ARCHIVED - Transcript, Hearing 12 September 2014

Volume 5, 12 September 2014

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

SUBJECT:

Let's Talk TV: A Conversation with Canadians

HELD AT:

Outaouais Room
Conference Centre
140 Promenade du Portage
Gatineau, Quebec
12 September 2014

Transcription

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

Transcription

Let's Talk TV: A Conversation with Canadians

BEFORE:

ALSO PRESENT:

HELD AT:

Outaouais Room
Conference Centre
140 Promenade du Portage
Gatineau, Quebec
12 September 2014

- iv -

TABLE OF CONTENTS

PAGE / PARA

PRESENTATION BY:

- v -

UNDERTAKINGS

PAGE / PARA

- vi -

ERRATA / ADDENDA

Volume 3 - 2014-09-10
  Para. 7085: "4A" should be "Cat A"

Volume 4 - 2014-09-11
  Para. 8401: "4B" should be "Cat B"
  Para. 8403: "4A et les 4B" should be "Cat A et les Cat B"

Gatineau, Quebec

--- Upon resuming on Friday, September 12, 2014 at 0830

10043   LE PRÉSIDENT : À l'ordre, s'il vous plaît. Good morning, everyone. Bonjour.

10044   Madame la Secrétaire.

10045   LA SECRÉTAIRE : Merci. Bon matin.

10046   We will now begin with the presentation of TELUS.

10047   Please introduce yourself and your colleagues and you have 15 minutes for your presentation. Thank you.

PRESENTATION

10048   MR. WOODHEAD: Thank you very much.

10049   Good morning, Mr. Chairman, Mr. Vice-Chairman and Commissioners. My name is Ted Woodhead and I am Senior Vice President, Federal Government and Regulatory Affairs at TELUS.

10050   With me today, on my right, are David Fuller, Executive Vice-President and President, TELUS Consumer and Small Business Solutions; Blair Miller, Vice-President, Content Solutions; Ann Mainville-Neeson, Vice-President, Broadcasting Policy and Regulatory Affairs; Clément Audet, Vice-President, Consumer Markets Quebec; and Anne-Marie Laberge, Vice-President, Brand and Marketing Communications.

10051   Also with us today, behind me, are our expert consultants Peter Lyman and Ricardo Avillez from Nordicity Group.

10052   Thank you for the opportunity to appear before you today to discuss the future of Canadian television.

10053   We applaud the Commission for this timely and extensive review of the television broadcasting regulatory framework. As you pointed out in your opening comments, Mr. Chairman, Canadian television does indeed find itself at a crossroads. Now is the time to take steps to ensure that healthy competition is sustained in the Canadian broadcasting system to the benefit of consumers. TELUS is pleased to see the role that you have given to consumers in this proceeding. We too believe in Putting Customers First.

10054   TELUS is also pleased that the proposals put forward by the Commission in this proceeding reflect a recognition that change in the regulatory framework is necessary. TELUS agrees with many of the proposals of the Commission in its working document. We are particularly heartened to see proposals which will further strengthen the safeguards against the opportunity and incentive for large vertically integrated companies to thwart competition in the markets in which they operate, including broadcasting distribution, mobile and broadband communications. We firmly believe that healthy and sustainable competition in all forms of TV content delivery will best meet the expectations and demands of consumers.

10055   Dave.

10056   MR. FULLER: TELUS entered the TV market with its own broadcasting distribution undertaking in 2006 with a market trial of an innovative new service and we further expanded this television offering significantly with the launch of our current Optik TV platform in 2010.

10057   Prior to TELUS' entry into TV distribution in our markets, consumers were faced with essentially only two options for paid TV content: to subscribe to the incumbent cable company or to subscribe to one of two Canadian direct-to-home satellite services. But all of these options provided similar large packaging tiers which forced the uptake of many programming services in order to receive the few that the subscriber truly wanted. From the start, we listened to consumers and heard clearly that they wanted more choice. For this reason, TELUS launched a TV service which would maximize choice in programming services for consumers.

10058   As such, TELUS' entry into the market provided not only a new choice in providers, it also significantly increased choice for consumers regarding how they purchased programming services because TELUS offers a much more "skinny" basic than its competitors and also offers all other discretionary programming services in small theme packs, averaging roughly five programming services per pack. We now also offer nearly 100 channels on an individual à la carte basis.

10059   Consumers like the choice provided by TELUS, which has led to significant success in the market. As a result of TELUS' success in the market, its main competitor in Western Canada now also offers more choice to consumers regarding the programming services they buy in an attempt to compete more effectively with our offering. Accordingly, the overall impact of TELUS' entry into the TV market has been an extremely positive one for all TV consumers.

10060   TELUS' introduction of the theme pack structure in our markets has also provided significant benefit to newer programming services. Often, these innovative services have had difficulty getting subscribers when offered on the stratospheric tiers of incumbent cable and satellite services. In TELUS' distribution structure, all discretionary programming services are on a level playing field for attracting subscribers and therefore audiences.

10061   Importantly, Category B services are offered alongside other established services in the same genre and they are found side by side with other like services in our channel guide, which is set up in accordance with thematic surf zones. This ensures that consumers who are willing to pay for a service in a specific genre also receive other similar programming services in the same genre.

10062   TELUS believes that its theme pack structure strikes an excellent balance between maximizing consumer choice and providing discoverability of new programming services. The consumer who likes lifestyle programming from HGTV might also like the programming on Food Network and will receive these together in a single small theme pack. The consumer benefits not only from discovering new services in a genre of their choosing but also from the effect of increased competition for the programming services in that genre as they all need to compete for audience share.

10063   However, entering the TV distribution market has been expensive for TELUS, not only as a result of needing to make significant network investments in order to ensure consumers are able to receive an increasing number of HD signals on a compelling new digital service but also as a result of paying significantly higher programming costs than our competitors for the same programming services offered to consumers.

10064   Higher programming fees are paid by TELUS as a result of "make whole" rate cards which set programming services for lower penetration levels, which are a direct result of the exercise of choice by consumers. The exercise of choice by consumers reduces the penetration level of programming services which are included in basic or in the first level tiers and large programming bundles of other incumbent BDUs in the market. This is to be expected since the myriad of services included in large packs can't appeal to all consumers. Some consumers like sports services and some don't. Others like drama programming and others don't.

10065   We've heard a lot in this proceeding concerning penetration-based rate cards which "make whole" a programming service but two important points appear to have been missed in determining whether a rate card is "reasonable" or not.

10066   First, the revenue level used to determine a "make whole" rate card is more often than not based on an "industry average penetration level" which is completely artificial and not reflective of consumer choice. Services which are distributed in basic or large tiers by all the incumbent BDUs will have by definition a very high "industry average penetration level" which is often not reflective of consumer choice. You can easily identify these services which have artificially high average penetration levels by the disconnect between their penetration and their actual viewership. Viewership is ultimately the most important indicator of the value a programming service provides to consumers.

10067   Secondly, the concept of a "make whole" rate card for programming services is completely inconsistent with enabling consumer choice. Why should programming services not suffer revenue losses if they fail to meet the needs of their market and attract audiences and subscribers? No other industry we are aware of is guaranteed success regardless of their performance. To fully insulate programming services from the effect of consumer choice and allow them to be perpetually subsidized through a lack of consumer choice will simply regulate complacency on the part of programming services, and further, it will precipitate the decline of the regulated TV market as the cost of these "make whole" rates are transferred to consumers. We are very encouraged to see the attention given by the Commission to this important issue.

10068   Allowing programming services to insulate themselves against the exercise of consumer choice by charging higher rates for lower penetration levels is inconsistent with the policy objective of ensuring more choice for consumers. Since the Commission's goal in this proceeding is to maximize consumer choice regarding programming services they buy, then the Commission must also ensure that programming services also bear some of the impact of the exercise of that consumer choice and not be allowed to completely insulate themselves through "make-whole" rate cards.

10069   Competition in the TV distribution markets where TELUS has entered has resulted in more choice being offered to consumers and more can be done if the barriers to doing so are removed.

10070   Ann.

10071   MME MAINVILLE-NEESON : TELUS considère que ce sont les services de programmation qui posent les plus grands obstacles à la liberté de choix des consommateurs en matière de services de programmation, et c'est donc là où le Conseil devrait concentrer ses interventions réglementaires. Afin que les consommateurs canadiens puissent bénéficier d'un véritable choix en matière de services de programmation, le Conseil doit d'abord interdire toutes les modalités contractuelles qui se dressent contre la capacité des EDR de maximiser le choix offert aux consommateurs.

10072   Par exemple, le Conseil doit interdire :

10073   - des conditions précises en matière d'assemblage;

10074   - des garanties exigées en matière de taux de pénétration minimal qui vont au-delà de la demande réel pour le service; et

10075   - des grilles tarifaires qui rendent l'offre du choix commercialement déraisonnable.

10076   Aussi, dans la mesure où le Conseil a l'intention d'obliger la distribution de tous les services sur une base individuelle à la carte, il devra assurer que telle mode de distribution n'est pas prohibée par les modalités contractuelles qui régissent la distribution du service.

10077   Establishing rate cards which reflect the real fair market value of programming services is necessary to make consumer choice viable. To assist in this regard, Nordicity Group has proposed a framework which builds on the list of factors in the VI Code, providing clear guidance as to how each of these factors should be considered when assessing fair market value of a programming service. Nordicity's framework also prioritizes the Commission's factors, putting consumer willingness to pay as a top consideration.

10078   TELUS submits that the clearer guidance provided by Nordicity's framework should replace the list of factors provided in section 2 of the VI Code. The additional clarity on how the Commission may assess fair market value would assist parties in their negotiations and ultimately result in fewer demands for the Commission's dispute resolution.

10079   Dave.

10080   MR. FULLER: TELUS also submits that special measures must be taken with respect to premium sports services. Many other countries have taken steps to maintain affordability of sports content in the face of the spiralling cost of sports content rights. We noted some of these international examples in our written submission filed on June 27, but we also have a more fulsome report of international precedents prepared by Michael Ryan of Arnold and Porter, which we would be pleased to share.

10081   The significant distinction between Canada and other countries is that all of Canada's sports specialty services are vertically integrated with large distributors who also own large broadcast groups which each include over-the-air television networks. Accordingly, the measures proposed in other countries such as the U.K. and Australia would not benefit the Canadian system.

10082   That is why TELUS proposes that sports services should be treated somewhat similar to pay movie services in that they should be prohibited from being included in the basic package. Also, in order to ensure that rates for these services are more closely aligned with consumer willingness to pay, these services should be required to provide a single rate for their services applicable to all Canadians.

10083   By not having penetration-based rate cards for sports services, BDUs would face no incentive to reduce consumer choice by making "unnatural" packaging decisions in order to meet penetration levels which would provide a better rate, something that has been called a "sports tax." And on the flip side, if rates become truly tied to consumer willingness to pay, the sports services would constrain their bidding for sports content rights in order to fit the budget set by consumers and advertisers. Being forced to sensibly constrain their bidding on sports content rights would ultimately also be beneficial to the other programming services in the sports services ownership group.

10084   Turning to another important aspect of this proceeding regarding the future of TV, TELUS submits that as content migrates to new platforms, vertically integrated broadcasting companies are taking advantage of loopholes and exploiting regulatory voids to stifle their competitors.

10085   Most recently, Rogers and Shaw announced to great fanfare a joint online content service called Shomi, indicating at the media conference launching the service and in their remarks in this proceeding that the service would initially only be available to Rogers and Shaw subscribers for between 6 and 12 months. TELUS is very concerned that a so-called "beta phase" is being used to justify an exclusive over the Shomi service, giving an undue preference to Rogers and Shaw and preventing TELUS customers from accessing this service.

10086   Content exclusives are detrimental to competition in the subscriber markets for broadcast distribution, Internet and mobile services. Consumers should never be prevented from accessing content on other platforms using the distributor or mobile carrier of their choice.

10087   MR. WOODHEAD: While some have argued in favour of the benefits of consolidation for the Canadian broadcasting system, there is a tipping point where concerns over market dominance far outweigh any benefits thought to be gained from consolidation. Canada is well past that tipping point. The Commission recognized this when it established safeguards to prevent anticompetitive conduct resulting from vertical integration. However, the Commission left open the possibility of content exclusives for content created for other platforms than traditional TV. TELUS submits that this is a gap that needs to be closed.

10088   Canada's cultural industry is benefitting from consolidation on the programming side, where the concentration of a significant number of programming services into large corporate groups provides many synergies, including cross-promotion of services, shared marketing and operational efficiencies. There is no need for additional benefits to flow from their vertical integration with network operators and there are considerable policy reasons which argue against allowing vertically integrated companies to use their programming arm to unduly preference their distribution arm and vice versa.

10089   Conversely, allowing vertically integrated companies to use their programming services or related content assets to boost their distribution and carrier businesses through the use of exclusives, for example, does nothing to promote network investment and technological innovation. Programming content exclusives, even temporary ones, used to lure consumers to a specific distributor or carrier, lead to an outcome where consumers have to subscribe to numerous distribution networks to get all the content they want. This too is not a good public policy outcome.

10090   Accordingly, the Commission should categorically prohibit content exclusives on all platforms, without distinctions regarding whether the programming was "designed primarily for conventional television and VOD services." Such distinctions merely create loopholes to be exploited by the large vertically integrated content companies to thwart competition.

10091   Ann.

10092   MME MAINVILLE-NEESON : Plusieurs des propositions du Conseil dans son document de travail répondent aux préoccupations que nous avons soulevées dans nos commentaires.

10093   En particulier, TELUS appuie la proposition numéro 6 du Conseil qui propose de modifier le Code de déontologie sur l'intégration verticale afin d'interdire certaines clauses limitant la capacité d'une EDR à offrir un choix à prix. abordable.

10094   TELUS appuie aussi la proposition numéro 8 du Conseil qui transforme les dispositions du Code sur l'intégration verticale en exigences réglementaires, ainsi que la proposition numéro 9 qui impose les mêmes exigences réglementaires aux services non canadiens.

10095   In closing, competition in the TV distribution market is the best means of addressing the goals of the Commission in this consultation of maximizing choice and flexibility for consumers. Indeed, healthy and sustainable competition will best ensure that consumer demands are met and satisfied not only with respect to choice and flexibility but also regarding affordability and customer service. Satisfaction of consumers with existing regulated TV providers will in turn quell the move of Canadians towards unregulated viewing options and best meet Canada's public policy goals.

10096   TELUS thanks the Commission for the opportunity to participate in this proceeding and we would now be pleased to answer your questions.

10097   Ted Woodhead will act as your quarterback, which makes sense since he actually played football.

10098   THE CHAIRPERSON: Thank you.

10099   First of all, I wanted to thank you for agreeing to change your forecasted appearance date to help us manage the agenda a little easier. That was very useful for us, so thank you for that.

10100   MS MAINVILLE-NEESON: Our pleasure.

10101   THE CHAIRPERSON: And I will be starting the questions here.

10102   On another preliminary point, I'm more than happy to see that TELUS believes in putting customers first. I tend to talk about putting Canadians first because sometimes Canadians, yes indeed, have consumer outlooks, but they also have citizenship issues and creator issues. But we'll leave the philosophic and rhetorical discussion to another time.

10103   Now, just on a more evidentiary issue, you referred to Michael Ryan's study on international precedence. Now your written submission largely summarizes his perspective.

10104   MR. WOODHEAD: That's correct.

10105   THE CHAIRPERSON: Is that correct?

10106   MR. WOODHEAD: Yes.

10107   MS MANVILLE-NEESON: That's correct. It --

10108   THE CHAIRPERSON: So he looks at the Australian anti-siphoning rules, probably the legislation in Belgium that allows for listing services of national importance, or some term like that?

10109   MS MANVILLE-NEESON: That's right.

10110   So he adds a few more examples that we didn't include in our submission, so...

10111   It's quite a lengthy report, but we're more than happy to share it, of course.

10112   THE CHAIRPERSON: If you assure me -- we'll take it under advisement, but if you assure me that it is -- the conclusions are largely already summarized in the --

10113   MR. WOODHEAD: That's correct.

10114   THE CHAIRPERSON: -- in your submission --

10115   MS MANVILLE-NEESON: Absolutely.

10116   THE CHAIRPERSON: -- but we'll take that under advisement.

10117   It is an area which I have had the chance to study earlier in my life and I'm sure our record would benefit from it, but I just want to make sure it's in fairness in other parties.

10118   In a sense, you're probably one of the most interesting intervenors in our proceeding for the following reason: you're a large player in the Canadian marketplace, in the broader communication marketplace; you operate in many regions of the country, including Quebec and in the west; you have concrete experience in a more flexible choice-driven offering; and you're not vertically integrated. So, in a sense, you bring a very unique and powerful perspective to this hearing.

10119   Now your main thesis, I believe, is that perhaps the problem is not so much at the retail level, but the root cause is an unhealthy wholesale market for the supply of Canadian and non-Canadian programming services.

10120   Would that overly summarize your perspective?

10121   MR. WOODHEAD: That's correct.

10122   THE CHAIRPERSON: So maybe I'll start with that: on how we could address your concerns -- or how you propose that we address your concerns with respect to improving the wholesale market.

10123   Perhaps, first of all, would you suggest maybe that we should change the name of our code, to call it perhaps a code to ensure fairness in the wholesale market, rather than the terms we see to use and trip over?

10124   MS MANVILLE-NEESON: Certainly that appears to be a very good suggestions, but one that we haven't raised. But we completely agree.

10125   THE CHAIRPERSON: Well, we'll give some thought to that.

10126   So the first area you mention in your written submission, paragraph 34, is fixing a loophole with respect to tied selling. Is that correct?

10127   You used the word -- it's in quotes, but refer to tied selling. Is that one of the areas you think -- you still maintain that position?

10128   MS MANVILLE-NEESON: I think where we spoke of loopholes, and particularly in our submission, was with respect to other platforms. So it a -- I suppose that might be get getting the impression of tied selling, where you have to be a BDU subscriber in order to get access to the OTT complementary authenticated product. And we do have some examples of that that's occurring now that --

10129   THE CHAIRPERSON: I don't believe paragraph 34 is talking about that. It's specifically relating to pay television regulations and specialty regulations, about unreasonable terms for standalone.

10130   MS MANVILLE-NEESON: Yep, absolutely, so -- I mean, we do have issues with numerous factors. I just wanted to make sure I clarified where you were looking at.

10131   So definitely the tied --

10132   THE CHAIRPERSON: I have a long list of areas --

10133   MS MANVILLE-NEESON: Okay.

10134   THE CHAIRPERSON: -- where you want to improve the wholesale market. I'm not boiling down all your comments to this one.

10135   MS MANVILLE-NEESON: Excellent.

10136   THE CHAIRPERSON: I'm just starting off to make sure that you still believe that this is an area we should address.

10137   MS MANVILLE-NEESON: Absolutely.

10138   THE CHAIRPERSON: At page 30 of your written submission, you also list a number of packaging restrictions that you've encountered with programming -- undertakings.

10139   Is it your view that all of these are unreasonable, or that they only become unreasonable in certain circumstances?

10140   MS MANVILLE-NEESON: Most of them are unreasonable, some only in certain circumstances. I think circumstances do matter.

10141   THE CHAIRPERSON: Can you elaborate exactly which ones and maybe unpack that for me?

10142   MS MANVILLE-NEESON: Certainly.

10143   With respect to -- I just want to get to the right page here.

10144   THE CHAIRPERSON: Paragraph 30. It's on page 16.

10145   MS MANVILLE-NEESON: Oh, sorry.

10146   MR. WOODHEAD: Oh, sorry, I thought you said page 30.

10147   MS MANVILLE-NEESON: Yeah, that's what -- that's where I was looking as well.

10148   THE CHAIRPERSON: No, para -- 16, paragraph -- well, we'll do better with digital versions. I referred to paragraph 30, three-zero.

10149   MS MANVILLE-NEESON: So definitely, to the extent that if the Commission determines that all services should be offered on a pick-and-pay basis, the first one, which clearly prohibits that, would be a problem and would always be unreasonable, right?

10150   At this point, if the Commission does not choose to mandate a full pick-and-pay environment, then naturally some services may choose not to offer their service à la carte, which we think is very unfortunate, but may not always constitute -- necessarily be an unreasonable commercial practice.

10151   THE CHAIRPERSON: So unlike, let's say, Rogers, you're of the view that all services, both Canadian and non-Canadian, should be available on a pick-and-pay basis, right?

10152   MS MANVILLE-NEESON: We certainly think that's what consumers want.

10153   THE CHAIRPERSON: There is no, in your view, any technical reason that that could not occur?

10154   MR. WOODHEAD: Not to our knowledge.

10155   THE CHAIRPERSON: And you're not concerned, as I understand Rogers' point, that there may be certain foreign services --

10156   MR. WOODHEAD: That's right.

10157   THE CHAIRPERSON: -- that might not go along with that. Is that not of concern?

10158   MR. WOODHEAD: I think Dave may have something to say on that.

10159   MR. FULLER: Yeah.

10160   I mean I -- it is a valid concern. I think there's a potential chance that, you know, as Rogers said, they may take their ball and go home if asked to, you know, conform to this. I think they're -- you know, they're likely probably concerned about the precedent of: if they agree to, you know, terms like this in a Canadian environment, will it end up, you know, happening in the U.S., in a much bigger market?

10161   You know, I do think, at the end of the day, they'll -- you know, economic reality of them wanting to access the Canadian market will cause many of them to say they'll stay. And those that don't, you know, I think what you'll find over time is the really, you know, high-quality shows that they have, you know, will come back into the Canadian market because the existing Canadian distributors would be fairly highly incented to go south of the border and, you know, buy the rights for the particular shows that are, you know, very attractive and that Canadians want to have so that they enhance their own services, right, so...

10162   THE CHAIRPERSON: But you're not concerned -- I mean you're a company that states that they want to put consumers first.

10163   MR. FULLER: Yeah.

10164   THE CHAIRPERSON: We could be in a situation where we have a foreign programming undertaking that has that hit show at that particular time and everybody wants to see it when it comes out, and that foreign programming undertaking will leverage that to get à la carte. You're not concerned how your customers will react with that?

10165   MR. FULLER: It's definitely a challenge. I think, you know, you're kind of caught in the middle: that if you want to be, you know, Canadian focused in this, then, you know, I think you do have to put in place things like pick-and-pay and choice.

10166   And, you know, the challenge that we have is to walk the fine line between, on one hand, you're not really providing full choice if the American services are all accepted from that, right?

10167   I would say American channels are -- you know, we don't even generally get penetration-based rate cards from American channels. Like, they're generally insistent on a guaranteed penetration number of -- like, it's got to be 75 per cent, and here's your rate.

10168   So, you know, I would be worried about -- if we went into an environment where it only applied to Canadian channels. But then, you know, U.S. channels have to be put into, like, a big tier or into basic to be able to get to those penetration levels. Then you're not, you know, meeting the needs of Canadians in terms of choices that they want.

10169   I do understand, thought, that, you know, the opposite side of doing that, and then regulating the U.S. channels, runs the risk that some content might for a time disappear from the Canadian market.

10170   MR. WOODHEAD: And if I may, Mr. Chair, you know, I think we're kind of caught in the middle, because while we believe that pick-and-pay is something that customers want -- and, as we've noted, we have almost a hundred channels today on a pick-and-pay business -- as Dave says, you know, there is -- and we are not going to discount it, that there is a possibility that, you know, a channel could refuse and de-authorize. So...

10171   MS MANVILLE-NEESON: But I think, to make Dave's point about -- that programming is very likely still going to be accessible to Canadians. If, let's just say, AMC decides not to abide by the new rules that should be applied to foreign services, then they may choose to sell their programming to CTV or Global, or any other service. Otherwise, if they don't, well, I can still get it on iTunes. I'm not a subscriber to AMC, but I can still get Walking Dead on iTunes.

10172   MR. MILLER: Yeah. I think, as covered over the last couple of days -- Kevin spoke to it, Brad Shaw spoke to it -- sorry, Kevin Crull -- I don't think there's ever been more ways for customers to get content. And if you have a hit show, you're going to be able to monetize that show, whether it's, you know, through a direct path, through an intermediary like Apple, or, of course, through the broadcasters.

10173   I think there's going to be numerous ways for foreign programming services to still have that content available to Canadians. We don't see it as, you know, net/net. We don't see it as taking it away, right?

10174   THE CHAIRPERSON: And so your view -- confirm or deny -- but that we're better off applying the same rule --

10175   MR. WOODHEAD: Yes.

10176   THE CHAIRPERSON: -- and allowing no potential exceptions, and everybody should be playing by that rule?

10177   MR. FULLER: I guess our view is that the risk of them potentially leaving, you know, is not as great as the risk of the, you know, lack of choice that would prevail if you didn't apply the same rules to the U.S. services.

10178   THE CHAIRPERSON: Right.

10179   We'll get in a moment -- so I have another question about, again, improving the wholesale market. We'll get in a moment to the Nordicity model and to your special case for sport.

10180   But is it your view that in every instance minimum penetration guarantees are unreasonable?

10181   MR. FULLER: Like, if I can -- you know, I --

10182   THE CHAIRPERSON: Whether they're through penetration-based rate cards or otherwise, are they always unreasonable?

10183   MR. FULLER: No, I don't think you can say they're always unreasonable. They're unreasonable when that minimum penetration that we're being asked to hit significantly exceeds what we know the natural penetration rate would be if consumers could choose it.

10184   THE CHAIRPERSON: But it's not the concept as much as the level.

10185   MR. FULLER: Right. Oftentimes what we find is that the minimum penetration level we're being asked to hit is significantly higher. It ties back to this comment we made in the opening comments around this industry average penetration. Not surprisingly, oftentimes, when we're dealing with a distributor, they'll say, you know, "Well, I think you should penetrate this at 75 percent because our average, in the industry, is 80 percent". Right?

10186   What we know, because we, from day one, have been consumer-choice focused, is that when given the choice, consumers, on average, only want to have that service penetrated to the tune of, say, 52 percent. Right?

10187   And that's when we get into this big debate about, "Well, you should be up to the industry average. Why can't you get to the industry average?"

10188   Well, the reason is because the industry launched it into basic or a near basic service and has had it there for a very long time, and that's dragged up the average.

10189   There are instances, though, for sure, where natural choice has always prevailed with that particular service, particularly with newer services, and we find that the penetration levels that we're being asked to hit are exactly what consumers want and so, it's not unreasonable.

10190   MR. WOODHEAD: And the example, Mr. Chair, if I may quickly, that Dave refers to is at page 19 paragraph 41.

10191   We reference the issue around TSN has a national average penetration rate of 87 percent and in our sports theme pack, only around 50 percent of customers choose it.

10192   THE CHAIRPERSON: Right. And, hence, that becomes the test case as to what the natural --

10193   MR. WOODHEAD: Yes. That's an example.

10194   THE CHAIRPERSON: -- in your view, what the natural level ought to be?

10195   MR. WOODHEAD: That's right.

10196   THE CHAIRPERSON: Right. Let's turn to the sports properties.

10197   You're making the case that they should be subject to a special regime, that they should prohibit -- you should prohibit penetration rate cards, it should be basically a flat wholesale rate for those.

10198   So, is it all category C sports services you would put in that regime?

10199   MR. FULLER: Yes.

10200   THE CHAIRPERSON: Tell me more why you're concerned that class of programming undertaking should be treated so differently, based on your experience.

10201   MR. FULLER: When we sat back and looked at it, we saw that sports services basically kind of share two or three characteristics that make them quite different than other services.

10202   First of all, they, by far, are the biggest example of this situation where a subset of Canadians end up paying, you know, for a sports service they don't necessarily want, to lower the rate for everybody.

10203   To be specific, that example that Ted just said where the average industry penetration level, because sports has so often been included in basic, often ends up being significantly higher than what we've seen when natural choice prevails and your number is more like 53, 54 percent.

10204   Secondly, the cost of those sports services, both on a wholesale and retail level, are escalating and are now, you know, far higher, actually, and begin to dwarf almost any other genre.

10205   So, to put it in an example, the theme packs that we've talked about, where we have these theme packs with, on average, five services, we charge -- for simplicity's sake, we basically charge the same price for each theme pack. Each theme pack is $9.00.

10206   I can tell you, in the case of sports, our content costs actually $9.00 already for --

10207   THE CHAIRPERSON: Right.

10208   MR. WOODHEAD: -- all the sports services that are --

10209   THE CHAIRPERSON: You made that case in your written --

10210   MR. WOODHEAD: Right.

10211   THE CHAIRPERSON: -- and spelled that out.

10212   MR. WOODHEAD: Thirdly, they're escalating at a very high level, the content rights, the people are paying.

10213   So, that's the reason we sat back and looked at it and said there's a lot of similarities, actually, between where sports services are going and pay specialty movie services.

10214   So, if you went to a regime where basically there was one rate, you couldn't include sports in basic and, in fact, you couldn't force unnatural packaging, because sports was always bought on a stand-alone basis for X dollars per service.

10215   Then, that would have the benefit of doing a couple of things.

10216   First of all, it would ensure that the penetration rate fell to what was natural because only people would buy that sports service that really wanted to gain access to the sports that are actually on that channel; and, secondly, and perhaps most important, is it would put a direct connection between the need to pay increasing rights for content, you know, with the leagues and your ability to pass that through to consumers. Because there would be a natural push-and-pull that, if I increased my rights costs by 30 percent and then just expect to pass that through and raise the price, consumers won't be willing to pay and you'll see penetration drop.

10217   And we see that happen in the pay movie services. There's a real natural push-and-pull that -- the pay movie services know that if they come and raise the price $5.00, they'll see penetration drop.

10218   I think there's a great example, you know, just last week, where the HBO services, so both Movie Central and TMN, announced that they'd significantly enhanced the VOD rights of that service. So, if you have it, you can now gain access to all of the previous episodes of all current on-air programming.

10219   They did that, and they didn't increase the price, at all, in doing so. They just added value. Because they knew if they didn't continue to add value to that service and not increase the price, they would continue to lose more and more subscribers to other OTT services, like Netflix, that are available.

10220   So, we were looking to put a direct correlation between those two things.

10221   THE CHAIRPERSON: How do you answer those that -- I mean there's a cost factor associated with sports services that's related to the growing costs of professional athletes. Right? That's drive. And, then, therefore, people want pro -- well, it's even non-professionals. The costs of the Olympic Games is also going up. They're very attractive properties because they're live, they attract audiences, and so forth. And so, that aspect of the equation is a little beyond our scope and jurisdiction.

10222   Aren't you afraid that you will naturally cause, by your proposal, a higher cost to those sports fans that want to see the content overall because you'll be making sure that fewer people pay for it and, in fact, may put at risk the availability of certain sports rights to the Canadian market?

10223   MR. WOODHEAD: I'll just start.

10224   I mean under this proposal, to me, it has several benefits. The fact is that the sports programmer gets to set their price for the package. We have no visibility or participation in their purchasing of the Olympics or other professional sports where there are high costs that you mentioned. But the programmer does. And the programmer, if -- in setting its price in this, it's not a negotiation. They are setting the price, presumably as they do today. Somewhere in their 20 percent annual growth rate that they're getting since 2011 in their sports package, they are accounting for that.

10225   So, it's up to them to account for that, just as it is today.

10226   But the fact is that they would set a rate -- and I'm not -- and, therefore, I think, to Dave's point, what it does is it provides them with that natural thought moment, "Okay, I have to recover all of these costs. What can Canadian consumers" -- or sports fans, or whatever we want to call them -- "what are they willing to pay?"

10227   And that will also have a moderating influence on what they're going to bid for those Canadian rights.

10228   MR. FULLER: But just to be clear. To the heart of your question, I think, yes, the inevitable result, if you went to this regime, is that the cost per service for those sports services would go up. It has to. Because the problem with the current situation -- and, you know, you may or may not think this is a problem, but the reality is that a lot of subscribers are subsidizing the sports costs or the sports price for the customers that actually do really want to watch sports. That's why the average -- you know, the actual penetration is quite a bit higher than what the natural choice would be.

10229   THE CHAIRPERSON: And that's putting customers first, in your view?

10230   MR. FULLER: Yes, because we believe it's ensuring that the customers that truly value sports pay for sports, at the appropriate price. Those that don't value sports aren't forced to pay, you know, for it -- be provided it when they don't necessarily want to watch it.

10231   THE CHAIRPERSON: Okay. Some might accuse you, though -- because you aren't in the programming business and you're not two large owners, like Rogers and Bell, of these sports properties -- that you're, in fact, trying to put une embûche, a roadblock in their business, for competitive reasons.

10232   MR. FULLER: No. Well, okay. No, we don't. That's not why we're doing this.

10233   I think a key point to understand, too, is that there is a lot of sports available on broadcast TV today. So, it's not that only 50 percent of western Canadians are interested in sports. That's not true, at all. If you did any surveys around, "What do you like to watch on TV?", you're going to get a higher number than that.

10234   The issue is how interested in sports are you, such that you're willing to actually pay incremental money to get the specialty services and, you know, those sports events that are not available on broadcast TV?

10235   Because a lot of the big mainstream events, like the Olympics, as you pointed out already, much of the Olympic content is available on broadcast television today.

10236   THE CHAIRPERSON: Right. There aren't a lot of foreign sports channels, but there are few, like golf.

10237   MR. FULLER: Right.

10238   THE CHAIRPERSON: Would the same rules apply to them?

10239   MR. FULLER: Yes. And to some extent, those rules apply to them already. Right? They tend to not have a penetration-based specific, you know --

10240   THE CHAIRPERSON: You haven't experienced that so far by non-Canadian services wanting to have penetration-based rate cards?

10241   MR. MILLER: No. I would say that there are -- we still struggle with the same issues, with respect to distribution commitments. I would say that's common. That's why the proposal around symmetry of treatment for Canadian services and foreign services.

10242   I think if you look at the foreign sports services that we carry, they just typically don't have the same calibre or quality of live rights. They're not in the same sort of right discussion. They're not straining the system in the same way. They're not putting that same cost pressure on -- not to the same degree.

10243   I think the risk is there, however. But it's just -- there's an order of magnitude difference in cost today.

10244   THE CHAIRPERSON: Okay. Let me now turn to the Nordicity framework, which, as I understand it, you're proposing should replace what's in section 2 of the code.

10245   MS MAINVILLE-NEESON: That's correct.

10246   THE CHAIRPERSON: The Code is now a condition of licence of certain undertakings. Are you willing to take the risk, assuming we buy into your Nordicity framework idea, that we would wait for amendments to the conditions of licence to update that?

10247   MS MAINVILLE-NEESON: We are certainly hoping, in light of the information bulletin that the Commission has put out that some of the policy decisions in this hearing will be enacted before the upcoming licence renewals of any of the parties, that we wouldn't have to wait that long.

10248   I think there is certainly a great advantage in having these additional guidelines and criteria come into effect sooner rather than later, because they will help parties have better information on what is the likely fair market value of their programming service.

10249   Right now you have parties that are very far apart, that often, because of a difference in interpretation of the factors listed in section 2 of the Code, are unable to arrive at their own successful negotiations and, unfortunately, have to resort to Commission dispute resolution.

10250   THE CHAIRPERSON: So, I take it, just to speed things along, that you think we would have to do it not through conditions of licence, but through either regulation or maybe an order under section 9(1)(h)?

10251   MS MAINVILLE-NEESON: We would certainly like to see all of the safeguards in the VI Code put into regulations.

10252   THE CHAIRPERSON: How different is the model from the current analysis?

10253   MS MAINVILLE-NEESON: I will ask Peter Lyman to address that, but what we have tried to do is to establish something that will add meat to the bones of the factors that are set out in the Code, so that each of these factors is more fully explained, and then they have put forward a process for that.

10254   THE CHAIRPERSON: Perhaps to accelerate the process -- and I have read it, and we have taken note of it.

10255   Would it be correct, therefore, in your view, to say that the major difference is that it is more driven by viewership first, and secondly, that it provides an analytical structure in steps, whereas the current section 2 may have a list of factors, but not necessarily in order of preference or analytics?

10256   MS MAINVILLE-NEESON: That would be, actually, perfectly correct.

10257   THE CHAIRPERSON: And this model would be used well before it would get to a dispute with the Commission?

10258   Do you think that parties actually sit down at tables to go through: Okay, now we are going to look at the Stage 1 analysis, and then we are going to do the Stage 2 analysis, and then we will do Stage 3 validation at the end?

10259   MS MAINVILLE-NEESON: I do think that parties, when they are negotiating and determining, and certainly when they are deciding "Do we go to dispute resolution", they do try to do an analysis of how will the Commission determine things, and that enables them -- enlightens them as to should they negotiate a lower or a higher rate, or should they bring their dispute to the Commission.

10260   Each individual, I don't think they will be sitting together trying to go through the framework, but I think they will certainly use that framework to establish their own negotiating positions.

10261   Hopefully, if both parties have done so, they will have arrived at a much closer number that perhaps will enable a successful solution.

10262   MR. WOODHEAD: If you use, Mr. Chairman, for example, the first -- the viewership thing, I think it just brings some clarity and predictability to it.

10263   Whether you go through -- I get your point -- whether you go through Stage 1, Stage 2, Stage 3, and all of this, in a mechanistic fashion like that, that's probably not real. That's not how people are going to interact.

10264   But if you provide that clarity and predictability upfront, and everybody is talking the same thing, I think that actually has the benefit of (a) allowing parties to more quickly and better arrive at a commercially reasonable solution, and it will have the ancillary benefit of not clogging the system with disputes that probably shouldn't actually end up where they end up.

10265   THE CHAIRPERSON: Right. So one of the advantages, in your view, is that it creates certainty?

10266   MR. WOODHEAD: Certainty, predictability, clarity.

10267   THE CHAIRPERSON: So you think it is consistent with our regulatory measures?

10268   The Notice of Consultation said, you know, only get involved if required, and if you do get involved, it has to be simple, proportionate, easily administered, and adaptable to change.

10269   MR. WOODHEAD: You bet.

10270   THE CHAIRPERSON: You think it meets all that.

10271   MR. WOODHEAD: I do.

10272   THE CHAIRPERSON: And why is it better?

10273   Perhaps Mr. Lyman may want to address that.

10274   MR. LYMAN: We offer it as a framework for you to consider. We hesitate to say that one is better, but it certainly adds structure to the decision-making on your part.

10275   I think you are right, the parties won't sit down and go through the process the way we laid it out, but this is a suggestion for your process, that you would do the analysis, and if they knew it was going to occur like that, they would pay appropriate attention to the factors.

10276   Right now the factors are listed without much explanation. When we looked at them individually, we found that there were certain instances where they were not necessarily -- you know, they were joined together -- two factors were joined together that didn't necessarily make sense to us, or there were factors that were not -- like volume discounts, for example, which we felt didn't have much to do with fair market value, per se, and that was twinned with penetration-based rate cards, or a penetration-based factor, and the two are quite different, so they might be subject to different treatment.

10277   So spelling that out made some sense.

10278   So they would go through it like that, and also, as has been pointed out, the audience part, or the viewership, is not listed specifically as a factor. I am sure you take account of that, but in this fair market valuation, we feel that that is an important factor to look at.

10279   THE CHAIRPERSON: Okay. Let me move to another subject dealing with improving the wholesale market. The point brought forward so far orally in this hearing, by Blue Ant, but others will make it later, is about a special case to be made for independent programming undertakings.

10280   They are advocating for a temporary mechanism to help them transition into --

10281   I think I worked too hard last night, the words aren't coming out.

--- Laughter

10282   THE CHAIRPERSON: -- transition to the new model that will come down the road.

10283   First of all, do you think that is a valid concern? Second, do you think their proposal is appropriate?

10284   MR. WOODHEAD: I think there probably is some merit for the independents in that.

10285   A lot of the changes --

10286   THE CHAIRPERSON: On the ratio that is in the Working Document?

10287   MR. WOODHEAD: Yes. Yes, absolutely.

10288   But there is a lot of change in the whole proposal that I think requires some little tweaks like that, and I don't think we would have an issue with that particular proposal.

10289   MS MAINVILLE-NEESON: We certainly understand -- when we listed to Blue Ant and their math, we certainly understand the issue they raise, that it does seem to affect them particularly hard, in that a vertically integrated company can launch significantly more of their services and much fewer independent services.

10290   So we understand that concern, and it might be something that should be reconsidered, or at least given a lot more road to --

10291   THE CHAIRPERSON: Right. I have given the opportunity to other parties to give an undertaking to provide a recapitulation, based on what they are hearing throughout the hearing, about mechanisms that could quite clearly define what is acceptable and not acceptable in the wholesale market.

10292   Would you like to make an undertaking to provide that, as well?

10293   MR. WOODHEAD: Absolutely.

10294   MS MAINVILLE-NEESON: We certainly would, yes.

Undertaking

10295   THE CHAIRPERSON: Because there are a lot of moving parts and suggestions that are rolling through, and I think it would be useful to see your suggestions.

10296   MS MAINVILLE-NEESON: Mr. Chair, could we just add that we also represent the Quebec market, and there are some distinctions in the Quebec market with respect to the issue on wholesale services, if you would indulge us.

10297   THE CHAIRPERSON: Okay. It was the next question, but go ahead.

--- Laughter

10298   M. AUDET : Oui. En fait, lorsqu'on parlait tantôt de conditions déraisonnables, il y a certaines compagnies de programmation qui ont des clauses qui tiennent compte du marché linguistique, et lorsqu'on fait affaire avec des compagnies américaines -- on pourra vous donner des exemples -- certaines grilles tarifaires qui exigent des pénétrations minimums sont complètement irréalistes en fonction des marchés.

10299   Dans l'Est du Québec, on a 5 pour cent de clientèle anglophone. Alors, il y a plusieurs chaînes américaines comme CNN, et il y a aussi des chaînes canadiennes come Sportsnet, auxquelles, si on veut offrir à notre 5 pour cent d'anglophones ce service-là, il faut donner le service à une très grande majorité de nos clients -- on vous présentera des exemples -- ce qui revient à interfinancer. C'est qu'une grande majorité de clients vont payer un peu plus cher pour financer des services à une clientèle qui est beaucoup moins nombreuse mais qui veut avoir le service.

10300   Alors, lorsqu'on parle de vouloir donner le service à tous de façon égale, à meilleur prix, il faut tenir compte dans la réglementation des réalités linguistiques. D'imposer une chaîne anglophone à une très large majorité des gens pour une région où il n'y a presque pas d'anglophones revient à augmenter le prix pour tout le monde.

10301   LE PRÉSIDENT : Et j'imagine que, dans vos propositions, cette conséquence que vous croyez être inappropriée serait testée à l'étape 3 de la validation, parce qu'on jugerait si c'est conforme à la politique publique?

10302   M. AUDET : Oui.

10303   MME MAINVILLE-NEESON : Oui, absolument.

10304   THE CHAIRPERSON: As you know, one of the big things in this hearing is about creating more flexibility and choice for Canadians. I was struck, just quickly, in paragraph 14, that you describe it as the widespread perception of lack of choice.

10305   Now, I understand that you believe that you offer -- is that what you are referring to in that particular paragraph, that you offer choice, but maybe the general public doesn't realize that that offering is available?

10306   MS MAINVILLE-NEESON: I think our point was more that choice does exist, to some degree, certainly, you know, when we offer 100 services à la carte.

10307   Regardless of that, there does appear to be, from all of the comments that we have read from Canadians, this perception that they aren't getting what they want, and perhaps it's more education on our part to ensure that that perception goes away.

10308   THE CHAIRPERSON: One of your major competitors out west, Shaw, is of the view of that all this greater choice should be done through guidelines. What are your views on that?

10309   MS MAINVILLE-NEESON: We have certainly considered the Shaw guidelines and a lot of what they say we completely agree with. The devil is in the details.

10310   THE CHAIRPERSON: But the fact that it would be guidelines as opposed to regulations?

10311   MS MAINVILLE-NEESON: We have some concerns with that. I think the -- we have noted again and again in numerous proceedings the incentive and opportunity for anticompetitive conduct exists, is very real and we feel that we need true enforcement which wouldn't be possible with guidelines.

10312   THE CHAIRPERSON: Even though -- even if the Commission concludes that certain regions in the country have a more -- has a more dynamic marketplace?

10313   MR. WOODHEAD: Yes.

10314   If I may, I mean, I heard Mr. Bissonnette talking about, you know, the harmony and all of this but I would -- with respect, I would say that despite the rhetoric around harmony there has been a fair bit of disharmony in the industry.

10315   While in a different context, Mr. Chair, I might say guidelines are enough, I really think we're at the point where we need to, for greater predictability, clarity, transparency; let's get these into regulations.

10316   MR. FULLER: Sorry, the other point.

10317   So I would actually agree with many of the comments they made yesterday about the dynamics in the western marketplace so that the challenge, though, is that he was describing what exists in a retail marketplace in western Canada. If you used guidelines and they then applied to wholesale arrangements, I mean, many of the people we negotiate, you know, wholesale arrangements are not necessarily focused on the western Canadian marketplace, right?

10318   THE CHAIRPERSON: Right. So there may be a distinction to be made between our regulatory options or non-options, as we distinguish retail and wholesale. Obviously, your view is in the wholesale market we need more strength.

10319   MR. FULLER: That's right.

10320   THE CHAIRPERSON: Whereas, in the retail market there may be more flexibility. Is that correct?

10321   MR. FULLER: Yes, correct.

10322   THE CHAIRPERSON: On the skinny basic, option one or option two?

10323   MR. WOODHEAD: Option A.

10324   THE CHAIRPERSON: A?

10325   MR. WOODHEAD: I think yes. It's like category As and ones and all that.

10326   THE CHAIRPERSON: Yes. So the first one. And you think that's better.

10327   So I take it, then, that you would disagree that one needs to add the 4+1?

10328   MR. FULLER: Yeah. I mean, I do somewhat agree with a comment that was made yesterday that it might be a bit odd from a customer standpoint to have, you know, package one be only these, the Canadian services, and then package two includes the 4+1s and there is no additional cost because there isn't an additional cost to us for them.

10329   So that, you know, I would agree with the comments that that will seem a bit odd. You know, our perspective is you could probably pretty easily include them in option A and you're not going to increase cost at all for customers. But you will give them, you know, more available content and that's going to be valuable to them.

10330   MR. WOODHEAD: For customers who are -- it is the same point, I guess, but for customers --having grown up in southern Ontario, for customers who are used to these in their basic package, it may be a bit of a disruption to see them out of it and on a discretionary basis.

10331   MR. FULLER: So I guess if forced to choose between option A or B we definitely prefer option A. Our preference would be an option C which is basically option A with the 4+1s added in.

10332   THE CHAIRPERSON: Right. And this leads to my next question which is precisely how we do the transition.

10333   I spoke about this with a number of parties. I started with the consumer groups and asked them and they certainly didn't think that we'd have to go out and get the entire subscriber base to re-subscribe to a package that, I think in paragraph nine of your Annex A, you talk about grandfathering.

10334   So basically, the status quo is the default position until an informed consumer or subscriber comes up to you and asks for a change. Is that how you see the transition occurring?

10335   MR. FULLER: Yeah. Certainly we have had numerous, you know, experience with trying to make changes to people's existing structures and it is quite disruptive to them.

10336   So from a -- you know, from a customer sort of standpoint we believe probably the most consumer friendly way to do this is to -- exactly as you outlined; make, you know, the new construct available. And new customers coming to us, you know, choose within that new construct and existing customers can choose to move to that construct when as they want to.

10337   But it's not like a forced wash over on the entire base where we have to, you know, move everybody to the new choice. That would be, I think, quite disruptive.

10338   THE CHAIRPERSON: Okay. As you know we have got a number of services that sort of multiplex that it's one licence but a number of feeds. It's complicated.

10339   But I take it your position would be that when we look at this in terms of choice and a la carte do we look at it -- well, I don't know what your view is. So would we look at it per licence or per feed when looking at the service?

10340   MR. FULLER: Per license.

10341   MS MAINVILLE-NEESON: I think we mean per feed, because ultimately we have received some -- since pick-and-pay has obviously been a topic of conversation, our customer service representatives have received lots of comments, "How come I can't get HBO only and not you know separate from Movie Central?" So consumers don't understand the distinction and it -- I think it does make a lot of sense.

10342   And I'm not speaking from a programming side. They very well have their reasons.

10343   THE CHAIRPERSON: Right.

10344   MS MAINVILLE-NEESON: But from a consumer side we've certainly received feedback that they don't understand why Movie Central has to be packaged with HBO. For them it's two separate things. It's channels.

10345   MR. WOODHEAD: And I mean I --

10346   THE CHAIRPERSON: Does the entire panel agree with that position then?

10347   MR. WOODHEAD: Yeah, we do.

10348   MR. FULLER: In an ideal world, I would agree with Ann.

10349   THE CHAIRPERSON: Right.

10350   MR. FULLER: Right. I think, you know, I guess it's all about perspective and where you move to. Moving to, you know, at least a world where you could get per licence in an a la carte or pick-and-pay is, you know, we think worlds better than the world today, if we could go as far as Ann stated, that would be fantastic.

10351   THE CHAIRPERSON: But we have a lot of like Sportsnet 1, 2, 3; TSN1, 2, 3 and more.

10352   MR. FULLER: Yeah, and that's actually what I was initially thinking and Ann went to --

10353   THE CHAIRPERSON: TeleToon.

10354   MR. FULLER: It's a good example around HBO, but I was immediately thinking about, you know, something like Sportsnet. You know, I guess from my perspective on that is that's actually up to the programmer. If they, you know, choose to want to say it's one price for all of those services then, you know, I think we could.

10355   Sports is a little bit different, right, like TSN is a great example. They've now got, you know, what is it, four, four channels. You know, at times they really do need all four, right, like when their U.S. Open is on and, you know, they want to be able to show all the matches. Other times, you know, much of the three are just showing the same content, right?

10356   THE CHAIRPERSON: Right.

10357   MR. FULLER: Or much of them, the four or five, right?

10358   MR. WOODHEAD: Where it was telling -- where it was telling to me, Mr. Chairman, was Commissioner Molnar's question of the Bell Media panel, because that's a really good example and Ann alluded to it, the TMN. That while I would have sympathy for the programmer because that's how they packaged it, and that's how they built the channel, but it's multiplex.

10359   And as Ann says, it's confusing for customers because while they are subscribing to TMN it has constituent parts and people just want, as Ann alluded to, HBO.

10360   MR. FULLER: I think that is the problem is that multiplexes are quite different by nature. So the HBO example and TMN is a great example where the services are quite discrete and different. So you are going to get consumers go and say, "I want this one but I don't want that one".

10361   In the case of TSN it would be quite odd, I think, you know, to a consumer to say, "Well, you can get TSN1 but, you know, 2, 3, 4 and 5 which you know you're going to want when the U.S. Open is on, you know, you have to buy those separately".

10362   Like the way they've set it up, I don't see how you actually break them out apart by feed, right?

10363   THE CHAIRPERSON: We have heard a lot in the hearing about concerns about the financial consequences of providing more choice, reduced levels of financing. Yet, in a number of places -- and I'm thinking in particular paragraph 24 of your written submission, you've actually given examples where certain services have benefitted from this.

10364   So what is your view globally as to whether providing more choice and flexibility will actually shrink or grow the revenue pie?

10365   MS MAINVILLE-NEESON: Whether it will shrink and grow it will certainly perhaps change the makeup of that pie for sure.

10366   And that's our point, is that we're seeing some of these services that otherwise, you know, are on very high tiers and they come with cable companies, don't get any penetration and they are unable to invest in programming whereas we're able to give them much higher penetration and a larger audience because they're in a package that consumers have bought for that genre.

10367   And so people who might have bought, you know, Food Network, might also discover Gusto. And I think there's good benefits to do that kind of packaging because it allows a new innovative service to be able to -- to have the funding it needs to be able to launch.

10368   So whether or not it grow the pie, I think it forces out of complacency all of those services that might otherwise have simply benefited from that average penetration historical level of penetration that they now try to be made whole on.

10369   THE CHAIRPERSON: Right, okay. Now, I have a whole series of questions that are not interrelated but maybe we can walk through them rather quickly.

10370   The 30-day cancellation that certain BDUs apply when somebody wants to switch BDU providers, how do you deal with that?

10371   MR. FULLER: We don't have one.

10372   THE CHAIRPERSON: You don't have one?

10373   MR. FULLER: No.

10374   THE CHAIRPERSON: And if somebody is a -- has a bundle of services they are not disadvantaged by it in any way, shape or form?

10375   MR. FULLER: No, no.

10376   THE CHAIRPERSON: They can walk away from your BDU service, if they wish to but it may have an impact on their price for the rest of the bundle?

10377   MR. FULLER: Yes, in that -- so as an example, if you're in a bundled service you can get a $5 discount of off some other services. So you would lose that discount if you, you know, dropped one of the other services. But that would be, you know, the only example.

10378   THE CHAIRPERSON: Right. You referred to the advantages of advanced rulings on certain issues. And I take it you're not necessarily -- are you referring to staff advance rulings?

10379   MS MAINVILLE-NEESON: Yeah. So we were referring to situations which we have in -- through negotiations and trying to be innovative and launching new products, have doubts as to whether or not it might create some concern with the existing regulations.

10380   So the example that we gave was one where we launched a bunch of services, you know, multi-view and, you know, various display services on the screen which in our negotiations with Bell Media ultimately led to a Commission decision which indicated that in fact we should be seeking a special condition of licence to avoid being in non-compliance with this rule.

10381   So it would be advantageous. And at this point we have indicated that we didn't think it was in non-compliance. And we have yet to hear back from the Commission so that is one area where, when I'm asked, it's difficult to be able to give good advice.

10382   And believe staff rulings would be great.

10383   THE CHAIRPERSON: Right, and would they be binding on the Commission?

10384   MS MAINVILLE-NEESON: Preferably.

10385   THE CHAIRPERSON: I know, but it's my experience when I was Director of Investment for Cultural Affairs that, you know, under the Investment Canada Act there was an express authority for those sorts of advance rulings.

10386   MS MAINVILLE-NEESON: Right.

10387   THE CHAIRPERSON: There is a long practice obviously in the income tax and in the world. But don't you think our regulatory -- our legislative framework lacks authority for that?

10388   MR. WOODHEAD: Yeah. It wouldn't be binding on the Commission because it would be fettering your discussion. So I think it's really indicative of, you know, a staff view of the situation.

10389   THE CHAIRPERSON: Understood.

10390   In terms of the rollout you've mentioned that you're talking you might need 12 to 18 months to roll this out. You refer, in part, because of your system lift or updates you have to do to your system to do that.

10391   MR. WOODHEAD: I think it was 9 to 18, wasn't it?

10392   THE CHAIRPERSON: I've got -- well, it doesn't really -- if you say one to 18, it's the 18 that becomes important.

10393   MR. FULLER: If that's what you are concerned about, okay.

10394   THE CHAIRPERSON: How would you calculate that? When do you start?

10395   MR. MILLER: Well, I think once the -- you know, whatever the new rule are or the new regime is in place then we would strike a project immediately to start to work on it, like, when we have clarity about where it's going.

10396   And the reason for the range is, you know, it's a bit difficult to tell. It depends on how significant the change is. We just know that in our business the long pull in the tent is almost always systems changes if they are significant. Either system changes to, you know, our ordering and billing systems or system changes to our TV platform which is a platform provided by Ericsson called Mediaroom. Those are even more problematic if we actually have to make changes to that because we've got to then influence Erikson to make the change to the platform to enable what it is we want to do and then it's got to get rolled out.

10397   THE CHAIRPERSON: Okay. I have offered the opportunity to other parties to provide some thoughts on a road map, how we roll this out. Would you be able to do that as well?

10398   MS MAINVILLE-NEESON: Yes, absolutely.

10399   THE CHAIRPERSON: So you undertake to do that for the 19th of September?

Undertaking

10400   MS MAINVILLE-NEESON: Yeah.

10401   THE CHAIRPERSON: And what we've been doing, and you may not agree with every aspect of the working document nor have a view on them, but if you could use that as the starting point at least at this stage it would be useful.

10402   Remedies of -- getting back slightly to the wholesale issue, you obviously are thinking that it should be a firm requirement. And of course, as you know, it's one thing to create a firm requirement so people know when they're negotiating but at one point the Commission has to decide how to enforce non-compliance.

10403   Have you -- you know, Mr. Woodhead and others know that under the Broadcasting Act we don't have powers of interim relief. Unlike others of our responsibility we do not have the power of administrative and monetary penalties. So how would we enforce breaches to the code, in your view, to ensure a dynamic market place?

10404   MS MAINVILLE-NEESON: Right. Well, certainly some of the mechanisms for relief are your dispute resolution mechanisms, right, so final offer arbitration being some form of relief to any party who feels they're injured.

10405   But I think what you've also done which has been very valuable is to provide no head starts and those types of rules which then address the issue before it becomes -- it causes too much of a penalty which then requires relief if we can address the problem before it causes a significant harm that is significant.

10406   So the no head start rules, the notice periods and requirement to renegotiate before the expiry of a contract so that we're not held liable for retroactive fees, those kinds of things address those problems and those issues that you have with the unfortunate, you know, voids in the legislative framework.

10407   THE CHAIRPERSON: Right. Set-top box, in your original written submission you thought that there was little value to that initiative. Is that still your view?

10408   MS MAINVILLE-NEESON: I think we have heard a lot through this hearing and with the proposal for a working group. Certainly, we'd be prepared to participate in that.

10409   THE CHAIRPERSON: Do you actually collect from path data and what do you use it for, if you do?

10410   MR. MILLER: We do, and I would say that it is more on an ad hoc basis. So we use it from the time to time in negotiations or, you know, when required by partners that are looking to understand performance where they might not otherwise have that availability of that data.

10411   THE CHAIRPERSON: So you might understand why, say, an independent programming undertaking might find it strange that you have that information and they may not?

10412   MR. MILLER: Yeah. Funny enough, I can't actually think of a circumstance in which that's happened. I guess I can foresee that happening but it hasn't come to bear.

10413   MR. FULLER: From time to time they've asked us for the viewership data and we have provided it. It's not -- we don't hold it a secret, right?

10414   THE CHAIRPERSON: Okay. It's my last question before I pass it on to some colleagues. I'll just get them ready.

10415   You've said, and you've got a number of proposals, and I won't ask questions on them because I think you've been quite clear about lightening the regulatory burden for BDUs.

10416   Yet, on the wholesale market you're actually contradicting your point of view by requiring a lot more regulatory intervention. How do you square that circle?

10417   MR. WOODHEAD: Actually, I would take issue with that characterization. I was thinking about this. We're not actually asking for any ex-ante regulation. There is a process in place for FOA to deal with disputes.

10418   We see that there are certain voids and, I mean, I say voids because they are voids. But, you know, regulation is complex particularly when you're dealing with interactions that have a bunch of tentacles coming out of them. And so, you know, it's impossible in one fell swoop to oftentimes totally get the entire structure correct.

10419   So I don't view this, Mr. Chair, as a form of ex-ante regulation of the wholesale market. I think it's still about commercial rates. It's still about commercial negotiations. It has a remedy, such as it is, at the other end.

10420   But it would, by putting it in -- by putting certain expectations, for lack of a better word, into however you determine you're going to do it, we would like to see you do -- put out these expectations or some clarity, predictability for everyone around how you might be viewing a particular issue if it's a rate dispute, for example, or any of these other things that we listed. You went through that list.

10421   THE CHAIRPERSON: Mr. Vice Chair...?

10422   COMMISSIONER PENTEFOUNTAS: Sure.

10423   Thank you all so much.

10424   Listen, first of all, on the option A or option C, which is the option A plus the 4+1s added in, I see -- and I'm going to do the TELUS promo -- you're somewhere between $20 and $35 a month right now on your basic service. There is a first year promotion and so on and so forth. So somewhere -- you're somewhere in the mid-twenties to late -- sort of twenties in terms of your pricing as it is.

10425   What would the price of your option C be in the current context of things?

10426   MR. MILLER: There is actually, as you can see, Tom, or sorry, Chairman Pentefountas or Vice Chair Pentefountas -- I'm doing really well today, guys. I guess I had a late night as well.

--- Laughter

10427   MR. MILLER: There's not a lot of other services in our essentials or our basic offering. So there is very little incremental cost in that. So there wouldn't be a significant change.

10428   I think today I would have to, you know, triple check, but we're less than $2 of cost for the services that wouldn't be described in the option A/1 or C or whatever we're calling it.

10429   COMMISSIONER PENTEFOUNTAS: Your basic service right now is not dissimilar from our option A, that's --

10430   MR. MILLER: That's correct. We have a very skinny basic as you can see.

10431   COMMISSIONER PENTEFOUNTAS: Yeah.

10432   MR. MILLER: Today, not actually the option A but it's still very light on services.

10433   COMMISSIONER PENTEFOUNTAS: Close to --

10434   MR. FULLER: And it is $29 -- $29, the price of it.

10435   COMMISSIONER PENTEFOUNTAS: You've got a three year --

10436   MR. WOODHEAD: It depends on whether you got it on a promotion or not.

10437   MR. FULLER: Yeah, A or --

10438   COMMISSIONER PENTEFOUNTAS: -- $5 for the first year so it comes close to $29 for a three- year term.

10439   That being said, on the issue of sports, sports is not part of your basic. You've got a sports package. Aren't you perpetuating the madness by offering that sports package below cost?

10440   And if it is a loss leader, well, then all of your subscribers are footing the bill in some way or another. I mean, it's the same as putting it in basic, is it not?

10441   MR. WOODHEAD: Only 50 percent take it.

10442   MR. FULLER: Yeah, and I wouldn't say it's the same as putting it in basic. Are we perpetuating the madness?

10443   COMMISSIONER PENTEFOUNTAS: You're selling it below cost. You are making up those costs somewhere else. You're making up that cost in the remaining base of your subscribers. Would you not agree?

10444   MR. FULLER: Yes, I suppose we are, right. But we kind of evolved to that, to be honest with you.

10445   Because what basically happened is that the sports costs have escalated over the last number of years to the point where, you know, originally they weren't you know, more than $9. Now, they've become more than $9 and we've been reluctant to make a change, a wholesale change to our entire theme pack structure just because of that. So we've you know, decided to live with the fact that, you know, we lose money on the sports packs as opposed to, you know, a complex type of environment where, you know, the sports pack costs price X and all the other theme packs are still $9, right.

10446   MR. WOODHEAD: I also think, Vice Chair, that you need to sort of put it in the context of what launching a very high capital cost of BDU service which we'd get in 2009, how you break into a market. You'd have to sometimes offer things like this.

10447   And we set it up from the beginning, from the very, very beginning as one that puts consumer choice right at the forefront. That was our differentiator and it's obviously been quite successful. But you know that costs money to break into that market. There's no two ways about it.

10448   COMMISSIONER PENTEFOUNTAS: And you were at $7. Your sports package was at $7 until last year, I think.

10449   MR. WOODHEAD: That's right.

10450   COMMISSIONER PENTEFOUNTAS: Yeah.

10451   You also would like to see, from what I understand and correct me if I'm wrong, sort of a regulated single-rate sports price --

10452   MR. FULLER: Yeah, not --

10453   COMMISSIONER PENTEFOUNTAS: -- that would apply to every subscriber coast to coast to coast, right?

10454   MR. FULLER: Yeah, not --

10455   MR. WOODHEAD: To subscribers.

10456   MR. FULLER: Not a regulated --

10457   COMMISSIONER PENTEFOUNTAS: Wholesale, I'm sorry. Yeah, to every --

10458   MR. FULLER: Not a regulated price. What we're saying is --

10459   COMMISSIONER PENTEFOUNTAS: Okay.

10460   MR. FULLER: -- there should be a single -- the regulations would --

10461   MR. WOODHEAD: A single price.

10462   MR. FULLER: -- would -- they set the price, but they basically can't tie their price to penetration level -- their cost, their wholesale cost, to penetration levels. Exactly what exists today with something like TMN or, you know, in our case, Movie Central.

10463   MR. WOODHEAD: They know their costs and they -- there's nothing nefarious about it. They know their costs. They know that industry. They know that part of the business. They need to make a determination to set the cost to recover all of their costs, and a reasonable mark-up, or whatever we're calling it, and ensure that they get that optimal -- they hit the bullseye --

10464   COMMISSIONER PENTEFOUNTAS: M'hmm.

10465   MR. WOODHEAD: -- on the optimal number of subscribers so they get -- maximize the eyeballs on their content.

10466   COMMISSIONER PENTEFOUNTAS: And if -- who decides on that price, ultimately?

10467   MR. WOODHEAD: They do.

10468   COMMISSIONER PENTEFOUNTAS: They do. And you accept it?

10469   MR. FULLER: Yeah.

10470   MR. WOODHEAD: And if they hit -- well, because here's how I -- and I understand -- like, you're -- not that -- you're looking perplexed because --

10471   COMMISSIONER PENTEFOUNTAS: Looking where I'm coming from, but, yeah.

10472   MR. WOODHEAD: -- and maybe it's we haven't articulated it properly, but the thing -- if they set that price really high --

10473   COMMISSIONER PENTEFOUNTAS: Let's use the Bell example from earlier this week: a 40-dollar wholesale rate for TSN.

10474   MR. MILLER: I don't think they'll end up setting it at that price point.

10475   COMMISSIONER PENTEFOUNTAS: Okay.

10476   MR. FULLER: But they could. So if they set it at $40, we would put that price out there at -- you know, at the retail price. Almost no one would acquire it, and their penetration would drop down to 2 per cent.

10477   COMMISSIONER PENTEFOUNTAS: And you're not worried about losing all those sports fans --

10478   MR. FULLER: Well, no, because I --

10479   COMMISSIONER PENTEFOUNTAS: -- to look outside that service?

10480   MR. FULLER: -- I think what they would immediately do is look at it and say, "Well, that's not acceptable, so we better figure out a way to lower the price" --

10481   COMMISSIONER PENTEFOUNTAS: And wouldn't it be more acceptable for them to try to attract that clientele onto their distribution network?

10482   MS MANVILLE-NEESON: We're assuming that they would also be required to pay that same price, right? So it'd be a price that they set for all of their distributors and --

10483   COMMISSIONER PENTEFOUNTAS: Well, there we go. So there's a wholesale rate coast to coast to coast?

10484   MR. FULLER: Yes.

10485   MS MANVILLE-NEESON: Which is tied to consumer willingness to pay. That's why it can' be on basic.

10486   COMMISSIONER PENTEFOUNTAS: Right.

10487   MS MANVILLE-NEESON: But if it's tied to consumer willingness to pay, that will temper their ability to charge much more, you know that $40 rate, if they can't recoup it from consumers.

10488   So I think there's -- it's one area where the wholesale rate is very much tied to consumer willingness to pay, which is the retail rate.

10489   COMMISSIONER PENTEFOUNTAS: Right. So every BDU will have those sports rights, the sports networks, at the same rate, and bear -- so -- okay.

10490   MR. FULLER: Yeah, likely that's what we'll -- it's exactly -- the analogy is exactly the same as exists with pay movie services, right? They are not tied to penetration. They tell us a wholesale rate. Inevitably, we end up all roughly around the same price point. Sometimes we do promotions where we might include it or not, and we work together with, you know, in our case Corus, on those things.

10491   COMMISSIONER PENTEFOUNTAS: But the retail rate is different on the movie services from BDU to BDU.

10492   MR. FULLER: It is, yes.

10493   COMMISSIONER PENTEFOUNTAS: I mean what happens --

10494   MR. FULLER: And that's what -- that's likely what would happen with sports, but the wholesale price is largely the same.

10495   And most importantly, the wholesale price is not tied to penetration. You don't go and say: if your penetration goes up to this, then your -- you know, your wholesale price drops.

10496   MR. WOODHEAD: The people that would be -- like, I mean, the sports programmers that would be doing this, these are sophisticated people, and nothing would make them sharpen their pencils faster than that proposal.

10497   COMMISSIONER PENTEFOUNTAS: And what happens on the retail level? Can't there be gaming on the retail level, in terms of dropping that price? I get back to the Bell example. And I don't mean to pick on them, but...

10498   MR. WOODHEAD: By dropping it in what way, sorry?

10499   COMMISSIONER PENTEFOUNTAS: Unreasonably low sports package prices --

10500   MR. WOODHEAD: Well, then --

10501   COMMISSIONER PENTEFOUNTAS: -- again to attract...

10502   MR. WOODHEAD: It would be either -- it would either be an undue preference kind of thing with the Commission, I suppose. Somebody might raise it there. Depending on -- you know, it could be a Competition Bureau issue. I mean, you know, I --

10503   COMMISSIONER PENTEFOUNTAS: Somebody can raise that with TELUS right now, because you're selling a service below cost. That could be considered anti-competitive behaviour as well.

10504   MR. WOODHEAD: Well, somebody could raise it. I mean, I would -- as I said to you, it is not uncommon in any -- any -- industry, including this one, to offer loss leaders.

10505   If you said that, if you took that position, Vice-Chair, promotions would be, you know, anti-competitive. What we're trying to do, and I think you need to sort -- we all need to think about it in terms of the broader picture, and that's what I was trying, perhaps ham-handedly, to convey: is that wherever you're a new entrant in whatever industry you are in, there are high up-front fixed costs.

10506   This particular industry we're talking about right here has extraordinarily high fixed costs. So our -- like, we're not making money on this service. There have been cumulative -- you know, so to say that that's anti-competitive, no, that's just normal -- that's normal entry behaviour.

10507   COMMISSIONER PENTEFOUNTAS: And I'm just trying to sort of shake the tree loose and see what kind of comes out of it, because, at the end of the day, we're trying to figure out some kind of solution that -- to a problem that you've -- that you've --

10508   MR. FULLER: And what the implications --

10509   COMMISSIONER PENTEFOUNTAS: -- identified --

10510   MR. FULLER: -- will be. Yeah, understand.

10511   COMMISSIONER PENTEFOUNTAS: -- be it a problem or not.

10512   At the end of the day, if we don't want the people that are not interested in sports content subsidizing the ones that are, would this be a solution?

10513   And you, yourselves, have put it out there's a loss leader. So, at the end of the day, the non-sports fans are subsidizing the sports fans.

10514   So is this wholesale rate, single rate, going to be the solution to not having that phenomenon occur in the Canadian market?

10515   MR. MILLER: I think there's a couple of things, before I pass it over to Dave.

10516   First, from a competitive and new entrant position, we had to look at how Shaw had constructed their packages. If you look at the Shaw offering, you've got TSN and Sportsnet and basic. That was -- it basically set a price in market that -- we had to be in or around that price in order to attract customers.

10517   So if you look at our $29 basic or essentials, and then you add our sports pack, you're close in price to what Shaw is at for their services.

10518   COMMISSIONER PENTEFOUNTAS: Yeah.

10519   MR. MILLER: And so I would say that the question about the loss leader aspect, that was -- you know, we need to be competitive in market. If you apply this new concept or idea, then you take that bit out of it, you're not going to be acting from a loss leader position because it's not going to be in basic because one of the tenants --

10520   COMMISSIONER PENTEFOUNTAS: And it allows you to differentiate your product above and beyond the technological differences --

10521   MR. WOODHEAD: And I would also --

10522   COMMISSIONER PENTEFOUNTAS: -- yeah, I understand that.

10523   MR. WOODHEAD: Yeah. And I also add -- and you noted it -- that used to be seven. It's now nine. You know, the dynamic pricing -- because it's -- as others have point out, the west is a highly competitive marketplace and the pricing will be dynamic --

10524   COMMISSIONER PENTEFOUNTAS: Right.

10525   MR. WOODHEAD: -- but where you price goods -- and Blair has just mentioned -- there's $1.90 difference between apples-to-apples service --

10526   COMMISSIONER PENTEFOUNTAS: M'hmm.

10527   MR. WOODHEAD: -- essentially, for -- using the sport example, between us and Shaw.

10528   But, you know, over time your position, as an entrant, will change as your market matures.

10529   COMMISSIONER PENTEFOUNTAS: So let me ask you another hypothetical. Supposing that sports services were no longer allowed on basic, what would that do to the cost of your sports package and what kind of increased flexibility would that allow you to offer your clients -- your customers?

10530   MR. WOODHEAD: They aren't in our basic now.

10531   COMMISSIONER PENTEFOUNTAS: I know, but -- I know, but the price -- you've got to maintain a lower price to be competitive with your competition, right? You said, sort of, it's apples-to-apples situation. When you add the sports package, you're at the same basic rate as a Shaw, to us your examples.

10532   MR. WOODHEAD: So if Shaw takes out $8 of sports, I believe Mr. Bissonnette said yesterday, they're going to make -- if they're going to change their marketing pricing, we're going to respond. That's a competitive market. But that's actually --

10533   COMMISSIONER PENTEFOUNTAS: But your basic is already at this rate.

10534   MR. WOODHEAD: That's --

10535   COMMISSIONER PENTEFOUNTAS: What happens to the sports package pricing?

10536   MR. MILLER: Maybe --

10537   COMMISSIONER PENTEFOUNTAS: Does it -- will it allow the sports package to more correctly reflect the cost, the wholesale cost, of that service --

10538   MR. MILLER: Yes.

10539   COMMISSIONER PENTEFOUNTAS: -- Mr. -- okay.

10540   MR. MILLER: Yeah. Yeah, and I think the ultimate retail price will be reflective of what that wholesale rate is --

10541   COMMISSIONER PENTEFOUNTAS: Okay. That's my question. Thank you.

10542   MR. MILLER: -- yeah.

10543   COMMISSIONER PENTEFOUNTAS: The great thing about being Blair Miller is that they call you Blair, they call you Miller. You have the movie star name.

--- Laughter

10544   COMMISSIONER PENTEFOUNTAS: It doesn't matter, you'll take either one. If only we could be all that lucky.

10545   That being said, back to the beta phase, and OTTs generally. That's an interesting sort of position.

10546   I don't think you -- correct me if I'm wrong, if it's a pure play OTT, I don't think you're calling on the Commission or anyone else to intercede in that content.

10547   MS MANVILLE-NEESON: Right. So we -- what we're suggesting is that there is a lot of -- a lot of ways that pure play OTTs aren't pure play, and we have a few examples where the argument is being made by a VI company that: Oh, this is OTT, so we're not going to give you the content, when, in fact, then it ends up on the set-top box and Video on Demand.

10548   COMMISSIONER PENTEFOUNTAS: Right.

10549   MS MANVILLE-NEESON: One -- yes.

10550   COMMISSIONER PENTEFOUNTAS: And if it's on the box six month ahead of when it's on your box, that's --

10551   MS MANVILLE-NEESON: That's exactly it.

10552   COMMISSIONER PENTEFOUNTAS: -- that's a competitive advantage --

10553   MR. MILLER: Right.

10554   COMMISSIONER PENTEFOUNTAS: -- that that is unfair. I understand that part.

10555   That was the first question. So if it's a pure play OTT, it's a pure play OTT. You have access to it as much as any other ISP, right?

10556   MR. MILLER: Yeah, it can get -- a pure play --

10557   MR. FULLER: But we don't in the case of Shomi, right?

10558   COMMISSIONER PENTEFOUNTAS: I understand.

10559   MR. FULLER: Okay.

10560   COMMISSIONER PENTEFOUNTAS: Yeah, I understand. What we're just is saying that they're sort of -- people are going from sort of pond to pond, and there's a -- there's a bridge that's been created --

10561   MR. FULLER: Correct.

10562   COMMISSIONER PENTEFOUNTAS: -- and the pure play has been somewhat diluted.

10563   MS MANVILLE-NEESON: Yes.

10564   MR. FULLER: Yeah. It's not very pure anymore.

10565   COMMISSIONER PENTEFOUNTAS: No, no. The wine has sort of lost a lot of its luster, in that sense, so -- but if it was a pure play, you wouldn't have a problem with that because it would be available --

10566   MR. FULLER: Correct.

10567   COMMISSIONER PENTEFOUNTAS: -- to you, as an ISP.

10568   That's the first issue. And the second issue is: if it's content that's specifically created -- and this goes back to sort of -- I guess it was our IV decision, or maybe our group licensing decision, one or the other -- if it's content that's purely created for the digital world, it should -- it's not subject to -- it should not be necessarily made available to competitors, and you have a problem with that.

10569   M. AUDET : Oui, assurément. Prenez l'exemple, la série « Les Beaux Malaises » qui a été diffusée sur TVA cette année, de votre point de vue, est-ce que c'est une série produite pour la télévision ou pour le Web?

10570   CONSEILLER PENTEFOUNTAS : Elles sont produites... Oui.

10571   M. AUDET : Bien, de notre côté, lorsque ça été annoncé par le groupe Québecor que ça allait être diffusé sur TVA, on était sûr que c'était une émission pour la télévision, et quand ils ont annoncé... quand on a voulu les approcher pour acheter les droits pour les mettre sur la vidéo sur demande, ils nous ont dit, « Non, non. Ça va être lancé trois mois avant sur le Web, parce qu'elle a été produite pour le Web. Elle va être diffusée ensuite sur TVA. »

10572   CONSEILLER PENTEFOUNTAS : Oui.

10573   M. AUDET : Et la même chose s'est produite pour « Mensonges » sur AddikTV.

10574   Dans un monde là, c'est ce genre de file-là qu'on dit, éventuellement, comment tu peux juger si ça été produit pour une application mobile, pour le Web ou pour la télévision? Dans un monde multiplateforme, c'est une notion floue, ça. Ça n'existe plus.

10575   CONSEILLER PENTEFOUNTAS : Oui.

10576   M. AUDET : Donc, tout contenu numérique accessible pour une compagnie verticalement intégrée devrait être accessible pour les autres.

10577   On a spécifiquement demandé à Québecor, on était prêt à payer en même temps qu'ils le lançaient, parce qu'ils l'ont lancée sur illico mais aussi en vidéo sur demande. Alors, on a voulu l'offrir à nos clients en vidéo sur demande, prêt à payer pour. On nous a dit, « Non, non, non. C'est produit pour le Web. Donc, ça fait partie des exclusions numériques. »

10578   Donc, ça devient très subtil. Alors, tout ce qui est contenu verticalement intégré pourrait donner demain matin des avantages. C'est toujours joué sur les mots : Ça été produit pour une plateforme, pour une application. Alors, on n'en sortira jamais là.

10579   Donc, tout contenu devrait être disponible à tout le monde. Aussi simple que ça.

10580   Il n'y a plus de distinction maintenant sur la plateforme. Dans un monde IP, tout est disponible partout.

10581   CONSEILLER PENTEFOUNTAS : Si c'était pour être diffusé par votre contournement, je comprends, mais là, ils l'ont rendu disponible sur illico, vidéo sur demande. O.K.

10582   M. AUDET : Ils ont refusé de le rendre disponible sur vidéo sur demande. C'est ça la problématique.

10583   CONSEILLER PENTEFOUNTAS : Il est disponible sur vidéo sur demande trois mois après que ça été disponible en ligne...

10584   M. AUDET : Il a été disponible pour les clients du groupe Québecor. Il a été disponible en même temps sur la chaîne illico sur demande que... c'est-à-dire sur la chaîne 900 des clients télé...

10585   CONSEILLER PENTEFOUNTAS : Oui.

10586   M. AUDET : ...que sur illico sur demande -- en même temps -- alors que pour les autres distributeurs, ça été trois mois plus tard.

10587   CONSEILLER PENTEFOUNTAS : Je comprends. C'est intéressant.

10588   Vous avez soulevé la question des services américains, puis CNN, c'était l'exemple. Si ces services américains sont assujettis aux règles du Code, est-ce que ça changera de quoi?

10589   M. AUDET : En fait, en autant, comme on disait tantôt, que le Code soit clair sur ce qui est déraisonnable, et là, on l'analysera, parce que demain matin, est-ce que c'est déraisonnable de demander une pénétration... là, on n'a pas donné de chiffre, mais de chiffre très élevé.

10590   CONSEILLER PENTEFOUNTAS : Non, je comprends.

10591   M. AUDET : Donc, c'est la notion de « déraisonnable » qu'il va falloir clarifier.

10592   Dans le fond, vous nous demandez, en tant que distributeurs, quels sont les freins, un jour, à offrir un libre choix à meilleur prix.

10593   CONSEILLER PENTEFOUNTAS : M'hmm.

10594   M. AUDET : Et présentement, dans le domaine grossiste, il y a plusieurs freins, qui fait que demain matin... on vit avec présentement.

10595   CONSEILLER PENTEFOUNTAS : Et pour reprendre la question que le président a posée plus tôt ce matin, si CNN décide de ramasser ses billes puis retourner chez eux?

10596   M. AUDET : Bien, demain matin, s'ils perdent un auditoire au Québec ou au Canada, c'est eux qui sont les perdants. Ces gens-là iront le chercher éventuellement à court terme sur le Web. Mais dans le monde où on veut aller, tout le monde aimerait distribuer son contenu à tout le monde. On va trouver des terrains d'entente.

10597   CONSEILLER PENTEFOUNTAS : Non, non. Je ne m'occupe pas d'eux autres s'ils sont perdants. Ils vont s'arranger, CNN, s'ils perdent 5 pour cent de votre marché au Québec. Mais pour vous en tant qu'EDR?

10598   M. AUDET : Bien, pour nous en tant qu'EDR, demain matin si on n'est plus capable d'offrir CNN, on ne le fera pas, et nos consommateurs iront le chercher sur le Web.

10599   CONSEILLER PENTEFOUNTAS : O.K. O.K.

10600   M. AUDET : Il faut s'adapter, tout le monde. Il y aura des conséquences à ça.

10601   Mais aussi, il faut faire attention. Beaucoup de personnes pensent qu'en offrant les choix qui vont être à la carte ou bien faites vos propres forfaits, ça va mettre fin aux forfaits thématiques. Ce n'est pas le cas. Présentement, on offre les deux chez nous. On offre la possibilité de faire vos propres forfaits et on offre des forfaits thématiques.

10602   CONSEILLER PENTEFOUNTAS : Tout à fait.

10603   M. AUDET : Et vous seriez surpris de voir que la très grande majorité de nos clients préfèrent les forfaits thématiques.

10604   Donc, il y aura toujours aussi des moyens commerciaux d'inciter les clients à mieux pénétrer certains services si on le juge pertinent. Il faut être créatif dans ces cas-là, mais ce n'est pas impossible. Mais de réduire ce qu'on veut, c'est réduire les barrières pour le faire.

10605   CONSEILLER PENTEFOUNTAS : Non, ça va. Je pose la question parce qu'il y a d'autres EDR qui s'inquiètent de la possibilité de perdre ces services américains si on les met dans les mêmes régimes que les services canadiens.

10606   M. AUDET : La cause à effet ne sera pas toujours aussi simple que ça. Si jamais on veut absolument... Disons que les Américains maintiennent un degré que vous jugerez un jour raisonnable et que nous, on juge un peu déraisonnable, bien, on essaiera de le commercialiser.

10607   Présentement, lorsqu'on vous parle de faire des pirouettes, on a créé, nous, une thématique qui s'appelle « Nouvelles et Sports ». Alors, le monde pourrait dire, « Pourquoi vous avez créé une thématique Nouvelles et Sports? » C'est qu'on sait que les sports francophones sont très populaires. En mettant CNN dedans, on l'a rendu attractif.

10608   Donc, il y a moyen d'être créatif. Ce n'est pas vrai, la vie n'est pas toujours noire ou blanche, hein! Il y a des moyens de... sauf limitons les frontières et laissons place à la créativité des entrepreneurs.

10609   CONSEILLER PENTEFOUNTAS : Merci beaucoup. Ça complète pour moi, Monsieur le Président.

10610   THE CHAIRPERSON: Just -- we're almost done -- three last quick questions from me.

10611   Wouldn't you agree that 4+1 issue is largely a red herring, in the sense that it's almost based on a nostalgic view of what cable television was in the sixties and seventies, and -- you know, an extension of cable -- of a on-a-roof-top antenna, and that you're talked about grandfathering people who are the system and -- are you expecting that much churn to a really, really skinny basic? In any event, you'll offer those somewhere, will you not?

10612   MR. FULLER: Oh, yeah. Yeah.

10613   I do agree it's a red herring. I guess just the point I was trying to make when I said why I would go with option C is I just -- you know, I think the challenge is, if we put in this Canadian-only skinny basic, and then there's another skinny basic that basically has the 4+1s in it, almost no one will buy the -- you know, the first one.

10614   THE CHAIRPERSON: Right.

10615   MR. FULLER: So, you know, we'll have -- you know, we'll offer it --

10616   THE CHAIRPERSON: But if you went with option 1 --

10617   MR. FULLER: Yeah.

10618   THE CHAIRPERSON: -- most people would be grandfathered with a 4+1 --

10619   MR. FULLER: You're right, yeah.

10620   THE CHAIRPERSON: -- and those that aren't -- choose the very skinny Canadian-only basic, under option 1 -- would somehow have the option elsewhere to get the 4+1?

10621   MR. FULLER: Yes, absolutely. Yeah.

10622   THE CHAIRPERSON: Okay.

10623   MR. FULLER: We would provide them that option, yeah.

10624   THE CHAIRPERSON: Later on today we'll be hearing from a party that's suggesting that we should create a local production fund to fund local news. The suggestion is 1 per cent above and beyond the 5 per cent that already exists.

10625   What are your views on that? And how would you -- what would you do with that additional charge that you would have to pay?

10626   MS MANVILLE-NEESON: Well, certainly, you know, we've argued that there are some concerns with raising the regulatory burden when we are facing competition from those who are unregulated, but I think we might want to take an undertaking on what we would want to respond on what we would do if that were to happen. I'm not sure we have a view to provide at this time.

Undertaking

10627   THE CHAIRPERSON: Okay, good.

10628   Final question -- so, yes, on an undertaking, because I think you'll hear from the CBC. They're wanting a 1 per cent above and beyond the 5 per cent, and, of course, I'd like to have your views as to what you do with that additional burden --

10629   MR. WOODHEAD: Yeah, very well.

10630   THE CHAIRPERSON: -- and how you pass it on, if at all.

10631   Looking at the working document, what's your top proposal, and your least favourite?

10632   MR. FULLER: We did anticipate this question, so I -- you know --

10633   THE CHAIRPERSON: Well, I hope so.

--- Laughter

10634   MR. FULLER: I actually joked with Ted last night that I'd -- I got to say what our most favourite was, but he had to actually say what our least favourite, but actually I'll do both.

10635   In terms of most favourite, not surprisingly, it is, you know, the concept of moving to more flexibility, more choice, more -- you know, whether that be pick-and-pay or à la carte. So, no question, you know, the aspects of the proposal that relate to that are what we appreciate the most.

10636   But somewhat related to that, I guess the one we're the most concerned about, if you do move to that environment, is option A in your preponderance section, because it will be -- you know, option A and B in preponderance. Basically A was we have to guarantee that we're providing more people Canadian shows than American -- or, sorry, Canadian channels than American channels, versus option B is offering.

10637   You know, we're not a big fan of option A because, actually, I'm not sure it's practically possible if you truly do move to a pick-and-pay world. If you got a skinny basic, with very few, you know, Canadian channels in it, and then you offer a plethora of other options for people, it is conceivable someone could, you know, be in a position where they want to choose the skinny basic, and then a whole host of what might actually be American channels, and they'll end up with more American channels than Canadian because of their choice. So, you know...

10638   THE CHAIRPERSON: How do you deal with it now, because that -- you're facing that issue currently, aren't you?

10639   MR. FULLER: We are, yeah, but the --because they're --

10640   THE CHAIRPERSON: How often did somebody get irritated because of the current rule?

10641   MS MANVILLE-NEESON: Well, I think that it --

10642   MR. FULLER: They don't, but it's almost -- it is, in fact, impossible, given the fact that we're got, you know, some 35-or-so channels --

10643   MR. WOODHEAD: Forty.

10644   MR. FULLER: -- 40 channels in our skinny basic, many of which are Canadian. And there aren't that many American channels --

10645   THE CHAIRPERSON: Oh, I see.

10646   MR. FULLER: -- right, so --

10647   THE CHAIRPERSON: Okay.

10648   MR. WOODHEAD: It's not mathematically --

10649   MR. FULLER: -- you can't actually get to it now, but you might -- if you drastically reduce the number of channels that was in that skinny basic, and it was cut down to half, it could actually then become --

10650   THE CHAIRPERSON: Then it does become.

10651   MR. FULLER: -- you know, possible.

10652   THE CHAIRPERSON: Okay. Yeah, fair enough.

10653   MR. FULLER: Okay.

10654   THE CHAIRPERSON: So the history can't be a test case in this particular case.

10655   MR. FULLER: No, no.

10656   THE CHAIRPERSON: Okay. Good.

10657   Thank you very much. Those are our questions.

10658   Since we have one large panel going to be replaced by another large panel, why don't we take a break till twenty-past, 10:20.

10659   MR. MILLER: Thank you.

--- Upon recessing at 1009

--- Upon resuming at 1021

10660   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

10661   Madame la Secrétaire.

10662   LA SECRÉTAIRE : Merci.

10663   Nous entendrons maintenant la présentation de la Société Radio-Canada.

10664   S'il vous plaît vous présenter et présenter vos collègues. Vous avez 20 minutes pour votre présentation.

PRESENTATION

10665   M. LACROIX : Bonjour, Monsieur le Président, Monsieur le Vice-président, Mesdames et Messieurs les Conseillers, membres du personnel. Je m'appelle Hubert Lacroix et je suis le président-directeur général de CBC/Radio-Canada.

10666   Je suis accompagné ce matin de :

10667   - Steven Guiton, à ma droite, vice-président, Technologies et chef de nos Affaires réglementaires;

10668   - à sa droite, Jean Mongeau, directeur général et chef des revenus de la Société;

10669   - à ma gauche, Louis Lalande, vice-président principal des Services français;

10670   - à sa gauche, Heather Conway, vice-présidente principale des Services anglais; et

10671   - à la gauche d'Heather, Bev Kirshenblatt, directrice générale des Affaires réglementaires.

10672   Avec nous également :

10673   - Patricia Pleszczynska, à droite, directrice générale, Services régionaux et ICI Radio-Canada Première;

10674   - à sa gauche, Marie-Philippe Bouchard, directrice générale, Musique et Services numériques;

10675   - à la gauche de Marie-Philippe, Jennifer McGuire, directrice générale et rédactrice en chef, CBC News et Centres; et

10676   - à la gauche de Jennifer, Sally Catto, directrice générale, Programmation, CBC Television.

10677   Nous vous remercions de nous donner l'occasion de vous présenter nos observations ce matin.

10678   En juin dernier, nous annoncions notre plan stratégique pour les cinq prochaines années. Nous connaissons par conséquent très bien l'étendue et la complexité des enjeux avec lesquels les télédiffuseurs sont présentement aux prises. Nous sommes aussi conscients des défis que le Conseil doit relever pour réaliser les objectifs de politique publique de la Loi sur la radiodiffusion dans un environnement où la seule chose dont on peut être certain est le risque de maintenir le statu quo.

10679   Comme vous l'avez d'ailleurs mentionné dans votre Avis public du 24 avril :

« ...le Conseil estime que si l'approche actuelle ne change pas, les objectifs de politique publique seront menacés. »

10680   Nous sommes d'accord qu'il y a des risques à conserver l'approche actuelle en matière de réglementation. Toutefois, nous pensons qu'il est encore beaucoup plus risqué de tenter d'ajuster un modèle qui ne fonctionne plus.

10681   Le plus important de ces risques serait que le système ne soutienne plus la création et la distribution de contenu canadien captivant dans les formats et sur les plateformes que les Canadiens veulent. Il serait clairement décevant que ces audiences aboutissent à l'adoption d'une approche réglementaire qui donne moins de résultats pour le système que ceux réalisés dans le passé.

10682   Nous croyons que l'approche du Conseil doit soutenir trois choses :

10683   - premièrement, des solutions aux enjeux qui s'appuient sur les forces du marché, plutôt qu'une intervention réglementaire;

10684   - des solutions pour l'ensemble du système, plutôt que pour protéger la réussite financière d'une entreprise en particulier;

10685   - des solutions pour l'ensemble du système qui établissent des pratiques commerciales et des règles de fonctionnement équitables pour tous.

10686   Ce sont ces mêmes trois éléments, Monsieur le Président, que vous avez-vous-même récemment mentionnés comme étant les facteurs déterminants au cours de cette audience pour que le système fonctionne et qu'il atteigne les objectifs de politique publique de la Loi. Comme vous l'avez indiqué :

« Nous devons nous assurer que le modèle commercial fonctionne, que le contenu canadien continue d'être produit, qu'il soit de qualité, que les nouvelles et l'information canadiennes continuent d'être soutenues et offertes, qu'elles soient de qualité et qu'elles soient livrées par des reporters et non pas simplement générées par des agences de presse. »

10687   Notre présentation aujourd'hui et nos observations vont dans ce sens.

10688   Your April 24th Public Notice describes the history of the Commission's involvement in Canadian broadcasting and the story of the fragmentation of conventional broadcasters' audiences. One of the startling aspects of this fragmentation is just how quickly and how significantly it has occurred.

10689   As an example, exactly 20 years ago, in 1994, the Commission licensed several new specialty services and in so doing noted that at that time existing specialty services had managed to attract only 4.6 percent of all hours of viewing by Canadians. On this basis and in licensing this handful of new specialty channels, the Commission concluded that, and I quote, "audience fragmentation should be minimal." If only that was so.

10690   Instead, as we all know, the fragmentation of conventional broadcasters' audiences from the launch of specialty and pay services has been long, uninterrupted and continues to be expanded today with VOD services, mobile services and OTT services. Today, the relative strength of the conventional and specialty and pay sectors is dramatically different than what it was 25 years ago.

10691   Since 1990, conventional television's share of total advertising in Canada has dropped by 25 percent.

10692   Since 1990, conventional broadcasters' share of all TV viewing in Canada among adults aged 25-54 has declined by over 40 percent.

10693   And yet, despite these changes, Canadians still look to conventional television for their local programming, especially local news. Conventional television still remains at the heart of the broadcasting system, but its business model is broken. But you already know this. So, why am I repeating it? Because we think that there is indeed right now a market-based and system-wide solution available to the Commission to address this issue.

10694   We think that conventional broadcasters should be paid by BDUs for the programming that BDUs take from them, just as specialty and pay services are. This change would restore balance to the business model of conventional broadcasters. How do we do this?

10695   Eh bien, comme le Conseil l'a reconnu, la transmission en direct de la télévision par un émetteur n'est plus une technologie efficace ou populaire pour le système. Le Conseil devrait offrir aux télédiffuseurs traditionnels l'option de mettre hors service leurs émetteurs et d'alimenter les EDR avec toute autre technologie de transmission qu'ils jugent appropriée. L'article 31 de la Loi sur le droit d'auteur ne s'appliquerait plus, ce qui permettrait aux télédiffuseurs traditionnels de négocier le paiement de leur programmation directement avec les EDR.

10696   Nous croyons que cela devrait être l'objectif premier de cette instance, celui de redresser le modèle d'affaires de la télévision traditionnelle et ainsi préserver la programmation locale dans le système canadien de radiodiffusion.

10697   Qu'est-ce que cela signifie pour le diffuseur public?

10698   Notre mandat est celui de jouer un rôle important dans la vie des Canadiens partout au pays, peu importe la plateforme où notre contenu est regardé ou consulté. Notre rôle est d'informer, de divertir et d'éclairer nos auditoires, de refléter et de servir les besoins de tous les Canadiens dans les deux langues officielles, peu importe où ils vivent, de contribuer à notre identité par la promotion et la création d'une variété d'émissions qui reflètent et célèbrent le Canada et les Canadiens.

10699   Nous sommes fiers de nos réalisations, mais l'environnement actuel nous pose des défis dans la manière dont nous remplissons notre mandat. Ces objectifs ne peuvent être atteints si, année après année, nous sommes forcés d'en faire moins et de constamment réduire notre contribution au système de radiodiffusion parce que nous sommes tributaires d'un modèle d'affaires qui ne fonctionne plus.

10700   Redresser ce modèle d'affaires pour l'ensemble de la télévision traditionnelle nous permettra tous de contribuer au système dans les années à venir, à la hauteur des attentes des Canadiens.

10701   So, what do we see as the way forward?

10702   First, we recognize that the Broadcasting Act sets out numerous policy objectives that the Commission must strive to achieve. The most significant of these is to permit and support the creation and distribution of compelling Canadian content in formats and on platforms that Canadians want. Broadcasters must be able to adapt.

10703   Second, the Commission has the responsibility and the tools to promote the health of the broadcasting system as a whole. All programming undertakings should have an opportunity to devise and implement reasonable business plans. This includes operating in an environment with adequate VI safeguards and the ability to receive reasonable compensation for their programming.

10704   And in this context, what should the regulatory regime look like -- beyond fixing the business model for conventional television?

10705   Well, CBC/Radio-Canada believes there are four overarching objectives the Commission should use to guide its ultimate decision in this proceeding.

10706   1. It is critical to keep the Canadian broadcasting system Canadian. In our view, this is best achieved by maintaining the preponderance rule. This approach has worked extremely well in the past and there is no reason to believe that it has somehow become outmoded.

10707   2. We believe it is important to preserve a diversity of voices in the system. Given the level of concentration that now exists, we believe that this goal is best achieved by means of ex ante safeguards that ensure independent broadcast services are provided with adequate distribution protections to ensure diversity of voices continue in the system.

10708   3. We believe it is essential that there be funding available for high-priority programming. In our view, this includes drama and, as Canadians have said loud and clear in this consultation, local news. The former should continue to be funded by the CMF and the latter by a new Local News Fund.

10709   4. All programming undertakings should be given greater flexibility to focus on the programming choices that are demanded by the marketplace and on the platforms that best meet Canadians' needs. An important measure of success will be connecting with audiences, so the Commission should not try to force-feed particular genres of programming through particular platforms. Instead, it should focus on ensuring that all types of programming are available somewhere in the system.

10710   These four elements are what we see as comprising the building blocks for a regime of broad regulation which can take the Canadian broadcasting system into the future with a reasonable chance for continued success.

10711   Mais pour revenir au point de départ, nous croyons que ce cadre réglementaire réussira seulement si le modèle d'affaires de la télévision traditionnelle est redressé. Autrement, celle-ci ne sera pas en mesure de contribuer au système comme par le passé, ce qui entraînera une baisse de la qualité du contenu et une diminution de la quantité de contenu canadien.

10712   Nous traversons une période difficile et marquée par de nombreux défis. Il est essentiel, cependant, pour la santé et la vitalité à long terme du système canadien de radiodiffusion que les télédiffuseurs et le régime réglementaire du Conseil s'adaptent au nouvel environnement multiplateforme. Selon nous, si le Conseil établit un régime réglementaire logique et souple sur le plan financier, il pourra avoir confiance que le système, dans son ensemble, répondra aux attentes des Canadiens et rencontrera les objectifs de la Loi sur la radiodiffusion.

10713   Merci. Nous répondrons, évidemment avec plaisir, à vos questions.

10714   LE PRÉSIDENT : Merci beaucoup, Monsieur Lacroix et votre équipe.

10715   Évidemment, nous avons entrepris le renouvellement des licences de Radio-Canada, il n'y a pas si longtemps. Donc, le but aujourd'hui, bien que ce renouvellement-là ait pris bien des années à avoir lieu -- je pense plus qu'une décennie entre le renouvellement avant ça dans les années '90, fin des années '90 -- je ne pense pas qu'aujourd'hui on va accélérer et décider de faire votre renouvellement dans le cadre de cette instance-là, puis je ne vois pas l'invitation de votre part qu'on entreprenne cet exercice-là aujourd'hui.

10716   Mais je voulais, par contre... parce qu'à l'époque, je ne crois pas que madame Conway était encore avec vous. I believe this is at least your -- I'm not sure if it is your first regulatory hearing, but it certainly is your first one in your new function. So, welcome.

10717   MS CONWAY: Thank you.

10718   THE CHAIRPERSON: I will start off the questioning on this, and maybe my colleagues will have some follow-up questions.

10719   The elimination of over-the-air transmitters seems to me to be one of the most challenging aspects of your proposal, and one of the reasons is how even the Commission's Working Document has attracted a significant amount of reaction in our online forum. In fact, so far it would seem that about half of the comments on the online forum are against the disappearance of over-the-air transmitters.

10720   Are you of the view that Canadians are ready for what, I think, they would see as a fundamental change?

10721   MR. GUITON: We actually think they are ready, Mr. Chairman.

10722   As you probably know, we have two --

10723   THE CHAIRPERSON: Okay. I am going to ask you, where is your evidence of that.

10724   MR. GUITON: I am going to get into it in my fulsome answer, if you don't mind.

10725   We have two motivations for putting this forward, as you probably know. One is to provide the Commission with a way of addressing the conventional issue. That's one.

10726   The other is, mostly, a view of the world that, we think, conventional broadcasting and other forms of broadcasting should be provided in a technologically neutral way.

10727   My rationale as to why I think we are ready for this? We do know from the research that the people who are using over-the-air are not people who believe that TV is an important part of their lives. They are not going to over-the-air because they are big TV people.

10728   The other thing we know is that 80 percent of them also have access to broadband access for online activity.

10729   So we know that it's not necessarily, kind of, their principal approach for TV. It's not like they are heavy users. It's not like they don't have other means.

10730   We also have looked at this in the context of this proceeding -- where you are considering a skinny basic, which has been around in discussions for some time -- the combination of a skinny basic to ensure that for those people who are still using over-the-air for affordability reasons, that is being addressed.

10731   So the combination of the characteristics of those users, plus the environment where you are coming forward with a skinny basic proposal to address affordability issues, we think that those together, actually, as your question indicated, suggest to us that Canadians are ready.

10732   THE CHAIRPERSON: Did you do any surveys on this specific point? Because I haven't seen any studies that you have filed, with evidence, with CBC/Radio-Canada viewers that that indeed is something they would be willing to accept.

10733   MR. GUITON: We have not done such research. The data that I am quoting from is from MTM and other sources. That is the information we have used.

10734   THE CHAIRPERSON: Okay. By the way, when I am asking questions, if there is specificity in one or the other of the language groups in your answers --

10735   MR. GUITON: Understood.

10736   THE CHAIRPERSON: -- I trust that you will be able to add to that.

10737   MR. LACROIX: Yes.

10738   THE CHAIRPERSON: How different is your model from the Bell proposal?

10739   MR. GUITON: I think that both models seek to provide the Commission with proposals for how to address the conventional television problem. I think that is the starting point.

10740   I think they both achieve that.

10741   From our point of view, what we tried to do, which was different from what Bell has done, is that we tried to actually preserve the conventional TV model, the local model, as much as possible. So we are not proposing that the Commission make major changes or eliminate conventional broadcasting or local broadcasting as a key component of the system.

10742   In fact, the changes that we think are necessary for the Commission to make in order to put our proposal forward are really discrete changes to the regs, and we have written them up, and we can provide them in an undertaking if you like. They are minor, and they would allow the Commission, basically, to, in the regs, identify the delivery of a signal by a conventional television broadcaster to be technologically neutral and not contingent on over-the-air delivery.

10743   I think there are -- and I will defer to my colleague Bev if I am wrong -- I think there are three instances where we have identified changes to the regs, both the BDU regs and the TV regs, that would be required.

10744   All of the rest, the benefits, the obligations of conventional local television, would remain.

10745   So, from our point of view, just to finish this, we think that ours is a more straightforward and simple way to actually achieve the same result.

10746   THE CHAIRPERSON: First of all, to complete the record, if you are willing to undertake those drafting changes, obviously, we would be interested in seeing them. Not that we have decided anything, but it completes the record.

10747   So you can do that for the 19th, if you already have it.

10748   MS KIRSHENBLATT: Yes, we will.

Undertaking

10749   THE CHAIRPERSON: Under your system, would this new non-over-the-air service that looks like conventional -- they would get carriage rights, particularly at CBC, whether it's a local or a regional signal.

10750   Is that correct?

10751   MR. GUITON: That's correct. Consistent with what we saw as the priority for local programming in the system, that's correct.

10752   THE CHAIRPERSON: And it would be added to the skinny basic, presumably.

10753   MR. GUITON: Correct. That's our proposal.

10754   THE CHAIRPERSON: And it would benefit from simultaneous substitution rights?

10755   I know that in your particular case it may not be relevant under your current model, but would it add --

10756   MR. GUITON: I will try to keep my answers brief for you. We haven't considered that, because we have been thinking about it from our point of view, Mr. Chairman. We would be happy to consider that --

10757   THE CHAIRPERSON: It could be an undertaking perhaps?

10758   MR. GUITON: Sure, absolutely.

10759   THE CHAIRPERSON: Like another party is?

10760   MR. GUITON: Yes.

Undertaking

10761   THE CHAIRPERSON: Because, as some people know, but maybe not everyone, simultaneous substitution is very much a reality for conventional television, and currently, since, I think, probably over 60 percent of Canadians actually have viewership to specialties, it doesn't actually exist in the specialty world, nor in the non-linear world.

10762   There would be a negotiated wholesale fee under your model?

10763   MR. GUITON: Correct.

10764   THE CHAIRPERSON: So how do you explain, from an affordability perspective, to a Canadian who currently receives a free over-the-air service, of content they very much value -- that local content, and probably even more, the local news and information -- and based on some comments I have seen online, they perceive it as almost a constitutional right.

10765   I am not saying I agree with that, but the level of attachment to that over-the-air service seems to be quite strong.

10766   How do you explain to them that, in order to continue to receive that very valuable content, not only do they have to subscribe to a broadcast distribution undertaking, which could charge them $20, $25, $30 a month, but on top of that, that package would include a wholesale fee?

10767   MR. GUITON: I think there are three elements, Mr. Chairman, to the answer.

10768   I think the first element, if I understood the Bell presentation, is -- our answer would be the same, which is, what this does is actually preserve local television and ensure that viewers actually get something.

10769   Without this -- and you may get into this with our Plan B, but without this, the deterioration of the conventional broadcasting sector is going to mean that these people who -- yes, they are benefiting today -- are actually going to be receiving a lower quality service and, I guess, in the private case, a non-existent service.

10770   So that is our first answer, and I think that is an entirely complete answer.

10771   I would only add that my other element was those people who are saying that the entitlement thing -- that we have this right to free service. I think that is an extremely interesting discussion, and if you will allow me 30 seconds, I will do it.

10772   I know you are tight for time and you have been running late, so I can be as brief as you like, but the interesting thing about that is that people have been saying: Yes, this is something I have received for free.

10773   We all know that it is not free, in the sense that it doesn't cost zero, it is that we have all, particularly people of my age, older than all of you, seen this be free, and there is an impression that it is free.

10774   Well, it is not free. It has been funded by a specific model, which is advertising.

10775   We have evolved, but the assumption in people's minds that this should be free has not.

10776   And the free has only been associated with the technology, which is that you broadcast massively to the audience and you get advertising.

10777   That doesn't work anymore. It is just a way of funding, through advertising. It's not that the service costs us nothing.

10778   So the funding, of course, is the problem, and these people -- 95 percent of Canadians, we know, have come to realize that you pay for TV. That's what we know today. And there is a good chunk of Canadians who are viewing TV online. They are paying for TV, in the sense that they need broadband access to do that.

10779   Canadians are there, but I agree with you, there is a group -- and it's not a criticism of them -- who still believe that there should be something in this free thing.

10780   It's not free, it costs money.

10781   THE CHAIRPERSON: I take it your proposal would apply to private as well as the CBC. It would be open to any over-the-air --

10782   MR. GUITON: It would be open.

10783   I haven't been able to watch all of the proceedings before you this week, but I understand that some conventional broadcasters are saying that it's not necessary, the model is not broken.

10784   So if they don't want to enter negotiations, they don't have to.

10785   THE CHAIRPERSON: But with respect to the CBC, this model, wouldn't it be perceived by some as quite surprising -- and you don't have to explain it to me, I understand that your funding model is more complicated than parliamentary appropriations. You have other sources of revenues, including subscriber revenues with some of your speciality services. But some might look at your proposal and be surprised that what you are putting forward is that not only would you receive parliamentary appropriations, but you would also receive subscriber revenue, and also advertising revenue.

10786   MR. GUITON: Yes, and I can go into a little bit of what I say when people say that to me.

10787   THE CHAIRPERSON: That's the question, because I am asking on their behalf.

10788   MR. GUITON: Okay. It goes back a little bit -- it is kind of a circular thing.

10789   People are used to having it free. That's what I have already talked to you about. And the second thing is, they say: Well, the CBC is publicly funded; therefore, it should provide its service for free.

10790   And they get the evidence for that from the OTA history. So it is kind of circular.

10791   But, really, the way we look at it is, things that are publicly funded, that doesn't mean -- there is no contradiction between things that are publicly funded and subscriber charges for that, or advertising.

10792   I give the example all the time that I travel a lot between the three cities, Montreal, Toronto and Ottawa, and whenever I get on a VIA train, I don't assume that I get a seat for free. But we know that VIA is subsidized exactly to the same degree, publicly, as we are.

10793   When I take a bus, I see advertising on the bus. I know it is very heavily funded by the public authorities, yet I have to pay to get on.

10794   In all cases the issue is: the public funding is at a certain level, and there are costs arising beyond that level, and public entities use subscriber charges, advertising, just to make up the total.

10795   Now, in all cases, it is certainly up to the authority in each case, whether it's the federal government in our case, or the municipal government in the case of buses, to decide that perhaps the funding is too large, or not.

10796   But as a regulatory approach, there is nothing inconsistent with what we are talking about. There is nothing in the Act that suggests that we shouldn't be going forward on this basis.

10797   And, as you said, we do have subscriber revenues in some of our other services.

10798   We have participated, as you know, in the LPIF in the past, when the Commission decided it was important that we subsidize, or at least support, local programming. You recognized that from a regulatory point of view, and promoting the objectives of the Act, it's important that CBC/Radio-Canada participate in that. So we did.

10799   So I don't think there is any contradiction in that, and we see evidence of it all the time.

10800   I think it is worsened because of this free thing. I think the OTA has led people to believe that CBC is free, and that funding should not be in addition to what they get.

10801   It gets into that kind of circle.

10802   That has been my experience, and the answer I give to people is the one I just gave to you.

10803   MR. LACROIX: Mr. Chairman, could I add one thing?

10804   THE CHAIRPERSON: Sure.

10805   MR. LACROIX: I would like to bring it back to the number of feet that you want -- 20,000, 30,000 feet, as we look at the system.

10806   An environment where -- I think it's paragraph 33 of your Avis d'audience -- you bring back the public policy objectives that we are all trying to meet, in that environment, the business model comes to -- it's 40 or 50 years old.

10807   We have a situation where all the players, not only CBC/Radio-Canada, but all the players right now -- the conventional broadcasters are telling you, I think: We need to continue thinking revenue stream as the ad revenues, which were the driving force behind the dollars available to the broadcasters to deliver on these promises and on these objectives -- well, they are going away. They are going somewhere else.

10808   And we see the content that we create as being something that we are not paid for. We look at the specialty model, and we are simply trying, for all, to even the playing field.

10809   THE CHAIRPERSON: I am not questioning that your intention is to, obviously, do the right thing, in light of the objectives of the Broadcasting Act, and your own obligations under that Act, nor am I questioning the reality that the over-the-air model is challenged. What I am suggesting -- and analogies are a bit dangerous, but let me put it to you that I think your proposal may be seen by some as not so much the equivalent of advertising on a bus, but taking the bus off the roads completely, so that there is no bus service.

10810   I think it is the public perception that I am trying to get my head around.

10811   MR. LACROIX: On the contrary, Mr. Chairman, I think that what we are trying to do is, we are trying to make sure that the bus -- let's continue on that path -- that the bus, actually, is perhaps going to be able to continue for a long time. Or, if it's replaced, it's replaced by a vehicle that actually is useful in 2014.

10812   What we are telling you right now is that the bus is on the side of the road and it's not going fast enough.

10813   THE CHAIRPERSON: Fair enough. Let me move on to another issue.

10814   Again, we aren't deciding anything today. The purpose is to explore and develop the public record.

10815   Of course, down the road it will be this Commission that will decide these issues, and no one else, but I don't want to have a debate about these things, whether it's a good idea or not, at this stage, but I understand your proposal.

10816   One of them is that there be a financial contribution from over-the-air -- OTTs -- OTAs/OTTs -- OTTs in this case, if they have revenues over $25 million.

10817   That is still your position?

10818   MR. GUITON: Yes, it is.

10819   THE CHAIRPERSON: And that these OTTs with revenues over $25 million would contribute to the CMF. That money would be directed there.

10820   MR. GUITON: Correct.

10821   THE CHAIRPERSON: Just so I understand your proposal, the revenues would either come from subscription or ad revenues?

10822   MR. GUITON: I'm sorry, maybe I am not understanding your question.

10823   THE CHAIRPERSON: Well, an OTT could have a business model that is partially, or entirely, advertising driven.

10824   MR. GUITON: Right. So I would suppose that the Commission would have to define what type of revenue -- total revenues, operations in Canada. I am not really sure, but it would be --

10825   I haven't really thought about that question. The idea is that you would identify a certain revenue base, and 1 percent of it would go to the CMF.

10826   THE CHAIRPERSON: And this would apply to both Canadian and non-Canadian operators?

10827   MR. GUITON: I believe that's right.

10828   THE CHAIRPERSON: And your view of what an OTT would include -- obviously, an SVOD?

10829   MR. GUITON: Yes.

10830   THE CHAIRPERSON: Would it include authenticated GO-type systems, as well?

10831   MR. GUITON: I am just going to -- since someone else may have been following this proceeding more closely, I am going to pass it to Bev on that question, if you don't mind.

10832   MS KIRSHENBLATT: Why don't we take an undertaking to go through the list of various types of undertakings that it would capture.

10833   THE CHAIRPERSON: Right, because the word "OTT" is used in common parlance. I have hesitated to use it for years, but apparently I am drawn into it now. But we need to know exactly what we are talking about, because they come in various shapes and forms.

10834   MS KIRSHENBLATT: Okay.

Undertaking

10835   THE CHAIRPERSON: Thank you.

10836   This is a question that I have been asking others, just to understand the OTT model. And, obviously, you have been studying this, or else you wouldn't have put this proposal before us.

10837   To your knowledge, do OTTs currently pay income or consumption taxes, GST, HST, in this country?

--- Pause

10838   MR. GUITON: We don't seem to know the answer to that question.

10839   THE CHAIRPERSON: You just don't know.

10840   MR. GUITON: We assume they do, but we don't know. We could certainly confirm that for you, but we don't know.

10841   THE CHAIRPERSON: Well, if you don't know, it would be difficult for you to confirm that, wouldn't it?

10842   And I am asking about both Canadian and foreign OTTs.

10843   MR. GUITON: I am suggesting that if you would like us to find out the answer to that question, we could certainly find out for you.

10844   THE CHAIRPERSON: How would you find that out in ways that I wouldn't be able to?

10845   MR. GUITON: CBC finds out lots of things, Mr. Chairman.

--- Laughter

10846   THE CHAIRPERSON: You will put an investigative journalist on this?

10847   Do you have an in at the CRA?

10848   MR. GUITON: No, we don't have such a thing.

10849   THE CHAIRPERSON: So, unless you have a publicly available way of getting to it, or some contact, it would be difficult for us to ask you to go and find that information.

10850   MR. GUITON: Okay. I would have thought it was publicly available. If it's not, it's not. We are not aware of whether it is true or not.

10851   THE CHAIRPERSON: Okay. Then I will move on, because I am not sure that this would be -- I have asked others, namely, the Government of Ontario, who should know these things. They have an undertaking, so perhaps at least we will have an idea on that.

10852   But you would expect that anybody conducting an online business would be subject to the generally applicable rules of Canada.

10853   MR. GUITON: This was where we were going.

10854   THE CHAIRPERSON: I meant in terms of taxation.

10855   MR. GUITON: That's what I meant, too.

10856   THE CHAIRPERSON: What I mean is true taxation.

10857   MR. MONGEAU: Mr. Chairman, if you would allow me, if you are addressing the question of OTT services, Canadian OTT services certainly pay GST and provincial sales tax.

10858   THE CHAIRPERSON: That would have been my assumption.

10859   MR. MONGEAU: Yes.

10860   THE CHAIRPERSON: We may be uncertain as to foreign suppliers, however.

10861   Let me turn to another issue now. You have seen our description of the likely future evolution of television in our Notice of Consultation, where we talk about moving away perhaps a little bit from program schedules to programming as a consumption habit.

10862   I would like to have your view, because traditionally the Commission's toolbox involved both demand-side regulation, such things as exhibition, and supply-side tools -- spending.

10863   I was wondering, as we morph from one to the next, your view is what, in terms of the relative balance of exhibition and spend?

10864   Some creative groups have appeared, or have submitted evidence, or will be appearing, and they are saying that both remain relevant in the future environment.

10865   What are your views?

10866   MR. GUITON: We've looked at this a little bit, in the context of the proposal that you put out a couple of weeks before the start of the hearing, and we've tried to, just as an aside, figure out what parts of it were applying to us and what weren't applying to us and in that context, we did ask ourselves about the question of exhibition versus CPE.

10867   As you know, we don't have a CPE currently. We're entirely exhibition. We tried to look at the idea of moving to a broad CPE for CBC/Radio-Canada and what it would mean for us in the future, versus exhibition.

10868   I have to say that, in both cases, we looked at it from the point of view of exhibition or CPE in a regulatory flexibility question, which would be better for us in the future, and we always were running up against the fact that it doesn't solve the problem.

10869   I'm not going to go into the financial problem with conventional. You understand that quite well.

10870   But even lowering or moving to exhibition, which we already have, and lowering it doesn't solve the problem. It's just watering down the solution. And for us, the CPE would result in the same thing.

10871   A CPE, for us, is a little confusing because we do only Canadian.

10872   In the past, you'll recall, Mr. Chairman, at a recent licence renewal, we talked about this and we agreed, between both of us, that it doesn't really make a lot of sense and, nonetheless, we looked at it from the point of view of simple regulatory flexibility.

10873   The CPE would have to be quite broad to get the kind of regulatory flexibility, because if you start to layer in exhibition and CPE together, that's when you're getting really restrictive.

10874   But it doesn't solve the underlying dilemma of conventional television.

10875   So, bottom line: it doesn't make much difference for us. We don't see either one as solving the underlying problem that it's a revenue issue, it's a business model issue.

10876   THE CHAIRPERSON: And the same conclusion on the English and French side? C'est les deux cotés? D'accord.

10877   Mais comme j'ai dit tout à l'heure, on n'est pas ici pour faire votre renouvellement.

10878   M. GUITON : Non.

10879   LE PRÉSIDENT : Donc, la même question par rapport aux autres opérateurs dans le système.

10880   M. GUITON : On n'avait pas pensé à ça. On peut faire encore, si vous voulez, un engagement pour discuter de ça avec vous pour vendredi prochain.

Undertaking

10881   LE PRÉSIDENT : D'accord. Je veux bien parce que c'est une question importante, et vous faites partie du système de radiodiffusion.

10882   M. GUITON : Oui.

10883   LE PRÉSIDENT : En fait, la Loi de la radiodiffusion stipule que le secteur public fait partie du système.

10884   M. GUITON : Absolument.

10885   LE PRÉSIDENT : Donc, j'aimerais bien avoir votre point de vue, que ça vous affecte, vous, soit du côté de Radio-Canada, anglais ou français, mais aussi par rapport à l'écosystème dans son ensemble.

10886   Let me now turn to the category C news.

10887   In your written submission, you seemed concerned, more particularly, at paragraph 59. But since then, we've issued the working document, which is not a preliminary review, it's just a working document.

10888   More specifically, at paragraph 14, is what you see in the working document of some comfort? Does it still raise issues, with respect to category C specialties use?

10889   MS KIRSHENBLATT: So, we've been following the proceeding and we noted what -- during Bell's appearance -- and we support when it comes to the hours of news, the 12 hours per day of original news content --

10890   THE SECRETARY: You might want to approach your mic a little bit.

10891   MS KIRSHENBLATT: Oh, I'm sorry.

10892   THE CHAIRPERSON: Thank you.

10893   MS KIRSHENBLATT: So, we've been following the proceeding and we were listening Bell up a few days ago and we support their position of an average of 12 hours, rather than the 16, for the reasons that they've cited.

10894   We also support their position about the types of programming and support adding documentaries.

10895   And then, on the third point, we support the Commission's working document proposal.

10896   THE CHAIRPERSON: Thank you.

10897   There has been some discussion in this hearing about children or children and youth programming, depending on how people define those, and that maybe there is a need of that particular specialty service to find itself on basic and some suggestion that the public broadcasters, including yourselves, maybe aren't meeting that responsibility.

10898   Do you have views?

10899   M. LALANDE : J'étais un petit peu surpris d'entendre hier l'AQPM dire que Radio-Canada s'était désengagée dans le secteur jeunesse, parce que Radio-Canada offre, et je pense que Radio-Canada est la seule télévision conventionnelle à offrir la programmation jeunesse tous les matins, sept jours par semaine, 365 jours par année. Alors, c'est un engagement sérieux.

10900   Il est vrai que nous avons dû faire des choix. Nous avons concentré nos investissements jeunesse sur un groupe d'âge 2 à 11 ans, qui sont le groupe le plus à risque et celui qu'on souhaitait vraiment rejoindre. Parce que, comme nous avions dit l'année passée, le groupe 12 à 17, dans l'évolution de la société, n'a plus la même place dans la société, et comme notre directrice de la programmation avait dit l'an passé, les jeunes de 12 ans et plus veulent souper à la table des grands, donc ils veulent maintenant avoir accès à des programmes qui sont effectivement des programmes plus généraux.

10901   Donc, c'est comme ça que nous avons et que nous continuerons à offrir notre service au niveau jeunesse.

10902   MR. LACROIX: And perhaps, Heather, you can talk about what's happening on the kids' side with CBC.

10903   MS CONWAY: Sure.

10904   It's my understanding that we're the only conventional broadcaster that actually does carry children's -- as Louis says, it is concentrated in the 2 to 11 age range -- every day. We do have a whole-child approach to it, so it's very much focused on education, fitness, development of children in that age category, and it is a different approach. It is unique. And we like it. We intend to continue to fulfil it. We believe in it, as a public broadcaster.

10905   Sally, I don't know if you have anything to add to that?

10906   MS CATTO: No. I think we're currently exceeding our conditions of licence on that front and have no intention of diminishing our children's programming, at all.

10907   THE CHAIRPERSON: And because of even our current rules, the CBC's signals are available widely, are they not?

10908   MS CONWAY: Yes, I would say that children increasingly, as I am sure all the Commissioners are aware, are consuming a lot of content online and, you know, we are part of that. We have Kids' CBC TV apps. We have a kid's YouTube channel. I mean we are, again, trying --

10909   THE CHAIRPERSON: You're on the new platforms, as well.

10910   MS CONWAY: -- to all audiences, but that audience, in particular, doesn't make very many distinctions between what screen they're getting it on and so, we're meeting that audience requirement as well.

10911   LE PRÉSIDENT : Dans l'hypothèse où on ajouterait, soit en anglais ou en français, au système de base, les propositions que nous avons de l'avant, un service spécialisé sur la base qui porte sur les enfants ou la jeunesse, quel impact est-ce que ça pourrait avoir sur vos plans d'affaires et votre désir de fournir du contenu pour la jeunesse et les enfants?

10912   You see, the challenge is that a lot of people come to this hearing and say, "We love all this, and we want more".

10913   I'm wondering whether, if we didn't have specialty service on basic and the skinny basic model, if that's not dividing the pie too much with a detrimental effect and you'll be in here, saying, "We can't do as much as we were doing" --

10914   MS CONWAY: I mean I --

10915   THE CHAIRPERSON: -- English or the French.

10916   MS CONWAY: -- I think. philosophically, we believe in providing, as a public broadcaster, a children's programming offering. So, we believe in that.

10917   So, you know, will it make it more difficult for us if there's a competing children's offering in skinny basic? Obviously, it would.

10918   But, you know, this is -- the challenge we're facing on all fronts is increasing competition; multiple screens; multiple offerings; content coming from everywhere; and add a pie that is both fragmenting, shrinking, moving to digital.

10919   So, the issue and the reason that we keep coming back to the idea of affiliation is the cost pressures, the competitive pressures, are limited, at some point. There's only so much you can do.

10920   And so, on the revenue side, having a source of revenue that helps you manage some of the competitive pressures with some stability and some predictability is part of the reason that we come back to that.

10921   LE PRÉSIDENT : D'accord. Et du côté francophone, même réalité...

10922   M. LALANDE : Oui.

10923   LE PRÉSIDENT : ...même engagement?

10924   M. LALANDE : Oui. Mais...

10925   LE PRÉSIDENT : Parce que la situation au Québec, je le sais que le marché francophone n'est pas limité au Québec -- je crois que, Monsieur Lalande, vous comprenez ça aussi -- mais le fait demeure qu'il y a des restrictions en vertu de la Loi sur la protection du consommateur au Québec qui ajoute un défi supplémentaire.

10926   M. LALANDE : Tout à fait.

10927   LE PRÉSIDENT : On n'est pas les seuls régulateurs sur la patinoire.

10928   M. LALANDE : Mais si vous ouvriez la possibilité d'ouvrir une chaîne spécialisée jeunesse sur le skinny basic, je vous dirais que je serais peut-être intéressé....

--- Laughter

10929   M. LALANDE : ...à demander et peut-être de vous offrir quelque chose d'unique et de travailler sur un modèle qui transporterait les valeurs du service public, parce que vous savez qu'effectivement, dans le domaine de la jeunesse, l'esprit du service public est quand même un atout considérable. Alors, retenez ça si vous allez plus loin dans cette dynamique.

10930   LE PRÉSIDENT : Merci.

10931   Je vais tourner vers un autre sujet.

10932   In your proposal, and you've reiterated today, so I take it, it's still your proposal that there be creation of some sort of, I think you called it a local news fund.

10933   And, again, like the other discussion, I'm just trying to understand exactly what you're proposing and not so much debating whether it's a good idea or not.

10934   As I understand it, it would be an additional 1% paid by BDUs for this local news fund.

10935   Is that correct?

10936   MR. GUITON: Correct.

10937   THE CHAIRPERSON: And it would be above and beyond the current 5%?

10938   MR. GUITON: Correct.

10939   THE CHAIRPERSON: There is a risk, and so I asked -- you were in the room when I asked TELUS and they've taken an undertaking, but I'm surprised they didn't have a clearer answer --but there is a risk that some broadcast distribution undertakings, either cable or specialty -- cable or satellite, might pass that through to subscribers.

10940   Aren't you afraid of affordability?

10941   MR. GUITON: Well, not if you are proceeding with the skinny basic option 2 -- and we would support skinny basic option 2, irrespective of this issue.

10942   If your goal, with the skinny basic approach, is affordability, then I think you need to be putting the cap on.

10943   If you put the cap on, you're assured that no matter what you do else-wise, that you've addressed the affordability issue.

10944   THE CHAIRPERSON: And that's how you address this issue?

10945   MR. GUITON: Yes.

10946   THE CHAIRPERSON: Basically, you're saying to BDUS that they have to eat this.

10947   MR. GUITON: Well, they're not going to recover it through the skinny basic.

10948   THE CHAIRPERSON: And so, you could -- and the CBC would benefit from this, obviously. You wouldn't have put it forward if the CBC/Radio-Canada would not benefit from it?

10949   MR. GUITON: The target group is conventional television product, yes, because they are the ones that are providing local programming, local news. It's targeting local news. So, we would suggest everyone required by COL to provide local programming would be eligible for this, and that is local conventional broadcasters. The requirement would be that they would be required to do local news of certain minimum amount to be eligible for the fund.

10950   THE CHAIRPERSON: So, there'd be some conditionalities --

10951   MR. GUITON: Yes.

10952   THE CHAIRPERSON: -- of accessing?

10953   What do you say to, particularly, with respect to CBC, Canadian taxpayers who would see that that's already part of your obligations and that you are getting parliamentary appropriations and other revenues, I know, but you are getting parliamentary appropriations for that, and it would seem to them -- I'm not saying that that's my view; I'm trying to put forward what I think others might say -- that it be a bit odd to have an additional funding mechanism going to you from the pockets of broadcast distribution undertakings?

10954   MR. GUITON: So, I won't repeat all the other --

10955   THE CHAIRPERSON: Sources of revenue.

10956   MR. GUITON: -- the other arguments or the points --

10957   THE CHAIRPERSON: Ah. Okay.

10958   MR. GUITON: -- I was making about there's no contradiction. I think you've heard me there.

10959   In this case, I think there's, in addition, no contradiction.

10960   What we're trying to suggest here is that the system has identified for you, in this proceeding, that local news is priority. That's clear from what Canadians are telling us.

10961   THE CHAIRPERSON: M'hmm.

10962   MR. GUITON: It's also in the Act, of course, that local programming is priority.

10963   So, we get that.

10964   As you've done or, I'm sorry, as the system has done, with respect to drama programming, we've got the CM to address that priority. So, the logic is the same. We're now addressing another priority.

10965   We're eligible for the CM because we contribute to meeting that objective.

10966   What be eligible for this one for the same reason of meeting the priority of local news objective.

10967   THE CHAIRPERSON: Right.

10968   MR. GUITON: For us, it's not inconsistent. The CBC does -- Radio-Canada does contribute to the system. What this is saying is we need a financial lever to help promote and -- the policy objectives -- we want to make sure the CBC/Radio-Canada helps us achieve that.

10969   MR. LACROIX: And, Mr. Chairman, as you know, we are not the only broadcaster in this country that actually benefits, directly or indirectly, from Canadian taxpayers' money or through either of those advantages coming either from the Income Tax Act, from direct contributions, or from other programs, to support the private broadcasters' business model.

10970   So, I mean, if the priorities are drama: CM. If the priority is local news in an environment where, again, the business model is broken and you want local news to continue, that's the solution.

10971   THE CHAIRPERSON: The irony is that the word "priority" comes from a Latin word that's "one", and it's supposed to be just one,. But we seem to always have long lists of priorities, from local news, to drama, to kids', to this, that and the other thing.

10972   MR. LACROIX: We have that with Canadians looking at CBC, sir, all the time.

10973   THE CHAIRPERSON: You won't like this question. but I will put it to you anyhow.

10974   I take your point about the challenges of conventional television and your realization, like many others, that there's a shift here occurring in the way Canadians consume content -- and I don't know if we're at the tipping point, near a tipping point, or anything else, but there's something occurring. I don't think you disagree with that.

10975   I'm going to put to you that the problem is not so much with our regulatory system, but with your shareholder -- and I use that term, not in any technical way because, obviously, it's not, but it's -- your problem is with your funding model and to the extent that taxpayers, through their elected government, is providing you the support to adapt in that change.

10976   MR. GUITON: So, the funding -- the issue is, obviously, conventional television. We're there with that.

10977   The funding model, I think I would differentiate two things -- and Mr. Chairman, when you took on this job, I remember the first time you, I think it was the first time you spoke publicly, you talked about how government policy is not what you do, you're not going there, what you're going to be doing is good regulatory interpretation and promotion of the public policy objectives of the Act.

10978   So, I think the way we look at this is we separate those two things. There's government policy and there's good regulatory public policy.

10979   The idea that the Commission would try to resolve the problems in conventional local television through the types of initiatives and models that we're proposing to you is the right way to go, on the regulatory side.

10980   If the government, through its government policy, was to turn around and say, "We don't think CBC should participate in that. We don't think CBC should have the same level of appropriation if they are going to be participating in that", that's a different ossium and that's the government's initiative and it's their prerogative, of course. They can do that tomorrow if they wanted to. They could do it today.

10981   So, we're trying to separate the issues of what's good for the system, what's good regulatory framework, from your point of view, and the government policy is, I think, we think, always there and their prerogative.

10982   THE CHAIRPERSON: Monsieur Lacroix...?

10983   MR. LACROIX: Well, Steven jumped at the microphone immediately when he heard that question because this is something that is fairly key to the presentation and to how we see the system.

10984   Government appropriation is something completely different from the conversations we're having today and the suggestions we're putting forward.

10985   This is about the system, and we have tried very hard to help everybody think about the system, focus on the fact that all of the actors in the system need to contribute in a way for it to continue in the direction that you would like it to continue, which is meeting the objective of the Act.

10986   That is why the solutions that we're bringing today are within your powers with the tools that you have and it has to go with the health of the system in Canada, at this time, of all the actors.

10987   Yes, if there's a news fund, because we do local news, we would participate in it -- in the same way that the local programming improvements fund was available to anybody that did local programming and the same way that the CM dollars are there for people who actually meet those criteria.

10988   It's not because we got government appropriation to do things that no other private broadcaster would actually do, because there is no business model for it or it doesn't fit their revenue model. Those are the reasons why we have that government appropriation. It has nothing to do with the health of conventional broadcasters right now and, I think, what is the focus of your hearing.

10989   THE CHAIRPERSON: Last question before I turn it to my colleagues to see if they have some questions.

10990   But building on your answer there, if you're arguing that one of the reasons you get parliamentary appropriations is to do things where there's not otherwise a business model, what do you answer to somebody that you should be using precisely those parliamentary appropriations to offer that local news and information?

10991   MR. LACROIX: We'll talk to you, sir -- Mr. Chairman, we'll say that when this model was struck -- when we talked about different sources of funding for the broadcaster to meet its objectives, this model was invented and it was struck or was built at a time where we didn't have platforms, we didn't have multiple platforms, we didn't have the kind of movement of ad revenues that were supposed to be, in everybody's expectations, the support.

10992   In addition, because it's a hybrid model to support the hybrid piece, the second piece, on top of government appropriation, because for years the government and the CRTC have been working hand-in-hand and saying, "Here is the way the system works and, you, CBC/Radio-Canada, if you want to continue doing more, well, you have to find ways to add revenues to your system by your own."

10993   And this is what we have done, I think, extremely successfully.

10994   Then, the creative destruction or the innovative destruction of all this technology changes the model. This is where the mandate becomes important and, yes, with the government appropriation that we have, we are fulfilling and we're trying to continue doing this in the best possible way.

10995   THE CHAIRPERSON: Okay. Thank you.

10996   I just wanted to give you that -- I'm not saying it's necessarily my view, I just wanted to give you an opportunity to answer that.

10997   MR. LACROIX: Thank you.

10998   THE CHAIRPERSON: Mr. Vice-Chair...?

10999   CONSEILLER PENTEFOUNTAS : Merci, Monsieur le Président.

11000   Brièvement, parce que le président, comme c'est son habitude, a très bien couvert la majorité des enjeux.

11001   Nous avons combien de stations conventionnelles dans ce beau pays?

11002   M. GUITON : Vingt-sept en total.

11003   CONSEILLER PENTEFOUNTAS : Ça, c'est la CBC, hein?

11004   M. GUITON : Non. Non.

11005   CONSEILLER PENTEFOUNTAS : CBC/Radio-Canada?

11006   M. GUITON : Oui, les deux : 14, CBC; 13, Radio-Canada.

11007   CONSEILLER PENTEFOUNTAS : Et avez-vous les chiffres pour le pays dans son ensemble, incluant les diffuseurs privés?

11008   M. GUITON : Le nombre de stations, non.

11009   CONSEILLER PENTEFOUNTAS : Conventionnelles.

11010   M. GUITON : Pas avec moi, non.

11011   CONSEILLER PENTEFOUNTAS : Alors, chez vous, vous avez 27?

11012   M. GUITON : Oui.

11013   CONSEILLER PENTEFOUNTAS : Alors, prenons le cas de CBC/Radio-Canada pour l'instant. Alors, à 27, en termes concrets, réels, votre demande, ça serait combien par station conventionnelle si on est pour essayer de mettre un chiffre à cette demande-là? Vous demanderez combien à chaque EDR pour chacune de vos stations? Pour les stations conventionnelles, je veux dire.

11014   M. GUITON : On demande le droit de...

11015   CONSEILLER PENTEFOUNTAS : De négocier.

11016   M. GUITON : ...de négocier seulement.

11017   CONSEILLER PENTEFOUNTAS : O.K.

11018   So, what would that mean, Mr. Guiton, in dollars? What kind of ask are we looking at?

11019   MR. GUITON: I suppose, Mr. Vice-Chairman, it's -- as is the case with all negotiations --

11020   COMMISSIONER PENTEFOUNTAS: Right.

11021   MR. GUITON: -- you would go in and you'd just see the best you could get, and under the Commission's final offer arbitration parties know that's where they're ending up, and so be it.

11022   COMMISSIONER PENTEFOUNTAS: So given that we don't have any kind of track record and we can go to the Nordicity report and other reports trying to figure out what the appropriate price eventually would be for any service --

11023   MR. GUITON: Right.

11024   COMMISSIONER PENTEFOUNTAS: -- how do we arrive at the correct figure in terms of subscription fee per month, per station?

11025   MR. GUITON: I think that --

11026   COMMISSIONER PENTEFOUNTAS: What base would we use?

11027   MR. GUITON: Right. But I think that the history of the growth of specialty services has been just this. New specialties come into the marketplace. They enter into negotiations. They make their best case for what they think is an appropriate wholesale rate based on what they think they're offering and the BDUs have the opportunity to disagree or agree and the two parties, based on what they think they're bringing to the table, come to resolution.

11028   COMMISSIONER PENTEFOUNTAS: Let's set that aside a second.

11029   You thought about this plan. You've been thinking about it for quite some time, I would imagine. You must have a dollar figure that you've put next to this idea?

11030   MR. GUITON: Mr. Vice-Chairman, I think the dollar figure is not the issue. It's the policy decision to allow conventional broadcasters to be able to say, okay, I'm selling a service here. I think I'm going to negotiate for the value of that service.

11031   COMMISSIONER PENTEFOUNTAS: I understand, but if the dollar figure is important, if it's going to add a billion dollars to the consumer's bottom line, I don't know what -- I don't see the humour in that. I'm trying to figure out --

11032   MR. GUITON: No, no.

11033   COMMISSIONER PENTEFOUNTAS: I think at the end of the day, it's all about the money.

11034   MR. GUITON: Sorry, I thought you were going to say we were going to get another billion. That's where I thought you were going with that.

11035   COMMISSIONER PENTEFOUNTAS: Well, you won't, but there's 27 of you and there may be another 77 on the private side. There may be 100 conventional broadcasters in this country and there may be more. So if it's a buck a sub per month per conventional station, the math is pretty easy to do.

11036   MR. GUITON: Yeah. Yeah, and of course the BDUs who are selling their service would come to those negotiations with the fact that they have to sell the service as well. And if the BDU comes to those negotiations and say, "No, it's not going to be X. It's going to be very little".

11037   COMMISSIONER PENTEFOUNTAS: Yeah, in the OT world it is going to be part of skinny basic, one way or another. It is part of a basic package.

11038   It's going to be part of the basic package and you also want -- you also prefer that it be the price capped basic. And you're going to be asking the BDU and, at the end of the day the consumer, to eat it one way or another. Excuse my English.

11039   So forgive me for asking you again what this represents in terms of dollars at the end of the day coming out of the consumer's pocket. And is that capacity for the consumer to pay unlimited?

11040   MR. GUITON: I can only keep answering the same answer, Mr. Pentefountas. It's a market-based solution. We're not talking about the money. It would be arrived at through negotiations, recognizing that, yes, the basic is capped. And we'd proceed on that basis.

11041   COMMISSIONER PENTEFOUNTAS: It is a market-based solution. The basic is capped. The rate for the BDU is capped. And you are a must, absolutely must-carry service.

11042   So where is the leverage and where does the balance of power fall? And how fair is that in a negotiation process?

11043   MR. GUITON: I think the whole history of the specialty industry has been one where there has been must-carry for services and they negotiate on that basis. I don't think there is anything inappropriate with that.

11044   The other thing is it's the --

11045   COMMISSIONER PENTEFOUNTAS: But this would be the equivalent of 9(1)(h)?

11046   MR. GUITON: Sure, and 9(1)(h) --

11047   COMMISSIONER PENTEFOUNTAS: If you're price-fixing at the end of the day, because at the end of the day it's going to come back to the Commission and the Commission is going to have decide what the appropriate number is.

11048   MR. GUITON: Well, and where I am having difficulty here, is you're making it sound, Mr. Vice-Chairman, like this is something different than what exists today.

11049   Your proposal is a skinny basic. We're saying, you know that works well with the idea of having affordability taken care of. The idea that 9(1)(h) has to determine -- 9(1)(h) that's carry-on basic has to determine their affiliation fee, their wholesale fee today?

11050   COMMISSIONER PENTEFOUNTAS: Yeah, but we don't have every conventional station in the country receiving a fee.

11051   MR. GUITON: Right.

11052   COMMISSIONER PENTEFOUNTAS: Not to mention the fact that you want to add another 1 percent on the cable bill at the end of the month as well.

11053   MR. GUITON: Right.

11054   COMMISSIONER PENTEFOUNTAS: Yeah, so actually coming back to, is the capacity of the consumer unlimited?

11055   MR. GUITON: Yes, and when --

11056   COMMISSIONER PENTEFOUNTAS: No. I think the answer is "no".

11057   MR. GUITON: No, no, what I was going to say -- I was saying "yes" to where you were going on this.

11058   COMMISSIONER PENTEFOUNTAS: Yeah.

11059   MR. GUITON: What I was going to say is that we're trying to put forward proposals to you that address the problems. We're not the only party that have addressed the problem in conventional television. The very first --

11060   COMMISSIONER PENTEFOUNTAS: And I am asking you to take into consideration l'assembles, the entire picture --

11061   MR. GUITON: Yes.

11062   COMMISSIONER PENTEFOUNTAS: -- and not simply be concerned with your little neck of the woods.

11063   MR. GUITON: So taking the entire picture --

11064   COMMISSIONER PENTEFOUNTAS: Yeah.

11065   MR. GUITON: -- we think the way to go to make sure that affordability is addressed is to cap the basic service. If, going forward, we want to have local stations and we want to have local programming and local news which the same Canadians that you're saying are going to be impacted, they're also the people who say, "We really want this". You're going to have to pay for it.

11066   COMMISSIONER PENTEFOUNTAS: To pay for it. Okay, I understand that.

11067   MR. GUITON: That's the logic, yeah.

11068   COMMISSIONER PENTEFOUNTAS: I also say that in the context of Mr. Audet's testimony yesterday who has firsthand experience in the U.S., with the advent of the retrans consent fee which has had a major impact in the U.S. and, yes, has filled the coffers of the broadcasters quite handsomely and has helped them offset some of the platform challenges and the fact that you're not -- you're just not getting 70 million people watching sort of Seinfeld on the Thursday night, you know, 10 million is a hit on a first run.

11069   So they are helped by that, but the outrage on the consumer's side of the equation of people that are forced to pay for it and pay for it quite handsomely, services that up until that point they perceived as being free because they have been since the advent of television.

11070   So how do you square that? And it goes back to the point that the Chair made earlier. You are asking us to do something different, something fundamentally different from the way television has been consumed for, you know, 70 years.

11071   MR. GUITON: So first, where you started was the experience in the United States and I can't speak to that. I did hear part of the Bell testimony and I did hear they -- I believe they had a witness, an expert from the United States who said it's actually been very effective. So I'm not going to agree or disagree with you.

11072   COMMISSIONER PENTEFOUNTAS: What has been effective?

11073   MR. GUITON: The retransmission fee in the United States. So I won't go there.

11074   But the bottom line is simply, yes, we have been seeing the way people have interpreted over-the-air technology as it looks like the service is free and there is some -- there has been a build-up of some expectation from that technology. It's a result of the technology that the service is free.

11075   Well, those days are over. Those days are over and, as I said earlier, 95 percent of Canadians are actually paying for TV today.

11076   So that remaining part of the television sector that's still relying on that over-the-air element is either going to have to go away or it's going to have to have its business model changed. That's the reality.

11077   COMMISSIONER PENTEFOUNTAS: Got it.

11078   Thanks so much, Mr. Chairman.

11079   THE CHAIRPERSON: Thank you.

11080   Commission Molnar...?

11081   COMMISSIONER MOLNAR: Thank you.

11082   Could you just clarify for me the subscription fee model and the local news fund, are those -- is that an either/or? Is that like the fallback, the local news fund or are you suggesting both are required?

11083   MR. GUITON: Well, we are suggesting actually that both are required. So the wholesale approach which is basically just allowing conventional broadcasters to charge that.

11084   COMMISSIONER MOLNAR: Yeah, you don't need to explain that one more time because I've heard a lot about it.

11085   MR. GUITON: No, no, okay.

11086   COMMISSIONER MOLNAR: I just wondered if this local news fund was your option B.

11087   MR. GUITON: No, the idea is that the Commission would deem local news to be a priority just like -- it's the CMF model all over.

11088   COMMISSIONER MOLNAR: Okay. That is what I was wondering a bit about. You know, as we go into here and there is issues from a consumer perspective regarding value and affordability -- and it's both of those, right? It's value and affordability?

11089   There's issues from a regulatory perspective when companies are coming forward and talking about perhaps inequities between their obligations and the obligations of some of the newer platforms and newer delivery methods. So we've got this regulatory potential inequity where some people are paying to support the objectives of the Act and some are not.

11090   We also have an Act that does say local is a priority; community, local, regional. It doesn't in the Act say drama. It doesn't say programs of national interest, but it does say those things. And we're already collecting 5 percent of the system revenue to support priority areas that cannot be supported commercially.

11091   So your suggestion was instead of 5, it should be 6. Did you consider at all that we should be looking at whether that 5 percent is in fact supporting the correct priorities within the system, based on what citizens are saying is important and based on the environment we're in today?

11092   MR. GUITON: No, we did not. We simply took what exists today and identified the 1 percent.

11093   COMMISSIONER MOLNAR: So what would be wrong with looking at whether the existing support money is actually addressing the needs of the system and the citizens?

11094   MR. GUITON: I don't think there would be anything wrong with it. I think the conclusion of that examination would be that if -- I think where you're going is if the CMF today is delivering value. I think the answer is definitely "Yes", so we'd have no difficulty suggesting if the Commission wanted to review whether that's actually delivering value. I bet you it is.

11095   MR. LACROIX: Then, Commissioner --

11096   COMMISSIONER MOLNAR: I am not, by the way, challenging whether or not the CMF is delivering value. I am just saying there are limits and the answer can't always be adding.

11097   You know, we're having an entire proceeding where nobody wants anything taken away from them. And, yet, we're in a system of change.

11098   MR. GUITON: Well, in fact, on some of the proposals you have made in this proceeding we're supporting you and it would result that some things have been taken away from us for our specialty services. But in the interests of where you're going we recognize you want to create more choice for consumers. You want to have a system that is more consumer-friendly and on that basis we've understood that. We have not objected to a lot of the consumer-friendly proposals that you've put on the table.

11099   COMMISSIONER MOLNAR: But additional funding is, of course -- I mean, ultimately the revenue in the system has only two sources and one of them is the consumer. And so it's not necessarily that consumer-friendly to propose that we increase the obligations, so anyway.

11100   MR. GUITON: The other element that we have mentioned -- just to go back to the Chairman's question earlier about OTT, is the 1 percent for OTT contributors to contribute to CMF. In the context of the current system, as you're saying, it doesn't seem to be completely unreasonable given the size of those players that they would make a contribution.

11101   To your point about more money, this would actually be new money, a very small amount to help support.

11102   MR. LACROIX: There are a couple of things, Commissioner Molnar, and I know that Heather wants to add also her view on what the CMF or what drama does.

11103   You know, the geography of our country when we talk about cultural expression, when we talk about Canadian content, Canadian stories, with our own view of it, resonates with everybody that doesn't -- I mean with all the Canadians that are paying these dollars. This is why we are different and this is why we want these stories, in the same way that in Australia the only addition before the current government is trying to take dollars away.

11104   One of the four areas where Mark Scott got additional funding was for Australian stories in primetime, high drama, because that is the key driver to the culture of content of that particular country as it is for us.

11105   Heather...?

11106   COMMISSIONER MOLNAR: I just -- I want to stop this before I end up with the entire cultural community challenging me. I don't -- I brought that up as an example. The 5 percent is used for CMF. It's used for community. Clearly, it's been put there for good reasons. Now, you bring up local as another area that has become a good reason.

11107   All I'm saying is in an environment where you can't always just add additional essentially taxes -- whatever you want to call it, it becomes the equivalent of an additional tax on the system. You have to make hard choices possibly between what's there.

11108   I'm not suggesting that I decided that it should come from CMF. I just threw that out there as to whether or not you considered --

11109   MR. GUITON: Yeah.

11110   COMMISSIONER MOLNAR: -- looking at the 5 percent and whether it's all going to appropriate priorities.

11111   MR. GUITON: And we have not.

11112   COMMISSIONER MOLNAR: Okay. That's my question.

11113   MS CONWAY: And I will not speak, because I was going to go to the whole Canadian cultural.

11114   THE CHAIRPERSON: Assume that we get that. I mean, we're obviously balancing a lot of difficult issues here and I don't think -- don't assume in our questions that we don't get it. Sometimes people commenting on the sort of questions we ask come to conclusions. We're here to test evidence. They're not necessarily our views; test positions. That's the job of an independent administrative tribunal.

11115   I have two last questions before we end. And the first one is, you currently benefit from the compulsory retransmission regime for over-the-air broadcasters?

11116   MR. GUITON: International outside Canada, you mean?

11117   THE CHAIRPERSON: No, in Canada.

11118   MR. GUITON: I think, yes.

11119   THE CHAIRPERSON: The retransmission?

11120   MR. GUITON: Yes, or I believe we do. Actually, I should confirm this with Bev.

11121   MS KIRSHENBLATT: For our over-the-air?

11122   THE CHAIRPERSON: Yes.

11123   MS KIRSHENBLATT: Yes.

11124   THE CHAIRPERSON: And how much is that annually?

11125   MS KIRSHENBLATT: I will have to get back to you on the annual amounts in an undertaking.

Undertaking

11126   THE CHAIRPERSON: Okay. Because you will agree with me that if you were to go on a -- to point this out, that there is a loss of revenue there.

11127   MS KIRSHENBLATT: Yes.

11128   MR. GUITON: Yeah, that's correct.

11129   MS KIRSHENBLATT: Yes.

11130   MR. GUITON: We understand that. It's a principle point of view, Mr. Chairman, as well as an economic one, the idea that moving to a technologically-neutral approach for delivery of service seems to make sense. Yes, there would be cost savings from doing this. Yes, there would be some offsetting revenue.

11131   At the end of the day you would hope -- I would think you would want to see broadcasters making that choice in a technologically-neutral way. As I said, more -- or maybe I didn't say that. I'm going to say that there are more than twice as many Canadians taking our services online right now than there are over-the-air.

11132   THE CHAIRPERSON: I get that.

11133   MR. GUITON: And so we have to make some choices.

11134   THE CHAIRPERSON: Right.

11135   MR. GUITON: And the idea of being in different technologies, we can't be in them all necessarily. So we're trying to promote some technological neutrality in the delivery of our services.

11136   THE CHAIRPERSON: Right. And I get your point of technological neutrality. With some quick, back of the envelope math we've been doing, suggests that what you're proposing is it's hundreds of millions, not small amounts of money in terms of additional revenues for the over-the-air broadcasters.

11137   MR. GUITON: This is in terms of --

11138   THE CHAIRPERSON: Following up to Mr. Vice Chairman's questions.

11139   MR. GUITON: I can't say. I don't know where the negotiations will go. I'm not sure where you're getting that number from.

11140   THE CHAIRPERSON: Perhaps the Vice Chair can --

11141   COMMISSIONER PENTEFOUNTAS: Can I give you some simple math, Mr. Guiton?

11142   MR. GUITON: Sure.

11143   COMMISSIONER PENTEFOUNTAS: At a dollar a sub wholesale, which will be two dollars a sub retail -- we're not going to redo the 9(1)(h) debate -- but at $2 a sub retail, your 27 conventionals for CBC, 92 conventionals for the privates, you're at 119. Make it a round figure, 120 conventional TV stations. At 12 million subs, roughly, maybe it's 11 and a half -- I don't know what the final number is -- you're over $2 billion retail out of Canadians' pockets. That would be for CBC alone, $650 million. $325 million would go into the coffers of the CBC and $325 into the BDUs, if we follow the 9(1)(h) model as established if you're going to be doubling the retail as opposed to wholesale.

11144   So I think if you're going to make a proposition, I think you have to know what that proposition looks like on the other side. That's the only point I was trying to make earlier.

11145   MR. GUITON: Right. And my only --

11146   COMMISSIONER PENTEFOUNTAS: And I don't think that a buck a sub would be an unreasonable rate from your point of view, given the quality services that CBC/Radio-Canada provide.

11147   MR. GUITON: The difficulty I am having with this discussion is you are assuming, first of all, that that is the nature of the negotiations. I think without a funding model, conventional television, local television isn't going to be what we've all come to expect it to be. It isn't going to be what consumers tell us and Canadians tell us they want it to be. So granted.

11148   What's the safest and best way to go forward? Price it at market. I don't know what that will be. Is it going to be two cents? Is it going to be a buck? I don't know and I don't think -- none of us in this room know.

11149   But I think the best way to find out, well, let's make sure that if BDUs can sell this service, if they think they can come into you and say, "Get through these negotiations. I'm not prepared to pay them more than two cents because that's what -- that's the way it's going to work" then so be it.

11150   THE CHAIRPERSON: Okay. Well, affordability is also an objective in the Act, right?

11151   MR. GUITON: Yes.

11152   THE CHAIRPERSON: So why don't you help us understand what potentially -- I understand your point that it's subject to negotiation, but why don't you take away an undertaking with a low, medium and high potential outcome of those negotiations and calculate how much money potentially could go to private conventionals that move to the system and what share of that would go to CBC? And set out all your hypotheses.

Undertaking

11153   MR. GUITON: I'd be happy to try and do that.

11154   THE CHAIRPERSON: Thank you.

11155   And my last question deals, and I've asked others, and hopefully you are ready, on the working document's top and worst scenarios.

11156   MR. GUITON: So you've seen our evidence. And our evidence has two things; conventional TV, safeguards.

11157   The worst thing in this proposal is that you propose that conventional TV not be permitted to engage in market-based negotiations to develop a fee. We definitely think that's the worst thing.

11158   We were going to say the best thing is the safeguards. However, we've noted that in your proposal, the safeguards, the linkage rules are actually worse than exist today. So we cannot say that.

11159   So we definitely believe going and looking at a system-wide approach. We believe the BDU code for consumers would be excellent.

11160   THE CHAIRPERSON: Somewhat ironic based on our recent discussions a few minutes ago.

--- Laughter

11161   MR. GUITON: M'hmm.

11162   THE CHAIRPERSON: Okay. Thank you very much. Those are our questions.

11163   Madam la Secrétaire...?

11164   THE SECRETARY: Merci. I would now ask Access Communications Co-operative Limited to come to the presentation table.

--- Pause

11165   LE PRÉSIDENT: À l'ordre, s'il vous plaît. Order, please.

11166   So, Mr. Deane, as you know, please present yourself and your colleagues and go ahead.

PRESENTATION

11167   MR. DEANE: Well, good morning, and thank you, Mr. Chairman and Commissioners.

11168   My name is Jim Deane, I am President and CEO of Access Communications Co-operative. I am pleased to be here today with two of my colleagues: Carmela Haines, Vice President, Finance and Administration and Wade Peterson, Community Programming Manager.

11169   Access Communications is a not-for-profit community-owned co-operative that operates one licensed cable system in Regina and 213 exempt cable systems throughout the rest of Saskatchewan.

11170   We are here today to talk about three specific issues.

11171   First, we believe the Exemption Order for terrestrial BDUs serving fewer than 20, 000 subscribers should be extended to include those that operate as not-for-profit co-operatives.

11172   Second, we support Option A for skinny basic, as well as proposals for build your own packages and a la carte offerings, provided that they apply only to our digital systems and digital customers

11173   Third, cable community channels are an important part of the television system and we believe the Commission should ensure that they have sufficient funding to meet the needs of the communities that they serve.

11174   Turning to our first point, Access Communications requests that the Commission extend the small system Exemption Order to include not-for-profit co-operatives, regardless of the size of the system and where it operates.

11175   In making this request, we acknowledge that, at this time, the only licensed BDU that would benefit from our proposal would be our cable system in Regina.

11176   As noted, the other 213 BDUs we operate are exempt systems. And every other BDU that operates as a not-for-profit in Canada is small enough to be exempt. The Exemption Order has been an enormous success. It has helped smaller cable systems by relieving them of licensing requirements and by easing their regulatory and administrative burden.

11177   We believe that the same benefit should be extended to all not-for-profit co-operatives.

11178   Allowing our Regina system to benefit from the small system Exemption Order would have no adverse effect and impact on the achievement of the Broadcasting Act's policy objectives. In fact, it will further those policy objectives that relate to community programming and local reflection.

11179   As a community-owned co-operative, all of our earnings are reinvested into the network and the services that we provide to our customers. None of our earnings are paid out as dividends to the members.

11180   As such, the savings that would flow to Access from a reduced administrative burden, licence fees and compliance with other licensing obligations would benefit our customers and the communities that we serve.

11181   For example, if our Regina system had been exempt, Access would not have had to contribute more than $1.8 million to the LPIF since 2010, most of which went to vertically-integrated companies and the CBC. The contributions we made to the LPIF represented less than 0.5 percent of the total amount of money that BDUs devoted to the Fund annually.

11182   Instead, our co-operative would have invested those funds into network improvements and producing more community programming, which would have benefited consumers. We would note that we did not pass the LPIF fee on to our customers.

11183   At the same time, operating our Regina system under the Exemption Order would not reduce the contributions we make to the Canadian broadcasting system. Access would still be a regulated BDU, and as noted, all of the savings that our Regina system would derive from the extended Exemption Order would be reinvested in the services that we provide to our customers.

11184   While the amount of money that Access contributes to the broadcasting system is an extremely significant amount for us, it is a negligible amount for the Canadian broadcasting system as a whole. By using that money to enhance our community programming and our networks, we can meet the needs of customers.

11185   The important role Access plays in these communities is evident from the fact that several community-owned cable undertakings in Saskatchewan have, in recent years, gifted their systems to Access in order to preserve community ownership.

11186   In the Notice of Consultation, the Commission indicated that it is seeking to ensure that the market for BDU services is dynamic and competitive. One proposal was to expand the scope of the Exemption Order by allowing BDUs with fewer than 20,000 subscribers to enter and compete in markets with licensed BDUs.

11187   Our proposal to extend the Exemption Order is another mechanism that would help. This adjustment would ensure that Access' flagship cable system in Regina is able to compete effectively with Bell TV, Shaw Direct and SaskTel in that market.

11188   MS. HAINES: The second set of issues that we want to talk about are the proposals to implement more choice and flexibility. Access Communications supports consumer choice. Our customers are asking for more choices and we want to provide it to them.

11189   We will offer a small, all-Canadian basic service and provide customers with the ability to select discretionary programming services in build your own packages and on a pick and pay basis.

11190   In order to do that, however, the Commission will have to ensure that commercial restrictions are removed and recognize the technical constraints of offering choice.

11191   This means that unbundling at the retail level on our systems can only occur if there is mandated unbundling at the wholesale level. Commercial constraints, such as unreasonable Penetration BBRCs, volume pricing, MFNs, minimum penetration requirements and packaging restrictions, must all be prohibited by regulation.

11192   It also means that the provision of choice and flexibility would only be available in digital systems that are technically capable of offering skinny basic and a la carte. We need to recognize that only those customers that receive digital services on these systems would be able to obtain these flexible service offerings.

11193   MR. PETERSON: The final issue that concerns Access is the regulatory framework governing community channels and community programming.

11194   We understand that in the working document issued in August, the Commission indicated that the current framework for community programming would be assessed in 2015 or 2016. Access will be an active participant in that review.

11195   We do, however, want to highlight the important role that community television plays in our serving areas. And the Commission not adopt any proposal that would reduce the amount of funds BDUs are allowed to contribute to their community channels.

11196   Community programming is a fundamental aspect of Access' mandate and a valued offering to our customers. As a community-owned co-operative, providing high quality community programming and community access to the broadcasting system are central to our mission. We provide exceptional community channels and opportunities for local expression and have continuously improved our programming.

11197   In many of our serving areas, our community channel, known as Access7, is the only source of local and community programming available on linear TV because there is no over-the-air television station.

11198   In advance of the hearing, we commissioned a survey to quantify the consumer support of Access7. Almost two-thirds of respondents indicated that Access7 is the only service of its kind available to them, and close to 75 per cent agree that it is important to have a community channel.

11199   These results demonstrate that Access 7 serves an unmet need even in a city the size of Regina.

11200   We are strong proponents of community programming because our customers care about community programming. And we want to ensure that the regulatory framework governing community channels will allow us to continue to meet this need.

11201   MR. DEANE: So, to summarize, we are requesting that the Commission:

11202   One, extend the Exemption Order to include community-owned co-operatives;

11203   Secondly, ensure that we can offer our customers choice and flexibility by removing the restrictions we have experienced to date; and

11204   Continue to ensure that our community channels receive sufficient funding.

11205   And we thank you for this opportunity to provide our comments in this proceeding and we would be pleased to answer any questions that you may have.

11206   THE PRESIDENT: Thank you very much. Commissioner Dupras will start off the questions. Thank you.

11207   COMMISSIONER DUPRAS: Thank you. Hi!

11208   MR. DEANE: Good morning.

11209   COMMISSIONER DUPRAS: Just tell me generally, what would be the advantages for a company like yours to be exempted?

11210   MR. DEANE: I think what would ease, I think the Administrative and Regulatory burden first of all for us. And secondly, it would free up some funds that -- licensing fees right now and, in the past, the LPIF, I think, would be an example of that. They would be retained locally and put back into our systems.

11211   COMMISSIONER DUPRAS: And in the case you were part of a exempt broadcasting undertaking, would the support you seek for community channel also be something you would need?

11212   MR. DEANE: Given that the organization doesn't pay dividends to its members, all of the savings that we would receive would be put back into the co-operative and either to improve the networks, keep costs as low as possible to consumers and to improve community programming.

11213   COMMISSIONER DUPRAS: Okay. Finally, on the point of the affiliation agreements, are there examples you could give us, factual examples of the difficulties you are meeting?

11214   MR. DEANE: Where to start? I think -- well the most recent deal we did with Bell Media required that some of the packaging was retained from -- historically, historic packaging had to be retained. We can give you examples of penetration based rate cards that are very punitive.

11215   And I can tell you overall, and this is wrong, I think, but we are now packaging and offering services to our customers based on contractual obligations rather than consumer demand, and that's not right and I think you have heard that throughout the first week of the hearing.

11216   COMMISSIONER DUPRAS: Okay. Well, thank you very much.

11217   THE PRESIDENT: Okay. Well, first, Commissioner Simpson.

11218   COMMISSIONER SIMPSON: Mr. Deane, going back to the community channel funding, I take your point extremely well when you say that as a community operated not-for-profit essentially system, the way the LPIF was structured, it was just essentially taking money out of a not-for-profit organization and putting it into profit organizations that quite often, as you are intimating, didn't need the additional help?

11219   MR. DEANE: Yes, that was our view, yes.

11220   COMMISSIONER SIMPSON: Yes. What's your view with respect to a condition -- and this is an angle on my behalf, not necessarily that of the Commission, but what's your view with respect to how community channels being run by VIs as you go from market to market?

11221   We are seeing in certain BDUs an appetite to start commercializing the undertakings of what they are doing in spite of the fact that there seems to be sufficient funding, and I am wondering if you have a comment on that because it causes me to think twice about a funding appeal from another BDU when we are seeing other parts of the system going the other way.

11222   MR. DEANE: Well, I can start by commenting on how we approach community programming. It's before my time, but when the the then Regina Cablevision Co-operative was founded, the founding purposes because the members that came together to found it was to reflect the community back to itself through the medium of television and I think, and I am proud to say we have been true to that. And so, we take seriously community programming.

11223   It's part of our mission and our founding purpose, so 50 percent of our programming is community produced and so, I think the way we approach community programming is probably the original intent of community channels.

11224   I can tell you anecdotally that we run into people from outside our communities that see us at an event, covering event, and asking what we're doing there and then say: I wish we had that in our town or our community.

11225   So, other than that I can't really comment on what others are doing.

11226   COMMISSIONER SIMPSON: Well, I am trying to gauge whether even the better subsidized community channels are not as well-subsidized or whether they actually are tempted by a profit model, whether it's within their condition of licence or not because there seems to be through the disparity of how they are being operated, the disparity being not only the ownership, but the models that we are seeing applied across the country. It just -- it muddies the water with respect to funding arguments?

11227   MR. DEANE: Yes. I don't disagree with that and maybe perhaps there needs to be some more checks of balances on how they are operating. I can tell you maybe it's philosophical, but I think the way we operate our community channel frankly is a good business. It connects with customers.

11228   You remember Mr. Peterson said that 75 per cent of our customers believe the community channel is valuable and contributes positively to their community and to themselves. There are a great number of our community customers watch the community channel daily, weekly and at least daily or weekly.

11229   So, we think the way we run it is good business. I wouldn't change it, just from a business perspective, irregardless of the fact that we are not a profit community-owned and as part of our funding principle.

11230   COMMISSIONER SIMPSON: Okay. Just stepping back to, and my last question to your exemption request, you stood out as an anomaly yesterday in the CCSA line-up, but you are not the only community station that our community operation that's community-owned, but you are definitely the largest. So, the question is this:

11231   Should this exemption apply and be written just the way, in your mind, to apply to all community-owned undertakings?

11232   And the reason why I am asking that is you had mentioned just a minute ago that some operators, some poor profit operators are essentially gifting or are transferring over to a community model their operations rather than selling them, there is obviously advantages.

11233   But is there the possibility that we could see, because of that, more larger than 20,000 non-profits and, therefore, have to contemplate them when we write your remedy?

11234   MR. DEANE: Yes. Well, with respect to the gifted community systems, these were usually town-owned or community-owned systems that gifted their systems to us in order to preserve community ownership when they ran into a wall technically or otherwise.

11235   I do see that in the Quebec market among our members, the CCSA members, that there is probably a chance for consolidation among the cooperatives. There is a large number of cooperatives in Quebec and our colleagues in Quebec City, I think, are approaching the 20,000 threshold.

11236   So, I would strongly recommend that all non-profit community-owned cooperatives be exempt.

11237   COMMISSIONER SIMPSON: Okay. Thank you. Those are my questions.

11238   THE PRESIDENT: Thank you very much. Your presentation is clear and builds on the presentation last evening, so thank you very much and we actually have no further questions, but thank you for participating and being present. Thank you.

11239   MR. DEANE: Thank you very much.

11240   LE PRÉSIDENT: Madame la secrétaire.

11241   LA SECRÉTAIRE: Merci. J'inviterais maintenant RNC Média et Télé Inter-Rives à venir à la table.

--- Pause

11242   LE PRÉSIDENT: Bonjour, messieurs. Bienvenue. Quand vous serez installés, vous pouvez procéder. Vous avez dix minutes pour votre présentation.

PRESENTATION

11243   M. BROSSEAU: Monsieur le président, distingués membres du Conseil, mesdames et messieurs.

11244   Mon nom est Pierre Broseau, je suis le président exécutif du Conseil de RNC Média.

11245   Avec moi aujourd'hui, pour notre présentation, se trouvent à ma gauche ou votre droite, monsieur Raynald Brière, président et chef de la direction de RNC Média. À ses côtés, monsieur Marc Simard et madame Cindy Simard, respectivement président et vice-présidente informations de Télé Inter-Rives. Derrière moi, en partant de ma droite, monsieur Robert Ranger, vice-président opérations, finance et administration de RNC Média. Stéphane Grégoire et Pierre Harvey respectivement, vice-président finances de Télé Inter-Rives et directeur général de CHAU-DT Carleton-sur-Mer.

11246   L'information locale est au coeur des préoccupations des Canadiens. Partout au pays, les consommateurs vous ont souligné, lors de votre récent consultation, son importance dans leur vie.

11247   C'est normal. Des gens choisissent de vivre dans des communautés, souvent éloignées, et veulent savoir ce qui se passe chez eux.

11248   Nous vérifions régulièrement l'attachement de notre clientèle à l'information locale. Sondage après sondage, l'écoute des nouvelles locales dans nos marchés est largement supérieure à celle des émissions des réseaux que nous diffusons.

11249   En fait, la part d'écoute locale est souvent le double de celle des émissions des réseaux et atteint jusqu'à 50 pour cent de l'auditoire disponible. Le message est clair : une marque d'intérêt et de confiance qui ne ment pas.

11250   Les gens nous font confiance parce qu'ils savent, depuis longtemps, que c'est notre mission et notre engagement envers la communauté.

11251   Les radiodiffuseurs régionaux jouent un rôle complémentaire, mais nécessaire, voire vital, dans le système de radiodiffusion canadien.

11252   Ce n'est pas une simple image; c'est la réalité. Pourquoi? Parce que c'est notre métier, le centre de notre activité et aussi notre passion. Et cela, depuis longtemps.

11253   Le paysage télévisuel a beaucoup changé et ce n'est pas fini. La mondialisation a rapproché les frontières, les a fait disparaître dans certains cas. Mais le service de proximité demeure essentiel pour les Canadiens. Il leur fournit une lecture de leur environnement immédiat, le pouls de leur communauté, bref, ce qui s'y passe.

11254   Les radiodiffuseurs régionaux jouent un rôle de complémentarité et d'équilibre en répondant à des besoins réels. Les Canadiens l'ont clairement exprimé.

11255   L'information locale est importante. Mais définir notre rôle à cette activité est un peu réducteur. Nous sommes une composante majeure du tissu social, économique, politique et culturel d'une région. Nous vivons dans la communauté. Et ce n'est pas d'hier.

11256   M. SIMARD: Au cours des 60 dernières années, les organismes réglementaires ont fait appel aux entrepreneurs canadiens pour implanter des stations de télévision afin de desservir les plus petites régions de notre pays.

11257   Il n'est pas inutile de rappeler à l'heure des grands débats et des enjeux nationaux, que la Loi sur la radiodiffusion stipule que l'utilisation des fréquences qui sont de propriété publique doit favoriser l'épanouissement de l'expression canadienne dans la programmation des diverses stations de télévision du pays. Pour refléter les préoccupations de la population, le système canadien de radiodiffusion doit, entre autres:

11258   Puiser aux sources locales, régionales, nationales et internationales;

11259   Offrir au public l'occasion de prendre connaissance d'opinions divergentes sur des sujets qui l'intéressent;

11260   Faire appel de façon notable aux producteurs canadiens indépendants;

11261   Participer à la diversité des voix; et

11262   Par sa programmation et par son fonctionnement, offrir de l'emploi aux Canadiens.

11263   C'est exactement ce que nous faisons chaque jour. Nous produisons et diffusons du contenu local parmi les émissions des grands réseaux auxquels nous sommes affiliés, ce qui procure à nos émissions locales un auditoire très important.

11264   Nous faisons appel à des producteurs indépendants dans la production d'émissions et nous contribuons certainement à la diversité des voix.

11265   En ce sens, nous sommes en harmonie avec les attentes du Conseil.

11266   MME SIMARD: RNC Média et Télé Inter-Rives emploient plus de 200 personnes, donc 92 au service des nouvelles locales comprenant 40 journalistes à temps plein.

11267   Si nos résultats d'écoute dépassent ceux des réseaux que nous diffusons, c'est en grande partie parce que nous avons déployé des moyens financiers importants. En effet, l'investissement combiné dans les bulletins de nouvelles locales de nos neuf stations de télévision est de sept millions par année.

11268   Ceci est sans compter sur le soutien accordé à des centaines d'organismes qui bénéficient de temps d'antenne gratuit afin de promouvoir divers événements.

11269   À cela, il faut ajouter de l'information communautaire qui informe la population sur les activités de nos régions, jour après jour.

11270   Également, Télé Inter-Rives et RNC Média ont produit plus de 600 émissions originales, en surplus de leurs engagements de programmation et ce, au cours des cinq dernières années.

11271   Ces émissions originales canadiennes ont nécessité des investissements de 4,7 millions. Une part importante, soit près de 40 pour cent, a été attribuée à des producteurs indépendants régionaux. Ce livre a permis à ces producteurs d'accéder à des sommes supplémentaires de 4,3 millions du Fonds des médias du Canada et des crédits d'impôt du fédéral, du Québec et du Nouveau-Brunswick.

11272   Dans nos marchés, la diffusion de nos contenus locaux sur nos plateformes Internet alimentés par nos journalistes, figurent parmi les pages les plus consultées. Par ailleurs, nous ne pouvons envisager diffuser sur Internet les émissions en provenances des réseaux puisque les droits de diffusion sur Internet leur appartiennent, ce qui, évidemment, limite considérablement le potentiel de nos revenus sur ces plateformes.

11273   Ce très bref résumé illustre que nous jouons un rôle véritable, que nous possédons l'expérience pour le faire et surtout que notre service est apprécié par les gens.

11274   M. BRIÈRE: La présente audience soulève des enjeux qui nous concernent plus directement.

11275   La substitution simultanée doit rester car elle protège la part des revenus que nous recevons des réseaux qui constitue la partie la plus importante de nos revenus.

11276   En éliminant la substitution simultanée, les heures d'écoute seront attribuées aux stations éloignées et nous perdrons les revenus qui y sont rattachés.

11277   Si le Conseil en venait à la conclusion d'éliminer la substitution simultanée, il faudrait alors envisager de ne plus permettre la distribution de stations éloignées affiliées aux mêmes réseaux que nos stations locales.

11278   Si nous reconnaissons le rôle vital des stations locales, il faut leur donner les moyens de remplir leur mandat. En ce sens, nous croyons que le Conseil doit arbitrer cet enjeu.

11279   Nous ne sommes pas favorables non plus à la fermeture des émetteurs hertziens. Nos deux groupes en exploitent 53. Les principaux motifs sont les suivants :

11280   - Les économies réalisées par la fermeture des émetteurs hertziens s'amenuiseront, au point de s'effacer, en raison de l'obligation d'alimenter de petites EDR;

11281   - La diffusion hertzienne rejoint 5 pour cent des foyers dans nos marchés, souvent des familles à plus faible revenu;

11282   - Dans nos régions, souvent marquées par de grands espaces, les gens captent nos signaux à divers endroits, au chalet, au camping et dans diverse autre sites. Le signal hertzien est le moyen de les rejoindre;

11283   - Nous croyons aussi que la fermeture des antennes canadiennes ferait augmenter l'écoute des stations américaines dans certains des marchés, tel celui du nord-ouest du Nouveau-Brunswick desservi actuellement par Télé Inter-Rives;

11284   - Il y a aussi la perte pour le consommateur canadien d'un choix personnel, celui de regarder la télévision généraliste sans défrayer le coût d'un abonnement.

11285   Si cela devait survenir tout de même, il faudra de toute nécessité s'assurer que la définition géographique du territoire de diffusion locale de chacune de nos stations soit la même que celle actuellement en vigueur, celle-ci en incluant les réémetteurs.

11286   Lier les obligations de dépenses en émissions canadiennes basées sur un pourcentage des revenus de l'année précédente, plutôt que par des engagements ou des conditions, est un modèle difficilement applicable pour nous. Comme nous produisons surtout des nouvelles locales, cette pratique limiterait notre flexibilité d'allocation des ressources financières.

11287   Les Canadiens ont clairement exprimé leur adhésion à l'information locale. Dans le marché francophone, la presse écrite régionale a réduit sa présence récemment. Vingt journaux hebdomadaires ont été fermés au Québec, dont huit se trouvaient dans nos marchés de diffusion. La télévision généraliste demeure un outil de communication efficace pour répondre aux attentes des consommateurs en matière de nouvelles. Elle est accessible et ne coûte rien.

11288   M. SIMARD : Dans notre mémoire, nous avons fait une proposition au Conseil pour apporter un support à la production locale et destinée aux stations indépendantes. Ce support proviendrait de la contribution déjà existante de 5 pour cent que versent les EDR pour la production d'émissions canadiennes.

11289   Cette formule offre les avantages suivants :

11290   - Elle assure la viabilité à long terme des stations locales;

11291   - Elle n'augmente pas le pourcentage de la contribution des EDR; et

11292   - Cela sans coût additionnel pour les consommateurs.

11293   Nous proposons que les sommes versées à chacune des stations indépendantes soient du même ordre que celles reçues dans le cadre du programme FAPL.

11294   Nous nous engageons, dans ce cas, à maintenir nos engagements actuels de programmation locale et à produire des émissions originales, comme nous l'avons démontré dans le cadre du FAPL.

11295   En 2008, le Conseil avait conclu que la télévision généraliste souffrait d'un problème structurel. Le FAPL a alors été créé. Le FAPL a été aboli avant que le projet du Conseil pour la compensation de la valeur des signaux locaux ait été entendu par la Cour Suprême, qui a rendu une décision défavorable envers ce projet. Voilà donc pourquoi les stations locales ont besoin d'un nouveau support.

11296   Ce qui compte, c'est que tous les Canadiens, peu importe où ils choisissent de vivre, reçoivent des contenus de tous genres, dont ceux qui les touchent directement.

11297   La raison d'être de nos entreprises, c'est de répondre à cette attente de proximité.

11298   Pourquoi faut-il continuer à le faire? Parce que la vie régionale, c'est aussi un morceau de la réalité canadienne, et nous avons la prétention de croire que nous sommes en mesure de remplir le mandat de bien informer et animer la vie de ces communautés.

11299   En conclusion, Monsieur le Président, distingués membres du Conseil, plusieurs pays aimeraient avoir cette proximité que les stations de télévision locale procurent aux Canadiens. La fin des services locaux de télévision causerait un tort irréparable à l'identité et à la culture de nos régions, que ce soit dans le Bas-Saint-Laurent, en Gaspésie, en Acadie, en Outaouais ou en Abitibi-Témiscamingue. La télévision régionale a besoin du support du Conseil afin que le système canadien de radiodiffusion puisse continuer de refléter les préoccupations locales des diverses collectivités canadiennes.

11300   Merci beaucoup. Nous sommes disposés à répondre à vos questions.

11301   LE PRÉSIDENT : Merci beaucoup.

11302   Je passe la parole à monsieur Dupras.

11303   CONSEILLER DUPRAS : Bonjour.

11304   M. SIMARD : Bonjour.

11305   CONSEILLER DUPRAS : Pouvez-vous nous expliquer maintenant si aujourd'hui, avec les revenus que vous avez, si vous êtes en mesure de rencontrer les exigences réglementaires qui vous sont imposées?

11306   M. SIMARD : Actuellement, Monsieur Dupras, oui.

11307   CONSEILLER DUPRAS : Et qu'est-ce que vous entrevoyez qui va changer là? Est-ce que c'est la fin du Fonds d'amélioration de la production locale essentiellement qui va vous causer un problème au niveau de la viabilité?

11308   M. BRIÈRE : Si vous me permettez, peut-être un commentaire à ajouter.

11309   Le modèle économique des télévisions généralistes change. Nous, on est affilié à des réseaux. On dépend essentiellement des revenus qui proviennent de la vente par les réseaux. Les réseaux sont intégrés verticalement. Les revenus qu'ils reçoivent sont dispersés sur plusieurs plateformes.

11310   Puis on constate, évidemment, que les revenus de la télévision généraliste diminuent, parce que si je suis un réseau généraliste, j'ai d'autres propriétés. Je peux vendre demain des revenus sur un canal de sports, je peux les vendre sur d'autres plateformes. Ça été créé, d'ailleurs, pour ça. Donc, on assiste depuis quatre ou cinq ans à une érosion de nos revenus nationaux.

11311   Même chose pour les revenus sélectifs. Il fut un temps au Québec -- je parle de notre marché particulièrement -- où les acheteurs pouvaient acheter des marchés particuliers : le marché de Gatineau, le marché de Québec, différents marchés. Ces revenus-là ont fondu comme neige au soleil parce qu'aujourd'hui les grands groupes sont en mesure d'offrir à ces annonceurs-là d'autres plateformes pour leur permettre de récupérer ces revenus-là.

11312   Donc, on voit qu'il y a une érosion de nos revenus nationaux particulièrement, et c'est clair que, dans le temps, on va faire face à une situation vraiment difficile.

11313   CONSEILLER DUPRAS : Quelle genre d'aide financière, à ce moment-là, allez-vous avoir besoin?

11314   M. BRIÈRE : Je pense qu'on a besoin d'une aide pour nous aider à poursuivre le mandat, évidemment, à assumer les responsabilités qu'on a, puis à continuer à défendre la couverture locale.

11315   Je pense qu'on propose une aide qui, au fond, est une nouvelle répartition d'un fonds existant. On ne dit pas qu'il faut ajouter au coût du consommateur, on dit peut-être qu'il pourrait y avoir aujourd'hui une répartition différente de l'argent disponible. On parle d'un fonds de 400 quelques millions. Il pourrait y avoir une part qui pourrait être attribuée aux stations indépendantes pour qu'elles continuent à jouer leur rôle. C'est de ça qu'on parle.

11316   M. SIMARD : Monsieur Dupras, si vous me permettez aussi également.

11317   Lorsqu'on vous dit qu'actuellement, au moment où on se parle, on est capable de continuer nos engagements, évidemment, on ne peut pas faire toutes les productions qu'on a faites pendant le moment où on avait le FAPL.

11318   On a produit une quantité d'émissions innombrables. On a aidé les producteurs indépendants. Les producteurs acadiens du Nouveau-Brunswick ont bénéficié d'une aide, d'une participation du fonds, avec laquelle ils ont été capables de produire plusieurs émissions, alors qu'on était le diffuseur officiel.

11319   Parce que, vous savez, lorsqu'on veut faire une demande, lorsque les fonds de producteurs indépendants veulent faire une demande, lorsqu'ils veulent obtenir des montants d'argent du fonds canadien, ils se doivent d'avoir un diffuseur.

11320   Je pense qu'on a été un diffuseur important pour permettre des productions extraordinaires qui ont été diffusées sur nos ondes, qui ont d'ailleurs aussi obtenu des cotes d'écoute extraordinaires, presque aussi fortes que celles des programmes réseaux. Alors, c'est dans cet esprit-là.

11321   Dans un autre côté aussi, Monsieur Dupras, c'est que, vous savez, le modèle économique a été brisé. Je veux dire, depuis 60 ans, nos stations n'ont survécu, n'ont vécu uniquement qu'avec les revenus de la radiodiffusion. Lorsqu'on parle avec des gens qui sont autour de nous, parfois, les gens qui ne connaissent pas le métier, ils sont surpris que nos seuls revenus soient ceux des revenus publicitaires. Plusieurs pensent qu'on reçoit de l'argent des câbles.

11322   Alors, écoutez, si on veut faire face à l'avenir, si on veut maintenir un très haut niveau, une très grande qualité de productions locales, ce qu'il faut dire sur la production locale, ce qui est très important, c'est que, d'abord, nos bulletins de nouvelles locales occupent la plupart du temps les cinq meilleures positions de toutes les émissions des réseaux confondus.

11323   Alors, lorsqu'on est dans une petite station régionale, vous comprenez qu'aujourd'hui les gens sont habitués à avoir une qualité exceptionnelle. On écoute Radio-Canada, on écoute TVA, on écoute le bulletin de nouvelles. Alors, lorsqu'on arrive puis on décide de faire... la station locale devient... pour diffuser ses nouvelles, il faut absolument avoir une qualité exceptionnelle.

11324   Je veux dire, on n'est plus au temps où... Je me souviens lorsque mon père avait fondé la première station de Radio-Canada. Le lecteur de nouvelles... le décor était en carton, comprenez-vous, puis on se demandait si le décor ne tomberait pas sur le nouvelliste.

11325   Aujourd'hui, on se doit d'avoir une qualité exceptionnelle parce qu'on quitte le réseau. Alors, les gens sont tellement habitués à avoir une qualité que ceci est très important. Alors, il faut absolument avoir des équipements qui nous permettent de produire cette qualité-là. Il faut aussi avoir des journalistes de qualité.

11326   CONSEILLER DUPRAS : Oui. Mais vous me parlez de pouvoir produire plusieurs sortes d'émissions locales. Vous avez mentionné que vous avez produit d'autres sortes d'émissions que de l'information locale depuis cinq ans, les deux groupes, jusqu'à 60 émissions.

11327   MME SIMARD : Six cent.

11328   M. SIMARD : Six cent.

11329   CONSEILLER DUPRAS : Combien vous avez dit?

11330   M. SIMARD : Six cent.

11331   CONSEILLER DUPRAS : Oui, c'est ça. Excusez-moi, j'ai mal lu.

11332   Mais aujourd'hui, vous nous dites dans les réponses à nos questions que la perspective devrait être surtout portée vers l'information locale, que c'est ça qui est important, donc de financer les autres genres d'émissions devient secondaire.

11333   M. SIMARD : Non, je vous dis pas que c'est secondaire, au contraire. Je vous dis que la base essentielle, ce sont les nouvelles locales. Le coeur même de notre existence -- d'ailleurs, lorsque vous le soulignez, Monsieur Dupras, c'est qu'il y a presque la moitié de nos employés qui travaillent seulement pour produire le bulletin de nouvelles quotidien, d'où la très grande importance des nouvelles locales.

11334   D'ailleurs, les citoyens l'ont dit sur les forums, les nouvelles locales.

11335   Cependant, je veux dire, c'est que l'expérience qu'on a vécue, c'est qu'en produisant quelques autres émissions -- évidemment, on n'a pas les moyens puis les capacités de produire une quantité énorme d'émissions.

11336   Et aussi d'ailleurs, nos réseaux ne nous le permettent pas. Les heures de détachement sont très difficiles.

11337   Mais en général, on a réussi avec les réseaux d'avoir des détachements en heure de grande écoute. Et la production de ces émissions-là ont créé chez nos auditeurs une expectative, alors, je veux dire, qui nous-mêmes, nous a surpris.

11338   On a été renversés de voir à quel point les gens avaient besoin de s'identifier localement par les nouvelles, par l'information. Mais aussi par quelques émissions qu'on a pu faire au fil des années.

11339   Alors, on pense, on pense que c'est aussi -- je veux dire que les nouvelles sont prioritaires. Mais les autres émissions sont quand même extrêmement importantes.

11340   CONSEILLER DUPRAS : Et pour adresser les difficultés financières à venir, est-ce qu'il y a d'autres mécanismes que de demander au Fonds des médias de payer pour ça, auxquels vous avez pensé, advenant que ce soit pas la solution retenue?

11341   M. SIMARD : Bien écoutez. Raynald, si tu pouvais y aller?

11342   M. BRIÈRE : Non. Euh...

11343   CONSEILLER DUPRAS : Qui pourraient alléger vos dépenses ou... Est-ce qu'il y a des exigences qui peuvent être allégées?

11344   M. BRIÈRE : Je pense que c'est... je pense que ça, c'est fait. Je pense qu'on gère bien nos entreprises. On les gère de façon le plus efficace possible.

11345   On doit faire les mêmes investissements que les autres en numérique. On peut pas penser aujourd'hui diffuser nos émissions sur une autre base que celle des grands groupes. Marc l'a bien expliqué, c'est comparatif.

11346   Ce qui est important là-dedans, c'est que si on reconnaît que l'information locale c'est important, va falloir qu'on se donne le moyen pour le faire.

11347   C'est clair qu'il y a une érosion des revenus. On est à même de le voir. On est à même de le constater. Puis, si on faisait une projection, on verrait que cette érosion-là va se continuer.

11348   Je pense, là-dessus, il y a une certaine unanimité. On comprend ça, puis on sait que c'est comme ça que ça va se passer.

11349   En fait, ce qu'on demande, c'est un partage de ce qui existe pour nous permettre de continuer à faire ce qu'on fait.

11350   L'information locale, il y a pas tant de monde que ça qui font ça. Je pense que les Canadiens ont dit que c'était important. Nous, on le mesure encore une fois chaque fois, parce que lorsqu'on diffuse les bulletins locaux, on constate une croissance importante de notre... pas de nos revenus, mais de notre écoute.

11351   Donc, c'est un besoin.

11352   Est-ce qu'on veut -- au fond, c'est un choix de société. Est-ce qu'on veut oui ou non que ça continue? Puis, est-ce qu'on veut se donner les moyens pour que ça continue?

11353   Et, je pourrais... Et la société a fait des choix.

11354   CONSEILLER DUPRAS : Et la distribution sur le câble uniquement, c'est pas une solution acceptable. C'est pas une façon de couper dans les coûts. Qu'est-ce que ça représente comme dépense par année...

11355   M. BRIÈRE : Ah! Vous parlez de l'abolition des...

11356   CONSEILLER DUPRAS : De la transmission en direct.

11357   M. BRIÈRE : Non. Pour nous, ce n'est pas une solution aujourd'hui.

11358   D'abord, on vient d'investir pas mal d'argent pour les transformer en numérique. Puis, au moment où on l'a fait, on nous a dit, bien c'est important d'offrir un meilleur service aux Canadiens. On a dit O.K. On l'a fait.

11359   Pour des petites entreprises comme nous, ça représentait des millions de dollars. On l'a fait. On l'a fait parce qu'il fallait qu'on le fasse. C'était une règle.

11360   Il y a encore un pourcentage de gens qui captent encore ça. Puis, on verra dans l'application des nouvelles règles -- parce que j'imagine qu'à l'issue de cette audience-ci, il y aura des règles. On verra l'impact que ça aura sur la façon dont les Canadiens vont consommer maintenant leur télévision.

11361   Est-ce qu'il y en a qui vont faire des choix? Est-ce qu'il y en a qui vont dire, bien, on aime mieux le choix, écouter directement.

11362   On a peut-être un peu de temps devant nous pour voir tout ça.

11363   Mais nous, les coûts liés à ça, sont pas très élevés. C'est pas une économie substantielle suffisante pour remplacer ce que pourrait nous fournir une aide qui, dans l'avenir, nous permettrait de continuer à remplir notre mission.

11364   M. SIMARD : Si vous permettez, Monsieur Dupras, pour revenir sur votre question. On a essayé d'envisager toutes sortes de solutions. Et la solution que l'on retient, c'est une participation, une aide du Fonds canadien dont le montant de 5 p. cent est dédié à la programmation canadienne.

11365   Écoutez. Les émetteurs, je veux dire, il y a beaucoup de -- par exemple, par exemple, si demain matin, en plus de desservir quand même 5 p. cent de la population, je veux dire, nos émetteurs alimentent dans nos territoires environ 30 câblodistributeurs.

11366   Alors, demain matin, selon la règlementation, comment ferions-nous pour alimenter ces 30 câblodistributeurs-là?

11367   Est-ce que c'est nous qui devrions louer de la fibre optique pour les rejoindre, pour leur apporter notre signal, parce que la loi actuellement fait en sorte que c'est nous qui devons leur apporter le signal.

11368   Alors, juste ça, juste alimenter ces 30 petits câblodistributeurs couvrirait déjà toutes les dépenses, l'argent qu'on pourrait sauver.

11369   Je vous donnerais un autre exemple...

11370   CONSEILLER DUPRAS : Et si ça, ça devait être assumé par les télédistributeurs?

11371   M. SIMARD : Oui, mais la plupart des petits câblodistributeurs vous diront qu'ils n'ont pas les moyens de le faire.

11372   Je me souviens, Monsieur le Président, lorsqu'il y avait eu des préaudiences, lorsque le CRTC avait commencé à discuter des fees for carriage, il y a eu des audiences publiques. Et dès les premières audiences, l'Association des petits câblodistributeurs du pays est venue vous dire que si, éventuellement, les frais de redevance arrivaient, tous les câblodistributeurs en bas de 20 000 abonnés, l'Association vous disait qu'ils ne voulaient pas participer à ça.

11373   Alors, dans nos territoires, il y a plusieurs petits câblodistributeurs de 2000 abonnés qui représentent une partie importante de la câblodistribution, qui ne voudraient pas y participer ou qui vous diraient...

11374   MME SIMARD : Qu'ils n'auraient pas les moyens...

11375   M. SIMARD :... qu'ils auraient pas les moyens de le faire.

11376   Alors, voyez-vous, c'est un autre...

11377   L'autre point aussi qu'il faut réaliser, c'est que vous savez, les émetteurs numériques... un émetteur numérique opère à 90 p. cent moins de puissance que les anciens émetteurs. Donc, les coûts en sont réduits énormément.

11378   Par exemple, nous, chez nous, les coûts d'électricité ont diminué de 60 p. cent la journée, à partir du 11 septembre... je veux dire, à partir du 1er septembre 2011 parce que l'électricité consommée, à titre d'exemple, était de beaucoup moins.

11379   Les émetteurs numériques sont d'une qualité exceptionnelle. C'est la plus haute qualité diffusée en radiodiffusion. Je pense que tous les gens, les ingénieurs vous le diront. La plus haute qualité provient des émetteurs.

11380   Les coûts d'entretien sont presque minimes. Je veux dire, un émetteur qui fonctionnait à 100 p. cent de sa puissance, dont, entre autres, prenons un exemple, un émetteur de 100 000 watts ou un émetteur de 10 000 watts opère seulement qu'à un dixième.

11381   Alors, vous pouvez vous imaginer qu'à toute fin pratique, les émetteurs aujourd'hui, avec la fiabilité qu'ils ont, ne demandent pas d'entretien.

11382   Alors, là-dessus, honnêtement, c'est pas... ça serait un, d'abord d'éliminer un service important pour un nombre de personnes qui en ont vraiment besoin.

11383   Dans l'avenir, est-ce que les émetteurs numériques pourront transmettre plusieurs signaux?

11384   Est-ce qu'on devrait se départir des émetteurs maintenant? Je pense qu'après avoir fait l'investissement, je pense que c'est peut-être pas le bon moment d'utiliser cette solution-là.

11385   CONSEILLER DUPRAS : Et petite question plus générale, qu'est-ce que vous voyez comme avenir pour la programmation locale? Est-ce que ce modèle-là de diffusion peut continuer encore longtemps?

11386   M. BRIÈRE : Moi je... très sincèrement, je pense que oui. Parce que le besoin était là hier, puis il va être là demain.

11387   Je pense qu'on est... si on s'entend sur le fait que le besoin est là, on devrait parler du moyen. Parce qu'au fond, c'est pas parce qu'on a accès aujourd'hui au monde. C'est pas parce que la télévision nous amène le monde dans notre salon qu'on veut pas savoir ce qui se passe chez nous.

11388   Puis la moitié de la population du Québec qui vit à l'extérieur de grands centres, les gens choisissent de vivre dans d'autres environnements.

11389   Puis, qui demain va se substituer à ça? Qui, demain? Parce que dans le fond, le contenu qu'on a, on va le transporter sur d'autres plateformes. On va suivre cette migration-là.

11390   Mais le besoin d'être informé, quand on habite une région, quand on habite un petit environnement ou un moyen environnement, ce besoin-là, il est tout le temps là, puis il va toujours exister.

11391   Donc, je pense qu'on doit pas, à mon avis, se questionner sur l'avenir du besoin. Je pense qu'on se questionne sur le moyen qu'on doit prendre, probablement pour rencontrer cette... ce besoin-là.

11392   Et les Canadiens vous l'ont exprimé assez clairement en disant : « Nous autres, l'information locale, c'est une priorité. On en veut. C'est ça, ça nous intéresse. Pourquoi? Parce que ça nous concerne, parce qu'on vit là. C'est ça.

11393   Là maintenant, nous on fait ce métier-là, puis on pense que la télévision généraliste, c'est encore la place. C'est pas demain la veille. Tu sais, ça changera pas dans 48 heures, on a encore un petit peu de temps.

11394   La télévision généraliste est encore là. On doit se donner des outils pour performer, pour être meilleurs, puis continuer à faire la mission qu'on a. Ça m'apparait pas plus...

11395   M. SIMARD : Je vous dirais, Monsieur Dupras qu'on est confiants que la télévision généraliste, puis les nouvelles locales sont quelque chose qui va continuer pendant longtemps.

11396   Nous, pour ce qui est de nous, on y croit, à la télévision locale. Mais, on pense qu'avec un support minimum, compte tenu des circonstances qui font en sorte que le modèle économique a changé. Je veux dire, le modèle économique, évidemment, étant que les revenus de la télévision généraliste ont diminué de beaucoup, principalement avec tous les canaux spécialisés. On croit fermement à la télévision.

11397   Écoutez, je pense que chez nos voisins du Sud, sur lesquels on prend quand même beaucoup d'exemples, je veux dire, écoutez. La première année des négociations ont rapporté 500 millions aux stations américaines.

11398   L'année passée, ils ont rapporté trois milliards de dollars et ils prévoient qu'en 2017, les revenus des stations généralistes dues aux négociations vont rapporter sept milliards de dollars.

11399   Alors voici qu'un système dans lequel la télévision conventionnelle, les nouvelles locales qui sont une partie importante de la plupart des stations locales américaines ont la capacité de continuer.

11400   Et, je pense, puis particulièrement au Québec, je pense que la télévision généraliste occupe une place extrêmement spéciale et importante. Et nous, on y croit.

11401   Par contre, on voudrait vous mentionner qu'on est quand même avant-gardistes. On opère un site internet que peut-être, je demanderais à Cindy, très, très brièvement de nous dire quelle suite on fait à nos nouvelles quotidiennes à tous les jours, à tous les jours pour nos compatriotes et pour s'adapter à ces nouvelles plateformes-là.

11402   CONSEILLER DUPRAS : Brièvement, brièvement.

11403   MME SIMARD : Brièvement. Bien c'est ça. On opère un site internet vraiment où on met nos nouvelles quotidiennement, minute en minute, sept jours sur sept, 24 heures sur 24.

11404   Et pour ça, bien, ça prend l'équipe des nouvelles de la station de télé pour pouvoir faire ça, sinon, ce serait impossible.

11405   Vous savez, c'est quelque chose de... Puis je vais juste vous mentionner la tragédie de l'Ile Verte, le feu dans la résidence pour personnes âgées. Je pense que même vous ici à Ottawa ou à Montréal ou peu importe, même à l'autre bout du Canada, tout le monde en ont entendu parler. Tout le monde a vu les images, les fameuses images de ce feu-là.

11406   Mais on est la seule équipe, en fait, on est les seuls à avoir été sur les lieux lors de l'incendie. Ces images-là ont été prises par nous et ont fait le tour du monde parce qu'on les a fournies à tout le monde.

11407   On était la seule équipe de télé sur les lieux. On est les seuls à avoir les images. Mais pour ça, il faut payer des gens en stand by, sept jours sur sept, 24 heures sur 24. C'est un service qui coûte cher et que je pense que personne d'autre que nous pourrait offrir.

11408   Et ça nous permet de mettre ce contenu-là également sur nos sites internet et de rendre ça disponible à la population 24 heures sur 24.

11409   CONSEILLER DUPRAS : Vous disiez que vous avez besoin d'un support minimum, Monsieur Simard.

11410   M. SIMARD : Oui.

11411   CONSEILLER DUPRAS : Comment est-ce que le Conseil doit établir quel montant de financement doit être alloué à la production locale?

11412   M. SIMARD : Bien, Monsieur le Président, je pense qu'avec...

11413   CONSEILLER DUPRAS : Dans les marchés non métropolitains.

11414   M. SIMARD : Oui, dans les marchés comme... Je pense, Monsieur le Président, qu'il y a eu beaucoup de réflexions du Conseil là-dessus lors de la création du FAPL. Et notre suggestion serait que les montants seraient semblables ou sensibles à ce que le FAPL nous donnait, les montants dont le Conseil a évidemment, avec précision.

11415   CONSEILLER DUPRAS : O.K.

11416   M. BRIÈRE : En fait, ça représente environ, parce que je pense, votre question est précise, 25 millions, à peu près, sur un fonds de 450 millions. Donc, autour de 5 p. cent.

11417   Et, ça s'adresse aux diffuseurs indépendants privés.

11418   M. SIMARD : Du Canada.

11419   M. BRIÈRE : Du pays évidemment, qui ne sont pas, ne font pas partie d'entreprises intégrées verticalement.

11420   On essaie de circonscrire ça pour dire, est-ce que ça ferait du bon sens si demain on prenait une mesure comme ça pour s'assurer qu'une partie du système canadien fonctionne aussi bien que les autres.

11421   Et ça, au fond, encore une fois, c'est un choix de société qu'on fait. Est-ce qu'on veut prendre ce fonds-là, le partager autrement? On parle de 25 millions roughly. On comprend que c'est pas un chiffre exact. Mais ça représente à peu près ce que recevaient ces joueurs-là dans le cadre du FAPL.

11422   M. BROSSEAU : Avec votre permission, Monsieur Dupras.

11423   CONSEILLER DUPRAS : Oui, allez-y.

11424   M. BROSSEAU : J'ajouterais qu'on doit se souvenir, je pense que lors de la révision qu'a effectué le Conseil sur l'exercice du FAPL en 2012, et on rapporte ça aux articles 25 et 26 dans notre mémoire.

11425   La majorité des intervenants -- et je dirais même la majorité des EDR se sont prononcés en faveur de l'existence d'un fonds qui visait les radiodiffuseurs indépendants dans les petits marchés.

11426   Souvenons-nous de ça. Je pense que ça peut nous aider dans cette démarche.

11427   CONSEILLER DUPRAS : Très bien.

11428   Écoutez, j'ai pas d'autres questions. Je vous remercie.

11429   Monsieur le Président?

11430   CONSEILLER PENTEFOUNTAS : Je me souviens.

11431   CONSEILLER DUPRAS : Monsieur le Vice-président, oui!

--- Rires

11432   CONSEILLER PENTEFOUNTAS : J'étais là, et il y avait d'autres membres du comité qui étaient là également.

11433   Le 25 millions, le chiffre que vous avez là, ça serait l'équivalent de ce que vous receviez à l'époque où le FAPL était 1,5 p. cent de rajout sur la facture des EDR en excluant CBC, SRC, c'est exact?

11434   M. BRIÈRE : Exact.

11435   CONSEILLER PENTEFOUNTAS : Alors, ce fonds-là ne sera pas disponible à CBC et SRC.

11436   M. BRIÈRE : Non, c'est...

11437   CONSEILLER PENTEFOUNTAS : Après votre proposition.

11438   M. BRIÈRE : C'est ça. Exactement.

11439   CONSEILLER PENTEFOUNTAS : O.K. Vous les mettrez dans la catégorie des intégrés, en effet!

--- Rires

11440   M. BRIÈRE : Dans la catégorie d'un financement différent.

11441   CONSEILLER PENTEFOUNTAS : O.K. Alors, ça nous donne une idée à ma première question à savoir quel sera le montant. Et ces sommes-là seront distribuées selon les mêmes critères qu'on utilisait pour le FAPL?

11442   M. BRIÈRE : Il y a... je pense que quand on reçoit de l'argent public, on a des responsabilités. Puis, il doit y avoir des règles.

11443   CONSEILLER PENTEFOUNTAS : Oui.

11444   M. BRIÈRE : Puis, c'est équitable qu'il y ait des règles. Appartiendra au Conseil de les déterminer. On a déjà établi une règle de base. On va faire au moins ce qu'on fait.

11445   CONSEILLER PENTEFOUNTAS : Vous vous souvenez qu'il y avait un débat autour des sommes dépensées...

11446   M. BRIÈRE : Oui.

11447   M. SIMARD : Oui.

11448   CONSEILLER PENTEFOUNTAS : Supplémentaires...

11449   M. BRIÈRE : Oui.

11450   M. SIMARD : Oui.

11451   CONSEILLER PENTEFOUNTAS : De ce qui se dépensait déjà.

11452   M. SIMARD : Oui.

11453   M. BRIÈRE : Oui.

11454   CONSEILLER PENTEFOUNTAS : Les Anglais parlaient de « incremental ».

11455   M. BRIÈRE : Oui.

11456   CONSEILLER PENTEFOUNTAS : Puis, c'était au coeur du débat. Voulez-vous adresser cette question-là...

11457   M. SIMARD : Bien, c'est-à-dire que... c'est-à-dire que... c'est-à-dire, Monsieur le Président, oui. On croit que la méthode... la méthode de répartition des fonds devrait être sensiblement la même qui existait. Et d'ailleurs, c'est une méthode qui avait été approuvée par le Conseil.

11458   Cette méthode-là de répartition des fonds avait été...

11459   CONSEILLER PENTEFOUNTAS : Existait à l'époque.

11460   M. SIMARD : Oui.

11461   CONSEILLER PENTEFOUNTAS : Sans changement.

11462   M. SIMARD : Absolument.

11463   CONSEILLER PENTEFOUNTAS : O.K. Et finalement, quant à la question de substitution simultanée, si on voulait éliminer cette pratique-là, strictement pour les chaînes américaines et non pas les signaux à l'intérieur du Canada. Je comprends, c'est jamais le fun de voir des concessionnaires d'autos de Montréal à Rivière-du-Loup quand on regarde TVA le soir.

11464   Mais, si ça s'appliquait strictement sur les annonces des chaînes américaines et qu'on gardait la substitution simultanée à l'intérieur du Canada.

11465   M. SIMARD : Bien écoutez. Oui, là évidemment...

11466   CONSEILLER PENTEFOUNTAS : Ça n'aura pas d'impact sur vous autres?

11467   M. SIMARD : Non, non. Absolument pas.

11468   CONSEILLER PENTEFOUNTAS : Vous ne serez pas affecté par ça?

11469   M. SIMARD : Non, absolument pas. Absolument pas.

11470   CONSEILLER PENTEFOUNTAS : Par ce changement-là.

11471   M. SIMARD : Non.

11472   CONSEILLER PENTEFOUNTAS : O.K.

11473   Ça complète, Monsieur le Président. Merci beaucoup.

11474   LE PRÉSIDENT : Merci bien. Juste pour que je comprenne bien votre proposition sur partir, prendre une quotepart du 5 p. cent. Ça viendrait -- parce qu'il y a plusieurs bénéficiaires de ce 5 p. cent-là. Il y a une partie qui peut... parce que c'est pour l'expression locale.

11475   M. SIMARD : Oui.

11476   LE PRÉSIDENT : Donc, il y a une partie qui va à des fonds indépendants. Il y a une partie qui pourrait aller comme crédit aux canaux communautaires. Puis, il y en a qui vont aux Fonds des médias.

11477   Vous allez chercher votre pourcentage...

11478   M. SIMARD : Bien écoutez.

11479   LE PRÉSIDENT : Il y a la contribution de qui?

11480   M. SIMARD : Écoutez... bien d'abord, Monsieur le Président, écoutez.

11481   Je pense que le CRTC, à l'intérieur du 5 p. cent, le CRTC en 2012 a déjà limité le montant maximum pour les canaux communautaires. D'ailleurs, le montant a été gelé de telle sorte qu'aujourd'hui, il ne représente peut-être que 1.8 p. cent parce que ce n'est pas le pourcentage qui a été gelé.

11482   Parce que le Conseil disait qu'il y avait possiblement trop d'argent dans la télévision communautaire.

11483   Alors nous, écoutez. Alors nous, on ne demande pas que ce montant-là soit nécessairement relié à la télévision communautaire. Mais dans la somme... dans la balance de la somme d'argent qui reste pour se rendre, je pense, au 450 millions. Parce qu'on parle quand même de ça.

11484   Mais ça, on croit que le CRTC devrait... il devrait être pris là, Monsieur le Président.

11485   Et c'est un choix. Évidemment, c'est un choix.

11486   LE PRÉSIDENT : Dans la part qui n'est pas pour le communautaire.

11487   M. SIMARD : Dans la part qui n'est pas pour le communautaire, exactement.

11488   LE PRÉSIDENT : Donc, les fonds indépendants, par exemple, comme le Shaw Rocket Fund qui finance la production pour enfants.

11489   M. SIMARD : Bien écoutez. C'était ça le choix du Conseil.

11490   LE PRÉSIDENT : Je soulevais ça parce que c'est l'extrême.

11491   M. SIMARD : Oui, oui, c'est l'extrême, absolument.

11492   LE PRÉSIDENT : En fait voler la veuve et... (ph)

11493   M. SIMARD : Et d'ailleurs, peut-être simplement l'augmentation du fonds, Monsieur le Président, au fil des prochaines années, on va peut-être, les compenser juste pour la somme qu'on aurait besoin.

11494   LE PRÉSIDENT : Et, si vous allez vers les fonds de production, la règle, à peu près, ça change d'année en année. Mais, il y a un effet de levier avec ces fonds-là.

11495   Donc, un dollar qui vient des fonds, souvent fait trois fois plus de production parce qu'il y a d'autres producteurs.

11496   Donc, si on enlève 25 millions avec un effet de levier de trois fois, on pourrait parler d'une diminution de production canadienne de 75 millions pour des dramatiques, des émissions pour enfants et toutes les autres catégories.

11497   M. SIMARD : Bien, voici. Écoutez. Par contre, nous, une partie de cet argent-là va servir à des... écoutez. Évidemment c'est un choix, Monsieur le Président. Il y a une partie de cet argent-là...

11498   LE PRÉSIDENT : Oui, oui. Je veux vous donner l'opportunité...

11499   M. SIMARD : Oui.

11500   LE PRÉSIDENT : ... d'expliquer pourquoi on devrait possiblement, selon votre thèse, réduire le volume de contenu canadien d'à peu près 75 millions d'autres types de contenu en faveur du contenu local.

11501   M. SIMARD : Écoutez. Je trouve peut-être votre chiffre... mais par exemple, nous on produit, on donne une quantité importante de ces changements-là à des producteurs indépendants. Comme par exemple, les producteurs du Nouveau-Brunswick qui eux, vont chercher... vont chercher des sommes d'argent pour... du Fonds canadien ou de la province de Québec ou du Nouveau-Brunswick.

11502   Alors, je pense que l'argent revient, il en revient de...

11503   MME SIMARD : Bien, c'est que de ces montants-là, Monsieur le Président, puis nous, on l'a bien démontré pendant la durée de l'existence du FAPL. On a été dans les compagnies où on a le plus produit justement d'émissions. Je pense même que dans une entrevue que vous avez donnée à un média au Nouveau-Brunswick, vous nous citiez en exemple.

11504   Parce qu'on s'en est servi. On l'a utilisé, l'argent du FAPL.

11505   Alors, ce qu'on vous dit aujourd'hui, c'est que de ces argents-là, nous, on va en produire aussi.

11506   Alors, nos gens dans nos régions ont le droit aussi, selon moi, d'avoir de la production locale, des émissions qui reflètent leur région, qui parle d'eux. Et cet argent-là servirait pour produire également des émissions.

11507   LE PRÉSIDENT : Et donc, dans votre cas, il y a aussi un effet de levier.

11508   M. BRIÈRE : Oui.

11509   M. SIMARD : Oui. Effectivement.

11510   LE PRÉSIDENT : Mais on le connaît moins possiblement.

11511   M. BRIÈRE : Oui.

11512   LE PRÉSIDENT : D'accord. Je comprends bien vitre position et je crois que ce sont nos questions. Merci beaucoup à vous tous.

11513   M. SIMARD : Merci infiniment, Monsieur le Président, Monsieur le Vice-président, Messieurs les Commissaires.

11514   LE PRÉSIDENT : Donc, nous allons prendre un ajournement jusqu'à... une minute. Il est deux heures moins... 14 heures moins... Pour parler mathématiques, c'est pas toujours mon fort!

11515   Jusqu'à 13 h 45. Donc, une heure de pause ou presque.

11516   Merci beaucoup.

11517   So we'll be back quarter to two.

11518   Merci beaucoup.

--- Upon recessing at 1245

--- Upon resuming at 1345

11519   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

11520   Before I pass it on to the secretary, legal counsel has an undertaking to address.

11521   M. DOUGHERTY : Merci, Monsieur le Président.

11522   Le Conseil exige que les entreprises de programmation qui ont acheté des droits afin de diffuser de la programmation en direct d'événements, incluant les événements sportifs, pour lesquels l'entreprise de programmation demande la substitution du service de programmation en vertu du régime de substitution simultanée, de fournir une liste en précisant le nom des événements, la date d'expiration de ces ententes pour l'achat de ces droits.

11523   Cette demande s'applique seulement aux ententes conclues avant le 21 août 2014. Les ententes doivent être déposées auprès du Conseil au plus tard le 19 septembre 2014, en suivant la procédure établie dans les Règles de pratique et de procédure du Conseil.

11524   The Commission requires programming undertakings that have agreements executed for the purchase of rights to broadcast any future live programming events, including sporting events, in which the programming undertaking will request programming substitution pursuant to the simultaneous substitution regime to file with the Commission a list of these events and the date of the expiry of the agreements for those broadcasting rights.

11525   This applies only to agreements executed prior to August 21st, 2014. These agreements must be filed with the Commission pursuant to the procedures for filing documents with the Commission set out in the CRTC Rules of Procedure by September 19th, 2014.

11526   Thank you, Mr. President.

11527   LE PRÉSIDENT : Merci.

11528   Madame la Secrétaire.

11529   LA SECRÉTAIRE : Merci.

11530   We will now hear the presentation of Bragg Communications Inc., operating as Eastlink.

11531   Please introduce yourself and you have 15 minutes for your presentation.

PRESENTATION

11532   MS MacDONALD: Thank you.

11533   Good afternoon, Chairman, Vice Chairman, Commissioners and Commission staff. I am Natalie MacDonald, Vice-President Regulatory at Eastlink, and with me here today is Lee Bragg, our CEO. We appreciate the opportunity to be here to participate in this important proceeding.

11534   MR. BRAGG: Although the scope of this proceeding is very broad, the ultimate objective is to establish a TV framework that provides consumers with more flexibility and choice over programming content, while ensuring that such choice is exercised in a broadcasting system that is sustainable in the long term.

11535   Eastlink fully supports the Commission's objectives of consumer choice because it is aligned with Eastlink's own business philosophy of putting our customers first. This means giving them high-quality services, control over the services they buy and winning their business every day. We believe in competition, which is why we have invested millions over the years to bring more competition to consumers in communities across the country and it is why we have also been investing heavily to become the third or fourth facilities-based wireless service provider in our serving areas.

11536   And our investments don't stop at network investments. We invest in providing the best customer experience through our installations, customer care, responsiveness to concerns and follow-up on consumer input by implementing many of the changes our customers ask for. In our written submission we explained in detail a number of changes we have made as a result of our customer feedback.

11537   Eastlink was the first to bring bundled services to Canadians over a decade ago and we are one of the few companies today who have launched, and promote, a TV model that provides consumers with added choice. Eastlink Personal Picks allows customers to select standalone and pick-packs of services to supplement their existing services. We want to continue bringing consumers more choice like this. That is why we generally support the Commission's proposal of requiring that all services be made available on a standalone basis and in pick-packages.

11538   For Eastlink, providing more choice and flexibility is critical if we want to keep our customers happy and if we want to avoid losing them to competitors, including third-party over-the-top services. As more consumers select OTT either in place of or to supplement their existing linear TV services, the traditional broadcasting model becomes threatened. Providing choice to consumers while also ensuring we, as distributors, have flexibility to manage our business is critical. This means being able to manage costs while running a profitable business at the same time. We invest every single penny back into our business, so making a reasonable return on our investment means further investment and improved service for customers.

11539   Natalie.

11540   MS MacDONALD: Today, we want to provide you with our proposal as to how we get there. Given the short time available, our primary focus will be to address one of the biggest issues that impacts our ability to increase choice for our customers while sustaining a viable business -- the rates we pay for content and negotiation of terms with programming services. So our oral presentation will be focused on the VI issues and the dispute resolution aspect of the working draft.

11541   Many interveners have proposed that the VI Code be incorporated into the regulations. We agree with that proposal. We also think it is important that the Commission establish clear rules regarding programming service contract terms and rates. We propose that the Commission make one other important decision -- to standardize affiliate agreements.

11542   We have described in our written submission that, notwithstanding the existing VI Code provisions, certain affiliate contracts still prevent us from including services in our Personal Picks offer or have forced services into basic or large tiers to avoid excessive rates at lower penetrations.

11543   We have carefully considered the different kinds of rulings that might help us to negotiate contract terms and prices that will enable us to give our customers more choice. No solution will be perfect. However, we think that one mechanism that would serve to balance the negotiations between independent distributors and programming services is to mandate a standard industry affiliate agreement.

11544   A requirement for standalone carriage, clarifying rules for negotiating affiliate agreements, including rates, combined with a standardized affiliate agreement, will be a positive step toward building an environment in which independent distributors and large powerful programming services can negotiate reasonable terms. This would contribute to maintaining a sustainable broadcasting industry, while giving consumers real choice.

11545   As part of our proposal, we request that the Commission implement the following in regards to the negotiation and content of affiliate agreements:

11546   - Entrench the VI Code into the regulations for all programming services.

11547   - Prohibit minimum penetrations or minimum revenue guarantees in affiliate agreements.

11548   - Prohibit volume-based rates -- the primary companies that benefit from volume-based pricing are the largest distributors, who are also vertically integrated. Volume-based rates make little sense. Forcing Eastlink to offer 100 percent of our customers a programming service in order to get a rate we can live with, while a large VI BDU is able to get a much lower rate at penetrations of say 20 percent because they have a massive subscriber base is unfair. Volume-based rates merely reward VI entities and provide a backdoor way for them to enjoy significant discounts while smaller independent BDU customers are paying their affiliated programming services a premium for the same content. It discriminates against customers of smaller BDUs.

11549   - Require standalone carriage at fair market rates.

11550   - Prohibit excessive PBRCs, including a prohibition on make whole pricing. Programming services should not get a rate guarantee for distribution to 90? or 100 percent of our subscribers if natural interest in the service is only at 50 percent. Make whole incentivizes a BDU to keep offering, and charging, all customers for the same service even when a number of those customers do not want the service.

11551   - Require programming services to include non-linear rights in affiliate agreements. If we acquire the rights to content, our right to distribute it should be technology neutral. We should not have to pay twice or our customers should not have to pay twice. The cost of the service should cover all rights.

11552   - Prohibit head starts for pay, pay-per-view and specialty services. We still have cases today where head starts occur.

11553   We note that other interveners may propose additional provisions during this hearing, which we will address in our closing comments.

11554   With a clear directive from the Commission addressing these issues, we have a starting point. But that alone is not enough. Today, rates are used by programming services to force us to negotiate away the rights we may have under the VI Code. The only way we can put a stop to this behaviour is if the programming services are not permitted to impose high rates as a tool to bypass flexible carriage rights.

11555   Establishing a standard affiliate agreement, which is consistent with the provisions above, in addition to other reasonable terms and conditions that may be established through this proceeding, would serve as a default agreement that the programming service must accept should the parties not be able to negotiate reasonable terms. In such case, the standard agreement would address everything but rate issues.

11556   This proposal simplifies the dispute process and avoids many of the inherent risks of dispute today, which otherwise require extremely detailed analysis of all of the issues, risks and loopholes found in many agreements. And the Commission is well equipped to assess rates as a last resort -- in fact it has regulated rates on content for years.

11557   By limiting the issue to only rates, distributors would not be at the mercy of large powerful programming services that use rates to force us to barter away other rights. It would also mean programming services cannot include other terms and conditions in the agreement which may go unnoticed during a dispute but which could have material negative impacts on consumers and the distributor. Rather, it creates further incentives for both parties to negotiate a reasonable rate.

11558   The standard terms for an affiliate agreement should not be that different from one company to the next and the communications industry is familiar with developing standard agreements in many other areas of the business. Standard terms reduce the burden on the Commission of regulating all aspects of an affiliate arrangement and add certainty for the parties involved while ensuring that distributors are contractually able to fulfill the Commission's goals for consumer choice.

11559   Moreover, today with hundreds of services being distributed, we are negotiating numerous contracts, all with different language and terms. When making any changes to our TV offers it is becoming more difficult to manage our way through numerous agreements, increasing the risk of oversights which may have significant consequences. A standardized agreement would make it more efficient to manage terms for the hundreds of services we distribute.

11560   Our proposal would likely be workable for all services, including the higher-priced services like sports services. The issue of sports pricing has been a major focus in many interventions and also a concern for us. We believe these costs are due in part to the lack of pricing discipline on the programming services when bidding on content rights, in addition to their expansion of content across multiple channels, forcing them to find more content to fill the space.

11561   With the assurance of full revenue guarantees from distributors, this excessive pricing behaviour will not likely change, but with a clear Commission directive mandating standalone carriage, and a standardized agreement which sets the terms and conditions for carriage, price becomes the key outstanding issue.

11562   Standalone distribution requirements for these services may reflect the natural penetration or interest in the service and it may also add discipline to spending practices when these services cannot force content into higher penetration packages. Natural penetrations without the revenue guarantees of the existing regime may pave the way for those programming services to make different choices about what content to pay for and what content to let pass. Natural penetrations will mean they need to establish a price that balances cost and consumer demand.

11563   The proposals we have described would help ensure that, as much as possible, Canadian consumers have the option to pay only for services they want, which will help ensure BDUs' ability to continue providing quality video services in the long term, by providing us the flexibility to meet our customers' needs at reasonable rates.

11564   There are many issues for the Commission to consider in this proceeding and we will provide our views on the Commission's Working Document either here today or in closing comments, but today we did want to offer a proposal that we think gets closer to a solution to one of our biggest concerns, which is negotiating rates and terms with the large powerful programming services.

11565   We would be pleased to answer any questions you have. Thanks.

11566   THE CHAIRPERSON: Well, thank you very much for your presentation.

11567   Commissioner Molnar will start off the questions. Thanks.

11568   COMMISSIONER MOLNAR: Good afternoon. Before I get into your document I wanted to just follow up with a conversation we've been having with a few.

11569   A number of the BDUs from the West have come out here to say, "Well, the West is different because it's very competitive there." My sense, and I'd like you to talk about it, is it's quite competitive where you are as well. So could you give me a sense as to the competitive environment within the area -- well, let me say -- because I understand that you operate in many areas within the country, but within the Atlantic Provinces where you operate.

11570   MR. BRAGG: Yeah. I mean, we do operate across the country. We operate out West versus TELUS in many areas.

11571   I do believe it is -- it seems like it's been more competitive in Eastern Canada. Aliant has been very aggressive at rolling out their fibre-to-the-home service. One of the comments that I think Wade Oosterman made, from Bell, was around, you know, basic pricing of Aliant at -- I forget exactly -- $54, versus ours, at $35, and how they were winning in the market, so that that would seem to be, you know, not an issue, that price wasn't really an issue.

11572   Well, that's -- actually, it's a little distortive. I mean they've been very aggressive at price discounting. I mean their rack rate on their traditional Triple Play bundled would be in the $179 rate, and they sell it at $99. And, to the best of our knowledge, nobody actually pays the rack rate, everybody -- everybody is discounted, so that's forced us to discount to match them.

11573   But that just shows -- like, when launched our first Triple Play bundle 10 or 12 years ago, it was at $99, and we're still, effectively, now selling at $99, even though both our rack rates are higher. But that demonstrates how competitive it is in that area.

11574   And that's a fear we have, with Aliant, really, you know, being an extension of Bell, and the dominance that they have, from a wholesale standpoint, to be able to leverage their own internal wholesale rates to themselves to benefit them in the retail market. I mean we see that every day.

11575   COMMISSIONER MOLNAR: So would you say it's that competition that caused you to begin trying to offer your customers greater flexibility?

11576   MR. BRAGG: Not really. I think the competition was really as we have got feedback from our customers on the way we had packaged and the way customers felt boxed into buying: Well, I really only want these two channels, but I have to buy this package of 10 channels to get that one and this package of 10 channels to get the other one, and we've seen just through being an Internet provider how much more video is being consumed through the Internet, you know, we just felt it was important to try to give customers more and more flexibility on buying.

11577   I don't -- it's -- you know, it may be indirectly driven from more competition, but -- you know, in a competitive environment you pay a lot of attention to your customers, so it may not necessarily be what Aliant's doing, but it does talk about, you know, you have to pay attention to what your customers want.

11578   COMMISSIONER MOLNAR: And just so that I am clear, when I spoke of the Atlantic provinces, is the condition the same in all of the provinces?

11579   MR. BRAGG: I think -- yeah, I really think it is, I mean to --

11580   COMMISSIONER MOLNAR: Yeah? Okay.

11581   MR. BRAGG: -- to varying degrees.

11582   COMMISSIONER MOLNAR: It's kind of like saying the west, right? You know, it's quite general. So I just wanted to be --

11583   MR. BRAGG: I mean, I could always find --

11584   COMMISSIONER MOLNAR: -- ensure we were generalizing.

11585   MR. BRAGG: -- a community where there's less competition. In some rural areas of Newfoundland, where it's difficult to get a good satellite signal because of the geography and Aliant has not built out their fibre network into those areas but we have a full bundle, you know, there's not as much competition in that town. But in general --

11586   COMMISSIONER MOLNAR: In general.

11587   MR. BRAGG: -- in general --

11588   COMMISSIONER MOLNAR: Okay, in general --

11589   MR. BRAGG: -- in general, you know, there is --

11590   COMMISSIONER MOLNAR: -- we could say --

11591   MR. BRAGG: -- pretty good competition across the country.

11592   MS MacDONALD: And if I could even add, it's different in different parts of the country. And that's a big learning we had had after we acquired the Persona systems in '07: is, you know, our customers are different in those different areas, and they have different expectations and different approaches to what they expect from a service provider, and that's been challenging.

11593   But I will say that we've had to tailor our approach in response to different competitors that have different approaches and different customers. So it's been -- and that sort of drove, I think, a lot of our kind of deeper dives into what our customers want because we were seeing different patterns of, you know, what are customers in our -- you know, our bigger systems are Halifax, Dartmouth, Sudbury and Delta, B.C., they're our biggest systems really, and complete -- you know, in some respects, completely different approaches in those areas.

11594   So we have different competitors and different approaches to a competitive response.

11595   COMMISSIONER MOLNAR: I was going to ask where you have non-exempt systems. Is it more than that four?

11596   MS MacDONALD: Actually, our licensed systems are Halifax and Sudbury and Dartmouth, yeah. So Delta was -- it has fallen below the licence requirement for exemption, so...

11597   COMMISSIONER MOLNAR: Okay.

11598   Moving on to your presentation -- and I did read your submission, more than once, actually, because it was -- you know, I'm not a lawyer, and I had to sort of figure out what lawyer talk meant when looking at some of these attachments and so on. But I have read it. I'll focus now on what you're put before us here.

11599   MS MacDONALD: Right.

11600   COMMISSIONER MOLNAR: Essentially, and you're not the first to say: you have to fix the wholesale issue if you want to retail issues to be fixed. But you have, as I understand it, proposed a different solution. For example, your part of CCSA, are you not?

11601   MS MacDONALD: Yes. Yes.

11602   COMMISSIONER MOLNAR: And they came forward proposing a single wholesale rate.

11603   Now, if I understand, you had proposed -- you can negotiate rates, but all the other terms of the agreement should be standard.

11604   MS MacDONALD: Yes.

11605   Actually, it's interesting when you ask that, because we, of course, have had conversations with the CCSA and in our written submission we sort of touched on the possibility of a standardized agreement. And after we reviewed a lot of the other submissions, we were starting to think through: well, would really work here? Because we tried to come up with something that's practical, that can be implemented, you know, in a realistic way and still give companies rights to negotiate.

11606   So that's where we arrived at this, and we can speak more to that if you have questions on it.

11607   The CCSA approach to a single rate, I don't necessarily -- I mean we haven't really thought through a firm position on: Oh, you know, would we totally go with that or not? I mean, we can see some pros and cons. But I think if I was to say what are the pros to that rate, it would be, you know, that it recognizes that volume-based rates aren't necessarily appropriate and that the rate -- you know, a standard rate would be reasonable.

11608   But I think our approach would be to give us a little bit more flexibility in negotiations for all parties involved, and I think we can get there with the proposal that we put forward.

11609   COMMISSIONER MOLNAR: I want to ensure I understand what you mean by "standardized affiliation agreement absent rates".

11610   MS MacDONALD: Okay.

11611   So we've heard -- I mean we know the VI Code already includes a number of provisions, and everyone is very supportive of, I think, the working document and the proposal that the Commission put forward, and we are as well, and so -- then there's other issues about clarifying, so no minimum penetrations and no volume-based cards.

11612   So whatever the Commission comes out with as these are the tools that we're going to say, as a result of this decision, that we're willing to say, you know, Thou shalt not do this in an agreement, we believe that with those tools it may be possible to take a working group of the industry -- programmers, BDUs alike -- and come up with a standardized agreement.

11613   When I say that, I mean when I read the affiliate agreements -- and there's, you know, so many -- generally they provide for the same issues, they're just written differently and they may have different definitions and, you know, different prohibitions.

11614   But, I mean, you're going to have your standard legal terms, which I think generally people can readily negotiate. Then you're going to have your terms about, you know, where you can move services and how you can move them, and notice periods and that sort of thing, with the Commission's rules in place around no minimum penetrations: you can't force something into basic.

11615   You know, all of those things would be built into an agreement that the industry says -- works on and puts together. And as with a number of these working -- and I'm not saying that they're always, you know, the most efficient -- but the -- working groups have come together and worked on standardized agreements before.

11616   What would happen then is if there was any outstanding issues, the Commission may need to make a determination on, you know, outstanding disputed issues for the agreement, as the Commission has done before in other areas. And then we would have that standardized agreement.

11617   It may be preferable that that becomes the norm, but we wouldn't be against companies, programming services and BDUs, saying, "Okay, we know that this standardized agreement is a possibility, but let's try to work out something within the Commission's rules, but let's work out something that we can both agree to."

11618   So it allows for commercial negotiations; however, where it balances the negotiating power is it allows us to say -- you know, if we're being forced into something that we feel like it's a power issue -- and I'm speaking from our perspective -- we would be able to say, "You know what, we're going to exercise our rights to go to the default," and what I would expect is the issue would then become a rate issue.

11619   So if we have to go to dispute resolution with the Commission, both parties know that they're taking this default agreement, there's no negotiation, it limits the issues to rates, and then the Commission can use the tools it has in place to assess the rates. And there have been all kinds of proposals put forward. TELUS made some interesting comments as to approaches as to how to use the VI principles to look at rates.

11620   So the Commission may have at its discretion, you know, a number of those tools, and then assess the rates perhaps for that agreement. We would think that that would be enough of a disincentive for both parties, you know, to come to some kind of a negotiation. So it would be a last-resort situation.

11621   COMMISSIONER MOLNAR: Okay.

11622   When I read this, one of the things that came to my mind is -- as we heard the different broadcast distributors come before us, we heard some that supported a pick-and-pay and sort of an à la carte process, some supported a make-your-own-bundle or small bundles. All were not alike. And I think that is exactly what you want if you want a competitive dynamic distribution: you want the ability to differentiate, provide choice and flexibility in different ways.

11623   So how does that fit into creating a standard agreement?

11624   And once you're done answering that, my next question is: what about the next innovation? How does a standard agreement support innovation in marketing, retailing, technology?

11625   MS MacDONALD: Okay.

11626   I don't -- I actually see a standard agreement as working to support all of the things that we want to do, so -- everyone is signing agreements today. The difference is that every agreement is different and a lot of the agreements that we're seeing have limitations in them that prevent us from offering flexibility.

11627   So given the Commission's goals in this proceeding, which is all about consumer choice, and balancing all of the other objectives, of course, we would see a standardized agreement supporting the rights of distributors to make decisions for packaging, et cetera, and through negotiation a rate could be arrived that continues to allow both parties to benefit in the market. It actually creates an opportunity. So an agreement would allow us to make packaging changes, as well as offering standalone and pick packs.

11628   With regard to innovation, I don't know --

11629   COMMISSIONER MOLNAR: And just to be clear, when you say it will allow "you," I mean, obviously, the programmer and the distributor have to be partners in this.

11630   MS MacDONALD: Absolutely. Absolutely.

11631   So, of course, we're speaking from our perspective.

11632   COMMISSIONER MOLNAR: Of course.

11633   MS MacDONALD: So when say "us," we're speaking from our perspective, but I think it -- it goes both ways.

11634   In terms of innovation, I would say today we have agreements, and 5, 10 years ago we had agreements that may or may not have considered, and probably hadn't considered, innovation and changes that require, you know, reconsideration of terms. I don't think that's unusual for anything. You know, business needs change. So, of course, agreements would typically have renewal provisions, and if there is a change in innovation that results in a different type of service functionality that isn't addressed in the agreement then it could be addressed.

11635   MR. BRAGG: Like today -- I mean, we see a standardized agreement as actually allowing for more differentiation and, you know, more ideas and more flexibility and -- but because it -- we want it to be a lighter agreement. Today the agreements all have: here is a big list of things you cannot do, and we want to get rid of that and have it, you know, be more simplified, standardized, so that it's more inclusive rather than exclusive, so that if you do have some innovations it's not already prohibited in the agreement, if you follow me.

11636   COMMISSIONER MOLNAR: And would you see standardized agreements with all programming partners? There's a lot of independents out there.

11637   MS MacDONALD: M'hmm.

11638   COMMISSIONER MOLNAR: I mean the focus here seems to be often on the big three and --

11639   MR. BRAGG: Yeah. I think it's less --

11640   COMMISSIONER MOLNAR: -- and the issues with that, but, you know, everybody's part of the system.

11641   MR. BRAGG: Yeah. I like to take a simple view of the world. I would say, yes, that might not be necessarily feasible with some of the international providers, who just may say, "I'm not signing on for that." But part of it is it's the -- I find one of the overriding issues on not only this hearing but others in the past is you have this spectre of the vertical integration issue that clouds a lot of the other things we're trying to accomplish, because that -- they have a potential distortion in the marketplace.

11642   Whether we're trying to, you know, offer our customers, sign reasonable agreements, come to reasonable rates, if you're an independent wholesaler, we both -- both parties can suffer if we don't come to a reasonable agreement. But with a vertically integrated guy who you're negotiating with, you know, they don't necessarily care if we don't come to an agreement because they can still sell their own service and buy it from themselves and deliver it to their own retail customers.

11643   So that's where the distortion is, which is part of what -- you know, is part of the challenge we have, which is one of the drivers for a standardized agreement.

11644   So I think it's less of an issue with some of the independents or foreign services. You know, I think it would be great if we could have it all the same, but less of an issue.

11645   MS MacDONALD: And I think -- I agree with what Lee's saying, you know, it may not be necessary for all distributors. But then when I think about what would be in the agreement, unless the Commission makes decisions -- for example, there's a few different proposals before the Commission with regard to smaller programmers, in terms of the transition to à la carte. And, you know, if the Commission chose to set different rules, it may be that a standard agreement wouldn't have a mandate for à la carte access for certain distributors, if that's where the Commission goes, so...

11646   But generally, I think the agreement provisions, the key impact in the agreement, is how rate takes away our flexibility. So if the Commission wants flexible carriage, and the agreements allow for flexible carriage, then I think, you know, we're -- a standard agreement would probably work for all parties involved. And, again, it would be a default if the parties couldn't negotiate.

11647   COMMISSIONER MOLNAR: I want to talk about -- you have said here prohibit "excessive" PBCRs. I think the term that had been used in the working document was "unreasonable" and you're "excessive." I mean, fair enough.

11648   MS MacDONALD: M'hmm.

11649   COMMISSIONER MOLNAR: Fair enough, I think they're meaning the same. And you say "including a prohibition on make-whole pricing." And you're not the first to say "make whole pricing is in appropriate."

11650   MS MacDONALD: M'hmm.

11651   COMMISSIONER MOLNAR: And, you know, an argument that has been made is: well, make-whole pricing puts all the risk the BDU, and yet I've been struggling a bit to understand how, without the ability for a programming service to attempt to get make-whole pricing, it could ever retain the quality of its product for the customers who remain in the system and want it.

11652   MR. BRAGG: But shouldn't it work the other way? Shouldn't they be motivated to create the good content that then drives the penetration so that they can achieve an equivalent make whole, rather than the other way around? The obligation shouldn't be on us to say, "Well, we'll just give you the money and hope that you create good content."

11653   COMMISSIONER MOLNAR: Let me --

11654   MR. BRAGG: It's their product.

11655   COMMISSIONER MOLNAR: Let me -- wait. We know generally that specialty services have half of their revenue out of advertising, half out of subscription fees. And once this is done, there's evidence -- and, I mean, this is going to be a first, so we don't have -- we don't know what'll occur, but there are expectations that advertising could decline, as well as subscriber fees.

11656   And so once they lose the advertising, and the distributors are unwilling to take on make-whole pricing --

11657   MS MacDONALD: M'hmm.

11658   COMMISSIONER MOLNAR: -- you have automatically dropped the amount of revenue available to that specialty service to invest in its quality programming.

11659   MS MacDONALD: So --

11660   COMMISSIONER MOLNAR: So while you're saying, you know, you don't want to take on the risk, and I understand that, but where these is true choice and flexibility wouldn't it be your customers who would choose if they're willing to pay for that service?

11661   I mean, you know, there are many services that are quite niche in nature, but are -- not everybody wants to watch cooking, but I really do.

11662   MS MacDONALD: M'hmm.

11663   COMMISSIONER MOLNAR: You know, it -- I really don't, but that was just an example.

--- Laughter

11664   COMMISSIONER MOLNAR: But...

11665   MR. BRAGG: Sure.

11666   MS MacDONALD: So I have a --

11667   COMMISSIONER MOLNAR: And, you know, sports -- sports, obviously, is the one that's been talked about --

11668   MS MacDONALD: Yeah.

11669   COMMISSIONER MOLNAR: -- over and over and over here.

11670   MS MacDONALD: And so I have a few things I would like to say about make whole, because I think it can get confusing as to what even is make whole.

11671   So when we say "more than make whole," that's where you get to the advertising revenues being -- or lost advertising revenue being included. So that's, like, what we would say is "more than make whole," because it's -- and when we say "make whole," we're talking about a subscription make whole.

11672   So, first of all, on the "more than make whole," which is the whole -- incorporating advertising losses, we would say, first of all, we've never had any agreements in the decades of negotiating affiliate agreements that compensated the programming service for ad loss until the one example that we provided in the submission.

11673   And if for decades we've been providing services and negotiating with programming services in an environment where they were independent and everyone had the same objective, if we weren't seeing those kinds of -- trying to recover everything, you know -- and the first instance was in the example we have, and we have the agreement today that has those what we call "hockey stick curves" at lower penetrations.

11674   So first of all, they're not the norm. And if they weren't the norm in the past, they -- you know, we don't see that being the norm. But, secondly, you know, we -- customers who aren't watching those services, they're not watching those ads either.

11675   On the make-whole point, what a make whole does is it's saying, Okay, we have legacy carriage of certain category A -- for the sake of example I'll avoid sports right -- certain category A specialty services being carried in extremely high penetration tiers. A make whole --

11676   COMMISSIONER MOLNAR: And just to be clear, I do understand that and...

11677   MS MacDONALD: So --

11678   COMMISSIONER MOLNAR: I'm kind of looking at the future, right? You know where you said, "Well, we don't have any, there's only one," in an environment of true flexibility, where the specialty services will maybe lose their genre protection, lose their carriage, and be subject to true consumer demand, you may be looking at different agreements in the future.

11679   MS MacDONALD: Right. And I guess what we would say is a make whole today is based on a penetration rate that's been artificially inflated.

11680   COMMISSIONER MOLNAR: So you don't even want a possibility for a specialty service to retain its subscription revenues?

11681   MS MacDONALD: Umm...

11682   COMMISSIONER MOLNAR: And, again, I don't --

11683   MS MacDONALD: Yeah.

11684   COMMISSIONER MOLNAR: -- see this as -- as you, I see this as giving your consumers the choice as to whether or not they'd be willing to pay for that service at its true cost.

11685   MS MacDONALD: What I will say is that all of the BDUs, I think, that presented here actually are against, you know, a make whole. And even though we've heard Bell and Rogers suggest that make whole is reasonable, what I heard them say this week is it isn't. And so I'll reference that because I think it's telling.

11686   When Bell and Rogers tell the Commission that a make whole is reasonable, and they want that make whole to be paid by the BDUs who buy their services, they don't want to pay a make whole to other service providers.

11687   So, for example, earlier this week Mr. Crull spoke very passionately about the fact that a U.S. specialty service had put -- they had a penetration of 50 per cent penetration, and that yet U.S. service, you know, maybe had the audacity to request 75 per cent penetration, yet the U.S. service wanted a payment based on 100 per cent, and he very passionately described that as punitive.

11688   We see a make whole as: we have customers who are taking -- you know, in a basic package taking a Bell service, and Bell wants 100 per cent -- actually, they want more than that -- if we lose penetration. So I think it's -- it's a similar example.

11689   And with Rogers, when the Commission asked Rogers about Blue Ant's proposal -- and Blue Ant proposed during a transition they would like -- and I think they said 35 per cent penetration guarantee during the balance of their licence, and Rogers' statement was: in this new regime Rogers has to assume risk. Programmers have to assume risk. Distributors have to assume risk. Blue Ant needs to assume risk.

11690   And then shortly after that, Rogers got up and said -- well, they were on the panel. They said: We believe in make wholes. And a make whole, as far as I can see -- because they suggested that you would look at the penetration they have today, which is already an inflated penetration for their specialty services, and they said: make whole based on current penetration to the balance of the licence term.

11691   To me that sounds like what Blue Ant asked for, and Rogers was completely against it. They said it wasn't a proper assumption of risk.

11692   So my point is: I don't actually think, if it was turned on Rogers or Bell, they would be wanting to pay make wholes.

11693   And I think that makes sense, because, you know, they do need to bear the risk.

11694   And I think that the Commission has a really good approach to supporting consumer choice and putting on the table à la carte and pick packs, because that is going to really show customers who want the service.

11695   Now, there is going to be a mix of that, because some customers might like what we offer as a bundle --

11696   COMMISSIONER MOLNAR: Thank you.

11697   Let me ask, do you believe that we need to make a decision on this as part of the framework, or that it could be examined on a case-by-case basis?

11698   MS MACDONALD: The issue of make whole?

11699   COMMISSIONER MOLNAR: The issue of defining what is excessive PBRCs, or what is an unreasonable PBRC, which would include, in some cases, I guess, should or should there not be make whole.

11700   MS MACDONALD: If we had our way, we would ask that the Commission actually consider the issue of make whole and make a finding that make wholes were not a reasonable approach to rate setting in affiliate agreements, with the parties under our proposal negotiating something.

11701   So, no make wholes.

11702   COMMISSIONER MOLNAR: Okay. I am not surprised that that's where your preference would be. Your preference would be a standard agreement and standard rules. An option could be case-by-case, I suppose?

11703   I mean, what are the issues, because we don't know how this is all going to unfold.

11704   MR. BRAGG: I think that is absolutely right. I think there is a lot of mystery as to where we are going to end up here, but, fundamentally, it just does not seem to make sense that if a content provider cannot manage, on their own, to garner enough consumer interest to justify their existence, that is their issue.

11705   Really, there should be a greater onus on them to create content that is compelling for consumers, that we will want to package in a way that we get those consumers, and that's the general economics.

11706   It just doesn't make sense from a make whole standpoint. There is too great an onus on us to guarantee the revenues, and there is no onus on them to continue to create good content.

11707   COMMISSIONER MOLNAR: Right. And, you know, maybe we are focused on old language. Maybe it isn't "make whole". Maybe we just say --

11708   Let's take an example that you have a specialty today that has a 25-cent wholesale rate. It's sitting in your basic. You pull it, and it's part of à la carte, and under à la carte, they anticipate that they might get 30 percent penetration.

11709   So they go to you with: Our wholesale fee now is $1.

11710   That might be, for them, make whole or not, but when they put that into the market, having done their homework, to see what sort of revenue they need, the price for them to sustain their service might be $1. They think that that is what they need to invest in their programming, and they think they will get 30 percent penetration and be able to retain it.

11711   Now, something like that wouldn't necessarily be unreasonable.

11712   Do you think that is unreasonable?

11713   MS MACDONALD: I think, for us, on the topic, we would say: What is unreasonable.

11714   I just want to be clear. We think it is very reasonable when we have a lower penetration -- so fewer subscribers are taking a service -- we think it is very reasonable that the per-subscriber rate for that service would go up.

11715   We are not against that at all. We think it makes sense, and that is the regime that we actually have in place, which historically has been in place.

11716   We provided evidence in Schedule B of an example; a Category B service provides a really good example of that.

11717   I think that the very simple line of when is it unreasonable, it is unreasonable when the amount we pay the service for 100 percent of the customers is the exact same amount when there is 30 percent, because that does not incentivize us to charge that much higher per-subscriber rate for 30 percent of our customers. Rather, it incentivizes us to say: Well, gosh, we are not going to force -- potentially, we are not going to force 30 percent to take this huge increase, when we are paying the exact same amount every month anyway. We may as well give it to all customers, since the same amount is being paid, and it then becomes a lower per-subscriber rate.

11718   And that ends up -- that's what is happening today with moving services into the higher tiers.

11719   So that is basically our test of: Is it a make whole.

11720   COMMISSIONER MOLNAR: Okay. I am going to move on, because I understand your position on this.

11721   Could I get your position as it regards the two options related to a small basic?

11722   When we talk about choice and flexibility, the Working Document provided a couple of options.

11723   MS MACDONALD: We had considered that, and we support Option A.

11724   The only thing I would say is, before the Commission is able to go to that skinny basic, we feel that it would be important to have the rate issues addressed, because today we have basic, where we will -- the costs of certain services, because of the high cost -- even if we drop 10 percent penetration, as soon as one customer moves out of our existing basic into a skinny basic, there is a huge cost increase for us.

11725   COMMISSIONER MOLNAR: Yes, I think that is well understood, that the wholesale side has to be part of the move to effect retail.

11726   MS MACDONALD: Yes.

11727   COMMISSIONER MOLNAR: I guess it was Rogers that said: Why don't you let BDUs pick whether they want to go with Option A or Option B.

11728   I haven't heard anybody else take that approach. Everybody is coming forward saying: We support Option A.

11729   My sense is a little bit that -- I mean, Option B gives you and other BDUs more flexibility, but there is this fear of rate regulation, and that is driving people to Option A.

11730   I think it was Cogeco yesterday that said: If you are going to set this price -- and they laid out the full regulatory -- I think they may have even had split-rate base, and costing, and everything in there that you have to do, and I was quite surprised.

11731   From my perspective -- and you are involved enough in the telecom side to know -- I looked at that price cap, if you will, more as the $22 that was set when the telecom local services were rate deregulated.

11732   They said: But just as a safety net, for those who want an affordable entry, we are going to have this capped, standalone price.

11733   MS MACDONALD: I think, when we discussed those two options -- because when you first look at them, you think, "Oh, Option B sounds pretty good," because you can add a little bit more. It gives you a bit more flexibility.

11734   But it was the cap that concerned us, because it's not that we couldn't live with a cap, say, today, but because you have that flexibility, you may be inclined to add discretionary services in there. Once you do that, if you don't have control over how that rate changes, those service prices could go up.

11735   And if we can't keep those services in there because we can't stay within the cap, then we are disrupting our customers, who have relied on and expected that content.

11736   So that is where the problem comes. It comes from consumer expectations, once you build that model and you are capped at that rate.

11737   So it sort of takes away your flexibility, and we certainly don't want to disrupt our customers, who have grown accustomed to something, if the rates for those discretionary services go up.

11738   That is really where it came from.

11739   COMMISSIONER MOLNAR: Could it be reasonable to say something like, if a BDU does not have a basic service priced at $30 or less, they should put in place an all-Canadian basic, something like that, if you can stay within that?

11740   There is an affordable entry -- and I recognize -- I mean, I threw out the number 30. Maybe that's not exactly the number. Whatever that number is, it would need to evolve as price changes occurred.

11741   So it's not a static number, but --

11742   MR. BRAGG: Depending on how regulated the retail rate is, if there is sort of equivalent protection on the cost side, I think we can get our heads around -- whatever we end up with.

11743   I think that's what concerned us, as Natalie said, about Option B. I actually think it makes more sense, except that I am unclear of the cost drivers in there, on how they may escalate, and I am still stuck at a $30 retail rate, and the margin disappears.

11744   At the risk of being too honest, what we are all likely going to do is all choose Option A --

11745   THE CHAIRPERSON: Certainly that's not a risk at a public hearing.

--- Laughter

11746   MR. BRAGG: We will all, likely, do Option A, because that's what we want, but do Option B, as well. I think that is what is going to happen.

11747   COMMISSIONER MOLNAR: But you will only do Option A -- you will do Option B to meet your customers' needs, and Option A --

11748   MR. BRAGG: To meet your needs.

11749   COMMISSIONER MOLNAR: -- because we said so, right.

11750   To me, if Option B could meet our needs, why have to do both?

11751   That was kind of my thought anyway.

11752   MR. BRAGG: Yes.

11753   COMMISSIONER MOLNAR: Okay. I think those are my questions. Thank you very much.

11754   THE CHAIRPERSON: Vice-Chair?

11755   COMMISSIONER PENTEFOUNTAS: Briefly, thank you.

11756   Good afternoon. On Option A -- let's get back to your basic as it stands now. I think it's $40 for basic, more or less?

11757   MS MACDONALD: It's $36. It varies by location, but --

11758   COMMISSIONER PENTEFOUNTAS: It's $36, with fluctuation from market to market.

11759   Now, under our Option A proposal, what kind of pricing would you imagine you would be at?

11760   Let's start with sports. Is sports in your basic right now?

11761   MR. BRAGG: Yes.

11762   MS MACDONALD: TSN is.

11763   COMMISSIONER PENTEFOUNTAS: TSN is, yes, because I see that you have a $5 pack for everything else.

11764   So, just taking TSN out of the equation --

11765   MS MACDONALD: We don't have a firm number, but we heard the numbers that everyone else was putting out, and we think those are probably in the range of what we would see.

11766   MR. BRAGG: Yes, $25 to $30, something like that.

11767   COMMISSIONER PENTEFOUNTAS: And the 4+1s?

11768   We have heard a lot about an Option C.

11769   MS MACDONALD: Yes. We didn't come here with a view to be really aggressively pushing for 4+1s to be in your Option A. We can understand where those arguments are coming from, but if the Commission were to say no, then we would probably just incorporate it into our other option.

11770   COMMISSIONER PENTEFOUNTAS: Yes, and that would probably be a free 4+1, above and beyond the initial --

11771   MR. BRAGG: To be honest, I was unclear about some of the previous discussion on: Well, let's choose Option A, but you could just give away the 4+1s.

11772   COMMISSIONER PENTEFOUNTAS: From a simple price point of view, adding the 4+1 wouldn't change very much.

11773   MR. BRAGG: I would say not much.

11774   COMMISSIONER PENTEFOUNTAS: And the audio services, as well?

11775   You probably have radio services and other audio services on.

11776   MS MACDONALD: Yes, there are.

11777   COMMISSIONER PENTEFOUNTAS: That wouldn't change very much, either, in terms of pricing?

11778   MS MACDONALD: I don't think so, no.

11779   MR. BRAGG: I don't think so.

11780   COMMISSIONER PENTEFOUNTAS: It's --

11781   MR. BRAGG: Negligible.

11782   COMMISSIONER PENTEFOUNTAS: -- negligible. I am not going to say pennies, but "negligible" is a better word. Okay.

11783   Simsub doesn't change anything for you?

11784   MS MACDONALD: We know that the Working Document offers two proposals. I guess what we would say is, we have heard what everyone has been saying, and what we wrote in our written was pretty much: Look, if it's still important for the system, we are living with it today, and we agree with trying to work toward an improvement.

11785   So, in case that question comes up, we have no problem working on a working group to try to address issues that do come up on it.

11786   COMMISSIONER PENTEFOUNTAS: U.S. services being subject to the Code?

11787   Is that problematic for you?

11788   MS MACDONALD: That is a tricky one, because we, obviously, have our own set of challenges, as well, just like everyone else has described with U.S. services.

11789   In a perfect world, we absolutely would like them to be subject to the Code.

11790   We are not really sure what would happen if they were. We don't know the answer to that.

11791   I don't know if Lee wants to add anything further, but --

11792   MR. BRAGG: I would think that we should approach it like they should be.

11793   Again, it comes back to my comments on the vertical integration issue. The Code is more important for the vertical integration guys than any independents, U.S.

11794   So if they weren't held to it, it's not as much of an issue. But from a consistency standpoint, it would be great if they were.

11795   COMMISSIONER PENTEFOUNTAS: You talked about make whole and about -- I am trying to remember what --

11796   Oh, "pay on", yes, that's what I was looking for.

11797   So you have the "make whole" and you have the "pay on", which is what you described in terms of, you know: I am guaranteeing you this penetration, but I am going to pay you for that penetration.

11798   It's even sort of better than make whole, it's make whole plus, it's super make whole.

11799   Obviously, the broadcaster has a responsibility to offer quality programming that is attractive to promote his product. What would you say to the broadcaster that would say to you, "Listen, the BDU is just not pulling their weight either"?

11800   That is part of the reasoning behind a make whole approach, because you have responsibilities, as well.

11801   MS MACDONALD: I think that question becomes interesting in the world where we are headed, which is likely to be an à la carte and pick and pay, because then the BDU has actually provided consumers with full choice.

11802   Where we do our part, I think, today, is in how we package and how we put services together.

11803   Now, we feel that we have a lot of limitations on that, but in a world where we can try to package in ways that we think create interest for the customer, and they move into those packages, that probably means that customers are buying the service.

11804   If they don't like that, with what the Commission is doing in this proceeding, they have those options to standalone and personal pick.

11805   So if they like the service, they are the ones voting. It really becomes the consumer's decision about whether the service is good enough.

11806   Now, keep in mind, as well, that -- you know, there has been a lot of talk about over-the-top during this proceeding, and when we think about issues around make whole, a lot of this content is also becoming available over-the-top through the same programming services that we are paying.

11807   So we would just say that we can't forget that if our customer is choosing to leave us, and we are committing to pay them a make whole, while they are still getting that customer somewhere else, that factors into why we think a make whole isn't entirely reasonable.

11808   COMMISSIONER PENTEFOUNTAS: So you have your group of druthers and problems with broadcasters in that sense. They are selling you their content, and they are making it available online, as well.

11809   Just briefly, set-top boxes. I know there is a technology issue with some of your markets.

11810   MS MACDONALD: Yes.

11811   COMMISSIONER PENTEFOUNTAS: Do you want to speak to that?

11812   MS MACDONALD: I think, from the sound of the interventions this week, and the presenters, it sounds like a lot of the other companies are way further ahead than we are in that department.

11813   We have some great services and some great functionalities in our boxes, some of which may have that capability, but we have a huge majority of our boxes that don't, and they need some sort of upgrades or software, or something, to be able to do that.

11814   COMMISSIONER PENTEFOUNTAS: Everyone else has a plan, and I don't want to get any state secrets out of you, but is there a plan to, if I could use the word, modernize your systems?

11815   MS MACDONALD: We like to think that we are quite modern. I think it's just that we have a huge number of other customers that are on some of the older boxes.

11816   MR. BRAGG: Yes, and there is only a handful of set-top box providers, and at the risk of sounding lazy, when Rogers and Shaw solve those issues, they get solved for us.

11817   I don't need to solve that issue. They are going to solve that technology issue.

11818   We use the same equipment, the same boxes, so that tends to be --

11819   It will get sorted out. The functionality will get built into the next variation of boxes, which we will buy, and then we will be able to do it.

11820   COMMISSIONER PENTEFOUNTAS: But, right now, would it be correct to say that a larger proportion of older generation boxes are being used under the Bragg/Eastlink networks?

11821   MR. BRAGG: I don't know that our percentage of old boxes is any different than anybody else's.

11822   MS MACDONALD: As I understand it -- and I would rather clarify this later, but as I understand it, we have some great new-generation boxes, but there are some other functionalities that you have to add in to be able to do that.

11823   Now, I might be wrong on that, but that was my understanding of it.

11824   COMMISSIONER PENTEFOUNTAS: So it's safe to say that you do not --

11825   MS MACDONALD: We are not accessing that information right now.

11826   COMMISSIONER PENTEFOUNTAS: -- access set-top box data presently.

11827   MR. BRAGG: From what I heard from everybody, the reason why they wanted all of this box data was to try to determine viewership and how many hours of particular programming people were watching.

11828   I keep coming back to -- I say: If we were in a pure pick and pay, consumer-driven market, then you wouldn't need all of that information, you would have it just based on who was actually buying those channels.

11829   Because now consumer desire for particular channels gets clouded in the fact that a channel rides along inside a package which may be driven by another channel.

11830   So it is hard to determine how much somebody actually wants to watch a channel, how many hours are actually watched, or what the desire is, or what the demand is for that channel in the marketplace.

11831   But in a purely open market, where every channel has to stand on its own, we will know that by who is buying it.

11832   COMMISSIONER PENTEFOUNTAS: You would have a better idea of what the sub revenue should be, but not necessarily what the ad revenue should be, if you had access to that data.

11833   MR. BRAGG: I think the ad revenue is predominantly driven by the number of subs.

11834   COMMISSIONER PENTEFOUNTAS: Okay.

11835   THE CHAIRPERSON: Thank you. I took the point at paragraph 16 of your oral presentation that you will be commenting in more detail on the Working Document at a later date.

11836   MS MACDONALD: Yes.

11837   THE CHAIRPERSON: That's fine. I would invite you, if you so feel that you might want to turn your mind -- you started a little bit today on the Nordicity model that was attached to TELUS. I would like to see your views in more depth, if that is possible, as well, in your reply, because I think that you may have some insight there, as well.

11838   So, when you get to your final comments, you might want to address that.

11839   MS MACDONALD: Okay, thank you.

Undertaking

11840   THE CHAIRPERSON: Thank you.

11841   Mr. Dupras...?

11842   COMMISSIONER DUPRAS: The make whole, if the VIs would like to make whole among themselves, and everyone who would be distributed on the VI system would be made whole, there would be no discrimination.

11843   Would you have any problem with there being an exception for VIs, if they wish to do so?

11844   MR. BRAGG: Are you asking if they --

11845   I am going to try to simplify it.

11846   If Bell and Rogers decided to make each other whole on their own content, would we care if they did that between themselves?

11847   I guess not.

11848   I am trying to think of --

11849   MS MACDONALD: If we think of something afterward that concerns us about that, we might file.

11850   THE CHAIRPERSON: You mean as part of your reply.

11851   MS MACDONALD: Yes, as part of the closing. It doesn't jump out as being a concern for us.

11852   THE CHAIRPERSON: Understood.

11853   Thank you for being here and for participating in the hearing, I appreciate it.

11854   MS MACDONALD: Thank you.

11855   LE PRÉSIDENT : Madame la Secrétaire.

11856   LA SECRÉTAIRE : Merci.

11857   J'inviterais maintenant Groupe V Média à venir à la table.

--- Pause

11858   LA SECRÉTAIRE : S'il vous plaît vous présenter et présenter vos collègues, et vous avez 10 minutes pour votre présentation.

PRESENTATION

11859   M. RÉMILLARD : Bonjour, Monsieur le Président, Monsieur le Vice-président, Madame et Messieurs les Conseillers. Je suis Maxime Rémillard, président et chef de la direction de Groupe V Média.

11860   Permettez-moi d'abord de vous présenter ceux qui m'accompagnent aujourd'hui.

11861   Tout d'abord, à ma gauche, Jean Durocher, vice-président exécutif et chef des revenus; à ma droite, Serge Bellerose, notre conseiller en affaires réglementaires; et à la droite de Serge, Tony Porrello, vice-président exécutif et chef des services de diffusion.

11862   Le processus qu'a entrepris le Conseil, il y a près d'un an, sur le système de télévision au Canada est d'une importance capitale pour l'avenir de notre groupe.

11863   Lorsque nous avons fait l'acquisition de TQS en 2008, nous étions conscients de l'ampleur du défi qui nous attendait. Malgré tout, les premiers mois n'ont pas été faciles. Il y avait une relation à rebâtir avec les fournisseurs, producteurs et distributeurs, et nous n'avions pas anticipé un ralentissement économique aussi important que celui qui a frappé l'industrie dans son ensemble.

11864   Nous avons retroussé nos manches, il a fallu prendre des décisions difficiles mais nécessaires, mais nous avons finalement réussi à relancer le réseau. Et nous sommes assez fiers de ce que nous avons réalisé, malgré les embûches et des ressources qui n'avaient rien à voir avec celles dont disposent nos concurrents.

11865   Entretemps, l'industrie a continué à se consolider. Le Conseil a permis la création de quelques grands joueurs intégrés et, du même coup, on a peut-être pensé, à tort, que les difficultés de la télévision traditionnelle au pays étaient réglées.

11866   Il existe cinq groupes qui exploitent des réseaux et stations de télévision traditionnelle privés au Canada, trois dans le marché de langue anglaise et deux dans le marché de langue française. Et de ces cinq groupes, un seul n'est pas intégré verticalement. C'est le nôtre.

11867   Le Conseil a jugé au cours des dernières années qu'il était dans l'intérêt du système de permettre la création de ces grands groupes intégrés verticalement qui ont des activités notamment dans les secteurs de la distribution, de la télédiffusion, de l'Internet et de la téléphonie.

11868   Mais il a aussi répété à plusieurs reprises qu'il était important d'assurer la présence de diffuseurs indépendants dans le système de façon à maintenir une saine diversité.

11869   Il faut un cadre réglementaire approprié pour que les diffuseurs indépendants puissent s'adapter aux changements de comportement des téléspectateurs et à l'évolution des technologies, tout en affrontant la concurrence des grands groupes intégrés et des services de contournement qui se développent rapidement.

11870   Or, quand nous prenons connaissance des propositions et hypothèses qui sont avancées pour faire face à cette nouvelle réalité, nous nous sentons vraiment laissés pour compte. Les mesures suggérées sont insuffisantes pour assurer notre survie dans le système, et plusieurs enjeux problématiques ne sont tout simplement pas évoqués.

11871   Le marché de langue française n'est pas à l'abri des tendances mondiales, mais il a son caractère spécifique qui le distingue à plusieurs égards du marché de langue anglaise. C'est important de se le rappeler. Et le cadre réglementaire doit tenir compte de cette réalité, comme le permet d'ailleurs la Loi sur la radiodiffusion.

11872   Au Canada anglais, les stratégies de programmation des télévisions traditionnelles sont bâties pour l'essentiel autour d'émissions acquises des grands réseaux américains et qui sont diffusées simultanément. Ce sont en quelque sorte les grands réseaux américains qui déterminent ce que les Canadiens de langue anglaise vont regarder, notamment en heures de grande écoute.

11873   Dans le marché de langue française, c'est surtout la programmation originale qui attire les téléspectateurs et suscite leur intérêt.

11874   Ce n'est pas le seul élément qui différencie les deux marchés.

11875   Au Québec, la distribution de services télévisuels est encore largement dominée par une EDR qui fait partie d'un groupe verticalement intégré, qui comprend aussi un diffuseur qui contrôle le tiers des heures d'écoute du marché de langue française.

11876   On le sait, la télévision traditionnelle est sous pression et le modèle d'affaires ne tient plus la route. Et c'est encore plus vrai pour un diffuseur indépendant comme V qui ne peut tirer avantage de son appartenance à un groupe verticalement intégré.

11877   Pourtant, ce n'est pas parce que les téléspectateurs ne sont plus au rendez-vous. Même s'ils sont de plus en plus attirés par les nouvelles plateformes de diffusion, ils écoutent encore massivement la télévision linéaire, qu'elle soit traditionnelle, spécialisée ou payante, en direct ou en différé.

11878   Dans le marché de langue française, les téléspectateurs francophones ont écouté en moyenne 30 heures 40 minutes de télévision linéaire en 2013-2014. C'est presque autant qu'au cours des deux années précédentes.

11879   Et même dans le groupe cible des 18-49 ans que nous visons plus spécifiquement, le niveau d'écoute hebdomadaire était de près de 24 heures par téléspectateur l'an dernier, un niveau sensiblement semblable à celui des deux années précédentes.

11880   92 pour cent des heures d'écoute de la télévision linéaire par les francophones sont consacrées à des émissions de langue française, et la télévision traditionnelle accapare toujours 50 pour cent de ces heures d'écoute.

11881   Pour sa part, V rejoint 75 pour cent des Québécois francophones chaque semaine et recueille près de 10 parts de marché commerciales.

11882   Lundi dernier, « Les Détestables », une émission sur V, a rassemblé plus de 600 000 téléspectateurs. Il s'agit là d'auditoires qui n'ont rien à envier aux résultats d'écoute moyens des plus importants diffuseurs du Canada anglais.

11883   On pourrait donc penser que tout va bien, qu'il n'y a pas de problème. Mais c'est loin d'être le cas. Les revenus publicitaires des télévisions traditionnelles sont en baisse. Le Conseil lui-même le constate en compilant les données financières des rapports annuels des titulaires. Et ce n'est pas une situation circonstancielle, un phénomène passager. Il s'agit d'une tendance lourde.

11884   Où se déplacent les dollars publicitaires? Ils sont d'abord allés vers les services spécialisés, et ils se déplacent maintenant vers les autres plateformes de diffusion et en particulier vers des moteurs de recherche comme Google.

11885   Les économies qui pourraient être réalisées par l'abandon de la transmission en direct, c'est bien, mais ce n'est pas suffisant pour résoudre le problème.

11886   Pas plus d'ailleurs que la possibilité de ne plus réglementer la diffusion de contenu canadien en dehors des heures de grande écoute, même s'il s'agit d'une proposition que nous accueillons favorablement puisque nous l'avons nous-mêmes suggérée pour les diffuseurs traditionnels indépendants dans le mémoire que nous avons déposé.

11887   Cette mesure permettrait effectivement un peu plus de flexibilité dans l'allocation des ressources financières destinées à la programmation canadienne. Mais c'est bien peu, compte tenu de l'inflation des coûts à laquelle on doit faire face présentement pour l'acquisition de contenu étranger.

11888   Même dans le marché de langue française, on sent vraiment l'impact de Netflix. La hausse de coûts à laquelle nous faisons face pour l'acquisition de séries étrangères est une conséquence directe des ententes récentes conclues par Netflix pour l'acquisition de droits de diffusion et de la réaction immédiate des grands groupes intégrés comme Bell et QMi, qui ont l'avantage de pouvoir proposer des déclinaisons sur plusieurs fenêtres et plateformes dans leurs offres d'acquisition de droits.

11889   Ainsi, pour acquérir de nouvelles séries étrangères similaires à celles que nous diffusons présentement, il faut parfois acquitter des droits de diffusion deux fois plus élevés que ce nous avons payé il y a deux ou trois ans. Les sommes additionnelles que nous devons ainsi débourser pour faire l'acquisition des droits sur ces séries étrangères, c'est de l'argent en moins dont nous disposons pour du contenu canadien.

11890   Dans la situation actuelle, plus que jamais, ce dont les stations de télévision traditionnelles détenues par des diffuseurs indépendants ont besoin, c'est de nouvelles sources de revenus.

11891   En même temps, nous comprenons que les consommateurs ne veulent pas débourser davantage et que les EDR sont réticentes à se faire imposer de nouvelles obligations financières.

11892   Ce que nous souhaitons et proposons d'abord et avant tout, c'est que le Conseil nous permette de toucher une juste compensation pour la distribution des services de télévision locale des diffuseurs indépendants.

11893   Et le montant de ces redevances qui seraient versées par les EDR aux stations de télévision locales détenues par des entreprises non intégrées verticalement pourrait être déduit des contributions de 5 pour cent de leurs revenus de radiodiffusion que les EDR sont tenues de verser présentement pour le soutien à la programmation canadienne. Ainsi, l'effet serait nul au plan financier pour les consommateurs et les EDR.

11894   Mais les consommateurs et le système en sortiraient grands gagnants car ils continueraient à jouir de la diversité que leur procure la présence de diffuseurs traditionnels indépendants dans leurs marchés.

11895   Car, à défaut de pouvoir compter sur ces revenus additionnels, nous ne pourrons plus soutenir encore longtemps la présence de stations de télévision dans les marchés locaux.

11896   Cet apport additionnel de revenus que nous souhaitons avoir permettrait non seulement d'accroître notre présence et notre offre de programmation locale dans les marchés que nous desservons mais elle nous fournirait aussi les moyens d'enrichir notre grille horaire, d'émissions originales additionnelles, en misant sur une programmation plus événementielle.

11897   Dans le contexte actuel, nous sommes plutôt contraints de limiter nos investissements dans plusieurs catégories d'émissions, en bonne partie à cause d'un manque criant de financement, particulièrement en provenance du Fonds des médias du Canada.

11898   Les entreprises verticalement intégrées et les sociétés publiques sont les principales bénéficiaires du Fonds, et on ne sent aucune sensibilité ou volonté de sa part d'adopter des mesures qui permettraient aux diffuseurs indépendants comme V de bénéficier d'un meilleur accès au Fonds. Il s'agit d'une situation qui fait partie du problème et qui n'a nullement été évoquée lors de la comparution du Fonds plus tôt cette semaine.

11899   Pourtant, nous tenons à rappeler que la contribution de V en émissions canadiennes originales de langue française a été substantielle au cours des six dernières années. Elle s'est élevée à plus de 200 millions de dollars en droits de licence, somme qui est allée directement et essentiellement au secteur de la production indépendante, qui n'aurait pas pu compter sur un tel apport si TQS n'avait pas été acquis par notre groupe en 2008 et ainsi sauvée de la faillite. V permet ainsi à chaque année la création de quelque 600 emplois dans le secteur de la production télévisuelle au Québec.

11900   Par ailleurs, le Conseil a approuvé hier le transfert de propriété et de contrôle effectif de MusiquePlus et Musimax à Groupe V Média. L'intégration de ces deux services au sein de notre groupe représente un nouveau défi pour nous et il nous a amené à nous préoccuper d'un certain nombre d'autres enjeux abordés dans le cadre du présent processus.

11901   Sur l'exclusivité des genres, nous favorisons la création de catégories de genres élargies dans lesquelles des services pourraient se faire concurrence avec des conditions de licence normalisées, plutôt que l'abolition pure et simple des genres.

11902   Une telle abolition réduirait la diversité de l'offre dans le marché de langue française, entraînerait la disparition d'un certain nombre de services existants, accentuerait le coût d'acquisition de contenu étranger pour les services, ce qui créerait une pression accrue pour les indépendants et menacerait certaines télévisions traditionnelles dans la mesure où il n'y aurait plus de différenciation avec les services spécialisés desservant le marché.

11903   L'élimination des droits d'accès est une autre préoccupation pour nous, et la proposition du Conseil à cet égard n'a rien pour nous rassurer car elle mettrait en péril un certain nombre de services indépendants dont l'accès ne serait plus assuré et qui se trouverait ainsi dans l'impossibilité de négocier des ententes d'affiliation satisfaisantes avec les EDR.

11904   Si le Conseil élimine les droits d'accès de certains services, nous demeurons persuadés que pour maintenir et accroître la présence de services spécialisés indépendants de langue française, il importe d'imposer aux EDR verticalement intégrées l'obligation de distribuer au moins deux services non liés de langue française, dont un service non lié indépendant de langue française ne faisant pas partie d'un groupe verticalement intégré, pour tout service lié de langue française que cette EDR distribue à ses abonnés.

11905   Monsieur le Président, Madame et Messieurs les Conseillers, nous sommes à la croisée des chemins. Les décisions que le Conseil prendra au terme du processus actuel seront déterminantes pour l'avenir des diffuseurs indépendants au pays et plus particulièrement dans le marché de langue française.

11906   Pour préserver la diversité que permet la présence de diffuseurs indépendants aux côtés des grands joueurs intégrés verticalement, il faut des mesures réglementaires appropriées et ces mesures doivent aussi tenir compte de la spécificité du marché de langue française et être adaptées en conséquence.

11907   Nous sommes maintenant disposés à répondre à vos questions.

11908   Merci.

11909   LE PRÉSIDENT: Merci, monsieur Rémillard, et vos collègues. Monsieur le vice-président.

11910   CONSEILLER PENTEFOUNTAS: Je vous remercie et félicitations sur votre dernière acquisition. À ce rythme-là, vous allez devenir des intérêts verticalement également bientôt, là, mais ça va. Un pas à la fois.

11911   M. RÉMILLARD: Un pas à la fois.

11912   CONSEILLER PENTEFOUNTAS: Bien. Ici, commençons par votre... cette espèce de nouveau fonds FAPEL. J'imagine que le modèle est basé pas mal sur ce que RNC et Inter-Rives ont mis de l'avant plus tôt cet après-midi?

11913   M. BELLEROSE: Pas vraiment. Il y a des différences. On parle davantage de négocier directement avec les EDRs une compensation, une redevance en quelque sorte.

11914   On ne parle pas de créer un fonds parce que, dans le fond, la proposition de RNC et de Télévision Inter-Rives, c'est de dire: les EDRs vont verser une partie de leurs contributions de cinq pour cent à un fonds, lequel fonds va redistribuer entre les joueurs.

11915   CONSEILLER PENTEFOUNTAS: Hum, hum.

11916   M. BELLEROSE: Ce n'est pas exactement ça que, nous, on propose.

11917   Nous, ce qu'on propose, c'est qu'il y ait une négociation directe entre les télédiffuseurs indépendants et les EDRs pour le versement de redevance et que les EDRs puissent déduire des contributions de cinq pour cent qu'ils sont tenus de faire aux différents fonds.

11918   CONSEILLER PENTEFOUNTAS: Hum, hum.

11919   M. BELLEROSE: Ce qu'ils auront versé en redevance aux télédiffuseurs indépendants.

11920   Donc, le coût est nul pour le consommateur parce que... et puis les EDRs n'auront pas à débourser plus que le cinq pour cent, mais la négociation va se faire directement entre le EDR et le télédiffuseur indépendant.

11921   CONSEILLER PENTEFOUNTAS: Et ça sera réservé strictement. Est-ce qu'on inclut CBC-Radio-Can dans cette gang-là?

11922   M. BELLEROSE: Non. C'est pour les privés indépendants seulement parce qu'on part du principe que la situation... la situation de la télévision traditionnelle, elle est problématique pour l'ensemble des joueurs, on ne s'en cachera, pas, en terme de génération de revenus.

11923   Le problème, il est existant aussi pour les joueurs intégrés, sauf... et pour la société publique. Sauf que les joueurs intégrés et la société publique ont des outils pour contrer cet élément-là.

11924   C'est qu'on semble oublier dans le cas des joueurs intégrés que lorsqu'ils ont fait, dans le cas de Bell particulièrement lorsqu'il a fait l'acquisition de CTV et, subséquemment, Astral, le fait de maintenir en opération et en exploitation des stations de télévision locale dans le marché canadien, ça faisait partie du "deal" et il ne faut pas l'oublier.

11925   Ils savaient qu'il y avait une difficulté au niveau des télévisions traditionnelles.

11926   CONSEILLER PENTEFOUNTAS: Hum, hum.

11927   M. BELLEROSE: Mais ils ont pesé le pour et le contre et, finalement, à la fin de l'exercice, ils ont convenu de maintenir ces stations-là ouvertes même si elles étaient déficitaires parce qu'elles en tiraient en contrepartie d'énormes avantages au niveau de la transaction qu'ils avaient conclue.

11928   Dans le cas de Radio-Canada, je pense qu'à partir du moment où ils bénéficient déjà des payeurs de taxes, de contributions, parce que l'argent qu'ils reçoivent du Gouvernement fédéral, c'est de l'argent qui provient de nos taxes, alors, je pense que de leur faire bénéficier de sources de revenus additionnels à partir de redevances tient moins la route parce qu'ils ont déjà une source de revenu importante qui provient des subventions et des crédits gouvernementaux.

11929   Alors, dans le fond, la proposition, nous, on dit: Écoutez, les télédiffuseurs indépendants, ils n'ont pas la même capacité de surmonter le problème que pose la situation actuelle.

11930   Quand on regarde dans le marché de la langue française, un groupe comme TVA bénéficie d'avantages indéniables à cause de la relation particulière qu'il peut créer au sein de son propre groupe, qu'il s'agisse de Vidéotron et, donc, Vidéotron est probablement le meilleur annonceur de TVA, lorsque vous regardez TVA puis vous voyez la fréquence de publicité de Vidéotron.

11931   CONSEILLER PENTEFOUNTAS: Non, non.

11932   M. BELLEROSE: Donc, au départ, ils tirent des avantages financiers là.

11933   CONSEILLER PENTEFOUNTAS: Non, non.

11934   M. BELLEROSE: Voyez-vous. Et au niveau de toutes les activités d'interactions qu'ils peuvent faire, et de convergence au niveau de plusieurs produits, ils le font très très bien. Alors, évidemment, ils en tirent des avantages.

11935   Alors, c'est pour ça que, ça, on ne peut pas le faire au niveau des indépendants et c'est la raison pour laquelle on dit: On a besoin de pouvoir régler le problème et la seule façon -- il n'y en a pas 56 -- c'est d'avoir d'autres sources de revenus.

11936   CONSEILLER PENTEFOUNTAS: Monsieur le président.

11937   LE PRÉSIDENT: Je m'excuse, j'aimerais bien comprendre. Je pense que je comprends la mécanique que vous dites.

11938   M. BELLEROSE: Oui.

11939   LE PRÉSIDENT: Ce serait semblable. Donc, il y a cinq pour cent de la contribution au local. Un peu comme on fait pour les canaux communautaires, les gens ont le droit à un crédit s'ils mettent un certain pourcentage vers le canal communautaire. Et ce que vous dites, ils pourraient aussi bénéficier d'un crédit s'ils dirigent des fonds, comme vous le proposez dans...

11940   M. BELLEROSE: Voilà.

11941   LE PRÉSIDENT: Mais ce n'est pas vraiment un... un abonnement, ce n'est pas vraiment un fonds, c'est une autre mécanique.

11942   M. RÉMILLARD: Mais regardez. Prenons un chiffre. Mettons, on va prendre un chiffre. Disons que la contribution est de 1 000,00 $, évidemment, ce n'est pas 1 000,00 $ et qu'ils négocient avec V ou qu'ils négocient à Rivière-du-Loup avec Télé Inter-Rives des redevances pour la distribution de leurs trois signaux, qui aura comme impact qu'ils vont devoir débourser 100,00 $ à Télé Inter-Rives, bien évidemment, ils vont seulement verser 900,00 $ maintenant au Fonds des médias, au FPIC à la télévision communautaire, leurs autres obligations. Il peut déduire.

11943   Son obligation c'est de verser cinq pour cent de ses revenus, lequel représente 1 000,00 $, mais il a préalablement à négocier avec les télédiffuseurs indépendants une redevance.

11944   Il convient d'un montant de 100,00 $ à verser aux télédiffuseurs indépendants de son marché, donc il n'a plus que 900,00 $ à verser, qu'il répartira entre les différents bénéficiaires.

11945   CONSEILLER PENTEFOUNTAS: Et ces négociations-là, ultimement, qui décidera? Parce que dans le cas des canaux communautaires, il y a un mécanisme. Quant aux diffuseurs indépendants on arrivera à un chiffre approprié de quelle façon?

11946   M. RÉMILLARD: Ça serait une négociation comme une négociation avec les chaînes spécialisées, mais qui serait encadrée par un processus supervisé par le Conseil, un processus d'arbitrage.

11947   Donc, pour être clair, c'est vraiment une négociation pour la valorisation du signal pour les indépendants, mais donc on pourra soustraire au cinq pour cent pour tous les autres programmes.

11948   M. BELLEROSE: Et l'avantage, monsieur le vice-président d'une proposition comme celle-là, c'est qu'elle arrive à un moment charnière.

11949   Dans le cas de V, la licence expire à la fin de l'année...

11950   M. RÉMILLARD: Septembre 2015.

11951   M. BELLEROSE: ... septembre 2015. Donc, voilà une belle occasion d'établir un modèle qui règle le problème et qui permet, à ce moment-là, de bâtir un plan d'affaires et des propositions au moment du renouvellement de licence qui serait approprié en terme de fournitures de programmation locale dans les marchés locaux.

11952   CONSEILLER PENTEFOUNTAS: Et ces fonds-là sortiront de la... si vous voulez, du fonds dans son ensemble au prorata, là. On ne l'enlèvera pas des chaînes que... Vous n'avez pas un plan à savoir que ça viendrait des sommes qui devraient être allouées au fonds, aux chaînes communautaires, au FMC ou à des fonds indépendants?

11953   M. BELLEROSE: Ça importe peu pour nous.

11954   CONSEILLER PENTEFOUNTAS: Ça importe peu. O.k.

11955   M. BELLEROSE: Voyez-vous. Et si le Conseil, dans sa sagesse, estime que la répartition devrait être repensée, il appartiendra au Conseil de le faire.

11956   CONSEILLER PENTEFOUNTAS: Pour vous, ça ne constituera pas une récompense ou une valorisation de votre signal tel quel?

11957   M. BELLEROSE: Valorisation en quel sens, monsieur le vice-président?

11958   CONSEILLER PENTEFOUNTAS: Dans le sens du jugement de la Cour Suprême?

11959   M. RÉMILLARD: Non, parce que la proposition du Conseil de pouvoir fermer nos émetteurs, si on peut dire, nous, on utiliserait...

11960   CONSEILLER PENTEFOUNTAS: Vous seriez prêts à fermer vos émetteurs?

11961   M. RÉMILLARD: On serait prêts à fermer nos émetteurs pour nous permettre de négocier avec les EDRs une valorisation de notre signal.

11962   M. BELLEROSE: Parce qu'en fermant les émetteurs, on ne fait pas une économie nette. On a dit dans le mémoire qu'on sauvait, je pense que c'était 600 000,00 $.

11963   CONSEILLER PENTEFOUNTAS: Oui, j'ai vu ça.

11964   M. BELLEROSE: Mais dans les faits on va perdre 800 000,00 $ de revenus de droits qui sont versés par CBRA.

11965   CONSEILLER PENTEFOUNTAS: O.k. Cette catégorie des genres protégée et élargie, ça mange quoi en hiver cette bête-là, là? Est-ce que vous pouvez peut-être m'expliquer ça un petit peu plus profondément?

11966   M. BELLEROSE: Bien, on a deux...

11967   CONSEILLER PENTEFOUNTAS: Ça ressemble à une Cat A libre à faire ce qu'ils veulent.

11968   M. BELLEROSE: Bien, ça dépend.

11969   CONSEILLER PENTEFOUNTAS: Ça peut être sauvage.

11970   M. BELLEROSE: Ça dépend comment on défini les genres « élargis ». Regardez...

11971   CONSEILLER PENTEFOUNTAS: Hum, hum. Justement.

11972   M. BELLEROSE: Je vais le prendre autrement.

11973   CONSEILLER PENTEFOUNTAS: O.k.

11974   M. BELLEROSE: Qu'est-ce qu'on a en face de nous actuellement? On a des joueurs qui sont venus vous dire cette semaine, pour le marché du Québec, ne touchez pas à la protection des genres, maintenez le statu quo. C'est ce qu'on a entendu et plusieurs sont venus dire ça.

11975   CONSEILLER PENTEFOUNTAS: Oui.

11976   M. BELLEROSE: En contrepartie, dans le document de discussion, le Conseil évoque plutôt la possibilité, on élimine totalement la protection des genres. Bon.

11977   Et il arrive avec une proposition pour les indépendants qui dit, si je me rappelle bien, pour chaque deux services d'une entreprise intégralement, verticalement intégrée, qui le distribue, il est tenu de distribuer un service non IV.

11978   CONSEILLER PENTEFOUNTAS: Exact.

11979   M. BELLEROSE: Si on fait un peu de mathématique.

11980   CONSEILLER PENTEFOUNTAS: Oui?

11981   M. BELLEROSE: On va continuer...

11982   CONSEILLER PENTEFOUNTAS: On va avoir beaucoup de maths aujourd'hui.

11983   M. BELLEROSE: Non, mais on va en faire un petit peu, mais ça ne sera pas trop compliqué. Ça va poser un « sapré » problème.

11984   CONSEILLER PENTEFOUNTAS: O.k.

11985   M. BELLEROSE: Parce qu'on va prendre... on va donner des vrais cas, là, on va prendre le marché.

11986   Prenons le marché de langue française avec QMI. QMI possède à peu près huit services spécialisés puis si on rajoute la télé à la carte puis la BSD, puis là ce n'est pas très clair si on peut incorporer ça là-dedans, là, mais mettons si on prend les huit services spécialisés qu'ils détiennent.

11987   CONSEILLER PENTEFOUNTAS: Admettons qu'on exclut ces services-là.

11988   M. BELLEROSE: Pardon?

11989   CONSEILLER PENTEFOUNTAS: Admettons qu'on exclut ces services-là.

11990   M. BELLEROSE: On va les exclure.

11991   CONSEILLER PENTEFOUNTAS: On reste sur les spécialisés.

11992   M. BELLEROSE: O.k., on les exclut. Alors, donc, on a huit services spécialisés.

11993   CONSEILLER PENTEFOUNTAS: Oui.

11994   M. BELLEROSE: Qui, en principe n'ont plus de droit d'accès. Donc, ils auraient l'obligation de distribuer quatre services non IV.

11995   CONSEILLER PENTEFOUNTAS: Je vais vous interrompre, là. Si le Conseil imposait des droits d'accès ou un régime autre pour les indépendants, est-ce que vous seriez en mesure de vivre avec nos ratios, deux pour un?

11996   M. BELLEROSE: Bien, là, il faudrait comprendre la proposition, comprendre la proposition du Conseil.

11997   M. RÉMILLARD: Mais là, on commente la proposition qui est sur la table, là. Nous, dans le fond, on travaillait à partir de ce que vous avez présenté et ce que vous avez vraiment présenté, c'est pour deux services IV n'ayant pas de droits d'accès...

11998   CONSEILLER PENTEFOUNTAS: Oui, un indépendant.

11999   M. BELLEROSE: ... il y a une obligation d'en distribuer un non IV.

12000   CONSEILLER PENTEFOUNTAS: Hum.

12001   M. BELLEROSE: Donc, ils auraient l'obligation d'en distribuer quatre. On s'entend, c'est ce que la proposition dit.

12002   CONSEILLER PENTEFOUNTAS: Quatre des leurs.

12003   M. BELLEROSE: Non, quatre non IV parce que quand je le regarde, là, quand je regarde le document.

12004   CONSEILLER PENTEFOUNTAS: Alors, oui, quatre. O.k.

12005   M. BELLEROSE: C'est marqué: Pour chaque groupe de deux services liés qu'ils distribuent, une EDR IV serait tenue de distribuer au moins un service non IV dans la même langue, assemblage deux pour un.

12006   CONSEILLER PENTEFOUNTAS: Oui.

12007   M. BELLEROSE: Donc, il y en a huit.

12008   CONSEILLER PENTEFOUNTAS: Hum, hum.

12009   M. BELLEROSE: Il va devoir en distribuer quatre.

12010   CONSEILLER PENTEFOUNTAS: Oui.

12011   M. BELLEROSE: Alors, c'est lesquels les quatre actuellement dans le marché? CORUS en a quatre. Je comprends que CORUS n'est pas considéré comme un IV au Québec.

12012   Là, nous, on va en avoir deux: MusicPlus, Musiquemax. CERDI en a deux.

12013   CONSEILLER PENTEFOUNTAS: Hum, hum.

12014   M. BELLEROSE: Et j'imagine que Radio-Canada rentre là-dedans aussi avec ARTV, Explora, RDI, ce n'est pas très clair, là.

12015   CONSEILLER PENTEFOUNTAS: Je pense que ARTV... en tout cas, vas-y.

12016   M. BELLEROSE: O.k.

12017   CONSEILLER PENTEFOUNTAS: Alors, là, le calcul, là, j'ai quatre...

12018   M. BELLEROSE: Alors, là, on commence à...

12019   CONSEILLER PENTEFOUNTAS: J'ai quatre chez CORUS, deux chez vous.

12020   M. BELLEROSE: On commence à avoir une pression, là, un petit peu, là, parce que, là, il commence à y avoir pas mal plus de services dans le marché qui n'ont plus de droit d'accès qu'il y a d'obligation pour Vidéotron d'en distribuer.

12021   Alors, là, nous, on se présente, là. Le contrat d'affiliation de MusicPlus et Musiquemax expire le 31 août 2015, je pense... en tout cas. Donc, il faut aller négocier avec eux et, là, le nouveau cadre est établi, il n'y a plus de droit d'accès. Alors, c'est quoi le pouvoir de négociation pour aller négocier un tarif?

12022   Qu'est-ce que V va se faire répondre s'il cherche à négocier un juste tarif et que le EDR devant nous prétend que ce tarif-là n'est pas justifié? Il peut tout simplement dire: Regarde, je ne suis pas obligé de te distribuer, tu n'as pas de droit d'accès et j'en distribue déjà cinq et je suis tenu d'en distribuer quatre.

12023   CONSEILLER PENTEFOUNTAS: Écoute, se peut...

12024   M. BELLEROSE: Alors, là, c'est: Ou bien, tu acceptes ma proposition ou bien, regarde, on te retire. Concrètement, c'est ce qui peut arriver. C'est ce que la proposition actuellement pourrait amener.

12025   CONSEILLER PENTEFOUNTAS: Ça ne sera pas une fois que... la première fois qu'un trifluvien m'apprenait quelque chose. Mais j'ai l'impression que CORUS est un IV.

12026   M. BELLEROSE: On m'a dit que c'est une entreprise liée, mais non IV. C'est ce que j'ai vérifié. Donc, ici on parle d'entreprise IV.

12027   CONSEILLER PENTEFOUNTAS: Oui.

12028   M. BELLEROSE: Donc, CORUS, les quatre, ils feraient partie du lot.

12029   CONSEILLER PENTEFOUNTAS: Je m'excuse, j'avais raison, un trifluvien qui triomphe encore.

12030   On va regarder ça, je vais demander au personnel de peut-être regarder ça puis on va clarifier ce point-là.

12031   M. BELLEROSE: Très bien.

12032   CONSEILLER PENTEFOUNTAS: Et, vous, votre proposition ça serait du un pour un?

12033   M. RÉMILLARD: Un pour un.

12034   M. BELLEROSE: Bien, en fait, c'est du... oui, ça équivaut à du un pour un parce que notre proposition c'est de dire, pour chaque entreprise liée, il doit en distribuer deux non liées de même langue dont un indépendant, effectivement, et donc, pour les indépendants ça équivaut à du un pour un.

12035   CONSEILLER PENTEFOUNTAS: O.k. Je pense que ça complète pour moi sur ce point-là qui est... et je suis bien heureux qu'on a pu le clarifier.

12036   M. BELLEROSE: Bien.

12037   CONSEILLER PENTEFOUNTAS: J'ai lu votre intervention sur les boîtiers décodeurs. Juste réitérer peut-être votre position.

12038   M. RÉMILLARD: Oui. On est pour cette proposition-là d'avoir plus d'information des décodeurs. On croit que ça va... ça « complémenterait » très bien un service numérique et pour la composition de l'auditoire ça nous aiderait aussi. Et si on peut avoir aussi en quelque sorte...

12039   Vous savez, c'est assez extraordinaire dans l'industrie de la distribution, nous, on a des services maintenant, bientôt MusicPlus, Musiquemax et on a aucune information sur nos clients. On a aucune information s'ils aiment le service et comment on peut améliorer la qualité, comment est-ce que...

12040   Donc, je crois que c'est déficient dans notre industrie et avoir... tout en respectant des barèmes de vie privée, mais si on peut avoir plus d'information sur notre client, on va être encore meilleur et encore plus performant dans l'industrie.

12041   Alors, ça, oui, pour les auditoires puis pour les audiences, mais avoir plus d'information aussi, accès à de l'information à un client, ça serait au bénéfice des services indépendants.

12042   CONSEILLER PENTEFOUNTAS: La question de substitution simultanée a été soulevée par Inter-Rives et RNC. Est-ce que ça vous cause des ennuis également?

12043   M. BELLEROSE: Non. On est tout à fait d'accord avec eux parce qu'on pense que c'est important. Télé Inter-Rives puis RNC, ce sont des affiliés à nous et on pense que c'est important de protéger l'intégrité de leur signal sur leur territoire.

12044   CONSEILLER PENTEFOUNTAS: Pour maintenir la substitution simultanée au moins au travers du Canada.

12045   M. BELLEROSE: Pour notre programmation. Autrement dit, on ne peut pas venir faire concurrence à nos affiliés dans leurs marchés respectifs.

12046   CONSEILLER PENTEFOUNTAS: Bien oui, tout à fait.

12047   M. BELLEROSE: On veut qu'ils aient la capacité de monétiser leur signal entièrement parce que, évidemment, si notre signal de Montréal était également disponible à Rivière-du-Loup puis qu'il n'y avait pas de substitution simultanée, bien les 10 ou 15 pour cent d'heures d'écoute qui viendraient sur l'antenne de Montréal, bien Rivière-du-Loups en serait privée puis ça viendrait diminuer la valeur de ses revenus publicitaires locaux qu'il peut générer.

12048   CONSEILLER PENTEFOUNTAS: Et quand on fait nos calculs dans un monde sans genre ou sans protection des genres, les Cat A et B sont confondues. Alors, juste pour être clair sur votre position...

12049   M. BELLEROSE: Je ne suis pas sûr de bien saisir quand vous parlez des... ah! les Catégories A et B?

12050   CONSEILLER PENTEFOUNTAS: Les Catégories A et B.

12051   M. BELLEROSE: Oui, O.k., très bien, je comprends.

12052   En fait, je n'ai pas vraiment complété la réponse tantôt parce que vous aviez commencé à me demander qu'est-ce que c'était, qu'est-ce ça mangeait en hiver, là, la « bibitte » de l'exclusivité des genres puis tout, puis j'avais commencé puis on a...

12053   CONSEILLER PENTEFOUNTAS: Je ne vous ai pas interrompu quand même.

12054   M. BELLEROSE: Pas du tout.

12055   CONSEILLER PENTEFOUNTAS: Dans le feu de la discussion, O.k.

12056   M. BELLEROSE: Jamais je ne prétendrai ça, monsieur le vice-président.

12057   CONSEILLER PENTEFOUNTAS: O.k.

12058   M. BELLEROSE: Non. Dans le fond, tantôt, ce que j'avais commencé à expliquer, c'est qu'on était confronté à deux offres qui étaient, dans le fond, une extrême où il n'y a plus de... il n'y a plus d'exclusivité de genre puis tout le monde peut faire n'importe quoi pour acquérir n'importe quoi puis ne plus se créer de différence entre eux et le statu quo actuel.

12059   Et à mon avis, le statu quo n'est plus une option non plus parce que je pense qu'il faut accorder aux services une certaine forme de flexibilité pour leur permettre de s'adapter. Ça a énormément bougé au fil des années.

12060   L'exclusivité des genres on l'a. Écoutez, j'ai dirigé des chaînes spécialisées il y a quand même une quinzaine d'années déjà et je me souviens qu'à l'époque l'exclusivité des genres de protection était très rigide et respectée énormément.

12061   À l'époque, je dirigeais une chaînes de nouvelles continues et je me rappelle très très bien qu'il y avait eu une plainte et que j'avais été convoqué par le directeur exécutif du CRTC à l'époque -- je ne me souviens plus très bien de son nom -- et parce qu'on avait un petit peu dérogé à l'époque et puis...

12062   CONSEILLER PENTEFOUNTAS: Il a beaucoup changé depuis.

12063   M. BELLEROSE: Oui, bien, il a grisonné un petit peu, effectivement. Mais à l'époque, voyez-vous, c'était très rigide. Il fallait que tu respectes tes conditions de licence et puis... Mais avec le temps, avec l'arrivée des chaînes numériques évidemment et la multiplication des signaux...

12064   CONSEILLER PENTEFOUNTAS: Ah! oui.

12065   M. BELLEROSE: ... on a un petit peu élargi puis tout le monde a cherché à étirer l'élastique et c'est ce qu'on constate aujourd'hui. Vous-même en avez été témoin lors de certains renouvellements de licences où ça a été assez amusant de voir la manière de se défendre de certains titulaires pour justifier la présentation de certaines émissions à leur antenne.

12066   Donc, à cause de ça, je pense, pour régler ça, je pense qu'on ne peut plus non plus maintenir ce statu quo là. Mais entre les deux, il y a probablement une variante, une option où on pourrait avoir des genres élargis et notre idée derrière ça, c'est qu'il y ait une diversité d'offres quand même qui subsiste dans le marché.

12067   C'est essentiellement pour ça que, nous, on préconise qu'il puisse y avoir encore des chaînes "lifestyle", des chaînes de sports, des chaînes de nouvelles et que, à un moment donné, du jour au lendemain une chaîne puisse ne pas décider de passer d'une chaîne "lifestyle" à une chaîne pour enfants.

12068   M. RÉMILLARD: Et je ne suis pas sûr même c'est souhaitable.

12069   M. BELLEROSE: Et ceci permettrait de protéger aussi davantage la télévision généraliste. S'il n'y avait plus d'exclusivité des genres ou protection des genres, tout le monde pourrait faire le produit qu'il voulait, mais ça viendrait mettre davantage de pression sur le modèle conventionnel.

12070   CONSEILLER PENTEFOUNTAS: Oui, oui, sur la patinoire des généralistes, là. O.k.

12071   M. RÉMILLARD: Exactement. Alors, ce serait problématique, comme vous pouvez l'imaginer.

12072   CONSEILLER PENTEFOUNTAS: C'est clair. Merci beaucoup.

12073   LE PRÉSIDENT: Deux petites questions très rapidement.

12074   D'autres groupes culturels dans le marché québécois ont plaidé que la spécifité du marché francophone faisait en sorte que peut-être que les transitions auxquelles on fait face notamment sur l'exclusivité des genres devrait être reportée dans le temps parce que les pressions qui semblent être en présence dans d'autres... dans le marché anglophone ne se font pas sentir à la même vitesse.

12075   Quel est votre point de vue à cet égard?

12076   M. BELLEROSE: Bien, si on regarde l'aspect de la télévision conventionnelle, c'est sûr qu'il y a encore un processus qui est fait en transition avec plusieurs étapes, si on n'est pas tout à fait...

12077   LE PRÉSIDENT: Je pense que mon point était plutôt dans le domaine spécialisé et payant?

12078   M. RÉMILLARD: D'accord, O.k. Effectivement, oui, ça pourrait être une option qui est adéquate pour nous, aller plus avec une transition en étape.

12079   LE PRÉSIDENT: Si je comprends leur position, c'est que les Catégories A, B et tout le...

12080   M. RÉMILLARD: Absolument, mais...

12081   LE PRÉSIDENT: ... « pataclan » de règlements que nous avons à l'heure actuelle demeurerait en place.

12082   M. RÉMILLARD: Nous sommes d'accord avec cette position.

12083   LE PRÉSIDENT: D'accord. Bon. Je reviens, là, à votre modèle de financement parce que je veux bien comprendre la situation.

12084   Vous proposez que si une société privée décide d'éteindre l'émetteur et de le retirer, il pourrait aller négocier avec l'entreprise de distribution des redevances et que cette redevance serait créditée contre le cinq pour cent?

12085   M. BELLEROSE: Exact.

12086   LE PRÉSIDENT: Bon. Ça marche pour vous?

12087   M. BELLEROSE: Oui.

12088   LE PRÉSIDENT: Mettons que TVA, peut-être pas à Montréal, mais ailleurs, décide d'éteindre l'émetteur en quelque part, négocie avec Vidéotron un montant, je ne sais pas combien c'est par abonné, mettons 20 millions de dollars ou 30 millions de dollars, aurait-il le droit de créditer ce plein montant contre le montant qu'ils ont à payer, par ailleurs, en vertu du cinq pour cent?

12089   M. RÉMILLARD: Monsieur le président, notre proposition que nous faisons aujourd'hui n'inclut pas les groupes intégrés verticalement. Donc, dans votre exemple TVA n'aurait pas le droit de négocier avec Québecor une redevance.

12090   Nous, on propose la négociation, la valorisation du signal des réseaux conventionnels indépendants.

12091   M. BELLEROSE: En fait, il pourrait le négocier, mais il ne pourrait pas le déduire. Je veux dire, on ne peut pas empêcher...

12092   LE PRÉSIDENT: Effectivement.

12093   M. BELLEROSE: ... deux parties de négocier quelque entente.

12094   LE PRÉSIDENT: Oui, oui, je comprends.

12095   M. BELLEROSE: Mais ils n'auraient pas l'avantage de pouvoir le déduire dans la contribution de cinq pour cent.

12096   LE PRÉSIDENT: Donc, il n'y a pas de chance...

12097   M. BELLEROSE: Il n'aurait pas d'avantage à le faire.

12098   LE PRÉSIDENT: ... d'avantage de le faire.

12099   M. RÉMILLARD: Pour la diversité puis protéger une concurrence saine, on croit que c'est une solution très acceptable et équitable pour les joueurs indépendants.

12100   LE PRÉSIDENT: Et c'est pour ça que vous ne voyez pas de risque? Parce que dans le cas des canaux communautaires il y a un plafond du montant qui est déductible.

12101   M. BELLEROSE: D'accord. Et qu'est-ce que... que voulez-vous dire par « le risque » monsieur le président?

12102   LE PRÉSIDENT: C'est-à-dire qu'il y a un risque que les deux parties, pour toutes sortes de raisons, négocient une entente qui fait en sorte qu'on réduit considérablement... ou les sommes d'argent qui vont à d'autres activités qui peuvent bénéficier du cinq pour cent.

12103   M. BELLEROSE : Bien, j'imagine que les compagnies de câble... parce qu'il y a une partie de la télé communautaire, c'est eux-mêmes qui la font, hein, si je me rappelle bien. Ça fait que j'imagine qu'ils vont avoir ça en arrière-pensée lorsqu'ils vont renégocier la redevance.

12104   Donc, il va avoir un enjeu de négociations probablement, parce que ça peut avoir certaines conséquences également sur les fonds dont ils vont disposer pour leur propre télé communautaire interne. Mais je pense qu'il y a sûrement moyen de trouver un terrain d'entente et une bonne négociation satisfaisante.

12105   LE PRÉSIDENT : Très bien. Je comprends beaucoup mieux la proposition maintenant. Merci.

12106   Ce sont nos questions. Merci beaucoup de votre participation.

12107   THE SECRETARY: I would now ask TV Nunavut Educational Broadcast Society to come to the presentation table.

--- Pause

12108   THE CHAIRPERSON: So welcome. When you are ready, please go ahead.

PRESENTATION

12109   MS DeWOLFF: Good afternoon, Mr. Chairman, Mr. Vice-Chairman and Members of the Commission.

12110   Thank you for the opportunity to appear before you today. My name is Charlotte Dewolff and I am the chair of the TV Nunavut Educational Broadcast Society (TVNEBS).

12111   Accompanying me today is Debbie Brisebois who is a board member of TVNEBS and Jerry Giberson, Broadcast and Telecommunications Consultant.

12112   To provide a bit of background, the TV Nunavut Educational Broadcast Society was formally incorporated earlier this year. Our mandate is as follows:

12113   - To inform, educate, entertain and engage Nunavummiut;

12114   - To promote and preserve the Inuit languages;

12115   - To reflect Inuit identity and culture;

12116   This channel would distribute programming that would reflect Inuit and Northern identity and culture and promote and enhance the use of the Inuit languages.

12117   Decades ago, with the introduction of new communications technologies, Nunavut communities adapted and changed in an effort to maintain cultural stability. For example, when CBC introduced its Accelerated Coverage Plan (ACP) in 1975, reaction from the Inuit community was swift and sharp. While the objective of the ACP was to make Canadian programming available to all, no consideration was given to local access, to programming in Aboriginal languages, or to a community's right to control the local airwaves.

12118   The ACP was resisted by many Inuit communities, recognizing the danger to a way of life, language and culture. It was not until the capacity to produce Inuit-language content was established that this, then new, technology was welcomed into our homes.

12119   This community-based response eventually led to the creation of Television Northern Canada (TVNC), a pan-northern network. TVNC later grew to become the national network, Aboriginal Peoples Television Network (APTN). APTN has a very broad and extensive mandate to serve all Aboriginal peoples-south, east, west and north.

12120   While a lot of progress has been made since the days of turning on our television sets to watch soap operas and Hockey Night in Canada, our determination to work towards maintaining a cultural equilibrium is as strong as ever. The production of regional and local content is crucial in supporting this goal.

12121   The proposed option A, small basic, within the Commissions' working document is desirable in that it would be affordable to Nunavut residents and incorporates the opportunity for the creation of much needed regional and educational programming. This basic service would serve a very specific regional audience in Nunavut that would not otherwise have access to programming focused on reflecting our values, language and culture.

12122   Over-the-Top (OTT) services such as Netflix will presumably continue to increase in popularity as an additional platform for distributing video/TV content in Canada.

12123   In Nunavut, the challenge of having fair access to adequate capacity of broadband continues. Unlike the NWT and Yukon territories, Nunavut is entirely satellite reliant. While Industry Canada has announced an extension of funding for broadband services past 2015, there is still a concern that the region will be left behind. Broadband targets of 3 to 5Mbps for Nunavut may not be able to keep pace with the rapid development of IP applications and hardware that require higher speeds to operate that will be enjoyed in other parts of Canada.

12124   Having said that, if over-the-top services were to contribute to the creation of additional Canadian content, we would like to see a funding formula that would include specific support for Aboriginal content.

12125   We noted that in the CMF submission:

"CMF's funding is the engine that drives a substantial proportion of high quality programming produced each year in both official; languages, in Aboriginal languages and numerous third languages."

12126   We, too are concerned that any negative changes in the funding formula for Canadian programming will adversely affect the most vulnerable segments of the content production community, such as Aboriginal content producers.

12127   We appreciate that the challenge before the Commission will be in somehow balancing program funding sustainability with consumer choice while ensuring diversity. Independent producers in Nunavut already face obstacles that do not exist in southern Canada under the current funding model to create relevant content for their audience. Any revised model should enhance funding opportunities not reduce them.

12128   In Phase 1-2 comments, it was noted that other than APTN, most Canadian broadcasters and specialty channels have included little if any Aboriginal programming on their schedules.

12129   Aboriginal producers stated that they face challenges in getting their programs shown on mainstream services.

12130   We note that the submission from PIAC in this proceeding supports this observation:

"The Broadcasting Act recognizes the importance of providing programming to serve and reflect Aboriginal peoples. Where programming services directed towards Aboriginal communities exist and are available, they should be offered by all BDUs. Mainstream programming should also adequately serve and reflect Aboriginal groups."

12131   The principles of the 1983 Northern Native Broadcasting Policy is still valid and should be considered in developing any future policy that would ultimately affect remote and underserved communities.

12132   To conclude, we are hopeful that if the proposed small basic option in the working document is implemented, it would make possible the realization of a new phase of development in the creation of additional much needed Inuit language educational and regional content.

12133   We believe that the success of this proceeding will be measured in the participants working together to re-establishing a cultural equilibrium in the face of recent rapid technological change. We hope we have contributed in some way to furthering that goal.

12134   We again thank the Commission for its consideration of our submission and we look forward to responding to your questions and comments.

12135   THE CHAIRPERSON: Thank you very much. Commissioner Simpson will start off the questions.

12136   COMMISSIONER SIMPSON: Thank you very much.

12137   Welcome. I first off want wish you happy birthday on your 15th anniversary in the formation of Nunavut. 2014 is your 15th anniversary and I think it's terrific.

12138   I would like to understand a few things about your submission because, first off, I get the impression very clearly that in the language that we chose to reflect some of the potential changes, we may not have been as considerate of all of the country and you brought it very specifically to our attention with the omission and the recommendation of including territories in paragraph 41 of the small basic language that we used. I think I'd like to use that oversight to first delve into the principal reason why you're here.

12139   In terms of a small basic service, from what I understand and having been there but not being as familiar as I think any of us would like, the idea of a small basic service has provided now by Bell Northwestel this is a satellite service that is a footprint throughout Nunavut and I'm trying to break this into two parts because I'm hearing a desire to create an educational -- what you're describing is an educational channel but I'm not sure whether that's educational/community or what it is. But I'll leave that for a minute.

12140   But I would like to go to the larger issue of small basic and get your impressions on what we are proposing which is perhaps looking at a variety of options including a smaller all-Canadian basic service and how that would impact in your community.

12141   MR. GIBERSON: I think a basic package in looking at, well, Nunavut specifically, affordability is a big issue. Not everybody is making very large salaries there. There's a lot of people who are disconnected now from cable and DTH. That also means they miss services like the Legislative Assembly or the TV -- EPTN and other services like CBC North.

12142   If there was an affordable skinny basic that focused on language, I think that would be extremely popular and that allows a base to be established and then people, if they can afford it, can choose other Canadian and/or foreign services.

12143   Affordability really is of a major issue but it's also being able to be engaged in their region and to know what's going on in their region. If you have a solid core of Aboriginal language or Inuktitut language programming, I think you're going to go -- you know a tremendous leap forward.

12144   COMMISSIONER SIMPSON: M'hmm. I didn't mean to put you on the spot from the standpoint -- from that standpoint -- but I think what I was trying to do is frame two things here.

12145   You know, it's been said that this hearing is of probably one of the most impactful and important hearings in the history of the Commission and the history of the television industry and cable business, but it's brought with it a view from a lot of different sectors, notions that perhaps what we have to do on one end is pare down and make more affordable service and on the other end make all the rest of the service that's out there in the world offered in different ways and means to cater to the choices and the relative economies of each household.

12146   But when you come here you have actually from my impression a very different view because you're saying, I think, that no matter what the Commission does, small basic, if you do choose to pare it down, doesn't contain the raw ingredients of what your community needs.

12147   Would that be a fair characterization?

12148   MR. GIBERSON: I think that is quite correct. I think there is an opportunity here to create, if you will, a northern basic that would be very suitable and affordable for the people there, that would be unique to that region and to its needs.

12149   COMMISSIONER SIMPSON: Yeah. Okay.

12150   So that sort of set the table because, you know, we were sort of, I think, having a tendency to -- you know, the hearing has been going in one direction for a week and I think you're coming into it from a completely different direction. I wanted to sort of get my arms around that.

12151   Now, to move over to the more specific area of your interests which is to, I suppose, find funding for and apply funding to a new -- an element of a new northern service, and I'll refer to it that way because this one channel you're referring to would be a programming service within a broader scope of whatever that basic looks like.

12152   Where do you see this channel being distributed because your options right now are within the direct-to-home service of the satellite system through Northwestel and Telesat. So would this be a 9(1)(h) public broadcasting service that would demand automatic carriage within a basic service or are you looking at a different formula, something more along the line of what APTN did which was a free-to-air, what we call free-to-air service which is a freely-accessible satellite feed that goes into every household and ride on a different system into the home?

12153   It's important because it has to do a lot with the scope of this hearing.

12154   MR. GIBERSON: Well, I think to answer the first part of your question, the main distribution elements in Nunavut and, as I mentioned, it's entirely satellite-reliant, is with the cable systems which are in each community.

12155   COMMISSIONER SIMPSON: Yeah.

12156   MR. GIBERSON: And DTH providers.

12157   With reference to the -- you know, as an example, the educational service that may possibly move forward, we would see that as very much like priority carriage, mandatory carriage in the sense that it has to be into each -- every household to work.

12158   COMMISSIONER SIMPSON: Yeah.

12159   MR. GIBERSON: And that would also incorporate other services as well. But, I mean, if you were to focus on, say, the educational component of it which we feel is missing, APTN, you know, I think does a tremendous job in terms of its national mandate but language is really priority in Nunavut.

12160   The idea I think is -- from some of the surveys that I have seen is that people want to have what I would refer to as an ambient channel. That is to say, they want to hear Inuktitut being spoken when they get up in the morning like as in on the radio right throughout to the end of the day, through the evening and throughout.

12161   COMMISSIONER SIMPSON: But I -- sorry. It's just for the sake of efficiency because we're running extremely late and you've come from an incredibly long way, I just want to make sure that we get exactly what it is we need, from what it is you're asking.

12162   So fully understanding and accepting the merits and the need of such a channel, we have a tendency to put things into little compartments. I'm still struggling with the type of channel this is.

12163   Is it a territorially -- normally, public channels like TVO and the Knowledge Network, where I come from in Vancouver, get a good proportion of their money from the provincial governments and it's topped up with contributions from viewers and so on. And we know, and we've all heard the stories about our public broadcaster and where that money comes from or where it should come from or shouldn't come from, but functionally, part of the underpinning of a public service broadcaster comes in whole or in part from a territorial or a provincial or a federal government.

12164   Now, within that there are some components as to whether you're an educational channel or a public broadcaster which means that you'd be putting out entertainment as well, or are you going to be a community channel, something that is more derivative of a cable or direct-to-home service? So can you help me sort of put it into a box?

12165   MS BRISEBOIS: We do see it more as an educational channel, but perhaps our definition of educational is a bit broader than, say, for Ontario or B.C. Some of the programming that we envision being on this channel that we feel is educational may also look like entertainment. But, for example, a drum dance, you know, a drum dance performance may appear as entertainment to some. We see it as educational.

12166   COMMISSIONER SIMPSON: Sure, and cultural.

12167   MS BRISEBOIS: Cultural, you know, passing on the knowledge, traditional knowledge, all of that kind of stuff.

12168   COMMISSIONER SIMPSON: Yeah, well, the Knowledge Network started out as an educational channel and morphed into more of a public broadcaster, but it still has very high value in terms of bonding communities, telling stories and the like.

12169   So the reason why I was going down that road is that, you know, funding for broadcasting and programming fits into slots. In the way that community channels, for example, that are usually operated by or with the community by the cable or direct-to-home broadcaster, they have an apportionment of funding that comes out of the Northwestels of this world that your channel would have accessibility to, if it was to be a community channel and operated with the participation of the DTH provider. You know, that's one way to go and that's something that you know, you have to figure out and we have to resolve.

12170   But if you're going more into a pure play educational or public broadcast channel that puts you into a different league for funding applicability and there the amount of money other than your operating costs which usually would come from a government, your programming costs would be underwritten by something like the Canadian Media Fund which we just recently ratified to receive significantly more money.

12171   And I'm addressing a point you made where you felt that funding was under stress. We've actually being going the other way with CMF in terms of direction of tangible benefit money. This is the money that comes from the sale of broadcast assets and undertakings. So it's anywhere from 6 to 10 percent of the value of a sale. That money now pretty much is going to CMF.

12172   And then within the CMF basket there is money that goes to various types of programming which would include yours. I mean, APTN dips into that. A lot of, you know, broadcasters do. Independent producers also do but out of a different section.

12173   So there is money there and from the activities of concentration of ownership in the last few years with the type of sales that have been going on, there's quite a bit of money in that fund.

12174   And APTN, for example, was even able to go into a different formula where they were getting a good chunk of funding from Shaw directly because they operate within Shaw's footprint.

12175   So you know, funding to me, and I'm not saying it's easy. We've all heard how hard it is to nail down money because it seems like to get this amount of money you first have to get that and to get a television show or an episodic show funded you have to secure, you know, broadcast rights although that wouldn't be your problem because you are the broadcaster in this instance.

12176   But I think that I'd like to move over back to the scope of the hearing and understand some of your concerns. And we'll come back to -- because I think I've heard you say that you're going to be more of a public/educational broadcaster than a community channel. And that gives me enough to go on to the other aspects of your presentation.

12177   So I'm just trying to make sure I'm covering all the bases. If there's anything where I'm getting off base, just please jump in, okay?

12178   Okay. So making the assumption that your first port of call in your journey to launch this type of service would be to the territorial government.

12179   Have you done that?

12180   MS BRISEBOIS: We have been working with the territorial government on this from day one. From the time we had our first stakeholders' conference, there were a number of government representatives there. We have continued.

12181   And within the next week, we have a meeting with the Deputy Minister from the Department of Education.

12182   So, we have continued all along to work very closely with them.

12183   COMMISSIONER SIMPSON: You referred to the "stepping forward together" document, which I gather is a vision document --

12184   MS BRISEBOIS: From the government, yes.

12185   COMMISSIONER SIMPSON: Yeah. And in there, there's, I gather, ambitions that would support the creation of this type of a service. It may not say it explicitly, but it's in there. Right?

12186   MS BRISEBOIS: Absolutely.

12187   I mean two, in particular, is education and language, which are very strong priorities for the Government of Nunavut, as well as that's what we're trying to do.

12188   COMMISSIONER SIMPSON: Can you tell me what the Nunavut Uqausivut plan is?

12189   I could not find that anywhere.

12190   MS BRISEBOIS: That's a language plan. The Promotion and Protection of the Inuit Language Act.

12191   COMMISSIONER SIMPSON: Okay. And you address that a lot of the service that you propose would help support that plan?

12192   MS BRISEBOIS: Absolutely.

12193   I know it's not easy to find, but --

12194   COMMISSIONER SIMPSON: I googled it 60 ways to Sunday.

12195   MS BRISEBOIS: I know. We can help you out.

12196   COMMISSIONER SIMPSON: That'd be great.

12197   Well, as a matter of fact, I was going to ask you about something else .

12198   Wen you referred to -- you sort of caught me flat-footed here because, you know, I'm up in the north a lot, as is Commissioner Molnar, particularly, on her satellite investigation, but you sort of caught me flat-footed on the Television Northern Canada and Northern Network. And when I tried to do some homework on that, I got to your landing page on the website, but everything else past that was "404", which means the links are broken.

12199   Could you tell me a bit about that?

12200   MS BRISEBOIS: Television Northern Canada doesn't exist anymore. It basically grew to become APTN.

12201   TVNC was just in the North, you know, right from Labrador, over to Yukon.

12202   COMMISSIONER SIMPSON: Yeah.

12203   MS BRISEBOIS: And then, for a number of reasons, TVNC morphed into APTN.

12204   COMMISSIONER SIMPSON: Okay. So, going back to -- and, again, if I'm looking like I'm trying to be a little too brief, or abrupt, it's just simply because I'm trying to get to what you want and why you're here.

12205   So, what we've been doing, in the scope of this hearing, is looking at -- we've heard loud and clear from a variety of sources, including government, that it may be time to look at the present state of the television industry, and part of that is the way Canadians receive their television -- and within that, there's all these wheels within wheels, with respect to funding mechanisms, packages, and the like.

12206   I'm trying to understand whether you're here because you feel that what we may do threatens the prospect of this service of yours getting to air, or that you see that this is the forum to bring your need for programming service to our attention, because there's something that we might do in our decision that would make your service happen in a more viable way.

12207   Because, you know, what you are is a little bit out of scope with the hearing, but --

12208   MS BRISEBOIS: Yeah.

12209   COMMISSIONER SIMPSON: -- very, very appropriate to be here, nonetheless.

12210   MR. GIBERSON: I think, you know, timing is everything.

12211   COMMISSIONER SIMPSON: No kidding.

12212   MR. GIBERSON: This has been ongoing for several years, now. People in the communities have articulated they really feel they need this kind of a service.

12213   COMMISSIONER SIMPSON: Yes, sir.

12214   MR. GIBERSON: And when notice came out for this hearing, we saw that, perhaps, in these proceedings, we can have an opportunity to give input into this to dramatically improve the situation in the north, as you're well aware, in your travels, how challenging it is up there, you know.. It's $3,000 just to fly up there and it's another 2,000 to go to a community.

12215   COMMISSIONER SIMPSON: And to get from Whitehorse to Nunavut, you have to go down, to get up.

12216   MR. GIBERSON: Yeah. And if we can somehow offer educational programming, as in the kind of programming at, say -- Arctic College offers courses, as well as cultural programming, and it doesn't require somebody having to travel away from their community and having to deal with the stress of being away from family to get a good education, and if this is a means to do it, maybe we can get a start in this forum to at least start the discussion going on what, with your help, we might be able to achieve.

12217   COMMISSIONER SIMPSON: Well, you know, when it comes to the launching of public services, you know, usually, we've got a reputation of being pretty easy to get along with, and I would say your batting average is past the point of due diligence from everybody before you get to us wold be -- your batting average would be pretty good that you would get a licence to do this, if all the underpinnings are there and it turns out to be what is, as purported, to be a public, you know, a government-funded and publicly-supported public broadcaster.

12218   But I think that, you know, right off the bat, you would -- you know, this is just anecdotal, but you would stand a pretty good chance of getting mandatory carriage if it is what it is purported to be. So, that would not be the issue.

12219   And as far as the funding is concerned, beyond that core funding that may come from territorial government, or other sources, CanNor or whatever, the issue of whether program funding or industry-generated funding is under threat, as may be perceived by you, I think is -- may only be characterized as possible, only because there's a lot of organizations that are coming forward wanting to dip into that fund.

12220   And we've even heard how local broadcasting in the south is not the business it used to be and it wants to be supported with some new funding.

12221   But, I think pretty much everything that's been on the table has been the creation of new funds or the redistribution of existing funds, but I don't think, at any point, I've heard anything about removal of funds, other than the LPIF fund, which is gone, and that ship has sailed.

12222   So, if what I've just said rings a bell of truth with you, I think your timing is great, but I don't know that we can do much more for this application, at this point, because to be separately funded would be a decision that would be made by governments, not the Commission. It would also be made by funds that exist, not the Commission, as long as it fits within the boxes that are prescribed for those funds, whether it be independent production or whether it be an appeal that you make to a BDU, like Northwestel, for extraordinary funding that comes out of the 5%.

12223   They've got that 5% BDU contribution which is, really, three parts to one area and to -- it gets divided between community and production, their own community channel and production. But, you know, there's money within that, as well, so.

12224   I'm not running out of gas here, but I'm running out of ideas as to. you know, how we can help you get to the next level of the process.

12225   Anything that I've touched on that is wrong or needs clarification?

12226   MS BRISEBOIS: No, and I think we very much appreciate that you've brought out some of these issues.

12227   Can I go back to your first statement there, where you said, you know, the two issues, there's this proposed channel and then there's the issue of production funding. and kind of why are we here?

12228   It really is both. I mean, we're sort of putting this idea we've been working towards establishing a service or sort of, you know, bringing it up a little notch by bringing it out here.

12229   And then the second on there, in terms of funding, we're acutely aware about, you know, the difficulties to access funding and, you know, are also aware that there'd be operational funding, and then there's the programming function, as well. And our comments that we've made, in terms of any production funding that, you know, may be decreased or disappear, is just really a very general concern, because, as producers -- which is what, you know ,the group I work with, the group Charlotte works with, we're producers, at this point, and we're always afraid money is going to disappear.

12230   But the other thing, very specific for us, is any time that there is a fund that's established, we like to be able to say that it's important that there be a portion that's dedicated to our particular area --

12231   COMMISSIONER SIMPSON: Bingo.

12232   MS BRISEBOIS: -- because that's where we fall through the cracks all the time.

12233   COMMISSIONER SIMPSON: And, presently, there is not a directive for an apportionment to northern spending --

12234   MS BRISEBOIS: That's right.

12235   COMMISSIONER SIMPSON: That's kind of been at the bane of a lot of regional producers. Because over the six years I've been on the Commission, it's been a constant battle, within the network production community and the like, to try and drive interest in regional productions, not only for linguistic minority productions, but just for the pure purpose of spreading the wealth.

12236   I mean the other day, we heard the Ontario government say that they have the better part of 50% of the production industry, which is centred in Toronto.

12237   And, I think secondarily, with the technology sort of removing the obstacles of cost to the production of creative content for television, like the music industry, where, you know, recording artists record in their basement now and produce extremely high-quality work, the television industry is benefiting from a bit of that, and APTN is seeing a lot better opportunities to go further afield with the way they're contracting productions because they can get right out into the regions and stimulative production.

12238   So, one of the things that may be very beneficial in the timeliness of you being here is, as you say, to remind everyone, including the Commission, that it may be time to review a policy to see more money spent in a community reflection in the north.

12239   MR. GIBERSON: If I may add to that. The policies that were set forth in the early nineties and eighties, by the Commission, which we referred to, led to tremendous growth for northern broadcasting.

12240   As an example, Cancom, as part of its commitment as I think you'd call it a tangible benefit now, in its licence renewals, was extraordinarily supportive, financially and otherwise, into establishing Television Northern Canada as a network that's viable.

12241   There are a lot of other examples, too, in licence renewals for CTV and others, where they chose to, as a condition of licence, or as a voluntary thing, to support northern programming.

12242   With the onset of APTN, it became more towards, you know, supporting programming in that area.

12243   But, again, as we said in the submission, we feel that it's the responsibility of all the BDUs and networks to, perhaps, make a small but, you know, it could be of significant value, you know, in a way of a contribute.

12244   I might also point out, too, but going back to TVNC, because there's not a lot of information about it since it's morphed, it was very much an educational network that stretched across the Yukon, all the way through to Labrador, and it incorporated the involvement of the Yukon Department of Education, Northwest Territories and Nunavut Department of Educations, at that time, and Makivik -- or Kativk School Board activities.

12245   So, much of that stuff was there.

12246   And I guess, in some ways, what we're looking for, and to get assistance in perhaps achieving through some policy and, you know, financial support, is to come up with a, perhaps, if you will, a TVNC light for Nunavut that would be able to achieve those goals again, in that fashion.

12247   COMMISSIONER SIMPSON: Well, I'm finished questions.

12248   I just want to qualify that the statement I made earlier -- and I'm not being prompted to say this, but just as a precautionary tone, that when I say that, you know, at the outset I don't see any reason why you would not get a licence does not meant you would automatically get a licence. I'm simply trying to indicate that on, the face value of what you're proposing, there does not appear to be any reason why this type of an application, when it finally comes to pass, would meet with a lot of difficulty. That's, essentially, what I was trying to say.

12249   MR. GIBERSON: Yeah, I think that -- I certainly understand that. We haven't come here before you for a licence application, per se. But I think the intent, here ,is to make a service, or a set of services, on skinny basic, if you will, that directly serve the community and, very importantly, they're available to all the community, not those who can just afford it, which is why we think that the broadest coverage and availability is essential as a must-carry in, that fashion.

12250   COMMISSIONER SIMPSON: Yeah, and that a basic service in Nunavut would be different and should be different.

12251   Thank you. Those are my questions.

12252   COMMISSIONER SIMPSON: Thank you.

12253   I think we are due for a break now.

12254   Thank you for participating in the hearing, to remind us of the funding issues associated with aboriginal and, particularly, northern Inuit funding issues, as well as reminding us that when we do our framework, we have to think, not just about the current educational broadcasters, but that the set of educational broadcasters may change over time.

12255   So, thank you very much.

12256   We'll take a short break till 4:15 and finish the three last intervenors.

12257   Thank you.

--- Upon recessing at 1604

--- Upon resuming at 1615

12258   LE PRÉSIDENT: Donc alors, Madame la Sécretaire.

12259   LA SÉCRETAIRE: Merci.

12260   We will now hear the presentation of Allarco Entertainment 2008 Inc.

12261   Please introduce yourselves, and you have 10 minutes for your presentation.

PRESENTATION

12262   MR. KNOX: Mr. Chairman, Mr. Vice-Chairman, members of the Commission and staff, my name is Malcolm Knox. I am Super Channel's president and COO.

12263   With me today is Mark Lewis, our legal counsel.

12264   We wish to thank the Commission for inviting Allarco to this public hearing about the future of Canadian television in an era of tremendous change for our industry, particularly as such change can have important consequences for Canadian broadcasters such as Super Channel.

12265   I now begin our presentation.

12266   Allarco fully supports the Commission's initiative to review existing television policy, with the objective of offering more choice and flexibility to Canadian consumers. We would also like the Commission to use the present regulatory review to ensure the continued existence and growth of independent broadcasters, who, on a daily basis, contribute substantially to the diversity of programming choices available to Canadian consumers.

12267   At the outset, it is abundantly clear to us, and to many other independent voices that have contributed to the "Talk TV" initiative, that the present extent of vertical integration in the Canadian broadcasting and telecommunications marketplace is going to require from the Commission a substantive revised policy and regulatory framework if we want to maintain a true diversity of voices in the Canadian television system.

12268   This policy review initiative started out with a will to increase choice for consumers, particularly with an objective of ensuring a pick-and-pay environment. Allarco is, and always has been, a pick-and-pay service and we are acutely aware of the challenges this represents in the present communication marketplace, especially when under present regulations we have little control on accessing consumers at the retail level.

12269   Allarco is one of the few independently owned broadcasting licensees which have to deal regularly with four highly vertically integrated, publicly traded broadcasting and distribution entities, that control multiple platforms, competing programming services, and which are definitely the main gatekeepers to providing access to Canadian broadcast programming services for over 80 per cent of Canadian households.

12270   BDUs are the ones who deal with consumers on a daily basis at the retail level and who ultimately decide when and how programming choices are proposed to consumers, including the terms of promoting independent services and determining the marketing campaigns and the ultimate selling price of each service. This is why we were quite surprised by some of the points raised by the Commission in its working document of August 21st.

12271   While we understand that the primary objective of the Commission is to ensure Canadian consumers have more choice in selecting the television programming they want to watch, and particularly have to pay for, we fail to fully grasp the motivation of the Commission in opening up a discussion on some very basic regulations of our broadcasting system, which has been built up over a period of more than 70 years.

12272   What is the relationship of offering more choice to Canadians with the elimination of must-carry rules, that are critical to independent category A services? And, more importantly, for independent programming entities, which are already pick-and-pay services, what is the potential impact on their viability of eliminating genre protection?

12273   Allarco believes it is crucial that the Commission ensure independent programming services maintain their category A must-carry status because in today's marketplace, where most BDUs own competing programming services, there is no assurance those BDUs will continue to carry independent services. We have ourselves had to sign agreements with BDUs that specifically mention that our service could be dropped if and when the Commission changes the must-carry regulation. This is not a what if, but moreso a real threat for independent programming services.

12274   Under the terms imposed by BDUs, they can terminate the carriage of a Canadian independent programming service with a 90-day notice. Those provisions are imposed under duress by BDUs with no ability whatsoever for category A licensees, such as Allarco, to negotiate.

12275   Such uncertainty about carriage can seriously undermine our capacity to enter into long-term agreements with program supplier, and let me tell you that it's not easy in the programming acquisition business these days for an independent.

12276   Furthermore, Allarco wishes to reaffirm that genre protection remains an extremely important factor in maintaining strong Canadian alternatives within the Canadian broadcasting system. For instance, if the Commission decided to do away with the genre protection for pay television services, this would seriously undermine the financial viability of Canadian pay television services and their capacity to continue to contribute not only to developing and acquiring Canadian content, but also to the diversity of programming within the Canadian broadcasting system.

12277   As the only national and independent pay television service provider, which is already a pick-and-pay service, Allarco is well aware of how hard it is to reach consumers with a premium Canadian services, which, by existing rules, requires a consumer to assume high-level fees via basic service, and often big basic, before being able to purchase a pick-and-pay television service such as ours.

12278   This situation is even more dramatic when we see the millions of Canadian consumers who are increasingly opting for non-regulated streaming services, such as Netflix, that do not have to pass through an expensive array of BDU program packages to access the service. The reality is it only costs $8.99 per month to buy Netflix, but the cumulative cost to purchase big basic and Super Channel is about $63 per month. Furthermore, Netflix gets a free ride: no HST, no requirement to invest in Canadian programming, and no obligation to pay annual CRTC broadcasting licence fees.

12279   Allarco does not fear competition from OTT services, but what is preoccupying are the heavy costs for Canadian consumers to be able to access our service under present regulations. For this reason, we strongly recommend the Commission favour a model which will see consumers offered a very low-cost basic service, and then quick access to premium and speciality Canadian services based on a true pick-and-pay system.

12280   In addition, Allarco firmly believes the Commission has to use this policy hearing to examine the risk of self-dealing that could go on within and between the four vertically integrated companies in relation to carriage, promotion and sales of their own programming services versus independent services licensed by the Commission.

12281   The CRTC Public Notice of August 21, 2014, states, in section 7, the column titled, "What does this mean for Canadians", quote:

"This would ensure that negotiations between large broadcasting companies and independent broadcasters are conducted fairly so that Canadians would continue to have access to the diverse array of programming that independent television channels bring to the Canadian broadcasting system."

12282   Does anyone in this room seriously believe that the VIs would drop their own pay television services and retain Allarco's service if category A must-carry obligations were dropped? This is certainly a recipe to provide Canadian consumers with less choice and eliminate competitive services operated by independents.

12283   It is in this context that Allarco wish to share with the Commission our concern over the numerous ways that already impede the availability of independent services to reaching Canadian consumers because independently owned programming services are often provided with inferior access to potential subscribers by VI BDUs. These include inferior placement on electronic program guides, lack of prominent placement on BDU self-serve websites, such that the VI's programming services are given prominent placement and are thereby easier to order.

12284   VIs also have the ability to cross-promote their services in a variety of means, including barker channels and ad insertions into U.S. speciality channels. In addition, although the CRTC issued Allarco a licence on the basis that it would provide HD services, we're still not being fully carried in HD by some major BDUs. This limits the value of Allarco's pay television service to consumers, who can purchase competitive services owned by the BDUs, which provide a greater selection of HD channels. HD is the name of the game, as far as consumers are concerned.

12285   Allarco believes the present level of vertical integration calls on the Commission to maintain must-carry category A rules as they now exist, at least for independent programming services. We also believe that all BDUs should be subject to the VI Code as a condition of licence and that the Commission has to maintain the obligation for all BDUs to continue to distribute and promote category A services who contribute to offering more diversity in terms of programming, Canadian content, and higher Canadian content expenditures than category B services.

12286   Notwithstanding the above, the VI Code does not currently prohibit oppressive behaviour on the part of many BDUs, which impose restrictive MFN clauses in their affiliation contracts. It is our view that conditions of licence should be attached to every BDU licence by way of an amendment to the BDU regulations that strictly prohibit the BDU from imposing MFN provisions of any kind on independently owned Canadian programming services.

12287   We would be pleased to elaborate with you on the scope of the MFN conditions that are attached to BDU contracts if you so wish. In our view, none of the MFN provisions are actually designed to benefit Canadian consumers. If there is to be a true consumer choice, then MFN contractual provisions could preclude any collaborative efforts between programming services and various BDUs in terms of innovative packaging and pricing alternatives.

12288   In closing, Allarco wishes to put on the public record that we support the position of the Independent Broadcasters Group, which has submitted a substantive brief to the Commission. We also believe the Commission should seriously consider establishing a particular set of regulations to ensure that independent Canadian programming services can continue to play an important role in offering Canadians a different perspective in terms of programming options.

12289   Allarco has always been a pick-and-pay service, so we fully understand this reality. All we are asking the Commission to do is ensure that we still have an opportunity to be offered as an option to consumers and, in our view, only maintaining the category must-carry conditions can ensure this in a highly concentrated VI environment.

12290   Allarco submitted a detailed response to the Commission regarding key specific questions being considered at this hearing, and which, because of time limits, we cannot raise in this presentation. We only hope the Commission has had the time to look at our answers and concerns, and we of course look forward to any questions that you may have.

12291   Thank you.

12292   THE CHAIRPERSON: Thank you very much, Mr. Knox.

12293   And I can assure you that we do read carefully everybody's submissions. So thank you for being here.

12294   Commissioner Dupras will start off some questions for you.

12295   COMMISSIONER DUPRAS: Good afternoon.

12296   Indeed, there are many challenges for you ahead.

12297   First, can you tell us what the impact the OTT services have been on you since their advent?

12298   MR. KNOX: The OTT services -- at first, we felt the OTT services were basically supplemental to the system. Often it looked like they were being purchased like another specialty channel.

12299   Our audience is predominantly heavy users of television. So when you look at your statistics on hours of viewing television, that's really -- the folks that are really watching a lot television are watching pay television, and it's very common for our subscribers to also access one of the other pay television as well. So these are heavy users of television.

12300   So it's certainly -- it's certainly a -- Netflix is certainly of interest, for instance, to our subscribers, but I would suggest, as a supplementary source of content.

12301   Our audience is also significantly older. Because we're that expensive -- as I told you, with basic and the cost of service, where we're typically between $15 and $18 -- our service is really targeted at folks who are of a higher income. They tend to be older. Most of our audience is over 45 years old. So they're habits of watching television on television are well established and so they're looking at Netflix as an addition, an opportunity for other programming.

12302   Okay, having said that, Netflix has certainly created two issues for us. One is on the acquisition side. As we're curating our channels and acquiring programming, Netflix has very much stepped into the marketplace in Canada and is competing for programming that's in the pay television window. As you know, they did an output deal with Paramount a couple of years ago. They've just announced a deal with Disney. We run into them competing for programming every day. So that's a concern.

12303   And the other concern --

12304   COMMISSIONER DUPRAS: This has increased the price for programming? Have you felt an increase?

12305   MR. KNOX: It puts pressure on the price, no question. It's a give and take every day, so, yes, I would suggest that it can put -- it has put some pressure on increasing prices. I wouldn't say you could draw a line across the board and say everything has gone up, but, yes, some things have become more expensive.

12306   And then the third situation -- and this is more of a societal thing -- the value of pay television has -- the cost of pay television has always been high. And with Netflix being offered at $8.99, it is recalibrating people's expectations on value, to some extent, and on feeling that it is putting downward pressure on the price that we can achieve in the marketplace.

12307   When you look at the vast volume of content Netflix has for $8.99, you see Rogers reacting with Shomi, and they're likely to be about the same price point, so that's putting pressure on us and the BDUs to lower the price of pay.

12308   And, frankly, we've had two BDUs approach us to ask us about testing a lower price point in the marketplace.

12309   COMMISSIONER DUPRAS: Okay.

12310   So what you're saying, you're in favour of skinny basic, following which you could readily access pay TV, and that --

12311   MR. KNOX: Yes.

12312   COMMISSIONER DUPRAS: -- that could be some form of response to Netflix?

12313   MR. KNOX: Yes. Yes, that's a logical conclusion. We very much favour skinny basic. We like to have -- our hope is that people will have an opportunity to enter the system at a low price point so they have more discretionary spending power left to consider pay television. We're often the last one added and the first one cut when people are trying to trim the cost of their services with the providers.

12314   MR. LEWIS: We're finding that -- let me take a step back.

12315   Super Channel has not increased its wholesale price to BDUs since its inception. I don't know of any product or service in Canada that has not had a price increase since 2006 or '07?

12316   MR. KNOX: Seven.

12317   MR. LEWIS: Two thousand and seven. So what we've been seeing the last few years is -- and we went through this, I believe, last year during the hearings in the spring -- we've seen increases to sports services and other types of services as high as 117 per cent over a very short period of time.

12318   So the effect that we've seen for Super Channel is that the entire price platform for entry of subscribers has been going up very, very fast. Super Channel has remained at the same level, but there's less discretionary money available in the system. So what happens is when people are looking today to reduce their cable or DTH bills, they will call a customer service representative of one of the BDUs and say, "How can I cut $15 or $20 or $25 a month off my bill?" Ironically, Super Channel, or even TMN, are easy targets because that's what the retail price is by the BDUs. So that has -- that has contributed to churn as well.

12319   So if there was a -- I'm going to call it a smaller entry fee, which is -- I'm not going to suggest price regulated, but price stable, or more price stable than we've seen in the last few years, that could help with the stability and the growth of pay television.

12320   COMMISSIONER DUPRAS: Okay.

12321   And today convenience has become something that people look for, mobility. Is that something that you're looking at?

12322   MR. KNOX: Absolutely.

12323   Since we launched in 2007, we've been increasingly looking at how to make our content more available. We started with four SDs and two HDs, and over time we've -- and an SVOD offering of about 50 hours. So over the last licence term, and in this past year, that has increased to 4 SDs, 4 HDs, because we have to be sensitive to the satellite providers and they have to have enough options for their customers because they don't -- they didn't have VOD till recently -- SVOD till recently.

12324   And our SVOD offering was just on a set-top box, and it's grown from 50 hours to over 400 hours. And that's also available on broadband and with some BDUs, Moby and tablets.

12325   MR. LEWIS: I'll also add that we're aware -- and I don't think I can really disclose the -- you know, the direction some BDUs are going in, but there are some new technologies that they're looking at, possibly deploying as early as this fall, which makes the service -- or their services much more mobile in the home.

12326   As soon as they reached out to us to say: could we participate?, could we obtain the rights?, we turned around instantly, because we're very excited about the ability to compete head on with the fact that if Netflix is on your iPad, someone might want to watch Super Channel on their iPad in the home.

12327   We haven't had always the cooperation from the foreign and Canadian rights-holders we'd like to have, there are restrictions, so we can't clear every title, but we're doing the best we can to move very quickly. We're very agile.

12328   COMMISSIONER DUPRAS: Yesterday, I think, Cogeco told us that their offering could become mobile with TiVo, for instance.

12329   Is that what you're talking about?

12330   MR. LEWIS: Well, I -- they're -- they're certainly -- one of the things we vetted in the last month or six weeks is some major improvements on one of the BDUs set-top boxes, in terms of how people will be able to consume programming on demand. So we're fully engaged with them certainly.

12331   COMMISSIONER DUPRAS: Okay.

12332   And in terms of obtaining rights for your programming -- well, firstly, how do you distinguish yourself from the other pay channels that owned by the VIs?

12333   MR. KNOX: Well, we all provide programming on an exclusive basis so we all go out and make our own programming deals with foreign and Canadian suppliers. So we curate and we put a lot of effort into finding programming from around the world and we have extensive relationships with major suppliers.

12334   Of course, we deal with the large U.S. providers. We have an output deal with one of them. We have an output deal with a U.S. pay service for their series. We have -- we have had in the past output deals with Canadian suppliers.

12335   So we're very active in the marketplace to acquire programming. We differentiate ourselves by the very nature of the exclusivity of the programming. We don't have the same programs. And then we have to go out and either bid and compete for certain programming head-on with other programming services and then as output deals come up for renewal there is open competition and we compete.

12336   MR. LEWIS: As a general interest pay service SuperChannel has distinguished itself in the market with, I would say, more foreign English-language programming acquired from Australia, the U.K., both in series programming. There are also a number of series programs that have premiered on SuperChannel that have been on U.S. specialty channels, not U.S. pay channels but U.S. specialty channels but they're run commercial-free on SuperChannel.

12337   So those channels that don't come into Canada because of what I would call genre protection of other As in Canada, the programs are licensed so we do that all within the scope of our licence. Therefore, the elements of those foreign channels don't come into Canada. Some of those are heavily skewing sports or other types of programming.

12338   MR. KNOX: And plus Canadian. We are very active with the Canadian production community and we have -- we acquire a lot of features. We acquire --

12339   COMMISSIONER DUPRAS: You have conditions of licence that you have to meet.

12340   MR. KNOX: Yes, exactly. We have high expenditure commitments and exposure commitments so Canadian programming, of course, is very important.

12341   COMMISSIONER DUPRAS: How have you been able to meet these -- I mean, you have been able to meet these conditions of licence so far?

12342   MR. KNOX: We have just finished the first year of our second licence term and we have met all of our conditions of licence on the content -- on the CPE side.

12343   COMMISSIONER DUPRAS: I am sorry. I am just going to precise my question.

12344   What I was going to say is in light of the future which might not be more lucrative than what you've seen so far, you think you're still going to be able to meet conditions of licence like you've got in the future?

12345   MR. KNOX: Well, we are sure going to try. We have a track record of having made major effort. You may or may not be aware, but in our first licence term we went through CCWA and through that time we managed to meet our CPE requirement all the way through that licence term.

12346   So we believe meeting the CPE requirements are very important and we'll do our utmost. So at the moment I'm not suggesting that there is an issue.

12347   COMMISSIONER DUPRAS: Okay.

12348   MR. LEWIS: But I think to underscore the problem that we're trying to raise today, certainly if one of the two or three BDUs who has this 90-day parachute clause were to activate it if we lost Category A designation, then we would not be able to meet CPE if they dropped us.

12349   MR. KNOX: We would be -- essentially would be in jeopardy.

12350   COMMISSIONER DUPRAS: Okay. But what you're saying is that if you would have skinny basic and access right after, this would probably improve your position?

12351   MR. KNOX: Well, we already have access. We always have. It's a fundamental cornerstone of pay television since the early 1980s.

12352   COMMISSIONER DUPRAS: What I am saying is that if the basic service was a cheaper proposition that this could improve your position?

12353   MR. KNOX: Yes. It is important. Access is the key and the most important piece, but a skinny basic, yes, is helpful.

12354   COMMISSIONER DUPRAS: Okay. And if your distribution rights, your access rights were maintained, would your licence requirements be maintained as is or do you think you could contribute more to the system?

12355   MR. KNOX: Well, we have had must carry access -- so confirming must carry access going forward is the difference of us staying in business or going out of business.

12356   I would suggest that our conditions of licence are pretty hefty as they are and I think they are at an appropriate level and we would do, obviously, our utmost to ensure that those are met. I don't see them increasing by just maintaining access rights. Access rights have been in place since the 1980s.

12357   COMMISSIONER DUPRAS: Well, if for instance, your exhibition requirements were lowered, would that have an impact on your success and we'd increase Canadian production expense?

12358   MR. KNOX: I'd rather you keep the Canadian production expense where it is and live with the current exhibition.

12359   COMMISSIONER DUPRAS: Okay.

12360   MR. KNOX: We are already spending 32 percent of every dollar that comes in on Canadian. Our margins are pretty slim and it would be a challenge to actually spend more.

12361   We're increasing. I mean, the CPE, the actual dollar spend goes up every year. We spent $8 million last year. We're going to spend $10 million this year just by virtue of increasing revenue.

12362   COMMISSIONER DUPRAS: Okay. And if we then pose a standstill rule to freeze the current distribution conditions of independent programming services until the next licence renewal, a proposition of Blue Ant, is that something you could live with for now if we decide today to do that?

12363   MR. KNOX: We're not in the same boat as Blue Ant. We are not looking for penetration guarantees, revenue guarantees. We're standalone. We're pick-and-pay. We're already the future of what you're heading towards. So I'm not sure what a standstill --

12364   COMMISSIONER DUPRAS: But you want to keep must carry?

12365   MR. KNOX: We want to keep must carry which is a cornerstone of pay television and it was in place before specialties even arrived. And it's an essential feature of pay television. So I would hope that must carry would go way beyond the end of our licence period.

12366   We're vulnerable. We had a heck of time in our first licence term getting launched. We had a lot of BDUs behaving badly and the Commission is aware of this. We had had undue preference cases against, complaints against one of the major VIs. That was a major undertaking. We had to get another.

12367   We had to enter into another section 9, another section 9 with another of the VIs because they wouldn't launch us and we dropped it once they finally agreed to launching us.

12368   We were sitting -- I was sitting here in this chair in 2008 at the BDU policy reg hearing and we were discussing the fact that we had been launched for seven months and we had a significant number of BDUs that were pretending they didn't have bandwidth to carry us.

12369   That day alone -- and I believe it's -- that day alone we had two or three BDUs magically find space and say that they would carry us. So I am concerned that we lose must carry status, we're in grave danger.

12370   Right now, two of the VIs own pay television services. Who knows? Perhaps it could be in their best interests for some reason to come up with reasons why they wouldn't want to cancel us. We explained one of the cancellation provisions.

12371   We've got another BDU that's proposed a new affiliation agreement to us where they want us to list our key U.S. series and should any of those series end up being dropped for any reason they want to have the right to terminate our agreement on 60 days notice which is absurd because we don't have control over a lot of those series.

12372   So this is the environment we're living in. And all we're asking is that we've got a chance to be offered to Canadians.

12373   We were licensed in 2006 to offer choice to Canadians in pay television. We've done that. We've had a lot of challenges. We've overcome those and the cornerstone of our existence is must carry.

12374   We're not -- as I say, I'm not looking for guarantees for anything other than on revenue penetration. I'm not looking for a brand new specialty channel classification. We just want to be able to be sold.

12375   COMMISSIONER DUPRAS: We hear you. I think you -- I mean, you are an exception. There is only one like you in the country and you're a pay channel.

12376   MR. KNOX: That's right. I guess we are an anomaly in a group.

12377   COMMISSIONER DUPRAS: So we hear you. Thank you.

12378   THE CHAIRPERSON: Commissioner Molnar...?

12379   COMMISSIONER MOLNAR: Thank you.

12380   You mentioned you're the future and I accept that and so we should learn something from your experience. As well think about how, you know, things might change going forward.

12381   I appreciate that you have a threat of being dropped. I was wondering and then you said, well, there's two VIs who have similar services. So thanks for explaining that to me.

12382   But you are in the situation where it is all about customer choice. They choose you. Now, you're saying that you want to maintain must carry.

12383   Do you think that there is some reasonable tipping point where, you know, you have an obligation to maintain relevance to an audience in order to get must carry status? Could you see that?

12384   Could you see that there is a point at which if, you know if your audience drops by half or something like that where you no longer appear to be retaining significant relevance that maybe must carry status would be removed?

12385   MR. KNOX: Well, I am not sure what number that is. Pay television at best may have had a 10 percent penetration rate in the country. We're very expensive. The BDUs, we're probably one of the highest margin products for BDUs. They mark it up 100 or more percent typically; not all, but many of them do and so they're making a significant amount of money off of each sale.

12386   COMMISSIONER MOLNAR: Right. So at this point it wouldn't seem like there should be a significant danger that you're -- that you're at risk. I mean, if they're making money off you. But I shouldn't argue that point. You believe you may be at risk and I'm going to accept that because it's your environment.

12387   MR. KNOX: Yeah.

12388   COMMISSIONER MOLNAR: My question just rather than saying as an independent, you know, it is my right to must carry forever, is there a point where you know, must carry --

12389   MR. KNOX: Where it becomes so insignificant that --

12390   COMMISSIONER MOLNAR: Well --

12391   MR. KNOX: -- I would suggest we would be out of business before that ever hit because every day our subscribers vote with their subscription.

12392   COMMISSIONER MOLNAR: Okay. Actually, I understand what you just said and that makes sense to me. Thank you.

12393   THE CHAIRPERSON: Thank you.

12394   Oh, Mr. Vice Chairman, I didn't realize.

12395   COMMISSIONER PENTEFOUNTAS: The BDUs that have in place this 90 day -- I'm throwing into the Spartan pit clause -- are they VIs?

12396   MR. KNOX: Yes.

12397   COMMISSIONER PENTEFOUNTAS: They are?

12398   MR. KNOX: Yes.

12399   COMMISSIONER PENTEFOUNTAS: Okay. September a good month for you, just the same? Are the Sons is coming back for the final season?

12400   MR. KNOX: Fingers are crossed. I'm very optimistic.

12401   COMMISSIONER PENTEFOUNTAS: Good luck with that.

12402   MR. KNOX: And Homeland.

12403   COMMISSIONER PENTEFOUNTAS: Next month, yeah.

12404   MR. KNOX: Next month.

12405   COMMISSIONER PENTEFOUNTAS: Good, thank you.

12406   THE CHAIRPERSON: Thank you very much. As you know, we have a number of independent services coming back so we'll elaborate on a theme with a number of interveners. Thank you very much.

12407   MR. KNOX: Thank you very much.

12408   THE CHAIRPERSON: Madam la Secrétaire...?

12409   THE SECRETARY: Thank you. I will now ask Stornoway Communications to come to the presentation table.

--- Pause

12410   THE CHAIRPERSON: Mr. MacDonald, you have put up a little tent card. Did you think we had forgotten you?

12411   MR. MacDONALD: Old school, Mr. Chairman.

12412   THE CHAIRPERSON: Okay. When you're ready, please go ahead.

PRESENTATION

12413   MR. MacDONALD: Thank you.

12414   Mr. Chairman, Commissioners, ladies and gentlemen of the Commission, I am Jim MacDonald, Chairman of Stornoway Communications.

12415   And joining me today to my right is Don Gaudet, our Vice President of Programming.

12416   And to my left, Sandy Baptist, our Chief Executive Officer.

12417   In the front row is Mr. Kitson Vincent, the majority shareholder of Stornoway Communications.

12418   Stornoway would like to focus its comments on three aspects of the Commission's call.

12419   One, the proposed elimination of Category A services;

12420   Two, the importance of independent ownership within the Canadian broadcasting system;

12421   And three, what we believe will really happen with pick-and-pay.

12422   Stornoway Communications was born in 2000 when it was fortunate enough to be one of the winners of the coveted Category 1 specialty television licences and two Category 2 licences, or BPM and the PET Network.

12423   When awarding what were then Category 1 licences the Commission's expectation was that these licences would make a meaningful contribution to the Canadian broadcasting system, including the production and exhibition of Canadian programming as well as as significant level of support for independent production.

12424   As recently as last August when renewing the licences for independent Category A services, the Commission stated that:

"...these pay and specialty Category A services are owned by independent broadcasters that are not part of a large ownership group and play an important role in the provision of diverse, Canadian programming that serves the needs and interests of communities across the country."

12425   In rendering its determinations, the Commission's intent to ensure that these independent services continued to contribute to the achievement of the objectives of the Act. Yet, less than a year later Category A services and especially independently-owned Category A services are fighting for our lives.

12426   MR. GAUDET: As the Commission heard directly and often passionately during the Diversity of Voices hearing in 2007 and the BDU hearing in 2008, the importance of distribution cannot be overstated.

12427   The system is driven by market forces, a term that might have been created by Darwin himself because when applied to the broadcasting sector it simply means that the biggest and strongest survive and the rest do not.

12428   Clearly, the dominant force has been and will continue to be the BDUs. Even though the Commission has consistently stated since 2011 that the Category A services must be carried in the best available package consistent with their genre, as recently as last year, one major BDU indicated in a written submission to the Commission that what was meant was not clear to them.

12429   What does seem clear to us, though, is that Category A services that are owned by BDUs are definitely available in the best available packages while independently-owned services not so much.

12430   On an aggregate level Category A services owned by VI companies have a PBIT margin of over 35 percent while independents are less than 12 percent. This is not whining, just plain facts as outlined by the chart included in our submission.

12431   With very few exceptions, BDU-owned services substantially eclipse those owned by independents. And some would have you believe that the BDU services are simply more popular which is why they are successful.

12432   While popularity, however, usually starts with the opportunity to view a channel and the more widely a channel is available, the greater the potential audience.

12433   The bottom line, Mr. Chairman and Commissioners, distribution is obviously critical to the success of any service. However, despite your best intentions, independently-owned Category A services have not enjoyed the benefits that you had hoped might come from broader distribution based on the direction that the service should be carried in the best available package consistent with this genre.

12434   The Sun News proposal for 9(1)(h() status probably summarized this best when they told you that they were only available in five million homes which by the way is a number that dwarves most independently-owned services. And even at that level of penetration they did not have a business.

12435   In the case of Stornoway, limited distribution has meant that we have never been able to generate the income necessary to make the programming investments that we had envisioned to realize the audience potential of iChannel.

12436   MR. MacDONALD: We realize that consumer choice is fundamental to this review. But we also believe that ownership diversity remains important or else we can expect that both the creation and distribution of the entire Canadian broadcasting will be owned by just a handful of vertically-integrated companies.

12437   Today, 71 percent of specialty revenues and 75 percent of total conventional television revenues are shared by just four VI companies.

12438   We believe that one of the most fundamental decisions that the Commission will have to make in this policy hearing is whether or not independent ownership of television stations and specialty channels should be embraced and, if so, what the Commission can do to assist independent owners in a meaningful way.

12439   When the Broadcasting Act was written, clearly independent producers existed and were acknowledged in section 3.1(i) where the Act calls "for a significant contribution from the independent production sector".

12440   There is of course no mention of a contribution from independent owners of broadcasting companies or specialty channels because at that time of course virtually the entire industry was comprised of independent owners, some bigger, some smaller. But there is no question that the Canadian broadcasting system was diverse in every way.

12441   This is why we believe 3.1(i) of the Broadcasting Code also states that:

"The broadcasting system should be varied and comprehensive providing a balance of information enlightenment and entertainment for men, women and children of all ages, interests and tastes and provide a reasonable opportunity for the public to be exposed to the expression of different views of matters of public concern."

12442   Diversity in ownership is implicit in these objectives. We believe that it is time for the Commission to create clear and unequivocal support for independently-owned services especially Category A services in much the same way that the Broadcasting Act has done to ensure that independent producers are well represented within our broadcasting system.

12443   When the Commission has proposed or what the Commission has proposed for Category C national news services, we would suggest are the kinds of initiatives that we would ask you to consider for independently-owned Category A services.

12444   MR. BAPTIST: Today, Canadian consumers have access to even more channels than the average American viewer. When the Commission first licensed specialty channels they did not do so on the basis of a popularity contest alone but by creating a balance of popular mainstream and not so mainstream services that added diversity to the system.

12445   Packaging was a huge success for everyone, especially the viewer because we generally got more channels in a package for the same money than if we had ordered channels separately. There will always be channels in a package that you might not make your favourite list but when a program of interest is there you have the option to watch it.

12446   We believe that there are enormous number of potential pitfalls from converting our entire system to pick-and-pay. But we understand that some form of pick-and-pay will be a likely outcome of this hearing.

12447   Our hope that is that packing options will continue to exist because packages have, for the most part, been enormously successful, offering consumers excellent value, while also stimulating jobs and significant economic benefit for the industry.

12448   Thousands of jobs and millions of dollars of production could be impacted by pick-and-pay.

12449   Independent broadcasting services and the independent producers we rely on certainly have the potential to be damaged or closed if pick-and-pay becomes a popularity contest that results in small niche services folding.

12450   This is not conjecture, but contemplated by the Commission themselves in your call.

12451   We believe that there is a lot of confusion about what pick-and-pay really is. As an example, all BDU subscribers will continue to pay for some form of a basic service that includes the 9(1)(h) channels that are often cited as examples of the channels that viewers do not want to pay for and they still will have to purchase.

12452   Most consumers will not save money because the top American channels that were previously the drivers of predominantly Canadian packages will demand, and get, higher rates when they are offered on a stand-alone basis. Subscribers will not be able to order only American services, as many believe will be the case -- and the list goes on.

12453   MR. MACDONALD: In conclusion, Chairman and Commissioners, we hope that in your deliberations you'll think carefully about our existing system that has been built over many years.

12454   This hearing demonstrates that we all need to be mindful of the potential unintended consequences that could result from removing parts of the regulatory framework that has served us well.

12455   In fact, it has ensured a system that already provides Canadians with more choice than our American neighbours.

12456   Specially, we ask that category A status be maintained for independent services with carriage rules that are similar to what you've proposed for the category C news channels.

12457   At a minimum, we would ask that no changes take place to the status of independent A services prior to the exploration of our existing licence.

12458   We'd also ask that the VI code of conduct, as proposed by the Commission, become a regulatory requirement and that the definition of "best available package with the genre" be clearly defined, as outlined by the independent broadcast group.

12459   We appreciate your time today and are happy to answer any questions you may have.

12460   Thank you.

12461   THE CHAIRPERSON: Well, thank you, very much, gentlemen.

12462   Commissioner Molnar will start the questions.

12463   COMMISSIONER MOLNAR: Thank you.

12464   Can I ask, for your category A service, what is the best penetration that you've been able to achieve within a BDU package?

12465   MR. GAUDET: Currently, in terms of -- I think the highest penetration we have is about 20%, and that's with one BDU, and it's not a vertically-integrated BDU.

12466   COMMISSIONER MOLNAR: And that's under the existing rules and safeguards?

12467   MR. GAUDET: That's correct.

12468   COMMISSIONER MOLNAR: That's right.

12469   So, that's what you're asking to maintain: 20% and less?

12470   MR. GAUDET: We would --

12471   COMMISSIONER MOLNAR: If that's your best. I'm assuming --

12472   MR. GAUDET: Yes, exactly. I mean we're ==--

12473   COMMISSIONER MOLNAR: That's the top and the floor somewhere.

12474   COMMISSIONER MOLNAR: Yeah. I mean, obviously, we would like to have that level with everybody, and have been in negotiations with various BDUs, as several of our contracts expired, actually, over two years ago.

12475   But, as has been said by others here, this week, there are challenges with negotiations -- and we'll just leave it at that, for the moment.

12476   COMMISSIONER MOLNAR: Okay. How about your cat Bs? What would be the best penetration you've achieved with one of your cat Bs?

12477   MR. GAUDET: I think we are less than -- definitely less than 5%, with our category B channels, currently.

12478   COMMISSIONER MOLNAR: Thank you.

12479   MR. MACDONALD: What's very frustrating, though, Commissioner Molnar, is that when the channels are given an opportunity, then -- such as a free preview, as an example -- the audience, we found, has gone up very, very substantially, which -- and the frustrating part, of course, is that in a pick-and-pay world, you know that the audience is going to make a determination, based on what they like and what they don't like, and they see you and they like it, but the packaging is such that we're just not able to be offered.

12480   And so, we're not trying to be here whining. We're just simply saying we would like the opportunity for our services to get a proper shake, a fair opportunity.

12481   I'm going to go back, if I could, to our category A service, because we're passionate about public policy. Public policy is expensive. It's not unlike news, in terms of doing it correctly.

12482   But if you are expected to spend 37% of your revenue and you want to achieve an audience, you need to come up with compelling programming, which requires money.

12483   And if you can only achieve a certain level of a penetration, and that's it -- and Don was mentioning one particular BDU that we've had a great relationship with, but we've been flat out had other issues with others -- it's very, very difficult. And we just would really like to have that opportunity to be able to do what we said we were going to do, in 2000, when we got the licence.

12484   COMMISSIONER MOLNAR: So, would it be your expectation, if the Commission was to ensure that over the next licence term that you maintained your must-carry status, that you would maintain your CPE obligations, as well?

12485   MR. MACDONALD: Yes, absolutely.

12486   COMMISSIONER MOLNAR: Yes.

12487   MR. MACDONALD: And if I can go one step further, I mean, because the definition that we have asked you to provide is absolutely critical. Because what we know, for sure, is that what gets measured gets done. And if the Commission provides a very clear definition for what is meant by the best available package in the genre -- and I do understand that there's a lot of grey area -- but if there's anything that is clear, then I think that can help immensely. Because I cannot tell you how many times we've gotten sidestepped on we don't really understand what the Commission means by that, so we're really not going to get too fussed about it.

12488   COMMISSIONER MOLNAR: Okay. If I could -- and I'm aware that, Mr. Gaudet, you're coming back on Monday to talk with the Independent Broadcasters Group, at which point I expect you'll maybe go through some of the details of the working document and the different elements -- I'd like to talk to you folks a little bit about the experience you have had in negotiating and some of the discussions that have been going on here about, you know, different safeguards that are required in negotiations.

12489   We've heard a lot from the BDUS -- and they've been really discussing, I guess, their concerns in having to negotiate access to the programming of the VIs.

12490   But you, of course, are negotiating with those same BDUs in a different arrangement -- and they're talking things like they think you should eliminate volume-based rate cuts.

12491   Is that something you folks even negotiate?

12492   MR. GAUDET: We do. We negotiate both volume-based and penetration-based rate cards, depending on who we're dealing with and what the BDU is looking for.

12493   But let's be clear. It's BDUs that are the drivers. We are coming to them, cap in hand. We have no clout. The other VIs, when they deal with each other, obviously, have things they can trade.

12494   We're coming as an independent, with three channels -- one of them with a must-offer-pack promise; the other two do not have to be carried at all -- so, we're not in a strong negotiating position, and we negotiate from that point.

12495   As I mentioned, of the three major English-language BDUs, there's two that we currently do not have carriage agreements with -- and it's been over two years of negotiation, so to speak.

12496   It's hard to get meetings, at times, as well.

12497   COMMISSIONER MOLNAR: Okay. I want to make sure I do understand what you're saying.

12498   You don't have carriage agreements for which of your services are you speaking of?

12499   MR. GAUDET: Sorry. For all three.

12500   Our agreements have terminated or, you know --

12501   COMMISSIONER MOLNAR: Expired.

12502   MR. MACDONALD: Expired.

12503   COMMISSIONER MOLNAR: But you're still carried?

12504   MR. MACDONALD: And we're carried, on a month-to-month basis, based on our current agreements, But we've been trying to negotiate.

12505   For instance, one thing we've been trying to negotiate is a potential increase, a small increase in price -- and, as the previous panel just mentioned, we haven't had a price increase since we launched our channels in 2001 and 2004, for The Pet Network.

12506   I, again, can't think of any other business that has not increased their cost over that time.

12507   But it's non-negotiable ,when it comes to dealing with the VIs.

12508   MR. MACDONALD: Just to be clear, Commissioner Molnar. There is nothing that we won't talk -- negotiate.

12509   I mean we don't with a shopping list. We really want it to be a good business relationship for both sides. And so, there is no shopping list that is created by Stornoway.

12510   It's really. "What do we need to do to get a deal?" -- and that's about it.

12511   COMMISSIONER MOLNAR: Okay. I think I understand that.

12512   Do you think it would be a benefit to you if there were standard affiliation agreements, as proposed -- Eastlink was proposing it would be standard with -- absent the rate, then you're just negotiating rate. Is that a --

12513   MR. MACDONALD: I think that there is probably a lot of merit to that.

12514   COMMISSIONER MOLNAR: Okay. I think I understand what you're asking for here, and I understand better, now, looking at the penetrations that you've achieved. And as I mentioned, I know you're coming back as part of the Independent Broadcasters Group to talk about some of these again, so we'll wait.

12515   So, those are my questions.

12516   But I also just want to note that I acknowledge you've brought your major shareholder and your CEO and everybody on Friday afternoon, at five. So, you know, we understand how important this is to you.

12517   Thank you.

12518   MR. MACDONALD: Thank you.

12519   THE CHAIRPERSON: As I said to others, you can see that, from the schedule, we're looking at independent programmers as a unit, so it's not because we're not asking a lot of questions of you that we're not interested in your issue. But you've really helped us, so far, from your perspective, and we appreciate that, and I echo Commissioner Molnar's point of being here late on a Friday. We appreciate that.

12520   Thank you, gentlemen.

12521   MR. MACDONALD: Thank you.

12522   MR. GAUDET: Thank you.

12523   THE CHAIRPERSON: Madam Secretary...?

12524   THE SECRETARY: Thank you.

12525   I would now ask Anthem Media Group to come to the presentation table.

--- Pause

PRESENTATION

12526   THE CHAIRPERSON: Welcome.

12527   When you're all settled in there -- take your time -- you can go ahead.

12528   Unlike Mr. Macdonald, you bring a little tent card, Mr. Asper.

12529   MR. ASPER: I'm hoping you remembered.

12530   THE CHAIRPERSON: Go ahead.

12531   MR. ASPER: Thank you.

12532   Mr. Chair, and Members of the Commission, and Commission staff, my name is Leonard Asper, and I'm the president and CEO of Anthem Media Group.

12533   I believe this is my fifth hearing on the future of Canadian television.

12534   I'd like to begin by introducing Anthony Cicione, to my right, the general manager of Anthem Media.

12535   Mr. Cicione has been in the industry for almost as long as I have, starting at Global as a junior producer, followed by a series of internal promotions, after which he moved to Score Media, where he became vice-president of programming, and then to Fight Network, as the general manager, and, finally, he's the general manager for all of Anthem Media now.

12536   Anthony...

12537   MR. CICIONE: Thanks, Len.

12538   I think this might be my third hearing for me.

12539   We'd like to offer some background on where our company sits in the current broadcast landscape, in Canada, and outside of the country.

12540   We are, in Canada, a linear category B service and. in other arenas, a linear service on U.S. and international cable and satellite systems serving over 30 countries.

12541   We offer our content as VOD on BDUs.

12542   We are an OTT service on platforms like Roku. We have our YouTube channels. We are launching as an app on XBox, this fall, and we supply short-form video to third parties -- and like all media companies, today, we have apps and Facebook pages and are present on all social media.

12543   In addition to our Canadian assets, we are major shareholders of Pursuit channel, a U.S. hunting and fishing network available in over 40 million homes.

12544   We own U.S. websites rotoexperts.com, sportsgrid.com, and broadcast 40 hours per week on Sirius XM Radio, in the U.S. and in Canada.

12545   We've gone from 20 employees, in 2011, to 67, today, in Toronto.

12546   We have 12 employees in New York, as well.

12547   We have expended several million dollars to build HD studios, new editing and production equipment, apps, and short-form video capabilities.

12548   In a typical week, we studio produce around 15 hours of television, in Toronto, and, from Toronto, we oversee additional production in New York and in Las Vegas.

12549   I'd like to thank all my co-workers at Anthem Media, and the gentleman next to me, for making all this happen.

12550   I'd like to, now, talk about the current issues facing category B channels.

12551   Despite our international success in growth on digital platforms, growth in Canada has been slow. And despite the fact Fight Network was one of the first category B channels to offer its service in HD and has more live hours and original production than most category B services. FNTSY Sports Network, with six house per day, has even more live programming than Fight.

12552   Thus far, with FNTSY Sports Network, other than MTS and SaskTel, we've been unable to secure carriage in the rest of Canada, with most of the BDUs saying they don't have the bandwidth or they're awaiting for the outcome of this hearing.

12553   Meanwhile, BDUs have, miraculously, launched their own channels.

12554   We don't argue that everyone with a channel idea has a right of access. We simply see some hypocrisy and roadblocks to success that continue, despite the VI decision.

12555   The digital world is not the panacea it's made out to be -- at least not for now, and maybe for the next five years.

12556   It's still an add-on to linear services, in terms of the role it plays -- and we are happy to elaborate on why this is the case.

12557   The premise on which category B services were licensed has not come to pass, for which there are various reasons: our primary obstacle has been poor packaging and low penetration, combined with the small market.

12558   We continue to be offered in tiers that require the consumer to shell out the maximum dollars to buy through the tiers and to watch and find us.

12559   Our audience, in particular, resists that.

12560   Yes, we're also offered à la carte. But the majority of our subscribers still come from being offered as part of a multi-channel package.

12561   Repeated attempts to entice BDUs to co-market with us are resisted. We suspect it's because they do better selling us in a package that sells for between $8.00 and $12.00.

12562   We cannot afford to invest heavily in programming, because we do not have the revenues yet.

12563   BDUs say, "We do not have enough audience to justify moving us to a better tier".

12564   However, many constantly keep us in the least-penetrated tier they have, such that we cannot generate the audience.

12565   It's the proverbial chick-and-egg situation.

12566   MR. ASPER: While the notion of skinny basic and plus pick-and-pay offerings appear to be the simple solution, we caution that this choice, without some safeguards for the independent channels, will lead to the demise of those channels -- and even some owned by the VI companies -- as well as many other unintended consequences.

12567   So, what's the best way to balance the interests of the consumer -- which is how this all started -- with the words of the Broadcasting,; particularly, section 3?

12568   As we interpret the reports of the Commission and various parties, the vast majority of Canadians, whom we are calling the "customer' in this process, is not exactly an angry mob with pitchforks, demanding that the castle be burned and a revolutionary government be installed.

12569   Rather, they have been sending signals of dismay, over recent years, by viewing media outside the system -- i.e., OTT and online -- which provide a more nimble user interface the ability to effectively serve on-demand TV and are, of course, less expensive.

12570   Having sent those signals of dismay, the consumer is now being asked what is wrong with the system. And while the answers may vary, many have clearly said they do not like the BDUs package their services.

12571   From my extensive experience, in the U.S., in the last three years, trying to launch our channels there, I can say the mood is the same there, as well.

12572   In many cases, the BDUs are responding. They are offering more channels à la carte; the telcos, in particular, are offering a large selection of small packages; and, in the case of Videotron, and a few others, a true "build your own package" system.

12573   We do think that their concerns about cord-cutting and having to compete against unregulated entities are not overstated.

12574   We don't think that the house has to be burned down, though.

12575   Consumers will benefit from a good renovation, one that does not pull out a support beam leading a floor or two above to collapse -- or, as the Chair put it, creating the "kerplunk" moment.

12576   The system was built over time, in a very intelligent way, each part playing a role, whether it was creating jobs, providing diversity, Canadian content, or access for visible minorities and other under-served constituents.

12577   There is no need to start over.

12578   What we suggest is a stage transition, with a clear outcome and clear rules to achieve that outcome.

12579   We believe that programmers and BDUs, in general, should be deregulated, to the extent that the deregulation allows them to better compete with foreign services and/or new technologies.

12580   But we call for stronger regulation when it comes to protecting the small fish against the fish within the broadcast system, as the bargaining gap has widened too much.

12581   In other words, don't try to regulate the world of the Internet. It's impossible.

12582   Rather, equip the Canadian broadcasting system to better compete with it, both as individual sub-segments and as a whole.

12583   We close with some specific comments, in reference to the working notice known as the appendix to broadcasting notice of consultation 2014-190-3, and we've -- I miss Charlotte Bell, at these times, when I get all these -- right.

12584   But there's been a lot of discussion around that, in the last week, so we're going to try to make some comments that take into account that discussion.

12585   I think we're not the first people here to say that we think the pick-and-pay requirement -- the requirement for complete pick-and-pay or build-your-own-system packages is a bridge too far.

12586   A gradual move in this direction could work, allowing broadcasters and BDUs time to react and plan.

12587   The 50% model for pick-and-pay discussed here earlier this week is a good middle ground.

12588   As has also been discussed here for the last few days, subscription revenue protection for a minimum of, say, three years would be a necessity.

12589   Another approach could be to restrict the number of channels BDUs offer in any package other than basic, unless it is a build-your-own package -- and I'm going off script a little bit here, but I think the biggest problem is these 50-channel packages.

12590   I don't think that four-channel packages are problems.

12591   It's when you have to buy 50 channels to get the golf channel when people, I think, kind of get a little a little unnerved or upset.

12592   We believe the preponderance rule should be maintained, and we support option A of number 5, in this regard -- referring, always, to the working notice.

12593   We support item 6. The large programmers, particularly, those owned by BDUs, have such enormous negotiating power with BDUs, with the smaller BDUs, the non VI BDUs, that their deals now adversely affect the smaller independents -- and I'm happy to provide examples of that.

12594   We applaud the Commission's suggestions that the VI code should be expanded to ensure better access to the system for non-VI service.

12595   But whether Blue Ant's math is correct or not, as stated in these proceedings on Wednesday, a closer reading of the wording of item 7 of the working document, wherein you propose to change the relevant ratios from 3:1 to 2:1, on the face of it, looks like there will be a situation where, effectively, no VI company will really ever have to launch an independent non-VI service ever again -- and, again, I'm off script here, adding, that I would add that, now, when you look at it, they can drop even more channels that they could have before. We thought 3:1 was too light, anyway, and now it's even worse, the way it's worded there.

12596   So, that's something we have to, I think, all look at again if the principle you stated is what you're trying to achieve.

12597   We agree with number eight regarding a time limit for contract renewals, and with respect to the introduction of CPE to all services, as we read it, we disagree. We are leery of any costs being permanently built into a company that discourages it from increasing revenues and encourages it to find ways to create revenues not subject to the CPE.

12598   We would rather see direct government funding combined with fiscal policy to support the production sector, as well as of course the percentage of airtime requirements. CPE I found to be counterproductive and a significant administrative burden, certainly one which Category B services can ill afford.

12599   We completely support item 15 and we found it to be a pleasant and refreshing item. If the system is going to go more à la cart and programmers are left to fend for themselves, we need a direct relationship with our customers so we can market and program to them.

12600   Rogers mentioned that they received a zero rating on cricket, but they checked set top boxes in Brampton and they found they had 100 of them on. We would love to have that information.

12601   The broadcast rating system for TV especially, and for digital TV in particular, is flawed because sample sizes are way too small. We get zeros all the time when we know people are watching.

12602   If we have set top box information and could cross-reference the Nielsen data and other data that we collect online, it would be a very important benefit for us. I think better audience data and direct communication with customers goes hand-in-hand with the à la carte world.

12603   In conclusion, we are providing Canadian consumers with a choice and we are doing so on a variety of platforms built in Canada by Canadians, but we could be more successful if the field were more balanced, which would allow us to hire more people and provide even more and better content and choice for Canadians.

12604   That concludes our remarks and we would be happy to respond to questions.

12605   THE CHAIRPERSON: Thank you very much, gentlemen.

12606   I will be asking the questions first and the sign of a good presentation is, as you were going through it I scratched out some questions I was about to ask, which is always a good sign because you have been following and listening and know what we're about. But your oral presentation has raised a couple of issues and I have some other questions.

12607   Could you tell me more why you think the 50 percent model for pick discussed earlier is a good middle ground, because there was also some discussion about the risk that, you know, which 50; are they the ones related to vertically integrated companies, are they the large foreign companies?

12608   I mean there is -- when you create a class there is already a risk of abuse because -- well, there is the opportunity, there is a loophole.

12609   MR. ASPER: I'm wondering if you could find a way to include that in the VI ratios. It's a fair point. I mean I think a VI company would typically make sure that the U.S. services and of course their own services would stay on one side and the others would be left to fend for themselves.

12610   So I think if there was some way to include the ratios. I just picked 50 because I know where some of them are and I think it's a gradual -- you know, I think Shaw said they were close to that number anyway and I think it's just something -- it's not a scientific choice, it's just a way of getting us partway there, but not necessarily being too onerous.

12611   But I do think, yes, there has to be some VI type of regulation about which those services could be.

12612   THE CHAIRPERSON: Now, in your presentation you also said you could provide some examples. Perhaps you can start and complete -- start orally and maybe complete with an undertaking too, if there are enough of those. I don't want to force you to go through a long list if there is a long list.

12613   MR. ASPER: Well, I think it really boils down -- Anthony, you can jump in here, too, to the sports channels. What happens is, so when TSN goes and, you know, bids up and gets the rights to the NFL, or whatever they do, you know, everyone knows Rogers is next with the NHL, it's going to -- what happens is a conversation goes as follows, it goes, "Well, I just have to" -- TSN used to be a $1.09 when it was regulated and sometimes it was a little bit more, it might have been $1.30, but I think it's well known out there that TSN is a lot more than $1.30 now, it is rumoured to be somewhere anywhere between $2.00 to $4.00 and as much as $4.00.

12614   So if you think of TSN and nine million homes at $4.00 per subscriber, that's a lot of money that people are paying more for TSN right now.

12615   No one knows what TSN gets, I don't know it, but I know that the conversation goes, "Well, I have to pay triple for TSN now, so I don't have room for -- I have to get my costs back somewhere, they're coming out of the independents."

12616   And it's very similar to the retransmission problem in the U.S., because when it comes back to our fee for carriage conversation, but the transfer --

12617   THE CHAIRPERSON: No, let's not...

12618   MR. ASPER: No, I'm not going there.

--- Laughter

12619   MR. ASPER: But the retransmission, which put $5 million from cable to broadcast in the U.S., is squeezing out all the independents in the U.S., the smaller channels in the U.S., so TSN and the Rogers' prices for their sports channels is now making it -- you know, that's going to come back out of the independent sector.

12620   And I think the other example is -- and again, I don't know if I can undertake to provide this to you other than to swear under oath what I have been told, and you are a lawyer, I'm a lawyer, but --

12621   THE CHAIRPERSON: No, the undertaking, no, it's not that formal.

12622   MR. ASPER: I'm sorry, I just want to say, you know, as lawyers it's a hearsay what I'm about to say, but it's -- another conversation goes, "Well, I would like to meet -- your service is very popular, Anthem, I would like to move you to a better package, but I can't because there is a contract I have with a large company that says one of their services -- one of whose services is in your package that prohibits me from changing the package."

12623   THE CHAIRPERSON: Right.

12624   MR. ASPER: That goes on. So that's what we hear.

12625   THE CHAIRPERSON: So I suppose in contractual terms it's sort of freezes --

12626   MR. ASPER: So the big guy said, "You can't change my package, so I can't move --", they can't move Fight out of the package, even though we have no issue directly -- even though they would like to.

12627   So the smaller BDUs that are not Vi BDUs are being constrained in the system by the large companies, you know, so even they are being mistreated.

12628   THE CHAIRPERSON: Right. Thank you for that.

12629   Over the past few days we have talked about sports services in particular and TELUS provided some ideas of special rules for sports services. I was wondering, since you are in a sense sport related, whether your status as an independent is particularly impacted by the dynamics in the wholesale marketplace, either positively or negatively.

12630   I mean if you are building or trying to market a sports pack, one could think that you would be a natural to add-on to add value.

12631   MR. ASPER: I would say it works with telcos because they have small packages, what I will call middle packages, so there is basic, there's the next package called digital basic and then there's what the telcos have done and well I think, is -- and I'm talking about really the three Western telcos, and probably in some of the eastern ones, I think Bell Aliant and Eastlink in particular -- so the sports package on SaskTel for example probably get -- that we're in, in Fight Network, probably gets 45 percent penetration, which is one of the reasons why we chose sports as a theme to go into as a company. Because -- I don't know if it gets -- that's what I'm told and it may be 40, it may be something, but it's a lot more than 10 or 15.

12632   The reason that is, is because you don't have to buy as many channels. You don't have to spend $150 to get to the sports package as you do on the other larger -- other systems.

12633   So I do -- that's why I'm a big fan of the forcing of smaller packages and I think they went there earlier and, what, the telcos as I see it have gone there because they want to get people to buy those sports packages and they don't want to charge them $150 before you are able to buy a sports package.

12634   So where there is a lot of choice and smaller packages, we find as a sports channel we get put into those packages and we do well.

12635   Where there is large packages and you have to pay $50, $60 for each package, we are at the bottom. You know, the sport -- we are not among the sports channels that gets put into those packages. The Golf Channel gets there, you know, the CBS Sports Network might get there, but we don't.

12636   THE CHAIRPERSON: Okay. So get back to the 50 percent. Would you rather be in those that could be offered à la carte or those that couldn't be offered à la carte?

12637   MR. ASPER: I would want to be in the ones -- I would want to be offered it in a package and available à la carte.

12638   THE CHAIRPERSON: So you would rather be in the 50 percent that would be offered?

12639   MR. ASPER: I would want to be in the packages, yes.

12640   THE CHAIRPERSON: Right, right, right. Yes, okay. I'm just --

12641   MR. ASPER: As long as -- I wouldn't mind being available à la carte giving people an option, because --

12642   THE CHAIRPERSON: But you, like others, realize there is a lift associated with being in a package --

12643   MR. ASPER: Yes.

12644   THE CHAIRPERSON: -- because there is more value presumably --

12645   MR. ASPER: Yes.

12646   THE CHAIRPERSON: -- in the eyes of the subscriber?

12647   MR. ASPER: Yes.

12648   THE CHAIRPERSON: Okay. There was a discussion as to what the math around the ratio ought to be. Let's put aside the math, and I know the math is important as to what the ratio is, but do you believe that sort of principle of addressing it provides enough support for you; if the ratio is the right number?

12649   MR. ASPER: Yes. I think a little bit it depends on whether you are going to go in the direction of the A's and the B's and the C's get collapsed into one category. So there are some other parts to that discussion. I think it was a good -- you know, I think we argued for 5:1, we think that's a -- I think if you put them all into one category, you have to change it from three to a higher number.

12650   THE CHAIRPERSON: Right.

12651   MR. ASPER: But we do think the principle is right.

12652   And I think when I'm looking back at the hearing, you know, going back to that hearing, I think the -- and in reading the wording I guess, you switched it, you took out the words Category B and you just said non-VI. So I do think you have to go to a higher ratio if you are going to lump them all in together.

12653   THE CHAIRPERSON: And your view, if we lump them all in together, it would be 5:1; is that...?

12654   MR. ASPER: We had argued 5:1 before, I don't know the science. I would undertake to maybe provide a specific proposal in that regard.

Undertaking

12655   THE CHAIRPERSON: Sure. I mean I don't want to give you work necessarily, but if you are willing to do that undertaking I'm more than happy to give you that chance.

12656   MR. ASPER: One of the other suggestions we may come forward with that may help is, instead of trying to look at all the services the large VI companies can drop today is to say going forward there is a reset and so even if you have room and you are a Vi, today if it's 3:1, or whatever it is, or 5:1 with a big lump category of A's, B's and C's, wherever you are today, every time going forward, if you launch three, if we are one, it's 3:1 wherever it is.

12657   So you don't get to have that room of launching a whole bunch of your own before you get to the point where you go back to 3:1 or 5:1.

12658   Is that clear?

12659   THE CHAIRPERSON: Yes.

12660   MR. ASPER: That makes sense?

12661   THE CHAIRPERSON: Yeah --

12662   MR. ASPER: Thanks.

12663   THE CHAIRPERSON: -- I get it.

12664   Now are you at all afraid, especially if genre protection gets lifted, that your niche might be taken over by another?

12665   MR. CICIONE: I think in our business there's always that fear that your genre's going to get taken over. I think we deal with competition every day. All the big sports networks currently air the same type of programming that's on Fight Network and similar programming that's on Fantasy, so competition is what we're used to in the category B world.

12666   THE CHAIRPERSON: How do you manage that risk? Do you have long-term output deals?

12667   MR. CICIONE: I think we manage that risk by trying to be authentic to our viewers. I think our content really goes a long way. We try to put on compelling content that is different from the other ones. If we are a fight network, and we do this 24/7, you know, our take has always been those others channels are only doing it for two or three or four hours at a time, once or twice a week, so they're not really the go-to place.

12668   So want to make sure that -- you know, sure they can go and watch some of the bigger events on the bigger sports channels. But, at the end of the day, they're going to consistently come back to us, you know. And Golf Channel's a good example of that. When it started, initially it didn't have, you know, all the big programming, but as it grew, it started to acquire better programs and garner more audience.

12669   And, you know, we're going through that phase now, where, you know, we're -- we're doing some great productions. We've got some quality content on both networks. There's the possibility of acquiring a very big property in our space next year.

12670   So, yeah, competition, basically, we welcome it, to tell you the truth.

12671   MR. ASPER: Well, I think, though, you know, we feel we're able to compete, but we also know that there's no structural impediment for Rogers or Bell or anybody to wake up and say, "We're launching a fight network. We're dropping this fight network because we have room under our cap," and it's -- that's the end. I mean -- and at the end the day, they can either drop us, they can keep us and compete and just buy up all the programming. It's -- you know, if you think of program suppliers, they rarely do deals that are more than two or three years. So at any point, even, you know, as -- you know, these deals come up all the time, so whether -- if it's now or two years from now, there's -- there really aren't any marquis products, like the NFL Network -- the NFL in -- like, in the fight world. There is UFC, which is well-known, but, you know, you can -- we've survived without having UFC.

12672   But we just live in fear every day of these -- of these -- you know, that that could happen. There's nothing to stop anybody from doing that right now.

12673   THE CHAIRPERSON: Including a Over the Top offering?

12674   MR. ASPER: Yes, there could -- somebody -- there -- I mean, like, if you go on Roku, there are 10 fight channels.

12675   THE CHAIRPERSON: Right.

12676   MR. ASPER: We're trying to compete by just getting better programming, and because we do a lot of studio and live programming, where others are playing old -- you know, old fights. We're trying to be the most current and live and fresh and original.

12677   THE CHAIRPERSON: In your written submission, talking about the dynamic -- the health -- "Move us to a more healthy wholesale market," you refer to wanting "more meaningful and aggressive promotion" -- that's within quotes.

12678   Mr. Asper, you're a lawyer by training. You referred to that before. I don't know if your colleague is at all. But if we put that in a regulation, what do you think -- how successful will we be to implement that?

12679   MR. ASPER: Is that -- you call -- they call it "void for uncertainty."

--- Laughter

12680   MR. ASPER: I think there -- we would have to suggest -- there would have to be more clear language --

12681   THE CHAIRPERSON: Sure.

12682   MR. ASPER: -- around that.

12683   THE CHAIRPERSON: Well, there's other rounds of comments --

12684   MR. ASPER: Yeah.

12685   THE CHAIRPERSON: -- and perhaps you might want to give some thought exactly what that would look like. Not necessarily as an undertaking, although if you want to do it as an undertaking, that certainly helps our process.

12686   MR. ASPER: I mean I do think -- one thing that comes to mind that -- was -- is that, you know, we can't really afford to run promotions on the -- even though I think we have access -- regulatory access, but not financial access to run a promotion for Fight Network -- or a commercial for Fight Network on CNN or A&E or a U.S. channel, I mean, so, I think, while they have to make room for us, they still charge us for it, and maybe -- you know, I think, you know, some sort of PSA-like obligation to run some promotion for -- on the more penetrated channels, you know, for us would be -- you know, would help drive à la carte, I think, as well, so --

12687   THE CHAIRPERSON: Right.

12688   MR. ASPER: I mean, I won't get -- we'll get more specific --

12689   THE CHAIRPERSON: Yeah, I think --

12690   MR. ASPER: -- and I'll give you some numbers.

12691   THE CHAIRPERSON: -- I think that would be helpful, because, as you say -- as many parties have said, too, they want this in regulatory language, and it's a bit difficult to do that.

12692   Now I want to turn -- in your written comments, and even today, you talk about the great things you're doing. I mean you're facing competition by -- you're spreading a risk, right, because you're saying we're going to go international. And going international, Mr. Asper, you know, is not without risks as well. But you're going to several markets, and you're also developing new platforms for content -- for delivery of your content.

12693   Why is that not enough, as a strategy, for programming undertakings like you? Why do we need more intervention?

12694   As I said to a number of people, you know, our first guiding principle will be: only interfere where it's necessary, and then when you do it should be simple, proportionate, easily administered and adaptable to change.

12695   MR. ASPER: Well, I think the first thing is we wouldn't be able to do it if we didn't have a business in Canada. We wouldn't -- I mean to go try to start in a -- I mean, if we wanted to start internationally, these are really add-ons to a base in Canada we have. And when I looked at, you know, just -- you know, when I came in and acquired the Fight Network, it was because it had a certain revenue base from which, you know, the marginal cost of addition production would be --

12696   THE CHAIRPERSON: So we continue to be in a world where you need that --

12697   MR. ASPER: Yeah. You need -- yeah, yeah.

12698   THE CHAIRPERSON: -- that traditional springboard to --

12699   MR. ASPER: Yes.

12700   THE CHAIRPERSON: Okay.

12701   MR. ASPER: I think -- I mean I think I would say -- and I would guess that for Blue Ant, for some of the others here, they're -- that regulatory world is the basis of their business, and the rest is, you know -- is, you know, as an add-on. And what's beautiful about that is it allows a Canadian company to expand using -- you know, using -- but using Canadian employees, producing, you know, the right amount of Canadian content, according to its requirements, but then you get the benefit of -- I mean we -- and we -- if that system -- the system has to have at least a baseline for us to survive, otherwise we would shut the whole thing down and either go and start it in another country, but we probably wouldn't be able to go to those other countries without having a Canadian base.

12702   THE CHAIRPERSON: Well, you've got to be commended for having gone to those other countries --

12703   MR. ASPER: I mean, really, it's a mitigation strategy I was --

12704   THE CHAIRPERSON: Right.

12705   MR. ASPER: Yeah, it's --

12706   THE CHAIRPERSON: I get that.

12707   It strikes me sometimes how companies in Canada that have gotten certain regulatory support seem to only stay in this particular ecosystem.

12708   MR. ASPER: Well, I think -- yeah, I think -- I don't think -- I never thought that that would be sustainable, so I always felt that if there's a -- as long as there's a baseline of -- in Canada, that it would need to be buttressed, but the two couldn't operate independently.

12709   THE CHAIRPERSON: Right.

12710   Okay, well, those are my questions.

12711   COMMISSIONER PENTEFOUNTAS: Just briefly.

12712   THE CHAIRPERSON: Yes, Mr. Pentefountas.

12713   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

12714   You're CPE concern, it's pretty high as -- I mean, what's the concern there? I don't know if that's confidential or not, but your CPE spend is pretty good.

12715   MR. ASPER: Well, it's interesting, we -- by definition, we -- we just decided to spend that much money.

12716   COMMISSIONER PENTEFOUNTAS: Yeah.

12717   MR. ASPER: We're way over --

12718   COMMISSIONER PENTEFOUNTAS: Okay.

12719   MR. ASPER: -- what we probably would be if we were regulated.

12720   But I just -- I never, like -- I mean if there's a small base of -- I don't what it is, the number, I just found when operating other channels, like, you know, a TVtropolis, or something in my previous life -- I think the numbers were 43 per cent -- I just fundamentally opposed the idea of a tax on success.

12721   So if somebody -- if I can make a program for a hundred dollars and I can generate $200 of revenue from that program, but then I get creative and ingenious and I find a new way to generate another hundred dollar, I'm -- I'm really discouraged from doing that. So why should I -- why shouldn't I be able to -- you know, benefit from the creativity I just deployed and increase the profits of the business? I mean that's just a -- and I think any business person would get up here and say, "We don't want to always be -- have our cost base increase just because we're able to creatively generate additional revenue."

12722   So as long as we met a -- I would say as long as you met a baseline, whatever that number is, whether -- I don't say it's 10 or 20 or 30 per cent, but it just seems -- you know, especially for category B service. You know I -- it's hard to -- you have to track it all and you have to have somebody -- you have to reg -- start to build a regulatory departments, and we operate in a very lean way. We have four executives and we -- the rest is all production. So we don't have a regulatory person. We don't have a general counsel. We don't have these people because that -- it's just the business is just too small. You know, I just --

12723   COMMISSIONER PENTEFOUNTAS: But if you touch -- if you simply touch the revenue, and you -- I mean your...

12724   MR. ASPER: No, but what happens is, you remember, you're tracking last year --

12725   COMMISSIONER PENTEFOUNTAS: Right.

12726   MR. ASPER: It's a little more complicated, because now I have to say, "Okay, well, my revenues this year were x --

12727   COMMISSIONER PENTEFOUNTAS: Yes.

12728   MR. ASPER: -- so next year I have to spend y."

12729   COMMISSIONER PENTEFOUNTAS: M'hmm.

12730   MR. ASPER: And, by the way, next year revenues may be down --

12731   COMMISSIONER PENTEFOUNTAS: Yes.

12732   MR. ASPER: -- so in year where my costs just went up and revenue -- the ad revenue tanks or it goes down 5 per cent, but my revenues when up -- or my costs went up 7 per cent, it's just you start --

12733   COMMISSIONER PENTEFOUNTAS: Yeah.

12734   MR. ASPER: -- tracking. And then there's -- there's -- you know, there's --

12735   COMMISSIONER PENTEFOUNTAS: So what you do about CPE? How do you --

12736   MR. ASPER: We don't have a CP.

12737   COMMISSIONER PENTEFOUNTAS: None whatsoever?

12738   MR. ASPER: No, we -- because category Bs don't have it. So we just air 35 per cent Canadian content.

12739   COMMISSIONER PENTEFOUNTAS: Right.

12740   MR. ASPER: And that's why I say -- you know, the government --

12741   COMMISSIONER PENTEFOUNTAS: And what if you got -- the point we were trying to make is that you got a CPE number and you got a softening on the exhibition requirements, or no exhibition requirements or very low exhibition requirements, would that be a good quid pro quo?

12742   I think that was the intention behind that proposal. It wasn't to tax either part of it --

12743   MR. ASPER: It's a good question.

12744   COMMISSIONER PENTEFOUNTAS: -- as you see it.

12745   MR. ASPER: I don't --

12746   MR. CICIONE: I think we'd like to take that one back and --

12747   COMMISSIONER PENTEFOUNTAS: Okay.

12748   MR. CICIONE: -- and submit something later.

Undertaking

12749   MR. CICIONE: But, yeah, it's --

12750   COMMISSIONER PENTEFOUNTAS: You may come out ahead --

12751   MR. ASPER: Yeah.

12752   COMMISSIONER PENTEFOUNTAS: -- by having to exhibit 35 --

12753   MR. ASPER: Yeah.

12754   COMMISSIONER PENTEFOUNTAS: -- per cent, right?

12755   MR. ASPER: Okay. So I didn't realize --

12756   MR. CICIONE: Although our fear --

12757   MR. ASPER: -- I didn't realize that. I thought they were two or --

12758   MR. CICIONE: Although Cancon, for us, as a category B, has never been, you know, just do the minimum, 35 per cent. You know, if the programming is good and it's quality and it's -- and my Cancon's 40, 50 per cent, great, I'm just -- we're not sitting there looking to stop at the ceiling.

12759   COMMISSIONER PENTEFOUNTAS: Okay, I'm keeping you from the weekend, but on the 3:1 rule -- just to be sure, so we can take at our math -- 3:1, with one of those being an independent, you don't like that math?

12760   MR. ASPER: Well, it depends whether you take the words "category B" out or not. In the old -- in the current 2011 decision, there was 3:1 -- the 1:3 or 3:1 was -- referred only to category Bs, because it was felt that --

12761   COMMISSIONER PENTEFOUNTAS: Yeah, yeah, yeah.

12762   MR. ASPER: -- As had access so they didn't need that.

12763   COMMISSIONER PENTEFOUNTAS: Yeah.

12764   MR. ASPER: So I -- we never -- we still didn't like that because it allows, currently, three out of the four major VI companies, as I understand it -- and the IBG has all the exact numbers and will present those to you on Monday -- it allows them to drop channels and -- drop independents. Like, we could be dropped by three out four of them today.

12765   COMMISSIONER PENTEFOUNTAS: And even under the new proposal, where it's 2:1, that doesn't work for you either?

12766   MR. ASPER: Well, I think it went backwards. I think -- because now you lumped in more channels to that group, you lumped in As, Bs and Cs, and you lowered the number, so -- but then you took out the word -- yeah, because -- when you took out the --

12767   COMMISSIONER PENTEFOUNTAS: Yeah.

12768   MR. ASPER: -- word "category B."

12769   COMMISSIONER PENTEFOUNTAS: Right.

12770   MR. ASPER: So I think what happened is you made -- so as I think Blue Ant -- whether the math is exact or not --

12771   COMMISSIONER PENTEFOUNTAS: Right, okay.

12772   MR. ASPER: -- it allowed them to drop more --

12773   COMMISSIONER PENTEFOUNTAS: We'll do the math over the weekend and we'll speak to the IBG --

12774   MR. ASPER: I think you go back --

12775   COMMISSIONER PENTEFOUNTAS: -- Group next week.

12776   MR. ASPER: I think if you lump everybody in together, go back to 5:1, which is where it was before 11 -- and I'm not saying it's -- no one likes top say go -- the words "go back," but it's still -- you know, there's a lot of go forward on this as well. So I think it -- if you're changing some things, you have to restore others, I think.

12777   COMMISSIONER PENTEFOUNTAS: Five to one, no VIs.

12778   MR. ASPER: Just all the -- if you're going to collapse A, B and C, it could be all of them, I think.

12779   COMMISSIONER PENTEFOUNTAS: Okay. And you would -- you would include the other VIs --

12780   MR. ASPER: Sorry.

12781   COMMISSIONER PENTEFOUNTAS: -- in the five? I mean that's the --

12782   MR. ASPER: No.

12783   COMMISSIONER PENTEFOUNTAS: -- issue right now, that we've got a VI-concentrated world, and if you're trying to create a niche for independents that was the idea behind that: is that you really create a sort of -- a protective zone for independents with those kinds of numbers.

12784   MR. ASPER: So -- well, if you took VIs -- are you suggesting you take VIs out of that number? So for every one they launched, they would have to be two non-VIs, one of their own, not...

12785   COMMISSIONER PENTEFOUNTAS: It would --

12786   THE CHAIRPERSON: I think the difference between is how you calculate the denominator, because -- is it related to that individual BDU or is it -- or are -- all --

12787   MR. ASPER: VI.

12788   THE CHAIRPERSON: -- VIs as a class?

12789   COMMISSIONER PENTEFOUNTAS: Right.

12790   THE CHAIRPERSON: In other words, one theory would be that VIs scratch each others' backs --

12791   MR. ASPER: Yes, that's what we're --

12792   THE CHAIRPERSON: -- and the other theory is -- would be that, no, it's only -- you only have to look at that particular BDU.

12793   MR. ASPER: No, I would include the related, because they do. I mean you can -- they do -- we do believe that there's -- I mean --

12794   COMMISSIONER PENTEFOUNTAS: Scratching the others' backs --

12795   MR. ASPER: -- I've seen it.

12796   COMMISSIONER PENTEFOUNTAS: -- as the chair said.

12797   MR. ASPER: Yes.

12798   COMMISSIONER PENTEFOUNTAS: Okay.

12799   MR. ASPER: I think that theory is in the marketplace. I think that's a valid theory, and that's why I think you have to say -- you know, keep them separate.

12800   THE CHAIRPERSON: Great.

12801   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

12802   Thank you.

12803   THE CHAIRPERSON: Thank you very much.

12804   Those are our questions.

12805   And I apologize for you being a late night, although I guess in your business this is not that late.

12806   MR. ASPER: No, this is -- and you've been going till eight, so this is great. We'll catch our flight.

--- Laughter

12807   THE CHAIRPERSON: Great. Thank you very much.

12808   MR. CICIONE: Thank you very much.

12809   MR. ASPER: Thank you very much.

12810   THE CHAIRPERSON: So we'll be adjourned till nine o'clock Monday morning.

--- Whereupon the hearing adjourned at 1750, to resume on Monday, September 15, 2014 at 0900

REPORTERS
Lynda Johansson
Jean Desaulniers
Madeleine Matte
Monique Mahoney

Date modified:

2014-09-15