ARCHIVED - Transcript, Hearing 18 September 2014

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Volume 9, 18 September 2014



Let's Talk TV: A Conversation with Canadians


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


In order to meet the requirements of the Official Languages Act, transcripts of proceedings before the Commission will be bilingual as to their covers, the listing of the CRTC members and staff attending the public hearings, and the Table of Contents.

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

Canadian Radio-television and Telecommunications Commission


Let's Talk TV: A Conversation with Canadians


Jean-Pierre BlaisChairperson

Tom PentefountasCommissioner

Candice MolnarCommissioner

Stephen SimpsonCommissioner

Yves DuprasCommissioner


Jade RoySecretary

Joshua DoughertyLegal Counsel
Jean-Sébastien Gagnon

Sheehan CarterHearing Managers
Rachelle Frénette
Donna Gill


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

- iv -




83. Stingray Digital Group Inc. 2979 /18638

84. Channel Zero Inc. 3025 /18908

85. 1395047 Ontario Inc. o/a Festival Portuguese Television3048 /19069

86. Asian Television Network International Limited3068 /19201

87. Ethnic Channels Group Limited 3102 /19408

88. Fairchild Television Ltd 3132 /19615

89. Odyssey Television Network Inc. 3174 /19887

90. Urban Diversity Forum 3193 /20017

91. Bob & Denise Morrison 3209 /20131

92. Unifor 3218 /20194

94. Fédération des communautés francophones et acadienne du Canada3236 /20313

96. Forum for Research and Policy in Communications3271 /20542

97. Small Market Independent Television Stations Coalition3296 /20672

- v -



Undertaking3021 /18876

Undertaking3024 /18903

Undertaking3045 /19037

Undertaking3320 /20841

Undertaking3321 /20848

Undertaking3324 /20872

Gatineau, Quebec

--- Upon resuming on Thursday, September 18, 2014 at 0900

18632   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

18633   Bonjour, tout le monde.

18634   Madame la Secrétaire, s'il vous plaît.

18635   LA SECRÉTAIRE : Merci.

18636   We will now start this morning with the presentation of Stingray Digital Group.

18637   Please introduce yourself and your colleagues and you have 10 minutes for your presentation.


18638   M. BOYKO : Bon matin, Monsieur le Président, Monsieur le Vice-président, Madame et Messieurs les Conseillers. Mon nom est Eric Boyko et je suis président et chef de la direction de Stingray Digital Group.

18639   À ma droite, Éric Albert, vice-président exécutif; à ma gauche, Claude Laflamme, vice-présidente et avocate principale; et à sa gauche, Yves Mayrand, notre conseiller pour la présente instance.

18640   Stingray est une entreprise canadienne dont la propriété est entièrement canadienne et dont le siège social est situé à Montréal. Stingray emploie 150 employés en équivalent temps plein au Canada. Nos activités de radiodiffusion ont vu le jour au Canada, il y a sept ans, avec un service spécialisé de musique appelé Le Canal Karaoke. Nous avons par la suite fait l'acquisition du service spécialisé de musique à formats multiples Galaxie et nous en avons fait une réussite au Canada en négociant de manière indépendante des ententes à long terme pour la distribution du service par la plupart des EDR à travers le Canada à titre d'ajout à leur service de base.

18641   Sur la lancée de sa réussite au Canada, Stingray a étendu ses activités de services spécialisés de musique dans 113 pays à travers le monde, sur la base des mêmes stratégies de marketing et de distribution qui ont si bien fonctionné au Canada. En tant qu'entreprise de programmation indépendante basée au Canada et possédée par des Canadiens, nous sommes très fiers d'avoir réussi à pénétrer les marchés étrangers, y compris les marchés les plus concurrentiels comme le marché américain.

18642   MR. ALBERT: This proceeding is first and foremost about television, but Stingray's activities revolve primarily around audio programming. Indeed, our Galaxie service is an independently owned and operated, multi-format, commercial-free, subscription music service distributed by terrestrial and satellite BDUs on their basic service across Canada to over 10 million Canadian customers. So one may wonder why we have asked to appear.

18643   The reason is quite simple. While being clearly focused on consumer choice for television services, the Commission's proposed approach to the regulation of these services and how they are to be distributed by BDUs has the potential to hurt Galaxie as an audio programming service.

18644   The issue arises as a result of the proposed definition of a small basic service that BDUs would be required to deploy and the potential impact that this new definition may have on existing commercial agreements signed by Stingray with Canadian BDUs. As an independent Canadian audio programming service, Galaxie's business model is based on very wide distribution of the service to basic BDU television customers in return for low wholesale rates negotiated at arm's length with Canadian BDUs for a long duration or term.

18645   As an independent supplier of audio content with no ownership ties to any Canadian BDU, our affiliation agreements and the success of our business model reflect the fact that BDUs and their customers appreciate the Galaxie service as a good value choice-enhancing service when it is packaged with television as part their basic service.

18646   We submit to you that this packaging model is good for Canadian consumers, that it has been very well received by them over many years, that it is still well received by them and that it contributes to keeping them connected to our Canadian broadcasting system.

18647   Following the conclusion of this proceeding, should the Commission determine that a small basic service must be implemented by Canadian BDUs, we submit to you that there is a very simple way to implement it without causing irreparable harm to Galaxie and its over 10-million subscriber base.

18648   The solution merely consists in allowing BDUs the flexibility to include Galaxie in their small basic service in accordance with their existing and future contractual obligations under affiliation agreements signed with Stingray.

18649   In its complementary notice and Working Document issued on August 21st, the Commission seems to acknowledge, with Option B for the basic service, that an acceptable outcome of this proceeding would be that BDUs would be given flexibility to add programming services to the small basic service. This is indeed what we have asked for in our intervention with respect to Galaxie. We hope that the Commission will decide to provide that flexibility.

18650   We would be concerned, however, if the Commission left it to BDUs to choose between Option A and Option B, as outlined in the Working Document, since BDUs have clearly stated that they will opt for the more restrictive Option A to avoid retail price caps under Option B.

18651   Given the fact that Galaxie is already very widely distributed throughout Canada as part of the basic tier of television services offered by BDUs, that this does not cause any concern to Canadian consumers, that it is a Canadian service, that it has no material effect on the retail price of the BDUs' basic service, that it makes a substantial contribution to the financing and exposure of Canadian music here and abroad, and that it contributes directly to the fulfilment of the objectives of the Canadian broadcasting policy as set out by Parliament in the Broadcasting Act, we submit to you that the flexibility we are requesting is perfectly reasonable and in the public interest.

18652   The flexibility we are asking for does not, however, need to be tied to any price cap or other BDU retail rate-regulation regime because it simply cannot have any material impact on the cost of the basic service and its affordability for Canadian consumers. Indeed, Mr. Lee Bragg confirmed during the appearance of Eastlink last Friday that the impact of audio programming services carried on basic on the cost of basic to Canadian consumers is negligible.

18653   While we feel that what we are asking for is eminently reasonable in the circumstances and fully consistent with the Commission's objectives in this proceeding, we did indicate in our written intervention that should you decide for any reason to prescribe a small basic service that formally precludes the continued distribution of Galaxie's audio service on the new small basic service, we would then need a clear regulatory statement from the Commission that the Galaxie audio service should then be carried by BDUs as part of their most penetrated discretionary tier for the remaining duration of their existing affiliation agreements with Galaxie.

18654   We submit to you that it would simply be unnecessary and harmful to Galaxie to cause our existing agreements to be voided or otherwise compelled to be renegotiated with all BDUs across the country as a result of a change in the regulatory definition of the basic service that both we and our BDU partners relied upon in reaching our commercial arm's length multiyear affiliation agreements. It has already been confirmed on the public record of this proceeding that affiliation agreements contain clauses that could trigger demands for a full renegotiation of affiliation terms on the event of a regulatory change. We confirm that this is an issue for Galaxie as well.

18655   MR. BOYKO: When it considers fundamental changes to the regulatory framework, as is the case in this proceeding, the Commission must be mindful of the vested contractual and other legal rights of its licensees so that these rights are not impinged upon ex post as a result of the regulatory policy change. We submit to you that this is particularly vital when the rights of an independent Canadian programming service are involved because the Commission already recognizes that these services will be the most at risk in the new proposed regulatory framework.

18656   We submit to you that it would be very sad indeed if Galaxie, one of the great success stories of independent Canadian programming, became a collateral victim of this new regulatory framework, particularly when there are simple ways to avoid this unintended outcome.

18657   I would like to add also that should Galaxie be excluded from distribution on the new basic service in our domestic market, it would be the only one in all of the 113 markets that we are now in around the world that we would be prohibited.

18658   There is one last thing that is critically important for the survival of Galaxie, and it is maintaining in effect an unamended section 29 of the Broadcasting Distribution Regulations concerning linkage and distribution for audio programming services. We know that the point was not brought up but it's important for us.

18659   We would like to finish with thank you for hearing us and understanding our concerns. We will now be pleased to answer any questions you may have on our submissions. Merci.

18660   LE PRÉSIDENT : Merci beaucoup. Monsieur Dupras va débuter les questions.

18661   CONSEILLER DUPRAS : Bon matin. Je sais que votre service est distribué à travers le Canada, vous avez une base d'abonnés établie depuis plusieurs années, votre service est très connu, mais nous sommes ici pour explorer des options et discuter de scénarios possibles. Toutefois, il n'y a pas d'obligation réglementaire à distribuer votre service sur la base, comme vous savez.

18662   J'aimerais ça savoir s'il y a d'autres modèles d'affaires que vous avez pu examiner pour voir ce qui en serait si vous étiez distribués en mode facultatif.

18663   M. BOYKO : Pour ce qui est du service de Galaxie ou de musique -- puis on le voit bien en Amérique du Nord -- en Amérique du Nord, du Nunavut jusqu'à la Terre des Feux, il n'y a pas un opérateur ou une EDR qui n'a pas un service numérique avec un service de musique sur la base.

18664   Alors, même quand... Le service de musique même a été lancé partout au monde quand ils ont lancé le guide de la programmation. Alors, c'est un service vraiment... c'est un peu spécial là, mais dans tous les pays de l'Amérique et aussi en Europe, quand t'as un service numérique, t'as un service de musique. Ça fait que c'est un peu l'avantage de notre service, non seulement au Canada mais partout. Alors, on n'a jamais vendu le service sur un « tier » ou à la carte.

18665   CONSEILLER DUPRAS : Mais vous n'avez pas regardé d'autres options possibles, qu'est-ce que ça pourrait donner en termes de prix pour votre service si vous étiez facultatif?

18666   M. BOYKO : Bien, les exemples qu'on a au Canada, si on regarde les services de XM Sirius, qui sont vendus à la carte, eux autres, leur prix de base, c'est 15 dollars.

18667   Je ne sais pas si tu veux rajouter, Éric, ou...

18668   M. ALBERT : En fait, ce que je pourrais rajouter, c'est qu'au niveau du modèle d'affaires, ce qu'il faut garder en tête, Galaxie, c'est un service audio, c'est un service de musique. Les modèles d'affaires par abonnement aujourd'hui partout dans le monde, pour des services de musique, il reste vraiment à prouver... On pense à des services comme Spotify, par exemple, ou des services comme Deezer ou quoi que ce soit. Ces services-là aujourd'hui ne sont pas rentables.

18669   Le modèle d'affaire que Galaxie a développé il y a plus de 15 ans est un modèle où la distribution est extrêmement large, mais chaque abonné paie un montant plutôt faible, en fait très faible dans le cas de Galaxie au Canada. Et c'est ce modèle d'affaire-là qui a été prouvé pour fonctionner.

18670   Dans des modèles en Europe, par exemple, où des modèles d'abonnement sont suggérés sur des plateformes télé pour des services de musique, le taux de pénétration est plutôt faible, en fait très faible. Donc, c'est une chose qu'il faut garder en tête pour le service de Galaxie.

18671   On ne peut pas parler pour les services de télé évidemment, vidéo. Par contre, pour un service de musique qui utilise la plateforme de télé comme plateforme de distribution, le modèle par abonnement discrétionnaire, si on veut, n'a pas fonctionné encore aujourd'hui dans le monde.

18672   CONSEILLER DUPRAS: Vous n'avez pas tenté d'estimer quelle pourrait être la perte d'abonnés que vous subiriez si vous deveniez facultatif?

18673   M. BOYKO: Oui, mais nous autres, si on regarde le service... bon, nous autres, nos compétiteurs au Canada, tu sais puis sur la terre, nos compétiteurs c'est des gros joueurs Spotify qui valent $4-5 milliards. Il y a Pandora, il y a Rdio.

18674   Mais Spotify a essayé sur KPN au Netherlands, d'aller sur le service de musique, et ils ont offert le service gratuit pendant six mois et après le six mois -- c'est un service qui est très dispendieux, c'est un service qui coûte peut-être 6 00 $ par abonné, par mois, 6 00 $ à 10 00 $ -- alors, le EDR l'a offert et après le six mois moins d'une demie de un pour cent des gens ont continué le service.

18675   Alors KPM a arrêté de faire la promotion de payer pendant six mois de temps pour un service que les gens n'utilisent... que les gens n'étaient pas prêts à payer.

18676   CONSEILLER DUPRAS: Alors, j'ai des... ça fait longtemps que vous êtes offerts, vous êtes connus, vous avez... les gens ont adopté votre service, vous dites que vous rejoignez 50 pour cent des Canadiens chaque semaine. Ce n'est pas comme l'ancien et nouveau service.

18677   Pensez-vous que le prix pourrait être aussi élevé que 6 00 $ par mois dans votre cas si vous étiez... si vous deveniez facultatif?

18678   M. BOYKO: Mais ce modèle-là, ce n'est pas seulement on va dire qu'on voit au Canada, là. Qu'on regarde aux États-Unis, toute l'Amérique latine, en Europe, à Dubaï, en Asie, à Singapour, le modèle de service de "pay audio" est un service sur le service de base parce que, aussi, on inclut les vidéoclips, on inclut les karaoke.

18679   Ça fait que c'est sûr qu'on devient, nous autres, ce que Stingray est devenu finalement, on est devenu le "One-stop Shop" pour la musique pour les câblots sur la terre.

18680   À place, eux autres, de négocier avec tout le monde, ils négocient avec Stingray puis ils ont tous leurs services. Alors, pour ça, nous autres, on offre sur la base parce que c'est comme ça qu'on peut vraiment.

18681   Alors, c'est qu'on a toujours négocié comme ça. Ça a toujours été accepté de cette façon-là, ça fait que c'est très difficile.

18682   CONSEILLER DUPRAS: Mais pensiez-vous que vous seriez incapable d'offrir votre service si vous deveniez facultatif?

18683   M. BOYKO: Dans notre cas, je crois que ça serait... je ne crois pas qu'il y a un grand, surtout pour la musique, là, il n'y a pas encore. La seule compagnie sur la terre qui a réussi à lancer un service de musique d'abonnement qui fonctionne, qui est rentable, parce que toutes les compagnies de musique perdent de l'argent, qui vendent des abonnements.

18684   Il y en a une seule, c'est XM-SIRIUS parce qu'ils ont réussi à mettre... c'est dans la voiture, puis c'est le seul service de musique au monde par abonnement qui fait de l'argent. Mais encore une fois, ils ont quand même eu des restructurations financières parce qu'ils ont fait une ou deux fois faillite. Alors, maintenant, ils font de l'argent.

18685   Mais, sinon, mondialement, il n'y a pas de compagnie de musique par abonnement qui font de l'argent.

18686   On prend même Rhapsodie qui existe depuis dix ans, le fameux Napster qui existe depuis 2000, Rhapsodie, ils sont rendus à 200 millions de chiffre d'affaires puis ils perdent encore de l'argent.

18687   Pandora est rendu à peut-être au-dessus de deux millions de chiffre d'affaires et encore ils perdent de l'argent.

18688   Alors, il n'y a pas un... ce n'est pas... Les gens veulent avoir accès à de la musique. Nous autres, l'avantage à Galaxie, c'est qu'on n'est pas sur... on n'est pas "on demand". On est un service de musique qui est fait sans annonce puis 90 pour cent de la population sont très contents d'avoir un service de musique radio. Très peu de gens sont prêts à payer un montant de 10 00 $ par mois pour avoir accès à de la musique,, puis ça, on le voit dans nos recherches.

18689   M. ALBERT: Et je pense que c'est important de mettre l'emphase sur ce point-là, monsieur Dupras, parce que si on regarde vraiment l'industrie de la musique aujourd'hui, tous les modèles d'affaires par abonnement, le taux de pénétration, peu importe le marché, à l'exception de quelques pays nordiques en Europe, les taux de pénétration des services par abonnement sont extrêmement faibles.

18690   On parle en général de cinq, peut-être de 10 pour cent quand ça va bien, mais il y a 90 pour cent des gens qui, aujourd'hui, ne paient pas pour la musique.

18691   Ils l'ont sur la radio ou ils l'ont à travers des services comme Galaxie, par exemple, où ils paient indirectement sur leur facture de câblot, mais il n'y a pas un déboursé mensuel à tous les mois pour dire, je m'abonne à un service de musique.

18692   SIRIUS est un peu l'exception. Par contre, SIRIUS n'offrent pas juste des services de musique. Ils offrent aussi des services spécialisés, que ce soit le hockey, que ce soit le football, que ce soit Howard Stern ou peu importe.

18693   Donc, c'est un bon "bench-mark" SIRIUS, mais ce n'est pas nécessairement comparable à 100 pour cent à Galaxie où, nous, on se concentre vraiment juste sur la musique.

18694   M. BOYKO: Et même pour ce point-là, même, on regarde PANDORA, eux autres ils ont quand même... ils font un bon chiffre d'affaires, mais sur leurs... juste deux pour cent de leurs abonnés paient pour le service. L'autre 98 pour cent est prêt à accepter de la publicité pour l'avoir gratuitement.

18695   Alors, même Pandora ont essayé un peu de, comme je disais, de « upgrader » leurs clients puis ils n'ont pas encore réussi puis c'est pour ça qu'ils perdent de l'argent.

18696   Puis quand on regarde le rapport, les compagnies de... quand les compagnies de musique se mettent ensemble pour faire un rapport global, ils disent: Le futur de la musique va être dans un service de "bundle" avec les opérateurs câblots puis les EDRs.

18697   Ça fait que même eux autres disent que le futur de la musique c'est que ces services-là viennent dans un système de "bundle" sur les services de câblots. Ça fait que, eux autres, ils voient l'inverse.

18698   CONSEILLER DUPRAS: Bon. Et dans les options de service de base dans le document de travail, là, il y en a deux. Vous préférez l'Option B.

18699   Advenant que ce soit cette option-là qui soit retenue ou choisie par le Conseil, est-ce que vous croyez que les distributeurs vous incorporeront dans le service de base?

18700   M. BOYKO: Alors, nous autres, un peu chez Stingray, notre stratégie d'affaire, ça a été très simple. Nous autres, ce qu'on a décidé il y a quatre, cinq ans, c'est d'aller voir tous nos clients, même si les contrats n'étaient pas à échéance, pour faire des extensions, et même on a plusieurs extensions jusqu'en 2022, ça fait qu'on a fait des ententes de six à huit ans, tout en baissant le prix. Ça fait qu'on a fait une entente.

18701   Et nous autres, comme compagnie aussi, on n'est pas une compagnie publique. On est privé et on a pris, nous autres, ces contrats-là et on a pu, après ça, aller voir nos banquiers, prendre du financement pour faire nos acquisitions internationales.

18702   C'est comme ça que Stingray a réussi à faire 22 acquisitions, c'est qu'on a financé nos contrats. Ça fait que c'est sûr que nous autres, on est déjà sur la base, sur tous nos contrats, jusqu'en 2022.

18703   Alors, c'est pour ça qu'aujourd'hui on dit que si on change ce modèle-là, ça a un impact sur Stingray et ça a un impact aussi avec nos dettes puis nos banquiers. Parce que nous autres on a... on s'est financé, on s'est « leveragé » sur ces contrats-là.

18704   CONSEILLER DUPRAS: Bon. Mais peut-être juste une dernière question. Quand vous disiez que les gens ne sont pas prêts à payer 10 00 $ par mois pour un service de musique, je peux comprendre ce que vous dites.

18705   Toutefois, ici, vous ne vendez pas de publicité. Alors, si vous avez moins de pénétration, vous ne perdrez pas d'argent de publicité. C'est strictement des revenus d'abonnement dont vous allez être privés. Et je ne sais pas, moi, disons que la moitié des abonnés... vous retiendriez seulement la moitié des abonnés, devenant facultatif.

18706   Est-ce que ça ne veut pas dire que votre service, à ce moment-là, vous coûterait seulement deux fois ce que vous recevez, ce qui est chargé aux abonnés aujourd'hui?

18707   M. ALBERT: Oui, nous autres, on est... tu sais, si tu regardes notre modèle, le prix qu'on charge aux EDRs par rapport au prix de vente du marché, entre 10 00 $ et 15 00 $, il y a une très grande économie, vraiment d'avoir de l'économie d'échelle. Puis, en plus, on a une économie mondiale. Stingray, on est chanceux, on peut amortir ça.

18708   Alors, nous autres, ce qu'on dit aussi, c'est important aujourd'hui, c'est que si vous devez, vous, former un nouveau service de base avec un nombre limité de chaînes comme les 91H, au moins laissez-nous la flexibilité d'être sur le deuxième service.

18709   Parce que, nous autres, la pire situation c'est qu'il faudrait tout renégocier nos ententes. Alors, c'est sûr que Stingray, à cause que dans nos ententes il y a déjà aussi un changement de régulation, ça fait que ça c'est notre pire... notre pire scénario.

18710   Mais, non, Galaxie, nulle part sur la terre est payé à la carte ou dans... Il n'y a jamais eu un prix de Galaxie payé à la carte sur la terre, ça fait qu'on n'a jamais vécu ce système-là, comme je vous mentionne.

18711   Puis si on n'est pas sur le service de base au Canada, ça serait le seul pays qu'on serait prohibé parce qu'il n'y a aucune autre pays où on est dedans qu'on ne peut pas offrir le service de musique sur la base. Ce serait la première fois qu'on aurait cette situation-là.

18712   M. ALBERT: Et peut-être juste revenir sur votre point au niveau des revenus, monsieur Dupras. Galaxie, aujourd'hui, le service de Galaxie, Stingray est un des plus grands payeurs de droit de royautés aux endroits au Canada.

18713   Si vous demandez à la SOCAN, si vous demandez à Resound ou peu importe qui, vous demandez au niveau des ayants droits, Stingray, annuellement, contribue plus de $12 millions au système.

18714   Donc, tout impact au niveau de nos revenus, c'est parce que nos revenus d'abonnement baissent, par exemple, parce que le taux de pénétration baisse, va avoir un impact direct aussi sur l'industrie de la musique canadienne qui est quand même déjà assez affectée par tout ce qui se passe au niveau de l'industrie et de la musique au niveau mondial. Donc, c'est quelque chose à garder en tête aussi.

18715   CONSEILLER DUPRAS: Je vous remercie.

18716   LE PRÉSIDENT: Madame la conseillère Molnar, s'il vous plaît.

18717   COMMISSIONER MOLNAR: Good morning. You mentioned that you have negotiated with all BDUs and then, you mentioned something about a market price of $15 to $20. Could you help me get a better sense as to when you say you are negligible? Can you give me some sense without giving out trade secrets as to --

18718   MR. BOYKO: No. In our case, when we say $15,00 it's the price of XM service, it's the basic package for, you know, in the car. And usually, the market for like RDO services or on-demand in Canada is $10.00. That's, you see, a bit --

18719   COMMISSIONER MOLNAR: Okay. I think I mix things up here. Is there some way you can help me on the public record with what you define as "negligible", like what is the price?

18720   MR. BOYKO: So, usually around the world, below one per cent of the basic package. That's about the cost of our service. So, below one per cent of our basic service.

18721   COMMISSIONER MOLNAR: Okay, but I don't know what basic service costs around the world?

18722   MR. BOYKO: Well, in Canada, it's about $30.00, $30.00 $35.00, so it gives you a range of below the one per cent.

18723   COMMISSIONER MOLNAR: Okay. Through this hearing we have had a number of different BDUs come up and talk about their issues in affiliation agreements and not with you. But I am interested, since you have signed with all, what are your views on volume-based pricing?

18724   Do your agreements today incorporate any kind of volume-based pricing limits?

18725   MR. BOYKO: So, and maybe it's a -- I guess we are lucky that our service and not only in Canada, but also around the world, is on basic, so we always have -- there is no volume-based because we are on basic.

18726   COMMISSIONER MOLNAR: Right. I am not talking about penetration-based, but --

18727   MR. BOYKO: Oh! Volume-based.

18728   COMMISSIONER MOLNAR: -- would you have the same general rates for Rogers as you would for a little CCSA member?

18729   MR. BOYKO: No. We do have -- there is a volume-based pricing. So, it's not -- there is a small difference, but there is a difference between large BDU and so smaller BDUs.

18730   COMMISSIONER MOLNAR: And what's the justification for that?

18731   MR. BOYKO: The biggest one we have is that, again, our service is different. We don't transmit our service by satellite. Our service is transmitted by computer, so we are fully IP, so we have servers in the head end of all of our cable operators around the world. So, we have almost 340 servers and what we do is we update the playlist we get to that. So, because of that, we save on the satellite.

18732   But in the case of the smaller BDUs, we're obliged to uplink because a lot of the small BDUS, if you only have 2,000 subscribers or 500 subscribers, then we need to -- we can't put a server in that case because the service is too expensive. So, it all sets to the cost of satellite.

18733   COMMISSIONER MOLNAR: Okay. Thanks. It helps me and I appreciate that you are not part of the television, you know, ecosystem, the affiliation agreements we have been talking about, so thanks.

18734   MR. BOYKO: Thank you.

18735   LE PRÉSIDENT: Monsieur le vice-président.


18737   Would you be willing to file in confidence the rates that you receive per sub?

18738   MR. BOYKO: Yes.

18739   COMMISSIONER PENTEFOUNTAS: Coast to coast to coast?

18740   MS LAFLAMME: Absolutely.

18741   THE PRESIDENT: And you can do that for the 19th of September?

18742   MS LAFLAMME: Yes.

18743   THE PRESIDENT: Thank you. By Friday.

18744   CONSEILLER PENTEFOUNTAS: Ai-je bien compris que votre contribution c'est de $12 millions par année?

18745   M. ALBERT: Au niveau des paiements aux ayants droits canadiens, absolument. Nos services au Canada génèrent pas juste pour Galaxie, mais de façon générale. Galaxie étant la grande majorité, on génère plus de $12 millions de paiements aux ayants droits canadiens.

18746   CONSEILLER PENTEFOUNTAS: Canadiens. O.k. Et vous avez également des obligations au CCD?

18747   M. ALBERT: Nous avons également des obligations au CCD, absolument.

18748   CONSEILLER PENTEFOUNTAS: À l'ordre de?

18749   MME LAFLAMME: Quatre pour cent des revenus.

18750   CONSEILLER PENTEFOUNTAS: Quatre pour cent, exact, O.k. Alors, une fois qu'on va avoir vos chiffres on va pouvoir faire le calcul. Merci.

18751   Vous avez des sondages sans doute qui témoignent de votre popularité ou non et est-ce qu'ils sont publics ces sondages?

18752   M. BOYKO: Oui. Alors, nous autres, on fait... on fait des sondages à chaque trimestre.


18754   M. BOYKO: Alors, ils ne sont pas publics, mais on peut le partager. Mais où on a eu la chance depuis trois quatre ans c'est avec les IPTV, avec les OPTIC, avec les différences sur IPTV. Comme le service c'est une application, même si le service audio est diffusé, on réussit comme sur Internet à mesurer nos audiences sur tous les produits de IPTV.

18755   Au Canada, on a deux millions d'abonnés et ça nous donne une bonne idée de comment le marché va et c'est de là qu'on a eu nos chiffres.

18756   CONSEILLER PENTEFOUNTAS: Et est-ce que vous êtes en mesure de déposer ça également en confiance?

18757   M. BOYKO: Oui, mais est-ce qu'on a...

18758   MME LAFLAMME: On va le faire.

18759   CONSEILLER PENTEFOUNTAS: Et est-ce que nous aurons des détails par province?

18760   M. BOYKO: Sur ces rapports-là, oui.


18762   M. BOYKO: Oui, on peut l'avoir par région.

18763   CONSEILLER PENTEFOUNTAS: Sur ces rapports-là. Et notre proposition sur les données issues des boîtiers décodeurs, l'impact de cette proposition-là sur Stingray?

18764   M. BOYKO: Non. C'est sûr que nous autres, encore une fois sur les IPTV on réussit à rejoindre ou on a vraiment l'information complète, c'est 800 000 abonnés sur 10.5 millions. Mais nous autres, notre gros débat, à cause que Galaxie, il n'y a pas d'annonce, hein, alors on n'est pas mesuré par DVM. Alors, on est un des rares services qu'on a aucune vraiment idée dans le reste du marché de notre audience, ça fait qu'on laisse.

18765   CONSEILLER PENTEFOUNTAS: Oui, je comprends. Mais l'impact potentiel de l'accueil, de l'utilisation des données de par les boîtiers décodeurs pour Stingray, ça serait quoi?

18766   M. BOYKO: Non, mais nous autres c'est majeur parce que c'est comme... Par exemple, c'est comme jouer aux cartes. Moi, je joue aux cartes, vous voyez mes cartes, moi je ne vois pas vos cartes; c'est sûr que ça n'aide pas dans les négociations.

18767   Ça fait que ça nous aiderait beaucoup dans nos négociations de voir la valeur du service.

18768   CONSEILLER PENTEFOUNTAS: Dites-moi quelque chose. Les gens parlent souvent puis on voit souvent les chiffres quant à Spotify et Pandora, des évaluations de $4-5 milliards pour des entreprises qui ne font pas d'argent. Comment est-ce qu'on explique ces évaluations-là?

18769   M. BOYKO: Oui. Alors, moi, j'appelle ça en anglais "a walking dead zombie", mais... parce que, tu sais, le modèle d'affaires, bien c'est ça, hein, puis ce n'est pas d'affaires.

18770   Alors, moi, je pense que c'est un marché, en ce moment, qui est financé par la communauté du "Venture Cat", mais à long terme il va falloir que toutes les compagnies de musique deviennent rentables, hein. On ne peut pas juste financer des pertes et des pertes.

18771   Et dans un rapport de musique qui est sorti il y a six mois, ils mentionnaient que même si les compagnies de musique réussissaient à augmenter leurs ventes de dix fois, ils feraient juste augmenter leurs pertes,

18772   Parce qu'en ce moment, les compagnies de musique, à chaque dollar qu'ils vendent de plus, ils perdent plus d'argent. Ça fait qu'ils ne font même pas d'argent côté opérationnel.

18773   Ça fait que c'est un gros défi pour les compagnies de musique et on sait que les ventes de iTunes sont en baisse au Canada, selon les chiffres, alors les ventes de iTunes sont en baisse, tout est misé sur les services de "streaming".

18774   Alors, pour le futur de la musique c'est un moment extrêmement, je dirais, risqué et...

18775   CONSEILLER PENTEFOUNTAS: Difficile modèle d'affaires quand on exige du gratos.

18776   M. BOYKO: Oui. Et aussi, il faut comprendre que Stingray, Galaxie, un peu comme la radio commerciale, on est un service non interactif, alors on paie des tarifs qui sont prescrits. Ça fait que c'est sûr que nos marges sont beaucoup plus élevées que quand tu fais, comme on dit, du "on-demand". Alors, c'est différents produits.

18777   Alors, le marché, en ce moment, n'est pas prêt à payer pour un service "on-demand" puis la publicité, c'est prouvé, sur le téléphone ne rendra jamais ces services-là rentables.

18778   CONSEILLER PENTEFOUNTAS: Une dernière question que je vais poser en anglais parce que c'est une partie qui a été lue en anglais.

"But you're asking for a regulatory statement from the Commission to ensure your existing affiliation agreements."

18779   Why -- what makes you more special than anyone else?

18780   M. BOYKO: Je ne sais pas si Claude ou Yves?

18781   COMMISSIONER PENTEFOUNTAS: Would you like to extend that to all pending agreements?

18782   M. BOYKO: Oui. Yves?

18783   MME LAFLAMME: En fait, ce qu'on demande, c'est que nos ententes restent en vigueur jusqu'à la fin du terme. Donc, dans la décision que vous allez rendre, en fait que nos ententes, qu'on ne soit pas obligé de toutes les réouvrir avec les EDRs parce que les EDRs, dans un changement réglementaire, auraient la possibilité de tout réouvrir les ententes.

18784   Donc, ce qu'on dit c'est qu'on veut garder les ententes intactes jusqu'à la fin du terme.

18785   CONSEILLER PENTEFOUNTAS: Donc, on ferait une exception pour Galaxie dans la décision?

18786   MR. MAYRAND: Well, if I may add, Commissioner Pentefountas, the countermand is as follows: You know, this company is an independent company with no ties to any vertically-integrated groups.

18787   Now, they have managed without any assistance from the regulator or any particular protection to negotiate long-term agreements with each one of these large integrated groups and it has done so on the basis of a compromise on the overall balance of terms of affiliation, which includes the wholesale rates.

18788   So, these contracts contain a clause, and there is already statements on the public record to that effect, a clause that leads to the potential reopening of all the terms, not just some of them, but all the terms, in case of regulatory change.

18789   So, by setting up a new definition of the basic service that excludes the possibility for Galaxie to be -- continued to be carried on the basic service of these BDUs, you are triggering at that point a complete renegotiation of all the agreements that Galaxie has in effect.

18790   COMMISSIONER PENTEFOUNTAS: Most agreements in this country contain that clause, you would agree with me?

18791   MR. MAYRAND: Well, I don't think that Stingray has knowledge that most or all of them do. I don't think they have access to all the agreements, perhaps you do. What Galaxie says is that clause is in their agreements.

18792   And it seems to us, because there has been a lot of discussion on the business model, Galaxie and whether Galaxie could exceptionally morph into, you know, analog correct model altogether.

18793   The problem is that, you know, when they struck all of these agreements with considerably larger broadcasting groups, they did so on the basis of a framework that was known.

18794   And I think that it's perfectly reasonable for Galaxie to say: Well, you know, the first thing to consider for the Commission is that all your programming is about music and that sector is completely different and has completely dynamics than the television side.

18795   And there is a particular situation there that needs some caution on your part. And so, hence, the flexibility of Option B is really all they're asking.

18796   They are not asking for any obligation to carry. They're just saying: we would like to be able to have our agreements run through there in their own course, as agreed to with the BDUS. And frankly, it doesn't change anything for the BDUs to do so, if there is no prohibition for Galaxie to be carried on the basic for the remaining term of the agreements.

18797   So, that's the extent of it.

18798   COMMISSIONER PENTEFOUNTAS: I understand that and all I am saying is that as a successful member of the Canadian Broadcasting System you should be thinking about the system in its whole. That's my only point.

18799   MR. MAYRAND: I think that's well understood. I think that the consideration there is, you know, you need to have some kind of ability for licensees to adapt to the change and not give them a shock treatment that is of such magnitude that it will destroy them.

18800   COMMISSIONER PENTEFOUNTAS: Understood. Thank you.

18801   THE PRESIDENT: Three questions for you.

18802   Premièrement, lors des questions avec -- questions et réponses avec le conseiller Dupras -- vous avez dit que vous avez fait plusieurs études internes sur la valeur que les Canadiens seraient prêts à payer pour un service de musique?

18803   M. BOYKO: Comme je vous mentionnais, on n'a pas fait -- je me suis peut-être mal exprimé -- on n'a pas d'étude interne sur la valeur du service, là.

18804   Tout ce qu'on sait, c'est qu'est-ce que les autres compagnies qui font du "on-demand" et "over-the-top", comme je vous mentionnais, comme RDO et SPOTIFY chargent, mais nous autres, on n'a jamais fait, on n'a jamais vendu le service à la carte.

18805   LE PRÉSIDENT: Je ne sais pas exactement les mots dans la transcription, mais vous avez dit : Toutes nos études qu'on a fait nous démontrent que?

18806   M. BOYKO: Bien, c'est nos recherches d'abord, pas nos études, mais nos recherches. Quand on regarde le marché en général, il y a... Quand on regarde comme PANDORA que je mentionnais qui offre un service... un service, juste deux pour cent de leurs abonnés sont prêts à payer. L'autre 98 pour cent ne veulent pas payer pour le service.

18807   LE PRÉSIDENT: Mais quand vous dites « des recherches », quelle forme qu'elles ont prise ces recherches-là? Ce n'est pas des recherches écrites à l'interne que vous auriez?

18808   M. BOYKO: Oui, oui, on a et aussi, une grosse partie c'est que dans le domaine de l'industrie de la musique, il y a un rapport annuel qui se fait sur, tu sais sur le marché de la musique mondialement. Alors, je peux vous donner une copie.

18809   LE PRÉSIDENT: Alors, s'il existe des études sur la valeur attribuée à des services audios, pourquoi vous ne l'avez pas mis en preuve?

18810   M. BOYKO: Excusez.

18811   LE PRÉSIDENT: Pourquoi vous ne l'avez pas mis en preuve?

18812   M. BOYKO: Bonne question. Claude?

18813   LE PRÉSIDENT: La deuxième question c'est par rapport à vos préoccupations que si vous n'êtes pas sur la base, vous n'aurez pas le même taux de pénétration. Donc, votre modèle d'affaires sera affecté.

18814   We have had discussions with others in terms of how we might transition into the new rules, and people have various views.

18815   Wouldn't you expect, though, beyond the skinny basic entry points, that most BDUs would offer a high penetration package within which you could be offered?

18816   M. BOYKO: That's exactly one of our requests. If the Commission -- if there is a new skinny basic that's very limited, then at least, please, give us the flexibility that we can still be offered on that second year digital basic.

18817   THE PRESIDENT: I see. So, you do envisage that that's the possibility and then?

18818   MR. BOYKO: And I think we did mention that in our --

18819   MR. MAYRAND: Yes, and if I may add, Mr. Chair, the issue there is that, certainly, there is a possibility of Galaxie being carried on what used to be the basic package of BDUs. It is reasonable to assume that BDUs, or at least most of them, will continue offering some kind of larger package.

18820   The problem arises because of the fact that, due to the technical regulatory change on the definition of basic, there is a contractual void that occurs, and then any BDU -- and I think you have a good sense of the problem of an independent audio programming service, such as Galaxie, negotiating with all of the large VI entities at the same time.

18821   There is a void, and the problem is, there are no benchmarks for Stingray and their people to have even a clue as to where they will eventually land, and the landing can be so rough that it actually amounts to a crash.

18822   THE CHAIRPERSON: Right. We are all well aware that if the regime changes, you have to manage the transition, and you will have an opportunity, I guess, in your final reply statements to address that, as others have put proposals on the table.

18823   Correct?

18824   MS LAFLAMME: Correct.

18825   THE CHAIRPERSON: My third area of questioning deals with your comment that nowhere in the world are you excluded from basic.

18826   Does any jurisdiction actually define a skinny basic like the Working Document refers to?

18827   MR. BOYKO: When we say that we are on basic, in our agreements we always say digital basic, because many BDUs -- when you go to Latin America, the penetration of digital is only at --

18828   THE CHAIRPERSON: I don't think you are answering my question. I am asking whether any jurisdictions in the world are proposing to define a skinny basic in the way that Item 1 in the Working Document does.

18829   MR. BOYKO: There was in the U.S. a program to do a family package that was looked into. But still, today, when we do our deals in the U.S., we are still carried on digital basic.

18830   THE CHAIRPERSON: So nobody is really looking at something similar, or the same thing.

18831   MR. BOYKO: Maybe they are looking at it, I am just saying, with the customers we have right now, none of our customers have asked us to be on a tier.

18832   THE CHAIRPERSON: Does any jurisdiction require you to be on basic?

18833   MR. BOYKO: None that we are aware of.

18834   Like I said, most -- with the music service that we have, because it is music, it's not TV, it is pretty much -- not much regulated around the world.

18835   That's why we are lucky and we are able to penetrate all of those countries. Most -- except for certain countries it's more complicated, but mostly we can enter those markets.

18836   THE CHAIRPERSON: Right. And I take note -- and you ought to be congratulated -- of your ability to have rolled out your business in so many jurisdictions. You have been a very successful company in 113 countries, I think you mentioned in your presentation.

18837   So you have been able to negotiate your way onto those systems. Why can't we assume that you will be able to do that in the Canadian marketplace?

18838   MR. BOYKO: Our model is -- the model of our music service -- because in music, we are lucky, we don't --

18839   In TV programming, you have to pay for the costs of doing the TV shows, and there are a lot of fixed costs. In our business, we pay a percentage of sales.

18840   So we are lucky that we can have a large scale of subscribers, without having the fixed costs per subscriber. That's how the model works.

18841   THE CHAIRPERSON: Right. You are an aggregator of content, you don't produce original content directly.

18842   MR. BOYKO: And the beauty of music is that music is universal, and U2 is U2. U2 is U2 in Brazil, in Venezuela, in Dubai.

18843   You know, we have some local programming, but we do have big advantages of scale.

18844   The way our marketing works is on basic. So music has been on basic TV, the usage is high around the world. The 50 percent usage, we see it in Israel, we see it --

18845   THE CHAIRPERSON: Right. So you are actually, maybe, making the point that somebody looking at this will say: You have been successful in a free market environment outside of Canada to roll out your service, yet when you are in Canada, you come to the regulator asking for all of these mechanisms to protect you from the shock of potential changes.

18846   MR. MAYRAND: If I may, Mr. Chair, I think one has to look at -- we just referred to the fact that, really, in most, if not all jurisdictions abroad, there hasn't been a tight definition of a basic service. It goes without saying that, as well, there hasn't been any prohibition of including a service, such as an audio programming service like Galaxie, into the mix.

18847   The reason why the model has been so successful worldwide is that, in the absence of any prohibition or impediment by regulation to do that, it makes eminent sense for all involved, for the program supplier that is Galaxie, for the BDUs that want to add something that is extremely low-cost to enhance consumer satisfaction with the basic offerings.

18848   That model has been very well received.

18849   The situation that we see --

18850   THE CHAIRPERSON: Your argument is that it improves customer satisfaction, but when you filed, you provided no evidence about customer satisfaction. We actually had to ask for it in an undertaking.

18851   MR. BOYKO: Just to answer, what is important, though -- here we have a good case of -- independent of TV, we have a good case of a Canadian company doing well in its own country and using the foundation, the roots -- les racines -- to expand globally.

18852   So, for us, Canada is -- all of our employees are here, or 90 percent of our employees are here. Our financing is done here. Our stakeholders are here.

18853   So Canada is the foundation, the roots of this company. If you take away the foundation, the roots of our tree, then the rest will fall.

18854   We have been lucky to leverage what we have in Canada, leverage our deals to finance ourselves worldwide. So, I think, for us, that is why it is such -- even if Canada has 10 million subscribers, it's the most 10 million subscribers, and it is our homeland.

18855   THE CHAIRPERSON: That is a fair enough argument, but how long does that last?

18856   MR. BOYKO: Excuse me?

18857   THE CHAIRPERSON: Do we continue to have to feed the tree, so that it has roots in Canada for years and years to come?

18858   MR. BOYKO: I wish -- you know, I still have a BlackBerry today, and I love BlackBerry, and I will support them because I am a true Canadian, and I wish that every Canadian would do the same.

18859   So if we have a great success story, I hope that we, as Canadians, support what we have as a success story. We hope that Stingray can grow even larger and bigger.

18860   THE CHAIRPERSON: Nobody is requiring Canadians to have BlackBerrys.

18861   MR. ALBERT: Maybe there is one point that I could make, Mr. President. Galaxie, today, is on basic in 100 percent of digital households, not because of regulation, not because of access rules or any other benefits, if you will, that we would have received from the Commission.

18862   What we are asking for today is to maintain that status, essentially, and not, because of regulation, have our agreements that we have negotiated commercially -- you know, see our penetration rate go from 100 percent to 50 percent because of regulation.

18863   We are not asking for protection, we are not asking for anything that we don't have today, other than maintaining the status quo, maintaining the commercial agreements that have been negotiated.

18864   So, like I said, we are not benefiting from any new regulations.

18865   THE CHAIRPERSON: Have you negotiated any affiliation agreements within the last year?

18866   MR. BOYKO: Right now we have two BDUs that we are negotiating with, which are --

18867   THE CHAIRPERSON: Have you signed ones since the launch of --

18868   MR. BOYKO: Yes, we signed one, we signed --

18869   THE CHAIRPERSON: In those affiliation agreements, what have you put in terms of the risk of changes in the regulatory system?

18870   MR. BOYKO: You know, negotiating with a much larger vertically integrated company -- we have a team of one, they have a team of 20.

18871   So when you have a contract in place, those small details, they have been there forever and you can't change them.

18872   THE CHAIRPERSON: You knew the risk when you signed those.

18873   MR. BOYKO: Well, we are stuck in a situation with contracts that have been like this for 20 years. So it's almost --

18874   In our case, it would be impossible, as in the case of other independents -- we don't have the power. We, as independents, don't have the power to change a large company's team's agreement.

18875   MR. MAYRAND: If I may add, Mr. Chair, I don't think there is an undertaking to file the list of agreements, with rates and their expiry dates, so that will be done. But I don't know how one could say that Galaxie knew the risk before you issued Broadcasting Notice of Consultation 190.

18876   I don't think they could have possibly known the risk.


18877   THE CHAIRPERSON: Were any of the agreements signed after the issuance of 190?

18878   MR. BOYKO: No, our last agreement was signed, I think, in January or February.

18879   THE CHAIRPERSON: Thank you.

18880   Mr. Vice-Chair?

18881   COMMISSIONER PENTEFOUNTAS: Just briefly -- and you may have studied this or you may not have studied this, but notwithstanding the completion of your current affiliation agreements, what would the next tier -- what would the penetration of the next tier look like?

18882   What would the penetration be, Mr. Mayrand? Je ne sais pas si vous avez regardé ça. S'il y a un service de base hyper-squelette...

18883   MR. MAYRAND: I don't think we have that information handy. We would be talking about an aggregate figure, I guess, for the industry.


18885   MR. MAYRAND: I don't think we can provide that right at this moment. We can see whether Stingray could provide some estimate of that.

18886   The problem, though, remains that once everything is suddenly reopened, for everybody, there is absolutely no assurance at all that a particular tier will be the one that BDU A or BDU B or BDU C will actually want to accommodate Galaxie on.

18887   So it could be any kind of tier package.

18888   COMMISSIONER PENTEFOUNTAS: Well, there is no assurance now that you would get guaranteed access to the basic tier, as it is.

18889   MR. MAYRAND: That is correct, but the assurance is contractual, sir.

18890   COMMISSIONER PENTEFOUNTAS: I understand that, but those contracts, to the Chair's point, were signed without any kind of regulatory imposition on BDUs to assure you must-carriage.

18891   MR. MAYRAND: That is correct. There was no obligation to carry the service on basic, there was the possibility to do so.

18892   What is at issue here is that that possibility would be foreclosed, as contracts have been signed prior to Galaxie having any notice that there would be a change in the definition of basic.

18893   COMMISSIONER PENTEFOUNTAS: And what I would ask is what that possibility would be in the new regime, in terms of penetration rates.

18894   If you have thought about it, great. If you undertake -- I think you have 24 hours. I know it's late. Il y a des avantages et désavantages de comparaître si tard dans le processus, et un désavantage, c'est que vous n'avez pas grand temps de...

18895   THE CHAIRPERSON: The problem is that we have to balance off fairness with others who have to reply on the 3rd of October.

18896   If you are saying that a few extra days would assist, that is something we could consider.

18897   MME LAFLAMME : Jusqu'à lundi peut-être?

18898   LE PRÉSIDENT : Oui, d'accord, fin de la journée, heures de Vancouver, comme l'avis public le prévoit. D'accord.

18899   CONSEILLER PENTEFOUNTAS : 8 h 00 dans l'Est, c'est ça?

18900   LE PRÉSIDENT : Quelque chose comme ça, oui.

18901   CONSEILLER PENTEFOUNTAS : 8 h 00 dans l'Est.

18902   LE PRÉSIDENT : D'accord. Donc, 8 h 00 l'heure d'Ottawa.

18903   MME LAFLAMME : D'accord.


18904   LE PRÉSIDENT : D'accord. Merci beaucoup.

18905   Those are our questions. Thank you very much.

18906   THE SECRETARY: I would now ask Channel Zero to come to the presentation table.

18907   Please introduce yourselves for the record. You will have ten minutes for your presentation.


18908   MR. MILLAR: Thank you. Good morning, Mr. Chair, Mr. Vice-Chair, Commissioners, Staff and industry colleagues.

18909   My name is Cal Millar, and I am President and COO of Channel Zero.

18910   To my far right is Jennifer Chen, our Vice-President of Programming, and on my right is Christopher Fuoco, Vice-President of Sales and Marketing.

18911   We appreciate being a part of this very important hearing. The decisions from this proceeding should, when implemented over the next few years, provide Canadians with more choice and discoverability of high-quality Canadian television programs.

18912   We are also encouraged by the sharing of similar viewpoints on some of the issues, and the willingness of both small companies and large companies to work together to resolve them.

18913   Throughout this hearing, we have had the opportunity to review and reflect on many of the themes brought forward in the Working Document. After eight days of hearings, much has been said about a number of the topics up for discussion. We will, therefore, focus our brief remarks on the following four items: simultaneous substitution, the unique mechanism that supports Canadian programming rights; a revised licensing regime for over-the-air television stations; the equitable use of set-top box data; and the repatriation of foreign advertising avails for use by independent broadcasters.

18914   MR. FUOCO: Channel Zero supports simultaneous substitution in its current form, because it is still the most consumer-friendly method of accommodating programming rights.

18915   While simsub has long been perceived as an irritant to viewers, we also recognize that the execution of the substitution is complex, involves many parties, and is not without errors.

18916   We support the creation of an industry working group to improve the implementation of simultaneous substitution, and to do a better job of explaining it to viewers.

18917   We suggest that this issue is important enough that the Commission should require the group to report its findings and solutions by mid-December of this year, in time for the Commission's consideration in its decision on this hearing.

18918   Jennifer Chen and myself would appreciate the opportunity to participate in the working group, to contribute the unique perspective of the independent broadcaster.

18919   With respect to Theme 16 of the Working Document, we are in full agreement with the proposal. The Commission has outlined a solution that is both consumer sensitive and market driven.

18920   Throughout this hearing you have asked other panels to identify their most preferred proposal, and for us this is it.

18921   MS CHEN: There have been a number of submissions about the use of set-top box data. We agree that access to more data will help us make better, more informed programming decisions.

18922   The challenge at present is the lack of access to the data and the exclusive use of this data by the BDUs. This important data should be provided to a third party organization that can measure it, address privacy concerns, ensure it is statistically valid, and there should be fair and equal access by all parties to the data.

18923   Furthermore, there has been considerable discussion about the importance of improving the discoverability of Canadian programs by viewers. At present, the Canadian television ecosystem offers the viewer much choice and selection. The outcome of this proceeding will likely provide consumers with even more.

18924   Anticipating that, a very important mechanism to create increased discoverability of Canadian programs is the use of foreign ad avails. As submitted earlier, and also addressed by Pelmorex, we feel that now is the time to revisit and address the use of these avails.

18925   The Commission has asked previously how this could be implemented, and here is our suggestion.

18926   Foreign avails should be divided 50 percent to the BDUs and 50 percent to non-VI broadcasters. To ensure fair access to these avails by the non-VI broadcasters and to simplify efforts by the BDUs, we propose a straight rotation of the spots provided by the broadcasters, spread across the foreign services on a pure Run of Schedule basis.

18927   We believe this is such a fundamental issue to achieve discoverability that the Commission should mandate an industry working group to develop specific rules on how this would be implemented, and we would be pleased to participate in such a group.

18928   MR. MILLAR: We are still very optimistic and bullish on this industry and the sector. We like growth, we like pursuing opportunities, and with the support of regulatory framework we still see plenty of opportunity for the independent broadcaster in Canada.

18929   We would be pleased to answer your questions to provide further clarification. Chris will quarterback our team.

18930   We thank you for your time.

18931   THE CHAIRPERSON: Thank you very much. Before I pass it on to Commissioner Simpson, I was a bit surprised at your suggestion in paragraph 7. If there is such a broad consensus that this is something the industry should take on, why do you need the Commission to ask you to do it, why don't you just do it?

18932   MR. FUOCO: We have been watching the proceedings, and we were encouraged by the conversation that occurred during Bell's presentation. We felt that was a great suggestion, a step forward, and something that, by bringing the parties together --

18933   THE CHAIRPERSON: Sorry, when I said "you", I didn't mean you individually, I meant you who have the common view in the industry. Why do you always wait for the Commission, if you all agree that it's something that should be done?

18934   Are there any barriers for the industry to take this on? Why do you always have to wait for the Commission to require a group to report?

18935   MR. MILLAR: Mr. Chairman, that is a fair question.

18936   Each of the companies, large vertically integrated broadcasters and small independents, all have -- it's a little bit like herding cats sometimes, and in the back and forth --

18937   THE CHAIRPERSON: Is it, now?

18938   MR. MILLAR: It very much feels that way, even ours being one of the cats.

18939   In the back and forth with Mr. Crull, we noted that there was a direction that Bell should take it on, and there was a bit of an operator/distributor "Let's get the details worked out".

18940   Certainly, there is nothing precluding us, at the end of this hearing, from calling and saying: We would like to be part of it.

18941   However, we noted in the exchange that there was neither an undertaking specifically marked, nor was there a specific deadline as to when it would report.

18942   All we want to do is make the point that it is important, and if the Commission could give us some framework for a deadline to it, it would encourage this group of cats to cross a line.

18943   THE CHAIRPERSON: Right. I think everybody acknowledged -- I am being unfair, because I am targeting you, because you just happen to be there.

--- Laughter

18944   THE CHAIRPERSON: It is a strange suggestion that the industry can't fix what people had agreed was a problem vis-à-vis consumers, without us asking them to do it.

18945   Anyway, I will pass it on to Commission Simpson.

18946   COMMISSIONER SIMPSON: Good morning.

18947   Your positions are quite clear, so I would like to first delve into the opportunity to talk to an anomalous local broadcaster, because you are quite unique, like our friends in Victoria. You are an independent, you are making your way in the world, in a very highly concentrated VI world, and I would like to try and understand more about some of the anomalies that might impact you differently than the greatest majority of the broadcasters, who seem to command the majority of everyone's attention.

18948   First, on the issue of the main theme of this hearing, which is what does the broadcasting industry look like in the future, from the perspective of a standalone broadcaster, where do you think you are going to be in five to ten years, in the way the world seems to be shaping up right now?

18949   MR. FUOCO: We have spent many days and hours -- frankly, our days are consumed by thinking about that all the time.

18950   When we think about where our business will be in five years, there are some core fundamentals that are always there.

18951   We know that consumers will expect more choice.

18952   We know that digitization will put our content on many platforms, many of which we can't contemplate, we haven't even seen today.

18953   Consumers, specifically with our local programming, will be compelled to want to know what is going on in their community. I think that is one of the hallmarks of CHCH, and why this year it is celebrating its 60th Anniversary.

18954   We enjoy several hundred thousand viewers a day to our news products. I expect that will continue in the future.

18955   But to be specific as to where we see the business, if we were to say, five years ago, I can't sit here and say that, as a pure play specialty broadcaster, which we were a mere five years ago, we had in our business plan that we should go and acquire an over-the-air television station.

18956   We are in an era where opportunities present themselves. We like to be in positions to take advantage of those opportunities. We have to be mindful of our business to rationalize those opportunities. And, in many ways, we have a plan. We course-correct as we go, but ultimately the future will take us where it goes.


18958   And that future, from the standpoint of the importance of a stand-alone station that is also an OTA, is there going to be a predictable continuance of a heavy need for news and information to the local audience, given that there's so much migration to network and foreign service and other Over the Top content that really doesn't tell the local viewer a lot about what's going on in their backyard?

18959   MR. FUOCO: For us, our local programming is very much the bedrock of our entire business. It's what has our viewers turning to us multiple times throughout the day. It's why early on, after bringing CHCH into the fold, we decided: let's give the viewer more of what they want, and rapidly expanded our news offering to an all-day format.

18960   So we've grown that. We've invested in it on many fronts. And from that, that is -- again, I spoke about a bedrock. That's the core product that our local and regional advertisers tap into. So that's the financial viability.

18961   So I know that that will be there in the future, and we cherish that, and enhance it and grow it --

18962   COMMISSIONER SIMPSON: M'hmm, m'hmm.

18963   MR. FUOCO: -- and then off of that build the rest of our offering, the rest of our schedule, to become as wide appealing as we can to the broader advertising community.

18964   COMMISSIONER SIMPSON: Now the commitment to programming, both financial and from the obligations of percentage of Canadian content, news goes a long way to helping you achieve your content objectives, but it also has issues in that it's an expensive format to produce. Unlike producing episodic television or movies, you know you can't exactly recycle it 10 or 15 times and get your money out of it. You can't, you know, really extract value.

18965   So the question here is: Do you see local television, if, as you say, it's going to be increasing in its import of local content, that it's going to become increasingly more difficult for you to fulfil PNI objectives and scripted drama, and that type of stuff? Do you see yourself getting to a threshold where you have to become all news, for example, and redefine yourself, or are you going to have to try and -- I don't want to -- I'll just say it.

18966   News is high-value content. Ten-year-old Canadian movies are not as high in their value, although they fulfil an obligation. Is that kind of a life for you, unless the rules change, going to have to be the way you fulfil all your objectives of being relevant and comply?

18967   MR. MILLAR: Thanks for trying to clarify it.

18968   I think that you're right, news is not -- you know, it's a disposable product, but there's a couple of answers to that.

18969   One is that, you know, we see opportunities in the sector to expand a bit. While other of our colleagues have walked away from local news, we've seen opportunities, where we think that our model could work in other locations. So that's one part of that.

18970   And that, interestingly enough, allows us to amortize some of the news costs. It is expensive. It's not exactly like you can play the news from one city in another city. But there are some infrastructure elements. And when we cover the situation with the Scottish referendum today, for an example, the coverage of that actually will work in multiple cities and with digitization those news packages can travel. So it does actually lower our overall cost, so that expansion, modest expansion, but allows that.

18971   The second part, you know there is sort of -- or the second point on that is that there's some continuum between 10-year-old Canadian movies and content that isn't just news. An example of that is that we produce some of our own shows that are not strictly news oriented. We have a national sports recap and commentary show called Sportsline that we launched about four years ago, and it does very well for us. Again, with some tweaks, it can be used in multiple cities, and it plays not bad online.

18972   We also this year -- and Jennifer may want to add a little bit to it -- but we brought back an old stalwart of Canadian broadcasting, Tiny Talent Time. We've done the first season, and we plan on doing a second season of it.

18973   Again, it's local content. It's not produced by us under requirement for any PNIs that we don't currently have, but it just -- it makes sense. We can do that. When you get into scripted drama and what we've -- you know, we used to talk about priority programming --


18975   MR. MILLAR: -- and PNI, that is beyond our scope to be able to do. That would actually create a situation where the cost of that programming just isn't monetizable.

18976   COMMISSIONER SIMPSON: Yeah, and I appreciate that.

18977   Just to set the tone a little further, in looking at what constitutes local OTA today, we're seeing anywhere from two to four or five hours of news by an affiliated or VI-owned OTA. Once it got that out of the way, the greatest majority of your obligation is covered by the network. I'm trying to draw a distinction between you and still having to live within that same obligation that was largely constructed for a different purpose. But I was curious as to whether you could manage it, and you're telling that there's a need for more local programming that is entertainment oriented.

18978   But, you know, is there anything more, Ms Chen, that you want to add to that?

18979   MS CHEN: I was just going to add that I think that our unique position allows us to truly evaluate what is compelling content to our constituents, to our viewers. With the financial resources that we have, we have tried to relate as best we can to the audience, and the kind of programming that we are creating now addresses those issues.

18980   So I feel like we've had to be very creative, and our successes are small, but we hope to grow on them.

18981   COMMISSIONER SIMPSON: Okay. Thank you.

18982   If I can move on to your position on being an over-the-air or not, we hear you, I'd like to understand you.

18983   We've seen very divergent views from various station operators. Some are saying the costs really aren't that much, it doesn't matter. Others, particularly interest groups, are saying, "Wait a minute, if you pull the plug on that type of obligation, we go from one station to no station." That's the case in a lot of CBC markets.

18984   But from your standpoint, you're endorsing this idea why? Is it truly a big cost saving for you or is it because it forces you into being more of a digital broadcaster and gets you into the mobile space, and just it forces you into the new world a little more, given that there still would be protections?

18985   MR. FUOCO: I think having the flexibility on the question of the continuance and operation of the transmitters is something that we don't have today.

18986   Just for the record, let me be clear, we have no plans whatsoever to make any adjustments to our transmitter grid at present.


18988   MR. FUOCO: It's something that CHCH, over many years, has built up to a point where we operate eight across the province and CH is available to the better part of more than 90 per cent of people across Ontario.


18990   MR. FUOCO: And it's a heritage station. It's 60 years old. So we look at that and say what's being proposed in theme 16 contemplates solutions that would be market-specific --


18992   MR. FUOCO: -- market-driven. We have not, at present, conducted deep research into understanding what a possible adjustment to a transmitter in a certain market would mean, from a viewership perspective. But having that as an option, and understanding the operational costs, weighed against the impact on the viewer, is something that, having that flexibility, is beneficial to us.

18993   COMMISSIONER SIMPSON: It's another avenue, in other words, but you don't necessarily have to take it.

18994   MR. FUOCO: And as I said, we have no plans at present to do --


18996   And is that because that -- is there a vagary in the way this concept had been proposed that it would -- because it potentially could -- it could reduce your footprint. As you say, right now you're enjoying carriage throughout the province, and if you pulled off the air, with it comes sort of that superstation capability.

18997   MR. FUOCO: Well, but to be clear, when we went through theme 16, words like "that the service areas would be designated according to the contours of the former transmitter" --


18999   MR. FUOCO: -- provided to us the assurance that we could continue to serve the viewers in that community, albeit not necessarily over the air, and that we would need to understand the impact of that.


19001   MR. FUOCO: But it was those assurances in the theme that we said, "This works for us."


19003   MR. MILLAR: And if I could --


19005   MR. MILLAR: -- Mr. Commissioner, to clarify Chris' point a little bit, is that we look at our over-the-air viewing, which we -- again, it's very difficult to parse these numbers apart because we get our ratings and BBM -- sorry, Numeris, you know, has a proprietary sample that they use, so we -- it's very difficult to parse. We have to do it from anecdotal evidence, from the responses on our website, the calls. If there is a power outage that's not picked up by the generator, we find out who's watching us over the air in various areas. So it's very difficult.

19006   What we thought was really compelling about the proposal in theme 16 was just that: it would give us the flexibility to -- using that 90:10 rule, perhaps, in the paid system.


19008   MR. MILLAR: If there was a market that we just didn't believe -- and truly believed -- wasn't using the OTA, it would give us the flexibility to turn it off --


19010   MR. MILLAR: -- and stop burning, you know, the fossil fuels to fuel it if nobody's using it. In an area where it's being used, we'd obviously want to keep it, because we're looking to keep every viewer.

19011   COMMISSIONER SIMPSON: In other words, it's an interesting idea to be explored. You're not discounting it, but it requires further study.

19012   Two last very quick questions.

19013   On avails, you know, the way the interstitials work right now is that 75 per cent of them are supposed to be available to programming services and 25 per cent to the BDU.

19014   You're sort of implying that you don't get a shot at these. Is that right? And if so, why?

19015   MR. MILLAR: Okay, I'm going to wade into the shark-infested pool.

19016   The BDUs are our clients, and we love them. You heard Eric Boyko earlier talk about --

19017   COMMISSIONER SIMPSON: Do you want to say that again?

--- Laughter

19018   MR. MILLAR: We love them. When they're our customers, we love them. When they're a vendor to my own household, I may not be in the same position, but...

19019   So that said, the rules as they currently exist, I think it's fair to say, most of us in the industry know that they just -- they don't work. You know, I'm always the one that goes at the hard answers, so I may get a kick under the table, but, you now, the cost-recovery model hasn't worked. If it's cost-recovery, I'm pretty sure it costs the same to run avails in Ottawa as in Toronto. And picking on Rogers -- and I don't mean to -- but the reality is that there's different cost-recovery rate cards for those services.

19020   So what we looked at was, we said, "Why don't we try to make it simple, try to make it equitable, try to" -- you know, "We all want more for ourselves than others --


19022   MR. MILLAR: -- but let's just be fair about this." They're there. It's a very -- we think, a very easy way to increase the discoverability of the independent broadcasting services --


19024   MR. MILLAR: -- Canadian programming specifically, and --

19025   COMMISSIONER SIMPSON: Which is a recurring theme.

19026   MR. MILLAR: It is.

19027   COMMISSIONER SIMPSON: But is the issue -- understanding the sensitivity of it, is the issue that you're trying to delicately describe anomalous to companies such as yourself, because of your -- by our nature, or is it really more pervasive than that?

19028   And before you answer, is it something -- given the clock ticking, is it something that you'd prefer to answer in an undertaking to help us? What do you think?

19029   MR. MILLAR: I think that there's always -- if it's a confidential undertaking, I think that it does give us the latitude --


19031   MR. MILLAR: -- to answer very specifically without trying to couch our terms.

19032   COMMISSIONER SIMPSON: It doesn't have to be long, just a couple of paragraphs --

19033   MR. MILLAR: Yeah.

19034   COMMISSIONER SIMPSON: -- but just, you know, lay it out.

19035   MR. MILLAR: We'd appreciate that --


19037   MR. MILLAR: -- opportunity. Thank you.


19038   COMMISSIONER SIMPSON: And the last question, more of a comment: on alerting, you're basically saying, "Hey, we did it. What's the problem?" Right? Why was it so -- why was it not difficult for you to comply?

19039   MR. FUOCO: On the emergency --


19041   MR. FUOCO: -- alerting system?


19043   MR. FUOCO: Yeah.

19044   That's actually a point that we're quite proud of. That was a project that goes back a couple of years. We felt that wanted to take a leadership position and challenge ourselves to see if we could do it and assist the system, and sort of take on a pioneering role.

19045   So we're quite proud that we managed to do it. We've had the alert system live through the better part of this year, and it is actually -- if you're familiar with the weather throughout southern Ontario and across the province, it's been --

19046   COMMISSIONER SIMPSON: A lot of years in London.

19047   MR. FUOCO: Right -- it's been an active weather --


19049   MR. FUOCO: -- season.


19051   MR. FUOCO: So I think it's served our viewers and Ontarians well. Like any system, we want to continue to refine it, improve it, and we're encouraged and supportive that --

19052   COMMISSIONER SIMPSON: But technically and financially, it didn't, you know, turn you upside down?

19053   MR. FUOCO: No, we --


19055   MR. FUOCO: If we can do it, we think others can as well.

19056   COMMISSIONER SIMPSON: Okay. Thank you.

19057   THE CHAIRPERSON: On that last undertaking, you'll have to make the case for confidentiality. Facts can be confidential, specific negotiations might be considered confidential, but arguments to the Commission have to be on the public record.

19058   MR. MILLAR: Fair enough. Thank you.

19059   THE CHAIRPERSON: Okay. Thank you.

19060   But you still have to make your case. Thank you.

19061   Those are our questions. Thank you very much.

19062   MR. FUOCO: Thank you.

19063   THE CHAIRPERSON: Before I let you go, I do want to commend you for coming up with at least addressing the discoverability issues. The record has been rather thin on that, and so that's a -- I'm not sure I agree with it. Some people out there think that they already know what we've decided, which always comes to a surprise to us, but...

19064   Well, they have a pretty good Ouija board, I guess, that we don't have.

19065   But thank you for putting that forward, we'll consider it.

19066   MR. FUOCO: Thank you for your time.

19067   THE SECRETARY: I will now ask 1395047 Ontario Inc., to come to the presentation table.

--- Pause

19068   THE SECRETARY: Please introduce yourself for the record, and you may begin.

--- Pause


19069   MR. ALVAREZ: Good morning, Chair Blais, and members of the Commission.

19070   My name is Frank Alvarez. I am the chief executive officer and the president of Festival Portuguese Television, FPTV.

19071   Before I begin our presentation, please let me introduce the other members of the hearing team.

19072   Appearing with me today is Bon Falcone, FPTV vice-president, on my left; Domingos Melo, FPTV general manager, on the right; and Maggie Medeiros, executive assistant; and our legal counsel, Gary Jessop.

19073   Launched in 2001, FPTV is a general-interest, third-language category B specialty television service, offering Portuguese language programming 24 hours a day, seven days a week, across Canada to the Canadian Portuguese community.

19074   We appreciate the opportunity to participate in the "Let's Talk TV" proceeding and we thank the Commission for letting us appear today to discuss our submission.

19075   We strongly believe that the existence of Canadian third-language services like FPTV play a critical role in serving the needs of not only the existing Canadian Portuguese community, but also those of new immigrants to Canada.

19076   Current Packaging Requirements Should Be Maintained: If the proposed pick-and-pay model is implemented, the protections afforded Canadian third-language services will be eliminated. This will have severe consequences for FPTV as Canadian subscribers would then be able to select foreign third-language services without purchasing the Canadian services.

19077   While we understand that under the pick-and-pay model a BDU will still continue to be able to offer packages of services, given the price differential in favour of foreign services, with no Canadian regulatory requirements, it is not likely that such packages will include Canadian third-language services such as FPTV. In addition, services like FPTV have little to no control as to how the BDU packages, prices and markets our service.

19078   The current third-language packaging requirements were put in place in 2004 in exchange for increased access to foreign third-language services. These requirements provide us with some degree of protection and it is critical that they should be maintained.

19079   Since 2004, foreign third-language services have been authorized even though they are competitive with Canadian services. We do not have the same competitiveness protection afforded English and French category B services. If protections are eliminated, we will be defenceless against foreign services with no Canadian obligations.

19080   Why would Canadians select a Canadian service that only offers a portion of the foreign-service programming when they can get 100 per cent of the programming directly from the foreign service itself, and likely at a lower price? There would be no incentive for a Canadian third-language service to continue to operate.

19081   The revised proposal issued by the Commission, in August, unfortunately does not provide much comfort to FPTV. Under the revised approach, the Commission replaces the current requirements with only a requirement to offer one Canadian third-language service for each non-Canadian third-language service offered. This revised approach will allow subscribers to bypass Canadian third-language services completely in favour of the foreign services.

19082   FPTV submits that this proposal should be changed to require that subscribers receive one Canadian third-language service for each non-Canadian third-language service in the same language received. If, however, the Commission does decide to implement its revised proposal, we submit that it be amended to require BDUs to offer one Canadian third-language service for each foreign third-language service in the same language that it offers subscribers. This change will at least require a BDU to offer a balanced selection of third-language services in the same language.

19083   Canadian Programming: In order to be an effective cultural bridge to new Canadians, Canadian third-language services must offer Canadian local programming that is relevant to the ethnic community that it's serving. Just offering canned and recycled Canadian programming will not work.

19084   FPTV submits that, in addition to the current Canadian content exhibition requirement, a minimum annual Canadian programming expenditure requirement of 15 per cent of annual revenue should be imposed on Canadian third-language licensed and exempt services.

19085   In order to ensure that the requirement is met, we propose that all services, licensed and exempt, be required to file annual proof of compliance, including annual returns. This new requirement should ensure that the Canadian programming produced will be relevant to the service's audience, as the broadcaster will be motivated to produce good quality programming to be in a better position to recoup such ongoing costs.

19086   In conclusion, Mr. Chairman, while we are in favour of ensuring Canadian subscribers have greater choice, this choice should not come at the expense of Canadian third-language broadcasters like FPTV. If the Commission's proposals are implemented without amendment, FPTV will be at risk and the only group that will benefit will be the foreign services.

19087   Mr. Chair and Commissioners, we again thank you for the opportunity to speak today. We would be pleased to answer any questions that you may have. Thank you.

19088   THE CHAIRPERSON: Thank you very much for that presentation. I'm going to have a few questions for you, going forward.

19089   I noticed you used the word "protect" on a number of occasions or "protection measures" or variations on that. With your permission, I'm going to talk about more of supportive measures as opposed to protection measures.

19090   We've heard, along the course of this hearing, a lot from particular independent programming services that they feel perhaps threatened and have seen the demise of some support mechanisms we've had in our past regulations to ensure that they have a fair access to distribution in the current broadcasting ecosystem.

19091   Is it your view that you share entirely their perspective and on top of that you have a unique additional challenge because of your third language or is it very much the case that the third-language ecosystem in Canada is unique in every other respect?

19092   MR. ALVAREZ: I believe the third-language Canadian service is very unique in this environment and constantly evolving. We really feel that we need protection from the Commission if we really want to be around for years to come.

19093   THE CHAIRPERSON: Is there something unique to the supply of programming in third language that creates an additional burden that's not existing in other independent service providers?

19094   MR. ALVAREZ: In our specific case, FPTV, we do -- the Canadian content is mostly local, involving the Portuguese-speaking communities in Ontario and also in Quebec. So our programming is considered quality programming to our audience, to our viewers. And in fact, we are the only television station in Toronto able, on a daily basis, Monday to Friday, to produce local programming, the news on a daily basis, addressed to our Portuguese community.

19095   And if I may, I would like to ask our Manager Domingos just to highlight the kind of programming that we do more precisely on a local basis.

19096   THE CHAIRPERSON: Well, I don't necessarily need -- I understand you currently contribute that.

19097   What I'm trying to get at is we've heard throughout this hearing from certain independent programming undertakings that the current ecosystem works against them, they can't easily get access, be distributed, and they ask for all kinds of support.

19098   I'm trying to understand whether you agree with them generally and you're asking for some additional support because of the nature of your services being third language or are you suggesting it's an entirely different case and that we should have an entirely different regime for third language?

19099   MR. ALVAREZ: Well, I believe that -- I repeat, the Canadian third-language service is a very special case, very specific, and therefore the Commission should have some kind of protection like we have had for the past few years. Without it, without that protection, we most likely -- I'm not sure if we would be still in business today.

19100   THE CHAIRPERSON: Right. So do I take it then that you don't have similar concerns as others in terms of the fairness by which you are treated when comes the time to negotiate affiliation agreements?

19101   MR. ALVAREZ: Well, Mr. Chair, like I had indicated, we have very little say on that because the agreement we receive from BDUs, we don't have much room to, you know, make any changes or to really negotiate. It's kind of --

19102   THE CHAIRPERSON: So, in your view, it's take it or leave it?

19103   MR. ALVAREZ: Well, it's very close to it, sir, yes.


19105   MR. ALVAREZ: Well, the ones we have been, you know, dealing with, they have their own agreements. In some cases we are able to -- based on our experience dealing with the ethnic marketing, we have been able to expose our views and share our experiences. In some cases the BDUs listen to us and we achieve some compromise.

19106   In other cases, you know, that's what is written and the word is, you know, this is what it is and we cannot make a special case to you because, you know, this is our agreement in general for everybody. And, you know, we don't have the means as other television broadcasters of the mainstream, in terms of clout and power, to negotiate with BDUs. We are a very small fish and therefore our negotiation power is very, very limited.

19107   THE CHAIRPERSON: Right. A small fish in a turbulent pond.

19108   MR. ALVAREZ: Right you are.

19109   THE CHAIRPERSON: At paragraph 7 today -- and I appreciate that you've been following the process of the hearing as we try -- issues get joined as we go forward and you've got a proposal there that the word "offer" be replaced by "received" and this is sort of, using your words, a protecting mechanism, using my words, a supporting mechanism.

19110   Do you think this would be sufficient were we to take your perspective to provide you the sort of support that you think you would need to have going forward, as a small fish in a turbulent pond?

19111   MR. ALVAREZ: Well, Mr. Chair, when we say "received," what we mean is mandatory.

19112   THE CHAIRPERSON: M'hmm.

19113   MR. ALVAREZ: That's the interpretation that we have when we say "received." And I believe that one Canadian third-language service or one foreign service would secure the continuity of third-language Canadian services in the future.

19114   THE CHAIRPERSON: Right. So you think that's a sufficient mechanism?

19115   MR. ALVAREZ: Yes, I do believe so.

19116   THE CHAIRPERSON: Why do you think that that's the appropriate mechanism?

19117   MR. ALVAREZ: Why do I think it's the appropriate mechanism? In this market we have been experiencing cases that differ from our interpretation as far as what the Canadian content is all about.

19118   And we have an interpretation. We do -- like I mentioned earlier, we do -- our Canadian content is more than 50 percent based on local news, events, interviews, call-in shows, et cetera. What we're trying to do is to help the Portuguese-speaking community, the older and the newcomers, you know, to integrate them in the Canadian way of life. And for that matter, we create programs to discuss the constant immigration changes and policies, citizenship, police issues and also some politics because politics in Canada differ from our country of origin. And, you know --

19119   THE CHAIRPERSON: Let me -- I understand what you are doing --

19120   MR. ALVAREZ: Yeah. Yeah. Yeah.

19121   THE CHAIRPERSON: -- except remember that the Commission set out some outcomes it was looking for in this proceeding, things such as providing greater flexibility and choice to Canadians.

19122   MR. ALVAREZ: Right.

19123   THE CHAIRPERSON: And that's why I'm asking you, why is this an appropriate mechanism in light of that? Because you're in fact taking away choice and flexibility potentially from certain subscribers that may not want the linked service. So how is it consistent? Why is it a good idea in your case, notwithstanding that?

19124   MR. ALVAREZ: Well, you see, I am of the opinion that if the Commission were to remove at least the current protection that we share that the subscribers would prefer to receive in their home an interrupted service from Portugal.

19125   THE CHAIRPERSON: So you don't think they see value in your service?

19126   MR. ALVAREZ: They do see value but the problem being that, you know, in order for us to do our primetime local Canadian content --

19127   THE CHAIRPERSON: M'hmm.

19128   MR. ALVAREZ: -- we have to cut the live receiving satellite service from Portugal from 7:00 to 9:00 p.m. So what we do, we take that segment and we present it later at night.

19129   And, you know, we have had some feedback from our audience that even though they love what we're doing, but they are kind of unhappy that on prime time we have to cut what's being shown live from the satellite.

19130   THE CHAIRPERSON: M'hmm.

19131   MR. ALVAREZ: So by saying that, if there was no protection, I guess that in our case some of the -- a great chunk of subscribers would certainly prefer to have a channel that is not interrupted, that's live 24 hours --

19132   THE CHAIRPERSON: Right.

19133   MR. ALVAREZ: -- without having to cut three hours a day live from Portugal to insert the portion of the Canadian content. More that, rather than the content itself.

19134   THE CHAIRPERSON: Right. I get the fact they want it --

19135   MR. ALVAREZ: Uninterrupted, yes.

19136   THE CHAIRPERSON: -- when it's coming off the foreign services, but it does suggest to me that you don't have confidence in the value you are offering in your Canadian made portion of the program.

19137   MR. ALVAREZ: No, we do. We do but, you know, we have to make sure that in terms of future that we have the kind of protection that allows us to do -- right now we are doing a little over 15 percent Canadian content and we would like in the future to do just a bit more because we see the value.

19138   With so much offer, I would just be very brief on the services that nowadays everybody is able to get through the Internet. So I believe in the future the value of third language Canadian services will be based on the programming. Programming will be a big chunk of decision for the subscribers.

19139   So if we can do still more, because we need that prime time so that we can play our commercial content, this is the revenues that we have to offset the production expenses for the Canadian programming, correct, so we would like to not only continue that, but we would like, if at all possible, to go above the 15 percent Canadian content.

19140   Now, to do that we certainly have to cut another half-hour or another hour of the live content, and this is where we have to be very careful because the audience doesn't want to lose whatever is live on the satellite and so that we can insert our show.

19141   THE CHAIRPERSON: Right. Understood.

19142   MR. ALVAREZ: Okay.

19143   THE CHAIRPERSON: Okay. So I understand your perspective, you think that --

19144   My last area is very much so I get a better understanding, because I really don't know this area and you are an expert in particular in what is happening in Portuguese language and programming and we have heard, obviously, in English and French markets where we have a lot of programming now available through web-based applications, OTT, whatever, non-linear, whatever you want to call it.

19145   To what extent is that phenomenon occurring, particularly, are those foreign broadcasters that have Portuguese content making that content available online and is it the situation for your Portuguese-speaking audience and other Canadians more broadly, are they turning to those new platforms as they have turned I believe in the past to black market or gray market dishes to get to that programming they couldn't get in the past?

19146   MR. ALVAREZ: Well, in that respect there is not much difference with the others. I mean people, yes, they do turn on to the Internet services.

19147   I'm not sure that we have any Portuguese service over the top in Toronto, I'm not too sure, but almost every channel is on the Internet and it's another source, you know, of having the service at home and people do not have to search for it.

19148   THE CHAIRPERSON: Right. But companies like RTPI aren't providing Portuguese language content over-the-top that some of your potential viewers are going to?

19149   MR. ALVAREZ: Well, as you know, RTPI is free on satellite in North America, including Canada, and also RTPI --

19150   THE CHAIRPERSON: I'm talking about the Internet-based content.

19151   MR. ALVAREZ: Yes. RTPI is free, but all the content they have is from Portugal. There is nothing from Canada on RTPI.

19152   THE CHAIRPERSON: I get that. What I'm trying to see, because this is about the future of television --

19153   MR. ALVAREZ: Right.

19154   THE CHAIRPERSON: I'm trying to understand for Portuguese-language television the fragmentation of audiences in Portuguese language programming, is it facing the same sort of evolution, some people would say threat, through non-linear over-the-top programming?

19155   MR. ALVAREZ: Oh yes. Like I said, in that aspect I don't see any difference between the Portuguese-speaking community and other communities.

19156   THE CHAIRPERSON: Right. So aren't you concerned, therefore, that if there are restraints on choice and flexibility imposed through a future regulatory model, that those viewers you are actually trying to keep won't just find that content elsewhere?

19157   MR. ALVAREZ: You're right, the content we provide is very unique and we are the only source that is providing the community that content, but we have to be careful because, you know, I know that it matters to some of the viewers that they say that they have signed for RTPI simply because RTPI, it is an uninterrupted service, it's the whole 24 hours.

19158   And this is one of the points that is a great deal of concern for us, because nowadays we have Portuguese-speaking services on television, we have quite a few, it's just not only FPTV, but it is SIC International, it is SIC News, it's RTPI, it's RBTI, the Brazilian channel, it is the Global, there are so many.

19159   So our point here is, you know, to make sure that we are the only ones that really have two cut the live portion and that is a big deal for us.

19160   THE CHAIRPERSON: Right.

19161   MR. ALVAREZ: A big deal of concern, I should say.

19162   THE CHAIRPERSON: Okay. Well, that was helpful.

19163   MR. ALVAREZ: All right.

19164   THE CHAIRPERSON: My take-away is that the technological changes, the consumer choices that we see more broadly in English and French markets in Canada are also arriving in the Portuguese market, though perhaps in a different --

19165   MR. ALVAREZ: Some. A global phenomenon.

19166   THE CHAIRPERSON: -- though perhaps at a different pace.

19167   MR. ALVAREZ: Right, sir.

19168   THE CHAIRPERSON: Okay. Thank you. Those are my questions, thank you.

19169   MR. ALVAREZ: You are very welcome.

19170   THE CHAIRPERSON: Thank you very much. We have no further questions, so thank you.

19171   MR. ALVAREZ: Thank you very much. Thanks for the opportunity.

19172   THE CHAIRPERSON: Thank you.

19173   Why don't we take a short break until -- I'm sorry, do you have something to add?

19174   MS MEDEIROS: Yes.

19175   I just wanted to add, when you questioned if protections are eliminated, right, why would Canadians select a Canadian service that only offers a portion service when they can get hundred percent of the programming directly from the foreign service itself and a lower price that they will be able to get that service I think will play a major --

19176   THE CHAIRPERSON: Right. Right.

19177   MS MEDEIROS: -- also a major effect. And in this case there will be no incentive for Canadian third language service to continue, okay.

19178   Another concern that I would like to bring in, I don't know, you didn't ask about it, but I would like to bring --

19179   THE CHAIRPERSON: That's precisely the point, I didn't ask about it so you will have an opportunity --

19180   MS MEDEIROS: Okay.

19181   THE CHAIRPERSON: -- in the final reply stage to make additional points at that point.

19182   MS MEDEIROS: Okay.

19183   Being involved --

19184   THE CHAIRPERSON: Is this an answer to my questions?

19185   MS MEDEIROS: No, it's just something I would like to express. Is that okay?

19186   THE CHAIRPERSON: Well, then you will have an opportunity in the --

19187   MS MEDEIROS: Oh, okay.

19188   THE CHAIRPERSON: -- in the final submissions.

19189   MS MEDEIROS: That's fine. Thank you very much.

19190   THE CHAIRPERSON: I think that will be -- and you will have more time to actually elaborate on your point at that point.

19191   MS MEDEIROS: Okay. Thank you.

19192   THE CHAIRPERSON: Okay? Thank you very much.

19193   MR. ALVAREZ: Thank you very much.

19194   THE CHAIRPERSON: So we will take a break until 11 o'clock. Thank you.

--- Upon recessing at 1045

--- Upon resuming at 1103

19195   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

19196   Madame la Secrétaire.

19197   LA SECRÉTAIRE : Merci.

19198   THE CHAIRPERSON: Order please at the back of the room.

19199   THE SECRETARY: We will now hear the presentation of Asian Television Network International Limited.

19200   Please introduce yourself and you have 10 minutes for your presentation.


19201   MR. NAIDOO: Good morning, Mr. Chairman, Vice-Chairman, Commissioners and staff.

19202   My name is Prakash Naidoo and I am the Vice-President of Sales and General Manager of Asian Television Network International Limited (ATNI) and its subsidiary Asian Television Network Limited (ATN).

19203   Appearing with me today is Tony Lacombe, who is our Broadcasting Consultant.

19204   Dr. Shan Chandrasekar, President and CEO of ATNI and ATN, was scheduled to be here but unfortunately he could not make it. He is sending his regards to each one of you on this panel and the CRTC staff.

19205   ATN serves Canada's diverse cultural communities with one general interest third-language Category A specialty service South Asian Television, also known as ATN HD, and operator of 36 Category B and exempt services. It offers programming in many languages and genres. We are also sponsor to 15 foreign services on the digital satellite list. As you can see, since our ATN HD service was authorized in 1996, we have not remained idle to savour the fruits of the sinecure.

19206   Over the years, we have been able to develop and increase the number of services largely because of the success of our Category A (ATN HD) specialty television channel. It is our flagship general interest television service that is offering principally programming in the Hindi language and also provides programming in eight other South Asian languages. Many of our Category B services bring programming in additional languages to serve more communities and often it is being done at a financial loss.

19207   ATN was the first third-language service that sponsored a foreign third-language service to the satellite lists. ATN has also taken the initiative to convert foreign services such as Sony and Aapka Colors to Canadian Category B services in order to increasingly contribute to the Canadian broadcasting system with local programming. We note that ATN also operates the only South Asian radio service on SiriusXM available in Canada and the United States.

19208   By the way, Prime Minister Harper has inaugurated our new broadcast facilities in Markham last Friday, September the 12th. He told the attendees that he was impressed by ATN's facilities and this company was a great Canadian success story and it is a model that the government wants to see. He went on to say that we are providing consumers with services they want and that they get to choose.

19209   MR. LACOMBE: ATN has provided written comments in a number of areas, further to Broadcasting Notice of Consultation CRTC 2014-190, to assist the Commission in its deliberation.

19210   We note at the outset that one principal objective of this proceeding is to find ways for Canadian consumers to maximize choice and flexibility. It is important to recall that each one of ATN's specialty services can be offered on a standalone basis. However, the buy-through rule may apply in some instances.

19211   In fact, today we will be focusing on the buy-through rule and especially the part applicable to Category A third-language specialty services. It is important because another objective of the Commission in this proceeding is to find ways to foster compelling Canadian programming, including program production, promotion, exhibition and Canadian programming expenditures.

19212   In our view, the buy-through rule was put in place by the Commission to ensure that this very objective is being met. As the Commission is aware, to do away with the buy-through rule for third-language Category A services will result in a reduction of Canadian programming contributions by these services and in turn a reduction of service to Canadian ethnic minority communities.

19213   The buy-through rule was put in place in 2004, Notice 2004-96, at the time that the genre or language exclusivity rule applicable to ethnic and third-language Category A specialty services was eliminated. We also recall that further to Broadcasting Public Notice CRTC 2004-96 the Commission relaxed the entry test for non-Canadian general interest third-language services to the digital lists.

19214   The Commission then expressed that it was of the view that Canadian third-language services are the most efficient and effective vehicles for meeting the needs and interests of Canada's third-language ethnic communities and fulfilling the objectives of the Broadcasting Act -- we will call this the objective.

19215   At that time, as it is still the case in this proceeding, some interveners were concerned about the costs of services and distributors in general were opposed to packaging rules.

19216   The issue for the Commission is how to respond to the concerns of choice and cost for third-language services while continuing to ensure the objective outlined by the Commission in 2004-96.

19217   We note that there is another part of the buy-through rule applicable to subscribers who elect to subscribe to general interest foreign third-language services. They have to also subscribe to a Canadian third-language Category A or Category B service in the same principal language.

19218   Since this part of the buy-through rule affecting third-language foreign services is not under review, we have to conclude that the rule in this instance is beneficial to achieve the objective outlined by the Commission in 2004-96.

19219   The reasoning or justification for putting in place the buy-through rule affecting third-language Category A services was that Category A services have higher Canadian programming obligations, more Canadian presence and scope, than Category B services and that Category B services should not be a replacement for Category A services.

19220   As the Commission has recognized, should this part of the buy-through rule be eliminated then the current third-language Category A services should be allowed to reduce their Canadian programming contributions to the level expected of Category B services.

19221   According to the 2012 CRTC Annual Returns filed by the five existing ethnic and third-language Category A specialty services, they have invested nearly $19 million in Canadian programming expenditures in that one year.

19222   Eliminating the buy-through rule affecting third-language Category A services would simply translate in accepting that these services would provide a reduction of Canadian programming and local programming service to their Canadian third-language ethnic communities. It may serve to provide a degree of flexibility for selecting third-language services but it would also go directly against the objective of the Commission, as expressed by the Chairman in his opening remarks of this proceeding, that is to foster the creation of compelling programs made by Canadians and fostering local programming. The contributions that these Canadian services bring to the Canadian broadcasting system will then be less significant and in some cases the services may not survive and no longer be available to Canadians.

19223   In an effort to estimate the potential loss to Canadian programming contributions that would have the elimination of the buy-through rule for third-language Category A services, we estimate that the current nearly $19 million in annual contributions could likely be reduced by more than half of the current level to become a total of approximately $7 to $9 million for the five services. We base this estimate on the fact that some of the third language Category A services have current obligations of showcasing more than 30 percent Canadian programming in some parts of the broadcast day, while the Category B Canadian programming requirement is at a minimum of 15 percent throughout the day.

19224   Also, Category A services have a CPE requirement, while Category B services, generally, have no such requirement.

19225   MR. NAIDOO: ATN HD is a third language Category A service with a buy through requirement in existence today. As such, ATN HD is committed to Canadian content, per its condition of licence, which is higher than third language Category B services.

19226   In addition, ATN has engaged, in its opinion, the best of entertainment programming from the Indian subcontinent for ATN HD, going as far as signing long-term programming agreements with major programming houses, committing large sums of money on a long-term basis.

19227   This was done to ensure that ATN HD subscribers receive quality Canadian content, as well as the best of entertainment in the genre.

19228   These types of important long-term financial commitments were only possible on account of the buy through rule with other channels in the same genre.

19229   The buy through rule for ATN has not served as an excuse for us to provide substandard programming to our subscribers. Quite the contrary, it has assisted us to provide higher quality programming, including additional quality Canadian programming.

19230   To eliminate the buy through rule for third language Category A services would not only put our financial investments in long-term agreements into question, it would also lead ATN HD to reduce Canadian programming that its subscribers have been accustomed to receiving.

19231   We submit that there are only five ethnic and third language Category A services.

19232   Also relevant is the fact that our ATN HD service had less than 121,000 subscribers in 2013, representing a decrease of more than 16 percent over 2012.

19233   Therefore, we would submit that in the case of ATN HD, the occasions of possible additional costs on account of the buy through rule are relatively limited.

19234   On the other hand, without a buy through rule, the level of Canadian contributions and local programming offered by ethnic and third language Category A services over Category B services is seriously put into question.

19235   This, in the end, would be to allow the possibility for subscribers to choose only Category B services that offer them less Canadian programming and less local programming than the Category A services in the same principal language can offer today.

19236   The Commission noted at paragraph 88 of the Broadcasting Notice of Consultation, CRTC 2014-190, that comments received during Phases 1 and 2 were that ethnic and third language services are accessible only in packages that are often expensive, and also that ethnic and third language communities were concerned that programming available does not reflect the communities or the cultural diversity within these various communities.

19237   We submit that without the buy through rule, the issues of lack of reflection to the ethnic communities or cultural diversity within these various communities will only get worse.

19238   Such an action would also go totally against the trend reported by StatsCan in its Census reports that the non-official language population is increasing at a rate of, approximately, 1.5 percent every five years in Canada.

19239   In general, the packaging of specialty services in all language groups may have had the biggest impact in reducing flexibility for consumers and increased costs, even if there is consumer value in packaging services.

19240   Giving consumers the ability to select only the services they want and, in the case of third language services, even with the inclusion of the buy through requirement, will still provide consumers with greater flexibility.

19241   The cost of services may vary from what they are in packages currently, but the consumers will have gained a greater flexibility, without a reduction in the quality of programming from these services.

19242   If the Commission wishes, we can discuss the packaging and pricing of these services.

19243   In conclusion, eliminating the buy through rule for third language Category A services would prove to be very damaging, as it would translate in a reduction of Canadian programming service, including local programming, to portions of ethnic communities of Canada which already are often underserved minorities.

19244   Therefore, our quest to maintain the buy through rule for third language Category A services is hardly self-serving, as we are truly concerned about maintaining and improving on the level and quality of Canadian programming provided to ethnic communities in Canada.

19245   We thank the Commission for its consideration. We would like to point out that we think this public process is very well conducted by the Commission, and we are available for any questions that you may have.

19246   THE CHAIRPERSON: Thank you for that, and please give our regards to Dr. Chandrasekar. He always brings a jolt of energy to these hearings, so he will be missed, but I see that he is well represented this morning.

19247   MR. NAIDOO: Thank you.

19248   THE CHAIRPERSON: Commissioner Simpson will start us off.

19249   COMMISSIONER SIMPSON: Good morning. We will try to add a jolt to the hearing, between yourselves and myself. We will see what happens.

19250   MR. NAIDOO: Could I just recharge my batteries?

--- Laughter

19251   COMMISSIONER SIMPSON: I have quite a few areas to cover. I would like to start, though, with -- I have to say that it is refreshing and different -- and I want to pursue it -- when you take such a strong position on the buy through as having an implication, a very negative potential implication, with respect to Canadian program commitments, in that, if you lose the buy through agreement and some of the other supporting provisions that currently are in place --

19252   Again, I found it refreshing that you didn't talk, necessarily, about, first, the revenue implications, but that the Commission should have great concern over the fact that you might have to come back to make an appeal for reduced Canadian programming commitments.

19253   Now, starting with that, I would like to, first, go to your Category A station and make note of the fact that, of all of the Category A's, which were all hovering at between 25 and 30 percent CPE requirements, yours was at 15, hovering in the same ballpark as the Category B's.

19254   So, given that your CPE expenditure is significantly less than other Category A's in the market, why would you feel that you are as vulnerable as you say you are to having to reconsider your programming commitments if the buy through was ever removed?

19255   MR. NAIDOO: Thank you for that.

19256   First and foremost, our CPE requirements are not the same as the Category B's, and the Canadian content portion of our programming is not the same as a Category B.

19257   We have a requirement for between 17 and 20 percent in programming, as well as Canadian content expenditure, with the amount of money being spent taken into consideration as a percentage of the revenue generated by the network in the previous year.

19258   COMMISSIONER SIMPSON: But, still, in comparison to other Category A's, you are significantly less, and my question was: Why does that make you as vulnerable, given that your commitment against revenue is not as great as other Category A's.

19259   MR. NAIDOO: We do have a commitment against revenue. We have a financial commitment, which a Category B does not have.

19260   COMMISSIONER SIMPSON: No, I am not talking about Category B's, I am talking about the other Category A's.

19261   MR. NAIDOO: Yes, but the condition of our licence was such that --

19262   COMMISSIONER SIMPSON: I know what the condition of your licence was. I was just trying to understand, with the thresholds --

19263   What I was getting at is that the bar on your CPE expenditure is less, and yet you made significant inference throughout your presentation -- and I am presuming that you mean all services that you operate, your Category B's and your Category A's -- that if the buy through was lost, now or in the future, it would have the greatest impact.

19264   Aside from your revenue, what you are trying to bring to the Commission's attention is that it would have a significant impact on your Canadian programming commitments.

19265   As a matter of fact, you said in your written submission, on genre and buy through, that -- you used the term "protection"; we choose other words -- is needed because of onerous Canadian program commitments.

19266   I guess I am questioning how your threshold is onerous given the thresholds of other Category A's.

19267   MR. NAIDOO: We have already committed and made investments to the Canadian broadcast system from the perspective of Canadian programming.


19269   MR. NAIDOO: We have committed various areas of our company in technology and infrastructure, to be able to produce quality Canadian programming, to the extent that we have to do by condition of licence.

19270   In fact, at some points in time we even exceed that, because we believe that Canadian programming is as important as acquired programming, but it also gives a very phenomenal reflection of the community at large.

19271   We are a very diverse community. Our Category A licence has several different languages that it represents in its broadcasting, and given that fact, we are predominantly Hindi, but not unilingual, if you know what I mean.


19273   MR. NAIDOO: We do cater to other languages, and all of these language groups could be suffering tremendously because the ability to provide programming at those kinds of levels, with the expectation of the CPE, would also be brought under quite tremendous strain.

19274   COMMISSIONER SIMPSON: Okay. I am going to move on. Let's talk about the competition side of the equation with respect to genre and buy throughs, because I think we have about as much as we are going to get on your Canadian programming concerns.

19275   Your flagship is your 1996 service, ATN HD.

19276   MR. NAIDOO: Yes.

19277   COMMISSIONER SIMPSON: And this, as a Category A, has made great strides in serving the community that you are targeting, and that is acknowledged.

19278   But I would like to explore the subscriber and revenue declines that you are citing from a competitive standpoint, because I am to assume that competition is coming from competitive Canadian services and OTT, and other Internet-delivered services, but that potentially a lot of the competition is coming from foreign services.

19279   You actually reference that in your written submission, that foreign services, and the relaxed rules associated with their entry, is a concern for you.

19280   So is it competition that is creating the declines in your revenue?

19281   You cited that you have had a decrease in subscribership of 16 percent from 2012 to 2013, and advertising revenues decreased by approximately 47 percent in 2012.

19282   So, is it competition?

19283   Because it is not regulation, nothing has changed.

19284   MR. NAIDOO: Well, basically what happens is, when we do agreements with BDUs, the BDU makes the decision as to how they will market the service, how they will package it. They get a little bit of input from us, but ultimately the decision is theirs.

19285   When they decide to reduce the ARPU for us as broadcasters -- because they, themselves, are in competition with each other, so they are also fighting for market share.

19286   That being said, they would take a package of channels and they would put them into a package, and then they would market it. Again, that would also have an impact on us as broadcasters, and hence we see a decline in revenues.

19287   COMMISSIONER SIMPSON: And understanding that distribution agreements have a tremendous impact on revenues, based on what packages you are in and how you are marketed.

19288   I can't help but note, though, that a tremendous -- you are operating between Canadian-owned, 36 percent, and foreign-sponsored -- you are operating 50 channels in addition to your Category A, and I can't help but wonder if you are not creating competition for yourself.

19289   MR. NAIDOO: No, we actually are able to operate these channels and provide a very diverse amount of programming to the diverse community, on a unilingual basis, as you can see from the 36 Category B's, because our flagship channel, the ATN HD channel, is able to generate revenues, given the fact that it does have buy through status and it is a Category A.

19290   It assists us to be able to subsidize the other channels to a very great extent.

19291   COMMISSIONER SIMPSON: I totally understand that, and not just from the synergy in marketing, but from an operational standpoint -- you know, master control efficiency and --

19292   Does that efficiency also move into program production for you?

19293   MR. NAIDOO: Yes.

19294   COMMISSIONER SIMPSON: Even though you are multiple-language?

19295   MR. NAIDOO: Yes, it does.

19296   We have crews that go out there. We could very well have two or three reporters at one particular event in the community, each of them speaking a different language, to cover the event and provide it back to the subscriber or the viewer in their particular language.

19297   We have made large investments in those types of infrastructure, and we are able to do this, as I said, at the risk of repeating myself, with major assistance from the main ATN HD channel, which enjoys a buy through today.

19298   COMMISSIONER SIMPSON: Right. I apologize if this sounds like a licence renewal hearing all of a sudden, it's just that you are a major player in ethnic and third language, and you have done a very good job of indicating that future considerations, regulatorily, because you are as large as you are, could have a larger consequence, and that is why I am asking the questions I am.

19299   On programming, you are very eloquent in indicating that you are producing a significant amount of programming for these services, but I was taken by your comment in the written submission that you are finding the need --

19300   You obviously are a purchaser of programming that comes from foreign sources, and these foreign sources are, quite often, potentially, competitors, because they are foreign services.

19301   So, aside from the fact that you actually deliver some of these foreign services, could you help me better understand the problems you are having with rights and exclusivity on these services?

19302   Are you finding yourself in a situation where they are selling services to others who compete with you, or are they attempting to bring foreign services in that compete with you, and therefore the programming that you purchase, you are finding yourself duplicated on other sources of programming?

19303   MR. NAIDOO: Well, you know, when you deal with players the likes of which we deal with, with due respect to everybody else that we are not dealing with, we find that in order for us to ensure that we keep the player on a short leash, for want of a better description, that comes at a price.

19304   The terms of agreements, generally, are much more stringent, much more expensive, so we try to ensure that we do not become victims of their methods of delivery in any other form.

19305   That being said, there are always predators out there that are using these services and bringing them into the Canadian landscape on a totally unauthorized, illegal basis, and I think we are all subject to that type of situation.

19306   COMMISSIONER SIMPSON: Now, this group that you just referred to, or this type of service, is that what you meant when you said that OTTs have easy entry, but no basic requirements, and that a small basic would help?

19307   Are you talking about services that are coming in via satellite that are not regulated, and therefore all you have to do is just put a satellite up and pay a fee, and away you go?

19308   MR. NAIDOO: Yes.

19309   COMMISSIONER SIMPSON: Those are the guys.

19310   You are saying that we might have to look at regulating them?

19311   What is your recommendation?

19312   Because when you make reference to a small basic would help, how would that work, in your mind?

19313   MR. NAIDOO: If we look at a skinny basic that would be used, people would have much more money available to allocate to services or packages of their choice, depending on the language group to which they belong.

19314   That is what we looked at in terms of recommending a skinny basic.

19315   COMMISSIONER SIMPSON: Back to programming for a second, both programming you create and programming you buy, I have had the benefit of a few hearings lately where -- they have been radio, but, you know, I live in Vancouver, and it's a very ethnically diverse marketplace, very dynamic, and one of the things that we have been hearing as a comment about media in general, and it applies here, I think, is that when you started back in 1996, the Internet was in its infancy, OTT didn't exist, and not many other ethnic services existed either.

19316   So, first and second generation ethnic audiences had pretty slim pickings for an audience, and two things have happened with time. One is that technology has now made foreign service content and foreign programming, ethnic programming, third language programming, much more available, through a variety of means, and at the same time that first and second generation audience has become fourth and fifth generation.

19317   The question I have is: Are you finding yourself caught between the technology and the taste levels of your market, to the extent that you are having to change your programming with a maturing, more integrated market, as well as having to deal with the technology, which is one of the reasons we are here?

19318   MR. NAIDOO: We, in any event, change our programming to meet the needs of our audience.

19319   A fine example is currently on air today. We have a series called One Hundred Years of Indian Cinema, and some of the footage that we have in that series is not available anywhere else in the world. It is very well received by our viewing public.

19320   We also find that when we secure rights, as I said earlier, it comes at a much larger price, because we need to secure rights for most types of distribution mechanisms that are out there, inclusive of OTT, et cetera.

19321   That being said, again at the risk of repeating myself, there is always the person that wants to bring in these channels or signals illegally.

19322   I mean, with the advent of the YouTubes, a guy sits in his living room and if he is watching something on TV, he will upload it to the Internet via YouTube.

19323   Now, I read an article this morning saying that people prefer a television experience, as opposed to watching programming on their various devices, laptops, et cetera, even as far as watching it on the computer.

19324   So we want to maintain that TV experience insofar as having it available to us on an exclusive basis in Canada, and if there is going to be any move toward other types of distribution for the programming that we have, we would like to be in control of it from the Canadian perspective, respecting the complete rules and regulations of engagement in Canada.

19325   COMMISSIONER SIMPSON: But wouldn't it behoove you, given what you have said, to have a B plan, which hedges your bet?

19326   You are a very technologically capable company. You have a big footprint in the industry. Why wouldn't you start your own OTT?

19327   MR. NAIDOO: We have relationships with BDUs across Canada currently --

19328   COMMISSIONER SIMPSON: And that would jeopardize them.

19329   MR. NAIDOO: That, firstly, would. Secondly, we would rather follow the lead of our BDU partners, and as they move to that type of technology, we would like to be supporters.

19330   Then it becomes a Canadian-made solution, by Canadians, for Canadians, about Canadians.

19331   COMMISSIONER SIMPSON: Yes, and they are moving into OTT. We saw that with Shomi. But is it a possibility that they would become your competitors at some point, because the numbers are staggering with respect to percentage of population of different ethnic groups --

19332   MR. NAIDOO: Yes.

19333   COMMISSIONER SIMPSON: -- and it's an area that I think mainstream traditional conventional broadcasters can't ignore anymore. So do you feel confident that these partnerships can be maintained? Because, you know, Bell owns Telelatino right now, and I'm --

19334   MR. NAIDOO: No, it's Shaw.

19335   COMMISSIONER SIMPSON: Sorry, Shaw rather, my mistake.

19336   But will these partnerships endure or is there the potential of competition? Or do you have something that they need and that will continue to hold up your franchise, outside of regulation?

19337   MR. NAIDOO: Well, as I said, when we do agreements, we do agreements that would cover us inside and outside of regulation.


19339   MR. NAIDOO: So we will be prepared, when the time arrives, when our BDU partners say, "Okay, we're now ready for a Canadian-made OTT service." Because we can rely on their technology, we can rely on a pleasant viewer experience, which is that it's all about --


19341   MR. NAIDOO: -- ultimately, and, more importantly, it's programming.


19343   MR. NAIDOO: So have ensured in our agreements that we have, at -- again, at a huge cost, have these agreements in place to make sure that we have the rights for the various technologies, both now and in the future.

19344   COMMISSIONER SIMPSON: Thank you.

19345   Again acknowledging the completeness of the rest of your submission, and not needing questions, my last question has to do with our experience on this side of the table.

19346   Over the last six years that I've been on the Commission, we've seen dozen and dozens and dozens of category B applications for third-language and ethnic applications, many of which have been coming from you, which is good because it's a sign that things are good on your side of the fence. But my question is this: are all these applications the result of pent-up demand or the fact that cheaper content is available, therefore you can have as many as 50 different offerings to the public?

19347   Secondly, why are so many of these applications failing to launch, in your mind -- not just yours, but in general?

19348   MR. NAIDOO: Well, when the Commission introduced the category B category of services -- I believe it was sometime in 2000 -- we took that very seriously and we decided to apply ourselves and have as many niche services as possible within the South Asian community. As you have mentioned, and we've said in our submission, clearly, having 36 of these category B channels on air, we would like to be considered as very serious players.

19349   You know, the category B category was put into place for a reason. We rose to the occasion, and we tried to fulfil, as much as possible, of a need for the South Asian community.

19350   We also believe that we need to give some of these services a chance to grow to a much larger base. The only way to do that is to have something to back it financially. The way we do that is through our category A service.


19352   MR. NAIDOO: That's the first part.


19354   MR. NAIDOO: The second part is there are other services also of a similar genre to ours that we carry. They were under the list of eligible satellite services, namely Aapka Colors and Sony Television. We have now converted those two category B services and we --

19355   COMMISSIONER SIMPSON: With more Canadian content -- with Canadian content.

19356   MR. NAIDOO: And with more Canadian content.

19357   COMMISSIONER SIMPSON: Right, right.

19358   MR. NAIDOO: Okay? That way we're able to get as much of the Canadian content out, spend more money in Canadian content, because not only are we committed by condition of licence for category A, but we're also are able to now showcase more of the community category Bs.

19359   COMMISSIONER SIMPSON: But, sir, my question was not so much why you did it, but were these applications, yours and others, the result of demand for more than what was currently in the market? That was my first question. And, secondly, why are so many of them not launching?

19360   MR. NAIDOO: Well, the number of applications that were made were in various languages. Not all of them were in Hindi.


19362   MR. NAIDOO: We saw an opportunity in the marketplace to develop these services however small they may start out. But we saw an opportunity to develop them as we proceed into the future, and that's the reason why did apply for them.

19363   So, you know, there's channels like Gujarati. Not many subscribers, but there's a market there, and we're trying to develop programming for it. It's category B.


19365   MR. NAIDOO: Similarly, the other channels and the other languages that we applied for and launched, we found that there would be a need, if not at the time, but as we proceed into the future. As we said in our submission, you know, the immigrant population is growing by about 1.5 per cent every five years, and there's a lot of immigration from the countries that we cater to, from a language perspective. So we decided to us our means that were available to us to apply for these licences and put these language channels on the air.

19366   COMMISSIONER SIMPSON: But you have no opinion as to whether it was market failure or distribution failure that caused them to not launch? I'm still --

19367   MR. NAIDOO: To be very honest with you, it's more distribution failure than market failure.


19369   MR. NAIDOO: Because, you know, you often hear, a BDU will say, "I don't have enough bandwidth" --


19371   MR. NAIDOO: -- or "I don't have..." -- something to do with the availability of space --


19373   MR. NAIDOO: -- and, unfortunately, you know, time we have, space we don't have, and -- you know --


19375   MR. NAIDOO: -- it's unfortunate.

19376   But if there was more space available -- and, you know, we are very serious players. When we launch a channel on a BDU, we don't sit there passively. We go out there and we market the channel to the community.


19378   MR. NAIDOO: We offer free previews. Out of the ordinary.

19379   I'll give you a prime example. In 1996, Bell ExpresVu launched at the time, and the cost of the satellite dish was $1,500, plus installation. We were the only broadcaster in Canada who became an agent to sell a Bell ExpresVu dish. We physically became a dealer. We sold dishes. We marketed it on television and we were selling them at $1,500.

19380   The cable companies wouldn't launch us in '96, '97, '98, '99. In 2000, somebody heard us. We got onto cable. And it's been -- it was quite a long struggle to get onto cable --


19382   MR. NAIDOO: -- at massive costs, as you know, I mean, if you run a network. And, you know, it was few and far between in terms of ExpressVu. But we had one single channel, and we had to market it, and with the cost of the equipment, et cetera, it became pretty difficult.

19383   So we went forward. And we ran deficits in our company for a number of years, and every time we came close to offsetting the deficit, we found ourselves in a position: well, there's a need in the community, we see the writing on the wall, let's see if we can launch another channel in that particular group and we'll subsidize it. We worked hard it and the result is what you see today, in terms of --

19384   COMMISSIONER SIMPSON: And all that promotional effort, you were paying for.

19385   MR. NAIDOO: Exactly.

19386   COMMISSIONER SIMPSON: I'm sorry for the add-on question, but today are you enjoying what you consider to be your fair share of promotion with the interstitials that we asked of Channel Zero earlier? Because interstitial -- as you know, substitution of commercial content in foreign service provides you the opportunity to not have to spend so much money.

19387   Are you getting your fair share --

19388   MR. NAIDOO: No.

19389   COMMISSIONER SIMPSON: -- or could it be better?

19390   MR. NAIDOO: Oh, it could be absolutely better.

19391   But, you know, they say, "God or the Commission helps those who help themselves" --


19393   MR. NAIDOO: -- so we decided to take the bull by the horns. I mean we couldn't be sitting there for evermore waiting for somebody to promote our business.


19395   MR. NAIDOO: We are good corporate citizens. We want to make sure that, if we take on something, we want to put our best foot forward. We want to market it, and we do just that. We have a marketing department that -- and we're in maybe eight newspapers every single week across Canada, and we market our services and our BDUs so people know they can go to whichever BDU to get.

19396   We have a call centre in our facility if somebody needs to call and find out something. Often you'll find that Rogers may call up and say, "Oh, by the way, I have customer on the line. Can you help them?"

19397   "Sure, transfer the call through."

19398   So we provide that service. We're very actively involved in solicitation of a customer, whichever BDU he may want to go to.

19399   COMMISSIONER SIMPSON: Very good. Thank you very much. I appreciate it.

19400   THE CHAIRPERSON: Thank you very much for answering our questions. That's it for us.

19401   MR. NAIDOO: Thank you.

19402   THE CHAIRPERSON: Thank you.

19403   MR. NAIDOO: Thank you.

19404   THE CHAIRPERSON: Madame la Secrétaire.

19405   THE SECRETARY: Thank you.

19406   I will now ask the Ethnic Channel Group Limited to come to the presentation table.

--- Pause

19407   THE SECRETARY: Please introduce yourself, and you may begin.


19408   MR. LEVIN: Good morning Mr. Chairman, members of the Commission, and Commission staff.

19409   My name is Slava Levin. I am the Co-founder and the Chief Executive Officer of Ethnic Channels Group Limited.

19410   With me today are, to my left, Hari Srinivas, President of Ethnic Channels Group; to Hari's left is Sasha Zivanovic, Chief Technical Officer at Ethnic Channels; to my right, Monique Lafontaine, our external Regulatory Counsel; and, beside Monique is David Vowell, Senior Vice-President of Ethnic Channels Group.

19411   We are very pleased to be here to contribute to this very important conversation about the future of television. I'm also very proud to be at this hearing as a leading independent ethnic broadcaster. Over the last 10 years, we have built a multicultural media company from the ground up, brick by brick, with much effort and risk.

19412   In 2004, we started with four category B licences. Today, we operate or represent more than 60 ethnic services, offering content in more than 15 languages, including Arabic, Greek, Hebrew, Hindi, Mandarin, Punjabi, Russian and Tagalog.

19413   The Commission's ethnic broadcasting policy has been a great success. We propose building on that success with a view to offering more choice to consumers and strong ethnic broadcasting options for Canadians.

19414   MR. SRINIVAS: We begin with linkage rules.

19415   The third-language linkage rules have been critical for the reflection of Canada's multicultural communities on television. They allowed the launch of many independent ethnic category B services over the last 14 years, which in turn provided tremendous choice to Canadian audiences.

19416   We have reviewed the Commission's proposal in the working document for a 1:1 linkage rule for Canadian and foreign third-language services. We support this proposal. It's our preferred proposal in the Commission's working document.

19417   It is our respectful view that these linkage rules must go hand in hand with packaging. We're very concerned that the working document makes no mention of packaging for third-language services.

19418   Currently, foreign third-language services must be packaged with one or more Canadian third-language or ethnic service. This packaging rule is in place to minimize the potential negative impact of the Commission's open-entry approach for foreign third-language services.

19419   The Commission has proposed to maintain the open-entry regime for foreign third-language services. This approach, together with a removal of the 1:1 packaging rule, could lead to significant instability in the Canadian independent third-language market. By extension, it is likely to result in a drop in the Canadian third-language options in the system.

19420   We, therefore, propose that the 1:1 packaging rule for ethnic and third-languages services remain in place. Foreign third-language services can either partner with a Canadian entity or come into the Canadian market as a Canadian packaging partner.

19421   MR. VOWELL: Earlier in this proceeding, the Commission sought comments on the best approaches to support Canadian programming. We recommend a Canadian programming expenditure requirement for ethnic category B services of 15 per cent instead of a 15 per cent Canadian content obligation.

19422   Many independent ethnic category B services have modest subscriber numbers and revenue levels. It is very difficult for these services to finance sufficient high-quality content to fill 15 per cent of the schedule and in our environment we cannot recycle the content we acquire across our services because of the language and cultural restrictions. A CPE rule may be more appropriate for ethnic cat Bs.

19423   MR. LEVIN: Turning to the buy-through for ethnic services, if it is to remain in place, we propose a recalibration on the price.

19424   Under the current rule if a customer wishes to subscribe to a general-interest category B service offered in the same principal language as one of the grand-fathered ethnic category A services, they must first subscribe to the said category A service. It can, therefore, cost a subscriber about $540 per year before being able to subscribe to some category B ethnic services. This puts tremendous financial pressure on the Canadian consumer, limits access to other ethnic category B services, and could drive people away from the regulatory system.

19425   To address the cost issue, we propose that the Commission establish a maximum wholesale rate for ethnic category A services. This has traditionally been the Commission's approach for subscription services that must be purchased, such as 9(1)(h) services.

19426   We propose a wholesale rate in the range of $1.50 per month. If the Commission is not inclined to amend the buy-through policy, we recommend eliminating the buy-through for ethnic services as proposed by the Commission in its working document.

19427   MR. ZIVANOVIC: As the Commission heard a great deal about over the last 10 days, there has been an explosion in OTT viewing options. We firmly believe that Canadians should have access to programs on all platforms. In fact, we were one of the first in Canada to launch an OTT service in 2007 with NEXTV. There is, however, a mounting concern in the OTT ethnic media environment. There are hundreds of OTT operators offering ethnic and third-language content directly targeting Canadians.

19428   We have here a binder with the details from the web sites of 500-plus ethnic OTT operators targeting Canadians -- some legal, some not. We also have with us here five OTT boxes that offer ethnic content and are readily available. We got these at local convenience stores and on Kijiji.

19429   Also of deep concern to Ethnic Channels Group is that many ethnic OTT operators are offering programming for which they do not have the rights. We know this because many ethnic OTT operators are offering foreign content, for which we have the distribution rights, without our authorization. We have seen many ethnic OTT operators that offer hundreds of services illegally for $4.95 per month. With a 150-channel offering, that translates to 3 cents per channel. There is not a legitimate media company that can compete with that.

19430   We would like to play a short video comparing an ethnic OTT operator to a regulated cable platform.

19431   Can you please play that video?

--- Video presentation

19432   MR. ZIVANOVIC: As you have just seen, the features and capabilities of these systems look and feel like any cable-, IPTV- or satellite-licensed undertaking. If left unchecked, within the next five to 10 years, or even the next two to five years, the regulated ethnic broadcast market will be largely displaced. These illegal OTT ethnic operator are bypassing the regulated system. This disrupts the Canadian rights market; limits the ability of legitimate Canadian ethnic services to properly serve Canada's ethnic communities; and encourages Canadians to leave the regulated system.

19433   To address this serious concern, we recommend that the Commission amend the exemption order for digital media broadcasting undertakings to capture OTT operators that offer "illegal" content. For instance, the exemption order could state that exempt digital media broadcasting undertakings must have the necessary rights to the content they offer.

19434   MR. LEVIN: Mr. Chairman, members of the Commission, we believe that the proposals that we have made today will help ensure access, choice and greater flexibility for Canadians.

19435   Thank you for the opportunity to appear before you today. We would be pleased to answer any questions.

19436   THE CHAIRPERSON: Thank you very much.

19437   Vice-Chair, please.

19438   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

19439   Thank you so much for the brevity and clarity of your presentation today, as well as the concise and informative nature of your June intervention. You got more done in 15 pages that some others got in 70, but I digress.

19440   Back to the document of the day, it's quite clear, in terms of the linkage rules, you appreciate the proposal put forward. In terms of the packaging, your position is quite clear.

19441   I appreciate the expenditure on CPE, as opposed to the exposure, and given the fact that you've got some services with a small subscriber base. I won't get into further details on that front, some of that is -- obviously, most of that is confidential information.

19442   The buy-through -- and, initially -- when I was reading your paragraph 23 on the intervention that you put forward, you asked for a $1.50 wholesale rate, and I was wondering how the math would work out. And then when I saw 9(1)(h), and your document of the day, I got worried.

19443   But I gather you're not proposing the 9(1)(h) for these services, the intervenor agrees with the commissioner, for the purposes of the record, but how does that math work, given that most of these cat A services are retailing at $15, and even more? How do you drop them down to the $1.50 and still get local news and local programming?

19444   MR. LEVIN: Well, the challenge there is this: as channels, we have to grow as our -- the world's expanding and they have to get caught up to the reality of today. The pricing of $15 is extremely expensive. We understand they have a higher expenditure. For them, it would be an issue of coming to the Commission and asking for dropping that expenditure and the Canadian content requirement, because the reality is when you're in a buy-through environment -- as we said earlier, we're not opposed to the buy-through, it just has to be in check.

19445   We can't sell a category B service to a subscriber -- let me rephrase that. A subscriber wants to subscribe to a category B service for, hypothetically, $15, and yet they're being forced to take a category A service for $15. If the cost is inconsequential, it's okay, the consumer will accept it.

19446   Keeping that in mind, that these channels will still maintain a buy-through, they will still have the penetration that they're looking for. It may not be the dollar amount that they used to receive, but that correlates directly into the production and to the expenditure.

19447   COMMISSIONER PENTEFOUNTAS: Why would the cat B also be $15?

19448   MR. LEVIN: Because generally that's -- if you look today, the costs of channels -- well, let me rephrase that. If you look yesteryear, going back maybe two, three years, every ethnic channel was priced at $15, whether you're a category A, category B or even a foreign service. That was just the price.

19449   COMMISSIONER PENTEFOUNTAS: I don't understand why you charge $15, then, if you don't have to deliver on the local programming and local news in a third language.

19450   MR. LEVIN: Well, we do, 15 per cent. We still contribute to the Canadian broadcasters at 15 per cent.

19451   In most cases, as well -- a fair question, but in most case the BDUs set the price points.

19452   COMMISSIONER PENTEFOUNTAS: So how would $1.50 wholesale change the price rate if the BDU is going to occupy that space? How would that benefit the consumer? And here's my question.

19453   MR. LEVIN: Okay.

19454   COMMISSIONER PENTEFOUNTAS: We're uncomfortable -- and I understand in terms of offering more choice to Canadians, we are not comfortable with a $15 per service retail price for a third language service. It's an awful lot of money, it's more than people pay for sports, it's more than people pay for, to use an American model, ESPN these days. So how do we change that and how do we make it more affordable?

19455   Let's sort of attack the question from that angle.

19456   MS LAFONTAINE: Well, and I think that's what we were trying to do in the submission was to recommend some pricing models that might be more appealing to the consumer than, say, $15 per month or $7 per month as a buy-through.

19457   We propose $1.50 as a wholesale rate and that would work out to about $3 on the retail market for consumers and --

19458   COMMISSIONER PENTEFOUNTAS: And what kind of CPE can we provide --

19459   MS LAFONTAINE: Right.

19460   COMMISSIONER PENTEFOUNTAS: -- and local programming and local news in third languages at $1.50 wholesale rate, given your experience? That's my question at the end of the day.

19461   MS LAFONTAINE: Well, certainly there will be a reduction in the contributions to Canadian programming either through CPE or exhibition.


19463   MS LAFONTAINE: I think that is ultimately one of the, you know, ramifications, the repercussions of regulatory changes.

19464   COMMISSIONER PENTEFOUNTAS: And that's the regulatory flexibility you are referring to in paragraph 26 of your intervention. So you are answering two questions with one.

19465   Sure, go ahead.

19466   MS LAFONTAINE: I will just look at paragraph 26.

--- Pause

19467   MS LAFONTAINE: Exactly, that that -- I mean, and this is the approach that the Commission has taken with many other broadcasters in the system, times are changing and everyone needs to take a little bit of water with their wine and obligations are changing.

19468   COMMISSIONER PENTEFOUNTAS: So how much water would we put in this wine?

19469   MS LAFONTAINE: In terms of what the drop would be --


19471   MS LAFONTAINE: -- to the contribution to Canadian programming?


19473   MS LAFONTAINE: Well, we don't have like that math, what the exact impact would be on the expenditures, but we can --

19474   MR. LEVIN: We don't operate a Cat A service, so we really wouldn't know how to answer that question.

19475   MS LAFONTAINE: What we could do is we can run the math for you and we could put that forward in our final submission for you.

19476   COMMISSIONER PENTEFOUNTAS: Well, what would it look like? Yes, you're asking for something without telling us what it would look like.

19477   And you talked about regulatory flexibility, you raised Vision, you raised Travel and Escape --

19478   MR. SRINIVAS: If I may answer that question?


19480   MR. SRINIVAS: So let's look at firstly the definition of a Category A service.


19482   MR. SRINIVAS: So by definition you have access rights and you also have a buy-through requirement. So if you look at the last so many years since the Cat A has been in place, this has ensured the Category A services making a lot of money on account of simply regulation.

19483   So we operate some Category B services which have linkage rules attached to the Cat A service, so the $1.50 that we recommended was based on the math of taking into account both distribution and the buy-through requirement. And let me explain that a little more clearly.

19484   So if you have a Category B service, we don't have access rights, so it is up to the discretion of the BDU to launch us, whereas a Cat A service has access rights, so which means they can service markets that we cannot service.

19485   And doing a simple math of 50:50 revenue share, so let's say we price a Cat A service at $10, okay, so typically if you go into a revenue share arrangement, I'm just using a 50:50 math, essentially the Cat A service would be getting $5.00.

19486   So when we did this calculation of the $1.50, we took into account distribution in terms of nationwide, the population, and that's how we arrived at the math.

19487   COMMISSIONER PENTEFOUNTAS: I understand that. And what kind of local expression would you get for $1.50 wholesale, if any?

19488   MS LAFONTAINE: I guess --

19489   COMMISSIONER PENTEFOUNTAS: If it's none, you can always say none.

19490   MS LAFONTAINE: Well, I guess that would be a question for the buy-through services.


19492   MS LAFONTAINE: What we are trying to do is put forward --

19493   COMMISSIONER PENTEFOUNTAS: So if you eliminate buy-through, what happens to the local expression and how is that different from the feed you will get directly from Greece, Portugal, China?

19494   MR. LEVIN: If the elimination of the buy-through happens and based on the Commission's document there is going to be a blending of As and Bs, my understanding of that, the CPE and whether there will be CPE or not, but the Canadian content requirement will be dropped down to 15 percent.

19495   This is where we operate today, we have operated for 10 years. So I mean, those services will have to make the decisions of how they are going to grow their business and what they need to do. We have done this for the last 10 years, we have made it work.

19496   COMMISSIONER PENTEFOUNTAS: At $1.50 wholesale you can do 15 percent CPE. Okay, that's fine.

19497   MR. LEVIN: We potentially could. Again, I can't answer.

19498   COMMISSIONER PENTEFOUNTAS: Simple question, simple answer. Well, you have to be able to answer it because it's your ask.

19499   MR. LEVIN: I can't answer on their behalf, that's my point.

19500   COMMISSIONER PENTEFOUNTAS: But under your new model you have to be able to answer what that would look like.

19501   Let me ask you another question. Given that the Canadian population is used to paying $15 on average for a foreign language service, what would prohibit the BDUs from occupying that space when we move the wholesale rate down to $1.50?

19502   MR. LEVIN: I'm not following that question. One more time, if you don't mind?

19503   COMMISSIONER PENTEFOUNTAS: Okay. Canadians are used to paying $15 for a foreign service.

19504   MR. LEVIN: Yes.

19505   COMMISSIONER PENTEFOUNTAS: The suggestion is that we drop that dramatically, the wholesale rate; so if they are paying $15 perhaps, for the sake of argument, the wholesale rate is $7.50.

19506   MR. LEVIN: M'hmm.

19507   COMMISSIONER PENTEFOUNAS: Right, so we are going to drop that to $1.50. What will prohibit the BDUs from occupying that space?

19508   MR. LEVIN: Well, we have the rights for the content, so we have already dropped our prices.

19509   COMMISSIONER PENTEFOUNTAS: In terms of the pricing?

19510   MR. LEVIN: Yes. In terms of the pricing we have already dropped our price for a lot of our Category B services. The challenge there is, you have to understand that, for the Category B services, we are not the buy-through, so if we are selling for $5.00 we are selling for $5.00.

19511   The Category A service really doesn't have to do anything, they can keep their price at $25, it is a buy-through, you have to buy it, period. So at the end the Category B services are the ones that are in an unfair environment.

19512   COMMISSIONER PENTEFOUNTAS: Well, at some point you can choose not to buy it. It is available, you don't have to subscribe to it.

19513   MR. LEVIN: To what, the Category A?


19515   MR. LEVIN: No, you have to. It's a buy-through for those five services.

19516   I will use a real-life example, I will use, you know, the first thing that comes to mind, our Greek language services. You cannot buy our Greek language services without acquiring a Category B service.

19517   COMMISSIONER PENTEFOUNTAS: No, no, I understand. But the Greek language services, when they price themselves outside of the market I can choose to unsubscribe from the services.

19518   MR. LEVIN: Well, then you are leaving our system altogether because now it's too expensive and that's part of our oral --


19520   MR. LEVIN: Yes.

19521   COMMISSIONER PENTEFOUNTAS: Okay. You also mention in paragraph 24 a pricing model whereby the Cat A service will not retail for more than 50 percent of the lower Cat B service.

19522   MR. LEVIN: Yes.

19523   COMMISSIONER PENTEFOUNTAS: What does that look like? Is that strictly for ethnic services or all Cat Bs?

19524   MR. LEVIN: Strictly for ethnics. Strictly for third language ethnic.

19525   The idea there was, to elaborate, so the Category B services are really the ugly duckling in this whole environment. Foreign services leave nothing in Canada, they just make their money and go.

19526   Category As benefit from the buy-through. So we try to model it in the sense so if a Category B service is sold, hypothetically at $10, the maximum of foreign service or a Category A service, if they are packaged together in the buy-through, can be sold for no more than $5, 50 percent, because they are getting it across not just one channel, but all Category B services.

19527   When it comes to packaging of foreign service with either an A or a B, the same type of model would apply, making the Canadian service always the ones on top.

19528   COMMISSIONER PENTEFOUNTAS: Right. Another little clarification, at paragraph 27 of your intervention you talk about less -- more Cat As. Is that with a buy-through or without a buy-through?

19529   MR. LEVIN: Well, it depends on what the Commission is going to do.

19530   So we believe in this. When the Category As were licensed it was based on a population statistic and we looked at the statistics recently, and if you go back to 1996, or whenever the services were licensed, a lot of these communities have grown quite a bit and some of them have become much bigger, so why would one community be discriminated over the other? That was basically that approach.

19531   COMMISSIONER PENTEFOUNTAS: Okay. In paragraph 55 you also talk about the equivalent of a group licensing plan for foreign services.

19532   Irrespective of what language those services are offered in you think it's appropriate to allow the spend to move from language to language?

19533   MS LAFONTAINE: Just to clarify?


19535   MS LAFONTAINE: What we had proposed was a CPE and that the expenditure for that CPE could be expended across the group --


19537   MS LAFONTAINE: -- and so, yes.

19538   COMMISSIONER PENTEFOUNTAS: Irrespective of the language serviced?

19539   MS LAFONTAINE: Yes.


19541   Finally, you raised some privacy issues today. Privacy, yes, you did, privacy issues in terms of regulating OTT services.

19542   Firstly, it's probably the responsibility of the rights holders to make sure that they are not being pirated; and second, I'm not sure that we even license services. It's between the rights holders that that kind of enforcement would perhaps take place. So I think there is a bit of stretching going on there in that ask.

19543   MR. LEVIN: So I will answer the first part and I will let my counsel answer the other part.

19544   We are not asking for you to regulate it. There was nowhere in our document about regulation. What we want to do is, we want to keep in check what already is out there, which is the New Media Exemption Order, it is missing a few sentences that should be, in our eyes, added in there. And I think I will let Monique articulate a little clearer what we are asking.

19545   MS LAFONTAINE: Well, I mean, essentially what we are asking for is to have the New Media Exemption Order capture the OTT operators that are broadcasting content for which they don't have the rights. And your point is that, well, that is outside the scope of the Commission.

19546   There have been instances where the Commission has addressed rights issues and this proposal mirrors the Commission's regime for admitting foreign services into the -- admitting them onto the eligibility list, because one of the requirements there is that those foreign services have the rights to the content that they broadcast and if they don't have the rights then they get de-listed.

19547   So for us it didn't seem completely outside of the realm of possibility for the Commission to get involved in this, and that is in Circular 2008-9.

19548   Certainly there are matters for -- you know, it's copyright issues to be brought before the courts, you know, and disputes between the parties and, you know, demand letters, and so on, but the issue is so big, you know, there is at least 500 services that we tracked down last week and the boxes and so on, that we would see just that this could be an avenue for this matter --

19549   COMMISSIONER PENTEFOUNTAS: I'm not sure I agree with your analogy.

19550   MR. ZIVANOVIC: Or if you took some form of --

19551   COMMISSIONER PENTEFOUNTAS: That being said, I think I will let the Chair address your ask on that.

19552   THE CHAIRPERSON: Yes. I find it both intriguing and puzzling at the same time. I take your point that we will like -- when we add services to list, that Circular does talk about do they actually own the rights to services, but there is a far cry between a Circular -- I know everybody calls it as deregulated, but an exemption order is a regulation. You would agree with that, right?

19553   MS LAFONTAINE: Yes.

19554   THE CHAIRPERSON: So if we were to add that provision it would be part of a condition on maintaining your exemption status. You would agree with that?

19555   MS LAFONTAINE: Yes.

19556   COMMISSIONER PENTEFOUNAS: If they were to breach it?

19557   MS LAFONTAINE: Yes.

19558   MR. LEVIN: Yes.

19559   THE CHAIRPERSON: Right? So it's my understanding that under the Copyright Act we now -- there was some debate many years ago, but now it is quite clear that an exclusive licensee has standing to take copyright infringement and, as I understand your position, you, as exclusive licensees of copyright material in the Canadian territory would have standing to take copyright infringement action.

19560   MR. LEVIN: We have.

19561   THE CHAIRPERSON: Right. And you may have done so in some --

19562   MR. LEVIN: Numerous times.

19563   THE CHAIRPERSON: Numerous times, okay. And by adding it into an exemption order, the next step is, the moment somebody appears to not have those rights, I could just see somebody showing up on our doorstep and saying, "Please remove the benefit they have from that exemption order", and that inevitably brings the Commission to being an arbiter of a copyright issue, does it not?

19564   MR. LEVIN: You are correct, and we don't want to add more work for the Commission, but what we are saying is, we need some more tools to help this battle because this is a big battle.

19565   And we are not saying everybody should flood to the Commission's door saying this is illegal, this is illegal. Any time you file a lawsuit against anybody you have to have proof that they have done something. We would be delivering the same proof to the Commissioner, whichever body would be looking after it.

19566   The challenge today with piracy is really the word "unregulated". We are looking for a deterrent. You know, it's like the speed sign on the road, you may speed, you may not speed, and that's a deterrent, and we are looking for that deterrent.

19567   If there is a regulation in place by the government, if we can stop one or two of these people entering this country, it helps.

19568   THE CHAIRPERSON: I'm not unsympathetic --

19569   MR. LEVIN: I understand.

19570   THE CHAIRPERSON: -- I have been involved in copyright for years and copyright reform in particular, but here the issue is if it becomes an issue before us, not only do we have the evidentiary issue of whether there was a copyright infringement or not, which may be courts are better equipped to deal with, arguably, but forget that for a second, think about our enforcement powers.

19571   If somebody resists, you have to bring them to a mandatory order hearing. I mean there is still evidence required there. You then have to file it before the Federal Court and get an order of the court, and only then would you have to bring evidence that the person has breached the second order, the compliance order, the mandatory order before then.

19572   So at first blush I'm not seeing how that is more efficient than you going directly to the courts as an exclusive rights holder who has exclusive rights, you are already in court for step one.

19573   MR. LEVIN: Mr. Chair, if we had all day I would explain to you the process of going to court with these illegal guys and the end result --

19574   THE CHAIRPERSON: Oh, I know it's not easy.

19575   MR. LEVIN: Yes. We are looking for tools, suggestions. You are the regulatory body that regulates our broadcast industry, these are broadcasters, they are undertaking a broadcasting.

19576   THE CHAIRPERSON: Right.

19577   MR. LEVIN: You have just seen a video of an operator that offers far better than we have. We would love to have that stuff in our broadcasting system. The challenge is, you can't because there are rights issues with the content --

19578   THE CHAIRPERSON: Right.

19579   MR. LEVIN: -- and there are so many of them that it's the Whack-A-Mole game. I mean if we are going to talk games, we are asking for the hammer.

19580   THE CHAIRPERSON: I'm not unsympathetic. Clearly, I mean we saw in the video that you have an operator, they are bragging about having illegal content, right, and that flies in the face of the rule of law in this country. I get that.

19581   MR. LEVIN: It does.

19582   THE CHAIRPERSON: But what I'm saying to you, our current tool kit -- and I mentioned yesterday, Minister Moore announced that there may be one day some amendments to the Telecom Act for administrative monetary penalties. I have heard no one suggest in Parliament that this would happen in broadcasting.

19583   So our enforcement rights and actions were basically designed in 1968.

19584   MR. LEVIN: Yes.

19585   MS LAFONTAINE: So perhaps that needs to be expanded. I mean look at the anti-spam regime where there are all kinds of tools in that toolbox to stop people from sending e-mails that they shouldn't be sending, either within Canada or from outside of Canada into Canada.

19586   In this OTT issue, I mean we are here to talk about TV and what the future holds, and what we saw in that video really -- I mean it's not just what the future holds, it's here, it's just a matter of how much water is going to come through that dyke and how fast. It's here, so it's just one more thing that we --

19587   THE CHAIRPERSON: My question is more -- I'm not sure it's a question, my point is, in the current construct theory is fine, but I often think about how do you operationalize it, right, and that is where I am stumbling with your proposal.

19588   MR. LEVIN: So maybe this is something that needs to be taken back into our conference rooms, your conference rooms and discussed, because if unchecked, our broadcasting system will start to fail.

19589   In the multicultural space it is already failing. Everybody that appeared before you, we are all competitors and we all have the same issue, particularly the multicultural space. There is not one of us that was here that is dealing in a third language space that has not been affected by this and it will continue to grow and grow and grow.

19590   I keep on pointing to the binder because we could have actually bought you seven binders like that. Sasha and I spent some time actually -- there were 8,000 reports basically, that's what I'm trying to say, we took 500 because it is a fairly heavy thing.

19591   These are all not so much worldwide, these are specifically soliciting subscribers out of Canada.

19592   Now, here's a scenario. You have an ABC language subscriber that is subscribing currently to our broadcasting system and then there is an offering, whether it is 100 channels or 500 channels, regardless whether it's $4.00 or $29, it is still cheaper than our broadcasting system. And what happens is that consumer is sitting there saying, well, you know, I had Rogers because I was getting my multicultural, really, do I really need to have Rogers altogether, and they just leave the system.

19593   So those are cord cutters to the extreme, because you will never get them back as you can't -- the cable operators don't have the tools to go and get them. These are multicultural subscribers. That's a whole different element. And that's what I'm trying to say. I understand --

19594   THE CHAIRPERSON: I appreciate the point. I mean when I was Assistant Deputy Minister at Canadian Heritage back then the big issue, and it continues, was black-market dishes.

19595   MR. LEVIN: Good point.

19596   THE CHAIRPERSON: And at the time the estimate provided to me by one company was that it was over $1 billion that was being lost from the broadcasting system.

19597   MR. LEVIN: I was very much involved in that.

19598   THE CHAIRPERSON: Right.

19599   MR. LEVIN: I know the --

19600   THE CHAIRPERSON: The problem is, nobody -- you know, we are not the legislator.

19601   MR. LEVIN: But still there were rules that were put in place. There were boxes that were being blocked at the borders, there were tools put in place, and that's what we are looking for.

19602   THE CHAIRPERSON: Right.

19603   MR. LEVIN: Yes.

19604   THE CHAIRPERSON: I understand your position. Thank you.

19605   MR. LEVIN: Thank you.

19606   THE CHAIRPERSON: Thank you. I'm wondering if -- perhaps what we will do is hear the next presenter, but then take a break for lunch before the questioning, okay.

19607   Thank you.

19608   MR. LEVIN: Thank you.

19609   MS LAFONTAINE: Thank you.

19610   THE SECRETARY: I would now ask Fairchild Television to come to the presentation table.

--- Pause

19611   THE CHAIRPERSON: Welcome. As I said, I think what we will do is hear your presentation and save the questions for after the lunch break, if that's okay. Is that okay with you?

19612   MR. CHAN: Yes, okay.

19613   THE CHAIRPERSON: Okay, thank you.

19614   Go ahead.


19615   MR. CHAN: Good morning, Mr. Chairman, Mr. Vice-Chair, Commissioners and CRTC staff. I am the President of Fairchild Television Ltd. Appearing with me are, to my right, Connie Sephton, Fairchild's Director of Corporate Affairs and, to my left, Andrée Wylie, Fairchild's Broadcast Consultant.

19616   We thank you for the opportunity to appear today to expand on our written submission and to answer your questions, should you have any.

19617   Fairchild is the licensee of two national ethnic Category A services, Fairchild Television or FTV in Cantonese, and Talentvision or TTV in Mandarin.

19618   FTV and TTV are general interest services. They are distributed in anglophone markets by BDUs. FTV and TTV are discretionary to subscribers but have a mandated distribution status under section 18 of the BDU Regulations.

19619   FTV and TTV have always been sold to BDUs by Fairchild at a stand-alone per subscriber wholesale price, with a few grandfathered exceptions. Packaging and assembly decisions are made by the BDUs and do not affect the wholesale price per subscriber. In other words, under Fairchild's affiliation agreements, BDUs are free to offer FTV and TTV on a pick-and-pay basis.

19620   However, BDUs increasingly distribute Fairchild's service as part of a package of services, as more Chinese-language services have been licensed and authorized for distribution in Canada by the Commission since 2004.

19621   In its written submission and in its presentation today, Fairchild opposes the Commission proposal to eliminate both the requirement for BDUs to distribute ethnic Category A services and the buy-through requirement. The hearing is complex. Fairchild's request is not.

19622   Fairchild leaves it to the parties and to the Commission to discuss and to determine the most appropriate course for many issues raised in this process, except for Fairchild's agreement that a skinnier basic service would facilitate access to third-language services if it were to result in a decrease in the basic price.

19623   In Fairchild's respectful view, no proposal put forward in this process, if implemented, would preclude the maintenance in the BDU Regulations of mandated distribution for FTV and TTV or the buy-through requirement.

19624   Fairchild notes at the outset that of the three larger BDUs distributing FTV and TTV, only Rogers opposes continued mandated distribution and the buy-through requirement for ethnic Category A services. Bell and Shaw, expressly recognize their continued appropriateness. Corus considers them essential.

19625   FTV and TTV, as general interest services with a high level of Canadian news and information programming, are in fact more similar to over-the-air television services than to specialty services for Chinese-language viewers. Our goal today is to convince the Commission that while FTV and TTV are discretionary and do not have mandated distribution on basic or 9(1)(h) status, they continue to deserve mandated availability for purchase by subscribers and the buy-through mechanism.

19626   An important proposal discussed at this hearing is the elimination of genre exclusivity for Category A services. FTV and TTV lost their exclusivity in 2004 when the Commission opened the third-language service market to foreign and Canadian competition. For a full 10 years, a plethora of Chinese-language services, both foreign and Canadian, both general interest and niche, have competed with FTV and TTV for viewers and advertising. There are currently some two dozen Cantonese and Mandarin general interest foreign and Canadian services carried by the major BDUs.

19627   MS SEPHTON: The Canadian exhibition and expenditures requirements of FTV and TTV are substantial, more substantial than some proposals made by vertically integrated OTA television licensees at this hearing:

19628   - for FTV, Canadian programs not less than 40 percent of the time between 6:00 p.m. and 11:00 p.m. and 30 percent of each broadcast day; CPE of 29 percent of the previous year's gross revenues.

19629   - for TTV, Canadian programs not less than 33 percent of the time between 7:30 p.m. and 10:30 p.m. and 31.5 percent of the broadcast day; CPE of 29 percent of the previous year's gross revenues.

19630   These requirements have long been in place and were continued by the Commission, with Fairchild's full agreement, until 2020.

19631   By contrast, foreign services in Cantonese or Mandarin provide no Canadian content. Licensed or exempt Category B services are required to provide a minimum of 15 percent of the evening broadcast period, without restriction as to the hour of scheduling or the number of repeats. They have no CPE requirements.

19632   FTV currently devotes 33 percent of its required Canadian content hours weekly to news; TTV, 38 percent. FTV devotes an additional 24 percent to current affairs and information programming, for a total of 58 percent of its Canadian hours; TTV, an additional 8.3 percent, for a total of 46.3 percent of its Canadian hours.

19633   The provision of this type of programming by an independent broadcaster to the limited Chinese-language market is demanding. Moreover, much of this programming does not lend itself to repeats. Whereas Fairchild can purchase the rights to popular foreign drama for $400 per hour, the production of one hour of Canadian news, information or analysis programming can cost $4,000.

19634   Stable distribution and a degree of protection from the direct competition allowed in the market a decade ago continue to be necessary to sustain this performance. This was acknowledged by the Commission as recently as July 2011. In amending its BDU Regulations, it stated:

"The Commission considers that the buy-through requirement remains an important measure aimed at supporting ethnic Category A services in satisfying their regulatory obligations."

19635   Fairchild has achieved modest commercial success for some 30 years in providing quality, meaningful and integrative Canadian programming to Chinese-Canadians. How would it meet the requirements of the Broadcasting Act to reduce the amount of Canadian content provided by FTV and TTV by harmonizing the Canadian content of Category A and Category B third-language services, as suggested by the Commission at item 19 of its Working Document?

19636   In its written submission, at paragraph 201, Rogers supports the elimination of the buy-through requirement by illustrating that to subscribe to a foreign or a 15-percent Canadian content general interest third-language Category B service in Greek or Hindi, the relevant ethnic Category A service must be purchased, making the whole package unaffordable.

19637   What Rogers fails to point out is that included in the total price Rogers calculated is a monthly price of $39.48 for a basic service which contains a number of services that may be of little interest to a third-language subscriber. Rogers' basic service includes Sportsnet, usually on several channels, a service that does not even have mandated distribution under the BDU Regulations as a Category C service. Similarly, Bell includes TSN. Not surprisingly, Shaw includes both Sportsnet and TSN in its basic service, as well as its other related services, YTV, HGTV, History and Food. Moreover, we note that Rogers could have used Fairchild's services as examples: FTV is in a Rogers package priced $15 at retail, and TTV at $17, rather than $29.90, as claimed by Rogers in its written submission at paragraph 201.

19638   BDUs generally argue that a mandated skinny basic would not reduce substantially the cost of basic service. Would the BDUs have us believe that their own or related services are provided to subscribers without charge?

19639   In its written submission, Rogers suggests, as a solution to this cost problem for third-language subscribers, a Rogers offering of a small basic plus Mandarin services. We welcome such a solution as long as TTV is included in that package, in accordance with the BDU Regulations.

19640   We have noted that Rogers and other Canadians remarked that third-language services are only available through large expensive packages containing services that subscribers do not necessarily want. It is the BDUs who aggregate services into packages, including the packages in which FTV and TTV are provided. For example, as of May 2014, TTV was only provided by Shaw in a package of services with a price of $39.90.

19641   MR. CHAN: In conclusion, Fairchild's services meet not only the policy objectives of the Broadcasting Act with regard to the reflection of the multicultural and multiracial nature of Canada and the provision of information and analysis concerning Canada and other countries from a Canadian point of view but also the Commission's goal of the provision of compelling and diverse Canadian programming.

19642   Moreover, we emphasize that FTV and TTV, as legacy services with a high level of Canadian content of a general nature, can easily be considered akin to over-the-air television services for Canadians of Chinese origin, services deserving of special distribution consideration.

19643   As illustrated in its written submission, Fairchild will not be able to maintain the level of Canadian content exhibition and CPE requirements that FTV and TTV now provide if the decision whether or not to offer them, rather than services from a large available stable of directly competitive services, is left to vertically integrated BDUs.

19644   For all these reasons, Fairchild opposes the elimination of mandated distribution and the buy-through requirement for FTV and TTV. They remain appropriate, in the words of the Commission in 2004 and in paragraph 22 of the Notice of Hearing:

" protect services from some forms of direct competition where they have undertaken higher obligations with respect to the production and presentation of Canadian programming that could not be met without that protection."

19645   We thank you for your attention and will respond to any questions you may have to the best of our ability.

19646   THE CHAIRPERSON: Thank you very much and I apologize for having to break the question period but some of us have to turn our mind to another issue at the lunch break and there are people waiting for us, unrelated to this hearing. So we appreciate it.

19647   MR. CHAN: That is understood. Thank you.

19648   THE CHAIRPERSON: So why don't we take a break till 1:30, that's about an hour, and we'll come back with questions at that point. Thank you very much.

--- Upon recessing at 1234

--- Upon resuming at 1333

19649   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

19650   Donc, on va résumer, et je vais passer la parole à monsieur Dupras, qui...

19651   Sorry. I'm going to pass the floor to Commissioner Dupras, who'll start off the questioning.

19652   COMMISSIONER DUPRAS: Thank you.

19653   Good afternoon.

19654   I would start by asking you general questions.

19655   Can you tell us how popular are both your services and the market where you are buy-through and what is the viewing share of each service amongst the total viewing for Chinese services?

19656   MS SEPHTON: Commissioner, to answer your question, I think I can use an analogy.

19657   Chinese viewers view or use our service the way that you would put the basic service, or the skinny basic, if you want to call it, on air. So, they use our service like they use the basic service in Chinese.

19658   And if I could give you an example of our programming, what we do, given the --

19659   COMMISSIONER DUPRAS: I'm talking about the popularity of your television services.

19660   MS SEPHTON: You want numbers for our subscribers?

19661   COMMISSIONER DUPRAS: Well, of viewing shares --

19662   MR. CHAN: First of all --

19663   COMMISSIONER DUPRAS: Like when you sell advertising, you have a market share amongst the community --

19664   MR. CHAN: Yeah.

19665   COMMISSIONER DUPRAS: -- what is that for --

19666   MR. CHAN: To answer your question, first of all, the ethnic language services at the moment is not part of the BBM. So, we do not have any official audience measurement data to support our -- when setting our advertising.

19667   But, then, we do our own market survey, you know, sort of our own, as indicated, survey to do -- how many viewers are watching us.

19668   We did it once every four or five years.

19669   If you're looking at quantifying numbers, at the moment, like, Fairchild TV alone, we have stand-alone subscribers of 93,000, close to 100,000, within -- so, roughly, we are talking about 700,000 households, Chinese-population households, within Canada and we have subscriber numbers of around close to 100,000. So, the percentage of our penetration is close to about 30 to 34%.

19670   COMMISSIONER DUPRAS: Okay. This is in the market where buy-through is required?

19671   MR. CHAN: Yes.

19672   COMMISSIONER DUPRAS: So, it's compulsory, people have to buy, so you can't say that this is necessarily a sign of the popularity of your service.

19673   MR. CHAN: Yeah, because we are -- on this market, we are on a stand-alone basis. People are strictly just -- we are just talking about people who bought us alone. It's about close to 100,000 for Fairchild and about 80,000 buying our Mandarin service: TTV.

19674   MS SEPHTON: If I may add, Commissioner, the buy-through does not mean that every Chinese household will have to buy us. So, if they need to buy foreign services or a Canadian category B general interest service, they will have to buy through the language that we provide; for example, Cantonese for FTV. If they want to watch a foreign Cantonese channel, they will have to buy through Fairchild.

19675   So, the buy-through does not apply to every --

19676   COMMISSIONER DUPRAS: Fine. I'm aware of these things. I was just trying to get a sense of the popularity of your service amongst the community.

19677   And what you're saying is that it's difficult to say because there's no BBM and --

19678   MS SEPHTON: Approximate penetration, if you want to use that word, would be about 30%, in Canada, among Chinese, all Chinese Canadians.


19680   MS WYLIE: If I may add, this is only for whoever chooses to buy a general interest service. So, there are Chinese households who can buy a package of foreign services that are niche and then they wouldn't have to buy -- the buy-through would not apply, in that case.

19681   COMMISSIONER DUPRAS: Okay. So, the buy-through is linked to the general interest nature of the service.

19682   If you want to buy another general nature, you have to buy through, first?

19683   MS WYLIE: Exactly.

19684   COMMISSIONER DUPRAS: Okay. So, what would you say distinguishes your services from others, in your segment of the market?

19685   MS SEPHTON: From other Chinese --

19686   COMMISSIONER DUPRAS: Yes. What programming, what third-language programming, helps distinguish you from non-Canadian services?

19687   MS SEPHTON: Non-Canadian services.

19688   I think I may be able to give you a few examples of what we do in our programming.

19689   We have a program named "Timeline Magazine". This program has been produced for about 30 years, and it's still continuing.

19690   If I want to give you an example, it would be similar to, I would say, "60 Minutes", the American "60 Minutes".

19691   If you want me to give you a Canadian example, that would be the previous CTV "W5", if you are in the industry for that long.

19692   And for that program, what we do is that we did a long series of the history of Chinese Canadians, from when Chinese moved to Canada in the very, very -- from way back then and how they live in here; the head tax issue; and their recent activities. It's a long documentary-type of series. And that series was very well-received -- actually, it was even recommended by a Senator to be put in the U of T library for national reference.

19693   Also, we were invited by a Canadian force to go with them to Bosnia to do a feature story on their services, what they do -- and that was very well-received.

19694   We were doing a feature, invited by NATO, to do a feature on NATO as an organization and services.

19695   COMMISSIONER DUPRAS: So, would you say that the Canadian programming that you produce that --

19696   MS SEPHTON: That appeals to our viewers very much.

19697   COMMISSIONER DUPRAS: -- distinguish you?

19698   MS SEPHTON: They distinguish us from a non-Canadian, absolutely, because we have 40% Canadian content produced during primetime airing, or broadcasting --

19699   COMMISSIONER DUPRAS: But it's difficult to know if people would prefer your service than foreign services because you're a buy-through. If you wouldn't be a buy-through and you'd be both on equal footing, you would know if it's the Canadian programming that makes the difference.

19700   MS SEPHTON: I would say that without the mandated distribution and without the buy-through, our service won't be what we are or who are anymore.

19701   The reason is that without the buy-through, without the mandated distribution, we will lose the leverage to maintain our current wholesale fee, subscription fee, wholesale fee, and the BDUs will have every incentive to substitute the distribution of our service with foreign, or with any cheap, I wouldn't say cheap, less expensive category B Chinese service --

19702   COMMISSIONER DUPRAS: And why would they --

19703   MS SEPHTON: -- who may not even --

19704   COMMISSIONER DUPRAS: Why would they do that?

19705   MS SEPHTON: Because --

19706   COMMISSIONER DUPRAS: Let's say your service is a popular service. You've been in the market for 30 years. You've built a brand. People know you. I mean why wouldn't they offer your service? Why would they try to destroy your service the way you're talking about?

19707   MS SEPHTON: I think, Commissioner, you -- we already get the sense from one of the large BDUs who are against a buy-through, right, they have every incentive to substitute something -- substitute the distribution of an expensive Canadian content service with something else that does not have the content.

19708   So, after all, without the buy-through, without the distribution, mandated distribution, it is a Canadian content that's being compromised, in our perspective.

19709   COMMISSIONER DUPRAS: But don't you think that if you have a strong offering of programming that you appeal to the community that you can negotiate a reasonable wholesale rate with a BDU? Or this is absolutely impossible; it's only a question of numbers?

19710   MS SEPHTON: If you're talking about negotiation, that can be a long story anyway, but we're not.

19711   We're very confident, in terms of our content. We know that Canadians, Chinese Canadians, do want our services.

19712   But when it gets to the access, the mandated distribution, and the buy-through rules, that is the BDU side. And if they are not required to distribute us, they're not required to distribute Canadian content, at that price, they will choose not to. They have already shown to you that incentive, actually.

19713   COMMISSIONER DUPRAS: Okay. So, the public demand is not something that is of interest to a BDU and the choosing of what channel it distributes?

19714   MS SEPHTON: BDU have their own interests to look after. I'm not saying that they don't look after the public's interest, but I think it is the Commission's responsibility to ensure that good Canadian content be able to -- be available to Chinese Canadians.


19716   MS SEPHTON: And, therefore, the requirement -- the regulations, proper regulations, have to be there, in order to enforce that.

19717   COMMISSIONER DUPRAS: Let's say that the protections that you benefit from were taken away.

19718   Don't you believe that the brand and the programming style you have, and that people know about, would be an advantage for you in continuing to have a good penetration in the market?

19719   MS SEPHTON: No. As I said, I believe that without the buy-through, without the mandated distribution, the BDUs will have every incentive to substitute us -- and that substitution, you know, it could be any exempt service that might not even have 15% Canadian content. And, eventually, it will probably force us to either, you know, lower our wholesale fee and, by lowering our wholesale fee, that is lowering our ability or preventing us from being able to provide the amount of Canadian content that we are currently providing and we are proud of and Chinese Canadians value them.

19720   So, we won't be able to --

19721   COMMISSIONER DUPRAS: I'm sorry. You're saying that your wholesale fee is directly linked with your Canadian content obligations or your Canadian content programming levels that you choose to produce?

19722   I mean Canadian programming is an advantage. Let's say you have a lower Can-con obligation. You can still produce more Canadian content than your minimum Can-con obligation and still try to appeal to your market with the distinctive programming that you say helps you.

19723   MS SEPHTON: I believe that the wholesale fees that we negotiate to have, currently, is our bread and butter. That really is the essential element to sustain us to be able to do the level of Canadian content that we're doing.

19724   COMMISSIONER DUPRAS: I understand.

19725   But what I'm trying to understand is, if you have a good programming schedule that includes Canadian content over and above, even, what your obligations are, and that's your formula and that's the type of programming service you have, BDUs are not going to recognize that, that that's the type of service you would like to do, and it costs this and, therefore, your wholesale rate could be higher and the reason of the popularity in the programming you're proposing?

19726   Or is it strictly tied to your Can-con obligation and they're not going to give you more than what you're required to produce?

19727   MS SEPHTON: I don't think BDUs are very mindful of how much Canadian content we're producing.

19728   I think the most element that they are interested in, and which has been the case for the past decade or so, is, the price that we -- the wholesale price that we allow them to -- or we negotiate with them.

19729   Every single time, you know, they would not say, How much Canadian content are your producing? Or, you know, Are you producing what your viewers want? They would say that, I want your price to be lowered.

19730   COMMISSIONER DUPRAS: So it is not -- you don't say, Well, our service is going to cost X with the formula we intend to have our -- the way we intend to have our service? No, it's you take whatever wholesale rate they give you and from there you draw a budget of what you can do with that type of money, and that's it; that's it?

19731   MR. CHAN: Yes, that is the way we are doing it now. The BDUs -- it has been our experience in in dealing with them, they don't really care what you do or how many CanCon's you do. They just look at dollars and cents.

19732   COMMISSIONER DUPRAS: Talking about that, we have examined the wholesale rates that you are currently receiving, and the retail price charged by a certain distributor. I must admit that the mark up seems alarmingly high.

19733   Why is there such an important difference between the wholesale rate and the retail rate charged for the for the Fairchild and Talentvision services. Is that something you can talk to us about a bit more?

19734   MR. CHAN: Your mark up rate -- by mark up rate you're referring to our mark up or to the BDU?

19735   COMMISSIONER DUPRAS: The BDU mark up. The retail price versus what you're getting.

19736   MR. CHAN: Okay. I am sure you know -- maybe you know our wholesale price.

19737   COMMISSIONER DUPRAS: We know your wholesale, right.

19738   MR. CHAN: Okay.

19739   COMMISSIONER DUPRAS: Or, your wholesale rate, I mean.

19740   MR. CHAN: Yeah.

19741   COMMISSIONER DUPRAS: And, we have noticed that there is a very big margin with the retail rate, so we'd like to understand that.

19742   MR. CHAN: Yeah, because the retail rate is always at the discretion of the BDUs.

19743   COMMISSIONER DUPRAS: But have they --- have they ever explained to you why they need to charge that much more in the case of services like yours?

19744   MS SEPHTON: We do not have -- I would say that we do not have any influence or any say, or they would not even come to ask us what you would like to have your retail price to be.

19745   BDUs determine the retail price, and it is their decision how much they want to mark up, and it is, I believe they probably will have a better idea, you know, how much Canadian-Chinese will -- you know, they can afford at that mark up. So, we have --

19746   COMMISSIONER DUPRAS: But they didn't say to you, for instance, well, it's an a la carte service, it's more costly to offer to --

19747   MS SEPHTON: No, they don't need to explain to us.

19748   COMMISSIONER DUPRAS: You don't know?

19749   MS SEPHTON: No.

19750   COMMISSIONER DUPRAS: Okay. Because it is a buy-through. I mean they can charge the price they want and it's the community that has got to pay for this in the end.

19751   MS SEPHTON: I believe that might be a question that you may want to ask the BDUs.

19752   COMMISSIONER DUPRAS: I was wondering if you were ever explained why --

19753   MS SEPHTON: No.

19754   COMMISSIONER DUPRAS: -- the mark up was so high. Okay.

19755   Well, again, if we were to let go of the protection and we'd have only one category of third-language services and we'd set the CanCon requirement to be the same for everyone, would that be a more fair environment for you in which to operate?

19756   MS SEPHTON: Commissioner, I don't believe that it is in the public interest to reduce Canadian content being available to Chinese Canadians. And, I would think -- I would imagine that you would encourage everyone to do more Canadian content, rather than lowering.

19757   And, we're not here asking you to give us a break on you know the level of Canadian content. We're proud of our Canadian content. We're able to do it. Viewers are enjoying it. So, I just don't believe that it is in the best interests of the public to reduce Canadian content.

19758   COMMISSIONER DUPRAS: But don't you find it is a formula, what we've got right now, that is expensive for the third-language community to have a buy-through of service of --

19759   MS SEPHTON: If you --

19760   COMMISSIONER DUPRAS: -- $15 or the like before they can get any other service in their language?

19761   MR. CHAN: With our knowledge, Mr. Commissioner -- with our knowledge of our Chinese-speaking subscribers, yes, you know, almost on a daily basis we receive emails and phone calls coming in, and they express their concerns or praises or complaints. And, every often we don't see actually the complaint about the buy-through causing the package to be so expensive. The most of the complaints are actually coming from the price they pay for the basic package.

19762   Our audience, most of them, are in the age group -- our survey shows that our audience are mostly in the age group of thirty-five and above. And very often they subscribe to service for their parents and their grandparents. And those -- this group of the market, most of them have some -- have language limitations. They don't speak fluent English, so a lot of the time they're only watching Chinese TV.

19763   So, at the end of it, when they receive the bill, so even though with our buy-through at the moment, say like Fairchild plus one Cat B, is usually in the range of about $15 to $20.

19764   But the cable bill they receive is around $70 to $80.


19766   MR. CHAN: What they are complaining about is why we have to pay for twenty for the two Chinese services, because they spend most of the time watching our channels. And, practically, they spend very little time watching those basic channels.

19767   They are complaining about the basic package being too expensive, rather than the buy-through.

19768   They finally justify to spend the $20 on Fairchild plus a Cat B, buy-through.


19770   MS SEPHTON: Commissioner, if I may?

19771   COMMISSIONER DUPRAS: I think we have already had enough answers on the record on this. Unless there's something specific?

19772   MS SEPHTON: No, I just want to add one comment. You know, in terms of harmonizing Category A and Category B services, I think that will eventually -- really, eventually, it is the Canadian content that's being compromised.

19773   If you want to harmonize it, you are -- so you want us to produce less? You want us to become another Category B service.

19774   COMMISSIONER DUPRAS: Well, if you produce less. But there are more channels that produce -- oh, I mean, overall there might be, you know -- it's another -- it's another way of getting Canadian content. It's spread amongst more channels but --

19775   MS SEPHTON: I don't believe that with the amount and the level of Canadian content that we're at, Prime Time 40%, compared with, you know, an exempt Cat B who is, I mean, not even doing 15. I think there's no comparison. There's big differences reflected from the programming, yeah.

19776   COMMISSIONER DUPRAS: Well, we are exploring avenues to see how it can be, you know, more flexible, more affordable to Canadians.

19777   And the distribution rule that is proposed, 1:1, wouldn't that be a good measure to continue to provide you with access?

19778   MS SEPHTON: You mean one Canadian and then one foreign?

19779   COMMISSIONER DUPRAS: That is it, one Canadian for one non-Canadian.

19780   MS SEPHTON: I think that is what the current Category B servers are enjoying. If you want to call that a supporting measure, or 1:3. I do think that with the amount of programming, the Canadian content that we provide, we deserve more than just a 1:1 role.

19781   COMMISSIONER DUPRAS: Okay. What would it be? What other linkage rule would you propose?

19782   MS SEPHTON: We are here to ask the Commission to maintain the current mandate of distributions, that is, as well as the buy-through requirement. We are not asking anything more.

19783   COMMISSIONER DUPRAS: I understand. Thank you very much.

19784   THE CHAIRPERSON: Mr. Vice-Chair, please.

19785   COMMISSIONER PENTEFOUNTAS: Good afternoon. Would you agree that Canadian content is a competitive advantage for Fairchild?

19786   MS SEPHTON: Yes.

19787   COMMISSIONER PENTEFOUNTAS: Would you agree that a 30-year presence in the market is a competitive advantage for Fairchild?

19788   MS SEPHTON: As opposed to foreign?

19789   COMMISSIONER PENTEFOUNTAS: As opposed to walking in today?

19790   MS SEPHTON: To an extent, yes.

19791   COMMISSIONER PENTEFOUNTAS: It is a considerable head start.

19792   MS SEPHTON: To an extent, yes. That's why, Commissioner, we're not worrying about what we do and what another Category B service do from the perspective of the viewers.

19793   We believe that the mandated distribution and the buy-through are necessarily required in order to not let the decision to be made solely by the BDUs. So it's on the BDUs side --


19795   MS SEPHTON: -- that we're worrying about.

19796   COMMISSIONER PENTEFOUNTAS: Okay. But it's not new Cat B competition that is worrisome to Fairchild?

19797   MS SEPHTON: Not so much, no.

19798   COMMISSIONER PENTEFOUNTAS: As my colleague mentioned, given your brand.

19799   Setting aside the BDUs, and given that Canadian content is a differentiator and a competitive advantage for Fairchild, why would there be a reduction in CPE spent?

19800   MR. CHAN: I'm sorry, I --

19801   COMMISSIONER PENTEFOUNTAS: If we were to get rid of the buy-through, and allow Cat B's to more harmoniously compete in the market?

19802   MS WYLIE: I'm sorry --

19803   Why wouldn't you continue to do it since it's a competitive advantage?

19804   MS WYLIE: Perhaps I may add, if it were such a competitive advantage, you wouldn't have as low Canadian content as is being offered by them.

19805   COMMISSIONER PENTEFOUNTAS: So it is not a competitive advantage?

19806   MS WYLIE: It is a competitive advantage combined with exposure of the service, making sure that that is what is distributed by the -- by the BDU.

19807   COMMISSIONER PENTEFOUNTAS: Fairchild, after thirty years in the market needs more exposure?

19808   MS WYLIE: Exposure -- Carriage. Carriage at a decent price. And when you negotiate carriage it's -- it's a leverage to be mandated -- have mandated distribution.

19809   COMMISSIONER PENTEFOUNTAS: It certainly is.

19810   MS WYLIE: Because the cable operator can't say, I don't have to distribute you, so unless you give me $1.50 -- such as was suggested earlier today -- I won't distribute you. Or, I'll make a package of my own.

19811   You have a BDU already in front of you who has suggested that, and the package of his own is not for sure going to include Fairchild services.

19812   COMMISSIONER PENTEFOUNTAS: I understand all that.

19813   MS WYLIE: So, to just say you are doing well, you're very popular for 30 years, it's only the last ten years that there has been competition and it's only growing.


19815   MS WYLIE: So, it's very difficult to continue distributing what you distributed ten years ago before 2004 when the rules were changed, and -- and face the competition without some -- some support to allow a service to offer more than the mainstream programming services over the air are prepared to ; offer. It's over time; it's not going to happen tomorrow, but the relationship with the BDUs is not to be such as to allow you to negotiate a fee that makes it possible to continue your obligations.

19816   COMMISSIONER PENTEFOUNTAS: I understand all of that, yeah.

19817   But on the competition front I mean I think some unreasonable observers may think that it is a highly monopolistic environment to try to enter a market with your service once the subscriber is already at a $100 price point. It's a pretty expensive price point for a Fairchild competitor to enter the market, would you not agree?

19818   MS WYLIE: Well, a Fairchild competitor that would have the Cat A support, and would have to beat 40%, let's say, Canadian content.

19819   You know --

19820   COMMISSIONER PENTEFOUNTAS: Well, a Cat B service.

19821   MS WYLIE: Yes, but even if --

19822   COMMISSIONER PENTEFOUNTAS: For a Cat B service to enter.

19823   MS WYLIE: -- as one of the parties appearing before you has suggested, you should open Cat A's not only for mainstream programming, but for third language services.

19824   COMMISSIONER PENTEFOUNTAS: Third language services.

19825   MS WYLIE: Third language services. Well, if they are prepared to meet 40% Canadian content, we're all for that, too. I mean, they can see what they can do. But, Cat B's, as you know, don't do that.

19826   Now, there is some other matter that is difficult, is, at the moment the Cat A's with the support, is defined by a reference to a legacy whenever -- to the date when they were licensed. And there's a great discrepancy between 40% in prime time and others.

19827   There is nothing to prevent the Commission from re-defining Cat A's by some other reference point -- it could be a Canadian content reference point -- and let people meet that. And then they will have the support, as well.

19828   You know, support is -- you don't like the word protection. Support is offered. That's what regulation is about, over-the-air services, or on basic. Some 9(1)(h) services in the public interest are on basic. That's -- that's support.

19829   Much Music has enjoyed genre exclusivity ten years while Fairchild lost its, so there was a quid pro quo to continue the obligations. That quid pro quo, we believe, or Fairchild believes, should be -- should be continued. Otherwise, it is going to be a slide towards lower Canadian content. That's what harmonizing will be. And --

19830   COMMISSIONER PENTEFOUNTAS: Well, that goes to my first question at the beginning of this whole -- and the answer is quite long, but CanCon should be, from what my understanding is from the Interveners before me, is a competitive advantage, a differentiator, and not a regulatory burden. They didn't make it sound like a ball and chain.

19831   So, I'm not going to re-ask the question, but I would think that that Canadian content coupled with a brand and a 30 year head start should create, at the very least, a very -- a positive environment to add competition to the system. But, we'll set that aside for a second, and let's --

19832   MS WYLIE: Let me add one more sentence. You can transfer this position to the over-the-air services.

19833   COMMISSIONER PENTEFOUNTAS: Why don't we keep the apples with the apples, because I notice you are doing a lot of mixing and matching. And I'll tell you one of those mixings and matchings that I saw in the document today: When you make the link between a legacy service and an OTA service. I don't understand how we justify that link. And, maybe you can expand on that?

19834   MS WYLIE: Well, the link is only made to --

19835   COMMISSIONER PENTEFOUNTAS: Unless I misunderstood paragraph 23 of your document today?

19836   MS WYLIE: No, no. But the link is only made to say that the service is more similar considering how high the Canadian content is for a Chinese-language person to a Canadian content provider such as an over-the-air service. But, it is only, Mr. Vice-Chair -- I'm trying to be quick -- is, it is only to say the over-the-air television service has a lot of support. It's available in every house and heaven knows, it may be available at a price over time if that's -- if you agreed.

19837   And we're saying we're not -- Fairchild is not 9(1)(h). Fairchild is not on basic.

19838   Maybe considering the level of Canadian content it offers, it deserves a status of mandated distribution and of a buy-through. It's still the subscriber who will choose whether to buy it or not.

19839   So, the link is simply to say you know it's not asking a lot of support, considering the level of diverse, compelling Canadian programming and satisfying the requirements of the Broadcasting Act. That's why I say --

19840   COMMISSIONER PENTEFOUNTAS: What other legacy services should be considered as OTAs, Madam Wylie, and enjoy the same status?

19841   MS WYLIE: Well, no, I think that would be overly -- that would be Protection with a capital P, and probably not in the public interest to -- to take, for instance, third-language services to every household without the person choosing.

19842   COMMISSIONER PENTEFOUNTAS: Well, I am asking, what other services. Besides, the FTV and TTV, what other services should be considered akin to an over-the-air service?

19843   You're asking for special distribution consideration.

19844   MS WYLIE: Well, I would --

19845   COMMISSIONER PENTEFOUNTAS: You are creating the link. Who else would qualify?

19846   MS WYLIE: I would not -- I will leave it to Fairchild.

19847   It's not a -- it's not a question for us to decide. It's for you to decide whether services deserve support because they are supplying a lot of Canadian content and, therefore, are closer for the third language subscriber to a general interest where they get all kind of programming and lots of Canadian. It's for you to decide.

19848   The only comment I made was that you could link that support to the level of Canadian content in describing what is now called a Cat A. You could decide --

19849   COMMISSIONER PENTEFOUNTAS: A Cat A third-language buy-through access distribution?

19850   MS WYLIE: Yes.


19852   MS WYLIE: Because right now it's listed in the BDU Reg's, and it is defined. It's a requirement on the BDU, and it is by virtue to the way you define the service that has that status, and that definition could be re-defined, and then you could open it to more. You know, decide what the level is that deserves that support.


19854   MS WYLIE: And if other people want to apply and start competitive services at that high level, they can.

19855   COMMISSIONER PENTEFOUNTAS: Thank you. Speak to me briefly on the OTT threat to Fairchild.

19856   MR. CHAN: Yeah. I think we heard from some of the early Interveners talking about the OTTs. Fairchild actually is -- Fairchild and Talentvision are all actually both facing something very similar. And, I would say all of them are illegal. The impact of which, because right now we are keeping a very close observation about how it affects our businesses, we have to monitor its progress, but then there is no imminent threat that will cause us to do anything drastic that may, you know, jeopardize our existing offering.

19857   We are actually keeping it very under our radar and to monitor exactly how it is going to affect us. But we have no imminent plans of moving into that direction yet.

19858   COMMISSIONER PENTEFOUNTAS: Thank you very much.

19859   THE CHAIRPERSON: I am not going to force you to answer at this stage, so you might think about it maybe and comment on it in your final submission -- we have the buy-through provision right now that does providing lifting support of some sort to those services. Have you given some thought to perhaps using a mechanism such as preponderance as between similar language groups as another way of providing support?

19860   In other words, of the let's say Chinese-language groups -- and I see puzzled faces so that's why I'm not forcing you to answer right now -- but within the community of Chinese-language services, some are Canadian, some are not, potentially, that the end subscriber would have to have a preponderance of Canadian services.

19861   MS WYLIE: It would still mean that they could make it without the higher Canadian content service.

19862   THE CHAIRPERSON: I understand that but I am talking another mechanism of support as an alternative. I take your point in terms of that, but there' different ways we can -- you have proposed one model that does achieve certain objectives and -- and we're also trying to balance off choice and flexibility as also in addition to Canadian content results. And I -- what I'm asking you is, to go away and do some thinking about that as a potential option and the pros and cons.

19863   MS SEPHTON: Okay.

19864   MS WYLIE: Could you expand on -- it would be a numerical preponderance?

19865   THE CHAIRPERSON: No. In terms a bit like the current preponderance rules we have. When a person subscribes, you have to have a preponderance of your channels that are Canadian currently, right?

19866   MS WYLIE: Numerical, not quality or --

19867   THE CHAIRPERSON: No, no. Okay, I see what you mean. Yes, that's right. Counting, yes.

19868   MS WYLIE: We would just count. Okay.

19869   THE CHAIRPERSON: I understand your point --

19870   MS WYLIE: You've got three CAT Bs.

19871   THE CHAIRPERSON: Yeah. That would be in the same language groups. Now, it's more complicated than that because -- but let's say you had all the universe of English -- sorry, of Chinese services, that in the end somebody has to have a preponderance and how that would --

19872   MR. CHAN: Yeah. So, Mr. Chairman, I think we've got the point. I think we will go back and study it and see if we can come up with some brilliant ideas about this and we'll file --

19873   THE CHAIRPERSON: Okay. It is not because I'm not hearing you on the other point. I just want to explore some other options, understanding the challenges we have.

19874   MR. CHAN: Thank you.

19875   MS SEPHTON: But wouldn't it be another rule added to what you don't want to add?

19876   THE CHAIRPERSON: Well, you've requested some additional rules as well. So, you know, everybody's wanting --

19877   MS WYLIE: No.

19878   MS SEPHTON: We didn't.

--- Laughter

19879   THE CHAIRPERSON: You're just not wanting some rules to disappear, so it's all the same. Needless to say, look, if you would like to do it as an undertaking that's fine. If not, you can do it in your final submissions, whichever you prefer. So which one do you think?

19880   MS SEPHTON: We will do it in final submissions.

19881   THE CHAIRPERSON: Thank you. So those are our questions. Thank you very much.

19882   MR. CHAN: Thank you.

19883   LE PRÉSIDENT : Madame la Secrétaire, s'il vous plaît.

19884   LA SECRÉTAIRE : Merci.

19885   I would now ask Odyssey Television Network to come to the presentation table.

--- Pause

19886   THE CHAIRPERSON: Welcome. Our colleague was coaching us on the pronunciation of Greek names as you were getting settled. So when you're ready, please go ahead.


19887   M. MANIATAKOS : Merci pour l'opportunité que vous m'avez donnée de parler à l'audience « Parlons télé ».

19888   Good afternoon, Mr. Chairman, Mr. Vice-Chairman, Commissioners. My name is John Maniatakos and I am the Vice-President of Odyssey Television Network Inc.

19889   With me today is Mr. Gary Jessop of Jessop & Proulx LLP, the counsel to Odyssey.

19890   Odyssey will be presenting comments on the Commission's pick-and-pay proposal and its adverse effects on Canadian third-language broadcasters due to its potential to eliminate the regulatory packaging requirements applicable to Canadian third-language services and the Commission's proposal to impose a mandated small all-Canadian basic service package.

19891   Pick-and-pay. The Commission's proposed pick-and-pay model as drafted will apply to all Canadian third-language services as none would qualify for inclusion in a basic package. As outlined in the Commission's revised proposal issued in August, the third-language distribution rules will be eliminated and replaced by a BDU requirement to offer one foreign third-language service for each Canadian third-language service offered. Under the proposal the foreign third-language service would be available on an à la carte basis, thereby providing the opportunity for Canadian subscribers to bypass the Canadian third-language service completely.

19892   The third-language distribution rules were implemented in 2004 in exchange for the Commission opening up the Canadian market to more foreign third-language services. The elimination of the competitiveness test for the authorization of foreign third-language services meant that foreign services that are directly competitive with Canadian third-language services like Odyssey have been permitted to be distributed in Canada.

19893   Since 2004, Canadian third-language services no longer have the same protections that Canadian English and French services continue to have against competition from foreign services. As a result, without the third-language distribution rules, Canadian third-language services would be forced to compete directly with foreign services without any form of protection.

19894   No other type of Canadian service is subject to this type of treatment and we note that under the Commission's proposals the existing foreign authorization rules will not change. So, mainstream Canadian services will still be protected from foreign services, while third-language services will not.

19895   Maintaining the current buy-through requirements is necessary for Odyssey to remain in business with its current CPE requirements and to be able to effectively cope with the added competition of foreign third-language services. Currently, there are 10 Greek third-language services available to Canadians. Of the 10 services, 5 are Canadian services and 5 are foreign services.

19896   Foreign third-language services have the advantage when it comes to price because they do not have CPE or Canadian programming requirements and the foreign service programming expenses are covered from the country of origin. This means that if there were no buy-through requirements and if the current CPE and Canadian programming regulations are maintained, foreign third-language services will continue to have the lowest prices.

19897   Canadian third-language services are not able to compete with foreign language services when it comes to price. Removing the buy-through requirements and maintaining CPE and Canadian programming requirements for Canadian services would put Canadian third-language services at a great disadvantage and also affect their ability to function as a healthy business model.

19898   Without the buy-through requirements, Category A services would also be at a disadvantage to Category B services in regards to pricing. Category A third-language services have mandated CPE requirements that are not applicable to Category B services. As a result, Category A third-language services would not be able to compete with a lower priced Category B third-language service. The Greek third-language market is not big enough to sustain a pricing battle without the quality of programming being affected.

19899   There is a point where too much competition can lead to cutting corners and poorer quality of programming in order to offer a more attractive price. Lower quality of programming offered in Canada will likely lead subscribers to find alternative non-Canadian platforms in order to watch higher-quality programming. This would not only be detrimental to Canadian third-language services but to the Canadian broadcasting sector as a whole.

19900   Currently, all Odyssey services are offered at the lowest possible price. If all third-language services, foreign and Canadian, were to be offered à la carte, then Odyssey would have to raise prices or create a higher standalone price for all services in order to entice the subscriber to purchase a combo of all Odyssey services at today's lowest possible prices.

19901   Rogers in their submission singles out the cost required to be paid by subscribers to obtain Odyssey's Mega Cosmos service as a justification for the elimination of the third-language distribution rules. This argument ignores the fact that third-language services need revenue to survive and it also ignores the original reason the third-language distribution rules were put in place in 2004, that is, to deal with the increased access of foreign services being allowed.

19902   Roger's argument also ignores the fact that we do not control how it prices either our services or its basic service. Rogers has the ability to control the size and cost of their basic package and if they are concerned about the cost of third-language services they could easily make changes in how they market and price the basic service and our services.

19903   We agree that the cost to obtain third-language services should be lower and this is why we support the skinny basic proposal that should provide lower costs to subscribers. However, a lower cost for subscribers should not come at the expense of the continued operation of the Canadian third-language services like Odyssey. Roger's argument falls apart if the Canadian third-language services cease to exist due to the elimination of the third-language distribution rules as in that case no such services will be available to Canadian subscribers.

19904   Odyssey feels that the loss of Canadian third-language services that would result if the Commission's pick-and-pay distribution proposal is adopted without maintaining the third-language distribution rules will weaken the Canadian broadcasting system.

19905   We submit that the current third-language distribution rules already provide pick-and-pay options for third-language services. Category A is the only buy-through requirement. Thus, after subscribing for a Category A service the subscriber is then able to pick and choose any Category B service and foreign service subject to the 3:1 rule being satisfied.

19906   While Odyssey does not object to taking steps to ensure that Canadian subscribers have greater choice, this choice should not come at the expense of Canadian third-language broadcasters like Odyssey, Odyssey II and Mega Cosmos, and put our continued viability as Canadian services at risk.

19907   Odyssey respectfully requests that the third-language distribution rules be maintained in the event that the Commission determines to institute a pick-and-pay model along the lines that have been proposed in BPN 2014-190.

19908   As far as skinny basic, Odyssey is in favour of the Commission's skinny basic proposal provided that it results in a lower cost for basic service to Canadian subscribers. A lower cost for basic service will provide subscribers with more resources in order to purchase other programming services.

19909   Mandating a skinny basic requirement will also help to combat the competitive threat that OTT distributors, legal and pirated, of third-language services pose to licensed Canadian third-language services such as Odyssey and its related services. OTT distributors do not require customers to purchase a basic service before getting access to third-language services. This permits the OTT distributors to sell the third-language services for a lower price than what is possible when the third-language services are sold through BDUs. This puts Canadian licensed third-language services at a competitive price disadvantage to OTT distributors. Any steps taken by the Commission to reduce this competitive price disadvantage will be beneficial to Odyssey and its related services as well as to other third-language services distributed by BDUs.

19910   I would like to thank the Commission for giving me the opportunity to speak today and I welcome all your questions. Thank you.

19911   THE CHAIRPERSON: Thank you very much. Commissioner Molnar will start us off.

19912   COMMISSIONER MOLNAR: Good afternoon. You are the fifth broadcaster from the third-language marketplace to come here with the same message and if you've been sitting here you know that there has been a pretty significant discussion around the issue of CAT A and the protections it requires and the buy-through and so on. So given your position is the same, I think our record is quite complete on that. I do have a couple of questions though.

19913   I don't understand in the discussion you have here, page 2 of your comments, where you say:

"...if the current CPE and Canadian programming regulations are maintained, foreign third-language services will continue to have the lowest prices."

19914   What prices are you speaking of there?

19915   MR. MANIATAKOS: Wholesale prices with the BDUs.

19916   My comment there was just saying that if there is a pick and pay, but the current CPE regulations are still kept in place, the foreign services, at least in the Greek market, have the lowest price right now and they can be maintained. Whereas, the other services, which would have Canadian content obligations, would have to raise their prices to accommodate -- or maintain a higher price to accommodate this expense.

19917   In the Greek market, the foreign services can be brought in at a cheaper price to the consumer because they have less expenses.

19918   COMMISSIONER MOLNAR: I see. We had quite a conversation about that with the last party.

19919   So you believe that your wholesale fee is negotiated relative to your CPE.

19920   MR. MANIATAKOS: Yes.

19921   COMMISSIONER MOLNAR: Do you know the prices that your service is offered at within the market today?

19922   MR. MANIATAKOS: Yes, I can give you the wholesale prices.

19923   Odyssey I is offered at $14.95.

19924   COMMISSIONER MOLNAR: Are you giving me wholesale prices?

19925   MR. MANIATAKOS: Yes.

19926   I'm sorry, retail prices.

19927   Odyssey I is offered at $14.95, MEGA Cosmos is offered at $14.95, and the rest of the services are offered at $5 each.

19928   COMMISSIONER MOLNAR: Just remind me, MEGA, that is a Cat B?

19929   MR. MANIATAKOS: Yes, MEGA is a Cat B.

19930   COMMISSIONER MOLNAR: So if someone wants MEGA, it's $30.

19931   MR. MANIATAKOS: Correct.

19932   COMMISSIONER MOLNAR: And your solution for affordability for those folks is to try and strip it out of basic and not affect the fact that it would be $30.

19933   MR. MANIATAKOS: Correct, because it is our feeling that the BDUs have different revenue streams to subsidize --

19934   If they were to offer a skinny basic, they have other revenue streams to get this money back, either through the cell phone portals or Internet portals.

19935   When it comes to third language services, our primary forms of revenue are subscriber dollars and advertising dollars. That is the only income we have.

19936   We have the pressure from the BDUs coming to us to lower our prices. They ask us to be the first one to make a move. But, unfortunately, there is only so much we can cut. They have more flexibility to cut price, and that would ultimately lead to a lower price to the consumer.

19937   COMMISSIONER MOLNAR: There is certainly a lot of discussion and a lot of evidence to suggest that the programming costs in basic are relatively immaterial, relative to the cost of basic, which is capturing your fixed costs, your operational costs, your service costs, your billing costs, your set-top box, and all of the other costs related to distributing services.

19938   So a skinny basic may not be a $30 -- you know, you may not be able to pull out the $30 that you think is going to compensate for retaining your $15 buy through.

19939   MR. MANIATAKOS: Yes.

19940   COMMISSIONER MOLNAR: So, for the customers interested in your MEGA service, the $15 that you are asking them to pay in addition, I don't know that there is the ability here to compensate.

19941   If all customers deserve choice, I am not quite sure -- and I suppose that I am attacking you, but I have heard it five times -- I am not quite sure why Canadian citizens of third language don't deserve the same kind of choice and flexibility that we have been talking about with every other party that has come forward.

19942   Anyway, could I go on to ask -- you speak at the end of the threat of over-the-top. Is that a threat that you currently face?

19943   MR. MANIATAKOS: Yes.

19944   Just to go back to your previous point, though, with regards to MEGA Cosmos, they do have a choice. It's a Category B.

19945   COMMISSIONER MOLNAR: But they can take it without your Cat A?

19946   MR. MANIATAKOS: No, they can choose to have MEGA Cosmos or not, so the choice is --

19947   COMMISSIONER MOLNAR: Right, but if they want MEGA Cosmos, it is not, in fact, a $14.95 service --

19948   MR. MANIATAKOS: Yes, correct.

19949   COMMISSIONER MOLNAR: -- it is a $30 service.

19950   MR. MANIATAKOS: That is correct.

19951   COMMISSIONER MOLNAR: There is no way they can get it for less than the $30.

19952   MR. MANIATAKOS: No, that's right.

19953   COMMISSIONER MOLNAR: Thank you.

19954   MR. MANIATAKOS: So, over-the-top, it is becoming a threat. Unfortunately, that playing field is a different playing field, because the services are primarily pirated.

19955   As other licensees mentioned today, it is hard to compete when some of these people are offering hundreds of channels, with extremely sophisticated VOD capabilities, and all of these other advantages that, unfortunately, we don't have here.

19956   Right now, in my market, in the Greek market, it is not as big as it is in the more lucrative markets, but if I don't start doing something progressively right now, it will be a problem in the near future, because, unfortunately, the way technology is going these days, it might not be a five-year problem, it might be a next year problem or a couple of months problem, because technology is expanding at a lightning-fast rate.

19957   COMMISSIONER MOLNAR: And you think that, somehow, moving to a skinny basic may slow down or help compensate against that threat?

19958   MR. MANIATAKOS: As other licensees have pointed out -- and I don't want to keep reiterating what others have said today, but offering a skinny basic or a lower basic package will help free up money for the consumer.

19959   Some consumers might just pocket that money and say, "I have saved money," or they might use it for other services, and not just third language services, but maybe they want an extra sports channel. Maybe they want some other programming that they can use those funds toward.

19960   So I do think that, at least, it is a step forward, something we can try, to see if it does help to level the playing field just a little bit.

19961   COMMISSIONER MOLNAR: Those are my questions. Thank you.

19962   THE CHAIRPERSON: Thank you.

19963   Mr. Vice-Chair?

19964   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

19965   Mr. Maniatakos, you have your CPE on your principal service, the antenna service. Is that at 30 percent?

19966   MR. MANIATAKOS: It is at about 27.


19968   It's a Cat B?

19969   MR. MANIATAKOS: Yes, it's 15 percent, but it doesn't have a CPE.

19970   COMMISSIONER PENTEFOUNTAS: And the Alpha service?

19971   MR. MANIATAKOS: The Alpha service is a foreign service.

19972   COMMISSIONER PENTEFOUNTAS: Oh, it is a strictly foreign service that you are offering?

19973   MR. MANIATAKOS: That's correct.

19974   COMMISSIONER PENTEFOUNTAS: And ERT World, or whatever the public broadcaster, post-bankruptcy, name is?

19975   MR. MANIATAKOS: Cat B.


19977   What is your Cancon there?

19978   MR. MANIATAKOS: Fifteen percent.

19979   COMMISSIONER PENTEFOUNTAS: Are you doing original Canadian content for these three services?

19980   MR. MANIATAKOS: No, I am not.

19981   COMMISSIONER PENTEFOUNTAS: You are not. So you are taking the 27 percent Cancon production for antenna and applying that same content to fulfil your 15 percent requirements on MEGA and ERT, or whatever the public broadcaster is called.

19982   Is that correct?

19983   MR. MANIATAKOS: Correct.

19984   COMMISSIONER PENTEFOUNTAS: On the pirated front, you can't get content -- antenna content, as an example, since it is your flagship service -- you can't get antenna content over the air right now?

19985   MR. MANIATAKOS: Legally, no. Legally, we work with our partners to make sure that we protect --

19986   COMMISSIONER PENTEFOUNTAS: Antenna is not putting it over the air for free for anyone, right?

19987   MR. MANIATAKOS: No.

19988   COMMISSIONER PENTEFOUNTAS: And the same with MEGA, and the same thing with Alpha?

19989   MR. MANIATAKOS: Correct.

19990   COMMISSIONER PENTEFOUNTAS: Have you thought about an authenticated OTT service in Canada for these offerings?

19991   MR. MANIATAKOS: We have thought about it, but it was mentioned, again, by another licensee, that -- you know, we work with the BDUs here, and we don't know how they would see us creating our own platform.

19992   We have been working with some of these partnerships for quite a long time, and they might see it as a hostile move on our end.

19993   COMMISSIONER PENTEFOUNTAS: But that would be authenticated through their --

19994   MR. MANIATAKOS: Oh, authenticated, sorry.

19995   COMMISSIONER PENTEFOUNTAS: Yes, a subscription with the BDU.

19996   MR. MANIATAKOS: So you are talking more of an Anyplace TV, like the way Rogers has Anyplace TV.

19997   COMMISSIONER PENTEFOUNTAS: Yes, Odyssey GO, as opposed to HBO GO or anything else.

19998   MR. MANIATAKOS: The problem there is coming from Europe and the origin of programming.

19999   Unfortunately, they have not made progressive steps in the technological world, and sometimes when I go back to them and tell them of these concepts, they look at me like I am coming from space, because we are a little bit more advanced.

20000   COMMISSIONER PENTEFOUNTAS: From Canada, you might not be in space yet.

20001   MR. MANIATAKOS: Yes, we are a little bit more advanced in Canada than in a lot of other broadcasting sectors.

20002   It is something that they are aware of, and they don't have a problem as long as it's authenticated.

20003   It is something that we are looking at moving into in the future.

20004   COMMISSIONER PENTEFOUNTAS: Would you see that as a reasonable way of controlling your costs? The fact that you are only spending, let's say, on one of the services, and you are applying that spend against the other services, it's not costing you any more.

20005   MR. MANIATAKOS: Correct, because the other obligations are not Canadian programming expense obligations, it's just a 15 percent requirement to broadcast the programming.


20007   MR. MANIATAKOS: Thank you.

20008   THE CHAIRPERSON: Obviously, anybody who has been watching the hearing so far, when we are talking about either English or French-language services, there is this tension between the two public interest outcomes that the Commission identified of providing more choice and flexibility on the one hand, but also ensuring the creation of compelling and diverse Canadian programming.

20009   I guess, with the past intervenors, we are seeing the same tension arising with respect to third language services.

20010   It's all a microcosm, in its own world of rules.

20011   I think it was just a comment, rather than a question.

--- Laughter

20012   THE CHAIRPERSON: Thank you very much.

20013   MR. MANIATAKOS: Thank you very much.

20014   THE CHAIRPERSON: Madam Secretary.

20015   THE SECRETARY: I would now ask the Urban Diversity Forum to come to the presentation table.

20016   Please introduce yourself, and you may begin.


20017   MR. CARDOZO: Thank you, Madam Secretary.

20018   Thank you, Mr. Chairman and Commissioners. I greatly appreciate the opportunity to appear before you today at this momentous hearing.

20019   My name is Andrew Cardozo, and I am here on behalf of the Urban Diversity Forum, which can best be described as a micro research organization that addresses diversity issues in Canadian society, primarily diversity in the media.

20020   One of the signature projects is, which provides data on diversity in some 15 cities, and I want to take the opportunity to acknowledge Bell and CTV for their support of this project over the years.

20021   By way of introduction, I am a consultant and researcher to the organization. I should mention that I also run a think tank called the Pearson Centre for Progressive Policy, and more relevant to this hearing, teach courses in communications policy at Carleton University. In that context, I have the opportunity to engage with a number of young people on the nature of broadcasting policy, as well as new technologies.

20022   I want to take this opportunity to thank you and other members of the Commission and Staff who have come to speak to students at our school, as well as when you speak to students at other universities across the country. It is an extremely important opportunity for students to gain from your personal and practical experience.

20023   I will limit my comments today to four matters: skinny basic, the cost of pick and pay, diversity in programming, and a suggestion for going forward with regards to diversity in programming.

20024   First, the idea of a skinny basic is a good one. The key question is: How basic.

20025   I would suggest that the principles that need to be reflected in that decision relate to the Canadian identity, which encompasses bilingualism, multiculturalism and Aboriginal peoples.

20026   It would seem that CBC/Radio-Canada, TVA, CTV and Global are the basic English and French services, and APTN is the prime Aboriginal service.

20027   The multicultural nature is, and should be, reflected in the English and French services, through their programming and the inclusion of diverse people's issues and stories.

20028   We do not have, at this point, a national multilingual service.

20029   Second, with respect to the cost of pick and pay, I have not seen a viable model that would result in a pick and pay that would necessarily cost less than the current system, although it is pretty hard to argue that people should be forced to pay for channels they never watch.

20030   I suppose it comes down to whether you consider the current system as one such as where you are forced to buy items in a supermarket that you don't consume, which has been put forward by some people, or whether it is like buying a newspaper or a magazine, with the full knowledge that you are not going to be reading every single article.

20031   But in the end, pick and pay will only be viable, and will only make a difference, if consumers are able to buy basic and a handful of channels by paying less than they pay now. That is your challenge.

20032   Third, on diversity in programming, I am not aware of any studies that show how Canada has fared over the last 10 years when it comes to the reflection of our cultural and racial diversity in English and French television and radio, beyond the CAB study that was conducted in 2003-2004.

20033   Although I will say that the Commission's cultural diversity policy has been an important one, which has brought some success, my sense in talking to various people across the country, some in the system, some who just view the system, is that over the last 15 years we saw some improvements in diversity in the first half of this period, and a plateauing after that.

20034   The areas that have improved are on-screen news personnel and some drama shows, although there is some mixture on that.

20035   The areas in most need of improvement are the inclusion and reflection of diversity in the development of dramatic programming, and generally programming that includes Aboriginal peoples.

20036   I would suggest to you that there are six ways you can look at programming when it comes to assessing how well diversity fares. You can look at news and non-news, what we see on-screen and everything off-screen, and when we look at content, what stuff is about, or the image.

20037   The first couple refers to news and entertainment, a newscast versus a drama or comedy show.

20038   The second couple refers to on-air personnel and actors, versus those in producing, directing, writing and technical roles, and I might add, senior corporate roles, such as the people who appeared before you during this hearing.

20039   The third couple refers to the content of what the program is about, versus what you see on TV.

20040   Reviewing these six indices can give us a good sense of the strengths and weaknesses in terms of diversity.

20041   This brings me to our fourth point, going forward. I understand that the Commission plans to review its cultural diversity program over the next year. Our recommendation is for the Commission to undertake an evaluation of how such progress has been made over the last 15 years and consider how diversity needs to get reflected, with some attention to the digital age, where there are a rapidly growing number of platforms and sources of media.

20042   In closing, I want to end by complimenting the Commission for breaking new ground in how you do consultation.

20043   With all due respect to those who have been through this room in the past two weeks, myself included, there are legions of Canadians out there who have never seen the inside of a CRTC hearing room, and never want to.

20044   Your open-door process, however, of Let's Talk TV, the flash conferences, streaming of this hearing -- and, I might add, the attractive, TV-friendly backdrop behind you -- and even the signs at the front door saying "Open to the Public", which I have never seen before, are all important innovations.

20045   I want to suggest that you do more of this kind of consultation in all of your work, but also when it comes time to reviewing diversity.

20046   Thank you.

20047   THE CHAIRPERSON: Thank you very much. Those ideas come mostly from CRTC Staff, and that's why they win awards when the Public Service gives awards out for process and other content and policy, so we will pass that on. Thank you very much.

20048   Commissioner Simpson will start the questions.

20049   COMMISSIONER SIMPSON: Thank you very much.

20050   Mr. Cardozo, you have been busy. Have you had much time for your art lately?

20051   MR. CARDOZO: Yes, not as much as I would like to, but I will take the opportunity to mention to anybody who is looking to buy --

--- Laughter

20052   MR. CARDOZO: -- anybody who is looking to buy paintings, either for Thanksgiving gifts or Christmas.

20053   COMMISSIONER SIMPSON: That was not an invitation for a shameless plug, you ought to be ashamed of yourself. But full marks for recognizing an opportunity.

20054   I don't have very many questions, actually. First of all, I would like to thank you very much for your submission, very thoughtful, very thick, very academic, but very instructive, and also for sharing with us the University of Ottawa ethnic makeup deck. That has gone into the record, and it's appreciated.

20055   Getting right down to business, I would like to ask you, first, on the skinny basic -- I took your point and your guidance regarding composition, the various ways that we might have a look at how to achieve the goal of arriving at a skinny basic that succeeds in affordability.

20056   But I am curious about your point about not having a national multilingual service.

20057   You actually make this reference in a couple of different ways throughout your paper, and I am curious as to why you think we have to cross the Rubicon into a multilingual channel, when we have the system we do, both in public and private broadcasting, and also our preoccupation, at least at this Commission's level, on making sure that official language minorities are attended to.

20058   So what is the Mashup rationale?

20059   MR. CARDOZO: Don't get me wrong, I am not arguing that there should be a national multilingual service.

20060   If there was one, I suppose that could be considered part of what should be on skinny basic, but given the nature of ethnicity, immigration and all the rest of it, we have a plethora of services that provide service in various languages, and you have the broad service program, which ensures that various gaps get filled.

20061   COMMISSIONER SIMPSON: I was just wondering if you were trying to make the point that it is conspicuous by its absence, that's all.

20062   And it's not, it's just that --

20063   MR. CARDOZO: It is just more an observation, as opposed to saying that it should be happening.

20064   COMMISSIONER SIMPSON: Would you give me a little bit more insight as to why you link the success of pick and pay -- if indeed it has any measure of success, because we have heard a lot of reasons why it wouldn't -- why it would, more or less, only be successful as long we accomplish the first objective of a lower cost entry basic?

20065   How are the two tied?

20066   MR. CARDOZO: I think there is a notion out there that we all pay, and we do pay for channels that we don't watch. I mean, if you want to get CNN, you have to get a bunch of other services that you may or may not watch, for example.

20067   So there is the notion that if we have pick and pay, I will only go and get CNN and not those other six services that I have to get.

20068   The problem is, CNN won't be the cost that it currently is within that package, it will be a higher amount.

20069   The analogy I make is going to a buffet. You can go to a really good buffet -- or, for example, a restaurant that has a table d'hôte kind of service, that gives you three or four courses. They reduce their prices on everything, and you get a nice meal for, let's say, $30, but if you were to buy everything individually, you might pay $40.

20070   I think the same thing -- my sense is that the same thing goes for services.

20071   If you look at buying any of the services that are available individually, they to be quite high, like the people who were here right before us -- you know, $14.50 for a service is an enormous amount to pay for one service.

20072   Alternatively, if you buy a single program from various services, you are paying $3.99, $5, or whatever, for a single program that will last you an hour.

20073   So given the way that things are priced, I don't know that it's going to cost less.

20074   Each broadcaster has to balance that out. If they want to get carried individually, they have to keep their prices quite low, and at the same time, when they don't have a large number of subscribers, they need to increase their price.

20075   So none of them will end up being whole, I don't think, but in their attempt to be whole, their prices will go up, and everything I hear about how pick and pay would --

20076   COMMISSIONER SIMPSON: And if that does happen, it puts greater emphasis on the importance of the composition and the cost of basic.

20077   MR. CARDOZO: Yes.

20078   COMMISSIONER SIMPSON: That's what you are saying. Okay.

20079   On diversity -- two questions, and then I am pretty much done.

20080   First, again, going back to the question of linkages here, you're saying that -- I gather you're saying that diversity is working in both news -- at the local level with news -- you know, I'm talking about on-camera presenters and so on -- and you seem to have said, at least in your written report, that that seems to be working well, and that drama is also starting to show the positive signs of our diversity policies -- I don't want to say "policies," but encouragements, but that still, though, what's really missing is aboriginal reflection in mainstream broadcasting, particularly drama. Is that correct?

20081   MR. CARDOZO: Yeah.

20082   I think the -- you know, the inclusion of diversity in programming has improved quite a bit, but sometimes it's a bit problematic. So, for example, there's a program -- I think it's called Border or The Border --


20084   MR. CARDOZO: -- where it's kind of an interesting way to bring the issue of diversity because you've got, you know, people coming in at the airport, and so you've got the diverse stories all the time, except that most of the stories have these foreign people who look foreign, had foreign names and accents, and they were doing something shady.


20086   MR. CARDOZO: So they were either criminals or trying to smuggle something in. So just because it's the nature of sort of a crime program, most of the people who were doing bad things were non-white and whatever. There were some non-white staff who were the good guys, but invariably the bad guys were always from away, and so you sort of -- that's an area where --

20087   COMMISSIONER SIMPSON: Dramatic profiling --

20088   MR. CARDOZO: Dramatic profiling -- yeah, dramatic profiling, that would be a good way of putting it.


20090   MR. CARDOZO: Where, you know, you've got a lot of diversity in the program, a lot of Canadian actors from minority groups got a chance to get on TV and get experience, but I would say the outcome is kind of mixed, as opposed to --


20092   MR. CARDOZO: -- you know, the quintessential Little Mosque on the Prairie --


20094   MR. CARDOZO: -- which was, I think, a positive thing all-around.


20096   MR. CARDOZO: In terms of aboriginal people?


20098   MR. CARDOZO: I don't know why we haven't cracked this. I think one of the strong things that the Commission has done in the past while has been license APTN. And if you look at their news folks as well as their programming, it's pretty strong, and getting better.


20100   MR. CARDOZO: There is some migration of people -- probably it's the wrong term, but some movement of people from APTN to other channels, which is a good thing. They always regret it when they've trained somebody and they move on, but I think when you look at the system overall that's good. Not enough though.

20101   COMMISSIONER SIMPSON: M'hmm. But it is happening. You know --

20102   MR. CARDOZO: Yeah. Yeah.

20103   COMMISSIONER SIMPSON: -- in my tours of APTN, and exposure to them, they are having a heck of a lot of experience with migration from -- to use that term, appropriate or not -- from their operation to others because they -- you know, they are a credible broadcaster. It's a great opportunity and people are being well trained, so I think it maybe just has to take a little more time to take effect.

20104   But the last question, and then an observation I have, on your -- look, we encourage and we -- you know, all of our language, as it comes out, whether it's in licensing or other areas, when it comes to diversity we have -- you know, we have our standard terms of "encouragement", "expectation" and often "requirement," but do you think that that needs to be refined or strengthen, or do you think it's just question of a little more powerful writing in the way we infer things?

20105   MR. CARDOZO: I think a combination of all those. But I would say before I was to suggest what exactly in my view, or our view, the next step would be, I'd like to get a better handle on how far we've gotten, so getting -- it'd be good to do some study of the reports --or the annual reports that are filed.


20107   MR. CARDOZO: So it'd be good to get a good sense of where the progress is and where the gaps are.

20108   COMMISSIONER SIMPSON: That was going to be my closing comment, that, you know, we take that under advisement because it was your closing recommendation.

20109   Thank you very much.

20110   MR. CARDOZO: Thank you, Commissioner Simpson.

20111   THE CHAIRPERSON: Thank you very much. I think that covers our questions, Mr. Cardozo.

20112   Thank you.

20113   MR. CARDOZO: Thank you, Mr. Chair.

20114   Madame la Secrétaire.

20115   THE SECRETARY: Thank you.

20116   We will now connect to Calgary for a video conference.

20117   Hi, Mr. Morrison. Can you hear me well?

20118   MR. MORRISON: Yes, I can.

20119   THE SECRETARY: Perfect. Thank you for --

20120   MR. MORRISON: Can you hear me?

20121   THE SECRETARY: Yes, we can.

20122   MR. MORRISON: Excellent.

20123   THE SECRETARY: You may begin your presentation.

20124   THE CHAIRPERSON: And just as a reminder -- this is Jean-Pierre Blais, Mr. Morrison -- I saw your deck, and I'm asking you to keep within your five-minute presentation, if you can.

20125   Thanks.

20126   MR. MORRISON: I've got it down to about five minutes.

20127   THE CHAIRPERSON: Super.

20128   MR. MORRISON: Thank you very much.

20129   THE CHAIRPERSON: But not too fast, so we have the interpretation.

20130   MR. MORRISON: Okay. Okay, I'll try to get a good pace.


20131   MR. MORRISON: My name is Bob Morrison. My wife, Denise, and I are pleased to have this opportunity to submit our views to the Commission. We are fans of high-quality engaging television. I am also the southern Alberta representative on the board of KSPS, the PBS station in Spokane.

20132   We support a Canadian-dominated, slimmed-down version of the basic package. It will provide good representation of domestic programming and, we hope, strengthen the presence of community channels.

20133   We also support inclusion in the basic package of educational services, of which the PBS Network is the acknowledged leader in the field.

20134   Interventions from Canadians have made it clear that PBS is a significant part of our country's broadcasting system, complementing rather than competing with local stations. PBS stations produce significant Canadian content and are regular, enthusiastic consumers of Canadian content. I've provided in our submission a table of some of the more recent samples of Canadian content on our local KSPS station. As well, programs such as Newshour, Frontline, Nature and NOVA fill the gaps in understanding the world outside Canada's borders.

20135   Overall, PBS stations make a vital contribution to achieving the CRTC's mandate for a system that is varied and comprehensive, providing a balance of information, enlightenment and entertainment for men, women and children of all ages.

20136   Through their contributions to PBS stations, Canadians have demonstrated their support for the diverse high-quality programming PBS provides. PBS stations already operate under a pick-and-pay business model. Requiring Canadian viewers to make a second pick-and-pay contribution to access content they value is not in Canada's public interest and will drive viewers away from cable and satellite providers.

20137   We recommend that PBS stations serving local Canadian markets be required to be included in the basic package. As well, in our view, the basic package should be the same across a viewing area and receive top billing on cable and satellite channel listings, and also be provided at no cost to subscribers.

20138   A locally uniform and free basic package is vital to ensure that, as the Commission has noted, Canadians are informed on matters of public concern at all levels, and thus better able to participate in Canadian democratic, economic, social and cultural life.

20139   In terms of pick-and-pay and build-your-own packages, we support requiring BDUs to provide all discretionary services on a stand-alone basis and in custom packages. BDUs have shown little interest, and even less innovation, in making true consumer choice possible.

20140   In terms of simultaneous substitution, we recommend that pricing mechanisms be used to compensate Canadian broadcasters for lost revenue. The additional revenue would then be shared between BDUs and Canadian commercial broadcasters. We've identified a couple of those pricing options in our submission.

20141   In terms of Canadian content, we support minimum expenditure requirements and we agree with the Canadian Media Production Association that there should be specific spending requirements for particular programming.

20142   In terms of finding how to pay for all this, the elephant in the room is, of course, how to pay for all the wonderful things about television in Canada and make the system even better. For that to happen, the Commission needs to think outside of the box. In the interests of time, I will merely list our suggestions, which are tiered charges for advertising, a competitive licence renewal bid process, market-based licensing, a setup for repaying success, and a social contract for all media.

20143   In terms of community programming, community channels have the ability and a proven commitment. They need more resources, a higher profile and a broader Commission mandate.

20144   We have also identified in our submission several exemptions from advertising regulations that deserve a rethink.

20145   Thank you for the opportunity to present our views. Your work is essential to the enjoyment and understanding of viewers and the key to maintaining a strong and relevant broadcast system. We wish you every success.

20146   Thank you very much.

20147   THE CHAIRPERSON: Thank you very much, Mr. Morrison.

20148   I have just a few questions for you, if you have some time for that.

20149   The first one is with respect to ensuring that the PBS services form part of the available offering.

20150   We've heard a lot last week about 4+1. I guess you're focusing just on the +1 in your submissions.

20151   Would it be your view that it's only the +1 that should be added, or do you have an objection to the 4+1 being offered?

20152   MR. MORRISON: We're talking about the +1 because we are non-commercial. We are non-profit. We're very different and I think we provide, not duplication of what is provided in Canada, but, again, as I said, something that complements rather than competes with local Canadian stations.

20153   THE CHAIRPERSON: Right.

20154   The second point in your written submission, and again today, you hinted at it, is you seem to think there's maybe too much advertising on commercial television, and you feel that this is getting in the way of the viewer experience?

20155   MR. MORRISON: It certainly is for us, and I think for a number of other people.

20156   This gets back to the competition between conventional TV and the Internet. The Internet is actually a lot easier to access without that kind of commercial advertising.

20157   I think, as well, if you put some restrictions on there, you might actually be able to make more money for the commercial broadcasters, because the amount of space would be limited, it would be that much more desirable, and people might be willing to pay a much higher price for particular timeslots in the broadcasts.

20158   THE CHAIRPERSON: But financing is at the heart of making that we have good content on television. I've even heard that, you know, when people watch PBS stations, they get very frustrated by the ongoing pledge drives, that they just want to see their programming.

20159   MR. MORRISON: Yes.

20160   THE CHAIRPERSON: There's a frustration there as well, yet, you know, a bit like advertising, it becomes the lifeblood of making the content people come to that particular station to watch.

20161   MR. MORRISON: Yes. Pledge programming, everybody would love to get rid of it. But, unfortunately, in our situation, being a pick-and-pay model already, it is a necessary evil.

20162   THE CHAIRPERSON: One could say the same thing --

20163   MR. MORRISON: And I don't think I answered your question, though, but --

20164   THE CHAIRPERSON: One could say the same thing about advertising.

20165   MR. MORRISON: Yes. Yes. The disadvantage of pledge programming, yes, but as you -- if you've watched PBS at all, you know that the -- any kind of what you might call advertising on PBS is not in the middle of programs, but merely before the half-an-hour or before the hour break.

20166   THE CHAIRPERSON: Right. It's sponsorship programming.

20167   MR. MORRISON: And that's much more convenient for the viewers.

20168   THE CHAIRPERSON: Right.

20169   MR. MORRISON: Yes, that's right.

20170   THE CHAIRPERSON: Yeah, that's correct.

20171   The final area I would like to ask you a question on, because I found it rather intriguing, and you go on a little bit more in detail in your written submission, and that is competitive billing for services at renewal time for -- I believe you meant just for commercial stations.

20172   So I take it you mean at the end of the licence term, which generally are five to seven years in television, somebody's licence would be in jeopardy.

20173   Is that what you're thinking?

20174   MR. MORRISON: Potentially. And I'm assuming -- again, you may be changing your regulations -- that it would be for a particular kind of broadcasting and somebody can come in and say, "Well, I can do a better job" or "I can provide more Canadian content" or "I can do something that would better improve the system." So this isn't just somebody coming in and saying, "I'm going to do something completely different."

20175   THE CHAIRPERSON: Right.

20176   But you will appreciate that those hundreds of employees working at that particular station, if the operators are unsuccessful, those workers would be thrown out onto the street.

20177   MR. MORRISON: Yes, and that -- and, yes, I understand that would be unfortunate for them.

20178   THE CHAIRPERSON: Are you aware of anybody doing this anywhere in the world? It's always been my understanding that, you know, people go through renewal processes, perhaps even asking for more obligations. But I'm not aware -- and maybe you are, from your experience -- of regulators that put licences in jeopardy in the way you're proposing.

20179   MR. MORRISON: Not that I'm aware of, no.

20180   THE CHAIRPERSON: Okay. Thank you.

20181   Well, I've read carefully your submissions, and they cover a broad range of issues. I can tell you, though, that you had asked that we remove some of the time credits, for instance, in certain areas. I can assure you they're already gone, so we're already on the way of meeting some of your expectations.

20182   MR. MORRISON: Well, my apologies. That's the best I could find on the website.

20183   THE CHAIRPERSON: Yes. Okay, well, I understand. Our rules sometimes are rather complex and not always easy to find.

20184   So thank you very much, to you and your wife, for having participated in our process by making a submission.

20185   Thank you.

20186   MR. MORRISON: Okay, thank you very much.

20187   THE CHAIRPERSON: We'll take a short break now, till 3:15.

20188   Thank you.

--- Upon recessing at 1504

--- Upon resuming at 1515

20189   LE PRÉSIDENT : À l'ordre, s'il vous plaît.

20190   Madame la Secrétaire.

20191   LA SECRÉTAIRE : Merci.

20192   We will now hear the presentation of Unifor.

20193   Please introduce yourself and your colleagues and you have 10 minutes.


20194   MR. LAW: Thank you very much.

20195   Commissioners, thank you for the opportunity to appear. My name is Howard Law. I'm the Media Director for Unifor and my voice is about to quit.

20196   To my left, your right, is Angelo DiCaro. He is on the National staff of Unifor in the Research Department.

20197   And to my right is Randy Kitt. Randy is the elected Industry Chair for our Media and Broadcasting Sector. He works in the industry.

20198   Randy is going to present our remarks today and then the three of us will be available for questions.

20199   THE CHAIRPERSON: That's good. I thought you would be using a megaphone or something but I guess that's not quite appropriate here. Thank you.

20200   MR. KITT: Thank you.

20201   Unifor represents over 5,000 broadcasting workers who have the good fortune to pursue their callings in Canada rather than in Los Angeles or any number of American cities. As the representatives of media workers and as passionate Canadian nationalists we believe our comments are well aligned with the objectives of the Broadcasting Act and public opinion on how to find the delicate balance among these objectives.

20202   The Broadcasting Act objectives haven't been amended by debate and vote in Parliament, despite the steady stream of public comment from government members.

20203   The objectives of the Act include audience satisfaction at affordable rates, but the Act also mandates a regulatory model that places at its heart the strength and diversity of Canadian content and local programming. Opinion polls continue to show powerful support from citizens and audiences for that programming and we can provide that polling data to the Commission.

20204   Finding the right balance of statutory objectives is central to everything we do here because the bigger the regulatory change, the greater the consequence.

20205   There are a number of future scenarios and extrapolations of where the new technology and consumer demands will take us. We are necessarily engaged in speculating on the pace and direction of industry disruption and how to respond to it in a regulatory environment.

20206   This dilemma of managing disruption is not new to Unifor. We represent newspaper workers across the country too. That industry has been continually disrupted by the Internet, since the turn of the century, in an unregulated environment.

20207   During that time there have been any number of apocalyptic or Pollyannaish predictions of disruption for the newspaper industry scheduled to occur over the short, medium and long term, scenarios which did not happen or did not happen in the timeframe that was confidently predicted.

20208   This is a lesson for conventional television. Disruption is coming to this industry as well, but we may be making a terrible mistake by gambling on going too far, too fast with a regulatory strategy of self-disruption.

20209   The good news is that in a regulatory environment we can mitigate disruption with appropriately designed and paced regulatory measures.

20210   On the pick-and-pay proposal in the Working Document, we believe that the collateral damage to Canadian programming will eliminate a great deal of niche programming or see it replaced by American channels. How much revenue it will drain from mainstream broadcasters we don't know for sure but it will weaken them and draw down on the revenue for CPE.

20211   To remind ourselves of the Throne Speech, the mandate is to "unbundle channels while protecting Canadian jobs." The Miller Report makes it clear that thousands of jobs are at stake.

20212   That is why Unifor recommends that if the Commission must proceed with pick-and-pay, it should do so only on a gradual, experimental and trial basis to determine exactly what the impact will be with respect to subscriber retention for conventional TV on the one hand and revenue loss on the other.

20213   You have previously asked participants which proposals in the Working Document we favour the least or the most.

20214   We will start with the least.

20215   On simultaneous substitution, either proposed option is going to prevent broadcasters from monetizing their exclusive Canadian rights to the tune of hundreds of millions of dollars for seemingly minimal returns in audience satisfaction. American Super Bowl ads can be viewed the next day on YouTube.

20216   But perhaps the most underdiscussed proposal in the Working Document is the Canadian preponderance rule. If the Commission pursues pick-and-pay, we must maintain the preponderance rule to protect Canadian programming. We understand that to be the letter and spirit of Privy Council Directive 2013-1167.

20217   As well, the Commission's various versions of the preponderance rule required by section 3(1)(f) of the Broadcasting Act have already moved to a minimum requirement of simple preponderance. Moving to a consumer option on preponderance means there will be no rule at all and we believe that would be a violation of the Act. To be clear, we favour Option A in point 5 of the Working Document.

20218   As for Working Document proposals that we favour, that would certainly be the proposal concerning Category C news. However, we encourage you to go one step further and include the obligation for licensees to comply with the RTNDA journalistic Code of Ethics, as we outlined in our submissions in response to BNOC 2013-394.

20219   We also want to address two vital issues that are not included in the Working Document.

20220   The first is the Commission's reluctance to squarely take on the new media exemption.

20221   If the dramatic changes to the regulation of "old media" broadcasting being proposed in the Working Document are truly a response to the cord-shaving, -cutting and -nevering, we cannot at the same time take a hands-off approach to this Internet broadcasting.

20222   It does not enhance the opportunity for independent reflection on this issue when the Minister and other Cabinet members make public remarks about the regulation of OTT in the middle of a hearing dealing with just that. Unifor wishes to put on the public record that the Minister's actions are unacceptable.

20223   VIs like Quebecor have responded to the threat of the OTT competitive advantage by making advance comments on the Group Licensing hearings in 2016. We expect that all of the VIs will ask you to level the playing field with Netflix and Google by shedding regulatory obligations, which means shedding economic measures supporting Canadian content. The regulatory model will just unravel completely.

20224   The Commission must move forward on the new media exemption and it must move forward soon. Status quo is not an option.

20225   This should take place in a special review, as proposed by Friends of Canadian Broadcasting, where the line-drawing exercise can begin and we can identify what Internet broadcasting content ought to be regulated and what should remain exempted.

20226   Speaking briefly on this point, Unifor submits that for-profit long-form videos in direct competition with regulated Canadian broadcasters ought to be brought within the single broadcasting system immediately. Looking at YouTube as an example, the channels used by major American media companies to distribute conventional content probably fall on the regulated side of the line, while two-minute talking-dog videos probably ought not to be -- and cat videos should probably have their own separate hearing.

--- Laughter

20227   MR. KITT: Finally, local programming for both private and public broadcasters.

20228   According to 95 percent of Canadians polled recently, local programming is important, and it's no wonder. Local news and information programming is essential to being an informed citizen and consumer. Non-news local programming is one of the most basic forms of community self-reflection available through mass media.

20229   It is important not only that local programming survives in small, medium and large markets, it is important that it thrives. Unfortunately, the business model for local programming is no longer sustainable in any market and we must find additional revenue streams to fill the gap of declining ad revenue.

20230   Bell has made a local specialty proposal that amounts to carriage fees. That means lower BDU profits or higher subscriber fees, depending on the price elasticity of the market. It is a creative proposal and an honest one. There is no free lunch here. The money for local programming must come from somewhere.

20231   We don't support this particular Bell proposal but only because it requires shutting down transmission towers, which we believe is premature.

20232   Unifor proposes a revived revenue stream from BDU contributions, allocated among eligible markets and stations, both private and public stations, modelled on the LPIF. That is 1.5 percent of BDU revenues, pegged in 2010 at about $100 million. It might be north of $110 million now. We take note of the Commission's published figures on local programming losses of $90 million in 2012-2013, which don't include the CBC numbers.

20233   We propose as a starting point to use the LPIF rules for contributions, eligibility and allocation, but we would not exclude large markets. We would also prohibit BDUs from increasing basic prices as a result.

20234   And why the BDUs?

20235   We agree with the submissions from the Forum for Research and Policy in Communications on this point.

20236   The funding model for Canadian content is upside down between broadcasters and BDUs, even if, once upon a time, it was right-side up.

20237   Thank you, again.

20238   We hope we can be helpful in answering your questions.

20239   THE CHAIRPERSON: Thank you very much.

20240   I took note of your comment about public statements made by people in other places.

20241   But, by the same token, we should be careful not to elevate a request for a report into a directive. A policy directive is to be made in a certain way. So, let's not overextend a request for a report into something else.

20242   So, Commissioner Simpson will start the questioning.

20243   COMMISSIONER SIMPSON: Thank you, very much.

20244   I'm just looking at my iPad. The Don't Regulate My Cat Videos Coalition is already trending on Twitter.

20245   The people have spoken.

20246   Thank you.

20247   Predictably, on just about every area that you've touched on, you've been very eloquent and very effective and very thorough.

20248   I would like to, well, first of all, thank you for recognizing that this whole exercise is a balancing act between the needs of Canadians, as consumers and citizens, and industry that, for so many years, has been working well and created a very vibrant industry that entertained and employed Canadians and that you appreciate that it's a tough decision for all of us. So, that, really, is appreciated.

20249   I'd like to ask you for your experience, based on the following scenario.

20250   There's a pattern forming here, and that pattern is that, not only are the economic models changing, but the programming models seem to be changing. The technological models seem to be changed, but just in the content side.

20251   Where I'm going with this is your experience with the newspaper business.

20252   The newspaper business was -- it could be argued that newspapers were a delivery system for advertising and they were a delivery system for news. And the question is, what part started to become less relevant?

20253   What I can't help but note is that as the newspaper, as a medium, started to get into trouble, it was largely from the revenue side.

20254   But what didn't go away is news creation. It morphed into something else.

20255   Now, it can be argued that it morphed into something that is unstructured, that journalists had to move from being packs of journalists in the newsroom to becoming entrepreneurs and having to find different ways to feed their families -- but news is still around, and I can't help but reflect that in broadcasting, when we look at local television and the overwhelming recognition that Canadians love their local content, it's usually news and information that they say that they're liking, because most stations are deliverers of news, but that is not what they do all the time, unless they get untethered from the traditional broadcast ownership of a network, and then they have a tendency to do more news.

20256   So, would you comment on your experience in the devolution, or evolution, of newspapers and whether there's a bright spot here in broadcasting out of this whole thing that we're trying to contemplate?

20257   MR. LAW: Wow, that's like a PhD thesis. That's an interesting --

20258   COMMISSIONER SIMPSON: -- good at those --

20259   MR. LAW: That's an interesting topic.

20260   I think it's true that the Internet disruption challenged newspapers, both in delivery and content.

20261   The newspaper organizations, I think, have responded fairly well. They were a little bit slow off the mark, first, to the changing nature of news consumption; basically, the injection of, not just video, but of social media -- and that I think they're starting to find their feet now.

20262   There are some news organizations that are reluctant to make a full entrepreneurial bet on going OTT, essentially, because the old media of the news, speaking of the print and the delivery, in cars, in the middle of the night, still delivers money -- less so every year.

20263   And the entrepreneurial bets -- and this was a parallel here to making a regulatory bet, I think, for television -- the entrepreneurial bets vary.

20264   And so, you get a situation where the publisher of The Globe and Mail, four or five years ago, went into, essentially, a 20-year contract with Transcon Printing, worth something like $50 million, on the bet that newsprint was going to be around as long as 2035.

20265   And you can argue back and forth as to whether that's a good bet, but it's a bet that's still holding, at the moment, in 2014.

20266   On the other hand, you get an organization like LaPresse, which is going to be out of print in a year or two -- that's their avowed goal. They've invested $50 million in state-of-the-art OTT news delivery. And now it's a question of whether or not they're going to track the advertising dollars to make that bet pay off.

20267   So, you know, there's an industry that is adapting.

20268   I think the television industry is also adapting.

20269   The television industry, I think, has the added advantage, in a regulatory environment, of being able to get a little bit more control over the throttle and get some help, in terms of making those bets.

20270   So, individual entrepreneurs, in an unregulated environment, have to go all-in one way or the other -- old media, new media, something in between -- and it's a scary game for them.

20271   Whereas this Commission is in a great position for the industry of being able to make a regulatory bet that will help everybody, hopefully, and, in our view, if those bets are not made too dramatically and made with as much as pace and direction as they should be, then, you know, there's reason to be optimistic for this process and for the industry.

20272   Sorry. It's a long-winded answer.

20273   COMMISSIONER SIMPSON: No, it's great.

20274   I am trying to find some middle ground here because I think we're both recognizing that the jobs don't go away, they just change, and the income streams of those jobs change, more or less.

20275   But what I'm encouraged by is that when I see OTA in its form with the true independence, the news content goes up and the viability seems to go up.

20276   So, I just want to close by saying that in the newspaper business, it seemed like the methodology of delivery was as much to play in its demise, not the value of its content.

20277   Will you agree with that?

20278   MR. LAW: I think that their ability to adapt to change is going to be the key. They're still great news organizations.

20279   Can I just say that, you know, perhaps, as a debating point, we're not quite as -- I'm not quite as sanguine about the job situation in the broadcasting industry -- and we've appeared before you before and written to you before about the loss of jobs, and you know very well, I don't have to cite those figures and, you know, I tip my hat to any corner of the industry and say that's where, you know, we're losing jobs.

20280   In film creation, actually, we're not losing jobs.

20281   But in local programming in CBC, we are.And that's why we have to say what we do about the local programming -- and, yes, we want to see our members employed.

20282   But we're very concerned, as I know the Commission is, from what you've written, that we find a solution to what seems to be a downward spiral, in terms of local programming, where, you know -- I mean the way the VIs are structured, there's money on the BDU side and not so much money -- in fact a lot, of losses -- on the programming side. And we've seen this in the newspaper industry, too.

20283   It's tempting, sometimes, when people who control, you know, the profit line, just say, "Well, you know, we'll just let things, you know, kind of decline. That's tomorrow's problem."

20284   This is what some newspaper chains have done -- not all.

20285   And the newspaper chains -- I won't name them because it's just my opinion -- that have done that have simply run down the franchise, and they are in serious trouble and they're not going to get out.

20286   And so, we're really concerned about doing something.

20287   Now, we have the advantage of regulation about doing something creative and helpful for local programming.

20288   COMMISSIONER SIMPSON: Yeah. I just have to say that I don't know that, if the newspaper industry was regulated, further regulation of the paper the paper industry would have saved that business.

20289   I think the question here is that -- I'm trying to illustrate that the delivery system of how people get their content is very much in question, and that is separate, in my mind, although related, from the content production side of things.

20290   That's all. Thank you.

20291   THE CHAIRPERSON: Just one quick question.

20292   You referred to the Miller report, a number of -- the Don Miller report --

20293   MR. LAW: I know he did one for the CRTC, yes.

20294   THE CHAIRPERSON: Sorry?

20295   MR. LAW: I know he did one for the Commission.

20296   THE CHAIRPERSON: Yes. But the one that's attached to a number of submissions.

20297   Did you have an economist that worked within your union that looked at that Miller report?

20298   MR. LAW: We do, but he was on leave. That's Jim Stanford.

20299   THE CHAIRPERSON: Okay.

20300   MR. LAW: And we also wanted to get -- perhaps it's an obvious point -- we wanted to get somebody from the industry with a deep knowledge, and I gather Mr. Miller fills that role.

20301   THE CHAIRPERSON: I don't want to suggest that he doesn't have that knowledge.

20302   But he is a lawyer and an engineer, and not an economist. That's my --

20303   MR. LAW: That's true.

20304   THE CHAIRPERSON: -- only question. So, I'm just wondering if you had had people -- because I know sometimes you would call on the services of economists in your area.

20305   MR. LAW: Jim was in Australia, so we were really handicapped on that --

20306   THE CHAIRPERSON: There you go. Well, then I won't pursue any further.

20307   MR. LAW: All right. Thank you.

20308   THE CHAIRPERSON: Thank you very much. Those are our questions.

20309   MR. LAW: Thank you for the opportunity to appear.

20310   THE CHAIRPERSON: Not at all. Thank you.

20311   LA SECRÉTAIRE : Avant d'annoncer le prochain intervenant, j'aimerais juste annoncer que l'ADISQ ne comparaîtra pas à l'audience publique.

20312   J'inviterais maintenant la Fédération des communautés francophones et acadienne du Canada.

--- Pause


20313   MME KENNY : Bonjour, Monsieur le Président, Madame la Conseillère, Messieurs les Conseillers.

20314   Je vous remercie d'avoir invité la FCFA à comparaître devant vous aujourd'hui.

20315   Je m'appelle Marie-France Kenny. Je suis la présidente de la Fédération, l'organisme porte-parole des 2.6 millions de parleurs français à l'extérieur du Québec.

20316   Et je suis accompagnée aujourd'hui du directeur des communications, Serge Quinty.

20317   Je tiens à signaler d'emblée que nous ne sommes pas ici aujourd'hui pour défendre un certain statu quo. Nous sommes tout à fait d'accord que pour garantir l'atteinte des objectifs de la Loi sur la radiodiffusion dans un paysage technologique en évolution, il faut que le système canadien de télévision change.

20318   Nous sommes en faveur d'un système qui donne aux francophones plus de choix et plus de souplesse en matière télévisuelle, mais un choix parmi des chaînes de langue française qui continuent à présenter de riches contenus canadiens.

20319   Étant donné le temps qui nous est imparti, nos remarques se limiteront à trois thèmes : d'abord les propositions sur le service de base, l'abonnement à la carte et les forfaits; ensuite, la distribution des services spécialisés de langue française; et finalement, l'enjeu de la programmation locale, en particulier à Radio-Canada.

20320   En ce qui a trait à la mise en place d'un nouveau service de base, la FCFA appuie l'option A, soit un service composé des chaînes locales, des services 9(1)(h), des services éducatifs, d'une chaîne communautaire et de la chaîne législative provinciale.

20321   Ceci dit, un bémol : dans les provinces où il existe une chaîne éducative francophone comme l'Ontario, les deux chaînes, soit TVO et TFO, doivent être distribuées au service de base. Pareillement, dans les villes où il existe une chaîne communautaire francophone comme Ottawa ou Moncton, celle-ci doit être distribuée au même titre que la chaîne communautaire anglophone. Et enfin, étant donné l'importance que revêtent les stations CIMT et CHAU de Télé Inter-Rives pour la population acadienne du Nouveau-Brunswick, ces deux stations doivent être diffusées aux services de base dans cette province.

20322   Au-delà du service de base, la FCFA n'appuie pas l'idée de système d'abonnement la carte. Rien de ce que nous avons entendu au cours des derniers jours ne nous a rassurés quant au possible impact financier culturel.

20323   Comme plusieurs intervenants vous l'ont dit, il se pourrait que les consommateurs se retrouvent à payer plus cher et que bon nombre de chaînes spécialisées canadiennes se retrouvent fragilisées dans un environnement à la carte ou même disparaissent tout simplement.

20324   Comme les intervenants de Rogers, la semaine dernière, nous sommes d'avis qu'il faut apprendre à marcher avant de courir et surtout qu'il ne faut pas jouer à la roulette russe avec l'avenir du système canadien de télévision.

20325   La FCFA est d'avis qu'un système à deux options : l'abonnement à des forfaits préassemblés ou la création de forfaits personnalisés donneraient déjà beaucoup plus de flexibilité de choix aux consommateurs canadiens.

20326   Incidemment, ce système pourrait en principe permettre aux francophones de créer facilement leur propre forfait de langue française. Cette approche limiterait également les risques de fragilisation des chaînes canadiennes spécialisées de langue française sur lesquelles comptent les francophones.

20327   Ceci dit, la FCFA est aussi d'avis que les EDR doivent être tenus de s'assurer que chaque abonné reçoive une prépondérance de services canadiens.

20328   Puisque nous parlons des services spécialisés, la FCFA a noté que le CRTC propose de reconduire la règle imposant à tous les câblodistributeurs de distribuer un service facultatif dans la langue de la minorité pour 10 services de la langue de la majorité.

20329   Nous sommes certes en faveur de cette proposition, mais il faut se demander combien des plus ça coûterait d'assurer tout simplement que toutes les chaînes spécialisées francophones -- je crois qu'il y en a une trentaine -- bénéficient d'un droit d'accès à la distribution.

20330   Quelques mots en terminant sur la programmation locale.

20331   Je vous admets qu'à la FCFA, nous sommes inquiets, très inquiets. La stratégie 2020 annoncée par CBC Radio-Canada en juin, nous a laissés entrevoir un avenir où le diffuseur public sera devenu méconnaissable.

20332   On parle entre autres de la réduction de la durée des bulletins d'information locale -- c'est tout ce qui nous reste d'ailleurs au niveau local -- et de l'élimination de 25 p. cent du personnel qui, dans les régions, racontent nos histoires.

20333   À l'ouest du Québec, il n'y a que Radio-Canada qui fait de l'information locale en français à la télévision. Et si le diffuseur public perd la capacité de remplir ce rôle, ou fait le choix de ne plus le remplir à certains endroits, c'est très simple. Il n'y en aura plus, il y en aura plus d'information locale en français à la télévision pour nos communautés. C'est notre capacité de vivre en français qui en sera diminuée d'autant.

20334   Voilà pourquoi il est si important, si essentiel que le Conseil prenne des mesures pour appuyer la programmation locale de tout genre.

20335   Si le CRTC ne devait retenir qu'une seule de nos recommandations, nous souhaiterions que ce soit celle qui a trait à la création de fonds en ce sens.

20336   Certains vous diront sans doute que cette mesure n'est pas nécessaire puisque CBC Radio-Canada reçoit un milliard de dollars en allocation parlementaire.

20337   Notre propos ici, n'est pas d'entrer dans ce débat savoir si oui ou non la société d'État a les moyens de s'acquitter de son mandat.

20338   Notre propos c'est de vous dire que pendant que ce débat lieu, ce sont nos communautés qui voient leur programmation locale s'effriter.

20339   Dans ce contexte, la mise en place de ce fonds d'appui doit être considéré, pas tant comme une mesure de soutien à Radio-Canada, mais plutôt comme une mesure de soutien aux communautés francophones et acadiennes partout au pays qui veulent continuer à se voir et s'entendre à la télévision.

20340   Je vous remercie. Nous sommes prêts répondre à vos questions.

20341   LE PRÉSIDENT : Merci beaucoup, Madame Kenny, Monsieur Quinty d'être présents aujourd'hui.

20342   J'ai quelques questions pour vous. La première, votre position est très claire sur certains... sur la plupart des éléments. Donc, je veux juste clarifier quelques éléments.

20343   Vous mentionnez au paragraphe 10 de votre intervention écrite la relation que les abonnés de langue française aimeraient recevoir un préavis de certains changements. Et vous faites mention : dans la langue de leur choix.

20344   Je voudrais juste savoir quelle est votre expérience. Parce que vous savez qu'on a tout un chapitre sur la relation future entre les entreprises de distribution et leurs abonnés.

20345   Et j'imagine que puisque vous ne l'avez pas mentionné que, selon vous, il n'y a pas d'enjeu considérable par rapport à l'offre en langue française, mettons, pour les gens dans vos communautés.

20346   MME KENNY : En fait...

20347   LE PRÉSIDENT : Pas de la programmation, mais de la relation contractuelle.

20348   MME KENNY : En fait, j'habite la Saskatchewan. Donc, je vais vous parler de mon cas particulier.

20349   Je n'ai pas de relations en français avec mon distributeur qui est SaskTel. Sauf les rares fois où, parce que moi je dis toujours : « Allô bonjour. » Il y en a un une fois de temps en temps qui va me répondre en français. Mais autrement c'est en anglais que ça se passe y compris dans les contrats.

20350   Je dois vous dire que j'ai vécu dernièrement une situation où la chaîne UNIS qui est entrée en onde au début septembre, j'ai dû appeler SaskTel pour savoir où était la chaîne UNIS pour me faire dire qu'il n'y en avait pas.

20351   Finalement, il y en avait une. Un m'a renvoyé à un poste, c'était le Canal V ou Vie ou je me rappelle plus. En tout cas. Ils savaient pas eux-mêmes où c'était. Mais, il y a personne qui avait été informé de ça.

20352   Et si on suivait pas justement UNIS sur sa plate-forme web, bien, il y a personne qui savait qu'il y avait une nouvelle chaîne qui s'offrait en français.

20353   Donc nous, on voudrait qu'on soit informés particulièrement si on parle des postes français, être informés en français.

20354   Si on déplace une chaîne, ou encore, si on fait des changements, si on enlève une chaîne, si on n'en ajoute, ça serait fort apprécié.

20355   Moi, j'ai vu dernièrement aussi qu'on avait rajouté un paquet de chaînes spécialisées. Si je m'étais pas adonnée à aller voir sur le site web qu'est-ce qu'on m'offrait en français, j'aurais pas vu qu'il y avait des nouveaux dans les chaînes spécialisées.

20356   LE PRÉSIDENT : Ce qui m'amène à poser une autre question. Parce que vous faites des commentaires, puis je l'ai déjà entendu dans les représentants de la communauté, qui semblent favoriser les distributeurs terrestres.

20357   Vous-mêmes, vous en choisissez un plutôt qu'un satellitaire, mettons. Parce qu'au pays, on a deux fournisseurs satellitaires qui opèrent d'un bout à l'autre du pays, qui ont parfois l'offre de toutes les chaînes que vous voulez. Mais qu'on semble toujours favoriser le fournisseur câblodistributeur.

20358   Vous allez me dire, bien, il y a des droits plus importants en jeu ici, et je ne veux pas nier ça. Mais, il y a quand même les forces du marché.

20359   Pourquoi les francophones, dans des situations, dans des communautés en situation minoritaire, ne changent pas de fournisseur qui ne leur offre pas des services en français et n'offre pas des bouquets adaptés à leurs besoins?

20360   Vous avez une puissance, le consommateur, oui, vous êtes citoyenne ou citoyen selon de cas. Mais vous êtes aussi des consommateurs.

20361   MME KENNY : Oui, je vais vous expliquer mon cas bien particulier à moi encore une fois, je ne peux pas parler pour l'ensemble des citoyens et citoyennes sur cet enjeu particulier.

20362   Moi, j'ai mon téléphone, ma télévision, mon internet et mon téléphone cellulaire avec un seul fournisseur qui me permet de réaliser des économies. C'est un téléphone d'entreprise également. Donc, c'est pour ça.

20363   LE PRÉSIDENT : C'est un peu plus difficile dans votre cas de changer. Il y aurait...

20364   MME KENNY : Bien, quand on est à l'extérieur du Québec, je comprends. Écoutez, je suis pas experte. Les entreprises satellitaires sont Bell, qui n'offrent pas de services de téléphonie chez moi.

20365   Donc déjà, si je veux avoir ce qu'on appelle les forfaits, les bundles de mon fournisseur, bien, je dois aller avec un fournisseur qui est davantage local.

20366   M. QUINTY : Moi, je vous dirai que j'habite en Ontario, j'ai exactement la même situation que madame Kenny avec Rogers. Tous mes services sont avec Rogers. Et je pense qu'il y a beaucoup de Franco-ontariens qui sont sans doute dans une situation semblable.

20367   LE PRÉSIDENT : Et je ne veux pas minimiser votre préoccupation.

20368   Mais des fois je me dis, pourquoi n'utilisez-vous pas aussi les forces du marché pour identifier aux membres de vos communautés qu'il y a des fournisseurs qui sont à l'écoute des francophones, puis parfois, ils sont satellitaires?

20369   MME KENNY : On peut très certainement passer le message. Mais encore là, c'est une question...

20370   LE PRÉSIDENT : Je comprends que ça coûte plus cher, mais comme francophones, ça me coûte plus cher d'acheter un livre aussi. Puis, il y a pas un seul livre disponible de nos jours qui a une couverture rigide, des romans.

20371   MME KENNY : Je dois vous dire qu'à ma connaissance, le monde de l'édition n'est pas régi aux mêmes lois.

20372   LE PRÉSIDENT : Non, non. C'est la réalité des francophones au pays. Ça coûte plus cher être francophone dans ce pays.

20373   MME KENNY : Je comprends, sauf que c'est pas une raison pour que la télévision me coûte plus cher.

20374   LE PRÉSIDENT : Non, mais il y a des choix que, vous n'êtes pas que des citoyens. Vous êtes aussi des consommateurs.

20375   MME KENNY : Je comprends tout à fait. Sauf que, comme vous le dites, on paie déjà plus cher pour plein de choses. Je vois pas pourquoi on paierait encore plus cher pour la télévision.

20376   LE PRÉSIDENT : Mais pourquoi vous donnez votre argent à du monde qui ne fournissent pas les services auxquels vous vous attendez, notamment un service en français, une offre plus intéressante pour quelqu'un qui est en situation minoritaire.

20377   Comme je vous dis, je vous parle de mon cas à moi en particulier. Il faudrait sonder l'ensemble des citoyens francophones à l'extérieur du Québec pour savoir qu'est-ce les motive.

20378   C'est très certainement un message que j'entends auquel je vais réfléchir.

20379   LE PRÉSIDENT : O.K. C'est bien.

20380   Je vais poser quelques questions concernant le fonds pour aider la production locale.

20381   Avez-vous songé comment ce fonds-la fonctionnerait? Je sais que dans votre...

20382   MME KENNY : En fait...

20383   LE PRÉSIDENT : Par exemple, première question. Vous nous dites dans votre soumission écrite que ça devrait être pour bonifier l'offre. Donc si c'est pour bonifier l'offre, il nous faut une année de référence. C'est quoi l'année de référence pour dire bien ça doit être au-delà de...

20384   Il y a souvent des problèmes de cuisine de mécanique lorsqu'on amène de l'avant des enjeux de ce genre. Je voulais savoir si vous aviez songé à ça.

20385   M. QUINTY : Année de référence, je dirais que... je sais qu'on a dit au Conseil souvent qu'est effectivement, nous, on estime que l'élimination du fonds d'amélioration de la programmation locale, ça n'a pas été décision qui est favorable pour nous.

20386   Donc, certainement la dernière année du FAPL -- et je parle pas de la dernière année où le FAPL a été réduit à, je pense, point cinq ou un pour cent.

20387   Mais la dernière année où le FAPL était au niveau que le CRTC avait identifié en 2009-2010, ça serait peut-être l'année de référence.

20388   Donc, pour répondre à votre question plus large savoir comment...

20389   LE PRÉSIDENT : C'est aussi l'année où Radio-Canada avait crédits parlementaires plus intéressants.

20390   M. QUINTY : C'est sûr.

20391   LE PRÉSIDENT : Donc, est-ce que c'est vraiment la bonne année de référence? C'est comme cette année-là, je rappelais plus, c'est il y a trois ans, j'imagine. C'est pas tout à fait l'année idéale pour créer le barème de comparaison. Non?

20392   M. QUINTY : C'est sûr. Mais si on regarde niveau des compressions dans la programmation locale qui s'adresse nos communautés, faudrait revenir en arrière presque une décennie, je vous dirais.

20393   Parce qu'au niveau de la programmation locale, il a commencé à y avoir des compressions. Bon, c'est sûr, les compressions les plus importantes dont on se rappelle ont commencé en 2009, mais il y en avait déjà avant ça.

20394   Donc, mais ce qui est intéressant de prendre quand même cette année-là du FAPL, c'est que grâce aux FAPL, il y avait des phénomènes qui se sont produits, comme le retour de Radio-Canada à Winnipeg, par exemple, par la production d'émissions hors nouvelles. Ce qu'il n'avait pas fait depuis 20 ans.

20395   Donc, c'est pour ça que je mentionne cette année-là comme référence.

20396   LE PRÉSIDENT : Oui.

20397   MME KENNY : Si je peux me permettre. Il nous reste dans les régions, les nouvelles. Les nouvelles, puis là, on s'est fait raccourcir les bulletins de nouvelles.

20398   Ma vie se résume pas aux nouvelles. On parle de tout l'aspect culturel identitaire. Et si c'est seulement des nouvelles à quoi on... et là, en plus des nouvelles écourtées, on a de moins en moins de journalistes. Donc les journalistes se déplacent pas.

20399   On parle de grands territoires. Particulièrement si on regarde juste Terre-Neuve et Labrador. Je pense qu'ils sont rendus avec un journaliste pour l'ensemble.

20400   Donc, ce sont de grands territoires. Donc, on se déplace plus. On n'a plus vraiment de nouvelles.

20401   Et pour nous, la programmation, ça se résume pas un bulletin de nouvelles.

20402   LE PRÉSIDENT : Je comprends votre position. Et puis vous traitez de l'enjeu de l'opportunité de créer un fonds. Ce que j'essaie de cerner c'est, advenant qu'on est d'accord avec vous, éventuellement, on prend pas de décision aujourd'hui.

20403   Mais, advenant qu'on est d'accord avec vous, comment mettre en marche ce mécanisme? Parce qu'il y a quand même, comme j'ai dit tout à l'heure, des détails.

20404   Donc, l'année de référence, je pense que je comprends votre point de vue sur ça. Mais, qu'en est-il de la source de ce fonds-là?

20405   Est-ce que c'est un pourcentage qui viendrait des entreprises de distribution?

20406   MME KENNY : Comme c'était le cas avant, écoutez, on ne se cachera pas, oui, il y a de l'argent qui est envoyé Radio-Canada de la poche des contribuables, sauf qu'il y en a pas mal aussi, pas mal plus qui est envoyé aux entreprises de distribution.

20407   Et on l'a vu dans la dernière année, les profits de ces entreprises-là. Je serais curieuse de savoir -- et j'imagine que le CRTC aura fait le suivi -- combien de ces entreprises-là, quand on a éliminé le FAPL, ont effectivement baissé la facture. Ils l'ont pas augmentée la semaine d'après pour la même montant.

20408   Et pour moi, ça, je finis par payer le même montant que je payais avant l'élimination du FAPL et j'ai pas plus de services. Au contraire j'en ai moins.

20409   LE PRÉSIDENT : Oui. Effectivement, il y avait...

20410   MME KENNY : La dernière année du FAPL...

20411   LE PRÉSIDENT : ... une difficulté. Mais, est-ce que vous pensez que le pourcentage est alors je vais vous demander quel pourcentage -- tout à l'heure, je vais vous demander quel pourcentage? Est-ce qu'il vient au-delà de 5 p. cent de la réflexion de locale ou est-ce qu'il vient à partir du 5 p. cent de réflexion locale?

20412   M. QUINTY : Je vais répondre de façon un tout petit peu circonvenue. Mais je ne vous envie pas, Monsieur le Président et les Conseillers, parce que vous avez eu à peu près cinq demandes de fonds, probablement, relatives à la programmation locale dans la dernière semaine.

20413   LE PRÉSIDENT : Notre ligne, il y a rien qu'un portefeuille qui paie pour tout ça.

20414   M. QUINTY : Écoutez, on sait que la programmation locale est en difficulté, c'est très, très clair. Et c'est pas juste Radio-Canada.

20415   Bell est venu vous dire la semaine dernière que ses stations sont déficitaires et que je pense que ces stations l'offraient à un profit une année sur cinq.

20416   Donc c'est sur que le travail du CRTC, ça va être sans doute d'essayer de rassembler toutes ces propositions-là de façon consistante. Et, je pense que nous, la FCFA, on ne veut pas nécessairement vous compliquer la vie là-dessus.

20417   Donc, le message qu'on aurait aujourd'hui par rapport à ça, c'est, nous, ce qui compte c'est les résultats. Les résultats qu'on cherche, c'est un accroissement sensible de la programmation locale en français auquel ont accès nos communautés, parce qu'on a énormément perdu.

20418   On a entendu dire différentes options par rapport à d'où viendrait ce fonds-là.

20419   Je sais que Télé Inter-Rives sont venus vous dire qu'il faudrait prendre une proportion du 5 p. cent que les EDR versent au contenu canadien et mettre ça sur les télévisions indépendantes.

20420   On a entendu effectivement des mesures qui seraient dirigées vers le fonds des médias du Canada pour les producteurs, etc.

20421   Donc, à ce point-ci, suite à ça, quand qu'on écrit notre mémoire, nous c'est sûr et certain que ce qu'on avait en tête, c'était quelque chose qui était davantage sur le modèle du FAPL. Mais, c'est sûr qu'on sait qu'il y a à peu près cinq propositions de fonds sur la table.

20422   Donc, c'est pour ça qu'on vous dit, nous, ce qui compte, c'est les résultats au bout du compte.

20423   LE PRÉSIDENT : Donc, je vous comprends. Vous allez suivre les prochaines étapes. Les gens vont déposer des documents d'ici en grande partie, d'ici le 19 septembre.

20424   Il y a une période de commentaires écrits le 3 octobre. Donc, encore une fois, vous avez à traiter de la question, de l'opportunité d'un fonds.

20425   Moi, je suis à l'autre étape, à savoir comment ça fonctionnerait. Et, parce qu'évidemment, ça a un impact sur l'abordabilité des forfaits de base à un certain niveau.

20426   Si on l'ajoute sur le montant qui est contribué par les entreprises de distribution.

20427   Donc, si vous pouvez traiter de ça, ça serait, y compris le pourcentage que vous préconisez.

20428   M. QUINTY : Votre message est bien compris, Monsieur le Président, là-dessus.

20429   LE PRÉSIDENT : Merci bien.

20430   À la page, au paragraphe 44 de votre soumission écrite, vous demandez que CBLFT soit disponible sur la base, vous voulez dire en Ontario, partout au pays?

20431   M. QUINTY : Non, sur la base, je vais juste relire rapidement si vous permettez, le paragraphe en question.

20432   Oui absolument, on parle ici de Bell-Télé de Shaw direct. C'est simplement d'assurer qu'on n'efface pas le correctif que le Conseil a apporté il y a quelques années où est-ce qu'on avait une des deux EDR, PSRD (ph), je me rappelle plus lequel qui distribuerait seulement une des deux chaînes de Radio-Canada en Ontario.

20433   Alors, si on était à Ottawa, où il y a Radio-Canada, Ottawa-Gatineau et qu'on était abonné à cet EDR-là, on recevait le signal de CBLFT. Et si on était à l'extérieur, il arrivait des fois qu'on recevait le signal d'Ottawa-Gatineau, alors qu'on était...

20434   LE PRÉSIDENT : O.K. Donc...

20435   M. QUINTY : C'est pour ça que ça, c'est là.

20436   LE PRÉSIDENT : Donc, votre point de vue c'est que pour les abonnés en Ontario, les deux ou celui de Toronto qui serait plus pertinents?

20437   M. QUINTY : Les deux.

20438   LE PRÉSIDENT : Les deux. Bon, au moins c'est clair!

20439   Vous avez attaché aussi à votre -- c'est ma dernière question -- l'étude de Monsieur, je sais pas si je prononce bien son nom, de Jacques Guillot.

20440   Je dois vous avouer que j'ai pris connaissance deux fois de ce document-là, puis, je me posais la question, l'expertise de ce professeur dans le domaine de la réalité francophone au Canada, parce qu'il semble un très grand expert par rapport à la situation européenne.

20441   Il parle de Franco, ce qui est arrivé en Europe, l'Alsace et tout ça. Mais ça m'a laissé un peu sur mon appétit comme expert sur les questions minoritaires.

20442   Quel point vouliez-vous que j'en tire de ce document?

20443   M. QUINTY : Je pense qu'à la lueur de ce dont on discute dans les audiences publiques cette semaine et la semaine dernière, bon, monsieur Guillot, nous, on a travaillé avec une firme de juristes qui s'appelle Juriste Power qui nous ont aidés avec la préparation de certains éléments davantage de... comment je vous dirais? De toile de fond par rapport au paysage télévisuel et aux réalités, surtout des minorités linguistiques telles qu'elles se vivent ailleurs dans le monde.

20444   Et on donc été chercher effectivement le rapport de ce monsieur. Et, je vous dirais que l'élément qui est important à retenir, c'est que monsieur Guillot dit à la page 5 :

« Cela coûte cher de faire de la télévision encore plus pour des publics réduits. »

20445   Mais je pense que ça venait à notre argument effectivement savoir que la programmation locale, si on ne l'appuie pas, particulièrement dans le contexte minoritaire, je veux dire, c'est pas profitable de faire de la programmation locale nécessairement pour des petits publics.

20446   Et on le voit, je veux dire, à l'extérieur de Radio-Canada, la programmation française locale à l'extérieur du Québec, il y en a pas.

20447   Donc, si vous me demandez qu'est-ce que vous devriez retenir de ça, je vous dirais effectivement cet élément.

20448   LE PRÉSIDENT : D'accord. Donc, parce que je regardais ce qui est offert peut-être à l'international, basé sur ce rapport-là, et de ma connaissance et je regarde la liste des démarches que le Conseil a prises depuis plusieurs années. Et je crois que si on regarde la situation des communautés en situation minoritaire au Canada par rapport à la situation dans d'autres pays, on se compare quand même assez bien. C'est une comparaison très favorable, même.

20449   MME KENNY : C'est effectivement, c'est comparativement à d'autres pays, oui.

20450   LE PRÉSIDENT : Mais, vous en voulez un peu plus.

20451   MME KENNY : Bien, c'est pas encore assez.

20452   LE PRÉSIDENT : O.K. Je comprends.

20453   MME KENNY : Merci.

20454   LE PRÉSIDENT : D'accord.

20455   J'ai cité la chanson de Ariane Moffat l'autre jour : « J'en veux plus toujours et ici ». Bon voilà!

20456   Monsieur le Vice-président.

20457   CONSEILLER PENTEFOUNTAS : Oui, ça voyage en fin d'après-midi.

20458   Si on peut quitter l'Alsace Lorraine (ph) et se concentrer sur Rivière-du-Loup et au niveau du Nouveau-Brunswick, je vois votre demande par rapport à CMT et CHAU.

20459   Je pense que les représentants d'Inter-rives nous ont dit qu'ils se sont entendus avec les EDR du Nouveau-Brunswick pour être disponible à la communauté francophone du Nouveau-Brunswick.

20460   Mais, la motivation de cette demande-là, c'est n'eût été d'une erreur géographique, ces stations-là, ça sera l'équivalent d'un service à un CLOSM. C'est ça?

20461   MME KENNY : Oui.

20462   Je dois vous dire que ces stations-là sont écoutées énormément, particulièrement dans la péninsule acadienne qui est une CLOSM.

20463   CONSEILLER PENTEFOUNTAS : Et dans le cas d'un service de base, d'un petit service de base, il ne... ça ne rentre pas nécessairement dans le territoire d'un service conventionnel. Ça tombera pas dans... à cause que c'est dans une autre province, c'est ça?

20464   M. QUINTY : C'est ça.

20465   CONSEILLER PENTEFOUNTAS : Exactement. O.K. C'est clair. Merci beaucoup.

20466   LE PRÉSIDENT : Merci beaucoup.

20467   M. QUINTY : Merci.

20468   MME KENNY : Merci.

20469   LE PRÉSIDENT : Madame la Secrétaire?

20470   LA SECRÉTAIRE : J'inviterais maintenant la Fédération culturelle canadienne-française à s'approcher.

20471   LE PRÉSIDENT : Bienvenue, on est prêts à vous entendre.

20472   M. THEBERGE : Parfait.

20473   Monsieur le Président, Madame et Messieurs les Conseillers, bonjour.

20474   Je suis Martin Théberge, président de la Fédération culturelle canadienne-française. Carol Anne Pilon, Directrice générale par intérim de l'organisme et Simone Saint-Pierre, chef des communications m'accompagne.

20475   Nous vous remercions de prendre le temps de nous entendre à ces audiences.

20476   La FCCF a participé à toutes les phases de cette importante consultation. La télé est un moyen de culture, une fenêtre privilégiée sur le monde qui forge les imaginaires sociaux d'identification, et se doit de promouvoir les valeurs canadiennes, dont la dualité linguistique, est une composante fondamentale.

20477   La fédération préconise donc que le CRTC continue d'appliquer un cadre règlementaire qui favorise la production de contenu canadien et leur diffusion aux heures de grandes écoutes et ce, en respect des objectifs de la Loi sur la radiodiffusion.

20478   Ce cadre règlementaire doit évidemment favoriser le reflet des communautés de la francophonie canadienne.

20479   Premièrement, en ce qui a trait à la maximisation des choix et de la souplesse des forfaits, il est important pour nos communautés d'avoir accès aux services éducatifs de TFO et au service 9(1)(h) dont UNIS.

20480   Évidemment, les stations locales de la SRC doivent être distribuées à tous les Canadiens dans les deux langues officielles. Il en va de même pour ARTV et RDI.

20481   Pour les stations communautaires, lorsque celles-ci sont disponibles en français et en anglais, les deux chaînes devraient être incluses dans le petit service de base.

20482   La FCCF demeure convaincue que la politique règlementaire de radiodiffusion du CRTC en matière de distribution obligatoire par les EDR assure un accès à une programmation télévisuelle originale et multi genre.

20483   Cette programmation variée et en particulier celle développée par les producteurs indépendants et les réalisateurs de la francophonie canadienne participent à ancrer les référents culturels si importants pour assurer la construction identitaire des francophones.

20484   Nous saluons les efforts du CRTC qui, tout au long de ces consultations, a porté une attention particulière aux enjeux des CLOSM.

20485   Toutefois, la proposition du CRTC sur le démantèlement des forfaits nous préoccupe. Une telle règlementation pourrait réduire l'offre de programmation francophone disponible aux CLOSM francophones.

20486   En effet, certaines chaînes plus spécialisées seraient fragilisées si elles n'étaient pas offertes dans un bouquet.

20487   Le maintien d'une prépondérance de services canadiens est aussi à risque dans les scénarios de démantèlement proposés par le CRTC.

20488   La FCCF croit que l'exigence actuelle de distribution d'un service dans la langue de la minorité pour dix services dans la langue de la majorité doit à tout le moins être maintenue.

20489   Si les forces du marché sont les seuls barèmes décisionnels, cela pénaliserait grandement les CLOSM francophones.

20490   Quant à une nouvelle stratégie nationale de programmation, à nos yeux, la véritable problématique porte sur l'absence de règlementation des nouveaux services de programmation par internet.

20491   La FCCF soutient qu'il est impératif que tous les utilisateurs de contenu professionnel de radiodiffusion soient mis à contribution. Les fournisseurs d'accès internet, les fournisseurs de services de téléphone mobile, les services de programmation par contournement, ou encore les fabricants ou vendeurs d'appareils de réception.

20492   Nous félicitons le CRTC de conserver le pourcentage de revenu consacré aux EIN. Nous sommes particulièrement satisfaits de constater que les émissions pour enfants seront incluses dans la définition EIN et que les diffuseurs seront encouragés d'y consacrer une partie de leurs revenus à la programmation.

20493   Il est important de rappeler que l'accès à des émissions en français pour enfants sur les ondes partout au pays peut freiner l'assimilation et favoriser un enracinement de l'enfant dans sa culture francophone.

20494   La FCCF salue également la proposition du CRTC en matière d'exigence liée à la programmation et aux dépenses en émissions canadiennes.

20495   La FCCF est d'avis que des mécanismes d'appui à la production locale et régionale contribuent au développement des communautés francophones en situation minoritaire.

20496   Rappelons que le programme de production de langue française en milieu minoritaire du FMC a eu un impact positif sur la capacité de l'industrie médiatique issue des CLOSM à produire des contenus qui reflètent les réalités de la francophonie canadienne.

20497   D'autre part, le FAPL a grandement contribué à la diversité de la programmation locale et a soutenu nos stations locales et plus particulièrement celle de la SRC.

20498   Ceci nous amène donc à parler de Radio-Canada. Le mandat de la Société l'oblige à être présent dans toutes les régions du pays, et ce, dans les deux langues officielles.

20499   Malheureusement, la valeur de son crédit parlementaire est nettement inférieure à ses besoins et l'élimination du FAPL aurait aussi contribué à réduire son financement annuel.

20500   Nous demandons respectueusement au CRTC de réintroduire une mesure pour appuyer la production locale qui pourrait être administrée par le FMC, par exemple.

20501   Comme nous avons souvent entendu monsieur Blais le répéter au cours des audiences, le statu quo n'est pas une option. Le FCCF accueille le changement et appuie le CRTC dans ses démarches pour faire en sorte que tous les acteurs du système canadien de radiodiffusion contribuent au financement de nouvelles émissions canadiennes de qualité, compétitives, innovatrices et captivantes.

20502   Le CRTC a le pouvoir de faire en sorte que le cadre règlementaire protège toutes les composantes de l'industrie télévisuelle franco-canadienne et de servir les Canadiens, qu'ils soient créateurs, consommateurs ou contribuables.

20503   Nous vous invitons à continuer à en tenir compte dans les décisions qui suivront ces importantes consultations sur l'avenir de la télé au Canada comme vous l'avez si bien fait par le passé.

20504   Je vous remercie de votre écoute attentive et nous sommes prêts à répondre à vos questions.

20505   LE PRÉSIDENT : Merci bien. Monsieur le conseiller Dupras aura quelques questions pour vous.

20506   CONSEILLER DUPRAS : Bonjour. Vous dites dans votre présentation aujourd'hui que le démantèlement des forfaits vous préoccupe, que certaines chaînes plus spécialisées seraient fragilisées. À quoi pensiez-vous exactement?

20507   Si on parle de chaînes francophones qui existent au Québec, qui sont disponibles à la carte en dehors du Québec, un service « à la carte » est-ce que ça serait pas intéressant pour les francophones à l'extérieur, dans ce sens qu'ils sont pas obligés de prendre toutes les chaînes. Ils pourraient choisir celles qu'ils aiment?

20508   MME PILON : Ça pourrait. Sauf que dans plusieurs cas à travers le pays, les chaînes francophones sont offertes en bouquets.

20509   Alors, il y a des plus petites chaînes qui ont peut-être moins le moyen de promotion, qui pourraient être fragilisées si elles n'étaient pas offertes dans un bouquet.

20510   Parce qu'à un moment donné, à la carte, on sait pas non plus combien ça va coûter à la carte. Alors, peut-être que ces forfaits-là, peut-être que d'avoir une variété de chaînes en français pourrait coûter aux consommateurs beaucoup plus que d'avoir un forfait qui regrouperait toutes les chaînes francophones ensemble.

20511   CONSEILLER DUPRAS : Est-ce qu'il ya des chaînes en particulier auquel vous pensez?

20512   MME PILON : J'ai pas l'information pour vous dire lesquelles sont peut-être moins bien financées ou ont des difficultés financières. Mais, il y en a des très petites qui sont rentrées dans le marché depuis les dernières années. Peut-être qu'elles auraient du mal à survivre si, surtout à l'extérieur du Québec où elles sont moins connues, ça pourrait être difficile.

20513   CONSEILLER DUPRAS : Alors, donc, ce que vous suggérez, c'est qu'on continue à distribuer les chaînes francophones à l'extérieur, dans un forfait?

20514   MME PILON : Dans le meilleur des mondes, toutes les chaînes francophones du Canada seraient offertes dans des marchés de langue française à l'extérieur du Québec.

20515   CONSEILLER DUPRAS : Donc toutes les chaînes qui existent dans un forfait? Toutes les chaînes qu'on connaît au Québec, dans un forfait?

20516   MME PILON : Dans un monde idéal, oui. Abordable.

20517   CONSEILLER DUPRAS : Bon. Et tantôt, le Président a fait allusion qu'il y a d'autres fournisseurs que les câblodistributeurs ou que les fournisseurs terrestres. Pour les postes de télévision, que le satellite peut vous donner accès aux canaux francophones, est-ce que c'est pas une option qui est disponible, ça, pour les francophones à l'extérieur du Québec?

20518   MME PILON : Oui, en a...

20519   CONSEILLER DUPRAS : Et rencontrez-vous le même problème que ceux qui étaient devant nous tantôt, qui font... qui...

20520   MME PILON : L'accès peut être un problème aussi. Les petites communautés, souvent, sont en milieu rural. L'accès à la large bande peut être une problématique pour eux, pour avoir accès à ces contenus-là.


20522   M. THÉBERGE : Il faut aussi rappeler que les communautés avec lesquelles nous on travaille sont les mêmes communautés avec lesquels la FCFA qui était avant nous, travaille. Donc, les réalités sont les mêmes, puisqu'on parle de la même communauté.

20523   Et effectivement, comme nos collègues avant nous l'ont mentionné, c'est pas des options qui sont toujours avantageuses financièrement ou qui sont nécessairement faciles pour nos communautés non plus.

20524   CONSEILLER DUPRAS : Bon. Écoutez, j'ai pas d'autres questions. Je vous remercie.

20525   LE PRÉSIDENT : Y compris sur l'offre satellitaire? Parce que je comprends votre point sur les réseaux de distribution à large bande. Mais ce n'est pas nécessairement le cas pour les satellites. Ils sont disponibles partout. Sauf...

20526   M. THÉBERGE : Ils sont disponibles partout, effectivement. Mais pas toujours au prix avantageux qui pourrait y être avec, comme nos collègues l'ont mentionné...

20527   LE PRÉSIDENT : Parce qu'il y a les forfaits...

20528   M. THÉBERGE : Voilà.

20529   LE PRÉSIDENT : Avec d'autres services. Bon. Je comprends, c'est une réalité de marché ça aussi.

20530   M. THÉBERGE : Voilà!

20531   LE PRÉSIDENT : Oui, bon. Merci beaucoup, merci. Ce sont nos questions pour le moment, pour l'instant. Et puis évidemment, vous allez déposer vos répliques plus tard dans le processus, n'est-ce pas? Merci. On a hâte de vous lire. Merci.

20532   Madame la Secrétaire.

20533   THE SECRETARY: I would now invite Forum for Research and Policy in Communications to come to presentation table.

--- Pause

20534   THE SECRETARY: Please introduce yourself for the record, and you may begin.

20535   MS AUER: I apologize, Mr. Chairman, one of our members miscalculated the length of questioning, so we're going to be probably two minutes waiting, and I'm really sorry. We were calculating the average length of questioning and we just got the math wrong, I guess.

20536   THE CHAIRPERSON: You can't predict anything these days, can you?

--- Laughter

20537   THE CHAIRPERSON: That's okay.

20538   Okay, we'll take short two-minute recess, then.

20539   MS AUER: Thank you very much.

--- Upon recessing at 1613

--- Upon resuming at 1616

20540   THE CHAIRPERSON: Order, please.

20541   So please go ahead.


20542   MR. FRENKEN: Thank you, Mr. Chairman, and good afternoon, Commissioners, staff and members of the audience.

20543   My name is Sjef Frenken. I am the Chair of FRPC's Board of Directors.

20544   With me today are Robert Soucy, at the far end, John Harris-Stevenson, and Monica Auer.

20545   Bob was Director of the Canadian Audio-Visual Certification Office for several decades, administering Canada's tax credit system in relation to Canadian content. Bob is also a musician and composer and he is currently on the board of the Canadian Folk Music Awards and is a vested member of the American Federation of Musicians.

20546   John is just completing his doctorate at the Faculty of Information at the University of Toronto. His thesis studies the role of infrastructure in Google's current network neutrality strategy. While his main interests are in Internet governance and knowledge systems design, John also worked for many years in Canada's community radio sector, was most recently the Co-founder and President of the Community Radio Fund of Canada.

20547   As for myself, I graduated from Ryerson and worked in private radio in Ottawa and Toronto. I was with the CRTC from 1971 to 1995, where I held several management positions, including Director of Broadcasting Policy, and worked on a wide range of broadcast policy files. Since retiring from the Commission, I've taught at the University of Ottawa, and have appeared before the Copyright Board to testify with respect to radio and pay television.

20548   We are also joined by FRPC's Executive Director, Monica Auer, to my right. Like me, Monica worked at the CRTC, creating, among other things, the CRTC's first computerized ownership database, and then she went to work at the corporation. She has also appeared before the Copyright Board as an expert witness and was called to the Ontario Bar in 2006. Her Masters paper measured the CRTC's approach to non-compliant radio broadcasters from 1968 to 2005, which I suggest is a must-read for every commissioner.

20549   Monica.

20550   THE CHAIRPERSON: Welcome.

20551   By the way, I felt like my life just flashed in front of me --

--- Laughter

20552   THE CHAIRPERSON: -- while you were introducing yourselves.

20553   Anyhow, go ahead.

20554   MS AUER: Thank you, Mr. Chairman, and, again, apologies for the delay.

20555   The Forum is a not-for-profit, non-soliciting corporation, established to research communications policy. We were honoured to receive the CRTC's invitation to appear today.

20556   Our two-volume submission from June is on the record and our responses to the CRTC's working document are attached to these remarks, as published, and also ranked in terms of our preferences.

20557   To answer the question before it is asked, assuming you were going to ask it, the worst of the proposals for Canadians' choice is the elimination of over-the-air television. That would be number 16. The best for strengthening Canadian programming is the redefinition of "broadcast revenues" to include exempted service income.

20558   It seems to us that the main question before you today is whether Canada's broadcasting system is worth safeguarding. Should the system be protected if it does not provide the Canadian population with essential services which could not be provided otherwise? Does it make sense for the Commission to protect a system that essentially retails programming, quote, "using predominantly non-Canadian and other resources"?

20559   Canadians should obviously not be denied access to the best programs from other countries. Broadcasting systems must remain open to ideas from other parts of the world. Nevertheless, efforts to maintain an independent broadcasting system in Canada can only be justified if it meets the high expectations set by Parliament in the Broadcasting Act.

20560   With apologies, the text that I just entered into the record is taken almost verbatim from the CRTC's first major announcement on cable television in 1969.

20561   The Forum is not saying that Canada's broadcasting policies be anchored by history. We are saying that it is better to learn from the failures and mistakes of the past than to repeat them.

20562   Some now say that Canada's broadcasting system is in fine shape, raising the question of why a good thing should be changed. We have some concerns about whether Parliament's broadcasting policy objectives are being met currently. The system works very well for the four largest companies that control both ends of the pipe, so to speak: 87 per cent of TV revenues and 81 per cent of BDU revenues. It does not work as well for everyone else, especially citizens.

20563   For example, private over-the-air TV stations have been shedding jobs for many years: 26 per cent since 2006 alone. Independent producers have created new jobs, but if most are in Vancouver, Toronto and Montreal, what opportunities for working in Canada's television system exist everywhere else?

20564   Mandating more hours of original, local non-newscast program production will create employment opportunities, improve service to smaller cities and underserved regions, and meet Parliament's local reflection goal.

20565   Much of section 3 also mandates the pre-eminence of Canadian content. Unfortunately, very few data are available about what domestically produced programming is actually being broadcast in Canada today. This makes it very difficult to evaluate proposals put forward in the course of this hearing to eliminate Canadian TV content requirements.

20566   Suppose, however, that in November 2013 Canada's private TV services broadcast significantly less original Canadian programming and original Canadian drama than in November 2000. If so, shouldn't a new TV policy set clear objectives and measurable goals to ensure that by 2025 Canada's population can access more, not fewer, hours of original Canadian content?

20567   As for affordability, making all television services à la carte ignores solid empirical evidence, including the 2010 study mentioned in our written submission. Using actual prices and viewer preferences in the U.S., it estimated that à la carte BDU systems would double the prices subscribers pay for the same or less service, which may be why the U.S. Senate abandoned the pick-and-pay approach yesterday.

20568   Complete à la carte militates against Parliament's requirement that BDU rates be affordable. It should not be implemented.

20569   Canadians clearly find BDU rates far too high. Since the CRTC stopped publishing basic rate data in 2005, however, it's impossible to study variations in these rates across Canada or to determine if they have risen for any reason other than what the market will bear.

20570   Last week we learned, for instance, that some BDUs may be allocating most or all fixed costs to basic. Has this always been the case? And should basic-only subscribers pay the fixed costs of a BDU's entire set of services? In our view, no.

20571   Moving on to the implementation of a new TV policy, we've taken the liberty of adopting words the Chairman mentioned last week, "Trust, but verify." Canadians must be able to trust the CRTC to put their interests first, and I know that the Commission is focused on that. We define those interests in terms of Parliament's broadcasting law for Canada, which, incidentally, does not mention terms such as "profit margins," or "viability."

20572   We focus on the act because the Supreme Court's 2012 retransmission decision reaffirmed the CRTC's mandate to implement this cultural policy. Turning off OTA TV transmitters removes choice, and perhaps may not be within the CRTC's mandate or its jurisdiction.

20573   That said, the decisions from this proceeding must, of course, be verified, or at least supported by evidence. Much of this evidence is complex, and key evidence, such as the financial data sought by PIAC for individual TV stations, and whose request the Forum supported in a nine-page letter to the Commission, on August 28, has also been filed in confidence. This secrecy makes verification and challenging the evidence impossible.

20574   In some cases, of course, evidence is public, such as Bell's simsub study. It uses the method of a 1990 paper written for the Department of Communications to measure the value of simsub, and estimates that dropping simsub today would cost private English-language TV broadcasters as much as $458 million, or almost 24 per cent of all private TV revenues in 2013.

20575   This study raises at least three questions.

20576   First, if simsub affected 6 per cent of private TV revenues in 1990, which that study showed, why does it now affect 24 per cent of private TV revenues? A change of this magnitude really does need some explanation.

20577   Second, the 1990 study simply attempted to measure the value of simsub at that time. What this hearing needs, though, in our respectful submission, is an estimate of the financial and other advantages and disadvantages of eliminating simsub, preferably over time, not overnight.

20578   The Bell study seems to assume that simsub would vanish overnight, and does not discuss the impact of programs that broadcasters would presumably develop and schedule to replace American content. Would it not be more reasonable to assume that broadcasters would begin to include programs as popular as Vikings in their schedule to mitigate the costs of losing simsub?

20579   Finally, the study does not address the other effects of simsub, such as the impact on our broadcasting system when Canadian broadcasters tie their schedules to those of foreign broadcasters or when they schedule foreign programs to fill holes in their schedules even if this scheduling conflicts with the values set out in their own codes of conduct.

20580   Third, and last, the Forum respectfully asks that the CRTC publish specific and measurable outcomes for Canadian television and in terms of basic service pricing, employment, original Canadian drama and original local content.

20581   When so much decision-making today around the world, in our country, is based on mega-data, it is odd that so much of the data that would enable informed commentary and fact-based policy-making is either not being collected or not being published by the Commission.

20582   None of the 110 tables and figures in this year's monitoring report, for instance, set out the hours of original and repeat Canadian, local and foreign TV programs that are broadcast in Canada, even though broadcasters send this data to the Commission every month. Canadians need this to evaluate progress towards meeting the act's objectives.

20583   Sjef.

20584   MR. FRENKEN: Thank you again, Commissioners, for permitting us to appear before you.

20585   Your position, Mr Chairman and commissioners, is not one we envy. It cannot be easy to hear so many divergent views both in and outside this process.

20586   You know that some changes have to be made no matter what decisions emerge from this proceeding. None of the players within the system will be entirely pleased. And given that we live in an age of litigation and appeal when folks don't get what they want, your decision may be only the first step in the long process of broadcasting realpolitik.

20587   No pressure here, but some of the key cultural underpinnings of this country are in your hands. As the old crusader advised seekers of the Holy Grail in that Indiana Jones movie, "We urge you to choose wisely." That is why the Forum suggests that the most appropriate course for this Commission, as some of its predecessors have found, is to act within the confines of the CRTC's enabling statutes and to "Trust, but verify and report."

20588   We welcome your questions and hope to be able to answer at least some of them.

20589   THE CHAIRPERSON: Thank you very much.

20590   Commissioner Molnar will start us off.

20591   COMMISSIONER MOLNAR: So hello, everyone.

20592   A lot of paper. You mentioned your two volumes that you filed. So now it's three, and I've tried to go through a little bit just to see.

20593   Could you tell me, have you changed your positions from those you initially filed, recognizing that the working document came out later, recognizing -- I'm sure you've followed what's gone on. So is there anything that's changed?

20594   MR. FRENKEN: On major changes, I don't think our position has changed significantly, but, of course, as evidence comes in from the hearing, you modify certain stances. One works, essentially, a bit in the dark at first, but things become a little clearer. But substantially, I think, our submission holds.

20595   COMMISSIONER MOLNAR: Okay, thank you.

20596   I want to ensure I'm understanding, and it's very useful to get these matrix where you fill in your position relative to the working document.

20597   Under pick and pay, you say at the end that -- okay, so you oppose a framework in which all television services would be available strictly à la carte.

20598   Do you believe we need to regulate all wholesale rates?

20599   MR. FRENKEN: There are two things here.

20600   First of all, pick and pay has some advantages, however, a total and absolute pick-and-pay situation I don't think works for Canada. What we need to have at least is a bundle of services, based locally, that all Canadians should you have. You might say the care package, which includes local stations, Canadian news channels, CPAC, for instance, some children's programming, APTN, and possibly some ethnic programming and a community channel, in our views, preferably funded, but not necessarily operated by the cable licensees. That would be our basic package.

20601   Beyond that, we suggest that, if you go to foreign services, that they be at least a 1:1 proposition. You can't have one foreign service without having a Canadian service, too. That would be, I think, our basic position.

20602   COMMISSIONER MOLNAR: Okay. Well, I'm just trying to understand what you put into this box here under item number 2.

20603   MS AUER: Commissioner, are you looking at the table attached to our remarks today?


20605   MS AUER: Okay, good.

20606   COMMISSIONER MOLNAR: Just because I felt that was probably reflecting -- at least it responds to the working document in a way I can sort of --

20607   MS AUER: Yes, because --

20608   COMMISSIONER MOLNAR: -- compare your positions relative to others who have come before us.

20609   MS AUER: We had so many appendices in the submission, though, that I just wanted to make sure we had the right thing.

20610   COMMISSIONER MOLNAR: You definitely have many appendices, that's true.

20611   MS AUER: Well, if you can't put in an appendix, I mean what's the point?

--- Laughter

20612   MS AUER: Could you tell us which point you're looking at specifically?

20613   COMMISSIONER MOLNAR: I am looking at box 2, under "Pick and Pay."

20614   In the first one, I believe you said that you supported the notion of the skinny basic, and then you went on. Here you say, "If the CRTC declines to regulate the wholesale rates charged by television programming."

20615   Are you suggesting it would be necessary for us to regulate wholesale rates or are you just suggesting, under the situation that exists today, where wholesale rates are not regulated, this is your position?

20616   MS AUER: I think that in the 1980s, when the Commission first started getting into specialty service licensing, it was very clear that the wholesale rate regime made the delivery of a wide range of programming options very efficient for everyone concerned. BDUs had a very clear understanding of what they would be expected to charge.

20617   I think it's a matter of concern when you hear that BDU prices today might simply be doubled; in other words -- like, I'll offer my channel for $5 and the BDU ends up charging consumers $10. What is the rationale for 100-per-cent markup when we're talking about a delivery system that has virtually no, you know --

20618   COMMISSIONER MOLNAR: Right, but this was --

20619   MS AUER: -- high marginal costs?

20620   COMMISSIONER MOLNAR: Sorry, this was talking about wholesale rates, not retail rates.

20621   MS AUER: Well, we're talking -- well, yes, and if you regulate the wholesale rate, that would be the rate that BDUs accept, would it not, if you apply it by condition of licence? Or are you considering --

20622   COMMISSIONER MOLNAR: But you're talking about the...okay. Okay, sorry --

20623   MS AUER: Regulated rates, I think, are more efficient than requiring two to three hundred specialty services to negotiate one by one with a dozen different BDUs, or as many BDUs as there are around the country.

20624   COMMISSIONER MOLNAR: Okay, thank you.

20625   One more point I wanted to just discuss with you was your position on simsub, and I know you've talked about it a little in here.

20626   You're a bit of an outlier, actually, in this proceeding, so I thought I'd give you more of an opportunity as to why you believe removing simsub would be appropriate. I know you speak in your document of a phased approach, and I see here some discussion of schedules and so on. Yet, you are concerned about local programming and are proposing that one of the revenue sources that are helping to fund the conventional television stations should be removed or could be removed, and so I'd like you to just explain that to me a little better.

20627   MS AUER: I think Sjef would like to discuss this as well, but before he starts, I think historically the Commission -- simsub has been a blessing and a curse for the television system. It has protected for many years the value of local television signals. That framework may be gone, and the question, really, before you today, because this was the issue that was raised, obviously, as you know, in the Notice of Consultation: whether or not simsub should be eliminated altogether, I think there's something to be said for reducing the Canadian broadcasting system's reliance on American programming.

20628   Doing anything overnight would be Draconian and create enormous unpleasant consequences. We certainly aren't suggesting that. We suggested a phase-in approach. So, first of all, even if we have wonderful economic studies, such as the one we mentioned in our report from a University of Stanford professor, who did an amazing amount of math and equations to figure out the unexpected effects of negotiating prices between BDUs and their impact on consumer welfare, the central issue is whether or not we need to make more space for Canadian content.

20629   As I said, that's the curse side of the equation: that we're tying ourselves to a chariot -- it's not our chariot, it's not our car, it's not our vehicle -- and we maintain that because we believe we are making -- we have an excellent regulatory bargain. We're getting lots of money out of it.

20630   If the value of local over-the-air television is declining, isn't it time that we can at least start examining part of that blessing and curse?

20631   Sjef.

20632   MR. FRENKEN: The best way of looking at it, I guess, from a Canadian point of view, is that it is crutch that has helped television stations survive in an age of difficulty. It has worked to some extent, but I think, as the Commission has opened the gates for a broader look at the whole situation, the time has come to say, "Look, do we really want the Canadian broadcasting system's evening hours to be dictated out of Los Angeles or New York?"

20633   Somehow that sticks in my craw. It doesn't sound exactly that this is following the suggestion, the prescription that Parliament had in mind for the system.

20634   It is one system that we have. I think the Chairman has reiterated that at the beginning of these hearings and perhaps there is a way in which we can make a part of the system that is currently under funding the system, pay a little more, with the objective of working towards the increased production of programming non-sports programming, non-news programming, but especially high production dramatic programming to fill in the blanks that may occur when we slowly ease out of the situation of simultaneous substitution.

20635   And for that reason, both from the monetary production, monetary and production side, that has to be a slow process as well as the removal from simsub, it will be wise for us to step slowly in a process that eventually, maybe ten years, maybe it will take longer, gets that burr from under the saddle, and that Canadians can have an opportunity to watch competitive programming on their screens, in the evening, American, Canadian of high production value where most Canadians watch it.

20636   The end result being, for me the test would be, for us the test would be that if you get the bulk of listening and watching to Canadian programs at the moment, under the current regulation, and then taking account of, let's say, the increase in the population over time, whether you can get a bigger bulk of Canadian viewing to Canadian programs in the course of the end of that process.

20637   I think that would be a major step and I think that's the kind of flexibility the Commission put out and to the market when it said: "Let's talk TV".

20638   MS AUER: And if I could just add one small point to Sjef's, more to supplement what he has said. Simsub has been with us for 40 years. We aren't suggesting that it can be eliminated in two or three or four, but surely it's time to at least make a start.

20639   Without starting, we will be here in another 40 years debating endlessly whether we have any value in our Broadcasting system.

20640   MR. FRENKEN: And may I tackle one?

20641   COMMISSIONER MOLNAR: I am going to -- can I ask one more question?

20642   MR. FRENKEN: Sure.

20643   COMMISSIONER MOLNAR: Thank you. Just following, you know, this is about the future of television and what you are talking about is the prime time schedule ten years from now and whether or not it needs to be tied. And I guess one of the biggest question is: Is there relevance to a prime time schedule ten years from now?

20644   I mean if this is about changing habits, changing technologies, changing view or behaviours and so, it isn't clear to me as I read through your document what it -- how important do you see exhibition and linear television ten years from now?

20645   You throw 2025, and it seems like this is packaged on the perspective that, you know, linear television remains, an appointment viewing remains as important in 2025 as it is today. So, I would just like to let you clarify that.

20646   MR. FRENKEN: There are -- perhaps, if I may approach it this way. You don't have a crystal ball, we don't have a crystal ball. All we go by is what has come in the past and where the future seems to be leading. But our cautionary approach is this, that we want it staged.

20647   It is exactly to permit the Commission to reassess it, but every two years, I say no. The universe has changed, the Telecommunications Broadcasting universe has changed. We were going this way, we have to veer off this way.

20648   Your task is essentially, and the best way I can describe it, is building a castle with bricks of jello in a middle of a hurricane. Okay. You don't know. You don't know and we don't either, but I'll take a cautionary approach and say: this is what we have, if the system keeps going this way, this is a reasonable approach. If it does not work that way, we'll take another tack.

20649   I should also say, this is what I meant to say before, after Monica finished. I think the major players in this particular scenario have the wear-it-all to make the change, perhaps more speedily than we think, from the current system to the removal of simsub. They are big players with lots of money.

20650   MS AUER: The context before you, of course, is entirely different. Back in the late -- well, the early seventies, you would have had maybe 70 TV stations and 65 owners. So, it's 65 very small players trying to tackle on reality world and having to deal with signals coming in over the -- over the border very easily.

20651   Now we may be -- we have fewer than 20 major over-the-air television broadcasters, private broadcasters, of those, the four or five. If we can't do it now, having created these large companies for strength, I remember when at one debate on here and I kept hearing "In unity there is strength". Okay.

20652   Now, we have the strength, can we now move forward with the Act objectives?

20653   COMMISSIONER MOLNAR: Thank you. And those are my questions.

20654   THE PRESIDENT: Vice Chairman.

20655   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman. I hope you know that (inaudible) survived hurricanes, tsunamis and force measure of biblical proportions since the beginning of time or since its creation, Mr. Frenken. That being said, a little levity at this time of the day.

20656   Mr. Harris-Stevenson, just briefly on your thesis and infrastructure, given that we are going to have the biggest consumer of bandwidth with us tomorrow morning, and who was interested or disinterested party man -- neutrality and that strategy, would you please sort of give us a brief synopsis of what you're doing and what back, and add to our hearing?

20657   MR. HARRIS-STEVENSON: Primarily studying Google's infrastructure and the impact that that infrastructure built, that they have done in the last ten years has had on their approach in that neutrality. And that -- I have looked at Netflix a little bit, but I don't have the exact data on Netflix that I have on Google.

20658   COMMISSIONER PENTEFOUNTAS: And that infrastructure investment has given them some leverage? It has given them neutrality?

20659   MR. HARRIS-STEVENSON: It has given them significant leverage. I am particularly interested in the Canadian environment, what Google and Netflix, for example, are doing in Canada, from an infrastructure perspective.

20660   The story I always tell people when they ask me about my research is that they probably don't know that when they're using Google or watching a YouTube video that they are very likely not using the Internet.

20661   It's quite likely, and I would say in Ottawa, Toronto, Montreal, Calgary, these sorts of cities, it's guaranteed that if they're requesting content from Google and also from probably from Netflix, that that content must be served from a Canadian server.

20662   And now getting specifics on which servers are located in what location is a challenge, but I do know that Bell, for example, has servers posted from Google, that are controlled by Google, that are serving YouTube videos and Google content, that 70 to 90 per cent of that content that you request in Montreal is coming from that server. And if it isn't on that server, the server goes and gets it and then serves it to you. And this would be for all of the services that Google provides.

20663   So, YouTube would be the big storage, where the storage is, but it would be maps, it would be Gmail, it would be Google docs, it would be the whole suite of services.

20664   Netflix has an appliance that has 100 -- I think 100 terrabites of storage or 1,000 terrabites. It's a big amount of storage that it will place in an ISP and that is how Netflix is able to distribute high definition video in Canada, and in most of any other jurisdiction in which it operates.

20665   And I mean, the point is that Netflix and Google can't operate their services in Canada, without partnerships, without investments in Rogers, Bell, Shaw, these ISPs.

20666   MS AUER: In other words, there is a type of legal presence. We don't know the scope or scale of it, but it exists.

20667   COMMISSIONER PENTEFOUNTAS: Thank you very much. Thank you, Mr. Chairman.

20668   THE PRESIDENT: Thank you very much. Those are our questions.

20669   Madame la secrétaire.

20670   THE SECRETARY: I'll now ask the last intervenor of the day: The Small Market Independent Television Stations Coalition to come to the presentation table.

--- Pause

20671   THE SECRETARY: Please introduce yourself and you may begin.


20672   MR. ARNISH: Thank you very much. Good afternoon, Mr. Chair and Mr. Vice-Chair, Commissioners and the CRTC staff.

20673   My name is Rick Arnish, Chairman of the Pattison Broadcast Group with three television stations, two in British Columbia and one in Alberta.

20674   I am pleased to be here as Chair of the Small Market Independent Television Stations, or the SMITS Coalition.

20675   Before you today are representatives of seven of the nine member companies of SMITS, including on my left, to your right, Glenda Spenrath from Newcap; next to Glenda, Robert Ranger of RNC Media, three stations in Quebec; next to Robert, Rob Germain of CHEK Television in Victoria.

20676   On my right, to your left, Marc Simard of Télé Inter-Rives with four stations in Quebec; next to Marc, Don Caron of Thunder Bay Electronics, two stations; and next to Don, Jeff Thiessen of Miracle Channel in Lethbridge, Alberta.

20677   Not on the panel, but for completeness, I note these other members of the SMITS Coalition. Sylvie Courtemanche is behind us in the first row, from Corus and Newfoundland Broadcasting in St. John's who couldn't be with us today.

20678   I wish to note that both Corus and Newfoundland Broadcasting have confirmed that they endorse the positions of the SMITS Coalition and that they participated in all aspects of our submissions to date.

20679   We are also pleased to have with us, in the back row, our economic expert, Debra McLaughlin, who prepared the report on "Small Market Realities" appended to our submission, and our counsel Peter Miller.

20680   We are now ready to begin our presentation.

20681   You've had a long day and, we know, a long hearing. We will only address one of the issues you have identified as key for this hearing, and that is the plight of local television.

20682   We appear before you this afternoon at a time when the future of small market independent television in Canada is very troubling. What we are here to tell you are three simple unequivocal facts.

20683   One, Canadians care about local TV. They rely on it almost daily. And certainly in the markets we serve, it is not replaceable by larger groups or other types of media.

20684   Two, that if you do not act, local television in small and medium-sized markets, including any one of those represented by the folks at this table, will simply not be here as little as one or two years from now.

20685   And three, that there is a simple way of rebalancing obligations in the system to create a sustainable model for small market local independent TV, one that will not cost consumers any more money.

20686   The precarious financial state of small market local TV is well known to you. As pointed out in our submission, national ad sales are down 14 percent from 2007 to 2013, a much greater decline than for the conventional television sector as a whole. Indeed, as a group, were it not for LPIF and our ability to significantly grow local retail sales over the last few years, we would have been in the red.

20687   Sadly, as a group, we are now there. Our preliminary 2014 estimates now put us squarely in the red. Your statistics on local television issued at the beginning of this hearing also confirm the plight of local television.

20688   And next year, without your help, breakeven, in fact survival, will rest on containing programming costs while increasing retail sales, a very tall order in today's environment.

20689   MR. CARON: It's important to draw some key distinctions between independent and vertically integrated local TV stations.

20690   The good news is that small independent local TV is generally far more cost-effective than that of the larger corporate groups. Being usually of and from the communities we serve, we know how to get things done efficiently, and we can accept lower margins over the longer term.

20691   None of us have the ability to achieve corporate group efficiencies from profitable specialty or BDU operations, to change the way we amortize fixed programming costs to reduce expenses or to withstand indefinite losses.

20692   We can lose money for a little while, which is why many of us are hanging in, in the hopes the new policy framework will change our financial outlook, but the reality is that unless we have a regulatory framework that supports small independent local stations, very soon we will not all have the ability to sustain operations.

20693   MR. GERMAIN: We have been asked by you, many times, formally and informally, how is local TV still relevant? Surely, the logic goes, with access to the Internet and mobile, no one watches local TV anymore ... surely, new sources of content can replace local TV, can't they?

20694   Well, we're here to tell you that nothing could be further from the truth.

20695   Here are our top reasons why local TV, and particularly small market local independent TV, remains not only relevant but essential for consumers:

20696   1. Small market independent TV provides over 190 hours of original, quality, locally relevant programming every week, 52 weeks a year;

20697   2. Most Canadians continue to rely on local TV daily as their primary source of news and information. In the communities we serve, we are even more vital than local TV in larger centres. Our audience shares are proof of that. In fact, for many of us, our local news programming typically rates 50 percent higher on average than our acquired non-local program schedule;

20698   3. In times of crisis, Canadians in small communities rely on local TV more than any other medium;

20699   MR. THIESSEN:

20700   4. We bring communities together for worthwhile causes and events, through the promotion and involvement of local charities;

20701   5. We are a public interest economic force in the communities we serve, supporting thousands of worthwhile charitable and community public service endeavours: Crime Stoppers, Alzheimer's, ALS and mental illness, to name just a few. Together, we gift through the donation of airtime and the involvement of our personnel well in excess of $20 million across the country every year;

20702   6. We are cost effective and efficient. We know and dedicate the resources to cover our communities better than any other domestic or foreign medium because we live, work and play in the communities we serve;

20703   MR. RANGER:

20704   7. The reality is that Bell or Shaw won't buy our stations and serve our markets if we shut down. Google won't be sending a reporter to a fire in L'Isle-Verte near Rivière-du-Loup or a flood in Medicine Hat;

20705   8. As new online and mobile platforms do become increasingly important for local news and reflection, we will be there and also feed our reports to larger groups. In fact, we already are and do;

20706   9. Local reflection is more important than ever. The Commission's Phase II research revealed that Canadians value local news more than any other program category, at 81 percent. More recent Nanos research puts the number of Canadians that view local programming as "important" at 84 percent, up from 76 percent in 2008, and higher than any other type of Canadian content. As our view of our world is increasingly dominated by foreign and national sources, we need local Canadian media, TV and radio, more than ever; and

20707   10. The Broadcasting Act speaks to public service, local reflection and the role of users of radio frequencies in achieving such objectives. It also speaks to Canadian ownership, strengthening the cultural, political, social and economic fabric of Canada and exposing the public to the expression of differing views on matters of public concern. Achievement of these objectives matters to consumers and it is what we do.

20708   MS SPENRATH: Our key recommendations are these:

20709   - First of all, please do not eliminate simulcast, even in the limited form of live programming.

20710   As stated in our brief, simulcast is likely even more relevant to SMITS than large market players. That's because given the amount of programming we acquire and the number of incoming signals, for most SMITS stations, as much as 75 percent to 95 percent of a full 126-hour weekly schedule is simulcast. Accordingly, we estimate its value at approximately $25 to $30 million per year.

20711   Perhaps you think the portion of programming that is live is small and that eliminating simulcast on that would not have a big effect. If so, sadly, you would be mistaken. Eliminating simulcast on live programming would wipe out our ability to sub-license such programming and earn revenue from it. Without the ability to generate revenue from our local commercials appearing on hockey games or award shows, we would not only lose the simulcast revenues, we would lose all the promotional and revenue benefit we currently get from such signature shows.

20712   - Second, please do not reimpose CPE requirements on SMITS.

20713   These were eliminated in the 1999 TV policy review in recognition that requirements for specific weekly hours of local programming were more effective. This remains so today. No one is calling for CPE requirements on small market stations. To reverse such a decision 15 years later, at a time when our very survival is at stake, would be counterproductive.

20714   At best, it would create huge new uncertainty. How would you set these CPE levels? Based on historic performance? How can historic levels be relevant when they were supported by a contribution from an LPIF that no longer exists?

20715   At worst, it could further impact our economic viability and create a real disincentive to stations that want to go the extra mile and produce the most high-quality local programming they can.

20716   MR. SIMARD:

20717   - Third, please recognize that your working proposal on abandoning OTA transmission is not the solution to preserve local television in small markets.

20718   Most SMITS stations converted to HDTV in the last three years. As the Commission's own numbers confirm, the maintenance and power costs of these transmitters are fairly nominal. Thus, the savings from shutting them down would be relatively small and certainly not enough to "save local TV."

20719   More important, for many small market local stations, OTA audiences and revenues are material. This is why a number of SMITS stations keep more costly analog transmitters going, even though we're not obliged to. So for those stations, shutting down OTA transmitters would cause them to lose more money. Bottom line: Shutting down OTA transmitters will not make the difference between SMITS being sustainable and non-sustainable.

20720   MR. ARNISH:

20721   - Fourth, and final, we think the answer is a small, targeted contribution from BDUs to SMITS. These moneys would come out of the existing 5-percent contribution and would therefore not increase consumer costs.

20722   We are not alone in thinking along such lines. You have heard a number of proposals that recommend a redirection of some part of the 5-percent BDU contribution. What we're suggesting is that a modest contribution of 0.3 percent of revenues from cable and an additional 0.1 percent from DTH support local television provided by SMITS stations.

20723   Any decision you make to support other independent or medium market stations should also be separate and apart from, or at least incremental to, this.

20724   So why is our suggestion any more worthwhile than any other suggestion on BDU contributions?

20725   Let us provide four reasons:

20726   1. Two BDUs have already recognized that some redirection of local reflection money is reasonable;

20727   2. Of all the categories of programming at risk, local TV programming in small markets must be recognized as most at risk;

20728   3. The amounts we are talking about are relatively modest; and

20729   4. As amply evidenced by the record of this proceeding, saving local TV in small markets is something that you could be proud of and Canadians would support.

20730   In conclusion, Mr. Chair, you've made it clear that you do not believe the status quo is an option, and we agree. If you believe local TV in small markets across Canada is worth saving, if you want to ensure that 3 million Canadians, many living in some of the sparsest parts of this country, still have valued local service, we ask you act.

20731   We are doing what we can. We hope we have given you a reasonable roadmap for what you can do.

20732   Thank you very much for allowing us to appear at this hearing. We are now open for questions.

20733   THE CHAIRPERSON: Thank you very much, ladies and gentlemen. You're certainly a visual reminder that you represent small markets, not necessarily a small coalition.

--- Laughter

20734   THE CHAIRPERSON: The Vice-Chair will start the questions.

20735   COMMISSIONER PENTEFOUNTAS: Thank you, Mr. Chairman.

20736   Well, Mr. Arnish, I could listen to that voice all day, but --

--- Laughter

20737   MR. ARNISH: Thank you, Mr. Vice-Chair.

20738   COMMISSIONER PENTEFOUNTAS: -- that was the longest one issue. There must have been 50 sub-issues on your document today.

20739   That being said, just to go through them briefly, we understand the plight.

20740   I read your small-markets reality -- realities, sorry, because there is more than one, even though you're only addressing one issue today -- eliminating simulcast. I understand the $25-30 million figure that you put forward, that is for your members, strictly.

20741   MR. ARNISH: That's correct.


20743   I understand your concern over local simsub, as well.

20744   I understand your CPE.

20745   And not removing transmitters on OTA: clear.

20746   Let's get to your new fund, briefly: so, point three on your cablecos, point one on DTH.

20747   Would that money be dedicated to a certain type of programming and not another type of programming?

20748   MR. ARNISH: I'm going to ask Ms Spenrath to talk to this.

20749   Our discussion around this table, and I guess we leave it to the Commission in deliberations on this topic matter, is the fact that, you know, we don't think our television stations, our conventional televisions in small markets, is broken.

20750   There is troubling and challenging storm clouds on the horizon and we certainly do need that.

20751   And, you know, we have the small-market local programming fund, and that was set up, you know, 12 or 13 years ago now, and this works very, very well. But, at the end of the day, we are seeing significant drops in revenue on a national and regional basis, which is solely impacting the opportunity for us to produce local programming.

20752   So, with that, I'm going to ask Glenda to describe what we think and how we can accomplish our goal and --

20753   COMMISSIONER PENTEFOUNTAS: I understand that, but was it based on the LPIF model, in terms of those spending of those funds?

20754   MS SPENRATH: To answer your first question you asked, if it would be a new type of programming or would it be the existing programming that we do -- and the answer is that, by and large, most of us produce news, and that is what is in demand by the consumers and that's what, in the Let's Talk TV process came out loud and clea. A and I think, to quote Commissioner Simpson, the word he used was "overwhelming" response. And so, the notion is that this will be used to support us being able to go forward with providing the programming that we are, which is primarily news.

20755   COMMISSIONER PENTEFOUNTAS: So, it would be news? It wouldn't be sort of local programming in the LPIF sense of the word, firstly, and it wouldn't be incremental, either?

20756   MR. ARNISH: Well, I don't think our discussion with our group is that it wouldn't be incremental, but I wouldn't -- I think all of us are challenged, again, in this new 21st century that we're all working and living in, to provide as much local programming as we possibly can do.

20757   And I can't speak for all the members at SMITS here, but I certainly can speak for ourselves, that we're looking at every opportunity we can to do more local programming where and when we can, just not the regulatory seven hours a week -- we're over that. We want to do as much local programming as we can. That's what our viewership wants and that's what Canadians want.

20758   COMMISSIONER PENTEFOUNTAS: And those funds would be pulled out, on a pro rata basis, from the CMF, the inde funds, and the community stations?

20759   MS SPENRATH: No, actually, what we're looking at -- and we respect that, you know, as this Commission's gone on, there's been quite a bit of discussion about the CMF -- it is not our intention to go there.

20760   On the cable side, the whole enveloped is 5% on the cable side -- it's 3% CMF and 2% for local expression -- and on the DTH side, it's four and one.

20761   What we're saying is that we provide a valuable service, which is local expression, and it is something that is very valuable. And if you want a good value proposition for the consumers for Canadians, we have that solution.

20762   And so, what we're looking at is -- again, you've seen the numbers are small. We're not asking for a big piece of that, .3 of the two, .1 of the 1 -- so, yeah, that's where we --

20763   COMMISSIONER PENTEFOUNTAS: Come out of the community --

20764   MRS SPENRATH: Yeah --

20765   COMMISSIONER PENTEFOUNTAS: -- and local expression.

20766   MR. SIMARD: Yes.

20767   MS SPENRATH: Yeah. And I don't think that that we're breaking any new grounds by bring up this.

20768   I think back to only two years ago, at the LPIF hearing, we heard three different cable companies recognize the fact that the small-market indpendent stations were challenged and did provide a valuable service and needed some special consideration.

20769   With Shaw, although they didn't agree with LPIF, they did agree that if it's going to phased out, that we need to take care or look at the small markets.

20770   Rogers said, if it's going to be -- if LPFI is going is going to continue, it should only be for the small-market independent stations.

20771   And MTS said that if it's going to stick around it should be for the small markets, as well, and they even through a number out of the 25 million of 100 million.

20772   COMMISSIONER PENTEFOUNTAS: I think if it's not on the record -- it is on the record that most BDUs were sensitive to independent broadcasters and seem to have left a door open for those purposes. That's fine.

20773   Would you include non-members of the SMITS in that front?

20774   MS SPENRATH: We've talked about that, because, as we know, at that time, our own group got about 15 million of that 25 million for the independents and there was -- there were stations outside of our purview.

20775   Now, two years later, we have a couple of our colleagues at the table here that are now part of our group that wern't. We've got CHEK, we've got Newfoundland, and we've got Miracle -- sorry about that, Jeff -- and so, our own proposal and the math we did to get the amounts considered only the small-market group.

20776   We don't have a problem if you look at the group of all independents. The only thing is that you'd have to change the math because it was based on our needs.

20777   COMMISSIONER PENTEFOUNTAS: Okay. I understand that.

20778   The last point -- and I'm going to bring you to your submission from June, paragraph 47 through 55 -- you mentioned the small-market local production fund, briefly, and there seems to be concern there, as well, that it's insufficient. And maybe you can help me out with the math and I'll kind of go --

20779   MS SPENRATH: Well, that is why we suggested another .1% on top of the 4% because, at that point in time, again, a few years back, there were less members than there are now --


20781   But help me out with the math.

20782   Back in '03, when the program began, there was a calculation made, in terms of what programming costs were, and the figure was 7.3 million.

20783   So, we'll bring that down to 3.6 million and we'll create a fund to give you 3.6 million.

20784   And you were 16 members, at that time.

20785   And here we are, 10 years later, you're 19 members. True?

20786   And the fund is at 9.50 million.

20787   So, where's the problem?

20788   Explain that math to me.

20789   MS SPENRATH: Well, part of the problem -- and that's a good question -- is that we don't live in the world that we did pre-LPIF. A lot of things have changed since then.

20790   With the new harmonized programming levels, the new conditions licence, our own stations I can speak on behalf of, it increased our local programming productions by 50% to get to the harmonized levels.

20791   We didn't have closed captioning. That came in September 1 of 2009, for us. And over time, there has been continued erosion of the national revenues to the large markets, you know, our local teams --

20792   COMMISSIONER PENTEFOUNTAS: But this fund, per se, has tripled in size and the members drawing from that fund has not tripled in size. It's just gone up slightly.

20793   MS SPENRATH: No, our programming costs have gone up significantly, as well, with the increased conditions of licence and the harmonized levels.

20794   COMMISSIONER PENTEFOUNTAS: So, your programming costs have gone from 7.3 million to what, in 2013?

20795   We calculated them to be 7.3 million, back in '03, and that's how we set up -- the Commission, sorr,; I wasn't around back then, I wasn't even a thought back then, I'm speaking to my youth, but that's fine, that's a different issue.

20796   So, we had calculated 7.3 and the Commission decided to give you half those funds towards your programming budgets. Right?

20797   So, now, that fund has gone from 3.6 to 9.

20798   And what are your local -- what are your programming budgets at today?

20799   MS SPENRATH: I'll maybe ask Rick

20800   COMMISSIONER PENTEFOUNTAS: the fact that you're being shortchanged here?

20801   MS SPENRATH: Well, I know we've doubled our programming expenses, ourselves.

20802   The other thing's that happened in that time period is that the CBC network has completely cut off affiliation payments.

20803   COMMISSIONER PENTEFOUNTAS: But do you have those figures?

20804   Because the fund has tripled.

20805   And even if your programming is doubled, the fund has tripled since then.

20806   MS SPENRATH: Okay, that's a lot of detail that I don't have, at the top of my head, at the moment.

20807   Is this something that we could, maybe, file as --


20809   UNIDENTIFIED SPEAKER: We have it.

20810   MS McLAUGHLIN: We do. We do. We have it, In 2013, the --

20811   COMMISSIONER PENTEFOUNTAS: Thank goodness for the second row.

20812   MS McLAUGHLIN: It's in appendix 7.1 of the smaller market reality study.


20814   MS McLAUGHLIN: And if you look at it, the programming and production costs, in 2013, were sitting at 15.5 approximately million.

20815   COMMISSIONER PENTEFOUNTAS: Okay. So, you'd still be covered by the funds, but that's fine, because half of that would be 7.5 million of the funds at 9.5 million.

20816   But I'll let you kind of mull that over. I don't mean to have sort of -- I wasn't intending to ambush anyone. I was just --

20817   MS McLAUGHLIN" So, is there a --

20818   COMMISSIONER PENTEFOUNTAS: -- you saw the math. Because it didn't make sense when I was looking at your --

20819   MS McLAUGHLIN: Okay. So, is there an undertaking to come out of this?

20820   M. SIMARD : Est-ce que je pourrais rajouter, Monsieur le Vice-président?

20821   CONSEILLER PENTEFOUNTAS : Certainement.

20822   M. SIMARD : Écoutez, lorsque ce fonds avait été créé -- si on peut l'appeler un fonds, parce que c'était plutôt une compensation -- c'était pour compenser le fait que nos stations n'étaient pas distribuées... certaines stations n'étaient pas distribuées du tout sur les satellites, un.

20823   C'était pour... maintenant encore, nos stations ne sont pas distribuées... certaines de nos stations ne sont pas distribuées en HD. Alors, on peut s'imaginer que si, par exemple, notre station de Radio-Canada est distribuée en SD et vous avez cinq stations de Radio-Canada en HD distribuées sur les canaux suivants, il est très difficile de garder notre écoute.

20824   Et c'était aussi parce que la substitution pour les distributeurs par satellite ne pouvait pas être faite parfaitement, parce que, autrement dit, dans certaines parties de nos territoires, autrement dit, la substitution ne peut pas s'appliquer parce que, techniquement, les câblodistributeurs utilisent les codes postaux, et donc, la substitution ne se fait pas. Et aussi, en plus, bien, on reçoit les canaux qui sont dans les zones horaires extérieures, comme, par exemple, que ce soit Radio-Canada de l'Ouest ou TVA Ouest, alors, ces canaux là, évidemment, ne sont pas substitués, n'étant pas distribués à la même heure.

20825   Donc, le montant que le CRTC nous avait donné à ce moment-là ne couvrait pas nécessairement toutes ces pertes-là. Alors, je dirais que, du fait que le fonds a augmenté, ça nous a aidé à couvrir ces pertes-là.

20826   MS McLAUGHLIN: Excuse me. Can I just correct the record?


20828   MS McLAUGHLIN: I was really looking at the line below -- and it actually went from 7.2 to 26.9, I believe, or 25.9.

20829   So, it is a significant --

20830   COMMISSIONER PENTEFOUNTAS: Programming? Global programming?

20831   MS McLAUGHLIN: Yes. Local programming.


20833   MS McLAUGHLIN: The other number that I quoted was for program and production, which is --

20834   COMMISSIONER PENTEFOUNTAS: If the initial intent was to apply towards programming production, but --

20835   MS McLAUGHLIN: And I think --

20836   COMMISSIONER PENTEFOUNTAS: -- look for it and find it, if that's the case.

20837   MS McLAUGHLIN: I think it may be how we categorized it in this summary. So, we'll get back to it, in reply.


20839   Thank you, Mr. Chairman.

20840   THE CHAIRPERSON: Actually, could you do it sooner? Because when you do it in reply, it provides no opportunity for others to comment on it.

20841   Could you undertake to provide the information?


20842   MR. ARNISH: We could do that as an undertaking.

20843   We would ask, though, if we could wait to have it submitted by next Wednesday, to give us time to do that.

20844   THE CHAIRPERSON: Okay, Wednesday --

20845   MR. ARNISH: At noon. Ottawa time.

20846   THE CHAIRPERSON: Ottawa time.

--- Laughter

20847   MR. ARNISH: Eastern time.

20848   THE CHAIRPERSON: Okay. That seems reasonable. Because I'm always concerned about how long it -- giving enough time for people to reply to new evidence on the record.


20849   MR. ARNISH: So, we would undertake to give that report by Wednesday, at noon.

20850   THE CHAIRPERSON: That's fine.

20851   Just one question. Now, I think I may have, between the lines, read the answer already, but there's already the existing fund.

20852   You're proposing a new fund.

20853   Have you given any thought to making it as simple as possible and having a single fund?

20854   Now, I know, M. Simard referred to the previous fund as a compensation -- and this new fund is a bit different. But is there not a simplicity that could be found of all these funds? And have you given some thought to that?

20855   MS SPENRATH: The original small-market local programming fund -- and I'm going to probably date myself to be older than dirt when I say this, but it was brought in at a time when --

20856   THE CHAIRPERSON: A testament to the lack of child labour laws.

--- Laughter

20857   MS SPENRATH: Thank you.

20858   But that was brought in at a time when it was decided that we needed to make place for a second BDU in Canada. And so, there were certain concessions made to the DTH mediums so that they could develop a second service in Canada.

20859   At that time, they didn't have to do priority carriage. There was a lot more distant signals coming into our market, and we were impacted greatly by that. And so, a portion of that 4% speaks to the impact that it made on our small-market stations, at the time. So, it's not something that was maybe relevant to other stations that exist today that are looking for some sort of support for their local programming.

20860   THE CHAIRPERSON: Right. That was then. This is now.

20861   Have you given any thoughts of merging that? Or do you want some time to think about that and come back with that?

20862   MS SPENRATH: Well, the other part of that, then, is you had asked a question about have you thought about the other players that aren't around our table with us. Now, if we're going to create one fund and dump both in and then bring in more players, then they would, by default, share in a history that they weren't part of.

20863   THE CHAIRPERSON: I get that. But everything's on the table.

20864   MS. SPENRATH: Okay.

20865   MR. ARNISH: Well, I agree with what Glenda just said in this, as Mr. Simard said, the small-market local programming fund was established, for a number of reasons; one was because of all the distant signals coming into our marketplaces. And I think we, as a group, would be very concerned about that fund being lumped into another new fund or -- and others being able to access that particular fund, because it was set up for small-market independent stations that were impacted by DTH, and we know the reasons why the Commission wanted to have a DTH system in Canada. We agreed with it at the time, and still do today, of course.

20866   But I think if there's an ability to create a sustainability fund, if we can call it that, for other independents, along with SMITS, we do believe it's got to be a seperate fund.

20867   MS SPENRATH: And it might be more relevant to take a structure like the LPIF and create it for that model for smaller markets, in addition to -- and ourselves, in addition to them.

20868   THE CHAIRPERSON: Okay. I understand your position. But, you know, the Commission has also said that whatever comes out of this has to be as simple as possible, proportionately, administered and adaptable to change.

20869   Given that as a hypothesis, and not dismissing your argument, would it be possible, then, for you to suggest to build the record on something that would be more unified?

20870   MR. ARNISH: We can do that.

20871   THE CHAIRPERSON: Okay. By noon on Wednesday, as well?

20872   MR. ARNISH: Go ahead, Marc.


20873   And in answer to your question: yes, Mr. Chairman.

20874   THE CHAIRPERSON: Okay.

20875   M. SIMARD : Mais, Monsieur le Président, permettez-moi juste de rajouter que lorsque le Conseil a décidé de créer le FAPL, il avait vraiment laissé, séparé là, le fonds pour les petits marchés, puisque ce fonds-là reflétait vraiment une réalité, puis avait été créé pour des raisons très spéciales, qui existent encore aujourd'hui.

20876   LE PRÉSIDENT : Je comprends bien. Mais ça, donc, peut influencer la proposition que vous mettez de l'avant, mais en termes de calcul, qui, comment et tout ça.

20877   M. SIMARD : Oui.

20878   LE PRÉSIDENT : Mais je pense qu'il y aurait peut-être une solution plus allégée qui pourrait avoir un certain intérêt, et puis je voulais juste compléter le dossier. Je ne dis pas que c'est ça qu'on va faire, je voulais juste compléter le dossier.

20879   M. SIMARD : Absolument.

20880   THE CHAIRPERSON: So, you can do that. Okay. Thank you.

20881   I believe those are our questions. Thank you very much.

20882   MR. ARNISH: Mr. Chair, just before we conclude, I'd be remiss if I didn't say that we are all proud Canadians. We're all proud Canadian broadcasters. We won the best small-market television stations in Canada and, you know, we're proud of our heritage stations. Most of us have been around since the mid-fifties, and we're looking to the future. We want to continue in this business, as well, and we're very proud to be part of the Canadian broadcasting system.

20883   So, thank you for the opportunity to --

20884   THE CHAIRPERSON: We fully understand that. And you wouldn't be all here if you didn't care for it and want to contribute to its continued health and the benefits it gives to Canadians.

20885   So, thank you.

20886   Now, I'd be remiss not to remind everyone -- and all the twitterers out there can help us spread this news -- that, in fact, as I announced yesterday, tomorrow, we're starting at 8:30 for the last day of the hearing. So, 8:30 tomorrow morning.

20887   Thank you.

--- Whereupon the hearing adjourned at 1718, to resume on Friday, September 19, 2014 at 0830

Lynda Johansson
Jean Desaulniers
Madeleine Matte
Monique Mahoney

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