. SANDIFORD: You are not going to have customers that are watching all 22 channels at once, but for one television in the household watching a single definition stream could be 3 Mb per second could have underlying costs to the operator of $32 for that one channel given the current high levels of the CBB rates.
10037 COMMISSIONER PENTEFOUNTAS: Gotcha. Thank you so much. Very informative.
10038 THE CHAIRPERSON: Thank you very much. Again, apologies for keeping you late like this after class and sending you home with some homework as well.
10039 MR. SANDIFORD: We are happy to be here.
10040 MR. TACIT: Thank you.
10041 THE CHAIRPERSON: Thank you very much.
10042 So that adjourns today and we come back tomorrow morning at 8:30. Thank you.
--- Whereupon the hearing adjourned at 1923, to resume on Friday, September 12, 2014
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