ARCHIVED - Transcript, Hearing 15 September 2014

Volume 6, 15 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
15 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
15 September 2014

- iv -

TABLE OF CONTENTS

PAGE / PARA

PRESENTATION BY:

- v -

UNDERTAKINGS

PAGE / PARA

Gatineau, Quebec

--- Upon resuming on Monday, September 15, 2014 at 0900

12811   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

12812   Avant que je passe la parole à notre secrétaire d'audience, je voulais tout simplement prendre l'occasion pour féliciter tous les lauréats qui ont gagné des prix cette fin de semaine dans le cadre du 29e Gala des prix Gémeaux qui a eu lieu à Montréal. Donc, félicitations à tous et bravo pour faire de la télévision excellente.

12813   Madame la Secrétaire.

12814   LA SECRÉTAIRE : Merci.

12815   We will now begin today with the presentation of The Walt Disney Company.

12816   Please introduce yourself and you have 15 minutes for your presentation.

PRESENTATION

12817   MS FOX: Good morning. Thank you, Mr. Chairman and members of the Commission. My name is Susan Fox and I am Vice President of Government Relations for The Walt Disney Company.

12818   Disney appreciates your invitation to be part of the hearing today and we appreciate your interest in gathering the perspectives of a wide variety of stakeholders, including the views of a U.S.-based company like Disney.

12819   At Disney, we consider ourselves fortunate to play some role in the Canadian broadcasting system. From as far back as 1986, Disney has had and continues to have what we believe are mutually beneficial relationships with various Canadian broadcasters, both as a program supplier and as a minority shareholder. We value these partnerships with Canadian broadcasters and BDUs.

12820   Disney recognizes the uniqueness of the Canadian broadcasting system and we appreciate that the Commission's polices have resulted in a system that is enviable for its wide array of local, national and international programming.

12821   In Canada as in the U.S., we believe that it is that combination of local, national network and international programming, as well as the combination of news, entertainment and sports programming, that makes broadcasting particularly compelling. We also believe, and hope that you agree, that as a U.S.-based programmer we play some role in the overall success of our Canadian partners.

12822   In our view, it is in all of our interests, and most importantly, the interests of viewers, for Canadian broadcasters to continue to succeed by airing a wide variety of content because, as I said, for us it is that variety of content that makes broadcasting so special.

12823   Therefore, our focus in this proceeding is to support regulatory outcomes that will, in our view, preserve and protect the long-term health of the Canadian broadcasting system.

12824   As with the American broadcasting system, the Canadian broadcasting system is faced with many challenges as well as opportunities in light of emerging technologies, competitive market forces and evolving viewer expectations. This proceeding is very timely and we appreciate the opportunity to share our perspective and experiences.

12825   I would like to focus my remarks this morning on the two key issues that we discussed in our written submission: simultaneous substitution and channel packaging. I recognize that you addressed both of these issues and raised some proposals as part of your recent Working Document and I will address those specific proposals as well.

12826   Turning to simultaneous substitution, in our written comments, Disney supported the continuation of simultaneous substitution. In addition, in response to the Notice of Consultation, Disney also supported exploring the extension of substitution to include non-simultaneous substitution.

12827   We believe that the strength of the Canadian broadcasting system is its combination of compelling local, national and international content. Indeed, as I stated before, we believe that this combination of content is what makes broadcasting special around the world.

12828   We believe that the substitution policy for U.S. content plays a role in maintaining the overall health of Canadian broadcasters so that they can continue to invest in a full range of content to serve their viewers. Therefore, it likely won't come as a surprise to any of you that Disney has concerns with the recent proposal to either prohibit simultaneous substitution entirely or prohibit simultaneous substitution only with respect to live event programming.

12829   It is worth making a point about the distinction between the U.S. and Canada.

12830   In the U.S., program rights among domestic U.S. stations are preserved through a set of administrative rules coupled with private contractual provisions that prevent duplicated programming from being imported into a local broadcaster's market.

12831   In Canada, the preservation of program rights poses a unique challenge, given our close geographic proximity and the fact that the U.S. signals that are distributed in Canada often carry the very same programs for which the local Canadian broadcaster has purchased exclusive Canadian broadcast rights. This situation is unique to Canada.

12832   Simultaneous substitution is an innovative Canadian solution to address this problem. It is also, in our view, a much less intrusive and more consumer-friendly measure than program blackouts, which we see as one of the only other alternatives to protect program rights in Canada.

12833   In opening my remarks, I mentioned that Disney is proud of our partnerships with Canadian broadcasters to distribute our programming in Canada alongside Canadian content. However, we are concerned that without simultaneous substitution Canadian broadcasters will have no means to protect and monetize the program licences that they acquire to broadcast Disney programs in Canada.

12834   Again, to stress the point, we appreciate that U.S. content is only one category of the compelling content aired by Canadian broadcasters but we are concerned that without simultaneous substitution Canadian broadcasters' ability to license U.S. programming would be significantly diminished. In our view, this would inevitably encourage the North Americanization of program rights and could foreclose the opportunity for Canadian broadcasters to acquire those rights. A cynic would say this is a self-interested concern but we truly believe that there are overall ramifications for the Canadian broadcasting system and Canadian viewers.

12835   In such a scenario, while Canadians might still have access to some of this programming, it would only be via signals captured or imported from the U.S. We believe that no one benefits from that scenario. Canadian viewers would be watching these programs on U.S. and not Canadian stations. Canadian broadcasters would lose audiences to U.S. services and with declining audiences there would be declining revenues.

12836   To be clear, the U.S. services would be unable to monetize the increased viewing and so would achieve nothing in return. And as the Commission has previously acknowledged, the revenue generated from U.S. programs, including from simultaneous substitution, helps to play a part in funding the creation and acquisition of the full array of content aired by Canadian broadcasters, including Canadian programs.

12837   Although the consumer might benefit in the short term and on isolated occasions by being able to access some of the same programming without service disruption and with U.S. ads intact, in the long run the consumer, in our view, will also lose by not having the same access to the same variety of content on Canadian stations.

12838   Turning to live event programming, our concerns with the potential repeal of simultaneous substitution extend to that category of programming and, in fact, our concerns may even apply more strongly in that context.

12839   As all of you know, the broadcasting marketplace is more dynamic and challenging than ever. With the increasing adoption of DVRs, live programming is becoming increasingly important to broadcasters. Indeed, live programming often is the tent pole for broadcasters, serving as the place for the most valuable local advertising and the best place to promote the rest of the broadcaster's program schedule. In such a context, we believe that the repeal of simultaneous substitution for live event programming would have a disproportionally negative impact.

12840   In today's increasingly competitive digital environment, all broadcasters need to acquire and protect the best program rights that they believe are the most relevant and attractive to viewers. They can only do so if the rights that they acquire are adequately protected.

12841   We believe that repeal of simultaneous substitution could lead to the end of a separate and distinct Canadian market for U.S. programming and that that would be an unfortunate result of a well-intended regulatory measure.

12842   The second issue I'd like to address this morning is the unbundling of channel packaging. We addressed this issue at length in our written comments, and our comments included many references to economic studies that have been conducted in the U.S. During my testimony this morning, I'd like to focus on just a few key points.

12843   Again, we do recognize that the Canadian market is unique and we know that BDUs are already aggressively working to explore new consumer-driven retail options. I also recognize that the Commission recently set forth proposals to focus discussion during the hearing and I'll address those proposals as well.

12844   First, I'd like to highlight our experience with Disney Channel. We are very proud of the programming that airs in the U.S. on Disney Channel and we are also proud that much of that content now appears in Canada on Family Channel. Disney Channel is currently the premier destination in the U.S. for children's and family viewing, but for many years the service languished as an à la carte service.

12845   Disney Channel originally launched in 1983 in the U.S. as a premium à la carte service. Notwithstanding the strength of the Disney brand, penetration hovered at low levels, and like all other à la carte services Disney Channel had to contend with high subscriber turnover or what we call churn.

12846   This meant that in order simply to maintain the prior year's distribution Disney Channel had to replace those lost subscribers every month or every year. In order to attract and retain those new subscribers, rather than investing in programming, Disney allocated a significant portion of its sales revenue toward consumer marketing and promotion, from telemarketing to free previews and everything in between. This led to a vicious cycle because without attractive original programming the service was unable to attract and retain a wide subscription base. Without a wide and loyal subscription base, the service was forced to spend more on marketing and promotion.

12847   Even experiments with hybrid packaging for Disney Channel -- on an à la carte basis on some cable systems, as part of a premium package or part of tiers on other cable systems, and on an expanded basic tier on yet others -- proved to be unsuccessful. Even at their peak, the smaller tiers still were not sufficiently penetrated and they continued to require heavy investment in marketing and retention.

12848   By the end of 2000, Disney Channel was offered only as an expanded basic service in the U.S. With this greater subscriber penetration, the service was able to redirect funds previously committed to marketing and subscriber retention and spend them instead on high-quality family programming. Disney Channel's average yearly programming expenses increased significantly.

12849   This increased investment in programming resonated with viewers and resulted in the ratings for the service increasing significantly. It also resulted in Disney Channel receiving numerous programming nominations and awards, providing more diversified programs to reach a broader multicultural audience and now providing far-reaching support for various public affairs initiatives.

12850   Turning to another Disney-owned network, ESPN, the ESP has been broadly distributed since its inception in 1979 and, as a result, is now one of the most successful sports networks in America.

12851   ESPN's business model is built upon the widest possible distribution -- the sports leagues that control the rights to premier sports events demand as much and the economics of live-event and news coverage simply cannot be sustained without the revenue generated from broad distribution.

12852   Simply put, ESPN would not be the success it is today if it had been required to be distributed on an à la carte basis, in the U.S.

12853   As I mentioned earlier, our written comments focused, at length, on various economic studies and assessments that have been done in the U.S.

12854   While I do not want to dwell on the points made in our written comments, I would like to stress a few key points.

12855   Both from our experiences and from the industry and economic work done on these issues, we have concluded that broad distribution is preferential for programming services for a few fundamental reasons: first, it allows services to maximize advertising revenues, rather than increasing wholesale rates; second, it provides services with certainty to assess potential revenues in order to plan, on a long-term basis, to invest revenues in program production and acquisition; and, third, it allows services to redirect consumer marketing and retention expenditures into higher-quality and more diversified programs to better serve all viewers.

12856   In contrast, various U.S. economic studies have found that à la carte packaging would result in numerous unintended negative consequences.

12857   It would reduce the quality and quantity of programming available to viewers, for the reasons I described earlier.

12858   It would result in higher costs for both BDUs and programming services as they spend more on customer awareness and retention.

12859   It would reduce the diversity and variety of programming services, as some services inevitably go dark or are unable to take off from launch.

12860   Proponents of retail unbundling cite rising BDU rates and the misplaced, in our view, belief that consumers would pay less for certain combinations of channels.

12861   However, we believe that the reality is that even a few à la carte channels would cost the consumer as much, or more, than the preassembled tiers.

12862   While we recognize that the Canadian broadcasting system is distinctive, we believe that a review of the economic analysis undertaken in the U.S. is relevant and that it demonstrates that mandatory unbundling comes with many negative consequences, with a pure pick-and-pay model causing the most harmful effects.

12863   The Canadian market has an added dimension that decreased revenues, also, would translate to decreased expenditures on Canadian content.

12864   Turning to the Commission's most recent proposals, we note that the Commission has proposed that services should be available on an à la carte, pick-and-pay, and large bundled basis.

12865   While this approach is preferable to a pure à la carte model, you have heard multiple witnesses say that it will still result in material consequences to the system.

12866   As such, we recommend that BDUs and programming services should continue to be given the flexibility to determine the appropriate pricing for each packaging option proposed by the Commission.

12867   Thank you for your attention, this morning.

12868   Again, I do appreciate the opportunity to appear before you and I'd be happy to answer any questions that you may have.

12869   THE CHAIRPERSON: Thank you very much, Ms Fox, for being here. Indeed, we invited you. You hadn't asked to appear. But, I think we would benefit -- in fact, I've read, carefully, your evidence and I don't plan to ask a lot of questions on the various reports. But I still think that you're an important player in this single Canadian broadcasting system and you add diversity of content, which Canadians very much appreciate.

12870   MS FOX: Thank you.

12871   THE CHAIRPERSON: So, thank you for being here.

12872   First of all, though, in your written submission you say you're here on behalf of related companies.

12873   I'd like to know exactly which -- what do you mean by related companies?

12874   And I take it, you're speaking on behalf of the Disney production companies, the Disney broadcasting companies.

12875   Is that correct?

12876   MS FOX: I would say the Disney company's family of companies and interests. So, for us, that would be our programming production studios, the programming supplier on Disney Channel content, ABC studios -- Disney owns ABC and sells a lot of content into Canada.

12877   The one thing I will note -- I think it's worth stressing -- is that on the broadcasting side in the U.S., ABC owns only eight television stations.

12878   THE CHAIRPERSON: Right.

12879   MS FOX: And we do not own the border stations that have filed. They are partners of ours, but they are separately-owned affiliates.

12880   We also --

12881   THE CHAIRPERSON: You are speaking on behalf of those affiliates, I think they're in Chicago, Fresno, Houston, L.A. --

12882   MS FOX: Those are our stations, yes.

12883   THE CHAIRPERSON: -- Philadelphia, Raleigh, and San Francisco.

12884   Is that right?

12885   MS FOX: Absolutely. Those are our stations. We always speak on their behalf.

12886   THE CHAIRPERSON: Right. But none of those, to my knowledge, are carried in Canada. Correct?

12887   MS FOX: No.

12888   THE CHAIRPERSON: Are you speaking -- so you are speaking on behalf of ESPN and ABC?

12889   MS FOX: Absolutely.

12890   THE CHAIRPERSON: How about A&E?

12891   MS FOX: A&E. We have an interest in A&E. We are an equity partner in the ownership of A&E.

12892   I am always supportive and cognizant of their concerns. In drafting our comments, I did not focus on the issues that A&E raised and I haven't studied, deeply, some of the issues they raised. But, certainly, we are -- as a financial partner of theirs, likewise with our Canadian partners, we have some, certainly, support for their concerns.

12893   THE CHAIRPERSON: Fair enough.

12894   So, you would be okay if I assume that your perspective is not -- you're speaking on behalf of A&E and --

12895   MS FOX: I think that's fair.

12896   THE CHAIRPERSON: That's okay. We'll see them.

12897   The Canadian market -- I mean, obviously, your most important market is the U.S. market -- how would you classify the Canadian market, in terms of your overall economic interest?

12898   Is it the second-most important market? Or not?

12899   MS FOX: I would say it's very relevant and growing.

12900   So, given our shared heritage -- and I've thought a lot about this in thinking through the changing marketplace to be, as we've seen it from 10 years ago and 20 years ago, that we have, as a company, come to rely on and focus much more on international distribution, and Canada is a very large part of that.

12901   You have as strong a sense of the market as I do. But as programming expenses have increased, broadcast ratings decreased. It is important for us, as a company to be closer to our international partners than we ever have been, and we hope that that relationship grows.

12902   THE CHAIRPERSON: So, in terms of revenues -- I'm trying to get a sense of relativity --

12903   MS FOX: I don't --

12904   THE CHAIRPERSON: -- in your international presence.

12905   MS FOX: I don't think I can give that for you today, because I don't have it handy, and I want to be responsive.

12906   THE CHAIRPERSON: Right.

12907   MS FOX: So, I could do an undertaking on that point --

12908   THE CHAIRPERSON: I appreciate that.

12909   MS FOX: -- and beyond the broader points.

12910   THE CHAIRPERSON: Right. To have a sense, it's just I think you mean you represent a large number of entities here and we'd like to get a sense of the economic imprint.

12911   So, as you know, it's for the 19th of September -- and if any of that is confidential, you can of course produce it.

12912   So, a sense of the importance of the Canadian market compared to other international non-U.S. markets for you, as a company.

Undertaking

12913   MS FOX: M'hmm.

12914   THE CHAIRPERSON: I'll get to simultaneous substitution in a moment. But it's quite clear from your statements that you're very concerned, going forward, about the rights market, and simultaneous substitution is just part of that.

12915   It seems to me -- and I'm asking you if you agree -- that it's been a major concern for a number of years, as new platforms develop, that studios have started or producers of content have worked hard when there was a disruptive new technology to create more of an orderly marketplace with a subsequent platform.

12916   Would you agree that that's pretty much the story of the past 30 years?

12917   MS FOX: Can you explain a little more? I'm just trying to get my head around --

12918   THE CHAIRPERSON: Beginning, you know, when it was just over-the-air and specialties came out, or pay, there were attempts of VOD. There were attempts to make sure that all that was rolling out in prescribed windows, in a logical way, presumably to maximize the value of the content you're producing.

12919   MS FOX: Traditionally, yes, we have had windows. Those have, as you know, shrunk significantly and, I think in recent years, we've found ourselves following the consumer more directly.

12920   THE CHAIRPERSON: Okay. But you agree that, historically, that has been a way of going about it.

12921   So, here comes along SVOD platforms.

12922   So, how are you addressing those?

12923   MS FOX: So, what we --

12924   THE CHAIRPERSON: In the Canadian and foreign markets.

12925   Because I think there may be a different strategy there.

12926   MS FOX: So, what we want -- we're platform agnostic. We try to get our content into every new model that evolves. And we have, for SVOD -- and I'm assuming that the SVOD you refer to is in conjunction with a BDU partner or with a distribution partner --

12927   THE CHAIRPERSON: No, or just a stand-alone SVOD that operates in the country.

12928   MS FOX: So stand --- we have not done direct-to-consumer.

12929   Traditionally, in the U.S. what our strategy has been the last several years was to work their MVPD partners to launch what we call our watch apps, which are live linear viewing of our programming that's on an unauthenticated basis with wrapped-around with that live linear stream is a full VOD library.

12930   That evolved after the more traditional set-top-boxed-based VOD offerings that were also done in conjunction with our MVPD partners there.

12931   Our watch apps are done in conjunction with our MVPD partners, both for ABC content, our ESPN family of content, and Disney Channel and that family of content.

12932   So, thus far, we have worked with our MVPD partners -- as many are working here, I know -- aggressively, to launch authenticated offerings.

12933   We have not gone direct to the consumer.

12934   In the U.S., as I'm sure you know, we have an in interest in Hulu, which is something that we believe is important.

12935   Our strategy overall is to -- we don't know where the marketplace will land, so -- to place bets across the board. We obviously have a lot -- we were the first company at ABC to put our content on iTunes, which is a different model but it demonstrates that what we're looking to do is look at the models they evolved, get our content there and see how the economics work out.

12936   THE CHAIRPERSON: In terms of windows, then, and rights, and trying to create an orderly marketplace, I take it the authenticated content is an add-on to that window?

12937   MS FOX: It is.

12938   THE CHAIRPERSON: It hasn't evolved as a separate window, yet.

12939   MS FOX: No. No.

12940   THE CHAIRPERSON: I appreciate that you currently don't have an SVOD offering -- I'll ask you a question about that, in a moment.

12941   But with respect to something like a Netflix or other, is that a new window, in your view?

12942   MS FOX: It could be a new window. It could be a same window which they compete with other players.

12943   I think Netflix, also, is just evolving their own content strategy. It could be, as was here, with our output deal, on the theatrical side, a similar window to the pay TV window. In the U.S., we've done a lot -- we have library content on Netflix. We continue to have a significant amount of library content on Netflix. I don't -- I have no sense of -- I don't -- I can't look out into the future to see where that will -- where that will land, ultimately.

12944   THE CHAIRPERSON: So would it be fair to say that, in terms of the emergence of a new window, things are still in flux, we're in that transitional mode, and we don't quite know where that cleaner window will evolve? We'll only know --

12945   MS FOX: I think that's fair.

12946   THE CHAIRPERSON: -- in hindsight.

12947   MS FOX: And I think the concept of windowing, as carefully as you've described, historically is -- even internationally as -- to be candid, I think internationally our content years past was not aired as simultaneous as it is in the U.S. I think, in part, for us, one of the challenges that we haven't -- hasn't been raised, I think insignificant to the hearing, but is the challenge of piracy, and that that has driven us, in many ways -- not that we wouldn't always be looking at the consumer, but the presence of piracy in our market and around the world has led us to change some of our practices as well.

12948   THE CHAIRPERSON: Through other platforms that illegally take your content. So you have to more aggressive to put it into the marketplace, is that what you're saying?

12949   MS FOX: Well, we have to -- if a consumer -- if a viewer wants to see our content and can't see it on a legitimate source, which is what we want, as policymakers, as a copyright holder, we would obvious want, we recognize that some viewers may watch our content on sources that aren't legitimate, and, therefore, we would -- we want to reach consumers where they are in a legitimate way.

12950   So those pressures, the notion of having a slower rollout of content for a first season in the U.S., and waiting to roll out original content internationally, is more challenging because in non-U.S. markets we can obtain the content through other means.

12951   THE CHAIRPERSON: Now you say currently you aren't delivering your content directly to consumers.

12952   Do you foresee a day when that might be an evolution that your companies would be looking at?

12953   MS FOX: Perhaps. Everything is in evolution at this point. I can't say. I think that's probably about as much as I can say. We will always look at all options. We're --

12954   THE CHAIRPERSON: What factors would you be looking at when making that, because it's a pretty important strategic decision?

12955   MS FOX: It is. I think what I can say is that thus far what's been relevant to us is the value we see with our distribution partners. We think there is significant value there. And we have not -- thus far that's a model that we wish to continue to support.

12956   I think as the market evolves, we would have to evolve -- have to look at that on a going-forward basis.

12957   THE CHAIRPERSON: And the likelihood of that occurring over the next five years?

12958   MS FOX: It's probably something I can't speak -- I mean -- and honestly, I don't think I can make a prediction. That's an awful --

12959   THE CHAIRPERSON: Would you suggest that we're a little far from turning in that direction?

12960   MS FOX: I can -- certainly you can see where our current strategy is and where we're placing our bets.

12961   THE CHAIRPERSON: M'hmm.

12962   MS FOX: And one point I'll make is that in the U.S. where we have -- and certainly Hulu is -- can be -- is, as a consumer model, it's not -- you know, it -- so that's something that we have done there. And iTunes is a consumer model. So it's -- our live linear streams are still working very much -- close with our partners.

12963   The other point I'll make in the U.S. -- and there's been some press about this announcement as well -- is that we are -- in looking to evolve, see where the market's evolving and what -- where we sort of place our bets and invest our resources.

12964   There's some note made of a recent agreement we made with DISH to have an Over-the-Top service there. The truth to it, still with our distributor partner there's DISH, but as a Over-the-Top option that they would make is different from the satellite, that would have our live -- they would have our --

12965   THE CHAIRPERSON: Right, which is more akin to the authenticated model we talked --

12966   MS FOX: It would be a lower price point --

12967   THE CHAIRPERSON: M'hmm.

12968   MS FOX: -- and a smaller suite --

12969   THE CHAIRPERSON: Right.

12970   MS FOX: -- but, yeah.

12971   THE CHAIRPERSON: Do you see the premium Hulu service as a separate window?

12972   MS FOX: I don't know. Umm...I don't know, like, in a separate window or not. We see it, certainly, as a growing opportunity.

12973   THE CHAIRPERSON: Well, how are the rights negotiated? Are they negotiated with -- similar to the catch-up type windows or are they done separately?

12974   MS FOX: That is -- it is a -- mix some content, a bit of Hulu and Hulu Plus. So to get into further on that with respect to the details, I'd probably ask to respond via an undertaking --

12975   THE CHAIRPERSON: Okay, if you'd like --

12976   MS FOX: -- further on that.

12977   THE CHAIRPERSON: You understand what we're trying to --

12978   MS FOX: I do.

12979   THE CHAIRPERSON: -- to figure out, because oftentimes how business models develop in the U.S. have a ricochet effect in Canada.

12980   MS FOX: I --

12981   THE CHAIRPERSON: -- so if you -- yeah, so if you want to answer that in confidence --

12982   MS FOX: I do, yeah.

12983   THE CHAIRPERSON: -- I appreciate that. That's why we have confidentiality rules. But don't forget to make the case why it should be.

--- Laughter

12984   THE CHAIRPERSON: Some people -- Canadian companies often forget, just assume we would read between the lines.

Undertaking

12985   THE CHAIRPERSON: I'd like to turn to the whole issue of à la carte.

12986   Perhaps -- and, by the way, the documents you provided were very useful --

12987   MS FOX: Thank you.

12988   THE CHAIRPERSON: -- in terms of historical. You know, some of them do date back to 2004 --

12989   MS FOX: I know.

12990   THE CHAIRPERSON: -- and 2006.

12991   MS FOX: We recognize that.

12992   THE CHAIRPERSON: And it's a fast-moving situation. Would it be possible for you to share with us, because you must be following this quite closely, what is the current status of the issue in the U.S.?

12993   MS FOX: So since the 2006 report there have been, at times, a legislative proposal --

12994   THE CHAIRPERSON: M'hmm.

12995   MS FOX: -- that you may have picked up occasionally.

12996   THE CHAIRPERSON: You mean Senator McCain's proposal?

12997   MS FOX: Yes. And Senator McCain has been a long-time stalwart on these issues. He's very consistent.

12998   There has not been further action taken on any of those. That's on the legislative front.

12999   On the regulatory front, since 2006 the retail à la carte is not an issue that the U.S. Federal Communications Commission has picked up.

13000   THE CHAIRPERSON: So the FCC is not picking it up, but how about in Congress?

13001   MS FOX: It has not proceeded past the bill introduction stage.

13002   THE CHAIRPERSON: Right. There was some recent noise in August, but am I reading correctly that the two senators who have proposed that have since changed their minds?

13003   MS FOX: I can't -- I don't think that they've changed their minds, but the proposal has not moved.

13004   THE CHAIRPERSON: Or they're being more pragmatic, I guess.

13005   MS FOX: They have a lot of priorities.

13006   THE CHAIRPERSON: Yes, when there's a lot of priorities.

13007   In your written submission, and again today, you refer to this pure à la carte.

13008   MS FOX: M'hmm.

13009   THE CHAIRPERSON: You will agree that what we're proposing, at least in a preliminary review, is a far cry from pure à la carte, right?

13010   MS FOX: I will. I think there's one key distinction to be made, and I'm -- this is a point that I think merits fleshing out as to what our concerns are --

13011   THE CHAIRPERSON: Right.

13012   MS FOX: -- with the mixed model that you've proposed, which we are very well aware has the three elements to it. For us, we're coming at this question as a programmer and as a pure content company. So it is the existence of that -- of the one-third, the pure aspect there.

13013   When we are looking to make a programming deal to purchase programming or -- in the sports area, for example, was to purchase long-term sports rights and the production space to invest in programming. One of the factors that is very critical to know when you're making those investments is what revenue come in on the other side.

13014   With the existence of the pure à la carte option, admittedly with -- there's two other options the consumer can choose. But the uncertainty that's cause by that is what is our -- is what's our concern from a long-term revenue and planning basis and production basis.

13015   So that's why, even with the mixed model, you'll hear me echo concerns that it is for a programmer because we don't -- we don't direct, ultimately, how the -- we wouldn't have the insight, as a programmer or an investor, as to how the channel lineups would be designed straight to the consumer, so that's why the concern remains.

13016   THE CHAIRPERSON: And how would you, if we were to decide, in that sense, to have a mixed model --

13017   MS FOX: Yeah.

13018   THE CHAIRPERSON: -- understanding we've had a conversation with a lot of consumer groups.

13019   MS FOX: Right.

13020   THE CHAIRPERSON: They've realized, as well, that, you know, maybe the majority of Canadians are happy with what they get, so nobody's suggesting that we go out and ask everybody to rechoose their packages.

13021   MS FOX: Right.

13022   THE CHAIRPERSON: -- which would be a bit of a nightmare for everyone, but it would be an available regulatory entry point into the BDU market.

13023   Assuming that we do land that, along with other flexibility BDUs might have, that you'd have to have à la carte both for Canadian services and foreign services, how would you mitigate the risk you just mentioned?

13024   MS FOX: So one of the points we made in our comments today, and we've also made in our written submission, is, if the Commission goes that route, to preserve the pricing flexibility for the channels that are offered that that would be important for us and very relevant.

13025   What also would be -- frankly, one of the --

13026   THE CHAIRPERSON: What do you mean by "pricing flexibility"? You mean in the wholesale agreements between --

13027   MS FOX: So that there wouldn't be rate regulations. So that the BDUs --

13028   THE CHAIRPERSON: Oh, I see.

13029   MS FOX: So that's -- and at times the discussion about à la carte and individual à la carte can lead to a discussion of rate regulation.

13030   THE CHAIRPERSON: Okay.

13031   MS FOX: In order to recoup lost costs, we would submit that price --

13032   THE CHAIRPERSON: Okay. We'll assume not.

13033   MS FOX: And then the second -- and then the second is probably a robust discussion with us and our -- and the distributors or the programmers to whom we're selling content as to how to structure a programming deal that takes those uncertainties into account.

13034   You know, some of our -- sometimes content is licensed on a per-sell basis. That becomes challenging if -- to evaluate the economics of the deal if there's a pure à la carte option. So we'd probably want to have a -- you know, which we typically do in the U.S., a private marketplace discussion as we license our content as to where our content would fall, where it would be packaged, how it would look, things of that nature, what preassembled tiers, have some visibility into what the consumer offerings would be.

13035   THE CHAIRPERSON: So through the affiliation agreements?

13036   MS FOX: Yeah.

13037   THE CHAIRPERSON: So would it involve, potentially, arrangements to -- sometimes people refer to them as "make wholes" arrangements or making whole, either in terms of a per-sub or advertising revenue loss as a result of repackaging?

13038   MS FOX: I think at this point it's very early to say. I think we would -- what we would submit is that we, and the programmers who are directly programming into Canada, and the BDU issue, retain the flexibility to export a number of options.

13039   Conceivably, it could include a number of things. It could be -- we could switch to -- some of our programming is on a sold pure licence fee basis for an aggregate amount, but it would involve a robust negotiation about how -- you know, how to allocate those risks.

13040   THE CHAIRPERSON: Right. With several BDUs in the country trying to --

13041   You do understand that the suggestion is that all rules would apply, not just to Canadian companies, but would have a ricochet effect on non-Canadian companies. So people have suggested -- and, in fact, it is in the Working Document -- that these wholesale rules would also apply to U.S. services.

13042   MS FOX: I do, and I can comment a little broadly on that.

13043   As you know, our services aren't on the eligible list, so we are in a slightly different position as a U.S. programmer. We are a pure program supplier and we are an equity partner.

13044   Having said that, as you mentioned at the opening, we have a share in A&E, which is on the eligible list, and we also can share with you our overall regulatory philosophy, as we have advocated it in the U.S.

13045   Our general experience, and our philosophy in the U.S., has been not to have those requirements apply. We have, as a programmer, significant market incentives with the consumer to get our content viewed and on air, and those marketplace incentives and imperatives drive the deals just as -- or if not more sufficiently in the U.S. than the requirements would result in.

13046   THE CHAIRPERSON: Referring back to the fact that you think, if we were to go with a model where there was more choice and flexibilities provided to Canadians, you would enter robust negotiations with the BDUs, it has been suggested that those robust negotiations, not necessarily with you, but with others, might lead to parties -- foreign entities -- not entering into agreements. In other words, pulling out of the Canadian market.

13047   Would that be the strategy that Disney might take?

13048   MS FOX: I realize that that has been a topic from last week and previously, and hopefully it won't surprise you that I am not here to say -- and I don't think it is appropriate to say that we will exit a market, particularly one as valuable as Canada.

13049   What I can say is that, as we look at the overall arrangement, and whether it makes sense for us, certainly the regulatory environment is an aspect of that, so, obviously, the financial component is.

13050   How our content is presented and looks, and our distributor partners, what their service is like, is also important.

13051   But, obviously, the regulatory environment is a component there.

13052   But I don't think -- I wouldn't presume to say that we would exit the market.

13053   THE CHAIRPERSON: Because it would be inconsistent with your corporate philosophy.

13054   MS FOX: We want to serve. We want to be here. We want to continue our relationship. We want to grow the relationship. So that is our first principle.

13055   THE CHAIRPERSON: Now, with respect to simultaneous substitution, I was struck -- I have heard the argument -- and I think you disagree with it -- that if there wasn't simultaneous substitution, or any other form of blackout or anything like that, it might actually have a downward pressure on the costs of programming.

13056   Yet, at paragraph 10, I think you are saying the opposite. At paragraph 10 of your oral presentation you say: U.S. services would be unable to monetize the increased viewings that over-the-border stations would have.

13057   MS FOX: What I am referring to there are the U.S. border stations that are being carried here, because their contractual rights with ABC are for contractual redistribution of our programming within their local markets in the U.S. So that is their local market --

13058   THE CHAIRPERSON: So you are saying that they don't even own the rights beyond their local market.

13059   MS FOX: Right, and if they are carried throughout Canada, they can't sell advertising, and they would not benefit from the extent of that additional viewing.

13060   THE CHAIRPERSON: Right. So there are two issues there. You don't think that advertisers would give a premium of any sort for that Canadian advertising.

13061   MS FOX: You know, to be fair, you may have a greater perspective on that, depending on the extent of the carriage of those stations and into which Canadian markets, but it could be diffuse if you are trying to serve a number of markets -- your local car dealer. It's hard to --

13062   THE CHAIRPERSON: I guess it depends on the nature of the advertiser, as well, but there are national brands.

13063   MS FOX: That's right, but the overall point is that the U.S. stations being imported, they are U.S. partners of ours, and very good ones, but they don't have the contractual rights for redistribution.

13064   So monetizing that content -- they wouldn't be able to.

13065   THE CHAIRPERSON: So you are saying that, on the network content of -- let's just talk about ABC. You have a border station that is an affiliate of ABC. You are saying that the rights you have provided to them, for the network part, not their local station content, they only have the rights for that local U.S. market.

13066   MS FOX: Our policy in the U.S. is, when we license our non-owned affiliates, and our owned affiliates, they have the right for retransmission consent, which I know is a U.S.-based term, but to retransmit the network, or the ABC aspect of the programming within their local market, which, for our purpose, is defined under Nielson as a DMA.

13067   So it is within their local area.

13068   And at times it is significantly viewed, which is a slight wrinkle to that, but it is essentially their local market. That is where --

13069   And in the U.S. -- and I mentioned this a little bit -- is where the network non-duplication rules come into place, where there is a set of rules that automatically come into place that would allow the local broadcaster to block the importation of network programming from the next market over within the U.S.

13070   So it's fairly rote, it's a fairly routine process.

13071   THE CHAIRPERSON: In this proceeding we have some border stations that are trying to monetize their local signal into Canada. Are you saying that they don't actually, contractually, control those rights?

13072   MS FOX: Our affiliation agreements with our local affiliates cover their local markets.

13073   And part of my response is that I do recognize that this is a unique situation in Canada for the redistribution. It's an anomaly in many ways. So the current situation is what it is.

13074   THE CHAIRPERSON: If it is such a great idea to do simultaneous substitution, why haven't the Americans picked up on it?

13075   MS FOX: In the U.S. versus other local stations? I think that our system of network non-duplication essentially serves that purpose.

13076   That's how we deal with it. It's slightly different, but it is -- frankly, it's an analogue. It's a similar process.

13077   I grew up in Pittsburgh. If the Cleveland station -- or in between Pittsburgh and Cleveland -- if the Cleveland station was being brought into the Pittsburgh market, carrying duplicated ABC programming, the ABC affiliate in Pittsburgh could ask the cable system to block that out.

13078   So it's similar, it is just a slightly different regulatory structure.

13079   THE CHAIRPERSON: Okay. I think I understand your perspective.

13080   With respect to the Working Document, for you, whether there is a prohibition on simultaneous substitution writ large or targeted to live and sporting events, you think that would have just as much negative consequence.

13081   MS FOX: We do. What we tried to convey is that the live event programming -- and we recognize that the Super Bowl is a particularly unique situation, and live event programming is unique, but it represents more than four hours out of the schedule.

13082   And I am sure, from watching the Oscars, which we license in Canada -- the Super Bowl we do not -- but when you view them, you get a sense that the broadcasters and the programmers are using that broadcast to drive viewing to the entirety of their schedule.

13083   You can see it with the programming that is aired before and after, which is often the programming that the broadcaster is trying to launch successfully, that they believe can be the most successful.

13084   The promos placed in that content are for the shows that they believe have the best shot of making it and the ones they are trying to put the most promotional value behind.

13085   So the impact is not just the amount of time, it is greater than that.

13086   And I recognize that as a regulatory body you are balancing a lot of concerns, but our point is just that -- is that overall disproportionate impact.

13087   THE CHAIRPERSON: Right. When you license something like the Emmys, do you require the Canadian companies somehow to use promotion giving that promotional lift to any particular type of program, as part of that package?

13088   In other words, do you make -- I don't know what your next hit show will be, but asking promotion for that show, as opposed to another show.

13089   MS FOX: Generally, when we license content, we divide the time, so the Canadian broadcaster has the option there.

13090   Certainly we have ongoing discussions with our partners as to what shows we think are going to be the biggest hits, and where we think they should place their promotional value, but I don't know that it gets to that degree.

13091   So I would say that it would be more informal than any sort of formal requirement.

13092   THE CHAIRPERSON: So it has more to do with your programming arrangements, when you are selling that programming to Canadian private companies.

13093   MS FOX: Yes, and a recognition for the local programmer that that time is incredibly valuable to them.

13094   THE CHAIRPERSON: Right. But you are not preventing the promotion of Canadian programs or anything like that, right?

13095   MS FOX: No.

13096   THE CHAIRPERSON: Nor are you occupying so much of the promotional window that no promotional activity would be available.

13097   MS FOX: No, that's not --

13098   THE CHAIRPERSON: You are not in that. Okay. I just wanted to make sure. You got me nervous for a second when you were talking about lifting and promotion and all of that, because we would want to promote some of our content, as well.

13099   Those are my questions. I will pass it over to the Vice-Chair.

13100   COMMISSIONER PENTEFOUNTAS:

13101   Thank you, Mr. Chairman.

13102   Good morning, Madam Fox. Just briefly, you mentioned balancing concerns, and it is common knowledge that ESPN is a highly successful service.

13103   MS FOX: Yes.

13104   COMMISSIONER PENTEFOUNTAS: It is common knowledge that you have enjoyed broad distribution since 1979, and that rights have become increasingly expensive.

13105   Some might argue that the broad distribution has, in effect, fed that beast, and that the increase and the exigent demands of the rights holders only exist because we can spread the cost of those rights over 100 million subs, as an example, with our neighbour south of the border.

13106   So, given that, and given your extensive regulatory experience, as well, how do we justify the cross-subsidization of non-sports fans with the content enjoyed by sports fans?

13107   MS FOX: This is a point which we deal with a lot. A couple of points there. One is, with respect to ESPN, we would submit that the rising value of sports content is in part because it is DVR-proof, and there are competitive pressures that have created the dynamic where sports rights have become more valuable.

13108   And part of that is, frankly, the notion that ESPN faces greater competition for those rights than we ever have from other linear distributors in the U.S. and that's driving increases as well.

13109   We would also submit that sports -- you can look at it both ways -- that we believe that ESPN drives a lot of subscriptions in the U.S. to the expanded basic tier, that it provides the best value to their cable partners. We have consistently ranked as the network that provides the greatest value to our cable operators in driving subscriptions and ad revenues. That was confirmed in a study that was just released about a month ago. That was just with the beta studies that are done every year.

13110   The other point I'll say overall for ESPN is that although it can be viewed as a niche service -- and the arguments are that it is -- in our view it's a much rounder -- it's a much broader service for us in the U.S. Last fall, say, for college football, we have almost 190 million viewers of college football through the fall. We have every week 100 million people interacting with the ESPN media one way or the other. So for us it is a broader service that is appropriately deemed part of the broader tier and it drives the economics for a lot of other networks who may not be sports-related.

13111   The other point I will say is that there are growing options, and I know here there's a lot of discussion -- a lot of movement for tiering and pick-a-packs and the like. In the U.S. the one market development after the 2006 study to which the Chairman referred is that a lot of our MVPD partners in the U.S. have launched and are starting to launch more smaller tiers themselves or family tiers on which some of our services are available and some are not, and those are available to consumers and have had a slight growth rate.

13112   COMMISSIONER PENTEFOUNTAS: Thank you.

13113   THE CHAIRPERSON: Commissioner Simpson.

13114   COMMISSIONER SIMPSON: Good morning.

13115   MS FOX: Good morning.

13116   COMMISSIONER SIMPSON: I just have one question and it goes back to your point on this circular situation you were into or a teeter-totter where because you didn't have higher penetration in an à la carte you were forced to spend more money on programming, better-quality programming to get customers to reduce churn but then you would also then have to turn around and spend more money on promotion and the problem didn't really resolve itself until you got into an extended basic distribution.

13117   Given that even before you sort of vertically integrated Disney had deep pockets, why didn't ultimately better programming followed by more promotion work for you in terms of being able to negotiate better penetration?

13118   MS FOX: You know, I think even for a company like ours we don't have unlimited budgets and particularly now we don't in the dynamic we're facing, and I also think what drives in an à la carte world, what drives a lot of the programming decisions is the marketing of the subscription.

13119   So you may have, you know, a lot of money spent on some mainstream product that will drive subscriptions but there's not an unlimited bucket of resources no matter how big the company. And we also believe we have a pretty good brand. We couldn't drive it beyond that.

13120   What you won't have is the full robustness of content around some of that big programming that could be used to drive subscription. For Disney it's the Disney Junior content that we've been able to launch, which is to a much smaller age range, the 2-6 range, and that's what we think would face challenges.

13121   We're not saying that we wouldn't invest but it shifts the investment in a way that pushes a lot of the programming into the mainstream and tries to drive quick subscriptions and not long-term customer satisfaction.

13122   COMMISSIONER SIMPSON: So if I hear you right, a portion of the problem was that the type of programming that you were trying to create to go after a specific audience was not necessarily your Disney blockbuster-type programming but more niche, a different, smaller, more segmented audience with more specialized programming?

13123   MS FOX: At the time it was what I would probably call general family programming. The old Disney Channel was a lot of what I grew up with, a lot of the older Disney movies, and there was a lot of that content.

13124   It wasn't as much as what we pride ourselves in now for Disney Channel XD and Junior. It's programming that is specifically created for particular age groups, that has a greater diversity to it and a greater robustness, and it varies significantly across the age that we're working with and we're programming and it's much more diverse than just sort of a G-rated movie that would have been -- sort of all family-type movies that would have been on the old Disney Channel.

13125   COMMISSIONER SIMPSON: Thank you.

13126   THE CHAIRPERSON: Thank you. Just one final question. Do you currently, contractually or otherwise, have access to set-top box data of any sort in the United States?

13127   MS FOX: Of any sort? I'd be hesitant to say we don't have access to any sort but it is in the hands of the MVPDs. So that's, I think, similar to here, the MVPDs.

13128   THE CHAIRPERSON: Right. And is it something you would like to get access to?

13129   MS FOX: Sure, but there are regulatory constraints there. The MVPDs control that environment.

13130   THE CHAIRPERSON: Okay.

13131   MS FOX: So, you know, we can work with our partners to gain some visibility but there's both regulatory and business issues there.

13132   THE CHAIRPERSON: Thank you very much for being very cooperative too. Thank you. We appreciate it.

13133   MS. FOX: Thank you.

13134   LE PRÉSIDENT : Madame la Secrétaire.

13135   THE SECRETARY: Thank you.

13136   I would ask Zazeen Inc. to come to the presentation table.

--- Pause

13137   THE CHAIRPERSON: Gentlemen, welcome. When you're ready, please go ahead.

PRESENTATION

13138   MR. COHEN: Good morning, Commissioners, Commission staff and fellow participants. My name is Mel Cohen and I am Chairman of the Distributel group of companies.

13139   Distributel has been a competitive telecommunications supplier for over 26 years, offering a variety of services such as telephone, Internet and more recently TV. It is our experience as the largest competitive ISP in Canada that offers television services that brings us here today.

13140   With me today is Paul Louro, President of Zazeen Inc. Paul was one of the founders of Acanac, an ISP that was purchased by Distributel in 2010, and continues to lead Acanac within Distributel today. Distributel and Zazeen have been working cooperatively on the BDU since its inception, and the Commission will shortly receive an application seeking a partial transfer of ownership to Distributel.

13141   Also with me today is Matt Stein, who joined Distributel as Chief Executive Officer in March, and he is on the Board of Directors of Zazeen and will be making the balance of our presentation.

13142   MR. STEIN: Thank you, Mel.

13143   Mr. Chair, Vice Chair and Commissioners, Zazeen is a full BDU, offering television distribution services in the Ontario and Quebec markets, using IP technology to deliver services directly into the home through the use of wholesale Internet access services. It is important recognize that this is different from over-the-top players who acquire content but simply supply it via the open Internet and do not deliver it directly into subscribers' homes themselves.

13144   Our central message today is that the key to achieving a healthy and dynamic competitive broadcast market is to enable equitable and timely access to content by BDUs -- not regulating how retail services are provided. Put simply, addressing the barriers to accessing content by BDUs will result in a market where pick-and-pay and build-your-own-package options are available without the need for retail regulation.

13145   Zazeen is intimately familiar with how the existing barriers to accessing content prohibit the ability of a BDU to offer uniquely competitive television services. In fact, Zazeen's original business plan was to offer the very pick-and-pay service contemplated in this proceeding. This plan, however, was thwarted the minute that Zazeen entered into negotiations to obtain content due to the penetration-based rate cards, bundling of channels and other terms dictated by content providers. As a result, we had to completely change our service offering to accommodate the terms upon which we were able to access the content to solely satisfy the vision of those content providers.

13146   We believe that the Commission should address the barriers to accessing content by requiring all popular and must-carry content to be provided at rates and under terms specified in a tariff they file with the Commission. Each tariff should contain the rates, volume discounts and terms for each applicable channel, available to all BDUs, whether large or small, and paid for by all BDUs, whether unaffiliated or affiliated.

13147   Furthermore, we believe that the discounts on the rates contained in these tariffs should be capped at a maximum percentage, such as 10 percent, regardless of subscriber count or affiliation.

13148   Lastly, content providers should not be allowed to circumvent this system by bundling of multiple channels or other practices.

13149   This proposal will level the playing field for all parties. Small BDUs will no longer be subject to rates and terms dramatically disadvantageous relative to their large BDU competitors. This will also address the substantial delay faced by BDUs when attempting to access content. Specifically, the availability of a tariffed rate will remove the necessity for one-sided negotiations that are often needlessly prolonged by foot-dragging, non-responsiveness and other means by which BDUs have little feasible recourse.

13150   Acceptance of this proposal will forego the need for retail regulation and instead will encourage competitive options in the market so as to allow customers to vote with their wallets.

13151   Finally, I would like to briefly touch on the issue of capacity-based billing that was raised and discussed during the hearing last week.

13152   First, we agree with the comments regarding the need for caution related to establishing retail rates that cannot be economically provided by non-incumbent IPTV providers due to the existing rates for wholesale high-speed access services.

13153   Second, and while recognizing that the CBB framework is beyond the scope of this proceeding, the importance of addressing the impact of CBB rates on non-incumbent IPTV providers cannot be understated.

13154   This can be addressed in many ways, including technical solutions such as mandated multicasting that will promote efficient network usage to the benefit of both those IPTV providers and incumbents, decrease costs for both competitors and incumbents, and permit the delivery of service in the same manner enjoyed by those incumbents. Indeed, multicasting is widely regarded as the efficient way to deliver broadcasting over an IP network, as evidenced by the use of the practice by virtually every incumbent IPTV provider.

13155   Alternatively, if technical solutions are somehow deemed too complex to implement or during the interim while the practice is being deployed, the issue can be addressed through measures such as adjusting the rates for IPTV-specific traffic and so on.

13156   I would be happy to discuss either of these options during the question period.

13157   Thank you for the opportunity to appear today. This concludes our presentation.

13158   THE CHAIRPERSON: Thank you very much.

13159   Commissioner Dupras.

13160   COMMISSIONER DUPRAS: Thank you.

13161   Good morning.

13162   MR. STEIN: Good morning.

13163   COMMISSIONER DUPRAS: Tell us, you are a distributor in Quebec and Ontario. What kind of subscriber base do you have?

13164   MR. STEIN: We could file that information in confidence. We haven't disclosed that information.

Undertaking

13165   COMMISSIONER DUPRAS: Okay. And in Quebec you say that the practices of the dominant players have not enabled you to offer pick-a-pack, but in Quebec, as you know, there are such offerings. Why in Quebec didn't it work?

13166   MR. STEIN: We found that as we went to the various rights holders we were presented very rigid options that steered us towards certain packaging of our content and that really was what led us there. Perhaps it was where we were approaching the market and our size relative to some of the other players and so on. I can't comment.

13167   COMMISSIONER DUPRAS: So you weren't able to come up with competitive prices due to the number of subscribers you had, which was not sufficient to achieve with the programmers --

13168   MR. STEIN: Perhaps. We found that as we approached them, with our being a start-up at the time -- Distributel has been around for a very long time but the start-up Zazeen is very new. And as we would approach them we were not able to negotiate the kinds of arrangements that we would have required to offer sort of an exact thing, I want this, I want this, I want this, as opposed to larger groupings.

13169   COMMISSIONER DUPRAS: And your offering in Quebec found appeal because you had a value offering? There was some choice available with the other providers but in your case you were able to find subscribers with a large basic, meaning there was a high interest for a value offering?

13170   MR. STEIN: Consumers have continued to be interested in our product, yes.

13171   COMMISSIONER DUPRAS: And if you offered them a skinny basic but kept also a value pack, what impact would that have on your service?

13172   MR. STEIN: I'd be speculating but, as I said, our initial vision for Zazeen was to deliver a really, really, really slim service and let customers choose everything they wanted. So clearly, that's something that we would love to do, we continue to want to do it, but we were unable to, as I said.

13173   COMMISSIONER DUPRAS: Okay. Well, I thought you were saying that it was interesting for you to offer a big package because it was a way for you to differentiate yourself from your competitors.

13174   MR. STEIN: At a certain point we had to pivot with our -- once we viewed how we were able to acquire content, we decided that we could no longer try to approach it at that end of the market, that was closed to us.

13175   So in another way to differentiate us we had to move to the opposite end of the spectrum. We know that we cannot offer the same thing, so we went from this idea of offering a very custom bespoke offering to the idea of more for less kind of thing. So we had to sort of flop to the other side.

13176   COMMISSIONER DUPRAS: Okay. You say that we should regulate wholesale rates for services --

13177   MR. STEIN: Yes.

13178   COMMISSIONER DUPRAS: -- and there would be no need to regulate retail, that more discipline in the BDU market if competitive conditions are good would take care of that, enabling more choice and flexibility for the subscribers. Can you speak more to this?

13179   MR. COHEN: I just think it's the model that the Commission has adopted in the telecommunications market. We don't regulate retail rates but we try and ensure a vibrant wholesale market and leave the marketplace to decide on the retail side.

13180   COMMISSIONER DUPRAS: And you say that those services that would need to be regulated would be the must-carry content and the popular services. What is a popular service?

13181   MR. STEIN: Well, the Commission would have to come up with a test for popularity but it could be based on subscriber countering, peak viewership, that kind of thing or peak viewers at a certain time and so forth. But it would be content in channels that are already attracting a large viewership.

13182   COMMISSIONER DUPRAS: Do you believe --

13183   MR. STEIN: Those are -- sorry, just if I may.

13184   COMMISSIONER DUPRAS: No, go ahead.

13185   MR. STEIN: Those are the ones that we have found were difficult and we would suffer many months of delays just simply getting something sent back to us, foot-dragging and so on. That tends not to happen with the less popular content or the non-vertically-integrated content, et cetera. It's just those are the ones that we found there's very little interest in enabling us to provide.

13186   COMMISSIONER DUPRAS: Okay. Can you talk more about your difficulties to negotiate affiliation agreements?

13187   MR. LOURO: I mean --

13188   COMMISSIONER DUPRAS: If you can give us some factual examples.

13189   MR. LOURO: A perfect example would be we launched initially in Quebec in October of 2013 and the reason why we didn't launch in Ontario is because a mandatory channel that we had to carry was still being negotiated, and these delays actually cost us basically a three-month delay launch within the Ontario market.

13190   And that's just one example. In other cases it was several months just to sign an NDA agreement. Even before we got to affiliation agreement we had to negotiate the non-disclosure agreement. And these were the various delays that happened, I wouldn't say with all the content owners but with a few key ones that are vertically integrated.

13191   COMMISSIONER DUPRAS: Are there some provisions that you would like to include in your agreements but were unable to secure?

13192   MR. LOURO: I mean a standard NDA would probably be a good start and obviously we would prefer some type of rate card where we would be on an equal playing field with the incumbents.

13193   COMMISSIONER DUPRAS: Okay. Those are all my questions. Thank you.

13194   THE CHAIRPERSON: Just so I understand, in paragraph 14, when you talk about either the technical solution or other measures, I take it those would be under the Telecommunications Act?

13195   MR. STEIN: Yes. I recognize that CBB and wholesale Internet is not our topic here for today. I was really trying to respond to the --

13196   THE CHAIRPERSON: Thank goodness!

--- Laughter

13197   MR. STEIN: I'm sure that we will have plenty of time this year to address those topics and I'll see you then.

13198   But yes, that would be on the other side. But my point though was it is driven by the unbelievably large consumption that goes on with IPTV, that is far higher than anything else we've seen, any other application, far more than normal OTT. It's a completely different animal.

13199   THE CHAIRPERSON: I understand your point but what you are saying is that there may be a solution, in your view, and I appreciate that, but would you agree with me that depending on what decisions we make in this context it would be open to you to seek the sort of relief that you're hinting at here?

13200   MR. STEIN: No. In this context we are talking about content acquisition and the broadcast side of TV.

13201   THE CHAIRPERSON: No, I am referring to paragraph 14. You could eventually do an application pursuant to the Telecommunications Act, could you not?

13202   MR. STEIN: I suppose we could, yes. We could do that. The reason that I -- as I said, the reason I brought it up is it is a TV issue in terms of creating consumer choice, more options --

13203   THE CHAIRPERSON: Right.

13204   MR. STEIN: -- more differentiated services.

13205   THE CHAIRPERSON: Right.

13206   MR. STEIN: And for ISPs that are already using wholesale access, IPTV is almost a closed door --

13207   THE CHAIRPERSON: Right.

13208   MR. STEIN: -- because of that structure, but that is a key way to create more consumer choice. So I appreciate these are different topics but to me they're inextricably linked.

13209   THE CHAIRPERSON: Well, I see the linkages. What I'm saying is that if you think that there are measures, that there's another way of getting to that issue than this particular hearing. That's all I'm suggesting.

13210   MR. STEIN: Yeah.

13211   THE CHAIRPERSON: Okay. Those are our questions. Thank you very much.

13212   MR. STEIN: Okay.

13213   THE SECRETARY: I would now ask MTS Allstream to come to the presentation table.

13214   THE CHAIRPERSON: Welcome. Go ahead when you are ready.

PRESENTATION

13215   MR. FRIESEN: Good morning, Mr. Chairman, Commissioners. I'm Russ Friesen, Vice President, Regulatory at MTS.

13216   With me, to my right, Paul Norris, Vice President, Brand & Consumer Marketing, and to his right, Greg McLaren, Manager, MTS TV Content.

13217   Thank you for the opportunity to appear before you today. We feel we have a unique viewpoint to bring to this proceeding and are well positioned to speak about giving control to our customers.

13218   For over 12 years, MTS has fought tooth and nail with large programmers to provide customers with what they want -- control over how they consume content. We will concentrate on three of the themes set out in the CRTC working document. These are:

13219   Theme 1: Small Basic

13220   Theme 6: Affiliation agreement issues

13221   Theme 9: Distribution of non-Canadian programming services.

13222   MTS was a pioneer in giving consumers control in selecting programming services starting in 2003. We operate very small theme-based, discretionary packages which allow our customers to avoid buying services they don't want in order to get those that they do want.

13223   We have brought with us three commercials that show our long-term commitment to choice and flexibility. The first one is our very first MTS TV commercial from 2005. The second is from 2007 and the third is running now.

13224   We introduced choices as our strategy to build market share, because we knew it would be popular with customers. But this was not a ploy to just win their business so that we could then switch them to larger packaging.

13225   We continue to offer our customers control over packaging to the greatest extent allowed by the programmers. We will play those commercials now.

--- Video presentation

13226   MR. NORRIS: Offering choice and flexibility appealed to consumers and quickly drove our market share to roughly one-third. But our approach has not been popular with the larger, influential programmers.

13227   Over the years, they have applied mounting pressure to increase the size of our theme groups and to put their services into the most highly penetrated packages - even though their services may not be consistent with the themes of those packages.

13228   It is imperative that any new regulatory framework make it possible for Canadians to control how, when and where they view content within the regulated Canadian broadcast system.

13229   Rate structures that penalize consumers for controlling their programming selection need to be eliminated.

13230   The Commission must stop U.S. specialty services from forcing measures that take away the ability of Canadians to choose programming that suits their personal interest and budgets.

13231   For the framework to succeed, it's critical that unaffiliated BDUs, like MTS, be able to exist and flourish.

13232   I will first address Theme 1 - Small Basic:

13233   In almost every case, the penetration at MTS TV of the so-called "analog" services is lower than the national average, in some cases considerably lower. Many programmers blame MTS's small theme groups for low penetration.

13234   But the fact is, our customers are exercising the flexibility we have offered and are making decisions to buy, or not buy, programming.

13235   More than one large programmer has expressed concern that if every distributor adopted MTS packaging, many of their services would go out of business. In effect, the programmers are saying they do not like the transfer of control to consumers.

13236   Respectfully, we believe that less fragmentation of programming among services would strengthen the Canadian broadcast system.

13237   In 2005, each theme group averaged just four services. However, through pressure from large programmers, the average size of our theme groups increased and now stands at almost six services per group.

13238   These programmers also refused to allow distribution of key services on a standalone basis, despite the fact that they would also be included in a theme group, as required under the Commission's current rules.

13239   We believe that a pick-and-pay model is necessary to ensure the survival of the Canadian broadcast system. Unless consumers are able to exercise choice within the regulated system, they will increasingly abandon it.

13240   We also believe the U.S. 4+1 services should remain in basic, unless the Commission implements safeguards to protect consumers from a single, all-encompassing extended basic package.

13241   Without regulatory safeguards, many programmers will force the creation of a large packaged with the popular 4+1 services.

13242   Capping the retail price of basic service would be a mistake. Setting aside the programming fees, the fixed costs to deliver MTS TV to a basic-only household are the same as delivering it to a household with any number of discretionary packages. The competitive market can and should determine the prices that competing BDUs charge.

13243   Now, Theme 6 - Affiliation Agreements.

13244   A pick-and-pay model will provide consumers with greater choice and flexibility within the regulated broadcast system - and this is key - if consumers can afford to exercise that choice.

13245   To ensure this, large programmers must not be permitted to drive up the price of choice to unaffordable levels.

13246   The VI Code must incorporate the conditions of licence that apply t Bell and Corus. In addition, the following four measures are needed to further strengthen the VI Code.

13247   First, for any given programming service, the same wholesale rate must apply regardless of how the service is distributed. If 70 percent of customers have chosen a particular programming service, the BDU should pay the 70 percent rate for all those customers, regardless of whether they have purchased the service in a package, in a pick-a-pack or on a pick-and-pay basis.

13248   Second, penetration-based rate cards must not provide make-whole pricing. Make-whole PBRC is a misnomer. It's simply a pricing tool that created a flat licence fee, insulates programmers from the consequences of their actions, or inactions, and does not incent them to maintain or improve the quality of their programming.

13249   Third, volume-based discounts are, realistically, only available to vertically-integrated BDUs, since other BDUs do not have the amount of subscribers to quality for the highest discount levels. When a customer switches to a small BDU, there is no commercial justification for the wholesale rate to double or more than double for that same customer.

13250   Fourth, the number of services in a discretionary package must be limited. Larger programming services force their way into highly-penetrated theme groups - creating so-called "package partners".

13251   This behaviour sustains large packages that force consumers to buy programming they don't want, and moving the U.S. 4+1 services out of basic substantially elevates this risk.

13252   The last issue is Theme 9 - Non-Canadian specialty services.

13253   We welcome the Commission's proposal that non-Canadian programming services abide by the VI Code and submit to the Commission's dispute resolution mechanisms. We also recommend that a form the Category C News Policy should apply to non-Canadian, English-language news services.

13254   Following all of the Commission's guidelines, MTS provides a bilingual theme group in a news neighbourhood comprising all major, national and international news services.

13255   But there are two outliers on our channel lineup - CNN and HLN. They remain packaged in an entertainment theme group.

13256   Quite frankly, expecting our customers to buy news when they really want entertainment flies in the face of this proceeding's mandate to provide control to Canadians.

13257   Whereas the VI Code and New Policy set parameters for Canadian programmers, there are no limitations governing the distribution of non-Canadian specialty services.

13258   In conclusion, MTS has been providing our customers with the control to choose their programming for over a decade. No one knows better than MTS, the continual challenge associated with maintaining this strategy over a long period of time in the Canadian broadcast system.

13259   We believe the Commission has an opportunity to implement changes that will provide more customer's control, which MTS fully supports. Customer control has been the success behind MTS TV.

13260   Thank you and we would now be pleased to answer the questions.

13261   THE PRESIDENT: Thank you very much, gentlemen. Vice Chair will start off the questions.

13262   CONSEILLER PENTEFOUNTAS: Merci, monsieur le président.

13263   Your document was clear and direct, as was your initial intervention. And as the Chairman mentioned last week, as we move along people sort of drill down and get a better idea of where -- some of the issues that we want to further explore.

13264   U.S. services, much was made last week in terms of their distribution and the impact they may have on your cable subscribers. You are not concerned that your subscriber -- that the U.S. services are essential to maintaining those subs within the system?

13265   MR. McLAREN: You're referring to the 4+1?

13266   COMMISSIONER PENTEFOUNTAS: No.

13267   MR. McLAREN: No.

13268   COMMISSIONER PENTEFOUNTAS: The U.S. services, not the other services.

13269   MR. McLAREN: Oh! I beg your pardon. I beg your pardon.

13270   COMMISSIONER PENTEFOUNTAS: We'll get to the 4+1.

13271   MR. McLAREN: Understand. Yes. I mean, you know, we want the U.S. services on our channel lineup, but we need some kind of control around, giving us some level of playing field or some level of power, I guess, to level the playing field when we are negotiating with these folks, and we have nothing.

13272   COMMISSIONER PENTEFOUNTAS: And you are not concerned that imposing the same regulatory conditions and obligations that we impose on Canadian broadcasters, that that won't entice them to pick up their balls they mentioned last week and move on down the road?

13273   MR. McLAREN: Not in terms of the VI Code or the News Policy, we don't think. We think that that would not be enough to tip the boat. You know, the question of pick-and-pay might.

13274   COMMISSIONER PENTEFOUNTAS: Dispute Resolution?

13275   MR. McLAREN: They make a lot of money in Canada and even an agreement that went slightly less in their favour is still going to allow them to make a lot of money in Canada.

13276   COMMISSIONER PENTEFOUNTAS: That may not necessarily be the conclusion of a Dispute Resolution, but that would not be a problem?

13277   MR. McLAREN: Understood. Understood.

13278   COMMISSIONER PENTEFOUNTAS: Okay. You also mentioned that -- I like the consumer control as opposed to sort of if we had the consumer's choice being -- consumer's control is pretty interesting.

13279   MR. McLAREN: We got that from you.

13280   COMMISSIONER PENTEFOUNTAS: Oh! Did you?

13281   MR. McLAREN: It's in the document.

13282   COMMISSIONER PENTEFOUNTAS: Okay. Well, we have not used that terminology as much as you have. Well, you started using it back in 2004, back in the original --

13283   MR. McLAREN: The first commercial in 2005 took that message to the public.

13284   COMMISSIONER PENTEFOUNTAS: Am I understanding from reading your intervention is that unless Canadians can exercise more control within the broadcasting system, they may elect to leave it?

13285   We heard contrary discussions last week as it relates to the pick-and-pay and that no one is really complaining, everyone is happy with the bundling process as is. Speak to us briefly from your experience.

13286   I gather you don't agree with what was mentioned last week?

13287   MR McLAREN: Correct.

13288   I mean I'll step away from MTS, for just a moment,

13289   In my previous life, I worked for a cable company and the number one complaint I handled was "You're forcing me to take channels that I don't want, in order to get the ones that I do want".

13290   So, I personally have that firsthand experience.

13291   We don't hear that as much from our customers. We do still hear it. Even with theme groups that have five or six channels in them, we still get that message, but to a considerably less degree.

13292   COMMISSIONER PENTEFOUNTAS: You mentioned the idea of package partners and as it relates to 4 plus 1.

13293   Maybe expand on that idea, and the fear that you feel the risk that comes to place if 4 plus 1 is excluded from this skinny basic that's proposed.

13294   MR McLAREN: Right.

13295   I can refer back to an example with a specific -- I won't name it, but with a specific U.S. programmer -- well, there are several of them, actually, who do this. They'll put conditions in their agreements that require them to be in the highest-penetrated discretionary package.

13296   If we take the 4 plus 1s out of basic and move them, well, basically, it would become a discretionary service, at that point. And today we cannot distribute U.S. services on basic. They must be indiscretionary. And for the ones that have language that requires them to be in the highest-penetrated discretionary packages, the U.S. 4 plus 1 services are still extremely popular.

13297   It's not unreasonable to think that 90 or 93% of our customers are going to subscribe to those considerably higher penetrations than what we have today with even our most popular services with the U.S. And so, we feel it's a logical step that the U.S. programmers will come back to us and say, "Okay, the package that we're in now is no longer the highest-penetrated. We need to be in that one with the 4 plus 1s".

13298   The strongest Canadian services, then, are looking at that and they'll go, "Oh, that's where we have to be".

13299   And you move to the kind of a secondary programming services who are saying, "If we don't get into that package, and we can see what's starting to evolve here, if we don't get into that package, we're going to start to lose penetration, as well".

13300   We think over time, and not a long time, we think over time we'll be in a situation where customers will have two choices -- they can buy skinny basic; or they can buy skinny basic with this enormous extended basic package -- and everything that's not in the extended basic will go away.

13301   COMMISSIONER PENTEFOUNTAS: Will go.

13302   You also spoke of a wholesale rate and of volume discounts. You've much against PBRCs.

13303   And I also understand the volume discounts are sort of -- if we sort of interpret what you're saying -- created by VIs, for VIs by VIs, and they're only ones that can sort of take advantage of that volume, because no one else within the country has it, given that they're all -- many of them, north of 2 million subs.

13304   You wouldn't see any practical use for penetration-based rates or some kind of volume-based pricing?

13305   MR McLAREN: Okay. To clarify, we're not opposed to penetration-based rate cards. We're opposed to make-whole penetration-based rate cards. There really is no such thing as a make-whole penetration-based rate card. It's a negotiating tool at the table. Once a make-whole is established, that, effectively, creates a flat licence fee that, you know, we pay $1,000 a month or $10,000 a month for this programming service, regardless of how many subscribers there are. That's not a penetration-based --

13306   COMMISSIONER PENTEFOUNTAS: But hasn't that --

13307   MR McLAREN: -- flat fee.

13308   COMMISSIONER PENTEFOUNTAS: Hasn't that become the norm of penetration rate-based cards?

13309   MR McLAREN: No, absolutely not.

13310   There's --

13311   COMMISSIONER PENTEFOUNTAS: But the ask is, "You've got to make me whole if my penetration drops".

13312   MR McLAREN: I stand to be corrected, but my recollection is we have one series of penetration-based rate cards with a vertically-integrated company that's probably in excess of make-whole, and we have a second vertically-integrated company that's asking for it. We're in that negotiation.

13313   MR. NORRIS: Sorry, Mr. Vice-Chair, if I could just add.

13314   I think, really, what we're talking about is the differential between the best rate in a penetration rate card and the, call it, worst rate within a penetration-based rate card.

13315   It can't be punitive. It can't be egregious so that it creates a different market power where two companies have significantly different cost models.

13316   So, to that end, we support penetration-based rate cards where they're logical.

13317   And going back to our submission, we had provided some amounts where we would see a logic and, certainly, there is -- we understand the idea of penetration. We understand the idea of volume. But it shouldn't be egregious.

13318   That's really the point that we wanted to make.

13319   COMMISSIONER PENTEFOUNTAS: And you would equate make-whole with egregious and punitive?

13320   MR. NORRIS: Absolutely.

13321   COMMISSIONER PENTEFOUNTAS: That's my understanding of your ask.

13322   MR. NORRIS: Yeah. And if I could add to that, too, because, really, what it does, in effect, is it takes the customer's voice away from them. Because when the customer is providing feedback into the value of a program, it's very important that everybody in that chain feels a piece of that risk, right, and we all stand to benefit when a program is great and we all stand to not benefit when a program isn't.

13323   The problem with a make-whole is that it really insulates that programmer from that true feedback from the customer at the end, and that's really -- and at the expense of the BDU, then, the BDU starts to subsidize that programmer and, you know, if you take it to the nth degree, and I know that there's no programmer that would necessarily do this, but if you had a programmer that said, you know, "My business plan is to exit within two years", then what, theoretically, would prevent them from removing expense out of that to harvest as much as they could within a period of time, right, so.

13324   COMMISSIONER PENTEFOUNTAS: Right. Gotcha. Thank you.

13325   You mentioned feedback -- and it brings me to my final question, Mr. Chairman.

13326   For the most part -- you're, traditionally, a telco but you're, for the most part, an IPTV service?

13327   Okay.

13328   So, speak to me on the issue of return path data and your use thereof.

13329   MR McLAREN: Our set-top boxes collect it and we refer to it, from time to time, most commonly in our discussions with programming services, because they all come to the table with the number one programming service and our data suggested that's not always the case.

13330   Our data do not measure viewership. The set top does not know if there's somebody watching. The set top doesn't even know if the TV is turned on.

13331   Our set tops will run for three hours after the last action on the remote control and then they will turn themselves off. So, in those three hours, somebody may or may not be watching. They might have gone to bed.

13332   Relative to BBMs or another company's set-top data, ours have no relationship.

13333   But, internally, they give us a relative measurement from each of the channels on our channel line-up, in terms of how much tuning there's been to that channel.

13334   COMMISSIONER PENTEFOUNTAS: And do you share that data with your broadcast services, in advance?

13335   MR McLAREN: We don't share the actual specific numbers because they're not really effective.

13336   But what we will do is go back to a programming service and show them where they rank within their theme group, in terms of a percentage.

13337   We will not identify the other channels in the theme group. So, if a programmer has two of the five or six channels, we'll give them specific numbers -- you know, you're at 5% or 8% of the viewing -- and other channels in that theme group are at X, Y And Z, but we won't identify them. And then we'll also give them kind of a relative position of where they are in the entire channel line-up.

13338   MR. NORRIS: If I could just add a couple of points to Greg's answer there, too.

13339   So, twofold. Number one, we would be willing to participate in a working group, absolutely. A company of our size really can't push manufacturers to change, but we could draft in behind the industry on that. And we run MediaRoom, as well as many others do. So, we think that there's opportunity, there.

13340   I think the points that Greg is making, just to restate them, is that be careful of apples to apples comparisons, or an assumption of apples to apples, because there might be different nuances between the different BDUs and so, it might not be reflective or measuring what the Commission would like to see.

13341   And the last point I want to make is that -- and Greg spoke to this, but I just want to define it a little bit more -- the information that's provided is aggregate and so, we're not looking at individual customer information, in any form. That's all private. For customers, it's just aggregated information.

13342   COMMISSIONER PENTEFOUNTAS: Thank you.

13343   Thank you, Mr. Chairman.

13344   THE CHAIRPERSON: Thank you.

13345   Your position is very clear. I don't think we have any other questions.

13346   Madam Secretary...?

13347   THE SECRETARY: I will now ask Numeris to come to the presentation table.

--- Pause

13348   THE CHAIRPERSON: Please go ahead

PRESENTATION

13349   MR. MacLEOD: Thank you, Mr. Chair, Mr. Vice-Chair, members of the Panel.

13350   My name is Jim MacLeod. I'm the President and CEO of Numeris.

13351   And with me today is Robert Langlois, who is our Vice-President of Numeris. He is based in Montreal.

13352   You may not be familiar with the Numeris name, but we have been Canada's audience measurement authority for 70 years. We were formerly known as BBM. But only the name has changed. The reliable, leading-edge measure service that we have provided to Canadian radio and television remains exactly as it was, but with a new name and a new focus on the future, which I think is one of the things we're talking about today.

13353   We would like to take a few minutes to highlight the key points of our submission, which was dated June 24th, and we did confine our comments to the questions dealing with set-top box, or STB, measurement. STB is also commonly known as "return path data", or RPD. They're really interchangeable terms.

13354   There is no question that many advertisers and broadcasters believe that introducing STB data would represent a significant increase in the quality of the television audience data.

13355   The fact is no currency measurement system has been able to utilize STB in the type of balance currency panel that we use in Canadian television.

13356   Numeris employs what is called probability-based sampling. This ensures that our respondents are representative of the Canadian population.

13357   The Numeris sample is selected and balanced by geography, household size, age, sex, and how the household receives television. And households that do not subscribe to cable or satellite, the cord-cutters or off-air households, are included in our sample, provided they have any device whatsoever that allows them access to live TV signals.

13358   STB, on the other hand, is machine data. It only tells you what the set-top box was doing, not who was watching or, indeed, as we just heard from MTS, if anybody is watching. This data comes from a subset of television viewers, those who have a digital cable set-top box which, at this point, is about 55% of homes and I believe, as the Commission heard last week from some BDUs, not all of those homes are technically able to provide data.

13359   So, the challenge is to take the precise data from a probability-based sample and, preserving that precision, take advantage of the very large samples that are offered by STB data.

13360   Numeris believes that we have access to the technology to do that through our technology partner, Kantar.

13361   Kantar operates five commercial set-top box panels around the world and processes data from millions of homes every day.

13362   The Kantar data, however, is private data. It's not industry-wide currency data, and it's not combined with industry-wide data, except in one case.

13363   However, the technology that Kantar has developed to operate these panels is what Numeris would need to gather this data in Canada.

13364   There may well be other technology providers -- and we would shop the world, as we always do -- but we are confident the technology is available and technology that has the same base as our current commercial system that we use every day, and that would make implementation of STB much easier.

13365   The focus of our June comments is, really, how it could be possible to bring together the many organizations that would be needed to build a world's first: a universal commercial STB-based data collection system that would be syndicated, or available to all users.

13366   Numeris is an organization unique in the world: a very sophisticated technology organization owned by its members, with both content providers and the advertisers providing governance and sharing costs.

13367   Our members include Canadian radio and television stations, advertising agencies, and advertisers, and they are all part of the Numeris governance system.

13368   M. LANGLOIS : Dans la plupart des autres pays, le système de mesure de la télévision est soit la propriété directe d'un exploitant commercial, soit offerte par un exploitant commercial sous la surveillance d'un comité mixte de l'industrie, ou JIC, Joint Industry Committee en anglais. Numeris bénéficie d'un tel système de surveillance par l'implication directe d'acheteurs et de vendeurs de temps d'antenne dans sa gouvernance. Nous évitons les désavantages liés à ce que les opérations techniques soient offertes à contrat et les changements au niveau des fournisseurs de services techniques qui peuvent occasionner de graves soubresauts au service de mesure.

13369   Au Canada, les utilisateurs des données ont une influence directe sur la méthodologie, la technologie, la taille de l'échantillon et les marchés sondés. En tant que propriétaire de son propre système, Numeris peut mettre en oeuvre exactement ce que l'industrie a demandé.

13370   La structure de Numeris est unique et nous suggérons que la reprise de cette structure dans l'industrie de la câblodistribution aiderait à bâtir le premier système national de mesure de données provenant des récepteurs numériques au monde, avec des données d'auditoire largement accessibles. Ce système pourrait prendre comme modèle le système générant la monnaie d'échange en télévision en ce qui a trait aux marchés sondés.

13371   Sur le plan technique, il est possible de combiner les données provenant des récepteurs numériques et les données télévision servant présentement de monnaie d'échange.

13372   Nous avons décrit avec force détails son fonctionnement possible dans nos commentaires écrits en juin et nous ne ferons pas d'autres observations à cet égard aujourd'hui. Nous aimerions toutefois attirer votre attention sur certains aspects.

13373   Ainsi, Numeris n'a pas entamé de discussions formelles avec l'industrie de la câblodistribution, mais entretient des dialogues soutenus avec ses partenaires, Kantar et Nielsen, qui profitent tous deux d'une expérience approfondie dans la cueillette et le traitement des données provenant des récepteurs numériques.

13374   There are many unknowns. These include what level of data-gathering is currently being done by BDUs -- and that does vary quite a bit by individual BDU; how increasing that data-gathering could impact BDU operations and infrastructure; .the impact that future technology would have on the measurement system -- because, by definition, the measurement system would be integral to the cable system itself; what use BDUs could make of large amounts of clean STB data, thus, ensuring there is a business advantage for BDUs out of this.

13375   And of course there are significant privacy considerations that need to be very carefully considered.

13376   We are asked by our members how quickly this could be done.

13377   From the day the Numeris board agreed we should step up and take a leadership role by creating a parallel organization -- and we've coined the name CCC, Digital Collection Canada, it's only working name -- but it would take six months to a year to build the trust among the BDUs that DCC would protect their private data while making maximum use of STB. It could be possible to be building and testing a proof of concept in one market concurrent with setting up DCC.

13378   It could take a year or more to build a working commercial grade STB system and produce reliable data on a large scale.

13379   Numeris knows from previous launches of leading-edge technology -- namely, our picture matching system in the 1990s, the wireless PPM system in 2004, and NLM, or non-linear measurement in 2013 -- that new technology always takes longer than we expect it will when we go in.

13380   This STB plan is ground-breaking work and there are many unknowns.

13381   What is known, though, is there's a very strong interest in STB, that STB is gathered every day in other countries -- although, perhaps, not as measurement currency -- and that an industry-governed STB measurement system could work. And we believe that Numeris is proof of that.

13382   The old saying that every journey starts with a step is true. And today could well be the first step in building a unique Canadian STB system.

13383   We thank you, and we'll try and answer any questions that you may have.

13384   THE CHAIRPERSON: Thank you, gentlemen.

13385   Your presentation and your documents are very clear, but I do have a few questions.

13386   You refer to the fact that Kantar is in five jurisdictions.

13387   Is that correct?

13388   MR MacLEOD: They operate five different systems. They're all private research. BSkyB, in Britain, was the first one --

13389   THE CHAIRPERSON: So, what jurisdictions?

13390   MR MacLEOD: Pardon?

13391   THE CHAIRPERSON: Which jurisdiction?

13392   MR MacLEOD: They're in Britain.

13393   They aren't really jurisdictions because they're all, they're all done on behalf of individual companies.

13394   THE CHAIRPERSON: But those companies operate somewhere on the planet?

13395   MR MacLEOD: They provide private research to BSkyB, using their set-top boxes.

13396   They do work in the U.S. for two cable companies, one in Hawaii and one in -- they have Comcast.

13397   They have a semi-commercial system in South Africa.

13398   There's two parallel measurement systems in South Africa. I don't believe there's any attempt to put them together. But there is some use of the data made there by Shaw, which is I think the only place that it is.

13399   THE CHAIRPERSON: Right.

13400   At paragraph 13, you talk about the financial model and you say it could be either syndicated or available to all users.

13401   Are those two different models, in your mind? Or is --

13402   MR MacLEOD: No.

13403   THE CHAIRPERSON: -- available to all users is syndication --

13404   MR MacLEOD: "Syndication", by definition, is available to all users. And Numeris is a not-for-profit organization, so we need to recover our costs. That's all. And we would have to negotiate a fee system among the new members to decide how those costs would be allocated and who would be paying what.

13405   Obviously, the broadcasters should have to pay something for the data that's coming across.

13406   But there's also some value to the BDUs, in our view.

13407   THE CHAIRPERSON: Is there value to anyone else?

13408   Just the corporate players?

13409   Presumably, the public policy people might have an interest in that information, as well.

13410   MR MacLEOD: Well, never having pulled this data together and never having known exactly what you can do with it, are you going to combine it with the currency data or not, or is this a separate data set? And that depends partly on how much data you can pull back. It's hard to say what its ultimate uses are.

13411   I am sure you will have some interest in it, as you do in our currency data.

13412   But it primarily would be aimed at the users of our current data.

13413   There'll be another set of data that would come out for the BDUs, and what form that would take would depend on what they would specify to us that they would need done with the data.

13414   But, you know, the data would be cleaned and provided back to its owners. And then the piece that was used for measurement would go across to Numeris. That's the model that we think could work.

13415   THE CHAIRPERSON: Right. You've stated that this would be very valuable, it's a great idea, it's needed, we need to explore.

13416   If it's such a great idea, why hasn't it occurred yet? What were the barriers?

13417   MR MacLEOD: I think it's very -- somehow I knew you were going to ask that question. I don't know why.

13418   It's very complicated, and a VI among our members is reasonably recent and so you now have broadcasters that have some affiliation with BDUs -- and, you know, we often talk about this and, generally, I say, "Well, at least we know who to phone", you know, who it is we have to talk to in order to figure out what we can do.

13419   And there's been some lines of communication opened up. We have been, I don't want to say experimenting, but we've had some small-scale co-operation on pulling data back so that we could see what needed to be done with it and so on.

13420   What we're also realizing is, as we do that, how technically complex this, is on the BDU side.

13421   So, I think it's just a matter of you need some catalyst to get it going -- and maybe you're providing the catalyst. I don't know. We're moving that way, now. But you've put a focus on this, and we're here with this because we had to think about it to respond to you. I don't think we'd thought it through to this point until then, other than knowing we would somehow have to pull everybody together.

13422   THE CHAIRPERSON: Right.

13423   MR MacLEOD: But we don't have deep daily relations with the cable companies and, you know, you need to learn that. You need to learn the business before you can start setting something up.

13424   THE CHAIRPERSON: And so, I take it your view is that the Commission's role in this, much beyond nudging that's occurred already, should be rather limited?

13425   MR MacLEOD: Well, I believe our suggestion, with all due respect, is that if you made it clear what value you thought this had, I believe the industry will, in good faith, coalesce behind something, whether it's this or some other plan. And you will always have the option of coming back in, in a year or two, if you don't like what's happening, and doing whatever you think your option is today.

13426   It seems to be it would be easier to try and do this on a co-operative basis, considering that I think there's been some movement, to start with.

13427   THE CHAIRPERSON: Right. Understood.

13428   In terms of timelines, if I read and do the math on paragraph 23 and 24, it would take 18 to 24 months, you estimate, from "Let's do this" to actually having something that's working.

13429   MR. MacLEOD: I think that would be reasonable, based on our past introductions of new technology. And then you have to add something onto this to build the system itself -- I'm talking build the governance system -- so --

13430   THE CHAIRPERSON: I was struck when I was reading your written submission -- and it doesn't come out quite the same way in your oral presentation -- that you seem to be focusing a lot in your written submission on BDUs, right? What I've heard so far in this hearing, and reading the documents, is that there's probably broader interest.

13431   You're not suggesting that you would exclude other parties that might be interested?

13432   MR. MacLEOD: No, absolutely not. If you're -- you know, we looked at satellite. There's not as much -- there's not as much return path activity. I think that will change as equipment is updated. Cable seems to be in a position where you could do something now, and so that's why we were focusing there to start with.

13433   And you have to build -- you have to build some organization. There has to be some way to have governance over what you're pulling back and what you're doing with it, and then what you're doing with the data after you've made it into a business product. So that's why we focused on the BDUs, because we think that that is perhaps a little better organized in this way than others.

13434   But, no, we provide data to lots of people besides broadcasters and advertisers and agencies.

13435   THE CHAIRPERSON: Tell me that -- you know, we've heard, obviously, the current -- and you've reiterated that -- that the current system doesn't provide the sort of demographic information. The televisions may be on. We don't know whether anybody's watching other either -- that's another challenge going forward -- which your traditional system does get at.

13436   MR. MacLEOD: M'hmm.

13437   THE CHAIRPERSON: How would you envisage the structure of a new system? Would it be just a merger of two databases or would the actual devices gather information specifically on the set-top box? And how would you go about identifying who's watching at any given point?

13438   MR. MacLEOD: To answer that definitively you need a bunch of data, okay? So there's the problem. There are two or three approaches to this. There's certainly very sophisticated users of set-top box data now. You apply algorithms. There's ways to estimate who's in front of the set. Anybody that's used to a probability-based sample does not find that too acceptable.

13439   The way we could probably maximize the probability-based sample would be to have a small panel inside each of the markets with BDU, where you would be able to track the personal behaviour relative to the set-top box data and --

13440   THE CHAIRPERSON: Right.

13441   MR. MacLEOD: -- and then you could use that as --

13442   THE CHAIRPERSON: Extrapolate that.

13443   MR. MacLEOD: -- the hooks to fuse the data.

13444   Now how hard it is to create those panels -- privacy concerns and so on -- we don't know. You've got to -- you've got to go and try. But that's one way to do it.

13445   Algorithms could also work. You know, when you have this massive amount of data, and the very robust data coming from the panels, particularly in the six electronically measured markets, you may be able to do this without resorting to a panel. But our research department is confident this can be done in a way that would be acceptable.

13446   We have also indicated that we would subject whatever we do to MRC auditing, as we have with our current system. So it's got to meet the MRC standards as the currency data does.

13447   LE PRÉSIDENT : Concernant la protection de la vie privée, on a entendu... Peut-être c'est parce que c'est une technologie et puis les gens naturellement ont moins confiance lorsque les solutions sont technologiques. Je me demandais, à l'heure actuelle, avec votre système actuel, il y a des enjeux de vie privée, et comment en traitez-vous à l'heure actuelle?

13448   M. LANGLOIS : Bien, effectivement, on a un système à l'interne qui nous permet de rassurer nos répondants actuels par un commissaire à la confidentialité. On fait également partie d'organismes de l'industrie qui permettent d'identifier les sondages qui sont légitimes. Les gens peuvent retourner auprès de ces organismes-là pour vérifier que ce qu'on demande est légitime, et c'est la façon dont on travaille, en plus du fait qu'évidemment, si les gens ne désirent pas être rejoints par nous, ils peuvent demander d'être mis sur une liste de non appel.

13449   THE CHAIRPERSON: So no individual personal viewing would be disclosed under the proposals you're thinking about --

13450   MR. MacLEOD: Well, no, and --

13451   THE CHAIRPERSON: -- against their --

13452   MR. MacLEOD: No, it has to come out of the BDU aggregated, you know, because the BDUs have an obligation that needs to be respected.

13453   So the only way there'd be any individual data is if we did set up those panels, in which case it would be with full agreement, you know? So we have an agreement with each of our panellists now, and you've have to a similar agreement with the members of any set-top box panel.

13454   So, no, privacy is a really big deal. It's the paramount concern.

13455   THE CHAIRPERSON: And you currently work with officials responsible for privacy directly in this country to make sure that what you're doing is consistent?

13456   MR. MacLEOD: Our system is set up to exceed any requirements that are placed on us.

13457   THE CHAIRPERSON: Through PIPEDA or any other legislation?

13458   MR. MacLEOD: Yeah, exactly.

13459   THE CHAIRPERSON: Okay.

13460   Thank you. Those are our question, thank you.

--- Off microphone

13461   THE CHAIRPERSON: Oh, sorry.

13462   Commissioner Molnar.

13463   COMMISSIONER MOLNAR: I'm sorry, it's a very quick question.

13464   The working document proposed that a working group needed to be created -- or should be created. Based on your presentation, it wasn't clear to me whether you thought that was a necessary or unnecessary move on the part of the regulator.

13465   MR. MacLEOD: Well, it...it might get done faster in the absence of a working group. I pick my words --

13466   COMMISSIONER MOLNAR: So do you believe --

13467   MR. MacLEOD: I pick my words very carefully here because I wouldn't want to suggest that regulatory slows things down.

13468   But I think the industry, given a few months, will figure out exactly what we need to do, and it can probably be done -- it can probably be done among the players.

13469   COMMISSIONER MOLNAR: Okay, thank you.

13470   THE CHAIRPERSON: Thank you.

13471   Our questions are --

13472   MR. MacLEOD: Thank you.

13473   THE CHAIRPERSON: -- are finished. Thank you.

13474   We'll take a short 15-minute break till 10 past 11.

13475   Donc, nous sommes en ajournement jusqu'à 11 h 10. Merci.

--- Upon recessing at 1055

--- Upon resuming at 1110

13476   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

13477   Madame la Secrétaire.

13478   LA SECRÉTAIRE : Merci.

13479   Avant de débuter, on aimerait annoncer que le Conseil a publié aujourd'hui un Avis de consultation de radiodiffusion, 2014-190-4, qui est relié à cette audience publique, concernant les procédures de dépôt de documents additionnels.

13480   Before we begin, I would like to announce that today the Commission published Broadcasting Notice of Consultation CRTC 2014-190-4, announcing procedures for filing additional material for this hearing.

13481   We will now hear the presentation of FourthWall Media.

13482   Please introduce yourself, and you have 10 minutes.

PRESENTATION

13483   MR. FEININGER: Good morning, and thank you, the Commission, for allowing me to appear today. I appreciate being part of this important discussion.

13484   My area of interest and focus is on audient measurement services. My name is Bill Feininger. I've been in this space for about 20 years, between Nielsen Media Research and now I run FourthWall Media, the Data Division of the company.

13485   We've been doing set-top box measurement for many years and we provide data to quite a number of clients. I'll talk a little bit more about that in just a moment.

13486   In the proposal from the Commission's working document, there's an important section on television audience measurement. I believe set-top box provides the best methodology for these services. Set-top box provides a comprehensive viewership measurement, including live, video on demand and DVR, in effect all time-shifted services. It also serves as a platform for incorporating Over the Top data.

13487   A set-top box is large and near census. This has a positive impact on research services since data is collected from nearly every box and every device within a household. In the U.S. there are several million households today that are being measured. We measure over 10 million of them ourselves, all in a privacy-compliant and preserving manner. We don't know a single name or address of anyone that we collect data from. We provide that data to a number of clients, and they use that data to create a platform for their particular services.

13488   Data collection at scale is very cost-effective: it creates an open research environment, and we provide each day over two dozen clients, everywhere from Internet delivery right on through to research and measurement services, across the United States. Those companies create platform services, they create research, they create targeting, they do all kinds of other things that make that data valuable for their clients, and provide lots of choices for advertisers and for the television community for those services.

13489   The Commission has proposed a process to transition to a better measurement service. Continuing down that path with all parties is the best way to ensure that data collection, processing, reporting, delivery, and services all constituencies.

13490   Thanks again for allowing me to be here, and I'll be happy to take any questions you have.

13491   THE CHAIRPERSON: Thank you.

13492   Commissioner Molnar will start us off.

13493   COMMISSIONER MOLNAR: Thank you.

13494   Good morning.

13495   MR. FEININGER: Thank you.

13496   COMMISSIONER MOLNAR: Just to begin, you said that you had over 2,000 clients, and I think you brought up --

13497   MR. FEININGER: No, no, we have over two dozen clients.

13498   COMMISSIONER MOLNAR: Pardon?

13499   MR. FEININGER: We have over two dozen clients.

13500   COMMISSIONER MOLNAR: Over two dozen clients?

13501   MR. FEININGER: Yes.

13502   COMMISSIONER MOLNAR: Okay. Well, then, I'm glad I asked --

13503   MR. FEININGER: Yes.

13504   COMMISSIONER MOLNAR: -- because I wrote down 2,000.

--- Laughter

13505   COMMISSIONER MOLNAR: Can you give me a better sense as to who those clients are?

13506   MR. FEININGER: Yeah.

13507   COMMISSIONER MOLNAR: Are they BDUs?

13508   MR. FEININGER: In some cases, yes. Primarily, they're research and measurement companies. They're companies that would like to do targeted advertising for other television. So it's enabling the programmatic space for television advertising placement. It's also being used to inform and to place advertising in digital media. So we create audience segments that watch a particular program, and then those can then be targeted online.

13509   COMMISSIONER MOLNAR: Okay. That's helping me.

13510   MR. FEININGER: Sure.

13511   COMMISSIONER MOLNAR: As you know, we have a discussion right before --

13512   MR. FEININGER: Yes.

13513   COMMISSIONER MOLNAR: -- on the same subject --

13514   MR. FEININGER: Sure.

13515   COMMISSIONER MOLNAR: -- and the group that came forward is essentially a collection of the broadcast and program community.

13516   Are those clients of yours?

13517   MR. FEININGER: Some of them are, but we primarily focus on research and measurement companies, and those that are providing those services to their clients.

13518   So we don't provide a measurement product per se. Instead, our clients do that.

13519   COMMISSIONER MOLNAR: So what is it you're providing? Just a clean fee?

13520   MR. FEININGER: We provide the raw data. So think of us as in a wholesale and retail model. We're the wholesaler. We collect the data, we get the data out of the boxes, we process it, clean it, and we distribute it to clients, that then turn around and create research reports or targeting capabilities or other services from that data. So they're the retailer making the end product.

13521   COMMISSIONER MOLNAR: Okay.

13522   You said that you were able to overcome or work within the privacy considerations --

13523   MR. FEININGER: Yes.

13524   COMMISSIONER MOLNAR: -- and restrictions.

13525   So how is it you do that?

13526   MR. FEININGER: Well, we don't know the identity of any household. When our software is placed on a set-top box, we know the -- we know a unique identifier for that box, and we track the usage of that box.

13527   Working with our MSO clients, we also do double-blind matching with a number of providers -- two of them in particular -- and from those we can then overlay household demographic characteristics or other behaviours that those particular companies support.

13528   But we do it in a double-blind way, where we never see the identity of a household. The only thing we know is the zip code for where the household resides.

13529   COMMISSIONER MOLNAR: And can you just tell me -- certain limitations have been identified with set-top box data.

13530   MR. FEININGER: Sure.

13531   COMMISSIONER MOLNAR: One we just heard this morning is --

13532   MR. FEININGER: M'hmm.

13533   COMMISSIONER MOLNAR: -- you don't know if there's anyone watching at all because it's measuring when the set-top box is on.

13534   MR. FEININGER: Yeah.

13535   COMMISSIONER MOLNAR: And the second being: well, even if someone is watching, you don't have any demographic information about who that might be.

13536   Is that the same in your case?

13537   MR. FEININGER: There's really two questions there. One is on the demographics. We can do the double-blinds for the demographics --

13538   COMMISSIONER MOLNAR: Okay.

13539   MR. FEININGER: -- and, then, rather than just knowing it's a household, we can tell you the presence of the people at different ages, genders, incomes, education, et cetera. So we can provide that. Our partners can provide 4,500 elements of data that they can provide to our clients for that. We provide only a small subset.

13540   So that's the first issue: is that we can provide or we can help facilitate the demographic profiling of that household still without knowing the household.

13541   The second issue is a technical issue, which is knowing whether the television's on and the boxes -- whether the TV and the box are sync, because primarily they're not. So the issue there really comes down to figuring out algorithmically whether the box is on or not or whether the television's on.

13542   Most of our clients have already built those models, and they've built very, very successful ones. I think you're going to hear from one in a few minutes here that has done that very successfully.

13543   COMMISSIONER MOLNAR: Okay.

13544   MR. FEININGER: We feel that -- you know, we need it for --

13545   COMMISSIONER MOLNAR: So I understood that --

13546   MR. FEININGER: Yeah.

13547   COMMISSIONER MOLNAR: -- the same issue exists and --

13548   MR. FEININGER: Yes.

13549   COMMISSIONER MOLNAR: -- your clients are the ones who address that.

13550   MR. FEININGER: We address it --

13551   COMMISSIONER MOLNAR: Okay.

13552   COMMISSIONER MOLNAR: -- with some products that we do, but our clients have done a phenomenal job at addressing that issue with their clients.

13553   COMMISSIONER MOLNAR: Okay, thank you.

13554   MR. FEININGER: M'hmm.

13555   COMMISSIONER MOLNAR: Those are my questions.

13556   MR. FEININGER: Thank you.

13557   THE CHAIRPERSON: You've been very clear, so thank you very much.

13558   MR. FEININGER: Great. Thank you.

13559   THE CHAIRPERSON: No more questions.

13560   Madame la Secrétaire.

13561   THE SECRETARY: I will now ask Rentrak Corporation to come to the presentation table.

--- Pause

PRESENTATION

13562   MR. LIVEK: Thank you.

13563   And I see the slides are up. I am going to use some visual aids.

13564   First off, I'd like to introduce Cathy Hetzel, who is with me. Cathy and I will be facilitating answers to your questions.

13565   My name is Bill Livek. I'm the vice-chairman and CEO of the Rentrak Corporation.

13566   Rentrak is a global audience measurement service, operating in 36 countries around the world, including Canada and the United States. We appreciate the opportunity to present in front of you and we applaud the Commission for forward-thinking in looking at how all Canadian viewing activity can be measured into the future, with the idea of promoting a fluid system, where advertising transactions can be conducted for the smallest rated television shows to the largest television shows.

13567   We have two goals in being here today. One is to help the current ecosystem compete more effectively with the new and unregulated Internet television and video companies. The second goal is to ensure that all content created in Canada is measured so content creators can have the same opportunity to monetize their content.

13568   We live a very fragmented media landscape, making it very difficult for content creators, large and small, and BDUs to successfully compete in this world. We believe that Rentrak's system that we have developed in the United States is perfectly scalable and compatible to be used in the Canadian market using set-top box information.

13569   Rentrak -- and I'll get involved in more detail -- is consumer-centric. We start looking at all the consumers in all the demographics within the home, from who they are, or the age, the sex, the presence of children, the automobiles that they own or lease, the types of products that they buy at their grocery stores, how they use scanning cards, what their political party affiliation is, and in a privacy-compliant way merge all that information together.

13570   In addition to working in the television ecosystem, we're also working in the global movie landscape. So all around the world wherever a ticket is sold, whether it's on the Internet or at a physical movie theatre, the content creators around the world look at Rentrak information in real time to make marketing decisions on how they operate.

13571   If we look at our customer base in the United States, and globally on the movie side, we're working with virtually every content creator, understanding how many people go to the movies, what they think about the movies, and how much they spend.

13572   Using the U.S. as an example, on the television side we have three core constituencies. They're the video-on-demand constituency, where we're working with all MPVDs or BDUs, as we say in Canada, and virtually every content company, so they can understand when the content is being viewed, at what date, what time, and also to help monetize that in the advertising platform. As I will show you in a second, the consumer is becoming quite transient in how they're using the VOD platform.

13573   Secondarily, because of the census-based currency that we built, we're working with now almost 400 television stations in the U.S. Many of those televisions stations are unmeasured by the sample currency and they're utilizing Rentrak to conduct business with advertisers and ad agencies.

13574   Nationally, we're working with our national product, which essentially is a cumulative rollup of all the local markets, in a similar way so that television networks can look at advanced demographics of their television programming.

13575   I mentioned in Canada we are working with all of the content creators, whether they be independent local operators in Canada, with every cinema company, and working with many in all of the government regulatory agencies.

13576   To give you a brief idea of what we're doing, we do believe that we live in a world with two currencies: a sample currency and a census-based currency. A sample currency does one thing quite well, and it is to measure who is in front of the television set. The census currency deals with who is front of the television set with algorithms and different models, but it does something that is very important: it measures every television show so a value can be placed, not in terms of traditional age and sex, but the products that those households do buy or aspire to buy in the future.

13577   There is a significant benefit to that system. First, it's creating stable and predictable information, the ability to have a rating around the commercial that is being shown, and to have advanced targeting. What we mean by advanced targeting is simply that advertisers are on a never-ending quest to understand how to reach their consumer, and because of what is available on the Internet, the Internet has access to tools that are highly targeted, and in television, in the United States, those advertisers have access to those tools on video.

13578   So the landscape is becoming equalized, and measuring long tail video programs and local programs that cume up to national measurement is quite important, and at the same time measuring video on all the screens, whether the screen is a mobile device, whether it's a tablet device, within the household.

13579   A lot is made about a term of stability and granularity, but this graphic tries to show it.

13580   If the blue line is Rentrak information for a television program and the red line is that of a sample -- and this is a large television program -- where the inequity comes in a market, advertisers charge on when that television program runs a commercial, and there is a great deal of statistical variance within any sample.

13581   That is something that we all learn in basic statistics, whether in high school or college, it's the nature of the system.

13582   But because of the Internet, the stability that is required is far beyond what samples can produce, and that is one of the things that we have addressed with Rentrak.

13583   In the United States, we are measuring every return path television set for video on demand, and that is in excess of 110 million television sets.

13584   Here in Canada, we are working with Rogers on video on demand information, and talking with the other BDUs about joining our video on demand co-op.

13585   Now, on this slide what you will see is that television viewing on video on demand varies greatly. These are our programs that are seen on a live basis and put up on video on demand rather quickly, sometimes on the same day.

13586   You will see that over half of the viewing is occurring after the seventh day, and two-thirds of the viewing beyond the third day. This varies widely by television show. This is an average representation, but it does show that the consumer is drifting to new platforms, because they are watching television when they have time, after their hard day at work.

13587   We are measuring multi-platform in the same way we are measuring video on demand, by pulling back information from BDUs, where it is available, for the smaller screens within the home.

13588   Now, when it comes to all television viewing, we started out our video on demand business about a decade ago, and invested in that business and in the return path business for all viewing of about $100 million U.S.

13589   In linear, it started out just with AT&T, and then with Dish. Today, we are operating with about 60 million television sets in addition to the 111 million.

13590   The massive and passive information with linear and video on demand allows us to integrate these disparate databases about the cars we drive and the consumer products we purchase. We are focusing on verticals -- all verticals -- but the ones that are the most important in the ad community.

13591   I will give you two brief examples of how this information is being used on a commercial basis.

13592   When General Motors introduced their small-platform ATS, their demographic when they bought television, with a sample currency, was 25-54, but all of their marketing revolved around competitive makes and models.

13593   With Rentrak today, they can target television the same way they target Internet, with competitive makes and models. That is how they pick the precise television shows to advertise in.

13594   This way a large television show is on the same footing as a very tiny television show.

13595   In the consumer packaged goods area, the same thing. Someone who makes protein products in the CPG area is buying TV on a 25-54 basis, but all of their marketing is around a protein eater.

13596   You can utilize set-top box information combined with their segmentation systems, and all of this in a privacy-compliant way, to target the TV shows that have a propensity to more protein than carbohydrates.

13597   Rentrak is the only company that has applied and is going through a rigorous audit for MRC, and if we do work in Canada, we will make the same commitment here of auditing our set-top box information.

13598   We plan on working with all of the operators in the commercial way that we are doing it now. If the Commission decides to set up a working committee, we would be happy to work with that working committee, but strongly urge that the BDUs provide test level information to Rentrak, so we can assess the size of the task of measurement, so we can give an accurate perspective of how long it would take to have a commercially viable system.

13599   These databases are complicated, they are disparate, but over a decade of working with it, we have figured out a way to have a statistically representative database.

13600   One last request. If you do move forward on this, we suggest that Internet television viewing, whether it is occurring from the library shows or from the international content, also provide into a cooperative the precise television shows that are being viewed, so that there can be a level playing field of television viewing.

13601   We are excited about being here in Canada. We are also excited about working with our Canadian partners.

13602   We will take questions, please.

13603   THE CHAIRPERSON: Thank you very much for your presentation. It was very clear.

13604   In terms of return path data, other than the United States, what other major jurisdictions are involved in that right now?

13605   MR. LIVEK: We are working in Mainland China, with a number of BDUs there, to do a very similar thing.

13606   If we think the problem in Canada is complicated, it's far more complicated there.

13607   We are also working in Spain, and we plan on working in all countries that are measuring movies, which are all developed countries, to work with return path information over the next few years.

13608   THE CHAIRPERSON: In every case, to your knowledge, this has occurred through natural commercial activity. It hasn't been prompted by regulator or government, or anything like that?

13609   MR. LIVEK: It has not been prompted by regulators.

13610   We were very fortunate that our primary business was measuring video, the video rentals in stores here in Canada and in the United States, and as that business started to decline, the movie studios wanted us to measure, in real time, box office information.

13611   We developed a trust with those program providers, and early on they wanted to get us into video on demand measurement, so we did so, and we did so at our expense, and great learning on the complexity of that information.

13612   They also encouraged us to move into the linear world, which we did.

13613   THE CHAIRPERSON: This is a question I have asked of others. If it makes such great sense, and would be beneficial to the parties that would have access to this information, why hasn't it occurred sooner in Canada?

13614   MR. LIVEK: Because of the competitive landscape.

13615   In the United States, we compete with a commercially robust system of a sample currency that charges a great deal, and there is great dissatisfaction within the market.

13616   And there is room for customers to support two currencies, and two currencies exist in many businesses.

13617   After your hearing, if we went down to an automobile dealership, we could buy a car in 15 minutes, because they have access to two currencies on credit scores.

13618   So we believe it's unnatural not to have two in all businesses.

13619   The reason that we haven't entered Canada in a bold way is simply that your system is a not-for-profit on measurement, and by varying nature, we are a public company and held to a standard of profitability.

13620   We believe that there is a hybrid model to be had in Canada, where the BDUs, in cooperation with Rentrak, can work in a lower margin but commercially viable way.

13621   THE CHAIRPERSON: So, in your view, there are no regulatory barriers for this developing in this country?

13622   MR. LIVEK: No, there is a catalyst to barrier of a market believing that they need this.

13623   The U.S. is more highly fragmented, and it allowed the catalyst to occur far earlier.

13624   The catalyst that may exist now is the international competition through the Internet that is happening, but there was no regulatory spur.

13625   THE CHAIRPERSON: Could it be -- and tell me if I am wrong -- that some people might fear what the numbers would tell them in terms of actual viewing?

13626   MR. LIVEK: Everyone fears what the numbers will say. They are good when they are large; they are bad when they are small.

13627   We have entered a new world because of the Internet. This happened slowly at first, and now it is happening more rapidly.

13628   We see the multinational agency holding companies looking to buy television in more of a three-dimensional way. Still, most of the business is conducted off -- think of a spreadsheet, with a demographic of 25-54, and then television shows. Now it has become more of a Rubric's cube, where there is a price for a make and model of a car, a political ad, a consumer packaged goods ad, and you can only do that when these large databases exist, with program ratings and exact commercial ratings using these other consumer databases.

13629   THE CHAIRPERSON: In your view, how long would it take to get one of these up and running?

13630   MR. LIVEK: If we had, today, sample test data from the BDUs on the platforms that they wanted measured -- and let's assume that it's all the platforms -- it would take, approximately, six months to ingest it, load and understand how each of the BDUs collects and operates differently.

13631   We do have different algorithms that we would tweak around the Canadian marketplace, and within six months we would be ready to go with a commercially viable system, which we believe we could have up within a 12-month period of time.

13632   THE CHAIRPERSON: So that would be 18 months, but is there not -- you said if you had the data from the cable companies and so forth. That requires building a relationship.

13633   MR. LIVEK: Yes, and we have relationships with the BDUs in Canada, and as I said --

13634   THE CHAIRPERSON: Some of them or all of them? You seem to be working with -- you mentioned Rogers.

13635   MR. LIVEK: Yes, we are working with Rogers.

13636   Cathy, I will let you comment.

13637   MS HETZEL: We have ongoing discussions with all of the BDUs in Canada. Rogers was the first to give Rentrak the ability to be able to measure their video on demand data, and since we have been talking about TV Everywhere with each one of them, including Bell Canada, Cogeco, Vidéotron, Shaw and Rogers --

13638   THE CHAIRPERSON: When you say all, you mean the larger players, obviously.

13639   MS HETZEL: The larger players, yes.

13640   THE CHAIRPERSON: And some small cooperatives in smaller communities --

13641   MS HETZEL: Yes, we would love to -- we listened this morning, with pleasure, to the MTS presentation, and we know that we could have the opportunities and, say, have the data to be able to help them make sense of it.

13642   THE CHAIRPERSON: Right, both on the IPTV side and --

13643   MS HETZEL: Exactly. AT&T is, in fact, an IPTV service, and that was the first one we started with.

13644   THE CHAIRPERSON: You saw in our Working Document that we proposed a working group idea. Well, we didn't propose it, the Working Document refers to that.

13645   In your view, would that slow things down or speed it along?

13646   MR. LIVEK: In our experience -- and the only good thing about being 60 years old is, you have seen many committees.

13647   On the one hand, it allows people to participate and feel part of it, but, in practice, it will slow things down considerably.

13648   We believe that it will yield something if there is test data to debate over. But without test data that has been processed, we are debating opinions, as opposed to a fact base.

13649   THE CHAIRPERSON: Right. Is there not a benefit, though, in terms of governance and expectations, to having a working group?

13650   Because you are thinking of how BDUs might use this -- how cable or satellite companies might use this information, or related programming undertakings, but the ecosystem is big and complicated. There are independent players, there are producers, there are people that fund this content.

13651   How would their interests be taken into account in a way forward that did not involve a working group?

13652   MR. LIVEK: Mr. Chairman, that is exactly why a working group does make sense, so that every voice can be heard and accounted for.

13653   My point, though, on the sample data is, without understanding what is available, it is very difficult to discuss intelligently how all of the constituencies can be served.

13654   So we think that may be the first step, and maybe simultaneously why a working group exists.

13655   But the working group shouldn't necessarily come before we start looking at the data, and what is available, so that judgments can be rendered.

13656   THE CHAIRPERSON: I see, because you already have some people asking you to explore those right now.

13657   MR. LIVEK: Right.

13658   MS HETZEL: I think putting formal structure around the meetings themselves and pulling the group together has the advantage of regular scheduled talking that occurs and helps us to make sure we are serving the interests of all parties involved.

13659   THE CHAIRPERSON: In a sense, what gets measured, gets done.

13660   MS HETZEL: That's correct.

13661   MR. LIVEK: That's true.

13662   THE CHAIRPERSON: You said that this data would be available in real time?

13663   MR. LIVEK: Our movie information is available in real time. We think it is impractical for set-top box data to be available in real time.

13664   THE CHAIRPERSON: Why is that?

13665   MR. LIVEK: Simply because we do not know what is being distributed back.

13666   We do know that in the U.S., some of the BDUs are pulling back information more quickly than others.

13667   Real time is the objective, but it is not practical yet today. We are confident that, with improvements in technology, it will be there at some point, and we are confident that we will be the company that helps the marketplace realize that.

13668   THE CHAIRPERSON: Your experience in the real time world in the movie area, what decisions get made quickly after getting that real time information?

13669   MR. LIVEK: It is actually unbelievable. Think about it. It's Friday in Sydney, Australia. People are still waking up in Los Angeles on Thursday morning. They are seeing, in real time, movie information come in -- ticket sales -- in Sydney, Melbourne, Hong Kong, Beijing, Moscow, Paris, London, Dublin.

13670   And by the time a movie opens in Toronto or New York, the projection systems have a pretty good idea of how it is going to play in North America.

13671   Then, what the content creators are actually doing is moving it around their marketing on the Internet and on television, to have a maximum opening weekend. Knowing that so much money is invested in this content, and more content is becoming globally oriented, they are opening up simultaneously around the world.

13672   It helps them achieve greater productivity, and one argues -- and I would argue -- that the more productive they are on marketing, the more they can put back into the content, and the content creators have a greater opportunity to succeed in the ecosystem.

13673   The movie industry is a very informed system, in part because it can be. It is actually easier to measure than television.

13674   THE CHAIRPERSON: My last question -- because you opened the door to the home video market -- and I have been trying to remember, or find somebody who does remember, how many hours a week people were watching home videos from the video store back in 2004.

13675   Do you have a recollection of that number?

13676   MR. LIVEK: No, I don't, Mr. Chairman, but it was a lot.

13677   The digitization of the video store has changed everything around the world.

13678   At one point, Blockbuster, when they were in business, employed 50,000 individuals, and today Netflix employs a fraction of that workforce.

13679   But the consumer, clearly, has a digital choice.

13680   But the videos that are being --

13681   THE CHAIRPERSON: Some would argue that those that built the networks to allow that content are also employing people.

13682   MR. LIVEK: That is also true.

13683   But what we see in our video on demand information is that movie consumption is actually fairly consistent. Over a decade, movies are being viewed a little bit more, and then, for the last few years it has been flat, while video store consumption, clearly, has fallen off a cliff.

13684   THE CHAIRPERSON: Your recollection of a lot is what, on a per-individual, per-week basis?

13685   MR. LIVEK: Cathy, do you recall, because I do not.

13686   MS HETZEL: I think it was about 17 hours per month, per home.

13687   THE CHAIRPERSON: In the U.S.

13688   MS HETZEL: In the U.S.

13689   THE CHAIRPERSON: When you refer to movies, do you just restrict your comments to movies, the growing viewership, or are you talking about all audiovisual content?

13690   Because, on the new platforms, the difference between a TV series or a high-end drama series -- I am not sure what the difference is. The budgets are similar these days.

13691   MR. LIVEK: We are talking about all content, across all platforms.

13692   MS HETZEL: Actually, interestingly, the highest growing category of content is television shows, both the new episodes of TV shows as well as previous seasons, where people discover new content that they may not have known existed, and then they go to video on demand to watch former seasons.

13693   I know that many of the operators here, Rogers and Shaw in particular, with Shomi, are looking for the opportunity to be able to provide those previous seasons to their customers, and it has been a phenomenon in the U.S. that we have watched a lot of what is called binge viewing.

13694   THE CHAIRPERSON: My last question -- I guess it is more of an observation. It is mostly because it is so easy technologically, whereas a decade ago you would have to drive back and forth several times to get the 96 episodes of -- whatever.

13695   Would you agree? It has facilitated --

13696   MR. LIVEK: I would agree.

13697   MS HETZEL: I think it makes it easier, if people are discovering new content and watching more. They might be watching it in different places, but that's why we think the TV Everywhere measurement is so important.

13698   THE CHAIRPERSON: Thank you.

13699   COMMISSIONER PENTEFOUNTAS: Just briefly, Mr. Chairman; if you can sort of take the undertaking and let us know, because if anyone would know, you would know how many hours a week would be consumed in 2004 of content from the video store.

13700   I know you just mentioned 17, but if you have a more precise number, before the end of the week, if you could --

13701   MS HETZEL: Sure.

13702   MR. LIVEK: We will get back to you on that.

Undertaking

13703   THE CHAIRPERSON: For the 19th.

13704   And, clearly, it's U.S. data that you would have, right?

13705   MS HETZEL: We have Canadian, as well.

13706   MR. LIVEK: Yes, we have Canadian data, as well.

13707   THE CHAIRPERSON: If you could split those out, that would be very useful.

13708   COMMISSIONER PENTEFOUNTAS: That would help us a lot. Thank you so much.

13709   Two quick points. One, you would agree with me that, in the eventuality that a set-top box measurement system were set up, whoever set that up, or was responsible for that, would have to work with the traditional currency measurement system?

13710   MR. LIVEK: Yes.

13711   COMMISSIONER PENTEFOUNTAS: You agree with that.

13712   Second, the relationship that you have with a BBM south of the border, and how the sample and census data is put together, if it is put together at all. Would you speak to us on the collaborative -- if there is any collaborative exchange between the two currencies in the U.S.?

13713   MR. LIVEK: We do not collaborate with the sample currency in the United States. It is a different market segment.

13714   We would have every intention to work with Numeris here in Canada, to cooperate with them. For a large number of reasons, we think it's the right approach.

13715   But because of the hypercompetitive market in the U.S., it's impractical.

13716   COMMISSIONER PENTEFOUNTAS: A final point, and you mentioned it briefly in your presentation, but you didn't have time.

13717   You would agree that sample data is tremendously effective in big markets, with big networks, firstly.

13718   And you can add to that in the big markets, but certainly, in the fragmented world in which we live -- I think the number in the U.S. is that two-thirds of broadcasters don't do a .5 share.

13719   Would you speak to us on what Rentrak has been able to bring to the table for these broadcasters, and how that could be applied to the more niche services in Canada?

13720   MR. LIVEK: Yes, the .5 rating is a different way of saying that they are quite small audiences, right? And small audiences, in and of themselves, only have value if you can describe who those types of people are.

13721   I use the auto category because we all drive a car, or most of us do. The type of car that we have, where we are in the purchase cycle, is mute whether you watch a very large show or a small show. The small shows have people who are driving automobiles. They become a highly targeted audience.

13722   Oftentimes these shows that are highly targeted, or small ratings, have the propensity to have some very unique product consumption characteristics, which make them highly coveted by certain advertisers.

13723   But with a sample currency, it is just impractical to measure them. You can't practically meter that many homes to have a commercially-viable outcome.

13724   Set-top box information gives the economics of scale so these small programs can market themselves in a way as they are in the United States: against the product consumption levels.

13725   COMMISSIONER PENTEFOUNTAS: And your experience in the U.S., sort of speak to us briefly about that.

13726   MR. LIVEK: The experience in the U.S. has been nothing short of phenomenal. We entered --

13727   COMMISSIONER PENTEFOUNTAS: For the niche broadcasters --

13728   MR. LIVEK: Yes.

13729   COMMISSIONER PENTEFOUNTAS: -- smaller niche --

13730   MR. LIVEK: Yes.

13731   Before Rentrak, these companies had to commission special studies, that no one believed, and we're in this virtuous cycle of no one believing. When Rentrak came on the surface that -- with the objective of serving large and small, in serving the advertiser so they can become more efficient the smaller broadcasters or one with great volatility found it easier to work within the existing ecosystem.

13732   MS HETZEL: As a matter of fact, the smaller broadcasters were the first to embrace census-based measurement and were the first group of customers that we had. Over time, the larger networks began to work with us as well, because even on a large network you might have some shows that also have a 0.5 rating that don't show up in the sample currency, making it very difficult for you to monetize those shows.

13733   COMMISSIONER PENTEFOUNTAS: Last point.

13734   Advertisers are also interested in making sure that the ads they pay for are actually being viewed.

13735   Does census data provide some enlightenment on that front?

13736   MR. LIKE: Yes.

13737   COMMISSIONER PENTEFOUNTAS: How so? How can we be sure that you're actually watching the ad and you're not going to pick up a beer --

13738   MR. LIVEK: Oh, no one is sure on the Internet --

13739   COMMISSIONER PENTEFOUNTAS: -- in the fridge?

13740   MR. LIVEK: -- or on TV --

13741   COMMISSIONER PENTEFOUNTAS: Right.

13742   MR. LIVEK: -- but you do develop algorithms.

13743   But you do have good case-level data with set-top box. We're recording every click of the remote control. Point of fact is some people click out when there's a commercial pod, and you can see the destruction curve within that when you look at it by television show. But it is not nearly to the extent as some people believe. There is not universal commercial avoidance.

13744   MS HETZEL: And we measure the same for DVR.

13745   COMMISSIONER PENTEFOUNTAS: You measure that, you measure the clicks, as you say?

13746   MS HETZEL: Yes.

13747   MR. LIVEK: Yes.

13748   MS HETZEL: And for DVR on a second-by-second basis. So when you look at our service, you can see a show and you can see the live viewing and the tune out during the commercial period, and we mark that. And then you can also look at the DVR, when the show is played back, and see the comparison. Generally, dips are a little bit bigger in the DVR, as you might imagine.

13749   COMMISSIONER PENTEFOUNTAS: And so some shows that may have a lower rating will have an equal rating when it comes to ad retention.

13750   MS HETZEL: Absolutely.

13751   COMMISSIONER PENTEFOUNTAS: Is that -- okay.

13752   MS HETZEL: Possible.

13753   COMMISSIONER PENTEFOUNTAS: Interesting.

13754   Thank you, Mr. Chairman.

13755   THE CHAIRPERSON: Thank you very much.

13756   I think those are our questions. Thank you for --

13757   MR. LIVEK: Thank you very much.

13758   MS HETZEL: Thank you.

13759   THE CHAIRPERSON: Thank you.

13760   So we'll at least hear the presentation of the next group.

13761   THE SECRETARY: I will now ask Independent Broadcast Group and OUTtv Network to come to the presentation table.

--- Pause

13762   THE CHAIRPERSON: So welcome.

13763   I think what we'll do is give you a chance to introduce the panel, make your presentation, and then we'll take the lunch break, and come back after lunch to ask questions, okay? Is that okay?

13764   So go ahead.

PRESENTATION

13765   MR. FORTUNE: We said "good afternoon," but it's good morning.

13766   Mr. Chairman, Vice-Chairman, Commissioners, CRTC staff, I'm Joel Fortune, legal counsel for the Independent Broadcast Group.

13767   With me today, to my far left, Gerry Wall, of Wall Communications; next to him is David Kines of Hollywood Suite; next to him, Brad Danks, OUTtv; to my right, Beverly Shenken of Zoomer Media; next to her is Don Gaudet, of Stornoway Communications; and next to him, Allan Schewbel, a consultant to many independent broadcasters.

13768   To streamline just a bit this important but lengthy hearing, we have, with the Commission's prior permission, combined the appearance of IBG with OUTtv.

13769   Let us begin.

13770   Today, we will discuss the characteristics and role of the independent TV sector, the CRTC working document, which has helped focus our thinking since our written submission, and some of the difficult realities of the distribution environment for independent broadcasters.

13771   David.

13772   MR. KINES: Independent broadcasters support consumer choice and we expect that some form of pick-and-pay model, and probably more than one, will be the outcome of this process.

13773   In the "Talk TV" Notice of Consultation, the CRTC recognized that: independent services contribute directly to diversity and other objectives of the Broadcasting Act; and that new entrants into the system could offer "new approaches and innovative business practices" that would benefit Canadians. We agree completely.

13774   Independent broadcasters reflect the core values of the Broadcasting Act, enriching and strengthening the cultural, political, social, and economic fabric of Canada. We program for diverse and distinct groups in practically every language present in Canada today, bringing an essential element of culture, equality, and plurality to balance and enrich the system. We are passionate about finding and serving Canadians wherever they may be.

13775   Each year independent broadcasters produce and finance thousands of hours of programming in all program categories, both in-house and through independent producers. Collectively, independents directly employ more than 3,000 Canadians and indirectly employ many more thousands in creative, skilled, and well paying jobs. This represents about 30 per cent of the private TV employee base in Canada, even though independents represent only about 22 per cent of the private TV revenue base.

13776   There is also considerable economic benefit to having smaller and more entrepreneurial independent operators in the system. To give you just one example, on the first day of this hearing the Google representative identified the first three Canadian companies that offered channels on their new subscription platform. Two of those three companies are independent Canadian broadcasters.

13777   With about $1.2 billion in annual revenue, independents remain a vital part of the industry; however, the largest and most profitable programming services are owned by the VI companies: 85 per cent of cat A and C channels are owned by the VIs, 52 of the 63 cat As, and 11 of the 13 cat Cs.

13778   In the cat B field, the VIs only own 21 per cent of those 126 channels, but generate far more revenue and profit than the independents' 99 channels.

13779   As the Commission helpfully tabulated in the last round of financial reporting, VI-owned category B services had an average PBIT of 42 per cent, whereas independent services averaged only 8.4 per cent.

13780   Yet, despite this vast disparity in PBIT, independents spent more on Canadian programming.

13781   MR. DANKS: Despite the vitality of the independent sector, our concern is that the existing imbalance in the broadcasting system could be much, much worse. We thank the Commission for recognizing the particular risk posed to the independent sector. This stems both from some of the changes being considered by the Commission, but also, more importantly, the size, scope, and behaviour of our vertically integrated competitors.

13782   In an environment in which subscribers will have more choice over the programming they receive, what happens at the point of sale determines whether a service thrives or dies. We know you appreciate our grave concern that the companies we compete against are the same ones we rely on to sell our services. Vertical integration has essentially ended the operation of market forces in the system for independent broadcasters, leaving us almost no negotiating leverage, let alone market power, when dealing with the VI companies.

13783   Adding to the threats of vertical integration are, of course, new challenges, such as Netflix, YouTube, and piracy. To borrow a line from Shaw Media, "cutters, shavers, stackers, nevers, bingers," and thieves, we'll add. This is the world we now find ourselves in.

13784   However, looking forward, we know that the broadcasting system is changing and transforming and that the regulatory system and our business models must evolve.

13785   MR. GAUDET: The IBG supports Canadians' desire for increased choice, but let's not forget that the existing business model supports thousands of hours of Canadian programming and gives Canadians access to the best of the world's programming. This model is based on the wide distribution of services in packages at a lower per-service cost than would be possible if all services were sold only à la carte.

13786   No one is able to say with confidence that with greater choice consumers will enjoy lower costs overall. Quite a few economists and analysts have predicted that services, especially niche services, will fail. This would mean an actual decrease in real choice for Canadians.

13787   There is a need to balance enhanced choice against the economic and cultural reality of the broadcasting system.

13788   MR. FORTUNE: We'll focus our discussion on some of the main points in the working document mostly related to the relationship between independent programming services and BDUs. Other issues relevant to independent broadcasters are covered in our written brief.

13789   On small basic, between the two options, IBG supports option B. A small number of non-mandatory independent services are currently carried on basic. Two IBG member services fall in this category, Zoomer Media's Vision TV, and Stingray Digital's Galaxie pay audio service. You'll be hearing from Stingray later this week.

13790   Independent services that have achieved basic carriage should continue to be carried on basic in accordance with the terms of their hard-negotiated agreements with BDUs. We support the position that customers should be able to retain their existing larger basic package and that no reselection be required. There's a real risk that BDUs that implement a new small basic with some optional services could include only their own or other VI services while removing independents.

13791   MS SHENKEN: This is an especially critical issue for Vision TV. We have been distributed as a basic service for decades and have worked extremely hard to maintain that position and fulfil our role as a valued basic service.

13792   We're not revising past issues. The Commission made its decision on 9(1)(h) and we have responded. We negotiated continued carriage with BDUs for basic. Obtaining that carriage has been a challenging task, and required proving clear and demonstrable value to the BDUs and to our subscribers. We wouldn't be there if we didn't meet that test.

13793   We were fortunate that the 17,000 letters of support we received helped show our value as a highly affordable part of the basic service. Our concern is that if the Commission now changes the rules for basic service, quite frankly, we have no idea where we'll end up.

13794   We do know that the audience may have to pay more to continue to receive a service that has been on basic since it launched. Even if our current subscribers keep their legacy basic service, with subscriber mobility we will face gradually declining numbers.

13795   MR. GAUDET: The IBG supports offering more choice through incremental measures that build on the choices already available to consumers, and they continue to support, and even favour, as a default option larger value packages.

13796   IBG also supports the Commission's close examination of affiliation agreement issues. Standardized terms will lower transaction costs for all parties in the system. And the IBG agrees that penetration-based rate carts should be reasonable and based on sub-revenue make-whole pricing and not advertising make-whole. BDUs, such as Rogers and Shaw, support this model for their own and other VI services, so it makes sense that this should extend to independents as well.

13797   IBG supports removing one-way MFN clauses, mandatory satellite uplink fees, and so-called equalization payments, from affiliation agreements.

13798   Continued access rights for category A independent services are necessary for their survival. These services have substantial Canadian content and expenditure obligations and we are all licensed because of our specific contribution to programming diversity. This includes LGBT programming, balanced multi-faith programming, reflecting Canada's ethno-cultural diversity, and, of course, public affairs programming, just to identify three that are represented here on the panel today.

13799   Most independent cat A services have had their licences recently renewed and are only just beginning the second licence year of their second term, so we urge the Commission to let the independent cat As maintain their access rights and genre protection until at least the end of their current licence term in 2018.

13800   MR. DANKS: There's been a lot of different interpretations of the Commission's proposal on linkage, but it appears to permit a significant number of independent channels to be dropped. I'm going to ask Mr. Fortune perhaps to handle that in questions. He's done the math.

13801   In addition, linkage needs to be augmented with a strong VI Code to ensure reasonable packaging, pricing, and promotion of the service. Accordingly, IBG agrees with the proposal that the VI Code be made a regulatory requirement and that it should continue to apply to all BDUs, VI and non-VI.

13802   There is a strong need for "bright line" rules, especially in the areas of packaging and retailing. As the saying goes, "Better fences make better neighbours," and "Trust, but verify" has not worked.

13803   For independent category A services, the "best available package" rule needs to be clearly defined to make it clear that: the most penetrated theme pack appropriate for the programming genre is the best available package; and, when a highly penetrated general interest pack is offered, that pack should include all independent category A services.

13804   Given the small number of existing independent category A services, these rules will improve the visibility and strength of these services to compete in a more consumer-driven environment, and will have a negligible impact, if any, on wholesale costs to the BDUs.

13805   In addition to a clearer packaging rule, the VI Code should provide greater certainty regarding fair treatment in retail marketing practices.

13806   IBG supports the Commission's proposed rule to prevent BDUs from imposing unreasonable conditions on pursuing multi-platform strategies. Affiliation agreements now often include such restrictions, even when the BDU itself seeks to obtain maximum multi-platform rights for its own use.

13807   The framework to ensure fair and sustainable wholesale agreements should address each of these points.

13808   To put this all in context, let me provide you with a specific example as it relates to our service, OUTtv.

13809   Several days ago Bell Media president, Kevin Crull, told the Commission that, in the future, only programming services with an AMA of 3.0 or higher will be viable. I'm paraphrasing, but that was the number he picked, so I'm going to use that.

13810   So what does this mean for OUTtv when we have an AMA of 1.0, an average near 2.5 in prime time? Or, the better question is: What would it take for OUTtv to get to the magical 3.0?

13811   As we filed in OUTtv's written submission, OUTtv had a national free preview in March 2014. We were made available in most digital households -- not all BDUs, but most BDUs cooperated -- across the country for free over that month. What was the result? Our ratings soared by over 300 per cent and we finished the month with an AMA of 2.9. Our prime time audience reached 4.5, well above the 3.0 threshold. Alas, upon return to our normal subscription package, our numbers settled back down to 2.0.

13812   This tells us that, if we were packaged and marketed better, we would be a much stronger service, and, by Mr. Crull's estimation, sustainable. If we were given reasonable access to U.S. channel avails from all BDUs, we could market ourselves better and likely get to the 3.0 threshold more often.

13813   If we were allowed to deliver our signal without the burden of uplink fees, we could produce higher quality original programming and/or acquire more acquisitions.

13814   If we had the security of knowing we weren't going to be moved or dropped on a whim, we would be able to invest more into our business.

13815   If we had the freedom to pursue direct-to-consumer initiatives, we could monetize our content better and make more innovative investments.

13816   If we had the support we seek through the VI Code, we could achieve our important license conditions and be a profitable, sustainable business.

13817   However we don't have these. But, if tomorrow we woke and sold to a vertically integrated company, they would have all of these advantages, and more, immediately following the approval of the sale. This, in a nutshell, illustrates the difference between an independent and a vertically integrated broadcaster in the current environment.

13818   The broadcasting sector is the cornerstone of Canadian cultural policy, and the independent sector is a vital component to the future as we are the innovators, the entrepreneurs, and the upstarts that breathe new life into the system.

13819   We are eager to work with the Commission and the BDUs to develop a framework that provides more choice for Canadians, but we strongly believe that we also have to ensure this system is sustainable, meets the requirements of the Broadcasting Act, and looks to the future.

13820   MR. FORTUNE: Thank you very much for allowing us to appear here today and to combine the OUTtv and IBG panels. We've tried to cover the most important points, we believe, regarding the regulatory framework, but there are other points in the working document, too, that we'd be pleased to discuss further in questions, which we welcome now or after lunch.

13821   THE CHAIRPERSON: I think we'll do it after lunch.

13822   I see we have a lot of cornerstones, but I do think Robert Frost's poem was "Good fences make good neighbours," not "Better fences," but in any event...

13823   MR. DANKS: We'll take "Good fences," Mr. Chairman.

13824   THE CHAIRPERSON: Good.

13825   So why don't we take a break till 10 past 1 o'clock, and we'll start questions then. Okay?

13826   Thank you.

--- Upon recessing at 1207

--- Upon resuming at 1310

13827   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

13828   I will pass the floor to Commissioner Simpson, for questions.

13829   COMMISSIONER SIMPSON: Hello, again.

13830   First off, I would like to say that your presentation this morning, I commend you for, I would say, a more enlightened view to the hearing. Your written presentation was pretty dire and I think you know I appreciate the fact that you're turning the corner with us to try and contemplate what's next and it's still emphasizing the impact on it, on your industry.

13831   I'd like to start with something you said, though, in your written presentation, and it had to do with some math that was done, I think, by the Wall report, but it was in paragraph 32 of your presentation.

13832   You said that when you pull 9(1)(h) out of basic, the remaining independent services are about 1% of the basic cost.

13833   My question is, what happens when you add the 9(1)(h) and cat As that are in basic now back in?

13834   Did you have a number for that?

13835   MR FORTUNE: Not with us. We can certainly provide that --

13836   COMMISSIONER SIMPSON: I would appreciate that, yeah, as an undertaking.

13837   You heard the date is the 19th?

Undertaking

13838   MR FORTUNE: Absolutely.

13839   COMMISSIONER SIMPSON: Thank you very much.

13840   Next question is to do with a statement on paragraph 33, where you indicated that -- I think this went to the argument of why you're reluctant, obviously, to give up hard-won negotiated agreements with the BDUs, and you said that independents have been able to negotiate their way in because they offer a recognized value to the system and to the customer, and that value seemed undeniable to the BDUs, to the extent that they felt that they had to sit down and negotiate with you for the betterment of the value of their service.

13841   I'm curious as to -- with the exception of certain services, certain cat As that enjoy 9(1)(h), are you making reference to other than those 9(1)(h) protected services when you say that?

13842   MR FORTUNE: Yes, we are, Commissioner Simpson.

13843   We're saying these are the services that are not required to be carried on basic and, yet, through negotiation, have managed to secure a basic carriage -- and the Vision TV service is an example of that, and the other one we refer to is the Stingray pay audio service.

13844   But, Beverly, perhaps you'd like to talk about the experience in negotiating basic carriage and how that happened.

13845   MS SHENKEN: When we didn't receive a 9(1)(h), we actually had some contracts that were still in place beyond the term that it would have been effective.

13846   But we did have one that expired and we actually went, for the first time, at least in my history at Vision -- I've been there 13-1/2 years -- where we went month-to-month while we waited to see what would be the outcome of the new normal for us. And I have to say it was really nerve-racking, internally, corporately, but also for programming planning perspective.

13847   We did end up getting the contract, and maybe the story I can tell you, just as a programmer, is what my experience was.

13848   Coming out of that hearing, one of the things that we heard -- and I'm really happy that the Commission asked every big VI, "What will you do with Vision?", because it helped us to have an understanding what the outcome might be for us, and that helped.

13849   But one of the things that I heard, as a programmer, was, "Well, as long as they're popular, we'll keep carrying them".

13850   So, as a programmer, I took up that challenge and said, "Okay".

13851   We've actually grown our audience 30% each year since 2011, so we've met that test.

13852   And part of the other of that is, "What if I become too popular? So, then what will they do with me after this?"

13853   So, the contract that we had that was going month-to-month, that was a new situation. We did get that signed. But it was a first.

13854   COMMISSIONER SIMPSON: Well, that helps.

13855   But what I'm trying to do, in this part of my line of questioning, is understand -- I'm trying to test an assumption here, that by the nature of the independents, the category Bs, in particular, they are -- they have value because they're not mainstream, that they're more niche, they're after a more defined target audience with a more defined typed of programming, and I'm trying to understand the merits of the concern as to what could potentially happen to the independents with a change in the whole system, whether your niche is actually what saves you or your niche is what hurts you, because right now your niche seems to marginalize you financially but it seems to define you when it comes to your difference.

13856   MR FORTUNE: Beverly, why don't you go, and then I'm sure that others could talk about the importance of their genre niche.

13857   MS SHENKEN: So, what we know, our niche caters to an older audience. Seventy-nine per cent of Vision's audience are over the age of 50, compared to 58% of the Canadian population.

13858   So, we embrace and we intend our brand is about this demographic. So, I think that's part of the benefit of the niche.

13859   But what we also know, on the side of, you know, our VI colleagues, is that these are also the same people that are probably, although we don't have the data, the cable subscribers. Because we know that the majority of our audience are cable subscribers.

13860   So, these are not your shavers, your cutters.

13861   Also, the majority of our audience are retired. So, they need a cost benefit package, something they can afford to keep their TV. They watch linear TV.

13862   That's one benefit.

13863   And then the other is the diversity of voices. We air 15 hours of Sikh programming per week. We air two hours of Islam programming. We air one-and-a-half hours of Sikh programming. And we know, we have heard from 9(1)(h), that people who can't get to their congregation for their services are watching our channel, for that reason.

13864   MR DANKS: Obviously, a similar situation for us.

13865   OUTtv is actually a bridge service. So, our mandate is to bridge from the LGBT community into the mainstream, and we do that quite effectively.

13866   We have a much larger straight audience than we had originally thought we would, over time.

13867   But it does answer your question. There is a limit to that,

13868   Plus, there are, obviously, political pressures and other problems which make it more difficult, from time to time, for BDUs to say, "Oh, yes, we absolutely want you. We absolutely want you".

13869   So, those are issues that we face.

13870   We will never be more than a niche. We'd like to be a large niche service, but, you know, that is the foundation of what makes us valuable.

13871   But, you're right. At the same time, it is from pure commercial perspective creates an impediment.

13872   COMMISSIONER SIMPSON: And there's also the old adage -- we talked about fences earlier -- that your greatest strength sometimes is your greatest weakness because what makes you strong also makes you vulnerable, in other areas.

13873   So, let's move on to another question on specific basic.

13874   And why I asked the question earlier about costs -- and you're going to help us with an undertaking -- is that I was impressed by the math that showed that if you aggregated all of the remaining independent broadcasters' programming services, they represent something like 1% of the total cost of basic, on average.

13875   And I guess the first question on this subject is, as you look at what we're contemplating for the Canadian consumer -- which is a lower threshold to entry to get into this broadcasting system -- if it's not affordable for all Canadian services to enjoy participation in basic, is there merit for an extended basic that's also called Canadian, in your mind?

13876   MR DANKS: We absolutely think there would be.

13877   I mean if you take the independent -- particularly, the cat As -- I think if it was an extended basic, I don't think you'd exceed $2.00 a month, on top of the, you know, additional service.

13878   It's one of the things that we see is, you know, under the Commission's own study, it's expense everyone wonders about.

13879   We haven't had a rate raise since 2001, and our numbers are going down. We run very lean, very tight services and don't add a lot of cost to the system.

13880   I'm glad that you said that because we really think an extended basic that included a lot of Canadian services, in particular, the cat As, would be a very good solution.

13881   COMMISSIONER SIMPSON: M'hmm. So, if that solution, for some reason, didn't fly, your starting-up point on life going into the future would be that you would ask for all existing access rights to be maintained --

13882   MR DANKS: Yes.

13883   COMMISSIONER SIMPSON: -- and that your present negotiated agreements would be enshrined, and that would be your go-forward position into the new world?

13884   MR DANKS: Yes.

13885   MR. FORTUNE: Well, that's -- on the access --

13886   COMMISSIONER SIMPSON: It may be oversimplified but --

13887   MR. FORTUNE: -- "enshrined "may be a bit of a strong word.

13888   Let's start with "honoured".

13889   And I don't mean that -- I mean we're not looking for -- this is not a de facto 9(1)(h) order that we're asking for. These are negotiated agreements. And the point is there's a lot of regulatory change coming down the road and a lot of these agreements include a regulatory change clause that permits them to be terminated, and you would expect with the disruption that's coming, there'll be packaging changes, and so on. So, we can anticipate, maybe not the day after the Commission releases its decision, but we can anticipate pressures on packaging. And in that environment, the services that have currently negotiated basic access will be under pressure to be moved. BDUs will be looking to cut costs; advance the interests of their own services. That puts competing services in a difficult position.

13890   So, with that little bit of nuance, you're exactly correct.

13891   MR DANKS: I'd add something to it.

13892   I think the answer is -- the simple answer is we want to be in the next tier of packages that people will be choosing, the broad packages that are often offered, like a Rogers VIP or equivalent of that, or the larger themed-packages, because we think those will still be marketed heavily by the BDUs.

13893   COMMISSIONER SIMPSON: I think the reason why I didn't feel it was inappropriate to say "enshrined" as opposed to "honoured" was that when you couple what's being asked -- and there's no dispute as to why you're asking, but when you couple it with the simultaneous request for strengthening the VI Code and other parts of the statutes, actually moving them from a code to a regulation, it sounds to me like it's taking negotiation off the table.

13894   MR DANKS: Yes, it is. And we've talked about the reasons for that.

13895   You mentioned earlier that we kind of negotiated ourselves into a position. But since that time, there's very little room, if any, for negotiation, you know; particularly, when you're a service that has the kind of CPEs we have.

13896   This is what we're saying, that vertical integration has ended the ability to negotiate between the BDU and the independents. We had no market leverage whatsoever. The only thing we have is what we can get from regulation.

13897   COMMISSIONER SIMPSON: On the notion of honouring those agreements, when you look at the options that are being contemplated that now put pick-and-pay ,or pick-a-pack, on the table, would those agreements apply to both the existing package agreements that are in place and carry straight across to a pick-and-pay? Or does pick-and-pay go back on the table as a negotiated cost?

13898   MR DANKS: They wouldn't apply. And this is a real fear. This is one of our biggest fears, that with the end. of every single BDU contract, with every one of us, there's a clause that says if the rules change, this is thrown out. So, we'd all be back at the table, negotiating with absolutely no negotiating leverage.

13899   COMMISSIONER SIMPSON: Have you done the numbers to look at a scenario where, if there is a status quo on packages as they exist now, with a rate as they exist now, that it makes the affordability -- it changes the dynamics of pick and pay from the scenario that was put forward in your written submission, where pick and pay was being looked at as an isolated instance, where, I gather, it wasn't being supported by any kind of base revenue that was coming from packages.

13900   Is that how you approached your position on pick and pay, that it was an either-or? Like, packages are off the table, pick and pay is on; therefore, we have to go back to square one, assuming lower penetration, higher costs, or do you actually make an assumption anywhere in your calculations that packaging would stay on the table, and therefore help underwrite the variable of pick and pay?

13901   MR. DANKS: We understood that everybody would stay the same, but new subscribers coming into the system would be making new choices.

13902   We assumed that, in the long run, it would be harmful to us and that we would lose more subscribers, but if we got some of the other conditions we wanted, it would soften the blow, so to speak.

13903   MR. FORTUNE: In fact, Commissioner Simpson, what we put forward, assumed, or proposed, was that, similar to other programming services, there remains a deep and inherent value in the system in pre-selected packages, and that they would and should continue, and that, even more so, because they would and should continue, they should treat independent services fairly, because in a pick and pay world they will continue to be important, and we think they should be promoted aggressively.

13904   Consumers would always, then, have the choice to pick and pay if they didn't like what they were being presented with. But, at the same time, the pre-selected packages, the theme packs, the value bundles, would be terrific.

13905   In fact, there is a bit of a feed-off between the pick and pay, à la carte and the value bundles. You take a value bundle and then you can add one that isn't in there. Or, similarly, if the value bundle is becoming too expensive, people will start moving over to pick and pay.

13906   So there is an ecosystem there that reinforces itself and enhances consumer choice, we think.

13907   But part of the ecosystem is continuing bundles. They remain very important, we think, and provide good value.

13908   COMMISSIONER SIMPSON: On the subject of genres and access rights -- let's start with access rights. I don't suppose it would be an understatement to say that access rights are probably one of the most important things on the table for you.

13909   MR. DANKS: Absolutely. But they have to come with packaging and payment, as well, for sure, yes.

13910   COMMISSIONER SIMPSON: Sure.

13911   But going back to the notion that what you are asking for is sort of a standstill order, where existing access rights and existing rates and fees and penetration agreements are honoured, and backed up to the extent that you asked for with regulation, not just a code with teeth, what happens to new entrants? Where do they fit in, in terms of access rights?

13912   Is this only for the players that are in the tent?

13913   MR. DANKS: No, we clearly would like to see more vibrancy put into the system in, you know, the OUTtv submission.

13914   I spent some time on this and said that there has to be a way for new blood to get into the system.

13915   We don't know what that mechanism is, and I think we have all noticed that over the last few years there haven't been entrants, or very few, and they are brave souls jumping in, considering the situation.

13916   There does need to be a mechanism, a way -- I made some suggestions that maybe there is CPE or maybe there is automatic carriage at a certain level. There may be ways to do that.

13917   But we think it is absolutely, fundamentally important that the system is able to allow new entrants.

13918   Our biggest fear going forward should be that young Canadians don't take an interest in the system, and that a young broadcaster is going to jump onto a YouTube platform or onto another platform, without coming into the broadcasting system.

13919   We have some ideas on that, and we have laid some of them out, and there really are new ideas. They are talking about things in the system that should be like the OTTs, but at the core of it, we recognize that we had a chance, and we would like to continue to contribute. We think that there has to be room for new entrants, and a mechanism to bring them in.

13920   COMMISSIONER SIMPSON: Following on, with respect to access, if we are in a world post the decision in this hearing, where a new entrant has to negotiate their way into the space, looking at some of the remedies that you suggested, one of them was -- and, again, I am getting into the pick and pay side of things, what gets selected for pick and pay and what gets selected for packaging.

13921   Tying it to CPE was looked at. In other words, the higher your ratio on CPE, the higher your eligibility. Would that be fair to say --

13922   MR. DANKS: Yes.

13923   COMMISSIONER SIMPSON: -- in terms of selection?

13924   MR. DANKS: Yes.

13925   COMMISSIONER SIMPSON: Now, that is something that you and your company had put forward, but is that, in generality, supported by the group?

13926   MR. FORTUNE: In our proposal, what we contemplated in terms of CPE was that it could be used as a proxy for carriage.

13927   And when you look at the universe of specialty services, certainly a 30 to 40 percent penetration level would be something you would expect to achieve in order to support that kind of level of Canadian production.

13928   So we put it out there as a kind of proxy.

13929   Now, like I said, we think that probably the same kind of outcome could be achieved, or close to it, with a clearer rule about the packaging of Category A services around the best available package, and also the make whole penetration-based rate card that you have been talking about.

13930   So probably the same kind of outcome could be achieved.

13931   But that CPE does reflect kind of a ballpark figure, a proxy if you will, for what carriage should probably look like to support that kind of service.

13932   Does that answer your question? I mean, we don't come at it the same way --

13933   COMMISSIONER SIMPSON: It does. But is it linear, or is it algorithmic, or logarithmic, in that, does it start to get untenable if, all of a sudden, a service finds itself in the situation where it has 75 percent penetration and it, all of a sudden, has a CPE that goes with it?

13934   MR. FORTUNE: What we are thinking of is the minimums, because that is the problem on this side of the table.

13935   COMMISSIONER SIMPSON: Yes.

13936   On genre, some of your members, I think, find it more important than others, but I think the general statement is: If it happens, go slow.

13937   Is that right?

13938   MR. FORTUNE: Your question, I guess, is the road map question?

13939   COMMISSIONER SIMPSON: Yes.

13940   MR. FORTUNE: What we have presented in terms of timing is certainly for the Category A services. They have existing licence terms, and there is kind of a 2018 date as it relates to the independent services, and that is a good timeframe for keeping the kind of Category A protection, and then, when 2018 comes around, it is time perhaps to look at that.

13941   I am not saying "Get rid of it", we will have to see what the world looks like at that point.

13942   For other points, in the pick and pay world, that is not something that, obviously, programming services can control. And we heard the conversation about technical issues.

13943   So, obviously, you wouldn't want to roll something out if you weren't ready to do it, and do it well. So I think that would be a concern.

13944   COMMISSIONER SIMPSON: I totally get the argument from a competitive protection standpoint, but I am more interested in hearing from you a little more on the notion of removal of genre can create a rush to the middle, and this may not just be in Category A services, but also Category B.

13945   Is that a real risk of upsetting the niche balance?

13946   MR. FORTUNE: Beverly...

13947   MS SHENKEN: We like our genre, and we know that we are catering to a very specific audience. But also what I know is, I guess as a parent of a multiracial child, I am concerned about all of the programming services, in their effort to compete, throwing away the baby with the bathwater, and then we all end up looking the same.

13948   It drives the prices up for the programming.

13949   I have an OTA service, as well -- well, we have it, it's not mine -- it's Moses' --

--- Laughter

13950   MS SHENKEN: -- and we have to compete for some simulcast programming, and there have been points several times over the last three broadcast years where I have said: I'm out.

13951   We are just not in that game.

13952   Also, we have an especially high CPE. Now, not on OTA, but for our specialty, our CPEs are among the highest, including the VIs.

13953   Now, as a broadcaster -- and, again, it's Moses' mantra -- we want to create innovative Canadian programming that represents Canadians and the landscape of culture that is Canadian. So we are not going to say that we don't want to produce that programming, we excel in that area. My concern is what will happen to the rest of the landscape, and what will happen to the next generation when they can't see themselves identified on the screen.

13954   MR. GAUDET: Just briefly on that, as well, you mentioned earlier acknowledging the fact that most of us in the independent sector have very niche channels, and I think that is what we are talking about here.

13955   We are not looking for protections, we are looking to maintain a level playing field, so that we can continue with those niche channels and not have that race to the middle.

13956   Again, we don't all want to look the same. I don't think that really helps the consumer differentiate either.

13957   So if we are out there and are available to them, our job will be to market to them and to make sure they realize who we are and what we are offering.

13958   COMMISSIONER SIMPSON: I have just a couple more questions.

13959   On protection, I am going to ask questions about dispute resolution here. Going back to access rights and sort of freezing the status quo on what exists now, you made some very constructive and pointed observations that dispute resolution is not really working if you don't have access rights to begin with.

13960   So my question goes back to the previous question, which is, if we were to toughen up the dispute resolution methodology, what does it do for new entrants who are trying to gain access and haven't accomplished it yet?

13961   Now, I know that dispute resolution is usually on a sustaining relationship basis, but it can be used for other purposes.

13962   So how does it apply to everyone, if only those who are in the tent can benefit from it because they have access rights?

13963   MR. DANKS: Well, it wouldn't be enough on its own. I mean, certainly making them stronger would be better, but we also talk about bright line rules, and what we really mean by that is a simpler system, where there isn't as much discretion. It is the discretion that everybody drives the truck through.

13964   When you are on the other side of it, as a broadcast service, and you are going, "Look, this should be simple, this is the intent," "No, it's not," you are into a dispute. Eighteen months go by, you are fighting with a company that is multibillion, and you are not. It is really tough.

13965   So I really think that if the bright line rule part was solved, and that was where we spent the time --

13966   I would point out that the OTTs that we talk about, they have really simple contracts. They have really simple rules. They have bright line rules. So it's not like it's something we have just made up.

13967   That is where the future is going for most of the technology platforms.

13968   So instead of worrying about what the fight is going to turn into, or how it is going to -- because it is very tough for us, obviously, to even start that, and there are services that have Cat Bs and get threatened and all of that other stuff. They can't even get into the dispute system.

13969   So I really think the focus should be on the bright line side first, and then a dispute mechanism system, where maybe we would have an early meeting, or the Ombudsman would come up. Anything would be better if it was able to be simplified and streamlined.

13970   But, again, the focus, I think, has to be on a clear set of rules that don't require -- don't get the fight started in the first place.

13971   At the end of the day, we should all be working hard to make the broadcasting system work for Canadians. We, as a group, take a disproportionate amount of time fighting and working just to get carried and just to get paid, and it absorbs a tremendous amount of our energy, which takes away from what we could be doing in our businesses.

13972   That is really, at the core of it, the problem we have with the dispute system.

13973   COMMISSIONER SIMPSON: Your entire presentation was very clear with respect to diagnosing the problems and coming forward with recommendations.

13974   I would like, first of all, to thank you, Mr. Danks, for some of your closing observations on where the industry is going, so this could be directed to you, but, actually, anyone could answer.

13975   The IPTV world is going to be a game-changer. It is causing everything to move, potentially, to an even more on demand scenario than just pick and pay.

13976   I have two last questions. First, how fast is that IPTV movement happening, in your mind, and is it a three or a five-year window? And, these standstill scenarios of freezing agreements and rates, should they have a sunset provision?

13977   I mean, they can't last forever.

13978   I am trying to understand what the correlation is between how fast IPTV is coming, because it will be the ultimate game-changer, and how long any of what you are asking for has to be in place before you are dealing with a new problem.

13979   MR. DANKS: That is a great question. It is anyone's guess how fast it is going to happen, but I would say that there are so many different subscribers, or I should say consumers, or Canadians, who are going to behave differently.

13980   We see, overall, the system changing slowly, but underneath it there are obviously core demographics. The older people in the system are not changing. They pay their cable bill, they do what they have done forever, more or less.

13981   The younger people, under 30, under 35 in some cases, they are the ones we should really be worried about. For them, these changes are here now.

13982   We have suggested that the sunset would be the current licence terms, because we have made investments, we did things necessary when we got those licences renewed a year ago, in our case, and I think the others can speak to that.

13983   But I think that by the time we get to the end of that licence period, it will be a very, very different world. We see new things happening every day, and we talk about tipping points and critical mass, but we can see it there.

13984   And as you know from the comments of Google, we play outside of Canada in that world a bit, and we do see the entire world shifting in that direction, and we see that people are interested in moving in that direction.

13985   So I think that's probably the best timeframe that I can -- that's my guesstimate.

13986   MR. FORTUNE: If I could just add, we don't see it as -- I think, in the discussions with independents, we don't see it as one taking over from the other, like a switch.

13987   There is a complementarity, obviously, and there is a bit of an argument as to how much is complementary and how much is destructive. But there is a complementarity, and the systems are going to move together and more merging is going to happen. There is going to be a merger.

13988   Discoverability has been discussed as a key issue in this hearing, and I guess we would say that for a programming service, offering programming under a brand, at this point the biggest access point, how people discover you, is still on TV, by and large.

13989   So there is an important connection between how you are treated under our current broadcasting system as to how you are going to do in the emerging world.

13990   COMMISSIONER SIMPSON: Well, it is the curse of the Internet, because it has hundreds of millions of offerings, but you have to know that it's there to go and get it, and that is a problem that is going to be upon you.

13991   But I just want to leave with this notion, Mr. Danks. You said that the point that neither the Canadian BDU nor the Canadian broadcaster will continue to exist without -- your point where the industry, as you know it, as broadcasters and BDUs, will continue to exist without a regulated system is not likely.

13992   I guess what I am asking here is, are we regulating to save something that should be changing, or are we regulating to simply delay the inevitable, given that the IPTV system is a game-changer that could affect more than just independent programmers?

13993   MR. DANKS: As you know, I strongly believe that we can have a Canadian broadcasting system, but the first thing we need to do is admit that both BDUs and broadcasting services in this country face the same challenges.

13994   This is a system where 90 percent of the programming revenue probably comes from intermediation of foreign content, primarily U.S.

13995   So the starting point is that we have to accept that as an industry and stop the fights between the parties over who within the system survives in order to save the whole system.

13996   It is our supposition, as you know from our submission, that we all have to learn to work together. There is a place for independents to service the niches.

13997   Because if OUTtv goes direct to consumer, it is bad for Bell and Shaw, too, because that is another chunk out of the system.

13998   We want to create a system, and we can do that if we work together, where the system does become something that is good for all Canadians, and we could create a strong offering if we work together to do that and take on these challenges.

13999   Now, the system has to transform in a way that adapts to the technology, and we are going to have to be careful. We are cautious here that these changes could just get rid of us, and we would have no say. We wouldn't be at a future hearing because we would have no business.

14000   So we want to be put in a position where we can keep working, if everybody has to take a hit -- and I think there will be losers and bigger losers on the revenue side. I think that is the experience of the music industry and other industries.

14001   We want to work and find ways to temper that, so that we can then become part of the future.

14002   At some point, though -- I mean, it is a saveable system, because we have such a creative and vibrant culture. We just have to figure out how to turn that so that the broadcasting system can be made workable.

14003   COMMISSIONER SIMPSON: Okay. Thank you.

14004   THE CHAIRPERSON: Commissioner Molnar.

14005   COMMISSIONER MOLNAR: Thank you.

14006   I have been looking here at the Bell packages, just because I know they are a large player, and I see that ichannel and OUTtv reside in what is deemed to be the Best channels. So it's a $100 entry point to get your service.

14007   MR. DANKS: Yes.

14008   COMMISSIONER MOLNAR: You don't believe that additional flexibility having à la carte could possibly help you?

14009   I mean, you have come here kind of arguing: Please protect us in the agreements we are in today and under the conditions that we exist with today.

14010   Really, very, very few have suggested: Free us from today and let us compete in a brave new world.

14011   But when I look at your particular services, it is a bit confusing to me why you believe that is the place you want to stay.

14012   MR. DANKS: It is not the place we want to stay. I think we have made that pretty clear.

14013   But in à la carte -- I don't think they would move us unless there were rules saying --

14014   I mean, what we have asked for is that, in a packaging situation like Bell, Best is not best, and best for us would be Better, and that would be --

14015   COMMISSIONER MOLNAR: But with à la carte, a consumer who has their entry basic could choose you next.

14016   MR. GAUDET: Could I speak to that for a moment?

14017   ichannel is offered à la carte on Bell, as well as on most of the carriers, and it amounts to less than 1 percent of our subscriber base.

14018   It is all about what we keep talking about here, which is discoverability. If people don't know that we are there, if they don't have the opportunity to see us, then we can have the best program on that you can imagine, but if no one knows it is there --

14019   If we are buried up in the Best package, it is hard for consumers to see us.

14020   COMMISSIONER MOLNAR: Thank you. For what it is worth, I would like to make the comment that I read a lot of submissions through this -- I am sure you can imagine, everybody saw the record -- and, Mr. Danks, yours is one that I enjoyed the most. I thought it was very forward looking, so thank you for that.

14021   MR. DANKS: Thank you.

14022   COMMISSIONER MOLNAR: That's all I have.

14023   THE CHAIRPERSON: Other than regulatory solutions, how are you adapting?

14024   One could say, you know: How are you going to the international stage?

14025   One could ask why you are not --

14026   Well, you have already started working together, why don't you act as a group?

14027   MR. DANKS: Commissioner, that's a good question. We are.

14028   First and foremost, as individual services, I know that we are all engaged in social media and other direct-to-consumer situations.

14029   One of our biggest problems, obviously -- we talk about discoverability, but how do you market to the consumer when your main marketer is, in some respects, a competitor.

14030   So we've all developed direct-to-consumer approaches. You know, we're obviously active on all social media platforms. We've developed a direct relationship to sell on Apple's iTunes, Google's Direct Play.

14031   Within this system ichannel and OUTtv currently are working on a couple of cross-programming arrangements to develop some more superior programming. Other independents oftentimes work together in conjunction. We have programs with Blue Ant that we do together too. So the independents collaborate in many, many ways.

14032   And then beyond that, in the international market, you know, we're extremely active. We have an affiliate now in Netherlands, Sweden, Belgium. We have a licence coming in South Africa. We have other initiatives abroad to try and monetize content, Canadian content.

14033   So I think we talk and one of the wonderful things is the independents are so collaborative. Everybody does want to help each other. So I think we definitely are in the headspace to collaborate.

14034   THE CHAIRPERSON: I am suggesting a little further than that. I mean you're good friends, I get that. You share regulatory costs, that's good. But I'm suggesting going a little further. I mean the sum total of each one of your target audiences is basically everyone in Canada.

14035   MR. DANKS: M'hmm.

14036   THE CHAIRPERSON: Is it not? Is that not the case?

14037   MR. DANKS: So are you suggesting we should be launching our version of Shomi?

14038   THE CHAIRPERSON: That may be one aspect to it, but I mean, you know what they say, if you don't hang together, you hang separately.

14039   MR. DANKS: Yes. Well, that would be in our contracts that we can't do it. That would be one answer but that's just one example.

14040   THE CHAIRPERSON: You're prohibited from acting as a group, a little bit like the CCSA is?

14041   MR. DANKS: No. Do you want to --

14042   MR. FORTUNE: What Brad is referring to is the exploitation of multiplatform rights as a programming service. We do refer to in our submission that often affiliation agreements, very often, they'll prevent a programming service from exploiting its own programming on multiple platforms. That's to be licensed through the BDU and then they exploit it on their platforms. So that's one issue in terms of working together to go direct-to-consumer.

14043   But I understand what you're saying. Like the smaller BDUs have done, buying group or selling group, if you will. We're not quite in the same position. I mean message taken but we're not quite in the same position as the small cable systems, who are not in each other's markets and sort of all do the same thing in their own respective markets. So it's a bit different but the point is well taken.

14044   MR. DANKS: There are people who work together in ad sales, things like that, as well on distribution and programming.

14045   Did you have an idea we could adopt?

--- Laughter

14046   MR. DANKS: I mean we're open. As you know, we're open to anything. We like to say we're not flexible, we're contortionists.

14047   THE CHAIRPERSON: You might want to talk to Michael MacMillan, who I think at one point brought Alliance and Atlantis together. It just seems to me that there's some -- it's a business solution.

14048   MR. DANKS: Right. Well, Blue Ant has become a tremendous leader for all of us and we talk frequency. In fact, OUTtv is at the master control with Blue Ant, so we talk all the time. So it is an incredibly collaborative group, the independents. We share a lot and work really hard to try and help each other.

14049   THE CHAIRPERSON: M'hmm.

14050   MR. DANKS: I think you'll hear that anywhere.

14051   THE CHAIRPERSON: Well, there was a point in Quebec a number of years ago when there were too many producers and they came together precisely because of that. Anyway, it's a thought.

14052   I believe those are our questions. Thank you very much.

14053   Madame la Secrétaire.

14054   THE SECRETARY: I would now ask Pelmorex Communications to come to the presentation table.

--- Pause

14055   THE CHAIRPERSON: Welcome. Go ahead when you're ready.

PRESENTATION

14056   MR. MORRISSETTE: Mr. Chairman, Vice Chairman, Commissioners and Commission staff, allow me to introduce our panel. I'm Pierre Morrissette, CEO of Pelmorex Communications Inc.

14057   To my far left is Luc Perreault, Vice-President Distribution and Government Affairs, and to my immediate left is Ken Headrick, Senior Vice-President, Content, Product and Corporate Marketing.

14058   On my far right is Maureen Rogers, Managing Director, Weather Canada, which includes our specialty services, The Weather Network and MétéoMédia, and to my immediate right is Paul Temple, Senior Vice-President, Regulatory and Strategic Affairs.

14059   Nous apprécions l'opportunité qui nous est donnée de participer à l'initiative « Parlons télé : une conversation avec les Canadiens » sur l'avenir de la télévision. Vous avez facilité cet échange à un moment de grands changements, mais également à un moment où certaines choses n'ont tout simplement pas changé. L'explosion de contenus en ligne, la popularité des appareils mobiles pour accéder au contenu, en tout lieu, en tout temps, sont en contraste avec la réalité économique, alors que le marché canadien demeure relativement petit. Le marché de langue anglaise est à peu près de la taille de celui du Texas, et celui du Québec est comparable au marché de la Virginie. Gérer le changement dans cet environnement exige un équilibre subtil, et les conclusions du Conseil à la fin de ce processus détermineront l'avenir du système canadien de radiodiffusion.

14060   Our comments today will focus on the second of four issues for discussion set out in Notice 2014-190-3, which is the "Relationships between broadcasting distribution undertakings and programmers." We believe that many of the changes raised in that Notice could seriously undermine independent programming services and their contribution to the Canadian broadcasting system. Empowering the Canadian consumer is a good thing, but it must be viewed through the lens of the current environment, which is highly concentrated and vertically integrated. For these reasons it is imperative that the Commission include the necessary regulatory safeguards to ensure a vibrant independent programming services sector and a healthy diversity of voices.

14061   MR. TEMPLE: Pelmorex believes that the current policy with regard to genre and access rights for Category A independent specialty services should remain unchanged. Without these safeguards, vertically integrated BDUs will have every incentive and opportunity to not carry competitive independent services or to compete directly with them until such time as their resources are able to outlast those of their independent competitor. This is borne out in the independent study conducted by Wall Communications which Pelmorex and others have filed. Removal of access rights and genre protection simply gives vertically integrated BDUs added leverage.

14062   However, maintaining these regulatory safeguards do not undermine the Commission's objective of "maximizing choice and flexibility" for consumers. Access rights do not force consumers to buy a service, it simply ensures independent programming services are on the menu.

14063   As to genre protection, while conceptually everyone understands the benefits to the consumer of competition, the reality of the Canadian broadcasting system is that it's a small, highly concentrated and vertically integrated environment. Abstract "economic" thinking that the removal of genre protection is intrinsically good for competition is flawed when applied to the environment in which we find ourselves. The complete removal of any form of genre security will simply relegate independent programming services to small niches while the large vertically integrated entities muscle into the more popular genres. The outcome is a further reduction in the diversity of voices and consumer choice.

14064   It is also misguided to believe that the removal of genre protection will encourage more compelling programming, stimulate innovation or permit added flexibility to respond to changing consumer tastes and demands. There already exists ample incentive to encourage more compelling programming and stimulate innovation. There is intense competition between programming services to attract viewers and advertising revenues. There is also intense competition between programming services and OTT and other unregulated services to attract viewers and advertising revenues. With the exception of mainstream sports services, it is unrealistic for any channel to expect it can command higher subscription fees. Growth in the broadcasting system today relies on attracting audiences and advertising revenues.

14065   MS ROGERS: The Weather Network and MétéoMédia, providing local information to 1,000 communities across Canada, are classic examples of innovation amongst independent services. Our reliance on audience and advertising revenues for growth is ample incentive to seek compelling and innovative programming.

14066   Having genre protection has helped us to invest significantly in capital and operating costs to improve the quality and granularity of the weather programming we provide. We have invested significant capital funds into the next generation of our localization technology to support HD channels and provide better graphics for all six of our regional feeds. We have added precipitation start and stop times for hundreds of locations, updated every 10 minutes, as well as lightning alerts based on our own lightning network across Canada.

14067   These recent innovations and programming improvements and many others have been done without the benefit of an increase in our affiliate fee since 1993.

14068   MR. TEMPLE: From a purely consumer perspective, we could find no compelling evidence in the Commission's consultation with Canadians that genre protection was an issue of concern. We saw little evidence that Canadians wanted more food channels or music video channels. Rather, they simply wanted the choice to pick the genres that were of interest to them.

14069   Finally, genre protection policy provides none of the advantages or characteristics of a monopoly. In our own genre there are at least a dozen basic channels in each major market that provides weather information during the key morning and evening day-parts. We all know History Television is not the only channel that contains programming of a historical nature. Blue Ant Media told us earlier that dozens of channels carry travel programming in competition to their Travel+Escape service.

14070   What genre protection does is to provide the consumer with a degree of assurance as to the nature of the programming they will receive, it assists services with their branding and allows them a modest competitive advantage while ensuring contributions to the Canadian broadcasting system are at their maximum.

14071   Notwithstanding all of the above, if large vertically integrated BDUs believe that the privileges and obligations associated with Category A status are too constraining, they can forfeit that status at any time. No regulatory change is needed. Of course, none have and likely none will, because that's not really why they want to eliminate access and genre protection.

14072   MME ROGERS : Nous prévoyons qu'il y aura des conséquences importantes, à la fois bonnes et mauvaises, sur toutes les parties, lorsque « le choix et la flexibilité seront maximisés » pour les consommateurs. Cependant, les arguments que nous fournissons dans notre intervention suggèrent des conséquences sur les propositions énoncées dans l'Avis, rendant les services de programmation indépendants particulièrement vulnérables.

14073   C'est pourquoi Pelmorex appuie un certain nombre de mesures qui feront la promotion des services de programmation indépendants au bénéfice des consommateurs canadiens.

14074   Parmi ces mesures, il y a le renforcement du Code d'intégration verticale, la promotion des services indépendants par l'accès à un canal d'autopromotion, les occasions publicitaires sur les canaux étrangers et la disponibilité des données de mesure des auditoires sur les décodeurs.

14075   On that subject, Pelmorex has been a longtime enthusiastic supporter of the proposal to collect set-top box audience data. While the advantages of strengthening the competitiveness of Canadian programming services to attract advertising will take some time to evolve, the benefits to programming services in terms of program selection and scheduling are almost immediate. In the case of The Weather Network and MétéoMédia, granular data regarding length and time of viewing, general geographic location, features watched, viewership between our standard and high definition channels will be invaluable to us.

14076   Pour toutes ces raisons, nous demandons instamment au Conseil d'aller de l'avant rapidement avec la proposition énoncée dans l'Avis 2014-190-3. Nous avons des idées précises au sujet du modèle et du calendrier de cette initiative. N'hésitez pas à nous poser des questions à la suite de notre présentation.

14077   We note the Commission's decision on Friday regarding standard non?disclosure agreements. We applaud the BDUs who have supported an industry-wide solution to provide set-top box data to broadcasters and advertisers. We encourage the Commission to incorporate into the BDU regulations broader safeguards, setting out requirements that any BDU that collects set-top box data be required to share that data with the appropriate programmer on whose service the data was collected. Other requirements should include BDUs who collect data for their own services to do so for independent services. These provisions are set out in our filing.

14078   MR. MORRISSETTE: Mr. Chairman, we have put forward evidence-based observations and proposals. Appended to our comments today are various tables and charts, already on the public record as part of our initial filing. We welcome questions on these as well as on issues related to small basic, pick-and-pay, dispute resolution, VI Code, promoting independent services, linkage requirements and other matters which we simply were unable to address in the time available.

14079   Thank you. We look forward to your questions.

14080   THE CHAIRPERSON: Presumably you addressed what was most important to you?

14081   MR. MORRISSETTE: Actually, we did.

14082   THE CHAIRPERSON: Thank you.

14083   Mr. Vice Chairman.

14084   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

14085   Your presentation is concise and clear, as is your document from -- I guess it was still the spring. Although we're in the fall, it doesn't feel like the fall. The Chair was commenting earlier he would like the manette, the converter that would change the weather, as was the case with MTS. So maybe you picked a bad day to show up. It's kind of cold, but we can't blame you for that.

14086   So let's try to just flush out a couple of things.

14087   One, we've had a lot of "Sophie's Choice" type of questions this week. Access or genre if you had a choice, if Pelmorex had a choice?

14088   MR. MORRISSETTE: Well, you know, in looking at the list, many reach up to the top of the list. So yes, we obviously have concerns about à la carte, concerns of access, concerns about genre exclusivity. Ultimately, genre exclusivity would be the one factor that is of greatest concern to us.

14089   COMMISSIONER PENTEFOUNTAS: I appreciate --

14090   MR. TEMPLE: If I could just add though?

14091   COMMISSIONER PENTEFOUNTAS: Yes, certainly.

14092   MR. TEMPLE: The Commission in fact has linked them because in theme 13 it says that the genre exclusivity policy would be removed or eliminated for specialty services and that, as a result, they would no longer have access rights. So if we can kind of package them together in a theme, really, they go hand in hand.

14093   COMMISSIONER PENTEFOUNTAS: Yes. That was going to be option C, but I didn't want to open it up for you.

14094   Let's take genre as sort of -- and follow your Chairman's -- I think you're still Chairman, Mr. Morrissette.

14095   MR. MORRISSETTE: Well, as of recently I returned --

14096   COMMISSIONER PENTEFOUNTAS: You're back.

14097   MR. MORRISSETTE: -- back to CEO. Unexpected but it's back in that role after one and half year. It was supposed to be semi-retirement. It turned out to be a sabbatical, I guess.

14098   COMMISSIONER PENTEFOUNTAS: That's all right.

14099   So let's take genre. I mean is there really a concern given the strength of your brand and the decades that you've had to work on that brand and to enrich that brand? Some might find it difficult to believe that Pelmorex would fear that a VI, as an example, would launch their own service by reading out Environment Canada type newscasts. How would you respond to that?

14100   MR. TEMPLE: Well, we've already challenged one application a number of years ago for what was basically a weather type service, so I don't think it's unreasonable.

14101   But again, we've tried to -- obviously, we're putting forward proposals that are of importance to Pelmorex but we've also tried to put forward proposals that we think are policy-based. So whether it's genre protection, you know, I don't think we're advocating it just for The Weather Network, we're advocating it for independent services at large.

14102   So whether someone would try and take on The Weather Network, as I said, someone has tried in the past and it's not unreasonable to believe that it could happen. But by the same token, some of the other services, Travel+Escape or OUTtv, could also be threatened and I think it's a sound policy to provide some kind of security -- I don't like the term "protection" but some kind of security that would allow these services to brand themselves and survive in the new pick-and-pay world.

14103   COMMISSIONER PENTEFOUNTAS: Right. Weather is obviously a highly commoditized form of content. Everyone has access to it and you're already competing with so many other players on so many other levels. Would eliminating genre protection really pose that big a threat, given all the other sources of competition that are out there?

14104   MR. MORRISSETTE: In our service, it's extremely people-intensive operating two live networks 24/7. It's extremely capital-intensive as well. And we have taken on a mandate of serving every nook and cranny of this country, a national network of localized content to over 1,000 communities, each with its own independent local content. We operate several sub-networks. We operate many various reporters and freelancers in the field across the country.

14105   Any kind of fragmentation of our current marketplace would only impact our ability to serve the needs of Canadians coast to coast in every region in our two official languages. So that's, you know, a downside of this hearing, which -- we've been to many hearings since our company acquired The Weather Network and MétéoMédia in 1993. There's no hearing proceeding during the course of our 25 years since The Weather Network and MétéoMédia started that represents a greater downside to our service.

14106   I know we're talking about genre exclusivity but if you just adopt the possibility of the service being tiered, as an example, so a proportion, a significantly reduced proportion of our subscriber base would be lost, and that impacts also not just the loss of subscription revenues but also the loss of directly related advertising revenues instantly, our ability to operate at the level of service meeting the needs of Canadians, which has resulted in very, very high satisfaction levels for all cable companies and satellite providers. We rank amongst their highest levels of satisfaction.

14107   So it's a huge amount of downside and for us it all starts with genre exclusivity as a base.

14108   COMMISSIONER PENTEFOUNTAS: And notwithstanding that high level of satisfaction with your service, you still don't feel that you would be able to ward off the threat, I gather?

14109   MR. MORRISSETTE: Well, what could easily happen is an alternative that would cherry-pick the largest markets and, you know, it's the old 80-20 rule, we totally depend on the contribution of the largest markets to enable us to provide the same level of quality service at the same price to all the 1,000 plus other smaller communities across Canada.

14110   COMMISSIONER PENTEFOUNTAS: Some might also argue that in large part Pelmorex itself is cannibalizing TV viewership through its exceptional app. How would you respond to that?

14111   MR. MORRISSETTE: Well, I have always been a huge admirer of one of the greatest hockey players ever, Wayne Gretzky, and his philosophy was to go where the puck was going to be.

14112   COMMISSIONER PENTEFOUNTAS: M'hmm.

14113   MR. MORRISSETTE: And our philosophy at Pelmorex is to anticipate the next big disruption, the next big market segment that could come and take market share away from us, and our philosophy is that, if we don't occupy that territory, somebody else will, and we will definitely suffer the negative effects of that.

14114   So our philosophy has been to be an early adopter, to be a leader in transitioning to these new market segments, new platforms, and to adopt an early position of leadership there, and that investment has really served us well.

14115   And, you know, as time has evolved, there's no question that we've added many users to our services, but our core service, the flagship, will always be television. You know, we're in every home. We connect with about 15 million Canadians every month through television. It's a huge reach number. They don't tune in for long, our market share number is not the highest, but we have a huge amount of reach.

14116   That number has really not been impacted by the other platforms. People are multitasking and adopting many different ways to consumer content, but, you know, different screens, at different times of day, and depending on where people are.

14117   COMMISSIONER PENTEFOUNTAS: You didn't speak specifically about skinny basic. Today, you did in your original intervention.

14118   Skinny basic, in a potentially non-9(1)(h) world, what kind of impact would that have?

14119   MR. TEMPLE: On our service --

14120   COMMISSIONER PENTEFOUNTAS: On your service, yeah.

14121   MR. TEMPLE: -- specifically?

14122   COMMISSIONER PENTEFOUNTAS: Yeah.

14123   MR. TEMPLE: Well, we would -- in a non-9(1)(h) world, we'd expect to be packaged, presumably in some kind of information pack, I would suppose, and presumably we'd be made available on a pick-and-pay basis, if that was a requirement as well.

14124   So we'd expect that there would be a fairly significant decrease in penetration, and, therefore, penetration -- or subscription revenues, and a similar decrease in advertising revenues. So it'd have a very significant, I would suspect, material impact on our ability.

14125   CONSEILLER PENTEFOUNTAS : Vous avez mentionné que vous êtes prêts à nous apporter un calendrier sur les données des boîtiers décodeurs. Est-ce que vous pouvez peut-être nous donner plus de détails quant à ce calendrier-là?

14126   Commençons, disons, même avant d'arriver là, à ce besoin, si besoin il faut d'un groupe de travail ou est-ce qu'on est prêt à se lancer d'une manière plus agressive?

14127   Oh, is Mr. Temple going to answer the question? I'm sorry.

14128   MS ROGERS: Yes, Ken is going to --

14129   COMMISSIONER PENTEFOUNTAS: So I should have asked it in English.

14130   MS ROGERS: That's okay.

14131   COMMISSIONER PENTEFOUNTAS: I'm just following --

14132   MR. TEMPLE: Well, I'll just start.

14133   CONSEILLER PENTEFOUNTAS : Je suis le document.

14134   MR. TEMPLE: We definitely think there should be a working group.

14135   COMMISSIONER PENTEFOUNTAS: Do we need the working group? Are we --

14136   MR. TEMPLE: I think so.

14137   COMMISSIONER PENTEFOUNTAS: -- far enough ahead that we can sauter, that we can skip that step?

14138   MR. TEMPLE: The reason that we think we would prefer a working group, which actually, in our hope, would at some point evolve into more of a governance board, would be to ensure that independent programming services, and their needs and concerns, are incorporated into that.

14139   We want to make sure that the rules that are set out at the very beginning -- you know, we have concerns about -- when BDUs start talking about cost recovery and costs, we don't oppose BDUs recovering their direct incremental costs associated exclusively with a set-top box regime, but we're worried about those costs being marked up or added to. So there's some issues if it -- you know, it would be unfortunate if we ended up with a set-top box regime that independent programming services couldn't afford to use.

14140   COMMISSIONER PENTEFOUNTAS: You've also suggested that, before we get to the potential set-top box regime, that data derived from the boxes be shared with the broadcaster, especially an independent broadcaster.

14141   MR. TEMPLE: Yes. We've actually modified our original filing a little bit, a nuance that I want to make sure the Commission is aware of. Because when we made our initial filing we called for interim rules, but on second sober thought we think that those rules should be permanent.

14142   Those rules would be that a BDU that collects set-top box information outside of the aggregator --

14143   COMMISSIONER PENTEFOUNTAS: Appreciate it.

14144   MR. TEMPLE: -- because it's quite possible they will still continue to collect information that is separate from this audience measurement system, that if they collect it for their own services, then they would be required to provide similar information to unaffiliated services, and that if they are to collect the information on a service, they be required to share it with that service.

14145   COMMISSIONER PENTEFOUNTAS: At no extra, Mr. Temple?

14146   MR. TEMPLE: At no extra cost, because, presumably -- we're not proposing that they have to do these things, but if they're going to do it, they've already incurred the cost to benefit themselves. But to ensure that there's no undue preference, these rules should be in place and incorporated into the regulations right from the get-go, whether this set-top box audience system takes one year, two years or four years.

14147   COMMISSIONER PENTEFOUNTAS: And at what frequency would that data be shared with the broadcaster?

14148   MR. TEMPLE: Whenever it's collected. So if they're -- we're not -- again, we're not asking that BDUs be required to collect this information. We're not talking about the set-top box measurement system -- or audience system now, we're just talking about things that they're doing on the side, that if they -- if they collect that information -- if and when -- then there would be an obligation. As I said, if it's for an affiliated service, they should be doing the same thing for unaffiliated. And if they're collecting it -- you know, if they're going and collecting a bunch of information on the Weather Network, they should share it with the Weather Network.

14149   COMMISSIONER PENTEFOUNTAS: The chair asked earlier this morning: If it was such a great idea, why wasn't it happening already?

14150   Do you want to speak to that?

14151   MR. TEMPLE: Well, I think -- I think now, with vertical integration, the interests of the vertically integrated are now kind of aligning, and, obviously, there's more of a benefit for vertically integrated BDUs, and puts the pressure on --

14152   COMMISSIONER PENTEFOUNTAS: And the sharing of that information --

14153   MR. TEMPLE: -- on the market. I mean Ken can speak to that.

14154   MR. HEADRICK: Yeah, I mean I think the -- when we spoke previously, I think the idea was that we needed a bit of a nudge. Because I think the equality of the vertically integrated players meant that no one was coming together and no one was taking the leadership position to make something happen and begin. I think what we're hoping is that you can help create the initial kick to get things going and/or perhaps some of the proposals at the table can create the coalescing to actually make action happen now.

14155   COMMISSIONER PENTEFOUNTAS: You haven't sensed a sense of urgency amongst the VIs?

14156   MR. HEADRICK: Well, to this point there haven't.

14157   It was interesting, in some of the submissions that have come to date, it fleshed out a lot of things that were happening that -- and I think moved people's positions forward a bit from where they were. A lot of the pieces that have to light I don't think were known.

14158   MS TEMPLE: But I think we're very nervous that the timelines could be quite lengthy.

14159   I think two of the BDUs now have -- or vertically integrated BDUs have suggested that we incorporate dynamic advertising, and kind of incorporate that, so now we've got a little bit of scope creep here.

14160   We think dynamic ad insertion is great, and we'd welcome any kind of industry look at that, but I think it should be quite separate from the TV audience measurement system so that one doesn't get bogged down in the issues related to the other.

14161   In fact, I'd almost suggest -- or I will suggest that the dynamic ad insertion, if it is to happen, would happen after there is a TV audience measurement system.

14162   There's a bit of a carrot for TV audience, but I think we need a little bit of a stick as well just to make sure that it moves along smartly and doesn't get bogged down.

14163   So the provisions that we mentioned in terms of safeguards independent of TV audience measurement, as well as perhaps unbundling the dynamic ad insertion suggestion, would help move a set-top box audience measurement along.

14164   CONSEILLER PENTEFOUNTAS : Voulez-vous rajouter quelque chose? Did you want to add something? No.

14165   Briefly, I forgot one point in my last question, Mr. Chairman. You raised the issue of un canal d'autopromotion, a self-promotion channel publicizing on other services, ad-avail usage.

14166   What's impeding you from using some of these mechanisms today?

14167   MR. TEMPLE: Well, in the case of ad avails on U.S. specialty services, the original proposal, going way back a number of years, was that these would be made available at no cost to Canadian programming services, and, of course, now it's being morphed into an at-cost process. I think we filed some of the rates, or we'd -- I'd be happy to make an undertaking to file those rates, but I don't think they're really at cost.

14168   COMMISSIONER PENTEFOUNTAS: They're also an excellent BDU promotional tool.

14169   MR. TEMPLE: And, you know, there's been a lot of discussion about discoverability, and the last panel raised that concern for independent services. How do they get discovered? Well, if they have free access to ad avails, I'm sure -- you know, setting aside half, or whatever portion, for the BDU still gives them ample value in promoting their services, but it gives a venue for independent services.

14170   I'll just mention two things --

14171   COMMISSIONER PENTEFOUNTAS: But would you reserve that? And how would you decide who would have access to that time? Would you restrict it to independent --

14172   MR. TEMPLE: We'd stick to a fair -- run a schedule or fair and equitable access to independent services.

14173   But what I wanted mention is that, you know, we've talked about, again, discoverability, and there's -- I think Bell mentioned how their system can make recommendations.

14174   And in the new world that we are going to see, I doubt that the Bell recommendation program, when you're watching TSN or something, is going to say: Tune in now to the show that's on Travel & Escape, or tune in now to something that's going to be on Vision.

14175   When you call into a Call Centre and you are doing you picked hand and you've got eight or nine channels and then you're saying, well, now I've got to think about tens one now so I can get my picked hand, I don't think the CSR is going to say, you know, people who pick those channels, they often pick Vision or they often pick Cottage live, obviously the BDUs are going to propose their own services, which is completely normal and it's not a bad thing and you would expect them to that.

14176   It's in the nature of a vertically integrated company to promote its own services. So, how do we offset that? How do we make independent services discoverable and one way is to go back to the original idea of bad avails and use that as a tool.

14177   In fact, I would encourage the Commission to require US services to make all their apps available for use by BDUs to enter at Bell, so we can actually promote and give the discovaribility to independent programming.

14178   COMMISSIONER PENTEFOUNTAS: And there would be a set aside -- a specific set aside for independent broadcasters that are going to be available?

14179   MR. TEMPLE: So there would be -- it would be a 50/50, the vertically integrated company has access to half, because they're doing the work, but independent services would have access to the other half.

14180   COMMISSIONER PENTEFOUNTAS: And just before I forget, coming back to genre exclusivity protection and access, would you limit that?

14181   Would one option be to limit that kind of protection? There is another word you used, not protection, but --

14182   MR. TEMPLE: Secure.

14183   COMMISSIONER PENTEFOUNTAS: -- security, to independent services, to the genre protection and access limited to independent services?

14184   MR. TEMPLE: Well, I am quite happy to throw the vertically integrated services under the boss, but, you know, I find it quite telling that Bell and Corus -- at least Corus, I think, in their written filing, all want a genre protection in Quebec, and it was great.

14185   I was quite interested when I read Shaw's, on how many points that we actually agree because they call for a very similar process that we did in our filing, to maintain genre protection and access right for Category A services, or at least, for them to make the case on some basis that they be maintained.

14186   So, if the Commission, in its wisdom, decides that it should or shouldn't be maintained for vertically integrated companies, I don't think we really care, but definitely it should be maintained for independent Category A services.

14187   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman. Thank you.

14188   THE PRESIDENT: I don't think there is any other questions.

14189   But I would note that we've had a lot of exchanges last week and a lot of undertakings, with people who will be putting forward ideas about the whole market. And so, I take it that you will have an opportunity in your applied comments or the back space of the comment, to address those. So, I do hope you will take that opportunity.

14190   MR. MORRISSETTE: We will, Mr. Chairman, but I would just like to make one additional comment and I guess it has to do with a piece of change.

14191   You know, as filled in, I have been around for a long time. I had the good fortune of entering the industry in 1977 and through Cancom I went through many very major policy hearings and since creating Cromax as well, but none as significant as this one.

14192   The stakes are very high and particularly for the independents. The down side is huge. It's not just a question of a down side for service affiliates, but down side for the existence of a company.

14193   So, as I have been witness to change over time because there has been a lot of technological change that's impacted regulatory change, which is all good. But it has always been consistent with the objectives of the Act.

14194   It has always been consistent with a balanced approach for all of the stakeholders and including consumers content players and distributers. It has always been orderly. It has been evolution and not revolution.

14195   So, in a context of -- I think it was Question 29, that spirit of adopting and a evolving change I think should continue to prevail as an outcome of this hearing.

14196   The win-win scenario for all stakeholders really I think calls on that kind of outcome. Anything other, I think, there would be a significant win-lose, particularly for the Canadian broadcasting system, which has been, you know, in the other world, we all know that, and that's because of the judicious care in evolving the system over time and I think that spirit should maintain.

14197   THE PRESIDENT: Well, thank you for reminding us of our obligations. Thank you very much.

14198   Next participant, please. Thanks.

14199   LA SECRÉTAIRE: J'inviterais maintenant la Fédération nationale des communications à s'approcher.

--- Pause

PRESENTATION

14200   LE PRÉSIDENT: Bonjour, messieurs. Donc, quand vous serez prêts, vous pouvez aller de l'avant. Merci.

14201   M. ROGER: Monsieur le président, mesdames et messieurs les conseillers, permettez-moi de me présenter. Pierre Roger, président de la Fédération nationale des communications.

14202   Je suis accompagné aujourd'hui de Claude Dorion, directeur général de MCE Conseil, une firme conseil avec qui on travaille depuis plus de 20 ans au maintien et à la relance des entreprises dans le secteur des médias et de la culture.

14203   Nous voulons tout d'abord vous remercier de nous permettre de réfléchir sur l'avenir du système canadien de radiodiffusion. Nous espérons que notre point de vue sera utile et qu'il nous permettra de participer de façon positive et dynamique au débat.

14204   Cela dit, nos commentaires porteront sur les trois objectifs que vous avez développés pour servir de base à notre réflexion.

14205   Un système canadien de télévision qui favorise le choix et la souplesse en ce qui concerne la sélection des services de programmation.

14206   En effet, les Canadiens ont accès à 700 services de télévision canadiens et étrangers. Le choix est vaste et présuppose une certaine diversité.

14207   Notre système de télévision est complexe et unique. Il est, de façon prépondérante, français et anglais et aussi multiculturel et multilingue. Il possède des racines publiques et privées et est ouvert aux réalités d'ici et d'ailleurs.

14208   Les citoyens doivent donc être bien informés pour faire des choix éclairés. Nous aborderons cette question plus loin.

14209   Les droits de tous les Canadiens doivent être respectés et tout doit être mis en oeuvre pour qu'ils se reconnaissent dans ce système...

14210   LE PRÉSIDENT: Ralentissez un petit peu pour qu'on vous entende bien dans les deux langues officielles.

14211   M. ROGER: Oh! Excusez-moi.

14212   LE PRÉSIDENT: Prenez votre temps. On a le temps.

14213   M. ROGER: O.k. O.k. Parfait. Alors, qui se veut profondément canadien, tout en état ouvert aux réalités étrangères.

14214   J'ai tendance à parler un peu vite parfois.

14215   Notre système doit demeurer canadien...

14216   LE PRÉSIDENT: Vous voyez ce qui arrive, c'est que vous l'avez tellement pratiqué que, pour vous, ça coule sur la langue, mais pas autant pour les interprètes.

14217   M. ROGER: Oui, ça coule. Oui, ça m'est arrivé une fois, c'était multilingue alors c'est encore plus compliqué.

14218   Notre système doit demeurer canadien, présenter de la programmation de très grande qualité et protéger la culture et la langue française. Nous croyons que le cadre réglementaire peut encourager la quête de qualité et favoriser la programmation locale.

14219   Ainsi, la flexibilité des modes de paiement d'accès à la distribution aura un impact sur le financement de la programmation. D'une part, un libre choix absolu dans la sélection des chaînes pourrait provoquer une commercialisation excessive et probablement un nivellement vers le bas de la programmation. Ce serait un risque important pour la diversité du système.

14220   D'autre part, l'existence de forfaits trop larges impose des coûts superflus aux citoyens et peut permettre la survie artificielle de certains chaînes vivant de leur seule présence sur les forfaits.

14221   Leur existence contribue en outre à la dispersion de revenus publicitaires de plus en plus éclatés en diverses plateformes technologiques. Il faut ainsi se méfier de la surprogrammation qui crée très souvent des besoins artificiels chez les consommateurs et qui exige une infrastructure complexe très difficile à financer.

14222   Nous sommes ainsi d'accord avec l'obligation faire aux distributeurs de permettre aux abonnés de choisir individuellement les services de programmation facultatifs, ce qui est d'ailleurs en vigueur avec succès au Québec depuis 1999.

14223   Quant au concept d'un petit service de base entièrement canadien, il jouit d'une très grande popularité au Québec et fait en sorte que les québécois puissent affirmer leur réalité identitaire. Les télédiffuseurs généralistes ainsi que les diverses chaînes publiques doivent en faire partie.

14224   Cette flexibilité devrait encourager un plus grand dynamisme des chaînes spécialisées pour accroître leur caractère attirant, menant à une hausse de qualité dans la programmation et poussant le coût moyen d'acquisition à la hausse.

14225   Quant à la substitution simultanée, elle représente pour nous un irritant marginal qui génère des ressources financières importantes renforçant la capacité canadienne de production. Elle devrait être maintenue, car toute alternative de mécanisme de contribution des chaînes américains semble en effet très complexe.

14226   Bref, à l'ère d'Internet, une rigidité accrue de la tarification pourrait accélérer la fuite des auditeurs vers l'ordinateur ou ITV. Les choix deviennent de plus en plus complexes à faire avec l'arrivée des nouvelles technologies qui sont maintenant réalité.

14227   Un système canadien de télévision qui encourage la création de programmation captivante et diversifiée.

14228   Nous appuyons cette affirmation qui confirme notre réflexion à l'effet que la programmation doit être la pierre angulaire de notre système de télévision et nous sommes en accord avec les principes énoncés par le Conseil à cet égard.

14229   La télévision, tout comme les autres forces d'expression culturelle, prend sa source dans le produit qui se doit d'être de très grande qualité, diversifiée, actualisée à nos réalités et à la fine pointe de l'évolution créatrice. Le choix des Canadiens et leur fidélité reposent sur cette réalité.

14230   Les objectifs qualitatifs d'information, d'éducation et de culture dépassent pour nous les contraintes économiques et le rôle des diffuseurs publics est essentiel à ce égard.

14231   La programmation doit être canadienne, c'est la condition de base pour offrir une programmation de qualité appréciée ici et ailleurs. Cette stratégie offre, de plus, de maximiser la création d'emplois canadiens et de développer une industrie de haute qualité, capable d'exporter sa production et de créer de la richesse collective.

14232   Cette stratégie dépend d'un système de financement diversifié qui dépasse les revenus provenant des seules publicités. Ce financement doit être souple et suffisant. Il doit provenir des secteurs publics et privés, de certaines mesures fiscales et de partenaires étrangers permettant d'atteindre des masses critiques tout en favorisant l,efficience quant au contrôle des coûts.

14233   Ainsi, la télédiffuseurs devraient avoir droit aux mêmes leviers de financement que les producteurs indépendants afin de permettre la sélection des modes de production réellement plus efficients, y compris à l'interne.

14234   Il faudrait aussi faire en sorte que les services étrangers de distribution non réglementés, comme Netflix, par exemple, participent à ce financement puisqu'ils ont accès aux auditeurs à travers l'utilisation de distributeurs canadiens.

14235   La télévision publique joue à cet égard un rôle absolument central pour l'information ainsi que pour la qualité et la diversité par sa programmation. Elle devient une référence pour les diffuseurs privés.

14236   L'exercice que le CRTC a entrepris nous porte à croire que nous ne sommes pas les seuls à penser ainsi. Pour certains acteurs privés, les radiodiffuseurs qui poursuivent des intérêts d'ordre public devraient faire de la télévision confidentielle, soit une télévision de haute qualité, mais sans impact sur les cotes d'écoute, et encore moins sur les parts des marchés publicitaires.

14237   La posture budgétaire gouvernementale provoque chez les diffuseurs publics une approche de financement de type commercial qui entraîne ces radiodiffuseurs à mettre de côté leur approche et à trouver de nouvelles sources de revenus.

14238   Le produit et la programmation en souffrent, l'imposition d'une quête accrue de revenus publicitaires pour les diffuseurs publics les mène à une programmation conforme aux attentes des annonceurs et limite ainsi leur aptitude à offrir une contribution riche et distincte à la programmation captivante et diversifiée recherchée par le CRTC.

14239   Ils érodent ainsi leur distinction, leur pertinence et leur contribution et c'est l'imaginaire collectif des Canadiens qui en paie le prix.

14240   Le public manifeste sa volonté d'avoir une composante publique dans le système de radiodiffusion canadien, qu'on soit imaginatif et que l'on trouve des moyens de financement qui vont permettre à tous les diffuseurs un équilibre opérationnel et financier permettant la croissance et aux citoyens canadiens de recevoir leur dû dans un système qui s'attardera sur la mission et la vision de notre télévision en définissant des moyens imaginatifs, productifs et efficients.

14241   Une télé publique dynamique, solide et confiante en son avenir est essentielle à la vie culturelle et politique de notre société.

14242   Nous regrettons profondément le rejet du scénario de la redevance de type européenne comme pilier de financement de la télévision publique qui aurait permis à la fois de stabiliser la structure de financement de la SRC, isoler cette dernière des tentatives de programmation trop commerciale, contribuer à l'équilibre budgétaire fédéral et libérer des recettes publicitaires de plus en plus rares au bénéfice des diffuseurs privés.

14243   De plus, avec le glissement progressif de l'écoute vers les plateformes alternatives, il faut chercher à générer une contribution financière à la programmation par les plateformes internet comme elles reconnaissent et respectent les droits d'auteur en musique.

14244   Le succès de notre télévision se confirme au Québec par des cotes d'écoute très éloquentes. à titre d'exemple, qu'on nous permette de mentionner qu'en 2012-2013, toutes les émissions du palmarès des dix meilleures émissions ont rejoint un million et plus de téléspectateurs.

14245   Un système canadien de télévision qui renforce la capacité des Canadiens à faire des choix éclairés et prévoit des recours en cas de différends.

14246   Notre système de télévision est bien structuré et laisse une place importante aux citoyens. Nous estimons par ailleurs qu'il mérite une attention accrue alors qu'il faut face à des défis de changements démographiques, technologiques et économiques.

14247   Ces tensions apportent la fragilisation de certains acteurs et la tentation occasionnelle de sursoir à des engagements pris devant le Conseil, sous prétexte de viabilité financière.

14248   Des mesures de suivi et de reddition doivent favoriser la création de programmation captivante et diversifiée. Une approche incitative serait préférable si elle s'avère suffisante. Nous n'en sommes pas convaincus. Des engagements réglementaires restent nécessaires.

14249   en conclusion, le système canadien de télévision est appelé à s'adapter à l'arrivée des nouvelles technologies, de la globalisation et de la mondialisation des marchés et de la fragmentation des auditoires, mais il n'en demeure pas moins cependant qu'un certain nombre de réalités sont restées les mêmes. Ces réalités se regroupent autour de ces trois axes que vous avez soumis à notre réflexion.

14250   Pour nous, le système canadien de radiodiffusion doit servir les Canadiens en tant que consommateur, mais aussi en tant que contribuable et citoyen. Le consommateur doit avoir la liberté de choix dans l'achat et le paiement de services télévisuels et la politique de tarification des services doit favoriser cette liberté sans fragiliser les piliers essentiels de l'industrie. L'industrie doit donc viser l'efficience dans son mode de production et de diffusion, incluant la radiodistribution. Le citoyen doit avoir accès à une télévision riche qui remplit des devoirs d'information, d'éducation, de culture et de divertissement. La diversité des choix offerts par la télévision privée et publique doit être soutenue par un cadre réglementaire adapté aux défis démographiques, sociaux, économiques et technologiques.

14251   Enfin, le Canada a choisi au fil des années de construire une industrie télévisuelle permettant d'offrir un choix, une diversité et une qualité supérieure à ce que les seuls revenus publicitaires privés auraient permis dans un système totalement privé basé sur la libre entreprise.

14252   Des exigences réglementaires et les leviers de financement variables ont permis de créer une industrie dynamique et créative, générant des contenus canadiens et québécois de qualité mondiale et attirant sur notre sol des coproductions et productions étrangères.

14253   L'industrie contribue à ce système de financement, mais l'État aussi à travers des participations, des subventions et des crédits d'impôt. Ainsi, le contribuable participe au financement de l'industrie qui doit servir le citoyen.

14254   Cette contribution appelle à l'efficience dans la gestion des coûts et milite dans le traitement équitable entre les acteurs afin de permettre de choisir le mode de production favorisant qualité et efficience.

14255   Ce ne fut malheureusement pas toujours le cas avec l'accès aux crédits d'impôt réservé à la production indépendante amenant la disparition de postes permanents à la faveur de postes contractuels, menant à une précarisation sectorielle et une perte d'expertise.

14256   Finalement, aujourd'hui, la question centrale pour nous est d'apporter des modifications dans le mode de financement afin d'équilibrer les règles entre chaînes généralistes et spécialisés, rendre les crédits d'impôt accessibles aux productions des diffuseurs et trouver un système de financement de CBC/Radio-Canada, pour permettre à cette dernière de remplir son mandat ainsi que les conditions de licence fixées par le Conseil lui-même. Ces questions sont centrales pour avoir un système canadien de télévision qui encourage la création de programmation canadienne captivante et diversifiée et protéger les emplois qui rendent possible cette programmation.

14257   Je vous remercie de votre écoute. Nous sommes disposés à recevoir vos questions et commentaires.

14258   LE PRÉSIDENT: Merci beaucoup. Monsieur le conseiller Dupras, s'il vous plaît.

14259   CONSEILLER DUPRAS: Merci. Est-ce qu'il y a des changements qui sont requis au Québec, si on regarde la formule qui est proposée actuellement dans le marché?

14260   Les différents télédistributeurs semblent tous offrir déjà des volets facultatifs, il semble y avoir un bon degré de satisfaction.

14261   Est-ce que vous trouvez qu'on doit aller plus loin que ça encore? Vous semblez dire que vous êtes en faveur que les services de programmation soient offerts à la carte.

14262   Vidéotron nous a dit qu'il y a un danger de faire ça, également les Services de programmation et d'autres associations sont venus nous dire qu'il ne fallait pas aller jusque là.

14263   De votre côté, vous dites que vous êtes pour ça. Pouvez-vous nous dire pourquoi?

14264   M. ROGER: Oui, mais je vais commencer et Claude pourra compléter.

14265   Je pense qu'au Québec, et ça a déjà été débattu un peu par le passé, mais jamais autant que lors de cette audience, à l'effet d'avoir un forfait de base qui soit vraiment le moins cher possible. Il semble que les consommateurs commencent à trouver que la facture est élevée, là, pour le service de télédistribution.

14266   Alors, il faudrait trouver une façon de commencer à un volet très très bas et j'avais déjà fait, dans le passé, la proposition, il y a plus de 15 ans et encore il y a peut-être dix ans, ici, devant le CRTC, surtout sur la question des canaux généralistes et, là, vous amenez la problématique réellement, là, à son point culminant avec la possibilité, là de ce que vous proposez de permettre aux propriétaires de licence de télévision généraliste de fermer leurs émetteurs alors qu'on soit qu'il y a à peu près encore, facilement, dix pour cent des gens, dépendant des régions du Canada qui regardent encore la télévision uniquement avec -- excusez-mois l'expression -- les « oreilles de lapin » là, qui regardent les signaux de ces émetteurs.

14267   Et vous savez aussi qu'il y a une augmentation de ce nombre. Il semble qu'il y a des gens qui délaissent les abonnements pour aller uniquement, là, vers la télévision à travers les émetteurs, surtout dans les grands centres urbains parce que la qualité est très bonne avec le signal numérique.

14268   Moi, j'aurais rien contre la disparition et je réitère la proposition que j'avais fait dans le passé, contre la disparition des émetteurs, mais à une condition : c'est que les télédistributeurs offrent un service de base pour retransmettre les chaînes généralistes qui soient gratuites.

14269   C'est à dire que les gens devraient acheter peut-être, là, l'équipement, mais après ça, il n'y a pas de coût pour regarder les canaux généralistes. Mais à partir du moment où les gens vont chercher des options, là, il y a des coûts, là. Ça va été retenu à l'époque, les gens aimaient cette proposition.

14270   Je vais laisser monsieur Dorion peut-être compléter, là, ma réponse.

14271   M. DORION: En fait, une des choses qu'on observe depuis une vingtaine d'années ou la Fédération nous mandate, va porter des avis et faire des analyses sur la situation économique des acteurs du secteur de la télévision au Québec et à l'évidence, des performances économiques des télévisions spécialisées, des chaînes spécialisées qui sont extrêmement confortables, comparativement à des contextes de plus en plus difficiles pour les télévision généralistes.

14272   Alors, il nous semble que l'accès... une fois que l'accès à la télédiffusion est établie, ça semble permettre des performances financières déséquilibrées, selon les deux statuts de télévision et, par conséquent, la flexibilité dans les programmes de forfaits amèneraient davantage de concurrence parmi les chaînes spécialisées et pourraient probablement contribuer à rééquilibrer un peu la situation économique des deux groupes respectifs: les traditionnels et les spécialisés.

14273   Face toujours à cette préoccupation d'avoir... de permettre un accès avec un tarif d'entrée faible, ça peut également ralentir l'exode des auditeurs plus jeunes vers la télévision en ligne et permettre un virage qui va donner un certain nombre d'années supplémentaires à l'adaptation de l'industrie en général à ce défi très important.

14274   CONSEILLER DUPRAS : Donc, vous êtes en faveur d'un service de base aminci, service à la carte. Ça créerait davantage de concurrence. Peut-être qu'au niveau de la fragmentation ça aiderait la télévision conventionnelle. Est-ce que c'est ce que vous envisagez, ce que vous voyez?

14275   M. ROGER : Oui, tout à fait. Évidemment, on comprend...

14276   CONSEILLER DUPRAS : Et que la petitesse du marché québécois peut se permettre d'aller avec un service à la carte pour les services spécialisés. Est-ce que vous avez fait des études de ce côté-là?

14277   M. ROGER : Monsieur Dorion?

14278   M. DORION : Écoutez, il est clair que nous nous présentons au CRTC avec une certaine modestie dans la mesure où vous avez pas un grand groupe de communications avec une équipe de recherche, d'économistes et de département des finances à temps plein sur le secteur.

14279   On fait des observations sur des bases ponctuelles de l'état de l'industrie. On s'abreuve avec beaucoup d'appétit des rapports de surveillance que le Conseil produit sur une base annuelle pour arriver à ces constats-là.

14280   Et un des éléments qui nous paraît des plus préoccupants est effectivement l'accès aux auditoires d'une part, les modes de financement d'autre part, amènent des règles de fonctionnements différents puis des résultats financiers qui sont différents.

14281   On l'a dit dans notre rapport. Un des éléments qui paraît fondamental est que politiquement, le cadre règlementaire permet au Québec d'avoir accès à une télévision nationale, si vous me permettez, ou un système de télévision qui est nettement au-dessus du pouvoir économique uniquement généré par les publicités.

14282   Donc, il y a un fonctionnement de crédits d'impôt, de licences de redevances qui permet aux citoyens d'avoir une télévision de bien meilleure qualité avec des contenus nationaux nettement au-dessus de ce qu'on peut voir dans un paquet d'autres sociétés occidentales.

14283   Mais que cette règle-là a entraîné -- et là, j'essaie de peser mes mots. Mais peut-être des orientations de ressources qui ont pu biaiser parfois l'allocation optimale des ressources.

14284   L'exemple le plus frappant est qu'un diffuseur peut choisir -- et il est peut-être trop tard pour renverser cette vapeur-là.

14285   Mais, depuis maintenant plus de dix ans, un télédiffuseur peut choisir de mettre à l'antenne une émission qui coûte 120 p. cent de ce qu'il aurait coûté à l'intérieur de la maison du diffuseur de produire la même émission. Parce que le mécanisme de financement rend le coût pour le diffuseur, plus bas que de le faire à l'internet.

14286   Donc, pour la société, le coût d'une production télévisuelle indépendante peut être plus élevé qu'une production qui est faite dans les murs du diffuseur.

14287   Évidemment, c'était plus réel lorsque les équipes étaient encore là il y a une dizaine d'années. Mais cette règle-là, d'après nous, a eu un effet pervers malheureux tout en favorisant une télévision qui est au-dessus, comme je le disais, du seul financement privé -- est au-dessus de ce qu'aurait pu permettre un seul financement privé.

14288   CONSEILLER DUPRAS : Peut-être je pourrais juste vous demander, est-ce qu'il y a d'autres changements auquel vous pensez qui pourraient être faits, ou une proposition pour une autre source de financement que celle qu'on connaît actuellement?

14289   M. DORION : Une des sources que nous avisons regardé de façon assez approfondie il y a quelques années était de voir la possibilité que Radio-Canada soit financé avec les mêmes mécanismes que ce qu'on voit en Europe où il y a une redevance payée par chaque ménage propriétaire d'un télédiffuseur en contrepartie d'un retrait, parfois total, parfois important du marché publicitaire.

14290   Comme on est dans une industrie où comme on fait le constat, que notre industrie est plus grosse que ce que le marché privé nous permet, cette mesure-là aujourd'hui répondrait à une diminution de la pression de Radio-Canada sur le Trésor public qui est une préoccupation, bien entendu, et mis en application depuis quelques années, d'une part.

14291   Et d'autre part, libérerait peut-être une partie des revenus publicitaires de Radio-Canada de façon à permettre de rétablir la situation financière des télédiffuseurs privés à un coût qui, toute proportion gardée, avec les forfaits actuels, ne paraissaient pas tout à fait délirants.

14292   Alors, c'est une piste que nous regrettons, qui n'a pas été retenue lors des années précédentes et qui, aujourd'hui, lorsqu'on voit des coupures répétitives à Radio-Canada, n'a pas perdu de sa pertinence.

14293   CONSEILLER DUPRAS : Je vous remercie. J'ai pas d'autres questions. Merci.

14294   LE PRÉSIDENT : Merci bien.

14295   J'ai été un petit peu... une dernière question.

14296   J'ai été surpris, au paragraphe 29 de votre présentation aujourd'hui où vous parlez des crédits d'impôt qui sont réservés à la production indépendante.

14297   Que je sache, c'est peut-être le cas du crédit d'impôt au Québec. Mais au fédéral, il est disponible pour la production interne aussi. N'est-ce pas?

14298   Donc, vous faites référence seulement aux crédits d'impôt provincial.

14299   M. ROGER : Oui. Tout à fait.

14300   LE PRÉSIDENT : Et d'ailleurs, le Fonds des médias a été réformé pour permettre aussi des productions internes.

14301   M. ROGER : Oui, oui.

14302   Je sais pas si, Claude, tu voulais compléter. Mais pour moi, c'était ma compréhension.

14303   M. DORION : Je suis d'accord avec votre accord!

14304   M. ROGER : Merci bien.

14305   LE PRÉSIDENT : Je ne voulais pas que les gens aient la mauvaise impression...

14306   M. ROGER : Oui. Non, non, effectivement.

14307   LE PRÉSIDENT : Que c'est vraiment le crédit au Québec qui est le problème.

14308   Alors, merci bien, Messieurs.

14309   M. ROGER : Merci.

14310   M. DORION : Merci.

14311   LE PRÉSIDENT : On va faire la prochaine présentation, s'il vous plaît.

14312   LA SECRÉTAIRE : J'inviterais maintenant le Conseil provincial du secteur des communications à venir en avant.

PRESENTATION

14313   LE PRÉSIDENT : Bonjour.

14314   Quand vous êtes installés, vous pouvez faire votre présentation.

14315   Peut-être, ce qu'on va faire par contre, parce qu'il se fait un petit peu tard. On va écouter votre présentation, puis on prendra une pause après pour vous poser des questions après la pause, si ça vous va?

14316   MME BLAIS : Ça me va. Sauf que je remarque qu'il me manque un joueur. Je viens de remarquer.

14317   LE PRÉSIDENT : Est-ce que c'est un joueur important, entre nous?

14318   MME BLAIS : Disons qu'il lit un bout du texte!

14319   LE PRÉSIDENT : Ah bon, O.K.

14320   Bien, peut-être... ah! Il arrive. Voilà.

14321   MME BLAIS : Alors, Monsieur le Président, Madame la Conseillère, Messieurs les Conseillers, merci de nous recevoir dans le cadre de cette importante consultation qui doit façonner l'avenir de notre système télévisuel.

14322   Mon nom est Nathalie Blais, je suis conseillère au service de la recherche du Syndicat canadien de la fonction publique.

14323   J'accompagne pour cette présentation des représentants du CPSC, le Conseil provincial du secteur des communications.

14324   À ma droite, Yves Larose, vice-président télédistribution du CPSC, et monsieur Martin Everell, vice-président du Syndicat des employés de TVA Québec.

14325   À ma gauche, monsieur Michel Labrie, vice-président national du Syndicat des techniciens et artisans du réseau français de Radio-Canada, ainsi que de monsieur Réjean Beaudet, président du Syndicat des employé(e)s de TVA Montréal.

14326   Le CPSC est certainement l'un des groupes à se présenter devant vous qui a le plus intérêt à ce que l'ensemble du système télévisuel sorte gagnant des modifications réglementaires discutées au cours de cette consultation.

14327   Nous représentons en effet 9300 personnes qui travaillent autant pour des distributeurs réglementés par câble ou par internet, que pour des diffuseurs, qu'ils soient privés, publics, communautaires, indépendants dans de petits marchés ou intégrés verticalement.

14328   Le CPSC a analysé la situation du système dans son ensemble en répondant, en juin, aux questions du Conseil.

14329   Aujourd'hui, nos commentaires porteront principalement sur le document de travail publié à la fin août ainsi que sur les interventions réglementaires nécessaires pour assurer l'atteinte des objectifs de la Loi sur la radiodiffusion.

14330   M. BEAUDET : Après être passé par différentes périodes de turbulence dans les années 2000, le système télévisuel canadien traverse encore de grands bouleversements.

14331   Cette fois, ce sont les habitudes de consommation du contenu télévisuel sur de multiples plateformes qui sont en cause.

14332   Compte tenu de cette prémisse, le CPSC a été surpris de constater que le document de travail du Conseil n'abordait pas directement la question des services par contournement.

14333   Pourtant, nombre d'intervenants en ont parlé et s'il y a un changement dans des habitudes de consommation qui menace la programmation canadienne, c'est bien celui-là!

14334   Contrairement à ce que le Conseil semble croire, la concurrence que livrent les services par contournement aux radiodiffuseurs réglementés n'est pas sans conséquence. En effet, le système de financement de la programmation canadienne risque d'en souffrir.

14335   Les entreprises de distribution de radiodiffusion commencent à perdre des abonnés au profit des services par contournement, si bien que le Fonds des médias du Canada prévoit une baisse de ses revenus dans un futur proche.

14336   L'équation est simple : moins il y aura d'argent au FMC, moins d'émissions de qualité seront produites ici, et moins il y aura d'emplois pour les créateurs.

14337   La réalisation de la Politique canadienne de radiodiffusion est donc directement compromise à plusieurs égards.

14338   Pour rétablir la situation, le CPSC croit que le CRTC doit mettre fin à l'Ordonnance d'exemption relative aux entreprises de radiodiffusion de nouveaux médias.

14339   Cette ordonnance a été adoptée il y a 15 ans à une époque où l'accès à la vidéo était encore difficile sur internet, ce qui n'est plus le cas.

14340   Depuis, les services par contournement ont bénéficié des améliorations apportées aux réseaux des fournisseurs de services internet et se sont développés avec succès.

14341   Il n'y a plus de raison, selon nous, de maintenir ces joueurs à l'extérieur du système réglementé.

14342   Au contraire, il est temps que l'ensemble des services par contournement participe au financement de la programmation canadienne.

14343   Ainsi, tous les services étrangers qui diffusent via internet une programmation audiovisuelle professionnelle et qui ont des abonnés au Canada, qui vendent de la publicité ici ou qui disposent de centres de données vidéo en sol canadien devraient verser une partie de leurs revenus de radiodiffusion au soutien de la programmation canadienne, comme les EDR.

14344   Cela étant dit, le CPSC reconnaît que la proposition du Conseil d'offrir un petit service de base et plus de choix aux consommateurs pourrait permettre aux EDR d'attirer ou de retenir les consommateurs dans le système.

14345   Toutefois, pour véritablement constituer un point d'entrée attrayant du système réglementé, ce petit service de base devra être offert à un prix concurrentiel par rapport aux offres de services par contournement.

14346   M. LAROSE : En ce qui concerne les autres options présentées dans le document de travail, nous croyons qu'une évolution du système canadien de télévision est essentielle à la réalisation des objectifs de la Loi; mais cette évolution doit se faire de manière graduelle et non de façon précipitée.

14347   Par exemple, l'abolition de la substitution simultanée comporte à notre avis un risque important qui doit être bien mesuré sur la base des faits.

14348   Nous estimons que pour l'instant, cette proposition devrait être laissée de côté d'autant plus que tous les diffuseurs généralistes s'y opposent.

14349   Son abolition pourrait entraîner la chute des stations de télévision indépendantes au Québec et provoquer la disparition des stations traditionnelles dans le marché anglophone.

14350   Le même raisonnement s'applique à la protection des genres. Le CPSC croit qu'il est possible de moderniser cette politique, mais que son abolition entraînerait des conséquences dramatiques.

14351   Dans le marché francophone particulièrement, nous pensons que la mise en place de conditions de licence normalisées pour les chaînes spécialisées serait néfaste. Elle mènerait à coup sûr à la généralisation de leur programmation, ce qui leur permettrait de gruger encore plus dans la tarte publicitaire des généralistes déjà mal en point.

14352   À ce sujet, le CPSC recommande que le Conseil reconnaisse l'apport essentiel des stations de télévision traditionnelle à la démocratie en créant un nouveau fonds destiné à augmenter la programmation locale.

14353   Ce fonds aurait également pour but de diversifier les genres d'émissions présentés par les télévisions généralistes et d'améliorer la qualité de la programmation, notamment en information, au bénéfice des citoyens.

14354   En région, les stations généralistes produisent presque exclusivement des nouvelles et la moitié des Québécois choisit toujours la télévision comme première source d'information.

14355   Le fonds d'aide proposé viserait à soutenir les télédiffuseurs généralistes dans leur mission, alors qu'ils sont durement touchés par l'exode des revenus publicitaires. L'embellie de la situation financière des stations locales invoquées par le Conseil pour mettre fin au FAPL, en 2012, n'a pas duré.

14356   La crise publicitaire actuelle qui ne semble pas avoir de fin, nuit à la télévision locale au point où certains diffuseurs ont même évoqué l'éventualité de fermer leurs stations en région.

14357   Pourtant, l'appui à la programmation locale n'a jamais été aussi important dans la population canadienne si l'on se fie à un récent sondage Nanos réalisé pour le compte de Friends, Unifor et ACTRA.

14358   Le CPSC préconise que le nouveau fonds soit balisé par des exigences de rapports annuels publics, comportant des critères quantifiables.

14359   Nous souhaitons également que l'accès à l'argent du fonds soit réservé aux stations généralistes qui sont régies par des conditions de licence et qui conservent leurs émetteurs en fonction.

14360   De cette façon, les consommateurs auraient davantage de choix et l'investissement fait lors de la conversion au numérique serait rentabilisé.

14361   Par ailleurs, il faut savoir que de nouvelles technologies pourraient permettre sous peu de capter les ondes numériques avec différents appareils mobiles. Il serait donc dommage de priver le public d'une alternative gratuite au Wi-Fi pour avoir pris une décision trop rapide.

14362   M. LABRIE : De l'avis du CPSC, il n'y a aucune raison d'exclure Radio-Canada/CBC de cet éventuel fonds. La SRC assure une diversité des voix et est la seule à offrir une vision pancanadienne de l'actualité dans le marché francophone.

14363   En outre, les stations locales de la SRC ont plus que jamais besoin de cette aide, puisque les dernières compressions auront un impact direct sur la quantité de nouvelles locales diffusées en français à l'extérieur des grandes villes.

14364   Selon nous, cette décision menace directement la survie du français à l'extérieur du Québec.

14365   Le CPSC demande donc au CRTC de faire rapport au gouvernement sur la situation précaire de la SRC - en vertu de l'article 18(3) de la Loi. C'est une question d'intérêt public.

14366   Radio-Canada/CBC a le mandat de réaliser certains des objectifs de la Loi sur la radiodiffusion.

14367   Or, l'atteinte de ces objectifs est compromise par les coupes budgétaires et la réduction draconienne du personnel du diffuseur public.

14368   Des années d'expertise ont déjà été sacrifiées par les compressions successives imposées depuis cinq ans et la chute de 11 p. cent du marché publicitaire de la SRC, en 2013, ne fait rien pour aider.

14369   Il est temps de tirer la sonnette d'alarme et de rappeler à l'ordre le gouvernement. Le diffuseur public ne pourra plus apporter la contribution qui est attendue de lui dans la Loi sans être financé adéquatement.

14370   Quant à la proposition du Conseil sur les services spécialisés des nouvelles de catégorie C, le CPSC estime qu'elle constitue un pas dans la bonne direction.

14371   Il faut cependant faire plus pour assurer la qualité de l'information et éviter que le temps d'antenne consacré à l'opinion surpasse celui consacré aux nouvelles factuelles.

14372   Le CPSC appuie par ailleurs la mise sur pied d'un groupe de travail sur la mesure des cotes d'écoute à l'aide de boîtiers de décodage.

14373   Pour assurer le respect de la vie privée des clients des EDR, le Conseil devra toutefois s'assurer que les données partagées par les entreprises ne contiennent aucune information nominative comme le nom de l'abonné ou son adresse.

14374   M. LABELLE : Pour conclure, le CPSC vous propose quelques idées positives pour rendre le système télévisuel plus compétitif et attrayant face aux diffuseurs par contournement.

14375   D'abord, il faudrait faire la promotion des avantages économiques du système règlementé auprès des consommateurs.

14376   Netflix coûte peut-être neuf dollars par mois, mas cela ne comprend pas les frais engendrés par la consommation excédentaire de la largeur de la bande.

14377   Le système télévisuel, lui, permet des visionnements à volonté pour un prix fixe.

14378   On pourrait aussi exiger que tous les diffuseurs intelligents et appareils électroniques vendus au Canada soient munis des applications nécessaires pour accéder à tous les services par contournement des entreprises réglementées, et non seulement aux services étrangers.

14379   Plus globalement, un groupe de travail pourrait établir les critères d'accessibilité des applications intégrées aux appareils, afin que celles-ci respectent les lois et réglementations canadiennes.

14380   Enfin, les EDR pourraient offrir gratuitement à leurs clients un service de vidéo sur demande (VSD) donnant accès aux émissions des stations généralistes pour une écoute en rattrapage ou en rafale.

14381   Disponibles via le système réglementé, ces émissions pourraient être comptabilisées dans les cotes d'écoute des réseaux.

14382   Face aux changements en cours, nul ne peut prédire avec certitude l'avenir de la télévision. Une chose est certaine cependant : malgré la multiplication des écrans, les Canadiens sont toujours friands de programmation télévisuelle.

14383   Il faut amener la réglementation à évoluer pour que le système réponde aux besoins des consommateurs, des citoyens et des créateurs, mais tout en respectant les objectifs de la Loi.

14384   Le système canadien de radiodiffusion doit servir à sauvegarder, enrichir et renforcer la structure culturelle, politique, sociale et économique du Canada, incluant la création d'opportunités d'emplois.

14385   Il doit aussi assurer et renforcer notre identité nationale, ainsi que notre souveraineté culturelle.

14386   MME BLAIS : Nous vous remercions de votre attention. Nous sommes maintenant disposés à répondre à vos questions.

14387   LE PRÉSIDENT : Comme j'ai annoncé tout à l'heure, on va prendre une pause d'après-midi, si ça vous va, pour une dizaine de minutes.

14388   Donc, on va revenir, disons à 3 h 20, s'il vous plaît.

14389   Merci.

--- Upon recessing at 1509

--- Upon resuming at 1521

14390   LE PRÉSIDENT : À l'ordre, s'il vous plaît. Et je passe la parole à monsieur le vice-président.

14391   CONSEILLER PENTEFOUNTAS : Bon après-midi. Bonjour.

14392   MME BLAIS : Bonjour.

14393   CONSEILLER PENTEFOUNTAS : J'ai vu votre intervention de ce printemps et j'ai suivi votre document d'aujourd'hui. Ça ressemble beaucoup à la présentation de FMC, sauf...

--- Laughter

14394   CONSEILLER PENTEFOUNTAS : Ça va de soi.

14395   Juste quelques questions pour clarifier certaines propositions que vous avez mises de l'avant.

14396   Quant à la protection des genres -- et vous avez dit qu'il est possible de les moderniser, de moderniser cette approche ou cette politique-là. Mais vous n'avez pas mis de détail à savoir comment on pouvait la moderniser.

14397   MME BLAIS : Bien en fait, ce qu'on se disait c'est que ce serait probablement possible de la simplifier, cette approche-là. Mais sans se départir des avantages qu'elle procure.

14398   Et l'avantage principal que l'on voit, nous, c'est qu'en ayant des genres définis, on évite que ces stations viennent gruger dans la tarte publicitaire des stations généralistes.

14399   Donc, la façon dont on abordait la question dans le mémoire, c'était de dire qu'on pourrait peut-être, par exemple, ne plus donner de droits d'accès aux catégories A et ne plus avoir de dépenses en émissions canadiennes supérieures pour cette catégorie-là. Mais considérer toutes les stations spécialisées, un peu sur le même pied, pour ce qui est des dépenses en émissions canadiennes. Donc, toutes auraient des dépenses en émissions canadiennes à faire.

14400   Et à ce niveau-là, elles seraient sur le plan concurrentiel au même niveau. Mais elles auraient quand même des genres différents pour maintenir une diversité dans le système.

14401   PENTEFOUNTAS : L'exclusivité des genres. On se défait de l'accès. Ai-je bien saisi votre pensée?

14402   MME BLAIS : On pense que ça pourrait être une avenue. C'est-à-dire, toutes les chaînes spécialisées devraient proposer leurs services, avoir la programmation la plus attrayante possible pour entrer dans le marché.

14403   CONSEILLER PENTEFOUNTAS : O.K.

14404   MME BLAIS : Cependant, il y aurait des genres toujours définis pour maintenir une diversité dans le système. Notamment, on pense que dans le système francophone, dans le marché francophone, on est plus à risque.

14405   Si vous enlevez les genres, tous les joueurs vont converger vers le même genre de programmation pour tenter d'attirer les mêmes auditoires.

14406   CONSEILLER PENTEFOUNTAS : Puis, ils vont venir jouer dans la platebande des généralistes...

14407   MME BLAIS : Voilà!

14408   CONSEILLER PENTEFOUNTAS : Ils sont déjà dans une pression, comme vous avez déjà mentionné dans votre intervention de ce printemps.

14409   Vous avez parlé d'un fin... d'un fonds, pardon! Ça commence à être une longue audience!

14410   Vous avez parlé d'un fonds, un fonds... je ne sais pas si ce fonds-là sera basé sur le modèle du FAPL ou si vous voyez...

14411   MME BLAIS : Pas entièrement, en fait.

14412   CONSEILLER PENTEFOUNTAS : ... d'autres enregistrements (ph).

14413   Alors le fonds là, où est-ce qu'on va aller chercher les sous pour ce fonds-là, d'abord?

14414   MME BLAIS : C'est une question qu'on laisserait à la discrétion du Conseil. C'est-à-dire que vous avez plein de données en mains.

14415   CONSEILLER PENTEFOUNTAS : Et si vous avez autres choix?

14416   MME BLAIS : Si on a le choix?

14417   CONSEILLER PENTEFOUNTAS : Oui.

14418   MME BLAIS : Bien c'est sûr que nous...

14419   CONSEILLER PENTEFOUNTAS : Avez-vous une proposition à mettre de l'avant?

14420   MME BLAIS : ... on vous propose d'aller chercher de l'argent chez les joueurs par contournement. Donc déjà, il y a de nouvelles entrées possibles de ce côté-là.

14421   Peut-être une combinaison d'une contribution des EDR avec ce qu'on irait chercher chez les joueurs par contournement.

14422   CONSEILLER PENTEFOUNTAS : Et les sommes nécessaires? Quelle serait la grandeur ou la taille de ce fonds-là?

14423   MME BLAIS : Ça dépend de nos objectifs. Donc, je sais pas Réjean, si tu veux...

14424   CONSEILLER PENTEFOUNTAS : Bien, parlez-en de vos objectifs.

14425   MME BLAIS : ... compléter un peu là-dessus?

14426   M. BEAUDET : On s'est fait quelques calculs. Et c'est sûr que si on part en pourcentage qu'on pourrait financer, on regardait la situation de Québec, les 18 heures de Québec. Combien y a-t-il de véritables... combien y a-t-il un véritable nombre d'heures de produits et pas tous les bouts qui sont répartis dans les bulletins de nouvelles ou n'importe quoi.

14427   CONSEILLER PENTEFOUNTAS : Mais, ça serait un fonds pancanadien.

14428   M. BEAUDET : Oui.

14429   CONSEILLER PENTEFOUNTAS : Ou non?

14430   M. BEAUDET : Pancanadien, mais ça serait pour la production locale, pour les stations régionales.

14431   CONSEILLER PENTEFOUNTAS : O.K. Je comprends.

14432   M. BEAUDET : De façon pancanadienne. Mais on essayait, nous, de le regarder de notre point de vue à nous.

14433   CONSEILLER PENTEFOUNTAS : M'hmm.

14434   M. BEAUDET : C'est sûr que si on le prend en termes de... on regarde ça serait quoi le coût d'une production à l'heure, 25 000 à l'heure. On pourrait financer 30 p. cent.

14435   Il faudrait, un peu comme les fonds présentement. Il faudrait atteindre les objectifs. Donc, pour nous, on devrait verser les montants quand la production a été effectivement faite et que les objectifs ont été atteints avec preuve au bout.

14436   Sauf que si on le prend par en bas, évidemment, on peut arriver à des sommes astronomiques.

14437   Si on veut y arriver avec une enveloppe de départ qu'on détermine, on va plutôt déterminer le pourcentage de financement à partir de l'enveloppe de départ, puis en le répartissant.

14438   CONSEILLER PENTEFOUNTAS : Mais pour les fins de votre proposition.

14439   M. BEAUDET : Oui.

14440   CONSEILLER PENTEFOUNTAS : L'enveloppe?

14441   M. BEAUDET : On n'a pas fait de calcul pour le Canada.

14442   CONSEILLER PENTEFOUNTAS : On n'a pas de chiffre pour ça?

14443   M. BEAUDET : Non.

14444   CONSEILLER PENTEFOUNTAS : O.K. Et est-ce qu'on va inclure les généralistes qui font partie d'un intégré?

14445   M. BEAUDET : De l'intégré?

14446   MME BLAIS : Nous, on n'avait pas exclu...

14447   CONSEILLER PENTEFOUNTAS : D'un diffuseur intégré verticalement.

14448   MME BLAIS : On n'avait pas exclu de joueurs. Et la raison est la suivante. C'est que même chez les joueurs intégrés verticalement, la programmation locale est constamment en péril.

14449   Je sais pas, Martin, si tu veux rajouter un peu là-dessus?

14450   M. LAROSE : En fait, ce qu'on peut dire sans se tromper, c'est que le fonds a généré des impacts positifs importants. Maintenant que le fonds est disparu, on comprend, nous à Québec, le fonds a permis -- et les conditions qui venaient avec le fonds, naturellement les conditions de licence -- ont permis de créer une programmation locale qui n'aura pas pu être produite si ça n'avait pas été le cas.

14451   Maintenant que ce fonds-là a été... a permis de créer ces émissions-là, il y a eu de nouveaux auditeurs qui se sont joints à la station. Il y a eu des augmentations des cotes d'écoute alors qu'on régresse dans les stations généralistes, au niveau des cotes d'écoute. Bien, ces nouvelles émissions-là ont créé un intérêt nouveau, parce qu'on a réussi à faire refléter la région de Québec de par cette production locale qui reflétait la région de Québec.

14452   Et ce fonds-là a permis, a donné le temps à tout le moins aux nouveaux auditeurs de se joindre à la télévision.

14453   Et, ils ont compris que malgré la venue des nouvelles plateformes, il y avait quand même beaucoup d'intérêt pour la télévision généraliste encore. Et la preuve, c'est les cotes d'écoute qui ont augmenté.

14454   Sans ce fonds-là, je pense que l'intérêt de Québecor, par exemple, ne serait pas le même. Et c'est clair, ils vous l'ont démontré dans leur mémoire de toute façon. Ils sont prêts à respecter les conditions de licence de 18 heures, mais sans pour autant refléter la région de Québec. Ce qui n'a pas de bon sens.

14455   C'est sûr et certain que le jour où les conditions disparaissent, et qu'on n'a plus de fonds pour nous aider, ça va être terminé. Ça va être la « montréalisation » des ondes qui va commencer.

14456   CONSEILLER PENTEFOUNTAS : Je comprends.

14457   M. LAROSE : Et malheureusement, ces nouveaux auditeurs-là qu'on a réussi à trouver, à retrouver vont disparaître.

14458   CONSEILLER PENTEFOUNTAS : Vous avez également parlé des nouvelles de catégorie C? Vous êtes heureux avec le développement dans ce domaine-là. Sauf qu'il faut porter une attention sur la qualité de l'information offerte par ces services-là. Qui décidera de cette qualité-là?

14459   Je veux dire, qui sera le juge à savoir si c'est de la bonne qualité ou non?

14460   MME BLAIS : Mais présentement, il y a différents codes qui s'appliquent.

14461   CONSEILLER PENTEFOUNTAS : Oui, ils sont toujours là.

14462   MME BLAIS : Oui, sont toujours là. Mais, à notre avis, ces codes-là ne sont pas suffisants. Par exemple, le code de déontologie journalistique du CCNR fait, entre deux et quatre pages. Mais celui du Conseil de presse du Québec en fait 36.

14463   Et, dans le cas du Conseil de presse, par exemple, vous allez avoir des balises à respecter lorsque vous faites une émission d'opinion. Vous devez le faire de telle façon.

14464   Lorsque vous traitez un reportage, vous devez le faire selon telle ou belle balise. Ce qu'on ne retrouve pas dans le cas du CCNR. Les balises sont assez larges et c'est très difficile de... c'est très difficile pour quelqu'un, par exemple, qui voudrait faire une plainte, de pouvoir mettre le doigt sur quelque chose.

14465   CONSEILLER PENTEFOUNTAS : Vous êtes pas crainte à ce qu'on restreint en quelque sorte, la liberté d'expression des médias à travers le pays?

14466   MME BLAIS : Non, je pense que l'objectif, c'est vraiment de donner une meilleure information aux citoyens.

14467   Par exemple, nous, ce qu'on constate, c'est que souvent, les gens confondent les chroniqueurs avec des journalistes. Et dans les deux cas, les règles à respecter ne sont pas les mêmes, les règles d'éthique.

14468   CONSEILLER PENTEFOUNTAS : Tous les services de nouvelle, 4 C en offre des chroniqueurs et des commentateurs et des journalistes en bonne et due forme.

14469   Il y a pas toujours un avis qui précède.

14470   MME BLAIS : Non, mais peut-être... peut-être qu'il devrait y en avoir un justement.

14471   CONSEILLER PENTEFOUNTAS : O.K.

14472   MME BLAIS : Est-ce qu'on devrait éduquer justement les gens sur le fait qu'un journaliste a des règles de déontologie à suivre X, Y, Z que n'a pas à respecter nécessairement un chroniqueur.

14473   CONSEILLER PENTEFOUNTAS : On doit imposer ça à tout service de nouvelles?

14474   M. BEAUDET : Est-ce que je peux compléter?

14475   CONSEILLER PENTEFOUNTAS : Oui. Certainement.

14476   M. BEAUDET : Moi, je suis à TVA Montréal. Évidemment, on a LCN. On a les bulletins de TVA.

14477   Il y a eu une augmentation, pas seulement dans nos stations. Une augmentation énorme des commentateurs sur les ondes.

14478   On a commencé à faire cette réflexion-là lorsque vous avez parlé dans un avis précédent de regrouper les chaînes d'information.

14479   CONSEILLER PENTEFOUNTAS : M'hmm.

14480   M. BEAUDET : Et on se disait, est-ce qu'on est pour ou contre? Encore faut-il que ce soit de l'information.

14481   Et l'opinion, c'est à mi-chemin entre la connaissance et ne pas savoir quelque chose.

14482   C'est « je pense ça, je pense ça », tu vas avoir deux personnes qui vont avoir des idées différentes. Est-ce de l'information?

14483   Si on veut regrouper ou si on veut identifier des chaînes d'information, on n'est pas contre le commentaire. On n'est pas contre d'avoir des commentateurs, des gens qui prennent leurs opinions.

14484   Mais, il faut que la proportion soit raisonnable.

14485   Si on veut créer des chaînes d'opinion, qu'on l'identifie, puis on va dire, ça c'est des chaînes d'opinion.

14486   Là, c'est un mélange et n'importe quoi. C'est pour ça qu'on s'est permis de faire le commentaire là. On est content d'avancer que vous avez mis dans vos documents que ça serait plus précis. Mais on pense qu'on pourrait même aller plus loin.

14487   CONSEILLER PENTEFOUNTAS : Il semble y avoir une tendance envers les commentateurs, je pense que les audiences l'apprécient. Ça semble être le cas premièrement.

14488   Et deuxièmement, tracer cette ligne-là, il faut trouver une façon de l'encadrer. Puis si vous avez des idées, il nous fera plaisir de les écouter. Mais ça semble être une tâche assez complexe.

14489   MME BLAIS : C'est pour ça qu'on vous suggérait un groupe de travail. Parce qu'il y a des universitaires qui se penchent sur la question depuis des années.

14490   Et il y a des façons aussi de faire de l'opinion appuyée sur des faits plutôt que de l'opinion pure et simple, votre opinion versus la mienne sur un sujet.

14491   CONSEILLER PENTEFOUNTAS : O.K. Je comprends.

14492   Vous avez également proposé à ce qu'on fasse l'éducation une oeuvre pédagogique pour expliquer aux Canadiens et au Québécois les coûts des services par voie de contournement.

14493   Est-ce que ça va se faire par voie réglementaire? On doit l'imposer à qui, cette responsabilité pédagogique?

14494   MME BLAIS : Bonne question. Mais le Conseil, en étant le gardien de la réglementation qui s'applique à la radiodiffusion a certainement un rôle à jouer dans la promotion de la radiodiffusion.

14495   CONSEILLER PENTEFOUNTAS : Et qui paiera pour ce temps d'antenne?

14496   MME BLAIS : Je suis certaine qu'on peut trouver un peu de temps de promotion à vous consacrer. Chez les diffuseurs, il y a toujours...

14497   CONSEILLER PENTEFOUNTAS : Des généralistes déjà en arrachent. La baisse dans le revenu a été annoncé au...

14498   MME BLAIS : Oui, mais je vous parle du temps de promotion non payant. Il y a du temps de promotion qui est prévu, toujours dans une grille horaire pour diffuser des promotions maison.

14499   Est-ce que ça serait pas... Non. Je suis d'accord.

14500   CONSEILLER PENTEFOUNTAS : On est pas là pour éduquer les Canadiens sur les coûts des services par voie de contournement, les coûts réels?

14501   MME BLAIS : C'est un service qu'ils se rendraient à eux-mêmes.

14502   CONSEILLER PENTEFOUNTAS : O.K.

14503   Également, votre proposition, c'est d'exiger à ce que les applications « imbridées », intégrées dans les télévisions intelligentes doivent être en quelque sorte réglementées également. Ça ne sera que des applications approuvées par le Conseil ou quelqu'un d'autre.

14504   Pensez-vous que ça aussi, ça sera pratique d'imposer nos applications aux fabricants coréens, par exemple, de Samsung?

14505   MME BLAIS : Yves, est-ce que tu veux répondre là-dessus?

14506   M. LABELLE : Bien moi, je crois que oui. Moi, je crois qu'ici, pour notre souveraineté canadienne au niveau de la télévision, on devrait justement mettre nos icônes à nous autres. Que ce soit Vidéotron -- puis, il y a bien de raisons.

14507   Tantôt, j'entendais d'autres confrères parler, qui parlait de la TV au niveau du web, au niveau du VSD, vidéo sur demande, puis tout ça.

14508   Ce que ça va permettre justement aux TV, puis je vais laisser mon confrère, tantôt, parler. Parce que ça concerne pas juste la TV en passant. Il y a d'autres petites machines que nos enfants se servent qu'ils vont passer des Netflix puis tout ça. Vous allez voir tantôt.

14509   CONSEILLER PENTEFOUNTAS : On va également imposer ou dicter les applications qui seront disponibles sur les iPad, si je suis bien votre raisonnement?

14510   MME BLAIS : Oui, en fait, nous ce qu'on pense, c'est qu'il y a peut-être un travail à faire par exemple avec Industrie Canada. On règlemente toutes sortes de matériaux et d'appareils qui entrent au Canada et on va règlementer, par exemple, le courant. Est-ce que c'est le bon voltage dans l'appareil? Est-ce que... comme disait Réjean tout à l'heure, est-ce que le plastique est toxique?

14511   Mais, on ne règlemente pas ces icônes qui nous permettent d'accéder à un contenu qui, peut-être, contrevient complètement à la réglementation canadienne, par exemple, sur la représentation sexiste ou sur la violence ou...

14512   Bon, je vous donne quelques exemples comme ça.

14513   Est-ce que nous, comme Canadiens, on n'a rien à dire sur ce qui entre comme ça dans nos produits et qui est accessible à nos enfants sans qu'on ait le choix d'aller les chercher ou non?

14514   Et là-dessus, je pense que les gens pourraient compléter.

14515   CONSEILLER PENTEFOUNTAS : Mais, il y a certains contenus qui est adressé par le Code Criminel, en parlant de la pornographie juvénile et autres.

14516   Mais je vous interromps, pardon!

14517   M. BEAUDET : C'est notre réflexion venait du fait, ne serait-ce que du point de vue fiscal.

14518   On permet que des consommateurs canadiens par le truchement d'un ordinateur, maintenant, qui est rendu dans une TV ou dans une console, consomme un produit au Canada et paient des montants d'argent à une compagnie qui est à l'extérieur, qui se sert de tout le système de FSI, d'internet pour amener le produit. Et cette compagnie-là ne paie pas d'impôt. La personne ne paie pas de taxe.

14519   Là, on rentre des concurrents dans un marché où il y avait un équilibre. Il y avait un écosystème, il y avait des règlements, il y avait des lois qui avaient été mises en place.

14520   On rentre des concurrents dans un marché qui sont complètement sur d'autres balises.

14521   Et je comprends, quand j'entends des intervenants qui viennent ici, qui vous demandent de tout dérèglementer. J'en ai entendu. Parce que ou on arrive à règlementer ceux-là ou il faut tout dérèglementer.

14522   CONSEILLER PENTEFOUNTAS : Je comprends.

14523   M. BEAUDET : Quand on regarde comment Netflix a rentré, ça s'est fait il y a quelques années. Les gens s'en sont pas vraiment rendu compte. Ç'a rentré dans les consoles X-Box. Ça a commencé par des choses comme ça. Des lecteurs Blue Ray. Maintenant, c'est dans les TV HD.

14524   On a fait une vérification sur le site même de Netflix.

14525   Dans combien d'entreprises présentement ces icônes-là sont installées pour utilisation? On pourrait penser que c'est beaucoup d'entreprises. C'est 11 entreprises. Onze entreprises seulement. C'est des ententes qu'ils ont faites. Netflix avec 11 entreprises. Évidemment, des gros joueurs d'électronique.

14526   CONSEILLER PENTEFOUNTAS : M'hmm.

14527   M. BEAUDET : On parle de Microsoft, Nintendo, LG, Panasonic, Samsung, Sharp, Toshiba, iSense, Apple, Google et Sony. C'est les 11 seules présentement.

14528   CONSEILLER PENTEFOUNTAS : C'est beaucoup.

14529   M. BEAUDET : C'est gros. C'est des gros joueurs. Je dis pas que c'est pas facile de leur faire comprendre quelque chose. Mais il faut au moins essayer.

14530   Et il faut se poser la question, comme on disait, on rentre un appareil, une automobile ou un appareil électronique au Canada, on s'assure de sa conformité d'un paquet de points de vue.

14531   Parce qu'on permettrait pas une automobile dont le volant est pas du bon bord. On permettrait pas un appareil dont le plastique est toxique.

14532   Là, on permet de rentrer des appareils qui, facilement, permettent à des gens ou même des enfants, d'utiliser un service qui contourne tout un système fiscal et de réglementation.

14533   On pense qu'il faudrait...

14534   CONSEILLER PENTEFOUNTAS : Mais dans le domaine fiscal, vous serez d'accord avec moi que dans le domaine des taxes harmonisées et autres, ça tombe dans la juridiction du MRQ et du MRC. On s'entend là-dessus, premièrement.

14535   M. BEAUDET : Je ne suis pas un expert des questions fiscales. Mais, on ne trouve pas ça normal.

14536   CONSEILLER PENTEFOUNTAS : Mais c'est pas de notre ressort nécessairement. C'est ça que je veux dire.

14537   M. BEAUDET : Non, on dit pas. Mais on fait quand même le commentaire. Ça veut pas dire que c'est juste au CRTC de régler ça. Mais ça n'est pas normal dans notre pays qu'on permette des choses comme ça.

14538   CONSEILLER PENTEFOUNTAS : Ça va.

14539   Vous avez également dit que vous aimeriez ça avoir du contenu offert sur les services VOD, VSD, des EDR gratuitement.

14540   Est-ce qu'on doit exiger à ce que l'EDR l'offre gratuitement et est-ce qu'on doit exiger également à ce que le télédiffuseur le rende disponible sans être compensé pour ce contenu-là?

14541   MME BLAIS : C'est un peu dans le même esprit que la promotion dont on parlait tout à l'heure.

14542   Nous, on l'a vu dans le sens où présentement, les cotes d'écoute ne sont comptabilisées pour l'écoute en rattrapage sur internet.

14543   CONSEILLER PENTEFOUNTAS : Non, non. Je comprends tout ça.

14544   MME BLAIS : Que dans la semaine suivante.

14545   CONSEILLER PENTEFOUNTAS : Mais si le télédiffuseur était récompensé pour son contenu-là. Est-ce qu'on doit lui nier ce droit-là?

14546   Et si le EDR veut être payé pour l'offre de ce service-là, est-ce qu'on doit également lui interdire d'être compensé?

14547   MME BLAIS : C'est une bonne question. On n'a pas réfléchi à la question sérieusement.

14548   CONSEILLER PENTEFOUNTAS : O.K.

14549   MME BLAIS : On l'a vu plutôt du point de vue des cotes d'écoute dont on peut aller chercher des revenus supplémentaires en publicité en s'assurant que ces émissions sont regardées en rattrapage et que les cotes d'écoute vont être comptabilisées.

14550   CONSEILLER PENTEFOUNTAS : Quant aux cotes d'écoute, c'est une relation commerciale entre annonceur et diffuseur. Et là aussi difficile pour un (inintelligible) de s'émisser. Vous serez d'accord avec moi?

14551   Si on veut comptabiliser l'écoute, bien, ça se comptabilise en sous. Et on peut pas imposer ce que l'annoncer va ou doit payer un télédiffuseur une fois qu'une émission sera vue par voie de VSD. On s'entend là-dessus également?

14552   MME BLAIS : Non, je suis d'accord.

14553   Sauf que vous pouvez quand même faire une recommandation. Vous êtes quand même là pour vous assurer que le contenu canadien soit diffusé, soit vu.

14554   Et vous pourriez penser que c'est une bonne chose que les gens puissent voir davantage les émissions canadiennes et que les diffuseurs qui ont produit ces émissions-là puissent en retirer quelque chose.

14555   CONSEILLER PENTEFOUNTAS : Et ça sera l'annonceur ou l'EDR qui va compenser ces télédiffuseurs pour le contenu?

14556   M. BEAUDET : À Montréal, nous représentons également les représentants aux ventes et les assistants aux ventes.

14557   CONSEILLER PENTEFOUNTAS : O.K.

14558   M. BEAUDET : Je suis convaincu que si on avait des données et s'il y avait plus d'écoute par une rediffusion non simultanée plus tard.

14559   Et si nos vendeurs avaient ces données-là, évidemment ils arriveraient à monétiser ces choses-là auprès des annonceurs. Ça serait... faut d'abord le prouver. Faut d'abord voir les gens qui l'écoutent. Ensuite, on le quantifie, puis ensuite, on peut l'expliquer pour la vente, pour aller l'augmenter les revenus là. Peut-être qu'il pourrait y avoir une contrepartie aux EDR.

14560   CONSEILLER PENTEFOUNTAS : Ils vont être bien placés pour enseigner, pour comptabiliser cette écoute-là à nos amis américains au Sud, qui sont en arraché de monétiser, si vous voulez, cette écoute, suite à la première présentation.

14561   Alors, écoute, moi je pense, ça complète. Vous avez pas mal... revisité presque tous les points que vous avez soulevés lors de votre intervention. Je vous remercie beaucoup.

14562   Monsieur le Président?

14563   LE PRÉSIDENT : Merci. J'ai quelques petites questions sur les paragraphes 7 et 8 de votre présentation.

14564   J'ai de la difficulté à bien saisir votre argumentation ici. Vous dites... vous savez que le Conseil a au-delà d'une douzaine d'ordonnances d'exemptions. Et vous dites ici qu'on doit mettre fin à l'ordonnance d'exemption pour les services, pour l'appeler en vertu de l'ancien nom. Il a changé de nom depuis, des nouveaux médias.

14565   Parce qu'il faut le garder... faut garder ce genre d'entreprises à l'intérieur du système règlementé. Or, la seule façon qu'on peut exempter une entreprise de radiodiffusion, des activités de radiodiffusion, c'est s'ils sont des activités de radiodiffusion.

14566   Et j'ai toujours pensé que même les entreprises exemptées faisaient partie du système de radiodiffusion. Est-ce que c'est votre compréhension?

14567   MME BLAIS : Bien oui, c'est ça exactement, c'est qu'on pense que ces entreprises-là en font partie et que le Conseil les a exemptées au départ...

14568   LE PRÉSIDENT : Oui, c'est exempté des obligations en vertu de la partie 2 de la Loi sur la radiodiffusion.

14569   MME BLAIS : Oui.

14570   LE PRÉSIDENT : Dont l'obligation de détenir une licence.

14571   MME BLAIS : Oui.

14572   LE PRÉSIDENT : Donc, si on met fin à l'ordonnance.

14573   MME BLAIS : Oui.

14574   LE PRÉSIDENT : Il faudrait donc, par conséquent, l'obligation de détenir une licence renaît.

14575   MME BLAIS : Oui.

14576   LE PRÉSIDENT : Et donc, vous nous invitez à donner des licences aux opérateurs qui opèrent par voie de contournement?

14577   Est-ce que c'est vraiment votre intention?

14578   MME BLAIS : En fait, ma compréhension -- et peut-être que je me trompe. C'est que si le diffuseur par contournement n'est pas réglementé, s'il n'a pas de licence, on ne peut pas lui imposer par exemple de contribuer à la programmation canadienne.

14579   LE PRÉSIDENT : Je crois que l'article 9(4) de la Loi sur la radiodiffusion permet que l'exemption soit conditionnelle. Donc...

14580   MME BLAIS : Donc, vous pourriez revoir...

14581   LE PRÉSIDENT : Donc, les autres intervenants qui ont parlé d'obtenir une contribution des services par voie de contournement, ont parlé d'ajouter une condition à l'ordonnance d'exemption. Et non pas l'abolir.

14582   MME BLAIS : Alors, vous pourriez réviser... C'est ça. Donc, vous pourriez réviser l'ordonnance en ajoutant une condition.

14583   LE PRÉSIDENT : O.K. Et c'est, en fait ce que vous dites au paragraphe 8, parler de la nature de la participation financière, si je comprends. Bien.

14584   MME BLAIS : C'est bien ça.

14585   LE PRÉSIDENT : Bon. J'ai besoin de votre aide pour mieux comprendre l'étendue de votre proposition. Vous dites que ça ne devrait s'appliquer qu'à des services étrangers. Pourquoi?

14586   On a quand même des services par voie de contournement qui opèrent au Canada par des compagnies canadiennes.

14587   MME BLAIS : Oui, en fait, on a précisé pour les services étrangers la façon dont ça devrait se faire.

14588   Mais, on pense que ça devrait aussi s'appliquer au service par contournement canadien.

14589   LE PRÉSIDENT : Peu importe leur revenu, leur « en plan ».

14590   MME BLAIS : Pourvu qu'ils fassent une programmation professionnelle.

14591   LE PRÉSIDENT : Je vais revenir à ça, parce que j'ai besoin d'aide avec qu'est-ce que vous voulez dire par « professionnelle ».

14592   Mais donc, ça voudrait dire que TOU.TV par exemple, ou le service de l'Office national du film ou Éléphant pourrait aussi être assujetti à cette obligation?

14593   MME BLAIS : C'est une question qu'on n'a pas débattue. Mais je pense qu'il pourrait y avoir certaines exemptions pour des services comme Éléphant, par exemple, ou comme l'Office national du film qui sont une base d'archives dans le fond.

14594   LE PRÉSIDENT : Certains diront qu'il y a des très gros joueurs qui opèrent un service par voie de contournement et largement une base d'archives.

14595   MME BLAIS : C'est vrai. Peut-être que ça nous demanderait plus de réflexion. Est-ce que vous voulez qu'on...

14596   LE PRÉSIDENT : Oui, bien si vous voulez y réfléchir. Parce que je dois vous avouer que c'est une question que j'ai posée à d'autres. Et on a souvent des gens qui viennent ici, qui nous proposent l'idée d'obtenir une contribution financière. Mais c'est loin d'être clair comment, pour qui et dans quelles circonstances.

14597   Donc, on vient maintenant, justement dans le même ordre d'idée. Peut-être que là aussi, vous allez vouloir y réfléchir.

14598   J'ai de la difficulté à cerner, dans un cadre réglementaire la décision de ce qui est une programmation audiovisuelle professionnelle.

14599   MME BLAIS : À la première journée d'audience, vous avez parlé des Kitten videos.

14600   LE PRÉSIDENT : Oui.

14601   MME BLAIS : Les petits... les vidéos de petits minous. Bon, bien ça, d'emblée, c'est exclu.

14602   LE PRÉSIDENT : Quoi d'autre?

14603   MME BLAIS : Les échanges entre particuliers. Si moi je mets sur YouTube une vidéo, je sais pas, d'une fête qui a eu lieu chez nous, puis j'invite mes amis à aller voir ça. Ça devrait pas faire partie de ça.

14604   Mais, on pourrait vous revenir aussi avec des critères plus spécifiques sur ce qui est...

14605   LE PRÉSIDENT : Parce que j'aimerais avoir votre point de vue.

14606   MME BLAIS : Oui

14607   LE PRÉSIDENT : Comme professionnels du domaine audiovisuel.

14608   MME BLAIS : Tout à faire.

14609   LE PRÉSIDENT : Que voulez-vous dire par...

14610   MME BLAIS : C'est sûr que d'emblée, tout ce qui est une production qui a déjà été diffusée par un télédiffuseur devrait faire partie de la programmation professionnelle, oui qui a été diffusé en VSD.

14611   LE PRÉSIDENT : Et pour le restant des conditions, donc, s'ils ne vendent pas de publicité, est-ce qu'ils sont quand même assujettis à votre proposition?

14612   MME BLAIS : Est-ce qu'ils ont des revenus d'abonnement?

14613   LE PRÉSIDENT : Donc, c'est soit des revenus d'abonnement ou des revenus...

14614   MME BLAIS : Oui.

14615   LE PRÉSIDENT : Donc, il faut des revenus, peu importe le montant. Parce que d'autres avaient dit... je ne me rappelle plus quel intervenant avait dit s'ils ont des revenus au-delà de 25 millions.

14616   MME BLAIS : Je pense que ça devient difficile peut-être de... je ne le sais pas là, pour l'organisme réglementaire de toujours surveiller au-delà de quels revenus sont rendues les entreprises. Nous, on proposait que ça soit toutes les entreprises qui proposent ce type de contenu soit par voie d'abonnement ou en offrant de la publicité.

14617   LE PRÉSIDENT : Je crois qu'il y a peut-être plus d'activités qui constituent des services par voie de contournement que vous réalisiez, et donc, le fardeau réglementaire serait peut-être considérable si on suit votre logique d'aller chercher des très petits joueurs.

14618   MME BLAIS : En fait, notre logique, c'est qu'on constate présentement qu'il y a beaucoup de contenu étranger qui nous parvient à faible coût, et on préférerait que le contenu canadien nous parvienne. Donc, c'est pour ça qu'on veut qu'il y ait une...

14619   LE PRÉSIDENT : Oui, oui. Je comprends ce que vous...

14620   MME BLAIS : Vous comprenez. Oui, je comprends qu'il y a un fardeau là.

14621   LE PRÉSIDENT : Je comprends que vous faites l'argumentaire au niveau de 20 000 pieds là, et c'est correct. Par contre, nous, si jamais on veut aller de l'avant, je tente de compléter le dossier public par mieux comprendre exactement dans le détail la nature de votre proposition. Donc, est-ce que c'est toutes les entreprises, peu importe le niveau de revenus? Donc, peut-être ça aussi, vous allez vouloir y songer.

14622   Et je n'ai pas compris en plus, « ou qui dispose de centre de données vidéo en sol canadien ». Donc, si leurs serveurs sont à l'étranger, ça ne s'appliquerait pas?

14623   M. BEAUDET : C'est « ou ». C'est un ou l'autre. En tout cas, dans le fond, c'est s'il y a ça ou s'il y a ça dans les deux cas.

14624   Évidemment, notre idée, c'est d'aller chercher des gros joueurs. Ça ne donne rien d'essayer de tout contrôler ce qui se passe sur l'Internet et tous les gens qui ont une start-up et qui n'ont pas de revenus, qui n'ont pas rien. Normalement, la séquence normale d'une start-up américaine -- c'est notre gros partenaire à côté de nous là -- ça part toujours : Je donne le service gratuit, j'ai une bonne idée, je la donne gratuite, je mets un peu n'importe quoi là-dedans, je ne me fais pas trop déranger par personne parce que je vaux tellement rien que si on m'attaque, je n'ai rien qu'à fermer puis à recommencer le lendemain matin.

14625   Donc, ça commence souvent, donner un service qui n'existait pas, avoir une idée lumineuse. Ensuite, on met alentour des publicités pour aller chercher un peu de revenus pour payer un peu les frais de ça. Par la suite, il va arriver l'abonnement ou il va arriver... Ça, c'est beaucoup plus loin dans la séquence. On ne veut pas que le Conseil commence à courir après tous les petits joueurs qui s'essaient là-dedans. Il y en a une multitude.

14626   Mais quand un joueur est rendu à un point qu'il vient concurrencer nos entreprises dans nos marchés et les mettre en péril, je pense qu'il y a quelque chose à faire. Il y a certainement un moyen de définir ça là, et si on va chercher les 1 pour cent des plus importants, déjà, on va avoir fait toute une job, ou .5 pour cent là.

14627   LE PRÉSIDENT : Oui, je comprends. Mais il faut quand même... On est un organisme réglementaire. Donc, nous devons avoir une ligne qui est claire. On ne peut pas avoir d'ambiguïté.

14628   MME BLAIS : On va vous revenir avec des critères plus précis.

Undertaking

14629   LE PRÉSIDENT : Et aussi -- vous allez peut-être vouloir y réfléchir -- vous parlez d'une partie de leurs revenus. Quel pourcentage?

14630   MME BLAIS : Vous êtes toujours au paragraphe 8?

14631   LE PRÉSIDENT : Oui. Donc, « en sol canadien devraient verser une partie de leurs revenus ».

14632   MME BLAIS : Ah, oui. C'était dans le sens où présentement les EDR versent 5 pour cent à la programmation canadienne et à la télévision communautaire. Donc, une partie de leurs revenus, un pourcentage.

14633   LE PRÉSIDENT : Oui.

14634   MME BLAIS : Donc, vous voulez que je revienne avec le pourcentage?

14635   LE PRÉSIDENT : J'aimerais savoir le pourcentage...

14636   MME BLAIS : Oui.

Undertaking

14637   LE PRÉSIDENT : ...pour avoir l'ampleur, pour pouvoir juger si c'est un montant qui est raisonnable ou non. Il faut avoir tous les éléments au dossier public pour prendre une décision et pour la mettre en vigueur. C'est tout ce que je posais comme question. Ça va?

14638   MME BLAIS : Parfait! Oui. Merci.

14639   LE PRÉSIDENT : Merci beaucoup. Merci à vous tous.

14640   Madame la Secrétaire.

14641   LA SECRÉTAIRE : Merci.

14642   I would now ask Knowledge Network Corporation to come to the presentation table.

--- Pause

14643   THE SECRETARY: Please introduce yourself and you have 10 minutes. Thank you.

PRESENTATION

14644   MR. BUTTIGNOL: Thank you.

14645   Bonjour. Hello, Mr. Chair, Commissioners and CRTC staff. I am Rudy Buttignol, President and CEO of Knowledge Network Corporation and President of BBC Kids. With me today is Glenna Pollon, Director of Government Relations and Communications.

14646   Thank you for the opportunity to share our perspective on some of the issues raised in the "Let's Talk TV" proceedings.

14647   To help inform the specific issues that we will be addressing today, I would like to provide some background on British Columbia's Knowledge Network and BBC Kids.

14648   Knowledge Network is B.C.'s commercial-free, public educational broadcaster. Our funding includes an annual grant from the Province of British Columbia and support from over 38,000 donors, who last year contributed over $3.4 million.

14649   In this period of explosive growth of content consumption on a multitude of old and new devices, Knowledge Network continues to experience increases in television viewership, and despite our modest budget we are regularly the fourth most watched network in our market in prime time. Our daily 12-hour preschool block has also advanced in market share, rising from fourth to the second most watched children's programming service in B.C.

14650   On our website, video streaming is also steadily on the rise. However, the growth of our television viewing audience attests to the fact that we successfully serve a large segment of British Columbia's population who continue to value and rely on "traditional" broadcasting.

14651   BBC Kids is a national commercial-free Category B channel carried on the majority of broadcast distribution undertakings. BBC Kids is a co-venture with BBC Worldwide and operated by Knowledge Network. The channel was re-launched out of our Burnaby broadcast facility in 2011.

14652   Together, Knowledge Network and BBC Kids support Canadian independent production through the commissioning of original children's, documentary and interactive content for distribution on television and on the Internet.

14653   The Commission has proposed two small basic service options that would include, amongst others, the provincial educational networks. We support this approach as we believe that Canadians have a right to a minimum level of service that is affordable and accessible to all. In our view, a basic service should include a reasonable number of channels at the lowest price possible.

14654   We agree with the Commission that provincial educational networks should continue to be part of a basic package. Knowledge Network offers an alternative to much of the programming available on commercial networks. Our audiences include cohorts that are regularly underserved as they fall outside of desirable advertising demographics.

14655   In British Columbia, they include pre-school children and their young families, seniors living on modest pensions, people with little discretionary income and those living outside of urban areas. These are the viewers who would benefit most from an affordable basic service.

14656   BBC Kids is independent, commercial-free and one of only a handful of national broadcasters based outside of Ontario and Quebec. BBC Kids' mission is to serve children, youth and their families by providing unique program offerings that add diversity and choice among the children's channels owned by vertically integrated companies.

14657   The Commission has proposed, as part of these proceedings, pick-and-pay and build-your-own-package options to be offered by the BDUs. We recognize and support the desire of Canadian subscribers to have additional options for receiving discretionary channels. We also agree with the Commission that subscribers should be able to retain the pre-assembled program packages they currently enjoy.

14658   The inclusion of BBC Kids in pre-assembled program packages has been indispensable in raising awareness of our channel with potential subscribers. As a Category B service, we do not always benefit from the high penetration and visibility of the vertically integrated channels. Outside of modest advertising and social media campaigns, the subscriber is most likely to discover BBC Kids in these pre-assembled program packages.

14659   In the last three years, we have revitalized and strengthened the BBC Kids brand by investing in new content, removing commercial advertising, investing in marketing and promotion, and signing distribution deals. During this time we have made significant investments in six original Canadian series, including partnerships with three B.C.-based animation companies on international projects.

14660   However, the majority of our time is consumed fighting for our existence rather than attracting subscribers. Negotiating distribution arrangements with vertically integrated companies has been extremely painful, lengthy and inefficient.

14661   It is important to note that, in our experience, negotiations with non-vertically-integrated BDUs have been conducted in a fair, reasonable and timely manner. These BDUs have been open to working together as partners with BBC Kids to get equitable deals done.

14662   There is an unhealthy imbalance in the Canadian broadcasting system. Large vertically integrated companies have overwhelming market power and near-total control of the telecommunications infrastructure, to the detriment of independent broadcasters.

14663   We support the Commission's proposal to expand the VI Code as a regulatory requirement to ensure fair negotiations between vertically integrated companies and independent broadcasters, with the requirement that any ruling be binding on the parties. In our view, a regulated, clear set of rules will provide important safeguards.

14664   In conclusion, we support the concept of a basic service that provides a reasonable number of channels that is affordable for all Canadians, not just those with lots of discretionary income.

14665   Independent broadcasters offer Canadians much needed diversity of programming. In the case of BBC Kids, we offer additional diversity through our British Columbian perspective, through our independent ownership and with our support of local producers. We support independent Canadian programming and believe that in our ever-expanding media environment diverse Canadian voices become ever more important.

14666   It is our view that the carriage, packaging and promotion of Canadian independent channels are vital to ensuring genuine diversity amongst the VI-owned services.

14667   We are hopeful these proceedings will inform new broadcast policies that strike a balance between supporting a healthy and diverse broadcast industry, and subscriber choice and affordability.

14668   We appreciate the opportunity to share our perspectives with you today, and look forward to answering your questions. Thank you, merci.

14669   THE CHAIRPERSON: Thank you very much for your presentation, which was very clear. You have travelled a great distance, no doubt, to participate in our hearing, so we very much appreciate that, as well.

14670   MR. BUTTIGNOL: It's a pleasure.

14671   THE CHAIRPERSON: Commissioner Simpson and I, and others at the Commission, have had the chance to observe how successful you have been in reaching your new audiences with the Knowledge Network service. What do you attribute that success to?

14672   MR. BUTTIGNOL: We introduced the HD channel last year, and we saw a big bump-up in what was already a growing audience share.

14673   At the end of the day, I have to think that our success is -- there is nothing very sexy about it. We kind of stick to our knitting as a public broadcaster. We offer a commercial-free service. We do look at appealing to different segments of the B.C. audience throughout the course of our seven-day schedule, but we focus on a few genres, and we offer it commercial-free, and we are accessible to everyone.

14674   From my viewpoint, as commercial advertisers are under increasing pressure for revenues, they keep interrupting programming with commercials, and it has created a vicious circle.

14675   I know from the hundreds of people that I have talked to over the course of years, people who support us tell us that the things they like about us -- they will mention a program, but they mention the fact that we are commercial-free, and that is really, really important.

14676   THE CHAIRPERSON: Perhaps you could compare and contrast, to a certain degree, because I understand that you are also connecting a lot with your audiences through new platforms, new avenues, particularly on the Knowledge Network side, and we have heard from other independent programming undertakings -- specialty discretionary undertakings -- that they feel sometimes that they don't have that pathway directly to their end viewers.

14677   So are you able to translate what I understand is a successful model on your Knowledge Network to what you are doing with your BBC Kids?

14678   MR. BUTTIGNOL: That is the challenge, because on the Knowledge Network we reach pretty much everybody in the province. We are a must-carry, and we make sure through various agreements that we reach every possible viewer there.

14679   So we actually have access to people. We are in a good position on the dial, and on the programming schedule. We are easy to find. We are offered by everyone, and we are able to back that up with a direct relationship.

14680   Because we raise a lot of money through voluntary donations, we have a one-to-one relationship with our viewer. Every phone call, e-mail, letter that gets sent to us gets followed up, and if that viewer isn't happy with that answer, they go to the next level, perhaps from Audience Relations to the programmer.

14681   And if they are not happy there, they might go to the Development Department.

14682   And if they are not happy there, I will take it.

14683   When you are asking people for their voluntary donations, we don't think of it as customer service, we think of it as stewarding a relationship.

14684   So that's a case where we have a one-to-one relationship.

14685   And the fact that the audience has universal access to our service, that we are available to everyone, is hugely important.

14686   On the side of our BBC Kids, our specialty channel, we don't control that relationship with the subscriber. That is completely in the hands of our BDU partners.

14687   So trying to reach them, trying to find out exactly how many households we are reaching, what is the data that tell us a bit more about it, it's very, very difficult. That is one of the frustrations.

14688   THE CHAIRPERSON: Which brings me to my next question, because we have heard a lot from groups like Blue Ant and the Independent Broadcast Group, and others that have a position as a class of service providers that are independent. I was wondering if you agreed with the positions they are taking on numbers of issues, like the set-top box issue, the contracts, and all of that.

14689   I guess you are just slip-streaming behind them?

14690   MR. BUTTIGNOL: We are also a member of the Independent Broadcast Group because of our co-ownership with BBC Kids, and we agree with them on many positions.

14691   THE CHAIRPERSON: So their answers to various questions, you are --

14692   MR. BUTTIGNOL: To many, yes.

14693   THE CHAIRPERSON: Well, where do you disagree? Why wouldn't you agree?

14694   MR. BUTTIGNOL: The Independent Broadcast Group came out with a lot of different things that don't apply to us as a not-for-profit, so I can't speak specifically about things that we don't, but generally we do agree with many important issues. The way that audiences can find us as being on those preassembled packages, that those preassembled packages need to be marketed properly.

14695   We need to get in front of the subscriber, so that the subscriber can then choose whether to pick up our service or not.

14696   THE CHAIRPERSON: So you would agree on things like the need for promotion support --

14697   MR. BUTTIGNOL: Yes.

14698   THE CHAIRPERSON: -- the content of affiliation agreements, the recourses -- all of those sorts of issues that we have heard about.

14699   MR. BUTTIGNOL: Yes.

14700   THE CHAIRPERSON: There is nothing that comes to mind where you violently disagree --

14701   MR. BUTTIGNOL: No.

14702   THE CHAIRPERSON: -- other than the fact that, maybe, your given situation is a bit different, because you are a not-for-profit.

14703   MR. BUTTIGNOL: We are in a different situation because, at the end of the day, we are not-for-profit. For us, any of the revenues -- profits that are generated with BBC Kids go to supporting our public service, go to creating new original content.

14704   As a public broadcaster, because that is what we are first and foremost, the issue of a basic service that is affordable for everyone is really important for us.

14705   THE CHAIRPERSON: Right. Now, last week some intervenors suggested that, as part of the basic offering, the skinny basic offering, there ought to be programming for children and youth.

14706   Then the issue is, is there enough on public broadcasters, and secondly --

14707   I will give you an opportunity to answer that question, and the second aspect is: Do you think that is a good idea, notwithstanding what the current public broadcasters may or may not be offering; whether there should be, on top of the skinny basic -- Option A -- there should be some programming services targeting children or youth.

14708   MR. BUTTIGNOL: I think, in terms of what is being offered by the public channels, we do, collectively, provide a good level of service, a good level of service for young children.

14709   For children nationally, we have CBC/Radio-Canada and APTN. Provincially, we have Télé-Québec, TFO in New Brunswick and Ontario, and parts of Manitoba, and TVO, which has a 12-hour schedule per day. And at Knowledge Network, we have a broadcast block of children's programming from 6:00 in the morning to 6:00 in the evening.

14710   So I think that we provide a really good level of service for kids.

14711   Could they use more? Yes, they could.

14712   In terms of considering adding other children's services to the basic block, that is a consideration, but it always has to measure up against the affordability of the basic package.

14713   I have heard some services suggested for that basic service, and I would have to say, since they are commercial kids' services, if they, then why not BBC Kids?

14714   THE CHAIRPERSON: Right. So if that door opens, you are going to say "Me too".

14715   MR. BUTTIGNOL: I thought it was a little rich that those services wanting to have basic that were owned by a vertically integrated company happened to be the vertically integrated company where we can't get carriage of our service, BBC Kids. It is probably the only major BDU that doesn't carry BBC Kids.

14716   THE CHAIRPERSON: Right. But, bottom line, if we were going toward a skinny basic, do you think there is a gap?

14717   I realize you are trying to balance affordability against availability. Where would you land on that, between the availability of children's programming -- presuming that there is an educational broadcaster, a provincial public broadcaster, and there is the national public broadcaster.

14718   MR. BUTTIGNOL: With the loss of two of the provincial educational broadcasters over the years, in Saskatchewan and in Alberta, there are gaps, definitely, in Canada.

14719   I can speak, definitely, for the two experiences that I have had personally, both at my former employer, TVO, and at Knowledge Network, that we do provide -- for those people in Ontario and in British Columbia, do we provide a good level of service for kids, and I don't see that gap, but I do think that is not the case across Canada.

14720   THE CHAIRPERSON: Right. But in your particular circumstance, you think they are well served.

14721   MR. BUTTIGNOL: Yes.

14722   THE CHAIRPERSON: Through you and the CBC, or Radio-Canada, as the case may be.

14723   MS POLLON: And APTN.

14724   THE CHAIRPERSON: Okay, good. Those are my questions. It looks like Commissioner Simpson has a question.

14725   COMMISSIONER SIMPSON: Mr. Buttignol, twice in your presentation today you used the word "reasonable", and I am curious if you could help me to qualify that.

14726   First, you said it in paragraph 7, where you said that, in your view, a basic service should include a reasonable number of channels at the lowest price, and then, toward the end of your presentation, at paragraph 17, you said: We support the concept that a basic service provides a reasonable number of channels.

14727   There are 200-plus specialty discretionary channels in the United States, and there are about 109 in Canada. When you net out the duplication of HBO and Discovery and National Geographic, and so on, assume that we might have 50-some-odd channels left that are discretionary Category B-type channels.

14728   Is that a reasonable amount to you?

14729   What is reasonable with respect to what should be carried on a basic service?

14730   MR. BUTTIGNOL: We chose the word specifically because it obviously has to be measured with the requirements of the Broadcasting Act representation of the various interests of Canadians.

14731   I am not sure exactly what that number is, but I know that in talking to many of our supporters and viewers -- and over the year I get to talk to hundreds of them -- I can't tell you how many of them tell me -- they are big fans of us. They tend to be 50-plus. They will tell us that they don't watch a lot of television, but when they watch, they will watch us and PBS, and maybe another channel.

14732   Their frustration -- they are not talking about the frustration of what the discretionary packages are that they can pick and pay or build, they're talking about basic. They're talking about the fact that their basic service has gone up and that it's in their basic service that they're not necessarily -- they have the impression that they're paying for a lot of things that they're not using.

14733   So, I think that the -- in terms of reasonable, it's what's the minimum level of services that Canadians have and what's the price point when you take into account people that don't have discretionary income. And I think that that's a decision for the Commission.

14734   COMMISSIONER SIMPSON: But we're always looking for a way to be able to measure success or quantify, you know, the wisdom of our decisions. We look at diversity, we look at nature of service, and the like, and I'm finding it a little bit dichotomous, because many of the services that are in peril in this kind of scenario that we're looking at, our independent services that do provide diversity and do provide variety but they're not necessarily what I would consider mainstream, you know, they are much more vertical and fringe with respect to their programming, so I was curious as to whether you have an opinion on whether they should be on basic.

14735   MR BUTTIGNOL: Well, it strikes me that the price point that the Commission has proposed in option B is probably a reasonable amount.

14736   COMMISSIONER SIMPSON: Okay. I won't try and pin you to the wall.

14737   I'll ask a straight, very brief question. It's to do with the stresses of the industry.

14738   We're hearing, significantly, that local television, which is commercially underwritten by advertising, is losing money, it's under stress. Yet, it's, by public definition, one of the more important components of broadcasting.

14739   And we're also hearing the public broadcasting is under stress.

14740   You're not awash in money but you're managing to keep your head above water, and we appreciate that. But the question I've got for you is, is it time to look at community broadcasting, which has money, and think about it differently?

14741   MR BUTTIGNOL: Well, I guess I'm old enough to know what community broadcasting looked like when it first came and it kind of felt like community broadcasting.

14742   In fact, I recognize many people in my community, actually, getting involved. And that seems to have kind of changed completely. And I don't remember exactly when, but I don't get the sense it's still television about the community but not community broadcasting, in the same sense that it involved actual people, no professionals, with some help, reflecting their community.

14743   I used to love my channel, for as wacky as it was. It was also a great breeding ground for new talent, new ideas, really, fringe kind of things, and some things kind of bubbled up to the surface. It was a great way to discover new talent. And there was something kind of a little chaotic and in a very orderly system. I thought it was -- I remember that, and it's not what it is today.

14744   COMMISSIONER SIMPSON: But is it what's needed today? The way it is now.

14745   MR BUTTIGNOL: Pardon?

14746   COMMISSIONER SIMPSON: Is it what is needed today, the way it has evolved?

14747   You're a programmer, you know. I'm trying to get some wisdom.

14748   MR BUTTIGNOL: I think that any chance for the community to express themselves on television to a larger format, to their own community, is a valuable. I's a valuable tool to communicate.

14749   It's a great way for people to experiment, to not only connect with audiences in their communities, but, also, to try out new talent and that. I know a lot of people that got their business started, so.

14750   COMMISSIONER SIMPSON: Yeah, but YouTube does that.

14751   MR BUTTIGNOL: It does. And, you know, it's amazing that while viewing is just going crazy on all devices, people don't give up a lot of stuff. When you look at tele -- television viewing should have ended years ago, and you find that television viewing going up. I think that's just the nature of electric media.

14752   As Marshall McLuhan once said, its property is that it's very addictive -- you just don't give up anything; you just keeping adding to it.

14753   And I think that that's really, you know -- is it the dominant media anymore? Of course, not. The Internet's disrupting every line of business, of which I think our business, broadcasting, is only one small part of that disruption.

14754   It's akin, you know, 120 years ago, to electrification. It starts off with light bulbs and electric motors. Then, you know, it takes off.

14755   Who could have predicted, 120 years, ago when electrification been popular where we would be today? And I think that the Internet is the same, that we are at the very beginning, trying to predict what might happen 10 years from now.

14756   But, you know our television viewing is going up, and that's part of the trend. Whether it's happening in your living room on your television set, or in your living room on your iPad, or on your smartphone, on the way to work, that's changed, but it's still television.

14757   THE CHAIRPERSON: Yes, indeed.

14758   Ironically, we're in the age of abundance, yet, we're challenged left and right.

14759   MR BUTTIGNOL: Yes.

14760   THE CHAIRPERSON: So, thank you very much, both, for having participated in the hearing and contributing to this. And I'm sure you'll continue to contribute in the next phase of the hearing, as well.

14761   MR BUTTIGNOL: Thank you.

14762   THE CHAIRPERSON: Thank you.

14763   Madam Secretary...?

14764   THE SECRETARY: Merci.

14765   I will now ask Mr. Daryl Kinsman to come to the presentation table.

--- Pause

14766   THE CHAIRPERSON: Good afternoon and welcome.

14767   So, when you're ready, please go ahead.

PRESENTATION

14768   MR KINSMAN: I don't have a statement.

14769   THE CHAIRPERSON: You don't have to have a formal statement --

14770   MR KINSMAN: I didn't and --

14771   THE CHAIRPERSON: -- but you have a few minutes to share your views with us.

14772   MR KINSMAN: Thank you.

14773   I didn't bring my lawyers with me, either.

14774   THE CHAIRPERSON: It's a plus.

14775   MR KINSMAN: I'll just start at the beginning.

14776   The only reason I'm here is I heard, through the grapevine somehow, that there was a chance that over-the-air television was going to be in decline, perhaps by decisions made by this Commission -- which I appreciate hasn't happened yet -- and so, I thought, "Somebody has to go down there and tell the Commission that maybe this shouldn't happen".

14777   So, here I am.

14778   The core of what I would like to communicate, and that is in the single graphic page that I submitted today, is that over-the-air television is, in fact, showing all kinds of signs of being vital.

14779   Of course, I live in a very large American -- I get my -- my tuner tells me I can get 38 stations. About 20 of them are useful; maybe 24.

14780   But I go into the shops that sell the antennas and I interact with people who aren't technical people. I met a woman there who was buying these giant antennas. I said, "What are you doing with those?" And she said, "Well, this is my third one. I'm putting them in every room in my house, and they're meant for outdoors. I'm just putting them behind our curtains".

14781   And I think of my own experience and that of my wife. We cut the cable four years ago. We were just feeling kind of abused and disappointed with the large VI BDUs --- that's anew term for me -- and we went to antenna television before digital happened. And I was quite a sceptic when Digital came out. I thought it was yet another plot for me not be able to watch TV, and I was very, very pleasantly surprised to discover just how good it is.

14782   Now, we have the TV on all the time, in our house -- probably two TVs; we have one son at home, still -- and we haven't looked back.

14783   It's just I'm sorry for the providers, CPAC and the cable companies. I don't think they're relevant anymore. And it's not because we've moved to the Internet.

14784   We just recently started watching TV on Google because we got new phones that could do that -- and we don't do that much of it.

14785   And we got Netflix because, well, there was a series I wanted to see, and I don't know if I'll keep it for another month -- and that was Trailer Park Boys, if anybody's interested.

14786   So, that's my perspective. I've had lots of thoughts about it. I just see that, with the use of sub-channels, the universe could be bigger than 20 channels, easily. It could be 80 channels.

14787   And so, when I think about the troubles that broadcasters within Canada are saying they're having, I think, "Well, let's open that up and they'll make more money by more programming that, incrementally, doesn't cost them that much to broadcast because they paid for the antenna already".

14788   And I'd like to see that universe expand.

14789   We'll never go back to cable, or satellite, or any other method. We'll supplement. Before we discovered Netflix, we were supplementing by buying box-sets with the amount of money we saved. We were watching the ending seasons of several of our favourite shows that way.

14790   And now that we're moving into the years in which we get discounts for being older, at restaurants, I can't see any reason why I'd want to start to spending that kind of money again -- and I think that really is going to apply to a lot of Canadians.

14791   So, for me, the opportunity to create this new competing universe that is not the single, sort of the single ecosystem, that so-called broadcasting, which I really think is narrow casting. Put a piece of wire going from the MTU -- that's not a broadcast to me.

14792   That ecosystem can be opened up -- a whole new ocean, Panama Canal connecting the Atlantic to the Pacific -- with broadcast over-the-air television.

14793   I'd like to see that happen.

14794   And that's about all I have to say, really.

14795   THE CHAIRPERSON: Thank you very much. That's very eloquent.

14796   It's funny that you would subscribe to Netflix to just see one program.

14797   Perhaps, one day, we'll have calls for a skinny Netflix to deal with that marketplace.

14798   Commissioner Dupras may have a few questions for you.

14799   Thanks.

14800   COMMISSIONER DUPRAS: Welcome.

14801   And the proposal of a skinny basic, which some players told us would be in the area of about $25.00, still, that would be a proposal that you would find too expensive since you're getting the same service almost off the air in your area?

14802   MR KINSMAN: Yes. But it's not that it's too expensive. I actually find myself getting older and having more money available. It's a business relationship, it's a build-a-pay, and it's one day do something, call me up and say, "Oh, you've got to change your equipment because of lack of luck and we've got to charge you for that equipment". I'm feeling abused. I'm feeling dictated to.

14803   You know, TV is a want, not a need. It's a need when there's an ice storm or when a flood happens, but the radio will fulfil that need, mostly, unless you're deaf, which some people are, I recognize.

14804   COMMISSIONER DUPRAS: But if that could give you access to different channels than those that you're accustomed to look at, wouldn't that be --

14805   MR KINSMAN: Honestly, we have friends that have two satellite dishes -- and they're wealthy, so they pay for everything. We can go visit them and try to find something to watch and we still can't find something to watch. It's really not that -- television, I don't know to be all about consumption.

14806   People are paying for it now because they don't know better, because they don't know about over-the-air, in the digital universe, how good it is.

14807   And the original rationale for cable was -- the reason people got it -- I mean, probably some of us here remember trying to get the tuner to go right, adjusting the antenna, hoping to get Channel 2 in Buffalo, for whatever was on that time. It's not there anymore. It's not that at all, anymore.

14808   I really think the long-term future is that the BDUs become -- band with sellers only and that broadcasting become broadcasting, again.

14809   COMMISSIONER DUPRAS: Okay. And if you have a choice with a Canadian service that's an over-the-top, like Netflix or Shomi, is that something that would divert your attention from Netflix?

14810   MR KINSMAN: Like which? I'm sorry.

14811   COMMISSIONER DUPRAS: Like there's a service similar to Netflix, but with more Canadian programming, that is proposed to be launched shortly by the Canadian companies -- a service that's going to be is called Shomi is going to be a Netflix-like service.

14812   MR KINSMAN: Right. I don't think I want to subscribe to something I had to stay subscribed to.

14813   I probably would if it had the content kinds of con -- I mean when I subscribed to Netflix, my motivating factor this time was to watch a Canadian program. So, I suppose that could happen.

14814   Would I do it because it was Canadian? I mean it's Netflix Canada that I'm subscribed to. I didn't get, you know, an offshore, I mean out-of-country proxy to connect to the Netflix, which I know -- I work for a graduate school, so I meet a lot of young people, and I know some of them do that. I didn't bother.

14815   COMMISSIONER DUPRAS: Okay. Well, thank you.

14816   MR KINSMAN: Thank you very much.

14817   THE CHAIRMAN: We're not quite done yet.

14818   Mr. Vice-Chair has some questions for you.

14819   COMMISSIONER PENTEFOUNTAS: -- technical questions.

14820   So, you talked about the good old days and adjusting the antennas and when it snowed, it snowed on your TV scree, and when it rained, it rained on your TV screen.

14821   MR KINSMAN: Exactly.

14822   COMMISSIONER PENTEFOUNTAS: Speak to us on how sort of digital antennas differ from those good old days, In terms of weather, the impact of weather on the quality of your screen.

14823   MR KINSMAN: For me, the impact of weather is primarily that I can't get really remote American channels any more. All the local channels, which I would say is probably about 60% or more of our viewing, 50% of it probably is a single-channel, CFTO, Channel 9 CTV.

14824   We just fall back. We wait for the storm to be done.

14825   COMMISSIONER PENTEFOUNTAS: So, the weather still impacts --

14826   MR KINSMAN: Sure.

14827   COMMISSIONER PENTEFOUNTAS: -- the quality of the image. Right?

14828   MR KINSMAN: Well, actually, it turns into an either/or. I mean it's going to be so bad, you just turn to another channel. You don't strain any more.

14829   Usually there's -- I mean quite often, there's -- it's funny because where we're located geographically, CFTO often, which is Channel 9, often transmits the same thing that a Buffalo station is transmitting, the exact same program. So, we just switch to Buffalo.

14830   I guess our antenna is closer to us, or the clouds are aligned differently, or something.

14831   COMMISSIONER PENTEFOUNTAS: Okay. No problem.

14832   Thanks so much.

14833   MR KINSMAN: Thank you.

14834   THE CHAIRPERSON: And thank you for having participated in the hearing.

14835   The perspective you're putting forward is shared by a lot of other people who are commenting on our forum.

14836   But you ought to be commended for making the effort to actually join us in the hearing room.

14837   Thank you very much.

14838   MR KINSMAN: Thank you for the opportunity.

14839   COMMISSIONER PENTEFOUNTAS: Thank you.

14840   THE CHAIRPERSON: So, I think that does it for the day.

14841   We'll adjourn now until nine o'clock tomorrow morning. Donc, ajournement jusqu'à 9 h 00 demain matin.

14842   Merci.

--- Whereupon the hearing adjourned at 1628, to resume on Tuesday, September 16, 2014 at 0900

REPORTERS
Lynda Johansson
Jean Desaulniers
Madeleine Matte
Monique Mahoney

Date modified:

2014-09-16